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Today's Market View - Amur Minerals Corporation, Katoro Gold, SolGold plc, Wolf Minerals, Weatherly International plc

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Amur Minerals* (LON:AMC) – Step out drilling returns mineralised intersections at the IKEN/KUB link

Katoro Gold (LON:KAT) – Update on Imweru PFS – insight to new Tanzanian mining regulations

SolGold* (LON:SOLG) – Latest drilling results from Cascabel

Weatherly International (LON:WTI) – Rescheduling of repayments to Orion

Wolf Minerals (LON:WLFE) – Secures additional $5m bridging finance.

 

Base metals are stronger today on the back of good US Q2/17 GDP numbers and ADP payrolls while Chinese official manufacrturing PMI beat market estimates.

• Gold is little changed trading around $1,307/oz ahead of US NFPs due tomorrow.

• The US$ index is flat today after climbing on Wednesday following the release of better than expected upgrade in Q2/17 GDP growth numbers.

• US gasoline prices climb on the back of hurricane Harvey related disruptions to oil refineries and a Colonial pipeline; Nymex September futures hit $2.0/gallon marking a 6.6% increase on yesterday and more than 20% from a week ago.

• Crude is little changed with Brent trading around $50.9/bbl after a drop in the previous session.

• Iron ore futures (January maturity) recorded the third consecutive monthly increase this year (+7.4%), although price gains have slowed amid signs accumulating steel inventories in China driven by record steel production.

• Steel rebar holdings climbed for past three weeks in longest increasing series since February; steel rebar futures are flat today in China but capping a 11.2% gain this month

 

Lithium battery nanowalls to make batteries more efficient

• Scientists at the Lomonosov Moscow State University reckon that the use of silicon, germanium and carbon nanowalls could significantly increase the specific characteristics of lithium-ion batteries.

• The implication is that the nanowalls should enable Li-ion batteries to be more energy efficient and presumably safer at higher energy densities.

• Our money is on the use of nanodiamonds and graphene nanowalls.

 

Brazil opens vast national reserve in Amazon to mining

• The National Reserve of Copper and Associates (Renca) banned mining in roughly 46,000skm of Amazon rainforest an area around the size of wales (all areas are compared to Wales which is just a bit larger than Denmark!).

• The reserve boarders with French Guiana and with the South of Suriname in the North of Brazil.

• The reserve was set up in 1984 by the military government more to reserve mineral resources than to protect the forest.

• Opening up the area to mining should help to control the illegal artisanal mines which already operate in the area

 

Afghanistan – The US is pushing ahead with plans to expand mining in Afghanistan

• The US is reported to have already spent some $500m on mining in Afghanistan and is looking to push forward with plans to expand this activity.

• The plan is to provide jobs and help Afghanistan to become financially independent.

• We suspect the US would also like to balance increasing Chinese influence on mining in the region.

• Afghanistan’s mineral resources may also help to repay some of the $0.5bn cost of US involvement in the region while supporting the ongoing US presence.

• Wilbur Ross, Trumps’ commerce secretary and a former venture capitalist, knows the mining business well and understands its risks and huge potential.

• We suspect the US military will make a good mining incubator. Reminds us of M*A*S*H the US tv series.

 

 

Dow Jones Industrials  +0.12% at   21,892

Nikkei 225   +0.72% at   19,646

HK Hang Seng   -0.44% at   27,970

Shanghai Composite    -0.08% at    3,361

FTSE 350 Mining   +2.04% at   17,964

AIM Basic Resources   +0.27% at    2,573

 

Economic News

China – Official manufacturing PMI data beat estimates posting stronger growth on the back of robust infrastructure spending and new domestic orders.

• On the less positive side, gauge of the services sector activity fell to the weakest since May/16.

• Manufacturing PMI: 51.7 v 51.4 in July and 51.3 forecast.

• Services PMI: 53.4 v 54.5 in July.

 

Germany – Inflation growth accelerated in August which would be a welcome news to the ECB which have been adding to monetary stimulus to revise inflation expectations.

• Unemployment held at the record low of 5.7% in August, in line with market estimates, matching latest reports over the nation’s robust economic growth.

CPI (EU Harmonised %mom/yoy): 0.2/1.8 v 0.4/1.5 in July and 0.1/1.7 forecast.

