SP Angel – Morning View – Monday 29 07 19
Metals rangebound ahead of US-China trade talks this week
MiFID II exempt information – see disclaimer below
Aura Energy* (LON:AURA) – Tiris uranium feasibility study
Cora Gold* (LON:CORA) – High grade intersections at Zone A
Katoro Gold (LON:KAT) –Tanzanian gold projects
Kodal Minerals* (LON:KOD) – Fundraising - £575,000 to progress the Bougouni lithium project
Power Metals Resources* (LON:POW) – Katoro Gold exploration projects in Tanzania
Solgold* (LON:SOLG) – Ingo Hofmaier joins SolGold as Executive General Manager
Chinese exports of rare earths to the US drop 3.9%mom heightening concerns that Beijing may limit supply of rare earth products as part of the trade war with Washington, Reuters reports.
- The news follows US President directions for the Pentagon to find better ways to procure samarium-cobalt rare earth permanent magnets, used in specialty motors, arguing that the nation’s defence would suffer without adequate supplies.
Earth's Core Has Been Leaking for 2.5 Billion Years and Geologists Don't Know Why. (Livescience.com)
- A new study shows the innermost part of our planet is leaking into mantle plumes some of which can end up at surface.
- See: https://www.livescience.com/65968-earth-leaky-core.html?utm_source=ls-newsletter&utm_medium=email&utm_campaign=20190728-ls
Tesla looking for a location for a new European factory
- Tesla is closing in on a location for the European Gigafactory with the decision to be announced by the end of this year.
- “Our plan is to source cars to greater Europe area from Fremont, California, until we have the European Gigafactory operational… but… its probably 2021 before we have an operation Gigafactory in Europe,” Elon Musk said.
- The Company currently has an assembly and testing factory in Tilburg, Netherlands.
- Several European countries have even launched campaigns to try to attract Tesla in their home market.
- Last year, Musk highlighted Germany as the “leading choice” for a factory in Europe while also suggesting “the German-French border makes sense” for a factory near the Benelux countries.
Dow Jones Industrials
+0.19%
at
27,192
Nikkei 225
-0.19%
at
21,617
HK Hang Seng
-1.48%
at
27,978
Shanghai Composite
-0.10%
at
2,942
FTSE 350 Mining
+0.10%
at
19,947
AIM Basic Resources
-0.24%
at
2,122
Economics
US – US and Chinese negotiators are due to meet in Shanghai on Tuesday.
- The FOMC is expected to cut rates by 25bp to 2.00-2.25% on Wednesday.
- GDP numbers released on Friday showed economic growth slowed in Q2, although, the pace came in better than market expected.
- Strong consumption (+4.3%) accounted for the largest share of growth with business investment, residential investment and net exports all weighing on numbers.
- Net exports subtracted 65bp from growth while destocking further deducted 86bp.
- GDP (annualised): 2.1% v 3.1% in Q1/19 and 1.8% forecast.
China – Industrial profits slump 3.1%yoy in June extending YTD decline to -2.4% from -2.3% recorded in five months to May.
- Weakening earnings put a pressure on business investment and hiring.
- Private companies’ earnings are down 6.0% in H1 while state owned firms’ profits are down 8.7% over the same period.
- Steel mills’ earnings were down 21.8% in H1 reflecting increasing cost of raw materials while iron ore producers registered a 327%yoy increase in profits.
- Earnings of auto makers remained weak with profits down 24.9%yoy in H1.
Hong Kong – violence escalates in Hong Kong
- Pro-democracy demonstrators continue to clash with Police in their appeal for full democracy for Hong Kong and autonomy from China.
- Beijing is unlikely to tolerate the demonstrations for much longer as the demonstrations risk spreading to other regions within mainland China.
- Beijing is unlikely to send in troops and may simply continue with using police to arrest the demonstrations’ leaders.
UK – The pound is off 0.4% this morning on increasing risks of a no-deal Brexit on 31 October.
- “No deal is now a very real prospect, and we must make sure we are ready… we still hope they will change their minds, but most operate on the assumption that they will not,” Michael Gove, a top aide of PM Johnson, wrote in the Sunday Times.
- Special cabinet of six senior minister who oversee Brexit preparations include Michael Gove, Chancellor Sajid Javid, Foreign Secretary Dominic Raab, Brexit Secretary Steve Barclay and Attorney General Geoffrey Cox.
South Africa – Fitch cut its nation’s credit outlook to ‘negative’ from ‘stable’ citing increasing debt levels and flagging growth potential last week.
- The agency left its rating a BB+ on both local and foreign-currency debt.
- “Fiscal metric have deteriorated significantly due to underperformance of revenue, which is expected to worsen in the current fiscal year as growth has turned out to be weaker than expected,” Fitch wrote.
