Berkeley Energia (LON:BKY) – Strategic investment by Oman Sovereign Wealth Fund
Condor Gold (LON:CNR) – Completion of 5922m drill programme at La India
Mkango Resources* (LON:MKA) – Interim report and progress update
Strategic Minerals* (LON:SML) – Drilling underway at Hann’s Camp
Thor Mining (LON:THR) – Tungsten mineralisation intersected at Pilot Mountain
Gold prices pull back on Trump response to North Korean missile launch. Markets’ turn attention to Friday US labour stats.
• US equities reversed earlier losses to close in the black yesterday as concerns over the confrontation between the US and North Korea subsided
• The US$ index is up marginally after declining to the weakest level in more than two years.
• The euro climbed to the highest level in more than two years crossing the $1.20 level for the first time since Jan/15 amid strengthening growth and speculation Mario Draghi will soon announce a dialling down of the latest monetary stimulus programme.
• The ECB is set to hold its next policy meeting on September 7.
• Storm Harvey continues to cause more flooding in eastern Texas and western Louisiana with water levels in reservoir in west Houston rising and a levee south of the city breached.
• Moody’s estimates the storm could cost up to $65bn in property damage and lost economic output while officials expect more than 450,000 people seeking federal aid.
• Base metals are largely range bound this morning.
• Iron ore futures finished lower today (-2.0%) as investors add to bearish bets amid expectations for increased shipments in coming weeks; steel futures were also down (-1.1%).
Houston – insurance is mainly Federal insurance as most private insurers will not cover flooding in the Houston area
• The National Flood Insurance Program was designed for home owners and is reported to be inadequate for businesses.
• Federal Insurance and does not costs for business interruption and significant disaster reparation are not covered.
• Flooding in the Houston area continues to worsen as water floods in from the levies and over the top of major dams and reservoirs.
LME to look at new lithium contract
• We would expect there to be a lithium carbonate concentrate contract and possibly a lithium hydroxide contract with strict quality controls which might add to costs.
• Lithium carbonate is the major traded raw material for lithium processors and battery producers with lithium hydroxide as a value added product preferred by some battery producers.
• The development of a market in Lithium concentrates should help investors access the market and encourage new investment in lithium mining and processing.
• Quoted prices for lithium vary in the market with The Industrial Minerals Battery Price report quoting $19.85-21.25/kg in China for lithium carbonate and Benchmark Mineral Intelligence quoting $14,000/t in June.
• The pricing picture varies dramatically when considering short term and longer term contracts with lithium carbonate prices varying from lows of $11/kg to highs of $16/kg for large biannual contracts delivered into the US. Spot bags of lithium carbonate delivered into China were quoted at $17.4-22.8/kg in July/August highlighting the discrepancy in prices for differing contracts and locations.
• We hope the LME can get on and establish this contract ASAP to help better mage and stabilise the market.
Electric Vehicles – Renault-Nissan to build electric vehicles in China through new venture with Dongfeng Motor
• Renault-Nissan and Dongfeng already manufacture conventional vehicles in China and will extend this co-operation to a new range of electric vehicles in China to capitalise on the new move to go electric in China.
• China is the world’s largest market for Plug-in Electric Vehicles with 530,000 passenger vehicles and 270,000 commercial vehicles expected to be sold in 2017 according to EVvolumes.com
• Foreign car makers need to raise their EV sales in China to meet new regulations as the Chinese government brings in quotas for new EV sales.
• Manufacturers also need to produce EVs locally to qualify for subsidies and to avoid import duties to remain competitive
EV Power: the critical element to an Electric Vehicle is its power source which will create an increasing challenge to town planners and local utility providers.
• The powering of a few vehicles in a local neighbourhood might not require much additional infrastructure but the arrival of significant numbers of Plug-in EVs could require new infrastructure on a major scale.
• Charging with DC is faster and more efficient than more conventional AC chargers but to be truly effective requires its own distribution network.
• The alternative is the development of a separate three phase electrical distribution network to deliver more power more quickly than our current single phase network.
• Many industrial sites already have three phase power but direct DC supply is relatively rare except for sub-sea cabling and Photovoltaic supply which naturally generates DC.
Dow Jones Industrials -0.02% at 21,808
Nikkei 225 -0.45% at 19,363
HK Hang Seng -0.35% at 27,765
Shanghai Composite +0.08% at 3,365
FTSE 350 Mining -1.00% at 17,232 (from last week)
AIM Basic Resources +1.06% at 2,546 (from last week)
Economic News
US – Consumer confidence strengthened to the second highest level since late 2000 on the back of robust assessment of present conditions, according to the Conference Board data.
• Gains have been led by a continuing improvement in the labour market and strong property and stock markets.
• Gauge of consumer expectations recorded only modest gains.
• The Conference Board index comes on top of University of Michigan data that saw consume sentiment climbing to a seven-month high in August as well as the Bloomberg Consumer Comfort Index which climbed for the sixth consecutive time to reach a 16-year high in the week ending Aug/20.
• This is good news for the consumer led economy with personal consumption accounting for 3/4s of growth in GDP in Q2/17.
• The survey was completed before Storm Harvey events which would be reflected in September reading.
Germany – Inflation is set to record an increase in the headline rate in August as suggested by the data released by separate states.
• CPI (Harmonised EU %mom/yoy): 0.1/1.7 forecast v 0.4/1.5 in July.
Spain – Inflation accelerated in August with an increase likely to have been led by oil prices, Bloomberg reports.
• The breakdown between categories in the headline inflation will be released only in two weeks.
• While unemployment rate has been continuously trending downwards it remains elevated implying a significant amount of spare capacity to weigh on inflation outlook.
• CPI (Harmonised EU %mom): 0.2 v -1.2 in July and 0.2 forecast.
• CPI (Harmonised EU %yoy): 2.0 v 1.7 in July and 1.8 forecast.
Russia – The government will recapitalise Otkritie, once Russia’s biggest private bank, following a run on deposits from the institution amid surprise ratings downgrade.
• Clients are estimated to have pulled $7.4bn or 26% of deposits in two months of June and July only.
• Current owners of the business will see their stakes capped at a maximum 25% and may potentially be wiped out completely if the bank continues to be undercapitalised after three months.
Currencies
US$1.2061/eur vs 1.1784/eur last week. Yen 108.46/$ vs 109.64/$. SAr 13.054/$ vs 13.162/$. $1.296/gbp vs $1.280/gbp.
0.796/aud vs 0.791/aud. CNY 6.596/$ vs 6.664/$.Commodity News
Precious metals:
Gold US$1,325/oz vs US$1,287/oz last week
Gold ETFs 67.5moz vs US$67.0moz last week
Platinum US$1,000/oz vs US$978/oz last week
Palladium US$945/oz vs US$935/oz last week
Silver US$17.57/oz vs US$16.99/oz last week
Base metals:
Copper US$ 6,798/t vs US$6,718/t last week – Rio Tinto is considering whether to continue with the Freeport JV agreement over the Grasberg operation or walk away.
• Rio has got a team in Jakarta currently in discussions over the operation.
• “There is a difference between having a world-class resource and a world-class business… depending on the outcome of the negotiation, then we will decide if we want to stay, or if we want to go,” Rio said.
• Freeport will need to get Rio’s approval before being able to proceed with the latest agreement with the Indonesian government regarding the disposal of the major interest in the operation.
• Codelco is sceptical the latest copper price rally is sustainable in the short run suggesting it could reverse in the coming months.
• Over a more medium to long term, the Company sees tighter fundamentals driving the price up.
• “If you look at the supply and demand in the next couple of years, you do see a deficit and fundamentals for a good price in the future and that is the reason why speculative capitals are moving towards copper,” Codelco said.
Aluminium US$ 2,088/t vs US$2,105/t last week
Nickel US$ 11,770/t vs US$11,705/t last week – Prices may break $12,000 in September on the back of strong fundamentals and falling US$, according to Chinese Antaike.
• Chinese visible refined nickel inventories dropped to 130kt from almost 200kt at the start of the year.
• Stainless steel mills are reported to be running full order books amid high margins.
• Nickel pig iron supply from Indonesia is expected to come short of market estimates, Antaike said.
• Nevertheless, total LME stocks remain at high level having climbed to 387kt from 372kt as of the start of the year.
