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Today's Market View - Cora Gold, Pan African Resources, Atalya Mining and more...

Published: 11:52 30 Mar 2020 BST

Anglo American PLC - Today's Market View - Cora Gold, Pan African Resources, Atalya Mining and more...

SP Angel . Morning View . Monday 30 03 20

Markets retreat as governments extend stay at home guidelines

MiFID II exempt information – see disclaimer below     

 

Anglo American (LON:AAL) – De Beers diamond sales

Atalaya Mining (LON:ATYM) –Operations suspended at Proyecto Riotinto

Caledonia Mining* (LON:CMCL) – Seeking exemption from virus mitigation measures

Cora Gold* (LON:CORA) 4.5p, Mkt Cap £5.9m – Commencement of drilling at Madina Foulbe, Senegal

Gemfields (LON:GEM) – Suspension of operations

Pan African Resources (LON:PAF) – Operations under lock-down

Rainbow Rare Earths (LON:RBW) 1.5p, Mkt cap £5.7m – Doubling production to 20,000tpa for >20 years reiterated in interim statement

 

SP Angel Healthcare team - Vadim Alexandre, Liam Gascoigne-Cohen

Market Update: Monday, 30 March 2020

Beximco Pharmaceuticals* (BXP.L): Donation of medical equipment 

Novacyt S.A* (LON:NCYT): COVID-19 test update

Redx Pharma (LON:REDX): Short term loan agreement

 

Oil-rich sovereign wealth funds to sell $225bn of equities (SWFI & Reuters)

In a re-run of the 2008 Global Financial Crisis when oil prices also fell as consumers cut back on driving due to financial uncertainty.

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Oil-related sovereign and related funds are seen selling some $225bn of equities as Saudi Arabia and other oil-rich nations struggle to support their economies.

Currencies, Equities, commodities and bonds are sold off first due to their readily realisable liquidity

The estimate is based on figures from  research-group, the Sovereign Wealth Fund Institute ‘SWFI’

SWFI reckon some $100-$150bn in equities have been sold excluding Norway with a further $50-$75bn still to be sold in the next few months to maintain cash levels.

Norway has lost some $124bn in value this year, its Sovreign fund CEO looking to buy back into the market to raise equity levels from 65% to 70%.

Sovereign wealth funds account for some 5-105 of the total market with around $8.40tr of assets most of which is held by the bigger oil-producing nations.

Saudi Arabia, the UAE and Qatar have pledged some $60bn in stimulus and may have sold some $80bn in equities so far which looks like similar sales to that seen in the GFC.

The critical difference between the COVID-19 crisis and the GFC is that the current crisis is likely to have a far larger impact on many more nations and looks likely to last far longer.

Policy makers have fixed the crisis in credit markets for now through liquidity injections but valuation look likely to fall further as the social and financial impact of the crisis escalates.

 

Chinese manufacturers struggling to buy metals as supply chain issues lead to destocking

Metals supply chain problems seen causing problems as new inventory fails to come into LME warehouses

Stockholders applying to store more in LME warehouses for collateral

 

Stimulus funding relating to the Coronavirus (Updates in bold, figures converted to US dollars)

G20 nations pledge to inject $5tr into global economy

$2tn US fiscal package approved by Congress

$1,000bn - IMF available

$963bn (€750bn) ECB scraps limits on sovereign bond purchases. + targeted loans to companies at an interest rate of -0.75%

ECB legal decision on the Pandemic Emergency Purchase Programme ‘PEPP’. The ECB may target shorter maturities in the hope that PEPP remains temporary.

The 33% issuer limit will not apply to emergency asset purchases.

No more limits to ECB QE!

$825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds

$700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE is to buy Treasuries and mortgage-backed securities. The program in two parts $500bn + $200bn  

$344bn - China stimulus + China PBoC cut repo rates to 2.2% from 2.4%

$78bn (C$107bn) - Canada

$17.4bn Japan +  + Y300bn of inflation-linked bonds,

$400bn (£330bn) UK - Government-backed loan scheme. New business interruption loan scheme up to £5m with no interest. Will add whatever is required in COVID-bill + $242bn (£200bn) UK QE from Bank of England.

