SP Angel . Morning View . Friday 06 08 21
Base metals rise as gold pulls back ahead of the US payrolls
IGTV: China fearing failure in metals pricing tactic: https://youtu.be/RK4HQPrs60s
Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw
VOX Markets: 04/08/21: https://audioboom.com/posts/7918741-john-meyer-talks-about-china-cora-gold-kodal-minerals-power-metals-rambler-metals
Altus Strategies* (LON:ALS) – BUY, Target 118p – Diba gold project Community Development Programme implementation progress
Castillo Copper (LON:CCZ) – Plan to spin-off Broken Hill assets in ASX IPO
Centamin (LON:CEY) – H1 delivers almost US$60 after-tax profit
Glencore (LON:GLEN) – Glencore looks forward to positive future on post-Covid stimulus and growing decarbonisation initiatives
Jubilee Metals Group (LON:JLP) – Jubilee Reports 178% earnings increase for FY 2021
Katoro Gold (LON:KAT) – Some potential finance sources for Blyvoor willing to proceed despite recent civil disturbances in S Africa
Maersk (MAERSK-B) – Q2 earnings triple yoy as shipping rates and volumes rise
Rainbow Rare Earths* (Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)) – Ongoing suspension of Burundi mine serves to raise REE prices to >$96,000/t
Resolute Mining (LON:RSG) – Sale of Bibiani gold mine for US$90m
Versarien* (Versarien PLC (AIM:VRS, OTC:VRSRF)) – Versarien results highlights innovation and progress being made
Ganfeng Lithium to build $1.3bn worth of battery production facilities
The world’s largest lithium company, Ganfeng Lithium, announced on Thursday its plans to build two projects for ‘new-type’ lithium battery construction.
Ganfeng currently supplies battery-grade lithium to clients including Tesla. However, the company is looking to increase its battery-making capabilities with the 8.4bn yuan investment.
The company’s planned construction of an industrial park in southwest China will enable a battery production capacity of 10GWh. The site will also hold an advanced battery research institute.
The site will look to explore ‘various solid-state batteries’, using electrolytes rather than flammable liquid materials.
Ganfeng plan to begin construction within three months and production is hoped to commence within 2 years.
The second project will establish a 5GWh plant in Jiangxi, operational by October 2023.
Ganfeng is also looking to establish a battery plant in Argentina, having already invested $900mn on lithium assets following boosted profits amid escalated lithium prices.
Ganfeng’s share price is up 82% YTD.
Chile strike threat boosts copper prices amid supply concerns
Workers at Chile’s Escondida copper mine, the world’s largest of the red metal, were told to prepare for a strike over contract-related issues
The 3m LME copper contract rose 1% following the news despite a strong dollar.
The union representing the workers at the mine are concerned over the slow progress made during government-mediated contract talks.
It is expected that further strikes will occur across Chile if the two sides do not reach an agreement in the talks.
Over 2000 union members rejected BHP’s contract offer at the end of the week.
BHP representatives have described the reformed proposal as having ‘substantial improvements which includes the issues raised by the union’ which it trusts ‘will bring positions closer to formalizing an agreement’.
Dow Jones Industrials +0.78% at 35,064
Nikkei 225 +0.33% at 27,820
HK Hang Seng +0.08% at 26,226
Shanghai Composite -0.25% at 3,458
Economics
US – S&P 500 and Nasdaq closed at a new record high on Thursday supported by positive corporate earnings and good jobless claims report.
The number of continuing unemployment benefits dropped to the lowest level during the pandemic.
Weekly jobless claims have also came down coming in slightly higher than expectations.
Non-farm payrolls data for July will be closely watched later today for signs of the pace of a recovery in the labour market and after a disappointing reading announced on Wednesday.
Estimates are for 858k NFPs and 5.7% unemployment rate.
Jobless Claims (‘000): 385 v 399 (revised from 400) in the previous week and 383 est.
US bankruptcies fell to their lowest level since 1985 in June.
US trade deficit hit US$75.7bn in June vs US$71.0 in May
US Senators aim to approve $1tn infrastructure bill by Saturday
Despite efforts to finalize the bill on Thursday, the U.S. Senate has scheduled a vote to move towards passage of the legislative bill tomorrow.
The bipartisan bill will inject $1tn in investment into new construction projects across the U.S. It will focus on refurbishing transportation networks and public infrastructure.
