SP Angel . Morning View . Thursday 16 02 23
Copper prices gain despite stronger US data supporting higher rates for longer
It is with great sadness, we report the passing of Peter Davey after a short illness.
Peter was a brilliant analyst and a fantastic colleague for many years at Societe Generale sharing his insight and expertise with investors and companies.
More recently his work as a director of Impala Platinum focusing on ESG and HSE was feeding Peter’s expertise back into South Africa to the benefit of workers and local management.
Peter will be hugely missed by all who knew him.
BeMetals Corp (TSX-V:BMET)* – 2023 drilling campaign underway in Japan.
BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)* – Bluejay mining ramps up activity to deliver value. Rob Edwards video interview
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) – Araguaia ferronickel project 40% complete and on schedule and budget.
Leo Lithium Ltd (ASX:LLL) – Key construction milestones at Goulamina achieved
MMG (1208 HK) – Two mine workers found dead at HK zinc mine in Queensland, Australia
Newcrest Mining Limited (ASX:NCM) – Rejection of US$16.9bn indicative offer by Newmont Mining
Power Metal Resources PLC (AIM:POW)* – Update on Berringa Gold Mine Drilling in Victoria Goldfields, Australia
Scotgold Resources Limited (AIM:SGZ) – Placing raises £3.0m for Cononish ramp up and exploration work
Tertiary Minerals PLC (AIM:TYM)* – Chairman’s statement and transfer of FQM historical datasets to Tertiary exploration team
Private investment opportunity in Zambian copper exploration company holding four licenses in highly prospective areas close to existing mines.
- Licenses are located in highly prospective areas close to existing and historic mines. All licenses are 100% owned.
- Drill-ready targets have been set following substantial early-stage work including airborne and ground geophysical surveys, rock chip and soil sampling.
- High-grade intersections from nearby mines and on-licence artisanal pits indicate potential for mineralisation on a number of the licenses.
*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
Gold steadies after buoyant retail sales push dollar and UST yields higher
- Gold bounced from a monthly low to $1.843/oz after falling 1% on US Retail sales, which highlighted a robust US economy.
- Strong retail sales pushed the dollar index towards 104, having hovered around 101 in lows seen earlier this month.
- Alongside the dollar, US Treasury yields climbed again as traders sold bonds in expectations of higher for longer interest rates.
- Gold ETFs sold physical as yields rose, with holdings down 0.9% this year.
Potash – Nutrien, the world’s largest fertilizer producer, is expecting to slightly delay capacity ramp up, Bloomberg writes.
- The Company is expecting annual operational capacity to reach by 2026 rather than 2025.
- “Nutrien is adjusting the ramp up timing of its existing low-cost potash capacity to optimize capital expenditures in-line with the pace of expected demand recovery in 2023 and beyond,” The Company said.
- Shipments this year expected to come in at 63-67m vs historical 70m accounting for a loss of share in supply from Belarus (-40/60%) and Russia (-15/30%).
Dow Jones Industrials +0.11% at 34,128
Nikkei 225 +0.71% at 27,696
HK Hang Seng +0.84% at 20,988
Shanghai Composite -0.96% at 3,249
Economics
US – Stronger than expected retail sales in January points to strong consumer demand momentum despite a series of rate hikes and suggest the Fed may need to keep tightening monetary policy for longer.
- Retail Sales (%mom): 3.0 v -1.1 December and 2.0 est.
- Retail Sales ex Auto and Gas (%mom): 2.6 v -0.7 December and 0.9 est.
- Retail Sales Control Group (%mom): 1.7 v -0.7 December and 1.0 est.
- Industrial production was level in January vs -0.8% in December and 0.8% yoy in January and 1.1% yoy in December
- Manufacturing output up 1% in January vs -1.3% in December and 0.3% yoy in January vs -1% yoy in December
- Capacity utilisation 78.3% in January vs 78.4% in December
- Business inventories rose 0.3% in December vs 0.4% in November
- NY Empire State manufacturing index -5.8 in February vs -32.9 in January
- NAHB housing index rose 42 in February vs 35 in January
China – New property prices stop falling after 20% fall last year
- New Home Prices (%mom): 0.0 v -0.3 December.
New home prices in China rise for the first time in 12 months as analysts expect worst is behind the debilitated sector
- New home prices rose 0.1% mom, marking the first rise in China since Xi’s crackdown on property speculation.
- A trifecta of the end of zero-Covid restrictions, a swathe of property policy adjustments and anticipation of further central bank stimulus has lifted sentiment.
