BlueRock Diamonds* (LON:BRD) – Sales rise in BlueRock October diamond tender
Kefi Minerals* (LON:KEFI) – Gold production plan rises to 144,000ozpa from 116,000ozpa in first three years of operation
Phoenix Global Mining* (LON:PGM) – Final batch of results from Empire mine drilling
SolGold (LON:SOLG) – Latest drilling extends limits at Alpala
Stratex International* (LON:STI) / Crusader (ASX:CAS) – Stratex suspends shares ahead of General Meeting
More than 10 firms in running for Codelco lithium assets
• World’s biggest copper producer, companies keen to partner to develop its massive lithium assets in Chile
• Lithium possessions are two salt lakes in initial stages of exploration and development
‘Tired Mountain Syndrome’
• North Korea’s Mount Mantap may be suffering from ‘Tired Mountain Syndrome’ following a series of underground nuclear explosions.
• The last nuclear blast recorded a magnitude of around 6.3. A second earthquake of magnitude of 3.1 which is said to be indicative of a collapse.
• The initial collapse is thought to have killed around 100 workers with potentially another 100 killed and or trapped by a further tunnel collapse.
• Our thoughts are with the families of those lost in the disaster.
Dow Jones Industrials +0.12% at 23,377
Nikkei 225 +1.86% at 22,420
HK Hang Seng +1.26% at 28,603
Shanghai Composite +0.08% at 3,396
FTSE 350 Mining -0.95% at 17,151
AIM Basic Resources -0.33% at 2,522
Economics
CME Group, the world’s largest exchange operator, is planning to create futures trading in cryptocurrency by year end.
• The launch is conditional on receiving approval from US regulators.
• Bitcoin, the largest by market capitalisation cryptocurrency, jumped $300 yesterday on the news driving October gains to 49%.
US – Consumer sentiment gained in October reaching the highest level in nearly 17 years dirven by confidence in the economy and labour market.
• Confident consumers is good news to the economy that has been driven by robust private consumption lately.
• The Conference Board gauge is consistent with other measures of the consumer sentiment.
• The University of Michigan has previously reported that sentiment index increased in October to the highest level since the start of 2004.
• CB Consumer Confidence: 125.9 in October v 120.6 in September (up from 119.8) and 121.5 forecast.
China – Private measures of the manufacturing sector performance showed the marginal improvement in operating conditions in China led by a slightly quicker increase in new orders.
• Amid pressures to optimise production and raise efficiencies companies continued to cut staff.
• “Manufacturing sector expanded steadily in October…but the stringent production curbs imposed by the government to reduce pollution and relatively low inventory levels have added to cost pressures on companies in midstream and downstream industries, which could have a negative impact on production in the coming months,” the report read.
• The private reading pointing to stable growth in the sector comes on the heels of the official PMI manufacturing data which dropped to 51.6 from 52.4 last month underperforming expectations for 52.0.
• Caixin Manufacturing PMI: 51.0 v 51.0 in September and 51.0 forecast.
UK – House prices are reported to have grown 2.5%yoy at the start of the final quarter which marks about half the growth rate since 2016, according to the Nationwide data.
• Expectations for rates to go up drive demand for fixed rate mortgage refinancing deals.
• Interest for five-year fixed mortgage deals hit record high, property services firm LMS reports.
• Markit Manufacturing PMI came in strong in October with the respondents pointing to robust domestic demand while orders from overseas have also continued to increase for the 18th consecutive month.
• Companies increased hiring in response to higher orders intake.
• Price pressures continued to build up with producers passing higher costs onto consumers; “input costs rose at the fastest pace in seven months, leading to the steepest rate of selling price inflation since April,” the report said.
• Strong manufacturing numbers together with signs of accelerating inflation should help the MPC to advocate in favour of higher rates during this week’s coming monetary policy meeting.
• Markit Manufacturing PMI: 56.3 in October v 56.0 in September and 55.9 forecast.
South Africa – Foreign investors sold $813m of South African sovereign bonds in five days following the announcement of the mid-term budget statement last week.
• Markets reacted to updated forecasts of a weaker economic growth and wider deficits over the next few years.
• Last Wednesday, the Treasury cut its forecasts for GDP growth to 0.7% in 2017, down from 1.3% forecast previously, and increased government debt to GDP estimates to 4.3%, up from 3.1%.
• Moody’s is currently considering to cut SA sovereign credit rating to junk citing the latest official estimates representing “a marked credit-negative departure from earlier fiscal consolidation efforts”.
• Both Fitch and S&P are already rating SA sovereign debt at BB+, one notch below the investment grade category, while Moody’s rates debt at Baa3.
• The Rand is down 3% against the US$ while 10y bond yields climbed 20bp from mid last week.
Currencies
US$1.1647/eur vs 1.1646/eur yesterday. Yen 113.91/$ vs 113.06/$. SAr 14.130/$ vs 14.049/$. $1.330/gbp vs $1.322/gbp.
0.768/aud vs 0.768/aud. CNY 6.616/$ vs 6.629/$.
Commodity News
China hopes to drive a sustained bull run for its Belt and Road Initiative (BRI)
• China’s ambitious “One Belt, One Road” concept, heavily promoted by Chinese President Xi Jinping, looks to develop infrastructure and other ventures along maritime and land corridors linking Asia to Africa and Europe. Despite encouraging billions to be spent on ports, roads, railways, power plants and other infrastructure, there has been little financial stimulation across the various economic indicators to suggest strong uptake by investors.
• China’s outbound, non-financial investment (ODI) fell 41.8 percent January to August. Of the total $68.72 billion, the commerce ministry notes only 13.4 percent of the investment in BRI-related spending, which is focused on buying stakes in existing companies and ventures, rather than on actual construction and infrastructure projects.
• Muted BRI stimulus is having a knock-on impact on exports for commodities ranging iron ore, coal, copper, crude oil and a host of minor metals with industrial applications, particularly with steel exports falling 29.8 percent to 59.6 million tonnes in the first nine months of the year (although impacted by the imposition of trade measures against Chinese steel exports by the European Union, the United States and India).
• In countries along the proposed BRI trail, steel exports performed particularly poorly during the first half of the year, with shipments to Pakistan and Vietnam weakening by 35 and 32 percent respectively.
• Ultimately commodity stimulus from BRI development will be substantial and help industrial metals extend the bull run, however the project is proving to be slow off the mark.
Precious metals:
Gold US$1,275/oz vs US$1,277/oz yesterday
• Gold and dollar index held steady as investors pause ahead of conclusions of the Central Bank’s two-day meeting on the US Federal Reserve’s monetary policy stance. Conclusions are expected to indicate potential changes to the benchmark interest rate to between 1.25% and 1.5% in December, which 98.2% of market participants are forecasting will happen (CME Group’s FedWatch).
• Investor sentiment in gold remains muted as reports surrounding the Trump tax cut show positive advances towards an announcement, strengthening the dollar.
Alaska gold mega project on track
• 39 million ounces of gold worth $49 billion on spot market, owned 50/50 by NOVAGOLD Inc and Barrick Gold Corp
• Project embroiled in exhaustive permitting process but agency review by U.S. Army Corps of Engineers, the lead permitting agency, has finished review of the Environmental Impact Statement – filing scheduled for 2018
Gold ETFs 69.3moz vs US$69.3moz yesterday
Platinum US$926/oz vs US$922/oz yesterday
Palladium US$995/oz vs US$974/oz yesterday
Silver US$16.87/oz vs US$16.88/oz yesterday
Base metals:
Copper US$ 6,959/t vs US$6,877/t yesterday
• Base metals prices broadly increased on announced Chinese Caixin manufacturing purchasing managers’ index (PMI) for October of 51 points and maintaining expectations for domestic manufacturing demand.
• LME week forecast copper price growth into 2018, as the Chilean Minister of Mining, Aurora Williams, sees prices averaging $2.95 per lb for Chilean metal. The positive outlook aims to build upon strong year to date performance of 24 percent growth helped by sustained Chinese growth which accounts for 40% of the approximate 23 million tonnes of annual copper consumption.
