SP Angel . Morning View . Friday 27 05 22
Base metals rise in thin markets despite Premier Li speech
MiFID II exempt information – see disclaimer below
Aura Energy Ltd (ASX:AEE, AIM:AURA)* – 10,000m infill program commences at Tiris
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* - BUY – Buyback programme for up to 10% of shares
Bushveld Minerals Limited (AIM:BMN, OTC:BSHVF)* – BUY, valuation 31p - David Noko appointed as new independent non-executive director
Hummingbird Resources PLC (LSE:HUM) – FY21 loss reported as mining operations underperformed
Pensana PLC (LSE:PRE) – Questions over FEED design and engineering study for Angolan mine and UK rare-earths processing facilities
Sigma Lithium Corp (TSX-V:SGML, OTCQB:SGMLF, NASDAQ:SGML) – Grota do Cirilo Project valued at NPV8% US$5.1bn
Tertiary Minerals PLC (AIM:TYM)* – Interim report confirms continuing exploration in Nevada, expansion of Zambian programmes and expresses optimism on permitting at Storuman
Dow Jones Industrials +1.61% at 32,637
Nikkei 225 +0.66% at 26,782
HK Hang Seng +2.14% at 20,546
Shanghai Composite +0.19% at 3,129
Economics
China – Is Premier Li going against President Xi with his speech to the nation on the Chinese economy?
- President Xi’s strict zero covid and other Socialist policies risk collapsing China’s economy prompting Li’s speech to the nation. (CNBC)
- The premier warned China’s economy is at a ‘critical point’ and called on officials to work hard for Q2 growth to reduce unemployment.
- It is unprecedented for a premier to speak out against the policies of the president on such scale as he works to undo the damage done by the strict Zero Covid and other policies.
- Over 200m people have been living under lockdown restrictions causing increasing unrest.
- Many workers are living away from their families in their factory workplaces fostering discontent.
- Consumers are not able to get to the shops with online deliveries also been restricted according to reports
- Many of China’s smaller companies work of smaller margins than state enterprises where higher input costs risk their collapse.
- High oil & gas prices are having a significant impact on SMEs with unemployment likely to rise as smaller companies go to the wall.
Ukraine – Critical week ahead as Ukraine forces reequip with US weapons
- News of conscripts fighting for Russia in Ukraine highlights level of Russian losses and desperation of Russian military leaders.
- We are increasingly hopeful of better news out of the Ukraine.
- Russia’s military has been severely discredited and weakened through the conflict creating potential for new uprisings against the Russian state on and within its borders.
China threatens to cut off rare earth exports according to the Express newspaper
- “China may soon tighten controls on its export of the rare-earth metals that are essential for assorted modern technologies - from smartphones to wind turbines - meaning that the rest of the world needs to increase production to meet demand, an expert has said.” The Express
- China’s three largest state-owned rare earth companies combined to form China Rare Earth Group in December last year.
- The company is now the second-largest rare earths miner and refiner in the world producing nearly a third of China’s rare earth output and > 60–70% of its heavy rare earth production, eg around 55% of global production.
- This should make it easier for Beijing to control the direction and pricing of rare earths potentially limiting exports to the west while fulfilling domestic demand.
Currencies
US$1.0752/eur vs 1.0690/eur yesterday. Yen 127.10/$ vs 126.85/$. SAr 15.646/$ vs 15.728/$. $1.263/gbp vs $1.259/gbp. 0.713/aud vs 0.709/aud. CNY 6.733/$ vs 6.730/$.
