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SP Angel . Morning View . Tuesday 19 05 20

10:29, 19th May 2020
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SP Angel
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SP Angel . Morning View . Tuesday 19 05 20

Germany and France agree on a €500bn recovery fund

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MiFID II exempt information – see disclaimer below

  

Antofagasta (ANTO LN) – 2019 final dividend hit by Covid19

Arc Minerals* (ARCM LN) – Arc raises stake in Zaco to 72.5% from 52.5%

KEFI Minerals* (KEFI LN) – Central bank approves Tulu Kapi debt funding

OXiS Energy* (Private UK-based) – Agreement to build world’s first Li-S manufacturing plant with Mercedes Benz Brazil

Rainbow Rare Earths* (RBW LN) – Geological studies identify 57 exploration targets at Gakara in Burundi

 

Chinese EV to mass produce graphene-enhanced battery by end of 2020

  • EV maker Guangzhou Automobile New Energy (GAC) has announced that it has developed a graphene-enhanced battery for EVs which will be available for production at the end of this year.
  • According to GAC, the graphene-enhanced batteries can charge up to 85% in just eight minutes.
  • The company began R&D into graphene batteries in 2014, and announced the development of the "super-fast-charge battery" in November 2019 (Graphene-info).  

 

Stimulus funding rises again as China hits at more stimulus and France and Germany agree to new recovery fund

China - Expect more stimulus from the National People’s Congress this week

  • China State Council announced national level planning to support development in Western China
  • $2tn US fiscal package approved by Congress. US may add $0.6t state aid for mortgage markets and travel industries
    • The House passed a $484bn aid package to rescue small small businesses, hospitals ($75bn) and coronavirus testing ($25bn).
    • $2tn US – Trump looking at $2tn infrastructure fund
    • $700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE to buy Treasuries and mortgage-backed securities.
    • US Fed may soon start buying in up to $750 billion of corporate debt and ETFs
  • $543bn EU Crisis Recovery fund backed France and Germany + $963bn (€750bn) ECB scraps limits on sovereign bond purchases. ECB PEPP buying running at around €250bn
  • EU Finance Ministers have so far failed to agree on a strategy to mitigate the economic impact of the pandemic.
    • The pandemic emergency purchase programme (PEPP) and asset purchase programme (APP) have been reiterated with a cap of €750bn and €120bn, respectively.
    • The bank is reported to have used €100bn of the PEPP so far.
  • $825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
  • $909m $344bn of China stimulus + $565bn in special bonds for infrastructure by local authorities
  • $996bn (108.2tn yen) – Japan +  BoJ pledge for unlimited quantitative easing
  • 400bn (£330bn) UK + $242bn (£200bn) UK QE from BoE & no business rates plus £25,000 cash grants for hospitality sector
  • $387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia Australia - RBA ready to buy bonds again.
  • US$260bn - India representing 10% of GDP. 
  • $78bn (C$107bn) Canada, $32bn Saudi Arabia, US$43.7bn Singapore, $22.6bn India, $19.3bn HK, $13.7bn South Korea, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
  • Argentina to default on $10bn of dollar debt issued til the end of the year. Does not affect the $70bn that Argentina is currently in talks to restructure.
  • $1,000bn - IMF available + $12bn World Bank, 

>13.2tn Total

 

Gold miners – Operating margins take off as costs fall while gold prices rise

  • Operating margins for gold miners have taken off as costs fall and gold prices rise
  • Many gold miners that were struggling to make ends meet at $1,100-1,200/oz gold have seen costs plummet
  • Collapsed local currencies combined with a very substantial fall in oil prices has cut costs particularly for open cast miners.
  • Reagents which are often derived from oil should also be cheaper.
  • Margins in many cases have multiplied from <$100 oz="" to="">$500/oz.
  • Gold prices are looking relatively solid at $1,730/oz for now

SP Angel recommended: 

Producers:

  • Anglo Asian Mining* - consistent gold production from the Gedabey gold mine in Azerbaijan
  • Chaarat Gold* - growth focused FSU producer
  • Rambler Metals and Mining* - gold with copper production at the Ming gold mine

Developers:

  • Scotgold* - Scotgold is building Scotland’s first modern gold mine with production due within months depending on lockdown restrictioons
  • Kefi Minerals* – Tulu Kapi project in Ethopia
  • Condor Gold* - preparing for project development in Nicaragua
  • SolGold* - 22moz of gold in Alpala project in Ecuador. The project is under evaluation and is backed by Newcrest and BHP Billiton.

Explorers: 

  • Altus Strategies* – around 1moz of gold resource across a number of propspects
  • Cora Gold* - exploring in Mali along from Yanfolila Gold Mine Humminbirds
  • Empire Metals* - gold cap at Kvemo Bolnisi project overlying larger copper resource

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

 

Dow Jones Industrials

 

+3.85%

At

24,597

Nikkei 225

 

+1.49%

At

20,433

HK Hang Seng

 

+2.14%

At

24,446

Shanghai Composite

 

+0.81%

At

2,899

 

Economics

The European Leveraged Finance Association, a group representing high yield bond investors, warned companies from using “inappropriate” earnings measures such as EBITDAC that is supposed to reflect profits the companies could have made if it was not for the pandemic, FT reported.

  • ELFA that was formed last year to protect the interests of corporate debt investors, added that “reliance on fictitious figures” could lead to companies to taking on more debt than they can afford to.

 

IMF – likely to lower their global -3% GDP growth for the year and 5.8% recovery scenario for 2021

 

US ramps up Trade war against China 

  • US stopped the sale to China of computer chips made anywhere in the world with US equipment which could hit Huawei chip supplies Taiwan Semiconductor Manufacturing.
  • Jay Powell and Steven Mnuchin will testifying before a Senate committee today regarding coronavirus related loan programmes.

 

China – president comments that China will continue to reform interest rates and allow currency to move more freely

  • China will also enhance targeting of macro regulation and drive legislation on property taxes
  • Chinese petrol and diesel demand rises to pre-crisis levels but kerosene for jet fuel remains lower with China air traffic at 60% pre-crisis level
  • China power generation rose 5.6% yoy in first two weeks of May

China whacks Australia with 80% tariff on Australian barley imports

  • China is punishing Australia today for its role in call for a full enquiry into the Coronavirus backed by 100 nations.
  • The UK is also backing the call for an enquiry and may be next. Maybe they will hit UK exports of vacuum cleaners or Japanese p orn again

 

Japan - Q1 GDP fell 0.9% vs -1.9% in Q4 )

  • personal consumption fell 0.7%, this represents >50% of GDP
  • exports fell 6%,
  • housing investment fell 4.5%
  • corporate investment fell 0.5%

 

France and Germany agreed on a €500bn EU recovery fund offering grants to the countries and regions hardest hit by the coronavirus crisis.

  • The EC is envisaged to borrow funds in the market to fund the programme.
  • Italy with the second highest debt to GDP ratio in the eurozone saw sovereign bond yields coming down on the announcement with 10y rates coming down 10bp to 1.6%, the lowest level since early April.
  • Meanwhile, Austria, Netherlands, Denmark and Sweden argued they will only accept the plan that would give out loans as opposed to grants.

 

UK – Jobless claims increased the most on record in April reflecting full month of the virus-related lockdown.

  • Unemployment applications increased by 856.5k to more than 2m last month.
  • The furlough programme is said to have saved around 7.5m jobs.
  • Furloughed workers are counted as being employed.
  • Separately, the UK laid out the post-Brexit tariffs plan targeting £30bn worth of tariffs to be removed.
  • The UK is set to take the share of tariff-free trade to 60% of the total compared to 47% at the moment.

Bank of England MPC member Silvana Tenreyro joined the central bank’s chief economist Andy Haldane over potential for negative rates to assist in offering the economy the required stimulus.

  • She said the central bank would need to examine certain aspects of negative rates when it comes to protecting the financial system but its also not ruling them out, Bloomberg reports.
  • Experience of negative rates in Europe “have had a positive effect in the sense of having powerful transmission to real activity,” Tenreyro said yesterday.
  • The potential for negative policy rates saw the pound trending lower against the US$ lately.

 

Ecuador - Mining operations to resume 

  • The country has restarted some mining operations that were paused for nearly two months due to the coronavirus pandemic. 
  • Ecuador’s two largest mines, Fruta del Norte and Mirador, are preparing to restart operations gradually, whilst smaller gold miners have already resumed. 
  • Precautions are in place to protect locals from Covid-19, such as testing the drivers who enter mines for the virus and a daily cleaning schedule. 

 

Mongolia - Government to construct Oyu Tolgoi power plant

  • The Mongolian government has notified Rio Tinto that it will develop a state-owned coal-fired power plant to fuel the Oyu Tolgoi copper-gold mine. 
  • This scraps the company's planned spending of $924m on a 300MW coal-fired power plant at Oyu Tolgoi.

 

Currencies

US$1.0940/eur vs 1.0822/eur yesterday.  Yen 107.42/$ vs 107.21/$.  SAr 18.240/$ vs 18.441/$.  $1.226/gbp vs $1.210/gbp.  0.655/aud vs 0.644/aud.  CNY 7.107/$ vs 7.112/$.

 

Commodity News

Precious metals:          

Gold US$1,731/oz vs US$1,761/oz yesterday

   Gold ETFs 98.9moz vs US$98.6moz yesterday

Platinum US$817/oz vs US$810/oz yesterday

Palladium US$2,034/oz vs US$1,962/oz yesterday - Palladium jumps above $2,000/oz on optimism over China reopening 

  • The price of palladium rose above $2,000/oz after gaining as much as 8.3% yesterday amid new optimism about China's reopening and planned stimulus for automakers (Bloomberg). 
  • Palladium has dropped about a third since hitting record highs in February as the coronavirus brought car production to a virtual standstill. 

Silver US$17.03/oz vs US$17.25/oz yesterday

            

Base metals:   

Copper US$ 5,368/t vs US$5,268/t yesterday – Copper rises nearly 3% on Monday as countries ease lockdowns

  • The price of copper jumped on Monday, as an easing of coronavirus lockdowns in many countries and hopes for a vaccine boosted sentiment. 
  • Benchmark copper on the LME was up 2.6% at $5,318/t yesterday afternoon, its largest daily gain since mid-April (Reuters). 
  • Copper has recovered from its four-year low of $4,371/t seen in March, as China's economy reopened after a Covid-19 related shutdown. 
  • Copper continued to rise on Tuesday, fuelled by positive data from an early-stage trial for a coronavirus vaccine. Three-month copper on the LME rose 1.1% $5,378/t - a two-month high. 

Aluminium US$ 1,500/t vs US$1,468/t yesterday

Nickel US$ 12,350/t vs US$12,045/t yesterday

Zinc US$ 2,018/t vs US$1,984/t yesterday

Lead US$ 1,667/t vs US$1,620/t yesterday

Tin US$ 15,250/t vs US$15,185/t yesterday

            

Energy:            

Oil US$35.3/bbl vs US$33.9/bbl yesterday

  • WTI crude oil jumped to a two-month high yesterday as production cuts showed signs of working and countries continued to lift lockdown measures
  • Brent also rose to its highest levels since March, when Russia and Saudi Arabia began waging an oil-price war • OPEC and its allies reached a deal to cut oil production by 9.7MMbopd in May and June to shore up prices
  • An OPEC delegate announced yesterday that production cuts might remain in place for the rest of 2020
  • Several countries that had enforced strict lockdown measures including Italy, Iran, Spain, Israel, and Germany, have been easing them
  • However, the risk of a second wave of infections resulting in a fresh set of restrictions remains
  • Several US states have also lifted some lockdown measures. As of Friday, Georgia, South Carolina, and Montana has lifted stay at home orders while others including Texas, Maine, and Illinois had eased some restrictions.
  • Baker Hughes rig count standing at 339 units, a 65% drop yoy
  • DoE reports a fall oil and petroleum product stocks..

