SP Angel – Morning View – Platinum finds new investor interest
Paul Kettle
SP Angel Research Note -4 min read
09:42, 12th April 2019

SP Angel – Morning View – Friday 12 04 19

Platinum finds new investor interest

MiFID II exempt information – see dsclaimer below 

African Battery Metals* (ABM LN) – Kisinka Copper-Cobalt project exploration commences

ARC Minerals* (ARCM LN) – New anomalies indicate further copper, cobalt discoveries to come

Highland Gold (HGM LN) – Robust performance amid steady production and operating costs

Newmont Mining (NEM US) – Shareholders approve combination with Goldcorp

Tri-Star Resources* (TSTR LN) – Management changes

Vast Resources* (VAST LN) – £600k equity placing

Yellow Cake (YCA LN) – Placing supports expanding uranium purchases

 

Vancouver junior gold exec jailed and fined for false statements and contempt of court (Mining.com)

  • The president and CEO of Vancouver-based Mountainstar Gold has been fined C$150,000 by the British Columbia Securities Commission
  • Brent Hugo Johnson was also jailed for making “false or misleading statements” and contempt of court.
  • Mr Johnson was also forced to resign and then effectively barred from taking up similar positions.
  • The fining and jailing of a junior mining promoter in Vancouver is likely to send shock waves through the Vancouver community.
  • If they start jailing Vancouver mining promoters the streets of the city could get awfully quiet.
  • Fortunately many have moved into medical marijuana where the regulators may be more relaxed!

 

Dow Jones Industrials

 

-0.05%

at

  26,143

Nikkei 225

 

+0.73%

at

  21,871

HK Hang Seng

 

-0.24%

at

  29,768

Shanghai Composite

 

-0.04%

at

   3,189

FTSE 350 Mining

 

+0.15%

at

  20,833

AIM Basic Resources

 

-1.25%

at

   2,138

 

Economics

US – JP Morgan and Wells Fargo are set to kick off the reporting season today which many expect to the first yoy contraction in S&P 500 quarterly profits since 2016.

 

China – A mixed bag of trade data coming from China this morning with exports climbing more than expected in March while imports disappointed.

  • Outbound shipments bounced from the steepest yoy decline registered in February increasing 14.2%yoy last month compared to a 7.3%yoy increase expected.
  • Imports declined 7.6%yoy, marking the fourth consecutive month of declines, versus a 1.3%yoy drop forecast.
  • “While a US-China trade deal looks increasingly within reach, the reversal of US tariffs would only provide a small boost to exports of around one to two per cent… with global growth set to remain weak in the coming quarters a strong rebound in exports therefore looks unlikely,” Capital Economics commented on numbers.

 

Japan – Exports are expected to post a fourth consecutive monthly decline in March highlighting waning external demand and trade frictions, according to a Reuters poll.

  • The nation’s consumer inflation is also expected to remain tepid in March, the poll also showed.
  • Exports are estimated to register a 2.7%yoy drop in march following a 1.2%yoy decline in February.
  • This may be further exacerbated by the government plan to hike sales tax which is to lead to a contraction in the consumer demand.

 

North Korea – Kim Jong Un has been re-elected as chairman of the State Affairs Commission with state media now referring to Kim as “supreme representative of all the Korean people”.

 

Currencies

US$1.1283/eur vs 1.1283/eur yesterday  Yen 111.85/$ vs 111.15/$  SAr 14.061/$ vs 13.885/

nbsp; $1.306/gbp vs $1.309/gbp  0.713/aud vs 0.716/aud  CNY 6.718/$ vs 6.715/$

 

Commodity News

Precious metals:         

Gold US$1,293/oz vs US$1,306/oz yesterday

   Gold ETFs 71.9moz vs US$71.8moz yesterday

Platinum US$895/oz vs US$909/oz yesterday

  • Investors begin to flood back into physical platinum market as prices hover near 11-month high, with holdings in platinum-backed ETFs surging dramatically. The funds have added about 20t of metal this year and reached a record earlier this month.
  • Prices have gained as expectations for tough wage negotiations this year in top producer South Africa raised the threat of supply disruptions, and platinum’s cheapness relative to sister palladium becomes more evident.
  • Platinum supply has outpaced demand for the past two years and the World Platinum Investment Council has forecast another global surplus this year of 680,000oz.
  • However, that may change if the South African wage talks later this year break down and workers down tools for an extended period of time. Anglo American Platinum CEO adds, there’s no prospect of more new mines starting up anytime soon.

Palladium US$1,376/oz vs US$1,393/oz yesterday

Silver US$14.98/oz vs US$15.21/oz yesterday

           

Base metals:   

Copper US$ 6,440/t vs US$6,450/t yesterday

  • Despite prices pulling back, the copper market is likely to move into a deficit over the coming years as China’s economic stimulus pushes demand to surpass faltering mine supply, according to Antofagasta’s chief executive.
  • Copper prices should “trade upwards progressively in the next 24 months…the market will move physically into shortage, we think, towards the end of this year or the next”, according to Ivan Arriagada.
  • Antofagasta predicts copper demand in China will grow 2-3% this year, U.S. demand will be “fairly flat,” while Europe will see a “slowdown.”

Aluminium US$ 1,859/t vs US$1,865/t yesterday

Nickel US$ 12,935/t vs US$13,160/t yesterday

Zinc US$ 2,881/t vs US$2,875/t yesterday

Lead US$ 1,931/t vs US$1,949/t yesterday

Tin US$ 20,595/t vs US$20,800/t yesterday

           

Energy:           

Oil US$71.0/bbl vs US$71.4/bbl yesterday

Natural Gas US$2.672/mmbtu vs US$2.705/mmbtu yesterday

Uranium US$25.85/lb vs US$25.85/lb yesterday

Uranium miners preparing for Trump’s US ore quotas

  • US purchases of uranium fuel could be shaken up, with two small domestic uranium producers feeling confident the Trump administration will impose limits on imports of the radioactive metal.
  • Energy Fuels Inc. and Ur-Energy Inc. asked the Trump administration to effectively require U.S. power plants and other users to get at least 25% of their uranium fuel from domestic sources as a matter of national security. The Commerce Department said in July it would investigate such a requirement under a law that it used last year to bypass Congress and slap tariffs on steel and aluminum imports.
  • The White House is due to report on quotas which could significantly hit nuclear plants, who purchase nearly all their uranium from foreign sources like Russia, Kazakhstan, Uzbekistan, and China.
  • However, the coalition of nuclear reactor operators indicate the domestic market quotas would increase costs to the industry between $500-800m per year, at a time when the industry is struggling for cost competition from natural gas and renewables.
  • Nuclear reactors supply about 20% of U.S. electricity, and uranium accounts for about 20% of their costs, according to the Nuclear Energy Institute.
  • Nuclear industry analyst at Bloomberg New Energy Finance suggests Trump could impose a quota less than what the industry asked for.
  • It’s not going to be black and white, it is going to be a gray compromise," Chris Gadomski said. “The industry asked for 25%, they would be delighted to get 10%.” A 10% quota would translate to between 4-5Mlbs of uranium, far more than the roughly 1Mlbs the U.S. industry produced in 2017, Gadomski said.

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$92.1/t vs US$91.5/t

Chinese steel rebar 25mm US$642.7/t vs US$643.3/t

Thermal coal (1st year forward cif ARA) US$75.0/t vs US$73.3/t

Coking coal futures Dalian Exchange US$187.3/t vs US$187.4/t

           

Other:  

Cobalt LME 3m US$34,500/t vs US$33,000/t

NdPr Rare Earth Oxide (China) US$39,816/t vs US$40,579/t

Lithium carbonate 99% (China) US$9,601/t vs US$9,605/t

Ferro Vanadium 80% FOB (China) US$48.6/kg vs US$50.0/kg

Antimony Trioxide 99.5% EU (China) US$6.4/kg vs US$6.4/kg

Tungsten APT European US$270-282/mtu vs US$271-282/mtu

 

Battery News

Operating costs fall 80% with major all-electric airplane purchase

  • Norway’s OSM Aviation, a specialist firm in recruitment and training for the aviation industry, has ordered 60 all-electric planes from Colorado-based manufacturer Bye Aerospace.
  • The order, which CEO Espen Høiby claims is the largest order for commercial electric planes to date, will be for Bye Aerospace’s eFlyer 2. Høiby said, “it’s important that the airline industry steps up to the challenge of developing more environment-friendly transport.”
  • The eFlyer 2, formerly known as the Sun Flyer, uses a Siemens propulsion system: a 57 lb. SP70D motor with a 90kW peak rating (120 HP), and a continuous power setting of up to 70kW (94 HP).
  • All-electric planes will only cost $20/hr against the typical operating costs of $110/hr.

 

Ford invests in ‘breakthrough’ solid-state battery start-up already backed by BMW and Hyundai

  • Solid Power, a start-up promising a breakthrough solid state battery, have announced that it is teaming up with Ford to develop batteries for their “next-generation electric vehicles.”
  • The company claims to have achieved a breakthrough by incorporating a high-capacity lithium metal anode in lithium batteries — creating a solid-state cell with an energy capacity “2-3X higher” than conventional lithium-ion.
  • They have already attracted investments from important companies, like A123 Systems and more recently BMW, which planned to validate their battery technology for the automotive market.
  • Last year, they announced the addition Hyundai, Samsung, and several others to the list as they close a $20m series A round of financing.

 

US energy consumption hits record high in 2018, solar/wind/natural gas grow

  • U.S. energy consumption set a record high in 2018, with wind, solar, and natural gas making the largest increases in energy supply, according to a new analysis.
  • Overall energy consumption reached 101.2 quadrillion BTU (or “quads”), passing the previous record of 101.0 quads set in 2007. Energy use increased 3.6% from 2017 — the largest annual increase since 2010.
  • In 2018, solar and wind energy were both up 0.18 quads, representing a 22% gain for solar and a 7.6% jump for wind.
  • In the last decade, Lawrence Livermore National Laboratory notes that overall renewable energy production has doubled in the U.S. During the same period, solar and wind have risen 48x and 5x, respectively, from where they were in 2008. Combined, they now produce more electricity than hydroelectric power.
  • Natural gas also jumped 10.7%, increasing by 3 quadrillion BTU from the prior year. The increase in natural gas use reflects an increase in electricity generation.

 

Company News

African Battery Metals* (ABM LN) FOLLOW 0.45p, Mkt Cap £1.6m – Kisinka Copper-Cobalt project exploration commences

  • ABM report recommencement of exploration activities at the Kisinka Copper-Cobalt project in the DRC, which follows detailed review of historic exploration.
  • Exploration programme will adopt a staged approach to protect and preserve the working capital, with initial wide area focussed on identifying areas of anomalous copper and cobalt mineralisation, to be followed by follow up drilling if appropriate drill targets present themselves.
  • The Company's initial programme will comprise of termite mound sampling across the Kisinka license area, with X-ray fluorescence testing conducted on site; following which the results will be assessed and mapped after comparison with available structural and geophysical data.

Conclusion: Staged efforts offer a conservative approach to systematic exploration at the Kisinka copper-cobalt prospect, and we look forward to material developments.

*SP Angel act as broker to African Battery Metals

 

ARC Minerals* (ARCM LN)FOLLOW  2.4p, Mkt Cap £17m – New anomalies indicate further copper, cobalt discoveries to come

  • Arc minerals reports good progress in its exploration of the Zambian copper belt around its new Kalaba copper, cobalt mine in the West of Zambia.
  • The team have finished the airborne geophysical survey and data analysis.
  • The next phase of exploration has already started on the principal targets to work out the best next targets to drill.
  • Curiously the Kalaba mine is not the largest anomaly on the survey indicating that better prospects may come on further investigation.
  • Soil geochemistry is being used to reduce spacing on targets to 200m from 1km currently
  • Cheyeza West Target: ~7km west of historical drilling at Cheyeza East has which intersected zones of copper mineralisation which may be a conductive sulphide rich sediment. The target shows well defined radiometric anomalies where thorium and potassium are coincident with the historic electromagnetic anomaly.
  • Lumbeta Target: is associated with the crest of a structural fold which may act as a mineralisation trap. The target has 11km of copper in soils of up to 580ppm and a large zone of irregular magnetic response with several isolated, but well defined, historic EM anomalies.
  • http://s2.q4cdn.com/256050873/files/doc_news/images/2019/04/Zamsort-50ppm-Cu-update.pdf
  • Small-scale pilot plant: management recently started copper, cobalt concentrate production at the new Kalaba plant using stockpiled ~2% copper oxide material further de-risking the project. The plant cost <$0.5m and was brought in under budget.

Conclusion: Today’s news on further targets is great news for shareholders. Cheyeza West and Lumbeta are just two of a number of promising targets which should attract the attention of other copper explorers. We expect many these targets will be joint ventured for further exploration with a number of majors.

*SP Angel acts as nomad and broker to Arc Minerals.

 

Highland Gold (HGM LN) FOLLOW 184p, Mkt Cap £671m – Robust performance amid steady production and operating costs

  • Gold production was little changed at 269.5koz compared to 272.3koz in 2017 and in line with the guidance range of 265-275koz.
  • Average realised gold price amounted to $1,171/oz (2017: $1,162/oz).
  • TCC and AISC came in at $506/oz and $682/oz, respectively (2017: $507/oz and $664/oz).
  • EBITDA totalled $153m (2017: $155m) with the EBITDA margin flat at 49% reflecting stable production, gold price and operating costs.
  • CFO was up at $136m (2017: $131m) with operations generating FCF (post interest) of $65m (2017: $60m).
  • The Company paid two interim dividends of 6p and 5p in respect of 2018 for a total of $46m (2017: $46m). The Board approved a third interim dividend of 2.4p.
  • The acquisition of Valunisty mine and the related assets was completed in December 2018.
  • 2019 gold production is set at 290-300koz, reflecting c.30koz additional contribution from the Valunisty operation.
  • Commenting on plans, the Company is planning to continue optimisation programmes at its mines including near-mine exploration at MNV, mine and mill expansion at novo, and processing plant upgrades at Belaya Gora.
  • The Company has done well in catching up with production at MNV that registered a 10% increase despite challenges in the milling section through Q1/18.
  • At Novo, the Company is planning to do more infill drilling to better understand grade distribution following a reduction in grades recorded in Q4/18 (4.07g/t v 5.97g/t in the previous year) as mined material at lower horizons did not reconcile well with the block model. Furthermore, to address lower recoveries, the team is addressing with an installation of spiral flow separation circuit scheduled for 2019 as well as considering to put in an ore sorting equipment as part of Stage 2 of the expansion to 1.3mtpa project.
  • At Kekura, preparations for ongoing construction and mining continued throughout 2018 ahead of the estimated start date of 2023 v previously expected 2021.
  • Additionally, both Klen and Kekura have been granted ‘residency’ status within the Chukotka Advanced Special Economic Zone allowing for a beneficial tax incentives.

 

Newmont Mining (NEM US) US$35.97, Mkt Cap US$19.2bn – Shareholders approve combination with Goldcorp

  • Shareholders of Newmont have overwhelmingly approved the proposal to combine with Goldcorp with 98% of votes in favour of the transaction to create a gold producer targeting 6-7mozpa of long term gold production.
  • The vote by Newmont’s shareholders mirrors that held at Goldcorp which also approved the transaction earlier this month with 97% approval.
  • The company points out that the enlarged business will have “the largest gold Reserves and Resources in the gold sector … Be located in favourable mining jurisdictions and prolific gold districts on four continents” as well as offering the “financial flexibility and an investment-grade balance sheet to advance the most promising projects at an Internal Rate of Return (IRR) of at least 15 percent”.
  • Newmont Mining expects the transaction to close “in the second quarter … [and to start] … delivering $365 million in expected annual pre-tax synergies, supply chain efficiencies and Full Potential improvements, representing $4.4 billion in Net Present Value (pre-tax)”.
  • Chief Executive, Gary Goldberg, thanked Newmont’s shareholders “for their overwhelming support for this compelling value creation opportunity as we build the world’s leading gold company”.

 

Tri-Star Resources* (TSTR LN) FOLLOW 39.5p, Mkt Cap £37.7m – Management changes

(Tri-Star holds 40% of jv company SPMP alongside The Oman Investment Fund and Dutco Natural Resources)

(Odey Asset Management, holds a 72.06% interest in TriStar Resources)

  • Tri-Star Resources has announced a number of Board changes with the departure of both its Non-Executive Chairman, Mark Wellesley-Wood and Acting Chief Executive Karen O’Mahony.
  • Mr. Wellesley-Wood is to be replaced by Independent non-executive director, Adrian Collins who has been a member of the Board since 2010.
  • Mark Wellesley-Wood, an experienced mining engineer and corporate executive with a background in corporate finance, has guided the company through the development and construction of the plant in Oman. We wish him well for the future.
  • Ms O’Mahony, who remains on the Board of SPMP, is replaced by Chartered Accountant, David Facey who will serve as both Chief Executive Officer and Chief Financial Officer of Tri-Star.

*SP Angel acts as Nomad to Tri-Star Resources

 

Vast Resources* (VAST LN) FOLLOW 0.15p, Mkt Cap £11m – £600k equity placing

  • The Company raised £600k before expenses by issuing 444.4m shares at 0.135p.
  • Andrew Prelea (CEO) and Roy Tucker (FD) subscribed for 7.4m and 29.6m shares.
  • Proceeds to be directed to working capital requirements at Heritage Concession (£300k) and Baita Plai as well as general corporate purposes (£300k).

*SP Angel acts as Broker to Vast Resources

 

Yellow Cake (YCA LN) FOLLOW 222p, Mkt Cap £169.1m – Placing supports expanding uranium purchases

  • Established by Bacchus Capital, specialist Yellow Cake announce placing of 12m new Ordinary Shares to support the view of holding physical uranium for the long-term. The accelerated bookbuild was completed as a price of £2.15/share, with high demand allowing the Company to increase the size of the Placing to £25.9m from the £22.9m originally proposed.
  • The placing price represents a 4% discount to the Company’s Net Asset Value on 31 March 2019, while the placing represents approx. 14% of the issued ordinary share capital.
  • Chief Executive Officer, Andre Liebenberg said “the recent pullback in the uranium price has provided us with an excellent window to add to our uranium inventory at an attractive price”. The fundraising has allowed Yellow Cake to purchase 1.175Mlbs of uranium at the firm price of US$25.88/lb.
  • Andres adds “we are very confident in the long term fundamentals of the uranium market, where a combination of constrained supply, the run-off of long term contracts and growing demand outlook means we remain confident on the outlook for the uranium price."
  • The latest purchases add to the 8.1Mlbs from KazAtomProm when the Company listed last year, raising US$200m. As part of the supply agreement YCA has an annual option, for the next 9 years, to acquire up to US$100m per annum of U3O8 at market price.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0496

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abagail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%

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