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Today's Market View - Shifting battery demand is drawing major investment in lithium projects

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SP Angel – Morning View – Thursday 22 11 18

Shifting battery demand is drawing major investment in lithium projects

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Altus Strategies* (LON:ALS) – Q3 operations update

Atalaya Mining (LON:ATYM) – Improved production guidance as operational improvements feed through

Bluejay Mining* (LON:JAY) STRONG BUY - Target Price 45p – Dundas project update

BlueRock Diamonds* (LON:BRD) – Higher grades at KV1 diamond pipe

Metals Exploration (LON:MTL) – $6.6m working capital facility agreed with major shareholders

IronRidge Resources * (LON:IRR) - £5.4m raised towards development of gold and high-grade lithium portfolio

 

Shifting battery demand is drawing major investment in lithium hard-rock projects

  • The global trend towards higher energy density rechargeable lithium-ion batteries is shifting chemical compositions towards nickel-heavy NMC 8:1:1 ratios which favour lithium hydroxide. The broad developed lithium workflow for hard-rock spodumene producers initially manufacturers lithium hydroxide with a subsequent phase (and cost) to lithium carbonate.
  • Roskill recognise the technology trend, estimating global growth of battery-grade lithium hydroxide of 38.8% CAGR through 2031 compared to 13.1% CAGR for lithium carbonate. Total consumption for lithium hydroxide is expected to rise to more than 4x compared to lithium carbonate, with demand climbing to 1,605,500t and 460,100t respectively in 2031.
  • As highlighted in Namaska Lithium’s unique Whabouchi process, the concentration of ore, calcination and roasting, impurity removal and upgrading outputs battery-grade lithium hydroxide directly for US$2,811/t. The addition of carbon dioxide generate a battery-grade lithium carbonate product for US$3,403/t (additional cost associated with carbon dioxide).
  • In contrast, lithium brine producers which dominate the ‘Lithium Triangle’ in South America initially output lithium carbonate, with subsequent processing required for lithium hydroxide. As a result, producers including Albemarle, SQM, Tianqi, sit higher on the cost curve for the more desirable lithium hydroxide.
  • To capture the growing trend, Albemarle Corp. have agreed to pay $1.15bn for a 50% stake in a potential JV with Mineral Resources Ltd. which owns and operates Wodgina hard-rock in Australia. The largest lithium producers will manage the marketing and sales of lithium hydroxide, and highlights the swift reaction towards shifting demand that has previously been concentrated on lithium carbonate.
  • Albemarle had announced earlier this month it was halting expansion plans for its Chilean operation beyond 2021. Instead, the company will focus on expanding its Kemerton plant in Western Australia, which processes hard rock from the Greenbushes mine to produce lithium hydroxide.
  • We’re seeing a significant acceleration in demand of lithium hydroxide and so we need to address that”, announced CEO Luke Kissam.

 

Vanadium – Ferro-vanadium prices in Western Europe remain stable at high levels at US$126-128/kgV (Fastmarkets MB)

 

Dow Jones Industrials

 

-0.00%

at

24,465

Nikkei 225

 

+0.65%

at

21,647

HK Hang Seng

 

+0.11%

at

26,000

Shanghai Composite

 

-0.23%

at

2,645

FTSE 350 Mining

 

-0.89%

at

17,003

AIM Basic Resources

 

+0.64%

at

2,156

 

Economics

 

Currencies

US$1.1406/eur vs 1.1417/eur yesterday  Yen 112.96/$ vs 112.81/$  SAr 13.914/$ vs 13.933/$  $1.279/gbp vs $1.286/gbp  0.724/aud vs 0.732/aud  CNY 6.935/$ vs 6.943/$

 

Commodity News

Precious metals:         

Gold US$1,228/oz vs US$1,220/oz yesterday

  • Gold holds its advance amid debate over a softening Federal Reserve stance on increasing its interest rates through 2019. Fed Chairman Jerome Powell and his colleagues are deemed likely to turn more wary of further tightening. Prospects for slowing global economic growth, fading U.S. fiscal stimulus and volatile financial markets all argue for more caution once officials lift rates next month near or into neutral territory, where policy neither spurs nor reins in economic activity.
  • MNI reported the Fed is starting to consider at least a pause to its gradual monetary tightening and could ends its cycle of interest rate hikes as early as the spring. Higher rates curb the appeal of bullion as it doesn’t pay interest.
  • Societe Generale strategists also foresee the S&P 500 falling toward a bear market decline of 20% next year as the economy approaches a recession, boosting the appeal of safe haven gold. The precious metal may also find support in volatility as UK and European negotiators continue to finalise parts of the Brexit deal as Theresa May fights to keep a crunch summit on Sunday on track.
  • The positive outlook may see global gold mine output to expand over the coming quarters, supported by solid project pipelines according to Fitch Solutions Marco Research. Worldwide production forecast is set to increase to 115m oz by 2022 from 104m oz this year, averaging 2.6% annual growth.
  • Chinese companies are expected to ramp up investment in foreign mines as the nation’s output will stagnate over the coming decade as declining ore grades, tightening environmental standards and foreign low-cost asset acquisitions limit the project pipeline.

   Gold ETFs 68.8moz vs US$68.7moz yesterday

Platinum US$846/oz vs US$847/oz yesterday

Palladium US$1,151/oz vs US$1,184/oz yesterday

Silver US$14.51/oz vs US$14.42/oz yesterday

           

Base metals:   

Copper US$ 6,254/t vs US$6,249/t yesterday

Aluminium US$ 1,961/t vs US$1,950/t yesterday

Nickel US$ 11,025/t vs US$11,285/t yesterday

Zinc US$ 2,576/t vs US$2,642/t yesterday

Lead US$ 2,002/t vs US$2,010/t yesterday

Tin US$ 19,320/t vs US$19,450/t yesterday

           

Energy:           

Oil US$63.0/bbl vs US$67.3/bbl yesterday - Trump ramps up pressure on Saudi Arabia to lower oil prices

  • US president Donald Trump praised Saudi Arabia for helping to reduce oil prices and ramped up pressure on the kingdom to maintain the decline, even as talks have gathered pace among producer nations to enact new production curbs.
  • “Oil prices getting lower. Great! Like a big Tax Cut for America and the World,” Mr Trump tweeted on Wednesday. “Thank you to Saudi Arabia, but let’s go lower!” he added.
  • Mr Trump referenced two prices in his latest tweet, causing confusion, saying crude was at “$54” having come down from “$82”. The president seems to have cited the current price for WTI with last month’s price for Brent.

Crude rises slightly despite oversupply fears

  • Crude futures rose ahead of settlement in choppy trade on Monday, supported by a reported drawdown of U.S. oil inventories, potential European Union sanctions on Iran and possible OPEC production cuts.
  • Brent crude settled up 3 cents at $66.79 a barrel, strengthening late in the session after earlier hitting a low of $65.27 a barrel.
  • U.S. crude futures traded 30 cents higher at $56.76 a barrel in a session that saw swings in a $2 per barrel range.

Natural Gas US$4.385/mmbtu vs US$4.547/mmbtu yesterday

Uranium US$29.00/lb vs US$29.15/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$70.6/t vs US$71.9/t

Chinese steel rebar 25mm US$627.2/t vs US$670.4/t

Thermal coal (1st year forward cif ARA) US$84.0/t vs US$85.0/t

Coking coal futures Dalian Exchange US$197.9/t vs US$197.0/t

           

Other:  

Cobalt LME 3m US$55,000/t vs US$55,000/t

China NdPr Rare Earth Oxide US$45,569/t vs US$45,513/t

China Lithium carbonate 99% US$10,094/t vs US$10,082/t

Tungsten APT European US$275-295/mtu vs US$275-295/mtu

 

Battery New

Enevate’s new battery technology decreases charge time dramatically

  • Enevate has been developing new Lithium-based batteries that present drastically improved results.
  • Batteries with the Advanced Enevate HD-Energy technology are built with a silicon-dominant composite anode, featuring more than 70% silicon, and are capable of charging 90% of full capacity in just 15 minutes, and 50% in just 5 minutes.
  • This makes it 8 times faster than conventional batteries, and 5x faster than fast-charging batteries.
  • Significant investment has already been provided by Alliance Ventures

 

Next-generation solid-state batteries in production in China

  • China's first solid-state battery production line has become operational in the city of Kunshan
  • Chinese start-up Qing Tao Energy Development Co. Ltd, led by Nan Cewen, , has invested 1bn yuan on the project.
  • The production line is capable of producing 0.1 GWh solid-state batteries per year, which have an energy density of over 400 Wh/kg.
  • Nan announced the line's operation on Monday, saying the batteries would first be utilized on special equipment and high-end digital products.
  • We are not sure that getting rid of liquid electrolyte will entirely prevent the risk of a battery fire.
  • Dendrites, which shot-circuit a battery cell, can also form in solid materials particularly when a battery warms up while damage or manufacturing imperfections will also raise the risk of combustion.

 

Window washing drone

  • A huge drone that can wash buildings and put out fires is being developed in Latvia. The Aerones drone weighs about 55kg and is tethered to the ground with a hose.
  • The company says it can clean buildings 20 times faster than humans and fly higher than firefighter ladders can reach.
  • When 5G mobile connectivity arrives it will be able to stream high-definition video to operators on the ground, Aerones says.

 

British Gas launches new tariff for electric vehicle charging

  • British Gas has launched a new lower tariff for electric vehicle owners charging their vehicles in off-peak hours between 0030 GMT and 0730 GMT
  • It said it would calculate annual costs based on how much electricity an EV owner has used in the past in the home
  • Its estimate of costs will assume that 38% of electricity will be used during off-peak hours

 

Company News

Altus Strategies* (LON:ALS) 3.8p, Mkt Cap £6.8m – Q3 operations update

  • The team has been busy in progressing with exploration works across a suite of exploration assets during the period.
  • On the ground operational highlights included:
    • Identification of new prospects at Daro copper gold project in northern Ethiopia;
    • Extension of the Bikoula colluvial iron ore target along strike in southern Cameroon;
    • Discovery of further artisanal gold working at Laboum gold project in northern Cameroon;
    • Mapping of over 14km of artisanal gold workings at Zolowo gold project in western Liberia;
    • Identification of copper mineralisation at the Ammas project in central Morocco
    • Reconnaissance sampling at Manankoto gold project in western Mali;
    • Initial exploration completed at the Prikro gold project in eastern Cote d’Ivoire.
    • Setting drill targets at the Lakanfla gold project in western Mali which is considered geologically analogous to the karst-type Sadiola and Yatela deposits located 6.5km and 35km away from the project, respectively.
  • Additionally, the Company signed a LOI with Raptor Resources regarding an earn in for copper and other base metals exploration assets in Morocco in return for upfront cash payment, equity in the Company and a NSR on licenses.
  • Following the end of the reporting period, the team has also agreed an LOI with Canyon Resources to vend the Birsok bauxite project for an additional 30m shares and a $1.5/t royalty; the Birsok project is located contiguous to the 550mt Minim Martap bauxite license secured by Canyon earlier this year; the deal is expected to be completed by the end of the year.
  • The Company had £2.1m in cash (£1.2m) and marketable securities (8m Canyon Resources shares valued at £0.9m as of 30 Sep and £1.8m as of 21 Nov) as of quarter end.
  • Exploration and admin expenditures amounted t0 £0.5m and £0.8m during the first nine months of the year, respectively.
  • YTD losses totalled £0.9m.
  • The Company currently owns a diversified portfolio of 18 early stage exploration projects including precious and base metals as well as bulk commodities across six African nations (Morocco, Ethiopia, Cameroon, Liberia, Cote d’Ivoire and Mali).
  • The team has two active partnerships with Resolute Mining regarding Pitiangoma Est gold project in southern Malia and Canyon Resources over Birsok and Mandoum bauxite licenses in central Cameroon.
  • Commenting on the outlook, the Company said it is progressing agreements with Raptor and Canyon towards completion while continuing to actively seek new partnerships on its remaining projects. Current exploration programmes over portfolio assets are expected to generate technical results that will be reported upon in due course.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Atalaya Mining (LON:ATYM) 196.5 pence, Mkt Cap £269.9m – Improved production guidance as operational improvements feed through

  • Atalaya Mining has increased its 2018 production guidance to 39-41,000t of copper from the previously indicated range of 37-40,000t as a result of improved grades, recoveries and throughput rates at the Riotinto operations.
  • Cost guidance for the year has also been revised to a range of US$1.95-2.10/lb on a cash cost basis (previously US$2.15-2.30/lb) and US$2.25-2.40/lb on an all-in-sustaining cost basis. The former guidance range for all-in-sustaining costs was US$2.50-2.60/lb.
  • Copper production during the quarter ending 30th September of 11,055t represented a 5.8% increase on the record Q2 production of 10,446t (and a 3.5% improvement on the Q3 2017 output) and brings year to date output to 30,942t.
  • Cash costs of US$1.88/lb during the quarter bring the year-to date average to US$2.00/lb while all in sustaining costs, at US$2.13/lb for the quarter bring the average for the first nine months of 2018 to US$2.35/lb.
  • The company points out that as part of a continuous improvement strategy at the mine, “an additional secondary cone crusher, installed during the previous quarter, is now fully operational. Crushing capacity is no longer a bottleneck in the production process. A detailed analysis of the current screening section is now under way.”
  • Plans to expand  throughput at Riotinto to 15mtpa remain on track for mechanical completion at the end of Q2 2019 with the earthworks and pipework substantially complete and civil engineering, structural work and installation of mechanical equipment in the concentrate handling area well advanced.
  • Near mine exploration around Riotinto has included the completion of the first 1500m of a planned 19000m drilling programme to investigate the extension of massive and stockwork mineralisation, “with positive preliminary results received. Drilling around the high grade underground workings in Filon Sur is also ongoing.”
  • Further documentation arising from the public consultation process at the Proyecto Touro project in northern Spain has been submitted to the regulatory authorities.
  • The company reports a year-to-date profit of €27.6m on gross sales of €144.4m and operating cash-flows of €44.2m. After €41.7m of capital investment, and investment of €42.4m, Atalaya generated free cash flow of €2.4m leaving a 30th September cash balance of €45.9m. Atalaya Mining reports that “Realised copper prices for the nine month period ended 30 September 2018 were US$3.02./lb copper compared with US$2.58/lb copper in the nine month period ended 30 September 2017.”
  • Commenting on the results, CEO, Alberto Lavandiera said “We have achieved record production and recovery levels, operating costs within our stated guidance during a period where copper prices have also been robust. The Riotinto plant is operating well and our expansion plans are well on track. Once complete, we will see an improvement in operational efficiencies and a reduction in maintenance requirements and operating cash costs."

Conclusion: The steadily improving production performance at Riotinto has given the company the confidence to upgrade both its production and cost guidance for 2018. The expansion plan which will see throughput increase from a rated 9.5mtpa to 15mtpa is currently on track for mechanical completion by the middle of 2019 and the management team has a track record in delivering previous expansion projects at the mine on time and budget.

 

Bluejay Mining* (LON:JAY) 11.7p, Mkt Cap £99m – Dundas project update

STRONG BUY - included in MSCI index

Target Price 45p

  • Bluejay Mining report the completion of the three-year Environmental Impact Assessment at Dundas in Greenland.
  • The Social Impact Assessment is also due for completion in January with support expected from the relevant local community.
  • The long-awaited Pre-Feasibility Study is being optimised and is reported to be on-track for the first quarter next year.
  • We suspect the PFS will be able to include an upgraded JORC resource utilising drilling and other assay results from this year’s summer work program.
  • Management will lodge the application for an Exploitation (Mining) license shortly after.
  • Work in and around the Iterlak Delta has the potential to significantly raise the scale and grade of the overall resource adding further to the potential value of the project.
  • Our site visit to the Dundas’ project indicated to us that logistical and engineering issues are, in our view, offset by the project’s location on a deep fjord and the relative ease of it’s mining.
  • The work done at site in the past two field seasons coupled with the mining, sorting and exporting of bulk samples to offtakers demonstrates Bluejay’s ability to work effectively in this location.
  • We look forward to further newsflow before Christmas.
  • Ilmenite prices in China have recovered to US$184/t from US$171.5/t at the beginning of August as predicted with ilmenite processing companies recovering production lost through furnaces problems.

Conclusion: We expect further news from Bluejay on grades and the scale of the ilmenite resource at Dundas. Dundas looks to be the world’s highest grade and also possibly the world’s most consistent resource from a mineralogical perspective. Both attributes are positive from a value and offtake perspective.

*The SP Angel mining analyst has visited the Dundas, Itelak ilmenite sands project in Greenland. *SP Angel act as nomad and broker to BlueJay Mining. 

 

BlueRock Diamonds* (LON:BRD) 0.28p, Mkt Cap £1.2m – Higher grades at KV1 diamond pipe

  • BlueRock Diamonds report higher grades at the KV1 diamond pipe in the Kimberley region of South Africa.
  • Grades at the KV1 pipe have risen to 4.51cpht as management had expected from the deeper levels in the diamond pipe.
  • Some 20,500t of kimberlite material has been mined with grades ranging from 3.9cpht to 5.11cpht to give an average of 4.51cpht.
  • The original Competent Persons Report statistically estimated a grade of 6.3cpht for the KV1 kimberlite pipe which we hope will be demonstrated to be reasonably accurate once diamond recovery rates are improved.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Metals Exploration (LON:MTL) 1.6p, Mkt Cap £34m – $6.6m working capital facility agreed with major shareholders

  • $6.6m unsecured short term working capital facility has been provided by existing major shareholders (MTL Sarl Limited and Runruno Holdings Limited).
  • The facility together with three previously announced  loan facilities amounts to $17.6m and carries 20% interest.
  • Under conditions of the loan, unless the Company replaces combined four facilities into a new Mezzanine style single facility by 31 December 2018, a default on $6.6m will be triggered.
  • The Company is reported to be working on putting such facility in place.

 

IronRidge Resources * (LON:IRR) 19.4p, Mkt Cap £54.7m - £5.4m raised towards development of gold and high-grade lithium portfolio

  • IronRidge Resources announce additional high-grade lithium intersections from the final drilling results at the Ewoyaa Project in Ghana, West Africa. The final 13 drill holes form a cumulative 8,210m 58 hole reverse circulation (‘RC’) drilling programme, which returned broad, high-grade lithium intersections.
  • COO Len Kolff said “High-grade lithium intersections over significant intervals and in close proximity to essential infrastructure, coupled with the pro-mining and stable jurisdiction of Ghana, bodes well for the future development of the Company’s Cape Coast Lithium Portfolio”.
  • Intersections including 56m @ 1.71% Li2O and 67m @ 1.32% Li2O continue to confirm high-grade lithium pegmatite in the north-east zone, with mineralisation remaining open to the north and north-east.
  • Coarse spodumene crystal fragments visible in the RC drill chips, coupled with preliminary mineralogical characterisation suggest spodumene is the dominant and preferred feedstock to enable a simple process flow-sheet design.
  • Final results received for the first phase drill programme indicate that the Ewoyaa deposit consists of steeply east dipping to sub-vertical pegmatite dykes and bodies in the southern, central, north extension and north-east zones with interpreted true widths between 20m up to 100m. The Ewoyaa deposit remains open to the north, with pitting programmes currently underway to define the extent of mineralisation.
  • A 3,000m exploration RC programme has been planned to test the Abonko target which includes step out resource drilling to test the northern extensions at Ewoyaa. Access tracks and drill pad construction is underway, with RC drilling to commence prior to the end of the year.
  • The Ewoyaa Project is strategically located within 1km distance of a bitumen highway, in close proximity to grid power, within 100km of the Takoradi deep sea port and within 100km of the capital city of Accra. The Takoradi port includes a dedicated Cape Size vessel dock with handling and loading facilities.
  • The company also raised approximately £5.4m through a subscription and placing of 27,022,000 new ordinary shares at a price of 20p/share. Binding commitments to subscribe for a total 24,522,000 new ordinary shares have been received from Assore Limited (the company’s largest shareholder), Sumitomo Corporation, Vincent Mascolo (company’s CEO), Neil Herbert (company’s Non-Exec Chairman), with an additional 2,500,000 placing of new ordinary shares.
  • IronRidge will primarily contribute towards their working capital and the ongoing development of the Company’s pipeline of gold and lithium projects in Ghana, Chad and Côte d’Ivoire.
  • CEO Vincent Mascolo adds “the capital raise….will enable the Director’s to execute their strategy to further develop the Company’s highly prospective gold and lithium assets. Most notably, the Ghanaian Cape Coast Lithium Project has continued to deliver exciting and potentially world class lithium grades and drill intersections, whilst in Chad, we have uncovered a substantial gold bearing province with a surface footprint rivalling some of today's largest operating gold mines.”

Conclusion – The capital raise places the company with a strong cash balance to continue advancing exploration efforts across the prospective gold and lithium assets. The latest RC drill results from the Ghana lithium project reveals positive high-grade lithium extensions, and we look forward to understanding the full extent and scale of mineralisation at Ewoyaa. Preliminary spodumene mineralogy is also significant with the broad global trend towards the development of hard-rock lithium assets to extract the highly desirable lithium hydroxide. The reduced operating expenditure to produce the battery-grade hydroxide is drawing attention and investment from major lithium miners and battery manufacturers.

*SP Angel act as nomad and broker to IronRidge Resources

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