IronRidge Resources (LON:IRR) – Update on Australian exploration
Mkango Resources* (LON:MKA) – Exercise of Warrants
SolGold* (LON:SOLG) – Progress report on Cascabel exploration
Royalties - Brazil’s hike in Iron ore and Gold Royalties could hurt high cost mines
• Congress passed bill that would increase royalty rates on iron ore by 75% and gold by 50% - if becomes law would make iron ore producers pay a 3.5% royalty instead of current 2% and would be calculated off gross revenue not net revenue
• Vale, world’s largest iron ore miner said that the new rate likely to compromise ability to maintain high cost mines and ability to remain profitable
Black Friday today – when people can buy hugely inflated products at discounted prices
• The good thing about Black Friday is that retailers are able to destock unwanted goods ahead of Christmas so they can restock with more unwanted goods in preparation for the new year sales.
• In essence, this is what drives the global economy. Just remember the happiest peoples in the world do appear to live in some of the richer countries according to Time Magazine. So perhaps access to consumer goods does, after all, make for happy people.
Dow Jones Industrials -0.27% at 23,526
Nikkei 225 +0.12% at 22,551
HK Hang Seng +0.51% at 29,859
Shanghai Composite +0.06% at 3,354
FTSE 350 Mining +0.03% at 17,513
AIM Basic Resources -0.56% at 2,664
Economics
US – Markets to re-open today following Thanksgiving.
• Markit is due to release November PMIs with estimates for a marginal acceleration in an already strong growth rate.
Germany – Merkel CDU/CSU and Social Democrats may form grand coalition again after the Free Democratic Party withdrew from coalition talks last week.
• Although, it is yet unclear if the SPD would rather offer support to CDU/CSU for a minority government led by the veteran chancellor.
• The SPD said they are open to negotiations which may see a solution to a current political deadlock in Germany which could potentially lead to new general elections.
• The euro climbed 0.15% against the US$ on the news as well as positive business confidence data released earlier this morning.
• Ifo Expectations: 111.0 v 109.2 in October and 108.8 forecast.
• Ifo Current Assessment: 124.4 v 124.8 in October and 125.0 forecast.
UK – Consumer confidence declined to the lowest level since the aftermath of the Brexit vote, according to YouGov and the Centre for Economics and Business Research data.
• Household financial situation gauge over the last 30 days as well as outlook deteriorated through the month amid a BoE decision to raise rates.
• “Households are understandably worried… the first interest-rate hike in over a decade triggered fears that higher borrowing costs will compound the inflation-induced squeeze on housedhold incomes,” the CEBR commented on numbers.
South Africa – The central bank left rates unchanged at 6.75% in November, in line with market estimates and ahead of sovereign bonds’ rating revision by Moody’s and S&P.
• The bank cut rates for the first time in five years in July to support the economy which fell into a recession for a second time in nearly a decade in Q1/17.
• On Thursday, Fitch left credit rating of both domestic and foreign currency debt unchanged at BB+, one notch below the investment grade, with a stable outlook.
• Moody’s and S&P are due to release their reviews today with a possible downgrade from current Baa3 (investment grade) and BB+ (non-investment) potentially leading to a sell off in bonds and the rand.
• While inflation has been within the 3-6% since the beginning of the year, a depreciation in the rand may see a change in dynamics.
• The MPC now projects more tightening in the monetary policy with three rate hikes guided through 2019. Compared with one increase previously.
Currencies
US$1.1847/eur vs 1.1837/eur yesterday. Yen 111.38/$ vs 111.20/$. SAr 13.945/$ vs 13.866/$. $1.332/gbp vs $1.331/gbp
0.761/aud vs 0.762/aud. CNY 6.606/$ vs 6.584/$.
Commodity News
Chilean mining sector to shrug off negative reserve law
• In spite of the upcoming Chilean presidential winning election, primary candidates have vowed to overturn the redundant Copper Reserve Law (Ley N° 13.196) which forces Codelco to provide 10% of annual profits from export sales to the country’s armed forces. “This tax affects Codelco’s competitiveness and the availability of resources for financing its operations and strategic investments” commented candidate Alejandro Guillier, with 2016 royalty totaling $900 million.
Precious metals:
Gold US$1,291/oz vs US$1,290/oz yesterday
• Gold remained steady on falling dollar, as the index retreats for its third weekly drop. Minutes released Wednesday indicate Federal officials meeting earlier this month saw an interest-rate increase in the near term even as tepid inflation drove divisions over the frequency and rate rise.
• Investors are cautious on the impact of the scheduled December rate hike on the inflation outlook, with many fed policymakers emphasising the need to look at upcoming economic data before deciding the timing of future rate rises.
