SP Angel . Morning View . Chile approves lithium expansion for SQM

Apple to repatriate hundreds of billions of dollars back into the US

The effect of the repatriation of potentially >US$1tr into the use by Apple, Amazon, Google, Starbucks and others could cause some unpleasant moves in overseas stock markets and currencies over the next few years.

• Trump’s tax reforms appear to be sufficient to persuade Apple to repatriate hundreds of billions of dollars of investment back into the US.
• The reforms may see Apple pay some US$38bn to the US treasury while also investing billions in new US based manufacturing, data centers, research centers and.
• Apple is planning some US$30bn of investment in the US over the next five years creating some 20,000 new jobs at existing sites and at the new campus it is planning.
• Apple is also planning to issue new $2,500 stock based bonuses to employees.

Global lithium supply concerns quashed as top Chilean (SQM) output cleared to rise

• Following years of bitter dispute with Chilean authorities, operator of one of the world’s richest lithium deposits, Soc. Quimica & Minera de Chile SA (SQM) has been cleared to ramp up production. Development agency Corfo and SQM signed an agreement on Wednesday covering royalties, investments and corporate governance which will govern production from the Santiago-based company. The deal, which looks to more than double production quota for the Salar de Atacama brine project, also includes a $17.5 million end-of-dispute payment to Corfo.
• SQM’s initial quota of 1 million tonnes of lithium carbonate was expected to run out by 2022. Now the quota has been raised to 2.2 million tonnes through 2030. Corfo executive vice president, Eduardo Bitran notes “the increase in supply will be very significant” while the “deal has consequences for the long-term prices, but we aren’t worries about sending this signal because electric vehicles will keep driving demand”.
• The increased quota allows SQM to boost capacity from 66,000 tonnes lithium carbonate to as much as 216,000 tonnes by 2025, or more if it made additional investments and approvals. The move is expected to boost output from the South American nation, with combined production across SQM and Albemarle reaching as much as 500,000 tonnes of lithium as “Chile will recover its leading place as a lithium producer”. The boost in production could supply as much as 90% global lithium demand from the nation, with Deutsche Bank forecasting 534,000 tonnes 2025 consumption by end-use.
• The end of dispute also opens to option for SQM to partner with state-owned copper producer Codelco to extract lithium from one of the world’s highest-grade discoveries from the Maricunga salt flat in northern Chile. Both companies hold large properties in the salt flat and a partnership would allow economically viable production.

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Economics

China GDP growth surprises at 6.9% last year

• Chinese economic growth grew at a substantial 6.9% last year according to official data ahead of the official target of 6.5%
• The figure is particularly surprising given the crackdown on corruption and on polluting industries
• Makes you wonder if they closed energy-intensive industries to free up power capacity for other industrial growth
• Other observers, such as Capital Economics estimate real China GDP growth to be less than the official figures though the increase in GDP will still surprise many
• Officials in Inner Mongolia and Tianjin have commented that their figures for 2016 were overstated.
• China is moving to restructure its economy away from less energy efficient, polluting industries towards more modern and efficient concerns and continues to encourage growth in new high-tech industries.
• While there are concerns over debt levels the Chinese government has demonstrated its willingness to do whatever it takes to promote continued growth rates and the restructuring of industry.
• The IMF now states Chinese debt as equivalent to 234% of the total output which looks manageable given the high growth rate.

Currencies

US$1.2212/eur vs 1.2230/eur yesterday Yen 111.18/$ vs 110.78/$ SAr 12.248/$ vs 12.317/$ $1.384/gbp vs $1.377/gbp 0.798/aud vs 0.797/aud CNY 6.426/$ vs 6.433/$

Commodity News

Precious metals:

Gold US$1,329/oz vs US$1,336/oz yesterday

• Gold spot retreats as US equities continue to shine amid optimism on global growth while concerns surrounding the US government shutdown subside. The S&P 500 index closed on a record following yesterday’s trading, with the biggest gain in more than a month. GoldSilver Central note “the strengthening of the dollar and capital flows are the main reasons for gold’s decline”.
• However, tailwinds in both Asian physical and paper markets suggest the precious metal will continue its rally. Chinese New Year buying and option prices are expected to boost prices with marketing director of bullion dealer GoldCore Ltd. foreseeing the metal breaking highs above $1,400/oz. Gold tends to perform well in the opening two months of the year, with the metal advancing on average 6% in January and February combined over the past decade.

