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Today's Market View - Coal of Africa Limited, Eurasia Mining plc, Galantas Gold Corp, BlueJay Mining PLC, Mustang Resources Ltd

Today's Market View -  Coal of Africa Limited, Eurasia Mining plc, Galantas Gold Corp, BlueJay Mining PLC, Mustang Resources Ltd

Blenheim Natural Resources Plc (LON:BNR) – Charlie Wood joins Blenheim board

BlueJay Mining* (LON:JAY) STRONG BUY - Target Price 24p – First agreement signed for World’s highest grade Ilmenite Product

Coal of Africa (LON:CZA) – Uitkomst Colliery reserve/resource report

Eurasia Mining (LON:EUA) – Interim report and operational progress report

Galantas Gold (LON:GAL) – Outcome of judicial review expected on 29th September

Mustang Resources (ASX:MUS) – Robbery at Montepuez

 

Asian Development Bank presented an improved outlook for China’s economic growth on the back of strong domestic consumption, export recovery and solid growth in services.

• TC/RC fees set by Chinese smelters are expected to fall as a consequence of tightening copper supply while maintaining refining capacity.

• LME and ShFE copper rose almost 1% Monday on improved market viewpoint.

• The positive forecast from the Asian Development Bank was received with recovery in Shanghai rebar, which climbed 1.5 percent. Zinc, an anti-corrosive agent in steel, rose 3 percent on the back of improved demand.

• ShFE base metal prices are receiving a boost ahead of China’s weeklong National Day holiday, with a large drawdown in stocks. Zinc inventories fell almost 4% for the week of 22nd September.

 

BHP Billiton have emerged with a number of remarkable statements relating to copper, oil and electric vehicles

• BHP forecast 140m electric vehicles will be in use by 2035 raising demand for copper.  They note there have been no major copper mine discoveries in the past 20 years.

• BHP highlight their view that they are well placed with Spence, Escondida and Olympic Dam.

• They note it will take 10-15 years for the revolution in electric cars to hit the oil price a view which might serve to justify recent investments in BHP’s oil and gas division.

• We suspect the move to electric vehicles is already impacting oil prices and asset values and we reckon China could go electric much faster than many forecast.

• While we see many challenges ahead in the move to electric vehicles we see sufficient momentum and political pressure to push through these obstacles in many areas.

• We see the revolution to electric vehicles making the Dotcom boom look like a ripple ahead of tsunami

 

Dow Jones Industrials  -0.24% at 22,296

Nikkei 225   -0.33% at 20,330

HK Hang Seng   -0.04% at 27,490

Shanghai Composite    +0.06% at 3,344

FTSE 350 Mining   +0.65% at 16,577

AIM Basic Resources   -1.14% at 2,448

 

Economics

 

Currencies

US$1.1828/eur vs         1.1908/eur yesterday.   Yen 111.61/$ vs            112.26/$.           SAr 13.308/$ vs            13.299/$.           $1.350/gbp vs  $1.355/gbp.      0.793/aud vs     0.796/aud.        CNY 6.631/$ vs 6.614/$.

 

Commodity News

• Brazilian President Michel Temer’s administration made the surprise back-track to revoke an August decree to abolish mining in the National Reserve of Copper and Associates (Renca). The area, 17,800 square miles of Amazon rainforest, has once again been preserved against mining for significant deposits of gold, copper and iron ore.

Precious metals:

Gold US$1,308/oz vsUS$1,292/oz yesterday - Gold prices recover US countermeasures against North Korea and following Merkel Re-election

• Gold prices eased back on Monday in London but stayed above last weeks near 4 week low after Angela Merkel won general election in Germany

• Geopolitical tensions surrounding Pyongyang rose following comments from North Korea’s foreign minister that, following US President Donald Trump’s declaration of war appropriate countermeasures are to include shooting down US bombers outside of its air space.

