SP Angel . Morning View . Friday 29 10 21
Gold set to rise on high industrial metals prices and recovery concerns
Castillo Copper (LON:CCZ) – September quarterly project summary
Chaarat Gold (LON:CGH) – Production down on weaker mining rates and grade with annual guidance reiterated at 57koz GE
Condor Gold* (LON:CNR) – Valuation 102.5p – GBP4.1m fund raising
Power Metal Resources* (LON:POW) – Exploration licenses granted at Wallal Project
Vulcan Energy (ASX:VUL) – Trading halt lifted following strong repost to short seller report
VOX Markets: 27/10/21: https://audioboom.com/posts/7968108-john-meyer-dicusses-china-the-baltic-dry-index-afritin-bushveld-condor-gold
IGTV: 08/10/21: How high energy prices are pushing up metals: https://youtu.be/em4zwo2i4Cs
Rare Earth Elements – Prices in China hit the highest level since Nov/11 as the nation’s power shortage worsens supply disruptions.
The NdPr Rare Earth Oxide price has risen to US$115,041/t vs US$114,932/t (Asian Metals).
The ongoing rise in rare earth prices is being driven by strong expected demand for permanent magnets for wind farms and electric vehicles.
Power rationing and anti-pollution measures in China are of significant concern and may lead to restricted availability of the critical magnet rare earths.
We recommend Mkango Resources* and Rainbow Rare Earths* as offering exposure to future rare earth production and significant upside value.
*SP Angel act as Nomad, broker and financial advisor
Lithium – Pilbara Minerals tendered 10,000t of spodumene concentrate (5.5% Li2O) at $2,350/t in its third auction.
That breaks the previous high reached in mid-September of $2,240/t and highlights how tight market is for lithium chemicals’ precursors.
To put it into perspective, the average price for SC6% cargoes this time last year was ~$380/t.
“As with the previous two auctions, strong interest was received in both participation and bidding by a broad range of buyers,” (Pilbara Minerals).
“Parties placed 25 bids online during the 45-minute auction window, with the Company considering the bidding to be very strong in light of the deferred delivery date.”
Chinese Spodumene prices are quoted at US$1,430/t vs US$1,390/t for Li2O 5%min CIF and appear to be lagging auction prices quoted by Pilbara Minerals for spot cargos
Tin inventories fall to lowest level in 32 years at 680t causing tin prices to hit a new high of $36,050 overnight
A major withdrawal of tin from the LME warehouses in Malaysia is causing concern in the tin trade
Tin prices continue to support $35,800/t despite the 285t of official stock withdrawls.
A further 210t of warrants were also cancelled taking on warrant stocks to 470t
Shanghai warehouses also saw 287t of withdrawls reducing stocks to 1,009/t of official available stock.
A further 407t of warrants were moved reducing the on warrant stock to 641t
Market tightness has caused the premiums for the Cash to 3-month contracts to rise to a $1,650/t backwardation.
Cornish Metals* and AfriTin offer good value exposure to tin prices on the AIM market in London
*SP Angel act as Nomad and broker to Cornish Metals
Low inventories boost copper rally, further upward movement expected
Copper prices have held strong, heading for a monthly gain as low inventory levels suggest demand is still strong.
3-month LME is up 8% this month, its strongest rise since April.
Shanghai futures rose 0.8% to $11,094.25/t.
Shanghai stocks hit their lowest level since June 2009 at 39,839t having hit 1998 lows earlier this month.
Reuters data reveals net long positions from fund managers on the red metal as of Oct. 19.
Traders expect further bullish movements from copper as inflation, green spending, infrastructure investment and supply challenges all boost demand.
Consistent supply deficits are expected in the long term as new projects coming to production are few and far between.
Gold extends rally on weak dollar and US yields rising $1,803/oz yesterday
The dollar is expected to register a 3rd straight weekly decline helping gold higher despite 10-year Treasury yields having their worst week in 3 months.
The Fed is set to meet next week, with recent data painting a weaker picture for US economic growth and potentially delaying Fed tapering and a rise in interest rates
Dow Jones Industrials +0.68% at 35,730
Nikkei 225 +0.25% at 28,893
HK Hang Seng -0.80% at 25,352
Shanghai Composite +0.82% at 3,547
US – Economic recovery slowed more than expected in Q3/21 on the back of supply chain issues and a surge in Covid-19 cases.
Personal spending decelerated strongly while shortages, transportation bottlenecks and rising costs weighed on investment.
Services sector fared better than manufacturing and with supply chain challenges expected to persist well into 2022 it is likely to remain the case in the coming quarter.
Core PCE price index followed closely by the Fed remained elevated although came in lower compared to the previous quarter (4.5%qoq annualised v 6.1% in Q2/21).
GDP (%qoq annualised): 2.0 v 6.7 in Q2/21 and 2.6 est.
Personal Consumption (%qoq annualised): 1.6 v 12.0 in Q2/21 and 0.9 est.
US Economy hit by supply chain issues and Delta variant Q3
US GDP grew at 2.0% in Q3, its weakest since the post-pandemic recovery began in mid-2020.
Consumer spending rose at 1.6% vs 12% in Q2.
US Hotel occupancy hit 65% last week, highest since Mid-August (STR) as consumer concern over Covid wanes.
GM’s vehicle shipments in North America fell c. 50% in Q3 2021 vs same period 2020.
Spending on autos fell at an annual rate of 54% in the US this summer as the chip shortage continues.
45% of Wall St Journal-polled economists see H2 2022 as the period in which bottlenecks ease.
Asian shares slide as Chinese property sector drags despite Evergrande making bond payment
Asian shares are set to break 3 weeks of gains as Chinese property stocks fell 4% this morning.
Chinese real estate stocks are down c. 12% this week as Beijing’s property tax adds to concerns of over-leverage.
Evergrande shares fell a further 1.6% despite having paid its 2nd dollar-bond repayment today on concerns of further payment deadlines.
Evergrande has two coupons worth US$82.5mn due Nov. 6th and has missed 7 payments Sep-Oct, all due over the next 30 days.
Evergrande paid US$45.2mn on its $951mn bond due March 2024 with the payment made close to the end of its 30-day grace period having missed the Sept. 29th date (SCMP).
Evergrande founder, Hui Ka-yan, pledged his Hong Kong mansion as collateral for a $38.6mn loan to China Construction Bank (Data leaked from the Land Registry).
Evergrande has been struggling to sell assets to cover debt obligations, including a Hong Kong office tower and its ‘Evergrande Property Services
Furniture vendors, suppliers and real estate agents are all demanding payment from Evergrande, with Midland Realty suing the company (SCMP).
Centaline, another property developer, is demanding payment on HK$200mn worth of commissions.
Evergrande has $203bn worth of unfinished property developments in the pipeline.
ECB left accommodative monetary policy in place, in line with estimates, although acknowledging that faster inflation will be in place for longer than the central bank previously anticipated.
Nevertheless, the ECB highlighted that inflationary pressures will ease through 2022.
Markets bet that tightening will come as early as 2022 bring the timing of the first hike two months forward to October after the central bank press conference, Bloomberg writes.
Germany – Inflation continued to grow driven by higher energy costs and a global squeeze on supplies, Bloomberg writes.
CPI (EU Harmonised, %mom): 0.5 v 0.3 in September and 0.4 est.
CPI (EU Harmonised, %yoy): 4.6 v 4.1 in September and 4.5 est.
GDP (%qoq): 1.8 v 1.9 (revised from 1.6) in Q2/21 and 2.2 est.
GDP (%yoy): 2.5 v 9.8 (revised from 9.4) in Q2/21 and 2.5 est.
GDP (%qoq): 3.0 v 1.3 (revised from 1.1) in Q2/21 and 2.2 est.
GDP (%yoy): 3.3 v 18.8 (revised from 18.7) in Q2/21 and 2.4 est.
GDP (%qoq): 2.6 v 2.7 in Q2/21 and 2.0 est.
GDP (%yoy): 3.8 v 17.0 (revised from 17.3) in Q2/21 and 3.0 est.
GDP (%qoq): 2.0 v 1.1 in Q2/21 and 2.9 est.
GDP (%yoy): 2.7 v 17.5 in Q2/21 and 3.9 est.
Latam countries doubtful UN’s deep-sea mining rules completed by 2023
The UN’s International Seabed Authority’s regulations to govern deep-sea mining are not expected to be finalised by 2023 owing to pandemic-related disruptions.
Miners are looking to exploit deposits of nickel and cobalt among other metals on the sea floor.
The Latin American and Caribbean Group have claimed ‘no tangible progress has been achieved’ towards the regulations’ adoption. (Reuters).
African representatives see an agreement by mid-2023 as ‘seemingly insurmountable’.
US$1.669/eur vs 1.1602/eur yesterday. Yen 113.56/$ vs 113.71/$. SAr 15.219/$ vs 15.099/$. $1.380/gbp vs $1.375/gbp. 0.754/aud vs 0.752/aud. CNY 6.389/$ vs 6.397/$.
Gold US$1,796/oz vs US$1,803/oz yesterday
Gold ETFs 98.3moz vs US$98.3moz yesterday
Platinum US$1,020/oz vs US$1,022/oz yesterday
Palladium US$2,009/oz vs US$1,989/oz yesterday
Silver US$23.94/oz vs US$24.13/oz yesterday
Rhodium US$14,100/oz vs US$14,100/oz yesterday
Copper US$ 9,572/t vs US$9,668/t yesterday
Aluminium US$ 2,707/t vs US$2,676/t yesterday
Nickel US$ 19,355/t vs US$19,720/t yesterday
Zinc US$ 3,319/t vs US$3,367/t yesterday
Lead US$ 2,385/t vs US$2,403/t yesterday
Tin US$ 35,800/t vs US$35,535/t yesterday
Oil US$84.8/bbl vs US$83.7/bbl yesterday
Both Brent and WTI oil prices edged up in early trading today but are heading or their first weekly losses in at least eight weeks after US oil stocks rose more than expected and Iran flagged it was resuming talks with Western powers which could lead to an end to sanctions
Both benchmarks, which touched multi-year highs on Monday, but are on track to fall about 1% for the week – the first weekly drop in 10 weeks for WTI and the first in eight weeks for Brent
It appears that the heat has come out of a two-month rally stoked by tight gas and coal prices in Europe and China which had spurred fuel-switching in power generation to fuel oil and diesel while oil supplies were tight
US oil stocks rose much more than expected in the week to 22 October, data from the Energy Information Administration showed on Wednesday
However, with an oil deficit that will remain in place well into next year, energy traders will buy most dips if OPEC+ remains disciplined in gradually increasing output
All eyes are on the next OPEC+ meeting on 4 November
Consensus expects the group to stick to its plan to add 400,000bopd of supply each month until April 2022
Saudi Arabia has cautioned that, with an unclear demand picture, there could be a ‘huge uplift’ in global oil stocks in 2022
Concerns about erratic demand growth persist, with China looking to curb pollution ahead of the Beijing Winter Olympics and restricting mobility to curb any outbreaks of COVID-19
China reported 64 new confirmed coronavirus cases for 28 October, compared with 39 a day earlier, according to the country’s health authority earlier today
Natural Gas US$5.789/mmbtu vs US6.096/mmbtu yesterday
Russian President Vladimir Putin has instructed Gazprom to ship more gas westward yesterday sending fuel prices lower across Europe
European gas futures slid by almost 10% the Russian leader said the state energy company should pump more gas to Germany and Austria as soon as it has filled stores at home
Gazprom’s underground storage sites in Western and Central Europe are almost empty at a time of year when they would normally be brimming
US natural gas prices also reversed course yesterday, dropping 7.5% after rising 5.5% on Wednesday
This followed an inline build in natural gas inventories
The weather is expected to be colder than normal throughout the mid-West over the next 6-10 days but then turning milder throughout most of the West Coast.
There are no significant tropical disturbances in the Atlantic that are treating to become a tropical cyclone over the next 48-hours
The EIA expects Henry Hub prices will decrease after the first quarter of 2022, as production growth outpaces growth in LNG exports, and will average US$4.01/mmbtu for the year
US exports of LNG are establishing a record high this year, a new record high anticipated for next year
The EIA expects LNG exports to average 9.7Bcf/d this year (3.2Bcf/d more than the 2020 record high of 6.5Bcf/d) and to exceed annual pipeline exports of natural gas for the first time
The year-on-year increase in LNG exports coincides with slight growth in US natural gas production
US dry natural gas production is expected to average 92.6Bcf/d this year, which is 1.1Bcf/d more than in 2020 but 0.3Bcf/d less than in 2019
Uranium UXC US$47.8/lb vs $48.9/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$110.3/t vs US$117.4/t
Chinese steel rebar 25mm US$834.6/t vs US$832.7/t – China steel futures rise on Beijing’s most recent pollution intervention, raw materials slide
China’s environment ministry has announced plans to limit concentrations of PM2.5 over the winter.
The Ministry hopes to cut the hazardous particles by 4 on an annual basis over the next few months, staggering production at steel mills. (Reuters)
Mysteel’s steel production index rose 4.9% this week to 9.2mt, still considerably lower than 10.7mt same period last year.
Construction rebar rose 0.8%, HRC rose 0.9%, stainless steel futures rose 0.6%.
The NDRC also stated that coal prices have ‘room for further adjustment’ following its recent investigation.
Coking coal futures extended their decline to 10.2%, marking a 21.1% decline this week.
Iron ore futures fell 5.6%, spot prices for delivery to China fell $6 to 116.5/t (SteelHome).
Thermal coal (1st year forward cif ARA) US$112.0/t vs US$113.0/t
Thermal coal swap Australia FOB US$174.0/t vs US$182.5/t
Coking coal swap Australia FOB US$372.0/t vs US$364.0/t
Cobalt LME 3m US$56,545/t vs US$56,545/t
NdPr Rare Earth Oxide (China) US$115,041/t vs US$114,932/t – USGS and Rio Tinto join forces in search for Montanan critical minerals
Rio Tinto has teamed up with the United States Geological Survey to find critical minerals near Montana’s Boulder batholith.
The team will use airborne geophysical surveys over the Continental Divide in a development of the Earth mapping Resources Initiative.
The Boulder Batholith is thought to contain critical mineral resources including rare earth elements, tin, tungsten, tellurium, copper, molybdenum, and gold.
The surveys utilise airborne magnetic and radiometric surveys to reveal rock formations and geologic structures.
The data collected will be publicly available.
Lithium carbonate 99% (China) US$27,469/t vs US$27,443/t
China Spodumene Li2O 5%min CIF US$1,430/t vs US$1,390/t
Ferro-Manganese European Mn78% min US$2,258/t vs US$2,247/t
China Tungsten APT 88.5% FOB US$315/t vs US$314/t
China Graphite Flake -194 FOB US$595/t vs US$585/t
Europe Vanadium Pentoxide 98% 8.0/lb vs US$8.0/lb
Europe Ferro-Vanadium 80% 32.75/kg vs US$32.75/kg
China Ilmenite Concentrate TiO2 US$387/t vs US$387/t
Spot CO2 Emissions EUA Price US$69.2/t vs US$68.8/t
Taiwanese battery maker ProLogium raises $326m in latest funding round
Lithium solid-state battery manufacturer, ProLogium Technology, has raised $326m in its latest funding round.
The investment likely values the battery maker at around $2-$3bn.
The company plans to use the capital to expand its mass production of solid-state lithium batteries in Asia, Europe and the United States between 2023 and 2025, it said in a statement on Friday.
The battery maker, which is yet to deliver any battery product to automakers, have signed strategic cooperation agreements with Chinese EV makers Nio and Enovate, according to the company’s website.
Castillo Copper (LON:CCZ) 2.03p, Mkt Cap GBP26.9m – September quarterly project summary
Castillo Copper’s quarterly report for the three months to 30th September provides a summary of progress on its flagship ‘Big One’ project in the Mt Isa Belt of NW Queensland as well as its Zambian copper exploration and the due-diligence work on two Australian lithium projects where it has a 90-day option, from 29th September, to acquire the projects.
At the ‘Big One’, recent drilling includes the intersection of visible copper mineralisation “in drill-hole BO_318RC in two distinct zones – 11m from 89-100m and 34m from 153-187m (apparent thickness)”and the publication of assay results including:
An intersection of 9m downhole width at an average grade of 1.42% copper from a depth of 88m in hole BO-317RC including 4m averaging 3.06% copper from 92m depth with a single metre between 92-93m assaying at 9.19% copper; and
A 5m wide intersection averaging 1.06% copper from 141m depth in hole BO-316RC; and
A 3m wide intersection at an average grade of 1.22% copper from 65m depth in hole BO-315RC
Since the end of September, a second drilling campaign has started at the ‘Big One’ project “verified the known system runs for ~400m along the strike event then intersects at a sharp angle with a major regional fault”. A third drilling programme “comprising at least 22 drill-holes, will target several prime areas including the sizeable bedrock conductor on the north side of the dacite dyke”.
In Zambia, geophysical surveying identified drill targets along a 6km strike length of a previously delineated geochemical anomaly at Luanshya. Drilling is expected to start during the current quarter. Geophysical work has now moved to the Mkushi project.
Due diligence is continuing at the Litchfield lithium project in the Northern Territory and at the Picasso lithium project in Western Australia. Initial site visits and remote sensing work has confirmed pegmatite mineralisation of potential interest at both projects and assessment is continuing with further site visits.
Chaarat Gold (LON:CGH) 20p, Mkt Cap GBP138m – Production down on weaker mining rates and grade with annual guidance reiterated at 57koz GE
Q3 production came in at 13.2koz GE (Q3/20: 15.5koz) on the back of lower mining rates and mined grades.
Own material Kapan production was 9.9koz (Q3/20: 12.7koz) with third party toll processing contributing 3.3koz (Q3/20: 2.9koz).
The Company reports Kapan operations were affected by lower fleet availability and encountered lower ROM grades in Jul/21 with performance having improved since then returned to planned run rate in September.
AISC costs (ex TC/RC of ~$180/oz and calculated per oz produced) averaged $1,366/oz (Q3/20: $1,192/oz) reflecting lower production as well as inflationary pressures on the supplies side (reagents, tires, oils and fuels).
Underground development picked up during the quarter coming in at 6,011m (Q3/20: 5,857m).
Mill throughput totalled 167.1kt (Q3/20: 190.4kt) including 139.2kt of own ore and 27.9kt from 3rd parties (Q3/20: 169.1kt and 21.3kt, respectively).
Sales of copper/gold concentrate were paused during the quarter amid a revision in copper concentrates’ export regulations with the management in discussions with authorities to clarify whether regulations apply to Kapan; concentrate is currently being stockpiled on site and is expected to be sold through Q4/21.
The Company estimates Kapan generated ~$2.4m in EBITDA on mine level (Q3/20: $6.4m) reflecting a delay to copper concentrate sales flagged above.
The team highlighted increasing number of Covid cases in Armenia over the past two months and a potential effect it may have on performance in Q4/20.
Additionally, the Company noted challenges in getting spare parts on site reflecting logistics bottlenecks currently experienced globally.
The Company reiterated 2021 guidance for 57koz GE (including 3rd party) supported by own production and the steady outlook for third party ore supply.
At Tulkubash, the Company completed 2021 infill and step out drilling programme with MRE update expected next year.
Additionally, the team is working on closing the Tulkubash project funding that is now expected to be completed in 2022 with potential first gold pour in 2024 as the ongoing dispute between Kyrgyzstan and Centerra delays financing timeline.
Condor Gold* (LON:CNR) 37p, Mkt Cap GBP53m – GBP4.1m fund raising
Click here for Initiation note pdf
Condor Gold reports that it is raising GBP4.1m though the placing of approximately 11.7m units, comprising one share and a purchase warrant for half a share, at a price of 35p per unit.
The proceeds, which represent “8.7% of the Company’s existing issued share capital” are to be “used to complete a Feasibility Study” for the company’s initial 100,000oz pa La India gold development project in Nicaragua as well as to “pay the balance of a new SAG Mill, which is now 80% in Nicaragua and advance the site clearance and preparation for the processing plant”.
The purchase warrant entitles the holder to purchase an additional share in Condor Gold at a price of 50p/share over the next 24 months.
The company explains that 50% of the “Warrants shall be subject to an accelerated exercise period if the closing mid-market price of the Ordinary Shares on AIM is more than 60p for 10 consecutive trading days”.
Directors and management have participated in the issue with interests of Jim Mellon subscribing for around 2.86m units (approximately 24%) while Andrew Cheatle, Ian Stalker, Mark Child and John Seaberg have subscribed for a total of approximately 115,000 units or around a further 1%.
Echoing the consistent risk mitigation stance that has characterised Condor Gold’s development strategy, Chairman and CEO, Mark Child said that the additional funding to complete the Feasibility Study would increase “the confidence of the Project, incorporating a Feasibility Level engineering design, and +/- 15% capital and operating costs. This in turn will facilitate the securing of Project financing ahead of Project construction”.
Recent announcements from Condor Gold indicate that it expects to publish the findings of the Feasibility Study during Q1 2022.
We consider that Condor Gold’s development approach has, prudently and consistently, sought to address and contain development risks, including through the recent infill drilling programme which should provide increased assurance of the nature and quality of ore feed to the mill during the early stages of operations.
Condor Gold’s 30th June 2021 balance sheet reported a cash balance of GBP3m
Conclusion: The additional funding announced today, in conjunction with existing cash resources, provides security of completion for the La India Feasibility Study expected in Q1 2022.
*SP Angel act as a broker to Condor Gold
Power Metal Resources* (LON:POW) 1.75p, Mkt Cap GBP21.3m – Exploration licenses granted at Wallal Project
Power Metal reports that it has been granted the final exploration license at its Wallal Project in the Paterson Region of Western Australia.
Power Metal has now been granted the following licenses: E45/5853 – Wallal West 1, E45/5816 – Wallal Main, E45/5880 – Wallal West 2.
The Wallal West 1 licence fully encompasses the Western magnetic anomaly, which measures 5km by 5km, and is cross-cut by a northwest-southeast trending inversely magnetised dyke.
The granting of the license means that the entire Wallal Project land package has successfully been granted, which covers the Western, Eastern and Border anomalies.
Phase I seismic and 2D seismic reprocessing work is currently underway at Wallal, with results expected shortly.
Power Metal were recently awarded AU$165,000 in co-funding monies from the Western Australia government for a drilling programme targeting the Eastern and Border anomalies, expected to begin in Q1 2022.
*SP Angel act as Nomad and Broker to Power Metal Resources
Vulcan Energy (ASX:VUL) – A$12.51, Mkt cap A$1.55bn – Trading halt lifted following strong repost to short seller report
Vulcan Energy has been released from its Trading Halt on the ASX following publication of management’s strong repost to the critical report published by J Capital Research Limited, a short selling firm.
J capital has not named any of its experts and has used data from the Upper Rhine geothermal brines from 1981.
Anne Stevenson-Yang, co-founder of J Capital Research is reported to make a lucrative living bashing Chinese companies as a supposedly impartial analust (medium.com).
Vulcan Energy continue to evaluate the lithium-bearing geothermal brines
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
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Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite