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Today's Market View - Copper prices recover on Chile strike action

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SP Angel – Morning View – Tuesday 18 06 19

Copper prices recover on Chile strike action

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MiFID II exempt information – see disclaimer below 

 

Anglo Asian Mining* (LON:AAZ) BUY, 127p – Exploration Report

Bluejay Mining* (LON:JAY) BUY, Target price 21.3p – Focus on delivery of 5,000t, 89% ilmenite grade bulk smelter sample for Rio Tinto

Chaarat Gold* (LON:CGH) BUY, 42p – Tulkubash Drilling results

Strandline Resources (ASX:STA) – Strandline gains US$26m credit approval for mineral sands mine in Tanzania from Nedbank CIB

Virginia Energy Resources (CVE:VUI) – US Supreme Court upholds Virginia State ban on Uranium

Yellow Cake (LON:YCA) – Annual results

 

Tesla “might get into mining”

  • In a move that mirrors global automotive OEMs, Tesla CEO Elon Musk highlights battery supply risk as a primary limiting factor, reporting “there’s not much point in adding product complexity if we don’t have enough batteries” at the annual meeting.
  • We are matching the product roll out according to the scaling of battery production. That’s really the main limiting factor…As we scale battery production to very high levels, we actually have to look further down the supply chain. We might get into the mining business. Maybe. A little bit, at least.”
  • Tesla are reporting from experience, with the Company deploying more battery power than its next four biggest rivals combined in March, totaling 2,889MWh.
  • The battery represents at least a third of the cost of electric vehicles, with raw materials responsible for the bulk of the cost of the battery. Adoption of EVs is reliant on minimising this cost, with scale of production allowing lithium-ion battery costs to fall below $100/kWh for the first time, compared to $290kWh in 2014.

 

London looks to install as many as 50,000+ EV charge points by 2025

  • London Mayor Sadiq Khan has unveiled an updated electric vehicle infrastructure delivery plan which aims to put as many as 50,000 EV charge points in the city by 2025, as London looks to become a zero emission transport city by 2030.
  • The plan looks to further accelerate the already rising rate of EV adoption in the city, with estimates showing EVs could increase from around 20,000 in the city today to more than 330,000 by 2025. To address public ease of use the city looks to install thousands of charge points, as Khan calls for “an electric vehicle revolution.”
  • Transport for London has already committed to installing 300 rapid charge points by the end of 2020, and it’s expected that over 3,500 “slow to fast” AC charge points will also be installed by the end of 2020.
  • The Mayor’s Electric Vehicle Infrastructure Taskforce expects most charge points will be installed by the private sector but also notes that “further support from the Government may be needed.”
  • London will also develop rapid charging hubs to serve high-mileage/business users with the idea that these drivers will know a fast charger should be readily available. The city plans to create at least five of these easily accessible flagship rapid hubs, “one in each sub region of London,” with the first to open in 2020.
  • The plan even addresses concerns that EVs will put too much strain on the power supply, noting “evidence provided by the National Grid and local distribution networks suggests that this can be effectively overcome through better coordinated and ‘smarter’ use of our power networks.”
  • National Grid Electricity System Operator (ESO) has already announced that Britain’s grid will be able to operate using 100% renewables by 2025 for cleaner electricity.

 

UEFA President arrested by French Police over award of 2022 World Cup to Qatar

  • UEFA President Michel Platini arrested and taken to the Anti-Corruption Office of the Judicial Police for award of 2022 World Cup to Qatar.
  • Platini was banned by the FIFA Ethics Committee in 2015. A body of very high-moral standing!!!
  • Given that bribes and corrupt payments were tax deductible in France till very recently we are surprised to see Monsieur Platini arrested.
  • Football fans were amazed to see Qatar win the award of the 2022 world cup where the temperature is only 46oC today.

 

Dow Jones Industrials

 

+0.09%

at

  26,113

Nikkei 225

 

-0.72%

at

  20,973

HK Hang Seng

 

+0.96%

at

  27,487

Shanghai Composite

 

+0.09%

at

   2,890

FTSE 350 Mining

 

+0.77%

at

  20,090

AIM Basic Resources

 

+0.27%

at

   2,017

 

Economics

Global markets – predicting economic shock in China as US Tariffs depress demand for Chinese manufactured goods

 

US Commerce Secretary, Wilbur Ross, reckons it’s impossible to negotiate with the European Commission at the moment

  • Wilbur Ross in an interview on CNBC comments that it’s ‘‘complicated to negotiate with the European Union,’
  • The EU needs to pick a new President and new Trade Commissioner, with the new president expected to be elected by 1 November.
  • EU rules require complete support from all the 28 member states for any new mandate, thought the current trade team will continue with day-to-day activities.
  • Trump is ‘totally comfortable’ with Tariffs on European vehicles.
  • Ross is encouraging European automakers to set up manufacturing, R&D and new EV facilities in the US.
  • The US Republican negotiators seen solving of the US China issue and Auto issues as essential for the US.
  • https://www.cnbc.com/2019/06/17/its-complicated-to-negotiate-with-the-eu-wilbur-ross-says.html?__source=newsletter%7Cmorningsquawk

 

Currencies

US$1.1240/eur vs 1.1206/eur yesterday  Yen 108.23/$ vs 108.58/$  SAr 14.787/$ vs 14.823/$  $1.254/gbp vs $1.258/gbp  0.684/aud vs 0.687/aud  CNY 6.925/$ vs 6.925/$

 

Commodity News

Precious metals:         

Gold US$1,345/oz vs US$1,337/oz yesterday

   Gold ETFs 72.5moz vs US$72.5moz yesterday

Platinum US$798/oz vs US$801/oz yesterday

Palladium US$1,480/oz vs US$1,463/oz yesterday

Silver US$14.88/oz vs US$14.83/oz yesterday

           

Base metals:   

Copper US$ 5,847/t vs US$5,824/t yesterday

  • Global copper supply received a blow as output at one of Chile’s Codelco mine has been maintained at 50% capacity as it faced its fifth full day of the latest union strike.
  • More than 3,000 unionised workers at the world’s top copper producer’s Chuquicamata copper mine walked off the job last week after failing to reach a labor deal earlier this week with Codelco.
  • Liliana Ugarte, president of Union 2, one of three striking unions, said that Codelco had yet to approach the unions to reinitiate talks. Tensions have remained high, with job threats resulting from a major mining overhaul.
  • Codelco, reporting an 18% yoy fall in its first-quarter copper output, is seeking to transform the century-old deposit into an underground mine forming a 10-year, $39bn overhaul of Codelco’s key operations.
  • The mine produced 320,744t of copper in 2018, equiValent to 5.5% Chilean supply.

Aluminium US$ 1,763/t vs US$1,757/t yesterday

Nickel US$ 11,745/t vs US$11,935/t yesterday

Zinc US$ 2,460/t vs US$2,461/t yesterday

  • Zinc prices contracted in London as Chinese production is forecast to increase with smelters postponing maintenance in second and third quarters, helping to further build inventory and sustain downward price pressure.
  • Government data on Monday indicated Chinese zinc output climbed 7.4% from a year earlier to 480,000t in May.

Lead US$ 1,891/t vs US$1,875/t yesterday

Tin US$ 18,800/t vs US$19,255/t yesterday

  • Tin prices tumbled as stockpiles tracked by the London metal Exchange surged the highest since 2013, climbing 1,335t to 6,035t driven by deliveries into Singapore.
  • Total stocks are up 2,590t over the past three days, rising to the highest since 2016.

           

Energy:           

Oil US$60.5/bbl vs US$61.9/bbl yesterday - Japanese oil tanker owner reckons vessel was hit by a projectile

  • The owner has reports that something flew towards the ship before it was struck.
  • US Central Command is reported to have released pictures of a group recovering a potential unexploded limpet mine from the ship.

Natural Gas US$2.384/mmbtu vs US$2.396/mmbtu yesterday

Uranium US$24.45/lb vs US$24.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$101.9/t vsUS$103.5/t

  • In the wake of Vale’s tailings dam disaster, major investors, including the Swedish National Pension Funds and the Church of England, could withdraw a combined $12.5tr funding following a review of their stake in resource companies that use unsafe storage dams.
  • The management of tailings dams gained prominence following the collapse of Vale’s dam at Brumadinho in Brazil in January, which killed about 250 people.
  • Vale and other big listed miners are among more than 200 companies that have released data on dams in response to a request on behalf of 100 investors, the Church of England Pensions Board – one of them – said on Monday.
  • The Church of England pensions board said that 50% of the industry by market capitalisation had responded after it contacted more than 650 publicly listed companies in April, including oil and gas companies, asking them to disclose data on all of their dams.
  • Ethical investment is drawing more focus on transparency, with Vale reporting “we have not spared – and will not spare resources or efforts to repair any damages caused to the families involved, to the infrastructure of the communities and to the environment”.

Chinese steel rebar 25mm US$586.9/t vs US$590.5/t

Thermal coal (1st year forward cif ARA) US$62.8/t vs US$63.5/t

Coking coal futures Dalian Exchange US$203.5/t vs US$196.8/t

           

Other:  

Cobalt LME 3m US$28,000/t vs US$28,000/t

NdPr Rare Earth Oxide (China) US$53,069/t vs US$52,350/t

Lithium carbonate 99% (China) US$9,531/t vs US$9,531/t

Ferro Vanadium 80% FOB (China) US$39.0/kg vs US$39.0/kg

Antimony Trioxide 99.5% EU (China) US$5.7/kg vs US$5.7/kg

Tungsten APT European US$255-265/mtu vs US$260-270/mtu

 

Company News

Anglo Asian Mining* (LON:AAZ) 116p, Mkt Cap £132.7m – Exploration Report

BUY – 127p (from 126p)

  • Anglo Asian Mining has released its FY18 exploration report (http://www.rns-pdf.londonstockexchange.com/rns/5827C­-2019-6-18.pdf) 2-2019  and provided an update on the Q1 2019 programme as well as releasing detailed reserve and resource statements and geological details of the individual properties and project areas to its website.
  • In 2018, the company initiated a 3-year rolling programme of exploration aimed at replacing and increasing mineral resources depleted by mining as well as extending the lives of existing mining operations and identifying previously undiscovered deposits.
  • The company explains that the “introduction last year of a rolling three-year exploration programme enables the Company to budget far enough in advance to ensure that target evaluation is feasible and that it is considered separate to development-stage projects …[and] …. It also permits longer-term exploration and development planning to be conducted, so that drill rig movement and other exploration activities can be ‘locked in’, minimising downtime and maximising efficiency.”
  • At Gedabek, where the company completed a total of 28,179m of diamond drilling and 11,927m of reverse-circulation drilling, a series of airborne geophysical anomalies have been incorporated within the exploration programme providing potentially “exploitable oxide and sulphide assets consistent with the mixed ores currently being mined and processed (thereby no major reconfiguration of the processing facilities would be required”.
  • The Gedabek targets range in depth from shallow depth of less than 300m depth to deeper prospects of up to 500m depth and include as many as 6 deeper, potential porphyry occurrences.
  • The company has previously released a JORC compliant mineral reserves and resources update for the Gedabek deposit which shows a proven and probable reserve of 12.1mt at an average grade of 0.88g/t gold, 0.3% copper and 8.9g/t silver within a Measured and Indicated resource (at a 0.3g/t gold cut-off grade) of 29.1mt averaging 0.9g/t gold, 0.2% copper and 7.3g/t silver. Gedabek contains an additional 8.5mt classified as inferred at an average grade of 0.7g/t gold, 0.1% copper and 5g/t silver.
  • Despite in excess of 6km of Soviet era underground exploration adits and drives, Gosha is described as relatively underexplored. The recently discovered Asrikshay polymetallic prospect, located approximately 7km north of the Gosha mine, is being followed up with a programme of ground geophysics aimed at assisting in the design of a programme of resource evaluation drilling.
  • Initial drilling of 8 surface diamond-drill holes at Asikshay included an intersection of 4.3m of polymetallic massive sulphide mineralisation averaging 4.11g/t gold,112.23g/t silver, 3..07% copper and 3.02% zinc from a depth of 228.7m in hole ASDD03. “Outcrop sampling programmes are also being carried out over other parts of the Gosha Contract Area, with the aim of finding favourable geology and alteration styles.”
  • A remote sensing programme, to be conducted between July-September this year, is planned as part of a $1.84m exploration programme at Ordubad. An “extensive surface geochemical sampling programme has commenced … to complement the forthcoming satellite data and assist with drill targeting”.
  • As an indication of the wider exploration strategy, “In addition to the potential within its current contract areas, the Company is continually assessing further opportunities for expansion both within Azerbaijan and external to the country”.

Conclusion: Anglo Asian Mining’s continuing exploration programme is helping to identify the wider potential within and proximal to its existing operations as well as in the company’s wider licence areas, in Azerbaijan more widely, and perhaps beyond. We look forward to continuing news as the programme continues.

*SP Angel act as Nomad and broker to Anglo Asian Mining

 

Bluejay Mining* (LON:JAY) 9.21p, Mkt Cap £64m – Focus on delivery of 5,000t, 89% ilmenite grade bulk smelter sample for Rio Tinto

BUY - Target price 21.3p - included in MSCI index (Dundas Ilmenite project, Greenland, 100% owned)

  • Bluejay Mining report on their 2019 work program at the Dundas ilmenite project in Greenland.
  • The team are largely focussed on the supply of a bulk smelter sample for shipment to Rio Tinto Iron and Titanium Canada Inc.’s Sorel-Tracy plant in Quebec, Canada.
  • Bluejay is to produce a bulk sample of screened product to be barged off the beach and loaded onto a larger vessel for the 3,500km journey to Sorel-Tracy, Canada.
  • The sample will be further processed in Quebec, Canada to produce a minimum 5,000t sample grading 89% ilmenite.
  • The bulk sample will use a demonstration plant which has the same equipment as defined by Royal IHC Robbins in their detailed engineering and mineral separation flow sheet. This should effectively verify the process design and allow for some further optimisation of the design on a demonstration-scale plant.
  • Bluejay is going to build a 2,400t per week Run of Mine demonstration plant to process heavy mineral sands off the beach at Dundas for shipment to Canada.
  • The team is also in their final year for the Shallow-marine Environmental Base-Line study and will continue with further onsite infrastructure development.
  • Bluejay also plans to lodge their application for its mining license for the Dundas project with the Greenland government this year.
  • Bluejay’s latest JORC resource estimate is at 117mt grading 6.1% ilmenite for what is probably the highest-grade ilmenite project in the world.
  • We expect to see details of the Dundas Pre-Feasibility study sometime soon, following significant delay caused by the optimisation and reworking of the project.

Conclusion: The focus on delivering a 5,000t 89% ilmenite grade sample to Rio Tinto in Canada is significant news

*An SP Angel mining analyst has visited the Dundas, Itelak ilmenite sands project in Greenland.

*SP Angel act as nomad to Bluejay Mining. 

 

Chaarat Gold* (LON:CGH) 29.7p, Mkt Cap £119.5m – Tulkubash Drilling results

BUY – 42p

  • The Company reports that it has now completed more than 3,800m of its planned 20,000m programme at its Tulkubash Oxide Gold Project in the Kyrgyz Republic. The majority of the planned programme is to form step-out drilling beyond the current pit limits with approximately 2000m allocated to infill drilling aimed at “converting waste to ore and improving project economics”
  • The recent results have “identified new shallow mineralisation within and adjacent to current pit outlines” at Tulkubash while “Roadcut and outcrop mapping and sampling confirm extensions of gold mineralisation northeast along strike confirming that Tulkubash hosts a significant gold system”.
  • Commenting on the programme and the results obtained, the company’s Dorian (Dusty) Nicol said that “Now that the drill road and pad construction have extended northeast of the current resource boundary, we will be able to drill what we consider to be a highly prospective zone of geochemical anomalies, crackle breccia, and hydrothermal alteration identified by last year's mapping”.
  • Among the results reported today are:
    • A 9.7m wide intersection averaging 1.49g/t gold from a depth of 114.0m in hole DH19T466 which also contains a second intersection of 5.3m wide intersection averaging 3.90g/t gold from a depth of 135.0m; and
    • An 8.9m wide intersection averaging 0.91g/t gold from a depth of 66.0m in hole DH19T468; and
    • A 20.25m wide intersection averaging 0.94g/t gold from a depth of 60.0m in hole DH19T473; and
    • A 15.5m wide intersection averaging 2.20g/t gold from a depth of 27.0m in hole DH19T478

Conclusion: We look forward to continuing results as the exploration drilling campaign at Tulkubush progresses.

*SP Angel acts as Broker to Chaarat Gold

 

Strandline Resources (ASX:STA) A$0.14, Mkt cap A$51m – Strandline gains US$26m credit approval for mineral sands mine in Tanzania from Nedbank CIB

  • Tanzania is back on the investment map again following the approval of a US$26m 5-yr credit line for the ‘Fungoni’ mineral sands mine in Tanzania.
  • The credit line from Nedbank CIB is said to be on standard commercial terms which the company considers to be favourable.
  • DFS Key points Final Product Case:
  • Capex - US$35m.
  • Production: 23.4mtpa and 523.4mt over the Life of Mine ‘LOM’
  • Mine life – 22.5 years
  • Production:
  • 110,000tpa ilmenite.
  • 32,000tpa premium zircon.
  • 58,000tpa zircon concentrate production.
  • 20,000tpa HiTi90 production
  • LOM Revenue to total operating cost ratio of 2.2
  • LOM Operating C1 costs inc. transport of A$1,778m equates to A$3.4/t of ore mined vs revenue of $7.5/t
  • LOM price assumptions (FOB):
  • Ilmenite - $267/t
  • Zircon premium - US$1,480/t
  • Zircon concs – US$495/t.
  • HiTi90 – US$1,014/t.
  • Coburn Project JORC Compliant Ore Reserve April-2019
  • Ore Reserve: 523mt containing 5.83mt of Heavy Minerals grading 1.11% Total Heavy Minerals ‘THM’
  • Mineral Resource (Measured): 119mt grading 1.3% THM, containing 45% ilmenite, 5% rutile, 24% zircon, 6% leucoxene, 3% slimes and 6% oversize
  • Product price assumptions used to determine the Ore Reserve estimate were:.
  • Chloride Ilmenite price FOB1 US$269/t average over LOM
  • Leucoxene price FOB US$894/t2 average over LOM
  • Rutile price FOB US$1,118/t2 average over LOM
  • Zircon price FOB US$1,469/t average over LOM
  • Zircon price FOB US$1,043/t contained zircon in zircon concentrate product.

Conclusion: The Nedbank CIB financing is good news for Strandline and for Tanzania which has been seen as a difficult for a while.

The financing will hopefully provide a template for other companies looking to build mines in the region and for further mineral sands project financing.

Nedbank is a leading mine financing bank based in South Africa with extensive expertise in the East Africa.

 

Virginia Energy Resources (CVE:VUI) C$0.1, mkt cap C$11m – US Supreme Court upholds Virginia State ban on Uranium

  • Virginia Energy Resources have been firmly put in their place by the US Supreme Court which has elected to uphold the Virginia State ban on Uranium Mining.
  • The company claims to have the largest uranium resource at Coles Hill in North America.
  • The total indicated mineral resource at Coles Hill is 120mt grading 0.056% U3O8 with a cutoff grade of 0.025%.
  • The PEA on Coles Hill which was done many years ago quotes a cash cost of $30.7/lb with economics done at $64/lb.
  • Uranium prices are at US$24.4/lb so its interesting that the PEA has not been re-run at this lower price, but they why would you want to spoil the story with a bunch of negative numbers?
  • The share price and market capitalisation of the stock indicates that permitting this mine was always going to be a very long shot as the Virginia state looked like it was throwing everything at in to prevent the mine development. That is despite pressure from some leading politicians to get the US Supreme Court to overturn the Virginia State ban.
  • While we are normally pro-mining at SP Angel we do support the Virginia State in this one. The deposit is not critical to national security and there is plenty of uranium to be mined in less sensitive locations than Coles Hill.
  • Other states in the US are far more supportive of mining and the recent decision by the State of Minnesota to allow the development of Polymet’s Northmet mine heralds a new era for state support and mine development in the US.
  • It is our view that investors should not be overly concerned about the US Supreme Court upholding the Virginia State ban on Coles Hill. It looks like the right decision in this case and should not set an anti-mining precedent for the US as most other states appear significantly more supportive of sensible mine developments.

 

Yellow Cake (LON:YCA) 210.5p, Mkt Cap £185.7m – Annual results

  • Specialist uranium company, Yellow Cake, report profit after tax of US$29.7m for the maiden annual report period ending 31 March 2019.
  • Following successful US$200m capital raise in an oversubscribed IPO on the AIM market in July 2018, the company have purchased 8,441,385lb U3O8 from National Atomic Company Kazatomprom at an average cost of US$21.1/lb against a spot price as the end of March 2019 of US$25.75/lb.
  • Yellow Cake have the strategic advantage of long-term contract with NAC Kazatomprom; the largest and one of the lowest cost producers of uranium globally. The company provides exposure to uranium markets without the exploration, development, mining or processing risks associated with an operating company.
  • Fundamentals of the uranium market have improved, with the spot price increasing 13% from USD22.85/lb at IPO to USD25.75/lb at the end of March 2019.
  • As a result value of the underlying U3O8 has increased by 22% to US$217.4m relative to the acquisition cost of US$178.2m.
  • Since the end of March 2019, the Company has raised an additional £25.9m (approximately US$33.9m) through a placing of shares and acquired an additional 1.175m lb uranium.
  • Net asset value as at 31 May 2019 of US$2.70 (£2.14) per share, or US$238.2m, consisting of 9,616,385 lbs of U3O8 valued at a spot price of US$24.10/lb, a derivative liability of US$2.8m and other net assets of US$9.2m.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

 

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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