SP Angel . Morning View . Thursday 09 07 20
Gold, Copper and Iron Ore continues to post strong gains
MiFID II exempt information – see disclaimer below
Ariana Resources* (LON:AAU) – Kiziltepe Q2 production
Caledonia Mining* (LON:CMCL) – H1 gold production increases 12.5%
Cornish Lithium (private) - Raise £826,000 to continue exploration in Cornwall
Eurasia Mining* (LON:EUA) – Trading in shares resumes
Highland Gold (LON:HGM) – Quarterly operations update
IronRidge Resources* (LON:IRR) – IronRidge reports high-grade gold in drilling at Zaranou, Ivory Coast
Petropavlovsk (LON:POG) – Court hearing update
Tietto Minerals (ASX:TIE) – Metallurgical results from Abujar gold project
Gold firms above $1,800/oz as Fed suggests US recovery may be stalling
The gold price consolidated above $1,800/oz on Wednesday afternoon, as investors sought safe havens in response to Federal Reserve officials raising fresh doubts over the resilience of the US economy.
Fed officials made statements observing that businesses are exhausting order books without filling them, and households are facing the end of unemployment benefits.
Spot gold rose 0.9% to $1,811/oz yesterday, whilst US gold futures settled 0.6% at $1,821/oz (Reuters).
The US dollar index hit fresh four-week lows yesterday, sliding -0.37%, making assets priced in dollars such as precious metals more attractive to foreign buyers at supporting the gold price further (Nairametrics).
The Chinese Yuan rose on better than expected inflation data, eg less deflation in producer prices than forecast.
This was followed by strength in some emerging markets’ currencies in the rouble and South African rand driven by stronger commodity prices.
Despite many investors piling into gold when the economy is stalling, gold investment demand also tends to grow into the early stage of the economic recovery- driven by inflation concerns and lower real rates.
Copper prices continue to gain on stock withdrawals from LME and Shanghai warehouses
Copper inventories continue to fall on the LME down another 6,825t today
LME stock levels are now down to 185,200t. A further 2,825t of copper was also taken off warrant tightening the market further
Rare Earth equities continue to rise as China allocates output quotas for rare earth minerals
Rare Earth stocks continue to surge ahead following strong gains in Chinese REE companies yesterday
China Northern Rare Earth and Xiamen Tungsten each added >6% this morning
China Minmetals Rare Earth, China Rare Earth Holdings and Rising Nonferrous Metals Shangong all posted positive performance
China looks to have allocated its rare earth mining output quota for the second half of 2020 (Bloomberg)
Whilst there is been no official press release as of yet, various Chinese REE producers have seen their share price surge over the last couple of days.
China issued its H1 quotas in February at 66,000 tonnes, and said it would issue the mine output quota for H2 later in the year.
Rare earth miners in China experiencing gains this morning include: China Minmetals +7.0%, Xiamen Tungsten +5.4%, China Northern Rare Earth +6.9%.
Chinese iron ore spot price hits 11-month high
Iron ore prices continued to rise in China on Thursday, as mills looked to replenish inventories on hopes of strong demand in coming months.
Indicators such as rebounding property sales, along with rising heavy machinery sales are reaffirming the underlying demand which is driving the recovery in China.
The Dalian Commodity Exchange’s most-traded September iron ore contract rose as much as 2.5% to 800 yuan ($114.56)/t- heading for a fifth straight session of gains (Reuters).
The spot price of benchmark iron ore hit $106/t on Wednesday, the highest since August 2019 (SteelHome).
