SP Angel . Morning View . Thursday 26 01 23
Copper prices hold near 7-month high as South American supply remains in focus
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Albemarle (NYSE: ALB) - Albemarle expects further bullishness from lithium market as demand remains strong and supply tight
Beowulf Mining PLC (AIM:BEM)*– CEO interview highlights value potential for Kallak North high-grade iron ore for green steel
Caerus Mineral Resources PLC (LSE:CMRS) – Sale of Cypriot assets
Largo Resources (TSE: LGO) – Aerospace and VRFB battery sectors see strong growth. Rain, mine contractor change and sequencing holds back rise in production
Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)* – EHSIA approval brings Songwe Hill development closer
Shanta Gold Limited (AIM:SHG, OTC:SAAGF)– Inill drilling at West Kenya expands the Indicated category by 91%
Copper prices hold near seven-month high as South American supply remains in focus
- Copper prices have held over $9,300/t as traders eye supply insecurity from South America amid China’s reopening.
- Codelco produced 10% less copper in 2022 vs expectations and Peruvian majors including MMG’s Las Bambas and Antapaccay remain disrupted by protesters following Castillo’s impeachment.
- Chilean copper agency Cochilco forecasts copper output from Chile peaking in 2030 at 7.14mt, down from 7.62mt. The Agency cites cost and social pressures limiting new mine construction, alongside permitting difficulties and increasing tax burdens.
- Chinese trading remains muted following Lunar New Year celebrations.
- Freeport has warned of labour shortages threatening operations at its US operations, with some milling operations halted at its Bagdad mine. These issues are expected to continue through 2023.
- Copper inventories have fallen slightly but remain 43% below the past 10-year seasonal average
- Copper inventories have traditionally been bolstered in the first quarter of the year before seeing consistent weakness throughout the latter quarters.
- Contango in LME futures has increased, supporting arguments that supply remains ample.
- Treatment and refining charges have stabilised following a major climb through the second half of 2022. The lower the TCRC charges, the more bullish Chinese smelters are on copper demand and prices.
- Yangshan copper premiums also remain weak, 52% below the past 5 year’s seasonal average, suggesting supply of refined copper products in China remains ample, for now.
Gold strengthens again as Dollar touches May lows in run up to Fed meeting
- Gold touched $1,949/oz overnight as the Dollar extended its march lower, before weakening to $1,936/oz this morning.
- Traders are betting on weaker GDP Q4 figures this afternoon from the US, alongside weekly jobs data.
- A weaker US economy is expected to support a Fed decision to ease up on rate hikes going forward, a narrative which has weighed on the dollar, seen Treasury bond buying hit yields and supported bullion buying.
- ETF inflows into gold and silver continue as retail investors look to capitalise on gold’s recent rally, $224m worth of gold was bought yesterday, with ETF holdings now at their highest level since November 30.
- Silver ETFs saw precious metal holdings grow in parallel to gold.
- Polymetal’s management noted yesterday at an investor meeting that Russian state buying has seen a major jump, with ‘huge investment in physical gold by state entities.’
- The Jersey-based miner also noted Russian retail buying ‘for gold bullion exploded in the second half of last year.’
- Russia has been boosting Renmimbi and Gold in its federal reserves following America’s weaponization of the dollar in the wake of Putin’s invasion of Ukraine.
- Russia cancelled VAT on retail gold purchases last year.
Platinum – Power blackouts in South Africa risk PGM production with load shedding from Eskom reported over more than 200 days the previous year.
- Impala Platinum’s CEO notes SA’s electricity crunch is damaging output, stating: ‘if things don’t get better soon then we are likely to have a worse period this year than last.’ (Bloomberg)
- “If it gets worse it will get to a point when you have certain days where we will stop sending people underground.”
- South Africa supplies c. 70% of the world’s platinum and 40% of global palladium.
- Analysts expect the largest global platinum deficit in 20 years this year, alongside a palladium deficit.
- Platinum has rallied 25% over the past 4 months, despite EV demand clouding its longer term prospects for autocatalysts.
- The Industry notes limited investment into SA mining, with a Sibanye spokesman stating that ‘nobody is investing in replacing ounces or growth in the industry.’
- Production cuts could increase a global platinum shortage to the highest level in two decades in 2023 and add to palladium deficit, Bloomberg cites Metal Focus data.
Baltic dry index tumbles further as iron ore shipments fall 13% ytd
- The Baltic dry index has now fallen 87% from Covid peaks and 59% this year, sliding 40% below the seasonal average.
- A primary driver has been major weakness in iron ore trade, with shipments down 13% since December.
- Chinese demand traditionally cools in the run up to Lunar New Year, with February and March traditionally stronger months for dry bulk chartering.
- Brazilian iron ore shipments fell 34% as mining operations were halted by seasonal rains.
