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SP Angel Marketing Report Including: Elemental Minerals and Gryphon Minerals Limited

Published: 05:44 20 Nov 2012 EST

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Morning View

Economics

Housing starts in the US surprised on the upside yesterday providing some cheer to the market.

The National Association of Home Builders index rose to 46 its highest level since May 2006  suggesting that the housing market in the US has turned a corner although a long way from the boom years.

Foreign Direct Investment in China is slowing - $8.3 bn down 0.2% year on year with FDI flows down 3.5% in the first 10 months of the year.

Commodities

Gold appears to be getting more traction with reports of hedge fund gurus Soros and Paulson increasing their holdings. Gold equities continue to lag the performance 

Politics

Could West African politics be growing up with Sierra Leone going through its third elections without incident – we still need to wait on the reaction to results in 10 days.

Mines & Money London 2012 -  4th & 5th December – well worth a visit for the speeches and presentations

https://www.minesandmoney.com/london/ 

Economic View

China – Foreign direct investments in the country dropped 0.2%yoy to US$8.31bn in  Oct on rising labour costs, an economic slowdown and territorial dispute with Japan.

This is the 11th fall in 12 months.

Inflows in the first 10 months of the year fell 3.5%yoy to US$91.7bn

France – Moody’s downgraded French sovereign credit rating by one notch to Aa1 from Aaa yesterday amid rising public debt that has surpassed 90% of GNP.

This follows a move by S&P in Jan this year when the rating was cut to AA+ from AAA.

Fiscal outlook remains “uncertain” with economy suffering from “multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labour, goods and services markets,” Moody’s said.

In addition, Moody’s put France on negative outlook over the next 12-18 months.

10 year bonds trade near this year low of 2.09% this morning.

The government’s 2013 budget projects an average cost of borrowing for 10 years bonds of 2.9% next year.

US – Existing home sales beat estimates and rose 2.1%mom to 4.79m units in Oct, up from revised 4.69m in Sep. Estimates were for 4.75m units.

Record low mortgage rates helped to spur activity in the sector.

Homebuilder confidence increased in Nov to a six-year high of 46, up form 41 in Oct.

The median price of an existing home advanced 11.1%yoy to US$178,000.

Inventories of existing houses fell 1.4%yoy to 2.14m properties, the lowest reading since Dec 2002. This equates to 5.4 months worth of sales at current pace, the least since Feb 2006.

US property market reports due today: 

o Housing starts may have totalled 840k (annual rate) in Oct, down from 872k in Sep, the highest reading since 2008.

o Building permits may have fell slightly to 864k (annual rate) in Oct, down from 890k in Sep, the strongest level since 2008. 

Eurogroup meeting – European finance ministers meeting today in Brussels are unlikely to make a final decision to release the next tranche of aid to Greece pending the “troika” reconciling all their differences.

Finance officials from Germany, France, Spain and Italy met yesterday in Paris to discuss the issue ahead of the meeting in Brussels today.

IMF is still seen resistant to accept a delay in Greece meeting its debt/GDP targets.

Japan – The Liberal Democratic Party that is expected to win at the next elections scheduled for Dec 6 will release its campaign platform tomorrow.

One of the points will include a revision of an independence status of the Bank of Japan. The party may offer to set an inflation target jointly with the bank and the government and allow the administration to dismiss the BoJ’s governor and deputies.

The BoJ left asset-purchase fund at 66tn yen, credit-lending programme at 25tn yen and key overnight rate at 0-0.1% during the meeting today.

Australia – Minutes of the latest Reserve Bank of Australia meeting showed members may consider further rate reductions to spur economic growth as a mining sector slow down

Sierra Leone – Polls have closed in Sierra Leone in its third general election with no incidents which would suggest that the country looks as if it is on a more stable footing.  If results expected in 10 days are accepted without challenges, this would de-risk country risk and would be good news for producers and projects in the country.

DRC/Rwanda – Congolese rebels thought to be backed by Rwanda are said to have entered Goma City in the DRC giving concerns about a resumption of a DR Congo war.

US$1.2776/eur vs 1.2770/eur yesterday. Yen 81.15/$ vs 81.34/$. SAr 8.867/$ vs 8.834/$. $1.590/gbp vs 1.591/gbp

Commodity News

Precious:

Gold US$1,733/oz vs US$1,723/oz yesterday – Prices steady ahead in anticipation of more clarity regarding fiscal cliff solution and a release of bailout funds to Greece.

Investment demand may decline in the short term on the Reserve Bank of India order to stop lending money out for purchase of gold, including primary metal, gold jewellery, gold coins and units in gold ETF and mutual funds.

Holdings in gold backed ETPs increased to a record for a third day yesterday. ETPs stood at 2,604.2t.

SPDR gold trust holdings dropped to 1,342t (43.153moz) value US$74.659bn from 1,343t (43.165moz) yesterday. 

Platinum US$1,579/oz vs US$1,567/oz yesterday

Palladium US$643/oz vs US$634/oz yesterday

Silver US$33.14/oz vs US$32.60/oz yesterday

Base metals:

Copper US$ 7,752/t vs US$7,690/t yesterday – Prices are little changed this morning as positive US house market data were balanced by a drop in FDI in China and a France’s downgrade.

Japanese copper wire and cable shipments fell 0.8%yoy to 60,000t in Oct on sluggish demand from the auto and electric machinery industries. (The Japanese Electrical Wire & Cable Makers’ Association)

Shipments to the auto sector fell 15%yoy on expiration of the state subsidy for fuel-efficient vehicles.

Shipments to the electric machinery industry declined 10%yoy.

Shipments were down 2.5%yoy at 57,688t in Sep.

Aluminium US$ 1,980/t vs US$1,956/t yesterday

Nickel US$ 16,442/t vs US$16,141/t yesterday

Zinc US$ 1,940/t vs US$1,939/t yesterday

Lead US$ 2,187/t vs US$2,175/t yesterday

Tin US$ 20,750/t vs US$20,500/t yesterday

Energy:

Oil US$111.2/bbl vs US$109.7/bbl yesterday

Natural Gas US$3.767/mmbtu vs US$3.825/mmbtu yesterday

Uranium US$41.25lb unch on last week

Other:

Coal – The Indian government may delay auction of 54 coal blocks with estimated reserves of 1.8bn tons on concerns auctioning may not attract expected valuations.

Current Indian regulations do not allow environmental clearance prior to allocation of coal assets. Without environmental clearance it is hard for an auction participant to value the asset and the government to set a reserve price.

Seeking environmental clearance from the Ministry of Forests and Environment may further delay the allocation. It is said 50 projects with a capacity to produce 70mtpa were delayed trying to secure such clearance.

The government is more sceptical about the effectiveness of the auction system following an unfortunate experience of the allocation of 2G spectrum for the telecommunications sector. During the auction government netted US$1.72bn against estimated US$7.26bn.

Company News

Elemental Minerals (ASX:ELM) – Fund Raise to progress the project

The company is looking to raise $12.7m to progress the potash project in the Republic of Congo.

Funds will be used for feasibility studies and surveys (25%), operational costs (28%) and exploration and drilling (19%).

The Sintoukola potash project is 90 km away from the deepwater port of Pointe Noire.

The Kola Mineral Resource at the project has Measured and Indicated sylvinite resources of 573 Mt with an average grade of 20.9% of K2 O (potassium oxide) which is equivalent to 33.1% KCI and a total of sylvinite and carnalite resource of 1.32 Bt at an average grade of 

15.7% K2O.

The upper seam has 330 Mt of sylvinite at 22.3% K2O and the lower seam 243 Mt at 19.1% K2O with an inferred resource of 47 Mt at 34.88% for HWS with drilling focussed on expanding the HWS.

The PFS base case for the project is for conventional mining focusing on the sylvinite and transporting product by a dedicated high volume road from Kola to the jetty site at Tchiboula and having processing facility at the coast.

The PFS shows brine disposal in the ocean with a gas line for project drying – power for the project is estimated at 24 MW at the mine and 32 MW at the coast.

There are a number of infrastructure elements that need to be put into place such to enable hauling from mine to plant, shipping from port to vessel and power and gas requirements – securing partners for this part of the project is thought to reduce costs by US$530m.

Conclusion: The infrastructure issues for this project need to be resolved with private projects such as Cominco with its Hinda Phosphate Project having the advantage of being close to coast with a deposit which is flat lying and close to surface giving the project lower operating costs and upfront capex to get into development. Phased development as being proposed by Cominco is also likely to be a pre-requisite to get these projects into development with the significant costs of a processing plant setting a high hurdle for a junior company in this industry. While the long term trend for fertilizer products remains positive, potash prices have been relatively flat over the last year at US$460-$470/tonne as the surge in demand from China and India in 2007 has eased.

Gryphon Minerals (ASX:GRY) -  Fund Raise for Banfora Gold Project in Burkina Faso

The company has raised A$31.3m to advance the Banfora Gold Project which is entering the DFS stage.

The DFS is for a 3.5 mtpa operation and is looking phased operation with a 2mtpa scaling up to 4 mtpa which would save capex of $100m.

The company has existing funds of $61m and is directing most of the funds towards project development with 40% for buying long lead items and 16% towards resource and reserve drilling.

The company are looking at a conventional CIL processing plant with metallurgical testwork on the various ores has provided good recoveries.

There is also an ongoing PFS to be released in Q1 2013 for a heap leach process which would target additional ounces to the planned CIL plant.

The resource estimate for the project is for 3.6 m oz (56.4 Mt at 2 g/t gold) for the main project with an 0.93m oz(49.2Mt at 0.6 g/t) for the potential heap leach operation.

The company is targeting production in the second  half of 2014.

Conclusion: Looks like another gold project in Burkina Faso moving up the ranks. The focus on cutting capex to get this project off the ground shows that getting funding remains tight and starting with a smaller operation and then scaling up is the way to go – also de-risking at the commissioning level. 

 

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