SP Angel . Morning View . Friday 12 11 21
Copper rises on China plenary comments and Evergrande payment
Gold prices rise on rising US inflation
Tin rises on China covid restrictions with Myanmar
Pre-IPO gold project financing – We are raising funds for a new gold project development in Ghana
Altus Strategies* (Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)) BUY, Target 125p – Q3 update highlights acquisition of the first revenue generating royalty on the Caserones Cu/Mo mine
Bacanora Lithium (Bacanora Lithium Plc (AIM:BCN, OTC:BCLMF)) – Ganfeng cash takeover offer update
Power Metal Resources* (Power Metal Resources PLC (AIM:POW)) – Drill programme at Silver Peak delivers exceptional grades
VOX Markets: 10/11/21: https://audioboom.com/posts/7977163-john-meyer-on-ev-investment-china-bluerock-diamonds-kodal-minerals-rainbow-rare-earths
IGTV: Cornish Metals*, Mkango *, Kodal * – Fed to consider potential China slowdown when looking at rates https://youtu.be/FjIMHHXKzXg
*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.
Gold ($1,851/oz) – set for best week since May as inflation woes heat up
Gold is set for its largest weekly gain in six months after US inflation rose at its fastest pace in over 30 years.
US CPI data increased by 6.2% in October, with many expecting similar figures in the coming months.
Spot gold has risen over 2.3% this week to ~$1,860/oz and with prices likely to remain elevated whilst inflation worries persist.
We recommend GoldStone Resources (AIM:GRL)* and Condor Gold*, both developing gold assets which expect to be producing in the near term. *SP Angel acts as Nomad and brokers
Copper prices heading back towards $10,000/t as Evergrande default-dodge and China orders authorities to help Evergrande complete unfinished properties
Copper bounced 1.2% to $9,650/t on reports of bondholders receiving payments due Wednesday.
LME copper inventories are 50% lower than August.
Further stimulus is expected in China to support construction companies hit by the Evergrande crisis
Prices for structural steel rose 7.4%, Dalian iron ore bounced 6.8%, HRC up 8%, coking coal up 7%, stainless steel prices remain flat.
Tin ($37,935/t) prices continue to rise as China cuts off port access to Myanmar as Covid cases rise
Around 90% of tin concentrates for refineries in Yunnan come from Myanmar
Stocks to consider are AfriTin and Cornish Metals*. *SP Angel acts as Nomad and brokers
China EV sales rise 7.2% on month prior in October
China’s NEV sales rose 133% compared to the year before and 7.2% on the month prior to 383,000 units.
China’s NEV sales in October accounted for 16.4% of its total vehicle sales, with an 18.2% share for new energy passenger vehicles.
Nickel and Zinc added to draft US Critical Minerals list over fears of high-grade shortage
USGS’s draft critical mineral list has been opened to the public for comment.
Biden’s administration has noted the importance of boosting domestic nickel refining capacity as a priority.
The review raised the potential for a shortage of battery-grade nickel in 3-7 years.
Potash, Rhenium and Strontium are absent due to their ‘low disruption potential’.
Inventory restocking – is largely done in the West with the Baltic Exchange dry freight index halving since its peak in October
Christmas, Black Friday, Singles Day and other seasonal festivals added to the logistical chaos, competition for containers and shipping space.
Freight rates were driven to record highs as manufacturers competed with retailers to restock at around the same time, not helped by ongoing Covid protocols, port congestion and Eurozone bureaucracy.
Lower value goods can now afford containers though ongoing clampdowns in China may continue to affect shipments.
Maybe those yellow Tonka toys will arrive from China in time for Christmas.
WA miner trials vanadium redox flow battery at nickel operation
IGO and VSUN Energy are to trial a vanadium redox flow battery integrated hybrid standalone power system.
The 300kWh VRFB is manufactured by Gransolar Group’s E22.
It is expected the battery will be paired with solar PV tech and a backup diesel generator.
It will power a bore pump on-site.
