SP Angel – Morning View – Friday 03 05 19
Tesla supply risk to generate new mine investment
MiFID II exempt information – see disclaimer below
Adriatic Metals* (ASX:ADT) – Site visit to mines in Bosnia highlights fast-track potential to restart former mines
Altus Strategies* (LON:ALS) – Indiana Resources JV update
Edenville Energy* (LON:EDL) – Collateral shares issued to Lind
Mkango Resources* (LON:MKA) – offshore wind has looming rare earth metals problem
Rambler Metals & Mining* (LON:RMM) – Second consecutive record annual throughput in 2018
Strategic Minerals* (LON:SML) – Initial copper sales from Leigh Creek
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Economics
US – Stephen Moore was not put forward by President Trump for the seat on the Fed Board following weeks of criticism about his shifting views on interest-rate policy and sexist comments about women.
- Hours before withdrawing from consideration for the Fed Board, Stephen moore was quoted as saying he disagreed with President Trump for the central bank to sharply cut rates.
- “I’m not so sure I agree with the White House that we should cut rates by an entire percentage point… I just don’t see the case for that right now,” Moore told Bloomberg.
- Comments came two days after Trump called for a 1% cut to the Fed rate and urged more quantitative easing.
- The sequence of events may suggest that President Trump is in search for the candidate that would support his calls for looser monetary policy jeopardising the status of the central bank as an independent institution.
- April NFPs are due out later today with estimates for 188k, up from 182k in March.
UK – The BoE left rates unchanged in line with market expectations.
- The central bank although suggested that it is expecting to hike rates several times if the UK avoids a Brexit shock and the economy performs in line with BoE projections.
- Mark Carney challenged market expectations saying investors are underestimating the pace of monetary tightening.
- “There are insufficient hikes in the current market curve to be consistent with our remit,” Carney told reporters.
- The pound has largely dismissed Carney comments with the currency little changed against the US$ and €.
- The BoE revised its growth forecasts to 1.5% for the year, up from 1.2% estimated in February, reflecting better prospects for the global growth.
- On quarter by quarter basis, the central bank expects the economy to post a 0.2%qoq in Q2/19, normalising form a 0.5% reading in Q1/19 when businesses ramped up stockpiles on concerns for the no deal Brexit.
- Inflation is set to accelerate past the 2% target over the next two-three years with an overshoot potentially being stronger should oil outperform market expectations for prices to fall over coming years.
Currencies
US$1.1184/eur vs 1.1198/eur yesterday Yen 111.53/$ vs 111.45/$ SAr 14.508/$ vs 14.452/$ $1.303/gbp vs $1.307/gbp 0.701/aud vs 0.702/aud CNY 6.735/$ vs 6.735/$
Commodity News
Precious metals:
Gold US$1,269/oz vs US$1,272/oz yesterday
Gold ETFs 70.9moz vs US$70.9moz yesterday
Platinum US$853/oz vs US$865/oz yesterday
Palladium US$1,360/oz vs US$1,351/oz yesterday
Silver US$14.62/oz vs US$14.65/oz yesterday
Base metals:
Copper US$ 6,163/t vs US$6,219/t yesterday
- World’s largest copper miner advises market bears - the downtrend in prices won’t last long.
- While copper tracks towards it biggest weekly loss since August following weaker factory gauges in China and the US fueled demand concerns, fears aren’t grounded on fundamentals, Codelco Chief Commercial Officer Roberto Ecclefield said.
- The Chilean state-run miner has been receiving requests from traders and customers who want to buy additional supply of refined copper for the second half of this year and into next year. The company forecast 2.3% consumption growth in 2019, while mine production is slipping 0.5%.
- Supply disruptions, including rains in Chile and protests in Peru kept the market in deficit, even as demand for concentrate, eased up as a result of a four-month stoppage at two of Codelco’s four smelters, Ecclefield said.
- Codelco expects shortages to worsen in the second half of the year, with less copper concentrate in the market and more smelting capacity available.
Aluminium US$ 1,836/t vs US$1,823/t yesterday
Nickel US$ 12,155/t vs US$12,160/t yesterday
Zinc US$ 2,747/t vs US$2,736/t yesterday
Lead US$ 1,874/t vs US$1,866/t yesterday
Tin US$ 19,360/t vs US$19,585/t yesterday
Energy:
Oil US$70.8/bbl vs US$71.8/bbl yesterday
Natural Gas US$2.580/mmbtu vs US$2.615/mmbtu yesterday
Uranium US$25.20/lb vs US$25.20/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$91.4/t vs US$91.4/t
Chinese steel rebar 25mm US$646.1/t vs US$646.0/t
Thermal coal (1st year forward cif ARA) US$70.3/t vs US$69.0/t
Coking coal futures Dalian Exchange US$179.4/t vs US$179.4/t
Other:
Cobalt LME 3m US$34,500/t vs US$34,500/t
NdPr Rare Earth Oxide (China) US$39,869/t vs US$39,866/t
Lithium carbonate 99% (China) US$9,726/t vs US$9,725/t
Ferro Vanadium 80% FOB (China) US$51.0/kg vs US$51.0/kg
Antimony Trioxide 99.5% EU (China) US$6.1/kg vs US$6.1/kg
Tungsten APT European US$270-282/mtu vs US$270-282/mtu
Battery News
Tesla see risk of battery-minerals shortage
- Booming battery demand and a lack of investment into mines is creating strong supply concerns a global shortage could limit manufacture capacity and adoption.
- Prices for some of the minerals, which include graphite, cobalt, lithium and nickel, could increase as a result of the high demand and the limited supply, Tesla global supply manager of battery metals Sarah Maryssael reports.
- Responsible supply is the primary focus of investment into the space, with initiatives focusing on transparency and blockchain technology supporting the industry.
- Recognising supply risk, Republican Senator Lisa Murkowski of Alaska and Democratic Senator Joe Manchin of West Virginia are expected to introduce a bill this month designed to streamline the permitting process needed to mine so-called critical materials in the U.S.
- China controls about two-thirds of that industry, with Bloomberg NEF forecasting it could grow to about 73% by 2021. The U.S. controls only about 13% of the global lithium cell production capacity, with no growth expected, according to BNEF.
New US legislation would aid domestic mining of electric vehicle materials
- US Senator Lisa Murkowski, R-Alaska, is about to introduce legislation which looks to boost the domestic mining of materials like lithium and graphite for electric vehicles, according to a report by Reuters.
- Murkowski will introduce the Minerals Security Act along with Senator Joe Manchin. The act aims to streamline regulation and permitting requirements for mines that can produce EV supply chain materials.
- A meeting today on the matter included speakers from Tesla, the US State and Energy departments, and a number of companies that hope to develop lithium mines domestically. The US has been looking to develop its own national supply chain for electric vehicle materials, and would meet with automakers and battery manufacturers.
- The US isn’t alone in seeking more control in EV production. France and Germany announced an alliance today to develop EV batteries, with both countries planning to invest a combined €5-6bn, according to France 24.
- French finance minister Bruno Le Maire alluded to not just China in his comments, but the US as well. Le Maire said the alliance “shows Europe is not fated to depend on technological imports from the two powers that are the United States and China.” Le Maire said other EU countries may enter the venture. Italy, Belgium, Poland, Austria and Finland have already shown interest in the project.
- German finance minister Peter Altmaier wants the EU to supply 30% of global battery demand by 2030.
Company News
Adriatic Metals* (ASX:ADT) A$0.87, Mkt cap A$131m – Site visit to mines in Bosnia highlights fast-track potential to restart former mines
- Adriatic Metals hosted a large site visit for UK and Australian mining analysts this week in Bosnia.
- The Veovaca and Rupice mines in the mountains to the west of Sarajevo were quick easy to access despite heavy rain and snow.
- Veovaca: the Veovaca open pit is ready and waiting for new mining activity with good grades of zinc, lead for a surface mine.
- The current resource of 4.4mt grades 1.96zn and 1.1%pb
- Rupice: drilling is ongoing at Rupice with zinc, lead, gold and silver in remobilised mineralisation hosted in sediments.
- Rupice could be open pittable but may be easily accessed underground with zinc grades of 8-18% and lead at 4-11% in the key drill results.
- Four rigs are currently drilling the projects with another two rigs to be mobilised to join.
Conclusion: Veovaca and Rupice look like good projects going forward. The Mayor of the local community was extremely positive on local support for reopening the mines and we expect to see rapid progress towards the restart of the open pit at Veovaca and for the planning of a new underground mine at Rupice.
*An SP Angel mining analyst visited Adriatic Metals operations in Bosnia
Altus Strategies* (LON:ALS) 4.2p, Mkt Cap £7.4m – Indiana Resources JV update
- The Company agreed an extension to due diligence for Indiana Resources with regards to the JV on Lakanfla and Tabakorole projects in Mali.
- Under the JV, Indiana will have an option to earn up to an 85% interest in Legend Mali (BVI) II Inc., a wholly owned subsidiary of the Company that holds 100% in the Projects.
- In return, Altus is set to receive milestone based cash and equity in Indiana as well as retain a 2.5% NSR royalty on the Projects.
*SP Angel acts as Nomad and Broker to Altus Strategies plc
Edenville Energy* (LON:EDL) 0.06p, Mkt Cap £1.0m – Collateral shares issued to Lind
- The Company issued 36m shares to Lind Partners as collateral for drawdowns on the convertible loan facility.
- Lind elected to own shares outright paying 0.02p, reflecting the 5d VWAP over the 17-25 April period.
*SP Angel acts as Nomad and Broker to Edenville Energy
Mkango Resources* (LON:MKA) 7.4p, Mkt Cap £8.4m – offshore wind has looming rare earth metals problem
Rare Earths - Magnet metals for Drones, Turbines and Automobiles
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- Surging global offshore wind capacity is also creating a massive reliance on expanding global rare earth metal output, with a recent Department of Energy reporting expanding US offshore wind capacity would require additional 17,000t neodymium by 2050 – equivalent to 20m hybrid and electric vehicles.
- While current installations total 5 turbines off the coast of Rhode Island, a number of Eastern seaboard states have committed to ambitious offshore wind targets, and in December, the Trump administration held a record-breaking offshore wind lease sale.
- The largest installations rely on “direct drive” technology, which swaps gearboxes for strong neodymium-praseodymium-iron-boron magnets.
- The researchers found that the industry’s rare earth demand will rise from about 1,200 tons a year in 2020 to nearly 3,000 tons per year by mid-century.
- Global production of neodymium is nearing 30,000tpa, Reuters reported in 2018.
- However, US production is immaterial and requires significant investment to avoid supply risks as China dominates the market with 80% production.
- This also places emphasis on ex-China global supply, which includes Mkango Resources’ Songwe Hill project in Malawi, which has a strong proportion of NdPr in the deposit.
*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.
Rambler Metals & Mining* (LON:RMM) 1.5p, mkt cap £19.4m – Second consecutive record annual throughput in 2018
- Rambler Metals has reported a second consecutive year of record mill throughput in 2018 with the tonnage processed at the Nugget Pond mill increasing by 7% to 364,176t at an average grade of 1.24% copper and 0.57g/t gold (2017 1.27% copper and 0.58g/t gold).
- The milled tonnage was closely matched by the 344,363t of ore mined from the Ming mine.
- Copper concentrate production increased by 4% to 15,525t and the average grade of the concentrate rose by 1% to 28.1% copper and by 18% to 9.4g/t gold.
- As a result, production of saleable copper rose by 6% to 4,187t and of gold by 25% to 4,189oz.
