SP Angel – Morning View – Thursday 04 10 18

Strong economic data sparks US$ rally

MiFID II exempt information – see disclaimer below 

Bluejay Mining* (JAY LN) – STRONG BUY, Target 45p – Bluejay find new value in two stage processing of titanium mineral sands

Europa Metals Limited (EUZ LN) – Completion of reverse-circulation drilling at the Toral zinc, lead, silver project in Spain

MOD Resources (MOD AU) –Drilling results from the A4 Dome

Metal Tiger (MTR LN) holds a 30% joint-venture interest in the project

URU Metals Ltd* (URU LN) SUSP – Final Results

Vanadium prices rise further as market continues to strengthen

  • The Metal Bulletin report a further increase in the price of Ferro-vanadium last night to US$105-110/kgV for 78% grade material delivered into Western Europe
  • Vanadium prices continue to rise despite Largo Resources setting a new production record in Q3 for vanadium pentoxide along with improved recovery rates.

 

Nickel and zinc premiums rise in Asia  

  • China’s Green Shield policies appear to have sufficiently restricted smelting of nickel pig iron and zinc concentrates to tighten the market further.
  • There appears to be some relaxation of the Green Shield strategy as China fights with the US over tariffs and pumps liquidity into the market to support indebted companies.
  • However relaxation of this strategy does not appear to be affecting tightness for metal in local markets

 

Nickel futures climb 0.70% on spot demand

  • Amid pick-up in demand at the domestic spot markets, nickel prices were higher by 0.70 per cent to Rs 920.30 per kg in Wednesday on fresh positions.
  • At the Multi Commodity Exchange, nickel for delivery in October shot up by Rs 6.50, or 0.70 per cent, to Rs 920.30 per kg in business turnover of 950 lots.
  • On similar lines, the metal for delivery in November was trading higher by Rs 6.20, or 0.67 per cent, at Rs 925.70 per kg in four lots.

Peabody Energy Held Talks to Buy Drummond to Expand Global Footprint

  • U.S. mining company Peabody Energy Corp has held talks to buy Colombian peer Drummond International LLC
  • The potential deal would see Peabody acquire 80% of Drummond International, Colombia’s top coal exporter, leaving the remaining 20% in the hands of Japanese trading house Itochu Corp
  • The deal could be valued at between $4 billion and $4.5 billion.

Car sales plunge as Nissan warns on Brexit

  • The number of total vehicles registered was down 20.5% on the same period in 2017 at 338,834, the Society of Motor Manufacturers and Traders said.
  • Carmakers had struggled with "a raft of upheavals" including adjusting to stricter emissions standards, it added.
  • Meanwhile, Nissan said a no-deal Brexit would have "serious implications".
  • The Japanese firm, which employs almost 7,000 people at its Sunderland plant, urged the UK and the EU to "work towards a balanced Brexit".

 

Indaba – Mining Indaba sold for under half price to ITE Group

  • New management at Euromoney have elected to ditch the ailing Mining Indaba conference in Cape Town for £30.1m.
  • Euromoney which runs the Coaltrans conference and runs financial publications bought the Mining Indaba conference for some £70 just a few years earlier from a US PE group.
  • Euromoney worked hard to try to attract junior mining companies, the lifeblood of most mining conferences back to the Indaba following years of mistreatment by the American organisers.
  • The challenge for the new owners is how to attract the companies back into the Indaba hall.
  • Other conferences like the 121 Mining Investment Group conference, set in the historic gardens of an old Cape farm house have a far better offering bringing companies and investors together in a relaxed and stunningly beautiful setting in the cool and fresh air of Table Mountain.
  • The lesson for conference organisers is if you overprice and treat your clients poorly then they will most definitely go elsewhere.

 

South Africa – World Bank lowers forecast for South African growth to 1% from 1.4%

  • The World Bank has also lowered its 2019 projection to 1.3% from 1.8% previously.
  • Official inflation in South Africa is running at 4.9% from 5.1% seen in July.
  • Inflation is seen as rising to around 6% later this year having bottomed out at 3.8% in March.
  • The combination of low growth caused by a lack of investment over many years and high inflation is likely to cause the Rand to slide further.

 

Dow Jones Industrials

 

+0.20%

at

  26,828

Nikkei 225

 

-0.56%

at

  23,976

HK Hang Seng

 

-1.70%

at

  26,629

Shanghai Composite

 

+1.06%

at

   2,821

FTSE 350 Mining

 

+0.52%

at

  17,992

AIM Basic Resources

 

+0.16%

at

   2,208

 

Economics

US – Bond yields climbed almost 6bp to settle above the 3.2% mark for 10y debt following a sell off in US Treasuries.

