Today's Market View - China to punish officials who miss pollution targets

Proactive Published 23/01/2019

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SP Angel – Morning View – Wednesday 23 01 19

China to punish officials who miss pollution targets

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Berkeley Energia Ltd (LON:BKY) – Quarterly report December 2018

BlueRock Diamonds* (LON:BRD) – Inferred diamond grade rises by 5.4% at Kareevlei on consultant review

Botswana Diamonds (LON:BOD) – Placing to raise £370,000

Crusader (LON:CAS) – Suspended on AIM, Further A$1.4m of convertible notes issued

Element 25 (ASX:E25) – Butcherbird Resource infill drilling programme assays received

Strategic Minerals* (LON:SML) – Redmoor drilling results

China – Punishment for officials who miss pollution targets

China is planning to punish officials who do not meet goals to reduce air pollution.
“For those who failed to meet the targets, we will hold them accountable publicly and local governments will need to come out with detailed punishment measures,” according to Liu Bingjiang, at the Ministry for Environment.

Growing scepticism over Berkshire geothermal lithium project

The reported Berkshire Hathaway Inc project targeting lithium co-production from California geothermal wells is drawing similarities from failed Simbol Materials operation and raising questions about the success of the technological processing.
The company has reported is it “evaluating the mineral extraction opportunity in the Imperial Valley” in southern California, according to BHE Renewables. A FT report has suggested the venture could produce 90,000t of lithium per year, and has attracted the interest of Tesla Inc to supply its growing lithium requirements.
However, the scale of the project surprises – surpassing annual output from top global producers Albemarle Corp and SQM.
Berkshire’s geothermal business operates in California’s Salton Sea, which is part of the Imperial Valley. Extracted brines contain trace amount of lithium (with figures approximately 270mg/l), which offer a co-production opportunity. However, these concentrations fall far from average concentrations reported in the ‘Lithium Triangle’ e.g. 690mg/l at Salar de Olaroz in Argentina.
“It’s only slightly better than to say you’ll get lithium out of the ocean”, said James Calaway, Chairman of Nevada lithium start-up Ioneer Ltd and the former chairman of Argentina lithium producer Orocobre.
Details on the extraction remain unclear, whether the project will rely on vast evaporation ponds or nascent direct extraction processes.
The project strongly reflects a number of failed or delayed ventures, particularly Simbol Materials who struggled to scale up lithium extraction. Elon Musk was reported to offer US$325m for the proprietary operation, however the deal fell through.
A number of other projects are being explored, including EnergySource. We look forward to understanding how Berkshire can differentiate itself towards a lucrative new revenue stream that would make geothermal power more attractive to investors.

Elon Musk’s Boring Co. could cut cost of tunnelling CERN’s new FCC collider by a third

Elon Musk has proposed that his Boring company might be used for the new CERN particle collider.
The proposed Future Circular Collider will be 60 miles in circumference and cost >$22bn and due for completion in 2050.
The FCC is proposed by the European Organisation for Nuclear Research which currently operates the Large Hadron Collider.
$5.6bn is estimated for the tunnel building costs.
We were wondering why they don’t use the London Underground, Circle Line but the scientists might get confused when particles are held up at Edgeware Road for 15 mins for no particular reason

Dow Jones Industrials

-1.22%

24,404

Nikkei 225

-0.14%

20,594

HK Hang Seng

-0.00%

27,005

Shanghai Composite

+0.05%

2,581

FTSE 350 Mining

-0.72%

17,210

AIM Basic Resources

-1.11%

2,177

Economics

China – President Xi’s speech yesterday instructed officials to "prevent and defuse major risks"

The speech showed "serious concern" over potential slowing of economic growth

UK supermarkets prepare for Brexit by switching food suppliers to outside the EU

The move to source food products from outside the EU may reflect a likely significant fall in food prices if the UK comes out of the customs union.
EU tariffs are relatively high on food imports, possibly to protect French farmers who appear to have been a protected species since the end of WWII.

Europe looking to extract rocket fuel from the Moon

If the European’s are half as good at extracting fuel from the Moon as they are at extracting money out of the UK then this will be a successful project.

Currencies

US$1.1355/eur vs 1.1357/eur yesterday Yen 109.58/$ vs 109.42/$ SAr 13.928/$ vs 13.902/$ $1.295/gbp vs $1.288/gbp 0.713/aud vs 0.713/aud CNY 6.789/$ vs 6.808/$

Commodity News

Precious metals:

Gold US$1,285/oz vs US$1,284/oz yesterday

Gold ETFs 72.4moz vs US$72.4moz yesterday

Platinum US$791/oz vs US$793/oz yesterday

Palladium US$1,359/oz vs US$1,347/oz yesterday

Silver US$15.40/oz vs US$15.31/oz yesterday

Base metals:

Copper US$ 5,966/t vs US$5,973/t yesterday

Aluminium US$ 1,908/t vs US$1,860/t yesterday

Nickel US$ 11,670/t vs US$11,685/t yesterday

Zinc US$ 2,618/t vs US$2,574/t yesterday

Lead US$ 2,030/t vs US$2,012/t yesterday

Tin US$ 20,350/t vs US$20,550/t yesterday

Energy:

Oil US$61.8/bbl vs US$62.1/bbl yesterday

Natural Gas US$3.141/mmbtu vs US$3.283/mmbtu yesterday

Uranium US$28.90/lb vs US$28.85/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$73.9/t vs US$75.3/t

Chinese steel rebar 25mm US$591.3/t vs US$588.2/t

Steel futures climb to the highest since November as China’s central bank uses a new tool to boost liquidity ahead of the lunar new year break.
The People’s Bank of China offered 257.5bn yuan ($38bn) of liquidity to banks via a targeted facility deployed for first time. Analysts had referred to the new tool as a low-profile, interest rate cut. Still, that’s balanced by a more negative macro mood amid fresh uncertainty on U.S.-China trade talks.
Investors may see lending boost as effort to encourage banks to channel cash to small businesses, amid a manufacturing slowdown that’s hurt steel demand.

Thermal coal (1st year forward cif ARA) US$86.6/t vs US$86.1/t

Coking coal futures Dalian Exchange US$210.9/t vs US$210.3/t

Other:

Cobalt LME 3m US$38,000/t vs US$38,000/t

China NdPr Rare Earth Oxide US$45,888/t vs US$45,752/t

China Lithium carbonate 99% US$9,944/t vs US$9,914/t

China Ferro Vanadium 80% FOB US$70.5/kg vs US$70.5/kg

China Antimony Trioxide 99.5% EU US$6.9/kg vs US$7.0/kg

Tungsten APT European US$260-270/mtu unchanged from previous week

Battery News

Company News

Berkeley Energia Ltd (LON:BKY) 23.3p, Mkt Cap £60.1m – Quarterly report December 2018

Fundamentals for uranium remain robust with continued supply disruption being met by a recontracting cycle for US and EU utilities; and continued increase in global nuclear capacity. As a result, spot uranium has risen +4% since 30 Sept. 2018 to US$28.5/lb.
The Company has 2.75mlbs of U3O8 under contract for the first six years, with a further 1.25mlbs of optional volume, at an average price above US$42/lb.
Berkeley Energia continue exploration efforts with soil samples collected near the Salamanca mine reporting significant anomalies of gold, lithium, cobalt, tin and rare earths – in addition to uranium.
The company has applied for twelve new investigation permits for all the other elements covering more than 350 km2.
Berkeley Energia announce favourable permitting assessments from regulatory bodies including two from the Nuclear Safety Council relating to the pre-operational Surveillance Plan for Radiological and Environmental Affections and the pre-operational Surveillance Plan for the Control of the Underground Water.
The company reiterate the Salamanca mine is being developed to the highest international standards with commitments to the environment. It holds certificates in Sustainable Mining and Environmental Excellence which have been awarded by AENOR, an independent Spanish government agency.
A number of disclosed outstanding issues are currently being addressed by the company as part of the application for the Express Resolution on the award of the Urbanism Licence.
The Company is in a strong financial position with A$100m in cash.

BlueRock Diamonds* (LON:BRD) 0.3p, Mkt Cap £1.5m – Inferred diamond grade rises by 5.4% at Kareevlei on consultant review

BlueRock report key results from the ‘Z Star’ consultant review of the diamond pipes at the Kareevlei kimberlite pipe complex in Kimberley, South Africa.
The review results in a:

3.0% reduction in tonnes taking into account tonnes already mined;

2.2% increase in carats; and

5.4% increase in grade..

The most significant factor is the increase in the estimated average diamond grade which now estimates a 4.7cpht for 367,000cts in total.
The previous estimation which was calculated in 2013 before any real mining had taken place was 4.5cpht for 359,000cts in total
The new statistical estimation should now be vastly more accurate having been based on mining and diamond recoveries since 2014.
Higher values in recent auctions for BlueRock diamonds combined with an estimated valuation of US$411/ct for the K5 pipe which is as yet unmined indicates potential for further improvement in sales and profits assuming throughput targets are met.
BlueRock has now mined approximately 3% of the total resource at Kareevlei meaning there is plenty left to go for.

Conclusion: Bluerock looks set to turn a reasonable profit this year assuming it can feed >25,000t per month of ore to the process plant, diamond values are above the historic average for mines and costs remain in line with our expectations. Looking further forward, raising the mining / throughput rate, better recoveries and moving to more efficient working hours could lead to a significant increase in profit.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

Botswana Diamonds (LON:BOD) 0.6p, Mkt Cap £2.8m – Placing to raise £370,000

Botswana Diamonds announce placing with existing and new investors to raise £370,000 via the issue of 67,272,727 new ordinary shares, at a placing price of 0.55p per Placing Share.
Each Placing Share has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from 23rd January 2019.
Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 28th January 2019.
The funds raised will be used to fund exploration activities during the current year in Botswana and South Africa, which remain ongoing, and to provide additional working capital for the Company.

Crusader (LON:CAS) – Suspended on AIM, Further A$1.4m of convertible notes issued

Crusader Resources continues to issue convertible notes to keep the company alive.
Today Crusader reports the issuance of a further A$1.4m convertible notes though it does not state who the convertible notes are issued to.
This latest convertible is on top of the A$0.5m raised as reported on Christmas Eve bringing the total funds raised under that particular note to A$1.4m for working capital purposes.
The December notes carry an interest rate of 8%pa payable in new fully paid ordinary shares ("Shares") at the 30-day volume weighted average price of Crusader Shares (subject to a floor price equal to the lower of A$0.01 or the Entitlement Issue price) and mature one year from the date of issue, unless converted. .
‘Eyeon Investments Pty Limited (a company controlled by Stephen Copulos) subscribed for A$200,000 in Convertible Notes on the terms set out above. In aggregate, companies related to Stephen Copulos have now subscribed for A$500,000 of Convertible Notes.’
Stephen Copulos has long been involved with Crusader Resources in Australia and the listing of Crusader on AIM in London. Copulos stepped down as Chairman and director as reported on 17 April.
The company also states ‘The Company continues to require further immediate funding for short term general working capital needs and in particular, there is a need to raise additional funding before the end of January for the Group to continue as a going concern.
The Board is in advanced discussions to resolve the funding shortfall before the end of January, and intend to follow with a pro rata entitlement issue to eligible shareholders ("Entitlement Issue"). The timing, quantum and pricing for the Entitlement Issue however have not yet been finalised.’

Conclusion: Investors should avoid this company due to its poor financial condition and its pursuance of what we view as a relatively low quality gold project in Brazil though there may be other assets in the portfolio which could have better value. It’s a good thing the stock is suspended so unwitting investors can not buy the shares.

Element 25 (ASX:E25) A$0.2, Mkt Cap A$14.7m – Butcherbird Resource infill drilling programme assays received

Element 25 announce received assay results have been compiled from the 100% owned Butcherbird High Purity Manganese Project infill drilling programme.
The resource infill drilling programme comprised 210 aircore holes for a total 6,672m, completed in late 2018. The results of the programme will form the basis of a revised mineral Resource and maiden Reserve and to upgrade the planned starter pit area.
Infill drilling is designed to target 25% Measured and 75% Indicated Resources over initial 20 year mine plan.
The assay results and geological logging of the drill holes both compare favourably with the existing drilling data in terms of geology as well as mineralised widths and grades of the ore zone, confirming the robustness of the current understanding of the deposit
IHC Robbins have been appointed to undertake the updated mineral resource estimate for the Yanneri Ridge Deposit which is the target area for ore supply to the proposed high purity manganese processing plant the subject of the PFS.
The company target high-purity manganese sulphate for lithium ion battery cathodes as well as Electrolytic Manganese Metal for use in specialty steels.
Industry research is trending toward low-cobalt content Li-ion cathodes in NMC (Nickel-Manganese-Cobalt) batteries. As a consequence future chemical compositions are expected to become more reliant on cheaper Manganese, driving the requirement for enhanced global high-purity manganese production capacity.

Conclusion: We look forward to understanding the impact of resource infill drilling on the current JORC resource in excess of 180Mt of manganese ore.

