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Ecuador – may look to cut windfall taxes
• Ecuador’s new president Lenin Moreno is proposing to include a question about mining in a referendum to voters in Ecuador
• Part of the idea is to seek permission from community groups for mining aa well as the removal the windfall tax which is not used due it its onerous conditions.
• The Ecuadorean government claims that >$800m in new investment over the next four years is coming from the granting of 250 new concessions following 900 requests for licenses.
• SolGold and Lundin Mining are leading the charge into Ecuador with SolGold’s Cascabel discovery and Lundin taking on Fuerte del Norte from Kinross Gold
Phosphate and potash fertiliser supply to be affected as EU MEPs back stricter limits on Cadmium
• The European Parliament voted this week to a European Commission proposal to cut the level of cadmium allowed in fertilisers to 20mg/kg.
• The EU executive proposed that the new limits should be set at 60mg/kg, 40mg after three years and 20mg after 12 years for fertiliser products carrying the CE mark.
• As a concession to farmer, probably mainly French farmers, MEPs agreed producers need a longer transition before the introduction of the lower limits.
• Cadmium is carcinogenic, is linked to osteoporosis as well as kidney failure, heart disease and fertility issues
• Many EU nationals exceed recommended cadmium limits due to the use of fertilisers containing cadmium which may also be part of why EU fertility rates are falling
• Fertilisers are not subject to the same level of regulation s other mineral compounds – wonder why that is? And it is proposed that one lobby group that it should be subject to similar regulatory controls.
• It has taken time for the politicians to master support for these cadmium limits, due to aggressive opposition from the farmers who want cheaper fertilisers despite the dangers and health impact of elevated cadmium levels.
• While the move may not really change the major supply patterns it should lead to price differentials which better reflect the purity of products sold and should then encourage the development of purer fertilizer products.
• Apatite concentrates with a high level of Cd will have to pass a SX or similar step to extract the Cd, adding cost while Apatite concentrates with low Cd will not need such to go through this extra step reducing relative processing costs.
• Many older plants may not choose to invest in SX facilities, and instead source apatite from low-Cd areas sufficiently to come under the limit.
• The net cost of SX treatment adjusted for waste disposal and the possible sale of the more valuable recovered metals, may result in a 20-50 $/t price differentiation/cost when reducing cadmium down to the 40 mg level.
• The move is likely to favor imports from Russia while reducing the price of from North African products.
China’s Tianqi expands Australian lithium plant by $300m
• Investment will increase outlay in WA to more than $680 million making group one of states biggest mining related investors outside of iron ore
• Plant still under construction, expansion will double production of battery grade lithium to 48,000 tonnes a year
IEA says Southeast Asia will keep coal demand high
• International Energy Agency (IEA) says the need for cheap electricity will drive global demand for coal power generation through 2040 even as many countries retire coal projects
• Cheaper than natural gas and in many countries easier to pursue as they do not require capital intensive infrastructure associated with gas
Nickel falls as China cuts steel capacity
• Chinese nickel futures dropped on Friday in line with steel prices as steps up efforts to cut industrial production to combat smog hitting demand for nickel – country is worlds biggest consumer of nickel
• Government said it had met its target for cutting capacity this year, with further curbs expected in winter
Dow Jones Industrials +0.31% at 23,401
Nikkei 225 +1.24% at 22,008
HK Hang Seng +0.67% at 28,391
Shanghai Composite +0.27% at 3,417
FTSE 350 Mining -1.86% at 17,142
AIM Basic Resources -0.71% at 2,515
Economics
US – US equities finished higher yesterday on the back of better than expected results from top tech companies including Alphabet, Microsoft and Intel.
• Amazon has also beat analyst estimates as well as delivering positive holiday sales outlook seeing shares climbing more than 6% in after hours trading on Thursday.
• The US$ surged more than 1% yesterday and continued to gain further this morning as the US House Republicans passed a budget resolution bringing tax cuts regulation a step closer.
• Higher US$ led losses in the commodities markets as well as saw emerging market currencies lower since July.
China – Industrial profits climb at the strongest pace since 2011 on the back of faster growth in producer prices, improving output and sales.
• Industrial Profits: 27.7%yoy v 24.0%yoy in August.
ECB – The majority of Governing Council voted to cut QE in half to a €30bn per month rate, down from €60bn, starting from January and extending the programme to include first nine months of next year.
• The programme is conditional on the pace of Eurozone inflation with a potential further extension to purchases pas Sep/18 should growth in consumer prices disappoint.
• Proceeds from maturing debt will be reinvested for an “extended period of time after the end of its net asset purchases
• The ECB said interest rates will be left “at the present levels for an extended period of time, and well past the horizon of our net asset purchases”.
• The euro is down 1.5% against the US$ over the last two days as the US strengthened over tax regulation related news and as Draghi announced extension to the QE programme.
Japan – Inflation held steady in September highlighting challenges the BoJ is faced with trying to accelerate consumer prices growth.
