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Today's Market View - Glencore, Highland Gold, Keras Resources and more...

Glencore (LON:GLEN) –-  H1 report describes a strong half-year particularly from its marketing business Highland Gold (LON:HGM) – Recommended pre-conditional mandatory cash offer at 300p by Fortiana Keras Resources* (LON:KRS) (diluted) – Keras acquires 51% in near-production organic rock phosphate project in the US Metal Tiger (LON:MTR) – Drilling results from the A4 Dome in Botswana

Glencore PLC - Today's Market View - Glencore, Highland Gold, Keras Resources and more...

SP Angel . Morning View . Friday 31 07 20

China stimulus driving recovery as rest of world struggles

MiFID II exempt information – see disclaimer below 

 

Glencore (LON:GLEN) –-  H1 report describes a strong half-year particularly from its marketing business

Highland Gold (LON:HGM) – Recommended pre-conditional mandatory cash offer at 300p by Fortiana

Keras Resources* (LON:KRS) (diluted) – Keras acquires 51% in near-production organic rock phosphate project in the US

Metal Tiger (LON:MTR) – Drilling results from the A4 Dome in Botswana

Pensana Rare Earths (LON:PRE) – Quarterly report and project update

Taseko Mines Limited (LON:TKO) - North American copper producer to release Q2 results 

 

LME base metals fall on US GDP data

Base metals prices fell across the board on Thursday, as data showed that the US economy suffered the worst quarter since WW2- shrinking 32.9%. 

Nickel led the decline, falling 1.3% to $13,735/t as the WBMS announced that the global refined nickel market was in a surplus of 33,000 tonnes over January- May 2020 (Fastmarkets MB). 

As for other metals: copper -0.3%, aluminium -0.2%, zinc -0.4%, tin -1.0%, lead -0.5% (SMM News). 

 

LME copper inventories see biggest monthly drop since 2009

Copper inventories in LME-approved warehouses fell 66,475 tonnes to 128,125 tonnes according to data from the bourse. 

The drawdown was the largest in tonnage terms since 2009 and was driven by withdrawals in both Asian and European markets (Bloomberg). 

 Surge in private EV charging installations

April-June has seen a 354% surge in at-home charging stations in the UK according to research by Checkatrade. (Air Quality News)

As of April 2020, there were 11,320 charging stations with 31,619 charging outlets in the UK.

The UK Office for Low Emission Vehicles offers a £350 grant through its EV Homecharge scheme.

The average cost of an at-home charging point is £1000 but government grants reduce this to:

£250-500 for a 3kW EV charger

£450-800 for a 7kW EV charger

 

SP Angel APEX Fastmarkets Q2 metals price survey rankings:

-          No 1. in Gold, 2nd = in Copper, No 3. in Platinum, 2nd = in Iron ore, 2nd in Coking coal

 

IG TV interviews on copper and gold

https://youtu.be/ItCFs7EqbWk

https://youtu.be/lszustZe7_U

VOX Markets podcast on mining

https://us02web.zoom.us/j/83932525968?pwd=S281ODRsUXd1ZjFhYkVsK1Y2KzlmZz09

 

Dow Jones Industrials -0.85% at 26,314

Nikkei 225 -2.82% at 21,710

HK Hang Seng -0.26% at 24,647

Shanghai Composite +0.71% at 3,310

 

Economics

China – Economy continues strong recovery

A pick up in business activity seen in Q2 extended into the third quarter with July PMI numbers showing stronger growth in the manufacturing sector.

Manufacturing sector stepped up activity in July for a fifth straight month with export orders seen improving during the month (48.4 v 42.6 in June) implying export demand is slowly recovering.

The Composite PMI that hit a two year high in June stabilised this month with the overall pace of recovery broadly unchanged.

Composite PMI: 54.1 v 54.2 in June.

Manufacturing PMI 51.1 for July vs 50.9 in June as construction booms and factory output grows

Non-manufacturing PMI 54.2 down from 54.4 in June but still indicating rest of economy is recovering well

Construction sector sentiment rose to 60.5 in July from 59.8 in June

Services pulled back to 53.1 in July from 53.4 in June.

Trade recovered 0.5% yoy in June per cent in June

Imports rose 2.7%

New export orders metric at 48.4 in July vs 42.6 in June indicating confidence in exports.

 

US – Q2 GDP contracted 32.9%qoq (annualised) marking the sharpest slump in the quarterly data going back to 1947 with declines across consumer spending (-34.6%qoq and subtracting 25pp from GDP), investments and inventories.

Business investment dropped 27%qoq and residential housing fell 38.7%qoq.

Business inventories have also recorded a sharp drop deducting 4pp from GDP, the most since 1982, as factories were shut by government led restrictions.

A bright spot in the data was IT related investments that soared at an annualised rate of 67.7%qoq marking the biggest quarterly advance since 1998 as companies increased spending on equipment to support working from home initiatives.

While markets are expecting a 18.0%qoq rebound in Q3/20 a resurgence in new COVID-19 cases and many states reintroducing some form of restrictions sharp recovery is being questioned.

US weekly jobless claims rose 1.434m

GDP (%qoq, annualised): -32.9 in Q2 v -5.0 in Q1 and -34.5 est.

US goods trade deficit fell 6.1% in June to US$70.6bn, as exports rose 13.9% and imports up 4.8%. May imports were the lowest since July 2010.

China Still Needs To Buy 25-26M Tons Of Soy This Year – ADM $ZS_F

Pending home sales rose 16.6% in June vs 44.3% May, yoy 6.3% (-5.1%).

US exports of motor vehicles and parts rose 144% in June

US Expected To See Worst Economic Contraction Since Great Depression

China Has Already Committed To Buying Half Of That From US.

President Trump raised the possibility of delaying upcoming presidential elections suggesting higher use of postal ballots would lead to widespread fraud.

“Delay the Election until people can properly, securely and safely vote???” President Trump tweeted.

“There will be no delay in the #2020 Election… Congress sets the election date, and it should not be changed… it will be held on November 3, as planned and require by law,” Rodney Davis, the ranking Republican on the House administration committee that oversees federal elections, replied to the tweet.

President has no lawful authority, even in an emergency, to change the date for elections, FT reports.

 

UK – The government reintroduces some of virus related restrictions amid an increase in new cases in certain parts of England.

People from different households have been banned from meeting indoors across areas of norther England, FT reports.

People are still allowed to go to pubs, restaurants and other public places but only with members of their own household or support “bubble”, government said.

“Over recent days, there has been a marked change in the picture across Greater Manchester with regard to the spread of COVID-19… we have gone from a falling rate of cases in nearly all our boroughs last week to a rising rate in nine out of 10, affecting communitites across a much wider geography,” mayor of Greater Manchester said.

The areas affected include Greater Manchester, Blackburn with Darwen, Burnley, Pendle, Rossendale, Hyndburn, Bradford, Calderdale and Kirklees.

Measures are set to be reviewed weekly.

UK car production fell 48.2%yoy in June vs -95% in May

 

EU  - Eonomic sentiment 82.3 in July vs 75.8 in June

Industrial confidence -16.2 (-21.6),

Services -26.1 (-35.5),

Consumer confidence -15 (-14.7),

Unemployment at 7.8% (7.7%),

 

Germany - flash Q2 GDP -10.1% (-2%), yoy -11.7% (-2.3%),

Unemployment rate steady at 6.4%

Inflation -0.5% (0.6%), yoy -0.1% (+0.9%).

 

Spain – The economy recorded a historic drop in GDP in Q2 triggering a the steepest recession ever.

GDP contracted 18.5%qoq after posting a 5.2%qoq drop in the previous quarter as the nation implemented one of the strictest coronavirus lockdowns.

Private spending along with investment and falling exports led the drop.

GDP (%qoq/yoy): -18.5/-22.1 v -5.2/-4.1 in Q1 and -16.6/-19.7 est.

 

Mexico – Q2 GDP falls record 17.3%.

 

Zimbabwe agrees to pay $3.5bn compensation to white farmers (Reuters)

Zimbabwe agreed this week to pay $3.5bn in compensation to farmers whose land was invaded and forcibly taken by Robert Mugabe’s cronies (war veterans) / expropriated by the government.

The policy turned Zimbabwe from being the most agriculturally productive land in Africa to a country that is unable to feed itself.

Most of the farms decayed into ruin with their new owners unable and often uninterested in conventional farming methods.

