SP Angel . Morning View . Wednesday 30 09 20

SP Angel . Morning View . Wednesday 30 09 20

Copper rangebound as US fiscal relief talks resume

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MiFID II exempt information – see disclaimer below  

 

Altus Strategies* (ALS LN) – BUY – 115p – Tabakorole resource climbs 54% with a 20% increase in grades

Amur Minerals* (AMC LN) – Interims

Ariana Resources* (AAU LN) – Interim results and 2020 guidance 

Bluejay Mining* (JAY LN) – Interims highlight ilmenite offtake agreements, licensing progress and low operating costs

BlueRock Diamonds (BRD LN) – Pit expansion combined with new capacity and recovery of larger stones to lead significant increase in diamond production

Bushveld Minerals* (BMN LN) – BUY – 45.7p – Production sharing agreement with Orion financing Phase III expansion at Vametco with notes to refurbish Vanchem

Chaarat Gold* (CGH LN) – BUY – 57p – Kapan operations update

Orosur Mining* (OMI LN) – Agnico Eagle joins Newmont at Anza

SolGold* (SOLG LN) – Delivery of Alpala PFS delayed by Covid19 restrictionsTertiary Minerals* (TYM LN) – Progress report on Nevada exploration and MB Fluorspar project!!MISSING!!Tri-Star Resources* (TSTR LN) – To be suspended pending publication of annual results

 

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Dow Jones Industrials

 

-0.48%

at

27,453

Nikkei 225

 

-1.50%

at

23,185

HK Hang Seng

 

+0.91%

at

23,488

Shanghai Composite

 

-0.20%

at

3,218

 

Economics

JPMorgan pays largest CFTC penalty ever of $920 million and admits wrongdoing in market manipulation case

 

US – US Jul Case-Schiller home price rose 0.6%mom (Jne 0.3%) and yoy 3.9% (3.5%).

  • US, Spt Dallas Fed manufacturing index was 13.6 (Aug 8.0) and Kansas City Fed manufacturing index 18 (23).

 

UK – Government new policy on education and radical shake-up of adult education to break the elitism of the university system.

  • The pandemic has ‘massively accelerated’ changes to the world of work, and made training gaps ‘painfully apparent’ according to a statement by the Prime Minister (BBC).
  • The promise for radical change is probably best political and economic policy any government has ever proposed and is likely to be a major vote winner.
  • The high cost of university courses is putting many young people off further education and is not providing the UK with the skilled workers it requires.
  • The loss of Polytechnics and vocational sandwich courses was a significant loss to the nation when polytechnics were absorbed into the University system

 

EU consumer confidence -13.9 (-14.7), economic sentiment 91.1 (87.5), industrial confidence -11.1 (-12.8) and service confidence -11.1 (-17.2).

 

France – The Spt French consumer confidence was steady at 95.

 

Currencies

US$1.1728/eur vs 1.1673/eur yesterday.  Yen 105.63/$ vs 105.68/$.  SAr 16.954/$ vs 17.141/$.  $1.281/gbp vs $1.285/gbp.  0.711/aud vs 0.708/aud.  CNY 6.807/$ vs  6.822/$.

 

Commodity News

Precious metals:          

Gold US$1,884/oz vs US$1,880/oz yesterday

   Gold ETFs 110.6moz vs US$110.5moz yesterday

Platinum US$873/oz vs US$878/oz yesterday

Palladium US$2,322/oz vs US$2,262/oz yesterday

Silver US$23.77/oz vs US$23.57/oz yesterday

            

Base metals:    

Copper US$ 6,612/t vs US$6,562/t yesterday

  • China Smelter Purchase Team (CSPT) has agreed Q4 TC/RC will be US$58 and 5.8cents (Q3 53/5.3), it usually nudges up ahead of annual TC/RC discussions, the 2020 rate was 62/6.2, while spot is 51/5.1 an eight year low, see attached link,
  • Freeport production rose to 145.6kt in the firs thalf vs 122.5kt yoy
  • Japan’s Copper and Brass Assoc, expects annual unwrought cu output will fall 15.6% to 622kt, the lowest level since 1975 (’19 737kt), Aug output fell 31.2% to 36.7kt, the lowest since Aug’67.

