Amur Minerals* (LON:AMC) – 2018 Kun Manie development programme
Arc Minerals* (new ticker LON:ARCM) – Soil sampling to test potential between Akyanga and Akyanga East
Strategic Minerals* (LON:SML) – Leigh Creek Acquisition to be settled within five days
Stratex International (LON:STI) – Preliminary results for 2017
China steel and iron ore futures soar in new pollution curbs
- Steel and iron ore prices rose to year to date highs on Monday after China’s top steel producing region of Tangshan said it would extend winter production curbs intended to cut air pollution
- Tangshan’s local government said it would maintain production limits scheduled to expire when the winter heating season ends in March
- Extension of the cuts may reduce steel supply as construction demand picks up in warmer weather
- Steel production cuts might normally cause iron ore prices to fall but with steel mills concentrating on higher value added steels for higher margins and on lower emissions levels this is raising demand for higher quality ores which are generally imported.
Fortescue Metals - Chinese lenders are looking to join a $1.4bn refinancing deal at Fortescue Metals with the miner having launched a tender offer for its 2022 9.75% Senior Secured Notes.
- The refinancing is expected to cut annual interest cost by around $80m as the Company is set to benefit from improved credit rating.
POSCO signs long-term deal to buy lithium from Australia’s Pilbara
- POSCO, the South Korean steel producer, has agreed to buy 240,000t of lithium concentrate per year from Pilbara minerals to supply producers of electric vehicle batteries.
- The Australian unit of POSCO will acquire a 4.75% stake in Pilbara for A$79.6m (US$62.49m)
- POSCO plans to make ~30,000tpa of lithium products starting from 2020.
- The plan is to supply its battery material manufacturing affiliate POSCO ES Materials and its joint venture with China’s Huayou Cobalt Co Ltd, as well as other South Korean battery makers
Jeff Whittle – awarded Order of Australia
- Jeff Whittle, the originator of Whittle Pit Optimisation has been awarded the Order of Australia in the Australia Day Honours.
- The award is for “Distinguished service to the information technology sector and the mining industry, particularly through the development of industry standard computer programs for strategic mine planning and optimisation.”
- Whittle Pit Optimisation forms the basis plan of nearly every successful open cast mine in the world and is considered to be the industry standard.
- Whittle Consulting continues Jeff Whittle’s work through extending the optimisation process into plant design and other logistics to more fully optimise the whole mining process.
London – Heavy snow disrupts UK as temperatures plummet
- An unusual snap of cold weather is disrupting transport in the UK.
- Temperatures in London fell to -3o overnight and are set to fall to -4 o tonight in London.
- Overseas visitors are advised that the UK is now colder than some parts of Greenland
Dow Jones Industrials
+1.58%
at
25,709
Nikkei 225
+1.07%
at
22,390
HK Hang Seng
-0.73%
at
31,269
Shanghai Composite
-1.13%
at
3,292
FTSE 350 Mining
-0.41%
at
19,066
AIM Basic Resources
+0.29%
at
2,535
Economics
US – The US$ and Treasury yields are rangebound ahead of the Powell speech in the House of Representatives later today.
- Equities had another strong run on Monday with S&P 500 closing up 1.2% led by technology and telecom stocks.
- House prices growth and durable goods orders including nondefense capital goods ex-air orders, a proxy for business capex, reports are out later today.
- S&P 20 city prices (%mom/yoy): 0.6/6.4 forecast v 0.8/6.4 in November.
- Durable Goods (%mom): -2.0 forecast v +2.8 in December.
- Nondefense capital goods ex-air (%mom): 0.5 forecast v -0.6 in December.
Germany – Early regional inflation numbers released this morning suggest headline CPI is likely to come close to market estimates for a slight slowdown in annual growth rate.
- Although, some regional data point to a marginal strengthening in price pressures.
- Estimates are for nation-wide CPI to slow to a 1.3%yoy rate v a 1.4%yoy recorded in January.
Spain – Inflation picked this month for the first time since November beating market estimates which may mark a reversal in the downward trend recorder through 2017.
- Another thing to watch is changes in core prices which strip out the cost of oil prices and measure the strength of price pressures domestically which has been also declining lately on the back of ample spare capacity and high unemployment rates.
- February core CPI will be released in mid-March.
- CPI (%mom/yoy, EU harmonised): 0.1/1.2 v -1.5/+0.7 in January and -0.2/+0.9 forecast.
South Africa – New Ramaphosa cabinet retains compromised ministers, Gupta loyalists and corruption accused.
