SP Angel . Morning View . Tuesday 07 02 23
Chinese copper majors raise output into buoyant market and muted demand
MiFID II exempt information – see disclaimer below
Indaba - The SP Angel team will be at the 121 Mining Investment conference in Cape Town on Monday and Tuesday
- Normal service will resume from Monday 13th February.
Arc Minerals Limited (AIM:ARCM)* – Update on Anglo American JV with extension of exclusivity agreement as final due diligence is completed
BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)* – 2022 airborne geophysical survey at Kangerluarsuk zinc-lead-silver Project further enhances drill targets
Great Western Mining Corporation PLC (AIM:GWMO)* – Operations update as Nevada mill construction begins
Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)* – Final instalment of COTEC funding received
Ormonde Mining PLC (AIM:ORM) – Peak Nickel investment and suspension of listing on possible RTO
Power Metal Resources PLC (AIM:POW)* – Completion of 2,402m Molopo Farms Drill Programme
Pre-IPO investment opportunity in Zambian copper exploration company
- The company holds 100% of four licences in highly prospective areas close to existing mines.
- One license runs contiguous with First Quantum’s Sentinel copper and Enterprise nickel mine and close to Arc Minerals’ licences in the west of Zambia.
- Working technical cooperation agreement with First Quantum, under which FQM provided a comprehensive geological data package.
- Historic drilling on licence includes 0.7% copper over 1m and 0.2% nickel over 3m. Geophysics in 2021 & 2022 leading to identification of drill targets.
- Second large licence package offers multiple copper targets identified by recent geochemistry and other geophysics.
- Small artisanal mine on licence assayed at 15.8% copper and 0.57g/t gold. Second pit nearby but off licence ore assayed 18.3 g/t gold and 4.87% copper.
- Highly prospective licence acquired in 2022 on Western Foreland trend, which hosts the giant Kamoa-Kakula mine projected to be world’s second largest copper producer.
- All licences 100% owned with Zambian partners significant shareholders in the company.
- IPO documentation completed indicating near-term listing potential. Large scale IOCG potential identified.
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors
Dow Jones Industrials -0.10% at 33,891
Nikkei 225 -0.03% at 27,685
HK Hang Seng +0.36% at 21,299
Shanghai Composite +0.29% at 3,248
Economics
Australia – RBA hikes 25bp and plans further rate increases as inflation remains higher than expected at 6.9%
US – Fed President Bostic notes strong job data to trigger more rate hikes than anticipated
UK – BoE Chief Economist Pill notes concerns over ‘the potential persistence of inflation’
Currencies
US$1.0713/eur vs 1.0891/eur yesterday. Yen 132.11/$ vs 131.98/$. SAr 17.671/$ vs 17.505/$. $1.201/gbp vs $1.204/gbp. 0.692/aud vs 0.692/aud. CNY 6.788/$ vs 6.781/$.
Dollar Index 103.73 vs 103.12 yesterday..
Commodity News
Chinese copper majors raise output into buoyant market and muted demand
- Geospatial analysis notes that Chinese copper producers raised output at smelters in January by 2% to 744kt.(SAVANT)
- Processing fees are currently at 6-year highs, providing increasing incentive for smelters to ramp up output.
- However, Chinese stockpiles have seen major spikes in recent weeks and numerous indicators, including premiums for imported refined products (currently at April lows), are showing demand remains muted.
- Chinese spot copper currently trades at a discount to LME prices.
- However, supply concerns from major producers in Peru, Chile and DRC all present threats of a flip to deficit this year.
US eyes 200% tariff on Russian aluminium imminently in resurgence of protectionism
- Yet to be signed off by Biden, 200% tariffs on Russian aluminium are being considered to sustain economic pressure on Russia.
- Russia is the world’s second-largest aluminium producer, and has historically accounted for c. 10% of US aluminium imports.
- Efforts by the West to sanction Russian oil, gas and product fuels as seen a significant rerouting of global trade patterns, with China and India, alongside various Southeast Asian nations, absorbing much of Russia’s production.
- The move follow’s the US customs agency’s decision to withhold Chinese aluminium products last week on accusations of forced labour.
Gold holds lower ground as traders brace for Powell interview following surge in December employment
- Gold prices eased again to $1,875/oz as the dollar held is strength following Friday’s major US non-farm payroll beat.
- The precious metal has rallied 15% despite its recent correction, with China’s central bank buying for three consecutive months in a major policy shift.
- The dollar index has rallied 2%, and US 10-year treasury yields have held 30bp higher to 3.62% as investors sell bonds over concerns of resuming inflationary pressures and the need for more Fed rate hikes.
- Both the dollar and yields have historically moved in an inverse fashion to bullion.
- Expectations of either a soft or hard landing are fading, with no landing now looking likely for the time being as the US labour market continues to run hot and manufacturing data showed a marked improvement for December.
- Whilst gold’s longer-term outlook remains strong, hopes of an imminent Fed pivot fuelling further concerns of QE are easing, weighing on bullion’s recent rally.
Iron ore weakens as traders await resurgence in Chinese property demand
- Singapore iron ore futures fell 2.4% this morning to $122/t, following a week of weakness.
- Traders have been betting on a bullish combination of Chinese property stimulus and the country’s rapid reopening fuelling a major uptick in steelmaking demand, although this is yet to materialise.
- Analysts note that ‘downstream transactions remain in holiday mode,’ with concerns over the effect of China’s property stimulus measures accelerating growth as opposed to limiting further capitulation. (Bloomberg)
Precious metals:
Gold US$1,875/oz vs US$1,891/oz yesterday
Gold ETFs 93.0moz vs US$93.0moz yesterday
Platinum US$979/oz vs US$983/oz yesterday
Palladium US$1,596/oz vs US$1,605/oz yesterday
Silver US$22.42/oz vs US$22.62/oz yesterday
Rhodium US$12,050/oz vs US$12,000/oz yesterday
Base metals:
Copper US$ 8,917/t vs US$8,959/t yesterday
Aluminium US$ 2,532/t vs US$2,543/t yesterday
Nickel US$ 26,955/t vs US$28,072/t yesterday
Zinc US$ 3,122/t vs US$3,210/t yesterday
Lead US$ 2,106/t vs US$2,130/t yesterday
Tin US$ 27,100/t vs US$28,379/t yesterday
Energy:
Oil US$82.7/bbl vs US$80.6/bbl yesterday
- Crude oil prices bounced off lows supported by news that a major earthquake in Turkey has halted oil flows to the 1mb/d Ceyhan export terminal.
- European energy prices remain static despite the current cold snap with gas inventories well stocked and forecasts for warmer-than-usual weather over the rest of February.
- BP will slow the speed of its transition, now targeting a 25% reduction (from 40%) in oil & gas production to 2mboe/d and a 20-30% reduction in carbon emissions (from 35-40%) by 2030, and commit an additional $1bn to the capex budget of each of its oil & gas (short cycle ops) and renewables divisions (50% of capex by 2030).
Natural Gas US$2.453/mmbtu vs US$2.393/mmbtu yesterday
Uranium UXC US$50.65/lb vs US$50.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$121.9/t vs US$125.6/t
Chinese steel rebar 25mm US$619.3/t vs US$634.6/t
Thermal coal (1st year forward cif ARA) US$153.0/t vs US$156.5/t
Thermal coal swap Australia FOB US$244.0/t vs US$240.0/t
Coking coal swap Australia FOB US$325.0/t vs US$325.0/t
Other:
Cobalt LME 3m US$38,920/t vs US$41,685/t
NdPr Rare Earth Oxide (China) US$109,749/t vs US$111,566/t
Lithium carbonate 99% (China) US$62,977/t vs US$65,080/t
China Spodumene Li2O 5%min CIF US$5,970/t vs US$5,970/t
Ferro-Manganese European Mn78% min US$1,323/t vs US$1,359/t
China Tungsten APT 88.5% FOB US$333/mtu vs US$330/mtu
China Graphite Flake -194 FOB US$885/t vs US$885/t
Europe Vanadium Pentoxide 98% 9.6/lb vs US$9.4/lb
Europe Ferro-Vanadium 80% 37.75/kg vs US$37.45/kg
China Ilmenite Concentrate TiO2 US$345/t vs US$346/t
Spot CO2 Emissions EUA Price US$95.5/t vs US$96.4/t
Brazil Potash CFR Granular Spot US$510.0/t vs US$510.0/t
Battery News
Indonesia continues push to enhance downstream sector as Jokowi pressures banks for funding
- Indonesian President Jokowi has called on financing institutions to provide ‘concrete support for downstreaming,’ noting he is ‘hearing those who want to build smelters are struggling with funding.’
