SP Angel – Morning View – Copper continues to rise on China growth

SP Angel – Morning View – Wednesday 17 04 19

Copper continues to rise on China growth

MiFID II exempt information – see dsclaimer below 

Altus Strategies* (ALS LN) – New prospect identified at Diba, Mali

BHP (BHP LN) – Q3 operations update highlights the impact of Cyclone Veronica and focus on copper exploration

Canyon Resources (CAY AU) – Drilling at Minim Martap returns wide >50%Al2O3 low silica intersections

Altus Strategies* (ALS LN) is set to receive 30m shares in CAY

Galileo Resources (GLR LN) – Raising £500,000 to advance Star Zinc

KEFI Minerals* (KEFI LN) – Q1 update (replacement announcement)

Infinity Lithium (INF AU) – San Jose lithium hydroxide PFS update

 

China – Positive Chinese economic data reflect government led stimulus in Q1/19.

• Beijing accelerated fiscal stimulus this year to support growth, announcing billions of dollars in additional tax cuts and in infrastructure spending, while Chinese banks lent a record CNY 5.8tn in the first quarter.
• Growth rate held steady at 6.4% in Q1/19, beating estimates for a 6.3% reading.
• FAI by government owned firms climbed to 6.7% in Q1 versus a slowdown to 6.4% for private firms.
• GDP (%yoy): 6.4 v 6.4 in Q4/18 and 6.3 forecast.
• Retail Sales (YTD, %yoy): 8.3 v 8.2 in February and 8.3 forecast.
• Industrial Production (YTD, %yoy): 6.5 v 5.3 in February and 5.6 forecast.
• FAI (YTD, %yoy): 6.3 v 6.1 in February and 6.3 forecast.

 

Climate Change protestors bring Oxford Street, Park Lane and Regent’s Street to standstill

• The Climate change protestors have achieved in two days what the Mayor of London could not achieve in five years.
• They have stopped traffic in Oxford street and pedestrianised the road for the people – great news for those of us who work in the area
• We have to hand it to them, the protests looked peaceful, though a few protestors looked like they were asking to be arrested, the air was clean and the music was great.
• The only rubbish bit was a woeful speech by a protestor which felt disappointingly lame in its delivery and lacking in any material facts in its content.
• We have long wondered why largely empty busses roll down our busiest streets and why the air quality is dismissed to cater for corporate convenience because policy makers dare not come up with better ideas.
• If the world is to warm up, and it may well continue to do so for a number of reasons.
• China’s state-owned Cosco shipping company is shipping through the Artic sea route following previous trials through the North West Passage.
• The company says it has sent 10 ships on 14 voyages through the Arctic between China and Europe saving 220 shipping days, 7,000t of fuel and US$10m in costs vs running through the Suez Canal.
• Bluejay Mining* could benefit significantly from ice-free shipping through the North West passage and it would nearly halve the journey time to China’s East Coast. Bluejay’s Dundas titanium mineral sands project appears to host the highest-grade ilmenite in the world in what is ‘probably’ the world’s most consistent deposit from a purity perspective.

*SP Angel acts as Nomad and broker to Bluejay Mining

 

Zambian president reopens the Munali Nickel mine in Zambia

• His Excellency Edgar Lungu, President of Zambia has reopened the Munali Nickel mine in Zambia
• Over $50m of capital has been spent on the restart with all key technical aspects reviewed and re-engineered from re-interpreting the orebody, changing the mining method, to revising the metallurgical process with the introduction of Dense Media Separation ‘DMS’ technology and differential flotation.
• The mine is now ramping up to 60,000tpa by Q4 2019 to produce a 10-12% nickel concentrate.
• The mine now has a workforce of 380 with $7.5m spent on building new homes for the households as well as community infrastructure, including a new school, a new clinic, community water boreholes, a community dam and two bridges.
• The team at Munali have also established the Musangu Foundation, providing seed money for the first year of business moving away from the typical ‘donor’ style, and instead embed business principles, generating sustainability and longevity.
• Over the past two years, the Foundation has focused on several livelihood creation and enhancement initiatives including:
  • Trialling energy efficient cook stoves
  • Implementation of conservation farming practices
  • Delivery of educational resources to schools
  • Establishment of the ‘agriculture economic zone’ at the Munali Nickel Mine, in conjunction with Good Nature Agro.
• Plans to establish a peanut processing facility on-site, coupled with a grower scheme, should result in over 4,000 local livelihoods within the next three years.

 

Dow Jones Industrials		+0.26%	at	26,453
Nikkei 225		+0.25%	at	22,278
HK Hang Seng		-0.03%	at	30,120
Shanghai Composite		+0.29%	at	3,263
FTSE 350 Mining		-1.98%	at	20,421
AIM Basic Resources		-1.49%	at	2,079

 

Economics

Japan – Exports, a barometer for global trade activity, contracted for a fourth consecutive month in March.

• The data comes on the heels of poor industrial production data as well as fears that consumer demand may dealt a blow with a proposed sales tax later this year.
• Exports (%yoy0: -2.4 v -1.2 in February and -2.6 forecast.
• Industrial Production (%yoy): -1.1 v 0.7 in January.

 

UK – Inflation held steady in March coming in a notch below estimates in a welcome news to UHK monetary authorities.

• Annual CPI remained at 1.9%, the third month below the BoE 2% target, while core inflation held at 1.8%.
• The lack of inflationary pressures provides policy makers breathing space to keep rates on hold until Brexit crisis is dealt with.
• CPI (%mom/yoy): 0.2/1.9 v 0.5/1.9 in February and 0.2/2.0 forecast.
• Core CPI (%yoy): 1.8 v 1.8 in February and 1.9 forecast.

 

Currencies

US$1.1315/eur vs 1.1309/eur yesterday  Yen 111.98/$ vs 111.87/$  SAr 13.944/$ vs 14.028/$  $1.306/gbp vs $1.309/gbp  0.720/aud vs 0.715/aud  CNY 6.690/$ vs 6.707/$

 

Commodity News

Precious metals:         

Gold US$1,279/oz vs US$1,287/oz yesterday

• Gold trades near the lowest level in 2019 as global equities hold near six-month highs on renewed optimism about global growth after China’s economy unexpectedly held up in the first quarter.
• China’s first-quarter GDP figures out Wednesday exceeded economist estimates and March retail sales and industrial production were also better-than-expected. That’s easing concerns about a slowdown that had rattled investors.
• Technical indicators for gold also signal bearing trends, with the metal breaking below its 100-day moving average.
• White House economic adviser Larry Kudlow also reports that “very good progress” was made on multiple fronts in trade talks with China, including on enforcement issues.

   Gold ETFs 71.8moz vs US$71.8moz yesterday

Platinum US$887/oz vs US$892/oz yesterday

Palladium US$1,362/oz vs US$1,369/oz yesterday

Silver US$15.07/oz vs US$15.01/oz yesterday

           

Base metals:   

Copper US$ 6,520/t vs US$6,512/t yesterday

Aluminium US$ 1,859/t vs US$1,863/t yesterday

Nickel US$ 12,990/t vs US$13,140/t yesterday

Zinc US$ 2,815/t vs US$2,876/t yesterday

Lead US$ 1,938/t vs US$1,956/t yesterday

Tin US$ 20,515/t vs US$20,650/t yesterday

           

Energy:           

Oil US$72.0/bbl vs US$71.0/bbl yesterday

Natural Gas US$2.577/mmbtu vs US$2.591/mmbtu yesterday

Uranium US$25.90/lb vs US$25.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$91.9/t vs US$93.8/t

• Iron ore tumbles as Brazil’s Vale SA reported it will restart operations at its major mine in the next 72 hours, alleviating concerns about a shortage and potentially offsetting supply losses seen by rivals in Australia.
• Futures retreated as much as 3% in Singapore on prospects for the swift restart of the Brucutu mine following a local judge’s decision to allow the company to resume use of three tailings dams.
• Growing forecasts had called for a prolonged shortfall, with Australian producers also cutting output after cyclones and operational mishaps.
• A restart of the Brucutu operation will bring back 30mt of annual supply, Vale said in a statement that flagged a “complete return” of the project in the next 72 hours. Still, the miner opted to maintain current sales guidance for this year of 307mt to 332mt, noting lower supplies from its northern system following heavy rains.

Chinese steel rebar 25mm US$651.8/t vs US$650.8/t

Thermal coal (1st year forward cif ARA) US$73.6/t vs US$73.8/t

Coking coal futures Dalian Exchange US$182.9/t vs US$182.1/t

           

Other:  

Cobalt LME 3m US$34,500/t vs US$35,000/t

NdPr Rare Earth Oxide (China) US$39,984/t vs US$39,881/t

Lithium carbonate 99% (China) US$9,641/t vs US$9,616/t

Ferro Vanadium 80% FOB (China) US$48.5/kg vs US$48.5/kg

Antimony Trioxide 99.5% EU (China) US$6.3/kg vs US$6.4/kg

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

 

Battery News

Daimler invests $100m into Cali battery start-up

• Daimler has invested $100m for a 10% stake in Sila Nanotechnologies in a move for the German Group’s push into the electric car market. The investment forms part of the $170m funding round that values Sila Nano at more than $1bn, making it one of the first ‘tech unicorns’ devoted to developing improved battery chemistry.
• Sila Nano has agreements to supply its “next-generation” battery chemistry to both BMW and Daimler, the world’s two biggest makers of premium vehicles – both targeting for 25% electric car sales by 2025.
• Investment in the space is hotting up, with Volkswagen committing $100m into QuantumScape to become the largest shareholder in the solid-state battery developer.
• “The reality of the car in the 21st century is that it isn’t defined by the carmakers, it is defined by the chemistry,” Sila founder Gene Berdichevsky said. “The range, the cost, the acceleration and the recharge time are all a function of the chemical materials going into the cell.” 
• Sila aim to increase the silicon-based material content in the graphite anode to improve energy density, however the extreme volume change during charging means current loading is limited to ~5%.
• The Company are hoping to offer an anode chemistry that can be used by existing battery manufacturers such as China’s CATL, or South Korean groups SK Innovation and Samsung.
• Sila Nano has now raised a total of $295m over five funding rounds. Other investors include Bessemer Venture Partners, Chengwei Capital, Matrix Partners and Sutter Hill Ventures.

 

Tesla is developing a ‘unique battery recycling system’

• Tesla has confirmed that it is developing a “unique battery recycling system,” which the company believes will result in “significant savings” over the long-term.
• The company’s approach to battery recycling is quite different from most other automakers who are so far focusing on end-of-life applications for battery packs.
• Many automakers, like Hyundai, BMW, and Renault, have announced plans to use old battery packs in energy storage systems instead of recycling them to make new ones. Some of them are already doing it with older battery packs coming back to them.
• Tesla says that it doesn’t have a significant number of battery packs currently coming back due to their end-of-life, but it has a few packs coming back from “R&D, manufacturing, quality control and service operations” and the automaker is recycling those batteries by working with third-party recyclers.
• But that’s apparently a temporary solution as Tesla claims to be “developing a unique battery recycling system” at Gigafactory 1 in Nevada.
• Tesla wrote in the impact report, “At Gigafactory 1, Tesla is developing a unique battery recycling system that will process both battery manufacturing scrap and end-of-life batteries. Through this system, the recovery of critical minerals such as lithium and cobalt will be maximized along with the recovery of all metals used in the battery cell, such as copper, aluminium and steel. All of these materials will be recovered in forms optimized for new battery material production.”

 

Company News

Altus Strategies* (ALS LN) FOLLOW 3.8p, Mkt Cap £6.8m – New prospect identified at Diba, Mali

• The exploration team identified a series of prospective drilling targets in vicinity of the historic Diba resource, located only 13km south of the Sadiola gold mine.
• A review of surface geochemical anomalies as well as historical data located a significant prospect at Diba WNW, with a footprint of around 650m by 400m.
• New prospect lies around 1.5km NW of the Diba historical resource area which is estimated to host 275koz at 1.35g/t in Indicated and 33koz at 1.40g/t in Inferred categories and on the western margin of the 1.85km long by 400m wide Diba NW prospect.
• The prospect is open to the west and north with the team planning to test extensions of the anomaly as well as start a detailed mapping and a 25x25m spaced auger sampling programme to identify drill targets.
• Additionally, the Company identified a 1.2km long Diba SW target which is 500m southwest of and on strike of the existing Diba historical resource.
• Little work has been completed in that area and the team is planning a surface geochemical sampling programme at Diba SW to test it for potential drill targets.
• The Diba project is strategically located next to the multi-million ounce Sadiola gold mine in western Mali which is running out oxide feed and may potentially benefit from adjacent source of process material located on Altus properties.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

BHP (BHP LN) FOLLOW 1,848p, £101.3bn – Q3 operations update highlights the impact of Cyclone Veronica and focus on copper exploration

• BHP reports a lowering of its production guidance its Western Australian iron ore operations for  the year to 30^th June to 235-239mt “reflecting a 6 to 8 Mt impact from Tropical Cyclone Veronica”. Cost guidance has been increased to “below US$15 per tonne an increase from previous guidance of less than US$14 per tonne,”
• With iron ore production of 56.12 mt during the quarter and year to date output of 175.34mt achieving the approximately 60mt of production during the final quarter to meet the lower end of the revised guidance looks realistic. It is particularly encouraging that “volumes reflected record production at Jimblebar” where year to date output of 44.3mt compares with 15.3mt in the nine months ending 31^st March 2018.
• The company reports that “our facilities did not sustain major damage as a result of the cyclone, the port ramp up was slowed by localised flooding, processing wet material and equipment assessments” implying that the return to more normal operations should not face major obstacles.
• Production guidance for the Group’s other major commodities remains unchanged with copper output expected in the range 1.645mt-1.740mt, metallurgical coal in the range 43-46mt and thermal coal between 28-29mt. Petroleum guidance is also maintained in the range 113-118 MMboe.
• BHP’s copper output of 420,000t (Q3 – 2018 during the quarter (1.245mt YTD vs 1.290mt 2018 YTD) reflects lower output at the Escondida and Pampa Norte operations which suffered a planned grade decline and the “impact of heavy rainfall in northern Chile in February 2019 at both Spence and Cerro Colorado” respectively, partially offset by a 22% increase in output from Olympic Dam where production rose to 115kt as production built up following a “major smelter maintenance campaign in the prior period”.
• Copper output also increased at Antamina “by five per cent to 110 kt due to higher head grades”.
• “Metallurgical coal production was broadly flat at 31 Mt (54 Mt on a 100 per cent basis).” The sale of the Gregory Crinum Mine to Sojitz was completed in late March. Energy coal output was also broadly unchanged at 20mt year to date. Improved performance in the New South Wales operations were offset by lower output from Cerrejon where weather impacted on mine sequencing.
• BHP’s exploration expenditure amounts to US$122m so far this financial year. Greenfield exploration “is predominantly focused on advancing copper targets within Chile, Ecuador, Peru, Canada, South Australia and the South-West United States.”
• Among the projects highlighted by the company are the “identification in November 2018 of a potential iron oxide, copper and gold (IOCG) mineralised system at Oak Dam, 65 kilometres to the south east of Olympic Dam, BHP has commenced a further drilling program to define the extent of mineralisation.”
• BHP also points to its agreement with Luminex “for an earn-in and joint venture agreement on Luminex's Tarqui 1 and 2 mining concessions in Ecuador. Negotiations to complete a binding agreement will be undertaken over the next two months.” Additional copper exploration exposure comes through its 5% interest in “Midland Exploration Inc., which has copper exploration tenements in Canada.”

Conclusion: The effects of the cyclone in W Australia are reflected in the loss of around 6-8mt of production and lower iron ore production guidance. The group’s other operations are operating consistently within the previously announce guidance targets. The exploration focus on copper is clear with a focus on the Americas and Australia.

 

Canyon Resources (CAY AU) 0.23p, Mkt Cap £96m – Drilling at Minim Martap returns wide >50%Al2O3 low silica intersections

(Altus Strategies is set to receive 30m shares in CAY after selling adjacent Birsok and Mandoum bauxite licenses to Canyon, in addition, to 8m shares held already)

• The Company reported initial assays from its air core drilling campaign on the flagship Minim Martap Bauxite Project in Cameroon.
• The programme is targeting to expand the current resource (550mt at 45.5% Al2O3 and 2.06% SiO2 (total)) both in tonnage and grade terms as well as test previously undrilled bauxite plateaux.
• The first batch of assays show high grade bauxite and low in silica results including:
• 15m at 54.9% Al2O3 and 1.66% SiO2 (total) from surface;
• 15m at 53.61% Al2O3 and 1.67% SiO2 (total) from surface;
• 14m at 56.47% Al2O3 and 1.72% SiO2 (total) from 1m;
• 12m at 55.92% Al2O3 and 1.03% SiO2 (total) from surface.
• The Company completed 275 drill holes for a total of 2,578m to date with first results received for 35 holes drilled on the northern and eastern sections of the Beatrice plateau.
• Canyon is awaiting assays from the Agnes, Raymonde and Gregorine plateaux, as well as final assays from the Beatrice plateau.
• The team is confident the potential scale of the project is well over 1bn tonnes with nearly 65% of available bauxite plateaux remaining untested.

 

Galileo Resources (GLR LN)FOLLOW  0.535 pence, Mkt Cap £1.6m – Raising £500,000 to advance Star Zinc

• Galileo Resources reports that it has raised £500,000 to advance the exploration of its Star Zinc project in Zambia. The company is issuing 100m new shares at a price of 0.5p/share representing “a discount of approximately 13.8% compared to the closing mid-market price of 0.58p yesterday”.
• The new shares represent approximately 24.7% of the enlarged company and the funds are to be used in the production of “an independent ore resource estimate, block modelling/preliminary pit design, and application for a small-scale mining permit.”
• Commenting on the fundraising, Chairman, Colin Bird, referred to the positive results obtained from the 2018 drilling and said that the additional resources would “enable it to do all things necessary, as outlined above, to advance and add further value to what is undoubtedly a significant Project with potential for early production.  The directors believe that the potential ore at Star Zinc lends itself to a simple trucking operation for parties looking to enhance their feedstock with high grade zinc ore and early- stage discussions have started with potential off-take partners”.
• Mr. Bird has subscribed for 6m of the new shares taking his interest in Galileo to 13.7% while non-executive director Richard Wollenberg has taken an additional 600,000 shares leaving him with a 1.66% interest.

Conclusion: The additional funds should help Galileo Resources to establish a formal mineral resource estimate and advance its Star Zinc project towards development.

 

KEFI Minerals* (KEFI LN) FOLLOW 1.5p, Mkt Cap £9.7m – Q1 update (replacement announcement)

Updated announcement includes a corrected expected plant commissioning date of Q4/20, not Q4/21 reported previously. All other details remain unchanged.

• Relocation programme approved by the federal government with regional authorities having begun triggering the consecutive steps of the resettlement which is to lead to compensation payments for the phase one move of some 60 households in July.
• The central bank has issued approvals regarding capital ratios, hedging and bank accounts with residual matters expected to be resolved shortly.
• Earlier, PM Dr Abiy Ahmed expressed his support for the project by issuing the remaining instructions for the project go ahead.
• Infrastructure-wise, the Ethiopian Electrical Power Corporation and Ethiopian Roads Authority had their budgets approved and are readying sub-contractor tender documentation.
• Processing plant commissioning targeted for Q4/20.
• The Company raised £1.0m in February and has not yet drawn on the first £2m of the available £4m convertible loan facility with Sanderson.
• The team is expecting cash burn to come down to £1m per annum once development works start while the Company is estimating £2m of costs-reimbursement would be available once full financing is closed.
• The Tulu Kapi is estimated to generate £90m (100% based, post tax, after debt, 8% DR and $1,300/oz) or £41m for KEFI 45% interest at start of construction.
• In Saudi Arabia, the exploration team is in the field completing a programme of trenching and geophysical surveys ahead of the initial drilling scheduled for Q3/19 targeting copper-gold anomalies.
• The new Saudi Government continues the review of mining regulations with little information on changes involved so far.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Infinity Lithium (INF AU) A$0.09, Mkt Cap A$17.1m – San Jose lithium hydroxide PFS update

• PFS technical works and study have been accelerated following the recent increase of Infinity’s project ownership to 75%, with Wave International being appointed as the lead consultant and study managers.
• The first stage of metallurgical testwork has completed at Nagrom in Perth, successfully producing suitable amounts of concentrate for Stage 2 hydrometallurgical testwork. The concentrate produced in Stage 1 floatation was derived from approx. 80kg representative mineralised drill core.
• ALS Metallurgical Laboratories in Perth will undertake the Stage 2 program, designed to develop the sulphate-roast-water-leach flowsheet.
• Previous work recorded excellent recoveries from these processes, with the lithium hydroxide Scoping Study achieving greater than 90% lithium recovery in neutral, potable water.
• Stage 3 looks to purify the leach solution and crystallise lithium hydroxide.
• Wave International Director Ryan Hanrahan adds “recoveries and grades are an encouraging first major milestone for the San Jose PFS. These results provide a solid platform on which to progress the PFS engineering and ongoing metallurgical testwork”.

 

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

 

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

 

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