SP Angel . Morning View . Short covering may turn metals higher

SP Angel – Morning View – Friday 31 05 19

Short covering may turn metals higher

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MiFID II exempt information – see disclaimer below  

 

Anglo Asian Mining* (AAZ LN) – Research update

ARC Minerals* (ARCM LN) – New board member

Beowulf Mining* (BEM LN) – Local support in Sweden and Funding in Finland suggests good progress

Goldplat (GDP LN) – Closure of Kilimapesa gold mine

Kodal Minerals* (KOD LN) – Development and exploration activities update at Bougouni lithium

Mkango Resources* (MKA LN) – Q1 2019 results

Phoenix Global Mining* (PGM LN) – 2018 results

Tertiary Minerals* (TYM LN) – Interim results

Trans-Siberian Gold (TSG LN) – Mineral resource update and Director appointment

Savannah Resources* (SAV LN) – Significant upgrade in Mina do Barroso Mineral Resource

 

Short positions in commodities indicate potential for significant turnaround.

• Headlines suggest Trump is risking recession in the US and further slowdown in China in his Trade War with China.
• The US Fed has said the bank will act if inflation stays too low.
• This indicates strong potential for Fed easing in H2 eg a cut in interest rates and potential for new stimulus in the US.
• Funds and speculators are seen as significantly short in metals and commodities indicating potential for a major swing on the upside when the market turns more positive.
• While equity markets tend to look 6-9 months ahead commodity markets appear more reactive to near-term news.
• While copper Tc/Rcs are low this more indicates  new capacity in China as the nation is forecast to add >1mtpa of smelting capacity this year as it competes with Japan.
• Trump is enacting Republican Policy on intellectual property/theft and other trade issues but his overriding policy is pro business.
• His style is to negotiate tough and to extract the best he can, but the aim is still to close a deal though it may be a rough ride along the way.
• This all suggests to us that any positive news on the Trade War front could spark an almighty rally in commodities as funds and speculators move to close out short positions, as seen recently in US grain.

 

China’s rare earth retaliation ready to go if trade war deepens

• Beijing readies a plan to restrict exports of rare earths to the US, in a last ditch effort to control the outcome of the protracted dispute. The government has prepared the steps it feels necessary to use, relying on its stranglehold on the critical minerals in a targeted way to hurt the US economy.
• The measures would likely focus on heavy rare earths, a sub-group of the materials where the U.S. is particularly reliant on China. The plan can be implemented as soon as the government decides to go ahead, according to those familiar with the matter, without giving further details.
• The development follows a flurry of threats this week from state media and officials, highlighting the potential use of the strategic minerals as a trade weapon. China produces about 80% of the world’s rare earths, and an even higher proportion of the elements in their processed forms.
• Controlling global supply is likely to significantly boost prices, which surged in 2010 when China curbed its shipments to Japan.
• Shares in rare earths companies continued to surge this week, with China Northern Rare Earth High-Tech Co. climbing as much as 5.9% to the highest level this year. In Sydney, stock in Lynas Corp. took monthly gains to 51%.
• Any action on rare earths would deepen a confrontation that’s roiling markets and damaging global growth.
• Beijing will firmly defend its national interest, and can’t accept its own rare earths supply being used “to crack down on China’s development,” commerce ministry spokesman Gao Feng.
• For heavy rare earths, “China definitely dominates supplies, and if China abandons those exports, I don’t think the U.S. can find alternatives,” SMM’s Hu said. Dysprosium may be one of the more critical elements because of its use in permanent magnets, he said.

 

Dow Jones Industrials		+0.17%	at	25,170
Nikkei 225		-1.63%	at	20,601
HK Hang Seng		-0.59%	at	26,955
Shanghai Composite		-0.24%	at	2,899
FTSE 350 Mining		-1.47%	at	18,693
AIM Basic Resources		+0.13%	at	1,981

 

Economics

US – Escalation in protectionist policy risks drives risk sentiment down.

• President Trump threatened to hit all Mexican imports with a 5% tariff form June 10 until illegal immigration is stopped.
• The tariff would stay in place “until such time as illegal migrants coming through Mexico, and into our country, STOP,” Trump said on his Twitter account.
• Additionally, tariffs are expected to “gradually increase until the illegal immigration problem is remedied at which time the tariff will be removed.”
• Tariffs may reach 25% on October 1, Trump said in a statement released by the White House.
  • The news comes on the heels of deteriorating state of US/China trade negotiations as well as poor economics data released in China today.
  • Global equities are trading lower (S&P futures are off 1%) while gold is up nearly $6/zo this morning.
  • Yesterday, Q1 GDP growth rate was revised 0.1pp lower to 3.1% on the back of stronger consumer demand and government spending with revised lower housing and business investment.
  • Q1 GDP (%qoq, annualised): 3.1 v 3.2 estimated previously and 3.0 forecast.

