SP Angel – Morning View – Stumbling US inflation boosts gold prices
Paul Kettle
SP Angel Research Note -3 min read
10:42, 13th March 2019

SP Angel – Morning View – Wednesday 13 03 19

Stumbling US inflation boosts gold prices

MiFID II exempt information – see disclaimer below   

Altus Strategies* (ALS LN) – Indiana Resources due diligence period extended

Bluebird Merchant Ventures* (BMV LN) – Bluebird awaiting results from Kochang drilling

Birimian Limited (BGS AU) – Goulamina lithium corporate update

Gem Diamonds (GEMD LN) –Strong 2018 results

Greatland Gold (GGP LN) - Farm-in agreement with Newcrest Mining at Havieron

IronRidge Resources* (IRR LN) – Interim financial report

KEFI Minerals* (KEFI LN) – Funding update

Kenmare Resources (KMR LN) – Profits rise on higher production and ilmenite prices but operating cost rise is of concern

Oriole Resources (ORR LN) – Cuts losses in 2018

 

Stumbling US inflation boosts gold prices

Softer US February inflation numbers suggest the Fed might delay further rate rises any time soon with the US$ closing lower on Wednesday.

  • The brunt of trade tariffs looks like have been largely offset by stronger US$ with the index up 8%yoy.
  • Gold prices climbed past the $1,300/oz mark on the back of weaker inflation data.
  • CPI (mom/yoy): 0.2/1.5 v 0.0/1.6 in January and 0.2/1.6 forecast.
  • Core CPI (mom/yoy): 0.1/2.1 v  0.2/2.2 in January and 0.2/2.2 forecast.

 

China reports it has found super-large bauxite and molybdenum reserves

  • The statement reminds us of when China also reported it had found huge iron ore resources
  • There is no comment on grade or economic viability and we suspect the grade combined with the location may prove challenging.
  • The mine at the Yanlong coal field is large at 120mt but so are lots of other bauxite deposits.
  • The statement, reported by Reuters, may well support China’s long-standing ambitions to become self-sufficient in all things especially commodities but the discoveries are unlikely to change the way China’s aluminium and steel industries source their materials.
  • Chinese logistics are very firmly set to feed bauxite, alumina, moly concentrates, iron ore and coal through port terminals and rail lines direct to smelting and refining complexes inland.
  • China’s new Green Shield environmental policies also ensure that smelters and refineries now buy in higher-grade and better quality concentrates than before.
  • Western geologists have scoured the world for the best grade and quality ores and producers have innovated to produce the best quality ores and concentrates.
  • While the Chinese are proven innovators, they are likely to struggle to match the best the rest of the world has to offer.
  • China imported some 83mt of bauxite last year.
  • China also reports the discovery of an estimated 970,000t of molybdenum metal, 940,000t of tungsten trioxide and 266,000t of lead and zinc in another ‘super-large’ find, according to the Luoyang bureau. The mix suggests Skarn mineralisation and the need for a complex mineral processing plant.

 

Dow Jones Industrials

 

-0.38%

at

  25,555

Nikkei 225

 

-0.99%

at

  21,290

HK Hang Seng

 

-0.49%

at

  28,780

Shanghai Composite

 

-1.09%

at

   3,027

FTSE 350 Mining

 

+0.29%

at

  19,001

AIM Basic Resources

 

+0.26%

at

   2,159

 

Economics

Japan – Core machine orders, a proxy for business investment, fell more than forecast posting a third straight monthly decline in January.

  • The report follows on a drop registered in machine tool orders in February that marked the largest fall since 2009.
  • Coupled with weak industrial production, exports and manufacturing sentiment data released recently, the latest data point to a worsening growth outlook.
  • Core Machine Orders (mom/yoy): -5.4/-2.9 v  -0.1/+0.9 in December and -1.5/-2.1 forecast.

 

UK – The pound is up against the US$ this morning as Parliament is set to vote on no-deal Brexit.

