Today's Morning View - Gold prices climb despite Fed rate hike on safe haven demand

SP Angel . Morning View . Thursday 17 03 22

Gold prices climb despite Fed rate hike on safe haven demand

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MiFID II exempt information – see disclaimer below

Altus Strategies* (ALS LN) – BUY, 111p – Last batch of Diba and Lakanfla drilling results with MRE and PEA update planned in due course

Ariana Resources (AAU LN) – Kiziltepe production guidance

Atlantic Lithium* (ALL LN) – Drilling commences at Ewoyaa Lithium Project

Bushveld Minerals* (BMN LN) – BUY, Valuation 31p – Board changes and new NEDs

Caledonia Mining* (CMCL LN) – Turning attention to other projects in Zimbabwe following successful rejuvenation of the Blanket mine.

Empire Metals* (EEE LN) – Drill results at Eclipse Project

Gem Diamonds (GEMD LN) – Strong diamond prices fuel improved financial performance in 2021

Rainbow Rare Earths* (RBW LN) – BUY, 46p – Interims

China – Expect substantial disruption to supply chains and manufacturing output as China battles against Covid surge

Covid ripping through Chinese provinces as Sinovac vaccine proves ineffective against new variants

• The Covid situation in China is not looking good if Hong Kong is any form proxy.
• Hospitals in HK are reportedly overwhelmed; mortality rates are sky high and high levels of sickness are affecting productivity.
• China could try to vaccinate using Pfizer, Moderna and AstraZeneca vaccines but we suspect even this would be too little too late and national pride will also prevent this.
• High population density in HK makes it more difficult to control outbreaks while Omicron’s greater ability to spread has got ahead of the authorities.
• China as very little chance to control Omicron as new sub-variants evolve and even western vaccines become less effective.
• High pollution levels over many years may render the population more susceptible to severe disease and we expect hospitals to be overrun and relatively high mortality rates.
• Covid is generally a two-week process for mild cases while hospitalisations may require >1 month recovery for survivors
• Treatments: A range of newish treatments are available but will need to be made available in a relatively undeveloped healthcare system to offset high mortality levels.
• Lockdowns: China is likely to continue to lockdown cities as the State attempts to slow the disease causing further disruption to the economy.
• We see rolling lockdowns continuing through the year and potentially into 2023 paralysing parts of the economy.

European car sales fall to lowest February on record last month

• New-vehicle registrations in the EU fell 6.7% to 720,000 for the month, the European Automobile Manufacturers Association said on Thursday.
• A supply crisis of various components including semiconductors has hampered the industry over the past 12 months, with the situation likely to get worse amid Russia’s invasion of Ukraine.

LME nickel trading reopening delayed as broker have orders cancelled

• The London nickel market faced fresh turmoil on Thursday morning, as brokers trying to sell at the 8% daily price limit had their orders cancelled, resulting in the LME to delay the opening of electronic trading.
• Broker said orders to sell were being rejected ahead of the 8am opening, and it appeared that the LME hadn’t adjusted the lower limit form Wednesday’s 5% threshold.
• Finally, trading recommenced at 8.45am, after which futures dropped the daily limit of 8% to $41,945/t.

Dow Jones Industrials +1.55% at 34,063

Nikkei 225 +3.46% at 26,653

HK Hang Seng +7.04% at 21,501

Shanghai Composite +1.40% at 3,315

Economics

US – The Fed raised rates 25bp to 0.25-0.50%, in line with expectations, as well as increasing the number of forecast hikes to seven in total, up from three envisaged in December last year.

• Policy makers expect the rate to hit ~1.9% and then to around 2.8% by the end of 2023.
• The Fed brought down its GDP projections to 2.8% from 4.0% estimated in December for 2022 highlighting risks from spillovers from the war in Eastern Europe that will hit the US economy through a number of channels.
• “You are looking at higher oil prices, higher commodity prices.. that will weigh on GDP to some extent,” Jerome Powell said.
• Inflation estimates were revised higher to 4.3% from 2.6% for this year.
• The Fed also said it would start allowing its $8.9tn balance sheet to start contracting at a “coming meeting” without elaborating, Bloomberg writes.
• Broadly expected move saw all benchmark equity indices closing higher on the day while 10y Treasury yields coming down to 2.192% after briefly hitting 2.246%, the highest since May/19.

Russia - ~$120m coupon payment on two Russian sovereign bonds has been completed, the government reported this morning.

• Concerns were that Russia may elect not to service its US$ denominated debt or pay coupon in rouble equivalent that would constitute a default event.
• Some of Russia’s US$ and € denominated bonds contain a fallback clause allowing repayments in roubles, but the two bonds with coupons due yesterday were not among them, FT writes.

Russian government orders metals companies to slash profit margins to support domestic prices

• Putin’s government has directed steel and metal producers to slash profit margins to 20-25%.
• The move is aimed to keep domestic prices ‘affordable.’
• The Deputy Minister of Industry and Trade stated current ‘prices for metallurgical products do not suit’ Russia.
• The ministry will also direct orders to other metal producers including nickel, aluminium and scrap.
• The government is also considering banning scrap exports and has introduced a €100/t export duty on scrap exports.
• Metals service centres and trading houses are also under orders to reduce profit margins.
• Food, fertilizer, machinery, and industrial goods producers were all also ordered to reduce prices.

Ukraine – President Zelensky addressed US Congress and lawmakers in Germany asking Nato countries to establish a no fly zone over Ukraine.

• The US signed a $800m security aid package on Wednesday increasing shipments of military equipment to Ukraine including 800 anti-aircraft systems and 9,000 anti-armour systems.

Peace talks continue as Russia continues to shell Ukraine cities

• Financial markets are looking for some form of settlement between Russia and Ukraine as Russia’s ability to take Kiev is eroded.
• Military experts are describing Ukraine’s hit and run tactics as effective against Russia’s columns of heavy tanks and artillery leading to some hope for an independent Ukraine.
• Poor maintenance of trucks and tyres, combined with the onset of rain and the thawing of hard ground confines vehicles to paved roads making them vulnerable to Ukrainian tactics.
• Putin’s rapid invasion tactics with light troops failed to kill President Zelensky and secure Kiev in the first few days of the invasion.
• President Biden branded Putin a war criminal raising the stakes for Putin personally and perhaps giving the US another chip to negotiate with.

Japan- 7.3-magnitude earthquake near Japan kills four, derails bullet train and leaves 700,000 without power

Currencies

US$1.1061/eur vs 1.1089/eur yesterday. Yen 118.76/$ vs 118.28/$. SAr 14.913/$ vs 15.054/$. $1.319/gbp vs $1.306/gbp. 0.733/aud vs 0.723/aud. CNY 6.348/$ vs 6.343/$.

Commodity News

Precious metals:

Gold US$1,940/oz vs US$1,917/oz yesterday

Gold ETFs 103.9moz vs US$103.5moz yesterday

Platinum US$1,024/oz vs US$1,001/oz yesterday

Palladium US$2,460/oz vs US$2,463/oz yesterday

Silver US$25.28/oz vs US$24.82/oz yesterday

Rhodium US$19,000/oz vs US$18,700/oz yesterday

Base metals:

Copper US$ 10,200/t vs US$10,065/t yesterday

Aluminium US$ 3,316/t vs US$3,346/t yesterday

Nickel US$ 41,945/t vs US$43,995/t yesterday

Zinc US$ 3,872/t vs US$3,804/t yesterday

Lead US$ 2,273/t vs US$2,266/t yesterday

Tin US$ 41,375/t vs US$43,100/t yesterday

Energy:

Oil US$101.8/bbl vs US$103.3/bbl yesterday

• Oil prices continue to whipsaw due to heightened demand risks from China and conflicting accounts on the progress of ceasefire talks between Russia and Ukraine.
• The IEA downgraded global oil demand growth by 1mmb/d to 2.1mmb/d for 2022, and identified the potential shut-in of 3mmb/d of Russian crude from April due to the ongoing disruption in the market.
• The Russian energy ministry has scheduled 4.235mmb/d of exports in 2Q22, a 5% q/q rise, as domestic refineries typically undergo Spring maintenance programs.
• US natural gas prices are stable ahead of an expected 73bcf drawdown in today’s EIA gas storage report.
• The Ukrainian gas transmission operator (GTSOU) said Gazprom’s Ukraine transit nomination for Thursday is 95mcm, down from 109.4mcm on Tuesday.

Natural Gas US$4.735/mmbtu vs US$4.728/mmbtu yesterday

Uranium UXC US$55.40/lb vs $55.60/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$143.2/t vs US$140.1/t

Chinese steel rebar 25mm US$774.1/t vs US$765.7/t

Thermal coal (1st year forward cif ARA) US$187.0/t vs US$187.0/t

Thermal coal swap Australia FOB US$325.0/t vs US$325.0/t

Coking coal swap Australia FOB US$630.7/t vs US$630.7/t

Other:

Cobalt LME 3m US$82,000/t vs US$82,000/t

NdPr Rare Earth Oxide (China) US$162,253/t vs US$164,743/t

Lithium carbonate 99% (China) US$74,432/t vs US$74,489/t

China Spodumene Li2O 5%min CIF US$2,740/t vs US$2,740/t

Ferro-Manganese European Mn78% min US$2,283/t vs US$2,270/t

China Tungsten APT 88.5% FOB US$340/t vs US$340/t

China Graphite Flake -194 FOB US$805/t vs US$805/t

Europe Vanadium Pentoxide 98% 12.4/lb vs US$12.4/lb

Europe Ferro-Vanadium 80% 62.25/kg vs US$61.75/kg

China Ilmenite Concentrate TiO2 US$398/t vs US$398/t

Spot CO2 Emissions EUA Price US$84.3/t vs US$84.3/t

Brazil Potash CFR Granular Spot US$1,100/t vs US$1,100/t

Battery News

Samsung SDI begins construction of solid-state battery factory

• Samsung SDI has begun building a pilot production line for solid-state batteries at the research and development centre in Suwon.
• The production line will test systems to produce cathodes and solid electrolytes while trialling the new production process to make solid-state batteries.
• Samsung SDI says the 6,500sqm S-Line is expected to achieve “market-leading research results and production technologies for solid-state batteries,” but has yet to provide any technical details since it announced that it was testing a solid-state battery cell, 2 years ago.
• The solid-state cell that they have been testing “would be capable of powering an EV for 800km with a 1000 cycle lifespan.
• Yoon-Ho Choi, CEO of Samsung SDI, told the press this week the new S-line would be the “springboard” to make Samsung SDI the world’s No. 1 battery manufacturer through “technological competitiveness, superior quality, and qualitative growth.”

Company News

Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)* 55p, Mkt Cap £64m – Last batch of Diba and Lakanfla drilling results with MRE and PEA update planned in due course

BUY – 111p

• The Company completed RC drilling at the wholly owned Diba and Lakanfla gold project in western Mali.
• Among selected intersections at the Lakanfla Central area are:
• 4.37 g/t Au over 6m from 32m including 9.18g/t over 2m
• 2.21 g/t Au over 12m from 137m
• 1.32 g/t Au over 26m from 85m
• Selected Diba intersections included:
• 1.81 g/t Au over 10m from 256m (outside of MRE)
• Drilling extended the mineralisation at Lakanfla Central, one of at least four priority prospects at Lakanfla, by ~200m along strike to ~750m which remains open to the northeast and at depth.
• Drilling results from the ~12,000m programme will be used to update the MRE and PEA for the project.
• Latest PEA Update released in Nov/20 was based on the Diba deposit only and envisaged a $20m heap leaching operation running at 57kozpa over +3y LOM and $544/oz AISC generating $140m in after tax NPV10% at $1,800/oz gold price.
• Current Diba MRE stands at ~400koz at 1.22koz in total resource (~220koz oxide and ~190koz sulphide) with ~220koz at 1.39g/t in the Indicated category.
• Diba and Lakanfla is now referred as to a single project after the Company regained 100% interest in the latter and given close proximity to each other may be potentially developed as a single gold operation (Lakanfla is located 5km east of the Diba License).

Conclusion: ~12,000m of drilling completed at Diba and Lakanfla focused on infill as well as step out holes with resulting confirming extensions to mineralised areas. The Company will use results to update MRE and PEA estimates in due course.

*SP Angel acts as nomad and broker to Altus Strategies

Ariana Resources PLC (AIM:AAU) 3.85p, Mkt Cap £41m – Kiziltepe production guidance

• Ariana Resources reports that its 23.5% owned Kiziltepe gold mine in Turkey is expected to produce approximately 25,000oz in 2022. Production during 2021 was 20,737oz
• Following the expansion of the mill, throughput is expected to double to approximately 400,000t with grades expected to be around 2.5g/t at a recovery rate of over 90%.
• Commenting on the development history of Kiziltepe since production started in 2017, Ariana Resources says that the mine was “expected to deliver an average of approximately 20,000 oz gold per annum over eight years of initial mine life from 2017 to 2024. Expansion of the Reserves to 175,000 ounces of gold is enabling the mine life to be further extended”.
• The mine’s future is “currently targeting a minimum ten-year mine life (to 2026), which will require the addition of a further 25,000 oz gold in reserves outside of the five main pits (Arzu South, Arzu North, Banu, Derya and Kepez) that are currently scheduled to be mined. The joint venture is confident that this can be achieved assuming the conversion of existing Resources to Reserves”.
• Managing Director, Dr. Kerim Sener, explained that “the completion of the processing plant expansion … was a critical development for Kiziltepe, enabling overall production by year-end to exceed guidance for the fifth year running, despite the expected reduction in throughput grade. With the new SAG mill operating as planned and the other enhancements at the processing plant performing well, we are expecting that throughput this year will break new records and ensure our guidance of 25,000 ounces of gold is met.”.

Conclusion: Ariana Resources expects a 20% increase in gold production from Kiziltepe in 2022 to around 25,000oz following completion of the mill expansion and the increased resource base which should also extend mine life until 2026.

Atlantic Lithium Limited (AIM:ALL)* 35p, Mkt cap £202m – Drilling commences at Ewoyaa Lithium Project

• Atlantic Lithium reports that it has commenced drilling at its Ewoyaa Project in Ghana, where the company has a JORC-resource of 21.3mt @ 1.31% Li2O.
• Atlantic intends to complete approx. 12,000m of exploration drilling to test several new targets defined in auger drilling within the Ewoyaa license area.
• Also, 6,000m of resource extension designed to test depth and strike extensions of known mineralisation
• Finally, 960m of geotechnical drilling at Ewoyaa in order to test the proposed mine pit wall and ground conditions, necessary for engineering design.
• Atlantic will also undertake some regional exploration at the site, having awarded an airborne geophysical survey to NRG for regional magnetics and radiometrics survey over the Cape Coast license.
• Highlights from the recently completed updated scoping study at Ewoyaa, based on a 2.0mtpa include:
• Pre-tax NPV8% of US$1,227m
• Pre-tax EBITDA of US$2,024m
• Post-tax NPV8% of US$789m
• Post-tax IRR of 194%
• Average EBITDA of US$178m per annum
• Len Kolff, COO of Atlantic Lithium, said: “Since commencing exploration earlier this year, we have identified six new target areas for RC drill testing; all within 3.5km of the current 21.3Mt @1.31% Li2O resource footprint. We have also identified extensions within the current MRE, where mineralisation remains open along strike and at depth for RC drill testing.”
• “To date, only a small area of approximately 28km2 has been auger tested, with an even smaller 13km2 area drill tested within our broader 560km2 lithium portfolio in Ghana.”

*SP Angel acts as Nomad to Atlantic Lithium

Bushveld Minerals Ltd (AIM:BMN, OTC:BSHVF)* – 12.79p, Mkt cap £162m – Board changes and new NEDs

BUY – Valuation 31p

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• Bushveld announce three new independent non-executive directors to meet the high standards of corporate governance expected of London listed companies.
• The move also reflects Bushveld Minerals' status as the world’s third largest producer of primary vanadium.
• Jeremy Friedlander, a NED since 2012 has retired from the Board while Ian Watson and Anthony Viljoen are also retiring from the board in the next few months.
• Bushveld’s senior independent NED will act as interim chair till pending a suitable replacement.
• The board will comprise two executive directors, Fortune Mojapelo, ceo and Tanya Chikanza, fd, an acting non-executive chairperson, and four independent non-executive directors.
• The new independent non executive directors are
• Kevin Alcock, a qualified chartered accountant, former ceo at Morse Plc and a business adviser.
• Mirco Bardella, formerly led Ernst & Young assurance services in the Mining sector leading audits in natural resources and advising on governance services.
• Jacqueline Musiitwa, a qualified attorney who founded Hoja Law Group, a legal consultancy representing governments in improving the business enabling environment and clients interested in cross border trade and market expansion. . Ms Musiitwa was Chief Advisor of Corporate Relations for Africa and Ventures at Rio Tinto

*SP Angel act as nomad and broker to Bushveld

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)* 1030p, Mkt Cap £131m – Turning attention to other projects in Zimbabwe following successful rejuvenation of the Blanket mine.

• Caledonia Mining reports increased revenues, gross profit and EBITDA for the year ending 31st December 2021 described by CEO, Steve Curtis, as “a turning point for the business”.
• Mr. Curtis said that gold production of 67,476oz during the year was “above the top end of the guidance range and was a new record for annual production … [and was] … supported by good cost control and gross profit for the Year was $54.1 million - 16 per cent higher than 2020. Cash generated from operations before working capital increased by 17 per cent from $42.4 million to $49.6 million”.
• Net cash generated from operations of US$30.9m (2020 – US$30.9m) offset investment expenditure of US$35.9m (2020 – US$28.0m) leaving a 31st December 2021 net cash balance of US$17.2m.
• As previously announced, following the completion of the Central Shaft at the Blanket mine, Caledonia Mining’s production guidance for 2022 is for production of between 73-80,000oz of gold in 2022.
• Mr. Curtis explained that “Caledonia's immediate strategic focus is to complete the remaining underground development associated with the Central Shaft project, which is expected to increase production, reduce operating costs and increase the flexibility to undertake further exploration and development at depth, thereby safeguarding and enhancing Blanket's long-term future.”
• He also said that Caledonia Mining believes that “there is excellent exploration potential in the older shallower areas of the mine and in brownfield sites immediately adjacent to the existing Blanket footprint”.
• Discussing opportunities elsewhere in Zimbabwe, last year Caledonia Mining acquired the Maligreen property in the Midlands region where NI-43-101 compliant inferred resources amount to 15.6mt at an average grade of 1.88g/t containing an estimated 0.94moz of gold.
• The initial effort at Maligreen “is to improve the confidence level of the existing resource base and we are currently re-assaying historic drill cores. Thereafter we expect to prepare a feasibility study to commercialise the existing resource before we engage in further exploration on the claims area along strike, at depth and at a previously unexplored zone in the claims area”.
• Caledonia Mining will not, however, pursue the Connemara North project “as it does not meet our investment criteria” although it will “evaluate further investment opportunities in the Zimbabwe gold sector with a view to transforming the Company into a mid-tier, multi-asset Zimbabwe-focussed gold producer”.

Conclusion: The successful completion of the 5 year long, US$67m, Central Shaft project at the Blanket mine secures the mine’s future and underpins a planned 80,000oz pa production from the mine into the 2030s. It also provides a foundation for further expansion plans elsewhere in Zimbabwe where, following the decision to decision to forego Connemara North, the current emphasis is at Maligreen.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

Empire Metals Ltd (AIM:EEE)* 1.08p, Mkt Cap £3.5m – Drill results at Eclipse Project

LINK TO FEBUARY FLASH NOTE

• Empire has released RC drill results from its Eclipse Gold Project in Western Australia, designed to gather further geological and structural information on the mineralised shear at the project.
• Seven RC holes for 960m have been completed so far, focused on delineating gold mineralisation at depth around the Eclipse shaft and Jack’s Dream shaft, and to test for continuity along strike to the south-east.
• Drilling has confirmed gold mineralisation is associated with a NW-striking and steeply SW-dipping shear zone, labelled the Eclipse Shear, extending over a strike length of more than 200m.
• Significant RC intersections are as follows:
• ECRC22_005 - 10m @1.12g/t Au from 107m downhole
• ECRC22_004 - 3m @ 1.31g/t Au from 93m downhole
• ECRC22_004 - 3m @ 1.30g/t Au from 98m downhole
• ECRC22_003 - 1m @ 0.41g/t Au from 64m downhole
• ECRC22_001 - 2m @0.33g/t Au from 86m downhole
• These latest results confirm the overall depth of known mineralisation to at least 95m, remaining open at depth.
• Empire will now follow up on drilling through a diamond drill programme comprising of 6 holes for a total of 900m in order to improve the geological model at Eclipse.

*SP Angel acts as Nomad and broker to Empire Metals

Gem Diamonds Limited (LSE:GEMD) 55p, Mkt Cap £83m – Strong diamond prices fuel improved financial performance in 2021

• Describing 2021 as a year in which it performed strongly, Gem Diamonds reports an increase in attributable profit to US$14.8m (2020 – US$13.6m) based on increased revenues of US$201.9m (2020 – US$189.6m) from its’ Letšeng mine in Lesotho.
• Average prices for the full year, at US$1,835/carat were 4% below the US$1,908/ carat achieved in 2020 and the company says that “The decrease in the prices achieved compared to 2020 relates mainly to fewer large and exceptional diamond recoveries, and the overall quality of the diamonds recovered as a result of the areas of the resource mined during the year”.
• Revenues include US$64.5m generated from the sale of 21 diamonds which realised in excess of US$1m each and included “Six diamonds greater than 100 carats … [which] … were recovered during the year, which is comparable to the 13-year average of eight, albeit lower than the 16 such diamonds recovered in 2020. Exceptional recoveries during the year included the two large high-quality Type IIa white diamonds of 367 and 245 carats which sold for US$26 160 per carat and US$40 139 per carat, respectively”.
• Gem Diamonds says that the combination of strong diamond demand and a declining “number of diamond producers, suggests that the fundamentals are supportive for achieving higher diamond prices in the future … [however, the company warns that] … Russia's recent invasion of the Ukraine has created political turmoil and the impact on the global economy, and the diamond market in particular, is uncertain at this stage”.
• The company says that Letšeng performed well “despite the significant challenges presented by travel restrictions, supply chain constraints, extreme weather conditions and intermittent external power outages on site … [and that] … Tonnes treated increased 15% year on year as operations returned to normal after the COVID-19 shutdowns in 2020. Carats recovered increased 14% to 115 335 (2020: 100 780)”.
• In local currency terms, total operating costs reduced by “15% to LSL271.75 (2020: LSL320.20 per tonne treated) due to more consistent operational throughputs and an increase in tonnes treated compared to 2020”. Gem Diamonds says however, that “Local currency rates for the Lesotho loti (LSL) (pegged to the South African rand) and Botswana pula (BWP) were stronger against the US dollar (compared to 2020), which increased the Group's US dollar-reported costs”.
• Describing operational plans for 2022, Gem Diamonds says that “A pre-evaluation of the feasibility of an earlier shift to underground operation will start early in 2022 … [and that] … A number of other projects are planned to optimise mining efficiencies, improve production, decrease costs and reduce emissions in line with our commitment to decarbonisation”.
• CEO, Clifford Elphick, summarised the results saying that “Gem Diamonds has delivered positive operational and financial results notwithstanding the continued challenges brought about by the COVID-19 pandemic on the availability of skills, equipment, spares and other aspects of the supply chain.”
• He also commented on the company’s response to Covid19 confirming that almost all its employees were now vaccinated and that“One of our priorities remains the safety of our employees, contractors and surrounding communities and we are pleased that we were able to assist the Lesotho Government in its fight against COVID-19 with a donation of 20 000 vaccines and a new 4x4 ambulance capable of reaching remote communities”.

Rainbow Rare Earths* (RBW LN) 14.51p, Mkt cap £76m – Interims

BUY – 46p

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 report a total loss of $2.1m for the group for the six months to end December 2021.
• Administration expenses including $0.8m of administration costs in Burundi rose to $1.9m vs $0.8m a year earlier.
• Total assets rose to $19m vs $13m at end June 2021 with £6.434m raised in a placing bringing in Techmet as a significant new investor.
• Cash and cash equivalents rose to $6.4m vs $0.6m at end June.
• The restriction on REE exports out of Burundi has led to a significant increase in the value of the REE concentrate held in Burundi which contains around 19.5% of Nd/Pr in ~54% TREO grade concentrate.
• Rainbow placed its Gakara mine and processing operations on care and maintenance in June last year at the request of the government of Burundi and staff contracts were further terminated at the year end. Negotiations with he government are expected to result in agreement around a new fiscal regime for the operation of the mine this year.
• Phalaborwa: Rainbow continues to make significant progress on the optimisation and design of the process plant to extract rare earths from the chemical residue at Phalaborwa.
• The metallurgical team are working on the production of Nd, Pr, Tb and Dy using the K-Tech process to maximise the revenue received for these oxide products.
• The K-Tech process uses continuous ion exchange and continuous ion chromatography, for purification and separation of REEs

Conclusion: Rainbow appear to be making good progress towards the development of the Phalaborwa process plant. Time spent on the optimisation could lead to significant benefits and value when the plant is commissioned and thereafter.

*SP Angel acts as financial advisor and broker to Rainbow Rare Earths

SP Angel and Digbee ESG joint initiative for mining companies

https://www.uploadlibrary.com/SPAngel_JohnMeyer/DIGBEE_Press_release.pdf

• SP Angel and Digbee, a specialist ESG group, wish to announce their joint initiative in bringing ESG accreditation to mining companies in their drive to meet institutional investment and rapidly evolving ESG standards and regulatory requirements.
• We are rapidly approaching a point where a company’s ESG profile will not simply be a positive investment factor but will become a precondition to investment by many investment funds.
• The guidance and ratings process developed by Digbee is specifically designed to assist mining companies meet the new expectations and ensure directors meet their ESG compliance objectives.
• The initiative will not only quantify and score the ESG profile of qualifying companies but will also highlight ESG improvements and positive performance as companies develop.
• Importantly, the process will enable investment funds to demonstrate the positive results of their investments to their underlying investors and stakeholders which can, in turn, lead to further funding.
• It is imperative that any ESG Rating is seen to be credible. Digbee’s solution was developed to address this: it is mining specific, right sized and future looking, based on an independent assessment of a submission that is supported by evidence and approved by the company’s board of directors. It will also address investor frustration at a lack of comparable or meaningful data.
• For companies at an earlier stage of their ESG journey, recording improvements over time through the Digbee initiative is likely to prove attractive to investment funds as a demonstration of their ESG commitment permitting institutional investment at an earlier stage.
• The direction of travel is now firmly towards renewable sources of energy and a transition to environmental sensitivity. Historically, regardless of the individual facts, miners have collectively been identified as bad actors in this regard. Digbee engagement and ratings should improve the visibility of the good work being done.
• For example, installing, wind and solar generation to displace oil and gas should not only cut energy costs but also reduce carbon emissions. Sharing this energy with a local community may further reduce emissions, strengthen community engagement and lead to long-term sustainable benefits well beyond the end of the mine life. Similarly, a mine closure, thoughtfully done, can leave a positive community legacy that will stand a company in good stead when it is seeking new mining opportunities. Having a third party ESG specialist incorporate these initiatives into a rating accepted by investors will help secure the credit such initiatives deserve.

Jamie Strauss, Founder & CEO, Digbee Ltd: “We are delighted with this joint initiative with SP Angel, the number one ranked advisor to the AIM Mining sector*. SP Angel has acknowledged the importance of presenting their corporate clients to institutional investors with credible ESG disclosure as an increasing prerequisite to encourage new investment. We look forward to working together to achieve a more sustainable mining industry that is recognised for its positive actions ”

John Meyer, Mining Analyst & Partner at SP Angel “Working with Jamie Strauss and Digbee will help prepare our corporate clients for ESG-orientated investment. Mining, exploration, and development companies contribute much to local communities which combined with the potential benefits of increasingly sustainable operations is worthy of recognition. Quantifying the benefits, improvements and legacies of these operations should act a catalyst to further improvement to the benefit of all stakeholders.

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.

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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

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%