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Today's Market View - Fresh US sanctions hit Iranian metal exports

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SP Angel – Morning View – Thursday 09 05 19

Fresh US sanctions hit Iranian metal exports

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Altus Strategy* (LON:ALS) – Agdz returns high grade Cu/Ag/Au in rock chips – IP survey to follow

Acacia Mining (LON:ACA) – Revised mine plan at North Mara delivers

Bluebird Merchant Ventures* (LON:BMV) – Korea state funds confirm grant funding for drilling at Kochang mine

Lithium Australia (ASX:LIT) – Alliance forms with leading Chinese battery producer

Rambler Metals & Mining* (LON:RMM) – Record quarterly throughput in Q1 2019

Solgold* (LON:SOLG) – New copper/gold target identified in northern Ecuador

Versarien (LON:VRS) – US update

 

Should the globe prepare for a shortage of battery metals?

*SP Angel acts as Advisor and or nomad and or broker on these companies

 

Iran plans to quit parts of nuclear deal

  • President Hassan Rouhani said his country would stop complying with two of its commitments under the 2015 agreement, beginning to build up stockpiles of nuclear material and could resume construction of a reactor if European nations don’t begin trading oil, in violation of US sanctions.
  • President Donal Trump responses with orders for new sanctions on Iranian metals, the latest efforts to pressure the regime over is support for weapons proliferation and extremist groups in the Middle East.
  • "Today's action targets Iran's revenue from the export of industrial metals — 10% of its export economy — and puts other nations on notice that allowing Iranian steel and other metals into your ports will no longer be tolerated," Trump said in a statement about the sanctions.
  • The executive order targets Iranian iron, steel, aluminium and copper sectors.

 

Rio Tinto Chairman, Simon Thompson reckons coal is not essential to human progress

  • Mr. Thompson reckons it’s a different story for iron ore where ‘there are no obvious substitutes and a whole range of applications’.
  • Problem is Mr. Thompson, how are you going to produce all that carbon steel without the coking coal for the blast furnaces.
  • There was a reason why Rio Tinto wanted to buy Riversdale Mining in Mozambique, it was for the massive amount of high quality coking coal they were told was in the deposit.
  • Yes, you can produce steel using electric arc furnaces but some 71.5% of the world’s steel is still produced using Metallurgical or Coking coal.
  • Not only is the coal in a blast furnace providing the energy for the process but it also provides the carbon units as a reductant for the iron
  • Even with Electric Arc Furnaces coal is still required to make the pig iron input
  • So if everyone stopped producing coal, not only would the lights go out on the global economy due to a lack of power generation and we would be back in the dark ages where certain churches would rather have us. There would also be allot less steel to work with.
  • Personally we would prefer Rio Tinto were to continue to produce coal as we reckon the professional team at Rio would produce cleaner and better quality coal than some other miners and this would be better for the world as a whole.
  • To be fair Thompson does go on to talk about alternatives to coking coal such as using hydrogen as a reductant or biomass. These are all good ideas but steel producers have not been taking up these processes indicating that they are less feasible alternatives.

 

New US bill boost battery mineral development

  • Led by Lisa Murkowski, Republican senators introduce bipartisan legislation to reduce reliance on foreign minerals and secure domestic resources and supply chains. The new legislation – the American Minerals Security Act – listed lithium, graphite, cobalt and nickel as "critical minerals" to the auto and energy industries.
  • “Our nation’s mineral security is a significant, urgent, and often ignored challenge. Our reliance on China and other nations for critical minerals costs us jobs, weakens our economic competitiveness, and leaves us at a geopolitical disadvantage,” said Murkowski at last week's inaugural Benchmark Minerals Summit in Washington DC.
  • According to the US Geological Survey, the nation imported at least 50% of 48 minerals last year, including 100% of 18 of them. That includes 100% of its supply of rare earth elements, graphite and indium.
  • Simon Moores, managing director of Benchmark Mineral Intelligence adds “Graphite is the most extreme example with no flake graphite mining and anode production compared to China’s 51% and 100% of the world’s total, respectively. And its a similar story with nickel: under 1% mined in the US and zero capacity for nickel sulfate."
  • The Committee of Energy and Natural Resources has introduced similar standalone legislation, including sections in the energy bill in the 114th and 115th Congresses.

 

Dow Jones Industrials

 

+0.01%

at

  25,967

Nikkei 225

 

-0.93%

at

  21,402

HK Hang Seng

 

-2.22%

at

  28,358

Shanghai Composite

 

-1.48%

at

   2,851

FTSE 350 Mining

 

-1.31%

at

  18,730

AIM Basic Resources

 

-0.28%

at

   2,010

 

Economics

US – Markets are in a risk-off mode as Trump blamed China for stalling the progress in trade talks.

  • “They broke the deal!” President Trump tols a rally reiterating criticisms that China failed to commit to strict enforcement mechanisms of proposed terms of the deal.
  • Chinese top negotiator VP Liu He is arriving in Washington later today to continue with negotiations.
  • The US Trade Representative’s office reiterated Trump threats that tariffs on $200bn worth of Chinese goods would increase to 25% from 10% on Friday morning (12:01am).
  • Beijing argued that “escalating the trade conflict is not in the interest of people in both countries and the world” while warning that it would retaliate if tariffs rise.
  • The yen is up against the US$ while the Chinese yuan and the Australian dollar are off. Gold is up marginally while Chinese stock indices are at their lowest in 11 weeks.

 

China – Consumer inflation hits a six-month high in April led by a surge in pork prices amid a widespread outbreak of African swine flu.

  • CPI climbed 2.5%yoy last month accelerating from 2.3%yoy in March and in line with market estimates.
  • Pork prices recorded a 14.4%yoy increase compared to a 5.1%yoy change in the previous month.
  • Led by temporary supply disruptions, the latest uptick in consumer prices is unlikely to see the central bank considering tighter monetary policy amid increasing risks to growth on the back of

 

UK – PM May is planning to get a fourth chance to get the Brexit deal approved by lawmakers before European elections take place on May 23.

  • No agreement with Labour opposition are reported to be in sight suggesting the new proposal is likely to again fall through in parliament.
  • More calls for the PM to quit are made while the government office insisted Mrs May is determined to stay until Brexit is delivered.
  • The pound is little changed this morning hovering around $1.3 and €1.12 marks.

 

South Africa – ANC leads with 55% followed by DA with 26% and EFF 8%, preliminary results with a quarter of votes counted show.

  • While a drop of 7pp from 62% secured in 2014, looks like ANC is set to secure its majority in the National Assembly.

 

Currencies

US$1.1197/eur vs 1.1203/eur yesterday  Yen 109.74/$ vs 110.13/$  SAr 14.339/$ vs 14.371/$  $1.301/gbp vs $1.305/gbp  0.697/aud vs 0.702/aud  CNY 6.809/$ vs 6.771/$

 

Commodity News

Precious metals:         

Gold US$1,283/oz vs US$1,286/oz yesterday

  • Golf futures retreated as investors favour a rallying dollar, rising for a third day amid conflicting signals over prospects for a US-China trade deal.
  • However, gold should expect support as central banks continue to diversify reserves. Barrick Gold CEO, Mark Bristow, believes the trade dispute will ultimately be resolved, the spat is undermining the validity of the U.S. dollar as a global reserve currency. The U.S. is “putting its own contractual paper at risk in a global sense because it has become inward-looking.”
  • Under-investment by the mining sector and peak global gold production are also supportive of higher gold prices in the long-term, Bristow said.

   Gold ETFs 70.4moz vs US$70.5moz yesterday

Platinum US$858/oz vs US$872/oz yesterday

Palladium US$1,305/oz vs US$1,326/oz yesterday

Silver US$14.84/oz vs US$14.92/oz yesterday

           

Base metals:   

Copper US$ 6,118/t vs US$6,195/t yesterday

Aluminium US$ 1,793/t vs US$1,823/t yesterday

Nickel US$ 11,850/t vs US$12,085/t yesterday

Zinc US$ 2,637/t vs US$2,684/t yesterday

Lead US$ 1,863/t vs US$1,877/t yesterday

Tin US$ 19,400/t vs US$19,415/t yesterday

           

Energy:           

Oil US$69.7/bbl vs US$70.2/bbl yesterday

Natural Gas US$2.602/mmbtu vs US$2.541/mmbtu yesterday

Uranium US$25.05/lb vs US$25.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$91.6/t vs US$91.9/t

Chinese steel rebar 25mm US$639.1/t vs US$642.7/t

Thermal coal (1st year forward cif ARA) US$72.1/t vs US$70.5/t

Coking coal futures Dalian Exchange US$168.1/t vs US$171.3/t

           

Other:  

Cobalt LME 3m US$34,500/t vs US$34,500/t

NdPr Rare Earth Oxide (China) US$39,431/t vs US$39,652/t

Lithium carbonate 99% (China) US$9,692/t vs US$9,747/t

Ferro Vanadium 80% FOB (China) US$49.5/kg vs US$50.5/kg

Antimony Trioxide 99.5% EU (China) US$6.0/kg vs US$6.0/kg

Tungsten APT European US$270-280/mtu vs US$270-282/mtu

 

Battery News

EU CO2 emissions ‘significantly decreased’ in 2018

  • Eurostat estimates CO2 emissions from fossil fuel combustion decreased 2.5% in 2018 compared to the previous year – a “significant decrease”.
  • While eight countries saw an increase in CO2 emissions over the past year, the other 20 EU countries saw a decrease. Six countries saw an emissions decrease of more than 4%, starting with Portugal, which boasts an incredible estimated 9% decrease in CO2 emissions. Portugal was followed by Bulgaria (-8.1%), Ireland (-6.8%), Germany (-5.4%), the Netherlands (-4.6%) and Croatia (-4.3%).
  • CO2 emissions account for about 80% of all EU greenhouse gas emissions. Eurostat notes that imports and exports of energy products have an impact on reported CO2 emissions — importing coal leads to an increase in emissions, while importing electricity would not. The energy source for that electricity would be reported in the country where it was produced.
  • A report earlier this year noted CO2 emissions reached a new worldwide high in 2018, but most of that increase came from China, India, and the US.
  • The UK’s Committee on Climate Change recently suggested it should set a goal of net zero greenhouse gas emissions by 2050.

 

Company News

Altus Strategy* (LON:ALS) 4.3p, Mkt Cap £7.7m –Agdz returns high grade Cu/Ag/Au in rock chips – IP survey to follow

  • Recent mapping and rock chip sampling campaigns identified a series of mineralised and altered structures that may be potentially similar to the Bou Skour copper-silver mine (14km northeast of Agdz).
  • In particular, four priority prospects have been defined at Agdz including Makarn, Amzwaro, Miniere and Daoud where a series of NNE trending alteration zones have been mapped and intersected.
  • Selected rock chip results included:
    • 2.0km Amzwaro anomaly with grades including 4.82 % Cu, 189 g/t Ag and 1.91 g/t Au
    • 2.8km Makarn anomaly with grades including 8.00 % Cu, 448 g/t Ag and 0.73 g/t Au
    • 0.15km Minière anomaly with grades including 13.05 % Cu, 12 g/t Ag and 0.49 g/t Au
    • 0.7km Daoud anomaly with grades including 2.71 % Cu, 152 g/t Ag and 2.96 g/t Au
  • The IP survey will cover 50 line kilometres across the northern part of the Agdz license to identify follow up trench and drill targets.

*SP Angel acts as nomad and broker to Altus Strategies

 

Acacia Mining (LON:ACA) 151.6p, Mkt Cap £622.9m – Revised mine plan at North Mara delivers

  • Acacia Mining reports that its revised mine plan for the North Mara mine in Tanzania “saw April gold production at the mine increase to 33,941 ounces, 54% above the monthly average production during Q1” and 52% above the previous month.
  • Peter Galeta, Interim CEO said that “Although still early in the second quarter, I am pleased with the improved production levels now being achieved and remain confident of delivering against our full year production guidance of 500,000 to 550,000 ounces”.
  • Alluding to the discussions with the Tanzanian Government, Acacia says that it “continues to provide support to Barrick Gold Corporation (“Barrick”) in its direct discussions with the Government and, once these discussions have been successfully concluded, we look forward to receiving and reviewing a proposal for a resolution of Acacia’s disputes agreed in principle between Barrick and the Government”.
  • The company goes on to say that it “has noted comments attributed yesterday to Mr. Mark Bristow, the Chief Executive of Barrick, regarding the status of Barrick’s discussions with the Government of Tanzania (“GoT”), directed to identifying a proposal for a comprehensive resolution of Acacia’s disputes with the GoT including the normalisation of the operating environment for the Company’s businesses going forward”.
  • Acacia Mining goes on to say that it “is seeking clarification from Barrick regarding Mr. Bristow’s reported comments, not all of which are consistent with Acacia’s own understanding of the position, as well as Barrick’s expectations for the conclusion of their direct discussions with the GoT.  In the meantime Acacia confirms that it is continuing to provide support to Barrick in their discussions, although it has not yet received a proposal agreed in principle between Barrick and the GoT for a resolution of Acacia’s disputes”
  • Acacia Mining was formerly known as African Barrick Gold and Barrick Gold remains a 64% owner of Acacia Mining.

 

Bluebird Merchant Ventures* (LON:BMV) 2.4p, Mkt Cap £5.4m – Korea state funds confirm grant funding for drilling at Kochang mine

(Bluebird hold 50% of the Gubong and Kochang licenses in jv with Southern Gold Ltd)

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  • KORES, the Korea Resources Corporation has confirmed a grant for the drilling of three holes at the Kochang mine in South Korea.
  • The 280m drilling program should run through the summer from 1 July to 30 September.
  • Drilling should test three vein structures which should connect the two parts of the Kochang silver mine and should also extend to further depth.
  • This simplistically indicates a 600m section of unmined mineralisation between the two mined areas.
  • The team have also identified a further six old adits around 100m to the northeast of the current entrance with evidence of historic mining.
  • Strong ventilation suggests these adits connect with further tunnelling and adits indicating further extensions to the underground mine.
  • Management will update its JORC resources following the drilling.
  • Bluebird expects to start construction of its processing plant in September with feed to come from existing broken ore, cleaning of the old mine areas and remnant pillars..
  • Small scale silver and gold production should therefore start in Q1 next year.

Conclusion: News of this grant is very positive in our view as it shows support from the Korean authorities. The intention of the team to start production early next year is also good news for investors as it demonstrates a determination to de-risk the project and develop some early cash flow. While early production will be small to start, we suspect it will not take long to grow the scale of the operation at Kochang and also at the Gubong gold mine.

*SP Angel act as broker to Bluebird Merchant Ventures

 

Lithium Australia (ASX:LIT) A$0.09, Mkt Cap A$41.5m – Alliance forms with leading Chinese battery producer

  • Lithium Australia signs a letter of intent to establish a 50:50 joint venture for the supply and sale of DLG Battery lithium-ion batteries, packs and modules in Australia.
  • DLG represents one of the largest 10 battery manufacturers in China, with six development and manufacturing facilities, as well as sales and support offices in the US and Europe.
  • DLG focus on the manufacture of cylindrical LIB cells, packs and systems, producing not only lithium-iron-phosphate ('LFP') and lithium-nickel-manganese-cobalt ('NMC') battery cell types but also battery-management-system and pack technology.
  • The partnership has been working to test LFP cathode powders produced by VSPC Ltd (wholly owned Lithium Australia subsidiary) in Brisbane, Australia.
  • As part of establishing the business, Lithium Australia has agreed to purchase an initial battery inventory through the issue of 12,500,000 Company shares to DLG at the prevailing market price of 8 cents.
  • Under the LoI, parties will also undertake a technological cooperation for both cathode and battery development, with an initial focus on LFP – the ideal battery chemistry for Australian energy-storage applications. Subject to performance and cost hurdles, DLG will award VSPC preferred supplier status to provide cathode powders to China.
  • LFP is very safe (not prone to thermal runaway and fires), demonstrates superior longevity and operates reliably at elevated temperatures.

 

Rambler Metals & Mining* (LON:RMM) 3.95p, mkt cap £51.2m – Record quarterly throughput in Q1 2019

  • Rambler Metals reports that its Nugget Pond mill achieved a record quarterly throughput of ore from its Ming copper/gold mine in Newfoundland during the quarter ending 31st March 2019. In total, 98,411 tonnes of ore were processed at an average grade of 1.33% copper and 0.58g/t gold (Q! 2018 – 83,016t averaging 1.07% copper and 0.41g/t gold)
  • As a result of the production improvements, Rambler Metals has achieved “a 47% increase in saleable copper produced in concentrate and 70% increase in saleable gold produced in concentrate relative to the year-ago quarter”.
  • The company has publicised widely its target of achieving a treatment rate of 1250tpd and it is encouraging that “Daily production during the quarter averaged 1,266 dry tonnes per day with a monthly peak of 1,309 dry tonnes per day in February” with a single day record of 1492t achieved on 12th March, as reported  earlier this month.
  • Contributing to the improved performance has been higher levels of underground development at the Ming mine which provides greater access to production for the plant and has resulted in the mine achieving its “best developed state … since the expansion project began in 2016.”
  • The announcement also acknowledges “success at reducing mining interruptions such as power outages, ventilation interruptions, blasting misfires and secondary blasts, as well as to improving the skills and supervisory expertise of our people”.
  • Work has begun on the new tailings facility which is expected to be finished during Q4 2019 providing capacity for a further six year of production and which “includes some critical control components necessary to sustain milling rates in excess of 1,400 dry tonnes per day”.
  • The company has also released its production guidance for 2019 which envisages milling 400-450,000t of ore at grades of between 1.3-1.5% copper and 0.7-0.9g/t gold in order to produce saleable copper of between 5-6,000t and 5-7,000oz of gold.
  • The previously announced results for 2018 for comparison, were milling of 364,176t or ore at an average grade of 1.24% copper and 0.57g/t gold to produce 4,187t of saleable copper and 4,189oz of gold.
  • Achieving the guidance range would result in 2019 copper production increasing by 19-43% and gold output rising by between 19-67% compares with 2018 as a result of higher throughput rates, and feed grades of both copper and gold.
  • Commenting on the what he described as a “very good start” to 2019, Andre Booyzen, President and CEO, said that “Given the productivity improvements in the mine operation, which has provided access to better grade material in both the Lower Footwall Zone and the Ming Massive Sulfide deposits, we are now turning our attention to increasing the overall feed grade delivered to the mill and returning the Company to positive cash flows during a time that has seen significant run up and positive outlook on long term copper price forecasts.”

Conclusion: The company has achieved its 1250tpd target for throughput during Q1.With both the February average and the individual daily record achieved on 12th March well above this level, and bottlenecks being eliminated in the underground operations, it has established a platform to sustain this performance as is reflected in the 2019 guidance which envisages higher throughput grades and production of saleable copper and gold.

*SP Angel act as Nomad and broker to Rambler Metals & Mining

 

Solgold* (LON:SOLG) 37.7p, Mkt cap £696.1m – New copper/gold target identified in northern Ecuador

  • Following announcements earlier this week of the progress at its Porvenir exploration project in southern Ecuador and at Chical in Northern Ecuador, Solgold reports today on results from its wholly owned Cisne  Loja project in southern Ecuador.
  • The company has identified copper gold and silver mineralisation characteristic of epithermal style mineralisation over an area of 1.5km x 1km within a northeast trending zone of veining an fracturing hosted in diorite and granodiorite located approximately 7km north of the  copper-gold porphyry target at Celen where the company has previously announced rock chip sampling results including a sample grading 15.25g/t and 23.6g/t silver.
  • Among a number of assays from rock chip sampling highlighted in today’s announcement are:
    • Sample RO3001218 taken from the Hector Stream which averaged 5.28% copper, 0.66g/t gold and 91.4g/t silver; and
    • Sample RO3001221 also taken from the Hector Stream which averaged 5.08% copper, 1.10g/t gold and 25.8g/t silver; and
    • Sample RO3001204 from the Hector Stream which averaged 4.92% copper, 3.90g/t gold and 55.7g/t silver; and
    • Sample RO3001215 taken from the El Tio Stream which averaged 3.65% copper, 0.02g/t gold and 95.5g/t silver; and
    • Sample RO3001214 taken from the Hector Stream which averaged 3.43% copper, 0.09g/t gold and 73.8g/t silver; and
    • Other results including Sample RO3001211 taken from the Mandarina Stream which averaged 1.63% copper, 0.30g/t gold and 39.8g/t silver; and
    • Sample RO3001213 also taken from the Mandarina Stream which averaged 1.45% copper, 0.02g/t gold and 36.6g/t silver.
  • Photographs published on the company’s website show a number of the mineralised rock samples and outcrops from Cisne Loja containing the copper carbonate mineral, malachite and a number of other copper minerals.

Conclusion: Rock chip samples represent an early stage of the exploration process, however, the announcement of these results from Cisne Loja, coming after reports on another two exploration projects in Ecuador earlier this week underlines Solgold’s extensive exploration presence in the country.

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

 

Versarien (LON:VRS) 112.5p, Mkt Cap £173.2m – US update

 

  • Advanced materials engineering group report a fully operational office and laboratory in Houston, Texas, designed to act as a hub for the company’s activities in N. America.
  • The establishment of this US hub has already enabled the Company to accelerate its progress in North America with various new partners, in addition to the work it has been undertaking with the US National Graphene Association and various existing collaboration partners in the region.
  • New agreements recently entered include:
    • US manufacturer of speciality plastic packaging and transportation vessels for volatile chemicals to explore the use of Versarien's graphene to enhance these products, in particular to reduce weight and improve the barrier properties of the vessel materials.
    • North American graphene focussed company to investigate the addition of Versarien's graphene to certain polymer resins for the production of products used in the consumer goods market.
    • US producer of carbon nanotubes to explore the combination of Versarien's graphene with carbon nanotubes to evaluate potential performance enhancements for a variety of products and systems, primarily in the fields of energy storage and polymer resins.
    • NovoCarbon Corporation, a US-based, clean technology minerals processing company, supplying customers with innovative, high quality value-added carbon products.  This collaboration agreement covers the establishment of graphene supply chain components to facilitate the use of the Company's graphene products in the consumer goods and other sectors.
  • The total number of relationships has grown to 25 in N. America, encompassing sectors including automotive, aerospace, consumer goods, oil & gas, sports equipment and speciality plastics.

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