Today's Market View - China plays dirty banning Australian Coal from Dalian port

Proactive Published 21/02/2019

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SP Angel – Morning View – Thursday 21 02 19

China plays dirty banning Australian Coal from Dalian port

MiFID II exempt information – see disclaimer below

Anglo American (LON:AAL) – Broad based improvement, led by coal, continues to reduce debt

ARC Minerals* (LON:ARCM) – Sale of Andiamo stake for $0.25m

Glencore (LON:GLEN) – coal concession not all what it seems. Dalian coal ban will hurt but Glencore traders will profit in other ways

Horizonte Minerals (LON:HZM) –Araguaia project update and start of Vermelho pre-feasibility work

Lonmin (LON:LMI) – AMCU union give Lonmin notice of secondary strike action

Sibanye-Stillwater (JSE:SGL) – Good results hit by substantial impairment

Tertiary Minerals* (LON:TYM) – Polymetallic zinc claim staked in Nevada

China’s Dalian port bans Australian coal imports as political tensions simmer

Customs at China’s northern Dalian port has effectively banned imports of Australian coal, with 2019 annual capacity restricted to 12mt, according to an official at Dalian Port Group.
Australian coal exports are the country’s biggest earner, generating $64bn income, with dollar tumbling on the news to fall more than 1% to as low as A$0.7086.
Five harbours overseen by Dalian customs - Dalian, Bayuquan, Panjin, Dandong and Beiliang - will not allow Australian coal to clear through customs, said the official. Coal imports from Russia and Indonesia will not be affected.
The indefinite ban on imports from top supplier Australia, effective since the beginning of Feb., arrives as major ports across China also prolong clearing times for the coal rose from 25 day to at least 40 days.
While Beijing has been trying to restrict imports of coal more generally to support domestic prices, the ban comes amid simmering tensions between Beijing and Canberra over issues such as cyber security and China’s influence in Pacific island nations.
Australia recently revoked the visa of a prominent Chinese businessman further straining ties. Billionaire Huang Xiangmo, a property developer, called Australia a ‘giant baby’ as he was refused permission to stay in the country partly due to concerns over his ties to the Chinese government.
The ban is currently centred on coking coal used in steel making, however fears are growing it will spread to other ports and to thermal coal used in power generation.
"It is hard to find a replacement for Australian coking coal since its sulphur content is very low," said a purchasing manager at a large coke plant in Hebei province.
"Current inventory at ports should be sufficient to support usage for one or two months, but it could be a problem in the long term, especially if other ports also tighten imports," he added.

Australian dollar falls as Chinese Dalian port bans Australian coal imports in Huawei related move

The A$ is among worst performing major currencies today on the back of the news of major Chinese port customs authorities banning Australian coal shipments indefinitely.
The A$ is 0.99% against the US$ counterpart trading at the 0.71 mark.
The news overshadowed positive employment number released earlier today showing stronger than expected increase in jobs with the increase driven by strong gains in full time positions amid increasing participation rate as well. Employment Change (‘000): 39.1 v 16.9 (revised from 21.6) in December and 15.0 forecast.
China is playing dirty in banning Australian coal imports through its giant Dalian port, coal terminal.
It will be interesting to see if the ban will be extended to other ports and if coal traders will be able to find sufficient shipments of non-Australian coal to replace this material.
We suspect the authorities are working off the assumption that China’s power generators have sufficient coal stocks to manage without Australian coal for a few weeks / months.
It will be interesting to see if China had been stockpiling more coal than normal over the past few weeks?
Much coal is blended in the world to improve its calorific value, reduce ash content etc.. to meet minimum requirements and Australian coal will likely find its way into Dalian, China via this blending process.

Vanadium prices remain stable at US$76-78/kgV

Ferro-vanadium prices remain stable at US$76-78/kgV in Western Europe (FastmarketsMB)
Small lots sold in Europe include 5t sold at $78/kgV and 10t sold at $76.7/kgV.
Antimony prices also remained stable at US$7,700-7,900/t in Rotterdam perhaps helped by further delays to commissioning at the SPMP antimony roaster in Oman.

