SP Angel . Morning View . Friday 23 10 20
Eurozone growth pulled back by deepening slowdown in services sector
Beowulf Mining (LON:BEM) – Wolf Mountain Geophysics Results Define High Priority Drill Targets
Chaarat Gold* (LON:CGH) – Buy, 57p – $20.5m refinancing completed
Goldplat (LON:GDP) – Quarterly results indicate progress in South Africa and Ghana
Kavango Resources (LON:KAV) – Mineralogical study and sample analysis indicates presence of primary magmatic sluphides
KEFI Gold and Copper* (LON:KEFI) – Q3 update highlights Tulu Kapi funding progress and Hawiah maiden resource/PEA
China’s Renminbi may be set to stabilise at 6.66 / US dollar following recent gains
Chinese economists see 6.66 as a balanced level for the Renminbi / US dollar rate
Some hedge funds now see the US dollar as weakening towards Christmas against many major currencies
Metals prices are likely to continue to rise in US dollar terms in this environment
EV revolution, gold and other ideas (Interactive Investor): https://www.youtube.com/watch?v=ja0IdjszfCc
Metals Markets: Are they totally dependent on stimulus? (IG TV): https://youtu.be/TOiSwRpgfKM
Tesla Battery Day (IG TV): https://youtu.be/8su0PtyZLIM
SolGold interview: : https://youtu.be/wK3SDPKADgM
Stock ideas (VOX, 21/10/20): https://www.voxmarkets.co.uk/media/5f913cebb9f74a03c9dfcb4d/?context=/listings/LON/AAZ/multimedia/
(VOX, 14/10/20): https://audioboom.com/posts/7705483-john-meyer-talks-the-imf-anglo-asian-mining-orosur-mining-scotgold-resources
Dow Jones Industrials +0.54% at 28,364
Nikkei 225 +0.18% at 23,517
HK Hang Seng +0.25% at 24,849
Shanghai Composite -1.04% at 3,278
US – Coronavirus deal at $1.9tn according to White House Chief Of Staff
Eurozone – A correction in the services sector business activity drags composite PMI in the Eurozone into a contraction territory this month.
Services PMI hit a five-month low amid increasing COVID-19 concerns and more than compensating for an accelerating growth in the manufacturing sector.
While the rate of job losses eased, new orders showed a renewed drop and business optimism over the next 12 months fell to the lowest since May.
Eurozone Markit Manufacturing PMI: 54.4 v 53.7 in September and 53.0 est.
Eurozone Markit Services PMI: 46.2 v 48.0 in September and 47.0 est.
Eurozone Markit Composite PMI: 49.4 v 50.4 in September and 49.2 est.
Germany – Markit Manufacturing PMI: 58.0 v 56.4 in September and 55.0 est.
Markit Services PMI: 48.9 v 50.6 in September and 49.4 est.
Markit Composite PMI: 54.5 v 54.7 in September and 53.3 est.
France – Markit Manufacturing PMI: 51.0 v 51.2 in September and 51.0 est.
Markit Services PMI: 46.5 v 47.5 in September and 47.0 est.
Markit Composite PMI: 47.3 v 48.5 in September and 48.0 est.
UK – Markit Manufacturing PMI: 53.3 v 54.1 in September and 53.1 est.
Markit Services PMI: 52.3 v 56.1 in September and 53.9 est.
Markit Composite PMI: 52.9 v 56.5 in September and 54.0 est.
Hong Kong and Shenzhen start trading of cross-border ETFs in HK$ and Renminbi (SCMP)
The ETFs are for the The CSOP Yinhua CSI 5G Communications Theme ETF and the Yinhua ICBC CSOP S&P New China Sectors ETF
No metals ETFs have been cross-listed as yet.
US$1.1807/eur vs 1.1848/eur yesterday. Yen 104.76/$ vs 104.54/$. SAr 16.220/$ vs 16.339/$. $1.308/gbp vs $1.313/gbp. 0.713/aud vs 0.711/aud. CNY 6.673/$ vs 6.665/$.
Goldman Sachs see gold averaging US$1,836 this year and US$2,300 in 2021
Our forecasts are for $1,905 for 2020 and 1,925/oz for 2021
Goldman also sees base metals rising by 18% over the next 12 months and industrial metals 5.5%.
