SP Angel . Morning View . Wednesday 28 07 21
Nickel prices surge as metals await Fed decision
Anglo American (LON:AAL) – De Beers reports continuing strength in diamond jewellery and expects continuing positive demand during H2
Aura Energy* - (LON:AURA) – Progress with Tiris uranium project
BHP (LON:BHP) – BHP Group makes all-cash offer to pay C$0.55/s for Noront Resources valuing the Company at C$325m.
Noront Resources (CVE:NOT) – Offer from BHP at C$0.55/s
Bluejay Mining* (LON:JAY) – BUY - Valuation 37.7p - partial divesting of black shale properties in Finland
Empire Metals* (LON:EEE) – New gold lode identified at Eclipse near Kalgoorlie, Western Australia
Petra Diamonds (LSE:PDL) (LON:PDL) – Cullinan yields 342 carat white diamond
Power Metal Resources* (LON:POW) – Option exercised at Tati Gold-Nickel Project in Botswana
Renascor Resources (ASX:RNU) – Large scale pilot yields graphite concentrate purities of up to 97.5%
Rio Tinto (LON:RIO) –– Increases dividend by 2.6x as strong product demand coincides with supply constraints and spike in prices
Scotgold Resources* (LON:SGZ) – Cononish gold mine development as filmed by the BBC
URU Metals* (LON:URU) – Zebediela project sale to Blue Rhino Capital Corp on TSX exchange
Rio Tinto shows long term confidence in lithium on decision to invest $2.4bn Jadar in Serbia
Rio is investing $2.4bn to become a major European source of lithium
Jadar will produce ~58,000tpa of lithium carbonate, 160,000tpa of boric acid (B2O3 units) and 255,000tpa of sodium sulphate2
The group announced the project will ‘scale up Rio Tinto’s exposure to battery materials’, highlighting the company’s intentions to position ‘its portfolio for the global energy transition’.
The mine will provide Rio with battery-grade lithium carbonate.
The resource also offers potential for borate mining, used in both solar panels and wind turbines.
Company chief executive Jakob Stausholm suggested that the supply of lithium could provide an additional 1mn EVs pa, allowing Rio to ‘capture the opportunity offered by rising demand for lithium, driven by the global energy transition’.
There are still a number of hurdles Rio need to cross before mining can commence, with the project remaining subject to both approval and licensing as well as negotiations with both the Serbian government and the local community.
We see the decision as a positive move in terms of the outlook for long-term lithium demand.
By 2029 we expect the scale of the market for lithium hydroxide to have grown exponentially from here and for Rio Tinto to expand its planned 58,000tpa substantially higher, hopefully at a significantly lower incremental capital cost.
Lithium – UK House of Lords Committee encourages government to back domestic lithium miners
Lord Patel, chair of the House of Lords’ Science and Technology Select Committee, has called for the UK Government to utilise British domestic resources in its ambitions to reach net zero by 2050.
The committee encouraged the Government to make use of natural resources such as Cornish Lithium to position itself for the green energy transition.
It is estimated that Cornwall’s lithium resources could provide over 30,000 tonnes pa. The UK forecasts demand of 75,000 tonnes per year.
In a meeting with the Science and Technology Committee on the 25th May, Professor Richard Herrington highlighted the role that both Cornish Lithium and British Lithium could play in supplying the UK’s battery manufacturing industry.
The Government already provides grants to the two companies. However, the Committee raised concerns that manufacturing could shift to the EU if the necessary supply chains are not established.
U.S. metal buyers experiencing record premiums as supply chains falter
U.S. manufacturers buying physical aluminium currently have to pay record premiums of 30c per lb, equating to $670pt.
U.S. tin and lead buyers are also having to stump up record premiums.
The premium prices highlight the vulnerability facing importers amid supply chain chaos triggered by a global shipping crisis caused by Covid-19.
Flooding has shut a number of production facilities, including Germany’s Berzelius Stolberg smelter, placing further pressure on strained supply chains.
The U.S. relies on importing both tin and lead, with no primary domestic production facilities.
The LME 3-month tin price hit fresh highs on Tuesday of $34,990pt.
Dow Jones Industrials -0.24% at 35,059
Nikkei 225 -1.39% at 27,582
HK Hang Seng -1.20% at 25,387
Shanghai Composite -0.58% at 3,362
Economics
IMF cut growth outlook for emerging Asian economies on the back of a rise in new coronavirus cases.
China Is said to grow 8.1% this year, down 0.3pp on previous estimates due to a slowdown in fiscal support.
India is forecast to grow 9.5%, down 3pp, while growth in ASEAN-5 nations including Indonesia, Malaysia, the Philippines, Thailand and Vietnam was marked down 0.6pp to 4.3%.
This compares to upgrade in forecasts for advanced nations highlighting the divergence in growth momentum across nations from pandemic led challenges, Reuters reports.
US – Consumer confidence climbed for the sixth consecutive month hitting a fresh post pandemic high with Americans growing more optimistic over current business and labour market conditions, Bloomberg reports.
Although, the survey highlighted the increasing number of people concerned with rising consumer prices and the delta variant that in turn may weigh on sentiment going forward.
Treasuries are holding onto its gains with yields at ~1.26% ahead of the Fed decision later today.
Big tech reported significantly stronger than expected quarterly results yesterday including Apple, Alphabet and Microsoft with demand for digital services and gadgets continuing to soar.
Three tech companies reported a combined quarterly profit of $57bn, double the year before and 30% higher than expected, FT writes.
Futures equity indices are rangebound this morning after falling yesterday on a continuing sell off in Chinese markets and a downward revision in economic growth rates in the Asian region by the IMF.
Conference Board Consumer Confidence: 129.1 v 128.9 (revised from 127.3) in June and 123.9 est.
Ongoing strong economic performance from the US as indicated by the relative strength of the US dollar
Durable goods orders rose 0.8% in June from 2.3% in May
New orders rose by 0.3% excluding transport in June vs 0.8% in May
S&P Case Schiller home prices rose 17% yoy in May vs 14.9% yoy in April
The House price index 1.7% yoy in May vs 1.8% in April 18% and 18% yoy in May vs 15.7% yoy in April
Richmond Fed manufacturing index continued to climb to 27 in July vs 26 in June which had already been revised higher from 22
Germany – Consumer confidence unexpectedly pulled back in August on worries of rising cases, according to Reuters.
Following two months of steady declines, new cases started rising since early July led by the spread of the new variant.
“This is currently preventing a further significant increase in consumer sentiment,” GfK said in a statement.
Roughly 60% of Germany's 83 million people have had a first shot of a COVID-19 vaccine and about half of them are fully vaccinated.
The report follows weak business sentiment report released yesterday showing a surprising drop in the index on continuing supply chain worries and higher infection rates.
GfK Consumer Confidence: -0.3 v -0.3 July and 1.0 est.
UK - Bank of England set to continue stimulus levels despite inflation concerns
It is expected that the BoE will announce intentions to continue its stimulus programme at the current rate.
Two policymakers have now expressed concerns over speeding up inflation, suggesting that a tightening of the £900bn bond buying scheme should be reined in sooner than anticipated.
Inflation has quickly overtaken the BoE’s 2% target and is expected to surpass 3% in due course.
Rate-setters Dave Ramsden and Michael Saunders have argued for tightening the monetary policy sooner than anticipated in a bid to dampen rising prices.
The policy’s end date is scheduled in late 2021, and many of the Bank’s policymakers have argued that limiting the asset purchasing programme early could have an adverse effect to the UK’s recovery from the pandemic.
Gertjan Vlieghe, Monetary Policy Committee member, stated on Monday that stimulus should be kept in place ‘for several quarters at least, and probably longer’.
It is expected that consumer price inflation predictions will be raised to 3.5% on Aug. 5.
UK House prices growth slowed to 10.5%yoy in July from 13.45 in the previous month with the average price of a home down at £244k, 0.5%mom.
The stamp duty will now taper before ending completely in October following an active year of transactions that pushed house prices close to record high relative to incomes, FT reports.
Australia – Sydney lockdown will be extended for another four weeks or until August 28 at the earliest as the number of new cases rise.
There were 147 new daily infections reported on Wednesday, the highest level since the outbreak began in mid-June.
Sydney was placed into a strict lockdown five weeks ago.
All eyes on Jerome Powell and Fed policy meeting statement
A statement from the U.S. Federal Reserve is expected today at 2 pm EDT (18:00 GMT).
The policy update is expected to offer an indication as to how united the Federal Open Market Committee is on the fundamental question of inflation.
Investors are hoping for updates on the extent to which the Fed considers rising consumer prices as transitory.
Of primary concern will be when the U.S. central bank expects to start reducing its bond buying programme.
The meeting comes as earning reports from household brands such as Reckitt highlight the impact of rising prices on their balance sheets. The British brand, owner of products such as Lysol, dropped 8.4% after missing its sales estimates. It stated that rising costs have squeezed its margins.
Unilever, blaming higher raw material costs, was forced to cut its margin guidance on July 22.
Analysts expect the Fed to continue with its current policy considering the rampant Delta variant and the Bank’s continued emphasis on the transitory nature of current inflation.
