Today’S Market View – Governments Increasingly Turn To Fiscal Stimulus

Bushveld Minerals* (LON:BMN) – Vanchem competition commission approval Horizonte Minerals (LON:HZM) – US$25m royalty funding for Araguaia Mkango Resources* (LON:MKA) – Q2 results

Bushveld Minerals Limited - Today's Market View - Governments increasingly turn to fiscal stimulus

SP Angel – Morning View – Thursday 29 08 19

Governments increasingly turn to fiscal stimulus


MiFID II exempt information – see disclaimer below

Bushveld Minerals* (LON:BMN) – Vanchem competition commission approval

Horizonte Minerals (LON:HZM) – US$25m royalty funding for Araguaia

Mkango Resources* (LON:MKA) – Q2 results

Scotgold Resources* (LON:SGZ) – Fundraising, Cononish project and exploration update

W Resources (LON:WRES) –La Parilla concentrator moves into commissioning phase

UK battery industry warns PM of need for policy change

Urgent changes to energy policy are required to prevent the curtailment of the UK renewable energy and battery industry, per an open letter to The Guardian penned jointly by the Renewable Energy Association and British Electrotechnical and Allied Manufacturers’ Association (Guardian).

The call for policy change comes on the back of the decision to increase VAT on home batteries from 5% to 20% this October, a move that threatens the growth of the UK’s nascent behind-the-meter battery industry.

Battery companies are benefiting from substantial growth in home batteries on the continent, most notably in Germany. Growth in Europe risks leaving the UK behind, despite PM Boris Johnson proclaiming in the House of Commons last month that the UK was a world leader in battery technology.

Nickel gains over Papua New Guinea supply concerns

Interest in nickel contracts on the Shanghai Futures Exchange closed at a record high yesterday as concerns over supply from Papua New Guinea mount following a reported waste spillage in Basumuk Bay (Bloomberg).

Red discharge has been reported over the Bay near a nickel facility owned by the Metallurgical Corp. of China, Reuters reports, raising fears that supply disruption may follow.

Papua New Guinea’s Environment Minister Geoffrey Kama stated last week that the nickel processing plant, located in Madang, may be closed following a visit to the plant.

Madang Governor Peter Yama called the spillage “the worst environmental disaster in PNG history”, and urged the government to immediately close down the project.

The premiums of LME cash nickel over the three-month contract MNI0-3 rose to $97 a tonne, a decade-high, pointing to fears over tightening nearby supply.

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US – Little optimism on the trade war related front, with Treasury Secretary Mnuchin could not confirm if the previously planned September meeting with Chinese counterparts is going aheaed.

White House trade adviser Peter Navarro played down a quick resolution.

30y Treasury bond yields dropped 6bp to hit a record low of 1.905% on Wednesday reflecting investors’ concerns with weakening inflation and growth outlook.

The spread between 2y and 10y yields remain negative with the inverted yield curve seen by many as a precursor of a recession.

Germany – Corporate tax is proposed to be capped at 25% as one of fiscal stimulus measures, the Economy Ministry said.

The move is aimed at supporting the so-called Mittelstand, small and medium-sized businesses that account for nearly 60% of the nation’s jobs.

Germany’s overall tax rate on companies is around 30-33%, according to Deloitte.

UK – The Queen approved the suspension of the Parliament next month for 32 days (12 Sep – 14 Oct) ahead of her speech to lawmakers.

The Queen will formally re-open parliament and deliver the speech on 14 Oct.

Critics of the Johnson’s proposal for the long suspension argue it leaves MPs little time to debate on the future of the UK Brexit deal and potentially leads to a no-confidence vote.

Government officials said the plan to elect new administration is likely to fail as MPs would struggle to get the numbers needed to form an alternative administration.

“If MPs pass a no-confidence vote next week, then we won’t resign… we won’t recommend another government… we’ll dissolve parliament (and) call an election between November 1 and 5,” a government insider told FT.

PM Johnson is expected to travel to Brussels in search of a last-minute deal that is due Oct. 17-18.

The pound is down against the € (-0.2%) and the US$ (-0.2%) this morning.

France – Final GDP data for Q2 showed a slight improvement on previous estimates, in contrast to its lager neighbour (Germany) that posted a decline during the quarter.

Growth has been driven by stronger consumer spending, robust business investments as well as a positive contribution from trade.

GDP (%qoq/yoy): 0.3/1.4 v 0.3/1.3 in Q1 and 0.2/1.3 forecast.

Spain – Inflation in one of the fastest growing economies in the Eurozone continues to slowdown and hit the weakest level since 2016 in August.

The decline is largely attributed to lower contributions from energy prices, both fuel costs and electricity bills.

Although, core inflation also remains weak holding unchanged at 1.1%yoy this month.

CPI EU Harmonised (%mom/yoy): -0.1/0.4 v -1.1/0.6 in July and 0.1/0.6 forecast.

South Korea – The government proposed a record 513.5tn won ($423bn) budget for 2020 marking a 9.3% increase from the 2019 main budget, nearly in line with a 9.5% increase in 2019.

The government is turning to fiscal stimulus as the central bank runs out of room to support the economy.

The benchmark rate is currently at 1.5% (cut by 25bp in July).

The latest inflation reading came in at 0.6% (v 2.0% target) and economic growth slowing down to 1.7-2.1% in H1/19 (v 2.7% in 2018) driven by a collapse in trade and business investments.

Argentina – The government is calling the IMF to extend the maturity on the $56bn bailout loan as well as asking other local and foreign bondholders to push out debt due dates.

The move seeks to avoid yet another default by a country as President Macri is struggling to secure the extension of his term in the office.

A primary held earlier this month showed Macri, a free-market advocate, trails the leftist candidate Alberto Fernandez by w aide margin (elections are due Oct. 27).


US$1.1079/eur vs 1.1088/eur yesterday. Yen 105.99/$ vs 105.78/$. SAr 15.428/$ vs 15.302/$. $1.219/gbp vs $1.227/gbp. 0.673/aud vs 0.674/aud. CNY 7.165/$ vs 7.160/$.

Commodity News

Precious metals:         

Gold US$1,546/oz vs US$1,540/oz yesterday

   Gold ETFs 78.8moz vs US$78.5moz yesterday

Platinum US$912/oz vs US$871/oz yesterday

Palladium US$1,480/oz vs US$1,480/oz yesterday

Silver US$18.59/oz vs US$18.30/oz yesterday

‘Poor man’s gold’ is drawing the limelight, surging 12% this month to touch a two-year high on Wednesday. The metal is benefiting as concerns over the global economic outlook bolster demand for haven assets, sending sister-metal gold to the highest since 2013 according to

Meanwhile, an ounce of gold still buys about 84oz of silver, well above the three-decade average of 67oz, also pointing to the possibility of more increases in the white metal, according Mike McGlone of Bloomberg Intelligence.

Exchange-traded funds backed by silver are also lending support, with total known holdings in silver ETFs topping all-time highs in data going back to 2006, according to figures compiled by Bloomberg. The assets are heading for a 14th straight weekly advance weeks, longest streak in more than 11 years.

Base metals:   

Copper US$ 5,673/t vs US$5,685/t yesterday

Aluminium US$ 1,745/t vs US$1,761/t yesterday

Nickel US$ 16,175/t vs US$15,775/t yesterday

Zinc US$ 2,263/t vs US$2,277/t yesterday

Lead US$ 2,063/t vs US$2,085/t yesterday

Tin US$ 15,720/t vs US$15,820/t yesterday


Oil US$60.1/bbl vs US$60.1/bbl yesterday

Natural Gas US$2.228/mmbtu vs US$2.207/mmbtu yesterday

Uranium US$25.30/lb vs US$25.25/lb yesterday


Iron ore 62% Fe spot (cfr Tianjin) US$81.5/t vs US$80.2/t

Chinese steel rebar 25mm US$537.3/t vs US$540.6/t

Thermal coal (1st year forward cif ARA) US$63.0/t vs US$62.7/t

Coking coal futures Dalian Exchange US$196.4/t vs US$196.2/t


Cobalt LME 3m US$32,600/t vs US$32,600/t

NdPr Rare Earth Oxide (China) US$44,310/t vs US$43,781/t

Lithium carbonate 99% (China) US$7,397/t vs US$7,402/t

Ferro Vanadium 80% FOB (China) US$38.5/kg vs US$38.5/kg

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

Tungsten APT European US$198-205/mtu vs US$210-225/mtu

Battery News

Cambridge start-up claims breakthrough 6 minute charge

Startup, Echion Technologies, founder Dr. Jean de la Verpilliere offers commercialisation of a breakthrough battery technology as soon as next year.

De La Verpilliere claims to have created a new powder that replaces graphite inside Li-ion battery cells to enhance recharge capacity, reporting to Cambridge Independent “the powders are the central component of a lithium battery. This is a new kind of powder that allows you to recharge in six minutes, not 45 minutes. This includes a car, so your electric car is almost as easy to charge as it is to refuel conventionally”.

The startup claims to have a prototype that has been validated, and it secured investments from Newable Private Investing and Cambridge Enterprise. “We’re working on methods to make powders that are scaleable and where 1,000 tonnes could be made quite easily in factories. We have a prototype now, and are moving toward commercialisation early next year. The tests have to be validated beforehand.”

“Echion Technologies provides a unique platform for battery material and composite manufacture at pilot scales.  Our materials then simply ‘drop in’ to existing battery manufacturing infrastructure with no capital cost. This provides a low barrier to market entry and rapid customer access for our battery materials.”

Company News

Bushveld Minerals* (BMN LN) 22.75p, Mkt Cap £243.40m – Vanchem competition commission approval

Integrated primary vanadium producer report on 28 August 2019, it received approval from the Competition Commission of South Africa to acquire the Vanchem assets, without conditions.

On 1 May 2019, Bushveld announced a conditional agreement to acquire the primary vanadium processing assets of Vanchem Vanadium plant, the ferrovanadium production business of SAJV as a going concern, and a 100% of the outstanding shares of Ivanti Resources (Pty) Limited, a subsidiary of Duferco Participations Holding S.A.

Bushveld is progressing with negotiations with local banks for a debt facility to supplement existing cash resources, with the transaction remaining on track to be completed 31 October 2019 on outstanding conditions relating to commercial agreements and South African Reserve Bank approval.

CEO Fortune Mojapelo adds “We remain on track to complete the acquisition within our targeted timeframe, at which point we will have significantly increased our processing capacity, giving us the ability to unlock even more of our existing large high grade resource base and produce a  diverse array of products for the steel market, chemical industry and energy storage sector.”

*SP Angel acts as Nomad & Broker to Bushveld Minerals.

Horizonte Minerals (HZM LN) 4.9p, Mkt Cap £70.9m – US$25m royalty funding for Araguaia

Horizonte Minerals has announced that Orion Mine Finance has agreed to provide US$25m for the funding of the company’s Araguaia ferro-nickel project in Brazil in return for a 2.25% royalty on the estimated production generated by Phase 1 of the project which is equivalent to 426,429 tonnes of contained nickel within ferronickel product.

The feasibility study for the Araguaia project describes an initial production phase where approximately 900,000tpa of ore is treated in a Rotary Kiln Electric Furnace (RKEF) to produce approximately 14,500tpa of nickel contained in 52,000tpa of ferronickel.

Capital investment of US$443m for the initial phase of the project is expected to generate an after tax NPV8% of US$401m and an IRR of 20.1% with cash costs equivalent to US$3.08/lb of contained nickel..

The feasibility study includes the flexibility to double production to 29,000tpa of contained nickel by the addition of a second RKEF in the third year of the project. 

Commenting on the royalty agreement, Chief Executive, Jeremy Martin, said that the funding from Orion “enables us to build out our owner’s team, advance engineering and early works packages as we proceed to the start of full construction at Araguaia. This royalty financing is non-dilutive for shareholders, and has been pre-designed to be compatible with the project funding package.”

Mkango Resources* (MKA LN) 6.95p, Mkt Cap £8.84m – Q2 results

Principally focused on rare earth elements and associated minerals exploration and development, Mkango Resources target three properties in the Republic of Malawi including the Phalombe license, Thambani License and the Chimimbe license.

The operations for the next 12 months are currently funded by investments from Talaxis which total £12m ($17.3m), of which the first and second tranches were received during the year ended December 31, 2018 and the third tranche was received on March 28, 2019. Cash at the end of Q2 totalled $11.1m.

The Talaxis investments will be directed to funding the Bankable Feasibility Study for the Songwe Hill project.

