BlueJay Mining* (LON:JAY) STRONG BUY - Target Price 24p – Graham Marshall retires from BlueJay board
Orosur Mining (LON:OMI) 15.9 pence, Mkt Cap £18.7m – Q1 results and start of resource definition drilling
Strategic Minerals* (LON:SML) 2.4p, Mkt Cap £30.1m – Acquisition of Australian copper project
The IMF highlighted risks to growth in coming years amid weak inflation and increasing geopolitical risks.
• “Near-term risks are broadly balanced, but there is no room for complacency because medium-term economic risks are tilted to the downside and geopolitical tensions are rising,” the International Monetary and Financial Committee, the top advisory panel at the IMF, said over the weekend.
• On a brighter side of things the IMFC suggested the global outlook is strengthening with increasing investment, industrial output and confidence.
Cobalt – China shutting out Western Auto makers as battle for critical raw materials hot up
• News in the FT today states that VW has struggled to find any takers for its cobalt tender issued last month.
• The lack of interest in the tender should be seen as a wake-up call for VW and other Western Auto manufacturers who are being out maneuvered by China Inc. in terms of raw materials supply.
• While the lack of interest in the tender is being blamed on the prices being offered we also suspect that VW will struggle to fill it’s tender at higher price levels as China has grabbed so much cobalt supply for its own automotive and battery industries.
• We also have to wonder if VW is conscious and aware of the child labour issues which surround certain sources of cobalt supply in the DRC.
Antimony $8,150/t - 8,050/t – prices poised to rise as automakers look to add power to new electric vehicles
• Automakers are increasingly focused on the power to weight ratio of new electric vehicles as they look to extend the range and power of battery packs
• Increasing power brings new safety issues requiring increasing use of Rare Earths Elements and Antimony as manufacturers look to protect vehicles and passengers from the heat generated in battery packs and other components.
• Antimony is critical as a fire retardant and said to be around 150x more scares than cobalt by way of comparison.
Happy Diwali, Deepawali – Hindu Festival of Lights
• Traditionally Indians celebrate this ancient Hindu harvest festival on the 15th day of Kartik
• The festival commemorates the fight of good over evil and the triumph of light over darkness.
• The festival is also accompanied by a certain amount of gold buying
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 – Janet Yellen expressed her beliefs that a slowdown in US consumer inflation is temporary with the gauge to soon accelerate, a forecast supported by the ECB Mario Draghi and the BoE Mark Carney at the G30 meeting this weekend.
• The Fed head noted that “the ongoing strength of the economy will warrant gradual increase” in the policy rate.
• On a separate note, the US Treasury Secretary Steven Mnuchin is hopeful the tax bill will ready and approved by Congress by “the beginning of December”.
• Mnuchin expects the Sentate would soon approve a budget with sets the parameters for a tax bill and establioshes procedural framework to pass it with a simple majority, FT reports.
China – The economy is forecast to grow 7% in H2/17 accelerating from 6.9% recorded in H1/17, according to the nation’s central bank governor.
• This contrasts with market estimates for growth to slow down through Q3 and Q4.
• The latest money supply estimates showed new credit exceeded projections in September as the government allows lending to accelerate fuelling growth.
• M2 Money Supply (%yoy): 9.2 v 8.9 in August and 8.9 forecast.
• Aggregate Financing (bn CNY): 1,820 v 1,480 in August and 1,573 forecast.
• CPI (%yoy): 1.6 v 1.8 in August and 1.6 forecast.
Spain – Catalonia leader Calres Puigdemont rejected calls from Madrid to clarify the regional government position on the disputed independent referendum saying the declaration remained “in suspension” and looking for a dialogue with Prime Minister Mariano Rajoy.
• The official declaration of independence by Catalonia would have given the central government right to use of Article 155 of the constitution which involves a disbandment of the government and call fresh regional elections.
• Central government rejected any calls for dialogue as long as the Catalan government insists on its independence.
Currencies
US$1.1790/eur vs 1.1822/eur yesterday. Yen 111.81/$ vs 111.91/$. SAr 13.319/$ vs 13.433/$. $1.330/gbp vs $1.330/gbp.
0.788/aud vs 0.784/aud. CNY 6.590/$ vs 6.584/$.
Commodity News
Precious metals:
Gold US$1,304/oz vs US$1,297/oz yesterday
Gold ETFs 69.2moz vs US$69.4moz yesterday
Platinum US$945/oz vs US$938/oz yesterday
Palladium US$1,006/oz vs US$980/oz yesterday - Palladium tops $1,000 for first time since 2001 led by robust demand for catolytic converters in gasoline engines.
• Palladium price exceeded platinum last month for the first time in 16 years as the metal holds the spot of the best performing precious metal (+47.5% YTD v +4.5% for platinum) this year.
