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Today's Market View - Anglo American, Amur Minerals Corporation, BlueJay Mining PLC, Kodal Minerals, Leading Edge Materials Corp, Orosur Mining Inc, Ormonde Mining plc, Shanta Gold Limited, SolGold plc, Trans-Siberian Gold

Today's Market View - Anglo American, Amur Minerals Corporation, BlueJay Mining PLC, Kodal Minerals, Leading Edge Materials Corp, Orosur Mining Inc, Ormonde Mining plc, Shanta Gold Limited, SolGold plc, Trans-Siberian Gold

Amur Minerals* (LON:AMC) – 2016 annual results and IKEN and KUB drilling programme progress

Anglo American (LON:AAL) – Latest De Beers diamond sales.

Bluejay Mining* (LON:JAY) – BUY Target Price 22p – ElectroMagnetic work programme to move to Disko down south

Kodal Minerals* (LON:KOD) – Lithium-bearing drill intersections from Ngoulana

Leading Edge Materials (CVE:LEM) – to follow up drilling at Bergby lithium in Sweden

Ormonde Mining* (LON:ORM) – 2016 results and Barruecopardo update

Orosur Mining (LON:OMI) – 2016 production meets guidance estimates

Trans-Siberian Gold (LON:TSG) – $15m debt refinancing

Shanta Gold (LON:SHG) – BUY – Debt restructuring and $14m equity raise to convertibles buyback, fund working capital, exploration and integration of the proposed Helio Resources acquisition

SolGold (LON:SOLG) – BUY – Scott Caldwell resigns as a NED at SolGold

 

Day of Rage – Left wing campaigners planning a ‘Day of Rage’ in London tomorrow

• Jeremy Corbyn has refused to condemn tomorrow’s planned ‘day of rage’ which is interestingly timed to coincide with the state opening of parliament.

• The organisers have urged victims of the Grenfell fire to join in the ‘day of rage’ and ‘shut down London’.

• Corbyn has suggested that displaced council tenants from the Grenfell fire should be rehoused in luxury empty properties which should be requisitioned by government.

• Militant union leaders are said to be plotting a ‘summer of discontent’ and ‘Red October’ for an October revolution.

• Left wing activists appear to be politicising the Grenfell fire disaster in an attempt to overturn the conservative government.

• We hope councils are able to replace tower-block cladding and install fail-safe fire safety measures as a matter of great urgency

• We recommend visitors avoid central London tomorrow.

 

South Africa – Fitch warns new BEE regulations will deter investment in South Africa

• OilPrice.com describe South Africa as “The Worst Mining Nation on The Planet?”

• S&P Global Market intelligence show South African productivity as close to the worst in the world

• South Africa ranks fourth from the bottom in productivity terms measured as tonnes of ore mined per man hour, ranking above Indonesia, Guatemala and China.

• The ranking is a little unfair due to South Africa’s focus on underground mining.

• The US and Brazil top the list for productivity mainly because of their focus on open pit mines.

• If one focussed solely on open pit mining then South Africa would rank around 9th best out of 30 mining countries surveyed on 2016 data.

• The latest BEE proposal, which demands a rise to 30% BEE participation from the relatively new Minister of Mines could shrink South Africa’s mining industry yet further.

• The proposal is being challenged in the South African courts by the Chamber of Mines due to the lack of consultation with the industry.

• Fitch Ratings agency asserted on Monday that new regulations seeking to accelerate black ownership in South Africa's mining industry would deter investment.

• "Uncertainty about final outcomes, the implications on returns for existing shareholders of the new provisions, and the challenges of meeting procurement targets will continue to constrain investment in the mining sector" said Fitch.

 

Battery technology - Researchers at the Massachusetts Institute of Technology (MIT) have developed a safer, more efficient underwater battery using aluminium.

• MIT developed aluminium anode battery for use in unpiloted underwater vehicles (UUV) is intended as a replacement for lithium-ion batteries.

• The aluminium-based batteries which are considered significantly safer than the lithium-ion batteries are expected to increase the range of most UUVs by ten times.

• The battery consists of an aluminium-alloy anode, a nickel-alloy cathode, and an alkaline electrolyte between the electrodes.

• It only works when seawater is introduced into the system.

• Seawater is pulled into the battery and is split into hydroxide anions and hydrogen gas. The hydroxide anions react with the aluminium anode, forming aluminium hydroxide and sheds electrons in the process.

• These electrons travel back to the cathode, delivering energy, while the aluminium hydroxide and hydrogen gas are harmlessly released back into the water.

 

Dow Jones Industrials  +0.68% at   21,529

Nikkei 225   +0.81% at   20,230

HK Hang Seng   -0.31% at   25,843

Shanghai Composite    -0.14% at    3,140

FTSE 350 Mining   -0.48% at   14,439

AIM Basic Resources   -0.02% at    2,574

 

Economic News

Currencies

US$1.1154/eur vs 1.1188/eur yesterday.   Yen 111.61/$ vs 111.21/$.   SAr 13.015/$ vs 12.790/$.   $1.269/gbp vs $1.278/gbp.

0.762/aud vs 0.761/aud.   CNY 6.828/$ vs 6.815/$.

 

Commodity News

Precious metals:

Gold US$1,247/oz vs US$1,251/oz yesterday

   Gold ETFs 60.2moz vs US$60.2moz yesterday

Platinum US$929/oz vs US$927/oz yesterday

Palladium US$868/oz vs US$870/oz yesterday

Silver US$16.61/oz vs US$16.63/oz yesterday

           

Base metals:   

Copper US$ 5,711/t vs US$5,685/t yesterday – Bloomsbury Minerals I’s copper outlook shows global copper production, supported by low operating costs and markets, is forecast to increase by an average yearly rate of 4.1% between 2017 and 2021, as many major projects come on line.

• According to BMI “In terms of volume, we expect global copper output to climb from 20mt in 2017 to 23.7mt by 2021,”

• BMI note that a few developments pose serious risks to the production outlook for 2017, namely labour unrest in Latin America and Freeport McMoRan's negotiations with the Indonesian government to resume copper exports from the Grasberg mine, which could result in lower-than-expected production.

Aluminium US$ 1,900/t vs US$1,883/t yesterday - The President of the Aluminium Association of Canada, Jean Simard said the Canadian aluminium industry is looking at ways to ensure that aluminium exports to the US are not affected by instability in their trade relationship.  Canada exports 75% of its aluminium production to the US.

• Referring to negotiations around the Canada/EU Comprehensive Economic and Trade Agreement (CETA) aimed at boosting Canada’s trade with the EU Simard said that they are  strategically positioned for the future to carve out new markets for Canadian aluminium.”  Simard also commented ‘It’s a myth that the U.S. received major imports of Chinese-produced aluminium’.

Nickel US$ 9,055/t vs US$8,975/t yesterday – 13 Indonesian nickel smelters suspend operations as nickel prices fall (Reuters)

• The move may cut annualized capacity of up to 750,000t of nickel pig iron out of the market

• Another 12 smelters are reported to be in operation but are suffering heavy losses.

• It sounds as if the smelters break-even at around $9,000/t

Zinc US$ 2,575/t vs US$2,538/t yesterday

Lead US$ 2,141/t vs US$2,138/t yesterday

Tin US$ 19,585/t vs US$19,640/t yesterday – China and the world’s largest tin producer, Yunnan Tin Co. has been given government approval to process tin concentrates for export.  The move should allow Yunnan to avoid the 17% tin metal export tax which was has been in place since 2008.

           

Energy:           

Oil US$47.0/bbl vs US$47.2/bbl yesterday

Natural Gas US$2.904/mmbtu vs US$2.954/mmbtu yesterday

Uranium US$20.00/lb vs US$20.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$56.2/t vs US$55.3/t – Iron ore prices may pick up as more than half nickel pig iron smelters stop in Indonesia due to low nickel prices

Chinese steel rebar 25mm US$571.3/t vs US$571.7/t

Thermal coal (1st year forward cif ARA) US$69.7/t vs US$68.6/t yesterday

Premium hard coking coal Aus fob US$141.2/t vs US$141.9/t

 

Other:

Tungsten APT European US$220-226/mtu vs US$220-226/mtu

 

Company News

Amur Minerals* (LON:AMC) 6.1p, Mkt Cap £37m– 2016 annual results

• 2016 highlights include:

• A record 19,785m of drilling has been completed in 2016 taking the total number of drilled metres over the project area to 58,084m.

• Exploration focused on the Maly Kurumkon/Flangovy (MKF) deposit of the Kun Manie project which in turn translated into an updated mineral resource statement (Feb/17) of 101.3mt at 0.76% Ni, 0.20% Cu, 0.02% Co and 0.35g/t PGMs for 770kt nickel, 207kt copper, 15kt cobalt and 35t PGMs (0.4% COG).

• At Feb/17 spot commodity prices, new resource is estimated to host 1,045kt of nickel metal equivalent at an average grade of 1.03% NiEq.

• This marks a 46% increase in ore tonnage terms and a 40%/47% growth in nickel/copper contained from the previous mineral resource statement adjusted for 0.4% Ni cut off grade.

• Importantly, the higher confidence M&I category of the resource, a source for potential mineral reserves to form the basis of the mining plan, account for c.80% of the total mineral inventory.

• In Dec/16, RPM consultants completed a mining trade-off study confirming management considerations that the MKF mine development should involve a combination of open pit and underground operations; the Company added that “similar results could be derived at IKEN and KUB”.

• The study was based on an older much smaller MKF resource, but showed a considerable improvement of the Jan/16 PEA with projected mineable nickel/copper tonnages of 332kt/84kt, an increase of 38%/20%, respectively; the improvement is attributed to a larger share of higher grade material sourced from underground operations.

• A potential to improve on the trade-off study are believed to be present accounting for a larger MKF resource base and lower local operating unit costs versus West Australia mining costs benchmarks used in the study.

• On metallurgical studies in 2016, SGS completed a set of bench scale test work on samples from KUB and Flangovy (part of the MKF deposit) showing::

o Metallurgical recoveries improve with grades;

o Recoveries generally decrease from west to east and vary by deposit due to an unrecoverable nickel content (nickel silica);

o Recoveries were estimated to vary from 61-83% for nickel, 77-91% for copper and 50-65% for by-product cobalt, platinum and palladium.

o Post SGS studies, the Company completed the first large scale test on the MKF ores using Gipronickel Institute which showed:

 Recoveries were expected at 81% for nickel, 84% for copper, 61% for cobalt, 60% for platinum, 82% for palladium, 64% for gold and 71% for silver.

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 Finally, the Company collected a 7.4t bulk metallurgical sample at the MKF that should be used to determine the final flow sheet design and engineering of the process plant.

 On access road, an arguably one the major infrastructure components of the project, three access routes have been shortlisted for a proposed 320km long road link between Kun Manie and the Ulak rail station located on the BAM railway.

 A single and most optimised route for a c.$160m road construction project has been selected with design optimisation works now in progress as a 4km wide corridor along the road access being topographically and hydrologically mapped.

 The management has previously targeted Kun Manie DFS completion in Q1/18 (January) with an estimated budget of £13.3m; although, the Company highlighted that “a substantial and rapid devaluation of the pound against the US$ (post the Brexit vote) reducing the cash available to the programme by 20%” and the decision by shareholders “to discontinue the final two Crede tranches totalling £5.0m” resulted in a “shortfall of c.£7.8m for completion of the DFS”.

 In response to these developments, the Company is optimising its cost base sourcing more services locally while undertaking “substantial portions of the DFS work internally under the direction of independent qualified organisations that are part of the DFS compilation plan”.

 Financial results:

 Admin costs came in at $3.8m (2015: $4.1m).

 Net earnings totalled -$5.8m (2015: -$.7m) attributing to aforementioned admin expenses and losses attributed to changes in fair value of issued warrants to Crede CG III Ltd (-$2.0m).

 PPE capex and exploration spend amounted to $5.8m (2015: $2.8m).

 Two tranches from Crede for £2.5m each during the year netted $6.6m in cash inflows post issue costs; first tranche was completed in late 2015 while the remaining two of the five tranches programme were voted down by shareholders in 2016.

 Crede exercised 14.5m worth of warrants in Apr/17, but remain holders of c.48m of outstanding warrants.

 The Company remained debt free with closing cash balances of $8.2m (2015: $9.6m) as at Dec/16.

Conclusion: Successful exploration programme in 2016 has considerably expanded the resource base while laid the foundation for DFS works with c.80% of the mineral inventory now defined in the M&I category. The Company continued to advance the Kun Manie project on multiple fronts including metallurgical studies, infrastructure solutions and close interaction with consultants regarding optimal production flow sheet and economics of operations. The Company remains well funded for its 2017 field season, although, the highlighted DFS funding shortfall is likely to see changes to the timing of the study completion. The management is planning to complete 15,000m of drilling at KUB and IKEN in 2017 that aiming to expand the available resource, convert some of Inferred tons into the M&I category as well as collect bulk metallurgical samples from two deposits.

*SP Angel act as Nomad and broker to Amur Minerals

 

Amur Minerals* (LON:AMC) 6.1p, Mkt Cap £37m– IKEN and KUB drilling programme progress

• The Company released an update on the progress of the 2017 field season with four weeks of drilling completed through mid-June.

• 5,904m of drilling in 32 holes has been completed so far using too in-house owned rigs with works focused on two deposits – Ikenskoye (IKEN) and Kubuk (KUB).

• This accounts for roughly 30% of the planned 20,000m 2017 programme.

• 2,805m was drilled at IKEN with nearly 2,000m targeted at resource expansion testing a 2.5km long undrilled link between IKEN and KUB.

• IKEN currently has most of its resources in the Measured and Indicated category (16.4mt) compared to 4.7mt in Inferred.

• 3,099m was drilled at KUB where around 1,000m were dedicated to infill drilling to convert Inferred Mineral Resources (10.9mt) into Measured and Indicated (3.6mt) with the remainder accounting for a combination of resource expansion and delineation of the mineralisation limits for mine planning purposes.

• Preliminary assay results from the RFA gun from 25 of the 32 completed holes are due on 23 Jun/17.

• The first batch of samples to be assayed for nickel/copper/cobalt/platinum/palladium have also been shipped to Alex Stewart Laboratories with results expected in about 6-10 weeks

Conclusion: RFA units assay results proved to be relatively accurate early indicators of intersections’ widths and grades ahead of the ALS verified numbers. The Company is planning to release first set of results as early as this Friday and is looking to provide weekly updates starting from IKEN and then to KUB.

*SP Angel act as Nomad and broker to Amur Minerals

 

Anglo American (LON:AAL) 985 pence, Mkt Cap £12.7bn – Latest De Beers diamond sales.

• Anglo American reports that De Beers achieved sales of US$530m for its 5th diamond sale of 2017.

• The value of sales is approximately 1.5% higher than the $522m achieved during the fourth sale of the year and 6% below the $564m during the 5th sale in 2016.

• The company commented that it was seeing “continued good demand for De Beers rough diamonds”.

 

Bluejay Mining* (LON:JAY) 14p, Mkt Cap £107m – ElectroMagnetic work programme to move to Disko down south

BUY Target Price 22p

• BlueJay Mining report further details of their work programmes for the Pituffik titanium mineral sands project and the Disko massive sulphide project.

• The team will move south once fieldwork at Pituffik is done to work on the Disco project which is located on the south coast of Greenland.

• Some $75m has been spend on and around the project to date by Falconbridge, Cominco, Visamand and Avannaa Exploration

• BlueJay have complied all available historical data for Disko to aid their understanding of the project and will now conduct a high-powered, ground based, ElectroMagnetic survey for the purposes of identifying optimum drill site locations for the possibility of drilling during 2018.

• Global warming has made projects more easily accessible in Greenland while a lack of soil and vegetation makes surface exploration much easier than for many other locations.

• The company remind us that a massive 28t boulder grading 7% nickel, 3% copper and 2ppm PGMs was found at the site.  This boulder now sits in the foyer of the Danish Geological Museum.

• The boulder reminds us of the former exceptional high-grade Outokumpu mine in Finland.

• Disko contains a significant responsive anomaly which is 5.9km x 1.1km with similar scale to the Norilsk-Talnakh project, currently the largest nickel-copper palladium deposit in the world.

Conclusion:  There is significant opportunity to discover where this boulder has come from as such highly mineralised orebodies should carry a strong electromagnetic signature.  While the challenge has defeated other larger miners, Rod McIllree and the BlueJay team are determined to use the technology of today to find the projects of tomorrow.

*SP Angel act as nomad and broker to Bluejay Mining

 

Kodal Minerals* (LON:KOD) 0.26p, Mkt Cap £16.4m – Lithium-bearing drill intersections from Ngoulana

• Kodal Minerals reports that it has intersected additional high grade lithium mineralisation in its, now completed, drilling programme of 33 reverse-circulation (4802m) and 5 diamond-drill holes (361.2m) at Ngoulana within its Bougouni project area in southern Mali.

