SP Angel . Morning View . Thursday 23 01 20
Palladium prices continue to hold high levels
MiFID II exempt information – see disclaimer below
Base Resources (LON:BSE) – Quarterly report highlights market conditions continue to support strengthening rutile and ilmenite prices.
Edenville Energy* (LON:EDL) – £700k equity placing and operational/corporate update
KEFI Minerals* (LON:KEFI) – Polymetallic intercepts of up to 5% CuEq returned at Hawiah
Phoenix Copper* (LON:PXC) –Red Star extends known strike length.
World Health Organisation – likely to declare conoravirus outbreak as an International Public Health Emergency
If declared the conoravirus will be the sixth such emergency in the past 10 years
Base Metal prices retreat in Shanghai as coronavirus concerns escalate (Fastmarkets MB)
All base metals were down at the close of morning trading on Thursday in Shanghai, the final trading day before the New Years holidays.
Heightened concerns about the economic impact of a disease outbreak in China has brought about a broad weakness across base metals.
Nickel led the decline, falling to $15,334/t – down 2.3% from Wednesday’s close.
10m EVs expected to be on the roads by the end of this year (Benchmark)
Global investment in renewable energy rose 1% to US$282bn in 2019. Investment expected to rise over $300bn in 2020 adding >200GW of new wind and solar power generation capacity.
VW – reported to be interested in Guoxuan Hi-Tech. which had 13GWh of battery capacity in three factories last year (Benchmark)
Guoxuan Hi-Tech. is reported to have a fourth battery factory planned.
Indian companies to go shopping for lithium and cobalt as the nation risks being cut out of battery materials supply chain (Financial post)
India is very keen to move to electric vehicles as part of cleaning up and developing of its economy
Problem is that it does not currently have the raw materials and in particular the secondary processing to feed the supply chain
China is unlikely to want to see Indian companies competing with its battery and EV manufacturers.
Many Indian states don’t like mining and fewer like the furnaces which are needed to convert lithium into lithium carbonate, hydroxide or metal.
The prime minister unveiled a $1.4bn plan to help make India a manufacturing hub for EVs while cutting taxes on the vehicles.
India’s National Aluminium Co., Hindustan Copper. and Mineral Exploration Corp. have set up a jv called Khanij Bidesh India Ltd. to acquire lithium and cobalt mines overseas while Amara Raja Batteries Ltdis to build a lithium-ion assembly plant.
Suzuki, Toshiba and Denso Corp is also to build a li-ion battery plant.
Critically, Manikaran signed an agreement with Neometals (NMT AU) back in June to evaluate the potential development of a 10,000-15,000t lithium refinery in India.
Indian demand for lithium hydroxide is estimated to be at least 200,000t by 2030 according to Jasmeet Kalsi, director at Manikaran Power Ltd.
India set a target of 30% EV penetration by 2030 last year which could save 474mt of oil and 846mt of C)2 emissions
Dow Jones Industrials -0.03% at 29,186
Nikkei 225 -0.98% at 23,795
HK Hang Seng -1.52% at 27,909
Shanghai Composite -2.75% at 2,977
FTSE 350 Mining -1.42% at 19,083
AIM Basic Resources +0.74% at 2,158
China – Travel restrictions imposed in Wuhan as virus concerns escalate
The city of Wuhan, a city of 11m people, has temporarily shut down its public transport as it tries to halt the outbreak of Coronavirus.
Chinese authorities shut down also and suspended outgoing flights from Wuhan as of this morning, and are in the process of cutting the city off from highways.
So far, there are over 500 confirmed cases and 17 people have died, with all fatalities recorded in Hubei, the province around Wuhan.
Travel restrictions are set to caused social instability in the region, as the Lunar New Year is often the only time of year that many Chinese see their families, and a total of 3bn trips are expected to be made over the period.
Consumer spending is expected to be hit hard in cities where cases have already been confirmed, with hotels and tourism sectors set to suffer.
China’s CSI 300 Index closed 3.1% lower, its worst one-day performance since May and Hong Kong’s Hang Seng fell 1.9%.
China’s onshore exchange rate for the renminbi weakened 0.4% to 6.9296/US$.
Brazil – President Bolsonaro’s popularity surges according to poll on Wednesday
The President’s approval rating has climbed due to an improving economy and government efforts to fight corruption and crime.
The number of Brazilian’s who viewed his government as great or good rose to 34.5% vs. 29.4% in August, and the number of people who see the government as bad or terrible fell to 31% from 39.5%.
Bolsonaro’s personal approval rating jumped to 47.8% from 41% in August.
Economic growth is expected to more than double its pace to 2.3% this year, along with a steady decline in unemployment and a significant drop in the world’s highest homicide rate.
UK – Proposed digital tax to be met by retaliatory US tariffs
The UK has announced it will introduce a digital tax in April, which it hopes will raise £500m a year.
The US sees it as a ‘tax grab’ on American companies such as Google and Amazon.
France announced a similar tax, however appear to have reached a compromise with the US, who threated to place tariffs on $2.4bn of French goods such as wine if Paris did not back down.
Both France and the UK have said that they would prefer an international agreement through the OECD to change the way corporate taxes work on a global level, as digital companies currently shift profits to other countries to cut their tax liability.
US Treasury Secretary Mnuchin threatened arbitrary tariffs on goods from European nations in response, such as UK car exports including Mini, Bentley and Rolls-Royce.
Indonesia – leaves benchmark interest rates unchanged
The government has injected >$1.5bn into the economy this year (Bloomberg)
The rupiah is Asia’s best performing currency and continues to strengthen against the US dollar.
US$1.1082/eur vs 1.1091/eur yesterday. Yen 109.53/$ vs 109.97/$. SAr 14.331/$ vs 14.445/$. $1.312/gbp vs $1.306/gbp. 0.687/aud vs 0.684/aud. CNY 6.932/$ vs 6.903/$.
Gold US$1,554/oz vs US$1,557/oz yesterday - Gold edges lower ahead of ECB policy decision (Reuters)
Spot gold fell 0.2% to $1,556/oz this morning and futures fell 0.1% to just below $1,556/oz ahead of a policy decision by the ECB, however mounting concerns over the Chinese virus outbreak limited losses.
Both the policy decision and virus outbreak are preventing gold going one way or the other, however if the virus is declared a WHO emergency, gold may rise as a result of the economy uncertainty such an announcement would bring.
Gold ETFs 81.8moz vs US$81.7moz yesterday
Platinum US$1,008/oz vs US$1,000/oz yesterday
Palladium US$2,490/oz vs US$2,412/oz yesterday
Silver US$17.70/oz vs US$17.80/oz yesterday
Copper US$ 6,081/t vs US$6,143/t yesterday
Aluminium US$ 1,797/t vs US$1,828/t yesterday
Nickel US$ 13,325/t vs US$13,760/t yesterday
Zinc US$ 2,368/t vs US$2,457/t yesterday
Lead US$ 1,987/t vs US$1,976/t yesterday
Tin US$ 17,145/t vs US$17,670/t yesterday
Oil US$62.5/bbl vs US$64.2/bbl yesterday
Natural Gas US$1.938/mmbtu vs US$1.903/mmbtu yesterday
Uranium US$24.50/lb vs US$24.55/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$94.1/t vs US$94.4/t
Chinese steel rebar 25mm US$568.7/t vs US$571.1/t
Thermal coal (1st year forward cif ARA) US$60.3/t vs US$60.8/t
Coking coal futures Dalian Exchange US$183.6/t vs US$181.0/t
Cobalt LME 3m US$32,500/t vs US$32,500/t
NdPr Rare Earth Oxide (China) US$40,249/t vs US$40,417/t
Lithium carbonate 99% (China) US$5,554/t vs US$5,577/t
Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.5/kg
Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/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
Tesla market cap closes above $100bn for the first time (CNBC)
Tesla’s market cap hit $100bn yesterday, as the share price rose more than 8% in intra-day trading.
The stock has rallied since Tesla reported strong Q3 earnings, and ins now up more than 30% in 2020.
Tesla’s market cap now stands above that of GM and Ford combined, making Tesla the second largest car company behind Toyota (City A.M)
Nissan’s new grading system for used Li-ion batteries would enable the use of second life batteries in industrial and domestic applications. (Science/Business)
Researchers at WMG, University of Warwick were able to achieve the target 1MWh of second life energy storage. (Futurity)
Many Li-ion batteries have enough residual energy storage capacity to be used after the car they powered has been scrapped.
The team developed a system for grading modules in as few as 3 minutes, a process that would previously have taken 3hrs.
Ametek, also involved in the testing, worked with WMG to develop algorithms which they are in the process of implementing into their family of Solartron Analytical Battery Analysers which they “expect will reduce market barriers to second life applications”.
Graded second life batteries could provide reliable energy storage for a range of applications including home storage products and intermittent renewable energy storage on the grid. Nissan is hoping to be in a position to reuse the majority of their battery packs in the EU.
Metal oxide breakthrough produces batteries better suited to EV storage applications (Knowridge Science Report)
The previously undiscovered mechanism traps lithium in the batteries limiting the number of charges/discharges at full power.
Silicon anodes potentially have a capacity 10x times that of graphite-based anodes, but the expansion of silicon as it alloys with lithium stresses the anode. The Rice research team’s test batteries provided stable cycling and good capacity by making the silicon porous and limiting its capacity to 1,000 mAh/g.
The team tested pairing the porous silicon anodes with high voltage nickel manganese cobalt oxide (NMC) cathodes. The Li-ion batteries displayed stable cycling at 1,000 mAH/g over hundreds of cycles.
Those cathodes coated with up to 3 layers of alumina prevented the cathode from breaking down in the presence of hydrofluoric acid and accelerated the battery’s charging speed.
Base Resources (LON:BSE) 13.75p, Mkt Cap £161m – Quarterly report highlights market conditions continue to support strengthening rutile and ilmenite prices.
Base Resources report improved production guidance for 2020 based on improved recoveries and higher rutile in their mineral sands assemblage.
At Toliara, further high-grade mineralisation was recently reported from assays done before the government suspended all on-the-ground activity in November.
The company are in discussions with the government on fiscal terms for the project and no-doubt some other issues in relation to the project.
Base has also postponed completion of a local school, medical facilities and solar pumping equipment in the Toliara area.
Transparency International rate Madagascar at number 158 out of 180 most corrupt nations.
In Kenya a Kwale Operations haulage contractor killed a person on a public road. The company has launched an internal investigation.
There were no injuries or fatalities at the Kwale site. The incident is not said to have impacted production at Kwale.
Cash: Base Resources reports net cash of US$32.6m which was reduced by the payment of US$20.7m in corporate income tax to the Kenya Revenue Authority in the quarter
Cash and cash equivalents are US$47.6m. The company also has a revolving credit facility of US$15m.
Prices: Base reports tight market conditions and ongoing constraints on global supply of sulphate ilmenite and high-grade chloride feedstocks, including rutile.
Underlying demand for pigment remains firm despite global uncertainties causing consumers to hold low pigment stock levels
Underlying consumption of pigments appears sufficient for producers to maintain high production levels driving ongoing demand for feedstock.
Ilmenite: ‘The ilmenite supply deficit, created by strong demand and supply restrictions from major ilmenite-producing regions, continued to support a strengthening ilmenite price through the quarter.”
Ilmenite concentrate price 47-49% TiO2 China: $190-210/t in China (FastmarketsMB)
“Demand for Base Resources’ ilmenite from existing customers remains greater than the Company’s ability to supply and enquiries continue to be received from potential new customers globally.
Tight market conditions for ilmenite are expected to continue through the coming quarter resulting in further price gains.’
Rutile prices also continue to rise supported by ongoing firm demand and constraints though prices are expected to flatten through the start of 2020.
Rutile concentrate price 95%TiO2 fob Australia: $1,250-1,300/t (FastmarketsMB)
‘Major pigment producers are generally optimistic that demand for pigment will grow over 2020.’
Conclusion: Base continue to extend the potential lifespan of their operations in Kenya. Work continues on the assessment of the Toliara project in Madagascar while the ban on on-the-ground activity imposed by the government purely serves to delay the construction of schools, water and medical facilities in a region which desperately needs better education, sanitation and healthcare.
Edenville Energy* (LON:EDL) 0.055p, Mkt Cap £2.8m – £700k equity placing and operational/corporate update
The Company raised £700k through a placing of 1,750m shares at 0.04p, close to the closing price of 0.0475p yesterday.
Additionally, subscribers will receive one warrant (two-year maturity with an exercise price of 0.06p) for every two shares issued.
The funding is expected to provide necessary working capital to meet the current contracted production demands of up to 12,000tpm.
The management forecasts operations to reach cash flow positive status this year.
Since the placing utilises the majority of the existing share authority of the Company, a general meeting will be organised shortly to renew of share authorities enabling warrant holders to potentially exercise their rights.
Brian McMaster, a private investor, subscribed for 750m shares, equivalent to £300k, on the assumption that the Company will repay the £120k owed to him under the Nov/19 loan agreement before Feb/20.
Mr McMaster also agreed to offer a separate loan of £300k at 12% interest to ensure access to sufficient working capital if necessary.
Outstanding debt to Lind Partners currently stands at $737k repayable on a monthly basis at ~$51k per month.
The Company has contracts to supply 12,000t of washed coal per month to industrial customers in Tanzania, Uganda and Rwanda
In addition, the Company received enquiries and in close discussions with other potential purchasers of Rukwa coal.
In particular, the Company lodged a tender to supply 12,000kt of washed coal to a Rwandan power station which given its adjacent location allows for a competitive price offer.
On corporate update, Rufus Short decided to step down from his current role as NED before 31 Mar/20 with the Company looking to appoint new director in due course.
Conclusion: Funds secured are expected to allow the Company to ramp up production towards cash flow positive run rates of 12,000tpm leveraging off optimisation work completed last year including newly developed Northern Area that hosts better quality coal and involves lower waste stripping as well as wash plant improvements.
*SP Angel acts as Nomad and Broker to Edenville Energy
KEFI Minerals* (LON:KEFI) 1.72p, Mkt Cap £22.3m – Polymetallic intercepts of up to 5% CuEq returned at Hawiah
Initial drilling results from the Hawiah VMS project in Saudi Arabia encountered over 4km of consistent VMS mineralisation and returned high grade intersections.
Two zones have been identified including the ‘Camp Lode’ (800m long with an average width of 8m and confirmed to a depth of 275m) and the ‘Crossroads Lode’ (600m long with an average width of 6m and confirmed to a depth of 135m).
Selected intercepts from the Camp Lode include:
16.0m (8.0m true width) at 1.3% Cu, 0.5% Zn, 0.5g/t Au and 9.1g/t Ag (2.0% CuEq) from 151m (HWD-1);
8.4m (6.5m true width) at 4.2% Cu, 0.2% Zn, 0.7g/t Au and 15.6g/t Ag (5.0% CuEq) from 39m (HWD-3);
12.4m (9.0m true width) at 1.3% Cu, 1.3% Zn, 0.7g/t Au and 14.1g/t Ag (2.6% CuEq) from 359m (HWD-5);
7.8m (6.2 true width) at 1.1% Cu, 0.5% Zn, 0.1g/t Au and 5.7g/t Ag (1.4% CuEq) from 50m (HWD-12).
Assay results for the Crossroad Lode are being prepared with selected results to date including:
2.8m (2.2m true width) at 2.5% Cu, 0.6% Zn, 1.6g/t Au and 29.1g/t Ag (4.4% CuEq) from 51m (HWD-17);
12.6m (8.0 true width) at 2.8% Cu, 0.1% Zn, 0.8g/t Au and 13.6g/t Ag (3.5% CuEq) from 73m (HWD-18);
9.8m (6.4m true width) at 1.7% Cu, 0.8g/t Au and 13.6g/t Ag (2.5% CuEq) from 52m (HWD-19).
Both zones remain open at depth and along strike.
Geochemical analysis and volcaniclastic textures in the area point to a potential vent source located below the two zones where typically thicker massive sulphides and stockwork-style sulphide mineralisation is found.
The Company compares the Hawiah deposit to the Al Masane polymetallic VMS mine in southern Saudi Arabia (reserves of 7.21mt at 1.42% Cu, 5.31% Zn, 1.19g/t Au and 40.2g/t Ag).
Following initial exploration results, the Board of G&M, a JV between KEFI and a local partner, has approved a Stage 2 Hawiah drilling programme aimed at delineating a maiden Mineral Resource over the next six months.
KAFI has recently allowed its JV share to be diluted to 37%, down from 40%, in return for funding of G&M operations.
Based on encouraging drilling results, KEFI is not planning to incur more dilution and believes it is in a position to contribute its share of G&M costs going forward.
Conclusion: High grade intersections (up to 5% CuEq) from the Hawiah VMS project sees the Company extending the drilling programme and planning a second phase of works to eventually prepare a maiden mineral resource. The mineralisation remains open along strike and down dip with the management suggesting a potential for thicker massive sulphides and stockwork-style sulphide mineralisation at depth.
*SP Angel act as Nomad and Broker to KEFI Minerals
Phoenix Copper* (LON:PXC) 10.5p, Mkt Cap £4.7m –Red Star extends known strike length.
Phoenix holds 80% of the Empire mining property in Idaho
Phoenix Copper reports that during the construction of drilling access roads it has identified further outcrops of the Red Star vein which now extend the known strike length of the structure, which still remains open laterally in both directions, to 320m.
In addition, the company has identified a further two open-ended veins towards the southeast which appear to be orientated en-echelon to the main Red Star structure and “to define a larger,multi-vein shear zone”.
Results from road cut and trench samples along the extended Red Star Vein show the “geology and geochemistry of the sub-crop intercepts were consistent with the 2018 discovery outcrop channel with silver values ranging from 0.5g/t to 18.5 g/t, lead ranging from 0.001% to 0.705%, and zinc from 0.011% to 1.361%. Gold was anomalous, and manganese 0.031% to 0.769%. … The wider variation in the recent channel sampling results is likely to be due to the highly weathered and broken sub-crop that was exposed in the road cuts.”
In May 2019, based on an initial three drill-holes totalling approximately 144m, the company published an, inferred, resource of approximately 104,000t at an average grade of 173.4g/t silver, 0.85g/t gold with 0.33% copper, 3.85% lead and 0.92% zinc over a limited strike length of the vein.
The company reports that its “focus will be production from Red Star, anticipated in 2021” although it will also “be evaluating alternatives for the Empire Mine’s open pit copper project in an attempt to improve on the revenue, operating and capital cost estimates. The completion of the feasibility study for this project will be accelerated in a more attractive copper price environment.”
Describing future plans to move Red Star towards production, the company says that “During 2020 the Company plans to complete a drilling programme on Red Star to generate a Measured and Indicated resource sufficient to justify a small underground “adit” mine with a flotation process plant to produce lead-silver, copper-gold and zinc concentrates. The scale of operations will be in the region of 450 tonnes of ore a day or 155,000 tonnes a year.” The likely capital cost of such a development is “anticipated to be in the region of US$30m”.
Conclusion: The extension of the known strike length of the Red Star Vein and the identification of additional veins within a potential shear zone gives potential for an increased mineral resource estimate as Phoenix Copper moves towards initial mine production from Red Star expected in 2021.
*SP Angel acts as Nomad and broker to Phoenix Copper
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
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