SP Angel . Morning View . Wednesday 25 01 23
Tin breaks through $30,000/t as China’s appetite grows and Peruvian supply fears intensifies
MiFID II exempt information – see disclaimer below
Ariana Resources PLC (AIM:AAU) – Initial drill results from drilling at Salinbas Project
Beowulf Mining PLC (AIM:BEM)* – Fundraising for environmental permit application and development of Kallak North
Bluerock Diamonds PLC (AIM:BRD)* – Section 54 notice from department of mines holds up open pit mining
East Star Resources PLC (LSE:EST) – Mineralisation at Rudny-Altai, Kazakhstan
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) – Drilling continues to extend the mineralised envelop at Havieron as decline development accelerates
Polymetal International PLC (LSE:POLY) – 2022 production in line with guidance for 1.7moz GE
Dow Jones Industrials +0.31% at 33,733
Nikkei 225 +0.35% at 27,175
HK Hang Seng CLOSED at 22,044
Shanghai Composite CLOSED at 3,264
Tin breaks through $30,000/t as China’s appetite grows and Peruvian supply fears intensifies
- Tin prices have climbed 17% this year on growing Chinese imports and supply concerns.
- Whilst Indonesian exports grew 5% in 2022, Chinese imports grew to 31,115t vs 4,900t in 2021.
- China exported 10.7kt last year.
- Supply concerns from Peruvian firm Minsur’s San Raphael are mounting following the suspension of operations on widespread protests.
- Prices fell from $50,000/t last year to close to $17,000/t as demand cooled after a lockdown boom in solder demand.
China – Restarting factories after the Lunar New Year break could cause load shedding in China according to the China Electricity Council
- Renewed demand for electrical power from the restart of factories combined with supply uncertainty from extreme weather events could cause power shortages in China. (SCMP)
- Power consumption is expected to rise by 6% this year to 9.15tnkWh and a degree of uncertainty from extreme weather events as it attempts to keep pace with demand growth.
- The Council warn of power shortages in some areas at peak periods as capacity remains variable and constrained.
- Chinese power consumption rose 3.6% to 8.6tn kWh last year with supply capacity rising by 7.8% to 2.56bn kWh on 2021.
- A degree of supply uncertainty exists due to variable wind, hydropower and solar resources as well as some uncertainty in other fuel supplies.
- Last year high temperatures, low river levels and the overdrawing of hydropower slowed hydropower production into the Autumn disrupting manufacturing and other activities.
- A lack of new investment and maintenance in coal fired power generation due to losses at coal power companies raises the risk of further unexpected power outages.
- China GDP rose to 3% last year from 2.2% in 2020 last year but was someway off the 5% previously claimed due to lockdowns and a pullback in Western demand.
- Q4 GDP marked 2.9% before President Xi reversed his strict ‘Zero Covid’ policy of enforced and lengthy lockdowns as cities rioted and disrespected Xi’s name.
- We now expect China to suffer a series of waves of Covid infections, as seen in the west, though policymakers appear to be trying to ensure the entire nation is exposed to the virus as fast as possible.
- While we reckon this would have been better done through the Summer months for general health reasons there is little doubt that the virus spreads more easily in the Winter.
- The unfortunate consequence is that many migrant workers will need to remain in their home villages to look after their children if their parents are unable to manage their childcare.
- Ironically, this might help to restart China’s birth rate which collapsed due to the severity of recent lockdowns. This is now seen is a significant problem due to the demographic challenges it presents.
Wuxi city to issue Yuan cash vouchers for Electric Vehicle purchases
- The vouchers will contribute CNY1,500-3,000 ($210-420)per vehicle.
Recharge Industries, an Australian battery company, made a preliminary bid for collapsed UK based battery business Britishvolt, FT writes.
- The Company seeks to capitalise on a free trade agreement between Australia and the UK to rescue the business.
- Britishvolt that was once valued at £700m is expected to attract bids of less than £10m
- Other bidders include Jaguar Land Rover owner Tata Motors and DeaLab, a London-based financial group with close links to Indonesia, FT reports.
- Administrators are targeting to close the deal by the end of the month.
China, Japan and South Korea see coal imports surge on manufacturing revival
- Thermal coal imports from China, Japan and South Korea hit their highest combined total in 16 months for December, as China’s rapid reopening stimulated industrial activity in the region.
