SP Angel – Morning View – Monday 24 09 18

Metals pull back as China cancels latest trade talks

MiFID II exempt information – see disclaimer below

 

Altus Strategies* (ALS LN) – Next door major bauxite project resource update

Bushveld Minerals* (BMN LN) – Workers return to work

IronRidge Resources (IRR LN) – Trenching work reveals additional high-grade gold to define broad and continuous targets

Petropavlovsk (POG LN) – Proposed ICBC loan refinancing

Randgold Resources (RRS LN) – Recommended all-share merger with Barrick Gold

Strategic Minerals* (SML LN) – More exploration targets identified at Hanns Camp

 

Mineral riches revealed in deep sea abyss

  • While mineral explorers are raising efforts to target asteroids in space, scientists from the University of Norway are sending robots 2,500m down into the waters between Norway and Greenland to try to understand the environments potentially rich with rare earth minerals.
  • Thibaut Barreyre notes “the ocean sea floor on Earth is, for the most part, unknown. It’s totally fair to say that we know much more about the surface of the moon and Mars – mapped by satellites and different devices – than we know about our own planet”.
  • The international team is using technology including autonomous robots and human-piloted submarines to explore the sea’s depths for discoveries of zinc, gold and copper. The scientists hope the explorations will reveal why some areas have minerals and others do not, how much is down there and what damage mining them would have on the environment.
  • A viable new source of rare earths, a group of 17 elements used in the production of smartphone screens, magnets, camera lenses and X-ray machines could be highly lucrative. But it is not that simple, Barreyre said. Exploration is expected to extend 5 years to understand the distribution of mineralisation.

 

BPW applies BMW battery tech to trucks

  • At the IAA Commercial Vehicles, BPW Bergische Achsen has announced a cooperation with BMW i.
  • In the frame of the cooperation, BPW will be using BMW i battery technology to develop a more powerful axle-motor for electrified trucks.
  • The electric axle will be used for heavy transporters and trucks with a total weight up to 7.5 tonnes. The motor will be available as of 2019 to electrically refit MB Varios, for example for communal use in a small series.
  • A motor concept for 26 tonnes of total weight is also already being planned.

 

ACT Granted U.S. Patent for Modular Battery Charger and Inverter Technology Platform

  • Advanced Charging Technologies (ACT) has announced that it has been granted a patent by the United States Patent and Trademark Office for its modular smart grid Quantum battery charger technology that enables battery charging and grid-tie battery discharging into the electrical power grid.
  • “Patent awards such as this are evidence that ACT has been forward thinking about developing a battery charging technology platform that is smart grid ready,” said Dr. Nasser Kutkut, ACT’s Chief Technology Officer and patent inventor.

 

Dow Jones Industrials

 

+0.32%

at

26,744

Nikkei 225

 

+0.82%

at

23,870

HK Hang Seng

 

-1.50%

at

27,534

Shanghai Composite

 

+2.50%

at

2,797

FTSE 350 Mining

 

-1.44%

at

17,615

AIM Basic Resources

 

+0.71%

at

2,209

 

Economics

 

Currencies

US$1.1737/eur vs 1.1764/eur last week  Yen 112.58/$ vs 112.74/$  SAr 14.337/$ vs 14.319/$  $1.310/gbp vs $1.318/gbp  0.727/aud vs 0.728/aud  CNY 6.857/$ vs 6.846/$

 

Commodity News

Precious metals:         

Gold US$1,197/oz vs US$1,206/oz last week

   Gold ETFs 67.7moz vs US$67.6moz last week

Platinum US$828/oz vs US$837/oz last week

Palladium US$1,053/oz vs US$1,056/oz last week

Silver US$14.27/oz vs US$14.36/oz last week

           

Base metals:   

Copper US$ 6,333/t vs US$6,383/t last week

  • Base metals shrug off US-China trade war escalations as the Trump administration imposes tariffs on another $200bn on Chinese goods while Beijing threatens to retaliate. London Metal Exchange copper slipped -0.5% after posting the biggest one-day gain since 2013 on Friday, rising +4.6% to the highest close since July 9. Prices of nickel, which surged 5% on Friday to the strongest in since late August, slipped by 1.4% to open the week.
  • Last weeks’ surge eased on Monday as buying thinned by holidays in China and Japan with fresh jitters on global trade. Trade worries had eased last week on expectations that any impact to global growth from an escalating trade war between the world’s top two economies would not be as big as feared. However, China cancelled an upcoming trade talk with the US at the weekend, underlining the fragility of negotiations. Kingdom Futures notes “the news that the Chinese would not send a delegation to Washington for the proposed trade talks has duly sent the markets heading back down again”.
  • “The falls currently seen in the metals are not that big so far and the European opening will be key as much of Friday’s rally appeared to be short covering and any dips from those levels may be seen as a buying opportunity”.
  • The United States has expressed optimism about finding a way forward in its trade dispute with China, but does not offer a date scheduled for further talks as it assesses Beijing’s response to the latest round of tariffs.
  • Hedge funds and money managers trimmed their net short position in COMEX copper contracts in the week to Sept. 18 according to US Commodity Futures Trading Commission (CFTC) data from Friday.
  • Long-only positions rose 5,974 lots to 45,429 in the week ending Sept. 18. The long-only total was the highest in three weeks
  • Short-only positions fell 5,374 lots to 59,167. The short-only total was the lowest in 11 weeks

Aluminium US$ 2,076/t vs US$2,063/t last week

Nickel US$ 13,130/t vs US$13,250/t last week

Zinc US$ 2,526/t vs US$2,452/t last week

Lead US$ 2,041/t vs US$2,019/t last week

Tin US$ 18,900/t vs US$19,040/t last week

           

Energy:           

Oil US$80.3/bbl vs US$79.4/bbl last week

Natural Gas US$2.962/mmbtu vs US$2.952/mmbtu last week

Uranium US$27.35/lb vs US$27.45/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$68.9/t vs US$68.9/t

Chinese steel rebar 25mm US$695.8/t vs US$697.9/t

Thermal coal (1st year forward cif ARA) US$99.2/t vs US$98.6/t

Premium hard coking coal Aus fob US$192.8/t vs US$193.1/t

  • US coal miner Peabody Energy said on Friday it has agreed to acquire the Shoal Creek coking coal mine for $400 million from private mining group Drummond Co.
  • Peabody said it planned to close the acquisition of the Alabama coking coal mine, with 2.1mt of sales in 2017, by the end of the year. Peabody has assets in Australia serving the coking coal, PCI and thermal markets, as well as US domestic coal mines.
  • The St Louis-based group will use cash from its balance sheet to purchase the mine, preparation plant and supporting assets, and the transaction excludes legacy liabilities other than reclamation, it said.

 

Other:  

Cobalt LME 3m US$62,250/t vs US$60,000/t

China NdPr Rare Earth Oxide US$47,250/t vs US$47,328/t

China Lithium carbonate 99% US$10,354/t vs US$10,371/t

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

 

Company News

Altus Strategies* (ALS LN)  4.3p, Mkt Cap £7.6m – Next door major bauxite project resource update

  • Canyon Resources updated mineral resources from JORC 2004 to JORC 2012 on the recently acquired Minim Martap bauxite project, contiguous to Birsok licenses held by JV with Altus Strategies.
  • The Mineral Resource is estimated at 88mt at 41.8% Al2O3 and 1.3% SiO2 in the Indicated category and 466mt at 46.2% Al2O3 and 2.2% SiO2 in the Inferred.
  • The update highlights the potential to expand the resource with only 40% of available bauxite plateaux tested as well to high grade potential reserves focusing on rich zones of the resource.
  • The Altus team is currently in discussions regarding a potential vending of the JV that owns 198km2 Birsok as well as 174km2 Mandoum bauxite licenses into Canyon.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Bushveld Minerals* (BMN LN)  28.3p, mkt cap £313.3m – Workers return to work

BUY - Target Price raised to 35.2p from 34.2p

(Bushveld Minerals hold 75% of Vametco)

  • Bushveld report that workers at the Vametco plant returned to work today following a new agreement with management.
  • Workers have accepted a further two part payment to be made to full time employees in lieu of a previously discussed Employee Share Option Scheme.
  • Vametco is to pay employees R15,000 on 28 September with a second payment relating to the financial performance of the group to be paid by 31 March 2019.
  • The agreement effectively links the employee bonus with the financial performance of Vametco and this should help to enhance performance through the second half.
  • Vanadium prices jumped last week to $97-104/kgV fob China according to the Metal Bulletin with the price in Western Europe rose higher again last week to $101-105kgV.
  • Chinese steel mills are now buying more higher-grade Australian haematite which normally contain negliable vanadium grades in preference to magnetite which often comes with vanadium and titanium.
  • The change in source material is serving to restrict the supply of vanadium to the market causing prices to continue to rise beyond our expectation.
  • Winter production curbs are also likely to cause steel mills to turn off their more polluting production units
  • New regulations requiring a significant increase in the content of vanadium in steel rebar are also due to start in October with the market reacting to increased demand ahead of the new tougher standards.
  • ‘China’s new high-strength rebar standard is designed to limit the use of inferior steels in construction. The standard eliminates low strength Grade 2 rebar and sets out specifications for three different high strength standards: Grade 3 (400MPa), Grade 4 (500MPa), and Grade 5 (600MPa). These will require 0.03% V, 0.06% V, and more than 0.1% V respectively.’ according to Roskill, a well-respected metals consultancy.

Conclusion:  We are raising out valuation to 35.2p/s from 34p/s to reflect higher vanadium prices.

*SP Angel act as Nomad and broker to Bushveld Minerals. The analyst has visited the Vametco process plant and associated mining operations.

 

IronRidge Resources (IRR LN)  22.5p, Mkt Cap £63.4m – Trenching work reveals additional high-grade gold to define broad and continuous targets

  • IronRidge announce additional high-grade and broad gold trenching results received for the 200m infill and extensional trenching programme averaging 2.15g/t over 152m highlighted results. The positive grades reinforce the previously reported large, coherent gold targets while defining an additional sixth high-grade, coherent gold anomaly over 900m in strike and up to 150m in width.
  • Published results represent the remaining and final results of the second phase trenching totaling 9,360m completed during the last field season. The programme has confirmed the extension of mineralisation below cover and the continuity of anomalous intervals between previously reported wider spaced trenches; providing confidence in the continuity and scale of the mineralised system at Dorothe, Chad.
  • The field work focusing on geological trench logging, structural mapping and airborne geophysics have confirmed two dominant mineralisation settings; steeply east dipping vein mineralisation associated with the ‘Main Vein’ target and shallow west dipping ‘Sheeted Vein’ targets.
  • The 'Main Vein' target occurs along the lithological contact between medium and coarse-grained granitic gneiss units and interpreted to represent a zone of rheological contrast; a favourable structural setting for gold mineralisation. The 'Sheeted Vein' targets occur as multiple shallow, on average 10 to 35-degree west dipping sheeted grey quartz and laminated quartz veins and veinlets predominantly within the medium grained gneiss unit.
  • Chief Operating Officer, Len Kolff, updates “we are re-mobilising our teams in late October/early November to commence field programmes including a planned IP survey in November over the Dorothe prospect”. The IP survey is designed to target disseminated sulphides potentially associated with gold mineralisation to depth and to highlight potential structural corridors along which mineralisation occurs.

Conclusion: Trenching results continue to provide positive grades to define the continuity and scale of mineralisation at Dorothe. We look forward to results of the planned IP survey to provide additional control on target definition ahead of a drill programme targeting late 2019.

 

Petropavlovsk (POG LN)  6.4p, Mkt Cap £210m – Proposed ICBC loan refinancing

  • A leading Russian Bank is prepared to provide IRC with a new $240m facility to refinance outstanding $204m loan with ICBC and cover outstanding bridge loan and interest in the amount of c.$30m as well as guarantee costs of $6m due to Petropavlovsk.
  • Repayment of $36m owed to the Company is expected before the end of 2018.
  • Refinancing is subject to the approval by Petropavlovsk’s shareholders at a general meeting.
  • New facility will allow Petropavlovsk, a 31.1% shareholder in IRC and a guarantor of outstanding ICBC facility, to gradually reduce loan guarantee exposure to IRC.
  • Under the proposed terms, Petropavlovsk guarantee will start off at 75% of outstanding new loan (ie $180m of $240m) with the percentage going down to 50% during 2019 and ultimately 0% before the end of 2020.
  • No details on the cost of the refinancing as well as loan repayment schedule are provided; although, the announcement says a final maturity date is June 2025.

 

Randgold Resources (RRS LN)  5,128p, Mkt Cap £4.8bn – Recommended all-share merger with Barrick Gold

  • The Boards of Barrick Gold and Randgold Resources have agreed on terms of all-share merger to from New Barrick Group.
  • Barrick offers Randgold shareholders 6.1280 New Barrick shares for each Randgold share valuing the company at around £49 a share, equivalent to the Friday close price and implying virtually no premium for the Company.
  • Randgold shareholders will own 33.4% of the new group with the Company appointing one-third of the directors to the combined Board.
  • Executive Chairman of barrack, john Thornton, will become Executive Chairman of the merged Group.
  • Mark Bristow, CEO of Randgold, will become President and CEO of New Barrick Group.
  • The merger is set to form a £13.7bn gold producer with more than 6.5moz in annual production and the world’s largest reserve base overtaking Newmont Mining.
  • Barrack agreed to pay Randgold a break fee of $300m.
  • Both Boards recommend their shareholders to vote in favour of the deal with EGMs expected to be held on or around 5 November 2018 and the deal targeted to be closed by Q1/19.

 

Strategic Minerals* (SML LN)  1.6p, Mkt Cap £21.4m – More exploration targets identified at Hanns Camp

  • Strategic Minerals reports that a review of geological data has identified a further three prospective nickel sulphide exploration targets within its wholly owned Hanns Camp tenements near Laverton, Western Australia.
  • The targets at Hanns Camp South, Royal North and Royal Central have favourable underlying rock types  and geological settings and are considered to be “highly prospective for nickel sulphide mineralisation”.
  • Initial follow up work recommended by the company’s advisor, a “leading expert in ultramafic hosted nickel deposits”, Dr. Martin Gole, will be “a ground-based EM [electro-magnetic] survey across all three targets, which is planned to commence in the fourth quarter 2018”.“
  • The geophysical work is to be funded from the proceeds of the recent sale of the gold licences within the wider project area which were divested as non-core assets in order to focus more specifically on the nickel, cobalt and rare earths exploration potential of the area.
  • Commenting on the wider potential within the licence area, Strategic Minerals’ Chairman, Alan Broome, said  that “The Board believes that the Company’s tenement portfolio is excellently positioned in Laverton to pursue nickel sulphides, given the province is already host to several world-class deposits”.

Conclusion: Using the proceeds of the recent sale of its gold licences to fund a geophysical programme over newly identified nickel sulphide exploration targets is a tangible delivery on the stated strategic focus on Strategic Minerals’ nickel/cobalt/rare-earths opportunities within the Western Australian licences.

*SP Angel act as Nomad and broker to Strategic 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

 

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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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