Weekend Show – Sat 19 Oct, 2019

Hour 1 – Emerging Market Opportunities, Resource Sector M&A, Ecuador Updates, and an Update From SilverCrest Metals
Full Hour

I will be at the Schachter Energy Conference today in Calgary on the look out for some attractive oil and gas companies. If anyone is at the conference please email me (Fleck@kereport.com) so we can meet up.

The first hour of the show I feature Adrian Day, SilverCrest Metals, and Chris Temple with an update on the situation in Ecuador. I hope you all enjoy and I hope everyone has a great weekend!

  • Segment 1 and 2 – Adrian Day kicks off the show by looking at the relative value in global markets compared to US equities. In the second segment we shift focus to the resource sector and discuss why M&A has been slow in general.
  • Segment 3 – SilverCrest Mines released news on reconciliation results from the Babicanora Vein. Eric Fier, CEO of SilverCrest provides some more details on the results that yielded higher grades and more ounces from the February 2019 resource model. Click here to read over the full news release.
  • Segment 4 – Chris Temple wraps up the first hour with an update on the political and business situation in Ecuador.

Exclusive Company Updates This Week

Weekend Show – Sat 28 Sep, 2019

Hour 1 – Wide Ranging Discussions Focused On The Resource Sector

On this weeks show we focus a lot on the resource sector and even get an update from a Company that is in the process of completing a transformational acquisition. We start off with some insights on how the Fed has been forced to step into the repo market and what it could mean for future policy. Segments 2 through 4 then move to the resource sector with insights on Ecuador, the balance between copper and gold, and the Company update mentioned above.

Please keep in touch by emailing me at Fleck@kereport.com. I really appreciate all the emails throughout the week. It was also a busy week for company interviews. You can find the links to those interviews below.

  • Segment 1 – Marc Chandler, Managing Partner at Bannockburn Global ForEx and Founder of the Marc To Market blog kicks off the show with insights on how the repo market works with the Fed stepping in.
  • Segment 2 – Chris Temple updates us on the mining environment in Ecuador and some of the recent political decisions. For a copy of Chris’s Ecuador focused issue pleas email him at Chris@nationalinvestor.com or myself.
  • Segment 3 – Jesse Felder, Founder of The Felder Report shares his outlook for the precious metals into next year as well as a comment on copper that might surprise you.
  • Segment 4 – Calibre Mining (TSX.V:CXB) is in the process of closing a deal to acquire two mines from B2Gold and raise over $100 million, which $102.5mil has already been raised. Ryan King, VP Corporate Development updates us on the finer points on the deal.

Exclusive Company Interviews and Comments This Week

Marc Chandler
Chris Temple
Jesse Felder
Ryan King – Calibre Mining

Conversations With Money Managers – Mon 23 Sep, 2019

Matt Geiger – A Deep Dive Into The Precious Metals Market

This is the start of a new segment on the KE Report called Conversations With Money Managers. I found when talking to some of my guests, especially larger fund managers, we did not get to dive into topics as thoroughly as we would have liked. This new forma of interviews are much longer but enable us to do a deeper dive into major sectors of interest. I am hoping to have at least one of these conversations every month. Please email me with guests you would like to see featured – Fleck@kereport.com.

In this Conversation With Money Managers I chat with Matt Geiger, Founder of MJG Capital Fund. We focus on the precious metals markets and the investment narrative that he is utilizing for his fund. We balance the opportunities in gold vs silver stocks. Matt even shares with us his most recent investment in the fund. Copper is also discussed in terms of the overall market. We wrap up the discussion with a look into the political developments in Ecuador.

This is over 30 minutes so grab your favorite drink and take some notes on what Matt has to say. Please let me know what you think of this format.

Click here to visit the MJG Capital Fund website.

Solgold’s stock sinks after submissions for mining referendum on Cascabel

Solgold’s (LON, TSX: SOLG) stock took another hit on Thursday, the day after submissions for a public hearing were heard in Ecuadorean Constitutional Court regarding the proposed referendum on mining in the provinces where the Australian miner’s 85% owned Cascabel project and other wholly owned exploration projects are located.  

Solgold holds 72 mineral concessions in Ecuador through four subsidiaries.  

