Premier African Minerals (LON:PREM) – Increase in Underground Resource at RHA tungsten mine in Zimbabwe
SolGold* (LON:SOLG) – Drilling continues to ramp up with an initial Alpala resource in December and 12 rigs due in operation by early 2018
Conference – Europe – From Mine to Market - Dresden on Thursday 28th September
• The FAME Project, GKZ (Geokompetenzzentrum) and the Minor Metals Trade Association (MMTA). are sponsoring a mining conference in in Dresden to be attended by a range of European industrialists.
• Speeches range from minor metals to smelters and Europe’s approach to mining, metallurgy and downstream integration.
• SP Angel’s John Meyer, will delivering a key note speech on “Minor metals in mining and markets – the future has just begun”
Miners are lower this morning on the back of a continuing decline in bulk commodities prices as well as a strong run in the British pound against the US$.
• The pound gained 2.5% over the last two days as the BoE indicated the rate hike is on the cards over the coming months amid strengthening inflation pressures.
• Gold prices and the US$ index are little changed this morning despite reports saying North Korea launched another missile over Japan in the Pacific for the second time in two months.
• Copper stockpiles surged 10% today to 304.4kt marking the highest level since July and taking a weekly increase to 43%; prices are down 3% this week.
• Iron ore prices continued to slide heading to its first back-to-back weekly drop since June with Dalian futures trading at a two-month low today.
Dow Jones Industrials +0.20% at 22,203
Nikkei 225 +0.52% at 19,910
HK Hang Seng -0.09% at 27,752
Shanghai Composite -0.53% at 3,354
FTSE 350 Mining -1.10% at 16,632
AIM Basic Resources -0.79% at 2,525
Economics
US – Consumer prices inflation came in ahead of market estimates for the first time in six months with first signs of weather-related pressures making it into the data.
• Hurricane Harvey saw gasoline prices climbing 6.3%mom or 10.4%yoy last month during a period that is normally considered seasonally quiet.
• While core inflation measures excluding changes in energy prices also came in stronger than forecast stabilising following months of declines in growth rates.
• Weather related disruptions adding noise to inflation data may complicate Fed’s job slightly as policymakers are closely watching inflation amid the monetary tightening cycle.
China – Money supply numbers released today showed credit growth continued at a robust pace in August supporting growth dynamics ahead of the NPC opening on the 18th October.
• Total credit climbed 18.0%yoy in the first eight months of the year slightly down on 20.3% recorded through the January-July period but up on 16.4%yoy increase recorded in 2016.
UK – The pound rallied against the US$ yesterday on the back of the news the BoE may raise rates in “coming months” if the economy performs in line with authorities’ estimates.
• The rate setting committee voted 7-2 to leave rates unchanged at 0.25% for now, in line with market estimates.
• Greater attention is not turned to labour statistics and GDP numbers due on October 18 and 25, respectively.
• Should the data come in strong a rate increase in November may be a real possibility, Bloomberg reports.
• Markets are currently pricing in a one 25bp hike in February with a second one is not expected until beyond the same month in 2019.
Currencies
US$1.1919/eur vs 1.1900/eur yesterday. Yen 110.73/$ vs 110.38/$. SAr 13.146/$ vs 13.124/$. $1.343/gbp vs $1.321/gbp.
0.800/aud vs 0.800/aud. CNY 6.546/$ vs 6.555/$.
Commodity News
Precious metals:
Gold US$1,327/oz vs US$1,324/oz yesterday - Gold prices slip further as US dollar steadies
• The yellow metal slipped below $1,322 per ounce this morning, but it has since risen back to $1,327.60, just 0.03 per cent below its closing price yesterday
• Improved US yields and rising USD demand could encourage a deeper downside correction. The key support to the two-month rise stands at $1,300
• Growing tensions over North Korea follow Friday’s missile launch over Japan’s northern Hokkaido far into the Pacific Ocean, prompting a flood of gold purchases.
• August’s U.S. consumer prices rose 0.4% on the back of increase gasoline and rental accommodation costs, causing an increased likelihood of December’s interest rate hike from the Federal Reserve.
• Despite the increase in domestic consumer prices, the U.S. dollar index fell 0.4%.
• The announcement of the close in trading on Chinese bitcoin exchange ‘BTCChina’ has triggered a shift back to more traditional safe-haven trades in the gold market.
Gold ETFs 68.8moz vs US$68.8moz yesterday
Platinum US$980/oz vs US$981/oz yesterday
Palladium US$928/oz vs US$942/oz yesterday
Silver US$17.76/oz vs US$17.76/oz yesterday
Base metals:
Copper US$ 6,501/t vs US$6,484/t yesterday - Copper continued slide yesterday on China data and inflows of copper stocks into warehouses.
• Note: we don’t trust stock numbers so much these days due to manipulation by hedge funds and strategic agencies.
• A downturn in Chinese infrastructure investment continues to send base metals prices to their lowest in September. August’s industrial production figures indicated the slowest growth rate since December 2016.
• Copper prices continue to fall on the back of investor profit-taking. London Metal Exchange warehouse stocks rose a further 16% Wednesday with investors dumping their copper holdings.
Aluminium US$ 2,086/t vs US$2,091/t yesterday - Buyers in Japan, Asia’s biggest aluminium importers, have agreed a 20% reduction in premiums of October to December quarter shipments at $95/t.
• The premiums to London Metal Exchange prices are representative benchmarks for the Asian region.
Nickel US$ 11,070/t vs US$11,235/t yesterday
Zinc US$ 3,014/t vs US$3,006/t yesterday – The zinc market remained in deficit through July seeing the cumulative shortage climbing to 227kt in the first seven months of the year
• This compares to a 214kt deficit recorded through January-July 2016, according to the ILZSG.
• Both demand and supply recorded weak growth rates of 0.3% and 0.4%, respectively, with cumulative numbers coming in at 7,850kt and 8,077kt.
Lead US$ 2,314/t vs US$2,277/t yesterday – Market recorded another monthly deficit in July according to the latest ILZSG data.
• Consumption totalled 1,023kt surpassing supply of 987kt taking the deficit to 36kt.
• This extended the shortage to 109kt in the first seven months of the year compared to a 42kt surplus recorded during the same period last year.
• Chinese lead stockpiles continue to fall to the lowest since May 2017 on the back of industrial pollution inspections. This declining market output is the result of the closure of approximately 80% illegal secondary smelting operations.
• August’s ban on North Korean lead exports have only acted to tighten the concentrate market, pushing up the physical premiums on Shanghai lead contracts.
Tin US$ 20,530/t vs US$20,575/t yesterday
Energy:
Oil US$55.2/bbl vs US$55.1/bbl yesterday –
• Energy shares rose on the back of the weakening U.S. dollar index, while positive forecasting by the International Energy Agency on Wednesday proposed a more rapid rebalancing of the oil market.
Natural Gas US$3.058/mmbtu vs US$3.063/mmbtu yesterday
Uranium US$20.60/lb vs US$20.65/lb yesterday
Lithium - Kuehne + Nagel launches supply chain product for lithium battery industry
• The KN BatteryChain is designed to meet rapidly increasing global demand for lithium batteries and to offer safe reliable and efficient mass transport as well as storage.
• Transport of lithium batteries is complex given their classification as dangerous goods and the need to comply with new stricter regulations and restrictions.
• The KN solution complies with the respective international dangerous goods regulations and certified against ISO9001 and the leading automotive standard ISO16949
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$70.0/t vs US$72.3/t
Chinese steel rebar 25mm US$662.2/t vs US$663.6/t
Thermal coal (1st year forward cif ARA) US$82.9/t vs US$83.4/t
Premium hard coking coal Aus fob US$207.8/t vs US$208.9/t – coking coal prices cut by move by blast furnaces to more efficient higher-grade Australiana and Brazilian coals and lower feedstock throughput
• Thursday’s announcement of weak economic data from China, combined with tightening environmental legislations, have generated concerns over future demand for coking coal.
• The campaign to cut steel mill pollution, restricting raw material demand, has caused the greatest price drop in coking coal futures since inception in 2013.
Other:
Tungsten APT European US$310-335/mtu vs US$285-300/mtu
Company News
Premier African Minerals (LON:PREM) 0.43p, Mkt Cap £23.8m – Increase in Underground Resource at RHA tungsten mine in Zimbabwe
Premier owns 49% of RHA. RHA is indebted to Premier in excess of US$20m and until such time as this is settled, all concentrate produced will be attributable to Premier)
• Premier African Minerals report an increase in the underground resource at their RHA tungsten mine in Zimbabwe.
• The resource has been prepared under the South African SAMREC code rather than JORC or NI 43-101. We see SAMREC as a perfectly acceptable code for this sort of work.
• The company report a 32% increase in the underground Measured Resource category to 0.029mt and a 52% increase in grade to 5.45kg WO3/t.
• Plus a 33% increase in the underground Indicated Resource category to 0.076mt and a 95% increase in grade to 6.31kg WO3/t.
• The overall underground grade rises by 11% to 4.72kg WO3/t and 16% increase in total underground Mineral Resources contained metal to 6,257,493 kg WO3
Table 1: Summary of the Underground Mineral Resources (September 2017)
Category Gross Net attributable Operator
Tonnes (millions) WO3 Grade (kg/t) Contained metal (kg) Tonnes (millions) WO3
Grade (kg/t) Contained metal (kg)
Underground
Mineral Resources
Measured 0.029 5.45 157,679 0.029 5.45 157,679 Premier
Indicated 0.076 6.31 479,936 0.076 6.31 479,936
Inferred 1.220 4.61 5,619,877 1.220 4.61 5,619,877
Total 1.325 4.72 6,257,493 1.325 4.72 6,257,493
Conclusion: We view the grades as a bit skinny for the operation of an underground tungsten mine. Mining costs are lower in Zimbabwe which should be a help. We sincerely hope that the rise in tungsten prices is sufficient to enable the survival of the RHA mine and to repay the $20m owned to Premier following problems encountered with the open pit and the process plant.
SolGold* (LON:SOLG) 32.8p, Mkt Cap £497m – Drilling continues to ramp up with an initial Alpala resource in December and 12 rigs due in operation by early 2018
• SolGold continue to press ahead with resource definition and drilling at the Alpala prospect in Ecuador.
• Solgold’s AIF (Annual Information Form) filed in Canada yesterday confirms that SolGold intend to issue an initial resource for Alpala in December
• The company are also committing to update the resource quarterly
• The team and planning a minimum 100,000m of drilling at Alpala alone to close off the deposit.
• In addition SolGold are looking at 165,000 - 170,000m of drilling on the other targets at Cascabel with a further estimate of 170,000m for resource definition.
• The additional 440,000m of drilling will keep the drilling and geological teams busy and give plenty of data to asses.
• SRK Exploration have been commissioned to qualify the complex geological modelling and to draft the Cascabel Technical Report covering the Alpala deposit.
• Alpala now appears significantly larger than previously understood leading to the deferment of the maiden mineral resource estimate to December due to excessive portions of the deposit remaining open.
• This has resulted in an additional minimum of 100,000m of drill testing to fully constrain the Alpala deposit.
• SolGold plans to release updated mineral resource estimates on quarterly basis till such time that the true dimension of the Alpala Deposit are realised.
• Additional porphyry copper-gold targets within the Cascabel Project will also require over 165,000m of drill testing, with a supplementary 170,000 m of drilling anticipated for resource definition at additional targets.
• Five man-portable diamond drill rigs are currently working at site with a further two man-portable rigs being mobilised to site in September.
• A further 5 large track-mounted drill rigs are being mobilised to site during the final quarter of 2017 bringing the total number of operating drill rigs to 12 by early 2018.
• SolGold will be using three drilling contractors at Alpala and on the Cascabel site to accelerate and better define the project.
Conclusion: The move to 12 drill rigs marks a significant step up in activity at the Cascabel site and should feed further exciting and massive copper, gold intersections for analysis.
The new higher level of activity could make the next 12 months a big year for SolGold.
*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.