SP Angel – Morning View – Monday 12 08 19
UK power outage highlights need for grid-scale Li ion and Vanadium batteries
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Kodal Minerals* (LON:KOD) – Seeking clarity on funds from SVS
Shanta Gold (LON:SHG) – Interim results keep Shanta Gold on track to meet production and cost guidance
Thor Mining (LON:THR) – Metallurgical drilling results from Molyhil
UK power outage cuts critical services and highlights need for grid-scale batteries or additional capacity to balance wind and solar power
Lithium-ion and Vanadium Redox Flow Batteries ‘VFRBs’ could contribute a key part of the solution for grid balancing and backup power
Friday afternoon saw a significant power failure in many parts of the UK as the network automatically cut power to major parts of the country.
The outage was caused by the failure of a 727MW gas-fired power generator alongside a major 1.2GW wind-farm off the East coast.
While other generators scrambled to make up for the near 2GW power loss the 15 minute incident triggered widespread power cuts causing major disruption on trains and at one hospital where the back-up generators failed to work. Many consumers were also left without power.
The windfarm possibly went offline due to unusually high-gusting winds in which windfarms cannot operate.
The issue highlights the risk of moving to wind and solar power without adequate back up power supplies.
The UK grid wanted to tender mixed backup power but the EU halted the tender process in a court ruling last year.
The EU suspended the UK Capacity market auction which provides for back-up electricity generation and opened a investigation into its compliance with EU state aid rules
The next power tender / auction has been indefinitely postponed pending the EU court ruling
The UK 2016 Capacity Market auction for 2020/21 period permitted 500MW of battery projects.
Capacity market prices have fallen from £22.50/kw per year to £8.40/kw per year for 50.4GW procured in 2018 for 2021/22 winter.
Battery storage was awarded only 153MW out of 1.344GW that pre-qualified. Arenko won 15-year contracts for 73MW
UK has 900,000 homes with solar installations. The UK FIT ended in 2016. Smart energy storage is growing strongly e.g. products such as Powervolt.
UK Balancing Mechanism market worth £350m pa – this for Distributed Energy Resources (DERs). The market is expected to grow 179% to 145MW
The UK may look to install sizeable grid-scale battery power capacity with Lithium-ion and Vanadium Redox Flow Batteries ‘VFRBs’ potentially offering robust, credible and reliable source of back-up and distributed power to balance the imperfect supply of wind and solar power generation.
China EV sales decline for first time in 2 years
Monthly sales of ‘new energy vehicles’, a category that includes both hybrid and fully electric cars, declined by 4.7% yoy in July to 80,000 vehicles, per the China Association of Automobile Manufacturers (Financial Times).
The decline represents the first decrease in NEV sales for two years, causing the Association to cut its sales forecast for 2019 from 1.6m to 1.5m cars.
Falling NEV sales have been attributed in part to Chinese government cuts to NEV subsidies announced in March. In June, the final month before the NEV subsidy rules were applied, NEV sales jumped as buyers scrambled to take advantage of cheap prices.
Declining sales have also been attributed to high-emissions car owners taking full advantage of a government swap programme to trade-in for NEVs.
Cuts to government subsidies and tailing off of trade-ins increase the likelihood of consolidation of the EV market, as dozens of EV manufacturers compete to find a foothold on the back of strong market growth in the past few years.
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
US-China trade war data favours China
US and Chinese export data suggests US tariffs are not having their desired effect (Financial Times).
Between July 2018, when US tariffs were first imposed, to the end of June this year, US exports to China slumped by US$33bn, or 21% of the total.
In contrast, Chinese exports to the US grew by US$4bn, or 1% of the total, in the same period.
The growing trade surplus appears to suggest tariffs are having the opposite effect to that intended by the Trump administration.
The data disparity may reflect the reluctance of US consumers and manufacturers to switch away from Chinese made goods.
Europe - Continued uncertainty in Europe
Italy’s Matteo Salvini’s request for a no-confidence vote on the back of a breakdown in the working majority of Italy’s ruling coalition may be delayed, following doubts expressed by Matteo Renzi, a former PM with strong influence over the centre-left Democratic Party and senate (Reuters).