- 36/70 cities recorded rising new home prices for January vs 15/70 in December.
- However, home sales by floor area remain down c.20% yoy. (Reuters)
- Whilst the slight uptick represents a major turning point, a rapid improvement is unexpected given the market remains flush with property from decades of overbuilding and investment demand is set to stay subdued.
EV sales in China slide adding pressure to copper and lithium prices
- Electric Vehicle sales are sliding in China, with January recording a year-on-year decline in single month sales.
- Copper foil used in lithium batteries fell for a second straight month in January, down 14% from December to 39.8kt.
- Total copper foil output fell 8.6% to 66.1kt. Analysts expect February output to slide again.
Chinese steel mill stockpiles hit 8-month highs as production ramps up
- Inventories at Chinese steel mills have risen 9.36% mom to 18mt in February.
- Volumes have risen 7% yoy.
- Crude steel production across major steelmakers added 3.8% mom to 2.06mt/day.
- Production rates sit at their highest in three months.
- Non-steel mill steel inventories rose to 13.4mt.
South Korea - Unemployment fell to 2.9% in January vs 3.1% in December
Japan – Trade deficit hit a record of JPY3.5T, more than twice JPY1.5T recorded in December as exports slowed amid Chinese Lunar New Year and global slowdown while high energy prices weighed on imports.
- Exports to China were down 17.1%yoy while shipments to the US and Europe slowed to 10.2% and 9.5%, respectively.
- Exports (%yoy): 3.5 v 11.5 December and -1.7 est.
- Imports (%yoy): 17.8 v 20.6 December and 20.6 est.
EU - Trade deficit pulled back to €8,88bn in December vs €11.1bn in November
- Industrial production fell 1.1% in December vs 1.4% in November and -1.7% yoy in December vs 2.8% yoy in November
UK - Nicola Sturgeon has resigned as First Minister and leader of the SNP
- Sturgeon’s resignation appears to be linked to her stance on Transgender issues.
- She often reminded us of the Krankies, but, unfortunately, was not nearly so funny.
Ukraine/Russia – Three dozen missiles were launched from the air and sea hitting Urkaine’s critical infrastructure after Western allies agreed to provide more military support to the defending nation.
- Air defence systems in Ukraine intercepted just over a third of missiles with rockets striking the north and west of the country.
Australia – Unemployment jumped unexpectedly in January as the economy lost jobs for a second straight month.
- Results suggest the RBA will need to be cautious on continuing with further interest rate hikes, Bloomberg reports.
- The central bank raised the benchmark rate by 25bp to 3.35% last week and signalled more hikes are needed in a surprise move with market expecting the policy may reaching the end of the cycle.
- Employment Change (‘000): -11.5 v -14.6 December and 20.0 est.
- Unemployment Rate: 3.7% v 3.5% December and 3.5% est.
China and Australian trade relations continue to thaw as Chinese Trade Chief announces ‘Freeze is Over’
- Australian Trade Minister announces that a Chinese trade minister stated that ‘the freeze is over’ between the two countries, and that they are ‘now moving to a warm spring.’
- Coal shipments resuming after nearly three years marked a major shift in diplomatic tensions between the two countries, with Australia now hoping for rising exports of timber, wine and dairy to China.
Currencies
US$1.0716/eur vs 1.0710/eur yesterday. Yen 133.74/$ vs 133.35/$. SAr 17.988/$ vs 17.969/$. $1.206/gbp vs $1.208/gbp. 0.693/aud vs 0.690/aud. CNY 6.852/$ vs 6.847/$.
Dollar Index 103.64 vs 103.54 yesterday.
Commodity News
Precious metals:
Gold US$1,843/oz vs US$1,834/oz yesterday
Gold ETFs 92.9moz vs US$92.9moz yesterday
Platinum US$922/oz vs US$925/oz yesterday
Palladium US$1,472/oz vs US$1,472/oz yesterday
Silver US$21.73/oz vs US$21.55/oz yesterday
Rhodium US$12,100/oz vs US$12,100/oz yesterday
Base metals:
Copper US$ 8,958/t vs US$8,893/t yesterday
Aluminium US$ 2,392/t vs US$2,398/t yesterday
Nickel US$ 26,355/t vs US$26,370/t yesterday
Zinc US$ 3,052/t vs US$3,040/t yesterday
Lead US$ 2,045/t vs US$2,085/t yesterday
Tin US$ 26,790/t vs US$26,355/t yesterday
Energy:
Oil US$86.1/bbl vs US$84.4/bbl yesterday
- Crude oil prices remain range-bound as the EIA reported a huge 16.3mb US crude inventory build last week.