• Recently the BoJ has been considering to cut its inflation forecasts again.
• Headline CPI: 0.7%yoy v 0.7%yoy in August and 0.7%yoy forecast.
• CPI ex food and energy: 0.2%yoy v 0.2% in August and 0.2%yoy forecast.
Spain – The central government is preparing to impose direct rule in Catalonia on Friday with the upper house of parliament currently considering the government’s application of Article 155 oft eh constitution.
• A vote on the proposal is expected by 1200 GMT.
• Earlier Catalan President Puigdemont ruled out a snap regional election.
Australia – The high court ruled that Deputy PM Barnaby Joyce can not hold his seat in the parliament as he held a dual citizenship with New Zealand at the time of elections violating constitutional law.
• That in turn led the Liberal-National coalition government to lose its one-seat majority in the lower house of parliament.
• The A$ fell 0.5% against the US$ on the news this morning.
Commodity News
Precious metals:
Gold US$1,265/oz vs US$1,280/oz yesterday
• Euro strength faded as the European Central Bank extended its bond purchases while subsequently reducing the likelihood of potential interest rate hike in the new year, as the currency sank to a three-month low. The Euro lost 1% against the dollar on the back of the announcement, while across the Atlantic the U.S. House of Representatives voiced positive developments in the proposed Trump deep tax-cuts.
• Strong forecasts for growing interest rates throughout 2018, enhanced with the growing prospect of a hawkish John Taylor as the next Fed chair, has investor sentiment for the metal flatlining as a consequence of potential dollar support. The Reuter poll of 34 analysts and traders suggested greenback buoyancy and unwavering equity growth could test gold at $1,260 per oz., while silver forecasts were cut again on poor outlook for the dual investment vehicle and electrical industrial metal, falling expectations by $0.40 to $17.90 an ounce.
Gold ETFs 69.5moz vs US$69.6moz yesterday
Platinum US$914/oz vs US$923/oz yesterday
Palladium US$965/oz vs US$968/oz yesterday
• After surging 43 percent this year, with little indication of a slowing rally, the precious metal value is attracting more than investor interest in Chicago. A police locale released a bulletin this week alerting residents of growing catalytic converter thefts, as swelling prices are attracting commodity thieves to plunder cars for the valuable metal.
Silver US$16.70/oz vs US$16.98/oz yesterday
Base metals:
Copper US$ 6,895/t vs US$6,995/t yesterday
Aluminium US$ 2,160/t vs US$2,203/t yesterday
• Support for the metal diminished after three-month LME aluminium prices peaked for a five-year-plus record overnight, falling 0.5 percent. Investors forecast a tightening market as Chinese producers restrict output heading into winter, while inventories continue to tumble with London warehouses falling to nine-year lows. Total stocks of aluminium across LME-registered warehouses dropped an additional 3,975 tonnes to 1.2 million tonnes which represents the lowest levels since September 2008.
Nickel US$ 11,495/t vs US$11,875/t yesterday
• Nickel futures contracted in line with falling steel prices as Chinese efforts to significantly improve air quality through sweeping production cuts eat into industrial demand for the metal. The world’s biggest consumer of nickel, which can make up 35 percent of stainless steel, is expecting to restrict steel output between 30-50 percent during the winter ‘heating’ period associated with the heaviest smog levels. Efforts to combat the smog have been effective, with China’s government announcing it had met its target for cutting steel capacity over 2017, ahead of the imminent additional winter limitations.
Zinc US$ 3,170/t vs US$3,217/t yesterday
Lead US$ 2,447/t vs US$2,486/t yesterday
Tin US$ 19,770/t vs US$19,825/t yesterday
Energy:
Oil US$59.3/bbl vs US$58.3/bbl yesterday
• Valued at more than US$2 trillion, the national oil giant Saudi Aramco’s initial public offering remains on track for 2018. The public sale of approximately 5 percent of Aramco focuses on Crown Prince Mohammad bin Salman’s reformation plan to diversify the Saudi economy beyond oil.
Natural Gas US$2.879/mmbtu vs US$2.924/mmbtu yesterday
Uranium US$20.20/lb vs US$20.20/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$59.2/t vs US$62.1/t
Chinese steel rebar 25mm US$626.8/t vs US$632.8/t
• The world’s biggest steel producing country reined in its steel capacity throughout 2017, meeting the targeted 50 million tonnes. Despite the industrial successes, the Ministry of Industry and Information Technology (MIIT) will need to commit further efforts to curb production to meet air quality objectives, reducing annual crude steel capacity by supplementary 100-150 million tonnes over the next three to five years.
• Despite elevated nickel contract on the London Metal Exchange and domestic nickel pig iron prices, stainless steel prices experienced lackluster growth. Instead higher supply and muted demand had a stronger influence on price, with steel mills capitalizing on generous profit margins ahead of winter production restrictions to maintain steady supply to the spot market.
