SP Angel – Morning View – Wednesday 08 05 19
Escalating Iran threat draws safe haven demand
MiFID II exempt information – see disclaimer below
Arkle Resources* PLC (LON:ARK) Formerly Connemara Mining* (CON LN) – Exploration update from the Stonepark zinc project
AfriTin Mining* (LON:ATM) – 3.2p, Mkt cap £17.5m – Nampower agrees power supply agreement with AfriTin
Kodal Minerals (LON:KOD) 13p, Mkt Cap £11.0m – Board appointment
Premier African Minerals* (LON:PREM) – RHA management agreement and planned mine restart later this year
Solgold* (LON:SOLG) – New copper/gold target identified in northern Ecuador
First private enterprise Japanese rocket successfully launches to space
- The Momo-F3 reached a height of 70.5 miles before coming down in the Pacific
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
Global manufacturing PMI drops to the weakest level since Jun/16 with new orders at their lowest since 2012 led by lacklustre performance in the Eurozone.
- The headline JPMorgan Global Manufacturing PMI, complied by Markit, dropped to 50.3 in April, down from 50.5 in March.
- This compares to 53.4 recorded same time last year painting a stagnating growth outlook in the manufacturing sector in 2019.
- Backlogs of orders dropped for a fourth consecutive month with expectations of future production falling closer to the seven-year low recorded in February.
- Region-wise, North America continued to lead the upturn helped by the US numbers, while Asia reported only modest growth with PMIs down on the previous month.
China – Trade balance comes in significantly below estimates on the back of a unexpected drop in exports.
- The reading highlights weakening global demand backdrop with shipments to the US, Japan and South Korea down YoY while growth in exports to the EU slowed significantly compared to a sharp increase in March.
- An increase in imports suggested the domestic demand favoured better during the month.
- Exports (%yoy): -2.7 v 13.8 (revised from 14.2) in March and 3.0 forecast.
- Imports (%yoy): 4.0 v -7.9 (v -7.6) in March and -2.1 forecast.
South Africa – General elections are held today with the African national Congress facing its toughest vote amid a slide in support from voters frustrated with rampant corruption, high unemployment and lack of economic growth.
- The party won 62% of the vote in 2014 while securing 55% in 2016 municipal elections and latest polls pointing to 50-60% range the ANC may win this time.
- The ruling party main challengers are the centre-right Democratic Alliance and far-left Economic Freedom Fighters led by former ANC youth wing leader Julius Malema.
- Final results are due to be released by May 11 with the first parliamentary sitting scheduled for May 22.
>400 organisations to launch joint class action against Eskom over load shedding
- ESKOM directors at the South African state utility are to be sued for fraudlent, unlawful and reckless acts which have led to ESKOM load shedding in South Africa.
- The joint class action if successful will have significant repercussions for business in South Africa and open another route for businesses to claim against fraud, corruption and incompetence.
- Businesses in South Africa have suffered as a result of ESKOM load shedding and the joint-class action may provide a route for customers to make personal claims against those directors who have enriched themselves at the state’s and customers expense.
Venezuela – US sends hospital ship down to Venezuela in a move that may signal potential for conflict to Russia and China
- Reports of a US hospital ship heading south to Venezuela will worry some.
- The move may be a precaution but tensions are running high with President Maduro looking to export the nation’s gold and Russian planes waiting at Caracas airport.
- The situation reminds us of a saying ‘if you want peace, prepare for war’.
US$1.1203/eur vs 1.1216/eur yesterday Yen 110.13/$ vs 110.64/$ SAr 14.371/$ vs 14.472/$ $1.305/gbp vs $1.313/gbp 0.702/aud vs 0.703/aud CNY 6.771/$ vs 6.763/$
Gold US$1,286/oz vs US$1,284/oz yesterday
- Gold rose for a fourth day as the U.S. threat of higher tariffs on imports from China, as well as the possibility of a response from Beijing, giving support for safe haven assets.
- Vice Premier Liu He will visit the U.S. for talks on May 9 and 10 as President Donald Trump ratchets up pressure to clinch a deal. At the same time, the Asian nation is said to be preparing retaliatory tariffs should Trump carry out his threat.
- Progress had been made with trade talks, reflected in falling Chinese exports in April and rising imports, before the abrupt announcement has re-escalated the dispute.
- Risk also climbed as Iran formerly notified signatories to the 2015 nuclear deal that is plans to scale down its commitments in response to a year of US sanctions.
- The Secretary of State Mike Pompeo cancelled his first official visit to Berlin for an unexpected trip to Baghdad to address an ‘escalating’ threat from Iran.
- Prices were also buoyed by signs of a pickup in demand as China’s central bank extended its gold-buying spree for a fifth month, recording the biggest inflow since 2016.
- The People’s Bank of China raised reserves to 61.1moz in April from 60.62m a month earlier, according to data on its website on Tuesday. In tonnage terms, last month’s inflow totaled 14.9t and the increase follows the addition of almost 43t in the four months through March.
- First-quarter purchases have risen to the highest in six years as central banks diversify assets away from the dollar.
Gold ETFs 70.5moz vs US$70.5moz yesterday
Platinum US$872/oz vs US$884/oz yesterday
Palladium US$1,326/oz vs US$1,353/oz yesterday
Silver US$14.92/oz vs US$14.94/oz yesterday
Copper US$ 6,195/t vs US$6,254/t yesterday
- The world’s top copper miner posted the lowest production figures for more than a decade as heavy rains hit its Chilean operations and output declines across all its ageing mines.
- Chile’s Codelco churned out 370,900t in the first quarter of 2019, down 27% from the previous three months and the lowest since the second quarter of 2008, according to a monthly report by the government’s copper agency Cochilco.
- Output for the month and for the quarter fell sharply at El Teniente, Codelco’s largest mine. The Santiago-based miner is halfway through a $5.5bn project to build a new level to extend the century-old mine’s life for 50 additional years. The project is part of the company’s plan to invest more than $20bn over the next decade in order to upgrade mines.
Copper faces jolt as China steps up war of waste
- China’s government had made a move to block the import of lower-grade copper scrap, as part of a broader move to gradually end imports of all solid waste, by 2020. From July 1, the remaining copper grades will be subject to volume quotas and licence approvals.
- China’s copper industry traditionally relies on recycled material, with the move disrupting as much as 400,000t contained copper.
- Tougher government restrictions on scrap imports and rising domestic supplies will reduce China’s reliance on overseas scrap copper in 2019-2020, according to Bloomberg Intelligence. Less than 50% of China’s scrap copper demand will be met by imports next year, down significantly from more than 80% in 2008.
- This raises questions about increasing capacity outside of China the handle the material, and while some recycling firms have already invested, most are waiting for a clearer picture on the eventual crackdown.
Aluminium US$ 1,823/t vs US$1,798/t yesterday
Nickel US$ 12,085/t vs US$12,125/t yesterday
Zinc US$ 2,684/t vs US$2,739/t yesterday
Lead US$ 1,877/t vs US$1,887/t yesterday
Tin US$ 19,415/t vs US$19,565/t yesterday
Oil US$70.2/bbl vs US$71.0/bbl yesterday
Natural Gas US$2.541/mmbtu vs US$2.519/mmbtu yesterday
Uranium US$25.00/lb vs US$25.00/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$91.9/t vs US$91.1/t
Chinese steel rebar 25mm US$642.7/t vs US$644.0/t
Thermal coal (1st year forward cif ARA) US$70.5/t vs US$71.7/t
Coking coal futures Dalian Exchange US$171.3/t vs US$172.7/t
Cobalt LME 3m US$34,500/t vs US$34,500/t
NdPr Rare Earth Oxide (China) US$39,652/t vs US$39,702/t
Lithium carbonate 99% (China) US$9,747/t vs US$9,759/t
- Lithium export prices from the world’s second-largest producing nation continue to tumble in the first quarter, with Chilean lithium carbonate at an average price of $12,183/t, down 0.9%.
- Central bank figures released on Tuesday show lithium carbonate exports declined to $49m in April, from $83m the previous month.
- The South American nation holds the world’s largest lithium reserves, with Chilean lithium mined by the world’s two top producers, Albemarle Corp and Soc. Quimica y Minera de Chile SA, at large operations on the northern Atacama salt flat.
- Demand for lithium is expected to soar from 300,000tpa in 2018 to 850,000t in 2025, according to Bloomberg NEF.
Ferro Vanadium 80% FOB (China) US$50.5/kg vs US$50.5/kg
Antimony Trioxide 99.5% EU (China) US$6.0/kg vs US$6.1/kg
Tungsten APT European US$270-280/mtu vs US$270-282/mtu
EVgo commits to 100% renewable energy for fast charging network
- EVgo, America's largest public EV fast charging network, has announced it has contracted for 100% renewable energy to power its network - the first company of its kind.
- The Company will use a combination of Green-e certified wind and solar energy through its electricity suppliers and its renewable energy certificate partners to reach its 100% renewable commitment.
- EVgo said it “contracts with its energy suppliers and renewable energy certificate (REC) partners to ensure that each gigawatt-hour delivered on its fast charging network financially supports an operating renewable energy generator in the U.S.”
- The network is a member of the Renewable Energy Buyers Alliance, a recently launched organisation made of up of more than 300 companies. REBA has set a goal to bring more than 60GW of new renewables online in the US by 2025.
- In California, EVgo is procuring 100% solar RECs from state providers, and the network has announced its intent to purchase bundled renewable energy from partners that are certified through the California Air Resources Board Renewable Energy Pathways program.
- EVgo powered more than 75m electric miles in 2018, and the network plans to double its capacity by the end of 2020.
BYTON close to $100m new funding
- Chinese EV startup BYTON is close to securing $100m new funding with Chinese state-owned carmaker FAW.
- Sources said the startup is ultimately seeking $500m from its latest round of fundraising as it prepares to bring its first all-electric SUV to market this year, which would give BYTON a valuation around $2.5bn.
- FAW was also the lead investor during a $500m financing round last year. Bloomberg said the carmaker is partnering with BYTON at least in part to revive the country’s Red Flag limousine brand.
- BYTON is currently taking reservations for its M-Byte SUV with a starting price of $45,000 that brings drivers a 71 kWh battery pack for 250 miles of range, 30 minutes fast-charging to 80%, and a 200 kW rear-wheel drive motor.
Altus Strategies* (LON:ALS) 4.5p, Mkt Cap £8.0m – JV with Resolute extended by two years
- The Company signed an agreement with Resolute mining in respect of the JV on the Group’s 106km2 Pitiangoma Est project in southern Mali to extend the JV by two years to May 2021.
- Earn in terms remained the same including 70% for $3m exploration spend and a completion of the Feasibility Study while Altus holds an option to co-fund its 30% on a pro rata basis or exchange its interest for a 2% NSR royalty.
- Drilling is currently underway at the Pitiangoma Est project with exploration results to be released in due course.
- The project is located within the trucking distance of the operating processing plant at the Syama gold mine (40km away) with oxide and sulphide treatment circuits.
*SP Angel acts as Nomad and Broker to Altus Strategies plc
AfriTin Mining* (LON:ATM) – 3.2p, Mkt cap £17.5m – Nampower agrees power supply agreement with AfriTin
- AfriTin reports the signing of a formal power supply agreement with Nampower, the Namabian state power utility.
- The provision of grid power is a significant improvement on diesel power generation though diesel will still be used till a grid connection is completed.
- A high-voltage line runs to around 1km from the Uis process plant site and when connected will enable substantial cost savings at the plant.
- AfriTin are already stockpiling ore for the Phase 1 pilot plant with a throughput capacity of 500,000tpa for some 700tpa of tin in concentrate.
- Phase 2 should see the operation expand to 500,000tpa for 5,000tpa of tin in concentrate.
- The power supply agreement is to supply 1.5MVA at a voltage of 66kV over 10 years and is according to Nampower’s schedule of standard prices for Transmission Customers.
- AfriTin is looking to produce a 60% grade tin concentrate grading 60% on an 85% recovery rate.
- DMS: The recovery process in reliant on the success of the Dense Media Separation ‘DMS’ plant to upgrade low-grade tin for further processing into a saleable tin concentrate.
- Stage 1: Early work indicates the DMS plant should work well with Stage one showing Mass recoveries of 4.5-28% on sample densities of 2.7-2.6% tin feedstock.
- The DMS plant then sacrifices a relatively small fraction of the tin in its concentration of the heavier elements.
- The heavier material then sinks as cassiterite is heavier than the Dense Media Material used though some of the fine tin is also lost in the float.
- Tin recoveries are 71%-91% in Stage 2 of the process.
- Stage 2 is estimated to produce, a very nice to have, tin grade of 4 -23% which is then concentrated to a 60% concentrate in a conventional tin process plant
- The original open-cast tin mine at Uis worked from 1946-1980 mining ore from quartz-sulfide-cassiterite-wolframite veins which are hosted in Swakop Group metasediments.
- The company currently has a non-JORC complaint, resource at Uis 73mt grading 0.136% tin, with an additional 2.7m tonnes at a grade of 0.015% Ta2O5
- AfriTin has also indicated in the past that it identifies significant exploration potential in the vicinity with more than 180 tin-bearing pegmatite occurrences known within a 5km radius of the Uis plant.
- The team also acquired the Brandberg West Tin-Tungsten Mine in Namibia last year and have identified significant exploration potential in the vicinity with more than 180 tin-bearing pegmatite occurrences known within a 5km radius of the Uis plant.
- Last August water well drilling intersected pegmatite mineralisation from 14- 81m with visible cassiterite throughout.
Conclusion: This is another positive step forward for AfriTin and will enable lower-cost processing at site.
*SP Angel acts as nomad and broker to Bushveld Minerals which spun off AfriTin and still holds a meaningful stake in AfriTin.
Alexander Mining (LON:AXM) 0.075p, Mkt cap $1.4m – Royalty on Kapili Tepe project in Turkey draws closer
- Alexander Mining report that Deep South Resources has received approval from the Ministry of Energy and Natural Resources in Turkey to proceed and close the acquisition of 75% of a Turkish company which holds the Kapili Tepe project in Turkey.
- Alexander Mining have a 2.5% NSR royalty on the project if it uses its Leaching technology.
Arkle Resources* PLC (LON:ARK) 1.2p mkt cap £1.6m – Exploration update from the Stonepark zinc project
Formerly Connemara Mining* (LON:CON)
- Connemara Mining has provided a progress report on the exploration programme at the Stonepark zinc project (Arkle Resources 23.44%) which is investigating the Limerick Basin south of Glencore’s 45mt Pallas Green zinc project.
- Four diamond drill holes, totalling 1900m, were completed between November 2018 and April 2019. Although “No high grade zinc intersections were intercepted … each of these holes … provided strong vectors towards further exploration within the Limerick basin.”
- Hole G11-450-02 (also described as the “Kilteely Hole” did, however, intersect “a vertically extensive (230 metre) zone (downhole depth of 200-430 metres) containing varying amounts of extensive iron-sulphide (pyrite and possible marcasite), chert (suspected to be either volcanogenic and/or hydrothermal) and brecciation (mostly hydrothermal) - within a package of predominantly flat-flying and interlayered volcanics and limestones. …. This sequence is interpreted to represent the peripheral part of a hydrothermal system typical of southern Irish-Type zinc deposits.”
- Within this intersection, Hole G11-450-02 intersected 4.3m averaging 0.27% zinc from a down-hole depth of 305.7m and “aimed at testing an area 1.4 kilometres northwest of known high-grade zinc mineralisation at the Carrickittle prospect where high historic intercepts are known (e.g. 2.4m of 26.8% zinc + lead and 61 g/t silver; …), along the Pallas Green Corridor.”
- Commenting on the results, Patrick Cullen, CEO, pointed out that “This area of Limerick hosts the two largest undeveloped zinc deposits in Ireland, at Stonepark and at Pallas Green, in a region recognised for its world class zinc mines and zinc grades.”
- He went on to describe a growing body of evidence of a new hydrothermal mineralising system “in the southern part of the Stonepark Zinc Project …[as] … very exciting news” and to explain that “The ground at Kilteely is completely open to the north and, with only one historic drill hole in the area, the potential for a further major discovery is significant."
Conclusion: Recent drilling at the Stonepark zinc project has identified a zone of hydrothermal mineralisation within the Pallas Green Corridor south of Glencore’s 45mt Pallas Green deposit. Although drilling at Stonepark remains at a relatively early stage, the intersection of a 230m wide zone of hydrothermal mineralisation in hole G11-450-02 suggests the presence of a sizeable mineralising system and should help to guide future exploration efforts towards a possibly zinc enriched part of that system. We look forward to further news as the programme advances.
*SP Angel is Nomad and Joint-Broker to Arkle Resources formerly Connemara Mining
Avesoro Resources (LON:ASO) 106.5p, Mkt Cap £86.9m – Youga mine reserves increased by 23%
- Avesoro Resource has reported a 23% increase in the proven/probable ore reserves of its Youga mine in Burkina Faso to 814,900oz of gold contained within 14.74mt at an average grade of 1.72g/t gold.
- Over 99% (14.67mt) of the reserve is classed as probable. The reserve is stated at a range of different cut-off grades between0.7g/t and 1.1g/t depending on the individual mine pits with the three largest at Netiana, Mid-Pit and Gassore quoted at cut-offs of 1.1g/t, 0.7g/t and 0.7g/t.
- The reserve upgrade results in a four-year life-of-mine extension “with potential to extend further with additional drilling of existing Mineral Resources to upgrade the confidence level and prospective satellite targets across the Company's 763km2 exploration portfolio surrounding the Youga, Ouaré and Balogo deposits”.
- The company explains that it will require “Total upfront capital of US$17.7 million for the construction of the Ouaré to Youga haul road, Tailings Storage Facility ("TSF") upgrades and the mobilization of contract operations, plus sustaining capital costs of US$17.8 million, including TSF expansion and mine closure” and that “Average LOM operating cash costs of US$877 per ounce and all in sustaining cash costs ("AISC") of US$973 per ounce” will deliver a post-tax NPV5% of US$142.6m at a US$1,300/oz gold price.
Conclusion: The reserve increase at Youga delivers a four year extension to the mine life and a healthy return on a modest additional capital investment
Cora Gold* (LON:CORA) 4.2p, Mkt Cap £4.0m – Sanankoro maiden mineral resource estimate targeted for Q4/19
- The team mobilised a drill rig ahead of a 6,000m drilling programme at the Sanankoro Gold Discovery in the Yanfolila Gold Belt, Southern Mali.
- The programme will infill and expand the known near surface gold oxide mineralisation susceptible to cheap open pit extraction and processing while also testing the sulphide potential.
- The Company is targeting a maiden gold oxide mineral resource estimate by Q4/19.
- Additionally, final results of the metallurgical testwork of the Sanankoro material are expected in Q2/19 while a Scoping Study looking at the potential for a small scale open pit operation is expected to be compiled by the end of Q4/19.
- The Company is well funded after having raised £1.35m recently supported by both existing and new shareholders.
Conclusion: The Company laid out plans for the Sanankoro gold project looking to complete 6,000m of infill as well as step out drilling, release further metallurgical testwork results in Q2/19 and maiden mineral resource estimate together with a Scoping Study in Q4/19. The Company is fully funded and continues to gradually de-risk the project identifying low cost close to surface ounces that can be fast-tracked into production.
*SP Angel acts as Nomad and Broker to Cora Gold
Gem Diamonds (LON:GEMD) 89.0p, Mkt Cap £123.6m –Q1 production and trading
- Gem Diamonds reports that its Letseng diamond mine produces a total of 29,458 carats of diamonds from approximately 1.65mt of ore during the quarter ending 31st march 2019. Production was broadly in line with the 29,523 carats produced in the preceding quarter and is reported to be in line with the company’s guidance (118-118,000 carats).
- Although total tonnes mined increased by around 600,000t during the quarter to approximately 8mt, ore tonnage declined approximately 5% to 1.65mt as the mine stripped more waste rock “in line with the requirements of the updated long-term mine plan that incorporates the … initiative to steepen inter-ramp slop angles”.
- Grades, however, increased slightly from 1.70cpht in the quarter ending 31st December 2018 to 1.78 cpht “mainly driven by mining an area (K6 domain) within the Main Pipe that has a high grade relative to other sections within the Main Pipe.”
- Sales during the quarter amounted to 27,335 carats at an average price of US$1,900/carat (Q4 2018 – US$1,259/carat) and the company “Sold eight diamonds for more than US$ 1.0 million each, generating revenue of US$ 27.2 million during the Period”.
- “During the Period, the highest price achieved for a 70.69 carat white diamond was US$ 48 225 per carat while the 13.33 carat pink diamond achieved US$ 656 933 per carat, the highest US$ per carat ever achieved for a Letšeng diamond.”
- Commenting on the wider market, Gem Diamonds reports that “The demand and prices for Letšeng's large high-quality white rough diamonds have remained firm.”
Conclusion: Letseng’s ability to deliver very high value diamonds has helped lift the average sales price by 51% during the quarter to US$1,900/carat
Kodal Minerals (LON:KOD) 13p, Mkt Cap £11.0m – Board appointment
- Kodal announce the immediate appointment of Mark Pensabene as an independent Non-executive Director. Mr. Pensabene is an experienced Project Manager and company executive with industry experience in mineral processing and gas plant construction and associated infrastructure development.
- The Company has entered into an option agreement with Mr. Pensabene under which 10m options have been granted to him which will vest in three tranches, and will be exercisable at 0.14p and 0.25p.
Premier African Minerals* (LON:PREM) 0.115p, Mkt Cap £9.2m – RHA management agreement and planned mine restart later this year
- Premier African Minerals reports that it has reached a new management agreement with Zimbabwe’s National Indigenisation and Economic Empowerment Fund (NIEEF) which “is expected to see RHA Tungsten Private Limited ("RHA") brought back into production without any further financing requirement from Premier. Premier holds a 49% interest in RHA and is the operator.”
- The new, legally binding agreement with NIEEF “includes a funding undertaking of US$6 million for RHA. Use and application of these funds is expected to see RHA back in production later this year and allows for required upgrades that are expected to result in major operating cost reductions including electricity grid connection. Premier retains ownership of the plant and equipment and is reappointed as the manager for a further 5 years with renewal thereafter.”
- The new funding will “be structured as share capital and Premier will simultaneously capitalise an equivalent amount from Premier's existing loan account”.
- The RHA tungsten mine has faced a number of operational challenges in recent years, however, the company explains that it “has been significantly de-risked over the past 4 years and is now an operation that is better understood.”
Conclusion: Management expects that the agreement with NIEEF will facilitate a restart of production at the RHA tungsten operation later this year without the need for further recourse to Premier African Mining for further funds.
*SP Angel have an agreement with Premier African Minerals as a result of the acquisition of Northland Capital Partners
Solgold* (LON:SOLG) 37.75p, Mkt cap £697.0m – New copper/gold target identified in northern Ecuador