Altus Strategies (LON:ALS) BUY – Target price 12.2p – Legend deal deadline extended
Noble Group (SGX:CGP) – report the restructuring of its maturing ‘green tech’ and speciality metals supply chains
Phoenix Global Mining* (LON:PGM) – Increased resource at the Empire mine
Savannah Resources (LON:SAV) – Environmental permits issued in Oman
SolGold* (LON:SOLG) – Quarterly shows further progress towards the initial resources estimate at Alpala
121 Mining Investment Conference London – 27 th - 28th November, 8 Fenchurch Place
• The 121 event is SOLD OUT with 70 mining companies and investors from >300 institutions attending and presenting
• Commodities of the future panel: Metals driving new energy systems, cleaner fuels, and renewables growth - 11:50am Monday 27th
o From grid to battery – what metals will form the energy value chains of the future?
o EVs and new technologies impacting supply and demand dynamics
o What are the key considerations when committing capital to projects?
o Costs versus traditional electricity generation
Zimbabwe – The army takes control of Harare, national broadcaster, airport and the personal residence of the head of state.
• Military actions are seen as a pre-emptive measure to stop Grace Mugabe, the president’s 53-year-old wife, and her allies to succeed the President.
• Developments are believed to have been sparked by a sudden dismissal of Emmerson Mnangagwa, the vice-president, veteran of Zimbabwe’s liberation war and the expected successor to Robert Mugabe.
• Mnangagwa, a former Minister of State Security and Minister of Defence, has close ties with military forces with separate reports saying former Vice President has already flown back to Zimbabwe to potentially take control of the government.
• Maj Gen Sibusiso Moyo has stated that this is not a coup and that the president and family are safe and sound and their security is guaranteed while actions are targeted at removing “criminals” around Robert Mugabe.
• The army has taken over the state ZBC TV station and announced that it is seizing power to target "criminals" around President Robert Mugabe, people who have caused ‘social and economic suffering’.
• Zanu-PF had accused Gen Chiwenga of "treasonable conduct" following comments that the army was prepared to end the recent political purges within Zanu-PF.
• The Army have arrested the Deputy Director of the Central Intelligence Organisation and the President of ZanuPF National Youth League who is a known supporter of Grace Mugabe.
• The military and the people are reported not to be keen to see the empowerment of Grace Mugabe and the empowerment of a Mugabe dynasty. They are also unhappy at the purging of a number of former war veterans from the liberation of Zimbabwe in the 1970s including Mr Mnangagwa.
• While the military action has been described as a ‘bloodless correction’ it is possible that the political transition may be used as an opportunity to settle a number of old scores.
• In 1980 Robert Mugabe signed an agreement with North Korea to train and equip the Fifth Brigade for the Zimbabwe National Army.
• The Fifth Brigade brutally crushed ZAPU resistance in Matabeleland with atrocities committed in which >10,000 civilians were reputedly buried in mass graves. The Matabele may well seek revenge against the Shona for the ‘Gukurahundi’ meaning, ‘the rain which washes away the chaff before the spring rains’.
Dow Jones Industrials -0.13% at 23,409
Nikkei 225 -1.57% at 22,028
HK Hang Seng -0.83% at 28,910
Shanghai Composite -0.79% at 3,403
FTSE 350 Mining -1.50% at 16,884
AIM Basic Resources +0.02% at 2,636
Economics
US – Chris Evans, a Chicago Fed head and a voting member on the FOMC, shared his frustration with low inflation expectations in the US despite solid gains in the economic growth.
• “With each low monthly reading (of PCE, a preferred Fed’s inflation measure) it gets harder and harder tfor me to feel comfortable with the idea that the step-down last spring was simply transitory,” Evans said.
• Evans did not say if he is going to support a rate hike in December.
Japan – Q3 GDP came marginally above market estimates buoyed by strong exports and a drop in imports.
• External demand contributed 0.5pp to the headline growth.
• On the downside, personal consumption contracted 0.2%qoq while business investment posted a 0.2%qoq growth compared to expectations of a 0.3%qoq increase.
• Annualised quarterly growth came in at 1.4% in Q3, down from a revised pace of 2.6% in Q2 (upped from 2.5%) and beating market forecasts for a 1.3% reading.
UK –Unemployment rate held at the lowest level since 1975 in three months to September while the jobs report showed a pick up in productivity during the quarter marking the first positive reading since Q4/16.
• Despite positive productivity numbers the Office of National Statitstics (ONS) said “the medium-term picture continues to be one of productivity growing but at a much slower rate than seen before the financial crisis”.
• Sadly real wasges continued to shrink as earnings growth failed to keep up with inflation.
Australia – Wage growth remained subdued in Q3, the latest numbers showed.
• Labour earnings increased 0.5%qoq underperforming market estimates for a 0.7% reading.
• Additionally, the data includes the effect of a larger than normal increase in the minimum wage during the quarter suggesting the underlying growth is even weaker.
• The currency fell 0.6% against the US$ on the news.
Currencies
US$1.1819/eur vs 1.1685/eur yesterday. Yen 112.90/$ vs 113.84/$. SAr 14.375/$ vs 14.477/$. $1.318/gbp vs $1.310/gbp
0.759/aud vs 0.762/aud. CNY 6.633/$ vs 6.642/$.
Commodity News
Precious metals:
Gold US$1,283/oz vs US$1,272/oz yesterday
• Gold remained within a tight trading range as investors await October’s consumer inflation data to provide potential hints on the expected monetary tightening policy next month by the Federal Reserve. Positive inflation data could dictate sentiment for the forecast interest rate hike, with an expected increase by 25 bps in December and unusually weak physical market putting downside pressure on near term gold prices.
• However, St. Louis Fed President James Bullard noted the Federal Reserve should keep its benchmark interest rate at current levels until there is an upswing in inflation.
• Lack of progression of US tax reforms, with growing political risk linked to the U.S. Senate Republicans repealing a key component of Obamacare to their ambitious tax-cut plan, have seen investors favour the precious metal.
• Overseas, geopolitical tensions with North Korea rise as a regime-run state media has criticized Donald Trump for insulting leader Kim Jong-Un, adding that “He should know that he is just a hideous criminal sentenced to death by the Korean people”. The editorial in the ruling party newspaper Rodong Sinmum continued to insult the U.S. President, calling him a coward for failure to tour the demilitarized zone dividing the two Koreas. The editorial follows an escalating war of words with the latest trading of personal insults against the ‘short and fat’ supreme leader.
Gold ETFs 69.4moz vs US$69.3moz yesterday
Platinum US$929/oz vs US$930/oz yesterday
Palladium US$987/oz vs US$996/oz yesterday
Silver US$17.08/oz vs US$16.92/oz yesterday
Base metals:
Copper US$ 6,725/t vs US$6,867/t yesterday
Aluminium US$ 2,078/t vs US$2,108/t yesterday
• China’s winter war on smog moves into its official period of production capacity cuts, expected to run through till March in a move to combat air pollution as nation-wide peak coal-fire heating swells. Chinalco, the biggest state-run aluminium producer, has moved to cut its alumina capacity by 2 million tonnes to comply with the restrictions on heavy industry. Chinalco’s overall refining capacity for alumina, is approx. 7 million tonnes, indicating a 27% cap on winter production.
• A range of industrial plants have been ordered to curb output as Beijing actions against pollution, with aluminium and alumina producers in 28 northern cities must reduce their capacity by at least 30% for environmental reasons.
Nickel US$ 11,600/t vs US$12,330/t yesterday
• Broad selling of base metals follows concerns over the slowing growth in the Chinese economy, with industrial production reducing to 6.2% in October and fixed asset investment dropping to 7.3%. Nickel lead the contraction, falling 5% on the Shanghai Futures Exchange.
Zinc US$ 3,118/t vs US$3,201/t yesterday
Lead US$ 2,446/t vs US$2,488/t yesterday
Tin US$ 19,420/t vs US$19,470/t yesterday
Energy:
Oil US$61.6/bbl vs US$62.9/bbl yesterday – oil falls on IEA report that fracking might recover quicker than previously anticipated. Warmer weather also expected to dent oil demand.
• Warming global temperatures are expected to cut global consumption, with the Paris-based IEA reducing its oil demand forecast by 100,000 barrels per day; equivalent to 1.5 million bpd and 1.3 million bpd in 2017 and 2018 respectively. A steadily rebalancing market is also under threat as non-OPEC output is set to rise.
Natural Gas US$3.089/mmbtu vs US$3.110/mmbtu yesterday
Uranium US$23.40/lb vs US$23.15/lb yesterday
Lithium - Lithium battery recycling subsidiary established by Narada
• China headquartered battery maker of lead and lithium batteries invested $15m in setting up lithium recycling
• Said was important for corporate social responsibility and to create sustainable long term supply chain
Cobalt - Amnesty warns on use of child labour in cobalt mining
• Announced that world’s largest EV and electronics companies are not doing enough to ensure supply not mined by children in Democratic Republic of Congo
• Said that almost half of 28 largest companies including Microsoft, Renault, Huawei were not doing enough to demonstrate even minimal compliance with due diligence standards
• Apple and BMW best performers whilst Daimler and Renault scored worst
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$60.9/t vs US$62.5/t
Chinese steel rebar 25mm US$654.7/t vs US$650.4/t - Kobe Steel plant loses remaining industrial quality badge
• Japan’s third-largest steelmaker, Kobe Steel, is set to lose all of its Japan Industrial Standards (JIS) certifications at its Hatano plant resulting from the broad data falsification scandal. The certification loss follows discovery of the sale of products with falsified specifications to over 500 customers across the automotive, aerospace and other large engineering manufacture sectors
• The fallout from one of Japan’s biggest industrial scandals also extends to the stripping of the government-sanctioned seal on insulated copper tubing and its ISO 9001 quality certificate from the International Standards Organization
• JIS-certified products comprise 40% of Hatano’s sales by weight, forcing a big blow to the company’s revenues and its extensive role in global supply chains
• Japan manufacturing prowess has taken a hit in recent weeks from Kobe scandal and improper Nissan inspection procedures
Thermal coal (1st year forward cif ARA) US$84.5/t vs US$86.4/t - European insurers pull out of coal investments
• Insurers pulled $20bn out of coal investments but most are European and none of top 9 US has taken meaningful action according to unfriend coal
• Many companies such as Lloyd’s of London, AXA and Swiss Re are planning to out of bonds and stock invested in coal
Premium hard coking coal Aus fob US$187.6/t vs US$187.6/t
Other:
Tungsten APT European US$270-280/mtu vs US$275-285/mtu last week
Company News
Altus Strategies (LON:ALS) 7.8p, Mkt Cap £8.5m – Legend deal deadline extended
BUY – Target price 12.2p
• The deadline for completion of definitive documentation regarding the acquisition of TSX-V listed Legend Gold under the non-binding LOI has been extended to 20 November 2017, from 14 November.
• Legend assets include a portfolio of prospective gold exploration projects in Mali most of which are located within 10-20km radius of the operating 4.9mtpa 170kozpa Sadiola mine.
Noble Group (SGX:NOBL) 0.19SGD, Mkt cap SGD261.2m – report the restructuring of its maturing ‘green tech’ and speciality metals supply chains
• To capture opportunities from these new markets, Noble is developing two wholly owned subsidiaries, Kalon and Talaxis.
• Kalon is focussing on special ores and metals upstream and downstream operations, while Talaxis is to dedicated to developing the cobalt, lithium and rare earth business.
• The rare earths and special ores & metals groups have positioned themselves to emerge as significant participants in managing those flows that will benefit from trends such as the grid decarbonization and the new opportunities offered by the growing EV market.
• Noble’s rare earths and special ores & metals businesses operate long-term flows and are active in upstream origination in Jamaica, Malawi, Mongolia, Russia, Rwanda and South Africa. Their downstream distribution network extends to Canada, China, Malaysia, Thailand, USA and Europe, and our teams now cover all the major industrial players across those sectors.
• Consumers of specialty metals and rare earth elements globally are often dependent today on the supply chains that have low resiliency. Noble Group entities are building on a track record of successfully creation of new industrial supply streams to support consumers who are seeking alternative and more diverse sourcing solutions as a pre-requisite for their future development.
Conclusion: We see this restructuring as an important move in the orientation of Noble’s business towards supplying metals for the new generation of electric vehicles.
Phoenix Global Mining* (LON:PGM) 5p, Mkt Cap £11.5m – Increased resource at the Empire mine
• Following its recent infill drilling programme, Phoenix Global Mining has announced an increase of more than 50% in overall oxide resource tonnage at the historic Empire mine in Idaho. Compared with the April 2017 estimate, contained copper within the resource has increased by 33% to 90,547 tonnes at an average grade of 0.47% copper.
