Jangaga Mines (LSE:JAN) jumped over 16% into the market close yesterday as news spread regarding the sale of a royalty share of its flagship Pedra Branca asset. Solitario Zinc Corp (NYSE:XPL; TSX:SLR) sold a 1% Net Smelter Return (NSR) royalty in Pedra Branca to private Cayman Island based SilverStream, as part of a deal worth C$600k (c.£350k). This looks highly encouraging for Jangada’s shareholders, not least because Solitario described the Pedra Branca component as its “centrepiece royalty property”.

Under the terms of the agreement, Solitario will receive C$250kin cash, and C$350k in a convertible note which will convert into SilverStream stock should the company complete an IPO within 12-months. The deal also includes an additional 1% NSR in a Mexican asset and an option right to acquire a 1.5% royalty on a third asset in Montana.

Despite the transaction involving three separate royalties, its Solitario’s description of the Pedra Branca element as the “centrepiece”, which has caught AIM investors’ attention. Solitario’s description makes sense since Pedra Branca is the only one of the three assets that has a JORC compliant resource. As such it is a significantly larger and more advanced project. 

This is not surprising when taking into account Pedra Branca’s economics. This is a story we have highlighted a number of times on MiningMaven, but the NSR deal offers a new dimension of analysis.

A Net Smelter Return royalty is a royalty arrangement whereby the holder receives a new percentage of revenue generated from the sale of a mine’s metals, less all refining and transportation costs. It’s considered a preferential type of royalty since exploration and capital expenditure are not deductible from it, meaning payments are higher in the short-term.

As it happens, in the case of Pedra Branca the forecast payback period on investment is a mere 1.6 years anyway. That has been calculated on current commodity prices, which still appear to be at the lower end of their current cycle. This is, of course, with the exception of palladium, which has had a strong run over the past year. Pedra Branca’s production is forecast to be $64k ounces of PGM+AU per annum, which, very roughly equates to revenues of US$55m at today’s spot prices.

The project looks increasingly attractive when you consider it boasts a very low capital expenditure (CAPEX) requirement of around US$33.8m to build the processing plant. Operating expenditure (OPEX) has been estimated at $17.32/t based on processing 2.2m tonnes of ore – that’s just over US$38m per year.  All in all, Jangada forecasts total costs for year one will come in at around US$81.5m.

Focussing back on the deal and (adjusting for US currency, to compare like for like) if we assume US$200k – less than half of the value of the Solitario sale - is attributable to the 1% NSR royalty of the Pedra Branca project, this would translate to a current US$20m valuation for a 100% royalty. This appears to be broadly in line with the US$192m Net Asset Value (NAV) Jangada has assigned to the project. 

To put this in context, what is surprising is Jangada’s Market Cap is a mere £3.95m at today’s current share price of 2.1p. I highlighted the stock as a potential buy earlier this month at 1.85p after it appeared to have bottomed out. With today’s news adding further weight to the investment case, the company looks even more attractive, particularly when you consider it raised £2.1m last September at 3p per share.

It’s worth noting that Jangada’s directors aligned their interest further with shareholders by participating in the recent fundraise, with both Brian McMaster and Luis Azevedo investing £50,000 each. The company has stated it is fully funded to deliver its Bankable Feasibility Study (BFS) for Pedra Branca and there is plenty of newsflow to come as the project progresses.

With the Solitario/SilverStream deal highlighting and corroborating the potential on offer here it is surely only a matter of time before the market re-evaluates the value it is attributing to Jangada Mines.

Author: Stuart Langelaan

The Author currently holds a position or positions 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

MOD Resources (LSE:MOD) soared 57.3pc to 22.5p yesterday after revealing an unsolicited takeover bid from a major copper miner. The ASX-listed resources firm, which dual listed in London last November, received the proposal from fellow Australian business Sandfire Resources. MOD’s largest shareholder Metal Tiger (LSE:MTR) also rose 27pc to 1.6p on the news.

Sandfire offered to acquire 100pc of MOD’s shares at $0.38 each, valuing the firm at $113m. However, MOD said it believed the indicative proposal undervalued its assets. Despite this, it said it would be ‘willing to engage’ with Sandfire if it presents a more compelling price.

MOD is the owner of the 60Mt T3 copper project in the centre of Botswana’s highly prospective Kalahari Copper Belt (KCB). The company is progressing a feasibility study for the project, which it expects to release by the end of Q1 2019. This is expected to help it reach a decision to mine within the first half of the year.

The firm believes that its flagship asset presents the potential for a long-life, high-margin, open-pit copper mine with significant exploration upside. Indeed, based on its pre-feasibility study, the asset has an NPV (pre-tax) of $370m under the base case and $529m under the expansion case.

In yesterday’s update, MOD gave many reasons for considering Sandfire’s initial offer insufficient.

First-of-all, the company highlighted its dominant position in the KCB, which comes in at around 11,700km2 in granted licences. It called the area ‘one of the last under-explored sediment-hosted copper belts’, adding that exploration results have already indicated the potential for additional copper mineralisation.

Elsewhere, the business pointed to T3’s prospectivity. It said it expects the project to produce a high-grade, high-quality concentrate that will attract keen interest from metal traders and smelter. It also claimed to have confidence in a range of alternative funding options for progressing T3 to production following third-party discussions.

Finally, MOD pointed to the fact that its share price and the MOD/SFR exchange ratio are at a 2.5-year low. Extending this point, it highlighted its most recent $0.47 per share placing price.

Managing director Julian Hanna said the proposal confirms the potential of the T3 Copper Project. However, he said ‘significantly undervalues’ the company’s assets.

Elsewhere in Monday’s update, MOD announced that it had carried out a $10m placement with institutional and sophisticated issued. It issued the shares at $0.30 each, a 36pc premium to its last closing share price on ASX. It will now follow the placing with a rights issue to raise c.$5m from eligible shareholders. This will be priced at $0.24 per share.

MOD said the funds would be used to complete a 2019 capital works programme. This will see it progress T3, purchase a farm on which the T3 open pit is based, complete underground mining studies, and carry out follow-up exploration work. It will also fund infill drilling to upgrade part of the early stages of T3 mine production to a JORC compliant Measured Resource category. Finally, MOD said the money would enable it to progress negotiations with numerous parties around funding T3’s future development.

Hanna added: ‘Funding from this capital raise will enable the Company to progress the T3 Copper Project towards a development decision and conduct further drilling for additional resources. With strong ongoing support of our shareholders through a placement and a fully underwritten rights issue, we believe that the Company will have sufficient working capital to achieve our objectives.’

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

Kavango Resources (LSE:KAV) rose 1.9p on Monday after revealing the imminent launch of its next phase of airborne electromagnetic (AEM) surveying over Botswana’s Kalahari Suture Zone (KSZ). Importantly, the company also revealed that it has contracted a high-power new technology to carry out the work. It expects this to ramp up the speed at which it can highlight potential copper, nickel, and PGE mineralisation in the area dramatically. Speaking exclusively to MiningMaven, Kavango’s exploration director Mike Moles told us the significance of this development and how it could help the company in its quest to identify Norilsk-like mineralisation at the KSZ.

Surveying targets

In Monday’s update, Kavango announced that it has now mobilised the second phase of its AEM survey. The work is being carried out over the business’s 15 prospecting licences in Southwest Botswana. Much of this sits on the KSZ, which is a highly-prospective, 450km2-long magnetic anomaly.

Kavango hopes to identify massive sulphide orebodies containing vast amounts of nickel, copper, and platinum group elements beneath the KSZ’s surface. Mining consultant MSA Group has backed the potential presence of these deposits on the KSZ, which was first explored in the 1980s and 1990s. Meanwhile, Kavango has suggested that the area has a similar geological setting to the giant Norilsk copper/nickel deposits in Siberia.

The airborne EM survey is the first stage in the company’s efforts to identify these sulphide orebodies. It detects and prioritises potential locations for these deposits, which Kavango can then follow up with more detailed groundwork and drilling.

Flying for the second phase of the survey is expected to begin later this month, with the first phase completing at the end of last year. It will take between four to six weeks to complete and will cover up to 2,062 line-kilometres in the Hukunstsi area of Botswana.

The highlight of Monday’s announcement was the news that Kavango has contracted the services of a leading airborne geophysical survey player called SkyTEM for its latest phase of work. SkyTEM offers a ground-breaking, high-power surveying system that has been optimised to reach a depth of up to 300m below the earth’s crust.

It reaches these depths by using a high current and low base frequency of 12.5hz. According to Kavango, the technology has not been used in Africa before and is more effective than the older systems currently on the market.

Increasing efficiency

Moles tells us the technology will allow Kavango to investigate for orebodies at a much deeper level and with higher resolution than it was able to in the first phase of its survey.

The company identified 26 conductive anomalies over 2,000 line-km of the KSZ project during this stage of work. However, the technology used did not penetrate deep enough beneath the surface. As such Kavango was unable to tell which anomalies were low priority near-surface conductors like clays and shales and which went much deeper.

In layman’s terms, the deeper an anomaly is, the more likely to be prospective for mineralisation. This makes it a higher priority drilling target for Kavango.  As such, the firm was forced to carry out groundwork on all 26 targets to determine whether they were worth following up. Moles tells us this was a difficult task that took longer than expected to complete.

He believes the new technology will make it much easier for Kavango to differentiate between the two types of anomalies.

‘We will immediately be able to see which conductors have a depth component to them and represent high priority targets. Likewise, it will be much easier for the business to identify and ignore those surficial conductors that are very often just clays and other conductive materials that lie within the first 50-60m below the surface,’ he told us.

‘The technology we contracted in Phase One used a much higher frequency and was not getting deep enough to differentiate between the shallow and deep targets. If we had SkyTEM’s technology back in September when we launched the campaign, we could have reduced the number of conductors worth following up from 26 to about six or seven straight away. Using our new approach, we should be to turn over these conductors much more quickly in Phase Two.’

To assess the effectiveness of SkyTEMS’ technology, Moles told us that Kavango also plans to run lines over some of the areas it surveyed in Phase One and compare results. However, he tells us he is already very confident that the results will be positive:

‘We are confident that this new technique will work. A huge amount of test work has been completed in the past to demonstrate its effectiveness. We think it will represent major step forward in our exploration strategy.’

If Moles’ confidence translates into results this could prove to be highly significant for £2.5m valued Kavango. Since listing last summer the company’s story hasn’t attracted a great deal of attention, despite the progress it has made on the ground. Exploration plays can be extremely racey stocks and with the size of target Kavango is going for, the deployment of the new technology could give it just the edge it needs. 

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

The following represents the Author’s views only.  All readers should consider their own situation individually and take appropriate investment advice where relevant.

I have been investing in natural resource junior stocks for about 13 years and investing generally for over 30 years.  I came to the natural resource sector at a time in my life when I needed to find a way to make money faster than could be achieved through the slow grind of everyday work as an employee working for others.

2005 to 2006 was a pretty good period, and my first exposure to what the natural resource sector could give in terms of rapid returns.  Up 50% in less than a year.

2006 to 2008 was another lesson, this time in terms of what the sector could take away, also in a relatively short time period. Down 75% in around 2 years.

With 2008 came the Lehman debacles and Global Financial Crisis of course, which caused a capitulation driven collapse and crunch of listed company valuations all over.

Christmas 2008 was time for a review.  On a personal and financial front, things were not great and more than ever I needed to find something that could deliver really outsized returns quickly. 

I thought about it and realised I didn’t actually know too much about many things, other than being an employee (Forensic Accounting mainly in my career) and investing.  The former was possible but not for me a draw and certainly a slower grind to where I wanted to be.  The investing route though had potential and I felt if I applied my accumulated experience I stood a chance.

In preparation from 26.12.08 to 1.1.09 I studied three things.  Firstly, a book on managing trading emotions.  Secondly, articles on investing (from which I learnt – at last – that you buy the stuff that is hated). And thirdly, the opportunities available in the London stock market and AIM in particular.

I had one “aim” – to find the most hated, despised and therefore undervalued sector.  Natural resource juniors were clearly in that category.  I focused on natural resource investing along with a few forays into small cap biotechs and a few occasional others.

2009 -2011 the net result all in was a 2.5-year run that saw my portfolio increase 150 or so times. (Don’t worry it started from a low base.)

2011 – 2014 ouch down again with a 75% loss on paper.

2014 – 2017 overall up around 20 times

2019 so far, down around 50% on paper.

It’s a roller coaster, but one point to note is that at the most acute points of frustration, worry, unhappiness etc, there was something quite amazing about to happen.  Fortunately, historically at these times I held on just as I am doing today after the challenges of 2018.

If I had pulled out all my capital in mid-2014 I would have missed the 25x uplift that was impending (10x within a few months as the recoveries tend to be fast and furious).

Same for December 2008, when I would have lost that life changing 150x return.

If you are a reasonably engaged investor having experienced a poor 2018, like most junior resource company investors have, you will currently have a high level of fear and an overwhelming urge to protect capital.  These things are good to keep you in check sometimes but often frightfully damaging if you want to make the right investment decisions.

Right now you look at your positions and compared to months, weeks or even days ago you will likely see red. You may browse the discussion boards (not that most people with any money spend too much time on or around them anymore) and twitter and see a diatribe of abuse for holders of stocks.

Of course, much of what you read is not to be trusted.  Many market participants on the short side (and there will likely me many in the junior resource space at the moment) use social media to spread scare mongering and get you to sell shares at times like this.

Your husband, wife, sister, brother, aunty, uncle, friend, son, daughter, neighbour, work colleague or whoever you discuss share trading with will not be too engaged or sympathetic to your losses.  In this game you are a daft sod when shares are falling and a lucky bugger when they are rising.

There will be an overwhelming urge to blame the market and sentiment generally for your losses and there is a tendency to search for reasons why the companies in which you invested have failed to deliver. 

How the newsflow has been poor – fair criticism often as companies can be extremely poor at newsflow management.

How the companies should be more active – yeah maybe but what with – if finance is tight companies must be cautious and at times like this operational news hardly makes a dent on the share price (although regular news does increase market awareness of a stock ready for the next upswing, so is still important).

Perhaps how the overpaid management have just been creaming it and how they should buy more shares to show they are aligned – err no why should they, directors can’t sell stock they buy even if they drive the price up multiples without being abused, and if they convert options unless wrapped within a tax efficient scheme they get massively whacked with income tax. Management should simply do their job, and do it well, for fair compensation.  Just like most people are expected to do today.  And anyway, imagine if your employer kept banging on to you about lumping your earnings into shares in the firm just to keep your job and show you are aligned.

When prices are sliding, we look for reasons why somebody or something else is to blame. 

Generally, they are not to blame, but often neither are you, it’s just the way the cyclical resource market goes and as long as you have only invested what you can comfortably live without, for a good while, then patience usually does the trick and a bit of stock selection helps along the way.

So why stay invested through the cycle?  Why not sell at tops and buy at bottoms.

Nice idea and I have thought about it a lot.  I am just not really good enough as an investor to make it happen. 

However, let’s just say I could do the first part and sell at the tops.

The problem is you don’t really know it’s the top.  And if it keeps on going higher after you sell you get priced out really quickly and buying back in is different on many levels.

If you are right and prices fall great.  But when do you buy back in? If you buy too early you still can suffer capital losses quickly.  If you wait too long and miss the upturn you can be priced out of the market again. 

I have seen stocks fall from 5p to 1p and then rebound so quickly. 

If you sell at 5p and it drops to 3p you probably will think it might drop further and wait.  When it drops to 1p you think its on the way to 0.50p. Then it suddenly springs to 2p and its overvalued and you wait for the pull back.  Then it’s at 3.5p and it’s definitely going to pullback.  Then it’s back at 5p and you now think this is nutty and wait for 2.5p again.  Then it’s at 7p and you are not going to pay a 40% premium to the 5p you sold at.  Then its at 10p and clearly overbought.  Then you drop it off your monitor because you can’t take it anymore. But a week later you can’t help yourself and take a sneak peak ….  Feck me its at 16p and rising. You have been priced out and the whole process can happen in a few weeks or months in some cases.

For me now I try and position myself in a diversified way within the sector.  I stay within natural resources because I feel it’s a compelling sector at this time.  The world needs base and strategic metals and will consume vastly more going forward than it has in the past. The world needs precious metals because it’s financially frail and confidence soon enough will be benchmarked against gold and silver.

Some degree of ongoing portfolio juggling is good to stay exposed to the better opportunities for capital growth, based of course on the outcome of your research and personal opinion.

Also, reducing positions when shares move dramatically higher is validated by any sensible risk management model, even if they could yet go up further.

My aim as an investor is to see higher highs and higher lows as the sector moves higher (probably) over the coming years and maybe decades. I must stay with the rollercoaster route and stay in the game all the time because I am not good at selling at the right time and buying back at the right time. 

So, I sit and wait.

My dream is that just one or two of my holdings move dramatically higher whilst the rest of the market languishes for a while longer.  In that case redeployment of capital can afford stunning returns.  However, the reality is we in junior resource investing labour under a cyclical market where, when the tide comes in, all boats rise (or at least the vast majority do).

Most of us now would be happy just for the tide to start coming in.

I applaud those who have the guts and determination to invest in resource juniors at the moment and fervently believe there are incredible returns possible.  We are investing in a potentially life changing sector and notwithstanding the risk, personally I wouldn’t want to be anywhere else.

Author: Paul Johnson

Kodal Minerals (LSE:KOD) enjoyed a 5.9pc boost to 0.2p on Friday morning after releasing a strong set of drilling results at its flagship asset in Mali. Work carried out in November and December confirmed the continuity of lithium mineralisation at the 450km2 Bougoni project.

With a total mineral resource estimate of 207.9kt contained lithium oxide, Bougoni is among the 15 largest hard rock lithium projects in the world. Kodal believes its ongoing drilling shows significant exploration potential that could see this number grow further. To demonstrate this, it is currently completing an updated mineral resource estimate that is on track for delivery at the end of next month.

The most recent round of work saw Kodal carry out infill and extension drilling at defined mineralisation on Bougoni’s Sogola-Baoule prospect. This continued to high grade mineralisation, with one 108m drill hole encountering a 21m intersection at 1.58pc lithium oxide.

Kodal carried out the work after its maiden resource estimate and preliminary open pit optimisation showed the Sogola-Baoule resource could be economically tested at depth as well as along strike. The firm said its most recent work has confirmed this and has the potential to impact future mine design following its mineral resource update.

It is now waiting for assay results for 18 further reverse circulation holes and one diamond drilling hole. Alongside all its existing drilling data, this will be used to complete a geological interpretation and validation. Alongside a ground magnetic survey, this will inform further drilling at Sogola-Baoule. 

Sogola-Baoule is estimated to contain 122.2kt of lithium oxide, making it Bougoni’s largest prospect.

November and December also saw Kodal carry out reverse circulation and diamond drilling at Bougoni’s Boumou prospect. One hole intersected multiple pegmatite veins, consistent with the company’s geological interpretation. 

Boumou is estimated to contain 22.9kt of lithium oxide. It is characterised by multiple lithium mineralised pegmatite veins with an overall strike trending east-northwest/south-southwest and dipping to the north.

A maiden mineral resource estimate highlighted two distinct north and south zones at the prospect. Kodal said its latest results show that the southern zone is more robust. As such, it will be the target for further definition and extensions drilling. As with Sogola-Bauole, the results will now be used alongside a ground magnetic survey to highlight priority targets for next phase drilling.

Kodal chief executive Bernard Aylward said the latest work gives the firm ‘great confidence’ as it fast tracks its development plans for Bougoni.

‘As such, we are in the process of completing a Mineral Resource estimate update that will include all drilling results to date as we look to confirm a long term mine life.  This is on track for delivery at the end of February 2019,’ he said. ‘The opportunity highlighted by these continuing good results is that we are now able to assess our proposed operation parameters and factor in a larger mining operation with an initial 1.2Mtpa processing plant, expanding to 1.5Mtpa as the operation moves into steady production phase.

‘With this in mind, we are continuing to map out a development programme and will be looking to provide an update to the market on our recent activity and engagement of specialised Engineering contractors to work with Kodal and support this development schedule in due course.’

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

Avesoro Resources (LSE:ASO) revealed that it met its 2018 full-year gold production guidance on Thursday, helping shares to bounce 2.6pc to 166.8p. The West African-focused business produced 220,458oz over the period, a 15pc increase on its output in 2017.

Avesoro also provided a break down of this production down on an asset-by-asset basis. It produced 109,707oz from its New Liberty gold mine over the period, a robust 44pc increase on FY 2017. However, this fell just short of the firm’s annual production forecast of 110,000-120,000.

New Liberty is Liberia's first and largest commercial gold mine. The project has an estimated proven and probable mineral reserve of 7.4Mt with 717,000oz of gold grading 3.03g/t. It also offers an estimated measured and indicated mineral resource of 11.5Mt with 1,105,000oz of gold grading 3.0g/t and an estimated inferred mineral resource of 3.7Mt with 424,000 ounces of gold grading 3.6g/t.

Meanwhile, the company produced 110,751oz from its Youga gold mine in 2018. Although this represents a 4pc drop on the mine's output in 2017, it falls within Avesoro’s 110,000-120,000 production forecasts for the year. This helped to take total 2018 output into its forecast 220,000-240,000oz range.

Youga is based in Burkina Faso and acquired by Avesoro from Avesoro Jersey in December 2017. It hosts combined proven and probable mineral reserves of 11.2Mt with 660.1Koz of gold grading 1.84g/t. It also offers a combined measured and indicated mineral resource of 16.64Mt with 924.2Koz of gold grading 1.73g/t and a combined inferred mineral resource of 13Mt with 685Koz of gold grading 1.7g/t.

Avesoro’s chief executive Serhan Umurhan said 2018 represented a ‘significant year’ for the business, adding: ‘I am very pleased to announce that we have achieved our full year production guidance for 2018, which remained unchanged throughout the year.

‘2018 annual production of 220,458 ounces also represents a 15% increase compared with 2017 pro-forma production from the two mines. The substantial increase in gold production at New Liberty of 44% versus the prior year also underlines the strong performance of our team as we continue to optimise operational performance and add value at our mines.’

Avesoro now intends to provide 2019 production guidance in March 2019. It will also provide an updated mineral reserve and resource estimate for New Liberty, including its Ndablama satellite deposit.

On this, Umurhan said: ‘Moving into 2019, I look forward to updating the market on the results of the ongoing pre-feasibility study at the New Liberty underground project which is also expected to include the first open pit reserves from the Ndablama satellite deposit towards the end of the first quarter of 2019. The focus for this coming year will be on the delivery of strong cash flow and further debt reduction following the substantial reinvestment of cash generated by operations that characterised 2018.’

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

Yellow Cake (LSE:YCA) was up nearly 3% on Wednesday morning after releasing a quarterly operating update indicating its Net Asset Value (NAV) had increased to £2.53 per share. The company purchases physical uranium with a view to holding long-term and today highlighted a steady improvement in market fundamentals. The spot price for uranium has increased by 25% to $28.50 /lb since Yellow Cake listed on the London Stock Exchange in July 2018.

2018 was a very strong year for uranium with its rally from the US$18 / lb lows of 2017 picking up the pace. During the final quarter of 2018, India officially announced plans to expand its nuclear power use which would bring an additional 21 reactors into operation by 2031. The Department of Atomic Energy advised the National Parliament of its plans to implement a Strategic Uranium Reserve of 15,000 tonnes of uranium to underpin the security of the country's commercial nuclear power program. A number of other countries have made recent announcements that are supportive of the spot price including France which has delayed its target to decrease nuclear dependency from 75% to 50% from 2025 to 2035.

Uranium Spot Price

The value of the underlying physical uranium held by Yellow Cake has increased by 35% to $240.6m, and the organisation believes the long-term outlook for uranium remains positive. An option to purchase further uranium became available to Yellow Cake at the beginning of this year under its agreement with Kazatomprom. It’s not yet clear whether the company will take up the option with the board simply stating it will ‘continue to consider all options available to it and act in the best interests of its shareholders, with a view to narrowing the continued discount to Net Asset Value.’ 

Andre Liebenberg, CEO of Yellow Cake, said:

"It has been encouraging to see the uranium spot price continue to rise since our IPO, with the spot price hitting a three-year high in late November. Yellow Cake's performance has been solid, with NAV up 5.9% over the quarter. We look to the future with optimism as countries around the world implement new uranium programmes and extend the lifecycle of existing projects. Our investment thesis remains sound and we are confident in the long-term outlook for the uranium price."

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 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

 

Jangada Mines (LSE:JAN) released an operational update on Monday detailing its plans for the first quarter of the year. The company is focussed on developing South America's largest and most advanced platinum group metals (PGM) and nickel project, Pedra Branca. Having already reported compelling economics for Pedra Branca, there were some concerns in the market that perhaps Jangada didn’t have enough funds to see it through to its Bankable Feasibility Study (BFS). This morning’s announcement dispels any such concerns.

Pedra Branca around 48,000 hectares and includes 3 mining licenses covering 52% of the current resource, with 42 exploration licenses.  Fundamentally, the project looks very attractive with the company stating a Net Present Value (NPV) of US$192 million and an estimated average annual production of 64,000 ounces of PGM+Au.

A Bankable Feasibility Study (BFS) for the project is currently underway, and Jangada is aiming to complete the verification stage for all aspects of the BFS during Q1. This process should prove the economic and technical viability of the Project and results are expected in Q2 by which time it is anticipated the mine design phase will be complete 

Jangada agreed a fundraise of £2.1m in September 2018 to advance the Pedra Branca project. This included a £1.05m placing at 3p per share, together with a 12-month unsecured loan facility from Celtic Capital Pty Limited. Today’s share price of 1.8p offers a considerable discount to the raise, in which directors Brain McMaster and Luis Azevedo subscribed for a total 3.33m shares, equating to an investment of £100,000.

Much of the resource sector suffered strong price declines during the wider market pullback in Q4 last year, however it does appear that concerns over funding have also been weighing down on Jangada’s share price.  In today’s update, the company reassures investors its current work programme is fully funded.

Speaking exclusively to MiningMaven, McMaster told us, “Today we’ve addressed any speculation about Jangada’s funding. One of the key aspects of Pedra Branca is that it has such a low cap-ex requirement, with an NPV of US$192 million, an IRR of 67% and a 1.6 year payback. There just aren’t many projects of this size, with such favourable economics, anywhere in the world.

There have been suggestions that last September’s fundraise left us with a shortfall. Originally the plan was to raise £1.5m, but it was agreed that if the demand existed we would go higher, maybe as high as £4m. The idea was that any extra funds would help expand an exploration programme.  As things developed we decided the extra exploration wasn’t needed at this stage and the original £1.5m estimate was accurate.  We then closed a total package of £2.1m.  So clearly the speculation is wrong.  We are progressing without impediment. In addition to the money we raised in September, we also agreed with Consulmet, the firm producing our BFS, that it would receive its fee in stock. This is a highly positive endorsement of the clear potential at Pedra Branca.

We are delivering the work programme we’ve outlined today, including delivery of the verification stage of the BFS and additional exploration we are planning to test the high-grade vanadium deposit we have identified.”

A look at the timetable show’s there is plenty of newsflow to follow over the coming months with a review of the PGM resource and a hydrology study due by the end of January. The PGM resource review could be particularly exciting, especially if there is any upgrade there. It’s expected legal, environmental and social factors will be wrapped up by the end of next month and Metallurgy Test Work Verification is due in March.

Further exploration is also underway at the high-grade vanadium deposit identified at Pedra Branca.  Drilling is due to commence this week, with the results due to follow in March. According to the company, there is potential for this to be a significant vanadium discovery, offering yet further upside to an already exciting project.

All eyes will now be on what Jangada delivers by the end of this month, with particular attention focused on the PGM Resource Review.

Author: Stuart Langelaan

The Author currently holds a position or positions 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

 

Horizonte Minerals (LSE:HZM) was awarded a critical construction licence for its flagship ferronickel project in Brazil yesterday. The news helped shares in the nickel development company advance by as much as 8.9pc to 2.3p.

The construction licence, known locally as the Licença de Instalação (LI), applies to Horizonte’s 100pc-owned Araguaia ferronickel project. It was granted by SEMAS, the Brazilian Para State Environmental Agency. It gives Horizonte the permits required to construct a rotary kiln electric furnace processing plant at Araguaia. This means it is now fully permitted for construction to begin.

Horizonte called the news a ‘major de-risking step’ for Araguaia, with chief executive Jeremy Martin adding that it represents a ‘major milestone’ for the business.

‘Subject to funding, the company is now in a position to commence construction with the necessary environmental permits approved, including water abstraction permits issued in 2018 together with the newly issued LI,’ said Martin.

‘The LI allows development to commence on the RKEF process plant and associated infrastructure. The award of the LI has been delivered on time and on budget with the Horizonte team working closely with SEMAS, other State agencies and the local communities. Consistent with our objective to provide long-term sustainable value for our shareholders, employees and communities, we developed integrated solutions focused on environmental protection, water efficiency and socio-economic development.

Today’s approval follows the release of a feasibility study results for the asset in October. These were filed with the Para state government two months later.

The study confirmed Araguaia as a low-cost source of ferronickel for the stainless-steel industry. It gave the project an initial 28-year mine life, during which it will generate cash flows after taxation of $1.6bn.

Meanwhile, it has an estimated post-tax net present value (NPV) of $401m and an internal rate of return (IRR) of 20.1pc using a base case nickel price forecast of $14,000/t.  This NPV increases to $740m when using the consensus mid-term nickel price of $16,800/t.

Horizonte expects Araguaia to produce an average of 14,500 tonnes of nickel a year, housed within 52,000 tonnes of ferronickel. Against this, the development has a capital cost estimate of $443m. This includes $65.3m of contingencies.

Crucially, Horizonte has also designed the study to accommodate a second process line. This 'stage two expansion' could double Araguaia’s production capacity to 29,000 tonnes a year. Its introduction assumes a stage one production rate of 900kts a year for three years. After this period, Horizonte would reinvest free cash flows to extend the plant's capacity to 1.8Mts per year.

If this expansion takes place, then Araguaia will have a 26-year mine life and generate cash flows after tax of $2.6bn. Meanwhile, the asset’s NPV and IRR would hit $741m and 23.8pc respectively, using base case nickel prices.

Horizonte is also the owner of the Vermelho project in Brazil, which it describes as one of the largest, highest-grade undeveloped laterite nickel-cobalt resources globally. The site contains a measured and indicated resource of 167.8MMts, estimated to house 1.68MMts of nickel and 94,000ts of cobalt.

In yesterday’s update, Martin said the progress at Araguaia combined, the potential on offer at Vermelho, and the attractive nickel market backdrop combine to set Horizonte up well for the rest of the year:

‘The LI and FS results combined with the positive fundamentals around the nickel market positions Horizonte well for 2019, with the construction-ready Araguaia project to supply the ferronickel market and our second project, the Vermelho nickel-cobalt project, being advanced to supply the Electric Vehicle battery market. We look forward to updating the market over the coming months, at what is an exciting time for the Company.’

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

Chesterfield Resources (LSE:CHF) bounced 6.3pc to 4.3p this morning after hiring a senior geologist as its chief operating officer. Michael Parker will take on the role at Chesterfield’s 100pc-owned copper exploration project in Cyprus.

Parker is a geologist with more than three decades of experience in both exploration and project development. He began his career in gold exploration across South Africa and Gabon. He then then joined First Quantum Minerals (FQM) in 1997 as an exploration geologist in Zambia and Zimbabwe.

He remained at FQM for 20 years, holding numerous senior country manager positions while playing a key part in major copper discoveries. These included the Frontier Mine, which contains 2.1Mt of copper, and the high-grade Lonshi, which boast 250,000ts of contained copper at an ore grade of 5pc. Parker modelled the resources and oversaw mine planning and operations at both mines.

In his country manager roles, Parker took on administrative management responsibility for up to 3,000 staff, including a large expat contingent. He also oversaw government and community relations, environmental management, and exploration permitting.

Chesterfield controls three project areas in Cyprus. These comprise seven granted prospecting permits and six applications for prospecting permits. According to the firm, these project areas cover abandoned mines, known prospects with exposed mineralisation, and other indicators of nearby massive sulphide systems. The company’s initial focus will be on advancing the Troodos West Project, where it has already identified numerous high-priority prospects.

Chesterfield’s executive chairman Martin French said: ‘Mike brings a tremendous amount of experience in exploration and management from his long career at First Quantum Minerals. Most importantly, he has experience in making large discoveries. Mike has already been working with Chesterfield over the past three months on a Project Management basis helping to expand our copper exploration programme in Cyprus.

‘During this time Mike has become very confident in our prospects, which has attracted him to take a permanent role. The Company has been encouraged by its early drilling results and so has made the decision to significantly enlarge its exploration programme in Cyprus. We will provide more details of this in the coming weeks.’ 

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

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