Todays Market View - Gold higher as North Korea denuclearisation back in the headlines


SP Angel – Morning View – Wednesday 27 02 19

Gold higher as North Korea denuclearisation back in the headlines


MiFID II exempt information – see disclaimer below


Aston Bay Holdings* (CVE:BAY) – Elaine Ellingham appointed to Advisory board

Cradle Arc PLC* (LON:CRA) – Provisional judicial manager recommends full judicial management in Botswana High Court

Metals Exploration (LON:MTL) – Operations review results

Phoenix Global Mining* (LON:PGM) – Increasing its land position at Empire

Rio Tinto (LON:RIO) – Iron ore dominates 2018 earnings but copper recovers strongly


Automakers take the dive to build charging stations as no one else will

  • Not my job”, was the universal automaker response to questions about construction of refuelling stations for EVs. However a growing bottleneck is creating a need for carmakers to be “ready to get the ball rolling because nothing is happening on its own”, according to head of the European automotive practice at McKinsey & Co.
  • Volkswagen, Daimler, Ford Motor, and BMW have teamed up to create Ionity, a company that’s building charging stations across Europe.
  • VW has formed Electrify America, a unit that will spend $2bn on stations in the U.S., and the German company is considering a similar operation in China.
  • Porsche is installing chargers at dealerships, and is working with BMW and Siemens to develop ultrafast charging.
  • A flood of EVs is expected to hit the market by 2023, with more than $255bn invested into more than 200 battery-powered models, according to AlixPartners.
  • While 80% of charging is done at homes or offices, a recent survey shows refuelling on the go is a key concern for consumers – 41% of Germans and 36% French – figures are more than double the percentage for insufficient range.
  • As the global fleet climbs to 30% by 2030 as many as 30m public chargers would be require, according to International Energy Agency, 50x growth.


Barrick brings too much risk and not enough reward according to Gary Goldberg

  • Gary Goldberg, ceo of Newmont Mining has commented that ‘Barrick brings too much risk and not enough reward’.
  • We agree, Barrick has a troublesome portfolio of highly valued gold mines in some very difficult locations.
  • The merger with Randgold Resources brings the Kilomoto gold mine in the DRC where life is rarely easy for any miner.
  • This adds to Barrick’s trouble portfolio of gold mines in Tanzania where the President has publicly accused Barrick’s subsidiary Acacia of defrauding the Tanzanian revenue authorities.
  • We reckon Barrick’s higher-risk portfolio requires a very different skill-set from Barrick and the idea of merging the two will be detrimental to both sets of assets.


 Derailed copper concentrate train from Mt Isa in Queensland raises risk of pollution in flood


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US – President Trump is meeting North Korean leader Kim Jong Un in Hanoi to discuss the denuclearisation this week.

  • The US$ index came off on the back of dovish Fed chairman comments over the monetary policy outlook yesterday.
  • Jay Powell pledged to the Senate Banking Committee that the central bank was in “no rush” to raise rates amid conflicting signals over the state of the US economy.
  • Powell is set to speak before the House of Representatives panel on monetary policy and the state of the economy today.
  • More on the positive news front, consumer confidence surged in February after the government reopened according to the Conference Board data.
  • The data comes as a welcome news, specifically, in the light of weaker than expected retail sales numbers released for December.
  • Consumer Confidence: 131.4 v 121.7 (revised from 120.2) in January and 124.9 forecast.


UK – The pound is climbing against the US$ and € on the back of the news that PM May admitted for the first time that Brexit may be put on hold if MPs do not support a revised exit deal next month.

  • The pound is trading at a five month high against the US$ and near a two-year high against the € with markets relieved the no deal Brexit is likely to be avoided.


Italy – Weakening business confidence is a worrying development for the economy that has technically slipped into a recession in Q4 last year.

  • The economic sentiment indicator dropped to the lowest in four years in February, according to the statistics agency Istat.
  • Manufacturing and consumer confidence have also pulled back during the month, with the business gauge at the lowest since August 2016.
  • Istat will release growth figures for the CY18 on Friday with estimates for growth rate to have halved compared to the previous 2017 year (0.8%, down from 1.6%); estimates are for the growth to half further this year.
  • Economic Sentiment: 98.3 v 99.1 (revised from 99.2) in January.


