SP Angel – Morning View – Wednesday 07 11 18
Radioactive cobalt strikes major supply from the DRC
Savannah Resources (LON:SAV) – Discovery of additional lithium mineralisation at Pinheiro
Mkango Resources* (LON:MKA) – Extension of rare earth mineralisation in latest drill results from the Songwe Hill Project in Malawi
Battery industry set to attract $1.2tn in investment by 2040
- The global energy-storage market is estimated to will surge to 50GWh by 2020 and a cumulative 942GWh by 2040, according to a new forecast from Bloomberg New Energy Finance
- The growth in demand is estimated to necessitate $1.2tn in new investment much of which will come in the form of lithium ion and potentially vanadium redox batteries.
- The BNEF forecast estimates the capital cost of a utility-scale lithium-ion storage system falling another 52% by 2030 and that energy storage may be equivalent to 7% of the world’s total installed power capacity by 2040.
- Asia-Pacific is also forecast to account for some 45% of total installations on a megawatt basis by 2040. Another 29% will be spread across Europe, Middle East and Africa, with the remainder in the Americas.
Radioactive cobalt strikes major supply from the DRC
- The sudden discovery that Glencore’s cobalt is radioactive is helping to reverse broad trends of falling prices throughout 2018. After surging last year, threats of oversupply due to a wave of new supply have caused Metal Bulletin prices for refined product to fall 5.6% this year.
- But sentiment could be changing after Glencore’s unit in the Democratic Republic of Congo suspended cobalt sales after detecting low levels of radioactivity. Glencore plans to stockpile cobalt supplies until the middle of next year, while it builds a special plant to remove radioactivity. Caspar Rawles, an analyst at Benchmark Minerals, described the timing of the announcement as "opportunistic" because Glencore is currently negotiating 2019 supply deals.
- Glencore-controlled Katanga Mining Ltd. would have produced about 30,000t of cobalt next year, roughly 25% of global supply, according to RBC Capital Markets. Holding this off the market should tighten supplies and support Glencore’s other mine in Congo, which also produces cobalt. “Assuming there are no uranium issues that this uncovers elsewhere, this production will benefit from any positive price impact,” RBC said.
- Katanga boasts one of Congo’s biggest reserves of copper and cobalt, but the mine has underperformed for decades. In 2015, Glencore suspended operations to address the problems and upgrade the facilities. Production restarted in December and the mine is scheduled to hit 300,000t of copper next year, when it will account for about a fifth of Glencore’s global production.
BHP likely to invoke force majeure after derailment of iron ore train destroys track on route to major iron ore port
- BHP Billiton is in contractual negotiations with customers as iron ore port stockpiles aren’t expected to cover a rail outage after the derailment this week of a runaway freight train in Australia that travelled around 90km without its driver onboard.
- Melbourne-based BHP, the world’s top miner and the No. 3 iron ore exporter, expects to restore partial rail operations in the Pilbara district of Western Australia in about a week. About 1.5km of track was damaged in the deliberate derailment of the freight train and wagons, south of Port Hedland, Australia’s main export gateway to China.
- Stockpile reserves at Port Hedland will be used by BHP to maintain port operations over the coming days, though aren’t expected to last throughout the rail network’s suspension, prompting the liaising with customers.
- “Recovery operations are underway,” according to a BHP spokeswoman. “We cannot speculate on the outcome of the investigation, however we are working with the appropriate authorities and our focus remains on the safe recovery of our operations.”
- Investigations into BHP’s incident are being carried out by the Australian Transport Safety Bureau and by the Office of the National Rail Safety Regulator. The ATSB last month issued a final report on a 2015 incident involving the derailment of a BHP iron ore train, which led the producer to take measures, including an acceleration of improvements across more than 800km of track.
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US – Democrats won control of the House of Representatives back for the first time in eight years, while Republicans kept the Senate, in line with market expectations.
- Democrats appeared headed to a gain of more than 30 seats, well beyond the 23 they needed to claim their first majority in the 435-member House in eight years.
- The House under democrats will have the ability to looking into Trump’s tax returns, possible business conflicts of interest and allegations involving his 2016 campaign’s links to Russia, Reuters reports.
- The lower chamber of Congress can also scale back his legislative ambitions, potentially dampening his promises to fund a border wall with Mexico, pass a second major tax-cut package or carry out his hardline policies on trade.
- Republicans have consolidated their lead in the Senate and are currently confirmed to have 51 seats of 100 in total; 26 of the 35 contested seats have been previously held by Democrats including 10 in states won by Donald Trump in 2016.
- US yields and the US$ pulled back as the Congress gridlock reduces chances for any major fiscal stimulus; US equity futures are trading slightly higher this morning.
Germany – Stronger than expected industrial production numbers in September as well as upward revision to August data point to an improving growth momentum in the largest Eurozone economy.
- Positive data also comes amid two months of gains in factory orders with the central bank suggesting a third quarter stagnation may prove temporary.
- Industrial Production (%mom/yoy): 0.2/0.8 v 0.1/0.2 in August and 0.0/0.5 forecast.
UK – House prices climbed at the slowest pace in five years, according to lender Halifax.
- Prices were up 1.5%yoy in the three months through October, the weakest reading since March 2013.
- The report comes on the heels of the Nationwide data released last week showing annual house-price growth coming in below 2% for the first time in five years.
- The pound is at 1.32, up 0.6% on the day, as PM May is looking to finalise a draft Brexit deal with the Cabinet potentially within days.
US$1.1470/eur vs 1.1418/eur yesterday Yen 113.17/$ vs 113.26/$ SAr 14.001/$ vs 14.222/$ $1.315/gbp vs $1.308/gbp 0.726/aud vs 0.723/aud CNY 6.923/$ vs 6.921/$
Gold US$1,232/oz vs US$1,233/oz yesterday
Gold ETFs 68.7moz vs US$68.6moz yesterday
Platinum US$876/oz vs US$869/oz yesterday
Palladium US$1,120/oz vs US$1,132/oz yesterday
Silver US$14.66/oz vs US$14.69/oz yesterday
Copper US$ 6,190/t vs US$6,187/t yesterday
Aluminium US$ 1,962/t vs US$1,975/t yesterday
Nickel US$ 11,755/t vs US$11,815/t yesterday
Zinc US$ 2,492/t vs US$2,530/t yesterday
Lead US$ 1,920/t vs US$1,944/t yesterday
Tin US$ 19,090/t vs US$19,030/t yesterday
Oil US$71.8/bbl vs US$72.6/bbl yesterday - US crude prices drop to 8-month low on easing supply concerns
- A decline in oil prices accelerated Tuesday, with US crude dropping to an eight-month low as the market re-evaluated the impact of Washington’s sanctions on Iran.
- For its part, Iran said it has continued to sell a sufficient amount of oil.
- Brent crude dipped 2.2% to $71.59 per barrel, West Texas Intermediate fell 2.2% to $61.70 per barrel and, at a session low of $61.31 per barrel, US futures touched their lowest mark since mid-March.
Natural Gas US$3.518/mmbtu vs US$3.528/mmbtu yesterday - UK urged to ‘rethink and reverse’ gas storage plans
- The head of Italy’s largest gas distribution company has urged the UK to “rethink and reverse” its decision to operate its network with minimal storage capacity, warning it risks creating shortages and price spikes across the whole European continent.
- Marco Alverà, chief executive of Snam told the Financial Times that the “Beast from the East” cold snap earlier this year had laid bare the vulnerabilities in the UK gas system.
- “I would hope the UK would rethink and reverse its decisions — it’s important for the whole continent,” Mr Alverà said. “As the UK moves from being a significant exporter of gas to a major importer, there could be a significant gas supply issue in the near future.”
Uranium US$28.80/lb vs US$28.80/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$71.8/t vs US$72.2/t
Chinese steel rebar 25mm US$693.9/t vs US$703.0/t
Thermal coal (1st year forward cif ARA) US$90.0/t vs US$90.5/t
Coking coal futures Dalian Exchange US$199.3/t vs US$199.4/t
Cobalt LME 3m US$55,000/t vs US$53,000/t - Car Battery Pioneer Says New Breakthrough Will Lower Cobalt Use
- Kenan Sahin has announced a new battery innovation, which reduces the need for cobalt to only the most critical areas in order to lower costs.
- Named GEMX, it can be used in a number of types of nickel-based power packs and has been granted patents in the U.S., the EU, China and Japan.
- In Berlin this week for an annual car industry conference, he said he’s in talks with large manufacturers and one has already agreed to buy a license.
- The technique could lower cobalt content to as little as 4% of battery cathodes, he said, from about 20% needed in some now.
China NdPr Rare Earth Oxide US$45,642/t vs US$45,661/t
China Lithium carbonate 99% US$10,111/t vs US$10,115/t
Tungsten APT European US$275-295/mtu vs US$275-295/mtu
Bird launches London scooter pilot
- Bird Rides Inc. has begun a limited pilot of its service in London.
- In order to circumvent the ban on use of scooters on roads, they will only be available for use on private land.
- Starting Tuesday, 50 scooters will be available for journeys along a predetermined route of about 1.2 miles between the Stratford rail station and the coworking campus Here East, where Bird’s London office is based.
- The scooters will be restricted by GPS to specific pathways through Queen Elizabeth Olympic Park to avoid any law-breaking - if a rider deviates from that route, the electric motor will shut down.
- A spokesman for the company said that Bird hoped the initiative “will help demonstrate the benefit Bird will bring to U.K. cities more broadly.”
Botswana Diamonds (LON:BOD) 0.9p, Mkt Cap £4.6m – Development plans for Thorny River project
- Botswana Diamonds reports that it has reached a contractual agreement with “an experienced mining contractor”, Palaeo Minerals will undertake both bulk sampling and future full scale mining at the company’s Thorny River diamond project in S Africa.
- Under the contract, which envisages processing up to 30,000tpm of kimberlite ore, revenues will be distributed 80% to Palaeo in order to cover its mining and processing costs.
- The transaction will require regulatory approval and the relevant permit applications have been submitted.
- The company reports that “Indicated net royalties could be between US$2 to US$7 million annually based on current estimates.”
- Commenting on the transaction, Chairman, John Teeling said that “We are confident that Thorny River could be the first diamond producing project for Botswana Diamonds. A royalty bulk sampling / mining model means that we have no capital expenditure apart from a limited in-fill drilling programme in early-2019. We anticipate the award of the necessary regulatory approvals in anticipation of revenue being generated during the course of 2019”
- Further drilling at Thorny River is planned for 2019.
Savannah Resources (LON:SAV) 6.2p, Mkt Cap £54.6m – Discovery of additional lithium mineralisation at Pinheiro
- Savannah Resources announces that its recent reverse circulation drilling on the Pinheiro deposit, located south of the Grandao deposit and within the Mina do Barroso licence area in Portugal, has defined at least three steeply dipping zones of lithium pegmatite mineralisation ranging from 10-30m thick over a strike length of 250m.
- The mineralisation strikes approximately north-south and remains open both laterally and at depth.
Among the drill intersections reported today in terms of downhole intersection widths rather than true widths are:
- An intersection of 23m from a depth of 9m in hole 18PNRRC003 which averaged 1.14% Li2O; and
- An intersection of 14m from a depth of 18m in hole 18PNRRC004 which averaged 1.21% Li2O; and
- An intersection of 90m from a depth of 39m in hole 18PNRRC005 which averaged 1.14% Li2O and included 34m averaging 1.6% Li2O; and
- An intersection of 69m from a depth of 20m in hole 18PNRRC007 which averaged 1.58% and which included a higher grade section of 24m at an average grade of 1.58%Li2O from 48m depth; and
- An intersection of 35m from a depth of 16m in hole 18PNRRC009 which averaged 1.19% Li2O and contained a 21m section from a depth of 19m which averaged 1.45% Li2O.
- Assays are still awaited for a further 6 reverse circulation holes at Pinheiro.
- Savannah Resources also announces further RC drilling results from the infill drilling at the Reservatorio and NOA deposits which “confirms the continuity and grade of the mineral resource estimate reported in February 2018”.
Seventeen holes have been completed at Reservatorio, including:
- 23m at an average grade of 1.29% Li2O from a depth of 24m in hole 18 RESRC023; and
- 27m at an average grade of 1.03% Li2O from a depth of 24m in hole 18 RESRC026; and
- 24m at an average grade of 1.00% Li2O from a depth of 26m in hole 18 RESRC029; and
- 42m at an average grade of 1.21% Li2O from a depth of 51m in hole 18 RESRC033; and
- 27m at an average grade of 1.08% Li2O from a depth of 58m in hole 18 RESRC037.
- The drilling at Reservatorio has now identified pegmatite-hosted lithium mineralisation between 20-30m wide over a strike length of 500m and to a depth of 100m below surface “with the mineralisation remaining open down dip and along strike. Further drilling will be scheduled to continue to test and expand the Reservatorio Deposit.”
- Results of the recent drilling at the NOA deposit “confirm the continuity of the mineralisation and have now defined near surface mineralisation along a strike of over 400m with the mineralisation remaining open to the northeast and down dip. Further drilling is required to determine the full extent of the mineralised pegmatite.”
Among the results highlighted from the NOA deposit are:
- 19m averaging 0.97% Li2O from a depth of 99m in hole 18NOARC012; and
- 21m averaging 0.92% Li2O from a depth of 57m in hole 18NOARC013.
- Commenting on the results of the continuing drilling on the Mina do Barroso licence, Savannah Resources’ CEO, David Archer, pointed out that “The drilling has outlined what is now the fourth major deposit on the mining lease and highlights the still unconstrained nature of the resource potential of the overall lease area. Having already increased our Mineral Resource Estimate by +500% in a little over a year we are excited by the discovery of three new pegmatites at the Pinherio deposit which could further enhance the scheduling flexibility of a mine development and add to the overall mine life at Mina do Barroso.”
- We see potential to further expand the resource from further evaluation of the extensions at Reservatorio, Grandao and NOA and from the recently discovered mineralisation at Pinheiro. Our analysis indicates that, at the Grandao deposit the company approximately trebled the overall resource within approximately 9 months and was able to turn an initial inferred resource into a much larger resource with around 60% upgraded to measured and indicated.
Conclusion: The discovery of an additional area of lithium pegmatite mineralisation within the Mina do Barroso licence augurs well for a future resource expansion.
Mkango Resources* (LON:MKA) 9p, Mkt Cap £10m – Extension of rare earth mineralisation in latest drill results from the Songwe Hill Project in Malawi
- Advanced-stage rare earth explorer, Mkango Resources, announce positive results for a further forty-five drill holes from the recently completed 10,900m diamond drill programme at the Songwe Hill Rare Earth Project, with thirty-nine intersecting significant zones of mineralisation grading above 1% TREO.
- Step-out drill holes PX072, PX073, PX084, PX085, PX088, PX090, PX091, PX094, PX095, PX119, PX120 and PX121 focused on testing north-west extensions of the mineralisation; with nine of these twelve intersecting broad zones of rare earth occurrences.
- The holes include the highest grade intersection of the current drill programme to date in PX090. Furthermore, this new zone of higher grade mineralisation in PX090 is located outside both the area of previously mapped carbonatite and the existing Indicated and Inferred Mineral Resource Estimates, suggesting material enhancement to the current resource statement.
- The mineralised intersection in PX113 indicates the extension of the higher grade "black carbonatite" zone, located in the north-east as indicated on the accompanying geological map on the Company's website (http://www.mkango.ca/), to the north under cover.
- Drill holes PX038, PX039, PX040 and PX041 were step-out drill holes, focused on testing extensions of mineralisation to the south. The intersections in PX039 and PX040 further indicate that mineralisation may extend to the south beyond the limits of the existing Indicated and Inferred Mineral Resource.
- Remaining drill holes focus on infill zones within the existing Indicated and Inferred Mineral Resource Estimates, with broad zones of mineralisation continuing to support the concept of a bulk tonnage, open pit mining operation with low mining costs.
- The drilling programme forms a crucial component of the ongoing initial phases of the Feasibility Study, fully funded following investments by Mkango’s strategic partner, Talaxis Limited. CEO Will Dawes adds “following the resource update and on subsequent publication of the related NI 43-101 technical report, anticipated in the first quarter 2019, Talaxis will invest a further £7m to fund completion of the Feasibility Study for Songwe, which will be the main focus for 2019”.
Conclusion: The latest round of assays give continued positive results confirming broad rare earth mineralisation across a more expansive Songwe Hill deposit. While publication of the related technical report moves into the new year, we believe the scale of the upgraded Mineral Resource Estimates will present a significant advanced-stage rare earth developer outside of China. Yesterday’s news of supply disruptions as the Asian nation faces ongoing environmental inspections only confirm the global importance of reliable production, with firming prices only enhancing the project economics for Songwe Hill.
*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.
Walkabout Resources Ltd* (ASX:WKT) A$0.105c, Mkt Cap A$28.4m – High grade extensions proven at Lindi Jumbo
- Walkabout Resources confirm ‘spectacular’ high-grade graphite domain extension from recent Northern Block drilling and trenching assay results, highlighting approximately 1km of continuous delineated mineralisation. The positive grades extend the domain 300m to the northeast, while the deposit remains open towards the north and down-dip at its 100% owned Lindi Jumbo Graphite project in Tanzania.
- Results convey a successful Northern Block exploration programme incorporating upgrade drilling and trenching program of 7 RC holes for 490m and 7 trenches for 654m.
- Surface intersections in trench LJTR004 indicate 36.1m @ 23.5% TGC including 7.1m @ 32.9% and 27.6m @ 16.9% TGC including 5.9m @ 18.7% TGC and 12.4m @ 22.3% TGC in LJTR006.
- Highlights of the drill programme indicate intersections of 14m @ 19.7% TGC in LJRC046 and 6m @ 21.5% TGC in LJRC049.
- The area was targeted to confirm mineralised extension of the high-grade zones at or near surface with the aim of upgrading the Inferred Resource to Indicated and/or Measured, expected in November 2018. The upgraded categories will enhance the mining studies and inclusion into the Ore Reserve as well as amendment to the Definitive Feasibility Study.
- The planned addition of at/near-surface Mineral Resource and possible Ore Reserve could have a positive knock-on impact on the upfront capital expenditure and early operational expenditure.
- Assay results, while indicating the presence of high-grade graphite, also coincide very well with the Company’s current 3D mineralisation model with grades and thicknesses fairly predictable and constant in their geometry.
- Executive Chairman, Trevor Benson, adds “these results easily demonstrate Lindi Jumbo remains the highest grade, lowest risk graphite project around. The high-grade nature of the deposit gives the mine a huge advantage in mitigating start-up risks that face new mine operations”.
Conclusion: Assay results from the recent trenching and drill programme confirm extension of high-grade, near-surface graphite at the Lindi Jumbo project, reaffirming the deposit as the highest grade graphite in Tanzania. We look forward to understanding the scale of the resource upgrading and proportion of premium jumbo flake as the company advance the deposit to first production.
*SP Angel acts as UK Broker to Walkabout Resources Ltd