Today's Market View - KEFI Gold & Copper, Anglo Asia Mining, Phoenix Copper, and more...

SP Angel . Morning View . Wednesday 20 04 22

Expect demand for copper to fall in China as lockdowns hit factory activity

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MiFID II exempt information – see disclaimer below

Graphene / graphite purification – private financing

• We are inviting investors to finance a private company which produces high-grade graphite and graphene from low grade graphitic material.
• The company also sells: Graphene paint, and is developing Li-ion battery anodes along with a Concrete modifier

*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.

KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* – £8.0m equity raise

Libero Copper & Gold (OTCMKTS:LBCMF) – 251m at 1.13% CuEq assayed from the first 450m of 1,235m hole at Mocoa

Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* holds a 19.8% stake in LBC (12.6m shares + 6.3m C$0.75 warrants)

Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)* – Phoenix Copper Applauds Use of Defense Production Act

Prospect Resources Ltd (ASX:PSC) – US$343m received on disposal of the Arcadia Lithium Project

Rio Tinto PLC (LSE:RIO) – Iron ore and aluminium output fall in Q1 report

SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF)* – Cascabel pre-feasibility study envisages initial production in mid 2029

EV part maker Schaeffler signs European rare earth deal

• German auto parts supplier Schaeffler has signed raw materials deal to ensure the supply of rare earth magnets from Europe for its EV motor business.
• Schaeffler has agreed a five-year deal with Norway's REEtec to supply rare earth oxides from 2024, with the value of the transaction not revealed.
• The deal is the latest in a growing theme of part makers and automakers sourcing rare earths from outside China, who currently supply over 90% of globally mined rare earths.
• Schaeffler is also working with European partners to use the rare earths processed by REEtec to produce permanent magnets.
• REEtec has been running a demonstration plant since 2019 and the new deal will enable the company to build a commercial separation facility, sourcing raw materials from Vital Metals in Canada.
• We expect to see similar deals struck between rare earth miners/refiners and auto parts companies as market participants along the value chain realise the importance of developing a western supply chain.
• It is the first reported agreement by a European auto sector supplier or automaker to source rare earths within the region, according to Reuters.
• Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)* is currently progressing its feasibility study for the Songwe Hill Rare Earths project in Malawi, along with its Pulawy Separation plant in Poland, which is targeting 2,000tpa of high value NdPr oxides along with 50tpa Dy and Tb oxides.
• Mkango has successfully produced neodymium and praseodymium enriched rare earth carbonate from the final stages of hydrometallurgical piloting – a key milestone for the company.
• REE recycling is also a strategy for Mkango, who are currently collaborating with various UK institutions such as the University of Birmingham and Jaguar Land Rover with the aim of establishing a recycled source of permanent magnets in the UK.
• Rainbow Rare Earths Ltd (LSE:RBW)* is advancing its Phalaborwa REE tailings project in South Africa and its Gakara project in Burundi.
• Rainbow’s management are currently focused on testing and refining the flowsheet for the Phalaborwa project for the extraction of three rare earth oxide streams, NdPr, Tb and Dy.

*SP Angel acts as Nomad and Broker to Mkango Resources

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

Copper - demand falling in China as Henan copper reports a fall of 30% in activity over the first two weeks of April

Dow Jones Industrials +1.45% at 34,911

Nikkei 225 +0.86% at 27,218

HK Hang Seng -0.46% at 20,931

Shanghai Composite -1.35% at 3,151

Economics

IMF slashes global growth estimate by 0.8pp due to war in Ukraine

• The IMF downgraded its forecasts for the second time this year, projecting global growth of 3.6% in both 2022 and 2023, a drop of 0.8 and 0.2pp respectively, from its January forecast.

China – Covid restrictions now in >73 of China’s top 100 cities

Benchmark rate unchanged despite expectations of rate cut in April

• Chinese banks kept their loan prime rates unchanged in April, with the benchmark one-year loan prime rate at 3.7% and its five-year LPR at 4.6%.
• On Friday, the PBoC announced a 25bp cut to banks’ RRR from April 25th, releasing 530 billion yuan ($83.16 billion) in long-term liquidity.
• The cut was smaller than the usual 50 or 100bp cut that was expected.
• China’s economy has been hit in recent months by the country’s most widespread outbreak of the coronavirus since the pandemic began, prompting the IMF to cut its growth forecast for China to 4.4% from 4.8%.
• The smaller then expected RRR cut and not reducing rates may reflect concern by the Chinese central bank over inflation and U.S. monetary tightening, Reuters notes.

China will continue boosting strategic ties with Russia, according to senior diplomat Le Yucheng

• China’s Vice Foreign Minister has called for deepening ties in a range of fields during a meeting on Monday in Beijing with Russian Ambassador to China Andrey Denisov.
• Le said that a 30% jump in trade between the nations during Q1 22 demonstrates “the great resilience and internal dynamism of bilateral cooperation”.
• Le also commented: “No matter how the international landscape may change, China will continue to strengthen strategic coordination with Russia for win-win cooperation and jointly safeguard the common interests of the two countries”

US - NAHB housing index 77 in April vs 79 in March and 83.0 yoy

• Housing starts rose 0.4% to 1.793m units in March vs 6.5% at 1.788m in February
• Building permits 0.4% to 1.873mill units vs -1.6% at 1.865m units in February

Germany – Producer prices increase at fastest rate since 1949 amid soaring energy costs

• German producer prices increased at the fastest pace since records began 73 years ago, with prices for industrial products rising 30.9% in March vs last year.
• Consumer price inflation soared to 7.3% in March, the highest since German reunification – partly due to producers passing soaring raw materials prices onto consumers.

Peru - One fifth of Peruvian copper production currently offline due to social conflicts

• Resource nationalism and social unrest are on the rise in Peru, which is pushing up copper prices even further as prices sit just below historic highs.
• Currently about a fifth of the country’s copper output will offline as MMG’s Las Bambas and Southern Copper’s Cuajone are currently idled due to community protests.
• Residents near Glencore’s Antapaccay copper mine are also preparing a protest, various news outlets report.
• Mining companies operating in Peru are worried about tax hikes following the election of President Pedro Castillo, from the country’s Marxist party.
• On Tuesday, Pedro Francke, a former Castillo finance minister, said that modest hikes to mining taxes could raise more than $1bn.

India - wholesale price index rose 14.5% yoy in March vs 13.1% in February

Currencies

US$1.0813/eur vs 1.0783/eur yesterday. Yen 128.55/$ vs 128.09/$. SAr 14.975/$ vs 14.707/$. $1.302/gbp vs $1.301/gbp. 0.742/aud vs 0.739/aud. CNY 6.409/$ vs 6.374/$.

Commodity News

Precious metals:

Gold US$1,944/oz vs US$1,976/oz yesterday

Gold ETFs 106.9moz vs US$106.6moz yesterday

Platinum US$982/oz vs US$1,023/oz yesterday

Palladium US$2,382/oz vs US$2,427/oz yesterday

Silver US$25.01/oz vs US$25.82/oz yesterday

Rhodium US$18,750/oz vs US$18,900/oz yesterday

Base metals:

Copper US$ 10,277/t vs US$10,470/t yesterday

Aluminium US$ 3,250/t vs US$3,346/t yesterday

Nickel US$ 33,265/t vs US$33,745/t yesterday

Zinc US$ 4,470/t vs US$4,487/t yesterday

Lead US$ 2,419/t vs US$2,441/t yesterday

Tin US$ 43,090/t vs US$43,180/t yesterday

Energy:

