BlueJay Mining* (LON:JAY) Interim report and progress update for Pituffik
Mkango Resources* (LON:MKA) – Two year extension secured over Thambani licence
Savannah Resources (LON:SAV) – Start of PFS at Mutamba
Gold is flat this morning with the rest of precious and all base metals little changed as well.
• Copper is off only slightly trading around $100/t below $6,650/t hit yesterday afternoon.
• Nickel is trading around $11,400/t after reaching $11,550/t, the highest level seen this year, yesterday.
• Zinc is steady after climbing to a decade-high on Monday.
• Brent is off 0.5% at $51.6/bbl amid news that Libya reopened 230,000bbl/day Sharara field pipeline and lifted the force majeure clause
• Steel futures together with iron ore prices are off more than 3.5% today as China Iron & Steel Association warned that prices are unlikely to increase significantly from here but to continue fluctuate.
• Chinese steel market is expected to be well balanced with planned winter closures to be compensated with “quick release of superior capacity” on the back of higher prices.
• Steel demand is forecast to remain stable.
Dow Jones Industrials +0.90% at 21,900
Nikkei 225 +0.26% at 19,435
HK Hang Seng +0.91% at 27,402
Shanghai Composite -0.08% at 3,288
FTSE 350 Mining +0.45% at 17,065
AIM Basic Resources +0.32% at 2,519
Economic News
Eurozone – A broad measure of economic activity in the area in August showed the region “maintained growth momentum” in August with an increase in manufacturing production highlighted, in particular, as shown by Markit PMI numbers.
• The rate of expansion of the private sector remained around the best recorded over the past six years with both major economies, Germany and France, continuing to show solid output growth.
• Manufacturing sector recorded the strongest increase in export orders in six-and-a-half years.
• Of note, inflation in both input and output prices strengthened in August; although, the inflation rate remained modest.
• “The survey data over the first two months of the quarter are consistent with only a fractional easing in the rate of growth of GDP from the 0.6% rise in Q2…overall, this is another positive set of numbers for the euro area, which continues to enjoy its best growth spell for a number of years,” Markit wrote.
• Markit Manufacturing PMI: 57.4 v 56.6 in July and 56.3 forecast.
• Markit Services PMI: 54.9 v 55.4 in July and 55.4 forecast.
• Markit Composite PMI: 55.8 v 55.7 in July and 55.5 forecast.
Germany – Private sector activity picked up in August with both manufacturing and services sectors posting gains, according to the latest Markit PMI data.
• “Growth of output was broadly in line with the strong trend shown over the past 12 months,” Markit wrote.
• Additionally, new orders growth accelerated after having slowed to a six-month low in the previous month, employment continued to grow in August while inflation in output prices hit a five-month high.
• New export orders posted the strongest increase since May 2010 with strong demand recorded in Asia, in particular.
• Markit Manufacturing PMI: 59.4 v 58.1 in July and 57.6 forecast.
• Markit Services PMI: 53.4 v 53.1 in July and 53.3 forecast.
• Markit Composite PMI: 55.7 v 54.7 in July and 54.7 forecast.
France – Business surveys continued to show robust growth rates in output and new orders leading further gains in jobs in August, according to Markit.
• Composite PMI was unchanged from the July as stronger growth in the manufacturing sector made up for a slowdown in the services segment.
• Services sector activity slowed for the third consecutive month in August, although the rate remained above the long run average; new business in the sector continued to grow but at a slower rate.
• Manufacturing production expanded at the fastest pace in almost six-and-a-half years with respective new orders climbing at the strongest rates since Dec/10.
• Contrary to German inflation data, French selling prices declined in August after recording a marginal increase in July as the sharpest drop at service providers since November last year weighed on general inflation levels.
• Markit Manufacturing PMI: 55.8 v 54.9 in July and 54.5 forecast.
• Markit Services PMI: 55.5 v 56.0 in July and 55.8 forecast.
• Markit Composite PMI: 55.6 v 55.6 in July and 55.4 forecast.
South Africa – Inflation came in weaker than expected in July marking the lowest level since Oct/15.
