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Today's Market View - Kodal Minerals, Ncondezi Energy, Petropavlovsk PLC, SolGold plc, Gemfields PLC, Lithium Corporation

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Gemfields (LON:GEM) – China banking regulator warns local lenders to review exposure to overseas deals

Goldcorp (OTCMKTS:GG) – selling Camino Rojo silver and gold project in Mexico to Orla Mining

Kodal Minerals* (LON:KOD) – Birimian Limited increases resource at its Goulamina lithium project in Mali

Ncondezi Energy (LON:NCCL) – US$582,000 loan facility

Petropavlovsk (LON:POG) – Shareholders vote in favour of a major Board reshuffle

SolGold* (LON:SOLG) – Further promising assay results from Cascabel

West Cumbria Mining (LON:WCM) Private - announced that it plans to extract high value coal used for steelmaking rather than coal used predominantly in power stations.

 

Gold is flat with the precious metal gaining its weekly losses back as the US$ index retreats from one month high hit on Tuesday.

• Zinc prices post new gains (+0.96% at $2,725/t) climbing to the highest in two months as exchange tracked inventories continue to slide.

• Orders to withdraw zinc from LME stockpiles jumped 10% to the highest in three years.

• Generally, base and precious metals look stronger today, while bulk commodities such as iron ore and coal are slightly off.

• Iron ore inventories in Chinese ports continue to build up with latest estimates for pointing to record 141.5mt.

• Brent is little changed consolidating around $45/bbl following sharp declines recorded earlier this week (-4.4% since Monday).

 

Dow Jones Industrials  -0.06% at   21,397

Nikkei 225   +0.11% at   20,133

HK Hang Seng   +0.12% at   25,704

Shanghai Composite    +0.33% at    3,158

FTSE 350 Mining   +0.06% at   14,263

AIM Basic Resources   -0.69% at    2,528

 

Economic News

Japan – Slower growth in manufacturing output recorded in June “with both orders and output rising at the weakest rates since late last year amid reports of a slight softening in market conditions”, Markit reported.

• On the positive note, external demand is said to have held up well.

 

Eurozone – While general activity growth has slowed slightly in June, the region is reported to have recorded the best quarter in six years.

• “Although the rate of growth waned to a five month low, high order book inflows and elevated levels of business confidence meant job creation remained one of the strongest recorded over the past decade as firms continued to expand capacity to meet rising demand.”

• Also, inflation pressures are reported to have largely eased “reflecting lower global commodity prices”.

• Labour market has also enjoyed strong run “as firms expanded capacity to meet demand”.

• Markit Services PMI: 54.7 v 56.3 in May and 56.1 forecast.

• Markit Manufacturing PMI: 57.3 v 57.0 in May and 56.8 forecast.

• Markit Composite PMI: 55.7 v 56.8 in May and 56.6 forecast.

 

China – China Banking regulator to assess lending on overseas investments being made by rapidly expanding Chinese groups

• Reports indicated that the regulator will asses lending to Fosun International Dalian Wanda Group, Anbank Insurance, HNA Group and Zhejiang Luosen.

o The move appears to be a further tightening of the flow of funds out of China but seems to be aimed at specific groups which have expanded fast overseas.

o We have met with a Chinese trading group which explained that it is difficult to get funds out of China for acquisitions though it is still ok to move funds for trading purposes.

o We suspect profits made overseas can then be directed for overseas acquisitions indicating that companies may need to wait for profits to build up before buying further assets.

 

China refined imports of copper fell 17% in May to 265,053t

• Aluminium imports rose by 350% to 8,917t

• Nickel imports fell 48% to 19,493t

• Zinc imports fell 15% to 33,264t

• The figures serve to highlight the volatility of import statistics.

 

Kenya – more than 50 people have contracted Cholera while attending a health conference in Nairobi, Kenya

 

Currencies

US$1.1173/eur vs 1.1166/eur yesterday.   Yen 111.33/$ vs 111.04/$.   SAr 12.970/$ vs 12.993/$.   $1.274/gbp vs $1.267/gbp.     

0.757/aud vs 0.755/aud.    CNY 6.838/$ vs 6.832/$.

 

Commodity News

Precious metals:

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

   Gold ETFs 60.2moz vs US$60.2moz yesterday

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

Palladium US$893/oz vs US$884/oz yesterday

Silver US$16.68/oz vs US$16.62/oz yesterday

           

Base metals:   

Copper US$ 5,815/t vs US$5,700/t yesterday - Copper production in Zambia, is expected to rise to 850,000t in 2017 from 770,597t last year according to the vice president

• The increased in production is a direct result of expansion projects at existing mines and Greenfield projects that are on-going.

Aluminium US$ 1,878/t vs US$1,871/t yesterday - Aluminium prices held near six-week low on Thursday as the market focused on rising supplies and exports from top producer China, lower output costs and higher inventories.

• China is seen producing and exporting more aluminium but may suffer some cutbacks due to environmental restrictions particularly in city environments.

• China's aluminium exports have risen in recent months far beyond the much smaller import figures. China exported 460,000t in May of unwrought aluminium and aluminium products, up from 430,000t in April.

Nickel US$ 9,160/t vs US$8,920/t yesterday

• Zinc US$ 2,724/t vs US$2,633/t yesterday - GPM Metals has announced the startup of the initial, first pass drill program at the Pasco Project located in the Central Peruvian Zinc Belt.

• Drill targets have been identified and drilling is to include a minimum of 2,000 meters of core diamond drilling.

• This drill program follows the recently completed ground magnetics survey vectored into two delineated zones of a 4.25 Km by 1 Km trend of anomalous Silver (20ppm - 152ppm), Lead (100ppm - 3.97%) and Zinc (1000ppm - 2.7%).

Lead US$ 2,210/t vs US$2,180/t yesterday

Tin US$ 19,300/t vs US$19,580/t yesterday

           

Energy:           

Oil US$45.2/bbl vs US$44.7/bbl yesterday

Natural Gas US$2.905/mmbtu vs US$2.908/mmbtu yesterday

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

           

Lithium Corporation (OTCMKTS:LTUM) has announced that it has begun field work on the Michael and Yeehaw prospects in British Columbia.

• The preliminary phase is a helicopter-borne vegetation geochemical survey that will allow experts to cover large areas in a short time. This survey will better localize the source of the Tantalum – Niobium stream sediment geochemical anomalies that have been detected.

• After the results, data will be assimilated into the dataset, and Lithium Corporation will then focus further work in the areas determined to be most prospective.

• The company has the option to earn a 100% interest in three separate claim blocks under the terms of the March 31, 2017 agreement between Lithium Corporation and Bormal Resources Inc.

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$55.4/t vs US$55.7/t

Chinese steel rebar 25mm US$564.4/t vs US$568.2/t

Thermal coal (1st year forward cif ARA) US$68.9/t vs US$69.2/t yesterday

• Clean coal’s future is looking very dull today, as Mississippi regulators voted to stop progress on the second clean coal power plant in the US in favour of cheaper natural gas.

• Southern Co., the utility that has been working on a new type of coal-fired power plant that emits no CO2, seems to be out of luck – the Mississippi Public Service Commission has asked the company to keep the Kemper plant running on natural gas.

• The Kemper plan was supposed to work by converting coal to gas and then turning this gas into power. The project became controversial as costs ballooned from US$2.3bn when it was launched, to US$7.5bn now.

• Bloomberg notes that the failure of the Kemper project, which was supposed to be the first of its kind in the clean coal segment, would undermine the Trump’s efforts to revive the U.S. coal industry, which heavily suffered from the sharp growth in cheap natural gas supply thanks to the shale revolution.

Premium hard coking coal Aus fob US$144.0/t vs US$143.0/t

 

Other:

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

 

Company News

Gemfields (LON:GEM) 38.5p, mkt cap £212m – China banking regulator warns local lenders to review exposure to overseas deals

• The Chinese banking regulator has warned local lenders to review exposure to Chinese companies which have rapidly expanded overseas.

• The reason given is to reduce the ‘systemic risk’ from companies which have acquired and are acquiring increasing numbers of non-China assets.

• We suspect this is all part of China’s efforts to further restrict the flow of funds out of China in order to maintain investment within its borders.

• Fosun International is to be assessed by the China regulator along with Dalian Wanda Group, Anbank Insurance, HNA Group and Zhejiang Luosen.

• It is possible that the move may restrict Fosun’s ability to buy Gemfields for cash.

 

Goldcorp (NYSE:GG) US$13.5, Mkt cap $11.6bn – selling Camino Rojo silver and gold project in Mexico to Orla Mining

• Goldcorp, the world's fourth bullion miner in terms of output, is selling its Camino Rojo silver and gold project in Mexico to Orla Mining, adding to the list of projects it unloaded in recent months such as its Mexican Los Filos gold-and-silver mine, that was sold to Leagold Mining Corp for $438m.

• Goldcorp will receive 19.9% of the outstanding common shares of Orla; a 2% net-smelter-return royalty on revenues from all metal production from the project, with the exception of metals produced under a joint venture with the junior miner.

• It is salient to note that Goldcorp will have an option to acquire up to a 70% interest in future sulphide projects as well as the right to nominate a director to Orla's board for as long as the company’s equity ownership position is greater than 10%.

•  Company is dedicated to cut costs and forecasts AISC to drop by a fifth to around $700 per ounce over the next five years. Reserves are expected to increase 20% to 50m ounces over the next five years from the conversion of existing resources at its Century project in Ontario and flagship mines in Peñasquito and Pueblo Viejo.

 

Kodal Minerals* (LON:KOD) 0.26p, mkt cap £16.3m – Birimian Limited increases resource at its Goulamina lithium project in Mali

• Birimian Limited which is working on the Goulamina project in Mali has reworked its lithium resource

• The new inferred resource increases 15% to 32.9mt grading 1.37% Li2O containing 451,000t of contained lithium oxide at a 0.4% cut-off grade

• The indicated resource rises to 25.3mt grading 1.37% Li2O containing 347,000t of lithium oxide material

• The good part of the resource definition is that it has broadly maintained the grade of the resource

• We look forward to the publication of the Pre Feasibility Study which we hope will support the positive findings of the Scoping Study.  The company will then move on to complete a Detailed Feasibility Study.

• The results of these studies should be helpful to Kodal Minerals as it moves to further drill and delineate its own Birimian lithium project, just 79km away

*SP Angel act as broker to Kodal Minerals.  A partner at SP Angel acts as Chairman to the company.

 

Ncondezi Energy (LON:NCCL) 4.1 pence, Mkt Cap £10.3m – US$582,000 loan facility

• Ncondezi Energy reports that it has agreed a US$350,000 loan from existing shareholder loan holders and an additional US$232,000 loan commitment from senior management of the company.

• The company’s Chairman, Michael Howarth has committed US$200,000 alongside US$150,000 by other existing long term shareholders.

• The company has previously announced that the senior management team had agreed to defer 50% of their salaries between November 2016 and January 2017 and 100% of their salary since February 2017. “The senior management team have agreed to convert their deferred salaries into the existing shareholder loan. The total amount to be converted into the Shareholder loan is $232,000, but will not attract any interest and matures on 2 September 2017.”

• Ncondezi is planning to establish an integrated coal mine and power generation facility in northern Mozambique. The plant is intended to generate an initial 300MW with the capacity to increase in staged development to an ultimate 1800MW.

• Ncondezi Energy has previously announced the suspension of exclusive discussions with the major China based power utility and developer, SEP, and has reported that it is seeking to identify a new strategic partner. The new loan facility is intended “to progress the new partner search and repay outstanding invoices and salaries.”

• The company comments that the “New partner search is progressing as planned with update expected in July 2017.”

Conclusion: The new loan facility demonstrates the commitment of the existing shareholders and senior management to the 300MW Ncondezi Power Project in northern Mozambique and to the effort to identify a new strategic development partner. We look forward to the update in July.

 

Petropavlovsk (LON:POG) 7.2p, Mkt Cap £236m – Shareholders vote in favour of a major Board reshuffle

• Four members of the Board of six have been replaced at the latest AGM.

• Pavel Maslovskiy (CEO) and Andrey Maruta (CFO) have been re-elected with 98% of the votes in favour.

• Peter Hambro (Executive Chairman), Robert Jenkins (NED), Alexander Green (NED) and Andrew Vickerman (NED) will be leaving the Board with c.2/3 of votes cast being against re-elections.

• Peter Hambro remains a 5% shareholder (including holdings of connected persons) in the Group.

• Ian Ashby (Sothic and M&G candidate) has been appointed as independent Non-Executive Chairman.

• Ian has 35 years experience in the minerals industry across a range of commodities with the latest role (2006-2012) being President of BHP Billiton’s Iron Ore division.

• Bruce Buck, Vladislav Egorov and Garrett Soden (Sothic and M&G candidate) will also be joining the Board.

• Two corporate lawyers Vladislav Egorov, a project director at Renova Group, and Bruce Buck, a Chelsea FC chairman, were earlier proposed as candidates to the Bard by Renova Group, the largest shareholder of Petropavlovsk.

 

SolGold* (LON:SOLG) 39.8p, Mkt Cap £600.7m – Further promising assay results from Cascabel

• SolGold has announced assay results from the recently completed boreholes 24 (CSD-17-024) and 25 (CSD-17-025) at its Cascabel copper gold porphyry project in Ecuador.

• Hole 24 was drilled to investigate a south-eastward extension of the Alpala Southeast mineralisation and has increased the known known extent of “the Alpala Deposit by 350m to the southeast … and expands the known mineralised corridor along the greater Alpala corridor (or the ‘Trevinio – Alpala Southeast’ trend) to approximately 1300m.”

• CSD-17-024 returned a downhole mineralised intersection of 586m grading 0.27% copper and 0.25 g/t gold from a depth of 636m. Within the wider intersection there was a higher grade section of 160m grading 0.63% copper and 0.65 g/t gold from a depth of 738m.

• Hole 25 at Hematite Hill, between Alpala Central and Alpala Southeast, drilling intersected 776m of mineralisation at an average grade of 0.58% copper and 0.3g/t gold from a depth of 754m. The intersection includes a higher grade portion of 238m at an average grade of 1.31% copper and 0.70g/t gold from 772m.

• The mineralisation intersected in hole 25 “includes a high grade panel of intense bornite mineralisation representing the cupola of a previously unknown high-grade quartz diorite apophysis that lies immediately east of the Alpala deposit.” The discovery of a previously unknown high grade zone in one of the more thoroughly drilled parts of the Cascabel project area is, in our opinion, a strong indication of the so far untapped resource expansion potential at Alpala.

• So far, Solgold has identified 15 targets at Cascabel, of which it has only drilled four; namely Alpala Northwest, Alpala Central, Hematite Hill and Alpala Southeast. Drilling of the first  of the other targets at Aguinaga is expected to start in August this year and the company has also identified the Moran prospect, located approximately 700 metres to the north of Alpala as a high priority target.

• The recently announced geophysical work has also shown additional areas of prospectivity for follow up work which may, in some instances, identify further drill targets.

• Results from hole 23R in the Alpala Central area are currently delayed at the laboratory, while current drilling underway includes hole 23R-D1, which is a “daughter” hole from 23R planned to test “for extensions of the high grade quartz diorite intrusion intersected in Hole 23R.”

• Hole 24-D1 is a similar “daughter” hole of hole 24 which is “testing for deeper extensions to the mineralisation discovered in Hole 24”.

• Hole 26, planned to drill to at least 1800m to test north and north-easterly extensions of Alpala at depth is currently at a depth of 451.1m within mineralised diorite.

• Hole 27 is also drilling within mineralised diorite, currently at a depth of 895.5m, to test south east extensions of the Alpala trend.

• In addition to the news on its exploration activities Solgold has announced that it has been conditionally approved for a listing on the TSX, subject to its “satisfying the conditions and requirements imposed by the TSX.”

Conclusion: As Solgold steps up its drilling at Cascabel it is still extending the envelope of mineralisation within the Alpala trend and identifying previously undetected zones of higher grades. As the company deploys more rigs through the rest of 2017, we look forward to an accelerating flow of drilling and assay information.

*SP Angel acts as broker to SolGold

 

West Cumbria Mining (LON:WCM) Private - announced that it plans to extract high value coal used for steelmaking rather than coal used predominantly in power stations.

• The British coal mining industry may be set for revival on a £200m coking coal project being proposed by West Cumbria Coal.

• Mark Kirkbridge, ceo, reckons the mine should last >50 years and is looking for a 2019 open date.

• Following his statement that “Metallurgical coal was the best performing commodity in 2016” he added that “there is no source of it in Europe”.

• The plan is to develop a coking coal mine just off the West Coast of England that will supply the European steel making coal market, which imports 45m tonnes per annum and WCM already has commitments from European steelmakers to take 500,000 tonnes a year. Kirkbride finished by saying that “there is a future for coal.”

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