SP Angel . Morning View . Monday 14 11 22
Chinese regulators ease property lending rules to support the sector
MiFID II exempt information – see disclaimer below
Zambian copper / cobalt / gold exploration opportunity
- We are looking for investment into a private copper explorer with four highly prospective licences in Zambia, near major mines or significant exploration targets.
- Historic drilling on the licence includes 0.7% copper over 1m and 0.2% nickel over 3m. Geophysics in 2021 & 2022 advanced project toward identifying drill targets.
- A large licence with multiple copper targets. Samples from small artisanal mines assayed 15.8% copper, 0.57g/t gold and 4.87% copper, 18.3 g/t gold.
- IPO documentation has been prepared for listing when market conditions improve.
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors
Arkle Resources PLC (AIM:ARK)* – Successful £200,000 placing to progress Stonepark zinc drilling programme
Asiamet Resources Ltd (AIM:ARS) – Potential cost savings identified at the BKM copper project, Kalimantan
Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)* – Start of solar power supply to the Blanket mine
Condor Gold PLC (AIM:CNR, TSX:COG, OTC:CNDGF)* – Quarterly results highlight the open-pit mine feasibility study and continuing advances in metallurgy and mineral resources at La India and wider district scale exploration opportunities
Core Lithium Ltd (ASX:CXO) – First shipment of DSO from Finniss mine
GreenRoc Mining PLC (AIM:GROC) – GreenRoc reports meaningful grades from Amitsoq graphite project in Greenland
Pilbara Minerals Ltd (ASX:PLS) – A$250m debt facility from Australian Government
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) – Decision not to proceed with discussions over a potential offer
US Military reportedly ready to step-in and fund Canadian critical minerals projects in wake of China divestment order
- Canadian news outlet CBC has reported this morning that the US military has been soliciting applications for Canadian mining projects that want American public funding through a major national security initiative.
- The move is part of an urgent priority of the US government on reducing dependence on China for critical minerals.
- This news follows thew announcement from the Canadian government earlier this month that Chinese companies must divest out of Canadian critical minerals projects, citing national security.
- Sinomine (Hong Kong), Chengze Lithium and Zangge Mining Investment are the Chinese companies named by Industry Minister Francois-Philippe Champagne.
- We note that two of the companies, Power Metals and Ultra Lithium, have lithium projects based in Canada while Lithium Chile has no Canadian based lithium assets at this stage.
- According to CBC, the American military has funds to help private companies inaugurate new mining projects; it's for funding feasibility studies, plant renovations, battery-recycling and worker training.
- An official from the U.S. Department of Defence has confirmed that Canadian projects qualify for the Defense Production Act, focused on domestic sourcing of “critical materials necessary for the clean energy transition, such as lithium, nickel, cobalt, graphite, and manganese used in large-capacity batteries”
- In response to the interest by the US Military, the Canadian government say they've already provided the U.S. with a list of 70 projects that could warrant U.S. funding.
China’s Huayou Cobalt buys $49m stake in Indonesia nickel plant
- Huayou Cobalt have bought an 80% stake in a nickel refinery, with Vale owning the remaining 20%.
- The JV intend to build a High-pressure acid leach (HPAL) plant to process ore from in Southeast Sulawesi into a mixed hydroxide precipitate (MHP) containing 120ktpaa of nickel.
Base metals rally on optimism over new China property stimulus measures
- Base metals rallied over the weekend on China’s regulators decision to fuel the property sector with an additional $56bn worth of financing alongside other measures.
- Iron ore prices also rose to $92/t from a low of $80/t earlier this month. Nickel prices recovered to >$27,000/t, while lead and zinc both gained 2.7% and 4.4%.
- Copper prices reached $8,600/t before settling back to $8,530/t.
- New Chinese support for the property sector, in addition to a 20-point playbook issued to reduce the impact of the zero-covid policy, have ignited commodities previously downtrodden by Beijing’s rigid policies.
- But China’s property developers still hold >$292bn of onshore and offshore debt due by 2023-end , with $126bn worth of maturities due by Q2-23 (Bloomberg).
Gold holds gains as dollar and yields bounce from lows and traders weigh up Fed’s next step
- Gold has eased slightly from $1,771/oz to $1,756/oz mark.
- Gold prices have climbed 8.9% from lows hit on November 3rd as the US dollar weakened and easing yields on lower US CPI inflation data.
- US 10-year yields are a major headwind for gold prices, and their recent weakness, easing from 4.24% last week to 3.86% today has helped buoy bullion.
- Similarly, the dollar index, measured against a basket of major currencies, has fallen from 113 on Nov. 3rd to 106 today.
- The dollar and US Treasury yields saw some support today on hawkish comments from Fed official Waller, stating that ‘these rates are going to stay --- keep going up – and they’re going to stay high for a while.’
Dow Jones Industrials +0.10% at 33,748
Nikkei 225 -1.06% at 27,963
HK Hang Seng +1.55% at 17,595
Shanghai Composite -0.13% at 3,083
Economics
China – Central bank and the banking regulator prepared a 16-point plan to support the debt-ridden property sector, FT writes.
- Among new measures, the plan includes an extension to a year end deadline for lenders to cap their ratio of property sector loans.
- Lenders will now have an as yet unspecified time to cap he portion of their outstanding property loans at big banks at 40% of total loans and f their outstanding mortgages at 32.5%.
- Additionally, developers’ outstanding bank loans and borrowings from trust funds due within the next six months can be extended for a year, according to new regulations.
- The news sent the Hang Seng Mainland Properties index up as much as 16.3% this morning while shares in HK-listed country Garden, one of nation’s largest developers, climbed more than 36%.
- Depressed High Yield dollar bonds climbed 5c on the dollar.
- The Chinese Hang Seng Index has now erased losses triggered by Xi Jinping’s radical National Congress Politburo shakeup in which he consolidated power.
- >16,000 new coronavirus cases were reported in China marking the highest level since late April as authorities are seen easing strict Covid Zero policy.
- Beijing reported the highest daily reading with more than 400 cases.
- The government on Friday reduced the time inbound travellers and close contacts need to spend in hotel quarantine and eased ontact tracing requirements.
US - Biden’s Democrats win Senate as Republicans move to take House despite widespread rejection of Trump-backed candidates
- The Democrats have won the Senate following their victory in Nevada.
- The Republicans had been forecast by analysts to secure both sections of Congress, however they have failed to fulfil expectations of a ‘red wall.’
- The Republicans now require 7 more seats to hit the required 218 House seats needed for a majority.
- Without control of both the Senate and the House, Biden will be unable to complete major legislation such as his $380bn funding package for clean energy delivered this year.
- This is the most successful midterm result for a White House incumbent since WWII.
- Analysts expect the remaining 2 years of Biden’s presidency mirror Obama’s first term in which gridlock dominated America’s political landscape.
UK – Chancellor is set to deliver Autumn Budget this Thursday that is expected to see a series of spending cuts and tax rises as forecasts point to larger than initially expected budget deficits.
- The Office for Budget Responsibility estimates that a worse economic outlook will increase government borrowing close to £100bn in 2026-27, FT reports.
- This compares to ~£32n estimated earlier in March.
- “We are going to see everyone paying more tax… We’re going to see spending cuts,” Jeremy Hunt told the BBC on Sunday.
- Business confidence dropped to a 13-year low in October, according to the latest Accenture (NYSE:ACN)/S&P Global data.
- The gauge came in at 18% representing the net balance of manufacturing and service sector companies expecting activity to increase over the next 12 months.
- This compares to a reading of 28% in June and 56% in February.
Currencies
US$1.0326/eur vs 1.0232/eur last week. Yen 139.55/$ vs 141.37/$. SAr 17.255/$ vs 17.348/$. $1.179/gbp vs $1.172/gbp. 0.670/aud vs 0.664/aud. CNY 7.036/$ vs 7.119/$.
Dollar Index: 106.81 /-3.14% on week
Commodity News
LME to continue accepting Russian metals following ‘formal discussion’, supporting nickel and aluminium
- The LME has decided not to ban taking Russian metal in its warehouses, stating exchange ‘should not seek to take or impose any moral judgements on the broader market.’
- The decision has hit the share prices of US-listed aluminium producers.
- Traders are still reportedly ‘self sanctioning’ the LME’s Russian metals holdings, potentially skewing inventory data.
- Rusal has committed not to deliver large deliveries to the LME.
Precious metals:
Gold US$1,756/oz vs US$1,757/oz last week
Gold ETFs 94.4moz vs US$94.3moz last week
Platinum US$1,024/oz vs US$1,052/oz last week
Palladium US$2,034/oz vs US$1,996/oz last week
Silver US$21.74/oz vs US$21.77/oz last week
Rhodium US$13,550/oz vs US$13,150/oz last week
Base metals:
Copper US$ 8,528/t vs US$8,444/t last week
Aluminium US$ 2,443/t vs US$2,385/t last week
Nickel US$ 26,830/t vs US$26,575/t last week
Zinc US$ 3,068/t vs US$3,033/t last week
Lead US$ 2,145/t vs US$2,140/t last week
Tin US$ 21,270/t vs US$21,060/t last week
Energy:
Oil US$96.1/bbl vs US$96.0/bbl last week - Crude oil prices were largely unchanged over the weekend on sparse news flow.
- The US Baker Hughes rig count rose by 9 to 779 rigs last week, its highest since March 2020, with oil rigs up 9 at 622 rigs and gas rigs unchanged at 155 rigs.
- The UK Government is reportedly considering an increase to the Energy Profits Levy windfall tax from 25% to 35% and an extension of the scheme until 2028 (from 2025) as part of this Thursday’s autumn statement.
Natural Gas US$6.128/mmbtu vs US$6.323/mmbtu last week
Uranium UXC US$50.75/lb vs US$50.70/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$92.8/t vs US$88.0/t
Chinese steel rebar 25mm US$549.4/t vs US$539.4/t
Thermal coal (1st year forward cif ARA) US$208.0/t vs US$208.0/t
Thermal coal swap Australia FOB US$291.5/t vs US$291.5/t
Coking coal swap Australia FOB US$312.0/t vs US$312.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$92,023/t vs US$91,310/t
Lithium carbonate 99% (China) US$82,643/t vs US$81,687/t
China Spodumene Li2O 5%min CIF US$6,110/t vs US$6,110/t
Ferro-Manganese European Mn78% min US$1,275/t vs US$1,264/t
China Tungsten APT 88.5% FOB US$317/t vs US$317/t
China Graphite Flake -194 FOB US$880/t vs US$880/t
Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.95/kg
China Ilmenite Concentrate TiO2 US$319/t vs US$315/t
Spot CO2 Emissions EUA Price US$75.8/t vs US$73.8/t
Brazil Potash CFR Granular Spot US$570.0/t vs US$600.0/t
Battery News
Indonesia to set up $2bn EV fund
- Indonesia’s sovereign wealth fund has announced its intention to set up a green EV fund of at least $2bn, partnering with China's battery maker CATL and CMB International.
Company News
Arkle Resources PLC (AIM:ARK)* 0.55p, Mkt Cap £1.9m – Successful £200,000 placing to progress Stonepark zinc drilling programme
- Arkle resources successfully completed an equity raise for £200,000 before expenses through the placing of 50,000,000 new ordinary shares.
- The shares were issued at a price of 0.4p, with each placing share containing a warrant with the right to subscribe at a 0.5p price for one new ordinary share over the next 2 years.
- Arkle directors John Teeling and David Cockbill subscribed for a total of 5,000,000 shares.
- The Company reports that the funds raised will be used for the upcoming drilling programme at Limerick at the Company’s Stonepark Joint Venture, alongside general corporate outgoings.
*SP Angel are Nomad and broker to Arkle Resources
Asiamet Resources Ltd (AIM:ARS) – 1.05p, mkt cap £19.6m – Potential cost savings identified at the BKM copper project, Kalimantan
- Asiamet Resources reports that its work on the updated feasibility study for its BKM heap-leach SX/EW copper project in Indonesia has shown that estimated sulphuric acid consumption can be reduced by around 50% compared to the estimates contained in the 2019 feasibility study.
- The revised expectations of acid consumption result from “An updated interpretation of the heap leach test work undertaken by the project metallurgical consultant MWorx, in consultation with a review of the process circuit conditions by feasibility study engineers NewPro and Asiamet technical personnel”.
- The company explains that it expects the lower acid consumption to generate cost savings at a time when acid prices are increasing as a result of “increasing demand for battery minerals” recovery.
- In addition, Asiamet Resources says that climate data for the BKM site shows mean annual rainfall is expected to be 18% lower than assumed in the earlier study “with positive impacts on the modelled site water balance and a reduction in operating and capital costs to manage and treat site water”.
