SP Angel . Morning View . Thursday 21 10 21
Nickel prices hit seven-year high on supply concerns and forecast surge in demand from the steel and EV industries
MiFID II exempt information – see disclaimer below
Anglo American (LON:AAL) – On track to achieve 2021 production guidance following continuing production recovery in Q3
Antofagasta (LON:ANTO) - US Forest Service proposed a 20-year ban on mining in the watershed of the Boundary Waters in Minnesota
Bushveld Minerals* (LON:BMN) – BUY - Valuation 33p - Bushveld back on track with solid Q3 production and cost report
Condor Gold* (LON:CNR) - Valuation 102.5p – Infill drilling completed ahead of PFS/FS at the La Mestiza Open Pit
TMC the Metals Company (CVE:TMC) - Deep Sea mining company left short of funds after failed SPAC
Phoenix Copper* (LON:PXC) – Launch of ADR programme
Rambler Metals and Mining* (LON:RMM) – Conversion of loan note
Shanta Gold (LON:SHG) – Q3 production little changed with lower grades weighing on unit costs, FY21 guidance reiterated
W Resources (LON:WRES) – Q3 results and operational performance
Recent interviews
VOX Markets: 20/10/21: https://www.voxmarkets.co.uk/articles/john-meyer-altus-cora-rambler-953f402
IGTV: 08/10/21: How high energy prices are pushing up metals: https://youtu.be/em4zwo2i4Cs
Nickel prices hit seven-year high on supply concerns and forecast surge in demand from the steel and EV industries.
Three-month nickel prices on the LME settled 4.6% higher at $20,963/t yesterday – the highest since May 2014.
Chinese stainless-steel futures have risen 5% this morning on the back of a rally in the nickel price with Shanghai nickel prices rising 8% to $25,283/t.
Chinese imports of nickel ore and nickel pig iron in September fell 1.6% and 12.3% respectively with downstream demand looking ‘relatively sluggish’ after power rationing slowed manufacturing.
Vale cut its production guidance for this year due to a strike at its Canadian mine, forecasting 165-170kt from a previous estimation of 200kt.
The world’s largest producer, Norilsk Nickel, reported a drop in production in the first nine months of this year, down 23% on the year prior to 130kt.
The Philippines, the second largest producer of nickel expect output will be 10% lower than the annual average due to more frequent rains and vessel shortages.
Top supplier Indonesia last month indicated it plans to ban or tax exports of semi-processed products in order to keep more nickel in the country.
Copper - LME rule change caps backwardation on cash to 3-month copper price at 0.25% of the cash price
China coal futures slump continues on Beijing intervention as coal supply increases
Coal prices have fallen for a 3rd day in a row since Beijing announced potential to limit prices and boost output.
The NDRC, China’s state planner, met with major mining companies and industry leaders on Tuesday to discuss ways to lower coal prices.
Beijing is planning daily output of 12mt of coal per day and has increased daily production by 1.2mt since September.
China’s State Grid stated yesterday that coal stocks at power plants had hit 78% of last year’s October level.
China thermal coal futures fell 11% this morning. Down 20% from record highs of $248.28/t.
Coking coal down 8.8%.
Coke down 4.8%.
The National Meteorological Center expect temperatures in central and eastern provinces to fall ‘significantly lower than normal’, expecting temperatures to drop 4-10o C over the next few days. This may add further pressure to China’s power shortages.
Day 2 - Borehole drilling for ground-source heat pump
First hole completed to 125m plus a bit in case there are bits that fall into the bottom of the hole.
Somewhat disappointingly, the whole hole drilled into clay while intersecting just a few seams of chalk and limestone along the way.
The good bit is that clay is good for hole integrity and the limestone strata carries water which is also good for
The drillers have flushed the hole and are using high technology duck-tape to attach a heavy metal rod to the PVC circulation pipe to help guide it down the hole.
The team managed to feed 126m of PVC pipe down the borehole hole with much force, and a generous amount of lubrication.
