Big Vote of Confidence by Standard Life Investments in Atlantic Coal (ATC:AIM) & Anthracite

For those of you who follow me, you might know that I have been taking an interest in the coal market of late. Particularly as a result of what has been happening in the Ukraine. If you check my blog, I wrote a piece on the coal sector in Ukraine and some observations on the Ukraine coal market. For those of you that did not read it, I took the trouble to point out that Ukraine's coal production is contained primarily in eastern Ukraine, in exactly the area where patrician is underway by the Russian's. Like it or like it not, Ukraine's coal production area is now under threat from Russian influence.

Most of Ukraine’s coal is produced from the Donbas basin, in Eastern Ukraine and when exported by sea often goes through the Berdyansk commercial seaport and or the Mariupol commercial seaport, both located on the Sea of Azov.

So far Russia has focused its attention on securing the Crimea peninsula and is currently in control of the Port of Sevastopol, home of its Black Sea military naval fleet and the straits of Kerch where much of Ukraine's coal is exported through by ship.


On Thursday this week, Standard Life took a 3% stake in London listed Atlantic Coal, one of a limited number of public quoted companies investors can actually invest in, if they want exposure to the anthracite market (Anthracite accounts for about 30% of Ukraine’s coal production)

Clearly Standard Life have seen something in Atlantic Coal, that I actually saw (Did they read my blog..........looks like they might have done) 

Although Atlantic Coal is a US based anthracite miner, how the pricing, supply and demand of anthracite is likely to unfold because of the Ukraine crisis, know one yet knows. What is certain is that production disruption from Ukraine can only add to supply shortages, serving to increase prices and may even see customers look as far afield as the US for their anthracite. Is this what Standard Life are seeing????????????????????
Watch this space

www.atlanticcoal.com

Ariana Resources, Head Closer to Production at Red Rabbit as Ore Stockpiling Begins

Ariana Resources (AAU:AIM) The Turkish near term gold and silver miner, released an update today on its Red Rabbit Gold-Silver project in Turkey. See RNS Below. It takes under 18 months to get a CIL plant up and running, Proccea are very experienced in the construction of CIL plants having built several of them over the years, both in Turkey and overseas, their track record is as below

• Vasgold Gold Mine, Kazakhstan
• Amesmessa-Trek Gold Mine, Algeria
• Çöpler Gold Mine, Turkey
• Eti Gümüs-Silver Mine, Turkey
• Kittila Gold Mine, Finland
• Koza Gold-Mastsa Gold Mine, Turkey
• Maaden Gold Mine, Saudi Arabia
• Tüprag (Eldorado Gold)/Klada Gold Mine, Turkey
• Minera Triton, Argentina
• Ouagadogou Gold Mine, Burkina Faso
• Tüprag (Eldorado Gold)/Kisladag
• Gold Mine, Turkey
• Zarcan-Takeb Gold Mine, Iran

So the question is, when is the best time to invest in a near term gold play?

Have a look at the diagram below

If you look at the projected cumulative cash flow and how that should elevate the share price, you are looking for a three fold increase in share price performance over the next three years, and I would suspect that within 12 months the stock could be around 2p if not higher meaning that if you invested now at 0.88p you would more than double your money, subject to Ariana maintaining its progress on permitting as I think funding Red rabbit will not be a problem

Se below details of RNS

Ariana Resources plc ("Ariana" or "the Company"), the gold exploration and development company focused on Turkey, is pleased to announce an update on the Kiziltepe Sector ('Kiziltepe') of the Red Rabbit Gold-Silver Project in Western Turkey ('Red Rabbit'). The Kiziltepe Sector will be the initial mine site at Red Rabbit, which is being advanced towards production with its joint venture partner Proccea Construction Co. ("Proccea").

Highlights:

• Proccea continuing to earn-in on Red Rabbit, having spent approximately US$1.2 million during 2013.

• Proccea has indicated that a conditional financing arrangement to fund mine construction has been negotiated with a Turkish bank.

