Ariana Resources (LON:AAU) – Increased ore resource estimate at Kiziltepe
ASA Resource Group* (LON:ASA) – Board changes as Yuan Hu Ching removed from office as a Non-Executive Director
Avocet Mining (LON:AVM) SUSPENDED – Suspension of shares
Centamin (LON:CEY) – 2017 gold production guidance maintained despite decline in Q1 output
Kodal Minerals* (LON:KOD) – New prospects show high-grade lithium in pegmatite results
Premier African Minerals (LON:PREM) – tungsten mine update
RedT (LON:RED) – Agreement to install 180kWh battery at RNLI Lifeboat Center at East Cowes on Isle of Wight
Stellar Diamonds (LON:STEL) – Engineering & Design contract for Tongo-Tonguma project
Futures on US equities are pointing to a fall in the US stock indices
• Apple shares fell in out-of-hours trading from record highs following the release of its quarterly results which saw a slight decline in iPhone sales (-1%yoy), although Group earnings came ahead of market expectations.
• The pound came off this morning amid speculation that the UK is facing hard Brexit negotiations and the EU raised estimates for the UK departure obligation from €60bn to €100bn.
• Gold is slowly grinding lower amid a pick up in the US$ index this morning ahead of the US FOMC meeting announcement later today.
• Copper prices are off nearly 2% undoing all of the metal’s gains on Tuesday following the news that Grasberg miners went on strike as operations were starting to ramp up and recover from the latest standoff with local authorities on copper concentrate exports permits.
• Nickel prices are seen sliding this morning on the back of the news Philippine lawmakers rejected the candidacy of Gina Lopez, a driver in the latest nationwide mining industry audit, as an environment secretary.
• Iron ore futures on the DCE fell from 3-week high amid weak steel PMI numbers released for Apr.
• Brent is up slightly following a sharp drop on Tuesday that saw prices slid 2.1% to five-month lows on the back of oversupply concerns.
Philippines – Gina Lopez rejected for third time by the Commission on Appointments ‘CA’
• The introduction of a 3rd strike and you are out rule means that Gina Lopez is no longer in charge of mining in the Philippines
• Lopez is the second Cabinet Secretary appointed by President Duterte to be rejected following the rejection of the former Foreign Secretary Perfecto Yassay Jr
• Not only had Lopez banned all prospective open pits and suspended virtually all coastal mining in the Philippines but she had also required mining companies to give 2m Pesos for every hectare of farmland affected by their activities. This order may now never be fulfilled.
• Lawmakers questioned Lopez over her technical knowledge of the job as environment secretary in her first two confirmation hearings.
Lithium – Argentina sees its lithium production growing to 145,000tpa by 2022
• The government sees total investment of US$1.5bn raising the nation to the world’s third largest producer
• Projects include developments by Miners Enirgi Group Corp and Orocobre, Galaxy Resource, Eramet and Lithium Americas Corp.
• Rainfall levels across much of Argentina make the processing of lithium brine in evaporation ponds a slower process than in the Atacama in Chile.
Sodium and magnesium to replace lithium in batteries
• The ScienceDaily report that scientists have produced novel electrolytes for the recharging of sodium and magnesium batteries according to a project supported by the Swiss National Science Foundation.
• We suspect it will be many years before this work sees any commercial application.
121 Mining Investment conference – sponsored by SP Angel - 10–11 May 2017
• The 121 team are running the London 121 Mining Investment conference at No 8 Fenchurch Street in The City on 10-11 May.
• The event is for registered investment professionals, mining and exploration companies and mining analysts and brings the industry together alongside a series of investor briefings.
• 65 quality producers, developers and explorers attending / presenting
• I’m talking at 3:00 on the Thursday on: ‘UK mining outlook - A new era of UK funded exploration and production’.
• Follow link for investor passes - https://www.weare121.com/121mininginvestment-london/registration/register-investor/
Dow Jones Industrials +0.17% at 20,950
Nikkei 225 +0.70% at 19,446
HK Hang Seng +0.33% at 24,696
Shanghai Composite -0.27% at 3,135
FTSE 350 Mining -1.92% at 14,407
AIM Basic Resources +0.17% at 2,669
Economic News
US – Auto sales in the Big 3 automakers posted bigger-than-expected declines in Apr amid signs of cooling consumer demand.
• Nationwide numbers showed a slight rebound in sales last month from the lowest level in nearly two years; although, a pick up came in short of market expectations.
Germany – Labour market strengthened further with the unemployment falling by 15k beating market estimates for a 11k contraction and extending declines to four years.
• Jobless rate held at 5.8%.
UK – Retail prices are reported to have fallen 0.5%yoy in Apr marking the smallest decline in nearly three and half years.
• Food recorded a 0.9%yoy increase while non-food prices dropped 1.4%yoy, according to the British Retail Consortium data.
