SP Angel . Morning View . Friday 13 08 21
$9bn CATL funding to drive greater demand for battery metals
Bluejay Mining* (LON:JAY) – Nickel exploration portfolio drives new interest in Bluejay shares
Firefinch (ASX:FFX) – Firefinch requests for shares to be placed in trading halt
Galan Lithium (ASX:GLN) – A$50m raise
Galaxy Resources (ASX:GXY) – Orocobre merger approved by Court
Horizonte Minerals (LON:HZM) – interim results highlight progress securing offtake & strong cash position
Serabi Gold* (LON:SRB) – Drilling at Sao Chico project identifies probable mineable veins alongside the main Julia gold vein
CATL to raise $9bn to expand lithium-ion production
Chinese battery maker CATL said it was planning a private share placement to raise up to 58.2bn yuan ($8.98bn) to fund six projects aimed at boosting its production capacity of lithium-ion batteries.
The company wants to expand battery manufacturing capacity around China and in Germany.
It will also be used to build several battery factories in Fujian, Zhejiang and Guangdong provinces in China and to boost capital, CATL said.
CATL currently supply EV batteries to automakers including Tesla, VW and Geely.
Copper price rises as two Chilean mines strike despite Escondida agreement
London copper prices advanced towards a weekly gain this morning as strikes exacerbate supply concerns.
Codelco’s Andina copper mine has suffered a setback as two unions began a strike yesterday following the rejection of a new contract offer.
Workers at JX Nippon Copper’s Caserones mine also started striking after their contract talks failed to provide a solution to concerns over working conditions.
Supply concerns from major copper producer Chile have paralleled additional outbreaks of the Delta variant, pressuring supply chains and adding ‘upside risk to the sector’, according to analysts.
Workers at Escondida in Chile have approved a new contract with management, the mines owner BHP announced yesterday.
The deal avoids a labour strike at a mine that produces ~5% of the world’s mined copper.
The IEA cuts its oil demand projections for the rest of the year as more countries are imposing fresh virus related restrictions.
The update marks a sudden revision on a month old call for OPEC+ countries to raise production or risk a damaging jump in prices.
“The immediate boost from OPEC+ is colliding with slower demand growth and higher output from outside the alliance, stamping out lingering suggestions of a near-term supply crunch or super cycle,” the IEA said in its monthly report.
Dow Jones Industrials -+0.04% at 35,500
Nikkei 225 -0.14% at 27,977
HK Hang Seng -0.89% at 26,283
Shanghai Composite -0.24% at 3,516
US – Jobless claims pulled back for a third consecutive week pointing to further improvements in the US labour market.
Jobless Claims (‘000): 375 v 387 in the previous week (revised from 385) and 375 est.
Mary Daly, Head of the San Francisco Fed and a voting member at the FOMC, suggested the central bank should dial back its monetary policy support by the end of the year given the strength of the economic recovery.
“I remain very optimistic and positive about the (autumn) and ongoing improvements in the key variables we care about… that’s for me means it’s appropriate to start discussing dialling bac the level of accommodation that we’re giving the economy on a regular basis, and the starting point for that is of course asset purchases,” Daly told FT.
“Talking about potentially tapering those later this year or early next year is where I’m at.”
Economists expect Fed to release tapering plan by September
A Reuters poll has revealed a majority of economists expect the Federal Reserve to give an update on a planned reduction in asset-buying by next month.
US macro strategists from TD Securities expect that this may be farfetched, suggesting that ‘November is possible’ if ‘the next two employment reports are strong enough’.
Analysts see December as the most likely date for the taper.
60% of economists taking part in the poll believe that a reduction in Fed asset purchases would begin in Q1 of 2022.
80% of participants believe the Fed will stop all asset purchases by the end of 2022.
In terms of interest rates, analysts expect the Fed to keep its key interest rate unchanged until 2023.
Average US economic growth is expected to average 6.2% in 2021, which marks a major downgrade from predictions 1 month ago of 6.6%.
Japan – The nation is to avoid another recession by a slight margin as GDP report is expected to show a 0.1%qoq expansion in Q2/21 next week.
Weak growth is attributed to the slowest vaccination programme among the Group of Seven nations and the state of emergency that was recently extended to the end of August.
Japan has only ~36% of population fully vaccinated compared to >50-60% in other G7 countries.
Bulk shipping rates surpass record highs following China port shutdown
The Baltic Dry index hit an 11-year high yesterday following the news that China’s second-largest container port was forced to close after a Covid-19 infection was detected.
The shutdown of Ningbo-Zhoushan’s terminal caused major congestion at neighbouring Shanghai ports as vessels were forced to re-route.
Analysts expect a further rise in shipping rates to translate directly into both final demand and intermediate goods as peak consumer season gets underway.
Zambia to announce election results today as voters hit by expected government-induced internet restrictions
Suspicions over the result of the election are expected to be raised as government-induced internet restrictions impacted Zambians over the course of the election.
Polling stations were forced to remain open past closing times as the election witnessed a major voter turnout.
The incumbent president, Edgar Lungu, has already suggested suspicions of the election result whilst also accusing his opposition of provoking violence on Thursday.
European and African bystanders have noted a general peacefulness in the election proceedings so far.
The international copper industry is focusing on the outcome of the election, with a win for Lungu’s rival Hichilema expected to cause a rally in copper mining assets.
So far there has been little sign of the results favouring one side in particular.
US$1.1731/eur vs 1.1734/eur yesterday. Yen 110.29/$ vs 110.46/$. SAr 14.799/$ vs 14.686/$. $1.380/gbp vs $1.386/gbp. 0.734/aud vs 0.736/aud. CNY 6.479/$ vs 6.479/$.
Gold US$1,759/oz vs US$1,754/oz yesterday
Gold ETFs 100.4moz vs US$100.3moz yesterday
Palladium US$2,628/oz vs US$2,638/oz yesterday
Silver US$23.41/oz vs US$23.42/oz yesterday
Copper US$ 9,512/t vs US$9,580/t yesterday
Aluminium US$ 2,594/t vs US$2,589/t yesterday
Nickel US$ 19,660/t vs US$19,655/t yesterday
Zinc US$ 2,997/t vs US$3,045/t yesterday
Lead US$ 2,313/t vs US$2,323/t yesterday
Tin US$ 35,400/t vs US$35,785/t yesterday
Oil US$70.9/bbl vs US$71.3/bbl yesterday
Given the high gasoline prices in the US, it has been reported that yesterday House Republicans sent a letter to the White House requesting that it end the budget restrictions on the US fossil fuel industry.
The letter comes just a day after the White House urged OPEC to produce more crude oil to alleviate high gasoline prices that are squeezing consumers during pandemic times
The letter, sent by House Republicans on the Transportation and Infrastructure Committee, asked President Biden to remove the current restrictions in the 2022 budget that prohibits the US Army Corps of Engineers from engaging in any project “that directly subsidises fossil fuels, including work that lowers the cost of production, lowers the cost of consumption, or raises the revenues retained by producers of fossil fuels”
The US Army Corps of Engineers oversees a multitude of fossil fuel projects across the nation
Additional subsidies for the US oil and gas industry could spur further development, contradicting the Biden administration’s green stance
But the White House agrees more production is needed, it just disagrees that it needs to come from the US
But at a Wednesday press briefing, The White House said it had no plans to incentivise US oil producers to ramp up oil production
Natural Gas US$3.907/mmbtu vs US$4.060/mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$158.7/t vs US$163.7/t
Chinese steel rebar 25mm US$817.9/t vs US$821.6/t – Study shows China ramping up coal-powered steel mills as growth prioritised over reducing emissions
A report by the Centre for Research on Energy and Clean Air, an independent research and advocacy group, highlighted China’s expansion of coal-powered steel mills in 2021.
18 steelmaking blast furnaces and 43 coal-fired power plants were built in the first 6 months of the year.
The new mill capacity accounts to 35m t of coal-dependent plants dedicated to steelmaking.
It is estimated that these plants will emit 150m t of CO2 pa.
A rapid reduction in steel production and output will be needed for China to meet its target of a carbon peak by 2030.
Announcements from the Politburo last month sent iron ore prices plummeting in the wake of a potential limit on domestic steelmaking.
Concerns over power supply in China have increased in recent months as manufacturers struggled with rising demand, causing rationing. This has sparked worries in the industry over the transition to less carbon-intensive alternatives.
Further infrastructure stimuli are expected to increase power demand.
Thermal coal (1st year forward cif ARA) US$104.5/t vs US$102.8/t – China escalates coal mine restarts as prices continue to gain
Reports from China this morning indicate that the Chinese government has sanctioned the reopening of even more coal mines in order to try and keep a lid on prices.
