Amur Minerals* (LON:AMC) – Kun Manie financing update
ASA Resource Group* (LON:ASA) – Asset disposal of non-core business
Caledonia Mining (LON:CMCL) – Quarterly dividend maintained
Hummingbird Resources (LON:HUM) –Yanfolila remains on time and budget
Savannah Resources (LON:SAV) – Mapping at Portuguese lithium prospect
Steel – Rebar prices rise in China as capacity cuts and summer maintenance shutdowns tighten market
• Traders are raising steel rebar prices on concerns over potential supply shortages which may or may not materialise.
• Builders do not like to risk being caught short of rebar and other steel forms as idling construction crews is a very expensive event not to mention the cost of delays to construction.
• China is reported to have closed all ‘low-quality’ steel producers at end June.
• The Chinese government is monitoring the supply demand situation in an effort to maintain a balance.
• Rebar inventories were 3.73mt at end June, close to its low of this year.
• Shanghai futures contracts rose to 5.63n contracts yesterday representing some 237mt of rebar steel.
• Rebar is mainly used as reinforcing steel for concrete and is a major component in new infrastructure and apartment buildings
Tanzania – The National Assembly is debating proposed changes to the nation’s mining legislation.
Three bills proposed by the government include:
o The Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Bill, 2017;
o The Natural Wealth and Resources (Permanent Sovereignty) Bill, 2017;
o The Written Laws (Miscellaneous Amendments) Bill, 2017.
Major points include:
• Parliament will be given the power to “review any arrangements or agreement made by Government relating to natural wealth and resources”; should the agreement be found to contain “unconscionable terms” Parliament “may, by resolution, direct the Government to initiate re-negotiation of the arrangement or agreement with a view to rectifying the terms”.
• The Bill also allows for a review of new as well as existing agreements.
• Requirement for beneficiation – “any arrangement or agreement for the extraction, exploitation or acquisition and the use of natural wealth and resources shall ensure that no raw resources shall be exported for beneficiation” outside the country; also, operators would be required to provide “commitment to establish beneficiation facilities within the United Republic”.
• Prohibition of proceedings in foreign courts – “disputes relating arising from extraction, exploitation or acquisition and use of natural wealth and resources shall be adjudicated by judicial bodies or other organs established in the United Republic and accordance with laws of Tanzania”; concerns are surfacing as to investors’ ability to use foreign courts to settle local disputes with Tanzania currently being the Multilateral Investment Guarantee Agency and the International Centre for Settlement of Investment Disputes conventions and if new bills would see the nation withdrawing from conventions.
• Share participation – “in any mining operations under a mining license or a special mining license the government shall have not less than 16% non-dilute free carried interest shares in the capital of a mining company…in addition to the free carried interest shares, the government shall be entitled to acquire, in total, up to 50 of the shares of the mining company commensurate with the total tax expenditures incurred by the Government in favour of the mining company”.
Dow Jones Industrials +0.61% at 21,479
Nikkei 225 -0.12% at 20,032
HK Hang Seng -1.30% at 25,450
Shanghai Composite -0.41% at 3,183
FTSE 350 Mining -0.51% at 15,098
AIM Basic Resources -1.32% at 2,451
Economic News
US – US markets are closed today as the nation celebrates the Independence Day.
• Final manufacturing PMI numbers for June confirmed slowing growth momentum compared to May as output, new orders and employment all recorded weaker increases during the month.
• “The PMI has been sliding lower since the peak seen in January and the June reading points to a stagnation – at best – in the official manufacturing output data.”
• On the positive side, “survey respondents signalled resilient confidence towards the year ahead outlook… up to its strongest level since February”.
• Additionally, inflation pressures are reported to be coming off reflecting lower commodity prices.
• A separate report showed auto sales were down for a fourth consecutive month in June following a record year for automakers in 2016.
• Strong availability of nearly new vehicles weighing on new sales despite auto producers increasingly using consumer discounts and loosening lending terms.
• Shares of automakers climbed as retail sales to consumers were reported to have been relatively stable in the US while GM said the industry is set for a stronger finish to the year.
Australia – The Australian dollar lost around 1% against the US$ this morning on the back of a dovish RBA announcement.
• “The Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time,” the statement read.
• The RBA highlighted concerns over modest consumption growth rates on the back of slow increases in real wages and high levels of household debt.
• Rates were held at record lows of 1.5% for the 10th consecutive meeting.
Indonesia – government slowly lifting ban on ore exports
• The Indonesian government is to allow two more mining companies to export mineral ores.
• The recommendation will allow PT Dinamika Sejahtera Mandiri to export 2.4mt of bauxite and PT Ceria Nugraha Indotama to export 2.3mt of nickel ore over the next 12 months.
South Africa - The Passenger Rail Agency of South Africa (Prasa) claimed a huge victory in court on Monday when a R2.6-bn locomotive contract awarded to Swifambo was declared corrupt.
• Deputy Minister of Finance Sfiso Buthelezi, signed off on the contract without following proper procedures during his tenure as Prasa board chair.
• Swifambo will also have to pay back the money.
France – Assassination attempt on Macron foiled
• A plot by a nut-case right wing nationalist to assassinate President Macron on Bastille Day has been foiled by French police
• President Macron is shaking up French politics with proposals to change French labour laws and to cut the number of parliamentarians in the French Parliament.
• Macron is also calling for a new generation of leaders to run the European Union. We like this idea, bye bye Mr Junkers!.
• Macron’s party, which defines itself as not left or right, has promised a profound transformation of France and Europe
• We can only hope that Macron will be able to push his proposals through. .
North Korea – The nation launched its first intercontinental ballistic missile which landed in Japan’s exclusive economic zone, a 200m wide area off the Japanese coast.
• No damage to any vessel has been recorded, as per the Japan’s chief of staff.
• North Korea is reported to have been discussed only 24 hours earlier in a phone conversation between Mr Trump China’s Xi Jinping and Japan’s Shinzo Abe, who confirmed their commitment to denuclearise Korean peninsula.
• “North Korea has just launched another missile. Does this guy have anything better to do with his life?,” Trump tweeted following the release of the news.
Currencies
US$1.1362/eur vs 1.1403/eur yesterday. Yen 113.11/$ vs 112.64/$. SAr 13.187/$ vs 13.074/$. $1.295/gbp vs $1.302/gbp.
0.761/aud vs 0.767/aud. CNY 6.798/$ vs 6.788/$.
Commodity News
Precious metals:
Gold US$1,225/oz vs US$1,236/oz yesterday - Gold fell to a seven-week low today as higher bond yields and strengthened US dollar pushed the cost of holding the non-yielding asset upwards.
Gold ETFs 60.4moz vs US$60.7moz yesterday
Platinum US$909/oz vs US$920/oz yesterday
Palladium US$857/oz vs US$848/oz yesterday
Silver US$16.13/oz vs US$16.58/oz yesterday
Base metals:
Copper US$ 5,876/t vs US$5,955/t yesterday
Aluminium US$ 1,919/t vs US$1,928/t yesterday
Nickel US$ 9,135/t vs US$9,405/t yesterday
Zinc US$ 2,782/t vs US$2,788/t yesterday – Zinc prices are just off from their highest level in nearly three months on market concerns over potential metal shortage as Chinese demand remains strong.
• A shortage of zinc concentrates cut into metal production last year and this is feeding through into lower LME metal levels as Chinese smelters remain relatively short of production
• Zinc prices closed yesterday at US$2,805/t on the LME
Lead US$ 2,308/t vs US$2,321/t yesterday
Tin US$ 20,050/t vs US$19,950/t yesterday
Energy:
Oil US$49.5/bbl vs US$49.0/bbl yesterday
Natural Gas US$2.967/mmbtu vs US$2.957/mmbtu yesterday
Uranium US$20.25/lb vs US$20.50/lb yesterday
Lithium – Samsung looking to move to use solid-state batteries in place of regular Lithium-ion batteries in new models of smartphones.
• Unlike Lithium-ion batteries, solid-state batteries do not use liquid for ion conduction and hence offer better longevity, durability and safety.
• Samsung’s battery and storage manufacturing unit, SDI & Co, reckons it can produce sufficient solid-state batteries for upcoming smartphones in the next two years.
• It remains to be seen if the parent company Samsung Electronics will adopt the technology.
• We suspect it will be difficult to replicate the benefits of lithium-ion batteries without some compromise and it may be more effective to improve the makeup of the lithium-battery to aid safety and longevity than to replace the lithium-ion battery altogether.
Sayona Mining Ltd - reports successful completion of hydrometallurgical testing on concentrate from its Authier lithium project in Canada
• The program demonstrated that the conversion of Authier lithium concentrate into traditionally extractable beta spodumene was achievable, at high conversion rates.
• Up to 96.8% of the lithium was recovered in the process from a 5.98% lithium oxide concentrate.
• Achieved results compare favourably with benchmark data generated from other Canadian hard-rock spodumene projects with similar testing condition and increase the confidence that battery grade lithium carbonate can be produced from Authier lithium concentrates.
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$63.7/t vs US$63.3/t
Chinese steel rebar 25mm US$582.3/t vs US$578.9/t
Thermal coal (1st year forward cif ARA) US$71.0/t vs US$70.3/t yesterday
Premium hard coking coal Aus fob US$149.8/t vs US$149.8/t
Other:
Tungsten APT European US$212-222/mtu vs US$220-226/mtu
Company News
Amur Minerals* (LON:AMC) 6.45p, Mkt Cap £39m – Kun Manie financing update
• Amur Minerals is considering various financing pathways for its flagship Kun-Manie nickel-copper project, located in Russia, including the possibility of strategic partners and the involvement of various export credit agencies (ECAs).
• The Company reported yesterday that London-based corporate advisory firm Medea Capital provided it with a strategic advisory paper, which concluded that there is available market capacity for investment by a strategic partner and that ECA-covered debt project financing is available for the development of the project.
• Medea Capital recommended the Company to update the existing PFS providing the market with the most recent project economics estimates.
• Company’s CEO Robin Young, on Monday said; “Medea's comprehensive report has provided the company with the basis for developing a detailed plan and roadmap to full project financing. I look forward to updating the market as we develop and implement this strategic plan and as the company further focuses on its role in developing the Kun-Manie asset".
• SP Angel acts as Broker and Nominated Advisor to Amur Minerals
ASA Resource Group* (LON:ASA) 1.5p, Mkt Cap £25m – Asset disposal of non-core business
• ASA Resource Group has announced the sale of its South African slaughterhouse business, Asa Meat SA, for R15m (approximately £0.88m) in cash.
• The sale is subject to the successful transfer of land titles in South Africa.
• Commenting on the disposal, Chief Executive, Toindepi Muganyi, commented that the sale “marks a shift in the Group’s strategy to concentrate on its core activities of mining and exploration. The board will consider other non-core disposals as appropriate over the coming months.”
Conclusion: The disposal of the South African meat business and the decision to consider further divestments of non-core activities brings in cash and should free management to focus on the core mining businesses.
*SP Angel acts as Nomad and broker to ASA Resources and its analysts have visited ASA’s Bindura Nickel, Freda Rebecca and Zani Kodo assets.
Caledonia Mining (LON:CMCL) 500 pence, Mkt Cap £53m – Quarterly dividend maintained
• Caledonia Mining has announced a quarterly dividend of US$0.06875 per share, effectively maintaining the dividend following the recently completed one for five share consolidation.
• Paying a quarterly dividend has been central to management’s strategy in recent times and continues to underline confidence in the progress of the major redevelopment to access deeper ore in the Blanket mine, which increases output to 80,000ozpa by 2021 and extends the mine’s life.
• In May, the company lowered its production guidance for 2017 to 52-57,000 oz from 60,000 oz while maintaining the longer term target of 80,000 oz. This guidance remains intact. We interpret the maintained dividend as a signal of continuing confidence in the long term strategy.
• In our opinion, the previously announced reduction in production guidance for 2017 represents a practical response to the conflicting demands on the mine’s underground and shaft infrastructure of production balanced against the need to access these facilities to develop the longer term underground plan.
• We view the shorter term reduction in 2017 guidance as a worthwhile trade-off to accept a lower level of production growth in 2017 in order to deliver the longer term benefits of the strategic plan.
• Commenting on the progress at Blanket, CEO, Steve Curtis, noted that “I am confident that as gold production continues to increase at the Blanket Mine, the cost per ounce of gold produced will continue to fall”
Conclusion: Maintaining the dividend underlines management’s confidence in the progress of the deeper mine development at Blanket.
Hummingbird Resources (LON:HUM) 26.6p, Mkt Cap £91.4m –Yanfolila remains on time and budget
• Hummingbird Resources reports that its Yanfolila mine development in Mali remains on budget and on track to achieve its first production in Q4 2107.
• The company also confirms that its US$60m senior secured loan facility with Coris Bank is now fully drawn and that its cash position “now stands at approximately US$70 million.”
o The company has previously announced that production is expected to reach 132,000 oz of gold in the first full year of production and an average of 107,000 per year over the mine’s initial 7 years.
Conclusion: The development of Yanfolila appears to be progressing well and we look forward to further progress updates and to the first gold pout later this year.
Savannah Resources (LON:SAV) 5.4p, Mkt Cap £28.7m – Mapping at Portuguese lithium prospect
• Savannah Resources that its mapping work at the recently acquired Mina do Barroso Portuguese lithium exploration projects has expanded the surface footprint of the known lithium bearing pegmatites.
• At the Reservatorio prospect, mapping has “identified a relatively large pegmatite body, which has been traced for over 600m along strike … with the pegmatite body reaching up to 85m width at its widest point.” “Mapping has also indicated the possible presence of at least one parallel pegmatite between 10-15m in width.” Rock chip sampling has returned assay results in the range 0.87% to 2.7% lithium oxide.
• At the Grandao prospect, mapping has identified “at least three pegmatites” which could extend over up to 400m of strike and up to 200m width. Rock chip sample averaged 1.79% lithium oxide.
• The preliminary mapping at the NOA prospect “has identified what looks to be a stacked sequence of pegmatites ranging from 5-30m in width with at least three parallel bodies being defined.” Rock chip sampling averaged 1.5% lithium oxide.
• Follow up exploration involving a 3-5000 metres programme of reverse-circulation drilling is due to commence during the week of 17th July “focussing on defining a JORC mineral resource estimate to support a potential mine development.”
Conclusion: The encouraging early stage mapping and rock chip sampling is to be tested by a programme of reverse circulation drilling with a view to developing an initial resource estimate. We look forward to the drilling results as they become available.