SP Angel . Morning View .Thursday 08 12 22
Copper prices gain amid weaker US$, stronger Chinese imports and political crisis in Peru
MiFID II exempt information – see disclaimer below
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* – Good grades and wide intersections returned at the Gilar greenfield discovery
BlueBird Merchant Ventures Ltd (LSE:BMV) – £230k equity raise to progress Kochang permitting
Galileo Resources PLC (AIM:GLR) – Reconnaissance and follow-up sampling programmes at Kamativi Lithium project in Zimbabwe
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) – Further progress at Havieron as decline advances to 1,000m
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) – Initial tranche of debt received for the Araguaia ferronickel project
Gold prices rally as US Treasury yields continue sell off and traders brace for volatility next week
- Gold prices climbed to $1,800/oz yesterday before retreating slightly to the $1,795/oz mark.
- A renewed sell off in US Treasury yields has supported non-interest bearing gold.
- The benchmark US 10-year has weakened again to 3.457%, 88 basis points lower than its 1-year high hit in October.
Chinese nickel buyers shun LME prices for 2023 in favour of Shanghai as liquidity continues to falter and prices surge to $33,000/t
- Reuters reports major Chinese nickel buyers have asked producers to price product using Shanghai Futures Exchange contracts instead of LME prices.
- Buyers state that high prices quoted on LME, with prices jolting past $33,000/t mark this morning, up 8%, are not reflective of prices paid in Asian markets.
- The LME has seen a major reduction in liquidity and subsequent volatility swings following the halt of trading in March in an unprecedented short squeeze.
- The move comes as another blow to the LME’s reputation in what is a sad turn for one of the City’s oldest institutions.
- China is reportedly negotiating nickel supplies with Russia’s Nornickel, although it is reportedly charging a premium of over $300/t for nickel full plate supplies, up from $220-290/t this year.
UK approves first coal mine in 30 years to support domestic steel industry
- West Cumbria Mining will build an underground coal mine designed for coking coal extraction in northwest England following governmental approval.
- The LOM is forecast at 50 years and total capex is estimated at $201m. Production is expected in 2 years.
- Britain’s last deep-pit coal mine closed in 2015.
Trafigura profits reach $7bn on soaring commodity volatility as Russia’s war with Ukraine jolts supply chains
- Trafigura’s net profit of $7bn this year is the equivalent to the previous four years combined.
- The Trading house has benefited from ‘big structural shifts’ in supply chains and ‘unprecedented volatility’ on the back of Russia’s war efforts.
- The firm benefited most from crude, diesel and LNG and iron ore but recorded flat trade in non-ferrous metals.
- Trafigura’s zinc operation Nyrstar recorded a loss on soaring power prices hitting European smelters and operational issues in Australia.
- The company is also developing the 1,300km railway from Angola’s Lobito Atlantic port to the DRC’s border, in a boost to the Congo’s mining infrastructure.
- The company expects global copper demand to grow by 2.8% in 2022 and notes China’s copper demand in H2 this year should grow by c, 7% yoy.
- Trafigura notes the ‘outlook for the nickel market in 2023 is one of oversupply, driven by production growth in Indonesia and the ongoing weakness of the Chinese property sector.’
- Trafigura sees under-investment across commodities and renewed demand from renewable infrastructure investment to raise the potential of ‘commodity spikes’, seeing ‘a lack of production capacity’ resulting in ‘prices rising to levels that cause demand destruction.’
- The company also notes the potential for ‘greater supply disruptions as consumers become more selective about the origin and carbon footprint of the metal they consume.’
Vale confirms plans to spin out nickel/copper business with sale eyed for 2023
- Iron ore giant has confirmed its plans to sell its nickel and copper business following a spin out next year.
- The Brazilian firm will utilise a strategic partner and a potential IPO to extract value for assets it currently deems undervalued by the market.
- The assets will be placed under a new structure named Vale Base Metals with a management team specialising in deep underground mining and EVs.
- The unit will consist primarily of Vale’s Canadian nickel assets, the Indonesian JV, the Onca Puma nickel mine in Brazil and the Salobo copper project.
Dow Jones Industrials +0.00% at 33,598
Nikkei 225 -0.40% at 27,574
HK Hang Seng +3.38% at 19,450
Shanghai Composite -0.07% at 3,197
Economics
Peru – President Castillo announced the dissolution of the opposition controlled parliament and declared a state of emergency hours before a third impeachment vote.
- Nevertheless, lawmakers voted to remove Pedro Castillo from the office with his Vice President Dina Boluarte sworn as his successor.
- Prime Minister along with nine cabinet ministers announced their resignation following the announcement by Castillo while the armed forces and police also distance themselves for Castillo.
- “There has been an attempted coup d’etat,” Boularte said.
- Mr Castillo was taken into police custody at Lima’s town hall yesterday afternoon and accuse of “rebellion” by the public prosecutor’s office.
- The Peruvian Sol fell 2% on the initial news but has since recovered and subsequently strengthened.
- The Country produces c. 10% of the world’s copper and traders are concerned a major political shake up could add further supply uncertainty to an already-tight market.
- Although immediate copper supply disruptions are unlikely, the political chaos currently unravelling will further dissuade additional investment from international mining firms into the country and compound supply issues from the copper-rich nation.
Currencies
US$1.0518/eur vs 1.0472/eur yesterday. Yen 136.91/$ vs 137.43/$. SAr 17.193/$ vs 17.327/$. $1.219/gbp vs $1.214/gbp. 0.672/aud vs 0.669/aud. CNY 6.972/$ vs 6.981/$.
Dollar Index: 105.18 vs 105.72 yesterday.
Commodity News
Precious metals:
Gold US$1,783/oz vs US$1,773/oz yesterday
Gold ETFs 93.8moz vs US$93.8moz yesterday
Platinum US$1,011/oz vs US$987/oz yesterday
Palladium US$1,865/oz vs US$1,863/oz yesterday
Silver US$22.73/oz vs US$22.31/oz yesterday
Rhodium US$13,000/oz vs US$13,150/oz yesterday
Base metals:
Copper US$ 8,513/t vs US$8,354/t yesterday
Aluminium US$ 2,505/t vs US$2,495/t yesterday
Nickel US$ 31,750/t vs US$28,800/t yesterday
Zinc US$ 3,233/t vs US$3,128/t yesterday
Lead US$ 2,229/t vs US$2,197/t yesterday
Tin US$ 24,400/t vs US$24,300/t yesterday
Energy:
Oil US$77.6/bbl vs US$79.3/bbl yesterday
Natural Gas US$5.816/mmbtu vs US$5.679/mmbtu yesterday
Uranium UXC US$48.15/lb vs US$48.30/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$106.6/t vs US$108.6/t
Chinese steel rebar 25mm US$559.5/t vs US$559.1/t
Thermal coal (1st year forward cif ARA) US$262.0/t vs US$229.0/t
Thermal coal swap Australia FOB US$391.0/t vs US$399.0/t
Coking coal swap Australia FOB US$283.0/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$97,887/t vs US$97,052/t
Lithium carbonate 99% (China) US$77,521/t vs US$77,427/t
China Spodumene Li2O 5%min CIF US$6,110/t vs US$6,110/t
Ferro-Manganese European Mn78% min US$1,299/t vs US$1,292/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% 33.25/kg vs US$32.75/kg
China Ilmenite Concentrate TiO2 US$323/t vs US$323/t
Spot CO2 Emissions EUA Price US$91.9/t vs US$91.2/t
Brazil Potash CFR Granular Spot US$515.0/t vs US$515.0/t
Battery News
Company News
BlueBird Merchant Ventures Ltd (LSE:BMV)* 88p, Mkt Cap £101m – Good grades and wide intersections returned at the Gilar greenfield discovery
BUY
- The Company released assay results from the last stage of vertical diamond drilling at Gilar returning good wide intersections of gold/copper mineralisation.
- Selected results include:
- 67.0m at 2.02g/t Au, 1.6% Cu, 1.6% Zn from 327m (22GLDD118) including higher grade interval 17.8m at 4.31g/t Au, 3.1% Cu and 2.3% Zn from 336m;
- 13.9m at 3.04g/t Au, 2.7% Cu, 1.1% Zn from 198m (22GLDD103);
- 50.4m at 2.54g/t au, 1.4% Cu, 0.8% Zn from 342m (22GLDD112);
- 57.5m at 2.24g/t Au, 1.2% Cu, 1.0% Zn from 346m (22GLDD116).
- True thickness of mineralised intercepts is underdetermined at this point.
- The team is planning to release a Maiden MRE on the Gilar discovery in coming weeks with a total of 118m of corer drill holes for ~32,800m having been completed.
- The Company is planning to develop an underground adit to access the mineralised zone allowing for a more cost efficient drilling as well as production potentially.
Conclusion: Drilling at Gilar returns good grades and intersection widths with maiden MRE due shortly. The discovery may be easily fast tracked into production given relatively shallow depths as well as close proximity to existing processing capacities supplying higher grade material to blend with ores from Gedabek/Gadir and soon to be commissioned Zafar mines.
*SP Angel acts as nomad and broker to Anglo Asian Mining
BlueBird Merchant Ventures Ltd (LSE:BMV) 1.9p, Mkt Cap £12m – £230k equity raise to progress Kochang permitting
- The Company raised £230k at 2p to support completion of the application of the Temporary Mountain Use Permits at the Kochang Gold and Silver Project, South Korea.
- The permit is expected to be secured early 2023 paving the way for commencement of the proof-of-concept production at Kochang ahead of full production start.
- Directors and management subscribed for a total of £80k of the placing.
- Separately, Align Research converted £50k of debt into shares at the placing 2p share price.
- Each new share will come with a warrant attached to it with a 3.5p exercise price and a 1 year expiry period.
Galileo Resources PLC (AIM:GLR) 1.45p, Mkt Cap £16.8m – Reconnaissance and follow-up sampling programmes at Kamativi Lithium project in Zimbabwe
- Galileo provides an update on its 520sqkm exploration license Kamativi Lithium in western Zimbabwe in which it has a 29% interest and the option to earn an additional 51%.
- The Company has carried out reconnaissance mapping and sampling over the license and has identified four target zones with potential pegmatite-hosted lithium, tin and tantalum.
- 1,661/5,326 rock chip samples, stream sediments and soil samples have been sent to an assay lab to be analysed for lithium, tin, and tantalum.
- Target zones lie along strike extensions or on parallel structures to the nieghbouring Kamativi Tin Mine, which has a JORC indicated mineral resource of lithium in tailings of 26.3Mt @ 0.58% Li2O (Lithium Oxide).
- The team has identified possible spodumene and petalite mineralisation from rock chip sampling and will wait for laboratory confirmation.
- The team hopes to identify priority targets for drill testing by using the sampling for detailed mapping, geophysics and further analysis.
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) 8p, Mkt Cap £401m – Further progress at Havieron as decline advances to 1,000m
- Greatland Gold has provided a progress report on its exploration and project development work at the 30% owned Havieron copper/gold project in the Paterson district of WA.
- The company explains that the exploration decline has reached 1,000m in improving ground conditions which has bolstered confidence that targeted development rates will be met.
- The company confirms its previously announced decision to extend the timetable for its Feasibility Study beyond the current quarter to enable the study to include recent drilling results into mineral resource planning with the intention of enhancing the project’s production potential and/or mine life.
- Growth and exploration drilling is continuing with six drilling rigs currently deployed to extend the mineralised envelope of the Eastern and Northern Breccia systems and to investigate “regional geophysical targets outside of the main Havieron system on the Havieron mining lease”.
- Among recent drilling results included in today’s announcement are results from the Eastern Breccia Zone including:
- An intersection of 26m at an average grade of 2.2g/t gold and 0.17% copper from a depth of 1,584m in hole HAD-098W7; and
- An intersection of 82m at an average grade of 2.1g/t gold and 0.25% copper from a depth of 1,508m in hole HAD-134, including a 30m wide section averaging 2.4g/t gold and 0.19% copper from 1,540m depth; and
- An intersection of 78m at an average grade of 1.9g/t gold and 0.19% copper from a depth of 1,516m in hole HAD-167; and
- An intersection of 27m averaging 1.4g/t gold and 0.06% copper from a depth of 2,042m in hole HAD-152W5.
- Today’s announcement also reports results of drilling from the Northern Breccia Zone including:
- An intersection of 84m at an average grade of 3.2g/t gold and 0.14% copper from a depth of 1,008m in hole HAD-098W7 which includes a further intersection of 78m averaging 1.2g/t gold and 0.28% copper from 1,242m, which includes a 32m wide section averaging 2.4g/t gold and 0.40% copper from 1,260m
- Summarising the results of the growth drilling programme over the last year as “impressive”, Managing Director, Shaun Day, said that they support “the expectation for Havieron to deliver an expanded mineral resource estimate."
- We note that the intersection in hole HAD-152W5 exceeded 2,000m depth and, although given the angled nature of the holes the actual depth below surface will be somewhat shallower, as drilling probes deeper the time lag on reaching mineralised depths will lengthen and drilling costs will increase.
- In March 2022, the company reported a total resource of 92mt at an average grade of 1.9g/t gold and 0.24% copper of which the indicated resource stands at 35mt at an average grade of 2.8g/t gold and 0.42% copper with the balance classified as inferred at Havieron.
- The March 2022 estimate represented a 53% increase in the total contained gold resource, including a 63% rise in the indicated gold resource ounces compared to the previous, February 2021, estimate.
Conclusion: The exploration decline at Havieron is now advancing in better ground and passed 1,000m of development during November. The continuing drilling programme seems to be expanding the resource envelope at both the Northern and Eastern Breccia Zones raising expectations of further resource increases when the results are incorporated in a new mineral resource estimate. We look forward to a new mineral resource estimate in due course.
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) 139.5p, Mkt Cap £364m – Initial tranche of debt received for the Araguaia ferronickel project
- Horizonte Minerals reports that it has now satisfied the requirements of its lenders and has now received the first tranche of project debt funding for its Araguaia ferronickel project in Brazil.
- The company confirms that the release of the initial part of the project debt is a significant milestone as it “unlocks the balance of the funding required to complete construction, commissioning and ramp-up at Horizonte's 100%-owned Araguaia Nickel Project … where construction is underway and progress remains on schedule”.
- The company also confirms that it has also satisfied the conditions required to access the Cost Overrun Facility “and has fully drawn down the US$25 million of COF funding from Orion”.
- Characterising the unlocking of the debt facilities as a “significant milestone”, CEO, Jeremy Martin, said that it “is the culmination of a multi-year effort to sufficiently de-risk the Araguaia Nickel Project to access low-cost debt funding from a syndicate of leading international financial institutions. The rigorous due diligence process, and the extensive list of obligations that Horizonte was required to meet to access this funding, should provide all our stakeholders with confidence in the robustness of Araguaia”.
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 – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 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
DISCLAIMER
This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.
Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.
MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.
A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).
SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%