Today’s Market View – Alba Mineral Resources, Altus Strategies, Beowulf Mining and more…

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SP Angel . Morning View . Tuesday 15 06 21

Copper prices pull back as China threatens to release SRB stock

 

We are raising funds for a private Graphene producer – EIS scheme approval applied for

The company is selling a number of graphene products to industrial and retail customers.

·         Sales of certain products have sold out unexpectedly quickly.

·         The company wishes to fund a ramp up in production to get ahead of demand and to develop markets for a number of new, graphene products

·         The business is also able to upgrade graphite to a higher grade/specifications using its process – rolling out this process also requires funding

·         The company has also applied for EIS scheme approval from HMRC

·         Please let me know if you wish to invest in the company

*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.

 

Alba Mineral Resources (LON:ALBA) – Disposal of 5% interest in Brockham oil field to Angus Energy

Altus Strategies* (LON:ALS) – Royalty and project generation engine

Beowulf Mining* (LON:BEM) – Letter to Minister Baylan

Bluejay Mining* (LON:JAY) – Chinese ilmenite prices rise

Condor Gold* (LON:CNR) – Infill geotechnical drilling at La India to help firm up the open-pit design parameters

Kavango Resources (LON:KAV) – EM anomaly identified at KSZ project

Kodal Minerals* (LON:KOD) –Ganfeng to pay US$130m for 50% stake in SPV in Goulamina lithium project

 

UK – broad terms for trade deal with Australia agreed – leading the way into much bigger trade deals with the US and Asia

Details of the agreement are to be announced later this morning.

This would be the first deal negotiated from scratch since the UK left the EU.

A successful deal with Australia is seen as a way of accelerating UK deals into the US and other Asian nations

 

Copper prices pull back as China inc. threatens to release SRB physical stock and ahead of FOMC meeting

China inc. is making noise about reducing raw materials prices as it works to reduce inflation which it sees as driven by high metals price levels.

The authorities appear to be more concerned about copper which appears to impact on the margins of more small and medium sized companies.

We are surprised that China did not act much sooner on sky-high iron ore prices – though these were driven higher by local Chinese speculators.

Ongoing profit taking by long investors combined with the liquidation of some speculative positions is said to be helping prices lower

Copper failed to break above $10,200/t causing some chart-driven investors to back away from the market.

There is also a growing consensus that the Fed may start to reduce support for markets is reducing the demand outlook for industrial metals.

The Yangshan copper premium, which gives an indication for Chinese import demand has fallen to a two year low, while LME ‘spot’ copper traded at a $30/t discount to the 3m futures contract – indicating good availability of physical metal (Bloomberg).

Three-month copper fell as much as 2.9% in London earlier this morning, while the most-traded July copper contract on the Shanghai Futures Exchange fell 1.3%.

 

China – indications suggest the state may be about to release metal from strategic reserves

Given that we don’t trust much of what Chinese officials say to the media then we would be surprised to see the sate flood the market with metal which has been bought to safeguard the nation from potential shortages.

China’s state planner last week renewed its pledge to step up monitoring of commodity prices, as domestic producer inflation hit its highest in more than 12 years (Reuters).

 

Dow Jones Industrials +0.06% at 34,466

Nikkei 225 -0.03% at 28,949

HK Hang Seng +0.35% at 28,841

Shanghai Composite -0.49% at 3,593

 

Economics

US – The Fed is starting a two day policy meeting today against a backdrop of sharply increasing inflation.

We don’t expect any change but we remember how economists used to analyse Alan Greenspan’s breakfast cereal for clues as to the next direction for the US economy

 

World Bank – June Global Economic Prospects highlight, the unevenness of the global recovery

The World Bank reckons ~94% of first world, high-income nations should regain pre-pandemic GDP per capita within two years.

The World bank also expect 40% of emerging and developing countries to achieve this

 

NATO Summit – leaders declare China presents security risk

US, UK and Turkey account for 80% of defence spending in the 30 member organisation

Nato leaders are concern about China’s coercive policies with respect to the repression of the minority groups in China

Natio is also reported to be concerned over the expansion of China’s nuclear arsenal and ‘frequent lack of transparency and use of disinformation’ (The Guardian).

 

UN experts alarmed by reports of forced organ harvesting in China

UN human rights experts* said today they were extremely alarmed by reports of alleged ‘organ harvesting’ targeting minorities, including Falun Gong practitioners, Uyghurs, Tibetans, Muslims and Christians, in detention in China. (Chinanews.net.au)

 

Logistics – Container congestion is reported to be the worst for two years at ports in south China as authorities due to decontamination of imports due to Covid

 

UK – May payrolls climbed by a record amount as Covid restrictions eased and pubs and restaurants resumed indoor service.

The jobs market has been on a recovering trend, although, the number of people in work is still >0.5m short of pre-pandemic levels.

Tax data released on Tuesday showed UK payrolls increased by 197k in May.

Separately, unemployment rate dropped to 4.7% in three months to April marking the lowest level since the summer of 2020.

Almost 3.5m Britons remained in furlough programme as of end of April compared to 8.9m at its peak in May 2020.

ILO Unemployment Rate (3m): 4.7% v 4.8% in March and 4.7% est.

Employment Change (3m): 113k vs 84k in March and 135k est.

UK traffic now higher than pre-pandemic levels – has anyone done a test to see how easy it is to catch Covid on the London Underground. Lord knows most Londoners have caught just about everything else on the system. At least they banned asbestos from train break pads in the 1980s. How did we survive?

 

PM Johnson announced a four week delay to the next phase of England’s lockdown reopening amid a surge in the delta variant of Covid-19 first reported in India.

Rules regarding the use of face masks, limiting the number of people who can meet indoors and out, and shutting nightclubs and similar venues were due to be lifted Jun 21.

Those were pushed back to July 19 with a review in a two week time.

Extra time will be used to provide more second doses that are needed to combat the delta variant.

 

Japan – Industrial production rose 2.9% in April vs 1.7% in March and rose 15.8% yoy

Capacity utilisation rose 1.1% in April vs 5.5% in March).

 

India – CPI 6.3% yoy in May vs 4.3% in April

Wholesale price index rose 12.9% yoy in May vs 10.5% in April

 

EU – Industrial production rose 0.8% in April vs 0.4% in March and 39.3% yoy in April vs 11.5% in March

 

Turkey – President Recep Tayyip Erdogan said the country’s stance on the S-400 missile-defence system it purchased from Russia remained unchanged.

Comments came after a meeting with President Joe Biden on the margins of a NATO summit in Brussels yesterday dashing hopes for a breakthrough on a key issue that strained relations between the two countries.

Earlier, the US removed Turkey from its F-35 fighter jet programme and imposed sanctions over the S-4000 surface-to-air missiles purchase.

 

Australia – Minutes from the June central bank meeting showed members discussed the course of the monetary policy including a potential extension of the current A$100bn round that expires in September.

“Observing that the bond purchase programme had been one of the factors underpinning the accommodative conditions necessary for the economic recovery, members thought it would be premature to consider ceasing the programme,” minutes of its June policy meeting showed.

Options discussed included a third round of A$100bn bon purchases for six month, scaling back the amount bought and spreading purchases over a longer period.

The RBA did not indicate any clear preference to any particular option during the meeting.

The central bank left benchmark rate unchanged at 0.1% during the meeting with markets currently expecting it to remain at current levels through to 2024.

 

Currencies

US$1.2186/eur vs 1.2113/eur yesterday.  Yen 109.36/$ vs 109.69/$.  SAr 13.528/$ vs 13.746/$.  $1.416/gbp vs $1.410/gbp.  0.777/aud vs 0.771/aud.  CNY 6.389/$ vs  6.399/$.

 

Commodity News

Precious metals:  

Gold US$1,868/oz vs US$1,858/oz yesterday

Gold ETFs 101.1moz vs US$101.2moz yesterday

Platinum US$1,167/oz vs US$1,145/oz yesterday

Palladium US$2,755/oz vs US$2,764/oz yesterday

Silver US$27.74/oz vs US$27.73/oz yesterday

           

Base metals:  

Copper US$ 9,726/t vs US$9,965/t yesterday

Aluminium US$ 2,468/t vs US$2,477/t yesterday

Nickel US$ 18,005/t vs US$18,370/t yesterday

Zinc US$ 2,992/t vs US$3,058/t yesterday

Lead US$ 2,178/t vs US$2,211/t yesterday

Tin US$ 31,060/t vs US$31,400/t yesterday

           

Energy:           

Oil US$73.2/bbl vs US$73.5/bbl yesterday

Natural Gas US$3.358/mmbtu vs US$3.298/mmbtu yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$211.2/t vs US$210.2/t

Chinese steel rebar 25mm US$802.9/t vs US$803.3/t

Thermal coal (1st year forward cif ARA) US$84.8/t vs US$84.4/t

Coking coal swap Australia FOB US$147.0/t vs US$147.0/t

           

Other: 

Cobalt LME 3m US$42,535/t vs US$43,535/t

NdPr Rare Earth Oxide (China) US$73,262/t vs US$73,296/t

Lithium carbonate 99% (China) US$12,653/t vs US$12,659/t

China Spodumene Li2O 5%min CIF US$660/t vs US$650/t

Ferro-Manganese European Mn78% min US$1,803/t vs US$1,799/t

China Tungsten APT 88.5% FOB US$270/t vs US$270/t

China Graphite Flake -194 FOB US$515/t vs US$515/t

Europe Vanadium Pentoxide 98% $8.4/lb vs US$8.4/lb

Europe Ferro-Vanadium 80% $40.05/kg vs US$40.05/kg

 

Battery News

Ørsted to send divers to fix sub-marine power cables

The unique solution would see divers sent to the sea floor to place covers on damaged sections of cables running from its offshore wind turbines, potentially saving the company $489m in repairs.

The solution is currently being tested on a small scale with plans to scale it up to work on turbine cables.

In April, Ørsted disclosed that as many as 10 of its offshore wind farms had cables that needed to be repaired or replaced because of damage caused by them scraping across rocks on the seabed, causing shares to plummet 6.7%.

Around 90% of offshore wind farms use the same cable design that has led to damaged cables and this solution could save on kilometers of cable needing to be replaced in the future.

 

Company News

Alba Mineral Resources (LON:ALBA) 0.25p, Mkt cap £16m – Disposal of 5% interest in Brockham oil field to Angus Energy

Alba reports it is disposing of its 5% interest in the Brockham oil field to Angus Energy.

The disposal and settlement requires Alba to pay £32,000 + VAT to Angus Energy.

The VAT is paid in cash and the £32,000 is paid through the issue of 12.4m new shares at 0.2579p/s.

Alba is working on a number of fronts with a particular focus on the Clogau St David mine in North Wales.

The company is also looking to IPO its high-grade Amitsoq graphite and Thule black sands projects in Greenland.

 

Altus Strategies* (LON:ALS) 64p, Mkt Cap £51m – Royalty and project generation engine

BUY – 118p

Key points

Projects inventory – 29 projects, 9 commodities (>50% gold exposure), 7 countries, 9 royalties, 6 project partners

The team has so far added 10 new projects in 2021 growing the total portfolio to 29 projects including four gold projects in the highly prospective ANS region in Egypt as well as six new copper/other base metal projects in key mining districts of Morocco.

In addition to new license areas feeding into organic royalty generation pipeline, the team is studying a number of external royalty acquisition proposals focusing on cash generative or close to production opportunities.

~£12m in the bank following an oversubscribed £8m placing in Mar/21 along with La Mancha as a cornerstone investor to help de-risk and grow portfolio

The La Mancha strategic alliance (>35% interest) offers growth capital as well as providing access to new opportunities utilising the expertise of the Altus team in screening and picking most prospective investment candidates. Altus is the only royalty generation investment by La Mancha who are predominantly focused on Africa with a ~20% investment in Endeavour Mining (Mkt Cap C$7.3bn, 1.4moz 21E output) and a ~35% interest in Golden Star (Mkt Cap US$370m, 170koz 21E output).

The directors hold ~18% in the Company (Steven Poulton, CEO – 7%; Matt Grainger – 3%) keeping incentives well aligned with shareholders

17,500m drilling programme launched at 100% owned Diba Gold Project potentially to deliver a 50-75% growth in the MRE (resource and PEA update targeted Q3/21) 

The team is focused on growing the total resource at Diba where the Nov/20 PEA delivered an $140m NPV10% (after-tax, $1,800/oz Au) using only oxide part of MRE. A minimum of 5y LoM heap leaching operation raises NPV10% to $186m.

JV partner funded step out 6,000m drilling programme at Tabakorole Gold Project to test along strike extension targeting +1moz MRE (resource update due Q3/21)

Marvel Gold is testing on strike extension of the Tabakorole deposit ~500m outside of the latest MRE with previous >6,000m drilling programme extending the mineralisation to >3km with expectations for the MRE to grow to 1.2-1.3moz

Altus enters Egypt securing a strategic 1,565km2 landholding in a highly prospective but underexplored part of the ANS region after the country improves mining code

Valuation: We reiterate our BUY recommendation with a target price of 118p (from 132p to account for new shares and FX rate outlook) highlighting strong expected newsflow this year (exploration in Mali, potential JVs, royalty acquisitions). We feel Altus is well positioned to deliver on the royalty generation/acquisition business model given its extensive network of business contacts, strong regional expertise and support from a major strategic investor with notable interests in the mining sector in Africa.

*SP Angel acts as Nomad and Broker to Altus Strategies

 

Beowulf Mining* (LON:BEM) 4.05p, Mkt cap £33.5m – Letter to Minister Baylan

Beowulf’s CEO, Kurk Budge, has sent a letter to Sweden’s Minister of Enterprise and Innovation, Ibrahim Baylan, concerning the status of Beowulf’s Kallak application.

Mr Budge makes the point that Beowulf has satisfied the procedural and legal requirements to be granted the Concession and has the right to progress with its investment, project development and environmental permitting.

Minister Baylan sent a letter to the Company dated 30 September 2019, stating that a decision by the Government was ‘forthcoming’.

The letter can be read in full here: https://www.investegate.co.uk/beowulf-mining-plc–bem-/rns/kallak-iron-ore-project–letter-to-minister-baylan/202106150700068518B/

*SP Angel act as Nomad and Broker for Beowulf Mining

 

Bluejay Mining* (LON:JAY) 10.40p, Mkt cap £101m – Chinese ilmenite prices rise

BUY – Valuation 37.7p

Prices for Ilmenite concentrates continue to rise with the 46%min, Fe2O3 8%max grade rising to CNY2450-2500/t (US$388/t) in China.

The spot price for these concentrates is very much higher than the longer term contract prices reported and may suggest a move to more spot market sales driven by the high price differential.

But, transport costs from the coast to Sichuan also run at $250/t, a meaningful cost for anyone selling into the region.

Bluejay’s concentrate Premium and Standard ilmenite concentrate material should fetch high spot prices in China after transportation and other import charges as it is said to be comparable with Chinese ilmenite that is favoured by sulphate process operators.

Unlike local ilmenite, Bluejay’s concentrate is also suitable for the manufacture of chloride grade slag giving it access to the whole TiO2 pigment feedstock market and not just the sulphate process.

Local supplies of chloride process feedstock is limited in China driving prices higher though companies like Lomon Billions who have their own upgrading capability are able to use cheaper imports.

We currently assume a price of US$250/t for Bluejay ilmenite concentrate sales in our modelling with 70% of the concentrate shipped to Asia by bulk carrier.

If we add $10/t to our assumed ilmenite price this adds a further $54m or 5p/s of value to the Dundas project in our modelling.

Conclusion: While Bluejay is unlikely to receive the full benefit of high spot prices for comparable concentrate in China there is potential for the company to make significant spot sales into the region lifting the overall demand and value of their product sold.

*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland. The analyst recently bought shares in Bluejay Mining.

 

Condor Gold* (LON:CNR) 46.5p, Mkt Cap £62.7m – Infill geotechnical drilling at La India to help firm up the open-pit design parameters

Condor Gold has announced the commencement of a 1,700m programme of infill geotechnical drilling at its La India project in Nicaragua.

The programme, which is expected to be completed in 5-6 weeks and comprise 13 diamond-drill holes ranging from 50 to 200m deep, is directed towards acquiring the data required to refine the open-pit design for La India and establish optimum pit-wall designs to minimise waste stripping and maximise reserve extraction.

The company points out that its pre-feasibility work in 2014 “was conducted at US$1,250 oz gold. This current work programme will align  final pit slopes and future pit designs with current gold market conditions, where it is anticipated that this may push the pit deeper and convert the current underground mineral resource, beneath the pit, into an open pit mineral resource”.

Condor Gold reminds us that the 2014 PFS reported “a Probable Mineral Reserve of 6.9Mt at 3.1 g/t for 675,000 oz gold” within the open-pit underlain by “an underground Mineral Resource of 678kt at 4.9g/t gold for 107k oz gold in the Indicated Category and 1,116kt at 5.6g/t gold for 209k oz gold in the Inferred Category”.

The potential inclusion of a part of these underlying resources in an updated open-pit, driven by higher prevailing gold prices and by an optimised pit design based on a more detailed geotechnical knowledge than was available in the 2014 study, provides Condor Gold’s technical team and their advisors at consultants SRK  with an opportunity to optimise the engineering design and to enhance the project’s economic returns.

Conclusion: Infill geotechnical drilling is underway at La India in order to define pit-design parameters and optimise the open pit design which, as a result of increased gold prices since the original design may now justify a deeper pit and the inclusion of resources previously expected to form part of an underground mining phase into an updated open-pit design. We look forward to the outcome of the drilling and to hearing the results of the pit optimisation and its impact on the reserve base at La India.

*SP Angel act as sole broker to Condor Gold

 

Kavango Resources (LON:KAV) 6.15p, Mkt cap £21.6m – EM anomaly identified at KSZ project

Kavango reports that it has identified an EM anomaly in Target Area C in the Hukuntsi (northern) section of the Company’s Kalahari Suture Zone project in Botswana.

The Designated Target, C1, is located 11km from Target A2 which was first announced on the 20th of April. Both targets appear to lie within the same geological corridor.

The Company now plans to drill a minimum of one hole in A2 and a minimum of one hole in C1, set to commence by the end of June.

Its Kavango’s view that both A2 and C1 lie in ‘Norilsk-style’ gabbro keels, and the primary objective of both holes is to recover drill core from the bottom of the keels for further analysis to test the system’s potential to host major metal sulphide deposits.

Michael Foster, Chief Executive Officer of Kavango Resources, commented: “The fact that C1 shares a number of highly similar characteristics with A2 is very encouraging. Like A2, C1 is in an ideal geological setting (at the bottom of a “keel”), is nearly 2km2 in size, has a conductance of 2,500 Siemens and a decay constant of ~360msec.”

 

Kodal Minerals* (LON:KOD) – 0.29p, Mkt cap £47m – Ganfeng to pay US$130m for 50% stake in SPV in Goulamina lithium project

CNA report that Ganfeng is to pay $130m for a 50% stake in a special purpose vehicle set up by Firefinch (Formerly Mali Lithium).

Kodal Mineral’s Bougouni Lithium Project is directly adjacent to the Goulamina project.

Kodal and Firefinch also have a cooperative agreement to work together on the projects to share elements of infrastructure.

Conclusion: The deal on Goulamina has a clear read across to the value Kodal’s Bougouni lithium project which is directly comparable if not superior in metallurgical quality to Goulamina.

*SP Angel acts as Financial Advisor and Broker to Kodal Minerals

 

Recent Interviews:

IGTV:  Stock picks in the small-cap mining space: https://youtu.be/TxtMf6B2t8Q

Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw

VOX Markets:  10/06/21: https://audioboom.com/posts/7884446-john-meyer-talks-about-cornish-metals-empire-metals-anglo-american-ncondezi-energy-mkango-r

BBC:  Catalytic converters  https://www.bbc.co.uk/sounds/play/p09jl6c9

*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

 

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, Tungsten, Spodumene, Ferro-Manganese, Graphite

Asian Metal

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