Amur Minerals* (LON:AMC) – 2015 results: permitted, well-funded for 2016 works and launching the DFS
Anglo Asian Mining* (LON:AAZ) – 18koz hedged at the US$1,200-1,426/oz range
Aston Bay Holdings (LON:BAY) – BHP funded field season starts at Storm copper project for Aston Bay
Hummingbird Resources (LON:HUM) – Expanding exploration exposure in Mali
Kenmare Resources (LON:KMR) – update on proposed capital raising and deleveraging
Ortac Resources* (LON:OTC) – Casa Mining updated scoping study
Rambler Metals (LON:RMM) – Third Quarter earnings
Dow Jones Industrials +1.57% at 17,410
Nikkei 225 +1.59% at 15,567
HK Hang Seng +1.31% at 20,436
Shanghai Composite +0.65% at 2,932
FTSE 350 Mining +2.33% at 9,983
AIM Basic Resources -1.23% at 1,914
Equities are picking up for a second trading session led by gains in the financial, energy and mining stocks.
• Brent is up more than 1% today hovering around US$49.1/bbl level as US inventories are reported to have dropped by 3.86mmbbl last week, according to the API report.
• US$ index is slightly off (-0.3%) with gold prices posting a modest increase (+US$6/oz).
• Base metals are largely range bound following the biggest daily increase in three months recorded yesterday.
• Metals soared 2.3% on Tuesday as markets stabilised on speculation for global easing policies following the Brexit vote.
Date Index Period Actual Expected (Bloomberg) Previous
Monday Markit Services PMI Jun 51.3 52.00 51.3
Markit Composite PMI Jun 51.2 50.9
Tuesday GDP (Terminal) Q1 1.1%qoq 1.0%qoq 0.8%qoq
Personal Consumption (Terminal) Q1 1.5%qoq 2.0%qoq 1.9%qoq
Core PCE (Terminal) Q1 2.0%qoq 2.1%qoq 2.1%qoq
SP/CS 20 City Apr 0.5%mom/5.4%yoy 0.6%mom/5.4%yoy 0.8%mom/5.5%yoy
Wednesday Personal Income May 0.3%mom 0.4%mom
Personal Spending May 0.4%mom 1.0%mom
PCE May 0.2%mom/1.0%yoy 0.3%mom/1.1%yoy
Core PCE May 0.2%mom/1.6%yoy 0.2%mom/1.6%yoy
Thursday Weekly Jobless Claims 267k 259k
Friday ISM Manufacturing PMI Jun 51.4 51.3
Wards Total Vehicles Sales Jun 17.3m 17.4m
China – Data on corporate bond defaults suggest the government is slowly moving towards a market based approach to regulation and reducing fiscal support to troubled firms.
• The number of Chinese bond defaults YTD tripled compared to the annual 2015 number (21 v 7 last year).
Venezuela – Oil production which is currently at the weakest since 2009 is forecast to further slide back as the nation falls behind on its payments to oil services companies.
• The number of oil drill rigs fell by 10 to 58, the lowest level in over a year, in May.
• The government is preparing to take over functions of oil services providers by setting up a new state owned firm Camimpeg under the control of the military.
• Given a lack of experience Camimpeg is expected to underperform with production unlikely to be able to hold at current levels.
Russia/Mongolia – Russia is selling its stakes in Mongolian copper and gold JVs to a unit of Trade & Development Bank of Mongolia, Bloomberg reports.
• The size of the deal was not official;y disclosed while people familiar with negotiations suggested the Mongolian bank is paying c.US$500m for 49% in Erdenet Mining Corp and Mongolrostcvetmet.
• JVs were set up by the former Soviet Union and Mongolia in the 1970s with Mongolrostcvetmet producing gold and iron ore while Erdenet focused on copper with around 530kt copper con produced annually.
UK Politics – we are wondering when David Miliband will return to save the Labour Party.
• Mr Miliband currently works for International Rescue in NY – pictures below for anyone who remembers the Thunderbirds TV series and still wears the Badge of International Rescue. Beam me up Scottie
More UK Politics – The SNP have applied to replace Labour as the official Commons opposition in a move that proves that reality can be stranger than fiction
• The reason is that there are currently more SNP MPs supporting their leader than in the Labour party
• The SNP have 54 MPs supporting Nicola Sturgeon while Labour only have 40 MPs supporting Mr Corbyn
• More than 20 MPs resigned from Labour’s shadow cabinet earlier this week in an attempt to force Mr Corbyn’s resignation
• Corbyn is generally seen as unelectable in the probable event of a near-term general election
US$1.1062/eur vs 1.1060/eur last week. Yen 102.54/$ vs 102.10/$. SAr 14.985/$ vs 15.276/$. $1.339/gbp vs $1.331/gbp.
0.743/aud vs 0.740/aud. CNY 6.647/$ vs 6.651/$.
Gold US$1,320/oz vs US$1,314/oz last week
Gold ETFs 62.4moz v 62.2moz last week
Platinum US$988/oz vs US$981/oz last week
Palladium US$574/oz vs US$553/oz last week
Silver US$18.24/oz vs US$17.65/oz last week
Copper US$ 4,791/t vs US$4,780/t last week
Aluminium US$ 1,621/t vs US$1,607/t last week– US Midwest aluminium premiums fells to the lowest in 8 months, Harbor reports.
• Premiums dropped to US$143-153/t from US$149-160/t on Monday.
Nickel US$ 9,275/t vs US$9,185/t last week
Zinc US$ 2,062/t vs US$2,040/t last week
Lead US$ 1,732/t vs US$1,721/t last week
Tin US$ 16,835/t vs US$16,870/t last week
Oil US$49.2/bbl vs US$48.2/bbl last week
Natural Gas US$2.878/mmbtu vs US$2.750/mmbtu last week
Uranium US$26.55/lb vs US$27.00/lb last week
Iron ore 62% Fe spot (cfr Tianjin) US$52.3/t vs US$52.2/t
Thermal coal (1st year forward cif ARA) US$53.5/t vs US$54.5/t last week
Tungsten - APT European prices stood unchanged at $200-220/mtu from last week
Amur Minerals* (LON:AMC) 3.8p, mKT cAP £19.3m – 2015 results: permitted, well-funded for 2016 works and launching the DFS
• Operations update: By far the most important achievement in the Company’s history was securing the Production License from the Ministry of natural Resources in May/15.
• 5,821m of infill and step out drilling have been completed through the 2015 field season with major focus on the Flangovy deposit and additional drillholes driven in the Maly Kurumkon area.
• Two step out holes in the Flangovy area extended the the mineralisation by 400m with the resource remaining eastward open.
• The Maly Kurumkon/Flangovy (MKF) drilling programme allowed the Company to expand the resource to 90.6mt containing 367kt Ni and 110kt Cu with c.75% hosted by the Indicated category.
• This compares to 52.9mt containing 294kt Ni and 85kt with c.40% in the Indicated category estimated before.
• Additionally, the Company traced a high grade (+0.75% Ni) extension over 1,700m which is expected to supply better grade material early in the project life.
• In Jun/15, an updated in-house PEA showed attractive economics of the development of a captive smelter for production of an intermediate Low Grade Matte for export to China, India and South Korea.
• Post 2015, the Company updated resources at Ikenskoye (IKEN) and Kubuk to account for a potential for open pit and underground operations.
• The latest resource stands at 164.8mt containing 740kt Ni and 213kt Cu, up from 121kt and 651kt Ni and 178kt Cu calculated before.
• In Aug/15, the Company signed an agreement with the sovereign Far East and Baikal Development Fund in providing assistance in finding financing in Russia, India and China.
• Outlook: The management targets a completion of the DFS by the end of 2017.
• Before that, Amur Minerals is planning to complete a 15,000 drilling programme this year with a primary focus on generating a large sample for met tests from the MKF deposit, the largest across the Kun Manie project, and further infill drill the area to expand the Indicated category and a potential reserve base.
• Financials: The Company remains debt free and well-funded for future exploration and appraisal works with US$9.6m in the bank and an outstanding £12.5m capital commitment from a private fund as of Dec/15.
• The Company incurred a $0.7m loss (2014: -US$1.4m) as higher admin costs reflecting a non-cash charge for options grant were compensated by financial gains on Lanstead equity swap facilities.
• FCF totalled -US$5.8m (2014: -US$2.7m) including -US$3.1m balance in cash flow from operations (2014: -US$2.0m) and -US$2.7m spent on exploration and additional equipment (2014: -US$0.7m).
*SP Angel act as Nomad and Broker to Amur Minerals
Anglo Asian Mining* (LON:AAZ) 16.4p, Mkt Cap £18.4m – 18koz hedged at the US$1,200-1,426/oz range
• The Company entered into a series of net zero cost options locking in a gold price range for 18koz of its sales for H2/16 at US$1,200-1,426/oz.
• Options expire in 1.5koz lots every two weeks with the last one maturing on 13 Dec/16.
• Should gold price remain within the range during the period, gold sales will be completed at spot.
Conclusion: The decision to hedge c.25% of annual production is a good strategic move to take advantage of a recent pick up in gold prices and taking into consideration the Company’s outstanding debt repayment schedule. A wide gold price range locked in by the hedge leaves a potential to capture an upside should the precious metal surge towards the US$1,426/oz level and protect from a possible correction in the gold market.
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Aston Bay Holdings (CVE:BAY) C$0.40c/s, Mkt cap $22m – BHP funded field season starts at Storm copper project for Aston Bay
(75% BHP Billiton, 25% Aston Bay after option exercise)
• Aston Bay Holdings have announced their joint venture field season at the Storm copper property in Nunavut Canada.
• Drilling and other activities are due to start in early July
• Aston Bay is currently the operator of the project with a C$4m budget for the current field season.
• Thomas Ullrich, ex chief geologist for Antofagasta in North America is coo of Aston Bay and is running the field program.
• The idea is to better understand the processes and controls which formed exceptionally high-grade copper mineralisation within this sedimentary hosted property in Canada.
• Copper appears to have replaced hydrocarbons within the sedimentary package at the Storm property creating what looks like Congolese style high-grade copper mineralisation.
• If the thesis proves correct then the Storm property could provide a new front for copper exploration for BHP and no doubt other majors.
• Aston Bay’s project is effectively referred to three times in the following document:
• BHP can earn a 75% interest in Storm by spending a minimum of C$40m on qualifying exploration expenditures over a period of up to nine years.
• Aston Bay is the operator for this upcoming field season but BHP can assume operatorship at any time.
• Previous results Include:
o 110m @ 2.45% Cu
o 56.3m @ 3.07% Cu
o 53.2m @ 1.34% Cu
o 51.3m @ 1.16% Cu
See http://astonbayholdings.com/storm-copper for more information on the Storm project.
Conclusion: If you want to follow BHP’s investment thesis you could do worse than buy into Aston Bay.
Hummingbird Resources (LON:HUM) 22.75 pence, Mkt Cap £ 75.6m – Expanding exploration exposure in Mali
• Hummingbird Resources has announced plans to amalgamate “certain of its non-core gold exploration permits in Mali” with Kola Gold’s permits in Mali and Senegal giving a portfolio of “10 highly prospective gold exploration properties” totalling over 1600 square kilometres in area within the prospective Kenieba Window of Mali and Senegal and the Yanfolila Gold Belt in Mali.
• The assets are to be held in a new vehicle, Cora Gold, in which Hummingbird will hold a 43% interest. The transaction is conditional, amongst other terms, on “Cora Gold raising at least US$4 million from third parties, due diligence and final documentation by 30 September 2016.”
• Hummingbird will retain buy-back and royalty rights over the four properties closest to its flagship Yanfolila gold project “which could add significant upside to Hummingbird’s +100,000 oz per year production commencing in 2017”.
• Placing the non-core exploration properties into Cora Gold should enable Hummingbird to concentrate on advancing its two main projects at Yanfolila in Mali and Dugbe in Liberia while retaining significant exposure to any exploration success achieved by Cora Gold.
Conclusion: The creation of Cora Gold provides an independently financed exploration focussed vehicle, working within two of the most promising gold exploration areas of west Africa. Hummingbird retains exposure to any new discoveries generated but liberates its management to focus on the key mine development at Yanfolila and to advancing the Dugbe project.
Kenmare Resources (LON:KMR) 0.75 pence, Mkt Cap £20.9m – update on proposed capital raising and deleveraging
• Kenmare Resources have updated details on how they plan to raise a minimum of $275m by way of new equity.
• The offer could also raise up to $368m through the addition of a proposed open offer.
• The State General Reserve Fund of the Sultanate of Oman is very kindly subscribing for $100m of equity investments through its ‘Sarl’ African subsidiary which is making the scale of this deal possible and gives the fund significant leverage to the fortunes of the company and to ilmenite prices
• The statement states that every $3 in cash will discharge $4 in debt through a lender underwriting where $200m will repay $269m in debt and accrued interest under the terms of the Amendment, Repayment and Equitisation Agreement leaving no more than $100m of residual group debt. – sounds like magic to us. Also sounds like the lenders are very keen to get their cash back.
• The company discloses that “Three major shareholders have indicated their indication to participate in the Firm Placing for at least US$115m in aggregate, incluging M&G which has indicated that it intends to retain its existing percentage interest of 19.97%.”
• “Certain Lenders will underwrite up to a maximum of US$40.8m of the capital raise by agreeing to equitise a matching amount of debt, in the event that cash proceeds are less than US$275 million.”
• Operationally, the company reports that improved power quality and reliability is being seen as a result of additional transmission capacity commissioned by the supplier, Electricidade de Mozambique, in December 20145.
• Production tonnages for heavy mineral concentrates are rising as a result of increased head grades. Ilmenite production is up by 17% to 145,500 tonnes during April/May and zircon volumes have risen by 49% to 11,600 tonnes.
• The company previously reported that “Chinese ilmenite production reduced by an estimated 500,000 tonnes in 2015, as iron ore production in China, of which ilmenite is a by-product, continued to decline through the year. Chinese ilmenite production has continued to reduce during 2016 as a structural oversupply in the iron ore industry persists.”
• The deal is unusual and very interesting and suggests to us that the debt holders see Kenmare’s debt position as unsustainable and are keen to get their cash back.
• We note the sterling exchange rate used in the announcement is now looking a little out of date.
Conclusion: Forecast returns for ilmenite miners at lower ilmenite prices indicate to us that cutting Kenmare’s debt may be the best way to ensure the longer-term future of the company and provide a return to investors and shareholders.
We congratulate the genius who put this deal together. Maybe you could come round and equitise my mortgage?
*An SP Angel analyst has previously visited Kenmare’s mineral sands mining operations at Moma in Mozambique
Ortac Resources* (LON:OTC) 0.03p, mkt cap £1.6m – Casa Mining updated scoping study
(Ortac holds CASA Mining, 25% of Andiamo and 20% in Zamsort on conversion)
CASA is a private, Mauritian registered company holding 71.25% of the Misisi Gold Project located in South Kivu, eastern DRC.
• Ortac Resources reports on progress at the Akyanga gold deposit in the DRC owned by its 12% associate, Casa Mining.
• CASA have received an updated study on the Stage 1 gravity process and have started a further study into the Stage 2 carbon-in-leach process.
• The total capital cost for Stage 1 is “currently expected to be circa $7.3 million with $15million estimated for stage 2”. Using mining contractors, operating costs are expected to be $12.14/t delivering gold at a unit cost of $628/oz.
• The Akyanga deposit currently has an inferred resource of 5.5mt at an average grade of 1.5g/t gold (272 koz) within the oxide zone, and is planning an infill drilling programme “over a portion of the Akyanga deposit where the first couple of years’ production is proposed to be mined, along with targeting known prospects where there is a higher possibility of adding additional resource”.
• Additional inferred resources within the transition zone, which we suspect may be metallurgical more complex, amount to 16.2mt at an average grade of 1.8g/t (927 koz).
• Ortac reports that the scoping study completed in 2014 by MDM Engineering projects in conjunction with SRK Consulting delivered an NPV, discounted at 8%, of US$171m and an an IRR of 35% using a gold price of US$1300/oz.
• Stage 1, gravity-only production of around 250,000tpa with recoveries of 40-50%
• Stage 2, 960,000tpa, including the CIP plant should recover >90% of contained gold. Stage 2 study work is expected to cost another $4m
• CASA is also looking at a plan for a reduced rate gravity-only circuit with a lower capital requirement of around US$5m.
• Some $30m has been spent on the project to date.
Conclusion: The company does not give a gold production forecast but if we assume 250,000tpa with potentially higher-grade ore at 2g/t and a 50% recovery then we could be looking at round 8,000oz pa worth some $10m in sales at around current gold prices. Upgrading the process plant should approximately double the gold output with payback within one-two years
*SP Angel acts as Nomad and broker to Ortac Resources
Rambler Metals (LON:RMM) 3.4 pence, Mkt Cap £14m – Third Quarter earnings
• Rambler Metals reports earnings for the third quarter, ending 30th April 2016, of C$1.63m bringing YTD losses to C$49,000.
• Quarterly revenues increased by approximately C$2.2m to C$10.5m (Q2 revenues C$8.3m) based on a 25% quarter-on-quarter increase in copper concentrate production to 4,530 tonnes as a result of improved head grades.
• Cash costs (net) for the quarter were C$1.90 (US$1.42) per pound of copper production. (Q2 C$2.48/lb or US$1.80/lb).
• Cash flows from operations for the quarter amounted to C$3.4m (Q2 C$1.8m)
• The company is working to increase its daily throughput to 1,250 tpd over the next year. The company is also continuing engineering studies on ore pre-cocentration using dense media separation and at shaft rehabilitation aimed at further increasing production to 2000 tpd.
• Rambler is maintaining its production target which envisages treating 235-250,000 tonnes of ore to produce 17-21,000 tonnes of mineral concentrate containing 4,500-6,000 tonnes of copper, 5,500-6,000 oz of gold and 42-57,000 oz of silver.