Dow Jones Industrials

+0.24%

25,954

Nikkei 225

+0.15%

21,464

HK Hang Seng

+0.41%

28,630

Shanghai Composite

-0.34%

2,752

FTSE 350 Mining

-0.67%

19,476

AIM Basic Resources

+1.35%

2,179

Economics

US – US carbon emissions were more than double China’s on a per capita basis

US carbon emissions are also more than 3x the world average according to the World Bank using 2014 data.
UK carbon emissions are just under China’s on a per capita basis
Indian emissions lag at a fraction of just about everyone else on a per capita basis.

Japan – Declines in production and new orders see a drop in business activity in the manufacturing sector in February marking the first such downturn in two-and-a-half years, according to Markit.

IN addition, future output expectations turn negative for the first time since November 2012 “which come as no surprise given the international headwinds Japanese manufacturers are facing such as a China slowdown and the global trade cycle losing further steam”.
“Unless service sector activity can offset manufacturing weakness, the chance of Japan entering a recession in 2019 looks set to rise,” Markit wrote.
Markit Manufacturing PMI: 48.5 v 50.3 in January.

Eurozone – Manufacturing sector posted a monthly drop in production in February dragged down by falling output in Germany, according to the latest set of Markit PMI numbers.

The Composite PMI was up this month reflecting stronger performance in the services sector.
One of alarm bells regarding growth outlook is weakening new orders demand that dipped for the second month running. Manufacturing sector was the main source of weakness in new business as orders slumped to the greatest extent in almost six years with new export orders also falling at a faster pace than in January.
“The euro-zone economy remained close to stagnation in February… the general picture remained one of a more subdued business environment than seen throughout much of last year,” Markit wrote.
The 19-nation economy will struggle to expand by more than 0.1% in Q1/19, according to the report.
The data comes only two weeks before the next ECB monetary policy meeting with a number of policymakers lately publicly discussing options to respond to a weakening economic performance.
The euro is off against the US$ (-0.34%) trading around the 1.13 level this morning.
Eurozone Markit Manufacturing PMI: 49.2 v 50.5 in January and 50.3 forecast.
Eurozone Markit Services PMI: 52.3 v 51.2 in January and 51.3 forecast.
Eurozone Markit Composite PMI: 51.4 v 51.0 in January and 51.1 forecast.

EU targets carbon neutrality with CO2 restrictions for trucks

The European Union is introducing restrictions on carbon emissions from new trucks as part of its goal of achieving carbon neutrality.
The regulation, approved by the European Parliament and Council, requires new trucks to have 30% lower emissions in 2030 compared to 2019.
“The new legislation will help Member States’ emission targets, incentivise innovation, promote clean mobility solutions, strengthen the competitiveness of EU industry and stimulate employment, while reducing fuel consumption costs for transport operators and contributing to better air quality,” said the EU in a statement.
With heavy duty vehicles producing around a quarter of CO2 emissions from road transport in the EU and around 6% of the EU’s total CO2 emissions, the EU expects the regulation to cut 54 million tonnes of CO2 emissions between 2020 and 2030.

Germany – Services sector growth masks deepening weakening in manufacturing as “strong fundamentals in the domestic market are driving growth in services business activity (while) falling exports continue to weigh on the performance of the manufacturing sector”, Markit data showed.