- The currency is up 0.2% this morning following a sharp sell off on Friday (-1.4%).
- Moody’s is currently the only credit rating running an investment grade estimate on the South African debt (Baa3) with both S&P and Fitch ranking sovereign debt in the junk category.
DRC – Two workers from the Banro Corp gold mine in the east DRC province of Maniema have been kidnapped by gunmen on Sunday, an army spokesman said.
Ship seizures are the new normal
- Ship seizures are the new normal according to shipping specialists .
Currencies
US$1.1122/eur vs 1.1139/eur last week. Yen 108.62/$ vs 108.63/$. SAr 14.306/$ vs 14.165/$. $1.235/gbp vs $1.244/gbp. 0.691/aud vs 0.694/aud. CNY 6.889/$ vs 6.879/$.
Sterling – US dollar rate heads towards 1.11 as Brexit sentiment pushes sterling lower
- A relatively strong US dollar driven higher by better than expected Q2 GDP figures, though tempered by the prospect for Fed rate cuts is partly to blame.
- Brexit sentiment is further weakening sterling as PM Boris Johnson pledges to deliver on Brexit by 31 October.
Commodity News
Precious metals:
Gold US$1,419/oz vs US$1,420/oz last week - Gold – prices hold steady as market await Fed briefing
- Better than expected US Q2 economic performance may cause the Fed to hold back on the rate of rate cuts expected this year.
- If the Fed signals potential for more than two 25bp rate cuts this year then gold prices will likely jump higher.
- Much may depend on US trade negotiations with China with any further delays in a trade settlement likely to force rates lower in China and the US.
Gold shipment stolen at Sao Paulo airport
- A shipment of 719kg ($32m) of gold was stolen from an airline at Sao Paulo airport following its delivery by Brink’s Co..
Gold ETFs 75.2moz vs US$75.2moz last week
Platinum US$869/oz vs US$865/oz last week
Palladium US$1,534/oz vs US$1,530/oz last week
Silver US$16.41/oz vs US$16.44/oz last week
Base metals:
Copper US$ 5,958/t vs US$5,976/t last week
Aluminium US$ 1,809/t vs US$1,816/t last week
Nickel US$ 13,945/t vs US$14,120/t last week
Zinc US$ 2,454/t vs US$2,423/t last week
Lead US$ 2,054/t vs US$2,091/t last week
Tin US$ 17,700/t vs US$17,760/t last week
Energy:
Oil US$63.1/bbl vs US$63.5/bbl last week
Natural Gas US$2.181/mmbtu vs US$2.227/mmbtu last week
Uranium US$25.70/lb vs US$25.65/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$114.3/t vs US$112.5/t
Chinese steel rebar 25mm US$607.8/t vs US$611.1/t
Thermal coal (1st year forward cif ARA) US$68.5/t vs US$69.4/t
Coking coal futures Dalian Exchange US$212.9/t vs US$213.2/t
Other:
Cobalt LME 3m US$26,000/t vs US$28,000/t
NdPr Rare Earth Oxide (China) US$42,027/t vs US$42,083/t
Lithium carbonate 99% (China) US$8,783/t vs US$8,940/t
Ferro Vanadium 80% FOB (China) US$38./kg vs US$37.5/kg
Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg
Tungsten APT European US$210-225/mtu vs US$210-225/mtu
Battery News
Company News
Aura Energy* (LON:AURA) 0.725p, Mkt Cap £9.0m – Tiris uranium feasibility study
- Aura Energy has released a summary of its definitive feasibility study DFS (available on the company’s website at https://www.auraenergy.com.au/investor/ASX%20Announcements/2019/Tiris%20Uranium%20DFS%20Complete.pdf ) on the 85% owned Tiris uranium project in Mauritania (Mauritania Government – 15%). The study, builds on a scoping study completed in 2014 and a subsequent, May 2017, feasibility study prepared to support the application for an exploitation licence which was awarded for the Oued El Foule and Ain Sder tenements in February 2019.
- Based on a contract price of US$60/lb U3O8 and a capital cost of US$62.9m, the study envisages development of the Tiris project generating an after tax NPV8% of US$89.9m and an after tax IRR of 28%.
- The study envisages mining an average of 1.25mtpa of ore at an overall grade of 364ppm U3O8 (0.036%) over a 15 years mine life in order to produce an average of 823,000lbs of U3O8 annually at an average cash operating cost of US$25.43/lb and all-in-sustaining (AISC) cost of US$29.81/lb.
- Mineral resources for the deposit, at a cut-off grade of 200ppm (0.02%) are 50.9mt at an average grade of 345ppm with approximately 30% of the overall tonnage classed as measured/indicated.
