Today’s Market View – Capital Limited, Horizonte Minerals, Serabi Gold and more…

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SP Angel . Morning View . Thursday 15 07 21


Gold prices climb as Fed Chairman reiterates monetary policy stance


South African violence closes ports of Durban and Richards Bay




Graphene producer funding – EIS scheme approval applied for


The company wishes to fund a ramp up in graphene 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


Please email 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.




Bluejay Mining* (LON:JAY) – BUY – Valuation 37.7p – Major disruption to Richards Bay and Durban ports helps ilmenite prices higher


Bushveld Minerals* (LON:BMN) – Unrest in South Africa closes ports as Transnet declares force majeure


Capital Limited (LON:CAPD) – Record first half as drilling and non-drilling sectors continue to grow


Castillo Copper (LON:CCZ) – Further drilling results from the ‘Big One’ prospect


Horizonte Minerals (LON:HZM) – Progress report on financing the Araguaia ferronickel project


Serabi Gold* (LON:SRB) – Maintaining 2021 production guidance following best quarterly performance since 2019


Strategic Minerals* (LON:SML) – Conditional approval at Leigh Creek


W Resources (LON:WRES) – Quarterly production report shows improvements following completion of water containment dam




South Africa – Military clampdown on widespread violence and political restructuring likely to lead to new order in South Africa


We feel the widespread violence in South Africa must surely lead to a new and better political order in South Africa.


Maybe we are overly optimistic and maybe we just want the best for a beautiful but struggling developing nation where so many have worked so hard.


30 years of ANC rule has resulted in endemic corruption, a near total breakdown of law and order and the scale of unrest we see today.


Even the police have been seen looting from stores in South Africa resulting in the deployment of troops to control the situation.


More than 200 shopping centres have been ransacked according to the BBC news indicating the extent of the chaos.


The deployment of 25,000 troops into Gauteng (Johannesburg) and KwaZulu-Natal to arrest the looting, arson and violence.


We hope the introduction of martial law will stop the looting and destruction though what can 25,000 soldiers do against a population of 58 million.


President Cyril Ramaphosa is working hard to stamp out corruption in the ANC but has been frustrated by the scale of the problem with so many ANC MPs seen as having benefitted from corrupt practices in some way.


The impact of Covid-19 of low-skilled jobs and marginal households has pushed increasing numbers into crime and violence with little ‘community’ support to fall back on.


Conclusion: In short, the government needs to restore stability, prosperity and confidence in the economy.


If President Ramaphosa is able to clean up corruption in the ANC and restore confidence then South Africa may, once again, become a great nation.


If not, then we fear South Africa may need to suffer a state of emergency and effective military rule for longer.


Non-South African residents sold ZAR 4bn worth of investments on Tuesday following the start of violence in the nation.




Vanadium – Chinese officials express interest in VRB’s vanadium battery technology


Sparton Resources, who hold a 9.8% equity interest in VRB through their VanSpar Mining subsidiary, has announced selection by China State Power Corporation for installation of a vanadium redox flow battery for display at the National Photovoltaic and Energy Demonstration Experimental Center in north-eastern China.


The Center is planned by the People’s Republic of China’s to develop China’s energy storage technology on an industrial scale. Both the Center and the battery are estimated to be completed by October 2021


This shows the PRC’s desire to incorporate vanadium redox flow battery technology into the country’s industrial future. The ability for vanadium electrolytes to store energy at an increased capacity make them a potentially attractive alternative to Lithium-ion batteries which currently dominate storage technology.


The announcement bolsters further confidence with VRB’s technology following a $24m investment they received from Thailand-based BCPG earlier in July.


This follows news from December 2020 in which Vanadium mining firm LARGO acquired 12 patent families from Vionx Energy for their renewable energy storage solutions department ‘Largo Clean Energy’.




Gold prices hit four-week high as Fed Chairman reiterates dovish stance and potential for South Africa’s disruption to hit gold mines


Gold prices held steady above $1,830/oz on Thursday morning after U.S. Federal Reserve Chair Jerome Powell reassured investors that the US central bank was in no rush to tighten policy.


Powell announced yesterday that the recovery hasn’t progressed enough to begin paring the central bank’s asset purchases.


The massive asset purchasing programme has supported bullion given its traditional role as a hedge against inflation and currency debasement.


