Mkango Resources* (LON:MKA) – Securing nickel/cobalt exploration licence in Malawi
Ormonde Mining* (LON:ORM) – Progress report from Barruecopardo
Ortac Resources* (LON:OTC) – CASA Mining
SolGold* (LON:SOLG) – New discoveries in Southern Ecuador highlight move into extensive new exploration
Tertiary Minerals* (LON:TYM) – Securing fluorspar offtake agreements
Tri-Star Resources* (LON:TSTR) – US$6m mezzanine loan to SPMP
China’s focus on rental housing weighs on metal prices
• Plans to expand rental market coupled with oversupply of empty housing in China threaten to reduce demand for materials used in houses such as steel, copper and nickel
• Analysts say reform could cannibalise about 3bn square meters of future housing demand and will crimp demand for iron ore by 4.3% and copper by 2.1%
Dow Jones Industrials +1.09% at 23,837
Nikkei 225 +0.49% at 22,597
HK Hang Seng -0.19% at 29,624
Shanghai Composite +0.13% at 3,338
FTSE 350 Mining -0.46% at 16,995
AIM Basic Resources -0.12% at 2,664
Economics
US – Consumer confidence unexpectedly climbed to the highest level in 17 years with both expectations and present conditions measures posting strong performance this month.
• A greater share of respondents suggested they are planning to increase purchases of appliances and big-ticket items, as well as more intentions of taking vacations, signalling strong confidence in future incomes.
• Positive consumer sentiment bodes well for the largest economic growth driving segment amid the start of the holidays shopping season.
• US stocks finished higher despite the latest ballistic missile tests news from North Korea with markets focusing on positive consumer confidence numbers and improving prospects for tax reform.as the Senate budget committee advanced the Republican tax bill.
• CF Consumer Confidence: 129.5 v 126.2 in October and 124.0 forecast.
• CF Present Situation: 153.9, highest since Jun/01, v 152.0 in October.
• CF Expectations: 113.3, highest since Sep/00, v 109.0 in October.
Japan – Retail sales disappointed in October following poor Q3 numbers amid negative labour real cash earnings through H2/17.
• Weak monthly numbers as well as Q3 data were blamed on bad weather as typhoons and heavy rain kept people away from shops.
Germany – First inflation readings coming from Saxony pointed to an acceleration in inflation in November while broader data for remaining regions will be available the afternoon.
• Inflation disappointed in October slowing to 1.6% from 1.8% recorded in September with estimates pointing to a slight recovery in consumer prices this month (1.7%).
UK – Britain is expected to up their proposal for the EU divorce bill to €100bn aiming to break the deadlock in negotiations and in return for a good trade agreement.
• Although, it is argued when receipts and other deductions are taken into account the amount is expected to come down to €40-50bn, FT reports.
• That marks a revision on the PM’s original offer voiced in Florence in September for €20bn in net payment.
• The pound is up 0.6% against the US$ on the back of the news.
• Consumers are reported to have continued adding consumer debt in October with the BoE asking lenders to set aside another £6bn to their capital covering macroeconomic risks.
• Consumer credit climbed £1.5bn last month, in line with the average of the past six months despite prospects for higher borrowing costs, the BoE said today.
• Other “material” risks highlighted by the central bank as a potential risk source included epxnasion of consumer credit, global debt levels, asset valuations and misconduct costs.
Spain – Inflation growth remained level in November despite expectations for an expected pick up on the back of higher oil prices.
• CPI (%yoy, EU-harmonised): 1.7 v 1.7 in October and 1.9 forecast.
North Korea – The government is reported to have successfully carried a test of a new type of intercontinental ballistic missile today.
• The missile reached the highest altitude ever recorded by a North Korean missile travelling 950km before landing in waters off the coast of Japan.
• Kim Jong Un said the government completed its nuclear programme having tested the missile that put the US in range.
Currencies
US$1.1868/eur vs 1.1847/eur yesterday. Yen 111.42/$ vs 111.38/$. SAr 13.635/$ vs 13.945/$. $1.342/gbp vs $1.332/gbp
0.759/aud vs 0.761/aud. CNY 6.598/$ vs 6.606/$.
Commodity News
Precious metals:
Gold US$1,296/oz vs US$1,291/oz last week
• International sanctions imposed over North Korea’s nuclear weapons program were defied as the state successfully completed tests of a new type of intercontinental ballistic missile that has potential to strike the whole of continental United States. The Hwasong-15 missile, described as its “most powerful”, landed in Japanese waters after testing new heights for missile launches to reach an altitude of 4,475km.
• The upgraded missile launch was accompanied with the announcement that “as a responsible nuclear power and a peace-loving state (North Korea) would make every possible effort to serve the noble purpose of defending peace and stability of the world”, adding that the weapons represent a defense against the “US imperialists’ nuclear blackmail policy”.
• US Secretary General Antonio Guterres said the launch has shown “complete disregard for the united view of the international community”, while Japanese Prime Minister Shinzo Abe called reckless behavior an intolerable, violent act.
• Gold price increased as market participants reacted with caution with growing tensions favouring the safe-haven asset as investors focus on the US response to the test. However the traditional non-correlated asset has been heavily replaced by investors choosing significant gains within the cryptocurrency space, with bitcoin alone breaking through $10,000 with the total value surpassing $167 billion. With a fixed number of coins and ever-increasing scarcity as mining difficulty rises, the alternative virtual currency hopes to provide a substitute globalized storage of value during riskier financial periods.
• Geopolitical tensions hamper a strengthening dollar as US consumer confidence surges to a near 17-year high in November, boosted by a robust labour market and rising house prices which are expected to underpin consumer spending and boost US economic growth.
• Confidence in Trump’s tax cut bill grew as US Senate Republicans pushed forward with an abrupt, partisan committee vote that sets up a full vote by the Senate as soon as Thursday.
Gold ETFs 69.4moz vs US$69.5moz last week
Platinum US$952/oz vs US$938/oz last week
Palladium US$1,028/oz vs US$1,011/oz last week
Silver US$16.90/oz vs US$17.14/oz last week
Base metals:
Copper US$ 6,805/t vs US$6,995/t last week - US environmentalists file lawsuit to overturn approval of Canadian copper mine
• Groups have filed lawsuit against the $1.5bn Rosemont project in southern Arizona, expected to be the third largest copper mine in the United States accounting for 10% of production
• Lawsuit alleges that the mine would violate nearly a dozen state and federal laws, threaten water resources and destroy forest land
Aluminium US$ 2,092/t vs US$2,120/t last week
• Aluminium prices faltered as Goldman forecast the global balance of the metal to move into surpluses over the next 2-3 years. The updated balance is expected as new capacities are ramping up in less-polluted regions of China, which will only support suspended production from the winter output cuts. The gradual restarting of smelters outside of China has caused the bank to see a surplus of 526,000 tonnes material in 2019, increasing to 936,000 tonnes by 2020. Near-term prices are expected to receive support on continuing winter supply restrictions, but changes in the seasonal supply will lower average forecasts to $1,950/t and $1,900/t (2019 & 2020).
Nickel US$ 11,365/t vs US$12,030/t last week
Zinc US$ 3,147/t vs US$3,242/t last week
Lead US$ 2,439/t vs US$2,477/t last week
Tin US$ 19,485/t vs US$19,450/t last week
Energy:
Oil US$63.3/bbl vs US$63.6/bbl last week
• OPEC and Russia move to prolong the oil supply cuts for the whole of 2018 with the caveat to review the deal in June. The option was included to allow an assessment of the market balance to avoid global market overheating.
Natural Gas US$3.182/mmbtu vs US$2.910/mmbtu last week
Uranium US$23.50/lb vs US$24.50/lb last week
Lithium –
Tesla switching on largest lithium-ion battery Friday
• System began energising on Saturday reaching a third of potential 100-megawatt charge, meeting requirements for Australian governments requirement for operation, has been providing energy grid support to South Australia
• Battery will help support South Australia during upcoming summer season and reduce its reliance on other states for additional energy
Samsung battery can fully charge phones in just 12 minutes
• Technology made using the ‘miracle material’ graphene which can slash lithium ion battery charging time and make them safer
• Firm hopes the invention will one day help to create long life car batteries which can charge significantly faster
Samsung develops graphene ball to speed up battery charging
• Samsung Advanced Institute of Technology (SAIT) has successfully synthesised a ‘graphene ball’ that can be used to make lithium ion batteries charge five times faster and increase capacity by 45%
• Will only take 12 minutes to fully charge and can maintain temperature of 60 degrees Celsius which is required for use in electric cars
• Batteries use silica to synthesise graphene which is then used as material for anode and cathode on lithium ion batteries
Chinese battery manufacturers invest in battery recycling
• Jiangxi Ganfeng Lithium and GEM share prices rise as they invest in battery recycling facilities of their own as way of dealing with lithium ion battery waste, expected to be around 170,000 tonnes next year
• However, high operating costs associated with recycling means that to be economical lithium in batteries must be transformed back to lithium carbonate at maximum $7,000 a tonne
China focuses on metal recycling to deal with battery challenge
• Technology minister recently said that China will establish an extended producer responsibility regime which will make manufactures responsible for recycling
• As production and sales expected to reach 5 million by 2020 and with the average lifespan being 5 to 8 years amount of redundant batteries expected to hit 250,000 tonnes in 2020
• Raw materials such as cobalt can be reused, predicted that recycling will be main source of cobalt in the future
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$66.6/t vs US$64.8/t
Chinese steel rebar 25mm US$706.1/t vs US$676.6/t
Thermal coal (1st year forward cif ARA) US$84.6/t vs US$84.3/t
Premium hard coking coal Aus fob US$202.0/t vs US$199.6/t
Other:
Tungsten APT European US$275-285/mtu vs US$271-285/mtu last week
Cobalt LME 3m US$68250/t vs US$61750/t last week
• Major oil companies join the green energy revolution as Royal Dutch Shell announce a partnership with leading automotive companies to install super-fast charging points on European highways to accelerate the convenience and mass adoption of the electric vehicle story.
• Concerns over sourcing of socially responsible battery-raw materials is intensifying as the incorporation of cobalt within lithium-ion batteries relies on majority supply from the Democratic Republic of Congo, a country racked by political instability, legal opacity and child labour in the mines.
• Official data identifies cobalt supply from the nation to represent 54% of 123,000 tonnes global mined cobalt production, although growing unofficial artisanal production is strongly maintained by insurgent militias and relies extensively on child labour.
• The issue of ethical sourcing has been moved to the top of the LME’s agenda after complaints that one of its registered brands, produced by China’s Yantai Cash Industrial, could include metal sourced from the dark side of the DRC cobalt sector.
• Despite 48% global reserves in the DRC, concerns are causing the likes of Tesla and Apple to attempt to source material outside of the DRC, working with future producers in Canada and the United States to create their own cobalt supply chains. However, nine out of the top 10 producing assets will be located within the controversial nation by 2022.
• Further, with demand from the electric vehicle story expecting to surge and automotive companies like VW failing to secure enough units to deliver on its electrification promise, companies may remain exposed to unethical global supply.
Volkswagen struggles to reach long term cobalt supply deals
• Met with top cobalt producers last week in another failed effort to ensure long term supply deals
• Suppliers have suggested that the reason they have not secured supply is that they are looking for a fixed price – suggested that car companies are trying to shop in seller’s market which is more favourable towards producers rather than the car companies
Dispute at Congo cobalt mine heads to court and halts supply
• Attempt by Congo’s state miner Gecamines to block its 16 year partner GTL’s access to cobalt site to make way for new investor has backfired in both parties taking legal action for breach of contract
• Court schedule means no more cobalt likely to be produced at site until at least 2020 if there isn’t a settlement, site accounts for 4% of global supply
Company News
Mkango Resources* (MKA LN) 7.25p, Mkt Cap £7.2m – Securing nickel/cobalt exploration licence in Malawi
• Mkango Resources has announced that it has been granted an exploration licence over the Chimimbe Hill nickel/cobalt area in the Mchinji district of central Malawi.
• The licence, valid for an initial three-year term, covers almost 99 square kilometres containing historically reported and previously explored nickel and cobalt laterite deposits.
• There has been previous drilling, pitting and metallurgical testing work, dating back as far as the 1960s, which Mkango will now re-evaluate as well as a more recent, World Bank funded, airborne geophysical survey which shows a potentially significant magnetic anomaly.
• “Chimimbe Hill is a prominent northerly trending elongate feature, measuring 1200 metres by 500 metres and rising 140 metres above the surrounding plain. Located in Mchiniji district, approximately 80km west of Lilongwe, Malawi's capital city, Chimimbe Hill is underlain by a deformed and metamorphosed ultramafic body associated with high grade metamorphic rocks of the Mozambique mobile belt.”
• Commenting on the acquisition of the licence, Mkango’s President, Alexander Lemon highlighted that “Both nickel and cobalt are increasingly in demand as cathode materials for batteries in electric vehicles. This new licence, when combined with the Songwe Hill rare earths project and our collaboration with Metalysis on neodymium alloys for permanent magnets, positions Mkango as a potential future supplier of the critical raw materials used in both batteries and permanent magnet motors in electric vehicles.” We note that the recent agreement with Noble Group’s Talaxis, included provision for Mkango to act as Talaxis’s sole partner “for all activities of any sort in Malawi.” and securing this new licence may be one of the first products of this collaboration.
Conclusion: The new licence in exploration central Malawi underlines Mkango’s local knowledge and extends the company’s activities while remaining consistent with its focus on battery and magnet raw materials.
*SP Angel acts as Nomad and Broker to Mkango Resources
Ormonde Mining* (LON:ORM) 2.1p, Mkt Cap £10m – Progress report from Barruecopardo
• Ormonde Mining reports on progress of the preliminary civil engineering work at Barruecopardo with the earthworks for the water dams recently completed, and the concrete footings for crushing and screening plant underway.
• Preliminary mining of waste from the open pit area has already started and the first of the process plant equipment has been delivered to site with continuing plant shipments expected.
• The company notes that there are now approximately 100 people deployed on site, of which 32 are from Barruecopardo and the surrounding communities.
• Plant erection and construction is expected to start in early 2018.
Conclusion: The completion of the preliminary civil engineering works at Barruecopardo ahead of the winter should ease the task of the plant construction team early in the new year. The inclusion of a significant local component in the workforce is an important part of the long term integration of the project into the area and its economy and is likely to have been welcomed both by the communities themselves as well as their civic and political leaders.
*SP Angel acts as Broker to Ormonde Mining
Ortac Resources* (LON:OTC) 2.5p, Mkt Cap £8.3m – CASA Mining
(Ortac holds 70.09% of CASA Mining which holds 71.25% of the Misisi Gold project in South Kivu in the Eastern part of the DRC. This gives Ortac an effective 49.9% stake in the Akyanga project)
• Ortac report further higher grade gold intersections from their 2,200m drill program at their Akyanga gold project in the DRC.
• Akyanga is now consolidated within Ortac following their recent deal with CASA Mining.
• The two results reported today show:
o 8.70m grading 3.90 g/t gold from a down hole depth of 98.40m (including 2.80m grading 10.62 g/t gold from 100.20m)
o 27.50m grading 2.86 g/t gold from 110.60m.
o The current round of drilling is designed to infill gaps in the current resource and could lead to an upgrading of the grade and tonnage of ore estimated within the resource model.
o A second phase of program covering a further 2,800m of drilling is now underway.
o The two drill holes were drilled in the central part of the deposit with the first designed to test the down dip extent of the mineralisation at depth and the second testing the up-dip extent of the mineralisation along strike and approximately 100m to the north of previous drilling.
o Both holes show continuing gold occurrence with the second hold highlighting some significant high grade mineralisation.
o We expect to see further interesting gold results from the Akyanga project
*SP Angel acts as nomad and broker to Ortac Resources
SolGold* (LON:SOLG) 27p, Mkt Cap £409m – New discoveries in Southern Ecuador highlight move into extensive new exploration
• SolGold report a number of new prospect discoveries in Southern Ecuador. The prospects are all held in wholly-owned subsidiaries and are the result of extensive regional exploration programs based on information and expertise gained by the SolGold team at the Cascabel project in Central Ecuador.
• The geologists have identified outcropping porphyry style copper mineralisation Timbara and Porvenir with rocks of similar ages to that seen at the giant Fruta del Norte, Mirador and Santa Barbara deposits.
• Timbara and Porvenir are held within SolGold’s wholly-owned Green Rock Resources subsidiary
• Porvenir: rock chip samples include 1.58%, 4.27% and 1.3% copper. This is a good start for any exploration project and warrants drilling to see if the mineralisation extends to depth from the surface discoveries.
• Timbara: rock-chips show 2.44%, 1.59%, 1.64%, 1.23%, 1.00% copper in surface sampling. While the project is still considered to be at a very early stage the rock chips indicate copper mineralisation to continue over a potential 4.5km corridor which is some 1.2km wide.
• SolGold have gathered some 77 mineral licenses into four wholly owned subsidiaries covering an a total area of 3,198sqkm.
• The team have already identified five new geochemical targets covering 2.6sqkm with rock-chip values of up to 13.86% copper.
• Samples show veins of up to 3% chalcopyrite, 2% bornite, 1% chalcocite with traces of malachite and native copper as is seen in streams in the region.
• SolGold is adding further technical personnel to its exploration teams to better evaluate its new discoveries and licenses.
• La Hueca: management report the discovery of mineralised outcrops at the new La Hueca copper project in southern Ecuador.
• The La Hueca project is held within the Cruz del Sol subsidiary which is wholly owned by SolGold.
• SolGold is on track to complete its maiden mineral resource estimate on the giant Alpala project in late December. We expect the company may choose to announce the resource early in the new year.
Conclusion: SolGold is ramping up its exploration activity in Ecuador with new drill rigs arriving at Alpala and the Cascabel project and geological teams identifying a number of potential new copper projects in Southern Ecuador. The creation of a number of new wholly-owned subsidiaries means the new discoveries can be simply separated from the parent company should an offer be made for the Alpala project at Cascabel. We expect to see news on the new resource calculation at Alpala early on in the new year.
*SP Angel act as UK broker to SolGold
Tertiary Minerals* (LON:TYM) 0.7p, Mkt Cap £2.2m – Securing fluorspar offtake agreements
• Tertiary Minerals reports that it has secured a Memorandum of Understanding with a “leading global commodities trading group, Possehl Erzkontor GmbH” for them to “purchase up to a minimum of 70% of commercial grade acid-spar to be produced at Tertiary’s three fluorspar projects.”
• Possehl, “Founded in 1915 with headquarters in Lubeck” is described as “… a wholly owned subsidiary of CREMER, a global specialist for trade, processing and transport of agricultural, raw, basic materials and oleochemical products, including fluorspar.”
• The agreement allows for Possehl to provide funds “to Tertiary to assist the Company in meeting its working capital needs and/or its capital investment needs for the development of its fluorspar projects.”
• Possehl will also “provide invaluable commercial and logistical support and advice to Tertiary during the development of its fluorspar projects as the Company works towards its production goals and the ultimate signing of the Offtake Agreement”.
• “The MoU will be effective from the date of execution to a date which is one year from the commencement of first commercial production at any of the Company’s three fluorspar projects.”
Conclusion: The MoU and offtake agreement and its link to financing is an important milestone for Tertiary as it provides a route to market for potential future fluorspar production as well as access to finance to help put the projects into production.
*SP Angel act as Nomad and broker to Tertiary Minerals
Tri-Star Resources* (LON:TSTR) 0.18p, mkt cap £25.5m – US$6m mezzanine loan to SPMP
• TriStar Resources reports a US$6m mezzanine loan to its 40% owned Strategic & Precious Metals Processing (SPMP) which is building the new antimony roaster in Oman.
• The funds, which are subordinated to the existing $40m senior debt facility, are for a period of five years and attract an interest rate of 15%pa.
• “The investment in SPMP has been financed through the issuance of short-dated secured loan notes (“Loan Notes”) to Odey European Inc and OEI MAC Inc”..
• Commenting on the financing, Crispin Odey of Odey Asset Management, which owns a 53.8% interest in TriStar Resources, said, "We are delighted to continue to support the OAR project through this interim loan structure with Tri-Star. We have built up an excellent relationship with our partners in Oman and Dubai and continue to see positive signs for this business as we complete the project and bed down agreements on the feedstock and offtake side."
• The company has also announced a redeployment of its senior management with the current CEO of SPMP, Emin Eyi, standing down from that role in favour of Jason Peers, who represents the 20% owner of SPMP, Dubai Natural Resources Limited. Emin Eyi, however, continues as a director and non-executive deputy Chairman of TriStar Resources and hence SPMP retains his services and expertise as an advisor.
• The company has also announced that, with the OAR project remaining on budget and on schedule to commence the cold commissioning in January, it has received “Commitments to supply concentrates … from a number of suppliers to enable the facility to ramp-up to design capacity by the end of 2018.”
Conclusion: The additional financial support of Odey Asset Management underpins the completion of the OAR project, which is reported to continue on track for cold commissioning in January ahead of targeted full production by the end of 2018. The securing of a concentrate supply to feed the facility represents an important milestone and we interpret the management changes as a redeployment of the available skills as the needs of the project evolve to a more operational requirement.
*SP Angel acts as Nomad and Broker to Tri-Star Resources