Acacia Mining (LON:ACA) – Metallurgical innovations at Buzwagi protecting jobs
Atalaya Mining (LON:ATYM) – Q3 delivers record copper production
Georgian Mining* (LON:GEO) - STRONG BUY – Metallurgical test work shows good copper and gold recovery rates
Ironveld (LON:IRON) – Update on acquisition of Middleburg Smelting
Lithium mine supply struggling to keep pace with growing demand for electric vehicles
• Lithium mining infrastructure is struggling to keep up with the accelerating growth in electric vehicles.
• While consumption has grown by around 73% from 2010 to 2014 mine production has only increased 28% leading to a marked deficit in material stocks and a significant price rises.
South African Supercell Thunderstorm disrupts shipping and other transport closing the port at Durban
• https://www.bbc.co.uk/news/world-africa-41580041
Dow Jones Industrials +0.18% at 22,873
Nikkei 225 +0.35% at 20,955
HK Hang Seng +0.38% at 28,498
Shanghai Composite -0.06% at 3,386
FTSE 350 Mining +0.47% at 17,394
AIM Basic Resources -0.72% at 2,511
Economics
US – The US$ index is little changed this morning while Fed meeting minutes showed policymakers questioning the “transitory” nature of a recent slowdown in inflation.
• Nevertheless, many participants remained confident that a further increase is likely to be needed “later this year”.
• Probability of a rate hike in December changed only slightly following the minutes release coming down to 75.0% from 77.4%.
• US equities continued to climb higher with all three major indices, S&P 500, Dow Jones and Nasdaq Composite, closing at record high levels.
China – Chinese markets edged higher ahead of a week-long Congress meeting that will start on October 18 and determine the Party’s leadership for the next five years.
• Market operators are saying regulators are taking steps to ensure stable markets in the run up to the Congress gathering with large state-backed investment funds stepping into the market in recent days to limit market swings.
UK – Property market sentiment is waning with more respondents reporting declines in agreed sales rather than an increase, according to the Royal Institute of Chartered Surveyors.
• “The housing market increasingly is feeling chill winds from the prospect of higher interest rates and the lingering risk of a hard Brexit,” Rics wrote.
• A combination of increasing mortgage rates expectations amid declines in real wages will continue to weigh on demand, “likely ensuring that prices don’t rise at all over the next six months”.
• Additionally, a series of changes to tax relief on mortgage payments for buy to let properties that kick started in April this year is also seem to be having a dumping effect on property prices.
• London and South East of the country are leading declines, Rics said.
Brexit negotiations are stuck in a political standstill with little progress reached so far ahead of an EU summit on 19 and 20 October.
• The EU is looking for “sufficient progress” on issues including a financial settlement, EU citizens rights and the Northern Ireland border with the Republic of Ireland before the talks on trade start.
France – Consumer inflation underperformed expectations in September with prices falling 0.2%mom v -0.1%mom forecast.
• Year on year prices were up 1.1%yoy, in line with earlier estimates but well off the ECB 2% target for the Eurozone.
Currencies
US$1.1864/eur vs 1.1781/eur yesterday. Yen 112.24/$ vs 112.40/$. SAr 13.474/$ vs 13.737/$. $1.325/gbp vs $1.319/gbp.
0.783/aud vs 0.778/aud. CNY 6.584/$ vs 6.585/$.
Commodity News
Precious metals:
Gold US$1,296/oz vs US$1,289/oz yesterday
• Gold inched higher as investor appetite for the dollar weakened following dovish signals from Wednesday’s US Federal Open Market Committee meeting. The lengthy debate centered on the expected U.S. central bank interest rate rise later this year, with San Francisco Fed President John Williams suggesting three further rises hikes next year, and into 2019. Participants are calling for a ‘wait-and-see’ approach, wanting to see increased signs of upward inflation before rising interest rates further.
• The International Monetary Fund warned, that despite strengthening global financial stability, there is a growing medium-term risk concerning simple monetary and financial conditions during slow inflationary periods.
• Euro instability rises as tension surrounding Catalonia’s independence bid escalate with news of the Spanish ultimatum to enact a never-used constitutional power to suspend the regions political autonomy and rule directly.