Powell commented that the Fed stands to act should inflation expectations rise meaningfully, although data released on Tuesday showed prices paid by US consumers surged in June by the most since 2008.


The US producer price index surged 1% on the month prior in June and 7.3% from June 2020, indicating mounting pressure on companies to pass along higher costs to consumers.




Dow Jones Industrials +0.13% at 34,933


Nikkei 225 -1.15% at 28,279


HK Hang Seng +0.86% at 28,025


Shanghai Composite +1.02% at 3,565




Economics


Global consumer confidence surges to a record high in Q2/21 on the back of high vaccination rates and falling infections in North America and the eurozone, according ot the Conference Board data.


The index hit 109 last quarter, up on 108 in Q1/21 and 106 recorded in the pre-pandemic Q1/20.


“This reflect a global economic recovery that remains highly uneven, with many economies still struggling to contain COVID-19 amid a shortage of vaccines, new variants, and supply-chain bottlenecks that are raising prices,” the announcement read.


The data bodes well for the growth momentum in H2/21 and 2022.




US – Fed Chairman Powell dismissed claims the central bank might have been complacent about inflation risks during his appearance at the House financial services committee.


“It is still the same story… it is still the same parts of the economy that are producing inflation… it is a pretty narrow group of things that are producing these high reding, bu we are anxious like everybody else to see that inflation pass through…” Powell told the committee.


“It would be a mistake to act prematurely”.


Powell reiterated that the central bank will continue discussions with other governors later this month on reducing its $120bn per month asset purchases programme.


10y Treasuries extended its rally as Powell testified with yields trading 6bp on the day to 1.35%, FT writes.




China – Q2 GDP numbers came nearly in line with estimates with many expecting the economy to be able to easily reach an at least 6% growth target.


Sector wise, growth has been normalising since a jump in Q1/21 reflecting pandemic hit low base in the previous year.


Authorities’ concerns are the normalisation may go too far as indicated by the latest central bank decision to ease the monetary policy.


GDP (%yoy): 7.9 v 18.3 in Q1 and 8.0 est.


Retail Sales (%yoy): 12.1 v 12.4 in May and 10.8 est.


Industrial Production (%yoy): 8.3 v 8.8 in May and 7.9 est.


FAI (%YTD): 12.6 v 15.4 in May and 12.0 est.




UK – Employment continued to recover in June helped by hospitality and retail amid a gradual reopening of the economy, FT reports.


The economy added 356k jobs in June, although, employment was still over 200k down on pre-pandemic levels and a large number of workers remaining on the furlough scheme.


Data to May showed unemployment averaged 4.8%, 0 0.9pp higher than before the pandemic.


Unemployment Rate (3m p%): 4.8 v 4.7 in April and 4.7 est.


Earnings ex Bonus (3m yoy%): 6.6 v 5.7 in April and 6.6 est.




Australia – New cases in Sydney dropped to the lowest in several days with the city in a five week lockdown.


“Whilst the case numbers are bouncing around, we are seeing a stabilisation… they are not growing exponentially… that tells us that the settings that we have in place are having an impact,” premier of New South Wales said.


On a less positive note, Queensland and Victoria states have both identified positive cases from local residents returning from Sydney in recent days.


Both states extended mask wearing restrictions today.


Victoria also announced the start of a 5-day lockdown at midnight.




Currencies


US$1.1834/eur vs 1.1786/eur yesterday. Yen 109.82/$ vs 110.50/$. SAr 14.454$ vs 14.762/$. $1.384/gbp vs $1.384/gbp. 0.748/aud vs 0.745/aud. CNY 6.460/$ vs 6.476/$.




Commodity News


Precious metals:


Gold US$1,832/oz vs US$1,813/oz yesterday


Gold ETFs 100.5moz vs US$100.6moz yesterday


Platinum US$1,140/oz vs US$1,112/oz yesterday


Palladium US$2,830/oz vs US$2,833/oz yesterday


Silver US$26.36/oz vs US$26.04/oz yesterday




Base metals:


Copper US$ 9,440/t vs US$9,399/t yesterday


Aluminium US$ 2,530/t vs US$2,528/t yesterday


Nickel US$ 18,680/t vs US$18,685/t yesterday


Zinc US$ 2,955/t vs US$2,940/t yesterday


Lead US$ 2,323/t vs US$2,297/t yesterday


Tin US$ 32,745/t vs US$32,360/t yesterday




Energy:


Oil US$73.8/bbl vs US$76.4/bbl yesterday


Oil prices fell yesterday after reports that the UAE and Saudi Arabia had resolved a stand-off, paving the way for OPEC+ to raise output.


