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 itssuitability 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.
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.
African Battery Metals (LSE:ABM) fell 4.3pc to 0.45p on Monday after announcing that it will proceed with its copper-cobalt project in the Democratic Republic of the Congo. The business, which was trading flat with a £1.63m valuation on Tuesday, said it is now discussing a next stage exploration programme for its 70pc-owned and operated Kisinka asset.
The decision followed a site visit by chairman Andrew Bell who, alongside executive director Paul Johnson, replaced the firm’s old management team last month. After meeting with local technical advisers & vendors and analysing existing data, African Battery says it has found ways to modify Kisinka’s exploration programme and optimise expenditure. A further announcement will be made regarding a new programme ‘in due course’.
Alongside this, African Battery said that all outstanding Kisinka project payments have now been made to the site’s vendor, who is also 30pc owner. Meanwhile, the company has made changes to the site’s legal ownership structure to ensure it complies with the new local mining act. Consequently, Kisinka is in ‘good standing’ according to African Battery.
Johnson said he was looking ‘looking forward’ to taking the site forward, adding that the firm is continuing to review its assets in Cameroon and the Ivory Coast over coming weeks. It will report back individually on each these.
This work forms part of an ongoing strategic and operational review aimed at reorganising African Battery. This comes after the outfit was suspended from trading under its previous board last December as demands from short-term creditors exceeded available working capital. It was re-admitted last month after shareholders voted in favour of a host of proposals aimed and restructuring the business under Bell and Johnson.
This included a conditional placing and subscription to raise £1m at 0.5p a share and help pay off creditors. Last week, 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.
Alongside African Battery’s existing project interests, Bell and Johnson are reviewing the organisation’s administration and management. They are also looking at new opportunities in battery metals, precious metals, and other commodity groups with a principal focus on Africa.
In Tuesday’s update, Johnson added: ‘The overriding objective of the Company now is to work efficiently through our review of existing interests and where we decide to proceed, to design and implement exploration and development programmes efficiently. In parallel we continue to review additional opportunities where we see potential for considerable value to be added to our business for shareholders. Further update announcements are expected in the near term.’
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.
Jangada Mines (LSE:JAN) was down 1.9pc to 2.6p in midday trading on Monday after confirming that a high-grade vanadium deposit is present at its Pitombeiras West project in North East Brazil. Exploration drilling has confirmed that the deposits have the potential for significant resource delineation.
All four holes totalling 300m intersected high-grade, near-surface vanadium and titanium mineralisation. This was consistent with expectations from a recently-completed surface sampling campaign. It is also in line with other globally-significant vanadium deposits currently being worked in North East Brazil.
Jangada said the results indicate that Pitombeiras West contains a deposit with grades around three times higher than the 0.25pc in-situ grade that c.70pc at which global vanadium resources are currently mined.
Specifically, work identified a high-grade zone that contains an average of 0.83pc vanadium pentoxide, 11.6pc titanium oxide, and 48.4pc iron over a 12.8m average downhole width. Jangada said this high-grade mineralisation begins at surface and remains open at depth and along strike. Meanwhile, total mineralised intersections range from 26m to 46m wide with average grades of 0.57pc vanadium pentoxide, 8.1pc titanium oxide, and 37pc iron.
Elsewhere, the company said preliminary metallurgical tests demonstrate that the material mined at Pitombeiras West can be processed by conventional methods.
Jangada’s chairman Brian McMaster said: ‘The findings of this drill campaign are highly encouraging and further support our belief that we are discovering a potentially world class vanadium deposit. The mineralisation is consistent in width and grade, with high grade mineralisation starting at surface, all of which are very positive indications. The holes that we have drilled to date are shallow and have returned excellent results. The resource potential remains open at depth and along strike. If we continue to replicate these results in future holes then we will likely be holding a very substantial deposit. These results further confirm the breadth and potential scale of Pitombeiras West specifically, and Pedra Branca more widely.’
Pitombeiras West is found in close proximity to, but distinct from the PGM and nickel deposits within Jangada’s flagship Pedra Branca project. Here, the company announced a 117pc increase in JORC classified ore to 74.84 million tonnes. This included a 104pc increase in base metal content to 362.5 million pounds ('Mlbs') attributed to newly discovered nickel sulphide resource The firm said it is on track to complete its bankable feasibility study for the project by the end of Q1 2019.
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
Oriole Resources (LSE:ORR) was up 0.8pc to 0.38p in midday trading on Monday after revealing a $500k success-based payment from one of its investments in Turkey. The firm will receive the money from its partner Anadolu in relation to the Karaağaç project in Turkey.
The payment was triggered by the definition of a minimum JORC 2012-compliant resource of 50,000oz of gold at the site under the terms of a 2015 exploration agreement. Anadolu has announced an indicated and inferred resources of 348,150pz gold and 2,832,036oz at the site. The firm is now waiting for the Urban and Environment ministry in turkey to approval an Environmental Impact Assessment for the site.
Oriole will receive staged payments of $25,000 a month for 20 months. It was paid the first of these instalments in February. The business is also entitled to a 1.5pc net smelter return royalty on any future production.
Oriole’s chief financial officer Bob Smeeton said the development provided ‘further evidence’ of the success of oriole’s self-funding exploration strategy.
‘The company's focus on developing projects in conjunction with carefully chosen partners means that we can expose investors to significant exploration upside whilst also minimising the risk of dilution,’ he added.
The news comes less than a week after Oriole revealed very encouraging’ high-grade anomalies at its assets in Cameroon. In an exploration update for the Bibemi asset, where it is earning up to a 90pc interest, Oriole said the first phase of a trenching programme had confirmed multiple zones of gold mineralisation. This includes 6m at 3.02 g/t gold with individual veins returning up to 13.7 g/t.
The trenching programme is now complete, with the remaining results anticipated later this quarter or in early Q2 2019. The work followed the news last November that rock-chip sampling results for Bibembi had demonstrated ‘bonanza’ high-grade gold anomalism extending over the c.4km strike. A phase two trench programme will now begin for a planned 4,360m.
Elsewhere the business said it has also completed soil sampling at the earlier stage Wapouze project, where it is also earning up to a 90pc stake. Results for 2,119 soil samples and 146 rock samples are expected later this month.
Oriole entered a conditional option agreement with established Cameroonian outfit BEIG3 in June last year for Bibemi and Wapouzé. The assets cover the highly prospective Neoproterozoic Pan-African greenstone belts in the north-east of the country.
The two-part agreement gives Oriole the right to earn up to a 90pc interest in the projects and take over their management. For an initial 51pc stake, the firm must fund $1.56m of exploration over two years, with a minimum commitment of $560,000 in the first year. It can then earn up to a further 39pc in exchange for another $1.56m exploration payment.
Monday’s update also comes several weeks after Oriole received a £500,000 rebate from the UK tax office. It will re-invest this into Cameroon and its other projects.
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
Shares in gold and copper exploration business Chesterfield Resources (LSE:CHF) have languished since the company re-admitted to the Official List of the London Stock Exchange last summer. Currently sitting at 4p a share the Cypriot-focussed business is valued at £2.48m, which compares favourably to its current £1.73m cash position. With the firm fully funded for its 2019 drill commitments we caught up with Executive Chairman Martin French, who describes to us why he is so confident about the business’s prospects in 2019.
In the months since July’s readmission, Chesterfield has been building on its strong base in Cyprus, culminating in the news earlier this month that it has more than tripled its exploration land package in the formerly thriving mining jurisdiction. With a funded exploration programme and near-term revenue opportunities on the cards, French says Chesterfield will be stepping up efforts to make its story known to the retail market throughout the rest of 2019.
Re-vitalising Cyprus
Chesterfield was set up as a cash shell back in August 2017 by a consortium of experienced mining investors. The group aimed to buy a company or asset that could profit from underinvestment in the mining sector alongside growing commodity demand and advances in technology.
Following its suspension in November 2017, as potential transaction talks began, Chesterfield returned to trading in summer last year with the purchase of HKP Exploration for £500,000, paid in shares. The company raised a further £2m at 7.5p a share to cover a £1.1m work programme and £400,000 of working capital costs.
French told us that Chesterfield was drawn to HKP’s focus on exploring for natural resources in Cyprus. The island has a rich mining heritage and a very active copper industry that used to be centred around the foothills of its Troodos mountains. However, this activity came to an abrupt halt in 1974 following the Turkish invasion of Cyprus. French says a surprisingly small amount of exploration work has taken place in the decades since.
