SP Angel . Morning View . Thursday 30 09 21
Happy day in US markets as US avoids fiscal shutdown
Pre-IPO financing opportunity for new gold mine development in Ghana
We are raising funds for an advanced gold project in Ghana with good upside exploration potential
The project offers potential to fast-track gold production using a low-cost heap leach.
Management are experienced and are looking to IPO within 18 months.
Please contact us if you are interested in pre-IPO funding of the opportunity
Amur Minerals* (LON:AMC) – Interims
Ariana Resources (LON:AAU) – Backing Australian exploration via Panther Metals and interim results
Arkle Resources* (LON:ARK) – Interim results and project summaries
Botswana Diamonds (LON:BOD) – Exercising pre-emption rights to gain control of Thorny River
Castillo Copper (LON:CCZ) – Acquiring option over Australian lithium projects
Empire Metals* (LON:EEE) – Interims highlight progress at Eclipse and Central Menzies
GoldStone Resources (AIM:GRL)* (LON:GRL) – Interim report displays progress towards first gold pour
IronRidge Resources* (LON:IRR) – Interims demonstrate strong cash position prior to Piedmont agreement
Horizonte Minerals (LON:HZM) – Credit approvals for the $346m debt funding of the Araguia Project secured
KEFI Gold and Copper* (LON:KEFI) – Interims
Mkango Resources* (LON:MKA) – Successful completion of reare-earth recycling study
Premier African Minerals* (LON:PREM) – Interim results and project review
Serabi Gold* (LON:SRB) – 2021 interim results show 75% rise in after-tax profit
SolGold* (LON:SOLG) – Annual report highlights plans to optimise Alpala development to minimise capital and operating costs without reducing metal production
W Resources (LON:WRES) – H1 results and operational performance
China power crunch hits rare-earth producers
Rare earth smelters and recyclers in Hunan and Jiangsu have been forced to halt production as power rationing takes hold.
Several magnet producers in Zheijiang Province have also reduced output.
Rare earth producers in Fujian, Jiangzi and Guangdong continue to operate at normal capacity.
Gold prices continue to slide as US dollar strengthens and bond yields firm
Gold hedging may be accentuating the move as producers look to protect prices as the US dollar and US 10-year bond yields strengthen
Fed officials are considering reducing asset purchases before Jan. 2022 lifting the US dollar.
Dow Jones Industrials +0.26% at 34,391
Nikkei 225 -0.31% at 29,453
HK Hang Seng -0.21% at 24,612
Shanghai Composite +0.86% at 3,567
Economics
China - Manufacturing PMI pulls back to 49.6 in September as power crisis hits manufacturing.
Official Manufacturing PMI: 49.6 v 50.1 in August and 50.0 est. - PMIs of below 50 indicate a contraction in industrial activity
Official Services PMI: 53.2 v 47.5 in August and 49.8 est.
Official Composite PMI: 51.7 v 48.9 in August.
Trade surplus exceeds CNY291bn in August
Factory activity has been hit by electricity curbs and raw material prices.
China’s National Grid held an emergency conference yesterday to limit power to industry and preserve public supplies.
The CCP are prioritising residential power supplies over industrial demand as the redirect the available ‘Power to the People’.
Manufacturers are starting to report lower production in China with falling manufacturing PMIs as a result of power cuts.
A number of provinces in northeastern China have already announced power quotas for residential use with over 100m people affected.
Many other provinces have also joined the quota system highlighting the severity of power shortages in China despite heavy rainfall filling hydropower dams.
China’s state planner has ordered railway companies and local governments to rapidly improve the transportation of key coal supplies.
Power plants are being encouraged to boost stockpiles before the winter though the situation may take several months to regain control.
Manufacturers are either been suspended from production or forced to operate late at night and early in the morning.
Rising power bills are expected to fuel China’s inflationary fears.
The dramatic rise in thermal coal prices has led to a disconnect between power price caps and the cost of power generation.
Chinese companies prefer to buy coal on spot prices rather than follow the more traditional long-term contracts preferred by the Japanese and many other utilities.
China’s coal imports rose ~30% in August.
Baltic Dry Index close to highest level since 2008 as China energy crisis fuels demand for bulk shipments
Capsize commodity carriers mainly used for coal hauling have risen 50% this month to $75,000/day marking their highest since 2009.
The rates reflect power stations’ desperation to acquire coal, with rates already inflated on the back of strong industrial commodities demand.
Capesize freighter owner Ulrik Andersen sees ‘a very, very strong market’ and doesn’t ‘see why it wouldn’t continue for at least this week’.
Forward contracts suggest that elevated rates will be present into next year.
Japan – Industrial production and retail sales slump in August on the back COVID related logistics challenges and social restrictions.
Weak data highlights the challenge that the incoming PM Fumio Kishida is facing.
Kishida won a ruling party leadership election on Wednesday and is to replace outgoing premier Yoshihide Suga.
