SP Angel . Morning View . Wednesday 13 10 21
Copper and Gold rise as market awaits US CPI data later today
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
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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
IGTV: 08/10/21: How high energy prices are pushing up metals: https://youtu.be/em4zwo2i4Cs
VOX Markets: 07/10/21: https://audioboom.com/posts/7956216-john-meyer-on-chinese-energy-issues-and-news-from-altus-strategies-bushveld-minerals-scotsgold
Adriatic Metals* (LON:ADT1) – US$244.5m funding package for Vares Silver Project
Anglo Asian Mining* (LON:AAZ) - BUY, 180p – Robust Q3/21 with production guidance reiterated
Atalaya Mining (AIM:ATYM, TSX:AYM) (LON:ATYM) – Strong Q3 performance triggers increased 2021 production guidance
Caledonia Mining* (LON:CMCL) – New record quarterly gold production at Blanket
Rambler Metals and Mining* (LON:RMM) – Bridging finance arrangement
Serabi Gold* (LON:SRB) – Q3 production shows continuing recovery after Covid affected 2020
Rainbow Rare Earths* (LON:RBW) – BUY, Valuation 43p – Rainbow raises £6.4m to advance Phalaborwa rare earths residue reprocessing project
Versarien* (LON:VRS) – Appointment of Non-executive Chairman
Gold ticks higher to $1,767/oz as market awaits US CPI data later today
A slight pullback in the dollar of 0.2% from yearly highs has left gold steady around the $1,762/oz mark.
US consumer price inflation date is due at 12:30 GMT today.
US 10-year Treasury yields fell from a 4-month high yesterday.
A high CPI would give the Fed more incentive to scale back asset buying.
A taper next month could be likely.
Today is expected to act as a catalyst for gold, however a taper is forecast to be bearish for the precious metal in the coming weeks.
Evergrande crisis intensifies as Chinese high-yield spreads hit record high
Chinese high-yield spreads have soared following Evergrande’s 3rd dollar bond deadline miss.
Both high yield and investment grade spreads have surged this week as the risk of defaults across the Chinese property sector has risen.
Chinese property company bonds were 7/10 top losers on the Shanghai market.
Analysts expect that even ‘an orderly restructuring of the worst-affected developers’ would see construction activity ‘inevitably slow much further’.
Copper - China copper imports rise into China for first time in 5 months
Chinese customs data reveals a reversal in September copper imports following 5 month-on-month declines.
An easing of coronavirus curbs has eased congestion in Chinese ports.
Imports of unwrought copper and products rose 406,016t, up 3% from August’s 394,017t.
Copper concentrate imports rose 2.11mt in Sept, highest since March.
Imports are still down 44% from September 2020, the 2nd highest monthly total on record.
Copper consumption in China has fallen as electricity prices surge alongside coal.
The rise in imports is also explained by attractively lower London copper prices than Shanghai’s as warehouse inventories fell 30% in Sept.
Copper consumption is expected to fare better than aluminium and iron ore if energy costs stay elevated.
Inflation concerns weaken Asian shares, Chinese exports gives reason for optimism
The MSCI index of Asia-Pacific shares fell 1% yesterday before a 0.23% rise today.
Japan’s Nikkei fell 0.2% on concerns its imports of increasingly expensive oil, which is weighing on the JPY.
Brent crude hit a 3-year high on Monday of $84.6/bb.
Inflation concerns are mounting as energy costs are impacting consumer costs.
The US CPI data and Fed minutes from their September meeting are both due today.
US earnings season is set to get underway this week, with analysts unsure of companies to maintain strong performances in Q3.
3 US Fed officials called for an imminent taper of central bank support.
The dollar hit its highest since September 2020 yesterday.
Gold has held firm around $1,761/oz.
China’s unexpectedly strong September figures provide reason for optimism.
The manufacturing giant’ current concerns over energy costs, Covid, power shortages and the property sector may be soothed by signs of increasing consumption.
