SP Angel . Morning View . Tuesday 26 10 21
Risk sentiment rises on positive corporate earnings despite China lockdown
AfriTin* (LON:ATM) — Resource expansion drilling underway at Uis
Caerus Mineral Resources (LON:CMRS) – Trench results from Trouli
Condor Gold* (LON:CNR) – Valuation 102.5p – Detailed La India PEA published on SEDAR
Hochschild Mining (LON:HOC) – Robust production delivered in Q3 with annual output/cost guidance reiterated
IronRidge Resources* (LON:IRR) – Name change to Atlantic Lithium and demerger of gold assets into private vehicle
Petra Diamonds (LSE:PDL) (LON:PDL) – Q1 production and trading
Sibanye-Stillwater (JSE:SSW) – Brazil projects purchased for $1bn cash
Strategic Minerals* (LON:SML) – Cobre magneite sales
Vast Resources (LON:VAST) – General update and FY22 guidance downward revision
Nickel price continues rally on supply shortages
LME nickel rose 0.28% to $20,385/t.
Power rationing in China has exacerbated already tight supplies of the key steelmaking ingredient.
French mining group Eramet yesterday reported a reduction in ferronickel production yesterday.
China places city of 4mn people under lockdown as Covid cases spike
Lanzhou has been placed under lockdown, with people ordered not to leave home unless in an emergency.
Lanzhou is the provincial capital of north western province Gansu.
6 cases were reported in the city by Chinese health officials, with 29 reported in the entire nation.
The stringent measures reflect Beijing’s zero-covid policy.
An Inner Mongolia party secretary has been removed ‘due to poor performance and implementation in epidemic prevention and control.’
Criminal investigations have been launched into Covid safety breaches in Beijing.
Magnesium shortage raises potential for ‘catastrophic impact’, cross-industry coalition warns
A group of European industry players, including Eurometaux and Metals Packaging Europe have expressed grave concern over the lack of available magnesium.
95% of Europe’s magnesium supply comes from China, with recent production curbs on smelters placing immense pressure on supply.
Magnesium is key to aluminium, iron and steel producing.
The shortage is impacting end-use sectors including automotive, construction and packaging.
Magnesium has increased from lows of $2,000/t this year to a current range of $10,000t to 14,000t.
Stocks in Europe are forecast to run out by November.
Aluminium – China to continue to limit aluminium production
China has halted all aluminium production in Guizhou province according to reports as power is prioritised for households.
Aluminium boom propels Norsk Hydro to record quarterly earnings
Norsk Hydro has posted expectation-beating earnings on the back of soaring aluminium prices.
EBITDA for July-September doubled y-o-y to $863.8mn.
The company expects aluminium supply to remain tight, forecasting global inventories to fall and an undersupply vs demand.
3-month LME aluminium prices have risen 50% this year to c. $3,000/t.
A combination of firming demand and Chinese production limitations boosted prices.
Dow Jones Industrials +0.43% at 35,609
Nikkei 225 -1.87% at 28,709
HK Hang Seng -0.79% at 25,929
Shanghai Composite +0.22% at 3,595
Economics
US/China relations seem to be improving with news of a slowly resuming dialogue between two countries at top officials’ level.
Chinese VP Liu He and US Treasury Secretary Janet Yellen held their second call in about four months.
China described the conversation as “pragmatic, candid and constructive”, in a statement released today.
US – Equity futures trade higher as corporate earnings helped boost sentiment amid ongoing concerns about inflation and growth, Bloomberg reports.
~80% of S&P 500 companies reported better-than-expected results so far despite growing expectation that the Fed is getting closer to start winding down its stimulus programme.
China – Defaults from Chinese borrowers on offshore bonds climbed to a record high this year.
Property sector accounted for a third of the $8.7bn in issued offshore bonds that have seen a payment missed, according to Bloomberg.
Hong Kong property shares slide as Chinese developer Modern Land defaults
The Hang Seng property index fell 5% as Modern Land missed a $250mn bond payment.
The developer offered to pay 35% of the payment and asked to delay the rest by 3 months.
China’s NDRC is set to meet over-leveraged property developers today as liquidity concerns mount.
Property developers have also been hit by Beijing’s plans to pilot a real estate tax in several regions.
