Beowulf Mining (BEM LN) – Kallak North Application update
Dessert Star Resources (DSR CN) –is to develop a copper-zinc project in British Columbia
Ortac Resources* (OTC LN) BUY – Akyanga mineral resource update
Pilbara Minerals (PLS AU) – raises A$80m to fund development of Pilgangoora Lithium Tantalum project
Savannah Resources (SAV LN) – Cost savings on tailings storage at Mahab 4 and Maquail South in Oman
SolGold (SOLG LN) - BUY – Further thoughts as Newcrest commits another $41m to SolGold at 41p/s in transformational deal
Chinese authorities eased a number of restrictions for foreign investments in finance, metals, construction, insurance, auditing, rail transit equipment manufacturing, drug making and transportation sectors, effective July 10.
• Among finance and commodities related changes are (Bloomberg):
o Waiting period on foreign banks starting yuan-related business to be removed;
o Total asset requirement on foreign investors in financial asset management companies to be removed;
o Restriction on precious metal exploration and mining to be removed;
o Restriction on smelting of rare metals including molybdenum, tin and antimony to be removed.
Gold prices are trading at the weakest level in three weeks with the US$ index also little changed today after finishing the previous volatile week -0.3%.
• The CFTC data showed money managers cut their net long positions in gold for the first time in four weeks ahead of the FOMC decision to raise rates with the number of net long contracts down falling 11% in the week ended June 13.
• Major aluminium producing province is reported to launch government checks of local smelters on June 24-25 regarding official production rationing policies, SMM research said citing the NDRC document.
• Bulk and base metals are trading higher this morning helped by the news that Chinese regulators will ease restrictions on institutions regarding investments in commodities.
• Fang Xinghai, vice chairman of the China Securities Regulatory Commission in a speech on Saturday flagged the importance of promoting investments in commodities and developing derivatives markets.
• Brent is marginally weaker this morning following a four week run of declines as the data shows US producers continue to add drill rigs challenging OPEC efforts to cut market oversupply.
South Africa BEE – new BEE Charter in South Africa digs bigger hole for ANC to bury themselves into
• The Minister of Mines in South Africa has indicated that a new BEE Charter may raise the BEE equity commitment to 30% from 26% currently and also require miners to ensure that the 30% BEE commitment is in place even if previous BEE stakeholders have sold their shares.
• The proposals appear to do little to address the underlying deals which enable BEE shareholders to acquire their stakes but sometimes pay little out to the BEE partners.
• There is a danger that the proposals may be seen as unworkable unless miners are able to completely lock in their BEE shareholders.
• Investors are concerned that the Minister of Mines may also impose further restrictions and costs on miners which are not currently required.
• The South African Chamber of Mines is concerned that the Minister of Mines is trying to impose the new regulations unilaterally without discussion or any form of agreement with mining industry stakeholders
Titanium – Norsk Titanium rolls out Rapid Plasma deposition (3D) printing machines
• Norsk Titanium has announced that it has finalized a definitive purchase agreement for 12 of its Rapid Plasma Deposition machines with Fort Schuyler Management Corporation and Empire State Development for use in its Plattsburgh production centre in New York.
• Machines from that order are currently being delivered throughout 2017.
• Each of these machines are capable of printing up to 20tpa of material and use significantly less energy and material allowing for a cost savings of >30% over legacy forging.
• Norsk Titanium has also announced 60% expansion in New York production capacity.
• We expect the new process to lead to an increase in the overall use of titanium components in aerospace and other industries with exponential growth in the number of machines and feedstock material to be used.
Dow Jones Industrials +0.11% at 21,384
Nikkei 225 +0.62% at 20,068
HK Hang Seng +1.04% at 25,893
Shanghai Composite +0.64% at 3,143
FTSE 350 Mining -0.87% at 14,252
AIM Basic Resources +1.22% at 2,574
Economic News
US – Consumer sentiment dropped in June undoing most of the increase recorded post the Trump election on the back of the lack of clarity of economic policy direction.
• After hitting the highest level in over decade in January on expectations for health-care reforms, tax cuts and regulatory changes which have been stalled to date.
• The report comes amid latest reports showing the first monthly decline in nine months in May which does not bode well for consumer spending component of the nation’s GDP which has been driving economic growth lately.
China – Property prices growth continued to slow down for a sixth consecutive month in May, according to China’s National Bureau of Statistics.
