SP Angel . Morning View . Thursday 08 04 21
Copper and iron ore prices continue to rise on strong construction PMIs
We are working with a private copper company which is raising funds for new exploration
Please contact us for details of the investment opportunity
The company intends to list in London and its valuation is at a suitable discount to reflect its private status and stage of exploration
Anglo American (LON:AAL) – Demerging of South African thermal coal operations
Bushveld Minerals* (LON:BMN) – Ferro-vanadium prices continue to rise in China on stimulus and environmental crackdown
DeepGreen Metals Inc, – DeepGreen to merge into NY SPAC resurrecting Nautilus Minerals technology from Administration
Power Metal Resources* (LON:POW) – Drilling update at Haneti Nickel PGM Project
Rockfire Resources (LON:ROCK) – Plateau Gold preliminary scoping study
SolGold* (LON:SOLG) – Progress of the Alpala PFS
Vast Resources* (LON:VAST) – New underground mine manager appointed
IGTV: Improved global economic forecasts from the IMF provides trading opportunities: https://www.youtube.com/watch?v=_GXKPqzuCG0
VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw
VOX Markets: 07/04/20: https://audioboom.com/posts/7838976-john-meyer-on-rare-earths-and-3-resource-companies-plus-glen-goodman-on-bitcoin
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.
We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Dow Jones Industrials +0.05% at 33,446
Nikkei 225 -0.07% at 29,709
HK Hang Seng +1.26% at 29,036
Shanghai Composite +0.08% at 3,483
US – Biden proposes global corporate tax reform linked to local sales
The US is proposing that countries should be able to tax more corporate profits based on revenues within their borders in a big to reach a global tax deal.
The Biden administration has sent documents to 135 countries negotiating international taxation at the OECD in Paris in order to create a more stable international tax system.
The reformed system would seek to quash tax breaks from certain jurisdictions and profit-shifting from multinationals.
Earlier in the week the White House announced that is raising US corporate taxes by around $2.5tn over 15 years in order to pay for more than $2tn in investments in infrastructure, clean energy and manufacturing.
If the US plan is accepted, other countries would be able to increase revenues from companies including big US tech groups that operated in their jurisdictions but paid little corporation tax.
World – JP Morgan global services 54.7 in March vs 52.8 in February and composite 54.8 in March vs 53.2 in February.
ECB – Dutch central bank governor says the ECB doesn’t want a premature spike in borrowing costs (CNBC)
“We don’t want the runup in bond yields to prematurely tighten our financing conditions,” according to Klaas Knot
His comments come after the ECB decided at its last meeting to ramp up bond buying within its Pandemic Emergency Purchase Program, or PEPP.
The ECB is looking to start to reduce bond buying in Q3, according to ECB Council member, Holzmann,
Eurozone – Construciton PMI 50.1 as firms saw an influx of new orders and house building activity expanded for the first time in over a year
Services PMI 49.6 in March vs 45.7 in February and Composite PMI 53.2 in March vs 48.8 in February
Industrial producer prices rise by 0.5% in February vs January and rise by 0.7% yoy
EU – Industrial producer prices rise by 0.7% in February vs January and rise by 1.7% yoy
India – Services PMI 54.6 in March vs 55.3 in February and Composite PMI 56.0 (56.3)
Germany – Services PMI 51.5 in March vs 45.7 in February and Composite PMI 57.3 in March vs 51.1 in February,
France – Services PMI 48.2 in March vs 45.6 in February and Composite PMI 50.0 in March vs 47.0 in February,
Germany – Factory orders rise 1.2% in February in line with expectations
Factory orders rose in Germany as the manufacturing sector shrugged off underlying uncertainty over the Covid-19 situation in the country.
Demand increases were driven by orders from within the country and the euro area, Bloomberg reports.
UK construction sector expanded at fastest pace in over six years last month
The IHS Markit/CIPS UK construction index rose to 61.7 in March, from 53.3 in February, the sharpest pace of growth since September 2014.
Housebuilding was the best-performing category, supported by the stamp duty holiday.
Construction activity is seeing robust growth in all parts of the sector, and spurring the fastest rate of job creation for over two years (HIS Markit)
UK Services PMI 56.3 in March vs 56.8 in February and Composite PMI 56.4 in March vs 56.6 in February,
Blood clot risk similar to long-haul flight according to matt Hancock
Statists suggest that the risk of a blood clot from the AstraZeneca vaccine is the same that from a long-haul flight.
The statement risks decimating the long-haul flight industry but may lend some confidence to vaccine recipients.
To put into perspective the incidence of serious blood clots from the contraceptive pill is 0.6% and incidence from AZ vaccine is 0.00017% with no causality proven.
The situation highlights the complexities and hard to see risks of vaccine development and rollout.
Shipping – Capsized vessel rates have hit US$22,468per day, the highest level since 2014.
Greenland – Anti-uranium group expected to win parliamentary election
Yesterday, we reported on an ‘anti-mining’ opposition group Ataqatigiit (IA) which looks set to become the biggest party in the Greenland government.
IA has signaled that it will shelve plans to allow a rare earth mine near the southern tip of Greenland, where Greenland Minerals wish to build a mine.
We are told, the group is anti-uranium mining and not anti-mining per se.
Brazil – President Bolsonaro ignores calls for lockdown despite record 24-hour death rate
Brazilian President Jair Bolsonaro said on Wednesday that there would be no national lockdown despite growing calls from health experts amid rapidly rising cases and deaths attributed to Covid-19.
Currencies US$1.1882/eur vs 1.1878eur yesterday. Yen 109.56$ vs 109.82/$. SAr 14.475/$ vs 14.536/$. $1.377/gbp vs $1.380/gbp. 0.764/aud vs 0.764/aud. CNY 6.550/$ vs 6.542/$.
Gold US$1,744/oz vs US$1,741/oz yesterday
Gold ETFs 99.5moz vs US$99.5moz yesterday
Platinum US$1,233/oz vs US$1,242/oz yesterday
Palladium US$2,635oz vs US$2,686/oz yesterday
Silver US$25.29/oz vs US$25.11/oz yesterday
Copper US$ 8,982/t vs US$8,977/t yesterday
Aluminium US$ 2,269/t vs US$2,256/t yesterday
Nickel US$ 16,755/t vs US$16,730/t yesterday
Zinc US$ 2,844/t vs US$2,827/t yesterday
Lead US$ 1,986/t vs US$1,976/t yesterday
Tin US$ 25,810/t vs US$25,970/t yesterday
Oil US$62.9/bbl vs US$63.0/bbl yesterday
Natural Gas US$2.494/mmbtu vs US$2.478mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$164.5/t vs US$162.3/t
Chinese steel rebar 25mm US$779.6/t vs US$780.2/t
Thermal coal (1st year forward cif ARA) US$71.8/t vs US$73.0/t
Coking coal swap Australia FOB US$148.5/t vs US$149.0/t
Cobalt LME 3m US$49,750/t vs US$50,000/t
NdPr Rare Earth Oxide (China) US$87,713/t vs US$88,657/t
Lithium carbonate 99% (China) US$12,672/t vs US$12,840/t
Spodumene 6% Li2O min, cif (China) US$660/t vs US$510/t
Ferro Vanadium 80% FOB (China) US$36.0/kg vs US$36.0/kg
Ferro-Manganese high carbon 78% Mn US$1,665/t vs US$1,625/t
Tungsten APT European US$270-278/mtu vs US$270-275/mtu
Graphite flake 94% C, -100 mesh, fob China US$550/t vs US$560/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,525/t vs US$2,525/t
Electric Vehicles and batteries to net “lion’s share” of US infrastructure proposal, Fastmarkets MB reports
EVs and batteries feature predominantly in Biden’s $2tn plan to rebuild the country’s infrastructure and economy.
The proposed American Jobs Plan allots $621bn to reshape the transportation infrastructure in the US – with $174bn reported to be earmarked for the EV market alone.
In comparison, $115bn will be invested to upgrade roads, highways, streets, and bridges, and $80bn will be spent on US railways.
According to market participants in the US, the investment “would enable automakers to spur domestic supply chains from raw materials to parts and support American workers to make batteries and EVs”
Furthermore, funding will allow the replacement of 50,000 diesel transit vehicles and electrify at least 20% of the yellow school bus fleet.
Copper, nickel and other battery metals are expected to see a major boost as a result of the global transition to electrification.
Tsingshan Holding Group to invest $1.6bn in Chinese lithium-ion battery plant
China-based nickel and stainless steel producer Tsingshan Holding Group reports that it will invest 10.3bn yuan (US$1.57bn) to build a lithium-ion battery plant in the southern China province of Guangdong.
The project will be led by Ruipu Energy, Tsingshan’s battery division – with the plant expected to have an annual production capacity of 30GWh.
Tsingshan comment that the new battery plant aims to meet demand for new energy in Southern China and shorten supply chains (Fastmarkets MB).
China EV battery maker Octillion looks to cash in on carbon neutral drive
China’s push towards neutrality as well as tis growing manufacturing might allow EVs to compete equally with standard cars by 2030.
Peng Zhou, chief executive of Octillon Power Systems, a lithium-ion battery supplier, said battery cost is the main driver and economies of scale alone, coupled with innovation, will be sufficient to reach the parity line by 2030.
The company supplied 10% of the country’s battery EV market in the second half of 2020, and aims to raise production capacity from 1.4 gigawatt-hours last year to more than 22 gigawatt-hours by 2025. It shipped 95,191 units in 2020, up from 24,844 a year earlier.
Environmental groups have warned the boom in EV ownership will cause a surge in battery waste. Chinese cities have responded to the challenge by setting up recycling schemes.
Anglo American (LON:AAL) 3,036p, Mkt Cap £38bn – Demerging of South African thermal coal operations
Anglo American has agreed to demerge its thermal coal operations in South Africa to a new holding company called Thungela Resource Limited.
The separation deal is subject to shareholder approval on the 5th of May, and will be implemented through the demerger of Thungela shares and the primary listing of Thungela’s shares on the Johannesburg Stock Exchange (JSE) and standard listing on the London Stock Exchange (LSE).
Thungela has 16.5mt of attributable export production in 2020, with its operations close to an established rail network with secure access to export markets via the Richards Bay Coal Terminal.
The soon-to-be-listed entity has 137 Mt of reserves and 756 Mt of resources from its four open-pit and three underground operations.
Mark Cutifani, Chief Executive of Anglo American, commented: “Anglo American has been pursuing a responsible transition away from thermal coal for a number of years now. As the world transitions towards a low carbon economy, we must continue to act responsibly – bringing our employees, shareholders, host communities, host governments and customers along with us. Our proposed demerger of what are precious natural resources for South Africa allows us to do exactly that.”
Anglo is to provide an initial cash injection of ZAR2.5 billion (~$170m) and further contingent capital support until the end of 2022 in the event of thermal coal prices in South African rand falling below a certain threshold.
Following completion of the proposed demerger, 100% of the issued share capital of Thungela will be held by Anglo American shareholders who will each receive one Thungela share for every 10 Anglo American shares they hold.
Bushveld Minerals* (LON:BMN) 17.95p, Mkt cap £215m – Ferro-vanadium prices continue to rise in China on stimulus and environmental crackdown
(Bushveld is invested in Enerox alongside a <3% in Invinity Energy Systems)
Strong Buy 31p
Ferro-vanadium prices are reported to continue to rise in China according to one reporting agency
Prices appear to be playing catchup with the AsiaMetals price of US$36.0/kg for 80% Ferro-vanadium FOB China with higher prices in Europe and the US expected to follow.
The price hike follows on from a 5.7% price rise last week highlighting ongoing strong demand for the metal.
Vanadium imports into China have been rising as China cracks down on pollution while ramping up construction projects as part of its ongoing stimulus plan.
The ongoing crackdown on pollution by heavy industry in China and Japan is likely to continue to tighten the market for vanadium and titanium as steel producers are forced to process cleaner sources of iron ore.
US steel producers who generally process lower grade taconite ores may also be forced to reduce emissions as the Biden administration looks to cut carbon emissions.
Stimulus programs are starting to have a more substantial impact on new demand for vanadium as project in planning order structural and hardened steels for construction.
Today’s news on positive Construction sector Purchasing Managers Indices ‘PMIs’ provides confirmation of strong growth in this area.
*SP Angel acts as Nomad and broker to Bushveld Minerals.
DeepGreen Metals Inc, – US$9.98, Mkt cap US$374m to merge into NY SPAC resurrecting Nautilus Minerals technology from Administration
DeepGreen Metals Inc, are looking to mine polymetallic nodules off the deep ocean floor in the Pacific.
The company is reversing into a $330m SPAC (SOAC) backed by Allseas Group, Maersk Supply Service and Glencore.
If this all sounds rather familiar, you are right it is, in that DeepGreen bought out part of Nautilus Minerals off the Administrator.
The combined entity is reported in The Times to create a pro forma equity value of US$2.9bn.
This fine feat of financial engineering turns a company that was forced into Administration into a multi-billion dollar business almost overnight.
Don’t get us wrong, we love the concept, we admire the engineering and we are in awe of the technology first developed by DeBeers for ocean diamond mining off the Namibian coast and by the oil industry for pipeline trenching and working on well heads on the seabed.
Nautilus Minerals spent hundreds of millions of dollars working through ideas and designs for sub-sea mining of dead black smokers at around 2km depth. The smokers form high-grade metal sulphide deposits on the sea floor.
DeepGreen are proposing to hoover up, unattached, polymetallic nodules at twice that depth.
We remember being told that lifting rock off the sea floor would be easy using a simple air-lift system but the problem is that the tiny bubbles injected under pressure at the bottom of the air-lift pipe expand into massive bubbles on the way up and the system fails.
Last we heard, Nautilus were working on using a number of pumping stages to lift the material which will also present challenges.
Whatever lifting system they choose to use it will need to raise enough value fast enough to pay for the equipment, the boats and the power required to support it all.
Greenpeace appears to have already declared its opposition to the sub-sea effort and has three ships cruising the high seas which may look to obstruct DeepGreen despite its environmental credentials.
Environmental groups complain that sediment plumes may smother undiscovered species on the seabed, though we reckon this issue can be largely overcome.
We note Subsea tailings disposal is used in a number of mining operations and is considered by many experts to be environmentally preferable.
Power Metal Resources* (LON:POW) 2.1p, Mkt cap £24m – Drilling update at Haneti Nickel PGM Project
Power Metal reports that a maiden diamond drilling programme has been planned to test for nickel and PGM sulphide mineralisation at depth following the completion of the shallow rotary air blast (RAB) drill programme.
Power Metal holds a 35% ownership interest in Haneti with 65% held by Katoro Gold plc (LON:KAT) – with the project situated in central Tanzania.
A 50-hole RAB drilling programme at Mihanza Hill and Mwaka Hill identified intensely weathered nickel-copper-magnetite veins at a new outcrop at Mihanza Hill.
The deeply weathered nature of the rocks intersected by the shallow RAB drilling meant that no fresh un-altered rock or primary nickel sulphide mineralisation was delineated.
The RAB programme has successfully allowed the determination of gneiss-ultramafic serpentinite hangingwall/footwall contacts helping to further constrain the diamond drilling target area.
Surface mapping has identified small scale nickel-copper-magnetite gossanous veins at a new outcrop at Mihanza Hill, which Power Metal’s geologists consider to substantiate the potential for primary nickel rich sulphide mineralisation within the underlying ultramafic body, underpinning the requirement to progress to a deeper drilling programme.
Diamond drilling is now planned to a depth of at least 400m in order to intersect the TDEM and magnetic geophysics anomalies, to test for primary sulphide mineralisation and to obtain fresh unaltered rock samples for mineralogical analysis.
*SP Angel act as Nomad and Broker to Power Metal Resources
Rockfire Resources (LON:ROCK) 0.88p, Mkt Cap £6.9m – Plateau Gold preliminary scoping study
Rockfire Resources reports that a preliminary scoping study for the possible development of small scale open-pit mining operations to a maximum depth of 70m at its wholly owned Plateau Gold deposit in northern Queensland has shown “positive cash flow outcomes” from a range of possible development routes.
The preliminary study is expected to be superseded by “an expanded Scoping Study later in 2021” and was primarily a tool to help guide “in-fill and extension drilling” which is expected to start in the near future.
CEO, David Price, explained that “At an early stage of a project’s exploration history, it is prudent to focus on the possibility for eventual economic extraction and a positive result at this stage is a very significant achievement and a promising start”.
Mr. Price added the comment that “With numerous opportunities identified by the Study for further drilling, Management is excited by Plateau’s growth potential to improve the economics”.
The company recently released an updated Indicated and Inferred mineral resource estimate for the Plateau deposit. At a 0.2g/t cut-off, the overall resource amounts to 11.4mt at an average grade of 0.57g/t gold (208,000oz), of which around 37% (3.4mt at a grade of 0.71g/t) is classed as indicated.
Conclusion: The preliminary study for Plateau Gold is a guide for the future exploration of the deposit where infill and extension drilling is expected to start shortly. We await further news.
SolGold* (LON:SOLG) 25.7p, Mkt Cap £522m – Progress of the Alpala PFS
SolGold has confirmed that is on course to deliver the rescheduled pre-feasibility study for its 2.7bn tonnes Alpala project in Ecuador by late 2021.
The company indicates that its study is likely to confirm the amenability of Alpala to underground caving as the principal mining method although possibly on two levels in order to reduce mining dilution and pre-production capital requirements while shortening the lead time to initial production as compared to the development envisaged in the May 2019 Preliminary Economic Assessment.
Solgold’s announcement reiterates that the core of the deposit “measures approximately 900m in height and 500m in diameter” and Interim CEO, Keith Marshall, says that it is now considering a development plan that “is smaller in scale initially, but a much more selective and simpler approach to mining the deposit.”
He commented that the “previously studied plan was the equivalent of an inverted open pit, with limited selectivity, that would likely have resulted in the mining of larger volumes of waste material … [and that the new plan] … ”would introduce an upper extraction level that may offer earlier access to high grade material. We are also considering dual access, through shafts and a decline which might be developed from both ends concurrently”,
In addition to the underground mining optimisations, Solgold is also examining the potential for “near-surface, open pittable mining options at and near the Alpala deposit“ as well as undertaking additional metallurgical testing to improve recovery rates for copper, gold and silver.
Examination of potential for cost reductions from hydro-electric power production and of the electrification of underground production equipment are also identified as offering cost saving opportunities and environmental benefits.
Solgold emphasises its view that Alpala “is one of the most significant copper-gold porphyry discoveries of the last decade … [with the] … potential to become a key source of future copper supply amid an expected growing medium-term market deficit”.
In our opinion, a rigorous re-examination of the development of Alpala considering a wide range of alternative routes to production at different potential scales of operation offers the opportunity to identify the optimum plan which balances technical considerations and capital and operating costs against the project’s financial returns.
It is also our view that the pre-feasibility study is the appropriate stage of project development for this detailed analysis which will set the framework, to be refined at a feasibility study level, for a mining operation likely to last for several decades.
Conclusion: Solgold’s pre-feasibility study for the Alpala project in Ecuador is to be delivered late in 2021. Current work is directed at shortening the lead time to production while containing pre-production capital requirements and identifying the appropriate scale of operations and mine development plan. We look forward to the outcome of the study later in the year.
*SP Angel act as Financial Advisor to SolGold.
Vast Resources* (LON:VAST) 0.11p, Mkt Cap £23m – New underground mine manager appointed
Vast Resources reports the appointment of a new underground mine manager at its Baita Plai polymetallic mine in Romania.
Rubén Fernández is a highly experienced underground mine manager and will be critical in the implementation of the new mine plan
Rubén formerly worked for Lundin Gold, Fresnillo and Tahoe Resources and has worked in Europe and Central and South America.
Most recently, Rubén led the underground mine construction and ramp up phases at Lundin Gold’s Fruta del Norte Mine in Ecuador, a 3,800tpd underground gold mine.
Rubén holds an MSc Mining Engineering from Madrid School of Mines (Universidad Polytechnic de Madrid), a Masters degree in Project Management from EAE Business School and is a registered Spanish Professional Mining Engineer.
Rubén brings the underground mining skill and technical expertise required for the implementation of the new mine plan.
The updated production schedule involves a 65% increase in mining capacity under the new mechanised mine plan versus the old labour intensive approach.
Ore will be pre-treated using XRT processing and sorting circuit to upgrade the feed to the mill allowing to leave processing plant capacity unchanged.
Vast is acquiring three more Load-haul Dump trucks, a jumbo drill rig, two long hole drill rigs and a Tomra XRT processing circuit to increase production.
The $4.5m capital estimate is said to be funded from existing financial resources.
The plan focusses on the downdip extension of the Antonio skarn from 19 level to 22 level and is expected to start in June 2021.
This should give a 15y mine life based on 3.7mt of mineral inventory with mining and milling rates of ~260ktpa and ~160ktpa, respectively
In-situ grade are estimated to be 1.27% Cu, 1.10% Zn, 0.61% Pb, 0.49g/t Au and 62.08g/t Ag.
Further drilling should also expand the resource at the Antonio North skarn.
The latest resource estimate stands at: 608kt grading 1.11% Cu, 0.30% Zn, 0.29% Pb, 0.45g/t Au and 66.89g/t Ag
Vast also has an exploration target of: 1.8-3.0mt at 0.50-3.00% Cu, 0.20-0.80g/t Au, 40-80g/t Ag along with Zn and Pb.
Production should rise to ~4.4kt CuEq, generate $35m in gross revenue
(ex royalty and transportation; at $7,800/t Cu, $1,650/oz Au and $20.5/oz silver), ~$20m EBITDA and $16m post-tax FCF.
Conclusion: The addition of such an experienced underground mine manager should make a huge difference to the Baita Plai Mine and we hope will set the company on a path to much stronger cash flow generation.
*SP Angel acts as Broker to Vast Resources
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
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
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.
Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony