SP Angel . Morning View . Wednesday 15 04 20

IMF GDP forecasts spook market

 

MiFID II exempt information – see disclaimer below

 

Anglo Asian Mining* (AAZ LN) - BUY – 18.2koz produced in Q1/20 with 75-80koz FY19 guidance on target

Ariana Resources* (AAU LN) 345p, Mkt Cap £35.0m – Q1 Production report

Atalaya Mining (ATYM LN) 119p, Mkt Cap £154.5m –Production ramps to design capacity at Proyecto Riotinto

Bluejay Mining* (JAY LN) 3.87p, Mkt cap £36m – Exploration Licences in South Greenland offer great potential

Chaarat Gold* (CGH LN) - BUY – Proposed equity raise

Highland Gold (HGM LN) 231p, Mkt Cap £842m – Strong FY19 with a third interim dividend announced by the Board

Rainbow Rare Earths (RBW LN) 2.03p, Mkt Cap £7.7m – Export of another 100t of rare earth concentrate

Strategic Minerals* (SML LN) 0.47p, Mkt Cap £7.7m –Cobre magnetite sales

URU Metals* (URU LN) 120p, Mkt Cap £0.9m – Permitting update for the  Zebediela project in South Africa

SP Angel Healthcare team

Sanofi and GSK team up to develop a vaccine for COVID-19

Diurnal (DNL.L): Operational Update

Renalytix AI plc (RENX.L): Agreement with Three Rivers Provider Network

 

Air pollution kills 9m people each year while increasing the risk of dying from Covid-19

 

G-7 finance ministers support new IMF program that seeks to quickly address a shortage of dollars in emerging markets

 

IMF – Global economy to contract by 3% vs 3.3% growth seen pre crisis

  • - 6.6% advanced economies, -2.2% excluding China, -1% including China.
  • The IMF forecast GDP growth returning to 5.8% in 2021
  • They estimate the global pandemic will peak in Q2 and fade away in the second half
  • If the pandemic continues through Q3 then this could knock another 3% off global output
  • A second Coronavirus outbreak in 2021 could knock another 5% off the global GDP growth baseline for 2021
  • A longer outbreak in 2020 and a second outbreak in 2021 combines could knock 8% off its baseline
  • US economy will contract by 5.9% in 2020 vs 2% GDP growth forecast pre crisis.
  • US manufacturers are keen to minimise the length of any lockdown with three West Coast states announcing a pact on reopening economy
  • Global economy cumulative loss could be $9tr – which is remarkably close to our sum of the global stimulus so far offered of around $11tr.
  • Income per capita expected to shrink for >170 counties
  • Eurozone to contract by 7.5% this year and recover to 4.7% in 2021. Italy -9.1%, Germany -7%, France -7.2%, UK -6.5% for 2020,
  • Japan GDP to contract at 5.2% followed by +3.0% in 2021
  • China GDP growth +1.2% in 2020 vs 6% pre crisis and +9.2% GDP in 2021
  • India GDP growth +1.9% vs 5.8% pre crisis and +7.4% in 2021
  • Latin America GDP to fall -5.2% in 2020 and recover +3.4% in 2021

 

China personal savings increase by ~900bn as population save for rainy day

  • Chinese people normally pay for healthcare, though .the state picked up the bill for pandemic care and funeral costs.
  • The Wuhan / Hubei state lockdown and subsequent social distancing has kept consumers away from many purchases.
  • China indicates auto sales are returning to normal as manufacturers and dealerships reopen, though the credibility to Chinese statistics is increasingly questionable.

 

US Dollar posts gains ahead of data 

  • The US Dollar saw marginal gains this morning as President Trump edged toward rolling back some restrictions put in place to contain the coronavirus pandemic (FX Empire).
  • The market is apprehensive with the release of the US Retail and Core Retail Sales reports, along with an industrial production report due later today (FX Street).
  • The dollar index was trading 0.3% higher this morning at 99.19.

 

European equities halt after five-day rally

  • The Stoxx Europe 600 Index dropped 0.8% earlier this morning in London, as investors assessed the extent of the last five days of straight gains, and a renewed focus on the earnings season.
  • The European benchmark has climbed since its March low as the rate of new coronavirus infections slowed in many major countries, and closed at a one-month high on Tuesday following better than expected data from China.
  • Energy shares led declines after overnight declines in oil prices, with producers mainly in the Gulf flooding the market before a production deal begins next month.

 

SP Angel rank 2nd in APEX Precious Metals forecasting in Q1 2020

  • Rankings are as follows: 1st UBS, 2nd SP Angel, 3rd ED&F Man, 4th INTL FC Stone, 5th Capital Economics

 

Dow Jones Industrials

 

+2.39%

at

23,950

Nikkei 225

 

-0.45%

at

19,550

HK Hang Seng

 

-0.75%

at

24,253

Shanghai Composite

 

-0.58%

at

2,811

 

Economics

IMF urges policy makers to consider post-pandemic stimulus 

  • The IMF said yesterday that it is important that policy makers avoid repeating the Depression-era mistake of austerity once the coronavirus contagion begins to diminish.
  • According to the IMF's chief economist, 'once the recovery has happened and we are past the pandemic phase, for advanced economies it would be essential to undertake a broad-based stimulus' .

 

Trump temporarily halts payments to WHO

  • President Trump has instructed his administration to temporarily halt funding to the WHO, due to what he claims is an over-reliance on China.
  • Trump criticised the WHO for taking China's claims about the coronavirus 'at face value', and failing to share information about the disease as it spread.
  • 'The WHO failed in its basic duty and must be held accountable' Trump said in yesterday's White House press conference.
  • It is unclear how this halt in payments will take effect, however the US has contributed $893m to the WHO's operations during its current two-year funding cycle. Administration officials signalled the suspension would be for 60 days.

 

Germany may agree on easing of restrictions today 

  • Chancellor Angela Merkel will consult with Germany's 16 regional premiers via telephone today, and may agree on the easing of restrictions.
  • The Chancellor is expected to hold a news conference this afternoon to detail any relaxation of curbs on activity, such as reopening schools and some businesses.
  • The number of new cases in Germany fell for a sixth straight day on Wednesday. There were 2,138 new infections, the lowest increase this month, bringing the total to 132,210 (Bloomberg).

 

San Francisco cancels 420 marijuana event this year

  • The US is seeing record sales of marijuana this year with customers reported to be stocking up.
  • Legal cannabis has been declared an ‘essential medicine’ in state lockdowns, allowing stores to stay open.
  • Legal sellers report sales up 20-25% this year so pot heads can self-isolate with their stash this year.
  • Keep high and carry on!

 

Currencies

US$1.0960/eur vs 1.0930/eur yesterday.  Yen 107.12/$ vs 107.70/$.  SAr 18.512/$ vs 18.027/$.  $1.257/gbp vs $1.256/gbp.  0.636/aud vs 0.640/aud.  CNY 7.058/$ vs  7.050/$.

 

Commodity News

Gold US$1,716/oz vs US$1,713/oz yesterday

   Gold ETFs 93.7moz vs US$93.0moz yesterday

Platinum US$778/oz vs US$756/oz yesterday

Palladium US$2,229/oz vs US$2,245/oz yesterday

Silver US$15.47/oz vs US$15.53/oz yesterday

            

Base metals:    

Copper US$ 5,135/t vs US$5,175/t yesterday – Copper prices pull back on recession fear despite China rate cuts

  • Delays to the end of the lockdown restrictions hare depressing copper prices as the market wakes up to longer-term Coronavirus impact.
  • IMF estimates on a potential 3% contraction in the global economy has knocked copper
  • IMF forecasts are normally and understandably overly cautious and behind the curve and would not normally be expected to move copper prices.
  • Investors may fear that China’s rate cut signals further problems for manufacturers in China and that this may impact on copper demand.
  • Copper is more driven by investor sentiment at present that current physical demand
  • China's positive PMI data last week showed that factory activity expanded in March after falling in February. This has given industrial metals a more positive outlook as China is the world's largest consumer.
  • Peru's Antamina and Cerro Verde copper mines have both been suspended this week, adding to the supply disruptions occurring across South America and increasing the supply risk of copper.

Aluminium US$ 1,515/t vs US$1,499/t yesterday

Nickel US$ 11,840/t vs US$11,825/t yesterday 

Zinc US$ 1,924/t vs US$1,931/t yesterday - Zinc – Treatment charges fall in China as mines close

  • Chinese zinc smelters are fighting to buy zinc concentrates as mine supply falls
  • The closure of zinc mines in Peru is having a major impact on smelters in China

Lead US$ 1,687/t vs US$1,725/t yesterday

Tin US$ 15,325/t vs US$15,290/t yesterday

            

Energy:            

Oil US$29.1/bbl vs US$32.1/bbl yesterday

Natural Gas US$1.626/mmbtu vs US$1.729/mmbtu yesterday

Uranium US$31.30/lb vs US$29.80/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$83.5/t vs US$82.7/t - Iron ore prices rising in China

Australian iron ore exports fall 18% last week

  • Iron ore shipments from Australia fell to 16.2mt last week compared to 19.7mt a week earlier according to global ports data (Bloomberg).
  • Iron ore prices on the Dalian Commodity Exchange hit four-week highs as a result of the fall in shipments from Australia as well as Brazil.
  • The most traded September iron ore contract on the Dalian rose 1.2% to 607 yuan ($86.23)/t yesterday, its highest level since the 18th of March (Reuters).

Chinese steel rebar 25mm US$532.0/t vs US$532.8/t - Chinese  stainless steel hits 7-week high on restocking

Thermal coal (1st year forward cif ARA) US$54.1/t vs US$56.1/t - Chinese thermal coal futures rise due to mine accident

  • Thermal coal for September delivery rose 3.2% this morning to 495 yuan/t on the Zhengzhou Commodity Exchange, rebounding from its lowest price since August 2016.
  • Prices rose as a result of a mine accident in Shanxi province, which trapped five people and has halted production (Bloomberg).

Coking coal swap Australia FOB US$128.5/t vs US$136.0/t

            

Other:   

Cobalt LME 3m US$30,000/t vs US$30,000/t - 

China's cobalt sulphate production rebounds 94% in March 

  • China produced 3,500t of cobalt sulphate last month, as producers resumed 70-80% of their capacity.
  • Production in Q1 2020 was 8,400t - down 26% from the same period last year (SMM).

NdPr Rare Earth Oxide (China) US$36,835/t vs US$36,802/t - Mountain Pass – disadvantaged by having to ship into China

  • Co-Chairman of MP Materials calls for US taxpayer money should not fund US companies which source components from China.
  • James Litinsky comments on Western reliance on permanent rare earth magnets which are made in China
  • The supply of permanent magnets is critical for critical medical devices like ventilators as well as EVs, telecoms and other machinery.  
  • Mountain Pass produces some 15% of global REE concentrates but is taxed by around 40% for sales into China

Lithium carbonate 99% (China) US$5,454/t vs US$5,531/t - Struggles show no sign of abating for lithium producers

  • Tianqi Lithium is looking to sell part of its majority stake in Talison Lithium which owns the Greenbushes mine.
  • The Chinese producer is struggling to pay back debt it has racked to the tune of $4.1bn after taking a stake in Chilean miner SQM. (Financial Times)
  • The Greenbushes mine bought by Tianqi in 2012 is considered one of the best lithium assets globally.
  • Moody’s downgraded Tianqi’s credit rating to B2 last month highlighting their strained capital structure as a result of the high debt burden.
  • Yesterday Tianqi announced it expects to experience a net loss of 450-510m Yuan ($63.83-72.34m) in Q1. (Reuters)
  • Elsewhere Ganfeng Lithium have announced they expect Q1 results to decrease significantly citing a decline in the lithium salt price in the period to March 31st and disruption of productivity as a result of the coronavirus. (Reuters)
  • The Company expects net profit to fall as much as 96-97%.

Ferro Vanadium 80% FOB (China) US$26.5/kg vs US$26.5/kg

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

Tungsten APT European US$240-245/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,450/t vs US$2,550/t

 

Battery News

USC team develop sustainable redox flow battery

  • Researchers from the University of Southern California have developed a redox flow battery that uses cheap, sustainable materials. (Oilprice.com)
  • The majority of redox flow batteries use vanadium which is an expensive material.
  • The USC team used two solutions of iron sulphate and a compound called anthraquinone disulfonic acid (AQDS).
  • Iron sulphate is a widely available mining waste product and AQDS an organic material already used in some redox flow batteries. (Bioengineer.org)
  • At 10c for around 2.2 pounds of iron sulphate and $1.60/pound for AQDS materials costs for the battery would be $66 per KWh. At scale electricity would cost 50% less than that produced by redox flow batteries using vanadium. (PV Magazine)
  • The researchers claim their new redox flow battery has improved durability, exhibiting no loss in power over hundreds of charge cycles.
  • The team found principal voltage loss came from ohmic resistance of the electrode and electrolyte. This was reduced by up to 40% by altering the composition of the carbon-nanotube-modified electrodes.
  • The study was published in the Journal of the Electrochemical Society.

 

Researchers develop new method for ceramic electrolyte sheets

  • Researchers at Tokyo Metropolitan University have combined a garnet-type ceramic, polymer binder and ionic liquid to produce a quasi-solid-state sheet electrolyte. (Phys.org)
  • The electrolyte sheet functions 30-60oC making it viable for use in EV batteries. (Green Car Congress)
  • A garnet-type structure (Li7La3Zr2O12) exhibits high ionic conductivity and compatibility with lithium metal.
  • Production of LLZO requires high sintering temperatures up to 1200C making large scale production challenging.
  • Limited physical contact between brittle LLZO electrolytes and electrode material often creates high interfacial resistance, limiting application in solid-state Li-batteries. (Nanotechnology WA)
  • The Tokyo team cast a 75-micron thick ceramic polymer electrolyte sheet which they soaked in an ionic liquid (IL) to improve conductivity.
  • The IL, liquid at room temperature and highly conductive filled micro gaps in the structure and bridged the LLZO particles, making an efficient pathway for Li-ions and reducing interfacial resistance.
  • The method takes place at room temperature making it suitable for industrial production.

 

GM forced to take action on the Chevy Bolt EV

  • GM will be recalling Chevy Bolt vehicles due to a fault that makes the rear doors open when the rear window is rolled down.
  • The fault is a result of cabling for the door handle being too long and coming into contact with the windows which damages the cable. The result, the rear doors can open.
  • The issue is not widespread, only 897 vehicles from the 2019-2020 years are affected. GM will contact customers relating to the fault on May 11th. The cable will be replaced at dealers free of charge. (Cnet)
  • GM is also taking steps to make the Bolt EV a more attractive purchase following the coronavirus. The Company is offering a $4750 discount on the vehicle, with 0% APR financing for 72 months an no payments required for 120 days following purchase. (Electrek)
  • It has also been reported that there is shortage of 2020 Chevy Bolts, GM’s Orion Plant where the vehicles are produced halted operations on March 18th.

 

EV production to restart in Europe

  • Hyundai and Audi plants have reopened with Daimler expected to follow suite next week.
  • Hyundai’s Czech plant in Nosovice has imposed social distancing measures and only 2 of 3 shifts are running. (Reuters) 
  • 100 employees have returned to work at Audi’s Gyor plant in Hungary and production is expected to restart at their Ingolstadt site on April 27th. (Electrek)
  • VW has kept component operations running in Germany during lockdown across 5 sites to keep parts supplies flowing to China which restarted production in late February. (Bloomberg)
  • Daimler plans to restart manufacturing on April 20th with its Bremen plant included in those plans. (Electrek)
  • Renault has resumed some of its operations in Portugal and will resume production in Romania on April 21st.
  • Toyota plan to restart production at their facilities in France on April 22nd followed by their plant in Poland on April 23rd. (The Irish Times)
  • Volvo is to reopen its flagship Torslanda plant in Sweden on April 20th, the site was one of the last European factories to shut down.
  • Not all operations are starting to stir, TPCA, a JV of Toyota Motor Co and Peugeot will extend its shut down until May 4th, delaying pans to relaunch originally scheduled for later this week. (Reuters)
  • Both Ford in the US and Jaguar Land Rover in the UK have also be forced to push back planned restart dates. (The Irish Times)

 

Joplin tables $1bn package to build a factory for Tesla’s new cybertruck

  • Joplin, Missouri has offered a $1bn package of incentives and savings to build a new factory for Tesla’s new cybertruck. (Arkansas Online)
  • The city has offered a 1042 acre site at a 50% discount and a 100% tax abatement for 12 years.
  • Tesla is currently scouting US locations for a new Gigafactory that will produce Model Y crossovers for the East Coast and the new cybertruck. (The Street)
  • Joplin borders Oklahoma and Missouri and claims labour costs in the city will provide Tesla with significant savings. The median wage is $27.86 per hour far lower than other suggested locations. The city currently houses two industrial battery production facilities. (Autonews)

 

Company News

Anglo Asian Mining* (AAZ LN) 125p, Mkt Cap £143m – 18.2koz produced in Q1/20 with 75-80koz FY19 guidance on target

BUY

  • Q1 production amounted to 18.2koz GE (Q1/19: 20.3koz) comprised of
    • Gold – 15.9koz, -8%yoy (Q1/19: 17.2koz);
    • Copper – 559t, +9%yoy (Q1/19: 513t);
    • Silver – 34.6koz -32%yoy (Q1/19: 51.3koz).
    • Process wise gold production split included:
      • Heap leaching – 3.2koz (Q1/19: 2.9koz);
      • Agitation leaching – 11.9koz (Q1/19: 12.6koz);
      • Flotation – 0.8koz (Q1/19: 1.7koz).
      • Quarterly gold sales totalled 11.3koz at an average realised gold price of $1,577/oz (Q1/19: 13.2koz at $1,306/oz) reflecting COVID-19 related disruptions to dore gold shipments.
      • Gold dore production from 5 to 31 March was shipped to the refiner only in April with 90% of the Company’s sales share to the tune of $5.9m received on 6 April.
      • Q1 copper concentrate sales continued unaffected with 2.0kt sold generating $2.9m (Q4/19: 3,723kt and $7.4m).
      • Net cash position increased $26.0m by Q1/20 with no bank debt and up on $21.2m net cash position as of Dec/19; this also does not account for $5.9m in gold sales proceeds as highlighted above.
      • FY20 production guidance reiterated at 75-80koz GE including 65-67koz gold and 2.2-2.4kt copper with Gedabek operations remaining in operation.

Conclusion: Robust quarterly production report see the team maintaining its FY20 production guidance with operations at Gedabek continuing as normal. The quarter marked a major milestone with the Company going debt free and posting $26.0m net cash position by quarter end (excluding some $5.9m in dore gold sales proceeds with regards to the March production).Strong FCF generation and balance sheet bodes well for the sustainability of dividend payments as well as a continuing investment in the exploration programme.

*SP Angel acts as nomad and broker to Anglo Asian Mining

 

Ariana Resources* (AAU LN) 345p, Mkt Cap £35.0m – Q1 Production report

  • Ariana Resources reports the production of 5,129oz of gold and 67,459oz of silver from the 50% owned Kiziltepe mine in Turkey during the quarter ending 31st March 2020.
  • The production is derived from the processing of 53,840 tonnes of ore at an average grade of 3.22g/t gold and the announcement points out that production exceeded ʺaverage annualised quarterly guidance by 14%.ʺ
  • Managing Director, Dr. Kerim Sener, said that ʺWe have entered 2020 with a strong first quarter of production from the Kiziltepe Mine. Unlike the same period last year, production was not impacted by unusually poor weather, resulting in operations proceeding as planned across the Arzu South, Arzu North and Derya pitsʺ.
  • Commenting on the operational performance and outlook, Dr. Sener said that ʺMaterial movements from the pits were maintained at near all-time highs, while ore production for the quarter broke a new record. This higher production rate is in part to compensate for the expected reduction in grades from the satellite pits.  Production from our highest-grade pit, Arzu South, is due to be completed during Q3 2020 and production thereafter will be focused on Arzu North and Derya. In addition, the mine has built up a stockpile of over 130,000 tonnes of ore, sufficient to cover at least eight months of mill feed.ʺ

Conclusion: Ariana Resources has benefitted from favourable weather conditions during the first quarter and reports that quarterly production is running around14% ahead of annualised production guidance.

*An SP Angel mining analyst has visited Ariana’s licenses in Turkey

 

Atalaya Mining (ATYM LN) 119p, Mkt Cap £154.5m –Production ramps to design capacity at Proyecto Riotinto

  • Atalaya Mining reports that a 40% year-on-year increase in throughput during the March quarter to 3.4mt resulted in the Proyecto Riotinto achieving the expanded 15mtpa designed processing rate during March 2020.
  • The result comes ʺjust a few months after the start-up in November 2019ʺ and has been achieved at a time when operating restrictions to help contain the spread of the Covid19 virus will have undoubtedly added to operational challenges.
  • Copper production of 13,229 tonnes during the quarter was similar to the 13,527t during the final quarter of 2019 with ʺa 17% higher throughput offsetting the lower grade and recoveries.ʺ
  • The company explains that the lower recoveries were the result of ʺtreating lower grade surface stockpiles as a result of partial flooding of the pit floor during December 2019, several plant stoppages for scheduled maintenance and the COVID-19 shutdown order.ʺ
  • In addition, ʺDuring February 2020 major scheduled maintenance was undertaken, during which time the plant was not running. These upgrades led to a new production record being achieved in March 2020 with 5,375 tonnes of copper produced from the processing of 1.35 million tonnes of ore with a recovery of 84.6%ʺ. However ʺMarch 2020 figures confirmed that the 15Mtpa expansion is now successfully working at full designʺ capacity.
  • While Atalaya Mining is continuing to monitor the impact of the Covid19 containment measures, the company’s CEO, Alberto Lavandeira, confirmed that the previously announced production guidance of 55-58,000t is being maintained. He also confirmed that ʺto date there have been no known cases of COVID-19 amongst employees of the Company or its contractors.ʺ

Conclusion: The successful ramping up of Proyecto Riotinto to the expanded 15mtpa processing rate was achieved during March and for the present the company is maintaining its 2020 production guidance. It is also encouraging to learn that Proyecto Riotinto remains virus-free.

 

Bluejay Mining* (JAY LN) 3.87p, Mkt cap £36m – Exploration Licences in South Greenland offer great potential

  • Bluejay Mining report the addition of two new exploration licences in South Greenland covering some 2,025sqkm
  • The licenses are highly prospective for gold, base metals and uranium amongst other commodities. 
  • The new Thunderstone project will give the team more to work on while they wait for Rio Tinto to bulk test the Dundas ilmenite sample next year.
  • These are highly prospective licenses according to Bluejay’s geological modelling on the available geological, geochemical and geophysical data.
  • The licenses are seen as highly prospective for base-metals and gold.
  • The south of Greenland is largely ice free with the ice sheet covering around 80% of the country.
  • The retreating ice sheet has left huge tracts of exposed bare rock aiding exploration for surface and near surface mineral deposits.
  • While Greenland terrain is often difficult to cross, the many ravines also offer the opportunity to sample near vertical cross sections of exposed rock offering similar data to that gained from drilling.
  • Stream sediment sampling shows the licenses to be highly prospective particularly for zinc.
  • The licenses come at no cost to Bluejay as the Greenland government recently cut the cost for holding licenses to zero to help explorers through the Coronavirus pandemic.
  • Management continue to look for a partner for the Disko-Nuussuaq project.
  • Bluejay recently commissioned the re-analysis of all available historical stream sediment samples from the Geological Survey of Denmark and Greenland ‘GEUS’ archives for the area south of 61oN.
  • 764 historic samples have been re-analysed by ALS in Ireland with several samples showing grades that are too high for stream samples.
  • The new assays indicate the discovery of new geochemical anomalies which should make good targets for further testwork
  • Bluejay has sufficient cash resources for the next four years assuming ongoing work on desk-top and other studies relating to Dundas and other exploration.

Conclusion: Bluejay are pressing ahead with further exploration in Greenland. The company has a strong rapport with local government agencies and is well placed to make new discoveries while it awaits further progress at Dundas on demand for its high-grade ilmenite product and progress with Rio Tinto at RTIT.

*SP Angel act as nomad to Bluejay Mining. *SP Angel have visited the Dundas, Itelak ilmenite sands project in Greenland.

 

Chaarat Gold* (CGH LN) 29p, Mkt Cap £136m – Proposed equity raise

BUY

  • The Company is launching a placing for at least $12m at 26p by way of new investment, conversion of existing debt as well as the offset of accrued or future fees and salaries over the next two quarters.
  • The Company received commitments from its major shareholders, all board members and senior management.
  • Labro Investments, the Company’s largest shareholder with a 35% interest, agreed to put in $10m including $5m in a cash commitment and $5m debt conversion.
  • The Company will reduce the outstanding amount of $6m owed to Labro under the revolving loan facility to $1m with a further $7m remaining undrawn and available.
  • The facility has been also extended to 31 Dec/20 from 14 Jul/20.
  • All board members, senior management, the Company’s largest institutional shareholder and other existing investors have agreed to invest at least $2m in the placing.
  • The Company is open to additional capital commitments by 24 April 2020 that would further strengthen its liquidity position allowing it to advance its portfolio of assets.
  • Proceeds will be used to fund ongoing development works and exploration programme at the Tulkubash gold project, engage on technical work to advance the Kyzyltash project, potential M&A as well as reduce the Company’s leverage.
  • Separately, the Company agreed the fee with Labro regarding the offered guarantee in respect of the $19.4m investor loan (including accrued interest) that was extended to 31 Dec/20 as well as an extension of its revolving loan facility.
  • The Company will issue Labro 12m shares in respect of those fees as well as another 8m shares to be issued should the $19.4m loan is not repaid by 31 Oct/20.
  • The Company retain an option to repay all or any part of the loan without penalty at any time before the due date and if it pays back $5m before 30 May/20, the maturity of the remaining Loan will be automatically extended to 31 Mar/21.

Conclusion: The Company secured at least $12m in equity capital commitments from its major shareholders, the Board and the management bringing in funds to progress with development and exploration works at the Tulkubash oxide gold growth project while also exploring options to de-risk the major Kyzyltash sulphide gold asset as well as consider any potential M&A. The fundraise also allows to reduce the outstanding leverage of the Company and improve the liquidity position amid growing uncertainty over the effects and lasting period of the COVID-19 pandemic.

*SP Angel acts as Broker to Chaarat Gold

 

Highland Gold (HGM LN) 231p, Mkt Cap £842m – Strong FY19 with a third interim dividend announced by the Board

  • Production climbed to a record of 300.7koz (2018: 269.5koz) coming in broadly in line with the annual guidance of 290-300koz.
  • Revenues climbed to $395m (+27%yoy) reflecting stronger gold sales and higher realised gold price of $1,344/oz (2018: $1,171/oz).
  • TCC and AISC climbed to $556/oz (+10%yoy) and $791/oz (+16%yoy), respectively, reflecting higher cost ounces from the acquired Valunisty asset, the impairment of low grade ore at Belaya Gora and Valunisty, as well as higher maintenance capex at MNV, Belaya Gora and Novo.
  • EBITDA increased to $205m (+34%yoy) implying a strong 52% EBITDA margin.
  • Net earnings climbed nearly three times to $178m (2018: $56m) with EPS coming in at 48.7c (2018: 15.4c).
  • Net CFO amounted to $138m (2018: $136m) seeing FCF (ex interest) at $49m (2018: $74m).
  • Net debt position stood at $250m, equivalent to 1.22 times LTM EBITDA (2018: 1.38x including Valunisty).
  • The Board recommended a third interim dividend of 3.5p (ex-dividend date 23 Apr/20) taking the total for FY19 to 13.5p (2018: 13.4p).
  • The Company is confident in delivering sustainable dividend and growth projects based on strong cash flow generation, stable balance sheet and robust liquidity position with c.$340m available in undrawn credit lines.
  • FY20 production guidance reiterated at 290-300koz.
  • 1.3mtpa Novo expansion project is scheduled to be completed by year end as well as the Belaya Gora plant upgrade.
  • Construction works Kekura are ongoing with key infrastructure facilities at or near completion and commercial production start scheduled for 2023.

 

Rainbow Rare Earths (RBW LN) 2.03p, Mkt Cap £7.7m – Export of another 100t of rare earth concentrate

  • Rainbow Rare Earths report the export of another 100t of rare earth concentrate from its Gakara mine in Burundi
  • This follows on from the export of 75t of REE concentrate sold in February.
  • Production is rising again at Gakara since its significant reorganisation in December
  • The commissioning of a fleet of five new trucks this month will help as will the drier weather.
  • Exports continue across land boarder with Tanzania.

*SP Angel are financial advisor and broker to Rainbow Rare Earths

 

Strategic Minerals* (SML LN) 0.47p, Mkt Cap £7.7m –Cobre magnetite sales

  • Strategic Minerals reports sales of magnetite during the first quarter of 2020 of 12,953 tons generating revenue of US$0.76m.
  • The March 2020 quarter sales are approximately 37% higher than the 9,472 tons achieved in the equivalent quarter of 2019 and approximately 750 tons higher than the 12,202 sold during the preceding quarter to the end of December 2019.
  • The company attributes the increased level of sales to ʺthe factory maintenance undertaken by two of Cobre's clients in the quarter to March 31 2019, [which shows] the 2020 March quarterly sales performance is exaggerated when compared to the March quarter 2019ʺ.
  • Strategic Minerals reports that it is continuing to operate the Cobre ʺoperations have been permitted to continue and protocols have been adopted to, effectively, operate with a zero contact both between on-site employees and with trucks arriving at the siteʺ even though the operations at the copper mine which is the source of the magnetite material have been suspended ʺas a few employees tested positive for Covid-19ʺ.
  • Strategic Minerals says that ʺWhile the incidence of the virus has not been considered widespread, the mine operator deemed it appropriate to undertake a temporary suspension of its operations.ʺ
  • Revenues grew by approximately 38% compared to the first quarter of 2019 and by approximately 7% compared to the preceding quarter.
  • Strategic Minerals comments however that ʺsales revenue shown here for the annual period to 31 March 2020 excludes deposits received and forfeited by the major Cobre client.  As legal action has commenced in relation to this client, expectations for future sales growth are focused on those arising from new customers and other existing customersʺ.
  • Commenting on the state of the legal arbitration with its major customer, Strategic Minerals says that ʺa result [is] expected by 30 May 2020ʺ.
  • The company reports a 31st March 2020 cash balance of US$0.35m.
  • Managing Director, John Peters, said that ʺthe Company greatly appreciates both the continuity of activity at Cobre, due to its identification as an essential service provider, and the organic growth seen in sales over the past year.  We expect this growth trend to continue in 2020 despite the unusual market conditions. Operations at Cobre have always provided the highest level of safety for employees and these efforts have been lifted again to ensure all employees are safe in this work environment.ʺ
  • Mr. Peters also said that ʺEfforts continue to move our projects forward and, whilst the current environment has slowed the pace of some engagements, the Board and Management remain confident of future progress."

 Conclusion: Sales from Cobre remained robust during the first quarter of 2010 and the site remains in operation while observing the restrictions implemented to control the Covid19. virus

*SP Angel acts as Nomad and Broker to Strategic Minerals

 

URU Metals* (URU LN) 120p, Mkt Cap £0.9m – Permitting update for the  Zebediela project in South Africa

  • URU Metals reports that, following the successful submission of its Scoping Study, it has received approval from the South African authorities to ʺproceed with the Environmental Impact Assessment ("EIA") phaseʺ of its Zebediela nickel and pgm project project in the Bushveld region of South Africa.
  • The company explains that plans to commence the specialist studies for the EIA, which had been scheduled to start at the end of March, have now been postponed in response to South Africa’s Covid19 containment measures but that ʺThe EIA phase will commence as soon as the lockdown in South Africa is lifted, which at this stage is expected to be the 30 April 2020. The focus of the EIA phase will be to expand on the impacts and mitigation measures identified in the scoping phase, and is expected to cost GBP250,000.ʺ
  • URU Metals will request that the Department of Mineral Resources grant an extension to the EIA timetable based on the delays incurred as a result of the Government imposed lock-down.
  • CEO, John Zorbas, confirmed that ʺEven though the Covid-19 outbreak has resulted in some delays to the project timelines, the team are prepared and ready to immediately commence with the EIA as soon as the South African lockdown is lifted.ʺ

Conclusion: URU Metals’ work on the EIA at Zebediela has been set-back by the Covid19 containment measures in South Africa but is ready to get underway as soon as the restrictions are lifted.

*SP Angel acts as Nomad and broker to URU Metals

 

SP Angel Healthcare team - Vadim Alexandre, Liam Gascoigne-Cohen

Sanofi and GSK team up to develop a vaccine for COVID-19

  • Two large pharma companies, GSK and Sanofi, are collaborating to develop a subunit vaccine for COVID-19.
  • Sanofi is using its recombinant DNA platform to produce an antigen, which aims to generate a durable host immune response to the virus.
  • GSK is providing an adjuvant technology which enhances the potency of the vaccine and should reduce the required dose to achieve a protective immune response.
  • The partners aim to begin Phase 1 trials in H120 and have a product available in H221

The alliance between two of the largest vaccine developers is sensible in current circumstances given their vaccine expertise and manufacturing clout. Although the partners are yet to enter the clinic, their aim to have a product available by H221 is impressive for a process usually measured in years.  In terms of other COVID-19 vaccine developers, Moderna Therapeutics (MDRNA.NQ) currently leads the pack with an RNA-based vaccine candidate in Phase 1 trials with efficacy data expected in early summer. However, RNA vaccines are a novel modality with no approved treatments. Sanofi and GSK are taking a more conventional route; developing a subunit vaccine which relies on a proven, scalable technology. Sanofi used a similar technology for FluBlok, an approved vaccine for influenza.

 

Diurnal (DNL.L): Operational Update

Market capitalisation: £33.5m; Share price: 28p

  • Diurnal, the developer of therapies for rare hormonal diseases, provided a business update.
  • Measures are in place for the continuation of the Group’s safety extension study testing Chronocort®. No subjects have been required to leave the study to date as a result of COVID-19 restrictions.
  • Alkindi® revenues in Europe are in-line with Board expectations. 
  • There have been no material delays regarding the regulatory processes for Chronocort® in Europe and Alkindi® in the US. 
  • Management believe Diurnal has sufficient cash to reach profitability having completed a £11.2m placing and received an upfront payment of $3.5m as part of a US licencing agreement with Eton Pharmaceuticals (ETON.NQ) regarding Alkindi®.

Diurnal continue to progress the business despite the Covid-19 pandemic. The FDA is reviewing the Group’s New Drug Application (NDA) for Alkindi® Sprinkle with an approval decision expected in Q420. Alkindi® has already been approved in Europe and posted H1-20 revenues of £1.1m (H1-19: £0.2m). A recent placing and an upfront payment from Eton Pharma has provided the Group with capital to commercialise its second asset, Chronocort® for the treatment of patients with congenital adrenal hyperplasia. In December, the Group submitted a Market Authorisation Application (MAA) to the EMA, the European regulator, for Chronocort® with a decision expected in Q121.

*One of the authoring analysts has an interest in Diurnal shares

 

Renalytix AI plc (RENX.L): Agreement with Three Rivers Provider Network

Market capitalisation: £130m; Share price: 230p 

  • Renalytix the developer of AI-enabled clinical diagnostics for kidney disease, struck an agreement with Three Rivers Provider Network, Inc. (TRPN), a US proprietary provider organisation (PPO) network.
  • Under the provider network agreement, TRPN plan members and their clients now have access to KidneyIntelX testing as a participating service provider.
  • The TRPN network consists of over 1.5m provider locations, including 5,000 hospitals and 100,000 ancillary care facilities. 

PPO networks can help to accelerate coverage for newly launched tests, such as KidneyIntelX™. This agreement could bring significant potential market access. KidneyIntelX™ uses machine-learning algorithms to assess blood-based biomarkers and features from a patient’s electronic health record to improve clinical management of patients with Diabetic Kidney Disease.

 

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

SSY

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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