Today's Market View - Arc Minerals, Bushveld Minerals, Tungsten West and more...

SP Angel . Morning View . Tuesday 13 09 22

Base and industrial metals rise as dollar slides on US CPI expectations and Evergrande news

MiFID II exempt information – see disclaimer below

(Arc Minerals Limited (AIM:ARCM)) – Arc renews prospecting licenses in Botswana

(Artemis Resources Ltd (ASX:ARV, OTCQB:ARTTF, AIM:ARV)) – Drilling identifies copper/nickel mineralisation at the Chapman prospect, WA

(Bushveld Minerals Limited (AIM:BMN, OTC:BSHVF)) – Strong performance at Vametco offsets slow start to Kiln3 at Vanchem and ESKOM load shedding

(Keras Resources PLC (AIM:KRS)) – Diamond Creek organic phosphate mine should generate >150% margin as sales rise

(Kore Potash PLC (AIM:KP2, ASX:KP2, JSE:KP2)) – BUY, 5.0p – Interims highlight the completion of the Kola Optimisation Study

(Lithium Americas Corp (TSX:LAC, NYSE:LAC)) – US environmental group claims Thacker Pass threatens rare species of snail

(Petra Diamonds Limited (LSE:PDL, OTC:PDLMF)) – Preliminary results for year to 30th June, debt restructuring and latest diamond sales tender

(Tungsten West PLC (AIM:TUN)) – US$30m term sheet for Hemerdon reopening plan

(Vulcan Energy Resources (ASX:VUL)) – DLE demonstration plant construction works commence

Gold retains strength, silver rallies as traders position before US inflation data

• Gold strengthened to $1,735/oz yesterday before settling around the $1,725/oz mark.
• Silver rallied c. 5% from yesterday’s lows.
• The dollar index continues to show weakness, supporting gold, whilst the US 10-Year Treasury auction saw sliding demand as the Fed ramps up its QT programme.
• Foreign buyers bought c. 66% of the US Treasury bonds, down from 75% in August. The decrease in sales comes despite a c. 56bp increase in yields.
• The slide in sales suggests a growing liquidity problem in global credit markets, offering a potential tailwind to gold.
• Analysts point to trader concerns before the US CPI data due out today, with investors holding fire before the data release.
• The market expects annual price increases to ease to 8.1% from a high of 8.5% in June.
• Analysts expect inflation data will likely open the door to the Fed for an additional 75bp hike, supporting the dollar and potentially limiting gold’s upward momentum.

Iron ore climbs higher alongside copper and other base metals as Evergrande resumes development projects

• Iron ore bounced 2.2% following Evergrande’s announcement to restart construction on 668/706 projects currently frozen on liquidity issues.
• The move comes alongside local government efforts to boost credit support to developers and assist home buyers with down-payment terms.
• The property giant is planning to release its debt-restructuring plan by January as creditors close in on its assets, including its Hong Kong HQ.
• Copper is up 2.61% to $8,022/oz on both a sliding dollar and Chinese construction optimism.
• Lead and zinc have also rallied.

Dow Jones Industrials +0.71% at 32,381

Nikkei 225 +0.25% at 28,615

HK Hang Seng +0.26% at 19,412

Shanghai Composite +0.04% at 3,263

Economics

Shanghai Port prepare to halt operations as Typhoon Muifa closes in

• A typhoon expected to arrive in Shanghai and Ningbo tomorrow has caused port operators to brace for suspension.
• Wind levels are currently recording 127mph north of Taiwan.
• Major container terminal Yangshan will halt operations this evening and Ningbo will halt at midnight.
• Passenger train services in East Coast China will also suspend services.
• China container ports have faced a series of disruptions ranging from weather to Covid regulations, however these have begun to ease, sending container rates cratering.

China’s ex-coal hub plans $87bn investment into clean energy as CCP continues renewables push

• Liaoning Province is looking to build 6 10GW energy bases.
• Power generation will range from nuclear, pumped hydro energy storage and offshore wind.
• The region’s mothballed coal mines will be converted to energy storage stations.
• Authorities hope to boost power generation to 90GWs by 2025 from 60 in 2020.

Chinese markets were closed overnight for the Autumn Festival

• The festival caused liquidity to fall in commodity markets.

South Korea – on holiday yesterday

US Railroad operators brace for union strikes with potential to cost US economy $2bn/day

• Freight railroad workers are currently expected to strike on Sept. 17th.
• BNSF, Union Pacific (NYSE:UNP), CSX and other major railroad operators are at risk of walkouts.
• Bloomberg estimate this could cost the US economy $2bn/day. (Bloomberg)
• Rail freight is a primary transporter of coal required for both heavy industry and energy in the US.
• Biden stepped in on Monday to aid with negotiations.
• Lumber prices rallied 10% yesterday in reaction to the expected strikes.
• Farmers are raising concerns over the impact on fertilizer transportation.
• The strikes reflect a wider theme of rising wage demands in the face of soaring inflation, further contributing to the prospect of longer-term inflation in major economies.

Fed watchers are betting on interest rate rises of 0.5-0.75%. A shocking 1% rise appears to be an outlier.

• We expect inflation to reduce in the US, partly due to the shock tactics employed by the Fed.
• High oil and gas prices has also knocked business confidence
• Falling energy prices will also naturally reduce inflation as four of the top five inflation drivers have been energy related
• The strong US dollar has also helped to temper imported US inflation
• The Fed decision is due in the evening of Wednesday 21 September.
• US CPI data is due out later today

Japan - Machine tool orders rose 10.7% yoy in August vs 5.5% in July

EU Natural Gas prices slide as Commission draws up emergency plan

• Dutch TTF Nat Gas prices have fallen 40% from highs but remain well above seasonal averages.
• Whilst a short squeeze triggered by utility hedging was a primary driver in the rally and subsequent sell-off, market optimism is forming over the EU’s emergency energy plan and the Russian army’s reported retreat in Ukraine.
• The EU is expected to introduce a range of market reforms and price caps to avoid energy catastrophe this winter.
• EU gas storage is 84% full, higher than the 5-year average, however flows from Russia have been suffocated by Putin, raising concerns of a winter energy crisis.
• The soaring energy costs have seen a swathe of EU metal smelters, fertilizer producers and other industrial industries shut-down over the past few months.

Germany - €67bn in loan guarantees for energy firms

• Germany is set to use a fund created to help companies with Covid to provide loan guarantees for struggling energy firms.
• State development bank KfW will oversee the find and the volume is estimated to be around €67bn at this stage.

UK - Industrial production dipped 0.3% in July vs -0.9% in June and 1.1% yoy in July and 2.4% yoy in June

• Manufacturing output rose 0.1% in July vs -1.6% in June and 1.1% yoy in July vs 1.3% yoy in June

Bank holiday has been declared for next Monday for the State funeral o Queen Elizabeth II

• London will host most of the world’s heads of state and their spouses. Donald Trump does not appear to have been invited. Sorry Donald!
• Many other kings and queens will also attend as befits a major royal funeral.
• Presidents Putin and Xi are not expected to attend. President Bolsonaro and Erdogan may attend as may Emperor Naruhito of Japan
• Many shops and businesses are closing out of respect. GP surgeries will also close

Turkey Unemployment dipped to 10.1% in July vs 10.3% in June

• Participation rate 52.6% (53.2%).

India - CPI rose to 0.52% in August vs 0.46% in July vs 7% yoy in August vs 6.7% in June

• The CPI figure has been above the RBI upper tolerance limit of 6% for six months despite imports of discounted Russian oil and gas.
• Critically, food basket inflation was 7.62% yoy in August up from 6.69% in July
• India is seeing >10% yoy price increases in vegetables, spices, footware, fuel and light.
• Industrial production rose 2.4% yoy in July vs 12.7% in June and 11.5% in July 2021
• Manufacturing output rose 3.2% in July vs 12.9% in June

Reported anger among brokers as LME set to stay open for Queen’s funeral

• The LME has formally indicated to brokers that it intends for its markets to be open next Monday, although it is yet to make a formal announcement.
• Monday 19th Sept is to be a national holiday in the UK.
• Brokers and clients of the exchange are angry over the LME’s handling of the matter, with relationships remaining tense following the handling of the nickel crisis earlier this year, Bloomberg reports.
• The date is particularly awkward because it is when contracts for the third Wednesday of the month, where most liquidity is concentrated, are actively traded as “cash”.

China aluminium hub Yunnan hit by electricity shortage

• Aluminium smelters in China’s Yunnan province are being forced to reduce activity due to a drought-induced shortage of hydropower.
• Yunnan accounts for 13% of China’s aluminium capacity and has been asking producers to cut operating rates as of last weekend.
• Most smelters were ordered to reduce output by 10% for further notice, with scope for further cuts if the situation persists.
• Yunnan has emerged as a major producer of aluminium due to plentiful supply of cheap hydropower, however water levels are currently 50% lower than normal.
• Cheap and accessible electricity is key for aluminium, as it makes up about 40% of an aluminium smelters’ costs with one tonne taking about 15 megawatt hours of electricity to produce - enough to power the average UK home for about five years.
• SMM estimate China’s September output of aluminium will drop 3.4% on the month prior.

Germany – Business sentiment gauge continued to deteriorate this month amid rising inflation, energy crisis and outlook for tighter monetary policy, according to the latest ZEW Survey data.

• ZEW Survey Expectations: -61.9 September v -55.3 August and -59.5 est.
• ZEW Survey Current Situation: -60.5 September v -47.6 August and -52.1 est.

UK – Unemployment rate dropped 0.2pp to 3.6% in the three months to July as more people dropped out of workforce.

• More people are reporting to have left the labour force because they were studying or had a long term health condition with the economic inactivity rate up 0.4pp to 21.7%, above its pre pandemic level.
• Amid tightening labour market, wages continued to climb higher with average total pay (including bonuses) up 5.5%yoy during same three months.
• The pace remains below the headline inflation suggesting real incomes continued to contract as the central bank readies for another rate hike at the end of the month.
• The BOE governor warned that a shrinking workforce will make price and wage pressures more persistent.
• Grocery inflation hit a record high of 12.4%yoy in August, according to the data by the research company Kantar.
• Estimated average annual grocery bill is reported to go from £4,610 to £5,181 assuming unchanged consumption basket.
• Employment Change (3m): 40k July v 160k June and 125k est.
• Unemployment Rate (3m): 3.6% July v 3.8% June and 3.8% est.
• Average Weekly Earnings (3m yoy%): 5.5 July v 5.1 June and 5.4 est.

Armenia/Azerbaijan – A sharp escalation of the conflict was reported yesterday with both sides blaming each other on provocative military activity in bordering regions.

• Azerbaijan accused Armenia of carrying intelligence activity along the border and moving weapons saying its military positions came under attack, Reuters reports.
• Armenia said that at least 49 of its soldiers had been killed following shelling of several towns near the border including Jermuk, Goris and Kapan in early hours of Tuesday.
• Armenian Prime Minister Nikol Pashinyan accused Azerbaijan of attacking Armenian towns because it did not want to negotiate over the status of Nagorno-Karabakh.

Currencies

US$1.0138/eur vs 1.0161/eur yesterday. Yen 142.35/$ vs 142.86/$. SAr 17.106/$ vs 17.148/$. $1.171/gbp vs $1.167/gbp. 0.688/aud vs 0.688/aud. CNY 6.923/$ vs 6.927/$.

US Dollar index – 108.10 / -0.21% on week

Commodity News

Precious metals:

Gold US$1,724/oz vs US$1,723/oz yesterday

Gold ETFs 99.3moz vs US$99.3moz yesterday

Platinum US$907/oz vs US$897/oz yesterday

Palladium US$2,203/oz vs US$2,184/oz yesterday

Silver US$19.72/oz vs US$19.15/oz yesterday

Rhodium US$14,700/oz vs US$15,200/oz yesterday

Base metals:

Copper US$ 7,996/t vs US$7,954/t yesterday

Aluminium US$ 2,304/t vs US$2,307/t yesterday

Nickel US$ 24,577/t vs US$22,985/t yesterday

Zinc US$ 3,246/t vs US$3,217/t yesterday

Lead US$ 1,966/t vs US$1,934/t yesterday

Tin US$ 21,810/t vs US$21,410/t yesterday

Energy:

Oil US$94.4/bbl vs US$92.3/bbl yesterday

Natural Gas US$8.400/mmbtu vs US$8.078/mmbtu yesterday

Uranium UXC US$52.70/lb vs US$52.55/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$102.5/t vs US$101.7/t

Chinese steel rebar 25mm US$591.9/t vs US$590.2/t

Thermal coal (1st year forward cif ARA) US$312.0/t vs US$312.0/t

Thermal coal swap Australia FOB US$425.0/t vs US$429.0/t

Coking coal swap Australia FOB US$260.0/t vs US$260.0/t

Other:

Cobalt LME 3m US$51,955/t vs US$51,955/t

NdPr Rare Earth Oxide (China) US$86,307/t vs US$86,263/t

Lithium carbonate 99% (China) US$69,695/t vs US$69,660/t

China Spodumene Li2O 5%min CIF US$5,210/t vs US$5,210/t

Ferro-Manganese European Mn78% min US$1,252/t vs US$1,255/t

China Tungsten APT 88.5% FOB US$333/t vs US$333/t

China Graphite Flake -194 FOB US$820/t vs US$820/t

Europe Vanadium Pentoxide 98% 7.3/lb vs US$7.3/lb

Europe Ferro-Vanadium 80% 31.25/kg vs US$31.25/kg

China Ilmenite Concentrate TiO2 US$330/t vs US$330/t

Spot CO2 Emissions EUA Price US$65.7/t vs US$68.3/kg

Brazil Potash CFR Granular Spot US$800.0/t vs US$800.0/t

Battery News

Tesla VP – “we have access to all the battery cells we need”

• Martin Viecha, vice president of investor relations at Tesla, told attendees at Goldman Sachs (NYSE:GS)’ tech conference in San Francisco that it has access to all the battery cells it needs for the first time.
• The automaker has expended its suppliers in recent years from beyond Panasonic to also include CATL and LG Energy Solutions.
• Tesla itself plans to add to the supply with the volume production of its own 4680 battery cell by the end of the year at Gigafactory Texas.
• Viecha also warned that the supply chain will need to keep growing at a record pace to support the industry.

Company News

(Arc Minerals Limited (AIM:ARCM)) 3.69p, Mkt Cap £42m – Arc renews prospecting licenses in Botswana

BUY – CLICK FOR PDF

(Arc holds 72.5% of Zaco and 66% of Zamsort in Zambia. The Cheyeza license is 66% owned by Arc Minerals through its holding in Zamsort.)

(Arc holds 75% in Alvis-Crest (Proprietary) Limited which holds two licenses in the Kalahari Copper Belt, known as Virgo covering >210km2, around 10km south east the recently commissioned Khoemacau Copper in Botswana.)

• Arc Minerals reports the renewal of two prospecting licenses in Botswana held by its local subsidiary, Alvis Crest (Pty) Limited.
• The Virgo project licenses (PL 135/2017 and PL 162/2017), have been renewed till end-September 2024 following scout drilling.
• Drilling confirms geological interpretation of D'Kar and Ngwako Pan formation contact geology, with reports of visible sulphide mineralisation observed in the initial holes drilled through the contact.
• About the Virgo Project
• The licenses, cover an area of over 210km2, with PL 135/2017 approximately 10km south east of Cupric Canyon’s recently commissioned Khoemacau underground copper mine.
• Casa Mining: The full $250,000 cash payment has been made and Arc now awaits the issue of $1.25m in listed stock in the Canadian listed entity which is acquiring the Casa Mining gold assets in the DRC.

*SP Angel acts as Nomad and broker to ARC Minerals

(Artemis Resources Ltd (ASX:ARV, OTCQB:ARTTF, AIM:ARV)) 2.23p, Mkt Cap £29m – Drilling identifies copper/nickel mineralisation at the Chapman prospect, WA

• Artemis Resources has released drilling results from its drilling at the Chapman prospect located around 1km southeast of its Carlow Castle copper/gold project east of Karratha, WA.
• Reverse-circulation (RC) drilling to follow up previous drilling and a geophysical anomaly is reported to have intersected copper nickel mineralisation “associated with ~1km long gabbro intrusion and basalt contact”.
• The programme of 10 RC and one diamond drill holes totaled 3,011.3m of drilling and the “next phase of Chapman exploration will be designed to seek areas of higher-grade mineralisation along this and other sub-regional trends at Chapman”.
• Among the results highlighted today are:
• A 12.6m wide intersection at an average grade of 0.43% copper, 0.25% nickel, 0.018% cobalt and 0.08g/t gold from a depth of 79.93m in hole 22CHR-D001 which included a higher grade section of 5.3m from 82.2m depth which averaged 0.56% copper, 0.32% nickel, 0.020% cobalt and 0.07g/t gold; and
• 11m at an average grade of 0.56% copper, 0.36% nickel, 0.020% cobalt and 0.03g/t gold from a depth of 37m in hole ARC-385 which included 2m at an average grade of 0.70% copper, 0.69% nickel, 0.032% cobalt and 0.04g/t gold from a depth of 40m and further single metre intersections of 1.08% copper and 0.75% copper at 44m depth, 0.87% copper and 0.28% nickel at 46m depth; and
• A single metre averaging 1.06% copper, 0.44% nickel, 0.025% cbalt and 0.03g/t gold from 131m in hole ARC-373.
• Executive Director, Alastair Clayton said that “Intersecting broad shallow zones of continuous copper and nickel at Chapman is encouraging, especially as these mineralised zones appear to be related to the margins of regional gabbros and related structures”.

Conclusion: Drilling at the Chapman prospect has located copper/nickel mineralisation close to Artemis Resources’ existing Carlow Castle copper gold project. We await further news as exploration progresses.

(Bushveld Minerals Limited (AIM:BMN, OTC:BSHVF)) – 5.64p, Mkt cap £71m – Strong performance at Vametco offsets slow start to Kiln3 at Vanchem and ESKOM load shedding

Valuation under review

• Bushveld report interim results to end June.
• Sales rose to $76.2m vs $47.0m a year earlier
• Cost of sales rose slightly to $44.7m vs $43.4m marking a creditable performance on reducing unit costs
• Other operating and administrative costs rose slightly to $15.9m vs $14.4m yoy
• EBITDA rose to $15.6m vs a loss of $10.8m yoy supported by higher vanadium prices and a weaker ZAR:USD exchange rate.
• Operating profits rose to $6.1m vs $19.7m yoy
• Net finance expenses rose to $5.2m vs 2.9m yoy due to increased debt levels
• Post tax loss fell to $3m vs $19m
• Cash balance fell to $7.0m vs $15.4m at end December
• Free cash flow of $7.1m vs a negative $19.8m yoy
• Total borrowings of $76.73m vs $80.9m at end December
• Vametco mini-grid project: financial close enables site clearance and progress with many project activities.
• Guidance: Management expect positive EBITDA and free cash flow to continue into H2 which will be used to meet the remaining capital requirements and debt repayments.
• Vametco: guidance 2,550- 2,650 mtV - guidance increased due to strong operational performance
• Cash cost: $22.7-23.5/kgV vs 2,450-2,550 mtV previously
• Vanchem: guidance 1,350-1,450 mtV for 2022 from 1,750-1,850 mtV previously,
• Cash costs $34.9- $35.5/kgV from $27.7-28.4/kgV previously
• Vanchem Kiln 3: management are guiding production lower on Kiln 3 initial performance and ongoing ESKOM load shedding.
• Group production guidance adjusted to 3,900-4,100mtV for 2022 (previously between 4,200 mtV and 4,400 mtV). . This is above our forecast of 3,860mtV of sales for the year
• Management continue to expect Bushveld to produce at a run rate of 5,000-5,400 mtV by year end which is slightly lower than our previous 5,718mtV forecast.
• “The Group retains the optionality to expand its production to 8,000 mtVp.a. through a phased expansion plan, subject to securing the necessary funding and meeting its short-term performance targets at 5,000 - 5,400 mtVpa”
• Kiln 3 performance is improving production of 61mtV in July, increasing to 151 mtV in August.
• Inflation: Bushveld continue to target savings under their Cost Savings Programme in order to counter and contain inflationary pressures
• Bushveld use pulverised coal to generate heat at Vametco. While this has been beneficial in the past higher coal and energy prices will add to inflationary pressures.
• Vanchem:
• FOREX: the weakening rand / dollar exchange rate added $3.5m to EBITDA by reducing costs by $2.6m
• Cash: $7.0m vs $15.4m at end December due to refurbishment of Kiln 3, BELCO plant construction, equity for the new Vametco mini-grid and partial repayment of the Nedbank RCF.
• Debt: fell to $76.7m from $80.9m at the year end.
• Capital expenditure: Bushveld has spent some $8.5m of its budgeted $22.1m for the year with most of the expenditure rand-denominated.
• Management expect “reduced capital expenditure rate from 2023 onwards, limited mainly to sustaining capital, which is expected to support positive cash conversion of EBITDA”
• Vanadium: LMB ferrovanadium prices averaged $45.0/kgV in H1 vs $33.4/kgV yoy. Asian Metals prices averaged $37.2/kgV in H1 vs $31.8/kgV yoy. US Ryan’s Note prices averaged US$58.5/kgV in H1 vs $34.1/kgV
• While prices have stabilised in China, some softening has been seen in the West, though management expect “medium to long-term market fundamentals continue to support vanadium prices going forward.”
• BELCO: Construction of the 8m ltr pa VRFB Electrolyte manufacturing facility is reported to be 80% complete with first production expected in H1 2023.
• Bushveld Energy: to be carved out as a stand-alone company focused on the VRFB business with Bushveld retaining a substantial share of the entity.
• Bushveld Energy holds an indirect 25.25% in CellCube which announced multiple projects and milestones over the past year.
• VRFBs: South Africa, Europe and California really need utility scale storage batteries. While Li-ion batteries have filled the need for rapid response energy storage they fall back on longer term storage issues.
• VRFB battery technology is evolving into a viable alternative with a number of VRFB battery instillations being tested and built. We are hopeful that this technology will prove capable of supporting wind and solar farms around the world to better balance grid networks and ensure the availability of low-cost electrical power 24/7 to industry and consumers.

*SP Angel act as nomad and broker to Bushveld

(Keras Resources PLC (AIM:KRS)) 6.5p, Mkt cap £5.4m – Diamond Creek organic phosphate mine should generate >150% margin as sales rise

(Keras holds 100% of the Diamond Creek phosphate mine in Utah, USA. Keras also holds an 85% interest in Societé General des Mines for the Nayéga manganese project in Togo)

• Keras Resources report the creation of a new corporate website at www.kerasplc.com and an updated investor presentation at https://kerasplc.com/presentations/.
• Guidance: management expect to sell 7,500-8,000 tons of phosphate product from 1 September 2022 to June 2023 at an all-in sustaining cost (AISC) margin of between US$80 and US$100 per ton.
• Organic rock phosphate is used as a soil conditioner providing phosphorous for flowering plants and is sold to gardeners for US$10/kg in the US
• Keras is selling to wholesalers and blenders, and we estimate should receive around $250/t on its rock phosphate by our reckoning
• This implies a revenue of US$1.9-2m on the above guidance.
• Operating costs are expected to be US$0.6-0.8m.
• Operating profits should be US$1.125-1.36m.

Conclusion: Keras is earning good money from Diamond Creek with the potential to add substantially to sales through increasing tonnages and through the sale of higher value products. While Keras is not currently selling $2kg tubs at $20 a pot the sale of such products indicates further potential for value-added sales

*SP Angel acts as nomad and broker to Keras Resources

(Kore Potash PLC (AIM:KP2, ASX:KP2, JSE:KP2)) 1.1p, Mkt Cap £38m – Interims highlight the completion of the Kola Optimisation Study

BUY – 5.0p

CLICK FOR PDF

• The Company released interim results highlighting progress at the development ready Kola Potash Project in the Republic of Congo.
• As previously announced, the team received the completed Kola Optimisation Study in April and released detailed review of the study in late June.
• The Study identified optimisation opportunities reducing development capital cost by ~$0.5bn to ~$1.8bn (excluding ~$60m in deferred capex during the ramp up period) and cutting construction period by six months to 40m.
• The project is expected to deliver 2.1mtpa MOP over 31 year life of mine at ~$100/MOP CFR Brazil AISC, one of the lowest if not the lowest cost supply on delivered to Brazil basis.
• The Optimisation Study delivered $1.623B and 20% in NPV10% and IRR on after tax and attributable 90% basis using $360/MOP CFR Brazil price, in line with the 2019 DFS assumption and significantly below the YTD22 average of ~$1,000/MOP.
• At current $800/MOP economics improve to ~$6.9bn and 41%, respectively.
• The Study was undertaken by SEPCO that sub-contracted it to China ENFI Engineering responsible for mining, processing and infrastructure side of the operation and CCCC-FHDI Engineering reviewing the marine facilities.
• In June, the Company signed a Heads of Agreement for the construction of Kola in the presence of Minister of Mines confirming the timeline for SEPCO to complete discussions with the Company ahead of presenting it with an EPC contract proposal for Kola.
• Once EPC proposal is presented and Kore agrees all terms of the contract, the Summit Consortium representing a group of advisors, investors and engineering/construction companies is expected to finalise financing for the project.
• Financially, the Company recorded a $0.9m loss (H1/21: -$1.3m) most of which reflected administration costs.
• Capitalised project exploration costs amounted to ~$3.0m (H1/21: $3.5m).
• Closing cash balance stood at $7.6m with the Company remaining debt free (FY21: $11.1m)

Conclusion: Interims delivered little in the form of news highlighting major milestones achieved in H1/22. SEPCO is working on the EPC proposal that once delivered and agreed to by the Company should pave the way for financing discussions. The team has done well delivering a reduction in development capital spend and project delivery times as part of the latest economic study on a long life and low cost Kola Potash Project in Republic of Congo.

*SP Angel acts as nomad and broker to Kore Potash

(Lithium Americas Corp (TSX:LAC, NYSE:LAC)) $31.64, Mkt Cap C$4.3bn – US environmental group claims Thacker Pass threatens rare species of snail

• Environmental group Western Watersheds has petitioned the US Fish and Wildlife Service to list the rare Kings River pyrg, a springsnail found in a remote corner of north-western Nevada, as an endangered or threatened species.
• The pyrg is known to live only in 13 isolated springs around Thacker Pass, a project targeting 40,000tpa of battery-quality lithium carbonate.
• Executive director of the Western Watersheds Project, Erik Molvar, commented: “This rare springsnail’s entire worldwide range stands to be affected by open pit lithium mining, which threatens to draw down or contaminate all 13 springs where it is known to live,”
• In early 2021, the Trump administration approved the $1bn project, and the Biden administration has since defended that decision.
• In December 2021, Gold Fields were required to move over 20 Chinchillas to continue its $860m expansion project at its Salares Norte site in Chile.
• This latest setback at Thacker Pass may restrict development of the project to a snail’s pace.

(Petra Diamonds Limited (LSE:PDL, OTC:PDLMF)) 112p, Mkt Cap £204m – Preliminary results for year to 30th June, debt restructuring and latest diamond sales tender

• In its preliminary results for the year to 30th June, Petra Diamonds reports a doubling of its adjusted EBITDA to US$265m (FY 2021 -US$130m) and a 91% rise in free cash flow to US$230m (FY2021 – US$120m).
• Pre-tax adjusted profit of US$142m reverses the loss of US$183 reported last year and adjusted after tax net profit of US$102m reverses the US$26m loss of FY2021.
• Petra Diamonds is maintaining its operational guidance for the year to 30th June 2023 with 3.3-3.6m carats of diamonds recovered, on mine costs plus G&A in the range US$300-320m, expansion capex of between US$115-125m and sustaining capex between US$22-36m.
• Guidance for FY 2024 and 2025 is also maintained with production and costs in 2024 matching those expected for 2023 before increasing to 3.6-3.9m carats of production at the same US$300-320m in FY 2025.
• Expected expansion capex rises to US$125-135m in FY 2024 and declines to US$115-120m in FY 2025 with sustaining capex declining to US$30-32m and to US$26-28m in FY 2025.
• Chief Executive, Richard Duffy, highlighted the achievement of “the turnaround begun three years ago”, and announced that “Our strong cash generation in FY 2022 has enabled us to target a further reduction in our gross debt through a tender offer for US$150 million of our 2nd lien notes, … [which] … will see us saving up to US$15 million annually in interest expenses”.
• “The Total Consideration will be not less than $970 (the “Minimum Total Consideration”) nor more than $1,010 (the “Maximum Total Consideration”) per $1,000 of principal amount of the Notes”.
• In a separate announcement, Petra Diamonds reports the sale of 520,011 carats of diamonds for a total of US$102.9m or US$198/carat in its first tender of FY 2023. The total volume of diamonds sold was 9% lower than the 569,496 carats sold in the equivalent tender last year but realised an 11% higher revenue than the US$93m last year and average prices were 21% higher than last year’s US$163/carat.
• Mr. Duffy explained that the tender included “a high proportion of high-value gem-quality single stones particularly from the Cullinan Mine … [and that Petra Diamonds has] … seen strong support in fancy-coloured and large white stones while pricing of smaller stones has continued its recent upward trend. Subdued demand in China has led to relative pricing pressure on 0.75ct up to 5ct size ranges”.
• He said that the company expects “some volatility in pricing in the short-term given the ongoing macro-economic situation, … [ but that it is] … encouraged by the supportive diamond market resulting from the projected supply deficit in the medium to longer term”.

(Tungsten West PLC (AIM:TUN)) – 29p, Mkt cap £43m – US$30m term sheet for Hemerdon reopening plan

• Tungsten West reports that it has entered into a non-binding term sheet, with an undisclosed funding partner, for a US$30m royalty plan to finance the reopening of the Hemerdon tungsten and tin mine in Devon.
• The term sheet, which covers the life of the mine and will be payable quarterly, in arrears at an initial rate of 4.75% until the mine has produced and sold 7m metric tonne units (mtus) of tungsten trioxide after which the royalty rate reduces to 2.375%.
• Tungsten West retains the right to buy back 50% of the royalty “within the first four years for a single payment of $30m”.
• The company says that it is also “in advanced discussions with asset backed finance providers in order to secure additional finance of between £5m and £10m secured against fixed and mobile equipment, and spare parts” which it says will be used “for general corporate purposes, for cost over-run contingencies and to maintain a cash buffer during commissioning”.
• With cash on hand of £17m at 31st August, Tungsten West “is not seeking a project finance facility in the expectation that the Royalty and asset backed finance monies, plus cash on hand, are sufficient to finance the Company through to positive cash flow”.
• The company also provides a progress report on the mine reopening project where “67% of the plant refurbishment programme is now complete” and a letter of intent has been signed for the provision of contract drill and blast services.
• Long-lead time equipment, including primary and secondary crushing equipment has been ordered and screens and vibrating feeders are in transit to the UK.
• A site has been selected for the installation of a 9-12MW solar energy plant with a feasibility study on course for completion by the end of December.
• Executive Vice-Chairman confirmed that Tungsten West is “pushing ahead with construction from existing cash reserves” while resolving the conditions precedent relating to the royalty financing which include securing “off-take agreements which meet the Royalty holder's requirements … [and finalising] … appropriate security over project assets”.
• Tungsten West has previously indicated that it expects to resume production at the Hemerdon mine in H1 2023.

(Vulcan Energy Resources (ASX:VUL)) A$8.7, Mkt Cap A$1.3bn – DLE demonstration plant construction works commence

• The Company commenced construction of sorption Demonstration Plant (Sorption-Demo Plant) in Landau, Germany.
• The plant will be located on the premises of Energie Sudwest AG (ESW), the local energy utility for Landau, following the completion of FEED studies/
• The facility represents a step up in plant size from Vulcan’s Pilot Plant that was operating for 18 months.
• Most parts were pre fabricated offsite so that cold commissioning is expected in late 2022 and start of operations targeted for early 2023.
• The plant will test the geothermal brine from the adjacent utility under a cooperation agreement.
• Vulcan is betting on a sorption-type DLE technology to extract lithium from its geothermal brines.
• The lithium hydroxide production Demo Plant, (CLP-Demo Plant) also known as “LiLy”, is progressing concurrently and is still on track to start commissioning in late Q1 2023.

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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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