BlueJay Mining* (LON:JAY) STRONG BUY - Target Price 24p – Additional licenses granted at Disko-Nuussuaq in Greenland
BlueRock Diamonds* (LON:BRD) – BlueRock production rises toward target production with increasing diamond grade recovered
Goldstone Resources (LON:GRL) – Director sell shares to Non-Exec Chairman Bill Trew
Dalradian Resources (LON:DALR) – Raising C$84.75m to advance Curraghinalt
Edenville Energy (LON:EDL) - Sales agreement for up to 75% of Rukwa production
Strategic Minerals* (LON:SML) – Record quarter at Cobre underpins management expectation of >US$1m profit in 2017
Rare Earth (LON:REE) prices showing sustained increase
• The Australian listed rare earth developer, Peak Resources (PEK AU), has pointed to “Sustained price rises for the permanent magnet rare earths over the last 10 months [which] have seen NdPr [neodymium-praseodymium] prices increase over 110% since November 2016”.
• Citing that “In excess of 90% of EV and hybrid vehicles in development include an NdPr permanent magnet motor” the company highlights that “the strong price increases for NdPr have occurred earlier than analysts predicted, driven by industry consolidation and the enforcement of production quotas and environmental guidelines in China.
• Increased physical demand from EVs has yet to substantively kick-in, but the uptake of EV technology is gathering momentum.”
• We see Mkango Resources* , which is one of the few London listed rare earths companies and whose orebody at Songwe Hill in Malawi is also weighted towards NdPr, as a potential beneficiary of the price improvement and of the wider acceleration in the rare earth commodity market identified by Peak Resources.
*SP Angel acts as Nomad and Broker to Mkango Resources
New materials lead the way as Graphene companies go head to head with Haydale and Applied Graphene both launching accelerated bookbuilds to raise funds on same day
Graphene technology accelerating as companies raise funds for new growth
• It will be interesting to see if Haydale Graphene and Applied Graphene get their money as they go head to head for funds in the market today.
• Haydale is looking to raise £9m (£6m plus another £3m) to qualifying participants.
• Applied Graphene is also looking to raise a minimum of £9m plus another £1m from qualifying shareholders.
• “Haydale has income visibility from its long-term grant awards, the ongoing advanced composite consulting services from its highly skilled team at Loughborough, and SiC sales orders from its US operation which, in aggregate, provided the Group with a record order book of £5.4 million at the year-end, that has since grown to approximately £6.0 million as at the date of this Announcement.
• The Group has evolved from an R&D focused business to a commercial entity with a real geographic presence and this past year, has grown total income by more than 100 per cent. The recent overseas investments together with sales focussed management actions results in an expectation of significant increases in product sales in the current financial year, should build the foundations for Haydale to achieve its near-term and long-term growth objectives.
• The Directors believe that the long-term repeatability of its core markets, with Haydale's solutions being designed into the customer's end products, should add to its increasing sales and sales order visibility over time.”
• Haydale is also pressing ahead with aerospace applications for its product and recently completed a project with GKN and Cobham for lightning protection on an Airbus Aileron.
• “Applied Graphene Materials is wholly focused on graphene material production and assisting its adoption by end users in order to deliver property enhancements and performance benefits into host materials. The Company has established and is progressing a large number of customer engagements and has continued to develop its intellectual property, know-how and knowledge base through extensive work on the formatting and dispersion of graphene, including its proprietary graphene delivery technology, Structural InkTM.
• The Group has continued to expand its pipeline of commercial opportunities, particularly in the two core target market sectors of coatings and composites where the Board believes that its products can add most value and that there are large scale and long term opportunities.
• The Group's proprietary production processes have proven its ability to offer a specialty range of graphene of consistent quality. This, together with its knowledge of formatting blends and suspensions, along with the capability to effectively disperse graphene into customers' materials has, the Directors believe, positioned the Group to become a leading graphene provider and it is now pursuing volume production orders.”
• Applied Graphene is also working on aerospace applications and is developing lightweight adhesive for Airbus Space and Defence for use in satellites
• Graphite for graphene production: neither company mines its own graphite for graphene production and will have to buy more graphite material from the market to feed their expansion plans.
Conclusion: Graphite producers will need to ramp up production to meet the expected expansion in demand from new growth in graphene material supply and new graphene products.
Global graphite production is around 1.2mtpa and rising with China quick to lead the way with around 780,000t followed by India at 170,000t and Brazil at 80,000t.
While it is not difficult to find graphite deposits the challenge is to find and to then produce good quality large flake graphite for graphene production.
Graphene can also be created through the exfoliation of graphite into graphene in solution though we are uncertain of the the quality of the graphite input and the yields recovered.
UN bans ships from global ports for violating North Korean sanctions
• China and Russia have both signed up to the new ban meaning that any ship that docks in North Korea might as well head straight for the scrapyard assuming China and Russia adhere to the ban.
• Separately, Donald Trump is planning to visit South Korea and may visit the Demilitarised zone between North Korea and South Korea as part of his trip.
• We suspect the safest place in South Korea might be the underground workings at Bluebird Merchant Ventures’ Gubong gold mine where the main access points have now been selected for further civil works to provide permanent entrances for the project.
Dow Jones Industrials -0.06% at 22,761
Nikkei 225 +0.64% at 20,824
HK Hang Seng +0.58% at 28,491
Shanghai Composite +0.26% at 3,383
FTSE 350 Mining -0.19% at 17,331
AIM Basic Resources -0.01% at 2,520
Economics
Germany – Trade balance posted another strong month in August despite stronger euro with trade generating €17.8bn in current account balance and beating market estimates.
• Exports climbed the most in a year driving the trade surplus.
• Exports (%mom): 3.1 v 0.2 in July and 1.1 forecast.
• Imports (%mom): 1.2 v 2.4 in July and 0.5 forecast.
France – Factory output came in weak in August as weak consumer goods production overshadowed stronger an increase in capital goods.
• Despite a slowdown in August, previous month numbers have been revised upwards with Q3 numbers to date pointing to a positive contribution to quarterly GDP; albeit a smaller one when compared to Q2.
• Industrial Production (%mom): -0.3 v 0.8 in July and 0.4 forecast.
• Industrial Production (%yoy): 1.1 v 3.9 in July and 1.5 forecast.
UK – Factory output continued to recover in August following modest performance through Q3 led by gains in the manufacturing sector which accounts for nearly 3/4s of production.
• In the three months to August 2017, production climbed 0.9%qoq with all four main sector posting gains.
• Industrial Production (%mom): 0.2 v 0.3 in July and 0.2 forecast.
• Industrial Production (%yoy): 1.6 v 1.1 in July and 0.9 forecast.
Australia – Opposition parties blocked new royalty increase legislation in parliament.
• The Western Australia government is seeking to raise gold royalties to 3.75% from 2.5% at gold prices of above A$1,200/oz to improve the state’s earnings and reduce record debt.
• The government estimated that the measure would have raised A$392m over four years while the opposition argued it will cost jobs and exploration spending.
• Gold accounts for only 5% of the WA royalty income with iron ore being the main revenue driver accounting for c.85% of total receipts.
Indonesia – Foreign investors cut their positions in local debt and stocks as the US Fed looks determined to continue with monetary tightening with local currency dropping to nearly the weakest in a year.
• Overseas investors sold $849m of securities last week, the most since November, Bloomberg reports.
• Stocks posted a record outflow of $2.1bn in Q3.
Currencies
US$1.1781/eur vs 1.1687/eur yesterday. Yen 112.40/$ vs 113.03/$. SAr 13.737/$ vs 13.699/$. $1.319/gbp vs $1.307/gbp.
0.778/aud vs 0.777/aud. CNY 6.585/$ vs 6.653/$.
Commodity News
Precious metals:
Gold US$1,289/oz vs US$1,268/oz yesterday
• Geopolitical tension continue to rise as news of U.S. President Donald Trump’s Asia tour now includes the highly contentious, heavily-fortified Demilitarized Zone between North and South Korea to deliver a strong message to Pyongyang over its nuclear weapon development program.
• The diplomatic standoff between the USA and Turkey were also heightened following the arrest of a Turkish citizen employed at the US consulate for alleged involvement in the July 2016 failed coup against the Turkish President Recep Tayyip Erdogan.
• Gains to gold were capped however as the dollar index remained steady ahead of the expected Federal Reserve interest rate hike this year.
• Investor sentiment across the Eurozone climbed to ten-year highs on the back of robust industrial output in Germany, the highest for six years.
• Indian legislations surrounding anti-money laundering were withdrawn by government officials ahead of the Diwali festival. There were concerns that the legislations would curtail gold demand during the festival.
Gold ETFs 69.3moz vs US$69.0moz yesterday
Platinum US$925/oz vs US$916/oz yesterday
Palladium US$939/oz vs US$941/oz yesterday
Silver US$17.10/oz vs US$16.60/oz yesterday
Base metals:
Copper US$ 6,684/t vs US$6,693/t yesterday
• Shares in Freeport McMoRan Inc. have tumbled following news that Indonesia’s mining minister Ignasius Johan estimate the colossal Grasberg copper mine at $8 billion. The company has ongoing negotiations over the divestment of its majority stake (51%) in the operation.
• Public rage over foreign ownership of the region’s biggest copper asset forced closure of the mine, with deal negotiations focused on understanding the asset value, timing and structure of the required divestment. However, there has been no closure on establishing the worth of the world’s second-largest copper mine.
Hurricane rebuilding efforts lends support to copper prices
• Concerns of tight supply ahead of a traditional peak demand season for copper is expected to lend support to copper prices throughout the day – in physical market supply tight before China’s holiday
• Rebuilding effort in and around Houston, Texas, is having a noticeable impact on the country’s copper wire market while people start repairing their homes and replacing flooded cars
Congo halts Sicomines Copper exports
• Ordered Sinohydro Corp and China Railway Construction Corp’s local mining venture to stop exporting unprocessed copper and cobalt and refine all its metals within the country
• Must ship only ‘high value products’ as government looks to ‘ensure prompt repayment’ of country’s continuing $6billion minerals for infrastructure deal with China
Aluminium US$ 2,160/t vs US$2,161/t yesterday - Kobe Steel falsified data on copper and aluminium parts
• Admitted to falsifying inspection data on about 20,000 tonnes of metals used in aircraft and automobiles – affected shipments to about 200 customers
• Said was not aware of any safety concerns or problems as a result of shipments and gave no information on what was wrong with the metals it shipped
Nickel US$ 10,950/t vs US$10,605/t yesterday
• Nickel stocks in LME-registered warehouses dropped 1,638 tonnes, boosting the metal 4% to its highest price since Sept. 21.
Zinc US$ 3,224/t vs US$3,284/t yesterday - Shanghai zinc hits 9 and a half year high
• Rallied by 4% to hit most expensive since March 2008 at 26,935 yuan a tonne
• Concerns about dwindling supply have lifted prices as closure of several giant mines last year has crimped production of the metal
Lead US$ 2,491/t vs US$2,573/t yesterday
Tin US$ 20,905/t vs US$20,975/t yesterday
Energy:
Oil US$55.9/bbl vs US$56.8/bbl yesterday
Natural Gas US$2.845/mmbtu vs US$2.910/mmbtu yesterday
Uranium US$20.15/lb vs US$20.45/lb yesterday
Lithium – Sodium-ion battery beats lithium-ion for cost effectiveness
• Stanford team developed sodium – ion battery that would beat lithium in terms of cost per storage capacity
• The new battery does not surpass lithium in performance is but it leads on costs due to abundancy of sodium
• We suspect lithium carbonate and hydroxide costs will pull back in time
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$59.6/t vs US$62.2/t – Prices continued to slide as markets weighed the impact of steel production cuts in China on demand.
• Singapore iron ore futures lost as much as 2.3% hitting $59.1/t marking the weakest level since June.
• Benchmark spot ore with 62% Fe was trading at $62.7 on Monday after dropping to $61.7 last Thursday.
• Australia’s Department of Industry, Innovation and Science forecast prices to average $49.5 in 2018 in a quarterly report last Friday.
Chinese steel rebar 25mm US$640.6/t vs US$621.2/t
• Concerns in Chinese steel product markets are growing over substantial inventory level increases during the Golden Week holiday. Downstream demand is yet to match the increase, however growing inventory levels are likely a consequence of boosting production ahead of imminent winter production restrictions concerning national emission levels.
• Ferrous scrap exports from U.S. shores, totaling 165,000 tonnes, noticeably boosted export prices in strong contrast to the downward trend of the domestic market. The sale of four scrap cargoes elevated prices in the range $9-14 per tonne from previous East Coast sales at $301 per tonne cfr.
Thermal coal (1st year forward cif ARA) US$79.0/t vs US$79.8/t
Premium hard coking coal Aus fob US$185.0/t vs US$187.0/t - China’s coal market cools on rising inventory, steel output curbs
• Inventory in major ports increased and authorities ordered more steel mills to curb production, hurting demand of coking coal
• Stock levels with China's six-largest coastal power plants climbed to 10.46 million tonnes on Monday, up from 10.29 million tonnes a week ago
• campaign to curb production in more than 28 northern China cities added another blow to coking coke demand amid increasing worries of oversupply
Other:
Tungsten APT European US$280-295/mtu vs US$290-305/mtu
Chinese government begins enforcing restrictions on global scrap imports
• China is under pressure to deliver more detail surrounding it’s proposed plans to limit and ban certain solid waste imports, particularly to deliver transparency over the extension to non-ferrous and ferrous scrap metals.
• At the recent World Trade Organization, China was requested by the USA, EU, Australia, Canada and South Korea to submit details over its presented document informing that the country would no longer accept ‘foreign garbage’ such as slag from steelmakers and low-grade non-ferrous scrap items.
• The Ministry of Environmental Protection released a draft of changes to technical standards, detailing stricter regulations for imported scrap impurities, alongside new weight requirements for metal and electrical appliances. The report proposes a tightening of thresholds for ‘carried waste’ to 0.3% for all recycled commodities. However, industrial participants feel the proposed limitations cannot be met, and could have significant implications on the multibillion-dollar industry.
Company News
BlueJay Mining* (LON:JAY) 17p, Mkt Cap £131m – Additional licenses granted at Disko-Nuussuaq in Greenland
STRONG BUY
Target Price 24p
• BlueJay Mining report the receipt of additional licenses expanding its exploration territory around the Disko area by some 200%.
• The Disko license area is around 5.9km long and 1.1km wide with an 28t boulder at surface assaying 6.9% nickel, 3.7% copper, 0.6% cobalt and 2g/t PGM metals.
• The Disco licenses are located relatively close to the town of Illusak in Greenland which is relatively well connected due to incoming tourism to see the Illusak glacier.
*SP Angel act as nomad and broker to BlueJay Mining. An SP Angel mining analyst has visited the Pituffik ilmenite sands project in Greenland.
BlueRock Diamonds* (LON:BRD) 1.9p, Mkt Cap £2.6m – BlueRock production rises toward target production with increasing diamond grade recovered
• BlueRock Diamonds reports ore production of 22,010t through September up from 20,929t in August.
• The mine is now said to be break even before intercompany charges for the month of September.
• Level 2 kimberlite material should be processed shortly with expected further improvement in recovered grade.
• The team have also appointed a new consultant geologist, Jock Robey who is a Fellow of the Geological Society of South Africa and has a PHD from the University of Cape Town.
• Jock previously worked for De Beers as a kimberlite petrologist specialising in kimberlite mapping logging and petrology.
• BlueRock has also completed the first stage of its bulk sampling at Jubilee which comprised processing 480t of kimberlite excavated from 10m below surface level. 4.75 carats were recovered, with the largest diamond being 1.65 carats. In total, 11 diamonds were recovered, all of which were of high gem quality.
• Production at Kareevlei has been disrupted by rain in early October indicating the company may miss its 22,000t target for the month.
Conclusion: BlueRock is pulling itself up by its bootstraps with better operational and financial reports coming through. We look forward to the combination of higher target throughput of 25,000t per month with higher grades of around 4.5cpht making an appreciable difference to the financial performance of the company towards the end of the year.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Goldstone Resources (LON:GRL) 1.85 pence, Mkt Cap £4.6m – Director sell shares to Non-Exec Chairman Bill Trew
• Goldstone Resources reports today that Emma Priestly, CEO of Goldstone has sold 2m shares to Bill Trew, the non-executive chairman.
• Bill Trew was appointed to the Goldstone board on 2 October replacing Neil Gardyne.
• Trew is best known for his work at Oxus Gold and is also on the boards of MAED Group, Gold Mines of Uganda and Paracale Gold Limited. MAED Group is a mining contracting company.
• Goldstone recently announced results of channel sampling from a series of 4 trenches excavated to a depth of 7 metres to the south of the former Homase open pit, which is reported to have produced over 52,000 oz of gold between 2002-03.
• The trenches form part of a continuing study, which also includes a programme of reverse circulation drilling to help with pit definition, “showed economic intersections of up to 14 metres true width with grades of up to 4.5 g/t of gold”. The mineralisation is hosted within sub parallel quartz veinlets associated with pyrite and minor arsenopyrite and with disseminated sulphides within shales and metasediments.
Conclusion: Things are going to get interesting with Bill Trew now on the board.
Dalradian Resources (LON:DALR) 82p, Mkt Cap £232m – Raising C$84.75m to advance Curraghinalt
• The Company reports that it has agreed with two key shareholders, Osisko Gold Royalties and Orion Mine Finance, to raise a total of C$84.75m as it moves towards the development of the Curraghinalt gold mine in Northern Ireland.
• Subject to the company submitting its application to mine to the authorities in Northern Ireland, Osisko has agreed to subscribe for C$28.25m of new shares at a price C$1.47/share and to exercise warrants at C$1.04/share to raise a further C$6.5m. Orion has agreed to subscribe for C$50m new shares at C$1.47/share.
• The subscriptions are cross-conditional on the participation of both Osisko and Orion and will result in Osisko holding 9.1% and Orion holding 9.75% of Dalradian.
• Covenants attached to the subscription grant Osisko and Orion “rights, including among other things, a standstill, participation rights in favour of the investors to maintain their pro rata interest in Dalradian and rights to match other offers for project financing. In addition, Dalradian has granted Orion the right to designate one nominee to the board of directors of Dalradian and a period of exclusivity with respect to the negotiation of future project financing.”
• Welcoming the continuing support of Osisko and Orion, CEO, Patrick Anderson, commented “Today's placement, together with all recent warrant exercises, will provide the company with additional equity funding in excess of C$110 million. This means that the company is now well-funded to move Curraghinalt through permitting, while continuing to expand and improve the value of the project through further investment in exploration and engineering."
Conclusion: Dalradian has the support of two key shareholders in its development of Curraghinalt. We look forward to the planning application which has previously been targeted before the end of 2017.
Edenville Energy (LON:EDL) 0.67 pence, Mkt Cap £9m - Sales agreement for up to 75% of Rukwa production
• Edenville Energy reports that it has agreed with a Kenyan based coal trader, Riftcot Limited, for the supply of “up to 75 per cent of the Company’s Rukwa Coal Project’s yearly production … at a recognised commercial price”.
• The agreement, which “does not include the supply of any coal to the planned mine mouth power plant at Rukwa” provides Edenville Energy with access to the existing commercial and logistical network established by Riftcot while Riftcot “will be able to access the only washed coal product currently available in Tanzania and one of very few in East Africa as a whole.”
• Commenting on the significance of the agreement with Riftcot, CEO, Rufus Short, pointed out that “We see this as an opportunity to leverage Riftcot’s trading platform and experience with Edenville’s newly opened project … By committing 75% of our production we will be able to give volume Riftcot’s supply contracts whilst also having some product in reserve to supply other clients with their individual requirements.”
Conclusion: The agreement with Riftcot looks mutually beneficial to both parties, however we wonder whether Riftcot is committed to any minimum level of offtake which would help underpin Rukwa’s production of washed coal.
Strategic Minerals* (LON:SML) 2.4p, Mkt Cap £30.5m – Record quarter at Cobre underpins management expectation of >US$1m profit in 2017
• Strategic Minerals reports record quarterly sales from its Cobre magnetite tailings operation in New Mexico with sales of 29,539 tons generating revenue of US$2.036m for the three months ending 30th September 2017.
• The record quarterly figure which is unsurprising given that the company has previously reported record monthly sales for both July and August and brings year to date sales and revenues to 54,249 tons and US$3.47m.
• The company comments that “the figures for this September quarter are approximately 15% higher than the current underlying sales” as they partly reflect “clearance of prepaid June tonnage for our new client”.
• The company highlights that the Cobre operation is generating profit margins in excess of 60% during September and that “The Board and Management considers that, on the basis of current sales, this profit margin can be maintained throughout 2018 and that annual sales are likely to exceed US$5m.”
• Strategic Minerals now expects that “2017 will see the company record its first profit in excess of US$1m.”
• The company underlines the importance of the cash generation at Cobre in fulfilling its wider expansion strategy; “With sizeable cash flows, after meeting exploration costs associated with both Redmoor and Hanns Camp, the Company has a healthy cash balance, which at 30 September 2017 was US$1.627m (30 June 2017: US$1.359m).”
Conclusion: Accelerating sales volumes and improving margins at Cobre underpin management’s expectation that Sttrategic Minerals will generate profits of over US$1m in 2017.
*SP Angel act as Nomad and broker to Strategic Minerals