Morning View - Platinum set to outperform as money managers boost holdings


Altus Strategies* (LON:ALS) BUY – Target price 12.2p – Ethiopia licenses exploration update

Bushveld Minerals* (OTC:BMN) – BUY, Target price adjusted to 14 from 14.3p – Bushveld accelerates expansion to capitalise on higher vanadium price levels

Atalaya Mining (LON:ATYM) – Production for 2017 and 2018 guidance

Gem Diamonds (LON:GEMD) – Another large diamond recovered from Letseng

Lonmin PLC (LON:LMI) – 2017 results, maintained 2018 guidance and update on offer from Sibanye


SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand


Tractor beam – for levitating larger objects

  • New breakthrough could lead to futuristic new uses of tractor beam technology and open doors to levitating larger objects
  • Engineers from university of Bristol have been able to trap objects using acoustic tractor beam that is larger than the wavelength of sound used by the device
  • By changing the twisting direction of the vortices, the researchers were able to stabilise the tractor beam and increase the size of the silent core allowing it to hold larger objects
  • Applications could include touchless drug capsules or micro surgical implements inside the human body, could also become possible to manipulate fragile items in whole new way – including assembling objects without touching them


Chile looks to further boost lithium supply with $1.4bn proposal

  • State development agency Corfo is undergoing study of 6 firm offers interested in developing lithium projects across the South American nation. Proposals have arisen from Rosatom ($17m), Posco-Samsung JV ($285m), Sichuan Fulin ($100m), Jiangmen Kanhoo ($468m), Gansu Daxiang Energy technology ($200m) and Molymet ($360m).
  • The investment is expected to boost Corfo and InvestChile’s plan to diversify production of lithium-derived products, while enhanced output from SQM is expected to encourage the supplier to begin production of high-grade lithium hydroxide for Tesla.

Lithium equity indices fall following announcement that Chile will allow SQM and Albemarle to expand lithium production

  • Lithium stocks fell last week following news that Chile will allow a significant expansion in lithium production by SQM , the world’s second largest lithium producer
  • Global X Lithium & battery Tech (LIT:US) down 5%
  • Solactive Global Lithium (SOLLIT ) lithium Index down by 6.5%.
  • While the pull back in lithium stock prices is relatively small given the three and four fold expansion in index levels over the past two years the indexes are likely to fall further as investors take a more cautious approach to the sector.
  • While the expansion by SQM will impact lithium supply and prices it will take 3-5 years for SQM to expand to >3 times their current allowance to 216,000 from 60,000t currently.  We believe the expansion in demand should absorb all this new supply and still demand more enabling many new projects to still enter the lithium space.


121 Conference, Cape Town – 5-6 February 2018

SP Angel Analysts will be at the 121 Mining Investment Conference in Cape Town on 5th & 6th February

  • We look forward to meeting investors and companies there or by appointment thereafter.

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US – The government shutdown stretched into its third day on Monday after the Senate failed to clear a notion allowing the government to be funded through February 8.

  • Democrats are reported to have declined to support the government funding bill as Republicans declined to extend the financial support for the DACA programme (Deferred Action for Childhood Arrivals) past the planned March 5 expiry date.
  • The spending bill was blocked on Friday after a 50-49 vote failed to reach the required threshold of 60 votes.
  • Lawmakers are expected to hold another vote at noon today.
  • Despite uncertainties regarding the government funding extension bill US equity indices closed at record levels on Friday.


Germany – Centre left Social Democrats voted to start coalition talks with the Merkel’s CDU getting one step closer to a formation of the government.

  • The narrow vote (362 of 642 delegates supported the notion) preceded a concerns the party may reject the offer from the conservative block over a potential grand coalition with opponents blaming previous alliance for losses at the latest general elections.
  • Merkel welcomed the decision marking the start of official coalition talks and potentially leading to a new government by Easter.
  • Snap elections remain a possibility should the coalition talks fail in the end with opinion polls suggesting that a re-run in elections may see same inconclusive result to last September’s with no clear majority in the Bundestag.
  • The euro is trading slightly higher (+0.2%) against the US$ on the news this morning.


Spain – Fitch rating agency has upgraded Spain’s sovereign credit rating by one notch to A-, up from BBB+.

  • The move has been driven by a relatively broad base economic recovery and further deleveraging in the private and public sectors.
  • Unemployment has been coming down while the government is forecast to see a reduction in fiscal deficit to 2.0% of GDP in 2019 compared to around 3.1% recorded last year.
  • The rating compares to BBB+ assigned by S&P and Baa2 rated by Moody’s.


South Africa – Local media reported that the ruling ANC party asked its top six officials including its new leader Cyril Ramaphosa to plan details and timing of Mr Zuma’s exit from the office before his mandate ends in 2019.

  • The currency traded 1.2% stronger against the US$ this morning extending gains recorded lately and nearing the 12.0 mark, the strongest level since mid-2015.


Greece – S&P upgraded sovereign credit rating to B from B- citing improved growth and fiscal outlooks.

  • “The upgrade reflects Greece’s steadily improving general government finances and tis gradually recovering economic prospects… the government ran primary fiscal surpluses in 216 and 2017 while the economy exited a multiyear recession last year,” the agency said.



US$1.2238/eur vs 1.2272/eur yesterday  Yen 110.84/$ vs 110.62/$  SAr 12.039/$ vs 12.158/$  $1.389/gbp vs $1.392/gbp  0.800/aud vs0.803/aud  CNY 6.403/$ vs 6.403/$


Commodity News

Precious metals:         

Gold US$1,331/oz vs US$1,336/oz last week

  • Spot gold fades from last week highs, topping £1,344.81, despite US Federal government shutdown and advancing euro optimism as Germany’s Angela Merkel makes a breakthrough towards securing her fourth term. While Republican and Democratic leaders of the US Senate failed to break an impasse amid a dispute between US President Donald Trump and Democrats over immigration, the “US shutdown should not affect gold too much…it’s a political issue more than an economic one”.
  • Exchange-traded funds added 250,728 troy ounces of gold to their holdings in the last trading session, recording the fourth straight day of growth. The purchases were equiValent to £333.9 million at the previous spot price, and have supported total gold held by ETFs to climb 1.1% this year to 72.3 million ounces.

   Gold ETFs 72.3moz vs US$72.1moz last week

Platinum US$1,016/oz vs US$1,013/oz last week

  • The recently unloved precious metal, fundamental for pollution-control catalysts for vehicles, finally begins to outperform and gain the attention of hedge fund managers. Surging prices brought palladium above and beyond the price parity with the commonly substituted platinum throughout 2017, and closed the year with a $100 premium for palladium.
  • After Volkswagen AG admitted falsifying pollution data for its vehicles in 2015, the outlook for platinum had faded as purchases of diesel-fueled autos fell across Europe. However, recent implementation of more stringent emissions standards in China is expected to boost demand for the metal.
  • Precious metals have also benefitted from a lull in dollar strength, as the currency trades near a three-year low against a basket of 10 currencies. Collectively precious metals have continued to climb as traders seek a storage of value and hedge against uncertainty as the government services enter the first working day during the closures. Money manager sentiment towards the metal is changing with a raise in the net-long position, or difference between bets on a price increase and wagers on a decline, by 79% to 19,806 futures and options, according to US Commodity Futures Trading Commission data; the highest since mid-September. ETF Securities director of investment strategy notes the “the price rebound since the Fed raised rates last year, platinum is beginning to catch up with palladium and gold“, with futures having climbed 8.5% in January to $1,017.80/oz. The boost in price compares with gains of 3.9% for palladium, 1.7% for gold and 0.7% slide for silver.
  • Market fundamentals favour a rising platinum price, with consumption set to rise, stockpiles in warehouses tracked by the New York Mercantile Exchange have shrunk to their lowest since 2016. With 70% global supply sourced in South Africa, improving rand-dollar exchange is raising the relative cost of producing the metal and applying significant pressure on miners already struggling to stay afloat.

Palladium US$1,108/oz vs US$1,110/oz last week

Silver US$17.00/oz vs US$17.10/oz last week


Base metals:   

Copper US$ 7,107/t vs US$7,139/t last week

Aluminium US$ 2,228/t vs US$2,261/t last week

Nickel US$ 12,830/t vs US$12,570/t last week

Zinc US$ 3,423/t vs US$3,403/t last week

Lead US$ 2,604/t vs US$2,616/t last week

Tin US$ 20,615/t vs US$20,540/t last week



Oil US$68.9/bbl vs US$68.6/bbl last week

  • Global oil producers are in full agreement that cooperated efforts to maintain supply cuts should extend beyond 2018, as Saudi Arabia for the first time publicaly states the need for OPEC and non-OPEC producers to coordinate output controls.
  • The International Energy Agency expect global oil markets to tighten rapidly on falling supply from Venezuela, as debt and infrastructure problems cut the nations December output to 1.61 million barrels per day to record a 30-year low.