• Fed cautious surrounding inflation could support longer periods of low interest rates, undermining dollar strength and provide a “solid platform for gold investment”, according to GFMS consulting analyst.
Gold ETFs 69.5moz vs US$69.5moz yesterday
Platinum US$938/oz vs US$934/oz yesterday
Palladium US$1,011/oz vs US$1,003/oz yesterday
Silver US$17.14/oz vs US$17.09/oz yesterday
Base metals:
Copper US$ 6,995/t vs US$6,917/t yesterday
• BHP Billiton’s decision to remove 120 people from its workforce across Chile have been met with immediate union striking as labour relations worsen. The world’s biggest copper mine, Escondida, is no stranger to tensions with the union, with the longest 44-day strike happening earlier this year. The removal of 3% of the workforce falls under BHP’s rationalization plan, although the union sees the cutbacks as retaliation for the protracted and ultimately unsuccessful wage negotiation at the beginning of 2017. “This decision, lacking real and legitimate reasons, is adopted by the company in a post-negotiation scenario and a little over seven months ahead of starting a new negotiation, which allows [one] to attribute to it a character of retaliation and intimidation towards the workers”, comments from the union.
• While the union said operations were halted by the strike, Escondida claim digging and processing continued at a reduced rate, leading to supply concerns from a mine which typically provides 5% of global copper production.
• As prices for the metal rise to near three-year highs, so too do payment expectations for workers across global operations. Strikes by Southern Copper Corp. in Peru only highlight the desire by unions to negotiate more competitive rates.
Aluminium US$ 2,120/t vs US$2,102/t yesterday
Nickel US$ 12,030/t vs US$11,685/t yesterday
Zinc US$ 3,242/t vs US$3,214/t yesterday
Lead US$ 2,477/t vs US$2,430/t yesterday
Tin US$ 19,450/t vs US$19,375/t yesterday
Energy:
Oil US$63.6/bbl vs US$62.9/bbl yesterday
Natural Gas US$2.910/mmbtu vs US$2.952/mmbtu yesterday
Uranium US$24.50/lb vs US$24.50/lb yesterday
Lithium – Lithium - China’s EV industry increasingly looking for lithium, cobalt and nickel
• Prices of battery-grade lithium has made the economics of production in Australian hard rock spodumene sufficiently attractive to attract new investment from China despite high local operating costs
• Great wall motors, a Chinese car manufacturer, has bought a stake in Pilbara Minerals and also agreed to take large stake in Altura new mine with much of the production earmarked for China
Tesla rises to the challenge to finalise the world’s largest battery
• In July this year, Tesla won the bid to construct the 129 megawatt hour lithium-ion battery for South Australia, with the special caveat from chief executive Elon Musk to install it within 100-days of signing a grid connection agreement or give it to the state for free. The wind-power dependent state had been plagued by a string of blackouts over the past 18 months following the closure of one of the market’s biggest coal-fired power plants in March. With construction completed Tesla remains on track to meet the deadline, as testing at the Neoen wind farm is set to begin to provide grid security services.
• The system falls within the state’s budget A$510m energy plan, but the final cost remains unclear.
• “While others are just talking, we are delivering our energy plan, making South Australia more self-sufficient, and providing back up power and more affordable energy for South Australians this summer”
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$64.8/t vs US$64.8/t
Chinese steel rebar 25mm US$676.6/t vs US$678.9/t
Thermal coal (1st year forward cif ARA) US$84.3/t vs US$82.5/t - European Investors to fund $53 million bio-coal plant
• Baltania OÜ, a 100% owned subsidiary of Momentum Capital, announced that it has made a conditional investment decision to commission an industrial-scale bio-coal plant in Estonia
• European Union will also provide grant of about $30m, with idea of supplying clean energy to utility companies in Nordic countries and Central Europe
• Goal is to produce and process approximately 160,00 tonnes of torrefied bio-coal per annum
Premium hard coking coal Aus fob US$199.6/t vs US$197.3/t
Other:
Tungsten APT European US$271-285/mtu vs US$275-285/mtu last week
Cobalt LME 3m US$61750/t vs US$61000/t yesterday
Company News
IronRidge Resources (LON:IRR) 30p, mkt cap £82.4p – Update on Australian exploration
• IronRidge Resources reports that it has identified high grade bauxite mineralisation in rock chip samples at its Koko target located approximately 25km NW of its 24.9mt inferred resource at Monogorilby which grades 37.5% total alumina.
• Two new bauxite targets have been located at Koko extending over strike lengths of 1.2 and 1.8km of strike and with widths of 200m and 300m respectively.
• Also in Australia, the company’s reconnaissance exploration and review of historical data on the May Queen gold prospect in Queensland has “highlighted the Bat Cave target and workings approximately 1km south-east of May Queen with historic reported peak rock chip values of 3.16g/t and 22.2g/t gold. The work appears to be at a relatively early stage of exploration resulting for “Reconnaissance field traverses … over the magnetic anomalies directly south and south-east of May Queen”.