• Proccea now owns 26.5% of the project and is continuing sole-funding through the final permitting and construction stages.

• Trial mining at the Kiziltepe Sector has produced 4,800 tonnes of ore, which is stockpiled on site ready for processing.

• Positive report completed by the General Directorate of Mining Affairs following a site visit as part of the mining licence renewal process.

Dr. Kerim Sener, Managing Director, commented:

"We are very encouraged by the progress our Joint Venture partner Proccea has made on the Red Rabbit project and specifically at the Kiziltepe Sector which is being advanced towards production. Following the receipt of the Environmental Impact Assessment, which was a major project milestone, our partners are continuing to fund the development of Kiziltepe through the permitting and construction stages. With the final stage of permitting fast approaching, we look forward to updating our shareholders on new developments in due course."

The anthracite coal market, could Ukraine unrest disturb exports & pricing?

The anthracite coal market, could Ukraine unrest disturb exports & pricing?

The current crisis underway in Ukraine and in particular the Crimea peninsula

could serve to have some impact on the anthracite export and price markets particularly related to Ukraine bulk anthracite seaport exports. Ukraine typically exports between 4 to 5 million metric tons of anthracite each year, primarily to Turkey, Bulgaria, Poland, Spain, Italy and Belgium. Naturally, the biggest regional export competitor is Russia. Anthracite accounts for about 30% of Ukraine’s coal production

The pricing of Ukraine anthracite has essentially been controlled by the Ukraine State, given that the majority of coal mined in Ukraine is sold for domestic use, the Ukraine government does not want to purchase high cost coal. Essentially this pricing situation has made Ukraine anthracite competitive and attractive for customers in Asia and Western Europe, but how long can Ukraine’s export market for anthracite continue either un interrupted or indeed un affected by events in Ukraine?

Most of Ukraine’s coal is produced from the Donbas basin, in Eastern Ukraine and when exported by sea often goes through the Berdyansk commercial seaport and or the Mariupol commercial seaport, both located on the Sea of Azov.

So far Russia has focused its attention on securing the Crimea peninsula and is currently in control of the Port of Sevastopol, home of its Black Sea military naval fleet.

The most important seaport and main commercial export port in Ukraine, is the Port of Odessa, which is still under control of the State of Ukraine and not hindered by Russian military activity.

Should the situation in Ukraine worsen and Russian influence in terms of military presence spread to include a partition of Ukraine, where the east of Ukraine becomes under Russian control, then Ukraine would lose its most important energy asset, that of its coal fields. This is why the crisis in Ukraine is a serious one. Should Russian influence spread to east Ukraine, the whole of Ukraine from an energy security perspective would be affected.

There are two private coal miners of significance currently operating and exporting coal from Ukraine, they are;

DTEK, Ukraine’s largest privately integrated energy-company, involved in power generation and coal mining.

http://www.dtek.com

Sadovaya Group a pure play coal mining operation, with its head office in Alchevsk, Ukraine, but also with a domiciled address in Luxembourg. Sadovaya has its shares traded on the Warsaw Stock Exchange, ticker (SGR:WSE)

The company has seen its shares decline by 63% over the last 52 weeks.

http://sadovayagroup.com

The potential for supply disruption of Ukraine’s anthracite coal bound for export markets is clearly there and may well drive some of the Asian and European importers to look further afield for anthracite supply. Indeed, any export restrictions would only serve to increase the price of anthracite on world markets, as would demand by Ukraine domestic thermal power producers.

TSX and AIM listed East Coal (AIM: ECX) ceased trading on the 26^th February 2014, after acquiring theVerticalnaya anthracite mine and Menzhinsky mine in Ukraine, eventually disposing of these assets after filing for bankruptcy in November 2013.

http://www.eastcoal.ca

Clearly the opportunity for Ukraine to attract foreign direct investment into its coal sector, certainly from Western investors, remains challenging, given the difficulties East Coal faced in what was a pre-Russian interventionist environment.

For investors looking to get a position in the anthracite market, opportunities to invest in listed production and earnings play anthracite securities are slim.

South African listed securities, Petmin (PET:JNB) would give investors exposure to the anthracite market in South Africa, but also increasing the risks that the South African mining sector is facing in general with its current workforce unrest. Petmin cancelled a planned listing of their shares on London’s AIM market back in October 2013.

Closer to home, AIM listed Atlantic Coal (ATC:AIM) is one of  few anthracite focussed mining companies that is currently listed, is operationally profitable and with its main Stockton mine located in the anthracite coal fields of Pennsylvania USA, faces none of the geopolitical risks associated with other investment targets. Indeed, Atlantic’s Stockton mine does have the rail and port infrastructure to export, should it be able to increase its mining output through its stated plans to acquire other anthracite assets in Pennsylvania.

Investment Summary:

Listed on AIM, Atlantic Coal (ATC:AIM) is probably the best listed anthracite mining play with which UK investors can get access to at a time when the anthracite market is facing potential supply and pricing volatility.

ATC shares have rallied in recent days by 5%, partly due to a recent announcement of a major equipment purchase. Over a 5 year period, the stock is down 70%, over the last 12 month the stock is down 26% but in the last 6 months the stock has rose by 39%.

Further information on the company can be found at

www.atlanticcoal.com

Atlantic Coal AIM:ATC, Revving Up With Major Equipment Purchase and Lowering Idiosyncratic Risks

Last friday, Atlantic Coal (AIM:ATC) one of only a few globally listed anthracite miners, and one of just a limited number of AIM listed coal miners, announced a major order for six Komatsu Model HD785-7 100 ton haul trucks and two CAT D9 dozers. 

The market seems to have really missed the significance of this news by Atlantic Coal at a time when the anthracite sector in the USA has been posting some good results. I draw people's attention to a recent article in the Republican Herald a daily newspaper serving Pottsville, Schuylkill County, the main anthracite coal production regions in Pennsylvania, with Greg Driscoll, president and CEO of Blaschak Coal Corp, one of the leading US anthracite miners. Driscoll, reported that  Blaschak had seen record production output in 2013 and that the anthracite community at large in Pennsylvania was quite optimistic about prospects for the sector heading into 2014. The full interview can be seen at;

 http://republicanherald.com/news/local-coal-companies-producing-record-numbers-1.1639580

Share Price Prognosis:

I would see the order for this additional equipment as being a strong sign by management that demand and pricing for anthracite will remain robust throughout 2014 in line with the sentiment put forward by Blaschak who are backed by the private equity group Milestone Partners, http://www.milestonepartners.com and where this private company has no need to indulge in any PR share ramping.

The idiosyncratic risks for Atlantic Coal appear to be lowering as the company is now operationally profitable and appears to be lowering its debt risk. The average daily share volume traded through the stock is circa 14 million daily about 26,000 stg in real terms, making it at least for AIM, one of the more liquid stocks on the market. The US is certainly heading out of recession and the economy is on the move. I know this from personal experience given that I am a significant investor in the US, but also having just returned from a 6 week visit to the Midwest, can testify that there is a feel good factor heading back to the market. 

Whilst the recent weather in the US may have had some impact on mining activities (coal washing plants hate freezing weather), the longer term prognosis for ATC looks good and with uncertainty surrounding anthracite production from Russia and the Ukraine, because of geo-political risk, the ability for cheap anthracite imports to head to the US may well be set back. Anthracite is also a specialist coal and has a number of sales outlets, and is not just exposed to thermal heating market demand, but that of the steel sector where it is used as a carbon additive and reductant, the industrial sector where it is used in water filtration (A massive growth sector in the US) and in diverse demand markets such as bottle colouring, yes you might actually be buying some Atlantic Coal when you next purchase a Budweiser!!!

Anyway, thoughts are my own as usual,  but still  born out of more that 20 years of successful investment experience.