Prices were further subdued by US data showing a decline in fuel demand last week


According to Bloomberg, the compromise with Saudi Arabia will see the UAE’s output baseline rise from its current level of 3.17MMbopd to 3.65MMbopd


OPEC+ has yet to make a final decision on its output policy and it has not yet announced a new meeting date after talks were abandoned this month


But that boost to the UAE’s baseline potentially opens the door for other OPEC+ members to raise their individual output quotas


There was evidence that global oil markets were getting fed up with soaring crude prices


Oil was trading lower on Wednesday before news of the Saudi-UAE compromise deal was reported because of weakening demand from China, the world’s largest oil exporter


Oil is deemed to be too expensive for too long after China’s half-year crude imports were reported to have fallen by 3% against the same time in 2020


The oil markets appear currently appear bearish, with oil futures charts in deep backwardation; in fact, oil prices for US crude for delivery in December 2021 are currently trading at a big premium to oil for delivery in December 2022




Natural Gas US$3.671/mmbtu vs US$3.694/mmbtu yesterday




Bulk:


Iron ore 62% Fe spot (cfr Tianjin) US$210.0/t vs US$210.2/t


Chinese steel rebar 25mm US$808.6/t vs US$800.1/t – China cuts steel production for first time this year in June


China has cut its record-breaking steel production for the first time this year, heading into the seasonally weak summer period for demand.


Output fell 5.6% to 93.88mt, from an all-time high of 99.45mt in May – as construction activity is curtailed amid the hot weather.


The drop could also signal the beginning of a more prolonged period of lower production as Beijing seeks to curtail emissions from the industry.




Thermal coal (1st year forward cif ARA) US$90.8/t vs US$90.3/t


Coking coal swap Australia FOB US$207.0/t vs US$203.0/t


China Ilmenite Concentrate TiO2 46% US$375.4/t vs US$374.5




Other:


Cobalt LME 3m US$52,500/t vs US$50,500/t


NdPr Rare Earth Oxide (China) US$82,427/t vs US$81,461/t


Lithium carbonate 99% (China) US$12,383/t vs US$12,354/t – Compass Minerals identifies significant lithium brine resource


Compass Minerals’ Utah solar evaporation site has discovered a lithium brine deposit of around 2.4 million metric tons of lithium carbon equivalent.


The company expects to produce approximately 20,000 to 25,000 metric tons of battery-grade lithium per annum.


Compass are confident in their production capacity of lithium carbonate equivalent (LCE), estimating that up to 65% of possible production having been extracted from the lake already.


Compass’ CEO, Kevin S. Crutchfield, believes that the resource “could be a true differentiator” for the company “in a market hungry for domestically sourced lithium produced with minimal environmental impact”.


The resource is accessible through the company’s existing infrastructure in the Great Salt Lake, where it manages 160,000 acres of leasehold. Compass have both water rights and permission for active mineral extraction on the land.


Compass is currently in the process of selecting a direct lithium extraction (DLE) technology provider. An announcement is expected to be made imminently following an 18-month assessment period.


Through the solar evaporation technique, costs are reduced as is the use of carbon-based energy sources.




China Spodumene Li2O 5%min CIF US$700/t vs US$700/t


Ferro-Manganese European Mn78% min US$1,958/t vs US$1,950/t


China Tungsten APT 88.5% FOB US$289/t vs US$289/t


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


Europe Vanadium Pentoxide 98% US$9.0/lb vs US$8.9/lb


Europe Ferro-Vanadium 80% US$39.25/kg vs US$39.25/kg


Spot CO2 Emissions EUA $57.7/t vs $57.4/t




Battery News


ScotWind wind farm license leasing first round enters final day for applicants


ScotWind Leasing is the first round of seabed leasing for offshore wind projects in Scottish waters in over a decade and has attracted several big players, interested in the 17 sites spanning 8,600sq km of seabed that are being made available.


Many of the sites are suitable for floating wind farms which are few and far between, and many companies will be excited by this prospect.


So far, the following companies have confirmed plans to bid in the leasing round, but few specifics are known about the project planned if bids are successful:


BP and EnBW


TotalEnergies, Green Investment Group and Renewable Infrastructure Development Group


Eni and Red Rock Power


Equinor


Ocean Winds and Aker Offshore Wind


Vattenfall and Fred. Olsen Renewables


SSE Renewables, Marubeni Corporation and Copenhagen Infrastructure Partners


Orsted, Falck Renewables and BlueFloat Energy


TechnipFMC and Magnora Floating Wind


BayWa r.e., Elicio and Ideol


The initial application deadline, of the end of March, was pushed to 16th June following a review of lease prices around England and Wales – companies might pay up to GBP9bn in revenue for English and Welsh seabeds resulting in concerns the Scottish project was undervalued.


Crown Estate Scotland are expected to confirm who has won what soon after the bidding process.




Vattenfall and Preem plan Hydrogen Refinery


Swedish state-owned Vattenfall and refinery company Preem make progress with plans for 50 MW electrolyser at Lysekil refinery in southwest Sweden. Shell’s German refinery, currently the largest globally, has a capacity of 10 MW.


However, Preem has accepted that the size of the plant will be ‘governed by the possibility of scaling up biofuel production’ in addition to concerns over ‘obtaining greater output from the electricity grid’.


The refinery would enable the production of green hydrogen, with at least 80% of hydrogen produced there using fossil-free electricity.


Although environmental assessments are required, a study has shown ‘very good conditions’ for an electrolysis plant in the Lysekil area.


Hydrogen is an essential component in the production of biofuels, which Preem aims to increase to 5m cu m/year by 2030. This would allow Sweden to cut around 20% of their annual emissions.




EVgo acquire Recargo to further dominance of EV charging market


Evgo, who operate the US’s largest fast charging network for electric vehicles, has acquired Recargo in a $25million, all-cash, transaction.


Recargo has enjoyed innovative success through app development, data driven analytics, market research and e-mobility software.


PlugShare, Recargo’s most accomplished development success, has an estimated 3 million driver app downloads globally. The app assists drivers in locating EV charging stations across the globe.


For every 10 EVs being driven in the US, there have been 7 individual PlugShare app installations.


72,000 drivers use the developer’s PlugInsights, which provides data for survey and qualitative research.


EVgo aims to adopt Recargo’s PlugShare on their network, which they hope will open ‘the platform to other charging providers, giving drivers a simple way to use multiple networks and pay for charging in-app using PlugShare’s platform.’




Company News


Bluejay Mining* (LON:JAY) 9.84p, Mkt cap GBP96m – Major disruption to Richards Bay and Durban ports helps ilmenite prices higher


BUY – Valuation 37.7p


Rio Tinto to continue not to mine and process ilmenite at its giant Richards Bay Minerals complex in KwaZulu-Natal, South Africa.


The news is hardly surprising since the declaration of force majeure on 30 June following the murder of Nico Swart, a senior manager at Richards Bay Minerals by a hitman.


The Richards Bay Minerals ‘RBM’ operation has been plagued by violence including a number of murders in recent years.


Despite this Rio Tinto had approved $463m to extend the mine life at Zulti South, though this investment has since been put on hold.


Violence, following the jailing of Jacob Zuma has caused the government to deploy 25,000 troops into two provinces to arrest the looting and widespread violence in KwaZulu-Natal and Gauteng (Johannesburg) provinces.


Ilmenite spot prices in China ticked higher to CNY2400-2450/t ($375.4/t) in China from US$374.5 yesterday for TiO2 46%min; Fe2O3 8%max Ex-VAT EXW China RMB/mt


The ongoing suspension of mining at Richard’s Bay Minerals is likely to tighten an already taught ilmenite supply chain with few new mines being planned to replace forthcoming mine closures.


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.


Bluejay Mining also report that HMRC have withdrawn their Upper Tribunal appeal with respect to Bluejay’s ongoing VAT claims against HMRC.


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




Bushveld Minerals* (LON:BMN) 12.44p, Mkt cap GBP149m – Unrest in South Africa closes ports as Transnet declares force majeure


(Bushveld Energy holds an indirect interest of 25.25 per cent in Enerox. Bushveld is invested in Enerox alongside a <3% in Invinity Energy Systems.)


Bushveld’s operations in the Northern Province of South Africa are so far unaffected by the recent violence in South Africa.