Mining inflation
We notice inflation in the capital cost of developing mining projects.
Operating costs are also likely to rise, though rising production rates are likely to offset much of this from a unit cost perspective.
Higher commodity prices should also outweigh the impact of higher fuel, labour and reagent costs.
Dow Jones Industrials -0.44% at 35,921
Nikkei 225 +1.13% at 29,610
HK Hang Seng +0.26% at 25,313
Shanghai Composite +0.18% at 3,539
Economics
Evergrande – shares rise to HK$2.78 (mkt cap US$4.7bn) good news yesterday as Evergrande avoided default at the 11th hour
The business now has a further $366m of payments to make by January.
The Chinese authorities have been ordered to ensure unfinished properties are completed. Evergrande has 1m unfinished apartments.
The orderly management of the crisis should help settle the property and construction sectors along with the restructuring of Evergrande empire
China plans to break up Evergrande over the next few years.
Evergrande cuts contact with offshore bondholders as agency files lawsuit
Representatives of offshore bondholders with $5bn of Evergrande’s debt have stated they have not had ‘meaningful dialogue’ with the developer since it missed a payment Sept. 23rd. (SCMP)
The $129mn interest payment is due Sept. 23/29th, putting Evergrande at risk of default again despite Wednesday’s evasion.
Property agency Centaline Group has filed 2 lawsuits to recoup $13mn in unpaid commission.
2 HK-listed agencies sued this earlier week.
China – CPI rose 0.7% in October vs 0% in September and 1.5% yoy vs 0.7% yoy in September
PPI rose 13.5% yoy in October vs 10.7% in September
Total social financing slowed to CNY1,590bn in October vs CNY2,900bn in September
Vehicle sales fell 9.4% in October vs -19.6% in September
Concerns rise over cold weather’s impact on China’s power supplies
Despite a significant ramp up in supply and halving of thermal coal prices, China’s total coal inventories remain 20% lower than the October average between 2017-20.
Inventories at key power plants October-end 38% lower than 2017-20 average. (Caixin Data Tech)
Analysts expect ‘price volatility to be high’ amid a ‘very tight’ thermal coal market.
Demand is expected to ramp up considerable as the winter weather sets in.
China – sixth plenary session established the core position and guiding role of President Xi Jinping’s leadership with decisive significance
The communique opens the way for President Xi to serve a third term as the party leader following Presidents Mao and Xiaoping.
Xi Jinping is the necessary core for the Chinese Communist Party and is indispensable, according to the resolution
The resolutions were passed by >300 Central Committee leaders.
Very fortunately President Xi has not presided over the death and starvation suffered under Mao whose’ Great Leap Forward policy is said to have led to the death of up to 45m people
US Inflation – US CPI rose 0.9% in October vs 0.4% in September and 6.2% yoy higher in October vs 5.4% yoy in September
US 10-year breakeven rate rises to new 15-year high
The rise in the breakeven rate is reflecting expectations for higher inflation in the US
The rate reflects the difference between the yield of a nominal bond and an inflation-linked bond of the same duration.
While higher logistics, energy and raw materials prices have driven inflation in recent months we see the cost of goods settling at a new higher level
Japan – PPI 1.2% in October vs 0.3% in September and 8% yoy in October vs 6.4% in September
Germany – CPI rose 0.5% in October vs 0% in September yoy 4.5% in October 4.1% in September
Brazil – CPI 1.25% in October vs 1.15% in September 10.67% in October 10.29% in September
Greenland – government bans uranium mining halting REE project as expected
Greenland’s parliament has passed legislation that will ban uranium mining and cease development of the Kuannersuit mine, a major REE deposit on the island.
The law passed on Tuesday was put forward by the Inuit Ataqatigiit party that came to power in April after campaigning to ban uranium mining and halt the project.
The new law bans exploration of deposits with a uranium concentration higher than 100ppm – considered very low grade by the World Nuclear Association.
The law also includes the option of banning the exploration of other radioactive minerals such as thorium.