Gold ETFs 71.6moz vs US$71.6moz yesterday

Platinum US$999/oz vs US$1,002/oz yesterday

Palladium US$1,108/oz vs US$1,102/oz yesterday

Silver US$17.07/oz vs US$17.20/oz yesterday

Base metals:

Copper US$ 7,079/t vs US$7,083/t yesterday

• Disrupted supply from the world’s largest producer of copper, Chile, is expected to boost copper prices as the nation’s state copper commission, Cochilco, raises its estimated 2018 price for the metal to £3.06/lb from previous $2.95/lb forecast. Vice President Sergio Hernandez cited a “perception of vulnerability” linked to a large number, “between 20 and 25 collective (labour) negotiations” expected in Chile, and in neighbouring Peru.
• Given the potential for supply issues, Cochilco forecast as global copper supply deficit of 175,000 tonnes in 2018, compared to 67,000 tonnes in 2017. The commission expects Chile to increase production by 4.9% to 5.74 million tonnes, principally from normalised output from the world’s largest Escondida copper mine operated by BHP.

Mitsubishi considers raising stake in Anglo’s Quellaveco copper project

• Anglo’s board will decide later this year whether to give greenlight to $5.5bn development plan at Quellaveco, one of world’s largest copper orebodies.

Aluminium US$ 2,194/t vs US$2,186/t yesterday

Nickel US$ 12,505/t vs US$12,530/t yesterday

• Jinchuan Group Co., China’s top nickel supplier, is expecting to boost output to meet surging demand for battery materials. According to vice general manager of its marketing unit, Jinchuan aims to lift supply of nickel sulphate by 40%, from 50,000 tonnes in 2017 to 70,000 tonnes this year. “While physical demand hasn’t picked up too significantly yet, it may surge in about two years”, particularly as the Asian nation is leading global advance in electric vehicle manufacture with sales of new-energy vehicles forecast to top 1 million in 2018, having risen to 700,000 last year.
• Global major miners are also ramping up efforts to match rapidly advancing consumption for battery materials. BHP Billiton Ltd. has started construction on a giant US$55 million nickel sulphate plant at the Kwinana Refinery in Western Australia, aiming for first production in H1 2019. Looking to capitalise on the forecasted demand for lithium-ion batteries, stage one of the facility is expected to boost global production by 100,000 tonnes of nickel with the option for double capacity via a second phase.
• The positive demand outlook supported prices 27% higher in London last year, the biggest gain since 2010. However, rising Indonesian production of nickel pig iron, a low-quality alternative to refined metal, is expected to boost global stockpiles and apply some downward pressure on prices. Surging demand from high-quality battery-grade nickel is expected to generate a significant price disparity surrounding the quality of nickel products, with a large premium (as observed with different lithium products) for the Lithium-ion ready material.

Zinc US$ 3,386/t vs US$3,406/t yesterday

Lead US$ 2,568/t vs US$2,563/t yesterday

Tin US$ 20,495/t vs US$20,470/t yesterday

Energy:

Oil US$69.2/bbl vs US$69.2/bbl yesterday

Natural Gas US$3.222/mmbtu vs US$3.155/mmbtu yesterday

Uranium US$23.50/lb vs US$23.75/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$72.7/t vs US$73.5/t

Chinese steel rebar 25mm US$634.7/t vs US$631.4/t - Toyota clears all its vehicles of Kobe Steel scandal

• Has found no issue with safety and performance of its vehicles after completing inspections of materials supplied by Kobe Steel linked to its data falsification scandal.
• The company has conducted tests on aluminium plates, aluminium extrusion, copper pipe and steel wires, and has completed checks on materials purchased overseas, concluding inspecting all materials potentially affected

Thermal coal (1st year forward cif ARA) US$84.4/t vs US$84.5/t

Premium hard coking coal Aus fob US$240.8/t vs US$249.7/t

Other:

Tungsten APT European US$310-318/mtu vs US$307-318/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

Lithium - Lithium miner SQM gets green light to expand production

• SQM, the world’s second largest lithium producer, has resolved long running dispute with the Chilean government, on agreeing to expand its production.
• SQM said it would pay $17.5m to Chilean regulator Corfo and agree to pay royalties linked to the price of lithium to settle the dispute
• In return SQM will be able to produce an extra 349,553 tonnes of lithium until 2030 from the Atacama desert

Company News

Aston Bay Holdings* (CVE:BAY) 0.14c/s, Mkt cap C$10.5m – Seal Zinc resource shows 1mt grading 10% zinc

• Aston Bay Holdings has filed an initial NI 43-101 Mineral Resource Estimate for their Seal Zinc project of 1.006mt grading 10.24% zinc and 11.44% zinc equivalent.
• The project shows strata-bound zinc and silver mineralization over 450m of strike with a true thickness of 10-~25m.

Mineralization remains open along strike and down dip with previous drilling showing

• 18.8m core length grading 10.58% zinc and 28.7 g/t silver from 51m depth.
• 30.8m core length grading 5.11% zinc and 23.0 g/t silver from 101m depth..
• Storm Copper: The publication of the resource is a step forward for Aston Bay Holdings which is looking to identify the source of very high-grade copper chalcocite mineralisation which has come to surface naturally after a process of hydrocarbon replacement.
• BHP conducted ran a $2m soil survey which saw the collection of 2,005 soil samples over an area of approximately 120 km north-south and 20 to 40 km east-west on the property.
• This added to previously released drill results show visible copper mineralisation: (true widths estimated to be 75-100% of core)
• 16m at 3.07% copper and 12.26g/t silver from 93m down hole
• 4m at 1.17% copper
• 20m at 0.44% copper
• There has been >9,000m of historical drilling on the Storm copper property trying to find the source of high-grade copper chalcocite which lies at surface in small lumps
• The chalcocite so far discovered is thought to be from mineralisation bleeding to surface in historical events in mineralisation which dates back to the Polaris age 378m years ago.
• The Mineralogy, zonation and grade are all characteristic of sediment-hosted copper and zinc systems with structural setting which looks similar to Ivanhoe’s giant Kamoa-Kakula discovery in the DRC which shows an Indicated Mineral Resource of 116mt grading 6.09% copper, plus Inferred Resources of 12mt grading 45% copper, at a 3% cut-off.
• An updated presentation can be found at: https://astonbayholdings.com/wp-content/uploads/2018/01/Aston-Bay-Corporate-Presentation-January-2018.pdf
• The Aston Bay team is led by Thomas Ullrich, ex Antofagasta and David Broughton who is an acknowledged world expert in sediment-hosted copper deposits and who discovered Ivanhoe’s massive Kamoa copper project in the Central African Copper Belt in the DRC. The team are further supported by Michael Dufresne who is also President of Apex Geoscience and Dwight Walker the CFO.

Conclusion: The Seal Zinc project on Somerset Island is not large by many standards but with zinc prices >$3,000/t the project may be worth investigating further to define a larger resource for economic extraction.

*SP Angel act as broker to Aston Bay

BlueRock Diamonds* (LON:BRD) 2p, Mkt Cap £2.8m – Encouraging results from K5 kimberlite sampling

BUY

• BlueRock Diamonds report results from its recent 7,500t bulk sample at its Kareevlei ‘K5’ kimberlite diamond pipe are encouraging.
• The results are sufficiently good for the team to undertake a second bulk sample to further check the grade, consistency and quality of stones from K5 pipe.
• Kareevlei K2 pipe: Management report further details of their operations for the three months to end November 2017.
• BlueRock sold some 2,110cts as previously reported at an average price of US$374/ct.
• This gives average sales per tonne of ore of US$11.6/t on the 64,442t processed and an implied a grade of 3.27cpht ‘carats per hundred tonnes’.
• Costs: The average on-mine cash cost was US$6.2/t or ($189/ct) recovered giving a margin of US$5.4/t (US$184.7/ct) assuming an exchange rate of ZAR13.7 for the three months to end November last year.
• Unit costs should fall below the US$6.2/t level on more consistent performance if production targets are met this year.
• Production: Management are targeting 25,000t per month going forward indicating potential for some 300,000t of ore to be processed for the full year. This should significantly raise operating profits assuming the team are able to roughly meet the production target for mining and processing.
• Margins should increase further if management continue to see this consistency of grade and quality of diamonds recovered as seen in recent months.
• Management and other admin costs are relatively low and the cost of exploring and evaluating the other diamond pipes on the property is also relatively cheap due to the ability to simply put the bulk sample through the nearby plant at the K2 pipe.
• Today’s statement appears to confirm the positive effects of the increase in production and turnaround effected in the last few months of last year.
• Quality: There is always the chance of recovery of some larger and more valuable gem-quality diamonds as production progresses and the move to potentially mine the K5 diamond pipe close by should add to production and increase operational flexibility.
• Grades jumped by 37.5% to 3.63cpht from 2.64cpht in October indicating higher grades in the lower kimberlite levels and also potential for higher sales values as the November sales rose to 957.70cts at $404.45/ct.
• This gives further margin potential as the November numbers are replicated through much of this year now that mining is well into the fresh ‘Level 2’ kimberlite which should contain higher diamond grades.
• BlueRock should be able to recover around 1,125cts of diamonds on average a month which could raise sales to around US$454,500 a month or potentially US$5.5mpa.
• The turnaround seen in the last quarter was a direct result of the overhaul of the process plant and increase in mining capacity.
• Bringing the mining back in house is producing benefits and should lower costs
• The turnaround team is led by Adam Waugh, BlueRock’s ceo who now appears to be ahead of schedule in terms of the restructuring.
• The grades seen now appear to support the development of a significant profit at the K2 pipe and bode well for the potential development of the new K5 diamond pipe.
• New crusher: The new primary crusher should continue to reduce costs while the pre-screening circuit should further expand capacity and improve efficiency.
• Blasting contractor: The new blasting contractor is now working on site and will hopefully provide consistent run of mine material.
• Management support: The board is supported now by Johan Milho, as mine manager, and by Dr Kurt Petersen, a highly respected consultant metallurgist, who has advised on changes to the Company's plant. A new geologist should also be joining the team.
• Larger stones: The recovery of a number of 5-10ct stones indicates potential for the recovery of some larger and significantly more valuable diamonds as the year progresses with the K2 pipe already demonstrating good gem quality stones at the upper end of diamond values seen from most diamond mines.
• Throughput and sales have risen since Waugh’s reorganisation of the mining and process plant and recovered grades have improved towards the 4.5cpht estimated in the CPR.
• H2 ’17: The recovery seen in the second half of last year was tempered by rain in October which caused mine production to pull back to just 17,000t for the month from the 22,010t in September with grades slipping to an effective 2.64cpht from the 3.01cpht seen in the September sale. We expect December and January production rates may also be affected by the extended ‘seasonal holiday’ seen over Christmas in South Africa when much of the country appears to shut down for several weeks.
• Geologist: The team have also appointed a new consultant geologist, Jock Robey who is a Fellow of the Geological Society of South Africa and has a PHD from the University of Cape Town. Jock previously worked for De Beers as a kimberlite petrologist specialising in kimberlite mapping logging and petrology.
• Kareevlei K1 & K3: while blasting has started at the K5 pipe for bulk sampling plans are being made for the future development of the K1 and K3 kimberlite pipes which would again give the company greater flexibility in its mining program as well as the potential to increase production rates for an expanded diamond recovery plant.

• Pipe

• Tonnes

• Carats

• Grade (cpht)

• Classification

• Total

• 7,984,000

• 359,000

• K1

• 1,594,000

• 101,000

• 6.3

• Inferred

• K2

• 2,461,000

• 111,000

• 4.5

• Inferred

• K3

• 3,929,000

• 147,000

• 3.7

• Inferred

• Koedonza (Jubilee pipe): not wishing to be constrained by the one diamond mine, BlueRock are busy evaluating another kimberlite some 40km north of Kimberley with a 2,500t bulk sample now taken. BlueRock completed the first stage of its bulk sampling at Jubilee in October last year comprising the processing of some 480t of kimberlite excavated from 10m below surface level. 4.75 carats were recovered, with the largest diamond being 1.65 carats. In total, 11 diamonds were recovered, all of which were of high gem quality. While the implied grade is not good at <1cpht the="" sample="" is="" small="" and="" recovery="" of="" a="" 1="" 65ct="" stone="" positive="" as="" it="" indicates="" better="" potential="" may="" be="" present="" li="">
• Drought: While the Cape is suffering its worst drought in 100 years, the Kimberley area suffered severe flooding last year indicating sufficient water should be available for processing. Heavy rain does tend to slow mining and processing and is a risk from a production target perspective.
• Expansion potential: The investigation of two more diamondiferous pipes at Kareevlei alongside the Jubilee Pipe at Koedonza suggests potential for greater flexibility and further expansion. The cost of bringing the Kareevlei pipes into production will be relatively low while the cost of expanding the process plant should also be relatively modest. It is possible that management might look to expand the plant as the operation settles down.

