Kodal Minerals* (LON:KOD) – Annual results and project update
Ormonde Mining* (LON:ORM) – Interim results
Novo Resources – massive gold find?
• Novo Resources has sparked a rush of gold prospectors into the Pilbara which is better known for its iron ore.
• The company shows significant numbers of nuggets of what look like native gold in their 25 September presentation
• The nuggets are said to have come from the Karratha gold project near Karratha just south of Broome in Western Australia
• The host geology is a conglomerate interbedded with sandstone horizons with basalt clasts and minor vein quartz cobbles.
• Novo Resources has a market capitalisation of >A$1bn.
• Given the early stage and potential unreliability of estimating resources from nuggety orebodies we have to wonder if A$1bn might be too much too soon.
James Dyson is going to build an electric car by 2020
• The major car companies should be afraid given Dyson’s impressive track record for inventing game-changing consumer products.
• Dyson’s disruptive technological innovations have made Dyson one of the UK’s leading technology companies with £2.5bn of sales last year.
• Dyson is committing £2bn to solid-state battery technology and vehicle design.
• We wonder if the next Dyson offering might be a bagless car powered with centrifugal blowers and a fluff free option.
Dresden Mining Conference – 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”
Jeremy Corbyn has supported comments by his shadow chancellor John McDonnell that we should prepare for a run on the pound
• As analysts this got us thinking as to how we should best advise clients to manage this event.
• Buy Mining Equities for their overseas earnings and personally move out of the UK.
• Moving out of the UK will also serve to protect earnings from the >50% income tax which will come with a Corbyn government.
• Pamic now and avoid the rush!
Dow Jones Industrials +0.25% at 22,341
Nikkei 225 +0.47% at 20,363
HK Hang Seng -0.29% at 27,563
Shanghai Composite -0.17% at 3,340
FTSE 350 Mining -1.09% at 16,210
AIM Basic Resources -1.69% at 2,419
Economics
Currencies
US$1.1733/eur vs1.1741/eur yesterday. Yen 113.08/$ vs112.92/$. SAr 13.681/$ vs13.545/$. $1.337/gbp vs$1.339/gbp.
0.780/aud vs0.784/aud. CNY 6.669/$ vs6.636/$.
Commodity News
Precious metals:
Gold US$1,280/oz vsUS$1,289/oz yesterday
• Continued growing strength of the US dollar draws gold down to $1,278.36 per ounce, its lowest since August 16th. Robust US economic data continues to favour a rate hike later in the year, while President Trump proposed the largest tax overhaul in three decades.
• Positive market sentiment has been boosted on the unveiling of Trump’s tax overhaul, expecting to drive faster economic growth and ‘Trumpflation’ trading.
• Sanctions against North Korea continue to apply pressure for the breakup of the nuclear weapons program, with France’s foreign minister urging President Trump to raise diplomatic pressure on Pyongyang.
Gold ETFs 69.3moz vsUS$69.3moz yesterday
Platinum US$917/oz vsUS$924/oz yesterday
Palladium US$931/oz vsUS$916/oz yesterday
• Diverging demand expectations for platinum group metals is creating a price parity for palladium and platinum not seen since 2001. Palladium is benefitting from its inclusion in catalytic converters in gasoline-powered vehicles, which is expecting robust growth from the shift from diesel engines following the 2015 Volkswagen emissions-rigging scandal, and hybrid electric vehicle demand.
• Strong sales in the Chinese auto sector are linked to the recent strength of palladium, which is expected to remain supported through to the end of 2017.
• The impact of electric vehicles on current price is negligible, but expected to help boost the metals performance over the next two-to-three years.
Silver US$16.72/oz vsUS$16.83/oz yesterday
Base metals:
Copper US$ 6,439/t vsUS$6,468/t yesterday
• Copper prices continue to shrink, falling six of the last seven sessions, despite strong industrial performance year to date. Concerns on slowing industrial growth in China were calmed on notable profit results, rising 24 percent year on year to the strongest in four years.
Aluminium US$ 2,120/t vsUS$2,132/t yesterday
Nickel US$ 10,285/t vsUS$10,545/t yesterday
• Nickel prices slide 1.6 percent on the back of strong selling of industrial metals, particularly steel and iron ore, ahead of China’s national holidays next week.
Zinc US$ 3,112/t vsUS$3,131/t yesterday
• Despite zinc prices surging to 10 year highs, LME spreads are showing significant backwardation. A recent market positioning report indicated a single market player holding 50-79% of zinc warrants as of September 27. Additionally, 90-100% of tomorrow-next positions are also held by a single player, creating a tilt in the spreads not reflected by physical tightness.
Lead US$ 2,461/t vsUS$2,480/t yesterday
• Chinese investor interest in lead has risen sharply to shy of 130,000 lots. This attention has developed over increasingly tightening markets resulting from lower concentrate imports, and the stringent environmental inspections closing excess capacity.
