Bacanora Minerals (LON:BCN) – Sonora Lithium Project Feasibility Study update
BlueRock Diamonds* (LON:BRD) – August diamond sales
Bushveld Minerals (LON:BMN) – Additional working capital support from Wogen
Gold is little changed consolidating around $1,290/oz levels following a strong run through July/August.
• Copper is having another good day climbing $55/t to $6,620 on course towards $6,650/t, the highest level since the end of 2014, hit on Tuesday this week.
• Aluminium futures in China climbed to the highest level in six years as the State Council reiterated its pledge to follow through with capacity cuts.
• Surprisingly, with summer months being normally quiet ones in terms of activity in the market, trading volumes in aluminium futures on the Shanghai Futures Exchange climbed to record high this month to date.
• Base metals LME index closed at 3,147 yesterday marking the highest level since Q4/14.
• Steel and iron ore futures rebounded in China paring some of its Wednesday’s drop as markets bet on continuing tightness in the steel market.
• With the government concerned with speculation driven steel prices increases sees the Shanghai Futures Exchange capping daily new positions of a number of hot-rolled coil contracts at 3,000 lots per account for non-hedging clients from tomorrow and raising transaction fees to 0.05% of trading value from 0.01%.
• The US$ index is rangebound while Brent came off this morning shedding some of its previous session’s gains when oil prices increased on a drop in US crude stockpiles amid a period of seasonally strong demand.
• US equities closed slightly lower yesterday with President Trump threatening to “close down… government” by blocking spending approvals pressuring Congress to agree with the construction of the US-Mexico border wall.
• US Congress is set to vote on a spending package and a revision in the debt ceiling in September with the Treasury targeting new debt ceiling agreement by September 29.
• European equities are trading higher ahead of a meeting of central bankers in Jackson Hole, Wyoming, with investors following the event closely for clues over the future monetary policy decisions.
• Both Janet Yellen and Mario Draghi are scheduled to speak on Friday.
Dow Jones Industrials -0.40% at 21,812
Nikkei 225 -0.42% at 19,354
HK Hang Seng +0.43% at 27,519
Shanghai Composite -0.49% at 3,272
FTSE 350 Mining +0.52% at 17,329
AIM Basic Resources -0.04% at 2,518
Economic News
US – Private sector shows strong growth momentum in August with new business volumes increasing at the fastest pace in just over two years.
• Robust economic growth with strong domestic demand led employment gains with the rate of job creation unchanged from July’s seven-month record.
• The Markit PMI report also revealed an acceleration in output prices inflation with selling prices increasing at the fastest pace in nearly three years.
• “The US economic growth story remained a tale of two sectors… the overall rate of expansion accelerated to a 27-month record, driven higher by strong and improved growth of business activity in the vast services economy,” market wrote.
• “in contrast, the performance of manufacturing remained sluggish in comparison, with production volumes rising to the weakest extent in over a year.”
• Markit Manufacturing PMI: 52.5 v 53.3 in Jul and 53.5 forecast.
• Markit Services PMI: 56.9 v 54.7 in Jul and 55.0 forecast.
• Markit Composite PMI: 56.0 v 54.6 in Jul.
France – August business confidence hit the highest level since April 2011 adding further to growth momentum in the Eurozone’s second largest economy.
• Both manufacturing and services sectors tracked by Insee recorded improvements; although, the report highlighted that employment outlook weakened slightly.
• Business Confidence: 109 v 108 in Jul and 108 forecast.
Currencies
US$1.1787/eur vs 1.1784/eur yesterday. Yen 109.38/$ vs 109.43/$. SAr 13.215/$ vs 13.238/$. $1.280/gbp vs $1.280/gbp.
0.789/aud vs 0.789/aud. CNY 6.662/$ vs 6.664/$.
Commodity News
Precious metals:
Gold US$1,286/oz vs US$1,286/oz yesterday
Gold ETFs 66.9moz vs US$67.0moz yesterday
Platinum US$973/oz vs US$979/oz yesterday
Palladium US$933/oz vs US$935/oz yesterday
Silver US$16.89/oz vs US$17.01/oz yesterday
Base metals:
Copper US$ 6,614/t vs US$6,575/t yesterday
Aluminium US$ 2,094/t vs US$2,064/t yesterday
Nickel US$ 11,705/t vs US$11,520/t yesterday
Zinc US$ 3,110/t vs US$3,129/t yesterday
Lead US$ 2,377/t vs US$2,408/t yesterday
Tin US$ 20,490/t vs US$20,375/t yesterday – Earlier this week Governor of Bangka Belitung, the major tin producing province in Indonesia, suspended the release of new licenses and extension of existing ones for next two/three months as his administration is drafting new tin mining regulation.
• Governor said that his administration and local law enforcement.
• The province accounts for roughly 90% of the local tin production.
Energy:
Oil US$52.4/bbl vs US$51.6/bbl yesterday
Natural Gas US$2.925/mmbtu vs US$2.944/mmbtu yesterday
Uranium US$20.50/lb vs US$20.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$75.6/t vs US$75.7/t
Chinese steel rebar 25mm US$644.1/t vs US$651.7/t
Thermal coal (1st year forward cif ARA) US$77.8/t vs US$77.5/t
Premium hard coking coal Aus fob US$201.2/t vs US$200.9/t
Other:
Quarterly hard coking coal US$285.0/t vs US$285.0/t
Tungsten APT European US$250-256/mtu vs US$248-256mtu
Company News
Bacanora Minerals (LON:BCN) 85.5p, Mkt Cap £113m – Sonora Lithium Project Feasibility Study update
• Bacanora Minerals has provided a progress report on its feasibility study work for the development of the proposed 35,000tpa lithium carbonate production facility at its Sonora Lithium Project in Mexico.
• The study, which builds on the April 2016 pre-feasibility work, is now expected to be completed “in late 2017” which is later than the previously announced revised summer 2017 date.
• The project development envisages a Phase 1 development to produce 17,500 tonnes per year of battery grade lithium carbonate for the initial two years of production from 2019/2020 then doubling output to 35,000 tpa of lithium carbonate for the remaining 20+ years.
• Operating and capital cost estimation work “is nearing completion” and the company notes that as they are proposing to mine “a soft rock deposit, operating costs at Sonora are anticipated to be lower than the typical hard rock deposits due to the lack of a need for the lithium ore to be drilled, blasted, crushed and ground prior to processing.”
• Work continues on optimising the mine plan for the open-pits and on equipment selection and on securing the energy requirements of the project.
• The company comments that “While Sonora’s OPEX is expected to be higher than brine deposits in Chile, the length of time to produce Li2CO3 should be considerably shorter.”
• Work to finalise the proposed flowsheet, using a sodium sulphate roast, is nearing completion with the preparation of capital equipment tenders, plant layouts and optimisation. “In addition, mechanical and metallurgical optimisations of the Hermosillo pilot plant are currently being undertaken as a result of the past 12 months operating improvements and advances to improve flow sheet ergonomics and operations.”
• Elsewhere, the company confirms that approvals have been obtained to mine a large bulk sample for metallurgical testwork at the Zinnwald Lithium Project in Germany where “initial laboratory testwork has demonstrated that higher value lithium products can be produced from the Zinnwald concentrates”. Testing will now be expanded to establishing a pilot scale flowsheet.
• Commenting on market developments for lithium, Bacanora Minerals highlights China’s domestic car producers dominant 96% share of the Chinese electric vehicle market; the commitment of the British and French Governments to achieving zero emissions from all vehicles by 2040; and the strategy of major manufacturers such as Volvo and Volkswagen to move towards electric vehicles with the former “announcing that it will move to total electric vehicle production by 2019.”