  • Parliament voted down the latest May Brexit deal by 149 votes with the currency swinging as much as 1% higher yesterday before ending the trading day down 0.4% after the vote.
  • MPs are expected to vote on the government motion at around 19:00.
  • If the no-deal Brexit is rejected, MPs will vote on Thursday on extending Article 50.

 

Australia – Weak consumer confidence data reinforces a deteriorating outlook for the economy and raises the risk of an interest rate cut as soon as next month.

  • A survey of 1,200 people showed the number of pessimists now outnumber optimists with the index value slipping to 98.8, the weakest more than a year.
  • The data comes in a day after Australian business conditions gauge slipped below the long-run average in February amid declines in corporate profitability and sales.
  • Westpac Consumer Confidence Index: 98.8 in March v 103.8 in February.
  • NAD Business Conditions Index: 4 in February v 7 in January.

 

Currencies

US$1.1285/eur vs 1.1266/eur yesterday  Yen 111.36/$ vs 111.35/

nbsp; SAr 14.350/$ vs 14.273/
nbsp; $1.314/gbp vs $1.323/gbp  0.706/aud vs 0.707/aud  CNY 6.711/$ vs 6.712/$

 

Commodity News

Precious metals:         

Gold US$1,304/oz vs US$1,297/oz yesterday - Stumbling US inflation boosts gold prices

  • Gold moved above the $1,300/oz level as a key measure of underlying US inflation unexpectedly eased, underpinning the Federal Reserve’s plan for holding fire on raising interest rates.
  • Excluding food and energy, the U.S. core consumer price index rose 0.1% in February from the prior month and 2.1% from a year earlier, according to a Labor Department report Tuesday.
  • President Donald Trump’s top trade negotiator Robert Lighthizer reiterates the option of raising tariffs on Chinese imports as a way to ensure Beijing lives up to a trade agreement that could be finalised over the coming weeks.
  • Investors also weigh up the latest Brexit decision, with lawmakers voting on the ‘no-deal’ exit from the European Union in 16 days’ time, or give themselves the chance to delay Brexit in the hope of securing better terms.

   Gold ETFs 71.7moz vs US$71.5moz yesterday

Platinum US$835/oz vs US$815/oz yesterday

Palladium US$1,537/oz vs US$1,516/oz yesterday

Silver US$15.46/oz vs US$15.32/oz yesterday

           

Base metals:   

Copper US$ 6,454/t vs US$6,408/t yesterday

Aluminium US$ 1,881/t vs US$1,872/t yesterday

Nickel US$ 12,990/t vs US$13,110/t yesterday

Zinc US$ 2,844/t vs US$2,752/t yesterday

Lead US$ 2,094/t vs US$2,114/t yesterday

Tin US$ 21,130/t vs US$21,335/t yesterday

           

Energy:           

Oil US$66.9/bbl vs US$66.2/bbl yesterday

Natural Gas US$2.771/mmbtu vs US$2.805/mmbtu yesterday

Uranium US$27.90/lb vs US$28.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$82.4/t vs US$82.2/t

Chinese steel rebar 25mm US$612.8/t vs US$610.1/t

Thermal coal (1st year forward cif ARA) US$75.8/t vs US$76.0/t

Coking coal futures Dalian Exchange US$196.8/t vs US$196.4/t

           

Other:  

Cobalt LME 3m US$32,000/t vs US$33,000/t

China NdPr Rare Earth Oxide US$43,587/t vs US$44,835/t

China Lithium carbonate 99% US$9,761/t vs US$9,889/t

China Ferro Vanadium 80% FOB US$74.0/kg vs US$74.5/kg

China Antimony Trioxide 99.5% EU US$6.9/kg vs US$6.9/kg

Tungsten APT European US$271-282/mtu vs US$270-280/mtu

 

