SP Angel . Morning View . Thursday 05 03 20
Authorities step up response to coronavirus outbreak
MiFID II exempt information – see disclaimer below
Bluejay Mining* (JAY LN) - BUY, Target price revised to 20.1p (from 16.3p) – Valuation upgrade on theoretical optimisation of Dundas ilmenite project and rising demand for ilmenite feedstock
Chaarat Gold* (CGH LN) – BUY – 44p (from 42p) – Kapan is FCF positive and Tulkubash is on course for first gold in Q4/21
Petropavlovsk (POG LN) – Inclusion into the FTSE 250 Index
SolGold* (SOLG LN) – PDAC presentation gives snapshot of Alpala and Ecuador exploration programme
Stimulus funding (Coronavirus related)
- $50bn - IMF
- $15.4bn – Hong Kong relief package
- $13.7bn - South Korea
- $12bn - World Bank
- $8.3bn – US House of Representatives
- $5.5bn – Bank of Japan, ETF purchases and short term liquidity to Banks
- $2bn – Taiwan stimulus
- $0.75 - Indonesia
- $14.2bn China, already spent. $113bn worth of bonds issued by China regional governments in January
- China – much more stimulus to come
- ECB ready to take targeted action
- UK – Government advice: ‘Keep Calm & Carry On’
- $121.85bn – TOTAL stimulus offered to-date
Base metals rise on central bank and government support
- LME and SHFE base metals are rising this morning as governments announce new stimulus measures.
- News of the gradual resumption of industrial operations in China and a slowing spread of the virus in China is supporting prices though some question the accuracy of data coming out of China.
- The outlook remains tempered with downstream data such as the 80% drop in Chinese car sales reported yesterday.
China issues record number of force majeure certificates
- China has issued a record number of force majeure contracts in an attempt to exempt local exporters fulfilling contractual agreements with overseas buyers due to the coronavirus outbreak.
- Last week, the FT reported that the Chinese government has issued 3,335 certificates covering contracts worth a combined US$28.5bn since the beginning of February.
- According to Chinese law, the certificate holder may claim partial or complete exemption from a contract.
- A copper smelter belonging to China’s Western Mining, which has 160,000t of annual smelting capacity, had its application for force majeure excepted on Tuesday (Reuters).
- This is the second copper smelter in China to declare force majeure after Guanxi Nanguo announced last month that it was unable to take a delivery of concentrate.
- This morning, Chinas top gas importer PetroChina has declared force majeure on natural gas imports, including LNG, following the outbreak.
- PetroChina is thought to meet 40% of its total gas needs through imports, 70% of which are from pipeline gas through central Asia and Russia.
What happened - 2020 started so well
- The Trade war Phase 1 was settled between the US and China,
- Global GDP growth was looking good,
- Metals prices were rising along with expectations for good demand.
Then, this happened:
- America tried to start WWIII by blowing up Soleimani, the real head man in Iran,
- A plague of locusts invaded the Middle East and East Africa,
- The EU reneged on their Brexit negotiation, and
- Coronavirus collapses equity market,
- The global economy started tanking, and
- 3.4% of 80% of the population are forecast by the WHO to be toast
- Greta complained that a few Penguins got a bit warm in Antarctica,
- And Floods hit the North and West of England
So what do the politicians and public health experts advise:
- Keep Calm & Carry On
- Self-isolate & work from home
- Vacation in any non-Coronavirus regions which leaves you with Bognor because no self-respecting Coronavirus would go to Bognor!
What’s coming next:
- NASA might spot an asteroid coming our way
- Global warming is about to flood the UK in a never-ending succession of winter storms
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Dow Jones Industrials |
+4.53% |
at |
27,091 | |
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Nikkei 225 |
+1.09% |
at |
21,329 | |
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HK Hang Seng |
+2.08% |
at |
26,768 | |
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Shanghai Composite |
+1.99% |
at |
3,072 |
Economics
IMF is making $50bn available for low income and emerging market economies to help fight coronavirus.
- Of that, $10bn will be offered at zero interest for the poorest members through the Rapid Credit Facility.
US – The House passed a $8bn spending package to address the spread of the virus including funds for protective equipment, testing and surveillance.
- The amount was far higher than the $2.5bn White House asked for.
- California joined Washington in declaring a state of emergency after the first death from coronavirus and 53 confirmed cases in the state.
- Washington declared the emergency last month following the first confirmed coronavirus related death there.
- On a separate note, Mike Bloomberg dropped out of 2020 presidential race and endorsed Joe Biden after poor Super Tuesday results and despite spending more than $500m on his campaign.
- This leaves three candidates in the race with a number of commentators expecting Elizabeth Warren to drop out as well in support of Bernie Sanders.
UK – Investors are raising expectations the central bank will follow the lead of the US Fed and the Bank of Canada and cut rates before the scheduled policy announcement under new Governor on March 26.
- Andrew Bailey who currently heads the Financial Conduct Authority is scheduled to replace Mark Carney as the head of bank of England on March 16.
- Bailey said the central bank should wait until it has more clarity about the economic impact of the coronavirus outbreak before making a decision on interest rates.
- “I think what we need frankly is more evidence than we have at the moment, as to exactly how this is feeding through,” Bailey said.
- Although the incoming head of the BoE supports measures needed to help companies whose operations have been disrupted b the disease’s spread.
- “I think it is quite reasonable to expect we are going to have to provide ... some form of supply chain finance in the not very distant future now to ensure that the effects of this shock from the virus are not damaging to many forms of activity.”
- Comments over reluctance to consider the rate cut sees the pound trading higher against the US$ this morning.
Canada – The central bank by 50bp to 1.25% following a similar decision by the US Fed.
- The coronavirus presents a “material negative shock to the Canadian and global outlooks”, the Bank of Canada said.
- “It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.”.
- The Canadian dollar dropped 0.2% against the US$ on the news.
Italy – Authorities closed schools and universities in an unprecedented move as the virus spreads placing the nation in top three countries by the total number of infected people.
- A total of 107 people have now been killed by the coronavirus in Italy, which has the most serious outbreak in Europe.
- Most of the more than 3,000 cases are in the north but others have been confirmed in 19 of Italy’s 20 regions, BBC reports.
Currencies
US$1.1130/eur vs 1.1178/eur yesterday. Yen 107.29/$ vs 107.40/$. SAr 15.310/$ vs 15.362/$. $1.290/gbp vs $1.279/gbp. 0.663/aud vs 0.661/aud. CNY 6.942/$ vs 6.933/$.
Commodity News
Gold US$1,640/oz vs US$1,636/oz yesterday - Gold rises slightly with concerns over virus spread outside of China
- Gold continued to edge higher this morning, as investors continue to worry about the virus outbreak as it spreads to over 80 countries.
- Spot gold was up 0.2% at $1,638/oz earlier this morning (Reuters).
- The price of gold is showing resilience despite rebounds in US stock indexes yesterday as demand for gold is fuelled by an uncertain global marketplace (Kitco).
Gold ETFs 85.1moz vs US$85.1moz yesterday
Platinum US$867/oz vs US$879/oz yesterday
Palladium US$2,512/oz vs US$2,465/oz yesterday
Silver US$17.18/oz vs US$17.20/oz yesterday
Base metals:
Copper US$ 5,712/t vs US$5,713/t yesterday
Aluminium US$ 1,732/t vs US$1,728/t yesterday
Nickel US$ 12,850/t vs US$12,740/t yesterday
Zinc US$ 2,027/t vs US$1,988/t yesterday
Lead US$ 1,845/t vs US$1,834/t yesterday
Tin US$ 16,970/t vs US$16,870/t yesterday
Energy:
Oil US$51.3/bbl vs US$51.7/bbl yesterday
Natural Gas US$1.831/mmbtu vs US$1.789/mmbtu yesterday
Uranium US$24.60/lb vs US$24.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$88.2/t vs US$85.9/t - Iron ore continues to gain on policy support
- Iron ore prices continued to rise this morning, as policy makers and central banks around the world respond to the coronavirus outbreak - expected to support the manufacturing sector.
- The Bank of Canada followed the US Fed and cut 50bps from its benchmark interest rate on Wednesday, to support economic growth and keep inflation on target.
Chinese steel rebar 25mm US$531.2/t vs US$531.7/t
Thermal coal (1st year forward cif ARA) US$57.3/t vs US$57.6/t
Coking coal swap Australia FOB US$155.0/t vs US$156.0/t
Other:
Cobalt LME 3m US$33,500/t vs US$33,500/t
NdPr Rare Earth Oxide (China) US$39,757/t vs US$39,958/t
Lithium carbonate 99% (China) US$5,762/t vs US$5,770/t
Ferro Vanadium 80% FOB (China) US$28.0/kg vs US$28.0/kg - Ferro-vanadium prices fell 7.7% to $26-27/kgV in Western Europe yesterday (FastmarketsMB)
- We see the current pullback in ferrovanadium prices as a relatively short term move.
- Much new stimulus will be aimed at the restoration of business confidence and economic recovery through construction indicating rising demand for structural steel and related commodities.
Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.3/kg
Tungsten APT European US$240-245/mtu vs US$240-245/mtu
Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t
Battery News
GM announce 3rd generation of their electric-propulsion system
- General Motors (GM) has released details of their new BEV3 electric-propulsion system at an event at the GM Technical Centre, Michigan. (Forbes)
- BEV2 was the Chevrolet Bolt whilst BEV1 was the EV1 of the 1990’s. BEV3 is not a specific vehicle platform but a new architecture to support a range of products. (Techcrunch)
- The newly developed chemistry for lithium-ion cells referred to as the Ultium battery system helps reduce the cost and improve the performance of the battery. The majority of modern EVs use NMC chemistry, utilizing nickel, manganese and cobalt coatings on cathodes.
- Ultium cells us NMCA, the addition being aluminium, and the result a 70% reduction in the cobalt content. It will be capable of 19 different battery and drive unit configurations, 400-volt and 800-volt packs with storage from 50kWh to 200kWh.
- The chemistry will be proprietary to GM but was developed in partnership with LG Chem. GM suggests the chemistry could drive cell costs below $100kWh.
Veolia Water Technologies produces battery grade lithium
- Veolia has successfully produced battery grade lithium hydroxide monohydrate from brine. (Manufacturers Monthly) Veolia works as a consultant with Anson Resources.
- The brine was from Anson Resources, Paradox Brine Project in Utah, US. The lithium hydroxide monohydrate is in crystal form with a composite sample grade of 56.2%. (Proactive Investors)
- Anson Resources has been developing the Paradox Basin Brine Project to recover valuable chemicals from the slat-brine resource in southern Utah, USA. The project produced its first lithium hydroxide product in October 2018 and produced a high grade lithium carbonate bulk sample in December 2019. (Mining.com)
- Anson is now able to design a plant for producing both battery grade lithium hydroxide monohydrate and lithium carbonate from lithium hydroxide solution. The Company uses direct lithium extraction technology and conventional flow sheets for processing, no extraction ponds are required.
- Question is, how economic is the process and how well will it work over the longer term in an upscaled plant?
- Many companies have produced lithium from brines in bench-scale tests but we have yet to see anyone successfully operate sufficiently large pilot plant to demonstrate positive economics for a commercial-scale plant.
Suggestions of a bright future for lithium may be hard to believe as miners profit warn and struggle for funds
- A numbers of miners expect profits to plunge further, citing a falling lithium salt price and coronavirus fears. (PV Magazine)
- Ganfeng Lithium issued a profit warning, expecting total profits for 2019 to fall 65% compared to 2018. In the same vain Chilean Miner SQM, the #2 producer saw profits tumble in Q4’2019 and warned early sales in 2020 could be impacted by the virus. (Auto.com)
- Ganfeng has previously announced that the coronavirus was affecting their Chinese operations. SQM’s net income was down 38% from $108.6m in the same period in 2018 to $66.9m. Gross profits fell 30% to $137.8m.
- Meanwhile smaller mining enterprises hoping to take advantage of the EV boom are experiencing issues turning EV aficionados into investors. (Reuters) Protests about the environmental and socio-economic damage caused by mining operations in regions like the Atacama desert has created opposition to supporting these operations.
- Is there light at the end of the tunnel……a survey by S&P Platts seems to think so, a survey of industry players suggests they think Chinese lithium chemical demand will improve in 2020. (Stockhead)
- US lithium producer Livent saw its share price fall 15% after the company suggested expects lithium prices to remain depressed this year. The Company cited the glut of supply and coronavirus disruption as the reasons for this outlook. (Financial Times)
Company News
Bluejay Mining* (JAY LN) 6p, Mkt Cap £59m – Valuation upgrade on theoretical optimisation of Dundas ilmenite project and rising demand for ilmenite feedstock
(Dundas Ilmenite project, Greenland, 100% owned)
BUY, Target price revised to 20.1p (from 16.3p)
- We are upgrading our valuation on Bluejay Mining on our theoretical optimisation of the Dundas ilmenite project in Greenland.
- Our thinking and assumptions have evolved based on increasing confidence in the project and rising prices and demand for ilmenite feedstock.
- While the Coronavirus is impacting fundamental global GDP growth we feel there will be higher demand for paint and pigments as a result of lower interest rates and other economic stimulus.
- Alternative sources of ilmenite may also be disrupted leading to stronger demand for clean, ilmenite concentrate feedstock.
- New stimulus measures as well as self-isolation and the impact of greater home working is also likely to raise pigment demand.
- Assumptions:
- We have very simply added 50% to our assumed production rate in year 4. Taken 20% off our key mining, processing and loading costs and added 20% to our capital cost assumptions.
- Bluejay raises mine production to 11.3mtpa at the resource grade of 7.1%
- Ilmenite concentrate production rises to 641,000tpa from 440,000tpa
- Operating costs start at $109/t of concentrate but then fall to $89/t on operation optimisations
- EBITDA rises to $134/t per tonne of concentrate from $113/t in year four
- We assume an ilmenite sales price of $220/t – this is the mid-range of the current estimated ilmenite price by FastmarketsMB
- Capital cost rises to 294m from $245m previously assumed.
- We assume an 8% interest rate and an 8% discount rate for our NPV valuation.
- Resource:
- It is our view having visited the Dundas site that this mine should continue to produce ilmenite well beyond its current estimated resource as a relatively small proportion of the total beach area has been drilled.
- We assume the resource will continue to grow from the JORC 101mt grading 7.1% ilmenite as published on 17 December 2018 given the exploration target of 300,000-500,000t
- This resource report indicated much higher grade areas on the beach with 31mt grading 10.7% ilmenite in-situ using a 3.5% cut-off grade and 16mt at 12.9% at a 4.5% cut-off grade.
- Selective mining could lead to accelerated cash flow and lower costs in the early years depending on the optimisation.
- Bluejay later upgraded their resource to 117mt grading 6.1% ilmenite though the inclusion of some lower grade material on 29 May 2019.
- We believe Bluejay’s ilmenite grades have been underestimated in the JORC resource drilling due to issues relating to the sonic drill rig and will prove to be better than estimated on mining and processing.
- It is our view that further work on the resource to include more material from the Iterlak Delta combined with optimisation of the mine plan should also enable the extension of the resource at higher grades than currently forecast.
Conclusion: Optimisation of the Dundas ilmenite project should lead to significantly better returns in our view. While much will depend on future demand for ilmenite feedstock we see BlueJay’s location at Dundas in Greenland as strategically placed to feed into some major consumers going forward.
We see the impact of the Coronovirus as leading to significant economic stimulation which we feel with help drive demand for pigments and ilmenite feedstock.
As with the Victorians, following Cholera outbreaks in the 1800’s consumers and governments will wish to show clean and fresh looking homes and public places in an effort to restore confidence in their sanitisation.
This is why many Victorian buildings and possibly early London Underground stations were tiled as part of the trend to create a cleaner looking appearance and confidence in their spaces.
*SP Angel act as nomad to Bluejay Mining. *SP Angel have visited the Dundas, Itelak ilmenite sands project in Greenland.
Chaarat Gold* (CGH LN) 34p, Mkt Cap £158m – Flash Note – Kapan is FCF positive and Tulkubash is on course for first gold in Q4/21
BUY – 44p (from 42p)
FY19 Kapan output update – production up, AISC down and EBITDA generation ramping up through 2019
- The Kapan polymetallic operation in Armenia produced 60koz GE, +7%yoy (including 12 months of output) at $1,040/oz AISC (oz gross), -14%yoy, last year on the back of higher throughput helped by better mining rates and an improvement in recoveries in the grinding and flotation circuits more than compensating for slightly lower gold grades. Mining fleet availability improved through H2/19 while retendering of all services and goods that brought previously outsourced contracts in-house yielded cost efficiencies. Underground development meters climbed to >23,000m, +16%yoy, increasing the number of mine faces that in turn should help with mining flexibility and mining rates moving forwards.
Kapan Revised Mine Plan is implemented with 2020 guidance for 60koz GE and $20m in EBITDA at $1,400/oz Au, $6,000/t Cu and $2,400/t Zn prices
- The seven year Life of Mine Plan based on the latest mineral reserve of 4.5mt at 3.26g/t* GE for 471koz GE has been put in place with 2020 guidance at 60koz (gross) production, $1,121/oz (pre-tax, per oz payable) AISC and $20m EBITDA (using MRE commodity price forecasts). Adjusting for our price deck (see table below) we estimate Kapan to produce 57koz GE (gross) at $1,162/oz AISC (pre-tax, per oz payable) generating $25m, including $1m assumed contribution from 3rdparty concentrate utilising spare plant capacities. FCF post guided $4m in maintenance capex and $2m in taxes is expected to come in at ~$19m.
- FCF generated from the mine covers the Kapan acquisition loan repayments and interest expenses as well as offers an opportunity to refinance other liabilities of the Group.
- On our estimates, Kapan NPV8% stands at $141m or 23p/share accounting for ~40% of the Chaarat assets portfolio value with stronger commodity prices and adjustments to the USDGBP exchange rate compensating for higher operating costs. As previously stated, we run Kapan economics on +10y LoM through to 2030 reflecting the scope to expand the current mineral inventory given 7.6mt at 5.01g/t included in the Inferred mineral resource category (ie outside the mine plan).
Tulkubash development works to accelerate once project funding package is closed in Q2/20 with first gold pour remaining on target for Q4/21
- At the Tulkubash heap leaching gold project in Kyrgyzstan, the team is gearing up pre-development works ahead of $80m debt funding completion in Q2/20.
- The equity component of the $110m capex is covered by the Ciftay project level investment of $31.5m in return for a 12.5% interest in the Kyrgyzstan portfolio of assets, implying NAV for Tulkubash and Kyzyltash of $252m.
- Access road has been upgraded, earthworks equipment mobilised, 360-man camp installation commenced for completion in Q3/20, ore haul road and stockpiling platform construction finished, and detailed design of leaching heaps, crushing circuit and ADR started.
Drilling at Tulkubash consistently intersects mineralisation with nearly 3/4s of the prospective 24km trend remaining untested
- The latest mineral reserves estimate released in Feb/20 stands at 24.6mt at 0.95g/t for 749koz (Jan/20) marking a 60% increase in contained ounces at similar grades on an Apr/18 estimate of 468koz at 0.91g/t reflecting some 40,000m of drilling.
- The focus is to extend the life of mine at Tulkubash to at least 15 years through a multi-year drilling programme proving up shallow oxide mineralisation running along the NE strike.
- The team is planning to update the mine plan accommodating the latest mineral reserves in due course.
Life of mine extension drives the Tulkubash value appreciation
- At ~4.9mtpa throughput rate, the current mineral reserve covers five-year mine life that, judging from latest exploration results, is likely to increase delivering improved project economics. We estimate Tulkubash to run at 110kozpa and $932/oz AISC (pre-tax) potentially generating $67m in EBITDA and $60m in FCF ($1,500/oz) per annum once fully ramped up using updated operating parameters including slightly better feed grades (0.95g/t v 0.92g/t) and gold recovery rates (73% v 69%) as well as higher waste stripping ratios (3.9x v 2.6x). While we look forward to mineral resources/reserves update, we continue to value Tulkubash and Kyzyltash assets using the Ciftay investment implied NAV at $221m or 36p/share, equivalent to ~60% of the Group NPV. We also highlight that the deal was agreed in Q1/19 when gold traded around $1,300/oz levels vs current >$1,600/oz.
Near term news flow and catalysts
- Q1 Kapan operating update
- FY19 financial results
- Tulkubash debt funding update in Q2/20
- Mar/20 $17m loan refinancing update
- Expansion of the resources/reserve base at Tulkubash and Kapan
Valuation
- We have updated our target price to account for new commodity price forecasts, changes to production and operating/capital costs profile as well as amended long term GBPUSD exchange rate (1.3 from 1.4) arriving at $267m or 44p/share and reiterating our buy recommendation.
|
(Dec year end) |
2018 |
2019E |
2020E |
2021E |
2022E |
2023E | ||
|
Gold price |
US$/oz |
1,270 |
1,392 |
1,549 |
1,500 |
1,500 |
1,500 | |
|
GE production |
koz |
- |
57.1 |
57.4 |
61.2 |
140.7 |
174.2 | |
|
AISC |
US$/oz |
- |
1,270 |
1,162 |
1,090 |
977 |
979 | |
|
Revenue |
US$m |
- |
69.9 |
77.1 |
79.9 |
198.9 |
249.1 | |
|
EBITDA |
US$m |
-13.4 |
2.5 |
21.3 |
23.9 |
73.5 |
94.1 | |
|
PAT |
US$m |
-17.0 |
-15.6 |
-4.0 |
-0.9 |
25.0 |
36.0 | |
|
FCF |
US$m |
-23.2 |
2.5 |
-45.0 |
-16.6 |
43.0 |
72.8 | |
|
EV/EBITDA |
x |
- |
95.2 |
13.7 |
13.3 |
3.7 |
2.1 | |
|
PER |
x |
- |
- |
- |
- |
8.6 |
6.1 | |
|
Net Debt |
US$m |
25.3 |
75.1 |
130.3 |
156.5 |
113.5 |
40.7 | |
|
Prices as of 04/03/20 |
| |||||||
|
Source: SP Angel, Company |
| |||||||
*Reserves used$1,400/oz Au, $17.0/oz Ag, $6,000/t Cu and $2,400/t Zn commodity prices for conversion coefficients
*SP Angel acts as Broker to Chaarat Gold
Petropavlovsk (POG LN) 21p, Mkt Cap £705m – Inclusion into the FTSE 250 Index
- Following the March 2020 review, FTSE Russell included Petropavlovsk into the FTSE 250 Index.
- The Company will remain a constituent of the FTSE All-Share Index.
- The decision expands access to index funds and will improve liquidity in the stock.
- “Petropavlovsk was by far the best performing London-listed gold producer in 2019, as well as being the best performer year to date… this exceptional performance has resulted in our inclusion in the FTSE 250,” the Company commented on the news.
SolGold* (SOLG LN) 16.94p, Mkt cap £325.8m – PDAC presentation gives snapshot of Alpala and Ecuador exploration programme
- Solgold’s presentation to the annual Prospectors and Developers Association Conference (PDAC) in Toronto https://www.rns-pdf.londonstockexchange.com/rns/0703F_1-2020-3-5.pdf describes the company’s leading role in mineral exploration in Ecuador as well as the global context of its 85% owned Alpala copper/gold project in the north of the country.
- Describing its “first mover advantage” in Ecuador, the presentation highlights Solgold’s position as the largest tenement holder in the country with 3,200km2 in 75 regional concessions covering 13 high priority exploration targets, as well as its role as the country’s largest employer of geologists, of whom 30% are female, and its position as the largest spender on exploration (US$160m to date) and the completion of the most metres (227,000) drilled in Ecuador.
- The company’s application of advanced geophysical exploration techniques and leading magnetic modelling technology tied to coincident soil geochemical anomalism, which resulted in the 2bn tonne Alpala deposit, is proving more widely applicable across the company’s wholly owned exploration properties throughout the country where 11 porphyry targets and 2 epithermal targets have been identified as priority targets to date.
- At the flagship, Alpala project, the company points to a discovery cost of US$1.41/oz of gold equivalent or 3.4US¢/lb of copper equivalent for its current resource which amounts to 2.05mt of indicated mineralisation at an average grade of 0.6% copper equivalent (0.4% copper and 0.29g/t gold) with an additional 900mt classified as inferred at a lower 0.35% copper equivalent grade (0.27% copper and 0.13g/t gold).
- A high grade core at Alpala has been identified containing 400mt, classed as indicated, at an average grade of 1.49% copper equivalent which, based on the company’s May 2019 PEA analysis, is expected to assist in the delivery of a 3.6years payback of an initial US$2.7bn investment producing an NPV8% of US$4.4bn and IRR of 25.9% at a copper price of US$3.00/lb and gold price of US$1300/oz and silver price of US$16/oz.
- The company analysis is based on a mining rate of 50mtpa using twin 5km long decline access to develop the underground mine using low cost mass caving to produce an average 425,000tpa of copper equivalent or 1.6moz pa of gold equivalent in concentrate over the first ten years project life.
- Solgold’s estimate of a US$0.25/lb C1 cash cost of copper production for the first 25 years of the project (LOM US$0.91/lb) is reported to position Alpala comfortably in the lowest cost quartile of world copper production.
- A timeline shown in the presentation shows that the company is expecting to complete its definitive feasibility study for Alpala in Q1 2021 leading to the start a three-year construction period in mid-2021 and to a hand-over to operations in mid-2025.
- The company also stresses its social and community engagement, provision of employment opportunities and health, safety and environmental initiatives.
Conclusion: Although much of the information in Solgold’s PDAC presentation has been made public in previous announcements, the presentation is a useful synopsis which we recommend interested parties to scrutinise at their convenience.
*SP Angel act as Financial Advisor and broker to Solgold
Analysts
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
Sales
Richard Parlons – 0203 470 0472
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
SP Angel
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
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Sources of commodity prices |
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Gold, Platinum, Palladium, Silver |
BGNL (Bloomberg Generic Composite rate, London) |
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Gold ETFs, Steel |
Bloomberg |
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Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt |
LME |
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Oil Brent |
ICE |
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Natural Gas, Uranium, Iron Ore |
NYMEX |
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Thermal Coal |
Bloomberg OTC Composite |
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Coking Coal |
SSY |
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RRE |
Steelhome |
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Lithium Carbonate, Ferro Vanadium, Antimony |
Asian Metal |
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Tungsten |
Metal Bulletin |
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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%