Commodity News
Precious metals:
Gold US$1,855/oz vs US$1,850/oz yesterday
Gold ETFs 105.1moz vs US$105.1moz yesterday
Platinum US$952/oz vs US$949/oz yesterday
Palladium US$2,028/oz vs US$2,000/oz yesterday
Silver US$22.11/oz vs US$21.86/oz yesterday
Rhodium US$15,600/oz vs US$15,600/oz yesterday
Base metals:
Copper US$ 9,407/t vs US$9,347/t yesterday
Aluminium US$ 2,878/t vs US$2,884/t yesterday
Nickel US$ 27,545/t vs US$27,175/t yesterday
Zinc US$ 3,773/t vs US$3,747/t yesterday
Lead US$ 2,144/t vs US$2,114/t yesterday
Tin US$ 33,600/t vs US$32,950/t yesterday
Energy:
Oil US$117.0/bbl vs US$114.3/bbl yesterday
Natural Gas US$8.776/mmbtu vs US$9.160/mmbtu yesterday
Uranium UXC US$47.65/lb vs $47.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$130.2/t vs US$130.8/t
Chinese steel rebar 25mm US$703.1/t vs US$704.3/t
Thermal coal (1st year forward cif ARA) US$248.5/t vs US$248.5/t
Thermal coal swap Australia FOB US$365.0/t vs US$362.0/t
Coking coal swap Australia FOB US$487.0/t vs US$500.0/t
Other:
Cobalt LME 3m US$75,000/t vs US$75,000/t
NdPr Rare Earth Oxide (China) US$141,088/t vs US$140,410/t
Lithium carbonate 99% (China) US$65,123/t vs US$64,410/t
China Spodumene Li2O 5%min CIF US$4,500/t vs US$4,500/t
Ferro-Manganese European Mn78% min US$1,866/t vs US$1,854/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% 9.6/lb vs US$9.6/lb
Europe Ferro-Vanadium 80% 38.25/kg vs US$38.25/kg
China Ilmenite Concentrate TiO2 US$368/t vs US$368/t
Spot CO2 Emissions EUA Price US$87.8/t vs US$86.2/kg
Brazil Potash CFR Granular Spot US$1,200.0/t vs US$1,200.0/kg
Battery News
Johnson Matthey PLC (LSE:JMAT) £32, Mkt Cap £4.1bn – Some battery assets sold to EV Metals Group
- Johnson Matthey reports that it has sold some of its remaining battery assets to EV Metals Group as it pursues its strategy of exiting the sector.
- The units include sites in the UK, Germany and a partially constructed facility in Poland and will be sold for £50m in cash.
- As well as the sites, EV Metals will also receive a package of patents, licences and a team of 100 technical personnel.
- The deal includes the technology behind eLNO, a jet-black substance made from nickel, cobalt and lithium that Johnson Matthey believes could transform the EV industry by increasing the range and reducing the cost of batteries.
- J Mat will also receive a minority share in EV Metals Group and a seat on the board.
- Johnson Matthey is focusing on hydrogen storage growth, which it said better compliments its existing PGM business.
POSCO Chemical to invest $633m in battery materials plant with GM
- South Korean material-manufacturer, POSCO Chemical, will invest up to $633m on a battery materials production facility, a joint venture with General Motors in Canada.
- The companies announced plans to build a battery cathode materials plant in North America, by 2024, back in December 2021.
- POSCO Chemical specialises in nickel-rich, NCM cathodes and a diversified portfolio of anode materials (graphite, silicon and lithium).
Airbus sets up UK facility to research fuel systems for next-gen hydrogen planes
- Airbus has launched a UK-based facility focused on hydrogen technologies to support the design of its next generation aircraft.
- The Zero Emission Development Centre (ZEDC) in Filton, Bristol, will work on the development of what Airbus called a “cost-competitive cryogenic fuel system” that its ZEROe aircraft will need.
- Details of three zero-emission concept planes, under the name ZEROe, were released in September 2020 – Airbus wants to have developed zero-emission commercial aircraft by 2035.
- The ZEDC in the UK joins similar sites in Spain, Germany and France as Airbus looks to accelerate development of the technology with the hope of flight testing beginning in 2026.
Company News
Aura Energy Ltd (ASX:AEE, AIM:AURA)* 11.25p, Mkt Cap £55m – 10,000m infill program commences at Tiris
- Aura Energy reports that it has mobilised drilling equipment for a further 10,000m programme at its Tiris uranium project in Mauritania.
- Results expected in Q4 FY2022 with drilling due to start on 30th May
- The work aims to increase measured and indicated resources and will focus initially on the Sadi deposit which the company has previously explained was not included in previous mineral resources estimates and will also include the “Lazare South and Hippolye zones within the Tiris East Project”.
- The drilling will “generate large diameter (PQ) core in approximately 60 holes to validate the downhole radiometric logging results that the resource estimate will be based on, and will provide density data throughout the deposit”.
- As well as the core drilling, “Downhole radiometric logging contractors have mobilised and are due on site before 1 June 2022”.
- The programme seeks to upgrade more of the Company's 56 Mlb resource from Inferred to Measured and Indicated, and to identify further exploration targets within the tenure.
- Acting CEO, Will Goddard, explained that “By upgrading the Resource Estimate, in parallel with planned development and construction, we will add the opportunity to expand the Production Targets early in the mine life, following the commencement of production at Tiris from the fast-tracked 800 klb per annum project”.
- The company’s previously issued DFS for Tiris envisages
- Tiris DFS summary:
- Ore throughput: 1.25mtpa
- Grade: 364ppm (0.0364%)
- Process plant throughput: 0.16mtpa
- Recovery: 86.1%.
- Production: 823,000lb Uranium (U3O8)
- Capex: $74.8m including $4.7m
- C1 Cash costs: 25.43c/lb
- AISC Op costs: 29.81c/lb.
- Uranium price assumption: $60/lb (current spot ~54.2-56.7/lb)
- NPV: $79.9m .
- IRR: 22%.
- Cash flow: $214m.
- Payback: 4 years.
Conclusion: Aura Energy is mobilising drilling equipment to Tiris in order to expand drill coverage to additional deposits at Sadi, Lazare South and Hippolyte. Results are expected during Q4 and may generate resource expansion to underpin a potential expansion in the scale of the development beyond the 1.25mtpa of ore throughput currently envisaged.
*SP Angel acts as nomad and broker to Aura Energy
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 97p, Mkt Cap £111m – Buyback programme for up to 10% of shares
BUY
- The Company is planning to launch a buy back programme for up to 10% of outstanding shares (~11.4m shares) saying the current market capitalisation undervalues the business.
- Additionally, the Company is planning to keep acquired shares in treasury with accumulated blocks of stock to potentially be used to attract more institutional investors to the register.
- As part of the proposed programme, the Company will be seeking shareholder approval for a waiver granted by Takeover Panel of the obligation by certain shareholders to make a general offer for the entire issued and to be issued share capital.
- Reza Vaziri (CEO), Governor Sununu (NED), Michael Sununu (NED) and Limelight Industrial Developments currently hold 41.6% and are deemed to act in concert by the Panel.
- Should the Company complete the programme that interest is expected to rise to 46.2%.
- The Board (ex Variri, J Sununu and M Sununu) unanimously recommended that shareholders (ex Concert Party) vote in favour of the waiver and support the programme.
- The general meeting and the vote to be held on 23 June.
Conclusion: The Company is proposing a buy back programme for up to 10% of outstanding shares (~£11m at spot) and will be seeking shareholder approval for a granted waiver to obligation by major shareholders to make an offer for the Company. The Company is well capitalised with ~$37m in the bank and gold/copper inventories as of Q1/22 with the programme we believe to be adjusted based on the market price and exploration/development capital needs.
*SP Angel act as nomad and broker to Anglo Asian Mining
Bushveld Minerals Limited (AIM:BMN, OTC:BSHVF)*– 9.98p, Mkt cap £132m – David Noko appointed as new independent non-executive director
BUY – Valuation 31p
- Bushveld Minerals reports the appointment of David Noko as a new independent non-executive director to take over from Anthony Viljoen who has retired from the board.
- Anthony Viljoen was a founding member of Bushveld and now leads AfriTin Mining which was spun out of the Bushveld group in 2017.
- David Noko has acted on the boards of Royal Bafokeng Platinum, Harmony Gold (NYSE:HMY) Mining, AstraPak and Platistone Holdings and is currently a NED for African Rainbow Minerals and Tongaat Hulett alongside advising ESG Advisory.
- David is also the Chairman of the Council of the University of the Free State and has formerly had held senior roles at General Electric (NYSE:GE), PepsiCo (NASDAQ:PEP) Inc, South African Breweries, De Beers and AngloGold Ashanti (ASX:AGG).
Conclusion: The hiring of David Noko highlights the importance of Bushveld Minerals in South Africa and the potential for the Bushveld Energy business which is working on the development of grid-scale VRFB batteries.
*SP Angel act as nomad and broker to Bushveld
Hummingbird Resources PLC (LSE:HUM) 13.2p, Mkt Cap £52m – FY21 loss reported as mining operations underperformed
- Revenues totalled $156.6m (2020: $181.7m) reflecting a drop in production last year.
- Sales amounted to 87.6koz at average gold price realised of $1,788/oz (2020: 104.2koz at $1,745/oz).
- AISC averaged $1,536/oz (2020: $1,147/oz) on the back lower poured ounces and cost inflation.
- EBITDA dropped to $28.2m (2020: $75.2m).
- The Company reported a $10.6m loss for the year, compared to a $25.1m profit in 2020.
- Net debt position (ex leases) stood at $21.0m including gold inventories as of YE (2020: net cash $1.5m) as the team commenced construction of the Kouroussa Gold Mine in Guinea.
- Operationally, construction works at Kouroussa are rapidly advancing and major civil works underway with first production targeted by the end of Q2/23.
- At Yanfolila, the Company is working on improving productivity with delivery and commissioning of additional excavators as well as processing plant maintenance works completed earlier this year.
- FY22 guidance is for 87-97koz at an average AISC of $1,300-1,450/oz.
- Updated Mineral Resource and Reserve statement that will incorporate 2021 drilling results looking at extending life of mine at Yanfolila is expected in Q2/22.
- At Dugbe, Pasofino that is earning into the project is expected to deliver the DFS in Q2/22.
Pensana PLC (LSE:PRE) 80p, Mkt Cap £186m – Questions over FEED design and engineering study for Angolan mine and UK rare-earths processing facilities
- Pensana issued a technical report on the completion of their Front End Engineering Design (FEED) and Value Engineering studies for the Longonjo mining operation in Angloa and the rare-earths separation plant at Saltend, UK earlier this week.
- The figures have created some debate within the mining industry leading to some pertinent questions:
- Is the capital cost estimate realistic for this scale of mine in Angola and a REE processing plant in the UK?
- Capital cost inflation has jumped >20% since Covid struck in Wuhan.
- Capital costs were depressed in 2019 before covid stimulus plans and supply chain disruption sparked a new round of inflation in the sector. Higher iron ore, energy and logistics costs simply added to the inflation while the exclusion of cheap Russian processing equipment from projects has enabled Chinese companies to jack up their costs.
- Will Pensana be able to remove Thorium and Ac-227 from material to be imported into the UK. Importing any radioactive material will require some very special permits.
- Where is the additional feedstock for the REE refinery in Saltend, UK coming from?
- Are they really able to finance and build a REE refinery in Saltend without firm agreements in place for secure REE supply and will the imported material be a simple REE concentrate or does it need to be a chemical purified sulphide precipitated product or is the plant designed to take in a simple mineral concentrate?
Conclusion: While we congratulate Pensana for putting together such a detailed Front End Engineering and Design and Value Engineering Study we feel there some details which may require further refinement before the banks finance the full project. Having said that, we feel there is sufficient demand, will and technical expertise to overcome most issues presenting in the rare earth industry.
Sigma Lithium Corp (TSX-V:SGML, OTCQB:SGMLF, NASDAQ:SGML) 21.6p, Mkt Cap C$2.2bn – Grota do Cirilo Project valued at NPV8% US$5.1bn
- Sigma Lithium has released a technical report for its Grota do Cirilo project, with the asset expected to produce 531,000tpa (72,200t LCE) of battery grade lithium from combined Phase 1 and Phase 2 production.
- Highlights from the base case P1 & P2 at 5.5% Li2O are as follows:
- Annual ROM: 1.8mtpa
- Spodumene grade: 1.37%
- Phase-1 lithium recovery (DMS): 65%
- LCE Eq production: 72,200t
- Total combined capex: US$187m
- TCC: US$340/t
- AISC (CIF China): US$455/t
- Lithium concentrate price assumption: US$3,159/t until 2026, long term US$1,710/t
- Annual average revenue: US$675m
- After-tax NPV8%: $5.1bn
- After-tax IRR: 589%
- The phased expansion of this currently undeveloped project could potentially make the company the world’s fourth largest lithium producer.
- Sigma also comments 100% of the tailings are to be dry stacked, the mien will be powered by 100% renewable hydro power, and 100% of the water recirculated/reused in the plant – and sourced from a river with “high chemical levels of raw sewage contamination”.
Tertiary Minerals PLC (AIM:TYM)* – 0.21p, Mkt cap £3.2m – Interim report confirms continuing exploration in Nevada, expansion of Zambian programmes and expresses optimism on permitting at Storuman
- Tertiary Minerals has reported a loss of £0.60m for the six months ending 31st March 2022 (2021 - £0.22m loss).
- The company also reports a 31st March cash balance of £0.62m and £0.22m of exploration expenditure over the six months period (2021- £0.11m).
- While confirming that “Nevada remains a primary destination for exploration and mining investments”, Managing Director, Patrick Cullen, said that “we are particularly excited to be now moving ahead in Zambia where recent announcements are instilling renewed confidence in the country's mining sector”.
- Mr. Cullen highlighted the continuing exploration of the Brunton Pass copper/gold project in Nevada, where ”Anomalies generated by a project-wide soil sampling programme indicate that a programme of trenching is now appropriate and permitting is completed. We expect the first phase of that work to commence in the coming months”.
- Also in Nevada, drilling to follow-up surface sampling results at the Pyramid gold/silver project near Reno proved “disappointing and the decision was made to terminate any further exploration and impair the asset, ensuring that no unnecessary further costs are incurred and attention is re-focused”.
- The main focus of the company’s Zambian exploration is the Jacks copper project where the company recently reported the visual identification of the copper minerals chrysocolla and malachite in the drill core from the first hole, 22-JKDD-01.
- Tertiary Minerals confirms, however, that the Jacks project “is only one of several Copperbelt projects where we have recently acquired interests”.
- The company also confirms that it still maintains its “interest in the Storuman fluorspar development project in Sweden where the Company's mining concession application remains under government review and we hope for a positive decision in the coming reporting period”.
Conclusion: Tertiary Minerals is extending its exploration interest in Zambia while continuing to progress its Nevada projects and to express optimism on a resolution of its application for permits to mine the Storuman fluorspar project in Sweden.
*SP Angel act as Nomad and Broker to Tertiary Minerals
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
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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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