SP Angel . Morning View . Wednesday 20 10 21
Base metals pull back as LME changes rules after Monday’s record copper premiums
Altus Strategies* (LON:ALS) – BUY, 125p – First quarterly royalty payment received from Caserones Mine
Anglo American (LON:AAL) – De Beers reports continuing strong demand ahead of India’s Diwali holiday closures at diamond polishers
Castillo Copper (LON:CCZ) – Follow-up due diligence work at Litchfield
Cora Gold (LON:CORA) – Selin drilling provides opportunity to develop a single open-pit
Phoenix Copper* (LON:PXC) – Magnetic survey at Red Star identifies four anomalies
Power Metal Resources* (LON:POW) – Completion of sale of Schreiber-Hemlo Interests for GBP1m
Rio Tinto (LON:RIO) – $7.5bn pledged to halve mine emissions by 2030
IGTV: 08/10/21: How high energy prices are pushing up metals: https://youtu.be/em4zwo2i4Cs
VOX Markets: 07/10/21: https://audioboom.com/posts/7956216-john-meyer-on-chinese-energy-issues-and-news-from-altus-strategies-bushveld-minerals-scotsgold
Copper – prices pull back as Cash to 3-month premiums fall following run driven by short-term technical trading
LME changing rules after Monday chaos when Cash to 3-month blew out
While we believe physical copper demand is strong we also see the Cash to 3-month copper premium being driven by low liquidity and technical trading issues.
A report on Bloomberg speculates Trafigura traders helped cause the Cash to 3-month prices to jump higher on the LME.
UK – CPI inflation data slows to 3.1% in September removing some of the pressure to raise interest rates
UK CPI slowed to 3.1% in September vs 3.2% the month before, but still well above the Bank of England‘s 2% target.
The Bank of England now expects prices to climb above 4% by the end of the year.
UK RPI leapt to 4.9%, the highest rate since 2011, pushed up partly by house prices.
Data was somewhat skewed as restaurant prices rose less this year after the end of the Eat Out to Help Out scheme in 2020.
September’s inflation reading is used to set an annual increase in state pension payments, and at 3.1% is the second highest increase in a decade.
Secondhand car prices continued to surge, rising 2.9% in September and up 21.8% since April.
China – Property and construction sectors contracted in Q3 for the first time since start of the pandemic
Output in the real estate and construction industries shrank 1.6% and 1.8% respectively in Q3 of 2021.
Both sectors were hurt by a slump in real estate as Evergrande’s debt crisis and Beijing’s tougher property market regulation spread to other parts of the economy.
Both sectors contracted for the first time since the first quarter of last year, when the pandemic began.
Yesterday, data showed the growth rate of China’s property development investment slowed to 8.8% in the January-September period from 10.9% in the first eight months of the year.
Both home sales and new construction projects had already seen steep declines in August, falling 19.7% and 17% respectively.
UK government plans for greener mortgages to drive insulation upgrades
The UK government published a paper yesterday that could make buying older and less energy efficient properties more difficult
The move may force many homeowners to move to install insulation to meet EPC Band C efficiency by 2035. This is seen as a medium level of energy efficiency.
Lenders will also be encouraged to preferentially direct mortgage funds into EPC Band B and C properties
Hargreaves Lansdown see green mortgages as devaluing older homes which do not have green energy supplies and/or sufficient insulation.
Drilling boreholes for ground-source heating
This week I am having a series of boreholes drilled as part of a heat pump system to warm my country hovel.
Am told the combination of steady-state heating will work well with solid stone walls that act as a heat sink, though they are not insulated – I’ll let you know next year how well it works.
We are putting four boreholes down to 125m depth to make sufficient heat for an 18kW heat pump as calculated by the clever people who calculate these things.
Loading the drill pipe and emptying the chippings is refreshingly manual in a world full of automation which is toughening up the lads supporting the chief driller.
So far we are at 63m on the first drill hole mostly cutting though clay but with some limestone and chalk strata along the way.
The limestone strata is carrying water which is said to be good for the system as groundwater enables more efficient heat transfer.
Thankfully a government rebate will help offset the high cost of instillation, though for me accessing ‘free’ heat from the ground and ditching the old oil boiler seems a better use of capital than buying an electric vehicle right now, though I’ve not done the maths on the carbon saving.
If anyone is interested in installing a borehole ground-source heating system feel free to ask or better still come and visit our site near Enstone, Oxfordshire.
Dow Jones Industrials +0.56% at 35,457
Nikkei 225 +0.14% at 29,256
HK Hang Seng +1.19% at 26,094
Shanghai Composite -0.17% at 3,587
China – Beijing intervention sends China coking coal and coke prices tumbling, thermal coal producers ramp up output
Chinese coking coal and coke futures fell 9% this morning, hitting daily trading limits.
The National Development and Reform Commission announced plans to bring coal prices to a reasonable range.
The state planner also plans to police market-disturbing irregularities alongside malicious speculation.
Major Chinese coal producers, including China Energy Group, the primary miner of coal, have agreed to guide prices back to a ‘reasonable range’ and increase output.
The miners have promised to keep thermal coal spot prices below $282/t for energy content of 5,500kcal.
Daily coal production rose from 11.2mt in September to 11.6mt on Oct. 18.
Thermal coal futures fell 8% this morning from record highs yesterday.
Coking coal and coke futures have fallen 89% and 70% since June 30th.
Construction rebar fell 1.5% to $842.13/t.
Stainless steel futures fell 2.5% to 20,050CNY/t.
Dalian iron ore futures rose 1.5%, with spot 62% iron ore prices holding steady at $123/t.
China asks power grid operators to maximise renewables purchases
Power grid firms have been urged to maximise purchases of electricity from renewable projects.
China’s energy administration hopes that the increase will help ease power shortages.
Grid firms have been told to prioritise renewable power over more carbon-intensive sources for their electricity purchases.
US – Pentagon calls for US to boost rare earth supply chain with more mines
The US Department of Defense has called for both the US and its allies to ramp up the mining and processing of rare earths.
China’s dominance of the key EV ingredients have caused increased concern in the Pentagon over America’s access to an adequate supply.
A Pentagon representative stated that ‘new primary production of strategic and critical minerals – in a word, mining – is a necessity to increase resilience in global supply chains.’
The department fears ‘deliberate non-market interference in extended overseas supply chains’.
The Pentagon hopes to ‘work with miners to accelerate the transition from the lowest cost, technically acceptable sourcing, to one that reflects our values.’
Copper pares gains on China coal intervention
LME spot copper fell 7.2% overnight as China’s pledge to reduce coal prices soothed concerns over a disruption to metal supplies
China plans to raise coal output to 12mt/day, with priority given to deliveries from ports over railroads.
Shanghai November futures fell 3.2% on the news to $11,406.80/t.
Zinc fell 6.8% to $3,962/t.
US$1.1630/eur vs 1.1650/eur yesterday. Yen 114.45/$ vs 113.98/$. SAr 14.537/$ vs 14.573/$. $1.379/gbp vs $1.378/gbp. 0.749/aud vs 0.747/aud. CNY 6.392/$ vs 6.404/$.
Gold US$1,776/oz vs US$1,779/oz yesterday
Gold ETFs 98.5moz vs US$98.5moz yesterday
Platinum US$1,050/oz vs US$1,056/oz yesterday
Palladium US$2,099/oz vs US$2,071/oz yesterday
Silver US$23.66/oz vs US$23.66/oz yesterday
Rhodium US$14,000/oz vs US$14,100/oz yesterday
Copper US$ 10,019/t vs US$10,335/t yesterday
Aluminium US$ 3,064/t vs US$3,208/t yesterday
Nickel US$ 20,035/t vs US$20,325/t yesterday
Zinc US$ 3,534/t vs US$3,733/t yesterday
Lead US$ 2,360/t vs US$2,392/t yesterday
Tin US$ 37,375/t vs US$38,780/t yesterday
Oil US$84.5/bbl vs US$84.8/bbl yesterday
Natural Gas US$5.075/mmbtu vs US$5.006/mmbtu yesterday
Uranium UXC US$48.8/lb vs $48.1/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$123.0/t vs US$121.8/t – Vale to reduce iron ore output in Q4 as low prices limit appeal
Brazilian miner Vale is set to slow production of low-margin iron ore this quarter by 4mt.
It also raised the potential to cut back 2022 output if prices remain subdued.
Output is expected to be closer to 315mt than 335mt.
Vale produced 0.8% more tonnes of iron ore in Q3 2021 than the same period last year at 89.42mt.
Iron ore prices have slid on weakening demand from China and increasing shipments from Australia.
Chinese steel rebar 25mm US$902.4/t vs US$901.5/t
Thermal coal (1st year forward cif ARA) US$144.0/t vs US$144.0/t
Thermal coal swap Australia FOB US$222.5/t vs US$242.0/t
Coking coal swap Australia FOB US$363.0/t vs US$371.0/t
Cobalt LME 3m US$56,545/t vs US$56,545/t
NdPr Rare Earth Oxide (China) US$97,147/t vs US$95,645/t
Lithium carbonate 99% (China) US$27,063/t vs US$27,015/t
China Spodumene Li2O 5%min CIF US$1,240/t vs US$1,210/t
Ferro-Manganese European Mn78% min US$2,075/t vs US$2,056/t
China Tungsten APT 88.5% FOB US$310/t vs US$310/t
China Graphite Flake -194 FOB US$555/t vs US$555/t
Europe Vanadium Pentoxide 98% 7.9/lb vs US$7.9/lb
Europe Ferro-Vanadium 80% 31.25/kg vs US$31.25/kg
China Ilmenite Concentrate TiO2 US$384/t vs US$383/t
Spot CO2 Emissions EUA Price US$68.0/t vs US$68.7/t
Kincardine floating offshore wind farm now fully operational
50MW Kincardine wind farm, the world’s largest floating offshore wind farm, is now full operational according to a company statement.
Kincardine will generate over 200GWh of electricity a year, enough to power more than 50,000 Scottish households.
“Kincardine is further showing the readiness and commercial potential of floating technology,” Aaron Smith, Chief Commercial Officer, Principle Power, said.
The UK is a leader in realising the potential of floating wind, and “Kincardine demonstrates the readiness of floating wind to support the government’s net zero ambitions ahead of the forthcoming lease awards in ScotWind, floating wind leasing rounds managed by Crown Estate Scotland.”
80% of global offshore wind potential is located in deep waters, so floating technologies are seen as the future of offshore wind production.
UK government to invest further GBP620m for EVs as Net Zero Strategy announced
GBP620m in grants will be made available for EVs and on-street charging points.
An extra GBP350m has also been promised to help the automotive supply chain to move to electric.
To ensure that eco-targets are met, car makers will have to follow a new ‘Zero Emissions Vehicle Mandate’ which means they must sell a proportion of clean vehicles each year.
In the plans, further investments to reach net zero targets included:
An extra GBP120m to develop SMRs – small “modular” nuclear reactors that can be factory-built.
GBP625m for tree-planting and peat restoration.
GBP140m to two clusters promoting carbon capture and storage to produce hydrogen.
A GBP500m fund for low carbon innovation.
A GBP5,000 grant per household for switching from a gas boiler to a heat pump. This appears to be considerably lower than the current range of incentives.
Altus Strategies* (LON:ALS) 66.5p, Mkt Cap GBP54m – First quarterly royalty payment received from Caserones Mine
BUY – 125p
CLICK FOR PDF
Altus reports that it has received its first quarterly royalty payment of UAS$1.34 pre-tax ($0.94m post-tax) from its 0.418% net smelter return royalty interest on the Caserones copper mine in Chile.
The payment is in respect of Q2 production and exceeded Altus’ expectations by 18% due to strong copper prices during the period.
The next payment to Altus is expected in November 2021 for Q3 production.
Caserones is a large, open-pit porphyry copper-molybdenum deposit operated by Minera Lumina Copper Chile SpA, an indirect 100% owned subsidiary of JX Nippon Mining & Metals Corporation of Japan.
In 2020 Caserones reported production of 104,917 tonnes of copper and 2,452 tonnes of fine molybdenum in concentrates, and has an estimated 17 years of operation remaining under its current mine plan.
*SP Angel acts as Nomad and Broker to Altus Strategies
Anglo American (LON:AAL) 2,807.5p, Mkt Cap GBP38.4bn – De Beers reports continuing strong demand ahead of India’s Diwali holiday closures at diamond polishers
Anglo American has reported that the eighth De Beers sales cycle of 2021 realised US$490m on a provisional basis and that the previously reported sales for the seventh sales cycle of the year have now been increased to US$522m from the provisional figure of US$515m previously reported.
We estimate that this brings year-to-date sales to over US$4bn, ahead of the US$3.2bn achieved at this stage in, pre-Covid19, 2019.
De Beers is continuing its more flexible approach to rough diamond sales in order to accommodate Covid19 related restrictions on international travel and movement of products and as a result “the Sight event extended beyond its normal week-long duration”.
Commenting on the sales figures De Beers Chief Executive, Bruce Cleaver, confirms that, in the run-up to the “key holiday season and US consumer demand for diamond jewellery continues to perform strongly, we saw further robust demand for rough diamonds in the eighth sales cycle of the year ahead of the Diwali holiday when demand for rough diamonds is likely to be affected by the closure of polishing factories in India”.
Castillo Copper (LON:CCZ) 2.15p, Mkt Cap GBP27.3m – Follow-up due diligence work at Litchfield
Castillo Copper reports that, as a result of follow up sampling, it has highlighted four target zones along the western boundary of the Litchfield lithium project in the Northern Territory, Australia.
The second phase of its due diligence work involved “soil sampling across four grids – 400m spacing by 100m intervals – within four zones on the western boundary contiguous to CXO’s Mt Finniss Lithium Project” with the collection of 501 samples “collected from any outcrop, float or termite mounds found to be of significant size or interest”.
The company says that satellite imagery confirms that “there is comparable geology between the Finess and Litchfield Lithium Projects” and that “assay results for 657 surface samples are likely to have a key bearing on the due diligence process, especially if the lithium mineralisation is proved contiguous” implying that results from both phases of the sampling programme have not yet been received.
The comment by Managing Director, Simon Paull, that “Favourable assay results should make the case for the Litchfield Lithium Project significantly more compelling and hasten our due diligence efforts” also leads us to infer that assay results have yet to be received.
Due diligence is continuing at Litchfield as well as at the Picasso lithium project where the company also has an option to acquire the project.
Cora Gold (LON:CORA) 14.25p, Mkt Cap GBP34m – Selin drilling provides opportunity to develop a single open-pit
Cora Gold has released results from its 40,000m drilling programme on its Sanankoro gold project in southern Mali.
The company says that these results from the Selin deposit, which is located “on the eastern margin of the Sanankoro Shear Zone in the north-eastern corner of the Sanankoro permit … [completes] … the 2021 resource definition drilling for the Selin deposit.”
Cora Gold says that “The 300m long Selin gap between pit shells should now be removed in this MRE update to form a single coherent, economic unit. The combined results now confirm the resource continuity of broad, continuous, open pit-quality, oxide mineralisation along the entire 3.4km strike length of Selin gold deposit”.
Among the drill intersections reported today, which come from the most recent 4,126m of the 40,000m programme along 11 section lines, the company highlights:
An interval of 18m averaging 2.32g/t gold from a depth of 86m in hole SC1051; and
Another 18m interval averaging 2.29g/t gold from 146m depth in hole SC1032; and
A 16m intersection averaging 2.15g/t gold from 90m in hole SC1090; and
24m averaging 1.13g/t gold from a depth of 91m in hole SC1087.
The company says that in addition to identifying several new ore shoots in the hanging-wall to the west of the main mineralised zone at Selin the drilling shows that the “Selin resource remains open in all directions, since the 2021 drilling was focused on Measured and Indicated (M&I) conversion proximal to the 2019 pit shells”.
CEO, Bert Monro, described the hanging wall ore shoots as “an interesting development that will need further drilling but offers yet more potentially significant upside at the Selin deposit alone”.
The company’s website contains a link to SRK’s December 2019 mineral resources estimate for Sankoro Sanankoro Mineral Resource Estimate (coragold.com) which shows a total inferred estimate of 5mt at an average grade of 1.6g/t gold (265,000 contained oz). Approximately 40% of the resource (108,000oz in 1.8mt at an average grade of 1.8g/t gold) is reported from Selin which is the largest of the Sanankoro deposits including Zone A (91,000oz), Zone B (47,000oz) and Zone B North (19,000oz).
Phoenix Copper* (LON:PXC) 65p, Mkt Cap GBP72m – Magnetic survey at Red Star identifies four anomalies
(Phoenix holds 80% of the Empire mining property in Idaho)
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Phoenix Copper has reported that its ground magnetic survey at the Red Star project in Idaho has identified four anomalies including one coincident with the Red Star discovery outcrop and trending north-northeast from the outcrop.
The company says that the three new anomalies “are significantly greater” in both size and amplitude than the one at the discovery outcrop where the company has previously published an initial inferred mineral resources estimate of approximately 114kt at an average grade of 173g/t silver, 0.85g/t gold, 3.85% lead, 0.92% zinc and 0.33% copper.
The results of the survey “will be used to guide the location and direction of the upcoming drill programme at Red Star” where the company has previously announced its intention to drill some “3,000 metres of diamond core at the high grade silver-lead Red Star and Horseshoe/White Knob targets” in order to follow up silver and lead potential located by the company’s consultant structural geologist, Dr. David Rodgers, “in the contact region between the Mackay Granite formation and the White Knob limestone formation”.
As Dr. Rodgers’ report expected the silver enriched mineralisation to be located “in iron-rich portions of the skarn”, the presence of strong magnetic anomalies reported today is an encouraging endorsement of the overall exploration model in an area of steep terrain and limited geological outcrop.
CEO, Ryan McDermott, confirmed that in addition to the four high amplitude anomalies, the survey “also identified a trend of lesser magnetic anomalies which roughly parallels the patented claim boundary, trending off the patented claims to the northeast. This is the same trend that was targeted in 2020 using float and sub-crop geochemistry, and will also be the subject of future drill targeting” and that as a result it appears likely that additional drilling needs to be conducted further east along strike.
Mr. McDermott also confirmed that the magnetic survey “also included the … Horseshoe-White Knob area to the north, as well as the Navarre Creek gold project. The final reports for Horseshoe-White Knob and Navarre Creek are still in process and have not yet been received by the Company”.
He also took the opportunity to say that “the Phoenix team continues engineering for the feasibility study of the Empire Open-Pit Copper Oxide deposit, including final slope stability, metallurgical recovery and design, general arrangement layout, and hydrological characterization in the leach pad area”.
Conclusion: The ground magnetic survey has identified previously unknown anomalies at Red Star for drilling and provided confirmation of strongly magnetic zones which geological analysis indicates may host higher grade silver mineralisation at the contact between granite and limestone. Further magnetic results from surveying of the nearby White Knob/Horseshoe prospect and from Navarre Creek are awaited.
*SP Angel act as Nomad for Phoenix Copper
Power Metal Resources* (LON:POW) 1.75p, Mkt Cap GBP22.2m – Completion of sale of Schreiber-Hemlo Interests for GBP1m
Power Metals has confirmed the sale of its 100% owned Schreiber-Hemlo project interests located in Ontario, Canada, to First Class Metals.
The Schreiber-Hemlo Greenstone Belt is prospective for gold, silver, base and battery metals in typical Archaean / Hemlo style mineralised settings.
Power Metal Canada has been issued with 333,334 FCM shares at a price of GBP3 per share for total consideration of GBP1m.
FCM is currently pursuing a London listing targeted for late 2021.
Following the sale of Power Metal’s assets, the company has also subscribed for 9,588 shares in the pre-IPO financing of FCM at GBP3 per share – a total subscription value of GBP28,764.
Power Metal now has an interest in 342,922 FCM shares representing ~}36.1% of FCM after allowance for the pre-IPO fundraise shares issued by FCM.
*SP Angel acts as Nomad and Broker to Power Metal Resources
Rio Tinto (LON:RIO) – 4,883p, Mkt cap GBP81bn – $7.5bn pledged to halve mine emissions by 2030
Rio Tinto will invest $7.5bn in various projects to drive a 50$% reduction in its operational emissions by 2030.
Rios has also pledged to reduce its Scope 1 & 2 emissions by 15% by 2025, ahead of the COP26 climate summit later this month.
The company had previously targeted a 15% drop in absolute emissions by 2030, relative to 2018 levels.
Rio also announced today its plans to install 1GW of wind and solar power across its Pilbara iron ore mines to replace natural gas.
IGTV: Stock picks in the small-cap mining space:
Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw
VOX Markets: 10/06/21: https://audioboom.com/posts/7884446-john-meyer-talks-about-cornish-metals-empire-metals-anglo-american-ncondezi-energy-mkango-r
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
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, Tungsten, Spodumene, Ferro-Manganese, Graphite