Today's edition features:
• Andalas Energy and Power (LON:ADL)
• Bezant Resources (LON:BZT)
• Harvest Minerals (LON:HMI)
• Jangada Mines (LON:JAN)
• Lionsgold Limited (LON:LION)
• Mineral & Financial Investments (LON:MAFL)
• Xtract Resources (LON:XTR)
Markets
Europe
The FTSE-100 finished yesterday's session 0.41% higher at 7,383.85 whilst the FTSE AIM All-Share index was up 0.52% at 1,002.21. In continental Europe, the CAC-40 finished 0.36% higher at 5,140.25 whilst the DAX was up 0.10% at 12,177.04.
Wall Street
In New York last night, the Dow Jones ended 0.02% higher at 21,998.99, the S&P 500 closed 0.05% lower at 2,464.61 and the Nasdaq was down 0.11% at 6,333.01.
Asia
In Asian markets this morning, the Nikkei 225 was 0.05% higher at 19,763.68 and the Hang Seng was up 0.66% at 27,354.24.
Oil
In early trade today, WTI crude was up 0.46% at $47.77 per barrel and Brent crude was 0.57% higher at $51.09 per barrel.
Headlines
IMF warns on China's credit boom
The International Monetary Fund has warned that China's credit growth is on a "dangerous trajectory". In a new report, the IMF says there is an increasing risk of a "disruptive adjustment" and/or a marked slowdown in economic growth". The agency calls for decisive action to deflate the credit boom smoothly. Without the boom, the report suggests, China's recent economic expansion would have been significantly slower. Since the global financial crisis, China's economic growth has slowed, from an average of 10% a year in the previous three decades to a rate of 6.7% last year. The Chinese government expected a slowdown, since the earlier double-digit rate was not sustainable over the long term.
Source: BBC News
Company news
Altus Strategies (LON:ALS, 10.38p) – Speculative Buy
Altus Strategies has announced very good results from a high resolution ground magnetics survey at its Laboum gold project in northern Cameroon. Geophysics was done across a 17.8km by 5km wide shear zone and has shown a strong correlation between certain magnetic signatures and gold anomalies. Altus has, as a result, defined three large prospects which it has named Landou (3.75km long), Kalardje (2.5km) and Tapare (7km). The survey will now be extended to include new areas which also have artisanal workings.
Our View: The Laboum project is in our opinion one of Altus’ most exciting. The scale of the shear zone, presence of active artisinals and positive rock chip samples (up to 6.86 g/t) point to a potentially very large gold discovery. The cumulative strike of the three initial prospects is 13.5km and Tapare and Kalardje are both interpreted to extend along strike. A 218 line km soil survey is also being undertaken and we look forward to results from this and further geophysics surveying. We have a Speculative Buy recommendation.
Beaufort Securities acts as a corporate broker to Altus Strategies plc
Andalas Energy and Power (LON:ADL, 0.07p) – Speculative Buy
Andalas published two separate announcements. First to report it had raised c.£1m to repay the outstanding convertible (with Sandabel Capital); the second to clarify that it has indeed entered into a consortium agreement with an Indonesian state owned engineering and construction company to develop an independent gas power plant. The fundraise both cleans up the balance sheet and provides cash to progress the Independent Power Project (IPP) towards financial close and construction.
Our View: Andalas is a relatively poorly understood vehicle, and some financial journalists have still not grasped what management has achieved in Sumatra. This is partly due to an under appreciation of management's specific Sumatran gas experience and capabilities. The CEO Dave Whitby has over 20 years experience in the Indonesian gas industry much of that on Sumatra with major E&P companies and gas projects. He also worked at a senior level for Pertamina, the national oil company. He is supported by an Indonesian and Western team with longstanding Indonesian experience and contacts. Following this fundraise, Andalas is well placed to continue development of its first project Jambi 1 a 30MW wellhead gas power plant. And we expect the market to begin to focus on the Indonesian operations rather than the balance sheet. We anticipate the shares doing well from current levels and have a Speculative Buy recommendation.
Beaufort Securities acts as a corporate broker to Andalas Energy and Power Plc
Bezant Resources (LON:BZT, 1.45p) – Speculative Buy
Bezant has announced it has achieved initial commercial production at its Choco gold and platinum project in west Colombia (Choco Province). The plant was commissioned two months ago and is now fully operational and presumably performing as expected and as designed. Operational profitability is targeted within 3 months from now, with management expecting similar economics to the sub $800/oz (of gold and platinum) cash cost envisaged in the Scoping Study. The main change to achieve profitability will be mining of the deeper and higher grade gravels.
Our View: Bezant has delivered over the past 18 months. From a near standing start to production, supported by all important social and environmental expertise (mainly from its partnership with Colombia and alluvial experts Exumax). The Bezant investment case is based not just on profitability guided for 3 months from now, but on the construction of multiple low capital cost operations across the province. Bezant is currently producing from licence FKJ 083, but has a large licence footprint in an region with widespread platinum and gold alluvial deposits. We have a Speculative Buy recommendation.
Beaufort Securities acts as a corporate broker to Bezant Resources plc
Harvest Minerals (LON:HMI, 12.00p) – Speculative Buy
Harvest has published more positive results from agronomic test work of its KPfertil product. The tests were carried out at the Federal University of Uberlândia, approved by the Brazilian Ministry of Agriculture. The latest results were from tests looking at how rice responds to KPfertil when compared with a control (no fertiliser) and with a conventional fertiliser such as KCL (usually in the form of Muriate of Potash). The rice crops applied with KPfertil "demonstrated a substantial increase in dry matter production”. And when applying the same dose of potassium and phosphate as conventional fertilizer sources, KPfertil produced up to 73% of the dry matter as the more expensive fertilizers.
Our View: Harvest’s KPFertil product has performed well in all tests. As a slow release natural product it is difficult to make direct comparisons with traditional sources of fertilizer, however the company is now very confident it will become an important part of local fertilizer regimes. Harvest’s CEO stated "we believe KPfértil has the potential to replace significant amounts of conventional and more expensive fertilisers and become a staple product in the Minas Gerais agriculture belt in Brazil". Beaufort is looking forward to results from the Veloso crop trials (which appear encouraging) and maintain our Speculative Buy recommendation.
Beaufort Securities acts as a corporate broker to Harvest Minerals plc
Jangada Mines (LON:JAN, 4.75p) – Speculative Buy
Jangada Mines, the recently listed natural resources company developing South America’s largest and most advanced platinum group metals (PGM) project, announced today an updated JORC (2012) compliant resource estimate. The updated resource now includes 1Moz of PGM (plus Au), 109 Mlbs of Ni, 23 Mlbs of Cu, 6.4 Mlbs of Co and 600kt Cr at the Company’s Pedra Branca PGM project in Ceará State, north-eastern Brazil. When considering palladium equivalent (Pd Eq) the overall grade increased 93% from 1.3g/t to 2.5g/t Pd Eq based on current spot prices. Subject to metallurgical tests, the potential by-product credits could significantly offset the cost of production of the PGMs. The Pedra Branca project comprises four main deposits and management is focused on bring the easily accessible high-grade surface oxides from the Curiu and Esbarro deposits into trial production during 2018. At current spot prices, the updated resource could potentially add US$33/t to the value of ore extracted.
Our View: The above announcement is positive news as Jangada Mines continues to develop its multi-commodity Pedra Branca project. The potential Ni, Cu, Co, and Cr by-product credits could significantly add to the economics of the PGM project should these metals be easily extracted and processed. We note that the at surface high-grade oxide layer is amenable to low-capex and opex costs with the potential to produce a PGM-bearing concentrate through gravity separation and floatation process. We look forward to detailed metallurgical test work regarding the potential extraction of the by-products as part of the pre-feasibility study (PFS) as well as continued developments as the Company progresses towards trial mining in 2018. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Jangada Mines Plc
Lionsgold Limited (LON:LION, 0.88p) – Speculative Buy
Lionsgold, the gold-focused exploration company with assets in India and Finland, and a fintech subsidiary that provides physical gold online accounts, announced preliminary results from the NI 43-101 compliant Feasibility Study on the Jonnagiri Gold Project (owned by Geomysore Services India in which Lionsgold holds a 21.15% interest. Subject to peak funding requirement of US$39m, Geomysore intends to establish an open pit mine on the East Block, producing 495,000 tonnes of ore per annum at a rate of 1,500 tpd. The JORC-compliant mineral resource estimate has been upgraded to Probable Reserves of 2.8Mt containing 151,000oz of gold, with an average grade of 1.68 g/t (cut-off grade of 0.6 g/t). Based on a gold price of US$1,301/oz, the post-tax NPV (8.5%) retuned US$13m with a total cash cost of US$753/oz based on a seven-year life of mine and a recovery rate of 92.4%. Construction is expected to take 18-24 months following purchasing or leasing of land and a mine developer/operator contract being agreed.
Our View: The above results are an important milestone for Lionsgold and the development of the Jonnagiri gold project. We note that the surrounding exploration assets, including the West Block and South Block could potentially expand the mine life beyond the projected seven years. We are encouraged with the preliminary results of the feasibility study and look forward to continued developments including the tender process regarding the mine developer/operator contract in the coming months. In the meantime, we rate the stock as a Speculative Buy.
Beaufort Securities acts as a corporate broker to Lionsgold Limited
Mineral & Financial Investments Limited (LON:MAFL, 11.75p) – Speculative Buy
Mineral & Financial Investment, the metals and mining focused investment company, announced yesterday that TH Crestgate, a private investment company in which MAFL holds a 49% interest, had released the third batch of assay results from its 2017 drill programme designed to expand the current resource at the Lagoa Salgada project in Portugal. The 13,400ha Lagoa Salgada project is a polymetallic deposit with a preliminary resource estimate of 4.5Mt grading 2.79% Pb, 2.85% Zn, 0.34% Cu, 53.43g/t Ag and 0.81g/t Au for the LS-1 Zone. The third of six planned drill holes (LS MS-03) intersected 131m grading 0.49% Cu, including 20m grading 1.24% Cu from 231m. A massive sulphide zone comprising 28m was intersected grading 8.85% Zn Eq., including 13m of 12.42% Zn Eq. TH Crestgate has an exploration target of between 8.0Mt and 10.0Mt on the LS-1 Zone. The copper grades could be potentially economic without any by-products credits from the other metals.
Our View: We continue to be encouraged with the significant assay results from the third drill hole of the current drilling campaign which suggest that Lagoa Salgada is a large poly metallic mineralised system with potentially numerous ore zones. The massive sulphide horizon has a slightly higher Zn Eq. grade above the historical resource grade of 8.2%. These results bode well for an expanded resource targeted between 8Mt and 10Mt. We note that the copper grades and intervals could be economic without consideration of other by-product credits. We look forward to further drill results and the subsequent resource update for the LS-1 Zone. In the meantime, we maintain a Speculative Buy on the Stock.
Beaufort Securities acts as a corporate broker to Mineral & Financial Investment Limited
Xtract Resources (LON:XTR, 2.05p) – Speculative Buy
Xtract Resources has published an update of progress made at its Manica alluvial project in Mozambique. All of Omina's yellow goods (excavators, haul trucks etc) have arrived and are serviced. Two thirds of the plant equipment is onsite and installed, and other construction projects are well advanced. Initial mining is expected later this month. The announcement also discusses some of the stripping and reclamation challenges of the mining area, and how Omnia is well aware of the issues and is designing the mine plan accordingly. It also refers to plans by Xtract to install suitable monitoring systems (technology and manpower) to monitor operations - i.e. to ensure no gold theft.
Our View: The Manica alluvial project appears to be progressing well and we can look forward to updates over the coming months as mining and production ramp up. We have a Speculative Buy recommendation.
Beaufort Securities acts as a corporate broker to Xtract Resources PLC