Aluminium US$ 2,171/t vs US$2,165/t yesterday
Nickel US$ 12,650/t vs US$11,870/t yesterday - Nickel surges to best since 2015 on electric car boom
• Nickel rocketed to a two year high in London to $12,780 a metric ton on London Metal Exchange and is up 26% this year
• Investors are betting on long term boost to demand from electric cars as it is predicted batteries likely to use more nickel and less cobalt in future
• Nickel’s rally continues driven by overwhelming expectations for a substantial global supply gap.
• The metal price was boosted by 6.48 percent in overnight LME trading as demand from the rapidly growing new energy vehicle industry for lithium and hydrogen-powered cells increases.
• Chief economist at Trafigura, Saad Rahim, acknowledged nickel sulphate should expect 50 percent demand increase to 3 million metric tonnes by 2030. Despite representing a key ingredient in lithium-ion batteries, the metal price has shown lackluster performance compared to cobalt and lithium prices (which have more than doubled), as large stock inventories continue to be relied upon.
• Rahim continued by forecasting elevated substitution of cobalt due to high prices and contentious Democratic Republic of Congo supply, further boosting the demand for nickel. The metal price has risen 18 percent year to date, but still falls a long way short of the 2007 peak of $51,600 per tonne.
• Wood Mackenzie forecast nickel consumption in EV batteries to show sustained growth from 40 Ktpa in 2016, to 220 Ktpa by 2025 (20.8 % CAGR).
Zinc US$ 3,276/t vs US$3,244/t yesterday
Lead US$ 2,453/t vs US$2,432/t yesterday
Tin US$ 19,525/t vs US$19,550/t yesterday
Energy:
Oil US$61.3/bbl vs US$60.8/bbl yesterday
Natural Gas US$2.915/mmbtu vs US$2.993/mmbtu yesterday
Uranium US$20.05/lb vs US$20.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$58.4/t vs US$57.8/t
Chinese steel rebar 25mm US$627.6/t vs US$625.2/t
Thermal coal (1st year forward cif ARA) US$86.9/t vs US$85.3/t
Premium hard coking coal Aus fob US$178.0/t vs US$178.0/t
Other:
Tungsten APT European US$275-285/mtu vs US$280-285/mtu last week
Titanium – Chinese domestic titanium prices fell by Rmb50 this week for 46% conc material
Company News
BlueRock Diamonds* (LON:BRD) 1.87p, Mkt Cap £2.6m – Sales rise in BlueRock October diamond tender
• BlueRock Diamonds report a significant increase in the value of diamond sales in their regular monthly tender.
• Grades have also risen, possibly from improved operation from the diamond recovery plant.
• Sales rose to US$226,400 in the October tender vs US$175,621 in September.
• The average value per carat also rose to US$371.25/ct vs the last reported sale value of US$323/ct and the US$337/ct seen in the first nine months of the year. This remains well ahead of the assumed CRP value of $232/ct.
• Rain lost around caused mine production to fall to 17,000t from 22,010t reported in September and is still off from the throughput level of 25,000t per month being targeted.
• Recovered grades rose to an effective 2.64 carats per hundred tonnes ‘cpht’ in the October tender, this is higher than the Q3 grade of 2.49cpht and the disastrous 1.59cpht recovered in the first half but is somewhat off from the 3.01cpht reported on 18 September on the back of their September sale.
• It is interesting that grades continue to rise from the harder calcrete kimberlite ore which is almost certainly due to better plant performance and higher recoveries making it to the diamond sales.
• We look forward to throughput rates rising to 25,000tpm and to the mining of the softer and higher grade kimberlite material below the calcrete layer.
• This should contain grades of around 4.5cpht as estimated in the CPR and should be transformational from a sales and cash flow perspective. It will be interesting to see if the quality and per carat sales price of recovered stones rises from mining below the calcrete layer.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Kefi Minerals* (LON:KEFI) 4.2p, Mkt Cap £14m – Gold production plan rises to 144,000ozpa from 116,000ozpa in first three years of operation
• Kefi Minerals report the further optimisation of the Tulu Kapi gold mine in Ethiopia.
• The increase in gold production in the first few years enables the more rapid payback of capital to within three years assuming a gold price of just US$1,250/oz.
• The revised proposal builds greater process plant capacity from the start thus improving the viability of the mine and financial model.
• We often find that incremental increases in plant capacity are relatively inexpensive when compared with the cash flow gained from the increased throughput.
• Plant capacity expands to 1.9-2.1mtpa from 1.5-1.7Mtpa with the range depending on the actual hardness of the ore when mined.
• An additional $12m of funding for plant and infrastructure expansion should be offset by expected savings on capital expenditure and increased financial headroom.
• There is also an offer to expand Kefi’s Tulu Kapi financial facility to US$140m to US$135m by the supplier consortium and associated finance provider.
• Mine scheduling has been improved to allow for faster mining and intensified in-fill drilling and flexibility to switch between bulk mining and selective mining.
• Cash Operating Cost projections rise very slightly to US$685/oz from US$684/oz while AiSC costs fall to US$773/oz from US$777/oz.
• All in Costs rise to US$1,051/oz including debt service charges
• All in Costs excluding debt service charges rising to US$948/oz from US$933/oz indicating the cost of servicing debt is some US$103/oz.
• IRR rises dramatically to 60% from 22% shown in the last unleveraged 2017 DFS update and 28% in the 2015 DFS.
Conclusion: It is interesting to note the dramatic impact of producing more gold more quickly on the financial model. The dramatic increase in IRR to 60% highlights the improvement in returns by bringing forward gold production through the better utilisation of capacity in the plant and mining faster in the early years.
*SP Angel act as Nomad and broker to Kefi Minerals
Phoenix Global Mining* (LON:PGM) 4.1p, Mkt Cap £9.5m – Final batch of results from Empire mine drilling
• The company has released the final batch of drilling results from its recently completed 28 hole drilling programme at the historic Empire mine in Idaho. The programme comprised 21 reverse circulation and 7 diamond core holes.
• Among the results highlighted in today’s announcement are:
o A 6.1m intersection at an average grade of 2.08% copper, 79.18 g/t silver and 2.48 g/t gold from a depth of 9.1m in hole KXd17-7, which includes a higher grade section of 1.5m at an average grade of 4.19% copper, 195g/t silver and 6.04g/t gold from 10.7m
o A 24.4m long intersection at an average grade of 1.06% copper, 34.82 g/t silver and 0.17 g/t gold from a depth of 7.6m in hole KXd17-2 and
o A 29.0m long intersection at an average grade of 0.88% copper, 46.84 g/t silver and 0.29 g/t gold from the surface in hole KXd17-5
o The company points out that these grades compare with an average grade in the current resource estimate of 0.53% copper, implying the possibility that when the current drilling results are incorporated in an updated estimate there is scope for improvements in the grade.
o The results from the programme, in conjunction with historic drilling information, are to form the basis of a revised oxide resource estimate for the AP Pit area as part of the Preliminary Feasibility Study (PFS). The resource update is expected this month and the company confirms that the PFS remains on track for completion during Q2 2018.
o The PFS is expected to address the technical issues of mine design and the metallurgical characteristics of the mineralisation as well as environmental and cost issues as well as providing a financial analysis of the project and its sensitivity to key commercial and operating assumptions.
o Phoenix Global Mining also reports that it has started a programme to explore for the deeper sulphide mineral potential beneath the historic workings. “The first of two diamond drill holes targeting the the sulphide zone below the old workings has been completed from surface to a depth of 314 metres. A second deep sulphide hole has been started. All assays from these holes will be received in December.”
o In addition, work is continuing to access the old mine workings which will provide an opportunity for detailed sampling and mapping as well as sites for additional drilling.
Conclusion: The company is pressing ahead with its plans to rejuvenate the old Empire mine and we look forward to the revised oxide resource estimate later this month and to the results of the deeper sulphide drilling in December as Phoenix Global Mining moves towards completing the pre-feasibility study for oxide mining in the AP Pit area.
*SP Angel acts as Nomad to Phoenix Global Mining
SolGold (LON:SOLG) 34p, Mkt Cap £515m – Latest drilling extends limits at Alpala
• SolGold reports that recent drill results have extended the known mineralisation at Alpala by approximately 100m both to the northeast and towards the south with the two holes reported today both finishing in mineralisation.
• Hole 26-D1, which is a daughter hole of the original hole 26 diverting from its parent at a depth of 788.4m, was completed at a depth of 1662.7m within “strongly mineralised diorite porphyry” having encountered drilling difficulties. The hole intersected a 748.7m at an average grade of 0.58% copper and 0.43 g/t gold from a depth of 914m. The broader intersection contains a higher grade portion averaging 0.7% copper and 0.55g/t gold over a 517.2m long intersection from 1150m to the end of the hole.
• The company interprets the Hole 26-D1 mineralisation as extending “approximately 100m northeast of the previous boundary of the deposit”.
• Hole 28, drilled towards the west at Alpala Central from the same collar as holes 21,25 and 27 was completed a depth of 1568.2m and intersected 938.2m at an average grade of 0.59% copper an 0.36g/t gold from a depth of 630m and also finished in mineralisation.
• SolGold considers that the intersection in Hole 28 “extended mineralisation approximately 100m south of Hole 16 which previously returned 936m @1.35% cuEq (0.75% Cu, 0.95 G/t Au).”
• The company currently has seven rigs operating on site and is expecting a further 4 rigs to be deployed this month and the fleet to further expand to 12 rigs next year when it plans to drill 120,000m. SolGold plans to drill additional targets at “Carmen, Trevinio, Parambas, Moran, and Cristal as well as the exciting Aguinaga target” next year.
• Mineral Resource Estimate: SolGold further report on their recent site visit by SRK as part of their geological audit which is now advanced to the detailed hand contoured geological interpretations in level plan and cross section in ‘Leapfrog’ and 3D modelling.
Conclusion: SolGold continue to advance the scale and detail of understanding of the Alpala project at Cascabel in Ecuador. The commitment of capital and working of so many rigs makes this one of the world’s busier exploration sites. We look forward to the release of a very substantial Mineral Resource Estimate before the year end.
Stratex International* (LON:STI) SUSPENDED at 1.1p, mkt cap £5.5m – Stratex suspends shares ahead of General Meeting
Crusader (ASX:CAS) A$0.092, Mkt cap A$27.7m
(Stratex’s offer: 6.6 new Stratex shares for each Crusader share giving Crusader shareholders ‘81%’ of the enlarged company and valuing Crusader at A$0.127/s)
(Thani Stratex merger proposal gives Stratex shareholders ‘56%’ of the new group, see Thani Stratex presentation for more details)
• Stratex have taken the unusual step of suspending its shares ahead of today’s General Meeting which started at 9:30am today.
• We expect the incumbent Stratex board to pull every trick possible in an effort to save their proposed deal with Crusader.
• Their advisors will also be working to preserve the opportunity to charge exorbitant fees in relation to the Crusader deal which will not only hand the majority of new Stratex shares to Crusader shareholders but may also had the majority of Stratex’s remaining cash to its advisors in the form of fees as well as to Crusader.
• Shareholders can expect to see further significant dilution as a direct result of the Crusader deal and the outflow of cash relating to the transaction.
• It is our view that a ‘draft’ deal by Thani Stratex is a better and more appropriate proposal from an investor perspective.
• Details of the ‘draft’ Thai Stratex proposal are contained on the link below:
• https://newstrat.co.uk/new-presentations - we recommend you click down to the third presentation for the Thani Stratex proposal.
Conclusion: We hope the Stratex board will act on the representations being made by shareholders and will gracefully hand over the company to the newly elected directors in a gentlemanly manner according to the votes passed. Somehow we suspect we may see a few corporate dirty tricks before the day is out.
The Stratex General Meeting will be held at the offices Grant Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU at 9.30 a.m. on 1 November 2017.
Latest time and date for receipt of Forms of Proxy for the General Meeting is 9.30 a.m. on 30 October 2017
*SP Angel are completely independent with regard to Stratex, Thani Stratex, Crusader Resource or any of their directors, staff and advisors.