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121 Mining Investment Conference London – 27 th - 28th November, 8 Fenchurch Place
• The 121 event is SOLD OUT with 70 mining companies attending and presenting
• > 277 institutional investors are already registered
• If you are an FCA registered institutional investor and would like to join then please register for a free pass and conference agenda:
• https://www.weare121.com/121mininginvestment-london/registration/register-investor/
Anglo Asian Mining* (LON:AAZ) – Exploration update
Bushveld Minerals (LON:BMN) BUY – Target price 14p – Vanadium takes on new volatility as prices spike and then pull back
Mkango Resources* (LON:MKA) – Phase II funding for further R&D into neodymium-iron-boron alloy powder magnets for 3D printing with Metalysis
Dow Jones Industrials -0.48% at 23,329
Nikkei 225 +0.15% at 21,740
HK Hang Seng -0.35% at 28,204
Shanghai Composite +0.31% at 3,408
FTSE 350 Mining +0.36% at 17,320
AIM Basic Resources -0.70% at 2,533
Economics
US – Equity markets dropped for a second time in the week on the back of a relatively lacklustre earnings released so far.
• The S&P 500 closed 0.5% as all major sectors finished in the red with telecoms hit hardest on weaker than expected AT&T results.
• Dow closed 0.5% lower following selling in Boeing, GE and IBM.
• Nasdaq also finished lower ahead of a series IT companies earnings results including Intel, Microsoft and Alphabet (parent of Google) later today.
• New Fed Chairman is expected to be named by President Trump before November 3.
Eurozone – The ECB is scheduled to hold its press conference today post the monetary policy meeting with market expectations for the central bank to cut its monthly bond purchases from its current €60bn.
• The euro is up against the US$ as traders position themselves ahead of what is expected to be a hawkish announcement from the ECB.
Germany – Consumer confidence held up well in November supported by positive economic growth outlook and record low unemployment.
• GfK Consumer Confidence: 10.7 v 10.8 in October and 10.8 forecast.
Spain – Unemployment levels continued to fall reaching a nine-year low in Q3/17, although the rate remains one of the highest in the single currency block.
• The rate dropped to 16.4% from 17.2% in the previous three months beating market estimates for a 16.6% reading.
• Positive economic data comes amid a continuing political conflict between the central government and pro-separatist supports in Catalonia.
• The Senate is set to start a two-day vote today to grant the central government direct control over the region allowing PM Rajoy to dismiss the Catalonia’s regional government and kick start regional elections.
UK – Car production dropped 4.1%yoy in September marking the fifth monthly dcline this year and taking total output to 1.26m vehicles YTD, down 2.2%yoy on the previous year, on the Motor Manufacturers and Traders data.
• Previously released auto demand data showed domestic sales of British-made autos fell 14%yoy.
• “Brexit is the greatest challenge of our times, and yet we still don’t have any clarity on what our future relationship with our biggest trading partner will look like,” the agency said.
• “Leaving the EU with no deal would be the worst outcome for our sector.”
• Inflation expectations measures are reported to be climbing higher.
• Short term inflation expectations jumped to 2.8% in October, the highest in four years, according to Citi and YouGov.
• Long-term inflation sentiment (over 5-10 years) climbed to 3.2%.
• This compares to CPI of 3.0% reported for September month.
• Consumer sentiment measured by YouGov and the CEBR released today showed that consumer confidence picked up during the month reflecting more positive outlook for household finances and job security.
• Although, one of negatives of the report was deteriorating outlook over the housing market with asking property prices seen slowing across the country for months and prices in London falling the most since the financial crisis in September.
Currencies
US$1.1826/eur vs 1.1766/eur yesterday. Yen 113.65/$ vs 113.83/$. SAr 14.210/$ vs 13.746/$.
$1.324/gbp vs $1.312/gbp. 0.770/aud vs 0.772/aud. CNY 6.633/$ vs 6.641/$.
Commodity News
Precious metals:
Gold US$1,280/oz vs US$1,274/oz yesterday
• Gold spot price climbed following a significant US equity market sell-off, prompting investors to favour the safe-haven asset. The Dow Jones Industrial Average tumbled 112 points, its largest one day fall, on the back of disappointing corporate earnings reports. The simultaneous weakening of the dollar, falling 0.35%, added to market participants favouring gold.
• Market attention is focused on todays’ European Central Bank announcement on the tapering of quantitative easing and its minimum bid rate. During the conference president Mario Draghi is expected to extend the ECB’s bond buying program by nine months while reducing monthly purchases by approximately 20% to €20-30 billion, the largest step in tightening loose monetary policy. The results of the ECB announcement could see euro strengthening, encouraging more interest in the metal price.
• Experts fear that miscommunication between North Korea and the U.S. could prompt rapid escalation of tensions in the region, as President Donald Trump stands as the first U.S. president to reciprocate the threatening rhetoric. This follows growing anticipation of an imminent seventh nuclear bomb over the Pacific Ocean, following the claimed thermonuclear hydrogen test in September. Kim In Ryong, the country’s deputy ambassador to the United Nations claimed “unless the hostile policy and the nuclear threat of the United States is thoroughly eradicated, we will never put our nuclear weapons and ballistic rockets on the negotiation table under any circumstances”.
Gold ETFs 69.6moz vs US$69.5moz yesterday
Platinum US$923/oz vs US$918/oz yesterday
Palladium US$968/oz vs US$958/oz yesterday
Silver US$16.98/oz vs US$16.89/oz yesterday
Base metals:
Copper US$ 6,995/t vs US$6,977/t yesterday
• As copper price approaches the $7,000/t level, the US copper market focus on annual negotiations for over 70-80% of 2018 tonnages. Despite weak physical demand in the US, contracts between producers and consumers over the next two months are expected to hold steady in the near term. The metal price is expected to see ongoing support following promotion from the 19th National Congress of the Communist Party of China in driving construction associated with the “One Belt, One Road” infrastructure projects, with enormous consumption across base metals.
• Chief Executive Richard Adkerson of Freeport-McMoRan was encouraged by negotiation progress with the Indonesian government regarding its share in the immense Grasberg copper and gold mine. Since halting the operation in February this year, ongoing discussions surround the valuation of the project and consequently government ownership of the mineral resources. Further, the government has introduced new mining rules this year to gain additional control over the nation’s mineral rights, favouring the move of state-owned PT Indonesia Asahan Aluminium Persero to take over the mine.
Aluminium US$ 2,203/t vs US$2,153/t yesterday
• London aluminium rallied to a five-year high following expectations of limited supply of aluminium materials resulting from the mounting Chinese war on smog. As production output has fallen by 30 percent across important metal producing regions, concerns grow among the rest of the world over security of future aluminium supply.
Nickel US$ 11,875/t vs US$11,865/t yesterday - Deepening nickel deficit forecast as EV market booms
• Analysts forecast that expansion of EV will exacerbate the predicted structural shortage in nickel between now and 2025
• Sales of EV’s are forecast to increase from 2.4 million in 2016 to about 14.2 in 2025, increasing nickel demand from 40,000t to an estimated 220,000 - production expected to step up
Zinc US$ 3,217/t vs US$3,153/t yesterday
Lead US$ 2,486/t vs US$2,459/t yesterday
Tin US$ 19,825/t vs US$19,750/t yesterday
Energy:
Oil US$58.3/bbl vs US$58.5/bbl yesterday
Natural Gas US$2.924/mmbtu vs US$2.984/mmbtu yesterday
Uranium US$20.20/lb vs US$20.20/lb yesterday
Lithium - Savannah resources seeks pole position in European lithium race
• Aims to begin mining lithium in Portugal at end of 2019, making it first big producer of the battery mineral in Europe
• Set to produce spodumene hard rock form of lithium in favour of relatively quick source of lithium compared with brines which can take longer to process
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$62.1/t vs US$62.9/t
Chinese steel rebar 25mm US$632.8/t vs US$634.1/t
Thermal coal (1st year forward cif ARA) US$85.2/t vs US$85.0/t
Premium hard coking coal Aus fob US$177.9/t vs US$177.9/t
Other:
Tungsten APT European US$280-285/mtu vs US$280-285/mtu last week
Kobe Steel data falsification damages industrial standards certification
• Japanese metals giant Kobe Steel has had its Japanese Industrial Standards (JIS) certificate revoked following the unfolding data falsification scandal. The third-largest Japanese steel manufacturer has been stung by widespread cancellations and alterations from customers along the global supply chain for cars, trains, airplanes and other equipment. The extensive tampering in the specifications of its products has resulted in the loss of status of JIS-compliance labels, which will influence customers to switch suppliers to Kobe’s competitors.
• In light of the broad data fabrication, Kobe is undergoing detailed safety checks for improper quality management across the plants, the results of which are to be disclosed to Japan’s industry ministry today. Despite the potential hazards resulting from the data manipulation, four Japanese carmakers have identified no safety issues with aluminium parts supplied by Kobe Steel.
Company News
Anglo Asian Mining* (LON:AAZ) 30p, Mkt Cap £34m – Exploration update
• At Ugur, the recently commissioned open pit operation, the geological programme is currently focused on identifying extensions to the delineated resource with 295 geochemical samples collected in adjacent areas.
• At Gedabek where mining operations have been temporarily suspended in Q3/17 the team is continuing with infill drilling to update the geological model with 5,000m of drilling planned for Q4/17 on top of c.4,800m completed this year.
• As previously guided, Gedabek operations are expected to restart in Q1/18.
• At Gadir, exploration focused on drilling from surface and underground workings to establish continuity in the mineralisation, ramp development ahead of restart of mining operations as well as driving the tunnel in the direction of the Gedabek open pit which is only 700m away to assess its underground potential.
• Around 4,000m of drilling has been completed from surface at Gadir with 2,150 samples returning intersected mineralised intervals pointing to down dip continuation of the orebody.
• Gadir production is reported to have been restarted in Sep/17.
• Gedabek style mineralisation has been intersected at the end of the tunnel developed in the direction of the open pit with further drilling works scheduled for 2018.
• Additionally, the team is being busy testing other prospective targets at Gedabek and Ordubad.
• The Company is planning to provide further exploration update later this quarter.
• On infrastructure side of things, the Company is currently engaged in expanding its tailings capacity consisting of two phases (2x6m dam walls’ raises) with the first one due before the year end.
Conclusion: The announcement highlights increased focus on exploration in the Company following earlier success at Ugur. In this regard, a potential to establish the Gedabek underground potential as well as extensions to the high grade Gadir orebody look particularly exciting. The Company is planning to prepare a three year exploration programme reflecting a structured approach the Company is taking to replace current depleting resource base.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Bushveld Minerals (LON:BMN) 9.5p, mkt cap £76.6m – Vanadium takes on new volatility as prices spike and then pull back
BUY – Target price 14p
• Bushveld Mineral’s cash flows should have been having a good time recently with vanadium pentoxide prices doubling over the past six months to a peak of >$11/lb.
• Ferro Vanadium prices accelerated in July with quoted vanadium price in the market rising to around $47.5/kg in September from ~$26.5/kg in July.
• Market prices have since pulled back to $34.13/kg for Ferro vanadium and to $6.75/lb for vanadium pentoxide.
• Our modelled assumptions for Ferro-Vanadium are $30.80/kg for 2017 pulling back to $25.25/lb thereafter. We assume a further 5% discount to this price in case Bushveld is not able to achieve benchmark prices. Realised prices are subject to a three-month delay indicating that the average realised price at around $27.5/kg for the year to end September should continue to increase towards the year end despite the pull back in spot prices.
• Vanadium demand has been rising in China and elsewhere as with Chinese demand seen as particularly strong following moves by the Chinese authorities to enforce regulations on the strength or rebar and the vanadium content within the metal. Chinese steel producers were seen as somewhat lax with regulations previously.
• Demand for ferro-vanadium is also rising as EU growth recovers though vanadium pentoxide demand is reported to be failing to recover.
• We believe vanadium supply was also restricted with higher grade and cleaner iron ore from Australia preferred to lower-grade vanadium rich iron ores causing vanadium slag supply to decline.
• Vanadium production is now said to be recovering in China and this along with some profit taking on physical material has accelerated the pull-back particularly in vanadium pentoxide.
• Furnace closures ahead of China’s National Congress meeting as part of their ‘Blue Sky’ directive has shut down between 30-50% depending on metal and region causing demand for steel related metals to pull back. We expect much of this production to remain closed till March 2018 indicating it may be a long, cold winter for local traders in certain metals.
• Bushveld Minerals is ramping up its annual production capacity from 3,000tpa to 5,000tpa in 2020.
Conclusion: Producers generally see a three-month delay in the receipt of new price levels indicating that Bushveld has yet to realise the full benefit of higher price levels seen since July. Ferro-vanadium prices are still above our assumed expectations and while prices may fall further we suspect they could remain above our forecast average price for the year.
*An SP Angel Mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Mkango Resources* (CVE:MKA) 3.25p, Mkt Cap £2.7m – Phase II funding for further R&D into neodymium-iron-boron alloy powder magnets for 3D printing with Metalysis
• Mkango report that regulatory approval has been received for its placing of stock for £500,000 to Talaxis for 14.5% of the company’s stock.
• Funds are to be used to begin phase II of its R&D program with Metalysis and for the continued optimisation of the Songwe Hill rare earths project in Malawi.
• Metalysis have completed phase I R&D to produce a neodymium-iron-boron alloy powder which could be used for the 3D printing of permanent magnets.
• Phase II may should see product quality optimisation, test work scale-up and further analysis of the alloy and to test its physical and magnetic properties. It will also involve customer appraisal and further investigation into the printing of 3D magnets.
Conclusion: The 3D printing of neodymium-iron-boron alloy powder magnets could open up new high-value markets for products from Mkango’s Songwe Hill project in Malawi. The ability to more easily produce neodymium-iron-boron alloy powders from a purified concentrate could help to reduce some elements of production cost while increasing demand for this high-value product.