Overall business activity in Germany climbed to a 4-month high led by gains in the services industry that was growing at the strongest pace in five months.
However, the export oriented manufacturing sector slipped further into contraction as export orders dropped to the greatest extent for over six years.
“In terms of the factors behind the slowdown in manufacturing order books, many of the usual suspects – the uncertainty relating to US/China trade tensions and weakness in the autos industry – were highlighted, although there were also reports of growing competitive pressures within Europe”.
A separate report showed inflation averaged 1.7% in January the lowest since H1/18. Inflation outlook remains weak as indicated by the Markit survey showing average prices charged climbed at the weakest rate for 19 months in February, with the rate of factory gate price inflation down to its lowest since November 2016.
Markit Manufacturing PMI: 47.6 v 49.7 in January and 49.8 forecast.
Markit Services PMI: 55.1 v 53.0 in January 52.9 forecast.
Markit Composite PMI: 52.7 52.1 in January 52.0 forecast.
EU Harmonised CPI: 1.7 v 1.9 in December.

France – Private sector output stabilised in February after successive contractions in December and January.

Services sector remained in the contraction territory although the pace slowed to the weakest in three months as some panellists cited ongoing disruption caused by the “gilets jaunes” protests.
Manufacturers recorded stabilising production in February.
New orders book continued to contract for the third month in a row, albeit only at a marginal rate overall. The change was driven by a softer decline in the services sector and a first increase in order for four months at manufacturers.
On growth outlook Markit writes “the economy will continue to post below its potential as long as social unrest continues… and amid the current uncertainty in the global economy, domestic issues weighing on activity are likely to remain detrimental”.
IN line with Germany data, France’s inflation slowed in January with the Markit report pointing to weakening inflation pressures in February.
Markit Manufacturing PMI: 51.4 v 51.2 in January and 51.0 forecast.
Markit Services PMI: 49.8 v 47.8 in January and 48.5 forecast.
Markit Composite PMI: 49.9 v 48.2 in January and 48.9 forecast.
EU Harmonised CPI: 1.4 v 1.9 in December.

Uganda – President Museveni endorsed for his sixth election

President Museveni’ collection of writings and speeches in the book “What Is Africa’s Problem” sets out ‘Africa is tired of leaders who cling to power against the wishes of the masses’.
Museveni has ruled for nearly 33 years making him second only to Ali Khamenei of Iran who has ruled for 37 years and Kazakhstan Nazarbayev at 34 years.

Currencies

US$1.1352/eur vs 1.1352/eur yesterday Yen 110.76/$ vs 110.87/$ SAr 13.918/$ vs 14.103/$ $1.307/gbp vs $1.304/gbp 0.711/aud vs 0.717/aud CNY 6.713/$ vs 6.721/$

Commodity News

Precious metals:

Gold US$1,336/oz vs US$1,344/oz yesterday – gold prices remain steady today after reaching the highest level since H1/18 propelled by physical buying and net positive speculative positions among fund managers.

The latest CFTC report on net positions in gold futures by money managers (as of 29 January) showed a positive 55,804 contracts net balance as opposed to a negative of 50-100k contracts as of December end.

Investors are balancing U.S.-China trade talks together with the Federal Reserve’s policy stance, with optimism over progress in the fight between Washington and Beijing and signals from the U.S. central bank that hint at the possibility of further hikes.
Fed minutes released yesterday showed some policymakers did not rule out a pause to rate hikes if the economy does not perform as planned as well as considered changes to the pace of the current balance sheet reduction.
“Several participants argued further increases to rates might be necessary only if inflation growth exceeds their outlook, while several others saw rate rises as appropriate later this year if the economy evolves as forecast,” minutes read.
Commenting on the size of the balance sheet, the Fed “thought it would be desirable” to soon announce a plan to stop the wind-down of the Fed’s balance sheet later this year.
Capital Economics suggested the Fed might want to stop balance sheet run-down sometime in H2/19 implying taking it to around $3.5tn from current $4.0tn. “Official seem persuaded that they should halt the run-down even before reserves fall to their desired long-term level, which is presumably a bit below the current $1.6tn… reserves would then continue to fall gradually,” Capital Economics wrote in the note yesterday.
U.S. and Chinese negotiators are working on multiple memorandums of understanding that would form the basis of a final trade deal, with agreements covering areas including agriculture, non-tariff barriers, services, technology transfer, and intellectual property.
While there is no immediate breakthrough expected on current talks in Washington on major structural issues, there are efforts to extend the March 1 deadline for US tariffs to rise on Chinese goods.
While President Trump has been most vocal on bilateral trade deficit with China, the U.S. has numerous issues with China’s economic and trade policies, and the administration is pushing for what it terms ‘fair and reciprocal’ trade. In response, China continues to offer increase purchases of agricultural and energy products to shrink the deficit.
While Fed policy makers see 2019 marking the end of their balance sheet run-off, it won’t necessarily mark an end to rate rises, with minutes of the Jan. 29-30 meeting showing officials were divided over what it would take for them to raise again.

