Today's Market View - Autocatalyst demand supercharges palladium and rhodium

SP Angel – Morning View – Wednesday 06 03 19

Autocatalyst demand supercharges palladium and rhodium

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African Battery Metals (LON:ABM) – Reborn

Avesoro Resources (LON:ASO) – New Liberty underground mining pre-feasibility study

Beowulf Mining* (LON:BEM) – Swedish investors continue to buy Beowulf Mining shares

Connemara Mining* (LON:CON) – Directors and existing shareholders subscribe £230,000

Lara Exploration (CVE:LRA) – CAD$2.0m private placing

Oriole Resources (LON:ORR) – Gold mineralisation confirmed in trenching at Bibemi

Rambler Metals (LON:RMM) – Appointment of CFO

Talga Resources (ASX:TLG) – Graphene-infused concrete Innovation Award nomination

Race to acquire battery metals and critical materials continues to gain pace as nations move to control lithium, cobalt and REE supply

• News that the US is joining the race for the world’s most critical raw materials has caused us to look further into who else is competing for future supply.
• US funds may compete with Chinese, EU and Indian state funds with other nations also expected to encourage investment to ensure they are not left out in the cold.
• Nations looking to host new battery manufacturing plants, electric motor plants and EV production lines are going to need some security of supply.
• Indian State-owned firms are already mandated to acquire lithium and cobalt assets outside India. They know well the cost of competing with China.
• China is increasingly weaponising the import and export of commodities for its own commercial and political gain, eg REEs into Japan, Coal imports from Australia and now canoa imports from Canada.
• Elon Mush has been ‘persuaded’ to build a battery factory in China but must be spitting fire at yesterday’s ruling that Chinese EV’s can only
• It’s only a matter of time before China uses its position in cobalt, lithium and REE supply to achieve other objectives.

China cancels Richardson registration to ship Canola exports to China

• China blocked canola seed/product shipments from Canada's Richardson International on 1st March
• Richardson International is Canada’s largest agribusiness and is a private company working in Oilseed processing
• Canola is like Rapeseed which is commonly grown in the UK
• The move to block Richardson exports to China may or may not be in retaliation for the Huawei CFO arrest.
• The Canadian dollar has fallen to a five-week low in reaction to the news which indicates a systemic attempt by the Chinese state or key influencers to hurt the Canadian economy.
• Oilseeds which are mainly canola represented some 17% of all exports out of Canada in 2017.
• Alternatively, China is reported to be concerned over crop diseases and contamination of local crops and has a policy of moving towards greater agricultural self sufficiency.
• This was seen in 2015 when China cut dairy product imports while building huge diary farms internally, one of which may house 100,000 cows.

UK MOD to use new mini-drones

• The drones use less than 200g each and can be launched by the soldier by hand.
• The MOD is also to invest in autonomous vehicles for supply chains and no-doubt to counteract IODs
• The development of robotic aids is likely to be a major step forward in protecting and saving lives in hostile areas.
• Cobalt, copper and some specific Rare Earth Elements are likely to see increased demand from drone construction.
• Mkango Resources*, Rainbow Rare Earths, Peak Resources, Ucore Rare Metals, Greenland Minerals all have REE projects worth consideration

*SP Angel act as Nomad and broker to Mkango Resources

Dow Jones Industrials

-0.05%

at

25,807

Nikkei 225

-0.60%

at

21,597

HK Hang Seng

+0.19%

at

29,016

Shanghai Composite

+1.57%

at

3,102

FTSE 350 Mining

+0.72%

at

19,221

AIM Basic Resources

-0.95%

at

2,120

Economics

Japan – The BoJ board member, Yutaka Harada, argues the planned sales tax hike planned later this year may see the economy going into a recession.

• The policymaker highlighted that effects of the previous tax hike in 2014 have largely been underestimated with the central bank having to ramp up its stimulus six months after that.
• It is unusual to have a board member to express concerns so explicitly about adverse affects of a tax hike which comes in conflict with PM Shinzo Abe assurances that the economy can ride out the drag from the tax hike after the office put together a series of counter-measures.

ECB – The central bank is widely expected to leave rates unchanged amid a weakening economic outlook.

• Mario Draghi will hold the monetary policy conference and release updated economic projections on Thursday.
• Expectations are building up that the ECB may opt for a dovish statement on the back of waning growth in major single currency economies and Italy slipping into a recession.
• Markets have pushed the first rate hike into 2020 versus the current ECB guidance to keep rates at record lows through summer of 2019 at least.

Australia – GDP growth rates missed expectations on the back of a lacklustre consumer spending and a sharp downturn in the property market.

• Q4 GDP growth came in at 0.2%qoq, down on 0.3%qoq forecast, taking total for the year to 2.3% v 2.5% expected.
• Consumer spending climbed 0.4%qoq v 0.3%qoq registered in the previous month with commentators attributing subdued spending levels to high levels of debt and the largest decline in house prices experienced since the 1980s.
• Property prices dropped 10% in Sydney and 9% in Melbourne over the past 12 months on the back of tighter credit terms and lack of affordability.
• Weaker demand saw property investments posting a 3.4%qoq in Q4.
• Weak data increased chances of the central bank cutting benchmark rates to support growth with the A$ down 0.8% against the US$ this morning.

China's national legislature started its annual session yesterday with 3,000 NPC deputies

• Li Keqiang, Premier of the State Council, said though China faced a complicated and challenging environment rarely seen in many years with the economy under new downward pressure, the nation managed to accomplish main targets for economic and social development in 2018.
• Keqiang announced some of the main projected targets for economic and social development including 6-6.5% GDP growth, >11m new urban jobs, CPI increase of around 3%, and a reduction of over 10m in the rural poor population.
• Li Keqiang said it is necessary to sustain healthy economic development and maintain social stability to create a pivotal underpinning for completing the building of a moderately prosperous society in all respects and to mark the 70th anniversary of the founding of the People's Republic of China with outstanding accomplishments.

Greece – The country issued the first 10-year bond since March 2010 raising €2.5bn at a 3.9% bn.

yield.

• The issue is reported to have been oversubscribed several times over with the order book of €11.8bn.
• Thee economy is now expected to deliver primary budget surpluses every year between 2018 and 2022 with the credit ratings agency Moody’s having raised Greece by two notches to a B1 rating, comparable to B+ from S&P and one notch lower than BB- by Fitch.

UK – The pound is off this morning on expectations May Brexit deal may not get the support in Parliament with her chief whip warning he was not confident he had the numbers.

Pothole warning - New standard on repairs to enforce companies which repair potholes to guarantee the work for five years.

• Currently utility companies only have to guarantee road repairs for two years.
• We suspect the problem lies more with the enforcement of such repairs than the longevity of the repair itself.
• The matter is be further confused by repairs on repairs as seen on many London roads which appear to be constantly dug up for new cables and pipe repairs.

Currencies

US$1.1305/eur vs 1.1332/eur yesterday Yen 111.83/$ vs 111.95/$ SAr 14.172/$ vs 14.184/$ $1.314/gbp vs $1.318/gbp 0.704/aud vs 0.708/aud CNY 6.708/$ vs 6.702/$

Commodity News

Precious metals:

Gold US$1,289/oz vs US$1,285/oz yesterday

Gold ETFs 71.8moz vs US$71.9moz yesterday

Platinum US$833/oz vs US$838/oz yesterday

Palladium US$1,512/oz vs US$1,513/oz yesterday

Rhodium – auto demand drives surging prices

• Lesser-known sister precious metal, rhodium, climbs to a nine-year high, as platinum group metals find strong support from rising autocatalysts demand as user switch from polluting diesel engines.
• Rhodium can resist high temperatures and outperforms other PGMs in removing nitrogen oxides from car exhausts, making it a “super-charged palladium,” according a precious metals strategist at Macquarie Group Ltd, adding its it easier to substitute for palladium than platinum.
• “Rhodium has benefited from palladium’s rally,” Matthew Turner said. “This gives investors’ confidence that palladium’s rally is built on substantive foundations and points to a genuine auto-demand story.”
• Still, global supply of rhodium is only about 760,000oz, just a 10th of palladium output, according to Johnson Matthey Plc, giving the metal strong price volatility.
• Rhodium climbed +2.8% to $2,910/oz.