Natural Gas US$1.805/mmbtu vs US$1.717/mmbtu yesterday – China starts $5bn, 20mtpa LNG project in Shandong, around 10% of 2019 demand

  • Natural gas prices rebounded 9% yesterday as net injection of natural gas remains robust, which should continue to generate headwinds for prices The EIA reported last week that net injections to working gas totaled 103Bcf for the week ending 8 May
  • Working natural gas stocks totaled 2,422Bcf, which is 49% more than the year-ago level and 21% more than the five-year average for this week
  • The large overhand will be reduced by lower production levels in 2020/2021, but demand will need to recover for prices to rise

Uranium US$33.65/lb vs US$33.60/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$94.1/t vs US$90.5/t - Chinese inventories of iron ore are at a three-year low with prices rising to >$97.5/t yesterday

Chinese steel rebar 25mm US$548.0/t vs US$532.3/t

Thermal coal (1st year forward cif ARA) US$52.8/t vs US$52.8/t

Coking coal swap Australia FOB US$123.0/t vs US$119.0/t

            

Other:  

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

NdPr Rare Earth Oxide (China) US$37,918/t vs US$38,102/t

Lithium carbonate 99% (China) US$5,135/t vs US$5,132/t

Ferro Vanadium 80% FOB (China) US$27.0/kg vs US$27.0/kg

Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$4.9/kg

Tungsten APT European US$210-220/mtu vs US$215-225/mtu 

Graphite flake 94% C, -100 mesh, fob China US$500/t vs US$500/t

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

 

Battery News

EV sales likely to fare better COVID-19 hammers auto market sales

  • BloombergNEF reports that combustion engine sales are forecast to fall 23% in 2020 but EVs sales are only set to fall 18%. (Reuters)
  • Sales and consumer confidence have been hit by closed showrooms during lockdown and the next 3yrs are likely to be difficult.
  • The report forecasts EVs making up 31% of the car fleet by 2040 and 58% of new passenger vehicle sales.
  • Electrification of transport could remove as many as 17.6mbpd from oil demand by 2040 whilst adding 5.2% to power demand.
  • The reports also see growth in hydrogen fuel cells, predicting they will account for 3.9% of heavy-duty vehicle sales and 6.5% of municipal bus sales by 2040.
  • Sales are likely to accelerate in China and Europe as they commit to battery power using financial stimulus and infrastructure spending whilst the US is likely to put the brakes on. (Bloomberg)

 

Q1 European registrations show plug-in sales gain

  • Plug-in registrations increased 81.7% YoY to 228,210 vehicles whilst their market share increased to 7.5%, up from 3% a year ago. (Motor 1)
  • Plug-in hybrids registrations were up 127% to 97,913 vehicles, a 3.21% share, battery EVs were up 58.2% to 130,297 vehicles (4.27% share) and hydrogen EVs saw a 49% increase in registrations to 310,308 vehicles (10.2% share).
  • These figures are against a background of the declining registrations across the total market, down 26.3%.
  • Germany remains the largest plug-in car market with 52,449 registrations, up 125%. Norway saw registrations fall 3.6% in the quarter but remains the market with the highest share of EV vehicles at 69.7%. (Inside EVs)

 

Tesla sales plunge as weak Chinese NEV market is unlikely to support cobalt prices

  • Tesla car registrations fell 64% m/m in April, a sign of the weakness in the Chinese NEV market. (Nasdaq)
  • NewsMetal reports that the prospect of a sustained rally for cobalt is unlikely given the weakness in Chinese demand.
  • China has reintroduced subsidies out to 2022 to try and stimulate the market following poor sales last year when subsidies were withdrawn and the impacts of lockdown in Q1 2020. (Electrek)
  • There have been some green shoots as Nio reported a 181.7% sales increase YoY with record deliveries of their ES6 vehicle in April. (Just Auto)

 

Company News

Antofagasta (ANTO LN) 829p, Mkt Cap £8.4bn – 2019 final dividend hit by Covid19

  • Antofagasta reports that it is revising its final dividend recommendation for 2019 in the light of the uncertainty arising from the impact of the Covid19 virus in Chile.
  • While stressing that the company remains both operationally and financially strong, Antofagasta has ʺdecided it would be prudent to conserve cash in the Company by revising its 2019 final dividend recommendation to 7.1 cents per ordinary share (or a total of $70.0 million). This represents a reduction of 16.3 cents per share (or a total of $160.7 million) from the previous recommendation.ʺ
  • This revision brings the overall dividend payment for 2019 to 17.8cents/share which is ʺequal to a 35% pay-out of net earnings and in-line with Antofagasta's dividend policyʺ.
  • The company points out that ʺChile has recorded a significant increase in the number of new COVID-19 cases since 13 May and, on 15 May, the Chilean Government imposed a total quarantine over the Greater Santiago area. While these latest restrictions are not expected to have an impact on the Company's current operations, it has created additional uncertainty. The evolution of the health emergency in Chile could result in an increased risk of an escalation in quarantine provisions which could restrict the Company's ability to move its workforce to and from its operations.ʺ

Conclusion: The escalating uncertainty arising from the Covid19 public health emergency in Chile is prompting Antofagasta to adopt a prudent conservation of resources by lowering its recommended final dividend for 2019.

 

Arc Minerals* (ARCM LN) 1.74p, Mkt Cap £13m – Arc raises stake in Zaco to 72.5% from 52.5%

(ARC Minerals holds an effective 71.34% of Zamsort in Zambia. Zamsort has a portfolio of copper-cobalt prospects close to FQM’s new Trident mine on the Copperbelt in Zambia. The Cheyeza project is 66% owned by Arc Minerals through its holding in Zamsort. Arc Minerals now holds 72.5% in Zaco Investments holding 27.5%)

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  • Arc Minerals has raised its stake in Zaco Investments Limited to 72.5% from 52.5% with 27.5% held by Kopara Investments, Arc’s partner at Zamsort.
  • The 20% interest in Zaco was bought form Mumena Mushinge who is a non-executive director of Arc Minerals and founder of Zamsort
  • The all-equity deal gives Mushinge another 10m new shares raising his stake to 67,069,129 representing ~6.87% of Arc Minerals.
  • The Zaco exploration license covers 465km² of highly prospective area immediately adjacent to the 407km² Zamsort exploration license.
  • This area holds a number of significant exploration targets including the Fwiji, West Lunga, Nyambwezu, Muswema South as well as the Chihindi targets.
  • Nick von Schirnding, Arc’s Chairman will remain as Chairman of Zaco Investments while Mr Mushinge will step down from the board of Zaco
  • Vassillios ‘Sid’ Carellas, COO of Arc who remains CEO of Zaco.
  • Cash: Arc recently raised £2.37m at 1.7p/s while also converting US$1.5m of convertible loans into equity at the same price and issuing 10m shares to its drilling contractor at 2.58p/s worth £260,634).
  • Rio Tinto recently has negotiated to earn up to 75% of Midnight Sun’s licenses in the nearby town of Solweizi in Zambia
  • Rio will spend $3m, of which $2m is a firm commitment, within the next two field seasons as part of its commitment and has the right to pay $51m for the 75% interest. Rio Tinto agreed to pay $700,000 in an up front cash payment.
  • Discoveries in Zambia in recent years include:
  • Sentinel in 2014 with 1bnt grading 0.51% copper just 40km away from Kalaba (Arc Mineral, Zamsort asset) and is producing >190,000tpa of copper. 
  • Lumwana which is 100km to the east also has a reserve of 678mt grading 0.49% copper and is producing >116,000tpa of copper.
  • Kanshanshi: 200km to the east hosting 1.4bnt grading 0.64% copper resource.

