Today's Market View Including: Asiamet Resources, Bacanora Minerals, Metminco, Stellar Diamonds
Date
5/31/2016 5:50:20 AM
(MENAFN- ProactiveInvestors - UK) SP Angel, 10:36
Asiamet Resources (LON:ARS) Q1 results and project update
Bacanora Minerals (LON:BCN) Quarterly results highlight progress towards project financing and construction
Metminco* (LON:MNC) Completion of Quinchia acquisition
Stellar Diamonds (LON:STEL) Tongo Mine Licence
Lithium merger Galaxy Resources to acquire General Mining to create A$700m company
Galaxy Resources is to acquire General Mining an all share transaction.
Galaxy is offering 1.65 Galaxy shares for each General Mining share in an effective 9.4% premium for General Mining stock holders.
The deal values General Mining at A$216m
The merger effectively simplifies the joint venture structure of the two companies and should cut out some overhead.
Economic News
A revision in expectations for the timing of the Fed hike drive bond yields and US$ index higher.
Chances of a 25bp rate hike during the 14-15/Jun FOMC meeting are currently standing at 30% at the moment, up from 12% at the beginning of the month.
10Y and 2Y US bond yields are trading close to their highest since mid-Apr/16 and mid-Mar/16, respectively.
The Dollar Index is up 0.3% this morning and is on the way reach the strongest level in two months.
May shapes to be the best month this year for the US$ with the currency on track to post a 3.0% increase dragging metal prices lower gold (-5.9%) and copper (-7.6%).
US Economic news this week:
Date Index Period Actual Expected (Bloomberg) Previous
Friday Q1 GDP (2nd reading) 0.8%qoq 0.9%qoq 0.5%qoq (1st reading)
Core PCE (2nd reading) 2.1%qoq 2.1%qoq 2.1%qoq (1st reading)
Tuesday Personal Income Apr 0.4%mom 0.4%mom
Personal Consumption Apr 0.7%mom 0.1%mom
PCE Apr 0.3%mom/1.1%yoy 0.1%mom/0.8%yoy
PCE (Core) Apr 0.2%mom/1.6%yoy 0.1%mom/1.6%yoy
S & P/CS House Prices Mar 0.7%mom 0.7%mom
Wednesday ISM Manufacturing May 50.4 50.8
Wards Vehicles Sales May 17.3m 17.3m
Thursday Weekly Jobless Claims 270k 268k
ADP Employment Change May 175k 156k
Friday NFP May 160k 160k
Unemployment Rate May 5.0% 5.0%
Av Hourly Earnings May 0.2%mom/2.5%yoy 0.3%mom/2.5%yoy
Source: Bloomberg
China Futures for the CSI 300 Index, a Chinese benchmark equity index comprising top 300 stocks on the Shanghai and Shenzhen exchanges, dropped as much as 10% matching the daily limit before gaining back its losses in less than a minute.
1,500 contracts have been traded marking the highest volume of the day on the China Financial Futures Exchange.
The underlying CSI 300 Index has not registered any of an increase of volatility in the futures' market closing up 3.4% today.
Volumes have significantly fallen since last summer as authorities clamped down on short sellers of stocks.
Volumes are now down more than 90% from their peak last year as officials raised margin requirements, tightened position limits and launched investigations into bearish wagers.
Japan Economic news released this morning not as bad as expected.
Unemployment Rate: 3.2% in Apr v 3.2% in Mar and 3.2% forecast.
Household Spending: -0.4%yoy in Apr v -5.3%yoy in Mar and -1.3%yoy forecast.
Industrial Production: 0.3%mom/-3.5%yoy in Apr v 3.8%mom/0.2%yoy in Mar and -1.5%mom/-5.0%yoy forecast.
Both private consumption and industrial production recorded negative rates of growth in three months of the last 12.
Vehicles production which fell 9.7%yoy in Apr has been hit by the same-month earthquake on the southern island of Kyushu which disrupted parts suppliers and delayed output of Toyota Motor Corp vehicles.
In the wake of weak economic outlook, Prime Minister called for a delay in next year's sales tax hike yesterday.
While negotiations still at early stages, Shinzo Abe was promoting a two and a half year delay from Apr/17.
It is argued, PM will need to call for a snap general election for the lower house in a bid to secure the mandate for a rate hike delay.
The authorities decision on the tax hike is expected by Jul/16.
Germany Unemployment beat estimates coming down to the lowest since the nation's reunification.
Jobless Rate: 6.1% in May v 6.2% in Apr and 6.2% forecast.
Currencies
US$1.1129/eur vs 1.1182/eur yesterday. Yen 111.01/$ vs 109.71/$. SAr 15.851/$ vs 15.522/$. $1.461/gbp vs 1.466/gbp
0.723/aud vs 0.722/aud. CNY 6.585/$ vs 6.560/$
Commodity News
Precious metals:
Gold US$1,211/oz vs US$1,222/oz on Friday
Gold ETFs 59.3moz unch v 59.3moz yesterday unch
Platinum US$977/oz vs US$994/oz on Friday
Palladium US$544/oz vs US$543/oz on Friday
Silver US$16.08/oz vs US$16.31/oz on Friday
Base metals:
Copper US$ 4,661/t vs US$4,693/t on Friday
Aluminium US$ 1,559/t vs US$1,559/t on Friday
Nickel US$ 8,530/t vs US$8,450/t on Friday
Zinc US$ 1,925/t vs US$1,897/t on Friday
Lead US$ 1,700/t vs US$1,689/t on Friday
Tin US$ 16,155/t vs US$16,200/t on Friday
Energy:
Oil US$49.3/bbl vs US$48.9/bbl on Friday
Natural Gas US$2.173/mmbtu vs US$2.143/mmbtu on Friday
Uranium US$27.25/lb vs US$27.25/lb on Friday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$48.8/t vs US$47.4/t
Steel The EU may place new anti-dumping tariffs on Chinese steel shipments.
Thermal coal (1st year forward cif ARA) US$49.3/t vs US$48.2/t on Friday
Other:
Tungsten - APT European prices stood at $213-225/mtu unch vs $215-225/mtu
Company News
Asiamet Resources (LON:ARS) 2.1 pence, Mkt Cap 11.9m Q1 results and project update
Asiamet reports that it spent a total of $694,753 during Q1 2016, compared to $4.3 million in Q12015, including $3.9m spent on the acquisition of the Beutong licence.
This year, 72% of expenses were incurred on exploration and evaluation work with the balance comprising administrative expenses.
As previously reported, Asiamet has now completed a Preliminary Economic Assessment on the Beruang Kanan Main copper deposit and is moving to a programme of resource definition drilling as part of a Feasibility Study to upgrade the 'majority of the current Inferred Resource of 49.7 million tonnes grading 0.6% Cu to the Measured and Indicated Resource categories'.
In addition to the continuing work on the BKM deposit, Asiamet is working to convert the exploration permit on its 40% owned Beutong Izin Usaha Pertambangan to a production permit and 'this conversion is now in the later stages of the approvals process.', with a presentation to the Minister of Energy and Mineral Resources scheduled for today.
Similar efforts to convert the Jelai licence are also underway though the company has requested the suspension of the existing exploration permit for one year in order to process the application to convert the exploration licence which would otherwise expire on 2nd June.
Conclusion: Asiamet Resources has successfully delivered a PEA on the BKM Main deposit in little more than a year and is now moving ahead with Feasibility work. At the same time it is in discussions with the authorities to convert two of its exploration licence to production permits.
Bacanora Minerals (LON:BCN) 85.5 pence, Mkt Cap 83.2m Quarterly results highlight progress towards project financing and construction
Bacanora Minerals results to end 31 March 2016 highlight the work done and progress made towards production of lithium carbonate at the Sonora project near Hermosillo, Mexico.
The town of Hermosillo in Sonora is a major industrial centre close to the US border hosting manufacturing for Ford Motor co amongst other industry.
The results show some $20m of cash in the bank at end march vs $10m 9-months earlier. This should now have risen to around $27m following the recently placement of 7.7m worth of new stock to Blackrock at 79p/s.
Management aim to use the design of the pilot plant to build a new facility to produce 35,000tpa of lithium carbonate rising to 50,000tpa on further investment
Expenses have been running at around $1m per quarter as Bacanora upscale and 'man-up' the pilot plant for operation and training purposes. Expenses are expected to rise to around $1m per month on the additional recruitment and associated expenses.
The plant is now said to be running on a continuous basis and the recruitment of an experienced team of lithium specialists is an important step towards the production of good quality samples for offtakers and for the construction and eventual running of the proposed full scale plant.
The company took a $0.95m forex charge in the quarter though this offset gains seen in the previous period.
The steady rise in expenses indicates full-year expenses of around $3.5m leading to a probably loss of just over $7m for the full-year to end June mainly due to the running of the pilot plant providing samples for future offtakers.
Discussions continue with various Asian offtake partners, banks, debt providers and strategic investors with a focus on the stage 1 financing shown below.
The publication of the Pre Feasibility study details are the most recent key development. We show key highlights below:
Phase 1 17,500tpa years 1-2
Phase 2 35,000tpa years 3-20 and beyond
Potential for further expansion to 50,000tpa not in the PFS
Capex: $240m stage 1
Capex: $177m stage 2
Throughput 1.4mtpa Stage 1
Throughput 2.7mtpa Stage 2
Grade 3,500ppm. Strip ratio 3.1:1. Ore mined 52mt from 20 year open pit (84% of this ore is attributable to Bacanora).
Potash by-product production 50,000tpa 'K2SO4' - potash ore grade 1.5% k. Potash prices $600-700/t
Operating costs: $2,698/t Average life of mine
Operating costs: $2,100/t Average net of by product credits
Process residence time 3 days, possibly 5 days in practice
EBITDA $134mpa average
IRR 29% pre-tax, 25% post-tax
Payback 4.8 years.
NPV $776m pre-tax, NPV $542m post-tax
Lithium Carbonate 'LCO' price assumption $6,000/t.
Indicated resource of 5.0mt LCE equivalent + inferred resource of 3.9mt LCE .
Full Feasibility Study due for completion Q1 2017 at a cost of around $5m with detailed design and site preparation in Q2 2017.
Q2 2017 site preparation works.
Q4 2018 plant commissioning.
The mining of the lithium 'clay' which is more like a shale is relatively simple and will be done outside the wet season.
The lithium bearing ore is formed from the drying out of former lithium rich lakes 'salars' effectively concentrating the lithium into the clay over millions of years.
While this may not allow management to reduce costs to below 'salar' processing costs in Chile, feasibility work indicates costs should be relatively low at $2,100/t of lithium carbonate and significantly lower than the cost of production by hard rock spodumene producers.
Conclusion: Bacanora are making steady progress toward the financing and construction of its Stage 1 lithium carbonate mine and processing plant. Today's quarterly results highlight progress towards the financing and construction of the Sonora project and realisation of the value highlighted in the Pre-Feasibility figures above.
Metminco* (LON:MNC) 0.2 pence, Mkt Cap 7.2m Completion of Quinchia acquisition
Metminco has reported the completion of its acquisition of the Quinchia gold portfolio in Colombia from RMB Australia Holdings for 350 million Metminco shares.
'RMB requires South African Reserve Bank clearance before settlement can take place, which is expected within the next 2 weeks.'
The most advanced of the projects is the Miraflores gold property which has an NI-43-101 compliant Measured & Indicated resource of 72.6m tonnes at an average grade of 0.78g/t gold and 1.5 g/t silver and an additional 3.76m tonnes of inferred resources grading 0.51 g/t gold and 2.3 g/t silver, totaling 1.88m oz of contained gold and 3.8m oz of silver.
The previous owners of the property, Canadian based Seafield Resources, completed much of the feasibility work to develop Miraflores prior to entering administration in September 2014. Metminco is completing the feasibility study work and has already indicated that it is also considering an underground mining option which may offer improved economic returns and reduced environmental impact compared to the open pit mining option developed by Seafield Resources.
The Dosquebradas property currently has a reported inferred resource of 0.92m oz of gold and 1.04m oz of silver while there are also additional largely untested exploration targets within the licences including the Tesorito gold porphyry target where 'drill hole TS-DH-02 returned an intercept of 384m 1.01 g/t gold, 0.9 g/t silver and 0.08% copper from surface (including 29.3m 1.9 g/t gold, 1.0 g/t silver and 0.12% copper)' .
The Quinchia portfolio consists of a suite of exploration and development gold properties located in the Cauca gold belt of Colombia where there are already a number of significant gold projects including Anglogold Ashanti's 33m oz La Colosa deposit and Gran Colombia's 12m oz Marmato gold mine.
Conclusion: Metminco has now completed the acquisition of a project which offers near term development potential and a route to cashflow generation as well as a portfolio of exploration projects within an increasingly recognised gold province.
*SP Angel act as joint-broker to Metminco
Stellar Diamonds (LON:STEL) 7.3 pence, Mkt Cap 2.3m Tongo Mine Licence
Stellar Diamonds has announced that it 'has been verbally informed that the Minerals Advisory Board (MAB) has approved the application for a mining licence over its 100% owned Tongo project in Sierra Leone'.
Formal approval remains subject to the written approval of the Ministry of Mines and agreement of fiscal terms and the ratification of the Sierra Leone Parliament.
Stellar Diamonds is continuing discussions with the Environmental Protection Agency whose approval will also be required prior to the commencement of mining.
Conclusion: It appears that the company is making progress in gaining approval for mining at Tongo. We look forward to news of the formal approval of both the mining licence and the environmental approvals in due course.
SP Angel