SP Angel . Morning View . Tuesday 17 12 19
Copper prices break over $6200 as LME stocks draw down
UK stocks pull back on no deal Brexit concerns
MiFID II exempt information – see disclaimer below
Ariana Resources (LON:AAU) – Kiziltepe resource drilling
Condor Gold (LON:CNR) – Sale of the Poterillos concession
Eurasia Mining (LON:EUA) – Monchetundra Flanks license update
KEFI Minerals* (LON:KEFI) – Tulu Kapi funding update, award of 1,200km2 exploration license and a £1.9m equity placing
Renascor Resources Ltd (ASX:RNU) BUY - Valuation A$0.09/s - Siviour graphite DFS demonstrates value - Initiation note
Talga Resources* (ASX:TLG) – Valuation: A$1.80 – Talcoat Commercial Graphene coating trial on cargo ship
On the 12th day of Christmas Labour’s leader said to me:
Twelve crippling tax rises
Eleven acts of anti-Semitism
Ten million Labour voters
Nine years in opposition, another five to come
Eight defections to the Lib Dems
Seven defections to Independent Group
Sixty nine seats lost
Five Zionist plots
Four Brexit excuses
Thirty seven million ‘stupid’ voters got it wrong according to Labour
Two nationalised industries
One new Socialist leader required very quickly
Dow Jones Industrials +0.36% at 28,236
Nikkei 225 +0.47% at 24,066
HK Hang Seng +1.22% at 27,844
Shanghai Composite +1.27% at 3,022
FTSE 350 Mining +0.33% at 18,951
AIM Basic Resources +0.27% at 2,030
Economics
China – Economic growth slow down paused in November as US and China grow closer to striking the phase one deal, the data released yesterday morning showed.
Investments and industrial production stabilised last month posting 5.2% and 5.6% increases YTD, unchanged from the previous month.
Retail sales growth rates were off but only marginally (8.0% v 8.1% in October YTD, but in line with expectations).
EU – Car registration growth came off to 4.9%yoy in November v 8.7%yoy recorded in the previous month.
While the rate compares favourably to the rest of the year and H2/18, YTD sales are still slightly off (-0.3%yoy).
US – PMI measures of business activity held up well through December posting a slight increase and hitting a 5-month high.
New orders, employment, inflation and business outlook all picked up this month which is likely to further strengthen amid positive US/China trade deal negotiations.
“The brighter news needs to be caveated, as the overall rate of economic expansion signalled by the surveys remains well below that seen this time last year, commensurate with GDP rising at an annualised rate of just over 1.5%... the upward trajectory in the surveys is on course to see another year of above—potential GDP growth of approximately 2.2% in 2020,” Markit commented on data.
US homebuilders confidence rises to highest level since June 1999 (Reuters)
The National Association of Home Builders/Wells Fargo Housing Market Index rose 5pts to 76 in December
Prospective buyer interest and current sales conditions also saw their best levels since the 90s.
Confidence and sales is being driven by three successive rate cuts, healthy wage growth and strong jobs numbers.
The latest reading arrives as a trio of Federal Reserve rate cuts pushed mortgage costs lower through the end of the year. The latest jobs data also pointed to the US labor market remaining strong amid trade tensions and a lagging manufacturing sector.
"Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market," NAHB Chair Greg Ugalde said in a statement.
The year-end surge further establishes the housing sector as "the hottest part of the whole economy," Pantheon Macroeconomics Chief Economist Ian Shepherdson said Monday. Homes are many Americans' biggest investments, and the December data signals healthy demand to continue into the new year.
"The consensus was inexplicably soft, given the rising trend in mortgage demand, but this is way better than we dared to hope," Shepherdson said, adding that he expects "further increases in sales and construction activity over the next few months, at least.".
India – Monetary, Fiscal Policy not enough to pull India out of Great Slowdown according to Subramanian and Felman (Bloomberg Quint)
Currencies
US$1.1137/eur vs 1.1130/eur last week. Yen 109.61/$ vs 109.48/$. SAr 14.399/$ vs 14.471/$. $1.322/gbp vs $1.336/gbp. 0.685/aud vs 0.692/aud. CNY 6.999/$ vs 7.004/$.
Sterling pulled back 1.1% against the US$ this morning on the news that PM Johnson is not planning the extension of the 2020 deadline for the Brexit transition period fuelling concerns of a no-deal scenario.
Commodity News
Gold US$1,478/oz vs US$1,476/oz last week - Gold on track for biggest annual rise in nine years (MarketWatch)
The price of gold is on track to end the year more than 15% higher, which would be the biggest annual climb in nine years.
Gold has seen considerable safe haven buying, from investors concerned over low and negative yields in the bond market, along with ongoing macroeconomic and geopolitical uncertainties.
Prices settled at $1,481/oz on Friday, up 15% y-t-d. That would make the largest yearly rise since 2010, when prices climbed nearly 30%.
Gold ETFs 80.9moz vs US$80.9moz last week
Platinum US$930/oz vs US$933/oz last week
Palladium US$1,994/oz vs US$1,959/oz last week - Palladium eyes $2,000/oz mark (Reuters)
The price of palladium is set to break the $2,000/oz mark for the first time, after hitting an all-time peak of $1,998.43/oz earlier.
Prices have increased due to Southern African mines limiting operations due to power shortages, along with continued strong demand for its use in autocatalysts.
Silver US$17.07/oz vs US$16.99/oz last week
Base metals:
Copper US$ 6,207/t vs US$6,179/t last week
Aluminium US$ 1,771/t vs US$1,767/t last week
Nickel US$ 14,190/t vs US$14,180/t last week
Zinc US$ 2,307/t vs US$2,261/t last week
Lead US$ 1,900/t vs US$1,892/t last week
Tin US$ 17,250/t vs US$17,285/t last week
Energy:
Oil US$65.4/bbl vs US$65.3/bbl last week
Natural Gas US$2.321/mmbtu vs US$2.296/mmbtu last week
Uranium US$25.55/lb vs US$25.55/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$92.5/t vs US$93.0/t
Chinese steel rebar 25mm US$575.6/t vs US$581.2/t
Thermal coal (1st year forward cif ARA) US$59.1/t vs US$59.8/t
Coking coal futures Dalian Exchange US$177.8/t vs US$177.0/t
Other:
Cobalt LME 3m US$34,750/t vs US$34,750/t - Tech giants named in US lawsuit over Congolese child cobalt mining deaths (Guardian)
Apple, Google, Dell, Microsoft and Tesla have been named as defendants in a law firm filed in Washington DC by human rights firm International Rights Advocates.
A group of 14 parents and children from the DRC are seeking damages for forced labour, among other human rights violations.
The lawsuit accuses the companies of aiding and abetting in the death and serious injury of children who they claim were working in cobalt mines in their supply chain.
It argues that the companies allowed children to work at mines belonging to Glencore, who sold cobalt to Umicore, who then sold to the accused tech companies.
The suit is the first to target tech companies for their cobalt sourcing practices and raises the pressure on the industry to take stronger action to acquire the metal responsibly (FT).
One of the central allegations in the lawsuit is that Apple, Google, Dell, Microsoft and Tesla were aware and had ‘specific knowledge’ that the cobalt they use in their products is linked to child labour performed in hazardous conditions, and were complicit in the forced labour of the children.
The DRC produces about 60% of the world’s cobalt, of which approximately a third comes from artisanal miners who dig by hand.
NdPr Rare Earth Oxide (China) US$41,362/t vs US$41,617/t - Colorado rare earth processing plant is first one outside of China (mining.com)
USA Rare Earth and Texas Mineral Resources have opened a pilot plant processing facility in Colorado, which will purify rare earths.
The plant will process heavy rare earths (HREE’s) and lithium, along with uranium, beryllium, gallium, hafnium and zirconium.
The plant is the first step in Washington securing domestic supply of the key ingredients for military weapons, electric vehicles and phones.
Building the final plant is expected to cost between $10-12m, and is expected to produce roughly 100kg of REE’s by mid-2020.
The companies plan to move the pilot plant to Texas by 2021 and have full-scale production by 2023.
Lithium carbonate 99% (China) US$5,929/t vs US$5,996/t
Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.7/kg
Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg
Tungsten APT European US$235-245/mtu vs US$235-245/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
Company News
Ariana Resources (LON:AAU) 2.20p, Mkt Cap £23.3m –Kiziltepe resource drilling
Ariana Resource reports results from its recent reverse-circulation resource drilling at Arzu South within the Kiziltepe mine in Turkey where Ariana Resources holds 50% of the Red Rabbit Joint Venture with Proccea Construction.
The drilling has demonstrated “the continuity of the Arzu South mineralised structure at depth which may form the basis for establishing an underground mineral resource. The structure clearly extends to a depth of about 50-100m beneath the bottom of the current open pit”.
Among the results highlighted in today’s announcement are:
A 16m wide intersection at an average grade of 3.04g/t gold and 67g/t silver from a depth of 57m in hole KTP-RC02-19 which also contained a 3m wide zone averaging 1.37g/t gold and 20g/t silver from 51m depth as well as a single metre averaging 1g/t gold an 19g/t silver between 75-76m; and
A 3m wide intersection at an average grade of 6.25g/t gold and 129g/t silver from a depth of 54m in hole KTP-RC08-19 which also intersected single metres averaging 3.34g/t gold and 105g/t silver and 1g/t gold and 46g/t silver at 128m and 131m depths.
Today’s announcement shows mineralised intervals in several other holes including 2m averaging 3.33g/t gold and 110g/t silver from 98m in hole KTP-RC03-19 and 1m averaging 3.40g/t gold and 195g/t silver from 41m in hole KTP-RC04-19.
Dr. Kerim Sener, Managing Director of Ariana Resources confirmed that the company expects to complete a revised mineral resource estimate for Kiziltepe during Q1 2020 “with a view to identifying opportunities to extend mine life beyond the eight years determined in the Feasibility Study.”
Dr. Sener also said that “We look forward to planning this follow-up drilling and also to undertake a new resource estimate for the Kiziltepe Mine, encompassing areas drill-tested in the past year and including all known veins”.
Conclusion: The recent drilling shows depth extensions to the Arzu South system which may, eventually, support a transition to underground mining at Kiziltepe. In the shorter term, we look forward to the revised mineral resource estimate during Q1 2020.
Condor Gold (LON:CNR) 19p, Mkt Cap £18.0m – Sale of the Poterillos concession
Condor Gold has announced the sale of its Poterillos concession in northern Nicaragua to Mako Mining’swholly owned subsidiary, Nicoz Resources for US$600,000 gross (US$555,000 net after tax).
The sale, which is subject to the approval of the Nicaraguan Ministry of Mines and Energy, is expected to be completed by the end of May 2020.
The Poterillos concession comprises 12km2 including the San Albino mine is situated along strike from Mako Mining’s San Albino gold project which, according to Mako Mining’s website contains an NI-43-101 compliant resource estimate of 656,000t of indicated resources at an average grade of 7.13g/t gold and 12.7g/t silver (150,000oz of contained gold and 268,000oz of silver) plus an additional 880,000t classified as inferred at an average grade of 6.78g/t gold (192,000oz) and 10.4g/t silver (293,000oz).
Mako Mining’s website also says that “Construction [at San Albino] has commenced with first gold pour expected by late summer 2020”.
The disposal of the Poterillos concession, which Condor Gold explored “between 2007 and 2009, with a number of channel samples taken on trenches and former mine adits”, underlines the company’s focus on its La India gold project in Nicaragua.
La India has already been granted “an Environmental Permit for the development, construction and operation of a processing plant with capacity to process up to 2,800 tonnes per day with capacity to produce approximately 100,000 oz gold per annum from an open pit mineral reserve of 6.9 Mt at 3.0 g/t gold for 675,000 oz gold. La India Project contains a Mineral Resource of 9,850Kt at 3.6 g/t gold for 1,140Koz gold in the Indicated category and 8,479Kt at 4.3g/t gold for 1,179Koz gold in the Inferred category.”
Conclusion: The sale of Poterillos to the developer of an adjacent project provides Condor Gold with additional working capital and should assist management to concentrate their efforts to advance La India where applications were submitted in November to develop high grade feeder pits which would potentially increase output from around 80,000oz pa to 100-120,000oz.
Eurasia Mining (LON:EUA) 2.7p, Mkt Cap £72m – Monchetundra Flanks license update
Application for Monchetundra Flanks license has been approved by the Russian Ministry of Defence and is currently reviewed by SevZapNedra, the regional licensing agency.
Final approval is expected to be received in due course allowing Eurasia to secure highly prospective and adjacent to the Monchetundra project land package.
The exploration license application is for a 8km2 area covering on-strike continuation at both the Loipishnune and West Nittis deposits that form the 1.9moz Monchetundra project.
Historical exploration data together with the regional geological archive suggest flanks may host some ~13moz in additional mineral inventory potentially significantly expanding the scale of the project.
KEFI Minerals* (LON:KEFI) 1.25p, Mkt Cap £13m – Tulu Kapi funding update, award of 1,200km2 exploration license and a £1.9m equity placing
All the updated shareholder and subscription agreements have been distributed to KEFI project partners last week and are expected to be executed this month.
This will bring the release of the first tranche of the ANS Mining funds of $9.5m allowing to commence phase one of the resettlement programme.
The Ethiopian Government is reported to have already been committed to construction of a new road of 111km connecting the Tulu Kapi project with the main highway.
The Company secured 1,200km2 regional exploration license adjacent to the Tulu Kapi project with exploration works planned to restart in 2020 and funded with a modest part of the Project equity subscriptions.
KEFI announced a £1.9m (gross) equity placing involving 149m new shares issued at 1.25p with one warrant attached to every to placing shares (2p exercise price and 30Arp/20 expiry date).
Proceeds from the placing will allow KEFI to repay currently outstanding amounts drawn under the expensive convertible loan facility and cancel the remaining £3.5m in undrawn balances.
The proceeds will also be used for the provision of working capital ahead of partners’ equity investment in the Tulu Kapi project.
Additionally, the Company will be seeking shareholder approval for the issuance of 149m new shares in respect of outstanding bills (99.6m shares at 1.25p for £1.2m) and accrued directors’ and management fees (49.4m shares for £0.6m).
Subject to shareholder approval, parties receiving those new shares will also get one warrant for every two shares on the same terms (2p exercise price and 30Apr/20 expiry date).
Should everything be approved at the shareholder meeting (6Jan/20), the number of outstanding shares will be 1,298m, up from 1,000m.
Conclusion: The Company is expecting to receive all necessary documentation for the release of $9.5m ANS equity investment this month allowing to kick start Tulu Kapi community resettlement programme. In the meantime, KEFI raised £1.9m in equity placing replacing an expensive convertible loan facility as well as securing working capital as the team readies for the start of development works at Tulu Kapi.
*SP Angel act as Nomad and Broker to KEFI Minerals
Renascor Resources Ltd (ASX:RNU) A$0.012, Mkt cap A$15m - Siviour graphite DFS demonstrates value - Initiation note
BUY - Valuation A$0.09/s
Renascor are developing one of the world’s largest graphite Resources at the Siviour graphite project in South Australia.
DFS indicates low operating costs of US$355/t over the Life of Mine
US$82m capital start-up cost including mining overburden removal
Renascor are looking to develop one of the world’s largest and lowest cost graphite deposits in South Australia.
The deposit is close to flat lying with a significant proportion of the Resource running from 5m below surface with a 1.5:1 strip ratio over the first 10 years. This favourable geometry lowers the cost of mining resulting in a relatively low-cost operation overall.
Metallurgical test work indicates the project is capable of producing graphite products ranging from jumbo flake through to small flake and fine graphite with an average sales price of US$780-944/t as the market for battery anodes matures.
The large and jumbo flake represents >10% of the product and should sell for >US$1,000/t into the market for non-toxic fire-retardant material. This is a specialist market for around 60,000tpa in 2019 is expected to expand to 120,000tpa based on forecasts by Benchmark Minerals.
Medium flake should sell for US$800/t to US$1,000/t and represents some 7% of the product.
Small and fine graphite material represents 72.4% of the material and is expected to sell for US$700/t to US$900/t as the market for spherical graphite for battery anodes expands to feed the new electric vehicle revolution. We have reduced this to US$475/t in our modelling based on our own base-case assumptions.
The graphite market needs new supply to support the expected growth in demand for battery anodes over the next 10 years. Producers will need to gear up on consistent quality small & fine flake to meet rapid expected growth in the market.
Production: Stage 1: 80,000tpa. Stage 2: 144,000tpa
Capex: Stage 1 US$82m first 4 years. Stage 2 Expansion US$54m
Reserve: 45.2Mt grading 7.9% Total Graphitic Content. Resource: 87.4Mt of 7.5%
Renascor own 100% of Siviour Graphite Project
Source: SP Angel figures simplified from the DFS..
*SP Angel acts as broker to Renascor Resources Ltd
Talga Resources* (ASX:TLG) A$0.47, Mkt Cap A$103m – Talcoat Commercial Graphene coating trial on cargo ship
Valuation: A$1.80
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Talga Resources reports the start of a second large-scale trial of its Talcoat graphene coating for shipping.
Talcoat is delivered in the form of a dispersible powder to add graphene to paint and other coatings.
The trial is uses the Talga powder containing graphene to give the primer coating extra strength and durability.
The coating is mixed on site with a commercial coating system before spraying onto the vessel making it simple to use.
This second test uses a two-part epoxy based coating from a different supplier to the first trial to demonstrate the versatility of the product.
The performance of the new coating will be evaluated over the next 12-18 months on a vessel which is 225m long and weighs around 33,000t. The first vessel coated was a container ship.
Conclusion: Talga are working on taking graphene out of the laboratory and into real-world applications. The team are also working on other graphite innovations to diversify and add value to Talga’s graphite products.
*SP Angel acts as UK broker to Talga Resources. An SP Angel analyst has visited the leading battery R&D institution WMG partnering with Talga.
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
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*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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