SP Angel – Morning View – Thursday 27 05 19
Chinese rare earth rivals still lacking capacity
MiFID II exempt information – see disclaimer below
Bluejay Mining* (LON:JAY) – Annual report, Chairman’s statement Optimised Pre-Feasibility Study anticipates production of 440,000tpa
Solgold* (LON:SOLG) – Exploration results from northern Ecuador
Vast Resources* (LON:VAST) – £900k equity raise
China’s rare earth rivals still lacking capacity
- While rare earths are hotting up the tit-for-tat trade war between China and the US, purchasers of the crucial green energy and military metals have limited producers to turn to, highlighting the significance of sustained investment and development in the scape.
With consumers scrambling to secure exports, the US is turning to:
- Australia – the largest miner behind China raised output to 20ktpa (up 5% from 2018), according to the US Geological Survey. The nation is home to Lynas Corp., with the company announcing it plans to almost double output of fundamental neodymium and praseodymium by 2025 and expand processing capacity. It also plans to plug the shortfall in the US with a joint venture with Blue Line Corp., that will build a plant to process the commodities in Texas.
- Estonia – The European nation accounts for 6% imports, according to USGS data, hosting Neo Performance Materials Inc’s Silmet facility, which has the capacity to produce 2,500t rare earth products. As China threatens to control global supply, this operation will become more crucial, although the scale of the operation would only create a “minor and temporary impact”.
- Myanmar – The southeast Asian nation accounts for 5,000tpa, and following China’s decision to close its rare earth border, much of this output will need to find a new home. Beijing banned imports of the ore from Myanmar on May 14, SMM Information & Technology Co. said.
- India – The South Asian nation hosts the fifth largest mineral reserves, and became a fundamental source of material when China restricted shipments beginning 2007. India joined the race to increase domestic investment and production, commissioning a monzanite processing plant in 2010.
- Brazil and Vietnam - The two countries each have about 22 million tons in rare-earth reserves, according to USGS, but lacking coordinated investment to ramp out output. While Vietnam doubled its output last year, the total was only 400t. Brazil, on the other hand, cut its output to 1,000t, from 1,700 a year earlier
- Single source supply risk indicates projects including Mkango Resources’ Songwe Hill and Peak Resources’ Ngualla project require supportive development capital to diversify global production.
Ferro-Vanadium prices rise in Western Europe to US$34.8-36.5/kgV
- Ferro-vanadium prices have bounced a little in Europe following a halving of the price since March.
- Vanadium pentoxide prices are also a little higher in Rotterdam at US$7-7.95/lb.
- Europe has led vanadium prices lower as local steel producers took an increasingly negative view of the market due to Brexit and ongoing competition from Chinese products.
- ArcelorMittal announced yesterday further cuts to production at a number of plants in Europe on weak demand and higher imports.
- The news is worse for Thyssenkrupp which is cutting 6,000 jobs on the expectation that its jv with Tata will be blocked.
- British Steel is also in liquidation.
Bubble Gum Pink Diamond sold for $7.5 million at Christie’s Hong Kong auction representing $2.2m/ct.
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
US – US Special Counsel Robert Mueller said that Justice Department policy prevented him rom bringing charges against a sitting president while suggesting that it is up to Congress to decide whther Trump should be impeached.
- Additionally, Mueller noted that had he been confident the president had committed no crime he would have said so clearly.
- House Democrats are debating if they should move ahead with impeachment which is unlikely to secure support in the Republican-controlled Senate.
- Trump has previously called the Mueller investigation as a “witch hunt” while tweeting that “there was insufficient evidence (in the report) and therefore, in our Country, a person is innocent… the case is closed… thank you”.
China – The US negotiating tactic is “naked economic terrorism, economic chauvinism, economic bullying”, Chinese Vice Foreign Minister Zhnag Hanhui said commenting on the trade dispute between China and the US.
- Escalating rhetoric from two nations suggest weakening chances of a trade agreement at the coming G20 meeting in Japan set for June 28-29.
Australia – The economy is set to post the weakest growth rate since the 2008-2009 global financial crisis this year despite positive commodity prices, Fitch Ratings said.
- The economy is expected to grow 2.0% in 2019with the weakening momentum triggered by a protracted downturn in housing market.
- The central bank is forecast to cut rates by at least 25bps and possibly as early as this June.
- The cash rate remained unchanged at record low of 1.5% since mid-2016.
Israel – The nation will be holding new general elections after PM Netanyahu failed to build a coalition, the first case in Israel’s history.
- The Likud led by Benjamin Netanyahu and its allies dissolved parliament after being unable to persuade Israel Our Home party led by Avigdor Lieberman to add five seats to the 60 won by the rihgtwing bloc in April.
- The coalition needed 61 seats of the total 120 in Knesset to form the government.
- New round is scheduled for September 17th.
US$1.1154/eur vs 1.1161/eur yesterday Yen 109.24/$ vs 109.22/$ SAr 14.877/$ vs 14.815/$ $1.264/gbp vs $1.266/gbp 0.691/aud vs 0.692/aud CNY 6.908/$ vs 6.909/$
Gold US$1,276/oz vs US$1,283/oz yesterday
Gold ETFs 70.6moz vs US$70.4moz yesterday
Platinum US$794/oz vs US$798/oz yesterday
Palladium US$1,341/oz vs US$1,347/oz yesterday
Silver US$14.40/oz vs US$14.41/oz yesterday
Copper US$ 5,882/t vs US$5,938/t yesterday
China scrap import licences issued earlier than expected
- China aims to grant import licences and report the first batch of quotas by the end of June for soon-to-be restricted scrap metal shipments into the nation – earlier than previously expected.
- The recycling branch of the China Nonferrous Metals Industry Association had said last month that the environment ministry would only formally accept import licence applications from July 1.
- The quotas will restrict imports of high-grade Category 6 copper scraps from July, as well as aluminium and steel scrap, which acts as an extension from an earlier ban that started on Category 7 scrap which has less metal content.
- Traders and other scrap metal importers will have to show they have the capacity to manufacture scrap into refined metal or semi-finished products such as copper cathode or rods to receive licences and quotas from the Ministry of Ecology and Environment (MEE).
- "The MEE has been carrying out inspections on scrap metals importers and processing companies," ministry spokesman Liu Youbin.
- The move signals the crackdown on waste smuggling, with China absorbing hundreds of millions of tonnes of foreign scrap metal, paper, plastic and electronic waste for recycling since the 1980s.
- "China will resolutely tighten solid waste imports ... The MEE is working to revise related law and regulations, and will strive to publish it as soon as possible," Liu said.
- Other nations in the region have also been cracking down on waste cargoes from overseas, with Malaysia saying it would send back non-recyclable plastic scrap to the developed countries that shipped it there.
Copper supply black flag risks raised in favour of a strike
- Workers at the world’s largest copper mine voted in favour of a strike at one of its most significant pit in Chile, moving the unions closer to a stoppage which could hamper production and lend support to physical tightness and price reversal.
- Employees represented by three unions at Codelco’s Chuquicamata mine voted Wednesday to reject the state-run company’s final offer for a contract, according to Union No. 2 President Liliana Ugarte. Failure of the ongoing five-day government-mediated negotiation will result in workers downing tools.
- The impact of a strike at Chuquicamata could go well beyond the output at Codelco’s third-largest mine as Chuqui -- as the project is known -- also processes ore from Radomiro Tomic and Ministro Hales. The three mines, which make up the northern division, accounted for half the company’s 1.68mt of output last year.
- Copper continues to be hurt into 2019 by tensions between Washington and Beijing, which have stoked concerns growth will slow. While copper in London advanced as much as 0.6% on the news, the crucial metal has still lost 8% through May, and is set for the biggest monthly drop since 2015.
- A strike at Chuquicamata could also delay the ramp-up of its new underground mine, which started last month. Codelco has invested about $5.5 billion to close the century-old open pit, the world’s largest, and turn it into a modern, semi-automated underground operation that will allow it to maintain production.
- Codelco offered the three unions representing most workers at Chuquicamata a 27-month contract that included a 1.2% real wage increase and a one-time payment of 9.8m Chilean Pesos (about $14,000).
- 85% of workers rejected the offer in favour of striking, with unions in outcry as the company did not respond to demands for health care and retirement benefits.
- Codelco plans to cut 1,211 jobs at Chuquicamata over the next few years as the mine moves underground and as part of a companywide bid to pare costs and boost productivity.
Aluminium US$ 1,794/t vs US$1,802/t yesterday
Nickel US$ 12,045/t vs US$12,130/t yesterday
Zinc US$ 2,557/t vs US$2,543/t yesterday - Zinc moves into a 44,500t deficit March vs a 27,600t surplus in February ILZSG data as useage rising to 1,132t from 984t in February
- Zinc has now moved into 15,000t deficit for the year to date
Lead US$ 1,824/t vs US$1,810/t yesterday - Global lead market surplus widens in March - ILZSG
- Lead surplus widens to 10,300t in March from 3,600t in February despite usage rising to 1,064t from 1,015t in February
- Lead remains in a slight 7,000t deficit despite the influx of new production.
Tin US$ 18,750/t vs US$19,180/t yesterday
Oil US$69.8/bbl vs US$69.6/bbl yesterday
Natural Gas US$2.607/mmbtu vs US$2.586/mmbtu yesterday
Uranium US$24.10/lb vs US$24.10/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$101.5/t vs US$102.5/t
Chinese steel rebar 25mm US$614.1/t vs US$616.9/t
Thermal coal (1st year forward cif ARA) US$66.5/t vs US$67.2/t
Coking coal futures Dalian Exchange US$186.2/t vs US$197.8/t
Cobalt LME 3m US$33,500/t vs US$33,500/t
NdPr Rare Earth Oxide (China) US$47,061/t vs S$47,001/t
- China’s grip on the global rare earth market gives it the final ability to target exports of critical minerals for the growth of US weaponry. Everything from Lockheed Martin Corp’s F-35 Joint Strike Fighter jet to guided missiles and lasers rely on elements to perform key functions.
- Each F-35 Lightning II aircraft -- considered one of the world’s most sophisticated, maneuverable and stealthy fighter jets -- requires approximately 920 pounds of rare-earth materials, according to a 2013 report from the U.S. Congressional Research Service.
- Rare earths including yttrium and terbium are used for laser targeting and weapons in Future Combat Systems vehicles, according to the Congressional Research Service report.
- The US relies on at least 80% imports directly from China, with an additional 12% being fed through secondary nations.
- The tit-for-tat tariffs on a slew of commodities including soybeans, natural gas and aluminium have already stung markets, threatening global economic growth.
- “The fact that rare earths are on the menu again means China is using its most powerful political tool in the resources space,” said Simon Moores, managing director at Benchmark Mineral Intelligence, an industry researcher. “Rare earths are a niche specialty and critical to the Defense Department.”
- The U.S. imported $160m worth of rare-earth metals and compounds in 2018, an increase of 17% from the prior year.
- The Department of Defense accounts for about 1% of total U.S. consumption of rare earths, according to a 2016 report from the U.S. Government Accountability Office.
- While the US mines around 3,000-4,000t rare earth concentrates each month from Mountain Pass, the Chinese consortium owning and operating the project exports all output to China, before upgrading for the return trip.
Lithium carbonate 99% (China) US$9,629/t vs US$9,617/t
Ferro Vanadium 80% FOB (China) US$36.0/kg vs US$36.5/kg
Antimony Trioxide 99.5% EU (China) US$5.7/kg vs US$5.7/kg
Tungsten APT European US$270-280/mtu vs US$270-280/mtu
Renewable energy costs hit new lows, now cheapest new power option for most of the world
- Plummeting costs have made renewable energy sources the most inexpensive option for new power generation throughout most parts of the world, according to a new study.
- The findings come from the International Renewable Energy Agency (IRENA) in its new report, Renewable Power Generation Costs in 2018.
- The comprehensive study determined that costs “from all commercially available renewable power generation technologies” dropped in 2018.
- Expected continuing cost declines will only make renewable energy more enticing, and make renewables the cheapest power option in even more countries as time goes on.
- IRENA says onshore wind and solar PV power are now often less expensive than any fossil fuel option, without financial assistance.
- Furthermore, the agency expects that of projects set to be commissioned in 2020, more than three-quarters of onshore wind and four-fifths of utility-scale solar PV “should provide lower-priced electricity than the cheapest new coal-fired, oil or natural gas option.”
Hyundai debuts 70-passenger electric double-decker bus
- Hyundai introduced its first all-electric double-decker bus today as the company aims to reduce traffic congestion and air pollution.
- The electric bus uses a 384 kWh water-cooled high-efficiency polymer battery, with a maximum range of 300 km (186 miles) on one charge. Hyundai says the bus can be fully charged in just 72 minutes.
- Offering room for 70 passengers, 59 passengers on the lower level and the other 11 passengers up top, Hyundai offered more technical details on the big electric bus: “The large electric double-decker bus is 12,990 mm long and 3,995 mm high. It runs on an independent suspension system in the first driving axle for a more comfortable ride, and a 240kW wheel motor axle combined with a motor in the second axle that minimizes loss of electricity. A rear-wheel steering system works in coherence with the steering system of the first axle, optimizing steering performance.”
- Hyundai developed the electric bus over the course of 18 months through a project supported by the Korean Ministry of Land, Infrastructure, and Transport.
- Electric double-decker buses have already been roaming the streets of some cities for years. China-based BYD is a leading manufacturer of the buses, and the company launched the world’s largest electric double-decker fleet — 200 buses — in Xi’an, China earlier this year.
Trump continues to blindly ignoring climate projections
- The latest ‘new assault’ on science by the Trump administration details how the Environmental Protection Agency is set to model air pollution to manipulate and lower premature death estimates.
- “In the most recent example, the White House-appointed director of the United States Geological Survey, James Reilly, a former astronaut and petroleum geologist, has ordered that scientific assessments produced by that office use only computer-generated climate models that project the impact of climate change through 2040, rather than through the end of the century, as had been done previously.”
- The administration is targeting the National Climate Assessment, which is produced every four years since 2000. The assessment contains a projection which determines what may happen to the earth’s atmosphere, sea levels, etc., if fossil fuel emissions continue at “business as usual” levels.
Altus Strategies* (LON:ALS) 4.7p, Mkt Cap £8.3m – Q1 operational and financial update
- Operationally, the Company continued to advance and de-risk the diversified portfolio of Africa focused early exploration assets with a view to attract JV partners.
- Altus currently holds 17 precious metal and base metal exploration projects across six African countries including Morocco, Ethiopia, Cameroon, Liberia, Cote d’Ivoire and Mali.
- The team vended Birsok and Mandoum bauxite licenses in central Cameroon to Canyon Resources in return for up to 30m shares and $1.5/t production royalty form those tenements.
- The Company signed a non-bonding Term Sheet with Indiana Resources over Lakanfla and Tabakorole gold projects in Mali. Under the agreement, Indiana will have an option to earn up to 85% in projects while Altus is set to receive cash and equity in Indiana and retain a 2.5% NSR on the projects. Indiana is currently carrying out due diligence on assets.
- Post the reported quarter, the team signed a non-binding Term Sheet with Corben Resources regarding the Zolowo gold project (Liberia) and the Laboum gold project (Cameroon).
- The Company is also currently in an active JV with Resolute Mining over the Pitiangoma Est gold property in southern Mali.
- The exploration team identified a series of prospective drilling targets in vicinity of the historic Diba resource, located only 13km south of the Sadiola gold mine, in Mali.
- Financially, exploration expenses totalled £116k (Q1/18: £131k) with the team size and the level of activity remaining largely comparable to last year.
- Administrative expenses totalled £330k (Q1/18: £252k) reflecting higher employee costs as well as an increase in legal and professional dual listing costs.
- The value of deferred fees and salaries of the Board totalled £55k or nearly 2/3s of total remuneration and accounted for some of the increase in current payables on the balance sheet (£566k, up from £487k in Dec/18).
- Most of other costs accounted for a slight decline in the value of Canyon Resources shares held by the Company (-£74k).
- Operating loss totalled -£467k (Q1/18: -£397k).
- Net loss amounted to -£543k (Q1/18: -£516k).
- The Company spent £450k in cash during the quarter that was covered from the existing £725k cash balance as well as £127k in proceeds from the sale of Canyon shares.
- The Company held £402k in cash as well as £683k in Canyon shares as well as had £80k in long term lease liabilities as of Mar/19.
*SP Angel acts as nomad and broker to Altus Strategies
Bluejay Mining* (LON:JAY) 9.4p, Mkt Cap £80m – Annual report, Chairman’s statement Optimised Pre-Feasibility Study anticipates production of 440,000tpa
STRONG BUY - Target under review - included in MSCI index
(Dundas Ilmenite project, Greenland, 100% owned)
- Bluejay Chairman’s statement highlights progress towards production of an optimised Pre-Feasibility Study at the Dundas ilmenite project in Greenland.
- The Optimised Pre-Feasibility study envisages a production rate of 440,000tpa of ilmenite concentrate.
- the Environmental Impact Assessment ‘EIA’ and Social Impact Assessment ‘SIA’ reports have been submitted to the Greenland government of Greenland.
- The SIA envisages the creation of 175 direct jobs in Greenland along with increasing skills and training. This is important for the nearby local community and the Bluejay team are aware that recruitment and training must be carefully managed so as not to disrupt other economic activity in the region.
- “The Pre-Feasibility Study for Dundas is currently at a final draft stage and will be published as soon as practicable. The delay in the publication can be attributed to the significantly high level of detail that has been undertaken in producing this study. Looking ahead, this extended and in-depth PFS will result in both significant time and cost efficiencies, as this mitigates some of the test work required by Bluejay when it advances into the definitive feasibility stage. This will occur once the licence application has been lodged.”
- In the meantime, the team have continued geotechnical surveying and water monitoring for the plant and other infrastructure. There is a new 350kVA power generator and a containerised 30-person/man camp along with an upgraded mining fleet.
- Other exploration: The Chairman’s report reminds us of Bluejay’s other exploration at the Disko-Nuussuaq Magmatic Massive Sulphide nickel-copper-platinum project further to the south. Disko assays on surface material show 2.02% nickel, 0.8% copper and 0.2% cobalt causing the team to expand the license are to the scale of Luxembourg, which is about a 1/10th the size of Wales.
- The team are also evaluating the Kangerluarsuk Sed-Ex lead-zinc-silver project, where historical work has recovered grades of 41% zinc, 9.3% lead and 596 g/t silver and has identified four large-scale drill ready targets.
- Finland: Bluejay is also maintaining a number of highly-prospective base-metal and PGE prospects in Finland. We have visited the former mines at Hammaslahti (copper-zinc) and Enonkoski (nickel-copper PGEs) as well as the exploration area on trend with the historic and former world-class Outokumpu mine. These are highly prospective projects and should command new attention when the proposed Dundas ilmenite mine is up and running.
- Cash: Bluejay have £8.8m cash in the bank following the raising of £17m early last year.
- Exploration costs ran at £6.3m for the year just ahead of £4.6m a year earlier as further work was done on the on-shore and marine resources.
- Bluejay reports a loss of £10.8m for the year vs £2.7m last year.
- Admin expenses were £1.8m split between £0.5m in Greenland, £0.1m in Finland and £1.2m in the UK.
- The company impaired £8.9m of intangible assets probably mainly due to the movement of plant and equipment and work done in Greenland.
Conclusion: It is good to read that the Optimised Pre-Feasibility Study is on the way, that this is a relatively well advanced study and that it will result in significant time and cost savings. It should also speed up the production of a Definitive Feasibility Study in preparation for bank financing for the move to full production.
Feasibility studies are often held up as new ideas are examined and optimised to improve projects and often materially enhance project economics.
While the wait is frustrating the process is important as a little time in planning can save millions in capex and add many more millions to economic returns.
We are very keen to see the results of the feasibility study on what should be a relatively low capex cost project.
*The SP Angel mining analyst has visited the Dundas, Itelak ilmenite sands project in Greenland.
*SP Angel act as nomad and broker to BlueJay Mining.
Solgold* (LON:SOLG) 27p, Mkt Cap £498.5m – Exploration results from northern Ecuador
- The Amarillo project is one of the twelve priority projects Solgold has selected from its 72 regional concessions within Ecuador and consists of 5 project areas within the Rio Amarillo 1 and 2 areas. Maps shown on the company’s website also show an area designated Rio Amarillo 3 adjacent and to the north, however, today’s announcement concentrates on the first two areas.
Among the results highlighted from rock chip samples of the lithocap are:
- A sample (R01001075) assaying 0.33% copper, 0.31g/t gold and 32ppm molybdenum; and
- A sample (R01001089) assaying 0.21% copper, 0.05g/t gold and 45ppm molybdenum; and
- A sample (R01001068) assaying 0.14% copper, 0.84g/t gold and 4ppm molybdenum; and
- A sample (R01001056) assaying 0.12% copper, 0.45g/t gold and 5ppm molybdenum.
The Chilanes area, located on the north-eastern margin of the lithocap has identified a stockwork of veins with the best rock chip samples assaying:
- 0.93g/t gold, 0.18% copper and 11.85ppm molybdenum in sample R01000025; and
- 0.90g/t gold, 0.01% copper and 13.75ppm molybdenum in sample R01000026; and
- 0.51g/t gold, 0.13% copper and 10.35ppm molybdenum in sample R01000029.
- Rock chip samples from the Cuambo located to the northeast of the lithocap include rock chip samples assaying 11.3g/t gold (sample R01001018) and 1.85g/t gold (sample R01001019).
- The Pasquel project area, located around 2.5km south of the lithocap area produced rock-chip samples grading 13.35g/t gold (sample R01001290), 3.00g/t gold (sample R01001294) and 2.45g/t gold (sample R01001295) in a geological setting characterised by epithermal veining.
- The Pugaran prospect is located in Rio Amarillo 2. Rock saw sampling along a 250m long quartz diorite outcrop in Palomar Creek returned an assay of 0.24% copper over a 140m length, including 13m averaging 0.65% copper and a second section of 12m averaging 0.38% copper. Photographs published with today’s announcement show widespread blue staining, described as “strongly altered and copper rich with B and D type veining” at the Pugaran prospect.
- Solgold explains that “Drilling is scheduled to commence on regional projects as soon as practical following completion of permitting processes”. The recovery of rock chip samples is a relatively early-stage exploration technique and will need this initial follow-up drilling to help refine the priority targets further and to establish the work required to advance them.
- We observe, however, that coming after recent announcements of exploration success elsewhere in Ecuador, at the Porvenir, Chical and the Cisne-Loja prospects, it is clear that Solgold is applying the technical and operating experience acquired at the flagship Cascabel project to great effect within its broader project portfolio.
Conclusion: The Rio Amarillo project area in northern Ecuador is the latest of a number of promising early stage exploration projects identified as Solgold applies the expertise gained at Cascabel elsewhere in Ecuador.
*SP Angel acts as broker and advisor to Solgold. SP Angel have raised funds for SolGold on eight previous occasions.
Vast Resources* (LON:VAST) 0.12p, Mkt Cap £9.3m – £900k equity raise
- The Company raised £900k through a placing of 776m shares at 0.116p to cover Baita Plai related expenses as well as general working capital until the £10m loan facility is agreed.
- The pre-production expenditure at the polymetallic Baita Plai project include:
- The installation of a 7km long tailings pipe to the tailings dam fulfilling the license requirement;
- The installation of a new and independent power supply in addition to the one installed already.
- SRK economic study related costs.
- The above should significantly reduce the lead time up to commencement of production.
*SP Angel acts as Broker to Vast Resources