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Today's Market View - Altus Strategies, Anglo Asian Mining, Chaarat Gold and more...

Altus Strategies* (LON:ALS) – High grade gold mineralisation intersected at Tabakorole Anglo Asian Mining* (LON:AAZ) BUY Target 209p – H1 exploration update Chaarat Gold* (LON:CGH) BUY Target raised to 58p (from 51p) – Earnings update Glencore (LON:GLEN) – Record marketing performance shores up H1 results despite Covid19 pressures

Altus Strategies - Today's Market View - A

SP Angel . Morning View . Thursday 06 08 20

Gold rises to new record as USD slumps and EFT holdings grow

MiFID II exempt information – see disclaimer below 
 

Altus Strategies* (LON:ALS) – High grade gold mineralisation intersected at Tabakorole

Anglo Asian Mining* (LON:AAZ) BUY Target 209p – H1 exploration update

Chaarat Gold* (LON:CGH) BUY Target raised to 58p (from 51p) – Earnings update

Glencore (LON:GLEN) – Record marketing performance shores up H1 results despite Covid19 pressures

Jubilee Metals Group (LON:JLP) – Additional copper tailings in Zambia

Kavango Resources (LON:KSZ) – Petrology report confirms further similarities between the Kahalari Sutre Zone and the Norilsk nickel system in Russia

Vast Resources* (LON:VAST) – Drilling at Baita Plai returns high grade results

 

US dollar slumps to two-year low

Economic recovery fears in countries are affecting currency markets, as investors view the states’ recovery is lagging others.

The US dollar has an inverse relationship with gold price, meaning that the sliding dollar has been an additional form of support to bullion over the past few weeks.

 

China GDP growth softens as Yangtze flooding slows economic recovery

Glencore issued a note of caution to metals markets today as they cut the dividend and warned on the outlook.

The company did well in its Marketing (Trading) division, as we predicated.

This demonstrates the strength of combining the Marketing and Industrial (Mining) groups together.

Eg when metals prices tank and the industry is in crisis the Marketing division gains through helping clients in the distressed environment.

Glencore’s cautious outlook statement may be coloured by the flooding in China along the Yangtze and general economic sentiment in relation to the US / China trade war.

Yangtze floods – Typhoon Hagupit

The combination of flooding along the Yangtze river combined with the new typhoon is devastating for certain coastal areas

381,375 people evacuated during Typhoon Hagupit in Jaejiang province as rivers flooded and buildings collapsed.

Transport services were suspended (South China Morning Post)

 

Dow Jones Industrials +1.39% at 27,202

Nikkei 225 -0.43% at 22,418

HK Hang Seng -1.07% at 24,834

Shanghai Composite +0.19% at 3,384

 

Economics

Beware of sensationalist news headlines yesterday’s data shows ongoing recovery in many areas

Services PMI continue to recover despite having been hit really hard by the lockdown.

In many cases the services PMIs are ahead of the composite numbers highlighting how quickly services are to reopen and recover.

Note some key services sectors such as airlines and hotels will take much longer to recover indicating to us that other services are recovering far better.

 

US – July non-manufacturing index hits 58.1 vs 57.1 in June

US services sector activity hit a 16-month high in July according to the Institute for Supply Management.

The index slumped to 41.8 in April, the lowest level since March 2009.

Former Fed Chair Yellen says the Fed may well do more QE in the coming months

US Treasury to Auction $38bn in 10-year notes, $48bn in 3-year notes and $26bn in 30-year bonds

The US Treasury also plans to increase auction sizes across all securities

Markit Services PMI came in at 50.0 slightly better than expected

US ADP Employment rose 167,000 in July

US  - ISM nonmanufacturing 67.2 in July

Markit 50.0 in July vs 47.9 in June

and 50.3 (47.9) and

JP Morgan global composite 50.8 in July vs 47.8 in June

JP Morgan global services 50.5 in July vs 48.0 in June

Trade deficit fell US$50.1bn in June off 7.5% mom. May’s deficit was US$54.6bn

US exports rose 9.4% and imports 4.7% again highlighting the recovery

 

EU - Retail sales rose 5.7% in June vs 17.8% in May the figures are 1.3% yoy and -5.1% yoy

composite PMI 54.9 in July vs 48.5 in June

services 54.7 in July vs 48.3 in June

 

France - composite PMI 57.3 in July vs 51.7 in June

 

Germany – June factory orders rise 27.9% vs 10.1% expected

Germany manufacturing continued its recovery in June, as orders increased for the second month.

