Morning View - Copper falls as Chile looks to restart major projects


Base Resources (LON:BSE) – Completion of Toliara acquisition

Bushveld Minerals* (BMN) BUY – Target price rises to 18.28 from 14p – Vanadium price rise more than offsets SA rand strength

Phoenix Global Mining* (LON:PGM) – Initial cobalt exploration results

Serabi Gold (LON:SRB) – US$3m loan post the Coringa acquisition


Copper falls as Chile looks to restart five to six new mining projects

  • Elevated red metal prices combined with the prospect of a more investor-friendly government in the world biggest supplier, Chile, is encouraging a resumption of hopeful mining projects following years of operations sitting on care and maintenance. As President Sebastian Pinera’s four-year term begins in March, mining companies could pull the trigger on five or six large projects sinking more than $1 billion investment. With prices rising to two-year highs in the second half of 2017, signs of a renewed bull market have encouraged mining employment to increase and the pipeline for projects for the next decade grew for the first time in four years.
  • The chain reaction for new projects started as BHP Billiton were given the greenlight for the $2.5 billion expansion of the Spence mine in August. Initial projects to follow suit will be those with environmental and community licenses, including Antofagasta Plc’s expansion of its Centinela mine, Capstone Mining Corp.’s Santo Domingo project and Barrick Gold Corp. and Goldcorp Inc.’s Cerro Casale gold-copper venture.
  • In the short-term, copper is expected to pull back from recent highs as global stockpiles swell to their highest level since November as China’s refined-copper output climbed to a record. Zaner Group analyst notes that “if these stockpiles continue to rise, we could see a stagnation” in price.


Rising mineral prices trigger artisanal and small scale mining explosion

  • According the report, produced by Canada’s Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, an estimated 40.5m people were directly engaged in Small scale mining (ASM) last year, up from 30m in 2014, 13m in 1999 and 6m in 1993
  • The report shows that the Artisanal mining share of global mineral production is rising, despite the sector’s low productivity representing around ~20% of global supply


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.


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


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IMF revised its global growth forecasts upwards 0.2pp to 3.9% for 2018 and 2019 “reflecting increased global growth momentum and the expected impact to maintain near-term momentum”.

  • In particular, the US growth is estimated to pick up from 2.3% recorded last year to 2.7% in 2018 and 2.5% in 2019, up 0.4 and 0.6pp from previous estimates, on the back of positive effect of US tax changes dirving increased investments.
  • The tax rate overhaul and its effect on US trading partners accounted for around half of the cumulative revision to global growth over 2018/19.
  • Growth rates in the Eurozone economies have been upgraded (2.2/2.0 in 2018/19 up 0.3/0.3pp on previous numbers) and in Germany, Italy and Netherlands, in particular, “reflecting the stronger momentum in domestic demand and higher external demand”.
  • In Japan, growth estimates have been also brought up (1.2/0.9 in 2018/19 up 0.5/0.1pp) “reflecting upwards revisions to external demand, the supplementary budget for 2018, and carryover from stronger-than-expected recent activity”.
  • Aggregate growth forecasts for the emerging and developing markets have been left unchanged.
  • In China, in particular, growth is expected to moderate gradually (6.6/6.4 in 2.018/19 up 0.1/0.1pp) with estimates revised marginally upwards on stronger external demand.
  • On potential risks to growth momentum, the IMF mentioned low risk premiums and high asset valuations which increase the possibility of financial market correction that “could dampen growth and confidence” with a potential trigger being “faster-than-expected increase in advanced economy core inflation and interest rates”.
  • The IMF argued nations should use current cyclical upswing for “structural reforms to boost potential output and making growth more inclusive”.


US – The Senate reached a deal to end the federal government shutdown that lasted less than three days seeing equity markets posting new record highs.

  • Senate Democrats supported the notion allowing to extend the government funding for about another three weeks after accepting Republican leaders’; assurances that an immigration bill will be brought to the floor in the coming weeks.
  • The bill has gone through in a 81-18 vote passing the required 60 votes threshold with two Republicans joining 15 Democrats and one independent in opposing the measures.


Japan – The yen is rangebound this morning as the BoJ reiterated its commitment to continue with loose monetary policy dampening market speculation that the central bank might soon follow its US and European counterparts.

