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07 September 2018 07:45 AM
Overseas Market Report
Current Level
Previous
Change
Daily % Change
Monthly % Change
Dow Jones Industrial Average
25,996
25,975
21.00
0.08
1.43
S&P 500
2,878
2,889
-11.00
-0.37
0.69
NASDAQ
7,923
7,995
-72.00
-0.91
0.50
FTSE 100 Index
7,319
7,383
-64.00
-0.87
-5.18
DAX 30
11,955
12,040
-85.00
-0.71
-5.48
CAC 40 Index
5,244
5,260
-16.00
-0.31
-5.03
Nikkei 225 (Japan)
22,488
22,581
-93.00
-0.41
-0.77
HKSE
26,975
27,244
-269.00
-0.99
-4.51
SSE Composite Index
2,692
2,704
-13.00
-0.47
-3.16
S&P/TSX Composite Index
16,101
16,138
-37.00
-0.23
-1.14
NZ 50
9,104
9,102
3.00
0.03
2.58
US Volatility (Vix)
15
Overseas Market Report
US sharemarkets were mixed on Thursday. The technology heavy Nasdaq index dropped more than 1% during the trading session as internet stocks faltered for a second day on concerns about increased regulation. Shares of Facebook fell 2.8%,Twitter dropped 5.9%, Alphabet slipped 1.3%, Apple was down1.7% and Snap fell 3.1%, hitting a fresh record low. Demand warnings from Micron Technology (-9.9%) and KLA-Tencor (-9.8%)led a slide in chip shares. US-Canada trade talks continued on Thursday adding to market volatility. The Dow Jones index rose by 20 points or 0.1%. The S&P 500 index fell by 0.4% and the Nasdaq lost 72 points or 0.9%.
Global oil prices fell by over 1% on Thursday after US data showed gasoline inventories rose unexpectedly last week, overshadowing a bullish 4.3 million drawdown in crude. Stocks at the Cushing, Oklahoma, delivery hub for US crude futures rose by 549,000 barrels according to the EIA. Brent crude fell by US77cents or 1% to US$76.50 a barrel and the US Nymex price fell byUS95 cents or 1.4% to US$67.77 a barrel.
Base metal prices were mixed on the London Metals Exchange (LME) on Thursday. Copper rose 0.8% on US dollar weakness, funds short covering and vows by the Chinese authorities to maintain demand if the US imposes more import tariffs. But aluminium was down by 1.6% and lead fell 0.9%.
The gold futures price rose by US$3.00 an ounce or 0.2% to $1,204.30 an ounce. The spot gold price was trading near US$1,200 an ounce in late US trade. Iron ore rose by US$1.80 or 2.7% to US$68.85 a tonne.
Commodities
Current Level
Previous
Change
Daily % Change
Monthly % Change
Oil Brent
76.50
77.27
-0.77
-1.00
3.73
Oil - West Texas crude
67.90
67.77
0.13
0.19
-1.84
Gold Spot $/OZ
1,201.00
1,200.00
1.10
0.09
-0.82
Silver Spot $/OZ
14.20
14.20
0.00
0.16
-7.82
Iron Ore
62.70
62.30
0.40
0.69
3.23
Thermal Coal Newcastle
114.80
114.80
0.00
0.00
-1.71
Coking Coal FOB ECP AUS
182.20
182.20
0.00
0.00
6.74
Aluminium ($US/t)
2,002
2,036
-33.00
-1.63
-0.68
Copper Mar-18 ($US/lb)
2.62
2.62
2.60
1.00
-4.14
Lead ($US/t)
2,014
2,032
-19.00
-0.91
-4.28
Nickel ($US/t)
12,356
12,358
-2.00
-0.01
-9.11
Zinc ($US/t)
2,448
2,428
20.00
0.80
-6.59
Tin ($US/t)
18,856
18,857
-1.00
0.00
-3.77
Uranium ($US/lb)
27.00
27.00
0.00
0.00
2.31
Australian Market Report
Current Level
Previous
Change
Daily % Change
Monthly % Change
ASX All Ords
6,268
6,339
-71.00
-1.13
-1.15
S&P/ASX 200
6,160
6,230
-70.00
-1.12
-1.50
ASX 24 Futures
6,120
Australian Market Report
Thursday 6 September - close. Australian shares have dropped to their lowest since June in the wake of near-across the board falls triggered by increased US-China trade worries, falling world oil prices and a new round of mortgage rate hikes by local banks. The benchmark S&P/ASX200 index closed down 70 points, or 1.12 per cent, at 6,160.4 points, while the broader All Ordinaries index was down 71.4 points, or 1.13 per cent, to 6,267.8 points.
Ashanti Headlines
MOD Resources Site Visit
Ashanti recently visited MOD’s (and subsidiary Tshukudu Metals – MOD 70% MTR 30%) significant land holding in the Kalahari Copper belt. Fortuitously, the visit coincided with the new discovery announced at A4 on the 6th of August. The headline number of 52m @ 1.5% Cu is exciting for a bunch of reasons but mostly as a proof that MOD’s geological exploration model works.
Also attending the visit was George Long (Founder & CIO LIM in HK- 6.75% MOD shareholder), Steve McGhee (MOD Technical Director), Jeff Bowen (Manager - Project Development) and an SRK representative from London (working on independent tech report for LSE listing).
As you can see below, there have been significant improvements to the infrastructure at “The Barn” since our Dec 17 visit - and the ALS built sample prep lab is now fully operational. With 10drill rigs now active this has been important to ensure efficient turn around time with assays.
Following some frustrating delays with DEA approvals, MOD now has access to the wider T3 Dome- drilling the new A4 and A1 Domes with immediate success. The A4 discovery is 8km from T3, and the A1 target which is currently being drilled is just 26km east of A4.What is most encouraging (aside from the results) is that the exploration techniques of Airborne EM are now showing consistency of identifying mineralisation through the 3-5m layer of calcrete- a very important proof of concept. The cutting edge processing of the AEM data opens up the real possibility of district scale exploration success in the Kalahari Copper Belt (this is the first of 7 domes to be tested).
We again benefited from spending time with the local geologists (KB Tau - Exploration Manager) and Gaba Chinyepi (In-Country Manager) who are equally excited about all 7 Dome targets. The company is advancing the environmental approvals process for T20 and we expect drilling to commence at T20 in Q4 18. This ~2000km2 exploration area has attracted interest from some of the global majors, and we expect interest to increase as drilling approaches. Tshukudu geologists are convinced that T20 has the potential to host a significant copper deposit (much more obvious than T3, fingers crossed).
The recent resource update at T3 – 44% increase in contained copper sees the revised Mineral Resource at60.2Mt at 0.98% Cu for 590kt Cu from 36Mt at 1.14% Cu for 409kt Cu (with cutoff grade at 0.4% Cu). This has further confirmed the attractiveness of a standalone operation at T3- and we expect to see completed Feasibility Study in late Q1 19. The PFS reported in Q1 18 was based upon the 36Mt resource (including 21Mt reserve) and allowed for a 2.5Mtpa processing plant which had a capital cost circa US$155M for an NPV of US$280M and 2.5 year payback.
MOD has recently announced consolidation of T3 to 100% ownership following a deal with MTR that is due to complete Q4 18. The FS for T3 will be based on a 3Mtpa process plant and anticipates a mine life in excess of 10 years. The company is targeting copper production around 30ktpa with a view to increasing this through higher grade feed from possible underground ore at T1 and T3. This does not take into account ore supply from any new discovery such as A4 and A1.
The below table indicates where T3 sits compared to peers not owned by majors. This only adds to our opinion that MOD will attract increasing attention from strategic investors /potential acquirers.
We spent some time at the proposed T3 open pit – and the work below illustrates the “ground geotechnical testing for the plant site” as well as the “water pumping testing” for the pit. The water aquifer sits under the calcrete, typically 15m below ground level and the testing is also evaluating whether this will be a sustainable source of water for process plant and infrastructure requirements.
The first stage of the workers temporary accommodation camps and offices are almost complete (see below). The camp is originally designed to accommodate 40 personnel, but with plans to increase this to approximately 400 as development begins in Q3 19. Tshukudu now employs approximately 60 staff and contractors and is rapidly emerging as the largest employer in Ghanzi region.
Path forward and key catalysts for the next 6-12 Months:
Exploration
Exploration remains a continual catalyst for the MOD story (as demonstrated by the recent results atA4). With so many rigs active across such a large, prospective landholding, there is potential for one (or more) company making discoveries in the current drill campaign.
Feasibility Study
We expect the path to production at T3 to become clearer over the next 6 months (FS due 1H19). In our view, the T3 resource and Jan-18 PFS (Base Case Pre-tax NPV8 of US$280M) more than justifies the current valuation (MCAP A$115M, A$100M EV)excluding exploration upside.
Azure Appointed for Debt Discussions
The appointment of Azure to lead the debt discussion is an important step in our eyes. The debt discussions will allow the development of T3 to progress alongside the substantial exploration campaign.
LSE listing
MOD are in the process of listing on the LSE. We share the company’s view that MOD will have few peers(quality copper developers) on the LSE and expect the listing to draw strong investor interest. Furthermore, the LSE is traditionally less adverse to investments in African jurisdictions
Marketing
Ashanti will be leading a roadshow through Hong Kong and Singapore on the 13th and 14th of September respectively. Please reach out should you wish to arrange a meeting.
Ashanti Capital Pty Ltd, ABN 61 614 939 981, the holder of an Australian Financial Services License (AFSL) number 493204. Any advice included in this document is general advice only, based solely on consideration of the investment or trading merits of the financial product/s alone, without taking into account the investment objectives, financial situation and particular needs (i.e. financial circumstances) of any particular person. Before making an investment or trading decision based on the advice, the recipient should consider carefully the appropriateness of the advice in light of his or her financial circumstances and obtain a copy of and consider the Product Disclosure Statement for that product before making any decision.
While this communication is for informational purposes only and based on the information from sources which are considered reliable. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Ashanti Capital, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Ashanti Capital accept any responsibility to inform you of any changes.
This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Ashanti Capital.
Ashanti Capital and/or entities and persons connected with it may have an interest in the securities, the subject of the recommendations set out in this report. In addition, Ashanti Capital and/or its associates will receive commissions on any transaction involving the relevant securities.