SP Angel . Morning View . Thursday 15 10 20
New US fiscal deal delays and rise in new COVID-19 cases weigh on risk sentiment
China threatens to create REE black list for foreign companies
Ariana Resources* (LON:AAU) – Initial mineral resource at Magellan
Adriatic Metals* (LON:ADT1) – Vares pre-feasibility study released
Atalaya Mining (LON:ATYM) – Production guidance confirmed following record Q3 output
Base Resources* (LON:BSE) – Quarterly reports ongoing demand supporting steady price environment
Beowulf Mining* (LON:BEM) – Management to present at ProHearings Capital Markets day tomorrow
Orosur Mining* (LON:OMI) – FY 2020 Results
Rio Tinto (LON:RIO) - Rio Tinto to invest $103m in Isle Maligne hydroelectric power project in Canada
China threatens to create REE black list for foreign companies
China is looking to punish foreign nations and companies through restrictions on the availability of REEs ‘Rare Earth Elements’
China claims this list will be similar to the US Department of Commerce "entity list" for foreign companies that trade with North Korea or Iran, or are accused of illegal acts such as money laundering or forced labour, etc (ATF)
China passed draft legislation three years ago, reviewing the legislation twice since.
The National People's Congress is also expected to review this ‘draft’ legislation again next week ahead of its potential decree and implementation next year.
The legislation is a major and serious threat to Western manufacturers though China has been carefully restricting the availability of key REEs for some time using export quotas and generally preferring companies with manufacturing bases located in China.
BHP confirm that China are deferring Australian coal shipments
BHP announced yesterday that it has been asked to defer shipments of coking coal to China as a result of the new restrictions imposed by the Chinese government.
Chairman Kern MacKenzie told the media after the company’s AGM ‘Our commercial team has recently received deferment requests from some of our Chinese customers’ (S&P Global).
The comment from Mr MacKenzie confirms rumours coming out of China earlier this week that Beijing had told state-owned steelmakers and power plans to stop importing Australian coal.
ICL Boulby Mine Underground marathon - in support of Mental Health
A group of six runners from ICL’s Boulby potash mine in Yorkshire are preparing to run the world’s deepest underground race.
Sky News interview: Just giving page: https://uk.virginmoneygiving.com/beneaththesurfacemarathon
Dow Jones Industrials -0.58% at 28,514
Nikkei 225 -0.51% at 23,507
HK Hang Seng -1.38% at 24,327
Shanghai Composite -0.23% at 3,333
US – Fresh stimulus hopes waned as Treasury Secretary Mnuchin expressed doubts the deal will be reached before the election as two parties to discussions remain “far apart” on main issues.
Mnuchin also said there would be a very big GDP number coming up
China – Producer prices dropped at a faster than expected pace in September extending the run of negative readings to eight months while consumer prices growth moderated coming in at 1.7%yoy, down from 2.4% in August, as pork price inflation moderated amid stronger hog production and the release of frozen pork from state reserves.
Separate data showed credit growth continued strong in September driven by government efforts to add stimulus as well as stronger demand on the back of an economic recovery.
Aggregate financing totalled CNY 3.48tn v CNY 3.58tn in the previous month and CNY 2.51tn in Sep/19.
Q3 GDP numbers are due on Monday.
Ryanair further reduces the number of flights for the November to march period on the back of a sharp drop in bookings.
The Company expects to operate just 40% of last year’s schedule, down from a previously planned 60%.
Germany – The nation posted a record daily increase in confirmed coronavirus cases with 6,638 infections reported.
That beat a record of 6,294 recorded on March 28.
While this is considerably less than in neighbouring European countries, Angela Merkel warned there could 19,2000 infections per day if current trends continue.
France – New restrictions include a night-time curfew in Paris and eight other cities from 21.00 to 06.00 with a public health emergency declared.
Other cities include Marseille, Lyon, Lille, Saint-Etienne, Rouen, Toulouse, Grenoble and Montpellier.
The measure is expected to remain in place for four weeks initially while Mr Macron’s government will seek to extend it to six.
Residents will need a valid reason to be outside their home during curfew hours with fines set at €135.
New measures aim to reduce new daily infections rate to ~3,000, down from more than 20,000 recorded currently.
Spain – Catalonia bars and restaurants will close for 15 days starting today.
Gyms and cultural venues will be allowed to run at 50% capacity while shipes and large shopping centres to be limited to 30% capacity.
Australia – Unemployment ticks up on a lockdown in Victoria.
The jobless rate climbed 0.1pp to 6.9% in September, a little shy of 7.1% forecast and less than nearly a two decade high of 7.5% recorded in July.
Zambia – The nation is on its way to default on $3bn in foreign debt should investor reject a request to suspend payments, FT reports.
Zambia, the second largest copper producer in Africa, is attempting to restructure its $12bn of external debt.
2024 bonds dropped 3 points to 46c on the dollar yesterday on the default warning.
Zambia needs to pay more than $42m in interest on Wednesday.
Kyrgyzstan – President Sooronbai Jeenbekov resigned on Thursday following 10 days of unrest after a disputed election.
US$1.1736/eur vs 1.1737/eur yesterday. Yen 105.25/$ vs 105.50/$. SAr 16.635/$ vs 16.528/$. $1.299/gbp vs $1.289/gbp. 0.710/aud vs 0.716/aud. CNY 6.725/$ vs 6.742/$.
Gold US$1,898/oz vs US$1,896/oz yesterday
Gold ETFs 111.2moz vs US$111.2moz yesterday
Platinum US$860/oz vs US$874/oz yesterday
Palladium US$2,3662/oz vs US$2,354/oz yesterday
Silver US$24.09/oz vs US$24.14/oz yesterday
Copper US$ 6,709/t vs US$6,740/t yesterday - Copper prices continue to rise on Chilean supply risks
Copper prices continued to rise on Thursday, on supply concerns as a result of unresolved wage negotiations at Escondida and Candelaria.
Despite yesterday’s talks being labelled ‘last ditch’, BHP and supervisors at Escondida have extended mediated talks until Friday in an attempt to avoid a strike.
BHP will be keen to avoid the current situation at Lundin’s Candelaria operation, where production has slumped to 5% of normal rates, according to union president Patricio Garate (Bloomberg).
Escondida is one of six mines in Chile due to hold labour talks I the coming months, with the mines in question accounting for a combined annual production of 2.7mt (Reuters).
Copper prices have risen despite sizeable inflows into LME warehouses, as data on Wednesday showed copper inventories climbed by 16,725t to 169,925t- with stocks 131% higher than they were on the 25th of September.
Aluminium US$ 1,843/t vs US$1,850/t yesterday
Nickel US$ 15,385/t vs US$15,110/t yesterday
Zinc US$ 2,438/t vs US$2,417/t yesterday
Lead US$ 1,784/t vs US$1,789/t yesterday
Tin US$ 18,300/t vs US$18,285/t yesterday
Oil US$43.3/bbl vs US$42.3/bbl yesterday
Natural Gas US$2.678/mmbtu vs US$2.723/mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$115.2/t vs US$117.8/t
Chinese steel rebar 25mm US$560.8/t vs US$561.6/t
Thermal coal (1st year forward cif ARA) US$58.7/t vs US$58.4/t - JERA to shut down inefficient coal fired power plants by 2030
JERA, Japan’s biggest power generator has announced that it will close all inefficient coal fired plants in Japan by 2030 and it also intends to achieve net zero emissions of carbon dioxide by 2050.
This is the first time a company has stated an intention to match government policy.
JERA refused to reveal how many coal plants would shut down because of competitive reasons.
To reach the 2050 target, JERA intends to boost renewable energy centred on offshore wind power farms and at the same time use greener fuels like ammonia and hydrogen at its thermal plants.
It aims to start a pilot programme to use ammonia as fuel with coal in mixed combustion at its Hekinan thermal power station in central Japan by 2030 and hopes to achieve 20% use of ammonia at its coal fired power plants by 2035. The company also refused to say where it is going to import ammonia and hydrogen from.
JERA intends to cut 20% more carbon emission intensity of the thermal plants than the government’s reduction target for the plants across Japan. Thermal power generation using fossil fuels meets about 80% of the country’s electricity demand and makes up 40% of its CO2 emissions.
Coking coal futures Dalian Exchange US$137.0/t vs US$138.0/t - India August coking coal imports increase 35% MoM
India imported 3.17mt of coking coal in August, with demand increasing as a result of a recovery in the domestic steel sector.
India’s steel consumption climbed 7.7% MoM to 7.5mt in August.
Australian imports fell 40% YoY to 276,000t whilst intakes from the US surged 58% to 261,000t.
From January to August, India imported 26.36mt of coking coal- a decrease of 21% compared to the same period last year (SX Coal).
Cobalt LME 3m US$33,305/t vs US$33,780/t
NdPr Rare Earth Oxide (China) US$47,882/t vs US$47,762/t
Lithium carbonate 99% (China) US$5,205/t vs US$5,162/t
Ferro Vanadium 80% FOB (China) US$29.3/kg vs US$29.5/kg
Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/kg
Tungsten APT European US$212-220/mtu vs US$220-225/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
Blackrock bets big on Arrival with $118m investment
Arrival is the latest EV-start-up to receive substantial backing as the world’s largest asset manager Blackrock has invested $118m in Arrival, taking the Company’s valuation to €3bn. (Financial Times)
Arrival plans to spend $46m on building its first Us factory in South Carolina. The Company currently has mircofactories capable of producing 10,000 vehicles a year and has two research facilities in Reading and Banbury in the UK.
Blackrock joins existing backer Hyundai Motor and Kia Motors who invested €100m in January and UPS whose investment is undisclosed.
As traditional automakers scramble to meet emissions targets, EV producers continue to raise money and see their valuations sky rocket.
NIO, Li Auto Xpeng and WM Motors have raised US$8bn between them. Many of these companies are backed by one or more automakers hoping to partner on technology or manufacturing and benefit from the demand in the space.
Electric vehicle start-up Rivian, backed by Amazon and Ford Motor received a further $2.5bn from T Rowe Price in its July funding round while Xos which supplies trucks to UPS and Loomis raised $20m in August.
Novonix pushing the boundaries in the search for the million mile battery
Novonix is a battery testing company that through a JV with Coulometrics called PUREgraphite has begun supplying high performance anode materials for the li-ion battery market.
The Company has a mass production line operational for its PUREgraphite anode and has secured contracts to supply Samsung SDI and SANYO/Panasonic. Novonix has secured funding to expand production to 2,000 tonnes per annum at its Chattanooga facility through 2020-21.
Novonix ‘Dry Particle Microgranulation’ provides a method for synthesising high nickel materials into those suitable for use in Li-ion batteries. The method has enabled the development of single crystal cathode materials which could provide cost performance and sustainability benefits for li-ion batteries.
There currently is no horizon on when the Company’s advanced lithium-electrolyte system will be available and the cathode synthesis process remains in its infancy with pilot scale equipment and lab work on track to begin by the end of CY2020.
Novonix has a diverse customer base through its battery cell testing business including auto OEMs, battery manufactures and battery laboratories, among them CATL, SK Innovation, Panasonic and Samsung SDI providing a strong network to sell their anode, cathode and electrolyte products into.
The Company suggests that between its 3 technologies it has the elements required to develop a million mile battery. This at the moment remains an abstract goal.
Novonix has $38.8m of cash as of June 2020, compared to $6.05m the same time last year and booked a $20.02m after tax loss compared to $26.1m for the same period last year.
Ariana Resources* (LON:AAU) 6.15p, Mkt Cap £63.8m – Initial mineral resource at Magellan
Ariana Resources reports a maiden mineral resource estimate for its Magellan project in Cyprus where Ariana is currently earning a 50% interest in the project owner, Venus Minerals and currently holds approximately 12%.
The JORC compliant estimate amounts to an inferred 8.5mt at an average grade of 0.63% copper “with additional potential for gold, silver and zinc-rich zones (up to 0.6 % Zn) across the Klirou and Kokkinoyia Sectors”. In addition, the company discloses a “JORC Exploration Target of 2.7 to 8.4Mt within a grade range of 0.5 g/t Au to 0.8 g/t Au, for 42,000 oz to 216,000 oz of gold and 3.3 g/t Ag to 8.2 g/t Ag, for 297,000 oz to 2,218,000 oz of silver”.
The estimate for the Klirou part of the project amounts to approximately 3.3mt at an average grade of 0.54% copper while Kokkinoyia reports 5.2mt at an average grade of 0.69% copper.
The estimate “is based on a detailed review of all available drill data acquired from the 1950s through to 2007. This data comprises 201 open-hole percussion drill holes at Kokkinoyia (totalling 41,316m) and 184 open-hole percussion and 2 diamond drill holes at Klirou (totalling 21,140.45m) for a combined total of 62,456.45m of drilling” and is reported at a 0.2% copper cut-off grade.
Ariana Resources says that at both Klirou and Kokkinoyia the mineralisation remains open “in several directions and particularly down-plunge, beyond 250-350m depth” and it also points out that historical exploration in the area did not report grades other than for copper.
The company also comments on the potential for additional metals to the copper reported today saying that “Zinc resources are also defined for the Klirou Sector but are not defined for Kokkinoyia due to insufficient data. However, zinc grades within the open-pit area of Kokkinoyia average 0.6% Zn and it is reasonable to assume that the overall zinc grade of the Kokkinoyia resource would approximate this”.
A follow up drilling programme of up to 3,000m is expected to start imminently.
The company outlines the Magellan project saying that in addition to Klirou and Kokkinoyia, it includes a third area at New Sha. “Overall, the Klirou Sector is smaller and lower grade than the Kokkinoyia Sector. Kokkinoyia is typically more disseminated in nature with a stronger structural control on high-grade mineralisation, suggesting that the mineralisation represents a VMS system which formed just below the ocean floor, rather than as an exhalative deposit. Both sectors display chloritic alteration and show oxidation of sulphides, features which can be used as an exploration vector to deeper mineralisation. Kokkinoyia generally shows more intense alteration with localised gossanous outcrops, which became the initial focus of exploration drilling during the 1950s.”
“Mining for copper commenced at Kokkinoyia from 1973 and continued through to 1979. Mining records show that 474,000 tonnes of copper ore was mined via underground and open-pit methods, producing 285,000 tonnes of copper concentrate. No mining has been undertaken at the Klirou Sector”.
*An SP Angel mining analyst has visited Ariana’s licenses in Turkey
Adriatic Metals* (LON:ADT1) 124.5p, Mkt cap £250m – Vares pre-feasibility study released
Adriatic Metals has released details of its pre-feasibility study for the Vares silver project in Bosnia Herzegovina.
The study envisages a combination of underground mining of the Rupice deposit and open-pit mining of Veovaca to deliver a total of 11mt of ore at a rate of 2,180tpd over a 14 year mine life.
Life of mine production is expected to total approximately 42.7moz of silver, 246,000 oz of gold, 323,000t of zinc, 233,000t of lead and 38,000t of copper in a mix of a zinc, silver/lead and pyrite concentrates.
Based on an initial capital cost of US$173m, a cash cost of approximately $117/ milled tonne and a $14/oz silver price, $1900/0z gold price, zinc at US$1500/t, lead US$2000/t and copper at US$6500/t the project is estimated to generate an after-tax NPV8% of US$1.04bn and IRR of 113%.
*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia
Atalaya Mining (LON:ATYM) 185.5p, Mkt Cap £47m – Production guidance confirmed following record Q3 output
Atalaya Mining has confirmed its previously issued 2020 production guidance range of 55-58,000t of copper following the production of a record 14,695 tonnes during the 3rd quarter ending 30th September.
Quarterly production exceeded Q2 output of 13,635t by 7.8% and delivered “the third consecutive quarter where copper production has exceeded 13,000 tonnes” confirming the success of the expansion to 15mtpa at the Proyecto Riotinto operation in Andalucia and the operation’s ability to operate within the constraints of Covid19 containment measures.
The production arises from the processing of 4mt of ore at an average grade of 0.44% copper (Q2 2020 – 3.6mt at 0.44%) bringing year-to date throughput to 11mt at an average grade of 0.45% copper and copper output to 411,559t.
Atalaya Mining confirms that “Cash operating costs for the Period are expected to be slightly below the 2020 cost guidance ranges previously provided” and says that the details will be reported with its Q3 financial report in late October. The current 2020 cost guidance is for cash costs in the range US$1.95-2.05/lb and all-in-sustaining costs in the range US$2.20-2.30/lb.
The company is now concentrating on optimising the expanded plant to implement “cost reduction programmes relating to the reduction of fresh water and lime consumption” and to improve recoveries.
Atalaya Mining announced recently plans to construct a 50MW solar power plant to reduce the mine’s environmental impact. The company confirms that the permitting process is underway.
No further news is reported on the permitting process for the Proyecto Touro development in Galicia, possibly reflecting delays introduced as a result of Covid19 although the company expresses confidence that “its world class approach to Proyecto Touro, which includes fully plastic lined tailings with zero discharge, will satisfy the most stringent environmental conditions that may be imposed by the authorities prior to the development of the project”.
CEO, Alberto Lavandeira, applauded the achievements of the operating team and said that having achieved nameplate capacity at the expanded Proyecto Riotinto, the operations teams “are focused on looking for future growth opportunities in and around our mining properties.”
Conclusion: Atalaya Mining has, again, delivered a successful expansion at Proyecto Riotinto with a third consecutive quarter of copper production in excess of 13,000 tonnes. The company is maintaining its full year production guidance of 55-58,000t of copper in concentrates.
Base Resources* (LON:BSE) 14.5p, Mkt Cap £171m – Quarterly reports ongoing demand supporting steady price environment
Base Resources reports ongoing work within the local community in Kenya supporting the construction of hygiene facilities along with the distribution of food and medical supplies and equipment.
The Base team appear to be focussed on helping their workers and the their communities best manage the COVID-19 pandemic while continuing to run the Kwale titanium mineral sands mine in Kenya.
Production of ilmenite, rutile and zircon was lower in Q3 due to a planned eight-day stoppage in July to move a collection hopper and to install a third slurry booster pump for the solution mining operation.
Sales were ahead of production due to the ongoing catchup of disrupted sales in Q1.
Grades: are forecast to fall in FY21 to 3.24% Heavy Mineral content vs 3.63% in FY20 with the lowest grades expected in the first half of the financial year.
Base’s year runs to end-June indicating that grades will be lower in the run up to Christmas but should improve in the following six months.
Prices: Ilmenite concentrate prices rose further recently to $240/t marking their fourth successive rise this year.
Guidance remains at:
Rutile - 70,000-80,000 t
Ilmenite - 270,000-300,000 t
Zircon - 23,000-27,000 t
The guidance is based on the following assumptions:
Mining of 17.2Mt at an average HM grade of 3.24%, with all FY21 volume coming from Ore Reserves.
Average MSP feed rate of 66tph.
Average MSP product recoveries of 100.5% for rutile, 100% for ilmenite and 84% for zircon..
To put this into perspective the Mineral Separation Plant processed 67tph in Q1 FY20, 86tph in Q2 FY20, 90tph in Q3 FY20, 78tph in Q4 FY20 and 61tph in Q1 FY21
We suspect Kwale will beat these forecasts due to an element of management caution over the potential impact of COVID-19.
Conclusion: While ilmenite prices continue to rise the expected fall in sales volumes combined with higher unit costs is likely to cut into operating profits at Kwale.
*An SP Angel analyst has visited Base’s operations in Madagascar
Beowulf Mining* (LON:BEM) 6.5p, Mkt cap £39m – Management to present at ProHearings Capital Markets day tomorrow
Beowulf report the CEO is to present at the ProHearings Capital Markets Day in Stockholm tomorrow.
The presentation will be broadcast live at: https://youtube.com/c/prohearingslive
The video will also be available on the Company's website: https://beowulfmining.com/.
*SP Angel act as Nomad and Broker for Beowulf Mining
Orosur Mining* (LON:OMI) 28p, Mkt Cap £45m – FY 2020 Results
Orosur has published its audited results for the fiscal year ended 31st of May 2020, whilst also providing a summary of its operations in Colombia and Uruguay.
Orosur report a total comprehensive income of $460k vs a loss of $12.2m a year earlier.
The marked shift from loss to profit is a result of a gain of $2.5m this year from discontinued operations vs a loss of $9.8m in FY19.
Elsewhere, corporate and administrative expenses were lowered at $1.5m vs $1.8m last year.
Cash and cash equivalents amounted to $782k vs $526k last year.
The Company continues to wind down its operation in Uruguay at San Gregorio, through Orosur’s Uruguayan subsidiary, Loryser.
Loryser signed a Settlement Agreement with Uruguayan environmental agency, DINAMA, to recover the $1.3m from the environmental guarantee it had executed previously. Loryser is continuing with the reclamation of the tailings dam and DINAMA will pay in instalments upon completion of a six-phase closure plan.
The first payment of $150k from DINAMA was received by the company on the 21st of May, 2020.
Orosur has now pivoted from its Uruguayan operations to focus on its Anza project in Colombia, working with both Newmont and Agnico Eagle, with whom Orosur has signed an Exploration Agreement with Venture Option over the project.
As part of the Phase 1 agreement, Newmont and Agnico Eagle, under their 50-50 joint venture vehicle ‘Monte Aguilla’ must spend $10m over 4 years and make cash payments equalling $2m in the first two years in order to earn a 51% interest in the project.
Newmont Columbia made a payment of $500K to Orosur in August 2019 and a payment of $690K to Minera Anzá (the Company’s wholly owned subsidiary) in November 2019 to cover its outstanding commitments for the first year of the Exploration Agreement, before Agnico came on board in September 2020.
Further cash payments of $500k were made by Newmont Columbia on the 5th of March and the 3rd of September.
In October 2020, the company received $650k from Agnico to restart exploration at the Anza project for the 12 month period starting 7th September 2020, and is the first contribution of the required $4m of expenditure for this 12 month period per the terms of the Exploration Agreement.
Orosur aim to commence exploration at Anza as soon as possible, and CEO Brad George told media this week that the Company have an initial drill programme of 3000m planned to begin with, however will look to increase that as long as results go as expected, whilst looking at bringing in external geophysics.
In respect to the end of year results, CEO Brad George commented: “San Gregorio had been the backbone for the company for many years, producing some 1.5Moz of gold during its life. 2020 however marks a new chapter where we shift focus to Colombia and the Anzá project, with our partners Newmont and Agnico. COVID-19 has clearly presented challenges, but with careful planning and operation, we hope to be active toward the end of calendar 2020, setting the foundation for an exciting 2021.”
Conclusion: Orosur is transitioning from a gold producing company to an explorer, giving the Anza project its due attention now that it is no longer mining at San Gregorio in Uruguay. Orosur have brought two of the top-ten gold producing companies in the world on board to help develop the project by funding its exploration programme.
*SP Angel act as Nomad and Broker to Orosur Mining
Rio Tinto (LON:RIO) 4591p, Mkt cap £77bn - Rio Tinto to invest $103m in Isle Maligne hydroelectric power project in Canada
Rio Tinto are to invest $103m in the Isle Maligne hydroelectric power station in Saguenay Lac Saint Jean, Canada. This is in order to safely continue the company’s low carbon aluminium production in Quebec.
The funding will be used to replace valves which are used to cut off the water flow to the plant if necessary.
The work will start in the second quarter of 2021 and will run for five years.
It is anticipated that the project will create economic benefits for Saguenay Lac Saint Jean, with around $74.1 disbursed to businesses in the region.
John Meyer – [email protected] – 0203 470 0490
Simon Beardsmore – [email protected] – 0203 470 0484
Sergey Raevskiy –[email protected] - 0203 470 0474
Joe Rowbottom – [email protected] - 0203 470 0486
Richard Parlons –[email protected] - 0203 470 0472
Abigail Wayne – [email protected] - 0203 470 0534
Rob Rees – [email protected] - 0203 470 0535
Prince Frederick House
35-39 Maddox Street London
*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
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BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
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Lithium Carbonate, Ferro Vanadium, Antimony