Today's Morning View - Gold and base metals rally as Russian forces pull back

SP Angel . Morning View . Wednesday 30 03 22

Gold and base metals rally as Russian forces pull back

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MiFID II exempt information – see disclaimer below

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Beowulf Mining PLC (AIM:BEM)* – 3,400m drill programme to commence at multiple targets in Kosovo

Bushveld Minerals Ltd (AIM:BMN, OTC:BSHVF)* – BUY, Valuation 31p – Bushveld settle Enerox investment issue

Empire Metals Ltd (AIM:EEE)* – High-grade drill intercepts from inaugural campaign at Gindalbie

Europa Metals Ltd (AIM:EUZ, JSE:EUZ, OTC:EOPAF) – Interim report describes progress on resource evaluation and metallurgical testing at Toral

Petropavlovsk PLC (LSE:POG) – Gazprombank debt update

Polymetal International PLC (LSE:POLY) – Operations update

Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* - BUY – 17.9p – MoU for mine and plant automation and optimisation with a major partner

Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)* – Funding plans for the Empire open-pit copper mine, Idaho

Scotgold Resources Limited (AIM:SGZ)* – Interim results outline ramp-up plan and report record production in December 2021 at Cononish

Ukraine – Ukraine forces push back Russian forces as supply chains fail

• Ukraine forces appear to have gained the upper hand against the Russian invasion force, though news of Russian forces regroup to attack East Ukraine.
• We suspect Ukraine forces will use their advantage to push Russia out of Ukraine to a point where they can best defend the nation against future invasion by Russia.
• We expect the war to go on till Russian soldiers are forced back to a point which is seen as acceptable for the longer term defence of Ukraine.
• The cost of reparations will become a significant issue and we expect severe sanctions on Russia to continue with further Oligarchs placed on sanctions lists.

Gold recovers from one month low as traders weigh up peace talks as dollar and Treasury yields slide

• Gold climbed from one-month lows of $1,893/oz to its key resistance at $1,925/oz.
• More optimistic talks of peace between Russia and Ukraine hit the gold price, with Russia offering to ‘fundamentally cut back’ operations in northern Ukraine.
• Sentiment that this offer was more tactical than a genuine move towards peace has supported gold’s upward momentum overnight.
• Gold has been supported by a sliding dollar, with the index down 0.7% this week.
• Sliding US Treasury yields are also providing a tailwind to gold, with the benchmark 10-year note falling from 2.5% to 2.381% this week.

Nickel – LME market trading volumes collapse alongside other LME metals

• LME nickel volumes are down 60% from the 90-day average, raising the potential for a liquidity crisis in the key battery metal.
• The LME provides a key platform for producers and consumers to hedge their risk exposure to moving prices, with a lack of liquidity threatening that ability.
• Limited volumes also raise the potential for further extreme volatility.
• Aluminium and copper trading volumes have also fallen significantly.
• Analysts question whether traders have lost trust in the exchange following the LME’s cancellation of $4bn worth of trades of nickel on the unprecedented 250% short squeeze this month.
• Trading houses are also cutting back the size of their hedge positions on increasing margin requirements from creditors amid extraordinary volatility in commodities markets.

Copper - Mitsubishi looks to boost European copper trading business on incoming Quellaveco supply

• Mitsubishi has hired ex-Trafigura Branko Buhavac to expand its European base metals trading division. (Bloomberg)
• The move comes as the company expects a ramp up in copper concentrate supply from its 40% stake in Peruvian mine Quellaveco later this year.
• Anglo American expect Quellaveco to produce 120,000-160,000t of copper concentrate this year, increasing to 300,000t with full capacity.

Dow Jones Industrials +0.97% at 35,294

Nikkei 225 -0.80% at 28,027

HK Hang Seng +1.98% at 22,363

Shanghai Composite +1.89% at 3,265

Economics

China - Shanghai moves to support businesses hit by lockdown with tax rebates and subsidies

• Shanghai authorities are set to offer $22bn in tax incentives and fee cuts alongside offering rent exemptions.
• The move is intended to shore up businesses as they struggle with additional Covid restrictions amid the recent wave of infections.
• Banks are being instructed to offer low-interest bridging loans to companies affected. (SCMP)
• Beijing is concerned that the recent wave of infections and subsequent restrictions will limit the country’s ability to reach its 5.5% economic growth pace target.

US – House prices growth accelerated in January to more than 19%yoy with real estate sector remaining strong two years after the pandemic.

• S&P Case-Shiller 20-City Price Index (%yoy): 19.1% v 18.6% in December and 18.6% est.

Germany – Preliminary inflation data released from different states this morning suggest nationwide inflation is likely to beat a 6.8%yoy reading expected.

UK – Shop prices are reported to have climbed 2.1%yoy in March compared to 1.8% recorded in the previous month.

• While relatively subdued compared to general inflation levels in the economy, the rate was the highest since Sep/11.

Spain approves emergency fiscal support package to limit damage from soaring energy costs

• Spain has approved an emergency package, including fuel price cuts, to limit the fallout from the Ukraine war.
• Fuel sales will be subsidised by €1.4bn in an attempt to reduce prices by €0.20/litre and €450mn will be targeted directly at transport workers. (FT)
• The government hopes this will aid in cooling an unofficial transport strike initiated this month.
• Truckers have been striking against soaring energy costs, causing supply chain disruption across the country.
• The measures come into effect from Friday 1st April.
• Spain will also request increased support from the EU’s €800bn recovery funds.

Spanish inflation accelerated to the strongest pace in almost four decades coming in ahead of expectations.

• The measure climbed 9.8%yoy this month beating all 15 estimates in a Bloomberg survey.
• The rate was driven by food, fuel and power.

Chile - BHP touts $10bn investment in Chile if rules remain stable

• BHP has affirmed its intentions to keep investing in Chile, the world’s largest copper producer, as long as the rules remain investor friendly.
• Ragnar Udd, president of BHP Americas, commented: “we would like to invest over $10bn, and create mutual benefit for at least the next 50 years” at a copper conference in Santiago on Tuesday.
• BHP is looking at investing in a new concentrator and leaching processing facilities, developing new mines, and investments in decarbonisation.
• Chilean officials are currently debating proposals that include banning private ownership of natural resources and giving indigenous groups veto powers – although many market participants are sceptical of the likelihood of material change in the country.

DRC - China Moly and the DRC look to settle Tenke Mine dispute as Gecamines suspends court case

• State-owned DRC miner Gecamines has suspended its court case against China Molybdenum’s subsidiary Tenke Fungurume Mining.
• The DRC government is in the process of settling the dispute with China Moly outside of court.
• Gecamines is a minority partner in the giant cobalt and copper mine and accused China Moly of withholding information, including the size of the reserves.
• Tenke Fungurume produced 209,100t of copper in 2021 and 18,500t of cobalt.
• It aims to produce 20,500t of cobalt and 267,000t of copper in 2022.

Currencies

US$1.1134/eur vs 1.0979/eur yesterday. Yen 121.85/$ vs 123.95/$. SAr 14.450/$ vs 14.593/$. $1.313/gbp vs $1.315/gbp. 0.753/aud vs 0.751/aud. CNY 6.353/$ vs 6.369/$.

Commodity News

Precious metals:

Gold US$1,924/oz vs US$1,923/oz yesterday

Gold ETFs 105.7moz vs US$105.7moz yesterday

Platinum US$993/oz vs US$989/oz yesterday

Palladium US$2,186/oz vs US$2,288/oz yesterday

Silver US$24.89/oz vs US$24.90/oz yesterday

Rhodium US$19,200/oz vs US$19,000/oz yesterday

Base metals:

Copper US$ 10,482/t vs US$10,313/t yesterday

Aluminium US$ 3,510/t vs US$3,634/t yesterday

Nickel US$ 32,590/t vs US$32,500/t yesterday

Zinc US$ 4,105/t vs US$4,119/t yesterday

Lead US$ 2,396/t vs US$2,373/t yesterday

Tin US$ 42,545/t vs US$42,405/t yesterday

Energy:

Oil US$112.8/bbl vs US$111.6/bbl yesterday

• WTI oil prices briefly traded under $100/bbl after Moscow said it would cut military operations near Kyiv, before recovering as the U.S. cautioned against declaring progress as they await signs of de-escalation.
• The Dutch TTF Futures benchmark is up 12% in early trading to €121.2/MwH.
• Following the G7 nations rejection of Moscow’s demands for foreign companies to pay for their natural gas supplies in rubles, Russian officials confirmed they would work out practical arrangements by Thursday.

Natural Gas US$5.332/mmbtu vs US$5.444/mmbtu yesterday

Uranium UXC US$58.80/lb vs $59.20/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$154.3/t vs US$153.7/t - Iron ore continues rally as traders bet on swift demand recovery after China lockdowns and Russia-Ukraine war

• Iron ore has risen for a 4th consecutive day to hit $154/t, its highest since March 11th.
• Optimism over peace talks between Ukraine and Russia are supporting iron ore prices.
• Traders are also betting that Chinese demand will recover quickly following mass Covid restrictions in steelmaking hub Tangshan.
• Transport capacity to Tangshan remains muted as officials require truckers and other workers to test negative for Covid, hitting supply chains.
• Analysts expect these bottlenecks to clear soon as officials have started granting permits for iron ore haulage into Tangshan.
• Speculation trading margins have on Shanghai iron ore contracts have been lifted from 12% to 15%.
• Steel rebar and HRC prices have slid slightly.

Chinese steel rebar 25mm US$793.4/t vs US$792.1/t

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

Thermal coal swap Australia FOB US$253.5/t vs US$253.5/t

Coking coal swap Australia FOB US$500.0/t vs US$480.0/t

Other:

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

NdPr Rare Earth Oxide (China) US$153,087/t vs US$155,414/t

Lithium carbonate 99% (China) US$74,222/t vs US$74,018/t

China Spodumene Li2O 5%min CIF US$2,810/t vs US$2,810/t

Ferro-Manganese European Mn78% min US$2,209/t vs US$2,183/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% 12.1/lb vs US$12.2/lb

Europe Ferro-Vanadium 80% 61.25/kg vs US$61.75/kg

China Ilmenite Concentrate TiO2 US$399/t vs US$398/t

Spot CO2 Emissions EUA Price US$89.4/t vs US$87.7/t

Brazil Potash CFR Granular Spot US$1100/t vs US$1100/t

Battery News

State-owned utility to use Tesla batteries for energy storage

• Queensland’s CS Energy has picked Tesla’s Megapack batteries for it’s A$150m energy storage project to back up wind and solar power.
• The company plans to build the 100MW battery storage project, which would be able to provide 200MWh of power, next to its Kogan Creek coal-fired power station, to take advantage of existing transmission connections.
• The battery will be part of an energy hub that will include a green hydrogen demonstration plant being built by Japan's IHI Corp, with construction set to begin in September, CS Energy said last week.

Vietnamese automaker to build US factory in North Carolina

• Vietnamese automaker, VinFast, has announced a preliminary deal to initially invest $2bn to build a factory in North Carolina to build electric buses, SUVs and battery cells.
• The company plans to invest $4bn into the factory complex over time.
• Construction is expected to start this year, as soon as the company gets necessary permits, and is expected to finish by July 2024 – the plant's initial capacity will be 150,000 units per year, Vinfast said.

Lotus unveils new electric SUV as it leaves behind British heritage

• Lotus has left behind its heritage as a quirky English builder of sports cars last night to embrace its ambition to become a multinational, 21st-century carmaker.
• The British car maker will now manufacture its new electric SUV, the Eletre, at a new factory being built in Wuhan by Geely, the Chinese parent of Lotus.
• The Eletre has been billed as the world’s first electric hyper-SUV – with a top speed of 160mph and is capable 0-60mph in three seconds.
• When driven more conservatively, it claims a range of 370 miles on a single charge of its 100 kilowatt-hour batteries.
• Geely is one of China’s biggest automotive groups and is spending $2bn on the transformation of Lotus, with plans to build 90,000 executive and family cars a year in Wuhan from next year.
• Its existing assembly plant at an old RAF airfield in Norfolk will continue to build Lotus sports cars, with plans for a rate of 10,000 a year, about six times its present output.
• Geely has signalled that in time it will look at floating Lotus, as it has with Volvo and Polestar.

Volvo receives order for 126 electric semi-trucks

• Volvo Trucks has announced that it received an order for 110 units of its Class 8 electric semi-truck from Maersk-owned Performance Team.
• Performance Team added the 110-unit order to an initial order of 16 electric trucks made in Q3 ’21.
• The VNR semi packs 275 miles of operational range. With a 250kW charging capability that enables 80 percent charge in 90 minutes for the six-battery package or just an hour for the four-battery configuration.

Company News

Beowulf Mining PLC (AIM:BEM)* 8.9p, Mkt Cap £94m – 3,400m drill programme to commence at multiple targets in Kosovo

• Beowulf reports that it has mobilised a rig on site in order to commence drilling at the Mitrovica licence, firstly on the Wolf Mountain zinc-lead-silver targets before attention is turned to the Majdan Peak gold prospect.
• Both licenses are located within 10km of the Stan-Terg deposit, which has a total reserve of 29Mt @ 3.45% Pb, 2.30% Zn, 80 g/t Ag and past production of 34Mt of ore.
• Drilling has been funded by a £1m investment in Vadar Minerals by Beowulf, increasing the Company’s ownership in Vadar from 51.4% to 59.5%.
• Wolf Mountain: Drilling will follow on from previous drilling and trenching at Wolf Mountain which tested the depth extension and lateral continuity of mineralisation associated with widespread gossanous hydrothermal breccias.
• A 2020 IP survey identified a series of exceptionally high IP anomalies located on distinct northwest trends and were well supported by soil and rock sample anomalies.
• The 2022 programme will now target potential higher-grade feeder structures which could produce economic results.
• Madjan Peak: This highly prospective target is defined by a blanket of advanced argillic alteration typical of high sulphidation epithermal systems.
• Rock and soil sampling programmes have identified widespread and significant Au anomalies of over 11g/t in rock samples and <0.36 g/t in soils, with the company previously commenting that an extensive gold anomaly was identified over an area approximately 1400m x 700m.
• Results from 3D IP surveys have delineated prominent anomalies which are clearly associated with soil and rock anomalies at shallow depth.
• The scale and size of the anomaly, together with coincidental multi-element anomalies and extensive hydrothermal alteration, are comparable to significant high-sulphidation epithermal gold deposits within the region.
• The upcoming drill programme at Madjan Peak will l focus on drilling a selection of the most compelling IP targets on this prospect.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Bushveld Minerals Ltd (AIM:BMN, OTC:BSHVF)* – 12.52p, Mkt cap £157m – Bushveld settle Enerox investment issue

BUY – Valuation 31p

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• Bushveld Energy has amended its agreement with Acacia Resources in relation to its investment into Cellcube.
• Mustang holds a 22.1% interest in VRFB Holdings, a joint venture partner with Enerox Holdings Limited.
• Garnet Commerce Limited had objected to Mustang’s involvement initiating high court proceedings against VRFB-H and Enerox Holdings.
• The amended agreement extends the backstop arrangement for Mustang CLNs noteholders to 31 July 2022
• Mustang has cancelled its $1.5m Convertible notes issued to Primorus and has now issued a US$1.5m convertible loan note to Bushveld
• The joint venture can now proceed to work on building a portfolio of assets within the VRFB ‘Vanadium Redox Flow Battery’ supply chain.
• There is significant new demand for deliverable, grid-scale, battery storage solutions to compensate for increasing Wind and solar power within global power production.
• A 1MWh VRFB battery uses around 5.5mtV of vanadium indicating that a 40MWh project would require some 220mtV of vanadium worth around $8.8m.
• The relative simplicity, reliability, and long life of VRFB batteries enables bank financing for the rental of the contained vanadium.
• Portfolios of vanadium in VRFB batteries can then be securitised to lower the cost of financing.
• Vanadium prices have stabilised at over $44.5/kgV in China with higher spot prices seen in Europe and the US.
• We believe Bushveld is selling some vanadium material outside its ‘term contracts’ at up to 70kgV raising sales.
• We see the higher sales as offsetting the cost of ongoing disruption caused by Covid lengthening supply chains.

*SP Angel act as nomad and broker to Bushveld

Empire Metals Ltd (AIM:EEE)* 1.3p, Mkt Cap £4.3m – High-grade drill intercepts from inaugural campaign at Gindalbie

LINK TO FEBUARY 2022 FLASH NOTE

• Empire has released RC drill results from the inaugural programme at Gindalbie Gold Project in Western Australia, over which Empire has signed a Tribute Agreement.
• The Agreement gives Empire the exclusive right to explore, develop and mine within a granted area on Maher Mining's 100% owned mining lease M27/158, which sits adjacent to the eastern border of the Eclipse licence area and extends the current area for exploration targets by over 200% to a total of 943ha.
• To date, 1,676m of RC drilling has been completed focused mainly on known mineralised trends based on historical workings, soil geochemistry mapping and previous RAB/RC drill results, being Homeward Bound, Laurel-Bulletin, South Gippsland #3, Golden Puzzle and Bud’s Find.
• Of the 16 RC holes drilled, six returned significant intercepts and Homeward Bound, in particular, produced very high grades and/or good intercept widths within all four drill holes.
• Significant gold mineralisation was encountered at depth below the small open pit at Bud’s Find and a 3m wide mineralised lode was identified at Laurel.
• The Homeward Bound target yielded the most exciting results, with highlights from the four holes drilled:
• 5m @ 8.99 g/t Au from 31m downhole, including 1m at 40.90 g/t Au
• 3m @ 8.96 g/t Au from 98m downhole, including 2m at 13.28 g/t Au
• 3m @ 9.88 g/t Au from 46m downhole, including 1m at 26.20 g/t Au
• Significant intercepts were also reported at Bud’s Find and Laurel-Bulletin:
• 3m @ 1.15 g/t Au from 27m downhole at Laurel
• 2m @ 0.64 g/t Au from 89m downhole at Bud’s Find
• Drilling was completed with the aim of testing for high-grade gold lodes within the transition and fresh rock, immediately below or adjacent to several of the historic mine shafts.
• Several high priority targets have been defined at Gindalbie and it is intended to follow up on these with further, more targeted drill campaigns over the coming months.

Conclusion: Investors should take great encouragement from the suite of drill results released this morning at the company’s newly acquired Gindalbie Project. We look forward to seeing further results from Gindalbie as well as the adjacent Eclipse project, situated in the highly prospective Western Australian Goldfields.

*SP Angel acts as Nomad and Broker to Empire Metals

Europa Metals Limited (Europa Metals Ltd (AIM:EUZ, JSE:EUZ, OTC:EOPAF)) 3.75p, Mkt Cap £3.1m – Interim report describes progress on resource evaluation and metallurgical testing at Toral

• Europa Metals has reported a pre- and post-tax loss of A$1.36m for the six-months to 31st December 2021 (2020 – loss of A$1.65m).
• The company also reports a 31st December cash balance of A$2.53m.
• Reviewing the period, Executive Chairman and Interim CEO, Myles Campion, described the continuing work “to advance our understanding of the Company's wholly owned Toral lead, zinc and silver project in the Castilla y Léon region, Spain” where the company sees “a potential future low capex, high margin, lead, zinc and silver mine within the EU”.
• Drilling and additional metallurgical test work yielded a “55% increase in the indicated resource to approximately 5.9 Mt @ 7.1% ZnEq(including Pb credits) within a total resource of approximately 20 Mt @ 6.3% ZnEq(including Pb credits)”.
• Metallurgical investigation of drill-core has shown that X-Ray Transmission (XRT) technology can process material previously considered sub-economic through the rejection of over 40% of mass as waste and enhancing grade of the residual material.
• The company has previously explained that further test work will evaluate the flotation response of the upgraded material produced from the XRT study

Conclusion: Over the six months to 31st December 2021, Europa Metals’ drilling programme resulted in a 55% increase in the mineral resources estimate at Toral and metallurgical testing has demonstrated that meaningful grade enhancement is achievable through the application of X-Ray sorting technology. We await further news as the test programme progresses towards a Pre-Feasibility Study.

Petropavlovsk PLC (LSE:POG) 4.8p, Mkt Cap £190m – Gazprombank debt update

• The Company is in early stages of discussions with its advisers and Gazprombank in regards to a potential restructuring of outstanding lending facilities with the bank.
• The Company reported this morning that previously due interest payment of $560k and a $9.5m principal repayment were no paid due to UK sanctions that prohibit any business with Gazprombank.
• The Company currently holes a $200m term facility with the bank as well as a ~$87m revolving credit facility.

Polymetal International PLC (LSE:POLY) 386p, Mkt Cap £1.8bn – Operations update

• Gold and concentrate sales continue as usual from Kazakhstan.
• In Russia, gold and silver concentrates continue to East Asia and Kazakhstan while gold bullion sales were restored with the Company highlighting strong domestic demand from retail investors amid a temporary ban on buying of foreign currency and a rapid fall in the rouble.
• The Company continues to sell gold at global market price for exports and locally saying that the latest Central Bank of Russia proposal to buy gold off commercial banks at a fixed price of R5,000/g (~$1,800 at USDRUB 85) is not expected to affect Company’s realised gold price materially.
• Production forecast reiterated at 1.7moz GE with unit costs guidance is being reviewed to take into account latest change in exchange rates and logistics.
• Advanced capital projects will continue as planned with Kutyn, Urals flotation and Prognoz to be commissioned on schedule in Q3/22, Q4/22 and Q1/24.
• POX-2 will be delayed by 3-6 months due to logistical challenges while early stage development projects to be delayed by a year (Veduga, Mayskoye backfill, Maminskoye).
• Pacific POX project has been delayed indefinitely and potentially to be relocated to Kazakhstan.
• Commenting on its dividend policy, the Company continues to re-evaluate its latest dividend recommendation (52c final dividend or ~$246m) in light of funding and regulatory uncertainty and monitors reopening of trading in Moscow and development related to National Settlement Depositary - Euroclear operations ensuring all investors will be able to receive the dividend payment.
• New Board members including new five independent directors and a new Chair will be up for approval at the coming AGM scheduled for late April.
• Separately, FT article released yesterday suggested the Company may consider a demerger of its Kazakh assets, accounting for ~1/3 of production last year, to ringfence part of its portfolio from Russian sanction levied by major economies.
• As FT put it, the Company is considering to split the “operationally good” Kazakh assets from the “reputationally bad” Russian assets.

Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* 4.5p, Mkt Cap £76m – MoU for mine and plant automation and optimisation with a major partner

BUY – 17.9p

• The Company signed a Memorandum of Understanding with ABB to optimise production control and process solutions for spodumene concentrate mining and processing operation.
• ABB, a leading global technology and engineering company with four main business segments including electrification, robotics, automation and motion generating ~€25-30bn in revenues.
• The MoU is designed to help the Company to deliver ultra low carbon spodumene concentrate production using ABB’s expertise in industrial automation and smart electrification systems.

*SP Angel act as Nomad to Savannah Resources

Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)* 62p, Mkt Cap £71.1m – Funding plans for the Empire open-pit copper mine, Idaho

(Phoenix holds 80% of the Empire mining property in Idaho)

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• Phoenix Copper has announced that it “is in the process of engaging a syndicate of US based broker-dealers to work with the Company and its existing brokers and advisers to execute a proposed placement of non-dilutive loan notes (the "Loan Notes") to finance the construction and development of the Empire Open Pit Copper Mine in Idaho, USA”.
• The company is expecting “to raise a minimum of $60 million via the issue of Loan Notes to institutional and other investors” and advises that it “proposes to seek admission to trading of the Loan Notes on a recognised securities market”.
• Phoenix Copper explains that the US$ denominated Notes “will be non-convertible and be repayable after 10 years” and will pay a fixed interest coupon on a semi-annual basis “or a coupon calculated as a royalty on the net smelter return revenue received from production and sales at Empire”.
• Phoenix Copper cautions that “There can be no certainty that the Proposed Fundraise will proceed, or that the final terms agreed with investors will be consistent with those set out in this announcement”.
• Work is continuing on the feasibility study for the Empire project and should refine capital cost estimates for the project, however, the company’s published economic model envisages pre-production capital for the first phase of the mine’s development of US$52.6m.
• In a separate announcement today, Phoenix Copper reports that directors and advisors have exercised warrants representing a total of 121,111 shares at 28p each raising £33,911 in total.

Conclusion: Phoenix Copper intends to raise at least US$60m to fund development of its Empire open-pit copper mine in Idaho through the issue of tradable loan-notes.

*SP Angel acts as nomad to Phoenix Copper

Scotgold Resources Limited (AIM:SGZ)* 65p, Mkt Cap £39m – Interim results outline ramp-up plan and report record production in December 2021 at Cononish

BUY - 162p

• Scotgold’s interim report on the months to 31st December 2022 describes a “transformative time for Scotgold” with “significant progress” at the Cononish mine near Tyndrum.
• The company reports a pre-tax loss of A$5.3m (2020 – A$2.8m loss) and a 31st December 2021 cash balance of A$0.96m.
• Chairman, Peter Hetherington, said that the company was continuing to make progress and implement “optimisation initiatives at Cononish to achieve gold production of c.23,500oz p.a. run rate by end of Q1 2023.”
• He explained that “calendar year Q4 2021 saw us produce 1,508 ounces of gold and 7,200 ounces of silver from Cononish with the month of December 2021 being a record month in terms of gold concentrate with 101 tonnes produced to date”.
• CEO, Phil Day, said that “The second half of calendar year 2021 saw us lay the foundations for growth by implementing initiatives to increase Cononish's gold recoveries and in turn improve the gold production profile of the mine. During the past quarter we have been focused on preparing the access to the second cut and fill stope at Cononish and I'm pleased to report we accessed it as of 21 March 2022”
• Mr. Day described this as a “pivotal moment in our mine development plan, allowing us to access reserve mine gold grade more readily, which should see our gold grades increase significantly inline with our mine plan during 2022 and beyond”.
• A table published in today’s announcement quantifies the phased production ramp-up at Cononish:
• Phase 1 – Q1 2022 produces at an annualised rate of 36,000tpa of ore to produce gold at a rate of 9,910oz pa of gold;
• Optimisation Phase – Q2 2022 produces 51,000tpa of ore to produce gold at a rate of 17,500oz pa of gold;
• Phase 2/ Expansion Phase – Q1 2023 - produces 72,000tpa of ore to produce gold at a rate of 23,500oz pa of gold
• The company explains that it has “13 licences covering a significant 2,900km position of the Dalradian … [geological] … Belt … [and an] … overarching vision … to build the Company into a multi-asset gold production company in Scotland”.

*SP Angel acts as nomad and broker to Scotgold Resources

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

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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.

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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%