• The Measured & Indicated portion of the resource tonnage has increased by more than 40% to 10.4m tonnes at an average grade of 0.52% copper, 0.13% zinc, 0.23g/t gold and 10.62g/t silver.
• The new estimate was prepared, in accordance with the JORC Code by Hard Rock Consulting incorporating date from the recently completed 28 hole drilling programme and used a cut-off grade of 0.184% copper.
• Commenting on the revised resource, CEO, Dennis Thomas, said “We have made rapid progress this year with this latest milestone adding considerably more value to the Empire Mine. … Importantly, we have now begun to report the zinc (51,925t), silver (6.412 million ounces) and gold (165,686 ounces) contained within the copper resource.”
• Mr Thomas went on to remark that “We believe we have a valuable copper project, at a time when the demand fundamentals are very strong, in a safe, supportive and politically stable jurisdiction, and that we will be able to rapidly advance and crystallise its inherent value."
• Drilling is continuing on the deeper sulphide mineralisation potential with initial results expected in December.
• The company estimates that “only 5% of the potential ore system has been explored to date and accordingly there is significant opportunity to increase the resource through phased exploration; the current resource relates to the oxide resource only, which remains open along strike and does not include the deeper, higher grade sulphides.”
Conclusion: Since the company’s Admission to the AIM Market in June, Phoenix Global Mining has delivered a substantial increase in oxide ore resources at the Empire mine site in Idaho. Deeper drilling, where initial results are expected next month, should indicate the potential of the underlying sulphide mineralisation. Work is underway to gain access to the historic underground mine workings which will enable sampling and mapping to confirm the details within an extensive archive of historic data and build the geological model for further targeted exploration.
*SP Angel acts as Nomad to Phoenix Global Mining
Savannah Resources (LON:SAV) 5.25p, Mkt cap £33.4m – Environmental permits issued in Oman
• Savannah Resources has announced that environmental operating permits have been issued for the Mahab4 and Maqail South licence areas within the Block 5 exploration areas in Oman.
o The Mahab4 and Maqail South licence areas are “the first two of a planned series of high grade copper mine developments in Oman”.
o The environmental permits are an important milestone in the process of obtaining the mining permits where six of the eight Ministries required to accede to mining have formally confirmed that they have no objections to the proposals.
o The Ministry of Housing and the Ministry of Regional Municipalities and Water Resource retain the application under review, however, "Positive discussions are continuing for the remaining Ministries for both projects, with final approvals expected to all be received in Q4 2017. … [and] … Final Ministerial approvals expected to be received before the end of 2017 and the Mining Licences in early 2018 by Public Authority for Mining”.
Conclusion: The “Preliminary Economic Assessment” for mining has still to be submitted to The Public Authority for Mining, however Savannah Resources is looking increasingly well placed to have all the required permits for the start of development next year.
SolGold* (LON:SOLG) 26p, Mkt Cap £394.2m – Quarterly shows further progress towards the initial resources estimate at Alpala
• SolGold have announced a loss of A$5.8m (Acents 0.4/share) for the three months ending 30th September (2016 – loss A$805,000).
• The result leaves Solgold with a healthy cash balance of A$78.5m following an outflow of cash totaling A$10.5m during the quarter with A$2.1m of the outflow arising from operations and A$8.4m from exploration and investment.
• The quarter has continued to be very active with approximately 7500m of drilling completed in hole 26-31 at Alpala and preparatory modelling work completed “in preparation for upcoming Mineral Resource Estimate.”
• Providing an update on the work on the wholly owned project areas elsewhere in Ecuador, Solgold reports that “During the September quarter all four subsidiary companies have had technical teams working on the ground. By the end of September 2017, seven project areas will have had initial evaluation completed or nearing completion. Security and social teams have been in the field ahead of the technical staff ensuring access to all project areas and maintaining good relationships with local landowners.”
• Looking to the future, “The focus of the Company during the financial year ending 30 June 2018 will be to continue exploration on its Cascabel project in Ecuador and continue carrying out reconnaissance filed mapping and rock chip sampling programs as well as evaluating several mineralised outcropping targets over the 59 new tenements granted to SolGold’s four Ecuadorian subsidiaries.”
Conclusion: Solgold continues with a very active exploration programme in Ecuador. The company remains well funded for its ambitious programme at Alpala and on the wholly owned projects elsewhere in Ecuador. We look forward to the Alpala resources estimate in due course.
*SP Angel act as UK broker to SolGold