Amur Minerals* (LON:AMC) – IKEN/KUB drilling update and management estimates for potential resource expansion
Avocet Mining (LON:AVM) – Creditor discussions continuing
Bushveld Minerals (LON:BMN) BUY, Target price 14p – £8m convertible bonds issue
Karelian Diamonds (LON:KDR) – Indicator Minerals suggest a nearby kimberlite
Savannah Resources (LON:SAV) – Resumption of drilling at Mina do Barroso
Sunstone Metals* (ASX:STM) – Bramaderos project shows significant gold intersections in Ecuador
Stellar Diamonds (LON:STEL) – Confirms environmental payment for Tongo
Cobalt - Volkswagen looking for Cobalt contracts - Volkswagen is reported to be looking for serious long term contracts with cobalt producers for the production of lithium ion batteries to shift its focus towards electric vehicles
• The company has asked suppliers to submit proposals for a 10 year contract which would start in 2019
• A Volkswagen spokesman told Reuters that the company is looking to procure all the materials needed to meet its 2030 goals could result in a total order volume worth $50bn
• We suspect Volkswagen will struggle to secure solid contracts with respectable producers for this much cobalt unless it is prepared to pay a significant premium for future metal
• VW is also likely to look to sign contracts for other Rare Earth and Minor Metals to ensure longer-term production of batteries and Electric Vehicles
Iron Ore – Rising production rates and stock levels push iron ore back into bear market
• Iron ore slumps back into a bear market after posting biggest weekly loss in 16 months as rising production, stock levels and an easing of record demand in China causes process to slip
• Chinese steel mills have rushed to raise output through the summer ahead of enforced anti-pollution measures which are expected to close many furnaces through the winter.
• Benchmark iron ore prices rose as steel mills bought better quality Australian and Brazalian iron ore over lower grade and quality material.
• Rising premiums for >62.5% ores continue to indicate ongoing pressure on quality feedstock to reduce emissions levels.
• Economic data may also signal some cooling of growth in the Chinese economy.
• Losses probably driven by realisation that if as planned large amounts of steel capacity are taken offline during the winter months, will mean lower demand for iron ore
Economics
Germany – Angela Merkel re-elected for fourth term as far right AfD party gains 13% of vote
• Angela Merkel has won her fourth term as German Chancellor.
• Mrs Merkel remains three terms behind President Museveni of Uganda who famously wrote a book indicating that African leaders should only serve a single term.
• Merkel’s win is tempered by the rise of the far right AfD party which won 13% of the vote and has vowed to fight Germany’s foreign invasion.
Currencies
US$1.1908/eur vs 1.2001/eur yesterday. Yen 112.26/$ vs 111.98/$. SAr 13.299/$ vs 13.193/$. $1.355/gbp vs $1.358/gbp.
0.796/aud vs 0.795/aud. CNY 6.614/$ vs 6.593/$.
Currencies
US$1.1899/eur vs1.1908/eur yesterday. Yen 112.11/$ vs.112.26/$. SAr 13.281/$ vs3.299/$. $1.353/gbp vs $1.355/gbp. 0.796/aud vs0.796/aud. CNY 6.621/$ vs 6.614/$.
Commodity News
Precious metals:
Gold US$1,292/oz vsUS$1,292/oz yesterday - Gold falls as dollar firms
• Gold prices fell this morning to near one-month lows hit last week as the US dollar firmed and concerns over the Korean peninsula eased
• US gold futures for December delivery slipped 0.2 per cent to $1,295.00/oz
• Market risk sentiment fell over the weekend, following a quiet period in North Korean news and the victory of Angela Merkel in the German federal elections.
• This combines with increasing market expectation for another U.S. rate rise by the year-end, supporting the dollar, which has strengthened against the trade partners’ currencies. Growing market sentiment is evident in CME Group’s FedWatch tool, which tracks interest rate odds, who identify a 71.4% probability of a policy raise to 1.25-1.5 in December.
• Sanctions aimed at achieving a peaceful resolution in North Korea have been extended to a U.S. travel ban. It is hoped the enormous economic and human burden of the sanctions will persuade Kim Jong-Un to end its nuclear programme.
• On the back of buoyant gold prices, rising 15 percent this year, Chinese mining executives announced an intensification in exploration and capital allocations in the ‘Belt and Road countries’, which account for 80 percent of global gold consumption. The ‘go global’ strategy initiated in 2005 is expected to bring further investment in overseas gold projects, with a platform to promote the internationalisation of the yuan.
Gold ETFs 69.0moz vsUS$69.0moz yesterday
Platinum US$933/oz vsUS$933/oz yesterday
Palladium US$924/oz vsUS$924/oz yesterday
Silver US$16.92/oz vsUS$16.92/oz yesterday
Base metals:
Copper US$ 6,460/t vsUS$6,460/t yesterday
• The copper futures price rally appeared to wane at the end of last week from the disappointing news of broad increase in treatment and refining charges for Chinese concentrate across the 10-member China Smelter Purchase Team (CSPT).
• A previously recognised balanced market is experiencing fewer mine supply interruptions, with LME stock levels also rising, resulting in a minimum level for treatment fees set at $95 per tonne and refining charges at 9.5 cents per pound on the back of the latest meeting on Thursday.
• Despite the hike in TC/RCs, base metal prices have grown during the Asian morning trading session from a large drawdown in stocks ahead of China’s weeklong National Day holiday, beginning 1st October.
Aluminium US$ 2,143/t vsUS$2,144/t yesterday
Nickel US$ 10,525/t vsUS$10,530/t yesterday -
• Broad caution in Chinese industrial metals, most evident in declining iron and steel output, caused base metal future prices to plunge on Friday.
• Despite LME nickel and zinc price recoveries, 1.3 percent and 2 percent respectively, investors are showing restraints on the outlook for the economy for China. ShFE nickel fell for the second day, dropping an additional 1.9 percent.
• Investors are showing disappointment in fixed-asset investment potential, with encouragement to cash-in profits from the recently rising metal markets.
Amur anticipates sizeable increase in nickel resource at Kun-Maine
• Drilling has identified a minimum 2,200m of new mineralisation, drill results are expected to materially increase the current resource which stands at 770,00t nickel and copper
Zinc US$ 3,088/t vsUS$3,072/t yesterday
Lead US$ 2,494/t vsUS$2,481/t yesterday
Tin US$ 20,570/t vsUS$20,540/t yesterday
Energy:
Oil US$56.8/bbl vsUS$56.8/bbl yesterday
Natural Gas US$2.961/mmbtu vsUS$2.960/mmbtu yesterday
Uranium US$19.75/lb vsUS$19.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$63.0/t vsUS$63.0/t
• Iron ore demand uncertainties continue to hamper prices, with all indices registering large losses last week; in particular 62% content in Qingdao exhibiting the worst performance since May 2016 by falling 12%.
• The metal has registered a loss for every week in September. Expectations of rising sea-borne supplies from increasing large-scale mines ramping up production, competition from growing scrap feedstock, and peak steel production ahead of winter environmental production cuts, has analysts expecting further price drops before stabilizing around $60 per tonne (ANZ senior economist, Daniel Gradwell).
Chinese steel rebar 25mm US$624.1/t vsUS$624.9/t
Thermal coal (1st year forward cif ARA) US$82.3/t vsUS$81.9/t
Premium hard coking coal Aus fob US$200.6/t vsUS$200.6/t
Other:
Tungsten APT European US$310-335/mtu vs US$310-335/mtu
Other:
Tungsten APT European US$300-315/mtu vs US$310-335/mtu a week earlier.
• Probably just a correction but it is the first decline since 30th June this year
Quarterly hard coking coal US$170.0/t vs
Company News
Amur Minerals* (LON:AMC) 7.91p, Mkt Cap £50.2m – IKEN/KUB drilling update and management estimates for potential resource expansion
• The exploration team is reported to have drill tested 2,200m of the 3,000km area between IKEN and KUB deposits.
• Nickel and copper mineralisation has been intersected along 1,900m or nearly 90% of the drilled area.
• The average intersection per hole amounted to 23.1m with average grades of 0.87% Ni and 0.24% Cu.
• Along the 1,900m area three zones (ISK-1, ISK-2 and ISK-3) returned nickel/copper bearing intersections with the fourth one comprising a 300m long barren fault block:
• ISK-1 is an expansion eastward of the IKEN deposit with completed drilling having extended limits of the mineralisation 500m along strike and 400m in the down dip direction to the northeast. Drilling in the area returned on average 31.8m at 0.98% Ni and 0.28%.
• The management estimates the area may potentially add 70-150kt in contained nickel to the latest mineral resource (IKEN 21.1mt at 0.69% Ni for 146kt Ni).
• ISK-2 lies right after the 300m long barren block with a continuous mineralised section identified 800m in length and 200-250m down dip.
• Driling returned intersections averaging 24.2m at 0.79% Ni and 0.21% Cu with mineralisation remaining open in both strike and down dip directions.
• In particular, one of the holes drilled 500m northward of the main main ISK-2 zone intersected 11.6m at 1.28% Ni.
• ISK-3 zone is the continuation of the KUB deposit in the IKEN deposit with mineralisation traced for 600m along strike and 200-300m down dip.
• Drilling returned average mineralised thicknesses of 19.1m at 0.79% Ni and 0.20% Cu.
• The management estimates the area may potentially add 60-120kt of contained nickel to the KUB resource (KUB 14.5mt at 0.77% Ni for 112kt Ni).
• This makes the 800m long area between ISK-2 and ISK-3 the only untested block in the 3,000km long IKEN/KUB link which the Company is planning to continue drilling with sufficient supplies on site but the plan being always subject subject to weather conditions.
Conclusion: New mineralisation intersected between IKEN and KUB is expected to expand the Kun Manie resources with management guidance for the mineral inventory to grow past 1,000kt in contained nickel excluding copper/Co/PGMs from current 770kt Ni. An opportunity remains to further increase the mineralised by testing down dip extensions at ISK-1 and ISK-2.
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Avocet Mining (LON:AVM) 23.75p Mkt Cap £5.0m – Creditor discussions continuing
• Avocet has announced that discussions with the major financial and trade creditors of its Inata mine (SMB) in Burkina Faso are continuing “with a view to reach agreement on a consensual restructuring of SMB’s balance sheet.”
• The board is to meet on 28th September to examine the status of the discussions and to assess “SMB’s liquidity position and the available options.”
• The company warns that “it is unclear whether agreement on a restructuring of the balance sheet can be reached before SMB has exhausted all available sources of financing.”
Conclusion: Avocet Mining has been working on a resolution with SMB’s creditors even after an agreed standstill expired in early September. It appears increasingly likely that a speedy resolution will be needed to allow the Inata mine to survive.
Bushveld Minerals (LON:BMN) 9.125p, mkt cap £73.5m – £8m convertible bonds issue
Target price 14p
• Bushveld Minerals reports that it has agreed to issue £8m of unsecured convertible bonds to Atlas Capital Markets and its New York based joint venture company, Atlas Special Opportunities Limited.
• The bonds, which have a 2 year maturity and carry a coupon of 7.5%, are to be issued in two tranches at 98% of the £25,000 face value.
• The first tranche of £4.5m was issued on 22nd September with the balance to be issued, at the Company’s discretion, within 40 days.
• The bonds are convertible at the average 5day VWAP of the shares assessed over the 10 working days prior to notice of conversion. In addition to the bonds, the company will issue 6.25m 3-year warrants with the first tranche and a further 4.86m (approximately) options in connection with the second tranche of bonds. The warrants are exercisable at any time and have a strike price of 14.4p.
• Commenting on the issue of the convertible bonds and the new relationship with Atlas Capital and Atlas Special Opportunities, CEO, Fortune Mojapelo, noted that they will “provide the required capital to enable the Company to continue to deliver on its strategy to build the world’s largest, lowest cost and most vertically integrated vanadium platform”.
Conclusion: Bushveld Minerals is expanding its Vametco vanadium operation from 3000tpa to 5000tpa and the additional finance should help to ensure that the expansion is not held back by financial constraints.
*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Karelian Diamonds (LON:KDR) 0.475 pence, Mkt Cap £2.8m – Indicator minerals suggest a nearby kimberlite
• Karelian Diamonds reports that kimberlite indicator minerals analysis of 22 samples taken in the Kuhmo area of Finland suggest that one of the samples were taken within “a couple of hundred metres of a kimberlite source”.
• The indicator minerals have been seen in the “down-ice” direction for two further samples and the indicator mineral anomaly has been closed off in an “up ice” direction giving the company confidence that it is close to the kimberlite source.
Conclusion: Indicator minerals sampling was used in the original Canadian discoveries in the Lac de Gras area – it is however an early stage exploration method and much additional work will be necessary to establish that any newly located kimberlite is both diamond- bearing and of sufficient size and grade to be potentially economic. We await further news as exploration proceeds.
Savannah Resources (LON:SAV) 5.625p, Mkt cap £31.6m – Resumption of drilling at Mina do Barroso
• Following the recent encouraging results, Savannah Resources has announced that it is resuming reverse-circulation drilling at the Mina do Barroso lithium project in Portugal .
• The initial focus of the renewed programme will be on the NOA deposit and on locating “potential extensions to the significant zones of mineralisation identified at Grandao and Reservatorio in recent drilling.”
• Mapping is also underway within the wider licence area to “define other lithium bearing pegmatites.”
• Savannah Resources has a 75% interest in the holder of the Mina do Barroso mining licence, Slipstream Resources Portugal Unipessol Lda.
Conclusion: Earlier this month, Savannah Resources reported a number of wide intersections grading over 1% Li2O from its earlier drilling at Mina do Barroso. At that time the company expressed its intention to resume drilling shortly and this is now underway. We await results with interest and to the initial JORC resource timetabled before the end of 2017.
Sunstone Metals* (ASX:STM) A$0.017, Mkt Cap A$15.1m – Bramaderos project shows significant gold intersections in Ecuador
(Sunstone Metals formerly called Avalon Minerals)
• Sunstone Metals reports significant intersections of gold in their first five Trenches in Ecuador covering an area of 100m x 100m.
• A further 15 trenches are planned within the 700m x 400m soil anomaly.
• Permits for drilling are expected by the year end.
• Sunstone is also looking to drill a gold-copper porphyry target at its Mramaderos Main and Limon target once permits are received.
o 22m at 4.8g/t Au (including 7m at 12.7g/t Au)
o 9m at 1.9g/t Au, and
o 12m at 1.6g/t Au.
• The project lies adjacent to the Pan American Highway
• The company is run by Malcolm Norris who was formerly ceo at SolGold.
• Norris moved to Sunstone Metals, formerly called Avalon Minerals to develop the Viscaria project in the north of Sweden in the town of Kiruna which is renown for producing the world’s best quality iron ore pellets.
• Sunstone’s attention appears to have turned away from the Viscaria project in favour of more grass roots exploration in Ecuador.
• The Bramaderos project lies on a 4,949Ha concession in the Loja province, Ecuador and is subject to an earn-in joint venture agreement with Cornerstone Capital Resources which is listed on the TSX-V. The concession was awarded to a subsidiary of Cornerstone on 5 January this year and then joint ventured with Sunstone on 10 April
• Historic drilling includes:
o 257m @ 0.6g/t gold and 0.14% copper in hole CURI-03 (inc 76m @ 0.9g/t Au and 0.2% Cu from 53m) at Bramaderos Ridge within the Bramaderos Main prospect.
• Significant results in historical trenching include:
o 42m @ 3.7g/t gold in Trench WZ-TR02 and 22m @ 4.7g/t gold at West Zone Breccia, with a peak gold value of 55g/t gold.
• The Bramaderos project is located near the town of Catacocha in Ecuador which lies close to the boarder with Peru. It is an 11 hour drive from the capital Quito so there is little chance of former colleagues running into each other.
Conclusion: It is interesting to see the project generator model working with Cornerstone continuing to find and to feed projects in Ecuador to development companies
Stellar Diamonds (LON:STEL) 3.175 pence, Mkt Cap £1.7m – Confirms environmental payment for Tongo
• Stellar Diamonds reports that it has paid US$150,240 to the Sierra Leone Environmental Agency for the Togo licence.
• The issue of the Environmental is a key prerequisite for the consideration of the Mining Licence approval by Sierra Leone’s Minister of Mines and Minerals Resources.
• In addition to the licencing matters, the company also announced that it has agreed with Octea Mining to extend the dates for completion of their agreement on tribute mining at the Tongo-Tonguma mine to 31st October.
Conclusion: The payment of the environmental licence fee should help to keep the project to develop Tongo-Tonguma on track. We await further news before the expiry of the 31st October deadline for discussions with Octea.