Following completion of the Feasibility Study, Talaxis has been granted an option to acquire an additional 26% interest in Lancaster BVI, by arranging funding for project development. If exercised, Mkango will retain a 25% interest free carried to production.

The operations of the Company are also being funded by the proceeds received upon the exercise of warrants and stock options. A total of 20,081,533 warrants were exercised during the six months ended June 30 2019 for a $1.77m total increase in common share value of which $1.67m was cash consideration.

Total Malawi project expenditures for six months June 30 2019 has fallen to $756,171. This includes additional project costs associated with Chimimbe of $14,534, with exploration identifying a number of areas with potential for laterite and saprolite hosted nickel, cobalt, chrome.

*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.

Scotgold Resources* (SGZ LN) 35p, Mkt Cap £16m – Fundraising, Cononish project and exploration update

BUY – TP under review

The Company updated Cononish cost estimates and first production target on the back of civil engineering design delays.

First production is now expected end Feb/20 versus originally guided Dec/19.

Capital cost has been revised from £20.1m estimated in the Mar/17 BFS to £26.8m.

Operating costs have come up only slightly to 398/oz v £373/oz estimated previously as higher power costs assumed have been partly compensated by lower operating expenses related to tailings management; also, we suspect higher cash costs reflect higher royalty expense due to stronger gold prices assumed.

Updated costs called for an additional £2.5m capital injection that is being funded through a combination of equity and debt.

Nathaniel le Roux agreed to extend the existing loan facility by £1.5m taking the total to £7.5m; additionally, the Company is issuing 3.3m new shares at 35p for £1.15m of gross proceeds.

The term of the loan has also been extended to 36m (from 24m) from each drawdown.

More than 80% of the equity raise is being provided by three Company Directors and a member of the management team.

On the positive note, the Company estimates that the latest strong run in gold prices more than compensates for higher costs with life of mine EBITDA up ~45% at £146.7m when £1,200/oz gold price is used compared to previously assumed £920/oz (equivalent to $1,500/oz and $1,150/oz at 1.25 exchange rate used in the BFS). This brings a ~46% increase in NPV10% (pre-tax) to £63.3m.

Regarding operations update, mine development is continuing with ore access to be completed by ed of 2019 as scheduled.

Earthworks are due to commence in September, four months behind the targeted May start, as the characteristics of the area (elevation, environmental conditions, geotechnical factors) required more design work.

Major processing plant parts sourced from South Africa and China are currently in transit and should be arriving on site in due course.

On exploration side, the Company has successfully identified surface anomalies within the Company’s license areas including strong anomaly 1km NE of the Cononish orebody and high gold (125ppb) and silver (420ppb) in soil assays at the Inverchorachan area.

Conclusion: As much as an increase in capital costs and a delay to first production that led to a debt and equity capital injection by investors is an unwelcome setback, the Scotgold investment case remains strong with the high grade Cononish project continuing to offer strong cash margins (TCC of £398/oz v current £1,270/oz spot gold price). Furthermore, as previously highlighted, the team has brought forward a fair share of the Phase 2 capex (plant expanded to 6ktpm, up from Phase I 3ktpm) which in turn helps to de-risk and potentially accelerate the future switch to Phase 2. The Company benefits from weak British pound amid fears over no-deal Brexit and strong gold prices driven by a revision to investors’ expectations of future growth prospects as well as geopolitical risks including rising tensions in Hong Kong and the dissolution of the Italian government. We remain buyers of Scotgold Resources and will release updated target price and earnings estimates shortly.

*SP Angel acts as Nomad and Broker to Scotgold Resources

W Resources (WRES LN) 0.4p, Mkt Cap £24.1m –La Parilla concentrator moves into commissioning phase

W Resources reports that the commissioning of the new concentrator plant at the La Parilla tungsten mine in Spain has started and that “Commissioning of the spirals and shaking tables buildings ‘on water’ has commenced”.

Initial ore feed through the plant, leading to the first concentrate production, is expected during September.

Chairman, Michael Masterman, confirmed that “The Crusher and Jig & Mill Plants are operations ready and we have maintained the low-cost nature of this impressive world class project by ensuring each phase is delivered to the highest standards as we prepare for first concentrate production in September”.


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

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

SP Angel                                                            

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*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.

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