The Economic Ministry said that demand is already at 90.7% of the level recorded at the end of last year, however orders from abroad are lagging domestic demand.

Composite PMI 55.3 in July vs 47.0 in June, services PMI 55.6 in July vs 47.3 in June

 

Sweden - Q2 GDP fell 8.2% vs 0.4% in Q1. The figures are -8.6% yoy in Q2 and 0.1% yoy in Q1

Industrial production also fell unsurprisingly -8.8% in Q2 vs 0.9% in Q1 the figures were -8.2% yoy for Q2 and -16.8% yoy for Q1

 

UK – Bank of England expect economy to shrink by 9.5% this year

The BoE’s estimate is better than the initial estimate of a 14% contraction, however the decline would still be the largest in 100 years.

Despite the downturn being less severe than feared, the Bank said unemployment was likely to rise ‘materially’.

Interest rates were held at 0.1%, whilst the MPC said the use of negative interest rates remained under review.

The Bank expects the UK economy to grow by 9% in 2021, and 3.5% in 2022, with the economy forecast to get back to its pre-Covid size at the end of 2021.

The pound hit a four-month high against the dollar on the announcement, although dollar weakness is also in play (FX Street).

UK Markit/CIPS Construction PMI 58.1 in July vs 55.3 in June

Composite PMI 57.0 in July vs 47.7 in June

services 56.5 in July vs 47.1 in June

UK new car sales rose 11.3% in July vs -34.9% in June as the market started to recover

 

Asia:

Japan – Composite PMI 44.5 in July vs 49.6 in June

Service PMI 45.4 in July vs 45.0 in June

Australia – Composite PMI 57.8 in July vs 52.7 in June

Services PMI 58.2 in July vs 53.1 in June

HK – Composite PMI 44.5 in July vs 49.6 in June

Singapore - 45.6 in July vs 45.0 in June

India – composite 37.8 in July vs 37.2 in June

Services 34.2 in July vs 33.7 in June

Russia - Composite 56.8 in July vs 48.9 in June,

Services 58.5 in July vs 47.8 in June

Philippines – Economy expected to contract 5.5% this year

Officials expect a deeper contraction than earlier estimates of 2% to 3.4% amid the country’s strict lockdown measures against the coronavirus.

Q2 GDP shrank 16.5% YoY, the worst reading since record began in 1981.

Second-quarter data compared to the same period last year shows:

Consumer spending -15.5%

Industrial production -22.9%

Services -15.8%

Government spending +22.1%

 

Brazil – Benchmark rate cut 0.25% to 2%

Brazil’s central bank cut its key interest rate to an all-time low, following back-to-back reductions of 0.75%.

Composite PMI 47.3 in July vs 40.5 in June

Services 42.5 in July vs 35.9 in June

 

Africa recovering economically:

South Africa PMI 44.9 in July vs 42.5 in June

Nigeria PMI 50.4 in July vs 46.4 in June

 

Currencies

US$1.1876/eur vs 1.1816/eur yesterday.  Yen 105.50/$ vs 105.71/$.  SAr 17.359/$ vs 17.257/$.  $1.316/gbp vs $1.310/gbp.  0.719/aud vs 0.719/aud.  CNY 6.944/$ vs 6.953/$.

 

Commodity News

Precious metals:

Gold US$2,050/oz vs US$2,029/oz yesterday

Gold ETFs 108.8moz vs US$108.5moz yesterday

Platinum US$978/oz vs US$946/oz yesterday

Palladium US$2,192/oz vs US$2,144/oz yesterday

Silver US$27.64/oz vs US$26.31/oz yesterday

           

Base metals:  

Copper US$ 6,455/t vs US$6,469/t yesterday

Aluminium US$ 1,766/t vs US$1,774/t yesterday

Nickel US$ 14,395/t vs US$14,185/t yesterday – LME nickel price rises 4% on Wednesday as Metals traders call for higher prices

This follows Elon Musk’s call for miners to produce more friendly nickel

The price of nickel rose sharply on Wednesday, amid panic-buying against the monthly options expiry deadline, Fastmarkets MB reports.

LME nickel closed at $14,419/t yesterday, its highest close of the year while trading volumes were the highest since the 19th of March at more than 14,000 lots.

On the SHFE, nickel surged 1.95% as the Philippine government extended its lockdown until the 18th of August (SMM News).

Zinc US$ 2,393/t vs US$2,335/t yesterday

Lead US$ 1,932/t vs US$1,894/t yesterday

Tin US$ 17,865/t vs US$17,785/t yesterday

           

Energy:           

Oil US$45.4/bbl vs US$44.6/bbl yesterday

Following a poor Q2 reporting season for Big Oil, Exxon has warned that 20% of the world’s oil and gas reserves may no longer be viable

The Company reported yesterday that a material proportion of the world’s oil and gas reserves will no longer qualify as “proved reserves” at the end of this year if oil prices fail to recover before then

A considerable number of oil and gas companies have written off billions in assets as the value of those assets in the current oil price climate is no longer what it once used to be

Exxon is currently reviewing its oil and gas assets, the results of which should be available by November

Nevertheless, Exxon has an infamous history of not making many asset adjustments over the last decade, while its Big Oil peers have

Exxon recorded its worst quarterly loss in the second quarter of this year, booking a loss of US$1.1bn compared to earnings of US$3.1bn in 2Q 19

Still, the Company is not moving to cut its dividend, which analysts expect will cost the oil major US$15bn

It is thought that given that a large proportion of Exxon’s shareholders are retail investors, the Company continues to make their dividend a priority, to maintain the share price

Natural Gas US$2.231/mmbtu vs US$2.174/mmbtu yesterday

Natural gas prices have pulled back slightly in early trading this morning, however, still maintain well above the US$2/mmbtu level

The catalyst currently underpinning the market is an easing of storage availability fears, fuelled by a combination of excessive heat in June and July and expectations of more heat in August

Signs of strengthening liquefied natural gas export demand also helped to drive prices higher

There is one disturbance in the Atlantic Ocean that has a 30% chance of becoming a tropical storm according to NOAA

This storm is unlikely to generate any issues for natural gas infrastructure

Uranium US$32.25/lb vs US$32.30/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$113.5/t vs US$110.8/t

Chinese steel rebar 25mm US$545.9/t vs US$545.2/t - EU extends anti-dumping duties on Chinese steel

The European Commission has extended duties on Chinese corrosion-resistant steel to stop producers avoiding existing duties by slightly modifying the material.

Whilst anti-dumping measures had caused imports of particular products to fall almost to zero, imports of other corrosion-resistant products had climbed to around 1mt per year.

The extended duties will apply to corrosion-resistant steel products modified in various ways such as coating with magnesium.

The duties will apply to all Chinese exporters except for one unnamed cooperating company (Reuters).

Thermal coal (1st year forward cif ARA) US$59.6/t vs US$59.8/t

Coking coal swap Australia FOB US$121.5/t vs US$122.0/t

           

Other: 

Cobalt LME 3m US$33,200/t vs US$33,200/t

NdPr Rare Earth Oxide (China) US$44,066/t vs US$43,651/t

Lithium carbonate 99% (China) US$4,997/t vs US$4,991/t

Ferro Vanadium 80% FOB (China) US$30.0/kg vs US$30.0/kg

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

Tungsten APT European US$205-210/mtu vs US$205-210/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

CATL partners with Mercedes

Mercedes and CATL will link up to create battery technology for the upcoming EQS vehicle.

The partnership will produce battery technology for the high-volume electrification of Mercedes portfolio. (Electrek)

Mercedes plans to use CATL’s cell-to-pack design and the Chinese battery maker will supply cells for the upcoming EQS electric sedan.

The agreement covers the full range of battery technologies according to Daimler including cell modules for Mercedes cars and battery systems for Mercedes vans.

The battery packs will be capable of 700km on a single charge according to Company spokespersons. (Reuters)

 

ChargePoint raises $127m in latest funding round

ChargePoint has raised a further $127 in its latest funding round taking total funding to $660m. Pre-money valuation was $1.25m.

Investors in the latest round of funding include Daimler AG, BMW, and Siemens AG.

Use of funds will be building out the Company’s charging network in Europe according to the CEO.

The charging network provider set up in 2007 has 144,7000 charging points globally and 175 partners who help to deliver its service.

The Company aims to deliver 2.5m charging points by 2025.

 

Electric vehicle sales improved despite remaining a small segment in Australia

EV and hybrid sales increased 27.8% in July despite the wider Australian auto market falling 20%, continuing its 2yr slump. (Renewable Economy)

Passenger EV sales rose 44.5%, SUV sales were up 12.2% and light commercial sales increased 30%.

In reality this means 490 passenger vehicles were sold, with Tesla leading the way with 198 vehicle sales.

The numbers are small, but the intent is encouraging given the deepening slump in the broader auto market.

 

Albemarle warns of sliding profits as EV production slows

Albemarle’s quarterly profit fell 45% as slowing EV sales citing reduced demand for lithium.

The Company posted net income of $85.6m for the quarter down from $154.2m for the same period last year.

The Company warned Q3 sales would also suffer as EV makers produce fewer vehicles as a result of the pandemic. It is expected the effects will be felt more acutely in Q3 as stockpiles rise and prices continue to fall.

Albemarle does not plan to cut its dividend but will go ahead with previously announced cost cuts. (Reuters)

 

Company News

Altus Strategies* (LON:ALS) 64p, Mkt Cap £45m – High grade gold mineralisation intersected at Tabakorole

AC drilling intersected 6.2g/t over 6m from 14m at Tabakorole extending strike potential of the FT prospect by 600m to ~3km.

The programme (92 AC drill holes for 1,811m) identified a 28m wide target coincident with the key magnetic anomaly.

Graphex has already completed eight holes for 1,544m at Tabakorole with assay results expected shortly.

Drilling is both infill and step out testing high the potential for high grade plunge and strike extesions.

Graphex is earning an initial 33% in the Project under the JV with the latest data planned to be incorporated into an updated mineral resource estimate.

A series of high grade wide intersections returned post the 2007 resource compilation will also be included in the updated estimate.

Among selected intersections were 18m at 6.0g/t, 16m at 3.8g/t, 10m at 3.1g/t and 24m at 2.5g/t.

Conclusion: AC drilling returned wide high grade and close to surface intersection at the Tabakorole gold project in southern Mali where Graphex is earning an initial 33% interest under the existing JV. This extends the FT prospect potential strike by additional 600m to 3km. New data along with new diamond core drill holes will be used in the preparation of the updated mineral resource by Graphex.

*SP Angel acts as nomad and broker to Altus Strategies

 

Anglo Asian Mining* (LON:AAZ) 165p, Mkt Cap £189m – H1 exploration update

BUY – 209p

At Gedabek, the main drilling activity continued at the Avshancli and Gilar targets as well as on the flanks of this area that were prioritised as the ones that can be fast tracked into production.

Further drilling at the Gadir and Gedabek underground mines helping to potentially add new ounces into the resource and improving geological confidence in the orebodies.

Additionally, following the positive results from Ugur SE “deep” high-grade Cu-Ag mineralisation, drilling ramped up around the area with two core drill rigs in operation.

New mineralisation zone has been identified between Gedabek and Ugur open pit operations, named Zafer, where one drill hole intersected 194m of continuous sulphide mineralisation with a number of gold and copper bearing intersections.

“The Gedabek area continues to deliver positive exploration results and work is ongoing at each target area to piece together the geological picture... Exploration of the near surface gold targets are taking priority with the aim to rapidly develop mineral resources,” the Company commented on the exploration works completed at the Gedabek Contract Area.

At Gosha, the Company completed ~3,000m of diamond core drilling close to the underground mine targeting areas of extension to Zone 5 at depth as well as the area in between Zone 5 and Zone 13, located ~500m away from Zone5.

Gold intersections of up to 15g/t were recorded.

Additionally, the team completed a new geological map of the contract area with a number of targets identified for follow up exploration works including 15 porphyry mineralisation and 13 Au-Pb-Zn mineralisation targets.

“The Gosha Contract Area continues to show upside potential for the increase of the mineral resources for the Company. The drill results demonstrating the presence of mineralisation adjacent to the current Gosha mine potentially allows for the expansion of this mining operation in the future.”

At Ordubad, amid COVID-19 related travel restrictions, no drilling has been carried during the period with on the groundwork focused on trenching on the recently discovered gold vein systems.

“Geological modelling and mineral targeting is ongoing to identify drilling locations to test the presence of mineralising systems and lithocaps, with the aim to prioritise locations for resource drilling.”

Additional trenching and further drilling of a minimum of 3,000m is planned for H2/20.

Conclusion: The Company continued with an extensive exploration programme over its Contract Areas with a focus on discovering new ounces in vicinity to existing operations that may be fast tracked into production while also testing greenfield targets to establish a medium to long term pipeline of projects.

*SP Angel acts as nomad and broker to Anglo Asian Mining

 

Chaarat Gold* (LON:CGH) 35p, Mkt Cap £184m – Earnings update

BUY – 58p (from 51p)

CLICK FOR PDF

Kapan produced 27koz in H1/20 with FY20 guidance reiterated at 55koz

As per the quarterly update released earlier this week, the Kapan polymetallic operation in Armenia produced 27.0koz GE in H1/20 (using Company commodity prices assumptions) at $1,076/oz AISC* including 13.2koz gold, 262koz silver, 1.0kt of copper and 4.0t of zinc.

The plant processed 356kt at 2.89g/t of Kapan ore (H1/19: 381kt at 2.97g/t) and 10kt at 3.43g/t of higher grade third party material.

3rd party material contributed 0.5koz in production in H1/20 with the Company expecting to ramp up processing of 3rd party ore after signing new contracts in Q2/20, thus, utilising mill spare capacities.

Mined grades came off in H1/20 reflecting mining in lower grade areas with the team expecting those to pick up in H2/20 following targeted development work carried to date. Higher grades and operational efficiencies brought on from new equipment should see H2/20 AISC come down.

The Company reiterated 55koz production guidance for FY20

Separately, the Company reported on the plan to drill out and evaluate East Flank zone with an exploration target of 5-6mt at 2.25-2.75g/t based on historic database of 62 drill holes for ~22,000m; the area may potentially be developed and to start supplying ore to the mill in H2/22.

*AISC is based on an oz produced and excludes smelter TC/RC charges, others that add $234/oz (oz sold).

Tulkubash project funding remains on schedule for completion by YE20 with first gold pour in the end of 2022

A Tulkubash, the team is continuing with detailed engineering with equipment mobilisation remaining on hold affected by the ongoing international travel and border restrictions.

Financing discussions in progress with a number of parties including a couple of new banks and a team in the process of optimising the funding structure targeting closure by the end of 2020.

The site in Kyrgyzstan reported the first COVID-19 case in July with the outbreak reported to have been effectively managed and brough under control with minimal disruption to ongoing works or plans.