 

UK – Consumer confidence picked up slightly from the lowest level since the Brexit vote, although the sentiment gauge remained weak amid falling real personal incomes.

• A separate index of business confidence from Lloyds dropped to the lowest in a year in August reflecting uncertainty regarding Brexit negotiations.

• Consumer Confidence: -10 v -12 in July and -13 forecast.

 

France – Macron to reveal French labour reforms

• Today could be a big day in France as the Macron government announces measures to reform strict labour laws.

• Mass protests are planned for 12 September but interestingly one of the biggest unions has decided not to take part, implying their support for the new reforms.

• Macron has pledged to reduce unemployment from the 9.5% level to around 7% by 2022 but with support failing Macron’s reformist agenda will be tested.

France – Unlike Germany, France recorded no change in consumer price levels in August, in line with market estimates.

• CPI (EU Harmonised %mom/yoy): 0.6/1.0 v -0.4/+0.8 in July and 0.6/1.0 forecast.

 

US – Q2/17 GDP growth rates have been revised upwards tot the fastest pace in two years on stronger consumer spending and business investment, the latest Commerce Department numbers showed yesterday.

• The data also showed that corporate profits recorded growth in Q2/17 compared to a contraction in Q1/17 boding well for future employment gains and stronger business investment.

• Stronger economic growth is expected to further tighten labour market and drive inflation pressures further pushing the Fed to continue with the monetary tightening policy.

• A separate jobs report showed companies added more workers than forecast in August with July numbers revised upwards, according to the ADP Research Institute data.

• Job openings are at a record high while employer dismissals were limited hovering close to a three-decade low.

 

 

Currencies

US$1.1892/eur vs 1.1954/eur yesterday.   Yen 110.57/$ vs 110.07/$.   SAr 13.027/$ vs 13.030/$.   $1.288/gbp vs $1.296/gbp.     

0.789/aud vs 0.800/aud.   CNY 6.597/$ vs 6.586/$.

 

Commodity News

Precious metals:

Gold US$1,306/oz vs US$1,308/oz yesterday

   Gold ETFs 67.5moz vs US$67.5moz yesterday

Platinum US$989/oz vs US$993/oz yesterday

Palladium US$936/oz vs US$944/oz yesterday

Silver US$17.41/oz vs US$17.35/oz yesterday

           

Base metals:   

Copper US$ 6,838/t vs US$6,805/t yesterday

Copper – Zambian power supplier will restore power to Glencore’s Mopani Copper Mines following the Company’s meeting with President Edgar Lungu and an agreement on new tariffs.

• The government will also resolve outstanding issues with Mopani with regards to tax refunds and transfer pricing over the next six weeks.

• Previously, Copperbelt Energy Corp lowered supplies to Mopani after Glencore refused to pay new increased power prices with Mopani arguing fees rise was not part of the agreement with CEC and warned that the dispute could affect 4,700 jobs.

 

Aluminium US$ 2,117/t vs US$2,100/t yesterday

Nickel US$ 11,720/t vs US$11,715/t yesterday

Zinc US$ 3,125/t vs US$3,141/t yesterday

Lead US$ 2,389/t vs US$2,395/t yesterday

Tin US$ 20,595/t vs US$20,365/t yesterday - Yunnan Tin, Chinese top tin producer, will shut its smelting and refining unit for scheduled maintenance for 41 days starting today, the Company said.

• The shutdown involves 70ktpa refined tin capacity out of 80ktpa total Company’s capacity and a little under 50% of the nation’s 153kt produced in 2016 (WBMS).

          

Energy:           

Oil US$50.9/bbl vs US$52.0/bbl yesterday

Natural Gas US$2.940/mmbtu vs US$2.970/mmbtu yesterday

Uranium US$19.95/lb vs US$19.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.1/t vs US$74.7/t – The premium for higher quality material has expanded significantly over the last two years with the differential between 65% Fe and 58% Fe contracts of more than $50/t.

• This compares to a less than $10/t premium recorded at the start of 2016.

• 65% Fe material benchmark price currently hovers around $100/t compared to less than $50/t for 58% Fe material, according to Metal Bulletin.

• Among factors leading the spreads higher is the drive by steel mills to raise efficiency of its operations and reduce pollution.

