SP Angel . Morning View . Monday 20 02 23
Copper prices rise as China emerges faster than anticipated from Covid
MiFID II exempt information – see disclaimer below
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* – C$480k investment in Libero maintaining the 19.8% interest
Anglo American PLC (LSE:AAL) – Anglo to press ahead with Woodsmith polyhalite fertilizer mine
Castillo Copper Ltd (ASX:CCZ, LSE:CCZ) – Optimisation plans for the ‘Big One’ deposit in Queenland.
Corcel PLC (LSE:CRCL) – Operational and Strategic Update alongside Mt Weld Update
Great Southern Copper PLC (LSE:GSCU) – Exploration progress at the Especularita and San Lorenzo projects, Chile
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) – Update on Karakubis Copper Project
Power Metal Resources PLC (AIM:POW)* – Update on Athabasca Basin Uranium (CSE:NCLR, OTC:BURCF) Portfolio
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* Suspended – Rambler defaults on gold deliveries into Sandstorm streaming agreement
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 ticks higher on weaker dollar as eyes turn to PCE data due this week
- Gold prices have bounced from their lows last week of $1,820/oz, climbing over $1,850/oz alongside a weaker dollar index.
- Gold has been hammered over the past month on the back of a series of strong US inflation numbers, with the labour market reflecting strength alongside the consumer.
- Traders reduced gold positions as US Treasury yields climbed in expectations of the Fed hiking higher and holding rates at elevated levels for longer.
- This week, focus will be on the Fed minutes released on Wednesday, in addition to the Personal Consumption Index, also released this week.
Copper strengthens as optimism over Chinese housing sales improves
- Copper prices have bounced over $9,000/t having weakened over the course of last week on a stronger US dollar and signs of ample supply.
- Risk appetite in China is improving, with gains in the Hang Seng and Shanghai indexes supporting metals.
- A rapid build-up of copper inventories last week has started to slow in Shanghai, with Friday recording the smallest gain in two months.
- Reuters reports that new home sales across 16 Chinese cities jumped for the third straight week, reinforcing suggestions that the worst is behind for the debilitated constructions sector.
- Dalian iron ore rose alongside copper in hopes of a bounce in steelmaking demand from China’s developer.
Chinese copper trading giant Maike to start restructuring
- Maike, which imports 1mt/yr of refined copper into China (29% of total imports for 2021) has applied for restructuring.
- The move is one of several steps towards bankruptcy.
- The Company was hit by a liquidity crunch over Covid-19, with struggles to pay suppliers and limited premiums hitting margins.
- Trading houses like Maike have been hit by extreme volatility, increasing margin requirements from financiers.
- The Company is looking to sell assets to the government to satisfy liquidity problems.
Dow Jones Industrials +0.39% at 33,826
Nikkei 225 +0.07% at 27,531
HK Hang Seng +0.92% at 20,912
Shanghai Composite +2.06% at 3,290
Economics
US – President Biden visits Zelenskiy in Kyiv, Ukraine
- The, dangerous and almost unprecedented trip by the US president demonstrates how important the freedom of Ukraine is to the Western World.
- Russia is eroding its military forces, munitions and equipment in the battle to secure the Eastern side of Ukraine and it is now difficult to see how Russia could hold onto the country if it was successful in its invasion.
- Russia’s military forces and capability to wage war are severely depleted rendering Russia far less effective as a military superpower.
- US Markets are closed today as the nation celebrates Presidents Day.
- US is looking to increase tariffs on Russian aluminium to 200%,
China – Covid disruption may not be as long lasting as previously anticipated with Covid probably peaking in January
- Omicron appears to be more contagious but less deadly than previous variants with few new variants appearing.
- Omicron also appears to remain the dominant variant displacing other variants as they emerge.
- Hospitals were overwhelmed .
- Chinese demographics means there is still a relatively young population based in the urban environment with older people largely left in rural villages
- Chinese infrastructure ramping up towards normal with similar issues to that seen in the West.
- China has also removed the three-red-lines restrictions on property lending to arrest the decline in property prices and stimulate construction.
Hong Kong – International airport traffic jumped 29x times in January from last year after the city dropped inbound travel restrictions and China reversed its zero-Covid strategy.
- ~2.1m passengers passed through the airport during the month.
- Although, that remained just 40% of pre-pandemic levels.
- The city scrapped the quarantine requirements for inbound international travellers in December.