South Korea - Advanced Q2 GDP rose 0.7% qoq vs 1.7% in Q1
China – Vehicle sales push by China’s Ministry of Commerce
The Ministry is looking to support vehicle sales with tax cuts, cash rebates and easier approvals for number plate applications.
Covid-19 – China is struggling to contain the new Delta variant as Sinovac and Sinopharm show 50% and 79% efficacy from symptomatic covid infection
China appears to be struggling to contain infection rates in Nanjing, Jiangsu province though previous clusters were contained relatively quickly.
The relatively low efficacy of the Sinovac vaccine mean it is relatively ineffective though a surge in Covid cases in Chile has been blamed on residents mixing after their first shot.
In the UK the rapid fall in Coronavirus cases and Covid hospitalisations appears aligned with school closures.
The UK cabinet is looking at reopening the UK to double vaccinated travellers and tourists from the US and EU to help restore economic activity in the services sector.
South Korea - advanced Q2 GDP rose 0.7%qoq (Q1 1.7%), yoy 5.9% (1.9%), then off to the
Record copper prices encourage increased hijackings in southern Africa
Reuters have reported that millions of dollars worth of copper owned by Glencore, Trafigura and Traxys have been hijacked. The trucks were on their way to ports in southern Africa.
A total of 66 trucks were robbed between January and May. 60% of these hijackings supposedly took place in South Africa.
Estimates suggest that the total copper value stolen in the period amounts to $21m at current prices.
Copper prices hit a record high of $10.7k/t in May, with organised crime gangs melting the metal down to resell it.
Shipping costs rise >10x for capsize rates
The cost of shipping goods and commodities around the world continues to rise with capsize rates jumping to >$30,000 a day from a low of $3,000 in February 2020
The Baltic Dry Index for dry bulk commodities has risen around 132% this year reflecting increased shipping of raw materials mainly into China and the US as stimulus programs accelerate demand.
Carriers expect to see a rise in iron ore from Brazil into China and coal also into China through the second half (CNBC)
Covid quarantine regulations and port congestion are slowing the turnaround of vessels in ports reducing availability of ships and disrupting the logistical chain
Increasing regulation to counteract the new Delta virus variant may worsen delays and serve to raise rates yet higher.
Fleet growth is estimates at just 3% over the next three years due to a shortage of new ship building capacity limiting the availability of new carriers.
Shippers are wary of the potential for inflation to drive interest rates higher and slow economic growth causing shipping rates to pull back
Currencies
US$1.1780/eur vs 1.1782/eur yesterday. Yen 110.07/$ vs 110.15/$. SAr 14.907/$ vs 14.869/$. $1.379/gbp vs $1.375/gbp. 0.734/aud vs 0.736/aud. CNY 6.509/$ vs 6.487/$.
Commodity News
Precious metals:
Gold US$1,805/oz vs US$1,795/oz yesterday
Gold ETFs 100.2moz vs US$100.1moz yesterday
Platinum (AIM:ZERO) US$1,061/oz vs US$1,058/oz yesterday
Palladium US$2,632/oz vs US$2,649/oz yesterday
Silver US$24.83/oz vs US$25.17/oz yesterday
Base metals:
Copper US$ 9,752/t vs US$9,759/t yesterday
Aluminium US$ 2,483/t vs US$2,499/t yesterday
Nickel US$ 19,525/t vs US$19,365/t yesterday
Zinc US$ 2,956/t vs US$2,977/t yesterday
Lead US$ 2,327/t vs US$2,351/t yesterday
Tin US$ 34,450/t vs US$34,670/t yesterday
Energy:
Oil US$74.8/bbl vs US$74.6/bbl yesterday
Natural Gas US$3.949/mmbtu vs US$4.085/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$197.0/t vs US$200.2/t
Chinese steel rebar 25mm US$832.9/t vs US$835.2/t - Shanghai steel futures continue to fall over concerns of reduced Chinese demand
Stainless steel fell 1.8% to 19,180y/t.
Both steel rebar and hot rolled coil futures have also come off slightly.
It has been suggested that China’s slowing industrial production growth is to blame.
Analysts have also pointed to reduced manufacturing and infrastructure investment expectations as having a negative effect on the metal prices.
High costs of raw material prices have triggered 4 consecutive months of slowing profit growth for China’s industrial firms.
It is anticipated that steel demand will be hit the hardest by a reduction in transportation infrastructure investment in particular.
China’s steel mills, facing pressure from government officials to reduce production, have also struggled with supply chain restraints.
Iron ore has edged higher as Chinese steel profit margins have lifted sentiment for the integral ingredient.
