China trusts miss more payments intensifying liquidity crisis
MiFID II exempt information – see disclaimer below
Ariana Resources (AAU LN) – Maintaining gold production guidance as H1 production at Kiziltepe meets expectations
Adriatic Metals* (ADT1 LN) – Exploration update at Rupice Northwest
Beowulf Mining* (BEM LN) – Management changes at Jokkmok Iron Ore Subsidiary
Capital Limited (CAPD LN) – Maintaining 2023 revenue guidance after 11.7% rise in H1 aided by the Ivindo Iron contract in Gabon
Chaarat Gold (CGH LN) – Conditional sale of Kapan Polymetallic Mine
Evolution Energy Minerals (EV1 AU) – Offtake agreement for fine flake graphite from Chilalo
Great Southern Copper (GSCU LN) – Early exploration encouragement from the San Lorenzo prospect, Chile
GreenRoc Mining* (GROC LN) – Interim results highlight progress over future re-opening of Amitsoq graphite mine in the south of Greenland
Thor Explorations (THX LN) – Initial drill results from lithium-bearing pegmatite exploration project in Nigeria
Tungsten West (TUN LN) – Signs that some of Hemerdon’s technical issues are being resolved while further financial disciplines are implemented
Copper weakness continues as stocks rise and downstream users tighten purse strings
- Copper prices continue to hold lower at levels around the $8,200/t mark.
- Yesterday’s dump of disappointing Chinese data has fuelled pessimism on the metal, with Beijing holding off large-scale, infrastructure-based stimulus.
- Over the past month, LME copper stocks have jumped 52.3% to 90kt.
- Reuters reports Chinese copper rod producers are taking losses on tons sold at the moment, expecting continued weak demand over the next few months.
- China’s property market seems to be going from bad to worse, with key investment trust Zhongrong International Trust Co missing several payments on investment products last month.
- New home prices fell in July for the first time in July, whilst new home prices in smaller cities fell for the 17th straight month y/y.
Gold holds lower levels amid volatile Treasury markets and delayed Fed cuts
- Gold prices continue to hover around the $1,905/oz mark, having slid below $1,900/oz briefly yesterday.
- Real yields continued to march higher yesterday as investors sold off Treasury positions.
- Traders are eyeing the Fed’s forward-looking rate path, with strong US retail sales yesterday discouraging bets on an imminent rate cut.
- Gold ETFs are unpopular, wih no inflows reported to the SPDR trust since July.
Where does it all go from here – is this as bad as it gets from a valuation perspective?
- It is mid-August, markets are risk-off, many people are away, and the junior staff are running the show.
- So are UK junior and mid-cap mining equities as low as they will likely go?
- And will we see a pickup in new investment interest as investors return in the Autumn
- Or will investors wait till after the October witching hour before committing fresh capital to small cap equities
- China & commodities
- Chinese growth is collapsing, such that the authorities have stopped reporting youth unemployment.
- Rumours suggest China’s youth unemployment may be far higher than the official 21% figure while reports indicate factories are laying off workers as exports collapse.
- China has growth at a near-impossible rate over the past 20-30 years, far beyond the most optimistic of projections lifting China into second place
- China GDP = US$19.4tn vs the US at $26.9tn, Japan is third at $4.4tn with Germany close behind at $4.3tn
- Wind back 20-years to 2003 and China GDP was $5.7tn vs the US at $10.4tn, Japan at $3.5tn and Germany at sixth with $2.1tn
- China expanded its economy through the development and subsidy of low cost manufacturing supported by a highly supportive central government.
- But, Chinese ambitions to retake Taiwan, crackdowns in HK, weaponisation of critical materials and worst-of-all, its rivalry to the US automotive industry is leading the West to restrict its China trade.
- Manufacturers are pulling back the manufacturing of components from China fearing further lockdowns, logistics disruption and trade embargoes.
- Globalisation meant that China was supposed to be a good global and corporate citizen encouraging local consumption and fitting in well with the global economy.
- China’s focus on exports led growth, effectively stealing jobs from the rest of the world has unsettled and destabilised many weaker economies.
- Trade negotiations should normally result in a rebalancing of trade through increasing imports but China has simply promoted its own ambitions and agenda through the development of belt & road infrastructure plans and the offer of high-cost infrastructure projects into developing nations at the expense unsupportable national debt levels.
Conclusion: It is always tough to call the bottom of a market particularly when there is much negative China news around. But there are reasons to be cheerful and we imagine valuations should pick up from here, although the timing of the market recovery may be less easy to predict.
| Dow Jones Industrials | -1.02% | at | 34,946 | |
| Nikkei 225 | -1.46% | at | 31,767 | |
| HK Hang Seng | -1.44% | at | 18,313 | |
| Shanghai Composite | -0.82% | at | 3,150 |
Economics
US – Retail sales came in above market expectations in July suggesting US consumer is fairing better than expected despite ongoing monetary policy tightening.
- Retail Sales (%mom): 0.7 v 0.3 (revised from 0.2) June and 0.4 est.
- Retail Sales Control Group (%mom): 1.0 v 0.5 (revised from 0.6) June and 0.5 est.
- Retail Sales ex Auto and Gas (%mom): 1.0 v 0.4 (revised from 0.3) June and 0.4 est.
China – New property prices decline accelerated in July highlighting ongoing challenges in one of the top sectors of the economy.
- Separately, further details over missed payments by Zhongrong International Trust emerge.
- At least 30 products are now overdue and Zhongrong also halted redemptions on some short-term instruments, one of the people said to Bloomberg.
- The company doesn’t have an immediate plan to cover the payments since its short-term liquidity has suddenly dried up.
- Zhongrong looks after $138bn and is among the biggest firms in the country’s $2.9 trillion trust industry with investments in real estate, stocks, bonds and commodities.
- New Home Prices (%mom): -0.23 v -0.06 June.
France – Borrowing costs hit the highest level since 2012 on Tuesday as investors are adjusting their expectations for potential rate hikes.
- 10y sovereign bond yields briefly hit 3.3% yesterday afternoon exceeding a previous peak in March.
- Expectations are currently for a one more 25bp rate hike by the end of the year taking benchmark rates to 4%.
UK – The pound is up against the US$ this morning as a core inflation measure climbed at a faster pace from the previous month.
- Core CPI was up 0.3%mom in July compared to a 0.2% reading in the previous month.
- Headline inflation pulled back on falling gas and electricity prices with food prices also reported to have eased.
- Financial markets on Wednesday showed a roughly two-thirds chance that the BoE’s Bank Rate will hit 6% in February, up from 5.25% now, Reuters reports.
- CPI (%mom): -0.4 v 0.1 June and -0.5 est.
- CPI (%yoy): 6.8 v 7.9 June and 6.7 est.
- Core CPI (%yoy): 6.9 v 6.9 June and 6.8 est.
Russia/Ukraine – Russian air strikes on southern Ukraine overnight damaged grain silos and warehouses at one of the Danube river ports, a key facility for grains shipments, Reuters writes.
- “Russian terrorists attacked Odesa region twice last night with attack drones… The main target is port and grain infrastructure in the south of the region,” Odesa Governor said.
Currencies
US$1.0924/eur vs 1.0922/eur yesterday. Yen 145.48/$ vs 145.72/$. SAr 19.089/$ vs 19.188/$. $1.274/gbp vs $1.270/gbp. 0.647/aud vs 0.648/aud. CNY 7.294/$ vs 7.284/$.
Dollar Index 103.07 vs 103.04 yesterday.
Commodity News
Precious metals:
Gold US$1,905/oz vs US$1,904/oz yesterday
Gold ETFs 90.6moz vs US$90.6moz yesterday
Platinum US$894/oz vs US$898/oz yesterday
Palladium US$1,242/oz vs US$1,259/oz yesterday
Silver US$22.66/oz vs US$22.52/oz yesterday
Rhodium US$4,100/oz vs US$4,100/oz yesterday
Base metals:
Copper US$ 8,203/t vs US$8,275/t yesterday
Aluminium US$ 2,143/t vs US$2,158/t yesterday
Nickel US$ 20,015/t vs US$19,980/t yesterday
Zinc US$ 2,292/t vs US$2,346/t yesterday
Lead US$ 2,118/t vs US$2,098/t yesterday
Tin US$ 25,035/t vs US$25,000/t yesterday
Energy:
Oil US$84.7/bbl vs US$86.3/bbl yesterday
Natural Gas US$2.669/mmbtu vs US$2.858/mmbtu yesterday
Uranium UXC US$56.75/lb vs US$56.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$100.7/t vs US$100.1/t
Chinese steel rebar 25mm US$510.8/t vs US$508.7/t
Thermal coal (1st year forward cif ARA) US$123.0/t vs US$123.0/t
Thermal coal swap Australia FOB US$154.0/t vs US$153.8/t
Coking coal swap Australia FOB US$254.0/t vs US$236.0/t
Other:
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$65,323/t vs US$65,422/t
Lithium carbonate 99% (China) US$31,188/t vs US$32,059/t
China Spodumene Li2O 6%min CIF US$3,360/t vs US$3,460/t
Ferro-Manganese European Mn78% min US$1,043/t vs US$1,043/t
China Tungsten APT 88.5% FOB US$310/mtu vs US$310/mtu
China Graphite Flake -194 FOB US$672/t vs US$675/t
Europe Vanadium Pentoxide 98% 7.6/lb vs US$7.6/lb
Europe Ferro-Vanadium 80% 31.85/kg vs US$31.85/kg
China Ilmenite Concentrate TiO2 US$309/t vs US$310/t
Spot CO2 Emissions EUA Price US$94.4/t vs US$93.5/t
Brazil Potash CFR Granular Spot US$345.0/t vs US$345.0/t
Battery News
Chinese EV battery market at risk of oversupply issues
- China’s generous tax incentives for EV battery manufacturers has seen a host of new battery makers as well as businesses from unrelated industries entering the market to receive the state incentives.
- Chinese battery makers will be able to produce 4,800GWh annually by 2025, four times the national demand, according to data from Chinese online investment publication Gelonghui.
- There has been a dramatic increase in the number of entrepreneurs targeting battery technologies and projects, and overcapacity remains the greatest risk facing investors buying into China’s battery value chain.
- China’s largest food makers, Nanfang Black Sesame Group, announced in March that its wholly owned subsidiary Jianxi Xiaohei Xiaomi Food will change course from food to energy storage and spend 3.5 billion yuan in building a lithium battery production plant.
Merecedes Benz targets Malaysia with all-electric line up
- The German automaker will target Malaysia as one of the markets where it will have an all-electric line-up by 2030.
- Earlier this year it became the first carmaker to launch a domestically assembled electric vehicle in Malaysia.
- Sales of Mercedes EVs in Malaysia have already surged 200% this year, albeit off a low base – global growth has been around 120% in the same period.
- EVs account for about 11% of Mercedes’ global sales but is around 30% of their overall line-up in Malaysia.
- Malaysia is focusing on developing an EV ecosystem and has offered generous incentives to boost adoption – the country has a target of having EVs account for 15% of total industry volume by 2030.
Company News
Adriatic Metals* (ADT1 LN) 193p, Mkt cap £566m – Exploration update at Rupice Northwest
- Adriatic proves an update on its drilling programme at Rupice Northwest.
- The team notes a vertical strike-continuous domain of high-grade mineralisation caused by faulting and folding to the western extent of Rupice Northwest.
- Step out drilling highlights include:
- BR-30-23: 7.7m @ 595.8g/t AgEq/19.15% ZnEq from 275m
- BR-34-23: 4.5m @ 744.g/t AgEq/24% ZnEq from 200m
- These two holes were step-out intercepts, supporting an extension of the Lower Zone.
- BR-30-23: 6.8m @ 242g/t AgEq/7.8% ZnEq from 117m and 33.4m @ 1,196g/t AgEq/38.5% ZnEq from 218m
- BR-34-23: 3.1m @ 530g/t AgEq/17% ZnEq from 124m
- BR-36-23: 15.2m @ 1,501g/t AgEq/48.3% ZnEq from 163m
- These three holes where drilled to extend intercepts at the upper and main zones of Rupice Northwest
- Infill drilling highlights include:
- BR-31B-23: 8.6m @ 2,023.7g/t AgEq/65% ZnEq from 206m and 48.3m @ 833g/t AgEq/27.8% ZnEq from 225m
- BR-32-23 : 2.3m @ 142g/t AgEq, 4.6% ZnEq from 204m, 6.1m @ 283g/t AgEq, 9.1% ZnEq from 259m, 9.6m @ 108g/t AgEq, 3.5% ZnEq from 275m, 41.5m @ 632g/t AgEq, 20.3% ZnEq from 302m
- BR-33A-23: 4m @ 557g/t AgEq, 18.2% ZnEq from 113m, 19.4m @ 1,361g/t AgEq, 43.8% ZnEq from 205m
- BR-35-23: 17.7m from 206m, @ 1,612g/t AgEq, 51.8% ZnEq
- Significant intercepts reported use a 50g/t AgEq cut off, 2m minimum interval and a 5m consecutive internal dilution.
