Amur Minerals* (LON:AMC) – Drilling at KUB points to a potential resource expansion
Gem Diamonds (LON:GEMD) – Demand for Letseng quality diamonds remains strong
Metminco* (LON:MNC) – Miraflores underground exploration approved
SolGold* (LON:SOLG) – Annual results and operational update
Tethyan Resources* (LON:TETH) – Drilling results from the Rudnitza prospect
Base metals and bulk commodities pull back on disappointing Chinese industrial production, investment and retail sales
• Copper is retreating for a third session and is trading at a one month low.
• January iron ore futures slump 5.8% today extending losses in September to 8.9%; steel rebar futures were off 1.7%.
• Gold is level after posting losses on Wednesday amid an increase in the US$ and US equities posting new highs.
• US inflation data to be released later today will be watched closely as the latest slowdown in core consumer prices growth raised questions over the course of the future monetary policy tightening.
• Brent is holding onto its earlier gains on the back of stronger demand forecasts from the IEA and OPEC; Chinese oil production continued to decline to the lowest in eight years with output drop accelerating in August on the back of an outage at offshore fields; Nigerian Petroleum Minister is looking to raise production to 1.8mmbbl per day or 170kbbl more than it is currently pumping before agreeing to a new potential OPEC output cut.
New nickel catalyst transforms greenhouses gases
• Scientists have designed a water soluble nickel catalyst that transforms carbon dioxide to carbon feedstock.
• The discovery opens door to creating faster more efficient first-row transition metal catalysts for carbon dioxide conversion.
PotashCorp looking at selling stake in world’s largest lithium producer as part of deal to enable merger with Agrium
• PotashCorp is looking at selling its 32% stake in SQM, the world’s largest lithium producer
• The 32% stake is worth around US$4.6bn on the NYSE but may sell for more given growing interest in securing lithium production.
• Rumors reported on Mining.com suggest PotashCorp may be considering the sale of a 20% stake in SQM to GSR Capital, a Chinese Private Equity firm.
• PotashCorp are looking to merge with Agrium a smaller potash producer to create a combined business worth around $36bn.
• The deal has been approved by the Canadian competition bureau but Chinese and Indian appear to want PotashCorp to divest certain minority holdings in the Canadian firm.
• While we know SQM as a lithium company, investors should note that SQM is really a potash producer with a lithium co-product.
• The new combined entity will be called Nutrien if the merger goes through.
Dow Jones Industrials +0.18% at 22,158
Nikkei 225 -0.29% at 19,807
HK Hang Seng -0.42% at 27,777
Shanghai Composite -0.38% at 3,371
FTSE 350 Mining -1.88% at 17,027
AIM Basic Resources -0.41% at 2,545
Economics
US – Headline inflation picked up in August driven by an increase in energy prices.
• Despite a pick up in core inflation measures price pressures seem to be well contained for now.
• Hurricane Harvey related effect has not been accounted for in August numbers, although as historic data suggests inflation measures may remain elevated for a few months post storm incidents.
China – Economic growth unexpectedly slowed further in August following a weaker July with industrial production, investment and retail sales cooled.
• Infrastructure spending growth was down at 19.8% in the first eight months compared to 20.9% recorded in the first seven months.
• Regulatory efforts to rein in credit expansion saw home sales growing at the slowest pace in almost three years last month.
• On the positive side of things, steel production hit record high.
• Retail Sales (%yoy/YTD): 10.1/10.4 v 10.4/10.4 in July and 10.5/10.4 forecast.
• Industrial Production (%yoy/YTD): 6.0/6.7 v 6.4/6.8 in July and 6.6/6.8 forecast.
• FAI ex Rural (%YTD): 7.8 v 8.3 in July and 8.2 forecast.
UK – John Lewis, a supermarket and department store chain, reported a 53% drop in PBT on the back of weak consumer demand, adverse FX currency moves and restructuring charges.
• The group expected difficult consumer market conditions to persist in H2/17 exercising pressure on operational margins.
• Property prices in London are reported to have recorded the weakest month since 2008, according to the Royal Institute of Chartered Surveyor survey.