• Global demand for the metal in catalytic converters used by gasoline powered vehicles has grown due to momentum created by expectations of a supply deficit amid rising demand
• Expected to remain in deficit although will begin to ease over the long term
Silver US$17.41/oz vs US$17.28/oz yesterday
Base metals:
Copper US$ 7,065/t vs US$6,885/t yesterday – Prices passed the $7,000/t mark trading at the highest in three years on improving manufacturing profits and stronger credit supply in China.
Aluminium US$ 2,153/t vs US$2,159/t yesterday
Nickel US$ 11,750/t vs US$11,525/t yesterday
Zinc US$ 3,275/t vs US$3,260/t yesterday
Lead US$ 2,571/t vs US$2,552/t yesterday
Tin US$ 20,750/t vs US$20,770/t yesterday
Energy:
Oil US$57.9/bbl vs US$56.8/bbl yesterday
Natural Gas US$2.969/mmbtu vs US$2.997/mmbtu yesterday
Uranium US$20.45/lb vs US$20.50/lb yesterday
Lithium - Could salt replace lithium ion batteries?
• New research at Stanford University has demonstrated potential of sodium ion batteries to displace lithium ion which requires rarer and more difficult to obtain materials
• Energy efficiency increased to 87% but at less than 80% the cost of lithium ion batteries with equivalent storage capacity
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$62.9/t vs US$61.8/t
Chinese steel rebar 25mm US$644.4/t vs US$634.2/t
Steel – Global steel demand is expected to moderate in 2018 “mainly due to slower growth in China, while in the rest of the world, steel demand will continue to maintain its current momentum”, according to the World Steel Association.
• “The lack of a strong growth engine to replace China and a long term decline in steel intensity due to technological and environmental factors will continue to weigh on steel demand in the future.”
Thermal coal (1st year forward cif ARA) US$84.6/t vs US$83.8/t - China urges utilities to sign supply deals with coal miners as soon as possible
• China's state planner encouraged utilities to sign long-term purchase contracts with coal producers for next year as early as they look to secure sufficient supplies for the winter as coal power plants ramps up inventory for the peak demand season.
• The new is helping to rally coal prices following increasing safety checks and robust imports allayed concerns of tight winter supplies
Premium hard coking coal Aus fob US$181.6/t vs US$182.3/t
Other:
Tungsten APT European US$280-285/mtu vs US$280-295/mtu
Company News
BlueJay Mining* (LON:JAY) 17.8p, Mkt Cap £136m – Graham Marshall retires from BlueJay board
STRONG BUY
Target Price 24p
• News today is that Graham Marshall is retiring from the board of BlueJay.
• Marshall has been with the company since Western Areas reversed its Finnish mineral assets into the company in 2013.
• He is currently General Manager of Western Areas Limited, the Australian Nickel producer and has more than 25 years of experience in the discovery and development of mineral assets, mainly in Western Australia.
• We suspect Graham is more than busy as General Manager at Western Areas as nickel prices start to ramp up in response to new demand growth for batteries for electric vehicles.
• BlueJay recently presented to the TiO2 Industry World Summit in Spain
• The presentation estimates the total ilmenite deposited at Moriusaq derived from the Steensby Land Sill Complex and dykes north of Moriusaq to be between 500-1,100mt with some 17Gt estimated in the sills prior to erosion and 10Gt of ilmenite still remaining in the sills.
• The Initial production zone has a high-grade resource of 7.9mt grading 14.2% ilmenite.
• A feasibility study is currently underway to evaluate the drowned beach target.
• The Deltaic deposits from the Interlak drainage area are seen as the major source of all mineralisation at the ‘Dundas’ (formerly Pituffik) project with the Interlak Delta appearing to present exceptional high-grade ilmenite in a relatively simple to mine environment. Management reckon this material may grade >15% though we would estimate the grade here may be very much higher from our site visit observations.
• A low-medium tonnage area at Moriusaq Bay is reported to contain average grades of +/-50% ilmenite with up to 90% in areas.
• Critically, concentrate material from the project has a consistent grain size and is seen as relatively clean and free from impurities which might prevent it’s sale such as radionuclides which are below 10ppm detection limits.
• The team have now completed the Bathymetry survey along some 30km of coastline to within 50m either side of the mid-tide line. A large volume of very-high grade ilmenite is seen in <10m of water.
• Presentation link: https://www.titanium.gl/documents/investor-presentation/Bluejay%20TiO2%20World%20Summit%2010.10.17.pdf
Conclusion: BlueJay is moving towards being proven to be the world’s most significant titanium mineral sands discovery this decade.
*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.
Orosur Mining (LON:OMI) 15.9 pence, Mkt Cap £18.7m – Q1 results and start of resource definition drilling
• Orosur Mining reports production of 8626 oz of gold at a cash operating cost of US$901/oz and all in sustaining costs of US$1348/oz for the three months ending 31st August (2016 - 9950 oz at US$693/oz cash and US$989/oz AISC). The company comments that these “results exceeded expectations” and place the company in a strong position to meet its guidance for full year production for FY 2018 is 30-35,000oz at an operating cash cost of US$800-900/oz.
• Operations at the San Gregorio mine in Uruguay “continue to focus on expanding its resource base … from both underground and surface operations, with the aim of increasing its mine life and increasing production by utilising spare capacity at the San Gregorio plant.”
• Commenting on the results, CEO, Ignacio Salazar, highlighted that “Q1 2018 marks the 20th consecutive quarter of meeting internal production and cash operating cost guidance”.
• The move to expand the near-mine resource base includes a US$1.6m exploration effort during the quarter which, in part, is attributed to the increased operating cost levels.
• Continuing near mine exploration drilling is continuing with an intersection of 2.6m at an average grade of 5.8g/t gold reported today from a depth of 107.65m in hole VADD17-011 on the potential new underground mining area designated Veta A. Elsewhere in Uruguay, “Brownfield exploration is currently centred on the Santa Teresa-Polvorin area where the Muro deposit was discovered and mined out during the quarter”.
• The company has commenced a 15,000m resource definition drilling campaign at its Anza gold project in the mid-Cauca gold belt of Colombia. Initial results of this campaign are expected to be announced before the end of February 2018.
• The company reports cash flow from operations, before working capital, of US$1.5m (Q1 2017 – US$ 4.8m), a net after tax loss for the quarter of US$0.3m (Q1 2017 – profit of US$2.8m) and a 31st August cash balance of US$4.5m (US$3.4m at 31st May 2017).
Conclusion: The company reports that it has made a good start to meeting its 2018 production and cost guidance from San Gregorio. We look forward to the results of the definition drilling programme at Anza in the mid-Cauca belt of Colombia when they become available early next year.
Strategic Minerals* (LON:SML) 2.4p, Mkt Cap £30.1m – Acquisition of Australian copper project
• Strategic Minerals reports that, subject to due diligence, it has entered into an agreement to acquire the Leigh Creek Copper (LCCM) project located in South Australia.
• The project, which comprises three mining leases with a JORC compliant resource of 3.6mt at an average grade of 0.69% copper “forms the base of the project” aims to treat copper oxide material to produce a 70-75% copper product over an initial 3 years project life at a capital cost to restart the operation of approximately A$1.8m.
• A 2012 feasibility study “compiled geology, resources, mining, processing and marketing relating to the Project … treating oxide copper initially from two open pits (Lorna Doone and Lynda); treating the ore via a heap leach process to recover the copper into a copper sulphate solution; and extracting the copper into a copper cement via two existing Kennecott cones” suggests that much of the detailed technical analysis to restart the mine is already in place and, subject to verification as part of the due diligence, this should expedite the move back into production.
• The project, which has been held under care and maintenance since closure under a previous operator in early 2012, is being acquired from Reliance Mining (RML). Strategic Minerals “is to supply, within seven days of signing the Term Sheet, a AUD 50,000, 8-month, nil interest loan to LCCM.”
• “On completion of the due diligence, to SML's sole satisfaction, RMA and SML will enter the SPOA for the purchase of all shares in LCCM. Under the first phase, SML is required to provide LCCM a AUD 500,000, six-month, nil interest loan.” The loan is primarily to fund work aimed at recommissioning production from Leigh Creek, including the development of a detailed mine plan, reactivating one of the ore heaps and auger drilling of the existing ore heaps “to identify high grade material”.
• After the initial work is completed, SML will pay a further A$1m to RMA comprising A$250,000 in cash and the balance in shares and a further cash injection of A$1m directly into LCCM for project funding. RMA retains a royalty of 20% on sales to a maximum of A$3.65m.
• Commenting on the proposed acquisition, Strategic Minerals’ Managing Director, John Peters, pointed out that acquisition of the Leigh Creek mine “is a consistent step in the Company's growth strategy of acquiring and developing projects in minerals/metals that we expect to have demand/price upside over the next 3 to 5 years. The Project has near term production and cash flow potential, local product demand and excellent growth prospects, through further exploration or surrounding tenements.”
Conclusion: The proposed acquisition of Leigh Creek has the potential to provide near term cash flow from the reactivation of an existing heap-leach copper operation. The Australian location is consistent with the company’s existing spread of assets in the stable, advanced economies of US, UK and Australia. The possible near term cash generating capacity could, in due course, supplement the existing cash-flows from the Cobre operation in New Mexico which allows Strategic Minerals to fund its exploration of the CARE project in Western Australia and the Redmoor project in Cornwall without recourse to shareholders. We look forward to further details of Leigh Creek as the due diligence proceeds.