• Among the results highlighted in today’s announcement are:-

o 28m at an average grade of 1.96% Li2O from a depth of 178m in borehole KLRC043 and

o 24m at an average grade of 1.73% Li2O from a depth of 37m in borehole KLRC038 and

o 17m at an average grade of 1.58% Li2O from a depth of 187m in borehole KLRC031 and

o 16m at an average grade of 1.82% Li2O from a depth of 156m in borehole KLRC045

o In today’s announcement, the company reports a  total of 26 individual intersections grading over 1% lithium oxide and some holes contain multiple mineralised intersections.

o The lithium mineralisation at Bougouni is contained within pegmatite veins containing the lithium mineral, spodumene, which, we understand, is a more easily treated mineral form than, for example, lithium mica or lithium bearing clay.

o CEO, Bernard Aylward, commenting on the results of the drilling noted that “high grade and consistent mineralisation of the Ngoulana pegmatite that currently remains open along strike and at depth. … Furthermore, the multiple parallel and subsidiary veins are also demonstrating continuity of strike that will add to the potential for mining.”

Conclusion: Kodal’s drilling programme at Bougouni has delivered a number of high grade lithium oxide intersections, from the Ngoulana, Sogola Baoule and Orchard prospects. The core recovered from the programme is providing samples for metallurgical testing and for the provision of geotechnical information. The company is well funded with the support of Suay Chin and we look forward to further news as the project progresses.

*SP Angel acts as Financial Advisor and Broker to the company.  Robert Wooldridge, a partner at SP Angel is Chairman of Kodal Minerals.

 

Leading Edge Materials (CVE:LEM) C$0.79, Mkt cap C$69.5m – to follow up drilling at Bergby lithium in Sweden

• Leading Edge Material’s, ceo, Blair Way, says the company will immediately launch a follow-up drilling campaign at its Bergby lithium project, in Sweden.

• Announcement was made shortly after its most recent drill campaign returned “strongly positive” intersections of two new near-surface targets that exceed 16 m in thickness at greater than 1% lithium oxide.

• “The high hit rate of high grade lithium so near surface over a 600 m strike is impressive, and sets us up for an immediate follow up drilling programme” said Blair Way.

• Preparations are now underway for an expanded second drill programme which will test the along strike and down dip extension of lithium mineralisation and will be started in third quarter.

 

Ormonde Mining* (LON:ORM) 1.7p, Mkt Cap £7.9m – 2016 results and Barruecopardo update

• Ormonde Mining reports a loss of €2.41m for the calendar year 2016. The results include a €2m impairment on the value attributed to the La Zarza project in southern Spain which is being considered for divestment.

• As previously announced, Ormonde Mining is accelerating the development of its flagship, Barruecopardo tungsten project on a revised schedule which is aiming for commissioning during Q3 2018.

• Supported by the Regional Legislative Assembly in Castilla y Leon, key land acquisition tasks have been completed “resulting in access to and use of all lands required to enable the development of the Barruecopardo Tungsten Project”.

• Engineering and equipment contracts have been progressed and “All main, longer lead time, processing plant has been identified and sized and contracts let for manufacture. Procurement of most of the secondary items of plant is similarly well advanced”.

• A construction management contract has been awarded to Fairport Engineering, “the company expediting the plant design and procurement”.

• Ormonde Mining also reports that it has completed a short, 5 hole programme of exploration drilling around the northern and central part of the planned open-pit mine to confirm the extension of tungsten mineralisation at depth beneath the central part of the planned open pit. “The results of this initial drilling programme were most encouraging, lending support to the concept of a future Stage 2 underground mine at the project.”

• Company Chairman, Mike Donoghue, commented “We very much look forward to the coming year, as the Barruecopardo Project is developed to become an essential secure new producer of tungsten concentrates to a market in much need of new sources of primary supply”.

• Commenting in more detail on the market for tungsten concentrates, the company highlights to closure, in 2015, of the western world’s largest tungsten mine at Cantung and “a number of the larger tungsten mines were clearly struggling with limited reserves, technical issues and profitability.”

• The company goes on to observe that “What is clear is that tungsten concentrates are in tight supply and are likely to become tighter as global economic activity increases and no new tungsten mines are developed.”

Conclusion: The next twelve months will see work on the Barruecopardo project accelerate as the company aims to commission its tungsten mine by Q3 2018 in order to capture what it believes will be an improvement in tungsten concentrate prices to meet a supply shortage following problems and closures in western mines and a crackdown on illicit mining operations in China.

*SP Angel acts as Broker to Ormonde Mining

 

Orosur Mining (LON:OMI) 13.9 pence, Mkt Cap £14m – 2016 production meets guidance estimates

• The company reports that production of 35,371 oz of gold from its San Gregorio mine in Uruguay was in line with the guidance range of 35-40,000oz. “Operating cash cost guidance of US$800-900/oz expected to be confirmed when full year 2017 results are announced in mid-August.”

• Orosur is also planning a 15-30,000m drilling campaign during 2017 to assess and deliver a maiden resource estimate for its APTA (Aragon-Pastorera Trend Area)  project in Colombia. “Timing and scope of the drilling programme will be driven by a combination of exploration results, funding requirements of the Company and prevailing equity and gold market conditions.”

• CEO, Ignaciao Salazar commented “While our emphasis on cost management, operational excellence and delivery remains an overriding priority for us, we expect our focus on growth to deliver further results this next fiscal year initially centred on resource definition in Colombia, tapping the potential of the 100km greenstone belt controlled by OMI in Uruguay and advancing Anillo in Chile.”

Conclusion: Orosur is building on its established operation in Uruguay to expand into Colombia and Chile. We look forward to further news of the planned Colombian drilling programme in the future.

 

Trans-Siberian Gold (LON:TSG) 41. pence, Mkt Cap £45.7m – $15m debt refinancing

• Trans-Siberian Gold has announced that its wholly owned subsidiary, ZAO Trevozhnoye Zarevo ("TZ") has secured a five-year $15m debt facility with VTB Bank.

• The “new facility will be used to facilitate the repayment of TZ's existing two loan facilities, currently amounting to $14.8 million, and provide additional funds for working capital and other corporate purposes”.

• Interest rate amounts to 6.2%pa and repayments are repayable in equal quarterly amounts starting seven quarters from the initial drawdown of the facility.

• The CEO of Trans Siberian Gold, Dmitry Khilov, welcoming the improved terms on the debt commented that “I am grateful for the hard work of our finance team who have successfully negotiated improved terms which reduces our cost of borrowing. We maintain a low level of gearing and look forward to working with VTB Bank".

 

Shanta Gold (LON:SHG) 6.8p, Mkt Cap £39m – Debt restructuring and $14m equity raise to convertibles buyback, fund working capital, exploration and integration of the proposed Helio Resources acquisition

BUY

Investec issued a credit approved commitment letter to see Shanta replacing the current $40m facility ($35.3 currently outstanding) with a new $50m facility.

• The Company is planning to repurchase Apr/19 convertible notes at par with an indicative support for the buyback received from 77% of noteholders.

• The buyback is subject to the approval of 75% of the nominal value of the notes with the Company reporting to have received indications from more than 75% of the nominal value of outstanding notes.

• New Investec facility will carry a Libor+5.9% interest (v Libor+4.9% on the $40m facility), extend the final repayment date to 31Dec/20 (v H1/20 for the $40m facility) and offer a holiday repayment period to 31Mar/18.

• The facility involves a requirement to hedge 50% of forecast production for the next 18 months and a number of financial covenants including DSCR>1.10x, loan life cover ratio>1.2x, minimum cash balance of $5m and a minimum reserve tail ratio of 30%.

• The Company proposed a $14m equity raise with the “price at which the Placing Shares are to be placed will be decided at the close of the Bookbuild Process”.

• The management highlights “the Fundraising will provide funds for growth allowing Shanta to deliver the Revised Mine Plan, integrate Helio’s assets into the New Luika Gold Mine mine plan and to seek out and firm up high grade opportunities in the surrounding area… it would also enable the continued exploration at Singida”.

• A number of directors agreed to enter into a salary sacrifice arrangement for 12 months that should provide an aggregate cash saving of $450,000 over the course of the 12 month period.

• Finally, Shanta is proposing to acquire 100% of outstanding Helio Resources shares in exchange for 59.5m Shanta shares valuing next door SMP gold assets at c.$5.6m (at 7.4p/sh and USGBP 1.275).

• The Saza-Makongolosi gold exploration and development project is only 20km away from the NLGM processing facilities.

• The latest NI43-101 compliant resource estimates (as of Feb/15) the SMP to host 635koz at an average grade of 2.4g/t with around 93% of that contained in the Indicated category.

• An open pit indicated gold resource stands at 332koz at 1.8g/t and inferred resource of 17koz at 1.6g/t.

• An underground indicated gold resource of 258koz at 4.9g/t and inferred resource of 27koz at 3.8g/t.

• The acquisition is expected to increase Shanta’s gold resources (ex reserves) by 77% from 824koz at 1.9g/t to 1,459 at 2.1g/t.

• The transaction is subject to an agreement of at least two-thirds of the votes cast by the shareholders of Helio with an aggregate of around 39.3% of the outstanding common shares supporting the deal to date.

• Directors of Helio have unanimously supported the deal and recommended its shareholders to vote in favour.

• Shanta expects the transaction to close in late August.

Conclusion: We see proposed acquisition of Helio Resources as value accretive given a relatively low price paid per ounce of resource and given their close proximity to available NLGM processing facilities. At $5.6m valuation, the acquisition price amounts to $9.5/MI resource and $8.8/Total resource; although, resources estimated gold price of $1,400/oz looks somewhat high and a revision in the assumption is likely to translate into a lower mineral resource, we note that there is a potential to expand the available mineral inventory as a number of mineralisation targets reported remain open at depth and along strike.

Support provided by Investec bankers would see the Company retiring an expensive convertible debt (13.5% interest v Libor+5.9%) and coupled with a debt repayment holiday to Q1/18 would allow the Company to go through the capital intensive period of the underground mine development.

Equity raise will provide the Company more headroom with regards to ongoing exploration spend and integration of Helio Resources assets into the NLGM mine plan.

The Company has previously highlighted that amid delays in outstanding VAT refunds from the government which stood at $12.5m  as of April, the management decided to postpone most of expenses related to Singida and exploration. With the backing of shareholders and bankers, the Company should have more headroom in terms of future capital budgets.

 

SolGold (LON:SOLG) 40p, Mkt Cap £573m – Scott Caldwell resigns as a NED at SolGold

BUY

• SolGold have announced the resignation of Scott Caldwell as an NED at SolGold.

• Caldwell was the director nominated by Maxit Capital which put funds into the company last year.

• We have no idea why Caldwell has resigned but wonder if Maxit may have a potential conflict of interest.

• Conflicts of interest may or may not, on occasion, indicate potential for takeover or some over corporate event.

• SolGold announced on Friday the placement of $41m worth of new shares at 41p/s, a significant premium to the price this morning.

• Newcrest are putting another $40m into the company with a further $1.23m of shares placed with Ecuadorian investors.

• Newcrest first put $23m into SolGold at 16p/s on 17 October 2016 to fund further drilling on the Cascabel project.

• To date, Solgold has identified 15 individual targets within a 1.3km long mineralised corridor up to 700m wide within the Cascabel project area, of which it has drilled a total of over 36,000m on 3 of the targets. “an increased understanding of the deposit is now leading to much larger step-outs in drilling”.

• Following the investments by Newcrest and Guyana Goldfields Solgold is also stepping up its drilling activity with a target of drilling 90,000m per year from early 2018. A fourth drilling rig is currently being mobilised and with a further 3 rigs expected to become operational over the next 2 quarters  drill testing is expected to be underway at the Alpala East, Alpala West, Trivinio and Aguinaga by mid year and with eight rigs expected to be working by the end of the year, Solgold will also be drilling on the large Tandayama-America prospect, located further to the north.

• SolGold is suggesting that, while “the bounds of the greater Alpala system … remain untested”  the company “now believes that several targets clustered within the Alpala area may coalesce.” Based on these comments, it is clear that SolGold is coming to the view that they are investigating a larger mineralised system than had been apparent at earlier stages in the exploration programme.

Conclusion:  It is increasingly likely that one or more of the world’s major copper miners will position themselves to acquire a major stake or all of SolGold or the Cascabel project.

We can see a definitive shortage of new larger-scale copper projects to replace the world’s major copper mines as they draw towards the natural end of their economic resources. 

*SP Angel acts as broker to SolGold

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