SP Angel . Morning View . Cities scramble to contain third wave of flooding on Yangtze River


SP Angel . Morning View . Thursday 30 07 20

Cities scramble to contain third wave of flooding on Yangtze River

German GDP down 10.1% while US is expected to contract 34.5% in Q2

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MiFID II exempt information – see disclaimer below 

Adriatic Metals* (ADT1 LN) – Q2 Activities report 

Ariana Resources* (AAU LN) – Salinbas resource increase to 1.5moz

Beowulf Mining* (BEM LN) – Results highlight frustration with Swedish government but progress at Vadar and Fennoscandian 

Empire Metals (EEE LN) –- Mkt cap £4.5m – Interim results

Gem Diamonds (GEMD LN) – H1 2020 diamond sales

IronRidge Resources (IRR LN) – Further drilling results from Zaranou gold project in Ivory coast

Premier African Minerals* (PREM LN) – Conversion of loan from CEO

 

China – Three Gorges Dam under increasing pressure as third wave of flooding from torrential rain sweeps down the Yangtze 

  • The Asia Times reports the Three Gorges Dam is under fast mounting flood pressure.
  • Communities downstream are working to shore up embankments and dykes before the Three Georges Dam releases more water.
  • The dam is now releasing some 60,000m3 per second into an artificial lake which is acting as an overflow reservoir in an attempt to buy more time for cities downstream to ramp up defences.
  • A report by the Xinhua agency last week admitted that the Three Gorges Dam had suffered slight deformation on some peripheral parts of the dam structure though the structural status was well within design parameters.
  • Heavy rain is forecast for the rest of this week adding more pressure to the river, its dams and affected communities.
  • The need for greater flood defences will be good for concrete, steel and vanadium while the disruption caused may impact production from lead, zinc, copper and other smelting in the region.

 

Mayor of London unveils £1.5bn infrastructure project 

  • Sadiq Kahn has announced a package of infrastructure works to help kickstart London’s economic recovery.
  • Government’s around the world are using infrastructure spending as a ploy to kickstart their respective economies, as it utilises unused capacity within industry and also provides productivity boosts in the long term through efficiency gains. 
  • The London Recovery Board will join forces with the Mayor’s London Infrastructure group to progress projects including:
    • Reducing water leakage by 20% and pollution incidents by 30% by 2025.
    • Increase the resilience of the water supply network serving boroughs in north east London, the City and Canary Wharf.
    • Ensuring the electricity infrastructure is in place to support electric vehicles (Construction Enquirer).
    • EV charging infrastructure is to be installed in strategic locations, through the implementation of innovative planning tools (Energy Live News).

 

Mould from Chernobyl nuclear reactor tested as radiation shield on ISS (New Scientist)

  • A radiation-absorbing fungus found at the Chernobyl nuclear reactor absorbs cosmic rays on the International Space Station
  • We wonder if this fungus might be used to clean up Fukushima and other radioactive waste sites. If the fungus is absorbing radiation it may also have be useful for mineral processing to lower radioactivity levels in phosphates minerals where there are radioactive products.

 

SP Angel APEX Fastmarkets Q2 metals price survey rankings: 

–          No 1. in Gold, 2nd = in Copper, No 3. in Platinum, 2nd = in Iron ore, 2nd in Coking coal

 

IG TV interviews on copper and gold

VOX Markets podcast on mining

 

Dow Jones Industrials

 

+0.61%

at

26,540

Nikkei 225

 

-0.26%

at

22,339

HK Hang Seng

 

-0.45%

at

24,772

Shanghai Composite

 

-0.23%

at

3,287

 

Economics

COVID-19 herd immunity may be close in London and New York if theory of T-Cell immunity 

  • We may be lucky and be nearer to herd immunity than we think, particularly in places like London and New York
  • We feel there are increasing indicators suggesting greater immunity than current antibody tests show
  • Specialists in the field theorise that T-Cells may enable longer-term immunity than short-life antibodies
  • https://www.ft.com/content/5cf2ee49-df7a-4990-b337-860cf7737b2f

 

China – COVID-19 hit to fully reverse by year-end (Capital Economics)

  • China’s success in containing COVID-19 and the short duration of its lockdown have enabled its economy to rebound rapidly. With policy support set to remain strong, China is on course to return to its pre-virus path by the end of the year, far earlier than any other major economy.