Some of the new Zimbabwean farm owners did not even live in Zimbabwe and had little interest in restoring agricultural production.

The Zimbabwe government will issue long term bonds and intends to approach international donors with the farmers for the funds according to the agreement.

Some 4,500 white farmers were dispossessed with farms allegedly redistributed to some 300,000 black families.

The Zimbabwean government has agreed to compensate farmers for their infrastructure but not the land itself with farmers due to receive 50% of the compensation after a year and the balance within five years.

President Mnangagwa reckons the land reform can not be reversed but the compensation packages is key to mending ties with the West.

White farmers are now able to lease farms and land from the state giving a degree of protection and helping the nation towards the self sufficient production it once enjoyed.

Like all good ideas it remains to be seen what actually is implemented, eg. how will the infrastructure be valued and will this compensate for the cost of debt and mortgages carried by affected farmers.

 

Currencies

US$1.1896/eur vs 1.1752/eur yesterday.  Yen 104.36/$ vs 105.07/$.  SAr 16.796/$ vs 16.784/$.  $1.314/gbp vs $1.296/gbp.  0.721/aud vs 0.713/aud.  CNY 6.987/$ vs 7.006/$.

 

Commodity News

Precious metals:         

Gold US$1,972/oz vs US$1,954/oz yesterday - Gold set for best month in over four years

The price of gold rose on Friday, recouping yesterday's losses and putting gold back on track for its biggest monthly gain in nearly four-and-a-half years.

Gold rose on dollar weakness, as the greenback continued to slide on dismal US economic data to a two-year low. 

Gold has risen more than 10% so far this month, the largest monthly percentage gain since February 2016- whilst the price has risen roughly $500/oz in the last four months (Kitco). 

Spot gold was up 0.4% at $1,968/oz earlier this morning, whilst US gold futures rose 1% to $1,961/oz (Reuters). 

Gold ETFs 107.9moz vs US$107.7moz yesterday

Platinum US$915/oz vs US$914/oz yesterday

Palladium US$2,107/oz vs US$2,102/oz yesterday

Silver US$24.09/oz vs US$23.40/oz yesterday

           

Base metals:   

Copper US$ 6,486/t vs US$6,437/t yesterday

Aluminium US$ 1,729/t vs US$1,729/t yesterday

Nickel US$ 13,875/t vs US$13,900/t yesterday

Zinc US$ 2,324/t vs US$2,305/t yesterday

Lead US$ 1,878/t vs US$1,876/t yesterday

Tin US$ 17,930/t vs US$17,920/t yesterday

           

Energy:           

Oil US$43.3/bbl vs US$43.4/bbl yesterday

Crude oil futures finished slightly higher yesterday after a Government report showed US crude oil stockpiles fell by nearly 11MMbbls last week as imports dropped

This news would have normally sent prices sharply higher, but during the coronavirus pandemic, things are not normal

Gains were capped because low COVID-19 driven demand led to a rise in product inventories

The EIA has confirmed that US crude oil inventories shed an impressive 10.6MMbbls in the week to 24 July

This compares with a build of 4.9MMbbls for the previous week

However, inventories remain 17% above the five-year seasonal average

A day earlier, the API reported an estimated crude oil inventory decline of 6.8MMbbls, versus analyst expectations of a much more modest draw of 357kbbls

A surge in new Covid-19 infections in the US offset the oil price gains that followed the API’s report and now the figures that the EIA has reported will likely help prices recoup some of those losses

As the global oil demand outlook remains mostly negative since the coronavirus is resurging not just in the US but in other countries as well, optimism about the oil industry—especially the downstream segment—is on the wane

In gasoline, the authority estimated a 700,000-barrel inventory build for the week to 24 July, compared with a 1.8MMbbl draw a week earlier

The EIA also said refineries churned out an average of 9.2MMbpd of gasoline last week, compared with 9.1MMbpd a week earlier

In distillate fuels, the EIA reported an inventory increase of half a million barrels, compared with a 1.1MMbbl inventory build for the previous week

Distillate fuel production, the EIA said, averaged 4.8MMbpd last week, slightly up on the previous week

 

Natural Gas US$1.855/mmbtu vs US$1.901/mmbtu yesterday

Natural gas prices moved lower in early trading today as tropical storm Isaias formed in the Atlantic

The storm is headed toward the Gulf of Mexico but is expected to turn toward Florida

There is also a new disturbance that has moved off the coast of Africa, which has a 50% chance of becoming a tropical storm

The weather is expected to remain warmer than normal for the next 8-14 days

Inventories increased by slightly more than expected according to the Energy Information Administration

Uranium US$31.60/lb vs US$31.70/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$104.8/t vs US$107.6/t - Iron ore and steel rise on Chinese stimulus hopes

Iron ore and steel futures closed higher on Thursday in China, as Beijing aims to complete the local government special bonds issue- a stimulus for infrastructure projects. 

