Today’s Market View – Altus Strategies, Gem Diamonds, GoldStone Resources and more…

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SP Angel . Morning View . Wednesday 02 06 21

Tesla expects to consume $1bn pa of Australian minerals

 

Altus Strategies* (LON:ALS) – Drilling at Tabakorole grows the mineralisation along strike

Gem Diamonds (LON:GEMD) – Gem Diamonds donates 20,000 Covid-19 vaccine doses to Lesotho

GoldStone Resources* (LON:GRL) – Warrant exercise provides £1.5m funding to company

Savannah Resources* (LON:SAV) – FY20 results highlight cost control measures and reduced exploration spend amid Covid pandemic

SolGold* (LON:SOLG) – SolGold and Cornerstone agree to work cooperatively to advance the Alpala project at Cascabel in Ecuador

 

We are raising funds for a private Graphene producer – EIS scheme approval applied for

The company is selling a number of graphene products to industrial and retail customers.

Sales of certain products have sold out unexpectedly quickly.

The company wishes to fund a ramp up in production to get ahead of demand and to develop markets for a number of new, graphene products

The business is also able to upgrade graphite to a higher grade/specifications using its process – rolling out this process also requires funding

The company has also applied for EIS scheme approval from HMRC

Please let me know if you wish to invest in the company

*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.

 

Tesla expects to consume $1bn of Australian minerals per annum

Tesla chairman Robyn Denholm said in a speech to the mining industry that Tesla would soon consume more than $1bn a year of Australian lithium, nickel and other critical minerals.

Ms Denholm commented that miners, manufacturers and governments must speed up “at an extremely fast pace” the innovation needed to Australia from an exporter of fossil fuels into a global new energy superpower.

Ms Denholm also commented: “it will require massive innovation: we need to scale up at an extremely fast pace and mining needs the same kind of innovation as the industries it supplies”.

Tesla currently draws three quarters of its lithium supply from Australia, alongside a third of its nickel.

Among opportunities for Australia were the potential for greater local manufacturing of lithium batteries and ultimately even EVs, as one of the best ways to reduce the carbon footprint of battery cells is to reduce shipping distances of minerals.

Australia’s exports of spodumene are expected to hit A$1bn this year while its nickel exports are expected to be valued at A$4 billion, government figures show.

 

Gold prices set to rise further towards $2,000/oz on inflation driven by stimulus, a weaker US dollar and lower Bitcoin

New Basel III regulations forcing banks to hold allocated gold, eg. physically allocated gold bars in vaults is likely to tie up more gold.

The new rules require banks to set aside more High Quality Liquid Assets for longer periods to offset loans to clients.

The move risks sending bank lending into reverse, exactly the opposite of what policy makers and economies need right now.

Ross Norman explains the situation rather well in his Metals Daily.

In the meantime gold prices appear to be set to rise further and look likely to break the magic $2,000/oz barrier this year as ongoing stimulus projects create more cash in the global monetary system.

 

The UK reported zero Covid deaths yesterday for the first time since the start of the pandemic.

This marks a major milestone in the battle against the virus and reflects successes in detecion and treatment of Covid as well as the fast paced rollout of the vaccination programme.

 

Peru – socialist candidate Pedro Castillo adds copper sales tax to his copying Chilean proposals

Experts appear far more concerned about the impact new taxes are likely to have on investment into copper production in Peru than in Chile.

While Chile is increasingly left leaning, the nation has a long history of returning towards the centre and is seen as better balanced politically.

Excessive proposals for taxing copper are normally adjusted to encourage new investment by copper mines.

Peruvian politics appear more volatile with Castillo seen as significantly ahead of his rival Keiko Fujimori whose father was president in the 1990s.

Castillo is seen as more like Evo Morales than Fidel Castro or Higo Chavez but gives few interviews making it difficult to define his personal views.

Pedro Castillo’s rhetoric is populist and hard to the left calling for ‘No more poor people in a rich country’ and higher taxes for business and miners.

 

Vanadium – Momentum continues to build in vanadium market, with prices up over 50% year-to-date

Vanadium prices continue to rise with European Ferro-Vanadium prices have risen nearly 53% YTD to $8.25/lb (Asia Metal).

China has turned into an importer of vanadium in recent months reducing the downward pressure caused in European prices last year by Chinese exports

Increasing capacity utilisation in European, US and Chinese steel mills is being seen as construction projects move from excavation and concrete foundations to using more structural steel for above ground construction.

Wobbly skyscrapers as seen in Shenzhen serve to remind the authorities of the importance of build quality and the materials used in construction.

While a certain amount of wobble is tolerable in skyscraper fast build rates and potentially sometimes lax adherence to building regulations in China makes observers wary of the potential for catastrophic collapse.

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

 

Dow Jones Industrials +0.13% at 34,575

Nikkei 225 +0.46% at 28,946

HK Hang Seng -0.66% at 29,274

Shanghai Composite -0.79% at 3,596

 

Economics

US – Manufacturing PMI was revised upwards in May to a new high as the sector demonstrates unprecedented growth with economies reopening post pandemic.

New orders expanded at the fastest pace on record with easing of restriction and successful vaccine rollouts.

New export order growth accelerated and was the quickest since the first month of data collection in May 2007.

Interestingly, growth in employment slowed to the softest since December 2020 as employers experienced difficulties finding suitable candidates.

Input costs as well as final goods prices continued to increase at one of the strongest rates seen in survey history.

Amid shortages of supplies, manufacturers started to overorder with pre-production inventories reported to have increased at the fastest rate on record.

 

US ISM  – Manufacturing PMI 61.2 in May vs 60.7 and 47 Jne’20 43.5

Manufacturing PMI Markit 62.1 in May vs 60.5 and 47 Jne’20 43.5

 

JP Morgan global composite manufacturing index 56.0 in May vs 55.9 and 47 Jne’20 43.5

 

OECD – World economic growth revised higher to 5.8% for 2021 in May from 4.2% previously

 

China – Official Manufacturing PMI  51.0 i in May vs 51.1 in April

China Caixin  – Manufacturing PMI  52.0 in May vs 51.9 in April and 51.2 in June 2020

Nonmanufacturing Official PMI 55.2 in May vs 54.9 in April

 

Japan – Manufacturing PMI  53.0 in May vs 53.6 in April and 40 yoy

Taiwan  – Manufacturing PMI 62.0 in May vs 62.4 in April

South Korea – Manufacturing PMI 53.7 in May vs 54.6 in April and 43.5 in June 2020

India – Manufacturing PMI 50.8 in May vs 55.5 in April

Turkey – Manufacturing PMI 49.3 in May vs 50.4 and 47 Jne’20 43.5

EU – Manufacturing PMI 63.1 in May vs 62.9 and 47 Jne’20 43.5

Germany – Manufacturing PMI 64.4 in May vs 66.2 and 47 Jne’20 43.5

France – Manufacturing PMI 59.4 in May vs 58.9 and 47 Jne’20 43.5

UK – Manufacturing PMI 65.6 in May vs 60.9 and 47 Jne’20 43.5

Brazil – Manufacturing PMI 53.7 in May vs 52.3 and 47 Jne’20 43.5

Mexico – Manufacturing PMI 47.6 in May vs 48.4 and 47 Jne’20 43.5

 

Germany – Retail sales took a hit in April as the government introduced new lockdowns.

On a positive note, sales are likely to bounce back in May as new cases dropped and many states were allowed to ease restrictions.

Retail Sales (%mom): -5.5 v 7.7 in March and -2.5 est.

 

South Korea – The central bank talks down inflation expectations arguing a recent pickup in consumer prices growth is a reflection of lower energy prices last year.

Consumer inflation exceeded the central bank’s 2% target for the second consecutive month in May coming in at 2.6%yoy.

The central bank is expecting inflation to fluctuate around 2% in the second half of this year before coming back down to the mid-1% range in 2022.

 

Turkey – President Erdogan’s renewed calls to lower rates push the currency to a fresh low.

“I spoke with our central bank governor today… its an imperative that we lower interest rates… for that, we will reach July and August thereabouts so that rates can begin to fall,” Erdogan said in an interview yesterday.

The lira plunged more than 3% briefly following comments and is currently trading down 1.3% at 8.63.

 

Australia – Growth slowed to 1.8%qoq in Q1/21 beating market estimates for a weaker headline number.

Growth was driven by consumer spending and a build up in inventories.

With a lockdown in Victoria, the second most populous state, being extended, a weak pace of vaccination and potential destocking, economic growth outlook looks fragile.

GDP (%qoq): 1.8 v 3.2 (revised from 3.1) in Q4/20 and 1.5 est.

 

South Africa – Unemployment hit a new high of 32.6% in the first quarter as the construction and trade industries laid off workers.

Unemployment: 32.6% v 32.5% in Q4/20 and 33.5% est.

Manufacturing PMI 57.8 in April vs 56.2in March

 

Currencies

US$1.2207/eur vs 1.2233/eur yesterday.  Yen 109.75/$ vs 109.49/$.  SAr 13.788/$ vs 13.698/$.  $1.414/gbp vs $1.424/gbp.  0.773/aud vs 0.775/aud.  CNY 6.389/$ vs 6.376/$.

 

Commodity News

Precious metals:  

Gold US$1,899/oz vs US$1,913/oz yesterday

Gold ETFs 101.2moz vs US$101.0moz yesterday

Platinum US$1,188/oz vs US$1,193/oz yesterday

Palladium US$2,857/oz vs US$2,870/oz yesterday

Silver US$27.79/oz vs US$28.31/oz yesterday

           

Base metals:  

Copper US$ 10,235/t vs US$10,305/t yesterday

Aluminium US$ 2,471/t vs US$2,503/t yesterday

Nickel US$ 18,280/t vs US$18,360/t yesterday

Zinc US$ 3,095/t vs US$3,084/t yesterday

Lead US$ 2,207/t vs US$2,204/t yesterday

Tin US$ 30,985/t vs US$30,560/t yesterday

           

Energy:           

Oil US$70.8/bbl vs US$70.3/bbl yesterday

Natural Gas US$3.089/mmbtu vs US$3.086/mmbtu yesterday

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$198.4/t vs US$178.6/t

Chinese steel rebar 25mm US$810.6/t vs US$812.3/t

Thermal coal (1st year forward cif ARA) US$81.7/t vs US$80.6/t

Coking coal swap Australia FOB US$125.3/t vs US$125.3/t

           

Other: 

Cobalt LME 3m US$43,650/t vs US$43,650/t

NdPr Rare Earth Oxide (China) US$75,750/t vs US$76,460/t

Lithium carbonate 99% (China) US$12,677/t vs US$12,704/t

China Spodumene Li2O 5%min CIF US$640/t vs US$640/t

Ferro-Manganese European Mn78% min US$1,800/t vs US$1,804/t

China Tungsten APT 88.5% FOB US$270/t vs US$270/t

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

Europe Vanadium Pentoxide 98% $8.3/lb vs $8.3/lb

Europe Ferro-Vanadium 80% $39.25/kg vs $38.75/kg

 

Battery News

Russian government to invest big in EVs

The Russian government plans to invest $10.5b into electric and hydrogen vehicle development by 2030.

The figure comes after a recent announcement that the government planned to invest $5.5b into EVs, but reports claim that a newer version of the plan details a $10.5b investment.

In the next 9 years Russia’s EV share of the auto market could grow from 0.05% up to 15%, with 1.5m EVs, supported by 20,000 charging stations.

Uptake of EVs in Russia has been incredibly slow, with only 353 EVs sold in 2019 and 687 sold in 2020. There is also no manufacturing of EVs in Russia, but Ford is set to become the first mass producer of EVs in 2022.

 

New UK developer unveils £10bn North Sea plan

Green infrastructure developer Cerulean Winds have revealed a £10bn plan to decarbonise oil and gas assets in the North Sea with a 200-turbine wind and hydrogen development.

The developer has submitted a request for seabed leases to Marine Scotland for projects off Shetland and in the central North Sea.

Cerulean claims the project would be able to electrify the majority of UKCS assets as well as future production from 2024 to reduce emissions.

 

Company News

Altus Strategies* (LON:ALS) 63p, Mkt Cap £50m – Drilling at Tabakorole grows the mineralisation along strike

BUY

Marvel Gold, a JV partner on Tabarkorole and Lakanfla gold projects in Mali, released an exploration update yesterday.

The update covers diamond drilling results at Tabakorole that extended gold mineralisation along strike by 150m.

Selected intersections included:

2.99 g/t gold over 10m from 187m (hole 21TBKRCDD001)

1.22 g/t gold over 12m from 167m (hole 21TBKDD002)

Additionally, the project area under the JV was nearly doubled with the addition of two new adjacent exploration properties (Npanyala and Npanyala West) covering 87km2.

Separately, Marvel completed a ground magnetic survey over the Tabakorole license, as well as multi-element soil geochemistry, with results currently pending.

The data will help guide the next set of regional exploration works to target potential satellite deposits.

Marvel Gold currently owns a 51% interest in the project with the current exploration programme set to take the interest to 70%.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Gem Diamonds (LON:GEMD) 74.98p, Mkt Cap £105m – Gem Diamonds donates 20,000 Covid-19 vaccine doses to Lesotho

Gem Diamonds is donating 20,000 Johnson & Johnson Covid-19 vaccines to the people of Lesotho.

The company is working closely with Ministry of Health in Lesotho and has also donated a modular unit for use as a testing laboratory and some 17 oxygen concentrator machines to ten hospitals and clinics throughout Lesotho.

The Gem team are also working to raise community awareness and implement measures such as distributing food parcels, seeds for sustainable vegetable crops and personal protective equipment, including masks, hand washing taps and hand sanitisers among local communities.

Gem recently reported the recovery of a 370 carat white Type IIa diamond from its Letšeng mine following on from the finding of a similar 254 carat diamond earlier in May and a 233ct stone in September 2020 and a 442 carat diamond in August 2020.

The Letšeng mine has recovered >760 diamonds larger than 10 carats last year.

 

GoldStone Resources* (LON:GRL) 11.9p, Mkt Cap £41.8m – Warrant exercise provides £1.5m funding to company

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GoldStone reports that Asian Investment Management Services (AIMS) has exercised in aggregate 50,000,000 warrants at a price of 3 pence per ordinary share – providing £1,500,000 of additional funding to the Company.

It is expected that Admission will become effective and dealings in the new Ordinary Shares will commence at 8.00 a.m. on 8 June 2021.

On Admission, AIMS will hold 122,000,000 Ordinary Shares in the Company, representing approximately 29.91 per cent. of the Company’s then issued share capital.

*SP Angel act as Broker to GoldStone Resources

 

Savannah Resources* (LON:SAV) 3.5p, Mkt Cap £59m – FY20 results highlight cost control measures and reduced exploration spend amid Covid pandemic

BUY

Financial results reflect cost controls implemented to mitigate potential disruptions caused by the pandemic as well as reduced exploration related work amid government restrictions on movement and social distancing guidelines.

Administrative costs came down to £3.0m (2019: £3.6m) with senior management and remunerated Board members taking a temporary 20% reduction in salaries as part of cost saving measures in Mar/20.

Exploration spending was reduced to £1.6m (2019: £3.9m).

Loss from continuing operations was reduced to £2.9m (2019: -£3.6m) reflecting lower administrative costs.

Total loss came in at £8.3m (2019: -£3.8m) on the back of a booked £5.4m loss from disposed Oman operations during the year.

Closing cash balance as of Dec/20 stood at £2.0m with no debt.

In 2021 the team is expecting to secure an environmental approval, complete the DFS as well as agree a potential partnership/investment at the flagship Mina do Barroso lithium project.

The Company is well funded to deliver on set targets having completed an oversubscribed placing of £10.3m in April this year.

*SP Angel act as Nomad to Savannah Resources

 

SolGold* (LON:SOLG) 36.5p, Mkt Cap £836m – SolGold and Cornerstone agree to work cooperatively to advance the Alpala project at Cascabel in Ecuador

(Cornerstone Capital holds 7.6% of Solgold equity and 15% of the Cascabel licenses containing the Alpala project giving Cornerstone a combined direct and indirect 21.4% interest in the Cascabel Project and the projects falling within the Cascabel area of mutual interest)

In a rare display of common sense, the two principal warring factions over the Alpala project have agreed to work cooperatively.

Cornerstone rejected SolGold’s hostile offer to acquire Cornerstone last year publically highlighting a number of issues at SolGold at the time.

SolGold’s offer to consolidate its ownership of the Cascabel licenses was rejected as a majority of the shares must accept a bid before any shares can be taken up under Canadian take-over rules.

The two groups now agree to work to advance the Cascabel Project, to explore and evaluate a range of strategic and financing options and to focus on maximizing Cascabel project value.

The Alpala project has a measured and indicated resource of 2.663bnt grading 0.53% copper equivalent containing 0.37% copper, 0.25g/t gold, 1.08 g/t silver at a cut-off grade of 0.21% CuEq

The resource also has an additional 544mt classed as inferred at an average grade of 0.31% CuEq.

45% of the resource is classified as measured in terms of the NI-43-101 Reporting Code

SolGold’s May 2019 PEA for Alpala envisages production rates in the range 40-60mtpa ranking Alpala among the largest, and possibly most complex, block caving operations in the world. 

By comparison Rio Tinto’s Oyu Tolgoi Lift 1 cave at the Hugo North deposit in Mongolia envisages production of just 33mtpa served by 5 shafts extending to depths of 1300m.

We understand the Alpala Project Committee is reviewing the optimal scale, required financing profile and ways to extract the higher grade material early in the project life.

Conclusion: The nature and challenges presented by the future development of the Alpala project requires the cooperation of the groups concerned including BHP (11.18%) and Newcrest (13.7%) as significant shareholders in SolGold.

*SP Angel act as Financial Advisor to SolGold.

 

Recent Interviews:

BBC:  Catalytic converters  https://www.bbc.co.uk/sounds/play/p09jl6c9

IGTV:  Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw

Improved global economic forecasts from the IMF provides trading opportunities:  https://www.youtube.com/watch?v=_GXKPqzuCG0

VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw

VOX Markets:  28/04/20: https://www.voxmarkets.co.uk/media/60896b3f017903524c8e0936/?context=/listings/LON/BMN/multimedia/

21/04/20: https://www.voxmarkets.co.uk/listings/LON/BMN

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.

We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.

 

No.1 in Copper:  “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an  accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

 

Analysts

John Meyer – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Joe Rowbottom – [email protected] – 0203 470 0486

 

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – [email protected] – 0203 470 0471

 

 

SP Angel                                                            

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, Tungsten, Spodumene, Ferro-Manganese, Graphite

Asian Metal

 

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