SP Angel Morning View -Today’s Market View, Monday 17th July 2023

Rio Tinto investment into Sovereign Metals highlights drive for more graphite and titanium

MiFID II exempt information – see disclaimer below

Pre-IPO financing for High-Purity Alumina project

Li-ion batteries use a separator membrane made out of High-Purity Alumina

1. High-Purity Alumina (HPA) is an inert chemical with high thermal stability. It gives good heat resistance and insulation making it ideal as a coating for separator membranes.

1. The project alumina has been shown to be suitable for Li-ion batteries, LED lighting and synthetic sapphire for smartphones and tablets,
2. The resource contains a JORC inferred resource sufficient for 10,000 – 20,000tpa of HPA >30 years
3. The process uses an innovative process flowsheet combining commercial proven technologies with recent metallurgical tests producing 99.995% alumina.
4. CRU estimate demand for HPA powder could reach 187,000t in 2028 from 19,000t in 2018.
5. CRU predict substantial demand growth led by Li-ion battery and LED production,
6. Price: High-purity alumina sells for ~$30,000/t today up from $24,000/t in 2018,
7. The company looking to fund HPA studies, metallurgical work, working capital and listing costs

*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.

Anglo Asian Mining* (AAZ LN) – Tailings dam update

Bushveld Minerals*(BMN LN) – Primorus convertible loan note update

Rainbow Rare Earths (RBW LN) – Rainbow signs non-binding MoU with Mosaic on Uberaba phosphogypsum resource in Brazil

Sovereign Metals* (SVML LN) – Rio Tinto make $40.4m investment into Sovereign for its Kasiya Rutile-graphite project in Malawi

Phoenix Copper* (PXC LN) – Drilling begins at Navarre Creek to target hydrothermal precious metal deposition

SolGold* (SOLG LN) – 25-year Renewal of Cascabel Project Concession

Versarien* (VRS LN) – £650,000 raised to assist with asset sales

Wishbone Gold* (WSBN LN) – Gravity survey results show on the Cottesloe Project, Paterson Range

VOX Markets:  14/07/2023: https://audioboom.com/posts/8334912-john-meyer-on-china-s-deflation-plus-bushveld-minerals-empire-metals-strategic-minerals

*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.

Gold (US$1,956/oz) – Gold holds higher following sharp move lower in dollar

• Gold prices are holding around the $1,955/oz mark following a bounce of monthly lows last week.
• Gold bounced to a monthly high last week following US CPI data showing a clear disinflationary trend.
• This pressured real yields from their 2008 highs, supporting gold prices.
• The dollar has weakened on signs the Fed may be nearing the end of its hiking cycle whilst EU, the BOJ and the BOE look to hold monetary policy tighter.

Copper (US$ 8,549/t) – prices pull back following gains on US dollar weakness last week

• Traders reckon the macro funds see copper as reflecting slower Chinese GDP growth.
• But official GDP growth is reported at +6.3% yoy in China today.
• Copper is also heading into a new era with development of substantial new distributed renewable power generation and the need to supply power to EVs.
• The drive towards greater electrification means that copper should outperform traditional macro estimates..

Mali government considers increasing stake in mining operations to 35% (Reuters)

• A new mining code draft seen by Reuters suggests the Mali government is in talks with gold miners over increasing its stake in new projects.
• The code suggests a potential jump from 20% to 35% for a government interest.
• The draft would provide the government with a 10% stake on receipt of a mining permit, followed by the option to buy an additional 20% stake within the first 24 months of commercial production.
• 5% would be ceded to local stakeholders.
• Currently, the mining code gives the state the right to 10% of a project and the option to acquire an additional 10% stake.
• In response to the report, Barrick stated they are ‘confident’ that Mali will remain an attractive mining jurisdiction through ‘constructive dialogue.’
• Mali already owns a 20% stake in the Loulo-Gounkoto and Fekola mines.
• It is not clear whether the change would be subject purely to gold mining operations or whether other mineral projects, such as the Bougouni and Goulamina lithium projects, would be affected.

