SP Angel . Morning View . Monday 31 01 22
Base metals soften as China shuts down for Lunar New Year
MiFID II exempt information – see disclaimer below
This is the year of the Tiger - Happy Lunar New Year
Adriatic Metals (Adriatic Metals PLC (LSE:ADT1, ASX:ADT, OTCQX:ADMLF)) – Q4 report saw completion of US$245m funding package secured
BHP (ASX:BHP) – Unification confirmed as the ‘Big Australian’ goes home
Bushveld Minerals* (Bushveld Minerals Ltd (AIM:BMN, OTC:BSHVF)) – BUY, Valuation 31p Vanchem to lead expansion in vanadium production
Galantas Gold (Galantas Gold Corp (AIM:GAL, TSX-V:GAL, OTC:GALKF)) – Drilling intersection on the Joshua Vein
Gemfields (Gemfields Group Limited (AIM:GEM)) – Monthly mining statistics for Kagem and Montepuez
Hummingbird Resources (Hummingbird Resources PLC (LSE:HUM)) – Weak end to the year as contract mining underperforms at Yanfolila
Orosur Mining* (Orosur Mining Inc (AIM:OMI, TSX-V:OMI)) – Quarterly update provide highlights progress in Columbia
Vast Resources (Vast Resources PLC (AIM:VAST)) – Dec/21 operations quarterly update and Atlas refinancing
PRIVATE FUNDING – For a Rare Earth Phosphate deposit in the US
We are raising funds for a Rare Earth Phosphate deposit with up to 28% P2O5 in the raw ore.
REE enrichment is up to 4,200ppm, of which ~25% are high value magnet metals (Nd-Pr-Dy).
Management are looking to drill in 2022 to define potential for 20mmt 36% phosphate concentrate and 26,000t of REE magnet metals.
The resource is on privately-owned rural acreage, close to existing quarrying operations and rail infrastructure.
The company is working with several US REE extraction laboratories to maximise recovery and minimise opex.
Early estimates are for a $45m capex to get to phosphate concentrate production with additional capex for a REE leaching plant.
Please let us know if you wish to take part in this funding
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.
IGTV: IG Outlook 2022, China new year, winter Olympics may see metals prices soften: (12/01/2022): https://youtu.be/vNqDh74zW5I
VOX Markets: 12/01/22: https://audioboom.com/posts/8011559-john-meyer-on-china-s-factory-shut-downs-plus-news-from-bluejay-beowulf-atlantic-lithium
interactive Investors: FTSE 100 favourite stock: https://youtu.be/BomNRQJt-YA. 2022 outlook: https://youtu.be/SxMPiPEc_Rg
Three small-cap mining share tips for 2022: https://www.youtube.com/watch?v=9xvA_3UXXYQ&ab_channel=interactiveinvestor
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.
We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
Graphene - UK government and CIA-linked fund take stake in British graphene start-up with $170m valuation
Graphene start-up Paragraf has won backing from a VC fund set up by the CIA and the UK government’s Breakthrough scheme. (FT)
Paragraf has raised $60m and is valued at $170m after the recent funding round.
The company claims to have developed scalable graphene production and plans to target the semiconductor industry.
Graphene chips offer higher performance with less power reliance.
Applicable markets include the automotive, medical, computing, telecoms, and aerospace sectors.
*SP Angel act for Versarien (Versarien PLC (AIM:VRS, OTC:VRSRF)) which is developing a range of graphene products and is listed on the AIM market
*SP Angel also acts for Graphene Star, a private company which has developed a process for purifying graphite and also has a number of graphene products on sale and in development
Copper weakens to $ 9,560/t on strong dollar and China New Year shutdown
Copper is facing dual headwinds of rising interest rate expectations supporting the dollar
Chinese traders are also seen reducing inventories ahead of the Lunar New Year shutdown and Winter Olympics.
The dollar is nearing a 1.5-year high vs the Euro.
Gold struggles at $1,788/oz as market digests Fed rate-hike prospects
Gold prices have weakened to $1,878/oz as the dollar remains around its 18-month high.
Real rates have continued to move higher, pressuring gold to the downside.
Eyes turn to non-farm payroll data due on Friday, with analyst expectations on the low side at 100-150,000 new jobs. (Reuters)
A higher number could encourage the Fed to further accelerate its rate hike agenda.
Additional zinc smelters close as European energy prices continues to hit metal producers
Nyrstar is shutting down its Auby smelter on historically high gas and electricity prices in Europe.
Glencore has also closed its Portovesme zinc plant.
The two plants reduce European zinc supply output by 260kt.
LME zinc prices are approaching decade highs last seen in October, with premiums for physical zinc at record highs.
LME warehouses hold 1,350t of zinc, with only 50t of that waiting on physical load-out.
Singapore stocks stand at 82,050t and South Korea’s main port has 31kt in inventories.
Shanghai stocks rose 23% this week to 93kt on Lunar New Year restocking.
Dow Jones Industrials +1.65% at 34,725
Nikkei 225 +1.07% at 27,002
HK Hang Seng +1.07% at 23,802
Shanghai Composite -0.97% at 3,361
Economics
China - China manufacturing output slows in January on Covid disruptions and Lunar New Year slowdown
Official China PMI down from 50.3 in December to 50.1 in January.
Official non-manufacturing PMI (services and construction sectors) down from 52.7 to 51.1.
The production subindex fell to 50.9 from 51.4 in Dec.
The new order subindex fell from 49.7 to 49.3.
Officials point to the weak reading as a result of ‘seasonal factors’ and the ‘pandemic impact.’ (SCMP)
the Caixin/Markit PMI, focusing on SMEs, fell from 50.9 in Dec. to 49.1
Analysts expect further injections of fiscal stimulus to support the ailing economy.
Major property developer Shimao sells $708m hotel to state-backed firm
Shimao Group are selling a major hotel to government-backed Shanghai Land Group as the state continues to take control of downbeat assets.
Beijing is supporting cash-strapped developers by relieving them of assets following its crackdown on debt leverage.
Shimao defaulted on a loan this month and has $1.7bn worth of offshore bond maturities this year. (Moody’s)
Beijing moves to crack down on iron ore price speculation and ‘abnormal’ price swings
The top China state planner has vowed to crack down on hoarders, speculators, and price manipulators in the iron ore market.
The NDRC announced plans to take ‘effective measures to ensure the stability of iron ore prices.’
It also reported domestic stockpiles at ‘their highest in years. This may be due to a slowdown in steel production due to the Olympic clear skies policy.
China is also looking to boost domestic iron ore and scrap metal exploration though this is more of a longer term ambition..
Beijing hopes the country will find a 45% self-sufficiency ratio for iron ore by 2025.
The average iron ore import price rose 55% in 2021 yoy.
We believe Chinese are the only real speculators in iron ore futures and we suspect there are relatively few hoarders in the iron ore trade due to issues relating to the storage of bulk tonnages.
US Senate finalises sanction measures against Russia in case of Ukraine invasion
The Senate is nearing completion of a bipartisan legislation designed to hit Russia’s economy if Putin invades Ukraine.
The measures will target Russian banks, the Russian public’s savings and pensions and limit the Russian sovereign debt market specifically. (WSJ)
Export controls will also be targeted at key sectors.
Chairman Menendez, senior democrat, describes them as ‘the mother of all sanctions.’
UK – Economists expect further interest rate hike this week
The Bank of England is expected to hike interest rates to 0.5% on Thursday, Bloomberg reports.
The move would be the first back-to-back increase since 2004.
More hikes are likely across countries as the scale and persistence of inflation is rattling central bank chiefs.
Europe – Euro-area Q4 GDP rose 0.3% vs 0.4% expected
The euro-area economy grew modestly in the fourth quarter as surging omicron infections led governments to implement curbs on activities.
Ghana - $1.1bn trade surplus recorded in 2021
The bank of Ghana reported that Ghana recorded a trade surplus of $1.1bn in 2021, equivalent to 1.5% of GDP.
Exports for the period stood at $14.7bn, whilst imports recorded were estimated at $13.6bn.
Gold was responsible for $5.1bn value of exports in 2021.
Spain – Face masks now included in Spain’s inflation basket
Spain has included the cost of face masks in its list of articles to gauge inflation.
Spain’s latest CPI reading was 6.1% in January.
Portugal – The centre-left Sociality Party won a landslide victory in general elections securing ~42% of the vote and taking 117 seats in the 230-seat parliament.
This marks an improvement on 108 seats secured in the last elections after which PM Costa had to join with two far left parties to form his minority government.
Two allies – the Left Bloc and the Communist Party – who did not support the 2022 draft budget that led to snap elections lost seats.
Despite expectations of a tight race, the main opposition centre-right PSD party landed 71 seats.
A stable government is crucial for Portugal to make the most of a 16.6 billion euro ($18.7 billion) package of European Union recovery funds it is due to receive by 2026, according to France24.
Results offer PM Cost government mandate to push through with initiatives to promote growth and attract much needed investment.
Savannah Resources (SAV LN), a lithium developer owning the largest European hard rock spodumene project that is currently going through a permitting process, is one of the companies set to benefit from reduced political uncertainty in the region.
Currencies
US$1.1177/eur vs 1.1131/eur last week. Yen 115.39/$ vs 115.65/$. SAr 15.540/$ vs 15.477/$. $1.344/gbp vs $1.338/gbp. 0.704/aud vs 0.702/aud. CNY 6.361/$ vs 6.364/$.
Commodity News
Precious metals:
Gold US$1,788/oz vs US$1,794/oz last week
Gold ETFs 99.1moz vs US$99.1moz last week
Platinum US$1,013/oz vs US$1,020/oz last week
Palladium US$2,364/oz vs US$2,314/oz last week
Silver US$22.40/oz vs US$22.63/oz last week
Rhodium US$16,850/oz vs US$16,800/oz last week
Base metals:
Copper US$ 9,560/t vs US$9,687/t last week
Aluminium US$ 3,066/t vs US$3,122/t last week
Nickel US$ 22,310/t vs US$22,375/t last week
Zinc US$ 3,591/t vs US$3,634/t last week
Lead US$ 2,264/t vs US$2,299/t last week
Tin US$ 41,760/t vs US$42,080/t last week
Energy:
Oil US$90.9/bbl vs US$90.2/bbl last week
Oil prices have continued to tick higher in early trading today as OPEC+ supply concerns and political tension in Eastern Europe and the Middle East continue to push prices
The gap between OPEC+ commitment and output has deepened, adding fuel to an already strong price rally
In December, OPEC+ added 253kbopd to its combined production falling well short of its 400kbopd target for yet another month in a growing issue
Naturally, this has raised concerns about the security of global supply amid forecasts from the International Energy Agency that oil demand is going to exceed pre-pandemic levels later this year
In December, the IEA said that oil demand growth was going to slow down this year which has failed to materialise
It also forecasted a possible oversupply on the oil market for the current quarter, citing the effect of the Omicron variant on fuel consumption and rising non-OPEC production
Natural Gas US$4.933/mmbtu vs US$4.435/mmbtu last week
Natural-gas futures tallied their largest one-day percentage gain on record last week, up more than 46% on Thursday alone
The spike coincided with the expiration of the February contracts, and a short squeeze as a winter storm looms in the US Northeast
The February contract settlement marked the biggest one-day percentage gain for a front-month contract based on records dating back to 1990, and the highest finish since October of last year
European gas prices remain elevated on the possibility of a serious supply squeeze amid Russian hostilities towards Ukraine
The US is trying to help Europe secure emergency gas supplies, however much of US inventories have been committed
Uranium UXC US$44.85/lb vs $45.05/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$142.1/t vs US$137.9/t
Chinese steel rebar 25mm US$751.3/t vs US$750.9/t
Thermal coal (1st year forward cif ARA) US$117.0/t vs US$117.0/t
Thermal coal swap Australia FOB US$228.0/t vs US$228.0/t
Coking coal swap Australia FOB US$438.0/t vs US$439.0/t
Other:
Cobalt LME 3m US$71,000/t vs US$71,000/t
NdPr Rare Earth Oxide (China) US$150,129/t vs US$150,063/t
Lithium carbonate 99% (China) US$56,986/t vs US$56,961/t
China Spodumene Li2O 5%min CIF US$2,710/t vs US$2,710/t
Ferro-Manganese European Mn78% min US$1,783/t vs US$1,775/t
China Tungsten APT 88.5% FOB US$320/t vs US$320/t
Europe Vanadium Pentoxide 98% 9.7/lb vs US$9.7/lb
Europe Ferro-Vanadium 80% 39.25/kg vs US$39.25/kg
China Ilmenite Concentrate TiO2 US$391/t vs US$390/t
Spot CO2 Emissions EUA Price US$99.9/t vs US$98.3/t
Brazil Potash CFR Granular Spot US$805/t vs US$810/t
China Graphite Flake -194 FOB US$805/t vs US$805/t
Battery News
Li-ion battery plant fire kills one and injures three others in Korea
Making lithium ion batteries is a tricky business and we expect there will be more fires like this
Company News
Adriatic Metals (Adriatic Metals PLC (LSE:ADT1, ASX:ADT, OTCQX:ADMLF)) 129p, Mkt cap £343m – Q4 report saw completion of US$245m funding package secured
Adriatic provides a summary of its activities for Q4 2021, where total expenditure amounted to £4.6m.
Total exploration and evaluation costs (capitalised & expensed) amounted to £2.99m.
Administration and corporate costs amounted to £660k.
Adriatic held £83.2m of cash at the end of the period.
Adriatic announced a project finance package of approximately US$244.5m during the period.
A term sheet signed with Orion for US$142.5m comprised of US$120m of senior secured debt and a $22.5m copper stream.
Adriatic raised US$102m during the period consisted of a $50m equity subscription by Orion and a placing of a further $52m.
The company continued to report strong drill results at the Vares Silver Project, with step out drilling intersecting high-grade mineralisation.
Adriatic was awarded a new licence area, called Kaznovice, located southwest of the existing Raska Project concessions area.
The 37 km2 of new licence area increases the total licence area held within the Raska project to 136km2.
*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia
BHP (ASX:BHP) A$46.35, A$138bn – Unification confirmed as the ‘Big Australian’ goes home
BHP, once widely known as the ‘Big Australian’, has confirmed that, following the required court approvals, the unification of its corporate structure became effective “at approximately 9:00pm (GMT) on 28 January 2022”.
The listing on London’s Official List has been cancelled “with effect from 8:00am (GMT) on 31 January 2022” and trading in Johannesburg “will be suspended with effect from 9:00am (SAST) on 31 January 2022 … listing on the JSE is expected to be cancelled at 9:00am (SAST) on 4 February 2022”.
Shareholders in the UK plc and in Johannesburg will receive shares in the ASX listed BHP Group Limited in respect of their current holdings.
The company confirms that “2,112,071,796 New Limited Shares have been issued and allotted for the purposes of Unification, which represents approximately 42% of the total number of Limited Shares”.
Bushveld Minerals* (Bushveld Minerals Ltd (AIM:BMN, OTC:BSHVF)) – 9.20p, Mkt cap £117m – Vanchem to lead expansion in vanadium production
BUY – Valuation 31p from 33p
(Bushveld Energy holds an indirect interest of 25.25 per cent in Enerox. Bushveld is invested in Enerox. Bushveld Minerals holds 74% of Bushveld Energy. Bushveld Energy holds a 50.5% interest in VRFB-H)
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Production of vanadium and ferrovanadium rose by 28% in the second half to 2,018 mtV to make 3,592mtV for the full year
Sales were 14% lower yoy at 3,314 mtV due to logistics issues with December shipments which cut Q4 sales by 30% yoy.
Production at Vametco beat our forecast but was 7.5% lower than last year causing unit cost to rise by 31.1% yoy.
Production at Vanchem rose 15% yoy while changing the mix of products combined with a kiln shutdown raised costs by 36.5%
Inventory: Unsold inventory of 278 mtV (worth ~$9.1m) due to Covid and other disruption to logistics, though there is always some unsold inventory at the year end.
Guidance for 2022 production and costs
Group production of 4,200- 4,400 mtV in 2022
Vametco: 2,450- 2,550 mtV with costs of $22.7-23.5/kgV
Vanchem: 1,750- 1,850 mtV, with cost $27.7-28.4/kgV
Target : Production run rate of 5,000-5,400mtV by the year-end
Vametco run rate to maintain stable and consistent output at 2,800mtV
Vanchem to hit a run rate of 2,600mtV by end 2022 and to more than double in 2023.
Bushveld posted strong gains in the second half after a challenging start to the year. Production guidance is weighted towards the second half 2022 offering another 608-808mtV of mainly ferrovanadium production.
We expect unit costs to fall materially this year as management focus on stability and more efficient production though the relative strength of the South African rand remains an issue.
Vametco: the Vametco mine had a good Q4 mining 22% more ore and a grade that was 58% higher yoy
Concentrate grade improved by 4.9% yoy in the plant helping recovery rates to to improve 1.7% to 72.7%
Somehow Nitrovan FeV production fell 0.4% to 700mtV in Q4 despite the better performance indicating some material may still be in the system
Production for the year fell 7.5% yoy to 2,453mtV but was higher than our 2,308 mtV forecast. Production should pick up slightly in 2022 to the guidance above.
Vametco cut C1 costs in Q4 to $22.9/KgV resulting in an average $24.0/kgV for the year representing a 31% yoy increase.
C1 Costs should fall in 2022 though much will depend on operational stability.
Vanchem: FY vanadium production rose 15% to 1,138mtV and better than our 1,108mtV forecast for the year
Q4 Total vanadium production came in at 262mtV vs 261mtV a year earlier.
Vanadium production was stable though the mix changed to increase production of ferrovanadium to 204mtv vs 148mtV yoy
Vanchem C1 costs rose 36.5% yoy to US$30.6/kgV.
Q4 C1 costs also rose by 43.1% due to clay and silica in the ore coating the kiln and requiring shutdown and cleaning.
This was due to the mining of ores from the Upper Seam at Vametco with rain affecting the quality of the ore extracted.
The problem has been largely resolved though better mine control and will be more fully resolved through the use of a magnetic separator ahead of the kiln feed to ensure 1.6-1.7%V2O5 grade with low silica and calcium content.
Cash and cash equivalents came to $15m at the year-end vs US$25m at end September.
Capex: Bushveld expects to spend around $17m this year versus $29m in 2021 which included $10.5m invested in Enerox Holdings
Vametco capex ZAR78m ~$5.1m
Vanchem capex ZAR127m ~ $8.3m
Mokopane ZAR3m ~$0.2m
BELCO ‘Bushveld Electrolyte Company’ ZAR37m ~$2.4m
Bushveld Energy ZAR10m ~$0.7m
Outlook: the outlook for vanadium is driven by relatively strong demand for structural steel.
Rising steel production in the US is driving ferrovanadium prices higher in the region.
China. While China suffered a stalling of the property market last year as Evergrande teetered on the brink of outright collapse, the authorities have stepped in to avert the disruption of bankruptcy and are now seen as stimulating the economy through the activation of new infrastructure projects
VRFBs: The ongoing, but somewhat slow, development of Vanadium Redox Flow Batteries is beginning to gain pace with China planning 100s of megawatt hours of vanadium flow batteries. While it is difficult to gauge exactly when this demand will appear Bushveld estimate demand of >9,000t of vanadium pentoxide will be required to formulate the electrolyte for these batteries.
Valuation: We have revised our valuation to 31p from 33p due principally to higher unit costs incurred in the first half 2021 at Vametco due to Covid and furnace repairs at Vanchem due to silica and calcium in the feedstock caused by poor mining in heavy rain.
The relative strength of the South African rand did not help either. Fortunately, these issues should now be past.
Management appear more cautions with guidance given recent operating run rates and the business looks placed to benefit from an uplift in both production and Vanadium prices.
We feel we are being cautious with our vanadium price forecast where we are using the current $35/lb price as seen in Europe and the US for 2022. Prices are higher in China but translate to a lower $32.7/KgV after accounting for import tariffs.
We have also adjusted our longer-term ferrovanadium price to $38/KgV from $40/KgV though we are hopeful that we will be upgrading this price forecast when Biden’s new infrastructure bill is passed which should lead to a significant uplift in demand for structural steel.
US regulations require a greater proportion of vanadium in US used steel and this should have a disproportionate impact on vanadium demand.
China has also made recent comments on stimulating the construction of additional high-speed rail and other infrastructure projects to maintain strong economic growth again requiring more vanadium input.
Game changer: While demand for structural steel is the current price driver, VRFBs may well be a game changer for the industry this year.
VRF Batteries utilise around 10t of vanadium pentoxide per MWh. The material is near 100% recoverable and is not used up in the energy storage process.
The total market size of the vanadium market is around 110,000MtV pa indicating that additional demand for 9,000t of V2O5 will provide significant support to pricing.
China became a net importer of vanadium in 2020 supporting our view of a market deficit in supply vs demand through the year. While this deficit was probably provided for out of stocks from Evraz and Glencore we suspect surplus stocks will be low and for prices to lift as inventories are drawn down.
*SP Angel act as nomad and broker to Bushveld
Galantas Gold (Galantas Gold Corp (AIM:GAL, TSX-V:GAL, OTC:GALKF)) 31p, Mkt Cap £23.2m – Drilling intersection on the Joshua Vein
Galantas Gold reports an intersection of 13.1m (estimated 6.9m true width) at an average grade of 17.4g/t gold, 74.6g/t silver with 1.9% lead in surface drill hole FR-DD-21-175 at its Omagh gold project in Northern Ireland.
The drilling, which forms part of a continuing 4,000m programme, “successfully targeted a potential 'dilation zone' within the Joshua Vein and includes a higher-grade section with 25.3 g/t Au, 108.4 g/t Ag and 2.9% Pb over 8.7 metres”.
Long sections included in the announcement 0601A_1-2022-1-30.pdf (londonstockexchange.com) show what the company describes a three of these potential dilation zones and the company says that a “similar deeper dilation zone was also intersected during the current program with hole FR-DD-21-171 intersecting 10.1 g/t Au, 93.5 g/t Ag and 3.4% Pb over 6.5 metres (see press release on December 13, 2021). In 2015, hole OM-DD-15-155 intersected 9.9 g/t Au over 21.6 metres approximately 45 metres below the current reported intercept”.
CEO, Mark Stifano, explained that “detailed mapping of the exposed mineralization … [in underground mine development] … identified zones of thicker widths, suggesting the significant potential to not only identify wider zones of mineralization but higher grades, and the opportunity to significantly expand current resources with additional drilling”.
He also said that “The Joshua and Kearney veins remain open along strike and to depth, and only represent 2 of the 16 veins identified to date”.
Conclusion: Drilling and underground mapping is shedding additional insight on the mineral potential and generating high-grade individual drilling intersections at the Omagh gold project. We look forward to further news from the continuing exploration, however the high grades within the distribution and seemingly complex geology may take some time to unravel and we await resolution of these aspects within a formal mineral resource estimate with interest.
Gemfields (Gemfields Group Limited (AIM:GEM)) 16.5p, Mkt Cap £193m – Monthly mining statistics for Kagem and Montepuez
Gemfields has published a detailed month-by-month review of its operations at Kagem emeralds and Montepuez rubies up to 31st December 2021 on its website Monthly Operational Market Update – 31 December 2021 | Gemfields Group.
Gemfields shows accelerating production at the 75% owned Montepuez ruby operation and a stabilising of monthly production at Kagem where monthly output has been running at between around 3.5m-4.0m carats since September 2021.
The company reports a group net cash balance of US$63m, excluding “the outstanding balance of auction receivables of USD 54.5 million at 31 December 2021”.
The published monthly data for Kagem goes back to 2009, while that for Montepuez goes back to late 2012 and in addition to production information includes detailed cost and capital expenditure information making it a comprehensive information source for interested parties seeking to gain insight.
Publication of such detailed information is somewhat unusual, particularly in what is generally seen as the secretive world of precious stone production and should provide a valuable insight to those with the interest and time to study the detail. We applaud Gemfields for making the information available.
The data also includes monthly information on Fabergé since 2010 and is presented in both tabular and graphical form and illustrates a strong recovery from the depths of the Covid19 pandemic when mining operations were suspended.
Hummingbird Resources (Hummingbird Resources PLC (LSE:HUM)) 10.6p, Mkt Cap £42m – Weak end to the year as contract mining underperforms at Yanfolila
Q4/21 production amounted to 18.2koz (Q3/21: 22.1koz) reflecting a drop in processed grades (1.79g/t vs 2.27g/t in Q3/21).
As previously highlighted operations were impacted by a local unrest leading to the plant being offline for ~6 days with mining contractor’s excavator fleet not performing to the scheduled mining rates.
Grades came off as mining operations focused on lower grade sections of the orebody caused by reduced material movement from an underperforming excavator fleet.
Q4/21 AISC averaged $1,803/oz on the back of reduced production rates compared to a realised gold price of $1,782/oz.
FY21 gold production totalled 87.6koz at $1,536/oz AISC (FY20: 101koz at $1,147/oz).
FY21 gold sales amounted to 87.6koz with an average realised gold price of $1,788/oz.
FY22 guidance is for 87-97koz at an average AISC of $1,300-1,450/oz.
The team has put in place a mitigation plan to address mining bottleneck including ordering five excavators to be added to the current fleet, improving contract miners maintenance schedules and optimising geological control and ore management.
Q1/22 is expected to be a lower production quarter with output to ramp up from Q2/22 driven by the arrival of five excavators (the first one is onsite and operations, two further are also onsite and are being assembled with the final two expected to be delivered by Q1/22 end) as well as reflecting plant maintenance planned for the first quarter of the year.
The current ECOWAS sanctions are not currently expected to impact this timeline.
Orosur Mining* (Orosur Mining Inc (AIM:OMI, TSX-V:OMI)) 12.4p, Mkt Cap £24m – Quarterly update provide highlights progress in Columbia
Orosur provides a summary of its activities for the second quarter ended November 30, 2021.
Orosur reported a loss of $255k for the period vs $264k over the period last year.
Corporate & administrative expenses rose to $565k vs $284k last year.
At period end, the company had a cash balance of $5.33m.
During the period, the company was informed by its Colombian Joint Venture Monte Aguila that it had elected to exercise its right to assume operatorship of the Anzá Project in Colombia.
Monte Aguila is a JV between Newmont and Agnico Eagle.
The Anzá Project is now in its fourth year of Phase 1 during which time a further US$4m is required to be spent by Monte Aguila under the terms of the Exploration Agreement.
Post period, Orosur announced that it had entered into a joint venture with Meridian Mining in relation to the Ariquemes tin project in Rondonia state in northwest Brazil.
*SP Angel act as Nomad and Broker to Orosur Mining
Vast Resources (Vast Resources PLC (AIM:VAST)) 1.4p, Mkt Cap £4.3m – Dec/21 operations quarterly update and Atlas refinancing
Baita Plai underground operations delivered 9.6kt and 9.7kt of mined and processed ore during Dec/22 quarter.
Copper concentrate production totalled 0.4kt.
Production of zinc concentrate was small and insufficient for a commercial sale with no lead production recorded during the period.
The Company pulled its previous production guidance that will be superseded by new quarterly reporting.
The team is focused on underground development with second ramp access and ramp access for the third Sub-Level and completion expected mid-Q1/22.
The Company is expecting a delivery of two jumbo drilling rigs in Q1/22 that should expedite underground development works.
The team is planning to bring the first long hold stope into production in Q2/22 that should improve the feed rate into the processing plant.
At the processing plant, external technical consultants are on site looking at recommendations to modernise and automate the processing plant.
Among suggestions are optimisation of the crushing circuit as well as installation of the molybdenum flotation line.
The Company is continuing discussions with regards to the refinancing of the Atlas convertible loan facility amounting to $6.25m.
The Company received a binding term sheet from a Swiss Investment Banking and Asset Management boutique firm for the above amount.
The term sheet is conditional on completion of definitive legal documentation including the assignment of the relevant security assets.
The team renegotiated the loan due date with Atlas from 31 Jan/22 to 30 Apr/22 including certain changes to the loan facility terms including:
The Conversion Price will be equal to 90% of VWAP for a single day in the 20 Trading Days immediately before the notice to covert received from the bondholder with the Company no longer able to pick a cash alternative election;
The Company can redeem the bonds at par before the new maturity date of 30 Apr/22;
Andrew Prelea (CEO) will offer ~15m shares beneficially owned by him as an additional collateral for the outstanding loan.
Conclusion: The Company produced 0.4kt Cu concentrate last quarter that assuming ~25% grade implies ~$1m worth of copper at current spot price as the team is struggling to ramp up production amid underground development bottlenecks. Long hole stoping is guided to start in Q2/22 that should improve the plant feed rate while the delivery of new drilling equipment is expected to the pace of underground development.
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
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
*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