Amur Minerals* (AMC LN) – KUB drilling update
Ortac Resources* (OTC LN) – new NED
Kodal Minerals* (KOD LN) – Consistent grades at Ngoualana and Sogola-Baoule lithium projects in Mali
Changes in gold and the US$ index remain muted with relatively muted reaction from FOMC meeting minutes.
• Copper prices are trading higher as build up in LME stockpiles pauses.
• Both iron ore (-1.4%) and steel rebar (-0.9%) futures prices are weaker today.
• Brent is recovering post a 3.9% decline on Wednesday on the back of concerns over increasing supplies in the market; prices are up 1.5% this morning as US data showed local stockpiles contracted last week.
Volvo announced this week that it will become the first major car manufacturer to go all electric, saying that every car in its range will have an electric power train available from 2019.
• Swedish company has convincingly asserted that the announcement marks “the historic end” of cars solely powered by diesel or petrol and claimed that it “places electrification at the core of its future business”.
• “This is about the customer,” said Håkan Samuelsson, chief executive. “People increasingly demand electrified cars and we want to respond to our customers’ current and future needs”.
• Premium car manufacturer Volvo will launch five fully electric cars across its range between 2019 and 2021, two of which will be in the company’s Polestar high performance sub-brand and the rest of the company’s range will be available with “plug-in hybrid” power trains, meaning customers will be able to specify an environmentally friendly option on all Volvo cars.
• “This announcement marks the end of the solely combustion engine-powered car,” said Mr Samuelsson. “We have said we plan to have sold a total of 1m electrified cars by 2025. When we said it we meant it. This is how we are going to do it”.
• Volvo’s announcement comes in the same week that Tesla announced its low-cost Model 3 electric car aimed at bringing electric cars to the mass market will go on sale.
Dow Jones Industrials -0.01% at 21,478
Nikkei 225 -0.44% at 19,994
HK Hang Seng -0.18% at 25,477
Shanghai Composite +0.17% at 3,212
FTSE 350 Mining -0.31% at 15,265
AIM Basic Resources +0.79% at 2,455
Economic News
US – Minutes from the June FOMC meeting showed officials mostly agree on the need to start reduce the central bank balance sheet, although there remains uncertainty on the timing of the start of the programme.
• Nevertheless, there appears to a preference to start before year end.
• Policy makers remain convinced the recent slowdown in inflation rate growth is transitionary “reflecting idiosyncratic factors, including sharp declines in prices of wireless telephone services and prescription drugs”.
• “Most participants… expected these development to have little bearing on inflation over the medium term,” minutes read.
• Markets reaction was relatively mild with little changes in Treasury bonds yields, equities and the US$ index.
• On a separate note, factory orders fell more than forecast in May; although, on a less volatile proxy for business investment, nondefense capital goods ex aircraft shipments, May saw a 0.1%mom increase following a 0.2%mom gain in April (4.5% v 7.2% on annualised basis).
Date Index Period Actual Est Previous
Monday ISM Manufacturing Jun 57.8 55.3 54.9
Markit Manufacturing PMI (Final) Jun 52.0 52.1 52.7
Wards Auto Sales Jun 16.41m 16.53m 16.58m
Tuesday Independence Day
Wednesday Factory Orders (%mom) May -0.8 -0.5 -0.2
Core Durables Orders (Final) May 0.3 0.1
Core Capital Goods Shipments (Final) May 0.1 0.2
FOMC Meeting Minutes Jun
Thursday ADP Employment Change Jun 185k 253k
Weekly Jobless Claims Change 243k 244k
ISM Services Jun 56.5 56.9
Markit Services PMI (Final) Jun 53.0 53.6
Markit Composite PMI (Final) Jun 53.6
Friday NFPs Numbers Jun 177k 138k
Unemployment Rate Jun 4.3 4.3
Av Hourly Earnings (%mom) Jun 0.3 0.2
Av Hourly Earnings (%yoy) Jun 2.6 2.5
Source: Bloomberg
Germany – Strong factory orders numbers for May come in line with recent manufacturing PMI reports showing robust growth momentum.
• Factory Orders: 3.7%yoy v 3.3%yoy in Apr and 4.5%yoy forecast.
ECB – 10y Germany bond yields are up 2bp ahead of the ECB meeting minutes with markets to be watching for discussions on potential wind-down of the QE programme.
Australia – Trade surplus ballooned to A$2.47bn in May, up from the revised A$90m surplus in Apr, reflecting stronger commodity exports.
• In particular, coal exports totalled 31.3mt in May, up c.37% on 22.9mt in Apr.
Zambia – President Lungu is seeking parliament approval for the announcement of a state of emergency amid worsening political crisis in the country.
• Lungu made a national address yesterday following a series of fires directed at public buildings were reported in the capital.
• In parliament, his ruling Patriotic Front holds a majority with several opposition MPs from the UPND remaining suspended.
Currencies
US$1.1352/eur vs 1.1360/eur yesterday. Yen 113.34/$ vs 113.45/$. SAr 13.427/$ vs 13.218/$. $1.294/gbp vs $1.291/gbp.
0.760/aud vs 0.761/aud. CNY 6.803/$ vs 6.798/$.
Commodity News
Precious metals:
Gold US$1,224/oz vs US$1,224/oz yesterday
Gold ETFs 60.1moz vs US$60.4moz yesterday
Platinum US$908/oz vs US$910/oz yesterday
Palladium US$842/oz vs US$857/oz yesterday
Silver US$15.99/oz vs US$16.10/oz yesterday
Base metals:
Copper US$ 5,844/t vs US$5,890/t yesterday
Aluminium US$ 1,927/t vs US$1,929/t yesterday
Nickel US$ 9,125/t vs US$9,145/t yesterday
Zinc US$ 2,780/t vs US$2,788/t yesterday
Lead US$ 2,274/t vs US$2,279/t yesterday
Tin US$ 19,680/t vs US$20,000/t yesterday
Energy:
Oil US$48.3/bbl vs US$49.7/bbl yesterday
Natural Gas US$2.869/mmbtu vs US$2.979/mmbtu yesterday
Uranium US$20.25/lb vs US$20.25/lb yesterday
Lithium – Russia plans to expand its presence in the lithium sector in Chile, which will take place through the participation of the country’s nuclear monopoly Rosatom in lithium production and processing in Chile already this year.
• Chilean government, several weeks ago began the receipt of applications for the production and processing of lithium from foreign investors, including Rosatom. Selected companies will receive contracts (varying in the range of 25-27 years) for production of lithium carbonate in the country and will be able to purchase lithium carbonate from a US company, Rockwood Lithium Ltd (earlier entered into an agreement with the Chilean state agency Corfo on lithium production) at reduced prices.
• Rosatom is interested both in the production and processing of lithium in Chile. In regard to the production, there is a possibility that it will be carried out by Rosatom in cooperation with the Chilean state-owned company Codelco. The latter, earlier this year, announced its plans for a search of a partner for production of lithium at two salt marshes in the Atacama region (Northern Chile).
• In the meantime, the interest of Rosatom and other global energy and mining majors in the Chilean lithium industry could be mainly explained by the country’s record reserves of the metal, which are equivalent to 53% of global reserves, or 7.5 million tonnes.
• Majority of Chilean lithium production is exported. Currently 40% of the global lithium carbonate market is held by Chile. Demand for lithium is predicted to grow by 2-4 times during the next five years. That will be mostly ensured by the predicted doubling of sales of batteries for smartphones and electric cars.
• In the case of electric cars, last year their global sales grew by 86% compared to 2015 and amounted to 774,000 units. The growth will be driven by both developed and emerging nations, such as China. In the case of China, the government of the country has recently set a goal to bring up to 5m electric cars to the country’s roads before the end of 2020.
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$61.8/t vs US$63.7/t
• As Chinese aged buildings, bridges and cars produced over decades of rapid economic growth are knocked down, dismantled or crushed, China’s supply of steel scrap is surging which should push Chinese steelmakers to use more of the material in coming years, potentially sapping demand for steel ingredient iron ore from the world's biggest metals consumer.
• Faltering appetite for iron ore could hit a critical lifeline for international mining giants which have banked on China continuing to suck up hundreds of millions of tons of the most widely traded bulk commodity.
• This is substantiated by Daniel Meng, an analyst at brokerage CLSA in Hong Kong who said “In the medium to long term, scrap is the real threat to iron ore, for sure” adding that "We believe by 2020, replacement would become faster and the risk on iron ore from scrap would become more serious".
• Recent abundance of scrap in China followed Beijing's decision to shut mills churning out low-quality steel from induction furnaces - typically big users of scrap - as part of its drive against pollution and a glut in steel supply.