Diamond market collapse continues as Synthetic Lab Grown Diamonds steal market with jewellers pocketing big margins along the way

• DeBeers report price cuts from 5-15% in several categories of stones from 0.75cts and up, with an emphasis on 2ct stones.
• Rapaport report that prices of 1ct diamonds have fallen by 24% yoy marking a very substantial decline in a market that used to be remarkably steady.
• Let’s not mince any words here. Greedy jewellers are pillaging the diamond market through the sale of low-cost LGDs to consumers.
• Some might even suggest a LGD is equivalent to a natural diamond, problem is that LDG costs and prices are falling, while the cost of recovering natural mined diamonds is still rising.
• Giving a valuable asset to a loved one is a popular idea but giving a beautiful piece of jewellery is also a great idea, but giving something that purports to have value but where the main stone loses most of its value is a rubbish idea that might just leave the giver in the dog house.
• The diamond industry needs to get a grip of this before consumers move onto something which is better at preserving its value.

Economics

China – The economy lost growth momentum in Q2/23 as GDP climbed 0.8% qoq, down from 2.2% recorded in Q1/23.

• Slower growth is attributed to falling exports, weaker retail sales and continuing challenges in the property sector.
• Exports were down 8.3%yoy in June while retail sales expanded only 3.1% compared to 12.7% recorded in May.
• Private investments was little changed in the first six months of the year (-0.2%yoy) while infrastructure investment, regarded as a proxy for government stimulus measures, climbed 7.2%yoy.
• Q2 GDP YoY +6.3% [Est.+7.3%;Prev.+4.5%]
• Q2 GDP QoQ +0.8%[Est.+0.5%;Prev.+2.2%]
• Unemployment Rate(16-24yo) 21.3% [Prev. 20.8%]
• June Retail sales 3.1% y/y [Est.3.2%]
• June industrial growth 4.4% y/y [Est.2.7%]

China June property sales show accelerating weakness in concern for base metals

• China property sales by floor area fell 28.1% yoy, vs a 19.7% fall in May.
• Property investment in June fell 20.6% in June following a 21.5% drop in May.
• China’s property market accounts for c. 25% of Chinese GDP.

UK – Property sales are down 12% in July compared to pre-Covid 2019 levels as higher mortgage costs weigh on demand, Rightmove data showed.

• Prices are 3% compared to July in 2019 driven by a “shortage of property for sale”.
• Prices were down 0.2%mom.

Russia/Ukraine – Russian authorities halted traffic over the Crimea bridge connecting the peninsula with Krasnodar Region of Russia following a explosion caused collapse of one of sections.

• Blasts are reported to have been heard before dawn on the 19km long road and bridge.
• Two people are reported to have been killed as a result of the explosion, Reuters reports.
• Moscow blames Ukraine special services. Kiev denies involvement in the explosions.

US – Biden administration forgives $39bn of Student Debt

• UK Universities ramped up tuition fees when the government created the student debt scheme – an unintended consequence of the policy to create a market in the cost of signing onto a degree..
• Sadly, adjusting the cost of university courses towards their true economic value to the UK is probably beyond the will and power of most governments.
• Incidentally, a total lack of university education in Ukraine since the war started could leave a generation of aspiring doctors, nurses and some other professions significantly short of somewhere to study.

Currencies

US$1.12/eur vs 1.088/eur last week. Yen 138.62/$ vs 143.43/$. SAr 18.018/$ vs 19.022/$. $1.308/gbp vs $1.274/gbp. 0.681/aud vs 0.662/aud. CNY 7.175/$ vs 7.243/$.

Dollar Index 99.86 vs 103.06 last week

Commodity News

Precious metals:

Gold US$1,956/oz vs S$1,955/oz last week

Gold ETFs 92.1moz vs 92.1moz last week

Platinum US$975/oz vs US$967/oz last week

Palladium US$1,258/oz vs US$1,280/oz last week

Silver US$25.07/oz vs US$24.74/oz last week

Rhodium US$4,350/oz vs US$4,350/oz last week

Base metals:   

Copper US$ 8,549/t vs US$8,625/t last week

Aluminium US$ 2,254/t vs US$2,268/t last week

Nickel US$ 21,284/t vs US$21,225/t last week

Zinc US$ 2,391/t vs US$2,436/t last week

Lead US$ 2,109/t vs US$2,107/t last week

Tin US$ 28,543/t vs US$28,575/t last week

Energy:           

Oil US$79.0/bbl vs US$81.1/bbl last week

• Crude oil prices fell on disappointing economic data from China and the resumption of oil flows from two of the three Libyan oilfields that were shut-in last week.
• The US Baker Hughes rig count was down 5 units to 675 rigs last week (-81 or 11% y/y), with oil rigs down 3 to 537 units and gas rigs down 2 to 133 units, including a fall of five units in the Permian basin.