• “Shoppers are seeing inflation in travel, fuel and when spending away from home, so retailers are cautious about passing on cost price increases.”
Turkey – Inflation continued to edge higher through Apr with the central bank aiming to limit further price increases with tighter monetary policy post-referendum.
• Prices climbed 11.9%yoy last month.
• The central bank hiked its liquidity lending rate by 50bp to 12.25% last week making it the highest among developing nations.
Alitalia bankruptcy will force Italian banks to write off yet more debt from already weak loan books
• Alitalia, the Italian state airline is to enter bankruptcy after staff refused to accept a restructuring plan.
• The company has received >€7bn from the Italian state over the past 10 years.
• Etihad which owns 49% of the airline and other shareholders had offered a €2bn refinancing.
• The Italian state is advancing some €400m to the airline as a bridging loan to keep it flying
Currencies
US$1.0910/eur vs 1.0913/eur yesterday. Yen 112.22/$ vs 112.10/$. SAr 13.377/$ vs 13.285/$. $1.292/gbp vs $1.287/gbp.
0.749/aud vs 0.753/aud. CNY 6.893/$ vs 6.897/$.
Commodity News
Precious metals:
Gold US$1,254/oz vs US$1,255/oz yesterday
Gold ETFs 59.6moz vs US$59.6moz yesterday
Platinum US$921/oz vs US$932/oz yesterday
Palladium US$810/oz vs US$814/oz yesterday
Silver US$16.82/oz vs US$16.93/oz yesterday
Base metals:
Copper US$ 5,670/t vs US$5,778/t yesterday
Aluminium US$ 1,923/t vs US$1,905/t yesterday
Nickel US$ 9,320/t vs US$9,530/t yesterday
Zinc US$ 2,606/t vs US$2,634/t yesterday
Lead US$ 2,200/t vs US$2,244/t yesterday
Tin US$ 19,900/t vs US$19,925/t yesterday
Energy:
Oil US$51.0/bbl vs US$51.6/bbl yesterday
Natural Gas US$3.191/mmbtu vs US$3.229/mmbtu yesterday
Uranium US$22.65/lb vs US$22.65/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$67.2/t vs US$68.0/t
Chinese steel rebar 25mm US$546.8/t vs US$545.1/t
Thermal coal (1st year forward cif ARA) US$65.9/t vs US$66.8/t yesterday
Premium hard coking coal Aus fob US$234.9/t vs US$246.2/t
Other:
Tungsten - APT European prices $212-219/mtu vs $208-216/mtu
Company News
Ariana Resources (LON:AAU) 1.8p, Mkt Cap £16.2m – Increased ore resource estimate at Kiziltepe
• Ariana Resources has announced an increased JORC (2012) compliant resource at its 50% owned Kiziltepe project in Turkey. The new estimate shows 257,000oz of contained gold and 4.9m oz of silver, of which 181,000 oz of the gold and 3.2m oz of the silver are classed as measured & inferred within an overall resource of 3.8m tonnes at an average grade of 2.1 g/t gold and 39.7 g/t silver.
• The updated results reflect additional drilling completed last year and show an approximately 30% increase in the contained gold and over a 50% increase in the contained silver.
• Kiziltepe poured its first gold pour in March this year after a protracted development and construction period and now seems to be expanding the scope of the resource as it follows up depth and lateral extensions of its existing mineralised structures and investigates potential satellite deposits.
ASA Resource Group* (LON:ASA) 1.7p, Mkt Cap £28.3m – Board changes as Yuan Hu Ching removed from office as a Non-Executive Director
• ASA Resource Group announced further board changes yesterday.
• The team removed Yuan Hu Ching as a non-executive director and have appointed Ian Dearing as an executive director to continue restoration of proper corporate governance.
• Ian Dearing has been company secretary since September 2016 and is a lawyer specialising in civil litigation and company law.
• Dearing is described as an outstanding ambassador for the company and has been leading the inquiry into recent allegations.
• Conrad Mukanganga has also been appointed as an assistant company secretary responsible for Bindura Nickel Corporation and the Freda Rebecca gold mine.
• Mr Mukanganga was in the process of being retrenched by the now discredited management but has now been welcomed back by the directors of Freda Rebecca and BNC.
• The two mining units are now being operated independently without interference from Asa Resource Group.
• Mining plans at BNC have been restored to plans recommended by the local operating teams and supported by the BNC board.
• ASA Website: Management recently updated the company website to help investors better understand the group.
• https://www.asaresourcegroup.com
Conclusion: The Non-Executive Directors have acted swiftly, decisively and impressively to dismiss directors who have been unable to account for the expenditure of funds to certain Hong Kong accounts. Related personnel have either been suspended or removed and key employees who were effectively removed by the Chinese directors and then replaced with their own people are being reinstated.
*SP Angel acts as Nomad and broker to ASA Resources and its analysts have visited ASA’s Bindura Nickel, Freda Rebecca and Zani Kodo assets.
Avocet Mining (LON:AVM) SUSP – Suspension of shares
• The Company has announced that it has requested the formal suspension of its shares on both the London and Oslo exchanges. The request comes as the company announces that “it has been unable to publish its Annual Report and Financial Statements for the year ending 31 December 2016 within four months of the year end”.
• The immediate cause of the inability to meet the deadline is “due to the time needed by the Group’s auditors, Grant Thornton, to complete their audit work.”, however we suspect that is linked to the operational difficulties at the key, Inata mine in Burkina Faso where the mine “continues to be affected by the knock-on effects of the suspension of operations in October and November 2016, with funding for inventories, spares and maintenance having been impacted by the need to clear overdue payments.”
• “Against this background, the mine is experiencing shortage of critical supplies including reagents and explosives, causing ongoing interruptions to the mine’s production processes.”
• Management is in discussions with the mine’s trade creditors, banks and government. We hope that these discussions result in a fruitful outcome.
Centamin (LON:CEY) 166 pence, Mkt Cap £1.9bn – 2017 gold production guidance maintained despite decline in Q1 output
• Centamin reports that it is maintaining its 2017 production guidance for its Sukari mine in Egypt of 540,000oz of gold production at a cash cost of US$580/oz and an all-in-sustaining- cost (AISC) of US$790/oz.
• The maintained forecast come despite a decline in Q1 gold output for the three months to 31st March to 109,187oz. This is a 20% decline on the 136,787oz produced in Q4 2016 and 13% below the production achieved in Q1 2016. Cash costs for Q1 were US$734/oz and AISC was US$887/oz and the company comments that the principal cause of the lower production was a decline in head grades at both the open-pit and underground mines.
• The company emphasises that the lower grades are “in line with the respective mine plans” and that “Grades from the open pit are expected to increase towards the reserve average during subsequent quarters with further cutback in the east wall of the pit.”
• The company continues to generate cash, however, with operating cash flow of US$58m during the quarter (Q4 2016 – US$70m) and free cash flow after investment of US20m of approximately US$28m. Centamin remains debt free with cash on hand at 31st March of US$266m
Conclusion: Centamin remains financially robust and the dip in production during Q1 reflects the relatively short term fluctuations within the mine plan and we are encouraged that the company is maintaining its guidance on both production and costs implying that both will improve over the coming quarters.
Kodal Minerals* (LON:KOD) 0.33p, Mkt Cap £17.6m – New prospects show high-grade lithium in pegmatite results
• Kodal Minerals reports results from two new lithium pegmatite prospects at within its Bougouni project area in Mali, West Africa.
• The “Sogola-Baoule” and “Boumou” prospects have returned high-grade lithium results which are consistent with and probably exceed expectations.
• Sogola-Baouleprospect best results from five drill holes covering 864m
o 8m at 1.24% Li2O from 40m
o 7m at 1.29% Li2O from 63m
o 8m at 1.62%Li2O from 104m
o Boumouprospect new intersections out of six drill holes over 842m best intersections:
13m at 1.44% Li2O from 111m (inc. 5m at 2.02% Li2O from 116m)
8m at 1.63% Li2O from 62m
10m at 1.55% Li2O from 23m
Mineralisation: the good thing about Kodal’s Bougouni project is that it is spodumene rich with 20-30% spodumene content in low mica pegmatite bodies.
This type of mineralisation is preferred by Chinese lithium processors due to its higher LiO2 concentration within the mineralisation. Spodumene rich ores are also generally preferred to lithium in mica due to their processing characteristics. Micas produce dust which cause environmental issues and impair the performance and capacity of the lithium processing plant.
Conclusion: These are good results for Kodal Minerals and are well timed considering the ongoing negotiations with a previously announced Asian lithium trading organisation for the input of a £4.3m investment into the company.
*SP Angel acts as Financial Advisor and Broker to the company. Robert Wooldridge, a partner at SP Angel is also Chairman of Kodal Minerals.
Premier African Minerals (LON:PREM) 0.55 pence, Mkt Cap £24m – tungsten mine update
• Premier African Minerals reports that its X-Ray sorter ‘XRT’ is exceeding their expectations and has proved capable of recovering up to 100% of mineralisation contained in the run of mine feed to the sorter on a continuous basis and in a mass pull of circa 5% on average.
• There is no word or explanation on why the company is not yet shipping concentrate though they do say that shipments produced from the upgraded plant will commence in the beginning of this month.
• We look forward to further news on the concentrate shipments and it will be interesting to reconcile sales with tonnage sold when the figures come available.
RedT (LON:RED) 9.9p, mkt cap £65m – Agreement to install 180kWh battery at RNLI Lifeboat Center at East Cowes on Isle of Wight
• redT energy have signed an agreement to supply a new 180kWh vanadium redox battery to the RNLI on the Isle of Wight.
• The battery will provide energy security and will also enable the RNLI to sell excess power generated by its solar panels back into the grid.
• The RNLI facility appears to export up to 15kW when generation exceeds on-site demand
• redT’s batteries will help the RNLI power the hull curing ovens entirely using solar energy for the manufacture of new lifeboats.
• Critically the new batteries will provide back-up power and remove the need for diesel backup generation.
• The company remains well funded with €17.2m in the bank at end March and remains debt free.
• Revenues of €10.8m should grow as more battery storage facilities are installed. The company reported a loss of €5.8m for 2016 vs €1.0m reflecting increased cost of sales and administrative expenses.
• redT is now taking orders for its Gen2 containerised vanadium redox battery plants .
• Excluding the RNLI deal the team have orders for: 10kW-75kWh and 60kW-300kWh machines (equivalent to 5 x redT tank unit modules)
• They also have an LoI for a potential 490MW of grid connected sites and are at the final stage of customer selection of a €6.5m (25 x 60kW-300kWh & 1 x 5kW-20kWh). This is equivalent to 101 x redT tank unit modules.
• Plus the team have an active customer pipeline of potentially €246m worth of orders.
• The trial at the Isle of Gigha was cancelled due to the upgrade of the grid connection to the island. redT was able to fairly rapidly redeploy its machines to sites in Cornwall and the Isle of White where they should be better able to demonstrate the capacity and efficient running of the battery plant.
Conclusion: We continue to follow progress at redT. Strong demand for new forms of energy storage should continue to drive trials for redox batteries and we expect redT and other vanadium redox batteries to rival lithium-ion battery plants particularly for larger-scale storage devices.
While lithium storage plants have been relatively safe to date the very large number of connections involved and the potential for sudden and catastrophic failure associated with thermal runaway in lithium batteries may lead the market more towards vanadium-redox battery plants. The best reason to prefer vanadium redox should be its longer lifespan and ability to recycle and regenerate the vanadium in the battery.
Shanta Gold (LON:SHG) 7.9p, Mkt Cap £46m – Maiden resource at Nkuluwisi: a potential to extend the New Luika life of mine
BUY – Target price 12.2p
• The Nkuluwisi maiden mineral resource includes 3,973kt at 1.10g/t for 141koz (at 0.5g/t cut off grade) including:
o Measured and Indicated category for 2,535kt at 1.14g/t for 93.2koz
o Inferred category for 1,438kt at 1.03g/t for 47.8koz
o The Nkuluwisi project is located 12km away from the NLGM processing facilities offering potential for trucking and processing of mined ores at the existing plant.
o The deposit lends itself to open pit development with the mineralisation remains open at depth and along strike.
Conclusion: Nkuluwisi to prove a valuable addition to the NLGM resource base and is likely to be used as a blend with higher grade ores from other deposits towards the latter part of the NLGM life of mine. This would further extend the life of the NLGM operations currently envisaged to run to 2023 by several years.
Stellar Diamonds (LON:STEL) 5.8 pence, Mkt Cap £2.5m – Engineering & Design contract for Tongo-Tonguma project
• Following its recent announcement of the agreement on tribute mining and revenue sharing with Octea Mining which opened the way for the joint development of the Tongo-Tonguma kimberlite diamond project in Sierra Leone, Stellar Diamonds has moved rapidly to announce the appointment of Paradigm Management to prepare the Front End Engineering and Design (FEED) study for underground mine development of the project.
• Paradigm Project Management (PPM) “has significant experience in all aspects of diamond mine development, project delivery and operations, spanning 73 mines in 13 countries for 37 clients, including all African countries with known diamond deposits/operations.”
• The study will provide a more detailed analysis of the project which looks to produce around 200,000 carats of diamonds per year over a 21 years mine life making it, potentially the second largest kimberlite diamond mine in West Africa. The project currently envisages an initial capital investment of US$32m over two years, inclusive of a 15% contingency budget, to deliver a post-tax NPV of US$104m at an 8% discount rate and generate an after tax IRR of 31%.
• The study, which will include an additional 5000m of core drilling “to better define the near surface geology of the kimberlites in Resource with particular reference with particular reference to siting the decline portals, the declines and the development drives for the first two levels of mining to a depth of 75m below surface.”, is expected to be completed in approximately four months.
• As well as defining the operating parameters, capital and operating costs, the FEED will also develop a project execution plan to implement the development and a refined financial model.
Conclusion: The company is moving ahead with plans to develop the Tongo-Tonguma kimberlite as one of West Africa’s largest diamond mines. We look forward to the results of the FEED and the updated plan for mine development later in the year.