Today’s Market View – Arc Minerals, Kavango Resources, Pensana Rare Earths and more…

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SP Angel . Morning View . Monday 21 09 20


Copper prices continue to rise on Chinese recovery




Arc Minerals* (LON:ARCM) – Zamsort hits mineralisation in drilling at its new Fwiji target


Kavango Resources (LON:KAV) – Strategic joint-venture in Botswana


Pensana Rare Earths (LON:PRE) – Tanzanian gold royalty


Power Metal Resources* (LON:POW) – Strategic joint-venture in Botswana




LME copper prices continue to rise on Chinese recovery


Copper prices in London climbed to their highest level in more than two-years on Monday, as China’s industrial output accelerated the most in eight months in August.


Meanwhile, the dollar index fell to 92.82- making base metals quoted in dollars cheaper to holders of other currencies (Fastmarkets MB).


Three-month copper on the LME rose 0.3% to $6,833/oz earlier morning, after climbing to its highest since June 2018 earlier in the session at $6,878/oz (Reuters).


LME copper stocks fall 32% to 34,475t taking on-warrant stocks to their lowest level since March 2019.


The LME reports rising metal withdrawals from warehouses in New Orleans and Bilbao




China – Planning new stockpile bases for energy and agricultural products


The move may have been prompted by the disastrous floods along the Yangtze River which has destroyed crops along significant sections of the river.


China is also looking at building greater stockpiles for oil, gas and chemicals in Free Trade Zones.


The stockpiles would enable China to better manage its reliance on imports so Saudi Arabia can not demand premiums for oil destined for China.


The new storage would also enable China to take better advantage of low commodity prices when prices fall.


Some may also see the move as of potential military significance.




Wheaton Precious Metals plans secondary ‘standard’ listing in London


The metal royalty and streaming company which holds long-term rights to buy metal from mines at discounted rates has a market capitalisation of C$30bn.


There are no current reports to raise funds in London according to the ceo with the listing designed to raise the profile of the company.




Women in Mining – BBC reports first all mine female workforce


The BBC report the first al female mine workforce at the Zimbaqua gemstone mine in Zimbabwe


This is the first of its kind in Africa according to the BBC as it is entirely run and managed by women.


The all female staff are also being trained to cut and polish gemstones from the mine.


https://www.bbc.co.uk/news/av/world-africa-54209265




Dow Jones Industrials -0.88% at 27,657


Nikkei 225 +0.18% at 23,360


HK Hang Seng -1.54% at 24,079


Shanghai Composite -0.67% at 3,316




Economics


France – New COVID-19 cases jumps nearly 13,500 on Saturday


France saw its daily cases jump to the highest level since lockdown, with the number of people dying as a result of the virus rising to 26.


UK – Sunak to extend business support loans


The Treasury’s UK-wide programme of business support loans will be extended in an effort to avoid widespread job losses and business collapses.


The chancellor is expected to extend four loans schemes which have already backed GBP53bn in lending to companies through government guarantees.


The majority of state-backed loans have been through the bounce back scheme, offering loans of up to GBP50,000 on an interest free basis- which has been used by more than 1.1m businesses so far.


More than 60,000 businesses have borrowed GBP13.7bn using the coronavirus business interruption loan scheme, whilst the coronavirus large business interruption scheme has helped lend GBP3.5bn.


Woes over the economic fallout as a result of the virus are worsening due to a resurgence in Covid-19 cases in the UK, with hospitalisations doubling every eight days.


UK House sales pipeline rise by almost 40% yoy according to Rightmove


The rise in sales is driven by families looking to move to bigger homes following the lockdown.


Prices are 5% higher yoy following a rise of 0.2% so far in September.


Prices for 3-4 bedroom homes have risen the most as families look for greater space for home offices.


UK government ends rail ‘Franchise System’ in favour of new contracts-based system


While the current rail operators will continue to run the trains most of the risk involved with running the railways will be assumed by the government.


The move will have been caused by the impact of significantly lower passenger numbers due to the coronavirus and increased home working.


It is a national sport in the UK to complain about the trains but the rail system has had to handle significantly higher passenger volumes in recent years which were far beyond any conceivable forecasts when the network was built.


Europe – Equities drop on renewed virus concerns


Stocks fell on Monday morning as rising virus cases in Europe has led to countries imposing stricter social restrictions in some regions and mulling tougher action still.


The Stoxx 600 fell -1.9%, Dax -2.3% and the FTSE 100 fell -2.5% in early morning trade, with the European banks index extending last week’s losses to fall to its lowest level since May (FT).




US – President Trump approves of Oracle deal for TikTok app


Trump has given his blessing to a partnership between TikTok and USS firms Oracle and Walmart, as he had previously ordered the app to be banned due to security concerns.


US security officals feared data was being collected and handed to the Chinese government, though TikTok’s owner ByteDance denies this.


In as joint statement on Saturday, Oracle and Walmart said they were together investing to acquire 20% of the newly formed TikTok Global business.


The two companies said TikTok Global would create more than 25,000 new jobs and pay more than $5bn (GBP3.8bn) in tax in the US.




Banks on track to double income from precious metals to $2.5bn this year


The world’s 50 largest investment banks are expecting to earn more than double the $1.2bn earnings pool last year, as the global pandemic caused chaos in the physical gold market.


Big banks lowered their trading limits on the Comex exchange in New York which created a lack of liquidity, pushing prices above that in London.


The divergence in price allowed banks with infrastructure outside the US to buy gold outside of the states and deliver it to New York and profit on the difference.


CME data shows Goldman Sachs, Morgan Stanley and Citi have ramped up trade in vaults registered with the exchange in recent months, either delivering metal or accepting bars which they can sell forward.


Futures prices were sometimes $20/oz more expensive than London rates, and with supply route now reopened bars were shipped to New York- with shipping costs ranging between $0.50-$10/oz this year.


As a result, more than 700t of gold worth $45bn at current prices has moved to New York since March (Reuters).




Currencies


US$1.1866/eur vs 1.1855/eur last week. Yen 104.28/$ vs 104.64/$. SAr 16.290/$ vs 16.131/$. $1.296/gbp vs $1.298/gbp. 0.732/aud vs 0.732/aud. CNY 6.761/$ vs 6.755/$.




Commodity News


Precious metals:


Gold US$1,954/oz vs US$1,953/oz last week


Gold ETFs 109.8moz vs US$109.8moz last week


Platinum US$941/oz vs US$944/oz last week


Palladium US$2,378/oz vs US$2,345/oz last week


Silver US$26.74/oz vs US$27.13/oz last week




Base metals:


Copper US$ 6,839 vs US$6,831/oz last week


Aluminium US$ 1,799/t vs US$1,795/t last week


Nickel US$ 14,795/t vs US$15,125/t last week – Nickel ore prices continue to rally on tight supply


Nickel laterite ore prices were up 6.8% on Friday compared to a week earlier at $68-71/t – the highest since Fastmarkets began tracking the market in February 2016.


Prices are rising sharply as traders are worried about supply from the Philippines, with two major nickel miners in the country, Nickel Asia Corp and Global Ferronickel Holdings, suspended mining and export operations in April.


The Philippines became the leading nickel ore supplier after Indonesia banned ore exports in January, and the heavy reliance on Philippine ore has made the market very sensitive to any possible supply issues.


Fastmarkets data shows 1.5% nickel ore price in China increased by 17.8% in the first three weeks of September, compared with a 7.4% increase over the same period of last year.


China imported 12.4mt of nickel ore in the first six months of the year, a 40% decrease compared to the same period last year according to Chinese customs data.


