SP Angel – Morning View – Monday 08 10 18

China announces monetary stimulus to support economic growth

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Arc Minerals* (ARCM LN) STRONG BUY – Kalaba increasingly looking like a significant cobalt, copper discovery

(ARC Minerals currently owns 66% of Zamsort which holds 100% of the Kalaba copper/cobalt mine and associated mineral licenses)

Birimian Limited (BGS AU) Price A$0.25, Mkt Cap A$58.4m – Presentation on Goulamina project

Kodal Minerals* (KOD LN) Price 0.15, Mkt Cap 11.1m

Ceres Power Holdings (CWR LN) Price 199p, Mkt Cap £269m - Ceres announces £7m investment for construction of UK plant

IronRidge Resources* (IRR LN) 22p, Mkt Cap £61m – Ewoya lithium project drilling results

KEFI Minerals* (KEFI LN) 1.9p, Mkt Cap £11m – Tulu Kapi project resettlement programme schedule

 

Researchers Develop Liquid Battery which Takes Seconds to Recharge Electric Cars

  • Researchers at the University of Glasgow have developed a new type of battery which could make it possible to recharge electric vehicles in just a few seconds.
  • A team of chemists at the university developed a new flow-battery energy storage system that used a nano-scale battery molecule.
  • This nano-molecule has the capability to store either electric power or hydrogen gas in a new hybrid energy storage system.
  • The team, writing in the Nature Chemistry journal, said that it could release power on demand either as electricity or as hydrogen gas.

 

Electric car prices to soar as axe falls on green subsidies

  • Thousands of pounds will be added to the price of some electric and hybrid vehicles as one of the government’s main green initiatives falls victim to cuts.
  • The Treasury is being warned that emergency funds will be needed to avoid an imminent cut in the subsidies given to people buying plug-in cars, which some fear will dent Britain’s green credentials.
  • Under current proposals, the maximum grant would fall to £3,500, while the grant of up to £2,500 for hybrid plug-in vehicles would be abolished altogether.
  • A cap is also being considered, which would mean only cars worth up to £60,000 would be eligible for the scheme.

 

Dow Jones Industrials

 

-0.68%

at

  26,447

Nikkei 225

 

-0.80%

at

  23,784

HK Hang Seng

 

-1.20%

at

  26,254

Shanghai Composite

 

-3.72%

at

   2,717

FTSE 350 Mining

 

-0.06%

at

  17,212

AIM Basic Resources

 

-0.28%

at

   2,193

 

Economics

China – The central bank is has cut the reserve requirement ratio for local lenders equivalent to freeing up CNY 750bn ($109bn) of capital as it aims to stimulate the economy.

  • The 100bp cut will come into effect on the 15th of October marking the third cut this year and reducing the RRR to 14.5%.
  • While part of the stimulus is expected to compensate for a CNY 450bn worth of liquidity withdrawals under the maturing Medium-Term Lendgind Facilities, the balance is directed at propping up slowing growth.
  • Despite a RRR cut, equities are posting heavy losses with the CSI 300 Index down 4.3% today as markets reopen after a week long holiday.
  • Private sector business activity continued to demonstrate relatively lacklustre performance compared to that seen earlier in the year, the latest Composite PMI data demonstrate.
  • Surveys show that softer manufacturing growth has been offset by an improved service sector performance.
  • Manufacturing production growth came in at the weakest level since October 2017 while services sector posted the highest increase in three months.
  • New orders followed a similar trend while business optimism across both sectors fell to their second-lowest in ten months.
  • Employment was down across both the manufacturing and services sectors in September.
  • Commenting on staffing numbers Markit wrote “what we should be wary of is that overall employment contracted in September, with the sub-index hitting its lowest level since August 2016… the deterioration in employment will test policymakers’ determination in pressing ahead with reforms”.
  • Caixin Composite PMI: 52.1 v 52.0 in August.

 

Germany – Industrial production posted a third monthly decline in August as global tensions strain put a strain on manufacturers.

  • Industrial Production (%mom/yoy): -0.3/-0.1 v -1.1/+1.5 in July and 0.3/-0.1 forecast.

 

Italy – 10y bond yields climb to four year high as the government is rejecting calls to revise its next year deficit and growth forecasts.

  • Yields are currently trading at 3.58% with the spread over the equivalent Bund running at 304bp, the highest levels since mid-2013.
  • The Parliament will start budget debates on Tuesday morning as Finance Minister Giovanni Tria is set to hold a series of hearings before the lower House and Senate joint budget committees.
  • The government is expected to submit a draft budgetary plan to the EU commission by October 15 with the national parliament due to approve the budget by year end.

 

South Africa – The rand is off more than 1% this morning on report that the finance minister is considering resigning.

 

Currencies

US$1.1498/eur vs 1.1505/eur last week. Yen 113.79/$ vs 113.85/$. SAr 14.911/$ vs 14.783/$. $1.307/gbp vs $1.305/gbp. 0.705/aud vs 0.706/aud. CNY 6.904/$ vs 6.869/$.

 

Commodity News

Precious metals:         

Gold US$1,196/oz vs US$1,198/oz last week

   Gold ETFs 67.1moz vs US$67.1moz last week

Platinum US$818/oz vs US$825/oz last week

Palladium US$1,062/oz vs US$1,059/oz last week

Silver US$14.46/oz vs US$14.56/oz last week

           

Base metals:   

Copper US$ 6,151/t vs US$6,203/t last week

Aluminium US$ 2,078/t vs US$2,184/t last week

Nickel US$ 12,450/t vs US$12,435/t last week

Zinc US$ 2,581/t vs US$2,620/t last week

Lead US$ 1,976/t vs US$2,000/t last week

Tin US$ 18,955/t vs US$18,955/t last week

           

Energy:           

Oil US$83.3/bbl vs US$85.0/bbl last week - Oil drops as US considers granting some waivers on Iran crude sanctions

  • Brent crude oil prices fell more than 1% on Monday after Washington said it may grant waivers to sanctions against Iran’s oil exports next month, and as Saudi Arabia was said to be replacing any potential shortfall from Iran.
  • International benchmark Brent crude oil futures LCOc1 were at $83.26/bbl at 0352 GMT, down 90c, or 1.1%, from their last close.
  • US West Texas Intermediate (WTI) crude futures CLc1 were down 54c, or 0.7%, at $73.80/bbl.
  • US sanctions will target Iran’s crude oil exports from Nov. 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.
  • However, a US government official said on Friday that the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil.

India will keep buying Iranian crude despite the threat of US sanctions

  • Two Indian oil companies have placed orders to import Iranian crude next month, Oil Minister Dharmendra Pradhan said Monday, defying a call from President Trump’s administration for countries to completely cut-off the Islamic republic.
  • US sanctions targeting Iran's crude oil exports come in on Nov 4 with Washington ratcheting up the pressure on governments and companies around the world to slash their Iranian oil imports to zero.
  • However, Oil Minister Pradhan said India would continue to purchase Iranian crude in November, according to Reuters.

 

Oil and gas releases continue despite North Sea safety improvements

  • The figures show that the number of escapes has remained steady at about 100 despite calls for improvements.
  • The report said they had the potential to cause serious injury or death.
  • In April, the Health and Safety Executive expressed concern
  • The regulator said some had come "perilously close to disaster" and that more needed to be done to tackle them.

 

Natural Gas US$3.180/mmbtu vs US$3.205/mmbtu last week

Uranium US$27.50/lb vs US$27.65/lb last week - Uranium Development Stage Projects

  • It has been estimated that less than one in one thousand uranium exploration projects will lead to a commercially viable mine
  • Companies face major problems including long early stage exploration periods, problems securing funding and the commodity price used.
  • Further cited as an issue is the common disconnect between the value of the firm conducting the exploration and the size of the investment needed for the construction of the project.

      

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$68.4/t vs US$68.4/t

Chinese steel rebar 25mm US$680.0/t vs US$684.1/t

Thermal coal (1st year forward cif ARA) US$99.7/t vs US$99.5/t - India's coal import rises 35% to 21.1m tonnes in September 

  • India's coal import increased substantially by 35% to 21.1mt in September, as against 15.61mt last year
  • The rise in imports comes at a time when the captive power plants in the country are grappling with the issue of coal shortages. 
  • "The increase in coal and coke imports in September is mainly due to higher imports of non-coking coal during the month under review," according to mjunction services 

Premium hard coking coal Aus fob US$192.1/t vs US$193.7/t

           

Other:  

Cobalt LME 3m US$56,250/t vs US$62,000/t

China NdPr Rare Earth Oxide US$46,711/t vs US$46,951/t

China Lithium carbonate 99% US$10,284/t vs US$10,337/t

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

 

Company News

Arc Minerals* (ARCM LN)  3.9p, Mkt Cap £23m – Kalaba increasingly looking like a significant cobalt, copper discovery

(ARC Minerals currently owns 66% of Zamsort which holds 100% of the Kalaba copper/cobalt mine and associated mineral licenses)

STRONG BUY

  • Arc Minerals report results from the first eight drill holes at the Kalaba project in the west of Zambia.
  • The drill results shown cover an area of around 400m x 600m with drilling planned to extend another 500m to the north west and another 100m to the east
  • Zones of elevated mineralisation of 0.19% cobalt and 1.31% copper suggest a mineable and likely economic resource depending on metallurgy and recovery rates.
  • See diagram for Kalaba drill pattern and plan: http://www.arcminerals.com/gal.php?gID=148#group-2
  • The plan also shows an idea of the mineralisation encountered in drilling and surface sampling so far.
  • 46 holes have been drilled to date showing an average width of mineralised zone now seen to be 60-80m with a maximum thickness of 144m seen in drilling so far.
  • If we assume an average grade of 1.15% copper equivalent then a very rudimentary calculation indicates on these figures a 38mt resource containing some 437,000t of copper equivalent metal.
  • It is too early to make estimates of any certainty but the figures indicate to us good potential for the project to .
  • The Section V-V shown in the following link also shows the depth of mineralisation seen in drilling in 12 of the drill holes: http://www.arcminerals.com/gal.php?gID=148#group-3
  • A further section also shows how the mineralisation may interact with Soil Geochemical Anomallys seen at surface: http://www.arcminerals.com/gal.php?gID=148#group-3
  • If the soil anomalies do indicate an undulating mineralised orebody extending the deposit to a potential 2km x 5km then we could be looking at the first drill results from a significantly larger orebody
  • Soil anomalies indicate potential for a much larger strike length of 2km over a distance of 5km.
  • Drill results from four of the eight reported holes:
    • 1.15% Cu Eq. from surface to 29.3m with 0.45% Copper and 0.07% Cobalt
      • including from 7.3m; 18.5m at 0.63% Cu and 0.09% Co or 1.52% Cu Eq.
      • and from 17.5m; 8.3m at 0.81% Cu and 0.13% Co or 2.06% Cu Eq.
    • 0.54% Cu Eq. over 144m from surface with 0.20% Cu and 0.03% Co
      • including from 11.5m; 3m at 1.07% Cu and 0.07% Co or 1.79% Cu Eq.
      • and from 33m; 55m at 0.30% Cu and 0.03% Co or 0.63% Cu Eq.
    • 3.26% Cu Eq. from 34.3m to 39.3m with 1.31% Cu and 0.19% Co
      • including from 48m; 90.83m at 0.24% Cu and 0.03% Co or 0.56% Cu Eq.
    • 0.64% Cu Eq. over 127m from surface with 0.28% Cu and 0.04% Co
      • including from 0m; 8m at 0.41% Cu and 0.14% Co or 1.77% Cu Eq.
      • and from 24m; 26m at 0.53% Cu and 0.01% Co or 0.63% Cu Eq.
      • and from 57m; 48m @ 0.31% Cu and 0.04% Co or 0.68% Cu Eq..

*An SP Angel analyst has recently visited the Kalaba open pit mine, stockpiles, process plant and drilling operations.

Our intrepid analyst and co-driver drove to site from Lusaka and back again briefly stopping at the Royal Solweizi hotel on the Old Chingola Road.

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

 

Birimian Limited (BGS AU) Price A$0.25, Mkt Cap A$58.4m – Presentation on Goulamina project

Kodal Minerals* (KOD LN)  Price 0.15, Mkt Cap 11.1m

  • Birimian Limited have published a new presentation on their Goulima lithium project in Mali.
  • Goulima has now grown into the world’s 6th largest lithium resource with a 103.2mt grading 1.34% Li2O JORC resource and may well rise further up the rankings.
  • The company is supported by Ausenco and a team of leading engineers who are working on refining the economics of the project.
  • Goulima’s project estimates:
  • NPV US$690m
  • IRR of 49.5%
  • CAPEX US$199m
  • JORC reserve of 31.2mt grading 1.56% Li2O
  • Operating cost of US$281/t.
  • Throughout 2mtpa.
  • Recovery 70.4%
  • Concentrate production 362,000tpa.
  • That’s allot of trucks on a daily basis travelling from Mali to a port on the Ivory Coast.
  • The presentation shows nice wide pegmatites of up to 100m width.

Conclusion: Birimian has already had one takeover approach which failed to complete due to Chinese government restrictions on the outflow of capital. While Birimian does indicate a time line to potential development we suspect the team are quietly hoping for a further bid from potential offtaker.

 

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

 

Ceres Power Holdings (CWR LN)  Price 199p, Mkt Cap £269m - Ceres announces £7m investment for construction of UK plant

  • Fuel cell developer Ceres has announced a £7m investment to construct a UK plant to  produce cells and will target 2MW production by 2019 with a view to ramping to 10MW of output.
  • This interim manufacturing capacity is to meet demand from six OEM partners that include Bosch, Cummins, Honda, Nissan, Weichei Power and one unnamed.
  • In a strong indicator of confidence, Bosch, in September 2018, invested £9m in equity in Ceres Power Holdings.
  • This followed Ceres winning £7m in UK government funding in August 2018, undertaking a £20m placing in July and Chinese partner Weichai subscribing for £19.3m in stock in May 2018.
  • Future larger scale manufacture of Ceres fuel cell technology is expected to come from licence partners.
  • Ceres has been developing patented fuel cell technology over a number of years and is now finding applications in growth markets such as EV range extenders in automotive and data centre power.

Conclusion: Ceres is winning mandates, achieving funding and with today’s announcement, taking a firm step towards commercialisation of its Solid Oxide Fuel Cell (SOFC) technology.

 

IronRidge Resources* (IRR LN)  22p, Mkt Cap £61m – Ewoya lithium project drilling results

  • Assay results from a further 2,206m of drilling of a total 8,090m first phase RC drilling programme at the Ewoyaa lithium project in Ghana have been released this morning.
  • Results demonstrate a series of wide and high grade intersections (using 0.5% Li2O, 10m maximum internal dilution):
  • GRC0048: 72m @ 1.27% Li2O from 24m (including 56m @ 1.5% Li2O from 28m and 38m @ 1.65% Li2O from 36m);
  • GRC0049: 67m @ 1.21% Li2O from 70m (including 41m @ 1.2% Li20 from 70m, 5m @ 1.57% Li2O from 82m, 18m @ 1.47% Li2O from 114m, 7m @ 1.69% Li2O from 114m);
  • GRC0051: 36m @ 1.04% Li2O from 64m (including 11m @ 1.59% Li20 from 67m);
  • GRC0050: 13m @ 1.51% Li2O from 73m;
  • North Extension shows good continuity of grade and width with the mineralisation open to the north, west and north-east.
  • The field team launched a pitting programme to define the Ewoyaa pegmatite footprint along the North Extension to identify further drilling targets.
  • Intersections indicate that the Ewoyaa mineralisation is associated with steeply east dipping to sub-vertical pegmatite dykes with true widths of 20-80m.
  • Diamond drilling programme for a collection of a metallurgical sample is planned to start following the arrival of the remaining results from 1,704m of drilling.
  • “Results received to date indicate the development of a broad, continuous high-grade zone within the Central and North Extension zones which remains open to the north, with additional drilling results pending,” the Company highlighted in the announcement.

*SP Angel act as nomad and broker to IronRidge Resources

 

KEFI Minerals* (KEFI LN)  1.9p, Mkt Cap £11m – Tulu Kapi project resettlement programme schedule

  • The Company agreed with the local, zonal and reginal authorities a Tulu Kapi community resettlement programme currently targeted for 1 January 2019.
  • The team is planning to launch preparatory works as early as wet season ends including road construction to new host locations and preparation of new host lands.
  • In the meantime, the community will continue harvesting crops at Tulu Kapi while the Company will be clearing new farm lands to smooth the relocation process.
  • Construction start remains on target for the early 2019 and commissioning production during H2/20.
  • On project progress, the Company is planning to carry site surveys and geotechnical drilling of final foundation layouts for on-site infrastructure over the next month.

Conclusion: The agreement will allow for a smooth re-allocation programme ensuring development works and eventually operating project is on a good footing with local communities.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

 

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                                                            

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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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Recommendations are based on a 12 month horizon as follows:

Buy - Expected return >15%

Hold - Expected return range -15% to +15%

Sell - Expected return < 15%

 

** SP Angel acts as Broker to this Company