SP Angel . Morning View . Wednesday 18 01 23
Copper rises to $9,450/t as traders buy up supplies ahead of China reopening
MiFID II exempt information – see disclaimer below
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* - BUY – Underground development now underway at new Gilar copper, gold, zinc mine
Jubilee Metals Group PLC (AIM:JLP, JSE:JBL, OTC:JUBPF) – Warrant exercise raises £2m
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* - suspended – Improved mining operations deliver an increase of over 70% in 2022 saleable copper production despite working capital constraints.
Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* – BUY, Target 17.9p – Positive community engagement ahead of EIA submission
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) – 2022 gold production increases by 18% and just misses guidance target
Tertiary Minerals PLC (AIM:TYM)* – Lab results from soil sampling at Jacks, Zambia raise potential for hydrothermal copper sulphide mineralisation
Thor Mining (LON: THR) – Name change to Thor Energy
Copper soars to $9,450/t as traders rush to secure supply before Lunar New Year and shorts are forced to cover
- Copper prices jumped over 2% to near $9,450/t on a spree of buying from Chinese end users.
- Copper LME futures have swung into backwardation overnight, with the spot price now at a premium to 3-month futures for the first time in over a month.
- Backwardation suggests supply tightness, with analysts suggesting a major restocking effort in China in the run up to Lunar New Year this weekend.
- The copper price has also likely been a boosted by short covering, with over $3bn worth of short positions established in Summer 2022. Speculators are likely facing margin calls on several of these positions, requiring them to take long positions.
- The dollar continues to show weakness, despite easing pressure from the JPY, supporting copper buyers and boosting prices.
- Copper premiums remain weak in China for refined products, suggesting that speculative positions on future markets have been a primary driver of today’s sudden move higher, despite a flip to backwardation on the LME spot market.
Chinese aluminium imports fall 26% as domestic capacity ramps up to record high as manufacturing resumes
- Chinese aluminium output in 2022 rose 4.5% yoy to 40.21mt as power supply restrictions eased and capacity was boosted.
- December domestic aluminium output jumped 10.3% yoy to 3.43mt.
- Chinese smelters are ramping up production, with new capacity in Inner Mongolia and Guangxi and Yunnan provinces.
- Aluminium imports fell 25.6% in 2022 yoy as Covid-restrictions weighed on production and domestic output pushed higher.
- However, imports climbed 6.3% in December yoy to 258kt.
- Bauxite imports in December jumped 17% yoy as smelter demand soared.
Iron ore - Officials of the National Development and Reform Commission met yesterday with domestic iron ore traders and brokers causing iron ore prices to sell off.
- The new China Mineral Resources Group was set up to buy iron ore for most of the big steel mills as the CSPT ‘China Smelters Purchase Team’ does with copper concentrate.
Dow Jones Industrials -1.14% at 33,911
Nikkei 225 +2.50% at 26,791
HK Hang Seng +0.47% at 21,678
Shanghai Composite +0.00% at 3,224
Economics
China - Q4 GDP rose 2.9% yoy
- 2022 GDP fell to 3% , well below the official 5.5% target but set against the 8.1% GDP growth rate in 2021 and 2.2% in 2020
- Industrial production fell to 1.3% yoy in December vs 2.2% in November
- Industrial capacity utilisation held remarkably steady at 75.7% in December vs 75.6% in November
- Retail sales continued to fall -1.8% in December vs -5.9% in November
- Unemployment improved slightly to 5.5% in December vs 5.7% in November but will take off now that the army of Zero Covid enforcers has been let go.
- Chinese expenditure of Zero Covid workers and associated infrastructure is estimated to have accounted for 1.3% of GDP in certain areas
- Chinese house price index fell 1.5% yoy in December vs a -1.6% fall in November
- Fixed asset investment, non rural fell slightly to 5.1% ytd to CNY 57,213.8bn in December slowing from 5.3% yoy
- Chinese oil refinery output fell 3.4% last year as the economy slowed and possibly due to cheaper Russian oil imports
- China is in a degree of chaos due to an extended Lunar New Year break combined with mass Covid infection
- Extended factory shutdowns has collapsed energy prices
- It looks like commodity traders are buying up every available piece of metal waiting for China to reopen.
- We reckon traders are looking to profit from new growth in China, though China inc. will wait till the last possible moment before buying back into the market.
- Question is, how much metal will China be buying next year.
- China Inc. doesn’t do slowdowns and the CPC will strive to force GDP growth higher with ‘Dual Circulation’ eg vouchers to encourage domestic consumption
- BUT: China is going to suffer wave after wave of Covid. Their vaccines don’t work, not that anyone’s vaccines work against Omicron and the new XBB variant.
- Young migrant workers will lose a number of parents who look after their kids while away working in the new cities.
- Many workers will be sick and take weeks, if not months, to recover. Many will decide they want to lead a better life.
- Inflation: When China Inc. eventually returns to normal, they will party just like we have seen in the West, but, perhaps, on a larger and more lavish scale.
- It could even be like the Stans after the collapse of the Soviet Union when they realised, they were free from their Soviet oppressors!
- A second wave of inflation: China will likely suffer a second wave of inflation, though the CPC are generally good at supressing price increases, its not patriotic! .
- But by the time the second wave hits us the West should be well on the way to economic recovery and better able to work with the new inflation.
Japanese yen slumps whilst government bonds rally as Kuroda commits to further easing, defying expectations
- The dollar climbed 2.5% against the Japanese yen last night, with the currency slumping on the Bank of Japan’s decision to leave its yield curve controls unchanged.
- Bonds rallied on the move, with the 10-year yield falling 15bp, whilst the Japan Topix index climbed 1.7%.
- Speculators had expected Kuroda and the BoJ to move away from its looser policy that has defined it for over a decade following the decision to widen the YCC band late last year.
- The Bank of Japan has spent 6% of the Country’s GDP buying government bonds over the past 30 days to hold yields within its target.
- Kuroda, set to depart this year, has reinforced that the policy works.
- The BoJ’s dovish policy was the first in modern monetary policy and is now the only major central bank yet to start a major tightening programme.
Ukraine – Interior Minister killed in helicopter crash in Kyiv
- Zelenskiy to address World Economic Forum in Davos. Expect strong support for Ukraine in Davos and offers of further support.
- Western offers of military equipment continue to increase led by Challenger tanks from the UK.
- Russian missiles into civilian apartments and infrastructure have hardened Western resolve to help eject Russian soldiers from Ukraine.
Currencies
US$1.0848/eur vs 1.0836/eur yesterday. Yen 129.69/$ vs 128.60/$. SAr 16.952/$ vs 16.974/$. $1.233/gbp vs $1.222/gbp. 0.703/aud vs 0.697/aud. CNY 6.760/$ vs 6.764/$.
Dollar Index 102.23 vs 102.26 yesterday.
Commodity News
Precious metals:
Gold US$1,913/oz vs US$1,910/oz yesterday
Gold ETFs 93.9moz vs US$94.0moz yesterday
Platinum US$1,050/oz vs US$1,057/oz yesterday
Palladium US$1,758/oz vs US$1,740/oz yesterday
Silver US$24.23/oz vs US$24.00/oz yesterday
Rhodium US$12,250/oz vs US$12,250/oz yesterday
Base metals:
Copper US$ 9,434/t vs US$9,087/t yesterday
Aluminium US$ 2,642/t vs US$2,599/t yesterday
Nickel US$ 27,945/t vs US$26,965/t yesterday
Zinc US$ 3,354/t vs US$3,284/t yesterday
Lead US$ 2,220/t vs US$2,223/t yesterday
Tin US$ 28,585/t vs US$28,100/t yesterday
Energy:
Oil US$86.9/bbl vs US$84.6/bbl yesterday
- Crude oil prices edged higher as the EIA reported that China is expected to drive nearly half of global demand growth this year to a new record high.
- European energy prices edged higher on colder temperatures, though milder weather is expected to return across much of the Continent next week.
Natural Gas US$3.471/mmbtu vs US$3.756/mmbtu yesterday
Uranium UXC US$49.50/lb vs US$50.35/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$121.6/t vs US$122.2/t
Chinese steel rebar 25mm US$622.3/t vs US$621.8/t
Thermal coal (1st year forward cif ARA) US$170.0/t vs US$170.0/t
Thermal coal swap Australia FOB US$330.0/t vs US$335.0/t
Coking coal swap Australia FOB US$313.0/t vs US$310.0/t
Other:
Cobalt LME 3m US$49,000/t vs US$49,000/t
NdPr Rare Earth Oxide (China) US$106,874/t vs US$106,789/t
Lithium carbonate 99% (China) US$66,195/t vs US$66,142/t
China Spodumene Li2O 5%min CIF US$5,970/t vs US$5,970/t
Ferro-Manganese European Mn78% min US$1,340/t vs US$1,338/t
China Tungsten APT 88.5% FOB US$325/mtu vs US$325/mtu
China Graphite Flake -194 FOB US$885/t vs US$885/t
Europe Vanadium Pentoxide 98% 9.0/lb vs US$8.9/lb
Europe Ferro-Vanadium 80% 36.75/kg vs US$36.75/kg
China Ilmenite Concentrate TiO2 US$344/t vs US$344/t
Spot CO2 Emissions EUA Price US$84.2/t vs US$84.1/t
Brazil Potash CFR Granular Spot US$510.0/t vs US$510.0/t
Battery News
Australia – Federal Government outlines critical minerals grant framework
- The Australian government has detailed its Critical Minerals Development Program that will provide up to $50m in grants from $1m to $30m to support projects that will strengthen Australia’s sovereign capabilities in critical minerals.
- Projects eligible must have minerals “crucial for low-emissions technologies such as electric vehicles, batteries and solar panels, as well as aerospace and defence applications”
- Grants will “support up to half of eligible expenditure on projects that will strengthen global supply chains and help Australia build capacity to process critical minerals into strategically important technologies such as lithium-ion batteries, rare earth element magnets, semi-conductors, and communications components.”
Britishvolt enters administration as last-ditch funding efforts fail
- The UK battery start-up collapsed on Tuesday and 300 staff were made redundant “with immediate effect” on Tuesday as the business had no funds to continue operating.
- The company’s goal was to build a £3.8bn battery plant in Blyth, north-east England – though for months has been been surviving on short-term rescue funding and tax rebates, while it searched for a viable long-term owner.
- A deal almost struck last week saw a £30m investment or almost total control of the company, with £128mn of further funding to follow – though this ultimately wasn’t enough to save the business.
BASF and Eramet plan $2.6bn nickel smelter in Indonesia
- BASF and Eramet are to build a nickel-cobalt refinery in Indonesia, with capacity to produce 676,000tpa Ni and 7,500tpa Co.
- According to Indonesia’s investment ministry, the two companies expect to finalise an agreement on the plan in the first half of this year.
- The HPAL plant has an estimated capex of $2.6bn and will be located at Weda Bay in North Maluku.
Automaker Stellantis agrees nickel sulphate supply deal with Terrafame
- Stellantis and Finland’s Terrafame have agreed a five-year nickel sulphate supply deal, from 2025 onwards.
- The agreement “will cover a significant portion of the needs for sustainable regionally sourced nickel" as Terrafame has one of the world’s largest battery chemicals plants for EV batteries in Finland.
- Terrafame has an integrated mine and processing plant, meaning production is fully traceable – a factor becoming increasingly important to OEMs as they try to navigate supply chain accountability.
- Stellantis is the world’s third largest automotive group including brands Peugeot, Fiat, Chrysler and Jeep.
Company News
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 108.5p, Mkt Cap £124m – Underground development now underway at new Gilar copper, gold, zinc mine
BUY
- Anglo Asian Mining report the start of underground development work at the new Gilar copper, gold mine in Azerbaijan.
- The flotation plant is being expanded at Gedabek to support growth in production from higher copper grades at Gilar.
- A new zinc flotation line is also being installed for the recovery of zinc.
- A team of miners is already developing the decline into the Gilar deposit in preparation for further development for production and for underground drilling to better define and extend the existing copper, gold, zinc resource.
- The tunnel is currently being directed into the lower mineralised zone for access and eventual production.
- Processing: Gilars proximity to the multi-stream process plant at Gedabek is also important as it enable the processing of ore with relatively little additional modification and capital cost.
- We expect the expansion of the copper line at the process plant to be ready in time for the addition of significant quantities of copper ore from Gilar.
- Gilar resource: 3.90mt grading 1.08g/t gold, 0.55% copper and 0.6% zinc containing gold: 135,212oz, copper 21,450t, zinc 23,400t
- Class 1+2 resources contain: 2.41mt grading 1.22g/t gold, 0.62% copper and 0.66% zinc,
- Class 3 resources contain: 1.49mt grading 0.86g/t gold, 0.45% copper and 0.52% zinc,
- Applied cut-off grades: 0.5 Au eq / Au eq = Au g/t + (Cu% x 1.49) + (Zn x 0.46) + (Ag x 0.01) + (Pb x 0.37)
- Recent assay results show:
- 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).
Conclusion: Anglo Asian’s miners are very quick to start underground development with teams of experienced underground miners ready to deploy to new mine sites.
This ability to accelerate mine development is of significant value as it means newly discovered resources can be quickly defined and developed.
The expansion of copper processing capacity is part of its plan to become a new mid-tier copper producer.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Jubilee Metals Group PLC (AIM:JLP, JSE:JBL, OTC:JUBPF) – 11.9p, Mkt cap £325m – Warrant exercise raises £2m
- Warrant holders in Jubilee Metals have exercised 35m warrants raising £2m for the company at 6.12p/s.
- The shares will be admitted for trading on 24th January.
- A further 921,940 warrants remain outstanding at 6.12p/s
- The warrant exercise represents 1.3% of the company’s shares
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* suspended – Improved mining operations deliver an increase of over 70% in 2022 saleable copper production despite working capital constraints.
NPV Valuation: Under review
- Rambler Metals has reported operating results for the final quarter of 2022 showing production of 1,588t of saleable copper bringing output for the full year to 5,876t.
- President and CEO, Toby Bradbury, acknowledged that this level of production was “below the expectations we had set for ourselves. The reasons for this are almost entirely attributable to the increasing working capital deficit during the year”.
- We observe that although the total output falls below the company’s aspirations it is 72% higher than 2021’s production and exceeds the 5,299t achieved in 2019 and is at the highest level since at least the start of 2016.
- Quarterly production is the result of treating 94,831t of ore at an average grade of 1.84%, which we believe is the highest quarterly head grade achieved since at least Q1 2016.
- Production continues to draw on ore from the main areas of the Lower Footwall zone (LFZ) which contributed 67% of tonnage with 26% from the Ming North Zone and 7% from the Upper Footwall Zone of the Ming mine.
- Fifty-four percent of the production is coming from the deeper levels of the LFZ between the 710-760 levels where the company has previously indicated that grades are believed to be improving with depth.
- In what seems to be a response to working capital constraints, underground development is being “strategically reduced to keep pace with production in all zones through the Quarter, providing sustainable access to production tonnes going forward while preserving cash”.
- We are encouraged that changes to underground mining methods on the Ming North Zone are delivering “much better control over dilution … [and are providing] … the opportunity to increase the grades reporting from these stopes”.
- Working capital constraints have also impacted the operation of the Nugget Pond Mill where “over 100 hours of unplanned downtime during the Quarter …[resulted from] … Delays in procuring parts that would normally be stocked on site resulted in downtime being much longer than it would otherwise have been”.
- Breakdowns in the flotation circuit “were caused by delays to preventive maintenance due to working capital constraints. The repeated stop/start of the plant operations inevitably led to recovery losses” with recovery rates during the quarter declining to 94.7% to an average for the year of 95.8%.
- Although recovery rates are still at relatively robust levels, the declining trend through 2022 impacted the average grade of the copper concentrate which fell back to 25.6% for the quarter and to 25.8% for the year (26.5% in 2021).
- Rambler Metals confirms that “Discussions continue with several groups, including Newgen Resource Lending Inc. ("Newgen") as the Company's principal secured creditor, to restructure the finances of the Company”.
- Mr. Bradbury clarified that although the company continues to receive support from its suppliers, this “has naturally been tempered with the uncertainty created while the financial restructuring process of the Company has been ongoing”.
- He said that “The support of our suppliers and service providers is never taken for granted and is much appreciated”.
Conclusion: Production of saleable copper increased by more than 70% in 2022 despite working capital constraints resulting from the delays in securing a financial restructuring. Investors will no doubt be keen to see a speedy resolution of the restructuring and an end of the AIM suspension.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining
Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* 2.75p, Mkt Cap £46m – Positive community engagement ahead of EIA submission
BUY – 17.9p
- Savannah has provided an update on the Social Impact Assessment (SIA) currently being undertaken that gives insight into “the range of views that exists among stakeholders towards the Project and the Company, as well as the expectations and preferences that stakeholders have for benefit sharing from the Project”.
- A 'Social Issues Scoping Report', the final report from this first phase of the SIA is expected from the Community Insights Group (CIG) later this month, which will then be submitted to APA as part of the company’s revised Environmental Impact Assessment (EIA) during Q1 2023.
- The report enabled Savannah to ascertain public perception of the project and gave the company important feedback which can be used going forward to further improve relationships with stakeholders.
- Savannah will continue to gather stakeholder feedback while the CIG completed its Social Issues Scoping Report which will be part of Savannah's EIA resubmission.
*SP Angel act as Nomad and Broker to Savannah Resources
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) 11p, Mkt Cap £120m – 2022 gold production increases by 18% and just misses guidance target
- Shanta Gold reports an 18% increase in gold 2022 production to 65,209oz at an average cash cost of US$1,014/oz and all-in-sustaining cost (AISC) of US$1,270/oz in line with the guidance range of US$1,150-1,275/oz.
- The company’s guidance for 2023 is for the New Luika mine in Tanzania to produce between 66-72,000oz at an AISC in the range US$1,200-1,300/oz.
- The 2022 production is the result of a record 884,702t throughput with 88.2% recovery of ore grading an average 2.63g/t gold
- Shanta Gold comments that the 65,209oz of production is “4% below the annual production target of 68,000 oz” and cites equipment constraints in both the open-pit and underground mines as well as power shortages.
- Explaining its response to the equipment shortage, the company says that “Open pit mining equipment arrived at NLGM in December 2022 from a second mining contractor to support the surface operations. By the end of December 2022, the open pit mining fleet capacity at NLGM had increased by approximately 40% following commissioning of an additional excavator and three haul trucks and Q4 open pit mined ore was up 45% vs Q3”.
- In the underground mine, “a newly purchased Sandvik underground production rig (Solo DL321) was received and fully commissioned in December 2022. As a result, total underground production meters increased by 94% in December to 10,439 meters compared with the first 11 months of 2022 actual average of 5,377 meters. At the end of December 2022, a total of 10 underground stopes were ready and available for drilling versus a NLGM base case average of 3 at any one time”.
- Shanta Gold also experienced “Reduced grinding efficiency within the processing plant affected gold recovery during the Quarter” but the company reports improvements during December with rates of 63.4% “up from lows of 56.7% in October and 59.0% in November and against the target of 69.0% (and mill design of 80%)” and “As of 10 January 2023, grinding efficiency has further improved to 68%.”
- Commenting on its other operations, Shanta Gold confirms that “Singida remains on track for first gold pour in March 2023 transforming Shanta Gold into a 100,000 oz/pa producer” and that 3 exploration targets in west Kenya, at Ramula, “present several exciting additional open-pit and underground development options”.
- The company confirms that it “has now completed 65% of total planned drilling” at Ramula and that a “Significant update to Mineral Resource Estimate is expected shortly relating to the Isulu and Bushiangala deposits followed by Ramula mineral resource update in February”.
Conclusion: The New Luika mine has delivered an 18% increase in gold production during 2022. Although narrowly missing its production guidance the introduction of additional surface and underground mining equipment and improvements to the plant help a 2023 guidance target range of 66-72,000oz at an AISC in the range US$1,200-1,300/oz.
Tertiary Minerals PLC (AIM:TYM)* 0.17p, Mkt cap £2.7m –Lab results from soil sampling at Jacks, Zambia raise potential for hydrothermal copper sulphide mineralisation
- Tertiary Minerals have received laboratory check analytical results from soil samples taken at the Jacks Copper Project in Zambia.
- Sampling results follow provisional results based on pXRF results taken in situ.
- 107 soil samples received from 4 grids, with laboratory check multielement analytical results correlating well to initial pXRF results.
- Results note high Copper:Scandium readings, with Cu:Sc ratios in Zambia traditionally correlating to hydrothermal copper sulphide mineralisation.
- First Quantum’s Sentinel Mine in Zambia recorded high Cu:Sc ratios, with the Jacks Area C displaying similarly above threshold ratios.
- 27 contiguous soil samples from the licence area display high Cu:Sc rations across a possible mineralised strike length of 1km, providing the Company with an additional priority drill target on the licence.
*SP Angel act as Nomad and Broker to Tertiary Minerals
Thor Mining (LON: THR) 0.28p, Mkt Cap £8.1m – Name change to Thor Energy
- Thor Mining is changing its name to Thor Energy PLC (AIM:THR, OTCQB:THORF, ASX:THR) to better reflect the new focus of the company on uranium and energy metals.
- The new projects are in Australia and the US.
- The name change will also become effective in Australia within a week.
- Thor Energy is run by Alistair Clayton, chairman, Nicole Galloway Warland, managing director and Mark McGeough, non-executive director.
- The company recently corrected an erroneous assay result from drilling on the Kelly’s prospect in the Ragged Range project in WA
- The 4m intersection reported at under 0.01g/t gold vs 12.2g/t. This mix up arose from the reporting of a QA/QC sample in the laboratory.
Conclusion: Thor Energy has three uranium projects in the US at Vanadium King, Wedding Bell and Radium Mountain in the Uravan Mining Belt on the border between Utah and Colorado.
We look forward to further news on these projects in a well-known uranium province and on the permitting hoops the team will be required to jump through.
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Analysts
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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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