Materials Analyst/Strategist, Janus Analysis

Gaius King

Materials Analyst/Strategist

Janus Analysis

Equity Bottom-Up

<ul>
<li>Initiate on <a href="https://www.smartkarma.com/entities/20374" target="_blank" data-smartkarma-citation="entities:20374:1">Lynas Corp Ltd (LYC AU)</a> as a BUY</li>
<li>Six Chinese SOEs control ~78% of global primary REE supply</li>
<li>Est. China processes &gt;90% of global REE concentrate</li>
<li>LYC is the only LREE producer outside China of any note</li>
<li>Current focus on environmental problems and future capex secondary concerns</li>
<li>Potential mine expansion at Mt Weld</li>
<li>MOU regarding strategic processing in the US</li>
<li>Future margin expansion following recent REE price rises (~33% in a week)</li>
<li><a href="https://www.smartkarma.com/entities/2106" target="_blank" data-smartkarma-citation="entities:2106:1">Pensana Metals (PM8 AU)</a> as a Speculative BUY</li>
<li>
<a href="https://www.smartkarma.com/entities/4111" target="_blank" data-smartkarma-citation="entities:4111:1">Peel Mining Ltd (PEX AU)</a> focus on Mallee Bull a possible distraction</li>
<li>
<a href="https://www.smartkarma.com/entities/6698" target="_blank" data-smartkarma-citation="entities:6698:1">Gold Road Resources (GOR AU)</a>, <a href="https://www.smartkarma.com/entities/27844" target="_blank" data-smartkarma-citation="entities:27844:1">Yellow Cake PLC (YCA LN)</a>, Black Cat Syndicate (ASX: BC8), <a href="https://www.smartkarma.com/entities/20488" target="_blank" data-smartkarma-citation="entities:20488:1">Liontown Resources (LTR AU)</a>, <a href="https://www.smartkarma.com/entities/2971" target="_blank" data-smartkarma-citation="entities:2971:1">Hawkstone Mining (HWK AU)</a>, <a href="https://www.smartkarma.com/entities/28006" target="_blank" data-smartkarma-citation="entities:28006:1">Tietto Minerals Ltd (TIE AU)</a>, <a href="https://www.smartkarma.com/entities/14062" target="_blank" data-smartkarma-citation="entities:14062:1">Troy Resources (TRY AU)</a>, <a href="https://www.smartkarma.com/entities/15518" target="_blank" data-smartkarma-citation="entities:15518:1">Australian Vanadium (AVL AU)</a>, <a href="https://www.smartkarma.com/entities/15374" target="_blank" data-smartkarma-citation="entities:15374:1">Predictive Discovery (PDI AU)</a>, <a href="https://www.smartkarma.com/entities/19897" target="_blank" data-smartkarma-citation="entities:19897:1">Vango Mining (VAN AU)</a>, Carawine Resources (ASX: CWX)</li>
</ul>


Initiate on Lynas Corp Ltd (LYC AU) as a BUY
Six Chinese SOEs control ~78% of global primary REE supply
Est. China processes &gt;90% of global REE concentrate
LYC is the only LREE producer outside China of any note
Current focus on environmental problems and future capex secondary concerns
Potential mine expansion at Mt Weld
MOU regarding strategic processing in the US
Future margin expansion following recent REE price rises (~33% in a week)
Pensana Metals (PM8 AU) as a Speculative BUY

Peel Mining Ltd (PEX AU) focus on Mallee Bull a possible distraction

Gold Road Resources (GOR AU), Yellow Cake PLC (YCA LN), Black Cat Syndicate (ASX: BC8), Liontown Resources (LTR AU), Hawkstone Mining (HWK AU), Tietto Minerals Ltd (TIE AU), Troy Resources (TRY AU), Australian Vanadium (AVL AU), Predictive Discovery (PDI AU), Vango Mining (VAN AU), Carawine Resources (ASX: CWX)


New J Hutton – Exploration Report (Weeks Ending 31/05/19)