Oil US$108.6/bbl vs US$112.6/bbl yesterday

• Oil prices have steadied this morning following yesterday’s rout on the back of the IMF downgrading its global growth forecast to 3.6% (from 4.4%), citing Russia's invasion of Ukraine, heightening market concerns of an economic slowdown.
• According to API data, US crude oil stocks fell 4.5mb in the week ended April 15th. This afternoon’s EIA report is expected to show crude inventories up 2.2mb, with ~1mb draws for both gasoline and distillates.
• European energy prices were steady with reduced supplies from both Russia and Norway, as the traditional maintenance season is also scheduled to commence this week.
• US natural gas prices fell 10% as 2-week weather forecasts shifted warmer, with data provider Refinitiv now estimating 130 heating degree days (from 156 HDDs yesterday) over the next two weeks in the L48.
• Saudi Arabia reports February crude exports rose to 4.4% to 7.3mbpd
• Libya declared force majeure on oil exports due to political disagreement

Natural Gas US$7.104/mmbtu vs US$7.728/mmbtu yesterday

Uranium UXC US$64.05/lb vs $64.35/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$150.0/t vs US$154.8/t

Chinese steel rebar 25mm US$802.6/t vs US$803.9/t - March Chinese crude steel output was off 6.4%yoy at 88.3mt vs 94.02mt yoy

Thermal coal (1st year forward cif ARA) US$236.8/t vs US$236.8/t

Thermal coal swap Australia FOB US$336.0/t vs US$320.0/t

Coking coal swap Australia FOB US$515.0/t vs US$515.0/t - China coking coal imports from Russia surge as rest of world shuns Moscow

• China more than doubled imports of steel-making coal from Russia in March, buying at a discount as other Nations ban delivery due to the war in Ukraine.
• Coking coal imports from Russia jumped to 1.4mt in March vs 0.59mt in March 2021 and 1.1mt in Feb 2022.
• China is taking advantage of steep discounts to Russian coal as other buyers, including the EU, move to ban imports of the fuel, Bloomberg reports.

Other:

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

NdPr Rare Earth Oxide (China) US$133,425/t vs US$131,391/t

Lithium carbonate 99% (China) US$69,990/t vs US$70,677/t

China Spodumene Li2O 5%min CIF US$3,170/t vs US$3,090/t

Ferro-Manganese European Mn78% $2,147/t vs US$2,140/t

China Tungsten APT 88.5% FOB US$343/t vs US$343/t

China Graphite Flake -194 FOB US$825/t vs US$825/t

Europe Vanadium Pentoxide 98% 11.4/lb vs US$11.4/lb

Europe Ferro-Vanadium 80% 50.75/kg vs US$51.25/kg

China Ilmenite Concentrate TiO2 US$396/t vs US$398/t

Spot CO2 Emissions EUA Price US$86.7/t vs US$83.8/t

Brazil Potash CFR Granular Spot US$1,250/t vs US$1,250/t

Battery News

LG Energy signs $9bn EV supply chain deal in Indonesia

• A consortium led by LG Energy Solution, has signed an agreement with mining company PT Aneka Tamban and Indonesian Battery Corporation to establish an EV battery supply chain.
• The group will invest $9bn in Indonesia on setting up a mines-to-manufacture EV supply chain, which will handle smelting and refining nickel, cathode materials and cells and assembly of finished products.
• Indonesia is the world’s largest producer of nickel, with about 21mt of reserves, according to US Geological Survey data.
• LG have increased their investment in materials and chemicals for EVs as it seeks to reduce its dependence on China.
• Russia’s invasion of Ukraine has added to supply chain concerns – Russia accounts for 11% of global nickel production.
• LG are the second company to sign a multi-billion-dollar deal in Indonesia after CATL signed a $6bn with Indonesian companies for a similar project.

Italvolt founder to found company in California for EV battery production

• EV battery manufacturer Itavolt’s founder has announced plans to launch a new company in the US to build an EV battery gigafactory in California.
• The new company, Statevolt, will build a 54GWh gigafactory that supply batteries for 650,000 EVs annually.
• Like many other countries, the US is looking to reduce dependence on imports and establish local supply chains.
• Statevolt has also signed a letter of intent with renewable energy and lithium extraction company Controlled Thermal Resources (CTR) to purchase minerals and geothermal power.
• CTR extracts lithium from brine, a byproduct of its geothermal energy activity, from its Hell's Kitchen lithium and power project, also in California.
• The company's ‘hyper-local’ business model will offer Statevolt "a significant advantage in producing lithium-ion batteries at scale", Lars Carlstrom, Italvolt's founder and chief executive, said in a statement.

