Today’s Market View – BHP, Bluejay Mining, Botswana Diamonds and more…

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SP Angel . Morning View . Monday 09 11 20

US elections and strong China exports boost metal prices 

 

BHP (LON:BHP) – MOU signed with Baowu Group 

Bluejay Mining* (LON:JAY) – Bluejay shares list on the US OTCQB market today

Botswana Diamonds (LON:BOD) – Geophysics helps identify November drilling targets at Marsfontein and Thorny River

Bushveld Minerals* (LON:BMN) – BUY, Valuation 37.7p – US$35m convertible loan note with Orion Mine Finance

Oriole Resources (LON:ORR) – Planned resumption of aircore drilling at Senala

Peak Resources (ASX:PEK) – Peak adds Tanzanian lawyer as an NED to the board

Power Metal Resources* (LON:POW) – Application for additional license at Australia gold JV 

Strategic Minerals* (LON:SML) – Review of Leigh Creek development plan and project economics

Sunrise Resources (LON:SRES) – Completion of drill hole at the Clayton silver-gold project

Tri-Star Resources* (LON:TSTR) – H1 2020 Results and restoration of trading

Vast Resources* (LON:VAST) – GMs scheduled late November including the proposed consolidation of the interest in Romanian assets

 

Recent interviews:

US Election, China growth policies Solgold*, Mkango*, Rainbow Rare Earths*: https://youtu.be/YKk5-kVpVGE

EV revolution, gold and other ideas (Interactive Investor): https://www.youtube.com/watch?v=ja0IdjszfCc

Metals Markets: Are they totally dependent on stimulus? (IG TV): https://youtu.be/TOiSwRpgfKM

Tesla Battery Day (IG TV): https://youtu.be/8su0PtyZLIM

SolGold* interview: : https://youtu.be/wK3SDPKADgM

Stock ideas (VOX, 21/10/20): https://www.voxmarkets.co.uk/media/5f913cebb9f74a03c9dfcb4d/?context=/listings/LON/AAZ/multimedia/

*SP Angel act as nomad or broker or nomad and broker to companies mentioned in the above videos.

 

APEX survey rankings for SP Angel commodity forecasts: 2nd in Gold, 2nd in Copper, 2nd in Nickel, 1st in Tin, 5th in Iron ore.

The survey takes forecast from 21 analysts from commodity traders, banks, economics and specialist commodity forecasters

 

Dow Jones Industrials -0.24% at 28,323

Nikkei 225 +2.12% at 24,840

HK Hang Seng +1.18% at 26,016

Shanghai Composite +1.86% at 3,374

 

Economics

US – Equity markets are stronger this morning supported by the prospect of a split Congress and Joe Biden claiming presidency.

US media networks declared Biden the winner on Saturday after the Associated Press called the state of Pennsylvania for the former vice, president, according to FT.

President Trump has not conceded yet with counting continuing in a number of states.

 

China – the renminbi extended its recent gains as the dollar weakened following Joe Biden’s presidential victory.

Separately, strong trade data highlights a continuous rebound industrial activity as well as domestic demand.

Overseas shipments to the EU continued to decline form last year with a 7% drop, while exports to other major trading partners including the US, Japan and Asean picked up.

Exports (US$, %yoy): 11.4 v 9.9 in September and 9.2 est.

Imports (US$, %yoy): 4.7 v 13.2 in September and 8.6 est.

 

UK – Brexit talks near the November 15 deadline set by both parties with not clear resolution in sight.

Following eight months of negotiations between two sides, Johnson and European Commission President Ursula von der Leyen discussed the deal over the weekend in an effort to bridge differences.

Among main issues are so-called level playing field rules for business and access to British fishing waters, Bloomberg reports.

 

France – The central bank is estimating the economy may be running at 12% below pre-pandemic levels in November on the back of implemented new restrictions.

The expected drop marks an acceleration in the decline of 4% registered in October but compares favourably to the 31% drop during the first lockdown in April.

Industry and construction, sectors less affected by current restrictions, are expected to decline moderately this month, while the impact on services will be more severe, FT reports.

 

Turkey – New central bank governor said the policy will be in a review mode until its next meeting leaving rates unchanged.