Thermal coal (1st year forward cif ARA) US$84.3/t vs US$85.2/t
Premium hard coking coal Aus fob US$177.9/t vs US$177.9/t
Other:
Tungsten APT European US$280-285/mtu vs US$280-285/mtu last week
Company News
Bushveld Minerals (LON:BMN) 9.5p, mkt cap £77m – Restatement of JORC tin resources in CPR for AfriTin listing
BUY – Target price 14p
• Bushveld Minerals report today restated JORC resource figures for the Groenfontein and Zaaiplaats tin deposits in South Africa.
• The cut-off grade for the new JORC mineral resource estimate at the Zaaiplaats deposit has been revised to 0.1% tin from 0.07% Sn. This has been done to align the cut-off grade with the 0.1% cut-off at Groenfontein.
• The new inferred JORC resource at Zaaiplaats is 6.216mt grading 0.124% with the indicated resource now 0.017mt grading 0.136% giving a total new mineral resources estimate of 6.233mt grading 0.124% tin, with a total tin content of 7,753t.
• The ‘JORC 2012’ reported total tonnage of contained tin at the Zaaiplaats is revised lower to 7,753t from 12,452t as a result of the higher cut-off grade though none of the other parameters of the JORC resource.
• Geology: According to an abstract by Luke Longridge, Exploration Programme Manager, at the VM Investment Company, The granite-hosted Groenfontein and Zaaiplaats Tin Deposits are found towards the upper contact of late-stage, fractionated and hydrothermally altered granite pluton associated with the 2056 Ma Bushveld Complex, South Africa.
• They are suggested to have been formed as the result of fractional crystallisation of crustally-derived granites. Cassiterite mineralisation in pipe-like bodies, sub-horizontal lenticular bodies and as a sub-horizontal disseminated lower-grade bodies within both granites.
• Historical mining focused on high-grade (>1% Sn) mineralisation associated with pipe-like bodies and horizontal lenticular bodies, but recent exploration has focused on lower-grade (but still economically viable) disseminated cassiterite mineralisation.
• According to the fractional crystallisation model, disseminated mineralisation is the result of in-situ crystallisation of evolved, tin-rich fluids that were unable to separate from the solid crystals and escape, whilst higher-grade pipes formed from escaped, trapped, tin-rich fluids.
• Recent exploration has focused on lower-grade (0.1-0.5% Sn) disseminated mineralisation within the granites.
• The existence and grade of this disseminated mineralisation is controlled by the degree of separation of fractionated fluids from the crystal mush. Disseminated tin mineralisation is known from granite-hosted tin deposits elsewhere in the world (e.g. the Banke Complex, Nigeria and in late G4 granites, Rwanda).
• However, the vast majority of tin deposits are hosted in narrow, rich veins. Here we suggest that larger, lower-grade tin deposits in the roof zones of plutons may be present in many more plutons, and that these deposits could be easily targeted through systematic exploration and geochemical sampling, as demonstrated by case studies at Zaaiplaats and Groenfontein.
Conclusion: The restatement of the JORC resource for Groenfontein and Zaaiplaats in relation to the raising of the cut-off grade does not lower our valuation for Bushveld.
*An SP Angel Mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Kibo Mining (LON:KIBO) 5.3p, Mkt cap £21m - ESIA Certificates Awarded in Tanzania
• Kibo Mining has announced that the Tanzanian Government has awarded Environmental and Social Impact Assessment (ESIA) certificates to both the Mbeya Coal Project and to the Mbeya Power Generation Project in south west Tanzania.
• The award of the certificates, described by the company as the "latest milestone in the MCPP's development cycle" follows the submission of the formal 1000 page application document in February.
• The company points out that it has "already successfully completed a Power Pre-Feasibility Study, a Mining Pre-Feasibility Study, a Definitive Power Feasibility Study, a Definitive Mining Feasibility Study, an Independent Integrated Financial Model and an Integrated Bankable Feasibility Study."
• Welcoming what he described as "terrific news" for the project, CEO, Louis Coetzee, noted that "we have had several very productive meetings with the newly established Ministry of Energy over the past two weeks which confirmed our view that the Memorandum of Understanding ("MOU") on the Power Purchase Agreement ("PPA") is progressing well and will be finalised shortly."
• Mr Coetzee points to a 36-months lead time to production following the receipt of the PPA.
• Conclusion: Despite the widely publicised issues within the gold mining sector in Tanzania, Kibo Mining continues to buid a constructive relationship with the Government and to progress its Mbeya project, which is aimed at delivering a significant increase in power supply to this electricity deprived region.
Karelian Diamonds (KDR LN) 0.5p, £2.9m - Additional exploration licence in Finland
• Karelian Diamonds reports that the Finnish Mining Authority has granted it a further exploration license covering more than 600 hectares in the Kuhmo region.
• The license, which is valid for a period of four years, "may contain the source" of the green diamond whose discovery was announced in January this year.
Conclusion: The additional licence area provides the company with further scope to identify the hard-rock source of the earlier diamond discovery and we look forward to news of progress on the subsequent exploration as the programme proceeds.