Dow Jones Industrials +0.68% at 26,067
Nikkei 225 +0.40% at 22,529
HK Hang Seng +0.10% at 26,154
Shanghai Composite +1.39% at 3,451
EU – top court ruling may open way for VW owners to sue VW over diesel-emissions lies
Global light vehicle market forecast to fall 17.2% to 73.6m vehicles this year (GlobalData)
Worldwide plunge in car sales forecast to top 17%
UK - £30bn economic rescue unveiled by Chancellor
Stamp Duty holiday for first time buyers
Grants for home insulation,
VAT cut for hospitality
Subsidised dining to get people back into restaurants and bars
UK Biosecurity Centre led by senior spy to takeover advice on Coronavirus crisis
Scientific advisors to meet less frequently as government ministers take more direct control of the crisis
The reshuffle of advice was inevitable as the government balances the need for economic recovery with the practicalities of dealing with the crisis
We also suspect warnings of a resurgence of the virus from some senior advisors has been seen as unhelpful by ministers
‘Britain could have been hit harder by Covid-19 because it has avoided bad flu seasons in the past two winters as influenza kills the SAME vulnerable people, study claims’ (Daily Mail)
US$1.1334/eur vs 1.1291/eur yesterday. Yen 107.30/$ vs 107.45/$. SAr 16.915/$ vs 17.088/$. $1.264/gbp vs $1.256/gbp. 0.698/aud vs 0.695/aud. CNY 6.994/$ vs 7.018/$.
LME has no plans to reopen trading floor yet
The LME has no plans to reopen at this moment in time, despite the easing of social distancing in England.
Gold US$1,812/oz vs US$1,795/oz yesterday
Gold ETFs 104.2moz vs US$104.0moz yesterday
Platinum US$849/oz vs US$843/oz yesterday
Palladium US$1,955/oz vs US$1,931/oz yesterday
Silver US$18.79/oz vs US$18.35/oz yesterday
Copper US$ 6,302/t vs US$6,200/t yesterday –
Aluminium US$ 1,682/t vs US$1,644/t yesterday – Rio Tinto may close the NZAS aluminium smelter at Tiwai Point in New Zealand (Refintiv)
The smelter uses ~10% of total New Zealand grid power and is one of the nation’s largest employers at >1,000 staff
The smelter reported a $A43m loss last year despite an effective subsidy on its power
NZAS contributed some $A381m to the rural community of Southland's economy each year.
Nickel US$ 13,455/t vs US$13,430/t yesterday
Zinc US$ 2,141/t vs US$2,100/t yesterday
Lead US$ 1,832/t vs US$1,832/t yesterday
Tin US$ 17,100/t vs US$16,995/t yesterday
Oil US$43.2/bbl vs US$43.0/bbl yesterday
Oil prices remain steady despite gasoline demand weakening in some parts of the US, as the coronavirus continues to spread
The states hardest hit by the ramping up of infections are also some of the largest, with tens of millions of drivers
Nevertheless, much of the country continues to see a slight uptick in gasoline consumption
But in Arizona, Texas and Florida, where COVID-19 infection rates appear to be increasing exponentially, a growing number of people are staying home
Latest reports are that cases are rising in more than 30 states
Gasoline demand in the US climbed back to 8.6MMbopd for the week ending on 19 June, up from a low of 5MMbopd in early April
But demand slipped a bit by the end of June as the virus began to spread at a faster rate
Yesterday the EIA reported another increase in demand, although the report was offset by a rise in crude inventories, with the slight caveat that it was a holiday weekend in the US
Gasoline demand is still roughly 1MMbopd below last year’s levels
In other parts of the world, economies continue to rebound, with Germany’s industrial activity picking up pace last month, as did manufacturing activity in China
Strict lockdowns in prior months helped dramatically lower the number of daily infections, and some economies have largely reopened
Natural Gas US$1.848/mmbtu vs US$1.868/mmbtu yesterday
Natural gas futures are edging lower after the opening as LNG and production changes put a lid on the three-day rally
On Tuesday, prices jumped on increased cooling demand
Further impacting growth stemmed from a report issued by Global Energy Monitor confirmed a “perfect storm” of oversupply, low prices and the COVID-19 pandemic has impacted billions of dollars of LNG projects
The weather is expected to be warmer than normal over the next two weeks, which should further buoy power generation
There is no tropical cyclone activity in the lower Atlantic or the Gulf of Mexico, while a Tropical storm Christina continues to move away from land in the Pacific which will not impact any energy installation.
Exports of natural gas are set to rise into Mexico according to a recent report by the EIA
Uranium US$32.95/lb vs US$33.00/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$102.8/t vs US$99.4/t
Chinese steel rebar 25mm US$534.3/t vs US$529.1/t
Thermal coal (1st year forward cif ARA) US$58.4/t vs US$59.0/t
Coking coal swap Australia FOB US$121.0/t vs US$123.5/t
Cobalt LME 3m US$28,500/t vs US$28,500/t
NdPr Rare Earth Oxide (China) US$41,608/t vs US$41,393/t
Lithium carbonate 99% (China) US$4,790/t vs US$4,773/t
Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.5/kg
Antimony Trioxide 99.5% EU (China) US$4.9/kg vs US$4.9/kg
Tungsten APT European US$205-215/mtu vs US$215-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$460/t vs US$460/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,350/t
British Gas orders 1000 E-vans from Vauxhall
British Gas has made the largest UK order of commercial EVs, requesting 1000 of Vauxhall’s Vivaro-e vans. (Steelguru)
The move is the largest commercial battery order in the UK to date.
The Vivaro-e will be rolled out across British Gas engineer workforce. Charge points will be installed at the residences of the engineers.
The British utility company is upskilling engineers in EV charging and moving to accelerate EV adoption for homes and businesses.
Centrica, which wholly owns British Gas has committed to electrifying 12,000 vehicles in its fleet by 2030.
The Vivaro-e has a 75kWh lithium-ion battery capable of a range of 205 miles. A 50kWh version is available with a 143 mile range.
Tesla continues to see gains across global markets
Tesla’s model 3 entered the top 10 bestselling vehicles in the UK in June, whilst also being the bestselling EV.
2,517 Model 3 units were sold in the UK in June. The EV remains someway behind the bestselling auto which was the Vauxhall Corsa which sold 4,528 units.
The Model 3 benefits from a £3,500 tax credit in the UK.
In China Tesla’s domination continued as the brand accounted for 23% of the electric vehicles market.
In Q2 Tesla delivered 30,000 vehicles in China, with 11,095 units sold in May and 15,000 Model 3 deliveries in June.
Volvo invests in blockchain startup to trace cobalt
Yesterday Volvo announced their investment in Circulor, a blockchain startup, the blockchain traceability start-up. (Cointelegraph)
This move provides them with the ability to verify the entire supply chain. Cobalt is predominantly sourced in Africa and the Democratic Republic of Congo in particular often under questionable working conditions.
Volvo may also use Circulor’s traceability solution to track carbon emissions.
Circulor offer traceability as a service for verify responsible sourcing in industrial supply chains. Raw materials can be tracked from source.
Ariana Resources* (LON:AAU) 3.9p, Mkt Cap £41.9m – Kiziltepe Q2 production
Ariana Resources reports that its 50% owned Kiziltepe mine in Turkey produced 4,679oz of gold during the 3 months to 30th June 2020 (Q1 2020 – 5,129oz) ʺmeeting half-year annual guidanceʺ.
A total of 54,862t of ore at an average grade of 3.02g/t gold was treated during the quarter with overall mined ore tonnage of 77,179t at an average grade of 2.79g/t suggesting that over 20,000t of ore was added to stockpiles during the quarter.
The company says that ʺAverage metallurgical recovery of gold for the quarter remains high at 91.8%ʺ.
Commenting that production rates exceeded expectation for the quarter, Managing Director, Dr. Kerim Sener, said that ʺMaterial movements from the pits were maintained at very high rates, while ore production also continued at near record levels. The mill also performed at some of the highest monthly rates ever recorded, reaching an annualised rate of almost 220,000 tonnes per annum which represents an increase of over 45% above the feasibility designed rateʺ.
Dr. Sener also described the production plan saying that ʺProduction from our highest-grade pit, Arzu South, is as planned now drawing to a close with production shortly to be focused entirely on the Arzu North and Derya pits. In addition, the mine has continued to maintain a stockpile of well over 130,000 tonnes of ore at a grade of approximately 2.5 g/t gold, sufficient to cover at least eight months of mill feed.ʺ
Conclusion: Production at Kiziltepe remains in line with guidance with substantial ore stockpiles in place as production at the high grade Arzu South pit declines as mining shifts to the Arzu North and Derya pits.