China Evergrande shares fell 7.1%, with the developer stating it plans to rotate its core business into the EV sector by 2030.
Evergrande is due to pay an interest payment on a $1bn bond this week.
Analysts have suggested that the failure to make repayments suggests pressure by the CCP to use cash reserves to pay suppliers and complete projects as opposed to paying dollar-denominated bondholders.
Germany – industrial exports hit by raw material supply issues
LFO institute reports export expectations fell to 13 points in October from 20.5 points in September.
Manufacturers have been hit by raw material supply bottlenecks.
Export values this month hit their lowest since Feb. 2021.
Electrical equipment, auto and chemical manufacturers were hit hardest.
South Korea – Economic growth momentum slowed down more than expected in Q3/21 on global supply chain issues and virus restrictions weighing on consumer spending.
The central bank played down the slowdown saying the economic recovery remains on course suggesting it is potentially to raise rates for a second time this year in coming meetings.
Q3 GDP (%qoq): 0.3 v 0.8 in Q2/21 and 0.6 est.
Q3 GDP (%yoy): 4.0 v 6.0 in Q2/21 and 4.3 est.
Ghana – President Akufo-Addo announces government to step up support for small-scale mining
President Nana Akufo-Addo has told Ghanaians that the government will promote small-scale mining which it expects to contribute a larger amount to the country’s total gold production in the coming years.
The small-scale mining industry accounts for over 40% of Ghana’s gold exports, therefore playing a critical role in making Ghana Africa’s largest gold producer.
President Akufo-Addo commented: “The small-scale mining sector must, therefore, be promoted and encouraged, and we will do all that is necessary to advance it for our collective benefit”.
The President made the comments when unveiling a new unemployment initiative at the University of Mines and Technology, which intends to restore degredated ares to economically viable lands, and create job opportunities.
The President vowed to continue cracking down on illegal mining which often uses harmful practices to the environment.
Currencies
US$1.1683/eur vs 1.1653/eur yesterday. Yen 114.00/$ vs 113.67/$. SAr 14.484/$ vs 14.657/$. $1.379/gbp vs $1.379/gbp. 0.748/aud vs 0.749/aud. CNY 6.401/$ vs 6.381/$.
Commodity News
Precious metals:
Gold US$1,804/oz vs US$1,798/oz yesterday
Gold ETFs 98.2moz vs US$98.3moz yesterday
Platinum US$1,055/oz vs US$1,045/oz yesterday
Palladium US$2,045/oz vs US$2,039/oz yesterday
Silver US$24.38/oz vs US$24.42/oz yesterday
Rhodium US$14,100/oz vs US$14,000/oz yesterday
Base metals:
Copper US$ 9,803/t vs US$9,850/t yesterday
Aluminium US$ 2,861/t vs US$2,920/t yesterday
Nickel US$ 20,355/t vs US$19,960/t yesterday
Zinc US$ 3,407/t vs US$3,448/t yesterday
Lead US$ 2,424/t vs US$2,426/t yesterday
Tin US$ 37,200/t vs US$37,050/t yesterday
Energy:
Oil US$85.9/bbl vs US$86.3/bbl yesterday
Oil prices edged lower in early trading today despite consensus predicting a sustained rally driven by strong demand in the US, the world’s biggest consumer of oil and its products
While China’s red-hot power and coal markets have cooled somewhat after government intervention, energy prices remain elevated worldwide as temperatures fall with the onset of the northern winter
Forecasts for a colder November have energy traders bracing for a very tight market that will be met with unprecedented demand this winter
Goldman Sachs (NYSE:GS) said Brent was likely to push above its year-end forecast of US$90/bbl
The bank estimated switching to oil from gas may add 1MMbopd to oil demand
Gasoline and distillate consumption is back in line with five-year averages in the US after more than a year of depressed demand
The market will be closely watching US inventory levels this week
Crude oil stockpiles are forecast to have risen by 1.7MMbbls last week, according to a Reuters poll of analysts
However, gasoline and distillate inventories were expected to fall
Traders were also awaiting clarity on the outcome of talks between Iran and Western powers after the US said efforts were at “crucial phase” to revive a 2015 nuclear agreement with Iran, which could open the way for exports of its crude
Natural Gas US$6.053/mmbtu vs US$5.515/mmbtu yesterday
Natural gas futures soared as forecasts for chilly November weather in the US East Coast heightened concerns that supplies will struggle to meet demand this winter
Henry Hub gas for November delivery gained as much as 10.7%, the biggest gain in almost three weeks, to US$5.844/mmbtu
Prices are bouncing back from recent declines, though they’re still shy of the seven-year high reached earlier this month.
While mild October weather allowed producers to inject more gas into storage than usual, forecasts for a cooler early November in the Midwest and East are a reminder that supplies of the heating and power-generation fuel are still below normal
Meanwhile, the US is expected to export every molecule it can to help ease shortages of gas in Europe and Asia
In its October Short-Term Energy Outlook, the US Energy Information Administration forecasts that natural gas spot prices at the US benchmark Henry Hub will average US$5.67/mmbtu between October 2021 and March 2022, the highest winter price since 2007-2008
The increase in Henry Hub prices in recent months and in the forecast reflect below-average storage levels heading into the winter heating season and strong demand for US LNG, even after relatively slow growth in US natural gas production
The EIA expects Henry Hub prices will decrease after the first quarter of 2022, as production growth outpaces growth in LNG exports, and will average US$4.01/mmbtu for the year
US exports of LNG are establishing a record high this year, a new record high anticipated for next year
The EIA expects LNG exports to average 9.7Bcf/d this year (3.2Bcf/d more than the 2020 record high of 6.5Bcf/d) and to exceed annual pipeline exports of natural gas for the first time
The year-on-year increase in LNG exports coincides with slight growth in US natural gas production
US dry natural gas production is expected to average 92.6Bcf/d this year, which is 1.1Bcf/d more than in 2020 but 0.3Bcf/d less than in 2019
Uranium UXC US$48.9/lb vs $49.0/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$120.2/t vs US$119.4/t
Chinese steel rebar 25mm US$856.6/t vs US$863.1/t
Thermal coal (1st year forward cif ARA) US$124.0/t vs US$116.0/t – China NDRC looks for long-term solution to coal price volatility as prices continue to fluctuate
The China state-planner is considering place coal in a ‘prohibiting exorbitant profits’ category in a bid to limit volatile price fluctuations.
It is considering a mechanism using a benchmark price which considers factors ranging from account costs, market changes and reasonable margins.
The commission announced that ‘those who do not strictly follow the mechanism will be severely punished.’
China thermal coal futures are up 130% this year despite a major correction last week.
They are considering a range between $78-$120 as a reasonable long-term coal contract range.
It also announced plans to investigate index providers.
Analysts expect China’s coal deficit to continue into December as producers have failed to reach NDRC targets of 12mt of daily output.
The agency plans to send inspection teams to coal producing regions to investigate coal production and circulation costs.
January coking coal futures expressed volatility today, falling 3.4% having risen 3.9% hours earlier.
Coke also saw volatile price swings of 3.3% to 2.4%.
Stainless steel up 1.2%.
Dalian iron ore up 2%.
Construction steel rebar and hot-rolled coil down 0.6% and 1.7% respectively.
Thermal coal swap Australia FOB US$197.0/t vs US$201.0/t
Coking coal swap Australia FOB US$355.0/t vs US$355.0/t
Other:
Cobalt LME 3m US$56,545/t vs US$56,545/t
NdPr Rare Earth Oxide (China) US$104,176/t vs US$102,018/t
Lithium carbonate 99% (China) US$27,493/t vs US$27,503/t – Pilbara Minerals completes deal for lithium facility with POSCO
Pilbara Minerals has agreed a JV to build a lithium hydroxide conversion facility with steel giant POSCO in South Korea.
The facility is expected to cost $750mn.
Pilbara will take an 18% stake in the JV, with the potential to raise that to 30% within 18 months of the facility’s initial production.
The plant is expected to be completed by late 2023.
Pilbara will supply 315,000t of chemical grade spodumene concentrate to the facility.
Pilbara shares climbed 9.1% on the news having been halted.
China Spodumene Li2O 5%min CIF US$1,330/t vs US$1,300/t
Ferro-Manganese European Mn78% min US$2,245/t vs US$2,208/t
China Tungsten APT 88.5% FOB US$314/t vs US$314/t
China Graphite Flake -194 FOB US$585/t vs US$585/t
Europe Vanadium Pentoxide 98% 8.0/lb vs US$7.9/lb
Europe Ferro-Vanadium 80% 32.45/kg vs US$31.25/kg
China Ilmenite Concentrate TiO2 US$386/t vs US$386/t
Spot CO2 Emissions EUA Price US$67.3/t vs US$67.5/t
Battery News
Tesla hits $1tn valuation after major Hertz order
Tesla has become the first carmaker to be valued at $1tn after rental group Hertz reported it had ordered 100,000 Model 3 vehicles to electrify its fleet.
The order is sizeable given the automaker delivered a total of 241,300 vehicles in Q3 2021.
Although Tesla only produced half a million units last year, CEO Musk said the company’s vehicle production will grow 50% a year for the foreseeable future.
Tesla shares closed 12.6% higher on Monday at $1,024 with gains year-to-date at 40%.
Asian EV-related stocks jumped on Tuesday after the deal was reported, with Chinese EV maker BYD rising as much as 7.2% after it reported plans to spin off a semiconductor unit.
Tesla battery suppler CATL climbed as much as 4.5% on Tuesday, while Tianqi lithium, Panasonic, LG Chem all rose.
UK’s first gigafactory closing in on government funding worth GBP200m
Britishvolt is reportedly in advanced talks with the UK government to secure at least GBP200m of funding for a proposed battery facility in the North-East.
The proposed battery maker is backed by Glencore and expects to invest a total of GBP2.6bn in the project – making it the largest industrial investment in the North-East since Nissan’s arrival in 1984.
The new Gigafactory will also provide 3,000 jobs for the region, as well as 5,000 more across the plant’s supply chain.
The FT reports that the government has set aside GBP850m to attract battery investment in the UK.
In August, the company raised $70m in a funding round that valued the business at more than $1bn.
The company also reports that roughly two-thirds of its first 10Gwh batteries had been “earmarked by potential customers” – with Vauxhall owned Stellantis reportedly in talks with the company.
The other companies in talks with Britishvolt include Arrival, a recently listed electric bus and truck company, Tevva Motors, a UK start-up that develops electric trucks, and Lion Electric, a Canadian commercial vehicle group
Siemens Gamesa to build offshore wind turbines in US
Siemens Gamesa Renewable Energy has signed a long-term lease for space at the Portsmouth Marine Terminal in Virginia to build America’s first offshore wind turbine OEM blade facility.
The facility will be used to finish the Siemens Gamesa SG 14-222 DD Offshore IntegralBlades.
Development of the site is expected to cost around $200m and construction will go ahead upon a firm order for blades for the 2.6GW Coastal Virginia Offshore Wind Commercial Project.
The final number of SG 14-222 DD offshore wind turbines intended to be used remains to be determined.
LGES to build low-cost EV batteries to compete with Chinese rivals
South Korean battery manufacturers, who have previously had a focus on high-end batteries such as NCM, are now looking to enter the low-cost EV battery market to compete with Chinese rivals.
LG Chem, the parent company of LGES, has said it is developing a cobalt-free, low-cost material that can overcome the shortcomings of LFP batteries which have been adopted in low-end models for emerging markets.
Senior officials at SK On have also discussed the possibility of developing LFP batteries.
In its competition with China, South Korea announced an injection of 40.6 trillion won ($35 billion) by 2030 into its battery industry, at an event attended by President Moon Jae-in, battery makers and partner companies in July this year.
Company News
AfriTin* (LON:ATM) – 4.85p, Mkt cap GBP55.6m – Resource expansion drilling underway at Uis
AfriTin reports that it has started a 12-monthsprogramme of resource and reserve expansion drilling and associated exploration at its Uis tin mine in Namibia and within its wider licence areas.
The main priority of the programme is to drill around 8,000m to “expand the confidence level of the existing lithium and tantalum resources within the V1/V2 orebody” which is currently classified as inferred to “indicated and measured JORC-compliant categories, in order to increase confidence in mineral concentration and production estimation modelling, that will eventually lead to their incorporation into an overall mineral reserve estimate”.
The programme will also seek to validate historic drilling data elsewhere within the Uis mine area as well as to investigate the potential of the historic Brandberg West mine area, initially through a mapping and sampling campaign to identify drill targets for a 3,000m budgeted phase of drilling.
Other historical mining areas to be followed up during the programme include the Nai Nais mining licence “which incorporates the historical Tin Tan Mine that produced tin until the late 1980’s” as well as “investigation of historical information on license ML129 which contains the B1 and C1 pegmatites, these have previously been reported to contain significant tantalum grades as well as secondary tin mineralisation”.
CEO, Anthony Viljoen explained that the current Uis mine reserve “represents a small portion of the historically drilled area in the mining licence property and we believe that the extended Uis project area can expand the size of the operation as well as the Company’s footprint within the region”.
*SP Angel act for Bushveld Minerals which holds around 9.5% of AfriTin
Caerus Mineral Resources (LON:CMRS) 22p, Mkt Cap GBP13.6m – Trench results from Trouli
Caerus Minerals reports that trenching of historic run-of-mine (ROM) surface dumps at its Troui project in Cyprus has confirmed copper mineralisation.
The company says that it has completed 160m of trenches to depths of over 4m showing what it describes as “very high-grade visible copper mineralisation persistent across the defined Mineral Resource target area” and says that it plans further trenching over the next 7-10 days.
The trenching samples have yet to be assayed but grades derived from “semi-quantitative XRF analysis” are reported to be “significant” with “high-grade copper values, peaking at 17% Cu but more typically at 6-8% Cu”.
The company says that the “surface zone is immediately underlain by a highly enriched zone varying in width between 30 and 50 cm hosting visible copper mineralisation”.
The “ROM pad is ca. 200m x 120m in surface area and the trenches excavated so far show a re-assuring consistent, unbroken pattern of copper mineralisation”.
Explaining that current “lengthy lead times between sample dispatch and the delivery of results from the certified laboratory puts pressure on us”, CEO Martyn Churchouse, said that “We have therefore elected to utilise our XRF equipment to determine at field level the presence of copper mineralisation in all forms of exploration that we are currently undertaking, drilling, dump evaluation and regional exploration” and drew attention to the caution that “XRF data … can have a significant error term and an accuracy and precision of at least + 20% compared to the quantitative acid digestion- ICPMS laboratory methods”.
Conclusion: Preliminary trenching results based on field XRF analysis rather than laboratory assay confirm copper mineralisation within the surface dumps at Trouli. We await laboratory results as the trenching programme continues.
Condor Gold* (LON:CNR) 41p, Mkt Cap GBP55m – Detailed La India PEA published on SEDAR
Valuation 102.5p
Click here for Initiation note pdf
The Company filed a PEA for the flagship La India Gold Project in Nicaragua on SEDAR last week.
The detailed report follows the September announcement summarising PEA findings.
The study prepared by SRK includes two development options:
Scenario A envisaging four open pits (La India, America, Mestiza and Central Breccia Zone) feeding ~1.2mtpa processing plant;
Scenario B where mining operations are extended to include three underground mines at La India, America and Mestiza supplying ore to the 1.4mtpa plant.
Scenario B (1.4mtpa Open Pit + Underground) yields 150kozpa over the first 9 years and ~1,470koz over 12-year life of mine at $958/oz LOM AISC; delivers 54% IRR and $418m post-tax NPV5% using $1,700/oz gold price; development capex estimated at $160m (including contingency) with underground related capex to be funded from generated cash flows.
Scenario A (1.2mtpa Open Pit) yields 120kozpa over the first 6 years and ~860koz over 9-year life of mine at $813/oz LOM AISC; delivers 47% IRR and $302m post-tax NPV5% using $1,700/oz gold price; development capex estimated at $153m (including contingency).
The Company is currently working on the project feasibility study that is planned to be completed in Q1/22
*SP Angel act as a broker to Condor Gold
Hochschild Mining (LON:HOC) 156p, Mkt Cap GBP800m – Robust production delivered in Q3 with annual output/cost guidance reiterated
The Company reported the strongest quarter YTD reiterating annual production and cost guidance.
Q3 production (attributable) was 58.3koz gold and 3.0moz silver (Q2/21: 53.4koz and 3.1moz) equivalent to 93.6koz GE or 8.1moz silver equivalent (Q2/21: 89.4koz GE and 7.7moz silver equivalent).
Q3 realised gold and silver prices averaged $1,768/oz and $22.0/oz.
YTD output (attributable) was 268.7koz GE or 23.1moz silver equivalent (9M20: 195.3koz GE and 16.8moz silver equivalent).
2021 guidance reiterated at 360-372koz GE or 31.0-32.0moz silver equivalent.
2021 AISC are guided at $1,210-1,250/oz GE or $14.1-14.5/oz silver equivalent.
Immaculada production totalled 63.0koz GE (Q2/21: 55.4koz) with higher than expected grades and recoveries contributing to a strong quarter.
Pallancata production came in at 9.8koz GE (Q2/21:16.9koz) reflecting lower plant throughput and processed grades.
San Jose (100%) production amounted to 40.9koz GE (Q2/21: 33.5koz) with tonnage coming moderately better than expected, although, grades picked up less than previously anticipated.
On a corporate side, the Company announced plans to spin out its development stage Penco Module REE Project in Chile via listing of Aclara Resources on the TSX and exercised an option to start earning in to a 60% interest int the Skeena Resources Snip Gold Project in British Columbia.
Closing cash balance stood at $270m (Q2/21: $257m) with net cash balance at $64m (Q2/21: $51m).
IronRidge Resources* (LON:IRR) 17.65p, Mkt cap GBP102m – Name change to Atlantic Lithium and demerger of gold assets into private vehicle
IronRidge are changing their name to Atlantic Lithium.
The name change and demerger reflect the value presented by the deal on the lithium assets where Piedmont may invest a further US$17m in exploration and evaluation to a DFS ahead of a potential $70m commitment to fund the Ewoyaa lithium project in Ghana.
The company also plans to demerge the gold assets into Ricca Resources (Italian for Rich) as management feel they are seeing no value for their gold assets in the portfolio.
Ricca Resources will start off life as a private company, though we expect it may list next year, possibly in Australia on the ASX.
The deal gives IronRidge optionality over the timing of the listing for the gold assets while investors get a 1:8 in-specie distribution with the right to buy the equivalent amount of stock again at 5c.
The company should have A$14m of cash in the bank by the time it IPOs.
We note the ASX has a minimum IPO share price of 20c/s.
Lithium assets (Ghana): Piedmont deal on Cape Coast Lithium Portfolio in Ghana (Ewoyaa lithium project):
Stage 1 – Piedmont has subscribed for 54,000,000 new ordinary shares in the Company at a price of 20p per share (GBP10.8m). Piedmont has committed a further GBP720,000 increasing its stake to 9.91% via placing of a further 2.88m shares at 25p.
Stage 2 – Regional Exploration and DFS Funding to earn in up to an initial 22.5%. US$5m towards an accelerated regional exploration programme to enhance the current Ewoyaa resource; and US$12m towards completing the DFS for the project. The minimum “DFS criteria” is to deliver a 1.5 mtpa to 2mtpa run-of-mine operation for a 10-year to 8-year life of mine respectively.
Stage 3 – CAPEX funding of $70m to earn a further 27.5% of CCLP.
Scoping Study key stats: Pre-tax NPV8% of US$539m, Post-tax NPV8% of US$345m, Post-tax IRR of 125%
Assumptions; Price: US$650/t assumed for 6% spodumene concentrate with costs of US$247/t and an expected payback of under a year.
Gold assets
Ivory Coast; IronRidge were drilling at the Kineta North gold license in the Ivory Coast earlier this year where they were testing previously reported soil samples in 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.
Chad; Management are preparing to restart work post the wet season on the more promising gold prospects in Chad.
The company renewed it’s licenses at Dorothe, Echbara and Am Ouchar earlier this year for a further 4 years.
The most advanced gold project is the drill-ready Dorothe license with ~15km of trenching at 200m spacing over a 3km x 1km surface area.
Results to date have defined six coherent, large-scale gold anomalies with two target types defined at the “Main Vein” and “Sheeted Vein” targets.
Over 14,500m of trenching results have defined the targets. Highlights include:
84m at 1.66g/t from 80m incl. 6m at 5.49g/t & 8m at 6.23g/t*
4m at 18.77g/t from 410m incl. 2m at 36.2g/t+
Kalaka and Nabagay are included within the license package.
The intrusion related gold system in Chad is said to be analogue to the Tintina gold belt in Alaska-Yukon which hosts a number of multi-million ounce gold mines including Donlin Creek (Barrick / Novagold, >45Moz), Fork Knox (Kinross, ~10Moz), Pogo (NST, ~10Moz) and Dublin Gulch (Victoria Gold Corp., >3Moz).
Echbara: previous trenching of the 2,000 x 150m anomaly shows 100-300ppb of gold is soils and:
58m at 1.31g/t,
12m at 2.71g/t
Am Ouchar historic trenching shows 2m to 5m thick, shallow dipping quartz veins:
20m @ 6.8g/t gold,
16m @ 4.7g/t
12m @ 5.7g/t
The licenses, are granted by the ministry of petroleum and are located in the Ouaddai Region of eastern Chad, approximately 900km east of the capital city of N’Djamena, with the area characterised by Proterozoic lithologies that have been intruded and uplifted by younger Pan-African granitoids and is considered to be prospective for Intrusion Related Gold systems.
*SP Angel act as Nomad to IronRidge
Petra Diamonds (LON:PDL) 1.68p, Mkt Cap GBP165.1m – Q1 production and trading
Petra Diamonds reports an 8% increase in diamond production during the 3 months to 30th September to approximately 862,000carats (Q4 FY2021 – approximately 765,000carats).
Sales revenue of US$114.9m (Q4 2021 – US$122.8m) reflected “proceeds from the sale of Exceptional Stones during the Quarter totalling US$50.2 million”.
Petra Diamonds’ FY 2022 production guidance is within the range 3.1-3.4m carats, excluding the Williamson mine in Tanzania which is expected to “add between 0.22 to 0.27 Mcts for the Year” but is the subject of continuing discussions with the Government and is “currently classified as an asset held for sale”.
Petra Diamonds describes the diamond market as remaining “firm” with “prices for rough diamonds supported by buoyant demand in the midstream and in the key jewellery retail markets, notably the US and China”.
The company expresses “a positive outlook for the market for the remainder of CY 2021 and into CY 2022 due to the continued pressure on supply, given the significant recent contraction in global output, as well as promising forecasts for retail demand during the festive buying period”.
Operationally, Petra Diamonds describes a “convergence” of the easternmost of eight tunnels on the block cave at the Cullinan mine which occurred in September and “resulted in the installation of additional support to protect the tunnel for the longer term, and the closure of the southern access”.
“An investigation to determine the root cause of this convergence is in progress, together with the development of a plan to mitigate its impact on the mine’s production … early indications are that without any mitigation, the convergence could result in a reduction of around 75 to 100 kcts in the mine’s FY 2022 production”. For reference, in FY2021 the Cullinan mine sold approximately 2.26m carats implying that the worst case loss of 100,000 carats represents around 4% of production.
The company confirms that it continued to reduce its debt during the quarter with net debt at 30th September of US$207.6m (30the June 2021 – US$228.2m and 30th September 2021 – US$692.3m).
Sibanye-Stillwater (JSE:SSW) ZAR5,347, Mkt cap ZAR150bn – Brazil projects purchased for $1bn cash
Sibanye Stillwater has agreed to buy nickel and copper mines in Brazil for $1bn in cash, as the company continues to build a presence in the battery metals sector.
The deal sees Sibanye acquiring the Santa Rica nickel and Serrote copper mines from affiliates of funds advised by Appian Capital Advisory.
Santa Rita is one of the world’s biggest open-pit nickel sulphide mines, and has an estimated annual processing capacity of 6.5mt of ore per annum.
Construction at Vale Verde is now complete, and the project has secured the major permits needed to produce copper, and will have an estimated production of 20,000tpa copper over an initial 14 years.
The acquisition advances CEO Neal Froneman’s goal of building a presence in the battery metals space, with Sibanye recently purchasing lithium assets in Europe and the US this year, along with a nickel processing facility in France.
Strategic Minerals* (LON:SML) 0.43p, Mkt Cap GBP8.1m – Cobre magneite sales
Strategic Minerals has reported its’ magnetite sales from Cobre, New Mexico for the 3 months ending 30th September 2021.
Sales of 10,259t during the quarter realised US$US$0.61m and brought year t0 date sales to 48,237t generating US$US$2.87m.or approximately US$60/t.
The company reports a 30th September 2021 cash balance of US$0.56m and Strategic Minerals explains that “While after tax profitability from Cobre continues to cover corporate overheads and provide a small surplus of circa $0.2m p.a., costs associated with moving forward both the Leigh Creek Copper and Redmoor Tin Tungsten projects result in reducing cash balances”.
The company provides reassurance, however, that “With the Leigh Creek Copper Mine (“LCCM”) expected to move into production, and generate revenue, next year, subject to finance, it is expected that this may not be the case in 2022″.
Strategic Minerals also reports that there has been no “significant news from the Receiver appointed by the US Securities Exchange Commission in relation to the previously notified US$21.9m arbitration claim by the Company’s wholly owned subsidiary Southern Minerals Group LLC (“SMG”) against CV Investments LLC (“CVI”)”.
The company says that the Receiver has “identified over US$8m in liquid assets relating to its receivership of CVI, although there can be no certainty of what proportion of this could be attributable to SMG if any at this time”.
Conclusion: Strategic Minerals’ operations at Cobre continue to underpin corporate overheads and generate modest surpluses. Subject to finance, the expected addition of copper production from Leigh Creek during Q1 2022 will be adding a second cash generative asset next year.
*SP Angel acts as Nomad and Broker to Strategic Minerals
Vast Resources (LON:VAST) 3.6p, Mkt Cap GBP8.7m – General update and FY22 guidance downward revision
The Company released a general update yesterday covering operations in Romania and Zimbabwe, Atlas Bond restructuring as well as production guidance.
At Baita Plai, the Company revised its FY22 (April year end) production down on the back of geotechnical issues encountered in the underground operation, delays in getting new equipment on site and labour shortages.
FY22 production is guided at 56kt mined, 56kt milled, 1.5kt Cu concentrate, down from 109kt mined, 86kt milled and 4.4kt Cu concentrate forecast in Mar/21.
Mining operations run into a highly decomposed and friable zone within the Antonio Skarn on Sub Level 1 18 in late August warranting an adjustment to the size of mined tunnels (from 3x3m to 2.3/2.5×2.3/2.5m) and the length of blastholes that significantly reduced productivity.
With challenges encountered in Sub Level 1, the team has also decided to accelerate development Sub Level 2 and Sub Level 3 using a second ramp.
Underground development is currently being held back by delays to the arrival of the Aramine Jumbo drilling rig that should accelerate the pace of works once on site and commissioned in Dec/21.
The Company refers to a shortage of skilled labour after scaling up underground operations with the local unit payroll increased from 30 to 280 people.
Baita Plai is reported to be one of the major employers in the county and the only mining operator for underground non-ferrous mining in Romania.
The Group reported actual production for a little over 12 months (Oct/20-Oct/21) – 30kt mined, 31kt milled and ~0.9kt Cu concentrate produced (sold and concentrate in inventory).
This compares to Sep/20 guided production numbers for the Sep/20-Sep/21 period of 99kt mined, 116kt milled and 4.2kt Cu concentrate.
Actual production comes even below Mar/21 guidance for 6m through Oct/21 for 44kt mined, 44kt milled and 1.8kt Cu con.
Mar/21 mine plan update accommodated for lower than anticipated in-situ grades ramping up underground mining rates and using XRT to concentrate the material and increase feed grade into the mill allowing to avoid expansion of the processing plant.
XRT was previously planned to be operational by the end of the year.
In Zimbabwe, where the Group is looking to develop alluvial diamonds Chiadzwa Concession in the prolific Marange Diamond Fields, the Company reports a breach of confidential information by a counterparty to the confidentiality agreement regarding settlement of historic claims.
The Company has instituted an internal enquiry by the senior independent non executive director into the circumstances under which the confidential information was disclosed and any associated internal corporate governance issues.
Separately, the Company reports that restructuring of Atlas Bond aimed at replacing the convertible loan for a fixed non-equity linked debt with a slightly extended term has not been agreed.
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.
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