Amur Minerals* (LON:AMC) – Kun Manie operating costs to deliver nickel con to rail station at $1.78/lb Ni
Anglo Asian Mining* (LON:AAZ) – Q2 operations update
Firestone Diamonds (LON:FDI) – Start of commercial production at Liqhobong
Goldstone Resources (LON:GRL) – Pit definition drilling at Homase-Akrokerri
Kefi Minerals* (LON:KEFI) – Project funding for Tulu Kapi
Trans-Siberian Gold (LON:TSG) – Q2 Production Results
Tri-Star Resources* (LON:TSTR) – Director change
Miners are trading higher this morning helped by positive Chinese economic numbers.
• Gold is little changed after jumping more than $10/oz on Friday helped by a drop in the US$ index.
• The US$ index is trading close to the lowest in 10 months on the back of weak US economic data released late last week.
• Steel rebar futures are stronger today as the data show mills raised production to record high in June on favourable operating margins.
• Iron ore futures gain with other metals despite Antaike report showing iron ore stockpiles across ports in China posted a 1.7mt increase to 130.6mt.
• Brent is flat today after climbing 4.7% last week with reports showing US drillers added two rigs over the week, the smallest increase since May.
• Previously, OPEC production report showed members’ output hit a record high for this year in June. OPEC members’ compliance with November 30 output agreement is reported to have deteriorated to 92% in June from 110% in May; Saudi Arabia’s compliance was 119% in June v 127% in May with output at 9.97mmbbl v 9.93mmbbl, respectively; Iraq, UAE, Algeria, Gabon, Kuwait and Ecuador all reported compliance below 100% while Iraq posted the lowest compliance at 28% in June v 69% in May.
Oman Mining Strategy to be signed by The Public Authority with SRK, Meyer Brown and Wood Mackenzie today
• The Public Authority for Mining in Oman is to sign a contract with SRK Consulting and supporting companies Mayer Brown and Wood Mackenzie to implement the Oman Mining Strategy.
• One of the mandates of the authority is to develop a strategy to include plans and policies related to the geological infrastructure in the Sultinate of Oman and the mining system within the framework of the national strategy for development.
• The strategy aims at ensuring utilisation of the sultanate’s mining wealth and investing it in achieving comprehensive development and economic diversification.
• This looks like a significant move in helping mining companies like Savannah Resources and others to get started in Oman and demonstrates how keen the nation is to support mining within its borders.
China to invest $20bn in overseas ports and is looking to open shipping routes across the Artic (FT)
• The Artic shipping route could cut journey times by several days and result in the development of new ports in Russia, Lithuania and Norway.
• China is reported to be investing in nine overseas ports taking their investment spend to potentially >$20bn from $10bn seen previously a year ago.
• The new level of investment has led to questions relating to the potential for undeclared military objectives relating to China’s strategic port acquisitions and developments.
Global Logistics Properties Ltd – accepts takeover offer of US$11.6bn from Chinese consortium (Bloomberg)
• The takeover offer is 25% over the last traded price for Global Logistics Properties in Singapore
Grenfell Tower – Arconic withdraw plastic filled aluminium cladding panels from global sales
• Arconic, the supplier of the plastic filled aluminium cladding panels at the centre of the investigation of the Grenfell Tower fire, is reported to have withdrawn the panels from global sale citing “inconsistencies in building codes around the world.”
China censors remove Winnie the Pooh images from Chinese social media (FT)
• The crackdown appears to be associated with comparison of Winnie the Pooh with President Xi Jinping.
• We can think of worse cartoon characters to be associated with.
Coppa’ load of that (The Sun)
• The Sun today reports the discovery of mysterious mummies cocooned in copper and fur for 1,300 years in an icy Siberian burial site.
• The mummies are cocooned in copper, fur and permafrost. The discovery highlights copper’s significance and links to Persa at that time.
Dow Jones Industrials +0.39% at 21,638
Nikkei 225 +0.09% at 20,119
HK Hang Seng +0.30% at 26,467
Shanghai Composite -1.43% at 3,176
FTSE 350 Mining +1.00% at 15,974
AIM Basic Resources +0.12% at 2,448
Economic News
US – Slower than forecast inflation rate in June signals it may take longer for the economy to reach the Fed target rate.
• Additionally, retail sales numbers released for June showed a second consecutive monthly decline implying only a modest rebound in Q2 from a lacklustre Q1.
• Weak data saw the US$ index falling 0.6% on Friday with the probability of another rate hike by the end of the year coming off from 50.0% to 43.4%.
China – Positive Q2 GDP numbers and other economic data for June show strengthening growth momentum towards the end of the second quarter.
• Growth continues to run comfortably above the government target of “around 6.5%”.
• Growth rates in retail sales and industrial production accelerated slightly in June, while FAIs stabilised as a continuing tightening in state spending was compensated by a pick up of private investment from a near lowest level in the year to date.
• Additionally, property sales increased for the first time following a three month decline; since the value of sold homes climbed more than the physical amount of properties involved, it is likely home prices posted the first increase in growth since November last year (data on property prices is later this month).
Day Event Period Survey Actual Prior Revised
Monday GDP YoY 2Q 6.8% 6.9% 6.9% --
GDP YTD YoY 2Q 6.8% 6.9% 6.9% --
Retail Sales YoY Jun 10.6% 11.0% 10.7% --
Retail Sales YTD YoY Jun 10.3% 10.4% 10.3% --
Fixed Assets Ex Rural YTD YoY Jun 8.5% 8.6% 8.6% --
Industrial Production YoY Jun 6.5% 7.6% 6.5% --
Industrial Production YTD YoY Jun 6.7% 6.9% 6.7% --
Source: Bloomberg
UK – Property prices were little changed in July as asking prices climbed only 0.1%mom to £316,421, according to Rightmove data.
• Annual increase came in at a “relatively subdued” 2.8%yoy.
• “Wage growth is muted, there are signs that consumer credit is tightening, and at some point there will be the first rise in mortgage interest rates for a decade o rmore which will come as a shock,” Rightmove said.
• “Buyers, many of whom are sellers too, will struggle to afford to pay much more.”
Currencies
US$1.1450/eur vs 1.1419/eur yesterday. Yen 112.62/$ vs 113.27/$. SAr 12.988/$ vs 13.190/$. $1.309/gbp vs $1.296/gbp.
0.782/aud vs 0.776/aud. CNY 6.773/$ vs 6.782/$.
Commodity News
Precious metals:
Gold US$1,231/oz vs US$1,218/oz yesterday
Gold ETFs 59.7moz vs US$60.0moz yesterday
Platinum US$924/oz vs US$906/oz yesterday
Palladium US$861/oz vs US$860/oz yesterday
Silver US$16.06/oz vs US$15.64/oz yesterday
Base metals:
Copper US$ 5,975/t vs US$5,880/t yesterday – copper stocks rise as Chinese consumers focus on scrap for copper production.
• Trump infrastructure spending has so far failed to materialise, though larger than expected budgets for US military spending were recently passed.
Aluminium US$ 1,938/t vs US$1,927/t yesterday
Nickel US$ 9,610/t vs US$9,320/t yesterday
Zinc US$ 2,829/t vs US$2,788/t yesterday
Lead US$ 2,331/t vs US$2,288/t yesterday
Tin US$ 20,005/t vs US$19,850/t yesterday
Energy:
Oil US$49.1/bbl vs US$48.3/bbl yesterday
Natural Gas US$2.991/mmbtu vs US$2.978/mmbtu yesterday
Uranium US$20.75/lb vs US$20.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$64.6/t vs US$63.7/t
Chinese steel rebar 25mm US$595.7/t vs US$595.0/t
Thermal coal (1st year forward cif ARA) US$71.8/t vs US$70.8/t yesterday
Premium hard coking coal Aus fob US$167.6/t vs US$163.1/t
Other:
Tungsten APT European US$218-226/mtu vs US$215-222/mtu
Company News
Amur Minerals* (LON:AMC) 6.2p, Mkt Cap £38m – Kun Manie operating costs to deliver nickel con to rail station at $1.78/lb Ni
• RPM mining consultants completed independent review of operating costs estimates for the Kun Manie project.
• All-in operating costs for the nickle/copper concentrate delivered to the planned Ulak rail station is estimated at c.$24/t (ore) or an average of $1.78/lb Ni contained in the concentrate.
• Commenting on results the Company highlighted that using today’s nickel price of approximately $4.00 a pound ($8,820/t), our projected breakeven grades are lower than the cutoff grade at which we report JORC Mineral Resource; this means nearly all of our reported resource is available in the determination of mining tonnages and grades”.
• RPM estimates are based on a first principles approach, adjusted to reflect input costs as of Q2/17 and USDRUB exchange rate of 60.
• Costs do not include smelter terms, recoveries, charges, payable terms and royalties as the Company prepares for bulk samples’ metallurgical tests and continues to work on an optimal production flowsheet including options of in-house smelting using a projected treatment facility at Ulak or ship the concentrate for third party processing.
• Operating costs are estimated at a ±25% accuracy and do not include by-product revenues.
• As of now, two deposits (MKF and KUB) are planned to be developed using a combination of open pit and underground (long hole open stoping) mining methods.
• Although, the newly discovered high grade extension to the delineated mineralisation at IKEN where six step out holes returned intersections averaging 28.5m at 0.98% Ni and 0.28% Cu may be potentially incorporated into the mining plan and constitute underground mining target.
• That exploration target recently discovered at IKEN, subject to infill drilling, may potentially add 10-15mt at average nickel grades of 0.9-1.0% Ni to mined tonnages, equivalent to an extension of the Kun Manie life of mine by two years at 6mtpa processing rates, according to management estimates.
• The VOD deposit is expected to be purely open pit mining operation.
• Summary of costs per deposit and other operating details are provided below:
Cost per lb Ni in con delivered to Ulak
Deposit $/lb Ni Met recoveries, % Av Ni grade, % Open pit Underground
MKF 1.73 81.1 0.78 Yes Transitioning to UG
KUB 2.05 71.8 0.77 Yes Transitioning to UG
VOD 1.40 77.6 0.83 Yes None
IKEN 1.83 84.4 0.69 Yes Presently none; new exploration zone potential
Source: Company
• Breakdown of operating costs for the largest deposit (MKF) included in the Kun Manie projects along with previous internal management estimates released in Q1/15 are provided below:
Operating costs breakdown RPM Q1/15
Open pit mining * $/t (ore) 6.53 6.00
Underground mining $/t (ore) 7.44 11.88
Processing costs** $/t (ore) 13.24 10.51
Con transport to Ulak $/t (ore) 1.50 2.26
G&A $/t (ore) 1.98 1.72
Total (open pit) $/t (ore) 23.25 20.49
Total (underground) $/t (ore) 24.16 26.37
*Assuming 3:1 strip ratio
**includes ore transport costs ($1.58/t ore) and tailings treatment ($0.16/t)
***Q1/15 numbers are based on the USDRUB exchange rate of 40
Source: Company
Conclusion: Independently verified operating costs constitute another step towards completion of the feasibility study which are to be used to determine optimal production schedule. The Company mentions that once more work is completed on metallurgical recoveries, smelting costs and penalties, royalties and transportation costs, C1 costs for the project will be derived with lower quartile producers reported to be operating at sub $3.10/lb and 50% of producers running at below $3.80/lb as of YE15, on Wood Mackenzie numbers.
*SP Angel act as Nomad and Broker to Amur Minerals
Anglo Asian Mining* (LON:AAZ) 18.3p, Mkt Cap £20.6m – Q2 operations update
• Gold production totalled 12.1koz in Q2/17 (Q1/17: 11.1koz; Q2/16: 19.4koz) and comprised of:
• Gold in dore of 9.1koz including gold from heap leaching of 4.5koz (Q1/17: 3.8koz; Q2/16: 5.0koz) and agitation leaching of 4.6koz (Q1/17: 5.5koz; Q2/16: 12.9koz).
• Gold contained in floatation copper concentrate of 3.0koz (Q1/17: 1.8koz; Q2/16: 1.5koz).
• Copper production was 716t (Q1/17: 606t; Q2/16: 497t) with around 3/4s of that coming from the floatation plant.
• H1/17 gold and copper production totalled 23.2koz and 1.3kt, respectively, taking total output measured in gold equivalent to 28.6koz (H1/16: 36.7koz).
• Agitation leaching and floatation plants processed 179.5kt at an average grade of 1.77g/t (Q1/17: 184.1kt at 1.46g/t; Q2/16: 151.6kt at 3.59g/t) with a little over half of that coming from the Gedabek open pit as well as underground operations at Gadir and Gosha and the remainder sourced from ore stockpiles.
• Mining rate has come down following the management decision to temporarily suspend mining at Gedabek and Gadir to complete more drilling (c.15,000m) and update the geological model with operations due to restart in Q1/18.
• Ugur development continues on schedule for the start of mining operations in Q4/17; a separate update on development and exploration works at Ugur to be released before the end of July.
• Q2/17 gold sales came in at 7.4koz at an average gold price of $1,258/oz (Q1/17: 8.3koz at $1,220/oz; Q2/16: 15.7koz at $1,265/oz).
• Copper concentrate sales totalled 3.2kdmt generating $6.1m in by-product revenues (net of 12.75% government share) compared to 2.2kdmt in sales for $4.4m in Q1/17.
• The management reiterated annual production forecast at 64-72koz gold equivalent (2016: 72.3koz GE).
• Net debt totalled $29.0m as of the end of Q2/17 (Q1/17: $33.1m).
Conclusion: Gold production reflects the management updated strategy to temporarily suspend mining operations at Gedabek and Gadir in order to get a better handle on the resource, while processing availabale stockpiles in the meantime and developing the newly discovered mineralised zone at Ugur. Due to the change in the processing sequence at the agitation leaching and floatation complex, we see a little reduction in gold recoveries when combined production of gold in dore and in concentrate is used, while copper output benefits from rich in copper sulphide ore being first floated with tailings leached in tanks afterward. Timing of the Ugur commissioning is critical to meeting management annual production guidance and we look forward to update on development works at the deposit due before this month’s end.
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Firestone Diamonds (LON:FDI) 39 pence, Mkt Cap £124m – Start of commercial production at Liqhobong
• Firestone Diamonds has announced the start of commercial production at its 75% owned Liqhobong diamond mine in Lesotho with effect from 1st July. The announcement comes following the successful completion of commissioning and the achievement of full nameplate capacity targets in all three months of the final quarter of the financial year ending 30th June.
• During the financial year, 310,376 carats were sold for a total of US$27.8m or an average of US$90/carat. The company notes that it recovered a total of 112 “special” diamonds larger tha 10.8 carats in size during the year, including 54 such diamonds during the final quarter. The mine also continues to yield fancy yellow stones which typically would attract a premium price.
• Firestone notes that “The average price per carat for the quarter was lower than the Company's internal projections and is a result of an increase in the recovery of finer carats at Liqhobong, as the Company modified its plant during the commissioning stages as previously reported.” The company also comments, however, that it has continued to see “strong interest and support for its higher quality and better value goods in all four of its sales.”
• The company “does not expect a recovery in the lower priced category goods in the short to medium term, as supply remains readily available and demand is seen to be reducing slightly.”
• Firestone also point to the continuing negative impact of the Indian demonetisation programme which it estimates “has reduced sale proceeds by approximately 8% for the Company's sales to date.”
Conclusion: The start of commercial production at Liqhobong is a significant milestone for Firestone Diamonds. The continuing recovery of larger diamonds from the mine should provide some mitigation of the softer prices in the smaller, lower value, element of production and the negative impact of Indian demonetisation.
Goldstone Resources (LON:GRL) 1.6 pence, Mkt Cap £2.3m – Pit definition drilling at Homase-Akrokerri
• Goldstone has announced that, following a review of the historic data available on its Homase Akrokerri gold project in Ghana it has concluded that “there is a mineable reserve within the oxide zone within the Akrokerri licence”
• The company has now started a programme of “pit-definition drilling coupled with additional confirmation drilling to progress pit modelling” which is intended to put Goldstone in a position to apply to the Ghanaian Government for a mining permit.
• At this stage, Goldstone expects to make the necessary application before the end of September.
Kefi Minerals* (LON:KEFI) 5.5p, Mkt Cap £18.1m – Project funding for Tulu Kapi
• Kefi Minerals reports that it has signed a mandate and heads of terms agreement for US$135m of project funding for its Tulu Kapi gold project on Ethiopia with the private, Jersey based, company, Oryx Management.
• The agreement is subject to the completion of independent technical, accounting and legal due-diligence as well as the approval of the National Bank of Ethiopia and “Oryx completing the fund-raising of listed debentures.”
• Oryx was “created for the purpose of identifying, evaluating, effecting and managing investment-ready opportunities for fixed asset leasing in the resources sector.”
• Under the terms of the agreement, Oryx will issue Luxembourg listed bonds in order to “build and own all the on-site infrastructure for the Project which it would lease to the Project company, Tulu Kapi Gold Mines Limited (TKM”).”
• The bonds attract interest at 8%pa at a gold price of US$1100/oz “rising in a linear manner to a cap … [of] 16% pa at a gold price of US$1,700/oz.” The bonds have a 9 year tenor.
• Kefi Minerals indicates that, based on its cash flow projections at a gold price of US$1250/oz, “Oryx could be repaid around half-way through the nine-year term.
• Oryx will also operate the ore processing plant on “an open-book, cost plus performance-bonus related based operating contract.”
• The agreement with Oryx leaves the onsite infrastructure at Tulu Kapi largely financed, although Kefi Mining still needs to fund a further US$32 “for the residual working capital” and Kefi Minerals is considering a number of options and currently expects that “a combination of financing sources will ultimately be used”.
• Ausdrill, through its subsidiary, African Mining Services will, “supply and operate all the mining equipment under a mine services agreement” on an industry standard type of cost per tonne of material delivered basis.
• The company previously announced that the Ethiopian Government had “agreed to finance the budgeted US$20 million of capital expenditure for off-site infrastructure in exchange for Project equity of c 20% in addition to its 5% free-carry.”
Conclusion: Kefi Minerals’ securing of project financing for Tulu Kapi, the selection of mining contractor, Ausdrill, and plant construction contractor Lycopodium as well as the Government agreement on off-site infrastructure brings the project closer to achieving its goal to start project development later this year.
*SP Angel act as Nomad and broker to Kefi Minerals
Trans-Siberian Gold (LON:TSG) 33 pence, Mkt Cap £36m – Q2 Production Results
• Trans Siberian Gold has reported production of 7,363 oz of gold from its Asacha mine during the 3 months to 30th June, bringing gold production for the year-to-date to 15,007 oz.
• The company maintains its full year production guidance of 32-36,000 oz of gold, which implies that there may be a slight increase in gold output during the second half of the year.
• In addition, silver production for the year to date amounted to 22,212 oz.
Conclusion: Asacha seems to be operating smoothly with a mine life in excess of ten years and steady state production in line with the company’s production guidance.
Tri-Star Resources* (LON:TSTR) 0.15p, Mkt Cap £30m – Director change
(Tri-Star holds 40% of SPMP)
• Tri-Star Resources report that Dr Scott Morrison has joined the board of Tri-Star Resources as a non-executive director, replacing Jonathan Quirk who has resigned.
• Morrison was formerly ceo and then chairman of Metalor Technologies International SA a precious metals refiner and producer of value-added metalliferous products.
• Scott’s experience with Metalor is seen to be more relevant to Tri-Star which is building and soon to commission an antinomy roaster in Oman with a gold recovery circuit attached.
• Morrison remains a consultant to Metalor which is expert in the compounding of precious metals and the creation of pure and low-impurity metals for the electronic, semiconductor and decorative industries for plating, powders and flakes as well as pastes. Metalor’s key markets are jewelry, watch manufacture, dental alloys and electrical contacts.
• Morrison also spent 20 years at SGS which is expert in inspection testing and verification.
• Morrison is also a non-executive director of ASA Resource Group where he has previously worked with Mark Wellesley-Wood, chairman of Tri-Star.
• Conclusion: Morrison’s involvement with Tri-Star should bring in new He brings direct commercial experience of metals and minerals, particularly in the trading and customisation of metal products with the potential for the production of further value added products from Tri-Star’s new roaster following its commissioning. The Public Authority for Mining in Oman is to sign a contract with SRK Consulting and supporting companies to implement the Oman Mining Strategy today which shows ongoing government support for Tri-Star and other mineral projects in the region as the nation diversifies away from oil & gas.
*SP Angel acts as Nomad and Broker to Tri-Star Resources