SP Angel . Morning View . Thursday 01 09 22
Metals slide as Chinese PMIs indicate potential contraction in August
MiFID II exempt information – see disclaimer below
Conroy Gold and Natural Resources PLC (LON:CGNR, OTC:CGDNF) – Clontibret drilling results
Gem Diamonds Ltd (LON:GEMD) – Increased costs for fuel and explosives and exceptional rainfall squeezes H1 profits while demand remains strong
Galan Lithium Ltd (ASX:GLN) – Testwork demonstrates good flow rates and high lithium grades at the HMW Lithium Project
Hummingbird Resources Plc (LON:HUMR) – Kouroussa development update
Power Metal Resources PLC (AIM:POW)* – Exploration license granted in South Australia
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* – Valuation: 168p/s – 760L drilling improves resource definition and adds further tonnage potential at the Ming mine
Resolute Mining Ltd (LON:RSGR) (ASX:RSG, LSE:RSG) – Mineral Resource increases to 2moz at Syama North, Mali
Rio Tinto PLC (LSE:LON:RIO) – Agreement with Turquoise Hill for US$3.3bn acquisition to simplify ownership of Oyu Tolgoi
Gold prices hit six-week low on prospect of more central bank rate hikes
- Gold prices continued to decline on Thursday on expectations that the Federal Reserve and other central banks will hike rates to curb inflation.
- Gold fell for a fifth straight day, giving up virtually all gains made throughout late-July and August, while the dollar and treasury yields gained ground.
- Fed official Loretta Mester said yesterday the US central bank needs to raise its benchmark rate above 4% by early 2023.
- Meanwhile in Europe, money markets are currently pricing in a 125bp hike by the ECB in October.
- A strong dollar is bearish for gold as it makes bullion more expensive for holders of other currency, while rising treasury yields reduce the appeal of holding non-interest-bearing bullion.
- Global gold ETF holdings have been experiencing outflows since April this year which is a sign the market things the gold price will decline – down from 106Moz at the beginning of April to 99.8Moz today.
Chile’s July copper production falls 8.6% YoY
- Top copper miner Chile’s production continued to fall in July, down 8.6% following a 7% drop in June, both year-on-year.
- Declining grades and persistent droughts have hit the copper production.
- Chile’s July manufacturing output fell 5.1% YoY.
Coal – Lower than normal rainfall continues to support thermal coal prices
- Sichuan province which normally sees peak rainfall from May to October saw just 30% of normal rainfall in July and 60% in August leaving hydropower dams struggling.
Dow Jones Industrials -0.88% at 31,510
Nikkei 225 -1.53% at 27,661
HK Hang Seng -1.76% at 19,903
Shanghai Composite -0.54% at 3,185
Economics
China – Chinese PMI data revisions show economy teetering on edge of recession. PMIs are certainly far off 5.5% GDP growth
All Chinese provinces reporting covid cases in past 10 days
- China continues to suffer loss of hydropower due to ongoing drought conditions in certain provinces in Southwest China
- Caixin Manufacturing PMI 49.50 for August vs 50.4 previously and 50.2 expected
- Official NBS General PMI 51.7 in August vs 52.5 previously
- Official NBS Manufacturing PMI 49.4 in August vs 49.0 previously
- Oficial NBS Non-Manufacturing PMI 52.6 in August vs 53.8 previously
- China to hold its 20th National Congress of the CPC in Beijing on October 16th – they will have much to discuss
- China’s Zero Covid strategy will likely be at the head of the agenda. The West has largely recovered from Covid with China looking increasingly hamstrung and isolated.
- China has already pledged significant expenditure on new water infrastructure for transport and to aid agriculture
Droughts and power coupled with Covid-19 related disruptions see manufacturing sector slip into a contraction in August.
- The Caixin report mentions softening demand and a drop in new business while companies reduced inventories amid an uncertain outlook.
- Employment fell for the 12th time in the past 13months as firms cut staff to save costs.
- On a more positive side, inflationary pressures eased with input costs reporting the first decline since May 2020.
- In response, manufacturers cut output prices for the fourth month in a row and at a steeper rate in an effort to increase sales.
- Chengdu, the capital of the southwestern Sichuan province, was put in a lockdown from Thursday night amid growing number of Covid infections.
- A city of 21m residents, Chengdu is the fourth largest city by population and sixth biggest by GDP contribution (~1.7% compared t 3.8% for Shanghai and 3.6% in Beijing).
- The lockdown makes Chengdou the biggest city to face new curbs since Shanghai’s two month lockdown earlier in the year.
US – Equity futures and bond extended selloffs on Thursday morning amid tighter monetary policy expectations and weaker than expected Chinese PMI numbers.
- The two-year Treasury yields touched 3.5% this morning, the highest level since 2007 and up from ~0.25% a year ago.
- The US$ index is little changed this morning trading around 108.9, the highest level in over 20 years.
- NFPs will be closely watched for the strength of the labour market in the US with monthly reading running strong so far despite economic outlook headwinds.
- Estimates are for 298k reading, down from 528k recorded in July and on the higher end of the pre-Covid range.
Fed shock treatment hits shipping rates as consumers and businesses cut back on imports
- US private businesses hired 132K workers in August, down from 268K in July according to the ADP (NASDAQ:ADP) National Employment Report
- We expect US Non-Farm payroll numbers to reflect some slowing of the economy though maybe with a slower rate of decline
- Re-shoring of manufacturing to the US maybe supporting higher employment rates alongside the replacement of post-covid retirees an long-covid suffers
- We reckon the Fed will still put the boot into the US economy to well-and-truly nail domestic inflation to the floor despite the near-10% fall in crude oil prices this week.
- Drewry’s composite World Container Index has fallen 42% from its peak and another 4% this week (Bands.financial)
- The index remains 64% higher than the 5-year average
- Freight rates from Shanghai to Los Angeles fell 6% last week $6,127 per forty-foot container
Japan – The yen is about to break the JPY140 mark, the lowest since 1990s, amid growing expectations for a 75bp rate increase at the Fed’s September meeting.
Mexico – The central bank slashed national economic growth projections from 1.6% to 2.4% in 2022 on “slower growth of the US economy and industrial activity” reducing external demand, FT reports.
- In addition, Banxico flagged the possibility of trade disputes with the US and Canada that may affect trade flows and investments between countries.
- Earlier the US and Canada requested consultations under the USMCA trade pact over the country’s nationalist clean energy policies favouring state run companies at the expense of private firms that invested heavily in the sector over the last decade.
- The bank maintained its estimate for 2.2% growth in 2023.
Ukraine – Representatives of the International Atomic Agency (IAEA) are on their way to the Russian occupied Zaporozhzhia Nuclear Power Plant.
Ukrainian Energoatom, a nuclear power holding company, said yesterday that on of the site’s six reactors was forced to shut down after an emergency protection system was activated amid a mortar attack by Russian forces on the largest nuclear power site in Europe.
Zambia – The IMF granted a $1.3bn to the government to advance talks with creditors on exiting a default announced during the pandemic.
- The three-year bailout “will help re-establish sustainability through fiscal adjustment and debt restructuring” through an “homegrown economic reform plan”.
- In 2020, Zambia became the first African borrower to default in the pandemic when it stopped paying $17bn of external debt under the previous administration with China being the largest creditor with ~$6bn in outstanding loans.
Germany – Russia turns off gas to Germany through Nord Stream pipeline citing maintenance issues
- We advise German households to stock up on Candles and bushels of firewood for winter.
Russia – Chairman of Lukoil, the Russian oil company has died after falling from a hospital window in Moscow
- At least it was a quicker death than from Novichok
UK – Government bond prices fall as markets expect Truss to borrow to fund tax cuts and energy crisis
- Markets love to anticipate government policy which is not a particularly difficult game when so much is laid bare by competing political foes
- Truss is looking to use John Redwood to sort out the Treasury obsession of balancing the books
- This means more money for funding critical infrastructure projects such as Nuclear, gas fields and pipelines, defense etc..
- High inflation rates are almost inevitably going to drive interest rates higher as the UK follows the US in trying to control inflation
- Foreign investors are reported to have sold some £16.6bn of gilts in July and we suspect they may have sold more in August when the data emerges.
Boris Johnson to sign £30bn deal for a new nuclear power station at Sizewell C though he is not supposed to make any major decisions as he exits No10.
- Boris is essentially committing the government to a 20% (up to £6bn) stake in the £20-30bn project
- We wonder what other minor cheques Boris will sign before he is usurped.
- Boris’s plan is for the UK to develop eight new nuclear power plants, indicating the development of a series of Rolls Royce (LON:RR) micro-nukes may be on the agenda.
- Boris’s wife swept away Teresa May’s John Lewis furnishings when they moved into no10 and Boris is entitled to take the furnishings he paid for with him.
- We wonder what Liz Truss will settle for?
- While the UK heads into an energy crisis, the next probable leader offers to scrap motorway speed limits.
Malaysia - Prime minister Mahathir Mohamad has been hospitalised with Covid
Bhutan – to reopen to international tourists as Himalayan kingdom ditches zero-covid policy
- The Kingdom has also abolished its minimum daily package rate of $200-250 a night.
Currencies
US$1.0019/eur vs 1.0018/eur yesterday. Yen 139.23/$ vs 138.50/$. SAr 17.183/$ vs 16.997/$. $1.160/gbp vs $1.167/gbp. 0.683/aud vs 0.689/aud. CNY 6.903/$ vs 6.895/$.
US Dollar index – 108.94 / +0.22% on week
Commodity News
Precious metals:
Gold US$1,705/oz vs US$1,721/oz yesterday
Gold ETFs 99.9moz vs US$100.0moz yesterday
Platinum US$845/oz vs US$852/oz yesterday
Palladium US$2,093/oz vs US$2,120/oz yesterday
Silver US$17.76/oz vs US$18.40/oz yesterday
Rhodium US$13,950/oz vs US$14,100/oz yesterday
Base metals:
Copper US$7,704/t vs US$7,920/t yesterday
Aluminium US$ 2,314/t vs US$2,405/t yesterday
Nickel US$ 20,880/t vs US$21,369/t yesterday
Zinc US$ 3,353/t vs US$3,490/t yesterday
Lead US$ 1,931/t vs US$1,988/t yesterday
Tin US$ 21,855/t vs US$23,500/t yesterday
Energy:
Oil US$94.8/bbl vs US$99.8/bbl yesterday
- Crude oil prices continue to trade down driven by demand-induced concerns that have wiped almost 10% off the price this week, with already volatile trading accentuated by a material decrease in futures liquidity.
- European energy prices plunged lower yesterday following comments by EU officials that they would take further steps to reduce wholesale electricity prices across the continent.
- The EU has already agreed a voluntary goal to cut gas consumption by 15% over the Winter period, with Continental gas demand reportedly down by over 10% y/y driven by industrial shutdowns and substitution.
Natural Gas US$9.051/mmbtu vs US$9.143/mmbtu yesterday
Uranium UXC US$51.20/lb vs US$51.20/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$100.2/t vs US$98.4/t
Chinese steel rebar 25mm US$588.1/t vs US$602.5/t
Thermal coal (1st year forward cif A RA) US$305.0/t vs US$302.0/t
Coking coal swap Australia FOB US$300.0/t vs US$315.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$90,529/t vs US$91,007/t
Lithium carbonate 99% (China) US$68,874/t vs US$68,962/t
China Spodumene Li2O 5%min CIF US$4,990/t vs US$4,990/t
Ferro-Manganese European Mn78% min US$1,227/t vs US$1,227/t
China Tungsten APT 88.5% FOB US$333/t vs US$333/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 7.3/lb vs US$7.3/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg
China Ilmenite Concentrate TiO2 US$334/t vs US$334/t
Spot CO2 Emissions EUA Price US$83.0/t vs US$82.9/t
Brazil Potash CFR Granular Spot US$860.0/t vs US$860.0/t
Battery News
Toyota boosts planned investment into US battery plant to $3.8bn
- Toyota has increased planned investment in a new US battery plant from $1.29bn to $3.8bn, partly in response to rising consumer demand for electric vehicles, Reuters reports.
- Battery maker Panasonic will be a strategic partner with Toyota through the Prime Planet Energy & Solutions (PPES) joint venture.
- The plant is due to open in 2025 and Toyota now plans to add two production lines dedicated to making batteries for fully electric vehicles at the Liberty plant, in addition to the four lines initially planned to make smaller batteries for hybrid vehicles.
- Initially, the plan will build cells with NMCC chemistry though this may change over time.
Company News
Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF) 21.25p, Mkt Cap £9.7m – Clontibret drilling results
- Conroy Gold reports results from the first three holes of its 3,000m, 8-hole drilling programme at its Clontibret prospect in the Longford-Down Massif in Ireland where it is working with its joint-venture partner, Demir Export.
- The company highlights that drilling has intersected a total of 18 mineralised zones so far including four “new gold zones to the northeast of the Clontibret gold deposit”.
- The new zones were identified in hole 1 which was drilled to a depth of 285.8m at an angle of 50⁰ and is, “located over 200m to the northeast of previous drilling at the Clontibret gold deposit” and included
- 2m at an average grade of 1.1g/t gold from a depth of 56.0m; and
- Intersections, each of 0.5m width averaging 1.8g/t, 0.5g/t and 0.3 g/t from depths of 59.0m, 112.5m and 115.5m; as well as
- An intersection of 2.0m at ana average grade of 0.4g/t gold from 279.0m depth
- Hole 1 is reported to have “confirmed the presence of stockwork gold mineralisation in this area thus also demonstrating further continuity to the gold mineralisation in the stockwork”.
- Results from hole 2, which was drilled at 60⁰ to a depth of 179.0m included a total of eight mineralised intervals of which five were less than 0.5m wide as well as:
- An intersection of 1.0m averaging 0.6g/t gold from 32.5m depth; and
- 1.5m averaging 1.3g/t gold from 97.0m; and
- 3.0m averaging 8.2g/t gold from 143.0m depth
- The company says that “The 3.0m @ 8.2 g/t gold intersection, which suffered poor recovery of only 17 per cent, is interpreted to represent the zone (5.0m @ 6.1 g/t Au) 270m to the south which was drilled below the historic antimony workings (announced 26 February 2018)”.
- Hole 3 “targeted the up-dip zone of the stockwork identified in Drill Hole 1 and was just over 160m to the southeast of that hole” with two wide intersections of mineralisation at:
- 81.5m depth where drilling intersected 5.5m at an average grade of 0.8g/t gold; and at
- 135.0m depth where the hole intersected 22.0m at an average grade of 0.6g/t gold.
- We point out that although the wider intersections are more encouraging for building resource tonnages, intersection widths may not necessarily be true mineralised widths as holes could be intersecting the mineralisation at an oblique angle. No doubt the exploration team will address these issues as exploration proceeds and its knowledge of the geometry of the mineralisation increases, though poor core recovery, if widespread in conjunction with narrow mineralised widths will add to the challenges of geological interpretation.
- On the positive side, Chairman, Prof. Richard Conroy, explained that the drilling has “extended the known stockwork and discovered new gold lodes further enhancing the potential of the Clontibret target area”.
Gem Diamonds Limited (LSE:GEMD, OTC:GMDMF) 34.2p, Mkt Cap £49m – Increased costs for fuel and explosives and exceptional rainfall squeezes H1 profits while demand remains strong
- Gem Diamonds reports attributable profit of US$4.9m for H1 2022 (H1 2021 – US$10.6m) and a 30th June cash balance of US$24.2m.
- The company says that its “Letšeng operation has operated in line with expectations during the Period, despite numerous challenges presented by severe weather conditions such as a high rainfall season and snow which impacted both mining and treatment activities; increased frequency of electricity supply disruptions and increased operating costs”.
- Revenues from the sale of 57,075 carats of diamonds at an average price of US$1,745/carat declined by 4% to US$100m which “together with the extraordinary increases in operating costs, most notably diesel prices and explosive consumables, resulted in a decrease in underlying EBITDA from continuing operations to US$20.9 million (H1 2021: US$34.7 million), with attributable profit decreasing to US$3.8 million (H1 2021: US$9.3 million)”.
- Detailing some of the cost challenges, Gem Diamonds says that “Diesel prices have increased 87% from LSL10.87 per litre in June 2021 to LSL20.32 per litre in June 2022. Letšeng consumed an estimated 8 million litres of diesel during the Period. Electricity supply disruptions which necessitate an increase in the use of diesel-powered generators also significantly increased diesel consumption on the mine site. In addition, the price of explosives has also increased by an estimated 83% compared to H1 2021”.
- Cost containment measures include “reducing hauling and travel distances of mining equipment and the introduction of saver plugs in ore blasting practices”.
- Gem Diamonds recovered 3 diamonds larger than 100 carats in size (H1 2021 also recovered 3 carats) and a total of 374 individual stones larger than 10 carats (H1 2021 – 431 diamonds). As the 3 >100 carat stones were sold in July they are not reflected in revenues for H1.
- Gem Diamonds sold 15 individual diamonds for prices in excess of US$1m (H1 2021 10 diamonds), realising US$25.8m (H1 2021 – US$36.1m) while an 8.41 carat pink diamond realised a price of US$66,059/carat.
- Commenting on the diamond market, the company reports that the “global diamond market … has continued to recover into 2022. The sanctions imposed on Alrosa in Russia, a major diamond producer, has caused a shortage of rough diamonds in the market which has supported strong demand and robust prices being achieved for Letšeng's high-quality white diamonds”.
Conclusion: Cost inflationary pressures and the impact of sanctions against Russia’s Alrosa are exacerbating shortages of rough diamond supply.
Galan Lithium Ltd (ASX:GLN) A$1.2, Mkt Cap A$379m – Testwork demonstrates good flow rates and high lithium grades at the HMW Lithium Project
- A long term pumping test at Pata Pila (PPB-01-21) well at the 100% owned Hombre Muerto West Lithium Project in Catamarca Province, Argentina, was successfully completed.
- Pumping rates were recorded at between 17-20 L/s and extracted grades of 821-927mg/L supporting potentially higher production capacity at the project for the ongoing DFS.
- The Company also completed the first 72-hour flow rate test at Rana de Sal (PBRS-01-21) well located ~3.500m to the north west of PPB-01-21.
- Initial results point to similar pumping rates at 20L/s with brine samples returning high lithium grades ranging between 932-957 mg/L.
- A long term (30-day) pumping test is set to start shortly on PBRS-01-21 with expected flow rates of 22-27 L/s and targeted to be completed in early Oct/22.
- Separately, two exploration diamond drill holes were completed at Rana de Sal returning thick sedimentary intersections with high Li grades ranging 942-1,035 mg/L.
Hummingbird Resources PLC (LSE:HUM) 7.1p, Mkt Cap £28m – Kouroussa development update
- Construction at the Kouroussa Gold Mine is over 50% completed and remains on time and budget for first gold pour by the end of Q2/23.
- All long lead items have been ordered with deliveries expected to arrive at site at an increasing pace in H2/22.
- Mining operations readiness programmes are being finalised including mine plan, grade control drilling, engagement of mining contractors and overall mining infrastructure in preparation for start of operations by the end of Q2/23.
- Five CIL tanks and two leach tanks have been erected.
- Construction of building and camp infrastructure has commenced.
- Additionally, the Company received final assay results from the 2021 infill drilling programme covering 27 drill holes for ~4,100m confirming high grade nature of the deposit.
- Results will be used in the next MRE update expected to be released in H1/23.
- Kouroussa mineral resources and reserves currently stand at 12.4mt at 3.02g/t for 1.2moz and 4.9mt at 4.15g/t for 0.6moz, respectively.
Power Metal Resources PLC (AIM:POW)* 1.5p, Mkt Cap £23m – Exploration license granted in South Australia
- Power Metal reports that it has been awarded an exploration license covering 999km2 of ground in the Anna Creek area of South Australia.
- The exploration license carries an initial term of 6 years ending 24 August 2028, subject to a minimum exploration spend of A$100,000 prior to 23 August 2024.
- A desktop technical review completed over the site has identified an undercover 4x6km coincident magnetic and gravity geophysical anomaly, that the company believes could be a potential IOCG deposit given the location of the licence within the Gawler Craton.
- Based on the geophysics, the target is located 200-300m below younger cover sediments and has never been drilled.
- The company are currently planning a field programme which will include high-resolution gravity and magnetic surveys over the Target (NYSE:TGT).
*SP Angel acts as nomad and broker to Power Metal Resources
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* 21p, Mkt Cap £36m – 760L drilling improves resource definition and adds further tonnage potential at the Ming mine
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- Rambler Metals and Mining has reported the results of its continuing underground drilling programme at its Ming mine in Newfoundland, Canada where 12,767m has been completed so far this year.
- The results reported today focus on a series of relatively short, small (57mm) diameter, holes drilled on the 760L to infill coverage of the Lower Footwall Zone (LFZ) close to planned stopes.
- At this stage, assays for gold are not yet available but among the results for copper in the LFZ highlighted in today’s announcement are;
- A 10.00m wide intersection of the LFZ at an average grade of 1.71%, including a 2.50m section averaging 2.39% in hole R22-760-01; and
- An 11.68m intersection averaging 3.52% in hole R22-760-02; and
- A12.00m zone at an average grade of 2.02% copper, including 6.53m averaging 2.52%, in hole R22-760-03; and
- A 15.00m intersection averaging 2.28% and including 5.00m at 2.64% in hole R22-760-05; and
- 11.00m averaging 2.00% in hole R22-760-06; and
- 10.00m at an average grade of 1.56% with a 2.00m section averaging 3.52% in hole R22-760-07; as well as
- An 8.00m wide intersection at an average grade of 2.78% and including 5.00m at an average grade of 3.39%.
- Rambler Metals explains that the drill results, which come from the drift 4 area of 760L have “added a potential 34,000 tonnes of ore at 2.13% Cu representing an additional 82% of ore tonnes that were anticipated from the stopes that the drilling covers”.
- The company confirms that this detailed localised drilling “will continue as an integral part of our mining process and is anticipated to further extend the production life of the 760L” and also that the additional potential tonnage “is a 13% increase on the total current mineable material planned from the 760 level”.
- In addition to the identification of unrecognised tonnage potential, the drilling is adding to the understanding of the geometry and geotechnical characteristics of the mineralisation and facilitating improved stope designs and “drilling and blasting controls of the stopes and overall dilution control and management” which, we expect to minimise dilution and assist in cost control.
- The company confirms that “these results will be incorporated into the resource model and will likely improve the overall grade and tonnage for the Lower Footwall Zone”.
- Commenting on the drilling programme, President & CEO, Toby Bradbury, explained that it “is enabling us to expand ore zones while maintaining production grade targets, hence returning increased ore tonnes available per level … [and he added that the company anticipates that] … as we continue to employ this drill, further additions will be made”.
- In our opinion, Rambler’s continuing drilling, which has already identified three previously unrecognised mineralised zones close to underground workings so far this year (at the LP East, Jennings and Ezekiel Zones), highlights the relatively underexplored nature of the Ming mine and we expect that the results are improving management’s understanding of the orebodies it is mining.
- We expect to see these results reflected in future mineral resources estimates as well as in improved mined grades manifested in declining operating costs as mining progresses.
Conclusion: Rambler Metals’ continuing drilling programme is improving the delineation of the LFZ, adding additional tonnage potential and generating high grade copper intersections which should assist in cost containment and in achieving the company’s previously announced 7,000t guidance for 2022 copper production.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining.
Resolute Mining Limited (ASX:RSG, LSE:RSG) 17.45p, Mkt Cap £193m – Mineral Resource increases to 2moz at Syama North, Mali
- Resolute Resources has reissued its announcement of 30th August which reported a 40% increase, to 2moz of gold, in the mineral resources estimate for its Syama North deposit located around 300km southeast of the Malian capital, Bamako.
- Today’s announcement does not alter the technical details of the earlier release but includes a “section titled "Summary of Resource Parameters", which summarises various information already set out in JORC Table 1 to the original announcement, in accordance with ASX Listing Rule 5.8.1”.
- To reiterate our comments on the original release, the new estimate, reported using a 1g/t cut-off, consists of 20.04mt at an average grade of 3.1g/t gold with approximately 9.5mt at an average grade of 3.0g/t (917,000oz) classed as measured and indicated with the balance of 10.6mt grading 3.2g/t (1.09moz) currently within the ‘inferred’ category.
- Approximately 3.3mt at an average grade of 3g/t gold (315,000oz) is described as oxide and transition mineralisation with 16.7mt averaging 3.2g/t gold (1.7moz) hosted as primary sulphide mineralisation.
- The Syama North area is “located within 4-8 km of the main Syama mining and processing complex … [and] … extends for approximately 6,000 metres in strike and the west dipping gold mineralised zone is between 200-500 metres in horizontal width. The Mineral Resource is limited in depth by drilling, which extends from surface to a maximum depth of approximately 350 metres vertically”.
- Drilling is continuing and the company says that the “results confirm the potential for a new open pit operation adjacent to the Syama processing complex” and that the “sulphide mineralisation remains open at depth and appears to be contiguous along the entire strike length of the … [previously mined] … Beta and A21 deposits”.
- Resolute Mining says that among recent drilling results a 46m wide intersection averaging 1.83g/t gold from depth of 143m with a second mineralised interval of 30m averaging 3.84g/t gold from 202m depth in hole QVRD538 is of “particular interest … [as it] … appears to be a zone of coalesced mineralised shears producing … [an overall] … mineralised interval including internal dilution … [of] … 89m @ 2.41g/t over the entire zone”.
- The company says that “Subsequently an up-dip hole was completed and this hole QVRD566, confirmed and expanded the wide mineralised zone with intersections of 30m @ 3.84g/t and 9m @ 3.67g/t Au”.
- CEO, Terry Holohan, explained that “Given the strong performance of the Sulphide processing circuit post the planned major shutdown, we are now confident with our ability to process sulphides. The focus has thus shifted to exploring for more sulphide close to the processing complex. Assuming significant amounts of this convert to ore reserves, this will give us a huge amount of flexibility for our present expansion plans, processing options and debottlenecking initiatives in place”.
- He confirmed that “we have recently commenced a pre-feasibility study into low capital expansion options to further expand the sulphide operations with the results expected in early 2023”.
Conclusion: The successful expansion of the Syama North resource base follows the announcement earlier this year, in February, that Resolute Mining had expanded resources at its Tabakoroni project, also in Mali, to over 4m oz, including 1.3moz of ‘measured and indicated’ resources. In its annual mineral resources report for 31st December 2021, Resolute Resources reported a total resource base of 9.5moz within 122mt of material at an average grade of 2.4g/t gold.
Rio Tinto PLC (LSE:RIO) – 4,628.5p, Mkt cap £59.6bn – Agreement with Turquoise Hill for US$3.3bn acquisition to simplify ownership of Oyu Tolgoi
- Rio Tinto has announced that it has reached an agreement ‘in principle’ with Turquoise Hill to acquire the 49% share of Turquoise Hill which it does not already own in a move to simplify ownership of the Oyu Tolgoi project in Mongolia.
- The agreement, for C$43/share in cash, “has the unanimous approval of the independent Special Committee of Turquoise Hill's Board of Directors (the "Special Committee"), and values the Turquoise Hill minority share capital at approximately US$3.3 billion”.
- The agreement requires the approval of 66.67% of shareholders and a special meeting is expected to be held “as early as possible in the fourth quarter of 2022 and, if approved, the Transaction is expected to close shortly thereafter”.
- Chief Executive, Jakob Stausholm, confirmed that “Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia to realise its full potential for all stakeholders. This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.”
- Turquoise Hill owns 66% of the Oyu Tolgoi project where the US$6.9bn development of the underground mine is expected to make Oyu Tolgoi the world’s 4th largest copper mine by 2030 with lowest quartile cash operating costs.
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
*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.
Sources of commodity prices
Gold, Platinum, Palladium, Silver - BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel - Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt - LME
Natural Gas, Uranium, Iron Ore - NYMEX
Thermal Coal - Bloomberg OTC Composite
Coking Coal - SSY
RRE - Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite - Asian Metal
DISCLAIMER
This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
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Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
SPA, 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).
SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.
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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%