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Morning View . Miners pull back on weaker Chinese PMI and Fed comments

Published: 01:48 01 Mar 2018 AEDT

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Asiamet Resources (LON:ARS) – Maiden resource estimate at BKZ expected in May

Bacanora Minerals (LON:BCN) – Update on cornerstone investment

Bluebird Merchant Ventures* (LON:BMV) – Access to Kochang mine indicates 3km of strike

Metminco (LON:MNC) – Metminco in confidential and incomplete discussions to raise capital

Newcrest – to buy 27.1% stake in Lundin Gold for US$250m as part of US$400m placement

Phoenix Global Mining* (LON:PGM) – Option over Gordon Lake gold property

Savannah Resources (LON:SAV) – Mina do Barroso scoping study

Scotgold Resources (LON:SGZ) – Planning application approval

 

Valeo – expects battery powered EV sales to rise to >10% of total vehicle sales by 2025

  • Valeo, one of the world’s larger automotive suppliers, is now forecasting a base scenario of >10% of vehicle sales to be EVs by 2025 vs its previous estimate of 5-6% and 1% seen today

  • The move is due to increased spending on development programs by manufacturers following a collapse in diesel vehicle sales and new CO2 regulations starting in 2021

  • Ford plans to spend $11bn by 2022 in developing EV sales

  • Volkswagen €20bn by 2030 in EV sales

 

Diesel cars can be banned from German cities – according to a German judge

  • We wonder if they will ban VWs first or just all diesels.

  • An environmental group is trying to force Stuttgart and Dusseldorf to ban diesel cars though Euro-5 emissions vehicles should not be excluded until Sept. 1, 2019.

 

EU and China consider retaliation in response to potential Trump steel and aluminium tariffs

  • Commerce department considers tariffs on all steel and aluminium imported into the US not just from specific countries

  • EU and China plan to take aim at politically strategic products made in the US such as bourbon and motorcycles from symbolic American brands such as Harley Davidson

  • China is also considering limiting import of sorghum, a cereal grain imported from the US used to feed livestock

  • Commerce Department is making a case that the dumping of cheap steel and aluminium from China and other countries puts U.S. competitors out of business, risking national security

  • Our view is that tariffs on steel into the US are long overdue and the measures are going to hurt China Inc. much more than restrictions on the import of a few US brands into China

 

Company News

Dow Jones Industrials

 

-1.16%

at

  25,410

Nikkei 225

 

-1.44%

at

  22,068

HK Hang Seng

 

-1.36%

at

  30,845

Shanghai Composite

 

-0.99%

at

   3,259

FTSE 350 Mining

 

-1.82%

at

  18,632

AIM Basic Resources

 

-0.56%

at

   2,521

 

Economics

US – Bullish economic outlook provided by Jay Powell has seen bond yields rising and sParked a sell off in equities with S&P 500 posting a 1.3% decline on Tuesday.

  • During his address to the House of financial services committee, Powell said that the economy had performed better than he expected in December.

  • Fed Chairman pledged to continue with gradual monetary policy tightening to avoid overheating of the economy.

  • When asked by a Democratic Congresswoman from New York over the likely number of rate increases this year, Powell said his confidence in stronger inflation had increased since the Fed’s December forecasts but declined to comment further.

  • The US$ index was up 0.8% on the news and continued to strengthen this morning while market implied odds of four interest rate increases this year to 30% from previous 10%.

  • Fiscal stimulus and strong overseas demand have been mentioned among firm growth tailwinds to the economy.

 

China – Weaker economic growth numbers for February point to a cooling overseas demand with official February PMI numbers missing market estimates.

  • Manufacturing PMI fell the most in five years while new export orders dropped for second months.

  • Although, part of the decline is attributed to the timing of New Year celebrations this year.

  • Manufacturing PMI: 50.3 v 51.3 in January and 51.1 forecast.

  • Services PMI: 54.4 v 55.3 in January and 55.0 forecast.

  • Composite PMI: 52.9 v 54.6 in January.

 

Eurozone – Weaker inflation numbers warrant the continuation of the monetary policy stimulus the latest consumer prices data shows.

  • The ECB Governing Council will be meeting next week to discuss the policy.

