SP Angel . Morning View . Friday 08 10 21
Base metals rise as China crisis raises stagflation concerns
US delays debt ceiling decision to December
Pre-IPO financing opportunity for new gold mine development in Ghana
We are raising funds for an advanced gold project in Ghana with good upside exploration potential
The project offers potential to fast-track gold production using a low-cost heap leach.
Management are experienced and are looking to IPO within 18 months.
Please contact us if you are interested in pre-IPO funding of the opportunity
VOX Markets: 07/10/21: https://audioboom.com/posts/7956216-john-meyer-on-chinese-energy-issues-and-news-from-altus-strategies-bushveld-minerals-scotsgold
Anglesey Mining (LON:AYM) – GBP768k raised to progress Parys Mountain and Grangesberg projects
BHP (LON:BHP) – looks to DRC copper in major policy shift
Cora Gold (LON:CORA) – Step out and infill drilling returns good grades at Sanankoro
Lithium Americas (NYSE:LAC) – Thacker Pass MRE increase and project scale upgrade
Strategic Minerals* (LON:SML) – Progress at Leigh Creek
Base metals rise on positive US debt-limit progress
Am approval from the US Senate to temporarily raise the $28.4t debt limit has boosted base metal prices.
Sentiment has improved as the risk of a debt default has been delayed until December.
The bill still requires approval from the House.
LME 3-month copper rose 0.5% to $9,330.50.
Nickel rose 3.6% to $18,920/t.
LME tin rose 2.3% to 36,100/t.
Glencore puts Peruvian mine on ice for near-term
Glencore have announced they do not plan to proceed with the Coroccohuayco copper project in their Antapaccay mine in Peru.
The mine has come under criticism from locals over its environmental impact.
The Coroccohuayco project requires $590mn of investment.
Residents have blocked a key road in the region.
Antappacay is Peru’s 6th largest copper mine.
Dow Jones Industrials +0.98% at 34,755
Nikkei 225 +1.34% at 28.049
HK Hang Seng +0.32% at 24,782
Shanghai Composite +0.63% at 3,591
Economics
US – Labour data is due later today and will be closely watched for signs of the labour market recovery.
Strong reading is likely to reaffirm market expectations for the Fed to start winding down its bond purchases programme in November.
NFPs (‘000): 500 v 235 in August.
Unemployment Rate: 5.1% v 5.2% in August.
Av Hourly Earnings (%mom): 0.4 v 0.6 in August.
Av Hourly Earnings (%yoy): 4.3 v 4.6 in August.
China – Power supply shortages add to existing logistics bottlenecks and exacerbate supply chain challenges, Bloomberg reports.
Manufacturing sector is forced to cut production amid power rationing.
It also comes just as China starts its harvest season raising concerns over further food inflation.
Several plants were asked to shut or cut production to conserve power, including soybean processors that supply feedstock for animas and oil for cooking.
Prices for fertilizers are also rising sharply weighing on farmers that are already under strain of rising prices.
In the dairy sector, power outages could disrupt the operation of milking machines while pork suppliers are facing pressure from tighter supply of cold storages.
Production of cardboard boxing and packing materials that was already strained by a recovery in demand during the pandemic with power crisis suggesting outpu may be down 10-15% in September and October.
The supply crunch also comes at the crucial year-end shopping season.
Japan – Consumer spending slumps in August on Covid related restrictions.
Household Spending (%yoy): -3.0 v 0.7 in July and -1.2 est.
Germany
Exports (%mom): -1.2 v 0.6 (revised from 0.5) in July and 0.5 est.
Imports (%mom): 3.5 v -3.6 (revised from -3.8) in July and 1.8 est.
UK Covid-19 – Lockdown threat remains as NHS warns of worst flu rates for 50 years
The UK NHS is offering flu jabs to more than 35m people to help combat fears of up to 60,000 flu deaths this year in the UK
New virulent flu strains have been identified elsewhere in the world which are expected to come to the UK this winter
Anyone contracting flu is advised to stay well away from anyone who might have covid-19
UK – Electric vehicle power consumption to rise to 19% of total UK power demand requiring another four major nuclear power stations
There are some 300,000 pure electric vehicles on the roads in the UK rising to 600,000 including hybrids
Power consumption of an average electric vehicle is around 305Wh/mile with the average UK driver covering ~7,400 miles pa in 2019.
Pure electric vehicles tend to drive an average of 9,435 miles mainly because new cars tend to be driven over higher mileage in their first three years.
