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SolGold* (LON:SOLG) – Alpala assays highlight more massive mineralisation in results as rig count rises to 12
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Dow Jones Industrials +0.23% at 24,782
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HK Hang Seng +0.72% at 29,578
Shanghai Composite -0.09% at 3,297
FTSE 350 Mining -0.17% at 17,977
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Economics
US – US equities edged higher led by a positive sentiment from the recently passed new tax legislation.
• Final Q3 GDP numbers were adjusted 0.1pp lower on the back of a downwards revision in personal consumption (2.2% from 2.3%); although, the rate of growth remains the strongest since early 2015.
• The Congress passed a short-term extension of the federal budget avoiding a so-called government shutdown maintaining current levels of spending through January 19.
• The bill was voted through the Senate (66-32) after securing the win in the House (231-188).
• Q3 GDP (%qoq annualised): 3.2 v 3.3 (estimated previously) and 3.1 in Q2/17.
UK – Economic growth has been revised up to 1.7%yoy in Q3/17 with the increase largely reflecting changes to data going back to the start of last year, according to the ONS.
• Household spending is reported to have climbed at 1.0%, the weakest pace since early 2012.
• Amid falling real earnings, consumers are reported to have been net borrowers for four consecutive quarters for the first time since records began in 1987.
• Looking at growth in three months to October, the ONS said economic growth slowed to 1.3%yoy, the weakest in four years.
France – Q3 GDP numbers have been revised upwards marginally on the back of stronger private spending.
• Latest sentiment gauges are also suggesting that the momentum in final months of the year with business confidence survey hitting 10-year high in December, according to the Insee statistics.
• Both manufacturing and services sectors sentiment measures continues to run well above respective long term averages.
• Q3 GDP (%qoq/yoy): 0.6%/2.3 v 0.5/2.2 (estimated previously) and 0.6/1.8 in Q2/17.
Spain – Euro weakens against the US$ on the back of the Catalan separatist win in a regional election.
• The three separatist parties are estimated to have secured 70 seats in the 135 assembly amid a record 82% turnout.
• The result brings the conflict between separatist leaders and the central government back into the spotlight.
• 10y bond yields climbed 4bp to 1.5% on the back of the news.
Currencies
US$1.1854/eur vs 1.1878/eur yesterday. Yen 113.38/$ vs 113.49/$. SAr 12.706/$ vs 12.776/$. $1.337/gbp vs $1.336/gbp.
0.771/aud vs 0.766/aud. CNY 6.575/$ vs 6.587/$.
Commodity News
Precious metals:
Gold US$1,268/oz vs US$1,264/oz yesterday
• Gold prices hold up well amid flat US$ index and despite further gains in the US equities market and generally a positive economic sentiment on the back of the voted through tax bill.
Gold ETFs 71.4moz vs US$71.4moz yesterday
• Holdings in ETFs continued to slide for a fourth day, although, drawdowns were only marginal having amounted to 138.1koz over the period, equivalent to 0.2% of total holdings.
Platinum US$918/oz vs US$914/oz yesterday
Palladium US$1,041/oz vs US$1,020/oz yesterday
Silver US$16.22/oz vs US$16.19/oz yesterday
Base metals:
Copper US$ 7,071/t vs US$7,038/t yesterday
• Copper traders are the most bullish in two months as the metal consolidates above the $7,000/t mark, according to Bloomberg poll results.
• Union members representing about a quarter of the workforce at Quebrada Blanca operations in Chile signed a 24 months agreement with Teck paving the way for a return of production to normal levels.
• Miners laid down tools last Wednesday after failing to sing a deal with the Company on a bonus programme that would put in line the scheme with the mine’s two other unions.
• The operation is nearing the end of life having produced 17.3kt of copper year to date with Teck considering a $4.7bn investment in the mine for the second development phase.
• Refined copper market posted a 180kt deficit in the first nine months of the year expanding the shortage from 50kt recorded in the first eight months, according to the ICSG data.
• Shortages are driven by a 2.5%yoy drop in global mine production with Chile posting a 4%yoy drop largely on the back of labor issues at Escondida and lower production from Codelco mines.
• Previously, the agency forecast a 150kt total deficit for 2017 and a 105kt shortfall in 2018.
Aluminium US$ 2,159/t vs US$2,121/t yesterday
• Chinese aluminium market surplus is seen contracting next year expanding the global deficit to 265kt from 27kt in 2017, according to Japanese trader Marubeni.
• Market surplus in China is estimated to narrow to 1.79mt in 2018, down from 2.09mt in 2017.
• Marubeni forecasts aluminium prices to range $1,900-2,300/t next year marking a higher band to the $1,685-2,190/t recorded in 2017.
