SP Angel – Morning View – Monday 01 04 19
Copper climbs as China signals expanding factory gauges
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Anglo Asian Mining* (LON:AAZ) BUY – Target Price 96p – Airborne geophysics update
Bacanora Lithium (LON:BCN) – Corporate update
Beowulf Mining* (LON:BEM) – Subscription to raise £750,000 and further investment in Kosovan exploration
Condor Gold (LON:CNR) – Metallurgical test results from La India samples
Orosur Mining (LON:OMI) – Orosur and Newmont press ahead with exploration review around Anzá in Colombia
SP Angel appointed as Nomad and broker to Orosur
Scotgold Resources* (LON:SGZ) BUY – Target Price 57p – Exploration update
W Resources (LON:WRES) – Drilling confirms wide high grade mineralisation at Regua
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
China – Manufacturing and services sectors recorded improved PMI readings in March fuelling risk on sentiment in markets.
- Both Chinese official and private data point to a recovery in the manufacturing sector with both indices back in the growth territory.
- New orders climbed at the fastest pace in four months while new export orders are growing again.
- “Overall, with a more relaxed financing environment, government efforts to bail out the private sector and positive progress in Sino-US trade talks, the situation across the manufacturing sector recovered in March… the employment situation improved greatly,” Caixin report read.
- Official Manufacturing PMI: 50.5 v 49.2 in February and 49.6 forecast.
- Caixin Manufacturing PMI: 50.8 v 49.9 in February and 50.0 forecast.
UK – Manufacturing sector growth accelerates in March to a 13-month high driven by increased stockpiling ahead of Brexit.
- “Stocking of finished goods and input inventories surged to new survey-record highs,” Markit said.
- Unwinding of accumulated stock risks future growth.
- PMI Manufacturing: 55.1 v 52.1 in February and 51.2 forecast.
US$1.1230/eur vs 1.1212/eur last week Yen 111.09/$ vs 110.80/$ SAr 14.361/$ vs 14.523/$ $1.306/gbp vs $1.303/gbp 0.713/aud vs 0.708/aud CNY 6.709/$ vs 6.717/$
Gold US$1,289/oz vs US$1,291/oz last week
Gold ETFs 72.3moz vs US$72.3moz last week
Platinum US$848/oz vs US$848/oz last week
Palladium US$1,380/oz vs US$1,388/oz last week
Silver US$15.09/oz vs US$15.08/oz last week
Copper US$ 6,519/t vs US$6,451/t last week
- Copper is poised for its best close since end-June following China’s key factory gauge signalled expansion to beat expectations and ease prolonged worries over wavering demand across the nation’s manufacturing sector. Industrial metals broadly climbed in London after China’s official purchasing managers index for March rose to 50.5 from 49.2, the greatest increase since 2012. Separate Caixin/Markit PMI index also beats expectations, rising to 50.8 from 49.9.
- Concerns over the supply outlook are rising as Codelco’s $21bn master plan to modernise its aging copper mines and avoid production declines are under threat as its owner, the Chilean government, balks at supporting funding.
- A lack of funding definitely will affect the company’s expansion plans for its main mines in Chile and might force it to increase debt levels, Chief Executive Officer Nelson Pizarro reported, adding “we need to implement the development of the three structural projects that are being built now, and push ahead with three more…If the resources are there, the projects will be done, and if they are not there, we will need to adjust with the resources that we can generate internally.”
- Codelco’s output fell 3.2% in 2018 as ore grades declined 5.5% and costs rose to the highest in four years.
- The struggle to maintain output levels is happening as global stockpiles monitored by the world’s main exchanges are shrinking and the market is expected to end the year in deficit – global production shortfall of 300,000t by the end of the year.
- Lack of funding would send Codelco’s debt soaring to $21 billion from about $14 billion at the moment, Pizarro said at the company’s quarterly earnings release.
- Upgrades, such as the $5.5bn Chuquicamata mine expansion which is 76% complete, should stabilise falling grades. Codelco’s two other large projects, the Teniente and Andina expansions, are more than half complete. The company has almost finished the feasibility study for its Inca Pit project, the only one that would effectively increase output.
Aluminium US$ 1,928/t vs US$1,903/t last week
Nickel US$ 13,295/t vs US$13,050/t last week
Zinc US$ 2,953/t vs US$2,885/t last week
Lead US$ 2,034/t vs US$2,028/t last week
Tin US$ 21,495/t vs US$21,475/t last week
Oil US$68.2/bbl vs US$68.2/bbl last week
Natural Gas US$2.679/mmbtu vs US$2.700/mmbtu last week
Uranium US$24.95/lb vs US$25.05/lb last week
Iron ore 62% Fe spot (cfr Tianjin) US$84.5/t vs US$83.5/t
Chinese steel rebar 25mm US$618.3/t vs US$617.7/t
Thermal coal (1st year forward cif ARA) US$71.7/t vs US$71.5/t
Coking coal futures Dalian Exchange US$187.6/t vs US$187.4/t
Cobalt LME 3m US$30,000/t vs US$30,000/t
NdPr Rare Earth Oxide (China) US$42,852/t vs US$42,803/t
Lithium carbonate 99% (China) US$9,688/t vs US$9,752/t
Ferro Vanadium 80% FOB (China) US$60.5/kg vs US$62./kg
Antimony Trioxide 99.5% EU (China) US$6.6/kg vs US$6.6/kg
Tungsten APT European US$271-282/mtu vs US$271-282/mtu
Anglo Asian Mining* (LON:AAZ) 71.5p, Mkt Cap £82m – Airborne geophysics update
BUY – Target Price 96p
- The team has received a draft interpretation of the maiden Gedabek airborne geophysical survey and is expecting to release a final report this month.
Conclusion: The first systematic exploration programme at Gedabek is in full swing with the latest geophysics survey to help the team identify future drill targets.
*SP Angel act as Nomad and broker to Anglo Asian Mining
Bacanora Lithium (LON:BCN) 19.5p, Mkt Cap £26.2m – Corporate update
- Bacanora Lithium remain in active discussions with the State General Reserve Fund of Oman, the sovereign wealth fund of the Sultanate of Oman, to conclude the proposed US$65m Strategic Investment Agreement and Offtake Agreement for Bacanora's flagship Sonora Lithium Project in Mexico.
- The Company remains focused on completing the funding package in Q2 2019 to support the commissioning of a chemical processing plant with target first production at Sonora in H2 2021.
- The December 2017 Feasibility Study confirms Sonora has the potential to be among the lowest cost lithium carbonate producers at US$4,000/t, supporting a US$1.25bn pre-tax NPV (8% discount) and an IRR of 26.1%.
Beowulf Mining* (LON:BEM) 5.9p, Mkt Cap £33.4m – Subscription to raise £750,000 and further investment in Kosovan exploration
Nordic focused mineral explorer announced a subscription for new ordinary shares of £750,000, increasing the working capital to support:
- Follow-on investment in Vardar Minerals Limited, a private exploration company with interests in the Balkans, funding Vardar's 2019 Kosovan exploration programme, diamond drilling, geophysical surveys and other activities, at the Mitrovica project, targeting lead-zinc-silver, copper and gold mineralisation, and at the Viti project, targeting copper-gold, lithium-boron mineralisation. The Company also exercised its option to increase Beowulf's stake in Vardar from 14.1% to 31.3%.
- The 2019 work programme targets 2,200m diamond drilling at Wolf Mountain, with drilling determining the possible down-dip extension to mineralisation and intersect fresh sulphide ore for analysis.
- At Mitrovica South, ground geophysics (Induced Polarisation/Direct Current Resistivity potential for disseminated porphyry-related sulphides) and soil sampling programmes to define drilling targets.
- Drilling for potential higher-grade mineralisation at the Aitolampi graphite project, and exploration activities across the portfolio, including mapping, geophysics, sampling, assaying and metallurgical testwork. Exploration hopes to develop a ‘resource footprint’ to satisfy Finland’s natural flake graphite requirement for battery manufacturing.
- 600m diamond drilling will also test the porphyry target in the south-east Viti project area, together with IP/DC. A single stratigraphic hole will also be drilled to test for evidence of lithium-boron mineralisation and evaporitic units in the Miocene-sedimentary rocks.
- Drilling at Parkijaure, to the south of the Kallak iron ore project, targeting additional iron ore resource as indicated by geophysical data, aimed at generating another exploration target and demonstrating the potential longevity of iron ore production in the area.
- CEO Kurt Budge adds “We now have a company which has: Kallak as its foundation; a graphite exploration portfolio well-positioned to give Finland 'security of supply' in natural flake graphite for battery manufacturing; and an exciting 'blue sky' greenfield exploration programme for 2019 in Kosovo.”
Conclusion: The ability to raise capital in an uncertain economic environment is encouraging, and we look forward to the results of the methodical 2019 work programme across the prospective Kosovo portfolio.
*SP Angel acts as nomad and broker
Churchill Mining (LON:CHL) suspended – Intention to appoint Administrators filed
- The Directors of Churchill Mining plc advise that the Company has filed a notice of intention to appoint Phillip Sykes and Matthew Haw both of RSM Restructuring Advisory LLP, 25 Farringdon Street, London EC4A 4AB as administrators of the company.
- The notice of appointment follows the ICSID Annulment Committee decision to dismiss the Company's Annulment Application. Churchill had previously filed claims against the Republic of Indonesia at the International Centre for Settlement of Investment Disputes ("ICSID") for damages arising out of the unlawful revocation of the mining licenses that made up the East Kutai Coal Project ("EKCP") by the head of the East Kutai's Regency Government, Mr Isran Noor.
- In accordance with statutory requirements, the Board intends to appoint administrators after 5 business days, at which point the Company expects to request the cessation of trading in the Company's shares on the NEX Exchange. A corresponding announcement will be made in due course.
- The Company would also like to confirm that given these developments it will not be publishing interim results for the six months ended 31 December 2018 which were due for publication by 31 March 2019.
- The Company's shares will remain suspended from trading and further announcements will be made as appropriate.
- Churchill had previously filed claims against the Republic of Indonesia at the International Centre for Settlement of Investment Disputes ("ICSID") for damages arising out of the revocation of the mining licenses that made up the East Kutai Coal Project in East Kalimantan ("EKCP").
- The Stay of Enforcement of the December 2016 Award (which includes the adverse US$9.44m cost order) is terminated;
- Churchill shall bear its annulment proceeding costs of US$0.4m with these costs having already been met by Churchill through advances made
- Churchill Chairman of Directors David Quinlivan said: "Obviously we are extremely disappointed that the Committee has elected not to correct what was by any objective measure a manifestly defective and partisan Award. It is the Company's view that this case and its outcome will reflect poorly on the fairness of ICSID arbitration process and I imagine that, in time, fewer and fewer investors will have any confidence in the ICSID system for resolution of investment disputes with foreign governments."
*SP Angel act as NEX Corporate Advisor to Churchill Mining
Condor Gold (LON:CNR) 18.25p, Mkt Cap £13.6m – Metallurgical test results from La India samples
- Condor Gold reports the results of metallurgical tests on two samples, each of 23kg, and with a head grade of 12.1g/t gold from the permitted area of its La India project in Nicaragua
- The testing was conducted at the operating El Limon and La Libertad gold mines in Nicaragua owned and operated by Canadian listed B2Gold. The samples were collected by B2Gold staff from El Limon and produced average gold recoveries of 95.4%.
- The result obtained is reported to substantiate earlier work by the consultants, SRK, incorporated in the 2014 pre-feasibility study for La India.
- Thanking B2Gold for its cooperation in the testing programme, Chairman/CEO, Mark Child, commented that the results confirm “the suitability of La India ores to be processed at B2Gold's processing plants”.
- Mr Child went on to remark that “It is invaluable to conduct metallurgical test work at two nearby producing gold mines whose laboratories are set up to replicate the metallurgical recoveries at the mines. It assists Condor in deciding on a final mine design and metallurgical process as the La India Project progresses to the construction phase."
- In January 2019, Condor Gold published an updated mineral resources estimate for La India which included 9.85mt classed as “Indicated” at an average grade of 3.6g/t gold with an additional 8.48mt of “Inferred” material at an average grade of 4.3g/t gold.
- The sample results reported today appear, therefore, to come from a high-grade subset within the overall resource and although it will be commercially very important to ensure the optimum recovery of these higher grades, it will also be important to understand the processing and recovery characteristics of the full range of grades and ore types within the La India mineralisation.
- The confirmation of earlier testing by independent laboratories attached to operating gold mines should assist Condor Gold to fine tune the metallurgical flow sheet for La India. We observe, however, that prudence may require a larger number of tests on bigger samples representing the full range of grades and ore-types before finalising the design parameters.
Conclusion: Confirmation of high recovery rates from the higher grade parts of La India is encouraging, however, Condor Gold will probably need a substantial testing programme of the full range of material before it finalises the flowsheet design.
Edenville Energy* (LON:EDL) 0.035p, Mkt Cap £0.6m – Corporate update
- The Company treated 17.8kt of ROM coal during the 1 January / 26 March period producing 3.1kt of washed coal and 8.0kt of fine coal.
- Sales totalled 3.5kt this year most of which is washed coal. No information on revenues realised has been provided.
- Water treatment plant and pre-screen unit have all been installed in January and are all running as planned.
- Consumables supply including things like fuel and magnetite (used in the washing circuit) has been constrained due to working capital shortages.
- Development plans for the new open pit along strike and a transition to 24h operation has been put on hold until new capital is available.
- In the meantime, the team has focused on minimising its operating costs including stopping waste stripping and mining easily accessible seams while supplying core customers,
- As such, the management is not expecting an increase in production from current levels.
- On a more positive side, the Company received an order for 1,000t of fine coal which may see the Company potentially monetising existing on-site stockpiles of fine coal.
- Due to a shortfall of the Open Offer that constrained the Company from developing new pit, ramping up ROM feed to the plant and increasing production, the team highlighting the need to raise additional capital in the near term with the management exploring options at both corporate and project level.
Conclusion: Operating numbers point to a decline in ROM coal delivered to the plant (c.5.9ktpm v 8.9kptm in Q4/18) and lower wash plant yields (17% v 25%in Q4/18) on the back of working capital constraints. While mining operations continue to run focusing on already opened up seams, delaying waste stripping will catch up unless mining rates are ramped up. Mining has been the major bottleneck in operations with wash plant operating significantly underutilised. A delay in development of the new pit with lower waste stripping ratios suggests mining will remain a constraint.
*SP Angel acts as Nomad and Broker to Edenville Energy
Orosur Mining (LON:OMI) 3.4p, Mkt Cap £5m – Orosur and Newmont press ahead with exploration review around Anzá in Colombia
SP Angel appointed as Nomad and broker to Orosur
- Colombia: Newmont Mining is working through a strategic review of the Anzá project to define an exploration program in the area.
- Newmont is evaluating the Anzá project in agreement with Orosur Mining under a previously announced Exploration Agreement with Venture Option.
- Newmont has made the first of four half-yearly US$0.5m payments as well as US$240,000 to fund the property maintenance costs in Colombia.
- Newmont has committed to spend $10-30m on the Anzá gold project in Colombia in a three-stage earn-in.
- Newmont also agreed to take a $2m (19.9%) stake in Orosur shares at a 200% premium to the prevailing share price.
The earn-in structure works as follows:.
- $10m to earn 51% of Anzá + $2m of cash in the first two years.
- $20m to earn a further 14% of the Anzá project with a NI 43-101 compliant Pre-feasibility Study + $2m in cash
- Production of a NI 43-101 compliant Feasibility Study within a further four years.
- The earn-in structure allows for Newmont to take up to 10 years to move to an 80% position though the process would likely move much faster if the project proves to be a multi-million ounce gold and zinc resource.
- Newmont hold 20% of Continental Gold with the CEO of Newmont reckoning that Colombia might be the next Peru. Though AngloGold Ashanti might be forgiven for seeing Colombia as a La Colosa disaster following opposition from locals and permitting issues with the state.
- Uruguay: Orosur is completing the closure of its operations in Uruguay with agreement from a majority of creditors following the restructuring of its key operating subsidiary in Uruguay, Loryser, into voluntary creditor protection.
- Work has on advancing the remediation of the tailings dam and dewatering the wet part of the dam while applying gravel over the dry tailings area.
- Scavenger gold recovery has so far recovered some 160oz of gold with further gold recovery potential.
- Chile: Anglo American Inversiones SA is seeking US$3m in arbitration from Fortune Valley Resources Chile S.A. an indirect, wholly-owned subsidiary of Orosur on the Pantanillo project located in Chile. On March 28, 2019, the Arbitral Tribunal rendered its decision, ruling that FVRC is required to pay Anglo approximately US$1.6m plus interests at Chile´s current interest rate calculated from December 2015 until its effective payment. The Tribunal´s decision is exclusively against Fortune Valley Resources Chile S.A.. Orosur was not named in the decision from the Tribunal nor was Orosur a party to the relevant agreements. FVRC is evaluating its options with its Chilean lawyers.
*SP Angel act as Nomad and broker to Orosur Mining
Rio Tinto (LON:RIO) 4564p, Mkt cap £77.8bn – Cyclone Veronica hits iron ore guidance
- Rio Tinto has reported that as a result of the disruption caused by Cyclone Veronica, in conjunction with the effects of the fire at the Cape Lambert A terminal during January, it expects that around 14mt of iron ore production will be lost in 2019.
- As a result, “Rio Tinto’s Pilbara shipments in 2019 are expected to be at the lower end of the 338 and 350 million tonnes … guidance provided”.
- The company has, therefore, “declared force majeure on certain contracts and is working with its customers to minimise any disruption in supply”.
Scotgold Resources* (LON:SGZ) 34.0p, Mkt Cap £15.5m – Exploration update
BUY – Target Price 57p
- Soil geochemistry identified new zones of potential mineralisation extensions to the Cononish deposit that may expand the available JORC mineral resource.
- Additionally, the survey carried over the drainage area around the Beinn Udlaidh anomaly, located next to Cononish, confirmed that it is a prospective gold target that will be followed up with further geochemistry and geophysics data collection.
- The Company used a so-called ‘ionic leach gechemistry’ survey for soil and stream sediment samples that proved to be faster, simpler and more cost effecting that conventional methods.
- The results follow on successful initial calibration of the technique over the known Cononish gold orebody
- The team is planning to use the method combined with Induced Polarisation and Very Low Frequency Magnetics in the future exploration to identify drilling targets.
*SP Angel acts as Nomad and Broker to Scotgold Resources
W Resources (LON:WRES) 0.475p, Mkt Cap £27.5m – Drilling confirms wide high grade mineralisation at Regua
- W Resources reports that results of 916m of diamond core drilling and 1809m of reverse-circulation drilling have demonstrated the presence of thick intersection of higher grade tungsten mineralisation “closer to the planned mine portals chosen for initial mining operations”.
The company highlights the following results:
- A 12.55m wide intersection averaging 0.68% tungsten trioxide from a depth of 9.35m in diamond-drill hole RGD034, which also contained a second mineralised intersection of 12.00m width averaging 0.64% from a depth of 79.95m; and
- A 4.80m wide intersection averaging 0.44% tungsten trioxide from a depth of 154.30m in diamond drill hole RGD035; and
- A 12.00m wide intersection averaging 0.39% tungsten trioxide from a depth of 109.50m in diamond-drill hole RGD036, which also contained a second mineralised intersection averaging 0.43% over 15.20m from a depth of 140.80m; and
- A 3.66m wide intersection averaging 0.84% tungsten trioxide from a depth of 132.42m in diamond-drill hole RGD040; and
- A 4.00m wide intersection averaging 0.50% tungsten trioxide from a depth of 41.00m in reverse-circulation drill hole RGR015, which also contained a second mineralised intersection averaging 0.75% over 29.00 from a depth of 77.00m; and
- A 4.00m wide intersection averaging 0.44% tungsten trioxide from a depth of 58.00m in reverse-circulation drill hole RGR016; and
- An 6.00m wide intersection averaging 0.43% tungsten trioxide from a depth of 71.00m in reverse-circulation drill hole RGR020, which also contained a second mineralised intersection averaging 0.26% over 12.00 from a depth of 79.00m as well a further 4.00m averaging 0.90% from 93.00m; and
- A 4.00m wide intersection averaging 0.58% tungsten trioxide from a depth of 93.00m in reverse-circulation drill hole RGR021; and
- A 7.00m wide intersection averaging 0.42% tungsten trioxide from a depth of 99.00m in reverse-circulation drill hole RGR023, which also contained a second mineralised intersection averaging 0.31% over 7.00 from a depth of 161.00m.
- The company confirms that the existing mineral resource estimate for the Regua deposit as 5.46mt at an average grade of 0.28% tungsten trioxide. The results of the recent drilling programme will, no doubt, be incorporated in a revision to this estimate at some stage and the relatively wide and high grade intersections reported today may provide a positive impact although the scale of that impact will depend, amongst other factors, on the geometry of the mineralised body.
- Commenting on wat he described as “the exceptionally good drilling results” at Regua Chairman, Michael Masterman said that they “bode well for increase in mine feed grades and overall resource tonnages. The high grade zones are thicker and closer to the planned two mining portals providing the potential for higher ROM feed grades and lower unit costs. We will now complete updated resources estimates and optimise initial mine plans.”
Conclusion: Recent drilling results from Regua are to be incorporated in an updated mineral resources estimate and to revisions to the mine plan. We look forward to these updates when they are available.