Mkango Resources* (LON:MKA) – TSXV grants conditional acceptance of Talaxis deal
Patagonia Gold (LON:PGD) - Proceeding with Calcatreu option
Serabi Gold Price (LON:SRB) – Mineral reserve/resource update
Sula Iron & Gold (LON:SULA) – Acquisition of cobalt licence in DRC and name change
Strategic Minerals* (LON:SML) – Redmoor phase 2 drilling results
Dow Jones Industrials +0.49% at 24,329
Nikkei 225 +0.56% at 22,939
HK Hang Seng +1.18% at 28,978
Shanghai Composite +0.98% at 3,322
FTSE 350 Mining +0.09% at 16,558
AIM Basic Resources +1.01% at 2,554
Economics
Currencies
US$1.1788/eur vs 1.1746/eur yesterday. Yen 113.40/$ vs 113.54/$. SAr 13.676/$ vs 13.683/$. $1.337/gbp vs $1.351/gbp
0.753/aud vs 0.751/aud. CNY 6.617/$ vs 6.617/$.
Asian – Strong data positive for Asian shares
• Strong US payrolls data and better-than-expected Chinese trade figures boosted Asian shares as every single market bar one showed positive movement.
• The MSCI’s broadest index of Asia-Pacific shares outside of Japan climbed 0.5% to 552.38 above a recent two-month low. Japan’s Nikkei rose 0.6% with China’s blue-chip CSI 300 index up 1.2%.
Commodity News
Australian and Canadian miners benefit from EV boom
• EV and battery makers looking to lock future raw material supply have been investing in lithium and cobalt mines
• String of potential financing deals in Canada comes after handful of lithium miners in Australia secured investment from mainly Chinese automakers and battery makers this year
Beijing issues emergency order to relight coal generators
• Ordered power companies are required to immediately fire up backup coal burning generators in response to a natural shortage in North China during its critical winter heating period
• The city sent notices to the State Grid Corp. of China’s North China division, State Grid Beijing Electric Power Co. and Huaneng Beijing Thermal Power Co. Ltd. to begin emergency coal power generation to reduce the city’s reliance on natural gas
Precious metals:
Gold US$1,250/oz vs US$1,248/oz last week
• Bearish sentiment toward the precious metal rises to its highest levels since 2015, as traders and analysts surveyed before this week’s meeting of the Federal Reserve (Dec. 12-13) foresee an increase in US interest rates for a third time this year. Money managers have tripled their short positions in gold, which is the fastest pace since record-keeping started in 2006. Rapidly changing sentiment follows a five-year low in short positions last week as North Korea-US tensions and uncertainty surrounding the Senate tax bill supported demand for the safe haven investment.
• Buoyant US payroll data signaled robust economic growth as November figures rise to 228,000, above the 195,000 median economist forecasts. The jobless rate held steady, while wages rose less than expected.
• Traditional investors in the safe haven asset may be drawn towards the rapid ascent of cryptocurrency values, as CBOE launches the debut bitcoin futures markets. The January contract opened at $15,460 in New York on Sunday and rose over 21% to above $18,500 as the exchange is expected to give Bitcoin extra legitimacy. With the rival Chicago Mercantile Exchange opening their derivative contract next week, the increased availability in the digital currency is forecast to draw more finance away from conventional investing.
Gold ETFs 71.7moz vs US$71.7moz last week
Platinum US$892/oz vs US$896/oz last week
Palladium US$1,011/oz vs US$1,019/oz last week
Silver US$15.87/oz vs US$15.78/oz last week
Base metals:
Copper US$ 6,573/t vs US$6,599/t last week
• Following last week’s significant decline across metals, recording the largest fall since 2016, market participants will be looking forward to the release of China’s industrial production data on Thursday to calm concerns over diminishing demand. The combined impact of capacity cuts to China’s second-largest smelter and data indicating surging imports have bitten into the demand-led rally that has lifted prices 19% year-to-date.
Aluminium US$ 2,011/t vs US$2,013/t last week
Nickel US$ 10,900/t vs US$11,020/t last week
Zinc US$ 3,098/t vs US$3,095/t last week
• Zinc leads the rebound of metal prices following last week’s biggest weekly decline since 2016, climbing 0.9% after falling 5.1% last week. Concerns over weakening Chinese demand had drawn LME index of six metals down 3.7%. Although the backdrop for metals over 2018 remains positive, analysts foresee “investors to be looking to lock in any gains and we’re still susceptible to weakness” (Australia & New Zealand Banking Group Ltd).
Lead US$ 2,458/t vs US$2,450/t last week
Tin US$ 19,360/t vs US$19,430/t last week
Energy:
Oil US$63.3/bbl vs US$62.3/bbl last week
• OPEC and its partners have successfully eliminated more than half of excessive global supply this year, and forecast an effective market rebalance through 2018 through an extension of global supply cuts. However, the International Energy Agency foresee rising prices stimulating increased output from US shale drillers and non-OPEC producers, stalling the progress in reducing the remaining global glut.
• Worries over non-OPEC’s reaction to elevated prices has driven hedge funds and money managers to cut their bullish bets on US crude, as the speculator group removed 9,135 contracts in futures and options position in New York to 442,742.
Natural Gas US$2.830/mmbtu vs US$2.778/mmbtu last week
Uranium US$25.00/lb vs US$25.00/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$67.8/t vs US$66.1/t
Chinese steel rebar 25mm US$752.1/t vs US$745.2/t
Thermal coal (1st year forward cif ARA) US$87.4/t vs US$86.3/t
Premium hard coking coal Aus fob US$236.1/t vs US$231.2/t
Other:
Tungsten APT European US$293-300/mtu vs US$291-300/mtu last week
Cobalt LME 3m US$74500/t vs US$71000/t last week
• Tightening market conditions are driving concerns over supply as consumers rush to secure units to support the EV story. The surprise move by investment vehicle Cobalt 27 to acquire over 700 tonnes of physical metal prompted the price of high-grade cobalt to experience a dramatic 10% jump to the top end of $32.50-36.29/lb. The new of the recent purchase has since prompted several sellers to raise their offers and bids to secure deals.
• “There’s big tonnage changing hands in a tight market. Market investors have had a big impact on the whole community, and now with profit realization, we can see continued strength.”
Company News
Mkango Resources* (LON:MKA) 6.625p, Mkt Cap £6.5m – TSXV grants conditional acceptance of Talaxis deal
• Mkango Resources reports that the TSXV has conditionally accepted the Talaxis deal under which Mkango is set to receive £12m in three tranches for a 49% interest in the Songwe Hill Rare Earths Project. The transaction is subject to shareholder approval (excluding Talaxis) which is to be sought at a meeting to be held on 18th January 2018.
• “The first and second tranches, totaling £5 million (C$8.6 million), of the investment into the Project will be invested following receipt of Minority Approval, to be sought at a meeting ("Meeting") scheduled for January 18, 2018. The first tranche of £2 million (C$3.4 million) is being placed into escrow by Talaxis pending the Meeting.” In addition, there is an initial £1m investment into the new venture, Newco.
• The third tranche is subject to the completion of the formal documentation following the shareholder meeting. In addition, Talaxis has the option to “acquire a further 26% interest in the Project by arranging funding for Project development, following which Mkango would hold a 25% interest in the Project, free carried until commencement of production.”
• We also highlight the agreement between Mkango and Talaxis for cooperation on rare–earths projects worldwide and all other projects in Malawi, which singles Mkango out as the preferred partner for future rare earths projects as Talaxis owner, Noble Group develops its strategy in rare-earths.
• Commenting on the moves by the TSXV, Mkango’s Chief Executive, William Dawes, noted that “On shareholder approval and receipt of £6 million investment by Talaxis, the Company will commence the initial phase of the feasibility study, including mobilization for an extensive infill, geotechnical and exploration drilling programme starting in the second quarter of 2018, in parallel with ongoing processing flow sheet optimisation and work in relation to the Environmental, Social and Health Impact Assessment.”
Conclusion: We look forward to the shareholder vote in January which should clear the way for the funding needed to start the initial feasibility work at Songwe Hill and to the continuing flow of results from that work.
*SP Angel acts as Nomad and Broker to Mkango Resources
Patagonia Gold (PGD LN) 0.875p, mkt cap £20.7m - Proceeding with Calcatreu option
• Following its recent fundraising, Patagonia Gold is moving ahead with the formalities needed in order to exercise its option to acquire the Calcatreu silver/gold project in the Rio Negro Province of Argentina from Pan American Silver.
• The deposit contains an Ni-43-101 compliant indicated resource of 8mt at an average grade of 25.7 g/t silver and 2.63 g/t gold (6.6moz of silver and 675,000 oz of gold).
• “The system has a known strike length of over 8 km” and the company intends to undertake detailed geophysical and geochemical surveys to provide insight into the potential scale of the opportunity.
Serabi Gold Price (LON:SRB) 3.25p, mkt cap £22.7m – Mineral reserve/resource update
• Serabi Gold reports its mineral reserves and resources effective 30th June 2017. The proven and probable reserves, in accordance with the CIM / NI-43-101 reporting standard, amount to a total of 182,000 oz of gold contained in 703,000 tonnes at a diluted grade of 8.05g/t gold. The company notes that this supports “in excess of 4 years production”.
• Over 90% of the reserve is contained within the Palito mine reserve inventory with the balance at the nearby Chico mine.
• The company notes that “The mineral resource and reserve estimates exclude previously announced gold discoveries made by Serabi including the Currutela, Copper Hill, Piaui and Palito South areas, where there is currently insufficient geological data to estimate a mineral resource for these discoveries. [However] … An infill drill programme is currently underway that will provide additional geological date on each of these project areas.”
• The company makes the point that, since its last resource estimation in June 2012, and the reopening of the Palito mine in late 2013, the mine has extracted some 182,000oz of gold have been extracted and the overall measured/indicated resource of Palito has increased by 31percent to 271,000 oz (717,000t at a grade of 11.74g/t) with an additional inferred resource of 177,000oz (784,000t averaging 7.02g/t)
• We interpret this to mean that over the 4 year period since the mine re-opened, Serabi Gold has added an extra 182,000oz of gold to its measured/indicated resource base in addition to the gold produced.
• Similarly, we estimate that at Sao Chico, Serabi Gold has added some 39,000oz of resource in excess of the estimated 28,000oz of gold produced since the mine reached commercial production in January 2016.
Conclusion: Serabi Gold has boosted its overall mineral resources at both its operating mines at Palito and Sao Chico and is currently drilling a number of other prospects which may further add to resources if a sufficient density of drilling is achieved to support a resource estimate on these other properties. We look forward to continuing news as drilling proceeds.
Sula Iron & Gold (LON:SULA) 0.085p, Mkt Cap £2.8m – Acquisition of cobalt licence in DRC and name change
• Sula Iron & Gold has announced that it has acquired a controlling, 70% interest, in a cobalt licence in the DRC. The licence is located “close to a number of existing cobalt / copper mines …” and is underlain “by the type of rocks which hosts most of DRC’s cobalt and copper”.
• Grades reported on grab samples analysed in the field by a portable XRF analyser are reported to range up to 2.5% cobalt.
• The company has, conditionally, raised £1.75m to progress the cobalt project and assess other similar opportunities in the DRC, via the placing of 3bn shares with new and existing shareholders and “a subscription for 500,000,000 New Ordinary Shares with a single investor all at a price of 0.05 pence per share. The Fundraising, which has been arranged by SP Angel, is conditional, inter alia, upon Shareholders' approval of each of the Resolutions and Admission.”
• In order to reflect the shift in direction, “the Board has passed a resolution … to change the Company’s name to African Battery Metals plc”.
• A shareholder meeting has been called for 27th December.
• Commenting on the transaction, CEO, Roger Murphy, said “We are bullish on the outlook for cobalt and the other battery metals and believe that the creation of African Battery Metals plc will provide UK equity investors with exposure to cobalt, which some analysts see as the battery metal with the tightest supply/demand fundamentals.” Mr Murphy went on to add “The addition of cobalt to our existing gold assets in Sierra Leone, provides important diversification to our exploration activities. We remain committed to our Ferensola Gold Project and to maintaining and valorising it through a joint venture or farm-out, as previously announced."
Conclusion: The acquisition of a cobalt licence in DRC provides the London market with a new exploration exposure to the growing interest in cobalt as a battery metal. We look forward to developments as exploration proceeds.
Strategic Minerals* (LON:SML) 2.15p, Mkt Cap £28.4m – Redmoor phase 2 drilling results
• Strategic Minerals has released the results of the final 5 boreholes of its drilling programme at the Redmoor tin/tungsten project in Cornwall where it holds a 50% interest in Cornwall Resources with New Age Exploration.
• The results from the Phase 2 drilling show “Considerably higher-grade intercepts than previously reported”, and in our interpretation, show mineralisation within the sheeted vein system (SVS) extending over a vertical interval of up to 500m.
• The results of the full 20 hole, 7,045m programme, in conjunction with pre-existing drilling information, will be used for an update of the mineral resources estimate (currently an inferred resource of 13.3mt at an average grade of 0.21% tin and 0.16% tungsten trioxide) which is “targeted for release in Q1 2018.”
• The company also points out that the recent drilling “appears to indicate that the SVS grade may be increasing with depth.” Among the results reported today from the SVS are:
o An 8.5m wide intersection (7.83m estimated true width) at an average grade of 0.09% tin, 0.23% tungsten trioxide and 0.32% copper from a depth of 320.12m in hole CRD020, which also contained a 3m intersection averaging 1.55% tin, 0.06% tungsten trioxide and 2.45% copper from 301.13m and 4m averaging 0.57% tin, 0.15% tungsten trioxide and 0.75% copper from 354.76m; and
o Intersections of 6m averaging 0.03% tin, 1.29% tungsten trioxide and 0.28% copper from 465.10m and 7m averaging 0.01% tin, 1.79% tungsten trioxide and 0.17% copper from 507.05m in hole CRD019; and
o A 13m wide intersection (8.41m estimated true width) at an average grade of 0.08% tin, 0.43% tungsten trioxide and 1.24% copper from a depth of 357.17m in hole CRD018, which also contained a 2m wide intersection averaging 0.07% tin, 0.81% tungsten trioxide and 0.35% copper from 365.17m..
• We note that the recent drilling is showing potentially significant copper and tungsten trioxide grades while the tin grades, with the exception of those encountered in hole CRD020, are generally lower than those previously encountered.
• Commenting on the results, non-executive director, Peter Wale, highlighted that the “potential for the resource size and grade to improve at depth has opened a substantial opportunity for the projects, extending the depth of known mineralisation at Redmoor.”
• Mr Wale went on to comment that “These results have encouraged us to seriously examine fast-tracking the project to production and we look forward to updating the market after completing the resource update.”
Conclusion: The second phase of drilling at Redmoor has shown wide intersections of the SVS at depth and encouraged the company to examine fast track development opportunities for the project. We look forward to the updated mineral resource estimate during Q1 2018 and to further comment from the company on its view of the development possibilities at Redmoor.
*SP Angel act as Nomad and broker to Strategic Minerals