SP Angel . Morning View . Tuesday 28 07 20

Gold hits $1,981/oz as negative yield debt size climbs above $15tn

MiFID II exempt information – see disclaimer below 


Anglo American Platinum (JSE:AMS) – Amplats declares R2.8bn dividend as EBITDA rises 6%

Ariana Resources* (LON:AAU) – 2019 Results show threefold rise in after-tax profit

European Metal Holdings (LON:EMH) – Geomet partnership with EIT InnoEnergy

KEFI Minerals* (LON:KEFI) – Quarterly update: Tulu Kapi funding closure aimed for October and Hawiah maiden MRE due in August

Petropavlovsk (LON:POG) – Auditor appointment update

Pure Gold Mining (LON:PUR) –– Additional results from drilling at Red Lake mine

Rio Tinto (LON:RIO) – Initial resource and new discovery at Winu 

Scotgold Resources* (LON:SGZ) – Best time to commission a gold mine


China’s nickel ore imports rise 106% in June as demand for nickel for Li-ion batteries rises

China imported 3.45mt of nickel ore last month, up 1.77mt from May, but down 17% compared to the same period last year according to customs data.

Imports from the Philippines jumped 129% MoM to 3.07mt, however fell 3.5% YoY.

Over 246,000t of nickel ore arrived from New Caledonia last month, making the island the second largest supplier of nickel ore to China (SMM News).


Gold – prices pause as ETF buying continues and market prepares for next positive move

Gold prices rose to $1,981.7/oz in early trade in Asia falling back to $1,900/oz before recovering to $1,920/oz now

The gold market appears to have significant positive momentum driven by new investment in ETFs.

Disruption to major gold mines in South Africa and Latin America and at gold refineries earlier this year has also unbalanced the physical gold market.

Investors are braced for the passing of a new trillion dollar stimulus package in the US which may lift higher as nations work to reflate economies.

Further new stimulus is expected from around the world to lift gold prices higher.

Key drivers:

Coronavirus second wave fears and potential for the Coronavirus to be with us for years

Vaccines may offer short term protection causing

Huge stimulus finance programs

Uncertainty in many of the worlds key currencies

US dollar weak outlook as economy struggles and COVID-19 cases rise

Falling US 10-year bond yields

US/China Trade tensions & Tit for Tat consulate closures worsen relationship between the two nations.

ETF gold buying rises to 106.8moz, a new record as Robinhood and other investors pile into the instruments in preference to holding cash

Key stocks:

Juniors: Altus* (LON:ALS) , Anglo Asian Mining* (LON:AAZ), Chaarat* (LON:CGH), Condor* (LON:CNR), Cora* (LON:CORA), Scotgold* (LON:SGZ)

Majors: Newcrest (ASX:NCM), Sibanye Stillwater (JSE:SSW),  Newmont Mining (NYSE:NEM)

*SP Angel act as nomad and or broker or financial adviser.


SP Angel APEX Fastmarkets Q2 metals price survey rankings:

–          No 1. in Gold

–          2nd = in Copper

–          No 3. in Platinum

–          2nd = in Iron ore

–          2nd in Coking coal


IG TV interviews on copper and gold

VOX Markets podcast on mining




Dow Jones Industrials +0.43% at 26,585

Nikkei 225 -0.26% at 22,657

HK Hang Seng +0.49% at 24,724

Shanghai Composite +0.71% at 3,228



US manufacturing regains momentum

New orders for non-defence capital goods rose 3.3% in June excluding aircraft (Reuters)

Core capital goods orders remained 3.2% below pre-pandemic level though this looks like a very good results in terms of recovery.

New demand for machinery, fabricated metals and primary metals.

Orders for electrical equipment, appliances and components rose by 1.2% as office workers moved to working from home.

Shipments of core capital goods also rose 3.4% in June its biggest gain since November 2013.

The recovery in capital goods orders helps to offset the expected collapse in Q2 GDP which is forecast at 34.1% by economists in a Reuters poll following a 5.0% contraction in Q1 with US lockdowns starting in mid-March.

Orders for durable goods increased 7.3% in June following a 15.1% recovery in May mainly due to new auto demand

The US reported a 20% rise in orders for transportation equipment with new auto sales rising 85.7% in June vs 28.8% in May.

Civilian aircraft orders fell 462.3% plunge – a major hit to the US economy where Aviation accounts for 5% of GDP representing nearly half of all manufacturing which accounts for around 11% of US GDP.

