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Today's Market View - Bluebird Merchant Ventures Ltd, Firestone Diamonds, Goldplat plc, Gemfields PLC, Georgian Mining Corporation, BlueJay Mining PLC, Ortac Resources Ltd, Trans-Siberian Gold

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Gold prices are up $8/oz at $1,253/oz as prices halted a five day decline yesterday

• The US$ is consolidating around 97.5 levels after retreating slightly from 97.9, the highest since mid-May, hit on Tuesday.

• Copper is flat after climbing more than 1.5% yesterday on the weaker US$ and reports over continuing labour related disputes at Grasberg.

• Zinc posted strong performance over the last couple of days with prices up 4.5% this week as LME stockpiles contracted for 25 days now to the lowest since Jan/09.

• Zinc prices are up 2.1% today following news of a 29% fall in LMW on-warrant stocks today.

• Oil prices stabilised trading just sub $45/bbl and after posting a c.2.6% drop on Wednesday.

• Iron ore futures climbed on Thursday undoing declines over the last two days with prices up slightly on last week (+0.8%); benchmark 62% Fe Qingdao material is changing hands at $56.8/t, according to MetalBulletin.

 

Dow Jones Industrials  -0.27% at 21,410

Nikkei 225   -0.14% at 20,111

HK Hang Seng   -0.11% at 25,666

Shanghai Composite    -0.28% at 3,147

FTSE 350 Mining   -1.12% at 14,029

AIM Basic Resources   +0.49% at 2,546

 

Economic News

 

China – Investor demand for local non-performing loans has seen prices of bad debts rising more than 30%.

• The average selling price of NPLs increased to around 50c on the dollar in the past two years compared to 30c, according to the data from the deals and business recovery services unit of PWC.

• Such a high level is “very rare” in international markets, PWC said.

• NPLs of nation’s lenders climbed 61% in the past two years to CNY 1.58tn ($231bn) at the end of Mar.

• Equities creeped marginally higher led by a positive momentum of the MSCI decision to include a number of listed A-shares into benchmark indices.

• The CSI 300 Index is up 0.1% taking two days’ gains to 1.2%.

 

UK – The pound is little changed against the US$ this morning and is up 0.3% on yesterday after the BoE chief economist Andy Haldane heighted increasing risks of delayed monetary policy tightening.

• Andy Haldane said he may vote for a rate hike in H2/17 of the year.

• Haldane was one of five members who voted in favour of leaving rates unchanged last week (v three members supporting a 25bp increase) saying there were “few signs of higher wage growth” and the “chance of a sharper than expected slowing in the economy”.

 

New Zealand – The central bank left rates at a record low 1.75%, in line with estimates.

• The Governor highlighted weaker than forecast economic growth rates and moderate inflation in labour earnings.

• Nevertheless, headline inflation came in at 2.2%yoy in Q1/17, beating estimates for a 2.0% increase and up from 1.3% in Q4/16.

• This compares to the RBNZ official target corridor of 1-3% with a “focus on keeping future average inflation near the 2% target midpoint”.

• The kiwi climbed against the US$ on the back of the announcement and traded 0.6% up from yesterday as the bank highlighted positive growth outlook “supported by accommodative monetary policy, strong population growth, and high terms of trade”.

 

Currencies

US$1.1166/eur vs 1.1135/eur yesterday.   Yen 111.04/$ vs 111.16/$.   SAr 12.993/$ vs 13.090/$.   $1.267/gbp vs $1.261/gbp.  

0.755/aud vs 0.756/aud.   CNY 6.832/$ vs 6.829/$.

 

Commodity News

Precious metals:

Gold US$1,253/oz vs US$1,246/oz yesterday

   Gold ETFs 60.2moz vs US$60.2moz yesterday

Platinum US$930/oz vs US$920/oz yesterday

Palladium US$884/oz vs US$870/oz yesterday

Palladium – North American Palladium Ltd signs an agreement with Impala Platinum Holdings Limited and Transition Metals Corporation for the Sunday Lake project and commences new exploration strategy.