• The US flew two strategic bombers over the Korean peninsula in a show of force, as President Donald Trump met with top defence official to discuss response options to upcoming long-range missile tests.
Gold ETFs 71.1moz vs US$69.3moz yesterday
Platinum US$937/oz vs US$925/oz yesterday
Palladium US$961/oz vs US$939/oz yesterday
Silver US$17.24/oz vs US$17.10/oz yesterday
Base metals:
Copper US$ 6,838/t vs US$6,684/t yesterday - Copper edges higher on China demand bets
• Copper rose to one month high due to expectations of solid demand and crackdown on polluting mines in China
• Prices likely to consolidate around current levels due to anticipated deficits in the supply of copper and most other industrial metals through the fourth quarter and into next year
• Investor sentiment is growing despite elevated metal prices, with the net long position in LME copper rising for the first time since August. Net longs across all the base metals experienced growth.
• The falling dollar index boosted industrial metal prices, with London copper rising to its highest level in more than a month on a weakened dollar.
• A buoyant broad-based global economic upswing is expected to extend well into 2018 according to the International Monetary Fund, boosting the outlook for industrial metals.
• Robust Chinese demand has opened up a copper import ‘arbitrage window’, with traders gaining an additional $9 premiums for copper held in China bonded zones, bringing the premiums up to $74 and the highest value in more than two months.
Aluminium US$ 2,140/t vs US$2,160/t yesterday
Nickel US$ 11,280/t vs US$10,950/t yesterday
• Demand for refined nickel on the international markets is expected to remain strong, reducing the market balance as nickel pig iron furnace production will begin to dwindle during Chinese winter environmental output restrictions.
Zinc US$ 3,238/t vs US$3,224/t yesterday
• Latest data from the International Lead and Zinc Study Group (ILZSG) identifies a growing zinc deficit gap in supply over the course of 2017. Over the first eight-months of the year figures show an increase of 30%, up to 287,000 tonnes.
• The preliminary data suggests total reported inventories declining by 274,000 tonnes over the same period, while world zinc mine production rose by 3.9%.
Lead US$ 2,560/t vs US$2,491/t yesterday
• During 2017, the ILZSG noted world refined lead metal demand exceeded supply from 119,000 t. Global lead mine response ramped up production by 6.8%, with output source focus in China, India and Kazakhstan.
Tin US$ 20,800/t vs US$20,905/t yesterday
Energy:
Oil US$56.6/bbl vs US$55.9/bbl yesterday
• OPEC indicated the production-cutting deal with rival producers would be successful in removing excess supply glut, with a tightening market moving into deficit next year. The combination of higher forecast demand in 2018 and support over the cold winter period from low distillate fuel stocks, would have a positive impact on the market balance and oil price.
• Glencore looks to move over 6 million barrels per day of crude and refined product this year, as the traders aims to offset low volatility and tight margins with volumes 25 percent larger than 2016.
Natural Gas US$2.906/mmbtu vs US$2.845/mmbtu yesterday
Uranium US$20.50/lb vs US$20.15/lb yesterday
Global energy metals gears up for exploration of Cobalt project
• Set to bring in up to $1m to rapidly advance project in Australia, funding will allow GEMC to quickly add significant value to project in key mining district
• At the completion of this initial program, with a required $500,000 spend, GEMC will earn a 25% interest in the project.
Just SIX EVs charging in your street can short out the local grid according to the Green Alliance
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$57.4/t vs US$59.6/t
Chinese steel rebar 25mm US$634.3/t vs US$640.6/t
Thermal coal (1st year forward cif ARA) US$82.0/t vs US$79.0/t
Premium hard coking coal Aus fob US$182.8/t vs US$185.0/t
Other:
Tungsten APT European US$280-295/mtu vs US$290-305/mtu
Democratic Republic of Congo lists ban on Chinese raw material exports
• Congo’s government has lifted an order requiring joint venture partnerships with Chinese investors, initially enacted by mines minister Martin Kabwelulu to restrict the export of raw copper and cobalt from the country.
• Details remain thin on the lift removal which was introduced to encourage export of higher value exports into international markets, which would be used to pay off billions of dollars in infrastructure and mining investments.
• The new is positive for global EV development, where copper and cobalt metals are in high demand for their vital inclusion in the technology.
Swiss waterways secret $1.8 million gold each year
• Scientists from the Swiss Federal Institute of Aquatic Science and Technology estimate 43 kg gold passes through domestic waterways each year.
• Concentrations of gold contained in sewage sludge, within a country which is responsible for 70% global gold refining, are sufficiently high for commercial recovery.
Company News
Acacia Mining (LON:ACA) 183 pence, Mkt Cap £752m – Metallurgical innovations at Buzwagi protecting jobs
• Acacia Mining reports Q3 gold production of 191,203 ounces. The production results, which are expected to be reflected in the release of results by Acacia’s 63.9% owner, Barrick Gold later today will be described in more detail when Acacia Gold formally releases its quarterly results on 20th October.
• Acacia Mining does, however note that the Buzwagi mine performed better than expected with production of 69,097 oz of gold as a result of “strong grades”. At North Mara production amounted to 72,011 oz for the quarter while at Bulyanhulu the mine produced 50,094 oz.
• Output at North Mara and Bulyanhulu was “impacted, as previously flagged, by work permit issues and moving to reduced operations respectively.”
• Sales of 132,784 ounces of gold during the quarter, significantly below production, reflect the “ban on export of gold/copper concentrate produced at Bulyanhulu and Buzwagi from Tanzania.”
Conclusion: Further details of Acacia’s quarterly operations are to be published later this month and we look forward to the company’s insights into the continuing regulatory changes on mining in Tanzania.
Atalaya Mining (LON:ATYM) 173 pence, Mkt Cap £201m – Q3 delivers record copper production
• Atalaya Mining reports record quarterly copper production of 10,679 tonnes for the three months ending 30th September.
• As a result, the company has adjusted its copper 2017 production guidance for 2017 to 36-39,000 tonnes from the previously indicated 34-40,000 tonnes. Having already produced 28,542 tonnes of copper during the first 3 quarters, we are optimistic of the company delivering this updated guidance.
• CEO, Alberto Lavandeira commented “The continuing improvement in performance at Proyecto Riotinto is very gratifying and gives us confidence that our annual production will be at the upper end of the guidance range”.
• Since achieving commercial production on the re-opened mine in February 2016, the Proyecto RioTinto operations have steadily increased copper output, grades and recovery rates with this recent quarter also delivering what we believe are also record head grades of 0.58% copper and a recovery rate of 85.95%.
• The company reports that its “Near-mine exploration drilling has turned its focus on to the north-west extension of the Cerro Colorado pit now that the east-west extension of Filon Sur has been completed. The exploration block model has been updated with results which will be part of the resources and reserves update that form part of the studies related to the expansion to 15 Mtpa Project.”
• Work on the Proyecto Touro in northwest Spain is progressing with the technical studies ahead of schedule and the company expecting to release an NI-43-101 pre-feasibility level report during Q4. In parallel, the permitting process for Touro is progressing on schedule with “the public hearing having taken place at the beginning of October. The Company anticipates a period of consultation with different regulatory bodies which should take place over the following months.”
• Exploration work in the recently optioned concessions around Proyecto Touro included “an airborne VTEM geophysical survey, detailed assessment of structural geology and a regional geochemical campaign.”
Conclusion: The performance of Proyecto RioTinto continues to improve and we look forward to the results of the current investigation into upgrading throughput from the current nameplate 9.5mtpa capacity to 15mtpa. At the company’s other project, Touro, in northwest Spain, we await publication of the pre-feasibility study due during the current quarter.
Georgian Mining* (LON:GEO) 21.25p, Mkt Cap £24.3m - STRONG BUY – Metallurgical test work shows good copper and gold recovery rates
(Georgian’s assets in Georgia are held in a 50:50 joint venture)
STRONG BUY
• Georgian Mining report results from work done the extraction of copper and gold from ores at the Kvemo Bolnisi project in Georgia.
• Copper sulphide mineralisation: The work shows >90% recovery for copper and 98.4% for gold from the copper sulphide mineralisation.
