EU recovery fund deal in sight
MiFID II exempt information – see disclaimer in PDF
Bezant Resources (AIM:BZT) – Due diligence completed at the Hope copper/gold project, Namibia
Botswana Diamonds (AIM:BOD) – Acquisition of KX36 kimberlite pipe
Empire Metals (AIM:EEE) –– Deal to acquire Munni Munni held up by Platina Resources
KEFI Minerals* (AIM:KEFI) 1.8p, Mkt Cap £34m – Non-executive Director appointment
Pensana Rare Earths (LON:PRE) –– Pensana enters agreement with China Great Wall Industry Corp
Petropavlovsk (LON:POG) 28p, Mkt Cap £943m – UGC exercise its conversion rights for its holding of 2024 8.25% convertible bonds
Shanta Gold (AIM:SHG) 16p, Mkt Cap £127m – Robust production and strong gold prices deliver net cash positive status in Q2/20
Tertiary Minerals* (AIM:TYM) –– Progress of Nevada programmes
Economics
US – Discussions over a new COVID-19 related stimulus package will start at the White House on Monday involving Senate Majority Leader Mitch McConnell, Treasury Secretary Steven Mnuchin and others.
Bloomberg reports Virus ‘out of control’ in Florida with Los Angeles on the brink
Japan – Both exports and imports continued to plunge in June.
Virus containment measures in the US and Europe weighed on external demand.
Japan’s auto exports dropped 49.9%yoy in June driven by weaker shipments in the US and Europe while deliveries into China picked up, climbing 18.8%yoy after a 20.8%yoy in May.
Exports (%yoy): -26.2 v -28.3 in May and -24.7 est.
Imports (%yoy): -14.4 v -26.2 in May and -17.6 est.
EU – Members reportedly close to finalising a block wide stimulus package as four members that previously held back are ready to agree to revised terms,.
The Netherlands, Austria, Denmark and Sweden are satisfied with €390bn of the fund being made available as grants with the remainder to be offered in the form of low-interest loans, according to Bloomberg.
This compares to €500bn previously envisaged in the form of grants.
The news helped the € to climb to its highest level since Jan/19 while the spread between Italian and German benchmark bonds was at the lowest since March.
Negotiations are set to restart at 4pm today.
UK – UK house asking prices climbed the most in more than three years in July after the government suspended stamp duty on July 9 for about 90% of transacations.
Advertised prices were up 3.7%yoy in July, according to the Rightmove data.
Website traffic is reported to have jumped 35%yoy in the five days after the levy was lifted.
News is due on Oxford vaccine study.
The UK has ordered >90m vaccine does of vaccines in development from drugmakers including Pfizer (Bloomberg)
Australia – Government to deliver the largest fiscal deficit since WW2 amid the drop in economic activity and a series of stimulus measures announced.
Budget deficit is expected to hit A$192bn in FY21 after reaching A$93bn in FY20 that ended last month.
Meanwhile a resurgence of new cases and official efforts to contain the spread of the virus that forced Melbourne in lockdown and new restrictions implemented in New South Wales raised concerns over speed of a recovery.
Chinese H1 vessel orders up 3.4% YoY
New vessel orders rose 3.4% in the first half of 2020, accounting for 67.5% of new orders placed globally during the first six months of this year and amounting to 12.5m dead-weight-tonnes (Hellenic Shipping News).
India – IPO market reported to be picking up again (Bloomberg)
Japan – constantly scrambling fighter jets over the disputed Diaoyu Islands as China tests defences
China is aggressively probing Japan’s air defences with its jets in flights close to the disputed Diaoyu islands. (South China Morning Post)
Any escalation in military activity is unsettling from a global risk perspective.
Previous claims led to China withholding rare earth supplies from Japan with Japan retaliating through the banning of the export of Japanese porn into China.
Saudi Arabia – King Salman admitted to hospital suffering from inflammation of the gall bladder (Reuters)
Zimbabwe - Zimbabwe on course to meet 2020 budget deficit target: finance minister (Reuters)
Currencies
US$1.1452/eur vs 1.1393/eur last week. Yen 107.22/$ vs 107.13/$. SAr 16.710/$ vs 16.721/$. $1.257/gbp vs $1.256/gbp. 0.699/aud vs 0.699/aud. CNY 6.990/$ vs 6.998/$.
Commodity News
Precious metals:
Gold US$1,810/oz vs US$1,800/oz last week
Gold ETFs 105.0moz vs US$104.9moz last week - Gold ETF holdings increase for sixteenth straight day on Friday
ETF funds added 113,000oz of gold to their holdings on Friday, bringing this year's net purchases to 22.1Moz.
Purchases were equivalent to $204.7m at the previous spot price.
Total gold held by ETFs has risen 27% so far this year to 105Moz, as the price of gold has risen 19% year-to-date (Bloomberg).
Gold prices remained above 1,800/oz on Monday morning, as COVID-19 cases continue to surge in the US (Reuters).
Platinum US$840/oz vs US$825/oz last week
Palladium US$2,020/oz vs US$1,979/oz last week
Silver US$19.32/oz vs US$19.05/oz last week
Base metals:
Copper US$ 6,411/t vs US$6,418/t last week - Falling copper inventories are not an indicator of improving demand conditions in Europe, say Fastmarkets MB
LME copper stocks in Rotterdam have fallen 56% so far this month to 29,650 tonnes on Friday, however the LME's recent off-warrant stock publication shows surplus supply in the region.
A period of sustained restocking occurred earlier in the year due to weak domestic demand amid economic fears driven by COVID-19.
Since economies have begun reopening, the LME copper price has recouped its losses caused by coronavirus and is trading at two-year highs, supported by supply disruptions (Reuters).
Despite the perceived positive market outlook for copper, off-warrant stocks of copper are thought to be building- with the latest LME report for May showing 89,295 tonnes held in Rotterdam.
Traders have told Fastmarkets that demand is now recovering, but not as fast as many anticipated- and this is set to remain in July-August partly driven by the seasonal summer slowdown across the industry.
Aluminium US$ 1,656/t vs US$1,656/t last week
Nickel US$ 13,205/t vs US$13,315/t last week - China nickel imports from Philippines to drop 20.4% in 2020
China's laterite nickel ore imports from the Philippines are expected to drop to 35mt this year, as deliveries have been hit hard by COVID-19 earlier in the year.
The decline in supply is expected to be greater than the loss in demand, lowering stockpiles in China to 56,000t by the end of the year.
China's Ni supply from ore imports will total 546,000 tonnes this year, with 98,000t coming from other countries, whilst demand is expected to shrink to 490,000t (SMM News).
Zinc US$ 2,174/t vs US$2,201/t last week
Lead US$ 1,814/t vs US$1,834/t last week
Tin US$ 17,300/t vs US$17,325/t last week
Energy:
Oil US$42.7/bbl vs US$43.1/bbl last week
The supply/demand mismatch in the oil market seen earlier this year causing prices to plunge is changing, according to the July OPEC report, suggesting higher prices on the horizon
The report states that global oil demand in 2021 will recover strongly registering historical high growth of 7MMbopd although demand will remain below pre-COVID-19 levels
While positive, the report notes that the outlook for 2021 ‘remains dependent on considerable uncertainties, both to the upside and the downside’
OPEC+ will also rein in production cuts from August by 2MMbopd to 7.7MMbopd until December as global economic activity slowly picks up
However, fears remain of a second wave of COVID-19, highlighted recently by new lockdowns in some US states, which would hit economic activity and stall the nascent recovery
A combination of greater demand and reduced production cuts will underpin the price of oil, at the very least, and barring any second COVID-19 wave, higher prices look likely further ahead in our view
Natural Gas US$1.695/mmbtu vs US$1.725/mmbtu last week
Natural gas futures finished lower on Friday as investors continued to price in forecasts calling for modestly cooler temperatures over the short term
However, some weather services are calling for hot temperatures through the end of July and into early August
Specifically, the weather is expected to be warmer than normal over the next two weeks which should help buoy cooling demand
There is no tropical cyclone activity currently in the Atlantic or Gulf of Mexico.
Demand rose in the latest week due to power generation
Uranium US$32.60/lb vs US$32.70/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$107.0/t vs US$107.4/t - Japan's iron ore imports fall 32% YoY
Japan imported 6.1mt of iron ore in June, down 32% compared to the same period last year and down 10% from the 6.8mt imported in May.
Iron ore imports from January-June stood at 50mt- down 15% compared to the same period last year.
The fall in iron ore imports is broadly in line with Japan's reduced steel output, which fell 16% in June compared to a year earlier, with Nippon Steel also bringing forward planned closures of blast furnaces (Argus Media).
Chinese steel rebar 25mm US$534.7/t vs US$534.9/t
Thermal coal (1st year forward cif ARA) US$59.9/t vs US$59.4/t
Coking coal futures Dalian Exchange US$111.0/t vs US$112.0/t
Other:
Cobalt LME 3m US$28,500/t vs US$28,500/t
NdPr Rare Earth Oxide (China) US$42,198/t vs US$42,156/t
Lithium carbonate 99% (China) US$4,935/t vs US$4,930/t
Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.5/kg
Antimony Trioxide 99.5% EU (China) US$5./kg vs US$5./kg
Tungsten APT European US$205-210/mtu vs US$205-215/mtu
Graphite flake 94% C, -100 mesh, fob China US$430/t vs US$430/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,275/t
Battery News
Chinese EV start-up Xpeng raises $500m
EV maker Xpeng Motors has raised $500m as it aims to expand in the world's largest car market and compete with sales leader Tesla.
Xpeng began delivering its second EV, the P7 Sedan last week. The P7 has a range of up to 706km and costs about $36,000 after subsidies (Bloomberg).
The fund raise comes after China's EV sector has been hit hard due to COVID-19, with sales falling 33% YoY in June (CBNC).
Despite the fall compared to last year’s figures, sales of both conventional cars and EVs are rebounding on month-by-month basis, and the Chinese government has extended favourable EV policies to 2022.
Company News
Bezant Resources (AIM:BZT) 0.11p, Mkt Cap £1.9m – Due diligence completed at the Hope copper/gold project, Namibia
Bezant Resources reports the completion of its programme of due-diligence at the Hope copper-gold project in Namibia and that it is moving ahead with the administrative tasks required to complete the proposed acquisition of Virgo Resources which holds a 70+% interest in the project.
Explaining that further regulatory consents to proceed were not required by Virgo Resources, Bezant Resources said that it “has all the consents and approvals it required to complete the Acquisition save for the procedural consent required from AIM for Admission to trading of the Bezant Shares to be issued at Completion”.
In an announcement last week, Bezant resources explained that the Hope Gold projects has an overall JORC (2012) compliant mineral resource estimate of 10.2mt at an average grade of 1.9% copper and 0.3g/t gold (at a cut-off grade of 0.7% copper).
Explaining that the completion of the due-diligence is an “important milestone” for Bezant Resources, Exectutive Chairman, Colin Bird, said that “We now look forward to completing the administrative process of the parties completing the execution of the Agreed Form Completion Documentation. The Acquisition is on very favourable terms, of a major copper-gold project in an excellent jurisdiction with a significant JORC resource.”
Mr. Bird went on to explain that “there is unrealised gold potential and we already have a clearly identified value creation strategy for the project and are already planning its implementation”.
Conclusion: The acquisition of a 70+% interest in the historic Hope copper/gold deposit in Namibia, which already has a 10+mt JORC defined resource and previously unrecognised gold potential, is now expected to proceed following the completion of due- diligence.
Botswana Diamonds (AIM:BOD) 0.75p, Mkt Cap £5.0m – Acquisition of KX36 kimberlite pipe
Botswana Diamonds has announced the acquisition of the 3.5 hectare KX36 diamond pipe as well as two adjacent prospecting licences and a diamond bulk-sampling processing plant from Petra Diamonds though the acquisition of its wholly owned subsidiary, Sekaka Diamonds.
The KX36 pipe, located approximately 70km from Gem Diamonds’ Ghaghoo Mine is described by Botswana Diamonds’ Managing Director, James Campbell, as “the most significant diamond discovery in Botswana since Orapa and Jwaneng.” Mr. Campbell also explained that “KX36, together with its associated Prospecting Licenses, adds scale to the Company's Sunland and Maibwe JV properties in the Kalahari. Botswana Diamonds will refine resource estimates of KX36, and development options.”
Under the agreed terms of the transaction, which is subject to regulatory approval including that of the Botswana Ministry of Mineral Resources, Botswana Diamonds will make a deferred payment of US$300,000 in cash plus a 5% revenue royalty of any future production. Half of the cash is due to be paid on 31st August 2021 with the balance on or before 31st August 2022.
The KX36 kimberlite was discovered by Sekaka in 2010, and subsequent work defined a “SAMREC [South African reporting standard] compliant Indicated Resource of 17.9 million tonnes at 35 cpht, and an Inferred Resource of 6.7 million tonnes at 36 cpht, estimated for the pipe by Z-Star in 2016”.
The announcement indicates that diamond values are estimated at an average US$65/carat “with an upside range of between $97/ct and $107/ct”.
Botswana Diamonds confirms that it has not independently verified the resources estimate and says that it “plans to conduct a new exploration programme focused on the KX36 pipe and intends to spend approximately US$100,000 per annum in each of the next three years. No exploration activities are currently possible under the current lockdown restrictions in place in Botswana as a result of Covid-19.”
In addition to the KX36 pipe, the acquisition includes Sekaka’s exploration database extending since 2005 including airborne and ground-based magentic data and , heavy-mineral soil sampling which “will provide substantial support to … [Botswana Diamonds’] … future kimberlite exploration activities in Botswana”.
Describing the acquisition of Sekaka Diamonds as “an important step forward” for Botswana Diamonds, Chairman, John Teeling, said that “KX36 is a very significant diamond discovery and potentially offers upside potential - as do the two contiguous prospecting licences. You rarely, if ever, find a kimberlite pipe on its own and further exploration may find more kimberlite pipes. KX36, located deep in the Kalahari, presents challenges, but the greatest challenge of all is overcome - finding a significantly sized high-grade deposit. We have evaluated options on KX36 and believe we can add value to the discovery”.
Conclusion: The acquisition of Sekaka Diamonds including a known kimberlite pipe with a published mineral resource estimate appears to be a significant step forward for Botswana Diamonds. Although the company is to conduct its own resource work it starts from a solid platform of the work by Sekaka Diamonds. We await the results with interest.
Empire Metals (AIM:EEE) – 2.30p, Mkt cap £4.5m – Deal to acquire Munni Munni held up by Platina Resources
(Formerly Georgian Mining)
Empire Metals report that Platina Resources has served a writ of summons issued by the Supreme Court of Western Australia against Artemis Resources.
The writ is in relation to the agreement by Artemis to sell 58.6% of the Munni Munni platinum group metals project to Empire.
‘Platina claims that Artemis and its wholly owned subsidiary, MMPL, have breached the Heads of Agreement entered into by the parties relating to the Munni Munni Joint Venture as a result of the Company entering into the agreement with Empire.
Artemis denies Platina's claims and state that they intend to vigorously defend their position.
Empire announced the deal with Artemis on 27 April, are surprised at the claim.
We understand Artemis intend to stand by their deal with Empire and vigorously defend the standing of the agreement.
Empire continue to press ahead with the transaction which remains conditional on completion of due diligence, execution of a formal joint venture agreement and obtaining necessary regulatory approvals and obtaining all necessary third-party consents.
Georgia: The team at Empire continue to work in Georgia having gained approval to continue on two key licenses.
The team are waiting on advice from the Ministry of Economy and Sustainable Development on an a date for a hearing as a part of the Company's appeal against the National Agency of Mines findings.
The National Agency of Mines has cancelled a number of other exploration licenses held by Empire in joint venture with its partner in the region.
Conclusion: Artemis believe that Platina’s claim is without standing. Unfortunately the legal claim may hold up some of the work to be done at Munni Munni including the planned drilling program.
*SP Angel act as nomad and broker to Empire Metals
KEFI Minerals* (AIMLKEFI) 1.8p, Mkt Cap £34m – Non-executive Director appointment
Adam Taylor joins the Board as a Non-Executive Director with immediate effect.
The appointment follows the recent investment by RAB Capital with a ~12% interest in the Company.
RAB has a right to nominate a director for as long as it remains at 10% or above.
Mr Taylor is the founder, Chairman and former CEO of FirstWave Group BV, Africa's leading vertically integrated aquaculture group, which he founded in 2011.
Previously, he was MD of Oakfield Holdings, an Africa focused investment company, and a PM at Liongate Capital Management, where he was responsible for commodity sector hedge fund investments.
*SP Angel act as Nomad and Broker to KEFI Minerals
Pensana Rare Earths (AIM:PRE) – 24.66p, Mkt cap £40m – Pensana enters agreement with China Great Wall Industry Corp
Pensana enters into a heads of agreement with China Great Wall Industry Corporation ‘CGWIC’ for cooperation on the Longonjo project in Angola.
Pensana is planning to use a an ‘EPCF’ engineering, procurement, construction and financing model for development of Longonjo Project to ensure that the design and construction of the processing plant and associated infrastructure is funded through a single arrangement.
Paul Atherley, Pensana’s CEO, was formerly Chairman of the British Chamber of Commerce in China and Vice Chairman of the China Britain Business Council.
CGWIC is engaged with engineering projects in Africa and is a main contractor for the Chinese government in Angola with >US$20bn invested in the country.
‘The heads of agreement contemplates that the Company will seek the proposed debt financing component of the EPCF to be obtained from commercial banks in China with credit insurance from SINOSURE.’
Pensana is currently working on a Bankable Feasibility Study with 34 holes out of an 8,000m drilling program recently reported.
Drilling returned 2.5-3% of rare earth oxides.
The market for heavy rare earths is expected to continue to grow with significant recent investment into Offshore wind farms which mostly use permanent magnets in direct drive generators. Each of the generators in these wind turbines contains around half a tonne of heavy rare earths making security of supply critical for manufacturers.
Conclusion: It will be interesting to see Chinese banks investing in projects outside China in the current environment.
Petropavlovsk (LON:POG) 28p, Mkt Cap £943m – UGC exercise its conversion rights for its holding of 2024 8.25% convertible bonds
Uzhuralzoloto Group Of Companies, a major shareholder in Petropavlovsk, is reported to have exercised its conversion rights without elaborating what stake it will have in total following the conversion, Bloomberg reports.
Before the conversion, UGC held ~22% interest in the Company.
UGC has also acquired convertible bonds representing some 5.97% of the shareholder equity after conversion from previous owner , Roman Trotsenko, back in Feb/20.
“This was intended specifically to reduce the debt load and acilitate the adoption of a progressive dividend policy by Petropavlovsk,” UGC President Konstantin Strukov said in a statement today.
The news comes ahead of the planned General Meeting where shareholders are due to vote on a number of resolutions including changes to the Board.
Shanta Gold (LON:SHG) 16p, Mkt Cap £127m – Robust production and strong gold prices deliver net cash positive status in Q2/20
Q2/20 production totalled 22.2koz (Q1/20: 20.2koz) on the back of higher grade processed at the NLGM plant (4.36g/t v 4.03g/t in Q1/20).
The operation benefited from stable mining rates and supply of high grade ore from the Bauhinia Creek and Ilunga underground operations.
FY2020 guidance reiterated at 80-85koz and $830-880/oz in AISC.
Cash operating costs and AISCs averaged $512/oz and $771/oz (Q1/20: $630/oz and $883/oz) during the period, respectively.
National grid power supplied 14% of NLGM requirement during the quarter with that expected to increase to 25% over the next 12 months helping unit costs further.
Adjusted EBITDA (ex non-cash loss on unsettled forward contracts) amounted to $19.4m (Q1/20: $15.0m) with an average realised gold price of $1,663/oz vs spot gold price of $1,714/oz.
FCF totalled $15.5m (Q1/20: $3.9m); H2/20 FCF is expected to come in lower as the Company works to unwind outstanding gold forward contracts as well as accounting for tax payments (falling on Q4/20) and Singida capex spend (kicking in Q3/20).
Forward gold sales contracts stood at 27koz as of quarter end at $1,251/oz (reduced to 23.0koz post period) and on track to reach unhedged status by end of 2020.
Net cash balance hit $2.1m (Q1/20: net debt $15.1m) with $21.6m in cash and available liquidity and $40m Investec Senior Secured Facility repaid completely.
Outstanding VAT receivable stood at $23.2m (Q1/20: $22.9m) following a $1.0m offset against corporation tax (Q1/20: $0.9m).
Other H2/20 plans are:
Close West Kenya acquisition (Q3/20) and release the scoping study;
Report NLGM exploration results and update reserves;
Release Singida economics and financing update;
Conclusion: The Company reported good quarter with production picking up during the quarter while a surge in gold prices and a good control on costs delivering strong earnings margins and FCF. The Company is net cash positive and is aiming to reach unhedged position by the end of the year. Annual guidance reiterated at 80-85koz and $830-880/oz in AISC with the team aiming continue with exploration works at New Luika with a view to replace depleted ounces, close the recently announced West Kenya deal with Barrick and progress de-risking of the Singida project.
Tertiary Minerals* (AIM:TYM) – 0.24p, Mkt cap £2.2m – Progress of Nevada programmes
Tertiary Minerals has provided a progress report on its Nevada base and precious metals exploration programmes and on its MB fluorspar project.
At the Paymaster zinc/silver project, where the principal target is skarn mineralisation analogous to the Taylor deposit in neighbouring Arizona, mapping in the Valley prospect has identified intermittent out-cropping skarn along 230m of strike length with a series of grab samples assaying up to “11.73% combined lead, zinc and copper and 180 g/t silver”.
The company explains that the “Skarn mineralisation at Paymaster occurs in limestone of the Poleta Formation and in the south-eastern part of the claim block this is structurally overlain by phyllite schist at a thrust fault contact. The phyllite in this area is hydrothermally altered over a large area and contains narrow quartz veins containing up to 2.2% copper. Similar quartz veins are associated with the skarn elsewhere on the project and the consultant geologist has recommended this as a drill target to test for skarn mineralisation below the zone of alteration and pooled beneath an impermeable thrust contact”.
Also within the Paymaster project area, wide-spaced soil sampling at the East Slope prospect has outlined a 500m long zinc anomaly “where samples from prospecting pits have assayed up to 21% zinc. Mapping shows this area to have little outcrop so an infill soil sampling programme will be carried out.”
At the Pyramid gold project assay results are awaited from a second round of sampling of the drill core from its recent programme. “A programme of follow up soil sampling is planned for the project to determine the extent of an open-ended gold and multi-element soil anomaly originally defined in the 1980s and to define additional drill targets”.
At the Peg Leg copper/silver/lead/zinc prospect north of Tonopah, permits are now in place to allow a programme of trenching covering 160m at four locations “to test various targets including an outcrop of mineralisation exposed adjacent to the granite contact which assayed 59 grammes/tonne (g/t) silver 1.4% copper, 2.4% lead and 1.8% zinc. The objective of the trenching is to test the thickness of this outcropping mineralisation as it is largely obscured by scree and old mine waste”. Waste samples from nearby shallow mine workings “contains selected material assaying up to 181 g/t silver, 3.9% copper, 10.1% lead and 1.2% zinc”.
South of Winnemucca at the recently acquired Mt Tobin silver/gold prospect, initial field work is “targeting a zone of stratiform alteration and mineralisation in chert and silicified sediments over a thickness of 45-60m thick and a strike length of 1,200m. This zone was reportedly defined by outcrops and a significant silver-lead-zinc geochemical anomaly in exploration carried out in the 1980s”.
Results from a preliminary field evaluation sampling programme at the Lucky Copper Prospect are awaited and “the Company is now planning a follow up soil sampling programme and a drone magnetic survey to help define drill targets”.
Further metallurgical testing of material from the MB Fluorspar project has been taking place over the last few months “aimed at improving concentrate grade and recoveries. Whilst improvements were made, this test work has not yet produced acid grade fluorspar or high fluorspar recoveries”. The company says that it will now undertake a review of the project.
Commenting on the progress, Patrick Cheetham, Executive Chairman, expressed enthusiasm for the Nevada projects and confirmed that “drilling activities are anticipated on a number of projects this summer and autumn”.
Conclusion: Tertiary Minerals has promising results from a number of its early stage base and precious metals exploration projects in Nevada and expects to drill the more promising opportunities later this year.
*SP Angel act as nomad and broker to Tertiary Minerals
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474