• The pace came down to 10.4% compared with a peak of 12.6% recorded in Nov/16.
• Average prices were up in 56 of 70 cities compared to in 69 cities in Apr.
• First batch of Chinese A-stock is awaiting a decision on a potential inclusion in the MSCI emerging markets benchmark.
• The index provider last June has delayed the inclusion of A-shares into the stock index for a third straight year on the back of regulation and accessibility for global investors concerns, FT reports.
UK – Official Brexit talks kick off today with David Davis set to meet with Michel Barnier in Brussels.
France – Macron’s La Republique en Marche and centrist all Modem won 350 of 577 seats in the National Assembly offering the President a spectacular political mandate to proceed with proposed economic reforms.
• This is a remarkable success for a party that has been formed only 14 months ago.
• Socialists, the outgoing government, held only to 44 of their 284 seats.
• The centre right Republicans together with allies will be the major opposition with 137 seats, down from 199 seats.
• The far right national Front secured only 9 seats with Marine Le Pen to become the member of Parliament for the first time.
• Results come on the back of record low turnout of 43%.
• The EURUSD exchange rate is virtually flat on the day while the French benchmark CAC 40 climbed 1.2% on Monday morning hitting the strongest level in two-weeks and outperforming other European peers.
Currencies
US$1.1188/eur vs 1.1156/eur last week. Yen 111.21/$ vs 111.19/$. SAr 12.790/$ vs 12.834/$. $1.278/gbp vs $1.277/gbp.
0.761/aud vs 0.759/aud. CNY 6.815/$ vs 6.812/$.
Commodity News
Precious metals:
Gold US$1,251/oz vs US$1,254/oz last week
Gold ETFs 60.2moz vs US$60.3moz last week
Platinum US$927/oz vs US$922/oz last week
Palladium US$870/oz vs US$871/oz last week
Silver US$16.63/oz vs US$16.80/oz last week
Base metals:
Copper US$ 5,685/t vs US$5,658/t last week -
Aluminium US$ 1,883/t vs US$1,873/t last week
Nickel US$ 8,975/t vs US$8,920/t last week
Zinc US$ 2,538/t vs US$2,529/t last week - Teck is in talks to sell its stake in its Stonepark zinc jv in Limerick, Ireland which is located just 5km from Glencore’s Pallas Green project
• Teck is in jv with John Teeling's Connemara Mining (23.5%) and is looking to sell its stake to a local group called Group Eleven Resources .
• A total of US$9m has been spent on the project to date though it is a long way off any decision to start mining..
Lead US$ 2,138/t vs US$2,109/t last week
Tin US$ 19,640/t vs US$19,380/t last week
Energy:
Oil US$47.2/bbl vs US$47.2/bbl last week
Natural Gas US$2.954/mmbtu vs US$3.062/mmbtu last week
Uranium US$20.00/lb vs US$20.00/lb last week
Hydrogen - Researchers in Australia have discovered a way to produce hydrogen using sunlight and water vapor.
• The process involves painting a chemical compound onto sun-facing roofing.
• Researchers at RMIT University reckon the process could replace carbon-based fuels as we know it.
Lithium –
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$55.3/t vs US$54.6/t – China, high iron ore stocks may reduce on tighter credit controls despite surplus production
• Iron ore production thought to be at 100mt surplus in 2017
• Chinese blast furnaces also thought to be running at near peak utilization rates leading to strong demand for feedstock materials.
Chinese steel rebar 25mm US$571.7/t vs US$571.9/t
Thermal coal (1st year forward cif ARA) US$68.6/t vs US$68.2/t last week
Premium hard coking coal Aus fob US$141.9/t vs US$145.9/t
Company News
Beowulf Mining (LON:BEM) 8.75 pence, Mkt Cap £46m – Kallak North Application update
• Beowulf Mining reports that it is continuing to experience delays in the protracted application for an exploitation permit for its Kallak North magnetite project in Sweden.
• The County Administrative Board (CAB) “has suggested more information needs to be provided to further assess the potential impact of a mining operation at Kallak on Laponia” and while on the face of it this might be seen as an uncontroversial request, the CAB “has not said what information needs to be provided.”
• The Swedish National Heritage Board (RAA) and the Swedish Environmental Protection Agency (NV) have advised Sweden’s Mining Inspectorate “that the Company should provide more details to describe the possible indirect effects of a mining operation at Kallak on Laponia, the interaction of mining and reindeer herding, and matters related to transport.”
