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Today’s Market View – Oriole Resources; Shanta Gold and more …

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SP Angel . Morning View . Tuesday 22 09 20

Gold recovers well following volatile trading

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Bluejay Mining* (JAY LN) – Completion of Thunderstone field exploration program

KEFI Gold and Copper (LON:KEFI) – Hawiah PEA delivers $96m NPV with significant upside potential from MRE expansion

Oriole Resources (LON:ORR) –Preparing for a resumption of drilling in Senegal and Cameroon

Shanta Gold (AIM:SHG) – NLGM plant capacity to increase by 14%

US Equity markets pull back on Nasdaq tech stock sales, risk-off trade and second wave / lockdown fears

US and Asian markets fell substantially yesterday with US markets led lower on Nasdaq tech stock sales

Investors also moved to risk-off trades on second wave fears and further Coronavirus lockdowns.

The FTSE100 and most other US and European indices are recovering on the recovering UK and German economic outlook.

Gold – risk-off trade and stop loss selling added extra volatility to labouring gold prices

Gold recovered to $1,905/oz this morning having collapsed to $1,885/oz yesterday

Gold prices fell following heavy gold ETF liquidation and selling of Nasdaq tech stocks .

The move was exacerbated by prices pushing down through stop-loss limits

Silver also saw heavy liquidation as investors moved towards a risk-off trades

CSN – the Brazilian metals group is to IPO its mining business

Steel and iron ore producer Companhia Siderúrgica Nacional (CSN) is to IPO its mining division to fund a $6bn expansion plan.

The unit plans to increase capacity from 33mtpa to 108mtpa mostly through brownfield projects and improving iron ore grades to 67% Fe from 62% Fe.

CSN has capital expenditures calculated at $5.8bn and is looking to list to fund the expansion although the timeframe and size of the offering were not disclosed (Fastmarkets MB).

Dow Jones Industrials -1.84% at 27,148

Nikkei 225 closed at 23,360

HK Hang Seng -1.08% at 23,692

Shanghai Composite -1.29% at 3,274

Economics

Germany – IFO lifts German GDP forecasts to -5.2% from their previous -6.6% forecast

Deutsche Bank to close 20% of German branches (Reuters)

UK – BoE Govenor says UK Q3 recovery has been quite rapid and substantial and is a little ahead of expectations

The recovery is uneven with weak demand for labour and higher than reported unemployment

BoE not close to negative interest rates and statement last week did not imply BoE would use negative interest rates, though many FDs are now preparing for their potential possibility.

UK investment remains weak.

House prices are strong as seen post GFC stimulus but with the added boost from families looking for larger premises for more space and home offices.

UK House sales rose by 15.6% in August according to the Chancellor following the stamp duty holiday helping to protect nearly 750,000 jobs in the housing sector and wider supply chain. Stamp duty was cut to 0% for houses under £500,000.

China – Xi Jinping says no country should “be allowed to do whatever it likes and be the hegemon, bully or boss of the world.” (Bloomberg)

Currencies

US$1.1726/eur vs 1.1866/eur yesterday. Yen 104.64/$ vs 104.28/$. SAr 16.926/$ vs 16.290/$. $1.274/gbp vs $1.296/gbp. 0.718/aud vs 0.732/aud. CNY 6.796/$ vs 6.761/$.

Commodity News

Precious metals:

Gold US$1,905/oz vs US$1,954/oz yesterday – Gold ETF holdings surge on Monday amid golds heavy sell off

The worlds largest bullion-backed ETF, SPDR Gold Shares, attracted net inflows of $1.2bn on Monday- the most since the 19th of June (Bloomberg).

Gold slumped 3% on Monday falling to its lowest level in over a month amid a broad market sell off driven by uncertainty over more US fiscal stimulus and an uptick in virus cases in Europe (Reuters).

Gold is also likely experiencing margin-call selling pressure with investors covering losses elsewhere, however the underlying safe haven demand of gold still remains.

Dollar strength has also weighed on gold prices, with the index advancing for the third consecutive session to its highest level in six-weeks (FX Street).

Gold ETFs 111.0moz vs US$109.8moz yesterday

Platinum US$882/oz vs US$941/oz yesterday

Palladium US$2,272/oz vs US$2,378/oz yesterday

Silver US$24.01/oz vs US$26.74/oz yesterday

Base metals:

Copper US$ 6,708/t vs US$6,839/t yesterday

Aluminium US$ 1,799/t vs US$1,799/t yesterday

Nickel US$ 14,490/t vs US$14,795/t yesterday

Zinc US$ 2,465/t vs US$2,528/t yesterday

Lead US$ 1,892/t vs US$1,911/t yesterday

Tin US$ 18,025/t vs US$18,270/t yesterday

Energy:

Oil US$41.6/bbl vs US$42.6/bbl yesterday

Whilst weak oil prices have seen many IOCs and NOCs curtail investment, Brazil has continued to see strong activity this year

During January 2020, Latin Americas largest economy saw its all-important petroleum industry achieve a new milestone pumping on average a record 3.168MMbopd

The COVID-19 pandemic and March 2020 oil price collapse did little to slow the oil boom underway

Whilst Brazils national oil company, Petrobras, slashed planned annual spending by 29% earlier this year and shuttered its shallow water platforms in response to the pandemic and oil price collapse, this did little to stymie production growth

Petrobrass second quarter 2020 commercial oil output grew 4.1% to almost 2.5Mbopd

That was driven primarily by the significant expansion of the national oil companys presence in the pre-salt fields, where production expanded almost 31% to 1.5MMbopd

There are signs that even the ongoing impact of the pandemic, softer oil demand and weaker prices will not deter Petrobras growing petroleum production

Petrobras is in the process of ramping up activities at its offshore operations, notably in the prolific pre-salt fields, as the threat of the pandemic declines

The Company plans to recommence connecting new wells, conducting maintenance and commissioning new operations this month

That will give both the national oil companys and Brazils hydrocarbon output a solid lift.

Natural Gas US$1.870/mmbtu vs US$2.006/mmbtu yesterday

Natural gas prices fell by more than 10% during trading yesterday as the outlook for demand and LNG exports worsened as multiple Hurricanes caused disruptions in the Gulf of Mexico.

Hurricane season in the Gulf has caused numerous disruptions to both natural gas demand and LNG exports, with Tropical Storm Beta the latest threat to the industry, with ships that would carry LNG avoiding the troublesome area for now, and likely the remainder of the week as Beta, like Sally, appears to be a slow-moving storm that will take most of the week to dissipate

It is also noteworthy that the November contract for natural gas is now trading at US$2.684/mmbtu—a significant US$0.855 premium over the front-month contract

The fall in front-month contract natural gas prices is so far the most significant one-day drop over the last 21 months

Working natural gas in storage in the US has increased from 3,079Bcf according to the EIA to 3,614Bcf for the week ending 11 September

The five-year average for this time of year is just 3,193Bcf

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$115.9/t vs US$121.0/t – Iron ore prices fall amid rising infection numbers and easing supply disruptions

Iron ore futures fell in both Singapore and on the Dalian Commodity Exchange, as investors weighed the impact of rising infections on the global economy.

Renewed fears over Covid-19 have been compounded by a rebound in Brazils iron ore exports, with shipments rising 5% last week to 6.8mt.

Iron ore prices fell as much as -3.4% to $112/t on Tuesday, whilst iron ore futures on the Dalian fell as much as -2.6% (Bloomberg).

Chinese steel rebar 25mm US$548.0/t vs US$552.7/t

Thermal coal (1st year forward cif ARA) US$57.8/t vs US$58.5/t

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

Other:

Cobalt LME 3m US$34,200/t vs US$34,200/t – Cobalt to benefit from 5G technology demand

The need for larger rechargeable batteries and more energy storage is expected to significantly boost demand for cobalt over the coming years.

Larger batteries using lithium cobalt oxide chemistry (LCO) are needed in 5G phones, because the antenna used to transmit/receive radio waves requires more power.

Base station antennas for 5G also need significantly more power which puts more pressure on power grids, increasing the need for energy storage systems- now being built in China with cobalt containing lithium-ion batteries.

According to CRU, cobalt demand for portable devices is expected to rise to 73,000t by 2025 from 45,000t this year.

Unless cobalt supplies increase, EV companies could be in direct competition for cobalt against developers of 5G technology (Reuters).

NdPr Rare Earth Oxide (China) US$48,925/t vs US$49,180/t

Lithium carbonate 99% (China) US$5,047/t vs US$5,073/t

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

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

Airbus unveils plan for zero-emission aircraft

The aerospace company has announced that its hydrogen-fuelled planes could be in service by 2035, with the companys CEO hailing the design as “a historic moment” for the commercial aviation sector.

For aviation to be emissions free, a significant challenge is finding ways to produce large quantities of hydrogen from renewable or low carbon sources, as at the moment most large scale production relies on fossil fuels.

The planes would be powered by gas-turbine engines modified to burn liquid hydrogen and through hydrogen fuel cells to create power.

Airbus said that its turbofan design could carry up to 200 passengers more than 2,000 miles (BBC).

WM Motor raises $1.47b in latest funding round

Baidu-backed WM Motors has raised 10bn yuan ($1.47bn) in Series D funding. Investors include SAIC Motors and Shanghais state-owned asset regulators investment firms.

Use of funds is expected to be for further R&D on intelligent vehicle technologies, marketing and expansion of sales channels.

Sources familiar with the matter suggest the Company is gearing up to list on the STAR board exchange. Similar well-funded start-ups like NIO, Xpeng and Li Auto have all gone public in recently.

The EV start up is focused on the customer experience and has developed three core technologies: Living Motor powertrain, Living Pilot intelligent driving assistance and L2 ADAS autonomous driving alongside the Living Engine operating system. The Company hopes to become a supplier of smart mobility services in China.

The Company has partnered with a number well recognised firms on the technology for its vehicles. Qualcomms Snapdragon cockpit chips will power the in-cabin experience, Baidus Apollo autonomous driving system will provide self-parking capabilities, Unisplendour will provide the hardware for AI and Sino IC leasing will work on car connectivity according to Tech Crunch.

WM Motors Wenzhou factory has a capacity of 100,000 units and the Company is in the process of building a second facility in Huanggang.

The Company began vehicles deliveries in 2019, delivering 16,810 units. The Weltmeister EX5-Z has sold 9550 units up to July 31 this year. The car has a range of 400-520km depending on the model, it is equipped with a 69kWh battery and is capable of charging from 30% to 80% in 30 mins on a 120kW DC fast charger.

EV sales slump in Canada due to supply shortages

Canadian EV demand had risen dramatically in recent years with just over 5,000 vehicles sold in 2014 compared to over 40,000 in 2018.

Sales of new vehicles in Canada were down 45% in Q2 and 34% for H1 with NEV sales suffering.

2020 has seen a slump in sales as a result of supply factors. 9069 zero emissions vehicles(ZEVs: BEV, PHEV and Hydrogen) were sold in Q2, a 50% reduction from the same period last year when 18,032 vehicles were sold.

The slump has been a result of a lack of supply, caused by COVID-19 related supply chain disruption and manufacturers prioritizing shipments to China and Europe where demand is greater.

There are few EVs available outside of Quebec, Ontario and British Columbia (BC), with a great disparity in financial incentives having a part to play. A lead time of several months to a year can be an impediment to sales.

NEVs did however have a 3.3% market share in H1, an improvement on the 2.7% share for the same period in 2019. 168,000 ZEVs are on the roads in Canada today, with Quebec leading the way on 75,000 followed by Ontario (46,000) and then BC(41,000).

It is expected the supply problems should ease towards the end of the year or in early 2021 with Quebec and BC receiving vehicles first. It is predicted that NEVs will account for 40% of EV sales in 2025 up from around 20% this year.

Tesla announces high volume battery cell production will not start until 2022 on eve of Battery Day

Tesla confirmed yesterday that its high volume battery cell production will not begin until 2022 and therefore will be applicable for the Cybertruck, Tesla Semi and Roadster programs.

Musk also confirmed the Company intends to continue purchasing batteries from existing suppliers Panasonic, LG and CATL but will also look further afield to avoid anticipated shortages in 2022.

The share price fell 3% to $435.50 on the news.

Bluejay Mining* (AIM:JAY) 7.38p, Mkt cap £71m – Completion of Thunderstone field exploration program

Bluejay Mining report the completion of its fieldwork program in the South of Greenland on its new Thunderstone licences.

Thunderstone: Observations in the field align with geochemical anomalies for gold and remote sensing targets.

The anomalies are from previous stream sediment and heavy mineral concentrate sampling.

Nanortalik Gold Belt: the work indicates a potential significant southern extension to the Nanortalik Gold Belt.

Sample assays are expected later this year.

The team used a boat as an exploration platform with helicopter support to cover the license area

Dr Denis Schlatter, who is expert in orogenic gold and base metal deposits accompanied the team.

Schlatter has published studies on gold systems in South and West Greenland and oversaw the original BFS for the, which lies within the Nanortalik Gold Belt, just 15 km northwest of Bluejays Thunderstone licences.

Nalunaq Gold Mine: AEX Gold recently listed in London with a market capitalisation of £82m.

AEX Gold raised £42.5m on listing on the AIM market at 45p/s.

Nalunaq has an Inferred Resource of 251,000oz grading 18.5g/t gold

The property also has a near-mine Exploration Target of 2.5-10mt grading between 2.4-6.0g/t for 0.2- 2.0moz.

Drilling already has extended the known gold bearing structure but this work has not yet been included in the resource statement.

Conclusion: Bluejay have continued to work through the lockdown and Covid restrictions. We await the results and analysis to come from the assays taken on the Thunderstone licenses and particularly from the Nanortalik Gold Belt close to AEX Golds high-grade Nalunaq Gold Mine.

The retreating ice sheet has exposed bare-rock mineral occurrences and made the area significantly more accessible and easier to work in.

*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.

KEFI Gold and Copper (LON:KEFI) 2.2p, Mkt Cap £41m – Hawiah PEA delivers $96m NPV with significant upside potential from MRE expansion

The Company released internal PEA results on the 34% owned Hawiah VMS project in Saudi Arabia hosting 19mt at 1.9% CuEq in maiden resource.

Main results include:

Plant throughput – 2.0mtpa flotation plant for production of separate copper and zinc concentrates;

Life of mine – 7 years;

Underground operation using long-hole open stoping;

ROM grades – 0.87% Cu, 0.78% Zn, 0.53g/t Au and 9.9g/t Ag;

Gross metal in concentrate production per annum – 17ktpa Cu, 13ktpa Zn, 23kozpa Au and 436koz Ag;

Annual net revenue per annum – $153m (in terms of sales breakdown between metals – 52% Cu, 13%, Zn, 28% Au and 7% Ag);

Commodity price assumptions (August 2020) – $6,603/t Cu, $2,315/t Zn, $1,956/oz Au and $27.5/oz Ag;

AISC – $43/t of ore processed;

Development and sustaining capex – $222m and $46m;

NPV8% (after tax) and IRR (after tax) – $96m and 22%;

Upside potential to preliminary estimates lies in resource expansion with the current MRE based on drilling completed to maximum depth of only 350m with the polymetallic mineralisation reported to remain open at depth and include higher copper and gold grades.

The down-dip continuation of Camp Lode is of particular interest with the deepest two holes, HWD_005 returning 1.27% copper over a true width of 9m and HWD_059 returning 1.55% copper over a true width of 8.7m.

Higher grades may be an indication that resources are nearing the source of the VMS system, an area of typically higher grade copper mineralisation.

The team is planning to test down dip extensions in the next round of drilling as well as infill drill the current MRE as part of estimation of an ore reserves; additionally, the Company will carry a scout drilling programme targeting the “feeder zone” to the VMS mineralisation; further drilling to start in Q4/20.

The Company highlighted high sensitivity of the project to LoM extension with an additional 20mt at the higher grade of the Camp Lode is estimated to improve after tax NPV from $96m to $362m and the unleveraged IRR from 22% to 28% using same August 2020 prices.

Separately, the Company released its interim results.

Operating loss totalled £1.2m (H1/19: -£1.3m) after accounting for £1.6m in admin costs (H1/19: £1.1m) and a gain of £1.0m from dilution in the share of liabilities held by the JV Company in Saudi Arabia (H1/19: -).

Loss after tax amounted to £1.0m (H1/19: -£1.7m).

Net CFO (ex interest) came in at -£0.5m (H1/19: -£0.6m) after accounting for positive working capital contribution of £1.1m (H1/19: £0.6m).

FCF came in at -£2.5m (H1/19: -£1.6m) after accounting for Tulu Kapi and Saudi Arabia related spend.

The Company had £2.1m in cash as of H1/20 and no debt after raising £1.9m and £3.7 in January and later in May this year.

Conclusion: The Company released Hawiah VMS project PEA for a 2mtpa operation generating $96m NPV8% (after-tax) with a significant potential to improve on preliminary estimates with mineralisation remaining open and demonstrating higher grades at depth. The project benefits from ~80% exposure to gold and copper prices that recorded stRead More – Source