• “In an oversupplied market, you’ll see that flight to quality… we anticipate the maintenance of those differentials over the next two to three years,” metals and mining market intelligence firm Wood Mackenzie said.

Chinese steel rebar 25mm US$645.8/t vs US$645.8/t  – Chinese steel sector gauge climbed to the strongest in 16 months in August with sub-indices of production and domestic orders posting particularly robust performance.

• Steel PMI: 57.2 v 54.9 in July.

Thermal coal (1st year forward cif ARA) US$77.8/t vs US$78.8/t

Premium hard coking coal Aus fob US$207.7/t vs US$207.7/t

 

Other:  

Tungsten APT European US$269-275/mtu vs US$250-256/mtu

 

Company News

Amur Minerals* (LON:AMC) 9.5p, Mkt Cap £58m – Step out drilling returns mineralised intersections at the IKEN/KUB link

• The Company provides an update on the 2017 field programme at the Kun Manie copper/nickel project.

• A total 82 diamond core drill holes for 20,060m have been completed to date.

• The Company is planning to extend the programme for an additional 10,000m representing a 50% increase over the original plan with supplies available to continue through the remainder of the season (31 Oct/17).

• Infill drilling completed at KUB is expected to see Inferred resources which account for c.3/4s of the total converted to the Measured & Indicated category.

• Additionally, 29 of 39 holes driven along the 2,200m long link between IKEN and KUB returned economic grades of nickel and copper.

• Average intersections per hole assayed 0.85% Ni and 0.23% Cu over 24.4m (12.9m per mineralised interval).

• Of 2,200m tested 1,800m of strike showed present sulphide mineralisation present with plans to drill test the remaining 800m of the IKEN/KUB link.

• Should drilling hit further mineralised horizons, that would confirm that two deposits IKEN and KUB is likely a single “near continuous” deposit with a total of more than 4.5km in strike.

• Merging two deposits the Company estimates may potentially yield “more than a million tonnes of nickel alone” compared to the current c.1mt NiEq contained in the total Kun Manie resource (JORC, Feb/17).

• Given the scope of the potential in terms of tonnages as well as higher average grades, “the newly identified mineralisation will ultimately have a significant impact in reserve definition and resultant production schedule”, the Company said.

Conclusion: Latest drilling results continue to expand the resource/reserves potential of the Kun Manie project and are expected to favourably influence economics of the planed bulk mining sulphide nickel/copper operation.

*SP Angel act as Nomad and Broker to Amur Minerals

 

Tanzania

Katoro Gold (LON:KAT) XX 3.8 pence, Mkt Cap £4.1m – Update on Imweru PFS – insight to new Tanzanian mining regulations

• Recently listed Katoro Gold, which acquired the Imweru and Lubando gold projects in Tanzania from Kibo Mining in May this year has provided an update on the progress at Imweru which gives an insight into the working of the new Tanzanian mining regulations.

• The company has now completed resource, metallurgical and geotechnical drilling at Imweru where it is working to upgrade the existing, JORC (2012) 11.6m oz resource at 1.38g/t gold (515,000 oz contained gold).

• Samples from the resource drilling programme are currently being assayed within Tanzania and are “thereby avoiding any unnecessary delays as a result of the new export rules under the recently amended mining legislation in Tanzania.”

• Metallurgical and geotechnical samples, however, have been subject to the new regulatory regime as they cannot be tested within Tanzania and the metallurgical samples, required to establish the necessary processing parameters, were “successfully exported in late August after a lengthy process of Ministry of Energy and Minerals analyses and administration” and the geotechnical samples which help define the pit designs are “following the same process as the metallurgical samples.”

• The company has expedited other aspects of the pre-feasibility work and is confident that once the sample results are available from both the local and overseas testing they will be able to be incorporated into the study rapidly.

• Commenting on the progress made, Louis Coetzee, Executive Chairman of Katoro Gold noted that “We are … very proud [of] our ability to adapt and adjust quickly enough to be one of the first, if not the very first company, to successfully export geological / metallurgical samples under the new mining legislation.” Noting the cooperation between officials and the company’s technical staff he also said “We believe the successful export of this sample batch to South Africa demonstrates a willingness by the government to cooperate with industry to implement new regulations and to adjust where justified and necessary.”

