SP Angel . Morning View . Wednesday 01 04 20

Equities sell off on weaker economic data

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MiFID II exempt information – see disclaimer below

 

Ariana Resources* (AAU LN) – Due diligence completed

Botswana Diamonds (BOD LN)* – New exploration licences in Botswana

Caledonia Mining* (CMCL LN) – Deferral of dividend

Central Asia Metals (CAML LN) – 2019 results and decision to forego a dividend distribution

Gem Diamonds (GEMD LN) – Diamond sale

Glencore (GLEN LN) defers $2.6bn dividend decision.

Greatland Gold (GGP LN) –Newcrest exploration achieves 40% interest in the Havieron project

Strategic Minerals* (SML LN) – Experiencing little impact from Covid19

Scotgold Resources* (SGZ LN) – Interims

Vast Resources* (VAST LN) – Chiadzwa Community Diamond Project update

SP Angel Healthcare team

Cell and gene therapy ElevateBio raises $170m in Series B round

Diurnal (DNL.L): Marketing Authorisation Application validation

Faron Pharmaceuticals (FARN.L): Inclusion of Traumakine in pneumonia trial

 

Chinese scientists seeking potential COVID-19 treatment find "effective" antibodies (Reuters)

 

China to extend subsidies on Electric Vehicles to stimulate new demand

• A marked rise in recovering Pneumonia victims from COVID-19 as accelerating the need for cleaner air in our cities

 

Shanghai base metals mostly higher as Beijing pledges more stimulus 

• Base metals broadly higher this morning as the Chinese government announced it will set out fiscal and financial policies to expand domestic demand and assist businesses reopening (SMM). 
• Positive Chinese economic data also helped improve market sentiment, as data released earlier this morning showed China's Caixin manufacturing PMI stabilised this month and rose to 50.1 vs 40.3 in February (Fastmarkets MB). 
• Tin was the best performer on the SHFE, with the most-traded June tin onctract rose 1.68% htis morning compared to Tuesday's close of 120,650 yuan/t. 
• Aluminium and lead were the only metals to fall on the SHFE this morning, with futures contracts for both metals falling 0.3%. 
• Base metals on the LME were mainly weaker this morning, many erasing gains seen yesterday as a result of positive Chinese economic data.

• Demand: The CRU commodity forecasting group reckon global demand will fall 8% this year.
• That’s a big hit to demand but production is also pulling back as mines are forced to close by governments following Western protocols.  
• This is despite many emerging market health services having little in the way of oxygen and ventilators to help those with pneumonia recover.
• Costs for many mines will have fallen by ~18-25% based on the fall in oil prices depending on how much fuel oil and diesel these mines use.
• Oil & gas prices are lower due to markedly lower demand from aircraft, autos and industry. It has also been mild in the West and China.
• Saudi Arabia and Russia may also be keen to force the closure of North American shale oil & gas production and while this may work in the short term, many shale wells will spring back to life once higher oil & gas prices return.
• Shanghai metal inventories fell:  Copper down 3.5%, Aluminium down 1.1%, Zinc down 4.9%, Lead down 38%, Nickel down4.9%.
• LME inventories rise: Aluminium inventories rose 30kt last week, Copper rose 20%, Lead 25%, Nickel 24%, Zinc saw cancelled warrants of 34% of total stock.

 

Stimulus funding relating to the Coronavirus (Updates in bold, figures converted to US dollars)

