Bushveld Minerals (LON:BMN) BUY – Target Price 11.6p – Bushveld completes acquisition of the Uis tin project in Namibia
Gemfields (GEM LN) – Record breaking Singapore ruby auction at US$61.13/ct
Stratex International (STI LN) – Crusader acquisition details
Gold prices fall $14/oz on back of hawkish statement from FOMC regarding the future monetary policy tightening and a potential reduction in the outstanding balance sheet.
• The US$ index is up 0.7% since the FOMC announcement release yesterday evening.
• Rebar and iron ore futures are up today despite reports showing Chinese credit growth slowed in May.
• Brent prices are up slightly this morning after falling more than 3% yesterday after the EIA report showed US gasoline inventories climbed 2.1mbbl last week.
Dow Jones Industrials +0.22% at 21,375
Nikkei 225 -0.26% at 19,832
HK Hang Seng -0.98% at 25,621
Shanghai Composite +0.06% at 3,132
FTSE 350 Mining -1.12% at 14,606
AIM Basic Resources +0.41% at 2,604
US – The FOMC voted 8 to 1 to raise rates to 1.0-1.25% yesterday while expecting another rate hike before year end.
• Neel Kashkari was the only member voting for no change in the policy in line with his decision to leave rates unchanged during the previous FOMC meeting.
• On the potential reduction in the outstanding $4.5tn Fed balance sheet, Ms Yellen said the Committee will come up with the plan to be put in effect “relatively soon”.
• Considered approaches include a gradual increase in caps that limit reinvestment of held assets’ proceeds.
• So the FOMC expects to reinvest those proceeds that exceed a monthly $6bn cap which is set to increase to as much as $30bn in another 12 months. Mortgage backed securities proceeds caps are expected to start at $4bn before rising to $20bn over the period of a year.
• No indication of the target balance sheet size has been provided.
• The dot plot showed little change from the previous release advocating for three rate hikes per annum over the next two years.
• Economic growth forecasts have been upgraded a notch (2.2% v 2.1% for 2017; other forecasts have been left unchanged) with the FOMC highlighting strong household spending and improving business investment.
• Unemployment rate estimates have been brought down slightly amid signs of continuing strengthening labour market (4.3% v 4.5% in 2017, 4.2% v 4.5% in 2018 and 2019).
• Inflation expectations remained largely intact as the FOMC concluded prices growth “on a 12-month basis is expected to remain somewhat below 2% in the near term but to stabilize around the Committee’s 2% objective over the medium term”.
• On a separate note, Robert Mueller, the former FBI chief and the special prosecutor leading the FBI investigation over a potential influence of Moscow on the Trump win, expanded the inquiry into a possible case of obstruction of justice by the US President Trump, US media reports.
• Mueller is said to be preparing interviews with two top intelligence officials about the case including Dan Coats, the director of national intelligence, and Admiral Mike Rogers, head of the NSA.
• The investigation is reported to have been launched several days after Mr Trump fired Mr Comey on May 9, the Washington Post writes.
China – The government is seen slowing the credit growth in May as authorities are looking to reduce leverage in the financial system.
• M2 Money Supply (%yoy): 9.6 v 10.5 in Apr and 10.4 forecast.
• Aggregate Financing (CNY bn): 1,060 v 1,394 in Apr and 1,190 forecast.
Switzerland – The central bank left rates unchanged for the 29th consecutive month at -0.75%.
Australia – The A$ climbed against the US$ on Thursday morning on the back of stronger than forecast employment number for May.
• Employment Change (‘000): 42.0 v 46.1 in Apr and 10.0 forecast.
• Unemployment Rate (%): 5.5 v 5.7 in Apr and 5.7 forecast.
Heathrow Airport Terminals 3 and 5 suffer baggage system failure
• Passengers are advised to pack essential items in hand luggage
• Security will then advise passengers to ditch certain items in the bins provided
• We can only wish passengers the best of luck with it all. It’s such a joy to arrive on a field trip in Siberia or the Congo with just the clothes you arrived in.