• An agreement provides North American Palladium with an exclusive right to acquire 75% ownership position in Sunday Lake project located near Thunder Bay.

• New exploration strategy features up to $10m of annual exploration spending over next three years.

Silver US$16.62/oz vs US$16.48/oz yesterday

           

Base metals:   

Copper US$ 5,700/t vs US$5,639/t yesterday

Aluminium US$ 1,871/t vs US$1,874/t yesterday

Nickel US$ 8,920/t vs US$8,915/t yesterday

Zinc US$ 2,633/t vs US$2,560/t yesterday – This week, Zinc One Resources has stated their upcoming plans, following the receipt of an independent report commissioned on zinc oxide production, which was prepared by Mr. Pascal Briol and Mr. Noel Masson.

• Zinc One plans to submit drill-platform permit applications to the Ministry with the intention to begin the drill program in the third quarter.

• Program should be completed by December and will involve low-cost shallow drilling and tight drill spacing in the zones of known mineralization and on the periphery of the known mineralization.

• CEO also said that “The high-grade Bongará Zinc-Oxide Project will be a major focus in the near term. We also firmly believe that there is substantial upside for additional high-grade, zinc-oxide mineralization along the 6km long trend of the known mineralization from Mina Grande ... Zinc One continues to focus on the Bongará property and will … advance the project".

• He finished by saying “We believe this is the perfect time to be advancing a zinc project and remain bullish on the zinc commodity pricing”.

 

Lead US$ 2,180/t vs US$2,120/t yesterday

Tin US$ 19,580/t vs US$19,600/t yesterday

           

Energy:           

Oil US$44.7/bbl vs US$46.0/bbl yesterday

Natural Gas US$2.908/mmbtu vs US$2.898/mmbtu yesterday

Uranium US$20.05/lb vs US$20.00/lb yesterday

 

Lilthium – According to the Alexander Mining PLC, on Wednesday there was "significant interest" from several miners for its joint venture project to recover lithium from hard rock sources.

• In March, this year, Alexander launched the lithium research and development joint venture with Nicholas Welham, the company's principal technology consultant for hypochlorous and ammoniacal acid leaching.

• According to the company, following the interest in the project, Alexander and Welham have expanded the joint venture to include testing of potential processes on a wider range of lithium bearing minerals, ores and concentrates (original deal was restricted to spodumene containing ores, concentrates and tailings) while the commercial terms remained unchanged.

        

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$55.7/t vs US$55.8/t

Chinese steel rebar 25mm US$568.2/t vs US$571.7/t  – Great Lakes steel production shot up to 660,000 tons, an increase of 4.76%, according to the American Iron and Steel Institute.

• As on June of this year, US steelmakers have produced 41.6m tons of steel which is 2.5% more than they did during the same period in 2016.

• Steel mills have been running at a capacity of 74.4% so far this year, up from 72.6% through the same time last year.

• Overall, U.S. national steel output rose by 21,000 tons last week to 1.739m tons, a 1.22% increase, according to the American Iron and Steel Institute.

 

Thermal coal (1st year forward cif ARA) US$69.2/t vs US$69.8/t yesterday

Premium hard coking coal Aus fob US$143.0/t vs US$142.5/t

 

Other:

Tungsten APT European US$220-226/mtu vs US$220-226/mtu

Titanium – Spirit AeroSystems and Norsk Titanium have disclosed a commercial aerospace collaboration in 3D printing, reckoning that “thousands of titanium parts” manufactured at Spirit or by its suppliers are candidates for the new technology.

• Norsk Titanium’s proprietary plasma arc rapid plasma deposition (RPD) will be used to build the parts to a near-net shape, in turn, reducing waste, using less energy and cutting product costs Norsk says.

• “Reducing our material cost and our environmental impact is a win-win for Spirit, our customers and the communities where we do business,” said Spirit CEO Tom Gentile.

• Norsk also said that as well as working on 3D technology with Spirit since 2008 it also completed testing of its RPD material with Thales Alenia Space, the venture between Thales and Leonardo, to develop, produce and test components for use in spaceflight, and that it completed the first on-time delivery of FAA-approved RPD components for the Boeing 787 Dreamliner.

 

Company News

BHP Billiton / SolGold – Ecuador is hot property as BHP commits $41m to licenses near SolGold’s Cascabel project

BUY

• BHP has signed a formal exploration deal with the government of Ecuador over the spending of $41m on a series of concessions in the state of Imbabura, eg near SolGiold’s Cascabel project.

• SolGold recently signed up a series of licenses along from Cascabel in an effort to tie up more of the more promising exploration ground in Ecuador.

• BHP had previously made an offer to put $30m of funding into SolGold’s Cascabel project in an effort to displace Newcrest who have now committed a total of $60m into Cascabel

• Their offer was to take a 10% stake for $30m as part of an earn-in agreement for up to 70% of the local project subsidiary through total expenditure of $275m.

• Newcrest has since committed $60m earning a total of 14.54% of SolGold with conditions preventing Newcrest voting against a potential future takeover offer.  This has proved to be the better offer from a shareholder perspective.

• The Mining Journal report: The government of Ecuador appears to now be encouraging mining companies to spend money in Ecuador with new commitments of $415m over the next four years. Investment agreements with Lundin Gold and INV Metals are developing the giant Fruta del Norte and Loma Larga projects appear to be leading the way for the majors to come into Ecuador.

• SolGold have published an updated presentation including an updated model with marked drill holes and geophysics overlain

• There is further information on Ecuador showing potential for the Cascabel project to represent 2.5-3.5% of the GDP of Ecuador

• http://www.solgold.com.au/presentations/

 

Bluebird Merchant Ventures (LON:BMV, Standard List) 1.9p, Mkt Cap £3.5m - Land access to flagship Gubong gold Mine granted

• Bluebird Merchant Ventures reports that it has received formal access to the Gubong gold mine in South Korea.

• Agreement has also been granted by the Government Safety Department on the activity to be undertaken.

• The Gubong gold mine closed in 1967 and has nine different veins with production coming from 6 of them over 60 years until its closure.

• Gubong has >50km of level development accessed by 2 vertical shafts and 6 incline shafts indicating the scale of the historical mine and potential scale of a future project.

• Bluebird will now start a 6-9 month evaluation on mine viability including resource estimation, mining methodology, metallurgical process, costing and potential returns.

• The Cheongyang County Government has since ratified a request for co-operation has been submitted by Bluebird’s partners Southern Gold.

• Commitments:  Bluebird is committed to expenditure of $0.5m to produce a feasibility study in its first 12 months and to invest A$0.25m into a placing for Southern Gold shares.  The company has the same expenditure and commitment for the Taechang gold mine.

• Taechang: Bluebird’s second historic gold mine is progressing with data being digitized. Additional information shows that a much larger mine exists in the area than was previously indicated causing the team to consider their options

• Batangas (25%, option to increase to 50.1%) (Philippines):  Bluebird continues to hold a 25% stake in the Batangas Gold project in the Philippines in jv with Red Mountain Mining.  The company report recent developments in the Philippines could “provide a brighter outlook for the mining sector.  The President recently appointed Roy Cimatu to be the new Secretary for the Department of the Environment and Natural Resources.  It is believed that the new Secretary will take a more moderate tone than his predecessor and has stated that he believes responsible mining is possible in the Philippines.  Bluebird is aligned with this view and continues to monitor developments towards a more positive future for Philippine miners.”

• A pre-feasibility study on Batangas done on 15 June 2016 reported:

o capex $16m

o 128,000oz gold in open pit reserve

o Grading 4.2g/t

o Cash costs $735/oz

o Free Cash Flow generation $34m

o NPV 19m assuming a gold price of US$1,250/oz

o IRR 27%

*SP Angel act as broker to Bluebird Merchant Ventures

 

BlueJay Mining (LON:JAY)* 14.3p, Mkt Cap £109m – A rare Tsunami wrecked houses and killed four people on an island off the coast of Greenland on Sunday

• The Tsunami was caused by an earthquake which triggered a landslide into the sea off the mainland causing a rush of water to engulf the village of Nuugaatsiaq which lies just offshore.

• The island of Nuugaatsiaq is 728km away from Pituffik near where BlueJay’s ilmenite deposit is located.

• It is highly unlikely that BlueJay could ever be affected by this sort of event due to the topography of its location.

*SP Angel acts as nomad and broker to BlueJay

 

Firestone Diamonds (LON:FDI) 41.5 pence, Mkt Cap £132m – Standby facility with RCF

• Firestone Diamonds has announced that it has agreed with RCF an extension to the US$15m Standby Facility, which expires on 30th June 2017, for a further year until 30th June 2018.

• The agreement is subject to Firestone Diamonds drawing down US$5m on signature of the amended terms. This US$5m, taken together with proceeds of the company’s first diamond sale from the Liqhobong mine and existing cash, gives the company cash on hand of US$13.1m.

• The company makes clear that the extension of the facility is motivated by prudence and that “The Company has sufficient financial headroom to meet its debt obligations as the fall due.” Indeed, “The Company has also commenced quarterly repayments under the terms of its US$82.4 million ABSA debt facility, having achieved first production, and made its first capital repayment of US$1.4 million in March 2017.”

• On the operational side, the company confirms that its Liqhobong operations are progressing well with recovery rates and grades “improving in line with management’s expectations.”

• As a result, Firestone Diamonds “expects to recover approximately 360,000 carats in the financial year ending 30 June 2017, against April’s guidance of 300,000 carats.”

Conclusion: A 20% increase in the company’s production guidance for the period to 30th June 2017 since April implies that the production build-up at Liqhobong has been going well and we look forward to the June 2017 year end results.

 

Gemfields (LON:GEM) 39p, Mkt Cap £214m – Gemfields independent committee recommend Fosun cash bid as better offer for investors

• Pallinghurst has declared its offer unconditional despite not actually holding enough shares to complete the bid.

• Pallinghurst’s number of shares held and accepted now stand at 61.25%

• The offer still remains conditional on the passing of an ordinary resolution to approve the offer at the Pallinghurst general meeting at 11:00 on 26 June.

• “There is the possibility that Pallinghurst will not receive the necessary majority to pass the ordinary resolution. The Independent Committee would also note that, in the event of the Unsolicited Pallinghurst Offer closing, based on the number of shares held by Pallinghurst and the acceptances that they have received to date, Pallinghurst would not independently be able to delist Gemfields from AIM.

• The potential inability for Pallinghurst to delist the Company post closing would appear to be at odds with Pallinghurst’s rationale for the transaction as outlined in their circular to shareholders dated 2 June 2017.”

• We also note the Telegraph reported that Brian Gilbertson had been previously censured for failing to declare that he had been censured by a court in the Cayman Islands for breaching his fiduciary duties.   The Telegraph reported:

o “A Cayman Islands court ruled in 2014 that Brian Gilbertson failed in his responsibilities as a director when he bought jewelry brand Fabergé in 2007, having initially promised to engineer the deal on behalf of his principal investor, Viktor Vekselberg.“

o “Mr Gilbertson was not ordered to pay compensation to the Russian billionaire because Fabergé was loss making. The ruling was omitted from a circular Pallinghurst sent to shareholders earlier this month, which asserted that its directors had not been subject to “any public criticisms … by statutory or regulatory authorities””

• If Pallinghurst is able to block the Fosun cash offer then it is possible that Gemfields might remain listed on the AIM market in London offering investors the potential for further upside going forward.

 

Georgian Mining* (LON:GEO) 18p, Mkt Cap £20.6m – Results statement highlights scale of opportunity at copper, gold projects

(Georgian’s assets in Georgia are held in a 50:50 joint venture)

STRONG BUY

• Georgian Mining report significant progress achieved over the past year today.