• Concerns also grow between the USA and Iran over a contentious new medium-range missile test. Iranian state television released video footage Friday of the ballistic missile, which US officials claim to be fake.

• Gold crept lower as the US dollar index rose following Germany’s Angela Merkel’s fourth term success. The strength of the euro fell with agitated investors concerned about dramatic policy changes by the European Central Bank president.

• Neel Kashkari, US Federal President, referred to a lack of evidence for weak inflation data, and stated no need for an additional interest rate hike in late 2017.

   Gold ETFs 69.0moz vsUS$69.0moz yesterday

Platinum US$940/oz vsUS$933/oz yesterday

Palladium US$916/oz vsUS$924/oz yesterday

Silver US$17.14/oz vsUS$16.92/oz yesterday

           

Base metals:

Copper US$ 6,500/t vsUS$6,460/t yesterday

• 2017 is tipped as the ‘revolution year’ for electric vehicles, chief commercial officer at BHP, Arnoud Balhuizen, commented today. BHP recently forecast the rise in EVs to 140 million by 2035, stating the market may have underestimated the impact on copper demand given fully electric vehicles require four times as much copper as combustion engines.

• BHP are well placed, with assets like Escondida and Spence in Chile, and Olympic Dam in Australia, to meet a diminishing global supply which hasn’t had any new major discoveries in the last 20 years.

Aluminium US$ 2,148/t vsUS$2,144/t yesterday

Nickel US$ 10,580/t vsUS$10,530/t yesterday

Zinc US$ 3,135/t vsUS$3,072/t yesterday - Zinc mine suspensions may remove up to 6,000t from market

• As much as 6,000 tonnes of mined zinc output could be lost in China’s Sichuan province due to the suspension of several mines in the southwestern region for environmental inspections

• Suspensions of operations in more than 60% of zinc and lead mines in Sichuan

Lead US$ 2,508/t vsUS$2,481/t yesterday

Tin US$ 20,700/t vsUS$20,540/t yesterday

           

Energy:

Oil US$58.9/bbl vsUS$56.8/bbl yesterday

• Turkish threats to cut crude oil flow from the Iraqi Kurdistan region to global markets resulted in a surge in oil price. Brent Crude Oil spot price rose as high as $59.23 per barrel, the highest since July 2015.

Natural Gas US$2.933/mmbtu vsUS$2.960/mmbtu yesterday

Uranium US$20.50/lb vsUS$19.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$63.8/t vsUS$63.0/t

Chinese steel rebar 25mm US$622.4/t vsUS$624.9/t

• More stringent U.S standards regulating fuel efficiency is significantly boosting demand for galvanized higher-strength steel as a growing number of applicable auto parts will increase in the future.

• Planned output capacity growth (to 2 million short tonnes) of the PRO-TEC Coating Company, the JV between Kobe Steel Ltd. and United States Steel Corp, aims to capitalise on the rising requirement.

Thermal coal (1st year forward cif ARA) US$83.5/t vsUS$81.9/t

Premium hard coking coal Aus fob US$200.6/t vsUS$200.6/t

Lithium – Rosatom, the Russian nuclear company is looking to lithium following the recent collapse in uranium ore prices –

• Rosatom plans to get 30% of its revenue from businesses outside nuclear energy by 2030 and is in talks to revive Soviet-era lithium mine which was halted in 1990’s

• The interesting bit is that nuclear energy and uranium prices may well rise as consumers use more energy for their new electric vehicles

Cobalt - Cobalt nanoparticles for making amines cheaply and simply

• Cobalt nanoparticles can be used to kick start common chemical reaction used to make a variety of pharmaceutically and industrially important molecules

• The technique has been used to synthesize more than 140 important amines including drug molecules, chiral amines and amino acid derivatives

 

Other:  

Tungsten APT European US$310-335/mtu vs US$310-335/mtu

 

Company News

Blenheim Natural Resources Plc (LON:BNR) 0.47p, mkt cap £3.4m – Charlie Wood joins Blenheim board

(Formerly Coburg Group)

• Charlie Wood, formerly at Ortac Resources has joined the board of Blenheim Natural Resources as a non-executive director.

• The statement says “Charlie will assume the role of overseeing administration tasks currently the responsibility of our Chairman."

• The comment is interesting as we are not entirely sure how a director can have the role of overseeing administrative tasks while fulfilling the role of an independent non-executive director.

• Blenheim describes itself as a UK-incorporated company investing in shares and currently holds the following stakes:

o 30% in Nashwan Holdings which holds licenses in Mali close to Kodal Minerals.

o 40% in Mansa Lithium in Mali

o 29.9% in International Geosciences Services which recently reported a small loss on a 12% fall in revenues for 2016.

o 33.3% effective stake in Kalahari Key Minerals Exploration which is exploring for base (nickel), precious metals (mainly PGMs) in Botswana

o + a small holding in Andiamo Exploration Ltd in Eritrea

• Blenheim’s September presentation to investors includes pages on gold, copper, zinc, cobalt, antimony and a range of other speciality metals including uranium and thorium indicating a broad spectrum of potential interest for the company.

• Blenheim’s board is currently made up of Chris Ells, Mark Parker and Christian Schaffalitsky and now Charlie Wood.

 

BlueJay Mining* (LON:JAY) 18p, Mkt Cap £138m – First agreement signed for World’s highest grade Ilmenite Product

STRONG BUY

Target Price 24p

• BlueJay Mining have just signed their first agreement to supply high-quality ilmenite product to an experienced minerals sands processor.

• The agreement will allow for the company’s run of mine screened product to be further refined to a high-specification ilmenite product.

• This high-spec product will, at first, be used to seed the market to advance fresh offtake negotiations and better connect the mine with the market.

• Management hope the agreement will generate orders which are sufficient in scale to enable project development.

• Our valuation is currently based on initial sale of 142,000t for the first full year of production rising to 426,000tpa from year three.

• Process work done at IHC Robbins in Queensland, Australia indicates that two high-specification products can be produced efficiently for sulphate pigment production and for both sulphate slag and chloride slag markets.

Conclusion: The agreement is a significant step forward in terms of gaining future orders for Pituffik ilmenite material in world markets.  The good bit is that the  ‘experienced mineral sands processor will refine the ‘sample run of mine material’ and place this with the major players. This will save on costs and adds a new dimension to the marketing effort. The agreement may also lead to further benefits for BlueJay and its shareholders.

*SP Angel act as nomad and broker to BlueJay Mining.  An SP Angel mining analyst has visited the Pituffik ilmenite sands project in Greenland and has carried out his own density tests on the heavy mineral sands at Pituffik.

 

Coal of Africa (LON:CZA) 2.5 pence, Mkt Cap £70.4m –Uitkomst Colliery reserve/resource report

• Coal of Africa reports updated reserves and resources for the 91% owned Uitkomst Colliery in KwaZulu Natal.

• The company acquired its 91% holding in the colliery, which mines 45,000tpm of high grade thermal coal from underground operations to produce approximately 30,000tpm of saleable export quality coal, for R275m in June this year. The company notes that its products also have metallurgical applications which we imagine should broaden its sales base.

• The resource assessed at 28th February by the independent consulting company, Minxcon, stands at 26.9m gross tonnes of which 23.3m tonnes are deemed mineable. Reserves of 8.4mt are reported to have an ash content of 30.1% and a thermal value of 22.58 MJ/kg and 1.56% sulphur.

• The underground mining reserves are assessed on a minimum seam width of 1.2m on seams deeper than 25m below surface.

• Commenting on the significance of Uitkomst to the company, Chief Executive, David Brown pointed out that, “The Colliery provides CoAL with a cash generating asset that will assist the funding of the business while the Makhado Project is being developed … The high grade metallurgical coal products sold by Uitkomst Colliery facilitates access to these markets, providing further insight while the hard coking coal marketing strategy for the Makhado Project is being finalised.”

• Previous statements by the company indicate that Makhado is expected to produce around 5.5mtpa of saleable coal products including both thermal and metallurgical coal. At the time of the feasibility study in 2013, capital expenditure to develop the 345mt coal project was estimated at R3.96bn and the project was expected to generate an NPV of R6.79bn at an 8% discount rate and to deliver an IRR of 30.1% on an ungeared basis.

Conclusion: The acquisition of the Uitkomst Colliery provides cash generation and an important coal market presence for CoAL as it moves to develop Makhado where the disputed integrated water licence was reinstated in May this year after protracted legal wrangling.

 

Eurasia Mining (LON:EUA) 0.4p, mkt cap £6.3m – Interim report and operational progress report

• Eurasia Mining has reported an interim loss of £1.1m for the six months to 30th June 2016 (Interim 2016 - profit of £0.86m). The company held cash of £0.45m and overall net debt of £1.03m at 30th June.

• The company is continuing to advance the permitting process at its 1.9m oz Monchetundra platinum group metals project in the Kola Peninsula of north-west Russia. “The application for a mining permit for the Monchetundra License is expected to be made in the fourth quarter of this year, its exact timing is uncertain due to the further clearance that is required at various local and state commissions. The award of the mining license may occur six to 12 months after submission.”

• Mining of the alluvial West Kytlim platinum/gold project in the Urals recommenced “later than scheduled start up in mid-May 2017.” As a result of the later than anticipated restart, the company’s mining contactor “failed to reach the production quota outlined in an agreement that was entered into in January 2017. Therefore, in accordance with the agreement, the exclusivity granted to Regionmetall as mining contractors was automatically rescinded.”

Conclusion: We await further news on the progress of permitting for Monchetundra in due course.

 

Galantas Gold (LON:GAL) 5.125p, Mkt Cap £8.8m – Outcome of judicial review expected on 29th September

• Galantas Gold reports that the judgement of the Judicial Review of the July 2015 planning consent for underground mining at its Omagh gold mine in Northern Ireland is expected on 29th September.

• The review was sought in the Belfast High Court by a third party challenging the decision by the Department of Environment, Northern Ireland to grant consent for underground mining of the gold veins previously mined by open-pit methods.

Conclusion: The legal judgment should provide clarity over the future of underground mining at the Omagh gold mine.

 

Mustang Resources (ASX:MUS) A$0.083, Mkt Cap A$52.3m – Robbery at Montepuez

• Mustang Resources, which produces rubies close to the Gemfields operations in Mozambique, has reported the theft of approximately 19,000 carats of low quality rubies and some office equipment in what it describes as an opportunistic “grab-and-run” crime which unfortunately resulted in the death of one of the company’s security guards. The incident occurred during the early hours of the morning.

• The cause of death of the unfortunate security guard has not been disclosed and it is unclear whether the individual was deliberately attacked or suffered some medical episode brought on by the incident.

• The company reassures the market that the bulk of the rubies held on site were in a secure location unaffected by the crime and that “Mustang’s ruby inventory remains comfortably on track to exceed 300,000 carats by the time of the Company’s maiden tender next month”. The majority of the ruby inventory is reported to be held offshore.

• “Mustang is working with the local communities, police and the Government to find the thieves. Security at the mine site has been strengthened further since the incident, absolutely prioritising safety for our staff and security for the rubies.”

Conclusion: The theft at Montepuez highlights the wider security issues of producing valuable and potentially readily saleable minerals in comparatively remote locations. In this incident the demise of a security guard brings an added focus on these issues. We look forward to the outcome of the first ruby sale by Mustang, which, following Pallinghurst’s recent take-over of Gemfields, could be set to emerge as a leader in the independent production of rubies.

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