US$1.1180/eur vs 1.1216/eur yesterday. Yen 109.56/$ vs 110.10/$. SAr 12.704/$ vs 12.757/$. $1.273/gbp vs $1.279/gbp.
0.760/aud vs 0.756/aud. CNY 6.795/$ vs 6.797/$.
Gold US$1,262/oz vs US$1,268/oz yesterday
Gold ETFs 60.7moz vs US$60.7moz yesterday
Platinum US$934/oz vs US$929/oz yesterday
Palladium US$860/oz vs US$884/oz yesterday
Silver US$16.88/oz vs US$16.93/oz yesterday
Copper US$ 5,664/t vs US$5,730/t yesterday – Copper's ability to kill microorganisms is a new selling point for household and industrial products, which could boost it's demand by as much as 1m metric tons a year, expanding annual usage by 20m tons over the next 20 years, according to data from Bernstein.
• Global demand for all uses last year was about 23.4mt, according to ICSG.
Aluminium US$ 1,880/t vs US$1,887/t yesterday
Nickel US$ 8,900/t vs US$8,865/t yesterday - Nickel prices have touched their lowest in a year pressured by a fall in Chinese steel prices and ahead of expected weaker Chinese data.
Zinc US$ 2,509/t vs US$2,484/t yesterday
Lead US$ 2,084/t vs US$2,063/t yesterday
Tin US$ 19,150/t vs US$19,390/t yesterday
Oil US$46.9/bbl vs US$48.5/bbl yesterday
Natural Gas US$2.937/mmbtu vs US$2.966/mmbtu yesterday
Uranium US$20.00/lb vs US$20.00/lb yesterday
Cobalt – On October 26, 2016 Palisade Research claimed that in the next five years, cobalt could more than double from its price at a time of ~$13.00/lb to over $30.00/lb.
• 8 months later, cobalt is now trading at $25.63/lb, and the fundamentals are even stronger. Palisade Research therefore decided to re-examine their projection and are increasing their forecast to $60.00/lb.
• Thus, according to the latest report over the next 5 years cobalt set to rise by 130%.
• Demand for cobalt has increased over the course of the last year in large, thanks to demand from the global electric vehicle (EV) industry.
• Cobalt is a key component of the lithium-ion batteries used in electric vehicles, a report by CNBC reveals.
• The adoption of EVs around the world is only expected to accelerate thanks to the supranational Electric Vehicles Initiative which is calling for an electric car fleet of 20 million by 2020.
• Greatland Gold has applied for two adjoining exploration licences covering a large cobalt property in northern Western Australia’s Pilbara Region
• Greatland Gold CEO Gervaise Heddle said “We believe that the Panorama Cobalt Project is highly prospective for a large, near-surface deposit in an area that has been almost completely ignored by mineral explorers for cobalt for the past 40 years.”
Titanium - SI-BONE announced today that it has received FDA clearance for its patented iFuse-3D Implant which is the first 3D titanium implant for use in SI joints.
• It is a massive challenge to receive FDA clearance for medical devices and this clearance is a highly salient achievement for the 3D printing industry.
• This clearance might further increase the popularity of titanium in the 3D printing industry.
Iron ore 62% Fe spot (cfr Tianjin) US$53.8/t vs US$52.8/t
Chinese steel rebar 25mm US$566.4/t vs US$569.5/t -
Thermal coal (1st year forward cif ARA) US$68.3/t vs US$68.1/t yesterday
Premium hard coking coal Aus fob US$145.9/t vs US$146.2/t
Asiamet Resources (LON:ARS) 4.5p, Mkt Cap £31.9m – Assay results from infill drilling at the BKM prospect
• Asiamet Resources reports results from the final five holes of its recently completed infill drilling in the southern part of the BKM project in central Kalimantan.
• Among the results highlighted in today’s announcement are:-
o a 58m long intersection at an average grade of 1.45% copper from a depth of 6.5m in borehole BKM31800-07;
o a 17.5m long intersection at an average grade of 1.57% copper from a depth of 25.5m in borehole BKM31835-01 and
o a 4m long intersection at an average grade of 3.15% copper from a depth of 46.5m in borehole BKM31600-06
o The results are to be incorporated in an updated resource estimate which is currently in preparation as part of the wider work on the feasibility study.
o The drilling has confirmed the “continuity of near surface high grade copper mineralisation“ and Asiamet’s CEO, Peter Bird commented that “The thickness, continuity and grade of copper mineralisation has proven to be very robust and we are expecting a high level of conversion from Inferred Resource to the higher confidence level Measured and Indicated Resources as the updated Resource estimate for BKM is completed shortly.”
Conclusion: We look forward to the new resource estimate for BKM to provide further insight into the continuity of grade and mineralisation.
Bushveld Minerals (LON:BMN) 10.1p, Mkt Cap £77.4m – Bushveld completes acquisition of the Uis tin project in Namibia
BUY – Target Price 11.6p
• Bushveld has completed its acquisition of the Uis tin project in Namibia through its Greenhills subsidiary.
• The company now holds an 49.5% interest in Dawnmin Africa Investments which holds an effective 85% stake in the project; the remaining 15% being held by the ‘Small Miners of Uis’, a government entity.
• Bushveld agreed to pay for the 49.5% stake with 41m new shares worth (£4.14m, $5.27m) in Bushveld Minerals back in December.
• PFS & BFS: The agreement also allows for the payment of $1.2m to earn into a further 1% of Dawnmin plus a further $1m to PFS for an extra 10% and another $1m to deliver a BFS for another 10%.
• The deal would give a 71% stake in Dawnmin for $5.27m +$1.2m +$1m +$1m = $8.47m valuing Dawnmin at $11.9m and the whole Uis tin project at $14m.
• Scoping study: Erongo which is the major shareholder in Dawnmin will also spend A$2m to complete a scoping study including processing equipment which we assume with be for some trial mining and processing. This should add to the value of the project, though we do not include it in our simple valuation above.
• Bushveld is appointing two directors through its Greenhills subsidiary to sit on the relevant boards alongside the Erongo-nominated directors.
• Uis is an interesting tin project. It has potential for >90,000t of contained tin in a large low grade resource though better value may be gained from selective mining of a smaller and higher grade portion of the project.
• Value: The total consideration of $14m values the project at $700/t of contained tin at the smaller 20,000t non-JORC resource and $156/t if one was ever to mine the larger and lower grade 90,000t non-JORC resource.
• Lithium: The real value of the transaction may lie in the lithium which is associated with the tin in pegmatite veins on the property which may run as high as 10% Li2O, see below.
• Unusually high lithium grades as seen in grab samples in the old Uis tin tailings and pegmatite veins.
• Tawana, an Australian lithium producer, paid $3m to acquire the rights to the Uis tin and lithium tailings last September reporting 21mt of tailings with augur drill results showing 0.43-0.95% lithium. Tawana comment that “the most common lithium minerals reported from the unzoned albite rich Uis pegmatites are:
o Amblygonite (Li,Na)AlPO4(F,OH), contains 7.3-10.0% Li2O;
o Petalite LiAlSi4O10, contains 3.4-4.9% Li2O; and
o Spodumene LiAl (SiO3)2, contains 8% Li2O.”
o Elevated tin grades in parts of the orebody should enable Bushveld to start smaller scale mining relatively quickly.
o Settlement of Barak loan financing: Bushveld also report today the full settlement of the bridge loan from the Barak Fund including all outstanding fees.
o The $11m Barak bridge loan enabled Bushveld to complete the acquisition of the Vametco vanadium operations which have effectively paid for themselves using the cash flow from the operations.
o The financing was achieved without recourse to shareholders for new funds, a remarkable feat, enabled through a well timed and well constructed deal which coincided with rising vanadium prices and a weaker South African rand. Vanadium pentoxide prices peaked at $6.18/lb in May pulling back to $5.32/lb today.
Conclusion: We look forward to further news on the grades of lithium and tin at the Uis project in Namibia.
Gemfields (LON:GEM) 40.5p, mkt cap £222.7m – Record breaking Singapore ruby auction at US$61.13/ct
• Gemfields reports that their eighth auction of rough rubies and corundum from the Montepuez mine in Mozambique, held between 10-14th June, generated record revenues of US$54.8m at an average price of US$61.13/carat. This was more than double the last ruby auction per carat value.
• A total of 1,048,687 carats of “high and commercial grade rough rubies in both treated and untreated form” was offered for sale in 83 lots and the auction sold 78 of these parcels of stones (895,848 carats) representing 85% of the total carats.
• The company comments that it has seen “growing demand for rough rubies suited to the production of high quality jewellery as well as larger volume production runs, thereby allowing a broad cross-section of product to be placed on offer.”
• As “quality mix offered at this auction comprised a blends of varying qualities and sizes of material, a direct top-line comparison with the results of previous auctions is not feasible.” however, for the record, the previous auction of Montepuez output held in December 2016 realised an average of US$27.79/carat on the sale of 1,094,406 carats.
• In our opinion, however, the success of the Singapore auction in realising record revenues reflects Gemfields depth of understanding of the requirements of its customer base and of the increasing acceptance of Gemfields’ grading system as a benchmark for consistency of supply to the downstream jewellery manufacturers.
• CEO, Ian Harebottle, commented “The prices achieved at this auction, combined with the high percentage of goods sold, highlights our belief in the ongoing increase in demand for responsible sourced Mozambican rubies across key markets and jewellery categories.”
• The company notes that during the financial year to date, revenues from its auctions of Mozambican rubies and emeralds from its Kagem mine in Zambia total US$132.7m. For reference, we note that in the financial year to 30th June 2016, Gemfields reported revenue of US$193.4m, of which approximately US$73.1m was attributed to its Mozambique operations.
Conclusion: The record revenue from the recent ruby auction in Singapore shows an increasing market appetite for the Montepuez product and points to a growing acceptance of Gemfields for its ability to deliver consistent quality and volume to the downstream jewellery industry.
Stratex International (LON:STI) 1.425p, Mkt cap £6.7m – Crusader acquisition details
• Stratex International reports further information on the previously announced acquisition of Australian listed, Crusader Resources.
• The Crusader shareholders are offered 6.6 new Stratex International shares for each share in a deal which values Crusader at approximately £31.1m and will see Crusader shareholders holding approximately 71% of the enlarged Stratex.
• “The Proposed Transaction will also constitute a reverse takeover under the AIM Rules for Companies and will require the approval of Stratex shareholders and the publication of an Admission Document.”
• Crusader’s directors are unanimously recommending the transaction and have undertaken to vote in favour. Crusader’s executive director, Paul Stephens, and two non executive directors, Jim Rogers and John Evans, will join the Stratex Board.”
• Stratex has also agreed to provide interim funding of A$1m to Crusader for working capital via a convertible loan note.
• Crusader reports a JORC compliant resource of approximately 2.7m oz of gold based on its Borborema (2.43moz at an average garde of 1.1 g/t gold) and Juruena projects (261koz) in north-east Brazil. In addition, Crusader owns 100% of the Posse Iron Ore Mine in Brazil. The mine, located some 30km from Belo Horizonte, contains a JORC indicated & inferred resource of 36mt at an average grade of 43.5% iron.
Conclusion: The proposed acquisition of Crusader Resources with Brazilian assets is a major diversification for Stratex which was built on exploration success in Turkey and a portfolio of African exploration projects. We look forward to the publication of the AIM Admission Document as a source of more detailed information on the Brazilian assets.