SP Angel . Morning View . Palladium enters uncharted territory and extends rally

SP Angel – Morning View – Friday 18 01 19

Palladium enters unchartered territory and extends rally

MiFID II exempt information – see disclaimer below

 

Bushveld Minerals* (BMN LN) BUY – Target Price 87p – China to better enforce vanadium compliance

Cornish Lithium (Private Company) – Completion of further funding round

Ironveld (IRON LN) – Vanadium ore bulk sample delivered to potential off-taker

Kodal Minerals* (KOD LN) – Bougouni drilling results

LSC Lithium (LSC CN) – LSC Lithium enters definitive arrangement agreement to be acquired by Pluspetrol

Rio Tinto (RIO LN) – Q4 and 2018 production results highlight copper

Shanta Gold (SHG LN) – $325k worth of convertibles bought back

Vast Resources (VAST LN) – $5.5m Mercuria Tranche B update

 

Geologist killed in Burkina Faso

• Canadian geologist, Kirk Woodman has been found dead following his kidnapping on 15 January.
• Woodman’s bullet-riddled body was found near the village of Tiabangou at the Bira Trend exploration site run Predictive Discovery.
• The news highlights the increased risk of working in Burkina Faso and the worsening security state of the Saharan region in general.

 

Dow Jones Industrials		+0.67%	at	24,370
Nikkei 225		+1.29%	at	20,666
HK Hang Seng		+1.25%	at	27,091
Shanghai Composite		+1.42%	at	2,596
FTSE 350 Mining		+1.14%	at	17,669
AIM Basic Resources		+0.62%	at	2,203

 

Economics

 

Currencies

US$1.1400/eur vs 1.1388/eur yesterday  Yen 108.77/$ vs 108.76/$  SAr 13.709/$ vs 13.736/$  $1.288/gbp vs $1.285/gbp  0.717/aud vs 0.716/aud  CNY 6.769/$ vs 6.772/$

 

Commodity News

Precious metals:         

Gold US$1,289/oz vs US$1,291/oz yesterday

   Gold ETFs 72.0moz vs US$72.0moz yesterday

Platinum US$813/oz vs US$802/oz yesterday

Palladium US$1,419/oz vs US$1,331/oz yesterday

• Palladium surges to fresh highs, breaking the $1,400/oz level, to extend its rally even amid signals global vehicle sales are slowing. The fundamental emissions controlling metal used in the auto industry for catalytic converters has surged more than 60% since the middle of August, driven by an acute shortage of immediate supply.
• Investors are shrugging off signs of automotive weakness in key markets, with annual car sales in Europe falling for the first time since 2013. China also declined last year and sales in the U.S. barely rose. However, ever stringent emissions controls are expected to sustain demand as governments seek to match CO2 targets.
• The metal will remain in a supply deficit for an eighth straight year, according to Metals Focus Ltd. Palladium’s status as a byproduct of mines in South Africa and Russia means output levels aren’t adjustable to meet short-term demand, despite the surging price.
• “Investors appear to be ignoring the fact that weak sales figures have been reported for all major auto markets in recent days,” Commerzbank analysts report. “Instead, they are seeing news such as the planned widening of a strike to include the platinum mines of a major South African gold and platinum producer as being a good reason to buy.”

Silver US$15.51/oz vs US$15.62/oz yesterday

           

Base metals:   

Copper US$ 6,041/t vs US$5,981/t yesterday

• Copper breaks through $6,000/t level as a fresh bout of optimism over the US-China trade stand-off boosts risk assets. Treasury Secretary Steven Mnuchin proposed easing China tariffs, reinforcing earlier signs that the US is eager for a deal to prop up financial markets.
• Chicago Fed President Charlies Evans says the US economy is doing well and ‘we can easily be patient’ in deciding interest-rate increases. Shares also rose in Asia, extending gains so far in January on policy support from the US and China.

Aluminium US$ 1,872/t vs US$1,870/t yesterday

Nickel US$ 11,705/t vs US$11,750/t yesterday

Zinc US$ 2,580/t vs US$2,501/t yesterday

• Zinc prices are expected to edge higher through September as Chinese smelters refrain from boosting output due to broad environmental clampdowns, according to Japan’s top smelter.
• The metal used in construction and auto-making will likely average $2,600/t in the first six months of the Japanese financial year starting April 1 and trade mostly at the higher end of a $2,400-to-$2,800/t range, Osamu Saito, deputy general manager of metals and the recycling unit at Mitsui Mining & Smelting Co.
• Fitch Solutions, which takes a more bullish view and predicts prices will average $3,050 this year, said this month zinc will recover in coming months amid the tight supply as well as a boost to infrastructure in China.
• The cleaner skies policy in China, which produces more than 40% of the world’s zinc, has prompted local smelters to limit output growth even as ore supply is surging at mines from Australia to South Africa.
• Mitsui’s Saito said he predicts the global zinc market will return to a surplus in the second half of 2019 after three years of deficits as Chinese zinc producers are likely to ramp up production from around July, he said.

