SP Angel . Morning View . Friday 15 01 21
Biden delivers $1.9tn stimulus with more on infrastructure and green energy to follow
Bluejay Mining* (LON:JAY) – BUY, Valuation 29.4p – Bluejay agrees jv with Rio Tinto over the Enonkoski Project in Finland
Bushveld Minerals* (LON:BMN) – BUY - Valuation 37.7p – Ferro-Vanadium prices jump 11.6% in the US
Edenville Energy* (LON:EDL) – Funding agreement refinanced and £900k raised
Kodal Minerals* (LON:KOD) – Further progress at West African gold assets
Lucara Diamonds (CVE:LUC) – Karowe mine yields 341 carat diamond
Serabi Gold* (LON:SRB) –Q4 production results continue modest recovery of Q3
Indonesia - Government in process of adjusting mining royalties
Indonesia is currently working on adjusting its royalties applicable to gold and coal projects in an attempt to increase state revenue, Bloomberg reports.
Recent Interviews:
IGTV: Is 2021 the start of the new COVID-Supercycle or will Lockdowns delay the recovery? https://youtu.be/7LO0tDc-pNc
As traders continue to bid up Tesla, is the EV sector approaching a bubble? https://youtu.be/LaDWBpTZ7SQ
Copper price rise: https://youtu.be/mdPXTup15VY
VOX Markets: 13/01/20 https://audioboom.com/posts/7770987-john-meyer-on-lithium-ironridge-res-savannah-res-kodal-mins-cornish-metals-bluerock-diamonds
iiTV: The mining stock to own in 2021: https://www.youtube.com/watch?v=4x7SuSLQwCI&t=11s
Small Cap Mining Share tips for 2021 - https://www.youtube.com/watch?v=G_6RKAp91k4
Miners for a green industrial revolution - https://www.youtube.com/watch?v=rXlNS6JIDvg&t=3s
A Mining megatrend and three solid dividend stocks - https://www.youtube.com/watch?v=sH5r-QbTRwg
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.
We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, one and all, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
Dow Jones Industrials -0.22% at 30,992
Nikkei 225 -0.62% at 28,519
HK Hang Seng +0.27% at 28,574
Shanghai Composite +0.01% at 3,566
Economics
US – President-elect Biden announced a $1.9tn economic stimulus programme including new direct payments to American, aid to state and local government (~$350bn) and more virus related spending (~$400bn), FT reports.
Most Americans are due to receive a new payment of $1,400 in addition to $600 cheques recently received by individuals earning less than $75,000 per year.
Emergency unemployment benefits of $400 per week will be extended until September.
The plan is the first step in the Biden’s economic response to the virus related economic downturn with additional measures expected to be presented as early as next month.
The second step is expected to involve an increase to longer-term spending on infrastructure, green energy and education that in turn forecast to be partially funded by higher taxes on the wealthy and corporations.
Jobless claims climbed to the highest level since August highlighting concerns over the strength of the labour market.
Weekly Jobless Claims (‘000): 965 v 787 before and 789 est.
Continuing Claims (‘000): 5,271 v 5,072 before and 5,000 est.
China – New cases centred in the Hebei province increase risk a new outbreak as Chinese New Year celebrations are approaching.
A totally tally of reported infections in Shijiazhuang, the capital of northwest Hebei province, a three-hour drive south of Beijing, increased to more than 1,000 people with the first virus-related death reported in more than eight months.
Chinese authorities reported that 90 new symptomatic cases were discovered on Thursday in Hebei with a further 43 in Heilongjiang and one each in Zhaanxi province and the region of Guangxi.
With national holidays starting at the end of the month it is hard to see how China may avoid new travel restrictions given that around 236m people travelled within China for new year in 2019 and more than half of people in Beijing and Shanghai are from other parts of the country.
Germany – 1,244 people died of COVID-19 on Thursday marking a record high since the start of the pandemic with 25,164 new daily cases recorded.
UK – GDP contracts 2.6%mom in November driven by a drop in the services sector output reflecting a month long lockdown in England and tight restrictions in the rest of the country.
Industrial Production was little changed in the month (-0.1%mom) with construction sector posting growth (+1.9%) with both sectors largely continuing operations through lockdowns.
The economy finished November nearly 9% smaller compared to same time last year expanding the gap from -6.8% in October with hospitality sector being more than 60% smaller and entertainment industry nearly 40% off.
