Today’s Market View – Base Metals Gain On Positive Trade Talk Speculation

SP Angel . Morning View . Thursday 10 10 19Base metals gain on positive trade talk speculationAura Energy Limited* (LON:AURA) 0.525p, Mkt Cap £6.8m – Haggan resource upgradeAvesoro Resources (LON:ASO) 89p, Mkt Cap £72.6m – Lower Q3 gold outputCaledonia Mining

SP Angel . Morning View . Thursday 10 10 19

Base metals gain on positive trade talk speculation

Aura Energy Limited* (LON:AURA) 0.525p, Mkt Cap £6.8m – Haggan resource upgrade

Avesoro Resources (LON:ASO) 89p, Mkt Cap £72.6m – Lower Q3 gold output

Caledonia Mining (LON:CMCL) 575p, Mkt Cap £61.8m – Oxygen plant at the Blanket mine

Cora Gold* (LON:CORA) 7.4p, Mkt Cap £9.5m – Management changes

Thor Mining (LON:THR) 0.5p, Mkt Cap £4.1m – Molyhil resource update

Impala Platinum offer US$758m (C$1bn) in all-cash deal for North American Palladium

Impala Platinum offering US$758m to buy North American Palladium.

Impala is buying an 81% stake from private equity firm Brookfield Business Partners for C$570m representing C$16/s.

Impala is also offering a 15% premium or C$19.74/s to minority shareholders.

North American Palladium operates the Lac des Iles mine, which produces some 235,000oz pa

The combined entity will control around 13% of global palladium supply.

Palladium prices have risen >30% this year to a record high of >$1,700/oz last week.

Demand for palladium has risen as automotive manufacturers work to meet emissions standards without cheating and consumers opt to buy gasoline vehicles in preference to diesel.

Diesel vehicles use platinum-rich catalysts whereas gasoline vehicles use palladium-rich catalysts.

Sibanye-Stillwater took over Lonmin on 10 June this year serving to further consolidate PGM production.

The sector remains dominated by three major producers in South Africa followed by Northam, Royal Bafokeng, ARM, Vale, Gelncore and Norilsk Nickel with by-product palladium in Russia.

Ecuador – Fuel-price rise sparks rioting in anti-government protests in capital

President Moreno is negotiating with Ecuador’s many indigenous groups to restore calm amid ongoing rioting in the capital of Quito.

Indigenous protestors have disrupted oil production as part of their protest.

The government ended fuel subsidies last week as part of an IMF funding plan to rebuild Ecuador’s economy.

Indigenous groups see the IMF austerity deal as deepening inequality and economic inequality, which sounds rather Chavz-like!

Chavez when president of Venezuela had substantial influence on Ecuador and the region.

Solgold* continues to drill and develop its underground mine plan for the Alpala copper, gold project in Ecuador.

Solgold reported in June that it currently employed some 500 Ecuadorians. The Alpala project is estimated to require some 7,000 staff and contractors if it goes into construction.

*SP Angel act as Financial Advisor and broker to Solgold

Mexico – Blockade lifted at Newmont Goldcorp’s Peñasquito Mine in Mexico (Business Wire)

The company confirmed that the illegal blockade at its gold mine in Northern Zacatecas state has been lifted.

However, the mine remains temporarily suspended pending further evaluation of the situation and assurances the blockade will not be allowed to resume.

According to the company, the blockade hit Penasquito’s third-quarter production by some 11,000oz of gold, 1.7moz of silver, 13.7mlbs lead and 22.8mlbs of zinc (Reuters).

The mine has suffered multiple blockades as some locals have claimed that its operations have affected local water supplies.

The company has therefore enhanced water availability for the mine’s 25 neighbouring communities through a number of projects.

Peñasquito directly employs more than 6,500 people while supporting another 20,000 indirect jobs in the region. Since 2005, the Company has invested approximately US$5 billion in the project.

Dow Jones Industrials +0.70% at 26,346

Nikkei 225 +0.45% at 21,552

HK Hang Seng +0.10% at 25,708

Shanghai Composite +0.78% at 2,948

FTSE 350 Mining +1.68% at 17,618

AIM Basic Resources +0.48% at 2,131

US – Trade talks kick off today with a series of mixed news over the their status contributing to volatile trading week.

The delegation is currently scheduled to leave on Friday evening although this may change depending on how talks go.

Earlier, South China Morning Post suggested Chinese negotiators led by Liu He could cut short their stay which in turn briefly spooked markets; Washington said they were not aware of such plans.

A report from the NYT suggested Washington would soon issue licenses allowing a number of US firms to supply non-sensitive goods to China’s Huawei Technologies.

Fed minutes released yesterday showed members debating on the extent the FOMC should cut rates while also acknowledging higher downside risks to the economic activity outlook.

The bank cut rates by 25bp during the September meeting for a second time this year with markets expecting another reduction this month amid soft economic data released lately.

CPI report is out later today with estimates for inflation rate to have picked up marginally to 1.8% in September, up 0.1pp from August.

Sub 2% inflation rate reading may offer the central bank more confidence to go ahead with more policy easing during coming meetings.

China – Offshore renminbi rallied overnight climbing to the highest level in more than two weeks on a Bloomberg report that US and China were working on a currency pact first flagged earlier this year.

The agreement is allegedly suggested to stop further tariff hikes in return for commitments to hold yuan stable.

The currency accord was prepared earlier this year before trade talks broke down and was supposed to be the first step towards a more comprehensive deal.

EU/US – EU officials drafted retaliatory measures in case the US moves forward with import tariffs on $7..5bn worth of European goods.

Germany – Weak trade data in August show exports posting a 1.8%mom drop adding to concerns the economy may be heading towards technical recession in Q3/19.

Imports favoured better climbing 0.5%mom, in line with expectations.

UK – The monthly review of the UK GDP shows the economy contracted in August from the previous month as Brexit concerns mount.

GDP dropped 0.1%mom versus no change forecast and a 0.4%mom increase recorded in July (revised from +0.3%mom).

That meant the economy grew 0.3%qoq over three months to August.

Sector wise, industrial production was down down 0.6%mom/1.8%yoy while services were largely flat from the previous month (0.0%mom/0.4%qoq); only constriction grew last month (0.2%mom/2.4%yoy).

September PMI readings painted fragile outlook, although the economy is likely to have avoided a negative GDP growth reading in Q3 with markets forecasts a +0.3%qoq change.

France – Weak industrial production released this morning.

Industrial Production (%mom/yoy): -0.9/-1.4 v 0.3/0.0 in July and 0.3/0.1 forecast.


US$1.1016/eur vs 1.0984/eur yesterday.  Yen 107.42/$ vs 107.26/$.  SAr 15.128/$ vs 15.210/$.  $1.223/gbp vs $1.224/gbp. 0.675/aud vs 0.674/aud.  CNY 7.126/$ vs 7.134/$.

Commodity News

Gold US$1,508/oz vs US$1,505/oz yesterday – Trouble in Turkey raises gold price as Erdogan sends military into Kurdish territory

Gold ETFs 81.8moz vs US$81.6moz yesterday

Platinum US$892/oz vs US$886/oz yesterday

Palladium US$1,685/oz vs US$1,664/oz yesterday

Silver US$17.79/oz vs US$17.87/oz yesterday

Base metals: 

Copper US$ 5,741/t vs US$5,685/t yesterday

Aluminium US$ 1,746/t vs US$1,739/t yesterday

Nickel US$ 17,645/t vs US$17,580/t yesterday – LME nickel stocks continue to fall (Bloomberg)

Nearly 25,000t left LME warehouses last week, the biggest decline in the 40 year history of the nickel contract.

At Friday’s spot price of $17,906/t, the value of the metal withdrawn last week is worth about $450 million.

LME stockpiles have declined further this week, with inventories plunging by a record 8,166t on Tuesday.

LME nickel inventories stood at 126,000t on Tuesday, which is a seven-year low, while another 75,400t is expected to be withdrawn in the coming days (ING).

Tsingshan Holding Group, the worlds largest stainless steel producer, were one of the main forces behind the record drawdown of LME nickel inventories.

The company bought the nickel to secure supplies ahead of the looming export ban which comes into force in January 2020 (Reuters).

Zinc US$ 2,356/t vs US$2,276/t yesterday

Lead US$ 2,154/t vs US$2,124/t yesterday

Tin US$ 16,390/t vs US$16,325/t yesterday


Oil US$58.4/bbl vs US$58.1/bbl yesterday

Natural Gas US$2.246/mmbtu vs US$2.293/mmbtu yesterday

Uranium US$24.95/lb vs US$24.95/lb yesterday


Iron ore 62% Fe spot (cfr Tianjin) US$86.3/t vs US$89.2/t

Chinese steel rebar 25mm US$565.0/t vs US$564.8/t

Thermal coal (1st year forward cif ARA) US$68.5/t vs US$68.3/t

Coking coal futures Dalian Exchange US$182.4/t vs US$182.1/t


Cobalt LME 3m US$35,250/t vs US$34,500/t

NdPr Rare Earth Oxide (China) US$44,555/t vs US$44,500/t

Lithium carbonate 99% (China) US$6,946/t vs US$6,938/t – Millennial Lithium Corp granted tax relief from Argentinian government (

The National Mining Secretary of Argentina have granted Millennial Lithium with a Federal Fiscal Stability Certificate for its Pastos Grandes lithium project.

The certificate outlines the tax regime and additional benefits that the project will receive for the next 30 years (

According to Millennial’s president and CEO, the main aspect of the Federal Fiscal Stability Certificate is the confirmation of a reduction in the corporate tax rate to 25% as of January 1, 2020”.

So far, the companies Canadian owner has invested over C$40 million in exploration and development work.

The resource has proven and probable reserves as well as an Inferred resource of:

Measured and Indicated Resource of 4.12mt of Lithium Carbonate Equivalent (LCE)

798,000t LCE as Inferred Resource

Proven Reserves of 179,000t LCE

Probable Reserves of 764,000t LCE.

Ferro Vanadium 80% FOB (China) US$37.9/kg vs US$38.2/kg – Ferro-vanadium prices fell 3.8% yesterday to $25-26/kgV in Western Europe (FastmarketsMB)

The move follows a fall of 6.5% last week to $29.08-30.09/kgV.

Prices are being hit by reduced orders on the threat of recession in Germany and a general economic slowdown in Europe

We expect ferro-vanadium prices to pick up on news of further Quantitative Easing and regional economic stimulus plans which often involve the activation of local construction projects.

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

Tungsten APT European US$205-215/mtu vs US$205-215/mtu

Battery News

Nobel Prize in chemistry awarded for lithium-ion battery research

Three scientists have been awarded the 2019 Nobel Prize for chemistry for their work on rechargeable devices used for portable electronics.

Stanley Whittingham from Nottingham originally laid the foundations of battery technology as a result of the oil crisis in the 1970s (BBC).

Professor John B Goodenough was awarded the prize for his work at Oxford University- ground-breaking cathode technology which doubled a batteries voltage.

The Nobel Prize committee explained that the honour was awarded to the three scientists because “They created a rechargeable world”.

The British invention has allowed access to a technical revolution which is still developing today though electric vehicles.

Company News

Aura Energy Limited* (LON:AURA) 0.525p, Mkt Cap £6.8m – Haggan resource upgrade

Aura Energy reports an upgraded mineral resource estimate for its Haggan vanadium deposit in Sweden where it has now successfully expanded the overall scale of the resource and upgraded a portion from “inferred” to “indicated” status.

The new, JORC (2012), estimate, at a cut-off-grade of 0.2% vanadium pentoxide (V2O5) is 2bn tonnes at an average grade of 0.3% V2O5 for a total vanadium pentoxide content of 13.3bn lbs of which 320mlbs (42mt at an average grade of 0.35%) is now classified as indicated.

The previous estimate, all classed at the inferred level, was reported in August 2019 using a similar 0.2% cut-off-grade as 1.95bn tonnes at an average grade of 0.3% representing 12.8bn lbs of contained V2O5.

In its discussion of the use of a 0.2% cut-off-grade for resource reporting, the company explains that it believes this is a conservative approach because “Open pit modelling based on the resource block model has indicated a break-even grade of 775ppm (0.076%) V2O5.”

The indicated resource, known as “the Northwest High-Grade zone”, is based on the results of 25 drill-holes (3530m) and comprises “a coherent zone of mineralisation … commencing at surface and extending to +100 metres below surface” which remains “open in all horizontal directions” and “extends approximately 1 kilometre in both north-south and east-west directions”.

Aura Energy explains that the recent drilling has not yet established the limits of the high-grade mineralisation and consequently there is “excellent potential to expand the indicated Resource on high grade mineralisation”.

In our opinion, the gently dipping, relatively shallow mineralisation at Haggan should be relatively straightforward to develop although the company will need to establish a comprehensive mining, processing and rehabilitation plan and negotiate the Swedish permitting process.

Conclusion: Upgrading a portion of the large mineral resource to the indicated level gives Aura Energy a platform for more detailed evaluation of the Haggan deposit and to consider future mining and processing options at least at the level of a scoping study.

*SP Angel act as Nomad & Broker to Aura Energy

Avesoro Resources (LON:ASO) 89p, Mkt Cap £72.6m – Lower Q3 gold output

Avesoro Resources has announced a 34% decline in gold output during the quarter ending 30rh September 2019 to 22,678 oz (Q2 2019 – 34,338oz bringing year to date output to 102,113oz.

The lower output reflects operational difficulties at both the New Liberty mine in Liberia and the Youga mine in Burkina Faso. The company comments that “Given a number of operational uncertainties our full year production guidance remains under review. The Company intends to provide updated guidance once operational performance has stabilised for a sustained period of time.”

Chief Executive Serhan Umirhan, expressed confidence, however, “that operational performance will improve at both mines during Q4, with the end of the wet season allowing New Liberty to materially enhance productivity in the near term despite the recent pit-wall failure. Meanwhile, an additional 15 trucks, 6 excavators, a rock drill and further auxiliary equipment will be available at Youga later this week at the mining contractors cost, and we expect that this will result in an uplift in production during Q4.”

At New Liberty, gold production declined by 57% during the quarter to 8,059oz (Q2 18,822oz) following flooding of the main pit after heavy rain in July and August which “led to the suspension of milling operations for much of August and September” and we speculate that the pit-wall and ramp failure at the Kinjor East pit, announced on 3rd October, may continue to constrain throughput into the current quarter.

It seems likely that the difficulties encountered during Q2 may have left the New Liberty mine with depleted ore stockpiles to draw on while the pit wall failure at Kinjor East is rectified.

The Youga mine produced approximately 6% less gold during the quarter at 14,619 oz (Q2 – 15,516oz) as “a security breach resulting in severe damage to a number of haul trucks, excavators and auxiliary equipment within the Heavy Mining Equipment” in early August led to a “temporary suspension of both mining and processing activities”.

The disruption at Youga led to lower plant throughput, mined grades, and reduced waste stripping, the impacts of which may, in our opinion, carry over into operations during the current quarter, although the arrival of the new equipment will provide the physical resources to help catch up the backlog.

Caledonia Mining (LON:CMCL) 575p, Mkt Cap £61.8m – Oxygen plant at the Blanket mine

Caledonia Mining has announced the successful construction and commissioning of a new oxygen plant at its Blanket gold mine in Zimbabwe.

The new 6 tonne plant is expected to increase gold recovery by around 1% to approximately 94% as well as generating modest reductions in operating costs through lower cyanide consumption.

Commenting on the expected improvements to efficiency as a result of the new plant, Chief Executive, Steve Curtis, pointed out that the new oxygen plant is the “latest in a series of investments to increase production and improve operating proficiency at Blanket as we continue our growth trajectory to 80,000 ounces per annum by 2022.”

Mr. Curtis also pointed out that “the operating costs of the new oxygen plant are predicted to be lower than those of the previous two tonne plant”.

Conclusion: Although a 1% improvement in recovery might be considered relatively minor, simplistically, an additional 800oz pa of gold production on the planned  80,000ozpa annual production from 2022 represents a meaningful potential revenue enhancement of US$1.2m annually at current gold prices, with additional potential for benefits arising from any resulting cost and efficiency savings.

Cora Gold* (LON:CORA) 7.4p, Mkt Cap £9.5m – Management changes

Bert Monro who is in charge of Business Development at the Company will be replacing Jon Forster as CEO in early 2020.

Dr Forster confirmed that he is looking to remain with the Company in the capacity of Head of Exploration.

Additionally, the Company announced issuance of 6.55m share options with an exercise price of 8.5p and expiry date of 9 October 2023 to Board members and top management.

All options vest in four equal tranches during the period before the maturity date.

Conclusion: Jon Forster is to be replaced by Bert Monro as CEO in early 2020. Jon will remain with the Company as Head of Exploration providing his technical expertise and 40 years’ worth of experience in the mining industry to the team currently working on identifying the scale of the Sanankoro Gold Discovery in Southern Mali.

*SP Angel acts as Nomad and Broker to Cora Gold

Thor Mining (LON:THR) 0.5p, Mkt Cap £4.1m – Molyhil resource update

Thor Mining has released a new mineral resource estimate for its Molyhil project in Australia’s Northern Territory which, although it is “based upon no new sample data other than for … historical copper intersections” does include copper in addition to previous estimates which only reported the tungsten and molybdenum (Mo) resources.

The new estimate, which “increases contained WO3 [tungsten trioxide] by 1.5%, and contained Mo by 9.3% compared with the previous estimate” is 4.71mt of indicated and inferred resources at an average grade of 0.28% tungsten trioxide, 0.14% Mo and 0.05% copper using a cut-off garde of 0.12% tungsten 9presumably trioxide0 equivalent.

Approximately 80% of the new resource tonnage (3.78mt averaging 0.29% WO3, 0.14% Mo and 0.05% copper) is classified as indicated with the balance (0.93mt averaging 0.25% WO3, 0.15% Mo and 0.04% copper) being inferred.

The new resource estimate follows the commissioning of RPM Global to review the existing estimates following the company’s “recognition of consistent recoveries of copper in process testwork on Molyhil ore samples”.

Today’s announcement alerts readers to “note that the Mineral Resource has an applied grade adjustment factor for the RC drilling assays. The adjustment factor is supported by review of RC tungsten and molybdenum assays compared to underground bulk samples, diamond core samples and recent metallurgical hole core samples. [and] Although the adjustment factor has been applied, the reader should note there are a number of risks associated with it that should be further investigated and their impact reduced or mitigated before proceeding with classification of confidence categories higher than an Indicated Mineral Resource, any higher confidence economic evaluation of the deposit or progression to a feasibility study.”

The application of an adjustment factor to reconcile the differing sources of data is not, in our experience, unusual but as the announcement describes fully, it does introduce an additional level of uncertainty.

Despite the “modest” copper grades in the new resource estimate, Executive Chairman, Mick Billing, commented that “the copper minerals are extracted as a by-product of the molybdenum and other sulphide products flotation stage without additional reagent addition, and virtually therefore at no additional cost”.


John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474


Richard Parlons – 0203 470 0472

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

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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.