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Today's Market View - Centamin, Bluejay Mining, Firestone Diamonds and more...

Centamin (LON:CEY) – Expands on reasons to reject the Endeavour Mining offer Bluejay Mining* (LON:JAY) – Rio Tinto shuts Richard’s Bay as violence escalates Firestone Diamonds (LON:FDI) – Restoration of grid power  at Liqhobong

Centamin PLC - Today's Market View - Centamin, Bluejay Mining, Firestone Diamonds and more...

SP Angel . Morning View . Wednesday 04 12 19

Markets climb cautiously on Phase One deal expectations

MiFID II exempt information – see disclaimer below

 

Centamin (LON:CEY) – Expands on reasons to reject the Endeavour Mining offer

Bluejay Mining* (LON:JAY) – Rio Tinto shuts Richard’s Bay as violence escalates

Firestone Diamonds (LON:FDI) – Restoration of grid power  at Liqhobong

Premier African Minerals* (LON:PREM) – MNH investment

Rio Tinto (LON:RIO) – Richards Bay suspension and investment at Kennecott

Sunrise Resources PLC (LON:SRES) – CS Project permitting delay

 

Dow Jones Industrials -1.01% at 27,503

Nikkei 225 -1.05% at 23,135

HK Hang Seng -1.25% at 26,063

Shanghai Composite -0.23% at 2,878

FTSE 350 Mining +0.98% at 18,186

AIM Basic Resources -0.72% at 2,037

 

Economics

US – The House of Representatives passed the bill to sanction Chinese officials involved in human rights abuses against Uighurs, a Muslim ethnic group in the Xinjiang region.

Ahead of the vote Chinese state media speculated Beijing may expedite a blacklist of US companies to be sanctioned in retaliation.

China’s foreign ministry of Wednesday urged the US to stop the bill and vowed to further respond if the legislation is passed.

The legislation follows the bill in support of Hong Kong protesters that was signed into law by President Trump last week.

On Monday, Trump when referring to the status of trade negotiations said that the aforementioned legislation “doesn’t make it better”.

 

China – Composite PMI picked up in November largely driven by growth in the services sector, according to Caixin data released this morning.

Manufacturing remained somewhat subdued, although, the industry has recovered from sub-50 readings seen earlier int eh year.

Overall, “economy continued to recover in November, as domestic and foreign demand both improved… but business confidence remained subdued, reflecting the impact from uncertainties generated by the China-US trade conflicts,” Caixin wrote.

“The trade dispute is the major reason behind the slowing economic growth this year, and will become a key factor affecting the stabilisation and recovery of China’s economy next year.”

Caixin Services PMI: 32.5 v 51.1 in October and 51.2 forecast.

Caixin Manufacturing PMI (released on Monday): 51.8 v 51.7 in October and 51.5 forecast.

Caixin Composite PMI: 53.2 v 52.0 in October.

 

Australia – Economic growth slowed in Q3/19 (0.4%qoq) as rate cuts and government tax rebates failed to reignite household spending (+0.1%qoq).

Government spending and exports were among the largest contributors to growth.

GPD (%qoq/yoy): 0.4/1.7 v 0.6/1.6 in Q2 and 0.5/1.7 forecast.

 

Hong Kong – November PMI points to the sharpest private sector downturn since viral epidemic SARS crisis in 2003.

Sentiment is at the lowest since the data was first collected in 2012, employment is down and new orders contracted at the quickest pace since Nov/08.

Political unrest continue to disrupt the functioning of businesses.

Markit Composite PMI: 38.5 v 39.3 in October.

 

South Africa – The economy continues to struggle with Nov PMI data pointing to a steeper declines in business activity.

Both months of Q4, PMI remained in the contraction territory weighing on growth outlook after a negative quarterly GDP reading in Q3.

New orders came off through the period leading firms to reduce staffing numbers.

Markit Composite PMI: 48.6 v 49.4 in October and 49.3 forecast.

 

India – Central Bank to cut interest rates on Thursday (Bloomberg Quint)

India is growing at its slowest pace in 17 years, no doubt to intense competition with China

This will be the Central Bank’s sixth rate cut this year if it enacted

Commercial bank lending rates are said to be immune to monetary policy eg the rate cut won’t make much difference

Indian M4 money supply has fallen to single-digit levels indicating that more cash, QE, is needed to stimulate economic growth

 

Banks’ lending cut to Indian diamantaires causing a liquidity crisis in the market (FT)

Lending has been sharply cut in the industry after jeweller Nirav Modi as accused of defrauding a state bank of nearly $2bn.

According to an FT article in March this year, Mr Modi improperly received almost $2bn worth of cash advances bypassing the Punjab National Bank.

Over 90% of diamantaires are based in India, and this scandal is to blame for ‘bankers blacklisting the jewellers industry’, according to the president of the Indian Bullion and Jewellers Association.

Across the sector, rough diamond prices have fallen 15 per cent since last November, according to Polished Prices, and De Beers is on course to report its worst annual sales in at least four years.

Indian companies receive about 4/5ths of bank credit within the diamond industry, and total diamond credit has fallen 20% to $8bn this year.

This has caused diamond cutters to work through existing stock, causing imports of rough diamonds to fall 22% y-o-y to $7.3bn between April and October.

Large and mid-sized diamond companies have all reported lower prices, De Beers has reduced its prices by 5% and Lucara Diamonds has seen a 14% drop compared to last year.

Retail demand for diamonds has remained strong, as spending grew 4.5% to $36bn in the diamond jewellery sector.

 

Currencies

US$1.1072/eur vs 1.1083/eur yesterday.  Yen 108.71/$ vs 109.08/$.  SAr 14.572/$ vs 14.564/$.  $1.305/gbp vs $1.299/gbp.  0.683/aud vs 0.686/aud.  CNY 7.054/$ vs 7.046/$.

 

Commodity News

Gold US$1,475/oz vs US$1,464/oz yesterday - Poland successfully returns £4bn worth of gold bars from London (City A.M)

Planes, helicopters, lorries and specialist police were used to return the 8,000 bars weighing 100t.

The gold was repatriated in eight night-time flights over several months.

Poland’s gold reserves have been stored at the Bank of England since WW2.

Gold ETFs 81.0moz vs US$81.1moz yesterday

Platinum US$908/oz vs US$901/oz yesterday

Palladium US$1,859/oz vs US$1,858/oz yesterday

Silver US$17.15/oz vs US$16.95/oz yesterday

           

Base metals:   

Copper US$ 5,854/t vs US$5,834/t yesterday

Aluminium US$ 1,767/t vs US$1,790/t yesterday

Nickel US$ 13,290/t vs US$13,690/t yesterday

Zinc US$ 2,242/t vs US$2,219/t yesterday

Lead US$ 1,913/t vs US$1,894/t yesterday

Tin US$ 16,750/t vs US$16,570/t yesterday

           

Energy:           

Oil US$61.6/bbl vs US$61.1/bbl yesterday

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

Uranium US$25.95/lb vs US$25.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$86.0/t vs US$86.4/t

Chinese steel rebar 25mm US$598.5/t vs US$602.0/t

Thermal coal (1st year forward cif ARA) US$62.0/t vs US$62.8/t

Coking coal futures Dalian Exchange US$187.8/t vs US$188.0/t

           

Other:  

Cobalt LME 3m US$35,750/t vs US$35,750/t

NdPr Rare Earth Oxide (China) US$40,756/t vs US$40,661/t

Lithium carbonate 99% (China) US$6,308/t vs US$6,387/t - Competition launched seeking novel methods to extract minerals from brine (thinkgeoenergy.com)

Italian energy company Enel have launched BRINEMINE, a $30,000 competition seeking to extract lithium and other valuable minerals from brine.

Enel is specifically looking for novel methods and technologies to economically extract lithium and other valuable minerals.

The challenge will be run in tow phases, with the second requiring the signing of an NDA.

Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$29.0/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.2/kg

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

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

 

Battery News

Comparing the new Tesla Cybertruck against the Ford F-150

Tesla unveiled its all-electric pickup truck on the 21st of November and is the automakers sixth vehicle.

The table below compares the Cybertruck with Ford’s F series, the best-selling pickup truck in the US since 1977 and the best-selling vehicle since 1986.

Tesla plan to release three models, and the table below compares the most basic model unless specified.

 

According to EV database, the Cybertruck battery will have 120kWh capacity. Using a quick charging point, this should take 2.8 hours to charge. Due to the variance in the power capabilities of chargers, users are expected to charge overnight.

According to Pod Point, the average domestic electric rate is about 14p per kWh, making the cost to fully charge the Cybertruck would be £16.80. However, this doesn’t include the one-off fee for installation of a charging point at home. The fastest charger can be installed at home for £999 with the help of an OLEV grant from the government, saving you £500 and providing you with 50 miles of range per hour.

By contrast, the F-150 diesel has a 26 gallon tank, and costing £156.72 to fill up (131.7p/litre).

One factor worth noting when analysing the capabilities of the Cybertruck is the variance between the three different models:

The single motor rear-wheel drive has a range of 250 miles, 7,500-pound towing capacity, and 0–60 mph capabilities in under 6.5 seconds, costing $39,900.

The dual motor all-wheel drive has a range of 300 miles, 10,000-pound towing capacity, and 0–60 mph in under 4.5 seconds, costing $49,900.

The Triple motor all-wheel drive has a range of 500 miles, 14,000-pound towing capacity, and 0–60 mph in under 2.9 seconds, costing $69,900 (though this version won’t start production until late 2022).

Conclusion: The cost of running a Cybertruck easily beats the cost any other pickup truck for regular higher-mileage drivers. It will also win in terms of emissions and reliability and with costs rising for tradesmen driving diesel trucks in city centres the Cybertruck will make great sense.

 

Company News

Centamin (LON:CEY) 127.9p, Mkt Cap £1,478.5m – Expands on reasons to reject the Endeavour Mining offer

Centamin’s board has provided a more detailed explanation of why it is advising shareholders to take no action in relation to a preliminary proposal from Endeavour Mining for a combination between the two companies in an offer which we estimate is worth approximately C$2.5bn.

Explaining that “Centamin has communicated to Endeavour several times its willingness to engage … [in discussion]  … and Endeavour has repeatedly refused to engage in a proper manner and allow the sharing of non-public information in order to better assess the value to shareholders of the potential combination.”

Based upon what it describes as a review of the publicly available information by its financial and legal advisors, Centamin highlights a number of areas in which it believes that “the Proposal is skewed in favour of Endeavour's shareholders and fundamentally undervalues Centamin”

The proposed exchange rate of 0.0846 Endeavour shares for each Centamin share “would result in Centamin shareholders owning only 47% of the shares of the enlarged company. However, Centamin would contribute:

100% of H1 2019 free cash flow[1]

100% of 2018 free cash flow1

100% of H1 2019 dividend distribution1

100% of 2018 dividend distribution1

57% of Measured and Indicated resources2

69% of Inferred resources2”

Centamin’s rebuttal also says that while “Centamin had cash and liquid assets as at 30 September 2019 of US$289 million[2] and no debt, Endeavour had gross debt and financial obligations of US$729 million[3] and net debt of US$599 million[4] as at 30 September 2019 and financial liabilities related to hedging and streaming obligations. Therefore, a significant portion of the cash flows derived from Endeavour's assets will not accrue to shareholders”.

While undertaking to communicate further details on its reasoning, the Board asserts that Centamin’s shares are more liquid than those of Endeavour Mining and concludes that it “believes that the quality of Centamin's asset base deserves a premium”.

Chairman, Josef El-Raghy, confirmed that “The Board strongly believes that Endeavour's proposal significantly increases financial and operating risk without any material benefits to our shareholders. Centamin's stated strategy has always been to maximise returns for all of its shareholders, having returned approximately US$500 million to shareholders since 2014. In addition, despite numerous requests, Endeavour has refused to enter into a customary non-disclosure agreement to allow the Board to further assess the Proposal. It is the Board's belief that the Proposal made by Endeavour sits in stark contrast with Centamin's strategy and we strongly advise our shareholders to take no action."

Conclusion: The first exchanges between the two companies reveal that previous discussions have proved fruitless. If Endeavour Mining proceeds with a formal offer and Centamin provides an in depth response this will take some time and provide the shareholders with a wealth of information to make a considered decision on the merits or otherwise of combining the two companies. We do not expect a speedy resolution.

 

Bluejay Mining* (LON:JAY) 8.6p, Mkt Cap £80.1m – Rio Tinto shuts Richard’s Bay as violence escalates

(Dundas Ilmenite project, Greenland, 100% owned)

Rio Tinto has long had a love-hate relationship with South Africa with maybe less of the love and more of the other bit as the nation is not really their sort of place from an operational perspective.

News today that Rio’s has halted its Richards Bay operation due to an escalation of violence and criminal activity in surrounding communities towards RBM employees will shock the market though close observers will note that Richard’s Bay has long struggled with violence and murder within local communities.

Rio reports an escillation of criminal activity towards Richard’s Bay Minerals ‘RBM’ employees with an employee shot and seriously injured in the last few days.