*An SP Angel mining analyst has visited Ariana’s licenses in Turkey
Caledonia Mining* (LON:CMCL) 1322.5, Mkt Cap £147.5m – H1 gold production increases 12.5%
Caledonia Mining reports that following a 6.2% increase in Q2 gold output at the Blanket mine to 13,499oz, H1 production of 27,732oz is 12.5% higher than the 24,660oz produced during H1 2019.
The company is maintaining its full year production guidance of 53-56,000oz ʺand remains on track with progress towards its target of 80,000 ounces by 2022ʺ.
Acknowledging the unusual challenges posed by the Covid19 pandemic during the quarter, CEO, Steve Curtis, said that ʺTo have achieved a 6.2% increase on the comparable quarter in 2019 during a period where our workforce and supply chains were disrupted is a performance of which every employee should be justifiably proud. Thankfully the virus has not affected our operations or the broader Zimbabwean gold mining sector too seriously although we remain vigilant.ʺ
Mr. Curtis also said that ʺThis strong performance and high gold prices have ensured that the business remains on a very solid foundation as we prepare for the next phase of our growth with the completion of the central shaft in 2020 and increased production to 80,000 ounces by 2022."
Conclusion: Despite the additional challenges of the Coronavirus pandemic, Caledonia Mining’s Blanket mine is remaining on track to meet its 2020 and longer term production guidance as its production builds with the culmination of the company’s long term investment to access deeper level mineralisation.
Cornish Lithium (private) raise £826,000 to continue exploration in Cornwall
Cornish Lithium plan to use the funds to build on the successful drilling earlier this year
Metallurgical samples are undergoing testing
Cornish Lithium offers the potential for domestic lithium production to feed developing lithium battery manufacturing in the UK.
Cornish Lithium also discovered high grade copper and tin while drilling at United Downes earlier this year.
The United Downs licenses for base metals are held by Strongbow Exploration which is now looking at the potential for reopening the mine using a decline from the Wheal Maid mine next door. Cornish Lithium has the rights to lithium on the property.
Strongbow have a site nearby at the old South Crofty tin mine which should make the processing of tin and copper ores much quicker to start.
Eurasia Mining* (LON:EUA) 13p, Mkt Cap £350m – Trading in shares resumes
Trading in Eurasia Mining shares was resumed on the AIM market this morning.
The stock jumped more than 90% on the opening from the pre-suspension levels.
The Company has earlier appointed UBS as its leading adviser to assist in a review of its strategic options.
This complements the agreement the Company has with CITIC Merchant bank and it continues to work with VTB Capital.
*SP Angel acts as nomad and broker to Eurasia Mining
Highland Gold (LON:HGM) 241p, Mkt Cap £876m – Quarterly operations update
Production from four operating mines totalled 61.4koz in Q2/20, in line with management forecasts for the quarter.
H1/20 production amounted to 125.3koz (H1/19: 142.3koz) with the management reiterating annual guidance for 290-300koz.
At MNV, production came in at 27.0koz and 52.7koz in Q2/20 and H1/20, respectively (Q2/19 and H1/19: 28.7koz and 59.3koz) with waste stripping operations ramped up to access high grade mineralisation zones for H2/20.
At Valunisty, production totalled 9.0koz and 16.5koz (Q2/19 and H1/19: 7.6koz and 14.9koz) with higher waste stripping volumes recorded as mining moved to lower levels of the open pit and higher grade zone of 6g/t having now been accessed. Work continued on the planned expansion of the processing capacity to 350ktpa, from current 250ktpa, and the start of underground mining.
At Belaya Gora, production amounted to 8.2koz and 17.8koz (Q2/19 and H1/19: 6.5koz and 18.3koz) with processing plant maintenance completed in March. Equipment for the CIP circuit arrived on site in Q2/20 with the project remaining on schedule for completion in H2/20.
At Novo, production was 17.2koz and 38.3koz (Q2/19 and H1/19: 27.5koz and 49.7koz) as the feed grade continued to be lower yoy due to mining of lower grade stopes. The project to expand mining and processing capacity to 1,300ktpa from current 800ktpa addressing lower grades remains on schedule with completion later this year. Construction work focused on the skip hoist, ventilation system, heating facilities and pre-concentration circuit building. Additionally, design work continued for the expansion of Novo’s tailings dam, an underground water pumping station and a new water treatment facility.
At Kekura, initial stripping and ore mining continued during the quarter with the team carrying a series of trials to determine optimal mining parameters. Ramping up of the pilot processing plant (120ktpa) continued with the main plant due to come online in late 2022. The mill for the main processing plnt along with 8,500t of cargo were delivered to Kekura during the current winter road season in Q1/Q2 2020 supporting construction and mining operations.
At Baley ZIF-1 Tailings project, construction works started in Q2/20 for the 840ktpa heap leaching operation to process tailings fo the former Baley processing plant and produce around 15kozpa when launched in 2022.
Production, sales and supply chain were not materially affected by the COVID-19.
Conclusion: Production came in line with management estimates with the Company reiterating annual output guidance at 290-300koz and implying a pick up in output in H2/20. Capital projects’ development remain on schedule with the CIL circuit at Belaya Gora and expansion to 1.3mtpa at Novo to be completed in H2/20.
IronRidge Resources* (LON:IRR) 13.77p, Mkt cap £55.7m – IronRidge reports high-grade gold in drilling at Zaranou, Ivory Coast
IronRidge reports strong results from drilling at the Zaranou project in the Ivory Coast.
The results show continuity over a number of targets covering 500m by 100m.
The team have drilled some 5,910m of air-core drilling to date with an average 50m downhole depth achieved demonstrating the depth of weathering.
The Air-core drill has managed a maximum depth of 89m on the Ehuasso target area indicating ‘potential for extensive oxide mineralisation’
The following high-grade gold results are reported today:
4m at 17.9g/t from 44m
8m at 4.69g/t from 12m inc. 4m at 8.5g/t
12m at 2.65g/t from 32m inc. 4m at 5.7g/t & 4m @ 2g/t
4m at 7.63g/t from 44m
8m at 3.8g/t from surface inc. 4m @ 6.1g/t
16m at 1.87g/t from 48m
4m at 5.47g/t from surface
24m at 0.47g/t from 20m
4m at 2.58g/t from surface
The Zaranou Gold Project is just 200km from Abidjan in the Ivory Coast and covers 400sqkm of Birimian geology.
The Ehuasso prospect borders with Ghana and is along strike from the 5moz Chirano gold mine and 5.5moz Bibiani gold mine
Conclusion: Today’s high-grade gold results are a major step forward in the development of a potentially mineable gold resource at Zaranou. Goes to show that following structural trends and the strike from other major gold mines can lead to the discovery of potential new mines.
*SP Angel act as Nomad and broker to IronRidge Resources
Petropavlovsk (LON:POG) 25p, Mkt Cap £842m – Court hearing update
The final court ruling over the appointment of four directors on the Board of the Company is expected to be announced later today.
Previously, Everest Alliance Limited, a 7.5% shareholder in the Company, challenged the decision to appoint Peter Hambro, Alya Samokhvalova, Angelica Phillips and Johny Martin Smith and argued they should be removed from the Board.
Separately, the Company has earlier received a shareholder requisition from Aurora Nominees Limited representing 11.4% of shareholders to convene another general meeting proposing to vote on two resolutions:
The appointment of five of the former directors of the Company who were not re-elected at the Annual General Meeting held on 30 June 2020, being Fiona Paulus, Pavel Maslovskiy, Harry Kenyon-Slaney, Timothy McCutcheon and Damien Hackett; and
The appointment of two proposed new Independent Non-Executive Directors, Michael Kavanagh and Vitaly Zarkhin.
Tietto Minerals (ASX:TIE) A$0.615p, Mkt Cap A$209m – Metallurgical results from Abujar gold project
In a release to the ASX, Tietto Minerals reports that metallurgical testing of mineralisation from its 2.2moz Abujar gold project in Cote d’Ivoire has shown that high recovery rates are achievable at coarse grind sizes with low rates of energy requirements and reagent consumption.
At a relatively coarse grind size of 180μm the tests show recovery rates of 96% while at 106μm recoveries of 98% were achieved on samples of fresh ore.
The results indicate that a relatively straightforward flowsheet involving single stage crushing, SAG (semi-autogenous grinding) milling and a combination of gravity and CIL gold recovery is adequate for treating ore from Abujar with implied capital cost and operating cost benefits to the overall economic viability of the project.
Commenting on the future work to advance the project, Managing Director, Dr. Caigen Wang, said that Drilling continues at Abujar and we remain on schedule for delivery of an updated resource in Q3 2020. This updated Mineral Resource and results from the metallurgical testwork program will underpin our PFS which is scheduled for delivery in Q1 2021.”
Test results show that in excess of 50% of the gold is recoverable using gravity separation across all samples with results ranging to over 80% in some of the samples.
The company comments that its ʺfully funded 50,000m drill program continues, aiming to increase the resource inventory of existing deposits as well as identifying new prospects within the Abujar Project’s 70km‐long gold corridor, of which 90% of strike length remains to be testedʺ.
Conclusion: As the pre-feasibility work for the Abujar gold project moves forward, metallurgical testing provides indications that a simple flow-sheet with low capital and operating costs may be appropriate. We look forward to the pre-feasibility work to provide more details in due course.
Tri-Star Resources* (LON:TSTR) 24p, Mkt Cap £28.6m – Progress report on SPMP and financing discussions
(Tri-Star holds 40% in ‘SPMP’(Strategic & Precious Metals Processing LLC) which owns the antimony-gold processing facility in the Port of Sohar Free Zone, Oman)
World’s first Clean Plant designed to EU Environmental standards.
Target gold capacity 50,000ozpa, antimony 20,000tpa
Tri-Star Resources reports that by the end of Q2 2020, its 40% owned Strategic and Precious Metals Processing (SPMP)’s treatment plant in Oman has ʺbeen operating for short periods of time at 50% of capacity. SPMP, subject to appropriate and timely financing, is now working, together with its consultant engineers, towards reaching 100% capacity by 31 March 2021ʺ.
As the company points out ʺThis is a 3 months delay from the expectation in May 2020ʺ.
With resolution of the operational issues dependent on financing, the company says that SPMP is ʺcontinuing its discussions with local banks to provide a USD60m term loan facility … [and reports that] … Discussion continues as to how to meet these criteria although it should be noted, however, that until such facilities are agreed, the future financing of SPMP remains uncertainʺ.
The company also point to the need for additional working capital to see the plant in Oman funded ʺuntil it is cash flow positiveʺ. This position will depend on when the plant reaches full capacity and the antimony price as well as any impact from the Covid19 pandemic.
Tri-Star Resources confirms that SPMP has experienced a small number of Covid19 cases but that ʺthey have not substantially impacted plant outputʺ.
Previously announced arbitration between TriSar and its partners in SPMP, Dutco (20%) and the Oman Investment Authority (40%) are underway and the preliminary arguments have been submitted to the arbitrator. The company advises that ʺIf the Arbitration process runs its full course a final determination is not expected until the end of 2021 at the earliest.ʺ
Conclusion: Engineering issues continue to impact the ramp up of antimony production at the SPMP plant in Oman with full production now deferred a further 3 months until March 2021. Discussions with local banks for a term loan continue as does the arbitration process.
*SP Angel acts as Nomad to Tri-Star Resources. David Facey, a former partner at SP Angel is the CEO & CFO at Tri-Star Resources.
John Meyer – [email protected] – 0203 470 0490 / 07943031001
Simon Beardsmore – [email protected] – 0203 470 0484
Sergey Raevskiy –[email protected] - 0203 470 0474
Richard Parlons –[email protected] - 0203 470 0472
Abigail Wayne – [email protected] - 0203 470 0534
Rob Rees – [email protected] - 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