• Further news is promised as it becomes available and the company notes that “additional untested magnetic anomalies occur directly south-east of the May Queen projects”.
Conclusion: Early stage exploration has identified additional targets for further exploration for both bauxite and gold in Australia.
*SP Angel act as Nomad and Broker to IronRidge Resources
Mkango Resources* (LON:MKA) 8.25p, Mkt Cap £8.2m – Exercise of Warrants
• Mkango reports that 3.86m warrants have been exercised leading to the inflow of approximately £242,000.
• A total of 3.445m warrants were exercised at a price of 6.6pence and an additional approximately 418,000 at a price of 3.5pence each.
Conclusion: The recent investment by Talaxis has changed the outlook for Mkango, providing cash to progress the Songwe Hill rare earth project, a route to market for production from the uture mine and seeing Mkango emerge as the preferred partner for Talaxis, and its parent, Noble Group for future rare earths projects.
*SP Angel acts as Nomad and Broker to Mkango Resources
SolGold* (LON:SOLG) 27.25p, Mkt Cap £413.2m – Progress report on Cascabel exploration
• SolGold has provided a report on progress at the Cascabel project in Ecuador where, following the arrival of two track mounted rigs with a further two having arrived in country, the drill fleet is increasing to a total of 11 machines.
• Drilling completed to date at Alpala now exceeds 56,800m and a further 120,000m are planned for 2018.
• On the Alpala Central area, holes CSD-17-030 and its daughter hole CSD-17-030-D1 “extend the Alpala Central deposit approximately 100m southeast of Hole 28.” Hole 33, which has “intersected over 700m of visible mineralisation thus far from 791m to current depth of 1491m as drilling continues. Hole 33 extends mineralisation approximately 120m above holes 9 and 5, where the upper extents of the deposit along its western margin remain open towards the surface.”
• The detailed results at Alpala Central include:
o A 542m long intersection from a depth of 532m in hole CSD-17-030-D1 which averaged 0.37% copper and 0.22g/t gold and included a higher grade portion over 160m from a depth of 622m which averaged 0.53% copper and 0.3g/t gold.
o At Alpala East, Hole CSD-17-029-D1, “the first daughter hole off Hole 29, confirmed the presence of porphyry style Cu-Au mineralisation … returning an open-ended 348m @ 0.47% CuEq and extending mineralisation approximately 200m east of Hole 23R-D1”. The result of hole 29-D1 in detail shows:
A 430.4m long intersection from a depth of 738m at an average grade of 0.32% copper and 0.15g/t gold.
A higher grade section within the hole intersected 158.4m at an average grade of 0.49% copper and 0.27g/t gold from a depth of 1010m.
Assay results are pending for hole CSD-17-029-D2 which reported “over 420m of visible copper mineralisation from 900m 1564m, extending mineralisation approximately 200m below Hole 29-D1”.
Drilling continues at Alpala East in hole CSD-17-029-D3 which has “thus far intersected over 239mof visible mineralisation from 949m to current depth of 1188m”. The company comments that “Holes 29-D1, and 29-D2 have grown the width of the Alpala deposit by approximately 20% from 390m to 470m , at the 0.7% CuEq cut-off”.
At Alpala Northwest, hole CSD-17-26-D3 is currently at a depth of 1588m and remains in visible mineralisation which it entered at a depth of 964m.
Drilling is also underway at Hematite Hill and Alpala Southeast where holes 31, 31D and 32 have all intersected visible mineralisation. Hole 31-D1 infills “mineralisation between Hematite Hill and Alpala Southeast”. Hole 31 extends “mineralisation approximately 150m southeast of Hole 27”.
At Alpala West, “Hole 34 continues at a current depth of 1170m, testing for extensions to the high-grade panel intersected in Hole 25 which returned 238m @ 1.31% CuEq.”
To date, Solgold has drill tested 4 of the 15 targets identified so far at Cascabel and is working towards a maiden mineral resource estimate for the Alpala deposit. In the meantime “The Alpala deposit is open in multiple directions and the mineralised corridor marked for drill testing of the greater Alpala cluster occurs over a 2.2km strike length from Trivinio in the northwest to Cristal in the southeast”. The mineralised corridor is estimated to be around 700m wide.
Conclusion: As the drilling fleet expands at Casacabel ahead of the planned 120,000m campaign next year, results continue to expand the scale and extent of the mineralised bodies. We look forward to the initial resource estimate for Alpala and to news of exploration at the 11 identified targets which are so far untested by drilling.
*SP Angel act as UK broker to SolGold