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Today's Market View - China to lift lithium hydroxide exports to meet global EV growth

Today's Market View - China to lift lithium hydroxide exports to meet global EV growth

SP Angel – Morning View – Tuesday 29 01 19

China to lift lithium hydroxide exports to meet global EV growth

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MiFID II exempt information – see disclaimer below

 

Anglo American (LON:AAL) 1874.8 pence, Mkt Cap £24.23bn – De Beers diamond sales

African Battery Metals (LON:ABM) suspended – Refinancing, business strategy and resumption of trading update

Arc Minerals* (LON:ARCM) 2.8p, Mkt Cap £17.4m – ARC readies Pilot plant for first copper / cobalt production

Aura Energy (LON:AURA) 1.1p, Mkt Cap £12.0m – Uranium offtake agreement for Tiris project

Condor Gold (LON:CNR) 26p, Mkt Cap £17.5m – Mineral resource update for La India

Crusader (LON:CAS) – Suspended on AIM, Investors call Section 249D Notice to remove key directors. Copulos to inject A$1m for convertible notes

Crusader (ASX:CAS) -  Also suspended

Management Resource Solutions plc (LON:MRS) 4.4p, mkt cap £8.7m – Contract win

Metal Tiger (LON:MTR) 1.45 pence, Mkt Cap £19.6m Drilling results from the A4 Dome

MOD Resources (LON:MOD) 19.0p, Mkt Cap £47.2m –Quarterly Report and update

Savannah Resources* (LON:SAV) 5p, Mkt Cap £44.1m – Excellent test work from Mina do Barroso lithium

 

Cape Town – Wild fires engulf Lion’s Head mountain and threaten suburbs of Cape Town

  • Last year the water shortage in Cape Town led to water restrictions this year fires on the Lions Head mountain are causing the evacuation of people in nearby suburbs
  • Bad luck if you are renting a villa near by

 

Cape Town Mining conference sees significant increase in demand at 121 Mining Investment Conference in Cape Town

Monday 4th February & Tuesday 5th February

  • The organisers of the 121 Mining Investment Cape Town have been forced to extend the opening hours available for companies to meet with investors due to amazingly strong demand.
  • Over 450 investors have registered to meet with the 115 mining companies which are presenting through the one-on-one planner.
  • Each company now has 18 meetings on average meaning it’s going to be a gruelling two days of back-to-back meetings.
  • Luckily the event is located in the historic and beautiful gardens of the historic Welgemeend farm house on the slopes of Table Mountain close to the infamous and somewhat overpriced Mount Nelson Hotel.
  • The organisers have already extended the meeting schedules by another two sessions per company and this may be extended further to accommodate investor demand.
  • Sign up at: https://www.weare121.com/121mininginvestment-cape-town/registration/register-investor
  • The 121 conference is by-far the best event in town!

 

China to lift lithium hydroxide exports on surging EV growth

  • China is likely to raise exports of battery chemicals such as lithium hydroxide as domestic producers continue output expansions in a bid to profit from higher overseas price, according to Pilbara Minerals chief executive.
  • The increasing exports from China, which is mainly considered a buying of battery materials because of its large concentration of battery manufacturers, highlights an oversupply of some lithium products in the country currently.
  • Higher global prices for better quality material were likely to attract sales from Ganfeng Lithium and China's General Lithium Corp, which were expanding production, Ken Brinsden said.
  • Chinese producers such as Ganfeng and General Lithium have new plants that have been commissioning since the third quarter of last year and are starting to hit their stride, both in terms of underlying production and quality, with an expectation their material will be qualified for export.
  • A Ganfeng source added that the company’s current capacity is around 70,000-80,000t of lithium carbonate equivalent, which would rise to over 100,000t by the middle of next year.
  • Pilbara Minerals also note the South Korean market was growing at an ‘exponential rate’, as the company signed a preliminary deal with Posco for 30% stake in a proposed battery chemicals plant in South Korea.

 

China needs resolution to trade war with US to maintain economic growth

  • China’s vice-president visiting US next month to discuss a new accord
  • Manufacturers are rushing in China to beat potential new US trade tariffs which may disrupt the New Year’s holiday migration if manufacturers choose to stay working through the holiday

 

CAT – Caterpillar Q4 highlight turnaround led by sales into the resource sector and a marked rise in Asia/Pacific sales

  • Caterpillar shares were marked lower yesterday on an effective downgrade in the outlook for sales into China.
  • The Q4 figures missed market expectations despite a relatively strong Q4 performance from the Resource Industries segment
  • Q4 Sales in mining rose by 21% yoy while sales into Construction rose by 8% yoy causing total sales to rise 11% to 14,342m.
  • Resource Industries Asia/Pacific saw the greatest increase in sales up 41% to $758m which is catching up on the US which rose by 15% yoy in Q4 to $906m
  • Operating profits rose by 36% in Q4 yoy to $1,883m with the resources sector posting a 90% increase in operating profit yoy.
  • CAT posted a Q4 profit of $1,048m vs a loss of $1,299m in Q4 2017.
  • The company also raised dividends to $1.72/s from $1.56/s yoy bring the full year dividend to $3.36/s vs $3.11/s for 2017.

Conclusion: Caterpillar is a barometer for the state of the mining sector as it sells premium trucks and other vehicles.

The 90% increase in operating profits in the Resources sector marks a dramatic improvement and this combined with a 41% increase into sales into Asia/Pacific highlights significant inroads into the region and an important diversification should mining in the US slow down. Eg Trump is good for CAT.

 

Dow Jones Industrials

 

-0.84%

at

  24,528

Nikkei 225

 

+0.08%

at

  20,665

HK Hang Seng

 

-0.16%

at

  27,532

Shanghai Composite

 

-0.10%

at

   2,594

FTSE 350 Mining

 

+0.38%

at

  17,778

AIM Basic Resources

 

+0.94%

at

   2,197

 

Economics

US – The US Justice Department charged Huawei and its CFO with conspiring to violate US sanctions days ahead of the high rank US/China trade talks.

  • Late on Monday, public broadcaster CBC said the US has also formally requested CFO Meng Wanzhou, citing Canada’s Justice Department.
  • Huawei CFO has denied wrongdoing and is scheduled to appear in court in Canada today to discuss changes to her bail terms.
  • The news does not add optimism to investors with US index futures slightly weaker this morning after closing in the red on Monday.
  • On a separate note, President Trump sees less than 50% chance of reaching a security funding deal with Democrats before the next government funding expires on February 15, according to Wall Street Journal Sunday article.

 

China – The economy slowed for an eighth straight month in January on the back of weaker global demand and falling factory margins, Bloomberg Economics data shows.

  • “The economy is still decelerating, but at a slower pace… concerns over global trade and fragile confidence continue to weigh on the economy,” BE said.
  • Bloomberg Economics tracks the earliest-available indicators on business conditions and market sentiment.
  • In response to slowing growth rate, authorities unveiled a series of stimulus measures lately with BE estimating recent tax cuts and reductions to the RRR potentially adding up to CNY 4.9tn or around 5% of GDP.
  • In a separate report, Chinese provinces are reported to be lowering their targets for economic growth in 2019 from 2018. Of the 30 provinces which have released their 2019 growth targets, 23 lowered their goals from those set for 2018, according to local government work reports. Two largest regions by GDP, Guangdong and Jiangsu are expecting growth to hit 6-6.5% and above 6.5% this year, respectively, down from about 7% targeted by both for last year.

 

UK – Today parliament is set to debate on amendments to the May Brexit deal todays in an effort to find a compromise that would win support of lawmakers.

  • At the centre of many pro-Brexit lawmakers’ concerns is the Irish “backstop” with a number of conservatives arguing it should be removed and replaced with “alternative arrangements”.
  • The pound is rangebound this morning, hovering in the 1.3130-1.3170 band.

 

Venezuela – The US announced sanctions on PdVSA, a Venezuela’s state-owned oil company, effectively blocking the government from exporting crude to the US.

  • The sanctions to be made effective immediately and any purchases of Venezuelan oil by US entities would flow into blocked accounts which would be released only to the legitimate leaders of Venezuela.

 

 

KEFI Minerals* (LON:KEFI) 1.8p, Mkt Cap £10.5m – Q4/18 update

  • The Company provided a quarterly update as the team is ramping up preparatory efforts ahead of the start of Tulu Kapi development works.
  • All federal agencies approvals have been received apart from the project finance structure set out with the central bank that is now awaiting endorsement by the Prime Minister; KEFI does not expect problems with securing the latter given the continued support demonstrated by the government to date.
  • Major infrastructure contractors Ethiopian Electrical Power Corporation and Ethiopian Roads Authority are preparing design and tender documents for power supply and access road.
  • A three month programme of land clearing and geotechnical drilling for the design of infrastructure foundations has been completed.
  • Federal government approved the finalised community resettlement programme; regional authorities have recently updated KEFI that they are not yet ready to trigger resettlement due to recent changes to their structure for administration and security, but assured the Company they are looking to do so later this quarter (Q1/19).
  • The Company secured £4m in secured convertible facility during the quarter to provide working capital to KEFI ahead of the start of construction works at Tulu Kapi and finalising development of project financing package (expected Q2/19).
  • On the bond/lease funding package update, the Independent Technical Expert signed off on the project technical due diligence.
  • Both Lycopodium and Ausdrill, principal on-site project contractors, plan for the 24-month development schedule.
  • Regarding exploration assets in Saudi Arabia, KEFI renewed the Hawiah VMS exploration license in November with drilling to restart in Q2/19 after the Company launches the planned construction at the Tulu Kapi. The Hawiah EL is located within the Wadi Bidah Mineral District in the southwest of the Arabian Shield that hosts over 24 VMS deposits. Historical exploration activities included surface trenching which returned high grade (2-9g/t) samples over 2-8m intervals as well as geochemical and geophysical surveys that identified two parallel anomalies 600m and 800m in strike. KEFI owns 40% and acts as an operator of the project.

Conclusion: Q4/18 update highlights KEFI team efforts to move the flagship 135kozpa Tulu Kapi Gold Project towards the start of development works. The Company has got the support from regional and federal authorities for Tulu Kapi with resettlement programme due to start in Q1/19. Due diligence is ongoing with respect to a funding package that is due for completion in Q2/19.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Currencies

US$1.1440/eur vs 1.1395/eur yesterday  Yen 109.22/$ vs 109.42/$  SAr 13.709/$ vs 13.643/$  $1.315/gbp vs $1.317/gbp  0.717/aud vs 0.718/aud  CNY 6.736/$ vs 6.739/$

 

Commodity News

Precious metals:         

Gold US$1,308/oz vs US$1,301/oz yesterday

   Gold ETFs 72.7moz vs US$72.5moz yesterday

Platinum US$817/oz vs US$814/oz yesterday

Palladium US$1,333/oz vs US$1,351/oz yesterday

Silver US$15.86/oz vs US$15.74/oz yesterday

  • A burgeoning shortage of silver is promising a boost to prices through 2019 with miners avoiding new projects amid global economic uncertainty, with Bloomberg survey of 11 traders and analysts forecasting prices to spike as high as $17.50/oz.
  • Approximately 26,000t annual production is expected this year, according to Societe Generale SA forecasts; the least since 2013. Meanwhile, global physical demand will top supply for the seventh year straight as industrial uses (including solar cells, computer touch screen and medicine) is booming.
  • Industry demand is the most significant consumer, gathering around 55% available silver supply. The metal’s high conductivity to electricity and heat, along with its sensitivity to light and anti-bacterial qualities contributes to hundreds of end-use products.
  • The industrial-applications sector will likely boost demand for the metal in 2019, according to Bloomberg Intelligence’s analysts. They see silver with a 50% upside for demand by 2023, compared with 17% for copper and 11% for gold.
  • The Federal Reserve has also supported prices, with silver and gold among the best performing assets in the past three months as investors scale back expectations for interest rate hikes in the US amid signals of slowing global growth.

           

Base metals:   

Copper US$ 6,019/t vs US$6,048/t yesterday

Aluminium US$ 1,868/t vs US$1,903/t yesterday

Nickel US$ 11,920/t vs US$11,915/t yesterday

Zinc US$ 2,681/t vs US$2,700/t yesterday

Lead US$ 2,084/t vs US$2,118/t yesterday

Tin US$ 20,745/t vs US$20,660/t yesterday

           

Energy:           

Oil US$60.0/bbl vs US$60.7/bbl yesterday

Natural Gas US$2.898/mmbtu vs US$2.911/mmbtu yesterday

Uranium US$29.05/lb vs US$29.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$78.9/t vs US$74.6/t

Chinese steel rebar 25mm US$597.7/t vs US$597.8/t

Thermal coal (1st year forward cif ARA) US$83.8/t vs US$84.8/t

Coking coal futures Dalian Exchange US$198.5/t vs US$204.3/t

           

Other:  

Cobalt LME 3m US$38,000/t vs US$38,000/t

China NdPr Rare Earth Oxide US$46,245/t vs US$46,227/t

China Lithium carbonate 99% US$10,021/t vs US$10,017/t

China Ferro Vanadium 80% FOB US$70.8/kg vs US$70.7/kg

China Antimony Trioxide 99.5% EU US$7.0/kg vs US$7.0/kg

Tungsten APT European US$260-270/mtu unchanged from previous week

 

Battery News

Mercedes-Benz will produce electric batteries in Poland

  • Daimler-owned Mercedes-Benz Cars will begin production of electric batteries in Poland, according to Polish Prime Minister Mateusz Morawiecki; “we are very happy that an investor that has been with us for a few years has entrusted us again and in the same place in Jawor,”
  • Mercedes-Benz Cars board member Markus Schafer told the conference that the new investment would create 300 jobs and that investments would total over €200m.
  • Daimler will buy battery cells worth more than €20bn ($23bn) by 2030 as it readies mass production of hybrid and electric vehicles, the company said in December.

 

Company News

Anglo American (LON:AAL) 1874.8 pence, Mkt Cap £24.23bn – De Beers diamond sales

  • Anglo American reports that that De Beers achieved sales of US$505m for its 1st diamond sale of 2019.
  • This is 24.9% lower than the equivalent sale in 2018 and, according to De Beers CEO, Bruce Cleaver reflects “higher than normal sales in the previous cycle (cycle 10 2018) and the slow movement of  lower value rough diamonds through the pipeline”.
  • Sales for cycle 10 of 2018 have been confirmed at US$544m representing a modest improvement on the US$540m provisional estimate issued on 18th December. As the company indicates this was significantly higher than the US$455m realised by the cycle 10 sale in 2017 and the US$422m in 2016.

 

African Battery Metals (LON:ABM) suspended – Refinancing, business strategy and resumption of trading update

  • Board negotiations concluding in a business restructuring and refinancing package aims to enable the company to return to trading on the market.
  • Conditional placing and subscription raising £1,000,000 at a price of 0.5p per New Ordinary Share.  Each Refinancing Share has an attaching warrant to subscribe for one New Ordinary Share at a price of 1p per share with a two-year life to expiry from the date of admission resulting in the issue of 200,000,000 1p warrants.
  • The refinancing exercise will allow payment of all material Company creditors through a mixture of cash and/or shares, while enabling ABM to be essentially debt free with a robust cash position sufficient for at least 12 months of operation under current business costs and operational plans.
  • Proposed new directors Andrew Bell and Paul Johnson to each subscribe for 10,000,000 New Ordinary Shares in the Refinancing representing a financial commitment of £50,000 per proposed director; and
  • Red Rock Resources PLC, a company of which Andrew Bell is a director and a significant shareholder as defined by the AIM Rules for Companies, has committed to subscribe for 20,000,000 new ordinary shares in the refinancing, representing a commitment of £100,000.
  • A programme of core cost review has been undertaken with the corporate plc costs reduced to minimal levels.
  • The company will also undertake a full strategic and operational review to;
    • Review existing company interests and target exploration resources
    • To identify, review and if appropriate acquire new opportunities to complement and diversify existing business interests.  This may include the potential acquisition of interests within Africa, or new territories.  In addition, this may include Battery Metals interests or interests in other commodity categories.
  • The company proposes to hold the General Meeting on 15th February to secure shareholder approval for the issue of equity and warrants in the refinancing and to authorize the board to issue further new Ordinary Shares on a non-pre-emptive basis to support future activities of the Company.

 

Arc Minerals* (LON:ARCM) 2.8p, Mkt Cap £17.4m – ARC readies Pilot plant for first copper / cobalt production

ARC Minerals owns Casa Gold 99.4% of Casa Minerals and holds an effective 73% stake in Casa Mining’s Akayanga project

(ARC Minerals currently owns 66% of Zamsort which holds 100% of the Kalaba copper/cobalt mine and associated mineral licenses)

STRONG BUY

  • Back-end plant commissioning due next week. Initial production of copper / cobalt concentrates to start thereafter.
  • The front end of the plant has already commissioned with initial capacity for 10,000t per month.
  • The plant is reported to be on budget.
  • Zamsort have spent under $500,000 under ARC Minerals to complete the plant and run through the commissioning process highlighting careful expenditure by management and the advanced nature of the project when ARC too control..

Conclusion:  Kalaba was in an advanced state of construction in August when we visited and would appear to have significant potential for expansion through the simple addition of certain units.

A simple fag-packet calculation indicates a 10,000tpm plant could produce around 1,500tpa of copper in concentrate along with a cobalt by-product of 420t worth around $7.5mpa combined assuming the processing of 1.0% copper grades and 0.20 cobalt as indicated in surface drilling on 14 November. We see potential for the pilot plant to more than double in its throughput rate with incremental addition and relatively little disruption.

While the real value of the new Kalaba mine will be in substantially upscaling this operation; the cash flow earned from the Pilot plant could prove critical in the evaluation and financing of a much larger mine and plant without recourse to significant further equity dilution.

*SP Angel acts as nomad and broker to Arc Minerals.

‘The copper equivalent values are estimated using current metal prices of $6200/t copper and $55,000/t cobalt and are presented for ease of interval comparison only. Metallurgical factors are assumed to be 100% although the recovery factors for the respective metals may vary significantly.’

 

Aura Energy (LON:AURA) 1.1p, Mkt Cap £12.0m – Uranium offtake agreement for Tiris project

  • Aura Energy reports that it has signed a binding offtake agreement for the sale of 800,000lbs of uranium production from its Tiris calcrete uranium project in Mauritania with the London-based trading company, Curzon Uranium Trading.
  • The seven-years agreement, which also includes an option for the sale of a further 1.8m lbs of production and is capable of extension by mutual agreement, is for an average price “above US$44 per pound U₃O₈ compared with the current spot price of around US$29 per pound U₃O₈ and comfortably above Tiris’ total operating cost”.
  • Aura Energy is “currently completing a Definitive Feasibility Study (DFS) on the project … is expected to commence construction this year for an anticipated 2020 production start”. The project, as currently planned anticipates production of “approximately 1 million pounds U₃O₈ per annum” with “low operating and development capital costs”. The company’s presentation in October 2017 indicates that at that time the expected capital cost of Tiris was US$45m and the operating cost was US$19.40/lb U3O8. The forthcoming DFS will no doubt provide more current estimates.
  • The company confirms that “Aura was recently granted an Exploitation Licence by the Mauritanian Government to advance the Tiris Project.”
  • Commenting on the agreement, Executive Chairman, Peter Reeve, said “This agreement provides Aura with a strong level of certainty over the revenue stream from the fixed prices and excellent upside via the option volumes at market prices … With the DFS nearing completion and initial construction anticipated this year, the milestone that this agreement represents is undoubtedly significant”.
  • In October last year, the company also announced that technical studies on its Tiris uranium project in Mauritania had identified the potential to recover vanadium during the uranium recovery process.

Conclusion: The binding agreement to sell between 15-30% of the anticipated production from Tiris at prices above current levels mitigates the possible risk of fluctuating revenues during the early years of production and may assist with project financing. We look forward to the results of the DFS for a current view of the expected capital and operating costs, development plan and economics of the project.

 

Condor Gold (LON:CNR) 26p, Mkt Cap £17.5m – Mineral resource update for La India

  • Condor Gold reports an updated mineral resource estimate for its La India project in Nicaragua. The new estimate, prepared by SRK Consulting amount to 9.85mt at an average grade of 3.6g/t gold and 5.9g/t silver classed as indicated with a further 8.48mt classed as inferred at an average grade of 4.3g/t gold.
  • The new resource compares with a September 2014 estimate of 9.56mt classed as indicated at an average grade of 3.5g/t gold and 5.8g/t silver with an additional 8.53mt of inferred resources at an average grade of 4.5g/t gold.
  • The main difference between the two estimates for indicated resources appears to be the addition of approximately 210,000t of mineralisation at an average grade of 8.4g/t gold (57,000oz) and 14.8g/t silver(100,000oz)  on the Tatiana Vein within the Mestiza vein set which did not feature in the 2014 estimate but appears to have been upgraded from inferred classification in this update.
  • Commenting on the new estimate, Chief Executive, Mark Child, pointed out that the higher level of confidence, indicated resource had increased by 57,000oz of gold to 1.14moz.
  • Mr. Child went on to point out that the recent drilling “has proved two new satellite open pit resources … [and that] … The four satellite open pits outside the main, permitted La India open pit have combined open pit resources of 206Kt at 9.9g/t gold for 66,000 oz gold in the Indicated category and 2,127Kt at 3.23g/t gold for 221,000 oz gold in the Inferred category. The Company will conduct mining studies to determine the possibility of adding the contained gold within the satellite pits to a mine schedule to supplement the ore feed from the permitted La India open pit to the processing plant”.

Conclusion: The inclusion of material from the higher grade Tatiana Vein within the resource estimate for La India may, subject to mining studies demonstrating favourable accessibility and sequencing of this higher grade mineralisation, provide an opportunity to enhance the economic returns from La India.

 

Crusader (LON:CAS) – Suspended on AIM, Investors call Section 249D Notice to remove key directors. Copulos to inject A$1m for convertible notes

Criusader (ASX:CAS) -  Also suspended

  • Shareholders in Australia have called a Section 249D notice to remove Marcus Engelbrecht and Andrew Vickerman from the board of Crusader Resources.
  • The Notice also proposes the election of Brett Clark, David Sanders and Carl Luttig.
  • Directors must call the meeting within 21 days after the request is given to the Company and the meeting is to be held not later than 2 months after the notice of request has been received..
  • For further info on Section 249D notice see: https://www.lavan.com.au/advice/corporate-disputes/boardroom-drama-failure-to-act-on-a-valid-s-249d-request-can-leave-director
  • In a separate announcement, former director and related party under the AIM rules, Stephen Copulos’ Copulos Group is to subscribe for an additional A$1m worth of convertible notes to assist with the company’s immediate funding requirements.
  • This brings the total convertible funding to A$2.4m of which Copulos is subscribing for A$1.5m.
  • In addition the company reports it has received firm commitments for the placement of 22.5m new shares at A$0.01/s to raise A$225,000 from existing investors.
  • The company reports that it will apply for the Placement Shares to be admitted to trading in AIM in due course pending clarification of the company’s financial position.
  • “The Company currently anticipates raising between A$3-5 million under the Entitlement Offer. The Company and the Copulos Group are in advanced discussions regarding a potential partial underwriting of A$3 million of the Entitlement Offer by the Copulos Group.”

Conclusion: Stephen Copulos resigned shortly after the company listed on AIM. Given Copulos’ convertible subscription it would be helpful if Crusader would state what size stake Copulos holds and is likely to hold on conversion of the convertibles listed so investors might see who will control the company going forward.

 

 Management Resource Solutions plc (LON:MRS) 4.4p, mkt cap £8.7m – Contract win

  • Management Resource Solutions ‘MRS’ report it has won a significant contract for the fabrication of eight coal truck trays.
  • The contract has a value of A$800,000-900,000 with fabrication work to be done at the company’s Muswellbrook facilities in the Hunter Valley Region, New South Wales, Australia.
  • The contract endorses MRS’s diversified fabrication and maintenance service facilities at Muswellbrook
  • MRS’s Muswellbrook facilities may be the only workshop in the region capable of this from of complex and large-scale fabrication indicating potential for further significant contracts to come.

 

Metal Tiger (LON:MTR) 1.45 pence, Mkt Cap £19.6m Drilling results from the A4 Dome

  • Metal Tiger, which, following the sale of its 30% interest in the T3 copper project in Botswana to MOD Resources, holds approximately 12.5% of MOD Resources highlights the Quarterly Report of MOD Resources – see below. Metal Tiger also holds an interest in a further 18 exploration licences covering 8,163km2 in Botswana in association with MOD Resources through the jointly owned Tshukudu Exploration.
  • MOD Resources confirms that it “remains on schedule to provide an ore reserve update and complete the T3 Copper Project Feasibility Study by the end of the first quarter, followed by a decision to mine targeted during the first half of 2019.”
  • Activity during the fourth quarter focussed on:
    • The T3 open pit feasibility study where “significant progress was made towards finalising the open pit mine design, processing plant design and associated infrastructure requirements. Additional works included geotechnical drilling, mine dewatering and process water supply modelling and metallurgical test work. In addition, the Company held site visits for potential project financiers, mining contractors and key consultants.” Current designs envisage a 3mtp processing capacity with the capacity to expand to 3.5mtpa for a modest additional capital expenditure.
    • The T3 underground project which is examining the opportunities to develop underground mining to access the parts of the T3 structure which lie beneath the planned open pit. “A conceptual underground ining study commenced in the December quarter with results expected in the first quarter of 2019”
    • The T3 Expansion project which includes the T1, A1, A4 Dome structures as well as the T3 underground and forms “part of a strategy to explore for additional resources within transport distance of the planned T3 Copper Project process plant, to potentially add significant value to the project” and
    • The T20 Exploration project which is located approximately 120km west of the T3 area where extensive area of geochemical soil anomalism, including the T23 Dome structure and the T4 prospect are “interpreted to occur within the same structural corridor which hosts the T3 Copper Project and the T3 Expansion Project”. Initial drilling results from the T23 Dome showed copper mineralisation in the expected geological setting and “while not yet demonstrating economic grades, indicate the presence of lower grade disseminated copper mineralization with relatively high silver values at shallow depth … This supports the potential of the structural zone, interpreted to extend ~15 kilometres east to the T4 prospect, where MOD previously announced significant copper intersections (announced 1 April 2016). Further drilling is planned at T23 Dome and along the structural zone extending towards T4, during 2019”.
  • MOD Resources is debt-free with a 31st December 2018 cash balance of $5.0m. Financing subsequent to the year-end, the company raised $10m through a placement at $0.30/share and a further $5.2 m is to be offered to existing shareholders on a 1 for 13 basis at $0.24/share.
  • The company has also received an unsolicited, mon-binding, indicative and conditional offer from Sandfire Resources valuing the company at $113m. The board “believes [the offer] undervalues the MOD assets … [but] … is willing to engage with Sandfire and grant confirmatory due diligence if a compelling price is offered and capable of being supported by the Board and MOD shareholders”.
  • We believe that the approach from Sandfire places a significant discount on the pre-feasibility study value of the T3 project and fails to recognise any value in the highly promising projects emerging from the rest of the licence area in Botswana.

Conclusion: MOD Resources is well funded and pressing ahead to develop the T3 copper project in Botswana as well as adding to its project pipeline within the wider exploration area. The offer from Sandfire, while undervaluing MOD  is likely to focus attention of a wider audience on the opportunity it has created in Botswana and the role of Metal Tiger as a 12.5% shareholder is likely to be pivotal in any future corporate developments.

 

MOD Resources (LON:MOD) 19.0p, Mkt Cap £47.2m –Quarterly Report and update

  • MOD Resources reports that 2018 was a transformational year for the company as it progressed towards becoming a copper mine developer in the Kalahari copper belt of Botswana.
  • “An important part of this process was completion of the acquisition of the remaining 30% of the T3 Copper Project as well as the extension of 18 key exploration licences for an additional two years”.
  • The company confirms that it “remains on schedule to provide an ore reserve update and complete the T3 Copper Project Feasibility Study by the end of the first quarter, followed by a decision to mine targeted during the first half of 2019.”
  • Activity during the fourth quarter focussed on:
    • The T3 open pit feasibility study where “significant progress was made towards finalising the open pit mine design, processing plant design and associated infrastructure requirements. Additional works included geotechnical drilling, mine dewatering and process water supply modelling and metallurgical test work. In addition, the Company held site visits for potential project financiers, mining contractors and key consultants.” Current designs envisage a 3mtp processing capacity with the capacity to expand to 3.5mtpa for a modest additional capital expenditure.
    • The T3 underground project which is examining the opportunities to develop underground mining to access the parts of the T3 structure which lie beneath the planned open pit. “A conceptual underground ining study commenced in the December quarter with results expected in the first quarter of 2019”
    • The T3 Expansion project which includes the T1, A1, A4 Dome structures as well as the T3 underground and forms “part of a strategy to explore for additional resources within transport distance of the planned T3 Copper Project process plant, to potentially add significant value to the project” and
    • The T20 Exploration project which is located approximately 120km west of the T3 area where extensive area of geochemical soil anomalism, including the T23 Dome structure and the T4 prospect are “interpreted to occur within the same structural corridor which hosts the T3 Copper Project and the T3 Expansion Project”. Initial drilling results from the T23 Dome showed copper mineralisation in the expected geological setting and “while not yet demonstrating economic grades, indicate the presence of lower grade disseminated copper mineralization with relatively high silver values at shallow depth … This supports the potential of the structural zone, interpreted to extend ~15 kilometres east to the T4 prospect, where MOD previously announced significant copper intersections (announced 1 April 2016). Further drilling is planned at T23 Dome and along the structural zone extending towards T4, during 2019”.
  • MOD Resources is debt-free with a 31st December 2018 cash balance of $5.0m. Financing subsequent to the year-end, the company raised $10m through a placement at $0.30/share and a further $5.2 m is to be offered to existing shareholders on a 1 for 13 basis at $0.24/share.
  • The company has also received an unsolicited, mon-binding, indicative and conditional offer from Sandfire Resources valuing the company at $113m. The board “believes [the offer] undervalues the MOD assets … [but] … is willing to engage with Sandfire and grant confirmatory due diligence if a compelling price is offered and capable of being supported by the Board and MOD shareholders”.
  • We believe that the approach from Sandfire places a significant discount on the pre-feasibility study value of the T3 project and fails to recognise any value in the highly promising projects emerging from the rest of the licence area in Botswana.

Conclusion: MOD Resources is well funded and pressing ahead to develop the T3 copper project in Botswana as well as adding to its project pipeline within the wider exploration area. The offer from Sandfire, while undervaluing MOD  is likely to focus attention of a wider audience on the opportunity it has created in Botswana.

 

Savannah Resources* (LON:SAV) 5p, Mkt Cap £44.1m – Excellent test work from Mina do Barroso lithium

  • Ongoing test work at the Mina do Barroso exploration project in Portugal yields conventional 6-6.5% Li2O, low impurity concentrate with recoveries in excess of 80%.
  • Samples from the Grandao deposit, which currently represents the first five years of mine production, have produced concentrates with low iron and impurity levels with market research and initial customer discussions indicating suitability for conversion to either lithium carbonate or hydroxide for use in Li-ion batteries.
  • The project is targeting an average annual production of 175,000t of spodumene concentrate at a grade of 6% Li2O. Process development is also aiming at the production of feldspar and quartz by-products to feed into the regional ceramics industries.
  • Testwork conducted in Perth at ALS Laboratories was conducted on fresh pegmatite composite with the Li2O head grade of 1.3% - higher than that 1.1% previously assumed in the scoping study.
  • The spodumene concentrate produced had an unoptimized grade of 6.15% Li2O at a lithium recovery of 82.4%. One test produced a concentrate Li2O grade of 6.50% at a reduced Li2O recovery.

Conclusion: Positive test work give robust validation for the processing and development of Mina do Barroso lithium ore. We look forward to understanding the results of the planned pilot scale testing on Grandao bulk samples and variability work on other deposits within the project area. Low iron and impurity content gives strong indication for the potential value add processing to supply the growing European battery industry.

*SP Angel acts as Nomad to Savannah Resources

 

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