We see certain industrial metals such as Vanadium, ferrochrome and manganese moving higher than this due to the rapid development of new battery technology and manufacturing capacity.
Vanadium should go higher on its use in structural steel for Stimulus construction projects.
Ferrochrome should go higher as it substitutes for nickel which is being bought up for Li-ion batteries for EVs and grid power.
Manganese is used in LMO (Lithium Manganese Oxide) and NMC (Nickel Manganese Cobalt) batteries, with NMC proving to be a popular battery chemistry.
Gold US$1,907/oz vs US$1,917/oz yesterday – Gold prices fall as US stimulus talks appear to run out of steam
Gold prices fell 1% on Thursday, as talks of further US stimulus were put on the back-burner as policy makers focused on yesterday’s presidential debate.
US House speaker Nancy Pelosi said on Thursday that negotiators were making progress in talks with the White House over a fiscal aid package, although White House economic advisor Larry Kudlow said there were still “significant policy differences”.
Mr Kudlow also indicated that the differences are likely to remain unresolved until after the election.
A stronger US dollar also weighed on gold, as the greenback firmed on Thursday and rose a further 0.18% on Friday against the basket of currencies (FX Street).
Gold found support from the resurgence in coronavirus cases particularly in Western Europe, where governments have spent the week introducing measures to contain the virus which are also likely to affect economic activity.
Gold ETFs 110.9moz vs US$111.0moz yesterday
Platinum US$889/oz vs US$891/oz yesterday
Palladium US$2,396/oz vs US$2,405/oz yesterday
Silver US$24.68/oz vs US$24.92/oz yesterday
Copper US$ 6,873/t vs US$6,974/t yesterday – ICSG expect copper mine production to fall just 1.5% this year and for refined output to rise by 1.6%
The figures assume a 5.5% fall in production from scrap
The ICSG appear to imply a 16% increase in demand in China and an 8% fall in the EU and 6% in the US
China lifts import ban on scrap metals to make up supply shortfall
China has lifted its import ban on some high-quality scrap metals after several years of restrictions (South China Morning Post).
The move indicates a shift towards more recycling to meet a shortage of raw materials driven by external supply issues and robust Chinese demand.
The increase in metal scrap imports will relieve pressure on domestic supplies and cut raw material prices driven up by Chinese demand.
Import restrictions for high-grade copper, aluminium and brass scrap will be relaxed from the 1st of November, according to the Ministry of Ecology and Environment.
While here has been on imports of scrap metals since 2017, not all scrap metal imports have been curbed, and instead a quota system has drip fed the market.
Lifting the ban reduces uncertainty of supply which a quota system brings, given the sporadic nature of the size of the quotas.
China imported 3.55mt of refined copper in the first nine months of this year, exceeding the total for all of last year (Reuters).
Aluminium US$ 1,838/t vs US$1,844/t yesterday
Nickel US$ 15,785/t vs US$15,815/t yesterday
Zinc US$ 2,565/t vs US$2,571/t yesterday – ILZSG forecast zinc consumption to slow 5.3% to 12.98mt this year for a surplus of 620kt
Zinc consumption should then rise to 13.52mt in 2021 for a surplus of 463kt
Lead US$ 1,796/t vs US$1,802/t yesterday – The ILZSG expects lead demand to fall by 6.5% this year to 11.39mt for a surplus of 276kt
Demand is then forecast to recover 4.4% to 11.89mt shrinking the surplus to 192kt
Tin US$ 18,595/t vs US$18,550/t yesterday
Oil US$42.2/bbl vs US$41.8/bbl yesterday
Natural Gas US$2.945/mmbtu vs US$3.041/mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$116.8/t vs US$117.4/t
Chinese steel rebar 25mm US$567.2/t vs US$567.4/t
Thermal coal (1st year forward cif ARA) US$59.7/t vs US$59.3/t
Coking coal swap Australia FOB US$131.0/t vs US$131.0/t
Cobalt LME 3m US$33,305/t vs US$33,305/t
NdPr Rare Earth Oxide (China) US$48,849/t vs US$48,909/t – China September rare earth exports rise 11.7% MoM
Exports or rare earth metal and associated products rose 11.7% to 5,610 tonnes, according to customs data.
September exports were -21.3% lower YoY, a recovery from August when REE exports were -37.5% lower YoY.
Lithium carbonate 99% (China) US$5,245/t vs US$5,251/t
Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$29.0/kg
Antimony Trioxide 99.5% EU (China) US$5.3/kg vs US$5.3/kg
Tungsten APT European US$212-220/mtu vs US$212-220/mtu
Graphite flake 94% C, -100 mesh, fob China US$440/t vs US$430/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,275/t
No-deal Brexit could increase EV prices by £2,800 in the UK (SMMT ‘Society of Motor Manufacturers and Traders’)
The study published by the SMMT yesterday suggests the price increase would cut projected demand for zero-emissions vehicles by 20% next year as WTO tariffs cancel out the Government’s plug in grant.
The tariff would add £2000 to the price of British built BEVs sold in Europe which would damage the competitiveness of the UK in the market according to SMMT.
The 10% WTO tariff would add an estimated £4.5bn to the annual cost of assembling cars traded between the UK and the block.
Vehicles with greater than 45% of the ex-works price originating from outside the EU and UK would be subject to a 10% tariff.
The UK has been pushing for ~70% of value from non EEA countries particularly for battery and hybrid system sourced from Japan.
The draft also shows even more stringent regulations from 2027 with only car batteries manufactured either in the EU or UK being tariff free in trade between the block and the UK.
LG Chem to expand operations as rumours they are making new battery for Tesla gain momentum
Following record Q3 results LG Chem expects battery sales and profit to remain robust in Q4. There is also speculation the Company is the process of developing a new battery for Tesla following comments from Jang Seung-se, Executive Vice President, during a conference call on Tuesday.
Company earnings guidance estimates 902bn won (US$785m) of operating profit in Q3, up 158.7% for the same period in 2019. Q3 operating income beat consensus estimates of 732.8bn won. Sales also set a new quarterly record at 7.5trn won.
Jang Seung-se referred to the Company developing “cylindrical batteries that have five times more energy density and six times more output than current batteries”. Specs identical to those of the 4680 battery pack revealed on ‘Battery Day’.
LG Chem is working towards tripling its capacity to produce cylindrical batteries from 20GWh to 60GWh and increasing its total battery capacity to 260GWh by 2023 in anticipation of greater demand from Tesla. (Business Korea)
BYD and Hino Motor link up in JV (Just Auto)
BYD Auto and Hino Motor have signed a JV for commercial BEV development. Hino is Toyota Motor’s heavy-duty truck brand.
Both BYD and Hino will have a 50% stake in the JV. The partnership plan to launch vehicles under the Hino brand in the next 5yrs.
Earlier this month Toyota announced plans to develop a hydrogen fuel cell for use in a heavy duty truck. The cell is slated to be first used in Hino’s XL series Class 8 truck. The prototype is expected to be developed in H1’2021 but as yet there is no timeline for commercialisation.
Beowulf Mining (LON:BEM) 6.15p, Mkt cap £37m – Wolf Mountain Geophysics Results Define High Priority Drill Targets
(Beowulf holds 46.1% of Vadar. Beowulf also holds 100% Kallak iron ore in Sweden, 100% of Aitolampi graphite in Finland and 40% of the Mitrovica and Viti projects in Kosovo. Beowulf has 67.09% of its share in the form of Swedish Depository Receipts with remaining shares held in the UK.)
Beowulf report results from an IP survey at Vardar Minerals at the Wolf Mountain, lead-zinc-silver prospect in Kosovo.
The survey shows highly anomalous IP chargeability zones beneath areas of laterally extensive Pb-Zn gossans and hydrothermal alteration.
The zones follow established regional structural trends suggesting they may be representative of high-grade Pb-Zn-Ag feeder structures.
This also correlates well with geological mapping, drilling and trenching.
Drilling will test the main anomalies
Previous results from trenching show 51m grading 11g/t silver, 1.43% lead and 1.87% zinc.
This along with other supportive high-grade results in smaller sections suggests good potential for the development of a potentially economic mineral resource.
*SP Angel acts as nomad and broker to Beowulf Resources
Chaarat Gold* (LON:CGH) 27p, Mkt Cap £140m – $20.5m refinancing completed
Buy – 57p
The Company completed previously announced refinancing of the $19.4m investor loan and $1.1m in accrued interest.
As a results, Labro Investments assuming $13.5m of the total amount with respective maturity of the loan extended to 31 December 2024 was issued 7.5m shares.
