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Today's Market View Including ZincOx Resources, Noricum Gold, Mariana Resources, Gemfields and others

Published: 05:28 09 Jun 2015 EDT

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Economic News
China - trade data yesterday gave investors much to think about and showed the government 7% GDP growth target to be at risk
• Exports fell in May by 2.8% in Yuan value and imports dropped by a massive 18.1% partly due to lower raw materials imports ahead of the summer destocking as seen with iron ore
• But we do see news on the Chinese government helping local authorities to refinance and to fund infrastructure development
• The pull back in the Hang Seng and Nikkei is reported to be more down to the prospects for US rate rises but is also down to cooling Chinese domestic demand
• There are some concerns over the potential for deflation in China but with the CPI at 1.2% last month there seems to be much room for policy makers to continue easing

European GDP growth rises 0.4%
• Household consumption rises 0.5%
• Investment up 0.8%
• Exports rose 0.6%
• Euro weakness driven by EU QE has helped to weaken the euro and provide some recovery for European manufacturers

US$1.1283/eur vs 1.1113/eur yesterday.   Yen 124.35/$ vs 125.40/$.   SAr 12.5152/$ vs 12.431/$.   $1.529/gbp vs 1.532/gbp
US$0.766/aud vs0.762/aud

Commodity News
Precious metals:

Gold US$1,180/oz vs US$1,174/oz yesterday
Platinum US$1,113/oz vs US$1,099/oz yesterday
Palladium US$750/oz vs US$749/oz yesterday
Silver US$16.13/oz vs US$16.12/oz yesterday

Base metals:
Copper US$ 5,986/t vs  US$5,926/t yesterday
Aluminium US$ 1,761/t vs US$1,740/t yesterday
Nickel US$ 13,530/t vs US$13,120/t yesterday
Zinc US$ 2,166/t vs US$2,129/t yesterday
Lead US$ 1,934/t vs US$1,910/t yesterday
Tin US$ 15,430/t vs US$15,375/t yesterday

Energy:
Oil US$63.6/bbl vs US$63.0/bbl yesterday
Natural Gas US$2.709/mmbtu vs US$2.634/mmbtu yesterday
Uranium US$35.90/lb unch vs US$35.90/lb yesterday

Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$63.4/t unch vs US$63.4/t - Iron ore imports fell 8.4% month on month in May to 17.8mt

Company News
AngloGold Ashanti (NYSE:AU) US$8.72, Mkt Cap US$5.4bn – Newmont buys Cripple Creek for US$820m
Newmont Mining (ASX:NEM) US$25.8, Mkt Cap US$12.9bn
• Newmont has paid US$820m in cash and a 2.5% net smelter return royalty for Cripple Creek and Victor mine.
• The mine in Colorado produced 211,000 oz of gold and 110,000 oz of silver last year.
• The open pit mine started production in 1995 and has been expanding recently with a second expansion approved and initiated in 2013.
• Newmont believes that the mine has scope to add 350,000 and 400,000 oz of gold per year in 2016 and 2017 at an all in sustaining cost of $825-$875/oz,
• Cripple Creek generated revenues of US$266m last year for AngloGold Ashanti.
• The acquisition will be funded through an issue of 29m shares as well as cash on Newmont’s balance sheet.
• The transaction is expected to close in the third quarter of 2015 subject to regulatory approvals.
• AngloGold has been targeting a debt reduction programme of US$1bn to bring down debt from the current level of US$3.1bn.

Beowulf Mining (LON:BEM) 1.5 pence, Mkt Cap £5.7m – Salary sacrifice
• Beowulf reports details of its salary sacrifice program whereby directors take a proportion of their salary and fees in shares.
• The total salary sacrifice is £45,798 leading to the issuance of 2,035,457 new shares at 2.25p.
• The scheme ensures that directors interests are better aligned with shareholders.
• We wish more companies would follow Beowulf’s example in reducing costs and taking risk alongside their investors.

Gemfields (LON:GEM) 62.3 pence, Mkt Cap £347.7m – Matching rubies totalling 45 carats found at Montepuez deposit
• The company announce the discovery of a matching pair of rubies from their ruby deposit in Mozambique.
• This follows the discovery of the 40 carat ruby last year.
• The rubies will form part of the ruby auction in Singapore next week.
• Last year’s high value ruby auction netted US$43.3m with an average carat per value of US$688.64/carat.
Conclusion: This is an exciting find for Gemfields – having a matching pair of high quality rubies will form a strong basis for the auction next week. Good quality rubies are achieving high prices – this find augurs well for the Montepuez deposit. With the latter being harder to value without a formal resource, most of the value currently attributed has been to the company’s emeralds business. This find and valuations achieved next week should set a good basis for the ruby division to contribute more to the overall valuation.
*Two  SP Angel analysts have visited Gemfield’s emerald mines in Zambia and ruby mine in Mozambique

Kirkland Lake and Gold (TSE:KGI) 320 pence, Mkt Cap £257m – Update on Infill Drilling Programme
• Infill drilling has been taking place with average spacing of between 15.2 and 24.4m within the existing resource blocks.
• The initial phase of drilling had spacing of 36.6m between holes.
• Of the 10 holes drilled in the NSZ inferred resource area, 9 holes have returned intersections which will make the minimum requirement to calculate an indicated resource.
• Based on the conversions of inferred to indicated level, this would represent a 90% conversion rate.
• Of the 5 drill holes testing the fringes of the NSZ inferred resource, 4 intersections would be converted to indicated giving a conversion rate of 80%.
• The latter is expected to expand the dip and strike components of the resource block.
Conclusion: These results would suggest successful conversion of inferred to indicated resource in the NSZ block area.

Mariana Resources (LON:MARL) 2.425 pence, Mkt Cap £18.5m – Latest drilling indicates a north/south corridor of higher grade gold
• The company has reported results from the latest two holes of its drilling programme at Hot Maden in eastern Turkey.
• Hole HTD-10 intersected 110.2m of mineralisation at an average grade of 5.6g/t gold and 1.3% copper from 81.8m, including a higher grade 43m wide section at 11.7 g/t gold and 2.2% copper from 98.7m.
• Hole HTD-11 encountered 107.7m of mineralisation averaging 4.2 g/t gold and 0.9% copper from a hole depth of 255.3m including 14.2m averaging 27g/t gold and 0.94% copper from 255.3 m.
• Hole HTD-10 is reported to confirm the continuity of the mineralisation encountered in the discovery holes (HTD-04 and HTD-05) while “hole HTD-11 extends the Au-Cu zone south to a current total length of 225m in a north-south orientation”. The mineralisation remains open to the south and both up and down dip.
• The company also comments that “Drilling to date indicates a corridor of higher Au grades (>10g/t Au) may be correlated from (north to south) from the sections with holes HTD-04, HTD-10, HTD-05 and HRT-11.”
• Holes HTD-12, 13 and 14 are now complete and assays have yet to be reported, thought the company has disclosed that both holes 12 and 13 intersected the copper gold mineralisation.  Hole HTD-12 was drilled from the same position as HTD-11 but at a shallower angle and intersected 55metres of pyrite/chalcopyrite mineralisation, apparently confirming the up-dip continuity of the mineralisation.
• Hole HTD-13 was designed to test the down-dip continuity of the zone encountered in hole HTD-05 and is reported to have intersected 114m of pyrite/chalcopyrite mineralisation from a depth of 256m. Hole HTD-14 sought to test the up-dip (shallower) continuity of the mineralised zone from hole HTD-05 but encountered a geological fault, possibly trending towards the NW.
• Drilling is continuing with Hole HTD-15 looking to test the deeper continuity of the mineralisation encountered in hole HTD-10 and hole HTD-16 seeking to intersect the zone found in hole HTD-04 from the opposite direction in order to confirm its orientation and continuity.
• The current drilling programme is being funded by Mariana’s Turkish partner, Lidya, as part of its commitment to earn 70% of the project
Conclusion: As drilling progresses at Hot Maden, a clearer picture of the geometry and continuity of the mineralisation is emerging with a possible high grade mineralised corridor trending north/south. Mineralisation appears to remain open towards the south and both up and down-dip. Despite the depth of some of the intersections they are wide and relatively high grade and suggest that Hot Maden could host a sizeable resource. We look forward to the assay results from holes HTD-12, 13 and 14 and news of the progress of holes HTD-15 and 16 in due course.

Noricum Gold* (LON:NMG) 0.18p, Mkt Cap £2.5m – Results statement highlights prospects at Walchen
Noricum Gold is run as a low cost, no nonsense operation.
• The company is so cheap it only spends £100 on its AGM, so don’t expect free drinks and canapés
• The team are fortunate to have picked up the Walchen project, proving that patience is a virtue.
• Walchen is seen as the most prospective polymetallic project in Austria and work has already started on its geological evaluation
• Walchem comprises two main ore horizons with a horizontal extension of 3-4km and an average thickness of 0.5-4m. Historical records show the average grade of the Walchen  ore mined from 1942 was 1.7% Cu, 3.23% Zn, 2.48% Pb, 0.83g/t Ag 0.5g/t Au.”
• Results:  the financial results to end December reflect the low operating costs but also suffer an impairment charge of £762k on the Kliening, Goldeck and Goldzeche licenses.
o The total loss for the year comes to £1.598m for the year accounting for exploration, administration, impairment and a negative £225k for exchange differences.
o Rotgulden showed some promising grades but the geology is complex and will cost too much for Noricum to pursue for now.
o Schonberg is a similar situation but with less information.  Drill assays from Schonberg did not bestow sufficient confidence to want to continue expenditure and with Walchen now in the portfolio nearly all resources will be focussed on this project.
o We look forward, expectantly, to further news on Walchen
• Walchen only cost £10,000 in cash plus £350,000 worth of new shares issued at 0.2p/s.
*SP Angel acts as Nomad and Broker to Noricum.  An SP Angel analyst has visited the Schonberg site in Austria.

ZincOx Resources (LON:ZOX) 16pence, Mkt Cap £26m – Update shows continuing improvement at Korean zinc recycling plant
• ZincOx report continuing progress at their EAFD recycling plant in South Korea.
• The plant extracts zinc and iron from Electric Arc Furnace Dust, a waste material from steel recycling.
• This is one of the world’s largest facilities for the recycling of this material and should represent a significant advance on the more established Waltz kiln technology.
• The plant is backed by the IFC, Teck Resources as shareholders and Korea Zinc as a lender and strong supporter.
• The EAFD plant processed some 15,668t in May to produce 3,618t of zinc in concentrate at a 91% zinc recovery level (target 95%).
• This was short of its target 17,600t per month due to a lack of contracted EAFD dust available to the plant.  New contracts effective from July should bring the tonnage processed up to the target level and we understand the plant has run for some weeks at around 16,666t per month .
• The trick is to raise throughput, recovery rates and optimise the use of gas into the plant.
• In theory the plant should produce 4,063t per month at the 91% recovery rate and 4,242t per month at the target 95% recovery rate depending on the grade of zinc in the EAFD.
• This equates to 48,756 - 50,910tpa though this could improve if EAFD grades rise to >28% as suggested in the company’s presentation.
• Zinc prices are currently around $2,129/t and have averaged $2,146/t this year vs last year’s average of $2,162/t, indicating not much price erosion in the zinc price compared with other metals
• Expansion:  management reckon they can double revenue at only 30% additional operating cost suggesting potential for a significant reduction in unit operating costs.
• Debt:  ZincOx renegotiated US$15m of debt with Korean zinc delaying the capital repayment by 12 months so that it now falls due in February 2016 with repayments split over six equal payments of US$3.1m, including rolled up interest starting in February 2016. As part of the negotiations, Korea Zinc has increased it offtake agreement to 1,050,000 tonnes.
• Conclusion: ZincOx continues to improve its operation and we look forward to better news going forward.

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