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Today's Market View - KEFI Gold and Copper, Phoenix Copper, Sunrise Resources, and more...

Published: 10:59 28 Jun 2022 BST

Today's Market View - KEFI Gold and Copper, Phoenix Copper, Sunrise Resources, and more...

SP Angel . Morning View . Tuesday 28 06 22

Metals rise on G7 $600bn infrastructure target and as China eases travel quarantine rules

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MiFID II exempt information – see disclaimer below 

BHP Group Limited (LSE:BHP) – $4bn earmarked for emissions reduction by 2030
Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF) – Drilling at Clontibret encounters mineralisation
KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* – Response to press reports
Keliber (private) – Environmental permits secured for lithium plants
LON: KP2* - BUY – Kola Optimisation Study delivers better economics and more robust project with EPC and funding proposal targeted for H2/22
Orosur Mining Inc (AIM:OMI, TSX-V:OMI)* – Positive soil sampling results serves target delineation at El Pantano
Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)* – Latest presentation highlights ESG credentials
Rainbow Rare Earths Ltd (LSE:RBW)* BUY – valuation raised to 51p from 46p – New flowsheet adds substantial confidence to development of Phalaborwa rare earth project
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)*  Valuation: 168p/s – Shares issued to Hancon Construction
Sunrise Resources PLC (AIM:SRES) – Option to sell Pioche project, Nevada

 

Base metals rise across the board on further relaxation of Covid rules in China

  • Base metals rose on Tuesday morning after China relaxed quarantine requirements for inbound travellers, a signal the nation may be moving away from its Zero Covid policy.
  • China cut the quarantine period to ten days from three weeks previously.
  • Whilst the reduction in quarantine times is unlikely to directly spur demand for industrial metals, it has provided renewed optimism that China is moving towards less stringent Covid protocols.
  • China accounts for ~50% of global copper demand and the price is sensitive in the short term to government policy changes such as this.
  • The country’s restrictions such as a city-wide lockdown of Shanghai have hampered base metals prices over the last couple of months, adding to global growth woes primarily driven by runaway inflation in the western world.
  • Copper rose 0.7% this morning, while zinc rose 2.6% and nickel up 2.7%.
  • Iron ore prices rose 4% in Singapore and futures rose 4.4% in Dalian while steel rebar also rose in Shanghai on the news.

 

Dow Jones Industrials -0.20% at 31,438
Nikkei 225 +0.66% at 27,049
HK Hang Seng +0.73% at 22,392
Shanghai Composite +0.89% at 3,409

 

Economics

US seizes the $325m superyacht tied to Suleiman Kerimov and is sailing it into a port in Southern California that may potentially liquidated with raised funds to be directed towards support of Ukraine.

  • US authorities will have to bear an estimated annual maintenance cost of $25-30m.
  • Lawmakers in the House of Representatives passed a legislation recently that would allow the US government to seize assets from sanctioned Russians, liquidate them and use those funds to benefit Ukraine, Bloomberg reports.
  • US durable goods rose 0.7% in May
  • Pending home sales rose 0.7% vs -4% in April and -13.6% yoy in May vs -9.2% yoy in April
  • Dallas Fed manufacturing index -17.7 vs -7.3 in May

US president meets with EU leadership on Ukraine

  • The US is working with the EU leadership to reduce Europe’s reliance on Russian gas and energy.

 

Stimulus & infrastructure – G7 leaders pledge US$600bn over five years to counter Chinese Belt & Road projects

  • Much of the $600bn funding is to be raised through private and public funds.

 

China – Authorities cut the quarantine time for inbound travellers by half in a major easing of Covid restrictions helping global risk sentiment.

  • The PBOC governor pledged to maintain an accommodative monetary policy amid “stale” inflationary outlook.
  • The central bank will “continue to be accommodative to support economic recovery in the aggregate sense”, Yi Gang said while stopping short of naming any concrete measures.
  • Separately, Beijing authorities claimed that the city “will maintain its pandemic control policy for the next five years” spooking markets over prolonged time to potential covid related disruptions.
  • Reference to the time period was removed shortly afterwards after comments were published and rapidly spread on social media.
  • Industrial profits fell 6.5% yoy in May vs -8.5% yoy in April

ECB President Lagarde reiterated her stance that the central bank is ready to raise rates at the coming meeting in July to tame inflation running at four times the ECB’s target of 2%.

  • Some members of the Governing Council call for more aggressive pace of tightening arguing that “front-loading” hikes could be reasonable.
  • Martins Kazaks said that the ECB should consider an initial increase in interest rates over the planned 25bp hike.

 

Germany – Consumer confidence fell more than forecast in July sinking lower on inflationary pressures, outlook for tighter monetary policy and the ongoing war in Ukraine.

  • The GfK index hit new lows of -27.4 suggesting more severe outlook than at the start of the pandemic when the gauge reached -23.1.
  • GfK Consumer Confidence: -27.4 v -26.2 (revised from -26.0) in June and -27.3 est.
     

France – Similar to Germany, France reported a further deterioration in the consumer confidence gauge in June reaching a near nine-year low over uncertain economic outlook.

  • Household sentiment about the general economic outlook continued to weaken falling to the lowest level since May 2020 when France was in the second month of its first and most strict Covid lockdown.
  • Consumer Confidence: 82 v 85 (revised from 86) in May and 84 est.

 

India - Press reports suggest that discounted Russian oil is being re-exported to Europe via India.

  • Industry sources say Reliance Industries’ Jamnagar refinery in Gujarat received 27% of its oil from Russia in May, and about 20% of its exports then “left for the Suez canal, indicating that they were heading to Europe or the US.” (Asia Financial)
  • If this is proven, Reliance Industries could be sanctioned by the US and the EU.

 

Is NATO leading Russian forces into a trap?

  • The fog of war may be due as much to the spread of disinformation as the confusion which comes with conflict.
  • Headlines suggest Russia is gaining ground, capturing cities and making progress.
  • A Russian missile into a shopping centre into Kyiv is a very strange way of saying Russia is winning.
  • Ukraine forces are careful not to give away their locations even to close friends in fear of being targeted.
  • While we don’t believe the headlines we wonder if Ukraine forces are leading Russian forces into a situation where they may be better targeted with a view to stretching their supply lines and forcing them back.

 

Currencies

US$1.0588/eur vs 1.0583/eur yesterday.  Yen 135.79/$ vs 134.99/$.  SAr 15.850/$ vs 15.786/$.  $1.226/gbp vs $1.232/gbp.  0.694/aud vs 0.694/aud.  CNY 6.686/$ vs 6.685/$.

 

Commodity News

Precious metals:         

Gold US$1,827/oz vs US$1,836/oz yesterday

Gold ETFs 104.5moz vs US$104.7moz yesterday

Platinum US$916/oz vs US$917/oz yesterday

Palladium US$1,897/oz vs US$1,933/oz yesterday

Silver US$21.27/oz vs US$21.46/oz yesterday

Rhodium US$14,000/oz vs US$14,000/oz yesterday

 

Base metals:   

Copper US$ 8,418/t vs US$8,383/t yesterday

Aluminium US$ 2,496/t vs US$2,463/t yesterday

Nickel US$ 22,882/t vs US$22,745/t yesterday

Zinc US$ 3,318/t vs US$3,360/t yesterday

Lead US$ 2,004/t vs US$1,950/t yesterday

Tin US$ 26,991/t vs US$26,100/t yesterday

 

Energy:           

Oil US$116.7/bbl vs US$113.8/bbl yesterday

Crude oil prices rose after both Ecuador and Libya flagged potential output cuts due to political unrest, as the G7 nations also discussed imposing further restrictions on the insurance and shipping of Russian oil exports.

European energy prices edged lower as gas flows via the TurkStream pipeline resumed following maintenance, despite growing concern ahead of the closure of the Nord Stream pipeline for maintenance from July 11-21.

