Avesoro Resources (formerly Aureus Mining) (LON:ASO) – Q2 gold production increases by 6%
Botswana Diamonds (LON:BOD) – Acquiring additional exploration licences
Georgian Mining* (LON:GEO) – Strong Buy – Georgian delineates gold resource in gold oxide above copper sulphide mineralisation
Jangada Mines (LON:JAN) – Revised Pedra Branca resource estimate including copper and nickel.
Spinnaker Opportunities Plc (LON:SOP) – Spinnaker narrows down acquisition opportunities
Metal prices are little changed this morning ahead of the Yellen’s semi-annual monetary policy testimony before Congress over two days starting tomorrow
• US equities finished level yesterday with banks set to kick off reporting season on Friday
• Both the US$ index and Brent prices are range bound
• US is set to quadruple crude oil exports by 2020 exceeding volumes supplied by most OPEC members, according to PIRA Energy consultants; exports are estimated to reach 2.25mbbl per day compared to 2.1mmbbl shipped by Kuwait, 1.7mmbbl by Nigeria and 0.5mmbbl by the US last year
• Iron ore (+1.67%) and steel rebar (2.41%) futures amid reports showing rebar inventories across China at 3.74mt are not far off record low of 3.42mt reached in Jul/16
Dow Jones Industrials -0.03% at 21,409
Nikkei 225 +0.57% at 20,195
HK Hang Seng +1.59% at 25,904
Shanghai Composite -0.30% at 3,203
FTSE 350 Mining +1.30% at 15,521
AIM Basic Resources -0.34% at 2,428
Economic News
UK – Retail sales get a boost from the warm summer weather and the Muslim festival of Eid in June.
• Non-food goods sales climbed above their 12-month average of 0.6% and came in at 0.9%.
• “Leisure and activities spurred consumer spending on summer clothing, beauty products and outdoor toys, which were also boosted by gift purchases over Eid,” the British Retail Consortium said.
• Concerns remain that consumer spending is set to slow down moving forwards as inflation accelerates past the rate of earnings growth.
• Retail Sales (like-for-like %yoy): 1.2 v -0.4 in May and 0.8 forecast.
Greece – The nation should start developing a strategy of its return to market borrowing before the maturity of the latest Eurozone bailout programme in a year time, the head of the European Stability Mechanism said.
• Except for two occasions of two bonds issued in 2014, the nation has been absent from the market since the start of the Eurozone debt crisis in 2009.
Somalia – internet outage costing country £7.7m per day
• The internet is particularly important to Somalia as Southern Somalia remains subject to a 3G mobile ban due to the threat posed by Al-Shabab Islamist militants.
Currencies
US$1.1398/eur vs 1.1399/eur yesterday. Yen 114.37/$ vs 114.27/$. SAr 13.618/$ vs 13.348/$. $1.290/gbp vs $1.289/gbp.
0.762/aud vs 0.760/aud. CNY 6.806/$ vs 6.803/$.
Commodity News
Precious metals:
Gold US$1,210/oz vs US$1,207/oz yesterday – Hong Kong Exchanges & Clearing (HKEX) has said 3,000 of its new gold contracts traded on their launch day
• London Metal Exchange traded a third of this volume on its system which also went live today.
• The two HKEX platforms trade 24 hours a day and could turn HK into a global gold trading hub while allowing Chinese currency RMB deposits to trade in gold
• The idea is to attract trading and investment away from the much larger OTC market, to increase market visibility and enable better regulation
• The HKEX gold contract is available for trading in offshore renminbi ‘CNH’ and US dollars enabling the arbitrage between CNH futures and the other currency gold contracts
• Physical delivery in Hong Kong is also available which should lead to price convergence and help prevent manipulation.
Gold ETFs 59.9moz vs US$60.0moz yesterday
Platinum US$896/oz vs US$901/oz yesterday
Palladium US$844/oz vs US$838/oz yesterday
Silver US$15.50/oz vs US$15.29/oz yesterday
Base metals:
Copper US$ 5,842/t vs US$5,815/t yesterday – Nearly 100% of 654 workers at Antofagasta’s Zaldivar mine in Chile voted to launch a labour action.
• The Company has the right to request a 5-day government-mediated extension of negotiation.
• The mine contributed 7% (51.7kt) in copper production and 5% in EBITDA to the Group.
Aluminium US$ 1,901/t vs US$1,923/t yesterday – Chinese authorities may order the closure of 1.1mtpa aluminium smelter in Shandong province after finding the plant has not secured necessary state approvals.
• Regulators may shut the plant or close other outdated capacity instead to compensate, according to people who asked not to be identified because information is confidential.
• Final decision on smelter is pending.
• The plant accounts for c.4% of the nation’s annual production (31.6mt in 2016) and c.3% of the installed capacity (40mt).
