SP Angel . Morning View . Tuesday 15 09 20
SP Angel . Morning View . Tuesday 15 09 20
Positive Chinese economic news see copper prices higher
MiFID II exempt information – see disclaimer below
(BOD LN) 0.73p, Mkt Cap £4.5m – Kimberlite intersected in drilling at Marsfontein
(CAML LN) 152p, Mkt Cap £267m – Sasa plant suspended after tailings leak
(KMR LN) 251p, Mkt cap £263m – Relocation of the concentrator underway
* (MKA LN) 6.25p, Mkt cap £7.9m – Heavy minerals exploration success in Malawi
(POW LN) 1.275p, mkt cap £10.2m – Option exercised for Canadian silver project
* (SML LN) 0.43p, Mkt Cap £7.4m – Reports H1 profit as Leigh Creek moves ahead and Cobre masters Covid19 challenges
Dow Jones Industrials
HK Hang Seng
US – Equity index futures are trading higher this morning ahead of a two day FOMC meeting, the first since Chairman Jerome Powell announced a shift toward greater tolerance of inflation.
China – Retail sales released this morning posted the first increase since the coronavirus outbreak signalling a recovery in the domestic market is gaining pace.
- Retail spending was up 0.5%yoy in August v no change expected by markets.
- Sales remain nearly 9% down YTD compared to the previous year.
- Meanwhile, industrial production recovered its YTD losses (+0.4%yoy v -0.4%yoy in seven months to July) with growth accelerating in August (+5.6%yoy v +5.1%yoy est.)
- The renminbi strengthened as much as 0.4% to Rmb6.7857 per US dollar in trading within mainland China on Tuesday, a sixteen-month high coinciding with official data that showed retail spending increased 0.5% in August compared to a year ago (FT).
Eurozone – Industrial production growth slows down in July after an initial release of pent-up demand with a fragile economic outlook remaining amid an increase in new coronavirus cases.
- Industrial Production (%mom/yoy): 4.1/-7.7 v 9.1/-12.3 in June and 4.2/-8.1 est.
UK – The economy lost nearly 700,000 jobs from the start of the pandemic in March through to August with more than 5m people (including furloughed workers) still temporarily away from work in July.
- The government is planning to extend restrictions on evictions of commercial property tenants until the end of the year from its current expiry at the end of September.
- Separately, PM Johnson secured a second reading for the contentious internal market bill that would override the Brexit withdrawal treaty by 340 to 263 vote yesterday.
Ivory Coast – The Constitutional Council cleared President Alassane Outtara to seek a third term in next month’s election.
- The court has also barred two prominent opposition leaders to run for the office including ex-spekaer of parliament and former rebel leader Guillaume Soro, as well as Laurent Gbado, Outtara’s predecessor, according to Bloomberg.
US$1.1886/eur vs 1.1851/eur yesterday. Yen 105.70/$ vs 106.01/$. SAr 16.600/$ vs 16.676/$. $1.285/gbp vs $1.283/gbp. 0.732/aud vs 0.729/aud. CNY 6.786/$ vs 6.831/$.
Gold US$1,964/oz vs US$1,948/oz yesterday - Gold hits two-week high as dollar weakens ahead of Fed meeting
- The gold price advanced on Monday’s gains, as the dollar index slipped against its rivals ahead of the US Federal Reserve monetary policy meeting.
- The dollar index fell for a third consecutive session this morning slipping back below the 93.00 mark, as investor await an announcement from the Fed, following the shift to a more tolerant stance on inflation (FX Street).
- Furthermore, Officials have said rates will remain low until the economy has recovered, making gold more competitive against yield-bearing assets (Bloomberg).
- Spot gold rose 0.4% earlier this morning to $1,963/oz, after hitting $1,969/oz earlier in the session whilst US gold futures rose 0.5% to $1,973/oz (Reuters).
- Gold ETFs saw outflows on Friday after 12 straight advances, according to data compiled by Bloomberg.
