Anglo Asian Mining* (LON:AAZ) – New Ugur mine helps to ramp up gold production in Q3. On course for 64,000 to 72,000oz of gold equivalent in FY17
BlueJay Mining* (LON:JAY) – Change of project name to Dundas and appointment of consultants to advance project to production
Goldplat (LON:GDP) – Exploration at Anumso
Dow Jones Industrials -0.14% at 22,841
Nikkei 225 +0.96% at 21,155
HK Hang Seng +0.08% at 28,482
Shanghai Composite +0.13% at 3,391
FTSE 350 Mining +0.02% at 17,429
AIM Basic Resources +1.29% at 2,543
Economics
US – Factory gate prices are seen climbing higher in September reflecting hurricane related disruptions in food and refined oil segments, in particular.
• Hurricane Harvey affected chemical, gasoline and beef production while Irma devastated vegetable, citrus and sugarcane crops in Florida, Bloomberg reports.
• Core PPI (%mom/yoy): 0.4/2.2 v 0.2/2.0 in August and 0.2/2.0 forecast.
• Weekly Jobless Claims: 243k v 258k in the previous week and 250k forecast.
• Reports on consumer prices, retail sales and consumer sentiment are due later today.
• Inflation is expected to post a pick up in September, although, the data is not directly comparable to previous periods given weather relate factors.
China – The latest trade data showed a drop in trade surplus to the lowest surplus in half a year on the back of a strong increase in imports.
• Imports increase more than forecast with growth in commodities’ inbound shipments remaining robust.
• Iron ore imports climbed 10.6%yoy to a record 102.8mt beating the previous high recorded in 2015 and bringing total shipments YTD to 817mt, up 7.1%yoy.
• Exports (%yoy, $ terms): 8.1 v 5.1 in August and 10.0 forecast.
• Imports (%yoy, $ terms): 18.7 v 13.5 in August and 14.7 forecast.
Germany – No change in inflation rates from previous estimates recorded with CPI change holding steady at 1.8% in September after posting a rebound following a weak second quarter.
• CPI (%mom/%yoy): 0.0/1.8 v 0.2/1.8 in August.
ECB – Policy makers are considering to cut monthly bond purchases by at least half from January next year while continuing with the programme for at least nine months, according to officials familiar with discussions.
• That means the latest QE programme that has been in place since Mar/15 may be in place up to Q3/18 at least.
• Discussion continue amid ECB forecasts for inflation to remain well below the 2% target in the near term with the central bank’s estimates currently standing at 1.2% for 2018 and 1.5% for 2019.
• Next policy meeting is due in two weeks with the decision expected on October 26.
UK – The British Chambers of Commerce urged the BoE to hold off hiking rates calling the UK economy conditions as “uninspiring” as Brexit related political uncertainty continued to weigh on businesses.
• The pound climbed against the US$ and was trading 0.32% up from yesterday following a report in Germany’s Handelsblatt that the EU might offer the UK a two-year transitional Brexit deal.
Currencies
US$1.1822/eur vs 1.1864/eur yesterday. Yen 111.91/$ vs 112.24/$. SAr 13.433/$ vs 13.474/$. $1.330/gbp vs $1.325/gbp. 0.784/aud vs 0.783/aud. CNY 6.584/$ vs 6.584/$.
Commodity News
Precious metals:
Gold US$1,297/oz vs US$1,296/oz yesterday
• Gold hit its first weekly gain in five as the metal rallied against a stuttering dollar as investors wait on key U.S. data on the potential interest rate rise at the close of 2017. The hesitation rose from details of the U.S. Federal Open Market Committee meeting suggesting the central bank was concerned over low inflation.
• Market participants will be looking forward to the release of additional U.S. data today for hints on market condition suitability for a further rate rise, building on yesterday’s release of growing U.S. producer prices and reduced unemployment figures.
• Investors also patiently await further details of President Trump’s proposed tax overhaul, despite growing political uncertainty surrounding the confidence in his ability to pass the bill.
• Political tensions with Iran will be elevated as President Donald Trump is expected to submit a more aggressive tactic to Iranian activities in the Middle East during his White House speech later today. The move also is at risk of complicating U.S. relations with European allies as the findings of internal discussions among his national security team against Iran’s nuclear deal will be revealed.
Gold ETFs 69.4moz vs US$71.1moz yesterday
Platinum US$938/oz vs US$937/oz yesterday
Palladium US$980/oz vs US$961/oz yesterday
Silver US$17.28/oz vs US$17.24/oz yesterday
Base metals:
Copper US$ 6,885/t vs US$6,838/t yesterday
Aluminium US$ 2,159/t vs US$2,140/t yesterday
Nickel US$ 11,525/t vs US$11,280/t yesterday
• Nickel Pig Iron demand and changes associated with Chinese domestic stainless steel continue to drive up nickel prices, which grew a further 0.8 percent. The rise follows China’s broad removal of environmentally inefficient mines and metal plants and commencing emissions restrictions which has removed sizeable domestic supply from an ever-tightening market.
