Today's Market View - Central Asia Metals, Beowulf Mining, Polymetal and more...

SP Angel . Morning View . Thursday 17 09 20 Copper prices pull back as Fed keeps stimulus unchanged    Beowulf Mining* (LON:BEM) 5.5p, Mkt cap £33.1m – Market assessment of Kallak products Central Asia Metals (LON:CAML) 160p, Mkt Cap £282m – TSF4 update IronRidge Resources* (LON:IRR) 16.75p, Mkt Cap £68.7m – Drilling results from Zaranou Gold Project Kenmare Resources (LON:KMR) 253p, Mkt cap £278m – Moma dredge moved to Pilivili Polymetal (LON:POLY) 1,913p, Mkt Cap £8,995m – Prognoz ore reserves Talga Resources (ASX:TLG) A$0.63, Mkt cap A$159m – Vittangi Graphite resources upgraded   Dow Jones Industrials +0.13% at 28,032 Nikkei 225 -0.67% at 23,319 HK Hang Seng -1.68% at 24,310 Shanghai Composite -0.44% at 3,269   Economics US – US equity futures pull back this morning following the Fed policy announcement yesterday guiding to keep the current pace of stimulus in place. The FOMC pledged to continue to purchase $120bn in government bonds each month and keep rates at close to zero until at least 2023. There seemed to be some hopes that the central bank was gearing up to extend the duration of its bond purchases or ramp up the rate of buying, according to Reuters. The Fed has also revised its growth estimates higher with GDP expected to contract 3.7% this year, compared to its June estimate for a 6.5% drop; unemployment is expected to amount to 7.6% by the end of the year, compared with its previous estimate of 9.3%; inflation is also expected to come in stronger than previously envisaged averaging 1.2% this year, up 0.4pp on the June estimate, although 2% rate is not expected to be reached before 2023. The central bank’s balance sheet is reported to have been stable around $7tn since May as the Fed scaled back corporate bonds purchases as spreads narrowed; this compares to $4.3tn at the start of the pandemic in March. Separately, retail sales growth is reported to have slowed down more than expected in August as federal financial help for unemployed and small businesses lapsed with the pandemic continuing to weigh on activity. Retail Sales (%mom): 0.6 v 1.2 in July and 1.0 est.   Japan – The central bank kept the monetary policy steady on Thursday while slightly upgrading its view on the economy ruling out any immediate expansion of stimulus. In line with expectations, the BoJ maintained its -0.1% short-term interest rate target and a pledge to cap 10y bond yields around zero. “Japan’s economy remains in a severe state but has started to pick up as business activity gradually resumes,” the BOJ said.   UK – The BoE announcement is due later today with the policy likely to remain unchanged, although, expectations are building up for the central bank to announce more easing before year end. The vote split and minutes of the meeting will be watched closely for insight into the MPC’s intentions, Bloomberg reports. Outlook remains fragile with a resurgence in Covid-19 cases in the UK and abroad as well as uncertainty over the shape of the future Brexit deal and government fiscal plans. Benchmark rates currently stand at 0.1% with asset purchases pace at £745bn. Economists expect the BoE to add £50bn to the purchases programme in November and more cuts to the benchmark rates, Bloomberg reports.   Switzerland – Gold exports rise 13.5% MoM as China shipments resume Gold exports from Europe’s key refining hub increased to 116.5t last month, up from 102.6t in July, according to customs data. Exports to China increased by 10t, after 5 months with no shipments. Whilst supplies to India increased 35% to 20.2t. Meanwhile, sales to the UK rose 34% to 18.4t and sales to the US fell 55% to 28.5t as exports to the country continue to fall from record levels earlier this year Platinum exports continued to rise last month, increasing 40% compared to July to 6.7t (Bloomberg).   Currencies US$1.1784/eur vs 1.1848/eur yesterday.  Yen 104.80/$ vs 105.36/$.  SAr 16.349/$ vs 16.390/$.  $1.295/gbp vs $1.288/gbp.  0.728/aud vs 0.731/aud.  CNY 6.768/$ vs  6.770/$.   Commodity News Precious metals:          Gold US$1,946/oz vs US$1,965/oz yesterday - Gold price falls on Fed optimism and stronger US dollar Gold prices fell on Thursday morning after the Fed shared an upbeat economic view whilst not offering any further insight on additional stimulus. The dollar strengthened after the Fed signalled it expects the US economic recovery to accelerate, with the dollar index hitting a one-week high before meeting resistance around 93.60 (FX Street). Officials left rates unchanged, vowing to delay an increase until the US gets back to maximum employment and 2% inflation, offering some support to the gold price (Bloomberg). Spot gold fell 0.8% to $1,945/oz earlier this morning, whilst US gold futures fell 0.9% to $1,952/oz (Reuters). Gold ETFs 109.7moz vs US$109.7moz yesterday Platinum US$949/oz vs US$979/oz yesterday Palladium US$2,375/oz vs US$2,397/oz yesterday Silver US$26.83/oz vs US$27.29/oz yesterday             Base metals:    Base metal prices fall this morning on stronger US dollar Three-month base metals prices on the LME were down between 0.3% for aluminium and 1.8% for nickel this morning, as the stronger dollar made dollar-denominated metals more expensive (Fastmarkets MB). LME copper fell by the most in seven sessions, down 1.5% earlier this morning to a low of $6,676/oz before paring some losses (Reuters). Copper US$ 6,704/t vs US$6,753/t yesterday Aluminium US$ 1,787/t vs US$1,800/t yesterday Nickel US$ 14,905/t vs US$15,205/t yesterday Zinc US$ 2,484/t vs US$2,522/t yesterday Lead US$ 1,884/t vs US$1,917/t yesterday Tin US$ 18,120/t vs US$18,190/t yesterday             Energy:            Oil US$41.7/bbl vs US$41.3/bbl yesterday Natural Gas US$2.263/mmbtu vs US$2.373/mmbtu yesterday             Bulk:    Iron ore 62% Fe spot (cfr Tianjin) US$119.6/t vs US$123.9/t Chinese steel rebar 25mm US$553.8/t vs US$555.2/t Thermal coal (1st year forward cif ARA) US$58.5/t vs US$57.7/t Coking coal futures Dalian Exchange US$148.0/t vs US$142.5/t             Other:   Cobalt LME 3m US$34,200/t vs US$33,215/t NdPr Rare Earth Oxide (China) US$49,351/t vs US$49,555/t Lithium carbonate 99% (China) US$5,024/t vs US$5,022/t Ferro Vanadium 80% FOB (China) US$30.3/kg vs US$30.3/kg Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/kg Tungsten APT European US$220-225/mtu vs US$212-220/mtu Graphite flake 94% C, -100 mesh, fob China US$430/t vs US$430/t Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,275/t   Battery News  Kia to launch first dedicated EV next year Kia announced yesterday that it plans to launch its first dedicated battery electric vehicle next year as the company aims to establish a leadership position in the global EV market. The launch will be part of a new seven-model EV-only lineup that it intends to roll out across several segments by 2027. This new strategy is part of a broader aim to derive 25% of its global sales from EVs by 2029 Kia has sold more than 100,000 EV since introducing its first in 2011, however previous versions such as the Ray also came in a gasoline-engine version (automotiveworld.com).   Company News  Beowulf Mining* (LON:BEM) 5.5p, Mkt cap £33.1m – Market assessment of Kallak products Beowulf has announced the findings of an expert market assessment by Dr. Bo Arvidson, which investigated the market potential of future products from the Kallak North deposit, based on lab results and pilot plant testwork. Testwork on Kallak ore has produced an exceptionally high-grade magnetite concentrate at 71.5% Fe with minimal detrimental components - making Kallak the market leading high-grade product among known current and planned future producers. Kallak magnetite concentrate would reduce the carbon footprint of traditional steel manufacturing, improve energy efficiency in any downstream process and reduce waste due to magentites inherent energy content which ultimately results in lower energy demand for steel manufacturing when compared to current common practice. Globally, the feedstock for steelmaking is 80% hematite and 20% magnetite which means the demand for high-quality feedstock and therefore magnetite should increase as producers look to protect the environment by improving energy efficiency, minimizing waste and the impact of waste disposal. *SP Angel act as Nomad and Broker for Beowulf Mining   Central Asia Metals (LON:CAML) 160p, Mkt Cap £282m – TSF4 update Mining and processing plant operations at the Sasa mine will restart following approval from the North Macedonian environmental authorities. New tailings will be stored in the previous tailings facility (TSF3.2) with authorities allowing the facility to accommodate for up to 10 days’ worth of production. In the meantime, the team will be working on repairing TSF4 that should take around one to two weeks. The Company is working with local authorities to assess and address any environmental damage of the TSF4 leak. Causes of the incident remain unconfirmed with investigation still in progress to implement all necessary remediation solutions for the future ahead of the facility reopening.   IronRidge Resources* (LON:IRR) 16.75p, Mkt Cap £68.7m – Drilling results from Zaranou Gold Project The Company reports positive results from the second phase drilling programme at the Ebilassokro and Ehuasso targets, both within the Zaranou Gold Project area, Côte d'Ivoire. New high-grade 4m composite reverse circulation drilling results received for the final second phase drill holes completed over the Ehuasso target reported at a 0.1g/t cut-off and maximum 4m of internal dilution, including highlights: 16m at 10g/t from 44m in hole ZARC0022 40m at 1.29g/t from 80m in hole ZARC0019 Mineralisation is now confirmed over a 1.7km strike at the Ehuasso Main target, with mineralisation open to the south-west and at depth. The latest high-grade results build on results reported on the 30thof July, with highlights including: 6m at 9.08g/t from 53m in hole ZAAC0436 2m at 20.43g/t from 58m in hole ZAAC0432 24m at 1.14g/t from 12m in hole ZAAC0427 At the Ebilassokro exploration target, further new AC drill intersections are reported at at a 0.1g/t cut-off and maximum 4m of internal dilution, including: 4m at 6.13g/t from 52m in hole ZAAC0460 24m at 0.32g/t from 16m in hole ZAAC0491 8m at 0.88g/t from 16m in hole ZAAC0491 Next steps for the Company include follow-up phase 3 infill RC drilling at Ehuasso, as part of the 50,000m of RC and AC programme which is now underway with two drill rigs on site and a third rig planned to arrive within four weeks. *SP Angel act as Nomad for IronRidge Resources   Kenmare Resources (LON:KMR) 253p, Mkt cap £278m – Moma dredge moved to Pilivili Kenmare Resources reports that it was now completed the move of the dredge, which is part of the wet concentrator plant (WCP), to its new location at Pilivili successfully. The transfer of other parts of the concentrator along the specially constructed 23km long road is expected to start next week. Relocation to Pilivili is a key element of the company’s plans to increase annual ilmenite production to 1.2mtpa and “significantly lower cash operating costs to between US$125 and US$135 per tonne … [which is expected to bring Kenmare Resources into] … the first quartile of the industry revenue to cost (or margin) curve, supporting stronger free cash flow generation and providing for increased shareholder returns”. Managing Director, Michael Carvill, said that “Completing the relocation of WCP B’s dredge safely and within the expected timeframe is an important milestone for the project. The 23km purpose-built road performed well and we are confident in its ability to support the WCP in the coming days”. Conclusion: The successful completion of the relocation of the dredge is a positive indication for the moving of other parts of the concentrator next week. Moving the entire concentrator is a major operational task which, when completed, is expected to increase ilmenite production to 1.2mtpa and bring operating costs into the range US$125-135/tonne  giving Kenmare Resources one of the lowermost quartile operating margins of global production.   Polymetal (LON:POLY) 1,913p, Mkt Cap £8,995m – Prognoz ore reserves Polymetal released an initial JORC-compliant open pit reserve estimate on the Prognoz silver deposit (100% owned) located in the Verkhoyansk municipal district in the Republic of Sakha (Yakutia), Russia. The reserve is estimated at 7.9mt at 560g/t Ag for 142moz silver. Mineral resources in addition to estimated reserves amount to 5.6mt at 552g/t Ag for 100moz silver. The PFS uses 9y LOM using open pit mining and conventional flotation flowsheet producing clean high-grade concentrate. Prognoz is expected to run at 13.5moz of payable silver at AISC of $8-9/oz. Silver accounts for ~90% of value contained in the silver-copper-lead-zinc deposit using $15/oz silver price. Capex is estimated at $319m including $250m in development spend (including pre-stripping) and $69m sustaining capex.   Talga Resources (ASX:TLG) A$0.63, Mkt cap A$159m – Vittangi Graphite resources upgraded   Talga Resources has announced a 15% increase in estimated graphite resources and has also identified additional exploration targets both along strike and at depth at its Vittangi project located in northern Sweden. Using a 10% graphite cut-off-grade, the overall JORC (2012) compliant resource now stands at 19.5mt at an average grade of 24% compared o the previous estimate of 16.9mt at a grade of 25.6%. The majority of the resource is within the Nunasvaara deposit which reports an indicated resource of 10.4mt at an average grade of 25.6% with an additional inferred resource of 4.5mt at a grade of 18.3%. An additional indicated resource of 4.6mt at an average grade of 25.8% is reported for the Niska deposit to the northeast of Nunasvaara. Mineralisation is in the form of two sub-vertical “Stratiform to stratabound … 15-70m wide lithologically continuous units of a very fine-grained, dark-grey to black graphitic rock containing between 10-50% graphitic carbon as highly-crystalline, ultra-fine flakes”. Talga Resources says that the two additional exploration targets it has identified along strike and at depth at Vittangi are estimated in terms of JORC Exploration Target guidance to contain in the range of 26-46mt tonnes within a grade range of 25-30%, however “it is uncertain if further exploration will result in the estimation of a Mineral Resource”. The company’s continuing exploration plan includes surface diamond drilling to investigate the exploration targets with a view to establishing additional mineral resources and the testing of down-dip extensions to the existing resources at Niska (North and South) and at Nunasvaara (North and South). Welcoming the resource expansion, Managing Director, Mark Thompson, also drew attention to the fact that “The European Commission recently published an updated list of Critical Raw Materials necessary for the energy transition to a more sustainable society. Natural graphite features on this list of materials vital to European development as it forms nearly half the volume of active materials in electric vehicle batteries, where it is used as the anode”. Mr. Thompson also pointed out that “With projected anode demand set to reach 3.2 million tonnes by 2030  the potential of Talga’s Swedish integrated natural graphite anode production facility is significant for the European electric vehicle supply chain and the ‘green’ economy”. Conclusion: The mineral resource upgrade and identification of additional exploration targets at Vittangi provide Talga Resources an increasingly solid platform to meet growing demand for graphite within the expanding European battery supply chain.   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   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   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