SP Angel Morning View - Gold jumps higher on spread of Coronavirus Pandemic

SP Angel . Morning View . Monday 24 02 20

Gold jumps higher on spread of Coronavirus Pandemic

MiFID II exempt information – see disclaimer below   

 

Anglo Asian Mining* (AAZ LN) FOLLOW – Detailed Q4 exploration update bodes well for Gedabek LoM extension and highlights greenfield discovery potential

Bluejay Mining* (JAY LN) FOLLOW – Social Impact Assessment confirmed compliant for public consultation

Gemfields (GEM LN) FOLLOW – Emerald auction results

Kodal Minerals* (KOD LN) FOLLOW– Progress on Bougouni mining licence application

Nano One Materials* (NNO CN) - – Nano One raises C$11m

SolGold* (SOLG LN) FOLLOW – Constitutional Court rejects moves to ban mining

Automakers to fall short of EU emissions targets 

• EV sales in Europe have been slower than expected whilst SUV sales have increased, resulting in a net increase in emissions. The result, automakers are set to miss 2021 emissions target set by the EU and incur heavy fines. (Electrek)
• A report by PA consulting suggests the worst offenders and those set to take the largest fines are VW, Fiat-Chrysler, Ford and the Renault-Nissan-Mitsubishi Group. Total fines across the industry could rise above €14bn.
• The expected shift in EV momentum from China to Europe this year is likely to be driven by automakers making EU targets a priority in a bid to avoid the resultant heavy fines for non-compliance. (Autocar)
• Toyota is expected to receive the lowest fines, the Company’s earlier shift to hybrid vehicles improving their mix. 71% of the Company’s European portfolio is expected to be conventional or plug in hybrids by 2021. Jaguar is also likely to only receive a modest fine but does have a lower emissions target due to selling less than 300,000 vehicles a year in the EU. (Gizmodo)

 

Ferro-vanadium prices fall in Western Europe as impact of Coronavirus starts to bite

• Prices for ferro-vanadium fell 3.0% to $28.2-30.3/kg in Western Europe last week
• Vanadium pentoxide fell 5.3% to $6.5 - 7/kg Rotterdam
• Ferro-vanadium prices rose in the US by 2.2% to $13.6-14.25/lb

 

Drones making exploration faster, more accurate, safer and substantially less expensive

• We are seeing a rapid increase in the utilisation of drones for exploration and surveying by junior mining companies making their work faster, more effective and less expensive.
• Recent news shows drones being used for photogrammetric surveying, Induced Polarisation surveys as well as general mapping.
• Drones are now able to do low-altitude geophysical magnetic prospecting from just 5 meters above the ground even in rugged terrain with reduced magnetic interference in the flight platform with sensors slung below the drone.
• Drones are able to carry sensitive and valuable equipment safely over rough terrain and should reduce the need to cut roads and lines into previously inaccessible areas.
• The result is to make surveying faster, more accurate and considerably cheaper for the evaluation of mineral prospects particularly in difficult terrain.

 

Dow Jones Industrials		-0.78%	at	28,992
Nikkei 225		-0.39%	at	23,387
HK Hang Seng		-1.79%	at	26,821
Shanghai Composite		-0.28%	at	3,031
FTSE 350 Mining		-4.40%	at	17,387
AIM Basic Resources		+1.24%	at	2,372

 

Currencies

US$1.0836/eur vs 1.0816/eur yesterday. Yen 111.34/$ vs 111.74/$.  SAr 15.134/$ vs 15.132/$.  $1.292/gbp vs  $1.292/gbp.  0.660/aud vs 0.660/aud.   CNY 7.028/$ vs 7.033/$.

 

Commodity News

Gold US$1,682/oz vs US$1,634/oz yesterday

   Gold ETFs 84.0moz vs US$83.9moz yesterday

Platinum US$977/oz vs US$982/oz yesterday

Palladium US$2,703/oz vs US$2,706/oz yesterday

Silver US$18.77/oz vs US$18.54/oz yesterday

            

Base metals:    

Copper US$ 5,697/t vs US$5,724/t yesterday

Aluminium US$ 1,699/t vs US$1,706/t yesterday

Nickel US$ 12,520/t vs US$12,565/t yesterday

Zinc US$ 2,055/t vs US$2,104/t yesterday

Lead US$ 1,819/t vs US$1,840/t yesterday

Tin US$ 16,655/t vs US$16,500/t yesterday

            

Energy:            

Oil US$56.6/bbl vs US$58.6/bbl yesterday

Natural Gas US$1.853/mmbtu vs US$1.875/mmbtu yesterday

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

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$89.9/t vs US$89.2/t

Chinese steel rebar 25mm US$536.8/t vs US$534.6/t

Thermal coal (1st year forward cif ARA) US$57.8/t vs US$58.3/t

Coking coal swap Australia FOB US$159.0/t vs US$161.0/t

            

Other:   

Cobalt LME 3m US$33,750/t vs US$33,750/t

NdPr Rare Earth Oxide (China) US$40,623/t vs US$40,589/t

Lithium carbonate 99% (China) US$5,549/t vs US$5,545/t

Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$29.0/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/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$2,550/t vs US$2,550/t

 

Battery News

Lithium under pressure

• US lithium producer Livent saw its share price fall 15% after the company suggested  expects lithium prices to remain depressed this year. The Company cited the glut of supply and coronavirus disruption as the reasons for this outlook. (Financial Times)
• Livent will delay the expansion of their Argentinian brine project by 6 months as a result of the weak market conditions. CE, Paul Graves spoke to current lithium prices being unsustainable for the industry which needs to invest in order to meet the growing demand from the carmakers pushing into EVs.
• Elsewhere, Australian producer Galaxy Resources expects the coronavirus disruption to effect hard rock lithium concentrate producers in Australia. The customer base in China is being constrained by the virus outbreak and subsequent quarantines, unable to conclude purchases. (Argus)  
• The Company has 65,000 dry metric tonnes (dmt) of lithium concentrate at its Mount Cattlin mine unsold due to the downturn in demand.

 

Vulcan Energy Resources receives positive results from scoping study into its Zero-Carbon lithium project

• A scoping study into Vulcan Energy Resources’ Zero Carbon Lithium project suggests production of lithium hydroxide and renewable energy could be done with a net-zero carbon footprint. (Mining Technology)
• The project is located 60km north of Stuttgart, Germany and hopes to combine geothermal energy and lithium hydroxide monohydrate production. (Mining.com)  
• The lifecycle assessment for the 2 stage project indicated it could be the first negative carbon lithium project in the world.
• Stage 1: construction and operation of Direct Lithium Extraction and lithium hydroxide plant  at the Insheim geothermal power plant site. (Vulcan Energy)
• Stage 2, to commence 12 months after completion of stage 1 would be 2 larger production wells accompanied by 10 new geothermal production wells. A geothermal, direct lithium and lithium hydroxide plant would also be constructed. Stage 2 is dependent on receiving a permit to drill geothermal production wells. (Vulcan Energy)
• Vulcan have stated the scoping study was carried out by a multi-disciplinary, international in-house and independent team in conjunction with specialist consultants. Pre-feasibility studies will now commence, to be completed in late 2020. Stage 1 is scheduled to commence in 2023 and Stage 2 in 2024.

 

Company News

Anglo Asian Mining* (AAZ LN) FOLLOW 148.5p, Mkt Cap £170m – Detailed Q4 exploration update bodes well for Gedabek LoM extension and highlights greenfield discovery potential

• The Company released Q4 exploration update covering demonstrating positive results at Gedabek, Gosha and Ordubad Contract Areas.
• At Gedabek Contract Area (CA), exploration works focused on operating sites (Gedabek, Gadir and Ugur) as well as a series of regional targets.
• Drilling from surface and underground levels at Gadir returned high grade intersections proving up lateral and down-dip extensions to the orebody.
• The tunnel development connecting Gadir decline with the Gedabek orebody is progressing well with 488m completed in Q4/19 and drill chambers being set up to test down-dip mineralised extensions.
• Tunnel workings are currently in the northern part of the Gedabek open pit and 120m below the pit number four with the team planning to extend the tunnel to pit six where the targeted area of mineralisation is this year.
• Collected data is to be used in the Gedabek mineral resources and reserves update scheduled for later this year.
• At an operating Ugur open pit mine, four surface drill holes for a total of 1,509m were completed at the eastern edge of the pit in Q4/19 testing down dip extensions of the orebody with selected intersections returning good copper grades including:
  • 25m at 1.93% Cu, 1.47% Zn and 125g/t Ag from 309m (19UGDD06);
  • Including 5m at 2.78% Cu from 310m and 5m at 2.50% Cu from 321m.
• Follow up work is being carried at previously identified geophysical anomalies located within the trucking distance of the Gedabek processing complex including:
  • At Avshancli comprising three gold-copper areas has been subject to surface sampling, 1,732m of trenching and a series of surface diamond drill holes. Of 128 outcrop samples, 32 returned assay grades as high as 6.07g/t Au and 1.49% Cu. Trenching was carried in all three area during the quarter with selected results including 1m at 5.27g/t and 0.30% Cu as well as 4.5m at 4.29g/t and 0.49% Cu (AV1TR1). From nine surface drill holes for 1,732m completed a notable intersection was recorded of 1.1m at 7.03g/t and 0.45% Cu from surface (19BFDD05). Additionally, the team is carrying ground geophysics study across three zones to identify further drill targets.
  • At Gilar located 2km south of Avshancli 1 four drill holes were completed for 692m in Q4/19 returning a selected intersection of 1.4m at 5.48g/t Au from 23m (19GLDD01).
  • At Parakend Bugor located 9km NW of the Gedabek open pit a total of 343 outcrop samples were collected with good results recorded in 45 of those.
• Further work is planned at other ZTEM targets and known mineral occurrences including the gold prospect at Soyudlu, copper prospect at Maarif and copper-gold prospect at Bittibulag.
• At Gosha CA, drilling focused on down dip extensions of the Gosha vein system while surface sampling and trenching tested Gosha near mine potential during the quarter.
• Drilling results confirmed the mineralisation continues below the current ‘Zone 5’ development with selected intersections including:
  • 1.2m at 11.86g/t Au from 209m (GSHDD10);
  • 0.7m at 3.07g/t Au from 297m (GSHDD11);
  • 0.3m at 10.08g/t Au from 110m (GSHDD15);
  • 0.3m at 10.10g/t Au from 68m (GSHDD17).
• The team is compiling data from the extended drilling programme to understand whether a potential mine extension can prove economical and warrants infill drilling; additionally, further work is planned at other targets away from ‘Zone 5’ as well as an additional work programme at polymetallic mineralisation discovered at Asrikchay.
• At Ordubad CA, the team is working on geological model to prioritise drilling targets with results to date highlighting significant potential for a discovery.
• Drillling assay results received from Dirnis and Keleki during the quarter returned close to surface high grade gold and copper intersections including:
  • 2.0m at 204g/t Au from 85m (Dirnis, DRDD06A);
  • 4.1m at 10.61g/t Au from surface (Dirnis, DRDD09A);
  • 3.5m at 8.76g/t Au and 2.69% Cu from surface, 8.5m at 7.23g/t Au and 1.23% Cu from 8m (Dirnis, DRDD09B);
  • 2.4m at 1.95% Cu from 34m, 0.4m at 4.51% Cu from 41m (Dirnis, DRDD13A);
  • 1.0m at 126.61g/t Au from 25m (DIrnis, DRDD21);
  • 0.8m at 158.80g/t Au from 20m, 1.0m at 86.06g/t Au from 87m and 0.7m at 249.17g/t Au (Keleki, KLDD03);
  • 1.0m at 139.56g/t Au from 106m (Keleki, KLDD05)
• New geological map will be put together in Q1/20 using satellite imagery, collected geochemical sampling and data from field mapping.
• Further geological mapping, trenching and sampling work will be carried around Dirnis-Keleki-Aylis-Urchurdag, all clustered within several km’s radius.
• Additionally, a provisional 7,200m drilling programme will be carried in the area between Shakardara and Piyazbashi, Aylis as well as targets around Dirnis.
• The Natural History Museum research team completed the second site visit to Ordubad collecting more samples studying the Cu-porphyry potential of the area.

Conclusion: A comprehensive exploration update released demonstrates good progress on a number of fronts across the extensive land package within three contract areas. At Gedabek CA, drilling yielded both down dip and lateral extensions to the high grade Gadir orebody, tunnelling works continued to establish access to the Gedabek orebody down dip extensions for future exploration and development activities, deeper drill holes at Ugur returned wide high in copper intersections while follow-up test work at previously identified anomalies delivered encouraging drilling results. At adjacent Gosha CA, the team is collecting drilling data to be later used in a desktop study testing economic viability of down dip extensions of the Gosha orebody as well as budgeting more CA-wide exploration including drilling at Asrikchay that was delayed due to extended drilling programme at the Gosha mine. At Ordubad CA, the Company works on updating the geological model incorporating all the latest data for follow up exploration and drilling targeting to unlock the copper and gold upside potential of the greenfield project.

The Company is well positioned to continue to de-risk extensive underexplored land holding and establish a pipeline of projects for future organic growth supported by debt-free balance sheet and strong free cash flow generation.

*SP Angel acts as nomad and broker to Anglo Asian Mining

 

Bluejay Mining* (JAY LN) FOLLOW 8.3p, Mkt Cap £80m – Social Impact Assessment confirmed compliant for public consultation

(Dundas Ilmenite project, Greenland, 100% owned)

• Bluejay Mining report the Greenland Ministry of Mineral Resources has confirmed the Company's SIA ‘Social Impact Assessment’ for the Dundas ilmenite project to be compliant with guidelines for the purposes of public consultation related to an Exploitation Licence.
• The SIA concluded the construction and commencement of the ilmenite sand mine at Dundas will have a significantly positive effect on the livelihoods of the people of Greenland.
• The SIA and EIA Environmental Impact Assessment will now be presented to the Government of Greenland for approval to start the public consultation period as part of the approval process for an exploitation licence.
• “Bluejay has recently commenced dialogue with the Ministry of Industry, Energy, Research and Labour under the Government of Greenland regarding the new amendments to the "Large-Scale Project Act" in Greenland in order to evaluate the option of simultaneously applying for a Large-Scale Project Permit with its application for an Exploitation Licence.”

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

 

Gemfields (GEM LN)   FOLLOW Mkt Cap £134m – Emerald auction results

• Gemfields report the sale of 19 out of 25 lots of emeralds auctioned in Lusaka, Zambia.
• The 19 lots sold for a total of US$11.5m representing US$3.01/ct with 64% of the carats offered sold.
• Gemfields has run 35 auctions of emeralds and beryl (lesser quality stones) since July 2009 generating US$647m in sales averaging US$18.5mpa in sales per auction.
• These auction results are slightly better than Gemfield’s last two February auctions though the average per carat value is down 10% on last February.
• The number of emeralds and beryl offered was 8% higher than last February and 21% higher than in February 2018.
• The February auction is generally worse for prices and we suspect some of the better quality stones are either held back or effectively overly priced for the February auction.
• Were management asking too high a price for some of the lots in the auction?
• Did Kagem sell better quality lots of emeralds in its auction last August?
• Gemfield’s August 2019 auction sold US$18.6m worth of emeralds at an average US$4.75/ct representing a significantly higher sales price.
• Gemfields recently reported 11 fatalities within its Montepuez licenses in Mozambique following a number of incursions into Gemfields licenses by artisanal miners.

Conclusion: While it is interesting to analyse the auction sales and value per carat sold the ultimate judge of value for the emerald business is the total sales value versus the cost of running the mine.

Total sales were 6% higher than the last two February auctions representing a fairly positive result given weakening consumer sentiment and a worsening global economy.

Coronavirus impact: News of the coronavirus does not appear to have impacted this auction.

Jewellery sales in China and other affected areas will be hit as consumers stay away from shops as seen with the 98% fall in auto sales in China last month.

We would not be surprised if jewellery sales rose in other areas but the general economic impact of the Coronavirus may be to reduce total consumer spending on luxury items.

*An SP Angel mining analyst has previously visited the Kagem emerald mine and Montepuez ruby mine

 

Kodal Minerals* (KOD LN)  FOLLOW Mkt Cap £5.1m – Progress on Bougouni mining licence application

• Kodal Minerals reports that members of its senior management team have attended the first technical meeting with representatives of Mali’s Direction Nationale de la Geologie et des Mines (DNGM) as part of the mining licence application process for its Bougouni Lithium Project.
• The meeting, which “reviewed all technical aspects of the project and proposed development, as outlined in the Feasibility Study” included a summary presentation on the proposed project and provided an opportunity for the company to respond “to general questions regarding the proposed operation”.
• Kodal Minerals explains that, with the Environmantal Approval having already been granted, the next step after DNGM endorsement of the project “is for the Company to attend the ministerial commission meeting. This session is convened by the Ministry of Mines and representatives from various ministries are invited, including the Ministry of Finance.  This meeting will be called after formal reporting of the DNGM meeting is received by the Ministry of Mines.”
• CEO, Bernard Aylward, is quoted saying that “Our mining licence application is proceeding quickly, and we are pleased with how the DNGM technical review meeting progressed.  Kodal Minerals has previously presented the geology, resources and proposed mining development to the DNGM and has hosted technical visits to our Bougouni site on previous occasions and continues our practice of working closely with the Malian authorities to ensure progress of our project.

Conclusion: The mining permit application for Bougouni is reported to be proceeding smoothly following a meeting with DNGM in Mali. We await news on DNGM’s formal endorsement of the project and a date for the ministerial commission meeting.

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

 

Nano One Materials* (NNO CN) - C$1.51, mkt cap C$101.5m – Nano One raises C$11m

• Nano One Materials reports the raising of C$11m at a price of C$1.15/s for one new share and a warrant for one half of a share.
• The warrants are exercisable at C$1.6/s till 21^st February 2023.
• Nano One offers a significant solution for cathode materials which is reported to better withstand the battery assembly process, charging and offers increased stability and durability.
• Cathode material represent the major cost component of Li-ion batteries at around 22% of the cost of the average battery.
• The aim is to increase capacity and energy density without sacrificing durability or safety.
• Nano One’s process also offers half the process steps of other lithium-cathode production processes which should, in theory, drive down costs and production time.
• The company are also working in collaboration with Volkswagen on advanced, long-lasting, battery materials as a consortium partner with SDTC (Sustainable Development Technology Canada).
• The company is jointly developing the ‘One Pot Process’ with Pulead (China) for the production of lithium iron phosphate (LFP) cathode material.
• Pulead is one of China’s leading Li-ion battery cathode producers developed by Oriental Investment Co. Ltd and Peking University and is becoming a key player in the Li-ion battery supply chain,
• ‘Nano One, working with a raw material sourcing expert in China, has identified raw material supply sources that meet both Nano One’s performance targets and Pulead’s specifications for impurities and cost’”
• Nano One is also expected to complete an engineering report detailing an LFP production line for review by Pulead early in 2020.
• LFP is said to be the safest, lowest cost and longest lasting lithium ion cathode material making it ideal for use in electric buses, energy storage systems and other industrial applications.
• Nano One’s proprietary process is reported to have appreciable cost advantages over traditional methods of producing LFP.
• Pulead produced 15,000 tons of LFP in 2018 and has ambitious growth plans based on their forecast for global demand to reach 200,000tpa by 2025.
• This coupled with their manufacturing and supply chain expertise should make them a good partner for Nano One’s patented technology.

Conclusion: The C$11m of funding should enable Nano One to continue to advance its cathode process development work.

*SP angel acts for Talga Resources which has developed a number of graphite anode materials for enhancing the performance of lithium batteries using graphite from it’s mine in Sweden and facilities in the UK and Germany. SP Angel also acts for Renascor which is looking to develop a new graphite mine in South Australia. SP Angel acts for Kodal Minerals, Savannah Resources and IronRidge Resources which are developing lithium spodumene mining projects.

 

 

SolGold* (SOLG LN) FOLLOW 21.45p, Mkt cap £412.6m – Constitutional Court rejects moves to ban mining

• Solgold reports that the Constitutional Court in Ecuador has rejected a petition seeking to establish local consultation “to consider the prohibition of mining activities within the province of Azuay, Southern Ecuador”.
• Azuay province hosts Solgold’s wholly owned Sharug project which the company describes as a “high priority project“ with the potential “for the discovery of a world class orebody with commensurate benefits for Ecuador and SolGold.”
• The company quotes a statement made by Ecuador’s Ministry of Energy and Non-Renewable Natural Resources issued on 22^nd February which says that the Government“reaffirms its commitment to promote responsible, regulated and controlled mining in all Ecuadorean territory."
• This statement follows an earlier, similar, petition, which was also rejected and Solgold says in today’s announcement that “This decision, in conjunction with the previously rejected petitions of a similar nature in both the Imbabura and Azuay provinces, sets a strong precedent for any future petitions for consultation to consider changes to the constitution of Ecuador”.

Conclusion: The latest ruling by the Constitutional Court confirms Ecuador’s support for responsible mine development as a means to deliver economic benefits for its population.

*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

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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.

 

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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