Aluminium US$ 1,770/t vs US$1,778/t yesterday

Nickel US$ 14,335/t vs US$14,510/t yesterday

Zinc US$ 2,412/t vs US$2,431/t yesterday

Lead US$ 1,834/t vs US$1,849/t yesterday

Tin US$ 17,695/t vs US$17,460/t yesterday

            

Energy:            

Oil US$40.7/bbl vs US$42.1/bbl yesterday

Natural Gas US$2.509/mmbtu vs US$2.760/mmbtu yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$116.9/t vs US$114.4/t

Chinese steel rebar 25mm US$545.6/t vs US$543.8/t

Thermal coal (1st year forward cif ARA) US$60.2/t vs US$60.6/t

Coking coal swap Australia FOB US$149.0/t vs US$149.0/t

            

Other:   

Cobalt LME 3m US$34,200/t vs US$34,200/t

NdPr Rare Earth Oxide (China) US$47,886/t vs US$48,080/t

Lithium carbonate 99% (China) US$5,068/t vs US$5,057/t

Ferro Vanadium 80% FOB (China) US$30.0/kg vs US$30.0/kg

Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/kg

Tungsten APT European US$220-225/mtu vs US$220-225/mtu 

Graphite flake 94% C, -100 mesh, fob China US$430/t vs US$430/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,275/t

 

Battery News

 

Company News

Altus Strategies* (ALS LN) 66p, Mkt Cap £47m – Tabakorole resource climbs 54% with a 20% increase in grades

BUY – 115p (from 100p)

  • The Company released an updated mineral resource estimate at the Tabakorole gold project in southern Mali following a drilling programme completed by Marvel Gold under the JV agreement.
  • Updated Tanakorole MRE currently stands at 23.9mt at 1.2g/t for 910koz including:
  • 7.3mt at 1.2g/t for 290koz in the Indicated category;
  • 16.6mt at 1.2g/t for 620koz in the Inferred category.
  • This marks a 54% increase in ounces and a 20% increase in grades.
  • Oxide material accounts for 100koz of total in-situ ounces.
  • 43% of the resource is found within ~100m from surface suitable for open pit mining while consistently encountered thick mineralised zones in the deposit suggest the potential for a relatively low mining strip ratio.
  • Mineralisation remains open along strike and at depth with recently reported AC drilling returning 6.2g/t over 6m from 14m (600m along strike) showing the potential to extend the FT prospect strike length and eventually grow the resource.
  • Marvel said they are planning to drill discovered extensions as well as other targets in Q4 as JV is moving into phase 2 earn in.
  • Marvel will also start preliminary metallurgical testwork shortly with the results expected in Q4/20.
  • Altus remains a 100% owner of the project with Marvel Gold continuing to earn in an initial 33% interest into the Tabakorole and Lakanfla projects.
  • Under the JV agreement, Marvel needs to complete an initial 3,500m drilling programme at Lakanfla gold project in western Mali now (expected in Q4/20) to complete the first earn in phase.

Conclusion: The Company increased the Tabakorole MRE by 54% that included both higher tonnage and better grades with latest step out drilling showing the mineralisation remains open along strike and at depth. JV partner Marvel Gold is now planning to launch drilling at Lakanfla while budgeting phase two drilling programme at Tabakorole involving both infill and step out drilling, all boding well for potential future mineral inventory expansions. We increased our target price to 115p adjusting the preliminary target for the combined Tabakorole and Lakanfla mineral resource from 1Moz to 1.5Moz.

*SP Angel acts as Nomad and Broker to Altus Strategies

 

Amur Minerals* (AMC LN) 1.7p, Mkt Cap £24m – Interims

  • The Company continued to progress the Permanent Conditions TEO on the Kun Manie sulphide nickel/copper project in the far east of Russia during the period.
  • The independently prepared Russian FS will enable to proceed to the next stage of development including BFS and ultimately funding at Kun Manie.
  • The work completed so far involved hydrological assessment, rock mechanics study, base line environmental assessment and metallurgical testwork.
  • The latter confirmed the potential to produce two separate concentrates (copper and nickel) allowing to attract better payment terms on the final product.
  • In Jun/20 the Company secured non-binding indicative offtake terms for concentrates offering indicative revenue terms that are being fed back into the model and the TEO.
  • TEO is reported to be close to completion.
  • Post reporting period, the Company raised £6.1m in equity that funded a $4.7m investment in Nathan River Resources, an Australia-based iron ore developer, through 14% secured convertible loan notes.
  • The Roper Bar Project, acquired by NRR in 2017, is a close to production iron ore asset with “pit-to-port” logistics chain in place including a privately owned 171km paved road to port which involves an existing load-out facility and product stockyard.
  • First iron ore shipment is targeted for Oct/20.
  • NRR has an offtake agreement with Glencore for the marketing and distribution of the project’s iron ore.
  • The Company recorded little negative impact of COVID-19 to date and little effect on its ability to raise funds having completed three equity placings in Apr/20 (£750k), May/20 (£500k) and Aug/20 (£6.1m).
  • PAT came in at -$1.5m (H1/19: -$1.3m) reflecting mostly administrative costs of $1.3m recorded during the period (H1/19: $1.2m).
  • Cash balance stood at $0.8m with no debt on the balance sheet; the net cash position does not account for the £6.1m equity raise completed in August.