Fumio Kishida, 64, views nuclear power as Japan’s important energy option to support stable and affordable power supply on course for the carbon neutrality target by 2050.
Industrial Production (%mom): -3.2 v -1.5 in July and -0.5 est.
Retail Sales (%mom): -4.1 v 1.0 (revised from 1.1) in July and -1.7 est.
Germany – Unemployment continued to pull back through September in a sign of an ongoing recovery in the labour market.
The pace of employment gains slowed highlighting the impact of shortages of parts and raw materials, (Bloomberg)
Unemployment Change (‘000): -30.0 v -53.0 in August and -37.0 est.
France – Inflation accelerated to the strongest in almost a decade in September on the back of higher prices for energy and services, according to Bloomberg.
The data comes ahead of numbers from Italy, Germany and the euro area in general that are expected to show similar strong increases.
Nicolas Sarkozy was convicted of exceeding allowed budget limits during his failed 2012 re-election campaign, Bloomberg reports.
This marks the second criminal court ruling making Sarkozy the first ex-French president to be convicted twice of a crime.
French judges said the election campaign cost €42.7m or about twice the amount legally allowed.
CPI (EU Harmonised, %mom): -0.2 v 0.7 in August and -0.1 est.
CPI (EU Harmonised, %yoy): 2.7 v 2.4 in August and 2.8 est.
Italy
CPI (EU Harmonised, %yoy): 3.0 v 2.5 in August and 3.0 est.
Currencies
US$1.1592/eur vs 1.1661/eur yesterday. Yen 112.04/$ vs 111.47/$. SAr 15.160/$ vs 15.045/$. $1.342/gbp vs $1.351/gbp. 0.719/aud vs 0.724/aud. CNY 6.467/$ vs 6.468/$.
Commodity News
Precious metals:
Gold US$1,728/oz vs US$1,738/oz yesterday
Gold ETFs 99.3moz vs US$99.4moz yesterday
Platinum US$957/oz vs US$969/oz yesterday
Palladium US$1,883/oz vs US$1,891/oz yesterday
Silver US$21.57/oz vs US$22.26/oz yesterday
Diamond prices slide in September
The Rapoport Diamond Trade Index fell from $8,004.64 on Sept. 1st to $7,964.28 on Sept. 29th.
The index tracks the average asking price for the 25 top quality 1 carat diamonds with a colour between D and H and internal clarity between IF and VS2.
10% of the best priced diamonds for each quality form the index.
Base metals:
Copper US$ 9,098/t vs US$9,202/t yesterday
Aluminium US$ 2,907/t vs US$2,914/t yesterday
Nickel US$ 18,310/t vs US$18,470/t yesterday
Zinc US$ 3,034/t vs US$3,069/t yesterday
Lead US$ 2,128/t vs US$2,159/t yesterday
Tin US$ 35,305/t vs US$35,400/t yesterday
Energy:
Oil US$78.5/bbl vs US$77.7/bbl yesterday
Natural Gas US$5.533/mmbtu vs US$5.695/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$120.1/t vs US$114.3/t - Iron ore rallies as traders take stock before 1 week China holiday
Singapore iron ore futures surged 11% to $127.80 before sliding to c. $120/t. and Dalian futures jumped 9%.
Investors are looking to place bets before Chinese markets close for trading from tomorrow for the Golden Week break.
Both steel mills and ports have been restocking in advance of the break.
Iron ore prices have been boosted by Beijing’s call for banks to support local governments tackle the cooling housing market.
The suspension of operations at Mt. Gibson on the back of sliding iron ore prices and Fortescue’s Solomon Hub following an accident has also boosted prices.
Several Chinese steel mills are restarting operations in Jiangsu and Zheijang in October.
Chinese steel rebar 25mm US$896.2/t vs US$896.0/t
Thermal coal (1st year forward cif ARA) US$149.3/t vs US$145.0/t - Futures hit record high of $212.92/t as Chinese utilities restock coal inventories
Coking coal swap Australia FOB US$366.0/t vs US$369.0/t
China Ilmenite Concentrate TiO2 US$378.10/t vs US$378.0/t
Other:
Cobalt LME 3m US$53,380/t vs US$53,380/t
NdPr Rare Earth Oxide (China) US$92,167/t vs US$92,153/t – Australia to set up A$2bn (US$1.5bn) loan facility to fund critical minerals projects
Lithium carbonate 99% (China) US$26,444/t vs US$26,440/t
China Spodumene Li2O 5%min CIF US$1,110/t vs US$1,110/t
Ferro-Manganese European Mn78% min US$1,803/t vs US$1,813/t
China Tungsten APT 88.5% FOB US$305/t vs US$305/t
China Graphite Flake -194 FOB US$555/t vs US$555/t
Europe Vanadium Pentoxide 98% 8.1/lb vs US$8.1/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg
Spot CO2 Emissions EUA Price US$73.0/t vs US$75.0/t
Company News
Amur Minerals* (LON:AMC) 2.1p, Mkt Cap £29m – Interims
The Company was focused on completing the Permanent Conditions Report on the flagship Kun Manie nickel/copper sulphide project during the period.
