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Today's Market View - Altus Strategies, AngloGold Ashanti, Firestone Diamonds and more...

Altus Strategies* (LON:ALS) – £2.4m equity raise AngloGold Ashanti (JSE:ANG) – Resumption of gold production at Obuasi Bushveld Minerals* (LON:BMN) – Enerox Investment update Firestone Diamonds (LON:FDI) – Results reflect a challenging year

3M - Today's Market View - Altus

SP Angel . Morning View . Friday 20 12 19

UK industry calls for tariff-free EU deal

MiFID II exempt information – see disclaimer below

 

Altus Strategies* (LON:ALS) – £2.4m equity raise

AngloGold Ashanti (JSE:ANG) – Resumption of gold production at Obuasi

Bushveld Minerals* (LON:BMN) – Enerox Investment update

Firestone Diamonds (LON:FDI) – Results reflect a challenging year

Kore Potash (LON:KP2) – Trading Halt on ASX a company addresses questions relating to technical disclosure requirements

Phoenix Copper* (LON:PXC) – Extension of Warrants

Resolute Mining (LON:RSG) – Syama roaster fully operational

A MiFID II Christmas Carole

 

Dow Jones Industrials +0.49% at 28,377

Nikkei 225 -0.20% at 23,817

HK Hang Seng +0.25% at 27,871

Shanghai Composite -0.40% at 3,005

FTSE 350 Mining +0.58% at 19,226

AIM Basic Resources -1.23% at 2,017

 

Economics

UK industry calls for tariff-free deal with EU as output slumps (Reuters)

Output fell 16.5% last month to 108,000 cars, a trend of decline in 2019 which leaves output down 14.5%  in the first 11 months of the year to 1.2m vehicles.

Britain’s car industry body has called on Boris Johnson to secure a tariff-free trade deal with the EU, with manufacturers seeking the closest possible relationship to maintain production processes.

UK – The BoE kept rates unchanged in a 7-2 vote amid uncertainty over the form of the Brexit agreement under the new parliament.

“There was no evidence yet about the extent to which policy uncertainties among companies and households had declined following recent domestic policy developments,” the BoE statement read.

Former BoE deputy governor and current chief executive of the Financial Conduct Authority Andrew Bailey will b replacing Mark Carney in Jan/20 as governor of the central bank.

The parliament will vote on Johnson’s Brexit deal today (~14.30 GMT) with PM claiming to “get the Brexit vote wrapped up for Christmas”.

 

US – S&P closed at a new record high shrugging off the impeachment of Donald Trump.

US Treasury Steven Mnuchin said the US and China are set to sign their Phase One trade pact in early January.

 

Japan – Inflation numbers highlight price pressures are way off BoJ targets as the nation is on course to post a GDP contraction in Q4/19.

Stripping out an October sales tax hike, core prices climbed 0.2%yoy.

Overall inflation was up 0.5%yoy, in line with expectations, while core CPI that excludes fresh food and energy prices increased 0.8%yoy last month.

 

Germany – Consumer confidence unexpectedly came off in January suggesting household spending is on course to slowdown at the beginning of next year.

GfK Consumer Sentiment: 9.6 v 9.7 in December and 9.8 forecast.

 

France – Consumer spending climbed marginally extending the consolidation phase helped by the President Macron stimulus package of €10bn in tax cuts and other supportive measures last year.

The government injected around €25bn equivalent to ~1% of GDP into the economy since Macron took office most of which was a response to the gilets jaunes crisis.

An increase in spending is expected to see France crossing the EU 3% budget deficit limit again in 2019.

Consumer Spending (%mom/yoy): 0.1/0.2m v 0.2/-0.3 in October and 0.2/0.4 forecast.

 

Christmas recipe from up North – it’s a sure winner

Wensleydale Cheese and Christmas Cake - an unlikely combination in our view but we are told its popular up north

 

Currencies

US$1.1116/eur vs 1.1129/eur yesterday.  Yen 109.33/$ vs 109.57/$.  SAr 14.223/$ vs 14.343/$.  $1.303/gbp vs $1.310/gbp.  0.689/aud vs 0.687/aud.  CNY 7.011/$ vs  7.009/$.

 

Commodity News

Gold US$1,478/oz vs US$1,475/oz yesterday

Gold ETFs 81.1moz vs US$81.1moz yesterday

Platinum US$933/oz vs US$928/oz yesterday

Palladium US$1,944/oz vs US$1,931/oz yesterday

Silver US$17.06/oz vs US$16.95/oz yesterday

           

Base metals:   

Copper US$ 6,187/t vs US$6,172/t yesterday - Copper set for fifth straight weekly gain (Reuters)

LME copper held above $6,200/t this morning, heading for a fifth straight weekly gain.

Copper is on course to add 1.4% this week and 4.2% so far this year as US-China trade tensions ease and Chinese demand outlook improves.

Aluminium US$ 1,797/t vs US$1,781/t yesterday

Nickel US$ 14,190/t vs US$14,110/t yesterday - Indonesian nickel exports estimated at 26.7mt (Reuters)

Nickel ore exports from the world’s top exporter are estimated at 26.7mt this year, compared to the 30.83mt export quota- according to a senior mining official.

The mining ministry said that ore shipments in November had reached 25.73mt, however data from the Indonesia statistics bureau showed shipments of nickel ore reaching 29.34mt.

Indonesia’s supposed export ban is due to commence on new year’s day 2020, as the company attempts to boost its domestic mineral processing.

Zinc US$ 2,324/t vs US$2,323/t yesterday

Lead US$ 1,921/t vs US$1,934/t yesterday

Tin US$ 17,230/t vs US$17,245/t yesterday

           

Energy:           

Oil US$66.5/bbl vs US$66.1/bbl yesterday

Natural Gas US$2.313/mmbtu vs US$2.274/mmbtu yesterday

Uranium US$25.45/lb vs US$25.45/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$91.6/t vs US$91.5/t

Chinese steel rebar 25mm US$569.0/t vs US$570.5/t - Jingye Steel in £120m UK government funding talks (Sky News)

The Government is finalising the funding package to help secure the Chinese takeover of British Steel.

The takeover would safeguard tens of thousands of jobs in and around new Conservative constituencies.

A package of Regional Growth Fund (RGF) thought to be worth £120m was among items on the agenda of a meeting on Wednesday with ministers.

The Chinese company has pledged to invest £1.2bn in British Steel during the next decade.

Thermal coal (1st year forward cif ARA) US$57.8/t vs US$58.9/t

Coking coal futures Dalian Exchange US$176.6/t vs US$178.1/t

           

Other:  

Cobalt LME 3m US$32,750/t vs US$32,750/t

NdPr Rare Earth Oxide (China) US$41,295/t vs US$41,307/t

Lithium carbonate 99% (China) US$5,920/t vs US$5,921/t

Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.5/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

Tungsten APT European US$235-245/mtu vs US$235-245/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

 

Energy News

IBM battery replaces heavy metals with seawater (New Atlas)

International Business Machine Corp (IBM) announced on Wednesday that it has come up with a new battery technology that uses materials extracted from seawater and requires no cobalt.

In addition, the company announced that it has partnered with the research wing of Daimler AG’s Mercedes-Benz battery supplier to explore the commercial development of the new design (CNBC).

Instead of using nickel and cobalt in the cathode component, researchers have successfully used three materials extracted from seawater, and added a new type of liquid electrolyte.

Early testing of the battery demonstrated rapid charging rates- achieving 80% in 5 minutes and a power density exceeding 10,000 W/L.

According to the a VP at TBM, the company hope to have the first working prototype constructed within a year.

 

Tokamak – Chinese scientist reports construction of new 2M Tokamak device is going smoothly

China’s new Tokamak project should be operational in 2020.

The project is designed to use nuclear fusion to create near-limitless clean energy.

 

Company News

Altus Strategies* (LON:ALS) 5.8p, Mkt Cap £10m – £2.4m equity raise

The Company has conditionally raised £2.4m (gross) through a non-brokered private placement offering 46.3m shares at 5.2p (C$0.09).

Board members and management subscribed for 7.3m shares or 15.8% of the raise, broadly maintaining their previous interest in the Company and reiterating confidence in the Altus’ portfolio of assets and business model.

New shares represent around 20.7% of the Company’s enlarged issued equity capital of 224.2m shares.

Proceeds will be directed towards exploration and royalty generation business as well as general corporate purposes.

*SP Angel acts as nomad and broker to Altus Strategies

 

AngloGold Ashanti (JSE:ANG) Zar29,368, Mkt Cap ZAR 122.4bn – Resumption of gold production at Obuasi

Anglogold Ashanti reports that gold production has resumed at the newly refurbished historic Obuasi gold mine in Ghana where mining activity has been suspended for the last 5 years.

Over the last 18 months, the “Obuasi Redevelopment Project, which seeks to access Obuasi’s 30-million-ounce ore body over the next two decades and beyond, has completed the first phase of construction on time and on budget”.

The project, including refurbishment of the “existing plant and construction of new infrastructure and underground development” is planned to produce “gold at an average run-rate of 350,000oz – 400,000oz per year for the first ten years, and above 400,000oz over the life of mine at all-in sustaining costs of around $800/oz”.

“The underground mine development is ongoing, with deepening of the Obuasi Deeps Decline and access to the KRS shaft on schedule for mid-2020. The construction of new plant and infrastructure will continue in 2020”.

The Obuasi mine has a long history operating under various managements including the State Gold Mining Corporation of Ghana, Ashanti Goldfields and, most recently, Anglogold Ashanti. The earliest recorded gold production we are aware of is from March 1898 and the mine’s new lease of life could carry it into the 2040s.

 

Bushveld Minerals* (LON:BMN) 20p, Mkt Cap £228m – Enerox Investment update

(Bushveld Minerals owns 74% of Vametco, 100% of Vanchem, 84% of Bushveld Energy in South Africa, 100% of Lemur Holdings, 9.5% of Afritin)

Valuation 82p

Bushveld Minerals report the signing of an initial sale and purchase agreement for the acquisition of Enerox with the four members of the Consortium each acquiring 24.9%  per cent of Enerox for €150,000 from CellCube Energy Storage Systems Inc.

The Consortium has also invested €600,000 in Enerox to fund ongoing working capital and is committed to three further staged payments of €300,000 in December, January and early February to bring the total initial investment in Enerox to €1.65m

Bushveld intends to transfer its stake in Enerox to its 84% owned subsidiary Bushveld Energy Limited.

The consortium has exclusivity till end-February to complete due diligence and now expects to finalise the agreement to acquire Enerox for a further €10.85m on a debt free basis.

Bushveld Minerals expects to hold less than 50% of Enerox following the acquisition.

Enerox is a well established Vanadium Redox Flow Battery manufacturer with over 130 installations to date.

The acquisition is part of Bushveld’s VRFB ‘VIP‘ investment platform strategy:

Enerox – Bushveld are part of a consortium to acquire Enerox for €11m and may make a potential investment of 25-49% stake costing ~US$2.75-5.39m

Enerox have developed a new <10kw vrfb="" costing="" us="" 220-295="" kwh="" for="" a="" 4="" hour="" solution="" with="" 78="" roundtrip="" efficiency="" p="">

Avalon / redT – Avalon acquisition of redT to enable development of new VRFB sites. Bushveld is advancing interim funding of US$5m.

Avlon/redT are looking to raise US$30m to support the rollout of VRFB contracts into Germany and the UK.

Valuation:

We do not include any additional value for Bushveld’s involvement in Enerox and Avalon/redT though we can see the ‘VIP’ VRFB Investment Platform adding to our valuation of the group in future years.

We maintain our valuation of 82p for Bushveld. We see lower risk within the group through the acquisition of Vanchem and development of the Mokopane mine which we see as diversifying the primary production base and have reduced our discount rate to reflect this. Vanchem has a number of discrete process plants which offer good flexibility in terms of production and product diversification. We have adjusted our assumed rand/USD exchange rate to reflect some further slippage to SAR18/USD from 2022. We maintain our valuation on Bushveld Energy at 8.4p/s.

Conclusion:  Bushveld’s strategy to buy into VRFB manufacturers and installers should give the company a commanding position in the roll-out of Grid-scale battery technology and could eventually see the group competing against TESLA and other Lithium-battery manufacturers in the Grid Storage space.

 

Firestone Diamonds (LON:FDI) 0.65 pence, Mkt Cap £4.2m –Results reflect a challenging year

Firestone Diamonds has reported a loss of US$56.9m for the year to 30th June 2019 (2018 - loss of US$14.2m) as weaker demand and prices for rough diamonds reduced revenues.

The result includes an impairment charge of US$41.6m and a tax charge of US$6.3m. The impairment charge reflects weakness in the diamond market, “particularly in respect of the smaller, lower-quality diamonds which comprise 80% of Liqhobong's production by volume” and the company’s expectations for diamond pricing as well as adjustments to mining assumptions.

Sales of 774,830 carats of diamonds (2018 – 831,637 carats) at an average price of US$73/carat (2018 – US$75/carat) from production of 829,458 carats (835,832 carats) implies a stockpile increase amounting to 54,628 carats or approximately 6.5% of annual production (2018 – stockpile increase of 4,195 carats or around 0.5% of production).

The increased stock levels are reflected in a rise in 30th June balance sheet diamond inventories to US$4.2m (2018 – US$2.9m) and an inventory working capital cash requirement of US$2.1m.

Looking to the future market, Firestone Diamonds forecasts “flat pricing for better quality stones over the next four years, thereafter increasing by 1.5% real. The pricing for lower-quality goods is forecast to recover to 2017 price levels by the 2023 financial year and to recover further to 2013 price levels by the 2024 financial year, at a stage where global supply is forecast to be at similar levels to those in 2013.”

Productivity  since the end of the financial year has been adversely affected by the disruption to power supply from the Muela hydroelectric plant, which impacted most of October “resulting in an inability to meet the scheduled debt repayments in the near term”. Interim diesel power generation restored operations from late October until the restoration of grid power in early December.

Including the ABSA debt facility of US$65.9m and Eurobonds totalling US$38.1m, the company reports debt of US$104m and a 30th June 2019 cash balance of US$26.3m.

A scheduled capital debt repayment of US$2m due to ABSA in December has been deferred. ABSA has issued a non-binding term sheet “in respect of a 15-month capital deferral” and the company has also received non-binding term sheets “from the bondholders to provide a US$6.0 million working capital facility until 31 March 2021”.

Conclusion: Despite a solid operating performance Firestone Diamonds has been adversely affected by weakness in the diamond market and also by production disruption due to unavailability of power. Resulting financial pressures see the company in discussions with both its banks and bondholders.

 

Kore Potash (LON:KP2) 1.15p, mkt cap £10m – Trading Halt on ASX a company addresses questions relating to technical disclosure requirements

(Kore Potash hold 97% of the Sintoukiola Potash Project in the Repiblic of Congo)

Kore Potash report the suspension of their shares on the ASX as the company .

The halt was requested by the Company to address questions raised by the ASX relating to certain technical disclosure requirements in the Company's announcement on 17 December 2019, titled "Projects Update". The Company is currently working with the ASX to resolve their queries and will advise the market of the outcome as soon as practically possible.

The trading halt will remain until the earlier of an announcement to the market regarding the above or the opening of trade on ASX and JSE on 24 December 2019..

Kore Potash is run by ceo, Brad Sampson formerly of Discovery Metals and a former mine manager for Gold Fields of South Africa which built the Boseto copper mine in Botswana which is now held by Cupric Canyon Capital..

The halt is in relation to technical disclosures in the Dougou Extension Feasibility study the key points of which are:

Circulating brine flow rates can be reduced by approximately 40%

Potential to reduce electrical power requirement by up to 8%

Potential to reduce gas requirements by up to 40%

Cavern footprint is able to be increased by up to 27%

Life of project extraction ratio may be increased with potential to increase initial project life to 25 years.

Kola project optimisation

Kola Bill of Quantities exercise identified capital savings in excess of $300m in comparison to the DFS capital cost.

Discussions with European engineering and construction groups indicates that further optimisation activity (including design revisions) is likely to generate additional capital cost reductions.

Conclusion: The ASX trading halt indicates a toughening of the application of regulation on the ASX

 

Phoenix Copper* (LON:PXC) 13p, Mkt Cap £5.8m – Extension of Warrants

Phoenix holds 80% of the Empire mining property in Idaho

Phoenix Copper reports that 327,094 warrants with an exercise price of 60p per share which had been due to expire on 31st December 2019 have been extended so that they will now expire on 31st December 2021.

Directors, Dennis Thomas, Roger Turner and Richard Wilkins collectively hold 42,306 of the warrants; the exercise price remains unchanged.

On behalf of the company, CEO, Dennis Thomas, expressed appreciation of the warrant holders’ support and explained that “this additional timeline is intended to allow the Company to proceed into production at our Empire project in Idaho, USA prior to the extended expiry date.”

Conclusion: Extension of the expiry date of the warrants and the CEO’s comments provide a guide to the company’s timetable for initial resumption of production at the historic Empire mine in Idaho.

*SP Angel acts as Nomad and broker to Phoenix Copper

 

Resolute Mining (LON:RSG) 58.7p, Mkt Cap £530m – Syama roaster fully operational

Resolute Mining reports that following recent repairs the roaster at Syama is now fully operational and that 400,000t of sulphide ore is available for processing.

“The Syama roaster repair entailed a complete replating over the crack on the main roaster body by cutting and welding new 10mm plate steel. An additional crack in the primary cyclone and two minor cracks on the main roaster body were also replated as part of the repair program in addition to a range of refurbishments and maintenance to the sulphide circuit infrastructure.”

The company reports that “all aspects of the Syama sulphide circuit are performing as expected …[and that] … Underground mining at Syama continued without interruption during the roaster repair program. Resolute's fully autonomous haulage fleet is now commissioned and operational.”

Managing Director, John Welborn, said that despite the unscheduled downtime required to repair the roaster the company had been able to source “lost production from other production sources and complete the repairs as quickly as possible. As a result the material loss in sulphide production is likely to have only a minor impact on overall Group production and targeted FY19 production guidance at 400,000 ounces of gold. The lost production in 2019 is more than offset by the additional production we now expect to gain in 2020 by the deferral of the next major roaster shutdown to early 2021."

In a separate announcement today, Resolute Mining reports that Mako Gold now holds a 15.13% interest in the company. Mako Gold is listed in Australia and  is focused on exploring the Napie gold project in Cote d’Ivoire and the Niou project in Burkina Faso.

 

We wish you a MiFID II Christmas

We wish you a MiFID II Christmas

We wish you a MiFID II Christmas

And a happy compliant year


Good tiding we bring

To you and the compliance kin

We wish you a MiFID II Christmas and a happy MAR year

 

Oh, bring us some MiFID II compliant, independent, yet pre-paid research
Oh, bring us some MiFID II compliant, independent, yet pre-paid research

Oh, bring us some MiFID II compliant, independent, yet pre-paid research
And bring it right here

Good tidings we bring to you and your kin
We wish you a Merry Christmas and a happy MiFID II New Year

We can’t trade till we get some research
We can’t trade till we get some research
We can’t trade till we get some research
So bring it right here

 

Good tidings we bring to you and your compliance kin
We will send you some research if they relax the regulations in the New Year

They all like our financial forecasts
They all like our financial forecasts
They all like our financial forecasts
So please publish them right now

 

We can’t publish till they are paid for

We can’t publish till they are paid for

We can’t publish till they are paid for

And what if the company don’t like the forecasts*

 

So sorry old chum happy MiFID II new year

*(fortunately our clients have been remarkably grown up about our valuations and forecast estimates)

 

 

ESKOM cartoons from the Daily Maverick in South Africa

 

 

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.

 

Sources of commodity prices

 

Gold, Platinum, Palladium, Silver

BGNL (Bloomberg Generic Composite rate, London)

Gold ETFs, Steel

Bloomberg

Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt

LME

Oil Brent

ICE

Natural Gas, Uranium, Iron Ore

NYMEX

Thermal Coal

Bloomberg OTC Composite

Coking Coal

DCE

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

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