Conclusion: The Company is continuing to work closely with consultants assembling Kun Manie TEO that is reported to be very close to completion while the £6.1m equity raise in August brought exposure to the close to production Roper Bar iron ore project as well as provided capital to progress all necessary studies for the sulphide nickel/copper project in Russia ahead of the filing date.

*SP Angel act as Nomad and Broker to Amur Minerals

 

Ariana Resources* (AAU LN) 6.2p, Mkt Cap £65.4m – Interim results and 2020 guidance 

  • Ariana Resources reports that its share of profits from the Kiziltepe gold mine in Turkey amounted to £3.0m during the six months ended 30th June 2020 compared with £7.9m for the full year ended 31st December 2019.
  • Ariana records a pre-tax profit of £2.2m for the first six months of 2020 (2019 – £2.3m) and a 30th June 2020 cash balance of £2.3m.
  • The result reflects the production of 9,808oz of gold during the first six-months of 2020 compared to 13,734 during the first half of 2019 with the lower production attributed to the planned progression of mining to lower grade areas”.
  • The company confirms that “Gold production guidance for 2020 for the Kiziltepe Mine is c. 18,000 oz Au (gross to the JV) is expected to be met at the end of Q4 2020”.
  • Average operating cost for 2020 is expected to lie “in the region of US$580 per ounce”.
  • Chairman, Michael de Villiers, emphasised the significance of the final repayment of the construction loans during April 2020 and pointed out that this has “underpinned the financial strength of our business, through cash flow arising from the repayment of debtor balances and dividends, enabling us to support various exploration and development programmes across our Turkish portfolio and the diversification of the portfolio outside of Turkey”.
  • Mr. de Villiers also commented on the “Salinbas Gold Project, which we believe has the potential to become a significant new gold mine producing at a rate of 50,000 oz per annum over a 10-year life of mine”.
  • He also mentioned the proposed expansion to joint-ventures announced yesterday “with our current partners, Proccea Construction Co., along with a potential new partner, Ozaltin Holding A.S. … [which] … will drive the further development of the Red Rabbit assets of Kiziltepe and Tavsan, in addition to progressing the Salinbas asset through feasibility with the addition of new capital and engineering expertise.”

*An SP Angel mining analyst has visited Ariana’s licenses in Turkey

 

Bluejay Mining* (JAY LN) 8.4p, Mkt cap £82m – Interims highlight ilmenite offtake agreements, licensing progress and low operating costs