 

US – The Fed kept rates unchanged in the 0.00-0.25% range and pledged to do more to support the recovery if necessary.

  • The central bank has also extended emergency swap lines with its overseas counterparts until the end of Q1/21 as well as its temporary repurchases facilities to support the US$ liquidity and, hence, keep market borrowings costs lower.
  • “It looks like the data are pointing to a slowing pace of the recovery,” Jerome Powell said citing evidence of a pullback by consumers and a slowdown in the rehiring of furloughed workers, particularly by small businesses, according to Reuters.
  • The US “has entered a new phase in containing the virus”, Fed Chairman added.
  • On ne virus relief stimulus, another round of talks between the Trump administration and congressional Democrats brought them no closer to a compromise yesterday, Bloomberg reports.
  • Treasury Secretary Mnuchin said talks are to resume today as extra unemployment benefits are set to expire this week.
  • To make things worse, Congress is scheduled to leave Washington for an August break at the end of next week.
  • The administration suggested that lawmakers consider a short-term extension of expiring jobless benefits to allow time for negotiations.
  • Meanwhile, the number of new cases is running at ~70k in the US with California, Texas and Florida running at ~10k/day and a total number of infected on course to hit 5m people.
  • Sepeately, the US reported a 6.1%mom in June as exports climbed faster than imports, although, absolute levels remained well below year ago readings highlighting pandemic related challenges.
  • Trade deficit fell to $70.6bn in June compared with $75.3 recorded in May, according to the US Census Bureau.
  • Q2/20 GDP is out later today with estimates for a 34.5%qoq drop.

 

Japan – Retail sales jumped by a record in June from the previous month as the government ended a nationwide state of emergency.

  • Fiscal stimulus support has also helped consumer demand with a sales boost from the state’s one-time cash handouts to households is likely to wane in coming months, Bloomberg reports.
  • Retail Sales (%mom/yoy): +13.1/-1.2 v +1.9/-12.5 in May and +8.0/-5.7 est.

 

Germany – The economy posts a record quarterly drop in Q2/20 reflecting stringent virus related restrictions.

  • GDP contracted 10.1%qoq, the most since the quarterly series began in 1970, led by declines in exports, consumer spending and investment.
  • A similar situation is shaping up across the euro-area that is estimated to have suffered a 12%qoq, according to Bloomberg estimates.
  • Job cuts remain a major risk for the outlook.
  • July numbers offered a glimpse of optimism with employment posting the first increase in five months, although, no change in the jobless rate was reported.
  • GDP (%qoq/yoy): -10.1/-11.7 in Q2/20 v -2.0/-1.8 in Q1/20 and -9.0/-10.7 est.
  • Unemployment Change (’000): -18 v 68 in June and 41 est.
  • Unemployment Rate: 6.4 v 6.4 in June and 6.5 est.

 

UK – The government extends the list of firms eligible for a £12.5bn programme of financial assistance to include firms in dire financial position to help secure jobs.

  • Businesses with high levels of debt and accumulated losses will be able to apply for as much as £5m in government loans, the Treasury said.

 

UK auto production recovered in June from April and May lows when manufacturing virtually halted with 381k vehicles rolled out last month.

  • Despite a pick up from earlier months the June, the damage has been done with 2020 production estimated to come in at 888k, down almost a third from 2019.
  • The coronavirus pandemic had a “devastating” effect on an industry already struggling with challenging market conditions and years of Brexit uncertainty, the Society of Motor Manufacturers and Traders said.

 

The UK will invest £2bn over the next five years to develop infrastructure for cycling and walking.

  • Proceeds will fund new lanes, better protected junctions and more parking spaces for bikes

 

Italy – Unemployment picked up to the highest level since Feb/20 adding ~2pp from lows of 6.8% recorded in Apr/20.

Unemployment Rate: 8.8 v 8.3 (revised from 7.8) in May and 8.6 est.

 

Hong Kong – The economy contracted for the fourth consecutive quarter on the back of the coronavirus pandemic and political tensions.

  • GDP dropped 9%yoy in Q2/20 versus a 8.3%yoy expected and follows a revised 9.1%yoy decline in Q1/20.
  • The economy stabilised towards the end of the quarter, especially in May and June when the virus was largely under control, the government said.
  • On qoq adjusted basis, the economy contracted only 0.1% in the three months to June.

 

Namibia seeks IMF funding to help fight COVID-19 (CNBC Africa) 

  • Namibia has approached the IMF for a US$274m emergency loan to fight COVID-19

 

Currencies

US$1.1752/eur vs 1.1749/eur yesterday.  Yen 105.07/$ vs 104.97/$.  SAr 16.784/$ vs 16.431/$.  $1.296/gbp vs $1.293/gbp.  0.713/aud vs 0.717/aud.  CNY 7.006/$ vs  7.003/$.

 

Commodity News

Precious metals:          

Gold US$1,954/oz vs US$1,958/oz yesterday – WGC – India’s gold demand expected to hit 26-year low

  • India’s gold consumption in H1 2020 fell 65% YoY to 165.6 tonnes, as lockdowns and falling disposable incomes caused demand to collapse according to the World Gold Council’s latest report.
  • Despite no longer being in lockdown, rising gold prices driven by investor safe-haven demand is likely to sustain weaker demand, as Indians buy gold primarily for jewellery.
  • Global gold jewellery demand fell 46% YoY in H1 to 572 tonnes, half the ten year average of 1,106 tonnes.
  • Consistent weak demand throughout this year could drag gold demand to its lowest level since 1994, when demand stood at 415 tonnes.
  • Weak physical demand for gold was offset by record inflows into ETFs, as 734 tonnes of gold-backed ETFs worth $39.5bn was added to investor portfolios.
  • The price of gold edged lower on Thursday, as the Fed pledged continued support to the US economy, increasing investors appetite for riskier assets.
  • The dollar index continued to hover around two-year lows, making gold cheaper to buyers holding other currencies (Kitco).
  • Spot gold fell 0.3% to $1,965/oz after rising 1% in the previous session, whilst US gold futures rose 0.3% to $1,960/oz (Reuters).

   Gold ETFs 107.7moz vs US$107.7moz yesterday

Platinum US$914/oz vs US$939/oz yesterday

Palladium US$2,102/oz vs US$2,268/oz yesterday

Silver US$23.40/oz vs US$24.31/oz yesterday

            

Base metals:    

Copper US$ 6,437/t vs US$6,479/t yesterday

Aluminium US$ 1,729/t vs US$1,728/t yesterday – Aluminium prices in China hit two-year high 

  • Aluminium prices on the SHFE hit over two-year highs on Thursday, driven by Chinese demand through government-led infrastructure projects aimed at boosting the economy.
  • Inventories in Shanghai Exchange approved warehouses stand at just over 222,000 tonnes- a 58% drop compared to the March 2020.
  • The most traded September aluminium contract on the SHFE rose 1.8% earlier this morning to 14,805 yuan ($2,114)/t (Reuters).

Nickel US$ 13,900/t vs US$13,765/t yesterday

Zinc US$ 2,305/t vs US$2,287/t yesterday

Lead US$ 1,876/t vs US$1,867/t yesterday

Tin US$ 17,920/t vs US$18,035/t yesterday

            

Energy:            

Oil US$43.4/bbl vs US$43.5/bbl yesterday – The EIA has confirmed that US crude oil inventories shed an impressive 10.6MMbbls in the week to 24 July

  • This compares with a build of 4.9MMbbls for the previous week
  • However, inventories remain 17% above the five-year seasonal average
  • A day earlier, the API reported an estimated crude oil inventory decline of 6.8MMbbls, versus analyst expectations of a much more modest draw of 357kbbls
  • A surge in new Covid-19 infections in the US offset the oil price gains that followed the API’s report and now the figures that the EIA has reported will likely help prices recoup some of those losses
  • As the global oil demand outlook remains mostly negative since the coronavirus is resurging not just in the US but in other countries as well, optimism about the oil industry—especially the downstream segment—is on the wane
  • In gasoline, the authority estimated a 700,000-barrel inventory build for the week to 24 July, compared with a 1.8MMbbl draw a week earlier
  • The EIA also said refineries churned out an average of 9.2MMbpd of gasoline last week, compared with 9.1MMbpd a week earlier
  • In distillate fuels, the EIA reported an inventory increase of half a million barrels, compared with a 1.1MMbbl inventory build for the previous week
  • Distillate fuel production, the EIA said, averaged 4.8MMbpd last week, slightly up on the previous week

 

Natural Gas US$1.901/mmbtu vs US$1.794/mmbtu yesterday

  • Natural gas prices moved higher this morning as tropical cyclone number 9, heads toward the Caribbean
  • The trajectory of the storm is pointing to landfall in the US, with a target of the west coast of Florida
  • A shift to the west would put the storm on course to head toward natural gas installation which could generate a supply disruption
  • The market now awaits the Energy Department’s inventory report scheduled for this afternoon
  • Expectations are for a 24Bcf build according to survey provider Estimize
  • KNG exports increased week over week, reflecting an increase in demand

Uranium US$31.70/lb vs US$31.70/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$107.6/t vs US$104.9/t

Chinese steel rebar 25mm US$533.8/t vs US$533.5/t

Stainless steel crude output falls 3% in H1 in China

  • China produced 13.96mt of crude steel output in the first six months of 2020, down 2.74% compared to a year earlier, according to the China Stainless Steel Council.
  • Apparent consumption totalled 11.66mt, down by 270,500 tonnes or 2.27% from the first half of 2019.
  • Imports fell 6.41% to 636,400 tonnes whilst exports fell 5.01% to 1.61 compared to the same period last year (Fastmarkets MB).

Thermal coal (1st year forward cif ARA) US$59.5/t vs US$59.0/t

Coking coal swap Australia FOB US$113.0/t vs US$115.0/t

            

Other:   

Cobalt LME 3m US$29,000/t vs US$29,000/t

NdPr Rare Earth Oxide (China) US$42,179/t vs US$42,200/t

Lithium carbonate 99% (China) US$4,924/t vs US$4,927/t

Ferro Vanadium 80% FOB (China) US$29.7/kg vs US$29.7/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg 

Tungsten APT European US$205-215/mtu vs US$205-215/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

 

Battery News

Honda and CATL pen strategic alliance 

  • Honda and CATL have signed an agreement to form a comprehensive strategic alliance on new energy vehicle batteries.
  • CATL will supply NEV batteries to Honda, primarily for use in BEVs.
  • The first model to be equipped with a CATL battery is scheduled for 2022 into the Chinese market. (Robotics and Automation)
  • Honda has acquired 1% of CATL shares through non-public issuance of stocks to become a strategic partner.

 

South Korea investigates Tesla vehicles over safety concerns

  • South Korea is investigating suspected safety issues relating to the braking and steering systems including the autopilot function in Tesla vehicles.
  • South Korea’s Transport Ministry confirmed the Tesla Model 3 is under investigation.
  • The probe is expected to last 6-12 months.
  • Tesla will be cooperating with the investigation.
  • Tesla’s autopilot has previously been engaged in 3 fatal crashes in the US from 2016-2018 with the system being highlighted as ‘permitted the driver to disengage from the driving task’ in a 2016 fatal crash. (Insurance Journal)

 

Surge in private EV charging installations

  • April-June has seen a 354% surge in at-home charging stations in the UK according to research by Checkatrade. (Air Quality News)
  • As of April 2020, there were 11,320 charging stations with 31,619 charging outlets in the UK.
  • The UK Office for Low Emission Vehicles offers a £350 grant through its EV Homecharge scheme.
  • The average cost of an at-home charging point is £1000 but government grants reduce this to: 
    • £250-500 for a 3kW EV charger
    • £450-800 for a 7kW EV charger

 

Company News

Adriatic Metals* (ADT1 LN) 69p, Mkt Cap £120.8m – Q2 Activities report 

  • Adriatic Metals today summarises progress made in the three months ended 30th June 2020, where the company has focused on advancing its exploration programme and gaining environmental permits. 
  • Infill drilling confirms “continuity of the high-grade mineralisation in the central part of the Rupice deposit”, shown by the results:
  • The Federal Ministry for Environment and Tourism issued Adriatic with an environmental permit in May, for the development of the Veovaca mine, processing plant and tailing facility. 
  • The company commenced a 20,000m drilling campaign for 2020 in mid-January, and so far 7,500m has been completed with 25 holes, with exploration set to continue over the coming months. 
  • Whilst the company initially experienced some delays relating to COVID-19 with respect to assay results, the company maintain that exploration activity is continuing unaffected as the company received exemptions from authorities. 
  • Adriatic is working with Wardell Armstrong towards a PFS for its Rupice deposit, and is aiming to convert inferred resources into indicated with the reports expected release date in September. 
  • In May, the company entered a binding agreement to acquire Tethyan Resources, which holds brownfield exploration projects at Kizevac and Sastavci in Serbia and a large prospective exploration holding across the Tethyan mineral Belt.
  • Regarding the acquisition of Tethyan Resources, Adriatic plans to “rapidly advance the past-producing Kizevak and Sastavci polymetallic mines in the Raska district of southwestern Serbia towards a maiden JORC compliant resource by end-Q4 2020”. 
    • Hole BR-06-20 which intersected 26.7m at an average grade of 3.95g/t gold, 502g/t silver, 6.75% zinc, 3.76% lead, 0.35% copper and 72% barite from a depth of 275.5m as well as a deeper intersection of 10.2m averaging 5.81g/t gold, 876g/t silver, 8.65% zinc, 5.94% lead, 0.50% copper and 69% barite from a depth of 323m; and
    • Hole BR-07-20 which intersected 9.3m at an average grade of 3.49g/t gold, 393g/t silver, 3.13% zinc, 3.86% lead, 0.36% copper and 59% barite from a depth of 181.7m as well as a deeper intersection of 22.9m averaging 3.18g/t gold, 259g/t silver, 10.71% zinc, 6.48% lead, 0.63% copper and 45% barite from a depth of 199m; and
    • Hole BR-09-20 which intersected 31m at an average grade of 3.85g/t gold, 335g/t silver, 9.50% zinc, 8.12% lead, 0.76% copper and 36% barite from a depth of 198m.

*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia

 

Ariana Resources* (AAU LN) 5.65p, Mkt Cap £53.5m – Salinbas resource increase to 1.5moz

  • Ariana Resources has published an updated JORC (2012) compliant mineral resource estimate for its wholly owned Salinbas project in north-eastern Turkey.
  • The new estimate increases the overall mineral resource to approximately 1.5moz of gold (74.8mt at an average grade of 0.64g/t gold and 3.4g/t silver) compared to the previously reported 1moz.
  • The estimate is based on 134 drill holes as well as “extensive surface sampling”.
  • The project consists of the higher grade Salinbas Deposit which is estimated at a cut-off grade of 0.5g/t gold and contains mineralisation classified as measured, indicated and inferred as well as  the larger, lower grade, Ardala Porphyry Complex which at this stage is solely at the inferred level and estimated at a cut-off grade of 0.25g/t gold.
  • The Salinbas deposit, which is described as a high-grade epithermal replacement-type gold-silver deposit” is estimated to contain a total of 8.4mt at an average grade of 2.21g/t gold (598,000oz) and 16.9g/t silver (4.56moz) and approximately 40% is now classified as either measured or indicated.
  • Mineralisation at Salinbas appears to be positioned within an ENE-striking structural corridor, which has been shown in surface mapping to connect to the east with the Ardala Porphyry Complex.”  
  • The Ardala porphyry, described as a multi-phase copper-gold-molybdenum porphyry system”is estimated to contain approximately 66.4mt, all at the inferred level, at an average grade of 0.44g/t gold (939,000oz) 1.57 g/t silver (3.36moz) with minor copper and molybdenum.
  • Dr. Kerim Sener, Managing Director, describing Salinbas as well-positioned right at the heart of a major copper-gold province” commented that the prospectivity of this region is attested by the presence of several other major copper-gold systems in the immediate vicinity, such as the >4Moz Hot Maden deposit, located just to the south of our project licences, and the scale of the alteration systems encountered within our property in the vicinity of the porphyry centres at Ardala and Hizarliyayla”.

 Conclusion: The mineral resource estimate announced today increases the total contained gold resource at Salinbas by some 50% to 1.5moz. The Ardala porphyry resourrce remains at the inferred level and will require additional work to refine the estimate, however, the proximity to the more advanced Hot Maden deposit which was acquired by Sandstorm Gold for around £170m in April 2017 provides encouragement for the long term potential of Ariana’s Salinbas project. We look forward to further news as the exploration programme develops.

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

 

Beowulf Mining* (BEM LN) 4.15p, Mkt cap £25m – Results highlight frustration with Swedish government but progress at Vadar and Fennoscandian 

(Beowulf holds 42.2% of Vadar. Beowulf also holds 100% Kallak iron ore in Sweden, 100% of Aitolampi graphite in Finland and 40% of the Mitrovica and Viti projects in Kosovo)

  • Beowulf results statement highlights lack of transparency and progress with the Swedish government at the Kallak iron ore project.
  • Management will continue to hold the government’s feet to the fire particularly with LKAB running down its iron ore reserves in Kiruna.
  • Kallak has 118.5mt grading 27.5% fe Indicated and 33.8mt @ 26.2% as Inferred in resources with an Exploration target of 90-100mt @ 22-30%
  • A recent 4.1 Richter scale earthquake just 3km from the mine caused its LKAB to suspended operations at Kiruna on 18 May while staff were evacuated and the mine checked for damage.
  • Vadar: Beowulf is also working with Vadar towards the definition of a new gold, lead-zinc and silver resources in Kosovo.
  • The Mitrovica, Viti, Wolf Mountain and Madjan Peak (Vadar) prospects offer good potential for resource definition for relatively little funding.
  • Grab sampling at the Madjan Peak epithermal gold target shows 42 of 96 at >0.1g/t gold with individual assays of up to 7.1g/t gold
  • Drilling at Viti also intersected gold and visible copper mineralisation indicating copper-gold porphyry potential.
  • Beowulf’s annual report highlight s
  • Fennoscandian (Finland): Further drilling at the Aitolampi graphite project upgrades the mineral resource by 81% to 26.7mt grading 4.8% TGC ‘Total Graphitic Carbon’ for 1,275,000 tonnes of contained graphite as an Indicated and Inferred mineral resource.
  • The project is conveniently located for feed into the newly financed Northvolt battery factory being built in Sweden.
  • Fennoscandian is a consortium member, the Business Finland funded BATTrace project, which aims to improve traceability along the battery raw materials value chain.
  • Shareholder base: Beowulf is now 98% owned by retail investors in Sweden and the UK with the proportion of Swedish investors rising to over 67% of the issued stock through the year reflecting confidence locally in the government’s need to respect the mineral licensing process and eventual award of a mining license for the Kallak high-grade iron ore project.
  • Beowulf recorded a loss for the year of £428,707 vs £1,374,584 in FY 2018.
  • Administrative expenses rose to £904,666 vs £598,391 a year earlier
  • The higher admin expense was offset by a £563,431 gain on step acquisition

*SP Angel acts as Nomad and Broker to Beowulf

 

Empire Metals (EEE LN) – 1.97p, Mkt cap £3.81m – Mkt cap £4.5m – Interim results

(Formerly Georgian Mining)

  • Empire Metals report a profit of £256,515 for the six-months to end June 2020.
  • A £471,307 gain from the share of profit from reorganisation of the Georgian joint venture more than offset the low £223,013 admin expenses of the group.
  • Administrative expenses have been cut back from the £400,296 seen a year ago as management take care to preserve funds.
  • The team have made good progress so far this year with two key licenses approved by the Georgian government and a new joint venture deal signed with Artemis Resources to acquire a 58.6% in the Munni Munni platinum group metals project in Australia.
  • The deal is subject to a writ from Platina Resources which claims that Artemis and its wholly owned subsidiary, MMPL breached a Heads of Agreement entered into by the parties relating to the Munni Munni Joint Venture as a result of the Company entering into the agreement with Empire.
  • Artemis denies Platina’s claims and state they intend to vigorously defend their position.

Conclusion:  Empire Metals has significant underlying asset value in our view. Realising this value is may not be simple but deficits in copper and PGMs give management every reason to work to unlock the potential of these projects.

*SP Angel act as nomad and broker to Empire Metals

 

Gem Diamonds (GEMD LN) 25.9p, Mkt Cap £35.4 – H1 2020 diamond sales

  • Gem Diamonds reports the sale of 43,384 carats of diamonds at an average price of US$1,707/carat during H1 2020 compared to sales of 55,578 carats at US$1,576/carat during the preceding six months ending 31st December 2019.
  • Sales during H1 2020 included sixteen individual diamonds sold for in excess of US$1m each which generated revenue of US$29.4m.
  • The company confirms that its Letseng mine in Lesotho returned to its standard treatment capacity during Q2 2020 after temporarily suspending operations for 30 days in line with the Lesotho Government’s regulations to curb the spread of the Covid-19 virus”.
  • Describing the impact of Covid19, the company says that Letšeng’s advanced screening protocol has resulted in 74 suspected Covid-19 cases. As part of the Covid management strategy, all suspected cases have been safely transferred to their respective residences for self-quarantining and thus no suspected positive cases remain on mine site. Sadly, two employees have subsequently passed away whilst in quarantine, but these have yet to be confirmed by the National Health Authority as Covid-19 related deaths”.
  • Gem Diamonds says that the impact of the virus on its mining operations remains uncertain and that it will issue revised 2020 production guidance when the situation is clearer.
  • Confirming that the continuing demand for Letseng diamonds, positive prices and the benefits of its cost control and cash-preservation measures had “resulted in positive cash flow generation during the Period”, CEO, Clifford Elphick, expressed satisfaction that “Letšeng has quickly returned to its standard treatment capacity post the lockdown period, as well as ramping up waste mining activities from July”.

Conclusion: Despite the impact of Covid19, which may have claimed the lives of two Letseng employees, production at the mine is back to capacity and sales prices, including those of 16 diamonds realising over US$1m each, are holding up and exceeding those achieved in the preceding six months although volumes are reduced. The company reports, however that it is generating positive cash flow.

 

IronRidge Resources (IRR LN) – 15.50, Mkt cap £61.8m – Further drilling results from  Zaranou gold project in Ivory coast

  • IronRidge Resources reports further results from its continuing programme of reverse-circulation and aircore drilling at its Ehuasso prospect as well as results of reconnaissance aircore drilling at the Ebilassokro target.
  • At the Ehuasso target where the company is drilling 15,000m in phase 2 of its exploration programme, the company highlights the intersection of:
    • 4m at an average grade of 25.8g/t gold from a depth of 4m in hole ZAAC0446; and
    • 12m averaging 6.59g/t gold from 52m, including 4m at 17.9g/t
    • o  ZAAC0410: 4m at 16.8g/t gold from 56m
    • o  ZAAC0227: 4m at 8.91g/t gold from 4m
    • o  ZAAC0432: 8m at 4.08g/t gold from 52m, including 4m at 7.7g/t
    • o  ZAAC0282: 8m at 3.32g/t gold from 32m, including 4m at 5.4g/t
    • o  ZAAC0285: 38m at 0.52g/t gold from 2m
    • o  ZAAC0284: 31m at 0.57g/t gold from 28m
    • o  ZARC0011: 12m at 1.19g/t gold from 172m
  • These results have helped define the high-priority, potentially 1.6km long up to 100m wide ‘Ghana-Man Pit’ target in the north-west, with good mineralisation continuity in the 160m spaced AC drill grid and open to the south-west”.
  • At Ebilassokro, the company highlights 4m long composite aircore drilling results including:
    • An intersection of 20m averaging 1.09g/t gold from a depth of 16m in hole ZAAC0317; and
    • An intersection of 16m averaging 1.02g/t gold from a depth of 4m in hole ZAAC0321
  • Commenting on the latest results, COO, Len Kolff, said The Ghana-Man pit is shaping up to be our most significant target defined to date over a potential strike length of 1.6km and up to 100m wide and including high-grade intersections such as, with additional target areas defined for future RC infill drilling”.
  • He also described the results of the reconnaissance drilling at Ebilassokro, which is located 9km northeast of Ehuasso as “promising”.

Conclusion: The continuing drilling in Zaranou is outlinging the Ghana Main area at Ehuasso and has identified a further promising target at Ebilassokro some 9km to the northeast. We look forward to further results as the work progresses.

 

Premier African Minerals* (PREM LN) 0.07p, Mkt Cap £9.0m – Conversion of loan from CEO

  • Premier African Minerals reports that loans and accrued interest totalling approximately £159,000 received from a trust associated with its CEO, George Roach, have been converted into shares at a price of 0.0684p/share.
  • The newly issued shares amount to approximately 1.9% of the enlarged capital of the company and bring the trust’s interest to 2.7% and Mr. Roach’s overall holding in Premier African Minerals to “approximately 6.5 per cent. of the enlarged issued share capital of the Company”.
  • The shares are being issued at a price equivalent to 90 per cent. of the daily volume weighted average price during the five days trading days immediately prior to the conversion”.
  • The announcement concludes by confirming that Immediately on the issue of the Conversion Shares, the security held by the Trust over 200,000 shares of Circum Minerals Limited will be terminated”.

Conclusion: The CEO has increased his effective interest in Premier African Minerals to approximately 6.5% following conversion of a loan.

*SP Angel have an agreement with Premier African Minerals as a result of the acquisition of Northland Capital Partners

 

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490 / 07943031001

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

 

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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This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%



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