SP Angel – Morning View – Monday 24 06 19
Gold breaks $1400 on threat of further sanctions on Iran
CLICK FOR PDF
MiFID II exempt information – see disclaimer below
Arkle Resources* PLC (ARK LN) Formerly Connemara Mining* (CON LN) – 2018 results and exploration update
Cora Gold* (CORA LN) – Major shareholder raises his stake
Thor Mining* (THR LN) – Bonya XRF results confirmed
Tri-Star Resources* (TSTR LN) – SPMP update on antimony-gold plant
Daimler-Benz profit warning as automaker cuts outlook for the year
- This is Daimler-Benz’s third profit warning in a year.
- Daimler is being investigated for emissions cheating in the US and Europe.
- Daimler-Benz was ordered to recall some 60,000 diesel cars fitted with emissions cheat software over the weekend.
Batteries – China scraps list of recommended auto battery suppliers
- The move could open up the fast-growing China market for Electric Vehicle batteries.
- We suspect the list may have been scrapped due to the ongoing shortage of good-quality lithium-ion batteries and the expected need for Chinese EV manufacturers to buy in more stock than China is currently producing.
- Ironically many battery manufacturing facilities are seen as having spare capacity, though we feel this is more down to supply chain logistics and the rush to build capacity.
- The complexity of making good quality, reliable and fire-safe lithium-batteries and the sourcing of consistent and acceptable lithium, graphite, nickel and cobalt feedstock may be holding many manufacturers back.
- The China supplier list was scrapped on Friday as part of Chinese government management reforms. The list was seen as an effective subsidy for Contemporary Amperex Technologies and BYD Co Ltd in China though we wonder if some other conditions might come into to effectively maintain the list in another form.
POSCO – pulls out of Chilean battery materials plant
- Chile which was the world’s largest lithium producer till Australia overtook it has suffered another blow as POSCO pulls out of its part of a new battery parts plant in Chile.
- Problem is that lithium batteries require lithium hydroxide which is not produced by its partner, Albemarle, in Chile. Albemarle produces lithium carbonate which may then be turned into hydroxide at a later stage.
- If Albemarle agrees to supply lithium hydroxide then the deal may come back to the table, though hydroxide plants are not cheap use lots of power which may not be available in the region.
- POSCO acquired a number of lithium tenements in Argentina reported to contain 1.58mt of measured and indicated lithium in JORC resources last November for $280m.
- The Korean steel maker may well have decided it will be more cost effective to build its own plant to produce lithium hydroxide from the Sal de Vida, Salta & Catamarca, Argentina. The lithium deposit is located in the Puna region of northwest Argentina which may well still be good for evaporation ponds for the concentration of lithium in brine.
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
US – Investors’ attention is focused on the coming G20 summit in Japan with a confirmed meeting expected between Trump and Xi as well as deteriorating situation in the US/Iran standoff.
- Speculation over the outcome of an expected meeting between Trump and Xi later this week in Japan at the Group 20 summit is building up.
- The two day G20 summit starts June 28.
- “A rocky outcome” may need the Fed to step in with interest rate cuts sooner than expected, Bloomberg reports.
- Gold is trading above the $1,400/oz mark after hitting a six year high of $1,410/oz on Friday the back of heightened geopolitical worries and expected US Fed rate cuts.
- Brent prices also climbed to $65.7/bbl as tensions between Tehran and Washington are running high with US Secretary of State Mike Pompeo saying “significant” sanctions on Iran would be announced.
- President Trump denied that he had threatened to demote Fed Chairman Powell but said that he would “be able to do that if I wanted”.
- President has been critical of Jerome Powell for months arguing the Fed has been too hasty in raising rates.
China – Industrial profit data is due this Thursday with expectations for another weak reading in May .
- Profits were down 3.4% in the first four months of the year following a 3.3% drop in Q1 highlighting tough external conditions.
Turkey – The lira is up nearly 2% this morning after a re-run in the Istranbul mayor’s elections confirmed the win of the opposition leader Ekrem Imamoglu.
- Imamoglu won 54% of the vote while the ruling AK Party’s candidate, former PM Binbali Yildirim, got 45%.
- The lead has climbed to 775k votes marking a significant increase on the margin of 13k recorded in the earlier elections in March.
- Importantly, Yildirim appears to have accepted defeat and congratulated his opponent on the win.
Georgia – Anti-government protests marked a fourth straight day on Sunday as thousands of people called for the resignation of the interior minister and for changes in the election code.
- The first demonstration on Thursday was sparked by the presence of a Russia delegation in parliament.
- More than 240 people were injured during the crackdown on demonstrators which led to many calling for a resignation of the interior minister.
- Parliament speaker resigned last week.
- Russia announced a ban on passenger flights between the two countries effective from July 8 on travellers’ security concerns.
UK - £100m fund to help UK wind power firms
- The Offshore Wind Growth Partnership is to provide help and advice for UK firms on how to compete for contracts in the UK and global wind power markets.
UK Network Rail CEO says Passenger numbers have doubled and it is now ‘too difficult’ to make improvements and changes (BBC)
- If passenger numbers halve we suspect Network Rail won’t have sufficient funding for said improvements and changes.
- Dammed if you do and dammed if you don’t. We recommend Chiltern Railways as the best run rail line into London.
US$1.1380/eur vs 1.1309/eur last week. Yen 107.43/$ vs 107.45/$. SAr 14.294/$ vs 14.432/$. $1.273/gbp vs $1.270/gbp. 0.695/aud vs 0.692/aud. CNY 6.878/$ vs 6.873/$.
Gold US$1,402/oz vs US$1,389/oz yesterday
Gold ETFs 73.7moz vs US$72.7moz yesterday
Platinum US$814/oz vs US$807/oz yesterday
Palladium US$1,516/oz vs US$1,481/oz yesterday
Silver US$15.35/oz vs US$15.27/oz yesterday
Copper US$ 5,948/t vs US$5,964/t yesterday – Latest Condelco contract offer to Chuquicamata miners has been rejected extending the stoppage to 10 days now at the +300ktpa Cu operation.
- A majority of workers voted down the offer on Saturday which paves the way for the Company to present a new offer in five days (until June 28).
- The mine was operating at 50-60% rates during the first days of the strike, the Company reported.
- Although the effect of the stoppage could have a broader impact because the project’s smelter and refinery process ores from all of the Codelco’s northern division, which accounted for half of its 1.7mt of copper in 2018.
- China Non-Ferrous is interested in buying Zambia copper unit of Vedanta.
- Previously, the government said it will choose the buyer for Konkola Copper Mines in July.
- Authorities are looking to liquidate Konkola after President Lungu accused the Company of cheating on its taxes and misleading authorities on its expansion plans.
- Mines Minister Richard Musukwa has sought to ease investor concerns that the Vedanta dispute threatens other foreign-owned businesses, describing it as an “isolated case”.
Aluminium US$ 1,769/t vs US$1,776/t yesterday
Nickel US$ 12,120/t vs US$12,100/t yesterday
Zinc US$ 2,447/t vs US$2,444/t yesterday
Lead US$ 1,900/t vs US$1,898/t yesterday
Tin US$ 18,895/t vs US$19,070/t yesterday
Oil US$65.7/bbl vs US$64.6/bbl yesterday
Natural Gas US$2.207/mmbtu vs US$2.209/mmbtu yesterday
Uranium US$24.65/lb vs US$24.55/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$110.6/t vs US$112.0/t
Chinese steel rebar 25mm US$603.8/t vs US$594.9/t – Chinese steel futures climbed for a fifth session to the highest level in seven months as China (Tangshan) will extend capacity curbs to the end of the next month from a previous June deadline.
- The municipal government is reported to have ordered local steel mills to halt 20% of capacity (and some at least 50%) through July in an effort to reduce air pollution.
- Chinese iron ore futures are off this morning as traders are assessing how extended curbs are expected to curb demand for the raw material.
- On the other hand, shrinking Chinese port stockpiles’ suggest the supply remains restrained; inventories contracted for 11 weeks matching the longest streak since 2015 and coming down to the lowest level since 2017.
Thermal coal (1st year forward cif ARA) US$64.8/t vs US$64.0/t
Coking coal futures Dalian Exchange US$209.5/t vs US$206.8/t
Cobalt LME 3m US$28,000/t vs US$28,000/t
NdPr Rare Earth Oxide (China) US$53,455/t vs US$53,201/t
Lithium carbonate 99% (China) US$9,600/t vs US$9,607/t
Ferro Vanadium 80% FOB (China) US$39.0/kg vs US$39.0/kg - Ferro-vanadium prices remained unchanged at $34.45-36/kgV in Western Europe on Friday (Fastmarkets MB)
Antimony Trioxide 99.5% EU (China) US$5.7/kg vs US$5.7/kg
Tungsten APT European US$250-255/mtu vs US$255-265/mtu
- Prices are likely being hit by a fall in manufacturing investment in Europe and in China.