  • Bluejay Mining interim figures show how the company has suspended expenditure and cut costs to account for less field work through the 2020 summer season in Greenland.
  • Mining license: documentation for the mining license is now in its final phase with a decision from the government of Greenland expected soon.
  • The project shows minimal environmental and social disruption due to its location and very simple processing and logistics.
  • Offtake agreements: Bluejay has an MOU covering with a multinational trading firm expanded to 250-300ktpa from 200,000tpa previously. The current mine plan is for 390-490,000tpa of ilmenite concentrate.
  • Demand for further offtake is likely to be driven by the current tight market for ilmenite concentrates, production issues at other feedstock producers and ongoing demand for ilmenite bearing pigments and chemicals.
  • Management and staff drew reduced salaries through the lockdown though much work continued from various locations.  
  • Funds were spent on organising significant field work for this year, some of which has been delayed into 2021 in relation to drilling and the mobilisation of field equipment.
  • Cash: looks healthy at £7.0m plus £720,000 of receivables due and £914,870 of VAT receivable from HMRC.
  • Bluejay installed further accommodation at Dundas and acquired an office in Ilulissat for logistics for Dundas and to help exploration at Disko
  • Bluejay report a Pre-tax loss of £1,16m for the first half
  • Expenditure of £3.3m with just £0.23m spent in the second quarter as costs were cut back
  • Funds were mainly spent on renting the pilot plant to feed material for the RTIT ‘Rio Tinto Iron and Titanium’ smelter test which is to be run next year. We understand from independent sources that RTIT are running flat out to meet demand, hence the delay in processing the Dundas ilmenite feedstock.
  • Extensive exploration and drilling is planned for Disko-Nuussuaq Ni-Cu-Co-PGE-Au to target multiple nickel and copper geochemical anomalies and at Kangerluarsuk zinc-lead-silver project
  • Ilmenite prices rose a further 4.3% in September to 230-250/t in China according to FastmarketsMB.
  • The move reflects the impact of ongoing demand on an already tight market for ilmenite and rutile feedstock supply.
  • The price rise comes at a good time for Bluejay Mining which is looking forward to receiving approval to mine from the Greenland government sometime soon.
  • The company continues negotiating for further offtake supply contracts having previously announced that it is closing in on securing an offtake contract for some 70% of its planned mine output with a major ilmenite market participant.

*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Dundas ilmenite project in Greenland and has bought stock in the company. 

 

BlueRock Diamonds (BRD LN) 51.7p, Mkt cap £4.7p – Pit expansion combined with new capacity and recovery of larger stones to lead significant increase in diamond production

  • BlueRock report slightly lower sales for the first half year on year at $1.3m vs $1.4m a year earlier.
  • The figures should have been very substantially better had not been for 21 days of Lockdown and another 29 days of stoppage while management worked on the pit and plant expansion.
  • The team are now producing at a greater rate and should be on track for a markedly stronger second half to the year.
  • Grades have recovered to 5.5cpht following the expansion and are accompanied by the recovery of a significant number of larger and more valuable gem-quality diamonds.
  • Recovered grades fell during the pit expansion to 3cpht due to waste material being removed through the joining of the two pits.
  • greater proportion of larger gem-quality diamonds resulted in one diamond being sold for $104,000 and another estimated at $75.000 after the end of the quarter
  • Costs rose as management expanded the mine through joining the two main pits. This work has added significant value to the company through increasing the estimated economic resource by deepening the probable economic pit. The footprint of the KV1 mine also shows a further 25% more ore material as a result of this work. The pit should now work to around 120m depth rather than the 65m depth assumed in the resource statement.
  • An updated JORC resource is now expected in Q4.
  • Operating costs rose to $2.8m vs $1.8m yoy as the operating run rate increased and the impact of the lockdown and work done to increase future production capacity.
  • A loss of $1.1m was incurred on foreign exchange as the South African rate fell and gained again.
  • The total comprehensive loss rose to $1.8m through the period vs $0.5m yoy.
  • Second lockdown potential: Management caution that a further lockdown could require further funding.
  • Most, if not all, nations are adverse to a second lockdown due to the severe economic damage that would be caused.
  • We note that if South Africa were to lockdown again there would be very serious economic consequences and we would expect gold, platinum and palladium prices would rise significantly.

Conclusion: BlueRock is very well placed to continue to report much higher production of gem-quality diamonds through the second half.

It is our view, the next few months will present game-changing production figures along with a significant number of larger germ-quality diamonds thanks to the good work of Mike Houston and Gus Simbanegavi.

The sale of diamonds into Antwerp should also realise significantly better prices than are currently available locally in South Africa.

*SP Angel act as nomad and broker to BlueRock Diamonds

 

Bushveld Minerals* (BMN LN) 12.2p, Mkt Cap £141m – Production sharing agreement with Orion financing Phase III expansion at Vametco with notes to refurbish Vanchem

(Bushveld Energy has negotiated to holds 50% Enerox Holdings Limited (50% other investor) which holds 90% of Enerox GmbH along with 8.71% in Invinity) If no other investors participating then the €3.7m loan will be split between the Bushveld and the other investor. 

BUY -Valuation 45.7p (was 46.5p)

  • Interim resultsBushveld report sales of $43.1m for the first half vs $78.0m yoy.
  • The numbers are lower due to 21 lost days of production due to the COVID-19 lockdown, significantly lower ferro-vanadium prices and longer lead times for sales into China.
  • Sales to China rose to 18% of total vanadium sales vs just 3% a year ago as Vametco directed sales into China to meet rising prices and demand driven by national and local stimulus programs
  • A number of stimulus and other mainly housing projects will have been delayed by flooding along the 6.3km Yangtze river and should restart soon.
  • Vanadium sales into China incur longer shipping and payment terms pushing a proportion of H1 sales into H2 and will likely result in a greater proportion of H2 vanadium sales being reflected in H1 2021 revenues.
  • Ferro-vanadium prices averaged $25.70/kgV through the first half 54% lower yoy. This includes higher prices in China which incur longer lead times and a 13% VAT/import tariff.
  • EBITDA fell to -$1m for the six months to end June as a direct result of the lockdown, lower ferro-vanadium prices and delayed payment for sales into China which will now fall into the second half.
  • Directing sales into China has a double whammy effect on the company as costs are incurred in the first half by sales will only be recorded in the second half for around half of Bushveld’s ferro-vanadium sales into the region.
  • Operating profits fell to -$9.9m after $8.9m of depreciation. The depreciation charge has risen due to capital investment to expand production and lower unit operating costs over the past two years.
  • Management slashed capital costs to just $5m through the first half and also reduced unit operating costs through cost efficiencies and a weaker South African rand  
  • Bushveld recorded 36 COVID-19 cases all of whom have fully recovered and returned to work. There were also no work-related fatalities and an 11% improvement in the injury frequency rate.
  • Vametco produced 1,218 mtV vs 1,392 mtV yoy.
  • The group lost 380mtV of mainly ferro-vanadium production due to the Lockdown mainly at Vametco.
  • Cash cost at Vametco fell remarkably to $17.20/kgV despite lower unit production and the lockdown vs $19.30/kgV a year earlier.
  • Vanchem produced 431 mtV of output in H1 with 119 mtV in May and 97mtV in June 2020 highlighting how much better production is now running
  • Cash costs at Vanchem were $16.40/kgV, reflecting the low cost of processing stockpile material.
  • Bushveld Energy:  signed a surface sublease agreement and power purchase agreement for the Vametco mini-grid along with a debt financing term-sheet from a French Development Bank which needs to be underwritten by a South African institution.
  • Outlook: Guidance is for production of 3,660-3,950 mtV and is 25-35% higher than last year.
    • Vametco guidance: 2,700-2,850 mtV at $17.50/kgV) and US$17.90/kgV.
    • Vametco total cash costs were $23.90/kgV vs $28.8/kgV a year ago a very impressive performance given the tough operating environment
    • Vanchem guidance: 960-1,100 mtV at $18.40-19.00/kgV).
    • Vanchem total cash costs were $22.50/kgV. We expect Vanchem costs to rise from here.
  • Costs were helped by a weaker SA rand, though this has since strengthened slightly eroding some of the benefit seen through the first half.
  • Cash and cash equivalents: $24.6m as at 30 June 2020 vs $34.0m at end December ensuring the company has sufficient cash facilities to withstand prevailing ferro-vanadium prices while continuing to invest in Vametco’s Phase III expansion this year.
  • Mokopane (64%): Management have deferred the Mokopane DFS by a year as Vanchem is able to process stockpile material and Vametco concentrates for now.
  • The mine is one of the world’s largest primary vanadium resources at 298mt JORC resource grading 1.41% V2O5  in-situ and 1.75% in magnetite and will eventually be used to feed the Vanchem processing plant
  • Fortunately for Bushveld there is sufficient ore at Vametco to feed Vanchem once the stockpiles at Vanchem have been worked through.
  • Bushveld Energy / Vametco mini grid:  Bushveld Energy is looking at self-generation options to feed the Vametco mini grid in South Africa.
  • Vametco has aggregate loads of 21MW which are expected to increase to >50MW and would need >125MW of solar PV and 180MWh of VRFB energy storage. 
  • The group has permission to install the mini grid which should reduce power costs, enable the transition to a significantly lower carbon footprint and serve to demonstrate the effectiveness of VRFB ‘Vanadium Redox Flow Battery’ technology.
  • Bushveld’s UET VRFB system completed site acceptance testing in May 2019 with Eskom and was shut down. UET’s sister company in China ‘Rongke Power’ delivered a new replacement system in Q1 to Eskom but has yet to commission due to Covid-19 delays. We expect the data collected from last year’s trial combined with the new system to eventually lead to the rollout of VRFB systems to support substantial new wind and solar power generation in South Africa assisted by World Bank funds.
  • Prices: Ferrovanadium prices were 54% lower in H1 at US$25.70/kgV vs US$56.30/kgV yoy. Prices are $24.45-25/kgV in Western Europe this week and are $28-29/kgV in China
  • Ferro-vanadium prices were led lower in Europe where steel producers cut production due to stimulus delays. Globally steel production fell by 6% in the first half with producers cutting back on purchases of alloys and other raw materials.
  • The construction industry was quick to cut and slow projects while many governments tried to continue with projects of national significance like HS2.
  • Unfortunately the Lockdown closed most warehouses distributing steel across the world effectively forcing the few working construction projects to delay the structural element of their projects.
  • Steel mills around the world slowed production through the lockdown as uncertainty over uncertain demand for structural construction but have since ramped up utilisation rates to feed stimulus projects.
  • We further expect new stimulus in the UK, US and Eurozone to raise steel mill utilisation rates and alloy demand further from here.
  • Production sharing agreement: Bushveld has signed a long-term production sharing agreement with Orion Mine Finance.
  • The deal is designed to fund the Phase III expansion of Vametco to 4,200mtV pa  and to repay other debt.
  • The repayment will be 1.175% of Sales for 2020 and 2021 followed by 1.45% from 2022 for the life of the mine and is subject to a gross revenue floor
  • Orion are also subscribing for a $10-20m of new $35m convertible loan notes being issued by the company to fund the first phase of Vanchem refurbishment and debt repayment.  
  • Bushveld has the option to repay up to 50% of the loan notes on any of the first three anniversaries and reduce the repayment rate accordingly.
  • Both financings require consent from Nedbank where Bushveld holds $22.2m worth of debt.
  • Debt conversion into equity: Bushveld bought Vanchem from Duferco which has agreed to covert $6.5m worth of the $11.5m of convertible loan notes into Equity as per the agreement of 23/10/19. Bushveld is paying the remaining $5m + ($1.15m in interest) in cash.
  • Earnings: We have adjusted our model according to the guidance and costs presented by the company. Our EBITDA forecast now shows a potential loss of $10.8m for the full year leading to a $18.9m pre-tax profit loss. This is partly driven by the deferral of revenues due to longer lead times from sales into China.
  • Our NPV@5% valuation falls to 45.7p from  46.5p on the assumptions as presented in the table below.

Conclusion:  Bushveld is an entrepreneurial and innovative company that continues to expand while cutting unit costs and rolling out new VRFB technology through its Vanadium Investment Program.

Management continue to drive growth in preparation for an expected upturn in prices which will come as structural steel production rises to meet demand for new stimulus projects.

New VRFB battery projects should also lead to new demand for vanadium in electrolyte supported by Bushveld’s innovative financing structure for vanadium rental in the electrolyte.

We continue to recommend Bushveld as we see the group as well positioned to benefit from rising demand for vanadium and for rollout of increasing numbers of VRFB battery systems for grid support.

*SP Angel acts as Nomad & Broker to Bushveld Minerals

(Dec year end)

 

2018

2019E

2020E

2021E

2022E

2023E

FeV price

US$/kg

81

55

25

35

40

40

Vanadium Production

mtV

2,560

2,833

3,737

5,432

6,168

7,645

Vanadium Sales

mtV

2,573

2,392

3,946

5,782

6,168

7,645

Sales+

US$m

192.1

118.4

93.7

192.1

234.8

291.0

Cash Op costs

US$m

-65.3

-58.4

-73.6

-102.5

-107.1

-130.1

Unit Cash Op costs+

US$/kg

25.5

20.6

19.7

18.9

17.4

17.0

Operating profit

US$m

95.2

33.2

-15.8

50.2

85.1

114.4

Pre-tax profit

US$m

86.6

34.7

-18.9

46.3

83.4

113.0

Tax

US$m

-37.6

-7.4

0.0

-8.3

-18.2

-25.2

Post-tax profit

US$m

49.0

27.2

-18.9

37.9

65.2

87.8

EPS

US$c/s

2.90

2.02

-1.46

2.78

4.79

6.68

PE

x

5.7

7.6

6.1

3.5

2.5

EV/EBITDA

x

1.3

3.6

2.3

1.4

1.1

EBITDA

US$m

101.2

37.1

-10.8

57.9

94.4

123.9

Free Cash Flow (100%)

US$m

32.2

-23.0

-21.7

1.9

45.0

85.0

Source: SP Angel, Company. +Vametco & Vanchem figures combined.

     

 

Chaarat Gold* (CGH LN) 30p, Mkt Cap £159m – Kapan operations update

BUY – 57p

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  • The Company announced an update for the Kapan polymetallic operations in Armenia in regards to the conflict that flared up between Azerbaijan and Armenia in the Nagorno-Karabakh region over the last several days.
  • The conflicted area is around 150km away from the Kapan mine and processing plant while Armenia declared martial law in the country following reported military clashes on Sunday.
  • The team said the impact of latest events has to date been minimal while the Company continues to monitor the situation remaining in close contact with the team on the ground.

*SP Angel acts as Broker to Chaarat Gold

 

Orosur Mining* (OMI LN) 8.4p, Mkt Cap £8.7m – Agnico Eagle joins Newmont at Anza

  • Newmont has advised Orosur that Agnico Eagle is joining its joint-venture as a 50:50 partner in Newmont’s exploration of the Anzá project in Colombia where Newmont is earning an interest of up to 75% in the project.
  • Orosur Mining says that the Newmont/Agnico Eagle will provide initial funding of approximately US$0.7m to restart the exploration program … in several days”.
  • The company clarifies that “This funding is to be directed solely to fund exploration on the Anzá Project for the 12-month period starting September 7th, 2020 and is the first contribution of the required $4m of expenditure for this 12-month period per the terms of the Agreement … [and that it] … is not related to the previously announced payment in lieu for the shortfall of qualifying expenditure for the previous 12-month period ended September 6th, 2020. The payment in lieu, which amounts to US$582,170, is payable no later than November 6th, 2020”.
  • Orosur Mining says that it is refurbishing its exploration camp in anticipation of a resumption of operations and that it is finalising its detailed work plan which is “likely to include re-logging of core, geophysical surveys, geochemical surveys, and extensive drilling campaigns”.
  • CEO, Brad George said We warmly welcome Agnico to Anzá. To now have two of the world’s top 10 gold miners (combined production of over 7.5 million oz per year) investing in our project is testament to its potential”.

*SP Angel act as Nomad and broker to Orosur Mining

 

SolGold* (SOLG LN) 25.45p, Mkt Cap £534.6m – Delivery of Alpala PFS delayed by Covid19 restrictions

  • Solgold reports that restrictions on site access during the Covid19 pandemic have delayed the completion of aspects of the geotechnical work on its pre-feasibility study (PFS) for the Alpala project in Ecuador.
  • The company provides assurance that it has been working to recover lost time as a result of restrictions” and that many other aspects of the PFS, including the mineral resources estimate, mine and plant design, metallurgical and hydrogeological work are either already complete or are currently being finalised.
  • Similarly, work on other key elements of the PFS, including tailings disposal, pipeline rotes and port facilities as well as the environmental and social aspects of the Alpala development are well advanced.
  • Solgold explains that because of the restrictions on site access Geotechnical sampling and testing together with geotechnical domain identification and modelling have represented a significant source of delays and have impacted reliant activities in interpretation and mine planning and extraction models.  Collection of the necessary data has now been completed”.
  • Now that the data is available, however, Geotechnical numerical modelling is in the final stages with fragmentation, caveability and stability inputs ready to be fed into the draft PFS mine model and design”.
  • The company confirms that it “is focussed on delivery of all draft input from the studies referred to above as soon as possible. Following a review and revision period, financial modelling will be undertaken in order to complete the PFS as soon as possible”.

Conclusion: Facing the unprecedented challenges of the global Covid19 outbreak it is unsurprising that completion schedules envisaged before the pandemic have proved difficult to achieve. We observe, however, that as described in the Preliminary Economic Assessment released in June 2019, the Alpala project has a mine life of over 50 years and that in our view the benefits of taking a little extra time to ensure a thorough understanding of the technical aspects of the project far outweighs a comparatively minor delay at this stage and that the financial implications of inadequate preparation for a major development on the scale envisaged at Alpala dwarf the costs of a short delay at the start of the project.

*SP Angel act as financial advisor and broker to SolGold

 

Tertiary Minerals* (TYM LN) 0.24p, Mkt Cap £2.3m – Progress report on Nevada exploration and MB Fluorspar project

  • Tertiary Minerals has provided a progress report on its base and precious metals exploration programmes in Nevada.
  • At the Peg Leg copper/silver/lead/zinc prospect a programme of four trenches has been completed totalling 230m along the limestone granite contact where the exploration is seeking to identify skarn mineralisation.
  • Multiple skarn zones” have been exposed in the trenches and samples are awaiting assay. Surface outcrops of the mineralisation have assayed at “up to 59 g/t silver 1.4% copper, 2.4% lead and 1.8% zinc in previously reported sampling”. Follow up work includes plans to undertake a drone-based magnetic survey this week in order to target magnetic skarn.
  • At the Paymaster zinc/silver project, where skarn-type mineralisation is also the target, a “Drone photogrammetric survey … [has been] … completed …[and a] … drone magnetic survey to be completed this week, soil sampling programme commissioned”.
  • A soil sampling programme has been commissioned to “extend and confirm historic gold-in soil anomalies” and assist in the identification of drill targets at the Pyramid gold project.
  • Similar drone-based photogrammetric and magnetic surveys have been completed over the 1.2km long x 60m wide zone of hydrothermal alteration at the Mt Tobin silver prospect and soil sampling is continuing to assist in the definition of future targets for drilling.
  • Applications for drilling permits have been submitted at the Lucky Copper prospect where historic drilling dating back to 1951 “intersected 20.4m at 0.65% copper to bottom of the hole at 77.7m depth”.
  • The company says that following unsuccessful metallurgical test work it has terminated the lease agreement on the MB Fluorspar project. Tertiary Minerals clarifies that the testing shows that the fluorspar is finely intergrown with other minerals, in particular calcite, and a key challenge has been to separate the fluorspar from the associated minerals and concentrate the 10% fluorspar ore grade up to a 97% fluorspar concentrate at an acceptable recovery level … [and that] … the testwork has failed to achieve target concentrate grades or recovery and the Company has concluded that it is now unlikely that a viable processing route can be achieved for the MB Project using currently available technologies”.
  • Executive Chairman, Patrick Cheetham, explained that The decision to terminate the lease agreement over the MB Fluorspar Project reflects extensive but unsuccessful efforts to develop a viable processing route for production of an acid-grade fluorspar concentrate and a firm belief that the escalating holding costs are better applied to the continued exploration of the Company’s expanding gold and base metals project portfolio”.

Conclusion: Tertiary Minerals is re-focussing on base and precious minerals exploration in Nevada following metallurgical results which were unable to demonstrate a viable processing route for its MB Fluorspar project.

*SP Angel act as Nomad and Broker to Tertiary Minerals

 

Tri-Star Resources* (TSTR LN) 24.5p, Mkt Cap £27.6m – To be suspended pending publication of annual results

(Tri-Star holds 40% in ‘SPMP’(Strategic & Precious Metals Processing LLC) which owns the antimony-gold processing facility in the Port of Sohar Free Zone, Oman)

World’s first Clean Plant designed to EU Environmental standards.

Target gold capacity 50,000ozpa, antimony 20,000tpa

  • Tri-Star Resources reports that it is unable to publish its annual results for the year to 31stDecember 2019 and that consequently its “ordinary shares will be temporarily suspended from trading on AIM under AIM Rule 40, with effect from 7.30 a.m. on 1 October 2020 until such time as the Final Results have been duly published in compliance with AIM Rule 19.”
  • The company explains that “The delay in publication of the Final Results is due to the ongoing discussions between SPMP and its shareholders to reach a settlement agreement to provide greater certainty of funding for SPMP, redress the imbalance of the amounts invested by the three shareholders to date and to provide certainty over Tri-Star’s shareholding going forward with no further need for Tri-Star to finance SPMP (“Settlement Agreement”).”
  • While it cautions that there is as yet no certainty on the outcome of these discussions, Tri-Star also says that “these negotiations are at an advanced stage and upon completion of such an agreement,  and, whilst the audit is ongoing, the Company expects to be able to sign off its audited accounts on an unqualified basis”.
  • Today’s announcement sheds no further light on progress ramping up the antimony production at the SPMP plant in Oman which was last expected to be achieved by March 2021.

*SP Angel acts as Nomad to Tri-Star Resources. David Facey, a former partner at SP Angel is the CEO & CFO at Tri-Star Resources.

 

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

 

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, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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