Gold ETFs 72.7moz vs US$72.6moz yesterday

Platinum US$824/oz vs US$823/oz yesterday

Palladium US$1,479/oz vs US$1,495/oz yesterday

Silver US$15.92/oz vs US$16.05/oz yesterday

Base metals:

Copper US$ 6,384/t vs US$6,332/t yesterday

Aluminium US$ 1,874/t vs US$1,866/t yesterday

Nickel US$ 12,865/t vs US$12,745/t yesterday

Zinc US$ 2,679/t vs US$2,671/t yesterday

Lead US$ 2,038/t vs US$2,025/t yesterday

Tin US$ 21,260/t vs US$21,200/t yesterday - Use of Tin in Lithium-Ion Batteries Could Rise

According to recent research by the International Tin Association, tin could see increased use in lithium-ion batteries in the next decade.
The association said in a release “Tin has a wide range of technical properties that mean its uses extend to many areas of everyday life. For the same reason, it can adapt well to meet emerging needs for new materials that can generate, store and deliver tomorrow’s energy.
The ITA has identified “nine technology opportunities for tin in lithium-ion batteries, mainly in high-capacity anode electrode materials, but also in solid-state and cathode materials.”
“It is concluded that if tin does gain market share, lithium-ion batteries could grow to represent a significant new tin use in the 2025-2030 timescale,” the ITA says.

Energy:

Oil US$67.0/bbl vs US$66.4/bbl yesterday

Natural Gas US$2.681/mmbtu vs US$2.669/mmbtu yesterday

Uranium US$28.70/lb vs US$28.70/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$85.2/t vs US$85.5/t

Chinese steel rebar 25mm US$603.1/t vs US$602.4/t

Thermal coal (1st year forward cif ARA) US$79.9/t vs US$78.9/t

Coking coal futures Dalian Exchange US$197.0/t vs US$196.7/t

Other:

Cobalt LME 3m US$31,000/t vs US$31,000/t

China NdPr Rare Earth Oxide US$46,176/t vs US$46,119/t

China Lithium carbonate 99% US$10,203/t vs US$10,191/t

The world’s largest lithium producer, Albemarle Corp., gives bullish 2019 outlook while posting higher-than-expected quarterly profits.
The major is “not forecasting any significant macroeconomic headwinds and have not seen any decline in our customer demand forecast”.
The company are forecasting sales growth of up to 14% despite growing anxiety that the race to supply lithium for batteries and other materials could flood the global market.
The company reported fourth-quarter net income of $129.6m, or $1.21/share, compared to a net loss of $218.4m, or $1.95/share, in the closing quarter 2017.
Lithium sales rose 18% to $341.6m during the quarter on both higher volume and prices that were up 4% from a year ago, the company said.
Albemarle said it expects 2019 sales of $3.65 - $3.85bn. Its shares rose 2.6% to $85 in after-hours trading.