 

China – Business activity surveys point to slowing growth momentum in May.

• Manufacturing PMI gauging the sentiment among SOEs came in below estimates while sub-index tumbled to the lowest level since the aftermath of the global financial crisis.
• Manufacturing PMI: 49.4 v 50.1 in April and 49.9 forecast.
• Services PMI: 54.3 v 54.3 in April and 54.3 forecast.

 

Mexico – The peso is off c.3% on the back of Trump threats to levy 5% tariffs on Mexico’s imports that may potentially rise to 25%.

 

Currencies

US$1.1138/eur vs 1.1154/eur yesterday  Yen 108.84/$ vs 109.24/$  SAr 14.801/$ vs 14.877/$  $1.261/gbp vs $1.264/gbp  0.692/aud vs 0.691/aud  CNY 6.905/$ vs 6.908/$

 

Commodity News

Precious metals:         

Gold US$1,295/oz vs US$1,276/oz yesterday

   Gold ETFs 70.5moz vs US$70.6moz yesterday

Platinum US$793/oz vs US$794/oz yesterday

Palladium US$1,366/oz vs US$1,341/oz yesterday

Silver US$14.54/oz vs US$14.40/oz yesterday

           

Base metals:   

Copper US$ 5,840/t vs US$5,882/t yesterday

Aluminium US$ 1,785/t vs US$1,794/t yesterday

Nickel US$ 12,090/t vs US$12,045/t yesterday

Zinc US$ 2,536/t vs US$2,557/t yesterday

Lead US$ 1,793/t vs US$1,824/t yesterday

Tin US$ 18,790/t vs US$18,750/t yesterday

           

Energy:           

Oil US$65.6/bbl vs US$69.8/bbl yesterday

Natural Gas US$2.562/mmbtu vs US$2.607/mmbtu yesterday

Uranium US$23.95/lb vs US$24.10/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$99.9/t vs US$101.5/t

Chinese steel rebar 25mm US$614.2/t vs US$614.1/t

Thermal coal (1st year forward cif ARA) US$65.3/t vs US$66.5/t

Coking coal futures Dalian Exchange US$186.3/t vs US$186.2/t

           

Other:  

Cobalt LME 3m US$33,500/t vs US$33,500/t

NdPr Rare Earth Oxide (China) US$48,518/t vs US$47,061/t

Lithium carbonate 99% (China) US$9,631/t vs US$9,629/t

Ferro Vanadium 80% FOB (China) US$36.0/kg vs US$36.0/kg

Antimony Trioxide 99.5% EU (China) US$5.7/kg vs US$5.7/kg

Tungsten APT European US$270-280/mtu vs US$270-280/mtu

 

Battery News

Barcelona to receive 100+ new electric buses, replacing diesel buses

• Barcelona will soon be the latest city to add a large number of electric buses to its fleet, replacing aging diesel buses in the process.
• The European Investment Bank is granting a €73.5m loan to the city’s public transport operator, Transports Metropolitans de Barcelona (TMB).
• TMB will be replacing diesel and first-generation compressed natural gas buses with more than 250 new buses.
• Not all of the buses will be electric, however. Of the 254 “new, safer, less polluting and more modern vehicles” to be put into service, 116 will be electric.
• The remainder of the order will be made up of hybrid and new compressed natural gas buses. Hybrids will replace 20 diesel double-decker buses.
• The EIB notes the new buses will help reduce pollution in the city as the service continues to become more popular, “This will enable TMB to accelerate the transition to a zero-emission bus network and to improve service quality and reliability. In addition to improving air quality, the goal is to increase demand for this service to cut private transport use.”
• Barcelona’s public city buses have seen a 17% increase in use over the last six years – transporting 203m people in 2018 – a figure that is still growing.”