- Adriatic’s exploration team will use the additional drilling to update the Rupice MRE in 4Q23, intending to convert the majority of RNW mineralisation to indicated MRE status.
- High-grade definition is intenteded to be included in an optimised mine plan, with metallurgical test work to be included in the Q4 update.
- RNW exploration and infill drilling to be continued with two diamond rigs through to end of September.
Conclusion: Adriatic continues to deliver high-grade results at Rupice Northwest both in their infill and step-out drilling programmes. Management believes that the faulting and folding effect on the western extent of RNW have caused a vertically angled zone of high-grade mineralisation, with encouraging mining prospects. The western-lying intercepts are expected to add ‘more tonnes at higher grades’ to the upgraded MRE due in Q4 of this year. Adriatic is fully funded to up the stakes at their exploration programme with additional drilling at RPW alongside regional prospects including Semizova Ponivka and Droskovak-Brezik.
*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia
Ariana Resources (AAU LN) 2.65p, Mkt Cap £30m – Maintaining gold production guidance as H1 production at Kiziltepe meets expectations
- Production of 9,646oz of gold during H1 from its 23.5% owned Kiziltepe mine in Turkey prompts Ariana Resources to maintain its 18,000oz guidance target for 2023
- The company says that mine production averaged around 20,600tpm of ore and that “a stockpile of over 104,000 tonnes is being maintained, representing 3 months of production capacity”.
- During the period, mining concentrated on the Arzu North and Banu areas “with pushbacks planned across all previously mined pits”.
- As also announced yesterday, Managing Director, Dr. Kerim Sener, confirms that “we are pursuing opportunities to further extend the life of mine, through further exploration drilling campaigns. The drilling is ongoing at a number of satellite project areas, such as Kizilcukur, and a new drilling plan based in part on new geophysical targets encompassing the whole of the Kiziltepe Sector is currently under review”.
- He commented that “Further work on optimisation of the resource will be undertaken to determine the potential for further pushbacks of the current open pits. Several pushbacks are already underway at Arzu North and Derya, while a potential major pushback on Arzu South is scheduled towards the end of mine life as it will impact current haulage roads”.
Conclusion: A robust H1 delivered more than half of the previously guided 2023 production of 18,000oz for Kiziltepe leaving that target intact. Work continues to extend the resource life of the mine with planned drilling of potential satellite mineralisation at Kizilcukur, Kepez and Ivrindi.
Beowulf Mining* (BEM LN) 1.6p, Mkt Cap £18.2m – Management changes at Jokkmok Iron Ore Subsidiary
- Beowulf announces that Ulla Sandborgh is stepping down as CEO of Jokkmokk Iron Mines AB.
- Jokkmokk is a wholly owned subsidiary of Beowulf and holds the high-grade Kallak Iron ore deposit in Sweden.
- Management is currently in the recruitment process to find a replacement with ‘requisite project development and mining skills.’
*SP Angel acts as Nomad and Broker to Beowulf Mining
Capital Limited (CAPD LN) 83.6p, Mkt Cap £165m – Maintaining 2023 revenue guidance after 11.7% rise in H1 aided by the Ivindo Iron contract in Gabon
- An 11.7% rise in H1 revenue to $154.3m leads Capital Limited to maintain its full-year revenue guidance in the range £320-340m.
- The company says that rig utilisation rates declined to 75% (H1 2022 – 83%) “in part driven by the temporary shutdown of rigs at Perseus’ Meyas Gold Project in Sudan following the escalation of conflict in the country”.
- The company has maintained its interim dividend of 1.3¢/share.
- Net debt increased to $66.5m from the H1 2022 level of $36.4m mainly “to fund our second material mining services contract with Ivindo Iron SA without returning to equity markets for funding”.
- Capital Mining describes the new contract with Ivindo Iron as “a major earthmoving and crushing services contract … with a term of up to 5 years. The site, located in Gabon’s northeast, is one of the world’s largest undeveloped, high-grade hematite iron ore deposits. Operations are now already underway and once fully operational, the contract is expected to generate an annual revenue of approximately $30 million”.
- The company’s other major mine waste removal contract at the Sukari gold mine in Egypt “continues to perform well”.
- “Capital expenditure guidance for 2023 is approximately $65-$75 million. This increased ~$15 million from guidance at the FY22 results to include additional equipment for the new mining and crushing services contract at Ivindo Iron”.
- Looking ahead, in addition to the impact of the Ivindo Iron contract, the company “anticipates revenue growth in H2 2023, driven by the ramp up of at Reko Diq, Pakistan … together with a potential restart of operations at the Meyas Gold Project, Sudan”.
Chaarat Gold (CGH LN) 7.0p, Mkt Cap £48m – Conditional sale of Kapan Polymetallic Mine
- The Company agreed a bonding conditional sale of its 100% owned subsidiary, Chaarat Kapan CJSC, that owns and operates the Kapan mining operation in Armenia.
- Gold Mining Company LLC, the buyer, operates the Lichkvaz mine and was a supplier of third party ore to the Kapan plant.
- The consideration of the proposed sale amounts to $55.4m and includes a $5m cash component and $50.4m in payables due to Chaarat Kapan that will be taken over from the Company by the buyer.
- The agreement is conditional on Chaarat shareholder approval, Ameriabank agreeing to release its existing security and guarantees from members of the Chaarat group of companies, approval by local authorities and buyer shareholder approval.
- Proceeds from the sale will be used to provide working capital and cover other items as the Company is working towards completing the potential Xiwang investment.,
- The Company cites strengthening local currency that weighed on Kapan profitability recently as well as the need for a significant investment in the operation to implement identified improvements in the immediate future as reasons behind the sale.
- The mine generated $2.3m in EBITDA in H1/23 (comprising positive EBITDA in Q1 2023 of USD 3.2 million and negative EBITDA in Q2 2023 of USD 0.9 million), reflecting stronger USD/AMD FX rate exchange and lower production.
- Kapan mine hosts 4.5mt at 7.74g/t for 1.1moz in total resource with ~65% of the total in the Measured and Indicated category.
- Following the sale of its producing asset, the Company will focus on the Xiwang deal, development of its Kyrgyzstan portfolio of assets as well as potential other external M&A opportunities.
Evolution Energy Minerals (EV1 AU) A$0.24, Mkt cap A$41.5m – Offtake agreement for fine flake graphite from Chilalo
- Evolution Energy has signed a binding offtake agreement with BTR New Material Group from China.
- BTR will take 90% of EV1’s product from the Chilalo project for the first three years of production, with an option to extend for another three years.
- 100% of Chilalo’s fine flake graphite product is now under a binding offtake agreement.
- BTR will subscribe for A$4.9m worth of shares, a 9.9% stake in Evolution and a 14% premium to 15-day VWAP.
- BTR is a major natural graphite anode producer, and the two companies will use the relationship to develop a downstream partnership.
- The Downstream agreement is aimed to be signed by 31st March 2024.
- The agreement is conditional on the successful agreement of the aforementioned downstream agreement.
- Offtake agreements are a key requirement for project financiers, and BTR states its intentions to support EV1 in procuring development financing.
Great Southern Copper (GSCU LN) 2.75p, Mkt Cap £7m – Early exploration encouragement from the San Lorenzo prospect, Chile
- Great Southern Copper reports that reconnaissance sampling of the Suyay area within its San Lorenzo prospect has shown encouraging potential for a porphyry and Intrusive-related Au-Cu-Mo type mineral system.
- Rock-chip samples of “artisanal mine waste dumps and outcrop at Suyay” have shown assays of up to 4.13g/t gold and 1.75% copper with “High-grade gold and copper associated with structurally-controlled quartz-sulphide stockwork zones within phyllic to advanced argillic (clay-silica-sericite) alteration mapped over 2.5km2”.
- Chief Executive, Sam Garrett, explained that “anomalous geochemistry combined with our early understanding of the geology and controls on mineralisation suggest that there is potential at Suyay for a high-level gold-rich porphyry or intrusive-related system”.
- He said that “detailed follow-up exploration is now being planned for Suyay which will include further prospect-scale mapping, rock and soil sampling programmes. Geophysical surveys, such as magnetics and induced polarisation, will also be considered subject to the results of the next phase of exploration work”.
- The company explains that in addition to mineralisation at Suyay and Chinchillon, the San Lorenzo area hosts “a significant number of additional landsat clay-sericite anomalies … which are yet to be field-checked … Reconnaissance ground-validation of these anomalies is also planned to commence before the end of the year”.
Conclusion: Initial exploration results from Suyay are encouraging but more detailed systematic exploration will be necessary to gauge the full significance of the initial rock-chip sampling
GreenRoc Mining* (GROC LN) 4.45p, Mkt Cap £6.53m – Interim results highlight progress over future re-opening of Amitsoq graphite mine in the south of Greenland
- GreenRoc Mining report meaningful progress on the Amitsoq graphite project through the first half of the year.
- Critically, the Amitsoq graphite appears suitable for processing into high-purity spherical graphite for Li-ion anodes.
- Funding: The company has raised £1.35m since December in three placings each at 3.8p/s enabling steady progress
- Community engagement in South Greenland along with the Minister for Mineral Resources has served to advance the reopening of Amitsoq
- SIA ‘Social Impact Assessment’ and EIA ‘Environmental Impact Assessment’ programs are underway with the EIA now running for over a year.
- ERMA, the European Raw Materials Alliance has declared its official support for Amitsoq which should help with reopening and funding of the mine.
- Leonhard Nielsen & Sønner A/S a Norwegian Construction and Mining Group singed an MoU with GreenRoc in March
- GreenRoc also won the Greenland’s Prospector and Developer of the Year sponsored by the Greenlandic Government at the PDAC Toronto
- PEA expected in September
- Test work: Electrochemical testing of spheronised graphite is ongoing for battery anode use
- “Independent micronisation and spheronisation test work has proved that Amitsoq graphite can be easily upgraded to high-grade, anode-quality graphite, otherwise known as high purity spherical graphite or HPSG, a key raw material in the manufacturing of EVs.
- In GreenRoc’s test work programmes, Amitsoq spheronised graphite has achieved higher than 99.95% purity requiring relatively little energy and processing and using the milder alkaline purification method compared to the industry standard hydrofluoric acid, which bodes well for future production costs and sustainability commitments.“
- Bulk sampling: large scale bulk sampling should start soon on the Amitsoq Lower Graphite Layer making larger amounts of graphite concentrate available for spherical testing.
- Offtake samples will be produced from concentrating the larger bulk sample.
- Grade: Amitsoq hosts >20%Cg graphite grade setting the project out as a higher-grade graphite mine
- Amitsoq: JORC Inferred Mineral Resource to be 23.05mt grading 20.41% Gc ‘Graphitic Carbon’ with a total graphite content of 4.71mt including:
- 1.26mt of Measured Resource,
- 6.12mt Indicated Resource from 2.04mt – a 200% increase over the 2022 MRE,
- 15.67mt Inferred Resource from 6.24mt to – a c.150% increase over the 2022 MRE,
- Total: 23.05mt grading 20.41% GC at a cut-off grade of 0% Gc.
- PEA parameters:
- 400,000t of ore output for
- ~80,000t of graphite concentrate
- GreenRoc: also holds licenses over the Thule Black Sands Ilmenite Project towards the north of Greenland.
- The company also holds the Melville Bay Iron Ore Project where Greenroc has undertaken a study, including interpretation, of available geophysical data.
- Cash: £210k, a net cash inflow of £86k at end May with another $0.47m at 3.8p/s raised in August.
- Exploration expenditure was£134k,
- Creditor settlements (mainly related to exploration work towards the end of 2022) of £221k
- Administration costs of £414k including £230k of salaries and other costs associated with the GreenRoc in-house technical and geological team
Conclusion: GreenRoc looks well set to become one of a new tier of European graphite producers feeding into the EU battery materials industry. The reopening of the Amitsoq graphite should be relatively straight forward with particularly good grade and indications for good quality spheronised graphite.
*SP Angel acts as broker to GreenRoc Mining
Thor Explorations (THX LN) 20.5p, Mkt cap £134m – Initial drill results from lithium-bearing pegmatite exploration project in Nigeria
- Gold producer Thor Explorations publishes the initial assay results from the West Oyo lithium prospect in Nigeria.
- The Company is completing an initial drill programme to explore a selection of outcropping pegmatites.
- Drilling highlights include:
- NRC006: 10.5m true width @ 1.53% Li20 from 14m
- NRC010: 10.5m true width @ 2.61% Li20 from 15m
- NRC018: 2.9m true width @ 1.66% Li20 from 26m
- Thor notes that spodumene is the dominant lithium-bearing mineral, with some lepidolite.
- Thor’s geologists note the pegmatite drilled initially averages 20m in thickness, dipping at 5 degrees with a continuous, coarse spodumene mineralisation to the upper zone.
- The Company is currently working to identify additional pegmatites in the vicinity, in addition to pegmatites mapped to the south.
- West Oyo covers 600sqkm and is currently being exploited by artisanal miners for lithium-bearing minerals.
- We await additional drilling results funded by the Company’s gold production at Segilola.
Tungsten West (TUN LN) 3.75p, Mkt cap £6.8m – Signs that some of Hemerdon’s technical issues are being resolved while further financial disciplines are implemented
- In a series of announcements today Tungsten West has outlined progress on a range of operational, leadership, and financing issues as it works to resume production at the Hemerdon tungsten/tin project in Devon.
- The company explains that, following investigations of the low-frequency noise (LFN) issues which became apparent under the stewardship of the mine’s previous owners, it has now submitted applications for a Mineral Processing Facility (MPF) “to the Environment Agency which, once granted, will allow the plant to operate, thus facilitating the production of tungsten and tin at Hemerdon”.
- Tungsten West confirms that it “has worked closely with the Environment Agency and Devon County Council … throughout the entire permitting and noise trial process and anticipates the decision regarding the permit approval to be forthcoming within the coming months”.
- The company also explains that it has applied for modifications to the existing limits on road traffic movements of 50 trucks per day in order to facilitate the sale of “secondary aggregates, a by-product from mining which, once sold, will provide an early revenue stream and reduce the storage of barren rock and associated opex at site”.
- Tungsten West confirms that it “has actively involved the local community, local councils and regulatory bodies in the process … [of the application relating to heavy vehicle traffic] … participating in regular discussions and offering a direct line to the Company for all stakeholders”.
- We observe that issues relating to movement of heavy vehicles in rural areas can be contentious among local residents and clear and wide-ranging consultation will have been necessary to allay community concerns.
- As announced in April “spending priority has been given to activities relating to planning and permitting, environmental compliance and funding, as these are essential to the continued progress of the Project … [and] … in order to prioritise these activities, a proposed cost reduction programme will need to be implemented, including a further approximate 25% reduction in staff costs via redundancies, reduced hours and resignations”.
- Additional financial management and control initiatives include “agreeing deferred payment plans and restructuring supply agreements with a number of creditors”.
- The company also announces the resignation of director and CFO Nigel Widdowson “with immediate effect” although Tungsten West confirms that he “has agreed to remain in his operating role as CFO for the duration of his notice period, to focus on ongoing funding and project financing activities, and to ensure a smooth transition for the incoming CFO when appointed”.
- Hemerdon is clearly under financial pressure, requiring further staff reductions and bespoke arrangements with creditors and, we observe, this could be a difficult time to replace the CFO.
- Relating to other leadership matters “the Board intends to appoint Mr. Adrian Bougourd and Mr. Guy Edwards as non-executive Directors, subject to satisfactory completion of due diligence checks required for the appointment of a director of an AIM company”.
- The company also confirms that, as previously announced in May, it “expects to issue a further £2.975 million of loan notes on or around 17 August 2023”.
- The ‘Tranche B Notes, comprise “a maximum commitment of £1 million from funds managed by Lansdowne and up to £1.975 million from the other note purchasers”.
- Tungsten is already regarded as a ‘Critical’ or ‘Strategic’ Mineral by many jurisdictions including the EU, UK, US, Australia, and Japan
Conclusion: Tungsten West’s efforts to resume production at Hemerdon are addressing a range of operational, technical, management and financial challenges. In the circumstances, we expect that the search for a new CFO will be an important priority. We are encouraged that measures to mitigate the LFN problems may lead to approval of the MPF and signal that some of the long-standing technical legacies are being resolved.
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
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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.
| 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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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%
