SP Angel . Morning View . Monday 09 05 22
Gold prices continue to slide on rising treasury yields
MiFID II exempt information – see disclaimer below
AEX Gold Inc (AIM:AEXG, TSX-V:AEX) – Exploration results from Vagar Ridge, Greenland
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* – Recommended $105m cash offer for the Kun Manie nickel/copper project
KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* – Progress report on the Saudi Arabia projects
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* – April’s operational results show continuing performance improvement
SP Angel mining team at 121 in Cape Town this week
- The SP Angel mining team will be reporting from the 121 Mining investment conference in Cape Town this week.
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.
Dow Jones Industrials -0.30% at 32,899
Nikkei 225 -2.53% at 26,319
HK Hang Seng -3.81% at 20,002
Shanghai Composite +0.09% at 3,004
Economics
China – Export growth weakened in April as lockdowns hit production
- China’s exports and imports struggled in April as covid outbreaks adversely affected production and disrupted logistics.
- Export growth in April terms slowed to 3.9% YoY vs +14.7% in March.
- Imports were unchanged in April after sliding 0.1% in the previous month.
US – Nonfarm payrolls advanced 428,000 in April, matching the prior month while unemployment holds as 3.6%
- US hiring advanced in April at a rate better-than-expected by Bloomberg estimates of 380,000.
- Job openings and quits are back at record highs, and businesses are scrambling to hire enough workers to keep up with consumer demand.
- Average hourly earnings rose 0.3% from March and 5.5% higher than the same period last year.
Currencies
US$1.0517/eur vs 1.0510/eur last week. Yen 131.20/$ vs 130.38/$. SAr 16.136/$ vs 16.108/$. $1.229/gbp vs $1.231/gbp. 0.701/aud vs 0.708aud. CNY 6.724/$ vs 6.678/$.
Commodity News
Gold prices continue to slide on rising treasury yields
- Gold prices fell this morning as treasury yields rose ahead of multiple rounds of inflation data scheduled for release in the coming days.
- The yield on the US 10-year has risen 8% since Thursday morning to 3.1706%.
- Rising yields reduce investors’ incentive of holding non-interest yielding gold, with both assets regarded as safe havens.
- Bullion has been gradually moving lower since mid-April on concerns of aggressive rate hikes, which has in turn driven US Dollar and treasury yields up.
Phosphate prices hit all time high as conflict in Ukraine rages on
- MAP (Monoammonium Phosphate) prices hit an all-time high of $1,082/t in the final week of April, a record high.
- Conflict in Ukraine has also rocked the potash market, with state-owned Belaruskali OAO being the world’s second largest producer of the fertilizer.
- Potash prices are currently up over 50% year-to-date.
- Prior to new restrictions, the company controlled about 20% of the global potash market.
- Kore Potash* is currently developing its Kola potash project, where the final optimisation study for the project Is currently under review.
- The study was designed to improve on the initial layout and economics of the project represented by Jan/19 DFS reducing the initial capital outlay, cutting construction period as well as considering a number of other optimisation initiatives.
- The Consortium advising the Company on funding of the Kola Potash Project advised it was pleased with outcomes and is now working on the EPC proposal.
- The EPC proposal is due within the next two months (est. beginning of June) that once approved by the Company will follow by a project funding proposal.
- The envisaged financing is planned to be comprised of royalty and debt mix to minimise dilution allowing Kore to retain 90% in the project.
*SP Angel acts as nomad and broker to Kore Potash
Precious metals:
Gold US$1,870/oz vs US$1,876/oz last week
Gold ETFs 106.3moz vs US$106.3moz last week
Platinum US$958/oz vs US$956/oz last week
Palladium US$2,121/oz vs US$2,127/oz last week
Silver US$22.20/oz vs US$22.38/oz last week
Rhodium US$16,700/oz vs US$17,000/oz last week
Base metals:
Copper US$ 9,248/t vs US$9,461/t last week
Aluminium US$ 2,800/t vs US$2,894/t last week
Nickel US$ 29,520/t vs US$30,030/t last week
Zinc US$ 3,716/t vs US$3,848/t last week
Lead US$ 2,210/t vs US$2,259/t last week
Tin US$ 38,480/t vs US$40,155/t last week
Energy:
Oil US$111.2/bbl vs US$111.9/bbl last week
Natural Gas US$8.157/mmbtu vs US$8.787/mmbtu last week
Uranium UXC US$55.35/lb vs $55.15/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$141.0/t vs US$144.3/t
Chinese steel rebar 25mm US$745.3/t vs US$765.5/t
Thermal coal (1st year forward cif ARA) US$250.0/t vs US$250.0/t
Thermal coal swap Australia FOB US$360.0/t vs US$358.0/t
Coking coal swap Australia FOB US$465.0/t vs US$487.0/t
Other:
Cobalt LME 3m US$82,000/t vs US$82,000/t
NdPr Rare Earth Oxide (China) US$128,239/t vs US$126,905/t
Lithium carbonate 99% (China) US$63,562/t vs US$64,014/t
China Spodumene Li2O 5%min CIF US$3,720/t vs US$3,610/t
Ferro-Manganese European Mn78% $1,888/t vs US$1,980/t
China Tungsten APT 88.5% FOB US$338/t vs US$340/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 10.6/lb vs US$10.6/lb
Europe Ferro-Vanadium 80% 42.75/kg vs US$43.25/kg
China Ilmenite Concentrate TiO2 US$369/t vs US$372/t
Spot CO2 Emissions EUA Price US$95.3/t vs US$93.0/t
Brazil Potash CFR Granular Spot US$1,220/t vs US$1,250/t
Battery News
Tesla reaches supply agreement with mining giant Vale
- Tesla has reached an agreement with mining giant Vale, North America’s largest producer of finished nickel, for the supply of low-carbon nickel.
- Vale will supply Class 1 nickel to Tesla’s US operations from its operations in Canada.
- The agreement is part of Vale’s strategy to increase exposure in the EV industry – it is hoping to deliver 30-40% of its Class 1 nickel sales into the fast-growing electric vehicle
- Deshnee Naidoo, Vale’s Executive Vice President of Base Metals said, “This agreement reflects a shared commitment to sustainability and shows very clearly we are the supplier-of-choice for low-carbon and high purity nickel products essential for long-range batteries.”
Trafigura backs UK lithium refinery project
- Commodity trader Trafigura is looking to take a stake in Green Lithium, the startup with plans to supply car and battery makers in Europe with lithium from a UK refinery.
- As part of the investment, Trafigura, will provide Green Lithium with feedstock for its planned 50,000t a year processing plant in the north of England.
- Green Lithium started work on the project four years ago, raising £1.6m in seed funding last year from investors and has also secured a £600,000 grant from the UK government.
- It produced its first battery grade lithium hydroxide under lab conditions last year and is hoping to have the refinery running by the end of 2024.
- The company says the plant will use low-carbon refining technology and once at full capacity will produce enough lithium to support the production of 1m EVs a year.
Company News
AEX Gold Inc (AIM:AEXG, TSX-V:AEX) 44.5p, Mkt Cap £78m – Exploration results from Vagar Ridge, Greenland
- AEX Gold reports results from its 2021 exploration of the 4,090km2 Vagar Ridge licence located in the Nanortalik Gold Belt of southern Greenland and located approximately 25km north of the company’s principal project at Nalunaq
- The company says that the results which comprised “Mineral System Modelling, high resolution airborne geophysics, surface hyperspectral imagery and reconnaissance sampling … more than double the Vagar Ridge footprint, confirming its potential to be a multi-million ounce prospect”.
- AEX Gold says that the results show that Vagar Ridge “may host up to four Orogenic gold veins with new rock chip samples giving up to 86.7 g/t gold”.
- The company says that it will “continue to review and assess these results both internally and with external consultants and will look to action on the recommendations of this work during the 2022 field season”.
- Describing the results of the 2021 exploration as “extremely encouraging”, CEO, Eldur Olaffson said that “It was always our belief that the 'Vagar Ridge' discovery had the potential to be significantly larger than the previously mapped extent of ~2km. With the conclusion of our exploration studies in 2021, this has materially increased in footprint with not only Orogenic but also Intrusion Related Gold mineralisation potential.”.
- He said that if the potential for multiple mineralised veins at Vagar Ridge is realised, “we believe Vagar Ridge has the potential to become a globally significant discovery. We aim to further test the size and prospectivity of this target during the 2022 season”.
- He also said that “Additionally, we have discovered five further prospects over the Vagar Licence with similar structures and alteration as seen at Vagar Ridge, and these will also be the focus of further exploration”.
Conclusion: Early-stage exploration results from Vagar Ridge provide additional targets for follow-up during the 2022 exploration season.
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* 1.845p, Mkt Cap £26m – Recommended $105m cash offer for the Kun Manie nickel/copper project
- The Company entered into a Share Purchase Agreement with Stanmix Holdings for the sale of 100% interest in the Kun Manie nickel/copper project in Amur Region, Russia.
- Total consideration proposed for Kun Manie is $105m split over the following tranches:
- $15m on completion of the transaction;
- $10m within 12 months of the SPA;
- $50m within 48 months of the SPA;
- $30m payable in 10 annual instalments of $3m starting on the anniversary of the date of completion in 2027.
- The transaction is subject to shareholder approval at a General Meeting scheduled for 25 May as well as the approval by a newly created government commission that deals with deals involving change of control of western held assets and consent of the Federal Antimonopoly Service.
- Stanmix Holding is a Cyprus based company controlled by Vladislav Sviblov, a Russian entrepreneur involved in a number of mining M&A transactions recently.
- Sviblov previously acquired Highland Gold (300kozpa producer with 19.1moz in resource, valued at ~$1.7B) in 2020, Trans-Siberian Gold (AIM:TSG) (45kozpa producer with 1.7moz in resource, valued at ~$140m) and Zoloto Kamchatki in 2021, as well as Russian gold assets of Kinross Gold (+500kozpa production with 6.6moz in resource in Russia, valued at $680m in staged payments) in April this year.
- The transaction with Kinross is arranged in a similar to the Kun Manie deal manner involving staged payments with $400m for Kupol gold operation and adjacent exploration licenses to be paid over the next four years in $50-150m annual tranches with a further $280m to be paid for the PFS stage Udinsk project (4.3moz in resource) with annual payments of $80m in 2025, $100m in 2026 and $100m in 2027.
- Following the payment of the first $15m, all following payments are supported by a personal guarantee by Vladislav Sviblov.
- Proceeds from the first $15m are expected to be used to evaluate and acquire other mining projects located in mining friendly jurisdictions within six months of the transaction.
- The second and third payments are expected to be paid to the shareholders as dividends.
- Following the receipt of the first tranche and paying for all related costs and taxes the Company will have ~$20m in the bank.
- The Board is recommending the offer.
Conclusion: The Company agreed to sell the Kun Manie sulphide nickel/copper project for $105m structure in a series of tranches with >70% of the consideration to be paid within 48 months of the Share Purchase Agreement. Applying 10% discount rate to scheduled payments yields $71m or ~3.5p/share at a longer term assumed 1.4 GBPUSD exchange rate (~3.9p at closer to spot 1.25 rate) implying a ~83% premium to the closing price of 1.91p on Friday.
The transaction allows the Company to sell the asset at a premium to the current market value avoiding development and funding risks that climbed significantly for projects in Russia. Main risks remaining are securing all necessary regulatory permits and seeing all transaction related tranches through with the personal guarantee and a track record of completed M&A deals by the acquiror in the sector helping on the latter front. Additionally, no party to the deal is subject to Western sanctions, to our knowledge. Cash based consideration will provide capital to seek new mining projects outside Russia with the team aiming to select new investment opportunity within six months of completing the transaction.
*SP Angel act as Nomad and Broker to Amur Minerals
KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* 0.74p, Mkt Cap £27m – Progress report on the Saudi Arabia projects
- Kefi Gold & Copper has reported on its projects in Saudi Arabia where it operates and owns a 30% interest in a joint-venture with Abdul Rahman Saad Al Rashid and Sons Ltd.
- At the Jabal Qutman project, following the introduction of a new regulatory system, “development planning studies have recommenced” and the company explains that, with current gold prices significantly higher than the US$1,200/oz used in its original 2015 licence application, it is examining alternative processing methods “which should allow for a greater portion of the ore body to be developed, meaning a greater resource and production profile”.
- The company explains that “While there has been no formal notification on the award of a mining licence at Jibal Qutman, given the positive and constructive developments at the Ministry, the decision has been taken to re-establish a base in the nearby city of Bisha. This will be used to coordinate operations ahead of the field camp construction should the mining licence application be approved”.
- Work is continuing on the preliminary feasibility study (PFS) for the Hawiah project with 1,920m of geotechnical drilling in 16 holes and additional hydrological drilling recently completed and the PFS on schedule for delivery in Q4 2022.
- Further drilling to the south of the currently planned Crossroads pit at Hawiah has extended known mineralisation by a further 500m towards the Central Zone and “has returned gold grades averaging 2.3 g/t … with widths consistent to material within the pit-limits further north. This should result in the area being included in an expanded Crossroads open pit as part of the 2022 MRE”.
- A second phase of oxide ore drilling is expected to start at Hawiah “in June 2022 and will target material within the defined open-pits and extension areas to further close the drill spacing. This is designed to enable an 'Indicated' resource classification during the 2022 MRE”.
- At the Al Godeyer licence area, adjacent to Hawiah, a first phase of 19 reverse-circulation drill holes totalling 1,169m has now been completed to form an initial assessment of the “gold potential of the oxide/gossan cap and provide an early indication for the enriched copper potential of the transitional zone under the Main Gossan area”.
- Executive Chairman, Harry Anagnostaras-Adams said that “It's great to see the continued stream of results and news coming from Saudi Arabia as the Hawiah Copper-Gold and Jibal Qutman Gold projects push towards development. The team is pleased to be able to deliver rapid progress across all fronts given the very supportive stance taken by the Saudi Government recently”.
Conclusion: We look forward to the results of the Hawiah PFS later this year and to the outcome of the mineral resources work currently underway as well as progress on the licence application for Jabal Qutman.
*SP Angel act as Nomad and Broker to KEFI Gold and Copper
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* 27.75p, Mkt Cap £44m – April’s operational results show continuing performance improvement
NPV Valuation: 168p/s
- Rambler Metals & Mining reports a continuing improvement in operating performance during April 2022 with mine production from the Ming mine increasing by around 7% during the month to 35,535t (March – 33,284t) and mill throughput at the Nugget Pond Plant rising by approximately 15% to 30,195t (March – 26,172t).
- A dip in grades to an average of 1.46% copper (March 1.60%) and 0.29g/t gold (March – 0.41g/t) was offset by the combination of increased throughput and higher recovery rates to deliver a 7% improvement in both concentrate tonnage, to 1,599t (March - 1,494t) and contained copper production to 413t (March 386t).
- Commenting on the performance, President and CEO, Toby Bradbury, explained that “Focus for us has been to fully utilise the capacity of the mill at Nugget Pond and our peak daily plant throughput during April was 1,408 dry metric tonnes. Our mining is now at a rate that can support the designed plant throughput, and we will now optimise the feed grade to the mill”.
- He also said that the company has now “built a valuable stockpile ahead of the mill which mitigates some of the mining risk that the operation has been exposed to over recent years and we continue to progressively build resilience into all aspects of the operation."
- Maintenance problems with the secondary crusher, which have been discussed previously, and which “caused the mill to operate at or below 800 dmt for 9 days of the month” have been mitigated by the rental of a crusher which “was able to achieve … [throughputs of over 1,000tpd] … while building a 22,500 dmt ,stockpile of ore in front of the plant. The arrangement with the rented crusher has continued into May and is expected to do so until mid-month”.
- The company reports 366m of development work for April (March – 413m) and says that “The developed state of the underground mine has now been brought to a position where full production of 1,350 tonnes per day ("tpd") through the processing plant is imminent”.
- Both the Lower Footwall zone on the 510 level and the Upper Footwall Zone on the 770 and 790 levels are producing ore while the development of the Ming North Zone on the 785 level as “a cut and fill operation continues through the zone at scheduled rates” and “Production activities continue in” the Lower Footwall Zone on the 735 and 760 levels.
- The company also confirms that provincial restriction measures to contain Covid19 were lifted on 14th March but that it “will continue to abide by all Public Health guidelines for the long-term management of Covid-19 and protection of the entire workforce”.
- Earlier this month, Rambler Metals & Mining reported upgraded minerals resources estimates showing a measured and indicated 23.76mt at an average grade of 1.80% copper, 0.35g/t gold and 2.78g/t silver using a 1% copper cut-off grade plus an additional inferred resource of 6.43mt at an average grade of 1.86% copper, 0.38g/t gold and 2.60g/t silver showing a “5% and 8% increase for contained copper and gold respectively” compared to the estimate released on 26th May 2021.
- In addition to the updated mineral resources estimate, the company reported a 31st March 2022 fully depleted and diluted mineral reserve estimate of 7.4mt at an average grade of 1.74% copper, 0.38g/t gold and 2.53g/t silver which, we noted at the time represented a 15-year mine life at the targeted 1,350tpd processing.
Conclusion: Operations at the Ming mine and Nugget Pond plant continue to improve with multiple underground production areas and a 25,000t surface ore stockpile providing operational resilience and flexibility as well as sustainability for future production based around a 15-years reserve life.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining)
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
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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Gold, Platinum, Palladium, Silver - BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel - Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt - LME
Oil Brent - ICE
Natural Gas, Uranium, Iron Ore - NYMEX
Thermal Coal - Bloomberg OTC Composite
Coking Coal - SSY
RRE - Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite - Asian Metal
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