SP Angel . Morning View . Friday 24 02 23
Tin prices press ahead buoyed by better-than-expected semiconductor sales
MiFID II exempt information – see disclaimer below
Lithium exploration opportunity – Ghana – private financing
- Hard rock spodumene outcrop on licenses indicate good potential for lithium discovery in highly prospective region of Ghana
- Drilling to start shortly to test for lithium below surface of weathered outcrop
- Company is also looking at additional downstream processing in Ghana in co-operation with European lithium refinery company
- Potential for joint venture with listed company or LSE IPO
*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
Cora Gold Ltd (AIM:CORA) – ~$20m fundraise completed
First Quantum Minerals (TSX:FQM) – First Quantum halts ore processing at Cobre Panama as contract disputes continues
Galantas Gold Corp (AIM:GAL, TSX-V:GAL, OTCQX:GALKF) – Update MRE and mine plan to include high grade zones intersected at depth at the Kearny vein
Gold Fields Limited (ADR) (NYSE:GFI) – Gold Fields to limit M&A strategy to smaller acquisitions following Yamana failure
Resolute Mining Ltd (ASX:RSG, LSE:RSG) – Resolute raises gold production beyond guidance at Syama gold mine in Mali
Gold flatlines as traders wait for today’s PCE data for further guidance
- Gold has held its lower ground around the $1,830/oz mark.
- Bullion is set to record a decline for a fourth straight week, following its rally through January.
- The metal has rerated given the repricing of the US Fed rate hike schedule, pressuring gold lower over the month of February.
- US GDP saw its number revised higher to 2.7% last week as unemployment benefit claims fell unexpectedly, a further indicator of the strength of the US economy.
- The market now expects the Fed Funds rate to peak at over 5.3%, vs 4.9% expected in January.
- Today’s US personal consumption expenditures should give further guidance for both the Fed and gold today, as it acts as the Central Bank’s preferred measure of inflation.
Tin prices press ahead buoyed by better-than-expected semiconductor sales
- Tin prices rose to US$ 26,848/t from US$26,600/t yesterday.
Nvidia semiconductor sales beat expectations yesterday lifting the sector in Taiwan
- The recovery in sales is earlier than market expectations indicating a pickup in manufacturing in anticipation of a recovery in consumer electronics demand
- Higher semiconductor sales indicates greater demand for tin in solder for connections
- We recommend investors consider Cornish Metals* for exposure to future tin production
*SP Angel act as Nomad and broker to Cornish Metals
Coking coal futures climb as supply concerns mount following Chinese mine collapse
- Dalian coking coal futures hit an eight-month high yesterday following a major mine collapse in Inner Mongolia.
- To date, six people have been reported dead and 49 remain missing.
- Coking coal prices climbed 3% to June highs.
- Chinese coal miners were encouraged to ramp up production following supply shortages hit in 2021.
- Shanxi, Shaanxi, and Inner Mongolian authorities have ordered miners to conduct safety checks at their operations, raising concerns of delays or limitations to output.
Dow Jones Industrials +0.33% at 33,154
Nikkei 225 +1.29% at 27,453
HK Hang Seng -1.67% at 20,011
Shanghai Composite -0.62% at 3,267
Economics
US – Weekly jobless claims came in slightly ahead of expectations with markets awaiting January PCE inflation data due later today.
- Weekly claims pulled back with a less volatile 4-week average picking slightly, although, it remained close to the lowest level in nearly a year pointing to continuing tight labour conditions.
- Initial Weekly Claims: 192k v 194k in the previous week and 200k est.
- PCE Deflator (%yoy): 5.0 v 5.0 December.
- Core PCE Deflator (%yoy): 4.3 v 4.4 December.
UK – Consumer confidence improved more than expected in February, although, continued to run in deeply negative territory amid ongoing macroeconomic challenges.
- “Consumers have suddenly shown more optimism about the state of their personal finances and the general economic situation, especially for the coming year… While it’s too early to talk about ‘green shoots of recovery,’ the uptick across all measures should be welcomed, ” GfK said.
- The measure remains below the lows recorded at depth of the pandemic in 2020.
- GfK Consumer Confidence: -38 v -45 January and -43 est.
Russia – The US will be holding talks with G7 leaders and Ukrainian President today following a one-year anniversary of Russia’s invasion discussing new series of sanctions.
- The sanctions are expected to include Russian banks, technology and defence sectors, and will impact both people and companies involved in the conflict, Reuters cites White House spokesperson.
- Earlier, the EU is reported to have failed to unanimously agree a new package (#10) in time for the anniversary with discussions to continue today.
- The disagreement has been driven by Poland blocking the package over proposed exemptions to a ban on EU imports of Russian synthetic rubber.
Currencies
US$1.0583/eur vs 1.0612/eur yesterday. Yen 134.91/$ vs 134.85/$. SAr 18.290/$ vs 18.338/$. $1.213/gbp vs $1.205/gbp. 0.678/aud vs 0.683/aud. CNY 6.942/$ vs 6.891/$.
Dollar Index 104.68 vs 104.47 yesterday.
Commodity News
Precious metals:
Gold US$1,829/oz vs US$1,828/oz yesterday
Gold ETFs 92.5moz vs US$92.6moz yesterday
Platinum US$939/oz vs US$953/oz yesterday
Palladium US$1,425/oz vs US$1,463/oz yesterday
Silver US$21.17/oz vs US$21.59/oz yesterday
Rhodium US$11,500/oz vs US$11,500/oz yesterday
Base metals:
Copper US$ 8,909/t vs US$9,051/t yesterday
Aluminium US$ 2,381/t vs US$2,390/t yesterday
Nickel US$ 25,363/t vs US$26,155/t yesterday
Zinc US$ 3,023/t vs US$3,040/t yesterday
Lead US$ 2,060/t vs US$2,083/t yesterday
Tin US$ 26,848/t vs US$26,600/t yesterday
Energy:
Oil US$83.2/bbl vs US$80.9/bbl yesterday
- On the anniversary of Russia’s invasion of Ukraine, energy prices are surprisingly lower one year on as the West has somewhat adjusted to a significant global dislocation in both oil and natural gas markets, given Russia produced ~10% of the world’s crude oil and supplied ~40% of Europe’s gas in 2021.
- The EIA reported a 7.6mb US crude inventory build last week, as well as a 2.7mb distillate product build, with refinery utilisation falling 0.6% to 85.9%. EOG reported that it expects well costs to increase by 10% in 2023, following a 7% rise last year, and forecasts FY23 crude oil production to grow 3% and total volumes by 9%
- The US EIA storage report detailed a draw of 71bcf to 2,195bcf last week, with storage levels up 21.9% y/y and 15.2% vs the 5-year average. Both Chesapeake and Comstock outlined plans to shrink capital in 2023 by pulling out rigs from their US unconventional gas portfolios due to oversupply depressing gas prices.
Natural Gas US$2.486/mmbtu vs US$2.198/mmbtu yesterday
Uranium UXC US$51.70/lb vs US$51.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$130.4/t vs US$129.7/t
Chinese steel rebar 25mm US$648.6/t vs US$641.9/t
Thermal coal (1st year forward cif ARA) US$144.0/t vs US$144.0/t
Thermal coal swap Australia FOB US$199.0/t vs US$197.0/t
Coking coal swap Australia FOB US$370.0/t vs US$375.0/t
Other:
Cobalt LME 3m US$34,180/t vs US$35,690/t
NdPr Rare Earth Oxide (China) US$99,544/t vs US$99,375/t
Lithium carbonate 99% (China) US$52,457/t vs US$54,040/t
China Spodumene Li2O 5%min CIF US$5,820/t vs US$5,840/t
Ferro-Manganese European Mn78% min US$1,311/t vs US$1,316/t
China Tungsten APT 88.5% FOB US$333/mtu vs US$333/mtu
China Graphite Flake -194 FOB US$845/t vs US$845/t
Europe Vanadium Pentoxide 98% 10.1/lb vs US$10.1/lb
Europe Ferro-Vanadium 80% 39.75/kg vs US$39.75/kg
China Ilmenite Concentrate TiO2 US$342/t vs US$342/t
Spot CO2 Emissions EUA Price US$101.2/t vs US$102.7/t
Brazil Potash CFR Granular Spot US$495.0/t vs US$495.0/t
Company News
Cora Gold Ltd (AIM:CORA) 4.2p, Mkt Cap £12m – ~$20m fundraise completed
The Company received binding commitments for a total of $19.8m comprised of both equity and convertible loan notes.
The raise is subject to the passing of resolutions to be proposed at a General Meeting due 28 February 2023.
The raise will include the issue of 80.7m shares at ~4p for ~$3.9m and a convertible note for a total of $15.9m.
The announcement follows the news released earlier this month that the Company conditionally secured $19.6m while offering an option for other investors to participate in the placing for up to additional $10m.
The proceeds will be used to start development works at the flagship Sanankoro Gold Project in southern Mali.
First Quantum Minerals (TSX:FQM) 26.59, Mkt cap £18bn – First Quantum halts ore processing at Cobre Panama as contract disputes continues
- FQM reports it has suspended ore processing operations at its 350ktpa Cobre Panama mine.
- Panamanian authorities have described the move as unhelpful pressure tactics.
- The mining union has called for protests at the provincial capital.
- The concentrate storage area is said to be full making it difficult to find safe areas in which to store copper concentrates.
- The Company is hopeful that a concentrate export ban may be lifted.
- FQM notes that it could resume operations and shipments ‘within hours’ if the authorities agree to lift the export ban.
- In the meantime First Quantum continues to support the cost of operating the mine without the ability to ship product for sale.
Conclusion: This is a very delicate situation. FQM can not continue to pay for the running of the mine on an indefinite basis without the ability to sell its product.
Copper concentrates must be carefully stored in a secure area to prevent leaching of the copper into the environment else it risks the contamination of local water supplies and soils as see at Vedanta’s Sterlite smelter in Tuticorin which remains closed due to local opposition.
Galantas Gold Corp (AIM:GAL, TSX-V:GAL, OTCQX:GALKF) 22p, Mkt Cap £23m – Update MRE and mine plan to include high grade zones intersected at depth at the Kearny vein
- The Company is expecting to release an update NI 43-101 compliant MRE by the end of Q2/23 at the Omagh Gold Project in Northern Ireland.
- The resource will include the latest round of 7,800m of drilling with many drill holes returning higher gold grades and thicker intersections of the mineralisation.
- Internal modelling indicates that the grades and widths of mineralization increase within the dilation zones at the Kearney and Joshua veins.
- In parallel, the Company is studying the potential to incorporate new higher grade zones found at deeper levels into an update mine plan
- Updated mine plan is expected to include development of lower levels of the Kearny Vein as well as the north and south extensions of the vein’s existing workings that potentially may potentially accelerate expansion to 20kozpa.
- New mine plan is expected to be completed in Q2/23.
- Drilling from the underground testing extensions of the Kerr Vein is ongoing with the first hole completed ~200m north of the known surface exposure.
- Preliminary assessment indicates intersected sulphide mineralisation with assays expected in due course.
- The Company also highlighted challenges in staff recruitment with the team now increasingly considering transitioning to contract mining.
*SP Angel act as Broker to Galantas Gold
Gold Fields Limited (ADR) (NYSE:GFI) ZAR16,539, Mkt Cap ZAR147bn - Gold Fields to limit M&A strategy to smaller acquisitions following Yamana failure
- Gold Fields’ executives stated yesterday that it will not be eyeing any further major M&A opportunities this year following its failed bid to buy Yamana Gold (TSX:YRI, LSE:AUY).
- The Company noted plans to ‘look at more incremental growth, rather than big transformational projects.’
- Gold Fields saw its share price plunge 20% following the announcement of its bid for Yamana.
- The Company will now focus on acquiring development projects and smaller operational mines.
Resolute Mining Ltd (ASX:RSG, LSE:RSG) 15.3p, Mkt Cap £357m – Resolute raises gold production beyond guidance at Syama gold mine in Mali
- Resolute Mining recorded a strong performance through the year and in Q4 to produce 353,069oz gold ahead of guidance for 345,000/oz
- Gold sales of 357,447oz took sales to US$651.1m from $549.2m a year earlier at an average price of $1,819/oz
- AISC costs rose 9% to $1,498/oz mainly due to higher fuel and consumables
- EBITDA rose to $148.2m vs $129.9m a year eaerlier
- Underlying net profit after tax $20.3m vs -$93.5m in 2021
- Reported net loss after tax of -$34.7m vs -$367.5m in 2021
- Exploration: Syama North project drilling shows M&I resources of 19mt at 3 g/t gold for 1.86moz at a 1 g/t gold cut-off with 6km of strike length to explore.
- A PFS on Syama North should show potential to mine a number of open pits to feed expansion at Syama’s sulphide operations.
- Syama improved gold production in Q4 to 91.777oz reporting the fifth consecutive quarter of gold production
- Debt: The group repaid some $195m of debt through the use of $106m of equity proceeds and $84m of asset sale proceeds
- Resolute raised A$164m in the sale of new equity to institutions in November to reduce debt and help fund ongoing expansion
- Net debt reduced to $31.6m vs $228.8m in 2021
- Cash and bullion $94.0m at the year end.
- Guidance: for 350,00oz gold production at an AISC of $1,480/oz
- Next year’s earnings will be boosted by a stronger gold production, much lower interest bill and reduced cash costs.
- Adjustments: Resolute has taken $50m of abnormal expenses comprising $24m of disputed tex expenses in Senegal, $15m of historical tax adjustments a $16m impairment on obsolete consumables.
- We would hope the company should not suffer such extraordinary abnormal items going forwards and therefore expect profits to rise beyind the the reported underlying profit of $20m.
Conclusion: Terry Holohan and his team are doing a great job with the Syama gold mine in Mali. The improving performance goes to show that the right people in the right place make all the difference when faced with the challenge of processing sulphide ores through a roaster in West Africa.
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
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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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