SP Angel . Morning View . Wednesday 09 09 20
Gold steady amid uncertainty over vaccine
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AfriTin (ATM LN) – Further increase in concentrate production from the Uis mine during August
* (IRR LN) – Update to capital structure
* (KOD LN) – BUY – Kodal looks to lithium production in rising price environment
Marvel Gold (MVL AU) – Earn in on new prospect in Mali
(MTL LN) Suspended – Covid19 related disruption at RunRuno
(PDL LN) – Allegations of human rights abuses at Williamson mine
* (SAV LN) – Savannah raises £2.34m at 1.8p/s
* (VAST LN) – Baita Plai update
AstraZeneca paused all Covid-19 vaccine clinical trials when a participant got sick and to review suspected adverse effects.
- The company with assistance from Oxford university was on track to become one of the first drug makers to deliver results from a large trial of a vaccine.
- Previously, AstraZeneca agreed to deliver over 300m doses to the US government while the UK pre-ordered 30m of the company’s potential vaccine with UK health minister suggesting it would “most likely” be available in early 2021.
UK – the UK government may impose curfew following ban on meetings of more than six people from Monday
- The government has warned workers they should still head back to their desks because the virus is not seen spreading in offices (Daily Mail)
- We suspect many will continue to work from home due to busy commuting trains which have not been helped by most rail operators recently cutting 10% of services.
- The UK may be about to enforce quarantine on all travellers from EU countries (The Sun)
Dow Jones Industrials
HK Hang Seng
US – Fiscal deficit to hit record $3.3tn this year marking the worst reading since WWII, according to the non-partisan Congressional Budget Office data.
- This is equivalent to 16% of GDP.
- This is lower than projected earlier in the year at the height of the global pandemic in April with CBO guiding for a $3.7tn budget deficit in FY20 (September YE) and $2.1tn in FY21.
Ryanair attracted €4.4bn worth of orders for its €850m issue of five year 3% yield bonds yesterday as the Company is battling with travel restrictions and social distancing rules that weighed on the number of people traveling.
China – Inflation slowed in August driven by weaker food prices and sluggish core inflation pointing to weakens in household demand, Bloomberg reports.
- Core inflation that excludes changes in prices for food and energy was at 0.5%yoy extending a series of sub 1% readings to three months now.
- Weaker inflation and subdued demand offer the central bank more room to ease the monetary policy further.
- Factory gate prices remained in deflation
- CPI (%yoy): 2.4 v 2.7 in July and 2.4 est.
- PPI (%yoy): -2.0 v -2.4 in July and-1.9 est.
Germany – FT refers to a slower increase in German truck mileage as a proxy for industrial production and slowing growth momentum in August.
- The index recorded a 1.2%mom increase in August v +1.9%mom in July and 4.7%mom in June, according to the Federal Statistics data.
- Compared to pre-pandemic period, the index was down 3.5% v levels recorded in February.
UK – The pound slides sub 1.30 mark against the US$ on the back of increased concerns for a disorderly Brexit.
- PM Johnson restricts social public gatherings to not more than six people both indoors and outdoors from Monday with a £100 fine provided to enforce new limit.
- The limit will not apply to schools, workplaces or Covid-secure weddings, funerals and organised team sports.
- This marks a reduction on the limit of 30 put in place in July 4.
South Korea – The nation recorded the sixth consecutive month of job losses as the government is trying to contain the second wave of Covid-19 infections.
- The economy lost 274k jobs in August with unemployment rate climbing 0.1pp to 3.1%.
- Unemployment is set to worsen this month as authorities tightened anti-virus measures in late August.
Baltic index falls for ninth straight session
- The Baltic Exchange’s main sea freight index continued to fall on Tuesday, as rates fell across all vessel segments.
- China’s coal imports fell to an eight-month low of 20.7mt in August, whilst Asia’s total imports of coal from the seaborne market have slumped this year.
- The Baltic dry index for bulk commodities fell 1.6% 1,328 – its lowest since late July (Hellenic Shipping News).
US$1.1776/eur vs 1.1806/eur yesterday. Yen 105.92/$ vs 106.24/$. SAr 16.889/$ vs 16.742/$. $1.294/gbp vs $1.314/gbp. 0.722/aud vs 0.729/aud. CNY 6.848/$ vs 6.833/$.
Gold US$1,928/oz vs US$1,932/oz yesterday
Gold ETFs 109.6moz vs US$109.5moz yesterday
Platinum US$905/oz vs US$916/oz yesterday
Palladium US$2,301/oz vs US$2,319/oz yesterday
Silver US$26.66/oz vs US$26.98/oz yesterday
Copper US$ 6,694/t vs US$6,756/t yesterday – Copper prices fall despite further inventory drawdowns
- The price of copper fell on Tuesday afternoon and held steady on Wednesday, despite 3,125 tonnes of copper leaving LME approved warehouses.
- Benchmark copper fell 1.8% to $6,671/t on Tuesday afternoon, down from $6,830/t on the 1st of September which was 50% higher than prices seen in March (Reuters).
- Copper prices fell amid the continuing sell-off in US stocks, whilst the price of oil fell more than 5%.
- Meanwhile, the US dollar continued to climb, with the dollar index reaching a 4-week high on Wednesday morning which makes dollar denominated assets such as copper more expensive (FX Street).
- Other base metals suffered as a result of renewed dollar strength, as the most-traded metals contracts in Shanghai were down across the board by an average of 1.6% on Wednesday (Fastmarkets MB).
Aluminium US$ 1,784/t vs US$1,794/t yesterday – Chinese unwrought aluminium exports rise 5.9% MoM in August
- China exported 395,400mt of unwrought aluminium in August, 5.9% up from the previous month however down 15.2% from the same period a year ago (SMM News).
Nickel US$ 14,755/t vs US$15,215/t yesterday – Vale to place New Caledonia nickel plant on care & maintenance
- The Brazilian miner announced on Tuesday that it will place its VNC nickel and cobalt operation in the country on care and maintenance with a view to a possible shutdown.
- This is a result of the company being unable to reach an agreement to sell 95% of the operation to New Century Resources (NCZ).
- New Century explained that although it believes there was strong potential for sustainable operations at Goro, it had not been able to generate a funding package and equity structure for the project (Mining Weekly).
- NCZ had reportedly been seeking funding of at least $900m in equity and debt contributions for the project.
- Before agreeing on a potential sale with NCZ, Vale was negotiating with a number of Chinese parties. The company’s CEO said all alternatives are now being considered in terms of the project’s future owner (S&P Global).
Zinc US$ 2,414/t vs US$2,479/t yesterday
Lead US$ 1,910/t vs US$1,960/t yesterday
Tin US$ 18,025/t vs US$18,305/t yesterday
Oil US$39.7/bbl vs US$41.8/bbl yesterday
- Oil prices continue their downward trend with fears about global demand and a weak stock market being the core catalysts
- Brent dipped below US$40/bbl yesterday for the first time since June
- Brent’s three-month time spread has widened to its largest contango since May, a symptom of an increasingly weak market
- Further compounding the weakness, Saudi Arabia has cut pricing for oil sales in October, a sign the world’s biggest exporter sees fuel demand wavering amid more coronavirus flare-ups around the globe
- Aramco cut Arab Light to Asia to a discount against the benchmark oil price used by the Saudis for the first time since June
- It’s the second consecutive month of reductions for barrels to the region and the first month in six that US refiners will see a cut
- Aramco will trim pricing, too, for lighter barrels to northwest Europe and the Mediterranean region
- Pricing is being reduced for Light exports to Asia in October by US$1.40/bbl to 50 cents below the regional benchmark
- It was expected to pare pricing by US$1/bbl a barrel to a 10-cent discount
- U.S. gasoline prices over Labor Day weekend averaged US$2.22/gallon nationwide, the lowest price for this time of year since 2004 whilst demand remains 9% below the five-year average.
Natural Gas US$2.369/mmbtu vs US$2.551/mmbtu yesterday
- Along with WTI and Brent crude prices, natural gas prices fell during trading yesterday, but the regional differences in gas prices during the last couple of months are shrinking according to the EIA
- The spot price differentials between local natural gas hubs in the US and the Henry Hub benchmark in Louisiana were narrower in the first half this year compared to the same period last year
- This follows a rise on Friday, supported by expectations of an increase in LNG exports after they dropped the week before as Hurricane Laura shut facilities and export plants
- Cheniere Energy, the country’s top LNG exporter, and Sempra LNG are expected to resume operations after no major damage was found following Hurricane Laura
- Laura knocked out power to thousands of homes and businesses in Louisiana, Texas and Arkansas after slamming into the Gulf Coast near the Texas-Louisiana border last week as a major Category 4 storm
Iron ore 62% Fe spot (cfr Tianjin) US$123.3/t vs US$122.9/t – Chinese iron ore futures fall on rising Port Headland shipments
- Iron ore futures fell on Tuesday, as Australian data showed that shipments from Port Headland rose 5.3% in August to 46.07mt compared to the month prior.
- China’s year-to-date iron ore imports are 11% higher than the same period in 2019 as the nation’s imports have been bolstered by strong steel production and fiscal support (Bloomberg).
- Stockpiles of iron ore at Chinese ports rose for the second straight week last week, rising 0.6% 113.7mt (Mysteel).
- Iron ore prices fell -0.3% on Tuesday afternoon to 849 yuan/t on the Dalian Commodity Exchange, whilst also falling -0.4% to $123/t on the Singapore Exchange.
Chinese steel rebar 25mm US$553.3/t vs US$555.6/t
Thermal coal (1st year forward cif ARA) US$56.6/t vs US$55.5/t
Coking coal swap Australia FOB US$136.0/t vs US$136.0/t
Cobalt LME 3m US$33,200/t vs US$33,200/t
NdPr Rare Earth Oxide (China) US$49,649/t vs US$49,764/t
Lithium carbonate 99% (China) US$4,965/t vs US$4,976/t
Ferro Vanadium 80% FOB (China) US$30.5/kg vs US$30.5/kg
Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/kg
Tungsten APT European US$212-220/mtu vs US$210-215/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
GM announce strategic partnership with Nikola
- GM and start-up Nikola are to collaborate to bring the Badger electric and fuel-cell pickup to market. GM will take a $2bn equity stake (11% ownership) in Nikola and will be the exclusive supplier of fuel cells for Nikola’s Class 7/8 trucks outside of Europe.
- GM will provide Nikola access to its battery technology including the Ultium battery and Hysrotec technologies and will manufacture Nikola’s Badger electric pick-up truck.
- The deal is expected to close by the end of September and the Badger vehicle is expected to begin production in 2022.
- Both the Badger vehicle and GM’s Hummer EV will make use of the latter’s Ultium battery, reported to have capacity range of 50kWh to 200kWh, with a range of up to 400 miles+ for the larger batteries.
- GM have suggested the Ulitum battery will use 70% less cobalt which will provide cost savings and move them towards the $100 per kWh barrier the Company has announced it will break through, through its partnership with LG Chem. The Company is transitioning to an NMCA (nickel, magnesium, cobalt, aluminium) chemistry from an NCA chemistry to achieve this breakthrough.
- Nikola estimates the deal will save them $4bn in battery and drive train development costs and provide an additional $1bn in engineering and validation costs.
Nio remains on an upward trend
- Chinese EV maker Nio announced August deliveries increased 104.% YoY. The Company delivered 3,965 vehicles in August compared to the same time last year.
- It is a 12% improvement on July when 3,533 vehicles were delivered and beats the previous monthly record which was set in June when 3,740 vehicles were delivered.
- The numbers do mean that for Nio to hit Q3 guidance it will have to achieve another record month of deliveries. The Company guided to 11,000 to 11,500 deliveries, so it will have to deliver at least 3502 vehicles in September to achieve this, the top end of production capacity it has guided to.
- Nio recently announced a stock offering of 75m ADSs to raise $1.5bn for R&D and to increase its share capital and ownership in Nio China after having to transfer its assets into Nio China when the government bailed the Company out earlier this year.
- The Company received government funding in April of around 7bn yuan. In exchange for this cash injection the Company had to relocate its operations to Hefei and help to develop a smart vehicle ecosystem in the city whilst moving its assets into Nio China.
AfriTin (ATM LN) – 2.25p, Mkt cap £17.9m –Further increase in concentrate production from the Uis mine during August
- Afritin has reported a further increase in production of tin concentrate from the Uis mine in Namibia with August production of 37.5 tonnes exceeding the 35 tonnes achieved during July.
- A month-by-month breakdown of the mine’s production included in today’s announcement shows August reaching the highest production this year at over three times the monthly output of around 11-12 tonnes achieved during the first 5 months of the year with production starting to rise in June (19.7t).
- The company confirms that work to eliminate bottlenecks in the process plant’s fines dewatering circuit has now been completed and it will now “focus on improving the availability and utilisation of the plant to support the remainder of the production ramp-up. This includes additional instrumentation and controls, optimisation of piping and valving configurations, refining the density control in the dense medium separation circuits, and installing an on-site laboratory”.
- The August production resulted from the processing of 30,872 tonnes of ore and the company says that it is now “targeting the processing of 45,000 tonnes of ore per month, at a rate of 80 tonnes per hour, for the production of 60 tonnes of tin concentrate per month” in its planned “Stage 1 of Phase1”.
- CEO, Anthony Viljoen, welcomed completion of the debottlenecking and said that “We will now look to leverage these circuit improvements to reach our Stage I production target of 60 tonnes of concentrate per month in Q4 of 2020.”
- Afritin also confirms that “no confirmed cases … [of Covid19] … have been reported at the Uis Tin Mine” and also that “Regular shipment of tin concentrate continues from Walvis Bay, despite ongoing COVID-19 restrictions in Namibia and South Africa”.
Conclusion: A third consecutive monthly increase in tin concentrate production from the Uis mine is encouraging news as the company moves towards further improvements in throughput from the 31,000t achieved in August to a planned 45,000tpm.
IronRidge Resources (IRR LN) 14.75p, Mkt cap £58.8m– Update to capital structure
- The Company has on issue a total of 32,172,064 unlisted warrants and 23,950,000 unlisted options (totalling 56,122,064) exercisable at 12p each through to the 25th of June 2022.
- The warrants and options can be voluntarily exercised by the holder at any time up to the 25th of June 2022 and all are subject to an early exercise trigger in the event that the Company’s ordinary shares trade at a Volume Weighted Average Price at or above 16p per share for a period of five consecutive business days, known as the “call condition”.
- Where the call condition has been satisfied, the company can call on all holders to exercise their warrants and/or options. Any warrants or options not exercised at the end of the agreed 30-day period will be cancelled by the company.
- The Company also wishes to outline that whilst the call condition remains, the company does not intend calling on holders to exercise their warrants and/or options until 2021, and states that it has sufficient funds to continue with its current activities which have been primarily focused on the drilling campaigns at the Zaranou Gold Project.
- *SP Angel act as nomad to IronRidge Resources
Kodal Minerals* (KOD LN) – 0.08p, Mkt cap £8.9m – Kodal looks to lithium production in rising price environment
- News that Sinohydro are looking at financing and engineering the developing Kodal’s Bougouni lithium project is great news for the company.
- The MoU between Sinohydro and Kodal gives Sinohydro a six-month exclusivity to complete its review and close a financing package for the mine.
- Sinohydro are working with Suay Chin and Shandong Ruifu who process spodumene concentrate into lithium products in China.
- Sinohydro is already busy in Mali focussed on green energy, hydropower and construction.
- The Chinese parastatal company is also rebuilding the airport in Mali, building roads and working on a drinking water project to the town of Bougouni.
- The company is also busy working on a hydro project in Guinea while mining in South America.
- Eranove a French electricity producer has locked in Sinohydro as the site constructor for the Kénié hydropower project in Mali which could provide green energy to Kodal in future years to meet the drive for environmental production.
- Lithium: demand for lithium is rising in China with sales of electric vehicles continuing to grow market share.
- New NMC811 batteries with greater range and faster charging capacity are likely to drive further demand particularly for SUVs and larger EVs.
- The European Commission put Lithium onto its critical raw materials list last week highlighting the vulnerability of new European battery manufacturing to Chinese supply as the Trade war tensions between the US, China and Europe ramp up.
- Auto manufacturers fear that China will
- Prices for Lithium carbonate at US$4,965/t are unsustainably low causing some mines to reduce production and work off stockpiles.
- We see lithium carbonate prices rising with new battery manufacturing output as the world emerges from the COVID-Crisis with lithium prices likely to double from here over the next few years.
- Kodal minerals will hopefully start production into rising prices.
- Bougouni key stats:
- Production 220,000tpa of 6% spodumene concentrate over an initial 8.5 years
- Recovery of 71% of contained lithium
- Total revenues >USD$1.4bn assuming a concentrate sale price of $680/t starting H2 2021 and rising 2%pa
- Throughput 2mtpa with DMS and conventional flotation circuit. Recoveries are acceptable with the DMS on its own.
- C1 cash costs of USD$431/t (USD$466/t inc royalties and sustaining capital).
- Capex USD$117m est. plus contingency:
- Forecast payback period of 1.7 years;
- IRR of 58% (51% post tax).
- Pre-tax Project NPV7% of approximately USD$300m (NPV7% USD$200m post-tax).
Conclusion: The move by the European Commission to place lithium on the critical raw materials list indicates how concerned European auto manufacturers are to be sure of secure lithium supply. We see significant potential for a supply squeeze with the potential for European battery factories being squeezed out of a number of critical raw materials particularly due to Europe’s lack of processing capacity. China Inc is very quick to secure mine supply for its mineral processors and to do what it can to tighten its dominance in these markets.
Kodal Minerals is fortunate to have a high-grade lithium in spodumene project in a mining friendly region. The lithium concentrate from Bougouni has been demonstrated to be suitable for the furnaces at Shandong Ruifu making this a preferred project from a Chinese perspective.
*SP Angel act as financial advisor and broker to Kodal Minerals
Marvel Gold (MVL AU) A$0.05, Mkt Cap £21m – Earn in on new prospect in Mali
- The Company signed a binding option agreement with Mali project vendor, Societe Miniere et Commerciale (SOMICO) over the Sakaar Exploration Permit in western Mali.
- The project is located 15km south of the Lakanfla project where the Company is working with Altus Strategies to earn in an initial interest through a series of exploration programmes.
- Marvel can earn an 80% interest in Sakaar under a three-year stage arrangement and sole funding works to completion of a PFS.
- The Company launched geological mapping and soil geochemistry required under Stage 1 of the option agreement earning it a 25% interest.
- The ground magnetic programme will following after the upcoming 3,500m drill programme at Lakanfla.
- The project is found on the northern extent of the prolific Senegal Mali Shear Zone (SMSZ) with the license previously owned by a JV between Legend Gold and Randgold Resources.
- Historic exploration work was conducted by Barrick Gold between 1995-1999, although, results are not publicly available.
Metals Exploration (MTL LN) Suspended – Covid19 related disruption at RunRuno
- In its quarterly report for the three months ending 30th June, Metals Exploration reports that there has only been one Covid19 case reported at the RunRuno mine in the Philippines but that measures to mitigate the spread of the infection have disrupted the supply chains and power supply and resulted in reduced mining rates, lower gold production and sales of 14,908oz of gold (Q1 2020 – 16,794oz).
- Improved received gold prices of US$1,722/oz (Q1 2020 – US$1,581/oz) on 14,908oz of gold sales (Q1 2020 – 17,213oz) resulted in revenues of US$25.7m for the quarter and US$52.9m for H1 (H1 2019 – 40.3m). Cash at 30th June amounted to US$6.9m and to US$10.5m at 31st August 2020.
- The company explains that “Mining activity has been significantly reduced at the beginning of Q2 2020 as the operations have been scaled back to compensate for the impact of the continuing COVID-19 government measures. However, the reduced mining activity will result in certain cost savings, including from reduced contract machinery usage”.
- A major and “long over-due” programme of fleet maintenance has now been largely completed and in addition three additional 100 tonne trucks were deployed in July in a fleet expansion the company describes as “critically important to support the longer haulage as the outer pit dump develops and to reduce the reliance on contractor equipment”.
- The process plant was subject to “Unplanned process downtime … [including] … power outages, compressor trips, blocked SAG mill discharge gates, tails line failures and BIOX agitator gearbox failure/repair and conveyor belt repairs”.
- The company comments that it experienced recurring difficulties with the Biox circuit reporting that “On 29 March 2020, an external power line earth fault resulted in a site power failure. On site back-up generators subsequently came on line. However, a further cable failure on the backup power system resulted in a 12 hour loss of air to the BIOX system. Unfortunately, this lack of air to BIOX led to a collapse of the BIOX bacteria culture and the BIOX oxidation process. BIOX reactivated in the first week of May and was in full production by mid-May. A second internal failure of the BIOX power supply occurred on 27 June 2020 which resulted in 14 hours loss of air to the BIOX circuit while a new cable was spliced and tested. Again, this lack of air saw BIOX collapse, however the team has been able to bring it back on-line within three weeks”.
- “With the lack of available resources and parts, operations are focussed on keeping equipment running rather than enhancing production outcomes. All scheduled major shutdowns have been delayed, including the major overhaul of the BIOX blowers”.
Conclusion: Although Metals Exploration has been effective in containing Covid19 cases at the RunRuno mine to a single confirmed case, the knock-on effects of the containment measures and resultant disruption to power supply and supply chains has reduced gold output and impacted both mine production and the smooth operation of the BIOX plant.
Petra Diamonds (PDL LN) 2p, Mkt Cap £17.2m – Allegations of human rights abuses at Williamson mine
- Petra Diamonds reports that allegations, by “32 anonymous individuals in relation to alleged breaches of human rights at the Williamson mine” are under investigation and that claims relating to these allegations have been filed in the High Court in UK.
- “The claims are understood to allege that Petra and WDL [Williamson Diamonds Ltd] are liable for human rights violations, personal injuries and deaths suffered by these anonymous individuals at and surrounding the mine, arising from the mine’s security operations”.
- Petra Diamonds also says that “Additionally, Petra has very recently received a letter from the UK-based Non-Governmental Organisation RAID regarding similar allegations raised by local residents and others relating to actions by WDL, its security contractor and others linked to WDL. Petra will cooperate with RAID in order to understand fully the nature of its concerns”.
- Confirming that it “takes these allegations extremely seriously” Petra Diamonds says that WDL, as the mine operator, is investigating the allegations “as fully and timeously as possible given the limitations imposed by the COVID-19 pandemic, supported by an independent, specialist consultant”.
- “Petra has previously disclosed that there has been ongoing illegal artisanal mining taking place at Williamson over a period of time, due to the challenges in securing the large perimeter of the Special Mining Licence area, which covers 30.6km2 including the main 146 hectare orebody, together with alluvial resources. This illegal mining activity is managed by WDL and the local government authorities on an ongoing basis”.
- The announcement today does not comment on any measures or investigation by the Tanzanian Government, which owns 25% of the mine, although we would imagine that in view of the gravity of the allegations it would be anxious to understand more fully the credibility of the alleged criminal misconduct.
Savannah Resources* (SAV LN) 1.90p, Mkt Cap £27m – Savannah raises £2.34m at 1.8p/s
- Savannah Resources report the raising of £2.34m by way of an accelerated bookbuild to institutional investors.
- The placing is reported to be oversubscribed with both new and existing shareholders supporting the new stock issue.
- Investor interest supports the move by the European Commission which has just placed Lithium on its Critical Raw Materials list.
- Savannah is looking to advance its Mina do Barroso lithium project in Portugal and Mutamba mineral sands joint venture in Mozambique where Savannah is working with Rio Tinto.
- Savannah recently agreed to sell its copper assets in Oman copper projects to Force Commodities Limited for 50m shares in Force at a deemed issue price of 1Aȼ plus “Preferential payment of AUD$3,500,000 of an existing loan from cash flow from production” and a 1% NSR on future metal production.
*SP Angel acts as Nomad to Savannah Resources
Vast Resources* (VAST LN) 0.17p, Mkt Cap £21m – Baita Plai update
- The Company reported yesterday that works on fabrication of the new steel bridge access point at Baita Plai are progressing with installation to be completed by September 18.
*SP Angel acts as Broker to Vast Resources
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Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony
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