SP Angel – Morning View – Thursday 06 09 18

US$ pullback helps precious and base metals prices

 

MiFID II exempt information – see disclaimer below

BHP Billiton - Stake in SolGold indicates growing interest in Junior miners

DGR Global (DGR AU) – Update on project portfolio

Kodal Minerals* (KOD LN) – Initial resource estimate at Bougouni

Savannah Resources (SAV LN) – Further drilling at Grandao intersects widest mineralisation to date at Mina do Barroso

 

Vanadium prices turn higher rising 3.8% to 83-84.5/kgV in Western Europe

  • Vanadium prices continue to defy gravity, turning higher to 83-84.5/kgV in Western Europe according to the Metal Bulletin.
  • Ferro-vanadium prices are reported to be being driven by a return of consumer interest in the spot market .
  • China’s new standard for higher-content steel rebar is being implemented in November.
  • Production of Ferro-vanadium is currently lower in China due to environmental regulations reducing the amount of vanadium from stone coal and furnace slag.

 

Rare Earths - US Researchers win award for acid-free rare earth magnet recycling process

  • Researchers at the Critical Materials Institute and Ames Laboratory have won a prize for inventing a 100% acid-free magnet recycling process
  • Their innovation allows magnets to be dissolved in water-based solutions recovering >99% purity rare earth metals as well as cobalt
  • The team claim ‘A unique strength of this technology is that operational hazards and negative environmental impacts associated with acid-based dissolution process are eliminated without sacrificing purity, efficiency and potential economic impact,’.
  • We wonder if the process might also be applied to the processing of Rare Earth mineral ores and concentrates

 

Lithium-Oxide four-electron conversion doubles electron storage

  • Chemists from the University of Waterloo in Canada have successfully resolved two of the most challenging issues surrounding lithium-oxygen batteries, and in the process created a working battery with near 100% coulombic efficiency.
  • The new work, described in ‘Science’, proves that four-electron conversion for lithium-oxygen electrochemistry is highly reversible. The team is the first to achieve four-electron conversion, which doubles the electron storage of lithium-oxygen, also known as lithium-air, batteries.
  • The battery runs hot and while it works well under perfect conditions it may suffer low cycle life likely in real-world applications
  • While the technology looks interesting it will be at least 10 years away from commercialisation

 

Dow Jones Industrials

 

+0.09%

at

  25,975

Nikkei 225

 

-0.41%

at

  22,488

HK Hang Seng

 

-1.05%

at

  26,958

Shanghai Composite

 

-0.47%

at

   2,692

FTSE 350 Mining

 

-1.19%

at

  16,345

AIM Basic Resources

 

-0.13%

at

   2,204

 

Economics

US – The public comment period for proposed US duties on an additional $200bn of Chinese imports expires today.

  • It remains unclear if the proposed measure will be implemented by the administration.
  • Nevertheless, risks of a new escalation in trade war as well as a rout in emerging markets was enough to European equities (Stoxx Europe 600) falling to the lowest level in five months today.
  • At the same time, the S&P 500 index remains close to record highs despite a dip in the past week maid a booming domestic economy.
  • The US$ is weaker this morning with the yen and the Swiss franc up on investors demand for safe haven currencies amid concerns the US will go ahead with more tariffs on China.

 

Germany – New manufacturing orders surprisingly contracted in July (-0.9%mom v +1.8%mom forecast) amid a weaker global growth backdrop.

 

UK – The pound climbed on the back of the news that UK and Germany are prepared to drop  key Brexit demands potentially easing the path for the UK to strike a deal with the EU.

  • Germany is ready to accept a less detailed agreement on the UK’s future economic and trade ties with the EU aiming to get a divorce deal done, people familiar with negotiations said.
  • The UK is also willing to settle for a vaguer commitment on the future relationship postponing some decision until after Brexit day.
  • The currency jumped more than a 1% on the news yesterday but has since given up some of those gains and is currently trading 1.2920.

 

India – The rupee hit new lows this morning extending a series of losses since the start of the year (-11% YTD) with latest economic data showing an expanding trade deficit amid surging volumes and price of oil imports.

 

North Korea – Kim Jong Un is open to accepting “stronger” denuclearization measures if the US acknowledges measures that have already been taken to limit weapons testing, South Korean officials who met with the North Korean leader said.

  • President Trump cancelled a North Korea trip by Secretary of State Michael Pompeo last month on the back of lack of progress.

 

Currencies

US$1.1637/eur vs 1.1553/eur yesterday. Yen 111.31/$ vs 111.44/$. SAr 15.333/$ vs 15.613/$. $1.292/gbp vs $1.283/gbp. 0.719/aud vs 0.716/aud. CNY 6.835/$ vs 6.841/$.

 

Commodity News

Precious metals:         

Gold US$1,201/oz vs US$1,193/oz yesterday – Gold is steady this morning recovering to above $1,200/oz as dollar retreated and investors continue to watch developments in the emerging markets closely.

  • Gold prices rose yesterday from an 11-day low in the previous session as the US dollar rally runs out of momentum
  • Gold prices are rising as the dollar flattens versus a basket of major currencies

   Gold ETFs 67.9moz vs US$67.8moz yesterday

Platinum US$788/oz vs US$774/oz yesterday

Palladium US$978/oz vs US$977/oz yesterday

Silver US$14.26/oz vs US$14.13/oz yesterday

           

Base metals:   

Copper US$ 5,910/t vs US$5,847/t yesterday

Aluminium US$ 2,071/t vs US$2,055/t yesterday

Nickel US$ 12,540/t vs US$12,420/t yesterday

Zinc US$ 2,450/t vs US$2,409/t yesterday

Lead US$ 2,070/t vs US$2,077/t yesterday

Tin US$ 18,805/t vs US$18,775/t yesterday

           

Energy:           

Oil US$77.2/bbl vs US$77.6/bbl yesterday

Natural Gas US$2.792/mmbtu vs US$2.814/mmbtu yesterday

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

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$67.0/t vs US$66.5/t

Chinese steel rebar 25mm US$685.5/t vs US$684.1/t

Thermal coal (1st year forward cif ARA) US$96.3/t vs US$93.2/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$64,750/t

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

Lithium - Lithium Americas planning on developing new lithium mine in Nevada

  • Lithium America announced plans to develop the McDermitt Caldera in Nevada
  • The plan is to move to 30,000tpa of lithium carbonate by 2022 and then to 60,000tpa sometime after 2025

 

Company News

BHP Billiton (BLT LN)   1576p, mkt cap £89bn stake in SolGold indicates growing interest in Junior miners

  • BHP’s acquisition of a 6.1% stake in SolGold for a 20% premium indicates a new environment for explorers which are being stalked by cash-rich majors.
  • BHP were previously rejected by SolGold when Newcrest came in with its first round of funding but have being watching and waiting to become more involved.
  • Their acquisition of the 6.1% stake is a significant statement and a major endorsement not only for SolGold but for junior explorers in general.
  • SolGold started life as a typical AIM-listed London explorer working through and evaluating exploration prospects till it came across the Cascabel copper/gold prospects in Ecuador.
  • Management fostered a culture where brilliant geological insights were brought forward and funded within the AIM-listed entity.
  • The team’s expert, systematic and disciplined approach to exploration did the rest and while early targets proved elusive the approach led to the discovery of the Alpala prospect at Cascabel.
  • Significantly, SolGold’s portfolio in Ecuador is now substantially larger and tremendously more exciting given the team’s new expertise in the region offering opportunity for further major discovery in the region.
  • BHP CEO said the deal is “Consistent with our positive long-term outlook, copper is a key exploration focus for BHP as we seek to replenish our resource base and grow this important business,”
  • BHP like other major miners has been building teams to analyse the market and pick out the next generation of major projects for future development.
  • These teams are growing in their expertise and activity and are actively scouring the market. They will compete to buy the better juniors before being cut back in the next commodity price downturn – such is the nature of big companies and their reaction to lower cash flows.
  • SolGold looks likely to be the first AIM-listed junior explorer to be fought over by the majors for some time as we head towards a new round of stake building and acquisitions.

 

DGR Global (DGR AU) A$0.115, Mkt Cap A$70.5m – Update on project portfolio

  • Australian listed resource company incubator, DGR Global Resources, has provided an update on its activities including the continuing exploration and project development at Cascabel and elsewhere in Ecuador under 12% owned Solgold, the African exploration activities of IronRidge Resources (24.3%), moves towards commercial production at Armour Energy’s (25.9%) Myall Creek Well 4A, as well as progress at Aus Tin Mining (18.2%), Dark Horse Resources (17.2%) and plans to move unlisted Auburn Resources (58%) towards an IPO.
  • Drilling to update the maiden resource estimate of over 1bn tonnes for the Alpala deposit at the Cascabel copper and gold project in Ecuador is a high priority for Solgold with over 100,000m of additional drilling expected to be included and evidence emerging of a larger coherent high grade core than was identified in the earlier estimate. Drilling at the Aguinaga prospect, also within the Cascabel project area, is still at a relatively early stage but as the shape of the structure is emerging “SolGold geologists believe potential exists for ongoing discoveries through further drilling”.
  • IronRidge is actively pursuing gold exploration in Cote d’Ivoire and in Chad as well as a number of promising lithium projects in the coastal belt of Ghana where wide intersections of mineralisation in excess of 1% Li2O have recently been reported from initial reverse circulation drilling. Trenching results at the Dorothe gold project in Cahd have shown five “large, coherent gold targets over 500m to 1.2km strike length and 100m to 200m widths from trenching; with targets still open along strike.”
  • At Dark Horse Resources’ Las Tapias lithium  project in Argentina drilling of the waste dumps is underway and the company is expecting results from its hard rock drilling.
  • Ore sorting trials on Aus Tin’s Taronga ore have shown the opportunity to improve head grades by up to 240 percent and “Subject to the outcome of the program of bulk test work the Company may consider progressing an agreement to acquire or lease an ore sorter for the Taronga Stage 1 Project”.
  • At Auburn Resources’ drilling of copper gold porphyry and breccia targets showed “visible copper and other sulphide mineralisation” and assay results are awaited.

 

Kodal Minerals* (KOD LN)   0.195p, Mkt Cap £15m – Initial resource estimate at Bougouni

  • Our morning note yesterday contained a typographic error; we apologise to our readers but please note that the grade of the inferred resource at Bougouni is 1.2% Li2O and NOT 12.0% as erroneously reported. We re-issue our comment, in corrected form, below.
  • Kodal Minerals reports a maiden inferred mineral resource estimate for its Boubouni lithium project of 17.3mt at an average grade of 1.20% Li2O.
  • The estimate covers Kodal Minerals’ three most advanced projects at Sogola-Baoule (10.4mt at 1.18% Li2O), Ngoualana (4.7mt at 1.34% Li2O) and Boumou (2.2mt at 1.01% Li2O). The company points out, however, that these prospects remain open both laterally and at depth and only form a part of “a very large project area”, implying that potential exists for further mineral resource expansion.
  • Kodal Minerals’ CEO, Bernard Aylward describing the first resource estimate for Bougouni as a “milestone … [at this] …  very exciting phase for the Project” points out that even at this stage “This Mineral Resource estimate places the Bougouni Project in the top 15 hard rock lithium projects worldwide”.
  • Referring to the current inferred status of the estimate, which was prepared by the consultants CSA Global, the announcement points out that “The level of data for the Ngoualana and Sogola-Baoule prospects could support an upgrade to Indicated status following completion of a field visit by the CSA Global resource geologist who is the Competent Person for the resource estimation” and that “An update of the Mineral Resource estimate is expected in the fourth quarter of 2018 following a site visit by the independent geologist and additional drill testing.”
  • The company has also outlined its preliminary work on mining optimisation, which was undertaken as part of the planning of infill and extension drilling. At this point, the company envisages a 1mtpa open-pit mining operation producing “a good quality spodumene concentrate, with grade over 6% Li2O” through a dense media separation plant.
  • Reflecting the current distribution of resources between the three prospect areas, it is intended that “Sogola-Baoule has potential to provide the most tonnage to any potential processing plant, while the Ngoualana prospect has significant potential to add higher-grade material into the processing blend.”
  • Initial estimates suggest that costs could lie in the region of US$400/tonne of spodumene concentrate produced which “compares favourably with the current market price of approximately US$800 - 900 per tonne of concentrate.”
  • The company will be continuing with further drilling, giving initial priority to the Boumou prospect area and extension to the mineralisation at Sogola-Baoule as well as the testing of new targets. Metallurgical testing will continue to investigate the optimal processing of the mineralisation and examine the most effective blend of the different source of mineralisation. Work continues to optimise the mining and to investigate the cost structures.

Conclusion: The initial mineral resource estimate is a landmark in the development of Kodal Minerals’ Bougouni lithium project. The company is voicing optimism that the initial resource, already characterised as one of the world’s fifteen largest lithium projects, is capable of expansion as further drilling proceeds. At this stage indications are that the project should be amenable to a relatively low cost and metallurgically straightforward dense media processing to produce a spodumene concentrate. We look forward to further developments.

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

 

Savannah Resources (SAV LN)   8.2p, Mkt cap £70.6m – Further drilling at Grandao intersects widest mineralisation to date at Mina do Barroso

  • Savannah Resources has announced that recent drilling at the Grandao project has now identified outlined “a virtually continuous zone of shallowly westerly dipping pegmatite from surface to a vertical depth of over 150m and covering a zone of approximately 650m long and up to 550m wide”, including “the widest intersection recorded so far at Mina do Barroso”.
  • The results are to be incorporated within a new mineral resources estimate expected to be reported shortly. The current resource estimate shows 14mt of inferred resources at an average grade of 1.1% Li2O, of which 10.3mt averaging 1.1% Li2O are located within the Grandao deposit.
  • Among the results highlighted today are:
    • A 30m wide intersection at an average grade of 1.33% Li2O from a depth of 45m in hole 18GRARC106; and
    • A 99m wide intersection at an average grade of 1.46% Li2O from a depth of 20m in hole 18GRARC108 which also intersected a deeper zone of mineralisation averaging 1.02% Li2O over 18.9m from a depth of 122m; and
    • A 35.9m wide intersection at an average grade of 1.24% Li2O from a depth of 51m in hole 18GRARC109; and
    • A 33m wide intersection at an average grade of 1.28% Li2O from a depth of 50m in hole 18GRARC110; and
    • A 23m wide intersection at an average grade of 1.4% Li2O from a depth of 99m in hole 18GRARC111; and
    • A 23m wide intersection at an average grade of 1.14% Li2O from a depth of 57m in hole 18GRARC115
  • We note, however that, although the 99m wide intersection in hole 18GRARC108 is impressive, a cross section of the drilling displayed on the company’s website shows this hole cutting the mineralisation somewhat obliquely suggesting that the true width of the intersection may be rather shorter.
  • Savannah Resources also points to further potential for additional resource expansion with the completion of “First pass drilling” of six holes at a new area, Carvalha da Bacora, which lies west of the Grandao deposit. Results included a 7m wide intersection at an average grade of 1.48% Li2O from a depth of 62m in hole 18CDBRC003 and 5m averaging 1.5% Li2O from 50m depth in hole 18CDBRC005. The company also plans to start drilling at “a high priority exploration target at Pinheiro target” shortly.
  • Commenting on the results, CEO, David Archer, said “These results, together with the recent drill results announced on 26 July are being incorporated into our fourth and latest Mineral Resource study, which we hope to be in a position to announce shortly”
  • Mr. Archer went on to say that “Mina do Barroso continues to deliver, underscoring its increasing strategic significance to the European lithium value chain as Western Europe’s largest spodumene lithium deposit.”

Conclusion: The intersection of more wide zones of lithium mineralisation and the start of drilling in new areas of the licence bodes well for a positive resource update when it becomes available.

 

 

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 employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

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