Strat Aero* (LON:AERO) – Unmanned Aerial Systems ‘UAS’ pilot training company lists on AIM today
• Strat Aero is a UK registered, London Gatwick based Group with operations at the Roswell International Air Centre, New Mexico, USA.
• The company trains operators to fly fixed wing and rotary UASs for take off and landing and is looking to expand its pilot training operations
• Training operators to fly unmanned aerial vehicles is a skilled and growing high-tech business.
• UASs are increasingly used for civilian purposes such as surveying, filming and security and the explosive growth of smaller UASs is likely to attract new regulation from a safety and privacy perspective.
• UASs enable vehicles with cameras to get into locations which are too hazardous for helicopters and other vehicles and are likely to be used by rescue services going forward.
• Strat Aero has a team of highly experienced ex-pilots, flight trainers and consultants and has established significant infrastructure and facilities to meet demand from US law enforcement agencies, defence (take-off and landing) and the US commercial markets.
• The UAS market is set for significant growth - Visiongain (October 2013) estimated that the value of the global airborne market in 2013 is expected to have reached U.S. $19.23 billion.
• AUVSI forecast that between 2015 and 2025, the UAS market is forecast to grow to more than U.S$. 82.1 billion.
• The potential size is hard to quantify though, especially given the early stage nature of U.S. commercial markets. However, 1,000's of trained UAS pilots will be required as the market expands.
• Companies are now offering UAS surveys with the potential to cut the cost of geophysical mineral surveying significantly. Bye bye to expensive helicopter charters and trekking over difficult and dangerous terrain.
• DeBeers used an airship some years ago for magnetic and gravity surveying to find kimberlite pipes through sand cover in Botswana. Sadly the airship was destroyed in a tornado not long after it started.
• Amazon is planning to deliver goods using a fleet of drones while an entrepreneur is planning on delivering defibrillators to heart attack victims offering significant potential to save lives.
• Strat Aero raised £650,000 on IPO at a placing price of 8p/s for working capital for its work in the Unmanned Aerial Systems market. The company had a £6.2m capitalisation on introduction.
* SP Angel act as Nomad and joint broker to Strat Aero plc
Ebola - Bob Geldoff – releases ‘Do They Know its Christmas’ in 2014 Band Aid
• Philan-Pop comes to the rescue with Ebola Charity song.
• Buy the song or simply donate to - www.msf.org.uk/donate
G20 members agreed to make a further US$300m available to countries hit with the Ebola outbreak including Guinea, Liberia and Sierra Leone.
• The help to come in the form of concessional loans, debt relief and grants.
US – Economic news due this week:
• Monday: Oct industrial production (+0.2%mom v +1.0%mom in Sep), Oct capacity utilization (79.3% v 79.3% in Sep), Nov New York manufacturing index (+12.00 v +6.17 in Oct)
• Tuesday: Oct PPI (-0.1%mom v 0.0% in Sep) (dragged by weaker oil prices); Oct PPI ex food and energy (+0.1%mom v 0.0%mom in Sep)
• Wednesday: Oct building permits (+0.6%mom v +2.8%mom), Oct housing starts (+0.8%mom v +6.3%mom in Sep), 28-29 Oct FOMC meeting minutes
• Thursday: Oct CPI (-0.1%mom/+1.6%yoy v +0.1%mom/+1.7%yoy), Oct core CPI (+0.1%mom/+1.7%yoy v +0.1%mom/+1.7%yoy in Sep), Weekly jobless claims (284k v 290k in the previous week), Nov prelim Markit manufacturing (56.3 v 55.9 in Oct)
China –Bad loans climbed by CNY 72.5bn (US$11.8bn), the most since Q3/05, from the previous quarter as economic growth slows.
Bad loan ratio – 250% cover of reserves to non-performing loans in China looks good to us
• Nonperforming loans account for 1.16% of aggregate loans portfolio.
• Lenders’ bad-loan coverage ratio, a measure of reserves for soured credit, stands at solid 247.2% versus 262.9% in Jun.