The bill is one of Biden’s primary policy objectives since taking office this January however Republicans have been aiming to amend the bill to further increase investment in Defense Department improvements.
Democrats hope that a bipartisan vote on the bill would enable budget framework for a $3.5tn ‘human infrastructure’ bill towards the end of this year.
Once voted on in the Senate, the infrastructure bill will need to be approved in the House of Representatives.
The Congressional Budget Office estimates that the bill would boost federal budget deficits by $256bn over the next decade. Legislators of the bill have dismissed these estimations as misguided.
The American Iron and Steel Institute have estimated that the bill will boost US steel demand by up to 4%.
Biden pushes EV executive order with backing from U.S. automakers
Joe Biden signed an executive order on Thursday aimed at making half of all new vehicles sold in the US electric in 2030.
This comes as further evidence of the Biden administration’s commitment to cutting greenhouse gas emissions.
The administration is also looking at emissions standards for vehicles, using a 10% stringency increase for 2023 models.
The order also highlights Biden’s intentions to compete with China as the dominant leader in the electric vehicle industry.
Biden told reporters that the EV industry ‘is the future’ and that America ‘can’t sit by’.
Foreign automakers have told the administration that achieving Biden’s aims by 2030 will require billions of dollars in government grants and loans.
GM, Ford and Stellantis all announced on Tuesday plans to ‘achieve sales of 40-50% of annual U.S. volumes of electric vehicles… by 2030’.
Environmentalists have criticised the non-legally binding executive order, with Democrats calling for binding requirements for EV adoption.
California has already set a 2035 date for the phasing out of gasoline-powered light-duty vehicles.
Biden has called for $174bn in government investment into the EV industry, with $100bn of that going towards consumer incentives.
China – Why is the use of the term ‘spiritual opium’ in China’s Economic Information Daily important?
The use of the term ‘spiritual opium’ panicked already nervous investors causing a significant selloff in gaming stocks active in China.
Beijing had already cracked down on technology stocks causing shares to collapse from lofty heights.
While we are always wary of the potential contagion into other markets we see Chinese officials as managing markets down to more realistic levels ahead of potential rules to limit the huge time spent on gaming by Chinese students.
The disappearance of Jacck Ma of Alibaba, the cancellation of his $37bn Ant Group IPO, $2.8bn fine for monopolistic practices and orders to sell media assets followed a speech where Ma criticized China for lacking a functioning financial system and slammed Chinese banks for operating with a “pawnshop mentality.” (City AM)
Curiously, Beijing seems to have taken the comments to heart with a new trial in Hubei whereby banking chiefs are being given responsibility of logistics and growth.
While bankers may not make good leaders of industry, making them accountable for economic growth and stimulus in key sectors as well as job creation looks like a great idea.
Conclusion: China’s determined focus on higher-value industrial growth and metallurgical industries is likely to continue to drive demand for commodities, particularly battery-related materials. We see funds from gaming and other technology stocks as flowing into mining and mineral processing stocks as a result of Bejing’s new orientation of the economy.
Germany – Industrial production surprisingly dropped for a third month in a row in June highlighting supply chain challenges among manufacturers.
The drop was driven by a fall in the production of capital goods including machinery and vehicles that decreased 2.9%mom while consumer goods output continued to grow (+3.4%mom).
Industrial Production (%mom): -1.3 v -0.8 (revised from -0.3) in May and 0.5 est.
UK – The central bank voted to keep the existing the size of asset purchases unchanged at £895m with only one of the BOE’s eight MPC members voting in favour of a reduction.
The bank said it will consider allowing existing portfolio of bonds mature without further reinvestment of proceeds when policy rates reach 0.5% and actively reduce the size of the holding when the rate is near 1.5%.
Members voted unanimously to leave rates unchanged at 0.1% on Thursday.
Markets are expecting a first hike to 0.25% in August next year and the rate reaching 0.5% in late 2023.
The BOE revised its peak inflation projections to 4.0% in late 2021 and early 2022, up from 2.5% estimated previously, although, highlighted the increase is likely to be temporary.
Inflation in two year’s time is forecast at just over 2% target.
GDP is expected to grow 7.25% in 2021, unchanged from May estimates, and 6.0% in 2022, an upward revision to previous forecast.
The pound was little changed after the announcement.
UK starting salaries climbed at the fastest pace in at least 24 years as economy reopens and employers rush to fill jobs, according to KPMG and the Recruitment and Employment Confederation data.
