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Today's Market Report including Amur Minerals, Caledonia Mining, Gemfields, IMIC plc and others...

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Battery news - Japan is developing rechargeable batteries with 7x higher energy density than current Li-ion batteries

The University of Tokyo in collaboration with Nippon Shokubai Co Ltd. Has announced that it is developing a rechargeable battery that is expected to realize an energy density 7x that of existing Li-ion rechargeable batteries.

The technology uses the oxidation-reduction reaction between oxide ions and peroxide ions at the positive electrode and the group has shown that it is possible to produce a battery in which this reaction reversibly proceeds.

The group investigating the new technology notes that the positive electrode has a smaller mass ratio of Co than LiCo02 which is used is existing Li-ion batteries.

The ability to produce 7 times greater energy density than existing solutions would prove to be a major leap forward. 

The breakthrough appears to involve a change in process rather than a change in materials.

This is just one of a number of recent developments in battery technology which suggests to us that the availability of new battery power and capacity will change much over the next few years as products are commercialised.

Shipping rates rise on better rates for larger vessels

Rates for capesize and panama are leading the Baltic Sea freight index higher as traders charter increasing numbers of larger vessels for bulk commodities.

Rising seaborne tonnages of iron ore and coal for delivery into China are likely to be the main driver for the move as China imports more ore as it closes higher cost domestic mines.

Chinese stocks have fallen in recent weeks as local traders look for cheaper cargos. 

HK Hang Seng                                +1.22% at           24,596

 US – Economic news due this week:

Tuesday: Jun job openings (4,550 v 4,635 in May)

Wednesday: Jul retail sales (+0.2%mom v +0.2%mom in Jun), Jul core retail sales (ex auto and gasoline) (+0.4%mom v +0.4%mom)

Thursday: Weekly jobless claims (+295k v +289k in the previous week)

Friday: Aug New York manufacturing index (20.0 v 25.6 in Jul), Jul industrial production (+0.3%mom v +0.2%mom in Jun), Jul manufacturing production (+0.5%mom v +0.1%mom in Jun), Jul capacityutilization (79.2% v 79.1% in Jun)''' 

China – Inflation held at 2.3% in Jul, in line with a Jun reading and market estimates and well-below the official annual target for 3.5%.' 

Russia – Russian air forces completed a large scale 5-day military drills in the south of country close to Ukrainian border last week with troops returning to their bases. 

Turkey – Recep Tayyip Erdogan, current Prime Minster and a leader of the AK Party (“Justice and Development), claims victory in first direct presidential elections securing  more than 50% of votes.• Outgoing president Abdullah Gul is an old ally of the premier and cofounder of the AKP.• Before presidents have been elected by the nation’s parliament.

The benchmark Istanbul share index climbed above 80,000 this morning from 79,199 close on Friday, but has eased since then to 79,454 (+0.32%).

Lira followed equities, first strengthening to 2.1351 from 2.1452 close on Friday, but fell to 2.1492 afterwards.

 Iraq – US warplanes hit Isis militants in northern Iraq over weekend le the Royal Air Force delivered first humanitarian supplies in the region. 

South Africa – The South African Reserve Bank will bail out the trobled African Bank Investments with bank assets to be split into good and bad parts.

A R10bn raise (US$938m) is planned to shore up capital of the bank, while the bad loan book will be taken up by the Reserve Bank for R7bn.

Senior bondholders are reported to incur only a 10% haircut on their investments under the central bank and will keep claims over the good banks’ assets.

US$1.3387/eur vs 1.3388/eur yesterday.   Yen 102.07/$ vs 101.79/$.   SAr 10.693/$ vs 10.746/$.    $1.679/gbp unch vs 1.680/gbp

Commodity News

Precious metals:

Gold US$1,308/oz vs US$1,317/oz yesterday - 

Platinum US$1,471/oz vs US$1,481/oz yesterday

Palladium US$860/oz vs US$859/oz yesterday

Silver US$19.92/oz vs US$20.09/oz yesterday

 Base metals:

Copper US$7,020/t vs US$6,970/t yesterday Aluminium US$2,037/t vs US$2,012/t yesterday

Nickel US$18,584/t vs US$18,781/t yesterday 

Zinc US$2,309/t vs US$2,290/t yesterday

Lead US$2,240/t vs US$2,229/t yesterday

Tin US$22,321/t vs US$22,350/t yesterday 

Energy:Oil US$104.8/bbl vs US$106.4/bbl yesterday – as US bombs Iraq

Natural Gas US$4.009/mmbtu vs US$3.898/mmbtu yesterday

Thermal coal (1st year forward cfr ARA) US$80.5/t vs US$80.1/t yesterday – 

Hard coking, seaborne coal index (quarterly) US$120.0/t unch vs US$120.0/t

Uranium US$30.00/t vs US$29.75/t – following energy prices.  Uranium finding new demand on potential for restricted gas from Russia 

Other:

Iron ore 62% Fe spot (cfr Tianjin) US$95.7/t vs US$96.0/t  Tungsten APT European US$365.0/mtu unch vs US$365.0/mtuFerroalloys:

Trading in ferroalloys futures start at the Zhengzhou Commodity Exchange in China.

In particular, contracts for ferro-silicon and silico-manganese were launched last Friday.

150k lots of FeSi were traded with the price closing at CNY 5,804 (US$984/t) and 124k lots of SiMn with a respective price of CNY 6,482 ( US$1,099/t). 

Company News

Amur Minerals* (LON:AMC) – Mining license conversion payment review

Russian authorities revised one off payment for issuance of the mining license to US$655,000 (RUB 23.6m), down from previous estimates for US$818,000 (RUB24.6m) reported in May/13.

Mining license application is currently with Rosnedra as ters and conditions of the permit are being prepared for review and approval by the Ministry of Ecoomic Development (MED).• The Federal Security Service (FSB) and the Ministry of defence (MOD) are also reviewing updated application reports after having approved the project in Sep/13. The Anti-Monopoly Board (FAS) completed its updated review.

Post approval by the MED, Rosnedra will prepare a one page sumary for review by the by the Ministry of Natural Resources and Environment (Minprirody), the parent entity of Rosnedra. The Ministry will then write a letter of recommendation for the Government and potential approval by Prime Minister Dmitry Medvedev.

The review by the cabinet of ministers does not involve appraisal by the Foreign Investment Advisory Council meaning the approval timing is notlinked to the Council meetings schedule.

Conclusion: The license conversion charge by Russian authoities provides an opportunity for the Company to update on the status of the application.The change in the conversion price’s nominal in US$ reflects a depreiation in the RUB exchange rate since May last year (RUB36/US$ v RUB31/US$).A positive thing to note from the announcement is that approval process is not part of the Foreign Investment Council. In effect, the mining permit approval may come at any time during the year rather than being issued as part of the Council review that is held on a less frequent regulated schedule.*An SP Angel analyst has visited the Kun Maine licenss n Russia 

Caledonia Mining (LON:CMCL) – restatement of Q1 financial statement

Caledonia Mining have restated their Q1 financial statement.

The new figures give post tax profits of $3,091,000 against previously advised $$4,145,000 and a basic eps of $0.046/s vs $0.067/s.

“The error arose due to a misallocation of non-cash foreign exchange gain on the translation of certain bank balances being allocated to profit and loss instead of equity.”

“The error affects neither total equity nor total comprehensive income.”

Conclusion:   We are looking for further detail on what this really means 

Gemfields* (LON:GEM) – $15.5m received in auction for lower quality emeralds from Kagem mine

(Year-end 30 June) Gemfields own 75% of the Montepuez ruby mining operations in Mozambique

Gemfields report the sale of $15.5m worth of emeralds from the sale of lower quality emeralds from its Kagem mine in Zambia.

The auction held in Zambia last week realised a price of $3.61/ct excluding the sale of 1.5t of low grade beryl.

When the beryl is included the average sale price falls to $1.34/ct.

96% of all stones offered were sold eg 11.6mcts out of 12.1mcts offered.

The average value reasised at the 16 auctions held for Kagem is $17.25m bringing in $276m  since July 2009.

The total auction value was $0.9m lower than seen last November in Lusaka when 4.94mcts were sold giving an average sales valie of $3.32/ct, we do not know if the November auction included much or any low grade beryl which is excluded from today’s $3.61/ct realised emerald price.

The last high quality emerald auction realised $59.31/ct held in Lusaka in February to give sales of $36.5m with some 86% of lots sold by value.

Gemfields sold $68m worth of higher quality emeralds in the last financial year from the Kagem mine + $31.9m worth of lower quality emeralds and beryl.

Gemfields recently reported on the sale of $33.5m in Singapore from the sale of rubies from its Montepuez ruby mine in Mozambique

The company also sold $13.5m worth of emeralds in Jaipur which it had bought (not mined) as reported on 6th May

The company reported $65.7m of sales at the interim with another $47m of sales added from autctions in Jaipur and Singapore in the financial year to end June.

Conclusion:  This is a nice start to the new financial year.  Gemfield’s production update last week showed the Kagem mine to be recovering after suffering a couple of lower production quarters last year.  The emeralds are found at certain geological intersections within the mine, though not all of these carry good grade.  The miners do not know what the grade will be at each intersection till they start mining and the cost of uncovering each new intersection is considerable.  We look forward to a better year for Gemfields going forward.

*An SP Angel analyst has visited Gemfield’s emerald minesin Zambia and ruby mine in Mozambique 

BC Iron Ltd (ASX:BCI) - Recommended Offer for Iron Ore Holdings by BCI

Iron Ore Holdings Ltd (IOH AU) 

BC Iron has made a share and cash offer for Iron Ore Holdings at A$1.69/share, a 79% premium to a 60 day VWAPof A$0.99.

The bid value is $250m.

This is a friendly  bid which has been unanimously recommended by the board of Iron Ore Holdings.

The offer is for 0.44 new BC shares and A$0.10 cash per IOH share held and will leave IOH shareholders with a 36.6% interest in the new group.

Two nominees of IOH will also join the board of the new company.

IOH is building the Buckland mine, road and port project at Cape Preston East in the West Pilbara.

IOH also has the Iron Valley project which is being developed by Mineral Resources Ltd.

Iron Ore Valley has a JORC ore reserve of 134.7 Mt at 58.5% Fe.

Overall the resource on the company’s Central and Pilbara tenements is for 542 Mt at 57.4% Fe.

Coastal inferred resources are for 1.1 Bt at 44% Fe.

Total Ore reserves at IOH and Buckland stand at 269 Mt at 58.1% Fe.

As at the 30 June the company had cash of A$50.9m.

Conclusion: The IOH is expected to start production in FY 2015 with mine gate sales agreement with Mineral Resources Ltd. The Buckland project has had all environmental approvals granted and the feasibility study on the project was recently completed.  The Buckland Ore reserve is a channel iron ore deposit with a low strip ratio for DSO ore. The FS showed opex of US$48/t FOB with capex of US$744m for an 8 mtpa project for 15 years for a 58% fines product with a requirement for road and port infrastructure. The NPV for the project was $990m on a pre-tax ungeared basis.

This looks more like a merger than a takeover – the EV net of A$50.9m looks like A$200m – this is around 20% of the NPV of the Buckland project on an ungeared and pre-tax basis. With the recent acquisition of Aquila by Aurizon and Baosteel, Australian companies with good quality Pilbara projects look in play.

Bellzone Mining (LON:BZM) – Financing Update

The company is in advanced discussions to secure a short term loan of US$4m from China Sonangol.

The loan, secured against the Kalia Project, will enable the company to continue operations to late October 2014.

Long term financing has not yet been secured.

Conclusion: Financing discussions for the Kalia project were always going to be challenging against a weak iron ore price and infrastructure hurdles. With the advent of the Ebola virus, this is likely to have been compounded.

Goldplat (LON:GDP) – New Non-Executive Director Appointment

Mr Gerard Kisbey-Green’s joins the Goldplat board as a Non-Executive Director.

Mr Kisbey Green brings extensive experience to the Goldplat board with over 28 years experience.

He has worked within the mining and finance industry.

He has worked within the gold and platinum industries in a number of Senior management roles including Rand Mines Group and a division of Anglo American.

He spent 17 years in the financial markets working for UK and South African Banks including JP Morgan Chase, Investec and Standard Bank.

He has experience across a number of regional markets and knows South Africa well.

Conclusion: Gerard Kisbey-Green is a positive addition and will strengthen the Goldplat board. The company is coming through some challenging trading conditions over the last two years including facing ongoing losses at Kilimapesa. Mr Kisbey-Green’s experience will be useful as the company seeks JV partners for this business. His experience within the gold industry and financial markets will also be helpful. 

Hummingbird (LON:HUM) – Yanfolila Funded with US$75m of Debt

The company has entered into an agreement with Taurus Funds to provide a US$10m  bridge facility.