Natural Gas US$3.243/mmbtu vs US$3.156/mmbtu last week

Uranium US$23.40/lb vs US$23.40/lb last week



Iron ore 62% Fe spot (cfr Tianjin) US$74.7/t vs US$73.2/t - China’s iron ore stocks could make enough cars to reach the moon

  • The mountain of portside imports of iron ore continues to swell into unchartered territory, as stocks reach record after record as policy makers in Beijing continue to restrict steel production across the world’s largest consumer. Holdings rose for a 14th consecutive week to 154.43 million tonnes on Friday, the longest buildup since 2014, according to Shanghai Steelhome E-commerce Co. figures. Applying Bloomberg average daily shipment figures across 2017, current levels equate to more than 50 days’ of imports, crimping near-term consumption.
  • The record stockpiles across Chinese ports could produce enough steel for 107 million cars, more than three-times the Asian nations annual auto sales, or enough to reach the moon if lined up nose to tail.
  • Iron ore’s bull market rally is underpinned by demand for higher-quality ore, which is expected to reverse as the winter production restrictions close in March, driving mills toward an abundant supply of lower-grade material. Head of International business at Shanghai Metals Market notes that “Iron ore has clearly been oversupplied, and we’re still digesting the traditionally strong fourth-quarter shipments at a time when Chinese steel production is being reduced”, while “fundamentals will become a driving force over prices again, but that’s unlikely in the very near term. Steel demand should do well post-winter restrictions”.
  • Winter emission limitations have so far boosted spot ore with 62% iron ore delivery by 5.7% in the first month of 2018, supporting the margins of majors Rio Tinto Group, BHP Billiton Ltd., and Vale SA.

Chinese steel rebar 25mm US$622.7/t vs US$622.7/t - China steel output under control despite record 2017

  • Japan Iron and Steel federation chairman Kosei Shindo said steel output remains under control despite record output from world’s top prodcucer in 2017, citing abolition of illegal steel production and solid local demand
  • Although said he is worried about higher prices of steel making raw materials such as coking coal and iron ore, especially as cyclone season approaches in Australia


Thermal coal (1st year forward cif ARA) US$85.6/t vs US$85.8/t

Premium hard coking coal Aus fob US$224.0/t vs US$228.3/t



Tungsten APT European US$310-318/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$79,750.0/t vs US$75,250.0/t

Soybean shipment to China became the first commodity deal to use blockchain tech

  • Cargo of US soybeans shipped to China from Louis Dreyfus Co have become first fully fledged agricultural trade conducted using blockchain
  • Traders hoping that technology will lead to faster, cheaper and more secure ways of settling transactions with oil trading houses and energy groups now actively trialling platforms based on blockchain
  • Head of global trade at LDC, a Chinese agricultural processer said ‘expectations were high, but results even higher as processing time for documents was a fifth of a paper based process’ – benefits include ability to monitor operations in real time, data verification and reduced risk of fraud



Company News

Altus Strategies* (ALS LN) 8.0p, Mkt Cap £8.6m – Ethiopia licenses exploration update

BUY – Target price 12.2p

  • The Daro license is the recently granted 100%-owned permit covering 412km2 located in northern Ethiopia and 95km west of the Company’s Tugray-Afar Cu-Ag project.
  • The license covers the area within the Nakfa terrane prospective in VMS deposits including Nevsun’s Bisha (190km NW of Daro), East African Metals’ Harvest and Adyabo projects (35km west) and Sichuan Road & Bridge Mining Investment’s Asmara project (100km north).
  • The on the ground exploration followed upon targets previously identified by a remote sensing programme leading to a delineation of the Teklil gold-copper prospect.
  • The Teklil area has been mapped for 2.5km with a grab sample of a 2kg of present mineralised gossan rock returning grades up to 34% Cu, 0.54g/t Au, 10g/t Ag and 0.04% Zn consistent with a potential kuroko style rich in base metals VMS system.
  • The in-situ gossan and gossanous float has been mapped discontinuously along the strike.
  • The area also hosts a number of alluvial and hard rock gold workings including one target 7km north and along strike of Teklil with artisanal mines covering a 900mx500m zone.
  • The team is planning to carry a comprehensive stream sediment sampling programme with expected completion in February to establish the source of primary gold/copper mineralisation.

Conclusion: The team is continuing with a grass roots exploration programme at its Ethiopian licenses targeting the region prospective in polymetallic VMS deposits.

*SP Angel acts as Nomad and broker to Altus Strategies


Bushveld Minerals* (BMN) 8.9p, mkt cap £76m – Bushveld accelerates expansion to capitalise on higher vanadium price levels

BUY – Target price adjusted to 14 from 14.3p - (Bushveld Minerals now holds 59.1% of Vametco)

  • Bushveld Minerals are accelerating the expansion at Vametco bring forward expansion plans and maintenance activities.
  • Vametco reached a run rate of 3,035mtV (vanadium) will shortly raise to 3,650mtV by June 2018 and will then go on to 5,000mtV by 2019.
  • This makes the 2018 target of 3,050mtV plus 630mtV of FeV for the year look understated.
  • Last year Vametco produced some 2,649mtV of Nitrovan, Vametco’s key branded product though this was lower than 2016 due to increased maintanence.
  • Repairs and upgrades to the kiln caused vanadium production to fall 19.4% in Q4 QoQ.
  • The expansion to 3,750mtV should cost some US$2.5m and is to be self funded within Vametco while the expansion ot 3,035mtV cost just US$0.5m.
  • Costs are expected to fall next year to ZAR 205/KgV from ZAR221/KgV mainly due to the ramp up in production.
  • Sales of vanadium fell by only 14.5% due to the lag in sales versus production.
  • It is worth noting that pricing for Vametco’s sales also lags by three-months due to the way in which vanadium industry pricing works so that material produced today will effectively be sold at prices seen in three month’s from now.
  • Bushveld Energy (vanadium redox batteries): Bushveld signed an agreement with Eskom in partnership with the IDC to install a 450kWh vanadium redox flow battery with a peak power capacity of 120kW with co-developer UniEnergy Technologies based in the US.
  • Site preparations and procurement started in Q4 ’17 and operation should start in the first half.
  • Vanadium electrolyte: Bushveld Vametco has jointly produced laboratory batches of vanadium electrolyte for various types of battery-grade electrolyte.
  • If the new battery plant works well then Bushveld Vametco may develop into a significant producer of higher-value vanadium electrolyte products.
  • Lemur Resources: signed a 30-year power purchase agreement with the Madagascar state power utility and appointed Worley Parsons to manage the BFS and other technical aspects of the project.
  • The coal mine plan is being matched to feed a 30-year minimum life project.
  • Local consultants selected to work on the Social Environmental Impact Assessment alongside Worley Parsons.
  • Valuation: We have adjusted our forecasts and valuation based on last year’s actual production, next year’s costs forecasts and on adjustment to the US$/rand rate. The exchange rate was ZAR/US $13.3 for Vametco last year. We are using the futures market rand rate of 12.59 for 2018 and we have reverted to 13.6 from 2019.
  • Our valuation pulls back slightly to 14 pence per share from 14.3 previously though we note our cash flow forecasts and valuation are highly sensitive to the rand. 
  • We are using a FerroVanadium price of US$33.0/kg discounted to account for marketing and other costs for 2018 but pull this back to US$27.5/kg.
  • Prices: The FerroVanadium price has risen again, against almost all expectations to US$60/kg and this will almost certainly cause us to raise our raise our forecasts yet further as Vametco should benefit from these higher prices in the next quarter.

Conclusion:  Vametco’s lower Q4 production pulled back our numbers though this was offset by lower than expected costs through the second half.  The business is most sensitive to the vanadium price and to the South African Rand.  While the vanadium price has roughly doubled on last year the rand has significantly strengthened offsetting some of this benefit.  We will continue to work through our forecasts in relation to higher vanadium prices and our rand rate assumptions and will update the market in due course.


Figures based on 100% of Vametco plant. Bushveld now hold an effective 59.1% of the Vametco plant

*An SP Angel Mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa. 


Atalaya Mining (LON:ATYM) 181 pence, Mkt Cap £244m – Production for 2017 and 2018 guidance

  • Atalaya Mining reports that, during its first full year of commercial production at Proyecto Rio Tinto, it increased copper output by almost 11,000 tonnes (over 40%) to 37,164 tonnes during 2017.
  • The mine processed 8.8m tonnes of ore at a grade of 0.49% copper (2016 – 6.5m tonnes at a grade of 0.48%) with averaging metal recovery improving for 82.99% to 85.45%.
  • The company reports that “operations are now running stable quarter-on-quarter” and that in 2018 it expects to produce between 37-40,000 tonnes of copper.
  • Operating costs for 2017 were impacted by US$/€ exchange rates and are to be confirmed when the financial statements are published but in the meantime, “Management expects AISC to be in the range of $2.05/lb to $2.20/lb.”
  • The company is considering the addition of an additional secondary cone crusher to the circuit as part of its continuing process management.
  • On the larger scale, however, the approval during December 2017 of a further expansion of the RioTinto operation to 15mtpa throughput followed by a successful fundraising of £31m leaves the company confident that the expansion project “is on track to deliver increased production by 2019.”
  • At its Proyecto Touro in northern Spain, the permitting process is reported to be on schedule and “The technical report is substantially completed at pre-feasibility level of detail … The report will be released when the additional project improvements are incorporated to accommodate the final permitting process.”

Conclusion: Proyecto RioTinto is operating in a stable state with copper output in 2018 expected to increase slightly before the major expansion of throughput to 15mtpa comes through in 2019. Technical and feasibility work at Proyecto Touro seems to be proceeding on track and we look forward to the publication of the pre-feasibility level report when the modifications arising from the permitting consultations have been incorporated.


Gem Diamonds (LON:GEMD) 88p, Mkt Cap £122m –Another large diamond recovered from Letseng

  • Gem Diamonds reports that it has recovered a 149 carat type IIa diamond at its 70% owned Letseng mine in Lesotho.
  • News of the discovery of this stone comes shortly after the announcement last week that Gem Diamonds had recovered a 910 carat stone that is believed to be the fifth largest diamond ever recovered.
  • Today’s announcement points out that “This is the fourth high quality diamond of over 100 carats recovered so far this year”. We believe that Letseng produced seven stones of this size throughout 2017 and hence it appears that the mine has made a particularly strong start to 2018.

Conclusion: Although the recovery of large diamonds is an unpredictable event, with 4 stones greater than 100 carats in size reported so far this year it appears that the company’s work to minimise losses through breakage of large stones during the recovery process has been effective. We look forward to news on the values realised for these diamonds in due course.


Lonmin PLC (LON:LMI) 85 pence, Mkt Cap £241m – 2017 results, maintained 2018 guidance and update on offer from Sibanye

  • Lonmin reports a 2017 pre-tax loss of US$1.17bn after an impairment charge of US$1.05bn arising from the changes to the business plan arising from the decision to reduce production levels in order to focus on the core profitable “Generation 2” shafts.
  • Lonmin exceeded its published sales guidance of 650-680,000 oz of platinum with sales totalling 706,030 oz of platinum. The increased sales benefitted from the release of metal held within the pipeline as well as from 31,682 oz of platinum released from the smelter clean-up project. Unit costs rose by 8.9% to R11,701 per PGM oz.
  • The company’s move to concentrate on the “Generation 2” shafts (K3, Saffy & Rowland) saw the tonnage from these production units increase by 7.1% increase (to 6.9mt) while output from the  “Generation 1” shafts reduced by 15.6% to 1.9m tonnes. The 4B shaft, which is also a Generation 2 shaft, though not classed a core shaft, suffered a 16.9% reduction in production tonnage as a result of “worse than anticipated geological conditions and was also impacted by safety stoppages and the disruption associated with two fatalities.”
  • Commenting on the state of the market for its key commodities, Lonmin comments that although PGM pricing has recovered “from prior year lows [it] remained weak. In the short term, we expect markets to remain subdued, however we still believe the long term market fundamentals are strong. PGMs have a vital role to play as we move towards a greener global economy.”
  • Lonmin notes that “During the financial year, Rhodium and Palladium prices performed strongly, gaining 72% and 30% respectively. However, Platinum underperformed with the price declining 11% which resulted in Palladium trading at a premium to Platinum in September 2017 for the first time since 2001.”
  • Considering the outlook for prices in 2018, Lonmin points to “Cuts to production by South African producers initiated in 2017 are expected to result in reduced platinum output next year, while demand is forecast to recover to 2016 levels leaving the market in a fundamental deficit.”
  • Lonmin is subject to a recommended all share offer from Sibanye-Stillwater. The transaction is expected “to close in the second half of the 2018 calendar year.” Regulatory approvals in a number of jurisdictions as well as shareholder approval by both the Lonmin and Sibanye-Stillwater shareholders and court approvals will be required to implement the transaction and contribute to the relatively protracted timetable.
  • Sales guidance for the full financial year “is maintained at between 650,000 and 680,000 Platinum ounces. We are maintaining unit cost guidance of between R12,000 and R12,500 per PGM ounce produced.”
  • Capital cost guidance for 2018 is also maintained at between R1.4 to 1.5 billion.

Conclusion: Lonmin is pressing ahead with its refocussing of the business on its core shafts. If the company’s predictions of an emerging supply deficit in platinum are realised, the Sibanye-Stillwater offer for the company may been seen, in retrospect, as particularly astutely timed.



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