SP Angel – Morning View – Monday 01 10 18

Vanadium quietly hits decade highs

MiFID II exempt information – see disclaimer below

Arc Minerals* (ARCM LN) – Drill results indicate significant scale copper project at Kalaba, Zambia

Beowulf Mining* (BEM LN) – SP Angel as Nomad and Broker

Bushveld Minerals* (BMN LN) BUY - Target Price 34p – Vanadium prices continue to edge higher

Crusader (CAS LN) – Stock suspended

Jangada Mines (JAN LN) – Environmental permit for trial mining

KEFI Minerals* (KEFI LN) – ANS signs binding agreement regarding up to $38m project funding

Phoenix Global Mining* (PGM LN) – US OTC listing

URU Metals Ltd* (URU LN) – Temporary suspension of trading on AIM

Vast Resources (VAST LN) – Final results

 

Vanadium quietly hits decade highs

  • While battery markets continue to focus on spiking cobalt and lithium demand from booming electric vehicle sales, vanadium prices have surged as global energy storage requirements swell. Vanadium pentoxide (V2O5), which is incorporated in vanadium redox flow batteries (“VRFB”) has breached $20/lb for the first time since 2005, climbing four-fold since the start of 2017. The metal is primarily consumed in the steel industry, dominating 90% global demand, to help ferro-vanadium prices to also hit decade highs in September.
  • Recent global energy storage system trends for capacity exceeding 1GWh is highlighting the significant potential of the market for all battery technologies. Properties of VRFBs, including 20 year lifespans without capacity loss, non-flammable enhanced safety and broad operating temperature, is attracting the application to support renewable energy generation. Another advantage over lithium ion is that this type of battery can be charged and discharged simultaneously making it highly suitable for large-scale storage from renewable sources such as solar and wind when connected to an electricity grid.
  • Simon Moores of Benchmark Mineral Intelligence notes “If a vanadium battery producer steps forward with bold plans to produce vanadium flow at mass scale, giving the industry its Elon Musk or lithium ion moment, the potential for the technology to be the second most deployed ESS battery in the world is there. Raw material self-sufficiency is a critical component to this. At least a third of the cost of a vanadium flow battery is vanadium pentoxide which makes up the liquid electrolyte.”
  • Benchmark forecasts that the energy storage market will be between 100GWh to 120GWh in size by 2028, with VRFBs capturing 25% of the energy storage market.
  • Major investment is required to sustain the raw material requirements. The amount of V2O5 in a single MWh is just under 10t. Last year, only 80,000t was produced globally, with the majority sourced as a by-product of environmentally harmful magnetite mining and steelmaking. Tightening Chinese legislations and mill closures are only serving to highlight tightening supply, which is expected to sustain elevated prices.

 

World Bank Group commits $1bn to emerging market battery storage systems

  • The World Bank Group committed $1bn to finance battery-storage systems in developing and middle-income countries, and expects its participation to attract another $4bn in backing from investors as well as public and private funds.
  • Most existing battery projects are expensive and focused in developed countries. Storage can retain electricity from wind and solar farms to use after sundown or when the wind isn’t blowing, and is viewed at critical to expanding the use of renewable energy.
  • “Battery storage can help countries leapfrog to the next generation technology, expand energy access, and set the stage for much cleaner, more stable, energy systems,” World Bank Group President Jim Yong Kim said in the statement.

 

Uranium requirement is drawing Chinese interest in Namibian source

  • Rising global nuclear requirements are drawing significant interest in development of uranium supply and securing long-term production. Rio Tinto, the world’s second largest miner, has been talking to China National Nuclear Corporation (“CNNC”) about selling its stake in Namibia’s Rössing uranium mine, confirmed by energy minister Simeon Negumbo.
  • Rio has close to a 69% interest in Rössing, the world's longest-running open pit uranium mine. The mine currently generates around 3% global supply for the metal which has seen renewed interest from investors to help drive prices up more than 30% in the past four months only. CNNC seems the logical buyer for Rössing, as it already owns the nearby Husab mine, the world’s third largest uranium-only mine, which is set to produce up to 15-million pounds of uranium a year.
  • A recent surge in prices has been supported by recent supply cutbacks by major producers – mainly Canada’s Cameco and Kazakhstan’s state-owned miner Kazatomprom – as well as the closure of a number of higher-cost mines, which has helped shift the balance into a deficit for the first time in more than a decade.
  • Namibia is strengthening its position as a top uranium producer, with Husab mine coming online boosting output to the world’s fifth largest position, behind Kazakhstan, Canada, Australia and Niger.

 

Dow Jones Industrials

 

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HK Hang Seng

 

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FTSE 350 Mining

 

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AIM Basic Resources

 

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Economics

Currencies

US$1.1583/eur vs 1.1619/eur last week  Yen 113.98/$ vs 113.45/$  SAr 14.150/$ vs 14.154/$  $1.304/gbp vs $1.307/gbp  0.721/aud vs 0.722/aud  CNY 6.869/$ vs 6.885/$

 

Commodity News

Precious metals:         

Gold US$1,187/oz vs US$1,183/oz last week

  • Gold continued to track lower through the month of September, dropping for a sixth straight month, the longest stretch since 1997, as investors weigh the Federal Reserve’s tightening path and an escalating US-China trade war.
  • Federal Reserve Bank of New York President John Williams called for continued gradual rate increases as a strong US economy drives unemployment to a half-century low.
  • Wayne Gordon, executive director for commodities and foreign exchange at UBS Group AG’s wealth management forecasts the headwind for gold will be the dollar strength through the end of the year. “There were some question marks around how the Fed would start talking about trade-related issues and its impact on U.S. growth, but what we saw from the Fed was very comfortable on growth, very comfortable the U.S. economy continues to move forward, the labor market continues to tighten. The Fed is very confident which suggest to us that it’s likely they could raise rates again in December”.
  • Increasing ‘mistrust’ between Pyongyang and Washington DC has caused North Korea’s foreign minister to warn that his country would not take the first steps towards denuclearisation without further guarantees from the Trump administration. Ri Yong-ho added growing frustration at the slow progress since the June summit having not seen “any corresponding response” – only an increasing emphasis on sanctions.
  • Mr. Kim has said he would permanently dismantle North Korea's main nuclear complex, but only if the United States takes unspecified corresponding measures, and he promised to accept international inspectors to monitor the closing of a key missile test site and launch pad.
  • While sentiment remains, the threat of nuclear action remains real. Following escalating threats with Mr. Trump warning to “totally destroy” North Korea, negotiations formally ended the Korean War, but with a ceasefire and not a peace treaty.
  • Mr. Ri continued “without any trust in the US, there will be no confidence in our national security. The perception that sanctions can bring us on our knees is a pipe dream of the people who are ignorant of us”, adding that continued sanctions are “deepening our mistrust” and deadlocking the current diplomacy.
  • Safe haven gold received support last year as North Korea developed their nuclear capabilities, while slow progress in denuclearisation negotiations may help draw the precious metal higher.

   Gold ETFs 67.6moz vs US$67.6moz last week

Platinum US$815/oz vs US$810/oz last week

Palladium US$1,067/oz vs US$1,086/oz last week

Silver US$14.59/oz vs US$14.30/oz last week

           

Base metals:   

Copper US$ 6,228/t vs US$6,258/t last week

Aluminium US$ 2,050/t vs US$2,029/t last week

Nickel US$ 12,505/t vs US$12,670/t last week

Zinc US$ 2,586/t vs US$2,612/t last week

  • Base metals broadly decline, with zinc and copper leading the fall, after two gauges of activity in China’s manufacturing sector worsened in September, reflecting the nation’s economic slowdown and fallout from the trade war with the U.S., which has the potential to curb demand for raw materials.
  • China’s official manufacturing purchasing managers index stood at 50.8 in September versus 51.3 in August, lower than the median estimate of 51.2 in a Bloomberg survey of economists. The Caixin manufacturing PMI, which better reflects sentiment among smaller, private firms, fell to 50 from 50.6, the lowest since May 2017. A reading of 50 is dividing line between expansion and contraction.
  • LME copper fell -0.4%, while zinc lost -0.2% as the metal is on track for -21% loss year to date, the worst performer among 6 base metals.

Lead US$ 2,048/t vs US$2,016/t last week

Tin US$ 18,875/t vs US$18,875/t last week

           

Energy:           

Oil US$82.9/bbl vs US$81.8/bbl last week

Natural Gas US$3.018/mmbtu vs US$3.052/mmbtu last week

Uranium US$27.50/lb vs US$27.45/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$67.8/t vs US$67.9/t

Chinese steel rebar 25mm US$684.1/t vs US$688.8/t

Thermal coal (1st year forward cif ARA) US$98.3/t vs US$97.3/t

Premium hard coking coal Aus fob US$193.7/t vs US$193.3/t

           

Other:  

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

China NdPr Rare Earth Oxide US$46,951/t vs US$46,843/t

China Lithium carbonate 99% US$10,337/t vs US$10,313/t - Foreign-backed miner hopes to begin Chilean lithium project in 2020

  • Foreign-backed Salar Blanco expects to begin construction on its lithium mining project at the beginning of 2020 in Chile's north, once its environmental permit is approved by the government.
  • The approval process for the necessary environmental permit for the initiative, which includes an investment of $527 million, began this month. Salar Blanco CEO Cristobal Garcia-Huidobro said he expects it to be approved by the end of next year.
  • Garcia-Huidobro said the company is in talks with Chilean authorities to finalize the project's operation, considering it already has the permission of the nuclear power regulator.
  • "We are working very closely with the ministry of mining in order to define what will be the best structure to use," Garcia-Huidobro told Reuters.

 

Solar - Integration of solar cells and batteries

  • In a new paper published September 27 in Chem, scientists from the University of Wisconsin-Madison and King Abdullah University of Science and Technology (KAUST) revealed a promising method that could free solar consumers from needing to worry about the time of day or being off-grid.
  • The team details how they managed to break efficiency records by successfully marrying a solar cell and a battery to form what they call a solar flow battery (SFB).
  • At 14.1 percent round-trip efficiency, these new SFBs are eight times better than the team’s past prototype and is the highest successfully published in the burgeoning field of solar rechargeable batteries, according to the study.
  • The batteries also have multiple modes. Like a typical battery, you can charge it with electricity, and like a traditional solar cell, it can convert sunlight to electricity immediately. Its special third mode allows solar energy to be stored as energy for use at a later point.

Perovskite solar cells leap toward commercialization

  • Scientists from the Energy Materials and Surface Sciences Unit at the Okinawa Institute of Science and Technology Graduate University (OIST) believe they've found a winning formula in a new method to fabricate low-cost high-efficiency solar cells.
  • Prof. Yabing Qi and his team from OIST in collaboration with Prof. Shengzhong Liu from Shaanxi Normal University, China, developed the cells using the materials and compounds that mimic the crystalline structure of the naturally occurring mineral perovskite. 
  • "Research on perovskite cells is very promising. In only nine years, the efficiency of these cells went from 3.8 % to 23.3%. Other technologies have taken over 30 years of research to reach the same level," explains Prof. Qi.
  • The fabrication method he and his research team have developed produces perovskite solar cells with an efficiency comparable to crystalline silicon cells, but it is potentially much cheaper than making silicon solar cells.

 

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

 

Company News

Arc Minerals* (ARCM LN)  4.2p, Mkt Cap £24m – Drill results indicate significant scale copper project at Kalaba, Zambia

(ARC Minerals currently owns 66% of Zamsort which holds 100% of the Kalaba copper/cobalt mine and associated mineral licenses)

STRONG BUY

  • ARC Minerals report today the placing of 44m new shares at 4.5p/s raising £2m.
  • The placing follows approaches by a European family office and a European family office
  • The placing was done at an approximate 12.5% premium to last week’s share price
  • Funds are to be used for exploration at ARC’s Kalaba project in Zambia, to complete development of the small-scale mine and process plant and for further development of the project.
  • We recently visited the Kalaba copper/cobalt mine and process plant in Zambia. The mine is small scale but appears sufficient to feed the new process plant which is being constructed at site. The plant will produce a form of intermediate copper/cobalt concentrate.
  • Further assay results are due within the next two weeks from the drill program at Kalaba. Copper bearing mineralisation is seen in the core running from surface and near surface in the drill holes we have seen.
  • Drilling appears to be extending the known resource area indicating that the project could turn out to be larger than previously considered.
  • Recent results include:
    • 20m at 1.31% CuEq.
    • 25m at 1.24% CuEq.
    • 26m at 1.10% CuEq.
  • Copper equivalent grades are calculated at current metal prices and while we feel the current copper price is relatively conservative while we note that cobalt prices remain relatively high at $62,000/t.
  • We note: cobalt prices have fallen from a peak of $95,250/t but are still higher than the year-low of $55,750/t though they remain significantly higher than the five-year average of $40,770/t eg from before the start of the battery-metals revolution.
  • Metallurgical test work on the nature of the mineralisation is being done in South Africa to determine potential recovery rates and the eventual potential value of the project.
  • The mineralisation appears to be hosted in a dolomitic unit as seen in a number of Copperbelt mines.
  • The dolomite varies in composition between Ca rich and Mg rich with the latter seen as low from an acid consumption perspective.
  • Please see report from our recent site visit in link

*An SP Angel analyst has recently visited the Kalaba open pit mine, stockpiles, process plant and drilling operations. Our intrepid analyst and co-driver drove to site from Lusaka and back again.

*SP Angel acts as nomad and broker to Arc Minerals.

 

Beowulf Mining* (BEM LN)  5.9p, Mkt Cap £34m – SP Angel as Nomad and Broker

  • Beowulf has appointed SP Angel as Nomad and Broker to the company.
  • The company is looking to develop the Kallak magnetite iron ore project in Sweden, from which it has produced a super high grade concentrate of over 71% iron content.
  • Beowulf is also progressing with other exploration on a number of graphite projects in Finland, where the government is particularly supportive of mining, and the development of self-sufficiency in battery manufacturing.
  • Management appear to be making good progress in Sweden on the permitting of the proposed Kallak project, and this summer released a maiden resource for the Aitolampi graphite project..
  • See latest corporate video on the Kallak project highlighting local support for the project: https://youtu.be/CQsAvLoOwSc
  • Iron ore prices and the premiums paid for >62% iron ore continue to record high price levels 71% iron ore likely to now attract >$7/t for each percentage point above the 62% benchmark price
  • This should see Kallak iron ore fetch prices well over $100/t when sold into DRI furnaces in Europe and the Middle East.
  • The company is also advancing a number of graphite prospects in Finland where the permitting regime may be better defined and supported.

*SP Angel acts as nomad and broker

 

Bushveld Minerals* (BMN LN)  29p, mkt cap £322m – Vanadium prices continue to edge higher

BUY - Target Price 34p

(Bushveld Minerals now hold 74% of Vametco)

  • Ferro-vanadium prices continue to edge higher with the price for 78% grade FeV fob China rising 6.5% on last week to $104-110/kgV
  • The Chinese price appears to be playing catch-up with Europe with the top end of the range now higher than the European price of $110-105/kgV
  • Metal Bulletin report a lack of availability of vanadium pentoxide in China.
  • Recent softening of China’s Green Shield policies might serve to bring some vanadium supply if some idled titano-magnetite or stone coal production is restarted.
  • Given the authorities attitude and penalties for non-compliance in China these days it would take very greedy or foolish management team to restart much ‘polluting’ production in China these days.
  • Rongke Power is constructing a giant vanadium-redox flow battery in Dalian, China. The battery is scheduled for completion around end 2018. The project is designed to reduce the region’s peaking capacity by 8% when running. We suspect the project may be delayed and for the majority of the redox cells to be filled with electrolyte next year.

Vanadium quietly hits decade highs

  • While battery markets continue to focus on spiking cobalt and lithium demand from booming electric vehicle sales, vanadium prices have surged as global energy storage requirements swell. Vanadium pentoxide (V2O5), which is incorporated in vanadium redox flow batteries (“VRFB”) has breached $20/lb for the first time since 2005, climbing four-fold since the start of 2017. The metal is primarily consumed in the steel industry, dominating 90% global demand, to help ferro-vanadium prices to also hit decade highs in September.
  • Recent global energy storage system trends for capacity exceeding 1GWh is highlighting the significant potential of the market for all battery technologies. Properties of VRFBs, including 20 year lifespans without capacity loss, non-flammable enhanced safety and broad operating temperature, is attracting the application to support renewable energy generation. Another advantage over lithium ion is that this type of battery can be charged and discharged simultaneously making it highly suitable for large-scale storage from renewable sources such as solar and wind when connected to an electricity grid.
  • Simon Moores of Benchmark Mineral Intelligence notes “If a vanadium battery producer steps forward with bold plans to produce vanadium flow at mass scale, giving the industry its Elon Musk or lithium ion moment, the potential for the technology to be the second most deployed ESS battery in the world is there. Raw material self-sufficiency is a critical component to this. At least a third of the cost of a vanadium flow battery is vanadium pentoxide which makes up the liquid electrolyte.”
  • Benchmark forecasts that the energy storage market will be between 100GWh to 120GWh in size by 2028, with VRFBs capturing 25% of the energy storage market.
  • Major investment is required to sustain the raw material requirements. The amount of V2O5 in a single MWh is just under 10t. Last year, only 80,000t was produced globally, with the majority sourced as a by-product of environmentally harmful magnetite mining and steelmaking. Tightening Chinese legislations and mill closures are only serving to highlight tightening supply, which is expected to sustain elevated prices.

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

 

Crusader (CAS LN)  – Stock suspended

  • Crusader Resources stock is suspended this morning pending clarification of the company’s financial position eg. there is material uncertainty over its ability to meet its funding commitments.
  • Crusader recently reported an interim loss of A$4.1m for the six months to 30th June 2018 (2017 – loss of A$2.9m).
  • Factors contributing to the loss appear to be an increase in corporate expenses to A$2.88m from A$0.92m in 2017 and an increase in finance costs to A$0.31m from A$0.056m.
  • The combination of an operating cash outflow of A$3.74m and exploration and evaluation expenses (presumably largely for the Borborema gold project in Brazil), offset by a repayment of A$1.5m of debt and a net share issue raising of A$5.1m resulted in a reduction in the cash balance over the six months of A$1.17m to A$1.36m at 30th June.
  • Crusader hold A$1.3m of cash indicating that at the current burn rate that the company could run out of money in the next six months.

Conclusion:  While it is rarely good for a stock to be suspended pending financial uncertainty we suspect the funds which supported the ill-advised AIM IPO of this company on 16 April may be sufficiently embarrassed such that they will be effectively forced into supporting the stock further.

 

Jangada Mines (JAN LN)  2.8 pence, Mkt Cap £6m – Environmental permit for trial mining

  • Jangada Mines report the issuance of an environmental permit for trial mining at their Pedro Blanca polymetallic in northern Brazil.
  • Management now plan to apply for a trial mining license in Q4 this year.
  • The company says it does not intend trial mining till post BFS, though we wonder just how bankable this study will be without the knowledge gained on recoveries from processing of a bulk sample from a small trial mine.
  • Jaganda recently raised £2.1m of funding for a potentially Bankable Feasibility Study work and general working capital.
  • The funding consists of £1.05 raised by way of an equity market placing and a 12-month unsecured draw down facility for $1m.
  • Jaganda also agreed to issue new shares to Consulmet in lieu of fees for work being done on the project including plant design and metallurgy.
  • The BFS is looking to support earlier studies that estimates average annual production of 64,000 ounces of PGM+Au, 2.2 Mlb of nickel, 1.2Mlb of copper, 44,000 lb of cobalt and 30,000 t of chrome.

Conclusion:  While the in-ground value of metals in many polymetallic mines often look good, the few polymetallic Platinum Group Metal mines we have known have suffered from unexpectedly poor recovery rates on mining.

 

KEFI Minerals* (KEFI LN)  2.3p, Mkt Cap £12.7m – ANS signs binding agreement regarding up to $38m project funding

  • ANS Mining, a local investment syndicate, signed a binding Project Equity Investment Agreement regarding a minimum $30m investment for a 23% interest in the Tulu Kapi Gold Mines.
  • ANS may increase investment to $38m in return for 29% conditional that the combined stake of ANS and the government of the Government of Ethiopia does not exceed 49.9%.
  • The subscription to new shares under the Agreement to move forward in two stages:

1)     The first $9m instalment will completed next quarter for 7% interest subject to two conditions including necessary government approvals and reasonable assurances of the full funding for the project.

2)     The balance of $21-29m at or before full financial close of all development funding expected following the community resettlement programme in early 2019.

  • ANS highlighted to the Company that institutional interest in the project has exceeded the top range of the potential $38m investment.
  • $9m are planned to be applied to the community resettlement compensation among other things.
  • “KEFI’s majority interest in the Project gives the Company an implied valuation of $66m based on these transaction metrics, whilst not including any value for the Tulu Kapi underground deposit or the exploration prospects in Ethiopia and Saudi Arabia, the largest countries within the highly prospective Arabian Nubian Shield where KEFI is focused,” KEFI Finance Director commented on the news.

Conclusion: Upon necessary government approvals and assurances of full project funding completion, the Company will be able to draw on $9m from ANS which would allow the team to launch community resettlement programme. The news marks another important milestone towards the start of development works at the gold Tulu Kapi project.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Phoenix Global Mining* (PGM LN)  35p, Mkt Cap £11m – US OTC listing

  • Phoenix Global Mining is now qualified to trade on the OTC market in the US.
  • The company recently reported that drilling shows “extensive evidence that a high-grade feeder system exists below the Empire oxide resource and demonstrate the existence of such a sulphide system within the Empire Mine”.
  • “Five drill holes … intercepted predominantly chalcopyrite and bornite copper sulphide mineralisation in high-grade vein structures” below the oxide resource area identified for the initial open-pit mining. The company also indicates “significant gold and silver grades that would boost project economics.”
  • Results include:
    • 24.7m grading 1.58% copper, 1.96% zinc, 1.2g/t gold and 28.7g/t silver from a depth of 7.3m in hole KXD18-10; and
    • 19.8m grading 1.88% copper, 0.65% zinc, 0.79g/t gold and 44.8g/t silver from a depth of 164.6m in hole KX18-44 from within the open pit area; and a number of results from step-out drilling beyond the pit area with sulphide intersections including
    • 18.3m grading 0.96% copper, 0.08% zinc, 0.83g/t gold and 26.3g/t silver from a depth of 54.9m in hole KX18-47 which also intersected 4.6m at an average grade of 2.54% copper, 0.07% zinc, 2.85g/t gold and 57.0g/t silver from a depth of 77.7m; and
    • 2.7m grading 2.99% copper, 5.07% zinc, 0.33g/t gold and 39.2g/t silver from a depth of 26.4m in hole KXD18-9.

*SP Angel acts as Nomad and broker to Phoenix Global Mining

 

URU Metals Ltd* (URU LN)  0.4p, Mkt Cap £3.4m – Temporary suspension of trading on AIM

  • URU Metals have been temporarily suspended trading, pending publication of the company’s annual report and accounts.
  • The Company have also reported a successful phase 1 of the geophysics program consisting of two lines of ground-based geophysics to test whether the data can detect known high-grade Ni-PGE mineralisation intersected during the 2017 drilling campaign. The results, published end of August, indicate successful delineating IP (inverse polarization) anomalies over the mineralisation. The next phase of the program is underway with the aim of generating further IP anomalies to be followed up by a proposed multi-element soil geochemistry survey and a six-hole diamond exploration drilling campaign as detailed in the RNS released on 18 July 2018.
  • Metallurgical test work has also been completed to establish whether a Rados XRF ore sorter could be used to upgrade the metal content of samples from the Zebediela Nickel project. The Rados XRF ore sorter uses well established technology to analyse the surface of the ore and discard lower grade samples, thereby cost effectively increasing the mill-feed grade to the processing plant and potentially reducing acid consumption.
  • The distribution of Rados metal analyses shows that the sample can be sorted with the Rados XRF ore sorter. However, the increase in mill feed grade was not raised to levels substantial enough to justify the use of XRF Rados ore sorter in the process due to an overall lack of variation in nickel grade in the samples submitted.

*SP Angel acts as Nomad and broker to URU Metals

 

Vast Resources (VAST LN)  0.6p, Mkt Cap £33.4m – Final results

  • The Company reported financial results for the 2018 fiscal year ending in March last week Friday.
  • Sales climbed to $30.7m (FY17: $23.8m) with operating profit coming in at $2.0m (FY17: $1.7m).
  • The Group recorded a $16.9m loss last year (FY17: -$2.8m) led by a $12.5m loss recognised on re-assignment of the owed outstanding loan with a book value of $14.8m for consideration of $2.3m.
  • Operating cash flow came in at -$0.6m constrained by an increase in working capital.
  • The Company raised $12.2m in equity and debt during the period of which $4.1m has been directed to repay previous liabilities and $9.2m used on three mining properties in Romania (Manaila and BPPM) and Zimbabwe (PPGM).
  • Closing cash balance stood at $1.3 as of Mar/18 and has come down to $0.6m as of 25 Sep/18.
  • Outstanding debt climbed to $27.0m (FY17: $7.1m).
  • Operationally, Manaila polymetallic operations in Romania run significantly below plant capacity (59% utilisation rates) driven by limited mining equipment availability; post reporting period the team agreed to bring in a new dumper and excavator fleet that, when implemented, should help to reach targeted 15,000tpm plant feed capacity.
  • At Baita Plai, the Company has been in the process of securing mining permit to reopen high grade polymetallic underground operation with all documentation concerning the license now pre-agreed and submitted to local authorities; the management expects mining to re-start in three months and the flotation plant to be refurbished and re-started in six.
  • Regarding other projects in Romania, the Company is managing an exploration programme at the Blueberry polymetallic gold project (29.41% interest) testing the potential for a JORC resource and future independent IPO; additionally, the team is preparing a drilling programme at Magura Neagra and Piciorul Zimbrului to start in Q4/18 as part of the prospecting license eyeing to potentially converting it into an exploration license in Q1/19.
  • At Pickstone Peerless gold operation in Zimbabwe, the mine continued to generate free cash flow with the plant ramped up to 31-35ktpm run rate ; sulphide plant was completed with hot commissioning having not yet started as operations continue to run on oxide ore.
  • Generated FCF at PPGM is directed towards development works at the Eureka gold mine (23.75%) where design plans for the mine and the processing plant have been finalised and first production targeted for Jun/19; furthermore, the Company is continuing with a due diligence on the Heritage Concession, a license area located close to historic Marange Diamond Field, regarding a potential JV.

Conclusion: The financial year marked a busy period for the Company that pursues an aggressive strategy to expand operations across Romania and Zimbabwe. The team has secured the backing from Mercuria for the development of the Baita Plai mine which is currently being permitted while free cash flow generative Pickstone Peerless helps to pursue other targets in Zimbabwe.

 

 

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

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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

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

 

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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