• “It is understood that the RAA and NV have refused to provide further comments to the CAB on the application, despite the CAB asking for them.”
• Beowulf CEO, Kurt Budge, commented “The opportunity cost, time and resources, expended on this application process, have not only been borne by the Company, but also by the community in Jokkmokk. The continual delays and inefficiency of the application process are unacceptable.” Mr Budge went on to point out that “The Mining Inspectorate has been given a mandate by the Government of Sweden to make a decision on our application. Our application has met all the requirements of the prescribed process and we should be awarded the Concession without further delay.”
Conclusion: Beowulf’s application seems to be mired in the intricacies of the permitting process in Sweden and the lack of specific detail on the information required to move the process forward must be a huge frustration to the company. The announcement also implies a dysfunctional relationship between the various agencies contributing to the decision. We hope that the difficulties between the various parties will be resolved.
Dessert Star Resources (CVE:DSR) – C$0.4, Mkt Cap C$7.4m - is to develop a copper-zinc project in British Columbia
• Dessert Star Resources is paying C$28.8m for Capstone Mining's (CS CN) Kutcho deposit, in exchange for Capstone taking a 9.9% stake in Desert Star.
• Desert Star says it plans to advance the project, which is 100 kilometres east of Deese Lake, to the fully permitted stage by the fourth quarter of 2019.
• Desert Star, expects reserves of 10.4mt grading 2.01% copper, with by-products including 3.19% zinc, 34.61g/t silver, and 0.37g/t gold.
Ortac Resources* (LON:OTC) 3.4p, mkt cap £5m – Akyanga mineral resource update
BUY
• Ortac has announced the details of an updated mineral resource estimate at the Akyanga deposit within Casa Mining’s Misisi gold project in the DRC.
• The updated, JORC compliant inferred resource of 14.3mt at an average grade of 2.27g/t gold (1.046m oz of contained gold) was prepared by African Mining Consultants using a 1.5g/t gold cut-off grade.
• More detailed analysis of the resource at various cut-offs shows an increase of more than 350,000 oz over the previous estimate at the lower, 0.5g/t cut-off.
• The mineralisation, which is based on “five continuous mineralised vein system” is reported to be open ended providing additional targets for future drilling in the near term.
• In May, Ortac invested 2m in Casa Mining via a convertible loan note which “following conversion … [will give Ortac] an approximate 45% equity interest.”
• CEO Vassilios Carellas commented “the geology is very much pointing positively towards the view that a commercially viable and recoverable gold asset is about to be proven in what is a free milling orebody.”
Conclusion: The relatively high grade cut-off applied to Akyanga suggests that the mineralisation, which continues to remain open and which has indications of the presence of higher grade shoots within the mineralised envelope, is shaping up as a robust and coherent structure. The planned future drilling should provide further insights and we look forward to further results as the exploration programme continues.
*SP Angel acts as broker to Ortac Resources
Pilbara Minerals (ASX:PLS) A$0.37c Mkt Cap A$472m – raises A$80m to fund development of Pilgangoora Lithium Tantalum project
• Pilbara Minerals has raised an impressive A$80m to help fund the development of its Pilgangoora project in Australia.
• The A$80 is said to include commitments from qualified institutional and sophisticated investors in Australia and internationally for $53m.
• A further A$27m is coming from Jiangxi Ganfeng Lithium Co Ltd., Pilbara’s off-take partner.
• Pilbara is also running a A$15m share purchase plan for existing shareholders to be completed in July.
Savannah Resources (LON:SAV) 5.1p, Mkt Cap £27.4m – Cost savings on tailings storage at Mahab 4 and Maquail South in Oman
(Savannah holds 65% in holder of Mahab 4 and Maquail South deposits within Block 5)
• Further to our comment on Friday on progress at the Mahab 4 and Maqail South projects in Oman.
• We understand Savannah is looking at using an abandoned pit to store tailings without the need to line the pit presenting a significant cost and time saving to Savannah and its jv partners.
• The hope and expectation is that the pit may not need to be lined due to the higher ambient pressure of the local ground water.
• Ground water in the area is described as heavily contaminated due to historic mining and poor rehabilitation practices, which we suspect were virtually non-existent.
