SP Angel . Morning View . Monday 14 09 20
SP Angel
SP Angel . Morning View
10:12, 14th September 2020

SP Angel . Morning View . Monday 14 09 20

Potential vaccine optimism helps risk sentiment

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MiFID II exempt information – see disclaimer below  

 

Gemfields (GEM LN) – Covid19 constraints and Faberge impairment charge tip Gemfields into H1 loss

IronRidge Resources* (IRR LN) – Sale of May Queen gold project

Jangada Mines (JAN LN) – PEA commissioned for Pitombeiras

Pensana Rare Earths (PRE LN) – Mineral resources update from Longonjo 

SolGold* (SOLG LN) – Completion of $100m royalty financing

 

Dow Jones Industrials

 

+0.48%

at

27,666

Nikkei 225

 

+0.65%

at

23,559

HK Hang Seng

 

+0.67%

at

24,667

Shanghai Composite

 

+0.48%

at

3,276

 

Economics

AstraZeneca and University of Oxford will resume the international clinical trial of the proposed vaccine after completing the trial’s independent safety review.

  • People associated with the trial said the condition that led the trial to be paused was a suspected case of transverse myelitis, an inflammation of the spinal cord that has a known, but very rare, association with vaccination, according to FT.

 

Pfizer CEO said it is “likely the US will deploy a Covid-19 vaccine to the public before year end and that the Company is ready for that scenario, according to Bloomberg.

 

Bytedance reached a preliminary “technical partnership” agreement with US software group Oracle for American TikTok operations raising hopes over a resolution in US/China relations.

 

China – Credit growth accelerated strongly in August beating estimates in a sign that funding conditions eased.

  • Aggregate social financing recorded a monthly increase of 3.58tn CNY, up on 1.69tn in July and exceeding market estimates for a 2.59tn CNY reading.
  • Strong government bond issuance is reported to be the major reason behind the strong growth in the total headline figure with net government issuance coming in at  1.38tn CNY, up 834bn from July.

 

Japan – Chief Cabinet Secretary Yoshihide Suga was elected as the leader of the ruling Liberal Democratic Party by an overwhelming majority replacing Premier Abe.

  • Suga supported economic agenda of his former boss Abe and pledged to continue with regulatory reform and break down vested interests.

 

UK – The nation is expected to lose more than twice as many jobs in the coming months compared to the recession following the financial crisis, the Institute for Employment Studies wrote.

  • Around 450,000 roles are estimated to be terminated this autumn amid the expiry of the furlough scheme that is due to wind down at the end of October.
  • Increasing calls are made to Chancellor Rishi Sunak to extend the programme to support the labour market.
  • The analysis is based on notifications to the state’s Insolvency Services, which employer is legally required to file if he plans to cut at least 20 positions, Bloomberg reports.

 

France – The government is planning to raise its economic outlook for 2020 after consumer spending bounced back stronger than expected after lockdown measures were lifted.

  • “In the coming days, we will be able to revise the forecast of an 11% recession… it will remain a high figure, but less than 11%,” French Finance Minister said on Monday.

 

India – Economic contraction forecasts revised down for FY21 from 5% to 9% by the ratings agency S&P as the nation went into one of the world’s strictest lockdowns.

  • This compares to estimates for double digit contraction by Moody’s and Goldman Sachs.
  • Despite implemented social distancing and lockdown measures, the nation is now averaging more than 90,000 in new infections per day with its official tally of 4.8m closing the gap with the US.
  • A surge in new cases is also attributed to ramped up testing.

 

South Africa – President Ramaphosa faces increased pressure to accelerate reforms of the power and telecoms sectors to spark growth amid a pandemic that saw output falling 51%qoq and 17.1%yoy in Q2, FT reports.

 

DRC – Informal mine collapses due to heavy rain

  • Around 50 people are presumed dead after a mine collapse at Kamituga in South Kivu province. 

 

Currencies

US$1.1851/eur vs 1.1841/eur last week.  Yen 106.01/$ vs 106.16/$.  SAr 16.676/$ vs 16.782/$.  $1.283/gbp vs $1.284/gbp.  0.729/aud vs 0.729/aud.  CNY 6.831/$ vs  6.837/$.

 

Commodity News

Precious metals:          

Gold US$1,948/oz vs US$1,942/oz last week

   Gold ETFs 109.6moz vs US$109.7moz last week

Platinum US$943/oz vs US$929/oz last week

Palladium US$2,316/oz vs US$2,287/oz last week

Silver US$26.94/oz vs US$26.72/oz last week

            

Base metals:    

Copper US$ 6,756/t vs US$6,679/t last week

Aluminium US$ 1,782/t vs US$1,783/t last week

Nickel US$ 15,235/t vs US$14,825/t last week

Zinc US$ 2,481/t vs US$2,447/t last week

Lead US$ 1,890/t vs US$1,894/t last week

Tin US$ 18,130/t vs US$17,890/t last week

            

Energy:            

Oil US$39.8/bbl vs US$39.9/bbl last week

Natural Gas US$2.340/mmbtu vs US$2.306/mmbtu last week

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$122.3/t vs US$120.8/t – Chinese iron ore futures continue to rise despite rising port stocks

  • Iron ore futures rose on Monday, with resilient Chinese demand offsetting concerns over a steady rise in port stockpiles. 
  • Iron ore stocks jumped to 118.95mt on Friday, the highest level since the 10th of April (SteelHome). 
  • China's demand for iron ore has recovered strongly after the COVID-19 pandemic shock, with a series of record breaking import volumes resulting in the amount of material imported being 11% higher than the same period last year. 
  • The most active contract on the Dalian Commodity Exchange ended the morning session up 2.1% at 846 yuan ($123.80)/t, whilst the front-month October contract on the Singapore Exchange rose 1% to $124.60/t (Reuters).

Chinese steel rebar 25mm US$551.9/t vs US$550.0/t

Thermal coal (1st year forward cif ARA) US$57.7/t vs US$57.0/t

Coking coal futures Dalian Exchange US$138.0/t vs US$136.0/t

 

Brazilian steel rebar prices rise to 20-month high

  • Domestic rebar prices have risen for a third consecutive month on a sustained recovery of demand following the coronavirus pandemic, along with tighter supply. 
  • Steel producers in Brazil have reduced their capacity utilization rates after state governments decided to enforce social distancing in workplaces to curb the spread of Covid-19.
  • However, demand is resilient as the construction sector is classed as an essential activity, meaning that the majority of work sites are running with few restrictions.
  • According to the Brazilian Steelmakers' Association, consumption of long steel in July was 840,000t- the highest since April 2015. 
  • Rebar prices were 2,695-2,775/t on Friday, up 6.6% compared to the 14th of August and about 20% higher than the start of the year (Fastmarkets MB).

 

Other:   

Cobalt LME 3m US$33,200/t vs US$33,200/t

NdPr Rare Earth Oxide (China) US$49,332/t vs US$49,584/t

Lithium carbonate 99% (China) US$4,977/t vs US$4,973/t

Ferro Vanadium 80% FOB (China) US$30.5/kg vs US$30.5/kg

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

Tungsten APT European US$220-225/mtu       vs US$212-220/mtu 

Graphite flake 94% C, -100 mesh, fob China US$430/t vs US$430/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,275/t

 

Battery News

Tesla in talks to buy low-carbon nickel from Giga Metals

  • Tesla is in talks with the Canadian miner about helping to develop a large mine that would give the automaker low carbon nickel for its batteries.
  • The news comes after CEO Elon Musk said: "Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way," in July. 
  • Giga Metals low carbon nickel plans include turning waste from its mining operations into cement type rock using carbon dioxide in the atmosphere, along with using hydropower.
  • The Company plans to produce 40,000t of nickel and 2,000t of cobalt per year for 20 years at its Turnagain mine in British Columbia (Reuters). 
  • According to Benchmark Mineral Intelligence, nickel demand for batteries will rise to 1.4 million tonnes in 2030, or 30% of total nickel demand, from around 139,000 tonnes and 6% respectively this year.

 

Centrica partners with Stagecoach on electric buses

  • Stagecoach has deployed 32 fully electric double decker e-buses on routes in Manchester and Cambridge. The buses are funded by £6.9m of funding from the Department of Transport’s Ultra low Emission Bus Scheme.
  • Centric solutions led the design and delivery of the charging infrastructure for the project which includes a 6.6kV HV timed connection and 2MVA transformer. Centrica is also providing on-site solar generation and charger energy management system.
  • The fleet of Buses are Enviro EV400 models with the battery and drive train provided by BYD. The buses have a range of 190 miles.
  • The buses are equipped with two charging points, each having a twin 40kW AC feeds enabling recharging in 3.5hrs with an 80kW supply.

 

Audi e-tron the most popular EV in the most successful EV market

  • The Audi e-tron has topped the sales charts in Norway for August, with the Polestar 2 a surprise entrant into the top 5 in its firs full month of deliveries.
  • The Polestar 2 vehicle has a 78kWh battery with a range of 500km (275 miles). The batteries are lithium-ion cells supplied by CATL and LG Chem. The battery modules can be staked to best utilize the space available providing flexibility. The Polestar 2 is available from £46,900.
  • Norway has seen the greatest take up of EV vehicles globally with 70% of sales in August BEV or PHEV. Auto sales fell 11% YoY in August but EV sales rose 21%.
  • In H1 48% of new car registrations in Norway were BEVs, a 45% increased compared to the H1’19. Norwegian auto sales fell 24.3% in H1. It may come as a surprise that despite the success to date the Norwegian Electric Vehicle Association has suggested the country continues to fall short of their target of 100% of new sales being zero-emission by 2025.
  • The Audi e-tron leads sales YTD with 7148 vehicles sold in 2020. The VW e-Golf and Hyundai Kona EV are the next most popular vehicles. The Tesla Model 3 has sold 2081 units YTD, placing 7th in the list.
  • Norway’s owes its EV success to the economics of purchasing an EV in the country which is driven by the heavy taxes imposed upon gas and diesel vehicles. ICE vehicles have a 25% VAT slapped on them where as this is 0% for EVs. There is also no registration tax, no annual ownership tax and no fuel tax.   

 

Hyundai Motor and SK Innovation link up

  • Hyundai Motor and SK Innovation are to cooperate in the development of  a sustainable ecosystem for EV batteries. The collaboration is derived from a shared desire to create a battery value chain and improve eco-friendly practices in business operations across the lifecycle of EV batteries.  
  • Hyundai and SK will focus on batteries as a service and will look to improve the stability of the supply chain and resource lifecycle. The pair plan to synergize their affiliate business structures and capabilities to improve their battery competitiveness.
  • The link up is expected to enhance the value and competitiveness of the battery recycling industry.

 

Company News

Gemfields (GEM LN) 5.5p, Mkt Cap £67.3m – Covid19 constraints and Faberge impairment charge tip Gemfields into H1 loss

  • Gemfields reports that it is reasonably certain that its net loss after tax will be USD 56.7 million for the six months ending 30 June 2020 compared to a net profit after tax of USD 12.4 million for the six months ending 30 June 2019”.
  • The company says that the travel and quarantine restrictions in place to help control the Covid19 pandemic have resulted in it only being able to hold a single auction in 2020 and that “Auctions originally scheduled for May, June and August 2020 have been cancelled”.
  • The only auction held realised US$11.5m from the sale of emeralds and the company provides context saying that “During the comparative period in 2019 MRM and Kagem generated revenues of USD 50.0 million and USD 33.2 million, respectively”.
  • The company confirms that is “unable to provide reliable guidance as to when it might next be able to host gemstone auctions or generate meaningful revenue from gemstone sales”.
  • In addition, A USD 11.5 million impairment charge has been recognised against Fabergé's intangible asset for the period, driven by lower expected revenues as a result of COVID-19 and the general downturn in the market”.
  • Gemfields has also written down a further US$12.5m following a review of the value of its holding in Sedibelo Platinum.

Conclusion: Gemfields has been unable to bring its gemstones to auction as a result of Covid19 restrictions and has written down assets in Faberge and Sedibelo by a total of US$24m .

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

 

IronRidge Resources* (IRR LN) 16.2p, Mkt Cap £66.4m – Sale of May Queen gold project

  • IronRidge has entered a binding agreement with Australasian Gold Limited (AGL) for the sale of the Company's non-core May Queen gold project in South East Queensland, Australia. 
  • Historic drilling at May Queen in the 1980s intersected multiple high-grade gold intervals, including 2m @ 73.4 g/t Au (including 1m at 145g/t), 4m @ 38.8g/t Au (at end of hole) and 3m @ 18.9g/t Au, over an approximate 100m strike hosting numerous parallel vein systems, open to the north-west and south-east.
  • The Company will receive 4.5m shares representing 34.6% of the enlarged share capital of AGL, with IronRidge set to invest AU$100,000 at AU$0.10 per share.
  • IronRidge will hold an initial 5.5m shares in AGL on completion of the transaction, representing 39.3% of AGL whilst remaining top up rights as well as the option of a future seat on the AGL board providing a shareholding of greater than 10% is maintained. 

*SP Angel act as Nomad for IronRidge Resources

 

Jangada Mines (JAN LN) 2.7 pence, Mkt Cap £6.5m – PEA commissioned for Pitombeiras

  • Jangada Mines reports that it has commissioned a Preliminary Economic Assessment (PEA) for the development of its wholly owned Pitombeisas vanadium project in Brazil.
  • The company is also planning an additional 2000m of drilling in a series of relatively short holes of between 40-60m designed to delineate a further approximately 10 million tonnes at key targets”.
  • The planned additional drilling will start on Pitombeiras North where a total of 28 shallow drill holes have already been planned to test the lateral continuity of the VTM mineralisation and improve the actual mineral resource categories. Subsequent to Pitombeiras North, the drilling will be moved to Pitombeiras South and Goela targets”.
  • In January 2020, the company indicated that it had outlined a preliminary Exploration Target in the range of 40 Mt to 60 Mt tonnes at 0.3% to 0.6% V2O5, 40% to 55% Fe2O3 and 8% to 10% TiO2
  • In August, Jangada Mines announced an indicated resource of 1.47mt at an average grade 0.50% V2O5, 9.85% TiO2 and 49.78% Fe2O3 with an additional inferred resource of 4.23mt at an average grade of 0.51%V2O5, 10.17% TiO2 and 50.64% Fe2O3 at Pitombeiras.
  • Commenting on today’s announcement, Chairman, Brian McMaster said that “Since the initial drilling results, our strategy for the Pitombeiras Vanadium Project has been guided towards the development of the Project to production. For this reason, we have been working on the key aspects of project development encompassing logistics, resource development, metallurgy, and processing route. The results and findings to date have been constructive for the preparation of a robust PEA, which has now been commissioned. We are looking forward to reporting further on our developments, starting with the third phase of the drilling programme in late September 2020”.

Conclusion: Jangada Mines’ is pressing ahead with a PEA on its Pitombeiras vanadium project and is initiating further drilling to help expand the resource base following an initial mineral resources estimate in August.

 

Pensana Rare Earths (PRE LN) 50p, Mkt Cap £88.2m – Mineral resources update from Longonjo 

  • Pensana has reported a new mineral resources estimate for its Longonjo rare-earths project in Angola.
  • The new estimate which is reported at a cut-off grade of 0.1% NdPr (neodymium/praseodymium) contains more than 2.3 times the previous estimate of the Measured and Indicated resources used in the Preliminary Feasibility Study” amounts to 25.7mt classified as measured at an average grade of 2.58% rare-earths oxide (REO) including 0.55% NdPr plus 165mt classified as indicated at a grade of 1.51% REO and 0.33% NdPr as well as a further 123m inferred tonnes at a grade of 1.08% REO and 0.25% NdPr.
  • The estimate, which is prepared in accordance with the JORC (2012) guidelines includes the recently completed drilling of 195 infill holes comprising a further 7,987m bringing the total holes used in the estimate to 418 holes totalling over 16,000m of drilling  and increases the proportion of the overall resources classed as measured and indicated to 68% from the previous 31%.
  • The company reminds us that “A number of previously announced drill holes in fresh rock mineralisation immediately below the weathered zone have reported continuous mineralisation to a depth of 80 metres, which remain open. Further drilling is planned in this area which will form the basis for future Mineral Resource estimation”.
  • Director, Dave Hammond, explained that “We have only just begun to explore the fresh rock mineralisation which lies immediately beneath the weathered zone.  We've tested it to eighty metres depth so far with several holes ending in mineralisation. Metallurgical test work is currently underway on this material to confirm the optimum process route to treat this second style of mineralisation, which if successful, could add significantly to the scale of the Project”.

Conclusion: The new estimate and additional drilling contrinutes to the Bankable Feasibility Study currently underway and we expect that the increased level of measured and indicated resources should allow the stady to consider a significantly expanded scale of operations. We await the outcome with interest.

 

SolGold* (SOLG LN) 26.5p, Mkt cap £547.1m – Completion of $100m royalty financing

  • Solgold reports that it has now completed its previously announced US$100m royalty financing with Franco-Nevada.
  • The funds raised include the repayment of the principal and interest on the pre-existing US$15m bridging loan (BLA) with Franco Nevada. Accordingly, the Company is not required to issue 12,220,000 warrants to Franco-Nevada that would have been required had the Company elected to extend the maturity date under the BLA for a further four month term”.
  • The financing gives Franco Nevada a perpetual 1% NSR over the Cascabel concession in Ecuador and provides Solgold with adequate financial resource for the completion of final feasibility studies on the development of the Alpala deposit and the balance of the proceeds are expected to be used for SolGold's share of the development of Alpala”.
  • Earlier this year Solgold announced an increased mineral resource estimate for Alpala which is now estimated to contain a measured and indicated resource of 2.663bn tonnes at an average grade of 0.53% copper equivalent (CuEq) containing 0.37% copper, 0.25g/t gold and 1.08 g/t silver at a cut-off grade of 0.21% CuEq plus an additional 544mt classed as inferred at an average grade of 0.31% CuEq.
  • The preliminary economic assessment (PEA) on the project which was published in May 2019 estimated that pre-production capital investment of US$2.4-2.8bn generates an NPV8% (and IRR of 24.8-26.5%) of US$4.1-4.5bn at a copper price of US$3.30/lb and a gold price of US$1300/oz from the treatment of up to 50mtpa of ore over approximately 55 years
  • Franco Nevada and Solgold have agreed that a further US$50mof NSR funding is available, at Solgold’s election, under the agreement at a 1.5% royalty rate prior to 11th January 2020.

Conclusion: Confirmation of the royalty financing by Franco Nevada provides Solgold with the financial resources to ensure completion of the feasibility studies for the development of Alpala. We look forward to the results of the studies when they become available.

*SP Angel act as financial advisor and broker to SolGold

 

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474

 

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk - 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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