Beowulf Mining (LON:BEM) – Beowulf appoints a Swede as Chairman
Chaarat Gold (LON:lCGH) – Dekel Golan steps down as CEO of Chaarat Gold
Chatham Rock Phosphate (CRP NZ) – Chatham Rock planning to mine ultra-low cadmium phosphate
Metminco* (LON:MNC) – Miraflores Feasibility study and maiden ore reserve
Ortac Resources* (LON:OTC) – Additional funding and board restructuring
RedT (LON:RED) – Vanadium battery storage update
Strategic Minerals* (LON:SML) – Oversubscribed placing raises £1.05m alongside placing of new shares from employee options exercise
Thor Mining (LON:THR) – Positive ore-sorting trials at Molyhil
Weatherly International (LON:WTI) – Rescheduling of repayments to Orion
121 Mining Investment Conference London – 27 th - 28th November, 8 Fenchurch Place
• The 121 event is SOLD OUT with 70 mining companies attending and presenting
• > 277 institutional investors are already registered
• If you are an FCA registered institutional investor and would like to join then please register for a free pass and conference agenda:
• https://www.weare121.com/121mininginvestment-london/registration/register-investor/
Dow Jones Industrials +0.14% at 23,434
Nikkei 225 +0.01% at 22,012
HK Hang Seng -0.21% at 28,378
Shanghai Composite -0.77% at 3,390
FTSE 350 Mining -1.08% at 17,031
AIM Basic Resources -0.46% at 2,503
Economics
US – Friday GDP numbers came ahead of expectations providing further positive momentum to local equity markets and the US$.Numbers suggest a smaller negative effect of hurricane related damages in parts of Texas and Florida than initially expected.
• At the same time, one of the major drivers of a pick up in headline growth rates was a stronger built up in inventories which was likely hurricane related.
• Consumer spending growth slowed, although, was quick to recover by the end of the quarter on the back of replacement for damaged goods demand.
• The economy need to post a 2.2% advance in the final quarter of the year to take FY17 GDP growth rate to the Fed’s target of 2.4%, Bloomberg estimates.
• Inflation measures showed little pressure on consumer prices with core PCE index at 1.4% over the last four quarters compared to the 1.5% recorded in the previous quarter and marking the slowest pace since Q4/15.
• Trump said to name the next Fed Chairman by Friday.
• GDP: 3.0%qoq (annualised) in Q3/17 v 3.1% in Q2/17 and 2.6% forecast.
• Personal Consumption: 2.4%qoq in Q3/17 v 3.3% in Q2/17 and 2.1% forecast.
Germany – Retail sales are coming in strong in September on the back of low borrowing costs and record low unemployment rates.
• Retail sales (%yoy): 4.1 v 3.0 in August and 3.0 forecast.
UK – The BoE is expected to lift rates this week for the first time in a decade, according to a survey by Thomson Reuters.
• The Bank is also due to release its economic growth and inflation forecasts.
• The pound is up 0.4% against the US$ this morning ahead of the Thursday decision.
Spain – The central government displaced Catalan President Carles Puigdemont and his government and called for regional elections for 21 December.
• On Sunday, hundreds of thousands of supporters of a united Spain are reported to have come out on streets of Barcelona with estimates ranging from 300,000 to 1mln quoted by municipal police and the central government representatives, respectively.
• The Interior Ministry named new chief of the Catalan reginal police force, while Spanish prosecutors are planning to press charges of rebellion against Puigdemont.
• Pro-independence supporters called for civil servants to ignore instructions by the central government raising chances of a potential local government staff strike.
• Local newspaper La Vanguardia reported on Sunday that the Catalan cabinet had left their offices which were taken under control of the central government.
• On a positive note, national GDP held up well in Q3/17 running at a robust 3.1%yoy pace, in line with the previous quarter in Q2/17.
• Nevertheless, the conflict in the region accounting for roughly 20% of the nation’s output is expected to cost 0.3pp in growth next year with central government GDP estimating the economy to grow at 2.3%, down from 2.6% previously estimated.
• The euro is little changed this morning hovering around 1.164, the lowest level since mid-July, as Catalan independence standoff coincided with positive economic and earnings data in the US.
Currencies
US$1.1626/eur vs 1.1618/eur yesterday. Yen 113.69/$ vs 114.26/$. SAr 14.088/$ vs 14.333/$.
$1.316/gbp vs $1.311/gbp. 0.768/aud vs 0.764/aud. CNY 6.648/$ vs 6.656/$.
Commodity News
LME to develop metal contracts to support battery materials markets
• The London Metal Exchange aims to build a new battery metals consortium, recognizing leading index providers to develop a futures market for battery materials. The expansion into the battery metals offering looks to deliver new contracts on lithium and chemical contracts for cobalt and nickel sulphate, in addition to current copper, nickel, aluminium and cobalt contracts. LME CEO Matthew Chamberlain hopes that the delivery plan for 2018 will ‘bring price risk management’ for participants in the rapidly growing battery and electric vehicle industries.
• The move follows expansion of contracts in more traditional sectors, with development plans to introduce regional cash-settled aluminium premium contracts, regional hot-rolled coil (HRC) contracts in the ferrous space, and broad precious metals via gold and silver options, platinum and palladium futures.
Precious metals:
Gold US$1,270/oz vs US$1,265/oz last week
• Euro posted its worst week of 2017 as developing civil unrest in Spain’s Catalonia and dovish European Central Bank announcements boosted dollar index value, maintaining gold prices under pressure.
• A cautious Bank of Canada held its key overnight lending rate steady at 1% was swiftly followed by impressive third-quarter US gross domestic product growth figures. Data released on Friday highlighted stronger-than-expected annualised rate of 3.0% compared to the forecast 2.6% for the three months ended September. The accelerating economic growth only serves to support and remains consistent with the highly anticipated Fed rate hike in December, with results of CME Group’s FedWatch tool indicate 97.2% of market participants expect a rate rise to between 1.25% and 1.5%.
• US economic growth support may be strongly emphasized this week as many tier 1 central bank decisions, purchasing managers’ indices and other data cumulating non-farm payroll releases are expected.
• Hedge funds and money managers cut their net long positions in COMEX gold contracts for the sixth consecutive week, while the physical gold market remained quiet as the key festival season demand in India cooled in the world’s second largest consumer.
Gold ETFs 69.4moz vs US$69.5moz last week
Platinum US$916/oz vs US$914/oz last week
Palladium US$974/oz vsUS$965/oz last week
Silver US$16.76/oz vs US$16.70/oz last week
Base metals:
Copper US$ 6,854/t vs US$6,895/t last week
• Buoyant dollar provides strong resistance to copper prices, as the metal contracts further from recently breaking through the $7,000 per tonne level. Despite elevated volumes of metal sales at the end of last week, hedge funds and money managers are raising their net long positions in copper to six-week highs by increasing 1,026 contracts to a total 108,739.
• Annual copper demand is forecast to increase a further 232,000 tonnes by 2025 as China identifies the need for industrial sector upgrading to “smart” factories, green manufacturing and transport.
• Positive LME sentiment for copper improves on the metals fundamental story as investors appreciate its crucial role in the electrical economy will not be matched by waning global production. Ivan Arriagada, CEO of Chilean miner Antofagasta, highlights the additional requirement for up to 1-1.2 million tonnes copper to match the growth in hybrid and electrical cars by 2025. Declining grades across projects has required elevated levels of sustaining capital to compensate, which are only being met after three to four years of stringent capital allocation.
Aluminium US$ 2,164/t vs US$2,160/t last week
Nickel US$ 11,560/t vs US$11,495/t last week
• “Supportive macroeconomic backdrop and market tightening driven by Chinese nickel pig iron (NPI) cuts in Shandong province during the winter heating season” have driven Goldman Sachs to significantly raise its forecast for the metal to $12,500 per tonne in three months and $12,000 in six months, from $9,000 for both forecasts. These elevated forecasts reflect positivity in the medium-term price as the bank identifies sufficient inventory to cover demand from electric vehicles till 2020, but a requirement to improve supply moving forward.
Zinc US$ 3,195/t vs US$3,170/t last week - Peel mining shares surge on high grade zinc discovery
• Results included a hit of 21m at 31% zinc and 12% lead, stocks gained as much as 60% to hit a high of 48c
• Told investors that mineralisation at site ranked best the company had encountered to date
Lead US$ 2,418/t vs US$2,447/t last week
Tin US$ 19,855/t vs US$19,770/t last week
Energy:
Oil US$60.8/bbl vs US$59.3/bbl last week
• Crown Prince Mohammad bin Salman reiterated Saudi Arabia’s support for the proposed extension on the oil production cut agreement aimed at rebalancing global supply and demand. Since 4Q 2016, the oil output cut has been effective in reducing the global glut and maintaining price above $45 per barrel levels.
• Hedge funds and other money managers have boosted bullish bets on U.S. crude futures and options as the number of long positions raised 5% to 280,634 last week.
Natural Gas US$2.970/mmbtu vs US$2.879/mmbtu last week
Uranium US$19.95/lb vs US$20.20/lb last week
Lithium - Piedmont Lithium raises $16m to accelerate lithium project
• Proceeds accelerate development of project located in world class Carolina Tin-Spodumene belt in US – worlds primary source for lithium from 1950’s – 80’s
• Land holdings less than 25km away from 2 large lithium processing facilities making it one of best located in the world
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$58.7/t vs US$59.2/t - China Iron Ore imports breach 100m tonnes boosting prices
• September imported 103 million tonnes due to increase in demand as Chinese authorities come down heavily on low grade polluting mills
• Increased demand for ore from Australia and Brazil and widening of differential between benchmark iron ore and sub 62%
• Iron ore futures dropped more than 2 percent to a four-month low over rising apprehensions over faltering steel mill demand during the winter war on smog.
Chinese steel rebar 25mm US$625.0/t vs US$626.8/t - Kobe Steel to withdraw full year earnings forecast
• Withdrew forecast for current fiscal year as it struggles to quantify the impact of data falsification scandal
• Decided not to pay dividend for 6 months through September
Thermal coal (1st year forward cif ARA) US$84.9/t vs US$84.3/t
Premium hard coking coal Aus fob US$178.4/t vs US$177.9/t
Other:
Tungsten APT European US$275-285/mtu vs US$280-285/mtu last week
Company News
Beowulf Mining (LON:BEM) 7.4p, Mkt Cap £39m – Beowulf appoints a Swede as Chairman
• Beowulf have appointed a Swedish national, Mr. Per Göran Färm, as a non-executive Chairman.
• Per Göran was formerly Head of the Swedish Trade Union Confederation's unit for economic policy and investigation and a MEP of the Committee of Industry, Research, and Energy of the European Parliament.
• As a former journalist Göran has extensive experience in communications and public affairs advisor.
• Göran is also Chairman of Kommuninvest, a public development bank owned by Swedish municipalities, cities, and regions.
• As a former MEP we wonder if Göran might be able to unlock some European development funds for Beowulf.
• As a Swedish national we also wonder if Göran might be instrumental in breaking the deadlock over Beowulf’s Kallak North magnetite project exploitation permits in Sweden.
• Beowulf is following a tried and tested route in Europe for the issuance of mining licenses.
• Atalaya Mining appointed Alberto Lavandeira as COO of EMED and CEO in March 2014. The move broke the deadlock between the company and the local Junta which subsequently issued the required permits to mine.
Conclusion: We hope Per Göran will break the deadlock in Sweden and appease the Reindeer herders and other interest groups.
Chaarat Gold (LON:CGH) 19.8p, mkt cap £69.5m – Dekel Golan steps down as CEO of Chaarat Gold
• Dekel Golan has driven the development of the Chaarat Gold since the company’s inception
• Given past challenges of holding onto assets in Kyrgyzstan we wonder how the company will manage going forward.
• Feasibility Study work on the Tulkubash project in Kyrgyzstan published in April showed an IRR of 25% and NPV of $615m which would struggle to compensate for the risk of working down in Kyrgyzstan.
Chatham Rock Phosphate (CRP NZ) Price C$0.42, Mkt cap C$6.3m – Chatham Rock planning to mine ultra-low cadmium phosphate
• The demand for RPR will continue to grow in parallel with the demand for organic products. CRP rock is also ultra-low in cadmium (< 10 mg/Kg P2O5)
• The EU will set a 60mg/Kg P2O5 Ca limit in 2019, reducing to 20 mg/Kg in 2030
• This will eliminate all rock sourced from Egypt, Israel, Bou craa & Youssoufia (Morocco),Senegal, Togo, Tunisia, Nauru & Christmas Island
• Analysts consider that this will result in increasing price premiums over time
• Chatham won’t be in production until 2022
Metminco* (LON:MNC) 3.4p, Mkt Cap £4.3m – Miraflores Feasibility study and maiden ore reserve
• Metminco has amplified its comments earlier this month on the results of its recently completed Feasibility Study for its Miraflores underground gold mine project in Colombia.
• Based upon a treatment rate of 1300tpd (474,500tpa) and a mine life of 9.5 years, the company expects to produce an average of around 45,000oz per year of gold and to generate an after-tax NPV of US$72.3m at a discount rate of 8%. Assuming a gold price of US$1300/oz, an initial capital investment of US$71.8m generates an IRR of 25% with a 3.6 year payback following an 18 months construction period.
• Recovery rates are expected to be 92% for gold an 60% for silver using a combination of gravity recovery methods and cyanide leaching of a flotation concentrate of the gravity tailings.
• In September this year, Miraflores received approval for up to 2000m of underground development.
• Construction is expected to start in March 2018 with detailed engineering work and equipment specification. The company comments that “Commencement of site works is subject to EIA approval.”
• Commenting on the feasibility study, Managing Director, ILLIAM Howe, paid testament to the dedication and professionalism of the project team and pointed out that “The extensive experience of the individuals is demonstrated by the innovative thinking that has culminated in a low cost, fit for purpose mining and processing project.”
Conclusion: The evolution of a viable low cost underground gold mining operation at Miraflores contrasts with the large scale open-pit plans developed by previous owners of the project. The underground option should significantly reduce the environmental impact of mine development and help to smooth the way to the key EIA Approval.
*SP Angel act as broker to Metminco. SP Angel analysts have previously visited Los Calatos in Peru and the Miraflores project in Colombia.
Ortac Resources* (LON:OTC) 2.3p, £3.3m Mkt Cap – Additional funding and board restructuring
• Ortac Resources reports that it has raised £1.7m through the issue of 85m new shares at a price of 2p/share. The proceeds of the issue, which was oversubscribed with existing and new shareholders and a number of Board members participating, will be used to funds “further investments in Ortac’s core African assets.”
• Nick von Schirnding, who will assume the role of Executive Chairman, has subscribed for 2m new shares taking his interest in the company to 1.11%. Independent non-executive director, Brian McMaster also purchased 2m shares bringing his holding to 0.86% while former Chairman, Anthony Balme, who steps down from the Board today purchased 1m new share bringing his interest in the company to 4.61%.
• A new non-executive director is to be appointed shortly.
• The company also announces that the company’s CEO, Vassilios Carellas is to relinquish his role on the Board in order to assume the position of Chief Operating Officer “focussing on the Group’s promising African exploration assets.” Mr Carellas’ previous service and experience with the company in his former role should provide valuable continuity to the newly restructured Board.
Conclusion: The additional funding and the restructuring of Senior management roles positions Ortac Resources to pursue a new strategy under the executive leadership of its Chairman.
*SP Angel acts as nomad and broker to Ortac Resources
RedT (LON:RED) 11.5p, Mkt Cap £75.2m – Vanadium battery storage update
• RedT released on Friday details of their presentation to investors. https://www.redtenergy.com/reports-and-downloads
• Recent achievements include:
• a 14 Unit Order from Botswana based customer
• 1st Vanadium-Lithium Hybrid 1MWh System sold into Australian Market
• Expansion into new markets through strategic distribution partners 12 Units and 300 unit pipeline – engaging competitor’s pipelines
• Multiple unit orders within the UK and EU
• Team Expansion +97% y-o-y inc. Senior Hires from key competitors
• Diversified manufacturing – small and large volume production
• Launched Centrica – Cornwall 1MWh flagship project
• Commercial Update.
• 16 units produced and deployed vs 9 units in April.
• 16 units ordered + 12 distributor committed
• Pipeline €323m in active customer pipeline.
Conclusion: The presentation highlights the benefits of vanadium REDOX batteries and forthcoming growth in RedT’s vanadium battery business. RedT now have 4MWh of machines installed across the UK, EU, Australia and Africa. Technology costs are falling with costs now quoted at <US$500/kWh.
Strategic Minerals* (LON:SML) 2.5p, Mkt Cap £31.1m – Oversubscribed placing raises £1.05m alongside placing of new shares from employee options exercise
• Strategic Minerals report the completion of a placing at 2.25p/s which is more than five times the price of the last placing on 2 November 2016.
• The fundraising is for the acquisition and development of the new ‘Leigh Creek’ (LCCM) Copper project in South Australia.
• The placing also allows Strategic Minerals to bring in a new institutional investor onto the share register and removes a potential stock overhang.
• The Leigh Creek Copper project has a JORC resource of 3.6mt grading 0.69% copper
• The plan is to treat copper oxide material to produce a 70-75% copper product over the first three years.
• Capex: A$1.8m with processing due to start within 3-4 months of the completion of SML’s due dilligence.
• Production 6,400t
• Ore processing: 1.1mt grading 0.77% copper
• Strip ratio: 1:1
• A 2012 feasibility study focussed on two open pits treating the ore via a heap leach process to recover the copper into a copper sulphate solution
• 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 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.
Conclusion: The placing alongside cash flow from SML’s profitable Cobre mine should allow the company to move into production at Leigh Creek early next year.
Thor Mining (LON:THR) 1.1 pence, Mkt Cap £4.8m – Positive ore-sorting trials at Molyhil
• Thor Mining reports that recent testing of ore sorting at its Molyhil tungsten deposit in the Northern Territory, Australia has improved on previous results and delivered “An improvement in rejecting waste material to 41% of total sample mass from ore sorting with the latest trials on ore averaging 0.23% WO3”.
• These results compare with previous testing which achieved “waste rejection of between 15% and 25% of the total sample mass, on ore grading between 0.35% WO3 and 0.56% WO3.”
• Previous financial modelling contained in the Company’s Definitive Feasibility Study announced in January 2015 estimated a project NPV of A$67m for the Molyhil project. Although the announcement today does not provide an update of this estimate, the improved waste rejection ratio should provide opportunities to enhance the project economics through potential to reduce the overall size of downstream processing facilities and/or increasing the overall size of the economic ore reserve with implications for a longer life or larger scale operation.
• The company also point out that it has “previously signalled that we have identified cost reductions in both operating and capital cost estimates and these will be incorporated, with these sorting results, in a review of the Open Cut Ore Reserves for Molyhil, the results of which we expect shortly”
Conclusion: We look forward to the results of the revised ore reserve for Molyhil which arise from the new ore sorting data. It appears that the company may have scope to expand the resource base and capture operating and capital cost savings which could transform the project economics at a time when the price of the benchmark ammonium paratungstate is recovering.
Weatherly International (LON:WTI) 0.8 pence, Mkt Cap £8.5m – Rescheduling of repayments to Orion
• Weatherly International reports that it has reached agreement on the rescheduling of loan repayments due to Orion Mine Finance.
• The first repayment of “Facility B” which was originally due on 31st October 2017 has been deferred and “is now due on 31 December 2017 and the second payment previously due on 30 November 2017 is now due on 31 January 2018. Subsequent payments are unchanged, payable quarterly from 28 February 2018 until 28 February 2020.”
• The Facility B repayments are for “11 equal repayments of US$9.7m each.”
• “The repayment of US$10.3 million including capital and interest up until 31 August 2017 under Facilities C and D of the Amended Facility has been deferred until 31 December 2017.”
Conclusion: The two months delay in the first two payments under Facility B may provide a breathing space to Weatherly International, however, with subsequent repayments remaining due on a quarterly basis as from 28 February 2018, the company remains under pressure.