SP Angel . Morning View . Tuesday 12 05 20

SP Angel . Morning View . Tuesday 12 05 20

Gold prices likely to rise if second wave COVID.19 hit major economies

 

MiFID II exempt information – see disclaimer below

 

Caledonia Mining* (CMCL LN) – Quarterly results show little impact of Covid19 and improving operating environment in Zimbabwe

Condor Gold* (CNR LN) – Quarterly results and progress report 

Horizonte Minerals (HZM LN) – Quarterly results and project update.

Vast Resources* (VAST LN) 0.18p, Mkt Cap £19m – Preliminary test work demonstrates good copper recoveries at Baita Plai

 

Battery metal demand to jump by 500% by 2050 according to World Bank report

• EV sales have continued through the Coronavirus lockdown despite dramatic falls in combustion sales.
• The World Bank also forecasts that some 3bnt of minerals and metals will be needed for power generation and energy storage (Mining.com).
• The ‘Minerals for Climate Action’ report focusses on the construction of renewable power generation and related power storage .
• The report is looking for carbon emissions of greenhouse gasses to be cut by 50% by 2030 and to a net-zero by 2050.
• Emissions for the mining and processing of the metals for renewable energy generation and storage are estimated at just 6% of fossil fuel generation. 
• The growth required means that even if recycling rates were to reach 100% that there would not be enough copper, aluminium and other metals to meet the demand.
• The World Bank is encouraging nations to strengthen their commitments to climate-smart mining principles.
• COVID-19 is creating a significant number of pneumonia cases creating an urgent need to ensure clean air quality is maintained in towns and cities.
• Social-distancing restrictions combined with return to work strategies are encouraging workers to drive to work which may raise pollution levels.

 

Gold prices look set to move higher on potential for second wave of COVID-19 cases, rising ETF holdings and currency instability

• Gold prices look likely to move higher as Gold ETF holdings rise to 97.2moz
• A potential second wave of Coronavirus is a significant concern as nations trade-off the economic damage with infection rates ‘R-rate’’
• A significant rise in the infection rate and hospitalisations of COVID-19 patients may cause a stricter lockdown for longer
• We expect many companies to go into Administration with airlines and travel companies the first to fold.
• Banks hit by increasing levels of bad debts potentially undermining the banking system.
• Bad debt levels could spark a Debt crisis, particularly in economies where corruption is widespread
• Longer lockdown periods will create more Quantitative Easing, eg greater money printing
• Lower interest rates for longer
• Negative US interest rates potentially
• Escalation of Trade war between US and China
• Inflation and instability with the potential for stagflation in one or more economies

SP Angel recommended gold companies:

• Anglo Asian Mining* - consistent gold production from the Gedabey gold mine in Azerbaijan
• Chaarat Gold* - producing gold in Armenia and Kyrgyzstan
• Condor Gold* - preparing for project development in Nicaragua
• Cora Gold* - exploring in Mali along from Yanfolila Gold Mine Humminbirds
• KEFI Minerals* - progressing project financing for development of the Tulu Kapi gold mine in Ethiopia
• Scotgold* - Scotgold is building Scotland’s first modern gold mine with production due within months depending on lockdown restrictions
• SolGold* - 22moz of gold in Alpala project in Ecuador. The project is under evaluation and is backed by Newcrest and BHP Billiton.
• Empire Metals* - gold cap at Kvemo Bolnisi project overlying larger copper resource
• Rambler Metals and Mining* - gold with copper production at the Ming gold mine

*SP Angel acts as either nomad, financial advisor and or broker to these companies

 

Dow Jones Industrials		-0.45%	at	24,222
Nikkei 225		-0.12%	at	20,366
HK Hang Seng		-1.63%	at	24,201
Shanghai Composite		-0.07%	at	2,893

 

Economics

Fed to start bond ETF purchases announced earlier in a $750bn programme targeting both investment as well as junk grade debt.

• The measure comes amid a series of other initiatives aimed at keeping borrowing costs low and ensuring a a continuing flow of credit in the financial system.
• The central bank has previously cut federal funds rate target to 0-0.25%, pledged to buy unlimited amounts of government debt as well as announced support for commercial paper and municipal debt markets.

 

Ryanair plans to resume 40% of scheduled flights from July and potentially 50% in August.

 

US –The White House official have been ordered to wear face masks after two confirmed cases of coronavirus.

• President Trump valet and Katie Miller, communications director for VP Mike Pence, tested positive for COVID-19 last week.
• New York state is planning to ease restrictions in a “phased reopening” from this Friday with the new fatalities and hospitalisations at nearly two months lows, according to Andrew Cuomo.
• The state was divided into 10 regions with each to be evaluated separately and required to meet seven criteria including minimum amounts of testing and hospital capacity, as well as a 14-day decline in new coronavirus cases.
• If the region recorded an increase in infections restrictions would be tightened back.
• Reopening will be prioritised among industries as well with manufacturing and construction to reopen first followed by financial services and others next.
• City of New York is expected to start easing containment measures in June, according to the City’s mayor Bill de Blasio.
• The city recorded 21 COVID-19 related fatalities on May 10, down from a one-day peak of 577 on April 7, and the lowest since March 18.

 

China – Signal from the PBoC that they would accelerate counter cyclical adjustments and more monetary flexibility to support small and medium enterprises

• Also likely to bring in further interest rate reforms to lower borrowing costs and bolster liquidity.

Phase 1 trade deal discussions lead to lifting of tariffs on imports of 79 products from the US

Metals included in China's new tariff waivers 

• China has cut tariffs on 79 products on which China imposed retaliatory tariffs in the US / China Trade War (Reuters).
• The tariffs will be re-imposed on 18 May 2021 unless there is further progress in the trade talks with the US.
• Rare earth metals, gold ores, silver ores and concentrates are on the list for zero tariffs as Chin ramps up growth through industry and construction.

Wuhan testing: Chinese authorities are preparing a plan to test the entire 11m population of Wuhan after the new infections were recorded in the city where the pandemic started.

• All districts in the city of Wuhan have been asked to submit a plan on conducting the test within 10 days.
• Separately, producer prices deflation accelerated to -3.1%yoy in April amid a drop in commodity prices and weak demand.
• In turn, consumer prices climbed 3.3%yoy, down on 5.4%yoy recorded at the start of the year before the onset of the pandemic.
• Chinese vehicle sales rose 4.4%yoy in April (March -43.3%) indicating a strong recovery.

 

Germany –Federal Constitutional Court rules the government violated the constitution in its agreeing with the ECB public sector asset-purchase program.

• 10m workers or 20% of workforce have applied for the Kurzabeit scheme as of last month, FT reports.
• Under the programme the government covers two-thirds of the worker’s wage while one is on reduced hours or sent home.

 

Russia – The government said the nationwide lockdown will be lifted today while separate regions can keep tighter controls if required.

• The nation reported a record increase in new infections yesterday with 11,656 new cases taking the total to 221,344, the world’s fourth largest.
• Mass public events to remain banned and Russians aged 65 or over are asked to stay at home.
• Moscow has said it will keep its own lockdown measures in place until May 31.

 

UK - Chancellor likely to begin wind-down of the ‘Job Retention Scheme’ known as Furloughing

• The UK state is likely to cut furlough salaries to 60% from the current 80% of salaries up to £2,500 per month.
• The government is keen to keep staff employed so companies can more quickly return to work.

UK Coronavirus advice – Use good, solid British common sense, PM tells public

• The Prime Minister delivered a well written and clear strategy for the easing of lockdown restrictions.
• The government has since published a 50-page report detailing the overall strategy.
• The idea is to get as many people back to work as practically possible while keeping the ‘R’ reinfection rate down below 1.
• There will be many differing interpretations on how people follow the advice hence the ‘use your common sense’ advice.
• The idea is to avoid a second ‘wave’ of infections and further lockdowns. 

 

COVID-19 cases rise among mineworkers in South Africa

• South Africa has moved to level 4 COVID-19 restrictions easing the lockdown and allowing open pit mines and process plants to restart.
• Figures show the number of confirmed COVID-19 cases has risen to 16 from 10 last week with no fatalities, probably because most mineworkers are fit, healthy people.
• South Africa reports >100,000 COVID-19 cases so far

 

Norway – The world’s largest sovereign fund is planning to draw a record 382bn kroner ($37bn) form its wealth fund amid economic crisis and low oil prices, according to Bloomberg.

• This is more than four times Norway’s previous record, that was set in 2016.

 

Sweden – mortality rates in care homes spiral out of control

• Sweden which refused to Lockdown its economy is now focussing resources on protecting the elderly and more vulnerable.

