Friday 17 02 23
Expectations for steeper rate hikes lift US$ and dampen risk sentiment
MiFID II exempt information – see disclaimer below
Atlantic Lithium Limited (AIM:ALL, OTCQX:ALLIF, ASX:A11) – Discussions ongoing with Ghana sovereign wealth fund for potential $30m investment
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB) Suspended – Financial restructuring discussions ongoing as mine pauses pending delivery of key supplies
SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF) – Cornerstone transaction and organizational optimisation update
Sunrise Resources PLC (AIM:SRES) – AGM update and Chairman’s Statement
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 falls further on sticky inflation data, higher US Dollar, and strong Treasury yields
- Gold prices have fallen over 7% since early February to $1,820/oz following a slew of hot inflation data and increasing evidence of a stronger-than-expected US economy.
- Gold took another hit yesterday following the release of US Producer Price data, which showed its biggest gain since June.
- Goods prices climbed 1.2%, with an index of wholesale costs rising 0.7% in January mom.
- Services rose 0.4%. Total producer price index jumped 0.7% mom, and 6% yoy, Economists had expected a 0.4% increase and a 5.4% increase yoy from Jan 2022.
- The data release added further wind to the Dollar’s sails, with the Greenback climbing to early January highs and up around 3% since early February lows.
- Supporting the dollar was US Treasury yields, with the 10-year climbing 1.63% to 3.9%, and the 2 year rallying to 4.7% as traders slashed bond holdings.
- The move came alongside a major repricing of Fed rate hike expectations, with January expectations of the Fed terminal rate standing at 4.9% vs today’s 5.25% upper limit.
- The market is now barely pricing in an interest rate cut this year, with expectations of either a hard or soft landing now fizzling out as the US economy continues to display strong consumer strength alongside a tight labour market.
- Traders have ramped up bets on longer, stickier inflation, with expectations of February 2024 inflation levels at 2.9% vs 2.1%.
- Gold continues to trade inversely to US real yields, as traders slash non-interest-bearing bullion for risk-free US Treasuries.
Iron Ore – prices climb to two-week high as liquidity improves property lending landscape
- Iron Ore prices climbed to $126/t, having weakened close to $120/t over the past few weeks.
- The PBoC has improved steel making demand outlook by injecting liquidity via medium-term loans this week.
- Steel production at mills jumped 3.8% in early Feb and hit a 3-month high.
- Steek rebar and HRC prices are also climbing.
Vale highlights persistent inflationary pressure on mining operations amid earnings miss
- Iron ore giant Vale missed earnings for Q4 as its operations continue to struggle with higher costs.
- Costs rose both QoQ and YoY.
- The earnings report follows Barrick’s Mark Bristow stating last week that mining operations will continue to struggle with inflation.
- Vale also noted rain disruptions and licensing delays in northern Brazil.
Dow Jones Industrials -1.26% at 33,697
Nikkei 225 -0.66% at 27,513
HK Hang Seng -1.28% at 20,720
Shanghai Composite -0.77% at 3,224
Economics
US – Housing starts dropped to the lowest level since the beginning of the pandemic in January as higher mortgage rates weighed on the sector.
- While mortgage rates pulled back recently to 6.1% (30y debt), down from 7.1%, they remain elevated by historical standards.
- Building permits came in flat last month, underperforming expectations for growth.
- On a separate note, jobless claims remained under 200k amid tight labour market with unemployment rate currently at its lowest in 53 years.
- Headline PPI was reported stronger than forecast as well as the core measure that better captures underlying inflationary pressures was ahead of expectations.
- Housing Starts (%mom): -4.5 v -1.4 December and -1.9 est.
- Building Permits (%mom): 0.1 v -1.6 December and 1.0 est.
- Initial Jobless Claims: 194k v 196k previous week and 200k est.
- PPI (%yoy): 6.0 v 6.2 December and 5.4 est.
- PPI ex Food and Energy (%yoy): 5.4 v 5.5 December and 4.9 est.
- Philadelphia Fed manufacturing index fell to -24.3 in February from -8.9 in January
- New orders sub index also fell at -13.6 in January vs -10.9 in December.
Chinese tech banker goes missing as concerns resurface over Beijing strong-arm policies
- Bao Fun, a Chinese finance industry titan with a specialism in tech has gone missing over the past two days.
- His firm, China Renaissance, saw its share fall 50% on the news.
- Chinese authorities had been investigating the banker since September.
- XI Jinping had initiated an anti-corruption crackdown in late 2021, bringing down dozens of China’s financial industry players.
- However, analysts had noted an easing of heavy-handed policies towards the private sector in recent months, following the National Congress in the Autumn.
Turkey – The central bank to donate 30B lira ($1.6B) to survivors of the nation’s earthquake disaster in a century.
- The decision was criticised for the central bank to have bypassed the Treasury in their financial aid.
- “If we had transferred this money to the Treasury, the Treasury could have used it in an another area,” Governor Kavcioglu said defending their decision.
- The donation came amid a seven hour show broadcast on hundreds of TV and radio channels in Turkey that raised 115B ($6B) in aid for survivors of the February 6 twin earthquakes.
City of Erzin suffers no deaths and no collapsed buildings despite being just 70 miles from the epicentre of the earthquake
- The Mayor of Erzin, Ökkeş Elmasoğlu, is a hero whose heroic actions have exposed the impact of corrupt building practice in eastern Turkey.
- Elmasoğlu refused to allow corrupt building in his city. He tore down any building that did not meet regulations. He refused illegal construction and disallowed any building over six stories.
- He reported any developer who tried to circumvent the rules to the public prosecutor and ensured that Turkey’s building regulations were adhered to.
- None of the buildings in the city of Erzin collapsed, no one died and we are not aware of any injuries either.
- The city is also located on solid ground.unlike many others which are built on sand, silt and clay with cities on soft coastal ground more vulnerable to catastrophic collapse.
- Hard ground acts as a shock absorber reducing the impact of earthquake waves on buildings
- Vanadium: Structural steel normally contains vanadium or niobium.
- The reconstruction and repair of many collapsed buildings outside Erzin will require substantial tonnages of structural steel.
- China trebled its requirement for vanadium in structural steel to 0.062% following the massive Sichuan earthquake where many schools and other buildings collapsed partly due to the use of Q&T ‘Quench & Temper’ steel which is hard but brittle and not suitable for earthquake protection.
- US regulations require the use input of 0.106% vanadium in structural steel, while India asks for just 0.04% vanadium content.
- Turkey has no requirement for vanadium in structural steel as far as we can see.
- President Erdogan rose to power on the back of a previous earthquake for which his predecessor was blamed.
- Erdogan’s successor might gain power in a similar manner with elections due in June this year.
Switzerland – The government ruled out the possibility of confiscation of Russian sanctioned assets to direct proceeds help fund Ukraine’s defence and reconstruction.
- “The expropriation of private assets of lawful origin without compensation is not permissible under Swiss law,” the government commented on its statement.
Currencies
US$1.0639/eur vs 1.0716/eur yesterday. Yen 134.93/$ vs 133.74/$. SAr 18.287/$ vs 17.988/$. $1.192/gbp vs $1.206/gbp. 0.683/aud vs 0.693/aud. CNY 6.880/$ vs 6.852/$.
Dollar Index 104.47 vs 103.64 yesterday.
Commodity News
Precious metals:
Gold US$1,820/oz vs US$1,843/oz yesterday
Gold ETFs 92.9moz vs US$92.9moz yesterday
Platinum US$921/oz vs US$922/oz yesterday
Palladium US$1,465/oz vs US$1,472/oz yesterday
Silver US$21.26/oz vs US$21.73/oz yesterday
Rhodium US$11,700/oz vs US$12,100/oz yesterday
Base metals:
Copper US$ 8,944/t vs US$8,958/t yesterday
Aluminium US$ 2,394/t vs US$2,392/t yesterday
Nickel US$ 26,000/t vs US$26,355/t yesterday
Zinc US$ 3,016/t vs US$3,052/t yesterday
Lead US$ 2,062/t vs US$2,045/t yesterday
Tin US$ 26,820/t vs US$26,790/t yesterday
Energy:
Oil US$83.9/bbl vs US$86.1/bbl yesterday
- Crude oil prices remain stuck in neutral on the contrary signs of US inventory growth pointing to oversupply and improved market sentiment on Chinese demand rebounding.
- The US EIA storage report detailed a draw of 100bcf to 2,266bcf last week, with storage levels up 16.9% y/y. The 2.1bcf/d Freeport LNG terminal in Texas is now expected to recommence operations later this month.
- The UK’s offshore regulator has asked Equinor for further information on the environmental impact of its proposed £8bn Rosebank development in the UK North Sea.
Media reports that there is currently a 99.8GW pipeline for offshore UK wind projects, which includes 13.7GW fully operational and 13.6GW under construction, placing the UK second only to China 137GW) in global terms
Natural Gas US$2.343/mmbtu vs US$2.530/mmbtu yesterday
Uranium UXC US$51.80/lb vs US$51.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$125.4/t vs US$123.4/t
Chinese steel rebar 25mm US$638.6/t vs US$636.9/t
Thermal coal (1st year forward cif ARA) US$145.0/t vs US$133.0/t
Thermal coal swap Australia FOB US$186.0/t vs US$196.0/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$99,917/t vs US$101,070/t
Lithium carbonate 99% (China) US$57,770/t vs US$58,745/t
China Spodumene Li2O 5%min CIF US$5,930/t vs US$5,950/t
Ferro-Manganese European Mn78% min US$1,314/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% 39.25/kg vs US$38.75/kg
China Ilmenite Concentrate TiO2 US$341/t vs US$342/t
Spot CO2 Emissions EUA Price US$99.4/t vs US$97.1/t
Brazil Potash CFR Granular Spot US$502.5/t vs US$502.5/t
Company News
Atlantic Lithium Limited (AIM:ALL, OTCQX:ALLIF, ASX:A11) 38p, Mkt Cap £230m – Discussions ongoing with Ghana sovereign wealth fund for potential $30m investment
- Atlantic Lithium confirms ongoing discussions with MIIF, the Ghana state-owned Minerals Income Investment Fund.
- MIIF is looking to potentially invest US$30m into Atlantic Lithium as part of a program for the investment of around $100m in 2023.
- Fund website: https://miif.gov.gh/
- Edward Nana Yaw Koranteng, The Chief Executive Officer of MIIF was clear on the fund’s key objectives for the year at the Mining Indaba in Cape Town
- The fund is looking to support the development of Gold, Bauxite, lithium, iron Ore and other parts of the mining eco-system in Ghana.
- The fund aims to have built a portfolio of >$1bn of assets under management by 2030.
- MIIF is also active in supporting the victims of the Appiatse disaster where 16 people were killed when a truck carrying explosives crashed into a tri-cycle and exploded.
Conclusion: There is a great deal of political support for new mining ventures in Ghana. The ministry of mines is actively encouraging lithium exploration and development with MIIF offering financial support to accelerate the exploration and development process. If only more countries were as pro-active and supportive as Ghana!
*SP Angel acts as Nomad to Atlantic Lithium
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB) Suspended – Financial restructuring discussions ongoing as mine pauses pending delivery of key supplies
NPV Valuation: Under review
- Rambler Metals and Mining has paused operations at the Ming mine in Canada pending the delivery of key supplies to the mine.
- All operations will stop at 6:00am Canada time and are scheduled to restart on or before Next Friday the 24th February.
- The mine will be fully maintained through this period.
- The Altus default announcement may has caused a number of suppliers to require pre-payment for supplies causing the mine to suspend operations for a week.
- We remain hopeful that sense will prevail among the debt holders and that recent discussions should result in a restructuring of the debt and re-quotation of the stock on AIM.
- The suspension of the mine is unhelpful from a cash flow perspective.
Conclusion: Investors should not give up hope on Rambler. Management have been working hard to refinance the NewGen debt and are hopefully close to a resolution which should ensure the longer-term operation of the mine. We see substantial asset value in the ongoing operation of the Ming copper, gold mine.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining
SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF) 13p, Mkt Cap £330m – Cornerstone transaction and organizational optimisation update
- The Company reports that the Cornerstone Transaction remains to be pending and is expected to be closed in the week of 27 February.
- The delay is driven by the requirement to issue a prospectus by the Company to allow trading of consideration shares.
- Prospectus will now have to include interim financial results for FY23 that were released earlier this week.
- Separately, the Company is undertaking reorganisation to reduce workforce across all areas ensuring more appropriate levels of personnel are in place.
- The Company will reduce the number of time zone of its operations and focusing resources in-country to best advance the Cascabel project in Ecuador.
- The Company remains well funded having raised US$86m with Osisko Gold Royalties (TSX:OR) ($50m) and Jiangxi Copper ($36m).
Conclusion: The Cornerstone transaction is expected to close towards the end of the month once update prospectus is approved and released, while the team is advancing the optimisation programme to reduce head office costs and ensuring more funds available for the development of its mining projects.
*SP Angel acts as Financial Advisor to SolGold
Sunrise Resources PLC (AIM:SRES) 0.11p Mkt Cap £4.3m – AGM update and Chairman’s Statement
- Sunrise provides an update on its various projects in Nevada, USA.
- Patrick Cheetham, Executive Chair, notes that the CS Natural Pozzolan-Perlite Project remains the Company’s flagship asset and the main focus of its resources.
- The CS Project is fully permitted, shovel ready and has a fully approved mine plan to mine 14.5mt of pozzolan and 1.3mt of perlite at 500kt pa.
- A study on the cement and supplementary cementitious industries in California and Nevada will be used to update the project’s preliminary study.
- The Company is looking to develop markets for perlite, focusing on horticultural grade perlite.
- Patrick states that they continue to engage with potential strategic partners for the project.
- Sunrise is working with Tolsa SA, the world’s leading sepiolite producer, at its Pioche Project, and is looking to replicate this strategy with its other industrial mineral projects.
- The team is looking to potentially develop relations with cement and ready-mix companies, where offtake agreements are long-term and sources of regular recurring cashflow.
- Two pozzolan grinding projects have recently been commissioned in Utah and Arizona, and Sunrise is monitoring their success for its future strategies.
- Sunrise’s Hazen Natural Pozzolan project has seen a collaborative agreement made in Oct.22 with a processor to test a 250kt bulk sample, at no cost to Sunrise. The team is awaiting test grinding.
- Sunrise’s Pioche Sepiolite Project is currently being funded for evaluation work by Tolsa SA, the leading producer of sepiolite globally.
- Tolsa has staked an additional 31 claims, doubling the size of the Pioche Project, and holds a $1.25m option to purchase the Project by 28th December 2028.
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
W1S 2PP
*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
DISCLAIMER
This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.
Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.
MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.
A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).
SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%