Jim's Mining Letter - May 19, 2024

Anglo American (AAL.L AAUKF), currently the subject of a combination proposal from BHP (BHP.AX BHP BHP.L), announced it is accelerating delivery of a strategy to unlock significant value, resulting in a radically simplified portfolio of world-class assets in copper, premium iron ore and crop nutrients. Anglo American owns 3 of the top 10 producing copper mines in South America, with outstanding resource endowments. They are said to be set for multiple decades of competitive production and growth, with a defined pathway to over 1 million tons a year of copper production. The company also is a focused producer of 100% premium iron ore, ideally suited to support steel decarbonisation, and has what it describes as attractive resource endowments in Brazil and South Africa. Regarding crop nutrients, Anglo will slow down development to support balance sheet deleveraging, while critical technical studies are completed in 2025, to then support syndication. Capex will be reduced to $200 million in 2025 and no capex in 2026, thus preserving long term value from a high quality asset with multi-generational resource scale. This is said to provide a compelling value proposition exclusively for Anglo American's shareholders. Steelmaking coal is to be divested and the company is currently responding to strong buyer interest, nickel heads for care and maintenance and divestment, Anglo American Platinum is to be demerged and De Beers is to be divested or demerged.

Lifezone Metals (LZM) announced an overview of the company’s achievements during the past quarter and the Q1 2024 unaudited financial summary. Briefly, Lifezone is advancing its Kabanga Nickel Project (believed to be one of the world’s largest and highest-grade undeveloped nickel sulfide deposits), located in north-west Tanzania, through a strategic partnership with the Government of Tanzania and BHP (BHP.AX BHP BHP.L), and has a partnership with Glencore (GLEN.L GLCNF) to recycle platinum, palladium and rhodium in the United States. Highlights for the quarter were: the two-phased development plan for Kabanga (an initial 1.7 million tonne per year plus a 1.7 million tonne per year Phase 2 expansion for a base case 3.4 million tonne per year underground mining operation, concentrator and Hydromet refinery); results from 11 exploration drillholes completed at the Safari Link Area, of which 7 holes intercepted high-grade nickel, copper and cobalt mineralization; receipt of the Kahama Hydromet Refinery Licence from the Government of Tanzania (Kahama will be located within a newly promulgated Special Economic Zone); high recoveries through metallurgical test work, supporting the design of the Kabanga Concentrator and Kahama Refinery; connection of the Kabanga Nickel Project to the Tanzanian national power grid via a 33-kilovolt line; a fully funded Phase 1 partnership with Glencore for pilot plant and feasibility study to recycle platinum, palladium and rhodium from spent automotive catalytic converters in the United States; and a $50 million non-brokered private placement of unsecured convertible debentures. The company reported a cash position of $79.6 million as at March 31, 2024, not including final $4.9 million proceeds from the convertible debenture placement received on April 1, 2024. Basic and diluted loss per share was $0.05 for Q1 2024, compared to basic and diluted loss per share of $0.10 in Q1 2023.

New Gold (NGD.TO NGD) announced that it has entered into an agreement relating to its strategic partnership with the Ontario Teachers’ pension plan at the New Afton Mine, whereby New Gold will increase its effective free cash flow interest in New Afton to 80.1%. On closing of the transaction, Ontario Teachers’ free cash flow interest in New Afton will be reduced from 46.0% to 19.9% in exchange for an upfront cash payment of $255 million from New Gold. New Gold will fund the cash payment with cash on hand, borrowings from its existing revolving credit facility and net proceeds from a concurrent bought deal equity financing of common shares of New Gold for approximately $150 million. New Gold has entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets, pursuant to which the underwriters have agreed to purchase, on a bought deal basis, 87,300,000 common shares at a price of $1.72 per share. The company has granted the underwriters an over-allotment option, exercisable in whole or in part at any time at the offering price up to 30 days after closing of the offering, to purchase up to an additional 15% of the number of common shares issued pursuant to the offering to cover over-allotments.