Dow Jones Industrials -0.34% at 34,378
Nikkei 225 -0.32% at 28,140
HK Hang Seng -1.43% at 24,963
Shanghai Composite +0.42% at 3,562
Economics
IMF slightly reduced its 2021 growth forecast to 5.9%, down from 6.0% estimate made in July, with 2022 outlook remaining unchanged at 4.9%.
Persistent supply chain disruptions and inflation pressures are constraining the global economy’s recovery from the Covid-19 pandemic.
The IMF expects inflation to normalise towards pre-pandemic levels in 2022.
US – Markets await September inflation data due later today with estimates for growth in CPI to have held up close to the highest in decades.
CPI (%yoy): 5.3 v 5.3 in August.
Core CPI (%yoy): 4.0 v 4.0 in August.
China – Outbound shipments grew to a new monthly record in September driven by strong demand ahead of year-end holidays despite rising prices and power shortages, Bloomberg writes.
On a flip side, imports, a measure of local demand, underperformed estimates with growth seen slowing during the period.
Concerns are global demand may start to ease again after buyers frontloaded their Christmas orders with new export orders measures from official purchasing managers’ index and Caixin PMI pulling back in September.
Exports (US$, %yoy): 28.1 v 25.6 in August and 21.5 est.
Imports (US$, %yoy): 17.6 v 33.1 in August and 20.9 est.
UK – Economic growth momentum gained pace in August helped by the entertainment, arts and food services more than offsetting declines in the health and retail sectors, FT reports.
Although, steadily climbing coronavirus infection rates and costs of living with inflation increasing to 3.2% in August suggesting potential monetary tightening weigh on recovery hopes.
GDP (%mom): 0.4 v -0.1 (revised from 0.1%) in July and 0.5 est.
Currencies
US$1.1548/eur vs 1.1556/eur yesterday. Yen 113.59/$ vs 113.21/$. SAr 14.954/$ vs 15.058/$. $1.361/gbp vs $1.359/gbp. 0.734/aud vs 0.735/aud. CNY 6.451/$ vs 6.456/$.
Commodity News
Precious metals:
Gold US$1,763/oz vs US$1,759/oz yesterday
Gold ETFs 98.8moz vs US$98.8moz yesterday
Platinum US$1,009/oz vs US$1,014/oz yesterday
Palladium US$2,052/oz vs US$2,108/oz yesterday
Silver US$22.73/oz vs US$22.59/oz yesterday
Rhodium US$13,800/oz vs US$13,800/oz yesterday
Base metals:
Copper US$ 9,487/t vs US$9,400/t yesterday
Aluminium US$ 3,061/t vs US$3,048/t yesterday
Nickel US$ 19,055/t vs US$19,360/t yesterday
Zinc US$ 3,276/t vs US$3,226/t yesterday
Lead US$ 2,204/t vs US$2,227/t yesterday
Tin US$ 36,370/t vs US$36,005/t yesterday
Energy:
Oil US$83.2/bbl vs US$83.4/bbl yesterday
Crude prices seem to have settled quite comfortably above the US$80/bbl, despite growing calls from US officials on OPEC+ to increase production so as to ease the ongoing appreciation of transportation fuels
The supply restraint of the oil group has been largely offset by the Chinese power crunch and production mandates for refiners across the country
It takes several weeks for demand disruptions to be visible in crude flows, yet one can be certain Chinese buying for December loading barrels will be even weaker than the already meagre levels of Q3
Although developing economies in South and Southeast Asia are still imposing intermittent localised lockdowns, oil demand globally continues to grow and is set to reach pre-pandemic levels within a few months
Prices have risen as more vaccinated populations are brought out of coronavirus lockdowns, supporting a revival of economic activity, with Brent advancing for five weeks and WTI crude for seven
Coal and gas prices have also been surging as economies recover, making oil more attractive as a fuel for power generation, pushing crude markets higher
In India, some states are experiencing electricity blackouts because of coal shortages, while in China the government has ordered miners to ramp up coal production as power prices surge
The energy crisis sweeping the world is raising the prospect of a difficult northern winter as heating demand rises
Fund managers increased their net long positions in US crude futures and options in the week to 5 October, according to the Commodity Futures Trading Commission