- Australian iron ore shipments down 12% in Jan yoy.
Dow Jones Industrials +0.03% at 33,744
Nikkei 225 -0.12% at 27,363
HK Hang Seng +2.37% at 22,567
Shanghai Composite +0.76% at 3,265
Economics
Global smartphone shipments dropped the most on record in Q4/22 reflecting both high inflationary pressures weighing on consumers as well as a pick up in Covid infections in China.
- Shipments dropped 18.3%yoy last quarter taking the total for the year down 11.3%yoy and marking the lowest total for a decade.
US – First take on Q4 GDP is expected to be released today with estimates for a 2.6%qoq (annualised) reading, down on 3.9% recorded in Q3/22.
- Core PCE, a Fed preferred measure of inflation, is forecast to slowdown to 3.9%qoq from 4.7% in Q3/22.
Germany – Economy minister reckons Germany has broken the inflation trend
- The German government now estimate inflation to be 6% this year down from 7% previously forecast
- The government also estimated GDP to grow at 0.2% vs their Autumn forecast of -0.4%
UK – Business confidence dropped to the lowest since the global financial crisis, according to the Institute of Chartered Accountants.
- The survey was carried among 1,000 chartered accountants and was conducted between October 17 and December 16.
- Companies in the retail, real estate and manufacturing sectors were particularly downbeat and reported problems raising capital.
- Commenting on survey results the group attributed weak confidence to “the lethal combination of sky-high inflation and deteriorating customer demand,” and warned that “2023 is likely to be a bleak year for the economy as record inflation, rising taxes and interest rates push the UK into recession.
South Korea – The economy reported the first drop in GDP for the first since the pandemic on the back of a drop in exports and marginal growth in consumer spending.
- GDP contracted 0.4%qoq in Q4/22 compared to a 0.3% increase in the previous quarter.
- 2022 GDP growth came in at 2.6%, down on 4.0% in the previous year.
Spain – Unemployment unexpectedly ticked up in Q4/22 adding concerns over the resilience of the nation’s economy.
- The jobless rate climbed to 12.9%, up 0.2pp on the previous quarter.
Australia - China to bolster relations with Australia, as Xi calls for cooperation
- Xi has noted the ‘great importance’ of China’s trading relationship with Australia, in an address to the Nation on Australia Day.
- Frosty relations over Australian accusations of China’s role in Covid had cooled diplomatic relations over the past three years.
- However, a reopening of coal routes by Beijing in recent weeks points to a clear thawing of tension, potentially highlighting China’s expectations of renewed demand for Australia’s wealth of natural resources.
Ukraine – New barrage of missiles hits Ukraine days after the US and Europe agree to provide the nation with modern battle tanks.
- The decision to provide new categories of weapons and ramp up the scale of military assistance to Ukraine is believed to be driven by the expected step up in fighting over coming weeks.
Currencies
US$1.0924/eur vs 1.0847/eur yesterday. Yen 129.67/$ vs 128.92/$. SAr 17.072/$ vs 17.252/$. $1.242/gbp vs $1.236/gbp. 0.712/aud vs 0.694/aud. CNY 6.793/$ vs 6.776/$.
Dollar Index 101.63 vs 102.01 yesterday
Commodity News
Precious metals:
Gold US$1,943/oz vs US$1,929/oz yesterday
Gold ETFs 94.3moz vs US$94.1moz yesterday
Platinum US$1,039/oz vs US$1,053/oz yesterday
Palladium US$1,700/oz vs US$1,739/oz yesterday
Silver US$23.78/oz vs US$23.56/oz yesterday
Rhodium US$12,250/oz vs US$12,250/oz yesterday
Base metals:
Copper US$ 9,350/t vs US$9,335/t yesterday
Aluminium US$ 2,655/t vs US$2,651/t yesterday
Nickel US$ 29,000/t vs US$28,756/t yesterday
Zinc US$ 3,490/t vs US$3,435/t yesterday
Lead US$ 2,209/t vs US$2,146/t yesterday
Tin US$ 30,715/t vs US$30,000/t yesterday
Energy:
Oil US$86.4/bbl vs US$85.0/bbl yesterday
- Crude oil prices were flat after the EIA reported a negligible 0.5mb US crude inventory build last week, with cold weather limiting refinery utilisation to 86.1%.
- US Henry Hub natural gas spot prices fell below $3/mmBtu, the lowest levels since May 2021, due to ample supply from record domestic production and the longer-than-expected shutdown at Freeport LNG terminal.
- According to a recent study, Petrobras (NYSE:PBR), Repsol and ExxonMobil are the worst polluters in integrated oil and gas, with Equinor and ENI reporting the lowest Scope 1&2 emissions intensity.
