On Wednesday SolGold (LSE:SOLG) updated the market with details of exploration activities from its 100% owned Porvenir Project in southern Ecuador. Over the past five years, Ecuador has been recognised globally as a frontrunner in emerging mining nations. SolGold is the largest and most active concession holder in the country and is aggressively exploring the length and breadth of a highly prospective and gold-rich section of the Andean Copper Belt. The Australian company has formed four 100% owned subsidiary companies in Ecuador; Carnegie Ridge Resources S.A., Green Rock Resources S.A., Cruz del Sol S.A. and Valle Rico Resources S.A. The subsidiaries currently hold 73 mineral concessions over approximately 3,200km2 in Ecuador.
To date exploration activity has identified 15 potential porphyry centres at SolGold’s flagship copper-gold deposit, the Cascabel Project. SolGold published its maiden Mineral Reserve Estimate for Alpala, the main target in the Cascabel concession in January 2018. Alpala has produced some of the greatest drill hole intercepts in porphyry copper-gold exploration history. Over 145,000m of diamond drilling has been completed on the project and SolGold currently produces around 10,000m of core every month.
The plan is to apply the exploration blueprint developed at Cascabel to the Porvenir Project in southern Ecuador and elsewhere.
Location plan showing the Porvenir project in southern Ecuador
The company reports the discovery of ‘exciting’ new porphyry copper-gold mineralisation at Target 15, located on the Porvenir 2 concession. A broad zone of north east trending porphyry mineralisation approximately 1km wide and hosting numerous porphyry centres currently defined over 6 km long and open ended has been defined. This includes a 800m-wide mineralised corridor more than 1200m long recognised at Target 15 consistent with exposure of a vertically extensive, well-preserved porphyry copper-gold system.
Rock saw channel sampling copper and gold results from La Cacharposa creek in Target 15 at Porvenir
SolGold CEO, Nick Mather commented, "The result at Porvenir especially at Target 15, indicates the effort SolGold puts into its first mover advantage secured in 2014 across Ecuador. SolGold's team of geoscientists led by Dr. Steve Garwin, porphyry expert, recognised several targets with the right geochemical, geological and geophysical signature and SolGold has so far secured 11 of them. SolGold is committed to leading the development of a sustainable copper-gold mining industry in Ecuador. The high grades and strong gold endowment at Alpala and Porvenir provides SolGold with a unique opportunity to develop this Company without resorting to dilutive and erosive joint ventures.
SolGold has identified and secured the best of an entire copper-gold province, the size and metallogenic signature of northern Chile. That's a unique approach that can't be replicated. We are confident that Alpala and now Porvenir Target 15 are the first projects in a long, large and rich string of them. We have the cash, the expertise and the focus to deliver"
Author: Stuart Langelaan
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece. The Author has not been paid to produce this piece by the company or companies mentioned above. Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above. MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance
On Friday, Goldstone Resources (LSE:GRL) announced it had entered into a loan agreement with major shareholder, Paracale Gold. The loan of $1.224m will accrue interest of 6.0% per annum and is to be repaid in full by 2nd June 2022. Goldstone will draw down $324k immediately with three further tranches of $300k available over the next nine months.
Paracale Gold’s existing 40,352,377 warrants will be cancelled and replaced with the same number , exercisable at 1.2p at any time time until 2nd June 2022.
The loan will provide Goldstone with funds to continue advancing its Akrokeri-Homase project in the Ashanti region of south-western Ghana. The project lies 8 km along strike from the Obuasi Gold Mine, one of the world’s major gold mines with a total historical and current resource in excess of 70M ounces.
Two previously producing assets in the world class Ashanti Belt are included in the project; the high-grade Akrokeri underground mine and Homase open-pit mine. Goldstone is aiming to deliver gold production from both mines by mid-2020.
The Akrokeri mine previously produced 75,000 ounces of gold at a recovered average grade of approximately 24g/t Au, while historical recovery from the Homase open-pit mine totals 52,000 oz Au at an average grade of 2.5g/t.
Goldstone reported in December that shallow workings are currently being mapped as they are made safe at the Akrokeri mine while a pilot heap leach project is underway at the Homase open-pit mine.
Emma Priestley, CEO of GoldStone, commented:
"Paracale Gold shares the Company's vision for the development of the Akrokeri-Homase Project in Ghana. In what remains a challenging market for the natural resource sector, we are pleased to have secured the necessary funding to continue the advancement of AKHM and we welcome and value the continued support of our major shareholder, Paracale Gold as we seek to bring AKHM into production by mid 2020."
Author: Stuart Langelaan
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece. The Author has not been paid to produce this piece by the company or companies mentioned above. Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above. MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance
Goldstone Resources (LSE:GRL) provided an update on Friday regarding developments at its Akrokeri-Homase Gold Project in south-western Ghana. The Project includes two previously producing assets in the world-class Ashanti Belt, the high-grade Akrokeri underground mine and Homase open-pit mine. Goldstone is aiming to deliver gold production from both mines by mid-2020.
The Akrokeri mine previously produced 75,000 ounces of gold at a recovered average grade of approximately 24g/t Au, while historical recovery from the Homase open-pit mine totals 52,000 oz Au at an average grade of 2.5g/t.
The project lies 8 km along strike from the Obuasi Gold Mine, one of the world’s major gold mines with a total historical and current resource in excess of 70M ounces.
Work continues to make the shallow workings safe at the Akrokeri mine, and those that have been accessed are being mapped. At the North Shaft, where Level 1 the process of clearing out old rails, wood and debris is underway to form safe access to continue working in the shaft for the reopening of the mine to access the workings down to 400 feet.
A pilot heap leach project is underway at the Homase open-pit mine. Heap leaching is a process involves a series of chemical processes, through which the mineral ores are piled into the form of a heap, and a leach solution is spread over the ore surface to leach metal from the heap. The process can take several weeks or months and Goldstone reports after the first 40 days of its pilot, recoveries are 67.5% using 2.5 tonnes of material from Homase South.
The University of Mines and Technology (UMaT) in Tarkwa, Ghana, estimates that the leach cycle will be 65 days with recoveries of up to 80%. The oxide zone within Homase South is demonstrating suitability to the low-capex leaching treatment.
A planned Scoping Study will also look at the Homase North Resource Zone within the Homase Trend and the Environmental Baseline Study has also been expanded to include the potential Homase North pit.
Emma Priestley, CEO of GoldStone, commented:
"Our strategy of advancing development at both Akrokeri and Homase is centred on achieving production at multiple mining operations in as short time as practicable. Akrokeri has the distinct advantage of demonstrating exceptionally high-grade material, including intercepts of 1.0 metre at 51.01 g/t Au, and established mining infrastructure, whilst Homase offers the potential benefit of being amenable to low capital heap leach treatment. When looking at the assets in unison, I am confident that GoldStone has a clear pathway to production in mid-2020, utilising the significant support and expertise of our strategic shareholders and team who have a proven track record in building gold mines."
Author: Stuart Langelaan
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece. The Author has not been paid to produce this piece by the company or companies mentioned above. Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above. MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance
The Kookaburra license surrounds Rockfire’s Lighthouse tenement in the Charters Towers district and the explorer says it is targeting a medium- to large-scale, near surface gold resource. Rockfire is securing a significant ground-holding in a district that has produced more than 20 million ounces of gold and continues to produce from three operating, multi-million-ounce gold mines.
The Native Bee prospect lies on a discrete 500m-wide magnetic high anomaly and Rockfire's technical team have identified high-temperature fluid pathways. Since elements have different temperatures of precipitation, an elemental heat map can be generated. The heat map below reveals previously unidentified exploration target zones.
Chief Executive Officer of Rockfire, David Price considers the exploration potential at Native Bee to be ‘very high’ and said:
"Our strategy of systematic appraisal of each of our numerous prospects has identified Native Bee as a high-priority exploration target within the Kookaburra licence. Pegging the Kookaburra tenement has proved to be a prudent, strategic move and is providing Rockfire with material growth opportunity. It is surprising that this prospect has been sitting dormant and unexplored for over 25 years".
The prospect was primarily explored by Dalrymple Resources between 1988 – 1990. Forty-four RAB and RC holes were drilled returning best intervals of 8m @ 2.18 g/t Au, including 3m @ 5.13 g/t Au from 26m vertical depth, and 16m @ 2.14 g/t Au, from 35m vertical depth.
Price comments: "Historical drilling at Native bee has intersected potentially economic gold grades and widths close to surface. This fits nicely with Rockfire's deliberate strategy of accumulation of near-surface gold resources within trucking distance of operational gold processing facilities. Native Bee lies 29km from the operating Pajingo Gold Mine processing facility".
Rockfire has been granted the Kookaburra exploration license, which covers 232 sq. km, for five years and is planning to commence follow up work in early 2019.
Price said: "Rockfire will continue to appraise and rank each of its prospects in conjunction with on-going ground fieldwork. The Company intends to follow up these past significant results with detailed geological and structural mapping. In addition to the mapping, a gradient array IP geophysical and ground magnetic survey will be scheduled for the 2019 field season. Geophysics is expected to highlight the continuity of the sulphide-enriched zones at depth, in order to pinpoint accurate targets for drilling."
Author: Stuart Langelaan
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece. The Author has not been paid to produce this piece by the company or companies mentioned above. Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above. MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance
Jangada Mines (LSE:JAN) announces a significant improvement to the economics of its Pedra Branca project through the addition of a JORC compliant nickel and copper sulphide resource. The new resource will be included in the Bankable Feasibility Study (BFS), slated for delivery in H1 2019, and is expected to substantially improve already favourable economics.
The company announced it had identified the mineralization in October. The new nickel resource conveniently sits below the existing target PGM resource and planned open-pit mine. Since the nickel can be processed and recovered using the same plant as the PGMs there will be minimal additional CAPEX required making extraction economical.
Its estimated the new resource consists of around 8.2 million tonnes of mineral which the company believes could be worth an additional $110m project revenue at today’s spot price. Jangada also highlights that there is a strong chance the resource can be increased further as it is open at depth and along strike.
Brain McMaster told MiningMaven:
“Today’s news is highly positive for Jangada. The inclusion of our maiden nickel resource significantly improves Pedra Branca's economics, for what should be a minimal increase in the cap-ex requirement. The reason for this is that the nickel sulphide body is close to the existing PGM resource and will get processed by the same plant, so no additional plant will be required.”
This is a great way for us to end 2018 and marks what I expect will be the beginning of a period of increased news flow, as we advance towards completing the Bankable Feasibility Study in the spring.”
Pedra Branca covers around 48,000 hectares and Jangada estimates the project will produce around 64,000 ounces of PGM+Au per annum.
At today’s platinum price of $787, forecast production would generate a rough ballpark figure for revenues of $50.368m. That’s a conservative calculation since Spot palladium and gold are priced significantly higher at $1250, and $1240 respectively.
In November Jangada announced a 32% reduction in total capital expenditure required, estimating costs for year one of $81.482m. This suggests an impressive payback time on initial investment of just 1.62 years.
Today’s JORC resource addition further enhances project economics at Pedra Branca, while fundamentals for nickel and copper continue to look strong due to decreasing supply and increased demand from new battery technologies.
Brian McMaster, Chairman of Jangada, said: “Our ongoing work has enabled us to further understand the dynamics, scale and potential of the ore-body; the Project’s main economic drivers are palladium, platinum and nickel and the associated by-products are essentially cream on the top. “The planned processing route allows us to process and recover all metals in one concentrate from the one plant, meaning that the economics of Pedra Branca have improved substantially. We expect to demonstrate this in the upcoming BFS. Clearly, the current NPV of US$192 million against the Company’s current circa £6 million market cap demonstrates a disparity between asset and valuation; we expect this gap to close substantially as we continue to de-risk the Project.”
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
Rainbow Rare Earths (LSE:RBW) bounced 4.6pc to 5.1p after releasing the first-ever JORC mineral resource estimate for its Gakara rare earths project. Gakara has a total resource of more than 1.2MMts of ore covering a small fraction of total acreage.
Rainbow said three areas of the project – Gasagwe, Murambi South, and Gomvyi Centre - are very high-grade vein stockwork deposits. The sites total 12,491ts of total mineral resource at an average total rare earth oxide grade (TREO) of 55pc. This compares to an average rare earth project grade of between 1-4pc TREO.
The work defined another area called Kiyenzi as a substantial, lower grade deposit with a mineral resource of nearly 1.2MMts. It has an average grade of 2.2pc TREO employing a cut-off of 1pc TREO.
Rainbow has been producing from Gasagwe since December last year. It plans to bring Gomvyi Centre and Kiyenzi in production next year. Gakara is based in Burundi, North Africa, and is the continent’s only producing rare earth mine. It holds more than 1,000 rare earth discoveries with a basket weighted heavily (c.20pc) towards magnet rare earths.
Today’s resource uses just four of 28 mineralised prospects across the entire mining licence. Rainbow said this indicates significant further upside for future exploration.
The JORC resource follows a great deal of work undertaken by Rainbow at Gakara over recent years. This has included greenfield and brownfield exploration, drilling, mining, ore processing testwork, modelling, and ore processing and concentrate production.
Martin Eales, CEO of Rainbow, said: ‘We are pleased to announce the maiden JORC-compliant Mineral Resource Estimate for the Gakara project, on time and on budget. The Mineral Resource, which is based on only four out of the 28 identified targets within our licence, shows over 1.2 million tonnes of ore, a considerable deposit in its own right, and provides further evidence that the Gakara deposit is a world-class source of rare earth oxides.
‘Three of the areas are high-grade vein stockworks, and include 12,491 tonnes of ore Resource at 55% TREO. These alone will provide over two years' head feed for our planned ramp-up to 5,000t concentrate, and we will of course continue to explore these deposits further.
‘The Kiyenzi deposit has been confirmed as a very large, lower grade deposit, which ties in with the airborne and ground gravity results previously announced. The currently modelled deposit amounts to nearly 1.2 million tonnes of ore at 2.2% TREO, and may well be related to a carbonatite source. This deposit is open in all directions and is an extremely exciting prospect as it presents a new opportunity for Rainbow to further develop its mining and processing capabilities.
‘These results will provide us with confidence in our ability to obtain near and medium-term sources of ore, but more importantly point to the existence of a truly unique deposit, which we will continue to explore in the future.’
Until recently, Rainbow hoped to ramp up production to 5,000tpa or 400t a month by the end of 2018. However, this target was delayed in October until 2019.
Rainbow put this down to a challenging geological environment and uncertain average yields at Murambi. Compounding this, the business has also suffered lower production rates from Gasagwe in recent months. This has resulted from unpredictable vein structures.
Rainbow said the precise date at which it hits its target production rate will depend on progress at Murambi. It will also hang on one or two more mining areas that it plans to bring online over the next nine months. It plans to release upgraded production guidance for the 12 months to June 2019 early next year.
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
Horizonte Minerals (LSE:HZM) dipped 3.3pc to 2.1pc today after filing the feasibility study for its flagship Araguaia project with Brazil's government. The nickel development firm said it has handed over the study to Brazil's Para state in line with government standards.
Kavango Resources (LSE:KAV) rose to 2.4p on the offer today as the company announced it has identified several high-quality drill targets at its prospective Kalahari Suture Zone (KSZ) project in Botswana. With the news marking yet another step towards the recently-listed business potentially locating what it describes as ‘world-class mineral deposits’, could this weakness provide an exciting buying opportunity?
A weak commodity market and a negatively-received production delay in October have pushed shares in Rainbow Rare Earths (LSE:RBW) down to 4.8p, well below their 2018 high of nearly 24p, achieved in April. Despite this, the firm has taken major steps forward, steadily increasing production at its Gakara project in Africa and completing wide exploration work to support the release of a maiden JORC resource by year-end. With rare earths looking set to benefit from the inbound electric vehicle boom driving battery metals like nickel and cobalt, CEO Martin Eales explains why Rainbow’s current share price weakness could provide a good buying opportunity.
Rare opportunity
Rainbow Rare Earths listed in January last year to target production in the rare earths sector. The rare earths comprise seventeen chemical elements that often occur in similar deposits and share properties.
Thanks to their diversity, the elements have many uses including catalysts, alloys, glasses, and electronics. However, the one that Rainbow is most interested in is their use in the production of strong magnets. Rare earth magnets are used in several growing areas including electric generators and wind turbines. However, they are perhaps most notable for their use in electric vehicle (EV) motors. Indeed, with global EV sales growing 63pc last year alone, magnet rare earths now account for c.70pc of the total RE value chain.
With estimates putting 530m EVs on the road by 2040, Eales believes the current growth dynamic will continue for some time. As rare earths represent a much smaller market than established battery metals like nickel and cobalt, he says they provide investors with an attractive, alternative way of getting exposure to the upside potential on offer:
‘Every EV motor has a strong magnet in it, and we believe these will become more prevalent as the world continues to shift away from traditional vehicles. So, the demand drivers surrounding lithium, cobalt, and nickel in the EV batteries also apply to rare earths. Unlike these metals, there is not a lot of near-term supply for rare earths as projects take a lot of money to get going. Even if supply can be incentivised by financing, many projects are still three or four years away from supplying the market, providing an ongoing tailwind for prices.’
Ramping up
Rainbow is taking advantage of this dynamic at its Gakara project, located in the African nation of Burundi. The historic mine holds more than 1,000 RE discoveries with a basket heavily weighted (c.20pc) towards magnet rare earths. However, the real string to the site’s bow is its high grades, which sit at between 47-67pc total rare earth oxide (TREO), compared to an average project grades of 1-4pc TREO.
The site entered production from its Gasagwe mining area in December last year, followed shortly by the commissioning and construction of a processing plant. This development made Rainbow one of few rare earth producers outside China and the only African producer. Eales says Gakara’s high grades allowed production to begin at a ‘fraction of the cost and less time’ than similar RE projects:
‘Typically, rare earth operators have to mine thousands more tonnes at their projects than we do because the grades are lower. We are also supported by our veins, which are easily identifiable and extractable . We process far fewer tonnes and can use a smaller plant because we don't have to upscale or beneficiate our ore. This was quick and cheap, allowing us to enter production at a capex cost of just $2.23m.’
Output from Gasagwe has continued ever since, accompanied by ongoing drilling work to better understand the area and help to boost production. Work has also been completed to bring a second area called Murambi into production, supported by a £1.6m placing at 12p a share in August.
An aerial view of the Gakara rare earths project
Until recently, Rainbow was aiming to ramp up production to 5,000tpa, or 400t a month, by the end of 2018. However, this target was announced as delayed in October until 2019. It put this down to a challenging geological environment and uncertainty around average yields at Murambi, which has now entered production. Compounding this, the business has also suffered lower production rates from Gasagwe over recent months due to unpredictable vein structures.
The firm said the precise date at which it hits its target production rate will depend on progress at Murambi and one or two additional mining areas that it plans to bring online over the next nine months. It plans to release upgraded production guidance for the 12 months to June 2019 early next year. With shares falling from 9.6p to 4.5p over a matter of days following the announcement of the delay, Eales argues that the market over-reacted to the news:
‘We had set ourselves an ambitious production target for the end of this year. We haven’t quite got there, so we have pushed it back to next year. We know what we need to do to get there and the market I think punished us quite hard and did not realise that our strategy remains unchanged. We know what a great project we have got here so we will get our heads down and crack on with it and the share price will take care of itself over the long term. If Murambi ends up performing as we expect it to, then hopefully we will see production numbers double because both areas will be producing at a similar rate. It is difficult to forecast production as we do not have reserves and resources at present, but what we do know is that, given our inventory, we have multiple years of operation here and we will be going for a good while yet.’
Exploration upside
As well as ramping-up production, the last year has seen Rainbow increase its efforts to explore Gakara’s upside potential. This work began in November 2017 when an airborne magnetic survey found significant exploration upside at the project, identifying four large, prospective anomalies for a carbonatite source for Gakara's rare earth veins.
In particular, one anomaly complemented a ground-based gravity survey at Gakara’s Kiyenzi prospect, which was selected for investigation after it was found to contain large boulders at surface with very high RE grades. Following this, the firm carried out a phase one exploration drilling campaign on the Kiyenzi anomaly and the wider prospect area. This work identified new high-grade rare earth mineralisation up to 5m thick, consistent with that found previously in the boulders.
After failing to find mineralisation at the other anomalies, Rainbow began phase two drilling at Kiyenzi in July. The results will form the basis of its maiden JORC resource, which Eales says will be released this month. Following this, the firm hopes to identify a large deposit to enable production to ramp up to 10,000tpa or more.
Gakara mining licence perimeter, mining areas, and rare earth discoveries
Over a longer-term horizon, Rainbow is also looking at ways to process its own rare earth concentrate. As it stands, the business produces a mixed mineral product and sells it to someone in the market that will then separate the concentrate into processed rare earths and sell it on at a much higher price.
The business took its first significant step towards this goal in August when it partnered with a firm called TechMet. The company will fund a DFS for downstream rare earth separation at Gakara on a reimbursable carry basis up to $3m. According to Eales, Rainbow’s RE concentrate currently sells at a c.70pc discount to the finished metal product. As a result, he said he is very excited by the potential presented by any future JV with Techmet:
‘We have always said that if we can calculate the economics to allow us to process our own material then would be determined to do so. We are the feedstock, so if we can process our own material to make a higher value product, then the margins are very attractive. Our work with Techmet has begun, but we haven't given any estimated time for completion. I would imagine we would be seeing some news on that towards the end of next year. We are very excited about the possibilities because if we can narrow the gap between our sale price and our customers’ sale price, then it could have some serious benefits.’
Market turnaround?
Financially, Eales tells us that Rainbow’s revenues and cash balance are funding its existing work programme. The firm’s last publicly stated cash position came in its annual results in September, when it revealed that it had $354,000 as of 30 June 2018. However, it bolstered this considerably in August when, as mentioned, it raised £1.6m ($2m) to- in its own words- ‘cater for the sometimes irregular sales cycle for its concentrate and ensure sufficient working capital reflecting the company's complexity and nature of its operations’.
In October, the business then said it remained focused on using its existing cash and financing to reach concentrate sales of 250-300ts per month, the point at which it expects to be generating positive EBITDA. Once Rainbow has reached this point, Eales plans to use its relatively fixed cost base to reduce its operating cost per tonne by bringing additional areas into production:
‘Over the next year, we want to accelerate the third and fourth mining areas into production. We are currently using some of our recent placing proceeds to explore and develop an area called Gomvyi, which could be our third mining area. Our cost base is pretty fixed, so as we get more tonnes through the plant, costs come down significantly, and we achieve greater profitability.’
Despite this optimism, Rainbow’s shares have been on a downward trend since April, when they sat at highs of close to 24p. Alongside October’s negatively-received delay this can at least be pinned partly on this year’s broader commodities sell-off stemming from concerns over a US/China trade war, something that has hit junior miners across the board in H2 2018. It is worth noting, however, that Rainbow continues to enjoy strong backing from institutional investors Miton AM (4.6pc) and L&G (4.7pc). Likewise, management have taken advantage of this year’s downturn to increase their stakes. In particular, non-exec chairman Adonis Pouroulis, who founded Petra Diamonds and Chariot, maintained his 25pc stake in the company by participating in the August placing.
Eales tells us he believes that market sentiment towards Rainbow will begin to align with management once the firm provides proof of concept by achieving some of its near-term goals. He expects this to occur shortly:
‘Over the near term, I think the market will be looking at our maiden JORC resource and will be looking for us to demonstrate that we are cashflow positive on a monthly basis. These catalysts will provide some more understanding around the speed of ramp-up of production. One thing for sure is that the feedback from customers is very positive and we are sure there is a lot of demand for everything we produce.’
Alternative EV play
While the delay to Gakara’s profitable production is disappointing, it is worth noting that Eales insists nothing has changed in Rainbow’s business plan. Objectively, this point carries a lot of weight. Not a lot of junior miners can boast production revenues and imminent profitability in a niche metal sector that has substantial exposure to the popular EV investment play.
If this all sounds interesting to you and you are confident in Rainbow’s cash position, then the stock’s recent weakness could provide a decent entry point ahead of significant expected newsflow. Indeed, over the coming months, it will be worth keeping an eye on how the market responds Rainbow’s maiden JORC resource for Gakara alongside ongoing production and profitability updates.
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
KEFI Minerals (LSE:KEFI) provides an update regarding its Tulu Kapi Gold Project in Ethiopia this morning. The company reports that progress at the project is moving at a significant pace with a newly recruited construction manager and senior site risk manager relocating to the site next week. They join around 100 locally recruited personnel hired for land clearing and the drilling rigs required to complete the geotechnical surveys. Kefi bought the mine from Nyota Minerals in 2014 and plans to pour first gold in the second half of 2020. The company estimates output from the mine will include open-pit gold production of around 140k ounces (oz) per annum over a 7-year period at an all-in sustain cost (AISC) of $800 per oz. Ore reserve estimates for the project is 15.4Mt at a grade of 2.1g/t gold, containing a total of 1.1Moz.
There are still a few remaining regulatory consents required from Ethiopian government agencies which are expected over the coming weeks ahead of triggering the project. These include the approvals of the final community resettlement plans, Project financing details and the updated works program. The final design of the foundations for the processing infrastructure and dam walls will follow the geotechnical surveys. Upon receipt of the remaining Government consents, project-equity investor ANS Mining Share Company (ANS) will release US$9m of equity funds into the company's project subsidiary Tulu Kapi Gold Mines Share Company (TKGM) for funding the planned activities in Q1 2019 – these include the first phase of community resettlement and ongoing project financing and planning costs.
An additional US$9m of funding is expected at the end of Q1 2019 to fund the planned Q2 2019 project development. This will allow TKGM to proceed with activities prior to the closing of the US$160m bond/lease of non-equity capital project financing. The remaining balance of ANS's planned US$30-38 million equity investment is expected to coincide with full project finance close as soon as the non-equity component is accessed.
Managing Director of KEFI, Mr Harry Anagnostaras-Adams, said: "It certainly is an interesting period in Ethiopia, with many changes taking place, including far-reaching transformation on many levels. Our Tulu Kapi Gold Mine Project has remained a high priority for all stakeholders throughout this period and I am pleased with both the speed and level of progress being made. I would like to take this opportunity to thank all our partners and in particular the Ethiopian government at many levels for their continued support. All the pieces of the Project are coming together and we look forward to providing further updates as matters progress."
Author: Stuart Langelaan
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