SP Angel – Morning View – Friday 16 08 19
Central bank buying, de-dollarisation, Argentine peso collapse, HK and negative bond yields help gold higher
Nickel edges record highs on expedited Indonesia export bans
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AfriTin Mining* (LON:ATM) – Uis tin project drill results
OreCorp (ASX:ORR) - Raises A$13.5m to consolidate its ownership of the Nyanzaga gold project in Tanzania
Solgold* (LON:SOLG) – Annual report published
Gold US$1,514/oz – Central bank buying, de-dollarisation, Argentine peso collapse, HK and negative bond yields help gold higher
Increased central-bank purchases from China to Russia and Poland continue to buttress consumption at times of rising prices, with the de-dollarization story gaining traction as emerging markets “don’t want to own dollars with sanction risk, geopolitical risk, trade war risk out there”, according to global head of commodities research at Goldman Sachs Group.
Global economic worries fueled by heightened US-China trade tensions are underpinning haven demand, with bullion futures driving towards a sixth straight weekly gain, the longest run since 2016.
Institutional investors are also raising ETF demand, with holdings climbing near the highest since 2013, according to data compiled by Bloomberg.
China has also severely restricted imports of gold since May despite having liberalized the gold market in recent years (Reuters).
Chinese solar power is now reported to be cheaper than grid supply (Nature Energy, electrek)
A new paper published in Nature Energy reports that solar power is now cheaper in China than grid electricity.
Solar power costs have been driven down by large scale production reducing costs, state support for power input prices for solar panel manufacturers and some technological innovation. In effect state sponsorship has made the cost of solar panels cheap enough to undercut conventional state power costs.
The result is that China is now the world’s largest manufacturer and installer of solar panels and generator of solar power.
We recommend western consumers take advantage of the low cost of these effectively subsidised solar panels while China can afford to maintain these subsidies.
We refer buyers to the Sinovoltaics PV manufacturing Ranking report and Altman Z score before buying panels for large-scale solar instillations.
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
Malaysia’s economy growth faster than forecast
Malaysia’s economy grew 4.9% yoy in Q2 according to the central bank today, making it the first major southeast Asian economy to report an acceleration from January to March (Reuters).
GDP growth in Q2 outperformed the expectations of Reuters’ pollsters, and was the strongest in five quarters.
The resilience of Malaysia’s economy shows a weathering of regional headwinds, though trade slowdown, due in part to the US-China trade war, is likely to take its toll later in the year.
ECB stimulus may exceed expectations
The ECB is expected to announce a package of stimulus measures at its next policy meeting in September (WSJ).
Olli Rehn, a member of the ECB’s rate-setting committee, told the WSJ in an interview that stimulus measures should exceed investors’ expectations.
Stimulus measures are expected to include substantial bond purchases, as well as cuts to the bank’s key interest rate.
Greenland - Trump looking at buying Greenland
President Trump has floated the idea of buying Greenland from Denmark which has struggled to financially support the island population of around 57,000 people.
President Truman offered to buy Greenland from Denmark in 1946 fir US$100m which was probably a good price back then
Inflating this forward gives us a price of $1.28bn which is around half the nation’s estimated GDP was $2.7bn in 2016 or to put another way 0.5x sales
Fish account for around 90% of Greenland exports though we expect mining to overtake this in future years.
The real value in Greenland is contained in its strategic location as well as its mineral resources not to mention its value to the planet as a well preserved pristine environment. Despite the recent discovery of microplastics in Artic snow by researchers.
Denmark, which has administered Greenland granted home rule to Greenland in 2008 with Greenlanders voting in favour of the Self-Government Act as part of a longer term goal to gain full independence.
Greenland clearly recognises the need for economic expansion through the development of its minerals and is keen to enable miners to move to production
The US, which has supported a number of important airbases in Greenland for many years may also be concerned by the prospect of Chinese involvement in Greenland in three new airports as well as the Kvanefjeld Rare Earths project.
Trump might also be tempted to buy Scotland as an alternative proposal.
As a precedent, the UK effectively bought Scotland in ‘The Act of The Union’ in 1707 when England bailed out Scotland which had incurred losses of >£150,000 in the Darien scheme.
Article 15 granted £398,098 to bail out and support Scotland which would be worth something more than £93m which compares well with the bailout of the Royal Bank of Scotland for £45.5bn
Bluejay Mining* are developing the world’s highest grade ilmenite mineral sands project in Greenland within direct line of sight of the US Thule airbase and is currently preparing to load a 5,000t bulk sample for shipment to Rio Tinto Iron & Titanium ‘RTIT’ in Canada.
*SP Angel acts as nomad and broker to Bluejay Mining
US$1.1096/eur vs 1.1150/eur yesterday Yen 106.18/$ vs 106.20/$ SAr 15.208/$ vs 15.288/$ $1.212/gbp vs $1.208/gbp 0.678/aud vs 0.678/aud CNY 7.044/$ vs 7.026/$
Gold US$1,514/oz vs US$1,513/oz yesterday
Gold ETFs 77.5moz vs US$77.4moz yesterday
Platinum US$836/oz vs US$844/oz yesterday
Palladium US$1,449/oz vs US$1,434/oz yesterday
Silver US$17.17/oz vs US$17.16/oz yesterday
Copper US$ 5,764/t vs US$5,774/t yesterday
Aluminium US$ 1,783/t vs US$1,779/t yesterday
Nickel US$ 16,195/t vs US$15,820/t yesterday
Nickel continues surging to trade near record highs as an Indonesian minister said the nation will expedite a planned ban on exports of minerals ore, causing the metal’s spread to jump to its widest backwardation since 2009 on signs of tightening immediate supply (Bloomberg).
Indonesian President Joko Widodo also pledged to promote local processing of mineral resources, suggesting the country can add fourfold value to nickel ore if it’s processed domestically into ferro-nickel.
Jokowi’s call to process mineral resources locally may fan speculation the country may bring forward a ban on the export of raw ores from a previously announced deadline of 2022. The country’s trade minister said last week the president was gathering inputs on advancing the ban.
Nickel futures on the London Metal Exchange have surged 28% since the end of June as speculation swirled about an imminent export halt.
Once a top supplier of mined nickel, the nation relaxed a blanket ban on exports in 2017, allowing overseas sale of surplus ore containing less than 1.7% nickel.
As part of the commitment to value add, the government issues export quotas to miners with firm offers to build smelters, adding it will revoke shipment permits of companies failing to meet construction targets.
Zinc US$ 2,271/t vs US$2,283/t yesterday
Lead US$ 2,049/t vs US$2,046/t yesterday
Tin US$ 16,890/t vs US$17,000/t yesterday
Oil US$58.9/bbl vs US$59.4/bbl yesterday – UK Fracking regulations set for review
Strict limits imposed on the UK fracking industry are set for review following a scientific assessment of industry data carried out by the Oil & Gas Authority (FT).
The so-called “traffic light system” of regulation requires companies to pause or halt operations on the strength of tremors.
The nascent fracking sector only resumed operations last year following a seven year suspension on the back of public concern over tremors.
There is no suggestion that the government was committed to changing the traffic light system, though a review of the system is a positive sign for the industry, following a strong government dismissal of sector concerns over strict seismic limits as recently as February.
Natural Gas US$2.208/mmbtu vs US$2.170/mmbtu yesterday
Uranium US$25.15/lb vs US$25.30/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$86.3/t vs US$88.4/t
Chinese steel rebar 25mm US$561.0/t vs US$562.2/t
Thermal coal (1st year forward cif ARA) US$64.3/t vs US$65.2/t
Coking coal futures Dalian Exchange US$200.1/t vs US$198.7/t
Cobalt LME 3m US$32,600/t vs US$30,500/t
In a bid to boost the failing cobalt market, the world’s top producer Glencore plans slashing global output by one fifth by shuttering its biggest mine by the end of the year to cut losses and sooth a market suffering from chronic oversupply.