• Softer inflation is welcome news to the South African Reserve Bank which is pursuing a monetary easing policy aiming to help the economy recover from recession.
• The SARB cut benchmark rates for the first time in five years last month.
• CPI (%mom): 0.3 v 0.2 in June and 0.3 forecast.
• CPI (%yoy): 4.6 v 5.1 in June and 4.7 forecast.
Currencies
US$1.1784/eur vs 1.1792/eur yesterday. Yen 109.43/$ vs 109.39/$. SAr 13.238/$ vs 13.157/$. $1.280/gbp vs $1.287/gbp.
0.789/aud vs 0.794/aud. CNY 6.664/$ vs 6.656/$.
Commodity News
Precious metals:
Gold US$1,286/oz vs US$1,285/oz yesterday
Gold ETFs 67.0moz vs US$66.9moz yesterday
Platinum US$979/oz vs US$977/oz yesterday
Palladium US$935/oz vs US$936/oz yesterday
Silver US$17.01/oz vs US$16.95/oz yesterday
Base metals:
Copper US$ 6,575/t vs US$6,619/t yesterday
Aluminium US$ 2,064/t vs US$2,079/t yesterday
Nickel US$ 11,520/t vs US$11,400/t yesterday
Zinc US$ 3,129/t vs US$3,143/t yesterday
Lead US$ 2,408/t vs US$2,355/t yesterday
Tin US$ 20,375/t vs US$20,465/t yesterday
Energy:
Oil US$51.6/bbl vs US$52.1/bbl yesterday
Natural Gas US$2.944/mmbtu vs US$2.964/mmbtu yesterday
Uranium US$20.50/lb vs US$20.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$75.7/t vs US$76.8/t
Chinese steel rebar 25mm US$651.7/t vs US$652.5/t
Thermal coal (1st year forward cif ARA) US$77.5/t vs US$77.6/t
Premium hard coking coal Aus fob US$200.9/t vs US$194.6/t
Other:
FeCr lumpy Charge 52% Cr US$0.00/lb vs US$0.00/lb yesterday
Quarterly hard coking coal US$285.0/t vs US$285.0/t
Tungsten APT European US$250-256/mtu vs US$248-256mtu
Vanadium – The authoritative journal, “Metal Bulletin” has reported that China’s vanadium consumption could increase by as much as 30% or 10,000 tonnes per year as more rigorous standards for steel reinforcing bars (rebar) come into force.
• Quoting an un-named official of the China Iron & Steel Research Institute the journal points out that “The new standard is an improved edition of the GB 1499.2-2007 and proposes to eliminate the 335MPa strength rebar, replacing it with a 600MPa strength rebar, to increase rebar grades with earthquake resistance.”
• The moves to enhance standards for rebar in China came in 2010/11 following the substantial loss of life and structural damage caused by the magnitude 7.9 Sichuan earthquake of May 2008.
• Reports from the BBC suggest that the earthquake cost over 87,000 lives, rendered 4.8m people homeless and incurred over US$130bn in rebuilding costs.
• As we reported recently, vanadium prices have almost doubled since June this year. Although part of the increase may be in anticipation of additional Chinese demand, the long term outlook for vanadium prices is likely to be enhanced by the implementation of the more demanding standards in China.
• We also note that today, Anglo Pacific Group, which holds a royalty on production from Largo Resources’ Maracas Menchen vanadium mine in Brazil, reported that “the vanadium price has recovered to recent highs. Recent spot prices have been in excess of $9.00/lbs compared to an average spot price of ~$3.56/lbs in 2016. It is possible that higher pricing levels could prevail throughout the second half of the year.”
Company News
BlueJay Mining* (LON:JAY) 18.3p, Mkt Cap £140m – Interim report and progress update for Pituffik
STRONG BUY
Target Price raised to 24p from 22p
• In its interim report for the six months to 30th June, BlueJay Mining reports substantial progress in the evaluation of its Pituffik ilmenite sands project in Greenland. The project has now been “independently verified and recognised as the highest-grade ilmenite mineral sand project globally”.
• The company highlights the chemical homogeneity of the mineralisation over a strike length in excess of 30km with low levels of oxidation and of impurities contributing to a potential for low capital cost development.
• In April 2017, BlueJay Mining announced an initial resource estimate of 23.6m tonnes at an average grade of 8.8% ilmenite over “just 17% of the raised beach environment within the Moriusaq target area.” This resource contains a higher grade portion of 7.9mt at an average grade of 14.2% ilmenite and the company also points out that “The raised beach environment is one of three types of domains within the licence area, with the other two being the active and drowned beach environments, and Moriusaq is one of two primary target areas, with the other being Interlak.“
• CEO, Roderick McIllree, commented that “through targeted drilling currently underway, I expect this volume [of resource] to grow exponentially in the coming months.” He also pointed out that “as a result of glacial (mechanical) erosion and favourable deposition centres along the coastal plain, the entire front-end capital expenditure associated with mining, crushing, grinding and concentrating has been done naturally, … This greatly simplifies the requirements on us in terms of how we mine and produce a saleable ilmenite product and will have a significant impact on the unit cost of our product.”
• BlueJay Mining has already shipped an initial 250 tonne bulk sample, with a second similar sized sample due for despatch in the coming days, to potential customers as part of negotiations to demonstrate the quality of the product.
• The application process for the required permits to mine are “well advanced” with a successful conclusion to the public pre-consultation process and the company points out that it has received “overwhelming support … from the local community to date”
• At this stage, the company expects to complete the Environmental Impact Assessment and Social Impact Assessment “in the coming months, with the full Exploitation Licence anticipated in H1 2018.”
• At 30th June 2017 the company balance sheet shows cash of £5.76m.
Conclusion: BlueJay Mining is advancing the high grade Pituffik ilmenite deposit towards production and expects to receive an Exploitation Licence during H1 2018. The existing resource covers only a relatively small portion of one of the three prospective mineralised environments at Moriusaq with additional potential for further resources at Interlak. We look forward to further news of additional resources as exploration continues.
Mkango Resources* (LON:MKA) 3.1p, Mkt Cap £2.6m – Two year extension secured over Thambani licence
• Mkango Resources reports that the Malawian Government has granted a two year extension to the Exclusive Exploration Licence at Thambani. The licence is now valid until September 2019.
• The Thambani licence area is still at a relatively early stage of exploration for uranium, niobium, tantalum, zircon an other minerals. In May this year, the company announced the results of grab samples taken over the licence area which “returned high grade uranium, tantalum and niobium values ranging up to 3.3% U3O8, 1.9% TaO2 and 6.0% Nb2O5.”
• Mkango has previously disclosed that it is considering a range of strategies to advance exploration of Thambani, “including opportunities to joint venture or spin-off the project and other potential avenues to create value.”
Conclusion: The extension to the licence at Thambani gives Mkango Resources time to consider its options for the future of its exploration strategy while leaving adequate time for any possible incoming partner to complete an appropriate evaluation.
*SP Angel acts as Nomad and Broker to Mkango Resources
Savannah Resources (LON:SAV LN) 5p, Mkt cap £28m – Start of PFS at Mutamba
• Savannah Resources reports that Phase 1 of its pre-feasibility study (PFS) on the Mutamba mineral sands project in Mozambique is now underway and expected to be finished “in [the] coming months.”
• The Phase 1 work, comprising project definition and scoping for the PFS is to be conducted by “Mineral sands expert TZMI” which previously completed a Scoping Study for Savannah Resources.
• Completion of the PFS will be an important milestone for the company as it triggers the vesting of a 35% interest for Savannah Resources in the Mutamba Consortium.
• The company also reports that “assembly of the 20 tph pilot plant is well underway.” The plant will “provide product for metallurgical test work by our partner, Rio Tinto.”
• Under the terms of the Consortium Agreement, Rio Tinto (or an affiliate) has the right to purchase, on commercial terms, 100% of the heavy mineral concentrate produced.
Conclusion: Work now starting on the Mutamba mineral sands project should ultimately lead to the completion of a PFS and to Savannah Resources earning a 35% interest in the project.