- Chevron plans to buy back $75bn of shares and increase dividend payouts, equivalent to nearly 25% of the company’s market value and five times the current level of annual buybacks.
Natural Gas US$2.895/mmbtu vs US$2.955/mmbtu yesterday
Uranium UXC US$49.05/lb vs US$48.90/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$125.3/t vs US$126.4/t
Chinese steel rebar 25mm US$619.6/t vs US$619.6/t
Thermal coal (1st year forward cif ARA) US$178.0/t vs US$178.0/t
Thermal coal swap Australia FOB US$255.0/t vs US$290.0/t
Coking coal swap Australia FOB US$335.0/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$106,364/t
Lithium carbonate 99% (China) US$65,880/t vs US$65,880/t
China Spodumene Li2O 5%min CIF US$5,970/t vs US$5,970/t
Ferro-Manganese European Mn78% min US$1,349/t vs US$1,343/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$342/t
Spot CO2 Emissions EUA Price US$86.4/t vs US$89.0/t
Brazil Potash CFR Granular Spot US$510.0/t vs US$510.0/t
Battery News
Eramet and EDF look to extract French lithium for European EV supply chain
- Eramet and EDF have signed a MoU to develop geothermal brines for lithium extraction in Alsace, France.
- The Companies note a potential 10kt of lithium carbonate production pa.
- A final investment decision is required, with the partnership hoping to begin production by 2030.
- Eramet is also developing lithium production assets in Argentina.
Company News
Albemarle (NYSE: ALB) $271, Mkt cap 31bn- Albemarle expects further bullishness from lithium market as demand remains strong and supply tight
- Albemarle, in an investor presentation released this week, expects strong lithium price appreciation for 2023, in addition to boosted volumes: https://s201.q4cdn.com/960975307/files/doc_events/2023/Jan/24/2023_01_ALB_Strategic_Update_PPT_Web.pdf
- The Company assumes ‘FY 2023 volume expected to be up 30-40% YoY, price expected up 55-65% YoY’.
- It anticipates a 20-45% yoy increase in adjusted EBITDA in addition to this on the back of strong EV sales and robust economic health.
- The lithium producer anticipates a 28-30% CAGR in cash flow between 2022 and 2027.
- The Company forecasts an 800kt supply deficit net of recycling in 2030, with 2.9Mmt LCE in expected supply vs 3.7mt LCE in expected demand.
Beowulf Mining PLC (AIM:BEM)* 3.1p, Mkt Cap £26m – CEO interview highlights value potential for Kallak North high-grade iron ore for green steel
- Kurt Budge has given an interview on the Kallak North Scoping Study on Finwire TV https://www.youtube.com/watch?v=tG4Y3H7Y4e0
- Beowulf are currently running a preferential rights issue of 316,681,938 Swedish Depository Receipts (SDRs) alongside retail offer of up to 104,000,000 ordinary shares at 2.06p in the UK.
- N proceeds estimated at approximately £7.8m, assuming all are fully subscribed. The Board and executive management have subscribed to £181,000 worth of shares.
- Funds are to be used to advance the Kallak North iron ore project in Sweden, further exploration towards integration of Kallak South and repayment of short-term debt.
- Beowulf recently released a Scoping Study for Kallak North earlier this week. Key points are:
- Throughput - 2.7mtpa of concentrate.
- Concentrate grade 67% (though 71% is currently estimated)
- Capex - US$602m (inc. 20% contingency)
- Costs (TCC) - US$87.3dmt average
- Post tax NPV8 - $177m
- IRR - 14.5%
- Payback ~4.5yrs
- Total Life of Mine revenues - $3.7bn
- Total Life of Mine EBITDA - $1.5bn
- Assumes - long term prices of US$109/dmt for blast furnace material and US$125/dmt for direct reduction material.
- Resource does not include value for integration of Kallak South
- Current spot iron ore price assumptions give:
- NPV8 - US$852m.
- Assuming - US$161/dmt for BF and US$177/dmt for DR, the
Conclusion: Kallak North is expected to produce a particularly clean magnetite concentrate enabling steel makers to reduce carbon emissions, improve energy efficiency and reduce waste leading to cleaner and greener steel production. The delivery of a PFS and a successful environmental permit application will add further value to Beowulf and support its aims to start production in 2026.
*SP Angel acts as Nomad and Broker to Beowulf Mining
Caerus Mineral Resources PLC (LSE:CMRS) 4.25p, Mkt Cap £2.2m – Sale of Cypriot assets
- Caerus Minerals reports that it has signed an agreement with Ploutonic Metals and Indo European Mining for the sale of its Cyprus subsidiaries as it shifts its focus to the “acquisition of larger upstream development opportunities in the battery metals sector”.
