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

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

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

Strong supply/demand dynamics

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

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

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

A secure setting for 2020

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

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

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

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

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

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

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

Who will be the big nickel winners?

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

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

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

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

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

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

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

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

A valuable investment opportunity

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

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

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

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

Author: Daniel Flynn

 

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

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

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

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

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

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

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

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

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

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

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

Author: Daniel Flynn

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

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

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

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

 

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

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

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

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

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

 

What they say:

“ahead of market expectations”

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

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

Nothing wrong there.

 


What they say

“ahead of board expectations”

What they want us to think

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

What it actually means

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

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

So who knows?

Not PIs – that’s for certain!

 

 

What they say

“broadly in line with market expectations”

What they want us to think

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

What it actually means

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

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

 

 

What they say

“second half weighting” / “H2 weighting”

What they want us to think

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

What it actually means

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

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

 

 

What they say

“EBITDA is in line with expectations”

What they want us to think

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

What it actually means

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

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

 

 

What they say

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

What they want us to think

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

What it actually means

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

 

 

What they say

“related party transaction”

What they want us to think

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

What it actually means

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

 

 

What they say

“The board have invested in margin”

What they want us to think

“This was a strategic and deliberate to increase sales”

What it actually means

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

 

 

What they say

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

What they want us to think

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

What it actually means

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

 

 

What they say

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

What they want us to think

“This will help the company in its operations”

What it actually means

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

 

 

What they say

“The directors have awarded themselves nil-cost options”

What they want us to think

“The directors are now aligned with shareholders”

What it actually means

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

 

 

What they say

“The board is pleased to announce a placing”

What they want us to think

“This will be value accretive over time”

What it actually means

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

 

 

What they say

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

What they want us to think

“We couldn’t do anything about it”

What it actually means

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

 

 

What they say

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

What they want us to think

“There is only one contributing factor”

What it actually means

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

 

 

What they say

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

What they want us to think

“Things will get better”

What it actually means

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

 

 

What they say

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

What they want us to think

“We are definitely not doing a placing”

What it actually means

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

 

 

What they say

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

What they want us to think

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

What it actually means

“Wow – are we screwed!”

 

 

What they say

“The board are fully committed to delivering shareholder value”

What they want us to think

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

What it actually means

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

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

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

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

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

 

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

Charlie Munger

 

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

 

Author: Michael Taylor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Author: Daniel Flynn

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

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

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

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

 

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

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

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

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

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

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

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

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

Author: Daniel Flynn

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

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

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

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

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

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

Executive compensation, a hot topic in public markets

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

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

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

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

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

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

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

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

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

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

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

Author: Ben Turney

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

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

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

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

 

 

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

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

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

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

To read the report in full, please click here.

 

 

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.

https://www.rockfireresources.com

Horizonte Minerals (LSE:HZM) sat at 4p on Monday morning after confirming the drawdown of $25m worth of funding towards its Araguaia ferronickel project in the Para state of Brazil.

As announced in August, Orion Mine Finance has provided an upfront $25m cash payment to Horizonte in exchange for a 2.25pc royalty on Araguaia. This royalty applies only to the first 426,429ts of contained nickel within the ferronickel produced and sold at the asset. This volume is equivalent to the nickel production estimated over Araguaia’s life of mine as per its stage one feasibility study (FS).

Orion is a significant player in the mining financing space, deploying around $1.5bn in royalties, streams, debt, and equity over the past three years alone. The non-dilutive funding it has provided to Horizonte will support the business in advancing pre-construction work streams at Araguaia.

Araguaia is a Tier 1 mining project with a high-grade scalable resource, located south of the Carajás Mining District in the Pará State of north-east Brazil.  The area boasts plenty of well -developed infrastructure such as roads, rail and hydroelectric power.

Horizonte’s stage one FS for the asset centres around an open-pit nickel laterite mining operation that delivers ore from several pits to a central processing facility. Here, a single line rotary kiln electric furnace (RKEF) extracts ferronickel, used in the stainless-steel industry, from Araguaia’s ore. After an initial ramp-up period, the project will reach full capacity of c.900,000ts of dry ore feed per year to produce 52,000ts of ferronickel containing 14,500ts of nickel annually. Over an initial 28-year mine life, the FS design generates free cash flows after taxation of $1.6bn returning an IRR of more 20pc against on an initial capital cost of $443m.

