SP Angel . Morning View . US uranium petition to promote domestic critical minerals production
Paul Kettle
SP Angel research note -4 min read
10:14, 7th June 2019

SP Angel – Morning View – Friday 07 06 19

US uranium petition to promote domestic critical minerals production

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MiFID II exempt information – see disclaimer below 

African Battery Metals* (ABM LN) – Copper anomaly identified at Kisinka project

KEFI Minerals* (KEFI LN) – Central bank approval for project finance secured

Mkango Resources* (MKA LN) – Corporate update

Solgold* (SOLG LN) – Ecuador Government mining policy and proposed referendum

W Resources (WRES LN) – Mining contract keeps La Parilla on track

 

US uranium petition to promote domestic critical minerals production

  • US uranium miners report they are “confident” President Donald Trump will implement limits on uranium imports after the Commerce Department recommended urgent steps to boost domestic production of a list of 35 “critical minerals” that included the nuclear fuel.
  • A petition lodged by Ur-Energy and Energy Fuels, asks the president to require that at least 25% of U.S. uranium needs are filled by domestic supply, and requiring U.S. federal power utilities and agencies to buy U.S. uranium.
  • "It’s clear that the administration recognizes that relying on imported uranium creates a strategic vulnerability for our economy, military and overall security," Paul Goranson, CEO of Energy Fuels, and John Cash, vice president of regulatory affairs at Ur-Energy Inc, said in a joint statement. "We are confident that he will recognize the danger of imported uranium and use his authority to address this threat and protect U.S. national security."
  • Measures recommended in Tuesday’s Commerce report also include 61 specific recommendations – including low-interest loans and “buy American” requirements for defence companies – to boost domestic production.
  • The domestic uranium mining industry has been struggling with prices hovering just above historic lows; floating around mid-$20s/lb compared to highs over $140/lb in 2007.
  • The transition isn’t fully supported with some Western Democratic lawmakers and environmental groups raising concerns that greenlighting measures to boost domestic production would place iconic landscapes and sacred tribal lands at risk. The Commerce Department report recommended that both the Bureau of Land Management and the Forest Service review all areas that are currently “withdrawn” – or protected – from development.
  • In particular, US House Natural Resources Committee Chairman Raul Grijalva said such measures could open uranium-rich areas near Arizona's Grand Canyon and urged Congress to pass his Grand Canyon Centennial Protection Act, which would put a permanent ban on new mining claims on one million acres north and south of the national park.

 

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FTSE 350 Mining

 

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AIM Basic Resources

 

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Economics

ECB – The central bank is prepared to cut rates or buy more bonds should this be warranted amid rising global trade war as well as some regional disruptions risks.

  • Mario Draghi specifically mentioned a fresh expansion of the bank’s €2.6tn QE programme and rate cuts as possibilities, but insisted that the central bank’s efforts would need to be matched by a boost in public spending by the region’s governments, FT reported.
  • The governing council extended the guidance of keeping rates at their record lows by six months at least to mid-2020.
  • Additionally, the central bank revised its growth and inflation forecasts. GDP is estimated to grow 1.2% this year (+0.1pp revision) and 1.4% in 2020 (-0.2pp). Inflation forecast to come in at 1.3% this year (+0.1pp) and 1.4% in 2020 (-0.1pp).

 

UK – Germany and most other EU states will grant another extension to Brexit to carry a second referendum, a senior European source said.

  • The final deadline is expected to be as late as next spring, Times reported.
  • Theresa May resigns as leader of her Conservative Party today kickstarting the leadership race.
  • She is expected to remain in office as PM until late July before the next head of government is elected by the Conservative party.

 

Germany – April poor industrial production numbers released this morning reignite fears of a slowdown in the European largest economy.

  • Production was down 1.9%mom v a 0.4%mom drop forecast and a 0.5%mom increase in March.
  • Output was down 1.8%yoy v -1.7%yoy forecast and -0.9%yoy recorded in March.

 

France – The second largest economy in the Eurozone recorded a rebound in industrial production in France as manufacturing stabilised in April.

  • Industrial Production (%mom/yoy) 0.4/1.1 v -1.1/-0.7 in March and 0.3/1.0 forecast.

 

Mexico – Talks over the immigration flow between the US and Mexico are ongoing with tariffs set to kick in on Monday if no agreement reached before then.

  • Following a sovereign credit rating downgrade on Wednesday, Fitch cut the national oil company Petroleos Mexicanos rating to junk (BB+ from BBB-).
  • The Company’s outlook remains negative, reflecting the potential for further deterioration in the Pemex’s standalone credit profile, Fitch said.
  • The peso is slightly off this morning trading at the lowest level since the start of the year.

 

Currencies

US$1.1262/eur vs 1.1227/eur yesterday  Yen 108.49/$ vs 108.20/

nbsp; SAr 15.104/$ vs 14.927/
nbsp; $1.270/gbp vs $1.268/gbp  0.697/aud vs 0.697/aud  CNY 6.909/$ vs 6.914/$

 

Commodity News

Precious metals:         

Gold US$1,332/oz vs US$1,334/oz yesterday

   Gold ETFs 71.5moz vs US$71.5moz yesterday

Platinum US$804/oz vs US$808/oz yesterday

Palladium US$1,351/oz vs US$1,340/oz yesterday

Silver US$14.88/oz vs US$14.88/oz yesterday

           

Base metals:   

Copper US$ 5,842/t vs US$5,810/t yesterday

Aluminium US$ 1,776/t vs US$1,766/t yesterday

Nickel US$ 11,660/t vs US$11,730/t yesterday

Zinc US$ 2,519/t vs US$2,495/t yesterday

Lead US$ 1,879/t vs US$1,871/t yesterday

Tin US$ 19,250/t vs US$19,175/t yesterday

           

Energy:           

Oil US$62.6/bbl vs US$60.8/bbl yesterday

Natural Gas US$2.342/mmbtu vs US$2.372/mmbtu yesterday

Uranium US$24.60/lb vs US$24.35/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$95.4/t vs US$95.9/t

Chinese steel rebar 25mm US$603.7/t vs US$604.8/t

Thermal coal (1st year forward cif ARA) US$64.3/t vs US$64.3/t

Coking coal futures Dalian Exchange US$197.3/t vs US$197.1/t

           

Other:  

Cobalt LME 3m US$31,000/t vs US$32,000/t

NdPr Rare Earth Oxide (China) US$50,654/t vs US$49,897/t

Lithium carbonate 99% (China) US$9,624/t vs US$9,618/t

Ferro Vanadium 80% FOB (China) US$35.7/kg vs US$35.7/kg

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

Tungsten APT European US$260-270/mtu vs US$270-280/mtu

 

Battery News

GE bet on fossil fuels, lost nearly $200B in misjudging renewable energy transition, study says

  • General Electric’s profitability collapse over the past few years can be largely attributed to the company’s inability to judge the accelerating pace of the global energy transition away from fossil fuels and toward renewables, a new study claims.
  • The analysis comes from the Institute for Energy Economics and Financial Analysis (IEEFA), which says that “GE made a massive bet on the future of natural gas and thermal coal, and lost,” concluding: GE destroyed an almost unprecedented US$193bn or 74% of its market capitalization over 2016-2018.
  • IEEFA acknowledges a number of “other management missteps,” but claims that “this value destruction was driven in large measure by the collapse of the new thermal power construction market globally—a collapse which caught GE entirely by surprise.”
  • GE’s investors have lost billions as well, as the formerly most valuable company in the world now has a current market capitalization of $87bn.
  • The full report delves into the timeline of how GE’s Power division doubled down on natural gas and coal, and how quickly it fell apart within the past three years, before concluding that global investments must be rapidly and dramatically aligned to match the goals of the Paris Agreement.
  • While renewable energy costs hit new lows in 2018, the International Energy Agency found that installations stalled worldwide, adding about the same capacity as in 2017.

 

VW announces plans to install 36,000 electric car charge points in Europe by 2025

  • The Volkswagen Group is announcing a significant expansion of its investment in electric car charging infrastructure with plans to install 36,000 electric car charge points in Europe by 2025.
  • Over the last few years, they have already participated in the deployment of some charging networks, like Ionity, but the German automaker now plans to expand its own direct involvement in EV charging.
  • They have announced today: “Volkswagen is aiming for a rapid breakthrough for e-mobility and is redoubling its efforts in the field of charging infrastructure. Throughout Europe, the Group will be installing a total of 36,000 charging points by 2025; 11,000 of these are to be developed by the Volkswagen brand. They will be installed at Volkswagen plants and at about 3,000 Volkswagen dealerships in all large towns and cities. With its Group company for charging infrastructure Elli (Electric Life) and its charging service “We Charge”,
  • Volkswagen is also moving into further lucrative business areas connected with charging. All in all, the Group is investing about €250m at its European locations. At the same time, the Group calls for other measures to take effect rapidly for more charging stations in Germany.”
  • VW says that it is aware of the charging patterns of electric vehicles and its estimates put home charging at about 70% of all charging.
  • They plan to offer home charging solutions through Elli, Volkswagen’s new energy and charging company.
  • Volkswagen plans to deploy charging stations for work too, starting with their own locations. The automaker says that it “will be installing about 4,000 charging points for employees; many of these will be accessible to the public.”

 

Company News

African Battery Metals* (ABM LN) FOLLOW 0.45p, Mkt Cap £1.6m – Copper anomaly identified at Kisinka project

  • African Battery Metals announce an exploration uprate; XRF analysis (x-ray fluorescence spectrometry) has been carried out to identify anomalous levels of copper and cobalt on the 663 field samples with preliminary analysis identifying a 7km long anomalous zone for copper which is spatially relatable to the Undifferentiated Roan horizons within the licence area.
  • Undifferentiated Roan represents Roan rocks of the Roan 1, Roan 2 and Roan 3 Subgroups and the Neoproterozoic Roan Group of central Africa is host to the world's largest and highest-grade sedimentary rock-hosted copper-cobalt deposits in the Copperbelts of Zambia and the Democratic Republic of Congo.
  • Executive Director, Paul Johnson, adds “the potential significance of this large anomalous zone makes this a high priority prospect for the company”.
  • Further analysis and review of the copper and cobalt results from sampling will continue over the next week with conclusions reported imminently.

*SP Angel act as broker to African Battery Metals

 

KEFI Minerals* (KEFI LN) FOLLOW 1.7p, Mkt Cap £11m – Central bank approval for project finance secured

  • The Company secured a formal approval of the terms of the proposed full project funding package issued by the National Bank of Ethiopia.
  • The approval includes the permission to use leasing as a form of finance, a debt/equity capital ratio of up to 70/30, recognition of historical expenditure in the calculation of the capital ratio, the right to use gold price hedging and the application of market-based long-term fixed interest rates.
  • The decision paves the way for the Company’s project level partners including ANS Mining and the Ethiopian Ministry of Finance to subscribe to shares in TKGM, the holder of the Tulu Kapi mining license, for the combined $58m.
  • Upon the execution of subscription documents by all three partners in the project (KEFI, ANS Mining and Ministry of Finance) reflecting the previously agreed terms allowing execution and settlement of the first ANC Mining equity instalment of $11.4m this month.

Conclusion: Positive news as KEFI secures the approval from the central bank of the Tulu Kapi funding structure clearing another hurdle in the project financing process and bringing the team one step closer to the release of the first ANS tranche and start of development works.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Mkango Resources* (MKA LN) FOLLOW 9.3p, Mkt Cap £10.7m – Corporate update

  • Mkango Resources note that while it is aware the US Government is evaluating future sources of rare earth elements, detailed discussions have not yet taken place in relation to the Songwe Hills project in Malawi.
  • Reuters reported the US Department of Defence is actively seeking new sources of rare earths and other strategic minerals in a bid to diversify supply and mitigate risk from single source China.
  • Mkango also announce Metalysis has entered administration. Metalysis is a research and development partner for Mkango subsidiary, Maginito Limited.

*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.

 

Solgold* (SOLG LN) FOLLOW 28.5p, Mkt Cap £526.6m – Ecuador Government mining policy and proposed referendum

  • Solgold has reported that the Ecuadorean Constitutional Court has heard submissions on a "proposed referendum on mining in the provinces in which SolGold's 85% owned Cascabel project and other wholly owned exploration projects are located”.
  • Solgold confirms that “The Court heard arguments from many interested parties with the great majority opposing the proposed referendum. The Court subsequently adjourned and is expected to deliver its verdict by 24 June 2019”.
  • Share price weakness earlier this month has been attributed to rumours, subsequently confirmed, of the referendum.
  • The company also reports policy initiatives by the Ecuadorean Government “designed to strengthen investment and increase production in the mining sector as well as setting out a framework for environmental and social sustainability. The Vice President noted that the Government is supportive of the mining industry and described the sector as a fundamental axis of the country's economy”.
  • Solgold highlights its Cascabel project as "a key project in Ecuador's developing mining industry and a critical driver for the future of Ecuador's economy” that it employs some 500 Ecuadoreans comprising 97% of its staff.

Conclusion: Solgold confirms that a decision by Ecuador’s Constitutional Court on a proposed referendum on mining is expected by 24th June. The company highlights the significance of its Cascabel project within the context of a Government policy aimed at developing the mining industry as well as underlining supportive submissions to the Court and the importance of Cascabel as an employer within the region.

*SP Angel acts as broker and advisor to Solgold. SP Angel have raised funds for SolGold on eight previous occasions.

 

W Resources (WRES LN) FOLLOW 0.46p, Mkt Cap £27.7m – Mining contract keeps La Parilla on track

  • W Resources has awarded a mining contract for its La Parilla tungsten operation in Spain to local contractor, General de Maquinaria y Excavation (GME). The company plans to ramp up production at La Parilla to 2mtpa during the “T2” phase of the project and increase throughput further to 3.5mtpa from year 3.
  • The company confirms that “Development at La Parrilla is progressing well and project construction completion remains in line with guidance for completion of the Concentrator Plant in June …[and that] … commissioning of the Concentrator Plant also remains on plan for July”.
  • Welcoming the award of the mining contract and the overall progress at La Parilla, Chairman, Michael Masterman, also confirmed that “The project remains within budget and we look forward to ramp-up to T2 of the project which will deliver significant earnings starting in 2019”.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

SP Angel                                                            

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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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