<ul>
<li><a href="https://www.smartkarma.com/entities/23731" target="_blank" data-smartkarma-citation="entities:23731:1">Vale SA (VALE US)</a> woes continue, facing another dam collapse</li>
<li>Forecast seaborne iron ore market deficit &gt;100Mt CY19</li>
<li>Chinese house prices up 10% y-o-y</li>
<li>Chinese Government readying substantial investment stimulus</li>
<li>Continue to positively trade large IO miners</li>
<li>5-year gold price continues to be flat</li>
<li>Global Zinc inventories declining rapidly</li>
<li>
<a href="https://www.smartkarma.com/entities/23731" target="_blank" data-smartkarma-citation="entities:23731:1">Vale SA (VALE US)</a>, <a href="https://www.smartkarma.com/entities/5424" target="_blank" data-smartkarma-citation="entities:5424:1">Bhp Billiton Ltd (Adr) (BHP US)</a>, <a href="https://www.smartkarma.com/entities/13" target="_blank" data-smartkarma-citation="entities:13:1">Rio Tinto Ltd (RIO AU),</a><a href="https://www.smartkarma.com/entities/41" target="_blank" data-smartkarma-citation="entities:41:1">Fortescue Metals (FMG AU)</a>, <a href="https://www.smartkarma.com/entities/5124" target="_blank" data-smartkarma-citation="entities:5124:1">Azumah Resources (AZM AU)</a>, <a href="https://www.smartkarma.com/entities/4111" target="_blank" data-smartkarma-citation="entities:4111:1">Peel Mining Ltd (PEX AU)</a>, <a href="https://www.smartkarma.com/entities/19210" target="_blank" data-smartkarma-citation="entities:19210:1">Breaker Resources Nl (BRB AU)</a>, Pensana Metals (ASX: PM8), Axion (ASX: AZQ), <a href="https://www.smartkarma.com/entities/19111" target="_blank" data-smartkarma-citation="entities:19111:1">Alkane Resources (ALK AU)</a>, <a href="https://www.smartkarma.com/entities/1365" target="_blank" data-smartkarma-citation="entities:1365:1">Chesser Resources (CHZ AU)</a>, <a href="https://www.smartkarma.com/entities/2971" target="_blank" data-smartkarma-citation="entities:2971:1">Hawkstone Mining (HWK AU)</a>, <a href="https://www.smartkarma.com/entities/20488" target="_blank" data-smartkarma-citation="entities:20488:1">Liontown Resources (LTR AU)</a>, <a href="https://www.smartkarma.com/entities/4650" target="_blank" data-smartkarma-citation="entities:4650:1">Genesis Minerals (GMD AU)</a>, <a href="https://www.smartkarma.com/entities/28006" target="_blank" data-smartkarma-citation="entities:28006:1">Tietto Minerals Ltd (TIE AU)</a>, <a href="https://www.smartkarma.com/entities/11138" target="_blank" data-smartkarma-citation="entities:11138:1">Hot Chili Ltd (HCH AU)</a>, <a href="https://www.smartkarma.com/entities/12048" target="_blank" data-smartkarma-citation="entities:12048:1">Newfield Resources (NWF AU)</a>, <a href="https://www.smartkarma.com/entities/7068" target="_blank" data-smartkarma-citation="entities:7068:1">Lucapa Diamond (LOM AU)</a>, <a href="https://www.smartkarma.com/entities/8807" target="_blank" data-smartkarma-citation="entities:8807:1">Theta Gold Mines (TGM AU</a>), <a href="https://www.smartkarma.com/entities/16357" target="_blank" data-smartkarma-citation="entities:16357:1">Emperor Range (ERX AU)</a>  </li>
</ul>


Vale SA (VALE US) woes continue, facing another dam collapse
Forecast seaborne iron ore market deficit &gt;100Mt CY19
Chinese house prices up 10% y-o-y
Chinese Government readying substantial investment stimulus
Continue to positively trade large IO miners
5-year gold price continues to be flat
Global Zinc inventories declining rapidly

Vale SA (VALE US), Bhp Billiton Ltd (Adr) (BHP US), Rio Tinto Ltd (RIO AU),Fortescue Metals (FMG AU), Azumah Resources (AZM AU), Peel Mining Ltd (PEX AU), Breaker Resources Nl (BRB AU), Pensana Metals (ASX: PM8), Axion (ASX: AZQ), Alkane Resources (ALK AU), Chesser Resources (CHZ AU), Hawkstone Mining (HWK AU), Liontown Resources (LTR AU), Genesis Minerals (GMD AU), Tietto Minerals Ltd (TIE AU), Hot Chili Ltd (HCH AU), Newfield Resources (NWF AU), Lucapa Diamond (LOM AU), Theta Gold Mines (TGM AU), Emperor Range (ERX AU)  


New J Hutton – Exploration Report (Weeks Ending 17/05/19)

Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

INVESTMENT VIEW:  The outlook for Angang’s profitability in 2019 is deteriorating quicker than consensus forecasts, we believe.  Chinese steel demand and pricing are forecast to be weak in 2019, yet raw material costs remain high.  We recommend staying short <a href="https://www.smartkarma.com/entities/203" target="_blank" data-smartkarma-citation="entities:203:1">Angang Steel Co Ltd (H) (347 HK)</a> shares with a PT of HK$5.

INVESTMENT VIEW:  The outlook for Angang’s profitability in 2019 is deteriorating quicker than consensus forecasts, we believe.  Chinese steel demand and pricing are forecast to be weak in 2019, yet raw material costs remain high.  We recommend staying short Angang Steel Co Ltd (H) (347 HK) shares with a PT of HK$5.

Accelerating Tomorrow’s Independent Research

Boost Research

Boost Research Ltd is an appointed representative of Messels Ltd which is authorised and regulated by the FCA of the UK. 

This document is issued by Boost Research Limited solely for its clients. It may not be reproduced, redistributed or passed to any other person in whole or in part for any purpose without written consent of Boost Research. The material in this document is not intended for distribution or use outside the United Kingdom. This material is not directed at you if Boost Research is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you.

This document is provided for information purposes only and should not be regarded as an offer, solicitation, invitation, inducement or recommendation relating to the subscription, purchase or sale of any security or other financial instrument.  This document does not constitute, and should not be interpreted as, investment advice.  It is accordingly recommended that you should seek independent advice from a suitably qualified professional advisor before taking any decisions in relation to the investments detailed herein. All expressions of opinions and estimates constitute a judgement and, unless otherwise stated, are those of the author and the research department of Boost Research only, and are subject to change without notice. Boost Research is under no obligation to update the information contained herein. Whilst Boost Research has taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, Boost Research cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. This document is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty either expressed or implied is made, nor responsibility of any kind is accepted, by Boost Research or any of its respective directors, officers, employees or analysts either as to the accuracy or completeness of any information contained in this document nor should it be relied on as such. No liability whatsoever is accepted by Boost Research or any of its respective directors, officers, employees or analysts for any loss, whether direct or consequential, arising whether directly or indirectly as a result of the recipient acting on the content of this document, including, without limitation, lost profits arising from the use of this document or any of its contents.

This document is provided with the understanding that Boost Research is not acting in a fiduciary capacity and it is not a personal recommendation to you. Investing in securities entails risks. Past performance is not necessarily a guide to future performance. The value of and the income produced by products may fluctuate, so that an investor may get back less than he invested. Investments in the entities and/or the securities or other financial instruments referred to are not suitable for all investors and this document should not be relied upon in substitution for the exercise of independent judgment in relation to any such investment. The stated price of any securities mentioned herein will generally be the closing price at the end of any of the three business days immediately prior to the publication date on this document. This stated price is not a representation that any transaction can be effected at this price.