- The company reports that “Annual mill throughput averaged 1,108 dry tonnes per day with a monthly peak of 1,228 dry tonnes per day in April.”
- The company has previously announced that it is targeting an average throughput of 1,250tpd and so it particularly encouraging to hear that “Into 2019, to match increased mine output, the mill continues to push throughput and has recently achieved a one-day record throughput of 1,492 dry tonnes per day. This is another significant milestone for the Company and confirms that incremental mill improvements will allow the facility to produce at a sustained rate at or greater than 1,250 dry tonnes per day.”
- Operational improvements in the mine, including “The completion of the surface ventilation project and the continuation of the Business Improvement Initiative that was started in June 2018 has resulted in improved production metrics from the mine operation” and continuing success in de-bottlenecking “the copper concentrator processing circuit to accommodate the increased production from the mine” underline the improving productivity and provide encouragement that further improvements may be achievable.
- Commenting on the progress made during the year, recently appointed President and CEO, Andre Booyzen, highlighted “year-over-year improvements in mine output, mill throughput, concentrate production, and metal recoveries”.
- He went on to indicate that “Given the productivity improvements in the mine operation, which has provided access to better grade material in both the Lower Footwall Zone and the Ming Massive Sulfide deposits, we are now turning our attention to increasing the overall feed grade delivered to the mill and returning the Company to positive cash flows during a time that has seen significant run up and positive outlook on long term copper price forecasts.”
Conclusion: A second consecutive record year for ore treatment, in conjunction with the de-bottlenecking and closer matching of processing capacity to mine production, opens the way for sustainable production in excess of the targeted 1,250tpd as demonstrated by the delivery of record single-day throughput of 1,492t recently.
*SP Angel act as Nomad and broker to Rambler Metals & Mining
Strategic Minerals* (LON:SML) 1.65p, Mkt Cap £23.2m - Initial copper sales from Leigh Creek
- Strategic Minerals reports that it has sold an initial 5 tonnes of copper cement product from its Leigh Creek Copper Mine where on 11th April the company announced the first production copper cement production as part of its restarting of production operations and reactivation of the Mountain of Light plant.
- The company explains that production from the reactivated heap leach pads is continuing in accordance with its expectations and that production of between 150-180 tonnes of copper cement is expected from the existing leach pads.
- An offtake agreement for “all expected production” of copper cement is in place with Adchem which is based in Burra South Australia and whose website describes it as the operator of “the world’s largest single combined production facility for Black Copper Oxide … and Basic Copper Carbonate”.
- Describing the initial sale, Managing Director, John Peters, said that “whilst relatively small, [it] demonstrates the Board’s commitment to test all aspects of the LCCM operation meticulously prior to launching a full scale restart of operations.”
- Mr. Peters went on to explain that the production and sale of the initial consignment of concentrate had “provided the management team with valuable insight into operational techniques at LCCM [which] will form the blueprint for the larger production activities at Paltridge North and Rosmann East.”
- In our view, management’s approach in starting at a relatively modest scale in order to establish the operating characteristics of the project before reaching full scale operation ameliorates the commissioning risks and may help to ensure a smooth build-up of operations.
- These operations are “currently the focus of a feasibility study which is due for completion in the second half of 2019. Full production is scheduled for commencement late 2019 / early in 2020”.
Conclusion: The sale of copper cement from Leigh Creek, while small at this stage, demonstrates the viability of the project as Strategic Minerals re-establishes production with a view to full scale operations late in 2019 or early next year. As the Leigh Creek operation builds up, providing a second source of cash generation to supplement the existing Cobre operation, the company’s financial stability should be further enhanced as it pursues its earlier stage projects at Redmoor in Cornwall and the CARE project in W Australia. We look forward to the release of details from the feasibility work on Paltridge North and Rosmann East later in the year.
*SP Angel act as Nomad and broker to Strategic Minerals