SP Angel . Morning View . Battery adoption concerns growing from nickel market tightness
Paul Kettle
SP Angel Morning Research Note -3 min read
10:38, 12th February 2019

SP Angel – Morning View – Tuesday 12 02 19

Battery adoption concerns growing from nickel market tightness

MiFID II exempt information – see disclaimer below

  

Bezant Resources (BZT LN) – Mankayan projects economics

Connemara Mining* (CON LN) – Proposal to change name

Element 25 (E25 AU) – Bulk test yields high purity 99.95% manganese metal

Exore Resources (ERX AU) – Well funded gold explorer with extensive land package in northern Cote d’Ivoire: Antoinette drilling results

Firestone Diamonds (FDI LN) – Liqhobong mine yields 70 carat white diamond

Kodal Resources* (KOD LN) – High grade lithium intersections across final assay results

 

Dow Jones Industrials

 

-0.21%

at

  25,053

Nikkei 225

 

+2.61%

at

  20,864

HK Hang Seng

 

+0.10%

at

  28,171

Shanghai Composite

 

+0.68%

at

   2,672

FTSE 350 Mining

 

+0.44%

at

  18,632

AIM Basic Resources

 

+0.09%

at

   2,205

 

Economics

US – Market sentiment got a boost from the news that US lawmakers reached a tentative deal on border security funding.

  • An agreement should help avert another government shutdown that is currently due to start on Saturday.
  • Congressional aides say the deal did not contain the US$5.7bn funding for a border wall. The deal did include $1.37bn for erecting new fencing along the southern border which is around the sam amount Congress allocated last year and far below what President Trump asked for.
  • Both US and Chinese officials expressed hopes the new round of talks that began in Beijing on Monday would bring them closer to resolving the current trade dispute.
  • Previously, the US side set March 1 as a deadline for an agreement with tariffs on around $200bn of Chinese exports to the US set to increase from 10% to 25%, otherwise.
  • The US$ holds firm having gained for eight straight sessions hitting the highest level in nearly three months on Monday and marking the longest rally in two years.

 

China – National credit data is due this week that will be watched closed for signs of monetary authorities’ support for waning economic growth.

 

Germany – Q4 GDP numbers are due on Thursday with estimates suggesting the country has managed to avoid technical recession (0.1%qoq v -0.2%qoq in Q3/18).

 

UK – PM May is expected to tell MPs “we now all need to hold our nerve” in a statement to the House of Commons at lunchtime with Brexit talks being at a “crucial stage”.

  • The PM is currently seeking legally binding guarantees from Brussels that the contentious backstop, an insurance policy which prevents a hard border between northern Ireland and Ireland, is a temporary arrangement, FT reports.
  • Meanwhile, the opposition and some cabinet members believe May is running down the clock to exit day on March 29 to force MPs to back her position.
  • As it stands there are currently three main options: a no-deal exit, a last-minute deal or a delay to Brexit.
  • The pound is trading lower this morning as no deal concerns are weighing on sentiment with US$ gaining traction amid a tentative resolution to a potential government shutdown.

 

South Africa – The power utility is reported to have started a third day of power outages, blaming issues including failures at two huge new power stations that are also the main source of the Company’s massive debt.

  • On Tuesday, the Company implemented rotational power cuts of 3,000 MW.
  • On Monday, the Company resorted to the most intense cuts in four years after seven generating units tripped within a period of five hours, Bloomberg reports.

