Miners climb amid positive Chinese PMI numbers and higher iron ore/coal prices.
• Trading volumes in many markets were low ahead of the US bank holiday this Tuesday as well as the jobs report due on Friday.
• Gold is trading around a seven week low this morning after posting the first monthly decline of the year in June (-2.2%); although the metal remains up through the first half of 2017 (+6.8%).
• The DXY is little changed after falling 1% last week and hitting the weakest since October.
• Copper is on course for its best quarter performance since 2006 helped by falling inventories, supply disruptions and a weaker US$ index.
• Additionally, copper scrap supply is expected to ease after prices rallied last November.
• Brent reported the longest winning streak this year climbing for 0.4% this morning after posting 8.3% gains in the previous seven sessions.
• The latest report on US drillers showed the number of active rigs contracted for the first time in 24 weeks, according to the Baker Hughes data.
Dow Jones Industrials +0.29% at 21,350
Nikkei 225 +0.11% at 20,056
HK Hang Seng +0.13% at 25,799
Shanghai Composite +0.11% at 3,196
FTSE 350 Mining +0.95% at 14,809
AIM Basic Resources -0.57% at 2,484
Economic News
China – Private PMI recovered and climbed into a positive territory in June beating market estimates as firms reported “slightly stronger” increases in output and new orders.
• On a less positive side, respondents highlighted weaker business outlook which hit the lowest in 2017 amid a “relatively subdued customer demand”.
• Employment continued to contract although “the rate of job shedding eased to a modest pace (the weakest since Mar)”.
• “Based on the inventory trends (falling) and confidence around the future output, the June reading was more like a temporary rebound, with an economic downtrend likely to be confirmed later,” Caixin/Markit concluded.
• Caixin PMI: 50.4 v 49.6 in May and 49.8 forecast.
• On a different note, China launched the so-called Bond Connect system allowing foreign investors to trade local bonds without the need to set up onshore accounts.
• More than $1tn of offshore bond funds could flow into the market, Goldman Sachs estimates.
Germany – Final June PMI data showed the manufacturing sector growing at the fastest pace since 2011 reflecting strong growth in new orders reported in Europe, America and Asia.
• New order growth accelerated for the sixth time in the last seven moths to the strongest since Mar/11, preliminary PMI report said.
France – Manufacturing sector continued to grow strong in June, the final PMI numbers showed.
• Expansion came on the back of higher output and stronger new orders.
• Additionally, business outlook over the coming 12 months was “the most optimistic since the series began five years ago” reflecting reduced political uncertainty post presidential and legislative elections.
Italy – Manufacturing performed well through June with production up on the back of “robust export orders”.
• Employment strengthened amid higher output numbers and more positive business outlook.
• The index came in at 55.2, a little below the recent peak of 56.2 recorded in April; although the Q2/17 average was “the best seen in more than six years”.
Spain – June summed up a strong Q2/17 with “growth of output, new orders and employment remaining elevated”.
• Output increases were reported in three broad sectors led by gains in consumer goods segment while respondents noted stronger new export orders in other European markets including France, Germany and the UK.
• “The first half of the year has been impressive, with no real sign among the latest data that rates of expansion are running out of steam in the second half,” market concluded.
Currencies
US$1.1403/eur vs 1.1410/eur last week. Yen 112.64/$ vs 112.05/$. SAr 13.074/$ vs 13.071/$. $1.302/gbp vs $1.301/gbp.
0.767/aud vs 0.768/aud. CNY 6.788/$ vs 6.777/$.
Commodity News
Precious metals:
Gold US$1,236/oz vs US$1,243/oz last week
Gold ETFs 60.7moz vs US$60.5moz last week
Platinum US$920/oz vs US$921/oz last week
Palladium US$848/oz vs US$846/oz last week
Silver US$16.58/oz vs US$16.59/oz last week
Base metals:
Copper US$ 5,955/t vs US$5,929/t last week
Aluminium US$ 1,928/t vs US$1,911/t last week –
• Estimates just released by the Aluminum Association show that demand for aluminium increased year-on-year by 1.4% in April in the United States and Canada.