• The one-month high of the metal will be met with stronger demand for imports, details of which will arise from China’s Communist party congress next week.
Zinc US$ 3,260/t vs US$3,238/t yesterday
Lead US$ 2,552/t vs US$2,560/t yesterday
Tin US$ 20,770/t vs US$20,800/t yesterday
Energy:
Oil US$56.8/bbl vs US$56.6/bbl yesterday
• Global coordinated efforts to maintain production limitations aimed at alleviating the vast supply glut will effectively place the oil market into balance in 2018. The International Energy Agency foresee global demand for crude growing by 1.6 million barrels per day (bpd) across 2017 before reducing to 1.4 mllion bpd in 2018.
Natural Gas US$2.997/mmbtu vs US$2.906/mmbtu yesterday
Uranium US$20.50/lb vs US$20.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$61.8/t vs US$57.4/t
• Despite ongoing advances in Chinese winter production cuts, iron ore imports for the world’s top steel producer rose to a record high. Arrivals rose to 103 million tonnes, gaining 11 percent year on year in September.
• Elevated nickel pig iron (NPI) charges have strongly driven up Chinese domestic stainless steel value, with prices for benchmark 304 stainless cold rolled coil rising 500 yuan per tonne to 15,300 – 15,800 yuan. The value hike follows the removal of 200-250 Kt NPI from the market as China’s largest NPI-only producer, Shangong Xinhai Technology, is ordered to halve production on November 15. to alleviate pollution levels. The growing price is a reflection of tightening market supply, with NPI prices and charges increasing similarly. This growth is also impacting nickel prices, growing 3.1 percent across the previous two sessions.
Chinese steel rebar 25mm US$634.2/t vs US$634.3/t
• Asian steel markets remain steady amid further details from Kobe Steel’s data fabrication scandal. Supply and demand fundamentals remain unchanged, as the market waits to see how the company will manage the fallout of the revelations. Despite concerns over the forged product specifications, there is no indication that purchasers of Kobelco steel products have made any changes to orders or cancelled shipments.
• Data underpinning the fabrication arose from a series of self-inspections and quality audits for a series of contracts. The major Japanese steel producer remain adamant the steel power shipments are ‘high-quality’ and will have minimal impact on end-product performance. The automotive industry is one of the largest end-use sectors for the steel, and it remains unclear if results of ongoing safety checks will results in any large-scale vehicle recalls by any automakers.
• Data falsification now extends to steel wire products, on top of the already-announced fabrications for aluminum, copper and iron powder products.
Thermal coal (1st year forward cif ARA) US$83.8/t vs US$82.0/t
Premium hard coking coal Aus fob US$182.3/t vs US$182.8/t
Other:
Tungsten APT European US$280-295/mtu vs US$290-305/mtu
Company News
Anglo Asian Mining* (LON:AAZ) 33p, Mkt Cap £38m – New Ugur mine helps to ramp up gold production in Q3. On course for 64,000 to 72,000oz of gold equivalent in FY17
• Gold equivalent production climbed 10.8%qoq to 17.7koz (Q2/17: 16.0koz) led by the processing of high grade ore from the new Ugur gold mine.
• Gold production rose to 14.5koz (Q2/17: 12.1koz) with 12.2koz in dore from heap leach and tank leaching operations as well as 2.2koz from flotation.
• Copper production totalled 550t (Q2/17: 716t) with 385t from flotation and 165t from the SART plant.
• Year to date gold equivalent production amounted to 48.3koz (YTDQ3/16: 54.9koz) with management reiterating full year production guidance at 64.0-72.0koz.
• The Ugur open pit supplied 57.2kt of ore grading 3.34g/t accounting for around 1/3rd of the tonnage processed during the quarter as this is being blended with lower grade material ahead of the plant.
• Processing of Ugur oxide material helped to improve treated grades (2.04g/t v 1.77g/t in Q2/17) as well gold recoveries (63% and 82% when gold from flotation is included v 45% and 75%, respectively, in Q2/17) at the agitation leaching plant during the quarter.
• Gold bullion sales totalled 9.3koz at an average price of $1,286/oz (Q2/17: 7.4koz at $1,258/oz).
• Copper concentrate sales totalled 2.9kt generating $5.5m in sales proceeds (excluding PSA) (Q2/17: 3.2kt for $6.1m).
• Net debt came down to $25.2m as of Q3/17 v $29.0m as of Q2/17.
Conclusion: Production rates ramped up in Q3/17 with high grade and easy to process Ugur ore lifting production from the agitation leach plant by nearly 60%qoq.
The start of mining at Ugur in September enabled 12.2koz of gold and 4.4koz of silver in dore to be produced through the quarter with 6.8koz of gold and 3.2koz of silver poured in in September.
With mining operations set to accelerate at Ugur trhough Q4/17, the Company looks set to reach the guided 64.0-72.0koz GE target for the year.
*SP Angel act as Nomad and Broker to Anglo Asian Mining
BlueJay Mining* (LON:JAY) 17p, Mkt Cap £131m – Change of project name to Dundas and appointment of consultants to advance project to production
STRONG BUY
Target Price 24p
• BlueJay Mining are working towards the start of ilmenite production from the Dundas (formerly Pituffik) project in Greenland.
• Management have elected to call the project ‘Dundas’ which is the name of the Greenland subsidiary and should make life a little less confusing locally.
• The company has also appointed SRK Consulting to update the resource and prepare the mining schedule and assess water management.
• IHC Robbins are appointed to complete the process plant engineering and design study which should be relatively simple but may have some interesting characteristics due to its instillation in Greenland and need to winter in some cold weather.
• Royal IHC, who have been involved with the project for at least two years have been appointed to finalise a dredging study with a final draft expected in November.
• Amec Foster Wheeler Americas are to undertake the infrastructure and services part of the study. This is the really interesting and we feel sure there should be some elegant and relatively simple engineering solutions to ship loading, concentrate storage, dewatering etc…
• The final feasibility study report is expected in Q1 next year and the company expects the last part of the exploitation license to be approved in the first half next year.
• If this is done then the company should be able to start production next year, probably dry mining to start but maybe using a small Royal IHC dredge in the shallow marine environment to feed an onshore plant.
• BlueJay presented the ‘Dundas’ project to the ilmenite industry and its peers at the recent Titanium Summit in Spain on 3-5 October. We have heard positive feedback from the conference on the presentation though some questions on logistics remain to be answered by the engineering studies.
• https://www.titanium.gl/documents/investor-presentation/Bluejay%20TiO2%20World%20Summit%2010.10.17.pdf
Conclusion: BlueJay is moving ahead fast. Concentrate production and shipments were ahead of expectations this year and the project looks set to move into an initial production phase in next year using scrapers or excavators and trucks. This should set the company to ramp up production further by dredging though the extra tonnage is likely to warrant a larger process plant.
The key characteristics which make the ‘Dundas’ project are the unusually high and consistent grade, particularly low impurity levels and relatively simple mining and process plant required. We continue to recommend the stock as the team progress with reducing the risks to production.
*SP Angel act as nomad and broker to BlueJay Mining. An SP Angel mining analyst has visited the Dundas (formerly Pituffik) ilmenite sands project in Greenland.
Goldplat (LON:GDP) 5.9p, Mkt cap £9.8m – Exploration at Anumso
• Goldplat draws attention to a report on the progress of exploration at its Anumso gold prospect in Ghana, which is located approximately 15km west of Newmont Mining’s Akyem mine and is reported to be in a similar geological setting.
• The work was undertaken and announced by Ashanti Gold Corp, (not to be confused with the more widely known major mining company, Anglogold Ashanti), which has the right to earn a 75% interest in the project by spending US$3m on exploration over a period of 2.5 years.
• A total of around 1200 exploration soil geochemical samples recovered at 20m intervals along lines spaced 200m apart and extending over 10.3km of strike exposure have identified “multiple parallel mineralised zones which are in aggregate up to 480m in wide in certain areas of the mineralisation on the Project”.
• Ashanti Gold will use the results of the survey “to guide further exploration on the Project by trenching and drilling” and also comments that “the most prolific portion of mineralised stratigraphy was not tested with drill holes historically and the strongest gold in soil results on several sample lines have never been tested in the subsurface … with any drill holes.”
• In addition to the geochemical results, Ashanti Gold has conducted some preliminary metallurgical test work on oxidised and unoxidised samples from Anumso. The results for grindability show that the oxidised material is “soft to moderately hard”. Initial tests on recovery indicate “that up to 72.9% of the gold may be recoverable by gravity methods. Further work to optimise process conditions and evaluate variability is planned by Ashanti.”
Conclusion: The early stage exploration results from Ashanti Gold have identified possible targets for follow up exploration in previously untested areas while preliminary metallurgical work indicates the possibility of a portion of the mineralisation being amenable to recovery by gravity methods. We imagine that these results will encourage Ashanti Gold to carry on with the earn-in at Anumso and look forward to further news as the exploration programme proceeds.