SP Angel . Morning View . Monday 22 08 22
China cuts mortgage lending rate and extends tax exemptions on EVs
MiFID II exempt information – see disclaimer below
Beowulf Mining PLC (AIM:BEM)* – Encouraging initial drill results at Madjan Peak
Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)* – Filing of NI 43-101 DFS for Songwe Hill
Orosur Mining Inc (AIM:OMI, TSX-V:OMI)* – Orosur to hold investor webinar
Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)* (RBW LN) – Rainbow strike deal with OCP for Rare Earth processing of Moroccan phosphate residues
Dow Jones Industrials -0.86% at 33,707
Nikkei 225 -0.47% at 28,795
HK Hang Seng -0.33% at 19,707
Shanghai Composite+0.61% at 3,278
Economics
Putin and Xi to attend G20 summit in Bali on 15-16 November
- We expect most Western leaders will walk out of any meeting where Putin turns up
- The G20 may invite Ukraine to attend which will make life interesting
China - 5-year mortgage lending rate lowered 15bps to 4.3%
- China has cut the five-year loan prime rate for the second time this year as the property sector continues to suffer from a liquidity crisis.
- The one-year LPR, which is also based on domestic Chinese lending rates was cut to 3.65% from 3.7%.
- The cut shows that government worries over the crisis are intensifying.
- Country Garden, the country’s largest real estate group by sales, estimated first-half profits fell as much as 70%.
- China to extend tax exemptions on EVs
- China will extend the purchase tax exemption on new energy vehicles to the end of 2023, creating tax cuts worth a total of 100bn yuan ($14.63bn).
Japan - CPI rose 0.5% in July vs 0% in June and 2.6% yoy in July vs 2.5% yoy in June
Europe – Rhine levels at Kaub rise 74cm in two days, easing shipping woes
- Rhine water levels at Kaub in Germany rose 74cm to 107cm – the highest since 11th of July 2022.
- The two key bottleneck points along the Rhine are the Kaub, west of Frankfurt, and Maxau, near Karlsruhe in south-west Germany.
- At that depth, it is once again economical for many barges to pass the point carrying cargo.
- The marker is set to rise to 150cm by Tuesday.
- When the level at Kaub reaches 40cm or lower, it becomes uneconomical for barges to haul cargo through the checkpoint.
Germany - PPI 5.3% in July vs 0.6% in June and 37.2% yoy in July vs 32.7% yoy in June
Turkey - Official interest rates cut 1% to 13%. Inflation is running at 80%
UK - Retail sales rose 0.3% in July vs -0.2% in June and -3.4% yoy in July vs -6.1% yoy in June
- GfK consumer sentiment index fell to -44 in August vs -41 in July
- 2,000 workers go on strike at UK’s largest container port
- Dockworkers at the Port of Felixstowe are striking for eight days over pay.
- The port handles one-third of Britain’s total container volume and an even bigger share of direct trade with Asia.
Ghana – Interest raised by 3% to 22% and is looking for 17th bail out from the IMF since independence in 1957.
Freight rates - Baltic Exchange Dry Index also fell a further 3% on the day to 1279. The index is 77% down on its high in October 2021
- Drewy’s World Container index fell a further 3% last week to $6,223 per 40ft container last week. The index is 35% lower yoy.
Currencies
US$1.0021/eur vs 1.0083/eur last week. Yen 136.80/$ vs 136.37/$. SAr 17.031/$ vs 16.928/$. $1.181/gbp vs $1.188/gbp. 0.690/aud vs 0.690/aud. CNY 6.828/$ vs 6.810/$.
US Dollar index – 108.25 / +0.08% on week
Commodity News
Precious metals:
Gold US$1,739/oz vs US$1,753/oz last week
Gold ETFs 100.4moz vs US$100.4moz last week
Platinum US$885/oz vs US$905/oz last week
Palladium US$2,117/oz vs US$2,145/oz last week
Silver US$18.95/oz vs US$19.25/oz last week
Rhodium US$14,250/oz vs US$14,250/oz last week
Base metals:
Copper US$8,064/t vs US$8,022/t last week
Aluminium US$ 2,392/t vs US$2,406/t last week
Nickel US$ 22,258/t vs US$22,055/t last week
Zinc US$ 3,499/t vs US$3,514/t last week
Lead US$ 2,057/t vs US$2,066/t last week
Tin US$ 24,750/t vs US$24,300/t last week
Energy:
Oil US$95.1/bbl vs US$96.3/bbl last week
Crude oil prices edged lower as expectations of further US interest rate hikes strengthened the dollar and dented global growth forecasts.
