SP Angel . Morning View . Monday 03 10 22
Iron ore and copper lower despite more property market support in China
MiFID II exempt information – see disclaimer below
Aura Energy Ltd (ASX:AEE, AIM:AURA)* – Optimisation and acceleration of the Tiris development project in Mauritania
Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) – Quarterly dividend and confirmation of production guidance
Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) – Drilling campaign underway at the East Zone of the BHA project
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) – Kavango to commence drilling on KCB
Oriole Resources PLC (AIM:ORR) – Two year extension to prospective gold licenses in Bibemi, Cameroon granted
Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)* – BUY – Valuation 60p (formerly 51p) – REE breakthrough as Rainbow demonstrates economics of CIX / CIC process
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* – NPV Valuation: Under Review – Suspension of our valuation estimate following impact of inflationary pressures and lower copper prices during H1
Private Equity / joint venture opportunity
We are looking for investors / jv partners for an exploration opportunity on a newly discovered copper / moly porphyry system with two adjacent non-porphyry gold and silver deposits over 6km in South-East Asia
- 2,000m in 8 holes already drilled with intersections of visible chalcopyrite and molybdenite both disseminated and in B-veins
- Positive indications of grade at shallow depths. Total funding $2.34m to date. Current implied valuation $4.4m. Best drill result:
- 60m grading 0.4% copper, 0.2% gold plus molybdenum from 24m eg. below the leached cap
- 3m grading 0.51% copper, 9.2g/t gold, and 49g/t silver from 64m down hole
- 2m grading 0.3% copper, 6% zinc and 9g/t gold, 40 g/t silver from 33m down hole related to a massive pyrite-magnetite-sphalerite-chalcopyrite vein
*SP Angel’s role is limited to making introductions. No due diligence or verification of information supplied by the company has been performed. Interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.
Dow Jones Industrials -1.71% at 28,726
Nikkei 225 +1.07% at 26,216
HK Hang Seng -0.93% at 17,063
Shanghai Composite -0.55% at 3,024
Economics
Soaring borrowing costs add pressure to global credit markets, major banks start to feel the liquidity pinch
- A global tightening of liquidity by central banks is hitting the credit sector, with signs of a credit crunch beginning to surface.
- A syndicate of banks including Barclays and Bank of America cancelled a $3,9bn debt offering last week amid a lack of demand. (Bloomberg)
- Bloomberg reports a group of underwriters including Goldman Sachs (NYSE:GS), Bank of America and Credit Suisse took losses estimated at over $1bn on a debt package to private equity firms amid higher yields and lower demand.
- Outflows in US investment grade bonds hit their third largest outflow on record last week, following 6 weeks of withdrawals totalling $22.3bn.
- Emerging market dollar/euro denominated bonds hit their lowest in over a decade in September, with debt issuance down 79% from the same period in 2021. (Bloomberg)
- Bank of America expects $60-80bn worth of high-grade bond supply this month, below the 5-year average of $106bn.
- Credit default swaps across major European banks have soared in September, with Credit Suisse’s CEO noting the bank was facing a ‘critical moment.’ (FT)
- The Group is expected to release a strategic plan on Oct. 27th.
- Memories of the SubPrime crisis are resurfacing, with credit default swaps on major banks revisiting those 2009 levels.
- We hope, however, that US authorities learnt from the Lehman Bros collapse and are willing and able to avoid similar levels of chaos.
US – Fed tracked measure of inflation climbed more than forecast in August marking an acceleration in the rate of price increases and suggesting monetary tightening is set to continue.
- PCE Deflator (%yoy): 6.2 August v 6.3 July and 6.0 est.
- Core PCE Deflator (%yoy): 4.9 August v 4.6 July and 4.7 est.
China – Property companies gained sharply on Monday following a series of policies announced on Friday.
- The central bank said it will lower the interest rate for housing provident fund loans by 0.15pp for first-time buyers from the start of the month.
- Following the rate cut, the 5y and below interest rate for first time buyers borrowing from the government’s housing provident fund to finance a home purchase would stay at 2.6% while the +5y rate would stand at 3.1%.
- The move came after the governments tax refunding policy for new property buyers and banking regulator’s relaxation of a floor on mortgage rates for some first time buyers, Reuters reports.