- China’s output of industrial ingredients including ethylene, soda ash, sulphuric acid, resins, polymers and non-ferrous metals have all seen major signs of recovery, highlighting improving demand from end users following extended lockdowns.
Copper – Codelco expects to produce 172,000t less copper than last year
Economics
Germany – Business sentiment improved this month with firms still reporting being less satisfied with the current situation but growing more confident about their prospects.
- The Ifo Institute business climate index rose to 90.2, up from 88.6 in December, in line with market expectations.
UK – Producer prices inflation pulled back to the lowest level in almost a year in December, although, the absolute level remain high.
- Factory gate prices climbed 14.7%yoy last month, down from 16.2% in November and a recent peak of 20% in July.
- That compares to an average of 2.4% between 1985 and 2020.
Currencies
US$1.0847/eur vs 1.0847/eur yesterday Yen 128.92/$ vs 128.92/$. SAr 17.252/$ vs 17.252/$. $1.236/gbp vs $1.236/gbp. 0.694/aud vs 0.694/aud. CNY 6.776/$ vs 6.776/$.
Dollar Index 102.02 vs 102.01 yesterday
Commodity News
Precious metals:
Gold US$1,929/oz vs US$1,938/oz yesterday
Gold ETFs 94.1moz vs US$94.1moz yesterday
Platinum US$1,053/oz vs US$1,053/oz yesterday
Palladium US$1,739/oz vs US$1,715/oz yesterday
Silver US$23.56/oz vs US$23.64/oz last yesterday
Rhodium US$12,250/oz vs US$12,250/oz yesterday
Base metals:
Copper US$ 9,335/t vs US$9,349/t yesterday
Aluminium US$ 2,651/t vs US$2,590/t yesterday
Nickel US$ 28,765/t vs US$28,000/t yesterday
Zinc US$ 3,435/t vs US$3,392/t yesterday
Lead US$ 2,146/t vs US$2,071/t yesterday
Tin US$ 30,000/t vs US$29,660/t yesterday
Energy:
Oil US$85.0/bbl vs US$88.0/bbl yesterday
Natural Gas US$2.955/mmbtu vs US$3.307/mmbtu yesterday
Uranium UXC US$48.90/lb vs US$48.90/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$126.4/t vs US$126.4/t
Chinese steel rebar 25mm US$619.6/t vs US$619.0/t
Thermal coal (1st year forward cif ARA) US$178.0/t vs US$178.0/t
Thermal coal swap Australia FOB US$290.0/t vs US$290.0/t
Coking coal swap Australia FOB US$330.0/t vs US$330.0/t
Other:
Cobalt LME 3m US$49,000/t vs US$49,000/t
NdPr Rare Earth Oxide (China) US$106,364/t vs US$106,634/t
Lithium carbonate 99% (China) US$65,880/t vs US$66,047/t
China Spodumene Li2O 5%min CIF US$5,970/t vs US$5,970/t
Ferro-Manganese European Mn78% min US$1,343/t vs US$1,340/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$9.0/lb
Europe Ferro-Vanadium 80% 36.75/kg vs US$36.75/kg
China Ilmenite Concentrate TiO2 US$342/t vs US$343/t
Spot CO2 Emissions EUA Price US$89.0/t vs US$84.7/t
Brazil Potash CFR Granular Spot US$510.0/t vs US$510.0/t
Battery News
Company News
Ariana Resources PLC (AIM:AAU) 3.3p, Mkt Cap £37m – Initial drill results from drilling at Salinbas Project
- Ariana has completed 8,000m worth of diamond drilling at the Salinbas Project over the course of the 2021/2022 campaign.
- The Salinbas Gold Project is situated in NE Turkey, containing 1.5moz gold via a JORC MII Resource.
- 22,000m worth of resource and exploration drilling has now been planned for both infill and outfill drilling efforts.
- Highlights from the ongoing programme include:
- 13.7m @ 6.75g/t Au + 1.3g/t Ag
- 8.6m @ 3.90g/t Au + 1.5g/t Ag + 68ppm Mo
- 11.5m @ 1.37g/t Au + 8.5g/t Ag
- Base metal-containing sulphides have been displayed from drilling at Hizarliyayla, held within silica-carbonate mineralisation.
- The Company is targeting a potential base-metal rich intermediate sulphide epithermal system at Hizarliyayla, supported by recent surface sampling efforts.
Beowulf Mining PLC (AIM:BEM)* 3.1p, Mkt Cap £25m – Fundraising for environmental permit application and development of Kallak North
- Beowulf is set to conduct a preferential rights issue of 316,681,938 Swedish Depository Receipts (SDRs) alongside a PrimaryBid retail offer of up to 104,000,000 ordinary shares in the UK.
- The Board and executive management have subscribed to £181,000 worth of shares.
- The SDRs will be offered at SEK0.27 and the UK issued shares will be subscribed for at a price of 2.06p.
- Gross proceeds from the Capital Raise will amount to c.£9.1m, with net proceeds estimated at approximately £7.8m, assuming all are fully subscribed.
- The Company plans to utilise the funds for further development of the Kallak North high grade iron ore project in northern Sweden. This includes the potential to integrate Kallak Noth with Kallak South, through additional exploration drilling, alongside further technical work.
- The conversion of Kallak South’s current Exploration Target to a Mineral Resource is also possible through today’s fundraising.
- Funds will also be used to advance the delivery of the PFS, which is set to begin in Q2 2023.
- Furthermore, the Company plans to submit an application for the necessary environmental permit in Q4 of this year.
- Repayment of the short-term debt raised in July 2022 is also planned with part of the proceeds of the raise.
Conclusion: Beowulf’s fundraising efforts provide the necessary working capital to both maintain and develop the Company’s Kallak project, alongside additional projects in Finland and Kosovo. The raise follows Beowulf’s delivery of the Kallak North scoping study, which highlights the project’s strong economic fundamentals and positive sensitivity to current spot prices. The delivery of a PFS and a successful environmental permit application will add further value to Beowulf and support its aims to commence production in 2026.
*SP Angel acts as Nomad and Broker to Beowulf Mining
Bluerock Diamonds PLC (AIM:BRD)* – 3.62p, Mkt cap £1.5m – Section 54 notice from department of mines holds up open pit mining
- BlueRock Diamonds reported late on Monday the receipt of a Section 54 notice closing the Kareevlei open cast mine in South Africa.
- The Process plant continues to work through stockpiled material indicating there should be relatively little disruption to production as a result of the open pit shutdown.
- The Mining Inspectorate will shutdown mines on random inspection if they find something that they feel might compromise the health and safety of the workforce.
- The last time a Section 54 notice was applied to one of the Kareevlei open pits it was related to one of the ramps in the open pit, though other issues might have been involved.
- We expect any issues with the mining of the pits at Kareevlei to resolved relatively quickly and for the mine to resume normal operations quite soon.
Conclusion: The Kareevlei diamond mine has been beset by a series of problems over the years. The process plant now appears to work through the wet season but heavy rain will slow trucks out of the open pits. The greater involvement and commitment of Teichmann at Kareevlei should optimise the operation of the mine and process plant.
*SP Angel acts as nomad and broker to Bluerock Diamonds. The analyst holds shares in BlueRock Diamonds.
East Star Resources PLC (LSE:EST) 3.5p, Mkt Cap £6.6m – Mineralisation at Rudny-Altai, Kazakhstan
- East Star Resources reports that a review of historic technical literature and drilling results following the completion of its helicopter airborne magnetic survey in 2022, has identified copper/zinc and lead mineralisation within its wholly owned RA3 licence area at Rudny Altai, Kazakhstan.
- The mineralisation consists of polymetallic volcanic and sediment hosted exhalative sulphides within the 10kmx3km ‘Verkhuba Ore District’ with “up to seven parallel and several metres thick layers of massive sulphides”.
- The company explains that the area was drilled in a 45,000m programme in 1990 and it highlights drilling historic intersections including:
- An 11.0m wide intersection averaging 2.08% copper from a depth of 32.9m in hole 14 which also contained a deeper intersection of 6.3m at an average grade of 3.7% copper from 60.3m depth; and
- A 16.0m wide intersection in hole 25 averaging 0.35% copper from a depth of 84.5m which is contained within a wider, 42.0m intersection which averages 0.5% copper and 1.3% zinc from 84.5m depth; and
- A 9.0m wide intersection averaging 1.2% copper from 299.4m depth in hole 27; and
- Intersections of 7.1m, from 239.4m depth in hole 63 which averaged 0.8% copper and 2.6% zinc and a second, deeper intersection of 5.0m at an average grade of 1.57% copper and 5.48% zinc from 252.7m; and
- A 4.0m wide intersection averaging 2.48% copper and 2.59% from 155.0m depth in hole 269. Contained within a broader, 15.0m wide zone at an average grade of 0.9% copper and 1.06% zinc.