• According to estimates, shipments by domestic producers plus imports of aluminium totaled 2.257bn pounds in April. Demand for semi-fabricated aluminium increased by 1.9% year-on-year, totaling 1.618bn lbs.
• Apparent consumption (exports subtracted from demand), also rose year-on-year, totaling 2.002bn lbs, a 1.6% rise over April 2016. Apparent consumption is on a steady upward clip through April, up by 4.1% year-on-year and totaling approximately 8.142bn pounds.
• According to the data, a bright spot for producers in the month of April was the over-3% increase in shipments of aluminium sheet and plate (893.4m lbs). Also shipments of aluminium ingots for casting, exports and other uses, was up almost 1% year-on-year in April, totaling 639m lbs.
Nickel US$ 9,405/t vs US$9,300/t last week
Zinc US$ 2,788/t vs US$2,750/t last week –
• Valuations for bulk mining equities and industrial metals look to be are at attractive levels after underperforming during the second quarter, BMO analysts said on Thursday, listing zinc and copper as preferred commodities for the next 12 months.
• The firm sees support for most commodity prices at current levels but has limited expectations for near-term price gains except for zinc, which should move higher on positive fundamentals.
• BMO says aluminum also could be a surprise outperformer, depending on outcome of China’s supply reforms in 2018.
Lead US$ 2,321/t vs US$2,302/t last week
Tin US$ 19,950/t vs US$20,120/t last week
Energy:
Oil US$49.0/bbl vs US$47.7/bbl last week
Natural Gas US$2.957/mmbtu vs US$3.022/mmbtu last week
Uranium US$20.50/lb vs US$20.50/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$63.3/t vs US$63.0/t
Chinese steel rebar 25mm US$578.9/t vs US$579.7/t
Thermal coal (1st year forward cif ARA) US$70.3/t vs US$69.5/t last week
Thermal coal – According to data released by the Turkish statistical institute this week, Turkey's May thermal coal imports rose 47% year on year to 2.31m metric tonnes (mt), which was also 72% higher than April's three-year low.
• Colombia remained the largest shipper of thermal coal to Turkey at 1.32m mt, more than doubling last May's 652,399 mt and 98% higher on the month.
• Data also claims that Turkey's total purchases in May for imported thermal coal were $202.11m, more than doubling on the year and jumping 68% from the previous month.
• This was equivalent to a monthly average price of $87.61/mt, down from $89.46/mt in April.
Premium hard coking coal Aus fob US$149.8/t vs US$147.1/t
Other:
Tungsten APT European US$212-222/mtu vs US$220-226/mtu
• Wolf Minerals Ltd developing Plymouth's vast open-pit tungsten mine has hammered out a deal to receive an additional £10m safety-blanket loan and could potentially increase this further after the open-caste pit was hit with production delays and low ore prices.
• The company has stretched its existing bridge facility from £30m to £40m to support its short-term working capital whilst additional funding is found for "long term self-sustainable operations" at the £130m Drakelands mine, at Hemerdon.
• Wolf Minerals has reached an agreement with Resource Capital Fund VI LP to amend an existing bridging deal, put in place in 2016.
• Resource Capital Fund, a mining-focused private equity firm which normally specialises in buy-outs, has now agreed to provide Wolf with an extra £10m, with the potential for this to be increased to £15m in the future.
Company News
Altona Mining – Sichuan Provincial Government delays approval of investment in Altona’s Cloncurry Copper project in Australia
• Altona Mining has extended the timescale for completion of Chinese investment into its Cloncurry Copper Project in northwest Queensland.
• The delay is reported to be down to required approval from the State-owned Assets Supervision and Administration Commission of the State
• Council of the Sichuan Province of the People’s Republic of China ‘SASAC’.