G20 nations pledge to inject $5tr into global economy

• $2tn US fiscal package approved by Congress. US may add $0.6t state aid for mortgage markets and travel industries
• $1,000bn - IMF available
• $963bn (€750bn) ECB scraps limits on sovereign bond purchases. + targeted loans to companies at an interest rate of -0.75%
  • ECB legal decision on the Pandemic Emergency Purchase Programme ‘PEPP’. The ECB may target shorter maturities in the hope that PEPP remains temporary.
  • The 33% issuer limit will not apply to emergency asset purchases.
  • ECB PEPP buying running at around €250bn
  • $825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
  • $700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE is to buy Treasuries and mortgage-backed securities. The program in two parts $500bn + $200bn  
  • $344bn - China stimulus + China PBoC cut repo rates to 2.2% from 2.4%
  • $78bn (C$107bn) - Canada
  • $544bn (¥60tn) – fiscal stimulus package equiv. ~10% of GDP $17.4bn Japan + Y300bn of inflation-linked bonds,
  • $400bn (£330bn) UK - Government-backed loan scheme. New business interruption loan scheme up to £5m with no interest. Will add whatever is required in COVID-bill + $242bn (£200bn) UK QE from Bank of England.
  • $39m – UK (£30bn) stimulus + $29bn (£20bn) – UK No business rates plus £25,000 cash grants for shops, pubs, clubs in hospitality sector inc. $5bn (£3.5bn)
  • $387bn (€304bn) – France - loan guarantees for French business inc. $50bn (€45bn) + €4bn for startups, + France to also pay half wages for employees in affected firms
  • $200bn (€200bn) – Spain
  • $127.2bn China - China stimulus was $586bn in 2009 to rescue itself and the global economy. This time it is simply lowering lending rates slightly and made $77bn of new loan capacity at banks,
  • $214bn (A$320bn) Australia, a record A$130bn ($80bn) package bringing total fiscal and monetary stimulus to A$320bn or 16.4% of GDP.
  • $32bn - Saudi Arabia -  stimulus with debt ceiling raised from 30% to 50%.
  • US$38.6bn - Singapore
  • $22.6bn - India
  • $15.4bn – Hong Kong relief package
  • $13.7bn South Korea, $12bn World Bank, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
  • The world was slow to recover from the 2008 GFC due to a lack of stimulus allowing China to get ahead
  • This time the US and UK are likely to stimulate their economies to a far greater extent than seen in the GFC
  • $8.8tn – TOTAL stimulus offered to-date vs G20 GFC stimulus of ~$2 trillion or 1.4% of global GDP (ILO, EU, IILS)
  • >10tr expected if using the $7.4tr estimated by The Economist

 

NHS to release App to tell you if you have come into contact with someone who has tested positive for the Coronavirus

• The opt-in App will only currently work where COVID-19 sufferers have been tested in hospital due to the illness.
• The App will become infinitely more useful later on as more early testing is done and as Lock-down restrictions are lifted.

 

Fatalities year-to-date:

42,354 - Coronavirus

121,673 - Seasonal flu

245,477 - Malaria

268,367 - Suicides

337,826 - Road accidents

420,704 - HIV/AIDS

625,926D - Alcohol

1,251,062 - Smoking

2,055,373 - Cancer

3,249,000 - Communicable diseases

Stats from Worldometers.info

*Lies, damned lies, and statistics ‘Mark Twain’

 

Dow Jones Industrials             -1.84%  at         21,917

Nikkei 225                                 -4.50%  at         18,065

HK Hang Seng                          -2.50%  at         23,013

Shanghai Composite                -0.62%  at         2,733

 

Economics

US – President Trump is calling for another $2t stimulus package as part of the official emergency response to the COVID-19 pandemic.

• The infrastructure bill is being proposed only a few days after an unprecedented $2t relief bill announced last week.
• “It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4,” the President said.

 

EU economic confidence index fell 11.6 in March vs -6.6 in February 

• Industrial confidence fell 10.8 vs -6.2,
• Service confidence -2.2 vs 11.1,
• Consumer confidence -11.6 vs -6.6,
• UK GfK consumer confidence -9 vs -7
• US Dallas Fed manufacturing index -70 vs 1.2 – due to lower oil prices

 

China – Private manufacturing PMI points to a stabilisation of activity in March coming in ahead of more pessimistic forecasts.

• “To sum up, the manufacturing sector was under double pressure in March: business resumption was insufficient; and worsening external demand and soft domestic consumer demand restricted production from expanding further… whereas, business confidence was still high and the job market basically returned to the pre-epidemic level, laying a positive foundation for the economy’s rapid recovery after the epidemic,” Caixin commented on the data.
• Caixin Manufacturing PMI: 50.1 v 40.3 in February and 45.0 forecast.