- The opposition Democratic Alliance has accused Cyril Ramaphosa of filling his new cabinet with ‘compromised ministers, Gupta loyalists, and corruption accused.’
- David Mabuza will be sworn in as Deputy President who is accused of running his own personal military
- Malusi Gigba, the new minister of Home Affairs is reported to be Gupta Friendly
- More positively Pravin Gordhan comes in as Minister of Public Enterprises and Nhlanhla Nene is returned as Finance Minister. These are good moves from an anti-corruption and financial perspective.
- Minister of Mines: Gwede Mantashe has been appointed as the new Minister of Mineral Resources as President Cyril Rampahosa reshuffles the cabinet post Zuma departure.
- Mantashe currently serves as national chairperson of the ANC and is the former chairperson of the South African Communist Party.
- Expectations are that new mines minister will review the Mining Charter which has previously raised lots of criticism from the industry and has been challenged in court by the Chamber of Mines.
- Earlier this year Cyril Ramaphosa argues that “the Mining Charter is going to be thoroughly discussed with key role players so that we find a solution that will unlock our mining… if the Mining Charter is holding us back, then we must deal with it and find commonality of purpose and views with potential investors”.
- The industry lobby agreed to postpone its legal challenge of changes to the Charter following discussions with Ramaphosa.
- We suspect there will be further changes in the cabinet over the coming year with pro-Zuma/Gupta loyalists potentially falling away.
- Rand: while the SA currency has strengthened to 11.6 to the US dollar in recent weeks we are advised the currency may weaken again once economic reality sets in.
- While South Africa is entering a new era under Ramaphosa it will take time to resolve the economic woes of the nation and to restore investment in a country beset by political corruption.
Tin – Refined market deficit is set to persist through 2021 on weak production growth and “stronger demand… driven by the electronics industry”, according to the BMI Research.
- Global deficit is forecast at 7,000-9,000t a year from 2019 to 2021.
- Deficit is forecast to see prices climbing to $22,500/t by 2021.
Currencies
US$1.2335/eur vs 1.2321/eur yesterday. Yen 107.06/$ vs 106.59/$. SAr 11.606/$ vs 11.566/$. $1.398/gbp vs $1.405/gbp. 0.785/aud vs 0.788/aud. CNY 6.309/$ vs 6.308/$.
Commodity News
Precious metals:
Gold US$1,334/oz vs US$1,339/oz yesterday
Gold ETFs 72.3moz vs US$72.2moz yesterday
Platinum US$999/oz vs US$1,005/oz yesterday
Palladium US$1,062/oz vs US$1,060/oz yesterday
Silver US$16.66/oz vs US$16.70/oz yesterday
Base metals:
Copper US$ 7,130/t vs US$7,152/t yesterday
Aluminium US$ 2,153/t vs US$2,155/t yesterday
Nickel US$ 13,960/t vs US$13,980/t yesterday
Zinc US$ 3,529/t vs US$3,535/t yesterday
Lead US$ 2,580/t vs US$2,566/t yesterday
Tin US$ 21,645/t vs US$21,695/t yesterday
Energy:
Oil US$67.4/bbl vs US$67.2/bbl yesterday – Prices are holding up near multi-week highs today amid a positive news background with Saudis saying over the weekend that the nation’s oil production in January-March is going to be below output caps with exports averaging below 7mmbpd.
- Saudi oil minister also expressed his hopes that major oil producers will be able to establish a permanent framework to stabilised oil markets after current supply cuts expire this year.
- Currently, output cuts agreed between OPEC and non-cartel countries led by Russia agreed to keep cuts in place until the end of 2018.
Natural Gas US$2.673/mmbtu vs US$2.654/mmbtu yesterday
Uranium US$21.25/lb vs US$22.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$78.7/t vs US$78.1/t -
Chinese steel rebar 25mm US$693.4/t vs US$686.1/t
Thermal coal (1st year forward cif ARA) US$78.5/t vs US$82.8/t
Premium hard coking coal Aus fob US$235.9/t vs US$233.1/t
Other:
Tungsten APT European US$319-326/mtu v US$319-325/mtu
Cobalt LME 3m US$82,750.0/t vs US$82,500.0/t - Freeport says no plans to sell DRC cobalt asset despite buying interest
- Reuters report a number of parties are interested in buying Freeport’s remaining cobalt assets in the DRC
- The company, which sold its stake in the giant Tenke Fungurume copper/cobalt mine last year retains a further cobalt project in the DRC
- The Kisanfu project
- Freeport also holds the Kokkola cobalt refinery in Finland
- China Moly, which paid some US$2.65bn for Freeport’s 70% stake in Tenke Fungurume did not agree a price on the Kisanfu project in its negotiations last year.
- Freeport’s Kisanfu copper, cobalt deposit has a reported estimated reserve 108mt grading 2.62% copper and 1.08% cobalt
Lithium prices to fall 45% by 2021 according to Morgan Stanley
- Growth in electric cars will be ‘insufficient’ to offset rising supply of lithium from Chile, according to analysts at Morgan Stanley who forecast prices dropping 45% by 2021
- New lithium projects and planned expansions by the largest producers in Chile threaten to add around 500,000tpa to global supply by 2025
- The broker reckons this year would be the last of a global lithium deficit and is forecasting significant surpluses from 2019 with the price of lithium carbonate ‘LCO’ falling from $13,375/t to $7,332/t by 2021.
- Our view is that while new production should serve to alleviate the current deficit that delays to some new projects and expansions should keep the market relatively tight. Demand growth looks set to continue to soak up new supply with consumers continuing to compete to secure stable sources of supply. While SQM and Albemarle have expansion plans there should still be room for a number of smaller, hard rock spodumene, with lower capital intensity requirements to come to the market.
Company News
Amur Minerals* (LON:AMC) 4.7p, Mkt Cap £30m – 2018 Kun Manie development programme
- The company released the development plan for the Kun Manie sulphide nickel/copper project including:
- 15,000m of drilling planned for this year focused on resource conversion as well as representative metallurgical sample collection for defining flowsheet technical parameters and project economics
- Updated MRE is currently being updated to account for an expansion in the mineralisation strike at KUB and IKEN by 2.3km to 3.7km which the management previously suggested could nearly double the rerouces at IKEN/KUB from current 36mt at 0.7% Ni and 0.19% Cu.
- Economic trade off study for the IKEN/KUB orebody based on a combination of open pit and underground mining methods (to be followed the MRE update) and review the Kun Manie LoM production schedule with respective EBITDA and NPV estimates.
- Metallurgical studies will evaluate an opportunity to generate two separate concentrates one for copper and one for nickel as opposed to the current base case for a single nickel/copper product.
- Internally completed PFS will be independently verified by external mining consultants with regards to various production scenarios ranging from concentrate only option to a captive refinery and production of refined metal alternative.
- In view of strong fundamentals and demand projections in the EV-related batteries space, the Company is planning to carry additional test work for a potential to produce battery ready or near battery ready product from the Kun Manie concentrate.
- Environmental impact study and access road development plan will be progressed accordingly.
Conclusion: The focus of the 2018 development programme will be an update of the MRE following a successful drilling programme recorded last year and a PFS review which would incorporate mining and processing route trade-off studies. Additionally, the Company will study a potential for production of battery ready and near battery ready material to boost returns on the Kun Manie project.
*SP Angel act as Nomad and Broker to Amur Minerals
Arc Minerals* - new ticker (LON:ARCM) 2.5p, Mkt Cap 7.9m – Soil sampling to test potential between Akyanga and Akyanga East
Formerly Ortac Resources (LON:OTC)
- Arc Minerals reports that has started a soil sampling programme covering some 4km2 to test the potential expansion of its 1.57m oz Akyanga and Akyanga East Prospect deposit in DRC by examining the potential for a repetition of the host stratigraphy between the two as a result of a posssible geological thrust structure in the Valley at Akyanga East.
- The decision to initiate this phase of exploration, which extends previous soil sampling further to the east, stems from “an ongoing re-examination of geophysical data following the re-logging of all 125 diamond core holes drilled at the Akyanga Deposit”. Initial results are expected in early April.
- It is hoped that “Results of the soil sampling programme will enable the Company to generate new drill targets to test for additional mineralised zones at the Akyanga East Prospect and to target prospective geology in the hypothesised valley thrust structure.”
- “The Programme is expected to generate a number of high-quality drill targets at Akyanga East as well as the valley in-between the Akyanga Deposit and the Akyanga East Prospect."
- Commenting that the current drilling work is continuing to intersect broad zones of high grade mineralisation to the south of Akyanga, Executive Chairman, Nick von Schirnding commented that “The area in-between the Akyanga Deposit and the Akyanga East Prospect has not been systematically explored and the aim of the current soil sampling programme is to generate some high-quality drill targets with the aim to expand the current resource envelope to the east as well as the south.”
Conclusion: Continuing work at Akyanga and neighbouring prospects is continuing to expand the scale of the potential. The latest initiative is investigating and seeking to identify potential targets between Akyanga and Akyanga East and we look forward to further news as the results become available in early April.