  • “We haven’t reached the stage of thinking about how to handle an exit (from monetary easing),” Kuroda said during the press conference.
  • The BoJ kept rates unchanged at -0.1% and said to continue buying government debt at a rate of up to ¥80tn targeting ten year bond yields at close to 0%.


Eurozone – The ECB to hold its monetary policy meeting this Thursday against building up expectations for an indication of future tightening monetary policy amid hawkish December minutes, strengthening eu euro and rising oi prices.


Germany – Economic sentiment index which is supposed to measure investor expectations over a six months’ span continued to post new gains in this month laying good tone for the coming year

  • ZEW Current Situation Index: 95.2 v 89.3 in Dec and 89.6 forecast.
  • ZEW Expectations Index: 20.4 v 17.4 in Dec and 17.7 forecast.


UK – The pound has broke the 1.40 level against the US$ earlier today and climbed to a month-high against the euro on hopes for softer Brexit.


Zimbabwe – Grace Mugabe’s son crashes supercars as he crosses boarder from Botswana into South Africa

  • Three high-performance cars were damaged in the crash involving a Rolls Royce, a Range Rover and a Porsche
  • Grace owns the Range Rover and her son is reported to own the other two cars
  • There were suggestions that the former first lady and her son might have been trying to avoid having the cars seized when an amnesty expires for the return of all money illegally spirited from Zimbabwe during Mugabe's long rule.




US$1.2236/eur vs 1.2238/eur yesterday  Yen 110.94/$ vs 110.84/$  SAr 12.106/$ vs 12.039/$  $1.395/gbp vs $1.389/gbp  0.796/aud vs 0.800/aud  CNY 6.405/$ vs 6.403/$.


Commodity News

Precious metals:         

Gold US$1,337/oz vs US$1,331/oz yesterday

  • Gold resumes its climb as the dollar hovers around three-year lows despite President Donald Trump signs the spending bill Monday evening which ends the partial government shutdown. Trading has been within a tight range defined on the low end by safe-haven demand amid the US government closure, while the gains capped by resiliency of the wider financial markets and surging global equities, including Wall Street’s main indexes rising to record highs.
  • Commodity research at Geojit Financial Services foresee support for the precious metal “as there could be some correction in the equity markets and cryptocurrencies have started to fall again. We can see more investors coming into gold, which could be positive for prices”. Since the start of 2018 the total cryptocurrency market capitalization has faltered 15.9% to settle around $520 billion, as Asian investors withdraw from the digital market ahead the Lunar New Year and market participants weigh in on more stringent regulations on the volatile currency. During the early-year digital consolidation investors will be favouring safe-haven gold with MKS Pamp Group traders seeing psychological support at $1,350/oz.

   Gold ETFs 72.3moz vs US$72.3moz yesterday

Platinum US$994/oz vs US$1,016/oz yesterday

  • Following last weeks’ 79% surge in money manager net-long positions to 19,806 futures and options, the precious metal shows strong signals of being overbought and records the biggest decline since early December. Platinum for immediate delivery previously climbed to $1,019.42/oz with a 14-day relative strength index of 81, giving market participants signs that the price was set for a decline.
  • The metal lost 1.6% during yesterday’s trading amid profit taking with further loss warnings as platinum is “an illiquid metal, so once the market starts going the same way, it can get substantial momentum”.

Palladium US$1,094/oz vs US$1,108/oz yesterday

Silver US$17.05/oz vs US$17.00/oz yesterday


Base metals:   

Copper US$ 7,042/t vs US$7,107/t yesterday - China’s December Scrap Copper imports fall sharply on waste crackdown

  • Imports of scrap copper fell 19.8% in December from a year earlier customs data showed as country continues crackdown on foreign waste
  • China imported 260,000t of copper scrap last month, which was down 4.1% from 271,000t in November.
  • Full-year imports of 3.56mt were still up 6.2% from 2016
  • Trading firms are now unable to import scrap copper into China unless they can prove they are end-users of the material
  • China has moved to ban imports of Category 7 scrap - such as coiled copper cable and waste motors - from 2019

Aluminium US$ 2,232/t vs US$2,228/t yesterday

Nickel US$ 12,800/t vs US$12,830/t yesterday

Zinc US$ 3,418/t vs US$3,423/t yesterday

Lead US$ 2,614/t vs US$2,604/t yesterday

Tin US$ 20,685/t vs US$20,615/t yesterday



Oil US$69.3/bbl vs US$68.9/bbl yesterday

  • Oil bull concerns rise as the recent OPEC-led rally in crude prices hit refinery prices hard, with a wave of scheduled maintenance in spring expected to apply some downward pressure on the commodity.
  • Bearish sentiment is also growing as US crude production is on course to overtake Saudi Arabia and rival Russia, as the International Energy Agency revises its 2018 growth forecast while stressing that “explosive” expansion in shale was offsetting OPEC-led supply cuts. Big producer nations have feared a price rebound in recent weeks, climbing to a 2014 high of about $70 a barrel, could spur a flood of new supply from shale companies, undermining the effort by global producers to curb output.

Natural Gas US$3.278/mmbtu vs US$3.243/mmbtu yesterday - China switches to natural gas

  • China’s domestic natural gas output rose 7.7% year on year to reach 147.42bcm in 2017 according to the National Bureau of Statistics China (NBS)
  • Growth has accelerated in recent years against the backdrop of coal to gas switching policies spurred by Chinese government
  • Meanwhile, robust winter gas demand and widespread shortages in northern China have pushed average domestic trucked LNG prices in China up nearly 50% since mid-November
  • China’s gas demand this year is estimated to be nearly 260bcm, state owned company CNPC said recently

Uranium US$23.15/lb vs US$23.40/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$74.5/t vs US$74.7/t

Chinese steel rebar 25mm US$656.8/t vs US$622.7/t

Thermal coal (1st year forward cif ARA) US$85.9/t vs US$85.6/t - Lloyds of London to divest from coal over climate change

  • Lloyds is the latest financial firm to announce its plans to stop investing in coal companies
  • Lloyds will start to exclude coal from its investment strategy from April 1st, , with the definition of what a coal company is and the criteria for divestment set over the coming months  
  • The move follows a number of other large investors such as Aviva, Axa, SCOR, Swiss Re and Zurich have been shifting away from coal and other fossil fuels, with about £15bn being divested by insurers in the past 2 years  

Premium hard coking coal Aus fob US$224.1/t vs US$224.0/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


Company News

Base Resources (LON:BSE) 15.8p, Mkt Cap £178m – Completion of Toliara acquisition

  • The Company has announced the completion of its acquisition of the Toliara mineral sands project in Madagascar.
  • “With payment of the US$75 million up-front consideration by Base Resources, the initial 85% interest in the … Toliara Sands Project in Madagascar …  has now been transferred to the Company.  Base Resources will acquire the remaining 15% interest, with a further US$17 million payable on achievement of key milestones as the project advances to mine development.”
  • Describing the Toliara sands acquisition as “transformational” for the company, Managing Director, Tim Carstens, said “We are excited to now proceed with the development of what we consider to be one of the very best mineral sands projects in the world.  The strong support demonstrated by institutional and retail shareholders, as well as the Base Resources management team, through participation in the capital raising reflects a shared enthusiasm.”
  • We understand that the deposit contains a measured and indicated resource of 612m tonnes at an average grade of 6.7% heavy minerals with a further, implied, inferred resource of 245mt at an average grade of around 5%.

Conclusion: The Toliara acquisition provides Base Resources with an alternative asset to the declining Kwale mineral sands operation in Kenya. We look forward to further news as the project progresses.


Bushveld Minerals* (BMN) 8.6p, mkt cap £75m – Vanadium price rise more than offsets SA rand strength

BUY – Target price rises to 18.28 from 14p - (Bushveld Minerals now holds 59.1% of Vametco)

  • Yesterday we commented on the impact of lower vanadium production in Q4 ’17 caused by repairs and upgrades to the kiln at the Vametco plant in South Africa.
  • Today we focus on the impact of higher FerroVanadium prices and the impact of the markedly stronger South African rand.
  • FerroVanadium prices: The FerroVanadium price has more than doubled over the past six months to US$60/kGV and while Bushveld Vametco does not receive these prices till three-months after we see them, due to delayed pricing formulae, they do feed through.
  • We know the FerroVanadium price has averaged US$42.1/kgV over the past three months and we could fairly safely assume around US$50/kgV for the next three months followed by a fairly conservative US$30/kgV for the rest of the year.  US$30/kgV is still markedly higher than 2016 so while its half the current price it still feels cautiously realistic given where prices have come from.
  • This gives a price assumption of US$38.75/kgV which is 17% higher than our previous US$33/kgV forecast.
  • We then raise our longer term forecast by 9% to US$30/kgV from US$27.5/kgV previously which may again feel conservative in time and will hopefully give room for further upgrade in time.
  • Forex: The election of Cyril Ramaphosa to the head of the ANC has caused the ZAR:USD rate to strengthen significantly with the rand strengthening by a whopping 20% since its low in November.  It’s a big move for a major currency. 
  • We had previously assumed a ZAR:USD rate of 13.6 which we have cut to 13.0. While this is not the spot rate of around 12.1 it does reflect the view that SA growth forecasts may take some time to recover and the ANC still has much to do to clean up corruption.
  • Production forecasts: Following discussion with Bushveld Minerals we have raised our production forecasts to match the guidance given by the company.
  • Valuation: The net effect is to strengthen our valuation to 18.28 pence per share though we would caution that with the South African rand and vanadium prices both showing unusually large movements that the company’s cash flows and valuation are also liable to unusually large changes depending on the spot prices used or assumptions being made.


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. 


Phoenix Global Mining* (LON:PGM) 5.0p, Mkt Cap £11.5m – Initial cobalt exploration results

  • Phoenix Global Mining reports the highlights of results of assaying 46 grab samples from its recently acquired copper cobalt exploration licences located in Lemhi County, Idaho. “All of the sample results showed cobalt mineralisation above detection limits and ranged from 2.0ppm to 3120ppm, or 0.31% Co.”
  • The company reports the results from 2 of the 26 samples taken on the Bighorn property where one sample assayed at 1.55% copper and 1360ppm cobalt and the other at 4.12% copper and 1705ppm cobalt.
  • At the Redcastle property, where 20 samples were recovered, the company reports 6 results ranging between 153ppm and 3120ppm cobalt. Copper assays are not reported for the Redcastle samples.
  • Encouraged by these results, PGM plans “additional detailed ,mapping and sampling at both the Redcastle and Bighorn projects, as well as to conduct a focused drilling programme in 2018.”
  • Commenting on the results from the initial sampling, CEO, Dennis Thomas, explained that “The 2017 field season has significantly increased our understanding of the intricacies of the structural geology and geochemistry of the Idaho Cobalt Belt in general, and our own claim blocks in particular.”
  • Mr. Thomas went on to point out that drilling results obtained by US Cobalt from its Iron Creek Mine, located close the PGM’s Redcastle licence area, “have further underpinned this area of Idaho as the most prolific trend of cobalt mineralisation in the country”.

Conclusion: Although grab sampling is a relatively early stage exploration tool, it has confirmed the cobalt mineral potential of both the Bighorn and Redcastle properties, improved the company’s geological understanding and laid the groundwork for further exploration during 2018 which may include drilling. Exploration by PGM and others in the area is establishing the cobalt mineral potential of this part of Idaho. We find the high copper grades associated with the cobalt at the Bighorn property intriguing and look forward to further results as the 2018 exploration season progresses.

*SP Angel acts as Nomad to Phoenix Global Mining


Serabi Gold (LON:SRB) 3.8p Mkt value £26.2m – US$3m loan post the Coringa acquisition

  • Serabi Gold has reported that, following the completion of its acquisition of the 370,000oz Coringa gold deposit, its existing lender, Sprott Resource Lending Partnership, has granted an additional US$3m loan in order to replenish working capital and “to replace funds used to make the initial US$5 million cash payment upon completion of the acquisition.”
  • The new loan is repayable “in equal monthly instalments commencing 30 September 2018 with a final payment due 22 months later on 30 June 2020.”
  • In addition to the new loan, the terms of the existing loans with Sprott have been “extended to 30June 2020 and [the loan] is now repayable in 30 equal monthly instalments.”
  • Serabi Gold has been using loans from Sprott since September 2014 and seems to have established a productive working relationship with CEO, Michael Hodgson commenting that “Over this period Sprott have shown great flexibility and have been a strong contributor to Serabi’s current success”.
  • “Following completion of the New Facility the Company now has aggregate loans with Sprott of US$8 million which carry an interest rate of 10 per cent per annum.”
  • Work is continuing on the permitting and technical work to advance Coringa as well as the evaluation of financing requirements to develop the deposit.


Conclusion: Serabi Gold is building on its established lending arrangements with Sprott as it presses ahead with the work to develop the recently acquired Coringa deposit, which we understand is located some 200km from Serabi’s existing Palito mine.

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