Currencies
US$1.1444/eur vs 1.1463/eur yesterday. Yen 114.08/$ vs 114.04/$. SAr 15.330/$ vs 15.410/$. $1.338/gbp vs $1.339/gbp. 0.730/aud vs 0.730/aud. CNY 6.392/$ vs 6.404/$.
Commodity News
Precious metals:
Gold US$1,851/oz vs US$1,856/oz yesterday
Gold ETFs 98.0moz vs US$98.0moz yesterday
Platinum US$1,079/oz vs US$1,088/oz yesterday
Palladium US$2,041/oz vs US$2,048/oz yesterday
Silver US$25.10/oz vs US$24.91/oz yesterday
Rhodium US$14,350/oz vs US$14,350/oz yesterday
Base metals:
Copper US$ 9,632/t vs US$9,579/t yesterday
Aluminium US$ 2,663/t vs US$2,639/t yesterday
Nickel US$ 19,705/t vs US$19,720/t yesterday
Zinc US$ 3,241/t vs US$3,288/t yesterday
Lead US$ 2,364/t vs US$2,354/t yesterday
Tin US$ 37,935/t vs US$37,770/t yesterday
Energy:
Oil US$82.2/bbl vs US$82.8/bbl yesterday
Oil prices settled slightly higher yesterday, with a stronger US dollar coupled with concerns over increasing US inflation, and after OPEC cut its 2021 oil demand forecast due to high prices
On Wednesday, US data showed consumer price inflation rose in October at an annual rate of by 6.2%, the fastest in 30 years, driven largely by steeper energy prices
Expectations that the data would prompt US rate hikes pushed the dollar higher and sent Brent and WTI crude down by 2.5% and 3.3%, respectively
The dollar rose to almost 16-month highs yesterday against the euro and other currencies due to bets on interest rate hikes
Brent and WTI futures dropped sharply earlier this week as traders sold out of riskier assets, including stocks and commodities, driven by expectations that central bankers will take steps to curb rising prices
In the STEO, the EIA projected average prices for retail regular grade gasoline would decline from US$3.32 per gallon in November to US$3.16 in December and US$3.00 in the first quarter of 2022.
Any release from the US SPR, although it would likely have a temporary bearish effect on prompt prices, is not a lasting solution for an imbalance between supply and demand
Global oil spare production capacity could diminish next year as air passengers return to the skies, removing further reserves
Travelers took off from the US again, while the passage of Biden’s US$1trn infrastructure bill and better-than-expected Chinese exports underlined a recovering global economy
In India, fuel demand rose in October to a seven-month peak, with gasoline sales surging to an all-time high
Natural Gas US$5.071/mmbtu vs US$4.984/mmbtu yesterday
European natural gas prices remain flat below monthly highs as Gazprom announced that it had approved and started implementing a plan to send natural gas into five storage sites across the continent
The volumes and the transportation routes for the gas flows have been determined, concerns on the market and sending prices lower
Natural gas prices at the Dutch TTF hub, the benchmark for European gas, traded 2$ lower early yesterday
US supply of natural gas increased slightly last week
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$46.8/lb vs $46.4/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$90.6/t vs US$88.6/t
Chinese steel rebar 25mm US$750.4/t vs US$742.5/t
Thermal coal (1st year forward cif ARA) US$105.0/t vs US$105.0/t
Thermal coal swap Australia FOB US$149.0/t vs US$149.0/t
Coking coal swap Australia FOB US$333.0/t vs US$332.0/t
Other:
Cobalt LME 3m US$59,500/t vs US$59,500/t
NdPr Rare Earth Oxide (China) US$123,977/t vs US$122,964/t
Lithium carbonate 99% (China) US$27,924/t vs US$27,872/t
China Spodumene Li2O 5%min CIF US$1,870/t vs US$1,820/t
Ferro-Manganese European Mn78% min US$2,111/t vs US$2,115/t
China Tungsten APT 88.5% FOB US$313/t vs US$313/t
China Graphite Flake -194 FOB US$650/t vs US$650/t
Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb
Europe Ferro-Vanadium 80% 31.85/kg vs US$31.85/kg
China Ilmenite Concentrate TiO2 US$387/t vs US$386/t
Spot CO2 Emissions EUA Price US$72.4/t vs US$70.1/t
Battery News
Northvolt produce first battery cell with ‘100% recycled materials’
The Swedish battery manufacturer confirmed that it had produced its first battery cell using “100% recycled nickel, manganese and cobalt.”