 

Company News

Anglo Asian Mining* (AAZ LN)   96p, Mkt Cap £110m – Research update

BUY – 127p (from 126p)

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• The Company released FY18 earlier in May showing strong growth in earnings and cash flow generation with the Board proposing 4USc final dividend which together with 3USc paid in respect of H1/18 brought total dividend payments for the year to 7USc or 10.2% dividend yield on 2018 average price of 53p.
• Earning and FCF benefited from full year contribution from the Ugur deposit supplying easy to mill and leach ore as well as good cost control while the expansion of the crushing circuit in July 2018 is expected to improve operational flexibility and allow to increase copper concentrate production this year.
• As mentioned in May/18 update, reported EBITDA came in better than expected at $49.8m (our estimate: $39.8m); however the Company also reported higher than we expected capital expenditure numbers ($18.2m v our estimate of $11.5m) that included a proportion of waste stripping and development costs that were capitalised.
• For the sake of consistency and comparability with reported financial numbers, we have adjusted our earnings estimates capitalising $10m of expenses in 2019 and 2020 that in turn increases our EBITDA but is offset by higher capital expenditure projections.
• We have prepared line-by-line comparison with our previous estimates below:

		Previous		Updated		Change, $m
		2019e	2020e	2019e	2020e	2019e	2020e
Production	GE koz	85.3	86.9	85.3	86.9	-	-
AISC	$/oz	569	536	509	506	-60	-30
Revenues	$m	95.4	99.1	95.4	99.1	-	-
EBITDA	$m	37.4	41.2	47.4	51.2	10.0	10.0
Tax	$m	-7.8	-9.2	-10.4	-11.3	-2.6	-2.1
Net CFO	$m	31.5	32.8	38.9	40.6	7.4	7.8
Capex	$m	-11.0	-8.0	-16.0	-16.0	-5.0	-8.0
FCF(post%)	$m	20.5	24.8	22.9	24.6	2.4	-0.2
Dividends	$m	8.0	6.9	8.0	6.9	-	-
Net Debt/(Cash)	$m	-18.6	-36.5	-21.0	-38.8	-2.4	-2.3

• Our changes to 2019 and 2020 estimates involve reclassifying expenses from operating costs to capital costs. Our EBITDA estimates rise by $10m to $47m and $51m, respectively on reduced operating costs. However, this would have seen a corresponding increase in expected capital expenditure of $10m for both 2019 and 2020. We understand from the company that it now expects lower underlying capital expenditure costs than we had originally forecast and we therefore only increased our capital estimates for 2019 and 2020 respectively by $5m and $8m - this to give $16m for both years. Savings in sustaining capital costs of $4m (extra $1m comes from exploration) in 2019 and $2m in 2020 bring a drop in AISC of $60/oz and $30/oz, respectively (exploration costs are not included).
• The cash tax paid increases as a result of higher earnings in both years.
• Dividends remain unchanged as the 25% of FCF policy for both years gives lower than a minimum assumed payment commitment of 6USc per annum (i.e. c.$27m in minimum annual FCF).
• Net cash position improves by $2.4m to $21.0m as a reduction in capital spend outweighs higher tax bill in 2019, with little change in 2020 as the two nearly match.
• Please refer to the pdf file for production forecasts breakdown between different process routes.

Conclusion: Our above adjustments are aimed at better aligning reported and estimated numbers. Capitalisation of a proportion of expenses raised our EBITDA estimates incurring higher tax bill, which was compensated by a downward revision in capital costs (mostly sustaining). On a net basis, the overall effect on cash flows is slightly positive with net cash position improving by $2.3m over two years.

EBITDA margins reduce slightly as flotation circuit begins to contribute more to total production while higher margin AGL contribution pulls back. Counterintuitively, AISC are coming down during the period which in turn reflects higher share of by-product revenues in total sales (32% of pre-PSA revenues in 2019 v 17% in 2018).

Gedabek operations remain highly FCF generative benefiting from low cost jurisdiction and good infrastructure that allows the team to invest in exploration, pay good dividend (5.1% DY on 92p) as well as maintain robust balance sheet should an attractive target come along.

With the latest revision having little change to forecast FCFs and a share of cash costs reclassified form operating to capital expenses, we adjusted our target EV/EBITDA multiple down to 4.0x which after applying to an average of 2019 estimated EBITDA of $47m and 2020 EBITDA of $51m and adjusting for $6.1m in net cash as of Dec/18 we arrive at our target valuation of $203m or 127p per share.

