Italian Bridge Collapse Could Lead To Higher Vanadium Content In European Rebar

SP Angel's Morning View – Thursday 16 08 18

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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.

• Amur Minerals (AMC) FOLLOW – Kun Manie drilling update
• Horizonte Minerals (HZM) FOLLOW – Araguaia operational update
• IronRidge Resources (IRR) FOLLOW - High-grade gold trenching results in Chad
• Shanta Gold (SHG) FOLLOW – Interim results – 2018 guidance maintained
• Stratex International (STI) FOLLOW – Interim Results

Italian bridge collapse has potential to raise standards for European and Chinese vanadium content

Questions are being asked in relation to yesterday’s Italian bridge collapse

1. How did Davide Capello, the Italian goalkeeper survive the 160ft fall and did the Italian tax authorities act to save him?
2. Did the foundations give way in poor ground.
3. Is there sufficient ‘vanadium’ in the rebar reinforcement used in Italian and European bridges (see link for chart showing Consumption vs % vanadium standards).

Gold - Gold likely to remain under pressure as money continues to pile into the US dollar

• Trump's election marked a major turning point in the US attitude towards foreign policy, eg America First, everyone else Second!
• Further interest rate rises appear inevitable in the US this year given how well the US economy is performing adding to US dollar strength and potentially causing an emerging market crisis if weaker nations raise rates in an attempt to shore up their currencies
• Trump's tax changes is also causing the repatriation of huge fund flows back into the US compounding dollar inflows
• The effect is to put Emerging Market stocks on SALE, 'Everything Must Go' as American trustees and fund managers exercise their traditional SELL it now! approach 
• In the words of Warren Buffet, "Only when the tide goes out do you discover who's been swimming naked." eg, in this case, who is over leveraged with US dollar or similar debt versus local earnings

Dow Jones Industrials		-0.54%	at	25,162
Nikkei 225		-0.05%	at	22,192
HK Hang Seng		-0.82%	at	27,100
Shanghai Composite		-0.66%	at	2,705
FTSE 350 Mining		+1.61%	at	16,805
AIM Basic Resources		-2.05%	at	2,230

Economics

Currencies

US$1.1388/eur vs 1.1341/eur last week.  Yen 110.79/$ vs 111.36/$.  SAr 14.473/$ vs 14.220/$.  $1.272/gbp vs $1.273/gbp.  

0.727/aud vs 0.723/aud.  CNY 6.897/$ vs 6.900/$.

Commodity News

US Dollar strength and higher US interest rates continues to draw short-term funds out of commodities

• The Bloomberg Dollar Spot Index has risen +0.55% since the beginning of the week, climbing to 1197.9, the highest level since June 2017.
• As Turkey’s financial crisis expands and draws in casualties from emerging markets, concern is spreading across equity and metal markets.
• Base metal markets, recorded by the London Metals Index (LMEX), have fallen -2.37% since Monday and most contracts in London have tumbled more than 2% during yesterday’s trading.

Precious metals:          

Gold US$1,182/oz vs US$1,188/oz yesterday

   Gold ETFs 68.4moz vs US$68.4moz yesterday

Platinum US$782/oz vs US$789/oz yesterday

Palladium US$866/oz vs US$891/oz yesterday

Silver US$14.67/oz vs US$14.90/oz yesterday

Base metals:    

Copper US$ 5,907/t vs US$5,939/t yesterday – LME copper continues to drop value, touching a low of $5,622/t to enter a bear market, falling more than 20% from a near four-year high hit just over two months ago.

• Copper price continued falling as a result of extended government-mediated wage negotiations between BHP Billiton Ltd. and the main union who agreed to put a new offer to vote by workers, which would alleviate supply disruption concerns. The company has averted striking at the world’s largest copper mine responsible for close to 5% of global supply.
• Negotiations continued into the early hours of Wednesday morning when Patricio Tapia, the union’s president, reported the union had “received a new offer”.
• Despite robust fundamentals, metals currently appear more driven by financial markets though in the medium term we expect a deficit in copper by the year end to pull prices higher again.
• Escondida strike deferred

Aluminium US$ 2,041/t vs US$2,037/t yesterday

Nickel US$ 13,170/t vs US$13,210/t yesterday

Zinc US$ 2,346/t vs US$2,417/t yesterday

Lead US$ 2,023/t vs US$2,054/t yesterday

Tin US$ 18,625/t vs US$18,795/t yesterday 

Energy:            

Oil US$70.9/bbl vs US$72.2/bbl yesterday

Natural Gas US$2.937/mmbtu vs US$2.946/mmbtu yesterday

Uranium US$26.25/lb vs US$26.15/lb yesterday

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$66.9/t vs US$67.8/t

Chinese steel rebar 25mm US$674.3/t vs US$675.1/t

Thermal coal (1st year forward cif ARA) US$87.9/t vs US$88.8/t

Premium hard coking coal Aus fob US$183.7/t vs US$183.7/t

Other:   

Cobalt LME 3m US$64,250/t vs US$64,250/t

Quarterly hard coking coal US$196/t vs US$196/t

Company News 

Amur Minerals (AMC) FOLLOW 3.85p, Mkt Cap £25.5m –Kun Manie drilling update

• Amur Minerals reports that, following the completion of 48 drill holes totalling 7,757m during July, it has now completed over 80% of its planned (20,300m) 2018 programme with 114 holes (16,558m) now completed.
• The programme is intended to provide infill coverage to meet the requirements of Russian permitting regulations, upgrade high-grade inferred resources to the indicated level which would enable their incorporation in the pre-feasibility study and to provide additional material for metallurgical sampling “along the mineralised trend between, and including, the deposits of Ikenskoe / Sobolevsky ("IKEN") and Kubuk ("KUB").”
• The progress to date means that the company has now completed “infill drilling of limited in each of the four areas where we anticipate mining to occur” which “represents the final milestone required for inclusion in our work to obtain final Russian reserves as in accordance with Russian Federation requirements to obtain the necessary approvals for mine plans, designs and schedules”.
• Work on the conversion of higher grade inferred resources to indicated is now nearing completion at Ikenskoe/Sobolevsky and the company anticipates that the inclusion of this mineralisation within the mine plan should enhance the NPV and IRR and that“by mining this during the first 10 years of production, there is added upside related to the reduced Net Profits and Metal Royalties structure for the Far East which will further benefit the project.”
• Drilling to obtain metallurgical test samples is now well advanced  with approximately 3700m (55%) of the planned 6,800m programme now  complete. “Completion of the metallurgical sample collection programme is anticipated to generate from six to seven tonnes of sample allowing for detailed metallurgical test work related to final flowsheet design, plant design and metallurgical recovery determination.  Also key to the processing of the sample will be the determination of the content of the concentrate which is utilised in setting smelter payability”.
• In addition to the main programme, four holes, totaling 787m were completed at Gorny, east of the MKF deposits in order to help the geological and structural understanding which indicated the presence of “thin (4.2 metre) mineralised zones averaging 0.50% nickel (ranging from 0.32% to 0.73%) and 0.13% copper.  The drill intersections are interpreted to be similar to those up dip, low grade structures above the deeper economic mineralisation along the eastern half of MKF.  Deeper drilling will be required in the future to test this concept, however, completion of drilling in the Gorny area is of a low priority at this time.”

Conclusion: Amur Minerals 2018 drilling programme is now over 80% complete and, once the data is integrated into the resource model, is expected to result in upgrades to the indicated resources which the company expects to enhance the project economics. Further material for metallurgical testing should also assist in the flowsheet design and a better understanding of the likely payability of the resulting mineral concentrates

*SP Angel act as Nomad and Broker to Amur Minerals

Horizonte Minerals (HZM) FOLLOW 3.55 pence, Mkt Cap £50.9m – Araguaia operational update

• Horizonte Minerals reports that it expects to announce the final outcome of its feasibility study on the Araguaia ferronickel project in Brazil in October 2018.
  • The company has made modifications to the plant design in order “to accommodate the potential expansion of a second Rotary Kiln Electric Furnace ('RKEF') process line in the future after the first line is fully commissioned, providing flexibility to double the output of the operation;”
  • Presumably as a result of these adjustments to the design, “the Final Araguaia capex estimate is currently being prepared for internal review”
  • The company’s cash position at 30^th June 2018 is £8.9m.
  • The company also notes that “Global demand for nickel has been reported to be increasing by 7.3% this year, while supply rises 6.8% to 2.210 million tonnes1. Analysts in the sector have also stated this year that they expect the global nickel market deficit to widen to 88,000 tonnes, from 72,000 tonnes in 2017”and points to nickel’s strong performance this year.
    • Commenting on the progress at Araguaia, CEO, Jeremy Martin noted that “There has been a considerable amount of work involved in the optimisation of the plant layout and design where we have been able to successfully reduce the overall plant footprint, close-couple the equipment packages leading to a reduction in the overall material quantities (cut and fill material, concrete and steelwork). Additionally, we have now designed the plant in such a way to allow the potential to include a second RKEF process line in the future allowing for an increase in the annual nickel production”
    • The current plan envisages an open pit mining project running at 900,000tpa of ore over a 28 year mine life to produce around 14,500tpa of nickel in 52,000tpa of ferronickel. The decision to modify the plant design to accommodate a second RKEF suggests that management is already preparing to expand on these levels, though perhaps in stages.

Conclusion: We look forward to the feasibility study for Araguaia in Octeober this year.

IronRidge Resources (IRR) FOLLOW 25p, Mkt Cap £67.5m- High-grade gold trenching results in Chad

• Multiple high-grade gold trenching results have been obtained from the 200m infill and extensional trenching program at the Dorothe prospect in Chad, Central Africa.
• Chief Geologist, Len Kolff, notes “the results are highly encouraging, not only due to the widths and grades intersected in ‘fresh rock’”, with intersections recording up to 4m @ 18.77g/t including (2m @ 36.2g/t gold).
• Results to date have defined five large, coherent gold targets over 500m to 1.2km strike length and 100m to 200m widths from trenching; with targets still open along strike.
• Initial results from the target definition of 70% trenching, with 6,608m of results received to date for an overall 9,360m of trenching completed.
• Geological trench logging results form part of observations from structural mapping and airborne geophysics which confirm previous interpretation with two broad target type defined; steeply east dipping vein mineralisation associated with the ‘Main Vein’ target and shallow west dipping ‘Sheeted Vein’ targets. 
• Additional results are pending for 2,376m of trenching completed to the west of the ‘Main Vein Swarm’ and the remainder of Trench 29, ahead of later field work. IronRidge are recommending in October 2018 with a ground geophysics Induced Polarization (‘IP’) survey over Dorothe to further define ‘disseminated sulphides potentially associated with gold mineralisation’ drilling targets at depth.
• “Detailed trench logging has enhanced our understanding of structural, lithological, and vein type controls on mineralisation; providing further encouragement that we are dealing with a potentially large mineralised system”.

Shanta Gold (SHG) FOLLOW 4.85p, £37.8m – Interim results – 2018 guidance maintained

• Shanta Gold reports an interim, after-tax, profit of US$7.1m compared to an interim loss of US$2.1m in 2017.
• Operating cash flow of US$12.1m rose from the US$3.6m recorded in H1 2017 and combined with reduced investment expenditure of US$7.8m (H1 2017 – US$10.2m) the company generated free cash flow before financing of US$4.3m during H1 2018 which compares with cash outflows before financing of US$6.6m in H1 2017 and US$3m for the full year 2017.
• As a result, Shanta Gold’s net debt at 30^th June 2018 amounted to US$38.1m compared to US$39.5m at 31^st December 2017.
• The results reflect H1 gold production of 38,207oz of gold at a cash cost of US$549/oz and all-in-sustaining costs (AISC) of US$757/oz(H1 2017 – 40,073oz at US$547/oz and AISC of US$715/oz) and gold sales of 37,827oz at a an average price of US$1,303/oz.
• Shanta Gold highlights its cost initiatives which have improved “the cost base by approximately US$85 /oz in less than twelve months”
• The company is maintaining its 2018 guidance of 82-88,000oz of gold production at an AISC of US$680-730/oz.
• Commenting on the results which he described as demonstrating the effectiveness of the company’s “stringent cost focus strategy”, Chief Executive, Eric Zurrin, said that “Operationally, we are doing very well at New Luika - we achieved a record monthly underground production in June and importantly remain on track to achieve our annual production guidance for the year of 82,000 - 88,000 oz.”
• He also highlighted exploration successes at Singida where two phases of drilling produced “encouraging intersections” shortly to be followed up by ground geophysics, and at Bauhinia Creek where underground drilling has confirmed “the extension of high-grade mineralisation adjacent to our existing underground operation”.

Conclusion: Shanta has returned to positive cash flow and profitability as its focus on costs delivers savings. Exploration has yielded some success both at Bauhinia Creek and at Singida.

Stratex International (STI) FOLLOW 0.37p, Mkt cap £2.6m – Interim Results

• Stratex International reports a pre-tax loss of £3.3m for the six months to 30^th June (H1 2017 profit of £0.9m).
• The loss is attributed primarily “to the cancellation of TSR's licences in Ethiopia which resulted in the impairment of the carrying value of the licences by TSR, and a write-off to its profit and loss of approximately US$8.7m. Stratex's share of this write-off was approximately US$2.7m”.
• The company notes, however, that it “has significantly reduced its administrative and operational costs during the period to £1.04m compared to £1.49m in the 6 months ended 30 June 2017” and that it has received repayment of the A$1.6m loan to Crusader resources.
• Following these measures and a £1.15m fund raising completed in June, the cash balance at 30^th June stands at £2.3m.
• Under a management team headed by CEO, Tim Livesy, “The first six months of 2018 have been a time for realignment on existing assets and for an organisational overhaul in the Group, following the failed bid for Crusader in 2017. We have a new CEO and CFO, new assets in Cameroon, and have signed a highly significant exploration earn-in agreement with IAMGOLD on the Dalafin licence in Senegal.”
• The company expects that its exploration efforts over the next 6 to 12 months will concentrate on Cameroon and on Senegal.
• In Cameroon, Stratex is committed to spending “US$0.56m within the first year of the option and, subject to ongoing results, would expect to spend a total of US$3.12m over 4 years to earn-in to a 90% interest in … two early-stage gold projects in what we believe to be an exciting new gold exploration district.”
• In Senegal, at Dalafin, “IAMGOLD now have an option to take a 70% stake by spending a total of US$8 million, and have already begun a fast-tracked initial programme focused on the southernmost prospect, Madina Bafé, located within a few kilometres of IAMGOLD's 2.52 Moz Boto gold resource (Indicated and Inferred grading 1.61 g/t Au). A 5,750m drilling programme at Madina Bafé commenced in June and results from the first round of air-core drilling are expected towards the end of Q3-18”.
• At the Board level, Chairman Peter Addison has announced that he is to retire effective 3^rd September and also that fellow director, Chris Worcester, “has also decided to step down at this time after great service to the Group for which I thank him”.

Conclusion: The focus at Stratex is shifting to west Africa following the turbulence surrounding the Crusader Resources episode.

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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