SP Angel . Morning View .Wednesday 07 12 22
Weak Chinese trade data and stronger US$ weigh on base metals
MiFID II exempt information – see disclaimer below
Amaroq Minerals Ltd (TSX-V:AMRQ, AIM:AMRQ) – 2022 exploration summary and plans for 2023 follow up
Castillo Copper Ltd (ASX:CCZ, LSE:CCZ) – Follow up exploration planned at Luanshya, Zambia
Ferro Alloy Resources (LON: FAR) – Feasibility study drilling
Glencore PLC (LSE:GLEN) – Glencore to boost copper production and ease coal output going forward
Power Metal Resources PLC (AIM:POW)* – Drilling at Molopo Farms identifies visible nickel sulphides
Resolute Mining Ltd (ASX:RSG, LSE:RSG) – Retail offer raises A$46m
Gold weakens as dollar sell-off cools and traders wait for next week’s CPI reading
- Stronger than-expected services data on Monday continued to push gold lower yesterday, edging towards the $1,765/oz mark.
- The dollar has cooled its recent sell-off, supporting gold, amid weakness from the Japanese Yen on concerns over inflation alongside weakness in the Pound and Euro.
- Gold is expected to trade relatively flat before next week’s US CPI reading and the subsequent Fed rate hike announcement.
Base metals weaken as additional Chinese economic data weighs on demand outlook
- Copper and aluminium both weakened overnight despite Beijing officials providing further confirmation of an ease in Covid restrictions.
- Trade data for China’s exports in November disappointed below expectations, with exports down 8.7% yoy and imports down 10.6% yoy.
- However, China imported c.540kt worth of unwrought copper and copper products in November 2022, up 5.8% yoy.
- A firmer dollar has also weighed on base metals.
- Global growth expectations for 2023 are providing additional negative sentiment to base metals, with a number of major US banks now warning of a recession in 2023.
Dow Jones Industrials -1.03% at 33,596
Nikkei 225 -0.72% at 27,686
HK Hang Seng -3.22% at 18,815
Shanghai Composite -0.40% at 3,200
Economics
China – Weak trade data released this morning showing both exports and imports contracting at steeper rates in November imply challenging overseas demand conditions as well as Covid containment measures related issues at home.
- The decline also comes during a seasonally strong period when demand normally picks up ahead of the Christmas and holiday season overseas.
- Exports (%yoy): -8.7 v -0.3 October and -3.9 est.
- Imports (%yoy): -10.6 v -0.7 October and -7.1 est.
Germany – Following better than expected factory orders released yesterday, industrial production numbers reported today showed a lower than expected decline in October helped by milder than feared weather.
- Industrial Production (%mom): -0.1 v 0.6 September and -0.6 est.
- Industrial Production (%yoy): 0.0 v 2.6 September and -0.7 est.
UK – Property prices fell at the sharpest rate in 14 years in November amid surging mortgage rates, Halifax data showed.
- Prices were down 2.3%mom last month taking annual growth rate down to 4.7%.
- The news follows Nationwide data released last week that showed prices were down 1.4%mom in November.
- With 85% of mortgage holders currently on fixed rates, households are seen protected from higher borrowing costs, but people who will need to refinance in 2023 are facing potentially double monthly payments.
- The OBR previously estimated a potential 9% drop in house prices over the next two years.
Taiwan – Exports drop 13.1%yoy in November marking the worst reading since Jan/16 and significantly worse that a 6.8% drop forecast.
- The data highlights challenging overseas demand outlook with the Ministry of Finance expecting another decline in December.
- In particular, shipments to China are reported to have dropped 20.9%yoy last month, compared to a -9.2%yoy decline in October.
Currencies
US$1.0472/eur vs 1.0483/eur yesterday. Yen 137.43/$ vs 136.90/$. SAr 17.327/$ vs 17.340/$. $1.214/gbp vs $1.219/gbp. 0.669/aud vs 0.671/aud. CNY 6.981/$ vs 7.000/$.
Dollar Index: 105.72 vs 105.22 yesterday.
