Shares in gold and nickel exploration and development player Katoro Gold (LSE:KAT) are currently experiencing a lot of interest in the market – they are currently sitting at 3.16p after rising 241% so far this year.

Katoro’s strong momentum began recently with news of a new, near-term gold production opportunity in South Africa. With the deal immediately putting a near-term revenue stream on the horizon, it is not hard to see why Katoro has captured the attention of investors. That being said, even after recent price movements, Katoro is currently only valued at around £6 million. This demonstrates how far many junior exploration and development firms have really fallen in recent years.

Given the true scale of the JV’s revenue potential amid bullish gold market conditions and the likelihood of positive near-term news flow, we believe Katoro’s current bull-run could well continue for some time.

Immediate impact

To recap, on 30 January 2020, Katoro announced its binding, conditional entry into a 50/50 unincorporated joint venture (“JV”) with a company called Blyvoor. The partners plan to reprocess and exploit an existing 1.34 million ounce, JORC-compliant gold resource spanning six tailing dams 75 kilometres south-west of Johannesburg in South Africa.

As part of the deal, Katoro will provide up to a £790,000 repayable loan to the JV to fund ongoing development work on the project. To support this, Katoro has already raised £397,000 in the form of a convertible loan note with investors through SI Capital and has also agreed further facilities with external finance partners for the balance if this is called down. This means finance for Kataro’s entry into this transaction is already resolved, an important element for investor confidence.

The first critical point to note about the South Africa JV is that it represents a considerable, near-term revenue-generating production opportunity for Katoro.

Much of the groundwork has already been covered at the South African tailings project. For example, the mining licence and environmental impact assessment required for the reprocessing of the tailings is already in place. This means that production can begin immediately once a processing plant has been constructed and commissioned.

Plant progress may not be too far off, either – Katoro has already held discussions with potential funding parties for the project. It believes this will be secured at the project level in the form of debt funding – meaning shareholders would not be diluted at the PLC level.

The second key point to note is the potential economic impact that the 50/50 JV project could have for Katoro once gold recovery begins.

The partners are targeting an initial production rate of up to 250,000 tonnes of material a month at an average grade of 0.3 grams per tonne gold from the tailings. This is expected to mark the first stage of a production ramp-up to 500,000 tonnes of material a month within two years. At 500,000 tonnes of material per month, the project is targeted to produce around 35,000 ounces of gold a year and to have a 35-year life of mine.

So, what does this mean financially?

Katoro’s board believes that the project enters economic territory at a $1,300 an ounce (“/oz”) gold price. As such, this figure has used this to calculate economic fundamentals.

Including an all-in-sustaining cost of just $664/oz for the first five years planned production and project capital costs of $30-35 million, the firm puts the project’s net present value (10) at $49 million and its internal rate of return at 31%.

To put this another way, at an annual production rate of 35,000 ounces of gold, the project would generate around $22.3 million per annum for the JV ( (35,000 X 1,300) – (35,000 X 664) ). Katoro’s 50% share of this comes in at $11.15 million (c.£8.6 million per annum), a figure that compares very favourable to its current, c.£6 million market cap.

This type of comparison begins to look even more favourable when you consider the fact that, in reality, gold prices currently sit much higher than $1,300/oz. If we use the $1,565/oz quoted by Katoro as the current gold price in its 30 January release, then Katoro’s annual take from the project at a 35,000-ounce per annum production rate comes in at $15.8 million, or c.£12.2 million per annum ( ( (35,000 X 1,565) – (35,000 X 664) ) /2 ).

With many expecting gold prices to continue rising after climbing 20% in the third quarter of 2019, there is room for these figures to become even more attractive.

Moreover, the project currently has a projected life of 33 years, demonstrating the long-term production and revenue generating potential.

Finally, there are several important indications that the JV will be able to quickly and easily build on the strong economic foundations in place at the South African tailings project.

First, the funds provided by Katoro as part of the JV agreement will be used to, in the company’s own words, “optimise mining strategy”. The firms will complete final detailed mine planning and scheduling to perfect mining strategy and better define the expected plant feed grades and identify possible low-grade zones. They will also look at ways to keep operating costs down as much as possible and maximise processing efficiency. Currently, gold recoveries of 56-60% are thought to be achievable – could this figure rise?

Meanwhile, the JV has already shown its commitment to forming as strong a management team as possible to drive forward. On 10 February 2020, less than two weeks after the deal was announced, the firms had formed a JV management committee and appointed new JV manager  Graham Briggs – former chief executive of Harmony Gold Mining. The group have already started “moving forward multiple workstreams”, according to Katoro.

The JV’s new management, rapid pace, and work to optimise its project alongside financing discussions show commitment to advancing as quickly and in as economical a way as possible. Not only that, but these points are likely to provide a great deal of short-term news that – if positive – could provide further fuel for Katoro’s share price.

The sky is the limit

The bottom line is that Katoro’s entry into the South Africa JV has changed its outlook significantly, putting near-term revenue generation on the horizon. Although the meteoric rise in Katoro’s share price reflects this, the project’s potential in a strong gold market and the pro-active approach to its optimisation may mean the firm has not yet peaked. Now that Katoro has got the ball rolling, the next few months will be about maintaining the pace with frequent project updates and progress towards gold production.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Greatland Gold (LSE:GGP) powered forward to a record high of 3.78p at the end of last week after posting an “outstanding” set of drilling results for the Havieron asset it is advancing with Newcrest Mining (ASX:NCM). With a market cap of £104.1 million, the Australia-focused gold explorer and developer sat nearly 110% higher than it did at the beginning of 2020 after riding a massive wave of increased trading volume in its shares. The market is now eager to see the extent to which Greatland can build on this success and how big Havieron could ultimately prove to be, with an extra $25 million expected to be spent on the property this year.