Naci Agbal, a former finance ministry, was appointed to head the central bank on Saturday.

Additionally, Berat Albayrak, the current finance minister and a son-in-law of Erdogan, filed a resignation over the weekend.

The lira is up nearly 5% against the US$ this morning.

 

VW – signs $3.7bn deal to buy Navistar International taking it into the US truck market. VW already owns Scania and MAN vehicles which sell mainly into Europe.

 

Currencies

US$1.1882/eur vs 1.1847/eur last week.  Yen 103.49/$ vs 103.42/$.  SAr 15.597/$ vs 15.750/$.  $1.316/gbp vs $1.314/gbp.  0.729/aud vs 0.727/aud.  CNY 6.570/$ vs 6.618/$.

 

Commodity News

Precious metals:         

Gold US$1,961/oz vs US$1,948/oz last week – Gold prices rise as Biden win ignites hope of further stimulus 

Gold prices rose to nearly a two-month high on Monday, as a Biden win became widely accepted over the weekend despite the incumbent President Trump claiming fraudulent voting practices in key battleground states. 

Spot gold rose 0.5% to $1,961/oz earlier this morning, whilst US gold futures gained 0.6% to $1,963/oz (Reuters).   

Democrats have been calling for further stimulus to cushion the economic blow of coronavirus, however previous attempts to pass such bills were struck down by Republicans who wanted to focus on the election.  

The President-elect is expected to share details of his coronavirus response plan this week, including more stimulus aid for Americans which is reportedly likely to be a second stimulus check. 

Biden’s win sent the US dollar tumbling to a ten-week low on the prospect of more stimulus, making gold cheaper for holders of other currencies.  

However, the impact of a second wave of coronavirus on the economy could see investors buying the dollar for its safe-haven status, lending support for the greenback (FX Street). 

Gold ETFs 111.1moz vs US$110.8moz last week

Platinum US$905/oz vs US$901/oz last week

Palladium US$2,474/oz vs US$2,400/oz last week

Silver US$25.83/oz vs US$25.39/oz last week

           

Base metals:   

Copper US$ 6,957/t vs US$6,905/t last week – China copper imports rise 43% YoY in October 

Arrivals of unwrought copper and copper products amounted to 618,100 tonnes last month compared to 431,000t in October 2019, although imports were down 14% on the month from 722,500t in September.  

Imports in the first ten months of the year reached 5.61mt- up 41% YoY and beating the previous record for China’s annual copper purchases of 5.30mt in 2018 with still two months to go, according to Customs data. 

Imports have surged amid China’s rapid recovery from the coronavirus as the country attempts to build its way out of economic strife, which opened up an arbitrage between London and Shanghai prices which saw buyers purchase cheaper overseas metal.  

Aluminium US$ 1,908/t vs US$1,895/t last week

Nickel US$ 15,815/t vs US$15,480/t last week

Zinc US$ 2,667/t vs US$2,616/t last week

Lead US$ 1,843/t vs US$1,852/t last week

Tin US$ 18,395/t vs US$18,370/t last week

           

Energy:           

Oil US$40.4/bbl vs US$40.5/bbl last week

Natural Gas US$2.846/mmbtu vs US$2.940/mmbtu last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$115.0/t vs US$113.4/t – Iron ore prices rebound despite Chinese stocks hitting nine-month high 

Iron ore prices rebounded on Monday morning from Friday’s decline which saw prices fall for the third weekly loss out of four- as seaborne shipments increased, especially out of Australia.  

Iron ore futures on the Dalian Commodity Exchange jumped 4.8% this morning, the biggest uptick in nearly four months, as futures on the Singapore Exchange rose as much as 3.7% to $116.90/t. 

Chinese weekly iron ore port holdings have been steadily rising since the mid-June, when stocks totalled 108mt vs 131mt at the end of last week (Steelhome). 

Australian shipments increased to 18.2mt last week from 16.7mt in the week prior, according to global ports data compiled by Bloomberg.  

Brazilian miners are also shipping more material, signalling a rebalance in the seaborne iron ore market. Top miners are set to ship 356mt this quarter, 10.5% more than the period prior (Bloomberg). 