The cell’s nickel-manganese-cobalt cathode had been produced using metals “recovered through the recycling of battery waste.”
Tests showed the performance of the cell using recycled materials was on par with the performace of cells made using freshly mined metals.
The company also announced the design of its own recycling facility would be expanded so it could recycle 125,000t of batteries annually.
Construction on the recycling plant, named Revolt Ett is expected to begin in 2022, with operations starting in 2023.
It will use materials from end of life EV batteries as well as scrap metals from Northvolt’s gigafactory – both facilities will be located in Skelleftea, northern Sweden.
According to the company, the Revolt plant will be able to recycle materials including lithium, cobalt, manganese and nickel, supplying the gigafactory in the process.
Plastics, copper and aluminum will also be recovered and “recirculated back into manufacturing flows through local third-parties.”
Shell and RWE (ETR:RWE) interested in hydrogen plant in the UK
RWE and Shell New Energies have sign an MoU to advance ambitious projects for the production, use and distribution of hydrogen in Europe.
The primary aim of the MoU is to identify concrete projects that would support the decarbonisation of industries, as well as RWE gas and biomass power plants.
The two companies have previously worked together on similar projects in Europe, including the NortH2 project in the Netherlands and the AquaVentus project in Germany, and will now look to build projects in the UK.
Gelion UK Limited to register as plc ahead of IPO on AIM
The UK-Australian energy storage innovators are re-registering as Gelion PLC ahead of an IPO on the AIM market.
The company specialises in battery storage technology, developing a zinc-bromide battery that does not require a flowing electrolyte.
The Endure zinc-bromide battery is designed to provide a safe, cost-effective, long-life and recyclable alternative to lithium-ion and lead-acid (PbA) battery technologies for stationary storage of renewable energy.
Gelion’s battery can be manufactured using brownfield lead-acid battery production facilities, keeping capital costs very low when compared to other technologies for stationary energy.
Company News
Altus Strategies* (Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)) 71p, Mkt Cap GBP57m – Q3 update highlights acquisition of the first revenue generating royalty on the Caserones Cu/Mo mine
BUY – 125p
The Company released Q3 operational and financial update with one of the major milestones accomplished during the quarter being the acquisition of the Caserones NSR in early September.
Altus acquired an effective 0.418% NSR royalty on the producing Caserones Copper Molybdenum Mine in Chile in a $34m deal.
The deal brought the first revenue generating royalty into the portfolio validating royalty business model and increasing exposure to copper.
Royalty is estimated to generate ~$3.2m (post tax) per annum attributable to Altus (using ~$9,000/t copper price and ~145ktpa CuEq).
La Mancha, a major cornerstone investor with a 35% interest in the Company, provided a bridge loan to the tune of $29m with the balance covered by existing cash balances.
The Company is planning to refinance the facility by mid-Feb/21.
The Company received first quarterly royalty payment of $1.3m ($0.9m post tax) from the Caserones royalty later in October.
In western Mali, the team reported high grade intersections from its ongoing step out and infill drilling at the wholly owned Diba Gold Project including 8.5g/t over 24m from 20m and 2.54g/t over 30m from 36m.
The team restarted drilling in early November following a short break for the rainy season with a view to grow the existing MRE (403koz at 1.22g/t) and update the latest PEA.
In southern Mali, Altus/Marvel JV continued with exploration drilling at the Tabakorole Gold Project as well as expanded the project area from 100km2 to 292km2 adding prospective adjacent properties.