This will be ahead of putting into place a US$75m refinancing package.

The bridge facility will be used for front end engineering work for the Yanfolila gold project.

The bridge is for 18 months and carries a 9% semi-annual coupon with an arrangement fee of 1% of the facility amount.

On completion of the plant design and optimisation studies, Taurus will provide Hummingbird with a 5 year debt facility.

The facility will be used to refinance the Bridge Facility as well as contribute towards the development costs at Yanfolila.

Conclusion: The Yanfolila project acquired by the company for US$20m in Hummingbird shares has looked like a good acquisition at the outset and one which has good development potential. The attraction of debt funding from Taurus funds reinforces this and should provide a good basis for the optimisation work to be done. The terms of the bridge financing do not look onerous.

International Mining & Infrastructure Co (LON:IMIC) – Amendment of terms of existing bond

The US$50m existing bond has had its final redemption date extended to 18 October 2015.

US$10m has been drawn from the loan so far.

The interest rate on the bond remains unchanged at 8.125%.

Conclusion: We are not surprised to see the redemption date extended on the bond given the lack of revenues at the company. The company is said to be accelerating the feasibility study for Ntem which is closer to the coast but there has been little said on how this is progressing. The development potential of Nkout the more advanced of the two projects acquired from Afferro Mining is now likely to be pushed back given the lack of infrastructure options which are still awaiting any progress made by Sundance Resources on their Mbalam project.

Petropavlovsk* (LON:POG) – Confusion over debt repayment comment

A Russian mining analyst at BCS in Moscow called Oleg ‘Petropavlovskiy’ mentioned in a Bloomberg report that he thought the company could not repay its debts over the next 10 years.

There is nothing new in this idea but we note it has been reported by some, who are clearly confused by the name, as if the company has made this statement its self.

We believe the company is working to refinance its debt and may still be looking for the last few holders of its convertible notes which come due in February next year.

Conclusion:   It is worth noting that Oleg Petropavlovskiy does not work for Petropavlovsk and that the names are purely coincidental.

*SPAngel analysts have visited the Pioneer, Malomir and Albyn gold mines in Russia

Sirius Mineral – Tomato crop study

Sirius Minerals have announced the results of a Tomato crop study using POLY4 as a blend and as a straight fertilizer.

The press release reports that POLY4 outperformed MOP for tomato growth, yield and quality.

The global tomato market is worth some $60bn, representing 8% of world food production by value.

The majority of tomatoes are grown in the US, China, India, Egypt and Turkey.

The crop study results from the University of Florida are encouraging and are meaningful for Sirius though other crop studies will need to be done to verify the results and to prove the effectiveness of POLY4 as a suitable product.

Conclusion:  If Sirius is able to prove its lower cost POLY4 as a consistently effective fertilizer then this could be transformational for the marketing and operating cost base of Sirius and other ‘Polyhalite’ projects around the world.

Stellar Diamonds (LON:STEL) – Progress Update at Baoule in Guinea

The company has dismantled and relocated to Baoule site its 100 tph DMS processing plant.

Earth moving equipment also moved to site has started excavation work at the kimberlite pipe.

Commissioning of the plant is on track for early September.

Trial mining will then start to determine the diamond grade and value.

An EIS has been completed ahead of trial mining at the project.

Historical work on the pipe shows potential for a 5 hectare pipe drilled to a maximum depth of 190m.

This project and the company’s other projects have not been affected by Ebola.

A number of initiatives are said to have been incorporated to mitigate risks.

Conclusion: We look forward to result from the trial mining.

W Resources (LON:WRES) – First Tungsten shipment and sales

The company has received first sales revenues from the shipment of small amounts of tungsten concentrate from La Parilla.

Funds have been received 3-5 days following shipment of European tungsten processors from the facility processing tailings at La Parilla.

La Parilla project is ramping up with 17 tonnes of concentrate produced in July.

The company is targeting annual production of 28,000 tonnes of tungsten concentrate and 26 tonnes of tin.

This is expected to deliver €7m of revenues per year.

Conclusion: It is good to see W Resources starting to generate revenues from the tailings dumps at La Parilla and the quick turnaround in cash. However, it is now trading on the same market capitalisation at Ormonde which has the Barruecopardo project which is close to being permitted. Given the latter will be producing 10x the amount of tungsten when developed, Ormonde looks far to cheap in relative value terms.

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