(Dec year end)		2014	2015	2016	2017	2018	2019E	2020E
Gold price	US$/oz	1,267	1,161	1,253	1,261	1,271	1,302	1,350
Copper price	$/t	6,828	5,505	4,872	6,196	6,554	6,368	7,000
Gold production	koz	60.3	72.0	65.4	59.6	72.8	67.1	65.7
Copper production	kt	0.8	1.0	1.9	2.0	1.6	3.2	3.6
GE production	koz	65.0	77.0	75.2	71.6	83.8	85.3	86.9
AISC (incl PSA, reported)	US$/oz	1,050	858	616	604	541	509	506
Revenue	US$m	68.0	78.1	79.2	71.8	90.4	95.4	99.1
EBITDA	US$m	10.1	18.7	33.7	32.0	49.8	47.4	51.2
FCF	US$m	-6.9	3.4	14.6	16.3	27.4	22.9	24.6
EV/EBITDA	x	7.7	3.1	1.7	1.7	1.5	2.7	2.5
PER	x	-	-	5.5	13.9	4.9	10.2	8.6
DY	%	-	-	-	-	10.2%	5.1%	5.1%
Net Debt	US$m	52.4	49.0	34.6	18.1	-6.1	-21.0	-38.8
Prices as of 30/05/19 (92p) Source: SP Angel, Company

*SP Angel act as Nomad and broker to Anglo Asian Mining

 

ARC Minerals* (ARCM LN)  2.3p, Mkt Cap £16.2m – New board member

• Arc Minerals has reported the appointment of Rémy Jaime Jacques-Henri Welschinger as a non-executive director with immediate effect.
• Mr. Welschinger, a graduate of Cass Business School and holder of an MSc in investment management “is the founder and managing director of Limehouse Capital Limited, an investment holding company specialising in natural resources projects” and former “Head of Commodities Sales in Europe for Deutsche Bank”.
• Commenting on the appointment Executive Chairman, Nick von Schirnding said that “Remy brings significant experience to the Company and has been instrumental with our last two financings in respect of introducing family offices and institutions. As an experienced finance executive in the resource sector we look forward to working with Rémy as we execute our strategy to develop our highly prospective projects."

Conclusion: Arc Minerals is strengthening its board with the appointment of a new non-executive director with experience in natural resources investment and commodities.

*SP Angel acts as nomad and broker to Arc Minerals.

 

Beowulf Mining* (BEM LN)  6.375p, Mkt Cap £37.5m – Local support in Sweden and Funding in Finland suggests good progress

• Beowulf Mining highlights a number of positive and significant developments in Sweden and Finland.
• There is also progress at 40.1% owned project in Kosovo where work is ongoing at its Mitrovica and Viti projects. We look forward to news from here sometime soon.
• In Sweden, the Mayor of the local town has written to the government minister for Enterprise and Innovation expressing his support for the Kallak iron ore project and its economic importance to the region. The letter has significant local support.
• Beowulf has also met with the Government which has agreed to prioritise Beowulf’s application.
• The process may be helped by LKAB’s warning that its giant Kiruna iron ore mine may be depleted much earlier than expected.
• In Finland, where the government is pro-mining, Business Finland agreed to fund Eur224,900 to Beowulf’s local subsidiary for work on its graphite projects in the region.
• This gives the company an entry into the fast moving battery materials markets where it may follow the success of Talga Resources and some others in developing battery grade graphite materials.
• The company reports a post-tax loss of £223,096 after expenses of £183,650 for the quarter to end 31 March.
• The company also reports a year-end loss of £1.4m to end December 2018 following admin costs of £0.6m and impairment of exploration costs of £0.6m.
• The figures highlight good Capital discipline.

Conclusion: We see Beowulf as offering good potential for growth in Iron ore in Sweden, Graphite in Finland and Base metals in Kosovo.

*SP Angel acts as nomad and broker to Beowulf Mining

 

Goldplat (GDP LN)  2.2p, Mkt Cap £3.7m – Closure of Kilimapesa gold mine

• Goldplat has been forced to close its Kilimapesa gold mine as Kenyan Revenue Authority withholds >£1m in due VAT refunds.
• The Kenyan Revenue Authority owes the mine over £1m due in VAT refunds indicating the nation may be struggling with its finances.
• The Kenya Revenue Authority does not appear to be disputing a ‘material part of the claim’ but as we have seen in Tanzania in recent years the money remains owing.
• Base Resources is still owed refunds dating back to its Kwale project construction ($26.3m as of 31 March).
• All we can say is good luck with that one boys!

 

Kodal Minerals* (KOD LN)  0.1p, Mkt Cap £8.6m – Development and exploration activities update at Bougouni lithium

• Kodal Minerals had focused on advancing the development of the Bougouni Project through the completion of the Environmental and Social Impact Assessment ('ESIA') and various engineering studies, as well as continuing its exploration programme.
• The ESIA is nearing completion with all specialist baseline studies complete and draft reports received and reviewed by Kodal for the soils, wetlands, surface water, social, heritage, closure planning and the community development plan.
• The optimisation of the potential open pits is continuing following the site visit by the consultant geotechnical engineer to review the geology for open pit stability implications, as well as by the mine development engineers to assess the area of proposed open pit and confirm geological database.
• A bulk sample of 980t pegmatite at the Dakar port will now be shipped to China following discussions with the Ruifu Chemical technical team for ongoing metallurgical testwork feeding the processing plant design.
• The metallurgical testwork is continuing with analysis of a “master composite”, comprising materials from the Sogola-Baoule and Ngoualana prospects. In addition, a programme of testwork utilising ‘flotation’ is underway to review the potential to maximise recovery of the spodumene concentrate and maximise the grade of the material to ensure that Kodal can produce a high quality 6% spodumene concentrate.
• Bulk sample mining was terminated early due to poor performance and lack of focus on safe work practices and environmental awareness during surface mining activities.
• At the Bougouni Project, field work has focused on the region between Sogola-Baoule and Boumou with the recently identified "Marigo" prospect defined for initial drill testing in June 2019.
• Geological mapping and ground magnetic geophysical survey has defined a target extending for over 500m strike length and comprising multiple coarse-grained pegmatite veins with abundant spodumene identified in hand specimens.
• At the Bougouni West project, exploration activity has focused on geological mapping, ground magnetic geophysical surveys and compilation of all data to identify drill-ready targets.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

 

Mkango Resources* (MKA LN)   4.9p, Mkt Cap £43.2m – Q1 2019 results

• Mkango Resources unlocked the secondary tranche of £7m Talaxis investment to support the development of the Songwe Hill DFS. Cash from the previous quarter (Dec. 31, 2018) increased from $2.39m to $11.06m accordingly.
• The ongoing feasibility study focuses on optimising the production plan for the updated Mineral Resource estimate announced on Feb 4, 2019 for Songwe: 8 Mt grading 1.50% TREO in the Measured category, 12.2 Mt grading 1.35% TREO in the Indicated category and 27.5 Mt grading 1.33% TREO in the Inferred category, applying a base case cut-off grade of 1.0% TREO.
• The updated base case resource estimate equates to a 60% increase in the Measured and Indicated Resource tonnage and a 48% increase in the Inferred Resource tonnage versus the base case 2012 Mineral Resource Estimate, which formed the basis for the 2015 Pre-Feasibility study.
• The feasibility study is evaluating a bulk tonnage, open pit mining operations focused on broad zones of near surface and outcropping rare earths mineralisation, with pit optimisation work focusing on 21Mt grading 1.41% TREO.
• Metallurgical optimisation is also underway at laboratories in Australia and Canada, with the work programme scaling up flotation, hydrometallurgy and acid regeneration.
• The ESHIA is underway and is being completed in accordance with World Bank Standards and Equator Principles.
• The company also announced it had entered into a non-binding heads of terms agreement with MetalNRG PLC on April 29, 2019, whereby MetalNRG will earn up to 75% interest in the Thambani uranium licence by spending up to $2m on exploration.
• The terms of the Heads Agreement outline that the parties will enter into a binding definitive agreement on or before June 30, 2019 and that MetalNRG’s participation in the Thambani license is limited to exploration for uranium, tantalum and niobium.
• Exploration aims to build on previously identified high-grade mineralisation at the Little Ngona target, and ground-truth new geophysical targets and complete further reconnaissance sampling along the East and West Ridges.
• During the quarter, the company recognised a net loss of $506,939 during Q1 2019 compared to $897,105 during Q1 2018. The fall in loss is attributable to a decrease in warrant revaluation expense, falling Maginito research expense, offset by increasing foreign exchange loss and mineral exploration expenses.

Conclusion: Mkango Resources continue to position themselves with strength to capitalise on the growing trade war fallout as China begins to target the rare earth industry and strangle vital supply to the US. We look forward to learning more about the optimised development plan for Songwe Hill with a focus on valuable NdPr material for the EV and wind turbine industries. The supportive Thambani exploration could also yield crucial material to support the transition to clean energy.

*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.

 

Phoenix Global Mining* (PGM LN)  17p, Mkt Cap £7.3m – 2018 results

• Phoenix Global Mining has announced a loss for calendar year 2018  of $1.65m or 5.82cents/share (2017 loss $1.36m or 8.16cents/share) as it works towards the re-opening of the historic Empire mine in Idaho.
• Following share issues totalling $4.7m during the year, the company’s cash position at the end of December amounted to $0.1m, however the announcement last week of the raising of a further £700,000 provides, in our view, additional funding as the company progresses with feasibility study work at Empire.
• The 2018 drilling programme at the Empire site, comprising 93 holes totalling 8,604m, has resulted in a 46% increase in the measured and indicated oxide mineral resources to 15.2mt at an average grade of 0.47% copper, 0.15% zinc, 11.8g/t silver and 0.29g/t gold,
• The resource upgrade underpins the current work towards “the Bankable Feasibility Study (“BFS”) scheduled for completion in mid 2020”.
• Work by an independent environmental engineering firm “conducting plant and wildlife, hydrology, and surface impact studies at the Empire Mine for two years now as an integral part of the Plan of Operations development. No fatal environmental flaws have been identified”
• As well as the expansion and upgrading of the oxide mineral resource, initial drilling of surface sulphide mineralisation at the Red Star prospect “located 330 metres north-northwest of the Empire oxide pit” yielded “a small maiden "Inferred" sulphide resource of 103,500 tonnes, containing 577,000 ounces of silver, 3,988 tonnes of lead, 957 tonnes of zinc, 338 tonnes of copper, and 2,800 ounces of gold”.
• The company also expanded its landholdings adjacent to the Empire mine site to 1837 acres (approximately 740 hectares) “through the acquisition of an additional 54 claims containing the northern extension of the Empire Mine skarn orebody through to the old Horseshoe lead/zinc/copper mine, and a further four claims in the Granite block to the south of the Empire open pit.”
• Additional land holdings totalling a further 2,717 acres (2314 hectares) was acquired in February 2019 including “more than 30 historical prospects, shafts and adits north of the Horseshoe block into the Windy Devil area, resulting in an overall length of identified contiguous skarn mineralisation of some 5.38 kilometres”. The latest land acquisitions also include the Navarre Creek area some four miles west of the Empire Mine, “a 2,420-acre zone geologically similar to the Carlin Trend gold belt in Nevada”.
• Hailing the “2018 drilling campaign …[as] … a major breakthrough for our company” Executive Chairman, Marcus Edwards-Jones said that “The Empire project is already attracting interest from mining finance and trading houses, and we hope to be able to fund capital expenditure predominantly with debt and other forms of project and metal offtake finance, involving minimal issues of ordinary shares.”
• He also drew the attention of shareholders to the report of the company’s consulting geologist, Nigel Maund, (available on the company’s website at www.pgmining.com/research) ,  which “concludes that we currently understand less than 2% of the ore system” along the 5km known strike length of mineralisation and which “states that we are sitting on a major, district-style opportunity”.

Conclusion: Work at the former Empire mine during 2018 resulted in increased measured and indicated oxide mineral resources and has laid the foundations for the current bankable feasibility work scheduled for completion in mid 2020. An initial, inferred, resource estimate of sulphide mineralisation hints at the potential underlying the oxide mineralisation while additional land holdings have expanded the company’s tenure over a 5km long mineralised belt which is estimated to be significantly underexplored.

*SP Angel acts as Nomad and broker to Phoenix Global Mining

 

Tertiary Minerals* (TYM LN)  0.325p, Mkt Cap £1.4m – Interim results

• Tertiary Minerals reports a loss of £182,873 (0.05p/share) for the six months ending 31^st March 2019. The equivalent loss for the six months ending 31^st March 2018 amounted to £133,359 (0.04p/share)
• The company’s cash balance at 31^st March 2019 stands at approximately £217,000.
• The company highlights the acquisition of the Paymaster zinc-copper-silver- cobalt-tellurium prospect in Nevada where it intends to follow up a recent soil sampling programme with field work aimed at defining drilling targets over a 2km anomalous strike length which identified values of up to 0.5oz/ton silver and 0.2% lead.
• The recently reported acquisition of the Pyramid Gold Project, also in Nevada, provides gold exploration exposure over a 750m long gold-in-soil anomaly in an area of historic mining which has had limited modern exploration.
• At the company’s MB Fluorspar project in Nevada, metallurgical testing is underway “to address metallurgical complexities in those deposits that have been considered for early production. The project contains multiple zones of fluorspar mineralisation with different metallurgical characteristics and consideration is being given to a further drill programme to test for high-grade and metallurgically more amenable deposits”.
• Tertiary Minerals has “submitted an appeal of the decision” of the Swedish Mining Inspectorate to reject the mine permit application for the Storuman fluorspar deposit. “The Company and its legal team strongly believes that the Mining Inspector has not properly considered the Company’s submission on avoidance and mitigating measures”.
• Although the “fluorspar market remains strong and we continue to enjoy the support of global trading commodities group Possehl in the continuing evaluation of our fluorspar projects … the Board recognises that, whilst its key fluorspar deposits are large and potentially valuable, the current development hurdles have progressively eroded investor interest in the Company”. The commodity diversification into gold and base metals projects represents a move to address these investor concerns.

Conclusion: Tertiary Minerals’ diversification into gold and base metals exploration projects in Nevada is a move to address investor concerns over the slow progress of the fluorspar projects.

*SP Angel act as Nomad and broker to Tertiary Minerals

 

Trans-Siberian Gold (TSG LN)  51p, Mkt Cap £56m - Mineral resource update and Director appointment

• The Company released an updated mineral resource on the high grade Asacha gold deposit in Kamchatka, Far East Russia.
• Measured and Indicated category includes 498kt at 18g/t Au and 47g/t Ag for 290koz gold and 758koz silver.
• Inferred category hosts 360kt at 23g/t Au and 48g/t Ag for 263koz gold and 557koz silver.
• The resource estimate is using 4g/t Au cut-off grade and accounts for mining dilution through to Dec/18.
• The update marks a 98koz drop from 651koz estimated in the previous year with half of that accounting for mining dilution and the balance representing geological a re-interpretation of mineralised veins.
• The Company does not report JORC compliant mineral reserves on the deposit.
• The team is planning 13,200m of drilling this year looking to test lateral as well as down dip extensions of the mineralisation with 4,700m to be completed from surface and 8,500m from underground.
• On a separate note, Eugene Antonov who held the role of COO since 1 August 2018 joins the Board of Directors.

 

Savannah Resources* (SAV LN)  8.8p, Mkt Cap £10.0m – Significant upgrade in Mina do Barroso Mineral Resource

• Savannah Resources continue to develop the most significant lithium spodumene deposit in Western Europe, with ongoing exploration efforts yielding a ~15% increase in overall Mineral Resource estimate. The latest statement represents the fifth major mineral resource increase in just 15 months.
• The Mina do Barroso projects increases to 27Mt grading 1.06% Li2O for 285,900t contained Li20, with a maiden resource established at the Aldeia deposit.
• A Mineral Resource estimate for the Aldeia lithium deposit has been prepared by Payne Geological Services.
• The deposit comprises one main pegmatite and several minor parallel pegmatite bodies striking broadly NS and dipping at 35° to the west. he pegmatites have been defined over a strike of 250m and a dip extent of 340m with a typical thickness of 15m-30m, remaining open along strike to the north and down dip.

• The deposit is defined by a total of 18 RC drill holes, 5 diamond holes and 6 RC holes with diamond tails. All holes were completed by Savannah in 2019.  The holes were drilled on an approximate grid spacing of 20m-40m holes on 60m to 80m spaced cross sections.
• Metallurgical test work continues at the project, with no sampling currently completed at Aldeia. Initial assessment of the mineralogy and chemistry suggest mineralisation is broadly similar to other deposits at Mina do Barroso.
• The work was completed by Nagrom Metallurgical in Australia and confirmed that high-grade lithium, low-grade iron concentrate can be generated from the mineralisation using conventional processing technology.
• Upgraded Exploration Target* for Mina do Barroso, now calculated at 11-19Mt at 1.0-1.2% Li₂O, giving a potential project mineral inventory range of 38 - 47Mt.

Conclusion: Ongoing exploration continues to impress, with the fifth significant resource update in the last 15 months. We look forward to learning the true scale of the lithium resource, which will provide fundamental feed material to the growing European lithium battery industry.

*SP Angel acts as Nomad to Savannah Resources

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

⁺SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

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