Company News

KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* 0.85p, Mkt Cap £25m – £8.0m equity raise

• The Company conditionally raised £8.0m through a placing of 1,000m shares at 0.8p.
• The placing is split into £4.4m (550m shares) to be placed immediately and £3.6m (450m shares) to be raised subject to shareholders’ approval at the coming General Meeting.
• Equity raise proceeds will be used for:
• Tulu Kapi selected development activities with a view to confirming security conditions allow project full project development start and financial close by the end of Q2/22;
• Exploration works at satellite deposits in the Tulu Kapi District;
• Exploration works at the Hawiah Gold and Copper Project targeting an increase in the current MRE of 24.9mt at 0.90% Cu, 0.85% Zn, 0.62g/t Au and 9.81g/t Ag along with funding further work at the adjacent Al Godeyer property;
• General working capital purposes.
• Additionally, the Company will seek shareholder approval for the issue of one warrant for every two new shares to be issued (ie 500m warrants) at the 1.6p exercise price and a exercisable over the two years.
• Exercise of warrants will provide further £8m in addition to warrants issued as part of the Jan/22 placing (~390m warrants at 1.6p) for potential £6.3m.
• The team expects the raise along with proceeds from exercise of warrants to be sufficient to cover any KEFI equity component for the proposed $356m Tulu Kapi funding package.
• The General meeting is expected to be held in May/22.
• The Company reiterated targeted Tulu Kapi financing closure by the end of Q2/22 with all parties expected to sign binding commitments for the $356m project funding.

Conclusion: The Company conditionally raise £8.0m that along with potential £14.3m in proceeds from exercise of 1.6p warrants is expected to provide enough capital to cover KEFI equity component (including $70m worth of historic investment) for the Tulu Kapi gold project development. The team reiterated its targets to secure binding commitments from the Tulu Kapi funding syndicate paving the way for the start of development works on course for first production in mid-2024. Concurrently, the Company is planning to fund its 30% share of costs at the Hawiah project with a PFS targeted by end of 2022.

*SP Angel act as Nomad and Broker to KEFI Gold and Copper

Libero Copper & Gold (OTCMKTS:LBCMF) C$0.88, Mkt Cap C$56m – 251m at 1.13% CuEq assayed from the first 450m of 1,235m hole at Mocoa

Anglo Asian Mining* (AAZ LN) holds a 19.8% stake in LBC (12.6m shares + 6.3m C$0.75 warrants)

• Libero Copper & Gold announced first assay results from its first drill hole in the ongoing programme at the Mocoa porphyry copper project in Colombia.
• The drill hole was completed to a depth of 1,235 with assays for the first 450m showing good copper/molybdenum grades.
• The intersection included:
• 443m at 0.74% CuEq comprised of 0.48% Cu and 0.078% Mo from 7m including higher grade interval of
• 251m at 1.13% CuEq comprised of 0.75% Cu and 0.114% Mo from 139m.
• Within higher grade intersection there were two ~30m intervals at 1.61% CuEq and 1.92% CuEq from 265m and 362m, respectively, implying better grades at depth.
• Copper and molybdenum mineralisation is reported to be seen beyond the 450m with assay results due shortly.
• The drill hole was designed to confirm historically intersected mineralisation and infill an area between two separate high grade zones in the deposit.
• Mocoa is the largest copper resource in Colombia and one of the world’s largest undeveloped molybdenum deposits with a pit constrained NI43-101 compliant Inferred Resource estimated at 636mt at 0.45% CuEq comprised of 0.33% Cu and 0.036% Mo.