- The study is based on the use of contract mining and points out that the “uranium mineralisation largely lies within 3 to 5 metres of the surface in a relatively soft, free-digging material … [and that] … Based on trenching and metallurgical test work to date, this does not require blasting before mining, or crushing prior to beneficiation”.
- Compared to the 2014 scoping study, which estimated capital costs of US$45.0m and operating costs of US$29.46/lb, the DFS shows an increase of approximately US$18m in capital costs, offset by a 14% decline in unit operating costs.
- Analysis presented within the Executive Summary of the DFS highlights the long-term nature of uranium sales contracts and comments that, “World wide uranium consumption increased from 80,900 tonnes in 2017 to 84,300 tonnes in 2018, an increase in consumption of 4.2% year-on-year.”
- The analysis points out that “There are early signs of a sustained recovery in the uranium price with gains since September 2018” and mentions that a number of new reactors are coming on line in China and with other positive moves including Japan’s decision to restart the Tokai nuclear facility Russia’s announcement of the start of the Leningrad Phase II and Rostov nuclear plants, and clearance to continue construction of the Vogtie No3 and No 4 reactors in the US, “The scale of construction across Asia is forecast to increase consumption by 10,000 tonnes by 2020.”
Conclusion – The DFS is an important milestone for the Tiris uranium project and comes at a time when uranium demand is increasing in response to new nuclear reactors in Asia, Russia and the US
*SP Angel act as Broker to Aura Energy
Cora Gold* (LON:CORA) 5.8p, Mkt Cap £5.8m – High grade intersections at Zone A
- Results from the two RC drill holes returned wide high grade intersections of mineralisation at 90-100m depth at Zone A, Sanankoro.
- Intersections include:
- 27m at 2.43g/t from 92m including 6m at 4.24g/t (from 92m) and 7m at 4.16g/t (from 104m);
- 36m at 2.40g/t from 75m including 9m at 3.30g/t (from 88m) and 8m at 4.96g/t (from 103m).
- Drilling confirms the presence of a northerly plunging higher grade shoot over a strike length of around 250m remaining open at depth.
- A second, smaller shoot is also suggested at the southern end of Zone A.
- The Company is expecting to release assay results from a 212m orientated core hole at Zone A testing sulphide mineralisation at depth in due course.
- Results are part of the completed 2019 field season 6,500m drilling programme to be incorporated in the first mineral resource estimate on Sanankoro.
Conclusion: Good drilling results confirm the presence of oxide mineralisation within the 110m deep horizon lending itself for a potential open pit mining operation. Additionally, there is a potential for mineralisation to continue at depth with results from sulphide mineralisation target drilling to be released in due course.
*SP Angel acts as Nomad and Broker to Cora Gold
Katoro Gold (LON:KAT) 1.0 pence, Mkt Cap £1.7m –Tanzanian gold projects
(Katoro holds 75% of the Haneti nickel project alongside Power Metal Resources plc* which holds 25%)
- Katoro Gold reports that in the light of recent gold market strength it “has received expressions of interest with regard to the acquisition or joint venture” of its Tanzanian gold projects at Imweru and Lubando “in the Lake Victoria Goldfields of northern Tanzania”.
- As a result, the company is to investigate “the scope and cost for further exploration work programmes at Imweru and Lubando … [as] … The company believes the best opportunity to create near term value is to build the Projects’ resource inventory with an initial target of one million ounces, which represents a modest 32% increase in the existing Resource”.
- Commenting on the status of the more advanced project, the company also says that “The Imweru prefeasibility study ("PFS") can be finalised expeditiously when required, however firstly, we continue our engagement with the Tanzanian Ministry of Minerals to consider practical ways in which the Imweru PFS can be completed and relevant mining approvals sought, to allow production to become, once again, a primary focus for the Company”.
Conclusion: The recent gold price rise has stimulated renewed interest in expanding the resource base of Katoro Gold’s Tanzanian gold exploration projects - we await further news with interest.
*SP Angel act as Nomad and broker to Power Metal Resources plc formerly African Battery Metals
Kodal Minerals* (LON:KOD) 0.087p, Mkt Cap £7.2m – Fundraising - £575,000 to progress the Bougouni lithium project
- Kodal Minerals reports that it has raised £575,000 by placing an additional 718.75m shares at a price of 0.08p/share in order to help complete the Environmental and Mining licence applications for the Bougouni lithium project as well as continuing exploration and expansion of the project.
- The additional shares represent “approximately 8.0 per cent. of the Company's issued ordinary share capital as enlarged by the Placing.”
- Kodal Minerals’ largest shareholder, Suay Chin, subscribed for an additional 62.5m shares in the issue leaving it with 25.65% of the company.