Boost Research and its respective analysts are remunerated for providing investment research to professional investors, corporations, other research institutions and consultancy houses. Boost Research, or its respective directors, officers, employees and clients may have or take positions in the securities or entities mentioned in this document.  Any of these circumstances could create, or be perceived as creating, conflicts of interest. Boost Research’ analysts are not censored in any way and are free to express their personal opinions. As a result, Boost Research may have issued other documents that are inconsistent with and reach different conclusions from, the information contained in this document. Those documents reflect the different assumptions, views and analytical methods of their authors. No director, officer or employee of Boost Research is on the board of directors of any company referenced herein and no one at any such referenced company is on the board of directors of Boost Research.

Messels is authorised and regulated in the United Kingdom by the Financial Conduct Authority for the provision of investment advice. Residents of the United Kingdom should seek specific professional financial and investment advice from a stockbroker, banker, solicitor, accountant or other independent professional adviser authorised pursuant to the Financial Services and Markets Act 2000. This report is intended only for investors who are 'professional clients' as defined by the FCA, and may not, therefore, be redistributed to other classes of investors.

The content of this report is covered by our Policy of Independence which may be viewed at www.messels.com.

 

Analysts’ Certification

The analysts involved in the production of this document hereby certify that the views expressed in this document accurately reflect their personal views about the securities mentioned herein. The analysts point out that they may buy, sell or already have taken positions in the securities, and related financial instruments, mentioned in this document

<ul>
<li>
<a href="https://www.smartkarma.com/entities/23731" target="_blank" data-smartkarma-citation="entities:23731:1">Vale SA (VALE US)</a> have had two major fatal dam-failures in three years</li>
<li>Possible (probable?) design flaw</li>
<li>Expect all Vale's iron ore operations to be technically audited</li>
<li>Substantial Management &amp; Board changes inevitable</li>
<li>Probability that a portion of Vale's existing operations will fail engineering inspection.</li>
<li>Forecast resultant capacity constraints</li>
<li>
<a href="https://www.smartkarma.com/entities/13" target="_blank" data-smartkarma-citation="entities:13:1">Rio Tinto Ltd (RIO AU)</a>,  <a href="https://www.smartkarma.com/entities/147" target="_blank" data-smartkarma-citation="entities:147:1">Bhp Billiton (BHP AU)</a>, <a href="https://www.smartkarma.com/entities/41" target="_blank" data-smartkarma-citation="entities:41:1">Fortescue Metals (FMG AU)</a> to benefit from lost production</li>
</ul>



Vale SA (VALE US) have had two major fatal dam-failures in three years
Possible (probable?) design flaw
Expect all Vale's iron ore operations to be technically audited
Substantial Management &amp; Board changes inevitable
Probability that a portion of Vale's existing operations will fail engineering inspection.
Forecast resultant capacity constraints

Rio Tinto Ltd (RIO AU),  Bhp Billiton (BHP AU), Fortescue Metals (FMG AU) to benefit from lost production


Vale in Trouble - Expect Rio, BHP, FMG to Benefit (Flash Note)

Materials, IPO & Equity Analyst

Venkat Ramana Nandyal

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Mr Market is pricing <a href="https://www.smartkarma.com/entities/19043" target="_blank" data-smartkarma-citation="entities:19043:1">Mount Gibson Iron Ltd (MGX AU)</a> for less than its net cash and liquid assets on its balance sheet, which implies that an investor would get all the assets plus some cash for free. It sounds like a fabulous deal until one digs in a bit deeper. Investment Thesis<ol class=""><li>MGX has a strong balance sheet with cash and cash equivalents of A$507M at the end of September 2017 quarter with no debt. This cash is more than the company’s current market cap of ~A$430M, implying a negative enterprise value. On the face of it seems that Mr Market has got this one horribly wrong, but if one digs a bit deeper, Mr Market seems to doubt the ability of the company to generate free cash at the current iron ore benchmark prices. </li><li>The company reported all in group cash cost (includes opex, sustaining capex, royalties and corporate costs) of US$46/wmt in Q1/18 and expects the costs to remain in the region of A$47-52/wmt in FY18. This puts the company in the 4th quadrant of the cash cost curve amongst its peers. As the company restarts its Koolan Island operations in early 2019, Global Equity Research (GER) expect the cash costs to increase beyond this range for FY19 until the operations reach a steady state.</li><li>The current benchmark is trading at a range of US$60-70 per tonne. However, the company’s realised prices are at an average discount of 30% to the 62% Fe fines prices (benchmark prices). The company’s EBITDA margins are extremely volatile, and at these iron ore prices or any further drop from the current range, GER expects the company to report an operating loss and quickly burn cash, a scenario that is highly probable according to Mr Market’s current valuation of MGX. </li><li>The major risk to MGX earnings ability is the on schedule ramp-up of low-cost Vale's SD11 mining complex. This low-cost iron ore fines project could disrupt the market and would put pressure on benchmark iron prices to trade below US$60/t.</li></ol>

Mr Market is pricing Mount Gibson Iron Ltd (MGX AU) for less than its net cash and liquid assets on its balance sheet, which implies that an investor would get all the assets plus some cash for free. It sounds like a fabulous deal until one digs in a bit deeper. Investment ThesisMGX has a strong balance sheet with cash and cash equivalents of A$507M at the end of September 2017 quarter with no debt. This cash is more than the company’s current market cap of ~A$430M, implying a negative enterprise value. On the face of it seems that Mr Market has got this one horribly wrong, but if one digs a bit deeper, Mr Market seems to doubt the ability of the company to generate free cash at the current iron ore benchmark prices. The company reported all in group cash cost (includes opex, sustaining capex, royalties and corporate costs) of US$46/wmt in Q1/18 and expects the costs to remain in the region of A$47-52/wmt in FY18. This puts the company in the 4th quadrant of the cash cost curve amongst its peers. As the company restarts its Koolan Island operations in early 2019, Global Equity Research (GER) expect the cash costs to increase beyond this range for FY19 until the operations reach a steady state.The current benchmark is trading at a range of US$60-70 per tonne. However, the company’s realised prices are at an average discount of 30% to the 62% Fe fines prices (benchmark prices). The company’s EBITDA margins are extremely volatile, and at these iron ore prices or any further drop from the current range, GER expects the company to report an operating loss and quickly burn cash, a scenario that is highly probable according to Mr Market’s current valuation of MGX. The major risk to MGX earnings ability is the on schedule ramp-up of low-cost Vale's SD11 mining complex. This low-cost iron ore fines project could disrupt the market and would put pressure on benchmark iron prices to trade below US$60/t.

Brazil

Vale S.A. is a Brazilian multinational corporation primarily engaged in metals and mining. The company is one of the world's largest producers of iron ore and nickel, also extracting copper, manganese, and ferroalloys, along with operating extensive logistics infrastructure. Vale S.A. was founded on June 1, 1942, and is headquartered in Rio de Janeiro, Brazil.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Vale (VALE US)

New J Hutton – Exploration Report (Weeks Ending 31/05/19)

Initiate on Lynas Corp Ltd (LYC AU) as a BUY Six Chinese SOEs control ~78% of global primary REE supply Est. China processes >90% of global REE...

Gaius King

New J Hutton – Exploration Report (Weeks Ending 17/05/19)

Vale SA (VALE US) woes continue, facing another dam collapse Forecast seaborne iron ore market deficit >100Mt CY19 Chinese house prices up 10%...

Gaius King

Angang Steel: Headwinds Intensify

INVESTMENT VIEW: The outlook for Angang’s profitability in 2019 is deteriorating quicker than consensus forecasts, we believe. Chinese steel...

Charles Spencer

Vale in Trouble - Expect Rio, BHP, FMG to Benefit (Flash Note)

Vale SA (VALE US) have had two major fatal dam-failures in three years Possible (probable?) design flaw Expect all Vale's iron ore operations to...

Boost Research

MGX: "Cash Is King" – Not Always

Mr Market is pricing Mount Gibson Iron Ltd (MGX AU) for less than its net cash and liquid assets on its balance sheet, which implies that an...

Venkat Ramana Nandyal

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)