SP Angel's Morning View: Chinese Infrastructure Spending Promise Give Strong Boost To Metals

SP Angel – Morning View – Wednesday 19 09 18

Chinese infrastructure spending promise give strong boost to metals

MiFID II exempt information – see disclaimer below

SP Angel are the No. 1 broker for AIM mining stocks in London

Amur Minerals* (AMC LN) –Kun Manie drilling update

Anglo Asian Mining* (AAZ LN) – Interims: maiden dividend (3USc) and dividend policy announced

Bluebird Merchant Ventures* (BMV LN) – Completion of Gubong Feasibility report and project update

Golden Star Resources (GSC CN) – Shareholders approve La Mancha investment

Phoenix Global Mining* (PGM LN) – Interim results

Strategic Minerals* (SML LN) – Redmoor drilling results

DRC cobalt levy could limit global battery sector growth

Imposing a ‘super-tax’ on cobalt could have “whole-world implications” according to Benchmark Minerals Intelligence, referring to plans by the Democratic Republic of Congo to prepare categorisation of cobalt as strategic and introduce a 10% royalty tax on producers.
The metal could face the prospect of supply shocks in the early 2020s according to a May Bloomberg New Energy Finance report, with the updated royalty reducing the attractiveness of mine develop in the African nation.
The single-source is the greatest risk to the price, as cobalt falls ~16% this year as the updated mining legislation impacts mine production.
The DRC accounts for ~66% global output in 2017, which is forecast to rise to ~75% by 2021 as producers, including Glencore Plc, ramp up new production.
Also hampering future supply could be refining capacity outside of China, as Benchmark note existing supply should meet rising demand through to 2023 but which point there becomes a potential bottleneck in the supply chain.

Amionx Revolutionizes Lithium-ion Battery Safety with Introduction of New Technology

Amionx™ a leader in safe battery technology, today announced commercial availability of its Safe Core™ technology.
The Company plans to broadly license its patented and proprietary Safe Core technology for use in lithium-ion batteries globally.
This transformative technology acts like a circuit breaker to prevent lithium-ion batteries from being the source of a fire or an explosion as a direct result of overcharge, internal short or external heat.

World’s first hydrogen fuel cell-powered trains enter service in Germany

Capable of travelling at up to 140km/h, the two Alstom Coradia iLint trains will serve a 100km route, which was previously served by diesel units.
The new trains will be fuelled at a mobile hydrogen filling station, where gaseous hydrogen will be pumped into the trains from a 40-foot-high steel container at Bremervörde station. According to Alstom, one tank will provide enough fuel for 1000km of travel.
“The Coradia iLint heralds a new era in emission-free rail transport. It is an innovation that results from French-German teamwork and exemplifies successful cross-border cooperation,” said Henri Poupart-Lafarge, chairman and CEO of Alstom.

Driverless cars forecast to clog roads

Congestion on the roads could more than double over the next three decades despite rising numbers of driverless cars, according to analysis.
Estimates by the Department for Transport (DfT) show that up to 16% of roads will be clogged up by 2050 compared with 7% at present.
It is expected to result in slower vehicle speeds and longer travel times, with journeys taking 20 minutes on average rather than 17 now.
The number of vehicles on British roads is forecast to grow by as must as 51% due to changes in population and the lower cost of running electric cars.

Dow Jones Industrials	+0.71%	at	26,247
Nikkei 225	+1.08%	at	23,673
HK Hang Seng	+1.16%	at	27,398
Shanghai Composite	+1.14%	at	2,731
FTSE 350 Mining	+1.63%	at	16,670
AIM Basic Resources	-0.32%	at	2,186

Economics

US – Chinese equities extended Tuesday’s rebound despite a series of new sanctions announced by President Trump.

Emerging markets equities climbed for the fifth time in six sessions as risk appetite held up.
Japanese yen is little changed trading at the lowest level since late July.
Gold is doing well amid weak US$ and despite a run up in US 10y treasury yields which settled above 3% level.

China – Premier Li Keqiang said the government will not engage in competitive currency devaluation to support demand for its exports.

The announcement saw the renminbi climbing against the US$ after losing around 9% since mid-April amid ongoing trade war.
On Tuesday, authorities added $60bn of US products to its import tariff list in retaliation for the US planned $200bn of Chinese goods.
Given a significantly lower amount of US imports coming in China and Beijing being unable to match US dollar-for-dollar in this round of tariffs, Capital Economics questioned what might be further steps that authorities would be considering in retaliation to US actions.
“President Xi’s comment in the summer that China ‘pushes back’ appeared to be a threat that US firms could be targeted for regulatory harassment and consumer boycott… but as the likelihood of a protracted conflict has grown, China’s leaders have started to take a softer line, concerned more with not being seen as an aggressor in the trade dispute,” Capital Economics wrote in the note yesterday.

UK – PM May remains in support of her Chequers plan ahead of an informal EU summit in Austria.

“We are near to achieving the orderly withdrawal that is an essential basis for building a close future partnership… to come to a successful conclusion, just as the UK has evolved its position, the EU will need to fdo the same,” May said earlier.
It remains to be seen if the EU is prepared to “do the same” as the March deadline draws closer and many see risks of a no-deal Brexit increasing.
The pound is up more than 0.5% against the US$ this morning climbing to above the 1.2 level on the back of stronger than expected inflation numbers.
CPI and RPI growth rates accelerated to 2.7%yoy and 3.5%, respectively, beating market expectations for 2.4%yoy and 32% readings.

North Korea/South Korea – North Korea pledged to close missile test site and allow third party inspectors to verify the process supporting earlier pledges to denuclearisation programme.

The announcement came amid a summit between Kim Jong Un and South Korean President Moon Jae-in in Pyongyang on Wednesday.
Pyongyang also announced it will close its Yongbyon nuclear site if the US responds with the concessions it pledged during the Singapore summit in June; unspecified concessions might include an end-of-war declaration, South Korea’s national security adviser suggested.
US President welcomed the news calling latest pledges “very exciting”.

Currencies

US$1.1693/eur vs 1.1690/eur yesterday Yen 112.32/$ vs 112.00/$ SAr 14.774/$ vs 14.885/$ $1.316/gbp vs $1.314/gbp 0.725/aud vs 0.720/aud CNY 6.856/$ vs 6.860/$

Commodity News

Precious metals:

Gold US$1,204/oz vs US$1,198/oz yesterday

Gold ETFs 67.6moz vs US$67.6moz yesterday

Platinum US$822/oz vs US$800/oz yesterday

Palladium US$1,017/oz vs US$990/oz yesterday

Silver US$14.23/oz vs US$14.13/oz yesterday

As both gold and silver precious metals have been hammered this year, tumbling as the dollar rises and investor sentiment favouring the yield offered by stocks and bonds, gold has become the most expensive relative to silver in more than 20 years.
Bullion is around 85x more expensive than silver per ounce, a ratio not seen since 1995, drawing investors to exchange-traded funds. While ETF holdings backed by gold have fallen -1.3% this year, those tracking silver have climbed +2.3%. The cheaper metal typically trades as a higher-beta asset, associated with higher volatility, but meaning an upturn in precious metals would tend to benefit long positions in silver more.

Base metals:

Copper US$ 6,130/t vs US$5,935/t yesterday

Base metals receive a boost and demand in top consumer remains robust regardless of the threat to growth posed by the worsening trade war with the US. Prices for copper climbed above $6,000/t on the London Metal Exchange, gaining the highest level this month, on optimism that the barrage of tariffs on goods worth hundreds of billions of dollars won’t derail global growth, and on expectations that China will step up investments in infrastructure to shore up its economy.
The National Development and Reform Commission announced plans to ramp up crucial investment across important sectors including infrastructure. It also said it would speed up construction on infrastructure projects that have already been approved.
Despite spot copper price being hit, the premium paid for the metal at the Chinese port of Yangshan has risen to the highest level in almost three years as importers lock in fundamental supplies. The fee has soared to almost 50% since the close of July, and meanwhile LME prices have declined around 3%.
Inventories in warehouses tracked by the Shanghai Futures Exchange have more than halved in about six months, signaling tightening supplies. At the same time, production has been rising as smelters expand capacity, and imports of refined copper and concentrates are up strongly on a year earlier, feeding sustained demand from fabricators of pipes and wires for air conditioning and power supplies.
China’s overall copper demand, including scrap, has risen about 4-5% on year through August, matching or beating growth in 2017, a better performance than expected, said Ye Jianhua, an analyst with researcher SMM Information & Technology Co. The recent tightness in the market is also down to stockpiling before national holidays, Ye said.
Sustained demand in China is overprinting an escalating trade war as Beijing announces retaliatory tariffs on $60bn of US goods, while the Trump administration threatened duties on virtually all Chinese imports.
On Monday, President Donald Trump ordered his administration to levy 10% tariffs on about $200bn in Chinese goods on Sept. 24 and to increase the rate in January to 25% if Beijing refuses to offer trade concessions. In retaliation, Beijing has announced plans to hit U.S. goods, ranging from wheat to textiles, with 5-10% tariffs.

Aluminium US$ 2,040/t vs US$2,035/t yesterday

Nickel US$ 12,555/t vs US$12,315/t yesterday

Zinc US$ 2,417/t vs US$2,353/t yesterday

Lead US$ 2,072/t vs US$2,039/t yesterday

Tin US$ 19,000/t vs US$18,940/t yesterday

Energy:

Oil US$79.2/bbl vs US$77.7/bbl yesterday

Natural Gas US$2.928/mmbtu vs US$2.825/mmbtu yesterday

Uranium US$27.40/lb vs US$27.40/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$69.0/t vs US$68.7/t

China’s clean sky initiatives are driving trends towards more efficient, high-grade iron ore, creating a rift in pricing which is diverging the value of iron ore production. Alongside the push for better grades, shunning impurities which impact output and margins, mills are now paying premiums for raw material that comes in lumps and pellets.
The newfound focus on form is the latest manifestation of a market in upheaval, with consequences for miners in Brazil and Australia as well as users, especially in China. As with increased interest for high-quality ore that’s seen spreads explode, the main driving force behind the push for lumps has been Beijing’s drive to curb steel overcapacity and fight pollution. Ore in lump form doesn’t need to be sintered -- the polluting process by which grainy fines are stuck together -- can be fed direct into a furnace, and is therefore more efficient.
Lump premium futures on the Singapore Exchange Ltd., which also trades the benchmark futures contract, have more than tripled this year, and were last at 34.5c/t.
In the drive by mills for lumps and pellets has significantly benefited Brazil’s Vale SA, who produced a record amount of pellets in the second quarter, and said it’ll benefit from better pellet premiums this year, according to a production report.
China has been stepping up its campaign for blue skies by curbing steel production and other industrial activity, especially over winter. Earlier this year, authorities expanded the area that’s subject to controls, and analysts estimate that this season over half of the nation’s steelmaking capacity will be affected, compared with about a third last time around.
The campaign is driving up the value of imported cargoes, with curbs driving steel prices, aiding mill profitability and boosting the incentives to use more lumps. The nation has also shuttered domestic sintering and pelletizing operations, with Wood Mackenzie analysts noting inspections in Shanxi province cut local pellet supply by around a fifth.
The outlook remains strong, as the annual heating-season restrictions approach.

Chinese steel rebar 25mm US$695.2/t vs US$690.7/t

Prices for Chinese construction steel rebar surged on the news the government would boost spending on infrastructure, buoying the metal for the best one-day rise in over a week. The National Development and Reform Commission, the top state planner in the country, said in a news briefing on Tuesday that China would ramp up investment in infrastructure, as well as in agriculture, poverty alleviation and environmental protection.
Steel construction from infrastructure projects accounted for almost 20% total demand during 2017, helping to boost the most-active rebar contract on the Shangahi Futures Exchange by +1.1% to 4,177 yuan ($608.7)/t – the biggest one-day gain since Sept. 10. Analysts at CITIC Futures added “(The NDRC statement) helped to shore up the confidence of investors towards steel-demand in the long-term and drove up steel prices”.

Thermal coal (1st year forward cif ARA) US$96.6/t vs US$96.9/t

Premium hard coking coal Aus fob US$182.2/t vs US$182.2/t

Other:

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

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

Company News

Amur Minerals* (AMC LN) 4p, Mkt Cap £26.9m –Kun Manie drilling update

Amur Minerals reports that it has completed 29 holes (7,969m) during its August 2018 drilling campaign at its wholly owned Kun Manie nickel copper sulphide project bring the total for the current campaign to 143 holes (26,235m).
· The drilling has resulted in “resource expansion within the high grade orebody at Ikenskoe / Sobolevsky ("IKEN"), the joining up of the ISK Orebody with the Kubuk ("KUB") Orebody and the reduction of a barren zone that had been inadequately drilled”.
At the IKEN Inferred High Grade Zone (IIHG), drilling on a 100m square grid pattern has indicated mineralisation averaging 0.91% nickel and 0.25% copper over an area of 0.29km² “at an indicated thickness averaging 30.9m thickness”.
As a result, Amur Minerals expects a “substantial increase with regard to total mineralised tonnes and the JORC resource category”. The published resource prior to this work amounted to 14.6mt, classed as inferred, at an average grade of 0.87% nickel and 0.24% copper.
Also, “The 1,000 m long ISK Orebody and the 1,300 m long KUB Orebody have been linked together with the discovery of a 400 m long mineralised zone located between the two orebodies. In addition, drilling has expanded the ISK Orebody by an additional 100 m to the west. The total length of the unified orebody from the west end of ISK to the east end of the KUB Orebody in projected to be 2,800m”.
The company points out that as a result of its 2018 campaign, and “Consolidation of the 2017 and 2018 drill results now confirms the presence of a persistent flat lying strike oriented mineral structure from the west end of IIHG to the midpoint of the KUB Orebody. This 2,900 m long area hosts a total of 2,800 m … zone of mineralisation defined by 29 drill holes. These holes on average indicate the structure to be 35.6 m in thickness containing 0.83% nickel and 0.25% copper. The structure represents a substantial open pit target …”.
Drilling is to continue through September and is expected to include further drilling for metallurgical test samples and seeking to define “the up dip limits of the mineralisation in the ISK area and to continue drilling of the area at the west end of ISK adjacent the 100 m barren area”.
Commenting on what he described as “an exceptional month” of drilling during August, CEO, Robin Young said that “It is anticipated these results will have a material impact on the Mineral Resource Estimate, the Mining Ore Reserve, optimisation of the production schedule and the projected economic potential of Kun-Manie”. He went on to observe that “It is a rare achievement that a month of drilling can have such an overall potential impact on a Project."

Conclusion: August’s drilling campaign and the wider 2018 programme have clarified the geological interpretation and linked a number of the structures at Kun Manie. Inclusion of the results in the resource model looks likely to expand and upgrade the mineral resource estimate and modify the likely pit layout.

*SP Angel act as Nomad and Broker to Amur Minerals

Anglo Asian Mining* (AAZ LN) 59p, Mkt Cap £67m – Interims: maiden dividend (3USc) and dividend policy announced

BUY – 84p

Maiden dividend declared of 3USc and to be paid in cash in respect of the year ending 31Dec/18.
The dividend is payable on 8Nov/18 with 11Oct/18 ex-dividend date and record 12Oct/18 record date.
Rolling dividend policy announced involves distribution of 25% of annual free cash flow (FCF) comprising an interim and final dividend; FCF estimated as net cash flow from operating activities less capital expenditures.
Timing on dividend payments will be announced each year with interim and final results, respectively.
Revenue totalled $40.0m (H1/17: $29.8m) reflecting stronger gold production and higher gold prices compared to H1/17.
Gold sales (ex 12.75% share under the PSA) amounted to 25.8koz at $1,319/oz (H1/17: 15.7koz at $1,238/oz).
Copper concentrate sales (ex PSA) of 2,344dmt generated $5.9m (H1/17: 5,396dmt for $10.3m) as stronger commodity prices slightly compensated for weaker production levels.
EBITDA more than doubled to $18.5m (H1/17: $8.6m) implying high 46% EBITDA margins (H1/17: 29%).
AISC (incl government share under PSA) averaged $543/oz (H1/17: $564/oz) with lower reagent and other consumable costs led by easier to process Ugur ores partially offset by higher drilling and employee costs.
Capital expenditures amounted to $8.2m (H1/17: $3.4m) including deferred stripping costs ($4.9m), new crushing circuity ($2.0m) and underground mining equipment ($0.8m).
Interest costs nearly cut in half $1.0m (H1/17: $1.9m) as outstanding debt was reduced and the Company refinanced most of the remaining loans with cheaper facilities.
Processing of stockpiled material released some $2.9m from working capital during the period.
PAT and basic EPS came in at $5.1m and 4.46USc (H1/17: -$2.7m and -2.44USc).
Free cash flow (from 2019 onwards to be used for the 25% FCF dividend policy) totalled $16.4m (H1/17: $7.4m).
While the Company is net cash positive as of Sep/18, net debt as of H1/18 stood at $2.9m reduced from $18.1m as of Dec/17.
Unrecovered costs account balance at Gedabek currently stands at $82.7m (H2/17: $94.6m) with the current business plan not expecting it to be recovered until 2023 meaning PSA remaining at 12.75% until then.
The Company highlighted a number of operational improvements at the site including ROM stockpile reconfigurations at the processing plant to be completed by YE18, improved transportation logistics with a new spur road link between the main open pit and the plant, expansion of onsite maintenance facilities, new experienced staff to improve areas of mining, drill and blast, equipment operation and maintenance, a new diesel filtration system as well as a new solution sprinkling system at heap leaching operations; new crusher is up and running; announcement also touches on exploration works progress to date, updated mineral resources/reserves at Gedabek open pit as well as planned extensive exploration works scheduled at Gedabek and Ordubad contract areas.
2018 annual production target reiterated at 78-84koz GE comprised of 64-70koz gold and 2.1-2.3kt copper in concentrate.

Conclusion: A strong set of results released this morning highlight 46% EBITDA margins, $16.4m in FCF and an accelerated deleveraging of the balance sheet with the business being net cash positive as of September month versus $18.1m in net debt as of Dec/17. Robust FCF generation and strong outlook led the Board to declare maiden dividend of 3USc and set a dividend policy. $3.4m in dividend payments is covered more than 10x by our forecast FCF18 while at current price and exchange offers 4.2% yield. Subject to our previously released commodity price and production assumptions, the proposed dividend policy may see dividends nearly double next year ($6.7m) making it one of the top yielding precious metals producer on the London market. We will update and release our earnings estimates shortly.

*SP Angel acts as nomad and broker to Anglo Asian Mining

Bluebird Merchant Ventures* (BMV LN) 2.4p, Mkt cap £5.2m – Completion of Gubong Feasibility report and project update

(Bluebird is earning into a 50:50 jv with Southern Gold Ltd at Gubong and Kochang)

BUY – Target Price 12.8p

Bluebird Merchant Ventures reports that it has completed the feasibility report for the re-opening of the Gubong mine which meet its formal joint venture commitments with Southern Gold.
Bluebird expects to receive the necessary “Permit to Develop” within the next four months and is targeting initial gold production “during the fourth quarter of 2019 and for production to increase to 100,000oz of gold per annum over a five-year period.”
The company observes that the re-opening of the mine should mean that “The capital costs are significantly less that bringing a new mine into production.”
At the Kochang joint venture project, “metallurgical test work is underway and results are expected by the end of October.” Also by the end of October, the company is expecting to submit its feasibility report outlining “the path towards reopening the mines and bringing about production” to Southern Gold.
· Commenting on the projects, CEO, Colin Paterson, expressed delight “with the progress which has been made at Gubong and Kochang”. He also welcomed the appointment of Graeme Fulton as General Manager of the Gubong project and of Joseph Lee as President of the Joint-Venture company. Graeme Fulton in a mining engineer with over 30 years’ experience in Australasian and Asian mining. Joseph Lee “has spent the last five years in the Korean mining sector managing relations with government, corporate and community stakeholders”.

Conclusion: Bluebird Merchant Ventures is progressing its key projects at Gubong and Kochang and has made key appointments to strengthen its management team.

*SP Angel act as broker to Bluebird Merchant Ventures

Golden Star Resources (GSC CN) C$0.96, Mkt Cap C$366m – Shareholders approve La Mancha investment

Golden Star reports that shareholders have overwhelmingly approved the placement of 183.8m shares to La Mancha with a 98.95% vote in favour.
As announced in August, the privately owned La Mancha invested US$125.7m in a move which we interpret as a significant endorsement of Golden Star’s strategy and management as they have worked over the last few years to move the company from a high cost operator of open pit mines with complex metallurgy to higher grade, low cost, underground mining with straightforward processing.

La Mancha has other mining interests including a 9.6% interest in Australian based Evolution Mining but also, and in our opinion particularly relevant, is its 30% holding in the Canadian listed West African gold miner, Endeavour Mining, which produces around 600,000oz pa of gold from its operations in Mali, Ghana, Burkina Faso and Cote d’Ivoire.

Conclusion: We expect that the additional financial backing should enable Golden Star to accelerate its operational development, strengthen its balance sheet and, intriguingly, “to participate actively in the consolidation of the African gold mining industry.”

Phoenix Global Mining* (PGM LN) 33.5p, Mkt Cap £10.7m – Interim results

Phoenix Global Mining has reported a pre- and post-tax loss of US$0.68m for the six months ending 30^th June (2017 – US$0.73m).
The results are reported in $ following the company’s adoption of US currency in January in a move which, in our view, may be related to the proposed OTCQX dual listing of the company in New York as well as reflecting the functional currency of its principal operations in Idaho.
The loss “is after charging $99,629 in share based payments relating to options and warrants issued by the Company, and $47,384 relating to foreign exchange, both of which are included in administrative expenses” which increased to $0.67m (2017 - $0.43m) as the company steps up its exploration and evaluation at the Empire mine site in Idaho and on its cobalt projects and gold exploration at Gordon Lake.
The company holds a 30^th June cash balance of US$2.5m.
In a review of the status of its operations, including the discovery of a sulphide feeder zone and an additional mineralised area at the Empire property, which was announced yesterday, the company highlights progress with the Preliminary Economic Assessment (PEA) and Bankable Feasibility Study at Empire where it has achieved a “25% increase in forecast copper recovery … [and] … a 16% increase in target copper production” as well as drawing attention to its increasing land holdings at Empire which now stand at 1,837 acres (approximately 743 hectares).
In his review of the half year, Chairman Edward Marcus-Jones draws attention to the wider context of the copper industry where a number of high profile corporate acquisitions and investments involving major industry players have occurred recently and which he interprets “as further evidence of the industry's attempts to counter what promises to be a shortage of copper going into the 2020s”.
Commenting on progress at Empire in addition to yesterday’s news of the discovery of a sulphide feeder zone below the planned open pit as well as the identification of the new Red Star zone to the north-west of the current resource area, Chief Executive, Dennis Thomas referred to efforts to gain access to the historic underground workings as part of the exploration programme pointing out that although access had been achieved for approximately 1000 feet (approximately 305m) on the 700 level of the mine “underground conditions were deemed too unsafe to allow sampling or further access to take place, due to the manner in which the historic workings had been abandoned in the 1940s. Access to the 1,100 level has proved more amenable and work will continue at this level.”
Early stage exploration at the Redcastle and Bighorn cobalt exploration projects in the Idaho Cobalt Belt has provided sufficient encouragement that “It is hoped that before the end of the 2018 field season, a short shallow drilling programme on the Bighorn property and, conditions allowing, the Redcastle property, will also be completed.”
Phoenix Global Mining has also acquired an option to earn an 80% interest in the Gordon Lake, high grade, shear-hosted gold exploration project located 68 miles northeast of Yellowknife, in the Northwest Territories, Canada. The area has a history of high grade gold mines and Gordon Lake itself is known to host 17 zones of high grade shear hosted gold mineralisation over a strike length of 1km. In order to advance the project, the company proposes to commission an independent review by a Yellowknife based consulting company, Aurora Geosciences, “to complete a project review and report, with a view to proposing an exploration programme for 2019.”

Conclusion: Phoenix Global Mining’s exploration and evaluation work at the Empire site is advancing the feasibility work for the oxide pit and starting to reveal the potential of the underlying sulphides. Continuing drilling is likely to improve both the scale and classification of the mineral resource estimate while follow up work on the cobalt and gold properties may highlight further opportunities.

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

Strategic Minerals* (SML LN) 1.6p, Mkt Cap £22.1m – Redmoor drilling results

Strategic Minerals has reported encouraging results, which the company describes as the best results achieved to date, from the first two drill-holes of its current 2018 programme. Results are pending from a further 3 holes and the remaining two holes planned for the Phase 1 programme are expected to be completed in early October.
The programme is primarily designed to increase the tonnage and grade of the existing inferred resource estimate of 4.5mt at an average grade of 1% tin equivalent and prepare for a pre-feasibility study to be undertaken in 2019.
Work is directed at the Sheeted Vein System (SVS) which “has previously been demonstrated to be continuous along a strike length of over 650 m with a thickness of approximately 100 m, and a variable known dip extent (250 – 450 m)” while still remaining open down-dip.
The results reported today come from two holes, CRD 021 and CRD022 and the company says that a further three holes (CRD023 - CRD025) where assay results are awaited “have intersected multiple zones of tungsten and copper mineralisation of a similar appearance to that in CRD021 and CRD022.”
Hole CRD021 tested the deep extension of the SVS “intersecting mineralisation more than 180 m below that seen in nearby previous holes” and encountered four predominantly tungsten-bearing mineralised horizons;

o A 1.3m wide zone between 312.88m and 314.18m depth at an average grade of 3.94% copper,0.1% tin and 3.29% tungsten trioxide; and

o A 12.24m wide zone between 533.32m and 535.56m depth at an average grade of 0.02% copper,0.01% tin and 6.24% tungsten trioxide; and

o A 14.21m wide zone between 644.63m and 658.84m depth at an average grade of 0.09% copper,0.01% tin and 0.76% tungsten trioxide; and

o A 7.65m wide zone between 670.02m and 677.67m depth at an average grade of 0.06% copper,0.01% tin and 1.01% tungsten trioxide

The second hole reported today, CRD022, aimed “to intersect mineralisation to the west of CRD019, the deepest and highest-grade hole drilled prior to the current drilling ,and to provide continuity in order to connect this well mineralised hole, that is not yet part of the inferred resource, into the resource model”.
The company considers that “CRD022 was highly successful, producing grades and widths that compare favourably with those of CRD019 and which may offer evidence of strike continuity of the mineralised system over the approximate 75 m separation between the two holes.” Specifically, it intersected three principal zones, again showing relatively high tungsten contents including:

o A 9.75m wide zone between 405.00m and 414.75m depth at an average grade of 0.43% copper,0.07% tin and 0.54% tungsten trioxide; and

o A 14.1m wide zone between 420.25m and 434.35m depth at an average grade of 0.74% copper,0.17% tin and 0.68% tungsten trioxide; and

o A 10.88m wide zone between 483.36m and 494.24m depth at an average grade of 1.18% copper,0.05% tin and 0.28% tungsten trioxide.

The completed holes where assays remain pending were

o CRD023, which was drilled to examine the western, down-dip extension of the mineralisation included in the inferred resource. Drilling “successfully hit the wider SVS from ~600 to ~700 m, and a zone of wolframite-rich veins was identified during logging within this zone”

o CRD024 was directed at the eastern, down-dip extension of the current inferred resource and is reported to have intersected “clusters of veins … carrying coarse wolframite” within wider SVS zone at in-hole depths between 530-640m.

o CRD025 was drilled to examine the zone between the eastern part of the resource area and hole CRD19 which was too far from the resource envelope to be included in the resource estimate. Hole CRD025 “appears to have intersected extensive wolframite and chalcopyrite carrying veins at the anticipated depth”.

Based on these results, the company and its partner, NAE, are “reviewing plans to undertake additional drilling to further expand the size of the resource and upgrade a portion of it to an indicated, as opposed to inferred, status.”

Conclusion: The recent drilling confirms that mineralisation is more extensive both laterally and at depth than was established by the mineral resource estimate published in March. The results indicate that an updated resource may be larger than the current estimate as well as more robust than the current inferred level. Given that the company has previously identified the size of the resource as one of the key parameters for a development decision Strategic Minerals seems to be moving towards that resource increase ahead of starting a pre-feasibility study during 2019.

*SP Angel act as Nomad and broker to Strategic Minerals

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

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Sales

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This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose 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.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. 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.

This note is confidential and is being supplied to you solely for your information and 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.

Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

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).

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.