  • CPI (%yoy): 1.2 v 1.3 in January and 1.2 forecast.

  • Core CPI (%yoy): 1.0 v 1.0 in January and 1.0 forecast.

 

Germany – Jobs numbers came in stronger than forecast in February as the economy maintained robust growth momentum.

  • Unemployment Change (‘000): -22 v -25 in January and -15 forecast.

  • Jobless rate held up at record low of 5.4%, in line with estimates.

  • A separate report showed consumer confidence came in close to record high in February.

  • “Despite losses in this month, consumers continue to view economic prospects with optimism… the excellent condition of the labour market, a reduction in unemployment figures and the high number of job vacancies all support this expectation,” GfK said.

 

UK – Consumer confidence weakened in February as respondents to the survey were more pessimistic over their household finance and the wider economic growth prospects, according to the GfK data.

  • A separate report showed, non-food prices declines accelerated in February as consumers remained cautious about discretionary spending amid contracting real incomes.

  • Non-food prices dropped 2.2%yoy in February compared to a 1.9%yoy decline in January, according to the British Retail Consortium.

  • Meanwhile, food prices were up 1.6% during the month, easing from a 1.9%yoy increase in the previous month, as food retailers being cautious to pass all increases onto shoppers.

 

Currencies

US$1.2204/eur vs 1.2335/eur yesterday. Yen 107.19/$ vs 107.06/$. SAr 11.767/$ vs 11.606/$. $1.388/gbp vs $1.398/gbp. 0.781/aud vs 0.785/aud. CNY 6.332/$ vs 6.309/$.

 

Commodity News

Precious metals:         

Gold US$1,317/oz vs US$1,334/oz yesterday

   Gold ETFs 72.3moz vs US$72.3moz yesterday

Platinum US$980/oz vs US$999/oz yesterday

Palladium US$1,045/oz vs US$1,062/oz yesterday

Silver US$16.38/oz vs US$16.66/oz yesterday

           

Base metals:   

Copper US$ 6,993/t vs US$7,130/t yesterday

Aluminium US$ 2,143/t vs US$2,153/t yesterday – The Commerce Departmetn placed import tariffs on aluminium foil from China arguing overseas producers are receiving unfair subsidies.

  • A 49% to 106% duty will be imposed on Chinese aluminium foil for selling the product in the US, the statement said yesterday.

  • US aluminium foil imports from China were estimated at $389m in 2016.

  • In a 50mt market for refined aluminium and the US demand accounting for c.10% or $10bn, the proposed legislation is not that significant, but marks an interesting precedent.

 

Nickel US$ 13,785/t vs US$13,960/t yesterday - Amur Minerals* studying potential to supply nickel sulphate directly to battery makers

  • Amur Minerals has just released details of the 2018 programme of works for its Kun-Manie nickel sulphide mine in Russia, and the emphasis is now shifting further and further towards development

  •  Kun-Manie is one of the last remaining major nickel sulphide deposits in the world, and the largest in the vicinity of three of the major demand centres for electric vehicle batteries, China, Korea and Japan

  • Possibility of making own concentrate and generating sulphate minerals for use in batteries, cutting out the middle man and becoming product end supplier to battery makers themselves

*SP Angel acts as nomad and broker to Amur Minerals

Zinc US$ 3,476/t vs US$3,529/t yesterday

Lead US$ 2,544/t vs US$2,580/t yesterday

Tin US$ 21,625/t vs US$21,645/t yesterday

           

Energy:           

Oil US$66.3/bbl vs US$67.4/bbl yesterday

Natural Gas US$2.675/mmbtu vs US$2.673/mmbtu yesterday

Uranium US$21.25/lb vs US$21.25/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$78.4/t vs US$78.7/t

Chinese steel rebar 25mm US$691.1/t vs US$693.4/t

Thermal coal (1st year forward cif ARA) US$79.4/t vs US$78.5/t - China’s annual coal consumption rises for first time in 3 years

  • An especially cold winter and a natural gas shortage further increased coal demand, capacity cuts in its domestic mining sector mean China has bridged its coal demand through coal imports, driving global prices for thermal coal to their highest level since late 2016

  • Seaborne thermal coal prices are expected to stay high as China remains a strong importer

  • Prices are expected to settle lower in the long term as China turns on its new generation of nuclear power stations and Japan slowly returns to nuclear generation.

Premium hard coking coal Aus fob US$235.4/t vs US$235.9/t

 

Other:  

Tungsten APT European US$319-326/mtu v US$319-325/mtu

Cobalt LME 3m US$82,250.0/t vs US$82,750.0/t

 

Company News

Asiamet Resources (LON:ARS) 10.4p, Mkt Cap £89m – Maiden resource estimate at BKZ expected in May

  • Asiamet Resources reports that column leach tests on material from its BKM copper project in Kalimantan have confirmed the design parameters which the company is using for the leaching, solvent extraction and electro-winning in the current feasibility study.

  • After 270 days of test leaching, the company reports that recovery  rates from 19mm sized crushed ore ranged between 72% to 81% which represents “a 4% improvement, on average, over the recoveries obtained from the short column programme.”

  • The company comments that the “results confirm the expectation that utilising a finer crush size will deliver recoveries of 80% to 85% … for the dominant material types” and at present, “the finer crush size … is the preferred design basis for the BKM Copper Project.”

  • Further testing is underway “to provide further information to support production optimisation … This additional test work will also provide key input data for ramp up and early mine life stages of the operation”.

  • Commenting on the confirmation of the earlier test leaching results CEO, Peter Bird, confirmed that “The Feasibility Study remains on track for delivery by the end of H1 2018”. Mr Bird went on to observe that “The BKM Project remains extremely well positioned as one of the few advanced new copper project moving towards production against a backdrop of a projected net short supply balance and rising copper prices.”

Conclusion: The confirmation of high copper recovery rates from leach tests on the material from BKM validates a number of the process design criteria in the current feasibility study work. Indications that further recovery improvements may be achievable through finer crushing will need to be balanced against any increased cost implications in the crushing circuit. We look forward to the Feasibility Study later this year.

 

Bacanora Minerals (LON:BCN) 83p, Mkt Cap £111m – Update on cornerstone investment

  • Bacanora Minerals reports that its proposed new Chinese investor, NextView Capital has been unable to forward the agreed funds and that Bacanora is currently “taking advice and has reserved its rights in respect of this default.”

  • Under the terms of the agreement with NextView Capital announced in December 2017, Bacanora was to have received an approximately £31m investment  by an initial target date of the end of January 2018 in return for approximately 20% of the company.

  • Discussions between the company and NextView “have not resulted in any alternative proposals that would, in the opinion of the Board of Bacanora, be in the best interests of Bacanora and its shareholders.”

  • Meanwhile, “Bacanora continues to focus on … developing the Sonora Lithium Project in Mexico (‘Sonora’) into a leading supplier of high value lithium products to fast growing industries such as electric vehicles and energy storage.”

  • The company’s feasibility study envisaged an initial capital investment of US$420m to start at an initial  production rate of 17,500tpa of lithium carbonate before a doubling of capacity to 35,000tpa.  The feasibility study, published in December 2017, for the 19 years project shows an after tax NPV8% of US$802m and an IRR of 21.2%.

  • Today’s announcement does not elaborate on the reasons that NextView was unable to complete its investment, however in other similar cases, Chinese investors’ plans are thought to have been countermanded by Government instructions.

Conclusion: Bacanora will now need to source alternative backing as it seeks to develop its Sonora Lithium Project. We hope for positive news on future funding to allow the project to go ahead.

 

Bluebird Merchant Ventures* (LON:BMV) 3p, Mkt Cap £5.5m – Access to Kochang mine indicates 3km of strike

(Bluebird has a 50:50 jv with Southern Gold Ltd at Kochang)

  • Bluebird Merchant Ventures reports it has made rapid progress in its access to the newly acquired Kochang gold and silver mine in South Korea.

  • The mine is just 130km south east of Bluebird’s main Gubong mine.

  • Ground conditions in the mine are described as excellent with open development discovered and very solid looking stopes.

  • There appears to be material in the stopes for mining and simple future extraction

  • The cost of reopening the development is said to be just US$17 per meter which is far lower than that normally required for mine development.

  • It is interesting to note the low cost of development with the company being almost entirely funded by its directors.

  • The team now have access to the lowest level of the old Kochang mine to about 150m below surface indicating that this is a dry mine with just four weeks to dewater the levels.

  • Veins are inclinded at ~40o in the old stopes with development found to be open.

  • The main adit runs for around 3km indicating the potential length of the mineralised strike

  • Bluebird have spent under US$50,000 to enter the mine and dewater and gain access the lower levels.

  • The team now plan to access the upper levels and a second adit to give the mines two access points. An important point from a ventilation and safety perspective.

  • Kubong surface rock-chip samples show gold grades of: 8.2 g/t, 15.3 g/t, 3.61 g/t, 10.5 g/t, 6.35 g/t and 23.9 g/t.   

  • A previously published Competent Persons Report in January includes details of the Kochang project.

  • Gubong: a further entry point has been uncovered. The inclined raise may have been made for ventilation purposes. The discovery of the raise now gives the Gubong mine three access points.

  • See company website for further details www.bluebirdmv.com

Conclusion: Bluebird are moving quickly and effectively with the reopening of two mines in South Korea. News of multiple access points and mineralisation within the mines indicates good potential for the eventual reopening of these mines as significant gold and silver producers.

 

Metminco (LON:MNC) 2.4p, Mkt Cap £3.1m – Metminco in confidential and incomplete discussions to raise capital

  • Metminco Limited report that they are in confidential and incomplete discussions to raise capital to supplement its cash position which stood at A$833,000 at the year end.

  • The company also notes that Redfield, an Australian investment fund, wishes to redeem notes under the Unsecured Convertible Note Deed which means that the company no longer needs to hold an EGM on the matter.

  • The company also discloses that “further to the announcement of 8 February 2018 Lanstead Capital LP ("Lanstead") and Lanstead III LLC ("Lanstead III") (together "the Lanstead Parties") are not associates and consequently there is no change to the previously disclosed position that they are separate Significant Shareholders only.”

  • Metminco are looking to develop the Miraflores gold mine in in Colombia. We have previously visted the mine and walked through the underground adit and tunnels where mineralisation can be seen.

  • The Miraflores Feasibility Study proposes the extraction of 4.3mt of ore over a 9 years mine life to produce 420,000oz of gold and 210,000oz of silver

  • Capex of ~US$90m over the life of the mine

  • NPV8% of US$72.3m

  • IRR of 25%

  • Payback 3.6 years

  • AISC (All-in sustaining costs) ~US$643/oz.

  • Metminco still needs to complete its Environmental Impact Assesment and show potential impact on the local communities within the Quinchia where there are eight small communities

  • The company also needs a Social license and reckons it is still on track for all approvals for mine development this year.

SP Angel analysts have previously visited Los Calatos in Peru and the Miraflores project in Colombia.

 

Newcrest – to buy 27.1% stake in Lundin Gold for US$250m as part of US$400m placement

  • Newcrest is investing some $250m into Lundin Gold as part of a plan to explore further in Ecuador.

  • The investment is part of a US$400m placement by Lundin Gold at a price of C$5.44/s Orion Mine Finance is taking US$100m with a further US$50m taken by Lundin family trusts

  • Newcrest and Lundin Gold will jointly explore eight other concessions to the north and south of the project with earning up to 50% in the jv by spending $20m five years but is restricted to eight years before it can lift its stake in Lundin Gold beyond 32%.

  • The move highlights renewed interest in Ecuador as one of the last largely unexplored mineralised regions along the Andean mountain range in Latin America. The range hosts a number of the world’s largest copper mines in Chile and Peru.

  • Lundin Gold recently secured a US$300m debt facility for the development of the Fruta del Norte mine, a move which shows Ecuador to be investible from a banking perspective.

  • Lundin Gold’s Fruta del Norte project has 15.5mtgrading 9.67g/t gold and 12.7g/t sliver containing 4.82moz gold and 6.34moz silver.

 

Phoenix Global Mining* (LON:PGM) 4.8p, Mkt Cap £10.9m – Option over Gordon Lake gold property

  • Phoenix Global Mining reports that it has secured an option to acquire 80% of the Gordon Lake gold property located some 110km northeast of Yellowknife in the Northwest Territories of Canada and close to historic producers such as the Con Mine which produced 5.3moz of gold between 1938 and 2003 and the 7m oz Giant mine which operated from 1948 to 2004.

  • PGM has paid the current owner, ExGen, $25,000 to acquire the option and is to issue 2m shares to ExGen within 90 days as well as committing to spend $250,000 on the property within twelve months. Continuing commitments to pay an annual $25,000 for the first two years and $50,000  annually thereafter until completion of a Bankable Feasibility Study.

  • While underlining that the company’s principal focus remains the early development of its flagship Empire mine project in Idaho, and where Exgen is also a 20% shareholder, Chief Executive, Dennis Thomas pointed out that the Gordon Lake area ”has been a significant gold producer in the past and the Gordon Lake “footprint” is similar to other significant gold producing operations in the area. Exploration on the property to date has concentrated on only 4 of 17 identified zones with gold mineralisation open at depth …”.

  • ExGen’s President, Jason Riley, will join the Board of PGM in a non-executive role, further strengthening the links between PGM and ExGen.

  • The Gordon Lake property covers two mining leases totalling 609 hectares on the northern edge of the Gordon Lake. The project area contains “17 zones of high grade shear hosted gold mineralisation, over a 1 kilometre strike length”. The currently identified zones have been identified from geophysical surveys and a total of 59 mineralised holes have been drilled into 4 of these zones; The South Zone No 9 Vein; the South Zone S3 Vein; the Union Zone and the Main Zone. High grade intersections reported in the announcement include:

    • Ten intersections of the South Zone No 9 Vein assaying in excess of 10g/t gold over widths up to 7.4m and to a maximum down hole depth of over 240m

    • Two intersections, each of 2m width assaying 6.6g/t gold and 8.2 g/t from the South Zone S3 Zone

    • Six intersections of the Union Zone over widths up to 3m and assaying between 7g/t gold and 13.1g/t gold; and

    • Two intersections of the Main Zone of 1.02 and 1.55m respectively assaying 8.7g/t gold and 6.5g/t.

Conclusion: Phoenix Global Mining is expanding its North American asset base with a low-cost acquisition of already identified gold mineralisation in an area and geological setting which has produced three mines with over 1m oz of historic gold production. Only four of the seventeen known gold-bearing structures at Gordon Lake have yet been drilled and we look forward to the results of future exploration.

*SP Angel acts as Nomad to Phoenix Global Mining

 

Savannah Resources (LON:SAV) 6.3p, Mkt cap £39.8m – Mina do Barroso scoping study

  • Savannah Resources reports that it has appointed the international engineering consultant, Hatch, to prepare a scoping study of its Mina do Barroso lithium project in Portugal.

  • The study, which is expected to be available late in Q2 2018, will address “a potential mining and concentration plant development based on the Grandao, Reservatorio and NOA spodumene deposits.”

  • The study will include a project development schedule and risk review as well as addressing the environmental, social, mining and processing aspects and should provide insight into the possible economics and market position of a potential lithium mine development.

  • Announcements earlier this month revealed that continuing exploration had identified a number of additional targets within the lease area, however, Savannah Resources has already established initial mineral resource estimates for the Reservatorio and is apparently sufficiently advanced in its exploration to include the Grandao and NOA deposits alongside Reervatorio in the scoping study

Conclusion: We look forward to the outcome of the scoping study later this year.

 

Scotgold Resources (LON:SGZ) 35p, Mkt Cap £9.9m – Planning application approval

  • The Loch Lomond and Trossachs National Park Authority has unanimously approved the planning application for the development of the gold/silver Cononish underground operation.

  • The renewed application included new tailings management systems and an extension to the life of mine at Cononish in the wake of a phased project development programme.

  • The approval paves the way for the start of development works at Cononish which is expected to run at above 20kozpa at full 72ktpa capacity.

 

Conclusion: The news of the planning application approval highlights strong support of local authorities for the project. The new phased development approach allows for a lower start up capex while still providing attractive returns thanks to high grade nature of the Cononish deposit.

Australian Strategic Materials signs US$600 million LoI

Rowena Smith, CEO and managing director of Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF), joins Jonathan Jackson in the Proactive studio to discuss the company’ s Dubbo Project, in Central West New South Wales. This project aims to extract and process critical minerals and rare earth...

3 hours, 32 minutes ago