*SP Angel acts as nomad and broker to Arc Minerals
Strategic Minerals* (LON:SML) 2.1p, Mkt Cap £28.1m – Leigh Creek Acquisition to be settled within five days
- Strategic Minerals reports that all the conditions for its acquisition of the Leigh Creek Copper Mine, including the approval of Australia’s Foreign Investment Review Board, have now been met and consequently the company expects to settle the transaction within 5 business days.
- The acquisition is to be settled for A$1.5m cash (approximately £850,000) plus A$1.45m in shares valued at the “volume weighted average share price throughout the month of March.” The shares are issued subject to dealing restrictions “with one third being locked-up for three months after issue, and another third locked-up for six months after issue.”
- The company expects to be able to bring the project back into production relatively rapidly and is targeting a “production rate of 200 tonnes of copper per month expected to be reached in approximately one year”. In addition the company as an “Offtake Agreement in place for 100 per cent of copper production”.
- The company has previously drawn attention to work completed by the previous owners indicating that not only could the plant, which is currently on care and maintenance, be brought back to production for minimal capital cost, it could also be expanded from 2000tpa capacity to 4000tpa for a very low additional capital cost.
- When production is restored at Leigh Creek, in a presentation available on the company’s website, Strategic Minerals highlights the additional expansion opportunities of over 850 other known copper oxide workings in South Australia and the fact that there are 57 of these located within a 75km radius of Leigh Creek’s Mountain of Light Processing plant and a further 45 within a 45km radius of its Lorna Doone deposit which could be available using Leigh Creek as a processing hub.
- The existing resource base at Leigh Creek amounts to approximately 3.6m indicated and inferred tonnes at an average grade of 0.69% copper, of which 97% of the resource is classed as indicated. Strategic Minerals has, therefore, acquired the Leigh Creek plant, resource and expansion potential for a relatively low A$118/tonne (approximately US$94/t) of contained copper.
- At this stage, the detailed cost structure of a renascent Leigh Creek mine is not known, however, given the infrastructure already in place, Leigh Creek could probably achieve costs in the region of US$1.50/lb of copper and generate cash margins in the order of 50%+ at current copper prices. At the proposed 200tpm initial production rate this represents a potential cash margin in the order of US$8-10m per year or around 3-3.5p/share at current exchange rates.
- Commenting on the significance of the Leigh Creek acquisition, Managing Director, John Peters noted that "Once production commences and SML has a second line of cash flow, we will be in a significantly stronger position to consider cash management alternatives, which includes dividend payment as well as continuing our strategy of acquiring value accretive projects.”
Conclusion: The imminent completion of the Leigh Creek acquisition gives Strategic Minerals an asset which is capable of generating a second significant cash flow within a year. The company has even speculated that it could enable it to consider dividend payments. In addition, Leigh Creek offers potential expansion opportunities both through a near doubling of existing production rates and in the longer term through evolving as a production hub serving other oxide copper deposits within a reasonable transport radius.
*SP Angel act as Nomad and broker to Strategic Minerals
Stratex International (LON:STI) 0.9p, Mkt cap £4.2m – Preliminary results for 2017
- Stratex reports a loss of £5.4m for the year ending December 2017 (3016 – loss £2.7m).
- The loss includes a number of specific items including:
- Proceeds of US$8m from the sale of Stratex’s 45% interest in the Altintepe mine in Turkey which generated a profit of £2.9m
- The sale of its remaining 13.7% interest in Goldstone Resources, for £547k, following dilution of its interest which meant that it could no longer provide a meaningful “influence on Goldstone’s technical programme and strategic direction”. The sale of Goldstone generated a £655,000 loss
- Stratex is maintaining its interest in Thani Stratex Resources and is investing a further £200,000 increasing its holding to 30.4%
- The company has written-off £1.6m of legal and advisory costs relating to the proposed acquisition of Australian based Crusader Resources which was terminated following a shareholder meeting.
- A further £1.3m receivable from the company’s partner at the Dalafin project in Senegal has been written off though the claim is being pursued
- Following the withdrawal of the proposed Crusader Resources acquisition and subsequent departure of the CEO, founder and former CEO of Stratex, Bob Foster, returned as an interim CEO to stabilise the company. Bob is to stand down on 1st March to make way for the new CEO, Tim Livesey, though he is to remain available in a consulting capacity as needed. We Wish Bob well in his future activities.
- The company reports a cash balance for 31st December 2017 of £2m.
Conclusion: Stratex has come through what it describes as a challenging year with a clear view of the future development of its exploration portfolio and the need to identify complementary acquisition opportunities. The incoming CEO takes over after a difficult period and can now build on the