Conclusion: Drilling at the Mocoa Cu/Mo porphyry project is off to a good start with the first hole of the planned Phase 1 5,000m programme returning good grade wide intersections including ~250m at 1.13% CuEq from 139m. Results confirmed the first high grade Cu/Mo mineralisation zone with assay results from the remainder of the MD-043 hole due shortly.

*SP Angel acts as nomad and broker to Anglo Asian Mining

Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)* 55p, Mkt Cap £71m – Phoenix Copper Applauds Use of Defense Production Act

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

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• Phoenix Copper state they are pleased to see the US President encouraging domestic production of critical minerals, including copper and cobalt, for electric vehicles, defence systems and other technologies.
• President Biden recently invoked the Defense Production Act, stating that the directive will help secure American supply chains for the critical materials that support national defence, electric vehicles and storage of renewable energy.
• According to The White House, the directive will support U.S. production and processing of minerals and materials used for large capacity batteries, in particular those used in electric vehicles and in the infrastructure required to power and charge those vehicles. These metals include lithium, nickel, cobalt, and copper.
• Phoenix Copper is in the process of engaging a syndicate of US based broker-dealers for a >$60m issue of non-dilutive loan notes to finance the construction and development of the Empire Copper Mine in Idaho.
• Work continues the feasibility study for the Empire mine with first phase pre-production capital expected to be around US$52.6m.
• A PEA level cash flow showed gross revenue of $836m over a 10-year mine life with $43m of post-tax cash flow in year 1 at a $3.60/lb ($7,937/t) copper price.
• An October 2020 Measured and indicated mineral resources at Empire estimated at 22.9mt grading 0.38% copper, 0.19% zinc, 10.3g/t silver and 0.32g/t gold
• An additional inferred resource adds 10.6mt averaging of 0.4% copper, 0.14% zinc, 7.4g/t silver and 0.34g/t gold.

Conclusion: We look forward to further updates on the innovative funding of the first phase of the Empire copper mine through the issue of loan notes to investors.

*SP Angel acts as nomad to Phoenix Copper

Prospect Resources Ltd (ASX:PSC) A$0.92, Mkt Cap A$395m – US$343m received on disposal of the Arcadia Lithium Project

• The Company completed the sale of the 87% interest in the Arcadia Lithium Project to a subsidiary of Zhejiang Huayou Cobalt Co., Limited (Huayou).
• The Arcadia Lithium Project is a DFS stage project hosting petalite and spodumene mineralisation to the tune of 42.3mt at 1.19% Li2O in reserves.
• As previously announced in Dec/21, the acquisition is a US$378m cash deal with the Company having received US$343m net of Zimbabwean capital gains taxes (US$27m) and a consideration for termination of the offtake agreement with Sinomine (US$8m).
• The Company expects to distribute A$440-450m to its shareholders and retain A$30-40m to progress battery metals projects in the Sub Saharan African region and Zimbabwe, in particular.
• The distribution is expected to be completed shortly after 30 June 2022.

Rio Tinto PLC (LSE:RIO) – 5,919p, Mkt cap £99bn – Iron ore and aluminium output fall in Q1 report