$39m – UK (£30bn) stimulus + $29bn (£20bn) – UK No business rates plus £25,000 cash grants for shops, pubs, clubs in hospitality sector inc. $5bn (£3.5bn)

$387bn (€304bn) – France - loan guarantees for French business inc. $50bn (€45bn) + €4bn for startups, + France to also pay half wages for employees in affected firms

$200bn (€200bn) – Spain

$127.2bn China - China stimulus was $586bn in 2009 to rescue itself and the global economy. This time it is simply lowering lending rates slightly and made $77bn of new loan capacity at banks,

$214bn (A$320bn) Australia, a record A$130bn ($80bn) package bringing total fiscal and monetary stimulus to A$320bn or 16.4% of GDP.

$32bn - Saudi Arabia -  stimulus with debt ceiling raised from 30% to 50%.

US$38.6bn - Singapore

$22.6bn - India

$15.4bn – Hong Kong relief package

$13.7bn South Korea, $12bn World Bank, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,

The world was slow to recover from the 2008 GFC due to a lack of stimulus allowing China to get ahead

This time the US and UK are likely to stimulate their economies to a far greater extent than seen in the GFC

$8.34tr – TOTAL stimulus offered to-date vs G20 GFC stimulus of ~$2 trillion or 1.4% of global GDP (ILO, EU, IILS)

>10tr expected if using the $7.4tr estimated by The Economist

 

Dow Jones Industrials -4.06% at 21,637

Nikkei 225 -1.57% at 19,085

HK Hang Seng -1.17% at 23,209

Shanghai Composite -0.90% at 2,747

 

Economics

Easyjet grounds its entire fleet after completing customer repatriation flights.

Ryanair said last week it is planning to ground around 90% of its fleet in coming weeks.

 

US – President Trump extended stay at home guidelines until the end of April saying the peak of the virus in the US is expected to come in the next two weeks.

President expects the nation to be on its way to recovery by June 1.

Governors of at least 21 states representing more than half of the US population of 330 million closed “non-essential businesses” and asked resident to stay at home, Reuters reports.

New York authorities are putting together a field hospital for 68 emergency beds in Central Park that is expected to be ready by Tuesday.

State of New York reported nearly 60,000 cases of coronavirus and accounting for nearly a half of the total in the US with more than 33,000 of those cases coming from New York City.

 

China – The central bank brought down the benchmark 7-day reverse report rate to 2.2% from 2.4% marking the first rate cut since February.

The news comes following the announcement from authorities last week that the government will increase its fiscal deficit as a share of GDP this year, issue special sovereign debt and allow local governments to sell more infrastructure bonds as part of a series of countercyclical measures to support economic growth, Bloomberg reports.

 

Germany – Economic advisors to the government expect the worst recession since the global financial crisis even if most businesses come back to work in mid-May.

Under the scenario of everybody coming back to work in mid May allowing the economy to recover through the summer Germany is expected to post a 2.8% drop in GDP this year.

Should restrictions last longer the economy is expected to contract more than double that rate (-5.4%), according to a report by the German Council of Economic Experts.

 

Australia – The government announced a record A$130bn ($80bn) package bringing total fiscal and monetary stimulus to A$320bn or 16.4% of GDP.

Among measures announced authorities introduced wage subsidies of A$1,500 every two weeks per employee to help struggling business keep people at work.

Estimates suggest unemployment may soar to 12% soon up from 5.1% in February as businesses close down amid the coronavirus quarantine.

Local equity index posted a record one day gain (+7%) on the back of the announcement.

 

Saudi Arabia - $32bn stimulus announced last week with debt ceiling raised from 30% to 50%.

The need to ramp up spending comes at a time when the budget is set to record weaker oil sales proceeds following a correction in prices due to a fallout of OPEC+ members.

 

South Africa - Mining industry vital to stabilising economy post-coronavirus

Minerals Council South Africa announced this weekend that the mining industry could be an enormous asset in stabilising and growing the economy once the coronavirus crisis is over. 

To maximise the impact of SA's mining industry, the council said that the country needs to implement wide sweeping structural reforms across the economy. 

The country's competitiveness ranking needs to improve along with its productivity, and it also needs to generate higher levels of fixed investment.

Fixed investment needs to be greater than 25% of GDP, compared with the current 19% of GDP. 

These necessary reforms would enable ratings agencies to take South Africa back to investment grade, as the three main ratings agencies cut the country's credit rating to below this threshold.

 

Bolivia - Largest mine suspends operations 

The San Cristobal mine has suspended operations until at least mid-April,  as the country imposes tough rules to halt the spread of coronavirus.

The mine produces zinc, lead and silver and is owned by a subsidiary of Japan's Sumitomo Corporation. 

 

Namibia - Mining operations suspended for three weeks

Namibia ordered mining companies to cease operations as the country entered its first day of lockdown on Saturday. 

The sector generate around 50% of the nation's revenue, contributing 9.3% to GDP in 2019.

 

Automakers offering home delivery in attempt to shift unsold auto stocks

 

Japan - Governor of Tokyo to host media conference at 11:00 on new measures to restrict spread of Coronavirus

 

Currencies

US$1.1067/eur vs 1.1028/eur last week.  Yen 108.80/$ vs 108.80/$.  SAr 17.517/$ vs 17.517/$.  $1.218/gbp vs $1.218/gbp.  0.607/aud vs 0.607/aud.  CNY 7.088/$ vs 7.088/$.

 

Commodity News

Gold US$1,620/oz vs US$1,622/oz last week

Gold ETFs 89.7moz vs US$89.1moz last week

Platinum US$721/oz vs US$747/oz last week

Palladium US$2,251/oz vs US$2,391/oz last week

Silver US$13.96/oz vs US$14.48/oz last week

           

Base metals:   

Copper US$ 4,760/t vs US$4,841/t last week – Codelco, Chile reports 5.3% fall in copper output in 2019 as costs rise

Codelco reported profits $1.34bn on 1.588mt of copper production last year.

Aluminium US$ 1,528/t vs US$1,548/t last week - Aluminium industry faces huge supply glut 

Demand for aluminium is expected to drop 8% this year, as the world's biggest economies face lockdown (CRU). 

Automakers including VW and Ford have cut production at plants across the world, and therefore aluminium production could outstrip global consumption by 6mt this year (FT). 

The price of aluminium has fallen steadily due to week demand, sinking to four-year lows of $1,600/t last week. 

Despite the plummeting prices, producers are unlikely to immediately cut production as input costs have also fallen. 

Up to 40% of aluminium smelting costs are accounted for by electricity, which has fallen in line with oil prices. 

Aluminium producers are also more likely to continue producing, as re-starting mothballed plants takes a long time and comes with a high cost, so smelters typically try and avoid closing them (Reuters).

China produced over 55% of the world's aluminium in 2019, and IAI data shows that production is up 3.7% in February compared to last year.

Nickel US$ 11,320/t vs US$11,290/t last week

Zinc US$ 1,848/t vs US$1,896/t last week - Chinese zinc inventories continue to fall 

Zinc inventories in China fell 3000 tonnes over the weekend to 304,000 tonnes this morning, down 20,000 tonnes from last Monday (SMM). 

Stocks fell in north and east China, as downstream consumers continue to make purchases. 

 

Lead US$ 1,677/t vs US$1,720/t last week

Tin US$ 14,115/t vs US$14,200/t last week

           

Energy:           

Oil US$23.3/bbl vs US$26.0/bbl last week –

US crude oil prices fell below US$20/bbl shortly after trading reopened on Sunday, close to their lowest level in 18 years, as the market understands that production would have to be shut in to cope with the collapse in demand from the coronavirus pandemic.

Brent lost 6% to hit a low of US$22.03/bbl – its lowest level since 2002.

With supply accumulating at the same time because of the price war between Saudi Arabia and Russia, traders believe the surplus could approach 25MMbopd, a level that could overwhelm storage capacity worldwide within weeks.

The market collapse has led to a cut of tens of billions of dollars in capex (see below) and is threatening to force as many as 70% of US shale drillers into bankruptcy.

Natural Gas US$1.617/mmbtu vs US$1.629/mmbtu last week

Natural gas prices remained steady following last week’s inventory report, however projections are that demand is set to rise slightly in regional hubs driven by gains in the power sector.

According to the EIA, total US consumption of natural gas rose by 3% compared with the previous report week.

Natural gas consumed for power generation climbed by 8% week on week in the low natural gas price environment.

The weather is expected to be colder than normal for the next 7 days in many parts of the US, European models also show a colder front which should support short term pricing.

Uranium US$27.20/lb vs US$26.60/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$83.1/t vs US$84.2/t - Iron ore futures in China and Singapore fall on stimulus doubts

Doubts over whether the massive global stimulus measures introduced are enough to prop up the global economy has led to iron ore futures falling today. 

The Dalian Commodity Exchange's most-active May contract fell as much as 3% to 641 yuan ($90.26)/t this morning (Reuters). 

Iron ore prices are expected to be well supported in Q2, as Chinese steel mills are expected to increase output (Hellenic Shipping News). 

Chinese steel rebar 25mm US$524.8/t vs US$527.9/t - US Steel takes action to preserve future amid coronavirus outbreak 

The steelmaker is increasing borrowing under its revolving credit facility, cutting spending and temporarily halting operations as the coronavirus pandemic continues. 

The company announced on Friday that it is reducing its 2020 capital spending by $125m to $750m, and increasing its borrowings by $800m in order to boost its cash position (Bloomberg).

US Steel will immediately idle two of its blast furnaces until market conditions improve, and plans to idle most or all of its tubular operations in May (Globe Newswire).

The company said in the announcement that it doesn't expect these actions to "meaningfully impact" its guidance for first-quarter adjusted profit, but could affect its full-year earnings. 

Thermal coal (1st year forward cif ARA) US$56.7/t vs US$57.8/t - Zimbabwe - Coal mining firms exempt from lockdown

The government has exempted coal mining companies from adhering to a 21-day national lockdown. 

The country relies heavily on coal, and generates most of its power from the Hwange Thermal Power station. 

Coking coal swap Australia FOB US$147.0/t vs US$148.0/t

           

Other:  

Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$38,017/t vs US$38,092/t

Lithium carbonate 99% (China) US$5,632/t vs US$5,643/t

Ferro Vanadium 80% FOB (China) US$27.0/kg vs US$27.0/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

Tungsten APT European US$240-245/mtu vs US$240-245/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

Lavatory paper - Lavatory paper really is in deficit following a sudden surge in demand in the US (Washington Post).

Manufacturers are not willing to increase supply but consumers told  not to worry, the matter is in hand.

 

Battery News

Electric vehicle sales strong in February in the world before the coronavirus    

JATO Dynamics report that BEVs sales were up 92% in February to 38,700 units. Plug-in hybrids did similarly well, up 153% to 28,700 units. (Electrek)

In February EVs represented 3.7% of registrations and plug-in hybrids a further 2.7% leaving plenty of room for growth in the future.

The Renault Zoe is the most popular vehicle with 6391 registrations in February.  

EVs remain the outlier in the auto industry with the new car market falling 7% and SUVs down 1.7%.

Sweden reported EVs reaching a 26% share of the market. (Cleantechnica)

% of new car registrations EV models:

Norway: 75%

France: 14%

UK: 13%

Germany: 11%

Spain 10%

Italy: 8.6%

 

European Investment Bank (EIB) loan €480m to LG Chem Wroclaw Energy

The €480m cash injection will cover one third of the estimated €1.5bn cost of the lithium-ion cell production plant in Wroclaw. (Inside EVs)

LG Chem Wroclaw Energy is a wholly owned Polish subsidiary of LG Chem. (Automotive World)

The financing will be used for the construction and operation of manufacturing facilities for advanced lithium-ion cells and batteries for battery electric vehicles. Expanding manufacturing capacity by 35GWh to 65GWh annually. (EIB)

The remainder of the estimated €1b of costs will be covered by the company and other financing sources.

The annual 65GWh output of the plant will make it not only the largest in Europe but also the world. The facility should be able to supply lithium-ion cells for one million long-range-all-electric-cars annually.  

The project forms part of LG Chem’s clean energy transition goal. The investment has already attracted a number of specialised component suppliers and service companies to set up in the region to supply the facility. (World Construction Network)

 

The coronavirus limits US efforts to produce EV minerals

As the virus spreads and brings halt to normal activities US junior miners have slowed engineering work, environmental reviews and loan applications. (Reuters)

Both Piedmont, Lithium Americas Corp and Ioneer Ltd face regulatory or engineering setbacks whilst there are concerns the Pentagon could delay a decision on funding mines using the Defence Production Act. (Euractive)

Medallion Resources, USA Rare Earth and Texas Mineral Resources Corp are all waiting on a decision from the pentagon.

 

Italian battery industry hit by COVID-19 (ESP)

Italian battery firms have suspended production after the government issued orders for all non-essential businesses to close down.

All non-essential businesses will remain closed until April 3rd.

Sovema, supplier of lead acid batteries has suspended production until April 6th as has La Pneumetica which produces equipment for battery producers.

OMI continues to support cusomters remotely, trying to ensure spare and consumable parts are shipped as normal. Couriers are however reducing their services.

Battery moulding company Biasin is authorised to continue producing and shipping, primarily to the after-market but also a small number of OEMs.

 

Company News

 Anglo American (LON:AAL) 21,335p, Mkt Cap £18bn – De Beers diamond sales

De Beers has announced that the third diamond sale of the year will not now take place in response to ʺthe public health restrictions on the movement of people and product in Botswana, South Africa and India, which prohibit customers from traveling and prevent the shipment of goods to customers' international operationsʺ.

Sales to sightholders are able to defer their full allocation until later in the year and De Beers says that it ʺwill continue to seek innovative ways to meet Sight-holders' rough diamond supply needs in the coming weeks.ʺ

The third sales cycle last year realised US$581m bringing the year to-date total in 2019 to just over US$1.5bn.

 

Atalaya Mining (LON:ATYM) 82p, Mkt Cap £113m –Operations suspended at Proyecto Riotinto

Atalaya Mining confirms that under the Royal Decree in force in Spain to protect against the Covid19 virus, mining has been excluded as an essential industry and ʺconsequently the Company's Proyecto Riotinto site is required to halt its operations until 10 April 2020.ʺ

The company says that it will keep a minimum work-force on site for care and maintenance purposes during the stoppage.

Although the company’s announcement of 17th March maintained the production guidance then in force, this more recent turn of events is likely to require a reduction in the company’s advice as was intimated in the earlier announcement.

Conclusion: Spain has been particularly badly hit by Covid19 and the suspension of mining is one of a range of measures deployed to tackle the pandemic.

 

Caledonia Mining* (LON:CMCL) 730p, Mkt Cap £84m – Seeking exemption from virus mitigation measures

Caledonia Mining reports that it has applied for exemption from the measures implemented in Zimbabwe to help contain the spread of the Covid19 virus.

The regulations announced by President Mnangagwa  require ʺall commercial activities other than "essential services" must suspend operations from March 30, 2020 for a period of 21 daysʺ.

Caledonia Mining explains that although the Zimbabwean authorities have confirmed that ʺgold mining is not an essential service, Blanket is currently permitted to continue with its operations, as  the authorities will grant exemptions for businesses which demonstrate they can operate in a manner that contributes to the management of the spread of COVID-19 infectionsʺ.

Caledonia Mining asserts that operations at the Blanket mine can operate under these curbs as the mine and the employee village can be effectively quarantined from the surrounding area and the mine is able to reconfigure its operations ʺto reduce the risk of infections being transmitted amongst its employees.ʺ

The announcement explains that ʺA key measure to reduce the risk of infections amongst Blanket's workforce will be to increase the "social-distancing" of employees as they enter and leave the underground workings.  This will reduce the number of employees who can work underground and will result in daily production running at approximately 70 - 80 per cent of the target production rate.ʺ

The mine is permitted to continue working at the reduced rate until the authorities rule on the application for exemption.

Conclusion: As reported last week, Caledonia Mining is in a strong financial condition and has bolstered its supply chain to ensure that it has the ability to continue operating in the event that the Government accede to its request for exemption from the containment measures in force.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

 

Cora Gold* (LON:CORA) 4.5p, Mkt Cap £5.9m – Commencement of drilling at Madina Foulbe, Senegal

The team started a 2,000m RC drilling programme at the Madina Fouble Permit located in eastern Senegal within the Kedougou-Keniaba Inlier for completion in April 2020.

The programme will focus on Tambor (2,500x500m) and Madina (2,000x400m) gold anomalies testing mineralisation at depth.

Historical work included soil geochemistry work and surface drilling among other things which returned 3m at 41.2g/t and 3m at 7.9g/t.

Angled RC drilling programme is expected to better test the potential of the area compared to the previous shallow vertical holes drilling.