- Indonesia’s Investment Minister notes that foreign banks are willing to finance 90% of projects vs domestic banks willing to fund up to 70%.
- The Country is forming a major push to boost the production of higher value goods, with its rich reserves of commodities, battery metals in particular, providing a major opportunity for an economic transition.
- Eight bauxite smelters are anticipated for H1-23, and discussions of copper concentrate export bans are ongoing.
Company News
Arc Minerals Limited (AIM:ARCM)* 3.8p, Mkt Cap £45m – Update on Anglo American JV with extension of exclusivity agreement as final due diligence is completed
(Arc holds 72.5% of Zaco and 66% of Zamsort in Zambia. The Cheyeza license is 66% owned by Arc Minerals through its holding in Zamsort.)
(Arc holds 75% in Alvis-Crest (Proprietary) Limited which holds two licenses in the Kalahari Copper Belt, known as Virgo covering >210km2, around 10km south east the recently commissioned Khoemacau Copper in Botswana.)
- Arc Minerals provides an update on its JV with a subsidiary of Anglo American as regards its copper interests in North Western Zambia where Anglo American has the right to retain up to a 70% ownership in the JV.
- Arc notes that its negotiations with Anglo American are progressing well, specifically over the terms and conditions of the JV and associated commercial terms.
- The Company notes that substantive commercial terms of the proposed JV remain unchanged.
- Both parties are currently finishing remaining due diligence, technical and structural issues, expected within the next few weeks.
- Both parties have agreed to extend the exclusivity period to 31st March 2023, for internal approvals and the signing of a definitive JV agreement.
- Arc’s Executive Chair Nick Von Schirnding looks ‘forward to moving swiftly to signing all the final agreements and to updating shareholders shortly.’
*SP Angel acts as Nomad and broker. An SP Angel analyst has driven across the Zambian copper belt, flying the British flag, to visit Arc’s licenses West of Solwezi.
BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)* 4.9p, Mkt cap £51m – 2022 airborne geophysical survey at Kangerluarsuk zinc-lead-silver Project further enhances drill targets
- Bluejay Mining reports the results of its Q4 2022 for the high-sensitivity fixed-wing FALCON® Airborne Gravity Gradiometer (‘AGG’), magnetic and LIDAR survey at Kangerluarsuk in Greenland.
- Flight lines were flown at 300m spacing for a total of 587 line-km.
- Data from the survey has now been fully integrated with Bluejay’s previous electromagnetic, magnetic, geochemical, biogeochemical and geological data sets.
- Multiple gravity anomalies are considered to be coincident with conductive bodies identified from previous airborne electromagnetic surveys.
- High-precision LIDAR data has produced a detailed digital elevation model for the Project.
- The Company believes the 2022 exploration season has commercially de-risked the Project through enhancing its understanding of the geological model for the Kangerluarsuk mineral system.
- Extensions to various anomalies identified by the surveying will be further analysed alongside refining of existing drill targets.
- High priority geophysical and geochemical anomalies have been identified, with drilling required to target potential zinc, lead, silver and copper deposits.
- Previous operators at the project identified several zones of outcropping where chip sampling returned results of up to up to 1 metre @ 41.1% Zn, 0.4 metres @ 45.4 % Zn and grab sampling returned 9.3% Pb, 1.2% Cu and 596 grammes per tonne ('g/t') Ag.
- Bluejay’s CEO Bo Møller Stensgaard notes that the Company now has ‘multiple independent datasets that support the presence of sulphide mineralisation at depth.’
*SP Angel acts as nomad and broker to Bluejay Mining. The analyst holds shares in Bluejay Mining
Great Western Mining Corporation PLC (AIM:GWMO)* 0.085p, Mkt Cap £3m – Operations update as Nevada mill construction begins
- Great Western, who are exploring and developing a suite of gold, silver and copper targets, report an operations update.
- The Company’s JV partner, Western Milling, has attended a review meeting with the Nevada Department of Environmental Protection, who have suggested ‘reasonable’ and ‘easily manageable’ changes to the Company’s proposed mill plan.
- The mill will produce gold and silver concentrates from pre-mined material and shallow ore.
- A modified plan has now been submitted to the state agency for formal approval.
- Mill construction will begin while the Company awaits formal approval for operations, with surface work beginning last week in advance of the first concrete pour, currently scheduled for the end of this month, although somewhat weather dependent.
- As regards the Company’s exploration efforts, the team is focusing on priority targets at the Olympic Gold Project, with an RC rig currently being mobilised to the site for shallow drilling at the OMCO Mine, which hosts the extended OMCO Mine vein, with intercepts of:
- 6.10 m at 2.682 g/t gold from 38.10 m, including 1.52 m at 8.110 g/t gold and 1.52 m at 1.74 g/t gold.
- Great Western received a tax credit of £83k from geological work over 2020/2021.
Conclusion: We congratulate the Great Western team the beginning of construction work for their mill site, which, with approval confidently expected, should be an initial source of revenue streams for further exploration work across the Company’s highly prospective portfolio of Nevadan assets. By securing an RC drill rig, the team can continue to explore their priority targets at the OMCO Mine whilst progressing the mill construction.
*SP Angel act as Broker to Great Western Mining
Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)* 15.7p, Mkt Cap £41m – Final instalment of COTEC funding received
- Mkango has received £452,500 from CoTec – the final instalment of the £2,000,000 convertible loan agreement between the Company and CoTec.
- The convertible loan agreement was provided for a two-year, secured convertible loan from CoTec to Mkango with 5% interest, convertible into Mkango shares at 27p or into Magnito Ltd shares, a Mkango subsidiary.
*SP Angel acts as nomad and broker to Mkango Resources
Ormonde Mining PLC (AIM:ORM) 0.6p, Mkt Cap £2.84m – Peak Nickel investment and suspension of listing on possible RTO
- Ormonde has taken a 20% interest in Peak Nickel Ltd, a battery metal mining explorer, for £450,000.
- The agreement gives Ormonde an exclusive option to either invest an additional £4m in cash for exploration work, taking Ormonde’s interest to 49.9% or, acquire the remaining 80% of PNL through a share issuance of PNL stock to Ormonde.
- Ormonde’s initial investment into the Company will be utilised to drill c.1,350m of diamond core drilling, which PNL expects will support the completion of a code-compliance resource estimate.
- As a result of Ormonde becoming a cash shell in October 2022, AIM Rule 14 requires the Company to announce an acquisition or acquisitions sufficient to constitute a reverse takeover.
- If Ormonde takes the option agreed with Peak Nickel, it would satisfy the reverse takeover transaction. As a result, Ormonde’s shares were suspended at 7:30 this morning.
- Shares will remain suspended until either the necessary readmission documents have been submitted or an RTO transaction is approved by shareholders.
Power Metal Resources PLC (AIM:POW)* 1.21p, Mkt cap £21m – Completion of 2,402m Molopo Farms Drill Programme
- Power Metal announces the completion of its 2,402m diamond drill programme at Molopo Farms, Botswana which has been targeting nickel and PGE anomalies.
- The inaugural drillhole completed to a final downhole depth of 483m.
- 2,402m were drilled over 5 drillholes targeting four individual targets.
- Going forward, the Company will complete detailed logging of remaining cores and shipping of samples for Assay testing in South Africa.
*SP Angel acts as Nomad and Broker for Power Metal Resources
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
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35-39 Maddox Street London
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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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