Chinese steel rebar 25mm US$611.3/t vs US$588.8/t

Thermal coal (1st year forward cif ARA) US$54.6/t vs US$54.8/t

Coking coal swap Australia FOB US$117.3/t vs US$117.3/t

           

Other:  

Cobalt LME 3m US$32,835/t vs US$32,835/t

NdPr Rare Earth Oxide (China) US$52,362/t vs US$51,373/t

Lithium carbonate 99% (China) US$5,556/t vs US$5,515/t

Ferro Vanadium 80% FOB (China) US$27.0/kg vs US$27.0/kg

Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg

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

Graphite flake 94% C, -100 mesh, fob China US$440/t vs US$440/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,300/t vs US$2,275/t

 

Battery News 

UK government need to invest more to reach net zero  

The UK is not on track to meet its target of net zero carbon emissions by 2050. The Institute for Public Policy Research has said that the government has not provided the scale of investment needed to secure a low carbon future.   

Over the course of this parliament, the government has committed only 12% of what is necessary to meet the net zero emissions target. The think tank calculates that about £33bn more annual investment is needed. However, so far, only 4bn annually has been committed.     

The IPPR states that an extra £10.3bn is needed a year to help public transport services and efficiency, as well as encouraging cycling and walking, while four times the current annual spend would bring carbonising homes in line with targets.   

Green job creation schemes could also be introduced to improve the carbon footprint of homes and buildings, nature restoration, transport and infrastructure and work to make industry greener.   

The largest growth in green jobs is expected to be in the North West, East Midlands and Yorkshire and the Humber. Investment in low emissions housing would have a high impact on job creation in the North West and South East.  

 

Company News

BHP (LON:BHP) 1623p, Mkt cap £33.48bn – MOU signed with Baowu Group 

BHP has signed a memorandum of understanding focused on decarbonising steelmaking, which will see the diversified miner invest $35m in low-carbon steelmaking technologies and share technical knowledge with Baowu.  

One project alongside Baowu includes a potential carbon capture and storage project at one of Baowu’s production sites in China, and the utilization of low carbon fuel sources, the FT reports.   

The investment will be the first from BHP’s $400m climate investment fund, with the diversified miner pledging to develop technologies and approaches to make steelmaking 30% less carbon-intensive and shipping 40% less intensive under new climate goals set in September. 

Conclusion: Mining companies regardless of size are under increasing pressure to conduct themselves in the correct way in terms of ESG. However, climate activists are unlikely to be too impressed with a $35m investment from a company which raked in profits of over $9bn last year and produces scope 3 emissions that exceeded all those produced by Australia.  

 

Bluejay Mining* (LON:JAY) 9.82p, Mkt cap £95m – Bluejay shares list on the US OTCQB market today

Bluejay Mining report the listing of their shares on the OTCQB market in the US today.

The stock is listed on the BLLYF ticker in the US.

The shares remain listed in London on the AIM market.

The new listing will give North American investors easier access to trade Bluejay Mining shares.

Conclusion: The US listing comes at a critical time for Bluejay Mining. The team is working with an international trading group to place its future production with consumers. The purity and high-grade of the Dundas concentrate is considered by experts to be attractive for offtakers with around 70% of projected mine production already placed.

We believe there should be strong ongoing demand for the Dundas ilmenite due to growing demand for ilmenite feedstock from the sulphate processors as supply falls from existing mines coupled with a slow down in the development of new projects. Ilmenite prices remain strong at $240/t for 47-49% concentrate in China reflecting ongoing tight feedstock inventories. Any further interruption to mine supply could cause prices to jump higher.

Today’s news on the issuance of an Orange Smog Alert in Hebei China orders certain mills to cut production. While the anti-pollution restriction is less severe than last year the news has caused iron ore futures prices to rise.

The alert may further restrict the production of titanium slag from furnaces using lower grade iron ore containing vanadium and titanium co-products.

*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Dundas ilmenite project in Greenland and has bought stock in the company.

 

Botswana Diamonds (LON:BOD) 0.68p, Mkt Cap £4.7m – Geophysics helps identify November drilling targets at Marsfontein and Thorny River

Botswana Diamonds reports that a geophysics programme comprising gravity, electromagnetics, magnetics and ground penetrating radar undertaken at its Marsfontein and Thorny River diamond project has identified four target areas among the ten surveyed.

The target areas include a “potential blow of up to 0.25Ha and swells in the kimberlite dyke system of up to 10m” which will be addressed in a drilling programme expected to commence in the next two weeks.

Chairman, John Teeling, confirmed that “We have identified four likely targets, one blow, and three swells. These will be drilled in the coming weeks. Some of the kimberlite pipes in this area contain very high diamond grades”.

The Marsfontein kimberlite was initially discovered in 1993 and started production under the management of SouthernEra Resources in mid-1998. Production was relatively short lived with closure in the early 2000s however it was considered to be one of the highest grade diamond deposits and we understand that the ‘blows’ were historically productive ore sources at Marsfontein.

Conclusion: Drilling of targets identified with geophysics is expected to start within the next two weeks; we await the results with interest.

 

Bushveld Minerals* (LON:BMN) 12.86p, Mkt Cap £148m – US$35m convertible loan note with Orion Mine Finance

(Bushveld Energy has negotiated to holds 50% Enerox Holdings Limited (50% other investor) which holds 90% of Enerox GmbH along with 8.71% in Invinity) If no other investors participating then the €3.7m loan will be split between the Bushveld and the other investor.

BUY – Valuation 37.7p (was 45.7p)

Bushveld Minerals reports the signing of a US$35m Convertible Loan Note facility with Orion Mine Finance.

The Loan Note converts at 17p/s and is conditional on the completion of the US$30m Production Financing Agreement ‘PFA’ announced at end-September.

Bushveld can draw a minimum of $10m and a maximum $35m with the facility with Bushveld serving 15 day’s notice to Orion at any time after the PFA.

The convertible carries a fixed 10%pa coupon with a three-year maturity from the drawdown date.

Orion may, at their option, convert an amount of the outstanding debt, including capitalised and accrued interest, into Bushveld

First six months: Up to one third of the outstanding amount;

Second six months: Up to two thirds of the outstanding amount (less any amount previously converted);

From the anniversary of drawdown until the maturity date: the outstanding amount under the Instrument may be converted;

Bushveld also has the option to convert all, but not some, of the amount outstanding under the Instrument, if its volume weighted average share price is more than 200 per cent of the conversion price over a continuous 15 trading day period, a trading day being a day on which the AIM market is open for the trading of securities.

Valuation: While the new funding is likely to increase value through the maintenance and possible acceleration of Bushveld’s expansion plans the deal with Orion will add over 156m new shares if fully converted. Adding the new stock along with the dollar sterling currency adjustment reduces our valuation to 37.7p/s.

We continue to recommend Bushveld to investors due to its leverage to vanadium prices and our view that new Stimulus programs around the world will generate new demand for structural steel and new VRFB battery instillations.

It is also possible that new environmental restrictions in Hebei Province in China this winter may also serve to cut some vanadium slag supply from the market raising Chinese vanadium imports still further.

Conclusion:  Bushveld are securing facilities to finance the refurbishment and expansion of the new Vanchem plant, the Mokopane mine and the further expansion of Vametco.

Bushveld are also developing a new vanadium electrolyte plant to feed new VRFB battery demand.

The team are developing a new Solar / VRFB mini-grid in South Africa

Bushveld’s new VIP, ‘Vanadium Investment Program’ continues to help VRFB developers to work on new battery instillations with support from Bushveld. The approach should be highly beneficial to both Bushveld and its new partners, Invinity Energy and Enerox/Cellcube

 

Oriole Resources (LON:ORR) – 0.49p, Mkt cap £6.9m – Planned resumption of aircore drilling at Senala

Oriole Resources reports that Iamgold, which “is approaching the end of its Year 3 commitment to spend up to US$8 million to earn a 70 per cent interest in Senala” in Senegal is to resume aircore drilling later this month.

The planned 10,000m programme was suspended during the rainy season having completed 1,300m on the Faré prospect in the northern part of the licence area.

The company reports that during the period of suspension it has taken the opportunity to reassess results obtained by Stratex International’s drilling in 2013-2014 using a 0.3g/t gold cut-off criterion and a maximum of 3m internal dilution.

These results include a 20m intersection at an average grade of 31.13g/t gold including a 10m long section at an average grade of 60.98g/t gold in one of the reverse-circulation drill holes (FARC00007) and “59.60m grading 2.20 g/t Au and 49.50m grading 1.75 g/t Au from diamond drilling” in hole FADD-00003 and hole FADD-00004 respectively.

CEO, Tim Livesey, commented that “The historical results at Faré have already shown the potential for the development of a significant gold resource.  As we have seen from recent drilling on other licences in the immediate surrounds of Senala, long intercepts with grades well in excess of 2 g/t Au can quickly build the types of volumes required for stand-alone mineable resources … [and that] … As a potential stand-alone resource target, with over six kilometres of mineralised strike length, Faré adds significant value to the Senala licence, confirming its importance to Oriole”.

Mr. Livesey also pointed out that “In addition to Faré, we have four other mineralised zones within the Senala licence, already partially explored”.

Conclusion: The resumption of drilling by Iamgold later this month will add additional information on the Faré area where re-evaluation of historic information has indicated relatively wide intersections at grades which have the potential to establish mineable resources. We look forward to results from the latest drilling once it re-starts.

 

Peak Resources (ASX:PEK) A$0.039, Mkt Cap A$59.0m – Peak adds Tanzanian lawyer as an NED to the board

Peak Resources reports the appointment of the Honourable Abdullah Mwinyi to the board as a non-executive director.

The Honourable Abdullah Mwinyi is a member of the Tanzanian Parliament and is also Chairman of Swala Oil and Gas.

While this looks like a good appointment, we note that Peak has lost some key personnel in recent months.

First Peak lost its CEO, Rocky Smith, who was probably the most experienced operator in the REE space we have met.

Second Peak lost its CFO and company Secretary Graeme Scott and was left appointing an acting CFO and company secretary to fill the gap.

Conclusion:  Peak’s Ngualla REE project lies in a remote region of Tanzania presenting logistical as well as political challenges. It is impractical to process Peak’s ore to anything other than a simple concentrate at site in our view due to a lack of suitable power and other issues associated with its remote location.

Peak continues to examine the potential to develop a REE refinery at Teesside in the UK.

 

Power Metal Resources* (LON:POW) 1.93p, mkt cap £16.4m – Application for additional license at Australia gold JV 

Power Metal has applied for an additional license at its Red Rock Australasia (RRAL) joint Venture, of which it has a 49.9% interest, alongside Red Rock Resources who own 50.1% of the company.  

RRAL has applied for an additional license application comprising 148sq km of ground that forms a close-fitting inner ring around the Ballerat Mine, with the area also being surrounded by RRAL’s existing license applications.  

Three other parties have also applied for licenses covering the ground, and RRAL has received several approaches to acquire interests in, JV or earn-in to the license package- reflecting the strategic significance of this area.  

RRAL has lodged applications for thirteen new gold exploration licence areas covering circa 2,336 km2 in the Victoria Goldfields of Australia, and the company has previously commissioned and received historical reports and targeting assessments which are now being used in the preparation of the NI 43-101 report and to develop exploration programmes.   

According to Paul Johnson, CEO of Power Metal Resources: “RAL have completed project technical reports across the land package and finalised a NI 43-101 technical report across 8 projects.” 

Power Metal also provide a logistical update, as RRAL continues work on equipping and staffing its headquarters office in Ballarat, and on technical planning for anticipated exploration and drilling programmes.  

RRAL is also planning to appoint an experienced CEO in the near future. 

*SP Angel act as Nomad and Broker to Power Metal Resources 

 

Strategic Minerals* (LON:SML) 0.43p, Mkt Cap £7.4m – Review of Leigh Creek development plan and project economics.

Strategic Minerals has disclosed details of an independent review of the Leigh Creek Copper Mine development plan and the resulting economic outcomes for the project.

The review by PPM Global in conjunction with the company’s planned development delivers a  pre-tax NPV8% of US$26.7m based on a revised and shorter production profile at higher rates, reduced capital funding and updated operating costs using contact mining.

The company explains that environmental permitting is required for each of the three deposits at Paltridge North, adjacent to the Mountain of Light plant and at the Lynda and Lorna Doone deposits approximately 75km away.

Mining of the Paltridge North deposit is expected to take around 13 months and generate copper from the resulting heap leaching over a period of approximately “5 years with the majority processed within the first 18 months”.

Strategic Minerals explains that although mine operating costs will be higher than originally expected as a result of using contract mining, the beneficial effect on capital costs and the offsetting “lowering of operating costs associated with refining assumptions to reflect LCCM’s previous experience in operating the plant “ delivers an overall improvement in project economics which allows revenue generation at Paltridge North a month earlier than originally planned and the larger Lynda and Lorna Doone deposits are expected to “be mined for 32 months and copper recovered over 7 years”.

As a result of the PPM Global review, it has been established that a new, stand-alone plant can be established at Lynda / Lorna Doone for approximately A$5m which is a similar sum to that originally envisaged using part of the existing Mountain of Light plant.

As a result, the project’s expected timetable is enhanced “as the commencement of operations at Lynda/Lorna Doone are no longer dependent on the cessation of operations at the Mountain of Light processing plant. Accordingly, this has provided the opportunity to both bring forward commencement of operations at Lynda/Lorna Doone by around 18 months and process 300 tons of copper cementation powder per month. This shortens the time to produce the expected copper from Lynda/Lorna Doone, thus significantly reducing overheads and increasing profitability”.

As well as the updated capital and operating costs identified by PPM Global, the review has also examined the possibility of direct copper cathode production using SXEW technology. “The key conclusions from this high-level review were that it would need significantly higher levels of capital investment, an additional US$7.2m, but the production of a copper cathode would result in an approximate 18% increase in sales revenue and significantly reduce operating costs.  The overall result would see an increase in project profitability in the order of US$19.6m”.

The review also considered the direct production of copper sulphate “to supply Australian demand at around the LME price.  The key conclusions here were that for only a small increase in the capital cost, an additional US$4.5m, revenues could be increased by approximately 20% and operating costs also reduced.  Again, this would greatly increase the project’s profitability by the order of US$18.5m”.

Today’s announcement confirms that discussions on funding the project have been held with a number of interested parties and also that Strategic Minerals  “has also researched the possibility of listing the LCCM project on the Australian Stock Exchange and has received positive feedback that the project is of a sufficient size that a listing of LCCM, in its own right, is a viable proposition”.

Managing Director, John Peters, commented that “The reduced capital requirements, increased profitability and the market’s bullish sentiment on copper prices, have strongly improved the attractiveness of the LCCM project”.

Mr. Peters also said that “The confirmation by PPM of Lynda/Lorna Doone’s capital requirements and likely operating cost structures has helped to reinforce LCCM’s expected profitability from processing both the Paltridge North and Lynda/Lorna Doone deposits”.

Conclusion: A review of the Leigh Creek Copper Mine development indicates that earlier and improved cash flows are achievable as a result of developing the Lynda/Lorna Doone deposits and a new stand-alone processing plant in parallel with the Paltridge North deposit rather that sequentially with part of the Mountain of Light plant at Paltridge North being transferred following completion of Paltridge North.

*SP Angel acts as Nomad and Broker to Strategic Minerals

 

Sunrise Resources (LON:SRES) 0.28p Mkt Cap £12.3m – Completion of drill hole at the Clayton silver-gold project

Sunrise Resources reports that it has completed its planned drill hole at the Clayton silver-gold project in Nevada with the hole terminated at a depth of 104.7m having “passed through the target zone”.

The company reports that the hole, which was intended to replicate and deepen a historic drill-hole, CL-15 “which intersected 7.6m grading 165 grams/tonne silver (4.8ounces/ton) and 0.4g/t gold from 82.3m depth to the base of the hole at 89.9m depth”.

Assay results from the recent hole are pending and are not expected to available for several weeks.

The company explains that “Drilling conditions were extremely difficult, and progress was slow due to heavy faulting and extensive zones of swelling clays in fractured and hydrothermally altered rock. Whilst these geological conditions can be favourable indications for mineralisation, core recovery was very poor as a result.”

In our view, intersecting the full width of the mineralisation is a positive improvement on the historic work, however, the difficult drilling conditions and resulting poor core-recovery is likely to make the interpretation of the results, when they are received, challenging. The company will probably need to give careful consideration to its next moves in evaluating the Clayton project including the appropriate drilling technique but much will depend, we suspect, on the assay values obtained.

 

Tri-Star Resources* (LON:TSTR) 10p Mkt Cap £28.6m – H1 2020 Results and restoration of trading

Tri-Star Resources reports a pre-tax loss of £1.4m for 2019 (H1 2019 loss –  £1.0m) for the six months ending 30th June 2020.

As a result of the publication of the interim results “it is expected that trading in the Company’s ordinary shares … will be restored to trading on AIM at 9.00a.m. today”.

The results reflect reduced charges for share-based payments of £18,000  (H1 2019 – £211,000) offset by increased administrative charges of £425,000 (H1 2019 – £325,000) offsetting an increased fair value of the financial asset represented by the “the fair value of the mezzanine loan from TSTR to SPMP” of £2.1m compared to the £1.7m reported for H1 2019.

Finance costs during the period were approximately £0.3m (H1 2019 – £0.09m) and the company reports a 30th June 2020 cash balance of £58,000.

Tri-Star Resources confirms that it “does not have anything further to update shareholders on given the recent settlement agreement and annual results announcement” which was released last week.

*SP Angel acts as Nomad to Tri-Star Resources. David Facey, a former partner at SP Angel is the CEO & CFO at Tri-Star Resources.

 

Vast Resources* (LON:VAST) 0.17p, Mkt Cap £25m – GMs scheduled late November including the proposed consolidation of the interest in Romanian assets

The Company will be holding two GM to consider the acquisition of the AP Mining Group share capital that owns a minority stake in Baita Plai (23 November) as well as a number of resolutions granting Directors authority to issue new shares in respect of the Atlas loan facility (30 November).

In regards of the first GM to be held on 23 November, the Board is proposing to acquire AP Mining Group that holds 20% interest in Baita Plai and the 10% interest in a number of other Romanian assets including Blueberry, Piciorul Zimbrului and Magura Neagra exploration properties.

AP Mining is owned by Andrew Prelea (53%), Roy Tucker (8%), Michael Kellow (19%), Samuel Tucker (8%, son of Roy Tucker) and Alexander Prelea (12%, son of Andrew Prelea).

The Board is proposing to issue 2,850m new shares to respective shareholders of AP Mining Group as a consideration for the transaction.

Using 0.17p share price, the consideration is equivalent to £4.8m or $6.3m with new shares to account for 16.5% of the enlarged share capital.

Valuation prepared by Directors who were deemed Independent for the transaction including Brian Moritz (Chairman), Craig Harvey (COO), Paul Fletcher (CFO) and Nick Hatch (Independent Director) indicated that Baita Plai polymetallic operation NPV12.5% is $70m with respective 20% interest valued at $14m.

Hence, Independent Directors believe that the transaction is in the best interests of the Company and unanimously recommend to vote in favour of the acquisition.

The Company highlighted that the transaction is a requirement of the bank refinancing process that eliminates potential conflict of interest.

Andrew Prelea and Roy Tucker agreed to a lock up of their shares’ allocations of 1,500m and 225m,respectively, for a period of up to 12 months.

Lock up is not covering remaining shares including ~575m shares to be held by close relatives of Prelea and Tucker.

Separately, the Company will be holding a separate GM with proposed resolutions covering granting Directors authority to potentially issue shares up to £6.3m in satisfaction of its obligations under the Atlas loan facility, £1.0m for general purposes and £200k for the Company’s Share Appreciation Rights Scheme.

*SP Angel acts as Broker to Vast Resources

 

Analysts

John Meyer – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Joe Rowbottom – [email protected] – 0203 470 0486

 

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – [email protected] – 0203 470 0471

 

 

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.

 

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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