• The SASAC requires advice of regulatory amendments from the Sichuan Provincial Government.
• The Sichuan landslide on 24 June 2017, resulted in a major loss of life and many senior SRIG staff and Provincial Government officials were called to the site of the landslide delaying the project approval process.
• Altona has been advised to expect to receive formal approval from SASAC by mid July.
• The deal deadline has therefore been extended from 30 June 2017 to 21 July 2017. The last date for closing of the transaction will also be extended from 31 July 2017 to 11 August 2017.
• Altona reports the parties have made good progress towards finalising the Conditions Precedent to closing the transaction and Altona has completed most of its Conditions Precedent.
Auroch Minerals – Gains option over Tisova copper, cobalt mine in Czech Republic
• Auroch Minerals, an Australia-based company has gained the option over 100% of the historic Tisova copper mine, along with three exploration licence applications in the Czech Republic.
• The Tisova underground mine has a long history with previous exploration and mining focused on the copper rich volcanogenic massive sulphide. However, there is the prospect of increasing the economic viability of the deposit by undertaking a combined copper-cobalt project.
• Tisova previously produced 560,000t of ore containing 0.68% copper. The deposit is open along strike and down dip.
• The team have secured a significant ground holding which provides scope to prove up a substantial deposit.
• Auroch also sees potential to generate income from gold by-products. Samples show grades between 0.2g/t and 3.7g/t gold. Sampling also indicated grades of up to 0.68% cobalt and 3.5% copper.
• Management plans to commence drilling in the third quarter of 2017.
Gabriel Resources – Claiming $4.4bn in damages from Romania at the World Bank’s arbitration tribunal
• Gabriel Resources, which won a license in 1999 to exploit the Rosia Montana gold and silver deposits in Transylvania, but was never granted the necessary permits is claiming $4.4bn damages from Romania at the World Bank’s arbitration tribunal. Company accuses Bucharest of unfairly blocking its $2bn project to create one of Europe’s biggest gold mines and expropriating its assets.
• According to the CEO of the Company, it has complied with all necessary EU and Romanian legal requirements. However, environmental local campaign groups have been actively protesting against the mining plan, saying it would destroy a region of natural beauty and would have egregious effects on historic mine workings dating from Roman times.
• Some of the biggest street protests broke out in Romania in 2013 after the then socialist-liberal coalition sent a draft law to parliament giving the go-ahead to the project. Incoming socialist government in January 2017 asked Unesco to grant world heritage status to Rosia Montana which would end any chances of developing the mine.
• Gabriel Resources launched arbitration in 2016 and on Thursday disclosed it would seek $4.4bn of damages in a full statement of its claim to be filed on Friday. Salient to note that this is potentially the largest ever award by the World Bank’s International Centre for Settlement of Investment Disputes.
IronRidge Resources* (LON:IRR) 35p, Mkt Cap £85m – IronRidge raises £8.25m for development of gold and lithium portfolio
• IronRidge Resources has raised £8.25m in a subscription and placing at 35p representing a premium to the share price on 29 June.
• The subscription of 20.7m shares was supported by Sumitomo Corporation of Japan, Assore Limited of South Africa and DGR Global of Australia as well as Nick Mather, Chairman and Vincent Mascolo, CEO in addition to a number of existing shareholders.
• The company also placed 2.9m new shares with a number of new shareholders.
• The company will have 241.8m shares following the placing.
• IronRidge has come on allot since its original listing taking on new licenses and assets across Africa.
• Strong ongoing support from major names in the mineral industry gives credence to management’s strategy to develop a portfolio of projects ranging from gold to lithium, iron ore and bauxite.
• The most exciting of these assets are the gold projects in Chad, where little Western-style exploration has been done outside the oil & gas industry, and the lithium assets in Ghana where an historic hard-rock pegmatite field has been rediscovered.
Chad (Tekton Gold 100%)
• Tekton holds a total of 5 exploration permits covering approximately 1000 sq km in the Quaddai Province in Chad.
• We are currently waiting on results from samples taken from trenching on the Dorothe and Echbara licence areas. These licenses hold extensive artisanal workings in soft unconsolidated material. The implication is that gold grades continue into the unmined hard rock at very little depth. The extent of the artisanal workings indicates potential for a very large and potential million ounce gold deposit underneath.
• Exploration work suggests an Intrusion Related Gold System (“IRGS”) with the Ouaddaï Province potentially representing a metallogenic belt with possible analogy to the world class Tintina Gold system.
• Dorothe: previous sampling shows 14.12g/t of gold over 4m, 16m at 3.1g/t, 6m at 9.5g/t and 1m @ 63.2g/t Au,
• Grades up to 103g/t, 99.6g/t and 94.5g/t in rock chips
• Echbara: shows 58m at 1.31g/t Au and 30m at 1.25g/t Au over a 2km long 100ppb to 300ppb gold in soil anomaly,
• Am Ouchar: extensive artisanal gold workings over approximately 250m of strike length in addition to historic trench results including 20m @ 6.8g/t,
• Nabagay: ~25km north of Dorothe and considered highly prospective for gold mineralisation.
Ghana (Cape Coast Lithium project agreement to acquire up to 100%)
• IronRidge has a potential near-term development opportunity in Ghana. The project has the historic Egyasaminku Hill Lithium resource which may prove to be an underestimation in terms of scale and lithium grade. This project could more than justify the valuation of the company if check drilling confirms the resource and the value of developing the project. The Ghana Geological Survey defined a non-JORC compliant resource of 1.48mt at an average grade of 1.66% Li2O in 1962.
• A more recent 40m wide trench intersection at an average grade of 1.93% lithium oxide which includes a higher grade section of 15m at an average grade of 2.18%.
• Initial sampling and trenching work has identified up to 100m wide outcrops of lithium bearing pegmatites with grades in excess of 1.5% lithium oxide.
Ivory Coast (gold)
• In partnership with Eburnea Gold Resources and Kestrel Mining Exploration over the Marahui, Kineta and Bouna licence applications in the north-east of Ivory Coast.
• The licence areas cover 75 km of a prospective north-south trending gold bearing shear zone along strike from Centamin’s 3.3moz Konkera deposit and Azumah’s 2.2moz Wa-Lawra deposit.
• Recent results include rock chip assays of 35.1g/t, 32g/t,27.4g/t and 27.3g/t gold over an area measuring 400m x 100m within the Marahui licence.
• IronRidge now holds some 3,510sq km of licenses in the Ivory Coast straddling over 70 km of a belt of Birimian age rocks which host multiple +Moz operating gold mines.
• Kineta North (100%): The Kineta North appears to be located on the same structural shear as the Wa 2.2moz and Konkera 3.3moz which is now held by Centamin.
• Bianouan (100%): lies at the south-western extension of a structural setting which hosts the Ahafo 23moz, Bibiani, 7Moz and Chirano 5moz.
• Bodite (100%): gold seen in Birimian metasediments where thicker turbidite rocks are intruded by more fractionated granitic intrusives.
• In addition to these projects IronRidge also hold the Vavoua, Vavoua South and Gboguhue portfolio in the west of the country which straddles the strike extensions of a 700,000oz (JORC compliant resource).
Australia (gold, copper and bauxite)
• May Queen Prospect intersections of 4m at 38.8g/t (at end of hole), 3m at 18.9g/t, 2m at 73.4g/t and 1m at 145g/t.
• Drilling results showed short high grade gold intersections along the contact zone and in close proximity to the porphyry dykes. Copper-gold was intersected in the NE of the target (1m at 1.3% Cu and 0.62g/t).