- The purchasers are paying “US$528,001 to acquire in cash, in staged payments” to acquire the assets and the transaction will close “once Caerus has received the First Purchase Payment of US$100,000, anticipated to be on 30 January 2023”.
- Although the transaction will conclude “Caerus' direct involvement in Cyprus” it retains a residual involvement in the Trouli project “in the event that the Purchasers produce a new JORC or NI 43-101 compliant mineral resources estimate at the Troulli Project, demonstrating 7.75 million tonnes or more at a 0.5% copper equivalent (CuEq*) cut-off grade or higher” which triggers an additional US$432,000 I payment in cash.
- Commenting on the disposal of the assets in Cyprus, Chairman, Chris Lambert, explained that “Caerus is transitioning from a single project Company to becoming part of the upstream supply chain for critical minerals in the UK and Europe”.
- In August 2021, Caerus Minerals acquired of the private Cypriot company, Gold Mines (Cyprus} Limited (GMCL) for £300,000. GMCL was reported at the time to hold 3 licences at Anglisides, Pano Lefkara and Layia and the Trouli project was based around Troulli, Kokkinapetra and Anglesides, in an area of volcanogenic massive sulphide (VMS) mineralisation which was previously worked, most recently during the mid-20th century prior to the Turkish invasion in 1974.
Largo Resources (TSE: LGO) C$7.92, Mkt cap $506m – Aerospace and VRFB battery sectors see strong growth. Rain, mine contractor change and sequencing holds back rise in production
- Largo Resources report quarterly production of 2,004t of vanadium in Q4 vs. 2,003t in Q4 2021.
- Annual production rose slightly to 10,436t last year vs 10,319t a year earlier.
- Recovery rates fell to 74.7% in Q4 vs 76.0% achieved in Q4 2021 and set against the annualised recovery rate of 79.1% for the year as a whole (was also 79.7% in 2021)
- Low stockpile availability was insufficient to offset the impact of corrective maintenance in November and heavy rain in December at the mine.
- Demand remained steady for vanadium in the steel and chemical sectors with aerospace and VRFB battery sectors seeing strong growth.
- European vanadium prices rose ~18% to $9.44/b and are now around $10.08/lb.
- Chinese prices for V2O5 are at $7.9-8.0/lb.
Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)* 15.75p, Mkt Cap £31.7m – EHSIA approval brings Songwe Hill development closer
- Mkango Resources reports that Malawi’s Environmental Protection Agency has granted approval of the Environmental Social Health Impact Assessment (EHSIA) for the Songwe Hills rare earths project.
- The company describes approval of the ESHIA as “a significant milestone in the Mining Development Agreement ("MDA (TSX:MDA)") approval process … [as] … it is a fundamental requirement for the Company to be granted a mining licence and is expected to unlock significant stakeholder value and future investment for the development of Sub-Saharan Africa's first large scale, commercial rare earth mining and processing operation in Malawi”..
- Alexander Lemon, President of Mkango, thanked the Government of Malawi and its Environmental Protection Agency for their continuing support and reported that the “Malawi Ministry of Justice has appointed a London based international law firm with mining expertise to carry out a final review of the Mining Development Agreement ("MDA") and we are hoping to shortly conclude an agreement that is a win-win for both the Nation of Malawi and all of Mkango's stakeholders”.
Conclusion: Approval of the ESHIA for Songwe Hills and the appointment specialist legal advisors to review the Mining Development Agreement for the Malawian Government advance the project with the company now expecting “Mining Licence and MDA being approved in the coming weeks”.
*SP Angel acts as nomad and broker to Mkango Resources
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) 12.0p, Mkt Cap £126m – Inill drilling at West Kenya expands the Indicated category by 91%
- The Company released an updated mineral resource estimate at the West Kenya Project in Kenya.
- The update included new infill drilling completed at the Bushiangala and Isulu deposits resulting in a 91% increase in the Indicated category and a 15% growth in total MRE.
- Updated Bushiangala and Isulu MRE stands at 3.8mt at 10.60g/t for 1,286koz including:
- 2.0mt at 11.45g/ for 722koz in the Indicated category;
- 1.8mt at 9.68g/t for 564koz in the inferred category.
- The team plans to release an updated MRE in February that will include the conversion of a significant part of the Ramula deposit.
- Ramula MRE is currently all in the Inferred category estimated at 6.5mt at 2.08g/t for 434koz.
- Total West Kenya MRE including Ramula deposit now stands at 10.3mt at 5.21g/t for 1,719koz.
Conclusion: Ongoing infill programme delivered a 91% increase in the higher confidence Indicated category at similar grades confirming high grade nature of the deposit. Infill and step out drilling is ongoing to de risk the project testing the continuation of the mineralisation down to a depth of 800m over three phases two of which (up to 550m depth) having already been completed.
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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)
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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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