SP Angel . Morning view . Chinese steel futures gain on higher factory PMIs

SP Angel . Morning View . Monday 02 12 19

Chinese steel futures gain on higher factory PMIs

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MiFID II exempt information – see disclaimer below 

 

Altus Strategies* (ALS LN) – JV signed on Lakanfla and Tabakorole projects in Mali

Ariana Resources (AAU LN) –Earning 50% interest in Cypriot copper/gold assets

Beowulf Mining* (BEM LN) – Interims highlight plans for Kallak in Sweden alongside progress at Aitolampi graphite in Finland and Vadar lead, zinc in Kosovo

Greatland Gold (GGP LN) – Newcrest reports drilling results from the Havieron project

KEFI Minerals* (KEFI LN) – Bank loan funding selected for the Tulu Kapi project

 

Chinese steel futures gain as factory PMI rises (Reuters)

• Steel futures rose on Monday morning due to a surprisingly high gauge of factory activity for November boosted sentiment.
• The unexpected improvement in its manufacturing sector is thought to be due to Beijing’s stimulus measures, as Beijing front-loaded US$142bn of 2020 local government special bonds and urged that they are issued ASAP to boost infrastructure investment.
• This is the first time in seven months that factory activity in China has experienced growth, with economic growth cooling to near 30-year lows.
• PMI bounced back to 50.2 in November compared to 49.3 in October, and was expected to come in at 49.5 according to a Reuters poll.
• The most active January contract for hot-rolled coils on the ShFE gained as much as 1.7% to 3,614 yuan ($513/t).
• Steel rebar rose 0.5% in Shanghai to 3,637/t.

 

Blackstone Minerals partners with South Korea’s Ecopro BM Co for lithium-ion battery production (Reuters)

• Australian Blackstone Minerals said on Monday that it signed a non-binding joint venture agreement with the South Korean firm, to develop nickel and cobalt for battery manufacturing.
• Ecopro BM are South Korea’s largest electric vehicle battery cathode producer, and will develop a downstream processing facility with Blackstone’s Vietnamese nickel project.

 

Man reaches one million km in Tesla Model S (Electrek)

• A man in Germany has put over one million kilometres on his 2013 Model S.
• The vehicle has had two battery packs and 3 drive unit replacements.
• The most recent battery pack is going on almost half a million kilometres with very little battery degradation.
• The latest drive unit has 680,000km on it, as Tesla figured out a problem which caused issues on the early drive units.

 

Dow Jones Industrials		-0.4%	at	28,051
Nikkei 225		+1.01%	at	23,530
HK Hang Seng		+0.37%	at	26,445
Shanghai Composite		+0.13%	at	2,876
FTSE 350 Mining		+1.10%	at	18,454
AIM Basic Resources		-0.16%	at	2,059

 

Economics

Namibia – former ministers arrested in fisheries corruption scandal

• Icelandic fishing conglomerate allegedly involved in the Namibian fisheries scandal.
• Al Jazeera published an investigation on the ‘Anatomy of a Bribe’ highlighting corruption within the Namibian government.
• https://www.aljazeera.com/investigations/anatomyofabribe/

 

Currencies

US$1.1013/eur vs 1.1007/eur last week.  Yen 109.65/$ vs 109.55/$.  SAr 14.697/$ vs 14.678/$.  $1.291/gbp vs $1.291/gbp.  0.678/aud vs 0.678/aud.  CNY 7.042/$ vs  7.022/$.

 

Commodity News

Gold US$1,456/oz vs US$1,456/oz last week - Gold set for worst month in 3 years on US-China trade deal hopes (Reuters)

   Gold ETFs 81.3moz vs US$81.2moz last week

Platinum US$895/oz vs US$896/oz last week

Palladium US$1,846/oz vs US$1,841/oz last week

Silver US$16.86/oz vs US$16.90/oz last week

           

Base metals:   

Copper US$ 5,873/t vs US$5,880/t yesterday

Aluminium US$ 1,753/t vs US$1,756/t last week

Nickel US$ 13,660/t vs US$13,890/t last week - Nickel set for fourth weekly loss due to China demand worries (Reuters)

Zinc US$ 2,265/t vs US$2,272/t last week

Lead US$ 1,921/t vs US$1,955/t last week

Tin US$ 16,400/t vs US$16,420/t last week - International Tin Association: prices face pressure from rising output

• The global tin deficit will be cut next year as rising refined tin output rises.
• Benchmark tin has fallen 16% this year, making it the worse performer on the LME.
• Refined output is expected to increase by 5.8% to 352,000t, while demand rises only 0.4% to 353,900t according to ITA forecasts.
• New Chinese smelters ramping up production and increased output from Indonesia are likely to be the largest sources of increased output.

          

Energy:           

Oil US$62.0/bbl vs US$63.6/bbl last week

Natural Gas US$2.353/mmbtu vs US$2.462/mmbtu last week

Uranium US$25.95/lb vs US$25.95/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$84.6/t vs US$85.0/t - Chinese consortium to develop iron ore deposit in Guinea (FT)

• The SMG-Winning consortium has secured the rights to develop half of the huge Simandou iron ore deposit and expects to be producing in five years’ time.
• The group has plans to build a 110mtpa mine at an estimated cost of $15bn.
• Guinea is yet to export any iron ore, despite having one of the world’s best deposits.
• Rio Tinto has been trying to develop its half of the Simandou mine, but the project is yet to materialise.

Chinese steel rebar 25mm US$604.5/t vs US$609.9/t

Thermal coal (1st year forward cif ARA) US$62.9/t vs US$63.3/t

Coking coal futures Dalian Exchange US$188.2/t vs US$187.8/t

           

Other:  

Cobalt LME 3m US$35,750/t vs US$36,000/t

NdPr Rare Earth Oxide (China) US$40,400/t vs US$40,514/t

Lithium carbonate 99% (China) US$6,532/t vs US$6,551/t - Australian lithium-ion battery recycling plant up and running (AuManufacturing)

Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$29.0/kg

Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/kg

Tungsten APT European US$225-245/mtu vs US$225-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

 

Company News

Altus Strategies* (ALS LN)  FOLLOW4.9p, Mkt Cap £8.7m – JV signed on Lakanfla and Tabakorole projects in Mali

• The Company and Glomin Services signed a JV agreement on Lakanfla and Tabakorole gold projects located in western and southern Mali, respectively.
• Under conditions of the JV Glomin can earn up to 80% in projects by funding the exploration and development programme.
• Additionally, Altus is set to receive up to $1.45m in milestone cash payments and retain a 2.5% in NSR.
• Altus will remain the operator of the JV during the initial earn-in period at “costs plus 10%” basis.
• The agreement will kick off the Q1/20 exploration programme with 3,500m of drilling planned at Lakanfla and ground magnetics followed by 1,500m of drilling at Tabakorole.
• At Lakanfla, the management believes the area hosts a potentially significant karst-style gold deposit, analogous to the adjacent FE3 and FE4 pits  of the Sadiola mine and the former Yatela mine with historical drilling results returning wide high grade intersections including 26m at 5.10g/t, 12m at 9.78g/t and 14.5m at 5.61g/t.
• At Tabakorole, the programme is to test a shear zone that is reportedly up to 200m wide and coincident with a 2.7km long gold in soil anomaly with historical drilling results including 60m at 2.92g/t, 44m at 3.29g/t and 16m at 9.31g/t.

Conclusion: Signing the JV with Glomin secures exploration funding for Lakanfla and Tabakorole allowing to test highly prospective targets as the Company is carried through to the completion of a DFS while retaining a stake in the project and a 2.5% NSR as well as earning milestone cash payments and a JV management fee.

*SP Angel acts as nomad and broker to Altus Strategies

 

Ariana Resources (AAU LN) FOLLOW 2.35p, Mkt Cap £24.9m –Earning 50% interest in Cypriot copper/gold assets

• Ariana Resource reports that it has agreed to earn up to 50% of Venus Minerals through the commitment of up to €2.4m on exploration over the next 3 years.
• The company has already “acquired rights to 6% on prior expenditure of €0.6m” of UK registered Venus Minerals which “is focused on the exploration and development of copper and gold assets in Cyprus”.
• As described in the announcement, the principal focus is on the 10.8km²  Magellan Project which “contains a total historical resource [non JORC compliant] of c. 9.5Mt @ 0.6% Cu” and where the best results from drilling include:
  • “53m @ 2.05% Cu, 64m @ 0.97% Cu, 85m @ 0.68% Cu at the Kokkinoyia site. 
  • 36m @ 2.58% Cu, 50m @ 1.65% Cu, 47m @ 1.63% Cu and 48m @ 1.15 g/t Au, 36m @ 0.60 g/t Au and 8m @ 1.72 g/t Au at the Klirou site”
• The resources are reported to be “open in several directions and particularly down-plunge and show significant potential for the identification of gold-rich zones overlooked by previous exploration”.
• “The acquisition develops Ariana's strategy to create a portfolio of interests in the Eastern European region, and across the Company's broad target area of the Tethyan Metallogenic Belt.”
• Dr. Kerim Sener, Managing Director of Ariana Resources, commented that “Ariana is making full use of its regional exploration and development expertise. After two years of careful due diligence and relationship building in Cyprus, Ariana is committed to the successful development of Venus Minerals. We are also taking advantage of our geographic proximity to get maximum cost-time benefit from our existing team and infrastructure.  In Venus, we now what we believe to be an exceptional investment opportunity which we look forward to supporting for the benefit of all stakeholders.”
• Peter van der Borgh, Managing Director of Venus Minerals explained the attraction of copper gold exploration in Cyprus where “exciting exploration opportunities were effectively frozen-in-time since the early 1970s” and that “with Ariana's input, we will be able to scale-up our activities significantly”.

 

Beowulf Mining* (BEM LN) FOLLOW 5.9p, Mkt Cap £36m – Interims highlight plans for Kallak in Sweden alongside progress at Aitolampi graphite in Finland and Vadar lead, zinc in Kosovo

(Beowulf holds 41.5% of Vadar. Beowulf also holds 100% Kallak iron ore in Sweden, 100% of Aitolampi graphite in Finland and 40% of the Mitrovica and Viti projects in Kosovo)

• Beowulf report progress on a number of fronts within their mineral portfolio.
• Kallak:  We believe Kurt Budge is making progress in Sweden in the argument for the issuance of a mining license for the Kallak iron ore project in the County of Norrbotten in Sweden.
• Beowulf has submitted a concluding statement for Kallak to the Swedish Government, prepared by two law firms summarising circumstances relevant to a judicial review justifying a mining license at Kallak.
• Advice to management suggests that ‘Swedish law is sufficient for assessing the Kallak application’ indicating that Beowulf can use the law to ensure the mining license application is processed ‘by the book’.
• Vadar:  Beowulf report progress at Vadar in which Beowulf now holds 41.5%. The Mitrovica Project situated in northern Kosovo appears to show economic potential in an area of lead/zinc mineralisation.
• Aitolampi:  saw a substantial 81% increase in the resource at the higher grade Western zone. Indicated & Inferred Mineral Resource now stand at 17.2mt grading 5.2% ‘TGC’ for 887,000t of contained graphite. .
• Interim financials: Beowulf saw Administrative Expenses of £283.310 for the third quarter indicating to us that expenses should come in at around £1m for the year.
• The figures show an operating loss of £309,344 in Q3 and £765,810 for the nine months to End-September.
• While the Operating loss is less than for the comparable period last year the admin expenses have been higher due to management’s increased lobbying activity in Sweden to advance the Kallak iron ore project.
• The company also saw further progress on the Aitolampi graphite project in Finland and new investment into the Vadar, lead/zinc projects in Kosovo.
• Costs relating to the Vadar project were consolidated into the accounts from 1 April 2019 when Beowulf’s stake rose to 31.3%.
• Costs relating to work done in Sweden benefited from a fall in the Swedish Krona .

Conclusion:  Beowulf is pushing ahead on three key fronts. The move to use the prescribed minerals law to progress the mining license application in Sweden is expected to make significant progress. Reports of problems at Kiruna (LKAB) where errors in the calculation of the expanded mineral resource mean the giant iron ore mine will close earlier than previously expected despite having moved half the town to enable mining of the expanded reserve. Reduced production of high-quality iron ore from Kiruna is likely to lead to a move to replace reserves by LKAB within Sweden.

*SP Angel acts as nomad and broker to Beowulf Mining.

 

Greatland Gold (GGP LN) FOLLOW 1.765p, Mkt cap £63.0m – Newcrest reports drilling results from the Havieron project

• Greatland Gold highlights the publication, by Newcrest Mining of further drilling results from Greatland Gold’s Havieron prospect in the Paterson District of Western Australia where Newcrest has now completed its Stage 1 farm-in expenditure of US$10m and is moving into the second, US$10m, stage of the agreement which could ultimately earn Newcrest a 70% interest through expenditure of US$65m over a six year period.
• The results announced today extend the area of known high grade mineralisation, particularly towards the north, with a step out hole, HAD023, intersecting “high-grade mineralisation 300m north of HAD 005” which in December 2018 was reported to have returned a ““combined intercept of 275m at 4.77g/t gold and 0.61% copper, including an upper zone of 118m at 3.08g/t gold and 0.84% copper from 459m and a lower zone of 157m at 6.04g/t gold and 0.44% copper from 660m (HAD005).”
• Among the results highlighted in today’s announcement are
  • The most northerly hole drilled on the project to date, HAD023, drilled 100m north of hole HADHAD015, intersected 107m averaging 2.2g/t gold and 0.22% copper from a depth of 656m and included a higher grade section of 21m averaging 10g/t gold and 0.74% copper from 665m depth; and
  • HAD020, which was drilled 100m west of hole HAD014 in order to test beneath holes HAD005 and 014, intersected three mineralised zones; 122.9m averaging 1.7g/t gold and 0.36% copper from 673m depth; 114.8m averaging 0.84g/t gold and 0.13% copper from 809.2m and 184.5m averaging 0.81g/t gold and 0.44% copper from 1096.5m depth. Each of these horizons is reported to include higher grade sections of mineralisation.
  • HAD 021, which was drilled 75m east of HAD013 to investigate higher grade mineralisation potential between holes HAD103 and 017, intersected 128m averaging 3.4g/t gold and 0.44% copper from 670m, including 13m averaging 13g/t gold and 1.1% copper from 770m as well as a deeper zone of 110.7m width averaging 1.9g/t gold and 0.12% copper from 1039.3m; and
  • HAD025drilled in an east/west direction from 75m north of HAD005 which intersected 118m averaging 1.0g/t gold and 0.08% copper from 580m (including 12m averaging 3.9g/t gold and 0.21% copper from 612m, as well as a deeper zone of 39m averaging 6.5g/t gold and 0.4% copper from 764m (including 10.6m averaging 22g/t gold and 1.3% copper from 794.9m); and
  • HAD028, also drilled east to west from 125m northeast of HAD013, which “represents a significant step out to the east”, which returned partial assay results of 45.8m, from 543.2m depth at an average grade of 6.8g/t gold and 0.51% copper – including 32m averaging 9.2g/t gold and 0.67% copper from 555m.
• The company reports that Hole HAD019 “was stopped at 530m due to revised targeting”
• CEO, Gervaise Heddle, said that the results “extend the known limits of high-grade mineralisation, particularly to the north. It has become clear that the size of the mineralised footprint now significantly exceeds our initial expectations”
• Mr. Heddle focussed on two particular aspects of the results; firstly the high grades encountered in the step out hole HAD023 which significantly extends “the known limits of high-grade mineralisation” and secondly “to the multiple high-grade intercepts contained within these results … all of which serve to further boost our confidence in the potential for a significant high-grade resource at Havieron within the next 9-12 months".
• The company explains that “An additional 18 holes (HAD022, HAD026, HAD029, HAD031-HAD045) are at various stages of progress and further assay results are awaited”.
• Outlining future plans, the company explains that six drilling rigs are to remain in operation on site through the Australian summer, where, we observe, conditions can be demanding in this part of WA, in order to test an emerging northwest trend to the mineralisation with a plan that “Further drilling over the next 9-12 months will target the delivery of a maiden resource estimate for Havieron”.

Conclusion: The continuing intersection of wide, high grade mineralisation at depth, the expanding envelope of known mineralisation and the continuation of a substantial drilling programme through the West Australian summer are positive indications of Newcrest’s enthusiasm for the project. We look forward to further news and to an initial mineral resource estimate in about a year.

 

KEFI Minerals* (KEFI LN) FOLLOW1.5p, Mkt Cap £14.9m – Bank loan funding selected for the Tulu Kapi project

• The team opted for a bank loan proposal received from two leading African banks as underwriters and co-lenders for the Tulu Kapi project as a preferred infrastructure finance option.
• The proposal is considered to be a financially more attractive option compared to the bond-and-lease alternative.
• A preliminary term sheet has been signed and is subject to credit approval.
• The Company estimates a reduction in financing related fees adds $66m to the net cash flow over the Tulu Kapi life of mine bringing the total to $380m.
• Savings may potentially be directed towards development of the underground operation that is estimated at $37m as per its PEA.
• At the current gold price of $1,450/oz, the Company estimates the Tulu Kapi total NPV at $245m including the DFS-based open pit component of $171m and the PEA-based NPV of the underground mine of $74m.
• This is equivalent to $130m for the KEFI’s 45% effective interest in the project versus $19m market cap of the Company.
• Full finance close and bank loan drawdown planned for mid-2020.

Conclusion: More straightforward bank loan funding for the Tulu Kapi project is expected to generate cost savings further improving asset economics. Additionally, the proposed bank lenders are reported to have been actively working in Ethiopia and are familiar with the local market and many of local stakeholders.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

Richard Parlons – 0203 470 0472

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

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*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.

 

Sources of commodity prices
Gold, Platinum, Palladium, Silver	BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel	Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt	LME
Oil Brent	ICE
Natural Gas, Uranium, Iron Ore	NYMEX
Thermal Coal	Bloomberg OTC Composite
Coking Coal	DCE
RRE	Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony	Asian Metal
Tungsten	Metal Bulletin

 

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