Tabakorole MRE update was released in October showing 1,025koz at 1.20g/t, up from 910koz at 1.18g/t, accounting for ~10,000m of drilling completed during the 2020-21 field season.
Altus holds 49% interest in the project with Marvel currently earning a 70% interest through the completion of the third phase of exploration.
In Egypt, the team discovered numerous hard rock artisanal gold workings from the field reconnaissance programme at newly secured properties in the Eastern Desert of Egypt.
In Morocco, the Company reported high grade copper and silver results in reconnaissance exploration as well as mapping a series of historic hard rock artisanal mines at the recently granted Azrar, Izougza and Tata projects.
The Group was granted four new exploration licenses (~149km2 in total) targeting copper and silver.
Q3 closing cash balance stood at GBP6.5m with GBP1.6m in marketeable securities (Canyon Resources, Desert Gold and Stellar shares).
La Mancha bridge loan stood at GBP22.1m.
The Company recorded a GBP2.3m loss during the quarter (Q3/20: -GBP0.7m) reflecting Caserones NSR acquisition deal costs, higher exploration spend driven predominantly by Mali, Egypt and Morocco as well as a GBP0.5m impairment of the Pitiangoma Est project in southern Mali.
*SP Angel acts as Nomad and Broker to Altus Strategies
Bacanora Lithium (Bacanora Lithium Plc (AIM:BCN, OTC:BCLMF)) 67.5p, Mkt Cap GBP259m – Ganfeng cash takeover offer update
The Company reports that nearly 57% of shareholders including Ganfeng (29%) have so far expressed support for the 67.5p cash takeover offer from Ganfeng.
As such the offer has met the Acceptance Condition (>50% of shareholders to support the transaction) with the deal now subject to satisfying other terms including the Mexican Antitrust Clearance Condition.
The latter has not been satisfyied or waived yet.
Ganfeng holds 29% interest in Bacanora as well as a 50% interest in the Bacanora’s flagship Sonora lithium project in Mexico.
Power Metal Resources* (Power Metal Resources PLC (AIM:POW)) 1.7p, Mkt Cap GBP22m – Drill programme at Silver Peak delivers exceptional grades
Power Metal has released drill results from 19 short cored drill holes completed as part of the Phase I programme at the Silver Peak project in British Columbia.
10 out of the 19 holes drilled returned grades in excess of 1,000 g/t Ag, with significant copper, zinc, lead and antimony credits.
Notable intercepts form the programme include:
0.9m of 3,998.2g/t Ag (128.6 oz/t) from DDH21-1 (including 0.3m of 10,648.5g/t Ag)
0.76m of 8,692.2g/t Ag (279.5 oz/t) from DDH21-2 (including 0.35m of 12,373g/t Ag)
1.75m 2,669.3g/t Ag (85.8 oz/t) from DDH21-7 (including 0.25m of 17,015.5g/t Ag)
1.52m of 2,808.2g/t Ag (90.3 oz/t) from DDH21-8
2.44m of 1,060.0g/t Ag (34.1 oz/t) from DDH21-12 (including 1.53m of 1,644.8g/t Ag)
2.43m of 1,631.5g/t Ag (52.5 oz/t) from DDH21-13
2.59m of 1,437.6g/t Ag (46.2 oz/t) from DDH21-15
Power Metals comment that overlimit analysis is currently underway, where the sample grade exceeded the detection limits for the assay test procedures implemented, which occurred for copper, lead, zinc and antimony in certain of the samples reported.
Paul Johnson, Chief Executive Officer of Power Metal Resources commented: “The Phase I drill programme, was designed to test for frequency and extent of the high-grade silver mineralisation encountered in 2020, and has been a great success. Our original decision to invest in the Silver Peak Project has been fully validated by each stage of exploration work and the bonanza silver grades, including a highlight intercept of 0.76m of 8,692.2g/t Ag, confirmed today represent the biggest step forward for the Project to date.”
*SP Angel act as nomad and broker to Power Metal
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
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
*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
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