SP Angel . Morning View . Wednesday 03 02 21

Metals pause ahead of Chinese New Year holiday

All adults in UK to receive vaccination by end-August

 

Hummingbird Resources (LON:HUM) – Earnings climb as stronger gold price compensates for weaker production and higher costs

Kavango Resources (LON:KAV) – Exploration outlined for South KSZ

Rainbow Rare Earths* (LON:RBW) – Rainbow discovers high-grade REE in exceptionally thick veins on new targets around Gakara in Burundi

SolGold* (LON:SOLG) – Regional exploration in Ecuador

Tertiary Minerals* (LON:TYM) – Exploration at Mt Tobin

 

Shanghai copper hits two-month low ahead of Chinese new year

Copper prices on the Shanghai Futures Exchange fell to their lowest in eight weeks on Wednesday as a result of demand concerns ahead of the major Chinese holiday.

The US dollar continues to float around 2-month highs, making dollar denominated base and precious metals relatively more expensive.

Three-month copper on the ShFE fell as much as 1.3% to 56,860 yuan ($8,804)/t, while three-month copper on the LME fell 0.5% earlier this morning to $7,742/t (Reuters).

 

China – China is stockpiling chips and chip production equipment to resist US

Chinese businesses bought up nearly $32bn of equipment to produce chips from Japan, South Korea, Taiwan and elsewhere (SCMP)

China has long been obsessed with self-sufficiency with the nation cutting itself off from the rest of the world on a number of occasions through its long history

The Chinese authorities recognised early on that working from home arrangements led to a substantial increase in demand for laptops and other home-office electronics.

Western manufacturers are struggling to source semiconductor chips while China appears better prepared to ensure its automotive and other production lines keep going.

 

Four of the top ten best performing stocks on AIM over the past year are SP Angel clients

The stocks are Novacyt*, Orosur Mining*, Power Metals Resources* and Eurasia Mining* according to Investment Week.

*SP Angel acts as Nomad and broker to these companies.

 

Recent Interviews:

121 Africa Mining Conference panel:  Investment Leader’s Discussion: Van Eck, Qora Capital, Nedbank, SP Angel

Africa set to gain from Covid stimulus as East and West compete for metals in the new COVID-Supercycle:

The Assay – Africa Edition 2021

 

IGTV:   Metals expected to continue the last-year gains into 2021 https://youtu.be/afrB9cJe8L0

Is 2021 the start of the new COVID-Supercycle or will Lockdowns delay the recovery? https://youtu.be/7LO0tDc-pNc

As traders continue to bid up Tesla, is the EV sector approaching a bubble? https://youtu.be/LaDWBpTZ7SQ

Copper price rise: https://youtu.be/mdPXTup15VY

 

VOX:    28/01/20 https://www.voxmarkets.co.uk/articles/john-meyer-covers-news-from-bluerock-rambler-altus-anglo-asian-mining-85f68e3

21/01/20 https://www.voxmarkets.co.uk/media/600a877b40dc224b8b88a983/?context=/listings/LON/SML/multimedia/

13/01/20 https://audioboom.com/posts/7770987-john-meyer-on-lithium-ironridge-res-savannah-res-kodal-mins-cornish-metals-bluerock-diamonds

 

iiTV:     The mining stock to own in 2021: https://www.youtube.com/watch?v=4x7SuSLQwCI&t=11s

Small Cap Mining Share tips for 2021 – https://www.youtube.com/watch?v=G_6RKAp91k4

Miners for a green industrial revolution – https://www.youtube.com/watch?v=rXlNS6JIDvg&t=3s

A Mining megatrend and three solid dividend stocks – https://www.youtube.com/watch?v=sH5r-QbTRwg

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.

We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, one and all, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.

 

Metals price forecasting through 2020 – 2020 was probably the most difficult year for forecasting anything

No.1 in Copper:  “The winner of the 2020Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an  accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

2020 was probably the most difficult year for forecasting anything so we are very pleased to have ranked so well in the two key metals we cover

Please contact us directly for our updated metals price forecasts for 2021 and beyond

 

Dow Jones Industrials +1.57% at 30,687

Nikkei 225 +1.00% at 28,647

HK Hang Seng +0.20% at 29,307

Shanghai Composite -0.46% at 3,517

 

Economics

UK – all adults in the UK to have both Covid vaccines by end-August

More than 10m Covid vaccines have been administered (The Sun).

The rate of vaccination has risen to around 400,000 vaccinations a day.

Nearly nine out of every 10 over 80s and half of over 70s will have been vaccinated by mid-February

 

Currencies US$1.2037/eur vs 1.2071eur yesterday.  Yen 105.02/$ vs 104.98/$.  SAr 14.954/$ vs 14.936/$.  $1.367/gbp vs $1.369/gbp.  0.762/aud vs 0.762/aud.  CNY 6.458/$ vs 6.460/$.

 

Commodity News

Precious metals:  

Gold US$1,836/oz vs US$1,849/oz yesterday

Gold ETFs 106.8moz vs US$106.8moz yesterday

Platinum US$1,095/oz vs US$1,102/oz yesterday

Palladium US$2,241/oz vs US$2,248/oz yesterday

Silver US$26.75/oz vs US$27.54/oz yesterday

 

Base metals:  

Copper US$ 7,759/t vs US$7,758/t yesterday – Chile – Copper production falls 9.4% in December

Copper production fell to 499,700 tonnes in December, a 9.4% drop YoY according to Cochilco.

Full-year output amounted to 5.73mt in 2020, a drop of 1% compared to the year prior.

Aluminium US$ 1,967/t vs US$1,957/t yesterday

Nickel US$ 17,645/t vs US$17,780/t yesterday – New Caledonia – Government collapses citing unrest driven by sale of nickel assets

The coalition government collapsed on Tuesday after pro-independence politicians resigned after persistent unrest as a result of the sale of nickel assets.

The South Pacific nation has recently seen extensive rioting over the sale process of Vale’s nickel business, with protestors saying a locally led offer had been overlooked unfairly.

 New Caledonia is the world’s fourth largest nickel producer after Indonesia, the Philippines and Russia.

The country is also due a referendum by the end of next year and is currently a colony of France.

Zinc US$ 2,580/t vs US$2,553/t yesterday

Lead US$ 2,012/t vs US$2,015/t yesterday

Tin US$ 22,950/t vs US$23,125/t yesterday

 

Energy:           

Oil US$58.0/bbl vs US$57.0/bbl yesterday

Natural Gas US$2.862/mmbtu vs US$2.957/mmbtu yesterday

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$144.2/t vs US$150.6/t

Chinese steel rebar 25mm US$668.2/t vs US$667.9/t

Thermal coal (1st year forward cif ARA) US$66.5/t vs US$66.5/t

Coking coal swap Australia FOB US$160.0/t vs US$160.0/t

           

Other: 

Cobalt LME 3m US$43,000/t vs US$41,250/t

NdPr Rare Earth Oxide (China) US$70,767/t vs US$70,431/t

Lithium carbonate 99% (China) US$10,607/t vs US$10,603/t

Ferro Vanadium 80% FOB (China) US$30.5/kg vs US$30.5/kg

Ferro-Manganese high carbon 78% Mn US$1,560/t vs US$1,490/t

Tungsten APT European US$245-250/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$560/t vs US$530/t                

Graphite spherical 99.95% C, 15 microns, fob China US$2,625/t vs US$2,475/t

Spodumene 6% Li2O min, cif (China) US$455/t vs US$395/t

 

Battery News

Wind Power Monthly’s onshore turbines of the year 

Wind Power Monthly has announced their top onshore 4.5MW plus turbines of 2020.  

In first place is Enercon E-160 EP5 E1. It has 4.6MW and was installed in July. It is a steppingstone in Enercon’s mission to reshape itself for global demands. It has a 38% rotor area increment and the 5.5MW E-160 E2 upgrade is already planned for Q1 2021. 

Second place goes to Siemens Gamesa SG 5.8 – 155 which comes with flexible onshore ratings – the highest is currently the 6.6MW. The first prototype of this new 5.X modular global platform will be supplemented in 2021 by the SG 5.8-170 with a record 170 metre rotor.  

Third place is Vestas V162-6.0MW EnVentus. Installed in October 2020, it has one of the largest onshore rotors and is the second EnVentus prototype after the 5.6MW V150-5.6MW.  

 

Australia’s largest solar farm to power Nickel West

BHP has signed a renewable power purchasing agreement to supply up to 50% of its electricity from the Merredin Solar Farm.

The miner expects the deal to reduce emissions from electricity use at the refinery by up to 50% by 2024, based on 2020 levels.

The company estimate that the deal will reduce its carbon emissions by 364,000 tonnes over the life of the contract.

 

Company News

Hummingbird Resources (LON:HUM) 29p, Mkt Cap £105m – Earnings climb as stronger gold price compensates for weaker production and higher costs

Q4 production came in at 22.0koz (Q3/20: 24.7koz) at $1,496/oz AISC (Q3/20: $1,283/oz).

Lower production is attributed to a slight pullback in processed grades during the quarter (2.03g/t v 2.27g/t in Q3/20).

FY20 production was 101.1koz at $1,147/oz AISC (FY19: 116koz at 986/oz).

Q4 gold sales totalled 24.3koz at an average realised price of $1,862/oz (Q3/20: $1,919/oz).

FY20 EBITDA estimated at $75m (FY19: $55m) as stronger realised gold prices more than compensated for lower sales and higher unit costs.

PBT is estimated at $26m (FY19: $9m).

FY21 guidance is 100-110koz at $1,250-1,350/oz AISC with production to be weighted towards H2/21.

Mining operations are expected to access higher grade Komana West area in the latter part of the year.

The Company estimates Yanfolila to generate ~$70m in project level EBITDA in 2021 at current gold prices.

Exploration and mine life extension at Malian operations will be doubled to $10m focusing on drilling at KEUG that may start feeding high grade material in 2022, SE and SW as well as greenfield exploration at other targets.

Latest round of drilling at SE returned a number of good shallow to deep intersections with the team to accelerate exploration works in the area this year:

SNERC0379 10m at 5.75g/t from 137m

SNERC0402 42m at 4.07g/t from 80m (ended in mineralisation)

SNERC0403 33m at 3.40g/t from 149m

SNERC0405 6m at 7.93g/t from 101m

SNERC0406 10m at 3.55g/t from 26m

SNERC0406 10m at 3.61g/t from 46m

At Kouroussa, engineering studies are now nearing completion as the Company awaits mining license with exploration being planned to target several high priority targets to expand as well as upgrade current mineral resource of ~1.2moz at over 3g/t.

Cash balance stood at $11m, up from $9m in the previous quarter, with bank borrowings at $13m , reduced by $6m during the quarter, and gold inventory of $4m.

The Company expects bank loan to be fully repaid in Q2/21.

Conclusion: 2020 proved to be a challenging year reflecting lower grade feed reflecting re-sequencing of mining operations amid logistical issues recorded during the pandemic followed by a military coup in the country as well as heavy rainfall in Q3/20. The Company guides for stable production in 2021, although at higher cost, with exploration spending to double as the team is aiming to grow and upgrade the existing mineral resource at Yanfolila.

 

Kavango Resources (LON:KAV) 2.8p, Mkt cap £8m – Exploration outlined for South KSZ

Kavango reports that it has secured two additional prospecting licenses in the Southern section of the Kalahari Suture Zone (KSZ), with the Company’s licenses now in the zone now totalling 7,573km2.

Kavango have already commenced exploration in the northern part of the zone and now wish to develop its knowledge of the Southern section to the same level, with work involving:

Re-logging cores from 149 historic drill holes

CSAMT and ground magnetic surveys

Ground geophysics

Development of a comprehensive 3D underground model

Further field exploration will include Time domain ElectroMagnetic Surveys and test drilling of high-speed conductors which may be large-scale magmatic sulphide deposits, identified within gabbroic intrusions. Kavango also expect to hire a new full-time geologist.

New exploration will be conducted in the south while Kavango simultaneously build on initial positive results in the northern Kalahari Suture Zone, with the company aiming to achieve a proof of concept by the end of the year.

Michael Foster, Chief Executive Officer of Kavango Resources, commented: “We have refined sophisticated exploration methods over recent years at Hukuntsi. It is now time to leverage that experience in the Southern Section of the KSZ. The new licences strengthen our strategic position in the Kalahari Suture Zone. Given the size of our company, this represents a significant opportunity. We have already gathered compelling evidence that this region experienced extensive geological activity during the Karoo Age, which was conducive to the formation of large-scale magmatic sulphide deposits.”

 

Rainbow Rare Earths* (LON:RBW) 11.50p, Mkt Cap £54m – Rainbow discovers high-grade REE in exceptionally thick veins on new targets around Gakara in Burundi

Rainbow completes acquisition of Phalaborwa tailings and REE pilot plant

(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates. There is currently no BEE requirement as this is a retreatment processing operation)

Rainbow report the discovery of high-grade rare earth mineralisation in thick veins near their Gakara mine in Burundi.

Mineralisation grading up to 50% rare earth oxide has been discovered within the Burima and Kivungwe targets close to the Gakara mine.

The discovery will almost certainly lead to a significant increase future resource estimation and may serve to expand well production beyond the current mine plan.

Trenching shows mineralisation in veins of varying widths ranging from 6-180cm representing a meaningful increase on the current mineralisation being mined.

The increased width of these veins indicates the potential to mine this high-grade ore in a more cost effective and mechanised manner than has been done in past years at Gakara.

A 62t sample grading 44% straight out of the ground was very simply upgraded using gravity separation to >54% at the Gakara pilot plant indicating low process costs.

Significantly, the concentrate has low levels of radioactivity, an important consideration for the transport and overseas sale of any concentrate.

The new targets effectively increases the Gakara mine working areas to five areas increasing flexibility as well as available resource.

There are a further 10 targets to define within the JORC Exploration Target with drilling expected to start in the next few months following the wet season.

The wide width of the mineralisation indicates more efficient mining methods can be used for ore extraction raising production rates while lowering unit costs.

The work confirms the presence of three large carbonatite bodies at Gakara with potential for another two large orebodies based on radiometric and magnetic data.

Burima may be part of the same mineralisation emplacement as Kiyenzi which has a 3km diameter with a mineralised zone of 120-180cm apparent thickness identified through trenching.

The team took ~33t of ore grading ~50% REE from Burima to produce a high-grade low radioactive concentrate.

Kivungwe also shows veins of up to 1.2m width with ~29t of ore grading ~38% REE showing similar results to ore from Burima.

Phalaborwa (South Africa): Rainbow are waiting on results from the auger drilling programme at Phalaborwa in South Africa.

The assays should allow the calculation and confirmation of grade within the 35mt of tailings.

Phalaborwa could, in theory, generate sales of ~US$153mpa assuming current NdPr prices and sufficient demand to maintain these price levels.

We believe the rise in demand for electric vehicles and offshore wind turbines should generate sufficient additional demand to absorb all additional Nd/Pr production from Gakara and Phalaborwa.

Conclusion:  Today’s results support Rainbow’s ambition to raise production to 10,000–20,000tpa of rare earths in concentrates at Gakara. The move to mechanise and upscale the Gakara mine should result in a significant increase in sales. This combined with higher Neodymium and Praseodymium prices should see a significant turnaround in the profitability of the operation.

*SP Angel act as broker and financial advisor to Rainbow Rare Earths

 

SolGold* (LON:SOLG) 29p, Mkt Cap £619m – Regional exploration in Ecuador

SolGold has provided a progress report on its exploration programmes covering thirteen priority targets across Ecuador as it advances a portfolio of wholly-owned projects in parallel with the feasibility work on the flagship Alpala deposit.

At the wholly-owned Porvenir project in southern Ecuador, initial drilling has been on the Cacharposa porphyry copper-gold target which forms “part of a 1700m long northerly-trending mineralised corridor, up to 1000m wide … characterised by coincident Cu, Mo, Au and Cu/Zn soil anomalies”.

The company summarises results from 4 holes at Porvenir and comments that “Hole 1 at Cacharposa was re-entered and extended from 909.3m to 1122.9m depth. Holes 2, 3 and 4 were terminated at depth of 1200.1m, 750.6m and 1113.5m respectively”. Results include:

An intersection of 928m at an average grade of 0.39% copper and 0.18g/t gold from a depth of 10m in hole PDG-20-001; and

An intersection of 818m at an average grade of 0.35% copper and 0.14g/t gold from surface in hole PDH-20-002; and

An intersection of 304m averaging 0.35% copper and 0.3g/t gold from surface in hole PDH-20-003; and

An intersection of 934m at an average grade of 0.22% copper and 0.05g/t gold from 174m depth in hole PDH-20-004

Each of the bulk intercepts exhibit higher grade sections of mineralisation with grades of up to around 0.7% copper and 0.6g/t gold.

Hole 5 at Cacharposa has been completed at a depth of 1,037m with assay results awaited while a further three holes (6-8) currently underway with visible copper sulphide mineralisation, including the minerals chalcopyrite, chalcocite and bornite, encountered in all holes.

The company confirms that it plans a 25,000m drilling programme at Cacharposa during 2021 “designed to test a mineralised corridor over a 1700m by 1000m area”.

At the Blanca project, located approximately 8km northeast of Alpala, 4 drillholes totalling 2,041m have been completed at the Cielito prospect with a second campaign of 2 holes (1240m) on the Cierro Quiroz prospect,

Hole BDH-19-001 at the Cielito prospect returned an intersection of 0.27m at an average grade of 11.5g/t gold from 97.1m depth while hole BDH-19-002 intersected high grades of 61.9g/t and 32.6g/t gold over intervals of less than 20cm and the company says that “Whilst gold grades were encouraging, the intersection widths did not provide sufficient encouragement to continue drill testing for narrow-vein high-grade gold mineralisation at the Cielito Prospect.”

Depending on the results from the Cerro Quiroz area, further drilling of up to 3,000m may be conducted in 2021.

Drilling of the Rio Amarillo prospect, approximately 30km southeast of Alpala “was delayed due to permitting and COVID-19 related delays” however “an upgraded initial 12,000m planned drilling program at the high-quality Varela porphyry copper-gold target … [is] … planned for commencement in Q2 2021. Initial drilling at Varela will test underneath outcropping porphyry style vein stockworks which returned surface rock-saw channel sample results of 99m @ 0.34% CuEq including 25.1m @ 0.58% CuEq”.

Iniitial drilling of the Sharug and La Hueca prospects was also delayed but further work at La Hueca is planned following review of results to date while “An initial 3,000m drilling program is planned for” the Sharug project in “mid-2021”. Initial drilling is also planned at the Cisne Loja prospect in southern Ecuador with an initial 3,000m programme expected in mid 2021.

 

Conclusion: Solgold’s exploration programme throughout Ecuador has yielded significant success, notably at Porvenir where initial drilling of the Cacharposa target has yielded long intersections of mineralisation from near surface to almost 1,000m depth. Some drilling projects were delayed during 2021 as a result of the pandemic however plans are in place to move ahead with drill-testing of several other targets in 2021 and we await the results with interest. The commitment to a 12,000m programme at Varela may hint at a particular management enthusiasm for the project. The development of a pipeline of projects at varying stages of exploration and development is, however, an indication of the underlying strength of the Solgold exploration portfolio.

SP Angel act as Financial Advisor to SolGold.

 

Tertiary Minerals* (LON:TYM) – 0.36p, Mkt cap £3.5m – Exploration at Mt Tobin

Tertiary Minerals has announced the completion of its evaluation of soil-sampling and magnetic geophysics data from its Mt Tobin silver project in Nevada.

The company says that its assessment has identified silver in soil geochemical anomalies over a strike length of 1.2km and widths of between 75-200m and that it sees the geophysical and geochemical anomalies, which remain open along strike, as “associated”.

Modelling “of magnetic data defines sub-horizontal pipe structure that closely follows the silver-in-soil anomaly along its full length” and the company says that it plans further field-mapping and evaluation of the anomalous areas during the spring and summer.

Executive Chairman, Patrick Cheetham, confirmed that “The strong association of magnetic and silver-in-soil anomalies containing up to 15.7ppm silver makes for an exciting exploration target”.

Conclusion: Early stage geochemical and geophysical exploration at Mt Tobin has delineated an initial target area for further mapping and evaluation in the spring and summer. The prospective silver anomalism remains open and could perhaps be extended beyond thye current 1.2km strike length as a result of the follow-up work and we await further news as the exploration proceeds later in the year.

*SP Angel act as Nomad and Broker to Tertiary Minerals

 

 

Analysts

John Meyer – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Joe Rowbottom – [email protected] – 0203 470 0486

 

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – [email protected] – 0203 470 0471

 

 

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

SSY

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

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