German - PPI fell 1% in January from -0.4% in December and 17.8% yoy in January vs 21.6% in December
France - CPI rose 0.4% in January vs -0.1% in December and 6.0% yoy in January vs 5.9% in yoy in December
UK - Retail sales rose 0.5% in January vs -1.2% in December but fell -5.1% yoy in January vs -6.1% yoy in December
- UK government is planning to seal deal with Brussels on post-Brexit Northern Ireland trade rules early this week, FT reports.
- Meanwhile, the Democratic Unionist Party highlighted that if the resolution will involve Northern Ireland remaining in the EU single market they will not support it.
- Cabinet ministers are expected to approve the deal that would then be presented to parliament.
Burkina Faso marks official end to French military operations (Reuters)
Currencies
US$1.0694/eur vs 1.0639/eur last week. Yen 134.30/$ vs 134.93/$. SAr 18.287/$ vs 18.287/$. $1.204/gbp vs $1.192/gbp. 0.690/aud vs 0.683/aud. CNY 6.885/$ vs 6.880/$.
Dollar Index 103.80 vs 104.47 last week.
Commodity News
Precious metals:
Gold US$1,853/oz vs US$1,820/oz last week
Gold ETFs 92.9moz vs US$92.9moz last week
Platinum US$926/oz vs US$921/oz last week
Palladium US$1,492/oz vs US$1,465/oz last week
Silver US$21.85/oz vs US$21.26/oz last week
Rhodium US$11,700/oz vs US$11,700/oz last week
Base metals:
Copper US$ 9,009/t vs US$8,944/t last week
Aluminium US$ 2,425/t vs US$2,394/t last week
Nickel US$ 26,141/t vs US$26,000/t last week
Zinc US$ 3,081/t vs US$3,016/t last week
Lead US$ 2,071/t vs US$2,062/t last week.
Tin US$ 25,856/t vs US$26,820/t last week
Energy:
Oil US$83.81/bbl vs US$86.1/bbl last week
- Energy prices were broadly unchanged over the weekend, with robust inventories ameliorating market sentiment regarding the ongoing disruption to global crude oil and natural gas markets.
- The US Baker Hughes rig count was down 1 to 760 rigs last week, with oil rigs down 2 to 607 units and gas rigs up 1 to 151 units, with rising labour and equipment costs in focus during the 4Q22 results season.
Natural Gas US$2.312/mmbtu vs US$2.530/mmbtu last week
Uranium UXC US$51.75/lb vs US$51.50/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$124.9/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
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 94p, Mkt Cap £107m – C$480k investment in Libero maintaining the 19.8% interest
- The Company bought 3.2m new shares in Libero Copper & Gold as part of the recently launched C$2.5m private placing.
- The Company paid 15c per share for a total consideration of C$480k maintaining its 19.8% interest in Libero.
- Additionally, the Company has been issued 3.2 new warrants with an exercise price of C$0.22 and expiring in two years (17Feb/25).
- Proceeds are planned to be used for exploration at the Mocoa (Colombia) and Esperanza (Argentina) copper porphyry project.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Anglo American PLC (LSE:AAL) 3250.5p, Mkt Cap £43.3bn – Anglo to press ahead with Woodsmith polyhalite fertilizer mine
Sirius Minerals
- Anglo American is due to detail its plans this week to bring the Woodsmith polyhalite mine into production (The Times).
- Anglo has been busy widening the two mine shafts, possibly because there was a bit of a wiggle in the shaft when excavated under Sirius’ lax control.
- Straight shafts are essential for the transport of bulk material tonnages possibly supporting the decision to widen the shafts.
- Anglo is also reported to be increasing the budget to US$3.3bn following expenditure of some US$535m in 2022 following the expenditure of $530m in 2021
- Sirius Minerals had previously reported a cumulative capital cost of >$5bn based on an SRK CPR with a further $367m to expand the mine to 13mtpa.
- Investors in Sirius Minerals are understandably upset over the collapse and delisting of the company despite Anglo American’s bold rescue of the project.
- We suggest Sirius Minerals investors should address their concerns to the former Sirius Minerals CEO and CFO who had started construction without securing firm contracts for the capital required to complete the Woodsmith mine construction.
- Instead Sirius’ management simply stated the funding would be ‘Based on the expectation ofUS$2,500m facility being available with US$1,000m in further liquidity provided after all high yield bond issuances.’
Castillo Copper Ltd (ASX:CCZ, LSE:CCZ) 0.88p, Mkt Cap £11m – Optimisation plans for the ‘Big One’ deposit in Queenland.
- Castillo Copper has outlined its plans to optimise its ‘Big One’ deposit in the Mt Isa copper district of Queensland where previous work has identified an inferred mineral resource of 2.1mt at an average grade of 1.1% copper.
- The company says that intends to appoint “an independent engineering contractor to conduct a pit optimisation study on the viability of commencing copper mining operations, utilising prospective third-party processors and effective path to market”.
- In addition, Castillo Copper says that it will be reviewing its plans for a third drilling campaign and geophysical surveying “to extend known mineralisation beyond the line of lode”.
- Castillo Copper comments on the interest of major mining companies, including Rio Tinto, Glencore and Anglo American in the copper potential of “the Mt Isa region … [and says that] … there is a compelling case to ramp up exploration activities”.
- The company also says that the major companies “have operations proximal to Castillo's ground … [and that] … Post upcoming site visits to several targets - including Arya, Valparaisa, Boomerang and Josephine - the Board will rank the exploration potential then present the opportunity to prospective development partners in the Mt Isa region”.
Conclusion: The Mt Isa region of Queensland has been a prolific copper region for over 100 years and its untapped potential continues to attract exploration interest. Despite its name, the ‘Big One’s’ 2.1mt inferred resource may currently fall short of the size criteria of its major mining company neighbours, however they will no doubt have informed views on its potential to supplement their own exploration holdings.
Corcel PLC (LSE:CRCL) – 0.295p, Mkt cap £2.4m – Operational and Strategic Update alongside Mt Weld Update
(Corcel, formerly Regency Mines was renamed on 7th August 2020)
- Corcel has announced its revised strategy following the successful restructuring of its corporate debt and balance sheet.
- Currently, Corcel is positioned as a non-operator, carried miner across various exploration projects.
- Now, the Company will look to broaden its strategy to include oil and gas and will look to review its staffing model to ‘reflect this broadening and evolving technical requirements.’
- The Company retains a focus on battery metals, with a portfolio including two PNG-based lateritic nickel deposits Mambare and Wowo Gap, where Corcel holds a 41% and 100% respective interest.
- Corcel is currently working on a JV entity for its Asian assets.
- The Company has been targeting Brazilian acquisition opportunities, owing to its Chairman’s affiliation with the Country.
- As regards Corcel’s Mt Weld project, the Company reports today it has completed 3D Inversion Magnetics work on existing drill targets at the Project.
- The Company notes that it has identified clear drill targets, 1.4km from Lynas’ Mt Weld rare earth oxide mine.
- An eight hole, 2000m RC drill program will be planned to test these targets to 250m depths.
- The Company hopes to begin drilling this quarter.
- Corcel’s Mt Weld Project covers 171ha in size and currently consists of four undrilled magnetic features, which may represent carbonatite intrusives, similar to Mt Weld next door.
Great Southern Copper PLC (LSE:GSCU) 1.45p, Mkt Cap £2.8m – Exploration progress at the Especularita and San Lorenzo projects, Chile
- Great Southern Copper reports that, following mapping and sampling, it has identified drill targets at the Teresita prospect at Especularita where it is “targeting high-grade structurally-controlled quartz-carbonate vein breccia systems”.
- The company confirms that it currently has four field crews in operation and that a second phase of mapping and sampling is underway on the Victoria prospect to the north of Teresita with promising results from initial sampling yielding anomalous levels of copper/gold and zinc.
- “Trench sampling and magnetics surveys at Victoria are also being considered to assist with drill targeting plans”.
- Great Southern Copper confirms that “All drill-core samples from the San Lorenzo scout drilling programme are with ALS Laboratories and the Company will update in due course”.
- CEO, Sam Garrett, said that exploration at Especularita “is rapidly building with prospect-scale mapping and sampling at the Victoria and Teresita prospects demonstrating evidence for the potential of high-grade Cu-Au mineralisation. Both projects are approaching drill-ready status targeting high-grade structurally-controlled vein breccia style Cu-Au mineralisation”.
- He also said that “regional exploration work at Especularita has also generated a new target, the Aurelia project, identifying skarn-style mineralisation with highly anomalous Cu-Au results in preliminary reconnaissance rock sampling”.
- Additional exploration licences have been secured at auction giving the company “23 exploitation concessions covering 3,904 ha and four exploration concessions covering 900 ha were successfully acquired” at Especularita where a “further 900 ha of concession area were added to the Especularita project via the application process.” The additional licences give a total “18,209 ha with multiple targets that are currently undergoing evaluation using stream sediment and rock chip geochemistry”.
- “At San Lorenzo, 17 exploitation concessions covering 1,141 ha were successfully acquired and a further 1,052 ha of concession area were also added via the application process” increasing Great Southern Copper’s holding to “28,645 ha hosting multiple targets, only some of which have been investigated by recent scout drilling”.
- Explaining its exploration strategy, Great Southern Copper says that it is “planning an exploration and evaluation two-year work programme for the copper-gold projects, targeting principally large tonnage, low to medium grade porphyry style Cu-Au deposits”.
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) 1p, Mkt cap £7.76m – Update on Karakubis Copper Project
- Kavango’s Karakubis Project, formerly the Mamuno Project, lies on the Botswana, Namibia border.
- The site has recently been visited by KCB consultant David Catterall of Tulia Blueclay Limited.
- TBL has been looking to improve Kavango’s drill target selection and has provided the Company with a detailed report on its prospectiving licences, with a primary recommendation to ‘immediately focus its exploration efforts on the Karakubis Copper Project.’
- The report suggests that the D'Kar/Ngwako Pan horizon contact lies at moderate depths at Karakubis, with similarities to Sanfdire’s A4 and T3 deposits,.
- Airborne Electromagnetic Data has indicated abundant parasitic folding of both the D’Kar and Ngwako Pan sediments, suggesting potential structural traps for mineralisation.
- Going forward, the Company is planning to release further interpretation of existing geophysical and geochemical data with more precise drill targets.
Power Metal Resources PLC (AIM:POW)* 1.15p, Mkt cap £20m – Update on Athabasca Basin Uranium Portfolio
- Power Metal Resources have added to their Athabasca Basin portfolio through direct mineral claim staking, acquiring the Hawkrock East and Hawkrock West uranium properties covering 42.80km2
- The Hawkrock properties lie within the prospective Snowbird Tectonic Zone.
- Previous exploration work at Hawkrock East identified elevated radon, uranium, and methane-in-groundwater, coincident with largely untested electromagnetic ("EM") geophysics conductors.
- At Hawkrock West, previous drilling has highlighted elevated uranium, thorium and radiation CPS readings of drill core lying in close proximity to the Athabasca sandstone and basement unconformity.
- Power Metal’s Haresign Bay Property has been reduced in size from 31.89km2 to 1.65km2 owing to competing applications on the registry. Staking costs have been reduced accordingly.
- Power Metal’s Athabasca uranium portfolio now consists of 16 properties over 965.73km2.
*SP Angel acts as Nomad and Broker for Power Metal Resources
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* Suspended – Rambler defaults on gold deliveries into Sandstorm streaming agreement
- Rambler Metals and Mining reports on the default of 488oz of gold into a streaming repurchase agreement with Sandstorm Gold Ltd (TSX:SAND).#
- Under the agreement Rambler was supposed to repay $7m less the payable gold delivered into the agreement with 1,150oz of gold due to be delivered over the 18 months since 1 October 2021.
- The Elemental Altus streaming deal from April 2022 provided the cash to repay the US$7m owed to Sandstorm with Rambler also delivering 192oz of gold into the agreement. This leaves 958oz remaining to be delivered to Sandstorm.
- “No sale and delivery of refined gold to Sandstorm has occurred for the last seven months, being August 2022 to February 2023 inclusive, totalling 448 ounces of refined gold, and therefore an event of default has occurred, as defined in the Agreement..
- Pursuant to the existing Agreement, Rambler has 10 days, from 16 February 2023, to either deliver 958 ounces of gold or make a cash payment to Sandstorm of approximately CND 2.36 million. Sandstorm and Rambler intend to enter discussions regarding a solution to the default..
- At this stage there can be no guarantee that Sandstorm will agree to defer or reschedule the sale and delivery of gold pursuant to the Agreement, or the terms on which any deferral will be agreed. Accordingly, the Company's financial position remains uncertain.
- In addition, Rambler remains in discussions with several groups as the Company seeks to restructure its finances. Further announcements will be made as appropriate.”
Conclusion: The Rambler situation highlights how the effect of an ongoing and persistent debt default can spiral into a cascade of other issues. The mine is currently suspended pending the delivery of materials delayed by suppliers insisting on cash up front while the mine has now defaulted on streaming and royalty agreements.
If the mine reopens next week there is a reasonable chance the debt, royalty and streaming agreements will be repaid, if Rambler is able to agree a refinancing transaction. If the mine closes for much longer then the substantial cost of reopening the mine could prevent the recovery of much of the asset value inherent in the operation.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining
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%”
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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
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
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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
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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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