Natural Gas US$2.557/mmbtu vs US$2.544/mmbtu last week

Uranium UXC US$55.40/lb vs US$55.40/lb last week

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$112.4/t vs US$110.1/t

Chinese steel rebar 25mm US$528.6/t vs US$525.1/t

Thermal coal (1st year forward cif ARA) US$101.0/t vs US$108.5/t

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

Coking coal swap Australia FOB US$225.0/t vs US$225.0/t        

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$61,892/t vs US$60,109/t

Lithium carbonate 99% (China) US$41,658/t vs US$41,491/t

China Spodumene Li2O 6%min CIF US$4,080/t vs US$4,080/t

Ferro-Manganese European Mn78% min US$1,127/t vs US$1,120/t

China Tungsten APT 88.5% FOB US$315/mtu vs US$315/mtu

China Graphite Flake -194 FOB US$685/t vs US$685/t

Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb

Europe Ferro-Vanadium 80% 32.25/kg vs US$32.25/kg

China Ilmenite Concentrate TiO2 US$309/t vs US$305/t

Spot CO2 Emissions EUA Price US$94.6/t vs US$94.0/t

Brazil Potash CFR Granular Spot US$335.0/t vs US$335.0/t

Company News

Anglo Asian Mining* (AAZ LN) 73p, Mkt Cap £83m – Tailings dam update

BUY – Under Review

• The Company released an update regarding the second tailings dam planned next to the existing dam at the Gedadek operations.
• Authorities previously granted necessary land allocation for the second tailings dam.
• However, the location of the second tailings dam is reported to have been subject to protests recently.
• In response, the Company and government authorities agreed to re-evaluate technical and environmental data of the second tailings dam.
• The re-evaluation will be carried by an independent international consultancy under the agreement with the Ministry of Ecology and Natural Resources.
• The process will be assisted by CQA, the Company’s local environmental engineers, and Knight Piesold, the Company’s tailings management consultants.
• The Company is currently working with authorities to lay out a protocol for the Environmental Study that is expected to be completed in the coming days.
• Recently, government agencies supported by independent laboratories carried environmental sampling of the area surrounding the existing tailings dam for potential leakages, with results returning no contamination.
• While the second tailings dam is going through the Study, available capacity in the existing tailings dam is enough to support operations with another wall raise that was technically approved and agreed by authorities subject to the usual approvals and the completion of the study.
• Nevertheless, before the study is finalised and any identified work is completed, the Company expects to suspend Gedabek tailings disposal from flotation and agitation leaching plants into the existing tailings dam.
• The team is planning to update its production guidance (50-54koz AuEq incl 30-32koz gold and 4.1-4.3kt copper, previously) once the protocol is finalised.

Conclusion: The update is an unfortunate and unexpected development given a long history of successful and responsible operation at the Gedabek mining and processing complex. The Company has got a good track record of operating facilities in compliance with all relevant regulations with strong community relations employing nearly 1,500 people from Gedabek. The existing tailings dam is designed and constructed as a downstream facility that is a more costly option but at the same time more structurally stable and secure compared to upstream and centerline options that in turn highlights the team’s focus on security and sustainability of operations. Previous tests of the area surrounding the existing tailings dam returned no contamination with the Company employing well respected international consultants (Knight Piesold) in designing and auditing its existing and proposed tailings dam.

Commenting on capacity of existing tailings dam as the second one is going through the review process, the Company comments that a wall raise is able to accommodate operations in the meantime while also the team has been constructing an additional dam next to its mining operations that can also be used in the future.

While flotation and agitation processing facilities are expected to be paused, we expect underground development works including Gilar as well as heap leaching operations to remain unaffected in the meantime.

We are confident that the Company will be able to finalise the process with regulators regarding the review of the second tailings dam but have placed out target valuation under review until the Company releases an updated guidance.

*SP Angel acts as nomad and broker to Anglo Asian Mining

Bushveld Minerals*(BMN LN) 3.4p, Mkt Cap £44m – Primorus convertible loan note update

BUY – 15.8p

• The Company released an update on the outstanding convertible loan note with Primorus Investments last week.
• Under the agreement, the total principal and accrued interest currently standing at ~£910k Primorus will take a repayment in cash as opposed to shares.
• Bushveld will make an initial payment of $150k followed by bi-weekly payments of $125k to Primorus until the final payment is completed before 30 November 2023.
• During the repayment, the outstanding balance will be charged a 10% annual rate.

Conclusion: The agreement allows the Company to meet its obligations avoiding  dilution at currently low share price levels.

*SP Angel act as nomad and broker to Bushveld

Phoenix Copper* (PXC LN) 26p, Mkt Cap £29m – Drilling begins at Navarre Creek to target hydrothermal precious metal deposition

(Phoenix holds 80% of the Empire mining property in Idaho)

CLICK FOR PDF

• Phoenix Copper reports it has begun its 2023 drilling programme at its Navarre Creek site in Custer County, Idaho.
• The project is highly prospective for gold mineralisation and lies five kilometres west of the Company’s flagship Empire mine copper oxide deposit.
• The programme will run over 30 drill pads and comprise of 60 RC drill holes.
• The campaign is intended to follow up on promising geologic mappic, surface geochemistry, airborne hyperspectral mineral imaging and geomagnetic ground surveys.
• Navarre covers 14.48 km², within which is over 6km of prospective strike length, including 2.5km of highly brecciated jasperoid intersecting altered Eocene Challis volcanics.
• Mineralisation is understood to be contained within a jasperoid-hosted quartz stockwork and micro-veining system.
• Navarre Creek sits within an intrusive dome structure, with silicic alteration pointing to associations with steam-heated, acidic and oxidised hydrothermal fluids, prospective for precious metal mineralisation.

Conclusion: Phoenix has laid strong early-stage exploration foundations at Navarre Creek which have warranted the progression to a maiden drilling campaign. We look forward to the programme’s results as and when they are ready.

*SP Angel acts as nomad to Phoenix Copper

Rainbow Rare Earths (RBW LN) 13.71p, Mkt cap £82m – Rainbow signs non-binding MoU with Mosaic on Uberaba phosphogypsum resource in Brazil

• Rainbow Rare Earths has signed a non-binding MoU with Mozaic, the world’s pre-eminent phosphate and potash fertilizer supplier.
• The two companies have agreed to jointly collaborate on the development of a process flowsheet and work on a PEA for the extraction of REEs from the Uberaba process plant in Brazil.
• Mozaic have been extracting phosphates from a number of phosphate mines in Brazil for over 25 years where they have accumulated substantial stockpiles of phosphogypsum residue.
• Mosaic process some 2.9mtpa of phosphate material from their mines in Brazil resulting in around 1.5mtpa of phosphogypsum residue which is stacked at Uberaba.
• Rainbow reckons Mosaic produces some 6mtpa of fresh phosphogypsum
• Very rough examination of ariel photos appears to indicate that Mozaic’s Uberaba’ phosphogypsum stacks are around twice the size of Phalaborwa.
• Technology: Rainbow are working with K-Tech in Florida on a process to extract Rare Earths Elements using a CIX circuit for loading RE Elements onto cation resin before a CIC ‘continuous ion chromatography’ process.
• K-Tech in Florida expect the process should result in the separation of 99.95% rare earth oxides using their patented CIX/CIC technology.
• Uberaba mine processes around 1.5mtpa of DCP ‘dicalcium phosphate’, MAP ‘Monoammonium Phosphate’ and TSP ‘Triple superphosphate, nutrient fertilizers for crops through the reaction of desulphurised phosphoric acid with limestone slurry.
• We look forward to seeing further terms clarifying the details of a potential joint venture following this non-binding MoU.

Conclusion:  Rainbow are expanding their effective resource base through agreement with other large-scale phosphate producers. The company already has a cooperative agreement with OCP in Morocco as well as 85% ownership of the Phalaborwa project in South Africa.

SolGold* (SOLG LN) 16.4p, Mkt Cap £509m – 25-year Renewal of Cascabel Project Concession

• SolGold announces today that it has received the Term Renewal from the Ecuadorian Ministry of Energy and Mines for its Cascabel Project.
• The Company has received the Term Renewal of the Cascabel Mining Concession through to 2048, with the option to request additional renewals following that 25-year period.
• The Term Renewal covers c.5k of contiguous hectares and enables a large-scale mining regime in line with the Country’s mining regulations.

Conclusion: The 25-year renewal of SolGold’s Cascabel Project by the Ecuadorian Government demonstrates a key vote of confidence in the Project from the administration. This provides SolGold’s shareholders with longer-term conviction in Management’s plans to progress the project through to production.

*SP Angel acts as Financial Advisor to SolGold

Sovereign Metals* (SVML LN) 29p, Mkt Cap £129m – Rio Tinto make $40.4m investment into Sovereign for its Kasiya Rutile-graphite project in Malawi

• Sovereign Metals report the signing of a deal whereby Rio Tinto will invest $40.4m into Sovereign for a 15% stake in the company.
• Sovereign will issue 83m new shares at A$0.486 (25.4p/s) marking a 10% premium to the 45-day VWAP prior to 14 July on the ASX.
• Rio Tinto are also subscribing to 34.5m options which, if exercised, would represent an additional 4.99% of the company bringing Rio’s stake to 19.99%.
• The one-year options could bring in an additional A$18.5m if exercised at A$0.535/s representing a 21% premium to the same 45-day VWAP.
• This would bring Rio’s total investment into Sovereign to A$58.9m
• Funds are to be invested into progressing Sovereign’s Kasiya project towards a Definitive Feasibility Study.
• M&A:  While we suspect it is too early for Rio Tinto to make an outright bid for Sovereign Metals, this must surely be an end-game for Rio Tinto once the technical quality of the project is confirmed and agreement has been established with the government of Malawi to mine the Kasiya project.
• Rios will be careful not to go over 19.99% till they are sure they want to fully acquire Sovereign due to the Austalian takeover code which requires a mandatory bid once an investor raises its stake >20%.
• Project scale: We expect the Rio Tinto technical team to look to enlarge the scale of the Scoping Study for the DFS.
• The Scoping Study was done on just 30% of the resource leading to substantial potential for further expansion.
• We can easily see this expanding to >50% of the overall 1.8bnt resource for the DFS study on further confirmatory work.
• Kasiya resource:
  • Rutile resource: 1.8bnt grading 1% for 17.9mt of contained rutile equivalent
    • Indicated: 1.2bnt grading of 1% rutile and 1.5% graphite
    • Inferred: 0.6bnt grading 0.9% rutile and 1.1% graphite
  • Graphite resource: 1.8bnt grading 1.4% graphite for 24mt of graphite.
• Technical teams:  We expect Rio Tinto to add significant personnel to the DFS technical team along with a general manager and an observer
• ROFR / ROFO:  Rio Tinto are not able to sit on the project once the DFS has been published. If Rio Tinto decides not to be the operator within 90 days of the publication of the DFS then Rio will lose all pre-emption and marketing rights. These rights also disappear if Rio Tinto’s stake in Sovereign falls below 10%.
• Graphite:  Rio Tinto recently announced a new manufacturing research laboratory in Australia to work on the development of it’s EV battery business.
• We understand this laboratory will work on the ‘qualification’ of battery materials including graphite for sale into the world’s gigafactories.
• We expect this could be useful for the graphite to be mined out of the Kasiya deposit which is said to look identical to the graphite material from Sovereign’s recently demerged Malingunde graphite project.
• An initial four tonnes of flake graphite pre-concentrate has been produced at Sovereign’s laboratory in Malawi for despatch to SGS Lakefield for further testing.
• Early test work on the quality and shape of the graphite particles indicates Kasiya graphite should be suitable for sale into the Li-ion battery market.
• The Sovereign team have already secured rutile offtake MOUs with Mitsui and Chemours, a US based titanium technology company and titanium dioxide producer.
• Titanium: Rio Tinto are one of the world’s larger producers of titanium dioxide with mining operations in Canada, Madagascar and South Africa.
• Rios are also said to be looking into production of their own titanium metal in addition to the titanium dioxide they already produce
• Decarbonisation: Rio Tinto are focussed on decarbonising their Titanium Dioxide business. The potential future addition of the Kasiya project should serve to work towards decarbonisation of the business through Kasiya’s lower carbon profile.
• The dual extraction of both materials is a major benefit from a CO2 perspective.  Furthermore, the use of hydro-mining with high-pressure hoses should enable particularly low cost and low CO2 mining.  There are also lesser health concerns from the potential inhalation of graphite and related silica particles during mining and processing using this simple mining method. Hydro-mining also serves to preserve graphite flake size and quality.
• De-risking:  The Kasiya project should also serve to de-risk the Titanium Dioxide business through the addition of a further source of high-quality ilmenite-rutile feedstock. Rio Tinto operate ilmenite (titanium) mines  in Madagascar, South Africa and Canada. Each of these mines suffer local issues which will be de-risked through the addition of a supplementary source of rutile/ilmenite concentrate
• Terms: Sovereign and Rio Tinto have also entered into an Investment Agreement whereby:
  • If Sovereign is raising debt finance for the development of the Project, Sovereign and Rio Tinto will negotiate, in good faith, financing arrangements in order to put in place an acceptable mine construction funding package.
  • Sovereign and Rio Tinto will work together to qualify Kasiya’s graphite product with a particular focus on supplying the spherical purified graphite segment of the lithium-ion battery anode market.
  • Rio Tinto shall have the option to become the operator of Kasiya on commercial arm’s-length terms.
  • For so long as Rio Tinto is the operator of the Project, Rio Tinto shall also have exclusive marketing rights to market 40% of the annual production of all products from the Project as identified in the DFS on arm’s-length terms.
  • Rio Tinto’s option over operatorship and 40% marketing rights lapse if not exercised by the Investor End Date.
  • The “Investor End Date” means the earlier of (i) 90 days after the Company announces its DFS results or 180 days after the announcement of the DFS if Rio Tinto’s advises it needs additional time to consider the exercise of the Rio Tinto’s Option or (ii) Rio Tinto ceasing to hold voting power
  • in the Company of at least 10%.
  • Rio Tinto shall be entitled to appoint (i) a director to the board of the Company or an observer to the Board where it has not appointed a director, (ii) one of its General Managers with access to the Project and (iii) three members to the Project’s Technical Committee (one of which is Rio
  • Tinto’s appointed General Manager).
  • Rio Tinto will have the right of first refusal over any future capital raisings that are not pro rata entitlement offers as long as it holds a minimum of 10% of the issued share capital of the Company and subject to Rio Tinto’s aggregate holding not exceeding 19.99%.
  • As long as it holds a minimum of 10% of the issued share capital of the Company and until the Investor End Date, Rio Tinto will have a pre-emptive right over any offer from a third party to acquire any of the shares in, or the assets held by, any of Sovereign’s subsidiaries with interests in the Project.
• Rio Tinto also have a right of first refusal on equity fund raisings so long as Rio Tinto’s stake does not fall below 10% or exceed 19.99%.
• Rio Tinto also has a pre-emptive right of first refusal on the Kasiya project if there is an offer from a third party.
• Rio Tinto also has an option to be appointed as an operator of the Kasiya project on arm’s length terms and an exclusive right to 40% of the annual production of all products so long as Rio Tinto remain the project operator.
• Risk:  Malawi, which is best known for the quality of it’s coffee, is not entirely new to mining but the planned development of a number of new larger-scale mines in the country looks like it will transform the nation’s finances and employment.
• Brining a group like Rio Tinto into Sovereign substantially de-risks the Kasiya project not just through the A$40.4m of committed funding but through the addition of technical expertise particularly in process engineering.
• Due diligence: Rio Tinto teams will have conducted site visits as part of their due diligence for this deal. We would expect those teams to have collected samples for mineralogical assessment and should therefore have a good idea of the quality of the mineral assemblages to be mined and processed.
• We believe Sapan Ghai, Chief Commercial Officer and Ben Stoikovich, Chairman spearheaded the negotiations with Rio Tinto from Sovereign’s London office.
• We expect the Kasiya rutile/ilmenite and graphite mine could turn into a ‘world-class’ project with the involvement of Rio Tinto.

Conclusion:  This is a great deal for Sovereign, it gives the company the funding it needs to develop the Kasiya project at a premium to the prevailing price.

It gives shareholders significant upside to increasing the scale and value of the project. It gives new investors the ability to come in and share the upside potential with the benefit of the Rio Tinto finance and expert support. It helps to accelerate the Kasiya project development and it allows potential for rival bids.

*SP Angel act as Nomad and broker to Sovereign Metals.  

Investors should note, there is still much to know about the Kasiya Rutile-graphite deposit and while Rio Tinto’s confidence in the project is a major step forward in de-risking the project it is not a complete cast-iron guarantee of success.

Versarien* (VRS LN) 1.32p, Mkt Cap £3.5m – £650,000 raised to assist with asset sales

• Versarien report the raising of £650,000 at 1p/s.
• The funds are to be used for working capital and as a bridge to finance the company ahead of funds received from asset sales.
• The team, led by turnaround specialist, David Stone, and his firm Prompt Business Strategies is looking to sell its mature businesses and the intellectual property and plant acquired from Hanwha Aerospace in 2020 with a number of interested parties reviewing information in the data rooms.
• Chris Leigh, CFO and Stephen Hodge,CTO both participated in the fund raising.

• Versarien recently reported success in the use of its CementeneTM concrete mix when added to cement in trials done by Banagher, precast concrete experts.

Conclusion:  Versarien have graphene and non-graphene related assets. We await news on the sales process.

*SP Angel acts as Nomad and Broker to Versarien

Wishbone Gold* (WSBN LN) – 1.66p, Mkt Cap £3.3m – Gravity survey results show on the Cottesloe Project, Paterson Range

See link for recent note: CLICK FOR PDF

• Wishbone Gold report encouraging results from the gravity survey over the Cottesloe Project, Paterson Range, Western Australia.
• Combining gravity, magnetics, Geochem and drill data indicates a substantial conductive target and potential for discovery on the Cottesloe prospect.
• Cottesloe now appears to be a relatively well-defined potential base metal anomaly covering 2.5km with anomalous rock chip and soil samples indicating a potential 8km strike.
• The Cottesloe Project contains a basinal syncline within the Broadhurst Formation, which consists of carbonaceous shales and siltstones which are termed pyritic horizons.
• Previous RC and RAB drilling at the keel of this syncline had showed anomalous base metal mineralisation in the oxidized zone.
• This Broadhurst formation, as seen at Cottesloe, hosts the nearby world-class Nifty copper mine, alongside the Maroochydore sediment-hosted copper deposits.
• Nifty holds 99mt @ 1.63% Cu.
• The Broadhurst formation also bears similarities to the Mt Isa Formation, which hosts the George Fisher Zn-Pb-Ag deposit and the Mt Isa Copper Deposit.
• The team highlights two notable gravity highs coincident and near-coincident with the MMT-C1 resistive target, which lies within the syncline where previous drilling has registered base metals anomalies within a weathered zone. As a result, Wishbone will prioritise this target for initial drilling owing to its combined structural and resistive encouraging nature.
• Cottesloe is located ~55 km south of Newcrest’s Telfer Gold Mine and about 35 km south-east of Wishbone’s Red Setter Project in the Paterson Range.
• The Paterson area of WA is seeing a resurgence of exploration interest following discoveries by Rio Tinto at Winu and Newcrest/Greatland Gold at Havieron.

Conclusion:  Wishbone is narrowing down its targets for drilling at Cottesloe. The target has potential for significant discovery considering the presence of a number of other world-class mines and projects in the region. In this case Wishbone’s ‘near-ology’ appears to be backed up with some promising gravity surveys showing a favourable structural setting and anomalous resistivity and gravity highs. The combination of data sets has provided the Company with a clear anomalous target warranting additional exploration and drill testing.

SP Angel Acts as Broker to Wishbone Gold

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 – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

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

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

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