SP Angel . Morning View . Thursday 02 03 23
Concern for rare earth miners as Tesla looks to ditch NdPr for new motor technology
MiFID II exempt information – see disclaimer below
Lithium exploration opportunity – Ghana – private financing
- Hard rock spodumene outcrop on licenses indicate good potential for lithium discovery in highly prospective region of Ghana
- Drilling to start shortly to test for lithium below surface of weathered outcrop
- Company is also looking at additional downstream processing in Ghana in co-operation with European lithium refinery company
- Potential for joint venture with listed company or LSE IPO
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors
Ariana Resources PLC (AIM:AAU) – Completion of due diligence in Kosovo.
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) – B1 Conductor Upgrade following Downhole Electromagnetic Survey
Kenmare Resources plc (LSE:KMR) – Lightning damage at Moma pushes 2023 production guidance towards the lower end of the indicated range.
Orosur Mining Inc (AIM:OMI, TSX-V:OMI) – Operational update and $2m option payment received
Thor Energy PLC (AIM:THR, OTCQB:THORF, ASX:THR) – Geophysical survey at Alford West.
Rare earth miners struggle as Tesla looks to ditch NdPr for new motor technology
- Chinese, Australian and US rare earth majors have weakened amid news Tesla will reduce or eliminate the use of rare earths for its next generation of permanent magnet electric motors.
- China Rare Earth Resources fell 7.6% this morning following the announcement.
- Tesla stated that its new powertrain will be ‘more efficient,’ despite the lack of Neodymium, dysprosium, and terbium.
- However, it remains to be seen whether the technology is possible, given the clear advantages NdPr magnets offer to motor power and efficiency.
CATL cuts stake in Australian lithium major
- CATL sold its $573m stake in Pilbara Minerals following a sustained sell-off in lithium prices.
- Analysts suggest the sale decision may be either a result of weaker lithium market fundamentals, concerns over sustained frostiness in diplomatic relations between Australia and China, or a broadening of the lithium supply chain as alternative operations come online.
- CATL will continue to source Pilbara’s product via offtake agreements.
- Lithium carbonate prices have fallen 40% from their peak reached in Autumn last year.
Gold flatlines as traders look for direction following rate expectation repricing
- Gold prices have steadied lower around the $1,830/oz mark, having fallen over $100/oz through February.
- The dollar has weakened from its recent highs, with strength from both the Euro and the Pound weighing on the Greenback.
- As a result, gold has had some respite from its recent headwinds, where 10-year US Treasury yields climbed over 4% for the first time since November.
SQM plans $3.4bn CAPEX strategy for next three years with capacity boost to 210kt pa
- Chilean lithium giant SQM has outlined a $3.4bn capex plan for 2023-2025. It spent $900m on capex in 2022.
- The Company is looking to boost lithium capacity to 210kt pa from current levels of 180kt, with 100kt of lithium hydroxide capacity.
- SQM expects lithium demand to hit 1.5mt pa by 2025.
- $1.85bn will be put to increasing its Chilean production capacity alongside investments in Australia.
- It noted in the earnings call that it expects Biden’s Inflation Reduction Act to support global demand for lithium to grow at 20% this year.
Dow Jones Industrials +0.02% at 32,662
Nikkei 225 -0.06% at 27,499
HK Hang Seng -0.85% at 20,445
Shanghai Composite -0.05% at 3,311
Economics
EU – Eurozone CPI slides to 8.5% yoy in Feb, Core CPI 5.6%
US – ISM manufacturing climbs to 47.7 in Feb (47.9 expected)
Currencies
US$1.0630/eur vs 1.0640/eur yesterday. Yen 136.64/$ vs 136.02/$. SAr 18.196/$ vs 18.160/$. $1.196/gbp vs $1.208/gbp. 0.673/aud vs 0.676/aud. CNY 6.913/$ vs 6.887/$.
Dollar Index 104.78 vs 104.51 yesterday.
Commodity News
Precious metals:
Gold US$1,831/oz vs US$1,834/oz yesterday
Gold ETFs 92.6moz vs US$92.6moz yesterday
Platinum US$952/oz vs US$965/oz yesterday
Palladium US$1,425/oz vs US$1,441/oz yesterday
Silver US$20.81/oz vs US$21.04/oz yesterday
Rhodium US$9,400/oz vs US$9,650/oz yesterday
Base metals:
Copper US$ 9,059/t vs US$9,111/t yesterday
Aluminium US$ 2,431/t vs US$2,424/t yesterday
Nickel US$ 24,815/t vs US$25,405/t yesterday
Zinc US$ 3,109/t vs US$3,090/t yesterday
Lead US$ 2,120/t vs US$2,135/t yesterday
Tin US$ 25,000/t vs US$25,695/t yesterday
Energy:
- Oil US$84.2/bbl vs US$83.9/bbl yesterday
- Crude oil prices edged higher after the EIA reported a 1.2mb US crude inventory build last week, just ahead of ~0.5mb consensus, and a total stock draw of 3mb with refinery utilisation essentially unchanged at 85.8%.
- Natural gas prices were flat with German natural gas storage reportedly falling w/w from 71% to 69.5% full (vs 43.8% 5-year average) and the EU down w/w from 63% to 61.1% full (vs 39.6% 5-year average).
- A late-winter cold snap boosted LNG flows into northwest Europe’s gas networks this week to the highest level since December, with LNG futures on Wednesday settled at $13.09/mmBtu.
Natural Gas US$2.772/mmbtu vs US$2.767/mmbtu yesterday
Uranium UXC US$50.75/lb vs US$50.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$126.2/t vs US$123.4/t
Chinese steel rebar 25mm US$641.4/t vs US$641.3/t
Thermal coal (1st year forward cif ARA) US$156.0/t vs US$156.0/t
Thermal coal swap Australia FOB US$197.0/t vs US$195.5/t
Coking coal swap Australia FOB US$340.0/t vs US$340.0/t
Other:
Cobalt LME 3m US$34,180/t vs US$34,180/t
NdPr Rare Earth Oxide (China) US$97,792/t vs US$98,606/t
Lithium carbonate 99% (China) US$47,088/t vs US$48,141/t
China Spodumene Li2O 5%min CIF US$5,750/t vs US$5,800/t
Ferro-Manganese European Mn78% min US$1,313/t vs US$1,314/t
China Tungsten APT 88.5% FOB US$331/mtu vs US$333/mtu
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 10.1/lb vs US$10.1/lb
Europe Ferro-Vanadium 80% 40.75/kg vs US$40.25/kg
China Ilmenite Concentrate TiO2 US$342/t vs US$343/t
Spot CO2 Emissions EUA Price US$102.7/t vs US$102.8/t
Brazil Potash CFR Granular Spot US$480.0/t vs US$480.0/t
Battery News
Company News
Ariana Resources PLC (AIM:AAU) 3p, Mkt Cap £33.8m – Completion of due diligence in Kosovo.
- Ariana Resources reports that its 75% owned subsidiary, Western Tethyan Resources, has completed its due-diligence investigation of the Slivova sediment-hosted gold deposit in Kosovo.
- The deposit, which is reported to host an NI-43-101 compliant indicated mineral resource of 640,000t at an average grade of 4.8g/t gold and 14.69g/t silver, is owned by the Canadian-listed Avrupa Minerals.
- Completion of the due-diligence leads West Tethyan Resources to expect “to complete a definitive Earn-In Agreement on the Project … within the coming weeks” and a Preliminary Economic Assessment (PEA) is underway.
- Ariana Resources’ Managing Director, Dr. Kerim Sener, said that “We are looking forward to further advancing the development of the attractive Slivova Gold Project in Kosovo. We see a number of upside possibilities for the project and will be investigating these systematically during the period of earn-in, once agreed, by Western Tethyan and Avrupa Minerals”.
- The project “covers 32km2 and is valid for 7 years of exploration … [with the] … Peshter Main Gossan and Gossan Extension zones … hosted within a steeply-dipping package of intercalated pebble to cobble conglomerates and finer-grained sandstone units with subordinate shale horizons”.
- The mineral resource estimate for the project is based on approximately 4,162m of drilling in 40 holes with the gold mineralisation “concentrated in the calcareous pebble conglomerate and calcareous sandstone”.
- The company says that “the majority of the mineralisation is amenable to conventional hydrometallurgical processes … [and that metallurgical test work] … will be undertaken as a priority to determine the optimal process route”.
Conclusion: An earn-in agreement for the Silvova gold project in Kosovo is likely to follow the successful completion of due-diligence assessments. We await further news with interest.
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) 1.1p, Mkt cap £7.8m – B1 Conductor Upgrade following Downhole Electromagnetic Survey
- Kavango reports it has recently remodelled the B1 Conductor at its Kalahari Suture Zone North project.
- The B1 Conductor was remodelled using a conductance of 28.7k Siemens using Downhole Electromagnetic survey data.
- This conductance level is associated with pyrrhotite bearing massive sulphides, with common associations to nickel-copper mineralisation.
- The Company suggests that the B1 lies at a lithological boundary within mudstones and gabbro sills.
- The team believes that the aforementioned gabbro intrusive sills have the potential to host massive sulphides.
- Kavango is now looking to drill test the conductors alongside testing intersected coaly sediments which may represent a viable sulphur source for the system.
- The Company notes that the three B conductors are drill ready, and Executive Director Jeremy Brett notes that ‘conductance is one of the most powerful discrimination factors in nickel copper exploration.’
Kenmare Resources plc (LSE:KMR) 484p, Mkt Cap £464m – Lightning damage at Moma pushes 2023 production guidance towards the lower end of the indicated range.
- Kenmare Resources reports that, in early February, unusually severe weather at its Moma titanium minerals operation in northern Mozambique resulted in “a direct lightning strike of unusually high intensity” which struck power lines serving the mine and which “cut two of the powerline conductors and the energy discharged overwhelmed the mine’s lightning protection systems”.
- The company says that this was “a highly unusual event, which has not previously occurred in Kenmare’s 15 years of operations … [and that] … In addition to damaging the power line infrastructure, a large number of variable speed drives and electronic devices at the mine were also damaged, primarily at the three Wet Concentrator Plants”.
- The damage “severely disrupted” mining operations and although “Kenmare is working hard to recover lost production of Heavy Mineral Concentrate, production of ilmenite and rutile is now expected to be towards the lower half of the guidance range for 2023”.
- We understand that 2023 production guidance is for between 1.05-1.15mt of ilmenite production at a cash operating cost between US$208-228m. As well as the company’s warning that production is likely to fall in the lower part of the 2023 guidance range, we imagine that costs may be driven towards the upper parts of the guidance.
- Kenmare Resources confirms that repairs have now restored production capacity “close to normal operating levels”.
- The company says that it “is working to establish and mitigate the capital and operating cost impacts of the disruptions. Insurance cover is in place and Kenmare is liaising with its insurers to process claims in relation to the lightning strike”.
Conclusion: Kenmare Resources is reported to be the world’s largest ilmenite supplier and the disruption at Moma may put short-term pressure on the supply chain. We look forward to a speedy restoration of full production as the remedial measures are implemented.
Orosur Mining Inc (AIM:OMI, TSX-V:OMI) 8.8p, Mkt Cap £16.7m – Operational update and $2m option payment received*
- Orosur’s JV partner at the Anzá Project, MMA, a JV itself between Newmont and Agnico Eagle, has decided to move to Phase 2 of the agreement.
- Phase 2 requires MMA to spend a further $20m on the project over 4 years to take its total ownership of the Anzá project to 65%.
- Phase 1 was completed in September 2022, with MMA spending over $10m on exploration efforts on the project, taking their stake to 51%.
- Under the agreement, the move to Phase 2 by MMA will grant a $2m option payment payable to Orosur, taking the Company’s cash position to over $4m.
- The transition to Phase 2 by MMA will require several months of corporate restructuring.
- As a result, exploration efforts at Anzá have wound down for the time being, with the Company looking to consolidate various licence process currently underway.
- At Orosur’s El Pantano Project, a specialist geological site visit has just been completed, providing a better understanding of the project’s style of mineralisation and primary controls to guide future exploration strategies.
- Mapping and sampling at El Pantano suggests potential for low-sulphidation epithermal systems, guided by mercury and arsenic anomalies over an >8km strike.
- Going forward at El Pantano, geological mapping and geochemical sampling are underway alongside ground magnetic surveys. The Company hopes to utilise IP before the winter break starts in May.
- At Ariquemes in Brazil, Orosur is executing a large-scale regional sampling programme with its JV partner, with pending results expected to give more targeted exploration targets.
*SP Angel acts as nomad and broker to Orosur Mining
Thor Energy PLC (AIM:THR, OTCQB:THORF, ASX:THR) 0.35p, Mkt Cap £8.5m – Geophysical survey at Alford West.
- Thor Energy (formerly Thor Mining) reports that a geophysical survey, by its’ 30% owned EnviroCopper, has started at the Alford West copper gold project in South Australia.
- The Ambient Noise Tomography (ANT) survey, which uses “Lightweight battery-powered sensors … [to] … measure naturally occurring seismic vibrations to detect variations in density of the underlying rock units” aims to identify “areas with low-density contrast which have been shown to host oxidised copper mineralisation amenable to potential In-Situ Copper Recovery” for subsequent drilling.
- The company says that the “technology has the potential to significantly improve exploration efficiency in both time and cost, and lead to improved drill targeting. This will result in fewer drillholes, lower environmental impact and reduced time on the land”.
- The results of the survey, which is partially funded by a grant of up to A$30,000 from the South Australia Government, are expected “in late March 2023”.
- Managing Director, Nicole Galloway Warland, said that “This survey aims to create detailed subsurface maps which will assist targeting areas of potential oxide copper mineralisation within the Alford Copper Belt, hence reducing and focusing further drilling programs”
Conclusion: Thor Energy’s 30% owned EnviroCopper is starting a geophysical survey on the Alford West property in South Australia using advanced techniques to help identify areas amenable for in situ copper leaching and to help define drill targets. We look forward to further news on completion of the survey in late March.
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Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Sales
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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Gold, Platinum, Palladium, Silver - BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel - Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt - LME
Oil Brent - ICE
Natural Gas, Uranium, Iron Ore - NYMEX
Thermal Coal - Bloomberg OTC Composite
Coking Coal - SSY
RRE - Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite - Asian Metal
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