- European energy prices were broadly unchanged with EU storage reported at 65% full.
Natural Gas US$2.530/mmbtu vs US$2.566/mmbtu yesterday
Uranium UXC US$51.50/lb vs US$51.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$123.4/t vs US$123.1/t
Chinese steel rebar 25mm US$636.9/t vs US$635.6/t
Thermal coal (1st year forward cif ARA) US$133.0/t vs US$133.0/t
Thermal coal swap Australia FOB US$196.0/t vs US$195.0/t
Coking coal swap Australia FOB US$349.0/t vs US$349.0/t
Other:
Cobalt LME 3m US$35,690/t vs US$35,690/t
NdPr Rare Earth Oxide (China) US$101,070/t vs US$102,601/t
Lithium carbonate 99% (China) US$58,745/t vs US$58,932/t
China Spodumene Li2O 5%min CIF US$5,950/t vs US$5,950/t
Ferro-Manganese European Mn78% min US$1,323/t vs US$1,323/t
China Tungsten APT 88.5% FOB US$333/mtu vs US$333/mtu
China Graphite Flake -194 FOB US$865/t vs US$865/t
Europe Vanadium Pentoxide 98% 10.1/lb vs US$10.1/lb
Europe Ferro-Vanadium 80% 38.75/kg vs US$38.75/kg
China Ilmenite Concentrate TiO2 US$342/t vs US$342/t
Spot CO2 Emissions EUA Price US$97.1/t vs US$95.5/t
Brazil Potash CFR Granular Spot US$502.5/t vs US$502.5/t
Company News
BeMetals Corp (TSX-V:BMET)* – C$0.155, Mkt cap C$27.5m – 2023 drilling campaign underway in Japan.
- In an announcement to the Canadian market yesterday, BeMetals reported that its 2,000m, 2023, exploration drilling programme at the wholly owned Kato gold project on Hokkaido has started.
- The objective of the drilling is to extend the known gold mineralisation of the Seta and Kamitake veins, which drilling during 2022 traced over a 560m strike length, and to “scope out the potential for a mineral resource by yearend”.
- A map included in the announcement shows both the Seta and Kamitake Veins open in a SSE direction towards an area described as having “Gold in Outcrop Rock Chip Samples”.
- A second drill rig “is expected to arrive in early Q2 2023, to accelerate drilling at Kato” and later in the year to “commence, an initial 1,000 metre drilling program for our Todoroki Gold-Silver Project in southwestern Hokkaido” by mid 2023.
- President and CEO, John Wilton, confirmed that “Over the coming months we intend to further test the Seta and Kamitake gold veins, along strike and scope their grade continuity at depth … [and] … to commence, an initial 1,000 metre drilling program for our Todoroki Gold-Silver Project in southwestern Hokkaido”.
- On Kyushu, a recently completed “high resolution airborne drone magnetic survey … [at the Tashiro project] … will be processed and combined with existing geological data to generate drill targets”.
Conclusion: The 2023 drilling programme at the Kato project aims to build on the success of the 2022 drilling and further extend the known lateral and depth extent of the mineralisation at the Kato Project in Japan and prepare for mineral resource estimation. Initial drilling at a second project in Hokkaido, at Todoroki, and drill target identification at the Tashiro project provides a pipeline of exploration projects in Japan. We look forward to results as the latest drilling progresses.
*SP Angel act as broker to BE Metals
BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)* 4.1p, Mkt cap £43m – Bluejay mining ramps up activity to deliver value. Rob Edwards video interview
Valuation 12.3p
- Bluejay Mining have released a link to a new interview by Rob Edwards on his strategy for the group going forward.
- https://www.youtube.com/watch?v=-OsvXJ1c920.
- With reference to the recent convertible funding Edwards says “we can deliver, almost without doubt, we can deliver value with those dollars”.
- Enonkoski: Drills are turning at Enonkoski with drill core waiting for examination and assay.
- Kangerluarsuk: Edwards is particularly interested in drilling visible and probably high-grade, mineralisation at the Kangerluarsuk property in the south of Greenland.
- The Kangerluarsuk license area is close to the Black Angel lead, zinc mine with the team using Black Angel infrastructure.
- The helicopter drilling program will be commissioned soon for drilling in the summer exploration season.