Market response was immediate, fueling prices to gain 20% in August after hitting its lowest level since 2016 at the end of July, according to Fastmarkets.
Glencore’s decision has “given cobalt prices a shot in the arm,” Capital Economics report. “We think that this mine closure will eradicate the surplus in the cobalt market and we now forecast the market to be in a small deficit in 2020 and 2021.” Demand is expected to surge next decade as electric vehicles gain traction with auto consumers, boosting usage of cobalt-containing batteries.
Glencore will close its giant Mutanda copper-and-cobalt mine in the Democratic Republic of Congo by end-2019, until prices are viable, Chief Executive Officer Ivan Glasenberg said.
Standard-grade cobalt rose to $15.18/lb on Wednesday amid “modest consumer restocking in anticipation of higher prices in the coming weeks,” Fastmarkets highlight.
However, with battery manufacturers seeking to minimise the content of expensive cobalt in chemistries – favouring NMC 811 combinations – the true scale of demand remains unclear.
NdPr Rare Earth Oxide (China) US$42,235/t vs US$43,057/t
Lithium carbonate 99% (China) US$8,092/t vs US$8,113/t
Ferro Vanadium 80% FOB (China) US$39.3/kg vs US$39.5/kg
Antimony Trioxide 99.5% EU (China) US$5.3/kg vs US$5.4/kg
World’s first solar road disastrous
A one-kilometer stretch of solar highway trial project has been an absolute disaster, according to report in French newspaper Le Monde. Opened in 2016, the photovoltaic panels that made up the 2,800 square metre road surface have deteriorated beyond recognition, with panels peeling off the road and splintering.
The speed limit even had to be lowered to 70kmh (43mph) because of rotting leaves generating a significant amount of noise for nearby residents.
It also never reached the expected 790 kilowatt-hours a day the panels were supposed to generate, producing at most only half. The project may have been doomed from the start 75% of the panels were broken before even being installed back in 2016, according to Daily Caller.
It seems these projects still have a future, with a solar bike lane in the Netherlands exceeding the expected energy production.
American company Solar Roadways is also turning towards smart highways using solar panels, sensors and LED lights for traffic warning systems. While expensive, the cost can offset some of the efforts to clear ice and snow.
Acacia Mining reports that following the receipt of approvals from the Tanzanian Ministry of Minerals, it has now resumed gold exports from its North Mara Mine.
The company confirms that “Following the sale of this gold, the Company will be able to meet its financial obligations for an extended period of time”.
Acacia Mining points out, however, use of the tailings facility at North Mara remains suspended as a result of the Prohibition Notice issued by Tanzania’s National Environmental Management Council on 20th July. As a result, “Production at the plant will not resume until the Notice is lifted”.
Hopes of a successful resolution of the tailings dam issue are implied by the company’s statement that “Mining activities at the North Mara Gold Mine remain unaffected for the time being with mined ore being added to stockpiles while a resolution is sought with respect to the Notice.”
AfriTin Mining* (LON:ATM) – 3.2p, Mkt cap £20.6m – Uis tin project drill results
(AfriTin hold the Uis project in Namibia) (Bushveld Minerals* holds 9.5% of AfriTin)
Afritin, which is developing the Uis tin project in the Erongo district of Namibia, has announced that Nedbank has agreed an N$35m (approximately £2m) working capital facility as well as an N$8m (approximately £465,000) VAT facility with its Namibian subsidiary Afritin Mining Namibia.
The VAT facility ”is simply secured by assessed/audited VAT returns (refunds) which have not been paid by Namibia Inland Revenue yet”.
As the parent company of Afritin Mining Namibia, Aftritin, and Afritin’s 8% shareholder, Bushveld Minerals have “have offered surety for the [working capital] loan to Nedbank as collateral in the form of a joint suretyship from AfriTin and Bushveld”.