- The company highlights that, as a result of the continuing work at Bougouni, it expects to be making announcements on progress on a number of subjects including the submission of the licence applications, bulk sample testing of the lithium bearing pegmatite in China as well as additional metallurgical testing, open-pit mine design and additional assay results from drilling work completed in June.
- Bernard Aylward, CEO, confirmed the continuing progress on the projects and that “we have recently been in discussions with the Mali Department of Environment regarding the submission of our completed ESIA report. We have completed the translation of the majority of the reports into French, and are now finalising the overarching submission for the application that we expect to lodge by mid-August”. Mr. Aylward also confirmed that the approval process is likely to take up to 45 days.
Conclusion: The additional funding allows Kodal Minerals to continue with the licence applications for Bougouni as well as the continuing technical studies needed for future project development. We look forward to continuing news on the progress of both the licensing and technical work.
*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.
Power Metals Resources* (LON:POW) 0.525p, Mkt Cap £1.9m – Katoro Gold exploration projects in Tanzania
Formerly African Battery Metals (LON:ABM)
- Power Metals Resources has alerted the market to the announcement today by Katoro Gold of its review of its Tanzanian gold projects at Imweru and Lubando where it is evaluating the potential for further exploration to expand the existing resource inventory by 32% to 1m oz of gold
- “Power Metals Resources holds 10,000,000 new ordinary shares of 1 pence each representing 5.95% of Katoro Gold's issued share capital. In addition, POW also holds 10,000,000 warrants in Katoro Gold exercisable at 1.25p per share (2,500,000 warrants expiring on 15 March 2022 and 7,500,000 warrants expiring on 15 May 2022).”
- Katoro Gold has reported that in the light of recent gold market strength it “has received expressions of interest with regard to the acquisition or joint venture” of its Tanzanian gold projects at Imweru and Lubando “in the Lake Victoria Goldfields of northern Tanzania”.
- As a result, Katoro Gold is to investigate “the scope and cost for further exploration work programmes at Imweru and Lubando … [as] … The company believes the best opportunity to create near term value is to build the Projects’ resource inventory with an initial target of one million ounces, which represents a modest 32% increase in the existing Resource”.
- Commenting on the status of the more advanced project, the Katoro Gold also says that “The Imweru prefeasibility study ("PFS") can be finalised expeditiously when required, however firstly, we continue our engagement with the Tanzanian Ministry of Minerals to consider practical ways in which the Imweru PFS can be completed and relevant mining approvals sought, to allow production to become, once again, a primary focus for the Company”.
Conclusion: Via its 10m shares in Katoro Gold Power Metals Resources could be a beneficiary of exploration success at Katoro Gold’s exploration projects in Tanzania where renewed exploration is under review in order to lift the resource inventory to 1m oz.
*SP Angel act as broker to Power Metals Resources (formerly African Battery Metals)
Solgold* (LON:SOLG) 30p, Mkt Cap £555m – Ingo Hofmaier joins SolGold as Executive General Manager
- Ingo Hofmaier has joined SolGold from investment bank, Hannam & Partners.
- Hofmaier formerly worked for Rio Tinto on the $5bn takeover of Ivanhoe Mines, on the integration of Riversdale and on the jv between Rio Tinto and Chinalco.
- Question is, why is SolGold bringing in a deal-maker and expert corporate financier like Hofmaier?
- SolGold announced its intention on 31st January to make an offer to acquire Cornerstone Capital and consolidate its holding in the giant Cascabel project in Ecuador.
- Cornerstone dismissed the offer on 8th February with SolGold reporting that they were finalising the documentation for the offer on 26th March….
- BHP and Newcrest are also significant shareholders and are seen as stalking SolGold following significant cash injections.
- SolGold’s recent publication of a Preliminary Economic Assesment on the Cascabel project brings the team closer to potentially having to fend off a bid for the consolidated entity.
- BHP and Rio Tinto are earning substantial cash from the sale of hundreds of millions of tonnes of iron ore at >$100/t in recent months and can easily afford to acquire projects like Cascabel for future construction.
- Newcrest are expert in large-scale block cave mining as is Rio Tinto which is the operator at the major Oyu Tolgoi copper project in Mongolia which was formerly owned by BHP
- Copper deficit: The world’s major copper mines in Chile are running out of resource with few new discoveries for their replacement.
- Given that it can take 5-10 years to plan and build a major copper mine of this sort of scale the majors know they need to plan now to stay ahead in the next generation of copper mines.
Conclusion: SolGold’s Cascabel project offers one of just a few large-scale, copper projects while its large exploration area in Ecuador also offers potential for further discovery.
Hofmaier’s move to SolGold highlights the significance of the Cascabel project and its potential for acquisition.
*SP Angel acts as broker and advisor to Solgold. SP Angel have raised funds for SolGold on eight previous occasions.
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
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*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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