The report was completed by Moscow based Oreall LLC and submitted with Russian authorities (GKZ) in Aug/21.
The review of the study will establish the reserves available for open pit mining and subsequently to be utilised to establish the Russian approved mine plan.
Additionally, the team released an updated JORC MRE in Jun/21 growing the mineral inventory by nearly 15% with little change in grades translating into a ~15% increase in contained nickel and copper.
Updated MRE also improved confidence in the total estimate with Measured and Indicated category accounting for ~85% of the total MRE, up from ~75% in 2018.
Updated MRE includes:
148mt at 0.75% Ni and 0.21% Cu for 1,114kt Ni and 310kt Cu contained in the Measured and Indicated category;
29mt at 0.69% Ni and 0.20% Cu for 204kt Ni and 58kt Cu contained in the Inferred category;
178mt at 0.74% Ni and 0.21% Cu for 1,318kt Ni and 368kt Cu contained in total mineral resource (+14% on tonnage and +14%/15% on contained Ni/Cu from 2018 RPM estimate).
Separately, the Company reported that its $4.7m convertible bond investment was called for a cash consideration of $6.1m in Sep/21 netting a $1.5m capital gain on the original Aug/20 investment.
The Company was paid a $0.3m coupon in respect of the 14% convertible bond during six months to Jun/21.
Net profit amounted to $0.2m (H1/20: -$1.5m) reflecting largely a $1.0m revaluation gain of outstanding convertible bonds (H1/20: -).
Administrative costs totalled $1.0m (H1/20: $1.3m) with a reduction led by the departure of two board members.
The Company remained debt free with $1.8m in cash as of Jun/21 excluding $6.1m in proceeds from convertible bond sale completed post the reporting period.
*SP Angel act as Nomad and Broker to Amur Minerals
Ariana Resources (LON:AAU) 4.45p, Mkt Cap £49m – Backing Australian exploration via Panther Metals and interim results
Ariana Resources reported yesterday that the Asgard Metals Fund, “which is being developed as part of its proprietary Project Catalyst Strategy” is to take an interest in 1.25m Panther Metals shares on completion of Panther’s IPO on the ASX which is expected to occur before the end of 2021.
Ariana Resources provides technical consulting services to Panther Metals under a formal consultancy agreement and Dr. Kerim Sener, Ariana’s Managing Director, holds a 2.6% interest and serves on the Board of “Panther Australia which is currently 77% owned by Panther Metals PLC (LSE:PALM)”.
Michael de Villiers, Chairman of Ariana Resources explained that “Panther has defined a series of significant gold targets, including the recently discovered 40 Mile Camp anomaly, in a substantially under-explored part of the prolific Laverton Greenstone Belt … [and that it has also defined] … a JORC Exploration Target of 30-50Mt at 0.6-0.8% nickel and 400-600ppm cobalt on its Coglia nickel-cobalt Project at Merolia”.
Mr. de Villiers said that “We are very pleased to be taking a position in Panther Metals Limited in Australia at a significant time in its development and as it pursues a possible IPO on the ASX”.
The company also reports that its share of the earnings of the Kiziltepe mine in Turkey were “£1.3m (H1 2020 £3.0m), due in part to the reduction in holding from 50% to 23.5%”.
Ariana says that “Profit for the period of £5.0m (H1 2020: £1.9m) reflects the profit realised on restructuring of group activities”.
Ariana also highlights the “Payment of first dividend of £3.8m to shareholders post-period end, amounting to 0.35p per share, following capital reorganisation completed during the period”.
Kiziltepe produced 7,941oz of gold over the six months (2020 – 9,808oz) “with guidance for 2021 expected to be met by year end”. We believe that the current guidance is for approximately 19,000oz of gold for the full year 2021 which reflects “increased mill throughput after the completion of the process plant expansion” at Kiziltepe.
Arkle Resources* (LON:ARK) 0.80p, Mkt Cap £2.4m – Interim results and project summaries
Arkle Resources reports a profit of €37,000 for the six months ending 30th June 2021 as a result of accounting for a €185,000 gain due to volatility of warrants (2020 - €226,000 loss as the period did not include gains from warrant volatility).
The company reports a 30th June cash balance of €571,000.
The company provides a progress report on its exploration activities at its Mine River gold exploration project in Cos Wicklow and Wexford where “the current drilling programme … has been twice extended due to positive results”.
At “Tombreen West, some 900 metres west from the historic drilling at Tombreen Main returned gold mineralisation in three drill holes” and Arkle Resources is continuing its drilling deeper to test whether there are “further gold veins at depths below 100 metres in Tombreen West”.
Exploration is also following up previously untested anomalies by drilling Anomaly A and trenching Anomalies B and C southwest of Tombreen.
Arkle Resources has previously confirmed that its current exploration plans for the Mine River project are fully funded.
At the Stonepark zinc project in Co Limerick, long the focus of the company’s efforts, with a 23.4% interest Arkle is the minority partner of Canadian listed Group Eleven.
Arkle Resources reports that “In 2020 a proposal to acquire and rapidly drill the Stonepark ground was received. The proposal was acceptable to Arkle but not to Group Eleven. Arkle has protection in this area in that it has a pre-emption right on any proposed buyout”.
Conclusion: Arkle’s current exploration focus is the drilling programme and associated exploration at Mine River. Further work at the Stonepark zinc project awaits an agreement with the majority partner, Group Eleven, on the exploration plan.
*SP Angel are Nomad and broker to Arkle Resources
Botswana Diamonds (LON:BOD) 1.13p, Mkt Cap £8.9m – Exercising pre-emption rights to gain control of Thorny River
Botswana Diamonds reports that it has exercised its pre-emption rights to acquire control of the owner of the mineral rights to the Thorny River diamond project, Vutomi Mining.
Botswana Diamonds is to issue approximately 57m shares, valued at £627,000, to acquire Vutomi. Based on the AIM Rule 26 disclosure on the company’s website, we estimate that the new shares represent approximately 6.7% of the enlarged company.
Botswana Diamonds says that it “has agreed that immediately on completion of the Acquisition, the Company will sell 26% of Vutomi for a deferred consideration of US$316,333 to the Company's local South African Empowerment partner, Baroville Trade and Investments 02 Proprietary Limited ("Baroville"), in order to comply with South African requirements on empowerment ownership, which will be funded by a loan from Botswana Diamonds. On completion, the Company will own 76% of Vutomi”.
Managing Director, James Campbell, explained that “Following a third party offer for Vutomi, Botswana Diamonds has exercised its pre-emption rights. This transaction streamlines exploration activities and involves the local community as supportive stakeholders in this development”.
Explaining the potential at Thorny River, where recent drilling has demonstrated a link between two zones of wider development of kimberlite development and enhancing the potential for resource expansion, Mr. Campbell described the “potential for discoveries on a kimberlite system spanning 20km … [and the] … potential for additional nearby discoveries”.
Castillo Copper (LON:CCZ) 1.85p, Mkt Cap £18.3m – Acquiring option over Australian lithium projects
Castillo Copper has announced an option to acquire two Australian lithium projects.
The 90-day options over the Litchfield project in the Northern Territory and the Picasso project in Western Australia are being acquired for an A$50,000 non-refundable cash deposit plus an A$1m payment in Castillo shares upon exercising the option.
Additional payments each of A$1m in shares are payable on the completion of two drill holes, situated between 100-200m apart which each “produce assayed intercepts greater or equal to a true width of at least 10m @ 1.3% Li2O”, and a second share payment, also of A$1m, “if a JORC compliant total inferred resource of at least 7Mt @ 1.3% Li2O is modelled by SRK Consulting”.
A 2% NSR is payable “In the event of commercial mining operations commencing”.
The company explains that it “decided it was prudent to diversify the asset portfolio and acquire quality projects prospective for lithium mineralisation. By having the ability to develop projects prospective for copper and lithium, it positions the Company strategically to potentially create significant incremental value from the transition towards renewable energy sources and surging demand for electric vehicles globally”.
The Litchfield project is located near Darwin and borders the “Finniss Lithium Project which has four demonstrable spodumene lithium deposits” and contains a “JORC compliant total reserve … [of] … 7.4Mt @ 1.3% Li2O”.
The Picasso project is located around 50km from Norseman in “a well-known lithium producing region … [which] … hosts the Mt Marion and Bald Hill Lithium Mines” in an area of similar geology.
The company is starting its due diligence process, which is to include “assays for circa 600 surface samples” from the Litchfield project.
Conclusion: Diversification into lithium could be an important change for Castillo Copper and we await news of the results of the due diligence process for confirmation on whether it will proceed.
Empire Metals* (LON:EEE) 1.74p, Mkt cap £5.8m – Interims highlight progress at Eclipse and Central Menzies
Empire reported a pre-tax profit of £682,011 in the six months ended 30 June 2021, vs £256,515 over the same period last year.
Administration expenses rose to £913k vs £223k – due to an increase in legal and professional fees.
The Group’s net cash balance as of 30 June 2021 was £2.9m vs £2.3m at year end 31st December 2020.
The period marked a new focus for Empire since the divestment out of Georgia in 2020 for a cash payment of $3.3m to the company.
Empire’s focus is now Western Australia, with the Company making progress at its Eclipse Gold project and Central Menzies project.
Successful drilling campaigns at Eclipse scaled the project’s mineralised footprint in the first four months of the year, drilling confirming the existence of several parallel veins in addition to the main Eclipse vein and providing insight into the nature of mineralisation at the site.
Drilling has shown that the mineralised system at Eclipse is much larger than originally thought and that mineralisation at the Eclipse Shaft may connect to the Jack's Dream area further to the north-west.
Drilling has further confirmed that gold mineralisation likely continues to greater depths than previously thought, and Empire expect further drilling to test strike and depth extensions of the multiple gold structures at Eclipse.
Empire entered into an Option Agreement in May to acquire a controlling 75% interest in four prospecting licences which comprise the Central Menzies Gold Project, with the asset lying directly south along strike of the 15km-long Yunndaga line of workings, which has a total metal inventory (past and present) of 1.1Moz of gold.
Empire has identified two priority targets at Central Menzies for drilling, known as Teglio and Nugget Patch, with a combined 26 RC holes currently underway being drilled.
The period saw Shaun Bunn appointed as Managing Director in May 2021, who is based in Western Australia, and has over 35 years’ experience in exploration, mining, processing and project development.
Conclusion: The sale of empire’s Georgian Assets has given the company solid financials to prove up their assets in a highly prospective and under-explored region. We look forward to the company releasing further drilling results at both Eclipse and Central Menzies in due course.
*SP Angel act as Nomad and Broker to Empire Metals
GoldStone Resources* (LON:GRL) 10.2p, Mkt Cap £45.1m – Interim report displays progress towards first gold pour
GoldStone reported an operating loss of $549k in the six months ended 30 June 2021, vs $266k loss over the same period last year.
Administration expenses rose to $549k vs £266k.
GoldStone’s net cash balance at period-end was $1.5m vs 701k at year-end 31 December 2020.
Exploration costs fell to $747k vs $1.4m over the same period last year, while cost associated with the acquisition of property, plant and equipment rose to $2.1m vs 388k last year.
The increase in costs associated with procuring equipment and lower exploration costs reflects the progress made to the development stage of the project at Homase.
A total of US$4.8 million proceeds received during the period from the exercise of Warrants.
Post period end, on 17 July 2021, Paracale exercised 20 million warrants at a price of 1.2 pence per Ordinary Share, which was set against the related US$1,224,000 Loan provided by Paracale – with the balance of the loan reducing to US$723,669.
The Company made solid progress with the relevant Ghanian regulatory bodies over the period, and in February 2021 received formal approval from the Ghanaian Environmental Protection Authority and the Minerals Commission in respect of the Environmental Permit, Operating Permit and Water Permit, which permitted cyanide use enabling us to stack first ore on the Heap Leach Pad in May 2021.
GoldStone constructed the first two cells of the heap leach pad, with a combined area of 13,000m2 in May 2021, the first of seven cells will complete this initial Leach-pad with an area of approximately 73,000m2.
The first two cells enabled stacking at an initial rate of 100tph to commence, which is expected to ramp up to a target of 200tph.
Post period, the company received approval from the Minerals Commission of Ghana to start irrigation and leaching of ore placed on the heap leach pad in July, and in August successfully commissioned the Carbon in Solution ("CIS") plant on-site.
An assessment made by the Company earlier this month showed that the grade and tonnes mined to date are within expectations and at a total cash cost, pre-tax, of under US$600 per ounce.
The company has its first batch of loaded carbon out of the CIS plant, and initially was going to elute the gold at a nearby rented facility – however approval from the Minerals Commission was not forthcoming. Now the company is accelerating its plans to complete its own elution facility on site as soon as possible.
GoldStone maintains its guidance of 50,000ozpa within the first year of production, an increase of 300% from the original production schedule.
*SP Angel act as Broker to GoldStone
IronRidge Resources* (LON:IRR) 19.8p, Mkt cap £114m – Interims demonstrate strong cash position prior to Piedmont agreement
IronRidge reported a pre-tax loss of A$4.6m in the twelve months to 30 June 2021 vs $A6.4m loss over the same period last year.
Administration expenses fell to A$2.2m vs A$2.8m.
IronRidge reported a cash position at period-end of A$19.1m vs $7.3m last year.
The Company raised A$33.8m over the period to progress exploration at both its lithium and gold assets.
IronRidge completed its scoping study at Ewoyaa during the period, with details as follows based on the 2.0mtpa operation:
Pre-tax NPV8% of US$539m
Pre-tax EBITDA of US$854m
Post-tax NPV8% of US$345m
Post-tax IRR of 125%
EBITDA of US$105mpa average
Costs: US$247/t of spodumene concentrate
Price: US$650/t assumed for 6% spodumene concentrate.
Payback is expected to be <1 year.
Recovery rates: currently up to 72% for the P1 Fresh ore and average 51% for the P2 Fresh after re-crushing and gravity middlings,
Waste:ore stripping ratio of 1.5:1, and 4.4:1 over the life of the mine.
IronRidge’s most exciting news came post period, with the company securing an agreement with Nasdaq-listed Piedmont Lithium to fully fund and fast track development of the Ewoyaa Lithium Project to production for US$102m.
Piedmont to earn-in to up to 50% of IronRidge's Cape Coast Lithium Portfolio in Ghana through the following stages:
Stage 1 - Piedmont has subscribed for 54,000,000 new ordinary shares in the Company at a price of 20p per share (£10.8m). Piedmont has committed a further £720,000 increasing its stake to 9.91% via placing of a further 2.88m shares at 25p.
Stage 2 - Regional Exploration and DFS Funding to earn in up to an initial 22.5%. US$5m towards an accelerated regional exploration programme to enhance the current Ewoyaa resource; and US$12m towards completing the DFS for the project. The minimum "DFS criteria" is to deliver a 1.5 mtpa to 2mtpa run-of-mine operation for a 10-year to 8-year life of mine respectively.
Stage 3 – CAPEX funding of $70m to earn a further 27.5% of CCLP.
IronRidge also announced its intention to demerger the Company's gold assets in Côte d'Ivoire and Chad into a new gold focused entity structured to permit quotation on a recognised stock exchange.
*SP Angel act as Nomad to IronRidge
Horizonte Minerals (LON:HZM) 8.9p, Mkt Cap £151m – Credit approvals for the $346m debt funding of the Araguia Project secured
The Company reported that a syndicate of five international lenders along with the two export credit agencies approved a senior secured project financing facility of up to $346.2m to fund the construction of the Araguia ferro-nickel project in Brazil.
Senior lenders include BNP Paribas, ING Capital, Natixis, Societe General and Swedish Export Credit Corp along with two export credit agencies including EKF, Denmark's Export Credit Agency, and Finnvera, Finland's Export Credit Agency.
Senior Debt Facility comprises two tranches:
Tranche A of $146.2m, guaranteed by the ECA’s (Export Credit Agencies) covering a number of equipment and service provider contracts.
Tranche B of $200m.
Terms of Tranche A and B are 10.5y and 8.5y, respectively.
Tranche A costs LIBOR + 1.80% and Tranche B is charged LIBOR + 4.25% to 4.75%.
“Credit approval from the full syndicate is the catalyst for finalising the other components of the overall financing requirement for Araguaia. As previously announced, the process with the offtake partner and strategic investor is well advanced, and we look forward to updating the market on its conclusion, alongside financial close of the Senior Debt Facility in the coming months,” the Company commented on the announcement.
KEFI Gold and Copper* (LON:KEFI) 1.2p, Mkt Cap £25m – Interims
In Ethiopia, the development ready Tulu Kapi Gold Project is awaiting a closure of the financing package that is expected in Q4/21.
All equity and debt funding is would be committed and binding upon signing with debt disbursements to follow equity level investment to kick start site preparation and community relocation programme.
Advanced conditional approvals, which have already been received, account for c.63% of the US$356 million aggregated funding sources and the remaining c.37% (c.US$131 million) is expected to come from existing identified parties working alongside those who have already resolved their conditional approval.
The Company reported yesterday that the preparations for the launch of the development phase have been temporarily paused on the back of identified security concerns in the area, although, the team is hopeful the situation will improve through the final quarter allowing for the financial close and the start of development works.
The Company remains committed to the mid-2023 first gold production target should the funding be arranged in Q4/21.
In Saudi Arabia, Phase 4 (15,000m) drilling programme was completed at the 34% owned Hawiah Coper Gold Project on course for the Q4/21 MRE update that is expected to expand the existing resource and upgrade estimate confidence levels.
The focus of the Phase 4 programme was infill drilling to upgrade ~10mt of the Inferred Resource at Crossroads Lode and Camp Lode into a higher confidence Indicated category that will contribute towards maiden Ore Reserve Statement as part of the PFS.
Maiden MRE released in Aug/20 estimated 19.3mt at 0.9% Cu, 0.8% Zn, 0.6g/t Au (all Inferred category).
Net loss totalled £2.2m (H1/20: -£1.1m) reflecting £1.2m and £0.5m in admin and share based costs (FY20: £1.6m and £0.1m) as well as £0.4m in finance costs (FY20: £0.2m).
The Company had £2.2m in short term debt (FY20: -) after having drawn down on an unsecured working capital bridging loan arranged by certain existing stakeholders.
The loan carries a 25% interest is repayable at the earliest of a capital raise or 30 Nov/21.
Cash position stood at £0.9m (FY20: £1.3m).
*SP Angel act as Nomad and Broker to KEFI Gold and Copper
Mkango Resources* (LON:MKA) 28.3p, Mkt Cap £41m – Successful completion of reare-earth recycling study
(Mkango’s 75.5% subsidiary, Maginto Ltd holds a 25% stake in HyProMag, with an option to increase to 49%, which is a partner in the ‘Rare–Earth Recycling for E-Machines’ RaRE project)
Mkango reports that HyProMag Limited and partners, European Metal Recycling Limited and University of Birmingham have successfully completed the previously announced REAP project ("Rare-Earth Extraction from Audio Products").
The aim of REAP is to build on knowledge of recycling of NdFeB magnets from hard disk drives, using HPMS, and to investigate a new scrap stream from loudspeakers, specifically from end of life vehicles (ELV) and TVs (FSTS).
Mkango comment that the FSTS sector showed significant promise for recycling, with approximately 85% of the products containing NdFeB, although the low quantity of NdFeB found in each of these products makes recycling less attractive.
The study showed that more focus should be placed on hybrid and electric vehicles, and due to the increase in electric vehicles and general rare earth usage, it is fair to assume that the potential for capturing NdFeB from the ELV sector will increase significantly with time.
The importance of developing a domestic rare earth recycling supply chain is due to the over reliance placed on Chinese supply of REE, who control ~90% of the market.
The development of domestic sources of recycled rare earths via HPMS (Hydrogen Processing of Magnet Scrap), is a significant opportunity for the UK to fast-track the development of sustainable and competitive rare earth magnet production.
RaRE will for the first time establish an end to end supply chain to incorporate recycled rare earth magnets into electric vehicles, whereby recycled magnets will be built into an electric motor.
William Dawes, Chief Executive of Mkango stated: “This is a significant milestone for HyProMag, University of Birmingham and European Metal Recycling, demonstrating another potential source of both feedstock and route to market for recycled rare earth magnets. Recycling is a key component of Mkango's "mine, refine, recycle" strategy via its strategic interest in HyProMag, and will become an increasingly important part of the rare earth supply chain in the UK, Europe and elsewhere.”
“HyProMag is well positioned to unlock that supply chain with access to the technology, expertise and network of partnerships to make it happen, and Mkango looks forward to supporting HyProMag as it scales up to commercial production."
*SP Angel act as Nomad and Broker to Mkango
Premier African Minerals (LON:PREM) 0.23p, Mkt Cap £41m – Interim results and project review
Premier African Minerals reports an operating loss of US$0.7m for the six months to 30th June 2021 (2020 – loss of US$0.6m) and pre and post-tax profit of US$3.9m after a US$4.6m reversal of a previous impairment charge relating to Zulu Litium.
The company reports a US$0.2m reduction in its cash balance to US$0.9m at 30th June as a result of an operating cashflow deficit of US$1.1m and investment of US$.06m offset by US$1.3m raised from the issue of shares.
Chief Executive, George Roach, highlights the reversal of the Zulu Lithium impairment “which has been internally reviewed in consultation with our external auditor” as well as improvements in international spodumene prices which he describes as “most encouraging for our prospects at Zulu”.
Serabi Gold* (LON:SRB) 65.5p, Mkt Cap £49.6m – 2021 interim results show 75% rise in after-tax profit
Serabi Gold reports a 75% increase in interim after-tax profit for the six months ending 30th June 2021 to US$6.35m (2020 US$3.64m).
The results reflect the production of a broadly unchanged level of 17,361oz of gold at a cost of US$991/oz on a cash basis and US$1,320 all-in sustaining cost (2020 – 17,524oz at US$961/oz cash cost and US$1,265/oz AISC).
Serabi Gold reports a 30th June cash balance of US$18.1m
· CFO, Clive Line explained that “The Group has benefitted from solid gold production over the first six months of 2021, a continued strong gold price and favourable exchange rates resulting in an increase of 36 per cent in operating profit to US$8.33 million and an 18 per cent improvement in EBITDA to US$11.05 million”.
He also commented that following the £12.5m equity raising in February, Serabi Gold is debt free and that it has “settled the remaining purchase obligation for Coringa” where initial mine development started in late July and “With development works now underway, monthly expenditure on Coringa will increase over the remainder of 2021”.
Commenting on recent gold price movement, he explained that “Whilst we have seen some recent softening of the gold price in reaction to perceptions of world economies starting to improve and in particular signals of future interest rate rises in the United States, the decline in the gold price is more reflective of US dollar strength which has therefore seen some softening of the Brazilian Real. As a result, the gold price in BRL terms remains strong.”
Conclusion: Serabi Gold’s interim results continue to show resilience with production levels stable and costs reduced compared to H1 2020 which suffered the impact of the Covid19 pandemic. The company has a strong cash position as the Coringa development builds up and currency weakness in the Brazilian Real is expected to maintain a strong local gold price which should help to protect margins.
*An SP Angel analyst has visited Serabi’s gold mining operations in Brazil
SolGold* (LON:SOLG) 27.1p, Mkt Cap £619m – Annual report highlights plans to optimise Alpala development to minimise capital and operating costs without reducing metal production
Solgold’s annual accounts for the year to 30th June 2021 report a loss of US$22.9m (2020 – US$14.1m loss).
Operating losses of US$12.9m are broadly similar to the US$13.9m recorded in 2020 with increased finance costs of US$10.1m (2020 – US$0.4m) , including those associated with the Franco-Nevada NSR of US$9.6m (2020 -nil) under which Franco-Nevada advanced US$100m to Solgold in September 2020.
The company has also expensed US$4.4m (2020 – US$0.2m) “of exploration expenditure associated with other tenements that were surrendered or lapsed during the year”.
The company reports a year-end cash balance of US$72.9m (2020 – US$45.4m) and nil debt (2020- US$15.2m).
In its review of activities during the year, Solgold highlights “progressing critical study work and data collection for the Preliminary Feasibility Study (“PFS”) at its Alpala Project … [as well as] … on continuing to uncover the value in the Company’s vast regional exploration portfolio throughout Ecuador”.
The company lists its 13 priority exploration targets where it has “licencing approvals for scout drilling at the Porvenir, Blanca, La Hueca, Sharug, Rio Amarillo and Cisne Loja projects” as well as the continuing drilling operations at Cascabel where it has 8 rigs in operation and at Porvenir it had “three drills on-site for most of the reporting period at the Cacharposa deposit”.
“Drilling will continue at the Cacharposa Deposit throughout 2021, with additional drilling programs planned to continue or commence across the remaining four drill ready Core Targets at Santa Martha, Celen, Cerro Quiroz and Varela.”
At the Alpala Project the company reports “good progress studying potential Alpala mine plans while addressing a number of mine development and metallurgical enhancements as well as potential upsides. Early access and optimal production rates together with a selective and simple approach to mining the deposit are the guiding principles for the ongoing options studies”.
The company explains the benefits of this approach in allowing high grade areas to be developed in the early years of mining while ensuring that the rest of the resource remains available for later mining.
Solgold highlights the advantages of this approach as;
“Earlier access to the resource with shortest time to potential first production”; and
“More selective mining approach, without sterilising the remaining resource, reducing dilution without compromising metal extraction”; and
“Optimal size and orientation of an underground footprint with the potential for two extraction levels to minimise dilution and upfront development capex”; as well as
“Mining of higher head grades in the earlier years of potential production”.
Solgold explains that this approach is expected to “deliver similar metal production while mining significantly less material. This could result in potentially significant cost savings. The crushing, processing and waste storage requirements are also expected to be reduced accordingly as would, in this potential scenario, the upfront capex associated with these installations”.
Conclusion: Solgold is working on optimising the Alpala PFS to maintain metal production while minimising capital and operating costs.
*SP Angel act as Financial Advisor to SolGold.
W Resources (LON:WRES) 6.5p, Mkt Cap £7.7m – H1 results and operational performance
W Resources reports an operating loss of €1.3m for the six months to 30th June 2021 (2020 – loss of €1.1m) and a pre and post-tax loss of €4.3m (2020 – loss of €1.7m).
The company also reports a 30th June cash balance of €0.8m.
Operating cash flow of €0.7m (2020 – outflow of €0.3m) was offset by investment of €6.0m (2020- €5.8m) resulting in additional financing of €5.1m (2020- €4.3m).
The company does, however, report continuing operational improvements at its La Parilla mine in Extremadura, Spain during the six months with production of 169.9t of tungsten concentrate with a content of 10,835mtu (metric tonne units) of tungsten trioxide (2020 – 106.5t containing 6,062mtu) at an average recovery rate of 40%.
W Resources attributes the operational improvement to “the Plant Improvement Programme and further refinement of the production process” and describe the challenges in resolving “the high water levels at the mine in order for the team to safely access high-grade ore. Following completion of the first 500,000m3 water dam, the dewatering of the open-pit was completed on 24 June 2021 and the Company was then able to continue mining and processing the higher-grade ore”.
Recovery of tin continues to be difficult at La Parilla with volumes of both tin concentrate and contained tin lower in H1 2021 than in H1 2020.
Elsewhere, W Resources reports the start of mining at Regua in Portugal with initial adits into the skarn zones starting in March, however, “following an extension in Portugal of COVID-19 related restrictions, mining activity suspended … [and] … The Company looks forward to being able to announce progress with Régua which has an ore grade of 0.28% WO3 , almost three times that of the ore grade at La Parrilla”.
Executive Chairman, Michael Masterman, described the performance at La Parilla as “solid progress” and welcomed the developments at Regua.
Conclusion: Completion of the water containment dam at La Parilla and the resulting access to higher grade ore, in conjunction with the plant improvements is lifting La Parilla’s performance although tin recovery remains difficult and the tungsten recovery rates are probably still short of the levels the company would wish.
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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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