“In the unlikely event of default, Nedbank will first call on the suretyship of the parent company of the AfriTin Group (i.e. AfriTin Mining Limited). In the event that AfriTin Mining Limited cannot make payment, it is only at this point that Nedbank will call upon the Bushveld suretyship of N$30,000,000”.
Explaining the background to the facility and its importance to the Namibian economy, CEO, Anthony Viljoen, said that it “will enable the technical team to focus on a successful ramp-up in order to achieve the design capacity of the Phase 1 Pilot Plant as the Company transitions into cashflow”.
Mr. Viljoen also confirmed that “Having secured a working capital facility for the ramp-up phase of the Pilot Plant, AfriTin is on track to creating the first revenue-generating, conflict-free asset in our portfolio."
The Uis project area contains was originally discovered in the early 20th century and was mined on a large scale between the 1950s and 1990s, however the company’s website says that this activity covered just “a fraction of the licence area”. Afritin’s pilot plant plans to use dense-media separation to upgrade the mined ore prior to the production of a final tin concentrate. Test results shown on the company’s website indicate that 74% of the tin is recoverable to a concentrate grading in excess of 67%.
Conclusion: The loan facilities from Nedbank help Afritin as it ramps up the phase 1 plant at Uis into cashflow.
*SP Angel acts as nomad and broker to Bushveld Minerals which listed AfriTin on AIM and still holds a meaningful stake in AfriTin.
OreCorp (ASX:ORR) A$0.31c, mkt cap A$67.4m - Raises A$13.5m to consolidate its ownership of the Nyanzaga gold project in Tanzania
OreCorp has raised A$13.5m to consolidate its ownership of the Nyanzaga gold project near Lake Victoria in Tanzania
The funding is also to support work on its new Hobbes project in the Eastern Goldfields of Western Australia.
OreCorp is buying out Acacia Mining and Barrick gold for A$10m plus A$1.5m to replace a US$15m royalty
Management are working on feasibility study with the following potential parameters:
AISC cost $838/oz
Capex $287 million.
Tanzania likely to have a free carry of ~16%
Resource: 3.072moz grading 4.03g/t, measured, indicated and inferred
Conclusion: The placement highlights a return of investor confidence for gold mining in Tanzania
Solgold* (LON:SOLG) 27p Mkt Cap £498.5m – Annual report published
Solgold reports a pre-tax loss of US$32.7m for the year to 30th June 2019 (2018 loss -US$11.8m) in a year which has seen the release of the Preliminary Economic Assessment (PEA) for Alpala copper/gold/silver deposit within its Cascabel project area in Ecuador and further progress towards the completion of a pre-feasibility study for the project by the end of Q1 2020 and a definitive feasibility study by the end of 2020.
The PEA built on the updated November 2018 mineral resource estimate of 2.05bn tonnes of indicated mineralisation at an average grade of 0.65% copper equivalent (at a 0.2% CuEq cut-off) and an additional 920m inferred tonnes at an average grade of 0.35% CuEq.
The PEA estimated that pre-production capital expenditure of US$2.4-2.8bn, and total life-of-mine capex of US$10.1-10.8bn would generate between US$4.1bn to US$4.5bn of after tax NPV8% at an average copper price of US$3.3/lb and average gold price of US$1300/oz from the mining of between 40-60mtpa of ore by underground block caving methods.
Drilling is continuing at Cascabel with the company expecting to have 15 drilling rigs at work by September 2019. As well as working to infill and expand the drill coverage at Alpala, “Drill testing of the Trivinio target has commenced, whilst the numerous other untested targets, namely at Moran, Cristal, Tandayama-America and Chinambicito, are flagged for drill testing as overall program demands allow.”
“Solgold is intent on the application of its strategy to its 12 other wholly owned and highly prospective priority targets throughout Ecuador”.
Conclusion: As well as advancing the Alpala project towards feasibility studies, Solgold is extending its exploration activities within the wider Cascabel licence area and on its portfolio of wholly owned exploration projects throughout Ecuador.
*SP Angel acts as broker and advisor to Solgold.
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
Prince Frederick House
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.
Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony