SP Angel . Morning View - Gold breaks through $1,715/oz on record ETF holdings

SP Angel . Morning View . Tuesday 14 04 20

Gold breaks through $1,715/oz on record ETF holdings

 

MiFID II exempt information – see disclaimer below

 

BlueRock Diamonds* (BRD LN) – Extension to lockdown in South Africa till end April

Bluejay Mining* (JAY LN) – MoU with trader for 200ktpa of ilmenite

Chaarat Gold* (CGH LN) – FY19 financial results

Hochschild Mining (HOC LN) – Temporary suspension of the final dividend

Orosur Mining* (OMI LN) – Q3 results

Phoenix Copper* (PXC LN) – Reports a 32% reduction in losses for 2019

Rambler Metals* (RMM LN) – Covid19 mitigation measures

Serabi Gold* (SRB LN) –– March delivers highest monthly gold production since operations began

 

SP Angel rank 2nd in APEX Precious Metals forecasting in Q1 2020

• Rankings are as follows: 1^st UBS, 2^nd SP Angel, 3^rd ED&F Man, 4^th INTL FC Stone, 5^th Capital Economics

 

Chinese steel mills seen restocking driving iron ore, vanadium, coking coal and related prices

 

China GDP growth set to slow to 2.5% from 5.4% in 2020 (Reuters poll)

• China Q1 GDP forecast to fall by 6.5% yoy.
• We wonder if this may be a chance for China’s statisticians to reset the way they collate their statistics.

 

Copper – risk on as copper moves with recovering manufacturing confidence

• Supply disruption from mine closures looks increasingly likely to offset the expected fall in copper demand by the year end.
• We expect demand to fall by around 1mt this year but can easily see the disruption of mine closures in Latin America and elsewhere to cut production by more than this. WTO reckon global trade could fall by 13-32% slowing global GDP to just 1.5% according to the OECD..
• Copper mine supply could be cut by around 1.2mt this year if every mine is closed for around three weeks.
• While some mines may reopen others will remain closed for longer and most will suffer some form of disruption due to the Coronavirus and other logistical, supply chain issues. 
• MMG’s Las Bambas copper mine declared force majeure last week as Peru extended its lockdown till 26 April highlighting the disruption caused by the Coronavirus
• Increased bank lending in March in China as part of the government stimulus is seen as helping companies with working capital and liquidity

 

China – auto market recovering as state eases lockdown restrictions

• China auto sales fell 79% yoy in February but are seen recovering as demand rebounds in China as the state eases restrictions and dealerships reopen (Reuters)
• Long term trends for growth in China are reported to be unaffected (National Development and Reform Commission)
• The NDRC also see the sector as unaffected by the global supply chain
• Further new emissions standards may be postponed in some provinces according to the Ministry of Ecology and Environment
• European car plants prepare for factory restarts according to VW and Mercedes

 

Diamond sector frozen amid India's lockdown

• Migrant labourers vital to the diamond industry fled from urban areas to their rural hometowns as a result of the lockdown imposed by prime minister Modi last month. 
• Around 90% of all diamond cutting and polishing is done in India, however the lack of stones to cut has meant around 200,000 diamond workers have departed to towns and villages in Gujarat, further halting activity in the Industry.
• Until India reopens and once again receives rough diamonds to cut, there is no demand for the stones- highlighting the supply chain's fragmented nature and reliance on India.
• Prices for rough diamonds dropped 15-20% last month and are likely to fall further when the biggest miners such as De Beers inevitably cut prices (FT). 

 

Stimulus funding pledged

US – debating another $250bn help to businesses (not agreed with the Congress yet)

EU Finance Ministers failed to agree on a strategy to mitigate the economic impact of the pandemic. Further talks scheduled for Thursday

• $2tn US fiscal package approved by Congress. US may add $0.6t state aid for mortgage markets and travel industries
• $2tn US – Trump looking at $2tn infrastructure fund
• $700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE to buy Treasuries and mortgage-backed securities.
• $963bn (€750bn) ECB scraps limits on sovereign bond purchases. ECB PEPP buying running at around €250bn
• $825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
• $344bn - China stimulus + $127.2bn. China stimulus was $586bn in 2009
• $996bn (108.2tn yen) was. $544bn (¥60tn) - Japan
• $400bn (£330bn) UK + $242bn (£200bn) UK QE from BoE & no business rates plus £25,000 cash grants for hospitality sector
• $387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia, $78bn (C$107bn) Canada, $32bn Saudi Arabia, US$43.7bn Singapore, $22.6bn India, $19.3bn HK, $13.7bn South Korea, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
• Argentina to default on $10bn of dollar debt issued til the end of the year. Does no affect the $70bn that Argentina is currently in talks to restructure.
• $1,000bn - IMF available + $12bn World Bank,
• >11.9tn Total

