ASA Resource Group PLC Trading Update (6628K)

TIDMASA

RNS Number : 6628K

ASA Resource Group PLC

23 September 2016

23 September 2016

Asa Resource Group plc

("Asa Resource", "the Group" or "the Company")

Bindura Nickel Corporation AGM held 22 September in Harare, Zimbawe.

The Company wishes to announce that Bindura Nickel Corporation ("BNC"), a 74.73% owned subsidiary, has released forward market guidance at their AGM held 22 September in Harare, Zimbawe.

The relevant extracts of the Chairman's speech are published below:

UPDATE ON OPERATIONS

BNC Performance Report 1(st) Qtr. 2017

Executive Summary

 
                                Quarter   Quarter 
                                 ending    ending                         September     Quarter 
   TROJAN MINE                     31        30       July     August      Budget       ending 
                                 March      June      2016      2016        2016          30 
                                  2016      2016                                         Sept 
                                                                                         2016 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Development meters     (m)      634.8     599.7    286.2     309.4         345          941 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Tonnes mined           (t)     97,335    97,689    37,755    36,033      41,667       115,455 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Tonnes milled          (t)     107,421   101,433   38,568    35,371      41,667       115,606 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Head grade             (%)      2.30      1.76      1.86      2.20        1.83         1.95 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Recovery               (%)      90.8      87.0      87.2      91.2        86.0         88.1 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Ni in conc             (t)      2,246     1,555     624       709          655         1,988 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Nickel sales           (t)      2,274     1,493     614       745          655         2,014 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Average Nickel 
  Price Realised       ($/t)     5,520     5,728    6,660     6,726        5,525        6,304 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 Cash cost             ($/t)     4,370     5,736    5,392     4,160        3,770        4,418 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 All in sustaining 
  cost                 ($/t)     4,934     6,489    5,326     4,712        4,584        4,863 
--------------------  -------  --------  --------  -------  ---------  ------------  ---------- 
 

Business Re-organisation

After retrenching 300 employees in December 2015, BNC outsourced Development Services in the Mining Department to a contractor company, with effect from 1 June 2016. This has resulted in cost savings worth US$400 000 which would otherwise have been incurred in retrenchment costs. A new culture, anchored on the principle of improved accountability, is emerging.

Industrial Relations

Management continues to engage staff through meetings and other forms of communication, to ensure industrial harmony.

Human Resource Development

BNC has embarked on building its skills base through various initiatives which include the recruitment of graduate learners in key disciplines across the business. The newly introduced performance management system will assist in identifying skills gaps and focused training and development in critical areas of the business.

Sales

BNC sold 2 852.17 tonnes of nickel in the first five months of the year - a 53% increase compared to the same period in 2015 where 1 864.12 tonnes were sold.

Market Outlook

The average LME cash settlement price fell by 22.63% to $9 412.62/t ($4.27/lb.) compared to $12 165.10/t ($5.52/lb.) for the same period in 2015. Nickel prices had remained depressed last year due to historical high nickel stocks, lack of producer supply cuts and replacement of Indonesian ore by Philippine ore.

LME nickel prices fell to seven year lows before regaining to a nine month high in July 2016 supported by speculation of supply cuts in the Philippines and supply disruptions at Cerro Matosso. Philippines supplies 24% of the global nickel demand and had sustained Nickel Pig iron production in China as it came in as a substitute for the Indonesian ore after the ore export ban. The market is keeping an eye on the developments in the Philippines after a new government ordered an environmental audit of all mines. To date eight mines have had operations suspended and it is expected that more mines will be closed over the next six months. Small scale miners accounting for 11% of producers have been hardest hit, while the three major miners that account for 40% of the Philippines nickel ore production have met the ISO 14000 environmental standard. The suspensions are not expected to have a significant impact on the market in the short to medium term as they seem to be affecting the small scale miners with little production output. There seems to be a growing enthusiasm for a complete suspension of ore exports in Philippines (like the Indonesian ore export ban of January 2014). Indonesian smelters have been ramping up production as well as other nickel producers in a bid to reduce cost per tonne. A large stock overhang in and off exchanges and Chinese smelters that had closed are coming back into production. The recent increase in prices has resulted in an increased interest in commodities by traders as they believe nickel has entered into a bull cycle.

The International Nickel Study Group (INSG) reports that the global nickel market will be in deficit for year 2016 due to reduction in supply, increased production of the austenitic stainless steel grades (which uses more nickel) in all main markets and a sustained positive trend in nickel demand in the aerospace and battery sector. Fundamental and technical view supports that nickel is entering into a bull cycle. Jinchuan supports this view and reports that demand in China is increasing due to recovery of stainless steel sector and demand from new energy vehicles. Jinchuan also reports that there has been changes in the nickel demand in China that has seen demand of a mixture of nickel products: pure nickel, nickel pig iron, nickel salt and processed nickel products.

Life of Mine

Trojan Mine has the following estimated ore resources and Life of Mine:

 
 Ore reserves   Average Grade   Life of    Contained 
   (Tonnes)          (%)          Mine       Nickel 
                                 (Years)    (Tonnes) 
-------------  --------------  ---------  ----------- 
 6 410 194.00       1.61           9       103 102.09 
-------------  --------------  ---------  ----------- 
 

The first 4 years (up to 2020) will include blending of massive and disseminated ore at 0.500 million tonnes per annum followed by mining of disseminated ore at 0.750 million tonnes per annum. This, of course, is subject to economics and further exploration work.

Hunters Road Mine open pit will have a planned production rate of 0.720 million tonnes per annum during the first four years, increasing in year 5 to 1.2 million tonnes per annum, then gradually ramping up to full production of 1.92 million tonnes per annum in year 10. This will give Hunters Road a Life of Mine of 22 years.

Y C Kwan

Chairman

Cautionary Statement

This update has been prepared solely to provide additional information to enable shareholders to assess the Group's strategy and business objectives and the potential for the strategy and objectives to be fulfilled. It should not be relied upon by any other party or for any other purpose. This update contains certain forward-looking statements and has been made by the Directors in good faith based on information available to them at the time of their approval of this update. These statements should therefore be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

About Asa Resource's Strategic vision

Our strategic vision is to be a fully integrated pan-African commodity group, strengthening each commodity group through exploiting Asa Resource's wide portfolio of mining interests. We also continue to engage with trusted partners in many regions to help us exploit the true value of our assets.

The process of segmenting assets at Group level and integrating resources operationally is fundamental to both our short and long-term strategies. Over time we seek to shift our focus to having individual exposure in each of our key commodities including nickel, gold, copper and diamonds. Shareholders can have an interest in the whole Group or on a single-commodity basis. Our interests in agriculture and property will add valuable income during times of low commodity prices.

This strategy is already showing promise with significant efficiencies achieved through a transfer of skills at mine level and considerable efficiencies across our entire portfolio.

These developments would not be made possible without the commitment, versatility and expertise of management at all levels. This new vision has inspired us all within the Group to double our efforts to re-build Asa Resource Group plc as a strong and sustainable company.

For a copy of the full results please visit the company's website: http://www.asaukplc.com/ or contact [e-mail]

London

Asa Resource Group plc.

One Fleet Place, London EC4M 7W

Yim Kwan, Finance Director

Tel: [phone]

Hong Kong

Asa Resource Group plc.

Units 509-510, Level 5, Core E, Cyberport 3, 100 Cyberport Road, Hong Kong

Samuel Ng, Investment Manager

Tel: [phone]

Nominated Adviser and Joint Broker

SP Angel Corporate Finance LLP

Prince Frederick House, 35-39 Maddox Street, London W1S 2PP

John Mackay, Jeff Keating, Caroline Rowe

Tel: [phone]

Financial Adviser and Joint Broker

Cantor Fitzgerald Europe

1 Churchill Place, Canary Wharf, London E14 5RB

Stewart Dickson, Patrick Pittaway

Tel: [phone]

This information is provided by RNS

The company news service from the London Stock Exchange

END

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September 23, 2016 03:45 ET (07:45 GMT)