Seven open-pit mines in Inner Mongolia, with the capacity to produce 120mtpa, can resume after land usage permits were renewed, according to the NDRC.
Thermal coal futures in China hit record highs in May and are up over 30% year-to-date due to stronger industrial activity and extreme heat increasing demand for coal.
Earlier in the year, a cluster of mine accidents at coal operations led to tougher safety inspections which reduced supply.
According to the NDRC, the measures implemented to lift output are having an impact, with key mining hubs of Shanxi, Inner Mongolia and Shaanxi all reporting production increases.
Coking coal swap Australia FOB US$199.0/t vs US$198.0/t
China Ilmenite Concentrate TiO2 US$358.85/t vs US$358.9/t
Cobalt LME 3m US$52,500/t vs US$52,500/t
NdPr Rare Earth Oxide (China) US$96,697/t vs US$96,721/t
Lithium carbonate 99% (China) US$14,508/t vs US$14,358/t
China Spodumene Li2O 5%min CIF US$860/t vs US$850/t
Ferro-Manganese European Mn78% min US$1,743/t vs US$1,743/t
China Tungsten APT 88.5% FOB US$305/t vs US$305/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% 9.8/lb vs US$9.8/lb
Europe Ferro-Vanadium 80% 40.75/kg vs US$40.75/kg
Spot CO2 Emissions EUA Price US$67.7/t vs US$67.6/t
South Korea awards first floating wind license
Macquarie’s Green Investment Group (GIG) and TotalEnergies have obtained an electric business license for their floating offshore wind project off the coast of Korea – the first such license granted for an offshore wind project.
The project will have a maximum of 1.5GW of capacity, developed across three phases which would make it one of the largest floating offshore wind developments in the world.
The license allows GIG and Total the exclusive development rights to progress with the 504MW, first phase of the project.
Environmental impact assessments are about to commence with construction expected to start in 2024.
Australia seeking to build large grid-scale battery storage
Syncline Energy has revealed plans for a 600MW / 2400MWh battery storage near Melbourne – the battery project has been fast-tracked by the Victorian government under its planning scheme amendment, which is a pathway for significant state projects.
The company hopes to reach financial close by Q2 2022, with production to begin by the second half of 2023 to support the local power network over that summer.
The company will own and operate a 12.5MW solar farm to supply the battery’s ancillary cooling loads.
Syncline CEO, Phil Galloway said they are also looking at the feasibility of using “second life” batteries from cars and buses in its energy storage array. Syncline will also plans to build systems to recover the lithium, nickel, and cobalt on site, when its battery cells reach the end of their lives.
Orsted blames low wind speeds for loss in earnings
Renewables leader Orsted has pointed to limited wind speeds at its offshore wind farms for the primary reason behind low expected profits for 2021.
Mads Nipper, Orsted’s chief executive, stated that wind speeds in the second quarter of the year were the North Sea’s third worst in 22 years.
Limited wind speeds cost Orsted $220m in lost earnings before EBITDA.
Orsted shares have fallen more than 25% this year following a strong 2020.
Renewables companies such as Orsted have also been adversely affected by rising raw material prices as well as the entry of oil and gas majors such as BP and Equinor.
Orsted has increased its target for renewable projects from 30GW to 50GW by 2030.
Bluejay Mining* (LON:JAY) 14.68p, Mkt cap GBP143m – Nickel exploration portfolio drives new interest in Bluejay shares
Click link for Kobold deal pdf
BUY – Valuation 37.7p
Bluejay Mining shares are enjoying substantial new interest from investors for their nickel prospects.
Exploration is working apace on three fronts:
Rio Tinto joint venture at Enonkoski in Finland where the jv team are targettign Outokumpu-style nickel-copper-cobalt mineralisation
Kobold Metals joint venture at the Disko-Nuussuaq project in Greenland
Metals One black shale prospects near the Talvivaara nickel mine in Finland
The Finish side of the portfolio was jointly developed Western Areas, the Australian nickel producer, working alongside the management of FinnAust Mining, since renamed Bluejay when the Greenland assets were brought in.
Both sides of the portfolio show good potential for nickel discovery with substantial new confidence in the potential for discovery at Disko-Nuussuaq in Greenland from the involvement of the expert Kobold Metals team not to mention their $15m commitment.
The Enonkoski license area contains the historic Enonkoski mine. We believe existing resources in the Enonkoski mine could potentially justify the reopening at current metals prices with further discovery likely to add to the mine’s future life. While existing mineralisation in the Enonkoski mine might not be of sufficient scale to interest Rio Tinto we still see this as a potential value adding opportunity for the Bluejay team.
Nickel prices enjoy combination of strong demand and decreasing inventories
Nickel hit a two week high on strong consumption, a likely delay of Fed tapering and falling stock reserves of the metal.
The September nickel contract on the Shanghai Futures Index rose 4.6% higher.
We see the recent surge in price is a result of strong current demand and a boost from risk-on sentiment after the recent US inflation data.
Nickel inventories in LME-registered warehouses fell 1,116t to 204,012t – their lowest level since March 2020.
SHFE ‘Shanghai Futures Exchange’ warehouse stocks closed another 4.4% lower at 6,415t indicating a particularly tight market in China
Conclusion: We see the three key nickel-copper-cobalt exploration projects as offering significant additional value to Bluejay and look forward to adding value for these into our valuation int eh near future.
Our current valuation for Bluejay is entirely based on our [email protected]% on the Dundas titanium mineral sands project assuming an ilmenite price of $250/t.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland. The analyst holds shares in Bluejay Mining.
Firefinch (ASX:FFX) A$0.57, Mkt Cap A$519m – Firefinch requests for shares to be placed in trading halt
Firefinch have asked the ASX to halt trading in their shares in Australia today.
No reason is given so we will speculate:
Finalisation of Goulima lithium deal with Ganfeng with execution of transaction documents (the deal deadline was extended to today on 2nd August)
Demerger of the lithium and gold assets with the lithium business being spun out into a separately listed company on the on ASX.
The demerged entity may also raise additional funds from investors as part of the new listing process
Potential further delay to the Ganfeng deal due to approvals process in China / approval to remit Ganfeng funds to Australia and Mali.
We speculate Firefinch and Ganfeng may also be working on the wording of a potential joint announcement in relation to their proposed joint venture.
Lithium market: We believe the market for spodumene concentrates is unusually tight at present.
AsianMetals.com report 5% spodumene prices at US$860/t vs US$630/t in January
Pilbara Minerals reported the sale of its first 10,000t, 5.5% spodumene concentrate FOB shipment at US$1,250/t (equivalent to:.$1,315/t CIF China) on 30 July indicating strong demand for spot cargos.
Galan Lithium (ASX:GLN) A$1.2, Mkt Cap A$297m – A$50m raise
The Company raised A$50m in new equity at A$1.15 per share (10% discount to the previous closing price) to progress development of Hombre Muerto West, Candelas and Greenbushes South projects.
The raise consists of two parts (A$30m and A$20m) with the latter being subject to shareholder approval.
Proceeds from the placement to be directed towards:
Drilling at HMW to convert existing Resources into Reserves and establish well fields for future production;
Infill drilling at Candelas;
Ongoing exploration at Greenbushes South;
Completion of Feasibility Studies at HWM and Candelas;
General working capital.
HMW is located in the Catamarca Province, Argentina, on the west coast of Hombre Muerto salar next to Livent, Posco and Galaxy licenses and hosts 2.3mt LCE at ~946 mg/L Li in mineral resources with low levels of impurities.
Dec/20 PEA envisaged a 20ktpa LCE operation over 40 years at competitive US$3,520/t cash cost and ~$22,000/t capital intensity including relatively conservative 30% contingency.
Preliminary schedule is to complete Feasibility Study by Q3/22.
Candelas licenses are found on the other side of the salar with maiden resource prepared in Oct/19 and estimated to host 0.7mt LCE at 672mg/L Li.
Following the raise Galan will have a cash balance of ~A$65m.
Galaxy Resources (ASX:GXY) A$5.4, Mkt Cap A$2,720m – Orocobre merger approved by Court
Orocobre (ASX:ORE) A$9.5, Mkt Cap A$3,275m
The Supreme Court of Western Australia approves the Orocobre/Galaxy Resources merger with Galaxy shares to be suspended next Monday and new Orocobre shares in consideration of the deal to be issued Thursday, 26 August.
The deal was announced in Apr/21 involving Orocobre merging with Galaxy Resources in an all share deal and two companies holding 54% and 46% in the combined entity post the deal, respectively.
Galaxy Resources was valued at US$1.2bn adding a producing Mt Cattlin spodumene mine in WA, Australia (200ktpa SC at US$435/t cash cost (FOB, ex royalties); 208kt LCE at 1.05% Li2O in reserves and 326kt LCE at 1.20% in resources) and two development projects including Sal de Vida brines project in Argentina (Hombre Muerto salar next to Livent, Posco and Galan; 1.9mt LCE at 770mg/L in reserves and 6.3mt LCE at 754mg/L in resources; first production in YE21 to ramp up to 32ktpa in three stages; ~$3,300/t LCE cash cost) and James Bay hardrock deposit in Quebec, Canada (PEA stage project; 1.4mt LCE at 1.40% Li2O in resources; potential 330ktpa SC production at US$280/t cash cost (FOB, ex royalties) and ~$245m development capex) to the Group.
Orocobre is operating Olaroz brines deposit in Argentina that has capacity of 17.5ktpa LCE and is in the middle of Stage 2 expansion with first production targeted for H2/22 followed by a two year ramp up to add extra 25ktpa. Olaroz hosts 6.4mt LCE at 690mg/L Li in resources. Additionally, Orocobre owns 100% in the Cauchari property located next to Olaroz and estimated to host 6.4mt LCE at ~480mg/L Li. The Group is building Naraha Lithium Hydroxide conversion plant in Japan to process lithium carbonate from its brines operations in Argentina and produce battery grade hydroxide with commissioning expected in Q1/22.
Horizonte Minerals (LON:HZM) 6.60p, Mkt Cap GBP112m – interim results highlight progress securing offtake & strong cash position
Horizonte reports a loss from operations of GBP2.2m for the six months to 30th June 2021 vs GBP0.44m over the same year last year, as it moves ahead with the Araguaia ferro-nickel project in Brazil.
Admin expenses rose to GBP2.6m vs GBP1.6m last year.
Highlights for the period include the project financing of Araguaia nearing completion, with the company commenting that that each of the five international banks mandated to provide the US$325m debt component of its financing for the Araguaia ferro-nickel project has “commenced with their formal credit approval processes” following completion of technical, environmental and social due-diligence assessments of the project.
Horizonte is developing $443m phase 1 project to produce approximately 14,500tpa of nickel contained in 52,000tpa of ferronickel by treating 900,000tpa of ore.
The company comments that cornerstone strategic investors and final offtake agreements are well advanced and expected to be finalised shortly after credit approvals, with the approval for the senior debt facility expected in Q3 2021.
The company maintained a strong cash position of GBP22.2m following completion of an GBP18m equity fundraise in February 2021.
Serabi Gold* (LON:SRB) 62.48p, Mkt Cap GBP47m – Drilling at Sao Chico project identifies probable mineable veins alongside the main Julia gold vein
Ongoing drilling has intersected potentially mineable mineralisation alongside and on strike from the main Julia gold vein at the at the Sao Chico mine.
Julia Vein: Drilling from surface intersected Zone 3 of the Julia vein grading 8.52g/t over 4.3m from 67m down the drill hole and a further 14.3g/t over 2.55m from 85m down the hole.
Drilling from the underground workings has also extended the known depth of mineralisation with 12g/t over 3.3m intersected below 150m depth.
Further results are contained in a table in the RNS press release
Gabi vein: The team have also identified a parallel structure around 70m to the south of the Main Vein. The structure contains high gold grades but with narrow widths of mineralisation.
Lagoa: Drilling also intersected 1.95m grading 3.63g/t in a geophysical ‘Induced Polarisation’ anomaly 100m to the north of the Main Vein..
Conclusion: The identification of the new-found mineralisation is good news for expanding production and extending the mine life and value of the mining operation in Brazil.
The news follows on from a series of promising drill results reported at the Sao Chico mine in July.
Serabi are targeting the production of 33,000-36,000oz of gold this year rising to 45,000oz in 2022
*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil
Mining sector: where now as Gates & Bezos move in?: https://youtu.be/3is7kRMb7yk
China fearing failure in metals pricing tactic: https://youtu.be/RK4HQPrs60s
Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw
VOX Markets: 11/08/21: https://www.voxmarkets.co.uk/articles/john-meyer-on-bluejay-bluerock-bushveld-alba-minerals-efe74e1
BBC: Catalytic converters https://www.bbc.co.uk/sounds/play/p09jl6c9
*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
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
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, Tungsten, Spodumene, Ferro-Manganese, Graphite