Dow Jones Industrials +0.43% at 35,609
Nikkei 225 -1.87% at 28,709
HK Hang Seng -0.79% at 25,929
Shanghai Composite +0.22% at 3,595
Economics
US – Randal Quarles, a Federal Reserve Governor, said he will support a decision to wind down the pace of bond purchases as soon as next month amid concerns of a broadening of inflationary pressures, Bloomberg reports.
Commenting on the strength of recent price hikes, Quarles believed current high inflation is “transitory” although the surges have lasted longer than expected and there has been an increasing number of items that seen price increases.
“If those dynamics should lead this “transitory” inflation to continue too long, it could affect the planning of households and businesses and unanchored their inflation expectations… This could spark a wage-price spiral that would not settle down even when the logistical bottlenecks and supply chain kinks have eased,” he said.
Fed officials broadly agreed to the process in either mid-November or mid-December, according to minutes of the last meeting held in September.
Biden’s 24/7 efforts fail to reduce shipping backlog at LA ports
157 ships in and around LA ports were recorded by the Marine Exchange this week, matching September’s record figure.
97 vessels are currently waiting offshore to unload cargoes. Several of these have been waiting at anchor since early Sept.
The pre-pandemic record stood at 17 ships waiting to anchor.
Gene Seroka, the head of the Port of Los Angeles, does not expect supply-chain issues to improve until at least February 2022.
Biden’s introduction of 24/7 operations at the port have had some success but will be required through summer 2022.
The LA ports are struggling with a shortage of truckers and warehouse workers which is adding to delays.
Supply chain bottlenecks have been pointed to by the fed as a major cause of rising consumer price inflation.
China – Officials are talking down the scale of the major developers’ fallout arguing risks in the property market are controllable and the sector’s financing is becoming normal.
The remarks were made by high-ranking officials including Vice President Liu He and central bank deputy governor Pan Gongsheng.
Meanwhile, Evergrande in its Wednesday Hong Kong exchange filing said it was unable to progress further with its property management arm sale to meet its financial liabilities as well as reported a 97%yoy drop in sales for September through mid-October, a considered peak home-buying season.
The news comes days before the end of a grace period on a dollar-bond coupon that Evergrande failed to pay in September.
Industrial commodity prices hold as consumers wait for Evergrande resolution
Chinese pricing services report that consumers are waiting on the side-lines to see what happens with Evergrande.
We suspect, the uncertainty caused by the situation will lead to some destocking despite ongoing economic growth and logistical issues.
Power restrictions for smelters, refiners and converters add another element of uncertainty into the supply chain with potential for physical shortages.
Indonesia is to ban all ore exports forcing smelters to set up locally causing potential for further disruption particularly in the production of nickel pig iron in China.
South Korea – Early exports numbers show global trade is holding up despite headwinds from supply chain disruptions and an energy crunch in China, Bloomberg writes.
Overseas shipments climbed 36.1%yoy in the first twenty days of the month from a year earlier with sales to China, its largest trading partner, increasing 30.9%.
Mexico - Fresnillo CEO sees Mexican mining opportunities as ‘unfavourable’
Fresnillo’s chief executive has criticised Mexico’s governmental policies as creating an ‘unfavourable environment’ for the sector.
President Obrador has introduced a policy limiting new concessions alongside inconvenient regulatory delays.
Obrador last month proposed a constitutional reform which would limit lithium mining and other ‘strategic minerals.’
Fresnillo was forced to shut down operations but has since been able to open having been deemed essential by government authorities.
Currencies
US$1.1638/eur vs 1.1630/eur yesterday. Yen 114.00/$ vs 114.45/$. SAr 14.484/$ vs 14.537/$. $1.379/gbp vs $1.379/gbp. 0.748/aud vs 0.749/aud. CNY 6.4401/$ vs 6.392/$.
Yuan strength - We notice a gradual strengthening of the Chinese Yuan to 6.40 from 6.65 a year ago.
While this gradual strengthening may appear relatively minor we feel it signifies further Yuan strength will be allowed by China’s central bank.
Yuan strength enables importers to pay higher prices for importing commodities while US dollar weakness is also good for commodities,.
Commodity News
Precious metals:
Gold US$1,782/oz vs US$1,776/oz yesterday
Gold ETFs 98.5moz vs US$98.5moz yesterday
Platinum US$1,049/oz vs US$1,050/oz yesterday
Palladium US$2,085/oz vs US$2,099/oz yesterday
Silver US$24.17/oz vs US$23.66/oz yesterday
Rhodium US$14,000/oz vs US$14,000/oz yesterday
Base metals:
Copper US$ 9,959/t vs US$10,019/t yesterday
Aluminium US$ 3,065/t vs US$3,064/t yesterday
Nickel US$ 20,720/t vs US$20,035/t yesterday
Zinc US$ 3,600/t vs US$3,534/t yesterday
Lead US$ 2,418/t vs US$2,360/t yesterday
Tin US$ 37,650/t vs US$37,375/t yesterday
Energy:
Oil US$85.1/bbl vs US$84.5/bbl yesterday
Oil prices dipped in early trading today as it appears some investors are profit taking from the recent rally, though solid demand in the US and a switch to fuel oil from coal and gas amid surging prices capped losses
Crude prices have risen as supply has tightened, with OPEC+ maintaining a slow increase in supply rather than intervening to add more barrels to the market
Oil refiners are ramping up output to meet a synchronised uptick in demand across Asia, Europe and the US, but plant maintenance and high natural gas prices are expected to constrain supply in the fourth quarter
Oil markets hit multi-year highs this week, also supported by a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation
Strong demand in the US was confirmed by the latest weekly data
US crude stocks fell by 431,000bbls in the week to 15 October to 426.5MMbbls, compared with analysts' expectations in a Reuters poll for a 1.9MMbbl rise
US stocks at the Cushing, Oklahoma delivery hub hit their lowest level since October 2018, pointing to tightness in the market that may take some time to alleviate
U.S. gasoline stocks fell by a more-than-expected 5.4MMbbls to 217.7MMbbls, the lowest since November 2019, according to the EIA, while distillate stocks fell to levels not seen since April 2020
Natural Gas US$5.115/mmbtu vs US$5.075/mmbtu yesterday
In its October Short-Term Energy Outlook, the US Energy Information Administration forecasts that natural gas spot prices at the US benchmark Henry Hub will average US$5.67/mmbtu between October 2021 and March 2022, the highest winter price since 2007–2008
The increase in Henry Hub prices in recent months and in the forecast reflect below-average storage levels heading into the winter heating season and strong demand for US LNG, even after relatively slow growth in US natural gas production
The EIA expects Henry Hub prices will decrease after the first quarter of 2022, as production growth outpaces growth in LNG exports, and will average US$4.01/mmbtu for the year
US exports of LNG are establishing a record high this year, a new record high anticipated for next year
The EIA expects LNG exports to average 9.7Bcf/d this year (3.2Bcf/d more than the 2020 record high of 6.5Bcf/d) and to exceed annual pipeline exports of natural gas for the first time
The year-on-year increase in LNG exports coincides with slight growth in US natural gas production
US dry natural gas production is expected to average 92.6Bcf/d this year, which is 1.1Bcf/d more than in 2020 but 0.3Bcf/d less than in 2019
Uranium UXC US$48.9/lb vs $48.8/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$123.7/t vs US$123.0/t
Chinese steel rebar 25mm US$894.8/t vs US$902.4/t
Thermal coal (1st year forward cif ARA) US$136.8/t vs US$144.0/t
Thermal coal swap Australia FOB US$213.0/t vs US$222.5/t
Coking coal swap Australia FOB US$361.0/t vs US$363.0/t
Other:
Cobalt LME 3m US$56,545/t vs US$56,545/t
NdPr Rare Earth Oxide (China) US$97,147/t vs US$97,147/t
Lithium carbonate 99% (China) US$27,261/t vs US$27,063/t
China Spodumene Li2O 5%min CIF US$1,240/t vs US$1,240/t
Ferro-Manganese European Mn78% min US$2,101/t vs US$2,075/t
China Tungsten APT 88.5% FOB US$312/t vs US$310/t
China Graphite Flake -194 FOB US$565/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$385/t vs US$383/t
Spot CO2 Emissions EUA Price US$68.1/t vs US$68.0/t
Battery News
Tesla announces shift to LFP battery chemistry in all standard range EVs
Tesla has said its shifting its battery chemistry to lithium-iron-phosphate batteries, as prices for key battery materials continue to soar.
The switch to LFP will apply to all of Tesla’s standard range vehicles, the company reports.
Higher prices of nickel are impacting Tesla, with the company’s CFO commenting: “some of those costs have been flowing through to us”
In China, Tesla has already been using LFP batteries supplied by CATL, although these batteries in the past have lacked the energy density of NMC cells.
LFP batteries are also seen as safer, as the nickel component of the battery has been the cause of fires in the past.
At Tesla’s Battery Day last September, Elon Musk indicated the firm could look to use LFP components for lower cost models, and nickel-manganese based chemistry for long-range cars.
Company News
Anglo American (LON:AAL) 2,737.5p, Mkt Cap £38.4bn – On track to achieve 2021 production guidance following continuing production recovery in Q3
Anglo American reports that it is continuing to achieve 95% operating levels at most of its operations and that Q3 is 2% higher than was achieved in Q3 2020 leading it to remain “broadly on track to deliver our full year production guidance across all products”.
Chief Executive, Mark Cutifani, explained that the “increase in production is led by planned higher rough diamond production at De Beers, increased production from our Minas-Rio iron ore operation in Brazil … and improved plant performance at our Kumba iron ore operations in South Africa”.
He also said that Anglo American was “taking the opportunity to tighten up the guidance for diamonds, copper and iron ore within our current range as we approach the end of the year”.
Improving demand in China and the US has driven a 28% increase in De Beers rough diamond production to 9.2m carats (Q3 2020 – 7.2m carats) bringing the year to date output to 24.6m carats (2020 – 18.4m carats) with production increases largely derived from increases at the Jwaneng and Venetia mines.
Full year diamond production guidance is confirmed at ~32m carats compared to the range of between 32-33m carats announced on publication of the Q2 results in July “due to continuing operational challenges, subject to the extent of any further Covid-19 related disruptions.”
Year-to-date copper output of 487,000t is broadly in line with the 480,000t achieved in 2020 with quarterly output declining by 6% to 157,000t (2020 – 166,000t) as a result of “planned maintenance at Collahuasi”.
Chilean copper production is challenged by water availability in the face of a record local drought in the Central Zone and the copper guidance range has been tightened to a range of 650-660,000t from the earlier indication of between 650-680,000t.
Platinum group metals production increased by 17% on a year-to-date basis to 3.195moz (2020 – 2.733moz) and “delivered a 39% increase in refined output, reflecting stable performance from the ACP Phase A unit”.
Metal in concentrate output was adversely affected by a 12% decline at Mogalkwena during the quarter as a result of planned maintenance at the Mogalkwena North smelter and by “planned concentrator downtime at Unki following the completion of debottlenecking projects” partly offset by a 7% increase at Amandelbult “reflecting the implementation of improvement plans”.
Production guidance for both metal in concentrate and refined PGM output both remain unchanged at 4.2-4.4moz and 4.8-5.0moz respectively. Anglo American cautions, however, that its guidance is “subject to the potential impact of Eskom load-shedding … [and]… the extent of further Covid-19 related disruption”.
Improved performance at Minas Rio, where Q3 – 2020 was subject to “planned maintenance … for routine internal scanning of the pipeline” increased year-to-date iron ore production by 7% to 48.8mt (2020 – 45.5mt) and quarterly production by 15% to 16.9mt (2020 – 14.7mt).
