Asiamet Resources (LSE:ARS) sat at 6.6p on Wednesday after revealing that strong drilling results have taken it another step closer to completing a bankable feasibility study (BFS) for its BKM copper deposit in Indonesia.

The business said that the latest round of assay results received from infill and geotechnical drilling have confirmed its expectations for the deposit. It added that they also ‘further strengthen’ resource models at the site.

Highlights from the latest results include a hole called BKM31550-06 that delivered 19m at 1.16pc copper from a depth of 72.5m. This included 5m at 1.43pc copper from 82.5m depth and 2m at 2.61pc copper from 89.5m depth. Another hole called BKM31550-09 included 27m at 0.67pc copper from 57.5m depth. This featured 3m at 2.15pc copper from 80.5m depth.

Asiamet has now completed 37 resource evaluation holes and four geotechnical holes for 5,665m of diamond core drilling. It has received assays results for 32 holes, with the remaining nine expected before the end of the month. Once the company gets these, it will update its resource models at BKM, using this to generate first ore reserves for the BKM copper project.

Asiamet’s chief executive Peter Bird said the results strengthen the business’s position as it moved into the final phase of mine and process design to generate an initial ore reserve for BKM.

‘Upside potential in and around the BKM deposit remains very high and an external geological consultant with extensive experience in Indonesia has recently been engaged to further strengthen our understanding of the BKM geological system and develop a suite of additional high potential near mine Resource targets for testing in the next round of drilling,’ he added. ‘This work is currently under way and we look forward to providing an update on this target generation program shortly.’

The BKM BFS is expected to precede the delivery of a final feasibility study by the close of H1 2019 and first production by the end of the year. Asiamet has already carried out a preliminary economic assessment at BKM, which gave the site an after-tax NPV10 of $204m and after-tax IRR of 39pc. This calculation was based around a 25ktpa copper cathode heap leach operation to be carried out over an initial eight years.

BKM’s NPV alone dwarfs Asiamet’s current £66.2m (c.$87.6m) market cap considerably. What’s more, this figure doesn’t include the ‘district-scale potential’ Asiamet expects to be on offer in the area surrounding the project. This point was highlighted last month when institutional investor JP Morgan took advantage of a slump in Asiamet’s share price amid the resource market downturn to increase its stake to 9.37pc.

Author: Daniel Flynn

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

The Author has not been paid to produce this piece by the company or companies mentioned above

Catalyst Information Services 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 Catalyst Information Services 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

 

Since listing in London last July, Kavango Resources (LSE:KV) has been making progress in its quest to locate magmatic, massive sulphide orebodies in Botswana. In particular, the company is focused on a 450km-long magnetic anomaly called the Kalahari Suture Zone (KSZ), where it hopes to discover deposits of copper, nickel, and platinum group elements. In this piece, Kavango co-founder and seasoned geologist Mike Moles explains how the magmatic sulphide orebodies Kavango is searching for are formed, what they could contain, and how they can be developed into a marketable product.

Until Kavango started work on the KSZ, the mineral potential of the area had not been investigated using modern exploration techniques. Kavango believes that the KSZ represents a similar geological setting to the giant Norilsk copper/nickel/PGE deposits in Siberia. The firm has now begun an initial 1,000m drill program at its nearby Ditau prospect.  Meanwhile, the company is continuing to line up further drilling targets through the combination of an extensive airborne EM survey and a pioneering, high-resolution soil sampling technique that detects ultra-fine metal particles.

What are magmatic sulphide orebodies?

Magmatic ore deposits are formed in association with the intrusion of mafic/ultra-mafic magma into (or sometimes on top of) the rocks forming the earth’s crust. This magma contains more dark minerals like olivine and pyroxene than light-coloured minerals like silica-rich feldspars and quartz.

Examples of mafic/ultra-mafic rock include gabbro, peridotite and dunite. Most of the minerals making up these rocks are still silicates but they tend to contain relatively higher proportions of base and precious metals in their crystal lattices than felsic minerals. The diagram below shows this dynamic in action. When these metals are concentrated at high enough grades and in large enough quantities to be economically mined, they are called ‘magmatic ore deposits’.

 

This diagram shows examples of both mafic and felsic rocks (Credit: W.W. Norton & Company)

It is worth noting that magmatic ore deposits are not the same as volcanogenic massive sulphide (VMS) deposits. These are formed from the interaction of seawater with submarine volcanism. The extrusive volcanism represents a ‘heat engine’ that drives the hydrothermal alteration of both the lavas and the country rock. The metals that are ‘dissolved’ by the alteration then combine with sulphur in the seawater. This leads to the deposition of metal sulfide deposits on the seafloor or within the country rocks.

How are they formed?

Mafic/ultra-mafic magma is the product of the partial melting of ultra-mafic rock and sub-ducted crust. The magmas rise into the solid crust partly due to thermal convection (hot spots), partly due to the melting of sediments containing water, and partly due to density, temperature & pressure differentials.

In some cases, the magmas intrude into areas of structural weakness like deep-seated faults or ancient craton edges or suture zones. Here, the magma can reside for varying periods in what are known as ‘magma chambers’ where it interacts with the enclosing rock.

During this period, the magma may partly crystalize and alter the chemical composition of the residual magma. Further pressure from below may then force this ‘evolved’ magma into shallower depths.  In some cases, it may eventually reach the surface, where rapid decompression may result in the extrusion of lava (e.g. basalt). Extrusive lavas cool rapidly, but the magma in the magma chambers may take several million years to cool and crystalize to form solid rock. 

