SP Angel – Morning View – Tuesday 24 09 19

Metals gain on news of resumption of Trade Talks

CLICK FOR PDF

MiFID II exempt information – see disclaimer below

 

Beowulf Mining* (BEM LN) – Mineralisation Vadar

Botswana Diamonds (BOD LN)* – Marsfontein mining contract

Kavango Resources (KAV LN) – Kavango selects new targets for 1,000m drill campaign

Bluebird Merchant Ventures* (BMV LN) – Formal notification of Gubong mine development permit

Hummingbird Resources (HUM LN) – Hummingbird settles with Taurus

Metal Tiger (MTR LN) – Environmental management plan for drilling

 

US-China trade talks due to happen in two weeks according to US Treasury Secretary Mnuchin (South China Morning Post)

  • US treasury Secretary Steven Mnuchin and a US Trade Representative Robert Lighthizer have confirmed that the scheduled round of trade negotiations with Chinese Vice- Premier Liu He will still go ahead in two weeks’ time.
  • Chinese officials recently cancelled a planned farm visit in the US by Chinese officials, which was reported to have surprised President Trump and led to uncertainty that trade negotiations may not take place.
  • Three-month copper on the LME was up 0.3% at $5,793.50 as a result after closing down 0.3% on Monday- a two week low.  
  • Despite the indication of trade talks, gold jumped slightly which some attribute to the German PMI drop which was reported yesterday and weak interest rates. However, a resolution as a result of the trade talks in two weeks’ time could see the price fall.
  • The trade talks are hanging like a millstone around the kneck of commodity markets.

 

China to put government officials inside 100 private companies

  • Chinese government officials are to be placed at key jobs inside 100 private companies working in the tech hub of Hangzhou, according to China state media.
  • The local municipality is to transfer 100 representatives to key enterprises including Alibaba, Geely and Wahaha.
  • The move is worrying as it looks like an effort to exert greater government control over the private sector further consolidating control of China’s Communist party.
  • It may equally be to ensure that private companies adhere to legislation, pay their taxes and follow environmental guidelines.
  • We wonder if the state officials will be on fat-cat salaries or if they will maintain local party pay and rations?

 

Codelco issues $2bn in bonds to find mine overhaul plan

  • The worlds largest copper producer has issued 10 and 30-year dollar denominated bonds to enable a development due to last 10 years, costing $40bn.
  • According to the company, the bonds issued in New York were issued with yields of 3.02% and 3.71% respectively.
  • The company has also been selling assets, such as its 37% stake in natural gas port terminal GNL Mejillones for $193.5 million.
  • This news comes only five months after Codelco saying it didn’t need to raise money in the next two years, however Chile’s economy has been hit with a fall in copper price, and the firms activity has been restricted by labour striking and poor weather. As a result, the firm saw profits fall 4% to $318 million in the first half of 2019.

 

Burford Capital - Yesterday’s presentation by Burford Capital says ‘investors must also be wary of attempts to ignore materiality and focus on the picayune’ (slide 12)

 

121 Mining Investment Conference – 20-21 November - London

*SP Angel is sponsoring the 121 Mining investment in London

 

Dow Jones Industrials

 

-0.59%

at

  26,935

Nikkei 225

 

+0.16%

at

  22,079

HK Hang Seng

 

-0.61%

at

  26,274

Shanghai Composite

 

-0.98%

at

   2,977

FTSE 350 Mining

 

-0.91%

at

  18,374

AIM Basic Resources

 

+0.90%

at

   2,151

 

Economics

 

Currencies

US$1.0947/eur vs 1.1050/eur yesterday.  Yen 107.55/$ vs 107.95/$.  SAr 14.909/$ vs 14.801/$.  $1.243/gbp vs $1.254/gbp.  0.677/aud vs 0.679/aud.  CNY 7.122/$ vs 7.088/$.

 

Precious metals:

Gold US$1,518/oz vs US$1,505/oz yesterday

   Gold ETFs 79.7moz vs US$79.3moz yesterday

Platinum US$954/oz vs US$947/oz yesterday

Palladium US$1,663/oz vs US$1,648/oz yesterday

Silver US$18.32/oz vs US$17.91/oz yesterday

 

Base metals:   

Copper US$ 5,776/t vs.US$5,823/t yesterday -

Aluminium US$ 1,788/t vs.US$1,797/t yesterday

Nickel US$ 17,550/t vs.US$17,880/t yesterday -

Zinc US$ 2,300/t vs.US$2,314/t yesterday

Lead US$ 2,115/t vs.US$2,110/t yesterday

Tin US$ 16,600/t vs.US$16,605/t yesterday           

           

Energy:           

Oil US$64.9/bbl vs.US$64.6/bbl yesterday

Natural Gas US$2.513/mmbtu vs.US$2.555/mmbtu yesterday

Uranium US$25.70/lb vs.US$25.70/lb yesterday           

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$89.6/t vs.US$88.5/t -

Chinese steel rebar 25mm US$554.7/t vs.US$557.4/t

Thermal coal (1st year forward cif ARA) US$70.6/t vs.US$70.7/t

Coking coal futures Dalian Exchange US$194.7/t vs.US$195.7/t           

        

Other:  

Cobalt LME 3m US$37,000/t vs.US$37,000/t

NdPr Rare Earth Oxide (China) US$45,280/t vs.US$45,499/t

Lithium carbonate 99% (China) US$6,950/t vs.US$6,984/t

Ferro Vanadium 80% FOB (China) US$38.3/kg vs.US$38.4/kg

Antimony Trioxide 99.5% EU (China) US$5.0/kg vs.US$5.1/kg

Tungsten APT European US$195-205/mtu vs US$195-205/mtu

 

Battery News

World Economic Forum report focuses on electric battery value chain to achieve Paris Agreement goal

  • Harnessing the electric vehicle revolution through a responsible battery value chain is one of the main drivers to achieving the 2°C Paris Agreement goal in the transport and power sectors, according to the report.
  • For battery use to be fully harnessed in the global transport sector, batteries need to be cost efficient and sustainable. Furthermore, a dense charging infrastructure network is required to make EVs appealing to customers and economically viable.
  • The report also focuses on how polluting the transport sector currently is- Road transport emissions account almost 75% of all transport emissions and 11% of global emissions. Electrification is key to reducing GHG emissions in the power and transport sector- as EVs currently emit 30-60% fewer emissions than combustion engines depending on the energy mix of the country.
  • Sustainable mining of raw materials necessary for EV battery development is also analysed. Measures must be taken to minimise environmental impact and eliminate child and forced labour, two issues which have had media coverage in the battery metals space- notably cobalt mining in the DRC.
  • The report can be found here:  http://www3.weforum.org/docs/WEF_A_Vision_for_a_Sustainable_Battery_Value_Chain_in_2030_Report.pdf

 

Company News

Beowulf Mining* (BEM LN)  6.25p, Mkt Cap £37m – Mineralisation at Vadar offers potential

(Beowulf holds some 37.55% of Vadar with an option to invest a further £115,000, which would increase its ownership to 40.1%)

  • Beowulf Mining report the identification of extensive lead-zinc-silver mineralisation at Vadar’s Wolf Mountain prospect in Kosovo.
  • The mineralisation is said to have significant potential for high-grade feeder structures.
  • Drilling and trenching confirms mineralisation over 800x400m.
  • Trench results:
    • Trench 1 - 3.6% lead and 1.87% zinc plus 11g/t silver over 51m.
    • Trench 2 - 2.7% Pb, 0.55% Zn and 10 g/t Ag 18.0 m.
  • Drill results:
    • 1.2% Pb, 0.37% Zn, 10g/t Ag over 14.1m;
    • 1.4% Zn over 4.15m;
    • 1.27% Pb, 0.91% Zn, 8 g/t Ag over 8.9m; and 1.4% Zn over 20.9m;
    • 1.38% Zn over 19.3m;
    • 2.69% Pb, 0.4% Zn, 16 g/t Ag, over 4.3m;
    • 1.29% lead over 3.0m;
    • 2.45% Zn over 2.0m;
    • 2.14% Zn over 1.0m;
  • The project is reported to look similar to:
    • Crnac lead / zinc deposit which has a non-JORC 3.5mt of 8.1% Pb, 3.2% Zn, 120 g/t Ag)
    • Zijaca Pb-Zn deposit again non-JORC 5.2mt containing 2.83% Pb, 2.83% Zn and 16 g/t Ag.  Zijaca is just 3.3 km along trend from Wolf Mountain.
  • Vadar and Zijaca have similar geological settings to the nearby Trepča Stan Terg lead-zinc-silver mine, situated approximately 6 km to the southeast of Wolf Mountain which produced 34mt grading 3.45% lead, 2.3% zinc and 80 g/t silver.
  • Wolf Mountain is a hydrothermal breccia zone with stockworks which runs for 4km with widths varying from 20-300m. The mineralisation outcrop as a gossan, with iron-manganese oxides and hydroxides and intense silicification in peripheral areas with fold structures. Mineralisation is likely vein/replacement-type related to Oligocene magmatic activity responsible for the hydrothermal systems mapped in the southern portion of the licence area.

Conclusion:  The trench results are encouraging and look mineable on the basis of the results of the two tranches shown. The Drill results are interesting but appear insufficient to support mining at this stage. We hope a higher grade zone may be identified on further drilling to support sufficient tonnage for a development decision.

*SP Angel acts as nomad and broker to Beowulf Mining

 

Botswana Diamonds (BOD LN)  * 0.8p, Mkt Cap £5.0m –Marsfontein mining contract

  • Botswana Diamonds reports the signing of mining and processing contract for the diamond bearing gravels and residual stockpile material at the Marsfontein mine southeast of Mokopane,  in South Africa.
  • Chairman, John Teeling, said that the agreement between Botswana Diamonds, its 40% owned associate Vutomi and the contractor Eurafrican Diamond Corporation (EDC) “paves the way for commercial production to re-start on Marsfontein and Thorny River”.
  • EDC is reported to have been founded in 1964 and has a “EDC has a rich history of successful diamond mining and processing and has excellent technical and financial support”.  It is “currently mining and processing the Schuller kimberlite pipe and diamond-bearing gravels around Petra's Cullinan Diamond Mine, approximately 20km North West of Pretoria.”
  • Under the terms agreed with EDC, it will receive 25% of the pre-tax revenue from the sale of the larger diamonds recovered (those in excess of 10.8 carats or valued at more than $8,000/carat) and 15% of the revenue from the smaller run-of mine diamond production.
  • In our opinion, the structuring of the contractor’s payment in order to weight their rewards in favour of the recovery of the larger, higher value diamonds is prudent as it helps align the priorities of Botswana Diamonds as owner and its contractor.
  • In addition “The contract mining and processing agreement allows for the continued contractual bulk sampling on the Thorny River project, as well as first refusal rights, between EDC and Vutomi, on all their South African diamond exploration and development projects”.
  • The company has previously announced the award of Environmental Authorisation for the Marsfontein Project and says today that it expects “to receive the remaining regulatory grants shortly”.
  • Marsfontein was initially discovered in 1993 and started production under the management of SouthernEra Resources in mid-1998. Production was relatively short lived with closure in the early 2000s however it was considered to be one of the highest grade diamond deposits. A technical paper presented to the South African Institution of Mining and Metallurgy in 2003 (http://www.saimm.co.za/Conferences/DiamondsSourceToUse2003/008-Scott.pdf ) and co-authored by Chris Jennings of SouthernEra explained that “Mining commenced in August 1998 with values of 1 433 cpht [carats per hundred tonnes] being found in the overlying eluvial gravels. The grade of the unweathered kimberlite ranged from 355 cpht near surface to 81 cpht at the bottom of the pit at 150m.”
  • The same source also says that “Over 800 large stones (above 10.8 carats) were produced, the largest being a broken stone estimated to have been over 400 carats in size”.

Conclusion: Marsfontein has historically produced large, high value diamonds and the signing of a contract to restart mining and processing of the surface gravels and remaining stockpiles may see further, similar, stones recovered. We await news of the commencement of operations once the remaining permits have been received.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds which operates the Kareevlei diamond mine in S Africa

 

Kavango Resources (KAV LN)  1.8p, Mkt Cap £2.9m – Kavango selects new targets for 1,000m drill campaign

  • Kavango Resources has selected a number of targets for an initial 1,000m drill programme in Botswana.
  • The drilling plans to test for sulphide mineralisation – the theory being that this should host nickel, copper or Platinum Group Metals as seen in the large Norilsk / Talnakh deposits in Siberia (Bushveld Igneous Complex in South Africa is layered and the genesis of the KSZ geological model is different).
  • The Kavango team are focussing in on 15 drill targets out of 77 identified conductors as mapped using two airborne electromagnetic surveys.
  • Three targets will be drilled in this first round with two of these into a large magnetic anomaly over a high level gabbroic, intrusive, magma chamber
  • Drilling should start in early October.
  • Kavango used SkyTem for a survey looking through the Kahalari sand, sandstone and other rock to an average depth of 400m which showed up a further 51 conductors.
  • 3D modelling on the data was used to identify targets which were further refined.
  • Ditau: Kavango recently reported on the identification of carbonatite structures near the Ditau prospect.. Carbonatites are seen as a primary source of Rare Earth Elements and may be conformable with the Longonjo neodymium and praesidium carbonatite.
  • At Ditau, a 200m zone of intensely altered rock with indicative cobalt values of up to 0.9%, averaging 0.2% cobalt and >70m of elevated copper, zinc, lead and nickel was identified. The Palabora copper mine is hosted within a carbonate structure and has been mined in South Africa for over 60 years. This bullet point should be deleted as the info is wrong - it was discussed in RNS’s dated 2 Aug and 12 Aug.

Conclusion: Kavango is trying to identify deposits under the Karoo sediments using some high-tech remote sensing followed up with drilling. It’s a bit like using a large magnet on a long string to find a set of keys dropped in a river but with the added benefit of not knowing where the keys were dropped or if they are magnetic.

 

 Bluebird Merchant Ventures* (BMV LN)  2.3p, Mkt Cap £8.5m – Formal notification of Gubong mine development permit

(Bluebird hold 50% of the Gubong and Kochang licenses in jv with Southern Gold Ltd)

Click for initiation PDF

  • Bluebird Merchant Ventures has now received formal notification from the Korean Ministry of Trade, Industry and Energy confirming the application for a Permit to develop the Gubong mine is to be granted to the Gubong Project Company which is a 50:50 jv between Bluebird and Southern Gold.
  • The Ministry found that the Gubong mine application is in compliance with all relevant laws and covered all aspects of the intended project.
  • Formal communication has been sent to the Provincial Authority, Chungcheongnam-do, who are responsible for the issuance of the ‘Permit to Develop’. 
  • The company expects to receive the actual ‘Permit to Develop’ very soon.
  • Investors should note other permits will be required before plant construction and mining starts.
  • Re: Kochang: Bluebird has been advised that two key government agencies will be submitting written opinions to clarify technical issues for the Province in order to advance the application.

Conclusion: It is good to see the permitting process moving ahead at Gubong to the next phase. We hope the team will gain the final permissions to start this year and will be able to start small scale ore recovery to a modest processing plant soon after. Development of the Kochang mine should follow the same similar path.

Proving the mine extraction and processing process will transform the company into a gold producer and should rerate the shares.

Gold production at Gubong is forecast to start at a modest 4,912oz in its first year rising to 10,232oz in year two and then onto 28,651oz the year after.

*SP Angel act as broker to Bluebird Merchant Ventures

 

Hummingbird Resources (HUM LN)  24.5p, Mkt Cap £87m – Hummingbird settles with Taurus

  • Hummingbird report the company has settled a claim from Taurus Fund Management.
  • Taurus had claimed over US$10m for arranging a project finance facility and bridge loan, interest and associated costs.
  • The company dropped Taurus in favour of a better deal from Coris Bank for the funding to complete the Yanfolila gold project in Mali.
  • Hummingbird then repaid the bridge loan, interest and associated due diligence costs.
  • Having received the repaid bridge loan, interest and other costs Taurus initiated legal action against Hummingbird for the loss of its potential facility fee and royalty which should have been payable to Taurus of provision of the project finance etc...
  • Hummingbird has now settled at US$2.5m payable in two parts split 50:50 for 3 October 2019 and 31 March 2020.

Conclusion: Whatever the type of finance you are booking, always read the small print. terms & conditions apply!

 

Metal Tiger (MTR LN)  1.225p, Mkt Cap £19.1m – Environmental management plan for drilling

(Metal Tiger holds approximately 12.5% of MOD following the sale of its 30% interest in the T3 copper project in Botswana)

  • Metal Tiger reported yesterday that its 59.81% owned Kalahari Metals’ Environmental Management Plans to drill the Kitlanya East and Kitlanya  West licences in Botswana. Initial have been “approved for gazetting by the Botswana Department of Environmental Affairs”.
  • Initial drilling is expected to test favourable lithological and structural settings for mineralisation in fold structures at the boundary between the D’Kar Formation and the underlying Ngwako Pan Formation.
  • This setting hosts the nearby T3 deposit of MOD Resources which is currently the subject of a recommended share offer which values MOD Resources at  approximately A$167m. The inferred and indicated resources of T3 are reported to be 60mt at an average grade of 1% copper and 14g/t silver.
  • Priority drilling targets for Metal Tiger are to “test the stratigraphic relationship between the AEM [Airborne Electromagnetic geophysics] conductors and mineralisation associated with the D’Kar – Ngwako Pan formation contact. Based on these results the AEM modelling can then be used to guide a target focussed drill programme”.
  • The KIT-E-1A target is “a tightly folded conductor located in a fold nose mapped from high resolution magnetic data” while the KIT-E2A target “is an open, easterly plunging interpreted anticlinal structure”.

Conclusion: The Kalahari Copper Belt of Botswana and Namibia is gaining increasing recognition and the current bid for MOD Resources which holds one of the more advanced projects, further highlights the region. The issue of the relevant permits to allow Metal Tiger to start drilling should help to identify the specific potential of the Kitlanya East and West blocks -  we await further news with interest.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

Richard Parlons – 0203 470 0472

Abigail Wayne – 0203 470 0534

Rob Rees – 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

DCE

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

DISCLAIMER

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.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

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%