Alongside its prospectivity, French says Cyprus’s EU membership and strong UK ties have made it very easy for Chesterfield to operate. Indeed, despite the Turkish partition remaining in place, the area is well-ranked in terms of ease of doing business and corruption perception. Elsewhere, Cyprus’s climate allows for year-round exploration, and its well-developed infrastructure only serves to support operations further.
All-in-all French says these conditions, and healthy supply/demand dynamics in the copper market, have given rise to an opportunity to discover and develop multiple deposits in the country to production. Fortunately, he adds, the island’s government has reciprocated this enthusiasm to date:
‘I think Cyprus now wants to diversify away from its traditional, hallmark economic drivers, which are tourism and financial services. The fact that companies like Chesterfield are coming in to revive the island’s mining industry is very attractive from the government’s point of view,’ he says. ‘This, along with all of the connections to the UK, have made Cyprus a great area in which to operate – perhaps even more so than other EU jurisdictions, where some of our peers are targeting. We have found the mining regulatory authority very helpful.’
Troodos opportunity
HKP made applications to the government of Cyprus for 100pc-ownership of seven prospecting permits to search for minerals in 2017. These were approved in Q1 2018. Together, these form a 32.1km2 project on the west of the Troodos Mountains (Troodos West) that includes numerous, previously-operating copper and pyrite mines.
Following this success, the business applied for yet another six prospecting permits last year. Five of these cover c.23km2 to the north of the mountains (Troodos North), while the remaining license covers 4.8km2 to the east (Troodos East). Like the acreage to the west, these permits include old mines. As it stands, four of the Troodos North licences and the Troodos East permit have been granted. The final permits are expected soon.
A map of Chesterfield’s holdings in the belt surrounding Cyprus’s Troodos Mountains
Chesterfield immediately set out a phased exploration work programme for its HKP portfolio after taking over the firm last year. It gave itself a £1.1m budget and a one-year deadline for the work and is targeting a 1MM-5MMM mineral resource from multiple prospects. It expects this to grade c.2pc copper plus more than 1g/t of gold and silver & zinc credits.
Although different areas are progressing at different rates, its programme is broadly made up of three phases. The first phase involves collating historical data and interpreting satellite imagery to identify prospective areas and prioritise fieldwork. Stage two then consists of ranking these prospects and defining field targets using geological & structural mapping, soil sampling, and ground geophysics. Finally, phase three centres around drilling targets and creating mineral resources.
Despite historical drilling at Chesterfield’s acreage, French says he sees an opportunity in approaching the ground with superior geological understanding, modern exploration techniques and drilling technology. By doing this, the business hopes to prove up economic mineral resources and open new mines.
‘We are in Cyprus to make commercial discoveries, and we are very confident that we can do that. We have exploration techniques that were not previously available to companies operating in the region and a vastly improved geological knowledge,’ French tells us. ‘Drilling was very slow and expensive back then. In our eyes, we are approaching the asset as if it were new with the knowledge that it is already prospective.’
Kicking off
Chesterfield’s primary focus so far has been Troodos West. To kick things off, it signed a diamond drilling contract with GEOPS Bolkan for at least 4,000m of drilling on multiple targets at the property last September.
Rather than make a single massive discovery, French says the firm plans to discover a series of smaller deposits at Troodos West. Cyprus is well-known for volcanic massive sulphide (VMS) deposits. These are small but concentrated high-grade deposits surrounded by larger lower-grade mineralised vein systems. Provided these are found near each other, Chesterfield hopes to combine them and create a cheap, centralised processing operating.
The organisation’s first targets were at Evloimeni, Mavroyi and Double Seven where a review of historic mining data highlighted the existence of Cyprus-type VMS copper-gold-zinc-silver mineralisation. The firm also conducted ongoing fieldwork to identify additional drilling targets.
Alongside its exploration work, Chesterfield is working to develop early cash flow opportunities from waste dumps. In particular, French highlights a site called Limni as a near-term revenue opportunity for Chesterfield at West Troodos. Limni is a large, historic open pit mine where more than 8MMts at 1.1pc copper has reportedly been exploited.
‘We are fairly sure that Limni contains a large amount of copper in solution,’ says French. ‘When it rains heavily, the pit even starts to overflow with bright blue streams – as sure a sign of mineralisation as you could get. We are looking to drill into Limni and test if we can extract this and we should be talking more about that soon.’
Expansion plans
Last month saw Chesterfield announce that it had drilled more than 3,000m at Troodos West, with much of this taking place around Limni and other old workings nearby. Most of the holes intercepted mineralisation.
The drilling also discovered an unexpectedly high amount of gold potential alongside the primary target of copper. Furthermore, it provided evidence of epithermal mineralised structures alongside VMS deposits. In essence, French tells us that this offers the potential for two separate styles of mineralisation.
‘Cyprus is well known for hosting VMS deposits. So much so, that geology students often go out to the island to study its structures,’ says French. With this in mind, the real surprise for us was that we hit surprisingly high levels of gold, as well as copper. ‘We have also discovered more recent epithermal systems, which we did not expect. This, therefore, means that mineralisation is hosted in at least two types of systems, which is very exciting.’
In response to the strong results, Chesterfield has accelerated its pace in several areas. First of all, it has commissioned a remote sensing survey across all its licence areas, and additional operational ground facilities are being appraised.
Secondly, the company has decided to more than triple its exploration land package. Earlier this month, it revealed that it had filed applications over a further 182.96km2 of ground, taking its entire area of licences under application to 237.61km2. Now that these applications have been submitted, no other entities can apply for them.
French tells us that Chesterfield’s land interest in Cyprus is now a multiple of that of any other player in the country. He adds that the company has already begun a detailed exploration programme on this significantly enlarged licence area, with drilling planned for later this year.
‘If these licences are granted we will be the dominant player in Cyprus in terms of exploration acreage – we are very much gunning the engine,’ he says. We will take this land package and start to explore it straight away. There really is a lot you can do very quickly with remote sensing and archival data to begin generating target lists. We hope to drill again on these around mid-year, but this could come even sooner because our contracted drill is held in our facility, meaning it is easily accessible.'
Management experience
To support its expanded operations, Chesterfield has also been increasing its presence in Cyprus. The company established a local Cyprus-based office in September last year and hired a number of graduates from the Camborne School of Mines. It also took on a local geological team to accelerate exploration and data analysis. It hopes to grow this further over the coming weeks. It has also taken on Michael Parker as chief operating officer. Parker previously worked at First Quantum Minerals for 20 years, where he held senior country manager positions in the DRC and Latin America and played a crucial role in two substantial copper discoveries.
Chesterfield is also led by a wealth of mining and financing experience outside of Cyprus. Indeed, French, who was appointed shortly after the HKP deal last year, has more than 30 years of experience in capital markets and investment banking. He was previously Managing Director of North River Resources, a brownfield underground lead-zinc project in Namibia, which he turned around and sold to Greenstone Capital. The project is now entering production. Meanwhile, non-exec director David Cliffe was previously head of Exploration Europe for Rio Tinto.
Elsewhere, fellow non-exec director Peter Damouni has built a strong reputation in Canada for his skill as a corporate financier. Throughout his career, Damouni has worked on and led equity and debt financings values over $5bn. French, who owns a 4.84pc stake in Chesterfield himself, also highlights the company’s unusually prolific shareholder base for its size.
‘Peter Damouni is part of a group of seasoned mining investors who own around half of our business. As it stands, most of our remaining shareholders are mining professionals from the UK, including a number of other junior mining CEOs,’ he tells us. ‘When we raised £2m last July we placed it out to quite a specific investor group. So, for a small company, we have the backing of experienced mining investors and a lot of senior expertise.’
Tipping point
After a quiet entry to the market as it worked on securing a strong Cypriot foothold, Chesterfield is entering a critical period. Indeed, now it has begun to receive a regular stream of assay results from its drilling work, French says investors can expect a steady stream of news flow about new targets and projects over coming months.
‘We stayed under the market radar last year as we wanted to substantially build up our land-holding in Cyprus without drawing the attention of other players,’ said French. ‘Now that we have completed this land acquisition programme we are ready to come out and tell our story. We want the strength and assets of the company to be reflected in our market value and will be working on that. There is a huge global focus on copper right now, and a discovery in Cyprus would attract a lot of attention.’
With shares jumping nearly 15pc when the company announced its licence extensions last week, it seems the market is now starting to sit up and listen. The fact that the firm believes its current c£1.7m cash position will fully fund its 2019 programme is only going to help on this front. With near-term revenue opportunities and plenty of exploration ground in its arsenal, Chesterfield’s current £2.48m market could present interesting value.
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