- Market rumours suggest supplies of tungsten may be coming out of the Fanya as The Kunming Intermediate People’s Court sells off metals to repay investors.
- Fanya held around 30% of China annual production according to Roskill eg around 19,200t of metal. China accounts for >80% of global production.
- The collapse of the Fanya metal trading exchange in China in 2015 is still impacting many of the 14 rare metals traded on its platform.
- The court sold off a batch of indium in April with just a single bid taking 34.64t of indium bid for just 10 minutes before the 24-hour bidding window closed. Fanya held some 3,600t of indium before its collapse. Investors are owed some Rmb40bn ($5.8bn) (Reuters).
- Tungsten production has declined in the West with closure of the Cantung mine in Canada and the Drakelands mine in Devon, UK.
*SP Angel act as broker to Ormonde Mining which is currently commissioning the new ‘world-class’ Barruecopardo tungsten mine in Spain.
0.9p mkt cap £1.2m – 2018 results and exploration update
Formerly Connemara Mining* (CON LN)
· Arkle Resources, the Irish exploration company, reports a loss of €0.38m for the twelve months to 31st December 2018 (2017 – loss of €0.21m).
- The 31st December cash balance of €106,031, has been supplemented by a €230,000 fund raising which occurred in March 2019
- The company’s historic flagship project is its 23.44% interest in the Stonepark zinc project in the Limerick Basin where Arkle Resources operates in joint-venture with the Canadian-listed Group Eleven.
- The company points out that over €8m has been spent on the project to date and that a series of flat lying, relatively shallow zinc orebodies “are estimated to contain over 5 million tons grading over 11 per cent combined zinc and lead.” The company also describes increasing exploration interest in the area as Glencore continues to drill out the 42mt resource at the nearby Pallas Green deposit which is adjacent to Stonepark.
- Arkle Resources’ gold exploration projects in Wicklow/Wexford comprise a total of eight licences and the company “expect results from the ongoing work on the gold licences in Wicklow” in the near future, while “We anticipate new drilling targets will be identified in and around our existing discoveries at Tombreen and Knocknalour”.
- Commenting on the future outlook, Chairman, John Teeling, expressed concern that the current market valuation “of just above £1 million … significantly undervalues the potential of our exploration portfolio”, however he also indicated that “Good results from Mine River could lead to an enhanced drilling campaign. Arkle has enjoyed the support of the funding shareholders for many years and I am confident that this will continue.”
Conclusion: Arkle Resources is expecting results from its gold exploration programme in Wicklow/Wexford in the near future and is also seeing increased interest in the zinc potential of the Limerick Basin as Glencore continues its evaluation of the adjacent Pallas Green deposit..
*SP Angel is Nomad and Joint-Broker to Arkle Resources formerly Connemara Mining
5.4p, Mkt Cap £5.4m – Major shareholder raises his stake
- The Lord Farmer, a strong supporter of the Company, increased his stake in Cora to 13.16%, from previous 11.74%.
- The Company is currently progressing a 6,000m drilling programme at the flagship Sanankoro Gold Discovery in the Yanfolila Gold Belt, Southern Mali.
- Cora is well funded after having completed a £1.4m in April this year and is targeting maiden Sanankoro mineral resource in Q4/19.
- Previously, SRK published the Sanankoro exploration target estimate of between 30-50mt at a grade of between 1.0-1.3g/t suggesting a potential for 1.0-2.1moz of gold resource.
*SP Angel acts as Nomad and Broker to Cora Gold
0.85p, Mkt Cap £6.9m – Bonya XRF results confirmed
- Thor Mining has reported that laboratory results on samples from the recent reverse-circulation (RC) drilling programme at its 40% owned Bonya tungsten project (Arafura Resources – 60%) have confirmed the previously reported high grades determined by X-Ray Fluorescence(XRF) analysis.
- Among the results reported today are:
- A 27m wide intersection from a depth of 35m in hole 19RC020, drilled on the White Violet deposit, which averaged 0.29% tungsten trioxide (WO3) and included 16m averaging 0.31% copper from a depth of 43m as well as 7m averaging 0.2% WO3from 67m depth; and
- A 12m wide intersection from a depth of 46m in hole 19RC021, drilled on the White Violet deposit, which averaged 0.67% WO3 as well as 25m averaging 0.39% WO3 from 63m depth (the previously reported XRF result for this intersection was 0.70% WO3); and
- A 29m wide intersection from a depth of 81m in hole 19RC022, drilled on the White Violet deposit, which averaged 0.70% WO3 (XRF result previously reported 0.75% WO3) and included a 13m wide section averaging 1.13% WO3; and
- A 13m wide intersection from a depth of 19m in hole 19RC026, drilled on the Samarkand deposit, which averaged 0.48% WO3; and
- An 8m wide intersection from a depth of 38m in hole 19RC028, drilled on the Samarkand deposit, which averaged 0.45% WO3; and
- A 9m wide intersection from a depth of 64m in hole 19RC030, drilled on the Samarkand deposit, which averaged 0.75% WO3 and included 2m which averaged 0.2$ copper from a depth of 69m.
- Other copper intersections at Samarkand include 5m at an average grade of 0.36% from a depth of 9m in hole 19RC029; 12m averaging 0.77% from 32m depth in hole 19RC030; and 7m averaging 1.23% from a depth of 37m in hole 19RC030.
- Commenting on the results, Executive Chairman, Mick Billing, welcomed the confirmation of the previously reported XRF results and confirmed that “the joint venture will now target near term drilling to both test the extent of the deposits and facilitate reportable mineral resource estimates”.
- The Bonya deposit lies close to Thor Mining’s wholly owned Molyhil tungsten deposit and Mr. Billing explained that “In the event that follow up drilling leads to the definition of mineral resource estimates, there is potential to add materially to both the life and financial outcomes at the Company's Molyhil project”.
Conclusion: The confirmation of the previously reported tungsten and copper assays from Bonya provides the company encouragement to proceed with resource estimation drilling, which, if successful, could enhance the economic potential of Thor Mining’s wholly owned Molyhil project. We look forward to the results of the follow up drilling.
*SP Angel act as joint broker to Thor Mining
39p, Mkt Cap £36.7m – SPMP update on antimony-gold plant
(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 reports on the progress of SPMP’s environmentally advanced antimony/gold processing plant in Sohar, Oman where previously reported remedial action is “largely complete”.
- Among the significant improvements discussed by the company are “the installation of a new gas cooling solution and modifications to the electric furnace”.
- As a result, “SPMP now expects to be able to move to the production phase of processing antimony and gold dore” and expects to make “further announcements in this regard over the coming months as ramp up commences. It should be noted, however, that similar to all complicated engineering processes, there may be unforeseen issues that will need to be solved.”
- The company also reports that it is progressing discussions with sources of “supply of the appropriate range and volumes of concentrate available to SPMP … [and] … is confident on sourcing all materials necessary to facilitate targeted production levels.”
- SPMP is also pursuing offtake agreements “with a number of potential customers internationally. The SPMP Board does not expect securing such offtake agreements to be problematic once the plant nears commercial production.”
- SPMP is also seeking additional debt funding to cover the costs of “the delay of over a year in commencing metal production together with the cost of remedial works”. Tri-Star reports, however, that “the most likely funding sources will be the regional banks and specialist debt investors. It is not expected that Tri-Star will participate in the debt fund raising”.
- “The SPMP shareholders remain committed to exploring seeking a listing of SPMP at the appropriate time following the move to commercial production and further updates on this will be made in due course”.
- Tri-Star Chairman, Adrian Collins, explained that “The successful plant modifications are highly encouraging with SPMP now able to focus on production of metal, ramp up and concluding appropriate supply and offtake agreements. Now that the production phase is nearing, we intend to move to a quarterly reporting schedule in order to provide a regular news flow to investors”.
Conclusion: It appears that SPMP has now resolved most of the technical issues on the Sohar plant and is now moving towards commercial production. This will necessitate securing both adequate supplies of concentrate feed and suitable off-take agreements and Tri-Star Resources reports that both of these endeavours are underway. Tri-Star does not envisage participating in the additional debt-funding required to cover the delays in commissioning the plant and the associated remedial work and reports that SPMP’s shareholders remain committed to seeking a listing of SPMP once commercial production is established.
*SP Angel acts as Nomad to Tri-Star Resources
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
James Mills -0203 470 0486
Richard Parlons – 0203 470 0472
Jonathan Williams – 0203 470 0471
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
Prince Frederick House
35-39 Maddox Street London
*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.
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.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.
Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.
MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.
A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (email@example.com).
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%