Today’s Market View – Phoenix Copper, IronRidge Resources, Castillo Copper and more…

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SP Angel . Morning View . Wednesday 07 04 21

IMF upgrades global growth estimates on stimulus and vaccinations 

 

We are working with a private copper company which is raising funds for new exploration

Please contact us for details of the investment opportunity

The company intends to list in London and its valuation is at a suitable discount to reflect its private status and stage of exploration

 

Anglo American (LON:AAL) – De Beers reports continuing signs of recovering demand while warning on Covid19 challenges

Castillo Copper (LON:CCZ) – Additional exploration targets at Arya

Cornish Metals* (LON:CUSN) –  CLICK FOR PDF – Drilling starts at United Downs

IronRidge Resources* (LON:IRR) – Drilling commenced at Kineta North gold license, Côte d’Ivoire

Phoenix Copper* (LON:PXC) – Award of drilling contracts in Idaho

Scotgold Resources* (LON:SGZ) – BUY – 147p (from 177p) CLICK FOR PDF – Earnings update

Serabi Gold* (LON:SRB) – Visible gold reported from latest Sao Domingo drilling

UK Seabed Resources (Private) – UK government invests in Rare Earths sub-sea miner backed by Lockheed Martin

 

IMF upgraded its 2021/22 global growth estimates for the second time in three months.

Global output is expected to grow 6.0% in 2021 and 4.4% in 2022 versus 5.5% and 4.2% estimated previously.

A rebound is following a pandemic induced 3.3% contraction in 2020 marking the worst peacetime drop since Great Depression.

The IMF expects developed nations to be less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more, a contrast to 2009, when rich countries were hit harder, Bloomberg reports.

 

Gold US$1,741/oz – gold is staging a strong recovery

Gold prices are recovering this week following a significant selloff since August 2020

The gold price fell to $1,684 on 30th March but have staged a strong recovery from this point.

Prices have been helped higher by news of Biden’s proposed $2.3tn infrastructure stimulus and a weakening of the US dollar.

High national and corporate debt levels as highlighted by the IMF yesterday along with IMF advice to reduce loan exposure to riskier corporates raises default risk.

Banks, brokers and hedge funds have reduced leverage into the market, partly due to the closing of short positions and partly due to rising equity markets.

Gold prices were hit by a flow of funds out of gold and into Bitcoin as investors joined the rush to diversify away from paper currencies.

We expect gold prices to climb higher from here as nations use additional stimulus to better compete with increasing competition from Chinese manufacturing.

 

Copper prices hit two-week high on US recovery hopes

Copper prices jumped nearly 3% in London as the market reopened following the Easter break, driven predominantly by improving sentiment around a post-pandemic US recovery.

US employment data released on Friday showed the US economy created the most jobs in seven months in March, beating expectations and raising prospects of a swift recovery in the world’s largest economy.

Longer term, copper demand has been underpinned by President Biden’s $2.25tn infrastructure spending package reported last month.

The sweeping plan is expected to overhaul the nation’s roads, bridges and railways- along with building green energy infrastructure vital for the clean energy transition.

Chile announced last week that it intends to shut its borders during April to reduce the latest flurry of Covid-19 cases, although the Mining Ministry insisted that mining will not be affected.

Despite reassurances from the ministry, the potential for a supply shortage from the world’s top producer is likely to generate at least some feelings of uncertainty from end users and traders.

 

Nissan’s China Q1 passenger vehicle sales jump 71%

Nissan’s passenger and light vehicle business in China increased unit sales by 70.6% YoY in the first three months of 2021.

The division sold 352,352 vehicles in Q1.

 

Greensill Capital administrators uncover further irregularities reminding some of the collapse of ENRON

The Administrator has allegedly uncovered further irregularities in its investigation of invoices at Greensill Capital (FT).

“Greensill Capital’s administrator has been unable to verify some of these invoices, with companies listed on the documents denying they had ever done business with Gupta.”

Furthermore an employee at Sanjeev Gupta’s metals empire has been caught registering domain names which closely resemble names used by other trading houses.

“Concord Resources said it would send a cease and desist letter to Liberty House over the registration of concordresources.net.”

“The registrations include gunvorsg.com, a name that resembles Gunvor, one of the largest oil traders in the world.”

