Bushveld Minerals (LSE:BMN) dipped 5.3pc to 38.6p on Wednesday morning after revealing that its vanadium production fell short of expectations last year.

The firm, which has rocketed from 8.6p over the past year, produced 2.560mtV of the metal from its South Africa-based Vametco project. The metal was produced in the form of Nitrovan, Bushveld’s trademark product sold in major steel markets across the world. This figure falls short of the 2,649mtV produced by the company in 2017 as well as its previously-announced guidance range of 2,600 to 2,650.

Bushveld said production was hit by unplanned maintenance and a repairs programme at Vametco in the final quarter of the year. The lower volumes that resulted from this work also led production costs to come in 3pc higher than guidance at ZAR260.6/KgV.

Wednesday’s disappointment comes after Bushveld was forced to reduce its 2018 production guidance from a range of 2,850mtV to 3,000mtV in Q3 2018. This came after production was hit by a two-week-long period of local, unprotected industrial action and a seven day kiln shutdown due to unplanned maintenance. The resolution of these issues led the business to enjoy a 22.4pc jump in production between the third and fourth quarters of 2018. 

Despite the disappointing production figures, Bushveld investors can take some solace in the fact that the firm’s sales revenue soared 142.7pc to $192.2m in 2018. Likewise, its EBITDA rose by 349.2pc to $107.5m. These increases were underpinned by higher ferrovanadium prices, which increased by 148.9pc year-on-year to an average of $81.2/KgV in 2018. Since the beginning of 2019, however, prices of the metal have dropped to an average of $76/KgV.

To address its ongoing performance issues, Bushveld launched a detailed diagnostic review of the Vametco plant in October. This was followed by the launch of an ‘operational transformational programme’ in December that aims to enhance the site’s performance. In Wednesday’s update, the business said it expects these efforts to result in higher production over the next 12 months. Guidance for 2019 will be provided in Bushveld’s Q1 operational update, once all aspects of the transformational programme have been scheduled.

On the exploration side, Bushveld said it has completed 13 drill holes at Vametco. These are part of an initiative to increase geological confidence and grade control of the ore mined at the project. The results have provided evidence of additional resources and reserves and an updated mineral resource estimate is due in the current quarter.

Finally, the firm has now received all of the assay results for the first phase of an exploration programme at its neighbouring Brits project. These have either been above or in line with management’s expectations. The results of a second phase of drill holes are expected in the current quarter and will be followed by a maiden mineral resource estimate in Q2 2019.

Fortune Mojapelo, chief executive at Bushveld, said that while Bushveld is benefitting from high vanadium price, it recognises the importance of driving Vametco towards ‘operational excellence’ and its ‘true potential’.

‘The transformation programme we have initiated at Vametco is designed to do just that and we are confident to see an improved production performance during 2019,’ added Fortune. ‘The deposit hosts exciting potential and our drilling programmes at Vametco and Brits have been carefully designed to ensure that we extract the wealth of the minerals in our portfolio and extract them in the most cost efficient, sustainable way.

‘At the Brits deposit, the recent exploration results continue to prove the deposit as a future source of additional production tonnages. As it is an election year for South Africa, we expect continued stability and positive sentiment to allow us to focus on our operations and make long term investment decisions for the benefit of all our stakeholders, including employees, local communities and shareholders.’

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

Yesterday, Jangada Mines (LSE:JAN) announced a 117% increase in the size of the company’s JORC resource at Pedra Branca. The shares have rallied, trading at 2.25p-2.4p last seen, but there is a sense the market hasn’t quite yet woken up to the significance of this news. Since last summer’s placing, the fully funded Jangada has taken substantial strides forward in advancing South America’s “largest and most advanced platinum group metals (PGM) and nickel project”. We caught up with COO Heinrich Muller to understand more about what the JORC increase means.

Starting first with the numbers and Jangada reported a 117% increase in the JORC classified ore at Pedra Branca to 78.84million tonnes (Mt). This includes 29.34Mt in the indicated category and 45.5Mt in the inferred category.

In turn, this led Minxcon Projects, the company Jangada has employed to create its Bankable Feasibility Study (BFS) for Pedra Branca, to conclude that the deposit contains 3.05 million ounces (Moz) of palladium equivalent, a 103% increase. Of this 1.24Moz is in the indicated category at a grade of 1.36grams per tonne (g/t) and 1.81Moz in the inferred category at 1.28g/t.

This all sounds great, but what does any of this mean in real terms?

Broadly speaking there are three particular areas to focus on in Jangada’s announcement. These are;

  1. The size of the estimated resource in the indicated category and what that suggests
  2. What the “palladium equivalent ounces” reveal about the quality of the project
  3. The reported grades in the context of the plan for an open pit mine at Pedra Branca

Starting first with the categorisation and this matters because it will later feed into Pedra Branca’s economic model. The crucial numbers to focus on in the short term are those in the indicated group. When it comes to calculating Pedra Branca’s bankable reserves it will be the indicated ounces that are used, so it is encouraging to see Jangada already report such strong figures. As Muller put it to us,

“The 3.05Moz figure is the piece of dough from which the cookie will eventually be cut. Not all of it will go into the final reserve model, but it is great to begin with such a large resource to work with.

The important thing is that our indicated category is almost as large as what our previous resource was. This means that the amount of material we eventually end up with in reserves will be significantly higher than what was initially anticipated based on the previous resource.

This is important because at the BFS stage, to be able to declare reserves, you need sufficient resource at sufficient confidence levels (measured and indicated categories) to prove the economic viability of the project. In our case our estimated economic modelling already looks extremely robust, so to report the gains we have is very good news.”

Moving next to the reported palladium equivalent ounces Muller explained how these were calculated and what they can tell us about Pedra Branca.

“To calculate the palladium equivalent ounces is fairly straightforward and is defined in the JORC code. We used palladium because it is the main economic driver of Pedra Branca (contributing the most ounces), and then multiplied the other elements by the pre-set modifying factor, taking into account expected recoveries.

For example, as reported in our RNS, this led us to calculate that every 1ounce of palladium was worth the equivalent of 1.834 in situ tonnes of Nickel.”

Nickel has become particularly significant for Pedra Branca, since Jangada announced the project’s maiden nickel JORC resource in December. We asked Muller to expand on this and to put into context what this means for the project:

“First look at the top table in the RNS (reproduced below) and compare the 3.05Moz palladium equivalent ounces to the 2.17Moz of PGM plus gold (AU). This shows you, from a revenue perspective, the likely future contribution of the various elements.

In broad terms, we expect PGM + AU production to account for just over two-thirds of Pedra Branca’s future revenue, with the remaining one third coming from the base metals. Since our Nickel resource dominates these we expect that this metal will account for about 30% of total project revenue, after recoveries are taken into account.

We don’t feel the market has recognised this yet, but Pedra Branca is truly a palladium and nickel play”.

Pedra Branca

Tonnes

Grade

Metal Content

Resource Classification

 

Pd Eq

Pd Eq

PGM+Au

   

Mt

g/t

Moz

Moz

Indicated

 

29.34

1.36

1.240

     0.875 

Inferred

 

45.50

1.28

1.809

     1.293 

Indicated and Inferred

74.84

1.31

3.050

     2.168

SOURCE: JANGADA MINES ANNOUNCEMENT 28 JANUARY 2019

This brings us to the reported grades at Pedra Branca. As the table above shows the palladium equivalent ounces in the indicated category are based on 1.36g/t and the inferred ounces at 1.28g/t. MiningMaven explained a little more about understanding grades in this article recently, but for Jangada the Pedra Branca grades are significant because of the company’s plans to develop an open pit mine here.

Open pit mines are generally technically less challenging than underground operations and are therefore much less expensive to develop. In November 2018 Jangada announced a 32% reduction in the cap-ex requirement for Pedra Branca $43.9m. The payback period is estimated to be within 1.6years. Now factor in the relatively good grades of the updated JORC resource (in the all-important indicated category in particular) and a very clear picture is emerging.

At 2.4p to buy, Jangada is currently valued at £5.48m. With the company having previously reported an NPV10 of $192m and IRR of 67% for Pedra Branca, a great deal of upside seems left on the table. Jangada is fully funded for its BFS and the verification phase of this is due for delivery by the end of March. Exciting times lay ahead.

Author: Ben Turney

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

 

Kavango Resources (LSE:KAV) rose by nearly a third to 2.3p on Monday morning after announcing the imminent drilling of one of its major prospects in Botswana. The firm plans to begin work at its Ditau prospect, which forms part of the Kalahari Suture Zone (KSZ), early next month.

The KSZ is a 450km-long magnetic anomaly along which Kavango is exploring for copper, nickel, and PGE-rich sulphide orebodies at depth. The area is yet to be examined using modern drilling techniques. Mining consultant MSA Group has backed the potential presence of these deposits on the KSZ, 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.

Kavango’s initial 1,000m drill program is designed to intersect two coincident geophysical and geochemical base metal conductor/anomalies at the site. These are based at depths of 100m and 200m. The work will involve a combination of reverse circulation and core drilling, with conductors extending to depths of more than 600m. Kavango has signed a drilling contract with Maquana Explorations, an experienced Botswana company based at Selebi-Phikwe.

In today’s update, the firm said target anomalies extend north-south for at least 4km at Ditau. It added that they represent ‘very compelling’ geophysical anomalies that are coincident with zinc in soil anomalies at the surface. Zinc acts a pathfinder for potential base metal mineralisation at depth because it is the most mobile of the base metal elements.

Chief executive Michael Foster added: ‘We are pleased to be able to announce the start of drilling at the first of several exciting coincident geophysical and geochemical base metal anomalies that have been identified at the Ditau Prospect, which forms part of the KSZ Project. The drilling is scheduled to commence shortly and results will be announced as they become available.’

The news comes just a week after Kavango announced that it has now mobilised the second phase of an airborne electromagnetic survey over its 15 prospecting licences in the KSZ area. 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. 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. On this, Foster said in Monday’s update:

‘With the success of our exploration techniques, we expect many more anomalous areas to be identified following completion of Phase 2 of the airborne electro-magnetic (AEM) survey (see announcement of 21 January 2019). These will be followed up on the ground and prioritized for drilling.’

As revealed earlier this month, Kavango has contracted the services of a leading airborne geophysical survey player called SkyTEM for its latest phase of AEM 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.

Speaking to Mining Maven, Kavango’s exploration director Mike Moles said the technology will let Kavango investigate for orebodies at a deeper level and with higher resolution than it could 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.

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.’

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 Asiamet Resources (LSE:ARS) sat flat at 4.3p on Friday after the firm said work at its Beruang Kanan Main (BKM) copper deposit is going to plan.

The business is carrying out additional resource evaluation drilling as part of a bankable feasibility study (BFS) at the site. As it stands, 22 holes for nearly 3,000m of diamond core drilling have completed. Drilling is ongoing, with a further 1,825m planned. This is expected to be completed by five drill rigs by the end of the current quarter.

In an update, the firm said results from the first four holes confirm the continuity of mineralisation in the southern part of the BKM deposit. Moderate to strong chalcocite-covellite mineralisation was intersected just below the zone of oxidation. Some samples returned grades of up to 5.52pc copper.

A preliminary economic assessment has given BKM an NPV10 of $204m, and an internal rate of return of 39pc based on a 431.9kt contained copper resource. Asiamet plans to develop an open pit mine that will produce 25kt of copper cathode a year over eight years, with immediate expansion potential.

However, it hopes its current programme of drilling can upgrade and capture additional inferred resources at the site. If successful, it expects this to enhance BKM’s project economics and the robustness of its BFS significantly ahead of project financing. The firm plans to begin production later this year, with financing discussions underway.

In today’s update, Asiamet’s chief executive Peter Bird said initial drilling were positive and in line with expectations.

He added: ‘With operational work continuing apace we expect to be consistently reporting further results as they come to hand over the coming weeks leading into completion of the BFS. In addition to the ongoing technical programme, various work streams relating to the Environmental Impact Assessment ("AMDAL") for BKM and forestry use permits are also being progressed along with due diligence investigations and commercial discussions with potential partners on both our main projects. We look forward to providing further updates as they become available.’

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

Thursday saw MetalNRG (NEX:MNRG) reveal that its potential uranium project in Kyrgyzstan has been given the green light for mining. The State Reserve Committee of Kyrgyzstan has granted a mining licence covering 3,371.1ts of uranium reserves at the Kamushanovskoye deposit. This resource would have an in-situ value of c.$253.1m at current spot prices.

MetalNRG paid $50,000 last August to enter an option to acquire an interest in Kamushanovskoye and carry out due diligence at the site. The project is currently 94.7pc owned by International Mining Company (IMC), with MetalNRG now holding the remaining 5.3pc through its stake in IMC.

Under the terms of the option, IMC would transfer the project in a new holding company. MetalNRG would then inject a specified amount of project development funding in exchange for a 51pc stake in the new company and the project. Under an amendment to the option agreement made last month, the two firms agreed that MetalNRG would be granted an additional 2.5pc stake in the new company for every $50,000 payment made to IMC.

In today’s announcement, the business said it has now decided to pursue the joint venture. It said it has supported IMC financially with the application for a mining licence and now plans to pay a further $45,000 over coming weeks before ultimately injecting $813,500 to attain its 51pc position.

Kamushanovskoye is located 48km from Bishkek, the capital city of the Kyrgyz Republic, and within 550km of three uranium refineries. It includes a JORC-compliant measured and indicated resource totalling 3.604Mlb of U3O8, a compound of uranium, and an inferred resource of 1.939Mlb U3O8. It also offers a potential exploration upside of an additional 2.58Mlb of uranium from a partially explored zone

Rolf Gerritsen, chief executive at MetalNRG said the business is interested in the project because market dynamics are currently making it an ‘extremely interesting’ time for uranium.

‘Our project is moving towards production and we are all extremely pleased with the progress. The financials around the project make it an outstanding opportunity and we look forward to the ongoing working relationship with IMC who are doing a great job,’ he added.

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

 

Guest article by David Price, CEO of Rockfire Resources

Evaluating a mining exploration stock requires some level of knowledge of the terminology used within the sector and the ability to review and understand assay results.

Assaying is the process of determining the quantity of each element within an individual sample, which is representative of a prospect or an ore body. Assaying is usually performed by independent, commercial laboratories, however, some active mine sites will have their own assaying laboratory at the mine to minimise on-going costs of many hundreds of thousands of assays.

The term “prospect” is generally used to describe mineral occurrences and early-stage exploration targets. The term “Project” normally refers to a prospect which has been defined to the point that it is justified for significant funds to be allocated to the prospect and the Prospect becomes a Project. An ore body is a specific term used only when the economic parameters of potential mining have been taken into account. In other words, an orebody has to demonstrate potential to become economic at some point in the future. Without the economic component, mineral accumulations should only be referred to as prospects or projects.

There are numerous factors that combine to determine whether a mineralisation discovery is worth developing. Generally, how easy it is to mine (mining method), the size of the find (tonnage), the ease of extraction (processing), and the concentration of the minerals (grade) are the main considerations. Proximity to existing processing facilities naturally increases the odds of a discovery becoming economic, and a site having such operations nearby is often referred to as having ‘nearology’.

Near-surface deposits are cheaper to extract via open pit mining, as long as the orebody is large enough to be mined in bulk. Generally, open pit mines are no more than 300 metres deep and are several hundred metres wide. Open pit mines can be used in hard rock mining for ores such as metal ores, copper, gold, iron, aluminium, as well as coal mining and many other minerals.

As you might expect, the costs associated with underground mining are considerably higher owing to many factors including additional safety requirements, potentially harder rock, necessity for ventilation, escapeways and water/power provision at depth. As a comparison, if the cost of mining ore at an open pit mine is approximately $10 per tonne, an underground mine may cost around $25-$50 per tonne. The actual cost will vary from one project to another and factors such as rainfall, labour rates, snow depth, ground conditions, terrain, weathering of the rock, altitude, accessibility and fracture density in the rock will all contribute to variation in mining costs.

Does it make the grade?

Once a discovery is made, its economic viability needs to be assessed. Assuming the depth and size of the deposit make it attractive for development, the next thing to consider is its mineralisation grade. This is the proportion of target minerals within the rock and is usually expressed either as grams of target minerals per tonne of rock to be mined (g/t) in the case of precious metals (gold and silver), or a percentage (%) of target minerals within the ore in most other cases.

Analysis of gold content is generally performed by Fire Assay (FA). Each sample submitted by the company is firstly dried, crushed (to -5mm), then pulverized (to -80 micrometers) to create an homogenous sample. A sub-sample is then taken by the laboratory (either 30g or 50g) and generally, the larger the sub-sample, the more statistically accurate the result is likely to be.

A flux and lead bead is then added to the pulverized sub-sample and the sample is put into a furnace to be smelted to a liquid. The gold preferentially adheres to the lead, so as cooling occurs, the lead and gold separate out from the rest of the sample. The lead is ultimately absorbed into the crucible, leaving a small gold ball (prill) in the bottom of the crucible. This gold prill is then analysed using either Inductively Coupled Plasma (ICP) or Atomic Absorption Spectrometry (AAS), which are both spectrometry techniques to determine absolute gold values. 

From the assay results, exploration companies generally calculate the average grade across a deposit and apply what’s called the ‘cut-off grade’ – a minimum grade determined from possible economic parameters for the deposit. Grades beneath the cut-off grade are usually excluded from the data when calculating average grades. Similarly, high-grade cuts are usually statistical high anomalies which are excluded from the data when calculating average grades, to ensure anomalously high grades are not likely to contribute to an over-estimation of the average grade.

When reviewing grades, it is important to note the sample size. The more drill holes intersecting the orebody, the more reliable the data. It is also most important to note the individual sample size which is submitted to the laboratory. Sample sizes will vary from a 50g split to a 5kg sample. The larger the sample contributing to the preparation for fire assay, the more statistically accurate the sample is likely to be. For example, Rockfire Resources instructs the laboratory to crush and pulverises an entire 5kg sample which has been submitted to the lab, prior to a 50g sub-sample being taken by the laboratory for fire assay. This larger, homogenous sample increases the cost of each individual assay, but ensures the most statistically accurate sample is analysed.

Grades can vary quite significantly, with the highest grades frequently grabbing the headlines, but larger tonnages and higher average grades are the best indicators of a potential resource. Assay results are often mapped out in order to pinpoint likely targets for future drilling campaigns.

Author: David Price

Many thanks to David for this guest article. David is Chief Executive Officer and Managing Director of Rockfire Resources plc. David is an experienced geologist and senior executive with +30 years of experience in the global mining industry and has over 20 years’ experience in securing funding for exploration projects. David holds the highest category of membership as a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM) and is a Competent Person for Mineral Exploration under the guidelines of the JORC Code. Rockfire Resources is advancing gold and copper projects in Queensland Australia, where historical drilling has already identified significant gold, copper and silver mineralization.

http://www.rockfireresources.com

 

Fertiliser firm Harvest Minerals (LSE:HMI) has released a new corporate presentation to update investors on its plans for 2019. Harvest’s flagship asset it the 14,946-hectare Arapua fertiliser project in Brazil’s Minas Gerais agriculture belt. Here, it produces a multi-nutrient, slow release, organic, government-certified remineraliser called KPfertil.

According to the business, KPfertil offers many economic and agronomic benefits to local farmers. It also aims to address the significant demand for locally-produced fertiliser in Brazil. As it stands, the country imports 90pc of its potash. However, it rather ambitiously intends to be self-sufficient in fertiliser by next year.

Arapua is a shallow, low-cost mine with an indicated and inferred resource of 13.07Mt at 3.1pc potassium oxide and 2.49pc phosphorus pentoxide. This is based on drilling just 6.7pc of known mineralisation, which Harvest believes to leave significant upside potential. The existing resource is equivalent to more than 29 years of production.

In its new presentation, Harvest lays out its rationale for focusing on Brazil’s fertiliser market and provides a rundown of KPfertil and its production process. It also recounts its significant progress in 2018 – which included getting KPfertil government registered and securing its first significant sales contracts – before laying out its plans for 2019. Finally, the business states what it believes to be the case for investing in its shares, using the tagline ‘simple product, ideal location, revenue generating’.

The presentation can be accessed by clicking here.

It follows the launch of Harvest’s new corporate website earlier this week. This can be found at www.harvestminerals.net.

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

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

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