Zinc US$ 3,119/t vs US$3,119/t last week
Lead US$ 2,372/t vs US$2,365/t last week
Tin US$ 20,530/t vs US$20,380/t last week
Energy:
Oil US$52.0/bbl vs US$52.5/bbl last week
Natural Gas US$2.924/mmbtu vs US$2.944/mmbtu last week
Uranium US$20.00/lb vs US$20.25/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$75.1/t vs US$75.9/t
Chinese steel rebar 25mm US$650.1/t vs US$643.8/t
Thermal coal (1st year forward cif ARA) US$79.5/t vs US$78.3/t
Premium hard coking coal Aus fob US$207.5/t vs US$202.6/t
Other:
Tungsten APT European US$269-275/mtu vs US$250-256/mtu
Company News
Berkeley Energia (LON:BKY) 49.5p, Mkt Cap £126m – Strategic investment by Oman Sovereign Wealth Fund
• Berkeley Energia reports that, subject to shareholder approval, it has agreed a US$120m investment by the Oman Sovereign Wealth Fund (the State General Reserve Fund) “to fully fund the Salamanca mine into production.”
• The investment comprises an interest free unsecured convertible loan of US$65m which can be converted into ordinary shares at 50p/share to give the fund a 28% interest in the company and 3 tranches of options which are convertible at a weighted average price of 85p/share “contributing a further US$55 million towards the later phases of the Company’s development of the Salamanca mine resulting in the fund holding a further 9% of the Company.”
• In addition to the right to appoint a non-executive director, the investment allows the fund “to match future uranium off-take transactions on similar commercial terms subject to certain limitations on volume.”
Conclusion: Securing full funding to advance the Salamanca Uranium Project to production represents a milestone for the project and we look forward to further news as development progresses.
Condor Gold (LON:CNR) 42.3p, Mkt Cap £32.0m – Completion of 5922m drill programme at La India
• Condor Gold has announced that it has now completed a 5922m drilling programme of 43 holes to a maximum depth of around 200m testing the Mestiza vein set located to the north of the 1.3m oz resource contained within the La India Vein set.
• The Mestiza set of veins comprises 4 principal veins, the Tatiana vein, where a 450m long high grade shoot has now been confirmed over a strike length of some 450m within the overall 3.5km long Mestiza system; the Buenos Aires; and the Jicaro Vein; as well as the as yet largely untested 2km long Espinitio Vein. Mapping has also discovered a new, parallel vein, “the Tortuga Vein, which assayed up to 6.1 g/t Au in a mullock rock sample.”
• The area was drilled during the early 1990s by Soviet sponsored interests at which time a Soviet standard resource of 2.4mt at an average grade of 10.2g/t gold (786 koz of contained gold was outlined.
• Condor Gold’s current programme is intended to assess the area in terms of current, Canadian Ni43-101 reporting standards. As this area is currently excluded from Condor Gold’s published resource and mine plan, the company comments that “A successful resource conversion of the Soviet-style resource has the potential to add large, high grade, and relatively shallow resources to a future mine plan, thereby increasing the annual gold production, life of mine, and project economics.”
• Among the results highlighted in today’s announcement are the following intersections of the Tatiana Vein:
o The previously reported 3.3m wide intersection averaging28.3g/t gold and 38.9 g/t silver from a depth of 76.70m in hole LIDC 344;
o A 3.55m wide intersection averaging 23.3g/t gold and 66.6 g/t silver from a depth of 160.50m in hole LIDC 358;
o A 3.60m wide intersection averaging 13.7g/t gold and 13.9 g/t silver from a depth of 142.60m in hole LIDC 365 and;
o A 7.00m wide intersection averaging 2.9g/t gold from a depth of 145.50m in hole LIDC 363;
• The company also reports mineralised intersections of both the Buenos Aires and Jicaro Veins, including:
o A 0.70m wide intersection on the Buenos Aires Vein averaging 11.9g/t gold and 7 g/t silver from a depth of 93.3m in hole LIDC 373;
o A 0.90m wide intersection on the Jicaro Vein averaging 0.86g/t gold and 6g/t silver from a depth of 33.7m in hole LIDC 374; and
o Multiple intersections of the Buenos Aires Vein including 0.3m averaging 4.98g/t gold and 4g/t silver from 88.2m; 1.4m averaging 1.55g/t gold and 0.55m averaging 1.05g/t gold all in hole LIDC 375.
• Deeper drilling will require more powerful equipment but the company comments that “the deepest drill holes, about 200m below surface, intersected lower grades. This may reflect pinching of the vein or the base of supergene enrichment. This has only been tested in two holes at the western end of Big Bend; further deeper drilling is required to test this observation.”
Conclusion: The drilling a Mestiza highlights the expansion potential of the wider La India prospect with a new vein discovered and a high grade shoot identified within the Tatiana Vein. We look for further news as exploration progresses.
Mkango Resources* (LON:MKA) 3.1p, Mkt Cap £2.6m – Interim report and progress update
• Mkango Resources reports a loss for the six months to 30th June 2017 of US$0.01/share (6 months to 30th June 2016 – loss of US$0.02/share)
• At the 30th June 2017, Mkango Resources held a cash balance of approximately US$498,000 following an operating cash flow of approximately US$470,000 offset by the proceeds of the issue of shares which generated a net inflow of approximately US$535,000.
• Mkango remains focussed on the optimisation and development the Songwe Hill rare earth deposit in Malawi where the most recent update of the pre-feasibility study shows that the project could produce an average of 2,840 tonnes per year of rare earth oxides in concentrate over the first 5 years of an 18 years open pit mine life. Based on a basket price of US$59.80/kg of rare earth oxides for the expected mineral assemblage at Songwe Hill and on an initial capital investment of US$216m, the company’s PFS estimates that the project generates an after-tax NPV10% of US$345m and delivers an after tax IRR of 37%.
• The company has entered into agreements with a number of technical and commercial partners to advance the project in a cost efficient way. An agreement with researchers at McGill University provides access to a technology which generates high strength hydrochloric acid required for the processing of the rare earth mineralisation while it has also joined forces with Metalysis Limited to “jointly research, develop and commercialise rare earth metal alloys for use in three-dimensional (3D) printed permanent magnets.”
• Mkango has also entered an agreement which allows the Singapore-based international metals trader, Noble Resources International, to acquire up to a 12.5% interest while providing Mkango access to Noble’s marketing and logistics expertise and strategic advice.
• The company has also recently secured a two-year extension to its exploration licence at Thambani, also in Malawi, where it has relatively early stage exploration for uranium, niobium, tantalum, zircon and other minerals underway. Mkango has, however, indicated that it is considering a range of strategic options for the advancement of Thambani, including the possible joint-venture or spin off of the project.
Conclusion: Mkango Resources continues to make progress with its flagship Songwe Hill rare earths project in Malawi through developing cost-efficient alliances with technical and commercial partners to help optimise the project
*SP Angel acts as Nomad and Broker to Mkango Resources
Strategic Minerals* (LON:SML) 1.9p, Mkt Cap £23.7m – Drilling underway at Hann’s Camp
• Strategic Minerals has announced the start of a programme of aircore drilling comprising some 2500m in 50 holes at its Hann’s Camp property near Laverton, W Australia.
• The drilling will cover an area of some 1.1km2 using a regular pattern of holes spaced at intervals of around 120 metres and will focus on the potential for cobalt and nickel laterite mineralisation as well as identifying targets for a possible second phase of drilling aimed at nickel-copper sulphide mineralisation.
• The programme, which is being funded internally from the cash generated by the company’s Cobre operation in New Mexico, is expected to take approximately 2 weeks with a further four to six weeks after sampling before assay results are available.
Conclusion: The commencement of drilling at Hann’s Camp should provide an initial systematic test of the recently identified cobalt potential at Hann’s Camp as well as pointing to deeper level sulphide mineralised targets. We look forward to the results of the drilling and associated assaying when they become available.
*SP Angel act as Nomad and broker to Strategic Minerals
Thor Mining (LON:THR) 0.9 pence, Mkt Cap £3.8m – Tungsten mineralisation intersected at Pilot Mountain
• Thor Mining reports that its most recent drill hole at its Desert Scheelite prospect in Nevada has intersected scheelite mineralisation at multiple levels within the hole.
• At this stage, no assays are available but the scheelite, which fluoresces under ultra violet light, has been identified over a 15m interval between 198-213m; a 4m interval between 217-221m and an 18m wide interval between 256-274m all in hole 17DS-DD01.
• In addition to the tungsten mineralisation, the hole encountered copper sulphide mineralisation (chalcopyrite) “for 5m from 265m and for a further 4m from 266m.”
• Drilling is to continue though the company comments that “In response to challenging drilling conditions through the volcanic cover to the north of Desert Scheelite, the Company has elected to sight the next hole to the south of the deposit and drill through more competent quartz monzonite. Regulatory permitting to drill from this new site is in process, and subsequent drilling at Desert Scheelite will be deferred until this permitting is in place.”
Conclusion: Intersecting multiple tungsten bearing horizons at the Desert Scheelite Project provides encouragement for future exploration and we await the assay results with interest.