- East Star Resources reports that historic metallurgical test results indicate recovery rates of between 94-96% into copper concentrate and 60-90% to zinc concentrate.
- The company confirms that resource estimation work is underway using the historic information and that “multiple drill-ready targets have been added to the 2023 exploration programme”.
Conclusion: Re-assessment of historic drilling and technical information from within the extensive Verkhuba area of Kazakhstan, in conjunction with East Star Resources’ 2022 geophysical exploration work is providing additional drill targets and the basis for a mineral resources estimate.
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) 8.0p, Mkt Cap £407m – Drilling continues to extend the mineralised envelop at Havieron as decline development accelerates
- Greatland Gold draws attention to the quarterly exploration report of Newcrest Mining, its 70% partner in the Havieron project in WA.
- The announcement confirms that the underground decline had advanced to 1,519m by 18th January and that improving ground conditions and the transition to “drilling and blasting of the development face has seen an acceleration of development with record rates of advancement achieved”.
- Today’s announcement confirms that drilling “has continued to define high grade material within the Eastern Breccia and Northern Breccia” zones.
- Among the results from the Eastern Breccia zone highlighted today are:
- An intersection of 42.0m at an average grade of 2.4g/t gold and 0.43% copper from a depth of 1,542m in hole HAD-134W1; and
- An intersection of 86.0m at an average grade of 0.88g/t gold and 0.05% copper from a depth of 2,056m in hole HAD-152W4; and
- A 171.1m wide intersection averaging 0.68g/t gold and 0.04% copper from a depth of 1,458m, including 32m at an average grade of 1.5g/t gold and 0.09% copper from 1,492m in hole HAD-163W1; and
- An intersection of 68.0m at an average grade of 0.9g/t gold and 0.14% copper from a depth of 1,411m in hole HAD-164W2
- Highlighted intersection of the Northern Breccia zone include:
- A 137.0m wide section at ana average grade of 1.0g/t gold and 0.10% copper from a depth of 1,110m in hole HAD-098W8; and
- A second, deeper, intersection of 22.0m averaging 8.1g/t gold and 0.14% copper from 1,287m also in hole HAD-098W8
- The company confirms that “In 2023, the drilling programme is intended to focus on growth targets and ongoing resource infill for the lower South East Crescent Zone”. Drilling is expected to intensify after the end of the wet season with “three rigs scheduled to be on site in February 2023”.
- Drilling on the project, to date, amounts to 288,664m
- Greatland Gold also plans further geophysical testing of “targets within the broader mining lease”.
- Managing Director, Shaun Day, said that “The success of the drilling programme supports the expectation for Havieron to deliver and expanded mineral resource estimate”.
Conclusion: Recent drilling continues to expand the mineralised footprint at Havieron and to underpin a potential further resource expansion. Decline development ids accelerating asd ground conditions improve.
Polymetal International PLC (LSE:POLY) 333p, Mkt Cap £1.6bn – 2022 production in line with guidance for 1.7moz GE
- 2022 production amounted to 1.7moz GE, +2%yoy, in line with annual guidance.
- First full year of operations at Nezhda (133koz, +518%yoy) compensated for lower grades at mature assets.
- Q4 production came in at 540koz, +16%yoy, on the back of Nezhda contribution and strong grades at Kyzyl.
- Sales totalled $2.8bn, -3%yoy, reflecting lower average gold and silver prices.
- TCC and AISC are estimated to come in the range of $900-1,000/oz and $1,300-1,400/oz, respectively.
- Capex is expected to come in within the range of $725-775m.
- 2023 guidance is for 1.7moz GE at $950-1,000/oz TCC and $1,300-1,400/oz AISC.
- Voro flotation plant and mining operations at Prognoz are expected to start in 2023.
- Capex forecast at $700-750m including spending on POX-2, Albazion power line, Voro flotation and Prognoz.
- The Company is considering redomiciling into Astana, Kazakhstan, highlighting benefits of existing operations in the region, its legal system, tax regime and the ability to complete such redomiciliation.
- The move can potentially assist in splitting the Company into Russian and ex-Russian assets as Moscow banned asset sales for gold miners domiciled in “unfriendly” places like Channel Islands, where the Company is domiciled (FT).
- No final decision has yet been reached on the latter point.
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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
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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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