Today's Market View - Base metals edge higher on improving trade sentiment

Proactive Published 17/12/2018

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SP Angel – Morning View – Friday 14 12 18

Iron ore prices rise despite weak Asian equity markets

MiFID II exempt information – see disclaimer below

Bluejay Mining* (LON:JAY) STRONG BUY, Target Price 45p – Optimisation work increases grade and scale of existing titanium mineral sands resource in Greenland

KEFI Minerals* (LON:KEFI) – GM Statement

Savannah Resources (LON:SAV) – Lithium mineralisation extended at the Grandao and Pinheiro deposits

TRUMP SAYS 'CHINA WANTS TO MAKE A BIG AND VERY COMPREHENSIVE DEAL. IT COULD HAPPEN, AND RATHER SOON' on Twitter

China – President Xi to make major speech on ongoing economic reform on Tuesday

The speech is to mark China’s 40th anniversary since President Deng Xiaoping opened the nation to the world in 1978.
Xiaoping used a series of capitalist experiments which have swept away China’s previously mainly subsistence economy turning it into the world’s second largest economy.
Asian equity markets have posted gains ahead of Xi’s speech following comments from China’s Communist party that China will keep its economic growth within a reasonable range next year, striving to support jobs, trade and investment while pushing reforms and curbing risks.

EU ordered to reinstate tougher diesel emission rules

The EU’s decision to relax diesel emission rules two years ago was illegal, a lower court of the European Court of Justice has ruled.
On Thursday, the court annulled an EU decision that allowed diesel cars to produce “excessively high” nitrogen dioxide levels, upholding a complaint brought by the cities of Brussels, Madrid and Paris in an effort to reduce air pollution.
Thursday’s decision means that manufacturers have one year to ensure their new cars comply with the tighter NOx limit unless the EU appeals or passes new laws to raise the limit.

NASA develops plans for a nuclear-powered tunnelling robot

One of the proposed tunnelbots would use a small nuclear reactor while the other might use a radioactive heat source module.
The tunnelbots are being designed to tunnel through as much as 30km of ice on Europa which orbits jupiter.
While they are at it maybe we could have a tunnel bot to help with the tunnelling for HS2 and a few other projects on earth.

Vanadium prices continue to decline from high levels

Ferro-vanadium prices have pulled back 5.1% to $90-95/kg in Western Europe on Friday according to Fastmarkets MB
Ferro-vanadium prices are 19% lower in China at $80-90/kg, Fastmarkets MB.
Bloomberg report China Ferro Vanadium 80% FOB at US$100.5/kg vs US$103.5/kg on Friday.
We suspect buyers are standing back waiting for ferro-vanadium prices to find a new buying level.

Mick Davis to join Eskom task force

Mick Davis, the man who built Xstrata before selling the business to Glencore for around $30bn, is to join Ramaphosa’s task force to reform Eskom.
Eskom, the South African power utility which mines much of its own coal has been beset with corruption and procurement issues while raising the cost of power in South Africa and enforcing load shedding at times of short supply, hitting industry and domestic consumers.

Dow Jones Industrials

-2.02%

24,101

Nikkei 225

+0.62%

21,507

HK Hang Seng

+0.08%

26,117

Shanghai Composite

+0.16%

2,598

FTSE 350 Mining

+1.37%

17,102

AIM Basic Resources

-0.78%

2,072

Economics

Currencies

US$1.1315/eur vs 1.1324/eur last week Yen 113.41/$ vs 113.58/$ SAr 14.363/$ vs 14.372/$ $1.260/gbp vs $1.258/gbp 0.718/aud vs 0.717/aud CNY 6.901/$ vs 6.901/$

Commodity News

Precious metals:

Gold US$1,238/oz vs US$1,238/oz last week

Gold ETFs 69.6moz vs US$69.5moz last week

Platinum US$785/oz vs US$793/oz last week – Scientists maximize the effectiveness of platinum in fuel cells

In the journal Science, Argonne chemists have identified a new catalyst that maximizes the effectiveness of platinum.
In new research from the U.S. Department of Energy's Argonne National Laboratory, scientists have identified a new catalyst that uses only about a quarter as much platinum as current technology
The improvements were possible as they tweaked the shape of the platinum to maximize its availability and reactivity in the catalyst and produced a catalytically active, platinum group metal-free substrate as the support for the cobalt-platinum alloy nanoparticles.

Palladium US$1,250/oz vs US$1,245/oz last week

Silver US$14.60/oz vs US$14.62/oz last week

Base metals:

Base metals edge higher, starting the week with cautious optimism that China and the US will be able to resolve a trade row which continues to weigh down on prices, despite weak economic indicators capping gains.
China has reported it will temporarily suspend additional 25% tariffs on US-made vehicles and auto parts starting Jan. 1 2019, according to the finance minister, following a truce in the trade war between the two largest economies. Investors are now focusing on a speech by Chinese President Xi Jinping to mark the 40th anniversary of China's reform and opening up on Tuesday, after which a two-day Federal Open Market Committee meeting begins in the United States.
President Donald Trump adds in a tweet “China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended US Tariff Hikes. US is doing very well. China wants to make a big and very comprehensive deal. It could happen, and rather soon!”
China's industrial production rose 5.4% y/y in November, easing from a 5.9% growth in October and missing market consensus of 5.9%. It was the smallest increase in industrial production since Jan-Feb 2016, as growth eased for both manufacturing in October and mining while utilities advanced faster;

Copper US$ 6,119/t vs US$6,083/t last week

Aluminium US$ 1,925/t vs US$1,924/t last week

Nickel US$ 11,045/t vs US$10,770/t last week

Zinc US$ 2,548/t vs US$2,531/t last week

Zinc prices across both Shanghai and London rose the most in two weeks, paring losses of 18% this year, as Chinese stockpile hit the lowest in more than a decade, indicating tightening supplies. Holdings across warehouses tracked by the bourse last week hit the lowest since April 2007, falling -1,971t (-7.3%) to 24,879t.

Lead US$ 1,946/t vs US$1,941/t last week

Tin US$ 19,400/t vs US$19,380/t last week

Energy:

Oil US$60.4/bbl vs US$61.0/bbl last week

Natural Gas US$3.660/mmbtu vs US$3.958/mmbtu last week

Uranium US$28.70/lb vs US$28.75/lb last week

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$68.5/t vs US$66.7/t – Iron ore futures prices in Dalian, China, rise 2.3% to Rmb492/t ($71.3/t).

Inventory data shows iron ore stock levels are 4.5% lower yoy despite adding 900,000t to stocks last week SteelHome).
Environmental restrictions may continue to cut steel output with the cities of Tangshan and Xuzhou asking steel mills to restrict production through December due to air pollution targets.

Chinese steel rebar 25mm US$591.8/t vs US$588.7/t

China iron ore futures surged to a near four-week peak, buoyed by tight supply amid low inventories across ports and expectations for firm restocking demand ahead of the holiday period. The benchmark iron ore on the Dalian Commodity Exchange climbed as much as +2.3%; a level not reported since Nov. 22.
Fundamentals of iron ore have improved significantly as stocks of the steelmaking ingredient at China's major ports added 900,000t last week to stand at 137.1mt as of Monday, SteelHome data showed, but were -4.5% lower than a year earlier. Imported iron ore inventories across 64 steel mills surveyed by consultancy Mysteel last week dipped to their lowest since early November 2017.
However, environmental legislation and measures may undermine the strengthening market with the major Chinese steelmaking cities of Tangshan and Xuzhou asking mills to curtail more output over the remainder of December as city officials are concerned that they may not meet their pollution reduction targets for the year.
Steel mills in Tangshan were ordered to raise average production curbs to 40% from 30%, while Xuzhou plans to shut down all its mills.
Weekly utilisation rates at steel mills across China continued to dip last week, declining 0.13% points from the previous week to 65.75%, with the rate in Tangshan city slipping to its lowest in four months at 58.1%, Mysteel data showed.

Thermal coal (1st year forward cif ARA) US$89.5/t vs US$89.5/t

Coking coal futures Dalian Exchange US$208.5/t vs US$200.0/t

Other:

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

China NdPr Rare Earth Oxide US$46,225/t vs US$46,367/t

China Lithium carbonate 99% US$10,143/t vs US$10,143/t

China Ferro Vanadium 80% FOB US$100.5/kg vs US$103.5/kg

China Antimony Trioxide 99.5% EU US$6.9/kg vs US$6.9/kg

Tungsten APT European US$275-290/mtu vs US$275-295/mtu

Pushing lithium ion batteries to the next performance level

Materials chemist Freddy Kleitz from the Faculty of Chemistry of the University of Vienna and international scientists have developed a new nanostructured anode material for lithium ion batteries, which extends the capacity and cycle life of the batteries.
The improvements are based on a mesoporous mixed metal oxide in combination with graphene
The researchers developed a new family of electrode active materials, based on a mixed metal oxide and the highly conductive and stabilizing graphene, showing superior characteristics compared to those of most transition metal oxide nanostructures and composites.

Northumbrian Water set to power treatment works with battery storage technology

Water utility Northumbrian Water has unveiled plans to install battery storage systems made using end-of-life electric vehicle batteries at several of its water treatment works
The company will install the storage technology, which is made using lithium-ion units recovered from Renault EVs, at several of its desalination and treatment facilities across Essex, Suffolk and the North East next year, after partnering with energy technology firm Argonaut Power.
Northumbrian Water will charge the batteries during the night before using them to power the sites during peak evening hours.
Work to install the storage arrays is expected to be completed by autumn 2019, with Northumbrian Water set to sign a revenue-sharing contract with Argonaut Power and investment manager Ingenious Infrastructure, which is partly funding the project, ahead of the completion date.

Company News

Bluejay Mining* (LON:JAY) 12.8p, Mkt Cap £108m – Optimisation work increases grade and scale of existing titanium mineral sands resource in Greenland

STRONG BUY - included in MSCI index

Target Price 45p

Bluejay Mining report an updated mineral resource for the Dundas ilmenite project in the north of Greenland.
Importantly, ‘this material is now recognised by industry players as being suitable for sulphate pigment, sulphate slag and chloride slag production,”
Importantly, this statement indicates that the ilmenite product should be saleable into world markets, supporting our own work on checking the specifications for the ilmenite product to be produced.
The new resource is:
101mt grading 7.1% ilmenite (in-situ) vs 96mt grading 6.9% ilmenite as of 23rd April
The resource also contains higher grade sections containing:
31.2mt at 10.7% Ilmenite in-situ (using a 3.5% cut-off)
16mt at 12.9% ilmenite in-situ (using a 4.5% cut-off)
The upgrade to the resource is purely down to optimisation work in the Moriusaq area and does not include resources from the Iterlak Delta area which we expect to add significantly to the project.
Further assaying in pits and trenches demonstrates that some grade was lost during sonic drilling leading to grade underestimation in the previous resource statement.
Two areas of near surface mineralisation in the Moriusaq area have also been upgraded to indicated from inferred on better understanding of geological continuity along the beaches.
Significantly, Bluejay report the opportunity to upgrade the in-situ resource grade further by up to 30% by a ‘simple oversize separation step prior to processing’, eg using a simple screen to remove the pebbles.
Very are very few resources in the world that upgrade by so much by simple screening. This is made possible by the simple exclusion of oversize pebbles which sit at surface and in bands through the resource.
SRK have produced an updated mineral resource estimate showing 101mt grading 3.4% in-situ TiO2 which when divided by 0.4765 = 7.1% ilmenite.
The slimes content is also lower than 4.4% than 4.8% previously. Clay slimes are problematic in ilmenite recovery as seen at certain other mineral sands producers and the low level of clay slimes at the project is good news from a mining and processing perspective.
Management indicate “Results clearly indicate the strong possibility of a large and long-life operation with obvious expansion potential.”
The ore also contains no detectable concentrations of radionuclides in this unusually consistent, low-impurity and homogeneous resource.
Pre-Feasibility study (PFS): Rod McIllree comments that the team have been working hard alongside their consulting partners, Wood plc, IHC Robbins, Royal IHC and study managers Quedtech ltd, Keypointe ltd and SRK, in developing the mine and operational plan. McIllree will update the market shortly on the permitting and PFS.
.
Ilmenite prices have risen recently to US$186/t from a low of around US$171/t in August. Ilmenite prices recorded a year high of US$216/t in April this year but fell back as ilmenite processors struggled with furnace fires and other outages. The resulting restriction in processor capacity is said to have tightened stock levels for pigment consumers indicating that ilmenite prices should continue to rise as processing capacity returns to higher levels.
Ongoing economic growth in the US and China as well as elsewhere is also expected to drive end-user demand growth for pigments for paints and printing where titanium (ilmenite) is used to whiten pain and create opacity.

Conclusion: Not only does today’s statement confirm Bluejay as having the world’s highest-grade ilmenite resource but it also expands it’s scale in tonnes and grade.

The impact of the higher grade combined with the ability to upgrade this by up to 30% is significant from a value perspective as it could result in the processing of much higher grades than are processed elsewhere in the world.

Focussing on the higher grade portions in the early years could enhance processed grades of up to 16.7% ilmenite which will significantly reduce capital costs, storage and shipping volumes in the first six years.

We look forward to further statements shortly on the PFS and to the publication the resource scale and grade from the Iterlak Delta area

*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.

KEFI Minerals* (LON:KEFI) 1.7p, Mkt Cap £9.3m – GM Statement

KEFI Minerals announce the General Meeting held at today, with Chairman Mark Wellesley-Wood reporting “that the development plan for the Tulu Kapi Gold Project in Ethiopia remains on schedule to start in January 2019, commencing with the community resettlement programme”.
KEFI update that land clearing and geotechnical drilling for the design of the infrastructure foundations commenced early last week.
The company also report ANS Mining Share Company confirmed its equity subscription of the Birr-equivalent of US$9m to fund Q1 2019 activities and agreed to increase the subscription committed to Project subsidiary Tulu Kapi Gold Mines Share Company for Q2 2019 to the Birr-equivalent of US$10.5m to cater for early construction of a Tulu Kapi private air strip to enhance security and efficiency from the outset.
The Ethiopian State Minister of Mines, Petroleum and Natural Gas reported that his Ministry has issued the requested approvals to trigger the community resettlement, and in particular the updated Project works programme and schedule. Other relevant government agencies last week confirmed that their approvals remain on track to be issued this month, in particular the approval of the final community resettlement plans and of Project financing details.

*SP Angel act as Nomad and Broker to KEFI Minerals

Savannah Resources (LON:SAV) 5.8p, Mkt Cap £51.1m – Lithium mineralisation extended at the Grandao and Pinheiro deposits

Reverse Circulation and diamond drilling at both Grandao and Pinheiro deposits has returned a series of significant lithium intersections, confirming the mineralised potential of the project area.
A total of 295 holes for 24,723m have been drilled to date at the Mina do Barroso as part of the ongoing RC and diamond drill programme primarily focused on the Grandao, Reservatorio and NOA deposits.
The results from the recent RC and diamond drilling at Grandao and Pinheiro have now been received with diamond drilling ongoing at Grandao with a series of diamond tails being completed on some original RC drill holes and geotechnical drilling now well advanced at both Reservatorio and Grandao.
Key lithium intersections demonstrate grades 1.67% Li2O over 29.55m from 95.45m at Grandao and 1.05% Li2O over 9m from 39m at Pinheiro.
Drilling continues to expand both the Grandao and Pinheiro deposits, with mineralisation confirmed over significant strike lengths and grades, increasing with depth at Grandao. CEO David Archer reports “thanks to much of the resource definition work and geotechnical drilling to support the definitive feasibility study being largely complete, we anticipate a slower drilling tempo at the C-100 Mining Lease in 2019”.
“In 2019, we plan for the RC rig to initially drill test the Aldeia ground whereas the drilling rig will focus on obtaining material for the ongoing metallurgical test work programme as well as some geotechnical drilling.”

Conclusion: The results from the most recent assays continue to demonstrate lithium mineralisation across the identified Mina do Barroso deposits. We look forward to the release of the latest drilling to understand the full scale of the resource and the development plan within the anticipated definitive feasibility study.