• 85.7kg of material was tested from 18 core samples sufficient for scoping study levels.
• Gold oxide ores: A larger test was carried out 207.3kg of gold oxide material showing recoveries of 73.7% and 79.3% for -20mm and -12.5mm crush sizes. Eg the finer crush should give a 5.6% improvement in gold recovery.
• The ores are confirmed to be amenable to heap leaching and the giving 87.5% and 88.4% recoveries in column leach gold recoveries for the two crush sizes used.
• The recent site visit revealed that the ores are seen as complex with no particularly deleterious elements seen in the material tested to-date.
• Drill results: the team are now integrating results from the final 28 drill holes from Gold Zone 2 into the gold oxide feasibility study to complete the gold resource optimization.
• The press release states: “This will be followed by the development of new mining models and new pit optimisations based on the updated Resource utilising more refined metallurgical and project planning information in preparation for production.“ This suggests that the company is moving closer to the start of open-pit mining for the gold oxide material.
• The press release goes on: “Gold Zone 2 is just one of three zones we have identified at KB which we believe may coalesce at depth to form a large epithermal copper-gold system and which provide the basis for our Phase 3 exploration target of a 50Mt+ copper-gold deposit.“ We recently visited the Kvemo Bolnisi site in Georgia from which we could easily see the gold heap leach pads associated with the near-by Madneuli mine.
• A new road is currently being built by the joint venture partner which if extended may also serve trucks from Kvemo Bolnisi on the 10km haul to the Sagrisi heap leach site.
• Georgian is taking a phased approach to de-risk the Kvemo Bolnisi project as it moves towards production thought the company is being careful not to commit to a firm date for the start of mining at the site.
• The three prominent but small hills at Kvemo Bolnisi should be easy to mine with very little waste material, though stripping ratios will increase when mining develops below the surrounding ground level.
• Scale: The dimensions of the Kvemo Bolnisi project are said to be roughly equivalent to Madneuli in its totality indicating that Kvemo Bolnisi is going to become a relatively large and meaningful operation with the site likely to be developed as a single pit operation. The nearest village to the mine site is around 1.5km.
• Cash: Georgian Mining has $5m in the treasury and an $18m royalty credit sitting within the joint venture.
• Georgian Mining have operational control and rather unusually has 27-years to run on its mining license for the site. The project continues to grow in its apparent scale causing the move to mining to naturally take a little longer than first expected. We believe the principal terms for the joint venture arrangements are all but finalised and the team should be ready to move to the next phase relatively soon.
• Drill results: assays from recent drilling were held up by delays to sample preparation at the Madneuli sample prep site. We understand the backlog has now been cleared and expect to see results from more recent drilling sometime soon.
Conclusion: The Kvemo Bolnisi project is moving methodically through the optimisation process towards mining. We are looking forward to the next round of assay results and we are hopeful for some good numbers from enriched copper zones underneath the gold oxide.
*SP Angel acts as Nomad and Broker to Georgian Mining. An SP Angel mining analyst recently visited the Kvemo Bolnisi site in Georgia.
Ironveld (LON:IRON) 2.2p, mkt cap £10.4m – Update on acquisition of Middleburg Smelting
• Ironveld reports that, following the payment, in July, of a refundable deposit of R8.8m (approximately £530,000) and continuing due diligence work, which includes taking operational control of the 7.5Mw Miiddleburg smelter in South Africa, it remains in discussions “to secure the funding for the necessary upgrades and refurbishment to allow for the processing of the Company's own magnetite ore through the 7.5 MW smelter facility and remains confident of successfully concluding such funding arrangements.”
• The company reports that two potential funding sources “have completed their due diligence and are in the process of concluding their respective internal approval processes.”
• Company personnel have spent considerable time on site and the Ironveld’s Board has “now concluded that in order to ensure future efficient operation of the facility it is in the Company's best interests to hold off commencing these operations until the necessary upgrades have been made to the facility and funding is in place to conclude the acquisition.”
Conclusion: Ironveld continues to express its view that the acquisition, refurbishment and restart of the Middleburg facility remains a core objective. Financing discussions appear well advanced and we await further news when these have been concluded.