The G7 nations are moving towards reversing a commitment to halt the financing of overseas fossil-fuel projects by year’s end, according to media reports, and are expected to instead agree on recognising that investment in the LNG sector is a necessary response to the current global energy crisis.

Natural Gas US$6.500/mmbtu vs US$6.096/mmbtu yesterday

Uranium UXC US$49.35/lb vs US$48.45/lb yesterday

         

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$118.8/t vs US$114.5/t

Chinese steel rebar 25mm US$642.3/t vs US$639.5/t

Thermal coal (1st year forward cif ARA) US$252.0/t vs US$255.0/t

Thermal coal swap Australia FOB US$374.0/t vs US$385.0/t

Coking coal swap Australia FOB US$320.0/t vs US$320.0/t

 

Other:  

Cobalt LME 3m US$71,460/t vs US$72,400/t

NdPr Rare Earth Oxide (China) US$139,855/t vs US$139,863/t

Lithium carbonate 99% (China) US$68,432/t vs US$68,436/t

China Spodumene Li2O 5%min CIF US$4,500/t vs US$4,500/t

Ferro-Manganese European Mn78% min US$1,763/t vs US$1,762/t

China Tungsten APT 88.5% FOB US$327/t vs US$327/t

China Graphite Flake -194 FOB US$815/t vs US$815/t

Europe Vanadium Pentoxide 98% 9.7/lb vs US$9.7/lb

Europe Ferro-Vanadium 80% 36.25/kg vs US$36.25/kg

China Ilmenite Concentrate TiO2 US$364/t vs US$364/t

Spot CO2 Emissions EUA Price US$89.0/t vs US$88.4/kg

Brazil Potash CFR Granular Spot US$1,100.0/t vs US$1,100.0/kg

 

Battery News

Chinese battery maker Gotion to locate a third of production abroad by 2025

  • Chinese battery maker Gotion High Tech Co. has revealed plans to locate one-third of its production capacity outside China by 2025 to meet the growing demand from overseas EV makers and energy storage household clients.
  • In a statement, Gotion said that it plans to build a total battery production capacity of 300GWh in three years, reiterating the goal it first announced last year – Gotion produced 16GWh in 2021.
  • Chinese battery makers are starting to accelerate the expansion of production in overseas markets where rivals such as Panasonic and LG Energy Solution are dominant.
  • Gotion said it will start building its first overseas battery plant in Gottingen, Germany by the end of this year and aims to start production by next September.
  • CATL has also recently announced plans to start cell production at its German plant by the end of the year.

 

Norway to work with EU on battery raw materials

  • Norway and the European Union will closely cooperate on battery value chains and raw material supply as part of efforts to tackle climate change.
  • Norway, who are Europe's second-largest exporter of oil and gas after Russia, is aiming to diversify its industry base, including capitalising on its access to minerals, metals and rare earths that are key to Europe's battery-making plans.
  • As part of the agreement, non-EU Norway will participate in the ministerial meetings of the European Battery Alliance and in joint industry initiatives.
  • The two sides have also agreed to further discuss the application of a rules-of-origin clause stemming from the Brexit agreement between the EU and Britain, which Norway has said could hamper its fledgling battery industry.
  • The Brexit clause stipulates that EVs produced and exported in either Britain or the EU from 2027 must contain batteries produced within either of the two or face a 10% customs tax – Norway could be looking for a similar deal.

 

22,000 UK jobs at risk as EV drive intensifies

  • The Society of Motor Manufacturers and Traders (SMMT) has warned that more than 22,000 UK jobs making engines or other traditional car parts are placed at risk by the shift to EVs.
  • Around 15% of production jobs in the automotive sector are in specialist areas such as engines, exhaust systems or fuel tanks and these roles would be under threat as the UK seeks to phase out petrol and diesel models by 2035.
  • “For many long-established component segments such as engine and exhaust producers and their sub-suppliers, the transition to electrification presents major challenges,” the SMMT said, “…many risk being left behind as the jobs and skills involved with internal combustion engine technology may not be transferable.”
  • The SMMT did not quantify how many new roles would be created by the battery sector but according to industry forecasts fewer new jobs will open than those that disappear.

 

Company News

BHP Group Limited (LSE:BHP) £24.28, £123bn – $4bn earmarked for emissions reduction by 2030

  • BHP has announced plans to tackle biodiversity loss and reduce emissions following period of bumper profits post-covid due to high iron ore prices.
  • The company’s chief legal, governance and external affairs officer, Caroline Cox, unveiled the latest targets and expenditures this morning.
  • The Australian company is seeking to place 30% of the land and water it owns, leases or manages under conservation, restoration or regenerative practices by 2030.
  • Ms Cox also commented that BHP has cut greenhouse gas emissions from emissions by 20% since fiscal year 2020.

 

Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF) 26.5p, Mkt Cap £10.1m – Drilling at Clontibret encounters mineralisation

  • Conroy Gold reports that the first two holes of its previously announced eight-hole drilling programme at its Clontibret prospect in the Longford-Down Massif in Ireland have both successfully intersected mineralisation.
  • The drilling, which is being undertaken with Conroy’s joint-venture partner, Demir Export, encountered and extended the expected stockwork style mineralisation at depth and towards the northeast in hole 1, which also intersected “a number of new mineralisation zones”.
  • The second hole intersected mineralisation “at a number of levels relating to the central lodes of the ore body and has thus extended these lodes”.
  • Assay results are awaited for both the holes and drilling is continuing with two rigs on site.
  • Chairman, Professor Richard Conroy, welcomed the early results and said that it “appears that the mineralisation is extensive across the area and remains open in all directions, including at depth”.

Conclusion: the latest drilling programme at Clontibret has intersected additional mineralisation although the grades and widths await the receipt of assay results.

 

KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* 0.6p, Mkt Cap £22m – Response to press reports

  • The Company released a response to recent press reports that inaccurately referred to a loss of the Company’s Tula Kapi License.
  • The article published on CapitalEthiopia.com on Sunday said that Takele Uma, Minister of Mines, revoked 972 licenses including the one covering the Tulu Kapi Gold Project last week.
  • The Company refuted claims it lost the license and reiterated it remains in compliance with all regulatory requirements.
  • The Company reported it received a Reminder of Deadline letter late on 24 June from the Minister of Mines referring to a new deadline of 30 June when the team needs to demonstrate the availability of project funding.
  • The team is confident that the plan highlighted earlier this month including the signing of the Umbrella Agreement over funding of the project will be signed by the end of the month that proves up all parties’ commitment to project funding.
  • Upon signing the agreement, funding is expected to follow once remaining conditions are met including suitable security situation on the ground.
  • The Company is eyeing the start of project development works after the end of the wet season in Oct/22.

*SP Angel act as Nomad to KEFI Gold and Copper

 

Keliber (private) – Environmental permits secured for lithium plants

  • Keilber, the Finnish battery minerals miner Keliber has secured building and environmental permits for its planned Päiväneva concentrator and the Kokkola lithium chemical plant respectively.
  • The concentrator will produce spodumene concentrate from its lithium deposits in the area, before the SC is sent to the Kokkola lithium chemical plant, where it will be converted into battery-grade lithium hydroxide monohydrate.
  • Keliber aims to begin construction of the plants this summer and production in 2024, while the planned annual production of the lithium chemical plant is 15,000 tonnes of lithium hydroxide.
  • Last week, Keliber released a maiden MRE at its Tuoreetsaaret deposit in Finland of 1.41mt at 0.70% Li2O (all inferred) – increasing Keliber's total mineral resources by 9%, to 17.03mt.
  • Beowulf Mining* through its wholly-owned subsidiary, Grafintec, is aiming to be a leading supplier of anode material for lithium-ion battery manufacturing in Finland.
  • We expect increasing collaboration between stakeholders in the Finnish battery space given the government’s push to developing a domestic battery supply chain.
  • Grafintec is focused on establishing an anode materials production facility while simultaneously developing its portfolio of graphite exploration assets in-country.
  • Grafintec recently signed an agreement with Epsilon Advanced Materials to develop an anode materials production facility.
  • The purpose of the MoU is to develop the concept of a strategic processing hub for both natural flake and recycled graphite to be located in Finland, to target the market for pre-cursor anode material for the lithium-ion batteries in the Nordics and Europe.

*SP Angel acts as nomad and broker to Beowulf Mining

 

Kore Potash* (KP2 LN) 1.4p, Mkt Cap £46m – Kola Optimisation Study delivers better economics and more robust project with EPC and funding proposal targeted for H2/22

BUY

  • The Company released results from the Optimisation Study delivering improved economics for the flagship Kola Sylvinite Project in the Republic of Congo.
  • The Optimisation Study delivered $1.623B and 20% in NPV10% and IRR on after tax and attributable 90% basis) using $360/MOP CFR Brazil price, in line with the 2019 DFS assumption and significantly below the Q1/22 average of ~$880/MOP.
  • This compares to $1.452B and 17% under the 2019 DFS, respectively.
  • Stronger economics are driven by a reduction in initial capital outlay, a significant contributor to overall project economics given high capital intensity of potash projects, and an improvement in a construction schedule.
  • Development capital cost was cut down to ~$1.9B (including deferred capital investment for the ramp up to full capacity phase) from ~$2.2B (~$2.4B based on like for like EPC basis) reflecting development schedule changes and cheaper equipment and labour offered by Chinese EPC contractors.
  • Construction period was reduced by six months to 40m due to optimisation of road access to the site allowing to start ground freezing operations for shaft sinking earlier.
  • Additionally, relocation of the processing plant ~10km inland away from initially proposed site on the coast to new location with better ground conditions allows to save on foundation costs and bring the start of earthworks forward.
  • Moving the processing plant closer to mining operations and reducing the distance that mined ores are conveyed by a third also allows to optimise operating costs.
  • Once commissioned, the team assumed relatively standard ~2y ramping up process, in line with the 2019 DFS.
  • Among other adjustments, the Study uses slightly reduced production rate (2.1mtpa v 2.2mtpa) reflecting marginally lower throughput (6.8mtpa v 7.1mtpa) and recoveries.
  • Operating mine gate level unit costs were revised marginally higher ($63.6/MOP v $61.7/MOP) with all in sustaining cost estimated at ~$106/MOP CFR Brazil (2019 DFS: $103/MOP), one of the lowest if not the lowest cost product on delivered to Brazil basis.
  • Low unit costs are driven by good grades (32.5% KCl in Reserves), strategic location on the coast of the Atlantic, short distance to end markets in Brazil as well as less onerous fiscal terms compared to other potash producing regions.
  • As a result, estimated annual EBITDA was reduced to ~$545m (2019 DFS: $583m) that, nevertheless, imply high ~70% margins (on 100% project level basis).
  • Mineral Reserves cover 25 years with additional six years drawn from the Inferred Mineral Resource for a total 31y life of mine, down on 33y used in the 2019 DFS.
  • The project is assumed to produce all 100% of annual output in granular form compared to a 86/14% split between granular/standard envisaged before.
  • The Study was undertaken by SEPCO that sub-contracted it to China ENFI Engineering responsible for mining, processing and infrastructure side of the operation and CCCC-FHDI Engineering reviewing the marine facilities.
  • Under the agreement signed with the Summit Consortium representing advisors engineering/construction firms in 2021, the Study will be followed by the SEPCO EPC contract proposal for the construction of the project (exp. Aug/22) and, once EPC terms are agreed with Kore, a funding proposal from the Summit (within two months of Kore’s agreement on the terms of the EPC contract).
  • The consortium advised the Company that results of the Study remain highly supportive of potential project funding.
  • Separately, today the Company announced the signing of Heads of Agreement for the construction of the project with SEPCO.
  • Agreement was signed in the presence of the Minister of State and Minister of Mining, Industry and Geology of the Republic of Congo, Mr Pierre Oba.
  • The HoA will be followed by a binding construction contract proposal as part of the EPC contract in August.

Conclusion: The Company released a detailed overview of results from the latest completed Optimisation Study for the Kola Sylvinite Project. The Study delivered capital cost savings and a six months’ reduction in the construction period increasing NPV10% (after tax) by >10%. The Study clears the way for the Summit Consortium to present the EPC contract (exp. Aug/22) that once agreed with the Company should follow by the funding proposal (within 2m ie exp. H2/22). Securing project funding will be one of the major catalysts to unlocking value in the Kola Sylvinite Project that offers potentially one of the most competitive potash supply sources for end markets in Brazil thanks to grades, operations being located ~30km from load out facilities on the Atlantic coast and short seaborne transport routes.

*SP Angel acts as Nomad and Broker to Kore Potash

 

Orosur Mining Inc (AIM:OMI, TSX-V:OMI)*  8.5p, Mkt Cap £16m – Positive soil sampling results serves target delineation at El Pantano

  • Orosur reports that soil sampling at the La Esfinge prospect at El Pantano has returned highly anomalous results, with gold in soil results up to 152ppb Au.
  • A geochemical anomaly has been defined over a strike length in excess of 1km, open to the east and west.
  • This work has now defined a high priority exploration target which will be followed up after the winter recess which is expected to last until early September.
  • Follow-up work may include additional geochemical analysis over a wider area, ground magnetics, mapping, which if positive, could lead to a drilling campaign in the medium term.
  • Orosur CEO Brad George commented: “It is early days at El Pantano, but it is highly encouraging to obtain such positive results from what is essentially an untouched grass roots project. We look forward to returning after the winter, but work so far has supported our strategy of carefully selecting attractive earlier stage projects on the best possible terms.”

*SP Angel acts as nomad and broker to Orosur Mining

 

Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)*  39.5p, Mkt Cap £48.8m – Latest presentation highlights ESG credentials

(Phoenix holds 80% of the Empire mining property in Idaho)

  • Phoenix Copper has updated its corporate presentation and provided further information on the Empire project in Idaho
  • The presentation underlines the company’s commitment to environmentally and socially responsible development of the brownfield project which will use non-toxic ammonium thiosulphate to process the precious metals and highlights the underlying sulphide mineral potential beneath the initial oxide pit.
  • Phoenix Copper also outlines the company’s other nearby projects at Navarre Creek and in the Horseshoe Creek/ Red Star complex and its cobalt interests at Bighorn and Redcastle in the mining friendly and rapidly growing Idaho economy.
  • Interested investors may enjoy the presentation which is available at https://phoenixcopperlimited.com/media-presentations.

*SP Angel acts as nomad to Phoenix Copper

 

Rainbow Rare Earths Ltd (LSE:RBW)* 12.5p, Mkt cap £68m – New flowsheet adds substantial confidence to development of Phalaborwa rare earth project

BUY – valuation raised to 51p from 46p

(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates)

(Neodymium Nd, Praesidium Pr, Terbium Tb, Dysprosium Dy. Rainbow holds 100% of the Gakara mine and associated licenses in Burundi)

  • Rainbow Rare Earths confirm the successful development of a process flow sheet for the extraction of rare earths from phosphogypsum residues at Phalaborwa in South Africa.
  • The flowsheet incorporates K-Technologies technology which has undergone extensive test work at the ANSTO Minerals facilities in Australia and at the K-Tech facilities in Florida.
  • Overall recoveries of 65-70% of the contained rare earths have been confirmed for the specific Phalaborwa phosphogypsum residues.
  • The process uses standard, proven equipment, and readily available reagents in a novel combination.
  • The recovery process will be jointly patented by Rainbow and K-Tech with a view to applying this to further rare earths projects.
  • Rainbow plant to extract neodymium, praseodymium, dysprosium and terbium to start though the process can be adapted to extract other rare earths as required.
  • Process flowsheet:
  • Leaching: The phosphogypsum is first leached with sulphuric acid and is upgraded into a higher-grade rare earth leach solution.
  • This solution is further upgraded in K-Tech’s patented CIX ‘Continuous Ion Exchange’ and CIC ‘Continuous Ion Chromatography’ process to deliver high-purity oxides of the target rare earths.
  • The CIX and CIC processes have been used commercially since the 1980s mainly in the food, biotech, chemical, water treatment, pharmaceutical and mining industries with several industrial installations operating in South Africa.
  • Only nine process stages are required for the CIC separation, vs ~1,200 stages for conventional solvent extraction which is mainly done in China.
  • Critically, no hazardous or toxic solvents are required in the Rainbow / K-Tech process.
  • Capital and operating costs are said to be significantly lower and working capital costs are minimised due to reduced residence times and the relative simplicity of the CIX and CIC processes.
  • Rainbow is now able to work to complete a technical feasibility study to demonstrate Phalaborwa as one of the lowest cost global producers for separated rare earth oxides.
  • Each stage incorporated into the flowsheet is well tested on a commercial basis with readily available equipment and reagents.
  • Valuation: We value the group at 51p/s on a combined basis.
  • Our NPV valuation on Phalaborwa has risen to 43p/s on the back of higher rare earth prices despite our raising our capital cost assumption by 20% to $204m.
  • We have adjusted our valuation on Gakara to 8p/s. We now assume Rainbow will spend $14m at Gakara as part of its restart.
  • Assumptions: We are using the current NdPr price of US$139,855/t. Tb at US$4,199,000/t and US$639,700/t. We discount all prices by discounted by 25%.
  • NdPr represents 70% of sales followed by Tb at 22% and 8%.
  • We use a 12% discount rate for Phalaborwa in South Africa and 15% for Gakara in Burundi. We have also delayed the assumed restart and capital investment for the Gakara mine by another year.
  • Our model is highly sensitive to operating costs at Phalaborwa and we look forward to further information on the cost of running the new flowsheet.

Conclusion:  The confirmation of a working process flowsheet incorporating K-Tech’s route for rare earth extraction is great news for Rainbow. The recovery rate is well within our modelled assumptions and the use of standard equipment and reagents for CIX and CIC processing is reassuring. We see the Phalaborwa project as offering significant value to the group

*SP Angel acts as financial advisor and broker to Rainbow Rare Earths

 

Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)*  21.5p, Mkt Cap £33m – Shares issued to Hancon Construction

NPV Valuation: 168p/s

  • Yesterday, Rambler Metals & Mining reported that, it has authorised the issue of around 2.1m shares to Hancon Construction “In lieu of a cash payment for services provided in 2021” as previously announced.
  • Hancon has worked as mine development contractor at the Ming mine since December last year and the company has previously said that the mining contract with Hancon has enabled the Ming Mine to advance its development in a way that would not have been achievable otherwise.
  • Hancon’s willingness to accept shares in lieu of cash indicates its confidence in the future of the Ming mine where it is part of the effort to “regain its production profile at 1,350 metric tonnes per day at a targeted grade of 2% Cu in 2022 and evaluate expansion opportunities from that base”.

*SP Angel act as Nomad and Broker to Rambler Metals & Mining

 

Sunrise Resources PLC (AIM:SRES) 0.16p Mkt Cap £5.9m – Option to sell Pioche project, Nevada

  • Sunrise Resources has announced that it has granted a US subsidiary of the Spanish company, Tolsa SA a six-month option to purchase its Pioche Sepiolite project in Nevada for US$1.25m and a 3% NSR on 25 years of future production from the project.
  • The option can be extended for an additional 12 months on payment of US$50,000 if required.
  • Sepiolite is a specialised magnesium silicate clay mineral, also sometimes known as meerschaum, and its uses include products for the absorption of industrial spillages and in waste treatment and for pet litter.
  • Executive Chairman, Patrick Cheetham, explained that “As the world's largest producer of sepiolite, we feel Tolsa is best placed to evaluate and develop the commercial potential of the Pioche Project”.

 

No.1 in Copper:  “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

 

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474

Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486

 

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

 

 

SP Angel                                                            

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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, Tungsten, Spodumene, Ferro-Manganese, Graphite - Asian Metal

 

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%

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