Snap elections in Italy could conflict with Italy’s obligation to finalise the first draft of a budget that has to be submitted to the EU by the end of September. Italian President Mattarella, who has exclusive power to dissolve parliament, has insisted the budget must be finalised, suggesting any snap election may be pushed back.
Debates are underway in Germany as to the future of the country’s Schwarze Null, or black zero, policy commitment to balanced budgets. The policy has faced increasing criticism across the political spectrum, with many urging Berlin to increase spending and boost the German economy (Financial Times).
German chancellor, Angela Merkel is expected to unveil an ambitious climate package next month, heightening concerns over the future of Germany’s budget policy. Plans to tackle climate change could cost €30bn or more, raising the possibility of government issued “green bonds” meant to raise funds specifically for tackling climate change, rather than the budget generally.
Senior members of the government coalition are standing firm however, with the finance ministry insisting that the necessary funds to fight climate change can be raised while maintaining a “solid budget approach”, per a recent statement.
HK – authorities cancel all flights to airport as protestors take over airport
The demonstrations in HK are taking a new turn with protestors moving to protest in the main airport.
The protests have the potential to escalate and to spread into the mainland and to further disrupt the HK and mainland economies.
Argentina – Macri surprise election defeat
Argentine peso expected to fall 25%
US$1.1170/eur vs 1.1219/eur yesterday. Yen 105.49/$ vs 106.09/$. SAr 15.339/$ vs 15.015/$. $1.206/gbp vs $1.218/gbp. 0.678/aud vs 0.677/aud. CNY 7.066/$ vs 7.044/$.
Gold US$1,503/oz vs US$1,502/oz yesterday
Gold ETFs 77.2moz vs US$77.1moz yesterday
Platinum US$857/oz vs US$864/oz yesterday
Palladium US$1,430/oz vs US$1,426/oz yesterday
Silver US$16.86/oz vs US$17.02/oz yesterday
Copper US$ 5,799/t vs US$5,768/t yesterday
Aluminium US$ 1,789/t vs US$1,776/t yesterday
Nickel US$ 15,230/t vs US$15,730/t yesterday
Zinc US$ 2,278/t vs US$2,270/t yesterday
Lead US$ 2,085/t vs US$2,064/t yesterday
Tin US$ 16,900/t vs US$16,910/t yesterday
Oil US$58.4/bbl vs US$57.4/bbl yesterday
Natural Gas US$2.122/mmbtu vs US$2.108/mmbtu yesterday
Uranium US$25.30/lb vs US$25.30/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$86.0/t vs US$92.2/t
Chinese steel rebar 25mm US$555.7/t vs US$564.4/t
Thermal coal (1st year forward cif ARA) US$65.1/t vs US$66.2/t
Coking coal futures Dalian Exchange US$207.5/t vs US$208.0/t
Cobalt LME 3m US$28,500/t vs US$28,500/t
NdPr Rare Earth Oxide (China) US$43,517/t vs US$44,456/t
Lithium carbonate 99% (China) US$8,279/t vs US$8,296/t
Ferro Vanadium 80% FOB (China) US$40.0/kg vs US$40.0/kg
Transport secretary announces extra £2.5m for EV chargepoints
Transport Secretary Grant Shapps today announced an additional £2.5m to fund more than 1,000 new chargepoints on residential streets (FleetNews).
The Transport Secretary is now doubling funding for local authorities in the hope of accelerating the uptake of EVs in the UK as part of the government aim for net zero emissions by 2050.
There are currently 13,500 chargepoints in the UK, around half the number required in order to service the estimated size of the UK EV fleet by 2030, according to analysis by Deloitte.
Acacia Mining (ACA LN) 242.4p, Mkt Cap £994m – Approval to resume gold shipments from North Mara
Acacia Mining reports that the Tanzanian Ministry of Minerals has authorised the company to resume gold exports from its North Mara operation, “subject to its adherence to the export procedure”.
Permission to export was rescinded in July pending the outcome of an investigation. The company discloses that the Ministry’s letter “also states that the Mining Commission believes that certain provisions of the Mining Regulations, 2010 were violated and directs the North Mara mine to submit a feasibility study report and current mine plan for its approval by 16 August 2019.”
Conclusion: The ability to resume export of gold from North Mara is positive, however, it appears that the mine is continuing to attract the scrutiny of the authorities with the ruling that the feasibility study and current mine plan are to be submitted for review by 16th August.
Avesoro Resources (ASO LN) 59p, Mkt Cap £48.1m – Youga operations suspended
On Friday afternoon, Avesoro Resources reported that, following a previously announced incident involving an influx of artisanal miners at its Youga mine in Burkina Faso, the company has decided to suspend all processing and mining at Youga.
The company reports that its CEO, Serhan Umurhan is travelling to the mine “to assess the situation and determine when operations can recommence”.
In the meantime, “as a precaution, all Company staff at Youga have been relocated to Ouagadougou. Government security forces will remain on site to protect the Company’s assets.”
Bluejay Mining* (JAY LN) 6.5p, Mkt Cap £56m – Bulk sample for Rio Tinto Iron & Titanium underway
Included in MSCI index (Dundas Ilmenite project, Greenland, 100% owned)
Bluejay Mining report progress in the preparation and transport of the 5,000t smelter test bulk sample for Rio Tinto Iron & Titanium ‘RTIT’.
The bulk sample is ‘fully funded’ and management have appointed shippers for the bulk sample which is destined for one of RTIT’s smelters in Canada.
The shipping process also provides a dry run for the logistics to and from the Dundas site at Moriusaq in Greenland.
Photos of the site show stockpiles of high-grade ilmenite mineral sand along with the construction of a new causeway / barge landing-ramp for ship loading.
The Dundas mine site is close to the shore line and a deep-water into Baffin Bay, the Labrador Sea, the North Atlantic and Canada.
Ship loading and departure is estimated to start in the next four weeks.
Three shipping companies have tendered for the ship loading with the shipping contract awarded to Pangaea Logistic Solutions Ltd, ‘PLS’.
A US cargo and shipping management company, MID-SHIP Group LLC is to select the operator for the ship loading.
Guy J. Bailey Ltd from Newfoundland is to manage the deck-barge loading platform operation at Moriusaq. The Newfoundland company is reported to have an outstanding reputation and long-established relationship to the mining and quarry industry in Canada.
The Greenland government has granted an export permit for 40,000t run-of-mine material which is being mined at the Dundas mine site in Greenland.
It is possible that further material may be shipped under this export permit given its scale.
Conclusion: Bluejay appear well supported in their organisation of the bulk sample to RTIT in Canada and we look forward to further news on the trans-shipping of the high-grade ore within the next four weeks.
*SP Angel act as nomad to Bluejay Mining. *SP Angel have visited the Dundas, Itelak ilmenite sands project in Greenland.
Kodal Minerals* (KOD LN) 0.07p, Mkt Cap £6.5m – Seeking clarity on funds from SVS
Kodal Minerals reports that, following SVS Securities being placed in special administration on 5th August, it is seeking clarity from the administrators regarding settlement of the £200,000 tranche of its recent fund-raising from SVS Securities commitment to purchase 250m shares in the company.
“The Company, via its broker, will be seeking clarification from the special administrators of SVS as to whether they intend to comply with SVS's payment obligations pursuant to the Placing”.
The company states, however, that it “will be continuing to advance its development of its Bougouni lithium project in Mali … including the submission of its Environmental and Social Impact Assessment, completion of metallurgical test work and mine design engineering leading to its application for a mining licence in the second half of 2019”.
Kodal Minerals does, however, say that it may “delay the exploration and expansion drilling it was planning to undertake in October 2019 following the rainy season”.
Conclusion: Kodal Minerals confirms that it is pressing ahead with work for the mining licence application at Bougouni though uncertainty over funds from SVS Securities, now in administration, may delay some of the drilling planned for October.
*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.
Shanta Gold (SHG LN) 9.05p, Mkt Cap £71.3m – Interim results keep Shanta Gold on track to meet production and cost guidance
Shanta Gold reports that it remains on course to achieve both its full year production and cost guidance of 80-84,000oz of gold production at all-in-sustaining costs in the range US$740-780/oz.
Reporting an after-tax loss of US$5.7m for the 6 months to 30th June 2019 (2018- US$7.1m profit) the company highlights reduction in net-debt to US$26.9m from US$31.5m “following US$8.8 m of principal repayments on borrowings and a US$4.9 m partial buyback of Convertible Loan Notes during the Period”.
Adjusted EBITDA of US$22.6m is in line with the US$22.7m in H1 2018.
Working capital was affected by a US$4.2m increase in Trade and other receivables to US$29.5m mainly as a result of “the increase in VAT receivable owing to the Company, which at the end of June 2019 stood at US$25.3 m (converted from Tanzanian Shillings at June 30th closing rate). The Company's most recent VAT refund was received in November 2017 and amounted to US$3.4 m, comprising US$1.9 m offset against corporate taxes payable in 2016 and 2017 and a cash payment to the Company of US$1.5 m.”
Commenting on the results, Eric Zurrin, Chief Executive, said that “In H1 2019 we have continued to see steady operational performance at the New Luika Gold Mine and remain on track to deliver both full-year production and costs within guidance”.
As previously announced, the company is moving ahead with plans to list its Singida mine development on the Dar es Salaam Stock Exchange. The company plans a US$20m equity raising for the “upfront capital to bring the Project into production and provide additional funds for exploration “while retaining a 51% interest in Singida”; a move which Mr. Zurrin described as “offering Tanzanians a rare investment opportunity within their own mining sector as we build Shanta's second mine in Tanzania.”
Thor Mining (THR LN) 0.525p, Mkt Cap £4.3m – Metallurgical drilling results from Molyhil
Thor Mining reports the results of the second of two holes drilled to obtain metallurgical information from the down plunge part of the Yacht Club lode at its Molyhil tungsten-molybdenum project in the Northern Territory, Australia.
As with results from the previous hole, “The holes were designed specifically for production of concentrate samples and will not contribute to the mineral resource estimate”. The holes are drilled at 85mm diameter in order to obtain an adequate volume of sample material for metallurgical testing. In our opinion, the increasing metallurgical complexity at Molyhil which is emerging as a result of adding copper mineralisation to the previously reported tungsten and molybdenum mineralisation will require a thorough investigation to establish an appropriate metallurgical flowsheet and it is likely that further metallurgical drilling will be required in the future.
Highlights from hole 19DD001 reported today are:
A 3.5m wide intersection averaging 1.32% tungsten trioxide from a depth of 9.5m; and
A 10m wide intersection averaging 0.32% copper from a depth of 44m; and
Another 10m wide intersection averaging 1.32% tungsten trioxide from a depth of 53m; and
A 5m wide intersection averaging 1.74% tungsten trioxide from a depth of 76m; and
A 7m wide intersection averaging 1.58% tungsten trioxide from a depth of 88m
Commenting on the results, Executive Chairman, Mick Billing, said that “The continued confirmation of copper mineralisation at potentially economic levels is also very pleasing. Thor has commissioned a review of the resource estimate for Molyhil to include this, however until that work is complete, we can ascribe no additional value for any potential copper at this time”.
Currently the mineral resource estimate for Molyhil contains 4.71m tonnes classified as indicated and inferred at an average grade of 0.28% tungsten trioxide and 0.13% molybdenum.
Conclusion: Potentially interesting copper mineralisation encountered at Molyhil is leading to a review of the mineral resource estimates to include copper as well as the existing tungsten and molybdenum mineralisation. We await the results with interest.
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
James Mills -0203 470 0486
Richard Parlons – 0203 470 0472
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
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35-39 Maddox Street London
*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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