Today’s Market View – Edenville Energy, Castillo Copper, Botswana Diamonds and more…

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SP Angel . Morning View . Monday 14 12 20

Risk sentiment supported by vaccine optimism and potential US fiscal deal 

 

Anglo American (LON:AAL) – Production across all minerals forecast to increase by 14% in 2021

Berkeley Energia Ltd (LON:BKY) – Renewal of authorisation for Salamanca uranium concentrate plant#

Bluejay Mining* (LON:JAY) – Greenland government to sign Exploitation License for Dundas Ilmenite Project today

Castillo Copper (LON:CCZ) – Further copper assays from latest drilling at the Big One project in Queensland

Botswana Diamonds (LON:BOD) – Annual results describe exploration in Botswana, South Africa and Zimbabwe

Edenville Energy (LON:EDL) – One-for-1,000 share consolidation

Tirupati Graphite (LON:TGR) – Trading commenced on LSE standard list

 

Industrial metals make new gains as Stimulus funding and EV development drives demand for alloys and battery metals

Lithium carbonate prices rose Rmb4,500/t to Rmb48,000/t last week in China (Platts)

Lithium Hydroxide prices rose Rmb2,000/t to Rmb50,000/t

Ferro-vanadium prices twitched higher in Europe and the US last week with traders sensing new demand

European prices rose 0.8% to 24.9-25.3/kgV (FastmarketsMB)

US prices rose 2.3% to 10.8-11.2/lbV

Chinese prices rose 1.9% to 25.5-28/kgV

Ferro-Manganese prices rise 5.1% in China to €900-950/t and by 1.4% to Rmb5,300-5,400/t (FastmarketsMB)

 

China passenger vehicle sales rise 11.6% yoy to 2.77m  vs 12.5% in October at 2.57m vehicles

Electric passenger car sales rose 137% YoY to 186,000.

China is expected to sell over 20m passenger vehicles and 5m commercial vehicles in 2020 having sold a total of 26m last year (Reuters)

The China Association of Automobile Manufacturers (CAAM) expects Chinese sales to modestly grow next year and hit 30m vehicles in 2025. (SCMP)

Chinese passenger vehicle sales are expected to grow modestly next year rising to 30m vehicles in 2025 according to CAAM ‘Association of Automobile Manufacturers’

China expects to sell over 1.3m NEVs this year, up from 1.2m in 2019 according to an official at China’s Ministry of Industry and Information Technology

 

IGTV:   As traders continue to bid up Tesla, is the EV sector approaching a bubble? https://youtu.be/LaDWBpTZ7SQ

Copper price rise: https://youtu.be/mdPXTup15VY

VOX – 10/12/20: https://www.voxmarkets.co.uk/media/5fd228d9bc74c922485f501e/?context=/listings/LON/ARCM/multimedia/

US Election, China growth policies Solgold*, Mkango*, Rainbow Rare Earths*: https://youtu.be/YKk5-kVpVGE

EV revolution, gold and other ideas (Interactive Investor): https://www.youtube.com/watch?v=ja0IdjszfCc

Metals Markets: Are they totally dependent on stimulus? (IG TV): https://youtu.be/TOiSwRpgfKM

*SP Angel act as nomad or broker or nomad and broker to companies mentioned in the above videos.

 

 

Dow Jones Industrials +0.16% at 30,046

Nikkei 225 +0.30% at 26,732

HK Hang Seng -0.44% at 26,390

Shanghai Composite +0.66% at 3,369

 

Economics

US – The Fed last meeting of the year is due this week that will set the central bank’s tone for the opening half of 2021.

 

Germany – The nation will go into a hard lockdown on Wednesday as officials agreed that the coronavirus has spiralled out of control with attempts to contain the spread so far proving to be inadequate.

Non-essential stores will be closed, employers asked to close workplaces and school children encouraged to stay at home.

Stricter restrictions will last at least until January 10.

The new curbs “reflect the fact that it has gotten out of control.. if things continue at the same pace, hospitals will be overcrowded in a few wells,” Economy Minister said.

UK is currently running at a higher rate of new infections per capita than Germany.

 

France – The economy is not expected to reach its pre-pandemic level before mid-2022, according to the Banque de France.

GDP is expected to contract 9% this year before rebounding 5% next year and the year after that.

 

Australia – The central bank will extend its QE programme by another A$100bbn over a further six months when its current

 

Sudan – The US lifted Sudan’s almost three-decade designation as a state sponsor of terror.

The decision was long expected after President Trump announced in October that the country agreed to make a payment to US terror victims and their families.

The move will help the nation to regain access to international capital and attract new businesses into the country.

 

India – October industrial production rises 3.6% YoY

Industrial production came in higher than analyst’s estimates of +1.1%.

Mining production fell -1.5%, electricity production +11.2%, Capital goods +3.3%, Manufacturing +3.5%, Infrastructure +7.8%, Consumer durables +17.6%.

 

Currencies

US$1.2153/eur vs 1.2126/eur last week.  Yen 103.90/$ vs 104.07/$.  SAr 15.002/$ vs 15.124/$.  $1.340/gbp vs $1.335/gbp.  0.756/aud vs 0.742/aud.  CNY 6.537/$ vs 6.527/$.

 

Commodity News

Precious metals:         

Gold US$1,830/oz vs US$1,866/oz last week

Gold ETFs 106.7moz vs US$106.7moz last week

Platinum US$1,020/oz vs US$1,024/oz last week

Palladium US$2,331/oz vs US$2,336/oz last week

Silver US$23.85/oz vs US$24.65/oz last week        

Base metals:  

Copper US$ 7,785/t vs US$7,695/t last week

Aluminium US$ 2,043/t vs US$2,012/t last week

Nickel US$ 17,550/t vs US$16,395/t last week – Nickel prices hit 14-month high on supply worries

Nickel prices continued to rise on Monday morning, as supply worries persist while demand remains resilient on as a result of robust Chinese steelmaking.

Data showed that nickel output in the Philippines, China’s biggest supplier, dropped 12% in the first nine months of the year.

Widespread protests in New Caledonia over Vale’s proposed sale of its Goro mine has resulted in Eramet SA’s nickel smelter running at reduced capacity.

Three-month nickel on the LME rose 2.8% to $17,775/t earlier this morning, while the most active February nickel contract on the Shanghai Futures Exchange climbed 3.4% to 133,190 yuan ($20,376)/t – advancing for a sixth consecutive session (Reuters).

Zinc US$ 2,816/t vs US$2,795/t last week

Lead US$ 2,072/t vs US$2,085/t last week

Tin US$ 19,555/t vs US$19,150/t last week         

Energy:           

Oil US$50.7/bbl vs US$48.7/bbl last week

Natural Gas US$2.679/mmbtu vs US$2.460/mmbtu last week

Uranium US$29.75/lb vs US$29.70/lb last week

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$158.0/t vs US$144.0/t

Chinese steel rebar 25mm US$626.0/t vs US$613.7/t

Thermal coal (1st year forward cif ARA) US$64.9/t vs US$62.8/t

Coking coal swap Australia FOB US$124.3/t vs US$125.0/t

           

Other: 

Cobalt LME 3m US$32,000/t vs US$32,390/t

NdPr Rare Earth Oxide (China) US$61,877/t vs US$67,025/t – Rare earth producers to agree global environment standards in 2021

The President of the global Rare Earth Industry Association has told Reuters that the industry is going to formulate a single set of global environmental standards next year, in response to increasing pressure from downstream industries

Lithium carbonate 99% (China) US$6,654/t vs US$6,434/t

Ferro Vanadium 80% FOB (China) US$27.5/kg vs US$27.2/kg

Ferro-Manganese high carbon 78% Mn US$1,325/t vs US$1,320/t

Tungsten APT European US$220-230/mtu vs US$220-225/mtu

Graphite flake 94% C, -100 mesh, fob China US$510/t vs US$510/t                

Graphite spherical 99.95% C, 15 microns, fob China US$2,475/t vs US$2,475/t

Spodumene 6% Li2O min, cif (China) US$380/t vs US$375/t

 

Battery News

Indonesia starts building out EV infrastructure 

Toyota has plans to invest up to US$2bn into EV production in Indonesia.  

The Company alongside subsidiaries Daihatsu and Hino exports 200,000 ICE vehicles from Indonesia per year. 

Last year Hyundai announced its intention to invest $2.8bn in Indonesia, manufacturing for both domestic and foreign markets is expected to start in 2021. 

Hyundai has also invested $250m, into Southeast Asian ride-hailing firm Grab to develop EV’s in the region. 

President Widodo has committed to building out EV infrastructure in the country, part of a down streaming of the Country’s commodity-based economy. 

Indonesia Battery Holding, a state-owned company formed by a consortium of resources and utility companies is expected to help form a battery supply chain from extraction to manufacture. 

Indonesia is the world’s largest producer of nickel ore, a key ingredient in producing battery quality nickel sulphate for cathode precursors. 

The country is offering tax cuts for EV battery producers and automakers alongside preferential tariff agreements.  

 

Britishvolt to build UK Gigafactory

Britishvolt has secured initial funding of around £10m and has applied for a grant from the British government to fund construction. 

Construction of the plant, to be built on the site of the former Blythe Power Station, will begin in the summer of 2021. 

The Company is also considering a London listing, expecting to make a decision on a July IPO by March. 

Production of lithium-ion batteries is expected to begin at the Blythe facility by 2023, with 300,000 EV batteries expected to be produced by 2027.

 

Tesla to suspend production of Model S and X 

An internal memo seen by CNBC suggests Tesla will halt production of the Model X and Model S for 18 days starting December 24th. 

The reason for the curtailment of production is unknown.

Tesla delivered 144,000  in Q3, and the Company expects to deliver 187,000 vehicles in Q4 which would take it past its target of 500,000 vehicles in 2020.

 

European truckmakers to phase out diesel sales by 2040 

Heads of 7 truckmakers have signed a joint pledge to ditch traditional combustion engines by 2040, 10 years earlier than originally planned.  

The alliance of Daimler, Scania, Man, Volvo, Daf, Iveco and Ford are instead concentrating on hydrogen, battery technology and clean fuels. They are working with the German funded Potsdam Institute for Climate Impact Research to consider the best technologies. 

The industry will spend about €50bn-€100bn on new technologies.

The EU plans to reduce emissions by 50% by the end of the decade.

 

Company News

Anglo American (LON:AAL) 2,441p, Mkt Cap £33.3bn – Production across all minerals forecast to increase by 14% in 2021

The global diversified miner expects stronger production next year, and anticipates its unit costs to fall by 3%.

Its mining EBITDA margin is forecast to remain at about 42% in 2021, supported by cost control and robust copper & iron ore prices.

Anglo expects 20-25% volume growth over the next three to five years, including first copper production from Quellaveco in 2022.

Expenditure is expected to amount to $5.7-6.2bn next year, reflecting deferred spending in 2020 and new investments, including the Woodsmith Polyhalite mine, North Yorkshire.

An additional £150m is to be invested in the Woodsmith project next year, increasing its 2021 investment from £225m to £375m.

The Company intends to divest its South African and Colombian thermal coal operations by mid-2023, most likely through a de-merger and listing on the JSE for its South African thermal coal assets.

Anglo expects to produce 640,000-680,000t of copper in 2021, and forecasts 2023 copper production at 0.89-1.0mt.

Anglo trimmed its thermal coal production outlook from 26mt to 24mt in 2021.

The Company’s De Beers arm has maintained its diamond production forecast 26 million carats, but has cut its 2021 estimate to between 33-35m carats from 34-36m; while also reducing its 2022 estimate to 30-33m carats from 33-35m.

 

Berkeley Energia Ltd (LON:BKY) 42p, Mkt Cap £104m – Renewal of authorisation for Salamanca uranium concentrate plant

(Salamanca uranium mining project, Spain)

Berkeley Energia reports that its authorisation “for the uranium concentrate plant as a radioactive facility at the Salamanca project” has been renewed by the Spanish authorities “until there is a resolution on the Authorisation for Construction for the uranium concentrate plant as a radioactive facility” which is known as NSC II.

Berkeley Energia also “notes that the Spanish Supreme Court has rejected the appeal filed by a group of opposition parties against NSC I … [the authorisation as a radioactive facility].”

Berkeley Energia says that it is continuing “to engage with the relevant authorities in a collaborative manner in progressing the approval process for the Salamanca mine” however at this stage there does not appear to be a timetable for resolution of the issues.

 

Bluejay Mining* (LON:JAY) 13.2p, Mkt cap £129m – Greenland government to sign Exploitation License for Dundas Ilmenite Project today

BUY – Valuation: 29.4p

Bluejay Mining report the Government of Greenland will sign the Exploitation license for the Dundas Ilmenite project today.

The license should allow Bluejay to mine and process Ilmenite material from the Dundas project for 30 years

This will allow Bluejay to move forward on procurement, construction and ilmenite production

We expect the Dundas project to continue for far longer than the current PFS 11 year plan due to the presence of so much un-drilled ilmenite material

Resource: The current onshore JORC resource is 117mt. This does not include very substantial near-shore, shallow marine ilmenite.

We view the current resource grade as conservative and potentially subject to upward revision when the mine grade is reconciled.

Dredge mining of these resources could substantially add to the production rate through the mining of near-shore ilmenite through the summer season.

The offshore JORC Exploration Target here is currently estimated at 300–530mt grading 0.4-4.8% ilmenite

The resource does not include a certain amount of high-grade material in the Iterlak Delta area. We believe drilling stopped here due to the exceptional high-density of the ilmenite material in this area.

EIA & SIA: The Government of Greenland has approved the EIA ‘Environmental Impact Assessment’ and SIA ‘Social Impact Assessment’ as part of the Licence process.

The IBA ‘Impact Benefit Agreement’ between the Municipality of North-West Greenland, the Government of Greenland and Dundas has also been signed.

Dundas project: capital costs are being reduced through further refinement and optimisation of the project. These include further environmental enhancements.

The project PFS envisaged production of 440,000tpa though we are sure the company can ramp up production well beyond this rate if required

Offtake: we now expect Bluejay to finalise the financing proposal with existing, and newly interested parties

Finance: Greenland and Danish Government backed financial institutions recently backed the company with financial support. We strongly suspect Bluejay will access multilateral funds alongside Offtake and project finance funding to fund the capital cost of the project.

Optimisation: Capex is currently estimated at $245m. Optimisation of the relatively simple ore sorting and magnetic separation should reduce estimate which we feel has been inflated by the project’s remote location.

Costs:  were estimated in the PFS at $6.7/t for the mine and to total US$112.8/t of ilmenite concentrate.

The optimisation study is expected to reduce operating costs to under $100/t as well as cutting capital costs.

Margin: the current cost estimate indicates a potential US$128/t cash operating margin less the cost of loading and shipping.

Loading is simply via an extendable conveyor as demonstrated with the 44,000t bulk sample sent to Rio Tinto Iron and Titanium for a large-scale smelter test last year.

Shipping costs are likely to vary between $6/t to Canada and around $20-40/t to China depending on the potential to ship through the North-West Passage.

Valuation: We are raising our valuation for Bluejay to 29.4/ from 27p based on our estimated NPV valuation at a revised 7% discount rate to reflect the issuance of the Exploitation license. We assume ilmenite concentrate production of 438,000pa from 2024 rising to 641,000pa from 2027.

Bluejay is also required to obtain approval by way of a ‘Section 19 – 43 permit’ for the exploitation plan and closure plan by 31 December 2022 which should take no more than six months from submission as stated by the Ministry of Mineral Resources and will run in parallel with mine development planning. 

The Exploitation licenses required the Dundas project to start mining no later than 31 December 2025.

The Exploitation Licence will see a royalty paid to the Government of Greenland of 1.0%, 2.0% and 2.5% on years one, two, and three respectively and with 2.5% being paid from years four onwards.

ESPOO: Bluejay has also completed a consultation with the Canadian authorities as part of the ‘Convention on Environmental Impact Assessment in a Transboundary Context’

Ilmenite prices:  Demand for ilmenite has exceeded expectations with supply shortfalls now leading to further tightness within the supply chain and potential shortages in coming years. A lack of new viable projects with low impurity levels and port access in stable jurisdictions may cause some consumers to stock up on feedstock in a market that can sometimes resemble a game of musical chairs.

Seven major Chinese titanium dioxide producers recently announced price rises for titanium dioxide varying between Rmb500-1,000/t in local currency and $100-150/t for non-domestic pricing.

The FastmarketsMB titanium reference price remains at $230-250/t though we expect this to potentially move higher following the Chinese price rises.

Titanium was recently added to the European Commission list of Critical Raw Materials’ catching up with the US State Department’s defined list of critical metals.

Conclusion: Bluejay continue to deliver on their promise to advance on the development of the Dundas project in Greenland. We await further news on completion of the Offtake agreement, project and development finance and start of construction.

Bluejay’s timing is immaculate given industry concern over the next generation of ilmenite projects.  

It is also possible that some production might start ahead of the major project construction due to ongoing demand for feedstock.

*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Hammaslahti, Enonkoski and Outukumpu mines in Finland as well as Bluejay’s Dundas mine site in Greenland.

 

Botswana Diamonds (LON:BOD) 0.78p, Mkt Cap £5.8m – Annual results describe exploration in Botswana, South Africa and Zimbabwe

In its results for the year ending 30th June 2020, Botswana Diamonds reports an operating and after-tax loss of £0.39m (2019 loss – £0.77m) and a year-end cash balance of approximately £18,000.

The company highlights the potentially “transformative acquisition of Sekaka Diamonds” in Botswana where the company will now be focusing on progressing the exploration of the KX36 kimberlite pipe which has already “an indicated diamond resource of 17.9 million tonnes at 35 carats per hundred tonnes (cpht) and a further 6.7 million inferred at 36 cpht”.

Also in Botswana, the company points to the potential of the Malibwe joint-venture area where a kimberlite “contained large quantities of microdiamonds”. The operator of the joint-venture, BCL, “went into liquidation in 2016 leaving all activities at Maibwe in limbo. There are recent signs that the liquidation may be coming to a close. Some talks between the Maibwe parties have taken place”.

Elsewhere, the company has recently announced that its current drilling at Marsfontein in South Africa has identified a “0.4 hectare blow, the so called River Anomaly. We do not yet know the diamond grade but the average on this dyke is 55cpht … Core drilling will take place in early 2021”.

Botswana Diamonds also comments on the exploration potential of the Marange diamond field in Zimbabwe where it is in joint-venture with Vast Resources* and where it has “a 5% carried interest up to a certain expenditure” in an area known to contain kimberlite pipes. The company comments briefly on the troubled history at Marange where “Diamond exploration has all but ceased … [and also comments that] …There have been recent signs of a limited revival. We would like to be part of the revival”.

Conclusion: Botswana Diamonds is flagging the recently concluded Sekaka Diamonds acquisition as potentially transformative while also confirming the potential at Marsfontein and from the possible resumption of diamond exploration at Marange.

*SP Angel acts as Broker to Vast Resources

 

Castillo Copper (LON:CCZ) 2.1p, Mkt Cap £20.6m – Further copper assays from latest drilling at the Big One project in Queensland

Castillo Copper reports that a further six drill-holes at its Big One copper project in Queensland have all intersected visible shallow copper oxide and sulphide mineralisation. Assay results are expected to be received shortly.

Among the results reported today are:

A cumulative intersection of 12m in hole BO_301RC with 3m of mineralisation between 28-31m depth and a further 9m between 32-41m depth; and

A cumulative intersection of 10m in hole BO_303RC with 3m of mineralisation between 25-28m depth and a further 7m between 28-35m depth; and

A cumulative intersection of 7m in hole BO_306RC with 4m of mineralisation between 93-97m depth and a further 3m between 99-102m depth; and

A cumulative intersection of 5m in hole BO_305RC with 4m of mineralisation between 30-34m depth and a further single metre between 39-40m depth; and

An intersection of 3m in hole BO_302RC between 36-39m depth; and

A single metre intersection in hole BO_304RC between 81-82m depth.

The mineralisation is described as variously the copper oxide minerals  malachite and azurite, the sulphide mineral, chalcocite and “Black copper oxides”.

The company explains that it will “Provide an update on the next batch of assay results, further drilling logs and complete the Big One Deposit campaign, then move on to Arya Prospect”.

Ged Hall, UK Director of Castillo Copper, explained that “There are still a further 22 drill-holes to complete in the current campaign, which delivers significantly further potential exploration upside ahead”.

Mr. Hall also confirmed that “wide shallow intercepts with visible copper mineralisation is precisely the desired outcome” of the current drilling campaign.

Conclusion: Drilling continues to intersect copper mineralisation, apparently in two horizons in most cases, at the Big One prospect. We await assay results to establish the grades.

 

Edenville Energy (LON:EDL) 0.03p, Mkt Cap £2.2m – One-for-1,000 share consolidation

The Company is proposing a share capital reorganisation of the 8,146m existing ordinary shares at the coming AGM (5 Jan/21).

The reorganisation involves a one for 1,000 share consolidation reducing the number of outstanding shares to 8,146,575.

Share consolidation is expected to improve liquidity and marketability of shares with investors in the UK and overseas.

Separately, the Company reports it is continuing discussions with Lind regarding the repayment terms of the Funding Agreement.

*SP Angel acts as Nomad to Edenville Energy

 

Tirupati Graphite (LON:TGR) 45p Mkt Cap £33.6m – Trading commenced on LSE standard list

Tirupati Graphite has begun trading on the LSE’s standard list, with the Company raising £6m before expenses through a placing as part of the admissions process.

The placing saw the offer of 13,333,334 new ordinary shares at an issue price of 45p each, implying a market capitalisation of circa £33.64 million on Admission.

The Company has also received the LSE’s Green Economy Mark, which recognises companies that derive 50% or more of their total annual revenues from products and services that contribute to the global green economy.

 

Analysts

John Meyer – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Joe Rowbottom – [email protected] – 0203 470 0486

 

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – [email protected] – 0203 470 0471

 

 

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

 

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