India/Pakistan – S&P futures fell and Asian equities are trading lower on rising geopolitical tensions between India and Pakistan.

  • Pakistani fighter jets are reported to have downed two Indian Air Force airplanes over the Kashmir territory in worst escalation in decades.
  • One of the aircraft fell on India’s side of Kashmir, while the second came down in Pakistain-controlled territory with two pilots captured.
  • Tensions elevated following a suicide car bombing by Pakistan-based militants in Indian-controlled Kashmir killing at least 40 Indian paramilitary police on February 14 and as India launched an air strike on what it said was a militant training base on Tuesday, Reuters reports.



US$1.1391/eur vs 1.1354/eur yesterday  Yen 110.36/$ vs 110.81/$  SAr 13.849/$ vs 13.856/$  $1.327/gbp vs $1.316/gbp  0.718/aud vs 0.715/aud  CNY 6.684/$ vs 6.696/$


Commodity News

Precious metals:         

Gold US$1,326/oz vs US$1,325/oz yesterday

  • Gold tracks slightly higher as Federal Reserve Chairman Jerome Powell says the central bank’s in no rush to make a judgement on policy changes. In prepared testimony to Senate Banking Committee, Powell highlighted with inflation pressures muted a patient approach to future policy changes was warranted.
  • Safe-haven demand comes back into the forefront as President Donald Trump plans to hold his one-on-one meeting with North Korea’s Kim Jong Un today, as they kick off the second summit aimed at a deal for Pyongyang to surrender its nuclear arsenal.
  • While Trump has declared there way “no longer a nuclear threat from North Korea”, plenty of research completely disagrees.
  • CIA director Gina Haspel told U.S. Congress last month that her spy agency is convinced North Korea is still "committed to developing a long-range nuclear armed missile that would pose a direct threat to the United States."
  • Researchers at Stanford University estimate North Korea has increased its arsenal of nuclear weapons from 30 to up to 37 in the past year.
  • The Center for Strategic and International Studies, a U.S. think-tank, said it has identified 20 undeclared North Korean missile sites.
  • Commercially available satellite imagery suggests Pyongyang's main nuclear reactor at Yongbyon may be churning out weapons-grade plutonium even as Trump and Kim talk this week.
  • The precious metal is expected to find ongoing support as the disparity between Trump’s opinion and research become apparent.

   Gold ETFs 72.5moz vs US$72.5moz yesterday

Platinum US$864/oz vs US$850/oz yesterday

  • Supply from the world’s biggest platinum miners across South Africa have asked a court to block a planned strike by one of the country’s largest mining unions that the companies highlight would hurt a struggling industry.
  • Anglo American Platinum Ltd., the world’s top platinum-group metals supplier, and other producers want the Association of Mineworkers and Construction Union to be denied the legal right to start a seven-day strike at platinum mines on Feb. 28. The walkout would follow a strike over wages that’s been underway at Sibanye Gold Ltd.’s gold mines since November, and worsen already fraught labor relations.
  • We are of the view that AMCU is not acting in the best interests of workers, or the industry,” the Anglo American Plc unit said.
  • Industry-wide action aims to avoid repetition of the longest-ever strike in 2014, but only serves to highlight the deteriorating relations. Producers there operate some of the world’s deepest, costliest and most labor-intensive mines, and are bracing for a fresh round of wage talks with AMCU this year.
  • The Minerals Council South Africa lobby group estimates producers would lose 1.3t Platinum Group Metal production, equivalent to more than 500m rand ($36m).
  • Typical by-product palladium has already experienced a significant bull run with prices climbing to record highs of $1,562/oz, with further disruptions expected to compound the tight market.