- Asiamet’s CEO, Darryl McClelland, said that “The reduction in expected acid consumption and a reduction in the modelled annual average precipitation delivers significant environmental management and cost benefits to the project”.
Conclusion: The identification of cost saving opportunities at the BKM project should provide economic benefits to the updated feasibility study which, in its presentation in August this year, Asiamet indicated was due in the current quarter to help support debt financing.
Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)* 1020p, Mkt Cap £129m – Start of solar power supply to the Blanket mine
- Caledonia Mining reports that today its Blanket gold mine in Zimbabwe will start power generation from its solar generation plant
- Construction of the 12.2MW plant started in 2021and it is expected to provide up to 27% of the mine’s needs and help to insulate the operation from the instability und unreliability of the local grid and from the need to provide short-term diesel generated supply during periods of load-shedding and power cuts on the grid.
- The company also highlights the environmental attractions of solar power generation.
- Chief Executive, Mark Learmonth, explained that power represents 21% of the mine’s costs and that the new plant “will improve the quality and security of Blanket's electricity supply and provide environmental benefits through cleaner energy … [and will] … displace more expensive power from the grid and from the diesel generators”. reducing gold production costs by approximately US$37/oz,
- The company’s recent announcement of results for the quarter ended 30th September, released on 10th November, reported on mine gold production costs at the Blanket mine of US$695/oz.
Conclusion: The start of solar power generation at the Blanket mine provides a more reliable electricity supply and with a projected US$37/oz cost saving could represent around US$3m of annual savings on the mine’s targeted 80,000oz pa production.
*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe
Condor Gold PLC (AIM:CNR, TSX:COG, OTC:CNDGF)* 24p, Mkt Cap £37.3m – Quarterly results highlight the open-pit mine feasibility study and continuing advances in metallurgy and mineral resources at La India and wider district scale exploration opportunities
- Condor Gold reports a pre and post-tax loss of US$0.54m for the three months to 30th September 2022 (2021 – US$0.59m) bringing the YTD total to a loss of US$1.91m (2021 – US$1.61m) as it continues to progress the project towards production.
- Today’s announcement highlights key findings of the feasibility study for the La India open-pit, which was published during the quarter as well as the appointment of the company’s largest shareholder, Mr. Jim Mellon, as non-executive Chairman which was announced in October.
- The feasibility study describes an open pit mining operation producing a total of 7.3 mt of ore grading 2.56 g/t Au and associated 96.7 mt of waste at an average waste:ore ratio of 13.2:1 at an average ore production rate of 1.3mtpa producing gold at an average US$1,039/oz on an all-in-sustaining cost basis.
- Ore from the open-pit is expected to be treated at a nominal rate of 0.89mtpa over 9 years to produce an average of 81,545oz of gold for the first five years of production with higher grades treated in the earlier years and lower grade material stockpiled for later processing.
- Additional mining opportunities arise from the potential to develop underground mining operations at La India, as well as from “America, Mestiza, Central Breccia San Lucas, Cristalito-Tatescame, and Cacao)” and additional open pit Mineral Resources on four deposits (America, Mestiza, Central breccia and Cacao)”.
- The inclusion of production from the permitted satellite pits is expected to deliver 100,000ozpa of gold output from the wider La India project area during the initial years of the production phase.
- The feasibility study describes that the La India open-pit alone is expected to generate an after-tax NPV5% of US$86.9m and IRR of 23% (at a gold price of US$1,600/oz) from the investment of US$105.5m to mine a probable ore-reserve of 602,000oz of gold and 1.25moz of silver over an 8.4 years mine life at La India.
- Sensitivity analysis disclosed in September’s announcement indicates that at a higher gold price of US$2,000/oz, post-tax NPV5% increases by around 2.4x, to US$205.2m generating an IRR of 43%.
- Chief Executive, Mark Child, explained that Condor Gold plans “to develop the fully permitted La India Project in 2 stages using the new SAG Mill that has already been purchased … [and] … to materially expand production with a stage 2 expansion by converting existing Mineral Resources into Mineral Reserves and an associated integrated mine plan”.
- Among the technical details described in the study and highlighted in today’s announcement are metallurgical test results which “demonstrated that gold recovery is independent of grade” with a recovery rate of 91% from ore ground to a 75µm size although finer grinding to 57µm is projected to improve recovery rates to “about 93%”.
- The announcement also confirms the previously reported mineral resource estimate of “9,672 kt at 3.5g/t gold for 1,088,000 oz gold in the indicated mineral resource category and 8,642 kt at 4.3 g/t gold for 1,190,000 oz gold in the inferred mineral resource category” which includes an “open pit Mineral Resource Estimate is 8,693 kt at 3.2 g/t gold for 893,000 oz gold in the indicated mineral resource category and 3,026 kt at 3.0 g/t gold for 291,000 oz gold in the inferred mineral resource category”.
Conclusion: Condor Gold’s plans to develop the La India open-pit project in Nicaragua are discussed in detail in the feasibility study and the company expects to supplement the feed to the plant with higher grade ore sources from satellite pits lifting initial gold output to around 100,000oz pa. Development of underground ore sources at La India and elsewhere in the licence form a phased approach to the longer-term development of the La India district.
*SP Angel act as a broker to Condor Gold
Core Lithium Ltd (ASX:CXO) A$1.9c, Mkt cap A$3.4bn – First shipment of DSO from Finniss mine
- Core Lithium reports its first load of spodumene direct shipping ore (DSO) t from its Finniss mine in the Northern Territory has been crushed and sent to Darwin port.
- The 15,000dmt sale for the 1.4% Li2O product fetched a price of US$951/dmt on a CIF basis.
- Core also announces the resignation of its COO, Blair Duncan, after five years with the company.
- Mr Duncan has been replaced by Mike Stone, who has previously held the positions of Associate Director of Mining with KPMG, General Manager of the Oyu Tolgoi Open Pit operation and was Chief Advisor Productivity within, RioTinto
GreenRoc Mining PLC (AIM:GROC) 4.12p, Mkt Cap £4.6m – GreenRoc reports meaningful grades from Amitsoq graphite project in Greenland
- GreenRoc Mining report results from the first four drill holes at the Amitsoq graphite project in the south of Greenland.
- The company have also appointed ‘Niras’ a Danish/Greenland consultancy to run the all-important study to assess the potential social impact of the project / mine in the region.
- Drawing labour away from local settlements can have a catastrophic impact on settlements in Greenland if not managed properly, while bringing in migrant workers also needs planning and careful consideration.
- Results:
- Contained carbon grades in the graphite layers show up to 23.96% Cg with the main UGL layer ranging from 17.29-26.50% Cg in the results.
- UGL grades ranged from 17.29-20.92% Cg for mineable widths >2m.
- The UGL layer ranges from 32.91m to 49.05m down hole in the results
- True thickness widths in the UGL layer range from 0.14-4.7m
- The results show assays from four graphite layers down to 139m with drilling down to 167m.
- LGL2 seam shows 23.45% Cg over a true thickness of 11.84m.
Conclusion: Management should have a reasonable idea of the potential resource off assay result from the 19 drill holes when received in December. So far the results look promising but as much will depend on seam thickness and consistency as well as the impressive grade. The results combined with results of the spheronisation testwork indicates potential for EV battery anode production from the Amitsoq graphite.
Pilbara Minerals Ltd (ASX:PLS) A$5.3, Mkt Cap A$15.8bn – A$250m debt facility from Australian Government
- Lithium producer Pilbara Minerals has secured a 10-year debt facility from the Australian Government to support the expansion of its Pilgangoora operation in Western Australia.
- Funds will be used for the P680 project expansion to the Pilgan Plant to deliver an additional 100,000tpa SC6 production, with capex estimated at A$103m.
- Pilbara will build a 5mtpa crushing and ore sorting facility that will replace the existing facility, with Pilbara commenting that the plant could deliver up to 1mtpa of SC6 capacity across the entire Pilgangoora operation at a capital cost of $194m.
- Pilbara’s FY22 production was 378kt of concentrate, vs 281kt in FY21.
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) 9.42p, Mkt Cap £98m – Decision not to proceed with discussions over a potential offer
- The Board decided to end discussions with Shandong and Chaarat regarding a potential offer for Shanta.
- Both Companies agreed with the decision.
- Shanta reports that discussions have not delivered an attractive offer or deal structure.
- The Company remains committed to delivering growth in production with commissioning of the Singida Project (Q1/23) as well as aiming to diversify its production base with a potential development of the West Kenya Project.
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
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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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