Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

Today's Market View - Bushveld Minerals Limited, Highland Gold, Mkango Resources Ltd, Metminco Ltd

Today's Market View -   Bushveld Minerals Limited, Highland Gold, Mkango Resources Ltd, Metminco Ltd

Bushveld Minerals* (LON:BMN) – $9m financing agreed with Wogen for vanadium mine and plant

Highland Gold (LON:HGM) – Unkurtash scoping study
 

Metminco* (LON:MNC) – Non-executive appointment
 

Mkango Resources* (LON:MKA) – Collaboration agreement with Metalysis

 

Gold prices are up more than $4/oz this morning following a 2% (c.$25/oz) increase last week driven by more dovish Fed outlook on future rate increases than expected by markets.

• Brent is off 0.4% despite declines in the US$ index.

• The came close to the 100 mark this morning after recording a 0.9% decline, the largest weekly drop since mid-Jan, last week.

• Iron ore futures came off 0.4% on the DCE and the SHFE with steel rebar prices off 0.6%.

 

Lithium M&A

Speculation in Australian press suggests Albemarle (US) may be interested in Kidman Resources’ ‘Earl Grey’ lithium pegmatite resource (128mt, 1.44% Li2O)

• We stress this is purely speculation reported in The West Australian and neither company is commenting on the rumours though “Albemarle is understood to have had access to a data room of the Australian Securities Exchange-listed Kidman Resources for the past two months.” according to the paper.

• Kidman is further consolidating its tenement holdings in the vicinity around the ‘Earl Grey’ project with a deal to acquire rights to 50% stakes in two new exploration licenses from Western Areas through the offering of 6.3m new Kidman shares at 55Asc/s.  This brings Western Area’s stake in Kidman to 5.2%

• As with many good Aussie claims Kidman’s claims to the ‘Earl Grey’ lithium project are being desputed by Marindi Metals in a trial reported to begin on 29 May

• Albemarle holds a 49% stake in Talison Lithium which plans to double capacity to 1.34mtpa of lithium concentrate at a cost of $320m.

• Talison’s Chinese partner Tiamqi Lithium is also spending $400m to build a lithium hydroxide processing plant at Kwinana in a move which has baffled some industry observers.

• While there is talk of a boom / bubble in the lithium industry, there is also significant potential for further M&A activity given competition between major lithium concentrate producers and consumers to secure new production sources.

 

UK pig industry slams EU committee's decision to stand by zinc oxide ban recommendation (FarmingUK)

• The UK pig industry is revolting.  They are furious at an EU veterinary committee that has reasserted its view that zinc oxide should be banned at therapeutic levels.

• “The Committee concluded that overall the benefit-risk balance for the products concerned by this referral is negative, as the benefits of zinc oxide for the prevention of diarrhoea in pigs do not outweigh the risks for the environment.”

 

Dow Jones Industrials  -0.10% at 20,915 

Nikkei 225     19,522 Markets closed today

HK Hang Seng  +0.79% at 24,502 

Shanghai Composite  +0.41% at 3,251 

FTSE 350 Mining  -0.55% at 16,574

AIM Basic Resources  -0.02% at 2,613 

 

Economics

Germany – Producer prices growth accelerated from the previous year in Feb climbing to the strongest level since H1/12.

PPI (%mom/yoy): 0.2/3.1 v 0.7/2.4 in Jan and  0.4/3.2 forecast.

 

UK – Property prices growth consolidated at 2.3% rate in Mar being the lowest reading in more than three years, according to the Rightmove data.

• In London, house prices climbed to an all-time high in Mar led by gains of periphery areas.

• Average asking price for a house in London climbed to 649,772 pounds this month with best performing areas being in Ealing and Harrow; whereas, Kensington and Chelsea seeing biggest declines.

• Rightmove House Prices (%yoy): 2.3 v 2.3 in Feb.

 

Currencies

US$1.0767/eur vs 1.0767/eur yesterday.   Yen 112.72/$ vs 113.33/$.   SAr 12.655/$ vs 12.778/$.   $1.242/gbp vs $1.236/gbp.  

0.773/aud vs 0.768/aud.   CNY 6.904/$ vs 6.908/$.

 

Commodity News

Precious metals:         

Gold US$1,234/oz vs US$1,228/oz yesterday – Long hedge fund positions in gold have been cut the most since 2015 in the week ended Mar14, a day ahead of the Fed rate announcement which sparked a nearly $35/oz jump in prices for the precious metal.

• Net-long positions have been reduced by 47% to 49,835 contracts during the week, according to US CFTC data.

• India which imports most of its gold from overseas to meet local demand is reported to have increased inbound shipments of gold 175%yoy to 96.4t in Feb.

• Increased purchases came ahead of the start of festival and wedding period and in anticipation of a pick-up in demand following weak 2016.

• India gold consumption fell 21% to 676t in 2016 on the back high local currency gold prices, demonization related disruptions and further authorities’ moves to raise regulation of the market by introducing of Permanent Account Number (PAN) cards for purchases above $3,000.

 

   Gold ETFs 58.4moz vs US$58.5moz yesterday

Platinum US$966/oz vs US$956/oz yesterday

Palladium US$778/oz vs US$771/oz yesterday

Silver US$17.43/oz vs US$17.31/oz yesterday

           

Base metals:   

Copper US$ 5,920/t vs US$5,883/t yesterday – BHP Billiton improves the offer to striking miners ahead of the meeting with unions today.

• The management decided to increase end-of-conflict bonus of 111.5m pesos ($17,360), up from a previous 8m pesos.

• Although, the offer is reported to be falling short of miners’ demands for the 25m pesos bonus and a longer extension to existing contracts (48 months v 42months on offer).

 

Aluminium US$ 1,912/t vs US$1,903/t yesterday – EU, US and Canada aluminium industry associations call on G-20 for a coordinated action to address Chinese overcapacities.

• China’s “state-sponsored support is contributing to an unsustainable structural overcapacity that will impact growth and contribute to heightened instability until it is addressed,” associations wrote in letter to G-20 attendants.

 

Nickel US$ 10,190/t vs US$10,200/t yesterday

Zinc US$ 2,889/t vs US$2,849/t yesterday – Nine Chinese smelters are planning to suspend production on the back of low treatment/refining charges, Antaike said.

• Estimates point to at least 640kt of capacity to be affected, according to Antaike.

• Given that the nation produced 6.3mt of refined zinc in 2016 (+7.1%yoy), capacity curtailments add up to a significant share of the market.

 

Lead US$ 2,303/t vs US$2,265/t yesterday

Tin US$ 20,200/t vs US$20,165/t yesterday

           

Energy:           

Oil US$51.5/bbl vs US$51.8/bbl yesterday

Natural Gas US$2.917/mmbtu vs US$2.901/mmbtu yesterday

Uranium US$25.40/lb vs US$25.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$87.9/t vs US$87.5/t – Rio welcomes Chinese push to reduce emissions and restructure the steel industry arguing that should see an increase in the use of high grade material.

• “In order to produce the same output, then you are going to need better-quality  iron ore – absolutely music to my ears,” Rio Tinto CEO said to Bloomberg TV in Beijing.

• “Am I concerned about the Chinese economy today? The answer is no.”

• Rio has no difficulties in placing cargoes of iron ore or copper into China, he said.

• Chinese reliance on imported iron ore is estimated to have increased to 80% in 2016 as high cost local producers struggled to continue operations as prices hit lowest levels in the end of 2015 / beginning of 2016.

 

Chinese steel rebar 25mm US$579.4/t vs US$579.1/t

Thermal coal (1st year forward cif ARA) US$64.4/t vs US$64.3/t yesterday

Premium hard coking coal Aus fob US$157.8/t vs US$158.4/t

 

Other:  

Tunsgten APT European US$208-216/mtu (from the 17Mar week) v US$212-217/mtu (from the 10Mar week)

 

Company News

Bushveld Minerals* (LON:BMN) 5.5p, Mkt Cap £38.6m – $9m financing agreed with Wogen for vanadium mine and plant

• Bushveld Minerals report their agreement for $9m worth of financing from Wogen, the specialist metals traders.

• This is a major transaction for Bushveld and highlight to us the robust nature of the business at current vanadium prices

• Wogen are putting $3m toward the $18m acquisition debt package by way of product pre-payment

• Wogen are also putting up $6m of inventory and receivable financing to optimise the operation of the Vametco Alloys plant

• The transaction comes at a critical time for Bushveld as it works toward meeting all the conditions to finalise the remaining $14.8m for the acquisition of Strategic Minerals Corporation ‘SMC’ and the Vametco Alloys vanadium mine and plant.

• Wogen are to receive some 15m of warrants in in Bushveld Minerals as part of the transaction.

Conclusion:  Wogen’s support for Bushveld is significant for it provides finance and sales support for vanadium product from the Vametco Alloys plant.  It looks like a good opportunity for Wogen and Wogen’s financial backing is good for Bushveld as it finalises the debt package to complete the acquisition.  Our recent site visit and discussion on costs and sales support our view that the project offers significant upside based on current vanadium prices.

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.

 

Highland Gold (LON:HGM) 181p, Mkt cap £592m – Unkurtash scoping study

• Highland Gold has provided details of its scoping study on the Unkurtash gold deposit in Kyrgyzstan which it acquired from Barrick Gold in 2006.

• Unkurtash is reported to contain a total measured/indicated/inferred, JORC compliant,  resource of 3.5m oz of gold at an average grade of 1.82 g/t within three “well explored deposits – Unkurtash, Karatube and Sarytube”

• The study envisages two open pit mines feeding 4mtpa of ore to a gravity/CIL process plant with overall gold recoveries of over 80% to produce approximately 133,000 oz pa of gold at a cost of US$616/oz over an 18 years mine-life.

• The study expects a capital investment of US$322m to generate an IRR of approximately 19% and an NPV of US$200m at a 10% discount rate using an estimated gold price of US$1200/oz.

• “The Company is considering various alternatives for proceeding with the project, including partnering with another strategic investor to co-develop Unkurtash”.

Conclusion: The scoping study suggests a relatively low recovery rate for gold which may imply a metallurgically complex ore. At the scoping study stage, we feel that the IRR is relatively modest and no doubt the company will be looking for optimisation strategies as it moves on from the scoping stage and looks to bring in partners to develop the project.

 

Metminco* (LON:MNC) 5.9p, mkt cap £7.5m, – Non-executive appointment

• Metminco reports the appointment of the nominee of their 8.62% shareholder, Redfield Asset Management,  Mr Ram Venkat, as a non-executive director.

• Mr Venkat is an electrical and computer engineering graduate with an MBA from the University of Toronto and a career history in capital markets including mergers and acquisitions and investment banking.

• Commenting on his appointment, Mr Venkat noted that, “As a nominee of the shareholder with a significant interest of approximately 8.62%, our interests are aligned with the Company’s other shareholders and I am committed to the Company’s strategy of transitioning into a near term gold producer and a successful mid-tier mining company in the longer term.”

Conclusion: The appointment of a nominee of an important shareholder to Metminco’s Board comes at an important time for the company as it works towards the completion of the feasibility study for the Miraflores gold project by the end of May.

*SP Angel act as broker to Metminco.  SP Angel analysts have previously visited Los Calatos in Peru and Miraflores project in Colombia

 

Mkango Resources* (LON:MKA) 3.8p, Mkt Cap £3.1m – Collaboration agreement with Metalysis

• Mkango Resources reports that it has reached a Memorandum of Understanding with South Yorkshire based, Metalysis Limited to collaborate on research to develop and commercialise rare earth metal alloys for use in 3D printed permanent magnets.

• “Rare earth permanent magnets are a critical component of many electric vehicles as well as other consumer and green technologies.”

• Metalysis is developing patented technology, originally developed at Cambridge University, to produce metal powders applicable to uses in 3D printing and the application of this technology to rare earth alloys may, in our opinion, offer an innovative point of entry to the growing demand for permanent magnets for use in electric vehicles and other environmentally benign technologies.

• The combination of Mkango’s expertise in rare earths and its specialist knowledge of the market combined with Metalysis’ technology in “disruptive solid-state” processing on a commercial scale may lead to an evaluation of “the United Kingdom as a future host country for a manufacturing plant to exploit a commercialised technology.”

Conclusion: Mkango has developed a series of links with 3rd parties as it moves to develop its rare earths business. The association with McGill University to acquire hydrochloric acid regeneration technology provides potential cost savings in the process plant while collaboration with Noble Metals helps access a range of market intelligence and logistics expertise. The latest agreement with Metalysis extends Mkango’s access into downstream processing and potentially into manufacturing.

*SP Angel acts as Nomad and Broker to Mkango Resources



DISCLAIMER

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

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.

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. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, 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).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.

© Proactive Investors 2017

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use