Commodity News
Precious metals:
Gold US$1,773/oz vs US$1,770/oz yesterday
Gold ETFs 93.8moz vs US$93.8moz yesterday
Platinum US$987/oz vs US$995/oz yesterday
Palladium US$1,863/oz vs US$1,881/oz yesterday
Silver US$22.31/oz vs US$22.37/oz yesterday
Rhodium US$13,150/oz vs US$13,300/oz yesterday
Base metals:
Copper US$ 8,354/t vs US$8,378/t yesterday
Aluminium US$ 2,495/t vs US$2,494/t yesterday
Nickel US$ 28,800/t vs US$28,575/t yesterday
Zinc US$ 3,128/t vs US$3,135/t yesterday
Lead US$ 2,197/t vs US$2,221/t yesterday
Tin US$ 24,300/t vs US$24,200/t yesterday
Energy:
Oil US$79.3/bbl vs US$83.1/bbl yesterday
Natural Gas US$5.679/mmbtu vs US$5.477/mmbtu yesterday
Uranium UXC US$48.30/lb vs US$48.35/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$108.6/t vs US$107.0/t
Chinese steel rebar 25mm US$559.1/t vs US$558.4/t
Thermal coal (1st year forward cif ARA) US$229.0/t vs US$229.0/t
Thermal coal swap Australia FOB US$399.0/t vs US$391.5/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$97,052/t vs US$95,431/t
Lithium carbonate 99% (China) US$77,427/t vs US$77,645/t
China Spodumene Li2O 5%min CIF US$6,110/t vs US$6,110/t
Ferro-Manganese European Mn78% min US$1,292/t vs US$1,295/t
China Tungsten APT 88.5% FOB US$317/mtu vs US$317/mtu
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$32.75/kg
China Ilmenite Concentrate TiO2 US$323/t vs US$322/t
Spot CO2 Emissions EUA Price US$91.2/t vs US$90.3/kg
Brazil Potash CFR Granular Spot US$515.0/t vs US$515.0/kg – Mosaic temporarily suspends the Colonsay mine as prices pull back from recent highs after farmers hold off purchases.
- The Colonsay mine run at 1.3mtpa MOP and was restarted in August 2021 after having been standing idled for two years amid weak demand.
- “Our decision to temporarily curtail Colonsay reflects near-term dynamics and not long-term agricultural market fundamentals… Crop prices remain strong and continue to support healthy grower economics,” Mosaic commented on the decision.
- Brazil Potash CFR gMOP price climbed to over $1,200/t earlier this year as farmers rushed in to secure the product and restock amid increased supply risks for potash from Belarus and Russia.
- Prices have since been coming off reaching $515/t with farmers easing back on purchases and in some cases choosing to skip a year of potash application or to use less fertilizer in the face of high prices.
Battery News
BYD, a major Chinese EVs manufacturer, warns lithium market may swing back into surplus next year, Bloomberg writes.
- The Company called current lithium prices as “unreasonable” and highlighted an increase in new supply coming on stream next year.
- Meanwhile, global EV sales growth rates are likely to come down in Q4/22 amid an increase in infections in China and Beijing’s subsidies for EVs are scheduled to be phased out at the end of the year.
Company News
Amaroq Minerals Ltd (TSX-V:AMRQ, AIM:AMRQ) 40p, Mkt Cap £101m – 2022 exploration summary and plans for 2023 follow up
(Formerly AEX Gold (AEXG LN))
- Amaroq reports that during 2022 it completed 46 diamond drill holes at its Nalunaq exploration programme in southern Greenland with 42 of the holes successfully intersecting their targets on the Vein.
- The Main Vein intersections included what the announcement describes as “the highest grade intersection drilled by the Corporation” with an average grade of 116g/t gold over a width of 0.62m from 203.43m depth in hole AEX22-37.
- The company says that this result and others, including 0.56m averaging 26.2g/t gold intersected in hole AEX22-09, confirm a high grade mineralised shoot within the targeted ‘Valley Block’ and the drilling extends “the high-grade core of Valley Block ore-shoot up-dip around 300 m, making this recently discovered and previously unrecognised, high grade plunge a similar scale to the Target Block, the most productive part of the mine having produced around 250koz historically”.
- Additional early stage exploration work included a surface channel-sampling programme “near existing underground infrastructure in the Mountain Block … [ which confirms] … thick, high-grade intersections of up to 98.6g/t Au”.
- Amaroq Minerals says that the results “illustrate that the Mountain Block may provide the lowest cost access to mineralisation through subsequent mine development”.
- The company also describes what it describes as significant progress “in defining and sampling a series of hanging wall veins both in the Valley and Mountain Blocks with grades received of up to 10.8 g/t Au in these newly identified veins”.
- Next year, Amaroq Resources plans “the extraction of a large bulk sample within one of the resource areas with the aim to upgrade the Mineral Resource, a further step towards a maiden Mineral Reserve estimate. The bulk sample will demonstrate the revenue generation potential of the resource and be the first step toward full production”.
- Further drilling is planned “into the Mountain Block to further extend the Inferred Resources in this extremely high-grade zone of the project. Drilling may also be used to target generate in the newly defined Welcome Block area.”
Castillo Copper Ltd (ASX:CCZ, LSE:CCZ) 1.05p, Mkt Cap £14m – Follow up exploration planned at Luanshya, Zambia
- Castillo Copper reports that it plans additional induced polarisation (IP) geophysical work at its Luanshya copper project to follow up a 6km long IP anomaly identified in earlier exploration.
- The anomalous area is reported to contain 14 zones which the geological team are seeking to investigate more fully with the new IP programme.
Conclusion: We await results from the new IP survey at Luanshya with interest.
Ferro Alloy Resources (LON: FAR) 14.25p, Mkt cap £61m – Feasibility study drilling
- Ferro-Alloy reports that it has completed its 2022 drilling campaign having drilled a total of 19,720m.
- The campaign completed the “drilling for ore body one ("OB1") and the partial completion of drilling on ore bodies 2, 3 and 4 ("OB2, OB3 and OB4")”.
- Assay results from the OB1 drilling are expected by the end of December and the company expects to publish an updated mineral resource estimate, which currently stands at “23 million tonnes, sufficient for a mine-life of more than 20 years for Phase 1 of the project (processing 1 million tonnes of ore per year)”, during Q1 2023 as a prelude to an estimate of the ore reserves “required to support Phase 1 of the project … as part of the BFS”.
- The company says that the “drilling programme for OB2, OB3 and OB4, that will support Phase 2 of the project (an additional 3 million tonnes of ore processed per year), has been completed so far as possible”.
- Ferro Alloy Resources describes OB2,3 and 4 as lying in “an area of difficult topography … [although it says that the terrain is] … not expected to create difficulties for actual mining … [and that it] … is currently assessing the options available to access the undrilled area or omit it from the BFS if sufficient tonnes of resource and reserve are assessed from the remaining area”.
- CEO, Nick Bridgen said that “The early results of the expanded bankable feasibility study are expected to confirm the potential for Balasausqandiq to become a globally significant vanadium operation”.
Conclusion: Drilling during 2022 is expected to lead to an updated mineral resources estimate for the OB1 orebody during Q1 2023 as part of the continuing BFS.
Glencore PLC (LSE:GLEN) 544p, Mkt cap £71bn – Glencore to boost copper production and ease coal output going forward
- Glencore is planning to boost its total copper production, describing the IEA’s transition targets as triggering a supply shortfall of 50 million tonnes over the next 8 years.
- Glencore’s CEO Gary Nagle stated over an analyst/investor day call that the Company has the capacity to boost production by 60% from current brownfield projects to hit c.1.6mt of total annual production.
- Nagle states the Company is not in a hurry to bring projects into production, stating ‘we want to see that deficit…we’ll only see a drill when we see the process is real.’
- He noted that Glencore’s $5.6bn El Pachon project will only be brought on ‘if the world absolutely’ needs copper.
- Glencore will use proceeds from its fossil fuel business to transition to grow production at its copper business.
- The Company plans to shutter 12 coal mines over 12 years despite its current profit bonanza from the fossil fuel.
- Nagle states that they expect a slight drop off in Cobalt output in 2023 owing to demand but a production increase to 60kt by 2024.
- They expect flat zinc production to 2025 before output begins to decline.
- The Company notes it is experiencing a period of higher costs with its nickel business, noting lower byproducts from its copper production but expects total production to increase from c.110kt in 2022 to 123kt in 2024.
Power Metal Resources PLC (AIM:POW)* 1.4p, Mkt Cap £24m – Drilling at Molopo Farms identifies visible nickel sulphides
- Drilling at Power Metal’s Molopo Farms Complex in Botswana is currently underway, targeting nickel and platinum group elements.
- The Company reports the presence of nickel sulphides as identified using visual inspection of the drill core and subsequent analysis of identified sulphides using a pXRF spectrometer.
- The inaugural drillhole DDH1-3 is currently underway, with the visible nickel sulphides identified at 327m and within the interval from 348-354m.
- Assay testing of homogenised samples will be required for accurate determination of grades in intersections.
- The drillhole will be drilled to 450m at the Target T1-3.
- Alternative drillhole DDH1-14B was completed to a depth of 520m and EM geophysical downhole survey results should be expected imminently alongside a detailed core review.
- Hole DDH1-6B was completed to a depth of 650m with visible pyroxenites intersected throughout.
- DDH1-6B(2) was drilled to a depth of 300m to test for the up-dip extension of previously identified pyroxenites – a core review is underway alongside EM geophysics surveys.
*SP Angel acts as nomad and broker to Power Metal
Resolute Mining Ltd (ASX:RSG, LSE:RSG) 11p, Mkt Cap £187m – Retail offer raises A$46m
- Resolute Mining confirms that its retail entitlement offer has raised approximately A$46m at a price of A$0.16/share.
- A further A$22m “will be allotted to sub-underwriters of the Retail Entitlement Offer”.
- The retail offer follows the institutional offer which raised A$96m as announced on 14th November as well as the A$41m placement issue.
- In total, the recent fundraisings have raised A$164m and the company has previously indicated its intention to pay down the Company's Syndicated Loan Facility – reducing net debt to US$65m from US$156m.
Conclusion: Resolute Mining has raised A$164m to help reduce its debt through a combination of a placing and entitlement offers to institutional and retail shareholders since November.
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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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