Results are expected to be announced in Q2/20.

*SP Angel acts as Nomad and Broker to Cora Gold

 

Gemfields (LON:GEM) 8.5p, Mkt Cap £104m – Suspension of operations

Gemfields reports that, in response to the spread of the Covid19 virus ʺall but critical operations at the Kagem emerald mine in Zambia have been suspended for what is hoped to be a period not exceeding one monthʺ.

In addition, ʺGemfields' operations in Mozambique, including the Montepuez Ruby Mine, are poised to implement similar suspensions should developments so require however remain unaffected at this time.ʺ

The company’s ʺExploration projects in Madagascar have been suspended. Gemfields' offices in London and Jaipur are closed, with personnel working remotelyʺ.

Gemfields explains that ʺIn 2019, some 93% of Gemfields' revenue was derived from 6 gemstone auctions at which clients were able to carefully inspect the gems before bidding. Widespread travel restrictions dictate that Gemfields cannot presently host auctions. Once the travel restrictions are lifted, additional time will clearly be required before life and business returns to a relative 'normal'. There is clearly also a risk that travel restrictions may be extended or re-introduced should a second wave of virus infections take hold in key countriesʺ.

Although it is too early for the company to indicate when it expects to resume auctions of its production, it confirms that ʺAt 29 February 2020, the Gemfields Group had cash balances of approximately USD 73.5 million, a net cash position of approximately USD 43.5 million and undrawn overdraft facilities of USD 30 millionʺ.

The company also says that in ʺaddition to its cash position, Gemfields perceives additional comfort in the fact that well-bought gemstones have for centuries been regarded as a store of value and a guard against turbulent times. This was also evidenced during the 2008 financial crisis when gemstone prices proved remarkably resilient when compared to equity indices.ʺ

 *An SP Angel mining analyst has previously visited the Kagem emerald mine and Montepuez ruby mine

 

Pan African Resources (LON:PAF) 9.27, Mkt cap £207m – Operations under lock-down

Pan African Resources confirms that its operations have now implemented the 21-days lockdown required under South Africa’s measures to contain the spread of the Covid19 virus.

Essential security, pumping and ventilation work and maintenance on the metallurgical plant remain in place as do underground safety inspections, tailings dam monitoring and the maintenance and monitoring of water treatment and waste management installations.

At the Elikhulu Tailings Retreatment Plant and at its Barberton Tailings Retreatment Plant where gold is recovered using bacterial leaching, ʺlimited surface re-mining and processing activitiesʺ are continuing to ʺensure the required minimum feed for its BIOX ® processing plant.ʺ

Commenting on the measures, CEO, Cobus Loots, said that ʺIn this time of crisis, we are heartened by the manner in which all stakeholders in the mining industry are collaborating. Pan African Resources recognises that the adverse effects of the COVID-19 pandemic will be severe and far reaching.  The impact will be even more pronounced in areas with limited resources and poverty.  Recognising the economic and social hardship that communities and employees will experience during the National Lockdown, the Company will embark on support programmes, in addition to our existing initiatives, to alleviate this hardshipʺ.

Conclusion: Affected mines each have singular characteristics and in the case of the BIOX operations, sufficient ore needs to continue to be available to maintain a vigorous population of bacteria.

 

Rainbow Rare Earths (LON:RBW) 1.5p, Mkt cap £5.7m – Doubling production to 20,000tpa grading 54% TREO reiterated in interim statement

Rainbow Rare Earth senior management at site to ensure continued productivity.

Rainbow sold 114t of concentrate in the six-months to end December in line with its plan to cut back on production and focus on developing the resource and a better mine and processing production plan.

Sales of 100t in H2 were sold at US$1,560/t down on last year’s US$1,892/t due to the slowdown caused by the trade war last year.

Production costs of US$1.6m with Administration costs of US$0.8m which were slightly higher due to changes being made.

Rainbow reported an EBITDA loss of US$2.3m in H2 2019 vs US$1.4m yoy.

The mine produced 564t in the first half before management cut costs and loss-making production.

Management are now working on an optimised mine plan which will give better efficiency, fleet utilisation and understanding of the orebodies.

The rented mine fleet was reduced to just five haul trucks and a bulldozer.

Orders have been placed for five new haul trucks to replace the rented fleet and a grader to grade the haul roads.

Management can now see sufficient potential resource to push forward with the concept of raising production to 20,000tpa of 54% Total Rare Earth Oxide concentrate for at least 10 years and probably >20 years given the number of previously mines and identified REE targets at the Gakara site.

Neodymium and Praseodymium 'NdPr' makeup >80% of the basket price in its concentrate indicating further upside for the value and demand for Rainbow’ concentrate going forward.

Strong demand for these metals in permanent magnets for windfarms and EVs should drive significant expansion in the market.

The group also acquired 10 new mining claims in Zimbabwe.

COVID-19: while the impact of the Coronavirus is currently limited for Rainbow, quarantine restrictions into Burundi yae are likely to have some impact going forward.

Conclusion:  Rainbow is now managed by a dedicated team of professionals who are determined to turn the Gakara mine into a world-class site. The current share price represents a good opportunity to buy into the project at a relatively low price in our view.

*SP Angel acts as Nomad and broker to Rainbow Rare Earths

 

SP Angel Healthcare team - Vadim Alexandre, Liam Gascoigne-Cohen

Market Update: Monday, 30 March 2020

Beximco Pharmaceuticals* (LON:BXP): Donation of medical equipment 

Beximco Pharma, a Bangladeshi generic-drug manufacturer, is donating personal protective equipment (PPE) to healthcare professionals in Bangladesh as part of a response to the outbreak COVID-19 outbreak.

The PPE will be distributed in two phases, starting with two testing centres and eight government-designated hospitals and subsequently expanded to over 150 hospitals.

This donation program should provide welcome support as demand for medical equipment has increased significantly. The availability of PPE via this initiative will support healthcare professionals in carrying out their jobs and reduces the risk of infection to both themselves and vulnerable patients. Beximco Pharma is actively involved in other initiatives including arranging the availability of ventilators from abroad.

*SP Angel act as Broker to Beximco Pharma

 

Novacyt S.A* (LON:NCYT): COVID-19 test update

Share price: 171p; Market Capitalisation: £115m

Novacyt provided an update regarding its CE-Mark and research use only COVID-19 test.

As of 27 March, the Group has sold and received orders for over £17.8m of its COVID-19 tests. (Friday 20 March: £8.7m sold and received orders).

The Group received its largest single order to date, £1.4m from a new customer in India.

The Middle-East is becoming a key region, with orders of £1.6m received in c.2 weeks.

Novacyt is now supplying tests to over 21 UK hospitals. 

As the coronavirus outbreak increases the demand for effective diagnostics, Novacyt is now selling its test to over 80 countries and last week received emergency use authorisation from the US FDA. Novacyt’s COVID-19 test can be used on multiple laboratory instrument platforms to provide results in under two hours and can be shipped at ambient temperatures. The Company continues to monitor the genomics of the SARS-CoV-2 virus against its COVID-19 test to ensure the accuracy of the test. With growing demand for its test, Novacyt is focused on ramping up manufacturing capacity. The Company, in combination with BioType Diagnostic, a german manufacturing partner, estimates a production rate of c.4m tests per month and has committed to purchasing raw materials to produce c.18m COVID-19 tests. A contract manufacturing services agreement struck last week with AIM-listed Yourgene Health Plc (YGEN.L) should further support capacity whilst the Group progresses discussions with an additional third-party manufacturer.

*SP Angel act as Nomad and Broker to Novacyt

 

Redx Pharma (LON:REDX): Short term loan agreement

Share price: 14.3p; Market Capitalisation: £27m

Drug developer, Redx Pharma, has entered into a £5m short term loan with Redmile Group, a specialist healthcare investment firm which holds 48.2% of Redx.

The loan is secured by fixed and floating charges over all assets of the Group with the exception of the RXC006 and the GI-Targeted ROCK research programmes.

The Loan is repayable in full on 31 August 2020 and is deemed a related party transaction.

Redx intends to draw down on the loan immediately with the proceeds expected to fund the Company to Q320. The loan should enable Redx to progress its drug candidates in oncology and fibrosis. The Company is progressing a Phase 1/2a study of RXC004, a porcupine inhibitor-based cancer treatment, with results expected in H220.

 

 

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                                                                                                                            

 

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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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