  • US$ climbed to a 6-week high with putting pressure on emerging market currencies (RUB -0.7%, TRY -1.5%, ZAR -1.3%); India’s rupee is at a record low while rupiah in Indonesia hit its lowest level in 20 years.
  • The sell off has been driven by strong US economic data including services sector hitting record growth levels in September while private employment gauge came in better than expected
  • On the back of growth outlook optimism and the latest resolution to the USMCA agreement, US equities continued to trade near record highs yesterday.
  • Latest positive numbers have been supported by Fed Chair Jerome Powell who praised US growth in his latest public appearances calling it “remarkably positive”, “extraordinary” and “particularly bright”.
  • Mr Powell went on even to suggest that the current cycle could continued “for quite some time” if not “effectively indefinitely”.
  • Commenting on the pace of further rate hikes, Powell said “interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral… we may go past neutral… but we’re a long way from neutral at this point, probably”.

 

Italy – Markets and the European Parliament question Italian government budget deficit targets as weaker than expected growth is likely to see the nation overshoot set 2.4% goal.

  • Antoni Tajani, president of the European parliament, suggested the target is insufficient as the growth rate is too low calling a 1.6% GDP growth rate in 2019 “just propaganda”.
  • This compares to forecasts of 1.2% and 1.3% as per market consensus and European Commission estimates, respectively.
  • The government is yet to publish fial set of economic growth forecasts.
  • 10y bond yields are hovering around the 3.3% mark after hitting 3.46% on Tuesday, marking the highest level in more than four years.

 

UK – Car registrations dipped 20.5%yoy in September with numbers skewed by the introduction of new emissions standards at the start of the month.

  • The Worldwide Harmonised Light Vehicle Test Procedure came into effect in the EU on September 1 which led some producers to incentivise sales and front load deliveries in August.
  • “These are exceptional circumstances with similar declines seen in other major European markets,” the Society of Motor Manufacturers and Traders (SMMT) said.
  • When looking at YTD numbers which are more representative of demand trends, registrations remained subdued posting a 7.5%yoy decline over the first nine months.

 

India – Climbing world interest rates as well as tightening stance of the local central bank aiming to arrest accelerating inflation is putting pressure on local lenders.

  • Infrastructure Leasing & Financial Services, a $17bn in assets local lender, has recently defaulted on its debt which sparked fears of contagion.
  • Expectations are for the central bank to raise interest rates by 25bp this Friday following a 50bp hike in August.
  • India is faced with mounting pressures from rising oil prices as well as rapidly depreciating national currency significantly raising the cost of imported goods accelerating local inflation.

 

Currencies

US$1.1478/eur vs 1.1577/eur yesterday. Yen 114.26/$ vs 113.81/$. SAr 14.668/$ vs 14.366/$. $1.296/gbp vs $1.300/gbp. 0.708/aud vs 0.717/aud. CNY 6.869/$ vs 6.869/$.

 

Commodity News

Precious metals:         

Gold US$1,199/oz vs US$1,206/oz yesterday

   Gold ETFs 67.1moz vs US$67.3moz yesterday

Platinum US$824/oz vs US$834/oz yesterday

Palladium US$1,055/oz vs US$1,055/oz yesterday

Silver US$14.61/oz vs US$14.75/oz yesterday

           

Base metals:   

Copper US$ 6,296/t vs US$6,274/t yesterday

Aluminium US$ 2,251/t vs US$2,160/t yesterday

Nickel US$ 12,935/t vs US$12,480/t yesterday

Zinc US$ 2,661/t vs US$2,641/t yesterday

Lead US$ 2,034/t vs US$2,058/t yesterday

Tin US$ 19,050/t vs US$18,940/t yesterday

           

Energy:           

Oil US$86.1/bbl vs US$85.0/bbl yesterday

Natural Gas US$3.243/mmbtu vs US$3.171/mmbtu yesterday

Uranium US$27.70/lb vs US$27.55/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$68.3/t vs US$68.4/t

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

Thermal coal (1st year forward cif ARA) US$99.7/t vs US$99.0/t

Coking coal futures Dalian Exchange US$193.7/t vs US$193.7/t

           

Other:  

Cobalt LME 3m US$55,250/t vs US$63,000/t

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

China Lithium carbonate 99% US$10,337/t vs US$10,337/t - Lithium – Albemarle in contract dispute with Chile state over pricing of discount on lithium for local companies

  • Corfo, the lithium state agency in Chile is considering going to arbitration over the pricing of a discount for lithium to companies which add further value within Chile.
  • We suspect Albemarle has not needed to worry about this particular clause much but with a number of companies looking to set up battery manufacturing plants in Chile the discount mechanism may have suddenly become more of an issue.
  • Chile has been trying to attract battery manufacturers and materials processors into Chile with discounts on lithium raw material supply. So far a fair number of companies have offered significant investment into Chile including; Tesla, Rockwood, Sichuan Fulin, Molymet, Samsung and POSCO in joint venture.

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

 

Electric Vehicle and battery technology:  

Chinese Electric Vehicle Production

  • China has unveiled a comprehensive set of emission rules and delayed a credit-score program tied to the production of electric cars, giving automakers more time to prepare for the phasing out of fossil-fuel powered vehicles in the world’s largest auto market.
  • Under the so-called cap-and-trade policy, automakers must obtain a new-energy vehicle score which is linked to the production of various types of zero- and low-emission vehicles
  • Any vehicle maker must obtain a new energy vehicle score of at least 10% by 2019, which rises to 12% by 2020, and on up to 20% of sales by 2025, according to the Ministry of Industry and Information Technology
  • The rule applies to carmakers that manufacture or import more than 30,000 traditional vehicles annually, and those who fail to comply must buy credits or face fines.

 

OXIS Energy Progresses Its Lithium Sulfur Cell Technology to 450WH/kg

  • OXIS Energy UK has already achieved 425Wh/kg on a High Energy 16Ah pouch cell design for High Altitude Pseudo Satellite applications and expects to achieve 450Wh/kg at cell level by the end of 2018.
  • Dr. David Ainsworth, Chief Technology Officer commented: "At 425Wh/kg, OXIS has one of the lightest pouch cells currently available and is already attracting significant interest from major players in the aerospace sector. The cell is about to go into prototype applications."
  • OXIS has also developed a prototype battery module for the aviation sector which has enabled OXIS' customers to increase flight time three-fold. The battery module uses a High Power, Ultra-Light Lithium Sulfur pouch cell at 300 Wh/kg.

 

Pika Energy’s Harbor smart battery can now be added to existing solar arrays

  • Pika Energy has announced new capabilities that will enable any PV system owner to couple Pika Energy storage to an existing solar array.
  • Pika’s Harbor smart battery is one of the most powerful and efficient smart batteries on the market, storing up to 17.1 kWh of energy and supplying up to 10 kW of output thanks to the Panasonic Lithium-Ion (Li-ion) battery modules.
  • The category-leading power and capacity of the Pika Harbor smart battery has until now been reserved for owners of a Pika Energy Island, Pika’s DC-coupled solar+storage platform.
  • After the release of this update to the Pika Energy Island any existing solar (PV) system will be able to couple with Pika’s leading battery technology.
  • The upgrade is expected to be available by Dec 2018.

 

Major automakers heavily investing in the autonomous driving projects.

  • Toyota Motor is teaming up with SoftBank to develop mobility services with an aim of providing transport, delivery and logistics services using autonomous vehicles.
  • Earlier in the year SoftBank invested $2.25bn in Cruise, GM’s self-driving car unit.
  • Yesterday, Cruise announced a $2.75bn investment from Honda for 5.7% interest in the unit.
  • Honda is reported to have been in talks with Waymo, formerly the Google self-driving project, over a potential collaboration for two years; while no agreement has been reached two parties are exploring an opportunity to integrate Waymo’s self-driving technology into Honda vehicles, a spokeswoman for the automaker said.

 

Company News

Bluejay Mining* (JAY LN)  10.4p, Mkt Cap £88m – Bluejay find new value in two stage processing of titanium mineral sands

STRONG BUY - included in MSCI index

Target Price 45p

  • Rod McIllree, ceo at Bluejay Mining recorded an interview yesterday immediately upon his return from what appears to be a successful trip to Greenland.
  • McIllree, who appeared a tad exhausted from working in Greenland answered some complex questions giving away a bit more than he had intended.
  • He described progress made in terms of the instillation of buildings and infrastructure to support the small scale mining fleet and in preparation for future mining at the Dundas site.
  • The team have expanded the civil and site works and have mined a further 10,000t of high-grade sorted ilmenite sand for further testing by potential future offtake partners.
  • McIllree explained how the ilmenite crystals are unusually uniform along the whole known Dundas resource and is particularly low in deleterious impurities which should make it a popular source for ilmenite processors to turn into titanium pigments or titanium sponge for metal production.
  • One proposal from the Feasibility study work is to process the ilmenite in a first phase to 88% ilmenite concentrate in Greenland at site and to further process the ilmenite to >90% in Quebec in Canada.
  • Rio Tinto have a substantial ilmenite processing operation in Quebec called QIT which may prove to be a customer for Bluejay in future years.
  • A number of potential offtakers have trialled the Dundas product giving Bluejay options in terms of sales tonnages and risk control.
  • Much work has also been done from an environmental perspective on migratory mammals with the EIA now very close to completion.
  • Management are also training local people and future staff so that local communities do not suffer from a depletion of skilled people when the project begins
  • The company is well funded and expects to go into the new year with >£10m in the bank a completed pre-feasibility study, completed EIA SIA and an exploitation application lodged in the system. This cash would be sufficient for several years of further evaluation if need be.
  • We include a link for the interview: https://youtu.be/agmyWMLiYhA

Conclusion: Bluejay appear to be significantly improving the economics of the of the Dundas project through some innovative and smart reorganisation of the production process which should reduce  capital and operating costs for the business.

*The SP Angel mining analyst has visited the Dundas, Itelak ilmenite sands project in Greenland. *SP Angel act as nomad and broker to BlueJay Mining. 

 

Europa Metals Limited (EUZ LN)  0.14 pence, Mkt Cap £7.5m – Completion of reverse-circulation drilling at the Toral zinc, lead, silver project in Spain

  • Europa Mining reports that it has now completed its reverse-circulation drilling programme at the Toral lead/zinc project in northern Spain.
  • The programme was aimed at identifying extensions to the mineralisation beyond the current JORC (2012) inferred resources of 16mt grading 4.0% zinc, 3.3% lead and 25g/t silver (6.9% zinc equivalent) using a 4% zinc-equivalent cut-off grade. Assay results are pending.
  • The company plans to move on to further diamond drilling to target “key areas situated within the existing resource area”.
  • Further scoping study level work has identified a number of operating parameters including:
    • Decline access to develop a cut-and-fill operation in order minimise dilution.
    • The company plans to use raise-boring to construct the main production shaft.
    • Metallurgical work suggests two stage flotation to depress the zinc and float the lead
    • Permitting and environmental assessments are underway

Conclusion: Europa Metals are pressing ahead at Toral -  we await the results of the recent reverse-circulation drilling.

 

MOD Resources (MOD AU) A$1.39, Mkt Cap A$89m –Drilling results from the A4 Dome

Metal Tiger (MTR LN)  2.4 pence, Mkt Cap £32.4m holds a 30% joint-venture interest in the project

  • MOD Resources has reported drilling results from its 70% owned A4 Dome project in Botswana where Metal Tiger plc hold the remaining 30% interest.
  • Hole MO-A4-008D, aimed at vein hosted mineralisation, intersected 42.9m at an average grade of 1.0% copper and 19g/t silver from a depth of 257.5m. The broader intersection contained higher grade sections of 9.8m at an average grade of 1.4% copper and 26g/t silver from a depth of 264.8m; 9.1m averaging 1.5% copper and 31g/t silver from 281.9m and 3.4m averaging 2.4% copper and 41.g/t silver from 297.0m.
  • Hole MO-A4-005D was aimed at the deeper Ngwako Pan Formation “contact mineralisation which may form a flat lying “blanket” underlying the dome 450-500m below surface” intersected 6.9m averaging 1.7% copper and 16g/t silver from a depth of 471.1m, including 3.6m averaging 2.4% copper and 24g/t silver from 474m depth.
  • Commenting that they were still at an early stage in understanding the A4 Dome mineralisation, MOD Resources’ Managing Director, Julian Hanna, pointed out that “The proximity of A4 Dome to the planned T3 processing plant makes it an attractive proposition which supports our strategy to increase production above the current target of 30,000ktpa copper and build a long-term operation centred around T3.”
  • The company reports that it has completed a total of 12 holes at the A$ Dome and that five holes are still in progress. Assays awaited for a further seven holes (MO-A4-006D to MO-A4-010D, MO-A412D and MO-A4-014D).