The figures indicate 863GWh pa of current EV power demand
Alternatively, the average EV is forecast to use around 2,000kWh a year suggesting power consumption of 600GWh
The National Grid expect full EV use to increase power demand by just 10% which appears to assume around 12m vehicles by our reckoning
12m EVs will require 27 terawatt hours of power assuming 305Wh/mile over 7,400 miles a year
The Climate Change Committee are predicting 23m EVs by 2032 along with 328,000 public charging points will be required.
The figures imply EV power consumption will rise to 52 terawatt hours representing 19% of total UK power consumption
The UK National Grid are concerned and are bringing in legislation for domestic EV chargers in the home so they won’t function from 8am-11am and from 4pm to 10:00pm from May 2022 to avoid putting the electricity grid under stress with chargers imposing a randomised delay in chargers to avoid grid spikes.
China introduced legislation limiting the power capacity of battery packs in electric vehicles two years ago in anticipation of rising power demand for electric vehicles
While the legislation may have been partly aimed at excluding earlier Tesla models from the Chinese market it was also designed to persuade EV manufacturers to make vehicles more efficient.
By 2040 the UK government estimates the UK will need 140GWh of battery capacity in vehicles which on current estimates will approximately require some 76,000t of nickel, 308,000to of natural flake graphite, 168,000t of synthetic graphite, 112,000t of lithium, 24,500t of cobalt and 24,000t of manganese..
Peru – New energy and mines minister appointed in major cabinet reshuffle
President Castillo has made sweeping changes to his government since taking office, appointing a new cabinet chief and six other ministers in recent weeks.
Eduardo Gonzalez has been made energy and mines minister, replacing Ivan Merino.
Gonzalez is an engineer and the fifth minister in the post in less than one year.
China aluminium smelters cut production amid power shortage
Smelters in the Qinghai province in Western China have been given orders by the government to reduce power consumption by 30%, according to Mysteel.
Cuts come following the provincial government’s crisis meeting on the 28th of September due to a local power shortage.
Aluminium smelters in Qinghai province have an operational capacity of 2.65mtpa.
Currencies
US$1.1549/eur vs 1.1569/eur yesterday. Yen 111.92/$ vs 111.41/$. SAr 14.990/$ vs 14.929/$. $1.359/gbp vs $1.360/gbp. 0.729/aud vs 0.730/aud. CNY 6.449/$ vs 6.445/$.
Commodity News
Precious metals:
Gold US$1,758/oz vs US$1,763/oz yesterday
Gold ETFs 98.8moz vs US$98.9moz yesterday
Platinum US$990/oz vs US$987/oz yesterday
Palladium US$1,979/oz vs US$1,912/oz yesterday
Silver US$22.49/oz vs US$22.73/oz yesterday
Base metals:
Copper US$ 9,310/t vs US$9,173/t yesterday
Aluminium US$ 2,933/t vs US$2,909/t yesterday
Nickel US$ 18,870/t vs US$18,125/t yesterday
Zinc US$ 3,097/t vs US$3,021/t yesterday
Lead US$ 2,191/t vs US$2,147/t yesterday
Tin US$ 35,910/t vs US$35,300/t yesterday
Energy:
Oil US$83.1/bbl vs US$81.0/bbl yesterday
Oil prices drifted in early trading today as the US confirmed it was considering selling oil from its strategic reserves and as Russia said it was ready to stabilise the natural gas market
OPEC+ continues to face pressure from some countries to add back more barrels to the market as demand has recovered faster than expected in some parts of the world
Elsewhere, the American Petroleum Institute (API) reported another surprise build in crude oil inventories of 951,000bbls last week
This compares to analyst expectations for a loss of 300,000bbls for the week
It is the second week in a row that estimates were on the wrong side of zero
In addition, US shale producers have shown remarkable discipline in drilling activity despite the fact that WTI has been trading above US$60/bbl for nearly six months
Many analysts and oil companies see global oil demand returning to the pre-crisis levels of 2019 as early as the start of next year, if not earlier, by the end of 2021
Oil demand worldwide is expected to hit 100MMbopd by the end of this year or in early 2022, whilst demand next year is set to rise to 102MMbopd
Natural Gas US$5.725/mmbtu vs US$5.712/mmbtu yesterday
European gas prices surged again yesterday, bringing their gains over just two days to 60%, as the impact of soaring energy costs rippled through equity and bond markets and the European Union ramped up
Dutch and UK gas futures continue to hit fresh records along with rising power prices
Surging energy costs are stoking inflationary pressures and fuelling concern that economic growth will slow, prompting a slump in European stocks
Global gas and coal markets have tightened just as the heating season starts in the northern hemisphere, with limited supply failing to catch up with recovering demand
Colder weather is forecast for Europe next week, with temperatures across the mainland set to drop below normal levels
Several European countries including France and Spain have called on the EU to take urgent action to cushion the blow of sky-high gas prices
The bloc’s energy chief, Kadri Simson, has pledged a revision to market rules by the end of the year to prevent surging costs from stifling the economic recovery
The natural gas crisis is set to intensify as winter heating season approaches, with supplies insufficient to keep up with current demand, let alone build stockpiles for what will be increased demand in the cold season
Europe’s natural gas crisis has prompted European fertilizer producers to curb output, which could send food prices soaring along with the natural gas prices
It has also sparked warnings of blackouts and factory shutdowns
If the winter is colder than normal, natural gas supplies could run even shorter, leaving Europeans and possibly other countries, especially those that can barely afford current energy prices, in the cold
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$117.5/t vs US$117.6/t – Rio CEO emphasises importance of Simandou’s iron ore despite coup uncertainty
Rio’s CEO Stausholm has stated ‘that there is a need for the world to develop Simandou’.
