Today's Market View - BlueJay, Phoenix Global Mining, Spinnaker Opportunities and others


BlueJay Mining* (LON:JAY) STRONG BUY  (Target Price raised to 37p from 24p) – Valuation upgrade to NPV >$400m on future expansion and higher ilmenite pricing
BlueJay included in MSCI index today Click here for full note
Mkango Resources* (LON:MKA) - BUY – Talaxis investment implies a value of £24.5m for Songwe Hill Click here for full note
Phoenix Global Mining* (LON:PGM) – New corporate presentation
Spinnaker Opportunities* (LON:SOP) – Corporate update
121 Mining Investment Conference London – 27 th - 28th November, 8 Fenchurch Place
• The 121 event is SOLD OUT with 70 mining companies and investors from >300 institutions attending and presenting
• Commodities of the future panel: Metals driving new energy systems, cleaner fuels, and renewables growth - 11:50am Monday 27th
o From grid to battery – what metals will form the energy value chains of the future?
o EVs and new technologies impacting supply and demand dynamics
o What are the key considerations when committing capital to projects?
o Costs versus traditional electricity generation

Buoyant outlook once again draws investors to commodities
• Total commodity investor assets under management (AUM) continue their steady upward trend, with Barclays showing an excess of $300 billion for the first time since 2013.

Dow Jones Industrials  -0.59% at 23,271
Nikkei 225   +1.47% at 22,351
HK Hang Seng   +0.74% at 29,064
Shanghai Composite    -0.10% at 3,399
FTSE 350 Mining   +0.50% at 17,058
AIM Basic Resources   +0.49% at 2,648

US – US data hints at rising underlying inflation
• Latest figures from the Labour Department show US Consumer Price Index edging up 0.1%, lowering the YoY gain to 2.0% from 2.2% in September.
• However, the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index (which excludes food and energy), has persistently undershot central bank targets for 2% for more than five years.
• Underlying inflation showed gradual development as the costs of rents and healthcare rose. October figures show the cost of rental accommodation increased 0.3% while hospital services costs also rose 0.5% from previous levels.

Zimbabwe – BBC reveals Chinese military joint venture with Zimbabwe generals over Marange diamond fields
• The BBC revealed on the news last night Chinese military involvement in the mining of the Marange diamond fields in Zimbabwe.
• We hope the British government might move discover the killers of RAB, an SAS officer living in the region who was found hanged in 2016.
• RAB had been running a gold mine in the region but was also thought to have been keeping an eye on activities at Marange.

Canada – December’s tax sell-off season offers potential for cheap stock as investors deleverage mining investments
• Somethings in life are wonderfully predictable, the migration of the Wildebeest across the Serengeti, .

US$1.1781/eur vs 1.1819/eur yesterday.           Yen 113.18/$ vs 112.90/$.         SAr 14.371/$ vs 14.375/$.            $1.316/gbp vs $1.318/gbp
            0.759/aud vs 0.759/aud.            CNY 6.634/$ vs 6.633/$.

Commodity News
Precious metals:
Gold US$1,277/oz vs US$1,283/oz yesterday
• Market expectations that the US Federal Reserve will raise interest rates in December increased on the release of positive underlying economic data, bolstering the dollar index. The US consumer prices increased in October on the back of buoyant rental and healthcare costs, while a rise in weekly wages is encouraging broad consumer spending. Developing signs of economic recovery boosts the opportunity for a Fed rate rise in December, despite concerns over low inflation.
• A veteran Fed policymaker continued, stating “falling unemployment and sustained growth mean the US economy has accelerated beyond a sustainable level so the Fed should continue to raise interest rates, including next month”.
• Uncertainty mounted as the proposed Senate Republican tax plan came under fire from two Republican lawmakers as the plan repealed the Obamacare mandate and selectively gave permanent tax cuts to US corporations.
   Gold ETFs 69.5moz vs US$69.4moz yesterday
Platinum US$932/oz vs US$929/oz yesterday
Palladium US$988/oz vs US$987/oz yesterday
Silver US$17.00/oz vs US$17.08/oz yesterday
Base metals:   
Copper US$ 6,748/t vs US$6,725/t yesterday
Aluminium US$ 2,114/t vs US$2,078/t yesterday
• Idle aluminium capacity, the victim of President Xi Jinping’s flagship supply-side reforms and ongoing winter war on smog, could once again produce the abundant metal. Chief Executive Officer Zhang Bo of the nation’s top producer of the metal, China Hongqiao Group Ltd. announced considerations to physically relocate shuttered plants to other countries. The world’s biggest smelter has been forced to cut annual capacity as part of Xi’s drive to curb oversupply and minimise harmful pollution, with cuts extending an additional to 30% across the winter heating period covering Nov. 15th – Mar. 15th.
• The preference would be to relocate idled facilities to Indonesia, which already represents a significant supplier of raw materials to China. The move would also be favourable to the new hosting nation, who are eager to extract more wealth from its abundant resources by processing them in country, while domestic demand remains positive.
• The relocation matches growing Chinese sentiment to halt unrestricted expansion as the nation transitions into slower, mature economic growth with a less tolerance stance on pollution, and aligns with the ‘government’s push on overseas expansion’.
• The firm, based in the coastal province of Shandong, arranged to close nearly a third of its capacity, accounting for 2.68 million tonnes after the construction of plants without proper approval.
Nickel US$ 11,610/t vs US$11,600/t yesterday
• Cooling Chinese economic data in October encouraged broad profit-taking as London nickel edged back towards multi-weeks lows. Weakening industrial demand sparked concerns on the outlook for stainless steel, and therefore nickel, as investors locked in gains following the recent 20% price rally.
• CRU’s Peter Peng noted “the stainless steel market is weak as (there has been) too much supply since Q3, (so) nickel prices should fall back to in line with real demand from stainless steel”.
Zinc US$ 3,128/t vs US$3,118/t yesterday
Lead US$ 2,418/t vs US$2,446/t yesterday
Tin US$ 19,500/t vs US$19,420/t yesterday
Oil US$62.0/bbl vs US$61.6/bbl yesterday
Natural Gas US$3.075/mmbtu vs US$3.089/mmbtu yesterday
Uranium US$23.90/lb vs US$23.40/lb yesterday
Lithium - Extremely fast charge battery technology to push lithium demand higher
• News from a lithium-ion (Li-ion) battery technology company of a new HD-Energy® Technology for Electric Vehicles (EVs) which features extreme fast charging in only 5 minutes, could add yet another layer to the massive demand for lithium.
• New Technology developed for EV’s by Enovate features 5 minute charging with high driving range of 240 miles
• Charging time has long been barrier to EV’s and the new charge time breaks down this factor – adding to the demand for lithium
Cobalt - Manufacturers rush to North American Cobalt
• Currently only accounts for 6% of supply but consumers being led away from DRC due to scrutiny
• Projects in Ontario’s cobalt belt have large deposits at high grade of 22%, with exploration to identify more targets on-going 
Iron ore 62% Fe spot (cfr Tianjin) US$61.1/t vs US$60.9/t
Chinese steel rebar 25mm US$654.6/t vs US$654.7/t
Thermal coal (1st year forward cif ARA) US$84.6/t vs US$84.5/t - $20bn of assets shifted away from coal
• Allianz, Aviva, AXA and SCOR have divested from providing insurance coverage and investments to new coal projects, which are required to fund, build and operate projects and without will shut down.
• Companies represent 13% of all global insurance assets
Premium hard coking coal Aus fob US$187.6/t vs US$187.6/t

Tungsten APT European US$270-280/mtu vs US$275-285/mtu last week

Company News
BlueJay Mining* (LON:JAY) 24.5p, Mkt Cap £189m – Valuation upgrade to NPV >$400m on future expansion and higher ilmenite pricing
BlueJay included in MSCI index today
(Target Price raised to 37p from 24p)
Click here for full note
• BlueJay are making good progress towards the start of production next year.
• Valuation: we are raising our NPV valuation to 37p/s today in response to the high grade and purity levels of BlueJay’s ilmenite concentrate product.
• Production: While BlueJay plans to start production next year we assume sales  start in 2020.  We escalate the mining rate from 1mtpa in 2020 to 2mt in 2021,  3mt in 2022.  We then see a further jump in production to 5.5mtpa from 2026.
• Capex: we assume a $60m capital cost to start followed by a further $100m for the second phase expansion.  We assume a 10% discount rate by way of standardisation. The project gives a 43% IRR on these metrics.
• Pricing: We assume BlueJay could receive $200/t for its product, up from $180/t previously though management reckon they will get higher price levels.
• Upgrading: we have also assumed the upgrading of material at the first sieve to 18.5%.  This has the double benefit of raising the input feedstock grade reducing costs and improving throughput rates.
• Feasibility Study: A number of consultants are working on more detailed plans for the process plant and related infrastructure.
• Costs: we assume relatively high mining, processing and loading costs for a dredging operation given its location in the north of Greenland.  These costs should come down as the operation proves itself.  We assume $3.25/t for mining, $5.0/t for processing and $4.5/t for loading. The loading cost is particularly high given that it should simply require a longish conveyor belt to reach a ship parked in the Fjord, though it should cover the use of a tug boat to manage passing ice bergs.
• Offtake: management are in Hong Kong presenting at the ‘TZMI’ Titanium and Zircon Congress for mineral sands producers. We expect discussions to continue on offtake with Chinese producers and assume 60% of BlueJay’s Ilmenite concentrate may be sold in China with the rest to be sold in the West.
• TZMI conference: BlueJay presented at the major Titanium industry ‘TZMI’ conference in Hong Kong yesterday.
• Price view: Feedback from the conference is that titanium feedstock supply is much tighter than previously thought indicating that prices are expected to rise strongly over the next three years with a major supply constraint 18 months out.
• MSCI Index:  BlueJay are to be included in the MSCI World Micro Caps, effective 30 November 2017.
Conclusion: BlueJay is fortunate to have discovered the World’s largest, known, high-grade, ilmenite mineral resource. The sheer scale and consistency of the high-grade mineralisation is extraordinary and while the location in Greenland presents some challenges these appear relatively easy to overcome from an engineering and production perspective.
*SP Angel act as nomad and broker to BlueJay Mining.  An SP Angel Mining analyst has visited the Dundas (formerly Pituffik) ilmenite sands project in Greenland.

Mkango Resources* (LON:MKA) 6.8p, Mkt Cap £5.8m – Talaxis investment implies a value of £24.5m for Songwe Hill
Click here for full note
• Mkango reports that Noble Group’s Talaxis has agreed to invest £12m directly in Mkango’s Songwe Hill rare earth project in Malawi for a 49% interest implying a value of £24.5m for the project.
• The funds will be used to fund a bankable feasibility study and will be delivered in three tranches, with the initial £2m due on receipt of regulatory approval providing an 8% interest.  A further £3m, for an additional 12% interest, is due 45 days after receipt of regulatory approvals by the TSXV and the third tranche of £7m, for a further 29% interest, is subject to a number of conditions including the publication of an updated NI-43-101 compliant resource estimate.
• Upon completion of the bankable feasibility study, Talaxis has the option to increase its stake further, to 75% of Songwe Hill and securing rights to 100% of the production, for the cost of implementing the BFS and funding the project through to production.
• “Under the terms of the Agreement, Talaxis will be Mkango’s preferred partner for all rare earths’ projects worldwide and for all activities of any sort in Malawi.”
• In addition to the investment in the Malawi rare-earths project, Talaxis is also to make an investment into the Mkango joint venture with Metalysis Limited where collaborative research is underway to harness Metalysis’ solid state powder technology for the development and commercialization of 3D printed rare earth magnets.
• Iniitially Talaxis plans to invest £1m to acquire 24.5% of Mkango’s 85% interest in the joint venture (20.8%) interest in the joint venture and valuing it at £4.8m.
• Tallaxis has an option to invest a further £1m to acquire a further 20.8% interest leaving Mkango with a 43.4% interest in the joint venture, with Talaxis holding 41.6% and Metalysis with 15%.  Based on the initial Talaxis Investment, Mkango’s 64.2% of the Joint Venture would be worth £3.1m.
Conclusion: Talaxis’s investment secures the completion of the bankable feasibility study for Songwe Hill and provides a pathway for funding and developing the project through to production. This important endorsement of Mkango Resources provides Talaxis with up to 75% of the project and access to the future production as well as building for a wider partnership in the developing global rare earths industry. A separate investment in the joint venture with Metalysis provides Talaxis with an entry into the down-stream use of rare-earths.
*SP Angel acts as Nomad and Broker to Mkango Resources

Phoenix Global Mining* (LON:PGM) 4.8p, Mkt Cap £10.9m – New corporate presentation
• Phoenix Global Mining have published a new corporate presentation.
• https://www.pgmining.com/pgm-media-and-presentations/
• The company recently announced an increase of more than 50% in overall oxide resource tonnage at the historic Empire mine in Idaho.
• Phoenix’s contained copper within the new JORC resource increased by 33% to 90,547t grading 0.47% copper.
• Measured & Indicated resources also increased by >40% to 10.4mt grading 0.52% copper, 0.13% zinc, 0.23g/t gold and 10.62g/t silver.
*SP Angel acts as Nomad to Phoenix Global Mining

Spinnaker Opportunities* (LON:SOP) 3.9p, mkt cap £1m – Corporate update
• Spinnaker opportunities, looking for opportunities in the Oil & Gas, energy and wider resources sector.
• Spinnaker Opportunities, a cash shell, reports it is still looking for a suitable opportunity.
• “The Company has been introduced to numerous potential opportunities, of which it has reviewed a small number in greater detail.  This has included desktop analysis, meetings with management of potential target companies, initial due diligence and consultation with brokers as to market appetite.
• None has so far met the Company's stringent acquisition criteria which, as stated at the time of its IPO, are - in an industry with long term profit potential, opportunity for the Spinnaker team to add value, excellent management, market appetite, and valued at between £5 million and £30 million.
• The Company continues to see a number of good quality businesses and is confident that its strategy of being focused on sectors where the board and its advisers have experience, together with a highly disciplined selection process, will deliver an excellent return for the Company's shareholders.
• Of the £1.3 million that the Company raised at IPO, the Board and its close associates invested over £500,000, including £310,000 directly by the Board, who own in aggregate 27.7 per cent. of the Company's issued share capital.
• The Company's overheads are minimal, principally because the Company's directors took the decision not to take any salaries, and all due diligence to date has been undertaken internally at no cost to the Company.  Accordingly, as at 31 October 2017, the Company had cash of £1.1 million, with no debt, and its net asset value per share was 4.23p.”
* SP Angel act as broker and advisors to Spinnaker Opportunities

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