SP Angel . Morning View . Golden asteroid worth USD700 quintillion

SP Angel – Morning View – Thursday 27 06 19

Golden asteroid worth US$700 quintillion

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MiFID II exempt information – see disclaimer below

 

ARC Minerals* (ARCM LN) – Significant mineralisation in drill cores at Cheyeza copper, cobalt project

Atalaya Mining (ATYM LN) – Q1 2019 – AGM statement highlights strong operational performance

Bluejay Mining* (JAY LN) – Pre-Feasibility Study details show value for Dundas titanium mineral sands project in Greenland

Edenville Energy* (EDL LN) – Northern Area mining commences

Energold Drilling Corp. (EGD CN) – Energold discloses debt defaults and forbearance negotiations

Solgold* (SOLG LN) – Ecuador Constitutional Court Update

 

Golden asteroid could make everyone billionaires

• Asteroid mining looks set to blast into the spotlight with the discovery of a $700 quintillion asteroid dense in precious heavy metals. The metals mining space race is about to begin as Pysche 16 takes up residence between Mars and Jupiter, with NASA planning reconnaissance in 2022.
• Veteran miner Scott Moore, CEO of EuroSun Mining (ESM CN) adds “The ‘Titans of Gold’ now control hundreds of the best-producing properties around the world, but the 4-5m ounces of gold they bring to the market every year pales in comparison to the conquests available in space.”
• While the dream is ambitious, the reality could take around 25 years for a ‘proof of concept’, and 50 years to start commercial production.
• With the prospective asteroid belt 750m km from earth, more realistic targets could be offered on the moon – holding resourcing of gold and platinum group metals to Helium-3, water and rare earth metals.
• The global market for asteroid mining is in infancy, with Allied Market Research estimating it will top $3.8bn by 2025.
• Morgan Stanley offer more dramatic forecasts, suggesting the global space economy to be worth $350bn today. By 2040 it will be worth a cosmic $2.7tr.
• The race is hotting up, with China vowing to dominate the development. Indeed, in January, the European Space Agency (ESA) announced a deal with ArianeGroup, the parent company of Arianespace, to study a prep mission to the moon in 2025.
• Even tiny Luxembourg has 10 space-mining companies registered since 2016, with some targeting space ventures to the Moon, and others eyeing near-Earth asteroids for mining.

 

Canadian mining services company goes down as investors shun market in favour of Cannabis stocks

• Energold Drilling disclosed last night debt defaults and forbearance negotiations as the company struggles to pay its creditors.
• Dando Drilling in the UK, is controlled by Energold and is known to be one of the worlds most respected drill rig manufacturers.
• We speculate that a number of other Canadian mining services and potentially some junior companies may struggle to fund their activities in the current environment.
• The situation is causing some better quality Canadian and Australian miners to look to the UK for its deeper capital pools and heather markets.
• The AIM All-Share Index has risen 10% this year indicating ongoing shareholder support for smaller companies in the junior market in London despite a tightening of regulations and the impact of the MiFID II regulations on reducing the availability of research for smaller companies.

 

Dow Jones Industrials		-0.04%	at	26,537
Nikkei 225		+1.19%	at	21,338
HK Hang Seng		+1.31%	at	28,591
Shanghai Composite		+0.69%	at	2,997
FTSE 350 Mining		+1.10%	at	20,796
AIM Basic Resources		-0.00%	at	2,075

 

Economics

G20 summit starts this weekend

• Global leaders are travelling to Osaka, Japan for the G20 summit.
• While climate change and other protestors gather global leaders will be working to settle trade wars and other differences.
• Steve Mnuchin, US Treasury secretary has commented that the US is 90% of the way there on the China trade deal.
• The market appears to be looking for a trade deal settlement in the Autumn but it is possible that Trump may agree a settlement with president Xi Jinping.
• The Washington Post quotes Mnuchin as US, China on ‘path to complete’ a trade deal.

 

US/China – More news over a potential resolution of the trade conflict between the two nations emerge.

• The South China Morning Post, citing sources, said Washington and Beijing agreed a tentative truce in the trade dispute ahead of a meeting at the G20 summit.
•  “We were about 90% of the way there and I think there’s a path to complete this,” Steven Mnuchin said yesterday commenting on the state of the US/China trade deal.
• US President Trump said a trade deal with China was possible this weekend, although, he was prepared to impose tariffs on virtually all remaining Chinese imports.
• Trump is set to meet his Chinese counterpart Xi Jinping at the G20 summit in Japan on Saturday.

 

Japan – Retail sales climb 1.2%yoy in May accelerating from the 0.5%yoy recorded in the previous month.

• Sales are expected to pick up as consumers front load purchases ahead of an expected sales tax increase (10% from 8%) scheduled for October this year.

 

UK – MPs are preparing a new plan that would hold back funding from Whitehall departments if the next PM opts for a hard Brexit without Parliament’s approval.

• The amendment remains subject to a vote that is due Tuesday July 2.
• Japan foreign minister reiterates that Japan is very happy to negotiate a trade deal with the UK

• The US is also happy to negotiate a trade deal with the UK on favourable terms according to high level US sources who sometimes see certain key European politicians as highly disruptive from a Western perspective .

 

Currencies

US$1.1366/eur vs 1.1369/eur yesterday  Yen 108.08/$ vs 107.43/$  SAr 14.205/$ vs 14.306/$  $1.270/gbp vs $1.267/gbp  0.699/aud vs 0.698/aud  CNY 6.873/$ vs 6.883/$

 

Commodity News

Precious metals:         

Gold US$1,404/oz vs US$1,409/oz yesterday

   Gold ETFs 73.9moz vs US$73.8moz yesterday

Platinum US$813/oz vs US$806/oz yesterday

Palladium US$1,525/oz vs US$1,526/oz yesterday

Silver US$15.24/oz vs US$15.26/oz yesterday

           

Base metals:   

Copper US$ 5,993/t vs US$6,014/t yesterday

Aluminium US$ 1,816/t vs US$1,813/t yesterday

Nickel US$ 12,510/t vs US$12,290/t yesterday

Zinc US$ 2,491/t vs US$2,543/t yesterday

Lead US$ 1,922/t vs US$1,937/t yesterday

Tin US$ 18,850/t vs US$18,910/t yesterday

           

Energy:           

Oil US$66.0/bbl vs US$66.1/bbl yesterday

Natural Gas US$2.266/mmbtu vs US$2.297/mmbtu yesterday

Uranium US$24.65/lb vs US$24.70/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$110.0/t vs US$108.4/t

• Iron ore market could yield more predictable output, as major Brazilian iron ore miner Vale will spend 1.8bn reais ($469m) on safety and environmental recovery measures for the structures that remain standing near its Brumadinho dam that collapsed five months ago, killing nearly 250 people, an executive said on Wednesday.
• The spending measures, announced by Vale’s recovery and development director Marcelo Klein, will be in addition to the $4.5bn the miner has already provisioned for costs related to the dam burst.

Chinese steel rebar 25mm US$607.5/t vs US$606.6/t

Thermal coal (1st year forward cif ARA) US$64.7/t vs US$64.4/t

Coking coal futures Dalian Exchange US$210.2/t vs US$207.5/t

           

Other:  

Cobalt LME 3m US$28,000/t vs US$28,000/t

NdPr Rare Earth Oxide (China) US$51,630/t vs US$51,579/t

Lithium carbonate 99% (China) US$9,453/t vs US$9,444/t

Ferro Vanadium 80% FOB (China) US$38.7/kg vs US$38.9/kg

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

*Pricing sourced from Bloomberg

 

Battery News

Tesla developing “secret battery lab”

• In response to threats of battery supply, Tesla is developing its own in-house cells at a “secret battery lab” utilising its new Maxwell technology.
• CNBC report “Tesla employees conduct some of their battery cell manufacturing research at a ‘skunkworks lab’ at the company’s Kato Road facility, a few minutes from its car plant in Fremont, California.”
• Tesla has been relying on Panasonic which is making cells in Japan for the automaker’s Model S and Model X vehicles, as well as in Tesla’s own Gigafactory 1 in Nevada for Model 3, however “employees in Tesla’s battery R&D teams are now focused on designing and prototyping advanced lithium ion battery cells, as well as new equipment and processes that could allow Tesla to produce cells in high volumes, employees and former employees said.”
• According to Maxwell, the primary focus is on ultracapacitors; energy storage devices that are characterised by high power density, long operational life, the ability to charge and discharge very rapidly, and reliable performance at a wide range of temperatures.

 

BMW shows no desire to make own batteries in electric push, frustrating German govt

• BMW made a number of electric vehicle announcements on Tuesday as the carmaker looks to accelerate its EV plans, but reveal plans still don’t involve making their own batteries.
• The carmaker announced plans to have 25 electrified models by 2023 at Tuesday’s NEXTGen event, where it also unveiled a new electric concept car, an electric test vehicle that invites Tesla Roadster comparisons, and an electric motorcycle concept.
• BMW Chief Financial Officer Nicolas Peter said, “I don’t believe it makes sense for every carmaker to make their own cells.”. The carmaker is content to work with existing battery suppliers, or to join a consortium, but that appears to be it.
• This comes at a time when the German government aims to build more electric cars domestically, with an eye on battery production as a part of that.
• Chancellor met with BMW, Volkswagen AG and Daimler AG in Berlin on Monday regarding these efforts. As Bloomberg notes: The discussion ended without concrete results, adding to a sense of slow motion on the switch to cleaner vehicles.
• Germany and France recently announced an alliance to develop EV batteries, leaving the partnership open to other countries.
• Both BMW and VW have invested in Swedish battery startup Northvolt recently, with VW planning its own factory with the battery maker, as well.

 

Company News

ARC Minerals* (ARCM LN) FOLLOW 2.6p, Mkt Cap £18m – Significant mineralisation in drill cores at Cheyeza copper, cobalt project

(The Cheyeza project is 66% owned by Arc Minerals through its holding in Zamsort)

• Arc Minerals reports significant mineralisation seen in drill cores in the Cheyeza copper, cobalt project in Zambia.
• Management report the first two holes drilled contain visible copper mineralisation.
• The first mineralised zone starts at just 2m below surface.
• Pictures of the mineralisation appear to show highly mineralised sections with significant proportions of pyrrhotite and chalcopyrite.

Conclusion:  Nick von Schirnding appears to be sticking to his mantra to ‘under promise and over deliver’ with his statement of ‘a very satisfactory start to our drilling campaign’ which feels somewhat understated and not what we would expect to hear form may of our overseas mining friends.

If we run the quote through our proprietary ‘Mining lingo translator’ we get:

English into Australian: ‘it’s a ripper of mineralised hole Bruce, it’s sure to lead to a major discovery’

English into Canadian: ‘it’s probably a world-class copper discovery of major economic proportion’

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

 

Atalaya Mining (ATYM LN) FOLLOW 206 pence, Mkt Cap £282m – AGM statement highlights strong operational performance

• Atalaya sums up the years performance in its AGM statement today.
• Throughput rose to 9.8mtpa
• Copper production rose 13% to 42,100t from 37,200t in 2017.
• Feed grade of 0.49% copper was consistent with reserve estimates
• Recovery rates rose to 88.30% from 85.45% in 2017.
• Cash operating costs fell to $1.94/lb last year below guidance of $2.15/lb to $2.30/lb.
• Expansion to 15mtpa throughput is now 80% complete
• Proven and probable resources increased 29% leading to a 21% increase in contained copper to give a life of mine reserve of 13.8 years.
• The strip ratio falls to 1.43:1 from 1.95:1 with the new resources which is a major positive when it comes to cost.
• Project evaluation work has continued on the Proyecto Touro in Galicia with the Environmental Impact Assessment completed in Q4 2018.
• Court ruling: The company is in discussions with the the Junta de Andalucía over a procedural error by the Junta de Andalucíain giving environmental authorisation in 2014.
• ‘The Junta de Andalucía has been publicly supportive of the continuation of the operation and of the mining sector and we are confident that the matter raised by the court ruling will be addressed soon with no impact on our operation.’
• Exploration and evaluation work continues at the Rio Tinto project and at project Touro.

Conclusion: Atalaya is continues to show good operational performance and progress in Spain.

 

Bluejay Mining* (JAY LN)FOLLOW  6.9p, Mkt Cap £59m – Pre-Feasibility Study details show value for Dundas titanium mineral sands project in Greenland

Included in MSCI index (Dundas Ilmenite project, Greenland, 100% owned)

• Bluejay Mining have published details of their Pre-Feasibility Study on the Moriusaq Project at Dundas in Greenland
• The PFS uses an early 67.1mt JORC resource grading 7.3% for an initial and somewhat modest 9-year life.
• We feel sure the project will run for longer and should mine higher grades on further optimisation and scheduling of the higher-grade parts of the ore resource.
• For now we have modelled Bluejay’s base case scenario and have simply pushed out our mine life assumption based on our view of the project.
• Optimisation of the mining schedule should bring forward cash flows for early repayment of capital and profit though this will be done as part of future project evaluation.

• Production: The PFS ramps up of production to 440,000tpa of high-grade ilmenite via a simple dry mining, a wet concentrator and dry magnetic separation of mineral process.
• Mining and processing is to run year round with a spring/summer shipping window. The short shipping season does impact cash flow and increases the peak-capex to $245m.
• NPV (Bluejay Mining estimates):
  • Base Case @ 5% - $83m. $153m undiscounted net profit over 9-year mine life
  • Upside Case @ 5% - $131m. $247m undiscounted net profit over 11-year mine life including an additional $13.2m of capital in year-eight
• Pricing: the PFS assumes a price of $232/t which comes from chloride slag pricing forecasts from the leading industry advisory group as well as discussion with potential end users. Strandline recently used US$270/t in a recent PFS study for its higher-grade ilmenite product out of Tanzania.
• Strandline (1 November 2018 DFS update) Product Price Ilmenite (FOB) assumes US$266/t for Chloride grade ilmenite in their Oct 2018 DFS update. Previously, Strandline used US$232/t in October 2017.
• Capex: The Dundas project capital cost number is higher than our previous assumptions at US$245m due to additional mining fleet, infrastructure costs and contingencies.
• We had initially assumed a $60m capital cost to start followed by a further $100m for the second phase expansion. 
• The Base Case builds the larger project from the start with the Upside Case assuming an additional $13.2m in year eight for an extended mine life.
• We normally assume contractors bear much of the capital cost for mining machinery.
• The estimate also includes the cost of buying all mining equipment, process plant, storage facilities for dried finished product and a near shore direct ship loading facility.
• Opex: Dundas operating cost estimates are comparable with other dry mining mineral sands operations
• Costs per tonne are:
  • Mining $2.63/t ROM, $44.5/t of high-grade ilmenite product
  • Processing $1.82/t ROM, $30.8/t ilmenite
  • Infrastructure, Services and G&A $2.23/t ROM, $37.6/t ilmenite
  • Total $6.7/t ROM, $112.8/t ilmenite
• ‘Revenue to Cost Ratio (‘R:C’) on base case scenario for Dundas is 2.01, using industry accepted ilmenite pricing forecasts and OpEx (mining, processing, infrastructure and G&A) for an operation based entirely in Greenland.  This is significantly above an R:C of 1.7 which is considered a minimum metric by leading industry consultants TZMI for new projects to be brought online.’
• Strandline’s Revenue to C3 cost ratio is comparable at 2.45 times based on an ilmenite price assumption of US$266/t for chloride grade ilmenite.
• Total direct capital costs of $143m break down as follows:
  • Mining $24.4m,
  • Processing $57.7m,
  • Infrastructure $61,
  • Indirect costs $87.3m including freight, taxes, contingencies and escalations.
• Inflated capital costs: The capital estimate of US$245m have been amplified by adding an extra 20% for Greenland plus a further 20% on top of this for contingencies such a peak cash flow requirements due to the shortish shipping window. While operating in Greenland may carry extra cost the location is simpler in many ways that other mineral sands mines in remote locations in Sierra Leone and Mozambique. For example, the ship loading should be simpler and the locals are less likely to steal your fuel.
• Optimisation: design optimisation should generate significant cost savings which we hope the company will report in time giving scope for more upside value.
• Further value should come from raising mine and finished product production.
• Engineering: management are to starting a value engineering process with IHC Robbins and Inuiplan A/S for further operational improvements and we expect the capital cost estimate to either fall and for the envisaged high-grade ilmenite production rate to rise improving the economics further.
• Project finance; discussions are underway with European funding agencies. We expect the project to benefit from access to substantial low-cost capital.
• Mining license: management submitted the Dundas PFS as part of their mining exploitation license application to the Greenland government.
• The Geological Survey of Denmark and Greenland study reckon on some 700mt of ilmenite within the Company’s licence holding.
• Global warming: is likely to extend the shipping window for shipments into and from Dundas.
• The development of a ‘jetty’ to load bulk carriers and unload supply vessels should greatly enhance the operation.
• The mine will also create a new airstrip to replace the existing runway for year-round movement of personnel and consumables.
• A barge ramp will also be used for the unloading of construction and mining equipment.
• Bucket test: We have walked the project, we have done our low-tech bucket test and we have flown over the region.
• The Thule ‘Black Sands’ are clear to see on the raised beaches, in the Iterlak Delta area and in the shallow marine environment and they are far blacker and denser than any other magnetite-ilmenite we have seen.
• Dundas is also reported to be richer in ilmenite grade than other deposit in the world. Not greater in metal value than some others but definitely richer in ilmenite grade.
• Construction 2020: site construction is due to start in June 2020 with mining and processing due to start in September 2021 with first shipments due to start in October 2021.

Conclusion: Bluejay’s resource has always attracted controversy within the ilmenite industry as experts question every aspect as is typical for new and unconventional, entrants into the market. We view today’s PFS figures as a major step in the journey to profitable and long-lasting ilmenite production.

*SP Angel act as nomad to Bluejay Mining. *SP Angel have visited the Dundas, Itelak ilmenite sands project in Greenland.

 

Edenville Energy* (EDL LN) FOLLOW 0.07p, Mkt Cap £2.9m – Northern Area mining commences

• The Company completed access and haul road to the Northern Area ahead of schedule.
• Mining is currently focused on waste stripping and exposing coal seams.
• The Northern Area is expected to provide greater yields and require less waste stripping compared to current open pit operations.
• At the processing plant, located 2km away from the Northern Area, batch processing of fine coal from stocks using pre-screen produced encouraging results showing c.40% of the stockpiled fine coal may be reclassified as sized coal product, which will be available for washing or direct sale.
• Pre-screen is estimated to potentially reclaim up to 10,000t of saleable coal from the existing fine coal stockpiles.
• Calorific value of the screened fine coal is reported to achieve 5,000kcal/kg enabling the material to be fed through the wash plant for further upgrade or potentially sold directly.
• The Company targets to become cash flow positive within the next 10 months as washed coal production reaches 10,000kt per month.

Conclusion: The start of mining at the Northern Area should allow the Company to increase the supply of coal to the processing plant and ramp up monthly washed coal production rates. The potential to monetise the fine coal currently stockpiled at the Rukwa site is also a positive and may add to production of the saleable product.

*SP Angel acts as Nomad and Broker to Edenville Energy

 

Energold Drilling Corp. (EGD CN) C$0.1c, Mkt cap C$5.2m – Energold discloses debt defaults and forbearance negotiations

• Energold, the Canadian drilling company reports that it is facing material liquidity issues and as a result is in default of certain payment and financial covenant issues.
• The company’s principal and continuing defaults include:.
  • non-payment of interest due under the notes issued pursuant to the NPA (the “Notes”); and
  • failure to meet minimum working capital requirements..
• Energold is looking to:
  • divest non-core assets
  • reduce the current note coversion price per Energold share
  • issue creach accommodation warrants to noteholders
• Energold reported on 3rd May that it has reached a milestone agreement for a £20m convertible first negotiated in February 2017.
• Dando Drilling: Energold owns Dando Drilling which is based in Devon in the UK and has a legendary reputation for building drill rigs. Dando is known for its water drill rigs as well as for rigs for mining and for construction site drilling. Its new and innovative construction site rigs are seen as offering a safer working environment when compared with traditional cable percussion rigs.

 

Solgold* (SOLG LN) FOLLOW 33p, Mkt Cap £613m – Ecuador Constitutional Court Update

• Solgold advise the Ecuador Constitutional Court has rejected a petition to consider whether the future of mining in the Carchi and Imbabura Provinces in Northern Ecuador is valid and legal in accordance with the Ecuadorean Constitution.
• The decision by the Court should set a precedent for standards and legal robustness if future popular consultation, referendum, requests are to be considered by the Court.
• The Court also highlighted that it is unconstitutional to ask the  inhabitants of certain provinces about the matters relevant to other provinces, and that mining is a matter of national interest.
• See Solgold statement for further details

Conclusion: This is an important result for Solgold and for other explorers in Ecuador. While the court action highlighted opposition to mining in the country it has also firmly rejected the petition opposing mining in the region. The court appears to recognise mining as of national importance and this appears to create a good precedent for future mining project going forward.

*SP Angel acts as broker and advisor to Solgold. SP Angel have raised funds for SolGold on eight previous occasions.

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

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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