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Today's Market View - Copper deficit supported as major Chile supply returns

Published: 19:21 28 Jun 2019 AEST

1561714045_copper-periodic-table

SP Angel – Morning View – Friday 28 06 19

Copper deficit supported as major Chile supply returns

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Aston Bay Holdings* (CVE:BAY) – Drilling hits >2g/t over 18m at Buckingham Gold in Virginia, USA

Georgian Mining Corporation (LON:GEO) – Final results highlight directors writing off of fees as Company waits for license renewal in Georgia

KEFI Minerals* (LON:KEFI) – Tulu Kapi project update

Mkango Resources* (LON:MKA) – Exploration commencement on Thambani uranium licence

Solgold* (LON:SOLG) – Industry award acceptance highlights the team

Strategic Minerals* (LON:SML) – Revised terms agreed with New Age Exploration

W Resources (LON:WRES) – Progress report on La Parilla

 

Dow Jones Industrials

 

-0.04%

at

  26,527

Nikkei 225

 

-0.29%

at

  21,276

HK Hang Seng

 

-0.39%

at

  28,509

Shanghai Composite

 

-0.60%

at

   2,979

FTSE 350 Mining

 

-0.06%

at

  20,394

AIM Basic Resources

 

-0.03%

at

   2,074

 

Economics

US – Trump is meeting Xi on Saturday saying he is expecting productive talks.

  • However, when asked if he had promised Xi a six month delay form tariffs, Trump said: “No”. (Reuters)

  • Asian shares are down with gold up $5/oz this morning on the back of growing concerns over chances of a US/China deal.

  • Gold is on course for the best monthly performance in three years on the back of a revision in monetary policy expectations as well as growing geopolitical risks.

 

Japan – Industrial production climbed at the strongest rate in seven months during May beating market estimates.

  • Capital goods shipments have also climbed to a seven-month suggesting businesses are more keen to grow investments in the second quarter.

  • Output increased 2.3%mom v 0.7%mom forecast by Reuters.

  • Unemployment rate remained low at 2.4%; although, a drop in job-to-applicant ratio may weigh on future wage growth.

 

South Korea – Industrial production dropped 0.2%yoy in May reversing the growth recorded in the previous month as the nation struggles with headwinds from weaker demand for electronics and global trade tensions.

  • Output increased 0.2%yoy in April  after three months of declines.

  • Data released earlier showed the economy contracted 0.4%qoq in Q1 marking the sharpest decline in more than a decade.

 

Russia/Saudi Arabia – Putin and Crown Prince are set to meet on the sidelines of the G20 summit later this week and likely to discuss oil output strategy.

  • Talks are scheduled just days ahead of the 1-2 July OPEC meeting.

  • Brent is little changed today trading around $65.5/bbl after bouncing off February lows earlier in June.

 

Iran – Authorities are meeting with the remaining signatories of the nuclear deal in Vienna today arguing it would be the “last chance” to save the accord.

  • Tehran threatened to exceed the maximum amount of enriched uranium allowed by the deal in retaliation for US sanctions.

  • Diplomats say Iran is just days away from the limit.

  • European countries have set up a mechanism for barter trade called Instex aiming to circumvent US sanctions, although, it is not yet operational and will only able to handle small volumes of items as opposed to large oil sales Iran is seeking, Reuters reports.

 

DRC – At least 41 illegal artisanal miners are reported to have been killed as galleries in benches overlooking the extraction area at the copper/cobalt KOV open pit mine in the DRC collapsed.

  • A team of Kamoto Copper Company (KCC) owned by Glencore is currently engaged in assisting search and rescue operations with the local authorities.

  • Tragic set of events highlight risks of illegal mining on the edge of a commercial mine site with Glencore’s KCC reporting on average 2,000 illegal artisanal miners’ intrusions at its Kolwezi concessions per day.

 

Currencies

US$1.1387/eur vs 1.1366/eur yesterday  Yen 107.71/$ vs 108.08/$  SAr 14.123/$ vs 14.205/$  $1.268/gbp vs $1.270/gbp  0.702/aud vs 0.699/aud  CNY 6.865/$ vs 6.873/$

 

Commodity News

Precious metals:         

Gold US$1,413/oz vs US$1,404/oz yesterday

   Gold ETFs 74.0moz vs US$73.9moz yesterday

Platinum US$814/oz vs US$813/oz yesterday

Palladium US$1,544/oz vs US$1,525/oz yesterday

Silver US$15.25/oz vs US$15.24/oz yesterday

           

Base metals:   

Copper US$ 5,990/t vs US$5,993/t yesterday

  • Tight global copper market received a boost as supply disruptions from the world’s largest copper producer was resolved as a two-week labour conflict supported higher copper prices and deepened the global shortage.

  • A total of 75% of workers at Codelco’s Chuquicamata mine in northern Chile voted in favor of the state-controlled company’s offer for a collective contract, representatives from Unions 1, 2 and 3, with workers returning to the mine site immediately. The third-largest copper mine has been operating at over 60% capacity during the strike.

  • Early estimates suggest the conflict may have wiped out 10,000t of copper from the market, according to Juan Carlos Guajardo, executive director at Santiago-based consultancy Plusmining. This is in a market expecting a 189,000t deficit this year according to the International Copper Study Group.

  • The unions and the workers they represent are satisfied with the outcome of the negotiation, Cecilia Gonzalez, president of Union No. 1, accepting a 36 month contract.

  • Copper prices in London rose to the highest in more than a month earlier this week amid reports that talks were stalled between Codelco and the three unions representing 3,200 workers at the mine, with prices remaining unchanged on the news.

  • We have reached three agreements that fulfill workers’ expectations together with the challenges of our mining business,” Chuquicamata general manager Mauricio Barraza said. “Together we need to transform this business so it remains profitable and sustainable over time.”

Aluminium US$ 1,796/t vs US$1,816/t yesterday

Nickel US$ 12,630/t vs US$12,510/t yesterday

Zinc US$ 2,483/t vs US$2,491/t yesterday

Lead US$ 1,941/t vs US$1,922/t yesterday

Tin US$ 18,850/t vs US$18,850/t yesterday

           

Energy:           

Oil US$66.3/bbl vs US$66.0/bbl yesterday

Natural Gas US$2.324/mmbtu vs US$2.266/mmbtu yesterday

Uranium US$24.65/lb vs US$24.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$111.5/t vs US$110.0/t

Chinese steel rebar 25mm US$613.6/t vs US$607.5/t

Thermal coal (1st year forward cif ARA) US$64.0/t vs US$64.7/t

Coking coal futures Dalian Exchange US$211.2/t vs US$210.2/t

           

Other:  

Cobalt LME 3m US$29,000/t vs US$28,000/t

NdPr Rare Earth Oxide (China) US$50,258/t vs US$51,630/t

Lithium carbonate 99% (China) US$9,469/t vs US$9,453/t

Ferro Vanadium 80% FOB (China) US$38.5/kg vs US$38.7/kg

Antimony Trioxide 99.5% EU (China) US$5.7/kg vs US$5.7/kg

Tungsten APT European US$250-255/mtu vs US$255-265/mtu

*Pricing sourced from Bloomberg

 

Battery News

Bill for 50% US renewables by 2035

  • Five US Senators introduced a bill on Wednesday that would legislate the US to achieve at least 50% renewable electricity nationwide by 2035.

  • The Senators introduced the Renewable Electricity Standard (RES) Act of 2019, which aims to put the US on a path to achieve complete decarbonization of its power sector by 2050, in accordance with the United Nations Intergovernmental Panel on Climate Change (IPCC) 1.5°C Special Report.

  • The bill aims to:

    • Create a federal floor-setting standard that requires each retail electricity provider to increase its supply of renewable energy by a percentage of total retail sales each year, starting in 2020.

    • Each kilowatt hour of electric energy generated by a new renewable resource will be entitled to a Renewable Electricity Credit (REC), which will be turned in for compliance. Under limited circumstances, certain existing facilities that increase their generation, repower, or are not being used to meet state RESs or voluntary market demand could also receive RECs.

    • Achieves at least 50% electricity from renewables in the US by 2035, roughly double business as usual and nearly triple current levels (17.6% in 2018).

    • Requires the Secretary of Energy to submit a plan to Congress for changes to the program post-2035 to achieve zero-carbon electricity by 2050.

 

Renewables surpass coal in US

  • As predicted by the Institute for Energy Economics and Financial Analysis (IEFFA) in April, US electricity generation from renewable sources did indeed pass generation from coal during that month, the US Energy Information Administration confirmed:

  • Renewable sources provided 23% of total electricity generation compared to coal’s 20%.

  • This outcome reflects both seasonal factors as well as long-term increases in renewable generation and decreases in coal generation. EIA includes utility-scale hydropower, wind, solar, geothermal, and biomass in its definition of renewable electricity generation.

  • April 2019 also saw a new record for wind generation, 30.2m MWh. The EIA expects solar to break its own generation record set last June this summer.

  • Renewables also recently surpassed coal in total US capacity. The EIA notes that despite coal’s decline, it’s still likely to provide more annual electricity generation than renewables both this year and next. Renewables should pass nuclear in that regard next year, and coal not long after that.

 

Company News

Aston Bay Holdings* (CVE:BAY) $0.07, Mkt cap C$7.6m – Drilling hits >2g/t over 18m at Buckingham Gold in Virginia, USA

  • Aston Bay Holdings report further results from their recent six hole drilling program at the Buckingham Gold Property in Virginia, USA.

  • ‘All six drill holes intersected significant near-surface gold mineralization, either in quartz veins or in wider zones of sericite-quartz-pyrite alteration’.

  • Two broad zones of gold mineralization associated with sericite-quartz-pyrite alteration were intercepted with:

    • 2.16 g/t gold over 18.07m

    • 1.90g/t Au over 22.22m

  • ‘The outcropping zone sits within a much larger gold-in-soil anomaly, suggesting the potential for a much larger system concealed under cover.’

  • The team look forward to results from a more extensive proposed drill program later this summer.

  • Previous results (gold mineralization in quartz veins):

    • 35.61 g/t Au over 2.03m in hole BUCK19-001,

    • 20.44 g/t over 3.30m

    • 34.25g/t over 0.5m

    • 24.73 g/t over 3.57m including 62.51 g/t over 1.39m.

  • ‘All mineralized intercepts are located below sub-cropping quartz containing visible gold that have yielded up to 701 g/t Au (20.4 ounces Au per short ton) in surface grab samples.

  • The estimated true width is 80% of the core interval, based upon multiple vein intersections,.

  • ‘The current drill program was designed to test along strike and down dip from the northwest-southeast trending area of boulders and sub-crop of quartz veining, as well as test for zones of gold-bearing alteration.‘

  • The gold-bearing system is hosted within a package of likely Cambrian-age sediments, including greywackes with minor quartz-arenites (phyllite, schist and quartzites), within the Appalachian orogenic belt.

  • This region is the site of the historically prolific Pyrite Belt which hosted a reported 250 gold mines that were in production prior to the California gold rush of 1849 but has seen little recent mineral exploration. 

  • Gold production has also occurred to the south in the Carolina Slate Belt, notably at Oceana Gold’s Haile Mine located in South Carolina with commercial production commencing in 2017 and slated to produce up to 150,000 ounces of gold per year.’

*SP Angel act as broker to Aston Bay

 

Georgian Mining Corporation (LON:GEO) 1.2p, Mkt Cap £1.6m – Final results highlight directors writing off of fees as company waits for license renewal in Georgia

  • Georgian Mining is an exceptional company.

  • It is exceptionally unlucky in that it is still waiting for the Georgian government to renew its license to continue drilling and exploration on the Kvemo Bolnisi project in Georgia.

  • It is also exceptionally fortunate that its directors are prepared to write off £275,000 of fees due since May 2018 despite working to preserve the integrity of the business while maintaining good relations with ministers and their staff within the Georgian government.  

  • The write off is for all the director fees with the exception of the CEO who has written off part of his fees as he has been highly active working for the company in Georgia and back in the UK where the company is also considering diversifying into other projects.

  • The company is also exceptional in that it had the geological expertise and presence to reinterpret former drill hole data and to then work out the best places to drill to discover the Kvemo Bolnisi copper, gold project nearby the Madneuli copper gold mine which is currently operated by Georgian’s Russian joint venture partner.

  • Georgian Mining was never a high-cost or wasteful company but the team have continued to cut expenses while maintaining a small team in Georgia.

  • The Georgian country team will expand again if and when the Kvemo Bolnisi license is renewed.

  • Further desktop work has continued on the data from Kvemo Bolnisi East and West projects and then moving on to Dambludi and Tsitel Sopeli, and also stepping out to confirm regional datasets and regional models for more specific drill targeting..

  • This work should provide a good basis for further investigation and potentially new discoveries once the government starts renewing licenses again.

  • In essence much essential work is still being done in preparation for the potential future mining of these projects which should accelerate the move to mining when permits and economic conditions allow.

  • Cash: Georgian mining has some £420,000 in cash and while this is not allot it is sufficient to maintain the local team and workflow to advance the data and projects in hand.

  • Georgian reports an operating loss of £4.8m to end December vs £2.4m a year earlier following impairments of £4.2m administrative expenses last year of £1.4m.

  • A further £4m writedown was taken for the share of net loss in the equity joint venture bringing the total loss for 2018 to £8.8m

  • Expenses should be significantly lower this year and investors should feel the company is being managed as best it can in the current circumstances while they wait for the license renewal.

Conclusion: Georgian Mining is currently stalled awaiting the renewal of its license in Georgia. We are not able to forecast when the government will sign the license renewal but we do see the shares as offering a significant opportunity for investors if and when the license is renewed.

*SP Angel acts as Nomad and Broker to Georgian Mining. 

 

KEFI Minerals* (LON:KEFI) 1.2p, Mkt Cap £8.2m – Tulu Kapi project update

  • Gold explorer, KEFI Minerals report actions with the Ethiopian Government authorities to tighten precautionary security measures at the Company’s Tulu Kapi Gold project following heightened domestic security concern.

  • The Company has arranged that the independent experts for security and social management issues update their reviews of the readiness of the community and local government and the security system. These same experts had previously reviewed the situation, plans and processes and will, in due course, also review the development completion process, to ensure compliance with World Bank IFC Standards.

  • KEFI has also agreed with private-sector partner ANS Mining Share Company to update the independent reports on security and the readiness of the community and local government to trigger development of the Project.

  • ANS Mining has confirmed its first instalment of US$11.4m will be released to trigger community resettlement and other development tasks, upon the satisfactory receipt of the aforementioned updated independent reviews. 

  • It has also now advised KEFI that it has assembled the full US$38m for its beneficial interest of 33% of Project company, Tulu Kapi Gold Mines Share Company ("TKGM").

  • TKGM has initiated currency conversion processes with the Ethiopian central bank for an agreed part of the funds provided by ANS Mining's equity subscription to be used to meet planned hard currency expenditures for project development.

  • While recent safety concerns have delayed triggering of ANS Mining’s first equity subscription, the overall development plan and initial production dates should remain unaffected.

  • Elevated security precautions are normal responses to the situation and merely reflect TKGM partners’ commitment to the first-mover mining project for Ethiopia.

  • The beneficial uptrend in gold prices are also supportive of enhanced project economics. With gold at $1,400/oz, estimates for the open pit only are:

    • Project export revenues are projected at c. US$200m per annum which would likely make it the country's largest single-enterprise export generator;

    • TKGM NPV on start of production in 2021 is estimated at £196m (US$249m). And from KEFI's viewpoint, the Company's planned 45% beneficial interest in the Project NPV at start of production would be £88m (US$112m);

    • Today, at start of construction, KEFI's planned beneficial interest in the NPV is estimated at £59m ($74m); and

    • Project free cash flow is estimated at £31m per annum (US$40m), of which KEFI's beneficial interest would be c. £14m per annum (US$18m).

  • KEFI and TKGM Chairman, Harry Anagnostaras-Adams, said, "The decisions taken with our partners and the Government strengthen our preparations, tighten security and preserve production target of mid-2021.  Overall, they shield our Project from heightened anxieties in the country at present, which everyone is nevertheless confident will abate quickly."

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Mkango Resources* (LON:MKA) 9.1p, Mkt Cap £10.4m – Exploration commencement on Thambani uranium licence

  • Mkango Resources announce termination of the Non-Binding Heads of Terms Agreement with MetalNRG following the inflow of £1.1m from recent warrant exercise, allowing Mkango the commence exploration at Thambani in 2019 while retaining 100% of the exclusive prospecting licence.

  • The company will target multiple zones of high-grade uranium, tantalum and niobium, with a number of extensive uranium radiometric anomalies.

  • In parallel, Mkango will continue to evaluate partnership opportunities for the project.

Conclusion – Retaining 100% control over exploration gives Mkango management team full reign over the planned exploration programme, allowing the opportunity to continue success as the Company also advance the flagship Songwe Hill rare earth project.

*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.

 

Solgold* (LON:SOLG) 31.9p, Mkt Cap £589m – Industry award acceptance highlights the team

  • The mining industry related website, www.mining.com reports the award of the Northern Miner’s “Mining Person of the Year” to Solgold’s CEO, Nick Mather.

  • The website reports ( https://www.mining.com/solgolds-nick-mather-on-receiving-tnms-mining-person-of-the-year-award/ ) Mr. Mather’s acceptance speech at a ceremony held at Canada House in London in which he acknowledged the teamwork behind Solgold’s discoveries in Ecuador as well as the host Government and nation’s support which he said had “the potential to turn Ecuador into the second greatest copper-producing nation on earth.”

  • Acknowledging both the contribution of a number of named colleagues as well as “too many people in SolGold to mention them all” Mr. Mather also highlighted the geological endowment of Ecuador itself and suggested that his audience “think of Alpala as just one single outcrop in all of our project which covers the 700-kilometre strike length of three mineralized belts.”

Conclusion: The receipt of a prestigious industry award gave Solgold’s Nick Matther an opportunity to highlight the importance of the many contributors to successful mineral exploration and mining development projects whose contribution is often under-recognised and we applaud him for seizing the chance to acknowledge the skills and dedication of the entire team.

*SP Angel acts as broker and advisor to Solgold. SP Angel have raised funds for SolGold on eight previous occasions.

 

Strategic Minerals* (LON:SML) 1.575p, Mkt Cap £23.1m – Revised terms agreed with New Age Exploration

  • Strategic Minerals has announced that it has “reached an in-principle agreement with New Age Exploration Limited (“NAE”) on varying the terms of acquisition of its 50% holding in Cornwall Resources” which holds the Redmoor tin/tungsten project in Cornwall.

  • The final revised terms are expected to be established shortly.

  • Commenting on the in-principle agreement, Managing Director, John Peters, confirmed that ““The settlement arrangements for the acquisition of the remaining 50% of Cornwall Resources Limited, holder of the Redmoor Tin and Tungsten project, have been renegotiated in light of changes to the Company’s expected cash flows and we look forward to closing shortly.”

Conclusion: Earlier this month the company reported a delay to the expected receipt of funds from the main customer of its Cobre magnetite tailings operation in New Mexico which we speculate is a significant factor in the need to re-set the timing of the Cornwall Resources transaction. We look forward to news of the revised terms when they become available to the market.

*SP Angel act as Nomad and Broker to Strategic Minerals

W Resources (LON:WRES) 0.435p, Mkt Cap £26.2m – Progress report on La Parilla

  • W Resources reports that it continues to expect to start commissioning of the plant in mid-July following completion of the plant buildings.

  • The company also reports that the crusher and jigs have been commissioned and are “operating on mined ore near design capacity levels” and that “production for July remains in line with previous guidance of 20 tonnes of WO3 concentrate”.

  • Acknowledging the commitment of the construction team and suppliers, Chairman, Michael Masterman, said “Construction completion of the Spiral and Shaking table buildings is an important milestone for W Resources and the third FME Building will be complete shortly. Priority now moves to completion of electrical cabling and tie in to the MCC [Motor Control Centre] which will be delivered mid-July.”

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

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.

 

 

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