Strategic Minerals* (LON:SML) 1.8p, Mkt Cap £25m – Redmoor drilling results

Strategic Minerals has released the results from the final four holes of the 2018 drilling campaign at its 50% owned Redmoor tin/tungsten project in Cornwall.
The results from holes CRD029, 030, 031 and 032 each contain multiple mineralised intercepts of the principal potentially economic commodities, tin, tungsten trioxide and copper in varying proportions with a maximum tin equivalent assay of up to 26.20% (over a 1m wide section from a depth of 541.85m in hole CRD-031) almost matching the 29.68% tin equivalent value previously reported over a 0.7m interval from 545.78m in hole CRD-028.
Among the results highlighted in today’s announcement are:
Four separate intercepts in Hole CRD-029 namely; 5.8m from a depth of 478.6m with an average grade of 0.33% tin, 0.3% tungsten trioxide and 0.28% copper; 8.25m from a depth of 498.64m with an average grade of 0.34% tin, 0.04% tungsten trioxide and 0.88% copper; 3.86m from 538.88m with an average grade of 0.77% tin, 1.33% tungsten trioxide and 0.88% copper, and a single metre from a depth of 554.74m which averaged 0.69% tin, 5.88% tungsten trioxide and 3.14% copper.
Hole CRD-029 “tests a shallow part of the deposit, in the western tin zone, encountering tin grades of up to 5.13% Sn, the highest-grade tin hit of CRL’s drilling. CRD029 also contains significant tungsten grades alongside tin values; this is interpreted to be due to the increased depth of this hole. As the western-most hole of the program it reveals interesting potential for western strike extensions of the orebody, with continuing potential for increasing tungsten at depth.”
Hole CRD-030 intercepted 7.21m from a depth of 503.8m at an average grade of 0.32% tin, 0.18% tungsten trioxide and 0.49% copper as well as a higher level intersection of 5m from 492.6m depth which averaged 0.28% tin,0.24% tungsten trioxide and 0.45% copper. The hole is interpreted as “occurring on the overlap between the tin and tungsten zones”.
Hole CRD-031 highlighted 3 zones of mineralisation; 2.63m from a depth of 413.67m which averaged 0.17% tin, 2.9% tungsten trioxide and 5.02% copper and included a 0.88m wide section, from 415.42m which averaged 0.05% tin,7.22% tungsten trioxide and 0.37% copper; a 1.75m wide zone from 453.85m depth which averaged 0.01% tin, 8.62% tungsten trioxide and 0.28% copper; and a 5.9m wide zone at 537.95m depth which averaged 0.01% tin, 3.41% tungsten trioxide and 0.12% copper and included a single metre which assayed 0.01% tin, 18.22% tungsten trioxide and 0.32% copper.
Hole CRD-031 “contains the second highest grade section encountered at Redmoor”, and as the results reported above demonstrate, “successfully intersected multiple zones of exceptionally high-grade tungsten mineralisation, accompanied by copper”.
Hole CRD-032, which was the longest hole of the programme at an overall depth of 802.85m and “identified some of the deepest mineralisation seen to date at Redmoor, at encouraging grades of up to 4.07% SnEq”. The results included a single metre intersection from a depth of 482m which averages 0.05% tin, 2.55% tungsten trioxide and 0.94% copper as well as an intersection of 3.58m from a depth of 660.33m which averaged 0.01% tin, 1.79% tungsten trioxide and 0.18% copper.

The results from the entire 2018 drilling campaign and the results of the earlier campaign are to be incorporated in an updated mineral resource estimate which is expected later in Q1 2019. The existing resource inferred estimate for Redmoor is currently at 4.5mt at an average grade of 0.37% tungsten trioxide, 0.25% tin and 0.57% copper which the company equates to a tin equivalent grade of 1%.
Commenting on what he described as “These truly impressive assay results”, Executive Director, Peter Wale, commended “the performance of the CRL team, who have delivered a 2018 outcome which comfortably exceeds expectations. While delighted with the manner in which the programme was run on time and within budget, the level of success in targeting mineralization is a testament to CRL’s geological model and the team’s theories on the anticipated continuation of mineralization in high-grade zones within the SVS both at depth and along-strike.”
Mr. Wale went on to say that “2019 is anticipated to be a watershed year for SML – this update from Redmoor sets the tone for what the Board expects to be a year of substantial progress”
The company also reports that the local joint-venture operator, Cornwall Resources has “received a £138,000 Research and Development refund from HMRC on 3rd January 2019” which should defray a portion of the exploration cost.

Conclusion: The 2018 drilling programme at Redmoor has improved the understanding of the geometry, orientation and scale of the sheeted vein system at Redmoor and shown elevated grades of both copper and of tungsten in parts of the mineralised system. The forthcoming mineral resources update is likely to shed light on these relationships and show an increased footprint for the mineralisation as a whole as the drilling has increased the coverage both laterally and at depth.

*SP Angel act as Nomad and broker to Strategic Minerals