Conclusion: There is good potential for BlueRock to lower unit costs if it raises production on a consistent basis. Grades and diamond values have been rising which also indicate better potential for significant margin expansion. If all goes to plan this could be a good year for BlueRock diamonds with new performance and rising sales highlighting the undervaluation of the market capitalisation today.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

KEFI Minerals* (LON:KEFI) 3.6p, Mkt Cap £11.8m – Funding and operations update

• Operationally, the Company continued to progress the Tulu Kapi project through the pre-development stage.
• The Company confirmed costs and commissioning schedules for the final project models and populated formal financing data rooms.
• Amid a strong growth momentum in gold price seen lately, the base case has been upgraded to $1,300/oz, up from $1,250/oz assumed previously.
• The upgrade brings significant economic benefits including:
• NPV (100% based, 8% discount rate) at start of construction $92m, up from $74m at the lower gold price;
• NPV (100% based, 8% discount rate) at start of production of $152m, up from $131m at the lower gold price.
• Equipment procurement and development will be managed together with community resettlement once “due diligence, regulatory approvals and execution of binding documentation”.
• State power and roads authority confirmed their “budgets and schedule commitment to construct the project’s off-site infrastructure”.
• The Mining License transfer to local subsidiary TKGM has been cleared.
• The Company and Oryx Management, a private Jersey-based funding partner, terminated their agreement regarding the financing facility for the Tulu Kapi project.
• The Tulu Kapi development financing structure involving other members to the consortium including the Government of Ethiopia, Ausdrill and Lycopodium is reported to remain the same.
• The government of Saudi Arabia lent its support behind the pro-mining policy with the Company to update the market once “the new regulatory details are clarified along with G&M’s particular tenements”.
• The Company will host an investor event on Tuesday 13 February at Davy’s at Woolgate and Brasserie (25 Basinghall Street, London, EC2V 5HA) from 6pm with a presentation followed by a Q&A session.

*SP Angel act as Nomad and broker to Kefi Minerals

Kodal Minerals* (LON:KOD) 0.2p, mkt cap £14.7m - Further encouraging drilling results from Bougouni lithium project

• Kodal Minerals has announced assay results from the reverse-circulation drilling programme at its Bougouni lithium project in Mali where drilling is expected to resume shortly following the Christmas and New Year break.
• The results come from the Ngoualana prospect. where recent work has concentrated on both infill drilling and on identifying extensions to the mineralisation, and at the Sogola-Baoule prospect where the work has been aimed at identifying extensions towards the south-west of the known mineralised pegmatite.
• At Ngoualana, where 32 holes totalling 4,023m have been completed do far, drilling has shown the mineralised pegmatite veins extend along stike and that "the shallow infill drill holes are returning wide zones of pegmatite consistent with the previous drilling."
• Among the results highlighted from Ngoualana today are:
• A 31m wide intersection averaging 1.61% Li2O from a depth of 65m in hole KLRC061; and
• A 20m wide zone averaging 1,69% Li2O from 71m in hole KLRC061; and
• An 18m wide intersection averaging 1.66% Li2O from a depth of 66m in hole KLRC058.
• Work at Sogola-Baoule "Drilling has successfully delineated extensions to the pegmatite bodies with the prospect remaining open along strike and at depth."
• Results from Sogola-Baoule highlighted in today's announcement include:
• A 12m wide intersection averaging 1.69% Li2O from a depth of 110m in hole MDRC021B; and
• A 10m wide intersection averaging 1.56% Li2O from 128m in hole MDRC022.
• We note that results reported from thework at Sogola-Baoile in addition to the results noted above, include multiple mineralised intercepts within both holes MDRC021B and MDRC022 which may have potential to increase the tonnage available in any future resource estimates.
• Commenting on the results, which he described as "very pleasing", CEO, Bernard Aylward said "
• "Our exploration campaign is ongoing with drilling expected to recommence shortly following a Christmas break and the awarding of the bulk sampling contract to be finalised and activities shortly to commence. Additional assay for the drilling completed in December 2017 will be reported to the market as soon as they become available."