• A net 56% of respondents saw a drop in prices in London last month against a net 6% nationally seeing a price increase.
• Although, subdued outlook for property prices in the capital seem to be driven largely by prime central London locations, the report said.
Australia – The A$ climbed 0.5% against the US$ on surprisingly strong August employment numbers.
• Encouragingly most of the increase in the number of jobs came from the full time category accounting for c. 3/4s of the total increase.
• Additionally, the number of people actively looking for job continued to rise.
• Despite strong numbers, the RBA is expected to stay put with regards to a potential rate hike as underemployment remains high and wage growth continues to be weak, Bloomberg reports.
• Employment Change (‘000): 54.2 v 29.3 in July and 20.0 forecast.
• Unemployment Rate (%): 5.6 v 5.6 in July and 5.6 forecast.
Currencies
US$1.1900/eur vs 1.1991/eur yesterday. Yen 110.38/$ vs 109.97/$. SAr 13.124/$ vs 13.027/$. $1.321/gbp vs $1.331/gbp.
0.800/aud vs 0.804/aud. CNY 6.555/$ vs 6.528/$.
Commodity News
Precious metals:
Gold US$1,324/oz vs US$1,333/oz yesterday - Growth in the U.S. dollar index applied pressure to the precious metal markets, pulling gold prices moderately lower.
• Stronger U.S. consumer inflation data released in the August report today at 12.30 GMT could advance increased future interest rate expectations.
Gold ETFs 68.8moz vs US$68.7moz yesterday
Platinum US$981/oz vs US$987/oz yesterday – Ballard Power claims technology breakthrough allows replacement of platinum in fuel cell design
• The technology non-precious metal catalyst design is said to reduces amount of platinum required by >80%
• Historically less platinum in fuel cells has meant less power and conversion efficiency. Problem has been that platinum catalysts tend to run rather hotter than most consumers and manufacturers feel comfortable with. Previous platinum-rich designs ran at >400oC in the days when Ballard Power was a darling of the Dot.Com boom.
• If Ballard’s new designs work well then their fuel cells may provide a good supplement or alternatives to batteries in Electric Vehicles.
Palladium US$942/oz vs US$953/oz yesterday
Silver US$17.76/oz vs US$17.95/oz yesterday
Base metals:
Copper US$ 6,484/t vs US$6,603/t yesterday – 29,450t increase in LME approved copper warehouse stock brings the total to 276,025t, following further fund sales of the metal.
• Copper producers to benefit from hurricanes
• Texas hurricane costs estimated at $180bn with significant new demand for copper wiring and plumbing to come from need to rebuild houses, businesses and infrastructure
Aluminium US$ 2,091/t vs US$2,132/t yesterday - Chinese gov’t efforts to minimise excess smelting capacity limited August aluminium output, which fell to the lowest since April ‘16.
• August production was reduced following the forced closure of illegal capacity of top aluminium producers China Hongqiao and Xinfa Group.
Nickel US$ 11,235/t vs US$11,725/t yesterday – Indonesian discussions to increase nickel exports to China cause a 2% price drop amid concerns of excessive supplies.
Zinc US$ 3,006/t vs US$3,053/t yesterday
Lead US$ 2,277/t vs US$2,285/t yesterday
Tin US$ 20,575/t vs US$20,695/t yesterday
Energy:
Oil US$55.1/bbl vs US$54.3/bbl yesterday - Record premium for high grade iron ore
Natural Gas US$3.063/mmbtu vs US$3.010/mmbtu yesterday
Uranium US$20.65/lb vs US$20.65/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$72.3/t vs US$72.3/t -
• China’s environmental legislations are driving increasing premiums for high-grade iron ore, enhancing the output from steel mills while reducing associated emissions.
• Combined with August production highs of 74.6mt, the gap between the two iron ore grades is the greatest since August 2011.
• The environmental clean-up is pushing more steel producers to use higher quality feedstock material, eg Australian iron ore and has driven Australia and Brazil’s market share to >80% of China’s total iron ore imports.
• This is also forcing shippers of lower grade material to offer steeper discounts to draw in buyers
Chinese steel rebar 25mm US$663.6/t vs US$664.6/t
Thermal coal (1st year forward cif ARA) US$83.4/t vs US$80.5/t
Premium hard coking coal Aus fob US$208.9/t vs US$208.9/t
Other:
Tungsten APT European US$310-335/mtu vs US$285-300/mtu
Company News
Amur Minerals* (LON:AMC) 9.3p, Mkt Cap £57m – Drilling at KUB points to a potential resource expansion
• The Company reports the third drill update at KUB as part of its 30,000m field season in 2017.
• The team completed 21,933m of drilling through 8 September 2017 across IKEN and KUB deposits, part of the Kun Manie sulphide nickel/copper project.
• Infill drilling in the central part of the KUB deposit has been completed with the Company expecting high conversion ratios of the available Inferred Resources (10.9mt at 0.74% Ni and 0.20% Cu) to the Indicated category.
• Step out drilling in the eastward direction targeted 1,000m long segment of the 3,000m long continuous anomaly running between IKEN and KUB.
• A total of 14 holes that intersected mineralisation along the 500m long part returning an average thickness of 20.1m per hole (10.8m per mineralised interval) at average grades of 0.580% Ni and 0.21% Cu.
• Results “confirm that economic grades and thicknesses are similar to drill results defined and used in the generation of the KUB mineral resource estimates”, the Company highlighted.
• The remaining drilling scheduled over the next eight weeks until the end of the season is expected to test another 500m along the identified anomaly and potentially confirm IKEN and KUB are parts of a 4.5km long deposit similar to the MKF deposit.
• Conveniently, step out drilling is being completed at a spacing used in the identification of the Indicated Resource category suggesting the 2017 field season is likely to see “a substantial increase over current global 100mt inventory reported within four deposits”.
*SP Angel act as Nomad and Broker to Amur Minerals
Gem Diamonds (LON:GEMD) 76p, Mkt Cap £106m – Demand for Letseng quality diamonds remains strong
• Gem Diamonds report good demand for Letseng’s high quality diamonds.
• A recently recovered 126.75 carat D-colour Type IIa diamond and a 7.78 carat pink sold for $56,400/ct and $202,000/ct.
• The company reported an interim after tax profit in mid-August of just US$578,000 vs a loss of US$15.9m yoy.
• A combination of lower ore tonnages treated due to reduced plant availability and reduced recovered grades, which at 1.59cpht was lower than both the 1.79cpht achieved in H1 2016 and the targeted 1.63 cpht for H1 2017, led to a 12% decline in the overall production to 50,478 carats (H1 2016 57,380 carats).
• Gem Diamonds is focussing on the production of larger, higher value diamonds with improvement evident in this area.
Conclusion: If recoveries of larger stones continues to improve then Gem Diamonds looks likely to report further positive progress going forward.
Metminco* (LON:MNC) 2.875p, Mkt Cap £3.7m – Miraflores underground exploration approved
• Metminco has received approval for up to 2000 metres of underground development at its Miraflores gold project in Colombia.
• The development “will allow the Company to expose the previously defined ore zones on multiple levels and complete infill diamond drilling for stope definition ahead of a final decision to construct the processing facilities and supporting infrastructure”.
• The company plans to access the mineralisation on multiple levels which should provide detailed information on the mining characteristics of the deposit as well as providing sites for further underground drilling and significant quantities of mineralised material for further metallurgical testing.
• The company reiterates that it remains on course to complete the Miraflores feasibility study during Q3 2017. Given the timing, it is unlikely that the information gained from the initial exploratory underground work will be available to be incorporated in the feasibility study itself, however it should provide detailed information for the planning and implementation phases of a future mine development at Miraflores.
• In our view, gaining underground access to the mineralisation at Miraflores should provide important geological, mining and metallurgical information to help de-risk the project. It should also provide an opportunity for the company to demonstrate its operating credentials to local regulatory authorities and other interested parties within the local communities.
Conclusion: Approval for limited underground development at Miraflores should help to de-risk the project and provide detailed information for the future development.
*SP Angel act as broker to Metminco. SP Angel analysts have previously visited Los Calatos in Peru and the Miraflores project in Colombia.
SolGold* (LON:SOLG) 33p, Mkt Cap £500.4m – Annual results and operational update
• SolGold has reported a pre-tax loss of A$8.3m for the year ending 30th June 2017 (2016 – A$5.7m loss). The increased pre-tax loss is attributed to “A$2,239,533 (2016: A$nil) recognised as a share based payments expense representing the fair value of share options granted to employees and contractors during the year and an unrealised foreign exchange loss of A$1,032,010 (2016: gain of A$126,619) recognised on funds held in United States dollars.”
• After allowing for an A$3.8m tax benefit, the company reports an overall loss for the year of A$4.5m or 0.3Acents per share (2016 – A$5.7m loss or 0.7Acents)
• The company reports a 30th June cash balance of A$89.3m.
• The year has seen Newcrest Mining invest a total of US$62.8m in order to bring its holding in Solgold to 14.5% and the increased funding and support of a major industry player has enabled Solgold to escalate its exploration activity at Cascabel to the point where, with over 44,500m of drilling completed, the company is targeting “the Company’s maiden resource estimate for the Alpala Prospect, which is expected to be completed by the end of 2017.”
• Drilling at Cascabel “over a 2200m by 700m surface area along an 1800m deep vertical column has now defined a northwesterly-trending, steeply northeast-dipping zone of multi-phase porphyry style stock-work veining and associated phases of diorite to quartz diorite stocks and dykes”. As the company escalates its drilling campaign to a complement of 10 rigs by early 2018, the overall extent of the known mineralisation is likely to increase.
• In addition to the work at Alpala and in the greater Cascabel licence area, where only 4 targets of 15 identified and have yet been drilled, Solgold has secured a further 59 exploration tenements totalling 2,496km2 throughout Ecuador.
Conclusion: The past year has been pivotal for Solgold as it moves to its initial resource estimate at Alpala by the end of 2017.
*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.
Tethyan Resources* (LON:TETH) 3.125p, Mkt £5.3m – Drilling results from the Rudnitza prospect
• Tethyan Resources has announced results from its recently completed 4 holes diamond drilling programme at the Suva Ruda licence within its Rudnitza prospect in Serbia.
• The programme which totalled 2127.6m of core “drilling at Rudnitza has confirmed that this is a very extensive mineralised system.” Among the highlighted results are:
o A 460m long intersection at an average grade of 0.21% copper and 0.20 g/t gold from surface in hole RDD-006. This intersection includes a higher grade section of 20m from a depth of 92m which averaged 1.04% copper and 0.20g/t gold; and
o A 260m long intersection at an average grade of 0.22% copper and 0.20 g/t gold from a depth of 6m in hole RDD-005. This intersection includes a higher grade section of 12m from a depth of 116m which averaged 0.78% copper and 0.13g/t gold; and
o Hole RDD-007 reported an intersection of 572m from surface at an average grade of 0.11% copper and 0.16 g/t gold including a higher grade section of 80m, from a depth of 106m at an average grade of 0.3% copper and 0.16g/t gold; and
o RDD-008 which intersected 341.7m at an average grade of 0.17% copper and 0.24 g/t gold from a depth of 138m.
• Tethyan Resources comments that “The results of these drill holes have expanded the known extent of the Rudnitza porphyry system” and that following detailed geological interpretation, the results will help the exploration team to identify areas of “higher grade mineralisation” for future drilling.
• Today’s results add to the previously reported holes RDD-001 to RDD-004 which also showed relatively near surface, long intersections at similar grades, also including some higher grade sections within the hole.
• Although the assays reported today, and earlier in the programme, are relatively low, they confirm an extensive system of disseminated mineralisation close to the surface. Until the detailed interpretation is completed, the geometry, particularly of the higher grade sections of mineralisation, remains obscure, however we would expect the company to be planning further drilling once the more promising targets have been identified.
Conclusion: Drilling confirms an extensive system of disseminated mineralisation and has provided geological information which should help identify potential higher grade targets within the system for future exploration.
*SP Angel act as broker to Tethyan Resources