The special bonds issue quota has been set at 3.75tr yuan ($535.3bn), and local governments have been granted autonomy to use to the proceeds towards infrastructure projects. 

Steel and iron ore prices have risen as a result of China's comprehensive stimulus programme, as both are key building materials. 

The most active iron ore futures on the Dalian Commodity Exchange for September delivery rose for the third straight session yesterday, up 1% to 840 yuan ($120)/t. 

Steel rebar for October delivery rose 0.5% to 3,767 yuan/t on the Shanghai Futures Exchange (Reuters). 

Chinese steel rebar 25mm US$535.3/t vs US$533.8/t - Chinese steel imports exceed exports for first time since 2009 as stimulus construction demand drags in lower cost foreign steel

China imported 4.4mt of steel in June vs 3.7mt in May

Exports of steel fell as foreign automakers cutback on steel from China causing Chinese steel prices to unusually rise above international prices

The situation parallels that seen as China ramped up stimulus to offset the impact of the Global Financial Crisis in 2008/09

More locally: Shenzhen recorded a 0.1% GDP rise in 1H due to near zero COVID -19 infections

The city started 155 new construction projects in Q1, including a third runway for Shenzhen Airport at a cost of US$1.76bn

Shenzhen now has 163 construction projects in June with total planned investment of US$19.3bn

Thermal coal (1st year forward cif ARA) US$59.6/t vs US$59.5/t

Coking coal swap Australia FOB US$113.0/t vs US$113.0/t

           

Other:  

Cobalt LME 3m US$29,250/t vs US$29,000/t

NdPr Rare Earth Oxide (China) US$42,364/t vs US$42,179/t

Lithium carbonate 99% (China) US$4,966/t vs US$4,924/t - Rio Tinto approves a further ~$200m to fund feasibility of its lithium-borate Jadar project in Serbia.

The funding includes completion of detailed engineering designs, as well as permitting and land acquisition by the end of 2021, in line with the initial project schedule..

Ferro Vanadium 80% FOB (China) US$29.7/kg vs US$29.7/kg

Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.1/kg

Tungsten APT European US$205-215/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

Panasonic aims to boost energy density in Tesla batteries by 20% and to offer cobalt-free 2170 cells in 2-3 years.

 

EHang to Expand Production Facility for Autonomous Aerial Vehicles

New EHang AAV production facility in Yunfu city in Guangdong, China!

EHang aims to build initial capacity for 600 Autonomous Aerial Vehicles

 

Panasonic to increase capacity of Tesla batteries by 20%

Panasonic is working to increase the energy density of its 2170 battery cells by 20% in the next 5yrs.

The Company is also working towards a cobalt-free version of the battery ready for the market by 2022-2024.

The news comes from the head of Panasonic’s US EV battery business.

The 2170 batteries were first produced for the Tesla Model 3 and use NCA cathode chemistry with an energy density of 700wH per litre. 

Greater density batteries will enable the vehicles they are deployed in to travel further on a single charge. The batteries are also likely to be more compact, freeing up space.

 

LG chem shares climb on expectation of profitability in battery business in H2

Tesla supplier LG Chem saw its share price rise 10% on news the Company expects profitability in its battery business in H2.

In a Company statement LG Chem said, “Sales are expected to grow and profitability is expected to remain robust thanks to greater shipments from European automakers and increased sales for cylindrical EV batteries”. (Reuters)

The Energy Solutions division moved into operating profit in Q2. Factory utilization rates have normalized since May.

LG Chem became the #2 player in the EV battery supply market In China earlier this year, overtaking BYD. The Company produced 2087MWh of output up to May in 2020.

The Company also became the #1 global battery maker, moving above Panasonic to the top spot in May. LG Chem’s market share has increased to 27.1% in 2020.

 

Aceleron gets £2m investment boost

UK reusable battery specialist Aceleron has secured a £2m investment, enabling the Company to scale production.

Aceleron produces sustainable batteries using its Circa platform and patented compression method. The batteries are designed to be taken apart to allow for maintenance, repair and reuse.

£1.45m of the investment comes from UK investor BGF whilst the remainder of the £2m comes from Mercia Asset Management.

The Company currently produces:

OFFGEN: 8kWh battery system

ESSENTIAL: 12V, 100Ah LIFEPO4 battery

Solaron: 12V 12Ah intelligent battery

 

Company News

Glencore (LON:GLEN) – 179p, Mkt cap £23.6bn -  H1 report describes a strong half-year particularly from its marketing business

Despite the “unprecedented challenges presented by Covid19” Glencore describes the six months to 30th June as “an overall strong first half operating performance”.

Although measures to contain Covid19 have led to the temporary suspension of some operations, “the majority of our assets continued to operate relatively normally”.

The company’s full-year production mid-range guidance for its copper, cobalt and ferrochrome businesses remains unchanged, although the range width for copper has reduced, with relatively modest reductions to expectations for the zinc, nickel and coal operations.

For reference, the current 2020 production guidance is:

Copper 1,255,000t ± 35,000t – formerly 1,255,000t ± 45,000t

Cobalt 28,000t ± 2,000t – unchanged

Zinc 1,160,000t ± 30,000t - unchanged

Nickel 114,000t ± 4,000t – formerly 122,000 ± 5,000t

Ferrochrome 1,000,000t ± 25,000t - unchanged

Coal 114million tonnes ± 3mt –formerly 132mt ± 3mt

Glencore’s copper operations delivered 11% less copper (588,100t)  than in H1 2019  “mainly reflecting Mutanda being on care and maintenance in the current period, expected lower grades at Antapaccay and the short-term impact of Antamina’s Covid-19 related demobilisation/remobilisation, partly offset by stronger milling throughput at Collahuasi”.

Nickel and zinc output was in line with H1 2019 while ferrochrome production of 333,000t was 42% lower as a result of “the South African Covid-19 national lockdown during March/April. Smelting operations partly resumed on 1 May, with further capacity expected to be restarted towards the end of Q3”.

“Coal production of 58.1 million tonnes was 10.1 million tonnes (15%) lower than H1 2019, mainly reflecting the Covid-19 related asset suspensions in Colombia”.

The company reports a particularly strong performance in its marketing business which “allows us to now raise our full year 2020 EBIT expectations  to the top end of our $2.2-$3.2 billion guidance range”.

 

Highland Gold (LON:HGM) 299p, Mkt Cap £1.1bn – Recommended pre-conditional mandatory cash offer at 300p by Fortiana

Fortiana Holdings agreed to acquire 40.06% of the Company from Roman Abramovich and his business partners at 300p/share, marking a 4% premium to the market close on Thursday and 20% to the one month VWAP.

As a result of the acquisition and under current regulations, Fortiana, subject to certain conditions, will be making an offer to the remaining shareholders of the Company to acquire their shares at 300p.

The making of the offer is conditional on the clearance of the deal by the Russian Federal Antimonopoly Services (FAS).

More than 50% of shares should accept the offer for it to become unconditional.

Independent Directors of Highland after considering terms of the offer to be fair and reasonable and intend to recommend unanimously to accept the offer.

Fortiana is a Cyprus registered Company that is majority owned by Vladislav Sviblov and is part of his wider business interests in the metals and mining industry.

Vladislav Sviblov, is CEO and majority shareholder of Ozernaya Mining Company developing a Zn-Pb deposit in the Buryatia region and controlling a gold producing group of companies in the Zabaikalsk region in Russia with over 30kozpa in gold production.

“This is a strategic investment for us, in line with our aim to build a broader asset portfolio in the natural resources sector in Russia. This transaction adds to our existing strategic investments like the Ozernaya Mining Company, which is developing zinc-lead and gold-zinc deposits, as well as several gold mining assets and prospective deposits in the Zabaikalsk region,” Sviblov commented on the acquisition.

Fortiana is expecting to fund the cash acquisition using VTB loan facilities.