“In April 2017, the szmhgroups.com domain was registered, which resembles the szmh-group.com website of steel trader Salzgitter Mannesmann.“

 

Rare Earths – Radioactive tailings threaten to endanger Florida supplies if Piney Point phosphate tailings fail (The Times)

Radioactive phosphate tailings threaten to flood onto roads and pollute waters at Piney Point, close to Tampa in Florida

Heavy rain is threatening to overflow a toxic reservoir which is held back by mounds of radioactive industrial waste.

Engineers are pumping water containing phosphate tailings into the sea to stop the wall of phosphogypsum from collapsing.

The dam contains close to 1 bn gallons of water held back by tailings from the historic phosphate mine.

The phosphogypsum tailings are rich in nitrogen, phosphorous and ammonia as well as some other heavy metals such as cadmium.

Florida has declared a state of emergency and is evacuating 350 homes.

A leak from a tear in one of the reservoir liners has caused water to crumble the surrounding phosphate rock threatening catastrophic failure.

 

Recent Interviews:

VOX Markets:  24/03/20: https://audioboom.com/posts/7829467-john-meyer-on-arc-minerals-cornish-metals-rainbow-rare-earths-altus-stategies

12/03/20: https://www.ig.com/uk/market-insight-articles/volkswagen_s-electric-vehicle-expansion-plans-drive-a-record-hig-210317

IGTV:  VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw

Are we in a new commodity supercycle, or is one coming? https://youtu.be/sw6gLNnM1s0

Is this a new Supercycle for commodities: https://youtu.be/BIWb-wqoLpM

*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, 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.

 

No.1 in Copper:  “The winner of the 2020 Fastmarkets 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

 

Dow Jones Industrials -0.29% at 33,430

Nikkei 225 +0.12% at 29,731

HK Hang Seng -0.87% at 28,688

Shanghai Composite -0.12% at 3,479

 

Economics

China – IMF urges China to reduce its Corporate debt risk as debt to GDP ratio climbs to 266%

The IMF are urging China to cut its risk to corporate debt, particularly to riskier borrowers (SCMP).

Chinese authorities loosened controls on lending to corporates during the pandemic with many loans extended to riskier companies.

The IMF report on global financial stability issued yesterday highlights vulnerabilities in China are particularly driven by riskier corporate borrowers.

China’s debt to GDP ratio rose to 266.4% and end-Q3 2020 up from 245.4% yoy according to the IMF. The ratio is expected to rise to 275% for 2020 (CASS).

Japan has traditionally the highest debt-to-GDP ratio at 266% in 2020. The US debt to GDP ratio rose to 129% in 2020. The UK ratio has risen to 100%.

 

US – The Biden Administration announced an increase in corporate tax to 28% from 21%, as part of it’s Infrastructure Recovery Package

US Treasury Secretary Janet Yellen has called for a global minimum corporate tax rate

The UK government also signalled a rise in corporate tax to 25% from present 19% in Apr’23.

German corporate tax rates are expected to rise to 30% by the end of 2021 from 15% currently (tradingeconomics.com)

US, Feb factory orders fell 0.8% in February vs +2.8% in January

Fed to publish minutes of its latest FOMC meeting later today.

 

ASEAN – Manufacturing PMI rose to 50.8 in March vs 49.7 in April

 

Japan – Services PMI rose to 48.3 in March vs 46.3 in February

 

Eurozone – Final PMI numbers showed confirmed Eurozone returned to growth in March largely driven by strong manufacturing sector, although, a contraction in the services industry continued to slowdown.

“The economy has weathered recent lockdowns far better than many had expected, thanks to resurgent manufacturing growth and signs that social distancing and mobility restrictions are having far less of an impact on service sector businesses than seen this time last year,” Markit commented on the data.

Germany, Italy, Spain and Ireland all reported business activity increase last month and France halted its contraction.

“Firms’ expectations of growth are running at the highest for just over three years amid growing hopes that the vaccine roll-out will boost sales in the coming months,” Markit wrote.

Markit Manufacturing PMI (released earlier): 62.5 v 57.9 in February.

Markit Services PMI: 49.6 v 45.7 in February.

Markit Composite PMI: 53.2 v 48.8 in February.

 

UK – Moderna vaccine will be used for the first time in the UK from Wednesday after having been approved by regulators in January.

The UK ordered 17m doses of the Moderna vaccine and is to become the third to be administered in the country.

“I’m delighted we can start the UK rollout of the Moderna vaccine in west Wales today,” Matt Hancock, health secretary, said.

Moderna use should be ramped up through April and more volumes expected in May.

 

Greenland – Anti-mining group expected to win parliamentary election

The opposition party Inuit Ataqatigiit (IA) are set to become the biggest party in the 31-seat chamber, according to an early vote count of Tuesday’s parliamentary election.

IA has signaled that it will shelve plans to allow a rare earth mine near the southern tip of Greenland, where Greenland Minerals wish to build a mine.

According to a poll published by a local newspaper, about two-thirds of Greenlanders are against the project.

 

Chile closed boarders due to Covid-19 

 

Currencies US$1.1878/eur vs 1.1803eur yesterday.  Yen 109.82$ vs 110.39/$.  SAr 14.536/$ vs 14.601/$.  $1.380/gbp vs $1.387/gbp.  0.764/aud vs 0.763/aud.  CNY 6.542/$ vs 6.550/$.

 

Commodity News

Precious metals:  

Gold US$1,741/oz vs US$1,729/oz yesterday

Gold ETFs 99.5moz vs US$99.6moz yesterday

Platinum US$1,242/oz vs US$1,207/oz yesterday

Palladium US$2,686oz vs US$2,677/oz yesterday

Silver US$25.11/oz vs US$24.87/oz yesterday

 

Base metals:  

Copper US$ 8,977/t vs US$8,985/t yesterday

Aluminium US$ 2,256/t vs US$2,261/t yesterday

Nickel US$ 16,730/t vs US$16,560/t yesterday

Zinc US$ 2,827/t vs US$2,837/t yesterday

Lead US$ 1,976/t vs US$1,956/t yesterday

Tin US$ 25,970/t vs US$25,955/t yesterday

 

Energy:

Oil US$63.0/bbl vs US$62.7/bbl yesterday

Natural Gas US$2.478/mmbtu vs US$2.539mmbtu yesterday

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$162.3/t vs US$160.3/t

Chinese steel rebar 25mm US$780.2/t vs US$761.0/t

Thermal coal (1st year forward cif ARA) US$73.0/t vs US$72.6/t

Coking coal swap Australia FOB US$149.0/t vs US$149.0/t

           

Other: 

Cobalt LME 3m US$50,000/t vs US$50,000/t

NdPr Rare Earth Oxide (China) US$88,657/t vs US$88,546/tLithium carbonate 99% (China) US$12,840/t vs US$12,824/t

Spodumene 6% Li2O min, cif (China) US$660/t vs US$510/t

Ferro Vanadium 80% FOB (China) US$36.0/kg vs US$35.5/kg

Ferro-Manganese high carbon 78% Mn US$1,665/t vs US$1,625/t

Tungsten APT European US$270-278/mtu vs US$270-275/mtu

Graphite flake 94% C, -100 mesh, fob China US$550/t vs US$560/t                

Graphite spherical 99.95% C, 15 microns, fob China US$2,525/t vs US$2,525/t

 

 

Battery News

BA, Shell Ventures invest $24.3m in hydrogen aircraft developer  

Hydrogen-electric flight specialist ZeroAvia has secured further financial backing to help accelerate the development of its first 50-plus seater zero emissions aircraft, with British Airways, Shell Ventures, and Systemiq among funders jointly announcing $24.3m investment in the start-up.  

BA said the latest cash injection would help ZeroAvia launch a new development program to further demonstrate the credibility of its technology and accelerate the development of a larger hydrogen-electric engine, capable of flying further and enabling larger zero emissions aircraft as soon as 2026.  

ZerroAvia claims it could achieve commercialisation for its hydrogen-electric technology as soon as 2024, with flights of up to 500 miles in a 20-seater aircraft. 

With the new investment, the firm said it expected to begin operating zero emissions commercial aircraft carrying 50 passengers in 5 years’ time.  

 

Company News

Anglo American (LON:AAL) 2,969p, Mkt Cap £39.5bn – De Beers reports continuing signs of recovering demand while warning on Covid19 challenges

Anglo American has announced that the third De Beers sales cycle of 2021 realised US$440m and that the previously reported sales for the second sales cycle of the year have now been confirmed at US$550m.

Commenting on the results De Beers Chief Executive, Bruce Cleaver, said that “Following a good holiday season and that trend continuing during the first quarter of 2021, we have again seen solid demand for rough diamonds as we begin a traditionally quieter period of the year for the diamond industry. Sales were in line with expectations and both market sentiment and overall industry conditions remain positive”.

Mr. Cleaver cautioned on the continuing challenges facing the the diamond market saying that “with pandemic developments in Europe and Mumbai’s recent lockdown resulting in the Bharat Diamond Bourse being closed, it is clear that we will continue to see challenges relating to Covid-19”.

 

Castillo Copper (LON:CCZ) 2.55p, Mkt Cap £22.4m – Additional exploration targets at Arya

As Castillo Copper moves towards a resumption of exploration work on the ground at its Mt Oxide project in Queensland as the wet season ends, the company reports that after examining historical records it has identified a further 11 promising copper/gold targets at the Arya prospect.

The company says that “Castillo’s geology team are planning a return to site and resume exploration activities at the Mt Oxide Project. Within the next few weeks, a geophysical survey will be undertaken at the Big One Deposit that will focus on extending known mineralisation and uncovering additional anomalies”.

The additional target areas bring the current total to “21 viable targets across the Mt Oxide Project for copper mineralisation” including a range of mineralisation types from Iron-Oxide Copper Gold (IOCG) Mt Isa types and structurally hosted settings.

Managing Director, Simon Paull, confirmed that “The Board is targeting to have drilling teams back to site as soon as practical to complete work at the Big One Deposit then commence at the Arya Prospect”.

Conclusion: Plans to resume field exploration now have a wider range of potential targets to investigate following the examination of historical records. and we look forward to further news as the work proceeds.

 

Cornish Metals* (LON:CUSN) – 8.49p, Mkt cap £22m – Drilling starts at United Downs

Cornish Metals reports that drilling has started at its United Downes project in Cornwall.

The plan is to follow up on the high-grade mineralised intersections discovered last year which showed 14.69m at 8.45% copper and 1.19% tin.

The team recently received the required permits to restart drilling at United Downs in the historic Gwennap mining district of Cornwall.

The area was a prolific mining location from the 18th century with mining continuing into the 20th century with the Wheal Jane and Mt Wellington mines, which lie to the east of United Downs.

Drilling also confirmed the continuation of mineralisation at United Downs at depths below historic mining.

Drill hole GWDD-002 intersecting “4.04m grading 4.4% Cu and 2.06% Sn at a downhole depth of 638.85m – 642.89m beneath the United Mine”.

The company listed on AIM on 16th February this year

Tin prices continue to post gains rising to US$ 25,970/t vs US$25,955/t yesterday

PT Timah, the large Indonesian tin producer announced it expects to produce 34,000t of refined tin this year down 25% from 45,968t in 2020.

They also announced sales would fall to around 31,000t this year from 44% from 55,782tonne last year as the company ran down stock levels.

* SP Angel acts as broker and financial advisor to Cornish Metals. The analyst holds shares in Cornish Metals

 

IronRidge Resources* (LON:IRR) 22p, Mkt Cap £87.8m – Drilling commenced at Kineta North gold license, Côte d’Ivoire

IronRidge reports that it has commenced its 2,500m RC drilling programme at the Kineta North gold license in Côte d’Ivoire, designed to test the target where previously reported soils defined a 2km long by 250m wide >30ppb Au soil anomaly with coincident underground artisanal workings over a 700m strike and previously reported rock-chip sampling results including 15g/t, 32.4g/t and 46.4g/t gold.

The drilling programme is the company’s first within the broader Kineta portfolio which covers 1,532km2 of contiguous ground holding under application and granted over the prospective shear structure which hosts the 3.3Moz Konkera resource and 2.1Moz Wa-Lawra deposits to the North.

Visible gold has been observed in quartz vein RC drill chips in the first hole completed, with assay results pending.

*SP Angel act as Nomad for IronRidge Resources

 

Phoenix Copper* (LON:PXC) 34p, Mkt Cap £39m – Award of drilling contracts in Idaho

(Phoenix holds 80% of the Empire mining property in Idaho)

Phoenix Copper has announced the award of drilling contracts for the 2021 programmes in Idaho at its Navarre Creek, Red Star and Horseshoe projects and also for the investigation of deep sulphide mineralisation beneath its Empire mine project.

The announcement follows the news last week of the award of a contract for geophysical work at Red Star, Horseshoe and Navarre Creek.

Alford Drilling of Reno, Nevada, has been awarded the work at the “high-grade silver – lead Red Star and Horseshoe blocks, as well as the Navarre Creek gold block” with approximately 1,500m of core-drilling planned at Red Star and Horseshoe and a further 3,000m of reverse circulation drilling at Navarre Creek.

The work is expected to build on the results of last year’s campaign as well as the findings of the structural geological study by Dr. David Rodgers of Idaho State University announced last November and of the recently announced geophysical work which is scheduled to l be undertaken during May/June.

An additional 4,500m contract to drill deep sulphide targets at the Empire mine, in conjunction with around 1,500m to investigate and monitor the hydrology in the region of the proposed heap leach pad and processing area for the Empire oxide pit has been awarded to Drillriite, also based in Reno.

Work on the deep sulphides is expected to start late in the current quarter, subject to site conditions.

Phoenix Copper “completed two deep diamond drill holes below the open pit oxides at Empire in late 2017 that confirmed the presence of higher-grade sulphide mineralisation in the skarn structures at depth. Both of the core holes intersected mineralised skarn and … both drill holes intersected numerous significant intervals of copper, gold, silver, zinc, lead, and tungsten throughout their depths.”

The company explains that “tungsten values were particularly interesting as they positively reinforced the Company’s consulting geologist’s predictions of the Empire system being the uppermost horizon of a larger molybdenum-tungsten porphyry.”

“In 2018 five drill holes intercepted copper sulphide mineralisation below the Empire oxides. One hole returned 5.53% copper, 7.67 g/t gold, and 120 g/t silver, and was further north of any historical underground mining, whilst another returned 5.19% copper adjacent to historical underground workings”.

Chief Executive, Ryan McDermott explained that Phoenix Copper “is executing these field-based programmes using the results from the 2020 field season and utilising the funding from the recent equity raise”.

Conclusion: Phoenix Copper has an ambitious exploration programme to investigate the potential of the Navarre Creek licence as well as following up the previous exploration at Red Star, Horseshoe Creek and at depth beneath the historic Empire mine.  The exploration is taking place alongside the development of the Empire oxide pit which aims to produce an average of around 8,500tpa of copper over a 10 years mine life. We look forward to the exploration results as the drilling and geophysics get underway.

*SP Angel act as Nomad for Phoenix Copper

 

Scotgold Resources* (LON:SGZ) 72p, Mkt Cap £40m – Earnings update

BUY – 147p (from 177p)

The Company raised new equity last week and updated on the status of the Cononish ramp up process.

£1.5m was raised in a placing of 2.1m shares at 70p.

Additionally, Bridge Barn owned by major shareholder and the Chairman of the Company Nathaniel le Roux agreed to provide further debt funding of £0.5m if it is needed in the future.

The Company reiterated its CY21 production guidance for 25.7-28.5kt throughput and 7.0-7.9koz gold.

Proceeds will cover working capital requirements as operations at the recently commissioned high grade Cononish mine ramp up.

Longer than expected ramp up at the processing plant see commissioning of Phase 2 expansion to 72ktpa being delayed to Sep/22, from previous target May/22.

Processing plant issues highlighted earlier are being addressed including at the filter press part of the circuit that held back ramp through March.

The Company also released updated Cononish earnings and NPV projections adjusting for new ramp up schedule and lower gold price assumptions reflecting a pull back in market prices.

Using £1,250/oz gold price, the mine is expected to generate >£20m in EBITDA and >£15m in FCF (post-tax) per year following Phase 2 ramp up to 72ktpa, ~24kozpa GE and ~£430/oz (~$600/oz) AISC.

Conclusion: The fundraise along with access to expanded loan facility covers working capital requirements as the team ramps up production at the recently commissioned high grade Cononish operation.

Our updated earnings estimates largely reflect lower long term gold price estimates ($1,800/oz v $1,925/oz previously) and adjusted FX assumptions (1.4 v 1.3 before).

We expect the plant to ramp up to design 36ktpa (3ktpm) processing rates through the current quarter with CY21 production expected at 26kt and 7.7koz, in line with latest Company guidance.

On spot prices (~$1,740/oz, 1.4 FX), we estimate Scotgold to generate ~£20m EBITDA and £15m FCF (post-tax) at Phase 2 implying 2.4x EV/EBITDA multiple and 39% FCF yield. We would argue that given high grade nature of the deposit, favourable jurisdiction and significantly de-risked status of the project (permitted, in production and ramping up), a target multiple of 4.0x is applicable translating into 128p NAVPS at spot gold prices. We value Scotgold on DCF5% basis at $1,800/oz/1.4 GBPUSD with no premium included in our estimates for the dore part of the Cononish production or ~25% of annual output (although the management has highlighted strong demand from local jewellers willing to pay a premium for locally sourced gold of up to £400/oz on anecdotal evidence) to arrive at updated 147p NAVPS reiterating our BUY recommendation.

 

Serabi Gold* (LON:SRB) – 63.5p, Mkt Cap £50.7m – Visible gold reported from latest Sao Domingo drilling

Serabi Gold has confirmed the presence of visible gold in recent drilling at its Sao Domingo prospect located around 8km west of its Sao Chico mine in Brazil.

The results, from hole 21-SD-010 included an intersection of 7.15m at an average grade of 258.24g/t gold from a depth of 172.85m, including a section of 3.55m at an average grade of 519.45g/t gold.

The same hole intersected shallower mineralisation including 7.4m averaging 1.95g/t gold from 141,m depth and 7.00m averaging 9.68g/t gold from 151.55m depth.

In addition to the results from hole SD-010, Serabi Gold highlights other recent intersections from the Sao Domingo drilling, including:

Intersections of 0.8m averaging 89.03g/t gold from 140m depth and of 4.7m averaging 1.42g/t from 76m depth, both in hole 21-SD-005; and

0.50m averaging 6.22g/t from 42m depth and of 1.80m averaging 3.77g/t from 67.25m depth both in hole 21-SD-003.

The recent drilling “has intersected three mineralised structures, all hosted within a mineralised alteration zone with a true width of 50 metres … [and] … Mineralisation is confirmed along at least a 400 metre strike length and remains open at depth and along strike”.

CEO, Mike Hodgson, welcomed what he described as excellent results and explained that “Holes 21-SD-003 and 21-SD-010, together with the previously reported hole 21-SD-001, have all been drilled on the same drill cross section and the collective results are building a very encouraging picture.  We have identified multiple high-grade veins, of which at least 3 are significant, in a 50 metre wide, sub-vertical, mineralised alteration zone”.

Conclusion: Drilling results from Sao Domingo, which was acquired in October last year, are showing high gold grades within a 50m wide corridor containing a series of three mineralised structures over 400m of strike length. With mineralisation said to be open both laterally and at depth, further work will be required to establish the scale of the mineralisation and we look forward to further news as the exploration continues.

*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil

 

UK Seabed Resources (Private) – UK government invests in Rare Earths sub-sea miner backed by Lockheed Martin

The Times reported this week on Sunday about UK Government investment in a private company UK Seabed Resources.

The company plans to hover up rare earth containing metal nodules off the deep sea bed.

We note the Japanese have also been working on the recovery of rare earth-rich sludge out of deep sea trenches.

The investment highlights increasing desperation by government agencies to secure strategic supplies of rare earths and other critical minerals away from China.

China continues to dominate rare earth production and in particular rare earth processing.

Even if China plays fair, the UK is still likely to be ‘back-of-the-queue’ when it comes to rare earth and other critical battery raw materials when demand outstrips supply.

The politics between the UK and China simply put us slightly further behind in the queue than we would have previously been.

UK Seabed Resources is a private company with little available data but does detail notes on the third expedition to recover polymetallic nodules form 4,000m depth.

The UK government is also sponsoring expeditions for a deep-sea mining project in Abyssal plane of the Pacific with a target of 3mtpa of polymetallic nodules by 2030.

The venture reminds us of Nautilus Minerals which was delisted from London and then latterly from Toronto in March 2019.

Nautilus and its contractors made great strides in the field of sub-sea mining with the construction of some robust mining machinery using deep-sea oil well technology.

While we believe the technology and machinery exists to mine at 2km and possibly 4km depth, it is the cost and reliability of the pipes and pumps to lift nodules to surface that may be more of a challenge, not to mention the cost of supporting the ocean-going vessels required for such a mining operation.

Conclusion: Lockheed Martin might be great a aircraft and they probably know more about Mars than the Abyssal plane of the Pacific but when it comes to mining and processing rare earths my money is staying with Rainbow Rare Earths* (RBW LN) and Mkango Resources* (MKA LN) which are both developing more conventional rare earth projects on dry land.

Our view is; the UK government should accelerate the development of Pensana’s (PRE LN) rare earths refinery in the UK at Teesside to be fed with concentrates from a number of different mines.  

 

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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