CleanTech Lithium (CTL.L CTLHF) announced results from the processing of brine from Laguna Verde at the company’s direct lithium extraction pilot plant in Copiapó, Chile. The plant is said to have produced high quality eluate with low impurities. A lithium grade in feed brine of 196mg/L was concentrated to 710mg/L in the eluate, or a 3.6X concentration factor. Lithium adsorption recovery rate was 94%, with rejection rates over 99% for key contaminants calcium, magnesium, potassium, sodium and sulphate. An initial 200L of concentrated eluate has been sent to a third-party processor in North America for test work to set up the process plant for conversion of eluate into battery grade lithium carbonate. CTL will ship batches of 24m3 of the concentrated eluate for conversion with the first batch scheduled for later this month. The pilot plant is said to have demonstrated that it can operate at the designed capacity of concentrated eluate production sufficient for conversion to 1 tonne per month of battery grade lithium carbonate, placing CleanTech Lithium at the forefront of exploration companies in Chile and the wider sector, in its ability to make available large samples of lithium carbonate product to potential strategic and offtake partners seeking to start product qualification.

NexGen Energy (NXE.TO NXE NXG.AX) announced the offering of 20,161,290 common shares at a price of C$11.11 per share. The offering was distributed to Australian investors to enhance the liquidity, trading volumes and market capitalization of the company's CDIs listed on the ASX. The net proceeds will be used to fund the continued development and further exploration of the company's mineral properties, and for general corporate purposes. NexGen is a British Columbia corporation focused on the development into production of the Rook I Project located in the southwestern Athabasca Basin, Saskatchewan, Canada.

Sovereign Metals (SVM.AX SVML.L) announced the results of downstream testwork conducted at the independent consultancy ProGraphite in Germany. Sovereign provided Kasiya graphite concentrate to ProGraphite to produce and characterise coated spherical purified graphite active anode material for lithium-ion batteries. The overall program includes shaping and purification to produce spherical purified graphite, coating of the material to produce coated spherical purified graphite and evaluation of the electrochemical performance of Kasiya coated spherical purified graphite in a battery. The initial steps of shaping and purification to produce spherical purified graphite have now been completed with the results showing Kasiya spherical purified graphite has world-leading specifications. This spherical purified graphite material is now undergoing coating and electrochemical testing to characterise coated spherical purified graphite active anode material for lithium-ion batteries. Kasiya’s spherical graphite purification demonstrated exceptionally low levels of residual impurities achieving a 99.99% loss-on-ignition.

Caledonia Mining Corporation (CMCL CMCL.L) announced an increase to the mineral resources and mineral reserves estimates at the Blanket Mine in Zimbabwe. The 2023 drilling campaign yielded excellent results, with better than expected grades and widths indicated from the deep level drilling programme, resulting in a significant increase to Blanket's mineral resources and mineral reserves estimates.  Measured and indicated mineral resources, reported under NI 43-101, have increased by 63% to 1,789k ounces and mineral reserves by 106% to 812k ounces. Blanket's mine life is estimated to 2034 based only on the updated mineral reserves estimate, thus securing the future of Caledonian’s flagship asset and demonstrating its continued prospectivity and potential at higher production levels. Management believes that the inferred mineral resources may, based on past successful conversion rates, further extend the life of mine past 2040.

Arras Minerals (ARK.V ARRKF) announced the commencement of a regional field program across the more than 3,300 square kilometre license package it controls in Pavlodar, Kazakhstan. The 2024 Exploration program will target licences associated with the Teck Resources (TECK, TECK.A and TECK.B (TSX)) strategic alliance, and Arras’s 100% owned Elemes and Tay projects. This will be the company’s third exploration season in Kazakhstan. In addition to the work with Teck, Arras says it is excited to follow up on the Elemes and Tay prospects and expects to drill them later in the season after refining the targets with additional mapping and geophysics. The 2024 field program has the potential to be transformative for Arras. The company expects to drill at least three new porphyry prospects this year, which when combined with the Beskauga Project which it has under an option to purchase, means Arras potentially has at least four porphyry prospects controlled by the company.

Awalé Resources (ARIC.V AWLRF) announced that Newmont (NEM NGT.TO) has progressed to Phase 2 of the earn-in agreement over the Odienné Joint Venture Project. This is said to be a significant milestone that underscores the ongoing success and potential of the Odienné Gold-Copper Project through which Newmont could earn a further 14% interest (for a total 65% interest) via $10 million in exploration expenditure and defining a minimum 2 million ounce gold resource. This follows the company's successful Phase 1 outcomes, which included positive drill results and four discoveries. The $10 million from Newmont paired with Awale’s recent C$11.5 million equity financing now puts the company on a solid footing.

Coppernico Metals (CPPMF) announce that it has closed its $19.37 million private placement financing, which included participation by Teck Resources (TECK, TECK.A and TECK.B (TSX)). The company issued an aggregate of 38,750,580 units at $0.50 per unit, of which Teck acquired 17,546,580 units. Each unit consists of one common share of the company, one-half of one share purchase warrant and one special warrant. Each warrant is exercisable to acquire an additional share at a price of $0.75 until May 16, 2026. If the closing price of the shares on a recognized stock exchange meets or exceeds $1.25 for 20 out of any 30 consecutive trading days ending at least four months after the closing date, the company may accelerate the expiry date of the warrants to a date that is not less than 30 days from the date when such notice is given. Each special warrant will, without payment of any further consideration, be automatically exercised for 0.05 additional units, consisting of one share and one-half of one warrant, if the shares of the company are not listed on a recognized Canadian stock exchange on or before 5:00 p.m. (ET) on August 14, 2024. The net proceeds from the offering will primarily be used for drilling of the Sombrero Main target area at the company’s recently drill-permitted Sombrero Project in southern Peru.

SolGold (SOLG.TO SOLG.L) announced financial results for the third quarter ended 31 March 2024. Highlights include completion of the updated Cascabel pre-feasibility study, which incorporates a phased approach plan, significantly reducing initial capital costs. The project has a pre-tax NPV8% of $5.4 billion, a 33% IRR, and a post-tax NPV8% of $3.2 billion with a 24% IRR. An exploration update for the Blanca-Nieves Project states that channel-saw samples of gold-bearing epithermal quartz vein outcrops at the Florida target returned results of 6.15m @ 7.46 g/t Au, including 2.2m @ 21.1 g/t Au. Additionally, a significant porphyry target has been identified at Cielito Norte, covering approximately 2.5 x 2.5 km. SolGold also has signed a memorandum of understanding with Grupo Empresarial Semaica, Enerhydra, and Constructora Nacional S.A. for a sustainable hydro-solar energy initiative at the Cascabel Project. The collaboration aims to develop a power project delivering approximately 200 megawatts of renewable energy.

Oil/gas/helium/hydrogen news is at https://oilman.beehiiv.com/p/oilman-jims-letter-19-may-2024

These are opinions only of the individual author.  The contents of this piece do not contain investment advice and the information provided is for educational purposes only and no discussions constitute an offer to sell or the solicitation of an offer to buy any securities of any company.  All content is purely subjective and you should do your own due diligence.  No representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness or reasonableness of the information contained in the piece is made.  Any assumptions, opinions and estimates expressed in the piece constitute judgments of the author as of the date thereof and are subject to change without notice.  Any projections contained in the information are based on a number of assumptions and there can be no guarantee that any projected outcomes will be achieved.  No liability is accepted for any direct, consequential or other loss arising from reliance on the contents of this piece.  The author is not acting as your financial, legal, accounting, tax or other adviser or in any fiduciary capacity.