• We would also expect the local geology of multiple higher-grade VMS deposits of varying sizes to naturally affect groundwater as seen at many other VMS sites around the world.
• ‘’Savannah has received in principle approval for its tailings storage facility (‘TSF’) concept’’.
• Mahab 4 is estimated to host 1.51mt at 2.1% copper in a JORC compliant Inferred Resources
SolGold (LON:SOLG) 40p, Mkt Cap £573m – Further thoughts as Newcrest commits another $41m to SolGold at 41p/s in transformational deal
BUY
• SolGold announced on Friday that Newcrest is committing a further $41m to SolGold to further define the Cascabel copper, gold porphyry in Ecuador
• This is a transformational deal and provides the closest thing to an effective free carry for investors that we have seen in the markets for some time.
• To date, Solgold has identified 15 individual targets within a 1.3km long mineralised corridor up to 700m wide within the Cascabel project area, of which it has drilled a total of over 36,000m on 3 of the targets. “an increased understanding of the deposit is now leading to much larger step-outs in drilling”.
• Following the investments by Newcrest and Guyana Goldfields Solgold is also stepping up its drilling activity with a target of drilling 90,000m per year from early 2018. A fourth drilling rig is currently being mobilised and with a further 3 rigs expected to become operational over the next 2 quarters drill testing is expected to be underway at the Alpala East, Alpala West, Trivinio and Aguinaga by mid year and with eight rigs expected to be working by the end of the year, Solgold will also be drilling on the large Tandayama-America prospect, located further to the north.
• We repeat our comment published on Friday below:
• SolGold is suggesting that, while “the bounds of the greater Alpala system … remain untested” the company “now believes that several targets clustered within the Alpala area may coalesce.” Based on these comments, it is clear that SolGold is coming to the view that they are investigating a larger mineralised system than had been apparent at earlier stages in the exploration programme.
SolGold (SOLG LN) 36.5 pence, Mkt Cap £522m – Transformational deal as Newcrest puts a further $41m into SolGold at 41p/s
• SolGold have just announced the placement of $41m worth of new shares at 41p/s, a significant premium to the price this morning.
• Newcrest are putting another $40m into the company with a further $1.23m of shares placed with Ecuadorian investors.
• Newcrest first put $23m into SolGold at 16p/s on 17 October 2016 to fund further drilling on the Cascabel project.
• Now that Newcrest have had more time to drill and test the Alpala project and to examine the drill core it is a huge endorsement to see the Newcrest board confirm a further $40m for exploration on the project.
• The first $23m was a punchy sum to accelerate and continue SolGold’s exploration, and now that they have had further time to examine the property another $40m is a much greater endorsement of the potential future value of this project.
• Newcrest spent $44m on exploration in total in FY 2016 and $38 in 2015 demonstrating that Newcrest are significantly focussed on Cascabel project in terms of their exploration expenditure.
• Newcrest’s $40m plus the $23m already spent gives Newcrest 14.54% of SolGold leaving plenty of stock for investors to trade with Newcrest and some new shareholders footing the bill for the accelerated drill program.
• SolGold has agreed an anti-dilutionary clause with Newcrest to allow Newcrest to participate in any new equity raising over the next 12 months to maintain their stake at 14.54%.
• Given that Newcrest are committing so much of their exploration budget to SolGold for its Cascabel project we are impressed that the SolGold team have managed to keep Newcrest’s stake below that of a controlling shareholder.
• Furthermore, Newcrest must continue to support certain transactions including a change of control transaction in SolGold if recommended by the SolGold board and supported by an independent valuation. Eg if BHP or Rio Tinto decided to make an offer for SolGold then Newcrest must vote alongside the rest of the SolGold board in accepting or rejecting the potential bid.
• Newcrest operate Cadia Valley (Aus), Telfer (Aus), Lihir (PNG), Bonikro (Ivory Coast), Gosowing (Indonesia). They are developing the Wafi-Golpu project in PNG on of the highest grade porphry copper systems in South East Asia as well as Namosi another copper-gold project in Fiji.
Conclusion: We can not overstate the significance of this deal. Newcrest know what they are doing when it comes to the future of large-scale deep-level ‘block cave’ mining and exploration of these types of projects. This second investment by Newcrest is transformation for SolGold and implies that there is very much more to define and to find within the Cascabel license area in Ecuador.
Rarely have we seen so many investors effectively free-carried in this way.