Rio’s has halted mining as a result and is operating it’s RBM smelters at reduced levels with a minimum number of employees now on site.

Construction of RBM’s US$463m Zulti South project has also been paused.

The problem for RBM is that it is the only major employer in a region of high unemployment, poverty and tribal traditions.

The Mail & Guardian in South Africa report that funds to one of the tribal groups has been held up over succession issues relating to the Mbuyazi clan. Three other tribal clans receive funds from RBM. The negotiations may be part of the violence against RBM employees in the area.

The move means that Rio’s taitanium dioxide slag production is now expected to be at the lower end of 2019 guidance of 1.2-1.4mt indicating that this will impact pigment and paint producers.

The situation is somewhat ironic as RBM won the top employer award for the fourth year running with RBM, outperformed other certified average top employers.

In the meantime Base Resource’s Tolliara project may suffer some delay in Madagascar due to government interference relating to some minor local issues.

The situation reminds us of Jeremy Clarson’s article in in the Sunday Times this weekend commenting on the beauty of Madagascar.

I quote: “Shortly after the 70-strong crew arrived, all of the under-25s took to their beds with upset tummies. I mocked them for their millennial fraility, but two days later I too was struck with an urgent need to visit what passed on our campsite for a lavatory. I have a cast-iron constitutio. I could lick a Turkish urinal dry and not suffer any ill effects but there I became a human hosepipe.”

Conclusion: Rio Tinto may look to help BlueJay accelerate the Dundas ilmenite project to help protect supplies of ilmenite feedstock in a market which is expected to become tighter in terms of mine supply.

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

 

Firestone Diamonds (LON:FDI) 0.475 pence, Mkt Cap £3.1m –Restoration of grid power  at Liqhobong

Firestone Diamonds reports that grid power has been restored at its Liqhobong diamond mine in Lesotho production has resumed at its 75% owned Liqhobong mine in Lesotho following disruption as a result of the start of a two-month long shutdown of power from the Muela hydropower dam for maintenance which required the installation of diesel generating capacity.

The company reports that the processing plant is now able to operate at full capacity.

“The power interruption occurred from 1 October and the processing plant resumed production on 26 October when diesel generators were commissioned, which provided sufficient power for the plant to operate at between 80% and 90% capacity. Additional costs associated with operating the rented diesel generators during this period were approximately US$1.1 million and an insurance claim in respect of the loss of profit and the additional operating costs is in the process of being compiled.”

 

Premier African Minerals* (LON:PREM) 0.117p, Mkt Cap £12.9m – MNH investment

Premier African Minerals reports that it has agreed to amend the terms of its loan agreement with MN Holdings (MNH) in order to convert its loan into a 10% equity interest.

MNH operates the Otjozondu manganese mine in Namibia and the investment appears consistent with the company’s strategy to diversify into cash generating assets in preference to development projects.

Commenting on what he described as a potentially “transformational” development, Chief Executive, George Roach, said that “We believe that Otjozondu is a standout asset in a manganese district. Not only that, there are significant potential synergies and other benefits in this association.”

He went on to describe Otjozondu as “a very well equipped owner-operator open pit mining contractor and this expertise has the potential to complement and reduce operating costs at  RHA as soon as RHA is back in production, and Zulu both during exploration and mining phases”.

Conclusion: The association with MNH strengthens the management expertise available to Premier African Minerals which the company sees benefitting both its restart of the RHA tungsten operation in Zimbabwe and its Zulu lithium exploration efforts.

*SP Angel have an agreement with Premier African Minerals as a result of the acquisition of Northland Capital Partners

 

Rio Tinto (LON:RIO) 4206, Mkt cap £71.1bn – Richards Bay suspension and investment at Kennecott

Rio Tinto reports that it is suspending operations at Richards Bay Minerals in South Africa in response to rising levels of criminality and violence in surrounding communities which has seen one of its employees “shot and seriously injured in the last few days”.

Stressing that the safety of its employees was paramount, chief executive of Energy and Minerals, Bold Baatar, said that “we have taken decisive action to stop operations to reduce the risk of serious harm to our team members.”

He went on to explain that “We are in discussions with the local communities, regional and national governments, and the police in order to find a way to address the safety and security issues. Our goal is to return RBM to normal operations in a safe and sustainable way. We would like to acknowledge and thank the police and authorities for their support”.

In a separate announcement yesterday, Rio Tinto also announced plans to invest US$1.5bn to expand Kennecott’s Bingham Canyon copper mine in Utah.

According to Rio, this investment will extend the mine life from 2026 to 2032, with the potential to keep it operational thereafter.

Rio Tinto expects to produce 1 million mt of refined copper at Kennecott between 2026 and 2032 as a result of the investment (S&P).

The Kennecott mine produces nearly 20% of the US copper production, and Rio operates one of three US copper smelters at the site.

 

Sunrise Resources Plc (LON:SRES) 0.105 pence, Mkt Cap £3.3m – CS Project permitting delay

Sunrise Resources reports a delay in permitting its proposed CS Pozzolan-Perlite Project in Nevada which is now expected to be completed in early 2020.

The delay is attributed to the Bureau of Land Management introducing “additional information reporting requirements for one of the Company’s Supplemental Environmental Reports”.

Commenting on the slower than expected progress, Executive Chairman, Patrick Cheetham, said “Whilst any delay outside of our control is frustrating, all other aspects of the BLM permitting are now at an advanced stage and this delay is not expected to materially impact the Company's production planning.”

Mr. Cheetham went on to explain that “In the meantime, the Company continues to progress discussions with likely offtake customers and continues to be encouraged by the growing interest in our pozzolan and perlite products.”

 

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

 

Arc Minerals* (LON:ARCM) – Arc Minerals acquires an additional 5% of Zaco

Centamin (LON:CEY) – Advises rejection of unsolicited proposal from Endeavour Mining

Continental Gold (CVE:CNL) – Recommended offer from Zijin Mining

KEFI Minerals* (LON:KEFI) – Drilling at Hawiah returns high grade copper intersections

Mkango Resources* (LON:MKA) – Q3 Results and update

 

Mexican police force orders 15 Tesla Cybertrucks (Electrek)

The mayor placed the reservation as he believes the truck has great potential as a local police and municipal vehicle.

The vehicles will be utilized for heavy tasks such as pulling “water pipes and garbage containers”.

The reservation cost the municipality about MXN$30K or a little over US$1,500.

 

Trump to hit Brazil and Argentina with steel and aluminium tariffs (FT)

President Trump has reignited trade tensions, as he accuses Brazil and Argentina of a ‘massive devaluation’ of their currencies that hurts US farmers.

The move could also be related to the two economies building closer ties with China.

The announcement saw US and European equities suffer their largest one-day falls since early October.

The S&P 500 fell 0.9%, Europe’s Stoxx 600 index fell 1.6% and the dollar was down 0.5%- the most in three months.

Whilst both countries were initially shielded from US tariffs, the US-China trade war has caused Trump to restore the countries as targets.

Brazil’s exports of farm products such as soybeans to China have grown rapidly since the trade war began undermining Trump’s efforts to sell US agricultural products into the region

Trump is also taking more stringent measures to protect US manufacturing.

The Brazilian real slumped to a record low against the dollar last week.

The Argentine peso has lost nearly 60% of its value against the dollar this year due to the election of Alberto Fernandez as president and disgraced former president Cristina Fernandez de Kirchner who is on trial for corruption.

 

Standard Lithium completes US pilot plant (Arkansas Business)

The Canadian company which plans to extract saltwater for lithium, has completed an industrial- scale test extraction plant near El Dorado.

The test plant is part of an existing plant belonging to Lanxess Corp, who extract bromine from the Smackover brine formation.

The pilot plant will now attempt to extract lithium by running brine already pumped through Lanxess’ bromine- extraction process.

The company’s PEA contemplates the production of 20,900t of battery-quality lithium carbonate from existing brine flow, roughly five times greater than the existing US production (Chem Eng Online).

 

Dow Jones Industrials -0.96% at 27,783

Nikkei 225 -0.64% at 23,380

HK Hang Seng -0.20% at 26,391

Shanghai Composite +031% at 2,885

FTSE 350 Mining -1.28% at 18,119

AIM Basic Resources -0.32% at 2,052

 

Economics

US – President Trump reinstated tariffs on steel and aluminium from Argentina and Brazil arguing countries benefited from devaluation in their currencies that hurt competitiveness of US farming goods.

Additionally, the US threatened to levy $2.4bn worth of French products with tariffs over a dispute relating to the digital services tax charged on US companies.

“USTR’s decision to day sends a clear signal that the US will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies,” Lighthizer said in Monday’s statement.

“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies.”

Tariffs would be imposed following a public comment period that is due to be finished in early 2020 and could target sparkling wine, cheeses, handbags and makeup.

 

China – The government is planning to publish a list of “unreliable entities” that could lead to sanctions against US companies, according to Chinese state media.

The blacklist is reported to have been sped up in response to a bill supported by Republican Senator Marco Rubio involving sanctions against Chinese officials involved in alleged abuses of Uighur Muslims in the far west region of Xinjiang.

The US House of Representatives is expected to vote on the new version of the bill today.

 

South Africa – The economy underperforms estimates posting a negative quarterly reading in Q3/19.

Farming, mining and factory production dropped during the quarter putting the target for a 0.5% increase in GDP in 2019 under question.

Weak data risks the nation losing its last investment grade rating with Moody’s.

The rand is down 0.5% this morning on the news.

GDP (%qoq (annualised) and $yoy): -0.6/+0.1 v 3.2/0.9 in Q2 and 0.0/0.4 forecast.

 

Chile – The government announced a $5.5bn stimulus package yesterday as economic activity declined sharply in October.

The Imacec index, a proxy for GDP, dropped 5.4%mom and 3.4%yoy in October amid violent protests that kicked off in the middle of the month.

 

Currencies

US$1.1083/eur vs 1.1013/eur yesterday.  Yen 109.08/$ vs 109.65/$.  SAr 14.564/$ vs 14.697/$.  $1.299/gbp vs $1.291/gbp.  0.686/aud vs 0.678/aud.  CNY 7.046/$ vs  7.042/$.

 

Commodity News

Gold US$1,464/oz vs US$1,456/oz yesterday

Gold ETFs 81.1moz vs US$81.3moz yesterday

Platinum US$901/oz vs US$895/oz yesterday

Palladium US$1,858/oz vs US$1,846/oz yesterday

Silver US$16.95/oz vs US$16.86/oz yesterday

           

Base metals:   

Copper US$ 5,834/t vs US$5,873/t yesterday

Aluminium US$ 1,790/t vs US$1,753/t yesterday

Nickel US$ 13,690/t vs US$13,660/t yesterday

Zinc US$ 2,219/t vs US$2,265/t yesterday

Lead US$ 1,894/t vs US$1,921/t yesterday

Tin US$ 16,570/t vs US$16,400/t yesterday

           

Energy:           

Oil US$61.1/bbl vs US$62.0/bbl yesterday

Natural Gas US$2.384/mmbtu vs US$2.353/mmbtu yesterday

Uranium US$25.95/lb vs US$25.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$86.4/t vs US$84.6/t – Chinese iron ore futures rebound as Vale cuts production outlook (Reuters)

January 2020 Iron ore futures on the Dalian Exchange rose as much as 2.2% to $32.98/t, recovering after a 0.8% decline in the previous session.

The world’s largest iron ore producer slashed its output predictions yesterday, as it evaluates the stability of the Laranjeiras dam.

This will leave Vales largest mine in Minas Gerais state, Brucutu, operating at 40% of normal capacity.

Vale lowered its iron ore production for Q1 2020 to 68-73mt from a previous range of 70-75mt.

Meanwhile, Chinese iron ore inventories are nearing 10 week lows, and are more than 14mt lower than this time last year (Hellenic Shipping News).

Chinese steel rebar 25mm US$602.0/t vs US$604.5/t

Thermal coal (1st year forward cif ARA) US$62.8/t vs US$62.9/t

Coking coal futures Dalian Exchange US$188.0/t vs US$188.2/t

           

Other:  

Cobalt LME 3m US$35,750/t vs US$35,750/t

NdPr Rare Earth Oxide (China) US$40,661/t vs US$40,400/t

Lithium carbonate 99% (China) US$6,387/t vs US$6,532/t

Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$29.0/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$225-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

 

Battery News

 

Company News

Arc Minerals* (LON:ARCM) 2.5p, Mkt Cap £18.4m – Arc Minerals acquires an additional 5% of Zaco

Arc Minerals holds an effective 71.34% interest in Zamsort Limited ("Zamsort"), a private company focused on a prospective copper licence in the Zambia Copperbelt, together with a convertible loan to Zamsort which converts into approximately a 5% additional equity interest in Zamsort. A 52.5% equity interest in Zaco Limited (“Zaco”), a private company focussed on a prospective copper and cobalt license adjacent to Zamsort.

Arc Minerals reports that it has acquired an additional 5% interest in Zaco bringing it interest to 52.5%

Zaco owns the 448km2 license adjacent to Arc Minerals’ Zamsort property in Zambia

This gives the board of Arc control over the exploration assets within Zaco and the ability to forge joint venture’s on the assets with major mining companies

The 5% stake cost just US$37,500 valuing Zaco at US$0.75m.

The stake was bought from Mumena Mushinge, a Non-Executive Director of Arc

Commenting on the acquisition, Executive Chairman, Nick von Schirnding confirmed that “we have increased our stake in Zaco to 52.5% giving us a controlling interest in this exciting prospect, which contains a number of anomalies which we are drilling.”

Recommendation: we recommend Arc Minerals as a Strong Buy due to its potential for a major copper discovery at the Cheyeza and at its other projects in Zambia.

Any significant copper discovery is likely add significantly to the company’s value once the market recognises the value of the discovery on further drill results and resource estimation.

Discoveries in Zambia in recent years include Sentinel in 2014 with 939mt grading 0.49% copper just 40km away from Kalaba. Sentinel is producing >190,000tpa of copper.

Lumwana, 100km to the east also has a reserve of 758mt grading 0.51% copper and is producing >116,000tpa of copper.

Kiwara PLC, acquired by First Quantum Minerals in 2010 for US$260m with a Kiwara estimated resource at Kalumbila of 1.38bt grading 0.78% copper. The resources was later adjusted by FQM to 1.027bt grading 0.51% copper. Last year the mine reported an new resource of 0.88bnt grading 0.53% copper following production of 223,656t of copper in 2018.

Equinox, bought by Barrick Gold for its Lumwana assets in 2011 for $7.8bn post construction with 322mt of copper ore grading 0.73% copper.

Conclusion: Arc has moved to a controlling stake in Zaco in Zambia which helps consolidate its position adjacent to its existing Zamsort licences.

*SP Angel acts as nomad and broker to Arc Minerals

 

Centamin (LON:CEY) 120.9p, Mkt Cap £1,397.6m – Advises rejection of unsolicited proposal from Endeavour Mining

Centamin has advised shareholders to take no action in relation to a preliminary proposal from Endeavour Mining for a combination between the two companies based on an exchange ratio of 0.0846 Endaeavour shares for each Centamin share. Based on Endeavour’s price of C$25.79/share we estimate that the offer is worth approximately C$2.5bn.

In its advice to its shareholders, Centamin says that the offer would “provide comparatively greater benefit to Endeavour’s shareholders” and that the terms “do not adequately reflect the contribution that Centamin would make to the merged entity and that Centamin is better positioned to deliver shareholder returns than the combined entity”.

“Centamin will be making a further announcement with its detailed response in the near future.”

Endeavour Mining however, says that “the Combined Entity will be a compelling investment proposition for both Centamin’s and Endeavour’s shareholders, noting that there is significant overlap between their shareholder registers, as well as an attractive investment opportunity for the broader investor community due to its enhanced capital markets profile” and points to pro-forma gold production of 1.2moz pa (based on current guidance for 2019) all-in sustain costs of US$875/oz and a combined mineral reserve inventory of 15.9moz and 31.9moz of measured and indicated resources.

Conclusion: The offer for Centamin may prove to be an opening salvo in a lengthy struggle to consolidate African gold production -  we await Centamin’s detailed response to Endeavour Mining with interest.

 

Continental Gold (CVE:CNL) C$5.39, Mkt Cap C$1094.9m – Recommended offer from Zijin Mining

Continental Gold, whose principal assets is the 5.3moz Buritica gold project in Colombia, is recommending shareholders accept a C$1.4bn (approximately US$1.06bn) all cash offer from Zijin Mining.

The offer, reported to be at a 29% premium to the VWAP over the last 20 days, values the current 5.3m oz gold resource (excluding a further 21m oz of silver) at approximately US$200/oz of resources and at approximately US$4,200/oz of the projected 250,000oz pa production.

Newmont Goldcorp, plus directors and officers of Continental gold, “collectively holding approximately 21.5% … have entered into voting support agreements to support the transaction”.

As well as offering an up to date insight into current industry valuation yardsticks for gold assets, we anticipate that Zijin’s move may stimulate attention towards the gold exploration potential of Colombia and of the mid-Cauca belt in particular which hosts other deposits including the San Ramon deposit of the former Red Eagle Mining (reserves – 2.4mt averaging 5.2g/t gold), Orosur Mining*’s Anza deposit, where the consultants, MDA have identified a formal “exploration target” of 1.6-2.3mt at grades ranging between 3.2-3.7g/t gold over a small portion of the identified strike extent of the mineralisation, and Metminco’s Miraflores  deposit which, following some 40,000m of drilling, currently reports 877,000 oz of resources.

We note the support of Newmont for the transaction and observe that Newmont is also involved in the advancing of Orosur’s Anza exploration where it can earn an initial 51% interest in the project by spending US$10m over four years and cash payments of US$2m during the first 2 years. Newmont can acquire an additional 14% interest through the sole funding of a further US$20m within 4 years, completing an NI-43-101 level pre-feasibility study and paying a further US$2m cash to Orosur.

Completion of a NI-43-101 feasibility study within a third phase of 4 years gives a further 10% interest bringing Newmont to a 75% interest in the project which is located in the mid-Cauca gold belt approximately 50km west of Medellin and where gold mineralisation has been encountered along 450m of strike length at the APTA zone “immediately north of previous drilling”.

Conclusion: Zijin Mining’s acquisition of Continental Gold may spark further interest in the potential of the mid-Cauca gold belt in Colombia, including Orosur Mining’s Anza project.

*SP Angel act as Nomad and broker to Orosur Mining

 

KEFI Minerals* (LON:KEFI) 1.7p, Mkt Cap £17m – Drilling at Hawiah returns high grade copper intersections

Assay results from two more holes returned high copper intersections at the Hawiah Exploration License in Saudi Arabia.

2.6m at 2.5% Cu, 1.9g/t Au, 17.8g/t Ag and 0.1% Zn from 37m (2m true width, HWD 002);

8.7m at 4.2% Cu, 0.7g/t Au, 15.6g/t Ag and 0.2% Zn from 39m (6m true width, HWD 003).

The VMS mineralisation is reported to be continuous both along strike and down dip and is consistently intersected with drilling at the 1.5km long southern part of the 5km long outcropping gossanous ridge.

Remaining assay results for nine drill holes completed to date are pending, although, sulphide mineralisation is seen within the core.

Additionally, the Company is awaiting results on drill holes that tested the presence of supergene enriched gold in the weathered horizon of the ridgeline (within 20-40m from surface).

Conclusion: This is a good set of drilling results showing high grade copper intersections along with good gold grades as drilling consistently intersects sulphide mineralisation. The management believes Hawiah may represent a large VMS system with supergene enriched oxide gold zone at surface overlaying copper/gold/zinc sulphide mineralisation at depth.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Mkango Resources* (LON:MKA) 7.35p, Mkt Cap £9.8m – Q3 Results and update

Mkango Resources has reported a loss of US$1.1m for the three months to 30th September (2018 – loss of US$2.8m) bringing the year to date loss to US$2.2m ( 2018 – loss US$5.9m) as it progresses the feasibility study for the development of the Songwe Hill rare earths project in Malawi.

The study is being funded by being funded by Talaxis Limited under its earn-in agreement with Mkango Resources which gives Talaxis the right to earn a 49% interest in the project through the feasibility study and with the option to increase its holding by a further 26% to 75% by arranging funding for project development including funding the equity component.

Following the receipt, March 2019, of the third tranche of the Talaxis investment (£7m), the company reports a 30th September cash balance of US$10m.

The feasibility study is being run by SENET Engineering as project manager. SENET has a well established track record of project evaluation and development in Africa having successfully delivered some 500 African assignments and “has longstanding experience in project management and in providing detailed multidiscipline engineering, procurement, logistics management, and construction services to the mining, mineral processing, infrastructure and materials handling industries. It has extensive project and construction experience throughout Africa and boasts the largest and most advanced hydrometallurgical process engineering team on the continent.”

The company reports the shipment of a 60 tonne bulk sample of the mineralisation to Australia for pilot scale metallurgical testing, focussed on flotation and hydrometallurgical evaluations, and “Potential pilot facilities have been reviewed and a tender process for selection of a flotation pilot facility has commenced.”

Environmental Social Health (ESHIA) and related studies are also underway and are “being completed in accordance with World Bank Standards and Equator Principles”

On other projects, exploration of the Thambani licence, also in Malawi, is “focused on further definition of uranium, tantalum and niobium mineralisation in the licence area.”

Conclusion: Feasibility study work on Mkango Resources’ Songwe Hill rare earths project is advancing with bulk sample testing at the pilot scale in Australia, a technical study team under the management of SENET Engineering and ESHIA studies are underway.

*SP Angel act as Nomad and broker to Mkango Resources.

 

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.

 

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