Additionally, the pressure is driven by a weaker supply of labour following the UK exit from the EU.
Vacancies increased at the fastest pace since the survey began in 1997 while the number of people looking to fill them dropped almost as rapidly.
UK BoE MPC voted unanimously to leave monetary policy, interest rates and QE unchanged at 0.1% and £875bn/m.
The BoE expect CPI to hit 4% in 2021
Ecuador – President releases new framework for mining in Ecuador encouraging national and foreign investment
In a statement issued yesterday Ecuador’s President, Guillermo Lasso Mendoza sets out the framework for mining in Ecuador based upon the principles of state ownership of the nation’s mineral resources and responsible, environmentally, and socially sustainable development for the benefit of the Ecuadorean population and advancement of the local host communities.
The Plan specifically encourages both national and foreign investment in the exploitation of the country’s mineral wealth and confirms that pre-existing rights and contracts will be respected and that the state seeks to eradicate “illegal mineral exploitation and its environmental and social impacts in favor of legal and responsible mining”.
The Plan sets a timetable for the Ministry of Energy and Non-Renewable Resources to develop and publish proposals within the next 100 days on a wide range of issues including environmental and water management, assessment of the economic impact of the mining industry using an economic model to establish that “average profitability for the State is identified in terms of its contribution to Ecuador’s GDP, exports, national and foreign investment, production levels, environmental and social costs, and operational and post-operational costs, among other relevant aspects” and prevent “the discretion or arbitrariness of public officials in the interpretation of contracts and in other administrative actions”.
At the National level, the plan aims to ensure that “legal and responsible mining must be carried out in the country for the benefit of communities and the general public, and with respect and care for the environment”.
The provision of training programmes in relevant mining skills is encouraged to ensure benefit to local communities and the Government undertakes to adopt and comply with “international codes, protocols, agreements, declarations and instruments in each of the mining phases, determining factors for the responsible development of the sector, as well as the obligatory commitment of all parties involved” as well as “absolute respect for labor rights and access to complaint mechanisms established in the national regulatory framework, thus strengthening the institutional control of the State in the mining sector”.
Ecuador plans to guarantee “the integrity of current and future mining rights, promoting new national and foreign investment, creating more jobs, and increasing tax collection for the State.”
We comment that in recent years Ecuador has increasingly recognised the benefits to the nation of a vibrant mining industry and the role of international investments and yesterday’s announcement should reinforce the moves to develop the formal mining industry.
Western Australian Government to increase investment in resource exploration funding
The WA government has announced a boost to its contribution to the Exploration Incentive Scheme by $2.5m.
The scheme aims to incentivise exploration investment into the Western Australian mining sector.
Mines and Petroleum Minister Bill Johnston hopes the bill will ‘help find the next big resource discover, which in turn leads to new mines and new jobs for Western Australians’.
WA currently has $140bn worth of mining and resources projects in the pipeline, with ministers hoping the exploration incentives will further bolster these figures.
The previous two EIS rounds have seen a considerable boost in applications for exploration projects.
An independent study has shown that the first 10 years of EIS schemes returned AUD31 for every dollar invested.
Currencies
US$1.1822/eur vs 1.1839/eur yesterday. Yen 109.77/$ vs 109.67/$. SAr 14.487/$ vs 14.393/$. $1.392/gbp vs $1.391/gbp. 0.739/aud vs 0.739/aud. CNY 6.466/$ vs 6.464/$.
Commodity News
Precious metals:
Gold US$1,800/oz vs US$1,810/oz yesterday
Gold ETFs 100.6moz vs US$100.6moz yesterday
Platinum (AIM:ZERO) US$1,007/oz vs US$1,019/oz yesterday
Palladium US$2,664/oz vs US$2,653/oz yesterday
Silver US$25.17/oz vs US$25.36/oz yesterday
Base metals:
Copper US$ 9,579/t vs US$9,460/t yesterday
Aluminium US$ 2,606/t vs US$2,580/t yesterday
Nickel US$ 19,540/t vs US$19,220/t yesterday
Zinc US$ 3,025/t vs US$2,974/t yesterday
Lead US$ 2,344/t vs US$2,371/t yesterday
Tin US$ 34,750/t vs US$34,735/t yesterday
Energy:
Oil US$71.9/bbl vs US$69.9/bbl yesterday –
Oil prices rose more than 1% yesterday on increasing Middle East tensions, but gains were capped as fresh restrictions in China were imposed to counter a surge in COVID-19 cases
Brent Crude Oil (LSE:BRENT) futures rose 91 cents, or 1.3%, to settle at US$71.29/bbl, after earlier dipping below US$70/bbl for the first time since 21 July
Elsewhere, Israeli jets struck what its military said were rocket launch sites in Lebanon early yesterday in response to two rockets fired towards Israel from Lebanese territory, in an escalation of cross-border hostilities amid heightened tensions with Iran
The exchange came after an attack on a tanker off the coast of Oman last Thursday, which Israel blamed on Iran
The growing tensions come as nuclear talks between Iran and Western powers that would ease sanctions on Tehran's oil exports appear to have stalled
Offsetting the geopolitical tensions, concerns over the recovery of global oil demand grew amid a surge in coronavirus cases
Japan is poised to expand emergency restrictions to more prefectures while China, the world's second-largest oil consumer, has imposed curbs in some cities and cancelled flights, threatening fuel demand
In the US, the world's biggest oil consumer, COVID-19 cases hit a six-month high with more than 100,000 infections reported on Wednesday
Natural Gas US$4.160/mmbtu vs US$4.149/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$166.4/t vs US$178.3/t - Iron ore futures in Singapore down 20% in three weeks on demand outlook
Iron ore futures are down 4.5% so far this week, in what will be the third straight week of declines since mid-July.
Beijing has ramped up efforts to cut steel production in order to meet climate targets, which has seen demand for iron ore soften.
Shanxi province in northern China has ordered mills to cut output in the second half of this year.
For the country as a whole, Beijing has vowed to cap production below last year’s record high and raised export tariffs for steel.
Iron ore futures in Singapore are currently hovering around $169/t having dropped 21% in three weeks.
Chinese steel rebar 25mm US$817.9/t vs US$819.7/t
Thermal coal (1st year forward cif ARA) US$97.5/t vs US$96.0/t
Coking coal swap Australia FOB US$197.0/t vs US$197.0/t
China Illmenite Concentrate TiO2 US$359.60/kg vs US$359.7/t
Other:
Cobalt LME 3m US$52,500/t vs US$52,500/t
NdPr Rare Earth Oxide (China) US$96,279/t vs US$96,307/t
Lithium carbonate 99% (China) US$13,456/t vs US$13,460/t
China Spodumene Li2O 5%min CIF US$830/t vs US$820/t
Ferro-Manganese European Mn78% min US$1,756/t vs US$1,758/t
China Tungsten APT 88.5% FOB US$305/t vs US$305/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% 9.8/lb vs US$9.8/lb
Europe Ferro-Vanadium 80% 40.75/kg vs US$40.75/kg
Spot CO2 Emissions EUA Price US$64.4/t vs US$64.5/kg
Battery News
Colombian government publishes $2.5bn hydrogen blueprint
The Colombian government has unveiled an ambitious plan to install 1GW of electrolysis capacity for hydrogen production with a forecasted investment of $2.5bn.
It will also promote the wide-scale use of hydrogen fuel-cell vehicles as an alternative to EVs.
The plans also detail the aim to produce at least 50 kilotons of blue hydrogen from new steam methane reformer plants and the application of carbon capture and storage to existing facilities.
Portugal exceeds renewable energy target
Portugal exceeded their renewable energy targets for 2020, with the share of renewable energy in gross final consumption reaching 34.1%, surpassing the 31% target outlined in accordance with EU Directives.
The number is slightly inflated due to reduced fossil fuel consumption during the Covid-19 pandemic, particularly vehicle fuels as a result of restrictions on mobility.
Corrections to the final figure may still be made, but the adjustment should be below 0.5%, which would not affect compliance with the target.
Company News
Altus Strategies* (LON:ALS) 55p, Mkt Cap £44m – Diba gold project Community Development Programme implementation progress
BUY – 118p
The Company completed the first phase of a long-term Community Development Programme at the wholly owned Diba gold project in western Mali.
The team set up supply of fresh water to the local village and school by drilling a borehole and installing a water tank with a solar-powered water pump.
Following consultation with local communities, the CDP focused on public health and education projects with further phases currently being planned.
The programme builds on strong ties with the local community from which the Company employs many of its staff.
Conclusion: The team strengthens ties with a local community implementing a multi-phase Community Development Programme at the 100% owned Diba gold project where Altus is progressing a 17,500m drilling programme to be followed by MRE and PEA update towards the end of the year.
*SP Angel acts as Nomad and Broker to Altus Strategies
Castillo Copper (LON:CCZ) 2p, Mkt Cap £20.3m – Plan to spin-off Broken Hill assets in ASX IPO
Yesterday, Castillo Copper announced plans to spin-off its zinc/lead/silver assets at Broken Hill in New South Wales (known as the BHA Project) via an IPO on the ASX so that it can focus its efforts on advancing its copper projects in Queensland and Zambia.
Post-IPO, which it expects to raise between A$5.5-7.0m, Castillo Copper expects to retain a “significant minority interest” in the company which will pursue exploration based on “advanced predictive geological models for major mineral systems” developed by the Geological Survey of New South Wales.
The company says that, among the new insights arising from the predictive modelling are:
The West Zone has a plethora of drill targets for BHT (Broken Hill Type) Silver-Zinc-Lead)2 mineralisation and the potential to have similar underlying geology as the historic mining leases around Broken Hill”.
Managing Director, Simon Paull, explained the rationale for the divestment of the project saying that “It will accelerate the development of the BHA Project while ensuring, through our significant minority interest, that we retain exposure to potential material upside in the future. The divestment also enables the Board to channel more time and resources into developing our priority projects in Queensland and Zambia. This strategic decision is an important step in our strategy to deliver value for our shareholders and evolve into a mid-tier copper group”.
“The East Zone has numerous drill targets for IOCG (Iron Oxide Copper-Gold)2 mineralisation which have never been drill tested; and
Conclusion: In January this year, Castillo Copper confirmed that the potential to divest the BHA project was under active consideration in order to allow it to focus on advancing its copper strategy. Today’s announcement confirms that as the preferred course.
Centamin (LON:CEY) 103.2p, Mkt Cap £1,187m – H1 delivers almost US$60 after-tax profit
Reporting on what it describes as a strong first half performance, Centamin has announced an attributable after-tax profit of US$59.5m (2020 – US$74.8m).
The result stems from the production of 204,275oz of gold (2020 – 256,084oz) at a cash cost of US$807/oz (2020 – US$642/oz) and all-in-sustaining cost of US$1,186/oz) (2020 – US$899/oz).
CEO, Martin Horgan, explained that “Although this represented a 20% decrease in production and 32% increase in costs per ounce sold compared to the corresponding six months in 2020 ("YoY"), these results align with the Life of Asset Phase 1 reset in December, and both metrics are tracking ahead of schedule for 2021”.
The company confirms that it is maintaining its full year production guidance of 400-430,000oz of gold production at a cash cost of US$800-900/oz and AISC between US$1,150-1,250/oz and said that the maintenance of the guidance targets reflected the dedication of “our employees and partners … to ensuring business continuity”.
“Capital expenditure was US$78.3 million as good progress was made on key capital projects such as the solar plant, second tailings storage facility, paste-fill plant, workforce accommodation and facility upgrades”.
Capex guidance for the year is also unchanged at US$225m and the company expects to spend US$17m on exploration with over US$4.8m spent during H1 of which around US$2.9m was directed to Cote d’Ivoire.
The company reports progress on its three-year plan for the Sukari mine “including reduced production volumes and elevated capital expenditure in the short term to achieve long term sustainability and consistency of gold production”. Pogress includes outperformance of the waste stripping programme where the owner-operating team delivered improved operating efficiencies “supported by the quick mobilisation and ramp up from Capital Ltd, our contract-miner”.
The second tailings storage facility at Sukari was commissioned during February and other targets including the improved workforce accommodation and the 36MW solar power plant project remain on track.
Centamin has declared an interim dividend of US¢4/share equivalent to US$46.3m and “the Board reiterates its intention to recommend a total dividend of US$105 million (interim and final). Therefore, this implies a final dividend of approximately 5.0 US cents per share (US$58.7 million)”.
Today’s announcement confirms that the pre-feasibility study for the Doropo project in Cote d’Ivoire is underway and “scheduled for completion by H2 2022” and that Centamin is continuing to assess “the strategic opportunities for non-core asset Batie West (Burkina Faso), including possible disposal.”.
Conclusion: Centamin benefitted from strong gold price performance during H1 2021partially offsetting the impact of lower gold output and higher costs to deliver an after-tax attributable profit of US$59.5m. is flagging the Doropo gold project in Cote d’Ivoire as its most important development project outside Egypt and that it is likely to become the company’s next mine. A US$14m budget for further work is expected to deliver a pre-feasibility study by mid-2022.
Glencore (LON:GLEN) 323.9p, Mkt cap £43bn – Glencore looks forward to positive future on post-Covid stimulus and growing decarbonisation initiatives
Yesterday, Glencore reported an attributable US$1.28bn of earnings for H1 2021, reversing the US$3.60bn loss in H1 2020 reflecting the impact of higher commodity prices.
Chief Executive, Gary Nagle, explained that “Following Covid-19’s severe global impacts in early 2020, the subsequent economic recovery has seen prices of most of our commodities surging to multi-year highs amid accelerating demand and lingering supply constraints. Average prices for our key commodities’ benchmarks were up c.40% period-on-period, with thermal coal and copper even higher at c.60% compared to H1 2020”.
He looked towards the future, saying that “Fiscal and monetary stimulus, successful vaccine roll-outs and increasing momentum in relation to decarbonisation of energy systems should continue to underpin sector sentiment going forward”.
Net debt at 30th June 2021 declined to US$US$10.6bn compared to the US$15.8bn reported for 31st December 2020
Adjusted EBITDA increased to US$8.7bn with “Industrial Adjusted EBITDA of $6.6 billion” (H1 2020 – US$2.6bn) reflecting an improvement in mining margins from 22% in H1 2020 to 38%.
Marketing activities remained broadly stable contributing US$2.05bn of EBITDA (H1 – 2020 US$2.22) and US$1.80bn of EBIT (H12020 – US$2.02bn) of EBIT “as supportive market conditions prevailed in H1 2021”.
The improvement in EBITDA generated by the Group’s Industrial activities “was primarily driven by stronger average period-over-period commodity prices, notably copper, cobalt, zinc, silver, ferrochrome, nickel and coal. Noteworthy was the contribution from the African copper assets (up $884 million), as Katanga delivered steady state copper and cobalt production, following its progressive ramp-up over the past few years”.
Copper made the largest individual contribution to the EBITDA generated by industrial activities at US$3.88bn (H1 2020 – US$1.28bn) led by US$1.05bn from Collahuasi, with overall copper margins improving to 53% (32%).
Zinc operations contributed a further US$1.40bn EBITDA (H1 – 2020 US$0.65bn) with margins improving to 37% from 27%.
Margins also improved in the nickel operations to 40% (35%) on EBITDA of US$0.39bn (H1 – 2020 US$0,21bn).
Capital expenditure on the mining activities totalled US$1.48bn, including US$0.35bn of expansion capital, with US$0.75bn spent in the copper division, US$0.30bn on zinc and US$0.38bn on nickel.
Conclusion: Glencore attributes improved commodity prices to its recovery during H1 2021 and looks forward to post-Covid stimulus and increasing moves towards energy supply decarbonisation to maintain the momentum of the industry.
Jubilee Metals Group (LON:JLP) – 18p, Mkt cap £381m – Jubilee Reports 178% earnings increase for FY 2021
Jubilee Metals reports a 178% increase in attributable operational earnings for the financial year ending 30th June 2021 to £69.6m.
The company confirms that it achieved “its stated target of 50 162 PGM ounces for FY 2021 (up 23% compared with 40 743 ounces for FY 2020) … during a period which included the construction and commissioning of two new Chrome Beneficiation facilities and the commencement of the construction of the expanded Inyoni PGM operations”.
The Inyoni expansion is expected to be completed during Q3 2021.
As well as the operational progress, Jubilee Metals confirms that it has secured “the rights to an additional 944 000 tonnes of PGM containing surface tailings“ located on the Eastern Limb of the Bushveld Complex which should maintain a minimum 30,000tpm feed to the Inyoni Plant “he equivalent of 1 600 PGM ounces per month”.
Jubilee Metals explains that “the additional transport cost incurred for the transport of the Eastern Limb PGM material to Jubilee's PGM Inyoni operations located in the Western Limb region (some 400 km) is offset by the increased revenues realised by the contained higher value PGM material from the LG6 chrome reefs”.
The company also reports a 99% increase in the production of chrome concentrate to 751,223t (FY 2020 – 377,883t) as a result of “increased operational capacities”. The company says that “This is set to increase further with the commissioning of the new Chrome Beneficiation circuit completed during Q2 2021”.
Jubilee Metals says that “The increased chrome processing capacity directly contributes to increased PGM feed supply as a tailings stream produced from the chrome processing circuit”.
In Zambia, the Sable Refinery has achieved “early earnings from its copper and cobalt production as part of securing operational readiness to accept first production from Project Roan” which is reported to be “progressing well with the commissioning of the integrated copper concentrator scheduled to commence in Q1 2022 targeting an annual production rate of 10 000 tonnes per annum”.
CEO, Leon Coetzer, explained that “Achieving our first delivery, on time, of partially upgraded copper concentrate from Project Roan to the fully operational Sable Refinery was the first major step in our commitment to achieve our targeted production of 25 000 tonnes per annum of copper within the next four years”.
Jubilee Metals also says that it has completed the design work for its second copper processing plant, known as Project Elephant, and that it has “secured the rights to approximately 150 million tonnes of copper containing surface tailings …and remains on track to enter the execution phase for the project by the end of August 2021. Project Elephant 1 targets to reach the production of 12 000 copper units per annum in addition to Project Roan by Q2 of 2023.”
*An SP Angel mining analyst has visited Jubilee Metals Group assets in Zambia in 2018
Katoro Gold (LON:KAT) 0.83p, Mkt Cap £3.2m – Some potential finance sources for Blyvoor willing to proceed despite recent civil disturbances in S Africa
(Katoro Gold holds 65% of the Haneti nickel project alongside Power Metal Resources which holds 35%)
Katoro Gold has released details of its progress on advancing its Blyvoor gold tailings joint-venture project in S Africa and its Haneti nickel project in Tanzania.
At Blyvoor, following the completion of the technical work and publication of a Competent Person’s Report in May, the focus has been on securing the equity and debt finance to “fund the complete development, construction and commissioning of the Blyvoor Gold Tailings Project”.
Although the discussions initially “advanced at pace … the recent unrest in the Kwazulu-Natal and Gauteng provinces of South Africa, the funding process came to an abrupt standstill with a significant number of the parties on the preferred funder list requesting time to re-assess whether the country risk for their potential investment into the BV has been adversely impacted in any material way”.
Katoro Gold now confirms that “Some of the potential funders have subsequently indicated that they are satisfied that the latest events in South Africa did not have any adverse impact on their existing risk rating, and negotiations / discussions with these potential funders have since resumed, while the Company awaits the final decision from those preferred funding parties who have not yet completed their country risk re-assessment”.
The company now expects to conclude the funding “during the latter part of 2021” and appoint the “future EPC, mining contractor and operator … subject to successful funding”.
At Haneti, planning for the proposed diamond drilling for primary sulphide mineralisation targets identified in the geophysics has now been completed and the “programme and associated budget for Haneti will now be submitted for approval and subsequent implementation”.
Conclusion: It is encouraging that some of the potential finance sources for the Blyvoor tailings project do not see the recent unrest as a reason to increase their risk rating for a S African project.
*SP Angel act as Nomad and broker to Power Metal Resources PLC (AIM:POW, FRA:2M5)
Maersk (MAERSK-B) DKK17,325, Mkt cap DKK334bn (US$53bn) – Q2 earnings triple yoy as shipping rates and volumes rise
Maersk, the Danish-based shipper reports Q2 EBITDA of $5.1bn vs $1.7bn a year earlier.
Sales rose 60% to 14.2bn on higher container rates and ongoing strong demand.
Seaborne capacity is currently unable to meet demand which is not helped by covid-related delays, congestion in the port of Los Angeles and the closure of the Suez canal.
The cost of a 40ft container from Chine to the US has risen 5 times to >$20,000
Extreme weather conditions have also impacted the shipping industry, with typhoons off China’s southern coast, a crucial shipping channel, adding further pressure to already strained supply chains.
Philip Damas, of maritime consultancy firm Drewry, has said that shipping’s current ‘highly disrupted, under-supplied seller’s market’ is a phenomenon ‘we have not seen… for more than 30 years’. Damas expects these ‘extreme rates’ to last until February 2022 at least.
The president of China’s port association told Reuters that Delta variant complications has slowed turnover at major ports by 7-8 days.
Whilst shipping capacity orders are currently in the pipeline for an additional 20% in capacity, analysts predict this increase in supply will only come into effect in 2023.
The supply bottlenecks being reflected in shipping rates are also impacting European industrial output. Germany announced today that industrial output fell again in June, with ‘bottlenecks for important intermediate products… now making themselves felt’ according to Ifo economist Klaus Wohlrabe.
Rainbow Rare Earths* (Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)) 13.26p, Mkt Cap £64m – Ongoing suspension of Burundi mine serves to raise REE prices to >$96,000/t
(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)
(Neodymium Nd, Praesidium Pr, Terbium Tb, Dysprosium Dy. Rainbow holds 100% of the Gakara mine and associated licenses in Burundi)
Rainbow Rare Earths report on the ongoing suspension of mining in Burundi..
Management continue to engage with government on the export ban on REE concentrates out of Burundi and on the effective enforced suspension of the mine.
The Burundi government is concerned over the large discount applied to REE concentrates sold by Rainbow to ThyssenKrupp trading arm which has an impact on the royalties paid into the government treasury.
The REE discount was addressed in an independent report commissioned by the World Bank and done by SRK at the request of the Burundi government.
“The price paid by ThyssenKrupp, the multinational industrial group, for the Gakara rare earth mineral concentrate, which is established on the basis of internationally recognised pricing, is commercial and forms a reliable foundation for the computation of royalties payable to the Government.”
“The export grades of each shipment are independently verified as accurate by two internationally recognised laboratories (ALS Laboratories in Canada and Baotou Research Institute of Rare Earths in China) and have been correctly reported to the Government for each shipment from Gakara to date.”
The suspension of the mine contravenes Burundi law and Rainbow has asked the Government to lift the suspension to allow trial mining to restart and to enable staff to return to work.
Conclusion: The current suspension of the Gakara mine is has little impact on our valuation due to the greater value of the Phalaborwa project in South Africa.
Valuation: Greater value could be realised in Burundi if the company elects to expand the mine into a larger scale operation alongside the investment required to produce rare earth oxides which sell for a lower discount than the simple carbonate concentrate.
Our modelling of Rainbow’s operations gives a value of:
Phalaborwa: NPV@12% valuation 26p/s for 9,460tpa of NdPr oxide production and 37p/s including NdPr and TbDy Oxide production assuming a 75% playability
Gakara: NPV@10% valuation 7p/s for 8,951tpa REE carbonate production at NPV@10%
We see Rainbow’s operations as worth between 26-44p/s at rare earth prices of around $85,000/t depending on the incorporation of TbDy processing at Phalaborwa.
*SP Angel act as broker and financial advisor to Rainbow Rare Earths
Resolute Mining (LON:RSG) 30.5p, Mkt Cap £335m – Sale of Bibiani gold mine for US$90m
Resolute reported yesterday that it has entered into an agreement to sell the Bibiani Gold Mine in Ghana to Asante Gold Corporation.
The cash consideration amounts to:
$30m deposit (already received by Resolute to be applied upon completion)
$30m on or before 6 months from completion; and
$30m on or before 12 months from completion.
The agreement has received Ministerial consent from the Ghanaian Honourable Minister of Lands and Natural Resources, with completion expected within 10 days of this announcement.
An updated feasibility study in June 2018 conducted by Resolute demonstrated the potential for Bibiani to produce ~100,000oz per annum at a Life-of-Mine All-In Sustaining Cost of US$764/oz over a 10-year mine life.
The sale reduces Resolute’s portfolio to only two assets, Syama in Mali and Mako in Senegal.
Versarien* (Versarien PLC (AIM:VRS, OTC:VRSRF)) 35.85p, Mkt cap £66m – Versarien results highlights innovation and progress being made
CLICK FOR PDF
Versarien are continuing to develop new uses and applications for graphene in collaboration with major industry players as highlighted in yesterday’s results statement.
The work streams presented show a clear focus on the upscaling of graphene production along with a range of new applications.
Key applications include:
lighter, flame retardant seat backs for aerospace and fiber reinforced polymer products,
concrete for 3D printing and extra strength,
thermoplastic development,
graphene inks for printing onto and blending into textiles,
elastomers, enhancing the strength and durability of tyres, shoes and other materials
Conclusion: We see the real value in Versarien as contained in its intellectual property on the application of graphene into a broad range of products.
The inclusion of graphene into these products should create valuable royalty and revenue streams for the company going forwards enabling collaborative companies to develop leading products for global sales.
We Versarien as an important and significant business through the enhancement of UK-developed and manufactured products with graphene materials.
Please see pdf for our results comment.
*SP Angel acts as nomad and Broker for Versarien. An SP Angel analyst has visited Versarien graphene manufacturing facilities.
Recent Interviews:
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
Analysts
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Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
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Sales
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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
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