Full year production guidance is confirmed at ~64.5mt compared to a previously issued range of 64.5-66.5mt.
“Export metallurgical coal production decreased by 11% to 4.3 million tonnes due to operations at Moranbah being impacted by challenging geological conditions for most of the quarter”. The company comments that this “is was partly offset by Dawson and Capcoal increasing production levels after having scaled back production volumes since mid-2020 in response to reduced demand for their particular products”.
Anglo American is maintaining its production guidance for 2021 metallurgical coal production at “14-16 million tonnes, subject to the extent of any Covid-19 related disruption”.
“Primary nickel production increased by 2% over the period and by-product nickel from our PGMs business increased by 20% to 6,000 tonnes”.
While also cautioning on the potential for Covid19 disruption nickel production guidance is maintained at 42-44,000t for 2021.
Anglo American’s exploration expenditure “increased by 42% to $37 million driven by increased activity in copper and PGMs … [while] … Evaluation expenditure increased by 6% to $35 million, with increased spend in PGMs and diamonds”.
Conclusion: Anglo American’s operations are mostly operating at around 95% capacity as they recover from the constraints of Covid19. The Chilean copper operations are subject to record drought conditions leading to a reduction in the upper level of this year’s production guidance range. Exploration expenditure is focused on copper and PGMs while evaluation concentrates on PGMs and diamonds.
Antofagasta (LON:ANTO) - 1,443p, Mkt cap 14bn - US Forest Service proposed a 20-year ban on mining in the watershed of the Boundary Waters in Minnesota
The US Forest Service has proposed a 20-year ban on mining that would block Antofagasta’s Twin Metals mine project which lies in the watershed of the Boundary Waters in Minnesota.
The issuance of new mining leases and permits in the region has been blocked for at least two years.
It’s a great shame as Antofagasta’s geologists had done a great job identifying the opportunity and locating high-grade nickel in the Maturi deposit, part of the Duluth Complex.
The plan is a reversal of Trump’s decision to allow mining in the region, with the project potentially offering the US with a major supply of copper and nickel.
The announcement ties in with Biden’s hopes for domestic processing of batteries but importing the metals from America’s ‘allies.’
Biden had made a private commitment to miners in Minnesota during his 2020 campaign, ensuring the potential for domestic mining opportunities.
Twin Metals is ‘deeply disappointed’ by the decision.
Polymet, which we have followed closely and has spent >$50m on feasibility and environmental studies as well as licensing continues with its 15-year fight for the right to start mining in Minesota.
We can only conclude that while many states in the US welcome mining, certain states like Minnesota are simply off limits when it comes to sulphide mining applications.
We hate to say we told you so, but sometimes listing to an analyst who has taken time to understand the issues of a region and who has an outside perspective is a good idea.
Maybe one day the US will be desperate enough for new nickel supplies for policymakers to allow mining in this area but we suspect that day is still far, far away.
Bushveld Minerals* (LON:BMN) – 11.42p, Mkt cap £136m - Bushveld back on track with solid Q3 production and cost report
BUY - Valuation
(Bushveld Energy holds an indirect interest of 25.25 per cent in Enerox. Bushveld is invested in Enerox alongside a <3% in Invinity Energy Systems.)
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Bushveld Minerals report a significant increase in Q3 production to 1,056mtV of mainly ferro vanadium vs 886 in Q2 and 687 in Q1.
Group sales lagged behind at 826mtV in the quarter due to the timing of shipments and sales.
Logistics and general sales issues may cause group sales to lag further by the year end.
Vametco led production higher led by a significant increase in the recovery of MVO3 from the kiln which increased to 75% vs 66.3% in Q2.
Production at Vametco rose 29% to 765mtV vs 593mtV in Q2 reflecting better performance at the Vametco site.
If Vametco continues to report monthly production of around 250mtV then the plant could produce close to 2,503mtV in theory though the South African Christmas slowdown will cut short December’s production. We are cautiously forecasting 2,308mtV for the full year production.
Management estimate production of 2,300-2,400mtV this year and continue to prioritise operational stability to achieve a sustainable and consistent output of 2,800mtVpa.
Unit costs at Vametco fell to $22.4kgV from $25.8/kgV in Q2 bringing the average C1 cash cost to 24.4/kgV so far this year.
If the site maintains unit costs at $22.4kgV then the average cost for the year will be ~$23.9/kgV
Cost guidance is also maintained at between US$23.70-24.20/kgV
Vanchem production held steady at 291mtV in Q3 vs 293mtV in Q2. We are forecasting 1,108mtV for the full year which should account for the December slowdown in production.
Cash costs fell to $27.3/kgV from $28.1/kgV due to the slightly weaker exchange rate which maybe also compensated for the lower vanadium in concentrate grade and kiln recovery.
Recoveries in the kiln fell to 75.6% from an impressively high 89.9% in the last quarter.
Expansion:
Vametco: Management are looking at expanding the Vametco pit to supply Vametco and Vanchem saving the $20m we had earmarked for a new mine at Mokopane.
The team are also working on a Pre-Feasibility Study to upgrade the concentrate section to a Semi-Autogenous Grinding mill to reduce costs at Vametco.
Vanchem is to expand to 2,600mtV from 1,100mtV by end-2022 through the commissioning of Kiln 3. Kiln 3 has double the roasting capacity of Kilns1 and 1 and should lower unit costs in its more efficient operation.
Upper Seam mining: The Upper Seam has similar mineralogy to the ore used at Vanchem. Mining this seam at Vametco should enable better use of the overall resource resulting in an unexpected synergy between the two operations.
Production Target: Bushveld expect production should rise to 5,000-5,400mtVpa by end-2022 on the development of the proposed initiatives.
We await further detail on the feasibility study work being done on the expansion ahead of incorporating this expansion into our model.
Forex: the rand weakened slightly in the quarter reducing unit costs by a further 3%
While the South African rand appears relatively steady, the revelation of another 43 municipalities on the brink of collapse in South Africa suggests to us that the rand will weaken further.
Ferro-vanadium prices: have jumped 10% China over the past 30 days rising 1.8% this week reversing the weakness seen over the summer.
The Chinese price for ferro-vanadium is currently at $33.5/kgV which translates to $29.2/kgV after the application of import tariffs.
Valuation: We expect to update our valuation on conformation of feasibility study work which is expected to take production to 5,000-5,400mtVpa by end-2022 and on to 6,000-6400tpa in in the medium term eg. 2023.
Conclusion: Confirmation of the recovery in production through the third quarter appears to indicate that Bushveld has turned a major corner in terms of production. Unit costs are coming down and new initiatives to expand the Vametco mine and Vanchem production capacity look well founded. While we suspect a proportion of 2021 production will end up in 2022 sales we are hopeful the business is now well set for production and profit growth.
*SP Angel act as nomad and broker to Bushveld
Condor Gold* (LON:CNR) 39p, Mkt Cap £53m – Infill drilling completed ahead of PFS/FS at the La Mestiza Open Pit
Valuation 102.5p
Click here for Initiation note pdf
The Company completed a ~8,000m infill drilling programme at the fully permitted high-grade La Mestiza Open Pit Mineral Resource at La India Project, Nicaragua.
Ninety-six diamond core drill holes tightened drill spacing to 25m along strike and 50m down dip in the areas of planned open pit mining operations.
Narrower spacing is expected to upgrade the existing open pit gold mineral resource to the indicated category to be included in future PFS or FS on the fully permitted La India Gold Mine Development Project.
Assay results are reported to be consistent with previous drilling grades and widths adding confidence to the geological model.
The Mestiza vein set remains open down dip and along strike with parallel veins identified earlier that may potentially further grow the current resource estimate.
At the moment, La Mestiza Open Pit hosts an open pit mineral resource of 92kt at 12.1g/t for 36koz in the Indicated category and 341kt at 7.7g/t for 85koz in the Inferred resource.
Sep/21 PEA envisaged a fully diluted mill feed of 499kt at 5.37g/t for 86koz.
Conclusion: An infill programme carried between May and October at the high grade La Mestiza Open Pit located only 3km away from the permitted processing plant on Condor’s La India Gold Mine Development Project offers data to upgrade the existing Inferred mineral resource into high confidence Indicated category ahead of the planned PFS/FS.
*SP Angel act as a broker to Condor Gold
Phoenix Copper* (LON:PXC) 69p, Mkt Cap £77m – Launch of ADR programme
(Phoenix holds 80% of the Empire mining property in Idaho)
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Phoenix Copper reports that its ADR programmme on the NYSE’ OTCQX market is expected to commence on st November under the sponsorship of Bank of New York Mellon.
“Each ADR will comprise 10 existing Phoenix ordinary shares of no par value, currently trading on AIM”.
CFO, Richard Wilkins, explained that “Given that we are operating in Idaho and will be producing metals necessary for the global transition to clean energy, we look forward to increased exposure in the US and to attracting more US investors to our register”.
Conclusion: The ADR programme provides Phoenix Copper the opportunity to gain wider exposure to American investors as it presses ahead with the development of its Idaho projects.
*SP Angel act as Nomad for Phoenix Copper
Rambler Metals and Mining* (LON:RMM) 22.25p, Mkt cap £30.0m – Conversion of loan note
(Rambler owns 100% of the Ming Copper-Gold Mine)
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Rambler Metals and Mining has confirmed that it is shortly to issue 885,421 shares at a price of 16.3651p/share on conversion of unsecured, subordinated convertible notes held by Riverfort Global Opportunities and by YA II PN, Ltd
The company says that “Riverfort and YAII have now converted a total of US$2,000,000 principal” of the convertible loan note which was announced on 30th June.
“Following this conversion, a total of US$1,000,000 principal of the CLN remains unconverted”.
*SP Angel act as Nomad and broker to Rambler Metals & Mining
Shanta Gold (LON:SHG) 13.8p, Mkt Cap £144m – Q3 production little changed with lower grades weighing on unit costs, FY21 guidance reiterated
Gold production amounted to 14.2koz (Q2/21: 14.2koz) as higher throughput compensated for a drop in processed grade during the quarter at NLGM.
The plant processed 228kt at 2.2g/t (Q2/21: 201kt at 2.5g/t) reflecting ramped up treatment rates at the installed third mill.
Gold sales totalled 12.0koz at an average price of $1,790/oz (Q2/21: 16.8koz at $1,812/oz).
AISC came in at $1,480/oz (Q2/21: $1,351/oz).
Higher unit costs reflected lower processed grades as well as $145/oz in exploration costs at NLGM, +59% on H1, and $74/oz in sustaining capex covering bi-annual refurbishment of the HFP power generators.
Group EBITDA amounted to $2.0m (Q2/21: $9.8m) and $6.5m when West Kenya and Singida related expenditures are excluded.
The Company reiterated annual guidance that was previously revised in July to 60-65koz at AISC of $1,325-1,375/oz.
At West Kenya, infill drilling programme is continuing with Phase 1 delivering a ~118koz at 7.04g/t in the Indicated category implying a conversion rate of +100%.
Phase 2 and 3 are focused on converting ~994koz in Inferred Resources as the team de-risks next production growth project ahead of the final investment decision.
At Singida, mine and processing plant construction is underway with first production targeted for early 2023.
VAT receivable increased to $27.7m, up from $27.4m, after recovering $2.1m during the quarter.
Net cash stood at $19.5m as of quarter end (Q2/21: $24.1m).
TMC the Metals Company (NASDAQ:TMC) YS$3.69, Mkt cap US$830m - Deep Sea mining company left short of funds after failed SPAC
The Metals Company (NASDAQ:TMC), formerly known as DeepGreen, went public via SPAC last month with the company aiming to extract battery metals on the Pacific Ocean floor between Hawaii and Mexico.
The company intends to mine polymetallic nodules of metal high in nickel, copper manganese and cobalt, however environmentalists claim that these activities will damage the ocean’s sensitive ecosystems.
Despite having no revenues and around 25 employees, the start-up was initially valued at $2bn by its blank check partner.
TMC intended to raise $330m to fund exploration, however the company’s supposed biggest backer, Ramas Capital, refused to hand over $200m in funding.
Since TMC disclosed in early September that about two-thirds of its initial funding had not been received, shares in the company have fallen as much as 70%.
The company has now filed a lawsuit against amas Capital in New York’s Supreme Court in an attempt to get the funds.
If Ramas don’t pay, TMC will have just over $100m in cash - ;ess than the $163m in operating costs forecasted by the group in March.
Since the SPAC deal was announced in March, more than 500 scientists have signed a letter calling for a moratorium on deep-sea mining until the environmental risks are better understood.
Meanwhile, Greenpeace claims that the company’s disclosures to investors significantly underplayed the environmental risks – in response to TMC’s petition to the SEC commission.
W Resources (LON:WRES) 7.05p, Mkt Cap £9.4m – Q3 results and operational performance
W Resources reports a 58% year-on-year increase in tungsten concentrate production from its La Parilla mine in Extremadura, Spain to 168.3t containing 11,229mtu of tungsten trioxide at an average grade of 66.7% (Q3 – 2020 106.4t with a content of 6,919mtu at a grade of 65.0%).
Overall tungsten recovery rates have improved to 58% from the 47% achieved in Q3 2020 and have been on consistently rising trajectory since early 2020.
Tin recovery continues to be challenging with a decline to 23% (Q3 – 2020 27% recovery) in the production of 24.1t of concentrate at a tin grade of 51.9% (Q3-2020 – 23.8t of concentrate also at a grade of 51.9% tin).
The company comments that “Plant utilisation remains high at 87.1% compared to 88.2% in Q2 2021” with a total of 279,196 tonnes of ore treated during the quarter.
Although the company says that it “recorded a number of record performance milestones, production was impacted by a number of challenges which resulted in an estimated production loss of circa 40t of tungsten concentrate”.
The plant was affected by a “A number of power outages … caused by technical problems with the LNG generators. This has been resolved by the supplier after isolating the cause of the stoppages. To mitigate against future power outages the Company is installing an additional connection to the grid power supply. This is expected to be finalised in 2022 and will supply sufficient electricity to power the entire plant”.
Chairman, Michael Masterman, also disclosed that “In September, the Extremadura region of Spain, where the La Parrilla mine is located, experienced torrential rain fall for a period of time. Although the mine continued to work, production did slow due to the wet feed being fed into the plant. The team at La Parrilla is looking to introduce a silo to hold a minimum of one weeks' supply of dry stock which should negate the problems caused by similar flash flooding”.
The Company is also “leasing a water treatment plant to improve water quality in the feed to the process plant and expects this measure to reduce maintenance issues and improve productivity”.
As well as the power and water issues, “maintenance issues and supply chain bottlenecks for replacement parts have led to lower plant availability and as a result W Resources has adjusted its full year production guidance to between 650t and 750t of concentrate”.
In September, in an update on La Parilla, Mr. Masterman said that “Our current priority is to build production and improve tin recoveries and we remain positive about reaching our production target of 1,000t of concentrate in 2021 and increasing the production run-rate in Q4 2021 towards our T2 Target of 675t per quarter”.
Commodity prices are strong with the benchmark ammonium paratungstate price at US$315-320 per mtu and tin prices at close to US$38,000/t which may provide La Parilla with the improved revenues it will need to implement operational improvements.
Conclusion: La Parilla continues to face operational challenges and despite improving recovery rates for tungsten trioxide and better plant utilisation rates the company is scaling back its expectations for 2021 tungsten trioxide concentrate production to between 650-750tonnes from the 1,000t previously indicated.
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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
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Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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