SP Angel's Morning View: Metals Mixed As Chinese PMI Misses Estimates

SP Angel – Morning View – Monday 03 09 18

Metals mixed as Chinese PMI misses estimates

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SP Angel analysts consider the Social and Environmental impact of the mines and projects they work with.

Well considered projects with good ethical consideration often lead to lower risk and higher returns which is good for investors as well as the local environment while poor social and environmental consideration can lead to problems which interrupt projects leading to reduced returns for investors.

Bluejay Mining* (JAY LN) STRONG BUY – Target Price 45p – Drilling at Iterlak shows significant grade and resource potential

Bellzone Mining (BZM LN) – Kalia mining convention in Guinea

IronRidge Resources* (IRR LN) – Strengthening of the senior management team

Hot Rocks Investments plc (HRIP PZ) – On the Rocks?

Medusa Mining (MML AU) – Passing of non-executive director

Shanta Gold (SHG LN) – Operations update

Strategic Minerals* (SML LN) – Sale of gold tenements

Sunrise Resources Plc (SRES LN) – Bulk sampling completed at the CS project in Nevada

Does your dog share your political views? See link for answer: enjoy

Dow Jones Industrials	-0.09%	at	25,965
Nikkei 225	-0.69%	at	22,707
HK Hang Seng	-0.82%	at	27,661
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FTSE 350 Mining	+0.39%	at	16,866
AIM Basic Resources	+0.07%	at	2,220

Economics

Stocks rangebound amid declines in Asia this morning with investors trying to assess the outlook for US/China trade raft and whether turmoil in emerging markets can be contained.

The pound is off 0.33% trading at 1.2917 today as the chief European negotiator on Brexit said he is not supportive of the UK’s current plan.
Emerging market equities dropped with both lira (-1.38%), rand (-0.11%) and rouble (-0.49%) all down today.
Copper prices steadied around the $6,000/t mark following losses recorded last week (-2.1%)
Both gold and the US$ are both little changed with the precious metal hovering around the $1,200/oz level.
Among major US economic news this week is the NFP report due this Friday (193k forecast v 157k in July); US markets are closed today as the nation celebrates the Labor Day.

China – Private PMI survey shows manufacturing sector growth slowed to a 14-month low in August.

That comes in contrast to an official measure released last Friday that showed a pick up in growth that now looks less convincing.
Interestingly, while both reports pointed out weaker growth in new orders private, private measure suggested the slowdown has been driven by the domestic market whil export orders climbed in August.
“Overall, the PMIs for August suggest that economic activity continued to cool last month, most likely on the back of a further slowdown in credit growth and infrastructure investment… while the policy easing now underway should eventually put a floor beneath growth, the usual lags involved mean that growth will probably remain on a downward trajectory well into next year,” Capital Economics wrote in the note today.
Caixin China Manufacturing PMI: 50.6 v 50.8 in July and 50.7 forecast.

Italy – 10y bond yields are up this morning at 2.961% surpassing previous highs seen earlier in May and June as the government is planning to stock to its fiscal loosening plans implying a negative outlook for the nation’s budget deficit and debt.

On Friday, Fitch Ratings cut the nation’s credit outlook to negative from stable while maintaining foreign long-term credit rating at an investment grade BBB.
“The risk of a reversal on structural reforms negatively impacting Italy’s credit fundamentals has increased somewhat, in our view.. fiscal and other policy risks are compounded by the relatively high degree of political uncertainty,” Fitch report read.
The government is set to decide on new public-finance and economic-growth targets by September 27 and submit a draft budget to the EC by October 15.
Former estimates are for the government to see the budget deficit falling from 1.6% in 2018 to 0.8% in 2019 and reaching a balanced status in 2020.
While the Finance Ministry has recently suggested the deficit to come in at 1.2% in 2019 on the back of a weaker than expected economic growth, considered fiscal easing may see those targets drift even higher increasing the second highest debt to GDP ratio in the Eurozone (after Greece) even further.

Turkey – Inflation accelerated 2pp to 17.9% in August beating market estimates boosted by increasing cost of imports amid a sell off in the lira.

Currencies

US$1.1618/eur vs 1.1682/eur last week. Yen 110.92/$ vs 110.78/$. SAr 14.703/$ vs 14.771/$. $1.292/gbp vs $1.301/gbp. 0.720/aud vs 0.725/aud. CNY 6.824/$ vs 6.829/$.

Commodity News

Precious metals:

Gold US$1,202/oz vs US$1,207/oz last week

Gold ETFs 68.0moz vs US$68.0moz last week

Platinum US$790/oz vs US$798/oz last week

Palladium US$986/oz vs US$979/oz last week

Silver US$14.51/oz vs US$14.67/oz last week

Base metals:

Copper US$ 5,988/t vs US$6,048/t last week

Aluminium US$ 2,108/t vs US$2,144/t last week

Nickel US$ 12,800/t vs US$13,115/t last week

Zinc US$ 2,466/t vs US$2,505/t last week

Lead US$ 2,087/t vs US$2,096/t last week

Tin US$ 18,860/t vs US$18,985/t last week

Energy:

Oil US$77.8/bbl vs US$77.6/bbl last week

Natural Gas US$2.887/mmbtu vs US$2.897/mmbtu last week

Uranium US$26.45/lb vs US$26.40/lb last week

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$65.9/t vs US$66.1/t

Chinese steel rebar 25mm US$683.8/t vs US$682.5/t

Thermal coal (1st year forward cif ARA) US$90.9/t vs US$91.4/t

Premium hard coking coal Aus fob US$182.2/t vs US$182.2/t

Other:

Cobalt LME 3m US$64,750/t vs US$65,500/t

Tungsten APT European US$275-290/mtu vs US$280-300/mtu

Company News

Bluejay Mining* (JAY LN) 18p, Mkt Cap £155m – Drilling at Iterlak shows significant grade and resource potential

STRONG BUY - included in MSCI index

Target Price 45p

Bluejay Mining show on their twitter site completion of their third and final year of environmental impact assessment baseline sampling at Dundas in Greenland.
This shows that the company are well ahead in terms of data collection for their near-shore environmental studies which should enable the company to press ahead with their near-shore resource assessment and ship-loading plans.
Port site: The twitter account also show a picture of some of the new infrastructure for the proposed new port located 5km south of the main camp with two 52m x 8m sheds for housing the mining equipment.
Iterlak Delta: The twitter account also shows a core tray with material taken from the Iterlak Delta area.
Interestingly the sonic drill rig has yet hit basement rock in selected drill holes in the delta area according to the report indicating material in the delta runs much deeper than we had previously dared to think.
Maybe we should not be surprised given the environment of deep U shaped fjords all around.
The drill rig can drill to 26m as shown in the picture indicating significant tonnage potential. The plan is to complete 30 drill holes this season to generate an upgraded resource of well over 100mt of hopefully high-grade ilmenite.
The picture of the Iterlak drill core shows sediment of varying grain size. It’s colour suggests to us that probably all this sediment carries some grade starting with the fluvial gravel a the surface.
The core boxes are 1m long but the driller extracts core in 1.5m runs hence the incomplete sections of half core in the boxes.
Samples will begin pre-sizing in Nuuk this month and will be airfreighted for final sizing and assay on a semi-weekly basis. The weather is still good at site but drilling and most other operations should finish this month according to the program.
Bluejay have mined some 10,000t of Run of Mine upgraded material which may grade around 50% ilmenite and is ready for shipping to potential offtakers.
See Bluejay Mining twitter account: https://twitter.com/bluejaymining

Conclusion: All appears to be going well at Dundas and Iterlak for Bluejay. The new port facilities, accommodation and equipment are a major step forward toward production and we look forward to seeing further news on grade and a significantly upgraded resource.

*The SP Angel mining analyst has visited the Dundas, Itelak ilmenite sands project in Greenland. *SP Angel act as nomad and broker to BlueJay Mining.

Bellzone Mining (BZM LN) 0.58p, Mkt Cap £10.1m –Kalia mining convention in Guinea

Bellzone Mining reports that “following formal ratification by the Constitutional Court, the President of The Republic of Guinea has duly published the Presidential Decree promulgating into law the Addendum to the Kalia Mining Convention … which was signed on 9 November 2017.”
The announcement also discloses that Bellzone has “completed the extraction of the bulk sample and is proceeding to confirm the shipping logistics and test smelter campaign timetable with the unchanged aim of achieving conclusive feasibility study results by the end of 2018.”

IronRidge Resources* (IRR LN) 23.8p, Mkt Cap £67m – Strengthening of the senior management team

IronRidge Resources reports that it has agreed with its Chief Executive, Vincent Mascolo a further three years appointment with an option to extend the term by a further 2 years.
As part of the terms agreed with Mr. Mascolo, he is to receive 4m options at a strike price of 40pence valid for 2 years plus 5m 3-years options with a strike price of 60p and 6m 3-years options with a strike price of 90p/share. He is also to receive unlisted performance rights valid over 3 years at a range of maturity prices between 30p and £2.
The company has also appointed Len Kolff, formerly Chief Geologist, to the new position of Chief Operating Officer. The moves come as IronRidge “makes its transition from explorer to developer.”
In addition, IronRidge has made several key operating appointments including exploration managers in both Ghana and Cote d’Ivoire and a Principal Geologist in Australia.
An experienced exploration geologist with broad experience of running programmes in north and east Africa, the Middle East and central Africa, Moctar Keita has been appointed exploration manager for Cote d’Ivoire. “Moctar will work closely with Vincent and Len to administer the Company's diverse and extensive lithium and gold portfolios in Cote d'Ivoire. His immediate focus will be on the Company's rapidly advancing Kineta and Vavoua projects as they move towards initial drill planning and aeromagnetics respectively.”
Iwan Williams has assumed the role of exploration manager for Ghana. He has “extensive Southern and West African experience across a broad suite of commodities including iron, manganese, gold, porphyry copper, nickel, chromite and PGM's. Iwan has extensive studies experience, having participated in the delivery of multiple project studies including resource definition, mine design criteria, baseline environmental and social studies and metallurgical test-work programmes. He has extensive experience working in Africa, having spent 23 years of his 28-year geological career in Africa.”
The company has also appointed a Brisbane based Principal Geologist to assist Vincent and Len with “the Company's diverse and extensive lithium, gold, bauxite, titanium and iron ore project pipeline through Ghana, Chad, Ivory Coast, Gabon and Australia “. “Steve Cancio-Newton has over 20 years' experience in managing greenfields, brownfields and near-mine exploration in gold and base metals. Steve brings with him a wealth of experience across multiple commodities and deposit settings within both the major and junior sectors of the resources industry. Steve also has extensive experience with lithium pegmatite and gold exploration and project studies, and he has worked throughout West Africa and Australia in both grassroots exploration and brownfields locations.”
In connection with these appointments, IronRidge has announced plans to issue options to “various non-Board employees”. The company plans to issue 6.75m, 2 year options at a strike price of 40 pence, 5m 3 year options with a strike price of 60p and 6m 3year options with a strike price of 90p. Unlisted performance rights valid over three years at a range of maturity prices between 30p and £2 are also included in the package of awards to non-Board employees.

Conclusion: IronRidge Resources is securing the continuing services of two key players in the company’s progress to date and strengthening its operational leadership in Ghana, Cote d’Ivoire and Australia.

*SP Angel act as nomad and broker to IronRidge Resources

Hot Rocks Investments plc (HRIP PZ) 0.38p, Mkt Cap0.7m – On the Rocks?

Hot Rocks Investments, run by Brian Rowbotham, Gavin Burnell report a pre-tax loss of £219,298 for the year to end March vs a loss of £16,191 for the previous year.
The investment vehicle has a number of speculative mining and oil and gas holdings within its portfolio including Minergy Coal which is looking to ‘wean Botswana off dependence on diamonds’ alongside a number of other early stage exploration ventures.
Investors might like to turn to the company’s website which contains the following message “Unable to retrieve data - This site has an outstanding domain name and domain redemption balance to be settled.”
https://www.hot-rocks.co.uk/

Medusa Mining (MML AU) A$0.35, Mkt Cap A$72m – Passing of non-executive director

We regret to report the passing of Peter Hepburn-Brown of Medusa Mining.
Peter was recently reappointed to the Board of Medusa and had previously served as Managing Director of the Company between June 2011 and August 2014..
Medusa’s board now consists of Andrew Boon San Teo -Non Executive Chairman, Raul Conde Villanueva - Executive Director and Roy Philip Daniel - Non-Executive Director.
The Executive management also consists of Peter Stanley Alphonso - Chief Financial Officer, James Pingul Llorca - Manager, Geology & Resources, David Angus McGowan - General Manager, Engineering and Patrick Chang - Corporate Development Officer & Investment Relations. Boyd Timler – former Managing Director retired from the company on 15 June.
Peter was a well-respected and highly qualified mining engineer with a career of international mining experience from South Africa to Siberia and beyond.

Shanta Gold (SHG LN) 5.3p, Mkt Cap £41m – Operations update

Ilunga development schedule accelerated starting three months ahead of the plan with first ore expected in mid-2019.
Third high grade underground operation is expected to supply 5.6g/t material (as per the latest Mineral Reserves) to the NLGM plant with a planned mining capacity of 25ktpm contributing 20koz per planned level of development.
The mine will enhance economics given the processing of higher grade material compared to open pit and Luika underground ores with total overall production not expected to change.
Latest exploration programme focused on high grade Bauhinia Creek (BC) and Ilunga deposits.
The plan is to continue with drilling at BC and Ilunga from underground to bring some of the existing Inferred resources into the mine plan as well as test down dip extensions of both orebodies.
Trenching around New Luika has resumed within a 20km economic radius with a view to identify future exploration targets.
Third pre-leach tank to be commissioned on September 12 that should improve gold recoveries by 1.5-2 percentage points to 93%.
Phase II exploration at Singida to start this month with detailed project economics due in Q4/18.
Additional $1m in net annualised savings are expected to come in January 2019 following agreement to owner-operate HFO power plant at NLGM.

Conclusion: Acceleration of development works at Ilunga will bring forward treatment of higher grade material into the production schedule helping earnings margins at the NLGM. The Company highlights the focus on exploration activities at high grade BC and Ilunga deposits where the mineralisation has not been delineated in the down dip direction which has potential to further expand the existing life of mine. Operations are reported to continue run smoothly allowing to further deleverage the business.

Strategic Minerals* (SML LN) 1.3p, Mkt Cap £18.3m – Sale of gold tenements

Strategic Minerals reports that it has reached agreement, in principle, to dispose of four exploration tenements, currently held by its wholly owned Central Australian Rare Earths (CARE), to ASX listed Great Southern Mining for A$145,000 in a combination of cash and shares.
The transaction, which is subject to further due diligence and to the effective transfer of the title, relates to ground the company considers as gold exploration tenements which Strategic Minerals considers peripheral to CARE’s focus on “nickel sulphides, cobalt and rare earth elements”.
The consideration comprises A$100,000 in cash with the balance as 1m shares in Great Southern Mining at an issue price of A$0.045 per share. The shares issued will be subject to a voluntary escrow with 0.5m escrowed until 30^th December 2018 and the balance until 30 June 2019.
Referring to its plans for further exploration of the remaining CARE tenements, Strategic Minerals’ Managing Director, John Peters, disclosed that “The Company looks forward to updating the market shortly on its plans to undertake further drilling around Hanns Camp, notably at Hanns Camp South which is showing good signs of nickel sulphide prospectivity”.

Conclusion: The planned disposal of ground considered more likely to host gold exploration targets allows Strategic Minerals’ CARE to concentrate its energies on its primary objective of nickel/ cobalt and rare-earths exploration. We look forward to further news of the planned drilling programme at Hanns Camp South.

*SP Angel act as Nomad and broker to Strategic Minerals

Sunrise Resources Plc (SRES LN) 0.16 pence, Mkt Cap £3.9m – Bulk sampling completed at the CS project in Nevada

Sunrise Resources reports that it has completed bulk sampling and recovered 100 tons of natural pozzolan from its CS Pozzolan-Perlite project in Nevada for commercial scale testing by a potential large customer.
The bulk sampling programme has also recovered 8 tons of perlite for “testing pursuant to a marketing MOU signed earlier this year with a potential customer.” This material “is in transit to SGS Lakefield in Canada for crushing, grinding and screening with the objective to produce coarse horticultural grade raw perlite. Tests will also be carried out to determine the mechanical properties for crushing and grinding circuit design.” Results are expected in about 4 weeks.
The company has also completed internal mine planning work and moved to commission the consultants, SRK Consulting, “to prepare mine designs for inclusion in the Company's permitting Plan of Operations & Reclamation Permit”.
Commenting on the progress achieved on the project, Executive Chairman, Patrick Cheetham, said that This phase of bulk sampling marks an important transition from exploration, bench-scale testing and smaller scale customer trials to commercial-scale testing and market development. This is progressing hand-in-hand with mine design, plant design and mine permitting.”
Pozzolan is a volcanic derived mineral used to enhance the strength and physical characteristics of concrete. Much of this material is currently sourced from the “fly-ash” waste of coal fired power stations but as environmental pressures curb this form of power generation the company is seeking to develop alternative natural sources of supply to fill the widening potential supply gap.

Conclusion: The testing by a potential customer should help establish the commerciality of natural pozzolan while the mine design work being undertaken by SRK helps prepare the way for a future permit application to develop the deposit.

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

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