- Latest figures showed that lending to the property sector increased at the slowest pace on record as of end of June (+4.2%yoy) while real estate prices continued to slide posting the 12th consecutive monthly drop in August.
UK – The government abandoned plans to cut top rate of income tax by 5pp for the highest earners after a number of Tory MPs voiced their opposition to the plan.
- The pound jumped on the news hitting a high of 1.127 early in the morning before pulling back slightly and currently trading around 1.120.
Brazil – Presidential elections goes to runoff between Jair Bolsonaro and Luiz Inacio Lula da Silva to be carried October 30.
- Both candidates failed to secure simple majority in the first round with Lula coming ahead with 48% and Bolsonaro having 43% with 99% of votes having bee counted.
Turkey – Inflation hits 83.5% in September, the highest rate in 24 years and up on 80.2% reported int eh previous month.
- Under pressure from the administration, the central bank cut rates twice over the last two months from 14.0% to 12.0%.
- Last week, President Erdogan suggested that the main rate should come down to single digits by year end.
- Lira is trading 0.20% down this morning extending YTD losses to nearly 30%.
Zambia makes additional cuts to copper mining royalties in attempt to boost mining sector investment
- Zambia’s Finance Minister announced plans on Friday to further restructure the mining royalty system in the country.
- First Quantum’s shares jumped 5% on the news.
- Royalties under the new arrangement will switch to an incremental value alternating by adjusted price bands.
- New President Hakainde Hichilema is moving to provide a more business-friendly environment for international mining firms.
Burkina Faso – A military coup was reported on Friday with the former leader Lt Col Paul-Henri Damiba resigning and being replaced by Capt Ibrahim Traore.
- Damiba is reported to have left the country for Togo on Sunday.
- Protestors attacked he French embassy in Burkina Faso’s capital after supporters of the new regime accused France of harbouring the ousted interim president.
- Damila who came to power in January promised to secure the country from jihadi, although, the situation only deteriorated with attacks having intensified recently.
- Last week, at least 11 soldiers were killed and 50 civilians went missing after a supply convoy was attacked by gunmen in Gaskinde commune in the Sahel, Bloomberg reports.
- This is the second military coup in the country this year and the ninth since its independence from France in 1960.
Currencies
US$0.9793/eur vs 0.9819/eur last week. Yen 144.96/$ vs 144.37/$. SAr 17.986/$ vs 17.884/$. $1.118/gbp vs $1.116/gbp. 0.643/aud vs 0.650/aud. CNY 7.116/$ vs 7.090/$.
Dollar Index 112.20 / -0.74% on week
Commodity News
Gold holds Friday’s gains as dollar rally cools and credit anxiety mounts
- Gold has held the gains it made last week, its first weekly gain in three as Treasury yields and the dollar eased off multi-decade highs.
- The dollar has fallen 1.8% since its hitting a 20-year high last week, whilst 10-year Treasury yields have shed 4% over the same period.
- Gold hit a low at $1,622/oz last week but has regained ground alongside the aforementioned weakness.
- More volatility is expected this week, with US labour market data expected to offer the Fed’s rate hike schedule additional guidance.
- Anxiety is mounting over the European banking sector, with credit default swaps soaring and rumours surfacing of difficulty accessing credit lines amid a tightening of liquidity across global markets.
- Exhaustion in the dollar rally may encourage investors to return to gold as a safe haven if a banking sector crisis were to develop.
Iron ore weakens as China property stimulus package fails to reassure traders before 10-day holiday
- Iron ore weakened again towards $90/t on a recent round of Chinese stimulus measures announced last week.
- Steel demand continues to fall across China amid a combination of zero-covid policy damage and a slumping property sector.
- Chinese officials directed state-owned banks on Friday to extend $85bn of net financing to support the sector.
- Copper and aluminium both weakened too.
Soaring floating LNG terminal costs and supply deficit add concerns to European energy crisis
- Rental rates for LNG floating terminals (FSRU) have doubled, as the market shifted to a deficit on Russia’s invasion of Ukraine.
- Charters of floating terminals have hit $200,000/day.
- Shipyards for new builds are at full capacity.
- 3 FSRU’s have the throughput capacity to import 10% of Europe’s pipeline and LNG imports from Russia last year. (Excelerate Energy)
Precious metals:
Gold US$1,664/oz vs US$1,673/oz last week
Gold ETFs 97.0moz vs US$97.2moz last week
Platinum US$865/oz vs US$877/oz last week
Palladium US$2,166/oz vs US$2,208/oz last week
Silver US$19.30/oz vs US$19.13/oz last week
Rhodium US$14,000/oz vs US$14,000/oz last week
Base metals:
Copper US$ 7,450/t vs US$7,580/t last week
Aluminium US$ 2,141/t vs US$2,234/t last week
Nickel US$ 21,260/t vs US$22,690/t last week
Zinc US$ 2,938/t vs US$2,977/t last week
Lead US$ 1,875/t vs US$1,874/t last week
Tin US$ 20,305/t vs US$20,700/t last week
Energy:
Oil US$87.8/bbl vs US$88.9/bbl last week
Crude oil prices were broadly unchanged over the weekend ahead of the OPEC+ meeting on Wednesday, despite market chatter that the participants will likely debate an output cut.
European energy prices fell as the IEA’s quarterly report forecast that global gas consumption would decline by 0.8% in 2022 due to a 10% reduction of demand in Europe and flat demand in the Asia Pacific region.
The US Baker Hughes rig count rose by 1 to 765 rigs last week, with oil rigs up 2 at 604 rigs and gas rigs falling by 1 unit to 159 rigs. However, with rig additions flat month-on-month, the U.S. shale industry does not appear to be investing to boost output despite the relatively strong commodity price environment.
Natural Gas US$6.675/mmbtu vs US$6.870/mmbtu last week
Uranium UXC US$49.00/lb vs US$49.20/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$93.9/t vs US$96.2/t
Chinese steel rebar 25mm US$581.4/t vs US$583.0/t
Thermal coal (1st year forward cif ARA) US$278.0/t vs US$278.0/t
Thermal coal swap Australia FOB US$406.0/t vs US$409.0/t
Coking coal swap Australia FOB US$281.0/t vs US$285.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$94,155/t vs US$94,503/t
Lithium carbonate 99% (China) US$69,492/t vs US$69,749/t
China Spodumene Li2O 5%min CIF US$5,590/t vs US$5,590/t
Ferro-Manganese European Mn78% min US$1,209/t vs US$1,213/t
China Tungsten APT 88.5% FOB US$32.3/kg vs US$32.3/kg
China Graphite Flake -194 FOB US$835/t vs US$835/t
Europe Vanadium Pentoxide 98% 7.2/lb vs US$7.2/lb
Europe Ferro-Vanadium 80% 30.75/kg vs US$30.75/kg
China Ilmenite Concentrate TiO2 US$320/t vs US$321/t
Spot CO2 Emissions EUA Price US$64.6/t vs US$63.1/t
Brazil Potash CFR Granular Spot US$670.0/t vs US$680.0/t
Battery News
Tesla hits record sales in Q3, though misses estimates
- Tesla sold 344,000 vehicles in Q3, up 42% on the same period last year though the company commented it still faces production and supply chain issues.
- Deliveries came in below expectations of 358,000 vehicles, which the company attributes to these logistical issues.
Company News
Aura Energy Ltd (ASX:AEE, AIM:AURA)* 17p, Mkt Cap £86m – Optimisation and acceleration of the Tiris development project in Mauritania
- In its financial results for the year to 30th June 2022, published on Friday, Aura Energy reports a loss of $3.4m for the year to 30th June (2021 - $3.0m loss) and a year-end cash balance of approximately $10m.
- In the company’s review of operations over the year Aura Energy focuses on efforts to expedite the development of the flagship Tiris uranium project in Mauritania which could help address a growing international appetite for nuclear power.
- In August 2021, the Tiris resource was upgraded by around 10% to 56m lbs of contained U3O8 and a further infill drilling programme is underway to upgrade the proportion of ‘Measured and Indicated’ resources within the Tiris East area.
- Definition of an 18.4m lbs vanadium pentoxide resource, including 34% classed as Measured/Indicated, is leading to “Continued work on the integration of vanadium by-product circuit in Fast track Tiris project” which should provide an opportunity to generate a by-product credit to U3O8 production.
- The company confirms that “Pilot scale testing confirmed Tiris uranium ore grade can be increased on average 500% using simple screening, with 80% reduction of mass reporting to the leaching circuit and containing 90% of uranium at 1,572ppm U308 (ASX:UTO).”
- A continuing programme of optimisation studies is seeking further reductions of both the August 2021 capital cost estimate of US$74.8m and of the operating costs ahead of a formal investment decision.
- Aura Energy is continuing to “work with Mauritania’s well-established radiation regulatory body to initiate the process to gain regulatory approval for export of Uranium Oxide Concentrate (OUC)”.
- The company also discusses its continuing progress to “net zero emission uranium production at Tiris, with the initial study of Scope 1 and Scope 2 Greenhouse Gas (GHG) emissions completed, clearly defining a Net Zero Emission Pathway for the Project”.
- As well as Tiris, Aura Energy is continuing to advance its wholly-owned Häggån Project in Sweden, which hosts a ‘significant’ uranium and vanadium resource, though further consultations with Government and other Swedish stakeholders.
Conclusion: Aura Energy is continuing to progress it’s permitted Tiris uranium project to an investment decision with work underway to expand and upgrade the mineral resource, optimise the process route and reduce capital and operating costs in advance of a formal investment decision in order to tap the increasing global appetite for nuclear energy to accelerate low-emission power generation and to limit European reliance on geopolitically volatile energy sources. We look forward to the results of the current optimisation work which should provide a more detailed insight into the development of the project.
*SP Angel acts as Nomad and Broker to Aura Energy
Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) 825p, Mkt Cap £109m – Quarterly dividend and confirmation of production guidance
- Caledonia Mining has declared a quarterly dividend of 14US¢/share maintaining the increased level which was announced in October 2021. Payment is due on 28th October
- CEO, Mark Learmonth, explained that “Three years ago the Company was paying less than half the current quarterly dividend and at the current share price, the annualised dividend equates to a yield of approximately 6%. The dividend continues to be a central part of our strategy, as we continue to manage returning money to shareholders with production growth and de-risking the business from being a single asset producer”.
- The company confirms that it is maintaining its production guidance range of 73-80,000oz of gold output for 2022 with the total “on track to hit the top end of our guidance range”.
- It also says that it will be restarting oxide ore production at Bilboes, which it acquired in July “under the terms of a tribute arrangement with a view to creating a cash-generative operation within approximately six months”.
- Bilboes is a former Anglo American project which had limited open-pit mining producing “approximately 288,000 ounces of gold since 1989” hosts an NI43-101 compliant proven and probable mineral reserve of 1.96moz within 26.6mt at an average grade of 2.29g/t gold”.
Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) 0.95p, Mkt Cap £12m – Drilling campaign underway at the East Zone of the BHA project
- Castillo Copper reports that drilling is now underway at its BHA East Zone project at Broken Hill, New South Wales.
- The programme, which is expected to take four weeks, will comprise a single diamond-drill hole plus 17 reverse circulation (RC) holes totalling 2,100m.
- The programme will focus on the cobalt potential of the Reef Tanks, Tors Tank and Fence Gossan prospects with an additional RC two holes planned to test the Sisters prospect for “cobalt-copper-REEs”.
- The work at BHA East aims to extend “known mineralisation plus enhancing the confidence & grade of the current global mineral resource estimate (MRE) - 21,556t cobalt (64Mt @ 318 ppm Co) and 44,260t copper (63Mt @ 0.07% Cu)”.
- Managing Director, Dr. Dennis Jensen, explained that Castillo Copper’s “geology team have designed a comprehensive drilling campaign and the Board is optimistic the strategic intent to increase the confidence and grade of the current MRE is achievable”
Conclusion: Drilling to test the cobalt potential at BHA East is underway and we look forward to the results as the work proceeds over the next few weeks.
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) 1.6p, Mkt cap £7m – Kavango to commence drilling on KCB
- Kavango reports that it has hired Mindea to undertake its maiden drill programme on the KCB, with up to 6 holes planned for an estimated 1,250m on license PL082/2018.
- The campaign will test the Northern and Central anomalies and is scheduled to be completed by early November.
Oriole Resources PLC (AIM:ORR) 0.17p, Mkt cap £3.7m – Two year extension to prospective gold licenses in Bibemi, Cameroon granted
- Oriole has successfully extended its exploration license at its 90%-owned, 177 km2 Bibemi for an additional two years to September, 2024.
- Cameroonian law does not require ground relinquishment on renewal.
- To date, Oriole’s exploration efforts at Bibemi have highlighted shear-hosted gold mineralisation across four prospects, with 6.6km worth of drilling completed across 54 holes since 1Q21.
- Focus at Bibemi has been on Bakassi Zone 1, which has yielded intersections including 14.8m at 4.27g/t, 7.7m at 2.74g/t and 6.5m at 3.92g/t.
- Bakassi Zone 1 contains a package of sub-vertical quartz-tourmaline veins and extensional, sub-horizontal quartz veins.
- Oriole’s CEO Tim Livesey states the Company looks ‘forward to reporting a JORC Exploration Target shortly’.
Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)* 11.4p, Mkt cap £60m – REE breakthrough as Rainbow demonstrates economics of CIX / CIC process
BUY – Valuation 60p (formerly 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’s skilled team of management and metallurgical experts today demonstrate the positive economics of REE metal oxide extraction using a new, clean, efficient, and environmentally beneficial extraction process.
- The proposed plant uses existing hydrometallurgical processes to concentrate, clean and separate critical rare earths from gypsum residues.
- The process is simple, elegant, low cost and above all, is so much cleaner than existing REE extraction processes around the world.
- The use of CIX ‘Continuous Ion Exchange’ and CIC ‘Continuous ion Chromatography’, processes used in many industries, including food and mineral processing provides the key to a clean and low cost REE metal separation.
- Critically, Phalaborwa’s phosphogypsum residues have been demonstrated to be amenable to concentration along with the extraction of elements which might interfere with the CIX and CIC processes.
- CIX and CIC process plants already work at rates of 700m3/h, much larger than is needed at Phalaborwa.
- Low cost: The new process is estimated to have the lowest operating cost of any REE producer in the world at $33.86/Kg of separated magnet rare earth oxide.
- Management’s PEA and in-house financial modelling shows:
- Capex: $295.5m – very much lower than other REE metal oxide extraction plants
- NPV: $627 – $1,027m on base case, current and forecast pricing assumptions
- IRR: 40-51% on same basis
- Payback: 1.7-2.4 years
- Operating costs: $33.86/Kg separated magnet rare earth oxides
- Operating margin: 75 – 81% on base case vs current pricing assumptions
- Throughput: 2.2mtpa
- Life of Mine: 14.2 years
- Sensitivity: low operating costs indicate the project is not overly sensitive to +/- 10% capex or opex changes
- Location: Phalaborwa has good REE grades within its gypsum residues, low radionuclide levels and with much of the necessary infrastructure already in place.
- Ample engineering services and skills are also relatively close by due to South Africa’s excellence and experience in hydromet plants.
- Grades: The stacks contain some 31mt of JORC inferred resource grading 0.43% TREO.
- Phalaborwa has nearly 10x the REE grade of other ionic clay deposits, its NdPr grade is around 5x higher than the next closest ionic clay and its uranium content is vastly lower than everyone except for the La Paz project in Chile.
- This makes Phalaborwa a nice, easy, and less complicated project to start on for the new process, something, the metallurgical engineers will be grateful for.
- Optimisation: Management expect to optimise the process and materials of construction further to bring capex and operating costs down.
- Expansion: We expect Rainbow and their technical partners K-Tech (Florida) to find other phosphogypsum residues to process such as the huge tailings stacks generated by OCP in Morocco. While careful testing of the process will need to be done to refine the process this seems to be a substantial expansion opportunity from a feedstock perspective.
- Strategically critical technology: The new Rainbow / K-Tech process is strategically critical important for the west. Not only does it create a new, clean process for REE extraction, but it should mean that China is not able to undercut Western producers going forward with a view to putting them out of business and snapping up the discounted assets as seen at Mountain Pass in California.
- Furthermore, the process highlights how similar, hydrometallurgical processes can be used to clean-up and generate other critical metals in the West, without recourse to higher-cost, traditional smelting and roasting processes.
- We are, in essence, and due to necessity, entering a new era of cleaner, more environmentally friendly and hopefully lower cost metal refining using hydrometallurgical processes. Curiously, the capex is not as high as might be expected given the high rate of tailings residue being reprocessed.
Rare Earths Market
- The Phalaborwa project will be a significant producer of separated Neodymium/Praseodymium, Dysprosium, and Terbium oxides which are expected to represent 98% of the total rare earth market value by 2030, up from 92% in 2020.
- The demand for these four magnet rare earth metals, which are required in electric vehicles and offshore wind turbines, is forecast to grow as global pressure to decarbonise increases. Growth in electric vehicle demand is expected to increase by 22.4% per annum between 2020 and 2030, from a 1.5% passenger vehicle market penetration in 2020 to 45% by 2040. Global demand for direct drive wind turbines is expected to grow at approximately 25% per annum between 2020 and 2030, further driving the demand for rare earth metals.
- As a result, Argus is forecasting strong compound annual growth rates for the Magnet Rare Earth Metals over the next decade (Nd 6.4%, Pr 6.7%, Dy 7.4% and Tb 33.4%)
- Highlighting the urgency for near-term production of rare earths from new sources, Argus is forecasting a 25% supply deficit by 2030 from existing projects. Analysts are forecasting that this supply deficit will drive strengthening prices for the magnet rare earth oxides over the next decade.
- Argus undertook a market review for Rainbow in January 2022 and provided price forecasts for individual rare earth oxide products, which Rainbow has converted into a weighted average basket price for Phalaborwa. Price forecasts have indicated that the Phalaborwa product basket price will increase from around US$139/kg in 2022 to US$227/kg in 2030.”
Phalaborwa technical report
- Rainbow has published a technical report on the Phalaborwa processing flowsheet on their website at: https://www.rainbowrareearths.com/investors/results-reports-presentations/
Valuation: We have revised our valuation to 60p from 51p to reflect today’s significant lift in value for the Phalaborwa project to $627m. We have applied a hefty discount to this to reflect the need to develop a full Feasibility Study for bank or other financing, though finance for critical REE materials is expected to come from multilateral and development funding groups.
We also include 6p of value for Rainbow’s Gakara REE project in Burundi, though this project is currently stalled pending approval from the Burundi Minister of Mines
Conclusion: Its not often that we say that the majors should sit up and take notice of a process technology.
But then, it’s not so often that we get to see the demonstration of a new ‘breakthrough’ technology.
Reunion Mining demonstrated the power of hydrometallurgical processing at the Skorpion zinc project in Namibia which was later bought and successfully developed by Anglo American.
Rainbow’s technical director was also responsible for the Skorpion project process breakthrough at MDM Ferroman the forerunner of MDM Engineering (AIM:MDM) where George Bennett was also the CEO.
Rainbow and K-Tech have demonstrated a calculably more valuable and strategically important process.
Now it is time for a major to come along, apply their construction skills and access to cash to build this innovative, yet, simple project.
*SP Angel acts as financial advisor and broker to Rainbow Rare Earths
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* 7.4p, Mkt Cap £9.6m – Suspension of our valuation estimate following impact of inflationary pressures and lower copper prices during H1
NPV Valuation: Under review
- In the aftermath of Rambler Metals’ interim results, which included a downward revision to the company’s 2022 production guidance, we are temporarily suspending our valuation estimate for review.
- The results reflected improving costs at the Ming mine and a return to “a small operating profit as the mine started to reach its budgeted production levels” during Q2 despite the impact of declining copper prices which are currently more than 20% below the levels at the beginning of 2022.
- We endorse the company’s cost reduction strategy which, despite post Covid19 inflationary pressures, has seen costs on a downward trend through 2022 to reach US$2.91/lb in June and is targeted for further reductions to US$2.70-2.80/lb by the end of the year.
- We also recognise the quality and expansion potential of the Ming mine orebodies where exploration has identified three new mineralised zones close to existing mine infrastructure so far this year”.
- Having made considerable progress on operational matters, Rambler’s challenge is now to address its financial constraints including matching “repayment of debt to … Rambler’s operational cash flow generation and further capital expenditures”.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining.
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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%