• Closure of these mills, with a combined production capacity of 120m tons, helped push the nation's scrap exports to an all-time high in May. China last year generated a record 143m tons of steel scrap, up nearly fourfold from 2002. This could potentially replace around 200m tons of iron ore, equivalent to about a fifth of China's imports of the commodity last year.
Chinese steel rebar 25mm US$583.6/t vs US$584.0/t
Thermal coal (1st year forward cif ARA) US$71.9/t vs US$72.3/t yesterday
• Yesterday, South32 chief Graham Kerr said that a growing investor backlash is making it much harder for listed miners to stay in thermal coal, adding that he expects his Perth-based company to have a portfolio more titled to base metals over the next 10 years.
• The former BHP Billiton chief financial officer also slammed the mining industry’s “terrible capital allocation” that saw negative total shareholder return over the biggest mining boom in history and described BHP’s ill-fated entry into US shale as a bad acquisition.
• Speaking at a London briefing, Mr Kerr asserted that he was not optimistic on the outlook of thermal coal and said that he would certainly not add to the company’s South African thermal coal operations.
• He claimed: “Coal will play a part in places like India’s development, but to be honest, it is very hard for a public company to continue to own thermal coal” adding that “every time I see investors it becomes more and more challenging”.
• Salient to note, that this was said the day after Rio Tinto shareholders voted to sell out their last remaining coal assets, in the Hunter Valley, in a $US2.69bn sale to Chinese-controlled Yancoal.
Premium hard coking coal Aus fob US$153.8/t vs US$153.0/t
Other:
Tungsten APT European US$212-222/mtu vs US$220-226/mtu
Company News
Amur Minerals* (LON:AMC) 6p, Mkt Cap £37m – KUB drilling update
• The Company provides results of 4,685m of drilling in 21 holes completed at KUB from 5 May to 30 June (c.55% of total drilled at KUB and IKEN and 23% of planned 20,000m total 2017 programme).
• Infill drilling targeted at conversion of the available KUB inferred mineral resource (10.9mt at 0.74% Ni and 0.20% Cu) was completed with eight holes averaging 22.6m at 0.80% Ni and 0.27% Cu.
• The Company expects “a substantial portion of the Inferred resource (to be upgraded) to that of Indicated”.
• Mineralisation delineation at depth along the 600m long northern limit of the KUB deposit as included in the latest geological model has been completed with six holes sunk in the area and two intersecting mineralisation (average thickness of 7.0m at 0.4% Ni and 0.18% Cu).
• Following the completion of the above objectives, the Company is targeting expansion of the available KUB mineral resource through step out drilling to the east and west of the deposit.
• 200m westward extension to KUB, a part of the 2,500m long undrilled target between KUB and IKEN deposits, came back with intersections over four holes averaging 19.8m at 0.80% Ni and 0.21% Cu.
• Assays on the fifth hole are currently being prepared with sulphide mineralisation visible in the core.
• Should further drilling continue to hit mineralised intervals along the 2,500m trend linking both IKEN and KUB into a single deposit, a
• 100m eastward extension to KUB has been identified with limited drilling returning intersections of 3.8m averaging 1.02% NI and 0.28% Cu.
• Previously conducted geochemical sampling and trenching showed nickel/copper anomalies extending for 1,000m in that direction.
• The team plans to complete around 1,800-2,000m of additional step out drilling at KUB before the end of the field season.
• Additionally, the Company is expecting to collect a metallurgical sample as part of a wider FS.
Conclusion: Drilling at KUB progresses as planned with step out drilling continuing to intersect mineralisation beyond limits of the latest geological model that may potentially prove to link with the IKEN deposit making it a single in excess of 5,000m long structure.
*SP Angel act as Nomad and broker to Amur Minerals
Gem Diamonds (LON:GEMD) 96.5p, Mkt Cap £134m –Letseng yields another large diamond
• Gem Diamonds reports that it has recovered a 126 carat Type IIa, D colour diamond from its Letseng diamond mine in Lesotho.
• The Letseng mine has a reputation for producing large, high quality diamonds but recent announcements suggest that the mine is presently in a particularly productive period in that respect.
• In May, the company reported the discovery of a 98.42 carat high quality D-colour Type II diamond and an 80.58 carat D-colour type II stone and in June a further announcement disclosed the recovery of a 104.73 carat Type IIa diamond and a 151.52 carat Type I yellow diamond from Letseng.