• The company drilled eight Reverse Circulation holes for a total of 567m
• 2m @ 13.5 g/t Au in hole MQN5
• 3m @ 6.95 g/t Au in MQN5
• 3m @ 2.58 g/t Au in MQN6
• 1m @ 0.62 g/t Au & 1.3% Cu in MQN2
• These are good gold grades with a particularly interesting copper grade in the last hole though they are over relatively short intersections at present
• Bauxite: IronRidge also has a maiden JORC compliant bauxite resource of 54.9mt grading 37.5% total Al and 8.5% total Si.
Gabon (iron ore)
• Tchibanga iron ore: average 45.2% Fe close to the coast with low capex to start production if sufficient tonnage is proven. The iron ore varies in thickness from 2-10m.
• Belinga Sud (100%): lies directly along strike from the huge Belinga iron ore deposit which contains a non-JORC resource of 860mt of high-grade 63% Fe. This is one of the world’s major undeveloped high-grade iron ore deposits. Belinga Sud appears to show an average 40-55% Fe with moderate continants in the rock.
Conclusion: IronRidge is closing in on significant potential for a >1moz gold discovery in Chad and a potential near-term development project in Ghana. Other projects in the Ivory Coast and in Australia show good potential for value.
*SP Angel act as Nomad and Broker to IronRidge Resources
Paladin Energy Limited (ASX:PDN) – appointment of Administrators. EdF move may block sale of Langer Heinrich uranium mine to China
• Paladin Energy today announces that the board of directors have appointed Administrators to the Company and the other related companies.
• The Administrators have been called in following the receipt of a payment demand by EdF Electricite de France.
• Paladin had approached EdF for a standstill in respect of enforcement by EdF of ~US$277m due on 10 July 2017 to allow time for an alternative restructuring proposal to be implemented.
• Paladin had gained 75% acceptances from its 2020 convertible bondholders to extend its forbearance arrangements to 30 September 2017
• Paladin has been in negotiations to potentially sell the Langer Heinrich uranium mine to CNNC Overseas Uranium Holding Ltd.
• It sounds to us as if EdF were not willing to negotiate and may not have been keen to see the Langer Heinrich uranium mine fall into Chinese hands. We believe France sells nuclear services and fuels to China.
Premier African Minerals (LON:PREM) SUSP – Project update and suspension of trading
• Premier African Minerals reports that it is making progress at its RHA tungsten project in Zimbabwe. It has shipped and been paid for a 20 tons shipment of wolframite concentrate produced during what the company describes as an “optimisation period” at the mine.
• The company notes that “During the optimisation process to date, the mine has demonstrated the capability to operate at profitable levels on an instantaneous basis” however, “Certain issues have been identified during the optimisation phase and these are in the process of being attended to. These include minor upgrades to certain components to allow continuous operation at the higher tonnages now possible following the commissioning of the X-ray sorting system.”
• The company also remarks that, although mining operations have now progressed through the heavily weathered upper layers of the open pit, the wolframite mineralisation is “extremely spotty” and although grades are higher than originally expected, we infer that, in addition to difficulties in maintaining consistent processing rates in the plant there is the potential of variable feed grades which should add to the challenges within the plant.
• The RHA mine has faced a long period of development setbacks both in mining and processing since it reported that it expected to make its first commercial shipments of concentrates in July 2015 and it has clearly taken considerable perseverance to reach this point.
• At its Zulu Lithium project, which the company describes as having “the potential to be a company making asset” drilling is continuing with the objective of expanding the initial inferred resource of 20.1m tonnes at an average grade of 1.06% lithium oxide. Metallurgical testing has demonstrated that the mineralisation has a low iron content which is considered positive from a marketing perspective.
• The company also notes the approval of a mining licence for Circum Minerals’ Danakil Potash Project. The licence covers solution mining for an initial period of 20 years, renewable thereafter indefinitely in blocks of 10 years. Premier African Minerals holds 2m shares (approximately 2.1%) of Circum Minerals.
• The company also discloses that, as a result of its failing to have published annual accounts, its “shares have been suspended from trading on AIM pending publication of the Annual Accounts.” The company points out that the work “is substantially complete, however, the Company has faced technical complexities surrounding certain valuations, in particular the Darwin loan notes … and the integration and consolidation of Mozambique based TCT Industrias Florestais”.
