SP Angel – Morning View – Friday 07 09 18

Copper heads for 2nd weekly loss amid US/China trade woes

 

MiFID II exempt information – see disclaimer below

 

SP Angel are the No. 1 broker for AIM mining stocks in London

SP Angel analysts consider the Social and Environmental impact of the mines and projects they work with.

Well considered projects with good ethical consideration often lead to lower risk and higher returns which is good for investors as well as the local environment while poor social and environmental consideration can lead to problems which interrupt projects leading to reduced returns for investors.

 

Galantas Gold (GAL LN) – Private placement for £1.26m

Glencore (GLEN LN) – Sale of interest in Rosneft

Strategic Minerals* (SML LN) – Focusing on mineral diversity in stable jurisdictions

Thor Mining (THR LN) – Pilot Mountain scoping study

 

Dow Jones Industrials

 

+0.08%

at

  25,996

Nikkei 225

 

-0.80%

at

  22,307

HK Hang Seng

 

-0.01%

at

  26,972

Shanghai Composite

 

+0.40%

at

   2,702

FTSE 350 Mining

 

+0.03%

at

  16,172

AIM Basic Resources

 

-1.02%

at

   2,181

 

Economics

US – A number of tech companies filed their comments to the US Trade Representative yesterday in a last-minute move to convince the administration to avoid placing new tariffs on Chinese goods.

  • Among signatories were Cisco Systems and Hewlett-Packard who argued that increasing duties on telecom networking gear would raise the cost of accessing the Internet and slow the roll-out of next-generation wireless technologies.
  • No news from the administration on decision over more tariffs so far.
  • Chinese equities were cautiously up this morning (CSI 300 +0.45%) while US indices futures pointed to a lower open.
  • Markets will also be closely watching labour market statistics due later this afternoon with estimates for NFP to show strong 191k increase, up from 157k recorded in July, and no change in earnings growth rate (2.7%yoy v 2.7% in June).
  • Of interest are latest New York Fed Head John Williams who is a moderate hawk when it comes to the monetary policy outlook provided relatively dovish comments at an event in Buffalo yesterday.
  • “Its still a little bit of a puzzle” why wage growth hasn’t accelerated amid low unemployment rates while calling the current state of affairs as “Goldilocsks economy”.
  • Less aggressive monetary policy tightening will be welcome news for emerging markets where respective currencies recorded heavy losses since the start of the year.

 

US/Canada – Trade talks continued between two neighbouring nations, although, it was still unclear whether the two sides could bridge the gaps to save NAFTA.

 

China – Government cabinet meeting chaired by Premier Li Keqiang will accelerate studies on the economic impact of lower social security tax rate.

  • A potential reduction in fiscal burden would have acted as a strong stimulus to the economy where businesses rare estimated to be charged with an effective corporate tax which includes safety net contributions of 67.3%.
  • However, it is estimated that only 27% of Chinese companies currently comply with the social security requirement and pay the correct amount for their employees.
  • In July, the government said the oversight of social security collection services will be transferred to tax bureau from the social security bureau from 2019 which many commentators feared would lead to greater compliance and serve to raise tax burden on businesses.

 

Germany – Industrial production unexpectedly dropped in July reflecting further signs of strain and trade tensions between the US and the EU and general weakening global growth trend.

  • The report rounds up a challenging week with surveys showing trade concerns denting manufacturing confidence and Germany reporting another decline in factory orders.
  • The Economy Ministry attributed the current weakness partly to bottlenecks related to new emission-test procedures for cars implying industrial production to pick up once this has been resolved.
  • In a separate report trade numbers showed the surplus narrowed to the lowest level in more than four years in July amid a drop in exports and increase in inbound shipments.
  • Trade balance contracted by €3.2bn to €15.8bn pointing to slowing global demand for German goods
  • Industrial Production (%mom/yoy): -1.1/+1.1 v -0.7/+2.7 in June and 0.2/2.6 forecast.

 

UK – Property prices across the UK climbed in the three months to August at their fastest annual rate since November last year on the back of a gradual pick up in wages and limited supply, Halifax reported.

  • Growth picked up to 3.7%yoy from 3.3%yoy recorded in the previous three month period.
  • The data comes in contrast to Nationwide numbers that showed prices climbed only 2%yoy in August, the joint-smallest increase in five years.

 

Italy – Sovereign bond yields are coming down today as Finance Minister aims to limit an increase in budget deficit.

  • Giovanni Tria is meeting Eurogroup colleagues in Vienna today targeting for the deficit to not exceed 1.6% of GDP.

 

Currencies

US$1.1639/eur vs 1.1637/eur yesterday. Yen 110.70/$ vs 111.31/$. SAr 15.242/$ vs 15.333/$. $1.294/gbp vs $1.292/gbp. 0.715/aud vs 0.719/aud. CNY 6.839/$ vs 6.835/$.

 

Commodity News

Precious metals:         

Gold US$1,199/oz vs US$1,201/oz yesterday

   Gold ETFs 67.9moz vs US$67.9moz yesterday

Platinum US$793/oz vs US$788/oz yesterday

Palladium US$974/oz vs US$978/oz yesterday

Silver US$14.12/oz vs US$14.26/oz yesterday

           

Base metals:   

Copper US$ 5,871/t vs US$5,910/t yesterday

Aluminium US$ 2,048/t vs US$2,071/t yesterday – Prices remain rangebound as Rusal remains in negotiations with the US in an effort to lift the threat of sanctions before an October 23 deadline.

  • Previously, the US extended the time limit for US and non-US citizens to wind up business with the Company by almost five months to the aforementioned deadline.
  • WoodMac forecasts prices to move “quite swiftly” above $2,500/t should Rusal fail to strike a deal with US authorities.

Nickel US$ 12,265/t vs US$12,540/t yesterday – WoodMac forecasts nickel prices to climb to $28,000/t from current $12,450/t over next two to three years on the back of market supply shortages.

Zinc US$ 2,417/t vs US$2,450/t yesterday

Lead US$ 2,031/t vs US$2,070/t yesterday

Tin US$ 18,840/t vs US$18,805/t yesterday

           

Energy:           

Oil US$76.6/bbl vs US$77.2/bbl yesterday

Natural Gas US$2.779/mmbtu vs US$2.792/mmbtu yesterday

Uranium US$26.60/lb vs US$26.60/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$68.0/t vs US$67.0/t

Chinese steel rebar 25mm US$692.8/t vs US$685.5/t

Thermal coal (1st year forward cif ARA) US$95.2/t vs US$96.3/t

Premium hard coking coal Aus fob US$182.2/t vs US$182.2/t

           

Other:  

Cobalt LME 3m US$62,750/t vs US$62,750/t

Tungsten APT European US$275-290/mtu vs US$280-300/mtu

 

Company News

Galantas Gold (GAL LN)  5.25p, Mkt Cap £9.8m – Private placement for £1.26m

  • Galantas Gold reports a proposal to raise £1.26m via a private placement of 30m shares at a price of £0.042 per share.
  • The proceeds are to be used for the continuing development of the underground mine at Omagh in Northern Ireland where limited production of gold concentrate, from feed produced in development of the Kearney vein” is already underway“ and the company comments that it “expects to raise further funds in due course to enable full production status to be reached.”
  • The  new shares will be subject to a “four month plus one day hold period”.

 

Glencore (GLEN LN)   302p, Mkt Cap £43bn – Sale of interest in Rosneft

  • Glencore reports that the previously announced sale of a 14.16% interest in Rosneft to a wholly owned subsidiary of QIA has now been completed.
  • Glencore retains a 0.57% interest in Rosneft while the acquisition of the Glencore interest lifts QIA’s interest to 18.93%.

 

Strategic Minerals* (SML LN)  1.3p, mkt cap 2p - Focusing on mineral diversity in stable jurisdictions

BUY - Target Price 2p

CLICK FOR PDF

Highlights

  • Strategic Minerals is one of only around 20 profitable companies amongst the 116 members of the AIM listed mining sector.
  • The Cobre magnetite operation continues to generate cash to support growth through additional mine development and exploration.
  • Recommencement of copper production at Leigh Creek in 2019 provides a second source of cash-flow to fund growth aspirations.
  • The current drilling at Redmoor is aimed at upgrading and expanding the existing resource and establishing whether it can become large enough to justify mine development.
  • Relatively early stage exploration, primarily for nickel and cobalt, in the CARE licences of Western Australia exposes the company to the current burgeoning interest in battery metals.
  • We estimate a base case value of £27.4m or 2.0p/share with an upside case of £56.6m or 4.1p/share

Summary

  • Strategic Minerals has a suite of production, near term development, and exploration assets in low-risk, advanced, stable, western economies.  Internally generated cash flow from the Cobre magnetite operation in New Mexico financed the acquisition and is currently funding the re-opening of the Leigh Creek copper mine as well as the company’s exploration projects and corporate overheads.
  • Holding a spectrum of assets at varying stages of their life cycle is typically a hallmark of larger mining companies, and, in tandem with its relatively unusual profitability as a junior AIM mining stock, positions Strategic Minerals in a comparatively uncluttered part of the sector.

Valuation

  • Our valuation is based on a sum-of the parts estimate of each of the company’s main assets; the Cobre magnetite operation in the US, the Leigh Creek copper re-development in S Australia, the Redmoor tin project in Cornwall and the CARE nickel/cobalt exploration project at Hanns Camp in W Australia.  Our conclusions are summarised in the following table:

Strategic Minerals Valuation Summary

 

£m

pence/share

 

Base Case

Upside Case

Base Case

Upside Case

Cobre

5.4

11.2

0.4

0.8

Leigh Creek

14.1

17.6

1.0

1.3

Redmoor

4.5

21.7

0.3

1.6

Hanns Camp

4.8

6.0

0.3

0.4

Total

28.8

55.6

2.1

4.1

*SP Angel act as Nomad and broker to Strategic Minerals

 

Thor Mining (THR LN)  1.9p, Mkt Cap £12.3m – Pilot Mountain scoping study

  • Thor Mining has announced that the results of a scoping study on its Pilot Mountain tungsten project in Nevada have provided sufficient encouragement that it is commencing a more detailed Pre-Feasibility study to examine more closely the possible development of the Desert Scheelite and Garnet deposits at Pilot Mountain.
  • The scoping study envisages an overall mine life of 11 years to extract 7.5m tonnes of ore via open-pit contract mining with a final, twelfth year to fully complete the processing.
  • The study anticipates annual production of 650,000 tonnes at a grade of 0.22% tungsten trioxide of ore from Desert Scheelite to produce approximately 1.000 tpa of scheelite in concentrate. Supplementary ore from the Garnet deposit inferred resource is approximately 120,000tpa where initial open pit mining is expected to move into small scale underground mining.
  • The scoping level work estimates a capital cost of US$25m for the project with an additional US$4-6m expected to be needed for the provision of a power line and associated infrastructure.
  • Operating costs are estimated at US$242 per metric tonne unit. Current benchmark ammonium paratungstate (APT) prices are just below US$300/mtu though we point out that mineral concentrates will typically attract a discount to the price of APT
  • Using a price of US$350/mtu for APT and an overall recovery rate of 72%, the scoping study estimates a project payback of 36 months though it does not detail the expected NPV or IRR.
  • Commenting on the outcome of the scoping study, which the announcement pointed out assumed a further funding requirement for project development, Executive Chairman, Mick Billing, hinting at expansion potential, said that “The Pilot Mountain project hosts four known deposits, and it is anticipated that each of these has potential to contribute further as we continue to explore their potential”.
  • He went on to comment that “With no US domestic production, and tungsten classified by the US Department of the Interior as a Critical Mineral, our objective is to re-start Unites States commercial mining and tungsten concentrate production after a significant break”.

Conclusion: Initial results of the Pilot Mountain scoping study are encouraging and we look forward to the more detailed results of a pre-feasibility study in the future.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

 

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.

 

DISCLAIMER

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

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.

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. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, 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).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc. 

SP Angel – Morning View – Friday 07 09 18

Copper heads for 2nd weekly loss amid US/China trade woes

CLICK FOR PDF

MiFID II exempt information – see disclaimer below

SP Angel are the No. 1 broker for AIM mining stocks in London

SP Angel analysts consider the Social and Environmental impact of the mines and projects they work with.

Well considered projects with good ethical consideration often lead to lower risk and higher returns which is good for investors as well as the local environment while poor social and environmental consideration can lead to problems which interrupt projects leading to reduced returns for investors.

 

Galantas Gold (GAL LN) – Private placement for £1.26m

Glencore (GLEN LN) – Sale of interest in Rosneft

Strategic Minerals* (SML LN) – Focusing on mineral diversity in stable jurisdictions

Thor Mining (THR LN) – Pilot Mountain scoping study

 

Dow Jones Industrials

 

+0.08%

at

  25,996

Nikkei 225

 

-0.80%

at

  22,307

HK Hang Seng

 

-0.01%

at

  26,972

Shanghai Composite

 

+0.40%

at

   2,702

FTSE 350 Mining

 

+0.03%

at

  16,172

AIM Basic Resources

 

-1.02%

at

   2,181

 

Economics

US – A number of tech companies filed their comments to the US Trade Representative yesterday in a last-minute move to convince the administration to avoid placing new tariffs on Chinese goods.

  • Among signatories were Cisco Systems and Hewlett-Packard who argued that increasing duties on telecom networking gear would raise the cost of accessing the Internet and slow the roll-out of next-generation wireless technologies.
  • No news from the administration on decision over more tariffs so far.
  • Chinese equities were cautiously up this morning (CSI 300 +0.45%) while US indices futures pointed to a lower open.
  • Markets will also be closely watching labour market statistics due later this afternoon with estimates for NFP to show strong 191k increase, up from 157k recorded in July, and no change in earnings growth rate (2.7%yoy v 2.7% in June).
  • Of interest are latest New York Fed Head John Williams who is a moderate hawk when it comes to the monetary policy outlook provided relatively dovish comments at an event in Buffalo yesterday.
  • “Its still a little bit of a puzzle” why wage growth hasn’t accelerated amid low unemployment rates while calling the current state of affairs as “Goldilocsks economy”.
  • Less aggressive monetary policy tightening will be welcome news for emerging markets where respective currencies recorded heavy losses since the start of the year.

 

US/Canada – Trade talks continued between two neighbouring nations, although, it was still unclear whether the two sides could bridge the gaps to save NAFTA.

 

China – Government cabinet meeting chaired by Premier Li Keqiang will accelerate studies on the economic impact of lower social security tax rate.

  • A potential reduction in fiscal burden would have acted as a strong stimulus to the economy where businesses rare estimated to be charged with an effective corporate tax which includes safety net contributions of 67.3%.
  • However, it is estimated that only 27% of Chinese companies currently comply with the social security requirement and pay the correct amount for their employees.
  • In July, the government said the oversight of social security collection services will be transferred to tax bureau from the social security bureau from 2019 which many commentators feared would lead to greater compliance and serve to raise tax burden on businesses.

 

Germany – Industrial production unexpectedly dropped in July reflecting further signs of strain and trade tensions between the US and the EU and general weakening global growth trend.

  • The report rounds up a challenging week with surveys showing trade concerns denting manufacturing confidence and Germany reporting another decline in factory orders.
  • The Economy Ministry attributed the current weakness partly to bottlenecks related to new emission-test procedures for cars implying industrial production to pick up once this has been resolved.
  • In a separate report trade numbers showed the surplus narrowed to the lowest level in more than four years in July amid a drop in exports and increase in inbound shipments.
  • Trade balance contracted by €3.2bn to €15.8bn pointing to slowing global demand for German goods
  • Industrial Production (%mom/yoy): -1.1/+1.1 v -0.7/+2.7 in June and 0.2/2.6 forecast.

 

UK – Property prices across the UK climbed in the three months to August at their fastest annual rate since November last year on the back of a gradual pick up in wages and limited supply, Halifax reported.

  • Growth picked up to 3.7%yoy from 3.3%yoy recorded in the previous three month period.
  • The data comes in contrast to Nationwide numbers that showed prices climbed only 2%yoy in August, the joint-smallest increase in five years.

 

Italy – Sovereign bond yields are coming down today as Finance Minister aims to limit an increase in budget deficit.

  • Giovanni Tria is meeting Eurogroup colleagues in Vienna today targeting for the deficit to not exceed 1.6% of GDP.

 

Currencies

US$1.1639/eur vs 1.1637/eur yesterday. Yen 110.70/$ vs 111.31/$. SAr 15.242/$ vs 15.333/$. $1.294/gbp vs $1.292/gbp. 0.715/aud vs 0.719/aud. CNY 6.839/$ vs 6.835/$.

 

Commodity News

Precious metals:         

Gold US$1,199/oz vs US$1,201/oz yesterday

   Gold ETFs 67.9moz vs US$67.9moz yesterday

Platinum US$793/oz vs US$788/oz yesterday

Palladium US$974/oz vs US$978/oz yesterday

Silver US$14.12/oz vs US$14.26/oz yesterday

           

Base metals:   

Copper US$ 5,871/t vs US$5,910/t yesterday

Aluminium US$ 2,048/t vs US$2,071/t yesterday – Prices remain rangebound as Rusal remains in negotiations with the US in an effort to lift the threat of sanctions before an October 23 deadline.

  • Previously, the US extended the time limit for US and non-US citizens to wind up business with the Company by almost five months to the aforementioned deadline.
  • WoodMac forecasts prices to move “quite swiftly” above $2,500/t should Rusal fail to strike a deal with US authorities.

Nickel US$ 12,265/t vs US$12,540/t yesterday – WoodMac forecasts nickel prices to climb to $28,000/t from current $12,450/t over next two to three years on the back of market supply shortages.

Zinc US$ 2,417/t vs US$2,450/t yesterday

Lead US$ 2,031/t vs US$2,070/t yesterday

Tin US$ 18,840/t vs US$18,805/t yesterday

           

Energy:           

Oil US$76.6/bbl vs US$77.2/bbl yesterday

Natural Gas US$2.779/mmbtu vs US$2.792/mmbtu yesterday

Uranium US$26.60/lb vs US$26.60/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$68.0/t vs US$67.0/t

Chinese steel rebar 25mm US$692.8/t vs US$685.5/t

Thermal coal (1st year forward cif ARA) US$95.2/t vs US$96.3/t

Premium hard coking coal Aus fob US$182.2/t vs US$182.2/t

           

Other:  

Cobalt LME 3m US$62,750/t vs US$62,750/t

Tungsten APT European US$275-290/mtu vs US$280-300/mtu

 

Company News

Galantas Gold (GAL LN) 5.25p, Mkt Cap £9.8m – Private placement for £1.26m

  • Galantas Gold reports a proposal to raise £1.26m via a private placement of 30m shares at a price of £0.042 per share.
  • The proceeds are to be used for the continuing development of the underground mine at Omagh in Northern Ireland where limited production of gold concentrate, from feed produced in development of the Kearney vein” is already underway“ and the company comments that it “expects to raise further funds in due course to enable full production status to be reached.”
  • The  new shares will be subject to a “four month plus one day hold period”.

 

Glencore (GLEN LN) 302p, Mkt Cap £43bn – Sale of interest in Rosneft

  • Glencore reports that the previously announced sale of a 14.16% interest in Rosneft to a wholly owned subsidiary of QIA has now been completed.
  • Glencore retains a 0.57% interest in Rosneft while the acquisition of the Glencore interest lifts QIA’s interest to 18.93%.

 

Strategic Minerals* (SML LN) 1.3p, mkt cap 2p - Focusing on mineral diversity in stable jurisdictions

BUY - Target Price 2p

CLICK FOR PDF

Highlights

  • Strategic Minerals is one of only around 20 profitable companies amongst the 116 members of the AIM listed mining sector.
  • The Cobre magnetite operation continues to generate cash to support growth through additional mine development and exploration.
  • Recommencement of copper production at Leigh Creek in 2019 provides a second source of cash-flow to fund growth aspirations.
  • The current drilling at Redmoor is aimed at upgrading and expanding the existing resource and establishing whether it can become large enough to justify mine development.
  • Relatively early stage exploration, primarily for nickel and cobalt, in the CARE licences of Western Australia exposes the company to the current burgeoning interest in battery metals.
  • We estimate a base case value of £27.4m or 2.0p/share with an upside case of £56.6m or 4.1p/share

Summary

  • Strategic Minerals has a suite of production, near term development, and exploration assets in low-risk, advanced, stable, western economies.  Internally generated cash flow from the Cobre magnetite operation in New Mexico financed the acquisition and is currently funding the re-opening of the Leigh Creek copper mine as well as the company’s exploration projects and corporate overheads.
  • Holding a spectrum of assets at varying stages of their life cycle is typically a hallmark of larger mining companies, and, in tandem with its relatively unusual profitability as a junior AIM mining stock, positions Strategic Minerals in a comparatively uncluttered part of the sector.

Valuation

  • Our valuation is based on a sum-of the parts estimate of each of the company’s main assets; the Cobre magnetite operation in the US, the Leigh Creek copper re-development in S Australia, the Redmoor tin project in Cornwall and the CARE nickel/cobalt exploration project at Hanns Camp in W Australia.  Our conclusions are summarised in the following table:

Strategic Minerals Valuation Summary

 

£m

pence/share

 

Base Case

Upside Case

Base Case

Upside Case

Cobre

5.4

11.2

0.4

0.8

Leigh Creek

14.1

17.6

1.0

1.3

Redmoor

4.5

21.7

0.3

1.6

Hanns Camp

4.8

6.0

0.3

0.4

Total

28.8

55.6

2.1

4.1

*SP Angel act as Nomad and broker to Strategic Minerals

 

Thor Mining (THR LN) 1.9p, Mkt Cap £12.3m – Pilot Mountain scoping study

  • Thor Mining has announced that the results of a scoping study on its Pilot Mountain tungsten project in Nevada have provided sufficient encouragement that it is commencing a more detailed Pre-Feasibility study to examine more closely the possible development of the Desert Scheelite and Garnet deposits at Pilot Mountain.
  • The scoping study envisages an overall mine life of 11 years to extract 7.5m tonnes of ore via open-pit contract mining with a final, twelfth year to fully complete the processing.
  • The study anticipates annual production of 650,000 tonnes at a grade of 0.22% tungsten trioxide of ore from Desert Scheelite to produce approximately 1.000 tpa of scheelite in concentrate. Supplementary ore from the Garnet deposit inferred resource is approximately 120,000tpa where initial open pit mining is expected to move into small scale underground mining.
  • The scoping level work estimates a capital cost of US$25m for the project with an additional US$4-6m expected to be needed for the provision of a power line and associated infrastructure.
  • Operating costs are estimated at US$242 per metric tonne unit. Current benchmark ammonium paratungstate (APT) prices are just below US$300/mtu though we point out that mineral concentrates will typically attract a discount to the price of APT
  • Using a price of US$350/mtu for APT and an overall recovery rate of 72%, the scoping study estimates a project payback of 36 months though it does not detail the expected NPV or IRR.
  • Commenting on the outcome of the scoping study, which the announcement pointed out assumed a further funding requirement for project development, Executive Chairman, Mick Billing, hinting at expansion potential, said that “The Pilot Mountain project hosts four known deposits, and it is anticipated that each of these has potential to contribute further as we continue to explore their potential”.
  • He went on to comment that “With no US domestic production, and tungsten classified by the US Department of the Interior as a Critical Mineral, our objective is to re-start Unites States commercial mining and tungsten concentrate production after a significant break”.

Conclusion: Initial results of the Pilot Mountain scoping study are encouraging and we look forward to the more detailed results of a pre-feasibility study in the future.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

 

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.

 

DISCLAIMER

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

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.

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. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, 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).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.