Transnet, the South African rail and logistics company declared force majeure on 12 July as it suspends terminal operations in Durban and Richards Bay.


The news is accompanied by reports of violence across the nation following the jailing of former president, Jacob Zuma for contempt of court in a anti-corruption case.


Transnet has reported “the violence has now reached proportions beyond the control of the local law enforcement and security services.” .


While containers in Transet ports are thought to be safe for now, trucking is disrupted in KwaZulu Natal and in Gauteng provinces according to reports and pictures of roadblocks, burning warehouses and trucks.


Vanadium prices: South Africa is the world’s major source of primary vanadium production. With tightening supply already lifting vanadium prices we see potential for prices to spike higher on any interruption to supply.


Disruption to vanadium exports out of South Africa may cause prices to spike higher.


Ferro-vanadium prices have risen to CNY198,000-201,000 ($40.1/kgV) for Vanadium Nitride N 145min in China with prices closely followed by US and European prices with Ryan’s Notes reporting US$38/kgV.


Rand: The South African rand has strengthened to 14.45/USD on news of military deployment in two states and may strengthen further if the unrest is settled and new investment comes into South Africa.


Chinese officials express interest in VRB’s vanadium battery technology (see news above)


Conclusion: Bushveld has seen no material impact from the ongoing disruption in South Africa. Potential for disruption to vanadium exports out of other primary vanadium producers is likely to raise vanadium prices in an already tight market.


*SP Angel acts as Nomad and broker to Bushveld Minerals.




Capital Limited (LON:CAPD) 82.6p, Mkt Cap GBP148m – Record first half as drilling and non-drilling sectors continue to grow


Capital Limited reports a strong first-half and second-quarter trading update, prior to the Company releasing its half year results and providing a further operational update on 19 August 2021.


After a strong H1 2021 and better than anticipated drilling utilisation rates, the Group is increasing guidance on anticipated revenues for the current financial year to $200-210m, up from $185-195m originally guided at the FY20 results.


Q2 21 revenue of $54.7m, up 68% on Q2 2020.


H1 21 revenue amounted to $98.7m, up 51.7% on H1 2020.


Non-drilling revenue contributed 17% of total revenue for H1 2021, compared with 9% in H1 2020 – driven by mining services, maintenance services and MSALABS.


Capital continues to build its presence in West Africa, with the regions to the group revenue rising to 38% in H1 2021 from 31% in H1 2020.


Fleet utilisation rose to 73% in H1 2021 from 57% in H1 2020.


Net debt at the end of H1 2021 was $33.6m vs a net cash balance of $5.0m at the end of December 2020.


Average monthly revenue per operating rig rose to $180,000 in H1 2021 from $170,000 over the same period last year.


Capital was awarded an exploration contract with new client Shanta Gold at its West Kenya project, commenced new exploration drilling campaign with existing client Arrow Minerals at its Dassa Gold Project, among other progress in multiple locations.


Executive Chairman Jamie Boyton commented: Near decade high commodity prices remain a significant tailwind, with Capital seeing exceptionally strong demand for its drilling business, driving utilisation rates not seen since 2012. This has been the primary driver for our 2021 revenue guidance uplift announced today.”




Castillo Copper (LON:CCZ) 2.63p, Mkt Cap GBP28.4m – Further drilling results from the ‘Big One’ prospect


Castillo Copper has released results from its continuing drilling campaign at the ‘Big One’ prospect within the Mt Isa district of northwest Queensland.


The company says that the recent drilling, which is following up geophysical work and historical exploration in the area, “has clearly verified material extensions to known mineralisation and potentially a larger underlying system then initially envisaged”.


With 19 holes of the planned campaign left to complete, the company reports the presence of visible massive copper sulphide mineralisation including the minerals chalcopyrite and chalcocite.


Although the announcement today does not contain new assay information as samples are still awaiting analysis at the laboratory, with results “expected to be received imminently”, among the results highlighted in today’s announcement are:


An 11m wide zone of mineralisation from a depth of 89m in hole BO-318RC which also contained a deeper mineralised zone 34m wide from a depth of 153m; and


A 9m wide zone from a depth of 55m in hole BO-319RC; and


Another 9m wide zone from a depth of 63m in hole BO-321RC; as well as previously announced results from Holes BO-315, 316 and 317RC.


The company says that “The standout drill-hole was BO_318RC which, from visual inspection, appears to have intersected copper mineralisation in two distinct zones – 11m from 89-100m and 34m from 153-187m (apparent thickness). … [the company says that] … massive copper sulphide mineralisation – chalcopyrite and chalcocite – was observed.”


Castillo Copper explains that the results “suggest the underling copper mineralisation at the Big One Deposit is controlled by structural trends. This is positive, as it potentially means the mineralisation constrained within the trachyte/dacite dyke is a secondary feature” and that its’ analysis of the results obtained to date “clearly verifies significant extensions to known mineralisation… [implying that the mineralisation}…is potentially a larger underlying system then initially envisaged.”.




Horizonte Minerals (LON:HZM) 6.55p, Mkt Cap GBP112m – Progress report on financing the Araguaia ferronickel project


Horizonte Minerals has issued a progress report on its Araguaia ferro-nickel project in Brazil highlighting both operational and financial advances on developing the US$443m phase 1 project to produce approximately 14,500tpa of nickel contained in 52,000tpa of ferronickel by treating 900,000tpa of ore.


The company says that “Contract negotiations being well advanced with all key vendors following the completion of a detailed and rigorous assessment process of all technical and commercial proposals received and subsequent proposal optimisation process”.


Competitive tendering for key aspects of the project including:


“Process equipment including crushers, conveyors, electrical, dryer, kiln, dust collection and refinery;


Electric furnace and calcine transfer system;


Overland powerline and main electrical infrastructure EPC; and


Construction contracts, including bulk earthworks, temporary construction infrastructure and services, and civil works”.


The company has secured updated market proposals for key operating cost elements and verified that “Capital expenditure and operational expenditure remain in line with the Value Engineering work.”.


CEO, Jeremy Martin, confirmed that “Tenders have been completed for approximately US$230M of key equipment and services to be supplied under contract with industry-leading vendors”.


The company also reports further progress on environmental and social programmes required to secure Governmental approvals, aid the financing due-diligence process and help secure the “social licence to operate” the project.


The company also confirms that “Financing discussions remain on track. Credit committee approval for the senior debt facility expected in Q3 2021 as previously announced”.


Conclusion: Horizonte Minerals is making further progress in securing the engineering contracts and tenders, and verifying key operating and capital costs for its Araguaia ferronickel project ahead of the expected credit approval process during Q3 2021.




Serabi Gold* (LON:SRB) – 66p, Mkt Cap GBP49m – Maintaining 2021 production guidance following best quarterly performance since 2019


Serabi Gold reports production of 9,274oz of gold during the quarter to 30th June described as the company’s “the best quarterly performance since 2019”. This brings H1 gold production to 17,361oz.


As a result, Serabi Gold confirms that it is maintaining its 2021 production guidance range of 33-36,000oz of gold production.


Production resulted from the treatment of 39,976t of ore averaging 7.32g/t gold during the quarter bringing the total ore processed during H1 to 81,438t at an average grade of 6.79g/t.


CEO, Mike Hodgson, attributed the “excellent second quarter” output to “a healthy improvement in mined grades” as operations gradually return to “normality” as Covid19 containment measures ease.


He explained that “In the Palito orebody, the Ipe and Mogno veins continue to perform well in both development and stoping … [while] … At the Sao Chico orebody … In the western part of the orebody we are developing and producing from the Julia vein”.


Commenting on what he described as the “excellent” plant performance, he explained that “much-improved mined grades mean that the quarterly plant grade of 7.32 g/t, represents the best quarterly level since the first quarter of 2019”.


Exploration at the Sao Domingos prospect, located around 5km west of the Sao Chico operation, is concentrating on the Toucano zone, one of five prospective areas identified to date. “Mineralisation is already confirmed along at least a 400 metre strike length and remains open at depth and along strike with existing drilling and artisanal activity indicating a potential strike of 600 metres”. Further, more detailed exploration is planned along the entire strike length identified.


Drilling also continues at both Palito and Sao Chico with efforts at Palito concentrating on “the strike and depth extensions of the Ipe and Mogno veins” while at Sao Chico, “we are drilling the western extension of the Sao Chico orebody and more specifically the Julia vein near surface. Initial intersections have so far been visually very encouraging, though we await assays”.


Serabi Gold also reports that it has now completed the acquisition of the Coringa project where it is preparing for underground development and initial development of the mine portal is expected to start later this month.


Conclusion: As operations return closer to normality with the easing of Covid19 containment measures, Serabi Gold produced its best quarterly production performance since 2019 during Q2 and is maintaining its full year production guidance. Exploration at Sao Domingos as well as at the operating Palito and Sao Chico mines is providing encouraging results while initial underground development at Coringa is expected to start later in July.


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




Strategic Minerals* (LON:SML) 0.43p, Mkt Cap GBP8.1m – Conditional approval at Leigh Creek


Earlier this week, Strategic Minerals announced that it had received conditional approval from South Australia’s Department of Energy & Mining (DEM) for its Programme for Environmental Protection and Rehabilitation (PEPR) at the Paltridge North project within its Leigh Creek Copper project.


The approval is subject to the DEM reviewing several aspects of the PEPR, including:


The “final plans for identifying and managing Potentially Acid Forming (“PAF”) material.”; and


The “cover design for Paltridge North Waste Rock Dump (“WRD”) and heap leach pads” as well as the visual impact of the WRD; and


Aspects of the surface water management plan, the groundwater management plan and liaison with the traditional owners at site.


Strategic Minerals says that “As part of the approval, the DEM requires:


An environmental security deposit of AUD $3.7M.


Native Vegetation Fund contribution via a Significant Environmental Benefit payment of $81,398.52 to offset for native vegetation clearing.”


Strategic Minerals acknowledges that the scale of the required bond is “larger than catered for in the Company’s financial modelling of the project, the Company is comfortable with this level given the current overall amount of funding being sought … [and that it] … considers that the cost of funding the additional environmental security deposit will have a negligible effect on the profitability of its planned accessing and processing of material at both Paltridge North and Lynda/Lorna Doone (the “Project”). This impact will be more than offset as current market parameters indicate an increase of around 20% in the LCCM’s Project profitability, reflecting the current copper prices and the AUD/USD exchange rate (US $4-28/lb and 0.7500 respectively) compared to the previous levels employed (US $4-00/lb and 0.7800) and the Project’s 50% operating margin”.


Hailing the conditional approval as a milestone in the project development, Managing Director, John Peters, confirmed that “Work will begin on fulfilling the conditions, some of which are already underway, and the Company will report on its plans in due course.”


He added that the company “has had a number of encouraging meetings with potential funders” and that “Increased forecasted Project profitability and planned exploration has significantly improved the Project’s attractiveness and is assisting attempts to secure funding,”


Conclusion: The conditional approval of the PEPR clears the way for Strategic Minerals’ development at Paltridge North although additional review of several aspects of the plan is still required along with the posting of an environmental security deposit. We look forward to further news as the project development continues and the DEM completes its review.


*SP Angel acts as Nomad and Broker to Strategic Minerals




W Resources (LON:WRES) 6.75p, Mkt Cap GBP7.9m – Quarterly production report shows improvements following completion of water containment dam


W Resources reports Q2 production of 6,919mtu of tungsten trioxide and 12.4dmt of tin in concentrates from its La Parilla tungsten/tin mine in Extremadura, Spain.


Output shows improvements on the 3,916mtus of tungsten trioxide produced in Q1 although tin output is some 24% lower than the 16.3t produced in the preceding quarter.


Compared with Q1, tungsten recovery rates improved from 32% to 47% although those for tin declined from 44% to 27% although the company reports signs of improvement saying that during June 2021, “recovery rates for tungsten and tin reached circa 56% and 50% respectively” and says that “Plant utilisation increased from 84.8% to 88.2% and this is the best performance to-date”.


Providing guidance for the full year, W Resources says that it “continues to expect that total annual production will be between 880t and 1,000t of concentrate for the twelve months ending 31 December 2021”.


As well as the improvements at the plant, where we would hope for further improvements in recovery rates, the completion of the first dam to help control water levels within the old pit and reinstate access to higher grade parts of the deposit and design work for a “second dam, is currently at the design stage and is expected to be completed in Q4 2021. …[and the company describes this as] … a cautionary measure … [which] …will ensure future production is not adversely affected should we have another very wet winter with high rain fall.”


Conclusion: Following the completion of the first dam at La Parilla plant performance and concentrate production is improving, with June, in particular, delivering improvement however, we consider that further improvements in recovery will still be necessary in H2 to meet the company’s guidance targets




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


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*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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