Lead US$ 1,982/t vs US$1,981/t yesterday

Tin US$ 20,725/t vs US$20,700/t yesterday

           

Energy:           

Oil US$61.6/bbl vs US$61.0/bbl yesterday

Natural Gas US$3.327/mmbtu vs US$3.509/mmbtu yesterday

Uranium US$28.85/lb vs US$28.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.4/t vs US$73.2/t

Chinese steel rebar 25mm US$589.0/t vs US$589.1/t

Thermal coal (1st year forward cif ARA) US$86.5/t vs US$86.0/t

Coking coal futures Dalian Exchange US$207.5/t vs US$208.0/t

           

Other:  

Cobalt LME 3m US$40,000/t vs US$45,000/t

China NdPr Rare Earth Oxide US$46,007/t vs US$46,252/t

China Lithium carbonate 99% US$9,969/t vs US$9,991/t

China Ferro Vanadium 80% FOB US$69.7/kg vs US$69.5/kg

China Antimony Trioxide 99.5% EU US$7.0/kg vs US$7.0/kg

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

 

Battery News

UK firm launches fuel cell charge point for electric cars

• British firm AFC Energy has launched the first ever hydrogen fuel cell electric vehicle charger, a system it describes as a “breakthrough” in clean mobility.
• By using hydrogen fuel cells to recharge battery-electric vehicles in car parks and service stations, the system will help bridge the growing gap between electricity need and generation capacity caused by a projected rise in EV uptake.
• The modular, low-cost charger also solves some of the logistical issues currently associated with electric car charging, and can even operate entirely off-grid.

 

Lithium-ion batteries ‘will be cheapest way to store power by 2050’

• Researchers at Imperial College London say the technology will become more cost-effective than pumped-storage hydro or hydrogen electrolysis.
• The study determines the ‘levelised cost of storage’, which refers to the full costs of storing energy including investment, operation and charging cost, as well as technology lifetime, efficiency and performance degradation.
• The report suggests hydrogen storage and flywheel technologies may become the cheapest techniques for certain niche applications, such as when the stored energy needs to be discharged over a long time period or when it must be discharged very frequently.

 

Are lithium-sulphur batteries the answer to increasing the use of electric vehicles?

• Cranfield University has become a partner in a £7 million European research and development project to develop high energy, safe, lithium-sulphur batteries for electrified vehicles.
• A Li-S battery can be twice as light, which impacts the weight of a vehicle. Li-S technology also has a higher theoretical energy density, a lower environmental impact technology, and is fully compatible with mass production by green and low-energy processes – delivering a technology that is free of critical raw materials and toxic components.
• The project ‘Lithium-sulfur for safe road electrification’ (LISA) ,which is being led by Leitat in Spain, will last for 43 months and features a total of 13 organisations from across Europe. It has received funding from the European Union’s Horizon 2020 research and innovation programme.

 

Company News

Bushveld Minerals* (BMN LN) 42.3p, Mkt Cap £473m – China to better enforce vanadium compliance

BUY - Target Price 87p

(Bushveld Minerals now hold 74% of Vametco and 84% of Bushveld Energy it’s vanadium redox battery unit)

See link for last Bushveld Minerals PDF note

• Press reports indicate that the Chinese authorities are moving to enforce fuller compliance with the new rules on vanadium in steel rebar.
• China’s state bureau of quality and technical supervision have already started quality inspections in Jieyang, Guangdong and Xuzhou city, Jiangsu.
• Reports that some 30-40% of steel mills are not adding sufficient vanadium into their steel are a major embarrassment to the Chinese Authorities as the ongoing use of sub-standard, brittle rebar steel is a major concern to the authorities.
• The Quench & Temper ‘Q&T’ process is no longer allowed for the hardening of steel rebar for construction as it only makes the metal hard at the surface and is still soft on the inside (sounds like a Cadbury’s crème egg and is about as much use in an earthquake).
• Steel mills are also being required to improve tolerance limits for rebar diameters and mark their steel to reduce the potential for fake products and t ensure accountability.
• The cost of vanadium is around 6% ($35/t) of the cost of rebar in China which is currently around $589/t.
• Ferro-vanadium prices rose again yesterday by 0.7% to $70-72/kgV for 78% fob China.  Prices fell 6% in the US to $39-43/kgV for cheaper 70-80% Vanadium content ferro-vanadium.

Conclusion:  Ferro-vanadium prices look set to rise again on better enforcement of the new rebar regulations in China. We dearly hope none of the buildings constructed with sub-standard Q&T rebar are ever subject to a major earthquake. Ideally, the authorities would ensure that all Q&T rebar is re-melted and alloyed with vanadium before use in construction. It would be a great tragedy to Chinese bridges, schools and other buildings collapse in the next earthquake because of the use of substandard steel.

*SP Angel act as Nomad and broker to Bushveld Minerals. *An SP Angel mining analyst and nomad have visited the Vametco in South Africa.

 

Cornish Lithium (Private Company) – Completion of further funding round

• Cornish Lithium successfully raised a subsequent £1m from its existing investor base to enable continued exploration activities in Cornwall and to drill exploratory boreholes to extract samples of lithium bearing brines to validate the deposit model.
• Lithium-bearing brines continue to be the focus of the Company, however recent research by the Cornish Lithium team has demonstrated potential for the Company to extend its activities to include hardrock sources of lithium and other metals. Cornish Lithium therefore intends to evaluate an integrated approach to both lithium-enriched brines and hardrock projects in Cornwall.
• The Cornish Lithium team has grasped a totally new understanding of the geological potential of Cornwall’s mineral deposits from the vast collection of historical data. Such understanding includes delineating many of the various mineral ownership structures in Cornwall that have complicated exploration efforts in the past.
• The application of modern digital software has enabled a holistic view of mineral ownership in combination with structural geology, geophysics and historical mining data for the company to prioritise exploration efforts.
• The current focus is naturally-circulating lithium-enriched fluids in bedrock which often appeared in historic mines as ‘hot springs’. Cornish Lithium intends to drill extraction boreholes in the vicinity of historic mining operations, but to avoid historic mine workings themselves and instead to target permeable geological features which host the lithium-enriched brines. These brines are believed to be derived from the interaction of geothermal waters with lithium-enriched granite deep beneath Cornwall.

Conclusion: We look forward to understanding the results of the ongoing exploration work and the potential of Cornwall as a ‘lithium province’.

 

Ironveld (IRON LN) 2.4p, mkt cap £13.9m – Vanadium ore bulk sample delivered to potential off-taker

• Ironveld report that it has now delivered sufficient vanadium-bearing material to a potential off-taker for a full kiln smelting test.
• The outcome is expected within the next three weeks.
• A number of enquiries have also been received from potential development partners.
• Ironveld plc should have mined a 10,000t bulk sample from their Middleburg iron, vanadium and titanium project in the Bushveld complex of South Africa.
• The open cast project resource contains 27mt of HPI and 1.4bn lbs of Vanadium (V2O5) in situ JORC.
• Ironveld are looking to finance and build a 7.5MW smelting facility to produce some 190.5tpa of vanadium in slag grading 36% Vanadium , 21,000tpa of HPI powder and some 4,134.5tpa of titanium TiO2 in slag grading 65%.

 

Kodal Minerals* (KOD LN) 0.175p, Mkt Cap £13.4m – Bougouni drilling results

• Kodal Minerals has released further results from its 2018 drilling of 3,808m of diamond-core (DD) and reverse-circulation (RC) drilling in 23 holes programme at its Sogola-Baoule  lithium project in southern Mali and the results of the final diamond drill hole of the campaign at the nearby Boumou project.
• Infill and extension drilling at the Sogola-Baoule prospect has verified the existing geological interpretation and confirmed that the mineralisation remains open both along strike and at depth, making it a priority target for further work.
• Although assay results remain pending for 18 RC holes at Sogola-Baoule, the company highlights a number of intersections from the 7 RC and 3 DD holes announced today:
  • A 26m long intersection at an average grade of 1.24% Li₂O from a depth of 73m in hole MDRC115B;
  • An 18.5m long intersection at an average grade of 1.52% Li₂O from a depth of 99.3m in hole MDDH007; and
  • A 14m long intersection at an average grade of 1.43% Li₂O from a depth of 142.5m in hole MDDH008.
• The company points out that hole MDDH006, which intersected 3m at an average grade of 1.28% Li₂O from 126.07m and an additional 0.5m averaging 1.87% Li₂O from 146m depth “is located to the northeast of the prospect and is interpreted to have intersected a fault zone.  Review of the ground magnetics does highlight potential geological offset in this region, and further drilling will target an area further to the northeast.”
• The final diamond drill hole of the 2018 campaign at Boumou, KLDH006, which is located in the northern part of the prospect intersected “multiple pegmatite veins consist[ent] with the geological interpretation” including:
  • 1.5m averaging 1.48% Li₂O from 56.55m depth;
  • 1m averaging 1.43% Li₂O from 59.55m depth;
  • 1m averaging 1.34% Li₂O from 81.15m depth;
  • 2m averaging 1.40% Li₂O from 117.77m depth;
  • 7.5m averaging 1.04% Li₂O from 130.30m depth; and
  • 9.5m averaging 1.04% Li₂O from 142.80m depth.
• Commenting on the latest drilling results, CEO, Bernard Aylward said “The drilling programme completed last year at the Sogola-Baoule and Boumou prospects has confirmed the continuity and robustness of the lithium mineralisation at Bougouni”
• Mr. Aylward went on to confirm that an updated mineral resource estimate, incorporating all of the drilling results “is on track for delivery at the end of February 2019”. We remind readers that the current estimate, classed as inferred, stands at 17.3mt at an average grade of 1.20% Li₂O.
• He also commented that as a result of “these continuing good results is that we are now able to assess our proposed operation parameters and factor in a larger mining operation with an initial 1.2Mtpa processing plant, expanding to 1.5Mtpa as the operation moves into steady production phase”

Conclusion: The Bougouni project continues to deliver wide intersections of >1% Li₂O assays and the company expects to deliver an updated mineral resource estimate by the end of February. The company hints that this may be at significantly greater tonnage than the existing estimate in its decision to examine the operating parameters of an increased throughput of 1.5mtpa.

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

 

LSC Lithium (LSC CN) C$0.65, Mkt Cap C$105.4m – LSC Lithium enters definitive arrangement agreement to be acquired by Pluspetrol

• LSC Lithium enters into an arrangement agreement with Pluspetrol Resources Corporation B.V. pursuant to which Pluspetrol will acquire all of the outstanding common shares of LSC by way of a plan of arrangement under the Business Corporations Act.
• Under the agreement, Pluspetrol would acquire 100% of the issued and outstanding common shares of LSC for cash consideration of C$0.6612 per LSC share. The Transaction provides total consideration of approximately C$111m.
• The cash consideration represents a 30% premium to LSC’s 30-day volume-weighted average share price on the TSX-V for the period ending January 14, 2019.
• The Transaction is the result of the previously announced strategic review process conducted by BMO Capital Markets as lead banker and Haitong Securities of Hong Kong, which was focused on Asia.
• The strategic review process, while in place since August 2017, was accelerated upon the release of LSC’s updated Resource Estimate on its Pozuelos Project in November 2018 and its robust Preliminary Economic Assessment on its Pozuelos-Pastos Grandes Project in December 2018.
• LSC Lithium controls a large portfolio of prospective lithium rich salars across Argentina and is focused on developing its material projects - Pozuelos and Pastos Grandes Project, Rio Grande Project and Salinas Grandes Project. LSC Lithium has a land package portfolio totalling approximately 300,000 hectares.
• LSC Lithium and Rincon Lithium (formerly Enirgi Group Corporation) have a partnership agreement for continued development of Direct Xtraction Process (DXP) technology for lithium brines. The company has funded $30m validating the technology and building and operating a demonstration plant at Salar del Rincon. During 2017, the demonstration plant (capacity 500kg/day) successfully produced battery grade lithium carbonate with delivered recovery rates up to 75% (industry standard previously 55%).
• Pluspetrol is the leading oil and gas private company in Latin America, with presence in 3 continents and operations in 5 countries: Argentina, Angola, Bolivia, Colombia and Perú.
• The company also are strong supporter of unconventional reservoirs in Argentina, which makes it a key global player in the strategic resources.

 

Rio Tinto (RIO LN) 3916p, Mkt cap £66.5bn – Q4 and 2018 production results highlight copper

• Reporting what the company describes as “a solid operational performance in the final quarter of 2018”, Rio Tinto highlights the strong production profile from its copper division which delivered a 20% increase in mined production (to 177,000t) compared to Q3 2017 and an 11% increase during the final three months of the year.
• The company also points to the US$8.6bn of disposals which include its holding in the Grasberg mine, for US$3.5bn, and the company’s remaining coal assets ($4.1bn) as well as the sale of the Dunkerque aluminium smelter for $0.4bn and land and wharfage at Kitimat in British Columbia.
• Higher grades helped drive a 37% increase in annual copper output, to 203,900t, from the Kennecott operation in Utah although the company comments that “In 2019, the production profile will see increased variability in grade as operations mine in lower levels of the pit, together with waste stripping related to the south wall pushback expansion. Anticipated south wall pushback grades begin to increase in late-2020 and are expected to offset this variability over the longer term”.
• Mined copper output from Escondida increased by 29% bringing the 2018 output to 350,400t “reflecting the ramp-up of production to nameplate capacity following commissioning of the Los Colorados concentrator, and the absence of a labour strike which significantly impacted 2017 production.”
• Copper production at Oyu Tolgoi remained broadly stable at 53,300t for the year while progress on the underground project “continues to track in-line with the re-forecast undertaken in the third quarter of 2018”. The company also draws attention to the previously announced Power Source Framework Agreement between Oyu Tolgoi and the Mongolian Government which “provides a binding framework and pathway for the construction of a power plant and also sets out an amended timetable” for the 300MW plant.
• Overall mined copper production guidance for 2019 is in the range 550-600,000.
• Iron ore shipments from Rio Tinto’s Pilbara operations rose by 2% during the year to 338.2mt from production of 337.8mt, towards the upper end of published guidance. Guidance for iron ore shipments in 2019 is in the range 338-350mt.
• In November 2018, the company announced the approval of the $2.6bn investment in the 43mtpa Koodaideri iron ore mine in the Pilbara to replace existing depletion of capacity. Construction is scheduled to start during 2019 with first production planned for late 2021. Rio Tinto has also, In October 2018, announced the investment of $1.55bn (Rio Tinto share $820m) to sustain production at its 53% owned Robe River Iron Joint Venture.
• The company expensed US$488m of exploration expenditure during 2018 (2017 – US$445m). “bulk of the exploration expenditure in this quarter was focused on copper targets in Australia, Canada, Chile, Kazakhstan, Mongolia, Namibia, Papua New Guinea, Peru, Serbia,  United States and Zambia”.

Conclusion: Rio Tinto’s copper businesses showed further growth while the company also continues its investment in iron-ore. The disposal of its coal interests and of the stake in Grasberg and other assets realised $8.6bn.

 

Shanta Gold (SHG LN) 5.5p, Mkt Cap £42.9m - $325k worth of convertibles bought back

• The Company bought back $325k of outstanding unsecured subordinated convertible loan notes due April 2019 from El Oro Ltd.
• The Company paid $276k for convertibles implying a 18% discount to nominal value and accrued interest.
• The remaining convertibles nominal outstanding is currently $14,675k.

 

Vast Resources (VAST LN) 0.27p, £15.5m - $5.5m Mercuria Tranche B update

• The Company announced yesterday it will has not yet received the $5.5m Tranche B from Mercuria.
• The management continues to expect receipt of the Tranche B facility.
• Additionally, the Company notified that the no conversion right in regards of $1.575m received from Bergen expired today.
• The second convertible security with a nominal value of $1.575m is expected to be issued within approximately a week of the passing of the relevant resolutions to be proposed on 31 January 2019, and is conditional on the passing of that resolution.

 

 

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                                                            

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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.

 

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SP Angel – Morning View – Friday 18 01 19

Palladium enters unchartered territory and extends rally

CLICK FOR PDF

MiFID II exempt information – see disclaimer below

 

Bushveld Minerals* (BMN LN) BUY – Target Price 87p – China to better enforce vanadium compliance

Cornish Lithium (Private Company) – Completion of further funding round

Ironveld (IRON LN) – Vanadium ore bulk sample delivered to potential off-taker

Kodal Minerals* (KOD LN) – Bougouni drilling results

LSC Lithium (LSC CN) – LSC Lithium enters definitive arrangement agreement to be acquired by Pluspetrol

Rio Tinto (RIO LN) – Q4 and 2018 production results highlight copper

Shanta Gold (SHG LN) – $325k worth of convertibles bought back

Vast Resources (VAST LN) – $5.5m Mercuria Tranche B update

 

Geologist killed in Burkina Faso

• Canadian geologist, Kirk Woodman has been found dead following his kidnapping on 15 January.
• Woodman’s bullet-riddled body was found near the village of Tiabangou at the Bira Trend exploration site run Predictive Discovery.
• The news highlights the increased risk of working in Burkina Faso and the worsening security state of the Saharan region in general.

 

Dow Jones Industrials		+0.67%	at	24,370
Nikkei 225		+1.29%	at	20,666
HK Hang Seng		+1.25%	at	27,091
Shanghai Composite		+1.42%	at	2,596
FTSE 350 Mining		+1.14%	at	17,669
AIM Basic Resources		+0.62%	at	2,203

 

Economics

 

Currencies

US$1.1400/eur vs 1.1388/eur yesterday  Yen 108.77/$ vs 108.76/$  SAr 13.709/$ vs 13.736/$  $1.288/gbp vs $1.285/gbp  0.717/aud vs 0.716/aud  CNY 6.769/$ vs 6.772/$

 

Commodity News

Precious metals:         

Gold US$1,289/oz vs US$1,291/oz yesterday

   Gold ETFs 72.0moz vs US$72.0moz yesterday

Platinum US$813/oz vs US$802/oz yesterday

Palladium US$1,419/oz vs US$1,331/oz yesterday

• Palladium surges to fresh highs, breaking the $1,400/oz level, to extend its rally even amid signals global vehicle sales are slowing. The fundamental emissions controlling metal used in the auto industry for catalytic converters has surged more than 60% since the middle of August, driven by an acute shortage of immediate supply.
• Investors are shrugging off signs of automotive weakness in key markets, with annual car sales in Europe falling for the first time since 2013. China also declined last year and sales in the U.S. barely rose. However, ever stringent emissions controls are expected to sustain demand as governments seek to match CO2 targets.
• The metal will remain in a supply deficit for an eighth straight year, according to Metals Focus Ltd. Palladium’s status as a byproduct of mines in South Africa and Russia means output levels aren’t adjustable to meet short-term demand, despite the surging price.
• “Investors appear to be ignoring the fact that weak sales figures have been reported for all major auto markets in recent days,” Commerzbank analysts report. “Instead, they are seeing news such as the planned widening of a strike to include the platinum mines of a major South African gold and platinum producer as being a good reason to buy.”

Silver US$15.51/oz vs US$15.62/oz yesterday

           

Base metals:   

Copper US$ 6,041/t vs US$5,981/t yesterday

• Copper breaks through $6,000/t level as a fresh bout of optimism over the US-China trade stand-off boosts risk assets. Treasury Secretary Steven Mnuchin proposed easing China tariffs, reinforcing earlier signs that the US is eager for a deal to prop up financial markets.
• Chicago Fed President Charlies Evans says the US economy is doing well and ‘we can easily be patient’ in deciding interest-rate increases. Shares also rose in Asia, extending gains so far in January on policy support from the US and China.

Aluminium US$ 1,872/t vs US$1,870/t yesterday

Nickel US$ 11,705/t vs US$11,750/t yesterday

Zinc US$ 2,580/t vs US$2,501/t yesterday

• Zinc prices are expected to edge higher through September as Chinese smelters refrain from boosting output due to broad environmental clampdowns, according to Japan’s top smelter.
• The metal used in construction and auto-making will likely average $2,600/t in the first six months of the Japanese financial year starting April 1 and trade mostly at the higher end of a $2,400-to-$2,800/t range, Osamu Saito, deputy general manager of metals and the recycling unit at Mitsui Mining & Smelting Co.
• Fitch Solutions, which takes a more bullish view and predicts prices will average $3,050 this year, said this month zinc will recover in coming months amid the tight supply as well as a boost to infrastructure in China.
• The cleaner skies policy in China, which produces more than 40% of the world’s zinc, has prompted local smelters to limit output growth even as ore supply is surging at mines from Australia to South Africa.
• Mitsui’s Saito said he predicts the global zinc market will return to a surplus in the second half of 2019 after three years of deficits as Chinese zinc producers are likely to ramp up production from around July, he said.

Lead US$ 1,982/t vs US$1,981/t yesterday

Tin US$ 20,725/t vs US$20,700/t yesterday

           

Energy:           

Oil US$61.6/bbl vs US$61.0/bbl yesterday

Natural Gas US$3.327/mmbtu vs US$3.509/mmbtu yesterday

Uranium US$28.85/lb vs US$28.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.4/t vs US$73.2/t

Chinese steel rebar 25mm US$589.0/t vs US$589.1/t

Thermal coal (1st year forward cif ARA) US$86.5/t vs US$86.0/t

Coking coal futures Dalian Exchange US$207.5/t vs US$208.0/t

           

Other:  

Cobalt LME 3m US$40,000/t vs US$45,000/t

China NdPr Rare Earth Oxide US$46,007/t vs US$46,252/t

China Lithium carbonate 99% US$9,969/t vs US$9,991/t

China Ferro Vanadium 80% FOB US$69.7/kg vs US$69.5/kg

China Antimony Trioxide 99.5% EU US$7.0/kg vs US$7.0/kg

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

 

Battery News

UK firm launches fuel cell charge point for electric cars

• British firm AFC Energy has launched the first ever hydrogen fuel cell electric vehicle charger, a system it describes as a “breakthrough” in clean mobility.
• By using hydrogen fuel cells to recharge battery-electric vehicles in car parks and service stations, the system will help bridge the growing gap between electricity need and generation capacity caused by a projected rise in EV uptake.
• The modular, low-cost charger also solves some of the logistical issues currently associated with electric car charging, and can even operate entirely off-grid.

 

Lithium-ion batteries ‘will be cheapest way to store power by 2050’

• Researchers at Imperial College London say the technology will become more cost-effective than pumped-storage hydro or hydrogen electrolysis.
• The study determines the ‘levelised cost of storage’, which refers to the full costs of storing energy including investment, operation and charging cost, as well as technology lifetime, efficiency and performance degradation.
• The report suggests hydrogen storage and flywheel technologies may become the cheapest techniques for certain niche applications, such as when the stored energy needs to be discharged over a long time period or when it must be discharged very frequently.

 

Are lithium-sulphur batteries the answer to increasing the use of electric vehicles?

• Cranfield University has become a partner in a £7 million European research and development project to develop high energy, safe, lithium-sulphur batteries for electrified vehicles.
• A Li-S battery can be twice as light, which impacts the weight of a vehicle. Li-S technology also has a higher theoretical energy density, a lower environmental impact technology, and is fully compatible with mass production by green and low-energy processes – delivering a technology that is free of critical raw materials and toxic components.
• The project ‘Lithium-sulfur for safe road electrification’ (LISA) ,which is being led by Leitat in Spain, will last for 43 months and features a total of 13 organisations from across Europe. It has received funding from the European Union’s Horizon 2020 research and innovation programme.

 

Company News

Bushveld Minerals* (BMN LN)FOLLOW 42.3p, Mkt Cap £473m – China to better enforce vanadium compliance

BUY - Target Price 87p

(Bushveld Minerals now hold 74% of Vametco and 84% of Bushveld Energy it’s vanadium redox battery unit)

See link for last Bushveld Minerals PDF note

• Press reports indicate that the Chinese authorities are moving to enforce fuller compliance with the new rules on vanadium in steel rebar.
• China’s state bureau of quality and technical supervision have already started quality inspections in Jieyang, Guangdong and Xuzhou city, Jiangsu.
• Reports that some 30-40% of steel mills are not adding sufficient vanadium into their steel are a major embarrassment to the Chinese Authorities as the ongoing use of sub-standard, brittle rebar steel is a major concern to the authorities.
• The Quench & Temper ‘Q&T’ process is no longer allowed for the hardening of steel rebar for construction as it only makes the metal hard at the surface and is still soft on the inside (sounds like a Cadbury’s crème egg and is about as much use in an earthquake).
• Steel mills are also being required to improve tolerance limits for rebar diameters and mark their steel to reduce the potential for fake products and t ensure accountability.
• The cost of vanadium is around 6% ($35/t) of the cost of rebar in China which is currently around $589/t.
• Ferro-vanadium prices rose again yesterday by 0.7% to $70-72/kgV for 78% fob China.  Prices fell 6% in the US to $39-43/kgV for cheaper 70-80% Vanadium content ferro-vanadium.

Conclusion:  Ferro-vanadium prices look set to rise again on better enforcement of the new rebar regulations in China. We dearly hope none of the buildings constructed with sub-standard Q&T rebar are ever subject to a major earthquake. Ideally, the authorities would ensure that all Q&T rebar is re-melted and alloyed with vanadium before use in construction. It would be a great tragedy to Chinese bridges, schools and other buildings collapse in the next earthquake because of the use of substandard steel.

*SP Angel act as Nomad and broker to Bushveld Minerals. *An SP Angel mining analyst and nomad have visited the Vametco in South Africa.

 

Cornish Lithium (Private Company) – Completion of further funding round

• Cornish Lithium successfully raised a subsequent £1m from its existing investor base to enable continued exploration activities in Cornwall and to drill exploratory boreholes to extract samples of lithium bearing brines to validate the deposit model.
• Lithium-bearing brines continue to be the focus of the Company, however recent research by the Cornish Lithium team has demonstrated potential for the Company to extend its activities to include hardrock sources of lithium and other metals. Cornish Lithium therefore intends to evaluate an integrated approach to both lithium-enriched brines and hardrock projects in Cornwall.
• The Cornish Lithium team has grasped a totally new understanding of the geological potential of Cornwall’s mineral deposits from the vast collection of historical data. Such understanding includes delineating many of the various mineral ownership structures in Cornwall that have complicated exploration efforts in the past.
• The application of modern digital software has enabled a holistic view of mineral ownership in combination with structural geology, geophysics and historical mining data for the company to prioritise exploration efforts.
• The current focus is naturally-circulating lithium-enriched fluids in bedrock which often appeared in historic mines as ‘hot springs’. Cornish Lithium intends to drill extraction boreholes in the vicinity of historic mining operations, but to avoid historic mine workings themselves and instead to target permeable geological features which host the lithium-enriched brines. These brines are believed to be derived from the interaction of geothermal waters with lithium-enriched granite deep beneath Cornwall.

Conclusion: We look forward to understanding the results of the ongoing exploration work and the potential of Cornwall as a ‘lithium province’.

 

Ironveld (IRON LN) FOLLOW2.4p, mkt cap £13.9m – Vanadium ore bulk sample delivered to potential off-taker

• Ironveld report that it has now delivered sufficient vanadium-bearing material to a potential off-taker for a full kiln smelting test.
• The outcome is expected within the next three weeks.
• A number of enquiries have also been received from potential development partners.
• Ironveld plc should have mined a 10,000t bulk sample from their Middleburg iron, vanadium and titanium project in the Bushveld complex of South Africa.
• The open cast project resource contains 27mt of HPI and 1.4bn lbs of Vanadium (V2O5) in situ JORC.
• Ironveld are looking to finance and build a 7.5MW smelting facility to produce some 190.5tpa of vanadium in slag grading 36% Vanadium , 21,000tpa of HPI powder and some 4,134.5tpa of titanium TiO2 in slag grading 65%.

 

Kodal Minerals* (KOD LN)FOLLOW 0.175p, Mkt Cap £13.4m – Bougouni drilling results

• Kodal Minerals has released further results from its 2018 drilling of 3,808m of diamond-core (DD) and reverse-circulation (RC) drilling in 23 holes programme at its Sogola-Baoule  lithium project in southern Mali and the results of the final diamond drill hole of the campaign at the nearby Boumou project.
• Infill and extension drilling at the Sogola-Baoule prospect has verified the existing geological interpretation and confirmed that the mineralisation remains open both along strike and at depth, making it a priority target for further work.
• Although assay results remain pending for 18 RC holes at Sogola-Baoule, the company highlights a number of intersections from the 7 RC and 3 DD holes announced today:
  • A 26m long intersection at an average grade of 1.24% Li₂O from a depth of 73m in hole MDRC115B;
  • An 18.5m long intersection at an average grade of 1.52% Li₂O from a depth of 99.3m in hole MDDH007; and
  • A 14m long intersection at an average grade of 1.43% Li₂O from a depth of 142.5m in hole MDDH008.
• The company points out that hole MDDH006, which intersected 3m at an average grade of 1.28% Li₂O from 126.07m and an additional 0.5m averaging 1.87% Li₂O from 146m depth “is located to the northeast of the prospect and is interpreted to have intersected a fault zone.  Review of the ground magnetics does highlight potential geological offset in this region, and further drilling will target an area further to the northeast.”
• The final diamond drill hole of the 2018 campaign at Boumou, KLDH006, which is located in the northern part of the prospect intersected “multiple pegmatite veins consist[ent] with the geological interpretation” including:
  • 1.5m averaging 1.48% Li₂O from 56.55m depth;
  • 1m averaging 1.43% Li₂O from 59.55m depth;
  • 1m averaging 1.34% Li₂O from 81.15m depth;
  • 2m averaging 1.40% Li₂O from 117.77m depth;
  • 7.5m averaging 1.04% Li₂O from 130.30m depth; and
  • 9.5m averaging 1.04% Li₂O from 142.80m depth.
• Commenting on the latest drilling results, CEO, Bernard Aylward said “The drilling programme completed last year at the Sogola-Baoule and Boumou prospects has confirmed the continuity and robustness of the lithium mineralisation at Bougouni”
• Mr. Aylward went on to confirm that an updated mineral resource estimate, incorporating all of the drilling results “is on track for delivery at the end of February 2019”. We remind readers that the current estimate, classed as inferred, stands at 17.3mt at an average grade of 1.20% Li₂O.
• He also commented that as a result of “these continuing good results is that we are now able to assess our proposed operation parameters and factor in a larger mining operation with an initial 1.2Mtpa processing plant, expanding to 1.5Mtpa as the operation moves into steady production phase”

Conclusion: The Bougouni project continues to deliver wide intersections of >1% Li₂O assays and the company expects to deliver an updated mineral resource estimate by the end of February. The company hints that this may be at significantly greater tonnage than the existing estimate in its decision to examine the operating parameters of an increased throughput of 1.5mtpa.

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

 

LSC Lithium (LSC CN) C$0.65, Mkt Cap C$105.4m – LSC Lithium enters definitive arrangement agreement to be acquired by Pluspetrol

• LSC Lithium enters into an arrangement agreement with Pluspetrol Resources Corporation B.V. pursuant to which Pluspetrol will acquire all of the outstanding common shares of LSC by way of a plan of arrangement under the Business Corporations Act.
• Under the agreement, Pluspetrol would acquire 100% of the issued and outstanding common shares of LSC for cash consideration of C$0.6612 per LSC share. The Transaction provides total consideration of approximately C$111m.
• The cash consideration represents a 30% premium to LSC’s 30-day volume-weighted average share price on the TSX-V for the period ending January 14, 2019.
• The Transaction is the result of the previously announced strategic review process conducted by BMO Capital Markets as lead banker and Haitong Securities of Hong Kong, which was focused on Asia.
• The strategic review process, while in place since August 2017, was accelerated upon the release of LSC’s updated Resource Estimate on its Pozuelos Project in November 2018 and its robust Preliminary Economic Assessment on its Pozuelos-Pastos Grandes Project in December 2018.
• LSC Lithium controls a large portfolio of prospective lithium rich salars across Argentina and is focused on developing its material projects - Pozuelos and Pastos Grandes Project, Rio Grande Project and Salinas Grandes Project. LSC Lithium has a land package portfolio totalling approximately 300,000 hectares.
• LSC Lithium and Rincon Lithium (formerly Enirgi Group Corporation) have a partnership agreement for continued development of Direct Xtraction Process (DXP) technology for lithium brines. The company has funded $30m validating the technology and building and operating a demonstration plant at Salar del Rincon. During 2017, the demonstration plant (capacity 500kg/day) successfully produced battery grade lithium carbonate with delivered recovery rates up to 75% (industry standard previously 55%).
• Pluspetrol is the leading oil and gas private company in Latin America, with presence in 3 continents and operations in 5 countries: Argentina, Angola, Bolivia, Colombia and Perú.
• The company also are strong supporter of unconventional reservoirs in Argentina, which makes it a key global player in the strategic resources.

 

Rio Tinto (RIO LN) FOLLOW3916p, Mkt cap £66.5bn – Q4 and 2018 production results highlight copper

• Reporting what the company describes as “a solid operational performance in the final quarter of 2018”, Rio Tinto highlights the strong production profile from its copper division which delivered a 20% increase in mined production (to 177,000t) compared to Q3 2017 and an 11% increase during the final three months of the year.
• The company also points to the US$8.6bn of disposals which include its holding in the Grasberg mine, for US$3.5bn, and the company’s remaining coal assets ($4.1bn) as well as the sale of the Dunkerque aluminium smelter for $0.4bn and land and wharfage at Kitimat in British Columbia.
• Higher grades helped drive a 37% increase in annual copper output, to 203,900t, from the Kennecott operation in Utah although the company comments that “In 2019, the production profile will see increased variability in grade as operations mine in lower levels of the pit, together with waste stripping related to the south wall pushback expansion. Anticipated south wall pushback grades begin to increase in late-2020 and are expected to offset this variability over the longer term”.
• Mined copper output from Escondida increased by 29% bringing the 2018 output to 350,400t “reflecting the ramp-up of production to nameplate capacity following commissioning of the Los Colorados concentrator, and the absence of a labour strike which significantly impacted 2017 production.”
• Copper production at Oyu Tolgoi remained broadly stable at 53,300t for the year while progress on the underground project “continues to track in-line with the re-forecast undertaken in the third quarter of 2018”. The company also draws attention to the previously announced Power Source Framework Agreement between Oyu Tolgoi and the Mongolian Government which “provides a binding framework and pathway for the construction of a power plant and also sets out an amended timetable” for the 300MW plant.
• Overall mined copper production guidance for 2019 is in the range 550-600,000.
• Iron ore shipments from Rio Tinto’s Pilbara operations rose by 2% during the year to 338.2mt from production of 337.8mt, towards the upper end of published guidance. Guidance for iron ore shipments in 2019 is in the range 338-350mt.
• In November 2018, the company announced the approval of the $2.6bn investment in the 43mtpa Koodaideri iron ore mine in the Pilbara to replace existing depletion of capacity. Construction is scheduled to start during 2019 with first production planned for late 2021. Rio Tinto has also, In October 2018, announced the investment of $1.55bn (Rio Tinto share $820m) to sustain production at its 53% owned Robe River Iron Joint Venture.
• The company expensed US$488m of exploration expenditure during 2018 (2017 – US$445m). “bulk of the exploration expenditure in this quarter was focused on copper targets in Australia, Canada, Chile, Kazakhstan, Mongolia, Namibia, Papua New Guinea, Peru, Serbia,  United States and Zambia”.

Conclusion: Rio Tinto’s copper businesses showed further growth while the company also continues its investment in iron-ore. The disposal of its coal interests and of the stake in Grasberg and other assets realised $8.6bn.

 

Shanta Gold (SHG LN) FOLLOW5.5p, Mkt Cap £42.9m - $325k worth of convertibles bought back

• The Company bought back $325k of outstanding unsecured subordinated convertible loan notes due April 2019 from El Oro Ltd.
• The Company paid $276k for convertibles implying a 18% discount to nominal value and accrued interest.
• The remaining convertibles nominal outstanding is currently $14,675k.

 

Vast Resources (VAST LN)FOLLOW 0.27p, £15.5m - $5.5m Mercuria Tranche B update

• The Company announced yesterday it will has not yet received the $5.5m Tranche B from Mercuria.
• The management continues to expect receipt of the Tranche B facility.
• Additionally, the Company notified that the no conversion right in regards of $1.575m received from Bergen expired today.
• The second convertible security with a nominal value of $1.575m is expected to be issued within approximately a week of the passing of the relevant resolutions to be proposed on 31 January 2019, and is conditional on the passing of that resolution.

 

 

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

 

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⁺SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

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