China Ferro Vanadium 80% FOB US$71.3/kg vs US$71.3/kg

China Antimony Trioxide 99.5% EU US$6.9/kg vs US$6.9/kg

Tungsten APT European US$260-270/mtu unchanged from previous week

Battery News

Battery breakthrough as Irish researchers triple storage capacity

Researchers at Trinity College Dublin have found that incorporating a type of ultra-thin nanomaterial into the structure of a battery’s electrode could triple the storage capacity compared to a conventional battery, and their hope is that the technology can be easily incorporated into battery manufacture.
Prof Valeria Nicolosi, professor of nanomaterials and advanced microscopy at the school of chemistry said “In a rechargeable lithium-ion battery you have electrodes where the charge is stored, and in order to store more charge we need to make these electrodes thicker. But these electrodes can only be manufactured to a certain thickness. There is a threshold beyond which if we make the electrode too thick it starts cracking and the battery fails.”
The Researchers from Trinity College and Drexel University in Philadelphia, have explored how they might enable thicker battery electrodes. They looked at a class of ultra-thin nanomaterial called MXenes, ultra-thin sheets that are mechanically very strong and can conduct electricity effectively.

Company News

Anglo American (LON:AAL) 2017.5 pence, Mkt Cap £26.05bn – Broad based improvement, led by coal, continues to reduce debt

Citing continuing productivity improvements in its operations and better than expected commodity prices during 2018, Anglo American has reported a 12% increase in attributable profits to US$3.55bn.
Underlying EBITDA rose by 4% during the year to US$9.16bn and net debt declined by US$1.65bn (37%) to US$2.85bn.
The largest contributions to the underlying EBITDA came from the Group’s coal operations (US$3.20bn or approximately 35% of the total) which increased by 11% during the year.
Metallurgical coal represented approximately 70% (US$2.21bn) of the total of the coal operations as it benefitted from both an 11% increase in sales volumes and a 3% improvement in price while South African thermal coal (US$695m – up 18%) and Colombian thermal caol (US$388m – up 1%) represent 22% and 12% respectively.
The company particularly alludes to the “strong performance at Moronbah, which improved on its previous record and produced 6.8Mt, and Grosvenor, which increased output to 3.8Mt …” as contributory factors in the performance of its metallurgical coal operations.
Copper’s EBITDA contribution of US$1.86bn rose by 23% during the year and represents approximately 20% of the total based largely on the performance of the Los Bronces and Collahuasi mines.
Diamond production from De Beers represented around 14% of EBITDA (US$1.25bn) although the overall figure was around 13% lower than the US$1.44bn reported for 2017 and the company comments that “Margins in the trading business were lower owing to volatile market conditions”.
Anglo Platinum’s US$1.06bn contribution to EBITDA represents a 23% increase on the 2017 result and approximately 12% of the total while the contribution from the iron ore operations declined by 36% to US$1.18bn reflecting the suspension of Minas Rio throughout much of the year “following the two leaks in the 529 kilometre iron ore pipeline from the mine to the Port of Açu”.
Exploration activities increased “across most product groups, but predominantly in diamonds”.
Commenting on the Group’s performance in 2018, Chief Executive, Mark Cutifani, said “Our focus on efficiency and productivity, including through our Operating Model implementation, is continuing to deliver benefits - in terms of both safety and financial returns. In 2018, we produced 10% more product on a copper equivalent basis from half the number of assets we had in 2012. As a result, our productivity(1) per employee has doubled, supporting a 12 percentage point increase in mining margin(2) to 42% and placing us amongst the leaders in the industry”.

Conclusion: Anglo American’s 12% increase in attributable profit and 4% improvement in underlying EBITDA has led to further reductions in debt and is supported by improvements across most of its operating divisions and we expect the resumption of operations at Minas Rio to help the recovery of the iron ore business. The Group’s coal operations, particularly its metallurgical coal business are currently the largest contributor and we find it interesting that in referring to its exploration activities Anglo American highlights diamond exploration.

ARC Minerals* (LON:ARCM) 3.1p, Mkt Cap £22m – Sale of Andiamo stake for $0.25m

ARC Minerals reports it has agreed the sale of its stake in Andiamo Exploration Limited for US$250,000 in cash to Emerald Ex B.V.
The company also reports it has dropped some 465sqkm of the Zamsort mining license area as required under Zambia mineral legislation.
The stake has been dropped into vehicle called Zaco Investments Limited, a private Zambian registered exploration company where ARC Minerals holds a 42.5% stake and where Nick von Schirnding has been appointed as Chairman.
Zaco Investments is currently considering a range of options including an option to bring in one or more joint venture partners into key targets within this substantial and highly prospective license area.

Conclusion: Its nice to see more cash in the bank for ARC Minerals and its good to see the company retain a meaningful stake in the license area which it had had to drop under the ‘use it or lose it’ mineral legislation.

*SP Angel acts as nomad and broker to Arc Minerals.

Glencore (LON:GLEN) 305.4p, Mkt cap £42.5bn – coal concession not all what it seems. Dalian coal ban will hurt but Glencore traders will profit in other ways

We were interested to see Glencore’s statement on limiting its coal production.
It is particularly interesting given the CEO’s history and huge success in coal trading.
Quick inspection reveals Glencore is running at full capacity with its coal mines and effectively have the biggest free put option on coal in the market.
We read the statement more from an M&A perspective in that Glencore feels full up from a coal perspective and will now focus its acquisitive eyes on the domination of other commodities.
Problem for Glencore today is that the giant Dalian bulk commodity terminal in China has just banned coal imports from Australia in a move that is almost certain retaliation for Australia’s banning of Huawei technology.
The move is interesting as coal importers are going to have to move fast to replace Australian cargos with coal from Indonesia and India though many cargos may be rerouted through other Chinese ports.
This disruption may also impact coal stocks at Chinese coal fired power stations.
China is almost totally dependent on coal for power generation with new cleaner-burning coal fired power stations being built to supply growing demand and to replace older more-polluting power plants.

Horizonte Minerals (LON:HZM) 2.4p, mkt cap £35.2m –Araguaia project update and start of Vermelho pre-feasibility work

Horizonte Minerals has provided a progress report for its Araguaia ferro nickel project in Brazil’s Para State where, following publication of the feasibility study in December 2018 it is now “Advancing project financing options”.

Reiterating the principal conclusions of the feasibility work for the 28 year project comprising an initial production phase where approximately 900,000tpa of ore is treated in a Rotary Kiln Electric Furnace (RKEF) to produce approximately 14,500tpa of nickel contained in 52,000tpa of ferronickel, the study concluded that capital investment of US$443m for the initial phase of the project is expected too generate an after tax NPV8% of US$401m and an IRR of 20.1% with cash costs equivalent to US$3.08/lb of contained nickel and that doubling production for additional, internally funded expenditure of US$199.7m enhances the after tax NPV8% to US$741m, increases the IRR to 23.1% and reduces the cash cost of production to US$3.00/lb.

Horizonte Minerals points to positive sentiment towards nickel prices where it identifies “positive fundamentals with midterm consensus pricing of US$16,792/tonne ('t') Ni for 2022” compared with the US$14,000/t price assumed in the feasibility study.
The company also alludes to expectations the Brazilian economy is “set for growth in 2019 and 2020 with GDP set to increase 2.4% and 2.3% respectively” and points to Brazil having “tightened control over inflation rates, which have decreased from 8.8% in 2016 to 3.6% in 2018 … [and] … taken a series of measures aimed to improve fiscal responsibility, reduced government spending and increased direct foreign investment”.
The company also announces that it has started pre-feasibility level work on the Vermelho project which it acquired early in 2018 and which lies “in close proximity to Araguaia”. Although at this stage, the company is not indicating a timetable for completion of this work it says that there “are several phases of work currently underway at Vermelho, the first is to demonstrate upgrading the mixed hydroxide product (MHP) to nickel and cobalt sulphate suitable for use in the evolving EV battery market. The second phase will utilise the high grade saprolite material to produce ferronickel via the same RKEF flow sheet as developed at Araguaia.”
The work at Vermelho also includes environmental and social base-line data collection, which is expected to be incorporated at the pre-feasibility study stage.

Lonmin (LON:LMI) 66.7p £188.6m – AMCU union give Lonmin notice of secondary strike action

Sibanye-Stillwater (JSE:SGL) – Good results hit by substantial impairment

It was inevitable that the AMCU union in South Africa which has been striking at Sibanye-Stillwater’s gold mines for some time would also look to fight it’s action on a second front.
We had a long meeting with Sibanye-Stillwater management a few weeks ago to gain an understanding of the situation
The existing AMCU strike action at Sibanye-Stillwater has been running for some months in South Africa and losing its effectiveness with the AMCU union losing members and management managing to run its mines relatively well despite the action.
Sibanye see the AMCU action as politically motivated with AMCU union leaders refusing to accept any reasonable offer.
Notice the long-running and rival union, the NUM which was formerly led by President Cyril Ramaphosa is not supporting the AMCU and is not on strike.
Ramaphosa was also formerly a director of Lonmin and understands the union situation well.
Sibanye-Stillwater’s takeover of Lonmin is conditional on the restructuring of much of the Lonmin operation to ensure its longer-term viability with the potential closure of some unprofitable shafts.
Fortunately for all concerned the basket price for Platinum Group Metals ‘PGMs’ has risen substantially this year driven by palladium which has risen 80% to $1,466/oz since last August while platinum has risen 9%.
This combined with SA Rand : dollar depreciation should offset much of the increase in ESCOM power costs and labour cost inflation.
Labour currently accounts for around 50% of total operating costs at Sibanye-Stillwater.
Sibanye-Stillwater interim results released today report a small fall in 4E PGM production through the second half to December.
The fall in production is more than offset by significantly higher PGM basket prices which came in at $1,039/oz vs $1,051/oz on H1 through the second half and will have risen significantly further this year.
All-in Sustaining Costs were $755/oz just ahead $821/oz in H1 highlighting remarkably good cost discipline within the group.
EBITDA adjusted rose to US$136.3m for the group from $81.3m on H1.
Basic earnings came in at -US$195.1m vs US$6.4m in H1 driven by US$224.9m of impairments in the second half.

Tertiary Minerals* (LON:TYM) 0.35p, Mkt Cap £1.5m – Polymetallic zinc claim staked in Nevada

Tertiary Minerals reports that it has staked the historic Paymaster zinc/copper/silver/cobalt/tellurium prospect in Nevada.
The company indicates that the prospect, which is described as a skarn deposit, was “originally prospected in the late 1950’s under US Defense Minerals Exploration Administration grant system. A government mining engineer recommended that the project be drill tested, but records suggest this did not take place and no production ensued”.
The mineralisation has recently been traced westwards “over a total distance of 1.7km in a number of wide spaced and very shallow prospector pits”.
Results from the resulting seven grab samples “average 10.1% zinc (maximum 20.9%), 1.5% lead (max. 6.5%) 134g/t silver (max 253 g/t or 7.3 ounces/ton) and 0.68% copper (maximum 3.4%).”
Tertiary Minerals also says that the samples “also contain up to 0.11% cobalt (average of 419ppm or 0.045%) and up to 58ppm tellurium (average 31ppm) and 782ppm bismuth (average 315ppm).”
In addition to the news of the zinc prospect, Tertiary Minerals also discloses that the next phase of metallurgical test-work on its MB fluorspar project, also in Nevada, is expected to start before the end of February.

Conclusion: The early stage grab samples from the Paymaster project show high base metals grades from a series of pits along a 1.7km trend of skarn mineralisation. Considerable detailed follow-up work will be required to build on this promising start and eventually demonstrate a formal mineral resource estimate, however, it is encouraging to see that the company is developing further US opportunities while it appeals the Swedish decision to reject the application to develop the Storuman fluorspar deposit.

*SP Angel act as Nomad and broker to Tertiary Minerals