Nickel US$ 12,065/t vs US$11,990/t yesterday
Zinc US$ 3,250/t vs US$3,225/t yesterday
Lead US$ 2,504/t vs US$2,502/t yesterday
Tin US$ 19,425/t vs US$19,465/t yesterday
Energy:
Oil US$64.7/bbl vs US$64.6/bbl yesterday
Natural Gas US$2.606/mmbtu vs US$2.647/mmbtu yesterday
Uranium US$24.00/lb vs US$24.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$72.1/t vs US$70.9/t
- Iron ore futures rallied in Asia to the highest level in three months on the back of a restocking in China ahead of an expected rebound in demand post an end to restrictions on steel production over the winter period.
- Australian miners (ASX 300 Metals & Mining index is up c.20% YTD) were on track for the best close in nearly five years led by stronger commodity prices.
Chinese steel rebar 25mm US$725.0/t vs US$724.5/t
Thermal coal (1st year forward cif ARA) US$89.5/t vs US$89.5/t
Premium hard coking coal Aus fob US$236.1/t vs US$236.1/t
Other:
Tungsten APT European US$295-300/mtu vs US$293-300/mtu last week
Cobalt LME 3m US$75250/t vs US$74750/t yesterday
Company News
SolGold* (LON:SOLG) 26.5p, Mkt Cap £450m – Alpala assays highlight more massive mineralisation in results as rig count rises to 12
(SolGold own 85% of Cascabel in Ecuador)
SolGold report results from a further seven drill holes including a number of daughter holes which have come off existing drill holes.
The market is waiting for SolGold’s maiden resource statement for the Alpala project based on some 63,000m of drilling which will make interesting reading.
• The statement is due before the year end.
• The team plan >120,000m of further drilling next year with just five out of 15 drill targets tested to date.
• Assay results are coming through thick and fast with 11 rigs working and a 12th rig arriving next week. The new rig is track mounted and may drill quicker and deeper holes than the other man-portable rigs.
• The drilling of daughter holes off existing drill holes accelerates the drilling process, cuts the per meter drilling cost and gives good assay data.
• Hole 26-D2 in the north west of Alpala shows 454m grading 0.53% copper equivalent and includes a section of 230m grading 0.75% copper equivalent. The drill hole ended in mineralisation at 1334m as the rig reached the limits of its drilling capabilities in the hole.
• Spurring off this hole into D3 shows another massive 1,136m intersection of visible mineralisation with the hole ending again in mineralisation due to limit of drilling capabilities.
• Holes 29, 30, 31 and 32show similar results at:
o 484m @ 0.49% CuEq, incl. 146m @ 0.74 % CuEq.
o 772m @ 0.62 % CuEq, incl. 500m @ 0.71 % CuEq.
o 299.8m @ 0.33 % CuEq, incl. 132m @ 0.48 % CuEq.
o 226m @ 0.34 % CuEq, incl. 120m @ 0.38 % CuEq.
o 484m @ 0.34 % CuEq, incl. 98.2m @ 0.37 CuEq.
o Hole 33 at Alpala Central shows another huge intersection of 977m of visible mineralisation from a depth of 585m-1562m.
• Cash: SolGold has US$110m in available cash as a result of recent placings to Newcrest and other investors.
• Newcrest which holds some 14.54% of SolGold shares are major backers of the Cascabel project and have put Craig Jones, a mechanical engineer, onto the SolGold board . Jones is currently Executive General Manager at the giant Wafi-Golpu block caving project in PNG which is being planned a jv between Newcrest and Harmony. Prior to Newcrest Jones worked for Rio Tinto.
• Wafi-Golpu appears to be of similar scale and characteristics to what we see at Alpala. The joint venture is looking to complete a Feasibility Study at Wafi-Golpu by end March 2018 which will give us a good chance to compare the economic potential of Alpala against this similarish project.
• The Wafi-Golpu project has a mineral resource of 500mt containing 4.5t of copper and 10moz of gold. Current reserves are for 2.7mt of copper and 6.2moz of gold. This implies a resource grade of some 0.9% copper and 0.6g/t of gold. The project is scheduled to take five years to first production
• The Golpu project within the jv has a mineral resource of 410mt grading 1% copper, 0.7g/t gold and 1.3g/t silver.
• See: https://www.newcrest.com.au/media/resource_reserves/2016/Mineral_Resource_and_Ore_Reserve_Explanatory_Notes_1.pdf
Conclusion: It is easy to forget the significance of these massive intersections of copper and gold. Such long intersections of relatively consistent grade are highly unusual and are of great interest to the major mining companies from a block cave mining perspective. SolGold have promised a resource statement by the year end to quantify the scale of the Alpala resource which should add confidence to the prospects of mining this project. We note that the Wafi-Golpu project is to publish a Feasibility Study by end March 2018 which will also make interesting reading by way of comparison with the Alpala project.
*SP Angel act as UK broker to SolGold and have acted as placing agent in relation to the recent £45m new share issue