SP Angel . Morning View .Tuesday 06 12 22
US$ index climbs on good US economic numbers weighing on copper prices
MiFID II exempt information – see disclaimer below
AfriTin Mining Ltd (AIM:ATM, OTC:AFTTF) – Proposed name change
Aura Energy Ltd (ASX:AEE, AIM:AURA)* – Pilot plant delivers yellowcake complying with international specification standards
CleanTech Lithium PLC (AIM:CTL) – Drilling ramps up at Chilean lithium properties
Power Metal Resources PLC (AIM:POW)* – Update on Selta Lithium exploration efforts in Australia’s Northern Territory
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* – Suspended – Further copper forward sale
Versarien PLC (AIM:VRS, OTC:VRSRF)* – Successful completion of £1.85m equity placing for continuation of commercialisation work
Dow Jones Industrials -1.40% at 33,947
Nikkei 225 +0.24% at 27,886
HK Hang Seng -0.40% at 19,441
Shanghai Composite +0.02% at 3,213
Copper eases despite further signs of Beijing Covid policy shift as China property woes resurface
- Copper prices retreated from the $8,500/t mark to $8,390/t as a stronger dollar and renewed concerns of China’s property crisis came to the fore.
- Short term demand continues to weaken, with the Yangshan premium falling to its lowest level since July as import appetite wanes.
- Shanghai inventory levels are over double September levels, further highlighting weaker physical demand.
- The dollar paused its sell-off yesterday on stronger US data, with US service providers recording robust growth over November.
- A continuation of surprising US economic data will aid the Fed in its aim to hold interest rate hikes higher for longer.
- Easing restrictions are continuing to lift optimism in China, with Beijing dropping requirements for citizens to show negative tests for shops and workplaces.
US and EU look to weaponize sanctions on China’s metal industry to push climate agenda
- The EU and the US are considering tariffs on China’s steel and aluminium industries in a new development in climate politics.
- Bloomberg reports people close to the matter believe an agreement between the US and EU, likely due late next year, would target large polluting nations, with China at the forefront.
- American aluminium and steel producers jumped in pre-market trading on the news.
- China’s Foreign Ministry replied to the rumours that China would ‘safeguard’ its ‘legitimate rights and interests.’
- Concerns from the EU/US union are mounting regarding legal issues under WTO regulation against tariffs.
- The impact is expected to be twofold: another hit to the Sino-US relationship and further inflationary pressure on Western economies.
IEA expects global renewable capacity growth to double over next five years in boost to copper and NdPr demand
- The International Energy Agency forecasts renewable capacity will grow by 2400GW to hit 5,640GW by 2027.
- This forecast has increased 30% following Russia’s invasion of Ukraine and the renewed importance placed on energy security.
- The IEA forecasts renewables to overtake coal to become the largest source of electricity by 2025.
- Solar photovoltaic capacity is expected to c.3x by 2027, with wind expected to double over the same period.
Indonesia eyes coal levy as production rises 17% over past 8 months
- Indonesia will initiate a coal fund agency and collecting a coal levy to ensure supply security as of 1Q23.
- Indonesia was forced to halt exports this year following a supply crunch at power plants.
- Coal producers will face a levy on output to plug the gap between market prices and domestic capped prices.
- Coal production in Indonesia jumped 17% between April and November.
Economics
US – Equity prices pulled back on Monday following stronger than expected labour numbers the previous trading session as well as better than forecast industrial orders data.
- Factory Orders (%mom): 1.0 v 0.3 September and 0.7 est.
China – Further news over relaxation of Covid containment measures emerge with Beijing now no longer requires residents to provide proof of negative Covid-19 test before entering commercial buildings and supermarkets, FT writes.
- Residents will still need to provide a negative test taken in the last 48 hours to use other public places like restaurants, gyms, care homes, medical institutions and schools.
- The announcement follows a similar move from Shanghai the day before.
- Mainland stocks posted another daily gain while the renminbi climbed to a 12-week high against the US$ on reopening optimism.
Germany – Factory orders climbed more than forecast in October following a negative reading the previous month, but continuing to show a decline compared to last year levels.
- Better than expected numbers also reflect milder than feared autumn weather allowing Germany to fill gas-storage facilities and lower the risk of disruptive shortages.
- Factory Orders (%mom): 0.8 v -2.9 (revised from -4.0) September and 0.1 est.
UK – Food inflation averaged 14.6%yoy in November, down 0.1pp from the 14-year high reached the previous month.
- High grocery prices inflation will weigh on household budgets over the festive seasons and challenge private consumption, in general.
- Discounters like Lidl and Aldi are reported to have gained market share from competitors as buyers shop around for better deals.
Australia – The central bank raised interest rates a further 25bp to 3.1%, the highest level since 2012, while signalling more hikes to come amid strong inflation.
- That was the eighth consecutive increase.
- “The board expects to increase interest rates further over the period ahead, but it is not on a preset course… it is closely monitoring the global economy, household spending and wage and price-setting behaviour.
- Inflation came in at 6.9% in October compared to the bank’s target inflation range of between 2-3%.
Currencies
US$1.0483/eur vs 1.0529/eur yesterday. Yen 136.90/$ vs 134.51/$. SAr 17.340/$ vs 17.580/$. $1.219/gbp vs $1.228/gbp. 0.671/aud vs 0.682/aud. CNY 7.000/$ vs 7.039/$.
Dollar Index: 105.22 /-1.47% on week
Commodity News
Precious metals:
Gold US$1,770/oz vs US$1,798/oz yesterday
Gold ETFs 93.8moz vs US$94.2moz yesterday
Platinum US$995/oz vs US$1,021/oz yesterday
Palladium US$1,881/oz vs US$1,927/oz yesterday
Silver US$22.37/oz vs US$23.01/oz yesterday
Rhodium US$13,300/oz vs US$13,300/oz yesterday
Base metals:
Copper US$ 8,378/t vs US$8,500/t yesterday
Aluminium US$ 2,494/t vs US$2,566/t yesterday
Nickel US$ 28,575/t vs US$28,945/t yesterday
Zinc US$ 3,135/t vs US$3,146/t yesterday
Lead US$ 2,221/t vs US$2,235/t yesterday
Tin US$ 24,200/t vs US$24,315/t yesterday
Energy:
Oil US$83.1/bbl vs US$86.0/bbl yesterday
Natural Gas US$5.477/mmbtu vs US$5.970/mmbtu yesterday
Uranium UXC US$48.35/lb vs US$49.20/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$107.0/t vs US$106.8/t
Chinese steel rebar 25mm US$558.4/t vs US$561.6/t
Thermal coal (1st year forward cif ARA) US$229.0/t vs US$229.0/t
Thermal coal swap Australia FOB US$391.5/t vs US$389.5/t
Coking coal swap Australia FOB US$264.0/t vs US$264.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$95,431/t vs US$95,580/t
Lithium carbonate 99% (China) US$77,645/t vs US$80,417/t
China Spodumene Li2O 5%min CIF US$6,110/t vs US$6,110/t
Ferro-Manganese European Mn78% min US$1,295/t vs US$1,302/t
China Tungsten APT 88.5% FOB US$31.7/kg vs US$31.7/kg
China Graphite Flake -194 FOB US$880/t vs US$880/t
Europe Vanadium Pentoxide 98% 7.9/lb vs US$7.9/lb
Europe Ferro-Vanadium 80% 32.75/kg vs US$32.25/kg
China Ilmenite Concentrate TiO2 US$322/t vs US$324/t
Spot CO2 Emissions EUA Price US$90.3/t vs US$91.1/t
Brazil Potash CFR Granular Spot US$515.0/t vs US$515.0/t
Battery News
Company News
AfriTin Mining Ltd (AIM:ATM, OTC:AFTTF) 4.4p, Mkt Cap £67m – Proposed name change
- Afritin Mining, which yesterday reported encouraging drilling results from the Uis mine in Namibia, has announced that it is to hold an EGM on 5th January to consider changing its name to Andrada Mining.
- The announcement explains that the change helps to reflect “the Company's expanding lithium and tantalum resources alongside its existing tin production … [and honours] … Jose Bonifacio de Andrada e Silva, the Brazilian mineralogist and professor who first discovered petalite and spodumene which are major lithium bearing minerals”.
- Afritin reiterates its previously stated view “that the Uis licence could host a globally significant lithium resource”.
- Today’s announcement also says that the EGM will be asked to reconsider “an extraordinary resolution which relates to the right to issue shares and options for Management” which was not passed at the company’s 2022 AGM.
- “The re-proposal of the resolution follows engagement and consultation with investors regarding its remuneration policy”.
Aura Energy Ltd (ASX:AEE, AIM:AURA)* 15p, Mkt Cap £80m – Pilot plant delivers yellowcake complying with international specification standards
- Aura Energy reports that pilot plant test work undertaken by the Australian Nuclear Science and Technology Organisation (ANSTO) using concentrate material from Aura’s Tiris uranium project in Mauritania has produced a ‘yellowcake’ uranium oxide product which meets ASTM (American Society for Testing and Materials) international standards.
- Announcing the results of the “the uranium recovery test work program at the ANSTO laboratory”, which is now complete, Aura Energy says that they are “a key milestone as the Company moves towards near-term Phase 1 uranium production … [at Tiris and that they show] … that Tiris production could be sold in the international market as a high-standard product without penalties”.
- Managing Director, Dave Woodall, described the “successful production of yellowcake from material upgraded in the pilot plant … [as]…a significant step for Aura Energy … [which] … opens the door to commercial discussions with nuclear utilities, demonstrates the simple processing parameters required for uranium oxide production at Tiris and provides a strong technical basis for moving the project forward”.
- Mr. Woodall confirmed that Aura Energy would “focus on operating efficiencies as we progress to a final investment decision”.
- Aura Energy has been progressing technical aspects of the Tiris project including an August 2021 10% increase in the mineral resources estimate, to 56m lbs of contained U3O8. Further resource definition and expansion work is underway to upgrade the proportion of ‘Measured and Indicated’ resources which could expand the 800,000lbs pa production rate described in the 2019 Definitive Feasibility Study August 2021
- Aura Energy aspires to expand production to 3-5m lbs annually within 5 years and significant future resource expansions would, in our view, be a prerequisite for such expansion.
- The August 2021 revision of DFS capital costs to US$74.8m places the Tiris project as one of the world’s low-cost uranium developments, Aura Energy is continuing to optimise the project ahead of making the final investment decision during Q1 2023 with the objective of initial production in 2024.
Conclusion: Confirmation by ANSTO that the Tiris project is able to produce a high-quality yellowcake complying to international standards represents a landmark for the project as Aura Energy progresses its plans to bring the Tiris uranium project to initial production in 2024 and to tap the increasing global appetite for nuclear energy to accelerate low-emission power generation and to limit reliance on geopolitically volatile energy sources.
*SP Angel acts as Nomad and Broker to Aura Energy
CleanTech Lithium PLC (AIM:CTL) 46p, Mkt Cap £49m – Drilling ramps up at Chilean lithium properties
- The team mobilised a second drilling rig at the Laguna Verde as exploration works ramp up ahead of the updated MRE scheduled for the end of Q1/23.
- Current MRE stands at 1.5mt LCE at 206mg/L.
- Drilled wells will also be used for pump testing as part of key hydrogeological testwork.
- The team is expecting to report a Scoping Study in the coming weeks and commence PFS in H2/23.
- In the Francisco Basin area, resource drilling is expected to commence by December end after road access has been improved amid heavy snowfall in the region this winter.
- Scoping Study is expected to be completed in Q1/23and three new wells are forecast to be ready by early Q2/23 followed by an updated MRE in H1/23.
- Current MRE stands at 0.5mt LCE at 305mg/L.
- At the Llamara Prospect, exploration licenses are being secured (applications submitted May 2022) with drilling targeted to start in early Q1/23.
- A lab scale DLE demo unit was delivered to Copiapo (200-260km away from Laguna Verde and Francisco Basin) that will be used in process testing.
- Separately, the DLE unit for a pilot plant has been ordered that will be able to produce 1t of battery grade lithium carbonate / hydroxide that is planned to be installed and commissioned in Q2/23.
- The plant will be used to study the proposed flowsheet as well as provide product samples for potential customers.
- The Board held meetings with key central and regional authorities laying initial plans to commence production at Laguna Verde in 2025.
- The Board also met with SunResin representatives discussing further steps to commence construction of the first 20ktpa carbonate/hydroxide production facility in 2024.
- SunResin confirmed the DLE plant can be delivered to the Shanghai port within eight months of placing the order.
Power Metal Resources PLC (AIM:POW)* 1.5p, Mkt Cap £25m – Update on Selta Lithium exploration efforts in Australia’s Northern Territory
- Power Metals provides an update on its subsidiary First Development Resources, which holds the Selta Project in the NT.
- Phase II fieldwork is currently ongoing to explore a potential lithium-bearing pegmatite system.
- 700 outcropping pegmatites have been identified over 180km2 . Planned fieldwork will focus on a 30 km2 area to the SE of the project.
- Phase 1 reconnaissance in June 2022 confirmed pegmatite geology across 17 samples.
- The subsidiary FDR is eyeing a listing on London markets.
- FDR has now purchased 2 net smelter return royalties from the original vendor of the royalty for £150,000 via the issue of 1.875m new shares of FDR at 8p/share.
- The Company now plans to conduct targeted pegmatite mapping and initiate a sampling programme
*SP Angel acts as nomad and broker to Power Metal
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* suspended – Further copper forward sale
NPV Valuation: Under review
- Yesterday, Rambler Metals reported that it had sold 550 tonnes of copper forward at a price of US$8,300/t over the three months period from December 2022 to February 2023.
- The company says that this “is equivalent to approximately 1 month of payable copper production from the Ming Mine over this period, subject to completion of the 2023 budget”.
- This forward sale represents revenue of around US$4.5m and is additional to the forward sale of 750 tonnes of copper 12 months forward at a price of US$8,330/t announced in November which represented approximately US$6.25m of revenue.
- Based on the announcements in November and yesterday, we calculate that the combined forward sales of 1,300t of copper represents less than 20% of the Ming mine’s budgeted 2023 output and guarantees revenue of approximately US$10.8m.
- The company’s H1 results for the period to 30th June 2022 reported production costs of US$26.3m or around US$4.4m per month. During H2, Rambler Metals has announced cost saving initiatives which it expects to deliver monthly savings of around US$1m.
Conclusion: The forward sale of a further 550t of copper production over the next three months secures a price of US$8,300/t and follows the announcement in November, of 750t of forward sales over the following year of 750t of production at US$8,330/t. The moves to protect future revenues follow cost cutting measures which are expected to deliver monthly cost savings of approximately US$1m.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining.
Versarien PLC (AIM:VRS, OTC:VRSRF)* 10.6p, Mkt Cap £20m – Successful completion of £1.85m equity placing for continuation of commercialisation work
- Versarien has successfully completed the placing of 18,500,000 shares at 10p/share to raise £1.85m before expenses.
- The net proceeds of the raise will be utilised for the further advancement of the Company’s commercialisation work.
- Focus will target the construction and leisure sectors, the CEO Neill Ricketts stating ‘these two areas represent the best opportunities for near term commercial success,;
- Ricketts also notes that the ‘Company continues to explore additional funding options, with a focus on non-dilutive options such as grant funding and strategic partnership opportunities.’
*SP Angel acts as Nomad and Broker to Versarien
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Analysts
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Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
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Sales
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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
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