Conclusion: H1/20 delivered 27koz GE at $1,076/oz (H1/19: $972/oz) reflecting lower processed grades with the Company expecting a pick up in production rates in H2/20 as higher grade areas are accessed and, thus, reiterating 55koz target GE for FY20. Concentrates sales that slipped into Q3/20 should also even out revenues for FY20. Additionally, the Company has successfully added to the 3rd party ore contracts securing higher grade feed that should see higher contribution from 10kt recorded in Q2 and help better utilise milling capacities. We assumed 20ktpq 3.5g/t of 3rd party material in our revised estimates.

We have slightly adjusted the commissioning of the Tulkubash by one quarter to Q4/22 reflecting COVID-19 related challenges to people and equipment logistics.

Additionally, we revised our Company earnings forecasts to account for updated commodity price assumptions (see the line by line comparison below). Stronger production and commodity prices in H2/20 should also help cash flows with gold at an all time high (gold accounts for ~50% of Kapan revenues) and silver/copper/zinc currently trading higher than respective H1/20 realised levels. We reiterate our BUY recommendation with a revised target price of 58p, up from 51p.

 

*SP Angel acts as Broker to Chaarat Gold

 

Glencore (LON:GLEN) – 190p, Mkt cap £26.1bn - Record marketing performance shores up H1 results despite Covid19 pressures

Glencore reports an attributable loss of US$2.6bn for the six months to 30th June 2020 (H1 2019 profit of US$226m) after impairment charges of around US$5.5bn (US$3.2bn net) arising from its Chad oil interest (US$673m), Colombian coal (US$710m). Zambian copper (US$1,144m), Peruvian zinc (US$2,285m) and South African ferrochrome (US$116m) interests.

Operating cash-flow, however, remained strong at US$3,686m before working capital and other items (H1 2019 US$3,516m) and the company reports a 30th June net debt of US$19,695m (31st December 2019 – US$17,556m). The company states that it is targeting debt levels below US$16bn.

On an adjusted basis, EBITDA of US$4,833m declined by 13% compared to the US$5,582m reported in H1 2019 while adjusted EBIT was 34% lower at US$1,472m. The company attributes the weaker performance in its industrial activities to “weaker average period-over-period commodity prices (notably copper, zinc, ferrochrome, coal and oil) and some generally Covid-19 induced production curtailments compared to prior period”.

EBITDA margins improved for the group’s copper (to 32% from 26%) and nickel (to 19% from 12%) operations. Excluding Koniambo the nickel margins improved more strongly to 35% from 25%.

EBITDA margins declined for the coal (to 23% from 39%) and oil (to 22% from 40%) operations.

The group’s marketing activities performed strongly delivering “a record six monthly performance. Adjusted EBITDA in H1 2020 was $2,215 million, an increase of 105% over the prior period and Adjusted EBIT increased by 108% to $2,015 million, as oil, in particular, benefited from the volatile and structurally supportive marketing environment”.

Chief Executive, Ivan Glasenberg acknowledged that Covid19 had been a pervasive force during the reporting period but said that “Our Industrial activities faced numerous challenges, but for the most part were able to continue operating relatively normally. Unit costs are broadly stable (pre by-product credits), while capex is under close control …[while] …   Marketing delivered a half-yearly record Adjusted EBIT performance of $2.0 billion, allowing us to raise full-year guidance to the top end of our long-term $2.2-3.2 billion range”.

Summarising, Mr. Glasenberg pointed out that while short-term uncertainties remained, “Over the longer term, our diversified commodity portfolio, positions us well to play a key role in the next upward economic cycle, benefiting in particular from the commodities required for the transition to a low-carbon economy”

The company discusses the disrupting  impact of the Covid19 pandemic on a number of commodity sectors saying that “Material supply disruptions began in late March when Peru, which produces around 12% of global mined copper supply, implemented measures to contain the spread of Covid-19” and that the zinc business “has so far witnessed material Covid-19 disruptions in the supply of both concentrates and metal … Covid disruption is already of greater magnitude” than the anticipated world production growth this year.

Glencore says that in the zinc market “The largest uncertainty remains the final magnitude of the reduction in zinc demand and 2020’s resulting metal balance. LME/SHFE stocks have increased by ~140k to ~220k at end of June 2020 yet remain relatively low at less than a week of stocks relative to global consumption”, however mine supply is expected to recover as virus containment measures are eased.

The company notes that the impact of the virus on nickel market supply has been “has not been material, with lost production from traditional nickel suppliers more than offset by the continued increase in nickel pig iron (“NPI”) output from Indonesia” and “the long-term outlook for nickel consumption in this segment remains positive as demand for higher nickel-content batteries continues to grow”.

“Thermal coal demand growth in the Pacific, to the end of March, offset Atlantic demand weakness with overall global thermal coal demand remaining stable … [and] … Demand for imported coal in China during H1 2020 annualises in excess of 2019 levels”.

Glencore says that “Relating to Covid-19, only Colombia experienced material coal production impacts as a consequence of government-imposed lockdown measures. As demand slowed and prices fell, producers looked to rationalise production and export levels. Exports from USA, Colombia and Russia, all of which are exposed to Atlantic markets, fell by 40%, 13% and 15% respectively during H1, with Russia’s decline partly mitigated by an 8% increase to Pacific markets”.

 

Jubilee Metals Group (LON:JLP) – 4.8p, Mkt cap £96m – Additional copper tailings in Zambia

Jubilee Metals reports that it has secured processing rights over around 2mt of copper tailings containing grades of over 2% copper from a private Zambian company.

The agreement provides “further potential to increase the supply of copper ore to approximately 4 million tonnes with an additional 2.5 million tonnes of copper containing tailings available for processing”.

Jubilee metals describes the agreed terms saying that “Jubilee will construct, own and operate the Processing Facility while its JV Partner will deliver the ROM Material and Tailings at no cost to the JV. The JV Partner is tasked with producing the copper concentrates, which will be sold on an arms-length basis with Jubilee's Sable Refinery holding a first right to such concentrate.  The participation in the earnings received by Jubilee and the JV Partner is linked to the source of the processed material while Jubilee retains 100% of all earnings generated through the refining of the copper concentrate at its Sable Refinery”.

Jubilee Metals is focused on developing near-term production and “has completed the design for the construction at a targeted Brownfield site adjacent to the tailings (the "Site"). The Processing Facility will be commissioned in two phases with the first copper concentrate and revenues expected within four months”.

It is expected that “Jubilee will construct a new Processing Facility targeting a processing rate of approximately 600 000 tonnes per annum producing copper concentrate for further refining at its Sable Refinery”.

Estimated capital expenditure is US$15m over the next year and additional copper concentrates are expected to be a “significant step towards achieving Jubilee's stated goal of 25 000 tonnes per annum of copper production”.

CEO, Leon Coetzer said that these resources had been “a key target for Jubilee” in its production expansion plans and that “We have already completed the designs for our Processing Facility and engaged with key equipment suppliers to accelerate the implementation of Project Roan.  I am confident that we are able to fund the capital required for the Project from our own strong cash reserves and our ability to raise project debt”.

Conclusion: Securing additional copper bearing tailings in Zambia should provide additional feed for Jubilee Metals’ Sable copper refinery in a relatively short time. This looks like a good deal for Jubilee, its partners and for the environment in Zambia.

Jubilee has been keen to tidy up a number of legacy mining sites in Zambia while extracting the toxic metal content.  

We hope the government will recognise the dedication and good work being done from an environmental perspective as well as the employment and taxes that will be paid as a result of the clean up here and for future legacy mining sites.

*An SP Angel mining analyst has visited Jubilee Metals Group assets in Zambia in 2018

 

Kavango Resources (LON:KSZ) 2.62p, Mkt cap £5m – Petrology report confirms further similarities between the Kahalari Sutre Zone and the Norilsk nickel system in Russia

Kavango has had a petrology report done by Dr Martin Prendergast, an independent consultant, on the petrology and mineral composition of core samples, taken from the KSZ ‘Kalahari Suture Zone’.

The report shows similarities between the KSZ and the giant Norilsk deposits in Russia.

The geological theory is simple yet complex to work out

Investors should view the following presentation by Kavango’s chief geologist, Mike Moles, about the Kahalari Sutre Zone.

It only takes 2 mins but it explains all of what Kavango is about

https://twitter.com/KavangoRes/status/1286236091972976641?s=20

Kavango has been able to courier core samples from last year’s drilling to whole rock analysis and preparation of polished thin sections.

The thin sections and analytical data were then couriered to Dr Prendergast in Scotland for interpretation and reporting.

“The analysis shows there was enough sulphur in the magma to form a metal sulphide liquid phase.

Dr Prendergast’s report suggests that as much as 50% of the nickel and perhaps all of the copper in the magma may have precipitated as metal sulphides.

The quantity of metal sulphide precipitated is a function of how much magma passed through the system on its way to the surface.

All the indications suggest that it was in the order of several thousand cubic kilometres.

Where the metal sulphide was precipitated and eventually crystallised is now the main focus of the company’s exploration.

Geological modelling of the gabbroic intrusives in the Hukuntsi area identify areas of gabbro sill thickening similar to those associated with major orebodies at Norilsk.

These zones of sill thickening are now being mapped and evaluated. Targets for ground based low frequency EM surveying are being selected and the surveys will be carried out once the Covid-19 restrictions have been lifted.”

Dr Prendergast’s analysis confirms the presence of cumulate rocks and sulphide liquid fractionation

Kavango have also had a ‘Mineral System Review’ prepared by Dr David Holwell and Daryl Blanks. It’s a 23-page report but there are enough pictures to describe the geology and make it interesting.

https://www.kavangoresources.com/media/attachments/2020/04/29/mineral-systems-review-of-the-ksz-botswana.pdf

Conclusion: Investors should view Mike Moles’ short video to understand what the team are looking for. While the theory is extremely compelling in practice the team need to decide where to drill for the best chance to hit Norilsk style mineralisation. The problem is compounded by thick Kalahari sand cover which masks the underlying rocks and makes discovery all the more challenging. If we are lucky nature will repeat itself for Kavango in a similar style to Norilsk if not, we have to hope they will hit something else of potential economic value.

 

Vast Resources* (LON:VAST) 0.23p, Mkt Cap £28m – Drilling at Baita Plai returns high grade results

The Company released assay results from 15 (254m) of 20 (692m) drill holes completed at the Baita Plai Polymetallic Mine in Romania.

The drilling was carried from 18 level targeting mineralisation of up to 50m below that level on the Antonia skarn.

Among selected results are:

 

 

The data is to be used in the preparation of the JORC Resource on the area immediately below 18 level extending 50 m below the 19 level.

Over 75% of the delineated mineralisation is reported to lie outside the historic (NAEN Code) resource of 1.88mt at 2.19% Cu, 128g/t Ag, 3.46% Zn, 3.07% Pb and 1.41g/t Au.

The area below the 18 level will be mined in the first place once production restarts with potential resources expected to provide enough material to feed the plant for 3-4 years at a 180ktpa throughput rate.

Drilling programme continues with deeper holes planned to test the Antonio skarn at depths of ~100-150m below 18 level.

Each 50m of elevation is estimated to extend the life of mine 3 years at 180ktpa, the Company estimates.

On the flotation plant commissioning phase, the team is targeting first concentrate sale to Mercuria at the end of August/beginning of September, subject to sufficient quantities being ready for shipment.

Conclusion: Drilling of 50m below the 18 level returned high grade intersections as the team gears up for the start of production at the Baita Plai Polymetallic Mine. The area will be mined first and offers an indication of feed grades planned to be processed at the plant. The team is planning to continue test drilling areas above and below the 18 level that should potentially extend the Baita life of mine. The Final Metallurgical Report is expected later this month, while the first concentrate shipment to Mercuria is targeted in August/September.

*SP Angel acts as Broker to Vast Resources

 

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.

 

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