SP Angel . Morning View . Thursday 17 06 21
Metals dip as Fed comments drive US$ higher
China threats of SRB stockpile sales prompt further profit taking in metals
Graphene producer funding – EIS scheme approval applied for
The company wishes to fund a ramp up in graphene production to get ahead of demand and to develop markets for a number of new, graphene products
The business is also able to upgrade graphite to a higher grade/specifications using its process – rolling out this process also requires funding
Please email if you wish to invest in the company
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.
Arkle Resources* (LON:ARK) – Drilling at the Mine River project encounters gold in the first three holes
Bluejay Mining* (LON:JAY) – Greenland government approved Exploitation and Closure Plan for the Dundas ilmenite project
Horizonte Minerals (LON:HZM) – Progress report on financing the Araguaia ferronickel project
Kodal Minerals* (LON:KOD) – Kodal progress lithium mining license application in Mali alongside gold assays in the Ivory Coast
Metal Tiger (LON:MTR) – Significant geophysics anomalies identified in Gabon
Rainbow Rare Earths* (LON:RBW) – Phalaborwa REE JORC resource shows 38.3mt grading 0.43% Total Rare Earth Oxides
Sunrise Resources (LON:SRES) – Sale of non-core assets in Nevada
Dow Jones Industrials
-0.77%
at
34,034
Nikkei 225
-0.93%
at
29,018
HK Hang Seng
+0.11%
at
28,469
Shanghai Composite
+0.21%
at
3,526
Economics
US – Fed will start discussions about scaling back bond purchases while FOMC members’ rate projections have been revised upwards for 2023.
Fed Chairman Powell has been careful in providing guidance over a potential bond purchases’ tapering to the meeting as the “talking-about-talking-about meeting”.
So-called dots plot reflecting central bank projections for the benchmark rate showed a potential two 25bp hikes as early as 2023 compared to no change expected during the March meeting.
Additionally, 7 of 18 FOMC members expect at least one hike in 2022 (4 of 18 in March).
The central bank held the target range for its benchmark policy rate unchanged at 0-0.25%, where it has been since Mar/20, and maintained the $120bn pace of its monthly bond purchases.
Equity futures pulled back, 10y bond yields climbed (~10bp) and the US$ index gained on Fed comments yesterday.
EU car sales continued to recover climbing 53.4%yoy to ~892k in May with YTD sales up 29.5% to 4.3m units.
Nevertheless, May numbers remained far off the 1.2m cars sold in May 2019.
Brazil – The central bank raised the benchmark rate for the third consecutive time to tame accelerating inflation.
Rate was increased by 75bp to 4.25%. in line with market estimates, and is planning another 75bp hike in its next meeting in August.
Inflation climbed to 8.1% in May which is more than double this year’s goal of 3.75%.
Rates have gone up 225bp since March marking the largest increase among G-20 nations this year.
Australia – Unemployment rate dropped significantly beating estimates in May reaching pre-pandemic levels.
A recovery in the labour market is fuelling speculation the central bank will raise rates earlier than previously expected.
Employment Change (‘000): 115 v -31 in April and 30 est.
Unemployment Rate (%): 5.1 v 55.5 in April and 5.5 est.
Participation Rate (%): 66.2 v 65.9 (revised in 66.0) in April and 66.1 est.
Chile – The senate’s mining and energy committee is set to hold weekly hearings on the proposed royalty through mid July as lawmakers hear input from companies and unions.
The committee received requests to testify from executives from BHP Group, Antofagasta and Teck Resources among others.
Switzerland – The central bank left rates unchanged at -0.75%, in line with estimates, and reiterated its willingness to use FX interventions to avoid franc appreciation that could slowdown the economic recovery.
Officials raised near-term forecasts for inflation “slightly” on the back of higher oil costs as well as appreciation in prices for tourism related services and goods affected by supply bottlenecks.
Despite the latest pickup, inflation risks are well managed with the central bank expecting the rate to peak at 1% in Q4/21 and average only 0.4% through 2021 and ~0.6% over the following two years in 2022-23.
North Korea – Kim Jong-un acknowledges food shortages
The North Korean leader has formally acknowledged that the country is facing food shortages.
North Korea closed its borders to contain the spread of Covid-19 which saw trade with China plummet.
In the same meeting, he described the efforts to beat Covid-19 as a “protracted war”, which indicates that border closures will not be easing any time soon.
South Africa – ‘Diamond’ rush in rural South Africa
Hundreds of fortune seekers continue to flock to the rural village of KwaHlathi in search of diamonds after reports of unidentified stones in the area.
The stones are yet to be analysed by a geological expert, but the view from experts is that the stones are unlikely to be diamond.
South African authorities “have noted with concern, the reports of illegal mining activity” in the area.
The stones are currently being collected and analysed by geologists.
Currencies
US$1.1954/eur vs 1.2129/eur yesterday. Yen 110.72/$ vs 109.94/$. SAr 14.025/$ vs 13.772/$. $1.398/gbp vs $1.412/gbp. 0.761/aud vs 0.770/aud. CNY 6.430/$ vs 6.398/$.
Commodity News
Precious metals:
Gold US$1,809/oz vs US$1,860/oz yesterday
Gold ETFs 101.0moz vs US$101.0moz yesterday
Platinum US$1,121/oz vs US$1,150/oz yesterday
Palladium US$2,768/oz vs US$2,762/oz yesterday
Silver US$26.88/oz vs US$28.00/oz yesterday
Base metals:
Copper US$ 9,472/t vs US$9,530/t yesterday
Aluminium US$ 2,441/t vs US$2,448/t yesterday
Nickel US$ 17,410/t vs US$17,510/t yesterday
Zinc US$ 3,005/t vs US$2,974/t yesterday
Lead US$ 2,184/t vs US$2,174/t yesterday
Tin US$ 31,175/t vs US$31,120/t yesterday
Energy:
Oil US$73.9/bbl vs US$74.4/bbl yesterday
Oil prices dipped yesterday as a stronger US dollar brought them off multi-year highs, but losses were limited by a material fall in US crude oil inventories
US crude oil futures inched down 28 cents, or 0.3%, to US$71.87/bbl, after reaching their highest since October 2018 on Tuesday
The US dollar boasted its strongest single day gain in 15 months after the Federal Reserve signalled it might raise interest rates at a much faster pace than assumed
At the FT Commodities Global summit, Glencore forecasted that global demand should return to normal in the third quarter of next year, and crude prices may move higher on more widespread vaccinations and inflationary pressures
Meanwhile, money continues to rotate into the commodities sector more broadly
A monthly survey of fund managers by Bank of America showed that bullish commodities bets had overtaken Bitcoin as the most crowded trade in markets
Further along the oil futures curve, there are signs of market tightness
The difference between the nearest two WTI December contracts yesterday closed at more than US$6/bbl, the strongest close since September 2019, a sign traders are forecasting a stronger market
In the US, crude stockpiles are expected to have dropped 2.5MMbbls last week, according to a Bloomberg survey
Natural Gas US$3.244/mmbtu vs US$3.200/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$206.0/t vs US$209.1/t
Chinese steel rebar 25mm US$794.7/t vs US$798.7/t
Thermal coal (1st year forward cif ARA) US$82.3/t vs US$82.3/t
Coking coal swap Australia FOB US$150.0/t vs US$152.0/t
Other:
Cobalt LME 3m US$42,535/t vs US$42,535/t
NdPr Rare Earth Oxide (China) US$72,936/t vs US$73,302/t
Lithium carbonate 99% (China) US$12,597/t vs US$12,660/t
China Spodumene Li2O 5%min CIF US$670/t vs US$660/t
Ferro-Manganese European Mn78% min US$1,798/t vs US$1,825/t
China Tungsten APT 88.5% FOB US$270/t vs US$270/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% 8.6/lb vs US$8.5/lb
Europe Ferro-Vanadium 80% 41.75/kg vs S$40.75/kg
Battery News
GM expands EV investment and battery manufacturing capacity
General Motors will increase their investment in EVs and AVs to $35b between 2020 and 2025.
The initial commitment, made in March 2020, was for $20b over the same period. This was later increased to $27b in November 2020.
The automaker has also accelerated plans for 2 new battery plants in the US to go alongside the 2 Ultium Cell LLC plants currently under construction.
The revised plans come as a response to a supply chain review from the Biden administration which projects that the US market will total approx. 9.6m EVs in 2040. If the US was dependent on batteries produced abroad it could cost the US roughly $100b in imports.
Company News
Arkle Resources* (ARK LN) 0.9p, Mkt Cap £2.75m – Drilling at the Mine River project encounters gold in the first three holes
Yesterday afternoon, Arkle Resources announced results from the second and third drillholes of its 12-hole programme at its wholly owned Mine River project in Co. Wexford and Co. Wicklow.
The new drilling, including the previously published first hole is located around 750m west of its Tombreen prospect, discovered in 2017, and each of the holes are drilled to a depth of around 100m.
The results highlighted in the announcement are:
Results from hole 21-TB-06 including an intersection of 1m from a depth of 17.20m at an average grade of 1.08g/t gold as well as an intersection, also of 1m, from 201.10m at an average grade of 2.62g/t gold and a third 1 m long intersection from 65m depth at an average grade of 0.45g/t gold; and
An intersection of 0.45m from a depth of 18.65m in hole TB-21-07 at an average grade of 7.77g/t gold as well as a second 0.60m long intersection averaging 3.54g/t gold from 56.30m depth in the same hole.
Arkle Resources says that the “results revealed further gold bearing blue quartz and quartz veining in shale”.
After completion of holes 06 and 07, drilling “moved 750 metres toward the main Tombreen target area, and … completed a 200 metre drill hole, 21-TB-08, where the high grade 2017 drill hole 17-TB-01 intercepted 8.0 metres at 4.53g/t Au”.
The samples from this latest hole have been sent for urgent analysis “and results are expected within the coming weeks” but Arkle Resources says that “Observations of the drill core have identified visible gold at 145.7m, 148.6m and 149.1m”.
Drilling has now moved to a site a further 220m west along strike “to test the outer edges of another large gold anomaly extending to the south of the main Tombreen target”.
Chairman, John Teeling, confirmed that “Gold has been found in each of the first three holes in the new Tombreen West area … [and also said that] … visible gold … [was] … detected at three depths” within the latest hole drilled ”near the site of an 8m long intersection at a grade of 4.53g/t gold” encountered in an earlier, 2017 drilling programme.
Conclusion: The first three holes of the new drilling campaign at the Mine River project have intersected gold mineralisation around 750m along strike from the company’s previous drilling at the Tombreen prospect. Assay results from the most recent drilling closer to Tombreen are still awaited however the company reports that gold is visible in the drill core. We await the assays to confirm the tenor of mineralisation.
*SP Angel are Nomad and broker to Arkle Resources
Bluejay Mining* (JAY LN) 10.3p, Mkt cap £100m – Greenland government approved Exploitation and Closure Plan for the Dundas ilmenite project
BUY - Valuation 37.7p
Bluejay report the approval of the Exploitation and Closure Plan for the Dundas ilmenite project by the government of Greenland.
These final approvals give license to Bluejay to move directly to construction and production.
Ilmenite beach sands cover >30km of coastline around the Dundas project and we feel confident the Dundas project should have sufficient material to allow the mine to run well beyond the current mine plan.
The Bluejay team led by Bo Moller, the new CEO at Bluejay are buys optimising the Dundas project engineering.
Bo’s team are also pulling together a strong project finance syndicate to finance Dundas and bring the project into production shortly after.
We believe the team have made significant progress bringing in new mine transportation and power generation ideas which should significantly reduce operating costs at the mine.
The site lends itself particularly well to renewable power generation offering further benefit to the project.
This combined with the high-grade of the Dundas ilmenite and the fact that water drains through the material avoiding the need for drying could potentially enable the delivery of a environmentally preferable concentrate product when compared with other ilmenite producers.
Conclusion: Bluejay are making rapid progress towards the funding and start of construction at Dundas. We expect to see further good news shortly from the company.
*SP Angel act Nomad and broker to Bluejay. The analyst holds shares in Bluejay Mining.
Horizonte Minerals (HZM LN) 6.65p, Mkt Cap £113m – Progress report on financing the Araguaia ferronickel project
Horizonte Minerals has confirmed that each of the five international banks mandated to provide the US$325m debt component of its financing for the Araguaia ferro-nickel project has “commenced with their formal credit approval processes” following completion of technical, environmental and social due-diligence assessments of the project.
Although the company cautions that it has no control over the timing of the banks’ approval processes, Horizonte Mineals says that it “is targeting receipt of credit approvals in Q3 2021”.
In addition, Horizonte Minerals has “been in discussions with a number of Export Credit Agencies ("ECA") to provide credit support for a significant portion of the Senior Debt Facility. With the Company close to finalising the selection of key equipment and service providers for the Project, these discussions are now well progressed and a significant level of ECA credit support is now expected”.
The company says that it has also “continued to progress all other components of the project finance package and is in detailed documentation with a major cornerstone strategic investor and, having received significant interest in the Araguaia product, is also in final negotiations on a long-term offtake agreement for the Project. These other aspects of the overall project finance package are well advanced, and the Company therefore expects to be in a position to finalise agreements shortly after receiving credit approvals”.
Conclusion: Horizonte Minerals is progressing the project finance, Export Credit agency support, offtake agreements and the potential involvement of a strategic investor for it Araguaia ferro-nickel project and says that it is targeting credit approvals from the banks during Q3 2021.
Kodal Minerals* (KOD LN) – 0.35p, Mkt cap £54m – Kodal progress lithium mining license application in Mali alongside gold assays in the Ivory Coast
Kodal Minerals reports progress towards final approval of its mining license application for the Bougouni lithium project in Mali.
The company has paid the Ministry of Mines the Mining License Application fee as requested indicating the license application should be close to approval.
Dabakala (Ivory Coast): Kodal also report assay results from the Dabakala which show up to 1.97g/t in surface sampling.
The project shows some form of continuity in high-grade gold anomalism over 11km x 3km with multiple trends relating to geological structures and contacts.
The team have mapped the artisanal workings and have check sample previous assay results to show values of 4.2g/t and 3.5g/t where a 2.1g/t grade was previously recorded.
Nielle: Kodal have completed Aircore and Reverse Circulation drilling and Nielle with assays sent to the lab for analysis.
Fatou: RC drilling will start at Fatou by July.
Bougouni: Kodal should be close to receipt of its mining license in Mali on the Bougouni project. SinoHydro (Powerchina) are working through engineering details on the Bougouni project and may well be encouraged by Ganfeng’s investment into Goulamina.
A Chinese lithium processing company continues to support Kodal’s exploration and development of the Bougouni project with the intention of processing spodumene concentrate material from the Bougouni deposit.
Conclusion: Kodal is developing value on two fronts. Exploration of the gold licenses shows promising, though very early stage results while the lithium project advances towards mining license approval.
Ganfeng’s $130m deal for 50% of the Goulamina project next door to Bougouni lends significant confidence to the value of Kodal’s project and its prospects for financing and development
*SP Angel acts as Financial Advisor and Broker to Kodal Minerals. The analyst bought shares in Kodal following the Ganfeng investment into Firefinch’s Goulamina project next door.
Metal Tiger (MTR LN) 27p, Mkt Cap £43m – Significant geophysics anomalies identified in Gabon
Armada Exploration released results from the air borne electromagnetic survey completed over its properties in Gabon in March 2021.
14 new geophysics anomalies have been identified associated with the margins of interpreted mafic/ultramafic rock units.
The “late-time” conductive anomalies are distributed along the length of the 25km long Libonga- Matchiti Trend supporting the district-scale Ni-Cu potential of the target area.
Two targets, the Libonga North and Matchiti Central, Located on the northern and southern ends of the Libonga- Matchiti Trend are to be drill tested once Armada lists on the ASX.
Metal Tiger holds a direct 18.5% interest in Armada as well as an indirect holding through its ~%20 interest in Cobre that owns an 18.5% interest in Armada.
Armada holds two exploration licenses, covering a total area of 2,991km2 that are prospective for magmatic Ni-Cu sulphide in Gabon.
Rainbow Rare Earths* (RBW LN) 14p, Mkt Cap £67m – Phalaborwa REE JORC resource shows 38.3mt grading 0.43% Total Rare Earth Oxides
(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates. There is currently no BEE requirement as this is a retreatment processing operation)
Rainbow Rare Earths reports a first JORC resource for the Phalaborwa rare earths project in South Africa.
Calculation of a JORC resource requires the input and verification of a number of economic parameters giving significantly greater confidence in the ability of the project to go ahead.
The new Inferred Mineral Resource shows 38.3mt grading 0.43% Total Rare Earth Oxides which is larger than the 35m originally estimated.
The JORC resource confirms the presence of Nd/Pr Neodymium & Praseodymium at 29.1% within the rare earth content with an in-situ value of $95/t.
Dy/Tb, Dysprosium & Terbium also offer potential in-situ value for a further $28/t.
The total in-situ value adds up to $123/t.
The deposit has exceptionally low radioactive elements making the project environmentally preferable, making the material easier to transport and reducing costs.
Phalaborwa’s rare earths are contained in ‘cracked’ chemical form simplifying the process plant and lowering process costs.
Conclusion: Today’s news is significantly better than we have modelled indicating better value to be gained from the Phalaborwa project.
*SP Angel act as broker and financial advisor to Rainbow Rare Earths
Sunrise Resources (SRES LN) 0.25p Mkt Cap £9.3m – Sale of non-core assets in Nevada
Sunrise Resources reports that it has agreed to sell two of its early-stage exploration projects in Nevada to Power Metal Resources for cash and shares worth £81,875 including £20,000 in cash.
The sale of the Garfield and Stonewall projects is expected to “generate a combined profit of £33,329 based on the £40,671 carrying value of the two projects as at 31 May 2021 and the Market Price of the Shares”. Sunrise Resources will retain “a 2% Net Smelter Return Royalty in respect of the Properties, half of which can be purchased by Power Metal for US$1million for each property”.
The Garfield project is reported to contain “targets for sediment hosted skarn and porphyry-style copper-gold mineralisation” while the Stonewall project is a target for epithermal-style gold-silver mineralisation.
Executive Chairman of Sunrise Resources, Patrick Cheetham, said that “This disposal of these two non-core assets is in line with strategy and our continuing focus on our CS Pozzolan Perlite Project in Nevada. Nevertheless, we consider these two projects to be highly prospective and I am delighted that this agreement gives us not only a profit on sale but also exposure to the upside potential of these projects through our retained royalty interests. We intend to be a holder of the Power Metal Resources shares for the foreseeable future as we see a number of value catalysts for this company over the next few months”
Conclusion: The disposal of two early-stage exploration projects in Nevada allows Sunrise Resources to maintain its focus on progressing the CS Pozzolan-Perlite Project where recent successful grinding tests are to be followed up by commercial scale tests of concrete produced from the resulting material.
Recent Interviews:
IGTV: Stock picks in the small-cap mining space: https://youtu.be/TxtMf6B2t8Q
Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw
VOX Markets: 10/06/21: https://audioboom.com/posts/7884446-john-meyer-talks-about-cornish-metals-empire-metals-anglo-american-ncondezi-energy-mkango-r
BBC: Catalytic converters https://www.bbc.co.uk/sounds/play/p09jl6c9
*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, 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.
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
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
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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
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, Tungsten, Spodumene, Ferro-Manganese, Graphite
Asian Metal