Zinc US$ 2,528/t vs US$2,547/t last week


Lead US$ 1,911/t vs US$1,917/t last week


Tin US$ 18,270/t vs US$18,120/t last week




Energy:


Oil US$42.6/bbl vs US$43.7/bbl last week


Natural Gas US$2.006/mmbtu vs US$1.976/mmbtu last week




Bulk:


Iron ore 62% Fe spot (cfr Tianjin) US$121.0/t vs US$117.8/t


Chinese steel rebar 25mm US$552.7/t vs US$553.7/t


Thermal coal (1st year forward cif ARA) US$58.5/t vs US$58.6/t


Coking coal futures Dalian Exchange US$151.0/t vs US$158.3/t




Other:


Cobalt LME 3m US$34,200/t vs US$34,200/t


NdPr Rare Earth Oxide (China) US$49,180/t vs US$49,437/t


Lithium carbonate 99% (China) US$5,073/t vs US$5,032/t


Ferro Vanadium 80% FOB (China) US$30.1/kg vs US$30.1/kg


Antimony Trioxide 99.5% EU (China) US$5.3/kg vs US$5.2/kg


Tungsten APT European US$220-225/mtu vs US$212-220/mtu


Graphite flake 94% C, -100 mesh, fob China US$430/t vs US$430/t


Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,275/t




Battery News


Arc Minerals* (LON:ARCM) 4p, Mkt cap GBP39m – Zamsort hits mineralisation in drilling at its new Fwiji target


(Arc holds 72.5% of Zaco and 71.34% of Zamsort in Zambia)


Arc Minerals reports the intersection of both copper oxide and sulphide mineralisation in drilling at its new Fwiji target in the west of Zambia.


Arc says this ‘is the first time significant oxide and sulphide mineralisations have become evident based on our XRF analysis.’


Fwiji: Drilling over a 1sqkm area has confirmed an ‘anticlinal’ structure which hosts a carbonaceous shale carrying sulphide copper mineralisation.


Drill assays should be with the company shortly but have been slightly delayed due to a backlog of assay work at the lab in Zambia.


The carbonaceous shale unit appears analogous to the host rock at First Quantum’s Sentinel Deposit.


First Quantum Minerals acquired the Sentinel (Kalumbila) project from Kiwara in 2010 for US$260m. Kiwara had an estimated resource at Kalumbila of 1.38bt grading 0.78% copper. The resources was later adjusted by FQM to 1.027bt grading 0.51% copper. Last year the mine reported an new resource of 0.88bnt grading 0.53% copper following production of 223,656t of copper in 2018.


Anglo American: 2,500 soil samples have also been sent off for assay as part of the Anglo American Exclusivity agreement which covers Arc’s Zamsort and Zaco licenses. Anglo is analysing the soil samples to enable the mapping of lithology, stratigraphy, redox boundaries, zones of metal depletion and metal enrichment within the hydrothermal mineral system. Anglo have re-assayed the samples at ALS and are working through the results.


We look forward to further news on the potential development of a commercial transaction with Anglo or another major.


Conclusion: Visual and XRF identification of copper sulphides and oxides is a good start for the Fwiji target. We look forward to seeing the copper grades in the drill assays.


*SP Angel act as nomad and broker to Arc Minerals. The analyst holds shares in Arc Minerals




Kavango Resources (LON:KAV) 2.5p, Mkt cap GBP4.6m – Strategic joint-venture in Botswana


Kavango Resources reports the formation of a strategic joint-venture with Power Metals to accelerate the exploration of of its holdings in the Kalahari Copper Belt and exploration and drill target selection in the northern, Hukuntsi, zone of its Kalahari Suture Zone (KSZ) project.


The newly formed, private, Botswana company will take on Kavango’s two rare-earths and copper exploration projects within the Ditau project as well as its two copper exploration licenece within the Kalahari Copper Belt.


Power Metals will pay GBP75,000 to Kavango and fund the first GBP75,000 of exploration over the first 2 years plus provide up to GBP10,000 to fund the establishment of the joint-venture.


Power Metals will also issue 6m shares to Kavango at a price of 1.25p/share and a further 5m warrants to acquire shares at a price of 2p/share over 2 years and “1 for 1 replacement warrants, exercisable at 5p per share over two years”.


Chief Executive, Michael Foster, explained that “Over the course of completing the due diligence for the sale of the interest in our Ditau Project it became clear there was a much greater opportunity for both parties”.


Mr Foster said that the strategic alliance would “lead to a significant acceleration of our exploration efforts across both areas and we look forward to reporting our progress”.


The longer term aspiration for the joint venture is to “create a Botswana-focussed minerals exploration company, which will ultimately seek a separate listing on either a Canadian or British stock exchange”.


Conclusion: The establishment of a joint venture with Power Metals is expected to accelerate exploration of Kavango’s extensive exploration holdings in Botswana. We look forward to further bews.




Pensana Rare Earths (LON:PRE) 65p, Mkt Cap GBP123.2m – Tanzanian gold royalty


Pensana Rare Earths has reported that it has reached agreement with a Mauritius based company, Drillcraft Limited, for it to assume the company’s Miyabi gold exploration project with immediate effect.


Drillcraft, which is a private company, is reported to have “an established gold operational base in Tanzania” and it will pay approximately US$0.4m in cash plus a “2% royalty participation agreement over the existing mineral resource estimate of approximately 0.5 million ounces of gold, with operations forecast to commence in mid-2021”.


Chairman, Paul Atherley explained that, following the recent mineral resource upgrade at its Longonjo deposit in Angola, the “transaction on the Miyabi exploration asset allows us to focus fully on bringing online the first major rare earth mine in over a decade to meet the burgeoning demand for magnet metals in electric vehicles and wind turbines”.


Conclusion: The Miyabi transaction clears the way for Pensana to concentrate its attention on advancing the Longonjo rare eatyhs project in Angola.




Power Metal Resources (LON:POW) 1.2p, mkt cap GBP9.2m – Strategic joint-venture in Botswana


Power Metal Resources reports the formation of a strategic alliance with Kavango Resources to advance exploration in Botswana.


The transaction gives Power Metal Resources “a 50% interest in a 2,680 km2 portfolio of base and strategic metal project interests in Botswana (the “Acquisition”) to be held in a new strategic joint venture holding company”.


The newly formed, private, Botswana company will take on Kavango’s two rare-earths and copper exploration projects within the Ditau project as well as its two copper exploration licences within the Kalahari Copper Belt.


Power Metals will pay GBP75,000 to Kavango and fund the first GBP75,000 of exploration over the first 2 years plus provide up to GBP10,000 to fund the establishment of the joint-venture.


Power Metals will also issue 6m shares to Kavango at a price of 1.25p/share and a further 5m warrants to acquire shares at a price of 2p/share over 2 years and “1 for 1 replacement warrants, exercisable at 5p per share over two years”.


Echoing comments from Kavango Resources, Power Metal Resources says that “The four project licenses are to be held in a new Botswana private holding company, with an appropriate holding company structure to enable the possibility of the new vehicle to seek a listing on a Canadian or UK stock exchange in 2021”.


CEO, Paul Johnson, said that the transaction “complements Power Metal’s interest in the Molopo Farms Complex project, which is seeking a large-scale nickel-platinum group metal discovery in Botswana, and where a maiden drill programme is planned”.


Mr. Johnson also explained that “We are keen to develop more insight into the potential of the Ditau Camp project, and this can only be achieved through proactive ground exploration which we intend to undertake with our JV partners. Moreover, the addition of two key Kalahari Copper Belt licences brings the Company into a highly prospective copper territory which, as I have personally experienced, has the potential to deliver considerable discoveries. Again, ground exploration is key, and we intend to be proactive”.


Conclusion: The establishment of a larger exploration entity in Botswana should and broaden the exploration expertise and accelerate exploration of the nickel potential at Molopo Farms and of the Kalahari Copper Belt licences. We look forward to further news as the exploration proceeds.


*SP Angel acts as Nomad and Broker to Power Metals Resources






Analysts


John Meyer – [email protected]el.co.uk – 0203 470 0490


Simon Beardsmore – [email protected] – 0203 470 0484


Sergey Raevskiy –[email protected] – 0203 470 0474




Sales


Richard Parlons –[email protected] – 0203 470 0472


Abigail Wayne – [email protected] – 0203 470 0534


Rob Rees – [email protected] – 0203 470 0535




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.






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, Antimony


Asian Metal


Tungsten


Metal Bulletin



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