Silver US$15.14/oz vs US$15.08/oz yesterday

Base metals:

Copper US$ 6,455/t vs US$6,454/t yesterday

Aluminium US$ 1,875/t vs US$1,876/t yesterday

Nickel US$ 13,600/t vs US$13,515/t yesterday

• Nickel surged to six-month high on combined rallying steel markets, falling global inventories and rising electric-vehicle sales.
• Industrial metals broadly rose on soothing news of China’s major tax cuts and optimism over a US-China trade resolution. Despite trimming its growth target, the outlook appears brighter as China plans to trim the value-added tax rate that covers manufacturing.
• Inventories on the LME fell for a sixth consecutive day, drawing levels to the lowest since 2013.

Zinc US$ 2,767/t vs US$2,752/t yesterday

Lead US$ 2,096/t vs US$2,105/t yesterday

Tin US$ 21,525/t vs US$21,540/t yesterday

Energy:

Oil US$65.5/bbl vs US$65.4/bbl yesterday

Natural Gas US$2.880/mmbtu vs US$2.874/mmbtu yesterday

Uranium US$28.15/lb vs US$28.05/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$84.1/t vs US$83.2/t

• Chinese iron ore futures declined as investors weigh the impact of extensions to steel mill output restrictions as heavy pollution remains prevalent in key production hubs.
• The Asian nation’s environment minister reports extended winter anti-smog measures such as production cuts and traffic restrictions for a third successive winter according to the latest 2019 pollution battle plan.
• The Ministry of Ecology and Environment also vowed to speed up the elimination of small coal-fired heating boilers in major regions. It will also step up the elimination of outdated and excessive production capacity in polluting sectors such as steel, coal and coal-fired power.
• Stringent environmental policy aims at reversing the damage done by more than three decades of breakneck economic growth, with actions focused on eliminating outdated vehicles and production technology, cutting industrial emissions and easing its dependence on coal.
• Reuters analysis reports only six of 39 smog-prone northern Chinese cities have managed to cut concentrations of hazardous airborne particles known as PM2.5 during the latest winter anti-smog campaign beginning last October. Average PM2.5 concentrations actually rose 13% over the period.
• The 2019 action plan draws up new measures aimed at encouraging the use of cleaner-burning replacement fuels, while speeding up efforts to eliminate small and inefficient coal-fired heating boilers in smog-prone regions.
• Liu Bingjiang, a senior MEE official, said on Tuesday that while the rebound was partly caused by weather anomalies, some local governments believed they deserved "a rest after years of hardship" to meet the anti-smog measures. He added that those governments would face punishment.
• The environmental group will make use of satellite technology to monitor rural air pollution sources, to help limit failing air standards.

Chinese steel rebar 25mm US$615.5/t vs US$615.9/t

Thermal coal (1st year forward cif ARA) US$79.0/t vs US$80.7/t

Coking coal futures Dalian Exchange US$197.0/t vs US$197.1/t

Other:

Cobalt LME 3m US$33,000/t vs US$33,000/t

China NdPr Rare Earth Oxide US$45,711/t vs US$45,731/t

China Lithium carbonate 99% US$10,067/t vs US$10,071/t

China Ferro Vanadium 80% FOB US$73.5/kg vs US$73.0/kg

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

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

Battery News

UK car sales recover slightly after five months of decline

• The UK car market staged a small recovery last month when sales of new vehicles rose for the first time in six months. 81,969 new cars were registered in February, up 1.4% from a year earlier, according to the Society of Motor Manufacturers and Traders.
• Demand for diesel cars continued to fall in February, with the number sold down by 14% at 24,284 vehicles, while petrol car sales increased by 8% to 53,164. The strongest growth was in sales of alternative-fuelled vehicles, which surged 34% last month to 4,521.
• Registrations of zero-emission electric cars more than doubled to 731 units, although they still accounted for a fraction of the market at 0.9%.

‘Total Electrification in Europe by 2025’ announces Honda

• The Japanese automaker has announced that it is committing to “moving 100% of its European sales to electrified powertrains by 2025.”
• Historically, automakers have referred to “electrified powertrains” as anything from hybrids (completely gas-powered) to plug-in hybrids and all-electric vehicles.
• The announcement adds “Honda intends to build a portfolio of energy management products and services offering a comprehensive solution for both EV customers and service operators in Europe.”

Piëch Automotive claims its electric supercar runs on a completely new type of battery

• According to Electric car start-up Piëch Automotive, the all-electric Mark Zero is powered by a new type of battery that will recharge to 80% in less than five minutes.
• The company has described its new battery tech, “The special type of cell hardly heats up during charging or discharging phases. Significantly higher currents can flow as the cell temperature rises only marginally. In addition to conventional CSC charging, the fast charging mode allows for a sensationally short charging time of only 4:40 minutes to 80% battery capacity with an exceptionally high recuperation rate. Because of the reduced heat build-up, the batteries can be cooled by air alone.”
• With a charging time way below most conventional EVs, the company is promising to bring recharging time on par with the time it takes to refill a conventional car with gasoline or diesel. When charged to a full 100%, the Mark Zero is able to deliver a full 311 miles (500 km) of range in the EU’s new WLTP cycle.

Company News

African Battery Metals (LON:ABM) 0.45p, Mkt Cap £1.6m – Reborn

• African Battery Metals has been reborn with the backing of Paul Johnson, formerly of Metal Tiger which sold the T3 copper project into MOD Resources in Australia.
• Andrew Bell of Red Rock Resources and Jupiter Mines has also come in to join Iain Macpherson who was COO at UraMin and ECO at Elemental Minerals.

• The company reports it has £860,000 cash in the bank and has no material debt
• The executive team are currently reviewing existing project interests with a view to identifying the most optimal exploration strategy. Andrew Bell, the Company's recently appointed Executive Chairman, has been conducting a review of the company’s in-country assets and capabilities for the Kisinka copper-cobalt project in the DRC.
• By its nature this review of the Company's interests is project specific and the Company will report back to shareholders in respect of the three current operational interests, in Cameroon, the DRC and the Ivory Coast, through individual market updates over the coming weeks. Prioritising efforts will be skewed towards projects with the highest potential impact per exploration dollar.
• The strong cash position also allows ABM to augment existing in-country project interest with additional licences, geographically close to existing licences, particularly in respect of the DRC.
• The board recognise the commercial attractiveness of new opportunities, particularly in commodities or jurisdictions outside those currently in the ABM portfolio, where the acquisition thereof would improve management of risk through diversification. The company has received direct approaches from third parties with, new opportunities in battery metals, precious metals and other commodity groups.
• Paul Johnson comments “Any recovery scenario should look to focus on existing interests first, extracting the best opportunities and building from that core.”

*SP Angel act as broker to African Battery Metals

Avesoro Resources (LON:ASO) 162.5p, Mkt Cap £132.6m – New Liberty underground mining pre-feasibility study

• Avesoro Resource has announced the results of its pre-feasibility study and mineral resource and reserve estimation work to move the existing New Liberty open pit mine to a combined open-pit and underground mine.
• The study envisages a seven year increase in mine life to eleven years (to 2029), for a combined operation with average annual gold production of 114,500oz at an average cash cost of US$767/oz and all-in-sustaining costs of $862/oz.
• Under this framework, a capital development cost of US$35.9m generates a post-tax NPV5% of US$286m at a gold price of US$1300/oz.
• The revised mining plan entails “a period of higher waste stripping to complete the final open pit pushback and prepare the pit for the development of underground operations and as a result the AISC for New Liberty will temporarily increase as the Company undertakes this waste stripping that will be completed during 2019.”
• The increased mine-life is built on an 89% increase in mineral reserves to 17mt at an average grade of 2.49g/t gold comprising open pit reserves of 494,000oz in 4.9mt at an average grade of 3.12g/t gold and underground reserves of 461,000oz of gold (4.7mt at an average grade of 3.08g/t) plus an open pit reserve of 400,000oz (7.28mt at 1.71g/t) at Ndablama. The company also says that there is “potential to extend further via the drilling of prospective satellite prospects across the Company's 1,394km2 exploration portfolio surrounding New Liberty”.
• As well as the possibility of further resources within the wider exploration area around the mine “The New Liberty Mineral Resource remains open down dip, whilst the Ndablama Mineral Resource remains open down dip, as well as along strike.”
• The company has also issued its production guidance for 2019. Group gold production is expected to be in the range 210-230,000ox with New Liberty mine expected to produce 100-110,000oz and Youga to produce 110-120,000oz. Cash costs are expected to lie in the range US$850-910/oz with US$870-925 at New Liberty and US$750-800/oz at Youga. Capital costs for 2019 is forecast at US$45.1m “of which US$43.4 million is sustaining capital investment and US$1.7 million related to the development of underground operations at New Liberty”.

Conclusion: Avesoro Resources is looking to extend the life of New Liberty as an underground mine and perhaps eventually also through locating further ore sources through the wider exploration potential in the surrounding area

Beowulf Mining* (LON:BEM) 7.58p, Mkt Cap £43m – Swedish investors continue to buy Beowulf Mining shares

• Beowulf report today that holdings of its Swedish Depository Receipts have continued to rise and now stand at 61.32% up from the 60.65% held in January.
• Given the intransigence of the Swedish government with regard to permits for the Kallak iron ore project we have to wonder what these Swedish investors might know that we don’t.
• What we do know is that Sweden’s state-owned iron ore producer appears to have made a major miscalculation it’s iron ore resources and may need to look for new sources of supply.
• Beowulf’s Kallak project would fit the bill nicely and we suspect LKAB might have the lucky code to unlock the permitting holdup and appease any concerned reindeer herders.
• Beowulf has spent >£6.6m so far on the project and is looking to create 250 new jobs at Kallak and 300 indirect jobs in Jokkmokk, the local town.
• Iron ore prices are at US$84.1/t in China for 62% iron ore indicating that Kallak’s proposed 71% iron ore could potentially fetch >$150/t.
• Iron ore fines are fetching $97-99/t for 65% fines – an interesting price given that fines sell less well than pellets and higher-grade magnetite
• More pertinently the Kallak product would fit well into LKAB’s customer base and green-product marketing strategy.
• Pellets grading 65% are currently fetching $130.6/t in China
• Last year Kaunis Iron restarted the Kaunisacaara mine in Sweden ship loading at Narvik providing employment in the Pajala community de.
• Beowulf are also hold the Aitolampi graphite project in Finland which has a JORC Indicated and Inferred Resource of 19.3mt at 4.5% Total Graphitic Carbon
• The company are also invested in the Vardar project in Kosovo.

Conclusion: Beowulf is sitting on one of Europe’s more valuable iron ore projects in Sweden. The project must surely be a target for LKAB which has every reason to want to develop more high-grade iron ore production, not least to take advantage of very high prices for high-grade supply, thought Beowulf could develop the project itself permits permitting.

*SP Angel acts as nomad and broker

Connemara Mining* (LON:CON) 1.25p mkt cap £1.4m – Directors and existing shareholders subscribe £230,000

• Connemara Mining reports that certain of its directors and existing shareholders have invested an additional £230,000 to help fund its gold exploration in Cos Wexford and Wicklow through the issue of 18.4m new shares at a price of 1.25p/share.
• Each new share carries a warrant to purchase a further share at a price of 1.8p at any time before 11th September 2020.
• Among the directors, James Finn and Patrick Cullen each subscribed for 800,000 new shares, bringing their respective holdings to 6.85% and 0.61%, while David Cockbill purchased a further 444,444 new shares (0.71%).

Conclusion: The support of existing shareholders and board members helps support the company’s exploration of the promising gold targets in south east Ireland.

*SP Angel is Nomad and Joint-Broker to Connemara Mining

Lara Exploration (CVE:LRA) CAD0.46, Mkt Cap CAD$15.8m – CAD$2.0m private placing

• The Company reports that it has increased its private placement to CAD$2.0m due strong investor demand.
• The placing involves issuing 4m units (1 common share and 0.5 common share warrant with a CAD$0.7 exercise price) at CAD$0.5 per unit.

Conclusion: Lara is a project generator holding a number of early stage as well as well advanced projects spanning a number of commodities (copper, gold, phosphate, iron and coal) across Latin America (Brazil, Peru, Chile and Colombia). The business model involves generating a series of exciting exploration targets and attracting a partner during the capital intensive drilling, evaluation and development stages while diversifying risk across commodities/jurisdictions and minimising dilution to the existing shareholder base by retaining interest or NSR in the final project. It is positive to see the Company referring to strong investment demand in the sector. Altus Strategies is one of the few London listed companies following the project generation business strategy focussed on the portfolio of prospective tenements across Mali (gold), Liberia (gold), Cameroon (bauxite, gold, iron ore) Cote d’Ivoire (gold), Morocco (copper, zinc) and Ethiopia (copper).

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

Oriole Resources (LON:ORR) 0.36p, Mkt cap £2.5m – Gold mineralisation confirmed in trenching at Bibemi

• Oriole Resources reports that results from the first 13 trenches of its initial phase 1 programme of 22 trenches over 8,742m at Bibemi in Cameroon has “confirmed multiple zones of orogenic-style gold mineralisation”.
• Mineralisation lies within a north-east trending shear zone and the company says that the “Highest grades yielded from moderate to steeply-dipping N-S oriented structures, which cross-cut the main NE-shear foliation. However, there is also some evidence for mineralisation in more shallow-dipping (c.30 degrees), NW-trending veins, as well as those parallel to shear foliation”
• Among the results highlighted today are
• 2m at an average grade of 0.86g/t gold in trench BT002;
• 1.4m at an average grade of 6.31g/t gold and a second interval of 1.2m averaging 1.48g/t gold in trench BT005;
• 2m at an average grade of 0.87g/t gold in trench BT007;
• 4m at an average grade of .076g/t gold in trench BT008;
• 6m at an average grade of 3.02g/t gold in trench BT010 and
• 2m at an average grade of 0.76g/t gold in trench BT013
• The company also points out that “Channel sampling of individual veins within these trenches has returned grades of up to 13.70 g/t Au from amphibolite-hosted quartz and quartz-tourmaline veins”.
• Acknowledging that “more work [needs] to be done to understand the controls on mineralisation in this kind of complex structural environment” CEO, Tim Livesey outlined plans to start a second phase of trenching in order to improve geological understanding and identify higher grade sections of the mineralisation as a prelude to “a drill decision later in the year”.
• The company also refers to earlier stage soil sampling work at the Wapouze project located approximately 20km to the north-east where results from 2,119 sol samples and 146 rock samples are expected later this month. We observe that investigating a project to the north-east of Bibemi, which itself lies on a north-east trending structure, hints that Oriole Resources may be trying to establish whether the mineral trend is continuous.

Conclusion: Orogenic style mineralisation hosts a number of the worlds larger gold deposits and although exploration at Bibemi is still at an early stage, the initial results and identification of this geological setting provide encouragement for the follow-up work.

Rambler Metals (LON:RMM) 1.8p, Mkt Cap £22.7m – Appointment of CFO

• Rambler Metals has announced the appointment of Sanjay Swarup as CFO, in a non-Board role with immediate effect.
• Mr Swarup, a Chartered Accountant, has “worked with a range of businesses such as BP plc, Mandalay Resources and Lonmin plc. Mr. Tim Slater, the previous CFO, will assist with the transition of responsibilities to Mr. Sanjay before he leaves the Company to pursue other interests”.

Conclusion: The appointment of a new CFO comes at a time when the company is focussing on building on recent productivity improvements at its Ming Copper/Gold Mine and on sustaining mine and mill production at 1,250 metric tonnes per day as a foundation for a planned further increase production to 2,000 mtpd.

Talga Resources (ASX:TLG) A$0.53, Mkt Cap A$114.6m – Graphene-infused concrete Innovation Award nomination

• Talga has been recognised for its Graphene-infused concrete project and is one of only six companies nominated in the Innovation category of the renowned Green Awards to be presented at the 2019 Greentech Festival in Berlin.
• Partners and patrons of the Greentech Festival include Allianz, ABB FIA Formula-E, the German Federal Ministry of Transport and Digital Infrastructure, Deutsche Bahn and the World Wildlife Fund.
• Graphene-infused concreate seeks to develop greener concrete, the world’s most widely used construction material (and large greenhouse gas emitter).
• The combination of standard concrete with graphene exhibits significantly increased conductivity, driving smart roads that can charge EV batteries while in motion or be kept snow and ice free without the need for environmentally harmful chemicals.
• Enhanced concretes form a single part of Talga’s multi-industry approach, targeting global battery, coatings, construction and composites markets with the nanomaterial.