Gold ETFs 109.6moz vs US$109.6moz yesterday
Platinum US$966/oz vs US$943/oz yesterday
Palladium US$2,334/oz vs US$2,316/oz yesterday
Silver US$27.32/oz vs US$26.94/oz yesterday
Copper US$ 6,804/t vs US$6,756/t yesterday
Aluminium US$ 1,808/t vs US$1,782/t yesterday
Nickel US$ 15,265/t vs US$15,235/t yesterday
Zinc US$ 2,522/t vs US$2,481/t yesterday
Lead US$ 1,937/t vs US$1,890/t yesterday
Tin US$ 18,130/t vs US$18,130/t yesterday
Oil US$39.6/bbl vs US$39.8/bbl yesterday
Natural Gas US$2.289/mmbtu vs US$2.340/mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$125.7/t vs US$122.3/t
Chinese steel rebar 25mm US$555.4/t vs US$551.9/t - China crude steel output rises 8.4% YoY
- Latest data from China’s statistics bureau shows crude steel output rose to 94.85mt last month.
- Steel output rose 11.3% YoY to 119.13mt, and output in Jan-Aug is 4.8% higher than the same period last year.
- Primary aluminium output rose 5.5% YoY to 3.17mt, and rose 2.3% in Jan-Aug compared to last year.
- Both steel and aluminium output from the world’s largest producers saw new output records in August, helping power a wider surge in industrial production (Bloomberg).
Thermal coal (1st year forward cif ARA) US$58.2/t vs US$57.7/t - India’s coal imports fall 35% in August
- Coal imports fell to 12.46mt last month, as a result of sluggish demand from the power and cement sectors.
- Earlier this year, the Indian government announced plans to replace 100mt per year of imported coal with domestic supply (sxcoal.com).
Coking coal futures Dalian Exchange US$138.0/t vs US$138.0/t
Cobalt LME 3m US$33,210/t vs US$33,200/t
NdPr Rare Earth Oxide (China) US$49,443/t vs US$49,332/t
Lithium carbonate 99% (China) US$5,011/t vs US$4,977/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$5.3/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
Sponsored drive smashes EV charging records
- A team has achieved a trans-UK trip in a Tesla Model 3 Performance and in the process smashed the previous charging time record. The team spent just 1hr 31 mins and 32 seconds charging their Tesla Model 3 vehicle over the 1376.3km journey.
- The feat was made possible by ultra-rapid EV charging stations installed by Ionity at Perth, Gretna Green and Cullompton and a Tesla supercharger at Essington.
- The team charged the vehicle at using the CCS charging standard that is used by many EVs. The team averaged 6.05km/kWh and a charging efficiency of 97%. CCS compatible models include the BMW i3, Kia e-Nero and Jaguar I-Pace.
- Of note is the charging software the team used accurately predicted the charging time required for the journey to the minute. This level of accuracy and the charge speed the team was able to achieve provides evidence that the charging infrastructure could be sufficient to enable travel around the UK without hardship.
- This event is important as a key resistance to EVs is the view that there is a lack of charging infrastructure and moreover the time it would take to charge ones vehicle when driving.
Li-ion to remain the core battery technology
- Gene Berdichevsky, founder of Sila Nanotechnologies and former Tesla Roadster engineer suggests Li-ion batteries remain the future and solid state batteries will be confined to niche technologies.
- Alongside Sila co-founder Gleb Yushin they posit in a white paper that Li-ion batteries will reach $50/kWh in the next 5-10yrs and with the advent of new cathodes based on Fluoride or sulphur. Paired with a silicon anode this could reduce battery costs to $30/kWh by 2040.
- On the flip side the paper suggests that solid state batteries will be irrelevant in the coming battery storage revolution and will be confined to niche spaces.
- According to the paper the EV transition will drive the space, requiring battery production capacity of 2000GWh/yr by 2030 to support 100m EVs on the roads. It is also suggested that improvements in technology, product offering and economics will be the key factors not government policy.
- Government policy has to date been a key feature of the EV transition with subsidies and tax breaks a motivating factor for purchasing an EV vs an ICE vehicle.
CATL subsidiary invests in Neo Lithium Corp
- CATL has invested C$8.5m via a subsidiary into Neo Lithium Corp.
- The subsidiary will subscribe for 10.2m shares at C$0.84 with gross proceeds of C$8.5m. The deal gives CATL an 8% stake in the lithium miner.
- Members of management and the board have committed to a further subscription of 483k shares for gross proceeds of C$406k at the same issue price.
- Use of proceeds is expected to be working capital to support the 3Q project and finance the remaining cost to finalize the Definitive Feasibility Study.
- Neo completed a pre-feasibility study in May 2019 and will finish the DFS to determine the financing requirements for the 3Q project.
Botswana Diamonds (BOD LN) 0.73p, Mkt Cap £4.5m – Kimberlite intersected in drilling at Marsfontein
- Botswana Diamonds reports that percussion drilling at Marsfontein has intersected 4m of kimberlite in hole M17H001 which aimed to test the potential of the M8 kimberlite dyke.
- The company explains that the intersection encountered between 54-58m which is “one of the thickest intersections of kimberlite discovered in the Marsfontein - Thorny River project area, aside from the Marsfontein M1 pipe and thus warrants detailed ground geophysics in the area to position accurately further drill holes thus delineating the kimberlite blow”.
- The second of the two holes drilled, M17H002 failed to identify kimberlite.
- The wider “kimberlite cluster of Thorny River - Marsfontein - Klipspringer Mine has proved consistent in terms of its high-grade and diamond assortment which contains a relative abundance of coloured stones. Aside from the Klipspringer (kimberlite dyke) mine, the most economic zones have been the blows, being the Sugarbird, Kudu and the Marsfontein mine. The purpose of the current exploration programme is to find more of these blows at Marsfontein”.
- Detailed ground geophysics has proved to be a successful exploration tool at Thorny River and further work is planned during the next quarter to help “extend to other potential kimberlite blows in the Marsfontein - Thorny River project area” and to assist in planning future drilling.
- The Marsfontein kimberlite was initially discovered in 1993 and started production under the management of SouthernEra Resources in mid-1998. Production was relatively short lived with closure in the early 2000s however it was considered to be one of the highest grade diamond deposits.
Conclusion: We look forward to further news from Botswana Diamonds’ exploration work as the initial results of hole M17H001 are followed up.
Central Asia Metals (CAML LN) 152p, Mkt Cap £267m – Sasa plant suspended after tailings leak
- The Company reported a short term leakage of tailings from TSF4 into the local river at the Sasa polymetallic mine in north eastern North Macedonia yesterday.
- The leakage was detected on Monday morning and was stopped soon after.
- All relevant parties have been informed of the incident with an investigation over the volume of tailings leaked and the reason to the incident is now underway.
- The Sasa processing plant has been suspended.
Kenmare Resources (KMR LN) 251p, Mkt cap £263m – Relocation of the concentrator underway
- Kenmare Resources reports that its planned relocation of the wet-concentrator plant at its Moma mineral sands mine in Mozambique is now underway.
- The plant “is being moved 23 kilometres from its previous mining area at Namalope to a new high grade ore zone called Pilivili. It is being transported along a purpose-built road using platform vehicles called self-propelled modular transporters”.
- The operation is expected to be completed over the next few weeks and is the final stage in a plan to increase “annual ilmenite production to 1.2 million tonnes (plus co-products) on a sustainable basis from 2021”.
- The relocation of the plant to Pilivili is expected to bring the operation into the lowest cost quartile of global production with “significantly lower cash operating costs … [of] … between US$125 and US$135 per tonne”.
- Managing Director, Michael Carvill, confirmed that “we expect mining to commence at Pilivili during Q4 2020”.
Conclusion: Relocation of the concentrator is a major operational task which, when completed over the coming weeks, is expected to increase ilmenite production and bring operating costs into the lowermost quartile of global production. We await further news when the move is completed.
Mkango Resources* (MKA LN) 6.25p, Mkt cap £7.9m – Heavy minerals exploration success in Malawi
(Mkango’s 75.5% subsidiary, Maginto Ltd holds a 25% stake in HyProMag which is a partner in the ‘Rare–Earth Recycling for E-Machines’ RaRE project)
- Mkango Resources has announced shallow reconnaissance auger sampling results from the wholly owned Mchinji licence area in Malawi where the company has found initial indications of the titanium minerals rutile and anatase.
- The initial survey comprised 12 auger holes “drilled to depths of 0.45 to 9.40m, for a total of 35.8m”. The company explains that one hole, A6, was drilled to a depth of 8.9m with 9 consecutive samples “that contain between 4.10 and 9.01% total heavy minerals … and grade between 3.17 and 4.09% TiO2“. The weighted average grade over the full 8.9m interval is 6.28% total heavy minerals and 3.55% TiO2.
- We observe that the deepest individual sample for hole A6 taken between 8.0-8.9m depth averaged 4.18% total heavy minerals and 3.81% TiO2 indicating that the drilling ended within the mineralisation.
- The company explains that “Available equipment was not able to penetrate beneath a shallow ferricrete horizon in the Ludzi river channel to test the assumed river sands beneath, and eight holes failed to reach more than 2m depth … [and also that] … The other four holes were drilled in saprolite on higher ground between the Ludzi’s tributaries”.
- Mkango Resources reports that additional equipment “with improved ground cutting capability has been purchased and is currently being shipped to Malawi”.
- As well as the drilling Mkango Resources has undertaken soil-sampling from pits 50cm deep on a “staggered grid in four areas of the [869km2] licence , producing 134 samples”.
- The company says that it intends to continue the exploration programme with “more extensive soil sampling, additional auger drilling, and mineralogical test work to identify rutile prospects across this potential new rutile province within the Mchinji licence. The exploration programme will be funded from the Company's existing working capital”.
- Mkango Resources’ President, Alexander Lemon, explained that confirmed that “We are very pleased to add this new rutile and ilmenite discovery to our portfolio of projects in Malawi. These early stage results show similarities in terms of saprolite-hosted mineralisation to the recent rutile discoveries made on the adjoining Sovereign Metals Ltd licence to the east, and suggest the potential for discovering high-grade rutile deposits within Mkango’s large licence area, in what could potentially be a new province of rutile mineralisation”.
- Mr. Lemon also confirmed, however, that the company is “focused on developing the Songwe rare earth deposit in Phalombe district in Malawi and is looking forward to completing the feasibility study”.
Conclusion: As Mkango Resources progresses its Songwe Hill rare-earths project in Malawi it is also extending its in-country exploration expertise through investigation of the heavy minerals potential within its large Mchinji licence. Although it is still at an early stage, the proximity to another discovery and the intersection of almost 9m of heavy minerals mineralisation in one hole, ending in mineralisation, where there does not appear to have been a hard cap overlying the target zone, provides encouragement for further intersections once more appropriate drilling equipment is available on site. We look forward to further news from Mchinji as exploration progresses.
*SP Angel act as Nomad and Broker to Mkango Resources
Power Metal Resources (POW LN) 1.275p, mkt cap £10.2m – Option exercised for Canadian silver project
- Power Metal has exercised its option to earn-in to the Silver Peak Project in British Columbia, Canada.
- Exercise of the option enables the Company to earn-in to a 30% interest in the Project on terms including an additional CAD$225,000 committed by POW on ground exploration.
- The Company exercised the option within a 30-day exclusivity period for due diligence, in which Power Metal undertook sampling and testing at the site, whilst enhancing road accessibility to the exploration area.
- The work programme cost totalled C$25,000 (£14,512) and the amount expended will be deducted from the C$250,000 12-month project exploration spend as Power Metal has exercised the Option.
- Next steps include an ongoing technical review and plan, prepare and launch an exploration drilling programme at the project, subject to the receipt of relevant approvals and permits.
- Power Metal will now make a payment of £129,683 to the Vendors comprising CAD$30,000 (£17,183) cash and £112,500 through the issue of 9,000,000 new Ordinary Shares at a price of 1.25p per Option Exercise Share. In addition, the Vendors will be granted 9,000,000 warrants to subscribe for new Ordinary Shares in the Company at a price of 1.75p with a three-year life to expiry.
- Power Metal must then spend CAD$250,000 (£143,193) on Project exploration, within 12 months and of this amount CAD$25,000 has already been expended on the due diligence exploration programme, leaving CAD$225,000 (£128,874) outstanding.
*SP Angel acts as Nomad and Broker to Power Metals Resources
Strategic Minerals* (SML LN) 0.43p, Mkt Cap £7.4m – Reports H1 profit as Leigh Creek moves ahead and Cobre masters Covid19 challenges
- Strategic Minerals reports both a pre and post-tax profit for the six months to 30th June 2020 reversing losses for the first six months of 2019.
- Pre-tax profit amounted to US$261,000 (H1 2019 loss – US$1.03m) while after tax profit is US$77,000 (H1 2019 loss – US$1.18m).
- Strategic Minerals reports a 30th June cash balance of US$533,000 (31st December 2019 – US$519,000).
- It is particularly encouraging to heat that “Overhead expenses reduced 25% across all aspects of the Company's corporate operations compared to the same period last year”.
- At the Cobre operation in New Mexico, operations continued despite the constraints of Covid19 containment measures and the cessation of sales to CV Investments, now in administration, to deliver underlying sales growth of 18% compared to last year.
- “Excluding CV Investments income and US$47,000 Covid-19 related assistance received from the US government, Gross Profit increased 68% on the same period last year”.
- Cobre has also secured continued access to the magnetite stockpiles for the 8th time.
- As previously reported, arbitrators awarded a US$21.9m settlement against CV Investments and in favour of Cobre’s operator, Southern Minerals Group although as Strategic Minerals has cautioned in the past and Chairman, Alan Broome confirms in today’s announcement “whether the Company will receive any funds from this claim will be dependent on the outcome of the receivership of CV Investments”.
- Today’s announcement reiterates that the company’s long term strategic focus remains on the development of the Leigh Creek Copper project in South Australia and of the Redmoor tin/tungsten project in Cornwall.
- At Leigh Creek, the submission of the Programme for Environmental Protection and Rehabilitation (PEPR) and the completion of feasibility studies has “moved the project along to the point where it currently awaits the final sign off of the formal PEPR and financing to commence operations”.
- Mr. Broome comments on the recent strength of copper prices which have “improved the project's forecasted profitability and … leaves] … the Board …confident that 2021 will see full scale production re-commence at Leigh Creek”.
- Acquisition of the balance of the Redmoor project is now complete and “It is expected that an expressions of interest program to identify future joint venture partners for the project will be concluded by the end of the year and that the significant work undertaken to date in identifying the size and potential of the Redmoor resource will be recognised and rewarded”.
- Mr. Broome commended the company’s staff, management and advisors “for their support and hard work on our behalf during the period … [and said that he was looking forward] … to further progressing our key strategic goals in 2020 and pushing onto a brighter 2021”.
Conclusion: Despite the considerable challenges of the Coronavirus pandemic, Strategic Minerals has remained profitable during H1 2020 with rising sales from its magnetite operations at Cobre, reduced corporate overheads and further progress on its two main development projects at Leigh Creek, where it expects to resume full scale production during 2021, and at Redmoor.
*SP Angel acts as Nomad and Broker to Strategic Minerals
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
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
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony
This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.
Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
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 (email@example.com).
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%
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.