European energy prices surged to new highs after Gazprom announced it would halt natural gas deliveries to Europe for three days at the end of the month due to unscheduled maintenance on the Nord Stream 1 pipeline
The US Baker Hughes rig count fell by 1 to 762 rigs last week, with oil rigs flat at 601 rigs and gas rigs falling by 1 unit to 159 rigs.
Natural Gas US$9.268/mmbtu vs US$9.117/mmbtu last week
Uranium UXC US$49.00/lb vs US$48.70/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$101.3/t vs US$101.7/t
Chinese steel rebar 25mm US$614.9/t vs US$616.5/t
Thermal coal (1st year forward cif ARA) US$300.0/t vs US$300.0/t
Coking coal swap Australia FOB US$296.0/t vs US$280.0/t
Other:
Cobalt LME 3m US$49,455/t vs US$49,455/t
NdPr Rare Earth Oxide (China) US$103,993/t vs US$106,566/t
Lithium carbonate 99% (China) US$68,767/t vs US$68,349/t
China Spodumene Li2O 5%min CIF US$4,720/t vs US$4,720/t
Ferro-Manganese European Mn78% min US$1,227/t vs US$1,235/t
China Tungsten APT 88.5% FOB US$333/t vs US$333/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 7.3/lb vs US$7.4/lb
Europe Ferro-Vanadium 80% 32.25/kg vs US$32.75/kg
China Ilmenite Concentrate TiO2 US$345/t vs US$346/t
Spot CO2 Emissions EUA Price US$95.7/t vs US$96.3/t
Brazil Potash CFR Granular Spot US$900.0/t vs US$930.0/t
Battery News
Australia to target vehicle emissions and increase EV uptake
- Australia's government will introduce new regulations targeting vehicle carbon emissions to boost the uptake of EVs.
- Just 2% of cars sold in Australia are electric compared with 15% in Britain and 17% in Europe.
- The government will release a discussion paper for consultation in September, with a focus on increasing EV uptake, improving affordability, and looking at options for fuel efficiency standards.
- New Australian Prime Minister, Anthony Albanese has promised tax cuts for EVs, and raised Australia's 2030 target for cutting carbon emissions to a 43% reduction on 2005 levels.
Cambridge researchers develop artificial leaf to turn sunlight, water and CO2 to fuel
- Researchers at Cambridge University have developed artificial leaves that produce clean fuel as they float on water.
- The ultra-thin, lightweight and flexible devices use solar technology that mimics photosynthesis to create a carbon-neutral fuel – unlike conventional solar panels that generate an electrical current.
- Tests on the River Cam are the first time that clean fuel has been generated on water, they said, adding that if it was scaled up the technology could be used on polluted waterways, in ports or even at sea where they could help to reduce the global shipping industry’s reliance on fossil fuels.
- The leaves work when water and CO2 are present, and sunlight hits a panel that has been coated in a semiconductor powder – the chemical reaction creates formic acid, which can be stored.
- The leaves are not ready for commercial applications as additional improvements will need to be made, including creating a method to collect the fuel from the leaf.
Company News
Beowulf Mining PLC (AIM:BEM)* 5.65p, Mkt Cap £60m – Encouraging initial drill results at Madjan Peak
(Beowulf holds an approximately 59.5% interest in Vadar Minerals)
- Beowulf has released the first round of drill results from the Madjan Peak prospect, part of the Mitrovica licence, in Kosovo.
- Initial findings indicate the presence of a polymetallic epithermal system, with all eleven drillholes intersecting sulphides intense alteration, and multiple generations of veining.
- Given the drillholes covered an area 1,400 x 700m and all drillholes intersected alteration, the project seems to be of scale that could host a large polymetallic epithermal system.
- Highlights from the programme include:
- MP005 – 10.2m @ 0.25 g/t from 2.5m
- MP006 – 29.5m @ 0.21 g/t from 197m 196m including 10.8m @ 0.48 g/t Au, 0.1% Cu & 18 g/t Ag
- MP006 – 1.5m @ 16.44% Pb, 0.8% Zn & 54 g/t Ag from 239.5m
- MP013 – 16.4m @ 0.21 g/t from 42.8m
- The full suite of drill results indicates alteration at various depths, meaning mineralisation is likely to relate to multiple episodes of hydrothermal activity with distinct assemblages of gold, gold-silver-copper-antimony, lead-zinc-silver and zinc.
- Follow up drilling will target close proximity to hydrothermal breccias related to feeder structures as according to classic epithermal models, the gold-silver-copper-antimony mineralisation is likely to occur within these.
- Vadar also comment that the first significant polymetallic target (MP-T1) was intersected by drillholes MP006 and MP009 and following a distinct WNW trend evidenced in geophysical and soil sampling datasets.
- The mineralisation intersected in MP006 is typical of what can be expected on the margins of a high-grade feeder zone which is further supported by resistivity data.
- Separately, Beowulf released its interims last week for the six months ended 30 June 2022.
- Results show the cash held at the end of the period was £1.88m.
Conclusion: Vadar have succeeded with their initial aim at Madjan Peak of discovering the presence of a large polymetallic epithermal system. Given the postcode of the asset, in close proximity to the Stan Terg Mine, Vadar and Beowulf will now be working hard to refine the geological model at Madjan Peak in order to test areas of higher-grade feeder structures which exists at close proximity to the prospect. Interims released last week show a healthy cash position for Beowulf which enables them to add value across the three strands of its business. We look forward to the next phase of drilling.
*SP Angel acts as Nomad and Broker to Beowulf Mining
Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)* 18.5p, Mkt Cap £40m – Filing of NI 43-101 DFS for Songwe Hill
- Mkango has released its DFS for Songwe Hill into the public domain, having released key finding of the study on the 5th of July 2022.
- The full document can be found by searching for Mkango Resources here: https://www.sedar.com/search/search_form_pc_en.htm
- The study assumes mining will commence in February 2025 with average production of 5,954t of TREO in the first five years of production.
- The TREO is expected to contain 1,953tpa of neodymium and praseodymium oxides, and 56tpa of dysprosium and terbium oxides in a mixed rare earth carbonate grading 55% TREO.
- Mining at Songwe will be conventional open-pit mining using contract miners feeding mills, flotation and hydrometallurgy plants on site in Malawi to produce a Mixed Rare Earth Carbonate (MERC).
- The MERC produced from Songwe is expected to obtain an average realised selling price US$32,816 per tonne for the first full five years of production based on pricing estimates from Adamas Intelligence.
- Mkango reports that the product will be exported largely via existing infrastructure.
- Financial summary of DFS:
- LOM post-tax nominal cash flow of $2.08bn
- Post-tax NPV10 of $559m
- EBITDA of $215m per year
- Post-tax 31.5%
- Payback period from project start (assumed Mar 23) of 5 years.
- Capex of $389m
- Operational summary of DFS:
- Average yearly ore mined of 1.48mt at an average 1.16% TREO
- Life of mine: 18yrs
- Average strip ratio of 2.2
- Yearly flotation plant feed of 1mt
- Flotation TREO concentrate grade of 11.6%
- TREO recovery to concentrate of 74%
- Average yearly flotation concentrate feed of 74,000t
- Average yearly carbonate production (dry basis) of 10,826t
Conclusion: The completion of the DFS is a key milestone for Mkango, testament to the hard work of the board and management team. Songwe joins a small group of rare earth projects globally that have been progressed to the DFS stage and we expect this to hold the company in good stead when looking to finance development of Songwe. The demand outlook remains compelling for rare earths and more so the western supply chain of critical minerals, with Chinese Praseodymium-Neodymium prices robust as ever despite the recent wider pull back in metals prices. We expect material news on the proposed Pulawy Rare Earth Separation Project to be a positive rerating event for Mkango, allowing them to increase their margins and payability even further beyond this study.
*SP Angel acts as Nomad and Broker to Mkango Resources
Orosur Mining Inc (AIM:OMI, TSX-V:OMI)* 11p, Mkt Cap £18m – Orosur to hold investor webinar
- Orosur Mining will hold an investor webinar on Tuesday 6 September at 6pm BST.
- Please register using the following link:
- https://us02web.zoom.us/webinar/register/9616606533042/WN_EM3ye1AUQ960yumI243xTg
- Orosur recently reported highly anomalous results from soil sampling at the La Esfinge prospect at El Pantano with gold in soil results up to 152ppb.
