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27 August 2018 07:49 AM
Overseas Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Dow Jones Industrial Average25,79025,657133.000.521.33
S&P 5002,8752,85718.000.621.98
NASDAQ7,9467,87868.000.862.70
FTSE 100 Index7,5777,56314.000.19-1.61
DAX 3012,39512,36629.000.23-3.62
CAC 40 Index5,4325,41913.000.24-1.44
Nikkei 225 (Japan)22,60222,411191.000.85-0.49
HKSE27,67227,790-119.00-0.43-3.93
SSE Composite Index2,7292,7255.000.18-5.02
S&P/TSX Composite Index16,35616,32729.000.18-0.23
NZ 509,1739,16014.000.151.97
US Volatility (Vix)12
Overseas Market Report

US sharemarkets were firmer on Friday with the broader S&P 500index at record highs. Investors were encouraged by the latest speech from the Federal Reserve chair who vowed that rate increases would remain gradual. The US dollar eased, lifting export focussed sectors. The Dow Jones index gained 133 points or 0.5%. The S&P 500 index rose by 0.6% and the Nasdaq lifted 67.5 points or 0.9%. The Russell 2000 small cap index also hit record highs. Over the week the Dow rose by 0.5%, the S&P 500 was up by 0.9% and the Nasdaq rose by 1.7%.

Global oil prices rose by around 1.5% on Friday. A weaker US dollar lifted interest in commodities. A decline in the greenback can improve the purchasing power of buyers in Europe and Asia. The number of oil rigs in operation in the US fell by nine last week - the biggest decline since May 2016. Brent crude rose by US$1.09 or 1.5% to US$75.82 a barrel and the US Nymex price rose by 89cents or 1.3% to US$68.72 a barrel. Over the week Brent rose by US$3.99 or 5.6% and Nymex rose by US$2.81 or 4.3%.

Base metal prices rose by up to 2.7% on Friday with zinc up the most. But bucking the trend, tin fell by 0.6%. Over the week zinc rose by 6.3% and lead rose by 5.4% but nickel lost 0.4%.

The gold futures price rose by US$19.30 an ounce or 1.6% to $1,213.30 an ounce. The spot gold price was trading near US$1,205 an ounce in late US trade. Over the week gold rose by US$29.10 or 2.5%. Iron ore rose by US75 cents or 1.1% to US$66.40 a tonne. Over the week iron ore rose by US$1.10 or 1.6%.

CommoditiesCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Oil Brent75.6575.82-0.17-0.221.83
Oil - West Texas crude68.6468.72-0.08-0.12-0.07
Gold Spot $/OZ1,207.001,206.000.600.05-1.37
Silver Spot $/OZ14.9014.800.000.25-4.15
Iron Ore62.2062.30-0.10-0.224.56
Thermal Coal Newcastle117.90117.200.800.64-1.17
Coking Coal FOB ECP AUS182.40182.400.000.006.23
Aluminium ($US/t)2,0732,05320.000.970.42
Copper Mar-18 ($US/lb)2.702.70-0.10-0.02-3.14
Lead ($US/t)2,0692,04228.001.35-3.17
Nickel ($US/t)13,33813,198141.001.06-1.19
Zinc ($US/t)2,5412,47566.002.67-4.20
Tin ($US/t)19,04019,155-115.00-0.60-3.64
Uranium ($US/lb)26.0026.000.00-0.3810.74
Australian Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
ASX All Ords6,3586,360-2.00-0.04-0.53
S&P/ASX 2006,2476,2443.000.05-0.84
ASX 24 Futures6,220
Australian Market Report

Friday 24 August - close. The Australian share market has closed barely higher, falling back from a surge on Friday in the wake of Scott Morrison's selection as the nation's next prime minister. After a rollercoaster day the benchmark S&P/ASX200 closed a slim 2.9 points, or 0.05 per cent, higher at 6,247.3 points, while the broader All Ordinaries was down 2.4 points, or 0.04 per cent, lower at 6,357.9 points. 

Ashanti Headlines

Adriatic Metals PLC (ADT.ASX, 43cps, m.cap A$56.2m with 130.8m SOI, Cash GBP4.6m, Polymetallic Explorer / Developer

Please see below summary notes from Ashanti’s recent site visit to Adriatic Metals in early August. Ashanti was hosted on the trip by co-founder & NED Paul Cronin and Dr Adnan Teletovic- General Manager,Bosnia. 

Introduction and the ADT Team

Ashanti was immediately impressed with the team on the ground in Bosnia. Adnan is a dual Bosnian-Australian national with extensive experience in the mining industry having previously held senior positions at Kalgoorlie Consolidated Gold Mines, BHP Billiton and the Prevent Group, one of Bosnia’s largest diversified industrial corporations. Adnan has a Bachelor of Engineering (Hons.) from Victoria University of Technology, a PhD from Deakin University and has significant experience in not only general management within Bosnia, but also a track record in managing large capital mining projects in the Australian mining industry.

We spent our time focussed on the company’s two main assets near the mining town of Vares (an hour drive from Sarajevo). Veovaca, a historic open pit mine closed immediately prior to the civil war, and Rupice, a high grade poly-metallic exploration project which is approx. 15kms away.

It is first very important to remove any connection with Bosnia of 25 years ago (a war torn country). Bosnia now boasts a stable democratic government, and while the legislature battles bureaucracy (like many Balkan states) they are publicly demonstrating their support for foreign investment in the mining sector. Adriatic is part of an experienced in country team managing the discussions with both municipal and federal governments, led by Milos Bosnjakovic (Head of Regulatory and NED). Their progress to date and ability to navigate the in country framework were further highlighted by the two sperate license extensions which were awarded in 2017 and 2018. Adriatic’s commitment to work proactively with the different Govt depts and support the local communities is being widely recognised.

Existing Power at Veovacha

Old Steel Mill / Current Timber Mills + Rail

Existing rail from Vares

Infrastructure and Regional Setting

What stood out the most, was the infrastructure surrounding the projects. Bosnia is one of the largest net exporters of electricity in Eastern Europe, and both Veovacha and Rupice are serviced by quality power infrastructure.  Power costs are estimated to be between 6-8c/kWh , a fraction of the price paid by domestic producers in Aus (20-30c/kWh). This is largely due to large hydro-electricity power generation and low cost coal fired power stations.  

As demonstrated in the photo above, the existing railway line which previously serviced the iron ore mine at Vares lies approx. 2.5km away from the Veovaca pit. This rail siding connects to Sarajevo and into the European smelter and seaborne markets. The company has already progressed discussions with the govt regarding the re-opening of the railway and minor refurbishment that will be required. Once ore is loaded onto the rail it is 230km to the existing deep-water port of Ploce in Croatia or alternatively the Bar port in Montenegro. In addition to the seaborne market there is easy access to the many zinc/lead smelters in Europe, including in Belgrade, Serbia, which is approx. 50km away by rail. 

The town of Vares houses approximately 7,000 people, where there is a skilled and experienced workforce. The local people have a long history of mining and iron production and they have been vocal in their support for the projects and the employment opportunities it will bring to the region. The Vares iron ore mine, which closed in 1992, was one of the largest employers in the region and operated for about 100 years. 

Cost of Mining in the Balkans

We continue to be surprised by the potential cost of mining in the Balkans. The mix of infrastructure and operating expenses (power, labour, consumable etc) bode well for any future production at Veovaca and Rupice. To provide some regional context, the Sasamine in Macedonia (acquired by Central Asia Metals, LSE.CAML for US$403M in Nov17) has a first quartile C1 cost US$0.44/lb. Sasa is an underground Zn/Pb/Ag operation (no Au, Cu or BaSO4 credits) with a JORC Reserve of 10.9Mt @ 3.1 % Zn and 3.9% Pb and 18g/t Ag. The mine produces 780Kt of ore per annum at ~6.5% ZnEq head grade. Whilst ADT has not released any opex estimates, we remain confident they are going to be globally competitive.

Veovacha open pit

Mining Town of Vares

Old Vares iron ore mine

Rupice Exploration/Development Potential

Rupice is shaping up as world class asset for Adriatic.  Recent drilling results pointing to an incredibly mineralised system, with grade and width increasing at depth. See below for recent Rupice results (black is 2018 drilling and grey is 2017 and historic drilling). 

These drill hits are some of the best ZnEq intersections drilled globally in the last 2 years (source: SNL)

  • BR1-17: 64m@ 8.5% Zn, 5.1% Pb, 74g/t Ag, 2.3g/t Au, 1% Cu and 43% BaSO4 (~17.3g/t AuEq)
  • BR2-18: 64m@ 10.8% Zn, 7.7% Pb, 537g/t Ag, 4.6g/t Au, 0.9% Cu and 46% BaSO4 (~24.9g/t AuEq)
  • BR5-18: 66m@ 12.8% Zn, 8.6% Pb, 158g/t Ag, 2.1/t Au, 2.3% Cu and 37% BaSO4

 The grade and continuity of these results suggest that Rupice is already worthy of development. We await more drilling results to reveal the potential scale of this deposit.

Brestic-Jurasevac

Whilst on site we also gained a greater appreciation of the potential of the Brestic-Jurasevac (BJ) target. As highlighted in the schematic below, BJ displays similar IP characteristics and high grade surface samples to Rupice and is yet to be drill tested. Positive results from BJ provide huge upside potential and the best case scenario is that Rupice and BJ are part of the same mineral system. Drilling at BJ is underway, albeit at a much earlier stage than at Rupice. 

NED Paul Cronin with BR-1-17 discover hole

The Brestic-Jurasevac adit

Visible copper in rock samples at JB

Next Steps and Potential Catalysts

  1. Continued drilling and exploration success (we are particularly interested in activity at Rupice and the maiden drill campaign at Brestic-Jurasevac). Note - the company is fully funded with four drill rigs active on site.
  2. Ministerial approvals for extensions to landholding and exploitation (mining) license.
  3. 1Q19 maiden Rupice Resource, updated Veovaca resource
  4. Mid 2019 Scoping Study for combined Veovace-Rupice operation
  5. Aust / Asia / Europe / Nth America marketing in September/October.

Summary

The recent site trip to Adriatic has enhanced our already positive view on this story. We believe there are few exploration/developments projects of this quality and scale on the ASX (or globally for that matter) and expect ADT to be substantially de-risked in 12 months’ time. 

Please contact your advisor should you wish to discuss further.


Have a question? admin@ashanticapital.com.au

ERA Communications