SP Angel . Morning View . Wednesday 12 02 20
Risk sentiment improves on hopes virus impact may be controlled
MiFID II exempt information – see disclaimer below
Anglo Asian Mining* (LON:AAZ) – Debt free status reached
Chaarat Gold* (LON:CGH) – FY19 operational and financial results due next week
Mali Lithium (ASX:MLL) – new presentation highlights benefits of the Goulamina project
Kodal Minerals* (LON:KOD) –
Mkango Resources* (LON:MKA) – Sample results from Thambani
Phoenix Copper* (LON:PXC) – Empire mine environmental studies
SolGold* (LON:SOLG) – Timbara exploration results
China - companies seek billions in loans to cover cost of virus lock-down
Hundreds of Chinese companies are looking for billions of dollars worth of loans to ver the cost of the coronavirus .
Xiaomi Corp, China largest food delivery company and smartphone manufacturer is seeking some $8.2bn in loans to cover additional costs from the virus.
Hundreds of other companies are also looking for state support
The economic cost of the Coronavirus has the potential to further destabilise an economy already weakened by the US trade war requiring the government to pump additional liquidity into the financial system
Disruption in supply chains to manufacturers will cause further major economic impact if the lock-down persists.
Coronavirus: China reported the lowest number of new coronavirus cases since late January with 2,015 confirmed cases on Tuesday taking the total number of infected in China to 44,653.
The news supported earlier claims by Zhong Nanshan, the Chinese senior medical adviser, that the outbreak can peak this month and end by April.
Doubts over the reliability of forecasts remain as many point out that the government changed guidelines on the classification of cases, Reuters reports.
S&P forecasts GDP growth rate to come down by 1pp to 5% this year after taking hit in the first quarter on coronavirus outbreak.
BBC Two program on the Spanish Flu which killed some 50m people at the end of the first world war
The program provides valuable insight on the spread of the virus and how we might manage with a potential Coronavirus pandemic
Dow Jones Industrials -0.00% at 29,276
Nikkei 225 +0.74% at 23,861
HK Hang Seng +0.87% at 27,824
Shanghai Composite +0.87% at 2,927
FTSE 350 Mining +1.42% at 18,319
AIM Basic Resources +0.82% at 2,282
US – Jerome Powell suggested the central bank is examining the potential impact of coronavirus on economic activity but the current monetary policy is appropriate as it is for the time being, Bloomberg reports.
Powell has also stressed that there is a limit to the monetary policy to combat a potential economic downturn with interest rates at low levels arguing for the need of a fiscal policy response.
Fed Chairman comments come in the wake of the President Trump budget released on Monday that would push the gross federal debt above $30tn over the next decade.
Turkey – Recep Erdogan threatened to strike Syrian forces should there be new cases of aggression against Turkish soldiers deployed in Idlib.
Turkey that is allied with some rebel groups opposed to Syrian President Bashar al-Assad launched an offensive on Tuesday after 13 Turkish military personnel were killed by Syrian forces in Idlib in the last 10 days.
Turkish military are determined to push Syrian army beyond Turkish observation posts in the north western Idlib region by the end of February.
The lira is off this morning despite a general optimism and risk on sentiment in markets today.
US$1.0922/eur vs 1.0914/eur yesterday. Yen 110.11/$ vs 109.87/$. SAr 14.746/$ vs 14.876/$. $1.297/gbp vs $1.293/gbp. 0.675/aud vs 0.671/aud. CNY 6.970/$ vs 6.977/$.
Gold US$1,563/oz vs US$1,569/oz yesterday - Anglo Ashanti to sell South African gold assets to Harmony Gold for $300m (Bloomberg)
The company announced today that it will sell its last remaining South African operations to Harmony Gold for about $300m.
AngloGold is selling the assets as the CEO focuses on more profitable mines in Ghana, Australia and the Americas.
The deal includes a cash and deferred payment totalling about $300m, with additional proceeds due if the West Wits assets are developed below current infrastructure (Reuters).
AngloGold’s Mponeng mine produced 265,000oz of gold in 2018, while output from its South African surface operations totalled 171,000oz – all together, its South African assets accounted for 13% of AngloGold’s 2018 production.
Gold ETFs 83.3moz vs US$83.2moz yesterday
Platinum US$967/oz vs US$963/oz yesterday
Palladium US$2,340/oz vs US$2,316/oz yesterday
Silver US$17.52/oz vs US$17.75/oz yesterday
Copper US$ 5,744/t vs US$5,736/t yesterday - Copper trades in narrow range amid coronavirus uncertainty (Reuters)
Copper prices were steady on Tuesday as uncertainty over the Coronavirus capped gains, even though hopes rose that the worst might have passed.
Three-month copper on the LME was almost unchanged at $5,743/t on Tuesday morning, and the most traded copper contract in Shanghai was nearly flat at $6,547/t.
Gold prices were flat on Wednesday, as China’s senior medical advisor suggested that the coronavirus epidemic may be over by April, with the latest number of new infections falling to the lowest since the 31st of January.
Aluminium US$ 1,733/t vs US$1,717/t yesterday
Nickel US$ 13,065/t vs US$13,185/t yesterday
Zinc US$ 2,149/t vs US$2,156/t yesterday - Zinc sinks to multi-year low on inventory jump and China fears (Reuters)
Zinc prices fell to their lowest since July 2016 this week after a surge in inventories and worries over demand in China as cases of coronavirus increase.
LME zinc stocks have hit their lowest in nearly 30 years, however lots of metal is being held in warehouses not approved by the LME.
Metal that was being held back before contract negotiations were finished is now coming onto the markets, causing LME inventories to shoot up to 71,150t and bringing the gains over the past week to 43%.
Lead US$ 1,844/t vs US$1,821/t yesterday
Tin US$ 16,480/t vs US$16,505/t yesterday
Oil US$55.3/bbl vs US$54.2/bbl yesterday
Natural Gas US$1.816/mmbtu vs US$1.764/mmbtu yesterday
Uranium US$24.55/lb vs US$24.55/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$83.8/t vs US$79.6/t - Vale cuts Q1 2020 production forecasts (FT)
The world’s largest iron ore producer has lowered forecast after its operations were adversely affected by heavy rains.
Vale expect to producer 63-88mt in Q1, down from an earlier estimate of 68-73mt.
Despite this, Vale maintained its full year production guidance of 340-355mt, although this would depend on getting permissions to restart closed mines it said.
The company hopes 15mt of capacity will come back online this year followed by a further 25mt in 2021.
Vale’s Q4 2019 iron ore output fell 22.4% yoy, as the company continues to ramp up operations following the dam burst (Reuters).
Chinese steel rebar 25mm US$549.8/t vs US$549.7/t - Barrett Steel plans to buy UK distribution sites from British Steel (Yorkshire Post)
The largest steel stockholder in Britain has revealed plans to acquire a number of British Steel distribution centres, immediately after the planned sale of the company to Chinese company Jingye.
Barrett Steel said it is hopeful of securing a number of British Steel Metal Centre sites including those based in Wolverhampton, Dartford, Newcastle and Scunthorpe.
The company operates 27 sites in the UK, had a turnover of £328m last financial year and employs 1,100 people.
Thermal coal (1st year forward cif ARA) US$59.6/t vs US$58.6/t
Coking coal swap Australia FOB US$150.5/t vs US$150.5/t
Cobalt LME 3m US$34,250/t vs US$34,500/t
NdPr Rare Earth Oxide (China) US$40,317/t vs US$40,276/t
Lithium carbonate 99% (China) US$5,524/t vs US$5,518/t - Volkswagen and Daimler drive study to improve sustainability in the Atacama (Mining.com)
There have long been concerns about the sustainability of metal extraction from the Atacama, damage to the regional ecosystem and indigenous culture are at the forefront of discussion. Water usage has been identified as the primary vulnerability for Chilean mining.
Volkswagen and Daimler are the driving force behind a new feasibility study drawn up by the German development agency (GIZ) and the public-private Fundacion Chile and presented to Cristobal De La Maza, Chilean Environmental Regulator SMA Chief.
The study includes discussion with local communities, regulators and miners. The target is to develop a joint action plan and implement prioritized actions to address any concerns about sustainability of practice in the region.
Ferro Vanadium 80% FOB (China) US$30.0/kg vs US$30.0/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’s rising tide is lifting all boats! (Wall Street Journal)
The California EV producers spectacular if volatile start to the year has had a positive effect on the lithium producers. Lithium producers have registered double digits gain YTD.
Livent Corp is up 19%, Albermarle Corp up 16% and Sociedad Quimica y Minera de Chile ADRs have risen 12%.
The moves are powered by investor bets that demand for lithium, a key EV battery component will outpace the recent supply glut. (Conservative investing news)
Early data suggests that demand in 2020 has improved following a slowing in 2019. In Europe both Italian and German EV sales have surged whilst the UK has brought forward plans to ban the sale of petrol, diesel and hybrid vehicles to 2035. This pattern is echoed in India where orders for MG’s ZS EV have already outstripped EV sales nationwide in 2019.
Conversely in China where a cut in domestic subsidies last year stalled demand, EV purchases have continued their slide. States controlled BAIC, the #1 seller of BEVs in China posted a 54.5% YOY decline in sales for January, a 94.5% sequential decline. (Forbes)
Hyundai launches a partnership with Canoo to create a skateboard platform for low cost EVs (Forbes)
Hyundai has joined up with LA start-up Canoo to modify the latter’s flat platform that integrates the battery pack, motors and other key components.
Hyundai is not investing is Canoo, rather paying an undisclosed amount for its engineering services.
The target is to produce a low-cost common architecture from which a range of vehicles can be easily produced, eliminating the need for multiple platforms.
Hyundai hope to create a variety of purpose built vehicles from the newly created skateboard architecture.
Hyundai recently invested €100m in London based Arrival, began a $4bn JV with Aptive and joined up with Uber in a $6.7bn move to commercial clean hydrogen technology. All part of a proposed $87bn strategy geared towards future mobility projects.
Canoo plans to follow a subscription only model, making its electric vans available for use when required after their expected release in 2021.
Altus Strategies* (LON:ALS) 7.6p, Mkt Cap £17m – Flash note: Momentum builds as new JVs signed, strategic investment secured
Click for Flash Note
New JVs/royalty agreements yield cost efficient development options retaining exposure to a potential discovery.
Diba (Korali Sud) – potential cash flow from cheap oxide ounces.
La Mancha £6.5m strategic investment is a milestone achievement for the team improving its capacity to source, de-risk and monetise early stage project.
Management/shareholders incentives are well aligned – the Board holds ~30% (pre La Mancha subscription).
Well capitalised to deliver on growth plans with £10.5m in Treasury.
*SP Angel acts as Nomad and Broker to Altus Strategies
Anglo Asian Mining* (LON:AAZ) 144p, Mkt Cap £164m – Debt free status reached
The Company completed the final repayment of the outstanding loan and is now debt free.
This marks a remarkable turnaround for the Company with net debt peaking at over $50m in 2015 before posting net cash position of over $20m at the start of 2020.
“The financial flexibility of being debt free allows Anglo Asian to focus on the growth of the business,” Reza Vaziri, CEO, commented on the announcement.
Conclusion: Deleveraging of the balance sheet is a reflection of strong cash flow generation of Gedabek operations that have also supported a continuing investment in the business, exploration and payment of dividends. As Company puts it, debt free status with positive free cash flows puts it in a strong position for potential growth of the business.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Chaarat Gold* (LON:CGH) 39p, Mkt Cap £185m – FY19 operational and financial results due next week
The Company will release FY19 production, operational and financial update on Wednesday, 19 Feb/20.
*SP Angel acts as Broker to Chaarat Gold
Mali Lithium (ASX:MLL) A$0.082, Mkt Cap A$26m – new presentation highlights benefits of the Goulamina project
Kodal Minerals* (LON:KOD) 0.058p, Mkt Cap £5.3m –
Mali Lithium have released a new presentation on their Goulamina lithium project in Mali.
The presentation highlights two possible routes to ports in Senegal and the Ivory Coast at Abidjan port
The PFS envisages bulk transport of 362,000tpa of spodumene concentrate by road to the Abidjan port at a cost of US$87/t.
This is slightly cheaper than Kodal Mineral’s cost estimate of $93.60/t to the port of San Pedro which we believe is a shorter distance than the port of Adibjan.
Trucks from the Perkoa zinc mine in Burkina Faso truck concentrate similar distances to Abidjan.
Mali Lithium and Kodal Minerals recently signed an MOU to explore synergies between Kodal’s Bougouni project and Mali Lithium’s Goulamina project
The idea is to share key infrastructure close to the two mine sites in Mali potentially saving an estimated US$100m in the process on the two projects.
*SP Angel acts as Financial Adviser and broker to Kodal Minerals A partner at SP Angel acts as Chairman to the company.
Mkango Resources* (LON:MKA) 8.15p, Mkt Cap £10.8m – Sample results from Thambani
Mkango Resources reports the results of 128 samples retrieved during the 2019 exploration programme at its wholly owned Thambani uranium/niobium/tantalum/zircon exploration licence in Malawi.
The samples were part of a programme, intended to “better delineate the mineralised zones and to localise future drill sites to test the downdip extension of surface mineralisation” following up radiometric “uranium anomalies occurring across the Thambani East and West Ridges: a strong uranium anomaly, measuring approximately 3 kilometres (“km”) by 1.5 km, occurs along the length of the Thambani East ridge, with a north-south trend, and a second northwest-trending uranium anomaly, measuring approximately 1.5 km by 0.4 km, occurs along the foot of the West Ridge”.
The sampling comprised 58 grab samples , largely taken from an area along the western slope of the East Ridge, defined by a prominent radiometric anomaly an 4 samples taken from outcrop along the Supe River.
The remaining 70 samples were taken from a series of hand-dug trenches “immediately adjacent to a pit where the highest grades were encountered in 2017”
Results summarised in today’s announcement show U3O8 levels averaging 777ppm and ranging up to 2,755ppm from the grab samples and 221ppm (ranging up to 7,369ppm) from the trench samples. The company describes the generally lower assay levels reported from the trench samples as indicative of “extensive secondary remobilisation of the elements of interest”.
Mkango Resources summarises the results of the programme as providing “new information on the nature, disposition and grade ranges of mineralisation in the Thambani Massif … [and providing] … a target for shallow drilling on the down-dip extension of the surface showings”.
The company also comments that it is “currently evaluating strategic options for Thambani, including opportunities for joint venture and other potential avenues to create value”.
Conclusion: The 2019 sampling programme has helped to identify potential targets for initial follow-up drilling at Thambani. Meanwhile the company is evaluating its strategic options for the project as it presses ahead with feasibility work on its Songwe Hill rare-earths project, also in Malawi.
*SP Angel act as Nomad and broker to Mkango Resources
Phoenix Copper* (LON:PXC) 10p, Mkt Cap £4.5m – Empire mine environmental studies
Phoenix holds 80% of the Empire mining property in Idaho
Phoenix Copper reports that the completion of a two-years long independent programme of baseline environmental data collection and monitoring has not identified any flora, fauna, hydrogeological or archaeological issues which would impinge on the proposed mine developments at Red Star or the Empire open-pit copper oxide project.
The studies show that there is “no critical habitat for threatened or endangered plant and wildlife species … [and that] … no legacy impacts to surface or groundwater occurred as a result of historical mining operations … [and] … archaeologists were also unable to identify any significant cultural artefacts on the Empire property”.
Commenting on completion of the studies, Chief Executive, Ryan McDermott, said that “These findings clear the path to permitting and should have a positive effect on our permitting timeline.”
Mr. McDermott also said that the study area also covered the copper sulphide target area at the Empire mine site and consequently “we have three projects with these favourable environmental conditions.”
The “baseline environmental data … will serve a dual purpose in providing data for mine permitting and as a foundation for the Company’s Environmental and Social Responsibility platform”.
Conclusion: The successful conclusion of baseline environmental, hydrogeological and archaeological studies by independent experts, Cascade Earth Sciences has established that there are no impediments to the envisaged mine development which, in our opinion, should expedite the permitting process and provide a platform for Phoenix Copper’s future Environmental and Social Responsibility programmes.
*SP Angel acts as Nomad and broker to Phoenix Copper
Power Metal Resources (LON:POW) 0.375p, Mkt Cap £2.1m – Kisinka exploration programme
POW owns 18.26% of Kalahari Key Mineral Exploration PTY Ltd (“KKME”) which owns 100% of the Molopo Farms Complex (“MFC”)
POW has the right to acquire (earn-in) to a direct interest in 40% of MFC by spending US$500k on MFC. Assuming POW spends US$500k then its economic interest in MFC becomes: 40% of MFC. (Total interest in MFC = 50.956%)
Power Metal Resources reports that as a result of a programme of termite mound sampling undertaken in 2019 over a 400m times 200m grid at its Kisinga licence located 30km east of Lubumbashi in the southern DRC it has identified a “6.8km by 600m zone of apparent copper anomaly in the Undifferentiated Roan mineralisation running through the license”.
The company has now commissioned a follow up programme comprising “24 pits totalling c230 metres are to be dug on 9 cross-sections across the Target Area for copper, with channel and bottom sampling of pits; detailed mapping based on lithological units encountered, and preparation of samples for analysis including laboratory analysis to identify cobalt mineralisation”.
Termite mound sampling is a well tried reconnaissance technique in African exploration as it enables the recovery of material from below the surface without recourse to trenching, pitting or drilling; the proposed follow-up pitting campaign “will seek to confirm the copper trend established by termite mound sampling during the 2019 programme.”
Commenting on the results from Kisinka,CEO, Paul Johnson, said that although the company’s original expectations for Kisinka “were not high, …we were surprised and encouraged by the discovery of a very extensive copper anomaly following the trend of the Roan 1, 2 and 3 mineralisation”.
Mr. Johnson went on to say “We have decided to utilise the last part of the rainy season in carrying out a programme of pitting, sampling, and mapping that will not be excessively weather-dependent and which if successful will confirm a significant copper anomaly and advance our geological understanding of the area, and prepare for follow up work including geophysics and drilling”.
Conclusion: Relatively unexpected positive results from early stage exploration at Kisinka are to be followed up with pitting to confirm termite sampling and identify follow up geophysical and drilling targets.
*SP Angel act as broker to Power Metals Resources (formerly African Battery Metals)
SolGold* (LON:SOLG) 18.1p, Mkt cap £348m – Timbara exploration results
Solgold has announced results from its recent exploration of the wholly owned Timbara project in southern Ecuador where gold mineralisation has now been mapped over a 600m strike length and remains open in both directions at Timbara 2 and where initial rock-saw channel sampling has returned results of 7.7m averaging 6.63g/t gold at the northern stream outcrops and 2m averaging 5.16g/t gold at the southern stream outcrops.
Mapping along streams within the Timbara 2 area has “identified an 18m wide northwest trending silicified zone. This orientation was confirmed when the structure was again identified in another stream 600m along strike of the initial outcrop”.
The company describes mineralisation hosted in quartz veins containing copper and lead sulphides within diorite and andesite volcanic rocks of a similar Jurassic age to the nearby 9.9m moz (indicated) Fruta del Norte deposit of Lundin Mining, the >400mt, Chinese owned, Mirador copper deposit and the Santa Barbara deposit of Lumina Gold which forms part of the 3.9moz (indicated & inferred) Condor project.
Solgold’s exploration teams are reported to be “continuing with clearing to create additional outcrop exposures for further mapping and sampling … [and are planning further work including] … a detailed gridded soil sampling program covering the mineralised area in the Timbara 2 concession.”
Elsewhere in southern Ecuador, Solgold has previously announced encouraging initial exploration results at its Porvenir, Sharug, Cisne Loja and Hueca projects while in northern Ecuador, similar early stage exploration successes have been reported from the Chical, Blanc and Rio Amarillo licences.
Solgold published a Preliminary Economic Assessment of the 2bn tonnes Alpala deposit in May 2019 and is working towards a Definitive Feasibility Study later this year.
Conclusion: The success of early stage exploration at Timbara is another welcome addition in Solgold’s programme of deploying the expertise developed in the discovery of the Alpala project in northern Ecuador to its portfolio of wholly owned exploration projects throughout the country.
*SP Angel act as Financial Advisor and broker to Solgold
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.
Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony