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Today's Market View - Surging REE exports signal US stockpiling as China trade war risks rise

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SP Angel – Morning View – Wednesday 26 06 19

Surging rare earth exports signals potential US stockpiling as China trade war risks rise

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MiFID II exempt information – see disclaimer below

 

AfriTin Mining* (LON:ATM) – Uis tin project drill results

Cora Gold* (LON:CORA) – Metallurgical tests show 97% recoveries at Sanankoro

Chaarat Gold* (LON:CGH) – Annual results highlight Tulkubash growth/development progress and Kapan acquisition

Katoro Gold (LON:KAT) – Fully funded drill program planned for key targets at Haneti nickel sulphide project in Tanzania

Kodal Minerals* (LON:KOD) – Drilling update from Bougouni lithium project

Power Metals Resources* (LON:POW) – Major drill targets confirmed at Haneti Nickel Project

Savannah Resources* (LON:SAV) – Exercise option to acquire Aldeia mining lease

 

Surging rare earth exports signals US stockpiling as China trade war risks rise

  • US imports of valuable rare earth magnets surged more than 20% in May from the previous month to the highest since 2016, according to data released by the General Administration of Customs, highlighting the importance of the material in the protracted US-China trade war.
  • While rare earth magnets supply is dominated by China, President Trump signed a defence policy banning the purchase of rare earth magnets from China for the military in the 2019 fiscal year.
  • Exports to the United States of permanent rare earth magnets, or material that will be turned into permanent magnets, came in at 430,961kg, or around 431t last month, the customs data showed. That was up 21.5% from April and up 4.4% from May 2018.
  • In 2018, China’s exports of rare earth magnets to the United States were worth a total 1.325bn yuan ($192.7m), the customs data showed.
  • The rise in exports could signal the beginning of stockpiling on the chance China could limit trade to the US, according to Ryan Castilloux, managing director of Adamas Intelligence.

 

China CNMC signs agreement with ISR Capital for Tantalus Rare Earths project

  • CNMC will work as a contractor on the project and will have the right to buy some 3,000t of REE productions from the Tantalus project within its first three years.
  • Tantalus contains some 562,000t of REE oxides and is located some 500km north of Antananarivo in Madagascar.
  • The project is an Ionic Clay deposit of the type that are typically mined in China.

 

Dow Jones Industrials

 

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Nikkei 225

 

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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$1.1369/eur vs 1.1395/eur yesterday  Yen 107.43/$ vs 106.98/$  SAr 14.306/$ vs 14.326/$  1.267/gbp vs $1.276/gbp  0.698/aud vs         0.696/aud CNY 6.883/$ vs 6.883/$

 

Commodity News

Precious metals:         

Gold US$1,409/oz vs US$1,430/oz yesterday

  • While gold prices were in the doldrums, Russia continued doggedly increasing its reserves – a tactic which appears to be finally paying off as the precious metal climbs to the highest level since 2013.
  • Since being stung by sanctions for its aggression against Ukraine in 2014, Russia has been actively diversifying the composition of its international reserve.
  • The Kremlin and the Bank of Russia consider the risk of further restrictions unpredictable and dependent more on U.S. domestic politics.
  • While the total share of reserves in the central bank signals a slight fall, Russia added 274t to its reserves in 2018, bringing the total reserves to 2,113t.
  • Gold appreciation in June has added about $7bn to Russia’s international reserves, and if the price increase holds, gold will account for some 20% of Russia’s half a trillion dollars in international reserves, approaching the dollar’s share.
  • Russia isn’t alone in the attraction to the precious metal, the World Gold Council note first quarter 2019 purchases rising a record 715.7t across global central banks.

   Gold ETFs 73.8moz vs US$73.8moz yesterday

Platinum US$806/oz vs US$812/oz yesterday

Palladium US$1,526/oz vs US$1,534/oz yesterday

Silver US$15.26/oz vs US$15.44/oz yesterday

           

Base metals:   

Copper US$ 6,014/t vs US$5,985/t yesterday

Aluminium US$ 1,813/ vs US$1,799/t yesterday

Nickel US$ 12,290/t vs US$12,180/t yesterday

Zinc US$ 2,543/t vs US$2,504/t yesterday

Lead US$ 1,937/t vs US$1,914/t yesterday

Tin US$ 18,910/t vs US$18,980/t yesterday

           

Energy:           

Oil US$66.1/bbl vs US$64.7/bbl yesterday

Natural Gas US$2.297/mmbtu vs US$2.296/mmbtu yesterday

Uranium US$24.70/lb vs US$24.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$108.4/t vs US$110.5/t

Chinese steel rebar 25mm US$606.6/t vs US$606.6/t

Thermal coal (1st year forward cif ARA) US$64.4/t vs US$65.0/t

Coking coal futures Dalian Exchange US$207.5/t vs US$207.8/t

           

Other:  

Cobalt LME 3m US$28,000/t vs US$28,000/t

NdPr Rare Earth Oxide (China) US$51,579/t vs US$53,395/t

Lithium carbonate 99% (China) US$9,444/t vs US$9,444/t

Ferro Vanadium 80% FOB (China) US$38.9/kg vs US$39.0/kg

Antimony Trioxide 99.5% EU (China) US$5.7/kg vs US$5.7/kg

Tungsten APT European US$250-255/mtu vs US$255-265/mtu

*Pricing sourced from Bloomberg

 

Battery News

Solar boom in Georgia

  • NPR looks at the booming solar industry in Georgia, which isn’t benefitting from state subsidies, nor concerns about emissions or climate change, it’s on the rise due to “powerful market forces at work.”
  • Dalton, Georgia got a $150m solar panel assembly plant last year, the largest in the Western Hemisphere. That, combined with Trump’s tariffs on solar cell imports, falling costs, and the potential and desire for development in the Southeast, add up to a strong solar outlook for the Peach State.
  • Solar in the state also stands to benefit from a Facebook data centre, currently under construction outside of Atlanta. The social media Company was attracted to the area for its access to renewable energy, as it aims to be 100% renewable energy-powered by 2020. Georgia offered that opportunity, and a state cooperative will provide Facebook access to solar.
  • An official from one Georgia county that stands to earn additional tax revenue from a solar project said, “There’s no downside. I don’t see how it could be. We don’t have pollution. We don’t have smell. You know, there’s just nothing. They’re just there.”

 

Australian renewable projects

  • The Walcha Energy Project, a planned massive 4+GW project combining solar, wind, and pumped hydro energy storage, is moving on the right path in Australia. Wind giant Vestas is now involved in the project, and main developer Walcha Energy submitted a scoping report recently, according to PV magazine Australia.
  • The Walcha Energy Project website notes the project has the potential to provide 15% of New South Wales’ electricity generation. New South Wales is Australia’s most populous state and home to Sydney, its most populous city. Construction is still planned to start next year.
  • Though not as large as the Walcha project, Australia’s 180 MW Berrybank Wind Farm is now under construction in Victoria, Energy Magazine reports. The 43-turbine farm is expected to come online next year, and it should power around 138,000 homes once operational.

 

Company News

AfriTin Mining* (LON:ATM) – 3.4p, Mkt cap £22m – Uis tin project drill results

(AfriTin hold the Uis project in Namibia) (Bushveld Minerals* holds 9.5% of AfriTin)

  • AfriTin report results from the remaining drill assays from the Uis tin project in Namibia.
  • Significant intersections include:
  • 40.50m grading 0.15% Sn, 108ppm tantalum
  • 108.97m grading 0.17% Sn and 56ppm tantalum
  • 86.51m grading 0.16% Sn and 69ppm tantalum
  • 18.80m grading 0.19% Sn and 126ppm tantalum.
  • An intersection of 108.97m grading 0.17% tin indicates that the V1 and V2 pegmatites thicken with depth.
  • While the tin grades are relatively low the assays are considered to be comparable, subject to additional validation work, to those reported by SRK in 1985.
  • 20 drill holes are considered to be sufficient to confirm and declare an updated mineral resource. The previous SRK (1985) resource reported an average tin grade of 0.14%  for the V1 and V2 pegmatites.
  • Phase 1 Pilot plant commissioning:
  • Hot commissioning and continuous plant operations is expected to start next month followed by a four-month production ramp up with design capacity by the year end.
  • The Phase 1 Pilot Plant is designed to process approximately 500,000tpa for 60t tin concentrate per month while Phase 2 will comprise a planned operation of a much larger 3mtpa plant to produce around 5,000tpa of tin concentrate containing approximately 60% tin on an 85% recovery rate.
  • The team are also installing a Dense Media Separation plant to upgrade low-grade tin for further processing into a saleable tin concentrate.
  • Tin recoveries are estimated to be 71%-91% in Stage 2 of the process.

Conclusion: We look forward to the declaration of an updated mineral resource. We also look forward to further confirmation of the effectiveness of the Phase 1 Pilot plant commissioning. We are particularly interested to see how well the Dense Media Separation plant will works in upgrading low grade tin ore into higher grade tin feedstock at the front end of the plant for further processing.

*SP Angel acts as nomad and broker to Bushveld Minerals which listed AfriTin on AIM and still holds a meaningful stake in AfriTin.

 

Cora Gold* (LON:CORA) 5.3p, Mkt Cap £5.3m – Metallurgical tests show 97% recoveries at Sanankoro

  • The Company released results from additional preliminary metallurgical tests completed on samples of oxide gold from the Selin and Zone A prospects at the Sanankoro Gold Project in Mali.
  • Gravity processing followed by cyanide leaching (CIL) demonstrated recoveries as high as 97%.
  • Results bode well with the preliminary testwork completed earlier this year and suggest good leaching kinetics of oxide samples at relatively standard 75 micron fraction size.
  • Tests were carried on a 20kg composite oxide sample with a head grade of 2.74g/t.
  • Separately, the team tested oxide samples’ susceptibility to heap leaching involving percolation, agglomeration and column leach testwork.
  • Results so far show 40% recoveries within 14 days but are expected to improve further as more gold is leached with time and the team planning to report on results of a full leaching cycle in due course.

Conclusion: The testwork demonstrates high gold recoveries for Sanankoro oxide material using the gravity+CIL processing route. Results from a less capital intensive and lower cost heap leaching process are expected in due course. The data improves the management team’s understanding of the Sanakoro material metallurgical properties and is helpful in planning an optimal project development route.

*SP Angel acts as Nomad and Broker to Cora Gold

 

Chaarat Gold* (LON:CGH) 29.0p, Mkt Cap £117m – Annual results highlight Tulkubash growth/development progress and Kapan acquisition

  • Operationally, the team completed a successful drilling programme at Tulkubash and brought the producing Kapan polymetallic mine into the portfolio (acquisition closed in early 2019).
  • 20,000m of drilling completed at the Tulkubash gold project in Kyrgyzstan increasing the Measured and Indicated mineral resource by more than 650koz to 1.6moz at 1.20g/t hosted within just 4km of 24km trend.
  • In June this year, the Group released an updated feasibility study and mineral reserves based on updated mineral resources showing an increase of 40% in contained ounces extending the life of mine to the current 5.3 years.
  • The current open pit mine plan and heap leaching facility design is for 4.9mt throughput rates producing 94kozpa based on a reserve of 22.2mt grading 0.92g/t containing 658koz.
  • Exploration success to date and the continuity of the Tulkubash orebody lends itself to further potential expansion of the mineralisation footprint with the Company planning to complete 20,000m in 2019and growth the mineral resource further concurrently with the start of development works.
  • Exploration drilling completed this year suggest the Measured and Indicated category is likely to exceed 2moz in 2019.
  • The Company is looking to complete Tulkubash project funding in Q4/19, a slight revision on previously guided Q3/19.
  • Agreed $31.5m Ciftay equity investment and a downwards revision to the Tulkubash capex ($110m from $130m) allow the Group to minimise potential dilution to existing shareholders and seek debt funding for the most of the remaining project capital commitment.
  • At Kapan, the mine produced around 51koz GEO in 2019 generating a profit before tax of $3.2m; production is expected to improve to 65koz GEO in 2019,
  • Financially, the Company recorded $17.0m loss (2017: -$18.1m) driven largely by high admin costs of $12.0m (2017: -$4.7m) and interest costs of $3.4m (2017: -$1.6m).
  • An increase in admin costs includes $3.5m of Kapan acquisition related costs.
  • Cash flow operations came in at -$8.8m (2017: -$5.0m) helped by a positive contribution from working capital from an increase in payables of $3.9m.
  • The Company increase investment on exploration during the year to $12.1m (2017: $7.9m) as the team is looking to significantly expand the Tulkubash life of mine.
  • On balance sheet, the Group had $2.7m in cash and $80.7m in debt (including $40m in Kapan related bank debt) as of 31 May 2019.
  • Borrowings include $29m in convertible loan note (due 31 Oct/21), $10m loan (due Aug/19), $40m loan (Kapan related bank loan with quarterly repayments over four years) and $2m under the revolving loan facility from Labro (due Jul/20).
  • In terms of available liquidity, the Group has recently secured an investor’s commitment to invest $15m in 2021 convertible bonds with funds to be made available in early July with a further $12.5m available under the Labro revolving facility.

Conclusion: The Company remains focused on delivering on its strategy to establish a mid-tier FSU based gold producer having completed a polymetallic mine acquisition in Armenia and progressing with Tulkubash gold development project in Armenia. 2019 is expected to bring further expansion of the Tulkubash mineral resource base improving on the existing life of mine and economics of the project as well as see the Company closing the project funding paving the way for the start of full scale development works.

*SP Angel acts as Broker to Chaarat Gold

 

Katoro Gold (LON:KAT) 1.1 pence, Mkt Cap £1.8m – Fully funded drill program planned for key targets at Haneti nickel sulphide project in Tanzania

(Katoro holds 75% of the Haneti nickel project alongside Power Metal Resources plc* which holds 25%)

  • Katoro Gold reports it is to implement a fully funded drill programme at a number of key drill targets at the Haneti nickel sulphide project in Tanzania.
  • There are two large ultramafic structures at Haneti
  • The targets are considered to be within a chonolith type nickel sulphide structure.
  • For readers who have not come across the word chonolith before Wikipedia describes it as ‘A chonolith is an igneous rock intrusion of irregular shape. A chonolith has a demonstrable base, which is absent in other types of irregularly shaped intrusions ....’
  • Previous work has identified nickel grades of up to 13.59% and 3-3.5g/t PGMs in the target area where results from soil sampling has been used to work up the drill targets.
  • Some US$1.5m has been spent on the project identifying nickel, PGMs, cobalt and gold plus some significant lithium anomolies.
  • Mihanza Hill has been identified as a prime drill target for nickel, copper and PGM mineralisation.

Conclusion: Katoro Gold see Haneti as a top priority project but are also working on a number of other projects for exploration and potential development. We look forward to indications of mineralisation in the drill core and for the assay results when they come through.

*SP Angel act as Nomad and broker to Power Metal Resources plc formerly African Battery Metals

 

Kodal Minerals* (LON:KOD) 0.083p, Mkt Cap £6.8m – Drilling update from Bougouni lithium project

  • Kodal Minerals reports on recent activity within its Bougouni lithium project in southern Mali where drilling is underway at both the Marigo prospect and the Mafele concession although assay results have not yet been received.
  • At the recently identified Marigo prospect, which is located southwest of the Boumou prospect area and between Boumou and the Sogola Baoule prospect, mapping has identified “outcropping pegmatite veins with abundant coarse spodumene minerals”. The “pegmatite veins are interpreted as striking in an east-west direction, similar to other prospects in the region”. A photograph included in today’s announcement shoes an outcrop with crystals of spodumene mineral, although the scale is not readily identifiable.
  • The drilling at Marigo totaled 474m in 4 widely spaced holes “with all holes intersecting pegmatite veins, with a thickest intersection of 22m from shallow depth in drill hole MDRC130”. The company acknowledges that follow-up drilling will be required “to define the pegmatite veins and potential for additional mineralisation to be identified.”
  • Kodal Minerals also has a maiden reconnaissance drilling programme underway at the Mafele concession approximately 25km west of the Bougouni project where the company, using a 0.5%  Li2O cut-off grade, has already defined a JORC compliant mineral resource estimate of 11.6mt classified as indicated at an average grade of 1.13% Li2O and a further 9.7mt classified as inferred at a grade of 1.08% Li2O.
  • The company points out that the resource estimate, which relates to the Sogola-Baoule, Ngoualana and Boumou deposits “was calculated using only three of the eight currently recognised prospects” within the 450km2 project area.
  • Drilling at Mafele is following up targets defined by geological mapping and ground geophysical exploration in an area “largely covered by transported material and [where] outcropping geology is very limited”. Six drillholes (661m) have been completed to date and the company says that “All drill holes have intersected pegmatite veins with veins exceeding 12m in width and hosting spodumene mineralisation”.

Conclusion: Kodal Minerals’ exploration drilling within its Bougouni lithium project area continues to intersect spodumene mineralisation which potentially could expand the existing mineral resource estimate which the company describes as “in the top 15 hard rock lithium projects globally”. We await the results from the current drilling once the sample preparation and assaying has been completed.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

 

Power Metals Resources* (LON:POW) 0.5p, Mkt Cap £1.9m – Major drill targets confirmed at Haneti Nickel Project

Formerly African Battery Metals (ABM LN)

  • African focused metals explorer report the decision to drill prospective targets at the Haneti Nickel joint venture project, Tanzania, targeting nickel, copper and PGM mineralisation.
  • POW has established a joint venture with Katoro Gold in respect of Haneti, with POW’s initial 25% interest rising to 35% interest through a cash payment of £25,000 to Katoro before 15 May 2020. POW will contribute 25% to the cost of Haneti Project maintenance and exploration or will dilute in accordance with standard industry provisions.
  • The current work builds on historical exploration across the Haneti-Itiso Ultramafic Complex (“HIUC”) totaling US$1.5m, comprising rock sampling, soil sampling, geological mapping, trenching, geophysical surveys and petrographic analyses. Work concluded grades up to 13.59% nickel in rock samples, with additional gold, cobalt, platinum values and some significant lithium.
  • High-resolution airborne geophysics outlines mafic-ultramafic zones with strike lengths of 10-20km (northwest zone), 30km (southwest zone) and 80km (central zone), extending the footprint of the known nickel sulphide prospective HIUC.
  • Review of accumulated work programmes has formed a drill programme at two of the project’s key targets; Mihanza Hill and Mwaka Hill.
  • The main objective of the 2019 exploration programme focuses on the existence of disseminated or massive sulphide mineralisation at the identified high priority exploration targets.

*SP Angel act as broker to Power Metals Resources (formerly African Battery Metals)

 

Savannah Resources* (LON:SAV) 5.0p, Mkt Cap £52.4m – Exercise option to acquire Aldeia mining lease

  • Savannah Resources adds to its 100% owned Mina do Barroso portfolio with the exercise of the Aldeia option to acquire the Aldeia mining lease application areas.
  • The option has been exercised over the 2.94km2 Aldeia mining lease application areas following successful exploration and promising drill results following the declared maiden JORC Resource.
  • A maiden JORC Mineral Resource Estimate of 3.5Mt at 1.3% Li2O was published for one deposit on Block A in May 2019 confirming significant pegmatite mineralisation. The grade represents the highest average of the five resource-bearing deposits, which is approx. 23% above the total resource average of 1.06% Li2O.
  • The deposit offers continuous upside, remaining open along strike to the north and down dip, with additional pegmatite targets in the vicinity.
  • Exercising the option has triggered a ‘Commitment to Purchase’ subject to prior approval of the competent government authorities, followed by submission for a Request to Transfer with the GEG ('Direcção-Geral de Energia e Geologia').
  • The total purchase price for the acquisition of the Proposed Lease Area (once granted) is €3.25m, which would only be due once the Mining Lease Application has been granted and the Mining Rights transferred to Savannah's subsidiary.  Once triggered, the agreed payment schedule consists of an initial €55,000 payment upon execution with the balance due in 71 equal monthly instalments.

Conclusion – Exercise of the option signals Savannah long-term commitment to development of W. Europe’s most significant spodumene project. We look forward to understanding the true scale of spodumene inventory to support the accelerating electric vehicle market.

*SP Angel acts as Nomad to Savannah Resources

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

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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