Altus Strategies* (LON:ALS) BUY – Target price 12.2p – Tigray-Afar exploration update
Asiamet Resources (LON:ARS) – Metallurgical Drilling at BKM
Bushveld Minerals (LON:BMN) BUY – Target price raised to 14.3p from 11p – Bushveld adds value as it consolidates control over Vametco
Click here for research note
Golden Star Resources (TSE:GSC) – Peer recognition as Mining Company of the year in Ghana.
Kibo Mining (LON:KIBO) –Acquisition of an advanced coal to power project in Botswana
SolGold* (LON:SOLG) – SolGold raises £45m
Vast Resources (LON:VAST) – Carlibaba drilling update
Dow Jones Industrials +0.44% at 23,941
Nikkei 225 +0.57% at 22,725
HK Hang Seng -1.51% at 29,177
Shanghai Composite -0.62% at 3,317
FTSE 350 Mining -0.22% at 16,623
AIM Basic Resources -0.30% at 2,656
Economics
US – Q3 GDP has been revised up to 3.3% from 3.0%, beating estimates for 3.2%; although, a third of the upgrade attributed to trade and inventories.
• Business investments picked up while consumer spending was brought down showing little signs of improvement.
China – While both manufacturing and services sectors growth picked up in November on the latest official numbers, a separate Markit survey showed business outlook remained close to a record low in October.
• “Latest data signals subdued levels of confidence across both the manufacturing and service sectors towards future business activity, new orders and business revenues… at the same time, companies revised down their hiring plans, while forecasting stronger cost pressures,” Markit wrote.
• “Projected squeeze on margins fed through to weaker expected profits growth, with optimism towards profitability at its lowest since June 2016.”
• Manufacturing PMI: 51.8 v 51.6 in October and 51.4 forecast.
• Services PMI: 54.8 v 54.3 in October.
Germany – The number of people out of job fell for a fifth consecutive month beating market estimates in November.
• Unemployment rate held at record low of 5.6% amid strong economic growth and positive business outlook.
• German numbers come ahead of Eurozone wide numbers expected to show the jobless rate held at an eight-year low of 8.9%.
UK – House prices growth held steady at 2.5%yoy in November coming slightly below a 2.7%yoy market forecast, according to Nationwide.
• Demand is said to be driven by low mortgage rates and employment growth; although, “this is being partly offset by pressure on household incomes”.
• Initiatives announced by Philip Hammond earlier this month are expected to have only a “modest” effect on demand for properties.
• Consumer confidence fell to a four-month low in November with all five measures used by GfK posting declines and the willingness of consumers to make major purchases recording the biggest decline.
• “Household jitters following the recent interest-rate hike, squeezed incomes, higher inflation and economic uncertainty have dampened the consumer mood across the UK,” GfK said in the commentary.
Italy – Unemployment rate came in line with estimates holding up at 11.1% in November.
• A positive detail in the report is that youth unemployment dropped to 34.7%, the lowest since March this year, down from 35.4%.
Currencies
US$1.1845/eur vs 1.1868/eur yesterday. Yen 112.42/$ vs 111.42/$. SAr 13.682/$ vs 13.635/$. $1.346/gbp vs $1.342/gbp.
0.757/aud vs 0.759/aud. CNY 6.611/$ vs 6.598/$.
Commodity News
Precious metals:
Gold US$1,281/oz vs US$1,296/oz yesterday
• Gold prices edged back as positive US economic data was supported by comments from US Federal Reserve chairwoman Janet Yellen that economic growth was broad based, which saw investors become more convinced that rates would go higher.
• Third-quarter gross domestic product was revised upward to 3.3% from 3.0%, and home sales also improved, recording -0.6% yoy compared with a previous quarter at -3.9%.
• However, underlying geopolitical tensions surrounding North Korea’s insistence to develop its nuclear weapons programme and “continued acts of aggression” give support to the safe haven asset.
• A lack of clear drivers has kept gold between $1,265 and $1,300 an ounce throughout November, its narrowest monthly range in 12 years.
Gold ETFs 71.6moz vs US$69.4moz yesterday
Platinum US$943/oz vs US$952/oz yesterday
Palladium US$1,017/oz vs US$1,028/oz yesterday
Silver US$16.50/oz vs US$16.90/oz yesterday
Base metals:
Copper US$ 6,762/t vs US$6,805/t yesterday
• Despite encouraging manufacturing reports from key Asian nations, base metals drifted lower as investors locked in profits before the close of year. The downward trend is expected to continue as “There is higher risk aversion among market participants, with the oil price down as well, and there are lingering concerns about China…and rising (U.S.) interest rates” said Commerzbank analyst.
• China’s growth across its manufacturing sector unexpectedly rose, despite a cooling property market and the stringent winter air quality emissions measures cutting output. The official Purchasing Managers’ Index (PMI) for November recorded an increase to 51.8, compared to 51.6 in October, and sits comfortably above the 50-point mark which signifies sector growth. Manufacturing has been boosted by encouraging government infrastructure spending, a resilient property market and unexpected strength in exports, which have ultimately sustained the economy’s forecast-beating growth of 6.9%.
• Japan’s industrial output is expected to rise strongly in November and December as robust overseas demand continues to support factory activity and broader economic growth.
• Despite ongoing divestment issues, Freeport-McMoRan is aiming to increase exports to 1.1 million tonnes concentrate. Global production is, however, being hampered by continued striking in one of the world’s largest copper suppliers. Workers at Southern Copper Corp have completed the ninth day of an indefinite strike following failed wage negotiation attempts.
EV’s to drive long term copper demand
• Electric vehicles bullish driver for global copper demand as copper content higher in electric vehicles, also require expanded charging infrastructure
• Hybrid vehicle uses 40kg of copper compared to plug-in hybrid electric vehicles and battery electric vehicles, at 60 kg and 83 kg, respectively
Aluminium US$ 2,056/t vs US$2,092/t yesterday
• Emission-related production cuts across China’s polluting provinces are proving to be less stringent, causing Shanghai Futures Exchange (ShFE) aluminium to fall more than 11% this month as supply concerns fade.
Nickel US$ 11,295/t vs US$11,365/t yesterday
• Nickel prices have contracted 8% in November as market participants recognise that despite compelling and rapid demand growth from the electric economy, consumption by end use for battery technology still only represents 2-3% of the global total.
Zinc US$ 3,139/t vs US$3,147/t yesterday
Lead US$ 2,450/t vs US$2,439/t yesterday
Tin US$ 19,475/t vs US$19,485/t yesterday
Energy:
Oil US$63.6/bbl vs US$63.3/bbl yesterday
• The prolonged oil supply cuts of 1.8 million barrels per day agreed by OPEC and Russia will come under review when the committee meet again in June, as concerns rise over sustained oil prices encouraging a spike in U.S. production.
Natural Gas US$3.113/mmbtu vs US$3.182/mmbtu yesterday
Uranium US$23.90/lb vs US$23.50/lb yesterday
Lithium - PotashCorp CEO confirms Chinese interest in lithium producer SQM
• Chief executive Joel Tilk told Reuters there was a ‘broad interest from potential bidders and actual bidders coming from those interested in lithium and many in China’
• Last week was mentioned that Chinese private equity firm GSR capital and Canada’s wealth minerals are latest firms to be weighing an investment in SQM
MGX Minerals targets geothermal market for extraction of lithium and gold
• Partner PurLucid has developed high temperature filtration method to purify geothermal brines – similar to oil field brines
• The brines contain concentrated amounts of metals and dissolved salts including lithium and gold.
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$67.2/t vs US$66.6/t
Chinese steel rebar 25mm US$729.4/t vs US$706.1/t
Thermal coal (1st year forward cif ARA) US$86.0/t vs US$84.6/t
Premium hard coking coal Aus fob US$209.9/t vs US$202.0/t
Other:
Tungsten APT European US$275-285/mtu vs US$271-285/mtu last week
Cobalt LME 3m US$68250/t vs US$61750/t last week - Car makers join forces to drive sustainability in Cobalt mining
• Volkswagen, Toyota, BMW, Jaguar Land Rover and Volvo have joined forces to identify and address the risks posed by crucial materials like cobalt
• Set to unveil action plan by beginning of next year
Company News
Altus Strategies* (LON:ALS) 8.3p, Mkt Cap £8.9m – Tigray-Afar exploration update
BUY – Target price 12.2p
• Prospecting works completed during Q3/17 at the Tigray-Afar license in northern Ethiopia focused on the Asagara copper oxide target.
• Groups of up to 50 artisanal miners have been reported at site working on outcropping oxide copper mineralisation.
• Geological mapping at the site identified semi-continuous mineralisation over a 2.0km strike with recorded widths of up to 20m and a parallel structure of 0.6km strike length and up to 15m wide.
• Channel sampling of outcrops returned 8m at 0.56% Cu and 5m at 0.77% Cu (starting and ending in mineralisation).
• Rock chip sample from located artisanal workings returned grades up to 5.58% Cu.
• The plan is to continue with channel sampling programme in the area ahead of trenching scheduled for Q1/18.
• The Company is also planning to do more work at the Cu-Ag-AU Agamat target (8km away from Asagara) where previously grab samples returned grades of 8.7% Cu, 99g/t Ag and 13.5g/t Au while best drilling intersections came back with 0.70% Cu at 28.2m.
• The plan is to map mineralised structures and progress to channel sampling.
Conclusion: The Company is planning to follow on interesting early stage prospecting results at the Asagara copper target. Further channel sampling and trenching works should help to understand continuity, widths and grades of the mineralisation as well as identify future drilling targets. The team is also looking to do more work at the Agamat Cu-Ag-Au target planning extension of shear zones mapping ahead of systematic channel sampling programme.
*SP Angel acts as Nomad and Broker to Altus Strategies
Asiamet Resources (LON:ARS) 9p, Mkt Cap £77m – Metallurgical Drilling at BKM
• Asiamet Resources reports that it now has results from eight of the nine holes (764m) metallurgical drilling programme at the BKM property in Indonesia.
• The drilling was designed to obtain material for testing the 4 principal zones of copper mineralisation identified at the property and to establish the recovery parameters for heap leaching the different mineralogical domains identified which “vary laterally and vertically across the deposit, [but] however form broad and substantial spatially consistent zones”. These zones are identified as:
o A chalcocite zone
o A mixed chalcocite covellite zone
o A zone of covellite, bornite and chalcopyrite and
o A zone dominated by the primary copper mineral, chalcopyrite.
o Of these, the “most prevalent copper mineral species is chalcocite – covellite dominant which occurs in both the BK44 and BK58 Zones.” Without pre-judging the outcome of the test work, we expect that this should be beneficial as the minerals covellite and chalcocite, in their pure form, contain approximately 66.5% and 79.9% copper while the other species, bornite (63.3%) and chalcopyrite (34.6%) are not as copper rich.
o Insight into the metallurgical characteristics in terms of recovery under the proposed heap leaching for BKM will be established as a result of the testing.
o Among the assay results reported today are:
A 115.5m wide intersection at an average grade of 1.01% copper from a depth of 2m in hole BKM32230-01 which terminated in mineralisation grading 2.56% copper and included higher grade sections, for example 13m averaging 1.81% copper and 17m averaging 1.24% copper;
An intersection of 24.3m averaging 0.82% copper from a depth of 1.7m in hole BKM32425-02 which included 9m averaging 1.42% copper from 9m; and
An intersection of 41.5m averaging 0.74% copper from a depth of 25m in hole BKM32485-01 which included 9.5m averaging 1.84% copper from a depth of 46m.
Initial results from the testing are expected in early December with further results from the longer duration tests expected in early January.
Conclusion: Metallurgical results from Asiamet’s shallow copper resource at the BKM project are expected shortly and are expected to enable the company to identify the most favourable metallurgical treatment route for the proposed heap-leaching of copper and to locate the initial mining operation in a position to generate the strongest early cash-flows. We look forward to the results of the test work as it becomes available.
Bushveld Minerals (LON:BMN) 8.8p, mkt cap £70.7m – Bushveld adds value as it consolidates control over Vametco
BUY – Target price raised to 14.3p from 11p
(Bushveld Minerals now holds 59.1% of Vametco)
Click here for research note
• Bushveld Minerals is consolidating its control over Bushveld Vametco and the Vametco vanadium mine and process plant in South Africa.
• The acquisition of the remaining 55% of Bushveld Vametco which Bushveld did not own is value accretive on our modelling and raises Bushveld’s effective stake in Vametco to 59.1% from 26.6%.
• We are upgrading our target price to 14.3p from 11p based on Bushveld’s increased share of the cash flow from Vametco..
• Bushveld Minerals are to acquire a further 55% of Bushveld Vametco raising its stake to an effective 59.1% of the Vametco vanadium mine and process plant.
• The deal is being funded $4.5m in cash with the remainder being paid for on the issuance of new shares. There are also two deferred payments of US$600,000 and a further payment to be calculated by reference to the EBITDA of Vametco which on our modelling costs another US$9.61 in 2020.
• $6.6m worth of new shares are being issued raising the number of shares to around 863m. The deal appears highly value accretive as we value Vametco more highly than the indicated acquisition price on our vanadium assumptions.
• Vametco produces around 3.5-4% of the world’s vanadium with global demand growth set to take off on the application of new regulations in China causing steel producers to now add regulatory quantities of vanadium to rebar and other types of structural steel.
• Vanadium production is also being curtailed in China where a ban on the processing of slag material is restricting the production of vanadium and other metals from this source as part of the drive to improve air quality standards.
• Bushveld Vametco managed to repay the acquisition costs and associated debt within an impressive four months of the acquisition of their first 26.6% of Vametco. We hope this second deal will result in a similarly quick repayment of the debt associated with the deal.
• The team are looking to expand market share to >10% of global vanadium supply over the next 3-5 years in a move which could add significantly to production expanding nameplate capacity to 5,000tpa of FeV from 3,000 tpa currently.
Conclusion: We are excited to see vanadium prices take off but cautious in our revised valuation. We see Bushveld as offering unusually good value for investors in its cash flow generation and upside cash flow potential. Our revised earnings table is for 100% of the Vametco vanadium operations of which Bushveld now has an effective stake 59.1%. The ongoing rise in vanadium prices should have a substantial impact on Vametco’s profit through the fourth quarter as indicated in our revised numbers.
Vametco plant assuming 100% 2017 2018 2019 2020 2021
Price V2O5 $/lb 6.40 7.37 6.01 6.01 6.01
Vanadium flake price US$/kg 30.80 33.00 27.50 27.50 27.50
Vanadium sales kg 2,750 3,390 3,390 4,823 4,823
Sales US$m 80.46 106.28 88.57 125.99 125.99
Operating costs US$m 62.02 72.79 69.39 96.08 96.08
Operating costs US$/kg 22.55 21.47 20.47 19.92 19.92
Operating profit US$m 18.44 33.49 19.18 29.91 29.91
Pre-tax profit US$m 18.20 33.02 17.76 27.60 27.73
tax US$m 5.19 9.41 5.06 7.87 7.90
Post-tax profit US$m 13.01 23.61 12.70 19.74 19.83
EPS US$c/s 1.51 2.74 1.47 2.29 2.30
PE x 6.7 3.7 6.9 4.4 4.4
EV/EBITDA x 4.8 2.6 4.6 2.9 2.9
Figures based on 100% of Vametco plant. Bushveld now hold an effective 59.1% of the Vametco plant
*An SP Angel Mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Golden Star Resources (TSE:GSC) C$1.1, Mkt Cap C$426m – Peer recognition as Mining Company of the year in Ghana.
• Golden Star Resources’ Bogoso and Prestea operations have been recognised with the local operating subsidiary, Golden Star Bogoso/Prestea Limited receiving the award as Mining Company of the Year in the industry awards judged “by a panel of industry professionals” in Ghana.
• In addition to the corporate recognition, the company’s Chief Operating Officer, Daniel Owiredu, received the inaugural Mining Personality of the Year award while the company also received awards for its breast cancer awareness programme in the Best Performer in Social Investment category and the award for Best Graduate Research was bestowed on the Process Manager from the Prestea mine, Ahmed Salim Adam who was .
• “A student of the Golden Star School in Bogoso village, Winifred Korankye Amoah, was also awarded first prize in the essay-writing competition, which was open to school children across Ghana.”
• Commenting on the company’s success in the awards and highlighting the individual and corporate achievements, Golden Star’s Chief Executive, Sam Coetzer, pointed out the underlying teamwork saying “It is only through working together that we are able to win these awards and more importantly, deliver long term, sustainable benefits for all our stakeholders”.
Conclusion: As in other industries, peer group recognition by other professionals in the mining industry puts a spotlight on the achievements of the entire operating team; we congratulate the Golden Star team and the recipients of the individual awards on their achievements.
Kibo Mining (LON:KIBO) 4.6 pence, Mkt Cap £18.3m –Acquisition of an advanced coal to power project in Botswana
• Kibo Mining reports that it has concluded an agreement to acquire 85% of the Mabesekwa Coal Independent Power Project from Sechaba Natural Resources (a subsidiary of Shumba Energy), for 153.7m shares.
• The project, which builds on the expertise Kibo Mining has developed on its 250-350MW Mbeya Coal to Power project in Tanzania, is located approximately 50km southeast of Francistown, currently has an overall measured/indicated/inferred resource of 777m tonnes defined under the South African SAMREC code.
• “The power plant fuel source is envisaged to be drawn from the MCIPP Resource. As earlier stated, the Project will consist of a 300Mt subset of this current 777Mt coal Mineral Resource, with the precise subset comprising the MCIPP Resource to be defined during the detailed due diligence”.
• At this stage, it does not appear that the scale of the power generation plant has been disclosed, however, “Certain aspects of the Projects have been advanced previously by Sechaba, including water and land use permits and environmental certification which are now in place.”
o At Kibo Mining’s current share price, the transaction is valued at approximately £7.1m. Among the conditions of the transaction are Sechaba’s right to a US$0.50 per tonne royalty “from …coal sold from the area covered by the MCIPP Resource; and • US 0.225 cents from revenue received per kilowatt hour produced and sold by any power plant owned by NewCo in Botswana or using coal procured from the area covered by the MCIPP Resource”.
o Kibo Mining is also to “use reasonable commercial endeavours … to free-carry Sechaba for the reasonable funding requirements of the MCIPP until financial close of a project financing, after which Sechaba may be diluted”.
Conclusion: The acquisition of the Mabesekwa project has clear synergies with the company’s flagship Mbeya coal to power project in Tanzania and the expertise gained at Mbeya should benefit Mabesekwa. Despite these obvious benefits, we believe that Kibo Mining will need to make sure that its focus on delivering the Mbeya project is not impaired by its efforts in Botswana.
SolGold* (LON:SOLG) 27p, Mkt Cap £409m – SolGold raises £45m
• SolGold has raised £45m by way of a fully underwritten placement.
• The company is issuing 180,000,000 new shares which will trade on the London Stock Exchange Standard List.
• The placing price is 25 pence per share.
*SP Angel act as UK broker to SolGold and have acted as placing agent in relation to the SolGold issue
Vast Resources (LON:VAST) 0.5p, Mkt Cap £26.1m – Carlibaba drilling update
• The Company has released further results from its 2,150m drilling programme at the Carlibaba target, which is under consideration as a second open pit mine and the site of a new processing plant at the company’s Manaila polymetallic mine in Romania.
• The results, in combination with the existing database of historic drilling and sampling data, will be used to update the geological model and produce a revised JORC compliant resource estimate during H1 2018.
• The results of the 18 surface, cored, drill holes are reported to validate the existing data on Carlibaba, particularly “on the portion of the mineral resource which was previously identified as having possible open pit mining potential.”
• “The drilling programme appears to support the development of a second open pit operation at Manaila with the construction of a metallurgical processing facility on site, thereby significantly reducing the cost of ore transport incurred at the current operation.”
• Vast Resources’ Chief Executive, Roy Pitchford, commented that “The development of these twin objectives, which we are looking to fund through off-take debt finance, is expected to increase throughput volumes at Manaila considerably and also materially reduce operating costs - which should significantly enhance profitability in Romania moving forwards."
• Among the drilling results highlighted in today’s announcement are:
o A 12.4m long intersection averaging 0.44g/t gold, 14.6g/t silver, 1.11% copper, 0.18% lead and 0.43% zinc from a depth of 114.6m in hole F005;
o A 4.5m long intersection averaging 0.18g/t gold, 9.98g/t silver, 1.17% copper, 0.08% lead and 0.21% zinc from a depth of 109.2m in hole F004; and
o Three separate mineralised intersections encountered in hole F013; 1.5m averaging 0.13g/t gold, 18.3g/t silver, 0.43% copper, 0.45% lead and 14.34% zinc from a depth of 61.3m and 2.7m averaging 0.33g/t gold, 62.4g/t silver, 0.94% copper, 1.18% lead and 11.99% zinc from a depth of 92m and 4.5m averaging 0.26g/t gold, 16.2g/t silver, 0.39% copper, 0.27% lead and 4.37% zinc from a depth of 100.5m.
Conclusion: The drilling at Carlibaba will be used to develop an updated mineral resource estimate which should help the company to make a decision on whether to proceed with plans to develop a second open pit mine and a new processing plant within its Manaila licence in order to reduce operating costs. We look forward to the new resource estimate during H1 2018.