Bushveld Minerals (LON:BMN) – Brazilian producer highlights vanadium 5 year price high
Edenville Energy (LON:EDL) – Preparing to supply sized coal from Rukwa
Ncondezi Energy (LON:NCCL) – Progress report on search for strategic partner
Strategic Minerals* (LON:SML) – Proposed Management Option Programme
LME base metals index is on course to post the seventh weekly increase heading for the longest run of weekly gains in more than a decade.
• Gold is mute this morning trading in a $5/oz range around the $1,290/oz mark.
• The US$ index was also little changed after climbing 0.2% on Thursday.
• Copper prices continue their ascend hitting three year high amid reports of disrupted supply, firm Chinese demand and falling inventories; Shanghai Futures Exchange copper inventories dropped 8.2% from last week, most since week to June 8.
• Iron ore is stronger today following a surge in Chinese steel futures; iron ore inventories in Chinese ports declined for five straight weeks, the longest streak since Sep/16, but remained up 16% YTD.
• Brent prices are higher amid reports Hurricane Harvey is approaching the major producing region in the US Gulf.
Trading in steel related commodities surges with Bloomberg reporting that volumes in ferrosilicon trading on the China’s Zhengzhou Commodity Exchange climbing to more than 705,000 contracts this week.
• This compares to an average of 22,000 contracts trading daily in July.
• Prices hit record high on Tuesday recording a 25% increase YTD.
Chinese steel mill debt restructuring marks the first time investors agreed to a principal haircut, according to Goldman Sachs.
• Bondholders of Dongbei Special Steel agreed to a 22% cash payout on their debts of more than CNY 500,000 ($75,000).
• Investors may also opt for their claims being converted into equity.
• Previous cases of failed businesses saw either repayments of owed funds in full supported by state bail out or were stuck in restructuring with investors reluctant to accept losses.
Dow Jones Industrials -0.13% at 21,783
Nikkei 225 +0.51% at 19,453
HK Hang Seng +1.22% at 27,855
Shanghai Composite +1.83% at 3,332
FTSE 350 Mining +0.44% at 17,419
AIM Basic Resources +0.05% at 2,519
Economic News
Germany – Final Q2 GDP numbers released this morning confirmed previous estimates for the economy to have expanded 0.6%qoq/2.1%yoy led by strong growth in industrial production and private consumption.
• Industrial output was up by an impressive 1.8%qoq accounting for about half a percentage point of the GDP growth recorded in the period.
• Consumption climbed 0.8%qoq marking the strongest increase since 2011 and beating estimates for a 0.7%qoq rise.
• Change in net exports weighed on overall growth as an increase in imports (+1.7%qoq) outpaced a rise in exports (+0.7%qoq).
• In a separate report, business outlook improved to the highest since 2014, according to the Ifo data.
• While the composite index slipped marginally (115.9 from 116.0 in July) driven by a small drop in assessments of current trading conditions, the future expectations index beat estimates and came in strong.
• Previously, Markit in their latest PMI report showed that firms remained strongly confident regarding future output over the next 12 months; although the subindex eased for the third straight month in August to the lowest in 2017 so far.
South Korea – Samsung vice-chairman and de facto head of the Company Lee Jae-yong who was planning to take over from his father chairman Lee Kun-hee has been sentenced to five years in prison.
• The court found Mr Lee guilty on a series of charges including bribery, embezzlement and perjury.
Currencies
US$1.1784/eur vs 1.1787/eur yesterday. Yen 109.64/$ vs 109.38/$. SAr 13.162/$ vs 13.215/$. $1.280/gbp vs $1.280/gbp.
0.791/aud vs 0.789/aud. CNY 6.664/$ vs 6.662/$.
Commodity News
Precious metals:
Gold US$1,287/oz vs US$1,286/oz yesterday
Gold ETFs 67.0moz vs US$67.0moz yesterday
Platinum US$978/oz vs US$979/oz yesterday
Palladium US$935/oz vs US$935/oz yesterday
Silver US$16.99/oz vs US$17.01/oz yesterday
Base metals:
Copper US$ 6,718/t vs US$6,575/t yesterday
Aluminium US$ 2,105/t vs US$2,064/t yesterday
Nickel US$ 11,705/t vs US$11,520/t yesterday
Zinc US$ 3,119/t vs US$3,129/t yesterday
Lead US$ 2,365/t vs US$2,408/t yesterday
Tin US$ 20,380/t vs US$20,375/t yesterday
Energy:
Oil US$52.5/bbl vs US$51.6/bbl yesterday
Natural Gas US$2.944/mmbtu vs US$2.944/mmbtu yesterday
Uranium US$20.25/lb vs US$20.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$75.9/t vs US$75.7/t
Chinese steel rebar 25mm US$643.8/t vs US$651.7/t
Thermal coal (1st year forward cif ARA) US$78.3/t vs US$77.5/t
Premium hard coking coal Aus fob US$202.6/t vs US$200.9/t
Other:
Tungsten APT European US$250-256/mtu vs US$248-256mtu
Steel – US steel and steel-related companies signed a letter to President Donald Trump asking for immediate import restrictions amid reports showing that inbound shipments of overseas steel prodcuts surged back to 2015 levels.
Company News
Bushveld Minerals (LON:BMN) 9.4p, mkt cap £75.6m – Brazilian producer highlights vanadium 5 year price high
Target price 14p
• Further positive news on vanadium pricing is contained within the announcement by the Canadian listed, Brazilian producer, Largo Resources that it had shipped “its 1000th lot shipment of vanadium, representing approximately 44 million pounds of vanadium pentoxide” from its Maracas Menchen mine in Bahia State.
• Largo comments that “The price range of V2O5 for the week ended August 18, 2017 was US$9.00/lb to US$10.00/lb (Source: Metal Bulletin), which represents an approximate 64% increase over the US$5.81 average price for fiscal Q2. We anticipate that the vanadium price environment created by the recent price increases which represent a 5-year high”.
• The price rises and optimism over future price trends stem from a number of, mainly China – related, factors including moves to curb environmental breaches, seasonal closures in China’s principal producing region of Sichuan and measures to limit imports of vanadium bearing scrap metal as well as the recently implemented measures to increase the vanadium content of steel reinforcing bars.
Conclusion: Bushveld Minerals is increasing its annual production capacity from 3000 tonnes to 5000 tonnes at a time when vanadium demand is increasing and the price has just reached a five-year high.
*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Edenville Energy (LON:EDL) 0.79 pence, Mkt Cap £8.7m - Preparing to supply sized coal from Rukwa
• Edenville Energy reports that the majority of the components for its coal washing plant at Rukwa in Tanzania have arrived on site and, with construction already underway, the balance of the equipment is expected to arrive next week.
• The screening section has already been completed and is currently undergoing operational testing to “allow sized coal to be distributed to customers who have requests pending.” The company also remarks that “We are in communication with others to take both screened coal and washed coal once the plant construction is completed.”, and “In addition to the Company marketing the coal, we have an agent actively exploring new client possibilities in the region, including Kenya, Rwanda and Uganda.”
• Independent testing has “returned raw coal values of 5,220Kcal/kg (21.93Mj) and 15.7% Ash. We are very encouraged by these numbers and consider when this coal is processed through the wash plant a premium product can be obtained.”
• Progress on waste (overburden) removal at the mine has exposed “significant quantities of coal in readiness for the plant. Overburden at this stage is soft and friable which is helping to achieve high digging rates.”
Conclusion: Edenville Energy has made progress towards the production of saleable coal from Rukwa. The impact of recent legislative changes concerning mining in Tanzania on the company’s business remains unclear at this stage though, in the past, the company has appeared to enjoy a constructive relationship with Government.
Ncondezi Energy (LON:NCCL) 4 pence, Mkt Cap £10m – Progress report on search for strategic partner
• Ncondezi Energy reports that it is now receiving non-binding offers from prospective partners for the development of the planned 300MW Ncondezi coal-fired power project in Mozambique. All non-binding offers are expected to have been received by the end of the month.
• The company expects to move to a second phase of the process in September, when a limited number of preferred candidates will be facilitated to undertake their detailed due-diligence processes and invited to undertake detailed negotiations with a view to submitting binding offers in early Q4 2017, and “the Company expects to be in a position to accept its preferred offer before year end.”
• Commenting on the progress achieved, Non-Executive Chairman, Michael Haworth, commented that “We are very pleased with the quality of the partners who have submitted offers to date, and believe the power project will be well positioned to finalise development, financing and initiate construction once a binding offer has been agreed.”
• The company has also announced that the holders of loans to Ncondezi, which include board and senior staff members, have agreed, in principle, to extend their loans for a further 12 months until 2nd September 2018. “This will provide the Company with time to conclude the new partner process, better develop loan repayment options and raise additional working capital by the end of September 2017.”
Conclusion: Ncondezi Energy expects to have selected a new partner for the development of the coal fired power plant in Mozambique before the end of 2017. Continuing support of the loan holders has been secured, in principle, and the company may look to secure additional working capital during September.
Strategic Minerals* (LON:SML) 2p, Mkt Cap £24.9m – Proposed Management Option Programme
• Strategic Minerals has announced its intention to introduce an option programme “designed to incentivise the Board and Management of the Company to target, over the next five year, a market capitalisation of £100m and progressing onto a share price of £0.10”.
• The proposed scheme consistes of 3 tranches as follows:
o Tranche 1 comprising 120m shares at a vesting price of £0.055; an exercise price of £0.0275 at a maturity date of 30th June 2020 and
o Tranche 2 comprising 55m shares at a vesting price of £0.075; an exercise price of £0.0375 at a maturity date of 30th June 2021 and
o Tranche 3 comprising 25m shares at a vesting price of £0.100; an exercise price of £0.0500 at a maturity date of 30th June 2022
• The Company points out that “As the bulk of these options are for the Board, it is considered appropriate that the adoption of this proposal be ratified by shareholders at a General Meeting to be held in London on 24 October 2017… “
• “It is currently intended that 30% of each Tranche will be allocated to the Managing Director, John Peters, 20% to the Non-Executive Chairman, Alan Broome and another 20% to Non-Executive Director Peter Wale”. The proposed recipients of the remaining 30% has not been disclosed but by inference should include the operational management teams at CARE in Australia, Cobre in New Mexico and Redmoor in the UK.
*SP Angel act as Nomad and broker to Strategic Minerals