 

Fatalities year-to-date:

• 119,789 - Coronavirus
• 139,035 - Seasonal flu
• 280,400 - Malaria
• 396,547 - Suicides
• 385,889 - Road accidents
• 443,418 - HIV/AIDS
• 714,979 - Alcohol
• 1,429,058 - Smoking
• 2,347,807 - Cancer
• 3,711,054 - Communicable diseases

*Stats from Worldometers.info

 

Dow Jones Industrials		-1.39%	at	23,391
Nikkei 225		+3.13%	at	19,639
HK Hang Seng		+0.75%	at	24,484
Shanghai Composite		+1.44%	at	2,823

 

Economics

US – US equities are up more than 25% off lows recorded in late March implying the return of the bull market amid extensive stimulus measures, China reopening and a drop in new cases in Europe.

• The Fed rolled out a $2.3tn monetary stimulus package on Thursday last week to provide liquidity to small businesses and municipalities as well as expanding measures introduced last month to back corporate debt markets.
• Extraordinary measures are being led by quickly deteriorating economic data.
• Weekly jobless applications totalled 6.6m last week taking the total over the previous two weeks to 13.5m, an unprecedented level, as more states joined lockdown and self-isolation measures.
• Treasury Secretary Steven Mnuchin said airlines that ask for government aid will need to repay 30% of the assistance within five years and will have to issue warrants to the state equal to 10 % of those loans.
• The Treasury said it has contacted nearly all airlines by now regarding conditions of the financial assistance.
• Bernie Sanders dropped out of the presidential race last week and endorsed Joe Biden earlier n Monday.

 

China – Trade data came in better than expected with both exports and imports posting lower than forecast declines in March.

• Expectations are for effects of travel disruptions and national lockdowns to be reflected in Q2 numbers.
• Global trade is forecast to post a 13% decline in volume of international goods trade shipments in 2020 under the optimistic scenario beating a 12% fall recorded during the financial crisis in 2009, according to the WTO estimates.
• Pessimistic scenario is for a 32% drop.
• Exports (%yoy, US$): -6.6 v -13.9 est.
• Imports (%yoy, US$): -0.9 v -9.8 est.

 

UK – The cabinet will decide on extension of the lockdown in the next three days which is expected to be the case given growth in new cases’ increases with other European nations extending measures into May.

• Under the passed law, the government need to decide on new measures by Thursday, Bloomberg reports.
• The government’s Scientific Advisory Group for Emergencies will meet Tuesday and Thursday to assess the latest evidence.
• Government to look to gradual ‘unwinding’ of social distancing rules

 

Germany - exports rose in February despite slowing trade with China reflecting Germany’s surprising resilience to the coronavirus.

 

France – President Macron extended the lockdown until May 11.

• The nation had 137k reported coronavirus cases with new ones trending largely down lately (2.9k on Sunday and 4.2k on Monday).

 

Italy – Lockdown was extended to May 3 despite pressure from businesses.

• Government will be seeking an expansion of the budget deficit in Parliament to fund tis next economic relief package.
• The package is expected to be announced by the end of April and partly funded by EU funds worth around €10bn.
• Authorities approved an initial €25bn stimulus programme last month.

 

Spain – The nation reported the lowest number of new  cases since March 20.

 

India – PM Modi extended the national lockdown to May 3.

 

Australia – Business sentiment plunged to the lowest on record coming in significantly below previous lows recorded during the financial crisis in 2008/09.

 

South Africa – lockdown extended till end-April 2020

 

Nigeria - extends lockdown by two weeks in Lagos, Abuja & Ogun States.

 

Currencies

US$1.0930/eur vs 1.0869/eur last week (Thursday).  Yen 107.70/$ vs 108.93/$.  SAr 18.027/$ vs 18.110/$.  $1.256/gbp vs $1.240/gbp.  0.640/aud vs 0.624/aud.  CNY 7.050/$ vs 7.068/$.

