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Dalradian Resources (LON:DALR) – Drilling results from Curraghinalt
Lonmin PLC (LON:LMI) – Recommended offer from Sibanye
Mkango Resources* (LON:MKA) – Exercise of Warrants
Newcrest Mining Ltd (ASX:NCM) – Sale of Bonikro mine
Premier African Minerals (LON:PREM) – Further drilling results from the Zulu Lithium Project
Tertiary Minerals* (LON:TYM) – Annual results and project highlights
Dow Jones Industrials
+0.33%
at
24,585
Nikkei 225
-0.28%
at
22,694
HK Hang Seng
-0.19%
at
29,166
Shanghai Composite
-0.32%
at
3,292
FTSE 350 Mining
+0.55%
at
17,017
AIM Basic Resources
-0.66%
at
2,578
Economics
US – The Fed hiked the benchmark rate by 25bp in a widely expected move while leaving monetary policy outlook.
- Median estimates of FOMC members over future rate rises remained unchanged for three rate increases in 2018 and another two in 2019.
- Fed policymakers downplayed a potential positive economic effect of the suggested tax overhaul regulation suggesting growth will pick up next year but remain little changed in the long run.
- 2018 growth estimates were revised to 2.5% from 2.1% made in September.
- The Fed estimated potential sustainable growth rate at 1.8% which comes in sharp contrast to White House figures of around 3%.
- “Its not gigantic increase in growth,” Yellen told in the press conference referring to the proposed regulation.
- The US$ and US sovereign bonds yields came off while precious metals climbed on the back of reserved Fed growth outlook while S&P 500 closed lower breaking a four day winning streak.
China – A set of economic data released this morning point to a consolidation in growth pace in industrial and consumer sectors while investments continued to grind lower in November.
- Manufacturing benefited from good overseas demand with exports strengthening into year end.
- A share of government infrastructure spending, a measure of state stimulus, has picked up 0.5pp to 20.1%.
- Industrial Production (%YTD): 6.6 v 6.7 in October and 6.6 forecast.
- Retail Sales (%YTD): 10.3 v 10.3 in October and 10.3 forecast.
- FAI (%YTD): 7.2 v 7.3 in October and 7.2 forecast.
- The central bank slightly raised borrowing costs following the Fed decision to hike yesterday.
- Repo rates for seven-day and 28-day contracts were increased by 5bp while the cost of the medium term lending facility was increased by same 5bp to 3.25%.
- Given a modest adjustments market commentators suggested the move highlights the PBOC desire to balance the need to deleverage the economy while avoiding stresses to markets.
UK – While no policy changes are expected by economists, all the attention will be on Mark Carney comments over economic outlook and prospects for two more rate increases over the next three years.
Currencies
US$1.1832/eur vs 1.1741/eur yesterday Yen 112.74/$ vs 113.43/$ SAr 13.452/$ vs 13.618/$ $1.344/gbp vs $1.332/gbp 0.767/aud vs 0.757/aud CNY 6.609/$ vs 6.621/$
Commodity News
Precious metals:
Gold US$1,255/oz vs US$1,242/oz yesterday
- Federal Reserve projections for three interest rate increases in 2018 suppresses concerns surrounding tightening central bank policies amid signs of strengthening US economy, pulling investors to gold. The precious metal extended its largest daily increase for three weeks, closing 0.9% to $1,256/oz.
- Key changes in the announcement following the FOMC meeting remove prior language over expectations that the labour market would strengthen further. Labour department data showed consumer inflation, excluding food and energy, dropped lower than expected at 1.7% for November.
- While the dollar index was little changed following the meeting, rising gold prices “had primarily been a function of the slide in U.S. dollar strength, with prices expected to stay elevated as BOE and ECB meetings are seen as non-events” IG Asia strategist
Gold ETFs 71.7moz vs US$71.7moz yesterday
Platinum US$885/oz vs US$878/oz yesterday
Palladium US$1,020/oz vs US$1,016/oz yesterday
Silver US$16.05/oz vs US$15.71/oz yesterday
Base metals:
Copper US$ 6,740/t vs US$6,703/t yesterday
Aluminium US$ 2,021/t vs US$2,016/t yesterday
- Industrial metals rise following early contraction as China’s central bank surprises by raising borrowing costs following the Fed’s rate hike. PBOC’s move has looks to further tighten liquidity across the top consumer of commodities with the surprise announcement “hurting market confidence”. Metals regained losses as the effect of winter capacity cuts tighten market balances and boost prices.
- The nations aluminium output falls to its lowest since February 2015, with primary production dropping for a fifth consecutive month in November. The world’s largest aluminum supplier generated 2.35 million tonnes of metals, representing a 7.8% fall from October and the significant 16.8% reduction yoy. The war on smog during the peak winter heating season looks to cut output by at least 30% across smelters in 28 northern cities.
- Authorities may look to expand the cuts as China Hongqiao Group, the world’s largest aluminium smelter, managed to avoid steep output cuts despite being located within the Shandong province. Moody’s Investors Service Inc foresee Chinese capacity cuts not living up to market expectations, which could drive the price of aluminium lower.
Nickel US$ 11,125/t vs US$11,200/t yesterday
Zinc US$ 3,168/t vs US$3,161/t yesterday
Lead US$ 2,515/t vs US$2,517/t yesterday
Tin US$ 18,860/t vs US$18,800/t yesterday
Energy:
Oil US$62.9/bbl vs US$64.1/bbl yesterday
Natural Gas US$2.672/mmbtu vs US$2.714/mmbtu yesterday
Uranium US$24.65/lb vs US$25.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$69.0/t vs US$68.0/t
- Steel supply slumps as China slashes output across unregulated capacity and tightens output from operations during winter pollution cuts. The nation’s mill production sunk 8.6% in November mom to 66.15 million tonnes of crude steel, the lowest since February.
- President Xi Jinping is driving a reduction in surplus capacity across the country’s metal industry, with a focus on environmentally harmful operations. Authorities are broadly closing mills and smelters in northern regions, easing supply and driving prices to the highest levels since 2008 with Argonaut Securities (Asia) Ltd “expecting steel prices to stay elevated or test new highs as we are going through the winter production cuts until mid-March”.
- The crackdown in domestic supply has driven the demand for imports, while net exports have significantly dropped. The move has also impacted inventories which have contracted more than 30% in 2017, declining to their lowest levels since 2010.
Chinese steel rebar 25mm US$750.2/t vs US$755.7/t
Thermal coal (1st year forward cif ARA) US$89.5/t vs US$90.0/t
Premium hard coking coal Aus fob US$236.1/t vs US$236.2/t
Other:
Tungsten APT European US$293-300/mtu vs US$291-300/mtu last week
Cobalt LME 3m US$71000/t vs US$72750/t yesterday
Company News
Dalradian Resources (LON:DALR) 75.5p, Mkt Cap £268.2m – Drilling results from Curraghinalt
- Dalradian Resources has reported results from the latest 20 holes of its continuing infill and step-out drilling programme at Curraghinalt in Northern Ireland where there are 6 drill rigs operating on surface and 3 working underground.
- The company notes that, with around 75% of the planned programme completed the “drilling continues to deliver high grade intercepts, both within the bounds of the previous resource and up to more than 450 metres to the West. [and] … What we have seen so far shows that there are numerous areas within the deposit that we should be able to convert to lower cost mechanized mining methods because the rock strength is much better than originally modelled. This work is vital to our updated feasibility study planned for Q3 2018. Drilling will continue into January so that we have the data we need to deliver a resource update in Q2 2018, which will also feed into the FS update."
