Today’s Market View – Flight From Risk Drives Gold Prices to $1,320 Per Oz


Altus Strategies* (LON:ALS) – Gold/copper exploration license secured in norther Ethiopia

Beowulf Mining* (LON:BEM) – Drilling shows extension of higher-grade graphite zone at at Aitolampi graphite in Finland

Chaarat Gold* (LON:CGH) BUY – 42p – Fundraise update

Metals Exploration (LON:MTL) – Lenders to extend their standstill agreement

Sunrise Resources PLC (LON:SRES) – CS Project well received at inaugural NPA meeting

Malaria – may have found its Nemesis

  • A fungus has been genetically modified to produce a toxin from a spider venom which kills malaria carrying mosquitoes.
  • The fungus naturally infects Anopheles mosquitoes that spread malaria.
  • Genetic instructions for making the toxin were added to the fungus’s genetic code so it would start making the toxin once it was inside a mosquito.
  • The genetically modified fungus kills quicker, and takes fewer fungal spores to do the job.
  • Trials in a 6,5000ft fake village in Burkina Faso which is completely surrounded with a double layer of mosquito netting has shown the GM fungus to be hugely effective at killing malaria mosquitoes.

Blast at Russian explosives factory injures 79

  • The factory at Dzerzhinsk was producing and storing explosives and.

Frank Timis, who founded Regal Petroleum, African Minerals is shown to have paid just £35.20p in tax in 2017 and no tax in the UK in 2016 despite receiving £670,000 in payments from his offshore trust. BBC

  • The trust turned the payments/distributions into untaxable loans. A backdated loan agreement was used to make the loans look legitimate.
  • Timis has two former convictions for supplying heroin in the 1990s and has a number of failed mining ventures in Africa.
  • Regal Petroleum told investors it expected to find oil in Greece, even though it knew the well in question was dry. 
  • “Regal’s board hoped that the company’s survey team had found one of the largest oil deposits in Europe: up to a billion barrels. The oil was allegedly under so much pressure that it almost destroyed the drilling platform.” “This hype drove Regal’s share price up to a peak of 509p, with the company’s market value reaching £500m, making it one of the highest-valued companies of the Alternative Investment Market. Investors put some £45m in the company. Days later, Timiș secretly agreed to sell the company’s assets and the resigned as chief executive of the company.” Wikipedia
  • By mid-2005, it was clear that Regal’s oil field contained oil but not in commercial amounts. The flow rates were around 30 barrels a day and “deemed to be non-commercial”. In a few hours, the stock fell by more than 60%, and as of June 2006, the share price was at 65p, less than 20% of the peak price. In 2010, the company was still worth about £200m, and had cash reserves of £80m,[10]
  • Timis had left the board by the time the company was fined.
  • Timis’ lawyers claim Timis was personally investigated and cleared by the FCA in relation to his role in Regal Petroleum.
Dow Jones Industrials -1.41%at  24,815
Nikkei 225 -0.92%at  20,411
HK Hang Seng -0.08%at  26,879
Shanghai Composite -0.30%at   2,890
FTSE 350 Mining -0.99%at  18,447
AIM Basic Resources +0.16%at   1,984

Economics

US – It seems investors start to doubt a potential resolution to the US/China trade conflict at the coming G20 meeting.

  • A senior Chinese official and trade negotiator said the US cannot pressure China in to force a trade deal on Sunday.
  • China investigates if FedEx damaged terms and conditions after the US company diverted packages for the Huawei offices in China. While FedEx acknowledged the error and apologised to the Company, the incident comes during an sensitive time for Huawei and US/China relations.
  • Additionally, the US Defence Secretary Patrick Shannon voiced concerns over Chinese behaviour in Asia on Saturday while his Chinese counterpart warned the US not to meddle in security disputes over Taiwan and the South China Sea.
  • Markets are currently pricing in a more than 50% chance the rate cut will come as early as next month with a total of two for the year.
  • Gold is up $8/oz this morning climbing towards the $1,320/oz mark while copper is in a downward trend trading at slightly above the $5,800/t level and Brent prices down 1.4% at $61.1/bbl today.
  • Large financial institutions are cutting US GDP estimates down on heightened trade disruptions risks.

China – white paper estimates impact of tariffs on trade and investment.