Additionally, if the balance of the investor loan ($7m) is not repaid by the end of the month, a further 8m will be issued to Labro as a guarantee consideration.
Should the latter tranche of shares be issued and $1m worth of convertible loan notes converted into stock, Labro would hold ~222m shares or ~40.9% of the enlarged share capital.
*SP Angel acts as Broker to Chaarat Gold
Goldplat (LON:GDP) 8.2p, Mkt Cap £13.9m – Quarterly results indicate progress in South Africa and Ghana
The Company has provided the market with an operational update for the quarter ending 30 September 2020.
Goldplat’s South African operations achieved a profit of £1.12m vs £1.07m last year, whilst achieving a profit of £0.28m vs £0.02m last year from its Ghanaian operations.
South Africa: Goldplat modified its plant facility to improve the processing of the TSF material on a production scale, with initial results said to be encouraging and exceed the results from initial lab scale testing work.
As a result of the modification, one of the company’s producing mills was allocated to this which resulted in 1kg per month of gold production being sacrificed during the period.
Additional costs of £50,000 were incurred under Covid-19 procedures introduced to transport staff to and from work. With South Africa moving to lockdown level 1, these measures have been reduced.
The processing of the current Tailings Storage Facility at the required scale still remains dependent on securing a final deposition site and a plant, with the application to extend the current TSF for deposition of current production currently being progressed – and indications from authorities are that the Company should have feedback towards the end of January 2021.
Goldplat expect to spend a further £90,000 on manging the current facility until a larger facility can be established at an estimated build cost of £0.7m.
Ghana: The Company’s Ghanaian operations maintained improved production in the quarter, primarily due to a constant flow of material received from clients in Ghana, Mali and South America.
The Company also signed a new contract with a company in South America, with material currently being shipped and due to arrive in Ghana during the second quarter.
Kavango Resources (LON:KAV) 3.12p, Mkt cap £6.02m – Mineralogical study and sample analysis indicates presence of primary magmatic sluphides
Kavango Resources report that mineralogical study and sample analysis indicates presence of primary magmatic sluphides in thick gabbroic sills of >50m thickness within the Kahalari Suture Zone ‘KSZ’.
The report by Dr David Holwell is a significant update to the Mineral Systems Review published in April this year.
Dr Holwell is Associate Professor of Geology at the University of Leicester and is a leading authority on the development of Cu-Ni-PGM sulphide deposits associated with magmatic plumbing systems.
Kavango have produced a video to show how magmatic sulphides might have accumulated in trap zones in the KSZ to form massive sulphide deposits:
#KAV #KCB #Botswana @VNSGlobal
𝐊𝐒𝐙 𝐂𝐎𝐌𝐏𝐀𝐑𝐈𝐒𝐎𝐍𝐒 𝐖𝐈𝐓𝐇 𝐍𝐎𝐑𝐈𝐋𝐒𝐊
Short media clip which explains the formation of Magmatic Sulphides as at the Norilsk Mine and the similarity between #Norilsk and the #KSZ projecthttps://t.co/ClRDB0qbGv pic.twitter.com/QFRBDidzaK
— Kavango Resources (@KavangoRes) October 13, 2020
Conclusion: The report gives greater confidence in Kavango’s hypothesis for a Norilsk-style primary sulphide discovery under the Kahalari sand. The team now need to target the area with further drilling and geotechnical studies to find mineralised sulphides. Hopefully these will present significant tonnages of nickel, copper and PGMs.
KEFI Gold and Copper* (LON:KEFI) 2.2p, Mkt Cap £41m – Q3 update highlights Tulu Kapi funding progress and Hawiah maiden resource/PEA
The Company released Q3 update highlighting Tulu Kapi funding progress and maiden resource statement along with PEA at the Hawiah Project in Saudi Arabia.
KEFI assembled the $221m funding consortium and signed non-bonding term sheets for a combined minimum of $40m investment for Tulu Kapi Gold Project development.
$40m conditional commitment is with the Ethiopian division of a global industrial company (equity ~$10m) and a commodity trading company (ofttake ~$30m).
New funding structure allows KEFI to retain 65% in the project as opposed to previously envisaged 45%.
All agreements remain conditional on completion of due diligence, confirmation of regulatory compliance, internal approvals and the execution of full detailed documentation by each consortium member.
In the view of strong gold price environment the Company is considering to bring underground phase forward allowing to lift annual gold production rate from 140kozpa to 190kozpa within 3 years of commissioning.
In this case, inhouse estimates suggest updated Project NPV8% attributable to KEFI (65%) worth ~11p per share ($1,700/oz gold price), which excludes any upside from other KEFI portfolio assets including the Hawiah polymetallic deposit and Jibal Qutman gold project in Saudi Arabia.
In Saudi Arabia, the team released Hawiah polymetallic project maiden resource statement in mid-August estimating the deposit to host 19.3mt at 0.9% Cu, 0.8% Zn, 0.6g/t gold and 10.3g/t silver.
It is worth noting, mineralisation remains open at depth with higher grade intersections encountered at down dip extensions offering potential to not only grow tonnage, but also improve on the grade of the resource.
In particular, deepest two holes at the Camp Lode area returned 1.27% copper over a true width of 9m (HWD_005) and 1.55% copper over a true width of 8.7m (HWD_059).
Higher grades may be an indication that resources are nearing the source of the VMS system, an area of typically higher grade copper mineralisation.
The team is planning to test down dip extensions in the next round of drilling as well as infill drill the current MRE as part of estimation of ore reserves with PFS targeted for 2021; additionally, the Company will carry a scout drilling programme targeting the “feeder zone” to the VMS mineralisation; further drilling to start in Q4/20.
The Company released Hawiah PEA in late September envisaging a 2mtpa flotation operation for production of copper and zinc concentrates with precious metals by-products and generating $96m and 22% in NPV8% (after tax) and IRR (after tax), respectively (using $6,603/t Cu, $2,315/t Zn, $1,956/oz Au and $27.5/oz Ag).
In terms of commodity exposure, net revenue break down is 52% for copper, 13% – zinc, 28% – gold, 7% – silver.
Conclusion: The Company had a busy quarter progressing funding discussions at the development ready Tulu Kapi gold project in Ethiopia as well as continuing to de-risk Hawiah VMS project in Saudi Arabia where the team delivered maiden mineral resource and PEA with a significant potential to improve on preliminary estimates with mineralisation remaining open and demonstrating higher grades at depth. New proposed Tulu Kapi funding structure allows the Company to retain higher interest in the asset compared to the previous plan (65% v 45%) while stronger gold prices may see development of underground development brought forward lifting annual gold production. In Saudi Arabia, further drilling programme is planned to grow and infill test the resource with mineral reserves and PFS targeted for 2021. KEFI benefits from a diversified portfolio of assets with strong exposure to gold/copper.
*SP Angel act as Nomad and Broker to KEFI Gold and Copper
Power Metal Resources* (LON:POW) 2p, mkt cap £15.6m – Drilling contract signed at Canadian silver project
Power Metal have signed a drilling contract for an initial 500m of diamond drill programme, focusing on the Victoria Vein at the Silver Peak Project in British Columbia, Canada.
The drilling contractor expect to mobilise over the next few days with a view to commencing drilling next week.
The initial drill programme will entail drilling from two pads with planned core intercepts where previous sampling returned significant Silver, Copper and Lead grades.
Drilling oversight, core logging and sampling will be conducted by an experienced independent geologist, with half core samples sent to an accredited independent laboratory for analysis.
Drilling is expected to be completed within a two week window- prior to the onset of winter conditions.
In a separate announcement, the company received notices to exercise warrants over 7,136,000 new ordinary shares of 0.1p each in the Company.
In relation to the upcoming drill programme, Paul Johnson, CEO of Power Metal commented: “I am very pleased to report the signing of the drilling contract for an initial diamond core programme at Silver Peak, where the recently announced channel sampling returned exceptionally high silver assays. The team in-country are now focused on mobilisation and commencement of drilling and we are naturally eager to see the outcome of this programme, given the results we achieved from the sampling programme recently announced.”
*SP Angel act as Nomad and Broker to Power Metal Resources
John Meyer – [email protected] – 0203 470 0490
Simon Beardsmore – [email protected] – 0203 470 0484
Sergey Raevskiy –[email protected] – 0203 470 0474
Joe Rowbottom – [email protected] – 0203 470 0486
Richard Parlons –[email protected] – 0203 470 0472
Abigail Wayne – [email protected] – 0203 470 0534
Rob Rees – [email protected] – 0203 470 0535
Grant Barker – [email protected] – 0203 470 0471
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony