Today's Market View - Little sign of progress in US China trade talks.
Little sign of progress in US China trade talks
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Aura Energy* (LON:AURA) - June quarterly highlights the Tiris uranium feasibility study
Bushveld Minerals* (LON:BMN) - EBITDA rises by 15% yoy as management drive down unit costs
Resolute Resources (LON:RSG) - Acquiring Toro Gold for US$274m
Sunrise Resources PLC (LON:SRES) - CS Project permitting
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
US - US and China conclude a new round of talks today with little evidence of progress being reached.
Germany - Inflation slowed more than expected in July led by declined in prices for clothing and fuel.
Eurozone wide inflation is due later today with estimates for a 1.1% reading, nearly half of the ECB 2% target.
Weak inflation expectations see most economists expect the ECB to announce a rate cut in September and restart asset purchases, Bloomberg reports.
CPI EU Harmonised (%mom/yoy): 0.4/1.1 v 0.3/1.5 in June and 0.3/1.2 forecast.
UK - House prices growth slowed to 0.3%yoy in July marking the weakest pace since January, according to Nationwide data.
"Housing market trends will remain heavily dependent on developments in the broader economy... in the near term, healthy labour market conditions and low borrowing costs will provide underlying support, though uncertainty is likely to continue to exert a drag on sentiment and activity," Nationwide said.
On a separate note, investment in the auto industry dropped 70%yoy in H1/19 on the back of concerns of the disorderly Brexit, according to the automotive industry data.
Investment dropped to [pounds]90m in H1/19 versus [pounds]347m in the same period in 2018 and [pounds]647m in H1/17.
France - CPI EU Harmonised growth slowed to 1.3% this month, down from 1.4% in June adding to market concerns over slowing inflation outlook in the Eurozone.
Expectations were for a 1.2%yoy reading.
Spain - Economic growth ticked lower in Q2 as business investment contracted after posting unusually strong growth in Q1 and household spending slowed.
Net trade contributed positively to growth.
The economy has been dong well despite all the political instability in the country.
There is increasing chance Spain may face a fresh election in November as Socialist party that came first in April elections is struggling to form a coalition.
Latest voter polls show support for the Socialist party climbed to 41.3&, up from 39.5% in the previous month and 28.7% it had in April elections which in turn may incentivise party leaders to opt in favour of snap elections.
South Africa - Unemployment hit the highest level in at least 11 years putting pressure on Cyril Ramaphosa to come through with economic reforms.
Unemployment: 29.0% in Q2 v 27.6% in Q1 and 27.7% forecast.
US$1.1155/eur vs 1.1134/eur yesterday.
Yen 108.53/$ vs 108.69/$.
SAr 14.150/$ vs 14.234/$.
$1.216/gbp vs $1.217/gbp.
0.689/aud vs 0.690/aud.
CNY 6.886/$ vs
Gold US$1,432/oz vs US$1,426/oz yesterday
Gold ETFs 75.6moz vs US$75.4moz yesterday
Platinum US$879/oz vs US$880/oz yesterday
Palladium US$1,534/oz vs US$1,553/oz yesterday
Silver US$16.49/oz vs US$16.46/oz yesterday
Copper US$ 5,951/t vs US$6,006/t yesterday
Aluminium US$ 1,808/t vs US$1,812/t yesterday
Nickel US$ 14,355/t vs US$14,340/t yesterday
Zinc US$ 2,444/t vs US$2,480/t yesterday
Lead US$ 1,992/t vs US$2,055/t yesterday
Tin US$ 17,500/t vs US$17,600/t yesterday
Oil US$65.2/bbl vs US$64.1/bbl yesterday
Natural Gas US$2.139/mmbtu vs US$2.114/mmbtu yesterday
Uranium US$25.45/lb vs US$25.65/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$117.1/t vs US$114.4/t
Chinese steel rebar 25mm US$606.3/t vs US$605.4/t
Thermal coal (1st year forward cif ARA) US$67.2/t vs US$67.7/t
Coking coal futures Dalian Exchange US$213.0/t vs US$212.9/t
Cobalt LME 3m US$26,000/t vs US$26,000/t
NdPr Rare Earth Oxide (China) US$42,042/t vs US$42,036/t
Lithium carbonate 99% (China) US$8,786/t vs US$8,785/t
Ferro Vanadium 80% FOB (China) US$39.0/kg vs US$38.5/kg
Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg
Tungsten APT European US$210-225/mtu vs US$210-225/mtu
Aura Energy* (LON:AURA) 0.7p, Mkt Cap [pounds]8.7m - June quarterly highlights the Tiris uranium feasibility study
Aura Energy's quarterly report highlights the recently released definitive feasibility study on the 85% owned Tiris uranium project in Mauritania (Mauritania Government - 15%). The project is described as fully permitted and construction ready.
Based on a contract price of US$60/lb U3O8 and a capital cost of US$62.9m, the study envisages development of the Tiris project generating an after tax NPV8% of US$89.9m and an after tax IRR of 26%.
The study envisages mining an average of 1.25mtpa of ore at an overall grade of 364ppm U3O8 (0.036%) over a 15 years mine life in order to produce an average of 823,000lbs of U3O8 annually at an average cash operating cost of US$25.43/lb and all-in-sustaining (AISC) cost of US$29.81/lb.
Mineral resources for the deposit, at a cut-off grade of 200ppm (0.02%) are 50.9mt at an average grade of 345ppm with approximately 30% of the overall tonnage classed as measured/indicated.
The study is based on the use of contract mining and points out that the "uranium mineralisation largely lies within 3 to 5 metres of the surface in a relatively soft, free-digging material ... [and that] ... Based on trenching and metallurgical test work to date, this does not require blasting before mining, or crushing prior to beneficiation".
Compared to the 2014 scoping study, which estimated capital costs of US$45.0m and operating costs of US$29.46/lb, the DFS shows an increase of approximately US$18m in capital costs, offset by a 14% decline in unit operating costs.
Analysis presented within the Executive Summary of the DFS highlights the long-term nature of uranium sales contracts and comments that, "World wide uranium consumption increased from 80,900 tonnes in 2017 to 84,300 tonnes in 2018, an increase in consumption of 4.2% year-on-year."
The analysis points out that "There are early signs of a sustained recovery in the uranium price with gains since September 2018" and mentions that a number of new reactors are coming on line in China and with other positive moves including Japan's decision to restart the Tokai nuclear facility Russia's announcement of the start of the Leningrad Phase II and Rostov nuclear plants, and clearance to continue construction of the Vogtie No3 and No 4 reactors in the US, "The scale of construction across Asia is forecast to increase consumption by 10,000 tonnes by 2020."
Conclusion - The DFS is an important milestone for the Tiris uranium project and comes at a time when uranium demand is increasing in response to new nuclear reactors in Asia, Russia and the US
*SP Angel act as Broker to Aura Energy
Bushveld Minerals* (LON:BMN) 25.5p, Mkt Cap [pounds]285m - EBITDA rises by 15% yoy as management drive down unit costs
(Bushveld Minerals owns 74% of Vametco, 84% of Bushveld Energy in South Africa, 100% of Lemur Holdings, 9.5% of Afritin)
(Vanchem: Our figures include Vanchem production of November and December of ~80mtV per month)
BUY - Valuation raised to 92p from 90p
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Bushveld Minerals report a significant improvement in vanadium production in the second quarter.
Production of ferro-vanadium sold as Nitrovan rose by 14% in the quarter to 742mtV vs 649mtV in Q1 taking production to 1,392mtV through the first half.
A series of improvements have increased production through mine scheduling enabling better quality material into the kiln together alongside better feed and recovery rates.
Production target: the work means Vametco should be on target to meet current 2019 production guidance of 2,800-2,900 mtV.
Management expect to achieve a run rate of 3,400mtV in 2020 for no additional capital cost and continue to review the timing and investment to get to
>4,200mtVpa based on a name-plate capacity of 5,000mtVpa.
Costs fell 14% to US$17.40/KgV in the first half vs US$20.2/KgV a year ago driven by higher feed rates, a weaker rand and other cost initiatives.
Cost guidance remains unchanged at US$18.90-19.50/KgV for the year as we expect the SA rand may appreciate through the second half.
H1 EBITDA was US$48.6m vs US$42.4m a year ago with margins > 50%
due to the focus on unit costs, relatively good ferro-vanadium prices and weaker SA rand.
H1 Revenue was US$74.3m in H1 vs US$81.2m a year earlier when ferro-vanadium prices were higher.
H1 ferro-vanadium prices were 14% lower yoy at US$56.3/KgV.
Both sales and EBITDA benefit from a relatively strong ferro-vanadium price and the lag in pricing from December 2018 which feeds through into Q1 this year
Vametco also successfully completed wage and benefit negotiations with the AMCU union to run from 1 July 2019 to 20 June 2022
Bushveld Energy - Electrolyte Plant EIA on track to be completed this year with samples sent to vanadium battery companies for testing.
Electrolyte rental: The financing of VRFB's through the leasing of vanadium in the electrolyte has got off to a rapid start with the implementation of a first rental contract with Sandbar in the US though Avalon Battery Corporation. Bushveld management are also working on a dedicated vanadium electrolyte rental fund.
Eskom VRFB project continues to run following upgrades made to the VRFB battery. The battery passed a series of manufacturer and Eskom site acceptance tests in January and February. The battery will have peak output of 450kWh and is co-owned by Bushveld Energy and the IDC.
Vametco based Solar Mini-Grid Project: procurement to start in next few months following assessment of grid connections and local environment. Solar farms to supplement grid power are seeing significant growth in South Africa due to unreliable and increasingly expensive grid supply.
Vanchem: The deal has yet to receive approval from the South African competition commission.
Good progress is reported and the company is confident of meeting the 31 October date for completion with additional debt finance to come from local banks.
Lemur: revised BFS on the coal mining project, including both surface and underground mining to start this quarter.
JSE listing delayed till 2020 pending auditing of the Vanchem business as required for any listing.
Ferro-vanadium prices rose in China last week by 2.8% to US$36-38/KgV. Ferro-vanadium prices held steady in Europe at US$30-31.05/KgV. (FastmarketsMB)
Valuation: The fall in unit costs raises our valuation for Vametco and Vanchem following its acquisition to 92p/s from 90p/s. We value Bushveld's ownership of Bushveld Energy at 8.8p/s and we have adjusted our valuation on the other assets within the group to 5.4p/s.
It is remarkable that improvements at Vametco mean the business has almost met our full-year EBITDA forecast in the first half.
While we expect current ferro-vanadium prices to lead to lower margins though the second half, unit cost reductions should serve to offset much of the reduction.
Our post-tax profit for the year rises to US$50.0m from US$43.6m for the year assuming received ferro-vanadium prices average US$50/KgV for the year.
The fall in the pound-dollar rate also makes the figures look even better in Sterling terms.
Vametco 74% & Vanchem 100%
Free Cash Flow
Vametco Cash Flow
Vanchem Cash Flow
*Source SP Angel. SP Angel acts as Nomad & Broker to Bushveld Minerals.
Resolute Resources (LON:RSG) 99.25 pence, Mkt Cap [pounds]752.4m - Acquiring Toro Gold for US$274m
Resolute Resources reports that it has agreed to acquire the private company, Toro Gold, the operator and 90% owner of the Mako gold mine in Senegal (the Sengal Government has a 10% free-carried interest), for US$274m in a transaction funded by the issue of US$130m in cash and the issue of 142.5m Resolute shares.
The company describes the Mako mine as a "low-cost, high-margin" operation which produced 158,926oz of gold in 2018 at an all-in-sustaining cost of US$655/oz. The mine's December 2018 mineral resource base is reported to be 1.224m oz of gold at an average grade of 1.89g/t gold and a reserve of 928,000oz at an average grade of 2.05g/t gold.
Resolute Resources, which also operates the Syama gold mine in Mali and the Bibiani gold mine in Ghana as well as the Ravenswood gold mine in Australia, describes the addition of Mako as allowing it to expand its "production base, strengthen operational cashflow, increase revenues to which shareholder dividends are linked, and provides a strong platform for further growth"
As a result of the acquisition of Toro Gold, Resolute Resources is revising its current year (calendar 2019) "production and cost guidance to 400,000oz of gold at an AISC of US$960/oz which includes production from Mako from acquisition."
In 2018 "Toro Gold generated US$180 million of revenue and US$70 million of cash flow from operations" indicating that Resolute Resources is acquiring a 90% interest in the Mako mine for a multiple of approximately US$1,915/oz of attributable historic production and a multiple of around 3.9x historic operating cash flow.
The company reports that "shareholders representing 94% of Toro Gold's outstanding shares have committed to accepting the Offer. Resolute has received all required regulatory approvals and representatives of both Toro Gold and Resolute recently met with the Government of Senegal in Dakar."
Toro Gold Chief Executive Officer and Founder, Mr. Martin Horgan said "Resolute's acquisition of Toro Gold provides Toro Gold shareholders with the unique opportunity of realising immediate value for their Toro Gold shareholding in the form of partial cash consideration while becoming part of a premier African gold producer as shareholders of Resolute".
Resolute Mining's CEO, John Welborn, described the acquisition as "an important part of our next phase of growth. The acquisition also confirms our commitment to creating a leading African gold producer".
Sunrise Resources Plc (LON:SRES) 0.0725 pence, Mkt Cap [pounds]2.0m - CS Project permitting
Sunrise Resources has provided a progress report on the permitting of its CS Pozzolan-Perlite project in Nevada following receipt of comments on its proposed development plan by the Bureau of Land Management (BLM) and a meeting with the Bureau held on Monday this week.
The company describes the BLM's comments as "of a minor nature requiring additional text by way of clarification of certain operational matters" which Sunrise Resources describes as not affecting its "mining and mineral processing proposals".
Sunrise Resources has addressed the BLM's concerns and re-submitted its Plan of Operations to the BLM earlier this month.
The conclusion of the meeting with the BLM on 29th July clears the way "to progress the project through the National Environmental Policy Act (NEPA) process in accordance with the streamlined NEPA process that was mandated by an Executive Order of President Trump and in compliance with the quicker and less intense Environmental Assessment process rather than the longer Environmental Impact Statement process".
The meeting with the BLM established "the information and reporting requirements for the Environmental Assessment" and the necessary Supplemental Environmental Reports (SERs) required to address water quality, wildlife, soils, vegetation and related subjects. The company says that many of these reports "have already been drafted as far as was possible ahead of this meeting and can now be completed quickly".
When the documents are all available, the application will be "put forward by the BLM for public comment as a part of the final permit approval process."
Commenting on the progress with the permitting of the Project, Executive Chairman, Patrick Cheetham, welcomed the "passing of another critical milestone. [and said that] We continue to believe we are on track to be fully permitted later in the 4th quarter of this year."
Conclusion: The BLM's review of the proposed development of the CS Pozzolan-Perlite project provides access to an accelerated permitting process and provides the company with an expectation that the project will be fully permitted before the end of this year.
John Meyer - 0203 470 0490
Simon Beardsmore - 0203 470 0484
Sergey Raevskiy - 0203 470 0474
James Mills -0203 470 0486
Richard Parlons - 0203 470 0472
Jonathan Williams - 0203 470 0471
Abigail Wayne - 0203 470 0534
Rob Rees - 0203 470 0535
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony
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|Publication:||Proactive Investors United Kingdom|
|Date:||Jul 31, 2019|
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