Battery News

Tesla in talks with major CATL

  • Tesla and China’s number one battery cell manufacturer are reportedly in discussions to supply batteries for Model 3 vehicles produced at the Gigafactory 3 in Shanghai.
  • CATL primarily develop the LiFePo and NMC chemistries in prismatic cell formats and their batteries have been mostly going to electric bus production and plug-in hybrids. The company would need to develop cylindrical cells to support use in Tesla.
  • Negotiations continue as the cell manufacturer expands its global dominance with a number of other prominent deals.
  • CATL signed a supply contract with SAAB successor National Electric Vehicle Sweden (NEVS) in order to enable the production of hundreds of thousands of all-electric cars per year.
  • BMW also signed a $1bn battery supply contract with them to support their future EV production.
  • They have also secured a battery supply agreement with Honda for about 1m electric vehicles.
  • CATL reportedly has a current annual production of 17.5 GWh and they are planning a new factory with a capacity of 24 GWh to come online as soon as next year.

Las Vegas – tunnel express-route loop could be ready by year end

  • Elon Musk’s Boring Company has received first approval for its proposed Las-Vegas express-route.
  • A successful project could lead to the development of many more subterranean express-routes.
  • The initial phase of the project is estimated to cost just $35-55m.
  • Elon Musk’s Boring company, if successful, has the potential to significantly improve urban infrastructure globally

 

UK - Yü Energy launches electric vehicle charging service in the UK

  • Yü Energy is to offer purchase or lease options to businesses and other customers.
  • The UK National Grid is expecting up to 36m EVs on UK roads by 2040.
  • We ask, if the grid can’t even support a proper stable power supply in rural Oxfordshire how the-. are they going to enable the charging of 36m electric vehicles?
  • The grid is going to need allot more copper cabling and distributed power generation to keep up with forecast demand and the current policy of supporting network failures with mobile diesel gen-sets is not going to find favour with green-environmentalists who want to drive their new EVs to Gregs for their Vegan sausages.

 

Nanodots create special interface for Li-ions in batteries for ultra-fast charging

  • The Tokyo Institute of Technology has improved performance in Li-ion batteries through the use of BaTiO3 nanodots
  • We refer readers to Phys.org for further explanation

 

VW accelerates decarbonisation plans

  • Volkswagen update intentions to accelerate its electrification efforts as part of the broad decarbonization plan by adding 20 more “electric models” to its planned lineup in order to produce 22m electric vehicles in the next 10 years.
  • Dr. Herbert Diess, CEO of Volkswagen AG, added “We will be systematically aligning production and other stages in the value chain to CO2 neutrality in the coming years.”
  • The German automaker also reiterated its three-part plan to decarbonize its operation by “first, effective and sustainable CO2 reduction. Second, switch to renewable energy sources for power supply. Third, compensate for remaining emissions that cannot be avoided.”

 

Company News

Altus Strategies* (ALS LN) FOLLOW3.5p, Mkt Cap £6.2m – Indiana Resources due diligence period extended

  • The Company extended the exclusivity period for Indiana Resources to carry pout due diligence on Lakanfla and Tabakorole gold projects in Mali to 6 May 2019.
  • The announcement follows the signing of a non-binding Term Sheet with Indiana (IDA AU, A0.04, Mkt Cap A$4.2m) over projects in February this year.
  • According to the agreement, Indiana will have an option to earn up to 85% interest in Legend Mali (BVI) II Inc., a wholly owned subsidiary of Altus holding a 100% in the projects.
  • Upon reaching selected milestones Altus is set to receive cash and equity in Indiana and retain a 2.5% NSR on the projects.
  • Altus remains the operator of the JV during the initial earn-in period.
  • Lakanfla hosts a “potentially substantial karst-style gold target, analogous to the adjacent FE3 and FE4 pits of the Sadiola mine” while the Tabakorole project “targets a shear zone which has reportedly been mapped for 2.7km long and up to 200m wide”.
  • The projects are located adjacent to the world renowned but exhausted oxide resources of the Sadiola gold mine, and are associated with historical drill results including:
    • Lakanfla – 26.0m @ 5.10g/t and 12.0m @ 9.78g/t
    • Tabakorole – 60.0m @ 2.92g/t and 44.0m @ 3.30g/t

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Bluebird Merchant Ventures* (BMV LN) FOLLOW2.8p, Mkt Cap £6.4m – Bluebird awaiting results from Kochang drilling

(Bluebird is earning into a 50:50 jv with Southern Gold Ltd at Gubong and Kochang)

Click for initiation PDF

  • Yesterday we commented that Bluebird were awaiting news from drilling at Gubong. We should have said Kochang.

*SP Angel act as broker to Bluebird Merchant Ventures

 

Birimian Limited (BGS AU) A$0.16, Mkt Cap A$42.3m – Goulamina lithium corporate update

  • Birimian Limited commence the Definitive Feasibility Study (DFS) for the Goulamina pegmatite lithium project in Mali, building off the positive Pre-Feasibility Study completed in July 2018.
  • The study reported robust financials, with EBITDA averaging A$171m per annum, for the development of a 2Mtpa mill and mine for a minimum life of 16 years, producing 362,000tpa spodumene concentrate.
  • The Environmental Permit for the project has been granted and the Exploitation Permit is the next step in the permitting process.
  • The team have identified multiple opportunities to improve the Project and its returns in the high impact areas of Resource and Reserves, Process Plant Recoveries and Project Infrastructure. Three areas targeted for completion by Q3 2019 include:
    • Improve resource categorisation allowing increases to Ore Reserves and enhance confidence levels in the Mineral Resources and Ore Reserves.
    • Develop Li2O recovery from the 70.4% achieved in the PFS, while improving the spodumene quality from 5.9% Li2O with relatively high iron content of 1.35% Fe2O3 (industry penalty above 1.4% Fe2O3)
    • Water and road infrastructure optimisation are necessary to improve confidence in water resource availability. Optimisation of spodumene transport costs will yield significant benefits, currently accounting for almost one third operating costs.
  • To reflect the business strategy and development, the Company proposes changing its name to Mali Lithium ltd, seeking shareholder approval at the AGM in May.
  • The Company targets completion of the DFS by Q1 2020, with the final investment decision focus for H2 2020.

 

Gem Diamonds (GEMD LN) FOLLOW89.2p, Mkt Cap £123.9m –Strong 2018 results

  • Gem Diamonds reports an 185% increase in attributable profit, before exceptional items, for 2018 of US$26.0m (2017 – US$9.1m). EBITDA, also reported before  exceptional items, grew by 69% to US$82.3m (2017 – US$48.6m).
  • The company has, however, elected not to propose the payment of a dividend in respect of the 2018 financial year and ongoing focus on the Business Transformation, in order to strengthen the balance sheet.”
  • The results are underpinned by a 13% increase in diamond production to 126,875 carats, coupled with a 13% reduction in the volume of waste removal and a 10% improvement in the average revenue to US$2,131 per carat.
  • During the year, the Letseng mine yielded a record fifteen diamonds in excess of 100 carats in size, including a “138.28 carat white diamond [which] achieved US$60,428 per carat, the highest dollar per carat achieved for a rough white diamond during the year” as well as the “910 carat Lesotho Legend” diamond which is described as the fifth largest gem-quality diamond ever recovered” and which was “sold on tender in Antwerp for US$40 million in March 2018.”
  • Including these particularly large stones, the mine also produced a record total of 257 diamonds greater than 20 carats in size (2017 – 213). The company confirms that Prices achieved for Letšeng's large, high-value diamonds remained firm during the year. The recovery and timely sale of the 910 carat Lesotho Legend and the flexible marketing channels used in the sale of Letšeng's high-quality diamonds contributed to achieving an average price of US$2 131 per carat in 2018”.
  • In a mine with the capacity to produce large, high value diamonds, ensuring the recovery, unbroken, of these larger diamonds the company is working on technological solutions toidentify locked diamonds within kimberlite” and “to liberate diamonds using a non-mechanical process. These technologies are aimed primarily at limiting diamond damage and reducing operating costs”.
  • The company has approved the construction of a US$3m pilot plant at Letseng “which employs innovative technology to identify diamonds within kimberlite ore. This project will also include the use of a prototype high-voltage pulse generating unit to liberate the diamonds. We anticipate the pilot plant to be commissioned during Q2 2019.”
  • Gem Diamonds reports a 31st December 2018 cash balance of US$50.8m (2017 – US$47.7m) and, we estimate, a net cash balance of US$16.6m (2017 – US$1.4m).
  • After investing US$99.5m during the year (2017 – US$101.2m) the company generated free cash, before financing, of approximately US$38.9m during 2018 compared to the net outflow of US$3.8m during 2017.
  • Commenting on what he described as a “good set of results”, Chief Executive, Clifford Elphick, confirmed that The Business Transformation process has progressed well and remains on-track to achieve the target of US$100 million in cost savings and efficiencies by 2021. By December 2019, the initiatives already implemented are expected to deliver US$64 million to the end of 2021."
  • Mr. Elphick also disclosed that The mine plan for Letšeng was revised during 2018, with the aim of further reducing the waste stripping through the steepening of inter-ramp slope angles. Mining in accordance with this plan has commenced and is expected to significantly increase the net present value of the mine”.

Conclusion: Gem Diamonds reports a strong performance during 2018 and is continuing to invest in optimising the mine plan at Leseng as well as developing technology to minimise loss and breakage of its larger diamonds.

 

Greatland Gold (GGP LN) FOLLOW2.3p, Mkt cap £74m - Farm-in agreement with Newcrest Mining at Havieron

  • Greatland Gold reports that it has agreed a farm-in with Newcrest Mining under which Newcrest can earn a 70% interest in the Havieron gold project located some 45km east of Newcrest's Telfer gold mine in the Paterson region of Western Australia.
  • The agreement id staged over a six year period with Newcrest managing the exploration and achieving staged levels of ownership on the achievement of expenditure hurdles and exploration and development milestones.
  • Newcrest is committed to spend US$10m, and a minimum of US5m, during the first 12 months and on expenditure of a further US$10m during the second year will have earned a 40% interest.
  • Expenditure of a further US$25m during the third stage of the agreement increases Newcrest's interest to 60% and the final 10% interest, taking overall ownership to 70% follows the expenditure of a further US$20m. 
  • ,In addition, Newcrest will have the right to acquire an additional 5% interest, taking it to a 75% holding. at a "fair market value".
  • "The current intention of both parties is that, subject to a positive Feasibility Study outcome, the ore from the proposed Havieron Joint Venture will be toll processed at Newcrest's Telfer Gold Mine ("Telfer"), which sits approximately 45km to the west of Havieron". This strategy is seen as advantageous to the joint venture in eliminating the requirement to build a stand-alone processing plant and hence delivering capital cost savings, as well as reducing the development time to delivering initial cashflows.
  • Commenting on the conclusion of the agreement with Newcrest, Gervaise Heddle, CEO of Greatland Gold, said that "we are very excited about the future of Havieron and the Paterson region more generally and we believe that this agreement with Newcrest will serve as a foundation on which we can build Greatland into a large and successful business delivering significant returns to our shareholders"
  • Newcrest's General Manager, Fraser MacCorquodale, echoed the sentiment saying "We are excited to partner with Greatland Gold on this opportunity. The Paterson province is a great place for gold-copper ore bodies.  Leveraging our existing operations at Telfer represents an opportunity to create value for both companies and their shareholders"
  • Conclusion: The Paterson region is attracting substantial exploration interest at present and securing the involvement of Australia's major gold producer, with a nearby processing plant at Telfer, should enable the Havieron project to advance more rapidly.

 

IronRidge Resources* (IRR LN) FOLLOW18.75p, Mkt Cap £58.0p – Interim financial report

  • IronRidge report interim financial results for multi-commodity Africa-focused exploration efforts, primarily advancing lithium in Ghana, gold in Chad and gold and lithium across Ivory Coast.
  • Ghana:
    • Two phases of Reverse Circulation (“RC”) drilling has defined multiple broad, high-grade spodumene dominant pegmatite intersections across the Ewoyaa project within the prospective 684km2 portfolio. Drill results were returned at a 0.5% Li2O cut-off and maximum 10m of internal dilution including 128m @ 1.21% Li2O from 3m in hole GRC0004, 111m @ 1.35% Li2O from 37m in hole GRC0027, 56m @ 1.71% Li2O from 48m in GRC0034, 72m @ 1.27% Li2O from 24m in GRC0048, 45m @ 1.57% Li2O from 70m in GRC0042 and 45m @ 1.51% Li2O from 41m in GRC0039.
    • Additional mineralisation was discovered within a valley without any surface expression in the norther extension of the Ewoyaa project, indicating the significance of ‘blind’ pegmatite exploration potential.
    • The Company initiated and completed 1,350-line kilometres of ultra-high resolution helicopter borne geophysics including magnetics and radiometrics data over the Saltpond license. The survey was designed to extend the existing survey and will assist in the ongoing targeting of new pegmatites within the portfolio in conjunction with the regional soil geochemical data set.
    • IronRidge also completed a 1,000m metallurgical diamond drill core programme, which yielded 427kg samples sent to Nagrom in Australia for preliminary metallurgical work.
  • Chad:
    • Exploration within 900km2 portfolio defined a significant gold target at Dorothe in 15km of trenching at approximately 200m spacing over a 3km x 1km surface area. Broad trenching intersections were returned at a 0.4g/t gold cut-off and maximum 4m dilution including highlights 84m @ 1.66g/t*, 4m @ 18.77g/t, 32m @ 2.02g/t, 24m @ 2.53g/t, 12m @ 2.32g/t and 4m @ 5.27g/t gold.
    • Six coherent, large-scale high-priority gold anomalies were interpreted in trenching results received to date with observations from geological logging, structural mapping and airborne magnetics defining two broad target types; steeply east dipping ‘Main Vein’ target and shallow west dipping ‘Sheeted Vein’ targets.
    • Additional gold targets with trenching results or coincident artisanal workings have been defined at Echbara, Am Ouchar, Kalaka and Guerere.
  • Ivory Coast:
    • The first phase soil programme over the Kineta license in the north-east of the Country collected a total of 3,392 soil samples on a 400m x 50m and infill 200m x 50m grid over an 11 x 4.5km area. The results supported a broad 7km long by 1.5km wide anomalous gold corridor with two >30ppb up to 3.7g/t high-priority coherent soil anomalies with coincident artisanal workings and five lower priority soil anomalies.
    • At Bodite and Bianouan, auger drilling, pitting and trenching programmes were commenced, at Marahui a soils programme was commenced and at Vavoua a 100m line spacing airborne magnetics geophysical survey was commenced.
    • The work forms preliminary exploration efforts across the expansive IronRidge portfolio – recently expanding to 3,584km2 gold with the binding earn-in agreement of the Zaranou gold project and 1,177km2 for lithium.
    • Zaranou hosts eight high priority targets coincident with large-scale artisanal workings, containing evidence of gold mineralisation extending 10m into pyritic schist host rock averaging 1.5-12g/t Au.
    • IronRidge has the option to acquire up to 100% of the Zaranou project through staged earn in arrangements and expenditure to Feasibility Study, subject to the vendor parties retaining an aggregate net smelter royalty, of 2.5% of which 50% may be acquired for US$4m.
  • In November 2018, IronRidge Resources raised approx. £5.4m through a subscription and placing of 27,022,000 new ordinary shares at a price of 20p/share to support the company transition from explorer to developer.
  • For the half year ended 31 Dec. 2018, the comprehensive income for the period improved 52% - loss A$1.92m compared to loss A$4.0m in Dec. 2017.
  • Since June 2018, net assets have also risen, climbing from A$26.2m to A434.5m in Dec. 2018.

*SP Angel act as nomad and broker to IronRidge Resources

 

KEFI Minerals* (KEFI LN) FOLLOW1.7p, Mkt Cap £10.7m – Funding update

  • The Company reports it has launched the next stages of its engagement with its bond arranger and exclusive placing agent, ACT Capital.
  • Next steps include the formation of KEFI’s Luxembourg based company that would issue the planned listed bonds.
  • ACT Capital, a Switzerland-based boutique financing arranger, specialises in advising small and mid-size companies on private debt and alternative sources of funding. ACT manages the process from the inception stage through to final private placement and disbursement.

