30-50% of Canadian junior miners may not survive – British Columbia Securities Commission report
• It is unusual for a stock exchange to herald the potential demise of nearly half of its constituents.
• But in Canada all things are possible and the BCSC is quoting a participant in its interviews as forecasting that it is fine for 30% of companies to go to the wall but that 50% is not.
• Here on AIM, we don’t think its fine for any company to go to the wall, though we accept that bad management and bad luck sometimes combines to cause the delisting of member firms.
• Generally, listed companies find new value, even in shell form, sometimes with new projects and new management and sometimes with new funds to rescue good ideas and create new value.
• It is natural for the market to support its favourites and for less appealing ideas to fall by the way till they become better aligned with investor sentiment.
• Thankfully the AIM market for mining stocks appears to be enjoying a significant resurgence with many stocks showing healthy gains on fund raisings this year and good investor interest in the market.
• We receive near daily approaches from funds looking for ideas and offering new funding mechanisms to help companies move onto the next stage of development.
• AIM is a market which is coming of age and this new age looks set to potentially build a more solid foundation to its listed companies.
US - Delayed non-farm payrolls are due later today with expectations for the economy to have created 180k jobs, the most since Apr, in Sep before the government announced a 16-day shutdown. This compares to 169k reported in Aug. jobless rate is estimated to have remained at 7.3%, the lowest since 2008.
• Previously owned homes sales fell 1.9%yoy to 5.29m, in line with expectations, in Sep from a nearly four year high recorded in the previous month. Aug numbers have been revised don to 5.39m units.
• Rising prices and mortgage rates are reported to have cut affordability of available properties. Affordability currently stands at a five year low.
• Sales in Sep reflect contracts signed in Jul and Aug, when mortgage rates were 1pp higher than in May. A decline in sales in Sep was the first one in three months.
• Rates are estimated to have come down since Aug. The average rate on a 30-year fixed mortgage was 4.28% last week, down from a two-year high of 4.58% in Aug.
• Previously home sales contracted to a 13-year low of 4.11m in 2008, down from a record of 7.08m in 2005.
China - Property prices in four major cities climbed the most since Jan 2011fueling concerns gains in the sector may not be sustainable.
• New home prices in Sep climbed 20%yoy in the southern business hubs of Shenzhen and Guangzhou, 17%yoy in Shanghai and 16%yoy in Beijing.
• State measures to cool price inflation in the real estate had limited effect so far.
• Private estimates suggest nationwide home prices climbed 9.5%yoy in Sep (according to biggest real estate website owner in China).
• Developers say FY2013 are likely to exceed set annual targets. The sector continues to expand with loans to developers surging 50%yoy last month used among other things to finance land acquisitions. This in turn fuels land prices appreciation. A residential land parcel in Beijing is reported to have been sold for a record US$11,980/sqm on Sep 4.
• Home buyers rush into the market on expectations of further price gains.
• The government may forced to step in with more curbs. The risk is more property curbs might decrease chances of China reaching its annual set growth target of 7.5% this year.
Other - Thieves are targeting mining operations that went into care and maintenance and let go of fulltime security staff trying to extract precious metals from the workings and causing serious harm to equipment, Western Australia’s Gold Stealing Detection Unit.
• Following a fall in commodities prices and more firms finding it hard to continue to operate at negative margins, crime cases have increased.
US$1.3672/eur vs 1.3670/eur last week. Yen 98.37/$ vs 98.06/$. SAr 9.850/$ vs 9.817/$. $1.613/gbp vs 1.617/gbp
Gold US$1,312/oz vs US$1,321/oz yesterday
• Indian gold merchants are reported to be running low on gold stocks amid the festival season that has just started, a peak period for demand.
• “Even if someone wants 10kg, we don’t have the stock. So much so that we have stopped attending client calls,” a local wholesaler said to Reuters.
• The shortage is attributed to state measures to cut gold imports and improve nation’s trade balance.
• The government hiked import duty to 10% and imposed a rule requiring 20% of imported gold to be set aside and then re-exported.
• Stocks shortage and tight supply raised spot gold premiums to US$100/oz which may go further up to US$150/oz should the new imports continue to lag demand, according to the All India Gems and Jewellery Trade Federation.
• SPDR gold holdings fell to 871.7t (28,027koz) valued at US$36.9bn versus 882.2t (28,364koz) yesterday. Holdings lost nearly a third of the total from the start of the year.
Platinum US$1,427/oz vs US$1,442/oz yesterday
Palladium US$745/oz vs US$745/oz yesterday
Silver US$22.06/oz vs US$22.21/oz yesterday
Copper US$ 7,251/t vs US$7,263/t yesterday
Aluminium US$ 1,860/t vs US$1,855/t yesterday
Nickel US$ 14,618/t vs US$14,346/t yesterday
Zinc US$ 1,950/t vs US$1,943/t yesterday
Lead US$ 2,196/t vs US$2,186/t yesterday
Tin US$ 23,100/t vs US$22,920/t yesterday
Oil US$109.8/bbl vs US$109.7/bbl yesterday
Natural Gas US$3.652/mmbtu vs US$3.795/mmbtu yesterday
Uranium US$35.15/lb (21/10/13) unchanged on the previous close
Iron Ore - US$134/t (21/10/13) 62% Fe spot (cfr Tianjin) unchanged on the previous close
Aluvance (Private, run by Altus Strategies) – high grade results from Bikoula iron ore project in Cameroon
• Aluvance, a private company run by Altus Strategies yesterday reported high grade iron ore results from its Bikoula iron ore project in Cameroon.
• The results show concentrate grades of pDSO 67.6% iron and BIF concentrate grades of 63.5%.
• The samples used come from 17 drill cores with assay grades ranging from 35% to 64%, a relatively small but representative sample.
• We are looking for an exact definition for pDSO. It was used to describe iron ore mineralisation by Equatorial last year.
Conclusion: Looks like Altus are incubating a series of companies within its fund structure. An interesting strategy!
• Amara Mining (formerly Cluff Gold) has elected to delist from the TSX.
• Toronto was never Amara’s natural market and the collapse in stock prices and the ability to raise funds in Canada is making the TSX less attractive than it used to be.
• Combine this with increased corporate and compliance overheads and withdrawing from the market probably makes good sense for most London listed miners.
(Initiation note published 9/10/13)
• Noricum Gold have published further results from its underground drilling program a the Rotgulden gold mine in Austria
• The results continue to show high grade gold and silver along with some copper in mineralisation.
• Some results are better than others with gold grades ranging from 0.65g/t to 51.53g/t.
• Pictures of the ores in the press release show the highly mineralised nature of the ore and altered marble host rock.
• Intersections vary from 1.2m to 16.7m within the six drill holes reported.
• The key will be to work out the average grade within the orebody from a JORC classification perspective
• Key results from the drilling so far include:
• RZ01A – 16.7m @ 2.71g/t Au, 13.4g/t Ag from 6m
o Including 3m @ 7.24 g/t Au, 34.5g/t Ag from 14m
o And 1.7m @ 6.93g/t Au, 10.25g.t Ag from 21m
• RZ01 – 4.2m @ 4.58g/t Au, 20.39g/t Ag from 11m (partial results previously announced on 30 September 2013)
• RZ03 – 9m @ 1.00g/t Au, 5.13g/t Ag from 23m
• RZ03 – 3m @ 0.75g/t Au, 4.85g/t Ag from 4m
• RZ03 – 2m @ 1.09g/t Au, 4.98g/t Ag from 11m
Conclusion: The Rotgulden gold mine continues to show tantalizing gold and silver results. Each drill hole shows multiple intersections of mineralisation suggesting good returns if carefully mined. It is too early to guess tonnage and potential grade but many of the new intersections suggest potential for reopening Rotgulden as a small scale gold, silver, copper mine going forward.
*SP Angel acts as Nomad and Broker to Noricum. An SP Angel analyst has visited the Rotgulden gold mine. SP Angel recently raised £2m for Noricum Gold
• Iron ore production from WAIO business up strongly at 23% from same period last year and up 2% on previous quarter.
• Iron ore production for the quarter was 48.8 Mt with first production from Jimblebar mine expansion.
• Ramp up on phase one capacity to 35 mtpa is expected to be completed by the end of 2015.
• This will increase total WAIO supply chain capacity to 212 mtpa on 100% basis – 5 mtpa above prior year guidance.
• Petroleum products were up 2% year on year and 6% from the previous quarter at 62.7 m boe.
• Crude oil was up 16% year on year with natural gas down 6% over the same period.
• First production was achieved at Macedon, Bass Strait Turrum and NW Shelf Rankin with 12 major projects are on track.
• Copper was up 6% year on year at 403.3 Kt and down 13% quarter on quarter.
• BHP invested US$3.4bn (100% basis) to construct a desalination plant at Escondida to deliver sustainable water supply in the long term.
• Total capex into Escondida (100% basis) stands at close to US$8bn.
• Escondida copper production was up 12% in the Sept quarter to 278 kt as milling rates improved and is on tract to product 1.1mt for the full year.
• Guidance for copper for the full year is for 1.7 mt.
• Met coal production increased by 14% year on year to 10.2 Mt and was down 6% quarter on quarter.
• Met coal production guidance remains unchanged at 41 Mt for the full year.
• Energy coal was up 3% year on year at 19.6 Mt and 6% on quarter on quarter basis with production for the full year at 73 Mt.
• Alumina was up 7% 1,251 kt year on year and aluminium up 15% at 310 kt.
• Greenfield exploration is focussed on advancing copper targets within Chile and Peru with expenditure of US$115m spent over the quarter.
Conclusion: Iron ore production and copper continue to perform strongly. The performance of Rio at Pilbara and BHP at WAIO shows that the majors are continuing to build up low cost production in Australia and this is not letting up. It looks like Rio and BHP are targeting to take up any incremental demand in the market.
Investment continues into copper with total Escondida capex on a 100% basis of US$8bn of which the desalination plant is 42% - Rio’s share of the latter is 30% at $1.03 bn.
• The deal is for joint due diligence on the formerly producing Cehegin Iron Ore Mine located in the Province of Murcia, south-eastern Spain.
• Solid Resources is advancing the re-opening the Cehegin iron ore mine and is also applying for an exploitation permit on its Alberta-1 tantalum/tin and lithium property in north-west Spain.
• Solid Resources is a Canadian junior mining company focused in Spain on the exploration and development of rare and industrial metals.
Significant terms of the potential JVA are:
• Glencore is taking a 20% interest in the Cehegin project (Solid 80%)
• Glencore has an exclusively offtake agreement
• Agreement to jointly pursue third party financing when required.
• Dilution of non-financing partner(s) at fair market value.
• Glencore also gets 12m warrants in Solid at $0.19 till October 18, 2014 and $0.26 from October 19, 2014 till expiry at October 18, 2015.
• The warrants will only vest and be exercisable as to 50% on the signing of the Agreement and as to 50% on Glencore contributing its share of costs for the initial exploration and study phase of the development programme. The warrants, and any common shares issuable on exercise, are subject to a hold period that expires on February 18, 2014.
Conclusion: It will be interesting to see if Solid Resources and Glencore gain mining permits faster than EMED. The Spanish government is at long last making moves on exposing corruption mainly within the property sector in the nation.
• Petropavlovsk is perhaps the most unlucky of the large scale gold miners.
• The company is one of the largest pure gold miners in London.
• The company produced some 204,000oz through Q3 within guidance despite the heavy rainfall. Flooding may have cost the company around 3% of production.
• Total gold production for the year now comes to 499,100oz for the year to date
• Target gold production for the year of 760 – 780 koz now looks more challenging but still attainable so long as winter does not set in too early and all continues to go well.
• POG’s gold production still has some seasonality about it as the company seems to work on more waste stripping in the first half and on better grade ore production in the second half.
• Exploration: the company continues to discover and delineate gold oxide resources suitable for current heap leach and resin processing. The company will update the market on its new forecast mine life for its operating oxide processing operations in due course.
• Hedging: The company is realised an additional $157 per ounce sold through its hedging program, a welcome benefit considering the debt carried by the company.
• POX: facilities should ready for by February next year.
• Debt: reduced by $70m to $1.08bn and on track to be below $1bn by the year end
• Last year POGs produced 710,400oz versus Randgold 794,840oz last year. Randgold carries a market capitalization of £4.1 billion due to its inclusion in the FTSE 100 and does not carry any appreciable debt, though it carry $105m of long term liabilities for 2012.
Conclusion: POGs continue to focus on cost control and on the repayment of debt. The results would have been so much better without the heavy rain.
• Sundance Resources has raised A$40m by way of a convertible note issued to a group of big hitting investors.
• The group includes Noble Resources and an investor group comprising of Blackstone Alternative Solutions, DE Shaw and Senrigan Capital.
• Funds are to be used for working capital to progress the Mbalam-Nabeba project.
• While the funding is small beer for the funds involved the funds are an important lifeline for the company operating in South Eastern Cameroon and North Eastern Republic of Congo.
• Noble Resources, the iron ore and bulk commodity traders are likely to want a foothold in the company for iron ore trading further down the line.
• Noble will have the right to convert the note into 30% of a to-be formed marketing services company or to convert into Sundance shares at 12 cents a share.
• The Noble note will carry a coupon of 10%.
• The investor consortium of Blackstone, DE Shaw and Senrigan investing A$20m is into a 2 year zero coupon convertible with a conversion price of 10 cents a share.
• Both Noble and the investor consortium will be issued additional options subject to shareholder approval of 200m and 260m each.
Conclusion: The funds involved must feel there is a reasonable chance for the construction of a heavy-duty railway in to East Cameroon. This is a longer term project but the risk reward prospects must be sufficiently compelling for Blackstone and DE Shaw to put their names to the raising. The next logical move may be for these funds to look for investment in other miners with iron ore along the rail route to Sundance.