Boeing was already dragging down the US economy with suspension of its 737Max

Reckon this is the ‘year of the road trip’ for many US families wishing to avoid airports and other crowded places. New RV anyone?


US – Republicans announced their $1tn package aiming to send $1,200 payments to most Americans while trimming extra unemployment benefits.

This marks the first step in a series of negotiations to come with Democrats who offered their own $3.5tn previously.

House Speaker called the GOP plan “pathetic” piecemeal approach and saying it was not adequate to the nation’s needs, Bloomberg reports.

“Having said that, we are going to see if we can find some common ground… but we are not there yet,” Pelosi said.


ECB called on European banks to avoid dividend payments until January 2021.

The central bank ahs also asked to be “extremely moderate” when setting bonuses in order to help absorb losses and support lending through the pandemic, according to FT.


Spain – Unemployment climbed by 55k to 3.37m people lifting the jobless rate to 15.3%, up from 14.4%.

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The economic crisis has reversed some of the recent improvements with worse may be still to come, Bloomberg reports.

The nation’s central bank expects the rate to spike as high as 24% this in its worst-case scenario while the institution’s economists do not see it falling below 17% for at least two years.


South Africa – The IMF approved $4.3bn in emergency funding for South Africa marking the largest package for any country yet to help combat the pandemic.

The nation reported the largest number of infected on the continent while lockdown measures are estimated to see a 7.2% GDP contraction this year.


Google staff to continue working from home till July 2021 at earliest

The move is a blow to the concept of offices returning to normal this year with Google seen as offering leadership in this respect



US$1.1726/eur vs 1.1709/eur yesterday.  Yen 105.52/$ vs 105.47/$.  SAr 16.475/$ vs 16.541/$.  $1.287/gbp vs $1.282/gbp.  0.713/aud vs 0.714/aud.  CNY 7.001/$ vs 6.998/$.


Commodity News

Precious metals:         

Gold US$1,937/oz vs US$1,935/oz yesterday – Chinese H1 gold consumption falls 38% YoY

Gold consumption in China came in at 323.29 tonnes in the first half of 2020, lower than last year as lockdowns restricted buyers and rising prices hit demand.

Despite the drop compared to last year, consumption began to recover in Q2 2020 as lockdowns eased and buyers appetite for gold increased.

Q2 consumption was up 17.5% compared to the first quarter at 174.66 tonnes, however this was still down 26.2% YoY (Reuters).

Gold ETFs 107.1moz vs US$106.8moz yesterday

Platinum US$932/oz vs US$943/oz yesterday

Palladium US$2,302/oz vs US$2,258/oz yesterday

Silver US$24.33/oz vs US$24.13/oz yesterday


Base metals:  

Copper US$ 6,449/t vs US$6,430/t yesterday

Aluminium US$ 1,715/t vs US$1,705/t yesterday

Nickel US$ 13,615/t vs US$13,725/t yesterday

Zinc US$ 2,220/t vs US$2,224/t yesterday

Lead US$ 1,864/t vs US$1,822/t yesterday

Tin US$ 17,960/t vs US$17,805/t yesterday



Oil US$43.7/bbl vs US$43.2/bbl yesterday

Oil prices continue to trade in the same narrow margins as both bullish and bearish data continue to influence trading

The COVID-19 situation in the US continue to raise uncertainties over the prospects of demand recovery, while the announcement of a vaccine by the University of Oxford provided significant price support and optimism

Markets were increasingly concerned about a second wave of COVID-19 over the past week as data reflected a sharp rise in the number of cases

Rystad Energy now forecasts demand in 2020 to stand at 89.7MMbopd while considering a second wave as a base scenario, significantly less than the latest forecast of OPEC, IEA, and the EIA

Yet the impact of a second wave on global demand is not expected to be as bad as the first demand shock last April as the world is far more prepared to handle lockdown measures in a more local manner

Yet, the impact may continue to weigh on crude markets in 2021 and beyond as fuel demand continues to suffer due to movement restrictions

Elsewhere, the deteriorating relationship between the US and China continues to weigh on the global markets


Natural Gas US$1.735/mmbtu vs US$1.767/mmbtu yesterday

Natural gas prices have pulled back as tropical storm Hanna has now faded in the Gulf of Mexico and no longer headed for the Texas coast

There are some natural gas installations that will be impacted by the storm

Tropical storm Gonzalo is headed for the Caribbean and could make its way into the Gulf of Mexico

Supply rose in the last week according to a recent report from the EIA

Uranium US$31.90/lb vs US$32.90/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$104.2/t vs US$106.2/t

Chinese steel rebar 25mm US$533.7/t vs US$535.1/t – US Steel import volumes down 32% YoY

Finished steel import volumes continued to fall in June, as a weak domestic market has left buyers hesitant to produce foreign steel products.

