SolGold* (LON:SOLG) – Exploration update and move to trading on LSE Main Market
Euro climbs to highest level in 14 months, after ECB comments that latest rally is not worrying the Governing Council and suggested the central bank is planning to discuss adjustments to the QE programme this autumn
• The US$ index is 0.64% since Wednesday hovering at the weakest level since Aug/16.
• Gold is trading at the strongest level since the end of June and is on course for the first back-to-back weekly increase since June 2 on the back of the news of expanding investigation into links between Russia and Trump’s presidential campaign.
• Base metals are up this morning with copper prices up more than 1.3% and trading above $6,000/t helped by a weak US$ and the news over union protests in Peru and Chile.
• Antofagasta mine workers at Zaldivar are said to have rejected the latest company’s offer with the Company said to “have agreed tp extend negotiation until next Wednesday” regarding the new offer.
• Brent is on course for its second weekly gain ahead of the OPEC and non-members’ meeting at St Petersburg this weekend.
• Iron ore futures for Sep are off 2.1% on the DCE today, but were up strongly on the week (+7.6%).
Dow Jones Industrials -0.13% at 21,612
Nikkei 225 -0.22% at 20,100
HK Hang Seng -0.13% at 26,706
Shanghai Composite -0.21% at 3,238
FTSE 350 Mining -0.11% at 15,822
AIM Basic Resources -0.22% at 2,447
Economic News
US – Robert Mueller heading the US Special Council investigating possible ties between Donald Trump campaign and Russia is reported to be expanding the probe into Trump aides’ business transactions involving Kushner, Manafort as well as Trump.
• Trump lawyers said they were unaware of the inquiry into Trump’s businesses and deemed that to be beyond the Special Council mandate.
• Expanding scope of the investigation raised market concerns over the future of Trump proposed pro-growth regulations.
• On economics data front, unemployment claims contracted last week continuing to reflect strong labour market which in turn should potentially translate into increasing earnings fuelling inflation growth.
Date Event Period Survey Actual Prior Revised
Monday Empire Manufacturing Jul 15 9.8 19.8 --
Wednesday Housing Starts MoM Jun 6.20% 8.30% -5.50% -2.80%
Building Permits MoM Jun 2.80% 7.40% -4.90% --
Thursday Initial Jobless Claims Jul-15 245k 233k 247k --
Continuing Claims Jul-08 1949k 1977k 1945k --
Philadelphia Fed Business Outlook Jul 22.9 19.5 27.6 --
Source: Bloomberg
Eurozone – In line with expectations, the ECB left rates and the pace of asset purchases unchanged yesterday; although, Mario Draghi suggested the Governing Council is planning to discuss changes to its QE programme this fall.
• The central bank highlighted signs of “unquestionable improvement” in the Eurozone growth.
• “Inflation is not where we want it to be and where it should be...after a long time we are finally experiencing a robust recovery where we only have to wait for wages and prices to follow course to our objective,” Draghi said.
• Despite the latest rise in major Eurozone economies’ bond yields, the ECB said “financing conditions remain broadly supportive to secure a sustained return of inflation rates towards our inflation aim”.
• A survey of private sector economists of inflation forecasts carried out by the ECB showed annual projections have been cut by 0.1pp in each of the next three years.
• Annual inflation is forecast to average 1.5%, 1.4% and 1.6% in 2017, 2018 and 2019 (1.3% currently) suggesting the economy will not reach its 2% target in 2020.
UK – EU Brexit negotiators warn UK on slashing red tape and mass deregulation
• The EU’s chief Brexit negotiator has warned that the UK should not cut red tape and deregulate.
• The UK government repeal bill is designed to bring all EU law onto UK statute books but should give the UK government power to edit laws in what are called Henry VIII powers.
South Africa – The central bank cut the key interest rate 25bp to 6.75% as inflation slid into the bank’s 3-6% target corridor in April and the latest data showed it declined further than expected to 5.1% in June.
• This was the first cut in five years and the first change in rates in 16 months.
• Markets expected no change from 7%.
• The rand fell around 1% on the back of the announcement but has since regained most of its losses amid a general weakness in the US$.
Greece – The IMF agreed “in principle” to release the €1.6bn cash injection to the country if it receives more guarantees over the sustainability of outstanding borrowings.
• The fund continues to doubt current economic growth and debt servicing projections calling on other creditors to consider a restructuring of the debt which stands at 180% of GDP.
Ukraine – The central bank revoked auditing rights from PwC yesterday arguing the firm failed to spot a $5.5bn balance sheet gap at PrivtBank during its audits.
Currencies
US$1.1656/eur vs 1.1509/eur yesterday. Yen 111.83/$ vs 112.28/$. SAr 12.996/$ vs 12.967/$. $1.299/gbp vs $1.300/gbp.
0.789/aud vs 0.792/aud. CNY 6.765/$ vs 6.766/$.
Commodity News
Precious metals:
Gold US$1,248/oz vs US$1,238/oz yesterday
Gold ETFs 59.4moz vs US$59.4moz yesterday
Platinum US$929/oz vs US$917/oz yesterday
Palladium US$848/oz vs US$857/oz yesterday
Silver US$16.39/oz vs S$16.20/oz yesterday
Base metals:
Copper US$ 6,008/t vs US$5,984/t yesterday
Aluminium US$ 1,922/t vs US$1,928/t yesterday
Nickel US$ 9,575/t vs US$9,655/t yesterday
Zinc US$ 2,749/t vs US$2,744/t yesterday
Lead US$ 2,227/t vs US$2,221/t yesterday
Tin US$ 20,125/t vs US$20,100/t yesterday
Energy:
Oil US$49.3/bbl vs US$49.7/bbl yesterday
Natural Gas US$3.030/mmbtu vs US$3.074/mmbtu yesterday
Uranium US$20.55/lb vs US$20.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$66.6/t vs US$68.3/t
Chinese steel rebar 25mm US$601.4/t vs US$602.2/t
Thermal coal (1st year forward cif ARA) US$73.5/t vs US$73.5/t yesterday
Premium hard coking coal Aus fob US$171.1/t vs US$168.6/t
Other:
Tungsten APT European US$218-226/mtu vs US$215-222/mtu
Company News
SolGold* (LON:SOLG) 38.8p, Mkt Cap £857m – Exploration update and move to trading on LSE Main Market
• SolGold report that it has revised its magnetic exploration model for the Cascabel project in Ecuador.
• This is interesting because it indicates the potential for further copper, gold discoveries within the Cascabel license area and for the exploration project to become significantly more valuable.
• Drill results show strong correlation between copper, gold grades and magnetic content which can be detected remotely from surface.
• The new amended magnetic modelling show a northwest trend line of what look like potentially significant magnetic bodies at Moran, Trivinio, Alpala Northwest and Alpala Central, with further targets at Alpala West, Carmen and Parambas also supported by ground magnetics and further 3D modelling.
• The 3D magnetic modelling is masked by intense hydrothermal alteration to the Southeast of Alpala, though the hydrothermal alternation may carry its own mineralisation as seen around many mineralised porphyry orebodies.
• A second constrained magnetic inversion model based on airborne data, ground magnetic data and magnetic susceptibility in 41,000m of drilling at Alpala is also expected to provide a highly predictive model with which to further refine drill targeting at Alpala.
• A fifth drilling rig has now arrived at the main Alpala site to speed up the generation of the maiden inferred resource estimate being planned for end December.
• The next update should be on progress at drill holes 23, 24, 26, and 27.
• Incredibly, the Spartan Orion 3D magnetotelluric survey is planned to show 3D sulphide mineralisation mapping to 3km depth which will help to direct further drilling.
• Listing news: SolGold is moving off AIM and onto the Main Market of the LSE on or around the 18th August. The company is also listing on the TSX as part of a move to raise the company’s global profile. SolGold has been long supported on AIM with very substantial trading volumes.
• The team at SP Angel raised new money for SolGold at least eight times on AIM as the company explored, first in the Solomon Islands, then moving the focus to Cascabel in Ecuador. The last AIM fundraising was done at 1.5 pence per share before Newcrest came in with substantial new funds for exploration.
Conclusion: The Solgold team are using some of the best remote sensing techniques to work out where best to drill for mineralisation. Drilling is expensive and relatively time consuming using man-portable rigs at Cascabel and it is important to make every drill hole show value in new mineralisation or understanding of the future resource.
The correlation between magnetics and mineralisation looks good so far and the ability to create a 3D picture of the magnetic signature at up to 3Km depth is an valuable tool to use in predicting the potential scale of the Alpala and Cascabel projects.
*SP Angel acts as broker to SolGold. The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.