Altus Strategies* (LON:ALS) BUY - Target price 12.2p – Gold exploration license secured in Liberia
Horizonte Minerals (LON:HZM) – Araguaia mine plan submitted for approval
IronRidge Resources* (LON:IRR) – 2017 Results
Stratex International* (LON:STI) – Stratex drops Crusader transaction and seeks to recover cash loans
Tertiary Minerals* (LON:TYM) – MB Fluorspar project recognised in NMA awards
Glencore loaned funds to Dan Gertler to negotiate mining rights in DRC (Paradise Papers) BBC
• https://www.bbc.co.uk/news/world-us-canada-41892624
China’s iron ore imports remain strong despite steel cuts
• China imported 88.2mt through its ports in October up from 86.3mt in September despite steel cut to steel production capacity in the recent anti-pollution drive
• Iron ore usage looks likely to pull back as utilisation rates for blast furnaces have fallen to 71% with major steel providence of Hebei set to limit output by 50%.
Lithium - Enevate develops fast charge silicon anode technology for use in Li-ion batteries with greater charge capacity
• Silicon has greater charge capacity than graphite it undergoes greater volumetric expansion (300% vs 10% for graphite) and contraction leading to anode cracking and reduced battery operating life.
• Enevate’s patented HD-Energy technology—a silicon-composite anode film with More than 70% silicon—delivers more than four times the energy density of conventional Li-ion battery anodes.
• The company recently announced that its HD-Energy® Technology for Electric Vehicles (EVs) which features extreme fast charging in only 5 minutes with high energy density and long driving range that adds up to 240 miles (390 km)—or up to 50 miles (80 km) range with a 60-second charge.
• It is difficult to find out any information on how Enevate’s technology manages silicon based anode reliability issues or the type of equipment required for 5 minute charging
• The statement is short on answers and long on potential.
• We suspect improvements in lithium battery technology combined with the natural weight benefit of lithium will combine to render lithium as offering a better anode solution in the long term.
• Nexeon are also working on silicon-anode based technology backed by £30m in equity funding. See: https://www.nexeon.co.uk/
Oil market looking for $70/bbl by year-end as Saudi Arabia leads tightening of OPEC supply ahead of Saudi ARAMCO listing
• Much is going in in the Kingdom of Saudi Arabia.
• An anti-corruption purge has led to the arrest of Prince Alwaleed bin Talal alongside the detention of a number of princes
• A helicopter crash has led to the death of another potential rival for the crown.
• Oil prices are creeping higher as Saudi ministers are expected to extend cuts of 1.8mbbls per day through next year to reduce inventories and raise prices.
• Traders are concerned over oil supply as the anti-corruption purge incarcerates more of Saudi Arabia’s leading businessmen.
• Ironically, higher prices should serve to raise Saudi Aramco margins despite production cuts ahead of its potential flotation.
Dow Jones Industrials +0.04% at 23,548
Nikkei 225 +1.73% at 22,938
HK Hang Seng +1.39% at 28,994
Shanghai Composite +0.75% at 3,414
FTSE 350 Mining +0.37% at 18,046
AIM Basic Resources +1.21% at 2,600
Economics
Germany – Industrial production came off in September following a strong August month.
• Nevertheless, robust September factory orders released yesterday point to a positive outlook for the manufacturing sector.
• Forecast strong growth momentum is also supported by latest high Manufacturing PMI numbers.
• Industrial Production (%mom/yoy): -1.6/+3.6 v 2.6/4.6 in August and -0.9/+4.5 forecast.
UK – Retail sales slump in October the latest British Retail Consortium report showed while Halifax data showed property prices growth accelerated in three months to October driven by a shortage of new housing.
• “It was a meagre month in October for retail sales… consumers appear to have opted for outdoor experiences and excursions during half term, over visits to the shops,” the BRC said.
• Non-food sales dropped 2.1%yoy over the past year marking the worst performance since the BRC started compiling the data in Jan/12 with unseasonably warm weather weighing on clothing sales.
• Online sales growth came in less than half the pace of the three- and 12-month averages.
• Retail Sales (%yoy): -1.0 v 1.9 in September and 0.8 forecast.
• Halifax survey showed half of respondents remain bullish on property prices while the number who expect a fall have double to 20%.
• Short term outlook remains buoyant according to Halifax as “the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate continues to support house prices and is likely to do so over the coming months”.
• Halifax Property Prices (%mom/yoy): 0.3/4.5 v 0.8/4.0 in September and 0.2/4.5 forecast.
Australia – The central bank kept rates unchanged at record low of 1.5% for 15th month as inflation continued to lag RBA target range despite a continuing tightening in the labour market.
• Inflation came in at 1.8% in Q3/17, short of estimates for 2.0% and below the 2-3% RBA target.
• Unemployment fell to 5.5% from 5.9% in Q1/17; although, the central bank said “a sizeable degree of spare capacity” remains in labour market.
Currencies
US$1.1584/eur vs 1.1608/eur yesterday. Yen 114.19/$ vs 114.29/$. SAr 14.195/$ vs 14.225/$. $1.316/gbp vs $1.308/gbp.
0.766/aud vs 0.765/aud. CNY 6.631/$ vs 6.635/$.
Commodity News
Precious metals:
Gold US$1,278/oz vs US$1,269/oz yesterday
• Concerns over ongoing corruption charges and arrests of Saudi royal family members and ministers encouraged Asian sales in the metal as investors locked in profits from yesterday’s bullish session, after climbing nearly 1 percent to close above its 100-day moving average. The session was golds biggest single-day percentage gain in over five weeks as safe-haven investing followed the announcement of Saudi Arabia’s future king, Crown Prince Mohammed bin Salman, tightening his grip on power through a widespread anti-corruption purge. The metal continued its growth as the campaign of mass arrests expanded to internationally recognized billionaire businessman Price Alwaleed bin Talal.
• The next leg of Donald Trump’s Asian tour brings the presidential party to the frontline of the ongoing nuclear standoff with North Korea. Discussions within South Korea concerning the global security threat are expected to increase geopolitical tensions with the united military alliance rhetoric and continued support for the metal.
Gold ETFs 69.2moz vs US$69.2moz yesterday
Platinum US$928/oz vs US$922/oz yesterday
Palladium US$1,000/oz vs US$1,002/oz yesterday
Silver US$17.11/oz vs US$16.88/oz yesterday
Base metals:
Copper US$ 6,942/t vs US$6,951/t yesterday
Aluminium US$ 2,159/t vs US$2,177/t yesterday
• The winter capacity regulations are likely to take a more permanent hold on some aluminium smelters as Chinese government policies will shut off the furnaces. Escalating costs of production in the country and strong environmental momentum driven by the Ministry of Environmental Protection is forecast to permanently close excess domestic capacity.
• The drive against excessive air pollution has led to the reduction of 30% of capacity across 31 cities (equivalent to 3.6 million tonnes), while China’s National Development and Reform Commission has identified a further 5.1 million tonnes of illegal capacity operating without licenses.
• Escalating inflation in the price of raw materials is also driving operations to smaller margins, as the price for anodes increases to $700/t and alumina at $480/t.
Nickel US$ 12,845/t vs US$12,890/t yesterday
• Nickel prices contracted following broad profit-taking from the recent value surge on the back of positive sentiment in future demand for nickel sulphates fundamental to the electric vehicle story. Capital Economics warns that recent expectations in the metal, which briefly broke through the $13,000/t level last week and posted a nearly 10% weekly gain last week, from growing battery manufacturer demand was excessive. “It needs to be remembered that EV batteries account for just one to two percent of nickel output currently, whereas the stainless steel sector accounts for around 65%”.
Zinc US$ 3,218/t vs US$3,237/t yesterday
Lead US$ 2,486/t vs US$2,482/t yesterday
Tin US$ 19,425/t vs US$19,490/t yesterday
Energy:
Oil US$64.4/bbl vs US$62.5/bbl yesterday
Natural Gas US$3.135/mmbtu vs US$3.059/mmbtu yesterday
Uranium US$20.25/lb vs US$20.30/lb yesterday
Cobalt – China too reliant on the DRC for Cobalt (Reuters)
• The Chairman of Guangdong Jiana Energy Technology Co, a supplier of cobalt salts and other materials for EV battery cathodes has publically stated that China is over-reliant on the DRC for its cobalt supply. The comment is from the China International Nickel and Cobalt Industry Forum in Guangzhou.
Battery technology energises cobalt market
• Cobalt emerged as star performing metal for investors this year due to an uncertain supply situation and strong demand drivers
• China is the major driver behind consumption due to aggressive battery production growth and plans in terms of Electric Vehicle sales
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$63.5/t vs US$59.7/t
• Despite vastly decreasing Chinese winter steel capacity as the war on air pollution heightens, imports of iron ore continued to swell as shipments in October grew a further 2.2% to 88.2Mt. Imports from the top three suppliers to China, Australia, Brazil and South Africa represent the second-highest shipments of 2017. Chinese customs data indicates a steady annual rise in the raw material imports, reaching a record 102.8 million tonnes in September, equivalent to a year-to-date increase of 7.1%.
• Shipments arrive as utilization rates across blast furnaces drop to 71% in the week to Nov. 3, representing the lowest since 2012. The major steel-making province of Hebei acts to cut capacity ahead of its annual target in the fight against winter smog, beating objectives to remove 25.55 million tonnes excess capacity.
• Unrelenting trader interest in the essential raw material appear to focus on increasing stockpiles ahead of the significant pent-up demand for steel at the close of the winter measures.
Chinese steel rebar 25mm US$631.2/t vs US$630.9/t - Toyota supports Kobe Steel as it clears products
• Toyota says it has found no defects in cars using metal parts from Kobe steel materials including copper tube, aluminium extrusions and steel powder
• More than 80% of clients that received falsified products have been cleared of safety concerns
Thermal coal (1st year forward cif ARA) US$87.4/t vs US$85.6/t - HSBC pledges to deliver $100bn of green finance through to 2025
• Company said would reduce its exposure to thermal coal through discontinuing financing of new coal fired power plants in developed markets and thermal coal mines worldwide
• Stopped short of imposing moratorium on all coal related investments due to bank’s strong presence in Asia
Premium hard coking coal Aus fob US$179.8/t vs US$179.7/t
Other:
Tungsten APT European US$275-285/mtu vs US$275-285/mtu last week
Company News
Altus Strategies* (LON:ALS) 8.8p, Mkt Cap £9.4m – Gold exploration license secured in Liberia
BUY - Target price 12.2p
• The 732km2 exploration license is located in the Lofa County of the NW Liberia, 25km NE of the Bella Yella license and 190km NE of the capital, Morovia.
• The Zolowo area covers 33km of Archean greenstone gold belt and is found along the regional NE-SW geological trend which also hosts New Liberty gold mine owned and operated by Avesoro Resources.
• Altus has access to a series of historical data over the area including geological maps, remote sensing data and satellite imagery.
• The Company identified 24 area of alluvial gold workings within the license boundaries pointing to the prospectivity of the area.
• Exploration team is planning to launch reconnaissance work later this quarter starting with mapping and sampling of high priority targets.
• Afterwards, the Company is expecting to follow up with a license-wide stream sediment survey to identify further sources of alluvial gold.
Conclusion: In line with the project generation business model, the Company has just added a land package in NW Liberia, in close proximity to its existing Bella Yella gold license. A number of alluvial gold mining sites found in the area with the Company planning early exploration works in an attempt to identify hard rock sources of gold.
*SP Angel acts as Nomad and Broker to Altus Strategies
Horizonte Minerals (LON:HZM) 4.9 pence, Mkt Cap £57.1m – Araguaia mine plan submitted for approval
• Horizonte Minerals reports that it has submitted its mine plan for development of the Araguaia ferronickel project for approval by Brazil’s National Mining Agency.
• Approval of the “Mine Plan together with approval of the Mine Construction Licence ”, which was submitted during October, … “will grant Horizonte the principal mining and environmental permits to commence construction of Araguaia”.
• The company plans to construct a plant capable of producing “around 14,500 tonnes of contained nickel in approximately 50,000 tonnes of ferronickel per year from processing 0.9 million tonnes of ore via the proven and widely utilised Rotary Kiln Electric Furnace (RKEF) process route.” The project is reported to have a 28 year mine life.
• Although the company announcement provides no specific guidance on the expected timetable for receiving the relevant approvals, Horizonte’s CEO, Jeremy Martin commented that “The Mine Plan submission … marks an important shift taking the Project from the exploration stage into the mining development phase and therefore further de-risking the Project.”
• The company’s pre-feasibility study, published about a year ago, indicated that, at an assumed nickel price of US$12,000/tonne, capital expenditure of US$354m was expected to generate an after tax NPV of US$328m, discounted at 8% and an IRR of 19.3%. Work on the more detailed feasibility study is continuing.
Conclusion: The company has now submitted applications for the principal permits required to develop its Araguaia ferronickel project in the Para State of north-east Brazil. We await further news on the progress of the applications and the outcome of the feasibility study.
IronRidge Resources* (LON:IRR) 30.5p, Mkt Cap £83.2m – 2017 Results
• IronRidge Resources has published an after tax loss of A$5.23m (2.2Acents/share) for the year ending 30th June 2017. The result compares with a loss of A$2.31m (1cent/share) in the year to 30th June 2016.
• The company attributes the increased loss to the recognition of A$1.4m of project generation expenses “relating to Chad, Ghana and Ivory Coast, an increase in employee benefits expenses including cash bonuses of A$160,000 and approximately A$1.1m of share based payments “representing the Black-Scholes value of 19,000,000 options granted to Directors and staff and the expense recognised on the bonus shares issued to staff in December.”
• During the year, the company continued its multi-commodity exploration strategy in Africa and Australia, culminating in the acquisition of Tekton Minerals and its’ extensive portfolio of over 1000 square kilometres of exploration acreage and its established exploration team in Chad which was approved by IronRidge’s shareholders in early July and completed on 5th September.
• Highlighting the significance of the Tekton Minerals acquisition, Executive Chairman, Nicholas Mather, pointed out that “These projects have the potential for multi-million ounce gold discoveries, and I look forward to sharing the results of our work as it progresses over the next few months.”
• In addition to the largely gold-focussed exploration in Chad, the company is progressing early stage exploration of lithium bearing pegmatite projects in Ghana and Cote d’Ivoire, gold exploration in Cote d’Ivoire and bauxite, titanium and gold projects in Australia.
Conclusion: IronRidge Resources has assembled a diverse portfolio of exploration assets in Africa and Australia. The recently acquired gold exploration portfolio in Chad is thought to have multi-million ounce potential while the lithium projects in Cote d’Ivoire and Ghana provide exposure to the increasing investment appetite for lithium projects.
Stratex International* (LON:STI) 1.25p, Mkt cap £5.8m – Stratex drops Crusader transaction and seeks to recover cash loans
• The board of Stratex International has elected to terminate the proposed acquisition of Crusader Resources and will take all appropriate steps to recover the secured loans made to Crusader when these amounts become due.
• We like to think that these amounts might become due immediately when the deal is terminated and will read the next annual report with great interest to see what actually transpires.
• The Stratex board has also terminated the employment of the CEO who had championed the Crusader deal and led the board to vote for the deal and related loans into Crusader.
• We look forward to confirmation of the timing of the recovery of the loans and to announcements on a new strategic direction for the company.
• Shareholders should feel relieved that that the Stratex board has voted to terminate the Crusader deal.
• There are more than enough resource opportunities in parts of Africa where Stratex has significant experience.
*SP Angel remain wholly independent with respect to Stratex.
Tertiary Minerals* (LON:TYM) 0.58p, Mkt £1.8m – MB Fluorspar project recognised in NMA awards
• Tertiary Minerals reports that The National Mining Association (NMA) and the US Department of the Interior have recognised the “outstanding and innovative reclamation and sustainable mineral development work on the Company’s MB Fluorspar Project in Nevada.”
• The company was one of two companies recognised for the award in the “2017 Hardrock Small Operator Award – one of five categories of awards under the BLM’s [Bureau of Land Management] Reclamation and Sustainable Minerals Development Awards Programme”.
• Welcoming the recognition the project had received, Managing Director, Richard Clemmey, said “We are delighted to receive this prestigious award which is a testament to the operational and environmental excellence the Company strives for and to the quality of the carefully selected contractors employed on our operations.” Mr Clemmey went on to pay tribute to the company’s consulting geologists and earthmoving contractors for their contribution.
Conclusion: The recognition of the work done on the MB Project should stand the company in good stead when it seeks to advance the project through the permitting process in Nevada.
*SP Angel act as Nomad and broker to Tertiary Minerals