• By their nature, the recovery of these “exceptional” diamonds is a rare event, however, the recovery of at least 5 such stones so far this year underlines the quality of the diamonds at the Letseng mine which, as the company, points out has produced “four of the 20 largest white gem quality diamonds ever recorded.”
Conclusion: The Letseng mine continues to yield large high quality diamonds and sale of the recently discovered stones should cement its position as “the highest dollar per carat kimberlite diamond mine in the world”.
SolGold* (LON:SOLG) 37p, Mkt Cap £560m – Cornerstone Capital increases its stake in Solgold to 11.25%
• In an announcement released yesterday in Canada, Cornerstone Capital Resources disclosed that it “has agreed to acquire an additional 91,943,914 ordinary share of Solgold plc from multiple parties in exchange for 140,957,200 common shares of Cornerstone.”
• This transaction will give Cornerstone an 11.25% interest in Solgold, which taken together with Cornerstone’s direct 15% interest in the Ecuadorean company, ENSA – the holder of the Cascabel licence, gives Cornerstone “an approximate 25% economic interest (directly and indirectly) in the Cascabel concession.”
• We note that Solgold’s AIM Rule 26 disclosure credits Newcrest International with a 14.53% interest in Solgold and Guyana Goldfields with a 6.82% holding.
• Significant amongst the “multiple parties” selling Solgold share to Cornerstone appear to be Greg Chamandy, who receives approximately 62.7m new shares in Cornerstone taking his interest in Cornerstone to 11.9%, and Dmyant Sangha, who receives approximately 66.5m new Cornerstone share increasing his interest in Cornerstone to 13.9%. The identity of the other vendors receiving the balance of approximately 11.7m Cornerstone shares does not appear to have been disclosed.
• Both Mr Chamandy and Mr Sangha have agreed not to divest more than 2.5% of their respective Cornerstone shares without the consent of Cornerstone. Provided that he retains over 10% of Cornerstone, Mr Chamandy will have the right to appoint a director to the board.
• We speculate that, in the event that they might choose to align their interests, a combined 25.8% of Cornerstone, plus a director on the Board, should give Messrs Chamandy and Sangha a powerful influence over the direction of Cornerstone and hence over the future of Cascabel.
Conclusion: Solgold is building up its exploration efforts at Cascabel with the deployment of additional drilling rigs which should enhance considerably knowledge of the deposit. The recent corporate moves look likely to provide a parallel stream of newsflow in the coming weeks.
*SP Angel acts as broker to SolGold
Ortac Resources* (LON:OTC) 3.9p, Mkt cap £5.8m – new NED
(Sturec project 100% owned)
• Ortac resources has appointed a new NED, Brian McMaster, to its board to take the place of Nick von Schirnding who is stepping into the role of Executive Chairman at the company AGM.
• Paul Heber is also retiring from the board as previously announced.
• Nick von Schirnding, who successfully restructured Bumi plc is already seen as making a significant difference to Ortac.
• Nick’s drive and corporate talent make Ortac a stock to watch
*SP Angel acts as nomad and broker to Ortac Resources
Kodal Minerals* (LON:KOD) 0.28p, mkt cap £17.7m – Consistent grades at Ngoualana and Sogola-Baoule lithium projects in Mali
• Kodal Minerals report relatively consistent and better lithium grades than we had expected at the Ngoualana and Sogola-Baoule prospects in Mali.
• The drill assays look like a good result for the company as they show relatively good lithium grades when compared with other lithium projects which we have seen.
• Ngoualana: best results from nine reverse circulation drill holes for 1,362m:
o 21m at 1.80% Li2O from 170m;
o 18m at 1.54% Li2O from 134m;
o 17m at 1.68% Li2O from 150m;
o 14m at 1.73% Li2O from 52m
o Sogola-Baoule: all drill holes intersect lithium mineralisation. Best results are:
17m at 1.79% Li2O from 277m;
13m at 1.30% Li2O from 58m;
12m at 1.68% Li2O from 216m
“Drillhole MDRC015 at Sogola-Baoule has returned multiple intersections of lithium mineralised pegmatite with the drill hole finishing in mineralisation up to 2.1%Li2O”
• The lithium grades start off deeper than seen in some previous drilling but the grades look good to us and we believe the mineralogy is beneficial from a Chinese processing perspective
• The Kodal press release shows maps and plans of the location of the drill holes and an aerial photo of the terrain.
*SP Angel act as broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.