Tin US$ 20,670/t vsUS$20,705/t yesterday
Energy:
Oil US$57.5/bbl vsUS$58.2/bbl yesterday
Natural Gas US$3.062/mmbtu vsUS$2.927/mmbtu yesterday
Uranium US$20.60/lb vsUS$20.60/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$64.1/t vsUS$64.2/t
• China will cancel about a third of its iron ore mining licenses, mostly belonging to small polluting mines as part of Beijing’s efforts to improve air quality
• Over 1,000 mining rights will be eliminated under China’s campaign against pollution
Chinese steel rebar 25mm US$621.3/t vsUS$623.3/t
Thermal coal (1st year forward cif ARA) US$81.6/t vsUS$81.5/t
• B.C. is now the only exporter of thermal coal in the Pacific Northwest after Washington state rejected a coal project for failing to meet environmental standards – had it been approved facility would have doubled coal exports from the US
• Project rejected as it was determined it would cause significant and irreversible harm to environment
Premium hard coking coal Aus fob US$197.9/t vsUS$200.6/t
Other:
Tungsten APT European US$310-335/mtu vs US$310-335/mtu
Cobalt
• Cobalt prices continue to show strong support, climbing to fresh highs, despite restricted spot trading. Against slow market activity, rising low- and high-grade prices are reflecting a growing tightness on broken cathodes and briquettes.
• The Wuxi Exchange, a local Chinese futures platform, is attributed to lower available volumes. The price of November cobalt contract prices closed yesterday at the second highest in history, closing 445,000 yuan per tonne.
Lithium
• Northvolt and ABB have signed a memorandum of understanding to build Europe’s largest lithium-ion battery factory in Sweden to cater to the growing demand for electric cars
• Will be based on close collaboration on development of battery solutions and R&D activities and will start production in 2020
Company News
Kodal Minerals* (LON:KOD) 0.26p, mkt cap £16.7m – Annual results and project update
• Kodal Minerals reports a loss for the year ending 31st March 2017 of $1.2m, (2016 loss - £466,000) including an impairment charge of £669,000 arising as a result of the impairment of the company’s Grimeli copper/zinc exploration project in Norway and a further impairment charge of £6,436 on its eponymous Kodal project.
• Cash balance at 31st March reported at £1.7m.
• The year has witnessed a significant shift in the company’s emphasis to strengthen its west African exploration strategy while the Grimeli project has now been fully impaired and a decision taken “to relinquish the these licence areas at the next renewal date”.
• At the Kodal phosphate and titano-magnetite project, “No further expenditure is being incurred on the Kodal Project other than the costs of maintaining the extraction and exploration licences and limited consulting work to advance the Norwegian planning application.”
• The company started its shift towards west Africa with the acquisition in May 2016 of a suite of ten gold exploration projects in Cote d’Ivoire and in Mali and later in the year acquired a further six lithium exploration licences in southern Mali.
• A number of the gold exploration licences in Cote d’Ivoire are held in joint-venture with major mining companies which have committed to expenditure in order to earn an interest. At Dabakala, Newcrest Mining can earn up to 75% while at the Nielle, Tiebissou and M’Bajaikkro projects, the company’s partner, Resolute Mining is also earning up to 75% interests.
• Since acquiring the Bougouni lithium exploration project in Mali Kodal Minerals has completed two drilling programmes over six individual prospect areas with a total of 76 reverse-circulation holes (10,260m) and 5 diamond drill holes (362m). Results to date have been encouraging with wide reported intersections with grades in excess of 1% Li2O. At the Ngoualana lithium mineralisation has been identified over a strike length of 650m and “This zone remains open along strike and has yielded multiple high-grade intersections including 28 metres at 1.96% lithium oxide ("Li2O").”
• The success in the lithium exploration programme has attracted the support of a Singapore based investment company, Suay Chin which has now invested a total of £4.5m, of a total commitment to invest £4.8m, and now holds 18.9% of the company.
• Suay Chin has also committed to “a binding off-take term sheet covering the Group's lithium production from the Bougouni Project.” Kodal, “With the support of our major shareholder, we will continue with the metallurgical testing of our lithium mineralised zones and review the plant and processing requirements to allow the production of a spodumene concentrate suitable for marketing to China-based end users.”
• The company plans to continue drilling at Bougouni “with the aim of targeting extensions and providing definition of the mineralised zones and looking to identify new prospects … and we anticipate being able to continue to add significantly to the value of the Lithium Projects.”
Conclusion: Kodal Minerals is pressing ahead with its lithium exploration in Mali where it has the support of a strategic investor with metallurgical insight and access to China based end users of lithium. Suay Chin has taken an offtake agreement for potential future production and following completion of its full funding commitment will be entitled to appoint a director.
*SP Angel act as Nomad and broker to Kodal Minerals
Ormonde Mining* (LON:ORM) 2.625p, Mkt Cap £12.4m – Interim results
• Ormonde Mining reports a loss of €132,000 for the six months to 30th June 2017 (H1 2016 – loss €96,000) as it moves its flagship Barruecopardo tungsten project towards a planned commissioning in Q3 2018.
• The company reports that all the high priority items of equipment required are now being manufactured, construction of the main dam is underway and it has awarded contracts for the civil engineering and other work.
• The market for the benchmark ammonium paratungstate product is improving and Ormonde Mining reports a rise of “12% during the reporting perios, from US$193 per metric tonne unit (“mtu”) in January to US$217 per mtu at the end of June.” The company goes on to highlight the continuing rise in APT “with prices recently consolidating in the range US$300-315 per mtu, representing an increase of circa 60% year to date and 90% since January 2016.”
• China, the world’s largest supplier, has been restricting the activities of a number of minerals producers, including some tungsten operators, as part of its enforcement of environmental standards and the resulting scarcity of Chinese sources of tungsten concentrates is supportive of supply-demand fundamentals.
Conclusion: A firming of tungsten pricing and increasing demand provide a positive backdrop to the construction of Ormonde Mining’s Barruecopardo tungsten mine in Spain, where construction is accelerating towards a planned Q3 2018 commissioning.