Conclusion: The ongoing consolidation of the licenses around the Cheyeza copper discovery and number of other targets makes Arc highly prospective from a discovery perspective.

We expect drilling to resume shortly and we look forward to the results

*SP Angel acts as Broker to Arc Resources. The analyst applied for shares in the recent placing.

 

KEFI Minerals* (KEFI LN) 0.9p, Mkt Cap £12.5m – Central bank approves Tulu Kapi debt funding

  • The National Bank of Ethiopia approved the signed term sheet for the Tulu Kapi project finance with two leading African banks.
  • Additionally, the central bank registered the past investment in the project to the tune of $49m up to the end of 2014 with the remaining historical capital spending between 2015 and 2019 to be also registered in due course.
  • This allows compliance with the 30/70 (equity/debt) capital ratio required for foreign direct investments in to the project.
  • Lenders will now trigger respective procedures for credit approval and documentation with a view to close the deal in Oct/20.

Conclusion: The approval of financial terms by the central bank and recognition of past investment in the project as equity allows to progress debt funding negotiations with financial closure reiterated for Oct/20.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

OXiS Energy* (Private UK-based) – Agreement to build world’s first Li-S manufacturing plant with Mercedes Benz Brazil

  • OXiS Energy and CODEMGE, the Minas Gerais Development Company in Brazil have signed a lease agreement with Mercedez Benz, Brazil to build the world’s first large-scale Lithium-Sulphur battery manufacturing plant.
  • The 15-year lease agreement is for the Mercedes Benz manufacturing site in Juiz de For a in south-east Brazil.
  • CODEMGE has committed to invest $50m towards the building of the plant.
  • Phase 1, plant capacity is for 2m cells a year by 2023.
  • NORDIKA Pharmaceutical of Brazil is to work on the design and engineering while Siemens Digital Factory is collaborating for a 5m cell pa plant Upgrading the site will begin immediately and will involve an investment in excess of US $50m.
  • High power capacity:  Oxis Energy’s Li-S cells are close to achieving 500Wh/kg power capacity with 600Wh/kg targeted.
  • By comparison a typical Tesla Li-ion battery runs at around 250Wh/kg though Tesla and CATL (160Wh/kg) are both targeting high power density in their next generation cells.
  • Electric aircraft: The cells have sufficient power capacity for electric flight and have been installed in an aircraft in the US for test flight.
  • Low weight: OXiS Cells also have significantly lower battery pack weight than that seen in Automotive manufacturing as the cells are less temperature sensitive and are proven to be resistant to impact in nail and projectile tests.
  • Ground tests on the aircraft have worked well and passed examination while other aerospace companies have also asked for OXiS Li-S cells for instillation into larger test aircraft.
  • Busses in Brazil: Most of the cells to be manufactured in Brazil are intended for a new fleet of public transport busses to help improve air quality in Brazil’s polluted cities.
  • OXiS currently manufacture and develop their Li-S batteries in the UK at the BNFL site at Cullum in Oxfordshire
  • Phase 1 will be to lease circa 20,000 sq meters to enable the production of 5 million Lithium Sulfur (Li-S) cells per annum with the option to extend and double the estate and cell capacity.
  • The Brazil factory should become ‘a centre of excellence’ for the production of Li-S batteries exporting cells for Aviation, Defence, Heavy Electric Vehicles, Light Commercial Vehicles and large Marine Vessels.
  • Bus market: Brazil has the third largest bus market in the world, with 700,000 buses in circulation. Replacign this fleet over the next 25 years would require some 4bn Li-S cells at current battery capacity.
  • The consortium with CODEMGE is also looking at the electrification of regional aircraft, buses and trucks.
  • OXiS Energy is also planning a manufacturing facility in Wales.
  • New China battery safety standards: 
  • China announced three new battery safety standards on 14 May for battery electric cars and buses, effective January 2021 according to China’s MIIT  and approved now by the SAMR and SAC government agencies.
  • The new standards covering EVs, busses and traction batteries, require cells withstand thermal runaway for five minutes before catching fire.
  • The driver must also get a warning and there must be sufficient insulation and system control to give passengers five minutes to escape.
  • The new regulations appear to favour heavier LFP and low-nickel NMC cells over higher-capacity NMC and NCA battery chemistries.
  • NMC 811, NCA battery cells all have high capacity but are currently considered to be less stable than lower nickel content cells which are considerably heavier and generally use more cobalt.
  • Li-S batteries, as made by OXiS may therefore become a preferred option for busses in China under the new regulations due to their proven safety and impact resistance. They are also significantly lighter than most other battery chemistries which is a major consideration when adding several tonnes of battery pack to the back of the bus.
  • Whatever the regulations you can be sure they will be crafted to favour local manufacturers and exclude non-Chinese companies.

Conclusion: OXiS Energy is one of the world’s leading battery developers. They currently produce higher capacity cells than other manufacturers and are courting interest and investment from the world’s major aerospace and other manufacturers.

The company is a great example of British designed and developed technology moving from small-scale manual production towards automated mass production for mass-market commercial application.

*SP Angel act for OXiS Energy. Please contact John Meyer at SP Angel or OXiS Energy directly if you are interested to know more about this company

 

Rainbow Rare Earths* (RBW LN) 2.85p, Mkt Cap £10.8m – Geological studies identify 57 exploration targets at Gakara in Burundi

  • Rainbow Rare Earths has announced that a detailed review of the structural geology and lithologies at its Gakara rare-earths project in Burundi has revealed a total of 57 exploration targets of which 36 are identified as Tier1 and Tier 2 targets and the remaining 21 are Tier 3 targets.
  • ʺThese targets are expected to be sites where REE [rare earths elements] mineralisation, in the form of vein stockworks and/or breccias, are likely to have been more intensely developed.ʺ
  • The review and reinterpretation of high resolution geophysical data and the integration of ʺthe comprehensive mapping database accumulated by Rainbow over several yearsʺ as well as the findings of recently completed  PhD level studies ʺhas confirmed the presence of at least two large carbonatite bodiesʺ which is a rock type recognised as the source of primary rare-earth mineralisation globally.
  • The company notes the possible presence of a third, deeper, carbonatite intrusion at the northern end of a major NNE trending geological structure which delineates the spatial distribution of the carbonatites.
  • ʺThe southernmost carbonatite body, with a diameter of approximately 2.6 km, underlies a large proportion of mapped and mined REE-bearing veins and has been identified as the main source of REE-rich, mineralising fluids in the license area.ʺ
  • As well as the exploration, trial mining and processing is continuing at Gakara ʺdemonstrating that the ore from veins found across the licence area is amenable to simple processing via gravity separation to produce a high grade concentrate (averaging 52-58% TREO) suitable for direct shipping with minimal radioactive elements or other deleterious by-products often associated with rare earth projectsʺ.
  • Mineralisation at Gakara is known to contain a preponderance of the ʺmagnet rare earths, including neodymium and praseodymium, which are driving demand and account for 70% of annual global REE sales due to their use in vital components in motors, generators, wind turbines, and electric vehiclesʺ.
  • Commenting on the evaluation, CEO, George Bennett, explained that the focus was ʺto develop a deeper understanding of the deposit to realise the enormous potential it has to offer.  Understanding the structural controls that gave rise to the mineralisation is a key element to this.  Incorporating this knowledge into our 3D mineralisation models alongside the existing mining and drilling data will allow our initial JORC resource base to better reflect our potential and help drive our future exploration activities in the correctly targeted manner."

Conclusion: The systematic, data-driven, evaluation of the Gakara project area is providing multiple targets for follow-up exploration and providing insights into the underlying structural controls of the mineralisation. We look forward to the forthcoming initial JORC compliant mineral resource estimate as an important next step in building the technical understanding of the deposits.

*SP Angel act as broker and financial advisor to Rainbow Rare Earths

 

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 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%

 

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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.

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