Conclusion: The issue of bonds (c.$160m) funding the major share of the Tulu Kapi is the key to the start of construction activities and we are looking forward to the news on the progress of attracting debt finance for the project.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Kenmare Resources (KMR LN) FOLLOW202p, Mkt Cap £219m – Profits rise on higher production and ilmenite prices but operating cost rise is of concern

  • Kenmare are targeting a 20% increase in in production 1.2mt of ilmenite by 2021.
  • Sales rose 26% US$262m vs US$208m yoy on higher volumes and better prices
  • EBITDA rose by 54% to $93m on record shipments vs US$61m yoy
  • Profit after tax rose 162% to US$51m vs US$19m yoy
  • Net Cash turns positive at $13.5m vs net debt of $34.1m a year earlier .
  • Production of Heavy Mineral Concentrate rose 4% to 1,370,800t vs 1,323,000t yoy
  • Ilmenite production rose 958,500t vs 998,200t yoy
  • Zircon production rose to 48,400t vs 48,600t yoy
  • Shipments of finished products rose 3% to 1,074,400t vs 1,040,400t yoy
  • Cash operating costs rose 11% to US$145/t of final product vs US$131/t yoy due in part to higher utilisation of diesel-powered electric generators

Conclusion:  Kenmare has done well from a production and sales perspective but sensitivity to using more diesel and higher diesel prices is of future concern due to instability of the Mozambique national grid. The Mozambique grid is sensitive to voltage fluctuations which are probably caused by Moma and other demand exceeding available supply.

*An SP Angel mining analyst has visited Kenmare’s Moma mineral sands project in Mozambique and BlueJay’s Dundas (formerly Pituffik) ilmenite sands project in Greenland as well as Sierra Rutile’s (now part of Illuka) operation in Sierra Leone. *SP Angel act as nomad and broker to BlueJay Mining. 

 

Oriole Resources (ORR LN) FOLLOW0.375p, Mkt cap £2.6m – Cuts losses in 2018

  • Oriole Resources has reported a substantially reduced loss of £2.55m in 2018 compared to the £7.50m recorded in 2017. Among the contributory factors highlighted were a 26% reduction in administration expenses  reflecting the Group's reduced cost base and its return to a focus on earlier-stage exploration”.
  • The company also points out that A number of one-off costs impacted the 2017 results, with £5,060k of one-off items recognised, somewhat offset by the recognition of £2,883k profit on the sale of the interest in the Altintepe mine in Turkey. The 2017 one-off items included a provision for a VAT repayment of £557k which was the subject of a long-running dispute with the UK tax authorities. This dispute has now been successfully resolved and £516k of that accrual has been released to the Income Statement in 2018, with the cash expected to be received from HMRC early in Q2 of 2019”.
  • The company’s cash balance at 31st December 2019, £1.29m (2017 - £2.04m) is likely to have been enhanced by incoming funds expected from the resolution of the VAT dispute and the commencement of success-based payments from one of our Turkish partners”.
  • Chairman, John McGloin, described 2018 as “a year of transformation for the company” during which it has changed its name, appointed a whole new Board of Directors and implemented a new strategy focused on early stage exploration … [with a strategy] … to develop a portfolio of exploration projects for gold and base metals, and identify potential partners to take them into the advanced exploration and mine development stages”.
  • Commenting on the change of direction implemented over the year, CEO, Tim Livesey, said thatOriole is once again financially stable and is delivering excellent operational results with high-quality partners, clearly demonstrating the value across our portfolio of highly exciting early-stage assets."

Conclusion: Oriole Resources is moving back on track as an exploration focussed company which has, historically identified  appropriate partners to take their discoveries into development and production while sharing in the upside. Recent receipts from the company’s earlier generation of Turkish projects demonstrate the viability of the model and should help to bolster the balance sheet.

 

 

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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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

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This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc. 

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