SP Angel . Morning View . Tuesday 14 01 20
Expectations for trade deal and China trade data lead market
MiFID II exempt information – see disclaimer below
Anglo Asian Mining* (LON:AAZ) – 81.4koz GEOs produced in FY19 with net cash position up at $21.1m
Orosur Mining* (LON:OMI) – Q2 results highlight Newmont’s continuing interest in Anzá
Rambler Metals & Mining* (LON:RMM) – Off-take partner financing facility
Savannah Resources* (LON:SAV) – Mining licence issued at Mutamba
Serabi Gold (LON:SRB) – Over 40,000oz gold production for the first time in 2019
Strategic Minerals* (LON:SML) –Cobre magnetite sales
Dow Jones Industrials +0.29% at 28,907
Nikkei 225 +0.73% at 23,025
HK Hang Seng -0.24% at 28,885
Shanghai Composite -0.28% at 3,107
FTSE 350 Mining +0.26% at 19,401
AIM Basic Resources +0.15% at 2,115
Global debt-to-GDP climbed to an all-time-high of 322% in Q3/19, according to the Institute of International Finance.
Debt in all categories including consumer credit, corporate bonds and government borrowing climbed on the previous year.
Debt was up ~$10tn to 252.6tn compared to Q3/18.
“While borrowing costs remain very low, many countries are finding a debt-driven growth model increasingly difficult to maintain… the 2020s are likely to see a greater incidence of debt distress and restructuring,” MD of global policy initiatives at the institute Sonja Gibbs said.
Total debt is expected to exceed $257tn this quarter on the back by “low interest rates and loose financial conditions”.
China auto sales expected to fall 2% in 2020 (Auto Blog)
The China Association of Automobile Manufacturers (CAAM) expects a 2% fall in vehicle sales, following the 8.2% drop last year.
Sales were constrained by new emissions standards in an economic downturn, exacerbated by the ongoing trade war with the US.
New electric car sales jumped 62% in 2018, however a subsidy cut at the end of last year has dampened the outlook for electric vehicles- which saw sales plummet 27.4% in December and resulting in an overall 4% decline in 2019.
GM reported a 15% dorp in China sales, while VW reported a 1.1% YoY fall in sales and expect the market to stagnate for the next five years.
Tesla looks to have a more positive outlook, who began delivering Model 3’s from its $2bn Shanghai plant this month.
Despite the drop in auto sales, Second-hand car sales increased 5% YoY to a record 13.2m in the first eleven months of 2019 (FT).
China – The renminbi climbed to a five-month ahead of the US-China Phase One deal completion later this week.
Additionally, the Trump administration removed the label of the country as a currency manipulator that was first introduced in August after the Chinese central bank allowed to weaken past the 7.0 mark.
“(China) made enforceable commitments to refrain from competitive devaluation” US Treasury Secretary Mnuchin commented on the news adding that the country moved closer to the broader agreement on trade.
Exports and imports in China climbed more than expected suggesting a lower pressure from the trade war towards the end of last year.
Outbound shipments posted the first yoy increase in exports since the last July.
Exports (%yoy, US$ terms): 7.6 v -1.3 in November and 2.9 forecast.
Imports (%yoy, US$ terms): 16.3 v 0.8 (revised from 0.3) in November and 9.6 forecast.
Iran – The government arrested an undisclosed number of suspects accused of a role in shooting down a Ukrainian airplane in an effort to cool down street protests.
US$1.1135/eur vs 1.1120/eur yesterday. Yen 110.04/$ vs 109.83/$. SAr 14.429/$ vs 14.366/$. $1.297/gbp vs $1.298/gbp. 0.690/aud vs 0.691/aud. CNY 6.885/$ vs 6.889/$.
Gold US$1,543/oz vs US$1,548/oz yesterday
Gold ETFs 81.1moz vs US$81.2moz yesterday
Platinum US$969/oz vs US$968/oz yesterday
Palladium US$2,145/oz vs US$2,118/oz yesterday
Silver US$17.75/oz vs US$17.94/oz yesterday
Copper US$ 6,285/t vs US$6,205/t yesterday – New York copper hits eight month high (mining.com)
Copper for delivery in March closed at $6,314/t, an eight month high and up 3% from 2019’s closing level.
On Monday, the US treasury lifted China’s designation as a ‘currency manipulator’, aimed at easing tensions ahead of the phase-1 trade deal.
China consumes half of the world’s copper, and the dispute with the US has weighed on the copper market, which is sensitive to broader economic conditions.
Copper inventories in New York, Shanghai and London have shrunk 37% since July to under 300,000t (Bloomberg).
Chinese copper imports hit highest since 2016 (Reuters)
China’s unwrought copper imports rose 9.1% from November to December, reaching their highest level since March 2016.
Imports stood at 527,000t last month compared to 483,000t in November, and up 22.8% from December last year.
Full year unwrought copper imports were down for the year, at 4.98mt vs 5.3mt in 2018, a 6% drop.
Aluminium US$ 1,796/t vs US$1,797/t yesterday
Nickel US$ 13,725/t vs US$14,300/t yesterday
Zinc US$ 2,359/t vs US$2,351/t yesterday
Lead US$ 1,914/t vs US$1,906/t yesterday
Tin US$ 17,385/t vs US$17,285/t yesterday
Oil US$64.0/bbl vs US$65.1/bbl yesterday
Natural Gas US$2.198/mmbtu vs US$2.215/mmbtu yesterday
Uranium US$24.50/lb vs US$24.50/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$93.4/t vs US$92.1/t – Chinese iron ore imports rise to second-highest ever in 2019 (Reuters)
China’s iron ore imports rose 0.47% in 2019 to just below the all-time annual peak, fuelled by a second half recovery in shipments after disruptions earlier in the year.
Iron ore imports were 1.069bt in 2019 vs 1.064bt in 2018, and just below 2017’s all time peak of 1.075bt.
Iron ore purchases rose 11.8% in December to 101.3mt compared to the previous month, the highest monthly imported level in 27 months.
Chinese steel rebar 25mm US$572.2/t vs US$572.0/t – China finished steel export fell 7.3% last year to 64.29mt vs imports of 12.30mt down 6.5% yoy
December finished steel exports fell 15.8% yoy to 4.68mt though this was
The figures are hit by US tariffs and by a slowdown in general construction growth
Thermal coal (1st year forward cif ARA) US$64.9/t vs US$65.2/t
Coking coal futures Dalian Exchange US$179.9/t vs US$179.8/t
Cobalt LME 3m US$32,750/t vs US$32,750/t
NdPr Rare Earth Oxide (China) US$40,521/t vs US$40,568/t – Chinese annual rare earth shipments at lowest since 2015 (Reuters)
Annual shipments sank to their lowest level in four years in 2019, due to weaker global manufacturing demand.
Full year rare earth shipments came in at 46,330t in 2019.
December saw exports bounce back from a four-and-a-half year low the previous month as buyers ramped up purchases ahead of the Lunar New Year Holiday.
China exported 3,657t in December vs 2,636t in November, a 39% increase.
Lithium carbonate 99% (China) US$5,592/t vs US$5,588/t
Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.5/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 – Western Australia considering 20,000tpa graphite facility (Australian Mining)
GR Engineering Services and EcoGraf are in talks to construct the facility in Western Australia.
The companies have been working with the Western Australian government, and have finalised arrangements for a 6.7 hectare site in Kwinana at an estimated cost of US$22.8m for an initial 5000tpa capacity.
The project would then require a further $49.2m to expand production to 20,000tpa of battery graphite.
Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t
Ferro Manganese - ore prices rise 2.2% to €900-940/t in Europe as Chinese steelmakers stock up ahead of Spring Festival (FastmarketsMB)
Manganese ore and manganese alloy prices are reported to have risen since early December.
The majority of manganese is used for alloying construction steel with silico-manganese used for long steel products, wire mesh and reconditioned bar.
While ore and alloy producers have raised prices at least one major European steel producer is looking to extend production cuts in Q1 due to poor demand and lower steel prices.
Summit Nanotech exploring extracting lithium from oil field waste (CBC)
The Company is working with the oil and gas industry in Alberta, which has 3.6mnt of lithium deposits, including the Leduc Formation.
Using nanotechnology to selectively filter lithium from waste saltwater brine.
The Company aims to begin testing the technology at oil field sites by the end of 2020.
Volvo launch their first EV car into India (Inc42)
XC40, the Company’s first fully electric vehicle is to enter the Indian market by late 2021, early 2022.
The car is built on a compact architecture platform (CMA), which reduces the cost of the car to the customer and allows for new models to be developed as a faster rate.
The XC40 Recharge has a range of 400km and when using a fast charger can recoup 80% of capacity in 40 minutes.
Germany – Handelsblatt newspaper reckons >400,000 jobs are at risk in Germany as automakers switch to EV production
New automation, EV simplicity, and disruption caused by the transition of manufacturing is likely to cause significant job losses in Germany and other automotive centres.
BMW and other manufacturers are proudly showcasing robots making electric motors and other parts in contrast to manufacturers in China where manufacture is generally less well automated.
The new automation combined with the ability to ditch complex gearboxes, combustion engines, exhausts systems, fuel tanks, and other many components is going to hit suppliers as the sector transitions.
Further job losses will come as EVs which are simpler in their construction should be more reliable and require significantly less maintenance. Use of regenerative breaking should cut break wear for example.
Altus Strategies* (LON:ALS) 7.5p, Mkt Cap £16m – Publication of a circular with regards to a £6.4m La Mancha equity investment
The Company will be holding a General Meeting of its shareholders on 18 February regarding a C$11.2m/£6.4m equity investment by La Mancha and a 5:1 share consolidation.
On completion of the investment in return for 124m shares at a C$0.09 per share price La Mancha will own ~36.9% interest in Altus.
La Mancha is a well-known mining investment fund with a focus on Africa holding interests in three publicly traded mining companies including Endeavour (29.9%), Golden Star Resources (30.2%) and Evolution Mining (6.6%) (as of Dec/19).
Current investment is the first external investment into the listed mineral exploration sector by the fund reflecting a significant endorsement of the Altus management team and its exploration plans.
The proceeds are to be used for exploration activities across existing Altus portfolio of assets as well as acquisition and development of new targets in line with a project generator business model:
$1.7m planned for exploration and resource drilling programmes at Diba (Gold, Western Mali), Laboum (Gold, Cameroon), Tigray Afar (Copper, Ethiopia) and Daro (Copper, Ethiopia);
$3.0m on generating, developing and acquiring new projects;
$3.7m on working capital.
As part of the deal, La Mancha will have the right to appoint two directors to Altus’ board bringing additional operating and technical expertise within the mining space in Africa and will be locked in for 24 months following completion of the deal.
The Directors unanimously recommended to vote in favour of the deal.
*SP Angel acts as nomad and broker to Altus Strategies
Anglo Asian Mining* (LON:AAZ) 148p, Mkt Cap £169m – 81.4koz GEOs produced in FY19 with net cash position up at $21.1m
Q4 production totalled 21.3koz GEO (Q4/18: 21.9koz) including 17.9koz of gold (Q4/18: 18.2koz), 729t of copper (Q4/18: 588t), and 41.7koz of silver (Q4/18: 65.8koz).
FY19 production amounted to 81.4koz GEO at actual commodity prices (FY18: 83.7koz) including 70.1koz of gold (FY18: 72.8koz), 2,210t of copper (FY18: 1,645t) and 159.4koz of silver (FY18: 210.2koz).
Using commodity prices at the time the budget was prepared ($1,200/oz gold and $6,100/t copper), FY19 output came in at 82.8koz GEOs, in line with the lower end of the 82-86koz GEOs range.
As gold prices outperformed that of copper when compared to budgeted levels, GEOs for a tonne of copper production came down to 4.0oz from 4.9koz accounting for the discrepancy in two FY19s numbers above.
FY19 dore gold production amounted to 64.2koz (FY18: 65.6koz) as higher processed grades and better recoveries at the agitation leaching plant partly compensated for a drop in the heap leaching output.
FY19 stronger copper output is attributed to the benefit of a full year of operation of a dedicated crushing line installed at the floatation plant in Jul/18 allowing to process rich in copper ores separately.
Annual gold bullion sales totalled 54.1koz at an average price of $1,410/oz generating $76m in sales excluding government share of revenues (FY18: 59.5koz at $1,265/oz for $75m) while copper concentrate sales amounted to $17.9m (FY18: $15.4m).
Net cash position climbed by $21.2m as YE19 compared to $6.1m at the start of the year after accounting for $8.7m paid in dividends and $7.5m in taxes during the period.
Outstanding debt stands at $1.7m with the Company expecting to go debt free in February this year.
Conclusion: Robust annual gold and copper production coupled with low unit operating costs see strong cash flow generation from operations at the Gedabek processing complex leaving $22.9m of cash in the bank as of YE19. Excluding corporation tax ($7.5m) and dividends ($8.7m) payments during the year, operations generated $31.3m during the period allowing the Company to go debt free once the final refinancing loan is repaid later next month, enhancing the sustainability of the announced dividend policy as well as providing capacity to carry on with an extensive exploration programme at its prospective contract areas. An update on the latter is due to be announced later this quarter.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Orosur Mining* (LON:OMI) 3.1p, Mkt Cap £5.0m – Q2 results highlight Newmont’s continuing interest in Anzá
In its results announcement for Q2 to 30th November 2019, Orosur Mining highlights the receipt of a further US$690,000 from Newmont Colombia to maintain its Phase 1 commitment to the exploration of the Anza project project.
Under the agreement with Newmont 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.
Disposal of the company’s Uruguayan assets and implementing the Court-approved payment plan with creditors is continuing with 10m Orosur share issued to a trust for the benefit of creditors during December and continuing discussions with IMC International Mining (IMC) “as well as considering alternative options with other potential partners to sell its mining and exploration permits in Uruguay.”
The company reports a 30th November cash balance of US$809,000.
Conclusion: Newmont has paid US$690,000 to maintain its continuing interest in earning up to 75% of the Anzá Gold project in Colombia, where recent work has identified a 450m long zone of gold mineralisation at the APTA zone which lies immediately to the north of previous drilling. The exploration of Anzá remains the core focus for Orosur Mining as it exits Uruguay.
*SP Angel act as Nomad and broker to Orosur Mining
Rambler Metals & Mining* (LON:RMM) 2.45p, Mkt Cap £31.8m – Off-take partner financing facility
Rambler Metals & Mining has announced that its off-take partner, Transamine, has agreed to provide a financing facility of up to US$2m for working capital purposes.
The facility attracts interest at 7%pa and is repayable in nine equal monthly instalments of US$222,000. In addition, Rambler has “agreed to provide Transamine an extension to the current offtake agreement pertaining to concentrates covering an amount not less than 150,000 metric tonnes of copper concentrate”.
Rambler has also renegotiated the terms of “the previous loan for USD $ 4,000,000 from Transamine, announced on 29 December 2017. , wherein Rambler commits to pay off the remainder of the outstanding principal amount at US$130,000 per month at 6.75% interest, commencing at the end of December 2019. The outstanding loan amount at December 23rd, 2019 stood at US$2.331M.”
Describing the relationship with Transamine as “a long-term partnership … built on trust, performance and cooperation” President and CEO, Andre Booyzen, said that the “facility from Transamine will boost our working capital and enable us to further advance our focus on meeting underground development targets, which is critical to achieving our production schedules”.
Conclusion: The additional funding and restructuring of existing loans from Transamine and agreement to extend the existing off-take arrangements strengthens the relationship with Transamine at a time when Rambler Metals is establishing depth extensions to the existing mineralisation at the Ming mine and examining the potential to expand production rates to 2000tpd having successfully established its initial target of a sustainable 1350tpd.
*SP Angel act as Nomad and broker to Rambler Metals & Mining
Savannah Resources* (LON:SAV) 2.85p, Mkt Cap £37.0m – Mining licence issued at Mutamba
Savannah Resources reports that the Minister of Mineral Resources and Energy in Mozambique has issued a third mining licence covering 11,807 hectares of the Mutamba heavy mineral sands project.
The granting of the licence, which is valid until September 2044 and eligible for a possible 25 years extension, completes the pending licence applications following the award of two other contiguous licences in December.
David Archer, CEO, described the licensing process for the Mutamba deposit as “rigorous and demanding but [said that] we have now achieved one of the most important milestones in the orderly progression towards mine development”.
Mr. Archer went on to outline future priorities for Mutamba saying that “In the short term, our focus will be to continue to progress the Mutamba Pre-Feasibility Study ('PFS') towards completion, which, upon delivery, will trigger the increase in our interest in the Project from 20% to 35%.”
Conclusion: The award of the final mining licence in the core area at Mutamba is an important stage in the advancement of the project where completion of the PFS, currently underway, will lead to Savannah Resources increasing its interest to 35%.
*SP Angel acts as Nomad to Savannah Resources
Serabi Gold (LON:SRB) 81p Mkt value £47.7m – Over 40,000oz gold production for the first time in 2019
Serabi Gold reports that final quarter gold production of 10,223oz brought 2019 output to 40,101oz exceeding 40,000oz of annual production for the first time and meeting previously announced guidance in the range 40-44,000oz.
CEO, Mike Hodgson, explained that “Mining and plant throughput rates and grades have remained consistent throughout the year … [and that] … ” With the operation being plant constrained, every hour counts, hence we focus strongly on the quality of the ore feed and maximising plant availability. With the process plant running so well, we look forward to the commissioning of the ore sorter during this quarter”.
Mr. Hodgson also pointed out that the “year on year production improvement was helped by the processing of approximately 30,000 tonnes of stockpiled gold bearing flotation tailings, with this material have gold grades averaging over 4.5g/t”.
Serabi Gold reports a year end cash balance of US$14.3m and that it has “agreed with Equinox Gold Corp to extend the final payment of the deferred consideration due in respect of Coringa to 31 March 2020, as announced in December 2019”.
Recent encouraging drilling and exploration results from Sao Chico, where the lateral extent of the mineralisation has been extended for 200m both east and west of the current mining area and for approximately 100m below the deepest current development and the continuing work to secure permits for the development of Coringa demonstrate the progress made in building the company’s stated objective of 100,000oz of annual gold production by 2024.
The company’s production guidance for 2020 is in the range 45-46,000oz of gold.
Strategic Minerals* (LON:SML) 0.7p, Mkt Cap £10.3m –Cobre magnetite sales
Strategic Minerals reports sales of magnetite during the final quarter of 2019 of 12,202 tons bringing overall sales for the full year to 42,517 tons and realising revenue of US$2.49m for the year.
The December 2019 quarter sales are approximately 12% higher than the 10,931 tons achieved in the December quarter of 2018 and approximately 500 tons lower than the 12,704 sold during the quarter to the end of September 2019.
Referring to the impact of the long-running dispute with its major customer, where an arbitration date is expected to be announced shortly, the company explains that “Sales revenue for the year ended 31 December 2019 was weaker than in 2018 and 2017 due to the adverse impact caused by Cobre’s major client’s diminished purchases”.
The company reports a cash balance of US$0.52m at 31st December 2019 and explains that it is focussing on expanding its sales from Cobre to other customers.
Managing Director, John Peters, explained that “Stable sales volumes and continued organic growth at Cobre provides the Company with a solid foundation from which the Board can look to execute its strategy across the wider portfolio”.
Mr. Peters also underlined that “The key focus in 2020 remains on developing a reliable second income stream from LCCM [Leigh Creek Copper Mines] and SML is engaged in a number of active discussions with potential sources of financing to move its projects forward via a solution which is best for the Company and its shareholders alike”. Although today’s announcement is not specific, we speculate that if the company is successful in raising additional finance some of the proceeds could be deployed to accelerate the assessment of the Redmoor tin/tungsten project in Cornwall.
Conclusion: Despite the forthcoming arbitration with its major customer at Cobre the New Mexico mineral sands business continues to provide cash to Strategic Minerals. The focus on bringing the Leigh Creek copper operation back into production during 2020 should provide a second source of cash generation later this year and continuing discussions with other sources of finance may, if concluded successfully, provide additional impetus to the Redmoor tin/tungsten project in Cornwall
*SP Angel acts as Nomad and Broker to Strategic Minerals
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
Richard Parlons – 0203 470 0472
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
Prince Frederick House
35-39 Maddox Street London
*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.