Directa Plus plc (LON:DCTA) – New AIM listing for producer and supplier of graphene based products
Edenville Energy (LON:EDL) - Rukwa Coal to Power Project – update
Metals Exploration* (LON:MTL) – 2015 results and update
Scotgold Resources – (LON:SGZ) new director
W Resources (LON:WRES) – 2015 results and projects update
BHP reckon real sPark for copper demand is growth in renewable energy
• We spend allot of time looking into the impact of new energy sources and demand on materials, particularly copper.
• New distributed energy projects from urban wind and solar to large scale offshore wind and larger scale solar instillations will all use copper for transmission which is good for demand and in the case of large scale offshore programs is very good for demand.
• Bloomberg New Energy forecasts renewable sources will account for 2/3rds of an estimated $12.2trillion of investment over the next 25 years.
• The huge and transformational demand driver for copper is likely to be the growth of electric vehicles. If EVs and PHEVs become the preferred option over hybrids then governments will have to beef up national transmission systems.
• Voters will not take kindly to politicians if they are told they cannot plug in their new EVs and a large scale move to electric vehicles will require either a monumental increase in locally generated power or a massive increase in the capacity of the Grid.
• The only thing holding back the rise of EVs right now is ‘range anxiety’ eg battery performance. New developments are quite likely to lead to significantly improved batteries over the next few years.
• A 2x power density increase in lithium batteries will be a significant enhancement and should tip the balance away from gasoline.
• A 5-10x power density increase could effectively kill off the combustion engine for normal domestic use. Not to mention the environmental benefits.
• Timing: we think a 2x increase is coming shortly, whereas a 5-10x increase might take 10 years which gives policymakers time to get some plans into place.
• Either way the world is going to be using a lot more copper through the transitional process to build the infrastructure for renewables and EVs and we are quite likely to look back in time and say why didn’t we invest so much more in copper.
• The key copper miners for us are Glencore, Rio Tinto, BHP and First Quantum Minerals. SolGold* and Metminco* are AIM listed copper project companies to note.
Inventory levels in Shanghai fall for copper, aluminium, zinc and tin
• Significant drawdown in Shanghai warehouse stocks indicate growth in demand for metals as China moves to restart new infrastructure projects.
• Copper stocks fell by 36,122t on the week with Aluminium down 24,406t zinc down 17,995t and tin down 994t.
Dow Jones Industrials -0.13% at 17,828
Nikkei 225 +0.37% at 16,835
HK Hang Seng +0.88% at 20,577
Shanghai Composite -0.05% at 2,821
FTSE 350 Mining +0.10% at 9,038
AIM Basic Resources +1.25% at 1,906
Economic News
US - Durable goods orders rose by 3.4% in April 2016 – 85% of the increase was due to a surge in orders for new commercial jets.
• The jets though take 5 years to build. Auto parts demand increased by 3%. Removing transport related demand, core orders 0.4% higher in April
• and were 4.1% lower over the first 4 months of the year.
• US Federal Reserve official (Fed. Gov. Jeremy Powell) has stated that gradual interest rate rises are likely but it was important to see strengthening of both growth and jobs growth in the 2nd quarter of 2016 but also wage rises.
Markets and US dollar nervous ahead of data today
• US Corporate profits Q1 preliminary
• US GDP second Q1 estimate
• Speech later today by Federal Reserve Chairperson Janet Yellen
Japan - may now look to now delay the introduction a sales tax rise, from 8% to 10% until next year – this to help a flagging economy.
• A prior rise in 2014 is thought to have moved the country into recession. The decision on postponement of the rise is expected pre summer.
Taiwan - has cut its growth forecast for the year from 1.47% to 1.06% . The nation has been impacted by China’s growth slowing.
Taiwan saw exports to China slow by 6.8% in April – the apparently exacerbated by China moving to local suppliers for certain products.
G7 – leaders looking to stimulate demand
• Global leaders meeting in Japan for a G-7 summit have stated that they will use “all policy tools – monetary, fiscal and structural” to strengthen demand and put debt onto a sustainable path. The leaders are grappling with the challenges to create employment growth and manage debt. Japan’s prime minister warned at summit of the risks of a global economic crisis.
G7 leaders see BREXIT as serious risk to global growth
• G7 leaders meeting in Japan see a vote for Britain to leave the EU as a serious threat to global growth.
• Maybe its because it is very convenient for G7 nations to sell into the UK and EU as a single market
• Or maybe its because leaving the EU would raise trade barriers to UK business selling into the UK
• If we were to ask any of the other G7 nations to give up control of their boarders and allow an unelected group to determine their laws then we suspect they would refuse. Perhaps the answer is to reconfigure the EU into something more acceptable eg Economic Union without loss of sovereignty?
• https://www.bbc.co.uk/news/business-36394905
Currencies
US$1.1182/eur vs 1.1176/eur yesterday. Yen 109.71/$ vs 109.98.24/$. SAr 15.522/$ vs 15.615/$. $1.466/gbp vs 1.466/gbp
0.722/aud vs 0.721/aud. CNY 6.560/$ vs 6.559/$ –
Commodity News
Precious metals:
Gold US$1,222/oz vs US$1,227/oz yesterday - US interest rate outlook causes gold prices to slip further.
• News that Venezuela has been selling its gold reserves is no surprise but the market may still be absorbing the sales
Gold ETFs 59.3moz unch v 59.3moz yesterday – unch
Platinum US$994/oz vs US$1,002/oz yesterday –
Palladium US$543/oz vs US$541/oz yesterday –
Silver US$16.31/oz vs US$16.38/oz yesterday –
Base metals:
Copper US$ 4,693/t vs US$4,693/t yesterday -
Aluminium US$ 1,559/t vs US$1,555/t yesterday
Nickel US$ 8,450/t vs US$8,400/t yesterday –
Zinc US$ 1,897/t vs US$1,871/t yesterday
Lead US$ 1,689/t vs US$1,653/t yesterday
Tin US$ 16,200/t vs US$15,750/t yesterday
Energy:
Oil US$48.9/bbl vs US$50.0/bbl yesterday
Natural Gas US$2.143/mmbtu vs US$1.965/mmbtu yesterday
Uranium US$27.25/lb vs US$27.90/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$47.4/t vs US$46.9/t –
Steel – The EU may place new anti-dumping tariffs on Chinese steel shipments.
• A number of steel associations urged the G7 economies that meet in Japan this week to harden their stance on cheap steel imports from China.
• The US has also put a 450% duty on Chinese corrosion resistant steel as well as 3-92% duties on similar steel from Italy, India, South Korea and Taiwan
Thermal coal (1st year forward cif ARA) US$48.2/t vs US$48.6/t yesterday –
Other:
Tungsten - APT European prices stood at $213-225/mtu vs $215-225/mtu
Company News
Directa Plus plc – New AIM listing for producer and supplier of graphene based products
• Directa Plus plc, an Itallian based graphene producer and supplier is listing on AIM today with a market capitalisation of £33.2m.
• The company has raised £12.8m in the market to support its growth strategy.
• The business is based in the Como Science and Technology Park in Lomazzo, Italy.
• “The initial strategy was to create a company that was able to produce sustainable nano-materials at a reasonable price using scaleable production process. The final aim was to focus on specific existing markets and in particular ones where their experience in graphite suggested strong market opportunities for graphene. In June 2006, the Group filed its first patent application for Directa Plus’ super expansion G+ production process. After funding the initial development of its graphene production process through the founder shareholders, in 2009 the Company obtained external funding from Quadrivio Capital. This provided the Company with the additional capital required to further develop its graphene processes. In June 2010, the Group was granted the patent for its super expansion production process by the US patent and trademark office.
• During the last twelve months, collaborations between Directa Plus and its partners to develop commercial products have begun to translate into commercial sales. In October 2015, Vittoria launched its new range of high-performance bicycle tyres and wheels incorporating Directa Plus’ G+ technology. In December 2015, following successful remediation work on contaminated water in Italy and Romania using Directa Plus’ Grafysorber® product, the Group sold three mobile decontamination units for tackling environmental emergencies. In January 2016, at the international sport fair, ISPO, held in Munich, in collaboration with Colmar, the high-end Italian sports and activewear company, a sports clothing collection (comprising ready-to-wear ski jackets for men and women, ski suits, technical underwear and a polo shirt) incorporating Directa Plus’ G+ product was launched. This was the first application of Directa Plus’ graphene nanotechnology in sportswear. Directa Plus has now created a range of graphene products, in powder, paste and liquid form, all under the G+ brand and has supplied more than 2.2 tonnes of graphene-based products in the last 18 months.”
Edenville Energy (EDL LN) 0.0325 pence, Mkt Cap £3.0m - Rukwa Coal to Power Project – update
• Edenville Energy reports that “Over the past several months we have achieved several key milestones, with the Company, alongside Tanesco,[Tanzania’s Power supply Company] establishing the framework to move the Rukwa Coal to Power Project forward with the completion of the PCN review process.”
• Discussions with potential power plant developers are underway and site visits by two potentially interested groups are now underway.
• The Company has submitted Environmental Impact Assessment registration applications and briefs for the power plant.
• The Chairman, Rufus Short, is quoted saying “The project has now reached the critical point where the technical, financial and commercial requirements can be completed, in line with the timeframes and conditions set out by the Tanzanian authorities, as we also seek to secure the project finance.”
Conclusion: The Rukwa coal to power project appears to be moving forward, however, with cash at 31st December amounting to around £317,000 and even after the £400,000 funding in March, with the pace of work accelerating, we speculate that the company may need to raise additional funds later this year.
Metals Exploration* (MTL LN) 7.4 pence, Mkt Cap £127.7m – 2015 results and update
• Metals Exploration reports a loss of £2.15m (2014 loss of £4.77m) for 2015. The company completed construction of the RunRunO mine in the Philippines in November, however the impact of Typhoon Lando in October delayed the mine start up as remedial work was required to rectify the damage caused and provide additional protective measures.
• The remedial and additional works received governmental approval in April and “Ore commissioning and debugging of the processing plant and associated operations commenced post-period end in May 2016.”
• The delays in initial production have necessitated the raising of an additional US$6.2m of equity in March and the company has agreed an “initial rescheduling of capital repayments to funders regarding the Company’s senior debt facility was completed in the period.” The Company also notes that, despite the setbacks and project slippage resulting from the typhoon, the “lenders remain supportive of the project and recognise its economic fundamentals have not changed”.
• As previously announced, payments of $13m originally due on 1st June, 1st December 2016 and 1st June 2017 have now been increased to $15m with an $8m payment originally due on 1st December 2017 has been increased to $13m while payments of $8m on 1st June 2018 and $7m due on 1st December 2018 remain unchanged. The 31st December 2015 interest payment has been paid in full.
• Following the lifting of the Government’s suspension orders and the start of ore commissioning, more detailed discussions of the long-term debt restructuring have now commenced.
• At 31st December, cash balances amounted to approximately £11m.
Conclusion: Metals Exploration continues to enjoy the support of its main shareholders and lenders as it restarts the commissioning of the RunRunO mine following delays in the wake of typhoon Lando.
*SP Angel act as Broker to Metals Exploration
Scotgold Resources – new director
• Scotgold Resources have announced the appointment of Gabriel Chiappini as a director.
• Mr Chiappini is based in Perth and is an Australian Chartered Accountant with extensive corporate experience in Australia
W Resources (WRES LN) 0.50p, Mkt Cap £19.4m – 2015 results and projects update
• W Resources, the tungsten developer focussed on the Iberian Peninsula, has reported a loss for 2015 of £606,000, in line with the £641,000 reported for 2014.
• Cash at the year-end amounted to £864,000 following fund raisings totalling £3.8m during 2015. A further £850,000 has been raised since the end of the 2015.
• W Resources has made considerable progress in moving ahead with its wholly owned La Parilla tungsten project in Spain and with the Regua tungsten project in Portugal as well as with its gold projects at Portalegre and Sao Martinho.
• The “fast-track” mine development at La Parilla is expected to produce a final development plan in mid-2016 and the company continues to target full production of 1300tpa of tungsten concentrates during 2017.
• At Régua, metallurgical results to date have been encouraging and this, combined with process flowsheet updates will enable us to start work on the definition development study." Further drilling and bulk sampling during the year are adding to the geological understanding, resource potential and metallurgical characteristics of the deposit and the company reports that “Mine development planning is now advanced and on-track for completion during mid-2016. Metallurgical and plant design work for an initial shallow open-pit mine design, as well as a second phase for a larger scale high-grade underground operation are also in progress.”
Conclusion: W Resources continues to set itself an ambitious schedule for production at La Parilla. We look forward to details of the final development plan when they become available.