SP Angel . Morning View . Govt investing to boost UK battery technology
Paul Kettle
SP Angel Research Note -4 min read
09:48, 12th June 2019

SP Angel – Morning View – Wednesday 12 06 19

China CPI rises to 2.7% despite fall in factory prices

Govt investing to boost UK battery technology

CLICK FOR PDF

MiFID II exempt information – see disclaimer below 

Altus Strategies* (ALS LN) – New gold prospect discovered at Daro

ARC Minerals* (ARCM LN) BUY – Drilling starts on large Cheyeza copper target in Zambia

Avesoro Resources (ASO LN) – Youga processing suspended while negotiations continue

IronRidge Resources* (IRR LN) BUY - Target Price 52p – Acquisition of Vavoua projects in Ivory Coast

Landore Resources (LND LN) – BAM drilling underway

 

China - consumer inflation rises to 15-month high as pork crisis raises prices following epidemic of African swine fever

  • Chinese CPI accelerated to 2.7% last month following a 18% rise in pork prices despite a fall in factory producer prices and lower commodity input prices
  • Core China PPI increased just 0.6% yoy in May
  • The African swine fever epidemic is now affecting larger corporate pig farms indicating severe shortages as farmers have aggressively culled their herds.
  • Fresh fruit rose by a whopping 26.7% yoy beating the 14.8% yoy rise seen in April indicating more food inflation may come.
  • Chinese inflation has the potential to cause significant change in the global economy. The situation reminds us of a saying about a butterfly flapping its wings to create a typhoon in the world.

 

UK government gives green light for EV battery development

  • The Faraday Battery Challenge is set to give a strong boost to UK technology companies, benefiting from £23m investment, and forming part of the drive to maintain the UK as a world-leader in the latest technologies and emerging markets, through its modern Industrial Strategy.
  • The Faraday Battery Challenge brings together world-leading academia and businesses to accelerate the research needed to develop the latest electric car battery technologies – a crucial part of the UK’s move towards a net zero emissions economy.
  • It is also a key contributor to all new cars and vans being effectively zero emission by 2040.
  • Announced winner include:       
    • Mining consultancy firm Wardell Armstrong who will partner with experts at the Natural History Museum and Cornish Lithium to lead a new study looking to integrate a domestic supply of lithium.
    • Jaguar Land Rover-led project to maximise battery performance while maintaining safety.
    • A study looking into the use of artificial intelligence in battery manufacture, led by materials technology company Granta Design.
  • The latest funding forms part of the total £274m awarded to consortia across the UK as part of the government’s Industrial Strategy Challenge Fund.
  • Faraday Battery Challenge Director Tony Harper said “across the three rounds of funding competitions we have now awarded a total of £82.6m to 63 projects. This is a massive investment in business-led battery R&D in the UK, supporting innovative technologies and helping to build a UK supply chain that can compete on the global stage”.

 

NASA working on Warp Drive technology for ‘faster than light’ travel using Quantum-Thruster Physics (Space.com)

  • NASA scientists are working on the concept of ‘faster than light’ travel using a light-measuring device in the lab.
  • The team are looking for a change in path length of the photon on the interferometer, for evidence of being able to manipulate space time.
  • Quantum thruster physics is another way to potentially create a Quantum thrust through space-time using negative vacuum generators for negative vacuum energy.
  • We do not yet know what materials or fuel these warp drives may require but we feel sure they will use some Rare Earth Metals and possibly Helium 3 perhaps to fuel their Di-lithium crystals. Beam me up Scottie!
  • We recommend Mkango and Peak Resources for their key Rare Earth Element mining and processing ventures.

 

Dow Jones Industrials

 

-0.05%

at

  26,049

Nikkei 225

 

-0.35%

at

  21,130

HK Hang Seng

 

-1.90%

at

  27,260

Shanghai Composite

 

-0.56%

at

   2,909

FTSE 350 Mining

 

+0.07%

at

  19,704

AIM Basic Resources

 

+0.53%

at

   1,969

 

Economics

Currencies

US$1.1335/eur vs 1.1300/eur yesterday  Yen 108.33/$ vs 108.66/

nbsp; Ar 14.690/$ vs 14.921/
nbsp; $1.273/gbp vs $1.271/gbp  0.695/aud vs 0.697/aud  CNY 6.913/$ vs 6.933/$

 

Commodity News

Precious metals:         

Gold US$1,335/oz vs US$1,326/oz yesterday

   Gold ETFs 72.0moz vs US$72.1moz yesterday

Platinum US$819/oz vs US$804/oz yesterday

Palladium US$1,390/oz vs US$1,385/oz yesterday

Silver US$14.85/oz vs US$14.71/oz yesterday

           

Base metals:   

Copper US$ 5,863/t vs US$5,921/t yesterday

Chinese miners climb on spending plan

  • A gauge of metal miners including Teck Resources and BHP Group advanced the most in three months following a report China will boost incentives for infrastructure spending, improving the outlook for demand.
  • The BI Global Copper Competitive Peers index climbed 2.3%, the biggest gain since Feb. 22. China, the world’s top base-metals user, will allow local governments to use part of the proceeds from special bond sales as capital for major projects such as railway and national highways, the official Xinhua News reported Monday.

Aluminium US$ 1,777/t vs US$1,782/t yesterday

Nickel US$ 11,835/t vs US$11,840/t yesterday

Zinc US$ 2,499/t vs US$2,514/t yesterday

Lead US$ 1,895/t vs US$1,898/t yesterday

Tin US$ 19,180/t vs US$19,305/t yesterday

           

Energy:           

Oil US$61.2/bbl vs US$62.6/bbl yesterday

Natural Gas US$2.390/mmbtu vs US$2.368/mmbtu yesterday

Uranium US$24.90/lb vs US$24.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$102.5/t vs US$97.4/t

Chinese steel rebar 25mm US$602.6/t vs US$599.7/t

Thermal coal (1st year forward cif ARA) US$64.8/t vs US$66.8/t

Coking coal futures Dalian Exchange US$197.2/t vs US$197.1/t

           

Other:  

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

NdPr Rare Earth Oxide (China) US$51,714/t vs US$51,333/t

Lithium carbonate 99% (China) US$9,620/t vs US$9,616/t

Ferro Vanadium 80% FOB (China) US$37.5/kg vs US$36.5/kg

Antimony Trioxide 99.5% EU (China) US$5.8/kg vs US$5.8/kg

Tungsten APT European US$260-270/mtu vs US$260-270/mtu

 

Battery News

Hydrogen station explosion halts Toyota fuel cell

  • Toyota and Hyundai face massive set-backs in this programme following a hydrogen refueling station explosion in Norway, halting sales of fuel cell vehicles.
  • The Uno-X hydrogen station in Sandvika in Bærum exploded on Monday and resulted in two injuries in a nearby non-fuel cell vehicle.
  • Toyota remain steadfast in the value of fuel cell hydrogen vehicles; “This does not change our view of hydrogen, and it is important for us to point out that hydrogen cars are at least as safe as ordinary cars. The hydrogen tanks themselves are so robust that you can shoot them with a gun without knocking them.

 

Uber takes flying taxi ambitions to Australia

  • Uber selects Melbourne as the third pilot city for its air taxi programme, joining Dallas and Los Angeles.
  • Test flights are due to start from 2020, with the aim of launching commercial operations from 2023.
  • Uber said increased air mobility would help ease traffic congestion in cities. "As major cities grow, the heavy reliance on private car ownership will not be sustainable," said Eric Allison, global head of the firm's aviation division Uber Elevate. "Uber Air holds enormous potential to help reduce road congestion."
  • The Company is opening a laboratory in Paris to support development of flying taxis.
  • More important information on electrifying flight is found in the SP Angel flash note: CLICK FOR PDF

 

Tesla’s battery research group files new patent that could help prevent cell failure

  • Tesla’s battery research group in Canada has filed a new patent application for a way to analyse an electrolyte in a lithium cell; helping to prevent cell failure.  
  • The patent was filed through Tesla’s battery research group led by Jeff Dahn in Halifax. He is credited for helping increase the life cycle of the cells, which helped their commercialisation. His work now focuses mainly on a potential increase in energy density and durability.
  • In 2016, Dahn transitioned his research group from their 20-year research agreement with 3M to a new association with Tesla under the newly formed ‘NSERC/Tesla Canada Industrial Research’. Through the agreement, Tesla invested in a new research lab close to Dahn’s group near Halifax, Nova Scotia.
  • The latest patent is called ‘Method and System for Determining Concentration of Electrolyte Components for Lithium-ion Cells’.
  • They described the inventio; “A computer-implemented method for determining a concentration of a component of an electrolyte in a lithium-ion or for a lithium-ion cell”.

 

Company News

Altus Strategies* (ALS LN) FOLLOW 4.85p, Mkt Cap £8.6m – New gold prospect discovered at Daro

  • Altus Strategies reports that its Sentinel remote-sensing programme and follow-up exploration has identified a new gold prospect within its 412km2 Daro copper-gold VMS (volcanogenic massive sulphide) project in the Tigray State of northern Ethiopia.
  • Current mapping of the Wedi Keshi prospect extends over 2km of strike length and up to 300m in width “thinning to 100m wide at its southern end”.
  • The prospect coincides “with a series of discontinuous hard gold workings and likely represents the primary source for the gold in alluvial artisanal workings in the area”.
  • At this relatively early stage assay data relates to rock chip samples, including:
    • “14.1 g/t Au, 8.5 g/t Au and 7.3 g/t from quartz veins and wall-rock”
  • The prospect lies within “a NNE trending kaolinised quartz-feldspar porphyry intrusion at Wedi Keshi … [and] … The eastern margin of the prospect includes a zone of discrete hard rock artisanal gold workings, approximately 50m wide and characterised by notable quartz veining within a highly kaolinised wall rock”.
  • The company intends to follow up with a programme of “channel and trench sampling, in order to define potential drill targets.”
  • In addition to the work at Wedi Keshi, the company reports that it has completed a reconnaissance ground gravity survey “along an initial 300m section of the 2.5km long Teklil VMS prospect at Daro … [which has] … identified a potentially significant gravity anomaly adjacent to key VMS markers, including a gossanous outcrop sample which returned 6.95% Cu, units with sulphide stockworks and jasperoid”.
  • In view of the promising results obtained, Altus Strategies “considers that the gravity survey should be extended across the entire Teklil prospect.”

Conclusion: Northern Ethiopia is emerging as a promising exploration destination for VMS deposits; we look forward to further news as the programme develops.

*SP Angel acts as nomad and broker to Altus Strategies

 

ARC Minerals* (ARCM LN)  FOLLOW2.4p, Mkt Cap £17m – Drilling starts on large Cheyeza copper target in Zambia

(ARC Minerals is working on drilling a number of projects in connection with Zaco Investments Limited)

BUY

  • ARC Minerals report that drilling has now started on its newly identified and rather large Cheyeza anomaly in Zambia.
  • The team have moved two diamond drill rigs to the property indicating their confidence for a potential discovery on the target.
  • The drill program is designed to cover 7,500m of drilling on its Zamsort/Zaco copper projects.
  • The anomaly is significantly larger than that seen at the existing Kalaba copper, cobalt mine where pilot plant testing is ongoing.
  • The Cheyeza anomaly is around 10x8km in scale with Cheyeza East target (3x0.8km) showing up to 2,792ppm (0.28%) copper in geochemistry.
  • http://s2.q4cdn.com/256050873/files/doc_downloads/maps/Zamsort-50ppm-Cu-update2.pdf
  • http://s2.q4cdn.com/256050873/files/doc_downloads/maps/Cheyeza-infill-soil-XRF-results.jpg
  • Cheyeza East XRF readings for copper in soils show very high results though these are purely indicative as XRF readings need to be interpreted in relation to the manner in which they are taken.
  • ARC Minerals were forced to drop some 465sqkm of their license area under the Zambian use it or lose it legislation. A number of these properties are being worked on in joint venture with a vehicle called Zaco Investments Limited which is a private Zambian registered exploration company where ARC Minerals holds a 42.5% stake and where Nick von Schirnding also acts as Chairman.

Conclusion:  While the XRF readings are a great tool for targeting, drilling is the only real way to determine what is in the ground at Cheyeza. We look forward to the results.

We rate the stock a BUY based on our view of the potential for discovery at the Cheyeza property.

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

 

Avesoro Resources (ASO LN) FOLLOW 31p, Mkt Cap £25.3m – Youga processing suspended while negotiations continue

  • Avesoro Resource reports that negotiations are continuing with the open-pit mining contractor “and former employees” at its Youga gold mine in Burkina Faso.
  • The discussions concern “re-hiring the open-pit operators” and the company “remains confident of a positive near-term conclusion, however gold processing operations have now been temporarily suspended at Youga. Mining and processing operations will recommence upon successful conclusion of these negotiations.”
  • Earlier this week, the company announced that it was reducing its 2019 production guidance by 30,000oz to 180-200,000oz (around 15%) as a result of the problems at Youga as well as by disruption to budgeted production arising  from transition to contractor mining at its New Liberty mine in Liberia.

Conclusion: Suspension of processing at Youga adds to the pressure for a speedy resolution of negotiations and prompt resumption of normal operations.

 

IronRidge Resources* (IRR LN)  FOLLOW15.5p, Mkt Cap £48m – Acquisition of Vavoua projects in Ivory Coast

BUY - Target Price 52p

See link

  • African-focused IronRidge Resource announce the acquisition of 100% share capital of each of Marlin Minerals SARL, Booster Minerals SARL and CAPRI Metals SARL; collectively “Vavoua Projects”.
  • The Company announced on 18 April 2017, 28 March 2017 and 12 April 2017 that it had entered into Earn in arrangement with Bluefin, Major Star and Enchi Proci respectively, under which IronRidge had rights to acquire 100% of the projects with each entity maintaining a residual NSR of 2.5% of which 40% to 50% can be acquired for between US$2.5m-US$3m at any time.
  • The issue of 2,111,668 shares in IronRidge (equivalent to 0.7% interest in the enlarged share capital) at 22p/share is collectively for the consideration and transfer of full ownership.
  • Ownership of the three licence and application provides IronRidge with exclusive rights to tenure package adjacent to the 1.73Moz JORC Abujar project.
  • The Company have completed 100m airborne magnetics, with geophysics confirming strike extension over 40km of the extrapolated mineralised Abujar project.
  • Southern Geoscience Consultants completed detailed litho-structural interpretation, which in-conjunction with field mapping and sampling results, has defined fourteen targets of which four are priority one targets.
  • Anomalous due diligence results including 2.3g/t in auger drilling and the discovery of artisanal workings will help prioritise follow-up field programmes.

Conclusion: The completed acquisition in Ivory Coast bolsters the Company’s presence in country, with preliminary geophysical and geological data giving clear support towards nearology to the Abujar project. We look forward to learning the mineral potential as field programmes investigate targets.

*SP Angel act as nomad and broker to IronRidge Resources

 

 

KEFI Minerals* (KEFI LN)  FOLLOW1.68p, Mkt Cap 10.8m - Tapping into ANS mineral potential

See link

  • The 1.1moz Tulu Kapi Project is in final funding stages with community resettlement start scheduled for mid-2019 and full project funding closure before YE19 paving the way for a two year construction period with first gold in mid-21 (SPA schedule).
  • The project is estimated to run at c.135kozpa and $810/oz AISC generating an average of $75mpa in EBITDA and $96m NPV (DR10%, post debt/lease payments) using $1,350/oz gold price and 28.0 USD:BIRR exchange rate (v current spot 29.0 and up to 38.0 in the black market). Our estimates exclude c.$20m in buffer cash at the end of construction period included in NPV estimated by KEFI Minerals reflecting more conservative set of assumptions.
  • KEFI holds a 45% effective interest in the project reflecting $60m invested to date (including pre-KEFI investment by previous shareholders). With the development capex largely funded by equity partners (ANS and Government of Ethiopia) and proposed $160m worth of infrastructure bonds proceeds, we estimate KEFI interest in the Tulu Kapi NPV at $67m or 7.4p per share.
  • The Company engaged an experienced and well respected team of mining (AMS) and EPC/EPCM (Lycopodium) contractors and Owners’ Team for oversight of development minimising project development execution risk.
  • KEFI has got support from the federal government that is contributing $20m of infrastructure related spending in what is to become the first new major mining project in decades.
  • The orebody remains open in the dip direction and down plunge with the current mineral resource for the ‘below 1,400 RL’ part of the deposit (ie >350m from surface) estimated at 0.2moz (90% in the Indicated category) and representing a potential source of high grade material from the underground operation (5.7g/t). Tulu Kapi UG resource contributes $6m (45% interest) to the NPV or 0.7p.
  • Additionally, the Company is in the process of renewing exploration permits over the 1,900km2 of prospective ground offering growth potential as well as optionality to processing of new discoveries given adjacent future Tulu Kapi CIL plant.
  • In Saudi Arabia, KEFI is a 40% investor and technical partner at Gold & Minerals, a local JV with a leading local industrial group ARTAR, focused on the central-southwestern part of the prolific Arabian Nubian Shield prospective for gold and VMS deposits. The team is planning to launch a drilling programme once Tulu Kapi construction is started testing gold oxide at surface and the underlying copper-gold-zinc sulphide mineralisation.
  • Using our DCF valuation model (10%DR, $1,350/oz) we arrive at NAVPS of 7.8p based on 644m shares in issue. The extent to which KEFI will be able to realise value gains depends on the amount of dilution the Company will incur funding operations through the Tulu Kapi development stage. Next major catalysts to the share price include start of relocation programme, infrastructure bond placing and start of construction.

*SP Angel act as Nomad and broker to Kefi Minerals

 

Valuation

Interest

Att US$m

GBp/shr

Tulu Kapi OP

45%

67

7.4

Tulu Kapi UG (50% risked)

45%

6

0.7

Jibal Qutman (50% risked)

40%

7

0.8

Project Value

 

80

8.8

Adjustments

 

 

 

Net Debt

 

-

-

Corporate overheads

 

-9

-1.0

Company NAV

 

71

7.8

GBPUSD exchange rate 1.4, DR 10%, Gold price $1,350/oz

 

         

 

Landore Resources (LND LN) FOLLOW 0.715 pence, Mkt Cap £8.6m – BAM drilling underway

  • Landore Resources has announced that it has started a 4,500m diamond-drilling programme at its BAM Lake gold property at Junior Lake, Ontario.
  • The drilling, which includes both infill and extension holes, is intended to extend “the defined resource of 951,000 ounces of gold”.
  • The existing resource of 28.8mt at an average grade of 1.03g/t gold “extends over a distance of 1.7 kilometres within a drilled zone of 3.1 kilometre length. Infill drilling will be carried out within the remaining 1.4 kilometres to bring that section up to defined resource level.”
  • Landore Resources points out that the “BAM Gold Deposit remains open at depth and along strike to the east and to the West … [and that the] … recently completed estimation work modelled potential mineralised material  within the above target areas for a possible 14,761,000t at 0.93g/t ounces gold for a further 441,000 ounces gold, in the 'Unclassified' material category.”
  • In February, the company reported a Preliminary Economic Assessment (PEA) for the BAM deposit based on the reported resource from the 2018 drilling programme. This study envisaged, as a base case, the development of two open pits and a 2.2mtpa processing plant operating for 5.75 years to produce a total of 489,000oz of gold and indicated that, at a gold price of US$1300/oz, capital expenditure of $73.53m, plus $20.3m of pre-production capital expenditure would generate an after tax NPV of  US$69.2m and an IRR of 22.4%.
  • We noted at the time of its release that the PEA base case appeared to include some inferred resources as well as the indicated resource of the BAM project and would presumably need additional work to firm up the estimates so we are encouraged to see the new phase of drilling addressing the issue.

 

 

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

 

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.

 

DISCLAIMER

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 (tim.jenkins@spangel.co.uk).

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%

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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