Today’s Market View – Trans-Siberian Gold, Capital Limited, Ariana Resources and more…

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SP Angel . Morning View . Thursday 18 03 21

Copper, rare earths and lithium continue to rise on VW Day comments

 

Altus Strategies (LON:ALS) – Tabakorole drilling results point to grade/tonnage improvements on current MRE

Ariana Resources (LON:AAU) – Drilling in Cyprus

Capital Limited (LON:CAPD) – Dividend increase after profit more than doubles

Trans-Siberian Gold (LON:TSG) – Recommended pre-conditional mandatory cash offer at 118p by Horvik

Zamare (Private) – Zamare acquires additional license in Zambia for copper and cobalt exploration

 

Gold prices hit two-week high as Fed intends to keep rates low

Gold prices rose early on Thursday after the US Federal Reserve pledged to keep near-zero interest rates until 2023, although bullion gains were capped by the central bank’s bullish outlook of a strong economic rebound.

The US dollar index fell 0.44% as a result of the Fed’s continued dovish stance, with Chairman Powell reiterating that any tapering of the Fed’s asset buying programme remains premature (FX Street).

Spot gold rose 0.4% earlier this morning to $1,751/oz, while US gold futures jumped 1.3% to $1,750/oz (Reuters).

 

China refined copper output rises 12.3% YoY in Jan-Feb partly due to short Lunar NY holiday

China’s refined copper output amounted to 1.63mt in Jan-Feb 2021, up 12.3% amid low treatment and refining charges for copper concentrate.

Copper concentrates treatment and refining charges index cif Asia Pacific fell to $26/t on the 12 of March, down 14% from a week ago and the lowest in 10 years (Fastmarkets).

Historically, smelters average break-even TC/Rcs at around $60/t & 6c/lb, although in the current environment smelters are making money buying in the $30/t range.

 

Fatalities at iron ore mine in Hubei province leads to investigation

Chinese authorities are investigating the deaths of six workers at an iron ore mine in Wuhan.

The authorities suspect management have covered up three fatalities at the mine run by Tuanchengdong Mining Co, part of Wuan Metallurgical Mining Co,

Reports suggest six people fell down a shaft while returning to surface after a visit.

The mine formerly ran at 100,000tpa but was closed in 2018  

In 2004 a fire at several interconnected iron ore mines in Hebei led to 57 fatalities.

China recorded 573 mine fatalities last year according to Mining.com.

 

Tanzania – President John Magufuli has died aged 61 of heart disease

Vice-President, Ms Samia Suluhu Hassan will be sworn in as President in his place.

Unconfirmed reports suggest Magufuli, who was sceptical about Covid19 died of the disease following an 18-day absence.

We hope President Hassan will be more encouraging towards mining industry development than her predecessor

 

Recent Interviews:

IGTV:  VW expansion driving battery metals prices:

https://www.ig.com/uk/market-insight-articles/volkswagen_s-electric-vehicle-expansion-plans-drive-a-record-hig-210317

Are we in a new commodity supercycle, or is one coming? https://youtu.be/sw6gLNnM1s0

Is this a new Supercycle for commodities: https://youtu.be/BIWb-wqoLpM

Metals expected to continue the last-year gains into 2021 https://youtu.be/afrB9cJe8L0

Is 2021 the start of the new COVID-Supercycle or will Lockdowns delay the recovery? https://youtu.be/7LO0tDc-pNc

VOX Markets:  12/03/20: https://www.ig.com/uk/market-insight-articles/volkswagen_s-electric-vehicle-expansion-plans-drive-a-record-hig-210317

12/03/20: https://audioboom.com/posts/7820173-john-meyer-bluerock-kodal-minerals-orosur-mining-bluejay-mining

03/03/20: https://www.voxmarkets.co.uk/media/603f8a764ed39457176158df/?context=/listings/LON/BMN/multimedia/

*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

 

Dow Jones Industrials +0.58% at 33,015

Nikkei 225 +1.01% at 30,217

HK Hang Seng +1.21% at 29,385

Shanghai Composite +0.51% at 3,463

 

Economics

US – Long dated sovereign bond yields continue to rise despite dovish statement from the Fed.

The FOMC unanimously kept rates unchanged at 0-0.25% unanimously expecting no interest rate increases until at least 2024.

The central bank also added that it was too early to talk about scaling back $120bn in monthly purchases programme.

“The (stimulus checks are going out… COVID cases are coming down. Vaccination is moving quickly,” Fed Chairman said commenting on the economic growth outlook.

The Fed expects economic growth to remain above trend in coming years with GDP climbing 6.5% this year followed by 3.3% in 2022 and 2.2% in 2023.

Inflation is forecast to pick up temporarily averaging 2.4% this year, above the Fed’s 2% target, with the central bank saying to see through that keeping benchmark overnight interest rates near zero to help the economy continue to recover.

Unemployment is forecast to come down to 4.5% by the end of the year, an improvement on June projections for 6.4% and compared to 3.7% at the end of 2019 before the start of the pandemic (although labour participation rate was higher then as well at 63.3% v current 61.4%).

10y bond yields are up 8bp at 1.72% this morning reflecting stronger economic growth and inflation outlook.

US growth expected to regain pre-crisis GDP growth levels by year-end

Housing starts fell 10.2% to 1.421m in February vs -6% at 1.580m units in January

Building permits fell 10.8% in February to 1.682m units erasing all January’s 10.2% gain (fxstreet)

 

UK – Large companies with insufficient cash reserves will be required to restrict dividends and executive bonuses according to a major overhaul of the UK’s audit and corporate governance regime, FT reports.

The government white paper on changes follows up on accounting scandals at UK companies including Carillion, BHS and Patisserie Valerie.

The document refers to “high-profile examples of paying out significant dividends shortly before profit warnings and, in some cases, insolvency”.

The paper will go out for public consultation until July with companies and their auditors set to face new obligations around detecting and preventing fraud.

For instance, directors will need to review their internal business controls every year and attest to their effectiveness in the annual report.

Directors may be subject to a claw back of two years’ worth of bonuses if they are found carrying a serious misconduct including inaccurate accounts or a company suffering reputational damage.

 

Vehicle registrations – February sales figures

UK vehicle sales fell 43.1% in February vs a -32% fall in January. UK vehicle sales fell -35.5% yoy in Feb and -39.5% yoy in Jan

German vehicle sales rose 14.5% (-45.5%), yoy 019% (-31.1%),

French sales rose 5% (-32.2%), yoy -20.9% (-5.8%) and

Italy sales rose 6.7% (12.2%), yoy -12.3% (14.09%).

 

EU – CPI rose 0.2% in February vs 0.2% in January but was steady year on year

 

China is working towards the fourth industrial revolution,

China’s plan to develop the fourth industrial revolution known as Industry 4.0 is based on the automation of manufacturing and the upgrading of industrial practices, using modern smart technology (SCMP).

We are not sure how this sits with the goal of job creation and the elimination of poverty in China .

China claims to have 20 of the world’s top 69 factories seen as using fourth industrial revolution technologies followed by 19 in the EU, 7 in the US and 5 in Japan.

The World Economic Forum recently added five Chinese sited to its Global Lighthouse Network List of the world’s most advanced factories.

The five new factories are owned by Bosch Automotive, Foxconn, Midea Shunde, Tsingtao Brewery and Wistron InfoComm (was part of Acer).

The conclusion is that Chinese companies are now able to challenge their peers in critical sectors of electric vehicles, smartphones, appliances, beer and IT comms.

 

Poland – Government to ask EU commission to approve state aid to mines

Poland’s government hopes to agree final details with mining unions this week which would result in the government approaching the EU to approve state aid to mines which plan to close by 2049.

The EU’s biggest coal producer PGG miner is set to sign an agreement for a loan of 1bn zloty (€4.7bn) with the state development fund PFR this month.

 

Currencies US$1.1951/eur vs 1.1890eur yesterday.  Yen 109.16/$ vs 109.16/$.  SAr 14.682/$ vs 14.934/$.  $1.397/gbp vs $1.392/gbp.  0.782/aud vs 0.773/aud.  CNY 6.503/$ vs 6.501/$.

 

Commodity News

Precious metals:  

Gold US$1,738/oz vs US$1,735/oz yesterday

Gold ETFs 101.2moz vs US$101.5moz yesterday

Platinum US$1,215/oz vs US$1,210/oz yesterday

Palladium US$2,610oz vs US$2,490/oz yesterday

Silver US$26.40/oz vs US$26.01/oz yesterday

 

Base metals:  

Copper US$ 9,048/t vs US$9,019/t yesterday

Aluminium US$ 2,226/t vs US$2,207/t yesterday

Nickel US$ 16,085/t vs US$16,075/t yesterday

Zinc US$ 2,807/t vs US$2,813/t yesterday

Lead US$ 1,918/t vs US$1,937/t yesterday

Tin US$ 25,600/t vs US$25,000/t yesterday

 

Energy:

Oil US$67.3/bbl vs US$68.7/bbl yesterday

Natural Gas US$2.521/mmbtu vs US$2.548mmbtu yesterday

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$159.4/t vs US$159.7/t

Chinese steel rebar 25mm US$725.1/t vs US$724.5/t

Thermal coal (1st year forward cif ARA) US$71.3/t vs US$69.2/t

Coking coal swap Australia FOB US$128.0/t vs US$128.0/t

           

Other: 

Cobalt LME 3m US$52,610/t vs US$52,610/t

NdPr Rare Earth Oxide (China) US$88,811/t vs US$87,829/t

Lithium carbonate 99% (China) US$12,610/t vs US$12,305/t

Spodumene 6% Li2O min, cif (China) US$510/t vs US$455/t

Ferro Vanadium 80% FOB (China) US$35.0/kg vs US$35.0/kg

Ferro-Manganese high carbon 78% Mn US$1,625/t vs US$1,625/t

Tungsten APT European US$268-275/mtu vs US$263-268/mtu

Graphite flake 94% C, -100 mesh, fob China US$560/t vs US$560/t                

Graphite spherical 99.95% C, 15 microns, fob China US$2,625/t vs US$2,625/t

 

 

Battery News

British lithium (private) – £2.9m grant received from Sustainable Innovation Fund

British Lithium announced on Wednesday that the UK government’s Sustainable Innovation Fund has awarded the company a £2.9m grant which will allow it to have a full-scale lithium mine in South West England within five years.

The company said it would use funding to build a pilot plant, developed by its Cornwall-based research arm in order to prove the sustainability and commercial benefits of its Li-Sep technology for extracting battery-grade lithium from micaceous granite.

British Lithium hope to begin full-scale production of 21,000tpa of lithium carbonate in three to five years’ time, and its Li-Sep technology concentrates the lithium-mica that occurs in granite without the use of harmful chemicals.

The news follows Boris Johnson’s integrated review launched earlier in the week, that sets the goals of prioritizing the transition to a zero-carbon global economy, as well as exploring opportunities around domestic extraction and processing of critical minerals.

Andrew Smith, CEO of British Lithium, commented: “We are delighted to have won government recognition of our important work in Cornwall and the significant contribution we’ll be making to “building back better” and achieving zero carbon emissions,”

“Our growing team of experts have spent the last three years on intensive research and development and have built our own state-of-the-art laboratory to further develop our technology. “The results achieved so far have exceeded all expectations and we are now looking forward to expanding our operation to showcase what is possible – not just locally and nationally, but globally too.”

 

VW shares eye best-week-ever as automaker throws down the gauntlet to Tesla

Shares in Volkswagen rose for a fourth straight day on Thursday and on course for their best week ever as the automaker outlined plans to overtake Tesla in the EV market.

Europe’s largest carmaker is investing €35bn in order to lead the transformation away from fossil fuels.

VW said it would sell more than 2m EVs by 2025m hire 6,500 IT experts and become Europe’s second biggest software company behind SAP.

The automaker also said it intends to build six battery manufacturing siters in Europe to guarantee security of supply for its EV fleet.

VW also estimates that battery costs will fall by 50%, while reducing the complexity of battery systems and improving range and performance.

Through a series of partnerships, VW hopes to install 18,000 public fast-charging points in Europe by 2025

Volkswagen CEO Herbert Diess commented: “Tesla is not only about electric vehicles. Tesla is also very strong in software. They really run the car as a device. They are making good progress on the autonomous thing. But yes we are going to challenge Tesla,”

Volkswagen’s shares were up 4.6% earlier this morning and up 27% on the week.

 

Company News

Altus Strategies (LON:ALS) 82p, Mkt Cap £57m – Tabakorole drilling results point to grade/tonnage improvements on current MRE

The Company released further results from the completed 6,300m RC drilling programme (39 holes) at the Tabakorole gold project in southern Mali.

Selected intersections include:

2.2g/t over 7m from 86m;

2.0g/t over 10m from 49m;

1.1g/t over 33m from 84m including 2.3g/t over 10.

Results from the remaining 20 holes covering 2,760m, around half of the progamme, at the NW end of the Tabakorole end of the deposit are expected in April.

The programme has been funded and completed by Marvel Gold, a JV partner, with a goal to both expand the MRE testing along strike extensions (NW and SE) as well as infill drill areas of plunging high grade shoots within the resource.

Separately, 6,000m AC and 750m DD programme has been launched to test SE strike extension.

Current MRE stands at 24mt at 1.18g/t for 910koz (100% interest).

Conclusion: Exploration at Tabakorole testing on strike and at depth extensions as well as infill drilling some parts of the deposit with results returning higher mineralised grades and widths that were used for the current resource modelling.

*SP Angel acts as nomad and broker to Altus Strategies

 

Ariana Resources (LON:AAU) 4.55p, Mkt Cap £48.1m – Drilling in Cyprus

Ariana Resources has started diamond drilling on the Magellan project in Cyprus as part of its programme to earn a 50% interest in Venus Minerals where it currently holds a 16% interest.

The current drilling programme, comprising a total of 1,260m in eight holes is planned to test the possible extent of the Kokkinoyia deposit, which already hosts an inferred resource of 9.5mt at an average grade of 0.65% copper, as well as to obtain sample material for metallurgical testing.

The company says that “During the 1970s, the Kokkinoyia deposit produced approximately 465,500t of ore at an average copper grade of 3.7%.”

Saying that the start of drilling at Kokkinoyia represented the culmination of three years of preparatory work, Managing Director, Dr. Kerim Sener, explained that “Following the drilling of the Kokkinoyia Sector, we are expecting to move the rig to the Klirou and New Sha sectors of the Magellan Project.”

He also commented that “In addition to providing further understanding on the current Resource Estimate, we are expecting these programmes to provide sufficient mineralised material for metallurgical testwork, the results of which will be integrated in to the Magellan Scoping Study”

Conclusion: The drilling in Cyprus is an important step in the earn-in programme to increase Ariana Resources interest in Venus Minerals. We look forward to the results as drilling progresses.

Capital Limited (LON:CAPD) 63.75p, Mkt Cap £116m – Dividend increase after profit more than doubles

Capital Limited has declared a final dividend of 1.3cents/share (2019 – 0.7 cents) bringing the total for 2020 to 2.2cents (2019 – 1.4cents).

The increase is supported by a 139% increase in net profit for the year to US$24.8m (2019 – US$10.4m).

The company reports a year-end net cash balance of US$5.0m (2019 – US$4.4m).

Revenue rose by 17.5% to US$135m in 2020 and the company is providing revenue guidance of a further increase to between US$185-195m in 2021 “driven by improving drill rig utilisation, contract extensions and expansions from existing long-term contracts and the commencement of the load and haul waste stripping contract at Sukari, Egypt”.

The company expects to further expand its drilling fleet by the addition of 17 more rigs  during 2021 “with the majority allocated to previously announced contracts with Sukari, Bulyanhulu and Geita”.

Commenting on the results, Executive Chairman, Jamie Boyton, commended the performance of his team “while operating under extremely difficult conditions during the year” and confirmed that “Our focus on restructuring and rebalancing our business over the past three years is proving successful.”

 

Trans-Siberian Gold (LON:TSG) 115p, Mkt Cap £100m – Recommended pre-conditional mandatory cash offer at 118p by Horvik

Horvik Ltd agreed to acquire 51.2% of TSG shares from its major shareholders for 118p as well as planning to announce a recommended pre-conditional mandatory cash offer for remaining shares.

Selling major shareholders include UFG Special Situations Fund LP, UFG Equity Opportunities Limited, UFG Russia Select Master Ltd, Charles Ryan, Florian Fenner and Petrovka GmbH.

The offer is conditional on Horvik receiving clearance from the Russian Federal Antimonopoly Service.

Following the clearance and an acquisition of the majority stake, an offer at a price not less than 118p for the remaining interest in the Company will be made.

The offer implies a 18% premium to the yesterday’s closing price of 100p.

TSG Independent Directors unanimously recommend shareholders to accept the offer.

The ultimate beneficial owner of Horvik is Vladislav Sviblov who owns a number of mining assets, including in the precious metals space.

Mr. Sviblov’s existing strategic investments include Highland Gold Mining Limited, one of Russia’s leading gold mining companies with assets in the Khabarovsk, Zabaikalsk and Chukotka regions of Russia, and Ozernoye Mining Company, which is developing zinc-lead and gold-zinc deposits, as well as certain other gold mining assets and prospective deposits in the Zabaikalsk region.

“We are pleased to announce the Acquisition and the Offer which represent a further strategic investment for us in the Russian natural resources sector. This is in line with our strategy to build a broader asset portfolio and adds to our investments in Highland Gold and the Ozernaya Mining Company. We believe that TSG has an attractive asset portfolio in the Kamchatka region and we believe that we can support TSG’s future development,” Sviblov commented on the deal.

 

Zamare (Private) – Zamare acquires additional license in Zambia for copper and cobalt exploration

Zamare, a UK-based private exploration company, reports it has acquired a new large scale exploration license in Zambia from the Ministry of Mines.

The license runs next to Zamare‘s Dongwe licences where Zamare recently reported grades of 15.8% copper and 0.57 g/t gold from an artisanal open pit.

The company recently acquired historic geophysical data on the licenses which will help in the development of new drill targets.

The license tenure is for an initial four years renewable till 2030.

The Dongwe license is just 30km south of the historic Kalengwa mine where reports suggest grades of >20% copper were mined in the 1970s.

Zamare has an active drilling program at Dongwe and believes that this area has the potential to become a new frontier for IOCG-type copper-gold discoveries in Zambia.

The IOCG style mineralisation is associated with granitic intrusions, which are widespread in the area.

Fieldwork at Dongwe shows up to 15.8% Cu and 0.57 g/t Au in sulphide mineralisation similar to the geology of intruded Kundelungu sediments by late granitic intrusions

BHP Billiton previously ran a gravity survey over the area showing a number of anomalies for drill targeting but did not follow up due to licencing and permitting problems issues following which they withdrew from Zambia.

*SP Angel act for Zamare. Please contact our team for further info.

 

Analysts

John Meyer – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Joe Rowbottom – [email protected] – 0203 470 0486

 

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – [email protected] – 0203 470 0471

 

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

Sources of commodity prices

Gold, Platinum, Palladium, Silver

BGNL (Bloomberg Generic Composite rate, London)

Gold ETFs, Steel

Bloomberg

Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt

LME

Oil Brent

ICE

Natural Gas, Uranium, Iron Ore

NYMEX

Thermal Coal

Bloomberg OTC Composite

Coking Coal

SSY

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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