- Among the results from the 7,721m of drilling reported today are:
- A 1.85m intersection, from a depth of 220.95m in hole 17-CT-440, at an average grade of 19.27g/t gold in a step-out hole on the Crow Vein; and
- A 0.74m intersection, from a depth of 321.86m in hole 17-CT-456, at an average grade of 84.47g/t gold in a step-out hole on the V75 Vein; and
- A 2.61m intersection, from a depth of 80.04m in hole 17-CT-454, at an average grade of 36.15g/t gold in an infill hole on the No1 Vein; and
- A 1.29m intersection, from a depth of 295.31m in hole 17-CT-457a at an average grade of 24.73g/t gold in an infill hole on the Crow Vein.
- The increased drilling density provided by the infill drilling “would likely result in conversion of resource ounces from the Inferred to the Indicated category. Some of the drill holes were designed to also yield geotechnical data for a planned update of the geotechnical model during 2017.”
Conclusion: The current drilling programme at Curraghinalt is continuing to yield high grade intersections on a number of the veins and is expected to allow an upgrading of some resources currently classified as inferred. In our opinion, the combination of multiple mineralised, high grade structures at Curraghinalt places an onus on producing a closely defined resource in order to maximise the full potential of the deposit. The success of the step-out drilling provides encouragement that further resource expansions may follow and we look forward to update of the feasibility study in Q3 2018.
Lonmin PLC (LON:LMI) 78 pence, Mkt Cap £221m – Recommended offer from Sibanye
- Lonmin has received and recommended an all share offer from Sibanye Gold, the operator of the Stillwater Platinum operation in the US, which values Lonmin at approximately £285m or £1/share.
- The Offer represents a premium of approximately “57 per cent. to the closing price per Lonmin Share of 63.8 pence on 13 December 2017; and41 per cent. to the 30 trading day volume weighted average price per Lonmin Share for the period ended 13 December 2017 of 71.1 pence.” Sibanye-Stillwater is offering 0.967 of its share for every Lonmin share.
- “Following completion of the Acquisition, Lonmin Shareholders will hold approximately 11.3 per cent. of the Enlarged Sibanye-Stillwater Group and Sibanye-Stillwater Shareholders will hold approximately 88.7 per cent. of the Enlarged Sibanye-Stillwater Group”
- The Offer is conditional, amongst other things, upon the shareholders of Sibanye-Stillwater approving the allotment and issue of the new shares as well as the securing of the relevant regulatory approvals.
- Sibanye Stillwater is building its position in the platinum industry and the offer for Lonmin follows the acquisition of the Aquarius Platinum operations and Anglo Amerrican Platinum’s Rustenburg operations in S Africa as well as the Stillwater acquisition. It also owns and operates the major S African Kloof, Driefontein and Cooke gold mines.
Conclusion: Lonmin has struggled in recent years and implemented a series of rationalisation measures in order to cut unprofitable shafts and focus on a lower level of profitable cash generative operations. Current production guidance is for 650-680,000 ounces of platinum in 2017. The offer from Sibanye, a company clearly committed to the platinum sector and with a detailed understanding of running mining operations in S Africa should be a lifeline for Lonmin’s long-suffering shareholders.
Mkango Resources* (LON:MKA) 5.6p, Mkt Cap £5.6m – Exercise of Warrants
- Mkango Resources reports that 151,515 warrants have been exercised at a price of 6.6p bringing in an additional £10,000 and resulting in the issue of an equivalent number of shares representing approximately 0.15% of the enlarged capital.
- The balance sheet for 30th September 2017 shows a total of 45.37m warrants outstanding exercisable at a weighted average price of 6.6p each.
- Since the transaction with Noble Group’s Talaxis, which provides investment to fund the bankable feasibility study for the Songwe Hill rare-earths project and identifies Mkango as the preferred partner for Noble Group’s rare-earth’s strategy was announced on 16th November, we estimate that a total of approximately 4m warrants have been exercised at a weighted average price of 6.3p.
Conclusion: Noble Group’s investment has provided the funding for a bankable feasibility study for Songwe Hill, shown a potential development route and offtake partner and the resulting higher profile for the company has seen some 4m warrants exercised at an average price of around 6.3p.
Newcrest Mining Ltd (ASX;NCM) A$21.9, Mkt Cap A$16.8bn – Sale of Bonikro mine
- Newcrest Mining reports the sale, to a consortium of F&M Gold Resources and Africa Finance Corporation, of its 89.89% interest in the Bonikro gold mine in Cote d’Ivoire for $81m. The proceeds comprise a cash payment of $72m and a net smelter royalty on the first 560,000 ounces of gold production from the next pushback of the pit, valued at $9m.
- The transaction provides a useful yardstick into the current valuation of producing west African gold mines.
- Based on the reported production for the year to June 2017 of 128,000oz, the projected 2018 production guidance of 130-155,000oz and the overall resource of 1.2m oz of contained gold, we estimate that the new owners are valuing Bonikro at approximately $700/oz of past production, $630/oz of projected gold output and $75/oz of mineral resource.
- In August this year, Endeavour Mining’s sale of its 90% holding in the Nzema gold mine near Takoradi Ghana realised US$65m valuing that transaction at US$248/oz per reserve ounce and US$50/oz of measured/indicated resource. Nzema attracted approximately US$830/oz of historic and US$650-725/oz of forecast production.
Premier African Minerals (LON:PREM) 0.4p, Mkt Cap £26m –Further drilling results from the Zulu Lithium Project
- Premier African Minerals has announced more assay results from its latest drill-hole, ZDD-45, at the Zulu Lithium project near Fort Rixon, Zimbabwe.
- The new intersection, reported today is for 1.74m at an average grade of 1.69% Li2O from a depth of 148.77m. Assay results from a further 20m of this hole remain to be reported though the latest results bring the result to date from hole ZDD-45 to an overall 40.58m wide intersection at an average grade of 1.55% Li2O.
- The company also reports results from hole ZDD-27/2 which is located “east of the Main Zone” and intersected “9.62m of pegmatite in multiple intersections including:
- 5.19m at 1.86% Li2O from 114.38m
- 4.43m at 1.27% Li2O from 121.25m”
- A further hole, ZDD-28, intersected 1.03m at an average grade of 0.96% Li2O.
Conclusion: The company describes hole ZDD-45 as its best hole to date at Zulu – with assays from a further 20m of this hole still to be reported, there remains scope for further improvement on the result announced so far.
Tertiary Minerals* (LON:TYM) 1.9p, Mkt Cap £6m – Annual results and project highlights
- Tertiary Minerals has reported a loss of £395,532 or 0.14p/share for the year ending 30th September 2017 (2016 loss of £473,506 or 0.20p/share).
- During the year Tertiary Minerals raised £271,361 in equity (2016 - £91,250) leaving the company with a year-end cash balance of £159,278.
- Among the achievements the company highlights during the year were the discussions and technical due diligence conducted on a short-list of potential fluorspar project acquisitions, the progression of the Storuman mine licence application and the scoping scale metallurgical test-work on the MB fluorspar project in Nevada.
- The company has made clear its focus on fluorspar which is underscored by the disposal of the non-core gold assets in Finland.
- Following the end of the year, in November, Tertiary Minerals announced that it had reached an agreement with an MoU with the global commodity trading group, Possehl Erzkontor GmbH, for them to purchase up to a minimum of 70% of commercial grade acid-spar to be produced at Tertiary’s three fluorspar projects.
- Possehl is also providing funds to the Company to assist in the development of its fluorspar projects and Chairman, Patrick Cheetham, commented that this alliance “is a critical building block in our quest to becoming a leading supplier of fluorspar to the global markets”.
Conclusion: During 2017, Tertiary Minerals has progressed its individual fluorspar projects in Scandinavia and the United State and rationalised its non-core gold assets in Finland. The post-year end agreement with the commodity trader, Possehl Erzkontor provides a powerful financial backer, potential offtake of future production from the development of the company’s fluorspar projects and “inval