The speculator group increased combined futures and options position in New York and London by 8,902 contracts to 325,578 during the period
US producers are taking advantage of the increase in prices and added five new oil wells last week, the fifth straight weekly increase in oil and gas rigs
Natural Gas US$5.453/mmbtu vs US$5.321/mmbtu yesterday
Global gas and coal markets have tightened just as the heating season starts in the northern hemisphere, with limited supply failing to catch up with recovering demand
Colder weather is forecast for Europe next week, with temperatures across the mainland set to drop below normal levels
Several European countries including France and Spain have called on the EU to take urgent action to cushion the blow of sky-high gas prices
The bloc’s energy chief, Kadri Simson, has pledged a revision to market rules by the end of the year to prevent surging costs from stifling the economic recovery
The natural gas crisis is set to intensify as winter heating season approaches, with supplies insufficient to keep up with current demand, let alone build stockpiles for what will be increased demand in the cold season
Europe’s natural gas crisis has prompted European fertilizer producers to curb output, which could send food prices soaring along with the natural gas prices
Uranium UXC US$39.7/lb vs US$38.8/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$130.1/t vs US$134.1/t
Chinese steel rebar 25mm US$903.8/t vs US$920.1/t
Thermal coal swap Australia FOB US$251.0/t vs US$226.0/t
US power plants see coal use increase for first time in 8 years
US power plants are forecast to have burnt 23% more coal in 2021 than 2013.
Surging natural gas prices have forced energy providers to burn coal to keep up with demand.
US utilities are forecast to burn 536.9mt of coal from 436.5mt in 2020.
Colder weather is expected to further push up coal consumption with fuel shortages a potential in the US.
China coal purchases rose 17% in September to counter energy crisis
China’s coal imports rose last month as buyers looked abroad to ensure adequate supplies ahead of peak winter demand.
Coal purchases rose 17% on the month to 32.9mt – the highest total this year according to customs data.
China may have wanted to import more over the period, however Indonesia has been prioritizing its domestic needs while Covid-19 has affected Mongolian shipments.
China has tried to push Mongolia to supply more coal, with Premier Li Keqiang commenting this week that “China welcomes the expansion of coal trade with Mongolia”
Gas purchases rose 1.8% on the month to 1.06mt, with imports running 22% of last year.
India’s Ministry of Coal to auction 88 mines
India is set to auction 40 new mines and roll over 48 from previous auctions.
The mines have a combined resource of ~55bn tonnes of coal.
Coking coal swap Australia FOB US$372.0/t vs US$368.0/t
Other:
Cobalt LME 3m US$53,380/t vs US$53,380/t
NdPr Rare Earth Oxide (China) US$94,021/t vs US$93,480/t - Risk of substitution unless production ramps up
Industry leaders fear that soaring rare earth prices may trigger a roll out of alternative technologies and minerals for EVs and wind turbines.
Neo Performance Materials’ CEO Karayannopoulos has warned ‘that the industry should be very careful not to kill the goose that laid the golden egg.’
Automakers contributing 50% of global sales have stated they are limiting rare earth use.
Roskill forecast rare earth demand to increase 22% pa until 2030, with $6bn of investment needed for new supply.
Conclusion: Automotive manufacturers are programmed to cut costs and thrift wherever possible. The problem as Tesla discovered is that powering motors without permanent magnets impacts performance and range. Rare earth prices have been expensive enough for some years to encourage substitution but the reality is that it rarely works as well as using the key rare earth oxides.
The greater risk is from a simple lack of availability but fortunately a new breed of REE processes and processors are coming closer to fruition such as Rainbow Rare Earths*, Mkango*, Pensana and others. *SP Angel act as financial advisor / nomad and broker.
Deficits are forecast for 2024.
Lithium carbonate 99% (China) US$26,819/t vs US$26,797/t
China Spodumene Li2O 5%min CIF US$1,170/t vs US$1,150/t
Ferro-Manganese European Mn78% min US$1,842/t v US$1,843/t
China Tungsten APT 88.5% FOB US$310/t vs US$310/t
China Graphite Flake -194 FOB US$555/t vs US$555/t
Europe Vanadium Pentoxide 98% 7.9/lb vs US$7.9/lb
Europe Ferro-Vanadium 80% 31.25/kg vs US$31.25/kg
China Ilmenite Concentrate TiO2 US$379.0/t vs US$378.7/t
Spot CO2 Emissions EUA Price US$68.1/t vs US$68.2/t
Battery News
TATA plans $2bn EV investment following TPG fundraise
Tata Motors is planning to invest $2bn in EVs over the next 5 years.
The automaker has raised funds from TPG, a private equity firm.
Abu Dhabi state holding company ADQ will invest $1bn alongside TPG’s Rise Climate Fund for an expansion of the EV business.
The deal values Tata’s EV entity at $9.1bn.
Investments raised from the funds will be dedicated to EV battery technology, charging infrastructure and platforms.
Australian EV battery chemicals producer makes $3bn bet on Saudi Arabia
EV Metals Group Plc is planning to invest $3bn in Saudi Arabia to build mineral processing plants for lithium and nickel.
The company will then look to establish exploration projects in the country with 15 exploration license applications currently underway.
Saudi Arabia recently passed a law intended to incentivise new mining projects in the country.
The Saudi government believes the kingdom offers $1tn worth of untapped minerals.
EV Metals is ‘optimistic’ of the potential Saudi Arabia offers for significant deposits of key EV battery materials.
The company hopes to produce 50,000t pa of high-purity lithium hydroxide monohydrate from its first processing plant.
Saudi’s sovereign wealth fund has a major stake in EV auto manufacturer Lucid Motors which is looking to build a manufacturing plant in the region.
GE Renewable Energy to supply Haliade-X 13MW for Vineyard Wind wind farm
GE announced Monday that it had received an order to supply Haliade-X turbines for Vineyard Wind 1, the first utility-scale offshore wind installation in the US.
62 units of the Haliade-X 13MW will be manufactured for the project, located 15 miles off the coast of Martha’s Vineyard.
Energy generation is expected to start in 2023, providing electricity for more than 400,000 homes.
GE’s Haliade-X prototype operating in the Netherlands is the most powerful offshore wind turbine built today and received its official type certification from DNV GL in early 2021.
Toyota Mirai completes 1360km journey on single tank of hydrogen
The hydrogen fuel-cell Toyota Mirai has set an official record for furthest distance driven on a single tank of hydrogen.
The Mirai completed a 1360km journey around Southern California in two days to set the record beating the previous record of 1003km
A total of 5.65kg of hydrogen was used in the attempt.
Ford set to introduce fleet of ‘Charge Angels’ in US
Ford is planning to employ a group of technicians in specialised Mustang Mach-Es to travel the US to test charging stations connected vehicle data indicates the charge point is not working properly.
The company is reportedly finalising the details of the program but hopes to have the first group of ‘Charge Angels’ out on the road by the end of the year.
The automaker that has a network of approximately 63,000 chargers across the US but depends on companies like Electrify America and ChargePoint for that infrastructure – the team of technicians will ensure more customers have a positive charging experience.
LME’s sustainability register sees CO2 disclosures from major miners
9 metals producers including Teck and Antofogasta have disclosed their carbon emissions on the new LMEpassport.
Anglo American Platinum, Rusal, Zhejiang Huayou Cobalt and Freeport-McMoRan have all registered their details on the LMEpassport.
The digital register tracks carbon emissions from metal producing operations.
LME is also offering a ‘sustainability taxonomy’ which includes ESG matters.
Company News
Adriatic Metals* (LON:ADT1) 163p, Mkt cap £382m – US$244.5m funding package for Vares Silver Project
Adriatic is raising a total of US$244.5m through debt and equity following the completion of a DFSS for its Vares Silver Project.
Adriatic and Orion Resource Partners have signed a term sheet for a US$142.5m debt financing package, comprising of $120m senior secured debt and $22.5m copper stream, subject to ongoing due diligence and definitive legally binding documentation, which is expected to be completed during Q4 2021.
In addition to the debt, Adriatic raised $102m through an equity placing, of which $52m was raised by accelerated bookbuild and $50m was conditionally subscribed for by Orion.
The raise was completed at a placing price £1.5174 pence per New Ordinary Share, a 10.7% discount to the 10-day volume weighted average price on the ASX.
The net proceeds of the equity fundraise are expected to be £72.2m (approximately US$97.8m) and will be used to commence construction of the Vares Silver Project.
Alongside the raise, Sandfire Resources has agreed to sell its entire holding in Adriatic, representing a 16.1% stake.
In August, Adriatic completed a DFS at Vares indicating a Post-tax NPV8 of $1.06bn, with highlights:
Post-tax IRR of 134%
project payback of 0.7 years and initial capital costs of $168m
Adriatic expect 7.3mt mined to plant over a 10-year mine life
TCC of $7.0AgEq per oz
AISC of $7.3 AgEq per oz
Average annual EBITDA in years 1-5 of $281m
Underground mining costs (mined) of $24.1/t
Underground mining costs (milled) of $30.0/t
Processing costs of $30.3/t
Refining and freight costs of $35.7/t
~48% of revenues are set to come from payable silver and gold, with other metals including zinc, lead, copper and antimony
Paul Cronin, CEO, commented: “The announcement of the Proposed Project Finance package is a significant milestone, demonstrating the extent of support globally for new investments in mining in the Balkans, and Bosnia & Herzegovina in particular. “
Adriatic’s $244.5m financing package will support the biggest foreign direct investment into Bosnia since it was declared an independent state in the early 1990s.
Bosnia’s Prime Minister Fadil Novalić commented: “We welcome Adriatic Metals’ commitment to rebuilding Bosnia’s mining industry with the impending financing of the Vares silver project, which will be the largest single investment in the country’s metal mining history to date,”
*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia
Anglo Asian Mining* (LON:AAZ) 117p, Mkt Cap £134m – Robust Q3/21 with production guidance reiterated
BUY – 180p
CLICK FOR PDF
Q3/21 production reported at 16.3koz GEO (Q2/21: 16.7koz; Q3/20: 18.2koz GEO) taking total for 9M to 48.5koz GEO (9M/20: 50.7koz).
Gold production came in at 12.8koz (Q2/21: 12.3koz; Q3/20: 18.2koz) reflecting a slight increase in agitation leaching plant throughput and recoveries.
Copper production amounted to 573t (Q2/21: 695t; Q3/20: 688t) reflecting lower processed grades and flotation plant metallurgical recoveries.
Silver production totalled 36.9koz (Q2/21: 43.6koz: Q3/20: 31.0koz).
The Company sold 6.8koz (post deduction of PSA) in gold bullion at an average realised gold price $1,815/oz (Q3/20: 6.6koz at $1,947/oz).
Copper concentrate sales totalled 3.5kt generating $5.7m in net sales (Q3/20: 2.1kt and $3.4m).
The Company reiterated FY21 guidance for 64.0-72.0koz GEO including 48.0-54.0koz gold and 2.5-2.8kt copper.
Q3/21 closing cash balance came in at $30.9m after accounting for $5.2m in 2020 final dividend and $1.4m in corporate tax payments made during the quarter (Q2/21: $36.6m cash); the Company is bank debt free.
Earlier in September the Company announced acquisitions of three new concession areas in Azerbaijan that subject to parliamentary approval offer exciting organic growth development pipeline and add to the Group’s copper exposure.
Conclusion: Robust quarterly production update with the Company reiterating FY21 production guidance. Gedabek complex remains strongly FCF generative operation with the team busy de-risking near term growth development opportunities and the Company continuing to pay dividends to shareholders (2021e DY 5.0%).
*SP Angel act as Nomad and broker to Anglo Asian Mining
Atalaya Mining (LON:ATYM) 325p, Mkt Cap £448m – Strong Q3 performance triggers increased 2021 production guidance
Atalaya Mining reports that following Q3 copper production of 13,933t of copper in concentrate, which brings year-to-date output to 42,670t, it is increasing its production guidance for 2021 to 54-56,000t from the previously announced range of 52-54,000t.
The company’s cost guidance, previously in the range US$2.25-2.35/lb on a cash basis and US$2.50-2.65/lb on an AISC basis is “expected to be below full year 2021 cost guidance owing mainly to the Euro/U.S. dollar exchange rate together with higher copper production and better recoveries. Further details on costs will be provided with the Q3 Financial Statements due to be reported in mid-November”.
During the quarter, throughput of 3.9mt of ore, equivalent to “nearly 16 Mtpa” exceeded the plants 15mtpa nominal capacity despite a “planned SAG mill maintenance shutdown”.
Continuing cost containment initiatives include the implementation of an “expert system to control SAG mill operation that resulted in lower energy consumption as well as associated reduction of CO2 emissions … [and] … the investigation of new reagents” to improve flotation and enhance recovery rates.
Atalaya Mining says that final permits for its 50MW solar power plant at Riotinto “are expected in the next weeks, with construction to start immediately after” the approvals.
The company confirms that studies building on the “independent reserve estimate which confirmed a long mine life at the Cerro Colorado open pit … [have focussed]… on the addition of new resources contained in satellite deposits at Proyecto Riotinto” including the San Dionisio and San Antonio deposits.
Continuing drilling at Masa Valverde is being incorporated in a report from CSA Global expected in early 2022 and exploration of the nearby Majadales and Campanario-Descamisada prospects is also continuing.
Atalaya has received permits for additional exploration at Riotinto Este on the Cerro Negro and Los Herreros permits with a third permit at Peñas Blancas “expected to be granted in the coming months”. An airborne electromagnetic survey is expected during the current quarter to investigate the area “immediately east of Proyecto Riotinto and along the same structural and stratigraphic setting”.
CEO, Alberto Lavandeira confirmed that Atalaya “will continue to focus on maintaining a steady production profile at Proyecto Riotinto while we unlock additional value from the mineral resources located in our prolific land package”.
Conclusion: Atalaya Mining’s Riotinto operation is delivering strong performance at a time of robust copper prices and the company’s decision to increase its 2021 production guidance signals confidence in its ability to maintain operations at or above nameplate capacity.
Caledonia Mining* (LON:CMCL) 965p, Mkt Cap £113m – New record quarterly gold production at Blanket
Caledonia Mining has announced record quarterly gold production of 18,965oz for the 3 months to 30th September bringing year-to-date output from the Blanket mine to 48,872oz.
As a result, Caledonia Mining is adjusting its 2021 production guidance to a range of between 65-67,000oz from the previously indicated, wider range of 61-67,000oz.
Chief Executive, Steve Curtis attributed the increased gold output to “the substantially increased production capacity following the commissioning of the Central Shaft in March 2021” which represents the culmination a more than five-year long US$67m capital investment programme.
Mr.Curtis provided an instructive context to the rising production levels by explaining that “When we acquired Blanket from Kinross in 2006 our production in the third quarter of 2006 was 6,475 ounces - the Company has come a long way since then. Central Shaft provides the infrastructure required to access the deeper resources at Blanket for many years before any new vertical shaft deepening needs to be considered. The extra hoisting capacity provided by the shaft is the foundation to the production build-up to 80,000 ounces from next year onwards”.
Conclusion: The record production in Q3 follows a record in the preceding quarter as the Blanket mine closes in on its planned 80,000oz pa target rate only around 6 months after the completion of the Central Shaft project.
*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe
Rainbow Rare Earths* (LON:RBW) 15.15p, Mkt Cap £80m – Rainbow raises £6.4m to advance Phalaborwa rare earths residue reprocessing project
BUY – Valuation 43p
Click link for full research note: CLICK FOR PDF
(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates)
(Neodymium Nd, Praesidium Pr, Terbium Tb, Dysprosium Dy. Rainbow holds 100% of the Gakara mine and associated licenses in Burundi)
Rainbow Rare Earths has raised £6.4m at 15p with backing from TechMet which is backed by the U.S. International Development Finance Corporation.
The placing proceeds of US$8.5m will be used to complete the Phalaborwa PEA due later this year ($0.5m).
Technical work required for a BFS at Phalaborwa ($3m)
Restart of the trial mining project at Gakara in Burundi ($1m + $1.3m est. from the sale of REE concentrates in Burundi). If the government of Burundi do not allow the restart then Rainbow may spend a maximum of $1m on maintaining the project till December 2022 if required.
Repayment of the balance of an unsecured loan to a company linked to the Rainbow CEO.
General working capital ($3m).
Phalaborwa:
Management are working with the K-Tech process which is able to selectively extract rare earth elements and has been trialled on Gypsum residues containing rare earths in Florida.
The ability to produce rare earth oxides at site using a simple sulphuric acid leach offers reduced costs and ability to capture a far greater proportion of the rare earth oxide price.
The team are focussed on the processing of just a few specific high-quality and high-value rare earth oxides which may be added directly to make permanent magnets.
Neodymium Nd and Praseodymium Pr which are used to turn iron into permanent magnets along with Terbium Tb and Dysprosium Dy which enable permanent magnets are able to hold their magnetic strength at high temperatures.
Gakara
Rainbow have been successfully trialling the use of more mechanisation at Gakara in Burundi restoring the mine to positive cash flow, though the mine is currently on care and maintenance pending further negotiations with the Burundi minister of mines.
The Gakara mine requires significant further investment to realise more of its potential value through the expansion of the mine and addition of further processing plant.
Valuation: We value Rainbow at 46p/s following adjustment to current Nd, Pr, Tb, Dy prices and currency rates
We value Phalaborwa at 37p/s based on Nd, Pr, Tb, Dy oxide extraction.
Assuming: a 10% discount to the current NdPr Oxide price of US$94,021/t. And a 25% Tb and Dy prices at $1,372,000 /t and $422,000/t respectively.
We value the Gakara mine at 7p for production of a rare earth carbonate concentrate on an expanded production basis.
Conclusion: Rainbow is now well funded for the technical work required for the BFS at Phalaborwa and to restart trial mining at Gakara. We believe the team is already well advanced following its due diligence on the K-Tech process and hope to see positive reports on the development of the process flow sheet.
*SP Angel act as broker and financial advisor to Rainbow Rare Earths
Rambler Metals and Mining* (LON:RMM) 21.75p, Mkt cap £24.4m – Bridging finance arrangement
(Rambler owns 100% of the Ming Copper-Gold Mine)
CLICK FOR PDF
Rambler Metals has announced a US$1m bridging loan from Newgen and West Face Capital pending completion of the “US$20,000,000 senior secured loan with NewGen”.
Newgen and West Face are each providing US$0.5m at a 10% pa interest rate and the “principal amount of the existing West Face Note Purchase Agreement has therefore increased from US$5,000,000 to US$6,000,000 and will be rolled into the US$20,000,000 … loan with NewGen once the intercreditor agreement is signed”.
Acknowledging that the “financing has undoubtedly taken longer than anticipated” President and CEO, Toby Bradbury, paid tribute to the support of suppliers which he said had enabled Rambler to continue operations “at a time when we expected to have received funds already”.
He also thanked “West Face and NewGen for working together to reach a short-term financing solution”.
The quarterly results released last Friday confirmed that operational yardsticks such as ore throughput, concentrate production and crucially, development metreage, are improving despite the financial constraints under which Rambler is operating.
Last week’s announcement also confirmed grade improvements following the underground workings accessing ore from the Upper Footwall Zone headings in Block 6. Daily statistics showed milled tonnages averaging over 800tpd (and peaking at 939t) while grades averaged 2.29% copper and 0.18g/t gold over the same period.
Conclusion: Agreeing US$1m of bridging finance, in conjunction with the support of its suppliers provides Rambler Metals the opportunity to continue its operational improvements at the Ming mine pending completion of the slower than expected Newgen financing.
*SP Angel act as Nomad and broker to Rambler Metals & Mining
Serabi Gold* (LON:SRB) 65.5p, Mkt Cap £49.6m – Q3 production shows continuing recovery after Covid affected 2020
Serabi Gold reports a 34% year on year increase in gold production of 9,082oz during the three months to 30th September (Q3 2020 – 6,790oz) bringing year to date output to 26,510oz (2020 – 24,314oz).
The production derives from the treating of 41,995t of ore from the Palito and São Chico orebodies at an average grade of 7.2g/t gold (2020 – 46,135t at 4.75g/t gold) described as “a 28 per cent improvement on the average plant grade for 2020”.
The company also confirms the previously announced start of mine development at Coringa where decline development is underway “with the objective to reach the Serra ore zone during the fourth quarter, one of three main zones at Coringa”.
Serabi Gold’s exploration at São Chico has yielded intersections of shallow mineralisation in the Julia Vein including 4.3m at an average grade of 8.52g/t gold, and an underground intersection of 3.3m at an average grade of 12.02g/t “indicating a potential deeper mineralised shoot developing below 200 metres vertical depth on Julia Zone 3”.
Exploration at São Domingos includes the start of drilling on the Atacadão trend during July and where “A north-south drill traverse, designed to cover the structural intersection has returned early positive results on multiple narrow vein sets grading up to 6.19g/t Au”.
· CEO, Mike Hodgson confirmed that Serabi Gold “has followed up the excellent second quarter gold production with another solid 9,000 ounces of gold production for the third quarter meaning Serabi is on course to meet its 2021 production guidance” of 33-36,000oz.
· He explained that the expected intersection of ore in underground development at Coringa woud improve the understanding of the orebody and “deliver further economic benefits to the project”,
Commenting on the progress of exploration at São Chico, he described the results as encouraging and explained that “Julia West is near surface and easy to develop, requiring minimal capital development to access. Drilling from both surface and underground will continue well into the next quarter”.
Conclusion: Production results show gold output recovering from the Covid19 influenced levels of 2020 with a 34% increase in Q3 gold production driven by a 28% grade increase. Exploration at São Chico and São Domingos is continuing and underground development at Coringa is is expected to reach the Serra ore zone during this quarter providing important additional data to help refine and optimise the project.
*An SP Angel analyst has visited Serabi’s gold mining operations in Brazil
Versarien* (LON:VRS) 31p, Mkt cap £57m – Appointment of Non-executive Chairman
Versarien reports that James Stewart CBE will retire as Non-executive Chairman on 31 December 2021 and Diane Savory OBE DL will be appointed as the Company's new Non-executive Chairman on 1 January 2022.
Diane Savory has, until recently, served as Chair at GFirst LEP. She is a member of the Retail Sector Council at the Department of Business, Enterprise, Innovation and Skills and worked at Superdry PLC (LSE:SDRY) for a total of 22 years, including as a main board director.
Neill Ricketts, CEO, commented: "Having worked with Diane at GFirst I am confident that her experience will be invaluable to Versarien as we focus on our objectives of achieving commercial traction and sustainable shareholder returns, whilst also focussing on the benefits graphene can bring to the environment."
*SP Angel acts as nomad and Broker for Versarien. An SP Angel analyst has visited Versarien graphene manufacturing facilities.
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
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