• Leaders of the CPC (Communist Party of China) are considering lowering growth target below 7.5% for CY15, according to Bloomberg citing a person with knowledge of negotiations.
• Market estimates are for 7.4% expansion in CY15.
Japan – The economy slips back into recession on worse than forecast Q3CY14 GDP numbers (-1.6%qoq (annualised) v +2.2%qoqo expected).
• The drop comes on top of a 7.3%qoq decline in Q2CY14.
• A significant drag on growth was a reduction in inventories which cut GDP change by 0.6pp.
• The currency passed through the 117 hitting the weakest level in more than 7 years.
• Weak economic data signal the government is likely to postpone a second sales tax increase scheduled for Oct/15 next year.
Australia – The Government signed a tariff free trade agreement with China.
• 95% of nation’s exports to China are reported to be eventually free of tariffs, according to parliamentary secretary.
• In return, China agreed to lift higher duties on Australian coal exports (coking coal exports tariff will be cut to 0, thermal coal to 4% from 6% and eliminated completely in 2 years). Agricultural exports from Australia will have respective tariffs to 0 before 2021.
• Australia has also raised the threshold for Chinese investments in the economy without need for a government approval to just above A$1bn from A$250m. The level is comparable with the one for the US and Japan.
US$1.2496/eur vs 1.2458/eur yesterday. Yen 116.080/$ vs 116.350/$. SAr11.102/$ vs 11.220/$. $1.563/gbp vs 1.567/gbp
A$0.8729 vs 0.8703 yesterday –
Gold US$1,188/oz vs US$1,153/oz yesterday – closure of short positions helps gold as Switzerland heads towards central bank referendum
Platinum US$1,204/oz vs US$1,194/oz yesterday –
Palladium US$765/oz vs US$768/oz yesterday
Silver US$16.18/oz vs US$15.40/oz yesterday
Copper US$6,687/t vs US$6,626/t yesterday –
Aluminium US$2,026/t vs US$2,017/t yesterday
Nickel US$15,660/t vs US$15,351/t yesterday
Zinc US$2,262/t vs US$2,236/t yesterday
Lead US$2,026/t vs US$2,016/t yesterday
Tin US$19,850/t vs US$19,861/t yesterday
Oil US$78.32/bbl vs US$78.50/bbl yesterday –
Natural Gas US$4.153/mmbtu vs US$3.999/mmbtu yesterday
Thermal Coal $71.3/t vs $71.7/t
Uranium US$43.50/t unch vs US$43.00/t -
Iron ore spot price index (62% fines) $75.7 vs $75.9/t –
• Steel production fell in early Nov, as mills were forced to conduct maintenance or idle blast furnaces in the Hebei province to provide clean air for the Apec summit in Beijing.
• Daily production rate was cut to 1.635mtpd in the first 10 days of the month, down from the late Oct average of 1.665mt.
• Furnace utilization rates averaged 84.39%, down from 88.81% at the end of last month.
Seabourne Coking coal (quarterly) – US$119/t vs US$119/t
Tungsten APT European US$335.0/mtu vs US$335.0/mtu –
Ferrochrome $1.15/lb Cr Q4 vs $1.19/lb Q4 quarterly Benchmark pricing –
GoldBridges Global Resources (LON:GBGR) – Substantial reserve and resources increases at Sekisovskoye
• GoldBridges has announced a substantial upgrade to underground gold reserves and resources at its Sekisovskoye mine in Kazakhstan. The new estimates have been prepared by Venmyn Deloitte.
• Probable reserves have increased to 2.26m oz (17.25mt at 4.09 g/t) to a depth around 725m below surface. This represents a major increase on the 0.27m oz reserve declared in December 2011.
• Resources have also shown an uplift to 5.14m oz (33.9mt at 4.72 g/t) from the earlier figure of 1.8m oz.
• In addition, Venmyn Deloitte highlight additional potential of over 3m oz at depths down to 1825 metres.
• The current mine is producing up to 850,000tpa from open pit operations which are likely to be exhausted by 2016. The identification of additional ore for underground operations secures the mine’s future which is now scheduled until until 2032.
• Some ore is already being sourced from underground and the company expects to ramp up underground production to over 50% of plant capacity during 2015 rising to 85% between 2016-17. An increase in plant capacity to 1mtpa is scheduled for completion by 2018.
• The company expects that it will need capital investment of some $117.5m to develop the underground mine, including the expansion of the process plant and that post 2018 it will produce Approximately 100-120,000 oz pa of gold at a cost $518/oz.
• Based on a gold price of $1,273/oz, and using a discount rate of 9.3%the company expects to generate an NPV of $286.7m and an IRR of 64.4%.
• It is interesting that the company’s sensitivity analysis includes gold prices as low as $750/oz where the project would still generate an NPV of $55m.
Conclusion: Significant resource and reserve upgrades should secure the mine’s continued existence after the open pit ore is exhausted in 2016.
• Alecto has reached agreement to acquire the Kerboule gold project in Burkina Faso from Kaizen Discovery for £350,000 in shares.
• Kaizen is divesting the asset in Burkina Faso in order to concentrate on a series of base metals projects in the Pacific Rim.
• The Kerboule project is located about 20 km along strike from Avocet Mining’s Inata mine and previous exploration work, including limited drilling, plus widespread artisanal mining in the area points to an opportunity to identify a resource in a relatively rapid timescale.
• In addition to the initial purchase price, Alecto has agreed to a deferred consideration of US$1.5m, which can be satisfied in shares or cash at Alecto’s discretion, if it defines a JORC compliant resource of 1m oz of gold at a 0.5 g/t cut off orA JORC proven resource of 250,000 oz at a similar cut-off or produces 75,000 oz of gold.
• The company believes that the previous work has “proved the existence of an excellent low grade deposit with locally very high grade shoots.” The challenge is now to complete resource drilling.
• The company has signed an agreement with Lind Partners for US$3.125m.
• This will be in the form of two unsecured convertible notes for a maximum term of 36 months.
• The first tranche will be for US$1.125m and will be available with 10 days of execution of the agreement.
• The second tranche will be available if 80% of the face value of Tranche 1 has been repaid in cash or shares.
• Each note is repayable by equal monthly payments over an 18 month period from draw down either through cash or shares.
• If the company repays by cash they have to pay a premium of 2.5% on the monthly payment.
• Should they pay in cash Lind has the option to convert into shares at a 130% of the average VWAP of the 20 trading days prior to the funding agreement.
• Lind Partners will be granted 10.6875m options with an exercise price equal to the premium exercise price.
• The company will also issue 7.5m collateral/security shares to Lind Partners which will be returned once the convertible has been paid.
• Funds will be used to advance the company’s large mineral sands project at Guadalupito and Ilo Este Copper project.
• The company has a JV with Zahena to progress the Ilo Norte project where a further phase of drilling has started.
Conclusion: The way the two tranches have been structured the company in effect has funding for US$2.25m unless they pay for 80% of the face value of the first tranche – this is likely to be in shares given the current position of the company. It is unlikely that the level of funds being offered in the first tranche can give such an uplift in the shares that payment in shares will not be dilutive. Repayment through shares will be at 92.5% of 20 day VWAP.
New Age Exploration – Plans to build Lochinvar underground coking coal mine
• New Age Exploration, an Australian company is putting together plans to build an underground coal mine at Lochinvar
• The mine is estimated to cost around $280m to build and benefits from its close location to Steel mills at Teesside, Port Talbotand and Scunthorpe
• These mills consume some 6mt pa and currently import coal mainly from the US.
• Lochinvar is at the northern end of the Solway Basin which runs southwest to Cumbria and would effectively replace the UK’s last coking coal mine, the Maltby colliery which closed last year.
• Several large value stones of up to 8.9 carats were recovered in the 2013 bulk sampling programme.
• These have been sold for values in excess of US$2,400 per carat.
• The sale included fancy yellow stones as high as US$2,500 per carat.
• The first of a two stage production programme is starting with Stage 1 production will cover a 2 year period starting tat the end of 2014.
• 1 Mt will be mined and processed using a 75 tph processing plant.
• The company is targeting 20,000 carat during Stage 1 production with an estimated value of US$930/carat to generate revenues of US$9m.
• Cash flow generated at the first stage is expected to be used to complete a BFS and a 3D geological model of inferred resource.
• Stage 2 is expected to seek production ramped up to 3 Mt a year with peak production of 65,000 carats.
Conclusion: The high value achieved in the sales of these stones is promising of the potential at Lemphane. The first stage mining is being undertaken without a feasibility study as it was more economic to mine then to do a study. This makes sense particularly given the strong backing and funding of the chairman and his related trust. Results from the first stage will be useful in determining the mine plan for the rest of the inferred resource.
Rambler Metals (LON:RMM) – Agreement to look at viability of Hammerdown Gold Mine
• Rambler have signed a Letter of Intent with Maritime Resources to evaluate the re-opening of the underground Hammerdown Gold Mine in Newfoundland.
• The mine was in production between 2000 and 2004 with grades averaging 16 g/t and average recoveries in excess of 97%.
• During its operation a total of 291,400 tonne of ore was mined and milled at an average head grade of 15.83 g/t recovering 143,000 oz during its life.
• Mining stopped in 2004 due to low gold prices (the gold price averaged US$325/oz during 2000 to 2004).
• All ore was processed through the Nugget Pond mill now owned and operated by Rambler Mining.
• The LOI is for Rambler to oversee the engineering and evaluation work at Hammerdown to be funded by Maritime.
• Should the economic work prove positive the parties will negotiate mutually agreeable Management Services and Toll Milling agreements.
• Throughout the process Hammerdown which is owned within the Green Bay Property will be 100% owned by Maritime Resources.
• The Green Bay Gold Property has an MRE of 428,600 oz in the Measure and Indicated category (1.1 Mt at 4.47 g/t) and 661,100 oz in the inferred category (1.3 Mt at 5.44 g/t gold)
• The Hammerdown mineral resource was developed on 20 gold bearing zones at a cut off grade of 3 g/t gold.
• The vein system at Hammerdown is a series of stacked gold vein zones with a 250m long section of 1,800m long shear zone.
• Most gold zones are said to be cut off by the extensive Captain Nemo Fault which is north dipping.
• The fault cuts through the Hammerdown shear at an oblique angle, veins are cut off at depths varying from 150 to 250m.
Conclusion: These sorts of agreements are useful for Rambler Metals given its own lack of reserves. The Hammerdown Mine was mined at high grades mainly as an underground mine. The MRE now published is of much lower grades and while the gold price is much higher when the mine was closed, we look forward to seeing the economics on this project.
• Stratex International have restarted drilling at their Dalafin gold project in Senegal.
• The team are drilling 11,000m of Reverse Circulation ‘RC’ which gives good indication of grade and metallurgy through the collection of rock chippings which are recirculated back up the drill pipe.
• Stratex’s drilling is focussed on the Fare and Madina Bafe prospects.
• Previous drill results include:
o 7 m @ 86.39 g/t Au (FARC-07)
o 59.6 m @ 2.2 g/t Au (FADD-04)
o 9.6 m @ 16.08 g/t gold from 15.1m (MBDD-002)
o 3.8 m @ 1.43 g/t Au from 63.7 m (MBDD-007)
o 15 m @ 6.10 g/t Au from 14 m (MBRC-117)
o 2 m @ 4.90 g/t Au from 22 m (MBRC-091)
o 3 m @ 3.69 g/t Au from 29 m (MBRC-094)
o Stratex have agreement with a local partner, ‘Energy & Mining Corporation S.A.’ (EMC) to form a joint company to continue to develop the Dalafin project at 85% Stratex 15% EMC.
Conclusion: Dalafin offers significant potential to show a meaningful gold resource.
*SP Angel acts as broker to Stratex