• The company is planning to start mining this year and is now progressing to Phase 2 of its exploration program to define a target 3-5mt of copper, gold ore.

• Phase 3 is to further define a 50mt tonne target of copper, gold mineralisation in the Kvemo Bolnisi area.

• We believe the 3-5mt phase 2 target will be achieved over the next year or so with the 50mt target taking longer to achieve.

• We reckon Kvemo Bolnisi and neighbouring licenses have the potential to match the Madneuli mine in time which has produced some 80mt of copper, gold ore grading around 1.0% copper and 1g/t of gold.  The Mandeuli mine is now running short of ore needing supplies from new mines like GOE’s Kvemo Bolnisi project to feed the process plant.

• The company is well led by Greg Kunzel and Martyn Churchouse with Tony Frizelle coming on board as Chairman.  Mark Owen and James Royall the key geologists involved and

• Martyn Churchouse and Neil O’Brien have both acted for Lundin Mining which has previously taken an interest in the company.

• The results show an understandable rise in administration expenses to £1.7m for the year from £0.6m previously due to the increase in activity in Georgia.

• Directors fees were just £107,252 for the year vs £111,088 last year highlighting the discipline and unusually good value of the board structure.

• Employee salaries rise to £158,000 vs £12,569 again highlighting the value of the company given the amount of work undertaken.

• Professional legal and consulting fees rose to £337,388 vs £172,207 again reflecting the higher level of working being done.

• The group took a non-cash £4m impairment in assets relating to the carried forward costs of the Austrian assets which are now not a focus for the company.

• The final result is a £5.6m total loss for the year

• The company is very well located on the prospective ‘Tethyan’ copper belt which is considered to be highly prospective by many of the world’s geologists.

Conclusion: Georgian Mining is one of the best value opportunities we have seen in the mining space for many years. The company is going into production shortly with no significant capex due to its proximity to the Madneuli mine and is likely to prove up 3-5mt of copper, gold ore over the next 12-18 months if not sooner.  It is hard to think of a more sure value proposition in the junior exploration market today,

 

Goldplat (LON:GDP) 7.1p, Mkt cap £11.9m – BEE compliance in South Africa

• Yesterday, we forgot that for some reason Goldplat has to comply with BEE legislation with a BEE holding in its South African business despite that fact that it does not actually mine anything in South Africa.

• This fact accounts for the paragraph in its update yesterday commenting on the new South African Mining Charter which proposes a higher 30% BEE holding rate.

• The South African Chamber of Mines is reported to be taking the Ministry of Mines to court over the new Charter which has been pushed forward without any industry consultation.

 

Ortac Resources* (LON:OTC) 3.6p, Mkt cap £5.4m - Underground permit to be reissued in Slovakia

(Sturec project 100% owned)

• The Main Mining Bureau has confirmed that the underground mining permit for the Sturec gold project in Slovakia will be reissued

• The permit should allow Ortac to continue to test underground trial mining and bulk sampling to advance the main Sturec open cast project at Kremnica

• The company has the right to re-establish mining operations and to operate a small scale underground mining operation within their license area

• The project has a JORC Code (2004) compliant mineral resource of 1.36 moz of gold equivalent including a measured gold resource of 187koz gold eq at 1.69g/t and an indicated resource of 823oz eq grading 1.76g/t.

• The mine has historically produced some 1.5moz of gold and is the reason for the location of the historic Kremnica gold mint located within the town.

*SP Angel acts as nomad and broker to Ortac Resources

 

Trans-Siberian Gold (LON:TSG) 41.5 pence, Mkt Cap £45.7m – Additional $5m debt facility

• Trans-Siberian Gold reports that it has agreed a $5m additional debt facility with VTB Bank.

• The new facility, which is in addition to the $15m loan announced on 20th June, has a three year term and attracts interest at 6.2% pa.

• Welcoming the additional loan facility, the CEO of Trans-Siberian Gold, Dmitry Khilov, noted that “We have reduced the cost of debt which helps us to maintain flexibility for growth and development.”

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