Aside from Havieron’s ongoing potential, there were several key reasons why investors were particularly excited about the latest drilling campaign here. The long-term implications factors could prove to be truly transformational. Here, we take a detailed look at what is causing all this excitement.

Firstly, and perhaps most obviously, investors were highly encouraged by the quality of the news itself.

To recap, Havieron is a gold deposit centred on a magnetic anomaly in the Paterson region of Western Australia. Newcrest operates it under a farm-in agreement with Greatland. Exploration drilling by Greatland in 2018 led to the discovery of significant gold and copper mineralisation under 400 metres of cover.

After following this with its own set of strong drilling results in mid-2019, Newcrest completed nearly 19,000 metres of additional drilling in the final quarter of last year to enhance its understanding of Havieron’s true scale. With its latest work extending continuity of mineralisation at the asset over 450 metres of strike, including widths of up to 150 metres and depths over 600 metres, Newcrest has undoubtedly met its primary objective. What’s more, these extents could extend further yet, with mineralisation remaining open both to the north-west and at depth.

Meanwhile, highlight intersections included 136 metres at 2.9 grams per tonne (“g/t”) gold and 0.6% copper from 504 metres and 73 metres at 3.2 g/t gold and 0.67% copper from 513 metres.

In its update, Greatland put the importance of the results into context, stating:

“The latest drill results and the initial observed dimensions of the deposit suggest that Havieron represents a significant gold-copper discovery.”

Newcrest exceeds expectations

A second, highly encouraging sign for investors was Newcrest’s enthusiastic reaction to its latest results at Havieron.

The Havieron deposit is based just 45 kilometres east of Telfer, one of Newcrest’s flagship project that produces up to 460,000 ounces of gold and 13,000 kilotonnes of copper a year. Newcrest’s ultimate goal, alongside Greatland, is to truck high-grade ore from Havieron to Telfer for processing - extending its mine’s life and reducing production costs per ounce. To do this, the major miner entered a deal with Greatland last year that granted it the right to earn up to a 70% interest in Havieron target by spending up to $65 million on its development across four stages, as seen below.

Newcrest is currently in the second stage of the farm-in. However, the firm’s outpouring of support for Havieron in the wake of its latest results suggests that Greatland will continue to benefit from the major’s massive firepower moving forward.

For example, in its exploration report, Newcrest described the grades it has seen at the deposit as “unique” for the region, adding that it now plans to “progress and accelerate our evaluation of this opportunity”. Likewise, in a tweet, the company said Havieron “signals a new era in our asset portfolio”, adding: “Grades like this are rare & we’re excited with our progress”.

Newcrest also appears to be putting its money where its mouth is when it comes to this enthusiasm. As Greatland highlighted in its update:

-Drilling has recently recommenced drilling at Havieron following a short Christmas break;

-An additional 20,000-30,000 metres of drilling are planned in the next two quarters to support the potential delivery of a maiden resource by the end of the calendar year 2020;

-A number of environmental, geotechnical, and metallurgical studies have commenced to support the potential delivery of a resource and future permitting requirements.

Meanwhile, Newcrest itself said it expects its exploration expenditure to be $25 million higher than anticipated at Havieron in light of the positive results.

Things could not have got off to a better start at Havieron for Newcrest, and this paints a very bright picture for Greatland’s future at the asset.

Mapping out Havieron

With Havieron’s dimensions now established, the third (and perhaps most important) point that is likely to be on the minds of excited Greatland investors is that it is now possible to make an estimate of the project’s contained gold. Although by no means definitive at this stage, the early signs are very encouraging.

Let’s take a look.

With a 450-metre strike length, a 150-metre width, and a depth of 600 metres, it is reasonable at this stage to assume that mineralisation at Havieron covers roughly 40,500,000 cubic metres (450 X 150 X 600). Next, if we apply a specific gravity of three (which is broadly expected in the regional geology), we get to approximately 120,000,000 tonnes of ore (40,500,000 X 3 = 121,500,000).

Now it becomes a question of what grade we apply to the ore. To provide a range of potential outcomes, let’s apply three scenarios (note that we divide by 31.1 because this is the number of grams in one troy ounce):

-LOW: 1 g/t ore, which results in roughly 3,900,000 ounces of gold ( (120,000,000 X 1) / 31.1 );

-MID: 1.5 g/t ore, which results in roughly 5,800,000 ounces of gold ( (120,000,000 X 1.5) /  31.1 ); and

-HIGH: 2 g/t ore, which results in roughly 7,700,000 ounces of gold ( (120,000,000 X 2 ) / 31.1 )

Now, we have to assign a valuation to each ounce contained within the Havieron. The table below, taken from our recent report on Greatland, demonstrates the value of a few of Australia’s largest gold miners, in US dollar per resource terms.

If we take a relatively conservative view and assume that each Havieron ounce is valued at $200, then the total value of Greatland’s 30% project interest (on the assumption that Newcrest takes a 70% stake) is as follows:

-LOW: $234 million (£178.7 million) ( (3,900,000 X 200) X 0.3 )

-MID: $348 million (£265.8 million) ( (5,800,000 X 200) X 0.3 )

-HIGH: $462 million (£352.8 million) ( (7,700,000 X 200) X 0.3 )

No matter what scenario you apply, this initial estimate compares very attractively to Greatland’s current all-time high market cap of £104.1 million. This is especially encouraging when we take into account that gold prices are on one of their strongest runs in years and Havieron’s resource remains open – the project’s ultimate dimensions could be significantly larger than the numbers we have used here.

A bright future at Havieron

Three clear takeaways emerge from our analysis:

-Joint venture work has got off to as good a start as possible at Havieron, with the deposit showing more and more signs of boasting the prospectivity that Greatland has long suspected;

- With Newcrest indicating an additional $25 million spend here, this is a most encouraging indicator of its commitment to Havieron over the long term; and

-Rough early resource estimates suggest Havieron, even when using conservative assumptions, could be a vast economic force for Greatland- especially in combination with the remainder of its portfolio.

All of these points have the potential to have a very positive impact of Greatland’s share price and market cap, potentially pushing it to further hights. Heddle was keen to express his enthusiasm for the Havieron’s game-changing potential when we spoke to him, saying:

“It is a really exciting time for Greatland and Newcrest. We are just starting to see the true potential scale of the Havieron project, and we will see a lot more over the next six months. Our eyes are now on delivering a maiden resource by the end of the year, and this will be a really huge milestone for us.”

If Newcrest and Greatland can remain on track at Havieron as they have so far been able to, the future could indeed be very bright for shareholders.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

The global shift away from internal combustion engine-powered cars and towards electric vehicles (“EVs”) continues to accelerate at a record pace. With growing demand for the metals involved in the production of EV batteries being complemented in many cases by supply-side disruption, a major investment opportunity has arisen.

According to the International Energy Agency (“IEA”), electric car usage has been soaring over the last decade, with global stock passing five million in 2018 – a 63% increase on the previous year. However, this annual growth rate looks set to accelerate further moving forward. The same organisation expects the number of EVs on the road to hit 125 million by 2030, while JP Morgan believes that EVs and hybrid electric vehicles will account for 30% of all vehicle sales by 2025.

The reasons for this accelerating uptake are varied, encompassing improving technology, increasing environmental consciousness, and – critically – growing government support. Leaders around the world are setting ambitious targets and granting generous incentives to encourage the complete phase-out of traditional vehicles in favour of plug-in EVs in their respective nations. For example, the UK government’s current policy is to insist that, by 2040, all new cars and vans sold in the UK should be zero-emissions capable. Meanwhile, China aims to have five million EVs on the road by the end of 2020, increasing to over 80 million by 2030.

However, when it comes to meeting these ambitious targets, getting the public on board is just one half of the battle. The other half is ensuring that the capacity exists to meet the demand for EVs and their related charging infrastructure – a burden shared by governments and automobile manufacturers alike.

The wheels are already in motion here. Earlier this month, Canada and the US announced that they had finalised the Canada-US Joint Action Plan on Critical Minerals Collaboration. This aims to reduce both nations’ dependency on outside sources when it comes to sourcing “critical minerals” – many of which are required to build EV batteries – by securing supply chains. As well as the EV sector, this covers areas like manufacturing, communications, aerospace, and defence. Likewise, the US and China recently inked an initial trade deal that will boost America’s production of rare earth metals – critical to EV production because of their powerful magnetic properties.

Waking up to change

Key EV nations have woken up to the need to secure domestic energy metal supply, and these growing efforts throw yet more weight behind forecasts of a real explosion in uptake. The metals used in the production of these vehicles – particularly their batteries - are a clear beneficiary of this milestone. One of the most interesting is cobalt, a critical raw material for electric transport used in most common types of lithium-ion batteries.

Alongside an anticipated surge in demand like many of its battery metal peers, cobalt is experiencing severe supply-side disruption. This comes almost entirely down to the fact that nearly two-thirds of the metal comes from the Democratic Republic of the Congo (“DRC").

The cobalt industry in the DRC is well known for its vast artisanal mining contingent. Artisanal mining may be a vital source of income for many, but it also throws up many issues such as safety, child labour, and human rights abuses. These problems faced unprecedented levels of exposure last July when dozens of illegal miners were killed at Glencore’s Mutanda copper/cobalt mine after a wall collapsed. The firm subsequently shut the mine, effectively removing 20% of the world’s cobalt supply from the market. In the wake of this, several companies – including BMW and Apple – announced that they would stop buying cobalt from the DRC or at the very least insist on tighter regulations over working conditions.

Meanwhile, some areas of the EV market are even looking at ways to cut the amount of cobalt used in the batteries powering their vehicles. Tesla boss Elon Musk has pledged to remove the mineral from the next generation of his company’s cars and has already reduced the amount used in Tesla batteries from 11 kilograms per vehicle to 4.5 kilograms. Likewise, global tech companies like South Korea’s SK Innovation and LG Chem and the UK’s Johnson Matthew are researching ways of making cobalt-free batteries.

However, the reality is that removing cobalt from lithium-ion batteries is more easily said than done. Benchmark Minerals’ forecasts suggest that global demand for cobalt in 2029 will be 300,000 tonnes compared with an estimated 70,000 tonnes in 2019. Meanwhile, Tesla is thought to be inking a long-term contract with Glencore to ship cobalt to its new EV factor in Shanghai – suggesting the metal will remain key to the company’s expansion over the next few years at least.

So, while the movement away from cobalt may one day occur, for the time being, it appears to remain merely an idea than a reality. This poses an interesting dynamic for the metal in which its usage has to grow alongside accelerating EV adoption at the same time as industry participants are eschewing its key supplying nation. A clear beneficiary, therefore, appears to be companies with cobalt projects in the remaining 40% of supplying countries that are presumably giving rise to fewer ethical and jurisdictional issues than the DRC.

One such example is Global Energy Metals (TSX-V:GEMC), a pure-play cobalt business building a portfolio of projects in stable jurisdictions such as Queensland in Australia, Nevada in the US, and Ontario in Canada. Chief executive Mitchell Smith explains that the company has positioned itself ahead of the curve when it comes to the global trend of moving away from areas such as the DRC to source increasing amounts of cobalt.

As the global energy landscape evolves it is becoming much more mineral and metal intensive. Increasing the global production of batteries to electrify vehicles and power electronic devices will demand enormous quantities of critical minerals like cobalt. But the development of new mines, especially those in jurisdictionally safe mining districts in close proximity to refining capacity and end-use markets is not keeping pace,” he says.

“This paves the way for Global Energy Metals to continue to grow its strategies on a number of verticals and be integrated into the battery economy through collaboration with fellow industry peers with the direction of building a stable supply chain and mineral independence.”

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

2019 was an exciting period for the nickel market, with increasing demand and supply disruption helping to drive the metal’s price higher at a time when other commodities trod water. Having started the year at $10,600/t (“per tonne”) on the London Metals Exchange (“LME”), the metal hit a high of $18,000/t in September and became one of the year’s strongest performing metals.

The price of nickel subsequently dropped, hitting a low of $13,000/t in December. However, this pullback could have created an opportunity, and investors are now eagerly anticipating what might come in 2020 for the base metal.

With many of the forces that propelled last year’s nickel rally still in place, we have taken a look at several of the London-listed firms that will benefit if the metal soars.

Strong supply/demand dynamics

On the demand side, stainless steel – which accounts for most of nickel’s global usage – experienced a surge during 2019.

Meanwhile, the level of nickel required for electric vehicles (“EVs”) continued to grow, with more units being sold at the same time as critical developments in battery technology increased dependency on the base metal. According to the Nickel Institute, two of the most commonly used types of EV batteries, Nickel Cobalt Aluminium and Nickel Manganese Cobalt (“NMC”), are now made up of 80% and 33% nickel respectively. Meanwhile, newer formulations of NMC batteries are also approaching 80% nickel content, the body says.

Elsewhere, nickel prices were bolstered by fears on the supply side. Indonesia, the world’s largest nickel producer, confirmed plans to bring forward a ban on the export of raw nickel ores from 2022 to January 2020. With Chinese producers stocking up on nickel inventories in anticipation of the ban, LME nickel warehouse stock levels have reportedly dropped by almost 50%. In October, Reuters reported that stocks had even fallen to 79,800 tonnes, their lowest value since January 2009.

A secure setting for 2020

Nickel currently sits at around $13,800/t, approximately 30% higher than it was a year ago in spite of the recent decline. This suggests that the bull market is still intact, with fundamental growth expected across core markets as supply concerns continue.

From a demand perspective, the use of nickel in the stainless-steel sector is expected to continue to rise at a steady rate.

But the real game-changer for the metal this year could be in EV space. According to Kitco, batteries (including those used to power laptops, phones, etc.) currently account for 5% of the global nickel market. However, with a record four million EV units slated for global sale over the next 12 months, this share could rise to 8% in 2020.

With EV use set to grow by 30-40% annually for some years, the nickel market is likely to witness enduring change. Global demand is expected to rise from two million tonnes per annum, where it currently sits, to six million tonnes per annum by 2035. Batteries are expected to account for almost half of this demand growth.

Meanwhile, nickel’s bleak supply outlook is also set to linger. Wood Mackenzie has estimated that Indonesia’s export ban will directly result in the loss of 190,000 metric tons of nickel globally by next year. Meanwhile, very few large-scale nickel projects have been developed in recent years. With the process of moving greenfield nickel assets from exploration through to production taking many years, many analysts believe that LME stocks will continue to fall as demand grows. This is expected to result in an annual average deficit of 60 kilotonnes of the metal through to 2027.

Add the Federal Reserve’s dovish rate stance into the mix, and the combination of dwindling supply and rising demand could create an ideal setting for nickel explorers and producers globally.

For example, Fastmarkets analysts forecast an average LME nickel cash price of $16,375/t in 2020- a considerable leap on the metal’s current position. Meanwhile, Wood Mackenzie expects nickel prices to continue breaking out beyond the current 12-month period, reaching $25,000/t by 2025 and $28,000/t by 2027.

Who will be the big nickel winners?

Several firms listed on London’s junior market are well primed to benefit from an increase in nickel prices throughout 2020.

Horizonte Minerals (LSE:HZM) is one of the most likely candidates. The company wholly-owns the advanced Araguaia ferronickel project and the earlier-stage Vermelho nickel-cobalt asset to the south of the major Carajás mining district in Brazil.

Horizonte has grown the resources of its assets by more than 800% in just seven years. It now plans to turn Araguaia into Brazil’s next major tier-one producing ferronickel mine by 2022.

The firm recently entered a $25 million royalty agreement with Orion Mine Finance, providing the initial capital required to begin an early works programme at Araguaia and advance the project towards construction. At a nickel price of $14,000/t, the project has an estimated net present value (“NPV) of $741 million and an internal rate of return (“IRR”) of 23.8% (provided stage two expansion is completed).

Applying recent nickel price highs of $16,000/t only serves to improve Araguaia’s economics. Under these conditions, the asset’s NPV rises to $1 billion while its IRR hits 30%. This would see the project generate free cash flow of $3.5bn. For perspective, Horizonte’s market cap currently sits at £51.8 million.

Another London-based stock that could benefit from surging nickel prices is Power Metal Resources (LSE:POW). This company recently confirmed that it would earn-in to a 40% interest in the Molopo Farms Complex (“MFC”) nickel-copper-PGM (“platinum group metals”) project in Botswana, giving it an effective project interest of 50.96%.

Following an airborne survey and follow-up groundwork in 2019, five targets have been selected at the MFC project as a focus for an initial drilling programme. Power Metal describes these targets as highly conductive bodies that “could potentially be host to massive nickel sulphides” due to their location, geology, and associated magnetic responses.

Finally, a third London-listed firm operating in the nickel space is Regency Mines (LSE:RGM). Following a significant management shakeup last year in the wake of a challenging period, the organisation plans to push forward at its flagship, 50%-owned Mambare nickel-cobalt project in Papua New Guinea. Mambare covers 256 square kilometres and contains a compliant resource of 162.5 million tonnes at 0.94% nickel and 0.09% cobalt.

A valuable investment opportunity

The macro trade winds for the price of nickel look highly favourable. Given that Indonesia’s export ban will come into force imminently, supply is inevitably going to tighten this year. Meanwhile, the Federal Reserve’s hesitancy around raising interest rates any further this year is likely to cause further dollar weakness- a generally bullish force for commodities.

In parallel, 2020 is also expected to welcome in a great deal of EV market growth, putting further upward pressure on nickel prices. Following the nickel sell-off in the last quarter of last year, this could open up a valuable investment opportunity – especially given that stocks operating in the nickel market generally fell alongside the base metal. If the bullish outlook for nickel materialises into another price rally, it stands to reason stocks with nickel exposure will follow suit.

Given the stage of Araguaia’s development and the potential for news flow from Vermelho, Horizonte Minerals offers low risk and potentially sizeable returns at 3.1p (as at 21 January 2020). Power Metal, on the other hand, is a racier option. However, after raising £700,000 in December, the organisation has the funding in place to deliver exploration progress.

If looking to take a punt on nickel having another bumper year, these two stocks could present significant upside to your portfolio.

Author: Daniel Flynn

 

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Rockfire Resources (LSE:ROCK) was trading 27% higher at 1.05p on Monday morning after announcing that drilling to extend gold mineralisation had kicked off at its Plateau deposit in Queensland, Australia.

The firm said that a reverse circulation programme consisting of 13 proposed holes totalling 1,500m has now begun. This will aim to explore at depths of around 250m below the surface at the deposit as well as extending and infilling near-surface resources.

The development comes after Rockfire intersected 177m at 0.5 grams per tonne gold at Plateau in November last year with hole BPL025. The company will now test this geophysical anomaly by drilling holes 50 metres and 150 metres east of BPL025.

Alongside this work, which is expected to take 15 days to complete, Rockfire is also completing geological mapping and rock chip sampling at Plateau. Meanwhile, specialist analysis of drill chips collected in October last year is also nearing completing.

Rockfire’s chief executive David Price labelled the current drilling programme as “very exciting”, adding that success will demonstrate “significant extension of this deep gold mineralisation in an east-west orientation”.

"A second aim of the current program is to expand and build greater confidence in the gold mineralisation at our near-surface JORC resource, in an effort to define an open cut resource, 80m from surface,” he added. "We are fortunate to get underway with drilling at this time of the year, as the usual wet season in northern Australia has not yet arrived, and we intend to make the most of this window of good weather. Geological mapping, rock sampling and XRF analysis of drill samples from October 2019 drilling is in progress and the company expects results from this analysis within the next few weeks. We will keep the market informed of our progress."

Plateau is based around 50 kilometres southeast of the gold mining centre of Charts Towers in Queensland and 47 kilometres of the Ravenswood mining operations, which contain more than 10 million ounces of gold. The deposit is a breccia-hosted gold system and comprises similar mineralisation and geology to that at nearby mines Mt. Wright and Kidston. Rockfire’s ultimate goal is to identify another Mt Wright-style gold opportunity.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

It is well known that directors of corporate boards like to, err, bend the truth, in Regulatory News Service (RNS) announcements.

Of course, they like to think we are too dumb to work it out. And maybe some of us are, which is why they do it – so I’ve created a handy reference point in order to act as a translation tool in order to decipher the directors peak.

One smart chap once told me to read RNSs from the bottom up. That way you always get the bad news first. He’s right – it’s never in the headlines.

Many a director has tried to sneak a profit warning in the last few sentences despite the headlines at the top all being super bullish. And I suspect many have gotten away with it, too.

Here are the top phrases used by management, what they want us to think, and what it really means:

 

What they say:

“ahead of market expectations”

What they want us to think: “We have beaten our forecasts that are in the market”

What it actually means: “We have beaten our forecasts that are in the market”

Nothing wrong there.

 


What they say

“ahead of board expectations”

What they want us to think

“We have beaten our forecasts that are in the market”

What it actually means

“We want to trick you into thinking we have beaten our market expectations but as nobody has a clue as to what the board expectations are this is actually a meaningless phrase”

Ahh, board expectations. I do like that one. Of course, if you ever ask for board expectations it’s classed as ‘inside information’ (even though the board has relayed their expectations to the brokers) – and the board helpfully don’t tell you what the board expectations are when they release the RNS.

So who knows?

Not PIs – that’s for certain!

 

 

What they say

“broadly in line with market expectations”

What they want us to think

“We are trading in line with our forecasts that are in the market”

What it actually means

“If we’d had profits that came in any lower this would’ve been a profit warning”

If someone says broadly when the company was a whisker away from breaching the 10% deviation that is allowed from the forecasts where management would have to announce that profits would be below expectations.

 

 

What they say

“second half weighting” / “H2 weighting”

What they want us to think

“This is normal and our second half is our strongest half”

What it actually means

“We are probably going to warn but we don’t want to admit it just yet”

Sometimes this is legitimate. Sometimes it’s not. Especially when the word “challenging” or “tough” is used.

 

 

What they say

“EBITDA is in line with expectations”

What they want us to think

“EBITDA is a normal and meaningful metric that you can rely on”

What it actually means

“We’re using EBITDA because it’s a fiddly metric where we have complete discretion over how we depreciate and amortise and if we want to use this to our advantage when reporting we can”

You might as well pick a fantasy number for expectations here. Because that’s exactly what management have done.

 

 

What they say

“The auditors consider this action to be fair and reasonable”

What they want us to think

“The auditors have scrutinised this and conclude that it is fair and reasonable”

What it actually means

“The auditors will say what we tell them because we pay their fees – if they don’t then we’ll just get someone else in who will”

 

 

What they say

“related party transaction”

What they want us to think

“It’s a related party transaction but it’s fair”

What it actually means

“It’s probably dodgy but there’s nothing you can do about it – so suck it up”

 

 

What they say

“The board have invested in margin”

What they want us to think

“This was a strategic and deliberate to increase sales”

What it actually means

“We couldn’t sell our product/service at full margin so we’ve had to discount it to get the sales over the line”

 

 

What they say

“due to institutional demand the directors have sold a large amount of stock”

What they want us to think

“We are altruistically giving away all of our upside that we wanted to keep for the benefit of institutions”

What it actually means

“We wanted out and we think you are dumb enough to believe this spin”

 

 

What they say

“The board has taken the decision to significantly strengthen the balance sheet”

What they want us to think

“This will help the company in its operations”

What it actually means

“We are over the moon because that means we have another year’s worth of exorbitant salary and bonuses – paid for by you!”

 

 

What they say

“The directors have awarded themselves nil-cost options”

What they want us to think

“The directors are now aligned with shareholders”

What it actually means

“We couldn’t give a damn about the share price – we’re getting the options for 0p and it’s free money transferred from shareholders’ pockets to ours”

 

 

What they say

“The board is pleased to announce a placing”

What they want us to think

“This will be value accretive over time”

What it actually means

“We were down to our last few quid so we collectively breathed a sigh of relief that the gravy train can continue”

 

 

What they say

“Due to factors outside of the board’s control”

What they want us to think

“We couldn’t do anything about it”

What it actually means

“We probably could’ve done something about it but don’t want to admit it”

 

 

What they say

“Due to this delay in payments the board now believes the company will not be able to meet its expectations for the current year”

What they want us to think

“There is only one contributing factor”

What it actually means

“There are probably a load of other factors that we’d rather not mention if we don’t have to”

 

 

What they say

“The board believes the outlook for FY 21 is good”

What they want us to think

“Things will get better”

What it actually means

“We have no idea if things will get better or not but we can’t exactly say anything negative”

 

 

What they say

“The board knows of no reason for the sudden and sharp decline in the stock price over the last three days”

What they want us to think

“We are definitely not doing a placing”

What it actually means

“We’ve been sounding out investors and obviously some spiv has leaked it”

 

 

What they say

“The auditors believe there may be a small threat to the company’s going concern status”

What they want us to think

“The auditors think there is a small chance the company may not be able to continue operations”

What it actually means

“Wow – are we screwed!”

 

 

What they say

“The board are fully committed to delivering shareholder value”

What they want us to think

“The board actually care about shareholders and they are doing the job they’re paid to do”

What it actually means

“We’ve got options that expire soon much higher so we’re going to ramp this up to the exercise price”

Whilst some of these are meant in jest and good humour – do be careful when listening to directorspeak.

In one instance this year, a company was undergoing a placing (I was inside on this deal) that had been leaked to the market, and the director went on a paid promotion platform and discussed it as ‘rumours’.

Whilst the director couldn’t exactly confirm it as he would have to announce it to the market – he did go as far as to give the impression that a placing would not be going ahead.

In this market, don’t believe everything you read, see, or hear.

 

Show me the incentive, and I’ll show you the result”

Charlie Munger

 

Author Michael Taylor’s website www.shiftingshares.com contains numerous tutorials on how to trade and invest as well as his free book – ‘How to Make Six Figures in Stocks’.

 

Author: Michael Taylor

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Wednesday saw Rockfire Resources (LSE:ROCK) reveal assay results for the last two drill holes at its increasingly prospective Plateau gold deposits in Queensland, Australia.

The business revealed that hole BPL012 intersected 1m at 18.4g/t gold – the second-highest gold grade encountered during drilling at Plateau to date – while also hitting 12m at 2.5g/t gold. Meanwhile, hole BPL019 intersected 10m at 2g/t gold including 4m at 4.2g/t gold.

The figures are the last ones to be received from Rockfire’s highly-encouraging October 2019 drilling programme at Plateau, which is based around 50km southeast of the Australian gold mining centre of Charters Towers.  It is also 17km east of the 3-million-ounce, operating Pajungo gold mine, and 47 southwest of the 10-million-ounce gold Ravenswood gold mining operations.

