SP Angel . Morning View . Gold picks up amid uncertainty over Phase One agreement status

SP Angel . Morning View . Wednesday 13 11 19

Gold picks up amid uncertainty over Phase One agreement status

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MiFID II exempt information – see disclaimer below   

Anglo American (AAL LN) – De Beers diamond sales

Arc Minerals* (ARCM LN) – Arc sells Casa Mining to focus on Cheyeza copper discovery

Aura Energy Limited* (AURA LN) – Cost reduction programme

Bushveld Minerals* (BMN LN) – Bushveld Energy leading consortium for acquisition of Enerox from CellCube for €11m

Caledonia Mining (CMCL LN) – Robust performance despite challenges of power supply

Horizonte Minerals (HZM LN) – Quarterly results and project update.

SolGold* (SOLG LN) – Ingo Hofmaier takes over London office following resignation of Anna Legge

 

Environment – new regulation urged for reducing ship speed, pollution and environmental protection

• The International Maritime Organisation is being urged to consider new regulations to reduce the speed of shipping.
• The world’s shipping, mainly container and bulk carriers generates as much electrical power at sea as the entire USA.

 

Pallinghurst and Traxys joint venture to invest $2bn in battery materials (FT.com)

• The battery metals joint venture will look to take controlling stakes in lithium, graphite and cobalt projects.
• The launch comes as western countries seek to develop their own supplies chains of responsibly sourced minerals.
• As a result, the venture will be targeting projects in  North America, Europe and Australasia.
• Pallinghurst already pledged $1bn in July to develop projects to extract battery metals and the most recent deal sees Traxys matching the investment fund’s commitment.
• Pallinghurst acquired a 20% stake in Canadian firm Nouveau Monde Graphite, and has invested $258m in Nemaska Lithium.

 

 

Dow Jones Industrials		+0.00%	at	27,691
Nikkei 225		-0.85%	at	23,320
HK Hang Seng		-1.82%	at	26,571
Shanghai Composite		-0.33%	at	2,905
FTSE 350 Mining		-1.22%	at	17,972
AIM Basic Resources		-0.87%	at	2,090

 

Economics

US – The US will raise tariffs on China if the Phase One deal is not signed, President Trump said in a speck to the Economic Club in New York yesterday.

• “If we don’t make a deal, we’re going to substantially raise those tariffs… they’re going to be raised vey substantially. And that’s going to be true for other countries that mistreat us too.”
• No details on potential timing of the deal has been provided, apart from Trump saying that it “could happen soon”.
• US stock indices closed marginally stronger on Tuesday while futures are pointing to a lower opening today.
• White House is considering a cut in taxes for the middle class ahead of the 2020 elections, according to the Washington Post.
• A 15% tax rate for middle earners is being contemplated, unnamed sources involved in discussions said.
• The move should boost consumer spending and improve economic growth outlook amid a continuing trade conflict between the US and China.
• On the downside, the proposal is likely to further grow the budget deficit which hit the highest level in seven years during the FY19 (September YE).
• The US budget deficit widened to $984bn or 4.6% of GDP, up from $779bn and 3.8% in FY18, marking the fourth consecutive annual increase as higher tax receipts were offset by higher spending and growing debt service payments.

 

Germany – Investor sentiment survey released yesterday showed a significant improvement in the expectations gauge in Nov/19 amid better prospects for a US/China deal and less chances of a no-deal Brexit.

• The survey offers some optimism that the largest economy in the eurozone is stabilising suggesting the worse may be over.
• GDP data for Q3 is out tomorrow with expectations for the economy to have slipped into a recession briefly (-0.1%qoq v -0.1%qoq in Q2/19).
• ZEW Survey Current Situation: -24.7 v -25.3 in October and -22.3 forecast.
• ZEW Survey Expectations: -2.1 v -22.8 in October and -13.0 forecast.

 

Australia – Subdued wage growth highlights the need for further monetary and fiscal stimulus, Bloomberg reports.

• Labour earnings climbed 0.5%qoq in Q3, in line with expectations, and were up 2.2%yoy.
• The RBA has previously suggested that wage growth of around 3.5%yoy is required to sustainably increase inflation back to the middle line of the 2-3% inflation target band.
• Inflation averaged 1.7%yoy in Q3/19.

 

Chile – Peso is trading at its lowest level ever as protests that engulfed the nation for three weeks show little signs of abating.

• The currency hit 783.8 (-3%) on Tuesday.

 

New Zealand – The New Zealand dollar jumps 1% this morning after the central bank unexpectedly left rate unchanged.

• Th rate was kept at a record low of 1% with markets forecasting a 25bp drop.
• “Economic developments since the August Statement do not warrant a change to the already stimulatory monetary setting at this time… we will add further monetary stimulus if needed,” the RBNZ said.

 

Currencies

US$1.1014/eur vs 1.1031/eur yesterday.  Yen 108.91/$ vs 109.21/$.  SAr 15.000/$ vs 14.841/$.  $1.285/gbp vs $1.284/gbp.  0.683/aud vs 0.684/aud.  CNY 7.020/$ vs  7.006/$.

 

Commodity News

Gold US$1,466/oz vs US$1,455/oz yesterday

   Gold ETFs 81.2moz vs US$81.6moz yesterday

Platinum US$876/oz vs US$878/oz yesterday

Palladium US$1,717/oz vs US$1,703/oz yesterday

Silver US$16.97/oz vs US$16.79/oz yesterday

           

Base metals:   

Copper US$ 5,835/t vs US$5,848/t yesterday - Chile’s copper industry largely unaffected by general strike (S&P Global)

• While hundreds of thousands of Chileans halted work on Tuesday, employees of the world’s largest copper miner Codelco were not involved in the protest.
• Copper mining has not been significantly disrupted by the three weeks of unrest in the country which has seen 19 people killed.
• Some mines such as Anglo American’s  El Soldado and Los Bronces are experiencing delays, but still functioning normally (Reuters).
• Carrapateena faces delays - OZ Minerals has lifted the capital costs for its major Carrapateena copper development in South Australia and delayed first production.

Aluminium US$ 1,767/t vs US$1,770/t yesterday

Nickel US$ 15,490/t vs US$15,425/t yesterday

Zinc US$ 2,433/t vs US$2,497/t yesterday

Lead US$ 2,045/t vs US$2,095/t yesterday

Tin US$ 16,165/t vs US$16,525/t yesterday

           

Energy:  M&A activity builds momentum across the sector

• The past 12 months has seen the acquisition of Faroe Petroleum (FPM.L) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA.L) by Seplat Petroleum (SEPL.L); and Amerisur Resources (AMER.L) currently engaged in a competitive bid.
• Aramco’s proposed IPO is another good barometer for sector sentiment in our view. Days before a widely expected official approval for what would be the world’s largest IPO ever, Saudi Arabia has yet again delayed the much-hyped listing by at least several weeks, with international investors seemingly not buying the Saudi insistence that the biggest oil company in the world is worth US$2tn.

Oil US$61.4/bbl vs US$62.4/bbl yesterday - Oil continues to seesaw on every rumour (positive or negative) regarding the US - China trade war

• As a result, a lot of attention will be paid to President Trump’s speech today at the New York Economic Club, where he may provide more clues into what to expect next
• US crude futures were down 0.3% at $60.6/bbl on the New York Mercantile Exchange

Natural Gas US$2.616/mmbtu vs US$2.658/mmbtu yesterday - Natural gas inventories have increased significantly this year, rising from a low point of 1,155Bcf in April to 3,724Bcf at the end of October

• Natural gas stocks are now 37Bcf above the five-year average
• The U.S. is entering the winter season with ample supplies, which has weighed on natural gas prices and puts somewhat of a cap on any rally. Gas drillers are struggling financially as a result
• There is one tropical disturbance in the lower Atlantic that NOAA projects 10% chance of turning into a tropical cyclone over the next 48-hours

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

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$79.2/t vs US$77.0/t - Vale iron ore outlook cut equates to at least 15% sales drop in 2019 (mining.com)

• Vale expects irons ore pellet sales to be between 307mt-312mt in 2019.
• This is at least a 15% decline from a year prior, as the deadly dam burst resulted in cut production.
• Vale shares were down 2.4% in early afternoon trading in Sao Paulo when the news was announced.

Chinese steel rebar 25mm US$572.2/t vs US$570.2/t

Thermal coal (1st year forward cif ARA) US$62.8/t vs US$62.4/t

Coking coal futures Dalian Exchange US$179.5/t vs US$179.8/t

           

Other:  

Cobalt LME 3m US$36,000/t vs US$36,000/t - First Cobalt seeks government backing to restart Ontario refinery (mining.com)

• The company is in advanced talks with Ontario’s local government, asking them to finance the C$37.5m required to restart its cobalt refinery.
• The plant would be the sole North American producer of refined cobalt for the EV market.
• The deal would reduce First Cobalt’s reliance on Glencore, which in July agreed to extend $45m in loans to develop the project.
• Canada, the US and Australia are keen to reduce their reliance on China for rare earths (Reuters).

NdPr Rare Earth Oxide (China) US$40,384/t vs US$40,463/t

Lithium carbonate 99% (China) US$6,909/t vs US$6,922/t

Ferro Vanadium 80% FOB (China) US$28.7/kg vs US$28.5/kg

Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.3/kg

Tungsten APT European US$225-245/mtu vs US$225-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

 

Battery News

Tesla name Berlin as location for European Gigafactory (Electrek)

• Elon Musk previously said that Germany, and more specifically the German-French border “makes sense”.
• Gigafactory 4 is going to be built in the GVZ Berlin-Ost Freienbrink industrial park near the new Berlin airport.
• This factory is going to focus on Model Y production, and will also produce batteries and powertrains.
• Tesla is also going to create an engineering and design centre in Berlin (Tech Crunch).

 

Company News

Anglo American (AAL LN) FOLLOW 2015.5 pence, Mkt Cap £25.4bn – De Beers diamond sales

• Anglo American reports that De Beers sold US$390m of diamonds in its 9^th sales cycle of the year. This is US$93m higher than the revised US$297m  sales for the preceding 8^th sales cycle which has been revised upwards from the previously reported  as US$295m but almost 12% lower than the US$442m of the ninth cycle last year.
• On a year to date basis using the company’s previous sales announcements, we calculate that sales of approximately $3.6bn are approximately 26% or US$1.2bn  below the US$4.85bn at the end of sales cycle 9 in 2018.
• De Beers CEO, Bruce Cleaver commented that there were signs of increased stability in the prices of polished diamonds and explained that “Gobal consumer demand for diamond jewellery at the retail level continues to be broadly stable but, with midstream trading conditions still in the process of rebalancing, we offered Sightholders further flexibility during the Sight to provide support”.

Conclusion: De Beers diamond sales continue at well below the levels seen at this time last year, however De Beers reports that the polished diamond market is stabilising..

 

Arc Minerals* (ARCM LN) FOLLOW 2.85p, Mkt Cap £21m – Arc sells Casa Mining to focus on Cheyeza copper discovery

Arc Minerals holds an effective 71.34% interest in Zamsort Limited ("Zamsort"), a private company focused on a prospective copper licence in the Zambia Copperbelt, together with a convertible loan to Zamsort which converts into approximately a 5% additional equity interest in Zamsort. A 47.5% equity interest in Zaco Limited (“Zaco”), a private company focussed on a prospective copper and cobalt license adjacent to Zamsort.

Arc also holds 100% ownership of the Kremnica Mining Licence Area in Slovakia which host the 1.3Moz AuEq   Au PFS stage Ṧturec Gold Project.

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• Arc Minerals reports the sale of Casa Minerals for a headline figure of US$9.8m plus US$2.5m in debt.
• Non-core asset: This is not a core asset and while the project has grown in terms of its gold resource the cost of financing and developing mines in the DRC makes Casa unattractive when compared with Arc’s projects in Zambia.
• The sale is for an initial US$1.8m in cash for the asset and a series of potential staged cash payments on the identification of significant increases in the Minerals Resource Estimate within Casa.
• Staged payment terms:
  • US$2.5m on 6m of declared Minerals Resource Estimate at Casa within 5 years
  • US$2.5m on 9m of declared Minerals Resource Estimate at Casa within 5 years
  • US$3.0m on 12m of declared Minerals Resource Estimate at Casa within 5 years
• The total payment could potentially add up to US$9.8m plus US$2.5m in assumed debt and creditors associated with Casa.
• Running costs: Significantly, Arc is offloading the US$0.5m a year running cost associated Casa enabling it to better focus its time and effort on its key assets in Zambia.
• Casa’s Missi gold asset has a net book value of £5.1m (US$6.6m) indicating there will be a write down in the accounts this year.

• Valuation: we are looking at valuing Arc’s Zambian copper assets at Kalaba and Cheyeza as further detail on the project emerges.
• We see significant potential for a multi-million tonne near-surface copper resource at Cheyeza grading at or around 1.5% copper.
• Our very early and approximate resource estimate indicate potential to generate small-scale but significant cash flow using the plant at Cheyeza which may be significantly increased at relatively small expemse.
• New Cash Flow: The Kalaba plant could produce some 150-250 tonnes per month on our estimates for around $10-18m of sales covering a significant ramp up in exploration expenditure.
• This cash flow would also give Arc access to lower cost bank finance if required as well as further de-risking the project from a metallurgical perspective.
• Recommendation: we recommend Arc Minerals as a Strong Buy due to its potential for a major copper discovery at the Cheyeza and at its other projects in Zambia.
• Any significant copper discovery is likely add significantly to the company’s value once the market recognises the value of the discovery on further drill results and resource estimation.
• Discoveries in Zambia in recent years include Sentinel in 2014 with 939mt grading 0.49% copper just 40km away from Kalaba. Sentinel is producing >190,000tpa of copper.
  • Lumwana which is 100km to the east also has a reserve of 758mt grading 0.51% copper and is producing >116,000tpa of copper.
  • Kiwara PLC acquired by First Quantum Minerals in 2010 for US$260m with a Kiwara estimated resource at Kalumbila of 1.38bt grading 0.78% copper. The resources was later adjusted by FQM to 1.027bt grading 0.51% copper. Last year the mine reported an new resource of 0.88bnt grading 0.53% copper following production of 223,656t of copper in 2018.
  • Equinox bought by Barrick Gold for its Lumwana assets in 2011 for $7.8bn post construction with 322mt of copper ore grading 0.73% copper.

Conclusion: Arc is focussing its energy and resources on the Cheyeza East copper discovery, copper concentrate production from the Kalaba process plant and the copper cobalt portfolio within Zamsort and Zaco Limited in Zambia.

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

 

Aura Energy Limited* (AURA LN) FOLLOW 0.325p, Mkt Cap £4.3m – Cost reduction programme

• Aura Energy has announced a range of cost reduction initiatives, most of which were implemented during August/September,  in response to current market conditions.
• The focus remains on the Tiris uranium project in Mauritania where the company is advancing its efforts to obtain Export Credit Agency finance and “has recently short-listed two agencies for that purpose”.
• Efforts also continue to identify corporate “opportunities for development of the project with various parties”.
• The companies other projects in gold and vanadium will attract only minimal expenditure “with the focus only on corporate transactions and/or IPO or spin-outs of those assets”.
• In addition, Aura Energy is reducing the hours and costs of its head office staff as well as those in Mauritania and in Sweden while suspending payments to its directors and its technical staff and consultants.

Conclusion: Aura Energy is implementing a stringent cost reduction programme in order to press ahead with its Tiris uranium project where two potential providers of Export Credit finance have now been short-listed. The measures are no doubt painful but the discipline should be worthwhile to ensure progress of the project.

*SP Angel act as Nomad & Broker to Aura Energy

 

Bushveld Minerals* (BMN LN) FOLLOW 23.3p, Mkt Cap £268m – Bushveld Energy leading consortium for acquisition of Enerox from CellCube for €11m

(Bushveld Minerals owns 74% of Vametco, 100% of Vanchem, 84% of Bushveld Energy in South Africa, 100% of Lemur Holdings, 9.5% of Afritin)

Valuation raised to 82p

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• Bushveld Energy has signed a term sheet whereby it will lead a consortium of investors in the potential acquisition of Enerox GmbH on a debt-free basis from CellCube Energy Storage Systems Inc.
• The deal is in line with Bushveld’s strategy to invest in the roll out of battery storage systems and also appears opportunistic following the suspension of CellCube Energy shares Friday 1^st November.
• Cellcube shares were suspended on the failure of the company to raise funds in the Canadian market and the collapse of their agreed sale of the ‘V23’ vanadium mining business to Regency Gold Corp.
• The Cellcube business appears to have been hit by:
  • high vanadium prices cutting orders for VRFB batteries
  • low vanadium prices killing off a deal to sell V23 vanadium mining venture.
• The Enerox deal: Bushveld Energy is looking to acquire a significant minority holding (eg 25-49%) in Enerox following the acquisition.
• Bushveld Energy will also have a first right of refusal to supply vanadium products to Enerox, eg vanadium electrolyte under the same material terms as other suppliers.
• This should help to protect Bushveld from volatility in vanadium pricing going forward.
• Bushveld Energy has till end-February to complete its due diligence and negotiate the Enerox acquisition documents for 11m plus working capital of €1.5m.
• Acquisition structure, consortium payments:
  • €0.3m to the seller which will go to Enerox for short-term working capital
  • €1.65m inc. the €0.3m above to purchase 24.90% of the share capital in Enerox inc. shareholder capital contributions of €1.2m over next 4 months
  • €10.85m for 75.1% of Enerox subject to full due diligence made up of:
    • €8.35m on transaction completion
    • €2m in Bushveld Minerals shares at Bushveld’s discretion priced at the at the lesser of the 10-day volume-weighted-average-price prior to, or the price on, the 4th day before closing
    • €2.5m deferred consideration payable by the Bushveld Consortium in €0.5m chunks every 6 months starting June 2020
  • “Should the Seller or Bushveld Consortium elect not to enter into the Main SPA, the Seller has a call option to purchase the Initial Shares at a price equal to €1.65 million paid by the Bushveld Consortium to the Seller and Enerox, plus an amount equivalent to 12 per cent of such amount. In the event the call option is not exercised by the Seller, the Bushveld Consortium has an option to put the Initial Shares to the Seller for the same amount. Should the Seller not honor the put, the Bushveld Consortium would have the option of increasing its holding in Enerox by 50 per cent plus one share for an additional amount of €250,000. In circumstances where the Main SPA is not entered into because the Bushveld Consortium withdraws from the transaction, it would continue to provide the working capital payments to Enerox.”
• The acquisition should give Bushveld Energy access to Enerox’s pipeline of deals along with technology and patients in electrolyte, stack design, stack electrodes, system layout, system operation and power electronics.
• Pipeline: Enerox were the pioneers of containerised VRFB systems with a three-year projection for a $300m energy storage business and a 12-month sales pipeline of >$100m.
• Production facilities: in Austria for the construction of containerised battery systems and is rolling out a new 4^th Generation VRFB system
• System cost improvement: Enerox state that today Flow batteries are on a par with Lithium while offering longer duration and lesser cost in the medium to longer term.
• Lower VRFB costs: Enerox were quoting vastly improved system costs in March of US$220-295/kWh for a 4 hour solution to give <10kw of="" auxillary="" power="" and="" a="" 78="" roundtrip="" efficiency="" li="">
• Range: Management see VRFB batteries as most effective in the 1MW to 100MW range taking over from Li-ion batteries which are good at rapid and efficient discharge in the <10kw-10mw range="" li="">
• Longevity: Management claim Its highly integrated energy storage Systems feature 99% residual energy capacity after 11,000 cycles (cycling daily for 28 years) and larger scale containerized modules.
• Enerox (Austria) has installed VRFBs at over 130 sites and is one of the world's largest researchers, developers, manufacturers and distributors of VRFB ‘vanadium redox flow batteries’.
• The new consortia should help mobilise additional capital from third party funders to establish an investment capital pool to support VRFB original equipment manufacturing growth. This should support new demand for vanadium electrolyte and for services managing the construction and commissioning of VRFB instillations.
• VRFB configurations offered by Enerox:
  • FB 250 at 250kW for useable energy capacity of:
    • 1,000kWh (4 hours)
    • 1,500kWh (6 hours)
    • 2,000kWh (8 hours)
  • The grids are scaleable to:
    • 1MW – 4 MWh
    • 2MW – 8MWh
    • 10MW-40MWh
• System life is estimated at 25-30 years albeit with a bit of maintenance along the way. The key is that the system is non-degradable and has indefinite deep discharge cycles
• Cellcube estimate a C$130bn market for energy storage systems by 2030 driven by decarbonisation and a need for greater energy efficiency.
• Cellcube target applications and pipeline:
  • Large renewables: 16x for 2,997MWh
  • Capacity & reserves: 22x for 1,850MWh
  • Distributed energy resources & microgrid: 22x for 1,160MWh
• Bushveld Valuation: we maintain our 82p/s value according to the assumptions in the table below.

Conclusion: The acquisition should help Enerox maintain it’s competitive advantage and leadership in the VRFB space through the deployment of it’s 4th generation VRFB project.

This, in turn, should support growth in Bushveld Energy in both electrolyte sales and VRFB deployment. We see Bushveld Energy as a key driver for Bushveld Minerals going forward helping the company to expand into VRFB battery deployment and related vanadium sales.

 

	(Dec year end)		2018	2019E	2020E		2021E		2022E		2023E
	FeV price	US$/kg	81	45	45		45		45		45
	Vanadium sales	mtV	2,573	3,060	4,114		5,432		6,168		7,645
	Sales+	US$m	192.1	132.1	177.7		234.6		266.3		330.2
	Cash Op costs	US$m	-65.3	-62.2	-78.6		-101.3		-110.5		-129.9
	Unit Cash Op costs+	US$/kg	25.4	20.3	19.1		18.6		17.9		17.0
	Operating profit	US$m	95.2	42.7	72.3		103.7		123.3		162.9
	Pre-tax profit	US$m	86.6	44.2	69.6		101.7		121.3		161.3
	Tax	US$m	-37.6	-12.6	-19.8		-29.0		-34.6		-46.0
	Post-tax profit	US$m	49.0	31.6	49.8		72.7		86.8		115.3
	EPS	US$c/s	2.90	2.03	3.29		5.03		6.14		8.52
	PE	x	10.4	14.9	9.2		6.0		4.9		3.6
	EV/EBITDA	x	2.7	6.6	3.9		2.7		2.3		1.8
	EBITDA	US$m	101.2	46.2	79.0		113.4		134.6		174.3
	Free Cash Flow (100%)	US$m	32.2	-12.4	4.2		29.4		64.0		112.3
Source: SP Angel, Company Inc. Vametco & Vanchem figures combined.

*SP Angel acts as Nomad & Broker to Bushveld Minerals.

 

Caledonia Mining (CMCL LN) FOLLOW 624, Mkt Cap £67.1m – Robust performance despite challenges of power supply

• Caledonia Mining report gold production of 13,646oz in Q3 bringing production for the first nine months of 2019 to 38,306ozat an all-in-sustaining cost of US$824/oz and on site cost of US$671/oz (2018 – 39,558oz at US$812/oz AISC and on site cost of US$691/oz)
• CEO, Steve Curtis, reiterated the company’s full year 2019 production guidance of 50-53,000oz.
• A 7.3% improvement in received gold prices over the year-to date, to an average US$1,351/oz, in conjunction with lower production costs, resulted in a 22% improvement in gross-profit to US$19.8m (2018 ytd – US$16.2m).
• Operating  profit was heavily influenced by a US$28.3m foreign exchange gain rising to US$50.4m for the nine months to 30^th September (2018 US$15.4m) and with profit attributable to shareholders increasing to US$39.6m (2018 US$8.0m).
• The company reports a 30^th September cash balance of US$8m and we note that operating cash flow during the quarter of US$6.8m and investment of US$5.2m left the company with free cash flow before financing of US$1.5m during the quarter.
• Commenting on the operational aspects of the quarter, Mr. Curtis characterised “two distinct phases” with the first six weeks seriously affected by power disruption and “by the continued effects of the unstable economic conditions in Zimbabwe on our employees”. The second half of the quarter, however “showed a substantial improvement as the electricity supply improved; and measures taken in previous quarters to improve mining controls began to bear fruit.  Notwithstanding further interruptions to the electricity supply in October, the excellent performance in the second half of the quarter has continued into October and early November.”
• Elaborating on challenging the power supply situation, Mr. Curtis explained that “The mine experienced extended power outages in July and August which resulted in generator usage in the quarter totaling 1,451 hours, compared to 686 hours in the preceding quarter and 1,486 hours in the whole of 2018.   Although the electricity supply situation has improved, this problem has not been permanently resolved.  As we have previously announced, the situation has improved following the introduction of a revised electricity tariff during the quarter which allows the funding of imported electricity which is used exclusively to supply participating mining companies”
• Additional remedial measures to ensure power have included the purchase of an additional 6MW of diesel back-up generating capacity, which ensures that “Blanket is 100% self-sufficient on diesel generators” as well as evaluation, now at an advanced stage, of the use of solar power generation “which could supply Blanket's baseload demand during peak sunlight hours”.

Conclusion: Caledonia’s Blanket mine has faced significant challenges from power disruption, however, with back-up capacity now in place the company is maintaining its full year production guidance of 50-53,000oz. Cash generation remains robust and with the new Central Shaft now completed and being equipped, the company remains confident of its longer term target of 80,000oz pa of gold production at around US$7-800/oz by 2022.

 

Horizonte Minerals (HZM LN) FOLLOW 3.8p, Mkt Cap £55.0m – Quarterly results and project update.

• Horizonte Minerals reports a loss of £2.25m for the nine months ending 30^th September (2018 £2.10m).
• The company’s balance sheet shows a cash balance of £3.12m for 30^th September.

• Highlighting the main developments during the quarter, the company reiterates the US$25m payment received from Orion Mine Finance for a 2.25% royalty on the estimated production generated by Phase 1 of the Araguaia project which is equivalent to 426,429 tonnes of contained nickel within ferronickel product  which was announced in August.
• Also in August, the company reported an initial NI-43-101 compliant mineral resource estimate for its Serra do Tapa project in the Carajas region of Brazil, located approximately 90km north of Araguaia.
• Based on 48,845m of drilling in 952 holes, at a cut-off grade of 0.9% nickel, Serra do Tapa is estimated to contain 70.3mt of measured and indicated resources at an average grade of 1.22% nickel, and 0.05% cobalt. An additional 2.7mt is classified as inferred at an average grade of 1.14% nickel and 0.06% cobalt.

• Subsequent events include a pre-feasibility study confirmation of the “low cost, long life nickel sulphate project” at Vermelho in as well as the appointment of an experienced, Brazilian, project director for the development of Araguaia.

 

SolGold* (SOLG LN)  FOLLOW21.7p, Mkt cap £400.7m – Ingo Hofmaier takes over London office following resignation of Anna Legge

• SolGold report the resignation of Anna Legg, director and media relations exec at the company.
• Ms Legg’s role in investor relations will be assumed by Ingo Hofmaier who is part of the management team and is the company’s executive general manager, project and corporate finance executive.

Conclusion: Many companies are working on improving their corporate structures and corporate governance and it’s no surprise to see company structures change as the business evolves.

*SP Angel act as Financial Advisor and broker to Solgold

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

Richard Parlons – 0203 470 0472

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.

 

Sources of commodity prices
Gold, Platinum, Palladium, Silver	BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel	Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt	LME
Oil Brent	ICE
Natural Gas, Uranium, Iron Ore	NYMEX
Thermal Coal	Bloomberg OTC Composite
Coking Coal	DCE
RRE	Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony	Asian Metal
Tungsten	Metal Bulletin

 

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%