Conclusion: Katoro Gold has been a pathfinder in testing the new minerals regulatory regime in Tanzania and has navigated a route to advance its Imweru pre-feasibility study. Larger, producing companies will no doubt  have more in-house facilities available to them but face different challenges in exporting mineral product rather than samples for testing. We are, however, encouraged that Katoro Gold has found a workable solution to the new legislation and we look forward to the results of the Imweru PFS when it becomes available.

 

SolGold* (LON:SOLG) 36.5p, Mkt Cap £553m – Latest drilling results from Cascabel

• SolGold has reported the latest results from holes 26 and 27 at Cascabel and provided an update on the drilling programme and its wider exploration and evaluation work.

• Hole 26 (CSD-17-026) at Alpala Northwest was completed at a depth of 1875.9m and “returned an open ended 809.95m grading 0.72% copper equivalent” with average grades of 0.5% copper and 0.34 g/t gold. The broader intersection contains three higher grade sections of 356m between 1084m and 1440m at an average grade of 0.53% copper and 0.36 g/t gold and 114m between 1492m and 1606m at an average grade of 0.46% copper and 0.27g/t gold and 203.95m between 1672m and the end of the hole with an average grade of 0.63% copper and 0.47g/t gold.

• Hole 26 extends the known extent of mineralisation at Alpala Northwest by 300m further to the northwest of hole 15R2 and “A strongly mineralised diorite intrusion encountered in the lower portion of Hole 26confirms the Alpala Northwest deposit at depth, some 400m below the intersection achieved in Hole 13 of 190m @0.82% copper equivalent (0.63% Cu, 0.31 g/t Au).”

• The company also reports results from hole 27 (CSD-17-027) at Hematite Hill which was completed at a depth of 1614.3m and intersected 802m at an average grade of 0.32% copper and 0.14 g/t gold from a depth of 718m. The hole contains a higher grade portion between 806m and 1178m of 372m at an average grade of 0.39% copper and 0.19g/t gold which itself includes 212m between 906-1118m at an average grade of 0.52% copper and 0.24g/t gold.

• The results from hole 27 “extends Alpala mineralisation 100m southeast of Hole 21, and 250m southeast of Hole 16, which returned 894m @1.41% copper equivalent (0.78% Cu, 0.99 g/t Au).”

• In addition, Solgold reports the completion of holes 23-D-R1 in Alpala Central at a depth of 1626.6m and Hole 24-D1R at Alpala Southeast at 1268.15m. Assay results from these holes have yet to be received, however photographs of selected sections of the drill core for both holes which are included in the announcement show sulphide mineralised veins similar to those seen in other drill holes at Cascabel.

• The company notes that there are currently five drill holes in progress; 26-D1 at Alpala Northwest; 28 at Hematite Hill; 29 at Alpala East; 30 at Alpala Central; and 31 at Alpala Southeast.

• As previously announced, the company is building up its drilling efforts at Cascabel and is planning to have 10 rigs on site by January 2018. “A further two man-portable drill rigs (rigs 6 and 7) are currently mobilising to site from Cuenca, Southern Ecuador.”

• In comments on the general progress of exploration at Cascabel, Solgold confirms that, with Hole 31 “drilling the first of a series of infill holes between Alpala Southwest and Hematite Hill ahead of resource estimation expected in December 2017.”, we should expect an initial resource estimate later this year. The company also states that “Solgold is also commencing planning for the collection of necessary data to complete a prefeasibility assessment by the end 2018.”

• “The Company is currently planning further metallurgical testing and completion of an independent Prefeasibility Study at Cascabel. Solgold is investigating both high tonnage open cut and underground block caving operations, as well as a high grade / low tonnage initial underground development towards the economic development of the copper gold deposit/s at Cascabel.”

Conclusion: Solgold continues to generate lengthy mineralised intersections at the Cascabel project. We look forward to assay results from the recently completed holes, the results of the continuing drilling programme and an initial resource estimate later this year leading to a prefeasibility study by the end of 2018.

*SP Angel acts as Nomad and broker to SolGold.  The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.

 

Weatherly International (LON:WTI) 1 pence, Mkt Cap £10.3m – Rescheduling of repayments to Orion

• Weatherly International reports that it has reached agreement with its major shareholder, Orion Mine Finance, for the rescheduling of debt repayments due under the “Facility B” financing.

• The first repayment has now been “deferred to 30 October 2017 and Orion has agreed … to limits its acceleration and enforcement rights on the terms set out in Amended Facility. The Facility B Final Maturity Date remains unchanged at 28 February 2020, and each Facility B repayment will be increased so that Facility B will be repayable in 11 equal repayments of US$9.7m each, including capital and interest.”

• The company discloses that the second repayment is due on 30 November and that the remaining repayments are due quarterly thereafter. On this basis, Weatherly International is facing repayments due under Facility B totalling US$19.4m before the end of 2017.

• The company also discloses that it has deferred capital and interest repayments totalling US$10.3m under Facilities C and D has been deferred until 30th October 2017.

• Weatherly has drawn down US$2m of its uncommitted loan from Orion Mine Finance “to accelerate building of the leach pads at Tschudi. To seek to ensure the loan would be sufficient to meet the necessary funding requirements the Company has hedged both copper and currency out to March 2018, and some of these hedges were entered into prior to the recent upward movement in copper prices.”

• In total, “Weatherly has 1000 tonnes per month fixed December to December at an average copper price of US$6,077 per tonne and US$ to N$ exchange rate of 13.38; and 1000 tonnes per month fixed January to March at an average copper price of US$6,464 per tonne and US$ to N$ exchange rate of 13.25.” We note that the copper price yesterday was US$6798 and the current exchange rate is 13.03.

• Most worrying for investors, however, may be the company’s statement that “The Company and its subsidiaries are unlikely to generate sufficient surplus cash to meet all loan repayments when due, particularly in the near term. The Company continues to positively engage with Orion on the subject.”

Conclusion: Weatherly International has reached an agreement to reschedule its debt repayments to its major shareholder, Orion Mine Finance, however, with a major proportion of its production hedged below current copper prices and its admission that it is unlikely to generate sufficient cash to meet its loan repayments in the near term, its continued independent existence appears to rest on the forbearance and support of Orion.

 

Wolf Minerals (LON:WLFE) 3.9p, Mkt Cap £42.1m – Secures additional $5m bridging finance.

• Wolf Minerals has announced that “it has received confirmation from Resource Capital Fund … that the release of the further £5 million, which represents the remaining uncommitted amount of the existing bridge facility  … has been approved on the same terms as previously announced.” This brings the funds available under the facility to £45m.

• The increased facility supports Wolf’s “short term working capital, whilst additional funding requirements for long term self-sustainable operations at the Drakelands open pit mine (Drakelands) are being reviewed.”

• The company also provides an update on the progress of a number of aspects of its operating turnaround plan at the Drakelands tungsten mine in Devon. Initial, Phase I modifications to the DMS (Dense Media Separation) plant were completed during August and a second phase of work is planned to start on 9th September; “Initial results are encouraging with availability above target and recoveries starting to improve.”

• Wolf Minerals also completed the first phase of its planned modifications to the refinery last week and reports that “Initial performance indicators are on plan and Wolf expects an increase in throughput and availability as a result.” Further enhancements to the refinery are due in mid-October.

• “Gravity fines modifications are underway, with initial changes taking place last week. The remainder of the works will take place over the next 8 weeks to minimise the impact on production, with commissioning into early November.”

• Although the details of the modifications are not discussed, Wolf Minerals  expresses optimism on its operational changes: “These modifications along with improved operating discipline across the business are expected to provide the necessary foundation for sustainable performance into next year”.

• Commenting on the improving trend in tungsten prices this year, the company notes that “Wolf has also seen an improving trend in the price of tungsten, with a 44% increase since December 2016 from US$187 per mtu to US$269 per mtu in August 2017. The strong price growth has been particularly evident recently with a monthly increase of US$30 per mtu in both July and August.” We note that these prices are for the intermediate product, ammonium paratungstate (APT) which is used as a benchmark for pricing tungten concentrates which typically sell at a discount to the APT price.

Conclusion: The increased bridging facility provides Wolf Minerals the opportunity to implement operational improvements at Drakelands. The company indicates that a number of these initiatives are showing promise at this stage and that it is also encouraged by the recent improvements in tungsten pricing. We wish the operational team success with its turnaround plan and await further news on the review of the additional funding requirements for long term sustainable operations.

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