Imports totalled 1.3mt in June, down 23% from 1.6mt in May and 32% from 1.8mt in June 2019- according to the US Department of Commerce.

Imports of reinforcing bar fell 39% MoM and 21% YoY to 70,446 tonnes.

Imports of blooms, billets and slabs fell both 77% MoM and YoY to 62,731 tonnes (Fastmarkets MB).

Thermal coal (1st year forward cif ARA) US$58.8/t vs US$59.5/t – India Q2 coal imports drop by 30% YoY

India’s coal imports dropped to 48.84mt in Q2, as the country aims to be self-reliant in its coal production and usage.

Coal imports dropped 22.5% to 15.22mt last month compared to June 2019 (Hellenic Shipping News).

Coking coal swap Australia FOB US$115.0/t vs US$115.0/t



Cobalt LME 3m US$28,500/t vs US$28,500/t

NdPr Rare Earth Oxide (China) US$42,210/t vs US$42,008/t

Lithium carbonate 99% (China) US$4,928/t vs US$4,929/t – Chile – Judge calls for water study on Atacama salt flat

An environmental judge has called for the study in order to understand the impact that mining is having on the “highly fragile” water supply.

The call comes as many believe mining on the Atacama is not being carried out in a sustainable way, including VW and Daimler.

US-based Albemarle has previously expressed concern over how much water its rival SQM has been drawing, and regulators have charged the miner with over-pumping brine from beneath the flat.

Ferro Vanadium 80% FOB (China) US$29.7/kg vs US$29.7/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

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

Li Auto lists at $950m

Chinese EV maker Li Auto has launched an IPO offering up to $950m. The Company is backed by food delivery company Meituan Dianping.

Li Auto is selling 95m American Depository shares (ADS) at an indicative range of $8-10 per share.

Each ADS represents two Class A ordinary shares.

The Company will raise a further $380m through a concurrent private placement of shares.

Use of proceeds is expected to be capex and R&D.

The float will be priced on July 30 and begin trading the next day.


Audi begins testing bi-directional charging

German auto maker Audi has begun testing bi-directional charging for its EVs. The aim is to facilitate the storage of solar energy.

Bi-directional charging is vehicle to home (V2H) or vehicle to grid (V2G).

Audi has announced a partnership with the Hager Group to test the new system.

Audi is using the e-tron model to test the charging system and claims they are able to charge the electric DC to DC system using solar.


Tesla to install megapack battery as part of ‘’Gigawatt 1” project

Tesla together with Switch and Capital Dynamics are working on ‘Gigawatt 1’ an energy storage project comprising 3 solar and battery installations.

The batteries used for the project will be Tesla’s ‘Megapack’, the Californian EV makers largest energy storage unit and designed for grid use.

The Megapack has an AC interface and DC connectivity for solar grids, enabling a 250MW, 1GWh power plant to be installed in less than 3 months, significantly faster than fossil fuel alternatives.

Tesla’s Q2 earnings announcement showed the battery pack was profitable in the quarter.

‘Gigawatt 1’ is set to be one of the largest solar projects in the world with the 3 partners investing US$1.3bn. 


Company News

Anglo American Platinum (JSE:AMS) – ZAR143,051, Mkt cap ZAR386bn – Amplats declares R2.8bn dividend as EBITDA rises 6%

AmPlats interim report is interesting as it highlights how resourceful the company is in times of crisis.

AmPlats was already dealing with rolling power outages in South Africa disrupting its furnaces when the Coronavirus struck.

Yet the company has reported EBITDA up 6% yoy, headline earnings of R6.9bn and rising ROCE of 48% up from 45% yoy.

Amplat’s cash pile of R11bn gives plenty of room for a R2.8bn dividend making AmPlats stand out in a market that is desperate for income.

The results were significantly bolstered by a R9.6bn EBITDA gain from the Rhodium and Palladium price with Rhodium prices contributing R6bn of this. Rhodium prices rose to $13,800/oz in March resting at $8,750/oz today.

A weaker South African rand also added 2.6bn to EBITDA.

Non-productive labour and COVID-19 costs were a R1.5bn negative offset by a R2bn gain in cost improvements

The very diplomatically put ‘Operational headwinds’ cost the company R11.2bn in EBITDA

Lower production combined with non-productive labour and inflation drove unit costs higher to R12,555/oz from R9,951/oz a year ago though much of this should be regained in the second half.

Management see long-term automotive PGM demand as robust though sales of light duty vehicles are expected to remain between 14-22% lower this year than in 2019.

Industrial demand looks resilient, Jewellery demand remain weak and investment demand is said to be mixed but we suspect is stronger than expected due to the rise in gold prices.

Platinum, palladium and rhodium which saw supply demand deficits last year are expected to remain in deficit this year despite COVID disruption.

Conclusion: AmPlats performed well through the first half thanks to higher PGM prices, the rand and a good management. The second half should see further recovery supported by ongoing strong Rhodium prices and a return to more normal production. The results bode well for Implats and Sibanye Stillwater.


Ariana Resources* (LON:AAU) 4.9p, Mkt Cap £53.0m – 2019 Results show threefold rise in after-tax profit

Ariana Resources reports an after-tax profit of £6.98m for the calendar year 2019 (2018 – £2.18m).

A combination of “favourable gold prices” and increased production from the 50% owned Red Rabbit joint-venture  drove a 21% rise in turnover to £35.3m (2018 £29.3m).

Describing the outlook for 2020 faced by the challenges posed by Covid19 and the volatility of commodity prices, Ariana Resources says that “Operationally we are well-positioned to take advantage of these unusual circumstances” with supportive national and local governments and the joint venture mine at Kiziltepe “continuing to produce gold and silver at high margins due to the low-cost operating environment”.

With “sufficient cash-flow to satisfy our operational requirements” Ariana Resources “has created opportunities to diversify and make new investments, such as Venus Minerals” where Ariana is investing €2.4m in Cypriot exploration over the next 3 years in order to earn a 50% interest.

 Conclusion: Ariana Minerals is benefitting from increased production and low costs at Kiziltepe and today reports increased profits in 2019 of almost £7m.

*An SP Angel mining analyst has visited Ariana’s licenses in Turkey


European Metal Holdings (LON:EMH) 19.5p, Mkt Cap £23.8m – Geomet partnership with EIT InnoEnergy

European Metals Holdings reports the agreement between its local subsidiary in the Czech Republic, Geomet, and EIT InnoEnergy, described as “the principal facilitator and organiser of the European Battery Alliance … [which is mandated by the EU] … to secure raw materials, technological development and industrial production of modern energy technologies in Europe, for Europe to be largely self-supporting in these critical sectors”.

Today’s announcement says that EIT InnoEnergy “will support Geomet in the financing and development of Cinovec by assisting Geomet in:

Securing construction finance for Cinovec, potentially up to the full amount of the capex and working capital required to put the mine and lithium chemical plant into production;

Securing grant funding from applicable EU, national or regional grant schemes, for Project optimisation studies and economic development objectives, for development of green/sustainable energy projects (for example, through the Just Transition Fund recently announced by the European Commission);

Developing relationships with EIT InnoEnergy’s partner offtakers, with the intention of facilitating and advising on the negotiation of offtake agreements, potentially including offtake pre-financing; and

Providing general support including education, communication and societal and environmental acceptance.”

Welcoming the agreement, European Metals’ CEO, Keith Coughlan, said that “European Metals and its development partner, CEZ, look forward to receiving support from EIT InnoEnergy and working together closely with their industrial and financial partners to deliver production at Cinovec, and contribute to a sustainable supply chain for a world leading centre for EV development and manufacture in Europe”.


KEFI Minerals* (LON:KEFI) 1.8p, Mkt Cap £33.5m – Quarterly update: Tulu Kapi funding closure aimed for October and Hawiah maiden MRE due in August

The Company released a quarterly update on the progress at the Tulu Kapi Gold Project in Ethiopia and the polymetallic Hawiah Project in Saudi Arabia.

The focus remains to launch major site activities at Tulu Kapi in October 2020 paving the way for the start of production in 2022 and deliver a maiden Mineral Resource Estimate at Hawiah in August 2020.

With a strong increase in gold prices and robust project economics the Company reports it received significant interest to potentially provide the outstanding asset level equity and other forms of duly subordinated investment for the Tulu Kapi development.

On development progress, the Company highlighted the start of construction of infrastructure for connection of roads and power, with the road now being built into new host lands for Tulu Kapi residents to be settled while the processing plant Front End Engineering and Design was completed by principal contractors Lycopodium.

The team is currently working on finalising the funding package for the $221m project with half planned to be covered by senior debt and half from other sources including potential subordinated debt and offtake facilities.

The latter may potentially allow KEFI to avoid dilution and improve on the planned base case level project interest of 45%.

At Hawiah in Saudi Arabia, the team completed the first 12,000m drilling programme in May and is currently in the process of finalising the maiden MRE ahead of the release next month.

The wireframes constructed for the MRE currently indicate that the combined tonnage of the three defined massive sulphide lodes is likely be in the region of 20mt before being constrained for preliminary design of the selected mining zones with an average copper equivalent grade of ~2% for the expected mining zones.

PEA is expected to be completed after the maiden MRE is finalised.

The Company has also highlighted cost cutting measures and expenses’ optimisation to reduce the cash burn while preserving key business targets.

Conclusion: Climbing gold prices significantly improves development ready Tulu Kapi with the Company reporting increased interest to potentially provide the outstanding asset level equity, subordinated debt as well as offtake facilities. Funding completion targeted for October 2020 launching development activities ahead of first gold pour forecast for 2022. At Hawiah in Saudi Arabia, maiden resource is due next month following the completion of 12,000m of drilling.

*SP Angel act as Nomad and Broker to KEFI Minerals


Petropavlovsk (LON:POG) 36p, Mkt Cap £1,200m – Auditor appointment update

Pricewaterhouse Cooper informed the Company it will not be able to accept the proposed appointment at the present time due to significant changes to the Board, namely the removal of the majority of both independent and executive directors.

The auditor referred to lack of clarity as to the identity of those charged with governance and the current challenges facing the Board in its ability to function properly.

The auditing firm said it will await results of the forthcoming GM (10 August) to understand the composition of the Board and reassess whether it is prepared to act for the Group.

The Company does not currently have an appointed auditor that may lead to a delay in the publication of its Interim results, the company reported.


Pure Gold Mining (LON:PUR) – 133.5p, Mkt cap £500.4m – Additional results from drilling at Red Lake mine

Pure Gold Mining has reported additional underground drilling  results from its continuing 30,000m, drilling campaign at the Red Lake mine in Ontario.

Among the results announced today, which are close to existing underground development and hence likely to have a positive impact on mineral resources estimates and contribute to near-term production are:

A 10m wide intersection averaging 12.8g/t gold from a depth of 1m hole PGU-0136 and including 5m averaging 20.1g/t gold; and

A 2.4m wide intersection averaging 9.3g/t gold from a depth of 25m hole PGU-0123 and including 1.1m averaging 16.2g/t gold; and

A 2m wide intersection averaging 10.6g/t gold from a depth of 79m hole PGU-0124 which also includes intersections of 1m averaging 8.1g/t gold, 1.7m also averaging 8.1g/t, and 0.7m averaging 11.1g/t gold within the hole.

President/CEO, Darren Labrenz said that “Underground exploration drilling continues to extend stopes that are part of our near term mine plan, and to discover brand new gold zones which could have a direct net positive impact on our production profile, and  because of their proximity to existing development a potential impact to near term cash flow at our mine. In this case we have more than doubled the strike length of a planned stope, further demonstrating the dramatic transformative growth potential of our PureGold Mine. We have only just begun a 30,000 metre exploration program, which will span across our seven kilometre gold corridor”.

The company explains that “Previous drilling in the MV1280-3815 stope area… demonstrated potential for eastern and western extension of that stope. … Drill holes PGU-0123 and PGU-0124 have further extended mineralization highlighting the opportunity for significant growth of this stope.   Prior to underground drilling, the modelled stope had a strike length of 40 metres.  Current drilling has shown the potential to extend the strike length of this stope to 100 metres”.

Conclusion: The drilling programme at Red Lake is delivering extensions to the continuity of mineralisation and short-term stoping opportunities with the potential to add to the resource base in the short term. The company has previously reported the start of surface drilling recently started in the ‘Wedge Zone’ approximately 3km away from the Red Lake mill which could start to reveal the broader  potential of a 7km long mineralised trend.


Rio Tinto (LON:RIO) £47.625, Mkt cap £60.3bn – Initial resource and new discovery at Winu 

Rio Tinto has announced an initial, inferred, mineral resource estimate for its wholly owned Winu project located in the Paterson Province of Western Australia.

The estimate, at a cut-off grade of 0.2% copper equivalent (CuEq), amounts to 503mt at an average grade of 0.45% CuEq and includes a higher grade 188mt at an average grade of 0.68% CuEq using a higher, 0.45% cut-off grade.

The larger, 503mt resource, contains an average 0.35% copper, 0.27g/t gold and 2.15g/t silver while the higher grade portion at the 0.45% CuEq cut-off averages 0.55% copper, 0.36g/t gold and 3.21g/t silver.

The initial resource estimate is based on 390 drill holes totalling 124,872m of drilling of which 104 holes (56,784m) are diamond drill holes with the balance (286 hole – 68,088m) being reverse-circulation holes.

Plans and cross-sections available on the company’s website https://mc-56397411-4872-452d-b48e-428890-cdn-endpoint.azureedge.net/-/media/Content/Documents/Invest/Reserves-and-resources/RT-Winu-reserves-resources-2020.pdf?rev=fcdfb251cdca45c485524916c9a0e9f4 indicate that, unlike some of the other deposits in the emerging Paterson Province, mineralisation is present beneath relatively shallow cover suggesting that Winu may be amenable to open-pit mining.

In addition, the company has identified an additional “new zone of gold dominant mineralisation approximately 2 km east of the Winu deposit, at a prospect called Ngapakarra, as well as a number of other encouraging drilling results in close proximity to the maiden Winu Resource, …[which provides] … further encouragement about the potential for the development of multiple ore bodies within one system.”

The company says that it is continuing drilling in order to improve the definition of the shape and controls of the mineralisation at Winu and confirms that mineralisation “remains open at depth as well as to the north and southeast”.

Discussing the plans for the future development of Winu, Rio Rinto says that it is “working on the studies for a small-scale, start-up operation focused on Winu’s higher-grade core as we take another step towards commercialising this deposit.  We are also assessing options for future expansion in the Paterson region given the extent of mineralisation identified to date and our large land package … [whereit has] … so far carried out exploration activity in just 2% of our tenements”.

Subject to the relevant approvals, Rio Tinto is “targeting first production from Winu in 2023”.

Conclusion: The maiden mineral resources estimate for Winu shows in excess of 0.5bn tonnes of potentially open-pittable mineralisation beneath relatively thin overburden cover. The company indicates that it may develop the higher grade portion of the deposit initially and, presumably, expand production as the full scale of the deposit is established. With a new discovery at  the Ngapakarra prospect some 2km east of Winu and only 2% of the company’s tenement package yet explored, we believe that the full scale of the greater Winu package has yet to emerge.


Scotgold Resources* (LON:SGZ) 98p, Mkt cap £50m – Best time to commission a gold mine

BUY – 141p (from 119p)

Gold and Silver Project in June and is on course to bring the mine into production at what turns up to be the best possible time.

We are updating our earnings estimates to reflect the latest run in precious metals prices as markets brace for expanding fiscal and monetary stimulus while climbing new daily coronavirus cases continue to weigh on economic outlook.

A combination of record gold prices and a depressed British pound to the US$ exchange rate see GBP denominated precious metal prices leap to >£1,500/oz. That is a >20% premium to £1,230/oz we used in our latest estimates ($1,600/oz long term gold price, 1.30GBPUSD rate).

In the latest update released earlier this month, the Company highlighted that full underground mining team returned to work and development works including blasting restarted.

The team secured a second new drill rig and a second hand scooptram improving the equipment availability while helping with the future ramp up to Phase 2 (from 36ktpa to 72ktpa) that would now require only an additional truck.

The Company is in the process of treatment plant assembly with installation of the crushing circuit underway.

In our estimates we assume the Company will commission the mine before year end.

Conclusion: Adjusting our gold price assumption to $1,800/oz, up from $1,600/oz (while keeping our long term GBPUSD exchange rate unchanged at 1.30), we see Cononish NPV8% (after tax) climbing to £84m, up from £71m estimated previously. Higher gold price assumption lifts our Phase II full capacity (72ktpa and 23kozpa) earnings estimates to £23m and £18m in EBITDA and FCF (excluding corporate expenses) per annum, respectively and up from £19m and £16m forecast before. This, in turn, drives our NAPVS estimate to 141p, up from 119p and BUY recommendation reiterated.

*SP Angel act as Nomad and broker to Scotgold



John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490 / 07943031001

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

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



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



*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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