SP Angel . Morning View . Friday 15 11 19

Cautious trade deal related optimism helps risk on sentiment

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MiFID II exempt information – see disclaimer below    

 

Europa Metals Limited (EUZ LN) – Additional drilling at the Toral zinc, lead, silver project in Spain

SolGold* (SOLG LN) – Initial Blanca  drilling shows visible gold in core

Talga Resources* (TLG AU) – Up to A$6.25m equity raise

Thor Mining (THR LN) – Pump tests underway at Kapunda

 

Dow Jones Industrials

  

-0.01%

at

27,782

Nikkei 225

  

+0.70%

at

23,303

HK Hang Seng

  

+0.01%

at

26,327

Shanghai Composite

  

-0.64%

at

2,891

FTSE 350 Mining

  

+1.81%

at

18,283

AIM Basic Resources

  

+0.25%

at

2,103

 

Economics

US – White House economic adviser Larry Kudlow said Washington is getting close to a trade agreement with China.

  • China’s Commerce Ministry said the two countries are holding “in-house” discussions on a first phase trade agreement while adding that cancellation of tariffs is an important condition to reach a deal.
  • China has also ended a nearly five year ban on imports of US poultry meat that may be worth $1bn in annual shipments to China, Reuters reports.
  • Trade deal hopes support the risk on sentiment with US equity futures seen climbing while Treasuries and gold trading lower this morning.

 

China – The PBOC injects CNY 200bn ($28.6bn) into the banking system to ease tight liquidity in the interbank market that pushed up borrowing costs.

  • This is the second time it has done so this month.
  • The benchmark 7d repo rate, the indicator of general liquidity in China, climbed to 3.4% on Thursday before coming down to 2.75% this morning.

 

Mexico – The central bank cut its benchmark rate by quarter of a percentage point amid a subdued inflation and economic growth.

  • 3 members of the board voted for a 0.25pp cut while the other two argued for a 0.5pp decision.
  • Banxico said that both inflation and growth for this year and next will likely be below previous forecasts.

 

Hong Kong – The government is expecting the economy to contract 1.3% in 2019 amid continuing violent clashes between protesters and police.

  • GDP fell 3.2%qoq and 2.9%yoy in Q3 amid a decline in all components of the national output apart from government spending.
  • “As the impacts of the local social incidents have yet to show signs of abating, consumption and investment demand will likely remain in the doldrums for the rest of the year,” the government said.

 

Zimbabwe – Monthly inflation rate more than doubled in October as the nation nears a new case of hyperinflation.

  • Monthly inflation climbed to 38.8% in October, up from 17.7% recorded in the previous month, according to the National Statistics Agency.
  • That is the highest rate since 39.5% recorded in June.
  • Previously the administration suspended the release of annual inflation numbers for six months from August arguing it wants to collect comparable data after the introduction of a new currency earlier this year.
  • The economy is suffering from a drought, a cyclone related disruptions, power cuts and shortages of food and fuel.

 

Currencies

US$1.1019/eur vs 1.1003/eur yesterday.  Yen 108.67/$ vs 10865/$.  SAr 14.786/$ vs 14.858/$.  $1.288/gbp vs $1.285/gbp.  0.679/aud vs 0.680/aud.  CNY 7.011/$ vs  7.019/$.

 

Commodity News

Gold US$1,464/oz vs US$1,469/oz yesterday

   Gold ETFs 80.9moz vs US$81.1moz yesterday

Platinum US$876/oz vs US$876/oz yesterday

Palladium US$1,732/oz vs US$1,731/oz yesterday

Silver US$16.85/oz vs US$17.08/oz yesterday

           

Base metals:   

Copper US$ 5,823/t vs US$5,865/t yesterday

Aluminium US$ 1,734/t vs US$1,764/t yesterday

Nickel US$ 15,950/t vs US$15,425/t yesterday

Zinc US$ 2,387/t vs US$2,412/t yesterday

Lead US$ 2,008/t vs US$2,026/t yesterday

Tin US$ 16,180/t vs US$16,265/t yesterday

           

Energy:           

Oil US$62.0/bbl vs US$62.8/bbl yesterday

Natural Gas US$2.619/mmbtu vs US$2.642/mmbtu yesterday

Uranium US$25.00/lb vs US$24.85/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$82.7/t vs US$79.2/t

Chinese steel rebar 25mm US$581.7/t vs US$575.3/t

Thermal coal (1st year forward cif ARA) US$63.7/t vs US$63.6/t

Coking coal futures Dalian Exchange US$183.4/t vs US$183.4/t

           

Other:  

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

NdPr Rare Earth Oxide (China) US$40,439/t vs US$40,389/t

Lithium carbonate 99% (China) US$6,847/t vs US$6,910/t

Ferro Vanadium 80% FOB (China) US$28.8/kg vs US$28.7/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

 

Battery News

VW begin production of North American EV facility (environmental leader)

  • Volkswagen started construction on a $800m production facility for EVs in Chattanooga, Tennessee. 
  • The site is set to become the automaker’s assembly base for EV production in North America.
  • Earlier this year, Volkswagen increased its target for electric vehicle production over the next decade from 15 million to 22 million.
  •  Volkswagen says it plans to roll out production of long range electric vehicles next year in two locations in China and in two other German cities.

 

Company News

Europa Metals Limited (EUZ LN) FOLLOW 0.029 pence, Mkt Cap £3.5m – Additional drilling at the Toral zinc, lead, silver project in Spain

  • Europa Metals has announced that it is mobilising a new drilling campaign to target an area to the west of the current indicated mineral resource at its Toral zinc/lead/silver project in Spain.
  • The drilling is aimed at increasing the “confidence levels in the resource within the central, proposed future mining area of the Toral Project as set out in the 2018 December Scoping Study”.
  • In addition, the company has initiated geotechnical and hydrological evaluations intended to de-risk mine development at Toral.
  • Metallurgical test-work is “now entering the final phase … [and is] … expected to culminate in initial results demonstrating the potential recovery and grade of concentrate obtainable from the Toral Project. The Company believes that completion of such metallurgical testwork will be a significant step forward in de-risking and optimising its understanding of the Toral Project and provide a solid foundation from which it can progress the elements required to proceed towards a potential mine development application.”

 

SolGold* (SOLG LN) FOLLOW 19p, Mkt cap £350.8m – Initial Blanca  drilling shows visible gold in core

  • SolGold reports that the first two drill holes at its Blanca gold project, located approximately 8km NNW of the company’s flagship Cascabel project, have both encountered visible gold in core taken from the Cielito Vein system.
  • The project, where high grade rock chip sample results were reported in August, is held by Solgold’s wholly owned subsidiary, Carnegie Resources.
  • The Cielito Vein system is currently interpreted as a flat lying stacked system of polymetallic veins extending over an area of some 500m by 400m and thought to be related at depth to the Cerro Quiroz Dome described as “an extensively silicified topographic dome containing gold-stockwork veining up to 6.8g/t gold over a 700m by 300m area”.
  • The Cielito Vein system occurs within a NE trending structural corridor and “contains over 120 pre-existing artisanal workings”. Photographs included within today’s announcement show both an example of the underground workings and flecks of visible gold within the drill-core.
  • Although no assay results are yet reported from the drilling the announcement says that “The first hole BDH_19_001 intersected a 30cm wide quartz vein containing visible gold and rich in chalcopyrite and pyrite at a down-hole depth of 98m … [and that] … Visible gold was also noted in the second hole BDH_19_002 … drilled on the same section as BDH_19_001 at a shallower dip.  This hole also intersected multiple zones of flat dipping, thin sulphide rich quartz veins in the first 170m.  Structural correlation between the holes supports the conceptual model of a system of stacked mineralised quartz veins at the Cielito prospect”.
  • Additional assay results from a further 17 rock chip samples support the high grade results previously announced in August of up to 617g/t gold, 0.59% copper and 317g/t silver with highlighted results reported today including:
    • 540g/t gold, 107g/t silver and 0.28% copper in sample RO1000676; and
    • 545g/t gold, 286g/t silver and 0.45% copper in sample RO1000677; and
    • 392g/t gold and 190g/t silver in sample RO1000678 as well as 432g/t gold and 159g/t silver in sample RO1000684 and 428g/t gold and 2126g/t silver in sample RO1000715.
  • The company comments that “These flat lying veins … potentially form part of a larger intrusion-related stacked vein system similar in style to the Buritica deposit (6.4M oz Au) in Columbia.”

Conclusion: Relatively shallow visible gold in core, and high grade rock chip sample results across an extensive area with historic artisanal mining at the Blanca prospect provide early encouragement for the future potential of the Blanca project as exploration advances. The location in close proximity to Cascabel, where Solgold has already delineated an indicated mineral resource of 2bn tonnes at an average copper equivalent grade of 0.6% and a further 900mt of inferred resource at a grade of 0.35% copper equivalent, as well as other exploration projects across Ecuador demonstrates Solgold’s capacity to build on its experience at Cascabel to identify other targets and its local operating credentials to move them forward effectively.

*SP Angel act as Financial Advisor and broker to Solgold

 

Talga Resources* (TLG AU) A$0.47, Mkt Cap A$103m – Up to A$6.25m equity raise

Valuation: A$1.80

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  • The Company closed an oversubscribed A$3.25m equity placing (gross) at A$0.44 per share with existing and new institutional investors.
  • The Company has also launched a share purchase plan to existing shareholders to raise up to an additional A$3.0m (gross) at the same price as the placing.
  • Among uses of the proceeds are:
    • Expansion of Talnode-C customer samples production including higher throughput capacity at the Company’s pilot plant in Germany;
    • Progressing work on the Vittangi Graphite Anode Project Stage 1 DFS;
    • Advancing Talga’s projects for battery anode products and graphene additives in the north of Sweden;
    • General working capital requirements.

Conclusion: An up to A$6.25m (£3.3m) fund raise will allow the Company to advance the DFS on the Vittangi Graphite Anode Project and scale up production of Talnode-C customers’ samples as the team is developing the Europe’s first integrated lithium-ion battery anode supply.

*SP Angel acts as UK broker to Talga Resources. An SP Angel analyst has visited the leading battery R&D institution WMG partnering with Talga.

 

Thor Mining (THR LN)  FOLLOW0.25p, Mkt Cap £2.3m – Pump tests underway at Kapunda

  • Thor Mining has announced the start of pumping tests at the Kapunda copper project in South Australia where a series of holes are to be drilled in the southern part of the licence area to assess the hydrologic characteristics and the amenability to in-situ leaching of the inferred mineral resource of 47.4mt at an average grade of 0.25% copper.
  • Thor Mining holds a 25% interest (and the right to increase to 30%) in EnviroCopper which in turn has “an agreement to earn, in two stages, up to 75% of the rights over metals which may be recovered via in-situ recovery ("ISR") contained in the Kapunda deposit from Australian listed company, Terramin Australia Limited”.
  • The programme “is funded under the Australian Government Ministry for Science Jobs and Innovation grant of A$2.85million, as announced on 30 July 2018”.
  • The company has previously alluded to the low surface impact of extracting copper via in-situ leaching describing the start of the test-work as “a key milestone in further demonstrating the technical viability of the Insitu Recovery (ISR) process at Kapunda”, Executive Chairman, Mick Billing, said that “We look forward to both the technical component of testing the hydraulic properties of the host rock, and also the drill sample assays, particularly for copper and gold”.
  • He went on to explain the increasing importance of the company’s investment in EnviroCopper “as the resource base at both Kapunda and Moonta grows, technical hurdles are addressed, and prospects for commercial viability continue to develop.”
  • In our view, the test results will consequently be pivotal in establishing the future direction of the project and establishing, amongst other issues, whether additional work to upgrade the current inferred resource is warranted.

 

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

 

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.

 

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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