SP Angel – Morning View – Gold rises on risk-off sentiment, Investors looking for less risky assets as expectations for global growth soften
Paul Kettle
SP Angel Research Note -4 min read
11:06, 25th March 2019

SP Angel – Morning View –Monday 25 03 19

Gold rises on risk-off sentiment

Investors looking for less risky assets as expectations for global growth soften

MiFID II exempt information – see dsclaimer below 

Bushveld Minerals (BMN LN) – Drill results at Brits vanadium project

Chaarat Gold* (CGH LN) – Kapan site visit notes: focus on productivity to deliver sustainable cash generation

MOD Resources (MOD LN) - Infill drilling at T3 project delivers increased reserves


Vale – Sul Superior Dam seen to be in Critical condition (Mining.com)

  • Vale report that the Sul Superior dam at the Gongo Soco mine is in critical condition from a stability perspective.
  • The dam is currently inactive and is scheduled to be decommissioned along with nine other days.
  • The report is based on the view of an independent auditor.
  • The nearby Brucutu iron ore mine, the largest in Minas Gerais was ordered to stop production but has since reopened.
  • Vale is initiating level 3 of the Mining Dams Emergency Action Plan and has removed all residents from the Self-Rescue Zone.


Dow Jones Industrials





Nikkei 225





HK Hang Seng





Shanghai Composite





FTSE 350 Mining





AIM Basic Resources







US – Fed dovish tone and slumping economic growth indicators see investors switching safe haven assets like government debt and gold.

  • 10y Treasuries are trading at below 2.5%, close the lowest level since early 2018, as the central bank signalled last week it does not expect to incr3ease rates this year as the US economic growth momentum slows.
  • Markets are increasingly betting the central bank may cut rates before year end with implied probability of cut  derived from futures market is currently around 40%, up from 25% before the Fed’s announcement.
  • In the Eurozone, German 10y Bund yields dropped in the negative territory on Friday for the first time in nearly three years as German manufacturing reported a dramatic contraction. Additionally, France reported drops both in manufacturing and services sectors adding to investors’ concerns.
  • Gold prices are up more than $20/oz since the start of the last week trading at $1,323/oz, the highest level since late February.


UK – No-deal Brexit looks more likely

  • The EU reply to Teresa May’s extension to Brexit raises the risk of a UK exit without a deal with the EU.
  • EU intransigence suggests elements within the EU would prefer and have probably always preferred a UK no-deal exit.
  • Teresa May is under pressure from ministers in the Cabinet to name a date for her resignation which in turn may help her win support for her Brexit deal, people familiar with the matter said.
  • The PM has been struggling to gain support for her Brexit deal with reports suggesting that the meeting with Tory Brexiteers including Boris Johnson and Jacob Rees-Mogg failed to produce a breakthrough.
  • The third vote on the Brexit deal has been dealt a blow last week as Speaker John Bercow argued it can not proceed unless it includes “substantial” changes citing a ruling from 1604 to justify his decision to block it.
  • Earlier, EU leaders agreed to grant the UK an extension of the Brexit deadline to April 12 by which time member states are expecting the UK government to secure the proposed May withdrawal deal or “indicate a way forward”.
  • The pound is little changed against the US$ and € this morning.

Labour plans to re-educate Treasury officials in left-wing economic theories under a John McDonnell government

  • The Times today reports that John McDonnell, Labour’s Shaddow Chancellor, has put Treasury officials on notice that he would expect officials to conduct ‘listening exercises’ with unions under plans that would mean him exerting control across government.
  • McDonnell has written to the Treasury permanent secretary to set out his priorities under a Corbyn-led government. McDonnell says he would change the Treasury’s mandate so that it better reflected his priorities in what will be regarded as a warning of wholesale overhaul and change of culture including re-education in left-wing economic theories.
  • McDonnell is previously reported as saying that the reason for the failure of socialism in Veneuzela is because Chavez’s reforms did not go far enough.

Non-EU buyers pile into London office property (CityAM)

  • Buying of London commercial property by non-EU buyers rose by 75% last year to £8bn. In 2018
  • Non-EU buying was nearly 10 times that of their EU counterparts who spent £885m last year.


Turkey – Authorities launched an investigation into JP Morgan and another probe of unspecified banks blaming financial institutions for driving the lira sell off last Friday.

  • The Banking Regulation and Supervision Agency (BDDK) said the JP Morgan research note that recommended selling the lira against the US$ had “misguided and manipulative” content that resulted in volatility in markets and hurt the reputation of Turkish banks.
  • The Capital Markets Board began its own investigation on similar grounds.
  • In the note, the bank argued there was a risk the lira may depreciate after the March 31 municipal elections while also highlighting a recent drop in Turkey’s net foreign reserves.
  • The lira was down more than 6.5% at some point on Friday closing 5% on the day with a sell off accelerating on speculation that the central bank may using its FX reserves to support the currency.
  • The central bank’s holdings dropped $6.3bn in the two weeks through March 15 marking the strongest drop in the balance since January 2014.
  • The central bank tried to arrest the drop in the currency by unexpectedly tightening its monetary policy on Friday. The bank suspended one-week repo auctions for an unspecified period “considering the developments in financial markets”, Bloomberg reports.



US$1.1300/eur vs 1.1370/eur last week. Yen 110.09/$ vs 110.79/$. SAr 14.471/$ vs 14.273/$. $1.319/gbp vs $1.314/gbp. 0.709/aud vs 0.711/aud. CNY 6.714/$ vs 6.705/$.


Commodity News

Precious metals:         

Gold US$1,317/oz vs US$1,312/oz last week

   Gold ETFs 72.1moz vs US$72.0moz last week

Platinum US$851/oz vs US$864/oz last week

Palladium US$1,548/oz vs US$1,601/oz last week

Silver US$15.50/oz vs US$15.52/oz last week


Base metals:   

Copper US$ 6,311/t vs US$6,445/t last week

Aluminium US$ 1,897/t vs US$1,908/t last week

Nickel US$ 12,875/t vs US$13,070/t last week

Zinc US$ 2,804/t vs US$2,856/t last week

Lead US$ 2,031/t vs US$2,053/t last week

Tin US$ 21,375/t vs US$21,435/t last week



Oil US$66.7/bbl vs US$67.8/bbl last week

Natural Gas US$2.728/mmbtu vs US$2.792/mmbtu last week

Uranium US$26.00/lb vs US$26.05/lb last week



Iron ore 62% Fe spot (cfr Tianjin) US$83.8/t vs US$83.2/t

Chinese steel rebar 25mm US$619.5/t vs US$622.8/t

Thermal coal (1st year forward cif ARA) US$73.1/t vs US$73.8/t

Coking coal futures Dalian Exchange US$199.2/t vs US$199.5/t



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

NdPr Rare Earth Oxide (China) US$42,826/t vs US$42,879/t

Lithium carbonate 99% (China) US$9,757/t vs US$9,769/t

Ferro Vanadium 80% FOB (China) US$67./kg vs US$68.5/kg

Antimony Trioxide 99.5% EU (China) US$6.8/kg vs US$6.8/kg

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


Battery News

GE Power Conversion and Nedstack are to collaborate to create zero-emission cruise ships powered by fuel cells

  • So far Nedstack and GE have designed a two-megawatt hydrogen fuel cell power plant for an expedition vessel.


Hitachi looking to add batteries to new electric trains to Scotland

  • The new trains are being built for ScotRail for Central Belt lines and extend the range of the Class 385 trains by 60 miles on non-electrified sections of track. Recharging takes just 10-15 minutes.


Company News

Bushveld Minerals (BMN LN) FOLLOW 37.3p, Mkt cap £417m – Drill results at Brits vanadium project

STRONG BUY (from BUY) - Target Price 87p


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

  • Bushveld Minerals report drill results from their Brits vanadium project in the Bushveld region of South Africa.
  • The Brits project lies adjacent to the Vametco open pit mine which is currently mined for its relatively high vanadium-in-magnetite grade.
  • The results from 10 drill holes show a weighted average vanadium V2O5 grade of 0.66% in whole-rock and 1.66% in the magnetite concentrate.
  • ‘A geological trend of decreasing grade in vanadium for magnetite-rich orebodies from west to east in the Bushveld Complex accounts for the marginally lower grades on Brits in comparison to the grades at the operating Vametco Mine.’
  • The results show the Brits project may be a future source of open-cast vanadium-in-magnetite for the Vametco plant.
  • Bushveld benefits from low-cost open cash mining at the Vametco mine and it is useful to know that low-cost mine production should continue at the adjacent Brits project.
  • This is particularly significant in the event of further expansion at the Vametco process plant.
  • Ferro-vanadium prices pulled back further last week by another 4% to $57.5-61.5kgV in Western Europe (Fastmarkets MB)
  • Vanadium pentoxide prices also fell heavily by 15.9% to $13.25-14.5/kgV in Rotterdam
  • Ferro-vanadium prices also fell 6.4% to $64-67kgV in China
  • The Fastmarkets MB trade log indicates ‘European ferro-vanadium prices remain under pressure; few small volume deals concluded within the new range; end user buying remains limited’. There is weak sentiment in the market and buying remains limited.

We retain our Buy recommendation and 87 pence per share target price


*SP Angel act as nomad and broker to Bushveld Minerals


Chaarat Gold* (CGH LN) FOLLOW 26.9p, Mkt Cap £106.4m – Kapan site visit notes: focus on productivity to deliver sustainable cash generation

  • The Company is ramping up production at the Kapan underground mine looking at establishing a sustainable cash generative operation.
  • FY19 target is for 700kt throughput at c.3.5g/t GE yielding 60koz payable GE production at AISC $950/oz (2018: 50koz, $1,125/oz).
  • The team closed the $55m acquisition deal earlier this year securing a polymetallic (Au-Ag-Cu-Zn-Pb) Shahumyan deposit operation with 4.1mt at 4.2g/t for 551koz GE in Reserves and 12.4mt at 5.4g/t for 2,175koz in Total Mineral Resources (JORC-compliant) and a flotation plant producing both copper and zinc rich concentrates with precious metals by-products.
  • Underground mine is essentially driving the annual throughput rates at Kapan and is currently targeted to deliver 700kt and 750kt in 2019 and 2020, respectively, benefiting from improved productivity primarily coming from replacement of mining equipment (80% of current equipment has been updated in the last three years with total equipment availability currently at 80%) as well as a switch from manual to more efficient mechanized drilling.
  • FY19 budgeted development is for 21,000m, equivalent to 55-60m per day in line with levels recorded lately post upgrade of drilling equipment and nearly double the rates seen 4-5 years ago.
  • Dilution runs high at 65-70% reflecting narrow vein nature of the deposit with a continuous definition drilling used to confirm the position of the mineralization. The deposit hosts some 220 mineralized veins with widths going as low as 20cm (grades hitting up to 40g/t GE) and an average width of around 1m versus 2.2m minimum mining widths. The Company is implementing changes to the mining method attempting to reduce secondary dilution from rock breakage from the hanging wall as well as crown pillars that currently accounts for 20-25pp and aiming to bring it down to 10-15pp. More stopes will be mined bottom up (ratio will improve to 60/40 [bottom up/top down] from current 10/90) with accelerated backfilling of mined out sublevels as well as more cablebolt grouting support for the exposed hanging wall will be used. Reducing dilution will help not only to deliver haulage savings and higher ROM grade to the processing plant but should also help metallurgical recoveries that show positive correlation with the feed grade. The Company is also studying changes to the drilling and blasting in stopes trying to decrease mining widths from current 2.2m.
  • The Company is in the process of adjusting the existing block model including the latest round of infill as well as step out drilling with a target to compensate for mining depletion in reserves as well as adding new ounces to the total resource. Inferred category currently accounts for 72% of total mineral inventory offering good potential for LoM extension from current five years based on current JORC reserves (2023) to 2029 using historical conversion rates. The orebody remains open down dip as step out holes intersected polymetallic mineralization at sort of similar grades currently mined but better widths allowing to potentially reduce dilution.
  • Processing circuit involves three stage crushing, two-stage milling and a set of copper and zinc flotation cells, thickeners and filter presses powered from the grid supplying low cost electricity (6c/kWh) from hydroelectric power station. The Company is installing a fourth stage crusher to reduce mill feed size allowing to increase throughput rates and improve recoveries that are budgeted at 84% for gold/silver, 88% copper and 80% zinc for this year (combined in copper and zinc concentrates). The management is confident the current milling set up can be run at 1mtpa or some 115tph rate versus targeted 80/85tph mining rate offering spare capacity for new feed from other sources or toll processing. While crushing and milling circuits have been operating since 1950’s and 1980’s, respectively, the plant has been looked after with the latest improvements including replacement of filter presses, waste pumping engines, additional flotation cell in the copper circuit, hydrocyclones as well as refurbishing of thickeners.
  • One of the capital intensive items in the Kapan’s budget is reinforcing of the tailings dam walls ($4m over the next several years) as per latest CSA recommendations to avoid failure under increased seismic activity assumptions with part of the Kapan town and local river located downstream.
  • Employees are mostly local with the management team having years of experience operating at the site in the province that hosts a major share of mining operations including the Kajaran copper/molybdenum mine, one of the largest corporate taxpayer in Armenia.

Conclusion: The newly acquired Kapan operation brings a cash generating business into the fold as Chaarat builds a portfolio of mining projects focussed on the Central Asia and the FSU. The team identified a number of productivity improving opportunities at the mine as well as a processing plant that are being implemented and are expected to allow the operation to run sustainably at 700-750ktpa. Additionally, the exploration team is busy updating the block model and incorporating latest drilling results that are expected to increase mineral resources/reserves inventory further extending the LoM.

*SP Angel acts as Broker to Chaarat Gold


MOD Resources (MOD LN) FOLLOW 18p, Mkt Cap £55m - Infill drilling at T3 project delivers increased reserves

  • MOD Resources has announced a 61% increase in probable ore reserves at its T3 copper project in Botswana to 34.4mt at an average grade of 1.0% copper and 13.2 g/t silver.
  • The increase, which is based a US$2.91/lb copper price (approximately US$6,415/t) and a silver price of US$16.81/oz results from the drilling of around 90 additional drill holes “within a larger proposed pit shell boundary” compared to that outlined in the January 2018 pre-feasibility study.
  • The new reserve estimate builds on the revised mineral resource estimate published in July 2018 which outlined a total of 60.2mt at an average grade of 0.98% copper and 13.9g/t silver using a cut-off grade of 0.4% copper. Approximately 60% of the resource estimate is classed as indicated with the balance as inferred.
  • The new reserves estimate forms part of Feasibility Study for the development of the T3 project. The study is expected to be delivered by the end of March 2019.
  • The feasibility work is expected to outline an open-pit mining project conducted over six phases of mining treating around 3mtpa of ore at an average waste:ore ratio of 5.7:1 over an 11 years mine life.
  • Further infill drilling comprising around 60 drill-holes is continuing “within the boundaries of the first two stages of the proposed T3 Copper Project open pit, with the objective of upgrading early production into the higher confidence JORC compliant Measured Resource category.”
  • The company points out that “A further revision to the T3 open pit Ore Reserve may be required when all the results of the infill drilling program are received.”

Conclusion: More detailed drilling has increased the reserve base of the T3 project – we look forward to the feasibility study, incorporating the latest reserves, later this month.



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



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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