Following this, the concentration of the critical ‘ore’ minerals occurs through a number of different primary and secondary processes.

Primary concentrations

The mafic/ultra-mafic magmas vary in chemical composition depending upon their source rocks and the degree of partial melting that occurred during their formation. The molten magma may end up containing quantities of sulphur and water.

As the magma in the magma chamber begins to cool it starts to crystalise, with some minerals crystalising before others. This changes the chemical composition of the residual magma, leading it to be enriched in certain elements through a process known as ‘fractional crystallisation’.

The chemistry of the residual magma may also be changed by the incorporation of volumes of ‘country’ rock from the walls of the chamber. It is particularly advantageous for the magma to incorporate volumes of coal or coal shale that contains both sulphur and carbon. This appears to be the case with the gabbros on Kavango’s KSZ project. If the residual magma becomes enriched with sulphur, most of the metals will prefer to bond with the sulphur rather than form oxides or take up sites within the silicate lattices. The metal sulphide liquid is late to crystallize and forms an ‘immiscible’ liquid, which is heavy relative to the recently formed silicate minerals. This metal-rich sulphide liquid tends to crystallize on the cool walls of the intrusion or gravitates to the floor where it forms a concentrate - the massive sulphide. 

Concentration and crystallization of this immiscible liquid can also occur at other localities due to a sudden drop in pressure or introduction of new magma into the chamber. This type of mineral concentration is usually dependent upon large quantities of magma passing through the magma chamber, constantly enriching the residual magma in metal sulphide liquid.

A variation of this model occurs in very large mafic/ultra-mafic (layered) intrusive bodies such as Bushveldt, Duluth, and Stillwater. These are closed or partly-closed systems where magma replenishment is less important. In these bodies, sulphur is also less important. After the first phase of crystallization, the residual liquid becomes enriched in certain elements. This may lead to the crystallization of another mineral species until the residual liquid becomes depleted in the elements needed for that phase. This leads to cyclical fractionation producing alternation layers of mineral species. At some point in this very slow process, bands of chromite might form as the concentration of chrome in the residual melt combines with oxygen in the system. As the silicate crystals form, gaps occur between them. These gaps may be filled with the immiscible sulphide liquid, which is rich in copper, nickel and PGEs. In some cases, these sulphide-rich layers are rich enough to be economic.

Another variation are Komatiites, which seem to be restricted to very ancient ‘Archean’ terrains formed at a time when there was no free oxygen in the air. They are essentially ultra-mafic lavas that once flowed over the surface of the earth and were enriched in sulphur.  As the lavas cooled, the metals combined with the sulphur and the resulting immiscible liquid sank to the paleo-surface, where it accumulated in depressions and hollows forming sulphide concentrations. An example of this is Kambalda.

A magnetic image of the Kalahari Suture Zone, where Kavango is searching for massive sulphide orebodies 

Secondary concentrations

Secondary concentrations occur at some point in time after the intrusive has solidified (crystallised). The majority of these deposits are formed by hydrothermal alteration. Essentially, this is the activity of very hot water (or brines) circulating through the intrusive and concentrating the metals further, either within the intrusive itself or transported some distance away, where the precipitation of the minerals is favourable.  These secondary deposits come in the form of re-crystallised sulphides or as oxides/carbonates and can be very high grade.

What do they look like?

On the surface, weathered massive or disseminated sulphide orebodies will form ‘gossan’. These are generally rusty coloured rocks with a rough, crinkly texture. Gossans can be very high grade, although metallurgically these metal oxide ores can be difficult to process. Massive sulphide ore is generally very heavy, formed of a mass of shiny suphide crystals, and will smell of suphur when hit with a hammer. Disseminated sulphide ore will have large numbers of shiny sulphide crystals within a matrix of the host rock (usually gabbro or altered mafic rock).

An example of the various layers of a sulphide mineral vein, with gossan at the top (Credit: Bastian Asmus, Archaeometallurgy) 

How are they found?

The metal particles within the sulphide crystals are too small to find with the naked eye in streams or soils.

Most of the oldest mines are sited where outcrops of gossan were discovered. Typically, the gossans were assayed for metal values. When these proved to be positive, drilling was conducted beneath the gossans to identify sulphide mineralisation below the level of oxidation. Usually, the oxides were not mined, due to the difficulty of extracting the metal.

Although there have been some discoveries in very remote areas in recent times by finding the gossans, most exploration for magmatic sulphide ore bodies is now conducted by remote sensing for hidden orebodies.

Before starting the search, geologists will select areas where a discovery is likely. These will be in areas where mafic/ultra-mafic intrusives are known to occur. Preferably this will be in association with a major structural fault along which intrusives from below the crust can migrate. 

Soil sampling can identify metals coming to surface, whilst geophysical techniques can identify massive sulphide bodies at depth by testing the electro-magnetic signals of the ground being explored. This can be done by airborne EM surveys, which can cover hundreds of kms of survey per day and will typically identify conductors to 200 - 300m depth.

EM conductors identified from the airborne surveys are then followed up by ground-based geophysical techniques to identify drilling targets. Depths to targets can be calculated and drilling can be conducted to investigate the anomalies. 

How are they extracted? 

Once a metal sulphide deposit has been identified, drilled out and a resource calculated; a feasibility study will be carried out to determine whether it can be mined economically. It will be decided how the deposit is to be mined; open cast or underground mining.

During the mining operation, only the ore of a certain grade will be processed. The ore will then be crushed and milled to liberate the sulphides from the host rock (gangue). The resulting product will then undergo floatation which will separate the sulphides from the guague. The sulphides are then smelted to burn off the sulphur (usually captured), leaving a metal matte, which is then sent to a refinery where the economic metals are separated and extracted. The product is either sold at the matte stage or as a metallic product after refining.

Author: Mike Moles

Mike is the co-founder of Kavango Resources (LSE:KAV), where he is currently a non-executive director and responsible for exploration strategy in Botswana. He has 30 years of experience in mineral exploration in southern Africa and has formerly held senior roles at Delta Gold, Reunion Mining, and Lonmin.

In today’s podcast Mitchell Smith, CEO of Global Energy Metals (TSX-V:GEMC), explains the company’s strategy of being a pure-play on Cobalt.

Global Energy Metals is developing a number of Cobalt projects across Australia, Canada and the US and recently signed a Definitive Agreement to acquire the Lovelock Cobalt Mine and Treasure Box Project in Nevada. Both are around 150km away from the Tesla Gigafactory. Smith also discusses the company’s plans for an additional list in London.

This interview was recorded on 14th March 2019.

All opinions expressed are those of MiningMaven and the respective guests, unless otherwise stated and should not be construed as investment advice or a recommendation to buy shares in any featured Company. From time to time MiningMaven principals may take equity positions in companies featured. Listeners are advised to do their own extensive research before buying shares which, as with all small-cap exploration stocks, should be viewed as high risk. Investors should also seek the advice of a qualified investment adviser or stockbroker as they deem appropriate. MiningMaven.com is a trading division of Catalyst Information Services Limited. Registered in England no. 06537074 (Registered Office Address 3rd Floor Ivy Mill, Crown Street, Manchester, M35 9BG) #gold #mining #investing

Author: Stuart Langelaan

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

The Author has been paid to produce this piece by the company or companies mentioned above.

Catalyst Information Systems Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

Catalyst Information Systems 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 Catalyst Information Systems Ltd are not responsible for its content or accuracy. 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.

 

 

African Battery Metals (LSE:ABM) sat at 0.4p on Friday after securing an option to acquire a stake in a Tanzania-based nickel project. The firm has entered an option agreement with AIM-listed exploration and development company Katoro Gold (LSE:KAT). This gives it the right to purchase a 25pc position in Katoro’s Haneti project as well as a stake in Katoro itself.

Haneti comprises tenements that cover around 5,000km2 and are prospective for nickel, platinum group elements, cobalt, copper, gold, and lithium. Around $1.5m worth of work has been carried out at the project to date, identifying grades of up to 13.6pc nickel.

Katoro believes that Haneti could host a chonolith type nickel sulphide deposit and is principally targeting a prospect called Mihanza Hill. It is currently carrying out a 2019 work programme to determine whether disseminated or massive sulphide mineralisation is present.

Under the terms of its agreement, African Battery has acquired an initial £25,000 worth of Katoro shares at 1p each.  Each of these shares comes with a three-year warrant that is exercisable at 1.25p. This also gives the business exposure to Katoro’s other asset, which includes the Imweru and Lubando gold projects in Tanzania. Together, these host a JORC compliant gold resource 754,980oz gold.

Following this initial purchase, African Battery has been granted a 60-day option, giving it time to carry out due diligence on Katoro’s projects, with a particular focus on Haneti. If the business decides to exercise this option, it will acquire around £75,000 worth of shares with warrants attached.

It will also acquire a 25pc stake in Haneti, through Katoro’s subsidiary Kibo Nickel.  In this scenario, it will be required to fund a 25pc share of Haneti’s costs. Finally, African Battery will have the option to acquire a further 10pc position in Haneti for £25,000 a year on from the day it exercises its option.

African Battery’s exec director Paul Johnson said Friday’s deal complements the firm’s existing interests and provides it with some diversification without diverting its focus away from Africa and battery metal projects.

‘Alongside our existing copper and cobalt interests, the addition of nickel into our portfolio exposes our shareholders to another strategically significant metal where we believe the forward supply/demand dynamics are looking highly attractive,’ he said.

‘We are looking to work with Katoro on an accelerated exploration programme at Haneti to build on the knowledge that Katoro, and previous owner Kibo Mining plc, gathered.  This includes data demonstrating 13.59% nickel in sampling of outcrops. We look forward to reporting back on developments in respect of this strategic transaction in the near future.’

Friday’s update comes after African Battery announced that it had returned from the first stage of its strategic and operational review with a ‘robust financial position’.

The exploration player was suspended from trading in December as demands from short-term creditors exceeded available working capital. However, it was re-admitted to the market last month days after shareholders voted in favour of a host of proposals aimed and restructuring the business. This included a conditional placing and subscription to raise £1m at 0.5p a share and help pay off creditors.

In an update, African Battery said it has now paid all material creditor balances through either cash or share settlements. It now has no material debt and free working capital of around £860,000. It believes this figure will cover corporate plc costs, anticipated project exploration, and expenditure on existing interests for 12 months.

Author: Daniel Flynn

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

The article expresses the views of the Author solely and does not necessarily express the views of MiningMaven.com and Catalyst Information Services Ltd or their connected parties who are not responsible for its content or accuracy

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. Readers are recommended to seek the advice of appropriate professionals when considering investments in small capital.

Exploration business Oriole Resource rose to 0.37p on Wednesday after updating investors on its strategic repositioning, exploration progress in Cameroon and Senegal, and strong financial position. Here, chief executive Tim Livesey and chief financial officer Bob Smeeton talk us through the significance of the figures and why they believe Oriole remains highly undervalued in the retail market.

Financial discipline

The headline figure from the results was an operating loss of £2.55m for the year to 31 December 2018, a significant improvement on the loss of £7.5m in the prior year, where the higher operating costs were due mainly to the attempted acquisition of Australian listed Crusader Resources.

Chief financial officer Bob Smeeton tells us this drop in operating costs has arisen from the business’s strategic repositioning over the year as well as an increased cost discipline over the period, which resulted in an impressive 26pc reduction in administration costs.

This saw Oriole introduce a renewed strategic focus on high-impact, early-stage exploration assets. Principally, it shifted its focus onto its existing exploration project in Senegal and a new project in Cameroon while continuing its efforts to monetise its legacy and royalty assets in Turkey.

Elsewhere, the firm introduced a new management team headed up by chief executive Tim Livesey, who joined in March last year to replace Bob Foster, who had been in an interim role. Finally, to reflect its repositioning, the outfit changed its name to Oriole Resources from Stratex International in September.

We basically did all of the administrative changes that we could do without having to close down and re-open the firm,’ Smeeton tells us. ‘We have refreshed the company entirely. We are on a much more even keel now, following a difficult 2017. The reduction in administrative costs reflects the agreed revised compensation positions of the new management team and Board, additional fiscal discipline around advisers and other corporate running costs, and this will continue.’

Expanding on this final point, Smeeton said the successful resolution of a long-running VAT dispute with HMRC in February 2019 is likely to cut administration costs further this year. Indeed, the organisation incurred £170,000 worth of adviser fees in relation to the dispute last year, which will now fall away.

He adds that the resolution will also boost Oriole’s cash balance, as it expects to receive a £500k rebate from the UK tax office in Q2 2019. The organisation’s cash, which sat at £1.29m at the end of 2018, will also be boosted by a recent $500k success fee from its Turkish partners on the Karaağaç gold project and a £40k R&D credit noted last month, from activities in the 2016 tax year.  Further R&D rebates are expected for 2017 & 2018. Smeeton says this should cover the cost of its planned work activities and administration for the remainder of the year.

‘Obviously, as a junior explorer the more work we do, the more money we will spend,’ he added. ‘However, we are in a fairly comfortable position at the moment.’

New assets

Wednesday’s results also saw Oriole update investors on its 85pc-owned Dalafin project in Senegal. In March last year, the business announced that it had struck an agreement with IAMGOLD that would allow the mining major to earn a 70pc interest in the licence over six years by spending $8m. Work has commenced, with IAMGOLD meeting and exceeding its first year spending commitment.

The firm has confirmed mineralisation within multiple zones at the Madina Bafe target in the south of the licence area. This is a priority for the business as it falls within 10km of its 2.59Moz Boto gold project, where it has applied for a mining licence.

Last month, IAMGOLD outlined a $1m year two work programme for the asset that will see it carry out another c.13,000m of AC and RC drilling. This will include work at the Saroudia prospect, which Livesey tells us is also just a stone’s throw away from Boto.

A diagram showing the location of Dalafin and its prospects

Elsewhere, Oriole provided an update on its new Bibemi and Wapouzé ventures in Cameroon. Last year, the firm signed an agreement to earn-in up to a 90pc stake in the sites by spending $3.12m over four years. It has already completed a rock-chip sampling programme at Bibemi that demonstrated ‘bonanza’ grades, with multiple assays returning in excess of 100g/t.

Meanwhile, it started a phase one trenching programme on the licence late last year, with initial results this month confirming multiple zones of orogenic-style gold mineralisation. This includes 6m at 3.02g/t with individual veins returning up to 13.6g/t gold. The organisation is currently waiting for its remaining trenching results but has already commenced Phase 2 trenching across key results to date At the earlier-stage Wapouzé asset the firm has started a systematic soil sampling programme, with results expected soon.

With Cameroon’s wet season now approaching, Livesey told us that Oriole will spend some time analysing its geological results at both sites to date with a view to progressing them later this year:

‘We are interrogating the geological and sampling data that we have received and are still receiving. We will then try to understand the controls on the mineralisation at Bibemi and then apply that knowledge to the next phase of exploration. We will also look at whether the findings also apply at Wapouzé or if it is a completely different system. Ultimately, the goal is to get to the point where we can maximise our chances of success with some targeted drilling.

A diagram showing the location of Oriole's assets in Cameroon

Moving forward

Finally, in its outlook for 2019, Oriole said there is a ‘great opportunity’ for Oriole to establish itself as a high-quality exploration player after building foundations throughout last year. Despite the progress made by Oriole since its restructuring, the company’s shares have struggled to progress and currently sit at 0.38p. This gives the business a market cap of £2.63, little over its current cash balance.


The recent resource bear market has provided little support here, and Livesey told us he believes that Oriole is currently highly under-valued. However, he remains hopeful moving forward:

We consider Oriole to be massively undervalued with its current market cap close to cash in bank,’ he said. ‘We should be trading significantly higher than where we are today when one considers the money we have got in the bank, the fact we have IAMGOLD as a partner, the value being realised in our legacy assets, and the progress we are making as first movers in a new gold district in Cameroon. It just doesn’t make sense at all. Moving forward, we will continue to progress our efficient and cost-effective exploration programmes, and we are sure the market will eventually catch on. We have a free carry in Senegal, cash in the bank and a team delivering on exploration in Cameroon.  It is a very exciting time for us and we look forward to updating investors over the coming months.’

Author: Daniel Flynn

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

The Author has not been paid to produce this piece by the company or companies mentioned above

Catalyst Information Services 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 Catalyst Information Services 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

On Thursday, Horizontal Minerals (LSE:HZM) reported positive results from metallurgical and smelting test work at its Vermelho nickel cobalt project. Samples from Vermelho, which is located in northern Brazil, returned an average grade of 31.8pc nickel. The firm says the results confirm the suitability of a proposed conventional Rotary Kiln Electric Furnace for processing ore from the resource. 

The data will add to a pre-feasibility study for Vermelho which is currently underway. A study produced by the previous owner, Vale S.A. demonstrated the project had the capacity to produce 46k tonnes of nickel and 2.5k tonnes of cobalt per year.

Horizonte CEO Jeremy Martin said, "We are pleased to report the test work has confirmed that it is possible to produce high grade, commercial specification ferronickel from the saprolite and transition ore at Vermelho. These results confirm the suitability of the proposed conventional Rotary Kiln Electric Furnace ("RKEF") process selected for the Company's Araguaia ferronickel project is also suitable for processing Vermelho ore. In parallel the test work at SGS Lakefield on limonite samples from Vermelho to demonstrate its suitability for production of high purity nickel and cobalt sulphate to supply the EV battery markets is at an advanced stage and we look forward to reporting on the results of this work.

The company is also developing the Araguaia Nickel Project in the same region of Brazil. The project is expected to produce an average of 14.5k tonnes of nickel a year, with an opportunity to double this through the construction of a second Rotary Kiln Electric Furnace process line. Horizonte produced a feasibility study confirming Araguaia as a Tier-1 project with a large, high-scale resource last October.

Jeremey Martin added: Elsewhere we continue to advance the construction financing on the Araguaia Project. Against a backdrop of global growth in nickel consumption running at around 4 to 5% per year with stainless steel currently accounting for two thirds of demand. Going forwards and coupled with this continued growth in stainless steel, nickel use in battery chemistry is set to increase significantly. This robust demand story for nickel positions Horizonte well, owning 100% of two Tier 1 nickel projects, within trucking distance of each other with the potential to produce 40,000 to 50,000 tonnes per year of nickel. 

Horizonte’s share price was hit recently with a TR-1 notification of major holdings released on 5th March revealing significant holder City Financial had sold the bulk of its stake.  The investment firm was forced to sell its holding as it is entering administration, offering a potentially good opportunity for other interested investors to enter the stock.

Author: Stuart Langelaan

The Author holds a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

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

Catalyst Information Services 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 Catalyst Information Services 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.

Anglo Asian Mining (LSE:AAZ) revealed its maiden JORC mineral resource and ore reserve estimate for its producing Gadir underground mine in Azerbaijan on Thursday, sending shares down by 4.6pc to 73p.

The asset, which is based on Anglo Asian’s Gedabek contract area and has been in production since 2015, contains measured plus indicated mineral resources of 1,775,000ts. This is expected to hold 145,200oz of gold, 736,100oz of silver, 3,295ts of copper, and 14,470ts of zinc. Meanwhile, the site also contains inferred mineral resources of 571,000ts containing 27,200oz of gold, 104,400oz of silver, 571ts of copper and 2,972ts of zinc.

Elsewhere, Gadir has been estimated to contain proved and probable ore reserves of 797,000ts at a grade of 2.73g/t gold. This is thought to contain 70,000oz of gold, 11.86g/t silver containing over 300,000oz of silver and 0.17pc copper containing nearly 1,400ts of copper. At current production rates, Anglo Asian expects this to give the mine a life of more than five years.

The company said the publication of these figures is in line with its strategy of formalising its global resource inventory of producing assets. This also includes the Gedabek open pit and the Ugur open pit. Indeed, it has now prepared JORC-compliant resources and reserves estimates for all of its producing assets.

On this, Anglo Asian group director of geology and mining Stephen Westhead said: ‘The completion of this work provides a strong understanding of the combined production profile of all operating mines, that gives a mine life until end 2024 from the current reserves.

Meanwhile, Anglo Asian said it has now completed a 3D geological model of Gadir to support further mining and exploration. Expansion work is ongoing and is expected to enhance the site’s maiden resource and reserves estimate further.

Westhead added: ‘Importantly, the resources adjacent to these mineral reserves provide the opportunity to be further upgraded for future production. Additionally, exceptional exploration potential exists at not only the Gedabek Contract Area, but also at the Ordubad and Gosha Contract Areas, which will be evaluated in due course to increase the Group resources with the aim of expanding current mines and constructing new mines.’

Meanwhile, chief executive Reza Vaziri said: ‘This process of comprehensive geological exploration is continuing, and as additional geological data are obtained, this mineral resource and reserve estimate will be further updated.  Supporting these activities is a detailed, three-dimensional geological model of Gadir which will assist in both mining the deposit and further exploration.’

Anglo Asian has forecast metal production of between 82,000 to 86,000 gold equivalent ounces in 2019. Of this, between 28,000 to 30,000 GEOs is in the form of copper and gold flotation concentrate.

Author: Daniel Flynn

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

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

Catalyst Information Services 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 Catalyst Information Services 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.

 

 

This is a guest post re-published with permission from ValueTheMarkets.com

One of the most critical tools at an investor’s disposal when it comes to stock picking is a firm’s balance sheet. Here, we take a look at what a balance sheet is, what it consists of, and how it can be used to improve investment decisions.

What is a balance sheet?

A balance sheet is a snapshot of everything a company owns and how much it owes, at a specific point in time. It is made up of two sides that must ‘balance’, or be equal to each other. The first side records the business’ assets, which are the things of value under its control. The second side records all outstanding liabilities, including all outstanding debts and other amounts owed and its shareholders’ equity. The shareholders’ equity figure will also include all accumulated profits and losses. Remember, assets are always equal to liabilities plus shareholders’ equity.

To demonstrate an example of a balance sheet in action, we have used Hollywood Bowl’s (LSE:BOWL) results for the year ended 30 September 2018, released on 10 December 2018 (found here).

Assets

Assets are divided into two categories. Current assets (assets that are cash, or are expected to be converted into cash, within one year) and non-current assets (assets that cannot or are not expected to be converted into cash within one year). The contents that make up both current and non-current assets will vary depending on the stock that is reporting. However, current assets will often include the following:

Cash and cash equivalents – these are the most liquid assets and feature instruments such as treasury bills, short-term certificates of deposits, and hard currency. As you can see below, Hollywood Bowl had around £26m in cash and cash equivalents when it calculated its balance sheet.

Trade and other receivables – Also known as accounts receivable, this is money owed to the company by customers. Hollywood Bowl had around £6.6m of these when posting its balance sheet.

Inventories – These are goods available for sale, valued at the lower of the cost or the market price. Hollywood Bowl has around £1.2m of these on its balance sheet.

-Other common current assets, not held by Hollywood Bowl, include marketable securities, which are equity and debt securities that are part of a liquid market, and prepaid expenses, which is value that has already been paid.

 

Meanwhile, non-current assets will often include the following:

Property, plant, and equipment (PP&E): Also known as ‘fixed assets’, these are long-term assets vital to business operations that a firm cannot quickly convert into cash. This area can include things like land, facilities, machinery, office equipment, vehicles, furniture, and fixtures. As their value can increase or decrease over time, PP&E assets must be routinely updated.

The value of PP&E relative to total assets is likely to vary significantly between businesses in different sectors. For example, the long-term assets owned by an airline will likely be higher than those held by a consulting company, where staff will mostly operate on computers in a leased office. As you can see, PP&E assets are relatively significant for Hollywood Bowl, coming in at around £41.1m.

Intangible assets – These are assets that do not physically exist but have value due to cash generated by them or identifiable unimpaired capital sums invested into them. They can include things like goodwill (the difference between the value of the physical assets purchased and the price paid for them), brand recognition and intellectual property (patents, trademarks, and copyright). As an enterprise that relies heavily on branding, Hollywood Bowl’s intangible assets are very significant, coming in at nearly £79m.

It is worth noting that the market often applies a significant discount to intangible assets in a company’s share price, and can even assign no value to them at all. Although it is worth acknowledging a company’s intangible assets, it often pays not to include these when attempting to estimate what a firm’s quoted market capitalisation might be when measured against its balance sheet value.

-Although not present on Hollywood Bowl’s balance sheet, non-current assets also can include long-term investments. These are investments that a business will not touch, such as bonds invested as part of a portfolio.

Liabilities

As with assets, firms separate liabilities into those that are due within one year (current liabilities) and those that are due at any point afterwards (non-current liabilities). Once again, these will vary greatly depending on what type of stock is reporting. It is also important to remember that some debts will be ‘off-balance sheet’ and will not appear. These can include things like operating leases and details will be found in a company’s full annual report. Common current liabilities include:

-Trade and other payables– Also known as ‘accounts payable’. Perhaps obviously, this is the opposite of trade and other receivables in the asset segment of the balance sheet. It refers to goods and services that a company has received from suppliers but for which they have not paid. These make up the bulk of Hollywood Bowl’s current liabilities, at around £16.6m.

-Loans and borrowing – Again, a pretty obvious one also classified as ‘short-term loans payable’ in some cases. The category refers to loans that require payment in less than one year. Hollywood Bowls has around £1.4m of these on its balance sheet.

-Corporation tax payable– This quite simply the money the business owes to the tax office, which, in the UK, would be HM Revenue & Customers. Hollywood Bowls has incurred c.£2.8m of corporate tax.

-Other common current liabilities that have not been incurred by Hollywood Bowl are interest payable, rent, tax, and utilities, wages payable, customer prepayments, and dividends payable.

Meanwhile, common non-current liabilities include:

-Deferred tax liabilities– Generally speaking, these are taxes that have been accrued but will not are not due for another year. These are often used to reconcile differences between the financial reporting year and the tax year. Hollywood Bowl currently has just £487,000 worth of deferred tax liabilities on its balance sheet.

-Loans and borrowing– These are loans that companies do not need to repay within the next 12 months. They make up Hollywood Bowl’s largest non-current liability at c.£26.8m.

Accruals and provisions – Accrued liabilities are expenses that a business has incurred but has not yet paid. They can either be short-term or, as in the case of Hollywood Bowl, long-term. These expenses can include pension obligations, interest expenses, and wages.

-Other liabilities that are not present on Hollywood Bowls’s balance sheet include deferred compensation, deferred revenues (where a customer has paid for goods or services not yet received), and derivatives. Finally, in some cases, debt that is due within 12 months may, in some cases, be reported as a non-current liability if there is an intent to refinance this debt.

Shareholders’ equity

Shareholders’ equity can be an extremely helpful indicator in helping to value a stock. When you subtract liabilities from the assets, anything left over belongs to a enterprise’s owners and shareholders. This is also known as net assets. In addition to net assets (or net liabilities if there are more liabilities than assets) are the profits accumulated over the years along with money put into the company through issue capital. (e.g. through placings) Much of this value is to be found in the company ’s share premium accounts (representing sums raised at above the nominal value of a company’s shares as the company has progressed). As can be seen in the image below, firms divide this segment into several areas.

Retained earnings, by far the biggest component in Hollywood Bowl’s balance sheet, are the net earnings a company either reinvests or uses to pay off its debts.

Share capital – This is the total amount of funds raised by a firm in exchange for share of either common or preferred shares of stock. It only accounts for the amount initially paid by shareholders. It does not reflect any gain or loss made when reselling on the secondary market.

How do you interpret a balance sheet?

There are many ways a balance sheet can be used to analyse a business, some far too technical for this piece. Here we will look at three simple, common calculations that any investor can use to assess a stock’s financial health:

Debt to equity ratio

As we have described, assets are funded either by creditors in the form of loans and other liabilities or from shareholders through share capital and retained profits. The ratio between the two sources is critical because debts can always be called in by a creditor while shareholder equity is ongoing.

The debt to equity ratio is calculated by dividing total liabilities by total shareholder funds. So, Hollywood Bowl’s ratio would be £58,646/£94,938 = 0.62, often expressed at 62pc. There is no correct level because different types of business will require different amounts of debt relative to their equity.  However, a company with a high number is considered more ‘geared’ or ‘highly leveraged’ than one with a low number. In elementary terms, they can be considered riskier.

Having a high debt to equity ratio is not necessarily a bad thing. If the value of an asset increases, then a highly geared business will enjoy a higher return on their equity as the value of their loan will not increase in line with this growth. That said, it can work both ways. If the value of the asset decreases to below the size of the loan taken out to pay for it, then a business risks losing equity.

With this in mind, Tom Stevenson, investment director at Fidelity Worldwide Investment, advises investors using the D/E ratio to ask if a firm is vulnerable to an economic downturn before injecting their cash. He adds that it is worth looking at whether an enterprise’s revenues are predictable or protected by substantial barriers to entry. They should also look into how quickly a company will need to repay debt, how much cash it is generating, and whether it enjoys fixed interest rates.

Current ratio

This a straightforward measure of a business’s ability to cope in a worst-case scenario where it is forced to pay all of its short-term obligations in one go. It divides the firm’s current assets by its current liabilities, with a figure greater than one suggesting it would not have to go to the bank for more financing. In the case of Hollywood Bowl, the ratio comes in at 1.62 (£33,859/£20,846), suggesting the company is well prepared to pay off all its current liabilities in one go.

Return on Equity (ROE)

Finally, this is a measure of how hard a company is working its assets. It should earn an acceptable return on its assets, or, at the very least, make more from its investment capital than its cost through interest and dividends. It is worked out by dividing net income (found on a firm’s income statement) by total shareholders’ equity. In the case of Hollywood Bowl, this would be £18,784/£94,938 = 19.7pc.

Once again, it is difficult to compare return on equity figures for businesses operating in different sectors. To give this percentage meaning, then, it is worth putting it up against historical ROE, to see if things are improving over time. It should also be compared to names with a similar business model to get a better sense of how a firm is performing within its peer group. Finally, it should be put up against risk-free returns. There is little point investing in a business that is returning little more, or even less, than that offered by a deposit account.

A final tip for AIM stocks

For investors on the London Stock Exchange’s Alternative Investment Market (AIM), the usefulness of the information above can diminish somewhat, since most of the companies listed here tend to be much smaller and higher risk. As such, they do not tend to make profits nor have they accumulated much in terms of realisable assets. From a pure balance sheet perspective, these companies are, in the main, not “investment grade”.

However, one particular aspect of balance sheet analysis can be extremely helpful in determining a stocks prospects. Since many of the companies on AIM are reliant on issuing shares for cash (via placings) or borrowing monthly to survive, their balance sheets can often reveal how near or far they are to needing to raise money.

To work this out, the investor simply needs to calculate the firm’s net current asset position. This is straightforward to do, by deducting the company’s total current liabilities from its total current assets. If the result is a negative number or a low positive number, then the chances are the firm could be expected to run out of cash within twelve months and will, therefore, need to raise money.

Author: Daniel Flynn

Disclosure: The author does not hold a position in the company mentioned above

On Tuesday Greatland Gold (LSE:GGP) said it had reached a farm-in agreement with Newcrest Operations Limited concerning its Havieron gold-copper project in Western Australia. The deal gives Newcrest Operations, a subsidiary of Australia’s leading gold producer, Newcrest Mining, the right to acquire up to a 70pc interest in the 12 blocks that cover the Havieron target. In return, Newcrest will spend up to US$65m on exploration and development of the asset.

Four milestone stages have been agreed upon, starting with a US$10m spend on the blocks by Newcrest. Stage two will give Newcrest a 40pc earn-in and requires an additional US$10m investment within 12 months of the completion of stage one. Delivery of a Feasibility Study as well as a further US$25m in expenditure within two years from the satisfactory completion of stage two takes Newcrests ownership of the blocks to 60pc. Finally stage four requires a further US$20m spend, taking Newcrest up to a 70% working interest.

Assuming a positive Feasibility Study is delivered, the companies intend on processing ore at Newcrest's Telfer Gold Mine which is situated around 45km from Havieron. As today’s RNS highlights, this has significant benefits including no requirement another plant, the usage of existing infrastructure, and a reduction in the time to first production and revenues. 

Gervaise Heddle, Chief Executive Officer of Greatland Gold, commented:

"We are delighted to welcome Newcrest as our chosen partner for accelerating the exploration and development of Havieron. Greatland will receive tremendous benefit from Newcrest's experience as a developer and producer at Telfer and Newcrest's broader understanding of the geology of the Paterson region. We believe that this deal represents a win-win for both parties due to the potential for significantly reduced capital costs and increased efficiency resulting from ore being toll processed at Newcrest's nearby Telfer mine. Moreover, Newcrest's expertise should help fast track Havieron through to a completed Feasibility Study and, subject to positive outcomes, into production and positive cash flow."

"The terms of the Farm-in agreement recognise both the exciting potential of the Havieron project and the significant value that has been added to the project through a series of systematic exploration campaigns by Greatland since it was acquired in September 2016. Additionally, we believe that Newcrest's first right of refusal over the remainder of Greatland's Paterson project (the Black Hills and Paterson Range East licences and the areas of the Havieron licence not included in the Tenement Blocks) represents a strong endorsement of the attractiveness and prospectivity of our licences in the region.

"In summary, we are very excited about the future of  Havieron and the Paterson region more generally and we believe that this agreement with Newcrest will serve as a foundation on which we can build Greatland into a large and successful business delivering significant returns to our shareholders." 

Author: Stuart Langelaan

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

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

Catalyst Information Services 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 Catalyst Information Services 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.



 

Shares in Ariana Resources (LSE:AAU) enjoyed a 1.13pc boost to 1.9p on Tuesday after the firm announced a 25pc year-on-year increase in the gold production guidance for its key mine in Turkey. The business expects to produce around 25,000oz of the precious metal from the Kiziltepe mine. This is a quarter higher than its 20,000oz gold production guidance for 2018, and around 21pc above than feasibility plan for Kiziltepe’s third year of operations.

Kiziltepe commenced commercial production in 2017 and is part of Ariana’s 50pc-held Red Rabbit Joint Venture with Proccea Construction. It is currently expected to deliver an average of 20,000 oz gold equivalent per annum over eight years of initial mine life for a total of up to 160,000 oz gold equivalent.

Ariana is currently targeting a minimum ten-year mine life, which will require the addition of a further 40,000oz gold equivalent in reserves outside of the four main pits. In Tuesday’s update, Ariana said preparations are being made to start mining on satellite pits from early next year. For the meantime, however, open-mining at Kiziltepe will continue to focus on the Arzu South pit in 2019.

Ariana’s managing director Kerim Sener said the 25pc increase in production guidance reflects the firm’s expectations of higher grades as it continues to mine deeper at Arzu South. Indeed, the average grade of mined gold during the year is expected to be 5g/t, and recoveries are forecast to exceed 90pc.

Meanwhile, full-year ore throughput to the mill is planned to reach 195,000ts, representing a 30pc increase over Kiziltepe’s feasibility plan. Ariana also said that it forecasts average monthly production of around 13,000ts of ore, peaking in the final quarter of the year.

On this, Sener said: ‘Although ore output from Arzu South will be variable through the year due to the pushbacks required to accommodate the final stage of mining, current stockpiles are expected to provide for any shortfalls in output such that mill throughput can be maintained at the highest levels through the year.’

‘As a low-cost open pit operator, ranked in the lowest quartile of cash costs globally, the JV continues to target increases in production and life of mine. We are pleased to note that our plans for advancing production from some of our satellite pits are at an advanced stage and we look forward to commencing work in these areas towards the end of this year.’

Sener added that Kiziltepe has continued to perform ‘exceptionally well’ despite difficult weather conditions following a strong end to 2018. In January, Ariana revealed that Kiziltepe production had come in at 27,110oz for 2018, exceeding forecasts by 36pc. A month later, it announced that this had translated into gross annual income for 2018 of $37.8m, with operating cash costs coming in at just $349/oz,

Elsewhere in Tuesday’s update, Sener said the Red Rabbit JV expects to have mostly paid off the balance of a $33m JV construction capital loan for Kiziltepe by the end of the year. This comes after the firm announced that the venture had paid off half of the debt as at the end of Q4 2018.

Author: Daniel Flynn

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

Catalyst Information Services Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

Catalyst Information Services 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 Catalyst Information Services 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.

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