Anglo Asian Mining* (LON:AAZ) – Ugur maiden JORC resources/reserves
Caledonia Mining (LON:CMCL) – On track for 2017 production guidance
Savannah Resources (LON:SAV) – Pilot plant construction underway at Mutamba
Serabi Gold Price (LON:SRB) – interim results and production update
China Renminbi strengthening as North Korean tensions hit US dollar and Japanese Yen
• The more we look at the actions of North Korea the more we see the situation as benefitting the Chinese.
• North Korea’s threat to fire missiles to locations close to Guam could have been designed by China to test the USA’s resolve in the region.
• While China is publically trying to calm tensions we have to wonder who North Korea is working for here? Question is, which nation has the bigger mad-man?
China steel production saw new record rising 10.3% yoy in July to 74mt
• Steel production rose 5.1% yoy yo 491.23mt for the first seven months of the year
• The crackdown on pollution and the expected winter closures may be causing steel producers to push production through the summer delaying closures for maintenance till the winter.
• The move has lifted iron ore prices at a time when demand normally slows.
• Margins reported for Chinese steel producers are seen to have risen which may be causing the government to push producers to reinvest in new anti-pollution measures.
• The authorities are also allowing steel mills to expand if they comply with new tougher environmental standards. It will be interesting to understand just how tough these standards really are?
Steel prices (rebar 25mm $649.6/t) gain while iron ore prices pause at $70.5/t
• The recent rise in Chinese rebar prices have prompted the authorities to raise transactions fees to dampen speculative demand causing steel futures prices to pull back.
• Margins for Chinese steel producers are rising as the Chinese state cuts less efficient and polluting production.
• The state is reported to be widening steel production restrictions in winter months to another four provinces
• This is thought to be causing buyers to bring forward steel and other metal purchases raising stock levels for when production slows through the winter
Safe haven assets pull back as US/North Korea tensions calm
• Gold fell $8/oz this morning after hitting a 9-week high late last week.
• US 10y Treasuries yields climbed 2bp to 2.21% from a six-week low reached last week.
• The US$ index is hovering around a more than 12m low as US inflation data released on Friday came in below market estimates.
• Equities are trading higher as risk-off sentiment abates with the Stoxx Europe 600 Index up 0.8%, marking the strongest increase in more than a week, and S&P 500 futures up 0.6%, the largest gain in more than a month.
• Iron ore and steel futures extended declines on Monday as the China Iron and Steel Association said late last week that the latest rally in bulk commodity prices is based on a misunderstanding of the impact of government policies rather than on market fundamentals.
• Chinese steel mills are reported to have produced the record monthly volume with crude steel production hitting 74mt in July, up 10%yoy; this brings total output for the first seven months of the year to 492mt, up 5.1%yoy, amid high margins mills are locking in on a rebound in steel prices with index of steel profitability in China at the highest level sicne 2008 this month.
Dow Jones Industrials +0.07% at 21,858
Nikkei 225 -0.98% at 19,537
HK Hang Seng +1.25% at 27,220
Shanghai Composite +0.90% at 3,237
FTSE 350 Mining +0.73% at 16,256
AIM Basic Resources +0.47% at 2,483
Economic News
Currencies
US$1.1822/eur vs 1.1758/eur last week. Yen 109.53/$ vs 108.99/$. SAr 13.368/$ vs 13.481/$. $1.301/gbp vs $1.297/gbp.
0.789/aud vs 0.786/aud. CNY 6.661/$ vs 6.667/$.
Commodity News
Precious metals:
Gold US$1,286/oz vs US$1,289/oz last week
Gold ETFs 66.3moz vs US$66.3moz last week
Platinum US$978/oz vs US$984/oz last week
Palladium US$896/oz vs US$901/oz last week
Silver US$17.14/oz vs US$17.16/oz last week
Base metals:
Copper US$ 6,405/t vs US$6,363/t last week
Copper – Glencore suspends operations at Mopani Copper Mines due to local power restrictions
• Glencore suspends operations at its Mopani copper mine as Copperbelt Energy Corporation ‘CEC’ has restricted power supplies into the Kitwe and Mufulira regions.
• The company managed to raise all underground miners to surface.
• Mopani and other miners have been contesting new power tariffs of around 9.3US c/kWh in court. Vs around 6USc/kWh which had been previously negotiated.
• Zambia continues to suffer from lower hydropower availability due to low water levels in the Kariba dam.
Aluminium US$ 2,029/t vs US$2,030/t last week
Nickel US$ 10,610/t vs US$10,680/t last week
BHP talking to gold miners in Kambalda region in effort to keep nickel concentrator going
• News reports today suggest that BHP Nickel West is in talks to see if gold can be concentrated at the plant to avert closure of the Nickel West plant at Kambalda.
• The plant is challenged by a lack of feed due to the closure of mines by Mincor and Panoramic leaving only Western Areas, Independence Group and BHP ores to feed the concentrator plant.
• Worse still Independence is to close its Long nickel mine at Kambalda next year exacerbating the shortage of feed stock.
• BHP’s Nickel West plant has been running for 50 years and may extend its life through mining some of its own opportunities
Zinc US$ 2,916/t vs US$2,918/t last week
Lead US$ 2,344/t vs US$2,348/t last week
Tin US$ 20,325/t vs US$20,250/t last week
Energy:
Oil US$52.1/bbl vs US$51.4/bbl last week
Natural Gas US$3.001/mmbtu vs US$2.982/mmbtu last week
Uranium US$20.80/lb vs US$20.80/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$70.5/t vs US$71.9/t
Chinese steel rebar 25mm US$649.6/t vs US$648.1/t
Thermal coal (1st year forward cif ARA) US$77.0/t vs US$75.8/t
Premium hard coking coal Aus fob US$198.0/t vs US$198.0/t
Other:
Tungsten APT European US$248-256/mtu vs US$230-235/mtu
Ilmenite prices bounce back to $170/t (Metal Bulletin prices)
• Prices for basic Ilmenite have recovered to around $170/t following a very brief dip to around $155/t at end July.
• Prices remain very much better than they were in December at around $110/t.
Company News
Anglo Asian Mining* (LON:AAZ) 25p, Mkt Cap £28.4m – Ugur maiden JORC resources/reserves
• The Company together with geological consulting group Datamine International released maiden JORC-compliant mineral resources and reserves statement for the latest Ugur discovery located only three kilometres NW of Gedabek processing facilities.
• The deposit is estimated to host 3.6mt at 1.3g/t Au and 7.0g/t for 147koz and 808 koz in contained gold and silver in total reserves.
• Mineral reserves contain c.74% of the total mineral resource which stands at 7.0mt at 0.9g/t Au and 4.7g/t Ag for 199koz and 1,049koz in contained gold and silver, respectively.
Ugur Reserves/Resources mt Au g/t Ag g/t Au, koz Ag, koz
PP Reserves 3.59 1.3 7.0 147 808
MI Resources 4.46 1.2 6.2 172 884
Inferred Resources 2.50 0.3 2.1 27 165
Total Resources 6.96 0.9 4.7 199 1049
Source: Company
• Study assumptions include:
o Gold price of $41.19/g ($1,280/oz).
o Gold and silver processing recoveries of 90%/66% for agitation leaching (AL), 70%/7% for crushed heap leaching (HL) and 40%/7% for uncrushed heap leaching (ROM).
o Processing routes of the Ugur mineralisation are reported to be well understood with oxide ores said to be “relatively soft” and requiring “comparatively low levels of processing reagents for recovery”.
o Metallurgical testwork was completed on a number of samples with highest recoveries of 95% demonstrated by 1.5g/t gold grades, while other samples ranging from 1.0g/t to 3.6g/t yielded 84-89% recoveries.
o Accepted gold headgrades for AL, HL and ROM are 1.8g/t, 0.8g/t and 0.5g/t, respectively.
o “Further to the gold cut-off grade calculations (reserves), after long term scheduling the mill cut-off grade resulted in 0.3g/t gold”.
o Operation is estimated to involve a limited amount of waste stripping with the total strip ratio of 0.83x.
• On development progress, the team has completed the construction of the 4.6km road link between Ugur and Gedabek.
• Waste stripping commenced in late July with mining and haulage of Ugur ores is due to start before end of August.
• First Ugur ore is scheduled for processing in September, ahead of the previously envisaged Q4/17.
Conclusion: Ugur is set to help the Company to fill Gedabek processing facilities with soft oxide material as the team continues works on resources models at Gedabek and Gadir. The statement shows Ugur hosts 1.6mt at 1.94g/t for 100koz of contained gold suitable for agitation leaching in Proved Reserves, enough to keep the Gedabek AL 700-800ktpa plant running for a couple of years at least.
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Caledonia Mining (LON:CMCL) 510p, mkt cap £54m - On track for 2017 production guidance
• Caledonia Mining reports that it's Blanket mine in Zimbabwe achieved 12,521 oz of gold production during the quarter ending 30th June 2017 bringing H1 gold output to 25,315oz and keeping the company on course to meet its latest production guidance of 52-57,000 oz for 2017.
• In the longer term, the mine also remains on course with its deeper mine development project with the Central Shaft project currently at a depth of 870m and on course to help deliver 80,000oz pa of gold production in 2021 and ensure the long term viability of the Blanket mine. The Central Shaft project is still on course to start production during Q4 2018.
• Although cash production costs increased by 3% to $677/0z (H1 2016 US$658/oz) , costs on an "all-in-sustaining" basis declined by almost 9% to US$856/oz (H1 2016 US$937/oz).
• Despite a "marginally weaker average" gold price of US$1235/oz during the quarter, "Operating cash flow in the Quarter of $4.7 million contributed to a strong balance sheet and supports the funding of the Central Shaft project.
• The company maintained a broadly stable level of gross cash (US$10,9m) at the end of the quarter even after funding a further US$4.2m of capital expenditure and US$0.7m of dividend payments to shareholders.
• The quarter was not without its challenges with lower mined grades and "logistical difficulties in the underground material handling" which we consider reflect the competing priorities on the existing shaft infrastructure of the requirements of production and the new mine development work to access ore below the 750 level. Sadly the mine also experienced two fatalaties in recent months.
• Commenting on the operational issues, CEO, Steve Curtis commented "Management have implemented several remedial measures in the Quarter to improve our underground material handling capacity and to address the logistical constraints, The benefit of these actons was evident in July when we saw improvements in ore tonnages, grade and gold recoveries. I expect that further benefits will be realised in the second half of 2017."
• Conclusion: Development at the Blanket Mine remains on course to deliver both the long term goal of 80,000ozpa of gold production by 2021 as well as meeting the 52-57,000 oz guidance for 2017 A number of operational challenges have been addressed during the first half of 2017 and he company in indicating that improvements may carry through into H2.
Savannah Resources (LON:SAV) 5.1p, mkt cap £29m - Pilot plant construction underway at Mutamba
• Savannah Resources reports that construction of a 2-tph capacity pilot plant is underway at its Mutamba mineral sands project in Mozambique.
• The construction, which is expected to be completed by the end of 2017, is aimed to provide mineral concentrate samples for bulk metallurgical testing, will utilise a plant, previously "constructed and tested under the direction of Rio Tinto in 2012 in South Africa before being disassembled and packed into containers and shipped to the Mutamba site."
• The reassembly of a pre-tested plant on site at Mutamba should, in our opinion, facilitate commissioning of the pilot plant where major works will include the civil engineering and the connection of power and water supplies.
• The concentrate bulk samples will be used for analysis, "and the preparation of final products for test marketing. The completion of the plant will be a key milestone for the Mutamba Consortium as we move towards a development decision."
• Savannah Resources operates the Mutamba project in collaboration with Rio Tinto and is earning a 51% interest in the project in a series of stages. Savannah earned a 20% interest with the completion of a scoping study in May this year and will increase its interest to 35% through the completion of a pre-feasibility level study. Delivery of a full feasibility study earns Savannah the full 51% interest.
• Conclusion: The construction of the pilot plant at Mutamba will be part of the pre-feasibility and feasibility study work which provide milestones in the earn-in process which increases the company's ultimate stake to 51% of the project.
Serabi Gold Price (LON:SRB) 4.6p, mkt cap £32m - interim results and production update
• Serabi Gold reports an H1 loss of 15cents/share, reversing a 15 cents per share profit in H1 2016. Even so, the company expects an improvement in production which is already underway, to "recover lost revenue and cash flow with a relatively low increase in operating cost" during the second half of the year.
• Production during the first six months of 2017 amounted to 18,009 oz of gold (2016 - 19667oz) at an all in sustaining cost of US%1,072/oz representing a 13% increase on the US$945/0z achieved during H1 2016. Year to date cash costs of US$819/oz are approximately 7% above the US$763/0z of H1 2016.
• The company highlights that "Temporary operational issues in Q2 2017, which have now been fully resolved, restricted production, and in combination with a strengthening Brazilian Real, impacted financial results for the first half of the year."
• Commenting on the results, CEO, Mike Hodgson, reiterated that the operational issues encountered in April and May have now been fully resolved and that "June and July has seen production levels return to those levels that we achieved through much of 2016 and during the first quarter of 2017. Furthermore, the month of July was the highest monthly production for the year to date and I remain confident that we can recover shortfall over the remainder of the year and will be able to meet our full year production guidance of 40,000 ounces."
• The company also discloses that, it has taken out a new working capital loan facility totalling US$5m with the Sprott Resource Lending Partnership. The additional funds, which are available for a 30 month period are not reflected in the company's cash balance for 30th June of US$3.83m as they were not received until July. "This loan funding will allow the Company to expedite some of its capital investment programmes that it feels will improve operations and bring cost efficiencies in the medium term and thus reduce unit production costs."
• Conclusion: Serabi Gold expresses confidence that it has resolved the operational issues of April and May and that an improving trend in June and July will carry forward into the remainder of the year allowing it to meet its 40,000 ounce production guidance for 2017.