• “In addition, it has also been reported that China is targeting to have 65 percent of the world’s manufacturing capacity for lithium-ion batteries by 2021.”
Conclusion: Bacanora Minerals is aiming to complete the feasibility study on its Sonora Lithium Project by the end of this year, although this is later than originally hoped, we look forward to seeing the results and to further details of the planned development.
BlueRock Diamonds* (LON:BRD) 1.75p, Mkt Cap £2.4m – August diamond sales
• BlueRock Diamonds reports that during August it sold 400 carats of diamonds from its Kareevlei mine near Kimberley, South Africa, at an average selling price of US$330/carat.
• This compares with sales of 330 carats at US$395/ct in August and is significantly higher than the 143 carats sold for US$224/ct in May. Although the selling price in August declined from that seen in July, this was compensated by a more than 20% increase in the volume of stones sold, stabilising revenues at around US$130,000 per month.
• The July sales included a 5.5 carat diamond which achieved the “highest dollar per carat valuation to date of $7,054”. We comment that occasional abnormally high value stone has a disproportionate influence on the average value achieved by relatively small parcels of diamonds and take encouragement from the rising trend in the volume of stones offered for sale which has now almost doubled since BlueRock Diamonds sold 206 carats in April this year.
• We also note that over each of the last three months, sales of diamonds from Kareevlei have exceeded the most recent US$232/carat guidance price from the company’s competent person, Zstar, which was disclosed in the company’s 5th July production update.
• BlueRock Diamonds points out that grades are improving with “The diamonds produced and included in August’s sales tender has resulted in a grade of 2.07cpht showing an increase to Kareevlei’s previous average diamond grade achieved during 2017 of 1.7 cpht.”
• The company also notes that ore production rates continue “to improve with July’s total production of 20,200 tonnes representing an increase of 40% on the production achieved in June 2017. The total tonnage for August is on target to exceed July’s total.”
• Commenting on the progress towards achieving the targeted 25,000 tonnes per month throughput, Chief Executive, Adam Waugh, commented that “We are now well on our way to achiebing profitable mining with the expected further improvement to grades as we begin processing the sub 20 metre level kimberlite in September.”
Conclusion: BlueRock Diamonds is making progress towards achieving its targeted 25,000tpm throughput of ore with realized diamond prices holding above the most recent US$232/carat guidance price from the company’s competent person, Zstar.
Bushveld Minerals (LON:BMN) 9.5p, mkt cap £76.6m – Additional working capital support from Wogen
Target price 14p
• Following its announcement earlier this week that Wogen Resources had agreed to retire its prepayment facility to Bushveld Vametco and increase the working capital facility to US$9m, Bushveld Minerals has now announced that Wogen Resources has further increased the working capital facility “from US$9 million to US$11 million with immediate effect.”
• The facility, which has a five year term from March 2017, “is an inventory and receivable financing, is in place to optimise the operating position of Vametco Alloys Limited ("Vametco Alloys").”
• Wogen has exclusive rights to market Bushveld Vametco’s Nitrovan product worldwide (with the exclusion of Japan and Taiwan).
• Commenting on the transaction, Bushveld Minerals’ CEO, Fortune Mojapelo noted that the facility agreements with Wogen “relieves Bushveld Vametco's operations from the fixed debt commitment of the (now retired) prepayment facility and avails of additional cash resources backed by inventory shipments in a rising vanadium market."
• We commented yesterday on recent developments in the vanadium market where a tightening of standards for the production of steel reinforcing bars in China is expected to increase China’s vanadium consumption by as much as 30% or 10,000 tonnes per year.
Conclusion: The increased working capital facility, at time of rising prices and when plans to increase Vametco’s production capacity from the current nameplate 3,000 tonnes per year to 5,000 tonnes per year, should facilitate the expansion plans and suggests a positive and deepening relationship with Wogen
*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa. This note is MiFID II compliant.