 

Currencies

US$1.1280/eur vs 1.1313/eur yesterday  Yen 110.54/$ vs 110.00/

nbsp; SAr 13.764/$ vs 13.616/
nbsp; $1.287/gbp vs $1.292/gbp  0.708/aud vs 0.710/aud  CNY 6.775/$ vs 6.780/$

 

Commodity News

Precious metals:         

Gold US$1,314/oz vs US$1,311/oz yesterday

  • Gold rallies as the dollar advance peters out, while investors await the outcome of high-level US-China trade talks ongoing in Beijing this week. The Trump administration add the President still wants to meet Chinese counterpart Xi Jinping in an effort to end trade war, signaling optimism for current negotiations.
  • Separately, US congressional negotiators have reached a tentative deal on border security providing President Trump with significantly less money than he demanded for new barriers but could avert another destructive government shutdown.
  • A measure of U.S. core consumer inflation likely eased to 2.1% on annual basis, helping justify Fed’s pause in hiking cycle, according to economists surveyed before report Wednesday
  • Sustained concerns over trade talks, US shutdown threat, Brexit uncertainty and global slowdown is persisting strength in gold purchasing, with the People’s Bank of China adding to its reserves again, boosting holdings for a second month.
  • The nation raised holdings to 59.94moz, or about 1,864t, by the end of January from 59.56moz a month earlier, according to data on the bank’s website. In tonnage terms, it added about 11.8t last month after taking in just under 10t in December, which was the first time the PBOC had boosted its hoard since October 2016.
  • China were not alone. Central banks worldwide added the second-highest annual total on record in 2018 as heightened geopolitical and economic uncertainty drove them to diversify reserves, according to the World Gold Council.

   Gold ETFs 72.7moz vs US$72.7moz yesterday

Platinum US$791/oz vs US$794/oz yesterday

Palladium US$1,395/oz vs US$1,380/oz yesterday

Silver US$15.81/oz vs US$15.76/oz yesterday

           

Base metals:   

Copper US$ 6,145/t vs US$6,141/t yesterday

Aluminium US$ 1,880/t vs US$1,867/t yesterday

Nickel US$ 12,420/t vs US$12,520/t yesterday

  • Supply tightness is creating growing anxiety as battery metal consumers look to draw greater volumes in expanding capacity, according to the latest assessment of Bloomberg NEF. “Nickel is now the metal creating the most concern in the battery manufacturing community”, James Frith adds.
  • Cathode market leader Umicore SA also add supply constraints could push nickel prices up to as much as $20,000-$25,000/t.
  • None of these big shortages have yet come to pass and it’s hard to imagine an industry which is investing tens if not hundreds of billions of dollars transitioning to EVs being stopped by a few billion shortfall in nickel mining investment,” BNEF analyst Logan Goldie-Scot reports.
  • While supply tightness isn’t expected to derail the growing EV sector, there could be delays in the widespread adoption of high nickel chemistries such as NMC (811) – cathode composed on 80% nickel, 10% manganese and 10% cobalt.
  • Such a move would slow the adoption of higher energy density batteries, possibly slowing battery cost reductions, he added.

Zinc US$ 2,646/t vs US$2,646/t yesterday

Lead US$ 2,056/t vs US$2,060/t yesterday

Tin US$ 20,975/t vs US$21,020/t yesterday

           

Energy:           

Oil US$61.9/bbl vs US$61.8/bbl yesterday

Natural Gas US$2.692/mmbtu vs US$2.675/mmbtu yesterday

Uranium US$28.80/lb vs US$28.85/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$87.7/t vs US$91.0/t

Chinese steel rebar 25mm US$594.3/t vs US$593.8/t

Thermal coal (1st year forward cif ARA) US$77.4/t vs US$76.5/t

Coking coal futures Dalian Exchange US$195.2/t vs US$195.1/t

           

Other:  

Cobalt LME 3m US$32,000/t vs US$33,000/t

China NdPr Rare Earth Oxide US$45,981/t vs US$45,947/t

China Lithium carbonate 99% US$9,964/t vs US$9,956/t

China Ferro Vanadium 80% FOB US$70.9/kg vs US$70.9/kg

China Antimony Trioxide 99.5% EU US$6.9/kg vs US$6.9/kg

Tungsten APT European US$260-270/mtu unchanged from previous week

 

Battery News

Climate change: UK CO2 emissions fall again

  • The mass closure of coal-fired power stations has helped reduce UK greenhouse gases whilst global emissions (GHG) are rising.
  • The finalised official statistics show Britain’s GHG in 2017 were 2.7% lower than in 2016 - and 42.1% lower than in 1990. Coal use for electricity fell 27% to a record low following the closure of two major plants.
  • Overall, the UK has a target of cutting CO2 emissions 80% by 2050. Ministers are on track to meet their short-term goals, but the advisory Committee on Climate Change (CCC) says they are still short of policies to achieve long-term targets. The CCC warns there’s also a big difference between the current UK target of 80% cuts and the increased ambition of virtually 100% cuts that ministers are likely to embrace.

 

Newly discovered design rules lead to better fuel cell catalyst

  • To create better batteries and fuel cells, scientists must make oxygen molecules gain and lose electrons efficiently. The reactions are frustratingly sluggish. Speeding the reactions requires heat and platinum, which are costly.
  • Now, researchers uncovered vital design principles to engineer catalysts that use more readily available metals and less heat. The catalysts performed well and were stable over the long term.
  • Researchers have been examining promising catalysts made from various ratios of less expensive metals. Specifically, these catalysts are layered, mixed ionic-electronic conducting oxides.

 

Making green cars greener with battery recycling

  • Current lithium-ion battery recycling policies and processes were designed for the relatively low size and volume of consumer electronic batteries—AAs, AAAs, and the like. But with nearly every major automaker committing to all electric or hybrid-electric product lines in the coming years, this huge flood of new lithium-ion batteries will require a completely different approach to battery recycling than is currently available.
  • The researchers specifically examined how a direct cathode recycling process would compare to other recycling processes in terms of GHGs and energy consumption. This method of battery recycling is focused on keeping the cathode materials in tact so they can be used in future batteries.
  • While all lithium-ion batteries use lithium to carry the charge, their cathodes—which store the lithium ions when the battery is discharged—can be made out of a variety of materials, such as nickel, manganese, or cobalt.

 

Company News

Bezant Resources (BZT LN)FOLLOW  0.115p, Mkt Cap £1.1m – Mankayan projects economics

  • Bezant Resources reports the results of an independent study assessing the optimisation of potential future mine development for its Mankayan copper-gold project, located on the Island of Luzon in the Philippines”.
  • The study, conducted by Mining Plus Pty and incorporating the 2009, JORC (2004) compliant mineral resource estimate prepared by Snowden Consultants examines 11 different mining options including  using an intermediate “stepping stone” phase of sub-level caving as an intermediate phase towards the development of block-caving of the Mankayan copper-gold porphyry.
  • The mineral resource estimate defines 221.6mt classed as indicated at an average grade of 0.49% copper and 0.52g/t gold with an additional inferred resource of 36.2mt at an average grade of 0.44% copper and 0.48g/t gold.
  • Four “representative options” were examined more closely using a copper price of US$3.00/lb and a gold price of US$1250/oz:
    • A 24mtpa twin block-caving plan (taken over two lifts) and costing a total of US$6.356bn and an initial US$1.4bn to deliver a pre-tax NPV8.5% of US$2.06bn and 29% IRR over a 23 years mine life
    • A 12mtpa four stage block caving plan taken over two lifts which costs a total of 6.032bn and an initial US$896m which delivers a pre-tax NPV8.5% of 1.52bn and 27% IRR over a 34 years life;
    • A “Scaled Option” which includes an initial 6mtpa block cave followed by 3 12mtpa block caves which extends mine life to 38 years at an overall capital cost of US$6.2bn  but reduces the initial capital cost to US$633m and generates an NPV8.5% of US$1.06bn and an IRR of 21%; and
    • A 6mtpa initial sub-level caving option followed by three 6mtpa block caves with an initial cost of US$529m and an overall capital cost of US$6.019bn which generates an NPV 8.5% of US$562m and IRR of 14% over a 58years mine life.
  • The study recommends further work to develop a pre-feasibility study, including updated cost information.
  • Commenting on the study of what he described as a “major, well delineated copper-gold porphyry style deposit” CEO Laurence Read said that the work by Mining Plus affords us great confidence that the project lends itself to potential future development by medium size mining companies, as well as the majors, seeking to secure a long-term source of physical copper and goldThe Board remains positive regarding the fundamentals for copper over the next three years and believes that signs of a supply shortfall are already becoming evident."

Conclusion: The Philippines has a difficult reputation for large scale mining developments and, at this stage, with each of the main options in the Mankayan study expected to cost in excess of US$6bn and generate NPVs of under US$2bn at a US$3/lb copper price, we imagine that project development may need to identify significant savings to be viable at current commodity prices.

 

Connemara Mining* (CON LN) FOLLOW1.275p mkt cap £1.5m – Proposal to change name

  • Connemara Mining reports its intention to change the company’s name to Arkle Resources plc in order to reflect “the Company’s heritage as an Irish based company established to focus on zinc assets [and its evolution to a] diversified position in both gold and zinc exploration and resource development.”
  • The proposal is to be considered at an EGM to be held in Dublin on 12th March.

Conclusion: The eponymous racehorse, “Arkle”, enjoyed an illustrious career during the 1960s including as a three-times winner of the Cheltenham Gold Cup as well as a two-time winner of the Hennessy Gold Cup – perhaps the name change augurs particularly well for the company’s continuing gold exploration programmes in Wicklow, Wexford and in Donegal.

*SP Angel is Nomad and Joint-Broker to Connemara Mining

 

Element 25 (E25 AU) A$0.18, Mkt Cap A$15m – Bulk test yields high purity 99.95% manganese metal

  • Bulk metallurgical test work conducted on four representative PQ diamond drill hole core samples from the Butcherbird Manganese Project successfully yielded High-Purity Electrolytic Manganese Metal (HP EMM) utilising the proprietary E25 flowsheet.
  • The work forms a crucial part of the ongoing Pre-Feasibility Study scheduled for completion during 2019, with the leaching and purification of the first bulk sample representing a key milestone in proving the viability of processing methodology.
  • Leach test work produced approximately 270l of leach solution containing approx. 44g/L manganese. In terms of purity, 99.95% Mn is well above the industry standard for EMM of 99.7% Mn. All impurities were below acceptable limits for the production of metal.
  • The hydrometallurgical leach processing and purification was conducted on representative PQ diamond core from within the Yanneri Ridge resource area. The work was undertaken by Simulus Laboratories under the supervision of PPM Global Senior Metallurgist Mr Tim Porter.
  • Company focus targets multiple large-scale batch tests from approximately 6t of PQ diamond core to optimize the process and gain understanding of any localised geo-metallurgical considerations that need addressing during process plant design.
  • The Company has completed a positive scoping study with respect to developing the deposit to produce high purity manganese sulphate for lithium ion battery cathodes as well as High Purity Electrolytic Manganese Metal for use in certain specialty steels.

 

Exore Resources (ERX AU) A$0.067p, MKt Cap A$31m – Well funded gold explorer with extensive land package in northern Cote d’Ivoire: Antoinette drilling results

  • The Company holds 80% interest in the prospective land package over 830km2 as well as a binding farm-in agreement for up to 80% in 515km2 license area in northern Cote d’Ivoire.
  • Licenses are located next to Fonondara/Boundiali gold discovery (Randgold) and in close proximity to major gold operations including Tongon (4.2moz, 40km), Syama (11.5moz, 90km) and Sissingue (1.0moz, 50km).
  • Multi-rig drilling programme currently in progress at Antoinette and Veronique within the Boundiali Permit.
  • The team is planning to complete 10,000m of drilling as part of Phase I at Antoinette with a target to release maiden resource in Q2 and results of leach test work in Q1; additionally 12,000m of drilling is planned at Veronique.
  • The Company has today released results from the first 13 holes/c.2,000m (infill and step out) of a c.60 holes/10,000m Phase I RC drilling programme from the Antoinette Central area.
  • Results show a number of wide high grade intersections in the Antoinette Central area with mineralisation remaining open in all directions.
  • Selected results included 25m @ 6.87g/t from 32m, 9m @ 3.73g/t from 32m, 5m @ 6.97g/t from 55m, 12m @ 7.22g/t from 62m, 7m @ 4.97g/t from 71m, 11m at 12.79g/t from 81m, 6m @ 6.02g/t from 92m and 23m @ 3.89g/t from 120m.
  • Historical shallow drilling (av. 100m) at Antoinette tested only 10% of the +7km long geochemical anomaly with most holes returning wide high grade intersections including 17m @22.52g/t gold from 8m, 10m @ 6.86g/t Au from 58m, 14m @ 11.24g/t gold from 12m and 11m @ 9.07g/t gold from 50m among selected results.
  • At Veronique (5km south of Antoinette), the Company is in the process of completing 12,000m of AC drilling as part of Phase I testing high grade soil samples (often >200ppb and up to 1,320ppb gold) along 8km long anomaly and ahead of a follow up RC drilling programme.
  • Further drilling results from Antoinette and Veronique are expected in coming weeks.
  • Additionally, at the Liberty Prospect within the Korhogo Permit Area (c.30km to the south of Boundiali Permit Area) the team is completing AC drilling programme to be followed up by maiden RC drilling testing 20km gold in soil anomaly. Former AC drilling identified over 1km in strike shallow gold mineralisation returning 4-12m intersection at +2g/t.
  • The Company is debt free and currently has A$14m in cash.

Conclusion: Exore released a good set of drilling results from first 2,000m of Phase I drilling programme at Antoinette in northern Cote d’Ivoire with further 6,000m having already been completed and awaiting assay results. The Company is well funded with A$14m in cash allowing the team to carry out an extensive drilling and surface sampling programmes over identified targets offering a busy news flow in coming months. Antoinette maiden resource is targeted for Q2/19.

 

Firestone Diamonds (FDI LN) FOLLOW2.75 pence, Mkt Cap £15.0m – Liqhobong mine yields 70 carat white diamond

  • Firestone Diamonds reports that its 75% owned Liqhobong diamond mine in Lesotho has produced an undamaged 70 carat white gem from the “northern, low grade part of the pit where the bulk of our mining will take place in the coming months”.
  • This news follows the discovery, in December, 2018, of a 46 carat diamond which recently sold for in excess of US$1m. The latest discovery is to be offered for sale at the company’s next tender due in March.
  • The Liqhobong mine has a track record of producing large high value diamonds; in October 2018, for example, a “68 carat white diamond, the third most valuable stone sold to date for just under US$1.0m.”
  • Commenting on the latest discovery of a large diamond from the mine, Chief Executive, Paul Bosma, said that “Although the market for the smaller stones has been under pressure, we've seen continued demand and good prices realised for special stones".

 

Kodal Resources* (KOD LN)FOLLOW 0.2p, Mkt Cap £14m – High grade lithium intersections across final assay results

  • Assay results from the final reverse circulation (RC) drilling campaigns at the Sogola-Baoule and Boumou prospects continue to demonstrate lithium mineralisation at the 450km2 Bougouni Lithium Project in southern Mali.
  • Drilling at the Sogola-Baoule RC drilling targeted the north eastern and depth extension to provide definition to the wide zones of pegmatite veins. Results indicate multiple parallel pegmatite veins and continuity of the thickened pegmatite zone, with grades including:
    • 31m at 1.33% Li2O from 85m in drill hole MDRC123 and;
    • 27m at 1.06% Li2O from 92m in drill hole MDRC124;
  • Final results highlight the potential for an extension of mineralisation to the south west a the Boumou prospect, with grades including:
    • 11m at 1.32% Li2O from 114m and;
    • 11m at 1.03% Li2O from 128m in drill hole KLRC145;
  • The Company reiterate it remains on schedule for the Mineral Resource estimate by the end of February 2019, while continuing to meet both the Mali Minister of Mines and delegation to provide an update on the Project.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

 

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 has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

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.

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. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, 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).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc. 

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.

Comments
info
Login or register to post comments

Recent Articles
Watchlist