China to increase fiscal stimulus as logistics and falling demand for export products hits economy

• China is expected to strengthen its fiscal and monetary stimulus as Coronavirus-related disruption Locks-in Western consumers.
• Severe economic contraction in Q2. Hopefully this will rebound in Q3 in a V-shaped recovery.
• If Western Lockdowns persist through Q3 then the recovery will be delayed and greater lasting economic damage will be done.
• China has returned to work remarkably quickly and effectively following its Q1 Lock-down but is still restricting immigration to stem the flow of people bringing the Coronavirus back into China. It is possible China will see a second wave of Coronavirus infections later this year.
• Apple, Foxcomm, VW and most other manufacturers in China are back at work with 100% of migrant workers reported to be back in action.
• Problem is that the West is largely in Lockdown, except for Belarus where a bottle of Vodka and a Sauna will sort you out, and Brazil where the President is in denial. At least Trump is now recognising the problem facing his Presidency with America not taking over as the World’s Coronavirus hotspot.

China to cut bank reserve requirement ratios ‘RRR’ for medium- and small-sized banks (Reuters)

• China continues to adjust its economic levers to stimulate its economy back into sustainable growth
• China will increase re-lending and re-discount quotas for medium and small banks by Rmb1tn ($141bn)
• China will also issue more local government special bonds in Q2.
• Financial institutions allowed to issue Rmb300bn in bonds to support small firms
• Increasing corporate credit bond issuance by Rmb1tn yoy
• EV subsidies to be extended with EV purchase tax exempted for two years

 

Japan – Big businesses’ sentiment dropped to -8 in Q1 of the year marking the first negative reding in 7 years.

• The index measures the difference between the percentage of companies saying business is good and those saying it is bad.
• Separately, final manufacturing PMI data confirmed the drop in the sector accelerated in March with the index hitting 44.8 and production falling at the fastest pace since the aftermath of the devastating tsunami in April 2011.

 

Italy – Authorities are mulling a stimulus package to be approved this month that is expected to be significantly larger than the March one.

• The government announced an extension to the lockdown that started on March 9 to until at least the Easter holiday in mid-April.
• On reopening, authorities are expecting to lift restrictions on a sector-by-sector basis, rather than on a geographical basis.
• Manufacturing production and sentiment dived in March as businesses shut amid a nationwide lockdown, according to the latest PMI data.
• Output recorded the sharpest decline since Markit started collecting data while incoming new business orders dropped at the fastest pace since Mar/09.
• Business outlook was the lowest since the series were first compiled in Jul/12.
• The number of new coronavirus cases has plateau over the last several days offering some hope the peak has been passed.
• Markit Manufacturing PMI: 40.3 v 48.7 in February and 41.0 forecast.

 

Spain – Manufacturing firms recorded the sharpest drop in output and new orders since mid-2012 in March this year, according to the PMI data.

• “Whilst the latest data point to a noticeable reduction in output already, consistent with declines in official manufacturing production of over 7% year-on-year, the overall depth and length of the downturn is likely to be determined on the as yet unknown speed in which the pandemic can be brought under control,” Markit commented.
• Markit Manufacturing PMI: 45.7 v 50.4 in February and 44.0 forecast.

 

Indonesia –2020 GDP growth projections was nearly halved to 2.3% from previous estimates of 5.3% in the wake of the coronavirus outbreak.

 

Turkey – Erdogan under pressure as coronavirus sweeps through region

• President Erdogan is facing calls for a full Lockdown as the Coronavirus spreads through the region.

 

Currencies

US$1.0979/eur vs 1.1000/eur yesterday.  Yen 107.68/$ vs 108.46/$.  SAr 18.016/$ vs 18.000/$.  $1.235/gbp vs $1.229/gbp.  0.608/aud vs 0.616/aud.  CNY 7.097/$ vs 7.090/$.

 

Commodity News

Gold US$1,591/oz vs US$1,617/oz yesterday - Chinese lockdown freezes the country's gold market

• China is the biggest buyer of physical gold, however the national shutdown has prevented people buying at a time when people elsewhere are holding the metal for its safe-haven appeal. 
• Last year, Chinese customers accounted for about a fifth of total gold demand of 4,356 tonnes (WGC).
• China's retail sales of gold, silver and jewellery fell 41% in the first two months of 2020, and the China Gold Association estimate that the amount of gold jewellery sold in Q1 2020 will have fallen by at least 50%.  