Representatives from several Ecuadorean government bodies, regional community representatives, pro-mining groups, international mining groups workers and community members from Cascabel attended the hearing to demonstrate their opposition to the proposal, Solgold said in a media release.  

The court is expected to deliver its verdict by June 24.   

Earlier in the week, the vice president of the Republic of Ecuador, Otto Sonnenholzner, launched a new mining policy backing large-scale projects in the country. The policy is designed to strengthen investment and increase production in the mining sector and sets out a framework for environmental and social sustainability.

The policy document establishes the framework for mining sector planning for the period 2019-2030 and defines the government decision that will allow consolidating this sector as a fundamental axis of the country's economy, with a contribution to GDP of 4% by 2021.  

SolGold recently announced findings from its preliminary economic assessment (PEA) for the Alpala deposit in the Cascabel project in northern Ecuador. The project indicated approximately $17B (at $3.30/lb copper price and $1,300oz gold price) in taxes, royalties and profit shares to the government and peoples of Ecuador, Solgold said. 

Solgold’s stock was down 8.6% Thursday morning, trading at 53 Canadian cents on the TSX.   


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Ecuador’s new mining policy backs large-scale projects

The Vice President of Ecuador, Otto Sonnenholzner, and the Minister of Energy and Non-renewable Natural Resources, Carlos Pérez, presented the country’s new Public Mining Policy, whose focus will be on supporting large-scale operations and investments, and eradicating illegal mining.

The announcement was made during a visit to the southern Zamora Chinchipe province, where Lundin Gold’s (TSX:LUG) flagship Fruta del Norte gold project is located. Both Sonnenholzner and Pérez stopped by the mine site and met with representatives of the Canadian company, who said 50% of the construction phase is completed.

Minister Carlos Pérez presenting the new mining policy. Photo by the Ministry of Energy and Non-renewable Natural Resources.

The government officials said they expect first exports from large-scale mining to be delivered before year-end and that the national treasury foresees royalties, taxes, patents, and earnings generating some $836 million between 2019 and 2021. By 2021, the Lenín Moreno administration wants the mining sector to account for 4% of the GDP.

Besides focusing on large investments, the new policy gives relevant authorities six months to update a National Mining Development Plan so that it incorporates a strategy to combat unregulated mining operations and severe penalties for those extracting mineral resources illegally.

The policy also requires authorized mining projects to comply with mining safety and environmental and social sustainability standards, which will be outlined in new regulatory and auditing mechanisms.

The new protocol calls for the establishment of specific targets related to the updating of applicable regulations for the mining industry, as well as goals associated to economic development, research and development, and management and administration.

The presentation of these guidelines took place on the same week the Ecuadorian Constitutional Court is scheduled to receive arguments from those who have put forward a mining referendum in the northern Imbabura province, where SolGold’s (LON, TSX:SOLG) flagship Cascabel copper-gold project is located.

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SolGold’s shares crater on possible mining referendum in Ecuador

Shares in Ecuador-focused SolGold  (LON, TSX:SOLG) took a hit on Thursday, following media reports of a potential referendum on mining in Imbabura, the province in which its flagship Cascabel copper-gold project is located.

The company's stock dropped more than 28% in London to 24.26 pence in early morning, but recovered in the afternoon to close at 32p, leaving its market cap at almost 589m pounds ($743m). In Toronto, in turn, shares were last trading 10.2% down at 53 Canadian cents.

The Australian miner, which holds 72 mineral concessions in Ecuador through four subsidiaries, responded to the sharp fall of its stocks with a press release in which it stated its interests in the country were not as risk. SolGold also noted that it continued to receive “full and objective support” from the government.

In March, Girón — in the province of Azuay — voted against mining activities in a popular referendum held alongside a regional election

The copper and gold explorer said that, under Ecuadorean law, individuals are allowed to put forward petitions to the Constitutional Court for the inclusion of specific questions in a future vote. In this case, a group of locals wants to have a say on the future of mining in the northern province.

If that question is viewed as valid and legal by the body, the next phase is for the petitioning party to gain 10% of the signatures of the voting population of the provinces involved, SolGold said.

Next week, the Ecuadorian Constitutional Court will receive arguments from those who have put forward the referendum, as well as those who oppose it.

The court will then decide if the question on the future of mining is valid and legal, after which it must be approved by the electoral council to be included on ballot papers.

In March, Girón — in the province of Azuay — voted against mining activities in a popular referendum held alongside a regional election. The move casted a doubt on the future of INV Metals’ (TSX-V: INV) Loma Larga gold, silver and copper project. The Canadian miner has already announced it would relocate the proposed processing and tailings facilities outside of Girón canton.

"The Cascabel project is a key project in Ecuador's developing mining industry and a critical driver for the future of Ecuador's economy" — SolGold.

In two landmark cases last year, Ecuadorian courts sided with rural and indigenous communities who argued the national government had failed to inform them it was setting aside parts of their territories for mineral exploitation.

“The Cascabel project is a key project in Ecuador's developing mining industry and a critical driver for the future of Ecuador's economy. SolGold continues to receive full and objective support from the Ecuadorean government," the company said.

Earlier in the day, SolGold had announced that initial exploration of its Rio Amarillo project, also in Ecuador, had identified five different prospects in two concessions with significant copper and gold.

The Cascabel copper-gold project has piqued the interest of major miners, including BHP (ASX, NYSE:BHP). The world’s largest mining company last year acquired a 6.1% stake in SolGold, increasing its exposure to copper.

The move pushed Australia’s largest gold producer, Newcrest Mining (ASX: NCM), to up its holding in the company, consolidating its position as SolGold’s top shareholder.

While Ecuador has gained ground as a mining investment destination in the past two years, existing and future projects risk delays and potential halts due to growing local opposition to the extraction of the country’s resources, a report by Fitch Solutions Macro Research shows.

As mining projects face headwinds from rising tensions, investors' courage will be tested, the study concluded, which could thwart Ecuador’s plan to attract $3.7 billion in mining investments in the next two years, up from $270 million in 2018.

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Lundin Gold says Fruta del Norte on track for Q4

Canada’s Lundin Gold (TSX:LUG) on Friday provided an update on its flagship Fruta del Norte project in Ecuador, reporting overall construction was 59% complete.

"This is a pivotal year for Lundin Gold as we move from construction to production at Fruta del Norte. During this quarter we accomplished two major milestones with the underground development reaching the orebody and introduction of the first owner mining crews," Ron Hochstein, president and CEO of the Vancouver-based miner said. "In the next quarter we will reach peak staffing and reach several other project milestones. We remain on schedule and on budget to commence commissioning in the third quarter and achieve first gold as expected in the fourth quarter of this year." Fruta del Norte, discovered in 2006, is expected to produce 4.6 million ounces of gold over a 15 year mine life

The company said on Friday cash on hand at the end of the first quarter was $83 million, down from $167 million at the end of last year while working capital has been reduced to $60 million from $153 million. The change in cash was due to net proceeds from a bought deal in March this year of $33.9 million offset by development costs of $113.3 million, general and administration costs of $6.6 million and exploration expenditures of $1.4 million.

In April Lundin Gold completed the first draw down of $159 million from a debt facility, which will be used to fund the construction of the mine. The company has $191 million remaining under the facility and also entered an agreement with an insider for a $75 million cost overrun facility in exchange for 300,000 common shares and 300,000 warrants at an exercise price of C$5.98.

Fruta del Norte, discovered in 2006, is expected to produce 4.6 million ounces of gold over a 15 year mine life.

Lundin Gold, worth $1.2 billion in Toronto, acquired the project in 2015 for $240 million from fellow Canadian miner Kinross Gold (TSX:K) (NYSE:KGC), which had to halt operations after being unable to reach an agreement with authorities regarding the terms for developing the asset.

The underground gold and silver mine, which will be Ecuador’s largest, encompassing six of Lundin's 29 mining concessions, covers 70,000 hectares of land.

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SolGold confident of new major copper-gold find in Ecuador

Ecuador-focused miner SolGold (LON, TSX:SOLG) said Tuesday that recent results from the Porvenir project, held by its wholly owned subsidiary Green Rock Resources, suggest the presence of a "significant" copper-gold system.

Mapping and sampling, SolGold said, has extended copper-gold mineralization at Cacharposa Creek on Porvenir, located in southern Ecuador.  The samples, the company noted, shows similar veins to its other major target, Alpala, on its flagship Cascabel copper-gold project in the country’s north.

SolGold has also found similar results at Porvenir’s Mula Muerta Creek, and it believes both targets are part of the same system, comprising an 800 metre-wide corridor over 1,200 metres long.

SolGold believes its Porvenir project, located in southern Ecuador, has the hallmarks of a significant discovery.

"The 150-metre long channel sample is significantly longer and richer than the 50-metre long discovery outcrop at Alpala in the Cascabel tenement, which has so far yielded a contained resource of 23 million ounces of gold and nearly 11 million tonnes of copper," chief executive Nick Mather said in the statement.

He added that the Porvenir system had the hallmarks of a “significant discovery” so far.

The Australian miner, which holds 72 mineral concessions in Ecuador through four subsidiaries, said it planned to carry out drill testing and ground magnetics during the second quarter of the year, beginning this month.

“SolGold has identified and secured the best of an entire copper-gold province, the size and metallurgy of northern Chile. That's a unique approach that can't be replicated,” said Mather. “We are confident that Alpala and now Porvenir are the first projects in a long, large and rich string of them.”

Attracting top miners

In the past two years, SolGold has grabbed headlines as it made progress on Cascabel, one of the few new major copper-bearing projects expected to come online in the near future.

Australia’s largest gold producer, Newcrest Mining (ASX: NCM), upped its stake in SolGold in December to 15.33% from 13.83%, to secure a portion of the Cascabel.

The move further boosted Newcrest’s position in SolGold against No.2 shareholder, BHP, which in September had bought a 6.1% stake in the explorer.

Miners are scrambling for copper projects amid forecasts that demand for the metal will significantly outstrip supply from 2020, due to increasing demand for power generation and electric vehicles (there are 300kg of copper in an electric bus and nine tonnes per windfarm megawatt).

According to Colin Hamilton, director of commodities research at BMO Capital Markets, the current copper pipeline is the lowest seen this century, both in terms of numbers and capacity.

“After delivery of Cobre Panama we are left with a gap until we see the next batch of 200ktpa-plus projects in 2022-23. This is when the likes of Kamoa, Oyu Tolgoi Phase 2, and Quebrada Blanca 2 are likely to offer meaningful supply growth,” Hamilton said.

Ecuador has gained ground as a mining investment destination in the past two years, thanks to a revised regulatory framework and a major investor engagement campaign.


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Lumina extends Gran Bestia in Ecuador

Lumina Gold (TSXV: LUM) has drilled its longest continuous section of mineralization at its Gran Bestia copper-gold deposit in Ecuador, part of its Cangrejos copper-gold project.

The company cut 0.62 gram gold per tonne and 0.11% copper over 626 metres from surface including 1.14 grams gold and 0.13% copper over 86 metres from 224 metres downhole and 0.93 gram gold and 0.18% copper over 86 metres from 510 metres downhole.

The hole stepped out on the northern edge of the Gran Bestia anomaly and ended in mineralization, leaving the deposit open to the north.

Other recent drill highlights from the project include 0.35 gram gold and 0.06% copper over 148 metres from surface at Gran Bestia and 0.41 gram gold and 0.09% copper over 150 metres from surface at the Cangrejos deposit.

In early 2019, the company confirmed a deposit at Gran Bestia with its first three holes at the target. It found long intervals of gold mineralization, including 0.44 gram gold tonne and 0.12% copper over 262 metres from surface, and 0.41 gram gold with 0.1% copper over 26 metres from 274 metres downhole

Lumina believes Gran Bestia could significantly increase the scale of the current Cangrejos resource. The project currently contains 408 million inferred tonnes grading 0.65 gram gold, 0.11% copper, 0.6 gram silver and 25 parts per million molybdenum for 8.5 million oz. gold, 1.03 billion lb. copper, 7.8 million oz. silver and 22.5 million lb. molybdenum.

A preliminary economic assessment the company tabled in 2018 assigned the project a $920-million, after-tax net present value at a 5% discount rate and a 15% after-tax internal rate of return.

(This article first appeared in The Northern Miner)

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