On top of this, Araguaia has been designed to allow for a second RKEF process plant, funding through operational cash flow. This stage two expansion would double Araguaia’s ferronickel output, providing for a 26-year mine life generating cash flows after taxation of $2.6bn with an estimated NPV of $741m and an IRR of 23.8pc. All of these figures were reached using a conservative base case nickel price forecast of $14,000/t, well below the $16,462/t at which the metal presently sits.

Monday’s news comes just days after Horizonte announced that a pre-feasibility study (PFS) confirmed its Vermelho project as a ‘large, high-grade resource, with a long mine life and low-cost source of nickel sulphate for the battery industry’.

The work estimated that the property, also based in Para, would have a 38-year mine life generating total cash flows after tax of $7.3bn. Elsewhere, the PFS gave Vermelho – which produces nickel suitable for use in electric vehicle batteries- an IRR of 26pc and an estimated base case post-tax NPV of $1.7bn against an initial capital cost estimate of $642m. Finally, the work put Vermelho’s estimated annual production at 25,000ts of nickel and 1,250ts of cobalt when operating at full capacity. This translates into a cash cost of $8,020/t of nickel, defining the project as a low-cost producer.

Author: Daniel Flynn

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

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

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

MiningMaven Ltd is not responsible for its content or accuracy and does 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

Energy metal companies received another boost earlier this month when the UK government announced up to £1bn in additional funding to develop and embed the next generation of electric vehicles (EVs). The money will be used to develop UK supply chains for the large-scale production of EVs, and will also fund further research and development into the technology supporting the vehicles.

‘[The funding] will accelerate mass production of key technologies in the UK through major investments in the manufacturing of batteries, electric motors, power electronics, and hydrogen fuel cells, along with their component and materials supply chains,’ the government said in a statement.

The news marks yet another sign of growing global support for the move away from conventional vehicles and towards EVs, which require significant amounts of energy metals like cobalt, nickel, and copper.

For example, earlier this year, US Senator Lisa Murkowski proposed the introduction of a Minerals Security Act at a Washington-based conference. This would aim to streamline domestic regulation and permitting requirements in the energy metals sector and forms part of growing efforts to curb China’s increasing dominance in the EV space.

Also in attendance at the conference was Tesla, which highlighted its concerns around a global shortage of nickel, copper, and other EV battery minerals in the future due to underinvestment. Likewise, France and Germany both asked the European Commission to support a €1.7bn battery cell consortium earlier this year.

Elsewhere, more than a dozen countries and around 20 cities globally have proposed banning the future sale of passenger vehicles powered by fossil fuels. For example, a ban on the cars will commence in 2040 across much of the UK, and France, 2030 in the Netherlands, Israel, and Sweden, and as soon as 2025 in Norway.

The positive demand outlook this creates for metals used in the EV industry is also reflected in the latest global commodity demand figures from CRU. The research group expects demand for cobalt, lithium, and nickel to grow by 14.3pc, 12pc, and 5pc, respectively, from 2019 to 2023 in China. Likewise, demand for the three metals is expected to grow by 9.5pc, 10.9pc, and 5.4pc, respectively, across the rest of the world over the same period. On both accounts, they are the three metals expected to enjoy the highest growth rate.

Many energy metals are still sourced heavily from politically unstable countries – creating potential supply volatility. For example, more than 50pc of cobalt demand current stems from the DRC, an area known for human rights issues and political disruption. With this in mind, the figures and government initiatives mentioned above create a bright picture for firms in the sector with projects in more stable countries.

A potential beneficiary that we have previously covered on Mining Maven is Global Energy Metals (TSX.V: GEMC). The firm owns 100pc of the Millennium Cobalt Project and two neighbouring discovery stage exploration-stage cobalt assets in the famed Mount Isa region of Australia. The company is also developing two battery mineral assets in Nevada, US, called the Lovelock Cobalt Mine and Treasure Box Project. These neighbour the world’s largest lithium-ion battery production plant – Tesla and Panasonic’s Gigafactory One. Finally, it has also teamed with Australian business Marquee Resources to advance the past-producing Werner Lake mine in Canada.

Another potential beneficiary is Forum Energy Metals (TSX.V: FMC), which is developing the Janice Lake sedimentary copper project in the Saskatchewan region of Canada alongside Rio Tinto. The business also recently staked ownership of the nearby Love Lake project, which is prospective for copper as well as nickel, palladium, and platinum, and owns a portfolio of uranium assets.

Author: Daniel Flynn

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

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

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

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

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