 

Commodity News

Gold US$1,713/oz vs US$1,656/oz last week (Thursday) - Gold prices hit seven year highs on Tuesday

• Gold prices continue to rise on fears of a steeper economic downturn due to the coronavirus, and also the huge stimulus packages which continued to be offered globally. 
• Spot gold gained 0.2% to $1,716/oz earlier this morning, touching its highest price since November 2012 earlier in the session. US gold futures rose 0.9% to $1,777/oz (Reuters). 
• Yesterday's fall in US equities supported a higher gold price, and bullish traders continued to buy gold believing that the path of least resistance for prices remains sideways to higher (Kitco). 
• Gold futures are now nearing $1,800/oz after trading in the $1,400s less than four weeks ago, and spreads over spot prices remain wide (Bloomberg).

   Gold ETFs 93.0moz vs US$92.0moz last week

Platinum US$756/oz vs US$739/oz last week

Palladium US$2,245/oz vs US$2,184/oz last week

Silver US$15.53/oz vs US$15.13/oz last week

           

Base metals:   

Copper US$ 5,175/t vs US$5,030/t last week - Chinese copper imports rise 13% last month

• China's unwrought copper imports stood at 442,000t last month, as factories restarted production as the country eased its coronavirus containment measures.
• Imports of copper concentrate rose more modestly last month, up 0.7% to 1.78mt compared to March 2019 however this was the lowest since October 2019. 
• Copper futures prices in China climbed to their highest in nearly four weeks on Monday following a fall in inventories and halts in production across South America. 
• The most traded contract on the SHFE climbed as much as 1.9% to 41,980 yuan (5,959)/t - its highest since the 17th of March (Reuters).
• Premiums paid on copper imports rose to $76/t last week in Yangshan as Chinese industry restocks inventory and supply chains recover.
• Traders are looking for a cut in Chinese VAT rates to help the economy recover
• Chinese refined copper cathode output rose 2.6% in March to 665,000t mom (Antaike) on increasing local demand and better margins
• Antaike survey of 22 copper smelters saw 5.9% fall in output in March yoy from 690,000t hampered by difficulties selling by-product sulphuric acid which has filled storage tanks.

• BHP’s Escondida copper mine confirmed two cases of the coronavirus last week

 

Aluminium US$ 1,499/t vs US$1,471/t last week

Nickel US$ 11,825/t vs US$11,530/t last week

Zinc US$ 1,931/t vs US$1,903/t last week

Lead US$ 1,725/t vs US$1,710/t last week

Tin US$ 15,290/t vs US$14,565/t last week - Indonesia's refined tin exports fall 21% last month

• The world's largest tin exporter shipped 4,539t of refined tin last month, a 20.9% decline compared to March 2019 according to the country's trade ministry. 
• Exports fell 39.2% compared to February 2020, when refined tin exports were 7,464t.

           

Energy:           

Oil US$32.1/bbl vs US$33.7/bbl last week

Natural Gas US$1.729/mmbtu vs US$1.810/mmbtu last week

Uranium US$29.80/lb vs US$29.10/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$82.7/t vs US$81.1/t - Chinese iron ore imports fall 0.6% in March

• Iron ore imports dipped slightly last month, as mills slowed output whilst steel inventories built up to record highs.
• Many steel mills in China went into care and maintenance as steel inventories saw record highs due to falling demand from the manufacturing sector as a result of coronavirus. Inventories held by traders across China as of the 12th of March were at a record 25.98mt (Mysteel). 
• Imports stood at 85.91mt last month, down 0.6% compared to 86.42mt a year earlier, and compared with 176.8mt over the first two months of this year. 
• According to official customs data, China imported 262.7t in the first quarter of this year, up 1.3% compared to Q1 2019.

Chinese steel rebar 25mm US$532.8/t vs US$524.6/t -

Thermal coal (1st year forward cif ARA) US$56.1/t vs US$56.0/t

Coking coal futures Dalian Exchange US$136.0/t vs US$134.0/t

           

Other:  

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

NdPr Rare Earth Oxide (China) US$36,802/t vs US$36,857/t – Chinese REE exports highest since records began last month

• China's rare earth exports rose 19.2% in March year-on-year, hitting their highest level since records began in 2014, as the industry recovers from the coronavirus outbreak. 
• According to official customs data, REE exports stood at 5,551t last month, more than the total for the first two months of 2020 combined. 
• Rare earth exports in Q1 2020 were down 2.3% year-on-year at 11,041 tonnes.

Noble Group are apparently not closing their base metal and REE trading desks, apologies.

Lithium carbonate 99% (China) US$5,531/t vs US$5,589/t

Ferro Vanadium 80% FOB (China) US$26.5/kg vs US$26.5/kg

Antimony Trioxide 99.5% EU (China) US$5./kg vs US$5./kg

Tungsten APT European US$240-245/mtu vs US$240-245/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$2,450/t vs US$2,550/t

 

Battery News

CATL profit warns for Q1 as production remains frozen

• China’s largest EV battery maker warns profits will fall sharply as a result of production freezes. (Autonews)
• CATL estimate net profit for Q1 to be between 733-838 million yuan, a 20-30% drop from the same time last year.
• The Company cites a severe marked contraction in domestic EV output during Q1, down 62% to 77,000 vehicles.
• COVID-19 shutdowns production shutdowns and weak auto market demand have resulted in a decrease in instalments of batteries and declining revenue.  (China.org)
• CATL have suggested they will look to cut manufacturing costs and operating expenses to mitigate the impact.

 

The outlook for EV might be bleak but Lithium-ion batteries remain popular

• Market analyst Roskill reports that Lithium-ion battery demand will remain robust as energy storage and portable power applications offset falling EV production. (Mining.com)
• EV sales are projected to fall dramatically in 2020 as the fallout from the COVID-19 pandemic starts to crystallise.
• Wood Mackenzie project global EV sales could fall 43% in 2020 to 1.3m vehicles. (Green Car Reports) 
• Chinese demand is expected to return to 2019 levels in November at the earliest while in the US demand is expected to lag 2019 by as much as 30%.
• Buyers are often first-time purchasers of EVs and as such the uncertain economic conditions are likely to see them adopt a wait and see position. (Business Green)
• Roskill analysis shows plug-in EV sales down 30% YoY for Q1, 5.5GMw capacity. (Oil Price.com)
• Roskill’s report does however suggest that a number of 1GWh+ projects are scheduled for construction by 2022 which could support the battery space.

 

Tesla strengthens position in China as green shoots start to appear

• The Californian EV maker accounted for more than 20% of EV sales in March as Chinese demand picked up. (Technode)
• Tesla delivered 10,160 cars in China in March out of 47,000 pure electric EVs sold last month. This is a record figure for the Company in China. (Green Car Reports)
• The Company re-opened its Shanghai facility last month, its only Gigafactory currently operating as US facilities in Nevada and New York have been closed.
• Tesla’s rival Nio did similarly well with deliveries growth of 11.7% in March as BYD and Geely suffered 70% and 69% drops in sales respectively.
• 56,000 NEVs were sold in March an improvement on the 11,000 vehicles sold in February. February sales fell more than 80% YoY.
• The Chinese government is extending subsidies on EVs out to 2022 in light of the production and demand slow down that has stalled EV growth in the country. Last year subsidies were reduced and were scheduled to be withdrawn by the end of this year. (Electrive)

 

Company News

BlueRock Diamonds* (BRD LN) 57.5p, Mkt cap £3m – Extension to lockdown in South Africa till end April

• BlueRock diamonds report the South African government extension to the lockdown till end-April.
• The extension to the lockdown is not a surprise and is said to have no direct impact on the company’s reported strategy.
• We expect demand for diamonds to recover quickly following the Coronavirus pandemic and for BlueRock to restart operations as relatively quickly once the lockdown is removed.
• SP Angel acts as Nomad and broker to BlueRock Diamonds

 

Bluejay Mining* (JAY LN) 3.7p, Mkt cap £36m – MoU with trader for 200ktpa of ilmenite

• Bluejay Mining report the signing of an MoU for some 200,000tpa of ilmenite.
• The agreement is part of the company’s ongoing commercial discussions
• Management report the production of their first bulk sample of heavy minerals concentrate at their pilot plant in Canada for Rio Tinto Iron and Titanium 'RTIT' and others. The pilot plant is now on care and maintenance due to the coronavirus restrictions.
• The bulk sample material which was made for RTIT is now being stored by Bluejay at RTIT’s request.
• Rio Tinto ‘RTIT’ have since advised that they will delay smelter test until 2021 due to Coronavirus restrictions.
• Bluejay also report ongoing discussions in Greenland on how to conduct Public Consultation under the COVID-19 restrictions.
• Management have cut costs showing up to four years of working capital if required partly by reducing and deferring corporate overheads along with a 30% reduction in pay for all staff and directors till September.
• Licence waivers on Exploration Licence commitments in Greenland also help.
• The drill program at Disko-Nuussuaq and Kangerluarsuk has been postponed due to logistical issues which sound likely to put back the maiden drill campaign by a year.
• Bluejay is able to continue to work on marketing and trading agreements, feasibility and other desktop studies through the lockdown.

*SP Angel act as nomad to Bluejay Mining. *SP Angel have visited the Dundas, Itelak ilmenite sands project in Greenland.

 

Chaarat Gold* (CGH LN) 26p, Mkt Cap £123m – FY19 financial results

BUY – TP under revision

• The Company issued annual financial results last week highlighting FY19 milestones including the acquisition of the producing Kapan polymetallic mine and a continuing progress at de-risking the Tulkubash development project that is expected to come online in Q3/22. 
• At Kapan, the Company has successfully integrated the operating mine into the Group implementing major cost optimisation and productivity improvement initiatives as well as expanding the life of mine.
• The team reported improvements in fleet availability, better grades and recoveries.
• Kapan produced 60.3koz GE, up 7%yoy, at AISC of $1,040/oz* (2018: 56.4koz GE and AISC $1,183/oz); the total includes 12 months for comparison reasons, while the mine acquisition was completed on 31Jan/19 with annual accounts including 11 months of Kapan financials.
• GE sales totalled 55.3koz (2018: 50.9koz) contained in 4.0kt of copper concentrate and 5.3kt of zinc concentrate with a realised gold price of $1,413/oz (2018: $1,268/oz) on 12 months’ period basis.
• Mine level sales generated for 11 months of the year amounted to $68.1m yielding $10.5m in EBITDA before Group non-cash adjustments.
• At Tulkubash development project, the team completed an updated FS, agreed a JV with Ciftay including a $31.5m investment in return for a 12.5% interest in Kyrgyz assets of the Group, signed a Stabilisation Agreement with the government that stipulates taxes and license retention fees for next 10 years, continued with early earthmoving and equipment mobilisation works as well as exploration programme aimed at expanding the life of mine and enhancing economics of the project.
• Step out drilling, mapping and surface sampling completed during the field season point to a significant potential to improve on the current 0.7moz in reserves that was based on around 5.5km of a defined 24km strike length for the Tulkubash trend with mineralisation remaining open along strike.
• 2020 exploration programme will focus on infill drilling within the existing resource to finalise pit designs as well as drill test the Shir Canyon area located on strike to the northeast of the planned open pit where the roadcut and outcrop sampling returned a broad area of >1g/t Au; district scale surface work will run in parallel preparing future drill targets.
• Detailed engineering studies for the heap leaching facility, crushing circuit and ADR facility are advancing, while some 343,000m³ of soil and rock has been moved during the construction of haul roads and camp area.
• In the light of the COVID-19 containment measures, the Company has recently updated the commissioning date from late 2021 to Q3 2022 with capital costs reiterated at $110m.
• Regarding Group level financial results, revenues amounted to $68.1m (2018: -) generating -$13.1m in EBITDA on the back of high administrative costs of $27.8m (2018: $13.7m) that included $9.8m in non-cash share based invective plan related costs during the period (2018: $0.4m).
• Net loss came in at $29.4m (2018: -$17.0m) or -7.06cents per share in EPS (2018: -4.52c).
• Net CFO (ex interest) was $2.6m (2018: -$8.8m) reflecting positive contribution from Kapan and working capital changes.
• Capital costs (ex Kapan acquisition) totalled $15.9m (2018: $14.3m) driven mostly by a continuing investment in the Tulkubash project.
• The most recent net debt reading (as of Mar/20) showed the Group had $2.2m in cash and cash equivalents and $86.8m in debt (including accrued interest) comprised of $26.4m in convertible loan notes due 31 Oct/21 (including accrued interest through to maturity; conversion price 37p), $19.4m due 31 Dec/20, Kapan acquisition related $34.8 term loan note repayable in quarterly tranches with the final one due Jan/23 and $6.1m owed under the Labro revolving loan facility with a further $7.0m remaining available and repayment due on 14 Jul/20. 
• As mentioned above, the Company has recently extended the $19.4m investor loan to 31 Dec/20 from 31 Mar/20 maintaining the existing 13% pa interest rate payable at maturity and incurring a 150bp (~$0.3m) fee to be paid in cash on completion; Labro, the Company’s largest shareholder with a 35.2% interest in the Group, agreed to extend and match the guarantee.
• Commenting on the Group’s going concern, the Company highlighted that internal cash flow estimates for the period to 31 Dec/21 suggest that the Labro loan facility will need to be extended or refinanced before 14 Jul/20, the $19.4m loan will need to be extended or refinance by 31 Dec/20, while the Group will also need to raise further funding before Q3 to meet operation commitments and overheads; should Kapan operations be affected by COVID-19 related disruptions, the Company may be in breach of Kapan term loan covenants and would require additional funding if the mine is suspended for more than one month; the Company received a waiver from its lenders in regards to the Kapan related loan for breaching the maximum Net Debt to LTM EBITDA of 2.5x as at 31 Dec/19 and is currently in compliance of the loan.

*AISC is based on an oz produced and excludes smelter TC/RC charges, others that add $150/oz.

Conclusion: The team has successfully completed the acquisition of Kapan last year transforming the Group from a developer into a producer while continuing to de-risk the Tulkubash oxide gold project focusing on expanding the reserve base, finalising funding and nearing the start of full scale development works. The updated Kapan mine plan and reserves expanded the life of mine to seven years based on 471koz AuEq in reserves, up from five years envisaged at the start of 2019, while~1,300koz AuEq sitting outside the mine plan in the Inferred resource category point to the significant potential to growth the life of mine further.

The Company secured a $32m equity contribution for the Tulkubash project development with Ciftay in 2019 and is now working on closing the debt funding for the remainder of the $110m capex. The outbreak of pandemic saw a revision in the Tulkubash schedule with funding expected to be closed in Q2/20 and first gold pour moved to Q3/22.

The Company is in the growth stage and relies on external funding to continue with development works at Tulkubash while Kapan positive FCF is being helpful in covering some of Group level expenses and scheduled repayments, but insufficient. We see Kapan generating $23m in mine level EBITDA in FY20 ($1,626/oz Au, $5,385/t Cu and $2,018/t Zn assumed prices) and $17m in mine level FCF after subtracting $4m in capex and ~$1m in tax payment compared to requirements to cover to group level administrative costs, debt interest, scheduled bank repayment with regards to the Kapan mine acquisition ($10m in FY20) as well as other borrowed funds due ($6m to Labro due in Q3/20 and $20m under investor loan due in Q4/20 that are likely to be extended) and exploration costs at Tulkubash. We expect the team to successfully address liquidity issues given its good track record in securing funding allowing the Company to continue with growing the business amid favourable environment for precious metals producers.

We retained our BUY recommendation and will release updated earnings estimates with new price target in due course.

*SP Angel acts as Broker to Chaarat Gold

 

Hochschild Mining (HOC LN) 140p, Mkt Cap £724m – Temporary suspension of the final dividend

• The Board decided to temporarily suspend the final dividend for the FY19 amid the continuing COVID-19 containment measures curtailing operating capacities.
• Both the Inmaculada and Pallancata mines in Peru remain in suspension following the authorities’ decision to extend social distancing until 26 April 2020.
• The restart of the San Jose mine in Argentina is expected to be in phases after the permission to resume operations were secured and amid the current restrictions on the movement of people in the country.
• The Company had $166m in net debt as of Dec/19 with $33m in cash.

 

Orosur Mining* (OMI LN) 2.1p, Mkt Cap £3.3m – Q3 results

• Orosur Mining report a nine-month loss for the year to end February of US$640,000 vs $1,6m yoy.
• Losses at the exploration company are pared y the receipt of US$501,000 from Newmont last year and reduced corporate and administrative expenditure.
• Orosur report a cash of around US$963k boosted by a recent US$500k from Newmont in relation to its commitment to the Anzá gold project in Colombia.
• “Newmont may earn a 51% ownership interest in Anzá by spending US$10 million in qualifying expenditures over four years and making cash payments to Orosur equalling a total of US$2 million during the first two years of the Phase 1 earn-in period. During the first two years of the Exploration Agreement (commencing September 2018), Newmont is committed to spend a minimum of US$1 million per year on qualifying expenditures (“Minimum Work Commitment”), or pay Orosur cash in lieu of completing said minimum work commitment, in order to maintain the Phase 1 earn-in right. In years 3 and 4, the Minimum Work Commitment increases to US$4 million per year.
• The Exploration Agreement comprises a three-phase earn-in structure, allowing Newmont to earn up to a 75% ownership interest in the Anzá project by making cash payments to Orosur equaling a total of US$4 million over Phases 1 and 2, spending a minimum of US$30 million in qualifying expenditures over twelve years, and in addition completing N.I. 43-101 compliant prefeasibility and feasibility studies through the end of Phase 3.”
• Louis Castro has been appointed as Chairman and Non-Executive Director replacing Robert Schafer who is retiring from the board.

Conclusion:  The company continue to support Newmont in their evaluation of the Anzá gold project in Colombia. Management continue to look for other opportunities.

*SP Angel act as Nomad and broker to Orosur Mining

 

Phoenix Copper* (PXC LN) 7p, Mkt Cap £3.3m – Reports a 32% reduction in losses for 2019

Phoenix holds 80% of the Empire mining property in Idaho

• Phoenix Copper reports a loss of $1.13m during 2019 compared with $1.65m during 2018 as it moves towards an updated mineral resource estimate for the  Red Star project  by Q3 2020 and initial production in late 2021.
• The company reports a cash balance of $210,591 for 31^st December 2019 with subsequent additional funding of $1.85m comprising $1.54m from the issue of shares priced at £0.15 and a further $0.31m from the placing of unsecured loan notes.
• The company confirms that it has ʺcontinued to work on the development of the open-pit copper mine, in anticipation of higher copper prices, although we can see earlier cash flow potential from the Red Star project, to the north of the Empire open pit. The Red Star discovery is in primary high-grade silver/lead sulphide mineralisation. … Our current view is that Red Star may develop into a high-grade underground silver-lead mine with a modest level of capital expenditure, and we are going full steam ahead with the drilling programme to prove up enough metal in order to make a production decision later in the year.ʺ
• Commenting on the outlook for Phoenix Copper, CEO, Ryan McDermott, said that his ʺoutlook on the Company is more positive now than in the three years since joining the Phoenix team.  In that time, we have expanded our resources and exploration potential from a single oxide-copper resource into a high-grade silver lead vein system, a polymetallic sulphide vein system, a very prospective volcanic-hosted gold system, and two strategically located cobalt properties, all within the same geopolitically stable, pro-mining jurisdiction.ʺ
• Mr. McDermott highlighted the Red Star discovery which, he said, ʺprovides us with a seriously attractive and low cost near surface sulphide exploration target and the expanded claim holdings protect our future from competition, providing the Company with potential base and precious metals resources and perhaps the discovery of a world class polymetallic depositʺ.
• Outlining the impact of the Covid19 pandemic, the company explains that ʺmining was named an essential service under Idaho Governor Brad Little's recent stay-at-home order, so Phoenix employees are moving the Empire and Red Star Projects forward without delay.  To protect the health and safety of its employees and the local community, the Company, in concert with community leaders, has developed an innovative plan that minimizes employee-to-employee contact and virtually eliminates contact with the community at large while allowing the Company to proceed with the Red Star drilling programme.  The Company has closely examined the supply chain and is confident that all necessary equipment and supplies will be readily available for the drilling programmeʺ.

Conclusion: Despite restrictions aimed at containment of the Covid19 virus, Phoenix Copper is able to continue its exploration work in Idaho, where mining is deemed an essential service, and is aiming to produce an updated mineral resource estimate for its high grade Red Star silver/lead discovery in Q3 2020. We look forward to results of the exploration as they become available.

*SP Angel acts as Nomad and broker to Phoenix Copper

 

Rambler Metals* (RMM LN) 1.45p, Mkt Cap £18.8m – Covid19 mitigation measures

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• Rambler Metals has provided a summary of the measures it is implementing to ensure that its workforce and operations are protected from the Covid19 virus.
• The company confirms that ʺTo date, not one of our team and contractors have been diagnosed with having contracted the virus.ʺ
• Office based staff in both UK and in Canada are working remotely from home until further notice and an embargo has been implemented on all non-essential travel while self-isolation is being put in place for ʺanyone who has been in close contact with a confirmed case of COVID-19, or who has travelled to a location with high or moderate risk of COVID-19.ʺ
• At the operating sites at the Ming mine and Nugget Pond concentrator plant, where possible staff are also working from home and flexible working practices are being put in place in order to  ʺreduce or eliminate physical contact between people, and we comply with social distancing guidelines.ʺ
• ʺRisk management processes for crew shift changes have been implemented. This is to ensure physical distancing protocols and to reduce the movement of employees. This includes staggering of shift changes and crew starting/ending hoursʺ.
• Confirming that the company is operating in compliance with all the governmental measures during what he described as the ʺreally challenging and fast changing circumstancesʺ presented by the pandemic, Andre Booyzen, President and CEO, thanked the company’s staff for their efforts  said that ʺWe will ensure that we keep on making the necessary adjustments to our operations that will help keep not only our teams, but also or families and our communities, safe and healthy. Nothing is more important to us."

Conclusion: It is encouraging to learn that Rambler Metals remains free of Covid19 infection and we hope that, with the containment measures it has implemented this remains the case.

*SP Angel act as Nomad and broker to Rambler Metals & Mining

 

Serabi Gold* (SRB LN) – 69.5p, Mkt cap £36.2m – March delivers highest monthly gold production since operations began

• Serabi Gold reports that it produced 9,020oz of gold during the quarter ended 31^st March 2020 (Q1 2019 – 10,164oz) , including 3,674oz during March which is ʺthe highest monthly level since the operation openedʺ.
• Describing a mixed quarter, CEO, Mike Hodgson said that ʺThe first quarter of 2020 has been very eventful for us all. At Palito after a month of moderate production in January, we suffered a completely unforeseen mill breakdown during February losing over 18 milling days on our main ball mill.  This adversely effected gold production for that month, so I am delighted to report that the response in March, producing approximately 3,700 ounces of gold, a monthly production record represented a truly exceptional effort which has continued into the start of Aprilʺ.
• Mr. Hodgson ascribed much of the improvement during March to ʺimproved average ore feed grades, most notably from Palito, which can, in part, be attributed to the recently commissioned ore sorter, which is working extremely wellʺ. He explained that ʺWe estimate that during the first quarter the ore sorter performance would have ‘liberated’ on average approximately 80 tonnes per day of capacity (16 per cent) in the plant, and we hope to be able to fill that capacity, and replace the waste, with high grade ore going forward.ʺ
• At the Sao Chico orebody, where the access ramp is being extended to reach the -60m level, exploration drilling from both surface and underground locations has been successful with the mineralised envelope being extended by approximately 300m towards the west and by around 220m towards the east.
• Mr. Hodgson said however, that the most exciting development of the Sao Chico exploration was ʺan intersection located approximately 200 metres below the current lowest development level of the mine, where the assayed gold grade was 25.37g/t over a width of 4.08 metres.ʺ
• The company comments that ʺAs well as exploration success in the immediate mine area, we also continued to drill the near-minesite geophysical anomalies of Abelha, Besouro, and Cicada all of which lie within a 5 kilometre radius of Sao Chico.  The drilling started in December and continued through the quarter.  We have now drilled 5 holes, three of which have intersected gold bearing sulphidesʺ. The step-out drilling to the west of Sao Chico is now reported to have reached to within 1km of these anomalous areas which may provide some possibility of a future linking of the two areas as the geological assessment progresses.
• The company is able to confirm that operations have remained free of Covid19 infection and Mr. Hodgson said that ʺthe workforce at site have requested that in the immediate term there should be no rotation of workers, at least not until testing of oncoming workers is possible, to keep the site virus free.  For those at site, more rest days have been agreed.  We have stockpiled as many critical mining and processing consumables and supplies as we can to keep the site operational.  With this strategy, whilst we may not be able to quite reach our budgeted levels of production, I think we can come close.  Gold price and exchange rates are hugely in our favour, so we are at least in these troubled times finding success as a gold producer.ʺ

Conclusion: Serabi Gold is starting to reap the benefits of the ore-sorter with record monthly gold production achieved during March. Exploration success at Sao Chico has extended the known mineralisation to the east, at depth and towards the west where the envelope of known mineralisation is approaching newly emerging mineralised areas a Abelha, Besouro and Cicada.

*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil

 

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	SSY
RRE	Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony	Asian Metal
Tungsten	Metal Bulletin

 

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