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Today's Market View - Horizonte Minerals, Power Metal Resources, Sunrise Resources, and more...

Published: 11:14 19 May 2022 BST

Today's Market View - Horizonte Minerals, Power Metal Resources, and more...

SP Angel . Morning View . Thursday 19 05 22

Risk off sentiment weighs on base metals

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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.

 

Atalaya Mining (AIM:ATYM, TSX:AYM) – Meeting the challenges of high energy and supply costs as balance sheet strengthens
BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)* – Results statement highlights progress at Dundas ilmenite project alongside new exploration jv with Kobold Metals at Disko-Nuussuaq
Botswana Diamonds PLC (AIM:BOD) – Ground geophysical anomalies indicative of kimberlites at Sekaka
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) – Construction starts at Araguaia with official ‘ground-breaking ceremony’
Power Metal Resources PLC (AIM:POW)* – Consolidation of the interest in the Molopo Farms Complex Project in Botswana
Sunrise Resources PLC (AIM:SRES) – Myrtle precious metals project, Nevada

 

Dow Jones Industrials -3.57% at 31,490
Nikkei 225 -1.89% at 26,403
HK Hang Seng -2.65% at 20,098
Shanghai Composite +0.36% at 3,097

   

Economics

US – The S&P 500 dropped ~4% on Wednesday marking the biggest one day drop since June/20 with 98% of index constituents ending the day in the red, FT reports.

  • The drop was driven by disappointing earnings numbers from major retailers highlighting increasing risks of stagflation.
  • Target led declines falling 25% on the day after reporting that its profit margins were under pressure following similar warnings from Walmart.
  • Both companies reported their worst daily stock drops since 1987 this week.
  • Latest Fed Chairman comments that the central bank is determined to keep raising rats until inflation comes down added to the selling pressure
  • Markets are posed for more losses with futures contracts on S&P 500 and Nasdaq 100 trading more than 1% lower this morning.
  • Apr US housing starts 1.724 mill units, april -0.2% (0.3% at 1.793mill units) and building permits -3.2% to 1.819 mill units (0.3% at 1.87mill units),

 

Japan – Trade deficit more than doubled to ~¥839B in April from the previous month reflecting higher cost of energy imports and weaker exports as China battled the spread of the covronavirus.

  • The value of oil imports doubled and coal imports trebled form the previous year.
  • The data follows the report showing that the economy contracted at an annualised 1% in the first three months of the year.

 

China - Shanghai lockdown easing on no new covid cases.

  • Port congestion remains with 130 vessels waiting to dock.
  • 184 vessels are currently waiting to dock at Shenzhen and Hong Kong.
  • No vehicle sales in Shanghai in April vs 26,311 in 2021 according to the Shanghai Automobile Sales Assoc. Shanghai population is >28m.
  • China power generation fell 4% yoy to 608.6bn kWh and was >20% lower than Jul’s record generation figure last year.

 

UK - Unemployment fell to 3.7% in March vs 3.8% in February. There are not more job vacancies than unemployed, so no excuse for anyone shirking in this economy!

  • Labour productivity fell 0.5% in Q1 vs 1.3% in Q4
  • CPI rose 2.5% in April vs 1.1% in March
  • CPI rose to 9% in April yoy vs 7% yoy in March
  • Input PPI rose 1.1% mom in April vs 5.2% mom in March
  • Input PPI rose 14% yoy in April and 11.9% in March
  • Output PPI rose 1.6% mom in April vs 2% mom in March
  • Output PPI rose18.6% yoy in April vs 19.2% yoy in March – highlighting the inflationary effect of rising output prices

 

Philippines – Philippine central bank, Bangko Sentral ng Pilipinas, raises key interest rate to 2.25% as expected, it’s first rate hike since 2018

  • Philippine headline inflation is estimates to be 4.9%.  The move had been widely forecast.

 

Peru – Protestors and political disruption have put much of the planned US$53bn of investment into mining in the nation on hold.

  • Blockades and other disruption has worsened for many mines since the election of President Pedro Castillo as villagers protest over trucks, water and other issues.
  • Rising inflation will not help the unrest as impoverished communities call for a share of the profits and taxes generated by the mines on their doorsteps.
  • Many communities see Castillo as their champion and are unimpressed with opposition to his socialist policies.

 

Venezuela – The US is allowing Chevron to negotiate oil licences with PDVSA Venezuela as the US sees an opportunity to bring Venezuela back into the fold and use Venezuelan oil to offset Russian supply

 

Currencies

US$1.0482/eur vs 1.0517/eur yesterday. Yen 128.02/$ vs 129.18/$. SAr 16.054/$ vs 16.001/$. $1.237/gbp vs $1.242/gbp. 0.698/aud vs 0.701/aud. CNY 6.763/$ vs 6.748/$.

 

Commodity News

Precious metals:         

Gold US$1,812/oz vs US$1,812/oz yesterday

Gold ETFs 104.8moz vs US$104.8moz yesterday

Platinum US$927/oz vs US$959/oz yesterday

Palladium US$1,978/oz vs US$2,047/oz yesterday

Silver US$21.34/oz vs US$21.56/oz yesterday

Rhodium US$15,850/oz vs US$16,100/oz yesterday

 

Base metals:   

Copper US$ 9,275/t vs US$9,269/t yesterday

Aluminium US$ 2,872/t vs US$2,879/t yesterday

Nickel US$ 26,175/t vs US$26,365/t yesterday

Zinc US$ 3,625/t vs US$3,612/t yesterday

Lead US$ 2,068/t vs US$2,090/t yesterday

Tin US$ 33,665/t vs US$33,495/t yesterday

 

Energy:           

Oil US$110.0/bbl vs US$112.6/bbl yesterday

  • Crude oil prices pulled back alongside equity markets on increasing fears for a global slowdown that would impact forecast demand growth.
  • The EIA reported a 3.4mb draw in US crude stockpiles for last week, including a large 4.8mb draw (vs -1.4mb est.) on gasoline even as U.S. refinery utilisation rose by 1.8% to 91.8%.
  • European energy prices fell back, despite an agreement by the European Council to set an 80% target for gas storage levels in the bloc ahead of this winter.

Natural Gas US$8.135/mmbtu vs US$8.191/mmbtu yesterday

Uranium UXC US$48.90/lb vs $48.75/lb yesterday

         

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$123.9/t vs US$129.5/t

Chinese steel rebar 25mm US$710.2/t vs US$721.4/t

Thermal coal (1st year forward cif ARA) US$248.5/t vs US$248.5/t

Thermal coal swap Australia FOB US$403.0/t vs US$399.5/t

Coking coal swap Australia FOB US$485.0/t vs US$485.0/t

 

Other:  

Cobalt LME 3m US$75,000/t vs US$75,000/t

NdPr Rare Earth Oxide (China) US$139,367/t vs US$138,959/t

Lithium carbonate 99% (China) US$63,362/t vs US$63,513/t

China Spodumene Li2O 5%min CIF US$4,020/t vs US$4,020/t

Ferro-Manganese European Mn78% min US$1,819/t vs US$1,824/t

China Tungsten APT 88.5% FOB US$336/t vs US$336/t

China Graphite Flake -194 FOB US$815/t vs US$815/t

Europe Vanadium Pentoxide 98% 10.1/lb vs US$10.1/lb

Europe Ferro-Vanadium 80% 40.75/kg vs US$40.75/kg

China Ilmenite Concentrate TiO2 US$366/t vs US$367/t

Spot CO2 Emissions EUA Price US$89.5/t vs US$93.7/kg

Brazil Potash CFR Granular Spot US$1,215.0/t vs US$1,215.0/kg

 

Company News

Atalaya Mining (AIM:ATYM, TSX:AYM) 362.5p, Mkt Cap £510m – Meeting the challenges of high energy and supply costs as balance sheet strengthens

  • A transport strike, which caused a brief shut-down of Atalaya Mining (AIM:ATYM, TSX:AYM)’s plant during March, coupled with high energy costs and inflationary pressures contributed to higher operating costs and a decline in Q1 profits to €18.3m (Q1 20201 - €33.7m
  • Despite a 23% decline in operating cashflow to €28.3m (Q1 2021 - €36.8m), a sharp decline in investment to €7.6m (Q1 2021 -€63.9m) left a net cash balance of €86.8m at 31st March 2022 (31st March 2021 €10.6m).
  • Operating pressures lifted cash costs by 63.5% to US$3.33/lb of copper production (Q1 2021 -US$2.04/lb) with all-in-sustaining costs rising by 46% to US$3.59/lb (Q1 2021 – US$2.46/lb).  Atalaya Mining clarifies that the cost increase result from “lower production volumes and higher costs associated with electricity and other supplies, partially offset by the weaker Euro”.
  • The results reflect the treatment of 3.5mt of ore at an average grade of 0.37% copper during the quarter (Q1 2021 – 4mt grading 0.41%) with the company attributing the reduction in throughput to “the transport sector strike, which interrupted the supply of essential daily consumables and resulted in a temporary shut down of the plant”
  • The operating interruption was used to bring “forward certain maintenance works previously planned for Q2” and the company clarifies that the lower grades arose from “pit sequencing”.
  • As a result, copper production for the quarter totaled 54,209t of concentrate containing 11,461t of copper (Q1 2021 – 67,260t of concentrate containing 13,979t of copper).
  • At this stage, Atalaya Mining is maintaining its 2022 production guidance of copper output in the range 54-56,000t “with improvements in copper grade and ore throughput expected in the remaining quarters of the year, due in part to the bringing forward of maintenance activities during the transport sector strike”.
  • Inventories of concentrate at 31 March 2022 valued at cost amounted to €14.6 million (31 December 2021: €6.6 million). As at 31 March 2022, total working capital was €120.1 million, representing a €17.7 million increase from the €102.4 million surplus as at 31 December 2021 and an increase of €59.1 million from 31 March 2021”.
  • Atalaya Mining reports continuing volatility in the cost of electricity supply in Spain saying that prices “reached unprecedented peaks in March as a result of the conflict in the Ukraine … [and that the] … Spanish Government announced plans to implement measures that will aim to significantly reduce prices, which are currently unsustainable for the general economy. The details of these measures have not been finalised yet but are expected to come into effect during the coming months”.
  • Meanwhile, Atalaya Mining is “implementing a range of measures that will reduce its long term energy costs and exposure to the spot market, while also lowering carbon footprint” including the signing of “a long-term Power Purchase Agreement ("PPA") with its electricity supplier for approximately 31% of its electricity requirements, with deliveries beginning in January 2023 at prices that are approximately 80% of the rate realised in 2021 … [as well as its previously announced] … planned 50 MW solar plant for self-consumption … [which] … will also help to reduce the Company's long term power costs while at the same time lower its carbon emissions”.
  • The company summarises development in its project portfolio including:
    • The previously announced new, independent, mineral resources estimates for the San Dionisio and San Antonio deposits located to the west and east respectively of the Cerro Colorado pit in Proyecto Riotinto where “Atalaya plans to complete a PEA on an operating schedule that combines Cerro Colorado reserves with higher grade material from San Dionisio deposit during 2022” and where ore from San Antonio is “easily accessible via the construction of a ramp” from the existing Cerro Colorado pit; and
    • Continuing drilling at Masa Valverde and the nearby Majadales deposit where a new mineral resources estimate was announced in April “which included a significant increase in tonnage and contained copper, gold and silver compared to the prior estimate”.  Current drilling is concentrating on the Campanario trend which runs parallel to Masa Valverde/Majadales and on testing a geophysical anomaly situated 300m west of Masa Valverde.
    • The company confirms its commitment to developing Proyecto Touro in northern Spain “and continues to engage with all stakeholders in order to resolve any concerns associated with the project”.
    • Drilling at the Ossa Morena project is expected to start in July or August.
  • Commenting on the impact of external challenges on operations during the quarter, CEO, Alberto Lavandeira, said that “our team has been successful in reducing the impact of these external factors. During the transport sector strike, we brought forward maintenance activities which should allow for higher throughput in Q2, we are advancing the construction of our 50 MW solar plant and entered into a new long term PPA, and are implementing various efficiency measures to help to offset cost inflation”.
  • He also confirmed that “we continue to focus on advancing our project pipeline in the Riotinto District, which we believe can deliver significant production growth at low capital intensity as a result of the expected grades and synergies associated with utilising our existing plant as a central processing hub”.

Conclusion: During Q1, Atalaya Mining continued to progress its project pipeline while addressing the challenges of external industrial action in Spain’s transport sector and high and volatile power prices.  Management is maintaining its current production guidance for 2022 which we infer expresses confidence in its capacity to address the challenges in an orderly and productive manner

 

BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)* 6.25p, Mkt cap £65.5m – Results statement highlights progress at Dundas ilmenite project alongside new exploration jv with Kobold Metals at Disko-Nuussuaq

(Bluejay has a staged $20m jv with Rio Tinto and holds 100% of Enonkoski Ni-Cu-Co, Hammaslahti Cu-Zn-Au-Ag and Outokumpu Cu-Co-Zn-Ni-Au-Ag projects)

  • Bluejay Mining report a gross loss of £0.2m for the year to end 2021 due to the cost of exploration license fees in Finland and Greenland.
  • Total administrative expenses rose marginally to £2.7m vs £2.5m a year earlier as new expert hires came in to advance the Dundas project.
  • Travel and consultancy fees were reduced due to Covid restrictions in Greenland in 2021 but were offset by £0.66m in share option expenses for staff.
  • Other losses came in largely unchanged at £0.05m. Rather unhelpfully the note in the accounts offers no explanation.
  • A foreign exchange gain of £0.02 was better than the £0.065m loss in 2020.
  • Other income of £0.19m came in from exploration fees and the sale of ilmenite concentrate from the pilot plant. Bluejay’s agents are using this material to secure further offtake interest for its superior quality ilmenite concentrate.
  • Operating losses rose to £2.9m vs £2.5m a year earlier.
  • Cash and cash equivalents reduced to £2.7m at the year end from £5.9m in 2020 but have since been bolstered with £7m of new funding .
  • Prices have fallen to $366/t from $398/t in China over the past two weeks but remain substantially higher than the $250/t currently used in our modelling though this does not account for the cost of tariffs and transport within China.

Conclusion: There is allot going on at Bluejay with the Dundas team working on optimising the project for the updated feasibility study.  This should support the financing of Dundas in Q1 2023.

Exploration work is ongoing at Enonkoski Disko-Nuussuaq, and Thunderstone, any of which could show interesting results this year.

 *SP Angel acts as nomad and broker to Bluejay Mining. The analyst holds shares in Bluejay Mining.

 

Botswana Diamonds PLC (AIM:BOD) 0.99p, Mkt Cap £8.7m – Ground geophysical anomalies indicative of kimberlites at Sekaka

  • Botswana Diamonds reports that ground geophysical work in Botswana, close to the company’s KX36 kimberlite has identified anomalies which may indicate further kimberlites.
  • Four anomalies of interest have been identified as “magnetic highs along fault structures” within a six-km radius of KX36
  • Chairman, John Teeling, said that “If these anomalies prove to be diamondiferous kimberlites it will enhance the commercial prospects of the existing KX36 discovery. We will now do follow up work to target drill sites”.
  • Follow-up work includes “gravity modelling and soil sampling. A drill programme will be put in place”.

Conclusion: The discovery of additional anomalies, possibly representing additional kimberlites , close to Botswana Diamonds’ KX36 kimberlite in the Central Kalahari provides exploration targets for further exploration.  At this relatively early stage the company will need to demonstrate that the geophysics has located kimberlite and then that they are diamond-bearing before establishing whether they meet economic hurdles - we look forward to further news as exploration proceeds.

 

Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) 7.1p, Mkt Cap £270m – Construction starts at Araguaia with official ‘ground-breaking ceremony’

  • Horizonte Minerals reports that an official ‘ground-breaking ceremony’, held on 18th May marks the transition of the Araguaia project from a development project into the construction phase.
  • Construction of the first phase of the project, which targets the production of 14,500tpa of nickel in ferronickel, is expected to last 24 months.
  • The company says that “As at the end of April 2022, the Company had awarded contracts totalling US$204 million with a further U$66 million of contracts to be awarded imminently, on budget. In total this represents approximately 50% of our pre-contingency project direct capex”.
  • Jeremy Martin, CEO, says that the formal breaking of ground brings the company “a step closer to achieving our vision of bringing this Project into production and generating first revenues. This all comes at a time where the nickel market is facing constrained supply which will benefit Horizonte as we become a globally significant producer”.

Conclusion: Araguaia has moved into a 24-months construction phase for the first phase of the project aimed at producing 14,500tpa of nickel in ferronickel

 

Power Metal Resources PLC (AIM:POW)* 1.4p, Mkt Cap £20m – Consolidation of the interest in the Molopo Farms Complex Project in Botswana

  • The Company conditionally agreed to acquire an additional 58.7% interest in Kalahari Key that holds a 60% interest in the Molopo Farms Complex Project (MFC) in southwest Botswana.
  • Power is acquiring the stake from Kalahari Key investors by issuing ~46.1m new shares at 1.75p, equivalent to ~£810k, as well as 46.1m new warrants with an exercise price of 3.5p and a 2-year maturity.
  • Additionally, the deal involves a further consideration in the event that Kalahari Key or the MFC Project is acquired for $10m or more within 2 years of today’s date in the form of further 46.1m warrants with an exercise price of  5.0p with a 2 year life to expiry.
  • The deal is conditional on completion of all legal agreements and receipt of all Botswana regulatory approvals.
  • New shares are locked in for the next six (50%) and twelve (balancing 50%) months.
  • On completion of the deal and a restructuring of the MFC Project interest, Power, will hold 87.7% in Kalahari Key that will own 100% in the MFC Project, compared to ~53% effective interest in the Project at the moment.
  • The deal will allow Power to become project of the asset with immediate effect and accelerate exploration programme including a next stage drill programme targeting a large scale nickel/PGM discovery.

*SP Angel acts as nomad and broker to Power Metal

 

Sunrise Resources PLC (AIM:SRES) 0.14p Mkt Cap £5.2m – Myrtle precious metals project, Nevada

  • Sunrise Resources confirms that initial reconnaissance field-mapping and sampling has been carried out on the historic Myrtle mine in Nevada, which is held by another party and also on its own 20 mining claims which surround the mine.
  • Results from the Myrtle mine include “values of up to 142g/t gold (4.1 ounces/ton) from narrow in-situ quartz veins and up to 9.7g/t from quartz vein samples on the Myrtle Mine dumps”.
  • Values of up to 3g/t gold … [are reported] …from Sunnyside Mine workings on the Company Claims … [while] … Silver values of up to 13.2 ounces/ton (452g/t) and up to 4.9% zinc-lead-copper from more distal mineralisation on Company Claims”.
  • Patrick Cheetham, Executive Chairman of Sunrise Resources, said “The assay results from reconnaissance sampling of the Myrtle Project are very promising with different styles of mineralisation developed around what appears to be an intrusive related gold system”.
  • He confirmed, however, that the “development of our core pozzolan and perlite projects remains our priority and only limited funds are deployed on other projects where we think we can add value at little cost as demonstrated by these results

 

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

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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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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%

 

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