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Morning View . Battery metal exploration drives surging budget

Morning View . Battery metal exploration drives surging budget

Altus Strategies* (LON:ALS)Buy – 12.2p – Gold licenses secured in Cote d’Ivoire and a proposed private placing

Kodal Minerals* (LON:KOD) BUY – Further high-grade drilling  results from Bougouni lithium project

Metminco (LON:MNC) – Metminco rights issue, management changes and new strategy

Savannah Resources (LON:SAV) – Mina do Barroso metallurgical testing

Tri-Star Resources* (LON:TSTR) – Board changes assert Odey Asset Management on board


China to cut more coal, steel output to defend blue skies anti-pollution policies

  • China’s state planner pledged on Monday to cut more steel and coal production capacity this year, putting the country on track to beat its long-term targets, as Beijing reinforced its vow to beat smog and make “skies blue again”
  • The National Development and Reform Commission ‘NDRC’ reported it will reduce steel capacity by around 30mt and coal output by about 150mt this year
  • Cuts would put the world’s top steel maker and coal miner on track to meet its 2020 targets in the government’s five-year plan about two years ahead of schedule


White house says no countries exempt from steel and aluminium tariffs

  • White House trade adviser Peter Navarro says no countries will be excluded from upcoming steel and aluminium tariffs set to be imposed by the Trump administration, including the United States' greatest allies
  • Said there could be ‘exemption procedure for particular cases where we need to have exemptions so that business can move forward, but at this point in time, there will be no country exclusions’
  • Expects President Donald Trump to sign the measures by the end of this week or early in the next. The economic adviser called the President's move, which will impose tariffs of 25% on steel and 10% on aluminium, a "courageous and tough decision"   
  • Trade allies such as Canada, the EU, and South Korea are dealt a strong blow as the White House Office of Trade and Manufacturing Policy wipes away ideas of individual nation exemptions from US tariffs on steel and aluminium imports. While there could be exemptions for specific business uses there would be no carve-out for individual countries, with leading Peter Navarro noting “as soon as you start exempting countries you have to raise tariffs on everybody else…and so it’s a slippery slope”.
  • Mr Trump’s impromptu announcement concerning tariffs on steel of 25% on steel and 10% on aluminium set off a furious round of last-minute lobbying by allies for exemptions.
  • The low hopes of an exemption has driven nations to launch tit-for-tat measures once the Trump administration formally adopts detailed tariff proposals, with the EU preparing a “harsh and clear reaction from Brussels”.
  • The problem with exemptions is they often allow traders to circumnavigate the tariff system. Trump effectively pledged to bring in tariffs to protect certain US industries in his election so there should be few surprises at the new tarriffs.

Metals exploration set to rise as mining sector comes back to life

  • Global spending on metals exploration expected to rise as much as 20% this year
  • Exploration spending is expected to rise to an estimated $8.4bn (£6.1bn), according to S&P Global Market Intelligence's latest World Exploration Trends report , the rise after four years of declining exploration spend
  • Miners hunting for supply to support the rapidly advancing battery demand is helping to lift a mining exploration gauge to its highest since at least 2012. The number of speciality metals projects drilled in the closing quarter of 2017 surged from 6 in the previous quarter to 18, including 14 campaigns for cobalt, according to S&P Global Market Intelligence.
  • Canada and Australia attracted the most spending, while more than half of the combined 59 speciality metal projects targeted lithium.
  • It is clear to see substantially greater funds being directed into exploration by companies supported an increasing numbers of private and institutional investors


Chinese researchers present plans for a hypersonic aircraft

  • The concept aircraft may fly faster than Mach 5 which is five times faster than the speed of sound at 3,835mph.
  • Hypersonic aircraft could cut flight times from Beijing to many western cities to just a few hours.
  • The Chinese test plane uses two sets of wings to reduce drag.


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China – Premier Li Keqiang forecasts GDP to come in at around 6.5% this year amid lower fiscal stimulus with government budget expected to come down to 2.6% of GDP v 3.0% in the past two years.

  • Monetary policy is expected to be relatively contained as well with M2 monetary base growth which has been slowing down lately guided to remain steady at 2017 levels.
  • The economy beat market estimates climbing 6.9% in 2017.


Eurozone – Final private sector growth slowed from a near 12-year high, according to latest PMI data.

  • Despite a modest pullback the index remained in the expansion territory and above the long-term average pointing to strong growth momentum in the single currency zone.
  • Composite PMI: 57.1 v 58.8 in January and 57.5 forecast.


Germany – Merkel is set for a fourth consecutive four-year term as a chancellor as the SPD agreed to support the grand coalition.

  • The SPD referendum showed 66% of those who voted were in favour of the deal with the CDU and its Bavarian sister party the CSU.


Italy – With 74% of the vote counted, the latest general elections results point to a hung parliament as anti-establishment parties post strong gains in the number of supporters, but not enough to claim the majority.

  • The populist Five Star Movement is on course to be the strongest single party with 32% of the vote.
  • The centre right coalition led by Silvio Berlusconi is estimated to have claimed 37%.
  • The conservative and anti-immigrant Eurosceptic Norther League led by a right-wing nationalist Matteo Salvini was on 18%.
  • The ruling centre left coalition led by the Democratic Party was projected to score just 23%, down from 55% recorded in 2013.
  • The euro fell slightly on the news but has since recovered its losses and is little changed since the end of last week trading around 1.23%.
  • Local 10y sovereign bond yields had a more pronounced move climbing some 14bp and the measure hovering around 2.0% amid prospects for a hung parliament.


Ecuador looks to harmonise rules to create new mining hot spot

  • Ecuador’s new mining minister, Rebeca Illescas, reassures “no company needs to be worried” by the proposed rule changes that could undermine the nation’s status as a burgeoning copper and gold mining hub. She continued to suggest that rather than demanding more from prospectors and developers who have flooded into the country, the proposed changes are intended to make licensing simpler and boost incentives to invest. The new rules also encourage environmental and social sustainability.
  • Across 2017, 28 companies established a presence in Ecuador including BHP Billiton Ltd. and Fortescue Metals Group Ltd. as producers increases efforts to boost resource statements amid recovering prices. Majors Anglo American Plc., Barrick Gold Corp., and Rio Tinto are also in discussion over exploration opportunities.
  • The newly elected team are currently reviewing the nations mineral registry, with the goal of cleaning out inactive claims and improving control over the small and informal mining sector. Contracts and judicial stability will be respected, Rebeca said, and at the same time the mining ministry is working with environmental and water authorities, communities and local governments in a bid to harmonise regulations. Actions follow last month’s referendum, where Ecuadorians gave overwhelming support to tighten restrictions on mining in protected areas.
  • The government is also working on changes to tax conditions to provide greater clarity and more benefits to mining as part of a broader investment bill. The minister notes the plan is to become a major mining country as work focuses on “improv(ing) the tax conditions. It’s important that everyone wins – companies, communities and the state”.
  • Just four proposed projects – including Vancouver-based Lundin Gold Inc.’s Fruta del Norte – are expected to generate $4.5 billion investment through 2021, significantly boosting mining’s share of gross domestic product to 4% from just 1.3% currently.



US$1.2305/eur vs 1.2272/eur last week  Yen 105.43/$ vs 105.74/$  SAr 11.999/$ vs 11.855/$  $1.378/gbp vs $1.377/gbp  0.774/aud vs 0.777/aud  CNY 6.341/$ vs 6.348/$


Commodity News

Precious metals:         

Gold US$1,328/oz vs US$1,317/oz last week

  • Bullion for immediate delivery gains 0.3% for the second day as threats of trade war arise from President Donald Trump’s proposed tariffs on metals drive investors to seek haven protection. Head of Asia Pacific trading at Oanda notes trade war escalation would “make gold the go-to hedge against rising US fiscal and political vulnerabilities”.

   Gold ETFs 72.2moz vs US$72.3moz last week

Platinum US$968/oz vs US$964/oz last week

Palladium US$991/oz vs US$985/oz last week

Silver US$16.57/oz vs US$16.45/oz last week

  • Silver continues to fall out of investor favour with hedge funds and other large speculators are now most bearish ever on the precious metal. Money managers extended their net-short positions in silver to 16,593 futures and options contracts, the most since record-keeping began in 2006, according to US government data.


Base metals:   

Copper US$ 6,886/t vs US$6,924/t last week

Aluminium US$ 2,143/t vs US$2,137/t last week

  • US president tariff’s on steel and aluminium haven’t even been formally introduced before consumers are already stung by rising premiums. The premium to cover the cost of shipping aluminium to the Midwest have risen to three-year highs on Thursday last week as Trump backed a 10% tariff on imports, exceeding the recommendations of his Commerce Department. As domestic producers unable to meet local demand, consumers including automakers and breweries are now exposed to higher import fees.

Nickel US$ 13,380/t vs US$13,380/t last week

  • Despite advancing nickel prices, climbing 6% year-to-date, rising Asian output may weigh on the price of the refined metal. Nickel ore shipments from Indonesia soared in January to the highest level since 2014 as miners stepped up sales following a relaxation of the government supply ban. Indonesia banned the export of all unprocessed minerals in early 2014 in the aim to force the creation of domestic value-added processing industry. The successful restrictions are now being relaxed as the government is rewarding investors with issued permits for 20.4 million tonnes of exports through October this year.
  • The volume of shipments to China from Indonesia surpassed top exporter the Philippines, although Indonesian exports are expected to level out in second spot as its neighbor will increase following a seasonal drop.

Zinc US$ 3,343/t vs US$3,385/t last week

Lead US$ 2,447/t vs US$2,452/t last week

Tin US$ 21,575/t vs US$21,510/t last week



Oil US$64.5/bbl vs US$63.8/bbl last week

Natural Gas US$2.688/mmbtu vs US$2.688/mmbtu last week

Uranium US$22.00/lb vs US$21.65/lb last week



Iron ore 62% Fe spot (cfr Tianjin) US$75.8/t vs US$75.7/t

  • Iron ore stockpiles continue to rise, surging to fresh records as holdings expanded 3.3 million tonnes (2.1%) to 159.13 million tonnes last week, the largest increase since October 2017, according to Shanghai Steelhome E-Commerce Co. Current inventory levels are sufficient to cover 54 days of imports, based on Bloomberg average daily shipment figures across 2017.
  • The growing ore-quality demand disparity is expected to continue as China’s bid to fight pollution by cutting mills’ output this winter may last right through 2018. High-grade iron ore has proven resilient into 2018 with mills favouring more efficient ore at the expense of lower grades. While production restrictions are expected to lapse next week, officials in Tangshan City, a key steel hub, may impose more restrictions through November.
  • The bulk of supply being accumulated at across ports is the low iron-content variety according to chief executive officer of Cleveland-Cliffs Inc. While Barclays Plc has cited the unprecedented inventory levels as part of its warning that benchmark prices may fall back to $50 in the second quarter as a retreat in mills’ profitability triggers a switch back to lower-quality grades, the outlook is based on the winter steel supply curbs being lifted. With current talks on extending the curbs, Cleveland-Cliffs CEO see higher stockpiles not necessarily a bearish signal.
  • Higher-quality shipments containing more efficient, less polluting ore are expected to sustain prices as the spot price of benchmark 62% content ore fell 1.4% last week to $78.15/t compared to Brazilian supply with 65% content falling just 0.5% to $94.50/t.

Chinese steel rebar 25mm US$687.3/t vs US$690.8/t

Thermal coal (1st year forward cif ARA) US$77.5/t vs US$77.2/t

Premium hard coking coal Aus fob US$234.9/t vs US$234.9/t



Tungsten APT European US$322-330/mtu vs US$319-326/mtu

Cobalt LME 3m US$79,250.0/t vs US$81,000.0/t


Company News

Altus Strategies* (LON:ALS) 7.6p, Mkt Cap £11.3m – Gold licenses secured in Cote d’Ivoire and a proposed private placing

Buy – 12.2p

  • The team secured the Prikro gold exploration license covering 370km2 in eastern Cote d’Ivoire targeting Birimian meta-sedimentary greenstone gold mineralisation.
  • Altus picked up the license following a geological data of the area with a number of artisanal workings reported along strike of structures going through concessions.
  • The area is located c. 240km from the capital of Abidjan and is accessible by asphalt roads between regional centres and the capital followed by a series of secondary tracks.
  • The Company is planning to launch initial reconnaissance mapping and sampling programmes shortly.
  • The license has been issued for four years with a potential for two further three-year extensions.
  • The Company also announced a non-brokered private placement on Friday.
  • The amount targeted is between CAD$2.5m and CAD$5.0m (£1.4m-2.8m) at an issue price of CAD$0.15 (8.4p) per unit.
  • The unit includes one ordinary share and a warrant with an exercise price of CAD$0.30 (16.8p) and a maturity of five years.
  • Sprott Private Wealth will act as finders with regards to the issue and, hence, will be payable a 6.0% fee of the gross proceeds plus warrants equal to 5% of the value of units sold with an exercise price of CAD$0.225 (12.6p) and a maturity of three years.
  • Shares are subject to four months lock up period from the date of closing which is expected in the week of April 2.
  • Proceeds of the placing to be used on exploration works at the Company’s African licenses as well as for general corporate expenses.
  • The Company filed an application for the listing of its shares on the TSX-V with the decision expected shortly after completion of the placing.

Conclusion: The new license marks an expansion of the Group portfolio of licenses to six countries, ten gold projects and 16 exploration properties. Additional funds will allow the Company to continue with exploration programmes at its expanding portfolio assets with latest additions being prospective licenses in Mali, Morocco and Liberia.

*SP Angel acts as Nomad and Broker to Altus Strategies plc


Kodal Minerals* (LON:KOD) 0.21p, mkt cap £13.5m – Further high-grade drilling  results from Bougouni lithium project

  • Kodal Minerals continues to report good quality drill results from the Ngoualana prospect at its Bougouni Lithium project in Southern Mali.
  • Among the highlights reported today is a single metre intercept from a depth of 43m in an unspecified hole at an average grade of 7.15% Li2O and a number of wider intersection with grades in excess of a cut-off grade of 1% Li2O, including:
    • 26m averaging 1.67% Li2O from a depth of 83m in hole KLRC086, which also included a shallower, 5m wide intersection averaging 0.92% Li2O from a depth of 75m; and
    • 10m averaging 1.43% Li2O from 84m in hole KLRC087B which also contained a deeper section of mineralisation 16m wide from 119m depth averaging 1.59% Li2O; and
    • intersections of 11m and 12m averaging 1.27% and 1.64% respectively from depths of 81m and 125m in hole KLRC088; and
    • 8m averaging 1.59% from 79m depth in hole KLRC089 with a deeper intersection of 19m from 123m in the same hole averaging 1.68% Li2O
  • The company points to the high spodumene and low mica content of the lithium mineralisation at Bougouni  as comparing “favourably with other hard rock spodumene mineralised pegmatite veins under development around the world where grades range from 1.1% Li2O to 1.4% Li2O”.

Conclusion: The wider, relatively high grade multiple mineralised intersections reported today may, in due course, provide the basis for bulk open-pit mining of more than one mineralised horizon a low waste:ore, relatively shallow pit. We look forward to an initial mineral resource estimate at an appropriate time as a guide to the scale of the opportunity.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.


Metminco (LON:MNC) 1.3p, Mkt Cap £1.6m – Metminco rights issue, management changes and new strategy

  • Metminco Limited reports that it is seeking to raise A$5.1m through a 7-for-2 rights issue and a further A$190,000 via a placement. Both the rights issue and the placing are at a price of A$1.0 cents.
  • The funds are “intended to enable the Company to focus on driving valuation through advancing two high impact exploration assets in close proximity to the proposed mine site at Miraflores. Drilling is expected to commence in April 2018.”
  • The funds will also help to retire the Redfield convertible note, currently thought to amount to approximately A$830,000..
  • The exploration focus is to be on the 100% owned Tesorito project where surface diamond drilling by previous owners reported an intersection of 348m at a grade of 1.1 g/t gold; and on the “largely undrilled 0.5g/t Au geochemical anomaly and artisanal mining “ area at Chuscal which is held under option with Anglogold Ashanti.
  • The company comments that “Both exploration targets are within 2km of the proposed mine site at Miraflores and drilling at Tesorito is expected to commence in April shortly after the rights issue closes”
  • There are also management changes expected following completion of the rights issue. “Upon completion of the rights issue, it is proposed that experienced mining executive Kevin Wilson will become Metminco’s Executive Chairman … Additional management changes will be announced in due course.”

Conclusion: The refinancing follows a turbulent period for the company when the planned EGM scheduled for 2nd March was cancelled at the request of Redfield. We note that today’s announcement highlights the exploration potential at Tesorito and at Chuscal and appears to play down the development of Miraflores although at present we assume that the previously submitted permit applications, including the EIA, remain on the table. No doubt the incoming management will wish to clarify its strategic priorities after the fundraising.


Savannah Resources (LON:SAV) 6.1p, Mkt cap £38.9m – Mina do Barroso metallurgical testing

  • Savannah Resources reports that its Phase 2 metallurgical testing programme at its  Mina do Barroso lithium project in Portugal has demonstrated that at least 40% of the contained lithium can be recovered by gravity processing and that over 70% of the remaining lithium can be recovered by flotation.
  • “Further improvements are expected as part of Phase 3 test work programme currently underway.”
  • Details of the results confirm that the dominant lithium minerals is spodumene with low levels of the lower lithium content mineral, petalite. The results also show that the content of the lithium mica mineral, lepidolite, is only 1% in the test sample.
  • The results also confirm that “there are low impurities and an iron content in the spodumene of less than 0.5% Fe2O3 which is well below the threshold of of 1.4% Fe2O3 demanded by most offtakers.”
  • The company is also bolstering its metallurgical team with the appointment of Noel O’Brien as a technical consultant to oversee the Phase 3  testing. Mr O’Brien is reported to have over 35 years processing experience in the lithium industry in a variety of roles including at Tawana Resources, Kidman Resources, Galaxy Resources and at the Bikita lithium project in Zimbabwe.

Conclusion: The test work provides further confidence that a low cost processing route, including gravity techniques, may be applicable at Mina do Barroso. We look forward to further results as the Phase  3 testing progresses.


Tri-Star Resources* (LON:TSTR) 0.03p, mkt cap £17.6m – Board changes assert Odey Asset Management on board

(Tri-Star holds 40% of jv company SPMP alongside The Oman Investment Fund and Dutco Natural Resources)

(Odey Asset Management, holds a 65.1% interest in TriStar Resources)

  • Tri-Star Resources report that Guy Eastaugh, CEO, has stepped down and is to be replaced by Karen O’Mahony as acting CEO and CFO.
  • Karen is currently a non-executive director at Tri-Star and has been asked to oversee the transition of the company.
  • By transition we assume that implies the change of management through the commissioning period at the joint venture antimony roaster in Oman.
  • The roaster is commissioning at present Oman.
  • Scott Morrison will also resign his role as a non-executive director. Scott is Chairman and MD of M&A at Metalor Technologies, a Swiss-based metallurgist and refiner specialising in precious metals.
  • The board continues to be chaired by Mark Wellesley-Wood who has a history of troubleshooting in mining companies.
  • Adrian Collins remains as a Senior Independent Director in addition to his role as Chairman of LionTrust Asset Management.
  • David Fletcher also remains as a Non-executive director as well as non-executive Chairman of Odey Asset Management.
  • Karen Mahoney and David Fletcher effectively represent Odey Asset Management’s interests on the board with Odey holding 41,606m shares in the company representing 65.1% of the business.
  • Emin Eyi stepped down as Chairman of SPMP, Tri-Star’s joint venture partner on 28 November and also stepped down from his role as Deputy Chairman and a director of Tri-Star Resources in 20 December.
  • Tri-Star invested a further US$2.8m by way of a mezzanine loan into SPMO using funds raised from the recent £4.4m fundraising. The funding represented TriStar’s share of the additional capital required to complete the roaster where the most recent estimates indicate an overall capital cost of US$109m compared to a previous estimate of $96m though we note that at the time of the fundraising in December 2017, the total estimated capital was US$110m. TriStar ascribes part of the increased capital estimate “to the impact of movements in exchange rates.”
  • The roaster has been commissioning since early January with the first batch of antimony concentrate now delivered to the OAR’s warehouse in Sohar.
  • Discussions continue with multiple providers for future offtake and concentrate supply agreements.
  • While there appears to have been some minor delays relating to the late delivery of switchgear and associated regulatory and compliance issues relating to the switch-over to medium voltage power the project appears to have progressed relatively well, though we do not have details on the quality of the antimony so far produced.
  • Antimony prices are at US$8,700/t at end-February vs an average of around US$8,460/t over the last 12 months indicating ongoing demand and impact from the closure of polluting antimony processing plants in China.
  • Commissioning is ongoing with the OAR the plant ramping up to a run rate of some 20,000tpa of antimony and 60,000oz of gold by mid-2019.

Conclusion: Today’s directorate change is symptomatic of the project’s move towards commercial production. Odey Asset Management may have greater influence and are likely to help drive value in the project as it moves towards positive cash flow generation. Tri-Star has potential for very significant cash flow generation from antimony roasting and from the attached gold plant providing suitable concentrate supply may be sourced.


*SP Angel acts as Nomad and Broker to Tri-Star Resources


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