Stausholm accepts that ‘there is… a bit of uncertainty about Guinea’ following the military force’s coup d’etat last month.
Rio shares exploitation rights of Simandou, the world’s largest untapped iron ore deposit, with several Chinese firms.
Simandou’s iron ore reserves are estimated at 2.4bn t with 65% Fe.
Stausholm stated that he considers the development of the project as one integrated project when asked if Rio would be a shareholder in the infrastructure required to mine Simandou.
Chinese steel rebar 25mm US$923.9/t vs US$899.2/t
Thermal coal (1st year forward cif ARA) US$134.8/t vs US$145.0/t – Coal miners ordered to boost output by China as energy crisis intensifies
Inner Mongolia officials have instructed 72 miners to increase capacity by 100mt.
Zhengzhou thermal coal futures rose 3% before falling 11% on the news.
The CSI Coal index tracking listed miners fell 5.5%.
The move comes amid critical warnings that food production and other industries set to be hit by power cuts.
As of 1st of October, the region now has 225 coal mines in production with a total capacity of 640mtpa.
The regional Department of Energy & Land Resources have jointly facilitated the approval procedures for new coal mine production.
The region has newly approved a total of 107 open-pit coal mines with a temporary land use approval, with an annual production capacity of 169mt, since the beginning of this year.
Australia Newcastle thermal coal spot FOB US$196/t
China Qinhuangdao thermal coal spot FOB US$146/t
Coking coal swap Australia FOB US$373.0/t vs US$364.0/t
China Ilmenite Concentrate TiO2 US$379.13/t vs US$379.4/t
Other:
Cobalt LME 3m US$53,380/t vs US$53,380/t
NdPr Rare Earth Oxide (China) US$92,883/t vs US$92,943/t
Lithium carbonate 99% (China) US$26,516/t vs US$26,533/t – Mexico plans to reject private lithium deals with or without reform bill
Mexico’s President Obrador has stated that any proposal for private lithium concessions will be rejected.
The decision comes as Congress is set to vote on a bill looking to reserve extraction of the metal for the Mexican state exclusively.
Obrador wants it ‘established in the constitution that lithium belongs to the state.’
The government is currently beginning a controversial electricity reform bill which aims to cement the position of state-owned power company CFE.
The president did state that companies like Bacanora with active lithium concessions could show the potential for successful exploration.
China Spodumene Li2O 5%min CIF US$1,110/t vs US$1,110/t
Ferro-Manganese European Mn78% min US$1,796/t vs US$1,799/t
China Tungsten APT 88.5% FOB US$305/t vs US$305/t
China Graphite Flake -194 FOB US$555/t vs US$555/t
Europe Vanadium Pentoxide 98% 8.1/lb vs US$8.1/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg
Spot CO2 Emissions EUA Price US$68.1/t vs US$72.9/t
Battery News
Automakers and investors look to greener lithium production tech.
BMW, Stellantis, Gates, Buffett and Schlumberger among others look environmentally friendly lithium producing methods.
The firms are investing in direct lithium extraction (DLE) for commercial production within the next 2 years.
DLE uses minimal groundwater and land space than hard rock mining or traditional brine extraction.
The majority of DLE technology is also quicker than evaporation techniques but remains uneconomical.
DLE also requires clean water which is currently a primary ‘hindrance to DLE’ according to Suez PA which sells equipment to lithium producers.
Schlumberger hope to produce lithium without freshwater and is in the process of building a Nevada-based DLE project.
The US Department of Energy has offered a $4mn grant for the best geothermal lithium tech. development.
Analysts expect DLE to produce 25% of the world’s lithium by 2030.
Warren Buffett has backed Energy Source which is looking to add DLE tech to existing power plants.
S. Korea sets an emission reduction goal of 40% for 2030
S. Korea has raised its ghg reduction goal from 26.3% to 40% by 2030 as it looks to reach carbon neutrality by 2050.
Environmental groups have claimed the goals are too low, with a 59% domestic reduction from 2017 levels required for the Paris Agreement.
Company News
Anglesey Mining (LON:AYM) 3.6p, Mkt Cap GBP8.2m – GBP768k raised to progress Parys Mountain and Grangesberg projects
Anglesey Mining reports that it has raised GBP768,230 through the issuance of 2,595,000 shares at a price of 3.4p, a discount of 5.6% to the closing price on 7 October 2021.
As part of the subscription, Jo Battershill, CEO, has subscribed for 1,565,588 new ordinary shares.
Funds will be used to progress exploration at the Parys Mountain Cu-Zn-Pb-Ag-Au project on the isle of Anglesey and the Grangesberg Iron Ore Project in Sweden.
At Parys Mounting, Angelsey is to begin infill drilling on the White Rock Zone, along with some additional geotechnical holes, along with collecting samples for metallurgical testing and environmental studies.
At Grangesberg, the company is to begin a PEA, having already engaged Micon International to undertake the study.
BHP (LON:BHP) 1,907p, Mkt cap GBP101bn – looks to DRC copper in major policy shift
Bloomberg has reported that BHP is currently in discussions with Friedland’s Ivanhoe Mines for the purchase of the West Foreland region in the DRC.
The report sent Ivanhoe’s shares up 10% on the news.
An investment in the Congo marks a shift from BHP’s policy to avoid geopolitically risky jurisdictions.
The Company is looking to secure more copper mine developments as a bet on the red metal’s role in the decarbonization of society.
Ivanhoe’s neighbouring Kamoa-Kakula mine offers one of the highest grades in the world.
The shift in policy under Mike Henry comes after BHP divested its iron ore deposit rights in Guinea to Friedland in 2019, citing ambitions to operate in less risky jurisdictions like Canada, Chile, and Australia.
Cora Gold (LON:CORA) 13.5p, Mkt Cap GBP34m – Step out and infill drilling returns good grades at Sanankoro
The Company released another set of drilling results from the +40,000m programme completed at the Sanankoro Gold Project in southern Mali.
The programme is focused on both step out drilling testing along strike and down dip extensions of the deposit as well as infill drilling to convert Inferred resources into Indicated.
Zone B1 selected intersections include:
73m at 2.24g/t from 72m including 10m at 7.86g/t (SC0555);
22m at 3.73g/t from 117m (SC0556);
2m at 17.9g/t from 39m (SC0553).
Zone A selected intersections include:
34m at 3.06g/t from 61m (SC0521);
36m at 1.65g/t from 66m (SC0543);
30m at 1.85g/t from 96m (SC0544).
The intercepts reported confirm strong grade continuity within the 2019 pit shells and extension of these on strike and at depth.
The exploration drilling programme is now complete with final assay results expected to arrive over the coming weeks ahead of the updated MRE.
Geotechnical, metallurgical and hydrological diamond drilling is continuing as part of the data collection process for the planned Sanankoro DFS.
Lithium Americas (NYSE:LAC) US$21.2, Mkt Cap US$2.5bn – Thacker Pass MRE increase and project scale upgrade
The Company released an updated MRE o the Thacker Pass lithium rich clays project in Humboldt County, Nevada.
Updated MRE includes:
1,154mt at 2,231 Li (ppm) for 13.7mt LCE in the Measured and Indicated category (385mt at 2,917 Li (ppm) for 6.0mt LCE previously);
392mt at 2,112 Li (ppm) for 4.4mt LCE in the Inferred resource (147mt at 2,932 Li (ppm) for 2.3mt LCE previously).