Last month saw Rockfire soar on the news that it had potentially discovered a ‘large-scale gold deposit’ at the project. It revealed that initial drilling results from its programme had returned broad, consistent gold assays with mineralisation occurring almost continuously throughout a 215m deep drill hole.   In particular, the firm believes that hole BPL025 – which intersected 177 at 0.5g/t gold – had intersected the upper levels of an extensive mineralised system.

Gold grades are now expected to increase continually alongside depth, as they do at a comparable 10-million-ounce gold project owned by Resolute Mining called Mt Wright. Following this, earlier in December, the business said further assay results from its recent drilling campaign on the project had extended the discovery’s confirmed length of mineralisation to more than 150m.

In Wednesday’s update, Rockfire said that it is now planning further geophysics at Plateau and will update its modelling of mineralisation for the project to include all of its recent drilling results. Furthermore, additional reverse circulation drilling is planned to extend gold mineralisation along strike and at depth.

Chief executive David Price added: ‘We're delighted that drilling beneath the Plateau resource has hit such excellent grades and widths. These results demonstrate that gold mineralisation extends deeper and provides strong growth potential for the resource.

‘These deeper intersections are only 65m from surface and are still well within depths possible for open pit mining. There are operating gold processing plants nearby, so should any future toll treatment possibility eventuate, the costs of processing may materially reduce. I should clarify that no discussions have been instigated with the owners of these facilities at this point in time.

‘With all holes in this drilling campaign intersecting outstanding gold grades and widths, we are confident that our understanding of the geology and mineralisation is improving with each hole drilled. Additional geophysics will be undertaken to expand our interpretation at depth.

‘Targets for growth of the gold resource have been clearly identified and Rockfire plans to recommence drilling as soon as possible. The recent exercise of warrants has provided additional drilling capital and our technical team has already started planning for the next phase of drilling.’

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

Rockfire Resources (LSE:ROCK) sat at 1.9p on Thursday after revealing more positive signs from its Plateau gold deposit in Queensland, Australia, where a significant mineralised system was unveiled last month. The firm said further assay results from its recent drilling campaign on the project have extended the discovery’s confirmed length of mineralisation to more than 150m.

Particular highlights included a strong interval of 7m at 2.3g/t gold within a broader interval of 12m at 1.3g/t gold from hole BPL015. Meanwhile, BPL016 returned a substantial interval of 5m at 1.3g/t gold from 14m deep within a broader zone of 18m at 0.7g/t gold.

The latest assays come just weeks after Rockfire soared on the news that it had potentially discovered a ‘large-scale gold deposit’ at Plateau. The firm revealed that initial drilling results had returned broad, consistent gold assays with mineralisation occurring almost continuously throughout a 215m deep drill hole.  In particular, the firm believes that hole BPL025 – which intersected 177 at 0.5g/t gold – had intersected the upper levels of an extensive mineralised system.  Gold grades are now expected to increase continually alongside depth, as they do at a comparable 10-million-ounce gold project owned by Resolute Mining called Mt Wright.

On Thursday, Rockfire said it believes that the latest mineralised zone unearthed by its drilling at Plateau forms part of this proposed, large gold system. The firm added that gold mineralisation remains open at the central breccia in all directions. Meanwhile, it said the new mineralisation is not currently included in its 41,000oz gold resource estimate for the Plateau. It is now awaiting the results of nine additional shallow exploration/resource-infill/resource-extension drill holes over the next two weeks.

Rockfire’s chief executive David Price said: ‘It is extremely pleasing to have four holes drilled into a new target, with all four holes returning potentially economic gold grades and potentially mineable widths, so close to surface.

‘These results build on the recently discovered Central Breccia zone, which was identified by the Rockfire exploration team during mapping and sampling. The results from these holes demonstrate the strength of the near surface gold mineralisation, which is still open in all directions. The Central Breccia is a priority target for further exploration.

‘These holes are interpreted to represent the near-surface expression of what we believe to be a large gold system encountered at depth in hole BPL025. Importantly, the four exploration holes into the Central Breccia extends the mineralised target zone by another 150 m towards the east. The Central Breccia lies above a recently demonstrated geophysical resistivity and chargeable anomaly, providing Rockfire with a very large target for future gold exploration.’

Plateau is located around 50km southeast of the Australian gold mining centre of Charters Towers. It is also 17km east of the 3-million-ounce, operating Pajungo gold mine, and 47 southwest of the 10-million-ounce gold Ravenswood gold mining operations, including Mt Wright. The prospect is a breccia-hosted gold system where historic drilling undertaken by the likes of Esso Australia and Newcrest Mining has returned high-grade gold from a distinct circular magnetic feature.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Last week saw West Africa-based exploration business Oriole Resources (LSE:ORR) announce that its executive directors had agreed to be paid in options in lieu of contractual salary payments for a limited time. Non-executive chairman John McGloin and independent non-executive David Pelham also followed suit, making Oriole one of the few companies on AIM whose board's financial interests are directly aligned with those of shareholders. We can think of a number of mining companies that would do well to learn from this example. 

The move – full details of which can be found here – forms part of wider efforts at Oriole to maximise cash available for ongoing exploration across the firm's assets in Cameroon and Senegal. However, the board's decision to be remunerated with skin in the game rather than cash – even if on a temporary basis – also sends out a great message to investors. Crucially, what it indicates is that Oriole's management team genuinely believes in the story the company is communicating to the market – something many of its peers on AIM could learn from.

Executive compensation, a hot topic in public markets

Executive compensation was a hot topic at the recent Mello event in London, with many private investors expressing dismay at the money being paid to the boards of many of their held stocks.

Many of you will remember Jeff Fairburn, who was awarded a £75 million bonus last year and was promptly ‘forced to leave’ (or left voluntarily, depending on which newspaper you read). We doubt he will have been too bothered, as £75 million should surely see him through to the end of his days.

The bonus was awarded for “outstanding performance” – which is at odds with the many complaints of “shoddy building work” from Persimmon house buyers. But executive pay is not only an issue at the very top of the market (Persimmon is a FTSE 100 company) but also at the junior end too.

Many small companies have small boards, sometimes just two or three directors. These directors then sit on the remuneration committee, which is in charge of what to pay the directors (themselves!). Unsurprisingly, remuneration committees rarely vote to decrease their salaries.

One issue is that many of the smaller companies are not owned by institutions, and instead the majority of shares are in retail hands. Most retail investors are one-man bands; they can’t muster up enough of a holding in order to force change. The shareholder register is littered with private investors, who have punted a few hundred pounds or a few grand, only to hold onto the stock (and rather than sell they hold onto it forever as it goes down).

Once a director is a plum position at a company, where he/she can pay himself/herself whatever they feel like, there is often very little to challenge them. This is why we see share prices decline year-on-year, only for director remuneration to steadily increase.

Some directors take home packages of over £250,000 – despite not having delivered a shred of value and only failing at their jobs. There are very few industries where one can achieve such a high salary for doing very little/nothing, but the UK listed small and micro-cap space is one of them.

It's also why many of these directors rarely leave the businesses. It’s a lifestyle, and a gravy train. It’s why everyone wants to become a non-executive director. Turn up to two meetings a year, earn a decent packet, smash the expenses card, and impress your mates down the pub. Turkeys never vote for Christmas, and so as long as this goes unchallenged – it will only be set to continue.

This is why it is so refreshing to see Oriole's board increase their holdings at a time when the company needs cash to fund its growth. By being paid in options, they actually need to deliver something operationally, reaping the rewards alongside investors in the process.

The move was clearly appreciated by investors, as well – with shares rising 14.1pc to 0.3p on the news. This strength has continued and, at writing on Tuesday, the stock was trading up a further 38.2pc at 0.47p following the release of another positive update. However, the directors' remuneration options are yet to be issued and will not be until between 1 November and 31 January 2020.

Perhaps the appreciation showed by Oriole's investors might catch the eye of some of the AIM executive teams whose pay would unlikely change until the day their company closed and they are forced to move on to the next lifestyle vehicle. More likely, this is wishful thinking!

Author: Ben Turney

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

 

 

In March 2019, Greatland Gold (LSE:GGP) signed a $65m farm-in deal with major international gold firm Newcrest Mining (ASX:NCM) for its Havieron project in the Paterson area of Australia.

Subsequent drilling has solidified Greatland’s belief that Havieron holds the potential to host an extensive mineralised system. If correct, then this project could become a large, multi-commodity, bulk tonnage, underground mining operation.

Newcrest’s work at Havieron to date has firmed up the asset’s depth of mineralisation as well as extending its strike length both from the north to the south and from the east to the west. What’s more, the potential for gold to continue into asyet-untested areas remains open, presenting the opportunity for yet more upside at the prospective project.

In this special report, we lay out the potentially significant, value-enhancing effect that Havieron could have on Greatland’s market valuation to the benefit of the company’s investors.

To read the report in full, please click here.

 

 

  1. A beginner’s guide to understanding assay results - by David Price, CEO of Rockfire Resources
  2. Horizonte Minerals to push forward at Araguaia after completing $25m Orion royalty deal (HZM)
  3. Energy metals roundup: UK government doubles down on support for EV market and new figures forecast major global demand growth (GEMC, FMC)
  4. Shefa Gems demonstrates strong project progress in recent site visit (SEFA)
  5. Shefa Gems – moving towards trial mining and revenue generation (SEFA)
  6. Kavango Resources reveals ‘mounting evidence’ of mineralisation at Ditau encouraging major JV partners (KAV)
  7. Arc Minerals extends mineralisation at Cheyeza East and kicks off work at Lumbeta (ARCM)
  8. Q&A with Kavango Resources' Mike Moles on how it's all to play for at Ditau (KAV)
  9. IAMGOLD identifies new gold anomalies at Oriole’s Dalafin project (ORR)
  10. The Shifting Shares View: Why ‘story stocks’ are great for trading
  11. Rockfire Resources’ David Price talks through the vast potential on offer across firm's Australian exploration portfolio (ROCK)
  12. Chesterfield Resources jumps after revealing new drilling target in Cyprus (CHF)
  13. Shefa Gems rises following major exploration permit renewal in Israel (SEFA)
  14. Arc Minerals reveals further drilling progress at Cheyeza East (ARCM)
  15. Resources investment firm MetalNRG lists on main market of the LSE (MNRG)
  16. Rockfire Resources confirms exit from Papua New Guinea (ROCK)
  17. Kavango receives Ditau assay results as it positions for asset farm-out (KAV)
  18. ‘The opportunity value is huge’ – Cobra Resources’ Craig Moulton on his plans to create value as firm prepares development of maiden assets
  19. Kazera spikes as Namibia resource estimates exceed expectations (KZG)
  20. Arc Minerals up 38pc week-on-week after identifying a large new target at Zamsort (ARCM)

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