Nickel US$ 9,015/t vs US$8,930/t yesterday - Cuba sees 2017 nickel, cobalt sulphides output at 54 500 t
Zinc US$ 2,787/t vs US$2,765/t yesterday
Lead US$ 2,321/t vs US$2,280/t yesterday
Tin US$ 19,845/t vs US$19,680/t yesterday
Energy:
Oil US$47.2/bbl vs US$46.8/bbl yesterday
Natural Gas US$2.934/mmbtu vs US$2.879/mmbtu yesterday
Uranium US$20.55/lb vs US$20.25/lb yesterday
Cobalt - Cobalt 27 extends investor outreach in Europe by listing on the Frankfurt Stock Exchange
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$64.4/t vs US$62.4/t
Chinese steel rebar 25mm US$587.3/t vs US$581.0/t
Thermal coal (1st year forward cif ARA) US$71.9/t vs US$72.7/t yesterday - Indonesia sets July HBA thermal coal price at $78.95/mt, up 49% on year
Premium hard coking coal Aus fob US$155.1/t vs US$155.1/t
Other:
Tungsten APT European US$215-222/mtu vs US$212-222/mtu
Company News
Avesoro Resources (formerly Aureus Mining) (LON:ASO) 2.6pence, Mkt Cap £137m – Q2 gold production increases by 6%
• Avesoro Resources reports that it increased gold production at the New Liberty mine in Liberia by 6%, to 15,824 oz, during the quarter to 30th June bringing YTD gold output to 30,730 oz.
• The company is maintaining its previously published guidance for the full year “of 90,000 – 100,000 ounces of gold at a cash cost of US$750 – US$800 per ounce and all-in sustaining cost of US$925 – US$975 per ounce of gold produced.”
• Mining is moving into fresher, higher grade mineralisation in the Kinjor pit and hence overall tonnages of both ore and waste removal declined during the quarter and recovery rates dipped to 88% from the 90% level achieved during Q1 as the plant dealt with “a high proportion of transitional ore from the Marvoe pit contained within the plant feed.”
• The 19% quarter-on-quarter grade improvement to 2.64g/t underpins the increased production levels and “As previously disclosed, gold production for 2017 will be weighted towards the second half of the year”.
• The overall reserve grade of the deposit is currently reported at 3.4g/t gold and it would appear that production grades will need to pick up towards that level during the second half of the year in order to meet the company’s published guidance target. In our view, this should be achievable as increasing proportions of primary ore become available during the latter part of the year with likely improvements in throughput and recovery as a result.
• The company is working on a pit optimisation and revised life-of-mine production schedule for New Liberty and expects to publish the results of this work during Q3 2017.
Conclusion: Avesoro Mining expresses confidence that it will meet its previously announced production and cost targets for 2017, implying a substantial increase in gold production during the second half of the year as mining moves to deeper, fresher, higher grade ore.
Botswana Diamonds (LON:BOD) 1.3 pence, Mkt Cap £5m – Acquiring additional exploration licences
• Botswana Diamonds has announced that it plans to start drilling on its Vutomi diamond joint-venture project, near Frishgewaagt in South Africa, in late July “with the intention of having an initial inferred resource by the end of the year.”
• Preliminary analysis suggests a grade of 78 carats per hundred tonnes while continuing geophysical surveying has extended the lateral extent of the kimberlite dyke hosting the deposit from 6km to 7.5km.
• The company also note that the geophysics has identified 3 anomalous areas where the dyke may be swelling into “blows” analogous to small kimberlite pipes. This was the case on the nearby Marsfontein system which supported diamond mining for a number of years.
• At this stage, there is no indication of the likely value of any diamonds at Vutomi.
Conclusion: We look forward to the results of the forthcoming drilling at Vutomi
Georgian Mining* (LON:GEO) 18p, Mkt Cap £21m – Georgian delineates gold resource in gold oxide above copper sulphide mineralisation
(Georgian’s assets in Georgia are held in a 50:50 joint venture)
STRONG BUY
• Georgian Mining report the delineation of a modest gold oxide resource overlying more meaningful copper sulphide mineralisation.
• JORC: The new JORC standard resource shows 2.29mt of indicated and inferred resource grading a respectable 0.85g/t of gold and 0.07% copper, containing 62,486oz of gold.
• This narrows down to a smaller 1.14mt of ore grading at a higher 1.10g/t gold and 0.07% copper grade containing 40,255oz gold.
• The small gold resource which extends to a relatively shallow depth of around 40m should lead to the recovery of >30,000oz of gold worth >$36m.
• Footprint: the resource has been drilled over a relatively small 150m x 150m footprint covering 2.3 hectares to give the 2.29mt resource.
• Drilling will now expand to a larger 1km x 1.3km area which expands the footprint to 130 hectares.
• Scale: While it might be wrong to simply multiply the resource number by the expansion in the scale of the footprint this does suggest to us that the new target area is very much larger than previously considered.
• Cut-off grade: no cut-off grade is applied as the company will mine the whole resource area as part of its pre-strip to get to the more valuable copper resource underneath.
• True widths: the widths reported are effective true widths as the resource has silicified alteration in the form of pervasive stockwork and vein mineralisation over package widths ranging from 30m to >70m over a well-defined, visible oxide zone with a very clear break between oxides and sulphides and a rapid transition to sulphide mineralisation and supergene enrichment immediately beneath the oxide zone basal contact. There is also no reliance on individual narrow high-grade veins to carry the overall grade.
• Moreover we believe the true width numbers are not particularly relevant in the context of mining the whole resource and we would normally only expect to see this detail if the economics of the mine required a more selective view and understanding of the orebody.
• Cost estimate: We estimate the gold should be mined and processed by the joint venture partner at the Madneuli gold plant at a cost of <$600 oz="" our="" estimate="" based="" on="" heap="" leacing="" with="" an="" assumed="" and="" approximate="" 80="" recovery="" rate="" li="">
• Copper resource: more importantly the company states it is on target to produce a 3-5mt copper-gold sulphide and gold oxide resource mineralisation.
Conclusion: Georgian are stepping forward in terms of resource definition. We look forward to the release of assay results from the copper mineralisation which lies underneath the gold resource. We expect these results to be of greater significance to the market.
Jangada Mines (LON:JAN) 6.3pence, Mkt Cap £12.3m – Revised Pedra Branca resource estimate including copper and nickel.
• The recently listed Jangada Mines has announced an updated mineral resource estimate for its Pedra Branca PGM Project in northeast Brazil.
• The new estimate incorporates copper and nickel grades in addition to the platinum, palladium and gold previously reported. The new estimate now totals 23.138m tonnes at an average grade of 0.759g/t palladium, 0.48g/t platinum, 0.041g/t gold, 0.045% copper and 0.214% nickel. Approximately 38% of the resource tonnage is classified as oxide, 19% as transitional material and 43% as sulphide mineralisation.
• Around 13% of the resource tonneage is classed as “measured”, 34% as “indicated” and 53% as “inferred” under JORC (2012) reporting standards.
• At current commodity prices, we estimate that the platinum and palladium content represents around 59% of the in-situ value with an additional 33% attributable to nickel.
• The company’s recent AIM Admission Document confirmed that, “Extensive drill core and field sampled ore samples have been analysed by bench scale flotation tests. These tests have confirmed that the Pedra Branca ore can be processed by convention methods as seen on other PGM-copper-nickel-chrome operations.” although there was no obvious reference to likely recovery rates. Additional bulk metallurgical testing is scheduled in Q4 2017 which may give an indication of the likely recoveries for the different commercial commodities.
Conclusion: The inclusion of the base metals, copper and nickel, to the Pedra Branca resource estimates highlight that, subject to the achievable recovery rates, nickel could represent almost as much value as palladium. We look forward to the results of the metallurgical test-work scheduled for Q4 this year.
Spinnaker Opportunities PLC (LON:SOP) price 4.8p, mkt cap £1.2m – Spinnaker narrows down acquisition opportunities
https://www.spinnakeropportunities.uk/
• Spinnaker Opportunities reports today that it has narrowed down the number of opportunities being evaluated to a short list.
• The company is now carrying out additional work on these opportunities with a view to undertaking in-depth due diligence on one or two of these.
• Opportunities being evaluated have been in the oil & gas, energy, supply chain and technology areas.
• The opportunities selected are predominantly at the upper end of the initial £5-30m investment range.
• Spinnaker Opportunities listed as a cash shell on the Standard List of the London Stock Exchange today raising £800,000 through the issue of 16m shares at 5p/s + 1 warrant with each share exercisable at 7.5p/s.
• The company has a highly experienced board with expertise in the Oil & Gas and Energy sectors with directors drawing no salaries for now.
• Directors invested some £310,000 of their own money, in cash and are not looking to remain on the board unless required past the first acquisition.
• The directors are:
• Andy Morrison, Chairman, is known as a trouble shooter with strong track record in managing companies through difficult situations and achieving the best possible outcome for shareholders. Morrison is a chemical engineer with strong commercial acumen and is responsible for sourcing and negotiating on a pipeline of opportunities for the company.
• Richard Liddell, Director, is known for adding value in the oil & gas sector and is a good name on the board. He is seen as a seasoned veteran with allot of small company experience allied with technical capability in the oil & gas sector. Liddell is currently a non-executive at Sound Energy PLC and managing director at Clara Petroleum. He has also held positions at Falkland Oil & Gas, Premier Oil, British Gas E&P. Liddell will contribute to the origination, screening and due diligence of assets to be acquired by Spinnaker.
• Tony Harpur, Director, has worked as a senior executive in the oil trading units of BP and Shell and is the ex ceo of an oil and chemicals trading company based in the Middle East.
• Jonathan Bradley-Hoare, is a chartered accountant with his own practice at Welbeck & Associates.
• Mike Doherty, Board Advisor, has a good reputation for . He has just farmed out a large tract of offshore acerage offshore South Africa for Impact Oil & Gas. He described as a seasoned professional by analysts.
• David Bott, Board Advisor, is chairman at Oxford Biomaterials and a non-executive director of Oxford Advanced Surfaces Group. He has formerly worked for BP, Courthaulds and ICI where he worked as a director of Group Technology.
• David Little, company secretary, is a corporate and commercial partner with legal firm Bishop & Sewell, advising on buying and selling businesses.