  • China export volume into the US fell 9.7% yoy so far this year on US tariffs – some of this will be down to accelerated exports into the US ahead of the tariff introductions.
  • The introduction of tariffs has also hit investment with Chinese direct investment in the US down 10% yoy following a rise of 1.5% in 2018 and 11% in 2017.

China – Private sector manufacturing PMI reading was little changed from April indicating a marginal expansion in the sector.

  • New orders edged higher while new export orders gauge moved back above 50 matching the January level, the best reading since Mar/18.
  • On the downside, business confidence weakened to the lowest since the data was launched in April 2012 reflecting the US/China trade conflict.
  • Markit Manufacturing PMI: 50.2 v 50.2 in April and 50.0 forecast.

Eurozone – Eurozone manufacturing continued to contract in May with a fourth consecutive monthly decline in production and further steep decline in new orders seeing the toughest run for the sector since 2013.

  • The headline PMI came in at 47.7 compared with 47.9 in April.
  • “Trade wars, slumping demand in the auto sector, Brexit and wider geopolitical uncertainty all remained commonly cited risks to the outlook,” the report read.
  • In southern Europe, activity in Spain was little changed (50.1 v 51.8 in April and 51.3 forecast) while Italy remained in contraction (49.7 v 49.1 in April and 48.5 forecast).
  • The Spanish manufacturing sector broadly stagnated  last month with production little changed and new orders down marginally; confidence deteriorated to a six-month low.
  • In Italy, “the manufacturing sector recorded its softest contraction since Sep/18, with forward looking indicators suggesting a more positive outlook as move into summer”.
  • The European Commission is expected to take first steps toward a disciplinary procedure for breaking fiscal rules this week.
  • The Italian government is determined to reach a compromise with Brussels and avoid sanctions, Economy Minister Giovanni Tria commented on the issue.
  • Local equities are off this morning (FTSE MIB -0.7%) in line with the rest of Europe with the spread between yields on 10y Italian and German debt tightening.

South Korea – Manufacturing PMI slides into a contraction territory in May reflecting quickly deteriorating economic conditions both domestically and externally.

  • Respondents highlighted struggles “within the crucial automobile and semi-conductor industries, while weak exports due to slowdown at large trading partenrs such as China and Japan supported inventory, production and employment cutbacks”.
  • New export orders declined for the tenth consecutive month, with the May drop gathering pace versus the previous month.
  • Business confidence dipped to the lowest since Aug/16.
  • Markit Manufacturing PMI: 48.4 v 50.2 in April.

Currencies

US$1.1166/eur vs 1.1138/eur last week.   Yen 108.23/$ vs 108.84/$.   SAr 14.597/$ vs 14.801/$.   $1.264/gbp vs $1.261/gbp.   0.694/aud vs 0.692/aud.   CNY 6.907/$ vs 6.905/$.

Commodity News

Precious metals:         

Gold US$1,313/oz vs US$1,295/oz last week

   Gold ETFs 70.6moz vs US$70.5moz last week

Platinum US$799/oz vs US$793/oz last week

Palladium US$1,341/oz vs US$1,366/oz last week

Silver US$14.63/oz vs US$14.54/oz last week

Base metals:   

Copper US$ 5,827/t vs US$5,840/t last week

Aluminium US$ 1,796/t vs US$1,785/t last week

Nickel US$ 11,940/t vs US$12,090/t last week

Zinc US$ 2,505/t vs US$2,536/t last week

Lead US$ 1,800/t vs US$1,793/t last week

Tin US$ 18,750/t vs US$18,790/t last week

Energy:           

Oil US$61.2/bbl vs US$65.6/bbl last week

Natural Gas US$2.462/mmbtu vs US$2.562/mmbtu last week

Uranium US$23.90/lb vs US$23.95/lb last week

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$95.9/t vs US$99.9/t

Chinese steel rebar 25mm US$610.3/t vs US$614.2/t

Thermal coal (1st year forward cif ARA) US$64.5/t vs US$65.3/t

Coking coal futures Dalian Exchange US$197.3/t vs US$186.3/t

Other:  

Cobalt LME 3m US$32,000/t vs US$33,500/t

NdPr Rare Earth Oxide (China) US$48,494/t vs US$48,518/t

Lithium carbonate 99% (China) US$9,627/t vs US$9,631/t

Ferro Vanadium 80% FOB (China) US$35.5/kg vs US$36./kg

Antimony Trioxide 99.5% EU (China) US$5.8/kg vs US$5.7/kg

Tungsten APT European US$260-270/mtu vs US$270-280/mtu

Battery News

Ballard Power Systems – to help deploy 1,000 zero-emission fuel cell busses into Europe

  • A €40m grant is being used to support an initial 600 fuel cell bus program with 200 buses to go into the UK, Denmark and Latvia to start.
  • The target is to produce a single-decker bus for under €375,000 fuelled with hydrogen at between €5-7/kg and bus service costs of €0.30/km.
  • Ballard’s fuel cells have traditionally used quite allot of platinum running relatively hot depending on the platinum loadings. Development of these fuel cells over the past 20 years should have improved efficiency while reducing heat output.

Vanadium Flow Batteries to be used in renewable megaproject planned for Utah, USA

  • The Advanced Clean Energy Storage project is to house 1,000MW sufficient to power 150,000 American homes for a year.
  • Mitsubishi Hitachi Power Systems and Magnum Development are to use hydrogen, compressed air energy storage, large scale flow batteries, and solid oxide fuel cells to store energy.
  • Energy will be produced using a a gas turbine that can produce power using a mixture of hydrogen and natural gas with the natural gas to be phased out in favour of renewable hydrogen as its sole fuel source.
  • The site has been chosen for its location relative to some salt caverns in Millard County.
  • Ferro-vanadium prices remain steady in Western Europe at US$34.8-36.5/kgV

Company News

Altus Strategies* (LON:ALS) 4.8p, Mkt Cap £8.5m – Gold/copper exploration license secured in norther Ethiopia

  • The Company was granted a 285km2 exploration license across the highly prospective Arabian Nubian Shield (ANS) of norther Ethiopia.
  • The Zager license is found within the Neo-Proterozoic Nakfa terrane of the ANS hosting 27km of the northeast trending ophiolite belts with overlaying tuffaceous volcano-sedimentary sequence, in addition to two syn-tectonic granitoid intrusions.
  • The geological setting is highly prospective in VMS style base metal and gold mineralisation.
  • The Nakfa terrane hosts the Bisha polymetallic mine (136km NW of Zager), the Asmara project (125km NE) as well as the Harvest and Adyabo projects (10km south).
  • The team identified priority exploration targets and artisanal gold workings with a first phase of reconnaissance exploration programme scheduled to start shortly.

Conclusion: Securing the Zager license area expands the Altus portfolio of exploration holdings across the prospective Arabian Nubian Shield in addition to Daro and Tugray-Afar copper projects. The programme testing remote sensing targets and a license-wide stream sediment sampling survey will be launched shortly to priorities prospective targets.

*SP Angel acts as nomad and broker to Altus Strategies

Beowulf Mining* (LON:BEM) 6.6p, Mkt Cap £39m – Drilling shows extension of higher-grade graphite zone at at Aitolampi graphite in Finland

(Beowulf owns 100% Kallak iron ore in Sweden, 100% of Aitolampi graphite in Finland and 40% of the Mitrovica and Viti projects in Kosovo)

  • Beowulf Mining report the identification of a further 100m of strike extension to the higher-grade >5% graphite grade Western Zone at its Aitolampi project in Sweden.
  • Five diamond drill holes were drilled in In March and April totalling 838m following on from the four holes which tested higher-grade mineralisation to the south-east last year intersecting 92.5m at 6.19% TGC.
  • A fifth drill hole targeted one of 13 priority frequency-domain electromagnetic anomalies. Some of which have potential strike lengths of up to 500m indicating potential for further significant graphite discoveries.
  • The Western Zone remains open in all directions offering significant scope for upside scale.
    • Drilling at Aitolampi hit:
    • 102.04m grading 5.07% Total Graphitic Carbon ‘TGC’
      • including 46.68m at 6.09% TGC
    • 94.69m at 5.76% TGC
      • including 11.43m at 7.13% TGC.
    • 96.83m at 5.01% TGC
      • Including 22.65m at 6.0% TGC.
    • 91.13m at 5.03% TGC
      • including 42.69m at 6.16% TGC.
  • Fennoscandian, Beowulf’s Finnish graphite subsidiary is also looking to move downstream into the processing and manufacturing of value-added graphite products for batteries and other uses.
  • “The Company is reviewing its plans for a Scoping Study for Aitolampi, which was postponed last year allowing more baseline environmental data to be collected.”

