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Today's Market View - Petra Diamonds, Phoenix Copper, Shanta Gold and more..

Avesoro Resources (LON:ASO) – Response to take-over offer Barrick Gold – settles with Tanzania for $300m, a 16% free-carried interest in each of the Barrick-Acacia’s Tanzanian gold mines and a 50:50 profit sharing agreement Shanta Gold – Tanzanian tax settlement may enable Revenue Authority to repay VAT owed to Shanta Gold

Petra Diamonds - Today's Market View - Petra Diamonds, Phoenix Copper, Shanta Gold and more..

SP Angel . Morning View . Monday 21 10 19

China policy makers prepare for sub-6pct growth

MiFID II exempt information – see disclaimer below   

  

Avesoro Resources (LON:ASO) – Response to take-over offer

Barrick Gold – settles with Tanzania for $300m, a 16% free-carried interest in each of the Barrick-Acacia’s Tanzanian gold mines and a 50:50 profit sharing agreement

Shanta Gold – Tanzanian tax settlement may enable Revenue Authority to repay VAT owed to Shanta Gold

Bluejay Mining* (LON:JAY) – Kangerluarsul zinc-lead-silver project

Chaarat Gold* (LON:CGH) Target Price and Recommendation under review – Q3 operational update

Cora Gold* (LON:CORA) – Final Sanankoro met test work results are in

Highland Gold (LON:HGM) – Q3 update: on course for 290-300koz in FY19

Keras Resources* (LON:KRS) BUY, Valuation 1.08p – Mining permit granted by Council of Ministers of the Republic of Togo

Petra Diamonds (LON:PDL) – Q1 Results and diamond market update

Phoenix Copper* - (LON:PXC) – Empire mineralisation links through Red Star to White Knob showing porphyry potential

 

Capital Group fund manager forced to resign following BBC Panorama investigation

Hummingbird Resources shares acquired by Denning for secretive fund based in Liechtenstein

Mark Denning has been forced to resign following evidence gained by BBC’s Panorama that he was secretly acquiring shares for his own benefit in some of the companies in his fund.

“The Panorama investigation discovered that shares were bought on Mr Denning's instructions through a secretive fund based in Liechtenstein. It was called Morebath Fund Global Opportunities.” (BBC).

Denning denies any wrongdoing.

Panorama ‘Can You Trust the Billion Pound Investors? is broadcast Tonight at 20.30’

https://www.bbc.co.uk/news/business-50089887

 

Chile - Mining sector operating normally despite rioting (Reuters)

Mining minister Baldo Prokurica has insisted that riots near the country’s capital have not affected the countries mining operations.

The riots, which have left at least seven dead was sparked by a metro fare hike, and has widened to reflect anger over living costs and inequality according to the BBC.

Most mining operations in the country are far away from major towns, so have not been disrupted by the riots.

No mines have been attacked by the rioters, however some companies have reported that schedules have been altered as some employees are not able to get to work.

Despite this, the copper price hit its highest in a month on Monday morning due to unrelated strikes and hopes of a US-China trade deal.

 

Dow Jones Industrials -0.95% at 26,770

Nikkei 225 +0.25% at 22,549

HK Hang Seng +0.02% at 26,726

Shanghai Composite +0.05% at 2,940

FTSE 350 Mining +1.25% at 17,418

AIM Basic Resources -0.14% at 2,106

 

Economics

UK- Johnson to put his Brexit deal to another vote on Monday

The PM was forced to send a letter asking the EU for a three-month extension, however did not sign it.

Speaker John Bercow will decide on whether or not to allow the vote, as asking the commons to decide on the same question twice in the same session is against parliamentary rules.

Senior ministers said on Sunday that they are confident that the deal will get through parliament.

Johnson has made it clear that he’d rather Britain leave without delay, and accompanied the unsigned extension letter with a signed letter which said he believed a delay would be a mistake.

Sterling fell after UK politicians failed to deliver the vote, halting four-day gains for the pound.

The pound fell as much as 0.8% against the dollar on news of the vote failing to be passed.

As optimism grows that a second vote could yield a different result, the pound has strengthened on Monday morning to $1.30.

UK – Not a Democracy

The UK Parliament proved itself to be entirely undemocratic on Saturday.

The Government was effectively hijacked by a self-interest group of MPs which does not represent the will of the people.

Parliament has yet again demonstrated how it can be manipulated by minority groups for its own interests in preference to the interests of the UK population.

While Brexiteers are horrified, many Remainers are also shocked that Parliament can be manipulated in this way and are keen to get the UK out to end the current impasse.

Investors should be aware that if another UK Referendum on Europe is called that both Labour and Conservatives appear to believe the outcome is more than likely to remain the same.

 

China – policy makers preparing for sub-6% growth

Data released on Friday showed an economy expanding at just 6%- the lowest in three decades.

People’s bank of China Governor Yi Gang responded to the data by saying that China’s focus is keeping its heavy debt load under control.

The nation’s total corporate, household and government debt exceeds 300% of GDP and makes up 15% of all global debt.

Economists in China say that growth volatility is acceptable if other targets on employment, income and environmental protection are met.

 

Turkey – Kurdish fighters leave Syrian border town

Kurdish officials say that their fighters have evacuated Ras al-Ayn, giving turkey control of the border city.

The Kurdish dominated SDF left in convoy on Sunday afternoon beyond the 20 mile buffer zone that Turkey is seeking to clear along its border with Syria.

Turkey vowed to crush Kurdish militants if they were still in the border regions by the time the 120 hour ceasefire was over.

 

Canada – Prime minister Trudeau looks set to retain power but lose parliamentary majority

It is looking more likely that the liberals will need to rely on a left- leaning party to survive a second term as Canadians go to the polls on Monday.

According to a poll tracker, the liberals are projected to win 136/338 districts, compared to 124/338 for the conservatives, and 170 is required for a majority.

Only four times in the nation’s history has a prime minister been ousted after one term.

 

US-China – President Trump hopeful trade deal will be signed by mid- November

On Friday, Trump said he thinks that a trade deal will be signed by the time the Asia-Pacific Economic Cooperation takes place in Chile on the 16th of November.

A second round of trade talks id due to begin, and the first round last week saw China agree to buy $40bn of US farm products annually.

 

Currencies

US$1.1173/eur vs 1.1128/eur last week.  Yen 108.64/$ vs 108.67/$.  SAr 14.768/$ vs 14.767/$.  $1.299/gbp vs $1.288/gbp.  0.688/aud vs 0.684/aud.  CNY 7.070/$ vs 7.081/$.

 

Commodity News

Gold US$1,489/oz vs US$1,488/oz last week

Gold ETFs 82.1moz vs US$81.9moz last week

Platinum US$894/oz vs US$887/oz last week

Palladium US$1,762/oz vs US$1,758/oz last week

Silver US$17.68/oz vs US$17.48/oz last week

           

Base metals:   

Copper US$ 5,828/t vs US$5,752/t last week

Aluminium US$ 1,740/t vs US$1,729/t last week

Nickel US$ 16,170/t vs US$16,260/t last week

Zinc US$ 2,466/t vs US$2,454/t last week

Lead US$ 2,180/t vs US$2,200/t last week

Tin US$ 16,800/t vs US$17,105/t last week

           

Energy:           

UK Oil sector

  • Despite a tough capital market environment, UK equities in the Oil & Gas sector remained flat YTD (2018: -16%) wiping out September’s 8% gains
  • AIM Oil & Gas indices were also flat YTD despite some volatility, yet stabilising 2018’s 13% decline
  • These indices have largely tracked the oil price, and with the futures market also remaining steady
  • The small/mid cap constituents of the sector are due to engage in an active year of operational activity in 2020, with a number of high impact drilling catalysts

Oil US$59.5/bbl vs US$59.9/bbl last week - Signs of ample global oil supply combined with concerns about economic growth in China, the world’s largest oil importer, pressured prices lower again this morning

  • Yesterday Russia, the world’s second-largest oil producer, reported that it did not meet its supply reduction commitment in September because of an increase in natural gas condensate output as the country prepared for winter, again weighing on global prices
  • Talks between OPEC members Kuwait and Saudi Arabia to restart oil production from joint fields in the Neutral Zone between the two countries, with capacity of 500,000bopd will likely add further near term supply to the market
  • U.S. crude futures were off 0.3% at $54.1/bbl on the New York Mercantile Exchange, underlining uncertainties in the global economy
  • Longer term, US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view

Natural Gas US$2.306/mmbtu vs US$2.336/mmbtu last week - Natural gas futures inched higher last week as prices continued to be influenced by significant model differences on the intensity of cold later this month

  • These weather concerns created a mostly sideways trade last week as the American model trended colder late in the week, but the milder European model remained unchanged, widening the gap between the two datasets
  • The EIA reported a 104Bcf injection into natural gas storage inventories for the week-ending October 11, marking the third time in four weeks that stocks have risen by at least 100Bcf. 

Uranium US$24.85/lb vs US$24.90/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$82.6/t vs US$82.5/t

Chinese steel rebar 25mm US$555.3/t vs US$555.9/t

Thermal coal (1st year forward cif ARA) US$68.8/t vs US$68.4/t

Coking coal futures Dalian Exchange US$183.8/t vs US$183.5/t

           

Other:  

Cobalt LME 3m US$36,000/t vs US$36,000/t

NdPr Rare Earth Oxide (China) US$43,637/t vs US$44,418/t

Lithium carbonate 99% (China) US$7,002/t vs US$6,991/t

Ferro Vanadium 80% FOB (China) US$36.5/kg vs US$36.7/kg

Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/kg

Tungsten APT European US$225-245/mtu vs US$205-215/mtu

 

Battery News

British bloke invents Lithium-Air battery in his garage

  • Trevor Jackson, a former officer of the Royal Navy is reported to have invented a new type of Lithium-Air battery in his garage.
  • Jackson’s invention has landed him a potentially-valuable deal to produce batteries for Electric Vehicles with Austin Electric which plans to put the batteries into its vehicles starting next year.
  • Austin Electric has the rights to the historic Austin name and is to manufacture replica Austin vans powered by electric motors.
  • The proposed aluminium-air batteries last 1,500 miles but is not rechargeable, meaning the battery needs to be swapped for another one after 1,500 miles.
  • An equivalent weight aluminium air-battery to the Tesla Model S is said to last 2,700 miles while taking up less space.
  • The key to Jackson’s success is reported to be the discovery of a non-caustic liquid electrolyte.
  • Jackson came up with the innovation over 10-years ago but has faced headwinds to gain acceptance with his company, Metalectrique Ltd, recently landing a grant from the Advanced Propulsion Centre for £108,000.
  • The new batteries are far cheaper to make than current Li-ion batteries used in EVs and is also said to be more easily recycled.

Conclusion: this is an interesting invention but the replacement batteries will need to compete on cost with the recharging cost of Lithium-ion batteries.

We can see these batteries finding a niche, with long-distance hauliers in time where lorries make regular journeys but we suspect most consumers will prefer to run with a battery they can recharge for now.

The average UK family drove some 7,600 miles last year indicating that they would need over five of these batteries a year. At a proposed cost of £5,000 a battery this is not yet an economic proposition.

 

Company News

Avesoro Resources (LON:ASO) 95p, Mkt Cap £77.5m – Response to take-over offer

  • Avesoro Resources announces that it has filed its directors’ circular in response to the offer by its major shareholder, Avesoro Jersey Limited (AJL), which already holds approximately 72.9%, to acquire the balance of the company.
  • Excluding those directors who were conflicted, the Board has accepted the “unanimous recommendation of the special committee of the Board of Directors … [which has] … determined that the Offer is in the best interests of the Company and fair to the minority shareholders”. Consequently  the Board “unanimously recommends that Minority Shareholders accept the Offer”.
  • In a separate announcement, Avesoro reports that it has entered into an agreement with AJL for a working capital facility of up to US$5m. The Company “intends to draw down a first tranche of US$3,500,000 in the coming days … to assist with satisfying the Company’s near term cashflow needs”.

 

Barrick Gold – settles with Tanzania for $300m, a 16% free-carried interest in each of the Barrick-Acacia’s Tanzanian gold mines and a 50:50 profit sharing agreement

Shanta Gold – Tanzanian tax settlement may enable Revenue Authority to repay VAT owed to Shanta Gold

  • Barrick Gold report the settlement of their long-running tax dispute with the Tanzanian Government.
  • The deal involves the payment of $300m and the creation of Twiga Minerals which will share future economic benefits from the mines on a 50:50 basis.
  • Barrick took over the management of the mines after its buy-out of the Acacia minorities last month enabling better renegotiation with the government and the re-opening of the North Mara gold mine in the north of Tanzania.
  • Tanzania will receive its half of the economic benefits in taxes, royalties, clearing fees and participation in all cash distributions made by the mines and by Twiga Minerals.

Conclusion:  This is a good deal for Tanzania as it looks as if it gives the nation much more upside to higher production and gold prices than previously seen.

While the deal resolves the dispute it comes at a heavy cost for Barrick which now has to share half of all economic benefits from the mines with the government.

The extra cash may help the Tanzanian Revenue Authority to repay VAT owing to other miners in the country such as Shanta Gold.

 

Bluejay Mining* (LON:JAY) 10p, Mkt Cap £85.5m – Kangerluarsul zinc-lead-silver project

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

  • Bluejay Mining has announced that it has applied for a mineral exploration licence over 586km2 of land surrounding the existing Kangerluarsul exploration licence in central west Greenland  bringing the total exploration area, assuming the new application is approved, to 692km2
  • The licence application is seen as a prelude to drilling over an area which is known to contain “several large and highly conductive bodies identified by previous private sector operators and government bodies” and which have “returned historic surface samples of 41% Zn, 9.3% Pb, 1.2% Cu and 596 g/t Ag, combined, more than 50% metal.”
  • Commenting on the application, CEO, Roderick Mcillree, said that “Kangerluarsuk has been our least talked about project to date, even though it too has significant resource potential”. He went on to explain that it represented one of the “most prospective [types of] deposits for … [zinc, lead, copper and silver] … anywhere in the world.”
  • He also commented that “Importantly, Kangerluarsuk also brings further commodity diversification to our portfolio when added to our nickel, copper, cobalt, platinum targets at Disko and at the Dundas Ilmenite Project where we recently shipped our first bulk sample to Canada”.

Target price: 21.3p is based on our production assumption of 440,000tpa of ilmenite concentrate and an ilmenite price of $207/t based on Bloomberg’s Chinese TiO2 50% ilmenite Fe 30% ilmenite price.

Conclusion: The new licence application expands Bluejay Mining’s footprint over the Kangerluarsak area and prepares the way for drilling of prospective targets while diversifying the company’s commodity exposure. We look forward to further news once exploration gets underway.

*SP Angel act as nomad to Bluejay Mining. *SP Angel have visited the Dundas, Itelak ilmenite sands project in Greenland.

 

Chaarat Gold* (LON:CGH) 38p, Mkt Cap £169m – Q3 operational update

Target Price and Recommendation under review

  • At Kapan, production came in at 16.4koz GE (Q2/19: 17.0koz) reflecting stronger processed grades, improved recoveries and slightly lower throughput rates on the previous quarter.
  • Better gold recoveries (83.9% v 81.6% in Q2/19) attributed to the addition of a fourth stage crusher feeding finer material into the mill as well as new reagents used further down the processing circuit.
  • Mining fleet availability was also improved.
  • Cash costs have come down and averaged $1,092/oz (Q2/19: $1,223/oz).
  • Realised gold price averaged $1,474/oz (Q2/19: $1,306/oz) in line with the average spot gold price during the period.
  • EBITDA generated climbed to $3.6m compared to $3.2m for the initial five-month period since acquisition of the asset in the end of January.
  • The management reiterated guidance for annualised EBITDA of $20m run rates at 65koz pa GE to be achieved by year end.
  • Kapan mine plan update will be released in November.
  • At Tulkubash, operations gear up for the start of full scale development works with funding for ~$80m (ex Ciftay investment of $31.5m) of the balance of the $110m project capex to be closed this quarter or early 2020.
  • A term sheet received from one of parties indicated sufficient funds for the project.
  • On the ground, equipment mobilisation is in progress, work camp installation to commence before year end, access road to the site has been upgraded to improve year round access with detailed engineering on major parts of the processing plant continuing.

Conclusion: The update highlights operational and cost improvements at the Kapan polymetallic operation including de-bottlenecking of mining operations, enhancements to crushing and flotation circuits at the plant and an optimisation of contractors’ services. A reduction in unit costs is reflected in higher generated EBITDA during the quarter with management remaining on course for the $20m run rate before year end. Additionally, the team is eyeing closure of the Tulkubash funding in Q4/19 or Q1/20 paving the way for the first gold production in late 2021.

We are currently reviewing our recommendation/earnings forecasts and will be releasing an update in due course.

*SP Angel acts as Broker to Chaarat Gold

 

Cora Gold* (LON:CORA) 7.5p, Mkt Cap £10m – Final Sanankoro met test work results are in

  • The Company released final results of the metallurgical test work carried on the Sanankoro oxides.
  • Tests were carried on different host lithologies and depth profiles offering a better representation of the future ROM feed.
  • 207kg of oxide material has been used with grade ranging between 1.5g/t and 1.9g/t, and sourced from the Selin, Zone A and Zone B.
  • Deeper levels more competent sap rock is characterised as “very soft” based on crusher, abrasion and rod mill work indices and “medium” on the Bond Ball Mill Index, suggesting low milling costs for the oxide material.
  • Gravity and cyanide leaching tests pointed to recoveries of 95.4-98.3%.
  • Recoveries from gold concentrate varied from 76% to 95% and were decided to require more follow up work.
  • Additionally, the team completed a 95 days column leach test studying the potential for the heap leaching operation with results showing 56% recoveries during the three month leaching period.

Conclusion: Results confirm milling and cyanide leaching yields good +90% gold recoveries on Sanankoro oxides that involve low cost processing reflecting soft nature of the material and requiring low concentrations of cyanide.

*SP Angel acts as Nomad and Broker to Cora Gold

 

Highland Gold (LON:HGM) 197p, Mkt Cap £715m – Q3 update: on course for 290-300koz in FY19

  • Q3 production amounted to 75.0koz (Q3/18: 74.8koz) taking YTD output to 217.3koz (9m 2018: 203.7koz).
  • MNV production totalled 29.0koz (Q3/18: 31.9koz) as mining operation relocate to different orebodies resulting in lower open pit mining rates and grades with the material from historic waste dumps used for the plant feed.
  • Belaya Group production was 9.1koz (Q3/18: 12.7koz) with lower processed grades and throughput outweighing an increase in gold recoveries; lower feed grade reflected lower mined grades and a lower share of higher grade material sourced from stockpiles.
  • Novo production came in at 30.0kz (Q3/18: 30.2koz) recovering from weaker H1/19 reflecting better processed grades (5.25g/t v 4.73g/t in H1/19) with throughput and recoveries holding up well.
  • Valunisty production was 7.0koz (Q3/18: 9.4koz) as processed grades came off, as expected, due to the processing of ores from the Glavnaya and Novaya ore zones compared to the main Valunisty ore body and the satellite Gorny mine in 2018.
  • Baley ZIF-1 tailings reprocessing project has been approved by the Board in August with construction of the $23m project due to start next year and first production due in H2/21.
  • Construction at Kekura continued through the quarter as the team is preparing for initial mining in Q4/19
  • The management reiterated 2019 production forecast of 290-300koz GE for this year.

Conclusion: Good production results with the team reiterating the annual 290-300koz guidance and working on production growth profile with construction continuing at Kekura and development at Baley ZIF-1 heap leaching project to start next year.

 

Keras Resources* (LON:KRS) 0.48p, Mkt Cap £11.8m – Mining permit granted by Council of Ministers of the Republic of Togo

(Keras hold an 85% interst in Societé General des Mines which holds the Nayega manganese project license in Togo)

BUY, Valuation 1.08p

  • Keras Resources report the granting of its Mining License by the Council of Ministers of the Republic of Togo.
  • The license permits SGM, Keras’s local subsidiary to undertake large scale mining at the Nayega manganese project in northern Togo.
  • Nauega manganese mine:  Management completed a 10,000t bulk sample / trial run earlier this year and is ready to move to production of 75,000tpa of beneficiated manganese.
  • The Nayega mine has a JORC compliant Measured and Indicated mineral resource of 11mt grading 13.1% manganese and a mineral reserve of 8.5mt grading 14.0% manganese.
  • The Republic of Togo has a Moody’s accredited B3 Credit rating and a single-B stable outlook from Standard & Poor putting it on a par with Ghana.
  • Calidus Resources: Calidus has developed a 1.25m oz gold resource at the Warrawoona gold project in Australia.
  • The Warrawoona project has a high-grade resource of 14.6mt grading 2.37g/t for 1.1moz and has developed a mine plan for 97,000ozpa gold mine with All in cash costs of $1,159/oz.
  • Calidus published a Pre-Feasibility Study in July with an in-house estimate NPV of A$150.7m and an IRR of 39.5% based on a gold price of A$1,800/oz (US$1,217/oz).
  • Calidus is also evaluating potential at the Klondyke gold prospect which has 2012 JORC inferred resource of 20mt grading 1.79g/t for 1.15moz of gold.
  • The PFS combined with ongoing exploration around the existing gold resources indicates to us good potential for further value creation and the development of significant gold production.
  • Valuation: our valuation on Keras is 1.08p based on the value of our estimated cash flow from the Nageya manganese mine as well as the value of Keras’s shares in Calidus Resources.
  • We ran our valuation on a Calidus Resources share price of A$0.035c/s. Calidus shares are currently A$0.026c/s having traded as high as A$0.040c/s and as low as A$0.020c/s this year.
  • Keras plan to demerge its entire 723,750,000 shareholding in Calidus and to distribute to eligible shareholders who are on the share register at 6:00pm on 19 November this year.
  • The average daily trading volume for Calidus Resources on the ASX is around 5m shares a day over the last 100 days.

Conclusion:  The license award is great news for Keras and should enable mining to start quickly.

We see the Nauega manganese mine as offering significant value to Keras, equivalent to the current market capitalisation post the demerger of the Calidus shares to be distributed to Keras shareholders.

*SP Angel act as Nomad and broker to Keras Resources

 

Petra Diamonds (LON:PDL) 7.985p, Mkt Cap £69.1m – Q1 Results and diamond market update

  • Petra Diamonds reports production of 1.08m carats of diamonds during the three months ending 30th September 2019 and that it remains on course to achieve its published FY 2020 production guidance of 3.8m carats.
  • The company sold approximately 0.60m crats during the quarter (Q1 2019 - 0.63m carats) with the second tender of the year occurring after the end of the quarter.
  • Production increased at the Cullinan (+5% to 0.46m carats), Koffiefontein (+12% to 20,420 carats), and Williamson (+13% to 116,973 carats) mines, offset by a 5% decline in output at the Finsch mine to 0.48m carats.
  • Revenues declined by 23% compared to Q1 2019 achieving US$61.6m (Q1 2019 – US$80.2m) reflecting “lower diamond prices and volumes in comparison to Q1 FY 2019, compounded by a poorer product mix at Finsch, Williamson and Koffiefontein”.
  • Reporting on the diamond market, which Chief Executive, Richard Duffy, described as remaining “challenging”, the company says that results from the second tender shows “some stabilisation with early signs of modest improvement towards year end.” Improved levels of activity in advance of India’s Diwali holiday provide some encouragement, however, “polished prices and exports remain under pressure, with softer demand and lower prices for rough diamonds.”
  • Petra Diamonds also says that, “Supply discipline by the major diamond producers, combined with increased advertising spend targeting the festive retail season, is expected to help establish a balance of supply and demand”.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Phoenix Copper* - (LON:PXC) 17.5p, Mkt Cap £7.5m – Empire mineralisation links through Red Star to White Knob showing porphyry potential

(formerly Phoenix Global Mining)

Phoenix holds 80% of the Empire mining property

  • Phoenix Copper report links the metal sulphide mineralisation mined at the Empire copper, gold mine through the Red Star resource and on to a 2.5km trend at White Knob.
  • Analysis of the data and geology of the resources and mineralisation indicate that mineralisation seen at the three sites may be part of a larger molybdenum-tungsten porphyry known as the “Empire Mineralised System”.
  • The geologists have identified high-grade silver, lead, and zinc mineralisation, plus some copper and gold north of the main Empire copper deposit within a series of mineralised shears/faults
  • There are over 30 unnamed historic underground mines and prospects indicating potential for a major mineralised trend and the consultant geologist’s report concluded that “the potential mineralised system, including the Empire, Red Star, and the White Knob Group, "has been less than 1% exploited and explored" and "this northern part of the system remains unexplored with indications of substantial ore potential”.
  • White Knob: average production grades from the White Knob Mine where historic mine widths of 2-16m are reported:
  • 204 g/t silver,
  • 19% lead,
  • 6.5% zinc
  • 0.73% copper. 
  • Red Star drilling results report 9.15m grading:
  • 361 g/t silver,
  • 9.9% lead and
  • 0.8% zinc, and
  • 15.24m of 160 g/t silver,
  • 13.3% lead and
  • 1.4% zinc
  • Mineralisation at Red Star and White Knob appears consistent with a molybdenum-tungsten porphyry system similar to the Empire copper deposit to the south.
  • Phoenix Copper worked up a new NI 43-101 mineral resource at Red Star on three holes drilled of some 103,500t, of 0.5moz silver grading 173.4g/t silver, 0.85g/t gold with 0.33% copper, 3.85% lead and 0.92% zinc.
  • . This could well turn into a silver mine of modest capital cost.
  • Recent drilling at Red Star shows 15.24m grading:
  • 160g/t silver,
  • 13.3% lead and
  • 1.4% zinc
  • Commenting on the report, Chief Executive, Dennis Thomas said that “This is a strategically important development for the Company as it enables us to move away from being a single asset company with all the inherent risks that such companies face. As a junior company we are focused on developing value by discovery and development and we have known for a long time that we have an abundance of exploration opportunities at the Empire Mine.”
  • Mr. Thomas confirmed  that management plans to fast track Red Star with a development decision by the end-2020,
  • Empire Mine BFS: continues for the Empire Mine open pit copper oxide project.
  • The recently updated PEA envisages the treatment of 1.6mtpa of ore over a 9 years mine life in order to produce an average of 7,000tpa of copper and 1,600tpa of zinc.
  • Using a long-term copper price of US$3.25/lb, zinc US$1.35/lb
  • Capex US$50.578m - pre-production
  • NPV7% of US$55.5m – post tax
  • IRR of 33% - post tax
  • copper production - 68,500t LOM
  • zinc production - 16,500t,
  • Costs US$1.72 per lb of copper equivalent
  • Our analysis of 15 other undeveloped copper projects in North America shows that although Phoenix Copper’s Empire oxide project is amongst the smallest in terms of overall production it is also amongst the lowest cost in both capital and operating cost terms.
  • The analysis report, by the company’s geological consultant, Nigel Maund, is on the company’s website at https://phoenixcopperlimited.com/reports
  • Corporate presentation: https://phoenixcopperlimited.com/pgm-media-and-presentations
  • Phoenix Copper also confirms that it is “now undertaking some early exploration work at our Navarre Creek discovery, a Carlin-style gold zone west of the open pit oxide project."

Conclusion:  The consulting geologist’s report provides confirmation of a significant mineralised trend over at least 2.5km from the Empire mine northwards through the Red Star, Horseshoe, Blue Bird and White Knob deposits. The additional conclusion that the deposits exhibit consistent geological, mineralogical, and grade characteristics opens up the possibility of a common genetic source to the mineralisation of what now seems to be emerging as a significant polymetallic mineralised system.
 

*SP Angel acts as Nomad and broker to Phoenix Copper
 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

Richard Parlons – 0203 470 0472

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.

 

Sources of commodity prices

Gold, Platinum, Palladium, Silver

BGNL (Bloomberg Generic Composite rate, London)

Gold ETFs, Steel

Bloomberg

Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt

LME

Oil Brent

ICE

Natural Gas, Uranium, Iron Ore

NYMEX

Thermal Coal

Bloomberg OTC Composite

Coking Coal

DCE

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

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