• License update: The company has also confirmed that Mali's Directorate Nationale de l Geologie et des Mines (DNGM) has approved the application over two new 100km2 licence areas covering the high priority target areas in the Kolassokoro area. The new licences will have an initial validity of 3 years and are eligible to two further extensions each of a further 2 years.
• "Kodal confirms that all key target areas and prospects within the Bougouni Lithium project are retained within concession areas that the Company has full and exclusive rights to explore and operate."
• Kodal is continuing to enquire of the DNGM regarding the status of the "Kolassokoro licence that had previously been issued to EMAS Mining SA ("EMAS") and in which the Company had a 90 per cent economic interest." and will provide an update in due course.

Conclusion: Recent drilling continues to expand the footprint of lithium mineralisation at Bougouni; with drilling set to reume shortly, we look forward to further updates as exploration proceeds.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

Highland Gold (LON:HGM) 166p, Mkt Cap £539m – FY17 production comes ahead of guidance

• Q4 gold production totalled 68.7koz (Q4/16: 68.8koz) bringing total for the year to 272.3koz (FY16: 261.2koz).
• This compares to a previously guided range of 255-265koz.
• Regarding the mine-by-mine performance:
• MNV produced 24.4koz (Q3/17: 27.4koz; Q4/16: 26.4koz) with an increase in grades partly compensating for a decline in processing rates due to a failure of a feed trunnion on one of the mill lines with a replacement due in Mar/18.
• Belaya Gora (BG) produced 10.9koz (Q3/17: 12.3koz; Q4/16: 10.9koz) with c.4/5s of the plant feed drawn from stockpiles and gold recoveries holding up at improved levels compared to H1/17 (74-76% in H2/17 v 67-70% in H1/17).
• Novoshirokinskoye (Novo) produced 33.5koz (Q3/17: 32.1koz; Q4/16: 31.5koz) on stable plant throughput and better grades compared to the previous quarter (5.97g/t v 5.47g/t in Q3/17).
• Average realised gold price for the yer climbed to $1,260/oz, up from $,1247/oz in FY16.
• Work on Belaya Gora/Blagodatnoye PFS and update Mineral Resource as well as Kekura DFS is being finalised with a release scheduled for Q1/17.
• Updated JORC mineral reserve at MNV is expected to be completed in Q2/18.
• Works on the 1.3mtpa Novo project continued during the quarter with design documentation for the mining capacity and respective infrastructure expansion filed with authorities for approval; full capacity is expected to be reached in 2020.
• FY18 guidance is set at 265-275koz.

Conclusion: A positive set of production results with robust Novo performance compensating for operating challenges experienced at the MNV processing plant. The latter is expected to be fixed in Mar/18 with the management expecting production to hold up well in FY18 guiding for 265-275koz. FY17 output came ahead of the top end of the guidance and the level we used in our estimates on the back of better processed grades at Novo and MNV in the final quarter of the year.

Ortac Resources (LON:OTC) 2.65p, Mkt Cap 8.8m – Continuation of high grade gold seen at Casa Misisi (Akyanga) project

Arc Minerals* (new ticker (ARC LN) 2.5p, Mkt Cap 8.3m –

(Ortac has a effective economic interest of 62.3% in the Misisi Gold project through it’s 87.4% interest in Casa Mining Ltd which holds a 71.25% interest in project.

• Ortac Resources, shortly to be renamed Arc Minerals, reports that given the encouraging results obtained so far from its 3500m of drilling at Casa Mining's Akyanga gold project in DRC.
• Casa are moving to install a third drill at Misisi to increase the rate of diamond drilling on the project and reduce unit drilling costs.
• The move follows the release of significant higher gold grades than previously seen in sections of >3m in drilling in MSDD0119 and MSDD0120
• Recent results have confirmed the down-dip continuity of mineralisation by a further 100 meters and have also confirmed "the high grade nature of the deposit which has so far surpassed our expectations."
• Among the assay results reported today are:
• A 7.56m wide intersection at an average grade of 4.97 g/t gold from a depth of 259.14m in borehole MSDD0119.
• This intersection includes a higher grade section of 0.66m averaging 24.77 g/t gold from a depth of 263.3m; and
• A 3.13m wide intersection averaging 3.13g/t gold from a depth of 200.60m in borehole MSDD0120.
• Hole 119 "was collared approximately 100m down dip of recently announced hole MSDD0118. This hole not only confirmed the downdip

• continuity of the mineralisation along this section (extended by a further 100m down dip), but also the high grade nature of the mineralisation, as previously referenced to with hole MSRC0002 (18m @ 4.63g/t Au) on this drill profile"

• "Diamond drill hole MSDD0120 was collared between existing holes MSDD0077 and MSDD0079. These existing holes are spaced approximately 200m apart and MSDD0120 successfully confirmed the +2 g/t Au continuity of the mineralisation between these two holes".
• Table 1. Drill Intercepts for Hole MSDD0119

• Hole ID

• From

• To

• Length (m)

• Gold (g/t)

• MSDD0119
• incl.
• incl.

• 247.39

• 248.39

• 1.00

• 5.23

• 259.14

• 266.70

• 7.56

• 4.97

• 259.14

• 259.80

• 0.66

• 24.77

• 263.30

• 263.80

• 0.50

• 23.13

Table 2. Drill Intercepts for Hole MSDD0120

• Hole ID

• From

• To

• Length (m)

• Gold (g/t)

• MSDD0120

• 200.60

• 203.90

• 3.30

• 3.13

• Conclusion: The success of the drilling program at Akyanga so far has encouraged the company to increase its program through the deployment of a third drilling rig.

*SP Angel acts as nomad and broker to Ortac Resources which is to be renamed Arc Minerals on 22 January.

Shanta Gold (LON:SHG) 5.7p, Mkt Cap £44m – Q4 production climbs as underground operations ramp up to full capacity

• Q4 gold production totalled 21.3koz (Q3/17: 18.2koz; Q4/16: 18.9koz) on the back of increased supply of high grade ore from the underground.
• A total of 143.1kt at 4.7g/t was mined from the underground during the quarter, nearly double 76.0kt at 5.83g/t mined in Q3/17 and slightly in excess of the budgeted mining capacity of 45ktpm.
• The share of treated ore from the underground has been increasing through the year and accounted for most of the feed in Q4/17 with underground operations yielding more than 250kt at 6g/t in FY17.
• The plant processed 162kt at 4.48g/t (Q3/16: 163kt at 3.83g/t) during the quarter demonstrating stable gold recoveries of 91.1% (Q3/17: 90.9%; Q4/16: 90.9%).
• FY17 gold production totalled 79.6koz, broadly in line with a 80.0koz management target and 80.3koz our estimate.
• AISC costs averaged $747/oz versus guided $781/oz (FY16: $659/oz) for the year and an average realised gold price of $1,263/oz (FY16: $1,222/oz).
• FY17 gold sales amounted to 79.9koz (FY16: 86.3koz).
• Cash balances climbed to $13.5m (Q3/17: $8.0m) reducing net debt to $39.9m (Q3/17: $45.5m).
• While the Company received a VAT refund of $3.4m during the quarter, the outstanding account finished at $14.5m by the end of Q4/17 versus $15.8m as of Q3/17, implying a $2.1m build up in the account after adjusting for the refund received.
• $5m run-rate savings are expected to be reached by the end of Q1/18 with the management planning to extend further optimisation programmes seeing expenses cuts reaching a sustainable $7m rate by the end of Q3/18 (cuts are excluding changes to the mining method to be used at Luika underground operation).
• The management is planning to provide further update regarding the Investec loan facility restructuring and a potential repurchase of the Convertible Loan Notes by the end of Q1/18.
• FY18 guidance is set at 82-88koz at AISC of $680-730/oz.

Conclusion: While production numbers came broadly in line with our estimates, operations performed better on costs side leading to a lower closing net debt position as of FY17. The update highlights ramped up underground operations at New Luika gold mine with operations on course to generate positive FCF in FY18 to be directed at deleveraging of the balance sheet.