Palladium US$1,553/oz vs US$1,536/oz yesterday

Silver US$15.85/oz vs US$15.86/oz yesterday


Base metals:   

Copper US$ 6,480/t vs US$6,476/t yesterday

Aluminium US$ 1,916/t vs US$1,902/t yesterday

Nickel US$ 12,870/t vs US$12,960/t yesterday

Zinc US$ 2,729/t vs US$2,701/t yesterday

Lead US$ 2,086/t vs US$2,070/t yesterday

Tin US$ 21,530/t vs US$21,670/t yesterday



Oil US$65.5/bbl vs US$64.7/bbl yesterday

Natural Gas US$2.775/mmbtu vs US$2.850/mmbtu yesterday

Uranium US$27.70/lb vs US$28.20/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$82.3/t vs US$82.4/t

Chinese steel rebar 25mm US$608.3/t vs US$607.5/t

Thermal coal (1st year forward cif ARA) US$78.5/t vs US$78.0/t

Coking coal futures Dalian Exchange US$197.7/t vs US$197.3/t



Cobalt LME 3m US$32,000/t vs US$32,000/t

China NdPr Rare Earth Oxide US$45,876/t vs US$46,294/t

China Lithium carbonate 99% US$10,253/t vs US$10,230/t

China Ferro Vanadium 80% FOB US$71.7/kg vs US$71.5/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

Clean tech investment reaches ‘historic milestone’ with ScottishPower £2bn plan

  • Energy giant, ScottishPower, announced plans for the single biggest investment, directing £2bn into new renewable projects, energy storage and electric vehicle infrastructure.
  • The energy giant said the strategy represents "its biggest ever investment in the UK in a single year", and will further support its position as a 100% clean energy operator following the sale of its thermal generation business last year.
  • CEO Keith Anderson adds the strategy came in response to growing demand from consumers for “reliable, clean and affordable energy”.
  • Anderson also added to need to move beyond simply adding additional renewable capacity, and would deliver the “transition to electrify the economy where is matters most now – in transport and in heating”.
  • The £2bn commitment forms part of longer term plan to invest £6bn between 2018 and 2022 with 40% earmarked for renewable energy generation projects, 42% pledged for smarter enhanced networks, and 15% going towards a range of new services and products for customers, including a number of EV-related offers.
  • In addition, the company also announced plans for a 50MW battery storage project at the Whitelee onshore wind farm. "The large-scale battery project will be the first of a series of storage schemes, mainly located at wind farms and at strategic points on the network,"
  • ScottishPower also updated on the subsequent phases of on ongoing £2.5bn East Anglia offshore wind farm. “If consent is granted, it is anticipated that East Anglia TWO will commence construction in 2024 and East Anglia ONE North will commence construction in 2025,”
  • At the same time the company confirmed it is continuing to work on plans to develop a 1GW pipeline of onshore wind projects by 2025.


Lead battery research consortium promises big leap in performance

  • A global battery consortium charged with advancing lead battery technology has re-launched as it prepares a new technical roadmap designed to extend both the performance and lifetime of the core battery technology.
  • Since it was formed as the ALABC 25 years ago, the Consortium for Battery Innovation has ushered in innovations including start-stop batteries to help reduce CO2 emissions and boost fuel economy.
  • The Consortium, which includes more than 90 member companies worldwide supporting pre-competitive research into lead battery technology, is preparing for a surge in demand for energy storage in the next decade.
  • The program, which will be unveiled later this year, will fund projects designed to increase the cycle life of advanced lead batteries and further improve their ability to operate in applications such as start-stop and micro-hybrid applications.


Tesla shares fall 9% as electric car company slashes prices

  • Investors fled after Elon Musk’s company announced it would cut the price of all of its cars in the US by $2,000 (£1,589) to compensate for a reduction in low-emissions vehicle subsidies. The move includes the Model 3, the mass market car seen as Tesla’s route to profitability.
  • Almost 1,000 cars a day are now rolling off Tesla’s production lines, slightly less than analysts had forecast. Total production rose 8% to 86,555 vehicles during the final quarter of 2018 including 61,394 Model 3s. That was up from 29,870 a year earlier.
  • A $2,000 reduction would equate to $700m in lost revenue for Tesla if it continues to sell vehicles at the rate it did in the last quarter.


Nearly 50% of transport pollution deaths linked to diesel

  • Some 385,000 people worldwide died prematurely in 2015 from air pollution caused by vehicle exhaust emissions, a US study found Wednesday, which singled out diesel engines as the main culprit.
  • Diesel vehicles were responsible for 47% of the deaths, it said, but the figure jumped as high as 66% in France, Germany, Italy and India where diesels make up a large proportion of cars on the road.
  • In the wide-ranging study, researchers looked at the emissions from diesel and non-diesel cars, trucks, buses, the shipping industry as well as agricultural and construction machinery and their impact on our health. They found that the global transportation sector was responsible for 11% of the 3.4m premature deaths annually attributed to pollution from fine particles and ground-level ozone exposure.


Company News

Aston Bay Holdings* (CVE:BAY) $0.05, Mkt cap C$6.5m – Elaine Ellingham appointed to Advisory board

  • Aston Bay report the appointment of Elaine Ellingham to the Company’s Advisory Board.
  • ‘Ms. Ellingham is a geologist with over 35 years’ experience with major and junior mining companies in exploration, business development, investor relations and senior executive roles. She spent eight years with the Toronto Stock Exchange serving in various capacities and has held directorships over the past ten years for several junior explorers through to mid-tier producers, where she has been a major contributor to strategic direction including hands-on with management in several situations. This included serving as a Director of Richmont Mines for eight years, six as lead director, as well as stepping in as interim CEO in 2014, and through to its recent take-over by Alamos Gold. She is currently an active director on the boards of Alamos Gold, Aurania Resources, and Almaden Minerals.’
  • Aston Bay is exploring for large, high-grade, copper, zinc and precious metal deposits in Nunavut, Canada and Virginia, USA.
  • The Company is led by CEO Thomas Ullrich with exploration directed by Chief Geologist, Dr. David Broughton, the award-winning co-discoverer of Kamoa-Kakula and Flatreef, in conjunction with the Company’s advisor, Don Taylor, the 2018 Thayer Lindsley Award winner for his discovery of the Taylor Pb-Zn-Ag Deposit in Arizona.
  • The Aston Bay Property hosts the Storm Copper Project and the Seal Zinc Deposit with drill-confirmed presence of sediment-hosted copper and zinc mineralization.
  • The Company has also acquired the exclusive rights to an integrated dataset over certain prospective private lands at the Blue Ridge Project, located in central Virginia.
  • These lands are located within a copper-lead-zinc-gold-silver mineralized belt, prospective for sedimentary exhalative (SEDEX) and Broken Hill (BHT) type base metal deposits, as well as Carolina slate belt gold deposits.
  • Don Taylor, who led the predecessor company to Blue Ridge and assembled the dataset, has joined the Company’s Advisory Board and will be directing the Company’s exploration activities for the Blue Ridge Project.

Conclusion: Aston Bay continues to grow and diversity its activity to better utilise its geological expertise. The ability to attract Ms Ellingham to the Advisory board is testament to the skillset within Aston Bay and interest in its projects.

*SP Angel act as broker to Aston Bay


Cradle Arc Plc* (LON:CRA) Suspended – Provisional judicial manager recommends full judicial management in Botswana High Court

  • Sometimes a company with sensible management and a workable plan goes to the wall for all the wrong reasons.
  • Cradle Arc is a case study in taking on the wrong investor / debt instrument following introductions by Tamesis.
  • Yesterday the provisional judicial manager for the operating subsidiary, Leboam in Botswana recommended full judicial management in Botswana High Court. A final decision is expected on Thursday.
  • Fujax a commodity trading company based in Mauritus was reported have reneged on a USR4m funding arrangement causing the company to go into Judicial Review
  • Cradle Arc management were unable to refinance the business to complete its plan to raise copper recovery rates through the processing of better quality sulphide ores by sorting out the oxide and transitional material.
  • Tragedy: the tragedy is that having completed remedial action in mid-November last year, Fujax reneged on fulfilling its commitments and Judicial Management started on 18 December.
  • This put Cradle Arc’s loan notes into default causing the company to enter Administration on 31 Jan 2019.
  • Sadly the company was in the final stages of negotiation to sell assets in Zambia and Mali for $5m and the company was due to reclaim some £700,000 from HMRC.
  • The Mowana copper mine still has 5 benches of material available and 3 benches of the North Pit Available at strip ratios of around 2:1.
  • The material adds up to 1.8mt of resource with 1.2mt of ore expected from this.
  • Recovery rates should be between 55-85% copper depending on how much transitional material is sorted out.
  • The Mowana mine has debts of:
    • $10m Loan note - secured. Noteholder name remains undisclosed
    • $9.9m ZCI Secured Debt
    • $10m Liquidator (MCB) debt
    • $7m Offtake Pre-payment
    • $2m PenMin Facility.
    • $6m Creditors.
  • Cradle Arc the company owes:
    • £400,000 in trade creditors
    • £800,000 convertible loan notes – in default. Noteholder name remains undisclosed
    • £400,000 staff liability
    • $10m loan notes passed down to Mowana
    • $18m in shareholder loans down to Mowana including the notes
  • Management are/were looking to fund $600,000 of work to figure out if they should continue to mine the first 100m of ore which carries transitional ore uncertainty or to sink a $5m decline
  • A $5m decline should give access to some 900,000t per annum of material where 92% recovery rates are proven in primary sulphides. 
  • The mine, in its current configuration, is a marginal but expansion past 20,000 tpa cu should move the mine to a lower quartile producer.

*SP Angel acts as Joint Broker to Cradle Arc plc


Metals Exploration (LON:MTL) 0.7p, Mkt Cap £15.0m – Operations review results

  • New management team together with an independent 3rd party BIOX specialist conducted the review of Runruno operations and released findings this morning.
  • Historic statements referred to the BIOX circuit having achieved and maintained 100% of design throughput rate for extended periods of 2018.
  • Review of historical data shows announcements significantly overstated run rates at the BIOX plant at Runruno.
  • Some of selected announcements versus actual performance are provided below:
    • Q1/18 update: “circuit had achieved a throughput of 45% in ramp-up at the end of the quarter; subsequent to the end of the quarter, the BIOX® circuit reached a milestone event achieving and maintaining 100% of the design throughput rate” v actual “average throughput for the quarter to Mar 2018 was 10.7%”.
    • July/18 update: “after having achieved 100% of design throughput early in Q2 2018, the BIOX circuit operated resiliently at and about these levels, demonstrating the capacity of the circuit” v actual “1st Jan 2018 to 30th June 2018 average throughput was 21.8% with the best month being April 2018 where average throughput was 46.9%”.
    • Q2/18 update: “after previously announced disruptions, the BIOX® circuit has recently recommenced ramp-up and is progressing strongly with throughput having achieved 88% of design throughput” v actual “from 1st of July to 22nd of July the average throughput was 14.5%   with a one week period during the month achieving a throughput of 38.5%”.
    • Q3/18 update: “BIOX operations have been stable throughout Q3 and design criteria has been demonstrated” v actual “Average throughput for the quarter Q3 was 39.1%... best month was August 2018 with a throughput of 47.6%”.
    • Feed of concentrate into the BIOX plant averaged less than 40% of full capacity levels during the April to December period last year including 47% in April, 36% in May and 65% in December.
    • Additionally, plant gold recoveries have been consistently overstated (from as low as extra 5pp in Q1/18 to 18pp in Q3/18) which did not affect final gold production given an incorrectly calculated mill feed grades.
    • Corrected metallurgical recoveries improved during the last quarter climbing to 64.8% in Q4, up from 57.3% recorded in Q3 (previously reported at 75.3%).
    • The management reports mining operations are seeing higher levels of dilution (around 20% levels) than previously envisaged which is leading to a reduced mill feed head grade. The Company is working with a 3rd party at the moment reviewing the life of mine plan and are targeting to have an updated plan by end of Q2/19 as well as an updated mineral reserves/resources by end of Q4/19.

Conclusion: The operations review highlights BIOX plant ramp up have been significantly overstated with the latest data from December showing the plant is running at around 65% capacity versus reports for Q3/18 that design criteria have been demonstrated. The Company is carrying a review of their block model with an updated resource/reserve statement due in Q4/19 to account for higher mining dilution rates and weaker recoveries which in turn does not bode well for previously envisaged production outlook and running costs at Runruno.


Phoenix Global Mining* (LON:PGM) 19p, Mkt Cap £7.3m – Increasing its land position at Empire

  • Phoenix Global Mining has announced a substantial increase in its land position surrounding the historic Empire mine in Idaho. The staking of a total of 194 new mining claims to the north and west of the company’s Horseshoe claim block has increased the overall holding by 3,880 acres (approximately 1,570 hectares or over 200%) to 5,717 acres (2,314 hectares).
  • The new claim areas, known as the Windy Devil and Navarre Creek claim blocks cover “extensions to known mineralisation”. The Windy Devil block which is “contiguous with the Horseshoe Block, covers the identifiable extensions of the Horseshoe Block mineral trends and includes more than 30 historical prospects, shafts, and adits”.
  • Sampling results during the 2018 exploration programme at the Horseshoe Claim area “reported grades as high as 9.19% copper, 580 g/t silver, 2.02 g/t gold, and 20% lead in surface rock chips” and the company has apparently identified extensions of this mineralisation into the Windy Devil area.
  • The “larger Navarre Creek Block [which is located around 2km] to the west [of Windy Devil] was also recognised during the 2018 field season as a highly prospective target area based on the classic hot springs style alteration evident on the surface”.
  • Navarra Creek is identified as “an area of secondary alteration thought to be epithermal in nature and includes over 2.5-kilometres of highly brecciated … altered volcanic rocks … similar to the mineralised rocks in northern Nevada such as those found in the Carlin Trend”.
  • Commenting on the acquisition of the additional land CEO, Dennis Thomas said that “This new claim block contains more than 30 unnamed prospects, including multiple previously mined shafts and adits”.
  • Mr. Thomas emphasised, however, “The Company’s first priority remains the Empire copper deposit. Now that we control the Horseshoe, Windy Devil, and Navarre Blocks, we are confident that our future operational footprint and areas of expansion are secure.”
  • A revised mineral resources estimate for the Empire project, incorporating the results of the 8,604m of drilling completed in 2018, is expected during Q1 2019 as part of the continuing bankable feasibility study work to develop the near-surface oxide mineralisation.
  • When the revised estimate is available we expect the additional drilling and the earlier expansion of the company’s land position into the Horseshoe Block to result in an expansion of the current inferred resource of approximately 11.5mt classed as measured and indicated at an average grade of 0.52% copper, 0.14% zinc, 10g/t silver and 0.2g/t gold plus an additional 9.9mt classed as inferred at an average grade of 0.41% copper, 0.13% zinc, 9g/t silver and 0.3g/t gold.
  • A Preliminary Economic Assessment, completed in April 2018, envisaged heap leaching and solvent extraction to produce around 8,000tpa of copper cathode from the oxide resources. The 2018 exploration work also intersected deeper sulphide mineralisation similar to that extracted during the historical mining in the area.
  • As the company’s focus intensifies on the Empire mine area and on the cobalt projects, also located in Idaho, Phoenix Global Mining has allowed its option to acquire an 80% interest in the Gordon Lake gold property in Canada to lapse. The option required the expenditure of a “further $250,000in February. Given the potential of the Empire Mine and particularly in view of the Company’s increased acreage, the Company decided to allow the option to lapse.  The Company’s 2018 accounts are expected to include a write-off of the option, which has a carried value of $155,000”.

Conclusion: The three-fold increase in Phoenix Global Mining’s land holding around the old Empire mine and its decision to allow the Gordon Lake option to lapse emphasises the importance management attaches to the Empire mine project. We look forward to the revised mineral resource estimate for the project later in the quarter.

*SP Angel acts as Nomad and broker to Phoenix Global Mining


Rio Tinto (LON:RIO) 4428.5p, Mkt cap £75.5bn – Iron ore dominates 2018 earnings but copper recovers strongly

  • Rio Tinto has reported a 2% increase in 2018 underlying earnings to US$8.81bn or 512.3 US¢/share (2017 – US$8.63bn or 482.3US¢/share).
  • Rio Tinto is declaring a “record $5.3 billion full year ordinary dividend (equivalent to 307 US cents per share) - 72% of underlying earnings3, including final dividend of $3.1 billion (equivalent to 180 US cents per share), announced today”.
  • Excluding exploration, interest and other items, earnings of US$9.83bn were dominated by the 66% contribution of Rio Tinto’s iron-ore business which generated US$6.51bn of the underlying earnings albeit US$178m lower than the US$6.70bn generated by iron ore in 2017.
  • The contribution to underlying earnings of the Aluminium (US$1.35bn or 14%), Copper & Diamonds (US$1.05bn or 11%), and Energy & Minerals businesses (US$1.01bn or 10%) was broadly similar although the four-fold increase in the contribution of the Copper & Gold division from the US$263m contribution in 2017 stands out.
  • In terms of EBITDA, which declined by 2% to US$18.14bn or to US$19.32bn after the exploration and other adjustments, iron ore contributed 59% or US$11.33bn; Aluminium 16% or US$3.10bn; Copper and Diamonds 14% or US$2.78bn and Energy & Minerals 11% or US$2.19bn.
  • While referring to the general stability of its main commodity prices, Rio Tinto attributes an increase in shipments of iron ore as it debottlenecks the rail network and introduces autonomous trains coupled with the ramp up of output from the new Silvergrass mine for the strength of its iron-ore business.
  • The copper business “benefitted from better operating performance at Escondida including the absence of the labour disruption in 2017, as well as higher copper grades at Rio Tinto Kennecott and higher gold grades at Oyu Tolgoi”.
  • The company has also strengthened its balance sheet through a combination of divestments and robust operating cash flows partially “offset by the increase in capital expenditure, payment of the final dividend and the ongoing share buy back”.
  • As a result, “Our net debt declined by $4.1 billion, giving rise to net cash of $0.3 billion … [and] … Our net gearing ratio (net debt to total capital) decreased to -1% at 31 December 2018 (31 December 2017: 7%).”
  • Including US$2.9bn on development projects, capital expenditure increased by around 20% to US$5.43bn, (2017 – US$4.48bn) and is expected to increase further to “around $6.0 billion in 2019 and around $6.5 billion in 2020. In 2021, we expect to invest $6.5 billion in our business. Each year includes approximately $2-2.5 billion of sustaining capex”.
  • In a separate announcement today, Rio Tinto reports the discovery of copper-gold mineralisation at its Winu project located in the Paterson Province of W Australia about 350km southeast of Port Hedland.
  • The initial programme at Winu, in 2018, included eight reverse circulation (RC) drill-holes totaling 1473m and twenty diamond-drill holes (11813m). The company has now resumed diamond-drilling with assay results awaited for the four holes (1409m) of drilling completed since mid-January.
  • Although Rio Tinto makes clear that “the exploration project is still at an early stage and drilling to date does not allow sufficient understanding of the mineralised body to assess the potential size or quality of the mineralisation nor to enable estimation of a Mineral Resource”the results highlighted today include a number of lengthy intersections with grades in excess of 1% copper, including:
    • A 71m long intersection from a depth of 77m in hole RC18WIN0003 which averaged 1.02% copper, 0.49g/t gold and 5.14g/t silver; and
    • A 60m long intersection from a depth of 60m in hole WID0007 which averaged 1.03% copper, 1.22g/t gold and 4.30g/t silver; and
    • A 21m long intersection from a depth of 135m in hole RC18WIN0003 which averaged 1.00% copper, 0.72g/t gold and 7.58g/t silver; as well as
    • A 439m long intersection from a depth of 140m in hole WINU0003 which averaged 0.42% copper, 0.32g/t gold and 2.45g/t silver; and
    • A 145m long intersection from a depth of 88m in hole WINU0004 which averaged 0.43% copper, 0.48g/t gold and 3.09g/t silver.


Conclusion: Rio Tinto’s earnings are underpinned by the strength of its iron ore business, however copper is recovering strongly and having eliminated its net debt during 2018, the company is well positioned to fund its US$6bn pa planned capital programme over the next few years. The relatively unusual decision to announce the results of early stage copper/gold exploration at Winu in W Australia shows wide intersection of copper/gold/silver mineralisation and confirms the Group’s continuing interest in finding and developing new large-scale copper projects.

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