Atlantic Coal plc / Index: AIM / Epic: ATC / Sector: Mining

28 February 2014

Atlantic Coal plc ("Atlantic" or the "Company")

Purchase of New Equipment to Significantly Increase Production

Atlantic Coal plc, the AIM listed open cast coal production and processing company with activities in Pennsylvania, USA, is pleased to announce that it has ordered six Komatsu Model HD785-7 100 ton haul trucks and two CAT D9 dozers. This equipment purchase is expected to enable the Company to continue to increase the run-of-mine ("ROM") production profile at its Stockton Colliery, a producing opencast anthracite operation in Pennsylvania ("Stockton"). The purchase of the equipment is to be funded through a lease purchase agreement at a total cost of $8.5m over six years.

Atlantic Managing Director, Steve Best, said, "We anticipate that the acquisition of the new equipment will assist with our operational efficiency and enable us to meet our production goals for the immediate future. This should allow us to increase our production of ROM coal to the wash plant and maximise the circa 1.8* million tons defined anthracite reserves at Stockton."

"We look forward to providing further updates on our progress at Stockton and our Pott and Bannon project, together with our wider strategy to increase our presence in the US anthracite industry, at the appropriate time."

*As announced on 11 June 2013. The revised estimate is subject to completion of drilling to confirm the extent of prior by-passed coal on the south wall of the mine and development of an updated mine plan for recovery of remaining coal.

Vatukoula Gold Mines (VGM:AIM) Turning a Corner as Production Cash Costs Fall and Gold Production Increases

Monday 13th January 2013

Vatukoula Gold Mines (VGM:AIM) Turning a Corner as Production Cash Costs Fall and Gold Production Increases 

Vatukoula Gold Mines (VGM:AIM) today posted its operational update to the First Quarter ended 30 November 2013.

Investors and shareholders will be pleased to see a small rise in production but more importantly the fact that VGM has now stabilised its production costs to circa $1,300 oz per ounce.

For the 3 months ended 30th Nov 2013 cash costs per ounce were $1,363 and for the three months ended August 2013 they were $1,393 per ounce.

These figures are significant in that Vatukoula has always taken pride in its accounting policy, where factoring the majority of its direct operating costs into its cash cost per ounce.

Gold production was up by 2% in the quarter and importantly there was a 13% rise in the Sulphide ore delivered to the Sulphide Plant, with sulphide head grade now stabilising at over 5 grams per tonne (5.3) Q1 2013   (5.85) Q4 2013. Oxide head grade is 3.97 grams per tonne

With the Zhongrun financing now in place, VGM is now properly capitalised for really what is the first time in its history since it re-started the mine back in 2007.

VGM, like all gold miners, will be hoping to see a re-trace in the gold price to levels closer to 1,400 USD per ounce.

This could well be possible, given the fact US Equities are viewed by some commentators as over priced. It is clear that investors who flooded into gold during the financial crises have in 2013 reduced their investment exposure to gold and have been the main reason why the gold price has fallen in 2013. Demand for gold is increasing, particularly from Asia and production entering the market from new mines is only slightly increasing. Total gold supply to the market in Q3 2013 was down 3% compared to the same period in 2012, with recycling experiencing a decline of 13% or 158 tonnes.

Supply from gold mines is up 4% Q3 2013 compared to Q3 2012, 

With the VGM stock currently trading at 6p, and with the Fiji operation now properly capitalised, an upward gold price swing could have a real impact on VGM's share price further into 2014.

Fingers crossed

Vatukoula Gold Mines plc

("Vatukoula" or "the Company")

Operational Update for the First Quarter ended 30 November 2013

Vatukoula Gold Mines Plc. (AIM:VGM), the AIM-listed gold producer, is pleased to announce its unaudited preliminary operational results from its 100% owned Vatukoula Gold Mine in Fiji for the first quarter ended 30 November 2013 ("Q1").