 

Currencies

US$1.0824/eur vs 1.0834/eur yesterday.  Yen 107.58/$ vs 107.22/$.  SAr 18.471/$ vs 18.241/$.  $1.234/gbp vs $1.240/gbp.  0.648/aud vs 0.654/aud.  CNY 7.093/$ vs 7.082/$.

 

Commodity News

LME will not rush back to open outcry trading 

• The London Metal Exchange will not rush back into trading on the open outcry ring, and is happy with the effectiveness of the current electronic pricing model according to the CEO. 
• The ring has been closed since the 23rd of March and the LME moved to full economic pricing as a precaution to protect workers from the spread of coronavirus. 
• "I know by talking to many of our category one members, they would not want us to put LME or member staff at risk given we have an effective pricing model electronically" CEO Matthew Chamberlain said. 
• The electronic settlement uses the volume weighted average price (VWAP) methodology for price settlement over a five-minute pricing period, whereby an average price is produced based on both volume and price throughout the day (Fastmarkets MB). 

 

Precious metals:          

Gold US$1,700/oz vs US$1,709/oz yesterday

   Gold ETFs 97.2moz vs US$97.1moz yesterday

Platinum US$769/oz vs US$773/oz yesterday

Palladium US$1,887/oz vs US$1,929/oz yesterday

Silver US$15.47/oz vs US$15.56/oz yesterday

            

Base metals:   

Copper US$ 5,253/t vs US$5,319/t yesterday - Chilean industry group predict copper surplus of 200,000 tonnes this year

• According to Sonami, an association of Chilean mining companies, the copper market will see a supply glut of 200,000 tonnes this year as the economic impact of Covid-19 reduces global demand. 
• Sonami expect a 3.5 to 4% decrease in demand, and also anticipate supply to fall by 3%, which when combined with a decline in scrap metal recovery results in a balance of 200,000 tonnes (Reuters). 

• Fitch Solutions predict the 2020 global refined cu surplus will be 344kt (’19 deficit was 63kt and ’21 surplus 162kt)
• China refined copper rose 1.2%mom and 6.5%yoy to 752kt in April,

Aluminium US$ 1,488/t vs US$1,493/t yesterday

Nickel US$ 12,280/t vs US$12,340/t yesterday - NPI output fell 7% and 19.9% to was 38kt

• Nickel sulphate production fell 6% mom and 20.5% yoy  to 44.5kt

Zinc US$ 2,017/t vs US$2,026/t yesterday - China refined zinc production rose 2.8% mom and 4% yoy to 479kt in April

Lead US$ 1,663/t vs US$1,668/t yesterday - China refined lead production rose 9.3% and 3.5% to 262kt

Tin US$ 15,170/t vs US$15,430/t yesterday

            

Energy:            

Oil US$29.9/bbl vs US$30.5/bbl yesterday – Saudi Aramco sales fall 25% on collapse of prices and global demand

• Lucky Saudi Aramco did not list in London, HK or New York
• Saudi Aramco’s first quarter results report a 25% fall in sales due to the sharp fall in crude prices and cratering global demand
• Net income fell to 62.5bn Riyals (US$16.6bn) in the first three months of the year, down from 83.3bn Riyals over the same period in 2019
• This was “primarily reflecting lower crude oil prices, as well as declining refining and chemicals margins and inventory re-measurement losses.”
• Rather surprisingly, Aramco said it would pay its dividend of US$18.75bn in the first quarter, despite the fall in profit
• The company had pledged to issue a US$75bn dividend annually for five years as part of its pitch to investors before going public, and it does not appear to be rolling that back yet despite cuts to capital spending • Today’s results come after the country yesterday announced a further output cut of 1MMbopd in June — equivalent to 1% of global output — to shore up markets • That’s in addition to historic cuts agreed to in April by OPEC and non-OPEC producers totalling 9.7MMbopd

Natural Gas US$1.830/mmbtu vs US$1.831/mmbtu yesterday

• Natural gas prices rebounded from yesterday’s early lows to close in the black, despite falling demand for heating and cooling in buildings
• The weather is expected to be warmer than normal for the east coast of the US over the next 6-10 and 8-14 days according to the latest report from the National Oceanic Atmospheric Administration
• Underlining a medium-term bullish position, hedge funds added to long position in futures and options and reduced short positions according to the latest report from the CFTC

Uranium US$33.75/lb vs US$33.85/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$85.1/t vs US$85.3/t - Chinese iron ore stocks continued to decline last week 

• Iron ore stocks across 35 Chinese ports decreased 2.3mt to 103mt between the 30th of April and the 8th of May (SMM News). 
• Deliveries of iron ore at major Chinese ports totalled 14.1mt last week- up 1.2mt from the prior week and 1.7mt from the same period last year. 

Chinese steel rebar 25mm US$533.0/t vs US$534.3/t

Thermal coal (1st year forward cif ARA) US$53.5/t vs US$53.4/t - India sets up project monitoring unit for coal projects 

• The government has set up the unit to speed up the development of coal mines and raise domestic output. 
• India is the world's second-largest coal producer and importer of thermal coal, however delays acquiring permits and land has weighed on the growth of domestic production, leading to an increase in imports. 
• The unit will work with new coal block license holders, as well as all levels of government in order to reform the coal sector and result in less of a reliance on foreign imports. 
• The new project monitoring unit could also help state-controlled producer Coal India to bring new mines into production- as the company aims to raise annual output to 1bn tonnes by MRCH 2024 (Argus Media). 

Coking coal swap Australia FOB US$117.0/t vs US$117.0/t

            

Other:  

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

NdPr Rare Earth Oxide (China) US$37,570/t vs US$37,491/t

Lithium carbonate 99% (China) US$5,216/t vs US$5,295/t

Ferro Vanadium 80% FOB (China) US$27.5/kg vs US$27.5/kg

Antimony Trioxide 99.5% EU (China) US$4.9/kg vs US$4.9/kg

Tungsten APT European US$215-225/mtu vs US$215-225/mtu 

Graphite flake 94% C, -100 mesh, fob China US$510/t vs US$520/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,350/t vs US$2,425/t

 

Battery News

 Lotus-Centrica deal to work on vehicle to grid services

• Lotus has linked up with Centrica to develop a new zero emissions car that is integrated with the home. (Business Green)
• The pair hope to produce vehicles capable of providing services to the energy market and generating an income for the owner.
• Similar tie ups between car makers and energy companies include Honda and Islington Council, and Nissan and EDF. Both pairings are working on vehicles to grid technology and services. (Fleetworld)
• There will also be a focus on rolling out a global EV charging infrastructure for Lotus’ electric models.
• Centrica has committed to helping Lotus reach its net zero ambitions with a program to help reduce its environmental impact.
• Production of the Evija, Lotus’ first EV model is set to ramp this year. Only 130 units are scheduled to be built.

 

Wireless charging the next technology leap

• New Chinese national standard for wireless charging based on magnetic resonance technology from WiTricity. (Inside EVs)
• China has been working towards standardization of wireless charging, the primary obstacle in wider take up.
• WiTricity has been at the forefront of Chinese standardization with several companies licensed to use their technology including Zhejiang VIE and Anje Wireless. Both VIE and Anje have been working on wireless charging with OEMs.
• Meanwhile a team of Stanford engineers has been working on wireless recharging for moving objects.
• The hurdle to date has been efficiency but the team may have made a breakthrough with a more efficient amplifier. A prototype can transmit 10 watts of electricity over 2-3 feet in milliseconds, enough to charge a computer tablet. (Inews)
• The system would need to be scaled up for use in vehicles.

 

Company News

Caledonia Mining* (CMCL LN) 1072.5, Mkt Cap £116.6m – Quarterly results show little impact of Covid19 and improving operating environment in Zimbabwe

• Caledonia Mining reports an increase in both gross profit and EBITDA during the quarter to 31^st March 2020, with gross profit increasing by 146% to $10.6m (Q1 2019 - $4.3m) and EBITDA rising by 162% to $10.2m (Q1 2019 - $3.9m).
• The result reflects increased gold production of 14,233oz of gold (Q1 2019 – 11,948oz) and a reduction in mine costs of $678/oz (Q1 2019 – 794/oz) and all in sustaining costs of $879/oz (Q1 2019 - $1,039/oz).
• ʺCaledonia ended the Quarter with net cash and cash equivalents of $13.8 million – an increase of $4.9 million over the course of the Quarter.ʺ
• The company also reports that it has completed the purchase of an additional 15% interest in the Blanket mine bringing its interest to 64%.
• Caledonia Mining confirms that ʺCOVID 19 had a negligible effect on production and capital projects in the Quarter … because lockdowns were only implemented by the Zimbabwe and South African governments to manage the virus at the end of the Quarter.  During the lockdowns, which extended for much of April, Blanket achieved approximately 93 per cent of its normal target production by using its stocks of consumables and implementing measures to safeguard employees. In early May, Blanket resumed full production and I expect production to continue as planned provided Blanket’s workforce remains healthy and its supply chains and access to market for the gold produced remain open.ʺ
• The company also pointed to an improved operating environment in Zimbabwe with CEO, Steve Curtis, explaining that ʺAlthough the country continues to face challenges, the introduction of the interbank rate early in 2019 allows us to better protect our workers from the effects of high inflation.  The interruptions to the supply of electricity from the grid which we experienced last year have largely been addressed following the conclusion of an agreement whereby Blanket (and other gold producers) purchases power which is imported into Zimbabwe.  This power is cheaper than under the previous arrangement and Blanket can manage the reduced incidence of power interruptions using its increased suite of diesel generators.ʺ

• ·         Mr. Curtis also said that ʺWe are also well-advanced in the evaluation of a solar project to provide some of Blanket’s power supply and reduce its dependence on imported power during daylight hours.ʺ
• He also provided a progress report on the progress of the company’s strategic redevelopment of the Blanket mine and confirmed that ʺThe Central Shaft is the focus of our investing activities: when it is commissioned, Blanket will be able to increase production to the target rate of approximately 80,000 ounces of gold per annum.  Work on Central Shaft continued throughout the lockdowns; however, completion of the project requires specialised equipment and contractors to travel to Blanket from South Africa which under the restrictions is not currently possible.  This has not yet resulted in a significant delay to the project and we are receiving a high level of support from the Zimbabwe government to address these issues with the relevant authorities in South Africa.ʺ 
• As previously announced, the company confirms the payment of a quarterly dividend at the rate of 7.5cents/share introduced in January 2020.

Conclusion: Increasing production as the benefits of the long-term capital development programme at the Blanket start has helped reduce unit costs and improve cash generation giving the company the opportunity to maintain its increased quarterly dividend. It is encouraging to learn of the improving operating environment in Zimbabwe and that the Covid19 virus and resulting mitigation measures have had little negative impact on the operations.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

 

Condor Gold* (CNR LN) 42p, Mkt Cap £40m – Quarterly results and progress report

• Condor Gold reports a quarterly profit of £92,477 for the quarter ending 31^st March 2020 ( 2019 loss of £352,553) as a result of realising a £477,616 gain following a project disposal which we surmise is the US$600,000 sale of the Poterillos concession in northern Nicaragua which was announced in December 2019.
• The company highlights the progress it has made both during the quarter and subsequently on permitting both the La India pit itself and, since the end of March on the high-grade satellite deposits at Mestiza and America.
• At La India, the company has been granted an extension, until 27^th July 2021 ʺto complete the conditions of the key La India Environmental Permit.ʺ while the award of environmental permits for the Mestiza and America satellite deposits, located close to the permitted process plant site, provides the opportunity to process high grade mineralisation early in the project’s life with significant potential improvements to the project economics.
• The company reiterates that with the award of the permits for Mestiza and America it now ʺhas 1.12M oz gold open pit Mineral Resources permitted for extraction, inclusive of a Mineral Reserve of 6.9Mt at 3.0g/t gold for 675,000 oz goldʺ.
• Chairman and Chief Executive, Mark Child confirmed that as part of its studies for a development decision, ʺA high-grade mining dilution scenario study was completed, which supports a smaller, 1,000tpd processing plant capable of producing approximately 50,000 oz gold p.a. Total diluted mill feed is 1,637Kt at a 4.65g/t gold diluted head grade containing 245,000 oz gold. A smaller mill would significantly reduce the capex required to construct a processing plant and allow for a much larger plant at a later stage.ʺ
• Mr. Child also confirmed that ʺThe objective is to commence site preparation in Q4 2020 and demonstrate a clear route to cashflowʺ.
• In our opinion, the examination of development strategies for an initial 50,000ozpa production rate from early development of the high grade relatively small satellite deposits should contain pre-production capital exposure while enabling a subsequent phased ramp-up of the main La India pit is a prudent approach which should enhance the overall project economics. We look forward to further detail when the company is able to release its findings.

Conclusion: Condor Gold has made important progress on permitting both the main La India pit and the satellite deposits at Mestiza and America and is aiming to start site preparation by the end of 2020. The additional operational flexibility of the satellite pits provides scope to minimise pre-production capital expenditure and develop the longer term production potential through phased development generating benefits to the overall economic returns of the project. We look forward to further information on the planned mining schedules when the current studies are completed.

*SP Angel act as sole broker to Condor Gold

 

Horizonte Minerals (HZM LN) 2.65p, Mkt Cap £36.9m – Quarterly results and project update.

• Horizonte Minerals reports a loss of £1.03m for the three months ending 31st March (2019 – loss £0.45m).
• The company’s balance sheet shows a cash balance of £16.99m for 31st March.
• The company reports that ʺBoth in Brazil and the UK, the teams have adapted well to the change in circumstances due to Covid-19, including remote working, with all major workstreams continuing as plannedʺ.
• Work on the Araguaia nickel project is concentrating on ʺadvancing the level of engineering from Feasibility stage level through to being implementation ready.ʺ
• Horizonte Minerals also says that its project financing process is currently running on schedule ʺwith no negative effects on the process observed as a result of the Covid-19 pandemic, although a delay to the process may occur if "lock-down" continues for a longer period of time. It remains presently too early to tell if this is the caseʺ.

 

Vast Resources* (VAST LN) 0.18p, Mkt Cap £19m – Preliminary test work demonstrates good copper recoveries at Baita Plai

• The Company reported preliminary metallurgical test work results from the Baita Plai polymetallic project in Romania.
• Test work was carried on rock chip samples collected in accessible underground Baita Plai workings.
• Six 100kg each samples in two batches have been collected and sent to Grinding Solutions Ltd in the UK.
• Results include:
  • Sample 4 produced a concentrate grading 26.6% copper at an 84.8% copper recovery
  • Sample 5 produced a concentrate grading 20.0% with a 94.6% copper recovery and a 92.5% molybdenum recovery.
  • Sample 6 recovered a bulk concentrate grading 28% copper, 14% zinc and 2.8% lead with recoveries of 91% for copper, 94% for zinc, 83% for lead and 89% for molybdenum.
• Grades of respective Samples 4 to 5 are provided below (assay data for elements marked with * are pending from the laboratory):

Batch	Sample	Cu %	Pb %	Zn %	Mo %*	Au g/t*	Ag g/t*	As %	Cd %	Bi %*	Fe %*	S %*
Batch 2	0004 Sample Cu-Mo	7.09	0.36	0.32				0.07	0.01
Batch 2	0005 Sample High Cu	10.74	1.12	3.8				0.38	0.04
Batch 2	0006 Sample Poly	4.74	0.26	0.72				0.08	0.01

• Samples 1 to 3 from the Batch 1 were discarded with head assays believed to be not representative of expected grade ranges.

Batch	Sample	Cu %	Pb %	Zn %	Mo %*	Au g/t	Ag g/t	As %	Cd %	Bi %	Fe %	S %
Batch 1	0001 Sample Cu-Mo	8.53	0.96	1.36		4.81	326	0.23	0.02	0.46	4.55	4.62
Batch 1	0002 Sample High Cu	12.21	0.01	0.26		4.24	227	0.01	0.01	0.32	7.02	8.93
Batch 1	0003 Sample Poly	10.85	0.02	0.2		4.67	261	0	0.01	0.38	5.43	7.83

• Metallurgical recoveries correlate well with historical data that indicate copper recoveries and concentrate grades were 85.5% and 28.2%, respectively, in the 1999-2009 period.
• Separately, high grades of gold and silver recorded in samples collected from the underground confirm results from the underground sampling conducted in 2011 and 2012 and offer potential upside to in-house production estimates that did not include those.
• Test work is continuing with regards to the production of three separate concentrates (copper, lead and zinc).
• The team is looking forward to providing results over ongoing drilling and metallurgical studies over the next 4-6 weeks.

Conclusion: Preliminary results on high grade samples from underground workings, areas that would be targeted in first months of production, demonstrate high copper recoveries. Tests demonstrated the potential for 85% recoveries and 26.6% copper concentrate production compared to our modelled levels of 78% in recoveries and 28.2% concentrate grades. Those are encouraging results offering potential upside to our estimated copper production levels that on our former forecasts suggest $15m in EBITDA and $10m in FCF per annum (both mine level and excluding admin costs) at $6,000/t copper price and once fully ramped up to 13ktpm rates. Assuming Baita kick starts in July, we estimate its attributable NPV10% (post tax) at $47m. We are looking forward to results on recoveries on more representative samples as well as results for precious metals that account for ~40% of payable metal revenues and test work on production of copper, lead and zinc concentrates.

*SP Angel acts as Broker to Vast Resources

 

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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SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%