- Dundas: Further drilling to provide better confirmation of grade and ore consistency will be done as part of renewing the PFS.
- Optimisation of the plan to build Dundas has resulted in plan to build a floating process plant and other services on a series of barges to be built in China and commissioned in Denmark ahead of shipment to the Dundas site. The accommodation barge is expected to come from the oil and gas industry which has a surplus of second hand offshore facilities.
- The new plan should halve the time to first production and significantly de-risk the operation while reducing the longer term environmental footprint.
- Ilmenite prices in China are currently running at around $341-348/t for 46% TiO2.
- If we assume a price of $250/t for the Dundas ilmenite, a $54/t cost to ship to China for 70% of the product and a capital cost of $294m then our model shows 10p/s of value assuming a fully diluted 1.3bn shares.
Conclusion: The Bluejay Chairman is determined to see positive results from drilling this year. Drills are turning at Enonkoski and are planned for Kangerluarsuk and Dundas. Kobold Metals will hopefully also follow through with their intention to drill at the Disko nickel project. Rarely do we see a mining company with a workable project and so many prospective exploration targets which are ready for drilling. The potential $6m convertible loan note gives the company the ability to plan now and commission drill rigs for the 2023 field season in Greenland and to follow through on any positive results as they emerge.
*SP Angel acts as nomad and broker to Bluejay Mining. The analyst holds shares in Bluejay Mining
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) 151p, Mkt Cap £405m – Araguaia ferronickel project 40% complete and on schedule and budget.
- Horizonte Minerals has made a series of photographs of the progress of construction at its Araguaia ferronickel project in Brazil available on its website at https://horizonteminerals.com.uk/en/press-releases/2023/horizonte-minerals-pictorial-update-February-2023/ in what it describes as an inaugural edition of a quarterly series of photo albums during the construction phase of the project.
- The company takes the opportunity to confirm that “As of 31st January, construction of Araguaia was 40% complete and remains on-budget and on-schedule for first nickel in Q1 2024”.
- Among the pictures are photographs showing the arrival and assembly of the 18m diameter electric arc furnace which was “successfully delivered to site on 28th January, on time and on-budget … [and which has nameplate capacity capable of] … producing up to 14,500tonnes of nickel per year”.
- The update also shows progress on the foundations for the primary crusher as well as on the 230kV power supply-line, which is expected to become available, on schedule, during Q3 2023.
- The scale of the construction effort is reflected in the size of a workforce now numbering “over 2,100 people as of January” and the training of “over 400 people enrolled from the local community … [to help them prepare for] … the new job opportunities brought about by Araguaia”.
Leo Lithium Ltd (ASX:LLL) – A$0.6, Mkt cap A$646m – Key construction milestones at Goulamina achieved
- Leo Lithium reports that first concrete has been poured at its Goulamina Lithium Project in Mali, where it shares a JV agreement with Ganfeng.
- The Company notes the ball mill area foundations are also nearing their first concrete pour.
- Manufacturing of the ball mill alongside other crushing equipment has been successfully completed and final factory inspection tests are underway.
- Going forward, final trim earthworks for the plant area are underway.
- The Company is set to begin transporting structural steel and permanent accommodation to site.
- Goulamina is a hard rock lithium project expecting first production for H1 2024.
MMG (1208 HK) HK$2.24, Mkt cap HK$19bn – Two mine workers found dead at HK zinc mine in Queensland, Australia
- Perenti Ltd, (PRN.AX) which provides mining services reports the death of two missing mine workers following a collapse of ground in the HK zinc mine in Queensland, Austalia.
- The two men fell around 15m into a previously backfilled area with a third employee suffering minor injuries.
- A rescue team using drones and heavy underground mining equipment found the vehicle the men had been using.
Newcrest Mining Limited (ASX:NCM) A$23.9, Mkt Cap A$21.7bn – Rejection of US$16.9bn indicative offer by Newmont Mining
- The Board of Newcrest Mining has unanimously rejected the US$16.9bn indicative non-binding offer from Newmont Mining made earlier this month saying that “it does not represent sufficient value for Newcrest shareholders”.
- Newcrest does, however, say that “In order to determine if Newmont can provide an improved proposal … it is prepared to provide access to limited, non-public information on a non-exclusive basis”.
- Disclosure of information is subject to “an appropriate non-disclosure agreement”.
- Newcrest cautions that “There is no certainty that any further discussions with Newmont will lead to a revised proposal or any transaction”.
- Newcrest Mining produces around 2moz of gold annually and its 2023 guidance envisages this rising to 2.1-2.4moz this year while Newmont has around 4.5moz of ‘managed production’ plus approximately 1.5mozpa from ‘Non-Managed’ operations.
- At 30th June 2022, Newcrest Mining’s ‘Measured & Indicated’ mineral resource inventory amounted to around 120moz of gold compared to Newmont’s inventory of reserves and resources of around 150moz.
- We surmise that one of Newmont’s motives in seeking to acquire Newcrest is to secure its substantial additional mineral resources and to capture Newcrest’s expanding production profile.
Conclusion: While Newcrest Mining has rejected the initial indicative offer from Newmont, its willingness to continue a constructive dialogue suggests that this may be just the initial phase of a protracted discussion. We await Newmont’s response.
Power Metal Resources PLC (AIM:POW)* 1.2p, Mkt cap £21m – Update on Berringa Gold Mine Drilling in Victoria Goldfields, Australia
- Power Metal announces an update on its Berringa Gold Mine Project.
- The Company is progressing its inaugural drilling programme at the project, which is targeting the downdip mineralised zones and along strike.
- So far, three holes have been completed across a total of 655.9/1000m.
- The Company is looking to start the fourth hole shortly.
- Power Metal notes successful intersection of targeted geological formations, with visible gold noted within extensions.
- Highlights from the campaign to date include:
- Drillhole BED23001 – intersection of a 9m wide quartz vein from 380.5-389.5m.
- Drillhole BED23002 – intersected a 9.6m wide mineralised structure from 89.2-98.8m, with minor visible gold mineralisation.
- Drillhole BED23033 – Company notes preliminary observations have identified visible gold mineralisation.
- Paul Johnson, POW’s CEO, notes that ‘geologically, all drillholes completed thus far have successfully intersected the down dip and along strike extensions of the target mineralised zones.’
*SP Angel acts as Nomad and Broker for Power Metal Resources
Scotgold Resources Limited (AIM:SGZ) 41p, Mkt Cap 24m – Placing raises £3.0m for Cononish ramp up and exploration work
- The Company announced results of the Retail Offer with 1,178k shares of 1,250k taken up during the placing.
- Following the closing of the Retail Offer, 7.4m new shares will issued in relation to the 40p placing raising £3.0m.
- Proceeds of the placing will be used to ramp up operations at the high grade Cononish Gold Mine moving to higher tonnage long hole stoping at the underground operation.
- Additionally, the team is planning to direct some of proceeds for step out drilling at Cononish as well as reginal exploration across its 2,900km2 land package.
- At Cononish, the team is planning to test vein extensions at depth and along strike as well as explore an additional vein running adjacent to Cononish.
Tertiary Minerals PLC (AIM:TYM)* 0.14p, Mkt cap £2.5m – Chairman’s statement and transfer of FQM historical datasets to Tertiary exploration team
- Patrick Cheetham, Tertiary’s CEO, has made a statement at the Company’s Annual General Meeting today.
- Patrick highlights that Tertiary’s primary focus is now on copper exploration in both Zambia and Nevada.
- He notes the recent £150m investment by Kobold into the Mingomba copper deposit, which lies adjacent to Konkola West, one of Tertiary’s five project interests in Zambia.
- Tertiary is looking to explore deep down-dip extensions of the Musoshi-Lubambe-Mingomba-Konkola copper deposits, which host a pre-mining endowment of 775mt at 2-3% Cu.
- Patrick notes that FQM has completed the transfer of historical data for Tertiary’s Mukai and Mushima North projects in Zambia, in line with the Company’s Data Sharing and Technical Cooperation Agreement with the international copper major.
- Mukai lies adjacent to FQM’s Trident Project, which hosts the Sentinel Copper Mine and the Enterprise Nickel Mine.
- The Mushima North licence, Patrick notes, is also in an ‘active FQM exploration area and is prospective primarily for Iron-oxide-copper-gold (IOCG) mineralisation.
- Patrick notes that Tertiary initial evaluation of FQM’s datasets has presented ‘a number of exciting exploration targets.’
- He also states that Tertiary are ‘busy planning field programmes to start within the next couple of months.’
- As regards Nevada, Patrick suggests that the drill-ready Brunton Pass Project is the Company’s primary focus for 2023, with opportunities for epithermal gold, and copper skarn and porphyry copper mineralisation.
*SP Angel act as Nomad and Broker to Tertiary Minerals
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
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
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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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