·     Completed the first tranche of the US$ 40 million investment agreement with Zhongrun International Mining Co. Ltd ("Zhongrun") - US$20 million in November 2013

·     Quarterly production of 11,090 ounces gold, with 11,415 ounces shipped. This represents a 2% increase in gold shipped compared to the previous quarter

·     14% increase in underground ore mined to 62,073 compared to the previous quarter

Operating Results	3 months ended Nov 2013 (Q1)	3 months ended Aug 2013 (Q4)	3 months ended May 2013 (Q3)	3 months ended Feb 2013 (Q2)	3 months ended Nov 2012 (Q1)
Total underground tonnes mined (ore, waste & capital)	104,805	96,701	94,793	89,341	117,160
Strike drive development (metres)	315	395	405	342	540
Capital development (metres)	1,327	1,131	976	765	1,625
Ore processed (tonnes)	107,115	111,936	100,182	103,916	112,944
Average ore head grade (grams/tonne)	3.97	3.96	3.48	3.70	3.88
Total recovery	79.37%	79.44%	79.76%	74.82%	71.86%
Gold produced	11,090	11,442	9,005	8,861	10,549
Gold shipped	11,415	11,219	8,704	9,113	10,482

Unaudited Financial Highlights:	3 months ended November 2013	3 months ended November 2012
Revenue (£'000)	9,256	11,335
EBITDA (£'000)	(2,493)	380
Cash (used) / generated from operating activities (£'000)	(1,367)	834
Underlying operating (loss) (£'000)	(4,450)	(1,257)
Cash cost per ounce shipped (US$/ounce)	1,363	1,590
Average realised gold price (US$/ounce)	1,285	1,721
Basic loss per share (pence)	(2.00)	(1.17)
Capital Investment (£'000)	3,002	5,171
Cash and Cash equivalents (£'000)	9,382	3,998

David Paxton, CEO of Vatukoula Gold Mines, commented:

"The quarter was highlighted by the completion of the US$ 20 million equity portion of the US$40 million investment agreement with our majority shareholder Zhongrun.

With the funds we have placed the orders to return our stock levels of vital spares at the mine and have arranged for a comprehensive refurbishment program for the underground mining fleet.  These steps ensure that we can complete the essential development as detailed in our long term plans.  Other vital maintenance programs have been scheduled as required.

The US$40 million will provide us with the balance sheet flexibility to embark on our capital investment programme in this fiscal year and we look forward to working with Zhongrun as we deliver our Company strategy to grow our production to sustainable and profitable levels."

Operating Results

	3 months ended Nov 2013 (Q1)	3 months ended Aug 2013 (Q4)	3 months ended May 2013 (Q3)	3 months ended Feb 2013 (Q2)	3 months ended Nov 2012 (Q1)
Underground Mining
Total underground tonnes mined (ore, waste & capital)	104,805	96,701	94,793	89,341	117,160
Operating development (metres)	2,886	3,199	3,666	3,419	3,360
Strike drive development (metres)	315	395	405	342	540
Capital development (metres)	1,327	1,131	976	765	1,625
Total development (metres)	4,528	4,725	5,047	4,526	5,525
Sulphide Plant
Sulphide ore delivered (tonnes)	62,073	54,637	59,456	64,023	62,040
Sulphide head grade (grams/tonne)	5.30	5.85	4.53	4.55	5.19
Oxide Plant
Oxide ore delivered (tonnes)	47,593	57,076	40,424	41,017	50,530
Oxide head grade (grams/tonne)	2.06	2.15	2.36	2.36	2.28
Total (sulphide + oxide)
Ore processed (tonnes)	107,115	111,936	100,182	103,916	112,944
Average ore head grade (grams/tonne)	3.97	3.96	3.48	3.70	3.88
Total recovery	79.37%	79.44%	79.76%	74.82%	71.86%
Gold produced	11,090	11,442	9,005	8,861	10,549
Gold shipped	11,415	11,219	8,704	9,113	10,482
Cash Costs
Cash cost per ounce shipped (US$)	1,363	1,393	1,812	1,688	1,590
Cash cost per tonne mined and milled (US$/tonne)	145	140	157	148	148
Average realised gold price (US$/ounce)	1,285	1,317	1,474	1,636	1,721

Underground Production and Development

The initial funds from the Zhongrun investment were received in late October and early November, hence for the majority of the quarter capital was constrained and our planned capital development programme was not initiated as we restocked key supplies.

Total tonnes of ore, waste and capital mined for the quarter ended 30 November, 2013 decreased by 13% to 104,805 tonnes compared to the same period last year, but was 8% higher than the previous quarter ended August 2013.  Once again limited availability of the underground mining fleet due to cash constraints limited our underground production.  Total development, when measured by distance advanced was 4% lower than the previous quarter and 20% lower than the equivalent period last year.  Development advance was also affected by the limited availability of the underground mining fleet.

The ore delivered from underground for the quarter ended 30 November, 2013 was 62,073 tonnes, a 14% increase compared to the previous quarter and approximately the same level for the same period last year.

The average underground grade for the quarter ended 30 November 2013 was 5.30 grams per tonne 9% lower than the previous quarter and 2% higher than the same period last year.

We are currently mining a mix of historic low grade stopes and newer areas as they are opened.  The grade delivered will continue to be erratic until we have established sufficient new ore mining areas, which is the focus of the current development program.

Surface Production

Production from surface oxides and sulphide waste piles for the three months delivered was 47,593 tonnes at a grade of 2.06 grams gold per tonne.  Surface mining produces both oxide material from open pit mining and sulphide material from old waste dumps.  During the quarter we terminated the surface oxide mining, to focus on the higher grade sulphide waste dumps available in the mine area.  This ore is currently processed as sulphide material. The termination of the oxide mining led to drop of 17% in ore delivered from surface mining compared to the previous quarter.

Vatukoula Treatment Plant ("VTP")

During the three months, the VTP processed 107,115 tonnes of ore which was a 4% reduction compared to the previous quarter (111,936 tonnes), and a 6% reduction to the same period last year (112,944 tonnes).

Gold recovery for the three-month period was 79.37%, which was similar to the previous quarter (79.44%).  The composition of surface oxide ore has changed with more sulphide material in the surface waste dumps that has not been fully oxidised.  Although the surface waste material has a higher grade (2.06 grams per tonne), the gold recovery is much lower due to the locked gold in sulphide.

As previously detailed, surface waste dump material production is being maintained while the underground ore production is limited.  Mining of this material will cease once underground production is established.

Unaudited Financial Highlights

Revenue for Q1 was £9.3 million, lower than the same period last year (£11.3 million). This was primarily as a result of a decrease in the market price of gold, a 30% year on year decrease in US$ value. The average realised gold price was US$1,285 in Q1 compared to US$1,721 per ounce in the same period in 2012.

The net cash generated in operating activities decreased from £0.8 million generated Q1 last year to £1.4 million used Q1 this year. Prior to movements in working capital these figures are £0.9 million generated and £0.03 million used respectively. The large movement in working capital (cash used of £ 1.4 million in Q1) is a result of restocking of stores and returning the majority of our creditors to normal trading terms.

Capital investment decreased from £5.2 million in Q1 last year to £3 million in Q1 this year. This decrease is mainly attributable to a lack of working capital during the majority of the quarter while we completed the first tranche of the US$40 million investment agreement.

Cash costs for Q1 were US$1,363 per ounce shipped (Q1 last year: US$1,590 per ounce shipped). The main reason for the decrease in cash costs per ounce is the increase in grade and recovery from the mill and in addition a 2% decrease cash costs per tonne mined and milled from US$148 in Q1 last year to US$145 in Q1 this year.

Despite the decrease in the cost of sales the drop in gold price and changes in £ / F$ exchange rates (which resulted in a non-cash £1.5 million charge to our intercompany loan) resulted in a loss for the period of £4.4 million.