• Rio Tinto report a significant fall in production and shipments of iron ore out of the Pilbara in Western Australia due to cyclones and wet weather disruption.
• Iron ore shipments fell by 8% yoy and by 15% qoq in Q1.
• Iron ore production fell by 6% yoy and 15% qoq in Q1.
• Gudai-Darri iron ore mine ramp up should increase production in the second half.
• Guidance on full year shipments remains unchanged.
• Bauxite production remained steady yoy but rose on last quarter despite the wet weather.
• Aluminium production also fell by 8% yoy and 3% qoq following a strike at Kitimat in Canada which started last July. The smelter should restart in June.
• Copper fared better with a 4% increase in production to 125,000t though this was 5% lower qoq. Higher grades and recoveries at Kennecott offset lower grades at Oyu Tolgoi and lower throughput at Escondida.
• Titanium dioxide slag saw a strong 20% recovery on the last quarter though this was still 2% lower than Q1 2021 due to reliability issues at FTFT in Canada offset by the RBM ramp up in South Africa following its suspension due to violence.
• We expect recent extreme flooding in the Durban and Richards Bay areas to have some impact on production and shipments out of Durban in Q2.
• Oyu Tolgoi: the group started underground mining at Oyu Tolgoi following agreement with the Mongolian government
• Rio also proposed C$34/s to acquire Turquoise Hill minorities. Acquiring the full 49% stake would cost US$2.7bn.
• Rincon: Rio Tinto also completed its acquisition of the Rincon lithium project in Argentina following significant protests at Jadar in Serbia.
• Simandou: framework agreement signed on the Simandou iron ore project in Guinea.
• ESG: Management reached agreement with the Yinhawangka Aboriginal Corporation on a new co-designed management plan to ensure the protection of significant social and cultural heritage values. Rio also implemented 26 recommendations to improve their workplace culture.
• Taxes Paid: Rio Tinto report a total economic contribution of $66.6bn and paid $13.3bn of taxes and royalties in countries where they operate.
• Rios have also committed $5 million to humanitarian agencies and continue to offer support to our team members of Ukrainian and Russian heritage.
• Riversdale: Rio settled with the ASIC regulator in Australia over the disclosure of the impairment of Rio Tinto Coal Mozambique (Riversdale) in the 2012 year-end accounts.
• The court approved the settlement between ASIC and Rio Tinto and there were no findings of fraud or any systemic or widespread failure by Rio Tinto.
• Production guidance for 2022
• Pilbara iron ore shipments 322mt in 2021 guided to 320-335mt for 2022
• Bauxite 54mt in 2021 guided to 54-57mt
• Alumina 7.9mt in 2021 guided to 8.0-8.4mt
• Aluminium 3.2mt in 2021 guided to 3.1- 3.2mt
• Mined copper 494,000t in 2021 guided to 500-575mt
• Refined copper 202,000t in 2021 guided to 230-290mt
• Diamonds 3.8mcts in 2021 guided to 5.0-6.0mt
• Titanium dioxide slag 1.0mt in 2021 guided to1.1-1.4mt
• IOC3 iron ore pellets and concentrate 9.7mt in 2021 guided to 10.0-11.0mt
• Boric oxide equivalent 0.5mt in 2021 guided to ~0.5mt
• Operating costs
• Pilbara iron ore 2022 unit cost guidance of $19.5-$21.0/t remains unchanged.
• Copper C1 unit cost guidance in 2022 unchanged at 130-150c/lb ($2,866-3,306/t).

Conclusion: Management are sticking to guidance through 2022 despite a disappointing start to the year in iron ore and aluminium. Slowing economic activity due to Covid lockdowns in China may well cut demand and prices for iron ore and aluminium in China this year.

SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF)* 35.5p, Mkt Cap £826m – Cascabel pre-feasibility study envisages initial production in mid 2029

• Solgold has issued details of its pre-feasibility study for the development of its 85% owned Cascabel project in northern Ecuador where it plans to develop the Alpala deposit as a 25mtpa underground block-caving operation producing an average of 132,000tpa of copper, 358,000ozpa of gold and 1mozpa of silver over an initial 26 years mine life.
• The company’s study shows that pre-production capital investment of US$2,746m followed by post-production sustaining capital of a further US$2,136m is expected to generate an after-tax NPV8% of US$2,907m and an IRR of 19.3% using base case commodity prices of US$3.60/lb for copper, US$1,700/oz for gold and US$19.90/oz for silver.
• Pre-production mine capital development is expected to cost US$900m with a further US$465m for the process plant, US$309m for tailings storage and the estimates include a contingency allowance of US$391m.
• The major elements of post-production capital expenditure include an additional US$748m for further mine development, US$695m for additional tailings storage capacity and a further US$219m for the process plant.
• The project is expected to payback in 4.7 years and the company says that at “current spot commodity prices” of US$4.74/lb for copper, US$1,933/oz for gold and US$24.50/oz for silver, the “After-tax NPV would be US$4.1bn (US$7.9bn pre-tax) and IRR 23.4% (30.5% pre-tax)”.
• The initial development targets a ‘Probable’ ore-reserve of 558mt at an average grade of 0.58% copper, 0.52g/t gold and 1.65g/t silver which, the company explains, “represents only 21% of Measured and Indicated Resources tonnes and approximately 38% of contained metal”.
• Solgold also identifies additional opportunities for future expansion through the development of additional mineral resources within the broader Cascabel project area, including at the Tandayama-America (TAM) project, located approximately 3km north of Alpala, where it identified indicated resources of 233mt a at an average grade of 0.23% copper and 0.16g/t gold (reported as 0.33% copper equivalent CuEq) plus inferred resources of 197mt averaging 0.39% CuEq in October last year
• Initial access to the deposit is expected to be via a vertical shaft located to “the southwest of the deposit. This will link to a twin decline mined from the north of the deposit with a portal adjacent to the process plant. In the longer term the decline will be the main access path” with one of the two declines “for the conveyor only, located in proximity to the process plant location”.
• Primary ore crushing will take place underground with “crushed ore from the underground primary crushers … conveyed to the surface and fed to the secondary crushing circuit” and to the downstream grinding circuit.
• “The ground product will report to conventional rougher flotation … and will be subsequently upgraded within the cleaner flotation circuit to produce a saleable flotation concentrate”.
• “The flotation concentrate will be thickened using a high-rate thickener and then pumped via a pipeline to the Esmeraldas port facility”.
• Solgold confirms that “The project is expected to reach nameplate capacity in the fourth year from the start of process plant operations with first ore expected in mid-2029” and that it will target “the Alpala high grade core with copper grades expected to average over 0.75% (~1.35% copper equivalent) over the first 10 years of production”.
• Further optimisation of the project forms part of the DFS work currently underway and Solgold confirms that these results “will be included in a PFS Addendum planned for completion in H2 CY22”.
• Solgold identifies opportunities to optimise “process plant feed rates, including additional resources such as the Tandayama-Ameríca resource” as well as “underground mine design optimisation, mine sequence and scheduling”, process design improvements as well as the incorporation of hydropower and capital cost reductions.
• Managing Director and CEO, Darryl Cuzzubo, said that the PFS “supports what we have believed all along - that this project is no ordinary mining asset. Cascabel will be a significant, multi-decade and very low cost producer of copper that can help enable Ecuador's emergence as the next copper frontier at a time when the world needs copper”.
• He said that the “project is economically attractive and based upon assumptions that we believe can be delivered upon. There is further upside that will be explored over the coming months and the next phase of the project as we seek the necessary Government approvals to move into early works and execution”.
• Keith Marshall, Chair of the Cascabel Steering Committee explained that the “study focused on the "right sizing" of the project, with the objective of reducing the technical and execution risk. It also provides a straightforward approach to mining the deposit that optimises selectivity, without compromising any of the resource and maintaining optionality”.
• Former CEO and current non-executive director, Nick Mather, commented that “The various upsides at Cascabel offered by additional mineralised porphyry systems still being outlined and assessed, potential for additional production and treatment plant capacity, refinements to the mine plan, continued low cost of capital and what I see as the opportunity for long run higher copper prices as the world electrifies, suggest that this project indeed has considerable further upside to be evaluated”.

Conclusion: Solgold’s PFS for Cascabel describes a robust development of a lowest quartile cost copper project based around the Alpala deposit and captures additional potential from additional mineralisation within the broader Cascabel licence area. Initial development of a 558mt ore reserve over 26 years is expected to produce an average of 132,000tpa of copper, 358,000ozpa of gold and 1mozpa of silver with peak annual output hitting 210,000t of copper, 829,000oz of gold and 1.4m oz of silver.

*SP Angel acts as advisor to SolGold

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%