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Today's Market View - Cora Gold, Magnis Energy Technologies, Teranga Gold and more...

Cora Gold* (LON:CORA) 5.8p, Mkt Cap £7.5m – Exploration update Edenville Energy* (LON:EDL) 0.04p, Mkt Cap £2.2m – New coal supply contracts signed for up to 9ktpm Magnis Energy Technologies (ASX:MNS) A$0.096, Mkt cap A$60m – Magnis executes binding EPC contract with China MCC Renascor Resources* (ASX:RNU) A$0.011, Mkt Cap A$13m – Approval for production for large-scale marketing samples

Cora Gold Limited - Today's Market View - Cora Gold, Magnis Energy Technologies, Teranga Gold and more...

SP Angel . Morning View . Wednesday 11 12 19

Markets rangebound ahead of Fed and ECB policy meetings

MiFID II exempt information – see disclaimer below

 

Cora Gold* (LON:CORA) 5.8p, Mkt Cap £7.5m – Exploration update

Edenville Energy* (LON:EDL) 0.04p, Mkt Cap £2.2m – New coal supply contracts signed for up to 9ktpm

Magnis Energy Technologies (ASX:MNS) A$0.096, Mkt cap A$60m – Magnis executes binding EPC contract with China MCC

Renascor Resources* (ASX:RNU) A$0.011, Mkt Cap A$13m – Approval for production for large-scale marketing samples

Rio Tinto (LON:RIO) 4307.5, Mkt cap £73.0bn – Mongolian Parliament provides greater clarity on Oyu Tolgoi

Savannah Resources* (LON:SAV) 2.3p, Mkt Cap £29.8m – Second mining licence issued at Mutamba

Teranga Gold (CVE:TGZ) C$6.19, Mkt Cap C$666m – Acquiring the Massawa gold project in Senegal

 

Indaba – may be struck with water shortages again as ESCOM load shedding restricts power to Cape Town water works

SP Angel will be at the 121 Mining Investment Conference in Cape Town on 3rd & 4th February

So far the Central Business district has been spared the worst of South Africa’s load shedding due to the city’s instillation of backup power supplies.

Problem is that Cape Town's water and sanitation department has warned that Stage 6 load shedding could lead to interruptions in water supply.

If pumps for water and sewerage systems are left without power for extended periods then the system may fail to function according to the department.

Cape Town has asked residents to use water sparingly and prepare for the possibility of no water for a period of time and to store enough water for drinking, cooking and basic ablution.

South Africa – NUM calls for ESCOM board sacking for load-shedding

The president of South Africa’s NUM has appealed for the board of ESCOM to be sacked for recent power load shedding.

Recent load shedding has caused mined to shut shafts for safety reasons as power is cut for up to four hours at a time .

ESCOM has moved to Stage 6 load shedding hitting industry .

The state utility is now planning for stage 7 and stage 8 load shedding.

 

Dow Jones Industrials -0.10% at 27,882

Nikkei 225 -0.08% at 23,392

HK Hang Seng +0.79% at 26,645

Shanghai Composite +0.24% at 2,924

FTSE 350 Mining +0.81% at 18,216

AIM Basic Resources +0.22% at1,999

 

Economics

US – President Trump has so far not indicated is new tariffs will be postponed while two sides are reported to remain in almost daily contact.

“it’s the president’s decision… I’ve got no indication that he’s going to do anything other than have a great deal or put the tariffs on,” White House Trade Adviser Peter Navarro said.

Meanwhile, Chinese officials expect a delay to new tariffs initially set to come into effect this Sunday.

The US levied a 25% duty on around $250bn of Chinese products and a 15% levy on another $11bn of Chinese imports over the course of a 20-month long trade dispute.

December 15 tariffs are targeting a list of some $160bn of imports including consumer items like smartphones and toys.

Phase One discussions are focused on reducing those rates by as much as half.

On a separate issue, US House of Representatives is set to vote on a new agreed USMCA trade agreement next week.

President Trump welcomed the final overhaul of the NAFTA accord that has been subject to negotiations and changes for more than a year.

The announcement of the agreed deal came the same day as US House Democrats unveiled two articles of impeachment charging President Trump with abuse of power and obstruction of Congress.

 

China – Money supply numbers released yesterday showed a pick up in credit growth in November with bank lending coming in higher than expected and an increase in corporate bond issues.

Total financing totalled 1.75tn, up from 619bn in October and 1.6tn in November last year.

An impressive pick up in lending was driven by an increase in short term loans with longer term financing remaining under pressure which, in turn, argues in favour of monetary easing, Bloomberg reports.

China - libraries seen burning religious publications, deviant papers, illegal publications, picture books, photographs and other books

In a very worrying move libraries in northwest China have been seen burning books that are seen as politically incorrect or religious to show loyalty to the Communist Party. 

China is seen as increasingly regulating content available to young people including online content and video games.

Officials called for an overhaul of ‘patriotic education’ in schools as the of censorship appears to rise.

Books deemed ‘improper’ for students as well as those that are outdated and ‘of no value’ have been ordered to be taken out of circulation and stored at a different location by end-March.

 

The Asia Development Bank cuts its economic growth forecasts for two of the region’s largest economies to below 6% next year.

Chinese economy is expected to grow 6.1% this year and 5.8% in 2020, marking a downgrade from 6.2% and 6.0%, respectively, in September projections.

The downwards revision is driven by negative effects of the trade war and weaker domestic demand.

India’s growth was cut to 5.1% (FY20) and 6.5% (FY21) compared to 6.5% and 7.2% estimated previously

Weaker dynamic is attributed to a credit crunch and weaker household spending.

 

UK – The pound pulled back from its strongest level since Mar/19 after the latest YouGov poll suggested Conservatives’ lead narrowed down.

The Tories are expected to take 339 of the 650 seats in the House of Commons with Labour securing 231 seats, the SNP having 41 and LibDems taking 15.

This is less than half a majority for Conservatives projected two weeks ago.

The pound was down 0.6% against the US$ following the announcement of results, but has claimed some of its losses back since then.

 

Currencies

US$1.1084/eur vs 1.1079/eur yesterday.  Yen 108.69/$ vs 108.60/$.  SAr 14.786/$ vs 14.669/$.  $1.314/gbp vs $1.316/gbp.  0.683/aud vs 0.682/aud.  CNY 7.040/$ vs  7.039/$.

 

Commodity News

Gold US$1,467/oz vs US$1,464/oz yesterday - M&A in gold sector reaches eight year high (Mining.com)

Pending and completed gold acquisitions have reached about $33bn in 2019, the highest since 2011, as senior producers expect a mild appreciation in the gold price over then next few years (Mining Weekly).

Despite this, deals among all mining companies have declined 29% to $60bn as metal producers are prioritising cutting debt and lifting shareholder returns.

Some analysts believe that the increase in M&A in the gold sector could spill-over to other mining sectors, as higher interest rates and inflation could encourage miners to focus again on pursuing growth, rather than cutting debt.

Falling reserves world wide and the rising costs of gold exploration are a cheaper alternative than expanding reserves of gold through exploration (Fitch).

Gold ETFs 80.9moz vs US$81.0moz yesterday

Platinum US$920/oz vs US$901/oz yesterday

Palladium US$1,901/oz vs US$1,884/oz yesterday - Palladium breaks $1,900 mark

Palladium hit an all-time high of $1,903/oz yesterday, with the price rising for the 13th consecutive session.

The current power crisis in South Africa has exacerbated supply concerns of the autocatalyst metal, as the country produces 40% of the world’s palladium.

Flash floods have caused blackouts, which have caused production cuts for some mining companies this week, with palladium producers Implats and SIbanye-Stillwater affected.

Silver US$16.68/oz vs US$16.65/oz yesterday

           

Base metals:   

Copper US$ 6,116/t vs US$6,097/t yesterday - TcRcs cut by 23% on 2019 benchmark in China annual negotiations for 2020

Aurubis expect stable copper demand despite restrained demand from auto manufacturers

Aurubis are waiting for EU anti-competition regulators to approve their acquisition of Metallo next year following the opening of nvestigation into the takeover of the metal recycling group in November.

Aurubis see ‘fantastic opportunities’ in global recycling of complex raw materials and expects to make further acquisitions in this area.

 

Aluminium US$ 1,753/t vs US$1,756/t yesterday

Nickel US$ 13,470/t vs US$12,965/t yesterday - Indonesia to double royalties from nickel ore (Reuters)

Indonesia will double royalties on sales of nickel ore to 10% and nickel pig iron to 5%, and also adjust charges for other minerals.

The new regulations come into play from Christmas Day, and are aimed at encouraging miners to add value to ores by imposing lower royalties for processed products.

Indonesia is aiming to reduce its reliance on natural resource exports by developing a smelting industry to add value, and will stop exporting nickel ore from January and instead process it domestically.

Zinc US$ 2,229/t vs US$2,230/t yesterday

Lead US$ 1,921/t vs US$1,911/t yesterday

Tin US$ 17,375/t vs US$17,370/t yesterday

           

Energy:           

Oil US$64.1/bbl vs US$64.1/bbl yesterday –

Following the strong rally after OPEC+’s production cuts announced last week, oil prices slipped slightly after industry data showed an unexpected build in crude inventory in the US

Investors continue to wait for news on whether a fresh round of US tariffs on Chinese goods would take effect from Sunday

Brent futures fell by 44 cents, or 0.7%, to $63.90/bbl, whilst WTI slipped by 0.6% to $58.91/bbl, down from a more than two-month high reached on Tuesday

US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view

Gas Price News

Natural gas prices edged higher on yesterday, but overall sentiment continues to point towards the downside

Hedge funds continue to add to short positions in futures and options according to the latest update from Trader’s Report

The Department of Energy is scheduled to release its inventory report on Thursday

Inventories are expected to decline by approximately 52Bcf this week according to the latest forecast from survey provider Estimize

 

M&A activity builds momentum across the sector

UK oil and gas continues to thrive this quarter, demonstrated by the recent £5m Union Jack* (UJO LN) placing which follows Reabold Resources’ (RBD LN) £24m fundraise announced in October, primarily for the same West Newton conventional field onshore UK

Further institutional support has been demonstrated by the £10m raise and IPO of Longboat Energy, or Faroe Petroleum mark II, to build a new full-cycle North Sea E&P

The past 12 months has seen the acquisition of Faroe Petroleum (FPM LN) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA LN) by Seplat Petroleum (SEPL LN); and a £242m bid for Amerisur Resources (AMER LN) by Geopark

 *SP Angel acts as Nominated Advisor and Broker to Union Jack Oil

 

Natural Gas US$2.277/mmbtu vs US$2.222/mmbtu yesterday

Uranium US$25.85/lb vs US$25.85/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$91.3/t vs US$91.8/t

Chinese steel rebar 25mm US$587.1/t vs US$587.1/t

Thermal coal (1st year forward cif ARA) US$59.7/t vs US$59.4/t

Coking coal futures Dalian Exchange US$183.7/t vs US$188.2/t

           

Other:  

Cobalt LME 3m US$34,750/t vs US$34,750/t

NdPr Rare Earth Oxide (China) US$41,122/t vs US$41,127/t - US Army to fund rare earths processing facility (Reuters)

The development of the plant is part of an urgent push by Washington to secure domestic supply of the minerals used to make weapons and electronics.

Earlier this year, Trump ordered the military to update its supply chain for rare earths, complaining of an over-reliance on China.

Responses are due next week from potential industrial partners, Texas Mineral Resources Corp and a joint venture between Lynas and Blue Line Corp are expected respondents.

The Army said it will fund up to 2/3 of a refiner’s cost to produce a plant capable of processing heavy rare earths, which are less-common but highly sought after in weaponry.

Blue Line and Lynas agreed earlier this year to build a rare earth processing plant in Texas, however both companies declined to comment when asked if they will respond to the Army’s request.

Earlier this week, Lynas announced that they were going to build a rare earth processing facility in Kalgoorlie to be completed in 2022/2023 (Perth Now).

Lithium carbonate 99% (China) US$6,037/t vs US$6,038/t

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$5.1/kg

Tungsten APT European US$230-245/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

Germany surpasses Norway in EV sales (Electrek)

Germany has taken the lead over Norway in annual European EV sales since the start of this year, with sales amounting to 57,533 vs 56,893.

Norway has had higher EV sales than every country in Europe until now since 2010, despite having a population of 5.3m which is 1/16 the size of Germany.

Last month, Norwegian EV sales fell 27% and German sales rose 9%, due to seasonal affects in Norway and cash incentives in Germany.

 

Company News

Cora Gold* (LON:CORA) 5.8p, Mkt Cap £7.5m – Exploration update

The Company mobilised RC and DC drilling rigs at the Sanankoro Gold Project in Southern Mali.

This brings the total number of drilling rigs to four as the team is advancing a 5,000m drilling programme.

The programme is focused on selective step out drilling aimed at growing the Sanankoro resource.

In particular, DC rig aims at extensions to known resources at Zone B where access was limited during the previous field season.

Zone B is estimated to host a small yet highest grade part of the maiden mineral resource with 47koz at 2.0g/t delineated in the Inferred category.

Assay results are expected to be released in due course.

*SP Angel acts as Nomad and Broker to Cora Gold

 

Edenville Energy* (LON:EDL) 0.04p, Mkt Cap £2.2m – New coal supply contracts signed for up to 9ktpm

The Company signed two new contracts to supply washed coal to neighbouring Rwanda and Uganda.

Up to 6,000t per month supply has been agreed with a Rwandan company to provide coal to a major local cement producer.

Up to 3,000t per month supply has been signed with a Ugandan company with the end user being a Kampala based steel works.

Rukwa Coal Project benefits from a strategic location close to Lake Tangayika offering more cost effective delivery of coal using barge transport.

Up to 9,000t of washed coal per month covers c.75% of the current capacity with the delivery of production remaining subject to the Company securing sufficient operating capital to fund operations.

The management expects operations to reach cash flow breakeven production run rates of 4.5ktpm by May/20.

Conclusion: Securing contracts for Rukwa washed coal is a positive news and suggests the product is in demand. Team efforts remain focused on ramping up production at the plant to breakeven levels with operations challenged by lack of working capital.

*SP Angel acts as Nomad and Broker to Edenville Energy

 

Magnis Energy Technologies (ASX:MNS) A$0.096, Mkt cap A$60m – Magnis executes binding EPC contract with China MCC

Magnis Energy reports it has executed a Binding EPC Contract with Metallurgical Corporation of China ‘MCC’ for its Nachu graphite project in Tanzania.

MCC is the world’s largest metallurgical construction contractor and operation service provider with >130,000 employees, US$50bn of assets and >US$28bn in revenue

The EPC is for US$227m for a 240,000tpa throughput process plant.

Site clearance started at Nachu back in June with access road construction and site clearing continuing.

Funding applications and negotiation with the China Export Credit Agency have started

Magnis expects >80% of the capital required to be covered by debt or delayed payments

Production is said to be done using sustainable processes.

Conclusion: The signing of the EPC by MCC indicates China is keen to secure greater graphite supply for its growing Li-ion battery industry going forward.

Confirmation of funding from the China Export Credit Agency will further support our view that China is keen to secure more material going forward.

The MCC do not appear to be put off by Syrah’s offtake problems with material from Balma, which may relate to a specific disagreement with its Chinese offtaker or may relate to quality issues.

 

Renascor Resources* (ASX:RNU) A$0.011, Mkt Cap A$13m – Approval for production for large-scale marketing samples

(Renascor own 100% of the Siviour Graphite Project in South Australia)

Renascor report approval from the South Australia Department for Energy and Mining for a 60t bulk sample from the Siviour graphite project in South Australia.

The sample is to be shipped to China for pilot plant production.

Bulk samples and processed samples will be used for marketing for potential end users.

The Siviour DFS estimates by Royal IHC:

Capex:

Stage 1 US$79m for the first 4 years – includes a 10% contingency

Stage 2 US$54m effective from year 5 onwards

Throughput 

Stage 1 825,000tpa

Stage 2 1,650,000tpa

Grade

Stage 1 10.7%

Stage 2 9.1%

Production:

Stage 1 80,000tpa

Stage 2 144,000tpa

Flake distribution:

Jumbo Flake – 4%

Large Flake – 17%

Medium Flake – 7%

Small Flake – 72%

Pricing: Basket price US$804/t – over first 5 years to 2025 and US$925/t over Life of Mine

Jumbo Flake - $1,254-1,450/t

Large Flake - $877-1,047/t

Medium Flake - $780-942/t

Small Flake - $716-863/t

Costs: cash cost:

Stage 1 US$345/t

Stage 2 US$325/t

Valuation – Royal IHC DFS estimates for Siviour:

NPV10% - US$271m post tax

IRR 33%

EBITDA US$58m average LoM

EBITDA margin 57%

Life of Mine est. 40 years

Project cash flow: US$1.5bn est. over 40-year Life of Mine

Conclusion: Renascor report positive feedback from potential off-take and strategic partners looking for longer-term graphite supply for Li-ion anode production.

This tallies with reports from other graphite miners and developing project companies despite the problems reported at by Syrah in relation to offtake from its Balma project in Mozambique.

We expect Renascor to be able to produce good quality spheronised graphite in South Australia where it should have better access to expertise and technology. 

*SP Angel acts as UK Broker to Renascor

 

Rio Tinto (LON:RIO) 4307.5, Mkt cap £73.0bn – Mongolian Parliament provides greater clarity on Oyu Tolgoi

Rio Tinto has reported the formal resolution passed by the Mongolian Parliament instructing the Government “to look for ways to improve the implementation of the Investment Agreement of 2009” relating to the Oyu Tolgoi mine (source: BusinessWire).

The company says that this Resolution “effectively re-confirms the validity of all the investment agreements between the Government of Mongolia, Rio Tinto and Turquoise Hill Resources. This brings to a close an over 18-month review by the Parliamentary Working Group of Oyu Tolgoi and the investment agreements governing the business”.

Noting that “Adherence to these agreements by all parties has underpinned a total in-country spend of around $10 billion since 2010 …” Arnaud Soirat, Chief Executive of Rio Tinto’s Copper and Gold operations said that “There is a lot of work to do to ensure Oyu Tolgoi reaches its full potential and we remain committed to exploring ways to deliver even greater benefits from Oyu Tolgoi to all shareholders”.

The Parliamentary resolution “includes other additional clauses in relation to: exploring options to look at the Mongolian Government’s equity share in Oyu Tolgoi; a re-definition of the reserve report and updated feasibility report; a renewal of the environmental and water assessments…”.

 

Savannah Resources* (LON:SAV) 2.3p, Mkt Cap £29.8m – Second mining licence issued at Mutamba

Savannah Resources reports that the Minister of Mineral Resources and Energy in Mozambique has issued a second mining licence covering 16,126 hectares of the Mutamba heavy mineral sands project.

The granting of the licence, which is valid until May 2044 and eligible for a possible 25 years extension, comes two days after the company was awarded another, contiguous, licence covering 11,948 hectares at Mutamba.

A third licence application which covers 11,807 hectares in the northern and western parts of the project area has been conditionally awarded and “together, the three concessions contain an Indicated and Inferred Mineral Resource of 4.4Bt at 3.9% total heavy minerals.”

David Archer, CEO, described the Mutamba deposit as “one of the most attractive undeveloped mineral sands deposits in the world”

Conclusion: The award of the second mining licence at Mutamba within days of the first is a milestone for the project where completion of the PFS, currently underway, will lead to Savannah Resources increasing its interest to 35%. One further licence remains under application but given the precedent set by the granting of the first two licences we are optimistic that the remaining licence will also be approved in the near future.

*SP Angel acts as Nomad to Savannah Resources

 

Teranga Gold (CVE:TGZ) C$6.19, Mkt Cap C$666m – Acquiring the Massawa gold project in Senegal

Teranga Gold has agreed to acquire Barrick Gold’s 90% interest in the Massawa gold project in Senegal for $380m in a combination of cash ($300m) and shares ($80m). The Government of Senegal holds the remaining 10% of the project.

The project contains a proven/probable reserve of 2.6moz of gold (20.9mt at an average grade of 3.94g/t gold) and lies in close proximity to Teranga Gold’s Sabodala gold mine. The company says that Massawa “is located within trucking distance of Teranga’s flagship Sabodala Gold Mine (“Sabodala”) in Senegal, creating the opportunity for significant capital and operating synergies(3). The proximity of the projects and the combination of Sabodala’s mill and Massawa’s high-grade ore (the “Sabodala-Massawa Complex”) are expected to scale Sabodala into a top tier asset”.

According to Teranga Gold’s presentation (https://s2.q4cdn.com/949220588/files/doc_presentations/2019/12/Massawa-Presentation-Deck.pdf) Barrick’s feasibility study for Massawa indicated that it was expected to produce an average of 203,000oz pa of gold over the first ten years of its life and that a capital expenditure of $413m was expected to generate an after-tax NPV5% of $421m and an IRR of 28% at a $1200/oz gold price.

Teranga Gold’s presentation identifies opportunities for improving the economics in conjunction with Sabodala through reduced capital and operating costs, accelerated production, “with higher grade and longer mine life”.

The sale of Massawa sets a yardstick for current gold transaction in west Africa at approximately $160/oz of attributable proven/probable reserves and around $2,100/oz of annual attributable production.

Massawa was originally a discovery of Randgold Resources which merged with Barrick Gold at the beginning of 2019 and prompted speculation at the time that some of the assets, particularly in Africa, might be considered ‘non-core’ for the enlarged entity which now also has 61.5% of the 1.8moz pa Nevada Gold Mines joint venture with Newmont Goldcorp.

Conclusion: Teranga Gold’s acquisition may provide operating and development efficiencies for Massawa in conjunction with its existing Sabodala operation and it appears that Teranga is benefitting from rationalisation by Barrick Gold following its merger with Randgold Resources and creation of the Nevada Gold Mines joint-venture with Newmont Goldcorp.

 

 

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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