Thermal coal (1st year forward cif ARA) US$94.8/t vs US$94.3/t
Coking coal swap Australia FOB US$209.0/t vs US$209.5/t
China Illmenite Concentrate TiO2 US$357.41/kg vs US$358.4/t
Other:
Cobalt LME 3m US$52,500/t vs US$52,500/t
NdPr Rare Earth Oxide (China) US$91,082/t vs US$90,182/t - Russia mulls lower taxes for rare earth metals
Russia’s Industry and Trade Ministry wants to exclude rare earth metals projects from the increase of a mineral extraction tax, Kommersant reported.
Mineral extraction tax rates rose by 3.5 times for potash salts, phosphorite ores, ferrous and rare metal ores, bauxite, non-ferrous metal ores, among others.
Russia planned to boost the budget by an additional 56bn roubles a year from the tax hike.
Lithium carbonate 99% (China) US$12,759/t vs US$12,641/t
China Spodumene Li2O 5%min CIF US$730/t vs US$730/t
Ferro-Manganese European Mn78% min US$1,836/t vs US$1,844/t
China Tungsten APT 88.5% FOB US$295/t vs US$295/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% 9.6/lb vs US$9.6/lb
Europe Ferro-Vanadium 80% 40.55/kg vs US$40.55/kg
Spot CO2 Emissions EUA Price US$57.6/t vs US$57.4/kg
Battery News
Key Chinese industrial sectors to face new carbon tests when building plants
China will require new plants in several industries to meet carbon footprint requirements before winning approval, the Ministry of Ecology and Environment said in a statement.
Beijing will add an emissions criterion to approve or reject factories, in addition to the existing regulations controlling air and water pollution.
The new regime which is still in the planning phase will cover: Power, iron and steel, building materials, nonferrous metals, petrochemicals and chemicals.
The rules will only apply to planned new project and are expected to raise capex costs for plants.
New, green air-conditioning technology operates with no refrigerant gases
Irish clean-tech company Exergyn is pioneering the use of shape-memory alloys (SMAs), a group of materials with the ability to return to a predetermined shape when heated, for commercial scale applications.
SMAs release heat when deformed by compression, and then absorb it when the pressure is released and they return to their original shape – the Exergyn Drive uses a specific SMA, Nitinol, an alloy of nickel and titanium as their key technology.
The technology was initially developed for waste heat recovery, turning waste heat into mechanical or electrical power, but Exergyn are no focusing on its use for domestic and industrial heating/cooling to bring the technology to market quicker.
The air-conditioning system uses four nitinol cores – stacks of nitinol plates – with holes through the centre of each core to allow the flow of a heat-carrying liquid. The compression and expansion of the nitinol cores passes heat between the two fluid circuits, taking heat from inside to an external cooling unit
One of the key benefits of the technology in this use case is the fact that it uses no HFCs – making the Exergyn Drive “more environmentally friendly than an HFC set-up, [it] will also be less expensive to buy and 30-40% cheaper to run,” according to Tony Ennis the Exergyn Chairman.
The global air-conditioning market is expected to reach $247bn in 2025 with sales growing rapidly as more people move to urbanised areas and global temperatures continue to rise.
MSC Group taking steps for greener ships
Swiss-based shipping group MSC, Italian shipbuilder Fincantieri and gas group Snam are joining forces on a feasibility study with a view to building the world's first hydrogen-powered cruise ship.
Hydrogen is widely viewed as having an important role to play in reducing emissions in heavy transport sectors that are difficult to electrify.
"Maritime transport today accounts for some 3% of CO2 emissions worldwide ... the use of hydrogen can help achieve net-zero emission targets," said Snam CEO Marco Alvera.
MSC have recently taken delivery of their new flagship MSC Seashore, their first Seaside EVO ship, which features hybrid exhaust gas cleaning systems which have achieved 98% reduction of SOx emissions and NOx emissions by 90%.
Company News
Anglo American (LON:AAL) 3,070.5p, Mkt Cap £41.9bn – De Beers reports continuing strength in diamond jewellery and expects continuing positive demand during H2
Anglo American has reported that the sixth De Beers sales cycle of 2021 realised US$510m and that the previously reported sales for the fifth sales cycle of the year have now been confirmed at US$477m rather than the provisional figure of US$470m previously reported.
We estimate that this brings year-to-date sales to over US$3bn, ahead of the US$2.6bn achieved at this stage in, pre-Covid19, 2019.
De Beers is continuing to implement its more flexible approach to rough diamond sales in order to accommodate Covid19 related restrictions on international travel and movement of products.
Commenting on the sales figures De Beers Chief Executive, Bruce Cleaver, said that the latest sales have “seen the continuation of good demand for rough diamonds, driven by strong demand for diamond jewellery in the key US and China consumer markets. With the ongoing strength in consumer sales of diamond jewellery, the outlook remains positive for the second half of the year, subject to the risks that the pandemic continues to present across the globe”.
Aura Energy* - (LON:AURA) 6.1p, Mkt Cap £23.2m – Progress with Tiris uranium project
Aura Energy has announced progress relating to several aspects of its Tiris Uranium Project in Mauritania as it moves towards an update of its 2019 Definitive Feasibility Study during the current quarter and seeks to secure the reinstatement of its ASX listing.
Aura Energy expects to release an updated mineral resources estimate for the uranium at Tiiris “shortly” and is also working to produce an estimate of the vanadium content of the resource, which was excluded from previous resource estimations, by the end of the year offering the potential to develop a by-product revenue which would reduce the unit cost of uranium production.
The company clarifies that several drill holes containing both uranium and vanadium drilled at Sadi South were “never included in previous resource estimates due to timing issues. These drill holes were submitted as part of the vanadium estimate”.
Work has also been completed on revised capital cost estimates for the project to reflect current costs and the impact of exchange rate movements since the 2019 study.
The company also reports the identification of “a number of opportunities that were not included in the original Feasibility Study, thereby potentially resulting in further cost reductions”.
Water drilling was restarted this month “which the Company expects to reconfirm the results from the 2019 water drilling”.
Managing Director, Peter Reeve, confirmed that “With Stage 2 Exploration now commenced at Tiris, the Company also continues discussions with parties globally in regard to financing arrangements for the zero emission Tiris Project, as we progress towards production.”
As well as the project related matters, today’s announcement also confirms that, as previously announced in April 2021, Aura Energy “intends to conduct a non-renounceable loyalty entitlement offer of Options one month from relisting, on the basis of 1 Option for every 3 Shares held, with the Loyalty Options having an upfront payment of $0.013 each, an exercise price of $0.052, and expiry of 30 June 2024 (this offer will only be available to Australian and New Zealand registered shareholders)” and Mr. Reeve confirmed that “Both myself and the directors of Aura Energy intend to take up our full entitlement”.
Conclusion: Revisions to the capital cost estimates reported in 2019 to reflect current conditions and the impact of vanadium by-product credits on the operating costs for Tiris are being incorporated in an update to the 2019 Definitive Feasibility Study which should also reflect additional cost opportunities not captured by the original study. Work, including additional water drilling has been resumed on site and discussions are continuing on financing Tiris. We await further news, including the updated mineral resources estimates.
*SP Angel are Nomad and Broker to Aura Energy
BHP (LON:BHP) 2,290p, Mkt cap £128bn – BHP Group makes all-cash offer to pay C$0.55/s for Noront Resources valuing the Company at C$325m.
Noront Resources (CVE:NOT) C$0.55, Mkt cap C$325m – Offer from BHP at C$0.55/s
The offer represents a 69% premium to the closing price on the previous day and follows an unsolicited also all cash offer from Wyloo Metals of C$0.26 made in May.
Wyloo is the largest shareholder with a ~25% interest in the Company and is controlled by Andrew Forrest, of Fortescue Metals.
Noront owns a 100% stake in Eagle’s Nest high-grade nickel sulphide deposits, Blackbird chromite discovery, and Black Thor chromite deposit, all of which are in Ontario, Canada.
It also holds a 70% stake in the Big Daddy chromite deposit and a 100% interest in the Black Label deposit.
The Eagle’s Nest Ni-Cu-PGE sulphide deposit is estimated to host 11.1mt at 1.68% Ni, 0.87% Cu, 0.89g/t Pt and 3.49g/t Pd in Mineral Reserves with a 11y life of mine according to a 2012 Feasibility Study.
Additionally, the deposit hosts 9.0mt at 1.10% Ni, 1.14% Cu, 1.16g/t Pt and 3.49g/t Pd in Inferred Mineral Resource.
Bluejay Mining* (LON:JAY) 9.17p, Mkt cap £89m – partial divesting of black shale properties in Finland
BUY - Valuation 37.7p
Bluejay Mining report the partial divestment of a number of black shale licenses in Finland.
Metals One has been formed to specifically acquiring and test the Paltamo and Rautavaara Ni, Zn, Cu, Co prospects which are seen as analogous and adjacent to to the Talvivaara nickel mine.
Talvivaara’s 2016 resource showed 2bnt 0.23% Ni, 0.13% Cu, 0.54% Zn, 200 ppm Co and 16 ppm U of mineralisation over a 12km strike.
The cash and share deal will see Metals One seek to list on London’s AIM market later this year.
Terms:
£25,000 to be paid within five days of signing the term sheet
£250,000 in cash payable on completion of the Proposed Transaction
£3,725,000 payable in shares at the IPO price (shares retained by the Company)
Management fees
10% of approved expenditure undertaken in Finland payable to Bluejay
Bluejay will appoint a technical director to the board of Metals One. Bluejay COO, Thomas Levin, will also join the board of Metals One
Conditions:
The Proposed Transaction is dependent on the following conditions being satisfied.
Metals One having conducted and being satisfied with due diligence.
Metals One and Bluejay entering into the asset purchase agreement.
All applicable and necessary consents, authorities or approvals required if required.
Metals One having raised at least £3,000,000 from the issue of new shares.
The preparation and publication of a competent person's report in respect of the exploration licences.
The preparation and publication of an AIM admission document in respect of Metals One.
The admission of the enlarged issued share capital of Metals One to AIM; and
The granting of a waiver under Rule 9 of the Takeover Code to make a general offer to Metals One shareholder as a result of the issue of the consideration shares.
The deal does not effect the existing joint venture with Rio Tinto over the historic Enonkoski and Hammaslahti license areas.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland. The analyst holds shares in Bluejay Mining.
Empire Metals* (LON:EEE) 2.59p, Mkt cap £9m – New gold lode identified at Eclipse near Kalgoorlie, Western Australia
(Empire Metals has a 75% interest in Eclipse Gold Project with an option to acquire the remaining 25%)
Empire Metals report the identification of a new ‘Twin Shafts’ Lode at Eclipse Gold Project in reverse circulation drilling at the Eclipse Gold Project near Kalgoorlie, Western Australia.
Drilling has now identified a number of parallel veins in addition to the main Eclipse vein with diamond drilling replicating intercepts from previous drilling.
The work has identified the new ‘Twin Shafts’ mineralised lode running sub-parallel to the Eclipse vein.
A different stockwork style of near-surface mineralisation has also been identified in the vicinity of the Jack's Dream old workings.
This is breccia in style with a different orientation to Eclipse/Twin Shafts mineralisation increasing the gold bearing potential of the system albeit in a more complex setting.
Significant RC drilling intercepts include:
5m @ 3.54 g/t Au from 126m downhole at Jack’s Dream
6m @ 2.39 g/t Au from 50m downhole at Jack’s Dream
4m @ 4.78 g/t Au from 66m downhole at Twin Shaft
2m @ 3.65 g/t Au from 53m downhole at Eclipse
1m @ 4.08 g/t Au from surface at Eclipse
The project lies within the highly concentrated gold mining region of Western Australia, north-west of famous gold operations such as Kanowna Belle and Paddington (Figure 1).
Conclusion: Empire’s new managing director, Shaun Bunn, has made good progress with the identification and discovery of the new styles of mineralisation and underground lodes on the Eclipse property which is looking increasingly promising as a gold prospect. The company is relatively well funded with the recent receipt of US$3.3m from the sale of its Georgian assets.
*SP Angel act as Nomad and Broker to Empire Metals
Petra Diamonds (LON:PDL) 1.74p, Mkt Cap £153.6m – Cullinan yields 342 carat white diamond
Petra has recovered a 342.92 carat Type IIa white diamond from its Cullinan mine.
The company says that the stone, described as “of exceptional quality in terms of both its colour and clarity” is expected “to be sold via the Company’s upcoming tender during September 2021”.
Recent sales of exceptional diamonds from the Cullinan mine have included the of a39 carat blue diamond, announced earlier this month, for US$40m as well as the sale, announced in November 2020, of five blue diamonds, collectively known as the ’Letlapa Tala’ collection, for a total of US$40.36m.
Power Metal Resources* (LON:POW) 1.95p, Mkt cap £23m – Option exercised at Tati Gold-Nickel Project in Botswana
Power Metal reports that it has exercised its option to acquire a 100% interest in two gold-nickel exploration licences located within the Tati Greenstone Belt near Francistown, Botswana.
License PL127/2019 is located near the southern extent of the north-northwest striking Tati Greenstone Belt, covering a total area of 89km2 and is prospective for orogenic gold and intrusive magmatic nickel mineralisation. The license is also prospective for Ni-Cu-PGE rich deposits located along the periphery of the Tati Greenstone Belt.
Two soil sampling grids have been completed at the license, the first targeting a northwest-southeast oriented historic Au-in-soil anomaly and the second targeting historic nickel-in-soil anomaly, with both samples on the way to South Africa to be sent on for geochemical analysis.
License PL126/2019 is located near the northern extent of the Tati Greenstone Belt, covering a total area of 35km2 and is prospective for orogenic gold mineralisation.
A total of three soil sampling grids will be completed at this license, covering historic arsenic-in-soil and nickel-in-soil anomalies.
Power Metal signed an option agreement to acquire both licenses, providing a 60 business-day period, during which Power Metal may undertake due diligence and notify the Vendors of Option exercise to acquire 100% of PL 126/2019 and PL 127/2019 from the owner.
Upon transfer of the licenses, Power Metal will pay an initial consideration of £25,000, payable through the issue to the Vendors of 833,333 new ordinary Shares at an issue price of 3 pence per New Ordinary Share.
Should Power Metal elect to proceed with the year 3 exploration spend programme, it will pay a further consideration of £50,000, payable to the Vendors through the issue of 833,333 New Ordinary Shares at an issue price of 3.0p each for each licence where such spending is confirmed.
In addition, Power Metal will pay a single further consideration payment of £100,000 through the issue the Vendors of 3,333,333 New Ordinary Shares at an issue price of 3p if either of the two following conditions are met:
Confirmation of a 250,000 oz JORC (2012) compliant gold Mineral Resource across the two prospecting licences
Confirmation of a 5,000,000-tonne economic nickel deposit at a grade of >1.5% nickel.
In addition, the company will issue the vendors ,833,332 warrants over New Ordinary Shares at different stages as the projects progress.
Paul Johnson, Chief Executive Officer of Power Metal Resources PLC (AIM:POW, FRA:2M5) commented: “We consider that the Tati Project is highly prospective and has the potential to deliver major gold and nickel discoveries, and on that basis we have exercised our option to acquire a 100% interest in the Project.”
*SP Angel acts as Nomad and Broker to Power Metal Resources
Renascor Resources (ASX:RNU) A$0.074p, Mkt Cap A$135m – Large scale pilot yields graphite concentrate purities of up to 97.5%
Large scale pilot trials at an independent commercial graphite production facility have produced bulk quantities of high purity Graphite Concentrates from ore samples from Renascor’s Siviour Graphite Deposit in South Australia.
Rensacor’s +60t bulk pilot trial is being undertaken to produce large scale samples of Siviour Graphite Concentrates and to test adjustments to the flotation circuit to optimise the production of high purity Graphite Concentrates.
The on-going pilot trials have achieved graphite purities of up to 97.5% total carbon with graphite recovery of 93.2% by adjusting regrind times in the flotation circuit. These purity levels compare favourably to Renascor’s previous results from locked cycle tests, which achieved purities of 94.6% TC with graphite recovery of 94.5%.
Renascor plans to use the results from the pilot trials to optimise the Graphite Concentrate operation, with results also aiding downstream equipment selection trials and large-scale customer sample testing to support the progression to binding offtake agreements.
Renascor has previously reported the signing of a a non-binding MoU to supply purified spherical graphite to Shanxi Minguang New Material Technology Co. a Chinese anode manufacturer.
Renascor's Managing Director, David Christensen stated: “The potential for increased purities is another significant contribution from our technical team that offers a further advantage to our Siviour project and our plans to offer high-quality, low cost battery anode material for the lithium-ion battery market. We intend to use these results to support our on-going offtake discussions with lithium-ion battery anode manufacturers, as well to advance detailed engineering plans.”
Rio Tinto (LON:RIO) – 6,018p, Mkt cap £75bn – Increases dividend by 2.6x as strong product demand coincides with supply constraints and spike in prices
Rio Tinto has announced a dividend of US$5.61/share for the six months ending 30th June representing a 262% increase over the US$1.55/share declared for H1 2020 and “representing 75% of underlying earnings”.
Reporting the results, Chief Executive, Jakob Stausholm said that “Government stimulus in response to ongoing COVID-19 pressures has driven strong demand for our products at a time of constrained supply resulting in a significant spike in most prices”.
Mr. Stausholm reports the results in the context of “our four priorities, identifying opportunities for operational improvement, advancing our ESG agenda, taking important investment decisions and stepping up our external engagement” and reports progress across each of these areas and says that “We have identified what we need to do to make Rio Tinto a better company for the long term, with the right teams in place to unleash our full potential.”.
The company says that the US$13.66bn net cash generated by its operations “was 143% higher than 2020 first half, mainly due to higher pricing for iron ore, aluminium and copper … [and that the] … $10.2 billion free cash flow2 reflected the stronger operating cash flows partially offset by a 24% rise in capital expenditure1 to $3.3 billion, driven by an increase in replacement and development capital as we ramp up our projects”.
“Net debt reduced by $3.8 billion in 2021 first half, resulting in a net cash position of $3.1 billion at 30 June 2021. This reflected the strong free cash flows partly offset by payment of the final and special dividends of $6.4 billion”.
Both underlying EBITDA and earnings are dominated by the contribution of Rio Tinto’s iron-ore operation which, despite a 3% reduction in shipment tonnages as a result of adverse weather, contributed US$16.1bn (76%) to the total EBITDA of US$21.0bn and US$10.2bn (84%) to the total US$12.2bn of underlying earnings.
Copper represented approximately 10$ (US$2.05bn) of EBITDA and 7% (US$885m) of earnings while aluminium contributed approximately 9% (US$1.9bn) to EBITDA and 8% (US$921m) to underlying earnings.
Elaborating on the impact of commodity prices, Rio Tinto explains that, driven by a strong recovery in global demand led by China “The monthly average Platts index for 62% iron fines converted to an FOB basis more than doubled compared with 2020 first half” while “Average LME prices for copper and aluminium rebounded 66% and 41%, respectively, compared with 2020 first half … [and] … The published gold price increased 10% compared with 2020 first half”.
Commenting on its pipeline of future projects, Rio Tinto announced, yesterday, that it was going ahead with the US$2.4bn Jadar lithium and borates project in Serbia with initial production expected in 2026. ”Following ramp up to full production in 2029, the mine will produce ~58,000 tonnes of lithium carbonate, 160,000 tonnes of boric acid (B2O3 units) and 255,000 tonnes of sodium sulphate2 annually, making Rio Tinto one of the top ten lithium producers in the world.”
As previously announced, “Mining has commenced at the $2.6 billion Gudai-Darri replacement iron ore mine in Western Australia, with more than nine million cubic metres of pre-stripping completed in June. Despite labour shortages, first ore in the crusher is expected in 2021, although commissioning is later than originally planned. The project is expected to ramp up in early 2022, consistent with previous guidance, and reach full capacity in 2023”.
Elsewhere in Australia, initial production at Winu is expected in 2025.
Progress has been slowed at the US$6.75bn Oyu Tolgoi underground project in Mongolia as a result of local Covid19 containment measures with “site manning levels were less than 25% of planned requirements. Despite these restrictions, as the Material Handling System 1 had been ahead of the definitive estimate schedule, it is now 90% complete with technical criteria achieved to support undercut commencement, subject to the ongoing impacts of COVID-19 and satisfactory resolution of the non-technical undercut criteria.”.
The previously announced decision to examine underground mining opportunities at Kennecott has led to “the approval of a $108 million investment for underground characterisation studies to support an underground mine below the existing open pit … Potential underground mining would occur concurrently with open pit operations and result in increased copper output”.
Conclusion: Rio Tinto’s 262% increase in H1 dividend reflects strong prices as demand rebounds at a time of supply constraint precipitated in part by Covid19. The company’s performance continues to be dominated by its iron-ore operations where prices have more than doubled. Progress on project development includes the decision to proceed with Jadar and initial mining at Gudai Dam.
Scotgold Resources* (LON:SGZ) 61p, Mkt Cap £34m – Cononish gold mine development as filmed by the BBC
BBC2: https://www.bbc.co.uk/iplayer/episode/m000tkv3/gold-town-series-1-episode-3
Processing plant manager Nigel is taking on the challenge of turning the crushed quartz vein into gold, a major step in the development of the Cononish goldmine.
Development works continue with access to higher grade ore zones completed faster than anticipated with >10g/t expected to feed to the mill.
The team is trying to open up multiple mine faces to aid flexibility which along with improved equipment utilisation rates should improve production.
*SP Angel act as Nomad and broker to Scotgold Resources. A number of SP Angel analysts have visited the Cononish gold mine
URU Metals* (LON:URU) 385p, Mkt cap £6.3m – Zebediela project sale to Blue Rhino Capital Corp on TSX exchange
URU Metals report the conditional acceptance of the sale of the Zebediela nickel project by Blue Rhino Capital Corp.
Blue Rhino are listed on the TSX and will consolidate its share capital on a 2.3 for 1 basis following which it will issue 41m new shares to URU as well as assuming all ongoing liabilities including the 2.5 royalty on the project.
Blue Rhino have increased the scale of their placement of new shares to C$2.8m at C$0.25/s.
Richard Montjoie, a senior employee of URU, will join the board of Blue Rhino / ZEB Nickel Corp.
*SP Angel acts as Nomad and broker to URU Metals
Recent Interviews:
IGTV: Stock picks in the small-cap mining space:
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.
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The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
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+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
Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
LME
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ICE
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SSY
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Asian Metal