Larger resource is attributed to a lower cut-off grade applied to the model (1,334ppm vs 2,000ppm previously) as well as new drilling completed since the previous estimate was released in 2018.
Using same cut off grade as was applied in the 2018 MRE, Measured and Indicated estimate is 9.0mt LCE (2,749 Li ppm) with Inferred at 2.6mt LCE (2,703 Li ppm).
Separately, the Company expanded planned scale of the project with the ongoing FS to target 40ktpa LCE in Phase 1 (up from 30-35ktpa previously) and additional 40ktpa in Phase 2 (extra 30ktpa previously).
Final permitting decision is targeted for Q1/22 with early construction works starting in H1/22.
Increased scale is driven by optimizations to the mine plan and leaching efficiencies with the same proposed 3,000tpd sulfuric acid plant and water usage.
The Company is expecting to provide timing on the updated Feasibility Study incorporating optimised engineering plan and an increase in processing equipment by early 2022.
The team continues to advance engineering to consider option for a 20ktpa LiOH chemical conversion plant.
Strategic Minerals* (LON:SML) 0.4p, Mkt Cap GBP8.6m – Progress at Leigh Creek
Strategic Minerals has issued a report on the progress of its work to restart production at the Leigh Creek copper mine project in South Australia.
The company confirms that it is in discussions with a “respected global bank” for the provision of a loan facility of at least US$10m and that the bank is “undertaking due diligence, although … [Strategic Minerals cautions that]… at this time, there is no guarantee of a loan being offered”.
The company says that “discussions have occurred on the likely term, rates and fees” but the final details will not be known until “the end of the lender’s due diligence”. Strategic Minerals also says that it “continues to provide information to other potential funders should this facility not be forthcoming and the Board is confident funding will not further impact the revised timetable to production”.
The company has also made progress on the outstanding permitting issues for the Paltridge North pit at Leigh Creek where conditional approval of the company’s Programme for Environmental Protection and Rehabilitation (PEPR) was issued by the South Australian Department of Energy & Mines (DEM) in July pending receipt of additional clarification of parts of the development plan.
Subsequent meetings with the DEM have “identified that some elements of the requested clarifications are already covered in the submitted PEPR but some additional details are being sought, particularly in explaining the intended management of Potentially Acid Forming material, the cover design and visual amenity associated with the Paltridge North waste rock dumps and heap leach pads”.
Strategic Minerals indicates that the DEM have stressed their role in “ensuring the wider community is protected in any future mining operations” but within these constraints have also “outlined their intention to assist making this approval unconditional and have;
The company says that it has indicated that it has “raised the potential to gradually phase the amount of environmental security deposit held, in line with planned operations. This would have the effect of lowering the initial deposit currently required of AUD $3.7m and possibly reduce the absolute size of the deposit should LCCM undertake rehabilitation works as currently planned. The DEM indicated that they would consider such a proposition and encouraged LCCM to submit a fully reasoned request on the matter”.
Strategic Minerals also points out that the recent rise in copper prices could justify expansion of the mining to recover an additional 600t of saleable copper which “could result in an additional US $4.5m of revenue … [which could generate]… a meaningful boost to the project’s inherent value”.
The company says that, including the Covid19 impacts it “considers that the information required by the DEM can be provided before the end of the year and that operations, subject to receipt of finance and DEM approval, can commence in the later part of the first quarter of 2022”.
Welcoming the support of the DEM, Managing Director, John Peters reaffirmed the company’s enthusiasm to “get operations restarted as soon as possible at Mountain of Light, Leigh Creek” and confirmed that if the loan facility is forthcoming it “would not only permit the Company to recommence mining operations at LCCM but, also, provide funds for exploration and expected ASX listing costs”.
waived any re-submission fees; and
will be reviewing only the newly submitted material.”
Conclusion: Strategic Minerals is progressing negotiations for loan finance to help restart Leigh Creek copper production during Q1 2021 and describes constructive discussions with the Department of Energy and Mines in its efforts to finalise the approvals for the PEPR. The company also points to potentially greater overall copper production as a result of improved copper prices.
*SP Angel acts as Nomad and Broker to Strategic Minerals
Recent Interviews:
IGTV: Stock picks in the small-cap mining space:
Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw
VOX Markets: 07/10/21: https://audioboom.com/posts/7956216-john-meyer-on-chinese-energy-issues-and-news-from-altus-strategies-bushveld-minerals-scotsgold
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
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
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*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, Tungsten, Spodumene, Ferro-Manganese, Graphite
Asian Metal
