SP Angel – Morning View – Lunar mining gives Australia an opening in a new space era

SP Angel – Morning View –Tuesday 02 04 19

Lunar mining gives Australia an opening in a new space era

MiFID II exempt information – see dsclaimer below 

Bluejay Mining* (JAY LN) Target Price 45p – North West passage offers quick route to China for high-grade ilmenite

BlueRock Diamonds* (BRD LN) – Seven-day production to raise production rates

Caledonia Mining (CMCL LN) – Quarterly dividend declared

IronRidge Resources* (IRR LN) BUY - Target Price 52p – African frontiers – lithium road to resource

See link for ironridge resources pdf note

Thor Mining (THR LN) – Kapunda Copper ISR gold recovery

Walkabout Resources* (WKT AU) – First binding offtake term sheet secured

 

Lunar mining gives Australia an opening in a new space era

• Australia is joining the growing number of nations competing in the space race as the fledgling Australian Space Agency, set up last year, looks to capitalise on advances in technology and falling cost of launch slots. The nation aims to leverage the country’s industrial skills in mining remote locations, developing automation and tapping a fast-growing start-up culture to triple the size of the sector to A$12bn ($8.5bn) by 2030.
• “We’re witnessing a massive transformation of the sector, due to things like the miniaturization of technology, the lowering cost of launch and faster innovation cycles,” ASA Deputy Head, Anthony Murfett.
• However funding will need to grow to support the dream, with government budgeting just A$41m for four years, compared to NASA’s annual $20bn and the European Space Agency’s 5.7bn euros ($6.4bn).
• The main focus is reducing investment risk for major resource companies, with Rio Tinto Group reporting it was engaging with the industry to see how its mining technology could be used in space, particularly autonomous drilling.
• Lunar exploration is becoming a crowded space, with China landing the first vehicle of the dark side of the moon, Israel’s privately funded Beresheet probe progressing and an Indian lander and rover due to launch this month.
• The race to exploit lunar water is driven by the potential source of rocket fuel to enable manned missions to Mars.
• Andrew Dempster, Director of the Australian Centre for Space Engineering Research at the University of New South Wales is focusing on a mission within five years, citing the proliferation of private companies like SpaceX that are making space more easily accessible.
• Australian resource companies are becoming a proving ground for adapting terrestrial technology for space, with Woodside Petroleum, Australia’s largest oil and gas producer, partnering with NASA to use robot technology to improve safety at its offshore platforms.

India – weapons test upsets NASA due to creation of dangerous space debris

• India’s shooting and destruction of a satellite created 60 pieces of orbital debris large enough to track.
• 24 pieces of debris rise higher than the International Space Station orbit making the debris potentially life threatening.

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Economics

Global growth slows to the weakest pace since the great financial crisis, Bloomberg Economics’ new global GDP tracker shows.

• Q1 growth slowed to 2.2% from 4% in mid-2018.
• Bloomberg suggests that with major drags removed, growth is set to pick from Q1 low.
• On a less positive side, limited room for stimulative monetary policy suggests central banks may struggle to prop up economy should growth slow again.

 

Eurozone, German and French Manufacturing PMIs collapse

• Eurozone Feb Manufacturing PMI falling at fastest rate since 2011.
• German Manufacturing PMI at lowest level since 2012, though Angela Merkel has been preparing the Germany economy for this event for a year.
• UK Manufacturing PMI appears rather better, possibly supported by manufacturer stocking ahead of a hard Brexit

 

US – Improving investor sentiment building on better than expected Chinese PMI numbers received a boost yesterday from improvements in manufacturing activity in the US in March and construction spending in February.

• This overshadowed an unexpected decline in retail sales.
• Retail Sales (%mom): -0.2 v 0.7 in January (revised from 0.2) and 0.2 forecast.
• Core Retail Sales (%mom): -0.6 v 1.7 in January (revised from 1.2) and 0.3 forecast.
• Markit Manufacturing PMI: 52.4 v 53.0 in February.
• ISM Manufacturing: 55.3 v 54.2 in February and 54.5 forecast.
• Construction Spending (%mom): 1.0 v 2.5 in January and -0.2 forecast.

 

UK – The British pound is trading lower this morning as lawmakers failed to secure a majority for any proposed alternative to PM May’s divorce deal.

Brexit - No deal more likely but can still be avoided, says EU's Brexit negotiator Michel Barnier after MPs reject options (BBC)

• MPs rejected a customs union with the EU by three votes while a motion for another referendum got the most votes in favour, but still lost.
• Michel Barnier, the EU’s chief negotiator, said the no deal Brexit is now more likely but can still be avoided.
• The UK needs to come up with a credible plan before April 12 to secure a further delay.
• On a separate note, UK business investment sentiment collapsed to the lowest in eight years amid Brexit uncertainty, according to the British Chambers of Commerce.
• “UK growth nearly ground to a halt in the first quarter of 2019, with increasing anxiety over Brexit and weakening global economic conditions driving a significant deterioration… forward-looking indicators are disappointingly downbeat with weakening orders, confidence and investment intentions pointing to precious little growth over the coming quarters, unless substantial action is taken,” BCC said.
• The sterling trades at 1.3027 against the US$, close to the last month’s low of $1.2945.

 

India – Manufacturing growth hit the weakest rate in six months ahead of the general elections due next week.

• The PMI index was reported at 52.6 in March, down from 54.3 in February, the lowest level Sep/18.
• PM Modi is seeking a fresh mandate in the coming general election promising to continue with reforms and deregulation.

 

Saudi Arabia – Saudi Aramco financials show the Company is the world’s largest corporate earner having generated $111bn in net income in 2018, double the amount of #2 (Apple, $59bn).

• The Company is doing a roadshow aiming to raise $10bn in bonds funding its recent $69bn purchase of local petrochemicals company Sabic from the kingdom’s wealth fund.
• Saudi Aramco earned $224bn EBITDA last year with the government drawing nearly 2/3s of its revenues from the oil sector.
• Hefty oil extraction tax mean the Company is generating less in post-tax profits per barrel when compared to other peers ($26/bbl v $38 for Royal Dutch Shell and $31 for Total), although its extraction and upstream capex costs ($7.5/bbl) are far lower than the other integrated oil majors, FT reports.
• Aramco FX debt has been rated A1 and A+ by Moody’s and Fitch, respectively, constrained by the nation’s credit rating.
• Moody’s commenting on the rating said on standalone basis Aramco had many characteristics of a AAA-rated borrower including a minimal debt reliance to cash flows, large-scale production, market leadership and access in Saudi Arabai to one of the world’s largest hydrocarbon reserves; however, the final rating was restrained to A1 “because of the close interlinkages between the sovereign and the company”.

 

Turkey – The lira slides as the ruling part loses mayoral elections in the nation’s three largest cities including Istanbul, Anara and Izmir, according to state-run Anadolu Agency.

• The currency continued to decline early on Tuesday (-2.0%) as the US halted delivery of F-35 fighter aircraft equipment as Erdogan refused to cancel the order of the Russian S-400 missile systems.
• The fear is the integration of Russian systems by one of the NATO countries may allow Russia to spy on F-35s making it less able to evade Russia weapons.

 

Currencies

US$1.1203/eur vs 1.1230/eur yesterday  Yen 111.37/$ vs 111.09/$  SAr 14.222/$ vs 14.361/$  $1.305/gbp vs $1.306/gbp  0.708/aud vs 0.713/aud  CNY 6.719/$ vs 6.709/$

 

Commodity News

Precious metals:         

Gold US$1,287/oz vs US$1,289/oz yesterday

   Gold ETFs 71.9moz vs US$72.3moz yesterday

Platinum US$848/oz vs US$848/oz yesterday

Palladium US$1,420/oz vs US$1,380/oz yesterday

Silver US$15.06/oz vs US$15.09/oz yesterday

           

Base metals:   

Copper US$ 6,477/t vs US$6,519/t yesterday - First Quantum Minerals – Cobre Panama mine to expand to 100mtpa from 85mtpa

Aluminium US$ 1,895/t vs US$1,928/t yesterday

Nickel US$ 13,170/t vs US$13,295/t yesterday

Zinc US$ 2,900/t vs US$2,953/t yesterday

Lead US$ 2,015/t vs US$2,034/t yesterday

Tin US$ 21,480/t vs US$21,495/t yesterday

           

Energy:           

Oil US$69.1/bbl vs US$68.2/bbl yesterday - Saudi Aramco – net income US$111bn

• Vs Chevron at US$14.8bn.
• Saudi Aramco paid Saudi Arabia US$58.2bn in dividends last year.

Natural Gas US$2.705/mmbtu vs US$2.679/mmbtu yesterday

Uranium US$25.45/lb vs US$24.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$85.8/t vs US$84.5/t

Chinese steel rebar 25mm US$617.3/t vs US$618.3/t

Thermal coal (1st year forward cif ARA) US$71.3/t vs US$71.7/t

Coking coal futures Dalian Exchange US$187.3/t vs US$187.6/t

           

Other:  

Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$42,042/t vs US$42,852/t

• Despite increasing by nearly 30% to 50.4kt of light rare earths and 9.6kt of medium and heavy rare earths compared to the H2 2018 quota allocation.
• The H1 2019 rare earths quota has caused little uncertainty, as the MIIT have indicated H1 2019 allocation will represent 50% of the 2019 annual quota, suggesting no annual change in mining quota between 2018 and 2019.
• Inner Mongolia continues to hold the largest portion of the light rare earth mining quota, with 34.6kt REO assigned to China Northern Rare Earth Group, which operates the Baiyun Obo mine in Baotou.
• However, rare earths mining in H1 2019 are expected to remain far below quotas, particularly in Southern provinces where imports of mineral concentrates and semi-processed products have increased significantly since early-2018.
• Rare earth concentrates imported by China in 2018 and early 2019 have been sourced largely from Myanmar, the USA and monazite concentrates imported from Russia, Brazil and other Asian countries.

Lithium carbonate 99% (China) US$9,673/t vs US$9,688/t

• Prices for lithium produced in Chile experienced the largest decline on record in February, falling 22% from January to $10,700/t.
• The magnitude of decline surprised the equity market, and is likely a reflection of declines in SQM deliveries during Q1.

Ferro Vanadium 80% FOB (China) US$59.0/kg vs US$60.5/kg

Antimony Trioxide 99.5% EU (China) US$6.5/kg vs US$6.6/kg

Tungsten APT European US$271-282/mtu vs US$271-282/mtu

• Chinese tungsten quotas have left a degree of uncertainty in the market, as the Ministry of Natural Resources and the Ministry of Industry and Information Technology set quotas at 49.8kt (65% WO3 basis) for H1 2019.
• The first half quotas fall 22% lower than the overall quota for H1 2018 (63.9kt) and 3% lower than the primary tungsten quota (51.3kt), with a 12.6kt quota also outlined for by-product tungsten in H1 2018.
• Confusion is growing as usually two quotas are given – one for mines where tungsten is the primary (or sole) product, and a second for mines with tungsten as a by-product.

 

Battery News

Ganfeng raises stake in Lithium Americas Corp to 50%

• Ganfeng has raised its stake to 50% from 37.5% in Lithium Americas Corp.
• The move gives Ganfeng a larger stake in the Cauchari-Olaroz lithium project in Argentina.
• Management are looking at potential production of 25,000tpa rising to 40,000tpa starting in 2020.

 

Frack sand – Jan de Nul dredging profits on river sand for Argentine fracking boom

• Jan de Nul appears to be making good money out of the sale of dredged river sand to Argentina’s fracking boom (gcaptain.com).
• The dredger has a $12.6m agreement with Tecpetrol for up to 70,000t for the year.
• Frack sand prices are running at around $180-200/t including $70/t of tracking, vs $300/t for sand from the US.
• River sand is generally suitable for fracking due to its well-rounded form which allows for better permeability, whereas other more angular sands become more compact.

 

Company News

Bluejay Mining* (JAY LN) FOLLOW 9p, Mkt Cap £77m – North West passage offers quick route to China for high-grade ilmenite

STRONG BUY - included in MSCI index

Target Price 45p

• Bluejay Mining reports that a new resource calculation is due at the Iterlak East and Iterlak West later this month.
• Our previous visit to the site shows this area to host substantial quantities of very high-grade ilmenite close to and at the shore line with easy access to deep water for bulk shipping.
• We expect the previous 7mt resource grading 12.2% ilmenite in-situ at Iterlak East and 1mt at 6.2% at Iterlak West to increase significantly with the addition of more higher-grade ilmenite beach material.
• Consultants:
• Bluejay also report they have engaged RSC Consulting to evaluate the Offshote Shallow Marine target which could be very efficiently mined in the summer months using simple dredges. These dredges can also work during the formation of sea ice though some smart and simple engineering tricks.
• The use of dredges could significantly raise ilmenite production and give access to some particularly high-grade areas along the near-shore line.
• See suitable dredges: https://www.royalihc.com/en/products/mining/dredge-and-marine-mining

Shipping:

• Bluejay’s next challenge after simple sorting and separation of the heavy minerals into ilmenite concentrate is to ship to its nearest markets.
• Canada is the closest option and has the added benefit of cheap power near Rio Tinto’s titanium business in Quebec. Other options include, Europe, the Middle East and China.
• Ship loading should be relatively simple for Bluejay as the Dundas site is located right next to deep water with potential to run a conveyor directly onto a bulk carrier.

North West Passage:

• Bluejay has the option to use Panamax Ice class 1A ships to transport ilmenite concentrates to China through the North West passage.
• The journey will be cut to just a few weeks and would more than halve the journey times to China with bulk carriers accompanied by Ice Class tug boats across the top of Canada.
• The route offers two big advantages to Bluejay and its offtakers. The North West passage, when open in the summer months, will be a much shorter and quicker route to China from its location in Greenland.
• Nordic Bulk Carriers has six Ice Class 1A Panamax carriers of around 75,000t capacity each and are said to be looking to order 2-4 more boats to meet increasing demand.
• The Ice Class 1A carriers are reinforced, carry more powerful engines, different propellers and tank arrangements, at an estimated cost of $35-40m per carrier.

Demand:

• Chinese demand for titanium raw materials is expected to rise as China increases in prosperity with Chinese producers keen to dominate the newer "chloride and chloride slag" technologies
• China wants to be self-sufficient in titanium dioxide and metal production due to national security implications and is determined to be self-sufficient in as many markets as possible as a general rule.
• Their ongoing move into military and civilian aircraft will require much more titanium metal for key components and titanium dioxide for coatings and will want to used domestic material for strategic industries. We suspect China buys much titanium metal from the US and Europe.
• China’s party leaders have pledged ‘moderate’ wealth which means more cars and nicer houses for all indicating further demand growth in titanium dioxides for  paint for houses, cars and other pigments for papers and magazines.
• Rio Tinto highlighted their expectations for further demand growth in their annual report.

Production:

• We reckon Bluejay will help consumers meet expected demand growth at a time when some other ilmenite producers are struggling with production issues stemming from community and environmental issues in Africa resulting in the loss of millions of tonnes of ilmenite production which was expected in the market.

Prices:

• Ferro-titanium prices rose 12.4% in Europe last week to $5-5.3/kg.
• Ilmenite prices remain stable at around US$170-189/t in China.

Conclusion:  Bluejay continues to talk to offtake parties throughout Asia, Europe and North America. Major consumers in Canada and North American are  the closest geographically while the ability to ship ilmenite concentrates through the North West passage makes sales into China more realistic, significantly cutting shipping costs and importantly delivery time.

We are waiting on news and details on the Dundas project Feasibility which involves bringing together work from a number of specialist consultants and look forward to checking details of the study with our own modelling and estimates for the company. Guess it may be tempting to incorporate the new resource estimates into the Feasibility Study if time allows.

*The SP Angel mining analyst has visited the Dundas, Itelak ilmenite sands project in Greenland.

*SP Angel act as nomad and broker to BlueJay Mining. 

 

BlueRock Diamonds* (BRD LN) FOLLOW 0.24p, Mkt Cap £1.5m – Seven-day production to raise production rates

• BlueRock diamonds reports Q1 production of 42,409t vs 38,781t yoy
• Management only recently received permission to move to 365 day operation at the Kareevlei diamond mine.
• The team started seven-day operations on 26 March which should improve production rates and profitability.
• The production rate is down on Q4 at 53,341t and Q3 at 63,621t but this may reflect the Christmas slowdown in South Africa and the wet season.
• Grades fell to 3.41cpht from 4.01 in Q4 though this was a particularly good grade month.
• Values rose to $371/ct - good performance despite a general decline in diamond values in the diamond market. Values were elevated by the sale of a 8.97ct  diamond was sold for $74,513 or $8,306/ct while a larger, 16.28ct stone realised $78,947 or $4,849/ct.

Conclusion: Bluerock is slowly improving its operation as it continues to recover a good proportion of gem quality diamonds. The involvement of Mike Houston as a director is further good news which should help the company upgrade its operation.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Caledonia Mining (CMCL LN) FOLLOW 425p, Mkt Cap £45.5m – Quarterly dividend declared

• Caledonia Mining announces 6.875 cents per share dividend on each of the Company’s common shares, reiterating the strategy to maximise shareholder value including a quarterly dividend policy which the board of directors adopted in 2014.
• The Company expect that the current dividend of twenty-seven and a half US cents per annum will be maintained.
• Caledonia Mining’s primary asset is a 49% interest in the Blanket Mine in Zimbabwe, which could rise to 64% following signing a legally binding sale agreement, subject to receipt of regulatory approvals.
• Blanket Mine plans to increase production from 54,511oz of gold in 2018 to approximately 75,000oz in 2021 and approximately 80,000oz in 2022.
• As at December 31, 2018, Caledonia had cash of approximately US$11.2m.

 

IronRidge Resources* (IRR LN) FOLLOW 18.3p, Mkt Cap £57m – African frontiers – lithium road to resource

BUY - Target Price 52p

See link for ironridge resources pdf note

New presentation link: https://www.ironridgeresources.com.au/presentation

• The highly encouraging second-phase drill campaign assay results complement preliminary geochemical and geophysical data to define a broad host of pegmatite swarms; delineating a maiden JORC-compliant Ghanaian Cape Coast Resource with target 12-15Mt @ 1.25% Li₂O (SP Angel estimate).
• Coarse spodumene intersections are significant for a simple and proven process flow-sheet design, yielding a highly desirable lithium chemical to support accelerating electrification markets.
• SP Angel scenario modelling targets three viable mine scales, deriving NPVs for 1Mtpa, 1.5Mpta and 2Mtpa processing plants to deliver a 6% Li₂O spodumene concentrate only 100km to the Takoradi deep sea port:

 

Cape Coast Operational Summary
Operating Outcomes	1 Mt	1.5 Mt	2 Mt	Unit
Project NPV8 (post-tax)	144	222	298	GBP£m
IRR (post-tax)	50%	53%	54%	%
Target Share Price (post-tax)	46	72	96	Pence
Growth Factor (post-tax)	2.5	3.8	5.1	x

 

 

 

 

 

 

 

 

• Additional IronRidge value is derived from the 3,584km²province-scale gold and lithium pipeline portfolio across Côte d’Ivoire, attributing GBP£19m enterprise value against peers.
• Fundamental and methodical fieldwork should lead to a material discovery to further validate the promising preliminary grades, in the significantly under‑rated mining jurisdiction of Ghana expecting 15.6% sector growth through to 2021.
• The Company remain supported by the loyal shareholder base from inception onto AIM, and a strong board and management team with a depth of African experience will drive the maturity and transition from explorer to developer.

*SP Angel act as nomad and broker to IronRidge Resources

 

Thor Mining (THR LN) FOLLOW 0.75p, Mkt Cap £5.4m – Kapunda Copper ISR gold recovery

• Thor Mining announce successful recover of gold from samples of the Kapunda copper ISR project in South Australia, with results from CSIRO part of the CRC-P project funded by the Australian Commonwealth government.  
• Successful recovery of gold from samples from historic drilling has demonstrated proof of concept at the Kapunda ISR copper project using techniques appropriate for In situ Recovery (ISR) test work, with results for 28 surface and drill core samples reporting range from 0.6 to 5.54 dwts /ton (approx. 0.93 to 8.58g/t).
• A CSIRO thiosulfate-based product was used to leach 300g of the sample.
• Further work will be carried out as part of the CRC-P research program on the potential recovery of gold from selected samples including spectral analysis of core remaining in the South Australian core library.

*SP Angel act as broker to Thor Mining

 

Walkabout Resources* (WKT AU) A$0.16, Mkt Cap A$48.7m – First binding offtake term sheet secured

• Walkabout Resources report the formal signing of the first binding offtake term sheet with expandable graphite producer, Inner Mongolia Qianxin Graphite Co (IMQG), delivering a minimum of 10,000t and a maximum of 20,000t per annum flake graphite for the first three years mine life.
• The private IMQG has an expandable upgrading facility with a total capacity of 30,000tpa, with high-level approval to further develop capacity to 60,000-100,000tpa. The Company intends to process flake graphite concentrate to a high-purity within their existing facility.
• Although a framework for the pricing mechanism has been discussed, the final pricing agreement will only be agreed at a date, at least one month prior to delivery of the first batch of concentrate.
• Final sale volumes are dependent on the availability of adequate material in the sought-after fractions, with agreed mechanisms giving the Company flexibility in delivering excess product should demand result in improved prices.
• Discussions and negotiations with other holders of non-binding MoU’s and HoA’s continue with the Company in a stronger position for more favourable terms.
• Executive Chairman Trevor Benson adds “securing the sale of up to 50% of planned production also reduces financing risk.”

Conclusion: Following robust upgrades in the recently reported DFS, we are pleased to see recognition of the premium large-flake product. We look forward to developments in financing options for Africa’s lowest capital cost graphite project.

*SP Angel acts as UK Broker to Walkabout Resources Ltd

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abagail 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.

 

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