• CEO, George Roach commented “We deeply regret this delay, which should be resolved in a matter of days”.
Conclusion: The RHA tungsten operation continues to face challenges and it appears that further plant modifications and adjustments are needed, though it has now shipped a 20 tons consignment of wolframite concentrate.
Stellar Diamonds (LON:STEL) 6.25 pence, Mkt Cap £2.7m – Extension of time to conclude Octea transaction
• Stellar Diamonds reports that it has agreed a two week extension with Octea Mining to conclude the Tribute Mining and Revenue Agreement over the Tongo-Tonguma diamond mine development programme in Sierra Leone.
• In addition, the parties have agreed to extend the dates for the two outstanding Convertible Loan Notes (CLNs) by a further 45 days to 15th September in the case of the $1.24m Note and to 15th August for the $1.65m Note.
• The company stresses that “all other terms of the Tribute Mining Agreements and CLNs remain in force.”
• The development of Tongo-Tonguma is currently the subject of detailed technical and engineering studies of a proposed 21-years mine life producing around 200,000 carats of diamonds per year. The project currently envisages an initial capital investment of US$32m over two years, inclusive of a 15% contingency budget, to deliver a post-tax NPV of US$104m at an 8% discount rate and generate an after tax IRR of 31%.
Conclusion: The additional time to conclude the transaction should open the way for the development of what is described as West Africa’s second largest kimberlite diamond mine.
Tethyan Resources* (LON:TETH) 3.25p, Mkt £5.5m – Completion of drilling at Rudnitza
• Tethyan Resources reports that it has completed its 2127.6m programme of 4 diamond drill holes on its Rudnitza copper/gold porphyry project in Serbia.
• Assay results from the drilling are expected during mid-August.
• The company is also planning to conduct an induced polarisation geophysical survet during late August after the local harvest. As a prelude to the geophysics, Tehyan Resources has successfully conducted extensive discussions with local landowners and the authorities to secure land access.
• The object of the geophysical work is to “identify new targets within this this large mineralised system”. Results are expected to guide future drilling within this relatively underexplored licence area which was identified and subject to a limited drilling programme by Phelps Dodge during the early 2000s.
Conclusion: We look forward to the assay results from the recent drilling and to the outcome of the geophysical survey in due course.
*SP Angel act as Nomad and broker to Tethyan Resources
Top End Minerals (ASX:TND) - Secures option to acquire 85% interest Bawdwin Zinc-Lead-Silver-Copper Mine in Myanmar
• Top End Minerals Ltd has secured an option to acquire an 85% interest in Myanmar-located Bawdwin Zinc-Lead-Silver-Copper Mine lease
• The option will cost a total of US$20m and was secured by making the non-refundable deposit payment of $1.5m to the vendor.
• Lease covers 38sq km including the Bawdwin Mine and Bawdwin Volcanic Complex.
• The historical Bawdwin Mine was one of the richest British Empire mines before World War II. Mining reserve in 1938 was reported at 10.8m tonnes grading 23% lead, 14% zinc 1% copper and 670 g/t silver.
• A historical Inferred and Indicated non-JORC Mineral Resource of 42.4 Mt at 8.6% Pb, 3.6% Zn, 0.3%Cu, and 5.17 oz/t Ag at a 5% Pb cut-off grade was reported in 19971. This represents lower grade halo mineralisation around the mined high-grade lodes.
• Bawdwin was a world-class mine when in production and occurs in a volcanic complex that has never experienced systematic modern xploration and is considered to have high potential for discovery of more high-grade lodes.
• Management reported due diligence on Cornerstone Resources’ Lashio zinc refinery in Myanmar at end January
• The company is run by Mr Mordechai Gutnick, Peter Lee and David Tyrwhitt
• The company has previously been exploring for zinc in Arnhem Land