   Gold ETFs 90.5moz vs US$90.2moz yesterday

Platinum US$723/oz vs US$726/oz yesterday

Palladium US$2,344/oz vs US$2,327/oz yesterday

Silver US$14.00/oz vs US$14.16/oz yesterday

 

UK-based PlanarTech to make graphene bullet-proof vests for Thai Army

• PlanarTech have announced that an agreement has been reached with Thailand-based IDEATI to distribute its graphene-enchanced bullet-proof vests and body armour.
• Subject to product testing, the minimum order quantity is 1,000 with a lead time of 90 to 120 days (Graphene-info). 

Base metals:   

Copper US$ 4,826/t vs US$4,830/t yesterday – 

• China, Jiangxi Copper expects to increase output this year by 6% to 1.65mt
• Henan Yuguang to lose ~8,000t of production due to maintenance
• Russian copper exports rose 35%yoy to 59,000t in January

Aluminium US$ 1,517/t vs US$1,525/t yesterday - aluminium production rose to 55% of global production

Chalco report ’19 aluminium output fell 9% to 3.79mt vs 4,17mt yoy due to the closure of two smelters

Hongqiao production fell 11.3% to 5.6mt

Nickel US$ 11,330/t vs US$11,280/t yesterday

Zinc US$ 1,866/t vs US$1,872/t yesterday

Lead US$ 1,715/t vs US$1,711/t yesterday

Tin US$ 14,440/t vs US$14,155/t yesterday

           

Energy:           

Oil US$25.4/bbl vs US$23.0/bbl yesterday

Natural Gas US$1.633/mmbtu vs US$1.716/mmbtu yesterday

Uranium US$27.05/lb vs US$27.20/lb yesterday - Uranium – closure of uranium mines raising prices

• Uranium prices rise as mine closures force nuclear power stations to look to the market for source material.
• There are 440 major nuclear-power reactors around the world supplying around 14% of global electrical power (France75%)
• Some six mines are reported to produce two-thirds of global supply
• Cameco closed Cigar Lake for a month ~13% of global supply
• Rossing Uranium stopped as Namibia ordered the closure of all mines
• Kazatomprom – unaffected but subject to nationwide state of emergency with cities locked down in Kazakhstan.

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$81.4/t vs US$80.8/t - Australian iron ore exports rise 3.6% last week

• Shipments of iron ore from Australia totalled 17.4mt last week, compared to 16.8mt a week earlier (Global Ports data). 

Chinese steel rebar 25mm US$520.6/t vs US$523.5/t

Thermal coal (1st year forward cif ARA) US$55.3/t vs US$55.8/t

Coking coal swap Australia FOB US$147.0/t vs US$147.0/t

           

Other:  

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

NdPr Rare Earth Oxide (China) US$37,901/t vs US$38,939/t

Lithium carbonate 99% (China) US$5,636/t vs US$5,642/t

Ferro Vanadium 80% FOB (China) US$26.5/kg vs US$26.5/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

Tungsten APT European US$240-245/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

 

Battery News

China to extend EV subsidies for a further two years

• The State council announced a two-year extension on Tuesday to the provision of price subsidies to makers of new-energy vehicles. Car purchase taxes will also be waived until the end of 2022. (Yuan Talks)
• The extension is an effort to stimulate electric and clean energy vehicles to in turn prevent a more severe economic downturn as a result of the stasis caused by the coronavirus. (Teslarati)
• The central government will also compensate for the replacement of diesel vehicles in major population centres and waive used cat VAT tax until the end of 2023. (Ideanomics)
• In China ‘new energy vehicle’ is defined as any car with plug-in capabilities to receive power. This includes BEVs, PHEVs and fuel cell electric.
• Subsidies apply to EVs with a range of 400km+ (250 miles). The purchaser of a vehicle with the required range would receive up to 25,000 yuan (USD 3600) subsidy, reducing the purchase cost by that amount.
• The extension provides fleet operators and manufacturers more time to secure financing and boost production in the world after the coronavirus.

 

Toyota moves out of first gear in battery vehicles

• Toyota plans to have 60GWh of lithium ion battery capacity by the end of 2025. (Benchmark Mineral Intelligence)
• That is enough capacity to make over 1 million EVs with an average pack size of 55kWh.
• The news is confirmation of a shift in strategy towards new energy vehicles in line with their announcement of their JV with Panasonic to develop batteries last month. The JV will make prismatic batteries. (Reuters)
• The new company will begin operations on April 1, Toyota owning a 51% share. They will develop batteries to be made available to all automakers not just Toyota vehicles.
• Toyota’s strategy had been to focus on hybrid vehicles suggesting full electric vehicles are impractical and expensive. (Forbes)
• This mindset has been forced to evolve as EV technology has developed and in June 2019 Toyota announced plans to rollout EVs from 2020 with a range of 10 BEVs to be introduced in the early 2020’s. (Inside EVs)

 

ChargeUp Europe to be the voice of EV charging infrastructure

• The alliance is founded by Allego, ChargePoint and EVBox Group. Between them they have 150,000 charging ports across the EU. (Inside EVs)
• The goal is to be the voice of EV charging infrastructure and the founding members are encouraging other firms to join. (Auto day news)
• The priorities of the alliance are:
  • Enable a swift and efficient roll of EV charging infrastructure across Europe
  • Realisation of EU policy that supports investment in charging infrastructure
  • Removal of market barriers and facilitate a smooth uptake of EVs
• The strength and success of the new alliance depend upon how many other networks join in the coming months.

 

Company News

Ariana Resources* (AAU LN) 2.8p, Mkt Cap £30m – Due diligence completed

• Ariana Resources reports that the previously announced independent detailed assessment of the Kiziltepe, Tavsan and Salinbas projects on behalf of a proposed partner has now been completed.
• Ariana Resources and the proposed partner ʺhave completed a further extension to the MoU, to 30 April 2020, to enable sufficient time to review due diligence informationʺ.
• Explaining the future steps in the process, Managing Director, Dr. Kerim Sener, said that ʺA period of internal review will now be conducted by the Proposed Partner and Proccea.  In addition, draft definitive legal documentation has been prepared and is being reviewed by the Parties.  We look forward to reporting further on the proposed deal in due course."

Conclusion: As we discussed when the due diligence process was announced in December last year, the detailed nature of the process, which was said to include the drilling of twin-holes to verify Ariana’s results has the hallmarks of a major company approach. The identity of the proposed partner remains undisclosed however with the due diligence now completed it may soon become clear if the transaction proceeds further.

 

Botswana Diamonds (BOD LN)* 0.55p, Mkt Cap £3.0m – New exploration licences in Botswana

• Botswana Diamonds has announced that its wholly owned subsidiary, Sunland Minerals, has been awarded a further 6 prospecting licences covering 4,319 km² in the Kalahari area of Botswana.
• In addition, the authorities have granted a 2 year renewal of four currently held licencees covering 1,406 km².
• ʺAirborne and ground magnetic surveys from previous work conducted by Sunland Minerals on these licences have revealed well defined targets and subsequent soil sampling over the targets identified heavy concentrations of Kimberlitic Indicator Minerals (KIMs) over these targets … strongly suggesting an underlying kimberlite source. An environmental study is in progress to pave the way for the drilling of these high priority targetsʺ.
• In current circumstances ʺThe President of the Republic of Botswana Mokgweetsi Masisi has declared a state of emergency following confirmation of three coronavirus cases in the country.  He has also announced a lockdown beginning 2^nd April for 28 days.ʺ As a result, work on these licences will have to await the lifting of the emergency measures.

 

Caledonia Mining* (CMCL LN) 695p, Mkt Cap £82.9m – Deferral of dividend

• Caledonia Mining reports that in the current uncertain conditions it ʺhas decided to defer its approval of the declaration of the second quarterly dividend of 2020.  The board will keep this decision under constant review as it monitors prevailing market conditions.ʺ
• The company confirms that it is maintaining production at its Blanket gold mine, albeit at a reduced rate in order to safeguard its workforce from Covid19.
• The company has paid a quarterly dividend consistently since 2014 and in January announced that it was increasing the dividend by around 9% in a move which we interpreted at the time as a signal of increasing confidence in the operation as the major capital investment plan aimed at opening up access to deeper ore and securing the longer term future of the mine into the mid-2030s came towards a conclusion.

Conclusion: Caledonia Mining is one of a small group of AIM listed mining companies which consistently pays a dividend. The decision to defer the decision to pay a dividend is, however in our opinion, prudent in the current exceptional circumstances.

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

 

Central Asia Metals (CAML LN) 140.6 pence, Mkt Cap £275m – 2019 results and decision to forego a dividend distribution

• Central Asia Metals reports  a pre-tax profit for the year ending 31^st December 2019 of $67.8m (2018 - $72.7m) and reports a profit for the year of $51.9m (2018 - $48.0m).
• The company ascribes the lower levels of profit to ʺdecreased revenue due to falling commodity prices as low costs of production were maintained.ʺ
• The company’s gross debt of $108.8m (net debt $76.2m) is ʺalmost half the level it was only two years ago when we acquired Sasaʺ.
• The company remains cash generative with free cash flow of $69.8m (2018 - $73.8m) and group EBITDA of $108.6m (2018 - $125.3m) with an EBITDA margin of 60%.
• The company reports that both its operating mines, Sasa and Kounrad, ʺremain fully operational at present and we have experienced no disruption to either the production or sales of our metal products. However, both North Macedonia and Kazakhstan have now closed their borders to neighbouring countries for the movement of people, although not trade, due to the escalating number of casesʺ.
• The company also says that ʺSchools have been closed in North Macedonia and overnight curfews imposed, whilst in Kazakhstan, the cities of Nur-Sultan and Almaty are in lockdown.ʺ
• As a result of the current situation and the surrounding economic uncertainty, the company has decided not to recommend a dividend  and is also reviewing its capital expenditure commitments ʺwith the aim of identifying near-term savingsʺ and in order to protect its balance sheet.

Conclusion: The decision to forego a dividend and review capital expenditure commitments in order to protect the balance sheet seems prudent in current circumstances.

 

Gem Diamonds (GEMD LN) 28.2p, Mkt Cap £39m – Diamond sale

• Gem Diamonds reports that it has raised US$12.1m from the sale of large, high-quality diamonds via what the company describes as a ʺflexible tender sales process.ʺ
• The company explains that this sales process was implemented ʺas a result of the March large diamond tender being cancelled due to the travel and other Covid19 restrictions imposed by the Belgian government and the governments of the Company's clients.ʺ
• These sales arrangements are expected to remain in place while the restrictions to limit the spread of the Covid19 virus remain in force.
• As its Letseng mine produces a regular flow of large, high quality diamonds, Gem Diamonds is well placed to sell this type of stone through this kind of process though we assume that it would be less applicable to the sale of the majority of the mine’s production.
• Also, with production at the mine currently suspended in response to the virus and the implementation of containment measures, sales are coming from existing stocks of rough diamonds which will not be replenished until the resumption of operations.

Conclusion: The sale of US$12.1m of high quality diamonds is encouraging news for Gem Diamonds and should help the company’s finances during the suapension of operations at Letseng.

 

Glencore defers $2.6bn dividend decision.

 

Greatland Gold (GGP LN) 4.6p, Mkt Cap £171.7m –Newcrest exploration achieves 40% interest in the Havieron project

• Greatland Gold draws attention to the ASX news release by Newcrest Mining that, having now spent US$20m on exploration it has fulfilled the requirements of stage 2 of the Farm-in Agreement and hence acquired a 40% interest in the Havieron project in the Paterson Region of Western Australia.
• The announcement explains that, having implemented appropriate measures to contain the risks from the Covid19 virus, ʺDrilling activity at Havieron is continuing as planned with eight rigs currently operationalʺ.
• The completion of stage 3 of the Farm-in agreement, which is now underway, entails the expenditure of a further US$25m on exploration and the delivery of a pre-feasibility study in order to earn Newcrest a further 20% interest.
• Beyond that, Newcrest has the right to acquire an overall 70% interest in the project through the expenditure of a total US$65m plus the right toʺacquire an additional 5% interest at the end of the Farm-in period at fair market valueʺ.
• Describing the move into stage 3 of the Farm-in Agreement as an important milestone in the development of the Havieron Project, CEO, Gervaise Heddle, said that it ʺnow officially moves into the Pre-Feasibility Study stage of developmentʺ.
• Mr. Heddle went on to describe how ʺIn just over 12 months, Newcrest has delivered six consecutive sets of excellent drill results at Havieron, which support the potential for both high grade selective and bulk mining methods. We are delighted by Newcrest's ongoing commitment and we look forward to reporting further results as work continues towards the next major milestone at Havieron, the delivery of a maiden mineral resource in the second half of the 2020 calendar year.ʺ

Conclusion: As the Havieron Project moves into the pre-feasibility stage, we look forward to the initial mineral resource estimate which is expected during the second half of 2020.

 

Strategic Minerals* (SML LN) 0.45p, Mkt Cap £6.6m – Experiencing little impact from Covid19

• Strategic Minerals reports that it is ʺfortunate that the current crisis has had little effect on the Company."

• The company explains that not only is the movement of magnetite material from it its Cobre magnetite operation in New Mexico ʺconsidered an essential service and, as such, operations associated with it are exempt from conditions required during the partial lockdownʺ it also has only 4 employees on site and hence falls below the minimum threshold of 5 employees covered by the State’s ʺpartial lockdown in response to the threat of Covid-19.ʺ
• Strategic Minerals’ Managing Director, John Peters, explained that ʺOperations at Cobre in the first quarter of 2020 have continued in line with historical seasonal patterns and sales volumes have been in line with expectations.ʺ
• Turning to the company’s Australian business, Mr. Peters went on to explain that ʺ Whilst the progress of Leigh Creek's application to the South Australian government for a program for environment protection and rehabilitation is likely to be slowed, the fundamentals of the Company remain unchanged with tight cash control and continuing low overheads being combined with sustained revenues from Cobre.ʺ

Conclusion: Strategic Minerals is escaping many of the Covid19 induced difficulties experienced by other companies as a result of the scale of its operations in New Mexico where as a mineral business it is exempt from restrictions under a partial lockdown. In Australia, environmental permitting of Leigh Creek is likely to be slower than originally expected.

*SP Angel acts as Nomad and Broker to Strategic Minerals

 

Scotgold Resources* (SGZ LN) 44p, Mkt Cap £22m – Interims

BUY

• On project development update, the Company reported the arrival of all seaborne equipment parts in Oct/19 and an engagement of a local construction firm to build a dedicated plant building and tailings management facility in Sep/19.
• Unfortunately, the operation has been temporarily placed on care and maintenance on the 27^th of March in line with official guidelines issued by the Scottish Government as part of COVID-19 containment measures.
• The timing on a restart of construction works and the impact of the suspension on suppliers is currently uncertain with the previous May commissioning target to be moved to later date.
• On exploration front, the team completed a series of stream sediment sampling and soil sampling across a number of prospects at its Grampian Project.
• The Company reported a A$1.3m loss during the period (H1/FY19: -A$2.1m) with administrative costs remaining flat over the period as the team focused all efforts on delivering the Cononish project.
• Development capex has been ramped up to A$5.6m (H1/FY19: A$1.6m) with additional A$0.5m dedicated to exploration works (H1/FY19: A$0.1m).
• Corporate and development bills were covered by A$2.1m in equity raise proceeds (3.3m shares at £0.35p in Aug/19), a second tranche drawdown of £2m as well as £1m received in exercised options’ proceeds.
• Closing cash balance stood at A$4.6m with outstanding borrowings of A$9.1m (Jun/19: A$3.9m and A$4.4m, respectively); secured loan facility provided by Nat le Roux, the Company’s major shareholder, accounts for A$7.8 of the amount with £4m drawn down to date and £3.5m remaining available under the facility.

Conclusion: Interim results highlight the progress of development works at the Cononish project that were had be temporarily suspended last week on official guidelines to fight the spread of the COVID-19 virus. The Company had some £2.5m in the bank and £3.5m in undrawn loan facilities as of the start of the year. While the suspension delays the Cononish commissioning date, we highlight that it is a temporary issue with project economics remaining robust given high grade nature of the deposit, strong gold prices and weak currency. The project at full capacity is expected to generate £15m in EBITDA (mine level) and £12m in FCF (£11m including corporate admin costs) assuming 22kozpa at $1,500/oz gold price and longer term 1.4 GBPUSD exchange rate. 

*SP Angel acts as Nomad and Broker to Scotgold Resources

 

Vast Resources* (VAST LN) 0.18p, Mkt Cap £18m – Chiadzwa Community Diamond Project update

• Completion of the Chiadzwa Community JV expected to be finalized last month had to be postponed amid a 21 day lockdown announced in Zimbabwe.
• The COVID-19 related national lockdown commenced on 30 March.
• Finalisation of the JV is expected shortly.

*SP Angel acts as Broker to Vast Resources

 

SP Angel Healthcare team - Vadim Alexandre, Liam Gascoigne-Cohen

Cell and gene therapy ElevateBio raises $170m in Series B round

• US cell and gene therapy company, ElevateBio, LLC, closed a $170m Series B round.
• Investors included Vertex Ventures, Redmile Group, and Samsara BioCapital, 
• The proposed use of funds included the completion of the Group’s cell and gene therapy focused R&D and manufacturing sites and advancing six portfolio therapies into the clinic 

An impressive raise for a company which was created only in May last year (raising $150m at that time). ElevateBio has already launched two companies. AlloVir is developing ‘off-the-shelf’ T-cell therapies which aim to help combat viral infections in immunocompromised individuals, such as transplant patients and is collaborating with Baylor College of Medicine to investigate if their platform has any efficacy against SARS-CoV-2, the causative agent of COVID-19.  The Group’s second company, HighPassBio is developing T-cell receptor therapies which target specific tumours to prevent relapse of leukemia following bone marrow transplantations. London-listed Hemogenyx Pharmaceuticals (HEMO.L*) is also focused on novel approaches to de-risk bone marrow transplantation. The Group is developing a CDX bi-specific antibody therapy to condition patients prior to bone marrow transplantation and a Hu-PHEC cell therapy which uses a naturally occurring type of cell to generate blood stem cells, which can be used in bone marrow transplantation.

*SP Angel act as Broker to Hemogenyx Pharma

Company Update

Diurnal (DNL.L): Marketing Authorisation Application validation

Share price: 30.5p; Market Capitalisation: £37.1m

• Diurnal, the developer of therapies for rare hormonal diseases, provided an update regarding its Marketing Authorisation Application (MAA) for Chronocort® which has been submitted to the EMA, the European regulator.
• The Chronocort® MAA has been validated by the EMA which are now beginning the formal review process.
• Chronocort® is a potential candidate for the treatment of patients with congenital adrenal hyperplasia (CAH), a rare condition thought to affect 41,000 adult patients in Europe.

The validation of the MAA is a positive step toward achieving regulatory approval for Chronocort®, for which an approval decision is expected in Q121 with a recent placing providing sufficient capital to commercialise Chronocort®. If approved, this would be the second product to be approved by the EMA, the first being Alkindi®, a hormone replacement therapy for adrenal insufficiency, an orphan disease. In H120, Alkindi posted revenues of £1.1m (H119: £0.2m). 

*One of the authoring analysts has an interest in Diurnal shares

 

Faron Pharmaceuticals (FARN.L): Inclusion of Traumakine in pneumonia trial

Share price: 470p; Market Capitalisation: £203m

• Finnish drug developer, Faron Pharma, notes the regulatory approval for a global multicentre trial evaluating treatment options for community-acquired pneumonia including COIVD-19 patients.
• The trial, known as REMAP-CAP aims to recruit 6,800 patients and evaluate multiple treatment modalities, from antibiotics to hydrocortisone (link to trial website).
• The trial will include the use of Traumakine, Faron’s interferon-based treatment candidate.
• Traumakine, an intravenous interferon beta-1a (IFN-β) treatment is to be used in part of the trial testing test the use of interferon on the clinical outcomes of COVID-19 patients and those with other causes of pneumonia requiring ICU care

Whilst smaller trials are providing anecdotal data about the efficacy of existing treatments against COVID-19, larger studies such as REMAP-CAP and the SOLIDARITY trial being performed by the World Health Organisation should provide further guidance as to the efficacy of therapies against COVID-19. In 2018, Traumakine failed a Phase 3 trial (INTEREST) in acute respiratory distress syndrome (ARDS). It was suggested that standard-of-care corticosteroids were impacting the efficacy of Traumakine. The REMAP-CAP trial should provide further data on this observation. IFN-β is a cytokine protein involved in the body’s antiviral responses as part of the innate immune system. Coronaviruses, such as SARS-CoV-2, have mechanisms to suppress IFN- β production to evade the body’s immune system. A deficiency in IFN-β production by the lung may explain why certain patients develop severe lung diseases during respiratory viral infections, such as COVID-19. Elsewhere on AIM, Synairgen (SNG.L*), a respiratory drug development company, commenced dosing of patients for its trial of SNG001 (inhaled formulation of IFN-β1a) in COVID-19 patients.

*One of the authoring analysts has an interest in Synairgen shares

 

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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