Conclusion: Highland Gold major shareholders agree to sell 40.06% interest in the Company to Fortiana at 300p. Fortiana is intending to make a 300p/share cash offer to other shareholders of the Company within 28 days of securing the FAS clearance and eyeing to close the acquisition in Q4/20. The Board intend to unanimously support the potential offer.

 

Keras Resources* (LON:KRS) 0.13p, Mkt cap £5.3m (diluted) – Keras acquires 51% in near-production organic rock phosphate project in the US

(Keras also hold an 85% interest in Societé General des Mines which holds the Nayega manganese project license in Togo)

Keras Resources has acquired a 51% stake in the Diamond Creek phosphate mine just 70km from Salt Lake city in Utah, US.

The organic rock phosphate mine is open cast, fully permitted and able to direct ship 5,000t of ore into the North American market this year.

Phosphate ore production has already restarted and should ramp up to 48,000t in year 5.

Capital costs are just US$468,000 including contingencies. This reflects the simplicity of the open cast mining followed by crushing an screening.

Mining has already started with management looking to extract 7,500t in the next few months to ensure the operation has sufficient stock to process over the winter.

Offtake: A first order of 770tons represents ~15% of projected sales for the year ahead. We assume the Diamond Creek product quality will generate significant interest and greater ongoing sales to meet the initial 5,000tpa year-1 target.

Operating costs are estimated at $229/ton in at 5,000tpa in the first year falling to US$92/ton at peak production in Year 5

Prices: Organic Rock Phosphate prices are significantly higher than for ordinary phosphate products in the US indicating a substantial margin on the project.

Grade and quality: A bulk sample done in November last year shows Diamond Creek to be one of the highest grade phosphate projects in the US.

The mine produces a premium 28% Phosphorus pentoxide (‘P205’) with a minimum 14% available phosphorous

The Diamond Creek mine is reported to be one of the highest grade phosphate projects in the US and  is marketing a 28% phosphorus pentoxide which is seen as a premium product with minimum 14% available phosphorous which is significantly higher than the 3% seen in the majority of competitor products.

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Margins: An independent study estimates an average sales price of $362.8/ton for organic fertilizers in North America indicating potential for a significant margin on the $229/ton operating cost.

Volumes: the organic fertilizer market is estimated to have taken some 260,000t of product last year with forecasts predicting demand rising to 545,000t by 2030.

Life of Mine – 60-year mine life at a peak production rate of 48,000tpa from the opencast mine though the resource is not yet classified

Management: Keras has brought in Jean du Plessis who previously worked with Russell Lamming and Graham Stacey at Chromex. Jean is already at site managing the mining operation.

Certification: Critically, certification has been received from all three official certification agencies.

Resource: The mineralised zone is ~3m thick and averages 28% P2O5 with average available phosphorous of 16%.

Surface mineable resources are estimated at 3.1- 4.6mt with a 1980 resource estimate showing 3.89mt and 1.17mt of surface mineable phosphate ore in the southern and northern sections of the Project area with around 22,000t of premium ore and 15,000t of medium grade ore already pre-stripped and available for production

Drilling: An infill drilling campaign planned for Q2 2021 is expected to prove an additional 100,000t representing five years of JORC compliant ore reserves.

Market share: Diamond Creek aims to gain around 14% of the 3mtpa North American organic fertilizers market in the next five years with growth forecast to 6.3mtpa by 2030.

The market is said to be worth $1.17bnpa growing to US$2.5bnpa by 2030 giving 7% CAGR

Phosphate fertilisers make up 22% of the total organic fertiliser market and 20% of phosphate fertilisers are sourced form rock phosphate. 

Funding: Keras has raised £1,7m by way of a placing 1,440,011,666 new shares at 0.12p/s. A Warrant will be issued for each two placing shares.

The deal

Project development loan: Keras is lending $2.5m to Falcon Isle in a series of tranches to earn a 51% stake in the project. The loan is to be re-paid from the cash flow generated

The first tranche of US$700,000 has already been paid by Dave Reeves and Russell Lamming to fund the construction of access roads, the bulk sample and metallurgical testwork. The loan will be transferred to Keras for consideration payable in new Ordinary Shares.

The second US$1.8m tranche to be paid over the next seven months is to mine the first 5,000t, upgrade roads, commission the process facility and delineate five years of JORC compliant ore reserves.

The Loan will be repaid in two phases:

Phase 1 Repayment: 70% of distributable cashflow from the  Project will be repaid to Keras for the first $1.1m of the Loan.

Phase 2 Repayment: 51% of distributable cashflow from the Project will be repaid to Keras for the remaining $1.4m of the Loan.

During Phase 1 and 2, Falcon Isle Resources will be repaid a total of $1.82m from the Project, being a repayment of loans attributable to the shareholders of Falcon Isle Resources.

Post Phase 2 Repayment, distributable cashflow will be paid out pro rata to shareholders, so that Keras will be entitled to 51%.

Keras will hold a General Meeting for consent to issue further shares on 24 August 2020 with shares issued pro-rata of the issuing authority ahead of the GM.

Nayega manganese (Togo): Management continue to wait for a mining license at Nayega

Production capacity 6,500tpm

Planned capacity for 25,000tpm (300,000tpa)

JORC resource: 13.5Mt @ 11.1% Mn and an Ore Reserve of 8.44Mt @ 14.0% Mn

Conclusion: It is rare to see a deal where mining has already started with ore being readied for screening. Russell Laming and Dave Reeves have directly loaned funds into the business to enable the rapid restart of the project reducing the risk and bringing forward anticipated cash flow. The fundamentals for organic fertilisers should be supported by the ongoing trend towards more sustainable produce.

While no deal is ever without risk the low restart and operating cost should enable an unusually fast return to positive cash flow..

*SP Angel act as nomad and broker to Keras Resources

 

Metal Tiger (LON:MTR) 20.5p, Mkt Cap £32.9m – Drilling results from the A4 Dome in Botswana

Metal Tiger draws attention  to the quarterly report of Sandfire Resources released to the ASX on 30th July which includes information on the recent results from drilling the A4 Dome area in the Kalahari Copper Belt of Botswana.

Metal Tiger holds around 3.5% of Sandfire Resources plus a 2% NSR over the ground formerly held by MOD Resources which was acquired by Sandfire in October 2019.

As well as detailed optimisation work on the feasibility study for the T3 copper /  silver project, Sandfire reports that it has “enjoyed considerable early success with the emerging A4 Dome discovery located 8km west of the T3Project, where it has announced significant wide intercepts of shallow, high-grade vein-hosted copper-silver mineralisation. As a result, A4 has progressed rapidly to a resource drill-out.” Among the results highlighted by Sandfire are:

A 20.5m wide intersection at an average grade of 3.6% copper and 88g/t silver from a depth of 78.5m in hole MO-A4-045D; and

A 21.8m wide intersection averaging 2.5% copper and 57g/t silver from a depth of 74.2m in hole MO-A4-047D; and

A32.8m wide intersection averaging 1.8% copper and 32g/t silver from 94.9m depth in hole MO-A4-049D.

Sandfire Resources says that “The results demonstrate the continuity of high-grade vein-hosted mineralisation along strike within the A4 resources area and have increased the known strike length of the mineralisation to 800m with the deposit remaining open both to the north-east and south-west.”

Drilling at A4 was resumed in early June following the easing of measures to contain the Covid19 virus in Botswana “with up to six drill rigs drilling on 50m spaced sections with the objective to define a maiden mineral resource by the end of September.”

Sandfire also says that “Re-interpretation of AEM data data over the A4 Dome suggests that the area of the current drilling appears to have tested only part of the host structure (Zone A) which may continue north-east. … In addition, the Zone B structure 600m south of Zone A, and two interpreted structures within the T3Dome east of the planned T3 mine, are also high priority targets planned to be drilled during the next phase of drilling.”

Additional potential, defined by the geophysics has also been identified at the A1 Dome, located approximately 20km east along strike from the A4 Dome where a similar geological setting including “the interpreted southward thrusting of the copper host sequence over the top of the domes and steep north dipping structures extending along the axis of the domes … is supported by drill-hole MO-A1-002D drilled by MOD in 2018 … [which] … intersected 7m @ 0.9% Cu and 4g/t Ag from 190m and 0.4m @ 5.7% Cu and 95g/t Ag from 209.2m down-hole depth within a wide zone of veining similar to A4.”

Additional exploration drilling also started in June ”to test several new regional targets within the T20 Exploration Project, approximately 100km west of T3.”

Conclusion: Metal Tiger should ultimately benefit from both its equity holding in Sandfire Resources and its NSR following the continuing success of exploration in the Kalahari Copper Belt following Sandfire Resources’ acquisition of MOD Resources last year.

 

Pensana Rare Earths (LON:PRE) 24p, Mkt cap £41.4m – Quarterly report and project update

Pensana’s report for the quarter to 30th June, which the company describes as “transformational” provides a useful update on progress which includes the award of the 35 years mining licence for the Longonjo project, granting of the adjacent  7,456km2 Coola exploration licence and the investment of an additional A$7.25m by the Angola Sovereign Wealth Fund.

As it has previously discussed, Pensana says that the recent drilling results have supported the “strategy to extend mine life beyond the current PFS 9 year pit design … [while] … High grade drill intersections in the fresh rock immediately beneath the weathered zone add a new dimension to the project”.

The infill drilling completed so far is expected to “support the potential to convert substantial amounts of Inferred mineralisation to Indicated, thereby allowing its inclusion in an expanded mine plan for the BFS. Infill drilling in the Central area also demonstrated the continuity of the high grade weathered zone mineralisation, supporting the potential to convert much of the current Indicated category mineralisation to Measured in this important area of proposed first mining”.

The company confirms that the bankable feasibility study currently underway is “on track for completion mid October 2020”.

Pensana also confirms that a pilot plant under construction at ALS Metallurgy in Perth is nearing completion and that it expects testing of a 60 tonnes bulk sample of mineralisation from Longonjo to commence during August.

CEO, Tim George, said that “As the World looks to recover from the COVID-19 pandemic, it is clear that the renewable energy sector will play a significant role in the rebalancing of the global economy. The US$16 trillion post COVID stimulus programmes are set to transform the sector and drive significant demand for r critical rare earth magnet metals. Longonjo, will play a key role in supply this demand and ensuring that the growth of offshore wind and electric vehicles remains on track."

Conclusion: Pensana is pressing ahead with the feasibility work at Longonjo and has identified additional resource potential both laterally and within the underlying un-weathered rock beneath the current resources. Pilot scale metallurgical testing is expected to get underway during August while the award of exploration rights over the adjacent Coola exploration ground offers additional opportunities to expand the scale of the resource.

 

Taseko Mines Limited (LON:TKO) 47.5p, £116.9m - North American copper producer to release Q2 results 

North American multi-asset copper producer, Taseko Mines, is to release its second quarter 2020 financial results after market close on the 5th of August. 

The company has assets in both British Columbia and Arizona, with the Gibraltar Copper Mine in BC its flagship asset which has recently seen its mill capacity expanded to 85,000tpd from 32,000tpd. 

Annual production at Gibraltar has been stable since 2013, which has been the basis of solid cash flow for the company- allowing exploration and development of other assets including the Florence Copper Project in Arizona. 

The company aims to build on first quarter cash flows of $17.7m and adjusted EBITDA of $5.3m. The Company reported Earnings from mining operations before depletion and amortization of $5.9 million and an Adjusted net loss of ($21.6) million, or ($0.09) loss per share.

According to Russell Hallbauer, CEO and Director of Taseko "Although our financial results were impacted by the falling copper price, the operating performance at Gibraltar was in line with our expectations. The mine produced 32.4 million pounds of copper at Total operating costs* of US$1.82 per pound of copper".

Since the price of copper declined sharply in March as a result of COVID-19, the price has recovered 30% to pre-COVID levels, reinstating the company's margins which may lead to a better performance in Q2. 

The company’s CEO also commented: "To-date, there has not been any impact on Gibraltar operations as a result of COVID-19", "we are pleased to report that there have been no cases of COVID-19 at Gibraltar or any of our other locations."

 

Analysts

John Meyer – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] - 0203 470 0474

 

Sales

Richard Parlons –[email protected] - 0203 470 0472

Abigail Wayne – [email protected] - 0203 470 0534

Rob Rees – [email protected] - 0203 470 0535

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*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

Bloomberg

Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt

LME

Oil Brent

ICE

Natural Gas, Uranium, Iron Ore

NYMEX

Thermal Coal

Bloomberg OTC Composite

Coking Coal

SSY

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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