Although, the November drop was 2pp better than market forecast suggesting the economy may have avoided a double dip recession in Q4/20 if December number do not disappoint.
GDP (%mom): -2.6 v 0.4 in October and -4.6 est.
France – A nationwide 6pm-6am curfew for at least two weeks will come into effect from Saturday while authorities will also be tightening border controls on people arriving outside the EU.
This compares to a curfew from 8pm that has been in place since mid-December.
Italy – The government is looking to expand deficit target aiming for a third higher increase increase in debt than previously planned amid the virus outbreak and a deepening politicial crisis, Bloomberg reports.
PM Conte is expecting to increase borrowing by €32bn at the time when Conte faces confidence votes in parliament early next week after former premier Matteo Renzi’s party withdrew from a coalition.
Spreads on 2y bond yields over equivalent German debt increased to nearly more than 45bp yesterday, the highest in months and compared to a normal previous range of 30-35bp.
Currencies US$1.2124/eur vs 1.2148eur yesterday. Yen 103.69/$ vs 104.02/$. SAr 15.171/$ vs 15.184/$. $1.366/gbp vs $1.366/gbp. 0.774/aud vs 0.775/aud. CNY 6.473/$ vs 6.468/$.
Commodity News
Precious metals:
Gold US$1,853/oz vs US$1,841/oz yesterday
Gold ETFs 106.7moz vs US$107.1moz yesterday
Platinum US$1,099/oz vs US$1,105/oz yesterday –
Platinum – “Platinum has only just started to re-rate and it will continue… there is no reason why platinum will not eventually trade at $2,000/oz and probably even higher,” according to CEO Sibanye Stillwater Neal Froneman.
Demand for PGMs is recovering and has already reached pre-pandemic levels, Froneman said.
Platinum demand growth is expected to be driven by increasing use in hydrogen fuel cells as well as a substitution of expensive palladium in auto catalysts with automakers in China and North America seen already implementing that.
New technology developed by BASF SE, with backing from Sibanye and Impala Platinum, to partially replace palladium in autocatalysts could boos platinum demand by at least 300koz per annum or ~10% of auto catalyst sector demand or ~4% of total platinum demand.
Palladium US$2,392/oz vs US$2,382/oz yesterday
Silver US$25.40/oz vs US$25.21/oz yesterday
Base metals:
Copper US$ 7,985/t vs US$7,980/t yesterday - Codelco begin implementing stricter Covid-19 measures at mine sites as cases continue to rise
The world’s largest copper producer is once again ramping up its precautionary measures against coronavirus amid a recent surge in infections in Chile.
Measures include a reduction in personnel at site and suspending some visits from contractors and suppliers to its operations.
The company also plans to negotiate with unions returning to a seven day on, seven day off schedule.
Currently, Codelco expect the measures to have no impact on Codelco, and a representative told Reuters “for now, we will not stop projects”
Aluminium US$ 1,999/t vs US$2,008/t yesterday
Nickel US$ 17,975/t vs US$17,785/t yesterday
Zinc US$ 2,716/t vs US$2,726/t yesterday
Lead US$ 2,014/t vs US$2,036/t yesterday
Tin US$ 21,085/t vs US$21,000/t yesterday
Energy:
Oil US$55.7/bbl vs US$56.3/bbl yesterday
Total and Apache have made their fourth discovery offshore Suriname in the Guyana-Suriname basin
The discovery adds to numerous other significant oil finds in the Guyana-Suriname basin, where Exxon is a major besides Total and Apache
The latest Total-Apache well found oil at the Keskesi East-1 well, in Block 58 off the coast of Suriname
Prior to the latest discovery, Apache and Total had already encountered oil in three wells in Block 58
The block is part of the prolific Guyana-Suriname Basin and neighbours the Stabroek block, which has so far yielded a dozen oil discoveries, made by Exxon and Hess, tapping a reservoir containing more than 5Bnbbls of oil.
Last month, Exxon and its partner Petronas said they had made a significant discovery offshore Suriname adding to Exxon’s numerous discoveries offshore Guyana in the same Guyana-Suriname basin
Elsewhere, oil prices remain robust, somewhat supported by Saudi Aramco increasing its February 2021 official selling prices, surpassing market expectations
All Asia-bound grades were materially increased by 20-70 cents/bbl, with steeper increases in the light range (Arab Light saw the biggest month-on-month move)
Combined with turnaround in Japan and China assumed to take place in February and Saudi Arabia’s unilateral commitment of cutting production by 1mbpd in February-March 2021, the assertiveness of Saudi Aramco might lead some refiners to rethink their regional purchases
In addition, contango seems to have disappeared from the markets so storing crude in hefty storage tank farms no longer makes commercial sense
Saudi Aramco reacting to Dubai backwardation extending to its widest since July 2020 was to be expected, boosted by robust demand from China and India throughout December, the Dubai M1-M3 increased as high as 92 cents/bbl on 16 December, though it has declined since
However, as the market moved closer towards the end of December 2020 the extent of the backwardation eased to 20-30 cents/bbl, meaning that all the while Middle Eastern NOCs were expected to increase their February OSPs
Natural Gas US$2.719/mmbtu vs US$2.773/mmbtu yesterday
Natural gas prices moved lower on Thursday despite a larger than expected draw in natural gas stockpiles
The weather is expected to be cooler than average on the western half of the US and normal to warmer than average on the east coast
President-Elect Biden is expected to give a speech in the evening in the US that will outline his stimulus plan
This could be an impetus to help prices gain traction.
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$168.8/t vs US$166.8/t
Chinese steel rebar 25mm US$663.4/t vs US$664.7/t
Thermal coal (1st year forward cif ARA) US$72.4/t vs US$72.7/t
Coking coal swap Australia FOB US$134.0/t vs US$130.0/t
Other:
Cobalt LME 3m US$38,005/t vs US$38,010/t
NdPr Rare Earth Oxide (China) US$67,515/t vs US$66,793/t
Lithium carbonate 99% (China) US$8,806/t vs US$8,658/t
Ferro Vanadium 80% FOB (China) US$30.2/kg vs US$30.0/kg
Ferro-Manganese high carbon 78% Mn US$1,380/t vs US$1,370/t
Tungsten APT European US$235-240/mtu vs US$230-235/mtu
Graphite flake 94% C, -100 mesh, fob China US$530/t vs US$520/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,475/t vs US$2,475/t
Spodumene 6% Li2O min, cif (China) US$395/t vs US$380/t
Battery News
Hydrogen project for UK transition to sustainable economy
Essar is planning to build the UK’s biggest low carbon hydrogen production hub.
The £750m investment in two plants will be made jointly with clean energy specialist Progressive Energy as part of its HyNet scheme, a project to supply low carbon hydrogen to industrial sites and homes in north west England.
The plants will be built on the Mersey estuary in north-west England. Natural gas, and fuel gases from the refinery will be converted into low carbon hydrogen, with CO2 captured and stored in depleted gasfields 60km offshore in Liverpool Bay
The first plant should open in 2025 and have a capacity of 350MW and the second in 2027 with a capacity of 700MW. By 2030 the project should be trapping 10m tonnes of CO2 each year.
Company News
Bluejay Mining* (LON:JAY) 12.27p, Mkt cap £119m – Bluejay agrees jv with Rio Tinto over the Enonkoski Project in Finland
BUY - Valuation 37.7p
Bluejay Mining report the confirmation of their joint venture agreement with Rio Tinto over their Enonkoski Project in Finland
Fieldwork has now started at the Enonkoski nickel-copper-cobalt-PGE project with the relogging and reassaying of historical diamond drill cores at the Geological Survey of Finland's core archive.
The field team have started ground magnetic surveys in two of the near-mine areas at Tevanjoki and Laukunsuo
The Enonkoski area hosts two historical nickel, copper, cobalt mines which were worked in 1980s and early 1990s.
We expect the new ground and airborne geophysical surveys to highlight further mineralisation along strike of the old Enonkoski mines.
FinnAust drilled <1.5km southeast of the closed Enonkoski underground mine intersecting nickel and copper mineralisation near surface highlighting the lack of exploration done before the mines were closed.
Enonkoski is an old polymetallic mine, developed by Outokumpu and run till low metals prices and rising mining costs forced its closure.
The Enonkoski mine previously produced 6.7mt of ore grading 0.8% nickel and forms a key part of the Enonkoski nickel belt in Finland with 15km of strike along from the Enonkoski and Hälvälä mines.
Previous drilling showed 32.90m grading 4.09% Nickel, 0.56% Copper, 0.17% Cobalt and 19.70m grading 6.12% Nickel, 1.94% Copper, 0.29% Cobalt highlighting concentrations of high-grade material within the larger orebodies.
We believe the Enonkoski orebodies are made up of large remobilised VMS deposits resulting in a chain of separated metals along a decent strike length.
Under the agreement Rio Tinto may acquire up to a 75% of Enonkoski through $20m of expenditure on the property.
Stage One – allows Rio Tinto to gain a 51% stake in the old mine by spending US$5m over three years with $0.4m to be spent by 30 March 2021
Stage Two – gives 65% ownership for another $5m of expenditure by November 2025
Stage Three – allows Rio Tinto to take 75% for a further $10m by November 2029
Beyond Stage Three, each party shall fund its respective 75%:25% share of project expenditure or be diluted
Hammaslahti: Bluejay is also drilling at the Hammaslahti copper-zinc-gold-silver project in Finland close to historic mine workings.
The team have planned >4,000m of drilling at Hammaslahti targeting areas close to the mine to find potential repeating structures.
Bluejay also holds some 5,000ha of licenses around and along strike from the historic Outokumpu copper-cobalt-gold-silver mine.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland
Bushveld Minerals* (LON:BMN) 19.88p, Mkt cap £237m – Ferro-Vanadium prices jump 11.6% in the US on $1.9bn US stimulus
(Bushveld Energy has negotiated to holds 50% Enerox Holdings Limited (50% other investor) which holds 90% of Enerox GmbH along with 8.71% in Invinity) If no other investors participating then the €3.7m loan will be split between the Bushveld and the other investor.
BUY - Valuation 37.7p
Joe Biden’s ‘go big’ US$1.9 trillion stimulus package is helped ferro-vanadium prices rise 11.6% higher to US$27.5-29.7/kgV this week according to FastmarketsMB.
In China, prices have been strengthening since November on new stimulus infrastructure programs with a further 1.4% rise in ferro-vanadium prices to $29.5-20/kgV
Strong demand in China for structural steel has drawn ferro-vanadium away from the US and Europe potentially leaving Western buyers and steel mills short of this critical raw material for construction.
Global production of vanadium runs at around 73,000t with relative inelasticity in the ability to increase production to meet new demand.
Bushveld are one of just a few ferro-vanadium producers who will be able to expand to meet new demand, though this and any other expansion will take time to come through.
VRFB: New demand for vanadium to fill Vanadium Redox Flow Batteries will also take vanadium out of a tightening market.
Cumulative installations of grid-connected battery energy storage is predicted to hit 64GW / 179 GWh in 2025 and while much of this will be fulfilled with Li-ion battery storage units a number may also be made up of VRFB batteries.
*SP Angel acts as Nomad and broker to broker to Bushveld Minerals.
Edenville Energy* (LON:EDL) 35.5p, Mkt Cap £2.1m – Funding agreement refinanced and £900k raised
Edenville reports that it has reached an agreement with Lind Partners regarding the repayment terms of the Funding Agreement.
The company will pay US$116k in cash by the end of the month, and the remainder of the $464k will be repaid in monthly instalments of $50k starting from the end of April 2021, either in cash or via the issuance of shares decided by mutual agreement.
Edenville has also raised £900k via a placing of 3,600,000 new ordinary shares of 1p each in the Company at a price of 25p per share.
*SP Angel acts as Nomad to Edenville Energy
Kodal Minerals* (LON:KOD) – 0.1p, Mkt cap £12.2m – Further progress at West African gold assets
Kodal has provided an update on its gold exploration projects in southern Mali and Cote d'Ivoire, with further field reconnaissance highlighting extensive artisanal workings and geological control on mineralisation at its Fatou Gold Project in Southern Mali.
Kodal is currently finalising an initial diamond and RC drill programme at the Fatou Main and Fininko prospects, with historic drill data highlighting zones of high-grade mineralisation that will be followed-up as a priority.
Contracts are currently being finalised with a drilling contractor to undertake the drill programme and secure ongoing drilling for the Fatou Project and Kodal's additional gold assets in Cote d'Ivoire and Mali.
The Company has also completed 508 surface geochemical samples at its Dabakala project in Côte d'Ivoire to infill the extensive 8km x 2km surface anomaly, with extensive artisanal workings identified along the strike of the geochemical anomaly.
Geological mapping in conjunction with sampling at Dabakala highlighted shear zones and quartz veining, with further field mapping and sampling to be undertaken to assist in the targeting of future drilling.
Kodal also provide an update on the proposed funding agreement announced on the 17th of December 2020, with up to US$2.5m from the Investors to advance Kodal's gold assets and support the acquisition and exploration of the Fatou Gold Project.
Kodal has received the initial US$300,000 of funding advance under the Term Sheet and has completed the stage 1 consideration payments for the acquisition of the Fininko and Foutière concessions that form the Fatou Gold Project.
Bernard Aylward, CEO of Kodal Minerals, commented: "We are looking forward to commencing drilling at the Fatou Project as soon as possible once the Funding Agreement is finalised. The review is continuing to highlight opportunities to extend the previously defined gold prospect, as well as priority exploration targets. The focus of the drilling will initially be to confirm findings of previous drilling and geological information, however, we will also be targeting extensions to the mineralised structure to determine the size potential of the Fatou Project.
"The extensive artisanal workings at the Dabakala project in Côte d'Ivoire that have developed along strike of our previously defined surface geochemical anomaly are a positive indication of this area. We are awaiting the assay results for the sampling and will be looking to continue to advance this prospect through a maiden drilling programme this field season.
*SP Angel acts as Financial Advisor and Broker to Kodal Minerals
Lucara Diamonds (CVE:LUC) C$0.63, Mkt Cap C$250m – Karowe mine yields 341 carat diamond
Lucara Diamonds reports that a 341 carat white diamond has been recovered from its wholly owned Karowe diamond mine in Botswana.
The stone, which was recovered from “the south western quadrant of the South Lobe M/PK(S) unit. The recovery of large gem quality diamonds from the M/PK(S) unit of the South Lobe”, is reported to have been recovered unbroken.
CEO, Eira Thomas, explained that this latest recovery “builds on previous historic recoveries which include the 549 carat Sethunya, 998 carat, 1758 carat Sewelô, the 1109 carat Lesedi La Rona and the 342 carat Queen of the Kalahari”.
She also pointed out that the latest large stone is the “54th diamond greater than 200 carats to be recovered from Karowe since 2015” and said that “The consistent recovery of these large diamonds is a testament to the continued strong resource and plant performance at Karowe and underpins our rationale for moving forward with the underground expansion program that will see mining continue for at least another 13 years after the open pit ceases operations in 2026.”
Serabi Gold* (LON:SRB) – 91.5p, Mkt Cap £54.2m – Q4 production results continue modest recovery of Q3
Serabi Gold reports a continuing recovery in gold production to 7,254oz (Q3 2020 - 7,224oz) bringing the total 2020 output to 32,003oz .
The company reports that December production “exceeded 3,000 ounces, the best monthly result since the end of April 2020”.
Grade processed from the Palito and Sao Chico operations during the quarter reached 5.27g/t “an improvement of 9% compared with Q3”.
Looking forward, the company explains that it will need to re-establish additional working faces in early 2021 following the operational restrictions of the pandemic and that it “anticipates that production for 2021 from the current Palito Complex operations will be between 33,000 and 36,000 ounces with production in 2022 then increasing to approximately 45,000 ounces”.
CEO, Mike Hodgson explained that, with the operations Covid-free since September, ”Whilst we did forecast higher gold production for 2020, pre-pandemic, I believe all things considered, the overall result given the challenges faced has been an excellent outcome. The gold not produced during 2020, has not been lost. It still remains in the ground and will therefore be produced in the future and with the continued strength of the gold price may generate better revenues.”
Mr. Hodgson also said that “The fourth quarter has also seen the welcome return of exploration activities, with work focusing in three locations namely, the Palito and Sao Chico mine sites, and the newly acquired Sao Domingos prospect with three rigs arriving late in the quarter”.
Further progress has been made on permitting the Coringa project and Serabi Gold is “very optimistic … [that] … we will be in a position to start up the development of Coringa later this year”.
Conclusion: Serabi Gold reports that it has been Covid-free since September and that production is starting to build up with output expected in the range 33-36,000oz in 2021 building to 45,000oz in 2022. Exploration is resuming around the Palito and Sao Chico mines and around the recently acquired Sao Domingo prospect. The company expresses optimism that the development of Coringa may start later this year.
*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
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*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
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Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
LME
Oil Brent
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Natural Gas, Uranium, Iron Ore
NYMEX
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SSY
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Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony
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