Conclusion: Relatively early stage drilling results from the A4 Dome hold out the prospect of being able to provide supplementary feed for the T3 processing plant.

 

URU Metals Ltd* (URU LN)  SUSP – Final Results

  • URU Metals reports a loss of $862,000 for the year ending 31st March 2018 (2017 – loss of $645,000).
  • Cash reserves as at 31st March amounted to $1.3m (31st March 2017 - $2.7m).
  • Based on recent drilling at the company’s Zebediela nickel/copper/PGM project is showing “the potential to host a nickel ore body with significant PGE and Cu credits at shallow depths”.
  • Previously announced results including:
    • A 9m wide intersection at an average grade of 0.15% copper, 0.43% total nickel and 1.97g/t PGE were intersected 78.9m below surface in hole Z019, which also contained an intersection of 1.8m averaging 0.1% copper 0.44% total nickel and 1.6g/t PGE at a depth of 100m below surface.
    • A 10.0m wide intersection at an average grade of 0.18% copper, 0.52% total nickel and 2.39g/t PGE were intersected 43.2m below surface in hole Z020, which also contained an intersection of 2.1m averaging 0.15% copper 0.59% total nickel and 2.0g/t PGE at a depth of 137m below surface.
    • An intersection of 4.8m width located 176m below surface which averaged 0.12% copper, 0.48% total nickel and 2.15g/t PGE in hole Z021; and
    • A 3.6m wide intersection at an average grade of 0.09% copper, 0.35% total nickel and 0.89g/t PGE were intersected 28.9m below surface in hole Z022, which also contained an intersection of 0.5m averaging 0.13% copper 0.39% total nickel and 6.37g/t PGE at a depth of 70m below surface.
  • The drilling has improved “the understanding of the geology, geometry and mineralisation style of the ultramafic body hosting the Ni-Cu-PGE mineralisation” while a recently completed ground-based geophysical programme is contributing to planning of further exploration drilling. Results “are expected to be released in October 2018.”
  • Plans for the continuing exploration of the Zebediela project “includes further geological mapping, ground-based geophysics, soil sampling and exploration drilling” aimed at expanding on “the current understanding of the geology and the geometry of the ultramafic body hosting the Ni-Cu-PGE mineralisation and to ultimately define a JORC Compliant Mineral Resource estimate and conduct further feasibility studies on the Zebediela project”.
  • “Based on the similarity of the geology between the Burgersfort Nickel Project and the Zebediela Nickel Project, the geological model for the Burgersfort Nickel Project is currently being revised to incorporate learnings from the Ni-Cu-PGE discoveries at Zebediela.”

Conclusion: Continuing exploration, largely of the Zebediela project is planned to elucidate the geology and orientation of the host mineralisation and ultimately to the definition of a JORC compliant resources estimate. We look forward the results as they become available.

*SP Angel acts as Nomad and broker to URU Metals

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

 

SP Angel                                                            

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.

 

DISCLAIMER

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services and is a marketing communication for the purposes of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

SP Angel considers this note to be an acceptable minor non-monetary benefit as defined by the FCA which may be received without charge.  In summary, this is because the content is either considered to be commissioned by SP Angel’s clients as part our advisory services to them or is short term market commentary.

While prepared in good faith and based upon sources believed to be reliable SP Angel does not make any guarantee, representation or warranty, (either express or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein.

The value of investments referenced herein may go up or down and past performance is not necessarily a guide to future performance. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

The investments discussed in this note may not be suitable for all investors and the note does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. Investors must make their own investment decisions based upon their own financial objectives, resources and appetite for risk. 

This note is confidential and is being supplied to you solely for your information. It may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose. If this note has been sent to you by a party other than SPA the original contents may have been altered or comments may have been added.  SP Angel is not responsible for any such amendments. 

Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. Opinions and estimates included in this note are subject to change without notice. This information is for the sole use of Eligible Counterparties and Professional Customers and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”).

Publication of this note does not imply future production of notes covering the same issuer(s) or subject matter.

SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA has put in place a number of measures to avoid or manage conflicts of interest with regard to the preparation and distribution of research. These include (i) physical, virtual and procedural information barriers (ii) a prohibition on personal account dealing by analysts and (iii) measures to ensure that recipients and persons wishing to access the research receive/are able to access the research at the same time.

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.

 

Recommendations are based on a 12 month horizon as follows:

Buy - Expected return >15%

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

Sell - Expected return < 15%

 

** SP Angel acts as Broker to this Company