Conclusion: This latest drilling will contribute towards increasing the scale of the new Mineral Resource Statement for Aitolampi while drill core will be used for graphite purification and spheroidization testwork as well as environmental studies. Aitolampi graphite is also being considered for battery applications as part of the Business Finland funded BATCircle Project.

*SP Angel acts as nomad and broker to Beowulf Mining

Chaarat Gold* (LON:CGH) 32p, Mkt Cap £128m – Fundraise update

BUY – 42p

CLICK FOR PDF

  • The Company reported on Friday a new investor decided to increase the convertible bond commitment from $10m to $15m.
  • The receipt of the proceeds is expected to take place by the end of June.

*SP Angel acts as Broker to Chaarat Gold

Metals Exploration (LON:MTL) 0.7p, Mkt Cap £14.5m – Lenders to extend their standstill agreement

  • Metals Exploration has confirmed that its senior lenders, HSBC and BNP Paribas and major shareholders holding the company’s mezzanine debt “have renewed a Standstill Agreement” which relieves the company “of making both principal and interest payments due in relation to its Runruno Facility Agreement … and the Mezzanine Debt Facilities” until 28th June.
  • “The purpose of the Standstill Agreement is to allow the Company and all its lenders time to evaluate, and consider possible solutions to, Metals Exploration’s current financial position”.
  • The company’s quarterly report for the three months ending 31st March 2019 disclosed a cash balance of US$3.34m and “total interest-bearing liabilities as at 31 March 2019” of US$114.1m.
  • The quarterly report also disclosed that “Critical maintenance has been deferred due to working capital constraints. However, these activities will commence in Q2 2019, with a programme of major component rebuilds for mobile equipment. This will reduce equipment availability in the short term. … [and also that] … There remains an unaccounted discrepancy between calculated metallurgical recovery and gold poured of between 15% and 20%, which the Company is working diligently to understand. This requires a better understanding of the metallurgical balance, more robust sampling practices and better integrated metering and measuring systems throughout the plant”.

Conclusion: The company’s lenders have agreed to a further extension of their moratorium on debt repayments while the underperformance at RunRuno is assessed.

Sunrise Resources Plc (LON:SRES) 0.095 pence, Mkt Cap £2.6m – CS Project well received at inaugural NPA meeting

  • Sunrise Resources has reported a positive response to its CS Pozzolan/Perlite project at the inaugural meeting of the Natural Pozzolan Association (NPA) held in Arizona on 16th/17th May.
  • The company’s presentation to more than 70 delegates “was very well received, and it was clear from the level of interest, and intense question & answer sessions that there is much concern for the future supply of fly ash from coal-fired generating stations.”
  • Natural pozzolan provides a cost-effective and environmentally more benign alternative to fly-ash in the production of concrete  and the company reports that “there is much concern for the future supply of fly ash from coal-fired generating stations. These supplies are falling at a rate that is faster than many within the industry expected due to the accelerating closure of coal-fired power stations across the USA” in response to pollution concerns.
  • The company notes that other countries, including Sweden, the IK, France, Ireland, Portugal, Denmark and Germany have announced the phasing out of coal fired power generation  adding further pressures on the supply of fly-ash.
  • Chairman, Patrick Cheetham, observed that “the meeting has reinforced our belief that that the closure of coal-fired power stations and the resulting shortage of fly ash will be a “black swan event” within the industry that will see the continuing resurgence of natural pozzolan as a major component in concrete.”
  • Mr. Cheetham went on to comment that “We are well set to participate in this resurgence in a part of the US that is particularly badly affected and to pursue this scalable business opportunity in future on a wider basis.”
  • The company has previously reported, in October 2018, that a 100 ton bulk sample of natural pozzolan from its CS Project in Nevada has been tested by a cement company and found to meet all the “requirements of ASTM C618, the standard for natural pozzolan for use in cement and concrete mixes.”

Conclusion: Sunrise Resources’ CS Pozzolan project has attracted interest from concrete producers looking for an alternative to declining sources of power station  fly-ash as growing environmental concerns lead to the phasing out of coal fired power generation.

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

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.

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