- The Orosur team recently reported results from a further five drillholes at its flagship Anzá project in Colombia which is being managed by its jv partner, Minera Monte Águila, a 50:50 partnership between Newmont and Agnico Eagle.
- The results include:
- 4.85m grading 0.51g/t gold, 1.24g/t silver, 0.16% zinc and 0.02% copper from a depth of 243.05m
- 0.75m grading 3.30g/t gold, 0.86g/t silver and 0.14% zinc from 214.95m
- 10.45m grading 0.49g/t gold, 0.48g/t silver and 0.03% zinc from 205.90m
- 5.35m grading 2.67g/t gold, 2.61g/t silver, 1.04% zinc and 0.04% copper from 188.90m
- 2.50m grading 3.30g/t gold, 1.61g/t silver and 0.06% zinc from 278.70m, 9.25m averaging 1.77g/t gold, 4.63g/t silver, 5.33% zinc and 0.39% copper from 305.25m
*SP Angel acts as nomad and broker to Orosur Mining
Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)* 11.3p, Mkt cap £60m – Rainbow strike deal with OCP for Rare Earth processing of Moroccan phosphate residues
BUY – 51p
(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates)
(Neodymium Nd, Praesidium Pr, Terbium Tb, Dysprosium Dy. Rainbow holds 100% of the Gakara mine and associated licenses in Burundi)
- Rainbow Rare Earths report a new agreement with OCP in Morocco for the extraction of REEs ‘rare earth minerals’ from phosphate residues.
- OCP is the world’s largest producer of phosphates and related fertilizers with >70% of global rock phosphate reserves. OCP employs ~23,000.
- The ‘Master Agreement’ is with OCP and UM6P ‘Mohammed VI Polytechnic University’, a science focussed Moroccan university to further investigate and the extraction of rare earth elements from phosphogypsum which is the residue from phosphate.
- OCP phosphogypsum contains REEs similarly to Rainbow’s Phalaborwa project indicating that the mineral process flowsheet designed by Rainbow and K-Tech could work for OCP phosphate residues.
- OCP and the UM6P university have significant expertise in phosphogypsum processing having developed a process for the reduction of uranium and thorium in processed Moroccan phosphates.
- Collaboration of OCP, UM6P, K-Tech and Rainbow’s metallurgical team should lead to further optimisation of the K-Tech flow sheet to ensure the best possible recovery of rare earths from rock phosphates.
- The key to the process is K-Tech’s patented CIX ‘Continuous Ion Exchange’ and CIC ‘Continuous Ion Chromatography’ process which has been shown to deliver high-purity oxides of selected rare earths.
- The CIX and CIC processes have been used commercially since the 1980s mainly in the food, biotech, chemical, water treatment, pharmaceutical and mining industries with several industrial installations operating in South Africa.
- Only nine process stages are required for the CIC separation, vs ~1,200 stages for conventional solvent extraction which is mainly done in China.
- No hazardous or toxic solvents are required in the Rainbow / K-Tech process.
- Capital and operating costs are said to be significantly lower and working capital costs are minimised due to reduced residence times and the relative simplicity of the CIX and CIC processes.
- The combined parties will work on pilot plant processing ahead of moving to industrial-scale extraction of rare earths.
- We believe OCP produce a higher grade of REE’s in their phosphogypsum as was also seen at Phalaborwa when it was operational.
Valuation: We value Rainbow’s Phalaborwa project at 43p/s based on a $204m capex assumption for the Phalaborwa project. While we are not able to assess the value of the OCP / UM6P master agreement at this stage but we can see multiple upside opportunity from a deal with a producer of this scale.
OCP produce 41mt of phosphate in 2020 exporting some 10mt of raw material. The group produced 7mt of phosphoric acid for fertilizers with 1.9mt of this exported. OCP Group sales rose 50% yoy to $8.8bn in 2021.
Conclusion: The Master Agreement should serve to share the capital cost of pilot and full scale plant development, reduce process risk and potentially speed up the commercialisation of the Phalaborwa process.
In a world where China produces >80% of global rare earths, the development of new sources of the critical rare earths seems essential for global security and the ability to re-shore manufacturing to the West .
The deal also enables Rainbow to operate on phosphogypsum residues in a stable jurisdiction outside South Africa.
*SP Angel acts as financial advisor and broker to Rainbow Rare Earths
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.
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
DISCLAIMER
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.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.
Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.
MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.
A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).
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%