SP Angel . Morning View . Wednesday 01 03 23
Base metals rally as Chinese economy strengthens higher than expected
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
Artemis Resources Ltd (ASX:ARV, OTCQB:ARTTF, AIM:ARV) – Funding of 2023 exploration programme
Bradda Head Lithium Limited (AIM:BHL, OTCQB:BHLIF, TSX-V:BHLI)– Settlement of Arizona claim dispute
Empire Metals Ltd (AIM:EEE)* – Appointment of Ex-Rio Tinto geologist as Exploration Manager
First Quantum Minerals (TSX:FQM) – Panamanian officials reject FQM’s move to suspend worker contracts but agreement looms (Media Reports)
Polymetal International PLC (LSE:POLY) – Ore reserves show depletion while resources grow
Base metals rally as Chinese economy strengthens higher than expected
- Copper and iron ore prices jumped on improved economic data from China.
- Factory activity jumped in February alongside signs that the housing market is continuing to improve.
- Iron ore futures jumped over 2% and copper rallied $200/t to over $9,110/t.
- The Chinese manufacturing PMI hit its highest level since 2012 for February, whilst home sales rose for the first time in 20 months.
- Earnings calls with Chinese steelmakers has highlighted bullish sentiment, with over 60% of steel producers expecting sales to jump in March. (MySteel)
- This weekend’s National Congress meeting will provide major guidance for base metal demand from China going forward.
- Copper has begun to show marginal signs of tightening market fundamentals.
- Inventory levels have begun to tick lower, despite sitting at Sept,2021 highs.
- Yangshan premiums, which are used as a guide for Chinese import demand, have climbed to a 1 month high, despite sitting 82% lower than October levels.
- Futures in both the LME and Comex markets are easing closer to neutral from Contango, which is traditionally a sign of buoyant supply.
Major Chinese aluminium smelting province sees 33% capacity cut
- Power cuts in February saw Yunnan aluminium smelters reduce annual capacity by 650kt. (Caixin)
- Total cuts have now climbed to 1.9mt since September.
- A major drought last summer has hit hydropower supplies, with a hangover effect into 2023.
Chinese coal prices climb after mine disaster triggers safety inspections
- Coking coal auctions in China saw sell-out demand.
- A major mine disaster in Inner Mongolia has triggered a swathe of safety inspections, raising buyer concerns over possible domestic supply disruption.
- The auctions are also seeing rising demand as a result of ramping up steelmaking activity, as stimulus measures feed into the Country’s property sector.
Gold climbs as dollar rally subsides following month of volatility
- Gold prices jumped to $1,835/oz following a 5.5% fall in February to lows around the $1,808/oz mark.
- The move came as the dollar’s recent upwards momentum faded, as traders reduced exposure and ECB hawkishness supported the Euro.
- US Treasury yields remain strong, with the 10 Yr returning 3.95% and the 2 Yr returning 4.85%, weighing on gold’s appeal as a safehaven asset.
Dow Jones Industrials -0.71% at 32,657
Nikkei 225 +0.26% at 27,517
HK Hang Seng +4.21% at 20,620
Shanghai Composite +1.00% at 3,312
Economics
UK – PMI manufacturing at 49.3 for February vs 47 in Jan.
EU – PMI manufacturing at 48.5, down from 48.8 in Jan, output at 50.1, up from 48.9 in Jan.
China – PMI manufacturing up to 52.6 – highest since 2012 vs expectations of 50.7, PMI composite up to 56.4 vs 52.9
Japan – PMI manufacturing at 47.7 in Feb vs 48.9 in Jan
Australia – CPI slows to 7.4% yoy in Jan (Expectation of 8.1%), Core down to 7.2%
Currencies
US$1.0640/eur vs 1.0600/eur yesterday. Yen 136.02/$ vs 136.82/$. SAr 18.160/$ vs 18.476/$. $1.208/gbp vs $1.203/gbp. 0.676/aud vs 0.671/aud. CNY 6.887/$ vs 6.943/$.
Dollar Index 104.51 vs 104.81 yesterday.
Commodity News
Precious metals:
Gold US$1,834/oz vs US$1,808/oz yesterday
Gold ETFs 92.6moz vs US$92.7moz yesterday
Platinum US$965/oz vs US$936/oz yesterday
Palladium US$1,441/oz vs US$1,418/oz yesterday
Silver US$21.04/oz vs US$20.46/oz yesterday
Rhodium US$9,650/oz vs US$10,450/oz yesterday
Base metals:
Copper US$ 9,111/t vs US$8,804/t yesterday
Aluminium US$ 2,424/t vs US$2,352/t yesterday
Nickel US$ 25,405/t vs US$25,205/t yesterday
Zinc US$ 3,090/t vs US$2,962/t yesterday
Lead US$ 2,135/t vs US$2,086/t yesterday
Tin US$ 25,695/t vs US$25,295/t yesterday
Energy:
Oil US$83.9/bbl vs US$83.0/bbl yesterday
- Crude oil prices edged higher after the API reported a smaller w/w 6.2mb build in US crude stocks last week.
- Natural gas prices were steady despite expectations for below-normal temperatures bringing snow to the eastern US and northern Europe by the end of the week.
- Chevron CEO Mike Wirth said that while consolidation among the oil majors remains a possibility, any takeover would likely face regulatory and government hurdles.
Natural Gas US$2.767/mmbtu vs US$2.703/mmbtu yesterday
Uranium UXC US$50.95/lb vs US$51.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$123.4/t vs US$124.1/t
Chinese steel rebar 25mm US$641.3/t vs US$637.2/t
Thermal coal (1st year forward cif ARA) US$156.0/t vs US$160.0/t
Thermal coal swap Australia FOB US$195.5/t vs US$196.0/t
Coking coal swap Australia FOB US$340.0/t vs US$340.0/t
Other:
Cobalt LME 3m US$34,180/t vs US$34,180/t
NdPr Rare Earth Oxide (China) US$98,606/t vs US$98,805/t
Lithium carbonate 99% (China) US$48,141/t vs US$50,627/t
China Spodumene Li2O 5%min CIF US$5,800/t vs US$5,800/t
Ferro-Manganese European Mn78% min US$1,314/t vs US$1,309/t
China Tungsten APT 88.5% FOB US$333/mtu vs US$333/mtu
China Graphite Flake -194 FOB US$815/t vs US$835/t
Europe Vanadium Pentoxide 98% 10.1/lb vs US$10.1/lb
Europe Ferro-Vanadium 80% 40.25/kg vs US$40.25/kg
China Ilmenite Concentrate TiO2 US$343/t vs US$341/t
Spot CO2 Emissions EUA Price US$102.8/t vs US$100.0/t
Brazil Potash CFR Granular Spot US$480.0/t vs US$480.0/t
Battery News
Company News
Artemis Resources Ltd (ASX:ARV, OTCQB:ARTTF, AIM:ARV) 0.87p, Mkt Cap £13.5m – Funding of 2023 exploration programme
- Artemis Resources has raised A$2.55m to fund its 2023 exploration campaign at its Carlow copper/gold project east of Karratha, WA and its Paterson Central project, also in WA and adjacent to the Havieron project of Newcrest Mining and Greatland Gold.
- The funds are the result of placing an additional 170m shares at a price of A$0.015/share representing represents around 11% of the enlarged company.
- The new shares include an option to purchase one additional share for every two shares issued in the current placing at a price of A$0.025/share within three years.
- The company says that “Exploration activities across the Company's projects are expected to re-commence after strategic review”.
- At the Carlow project, Artemis Resources says that there is “Potential to increase … [the] … resource … [which] … remains open in multiple directions” as well as following up on additional targets at Marillion, Europa, Titan and Carlow North.
- In October 2022, Artemis Resources announced a JORC compliant inferred mineral resource for the “Greater Carlow gold copper cobalt project of 8.74mt at an average grade of 1.3g/t gold, 0.73% copper and 0.09% cobalt (reported as a grade of 2.5g/t gold on a gold equivalent basis.
- Today’s announcement explains that this resource estimate “does not at present support the value in use model underlying the carrying value of the Fox Radio Hill Processing Plant (approximately A$27.5 million at 31 December 2022 which includes a rehabilitation provision of A$5.2 million). As a consequence, the Company is required under accounting standards to reflect this asset at recoverable value. The Company is currently working with suitably qualified valuers to undertake a thorough assessment and valuation of the plant in the coming months.”
- “For the purposes of the Interim Financial Report for the half year ended 31 December 2022, which will be lodged prior to 15 March 2023, management have determined that a best estimate of recoverable value is A$15 million, and have accordingly booked an impairment provision of approximately A$12.5 million.”
- In the Paterson project area, the company identifies undrilled targets at Juno, Voyager, Vidian and Enterprise.
Bradda Head Lithium Limited (AIM:BHL, OTCQB:BHLIF, TSX-V:BHLI) 5.7p, Mkt Cap £22m – Settlement of Arizona claim dispute
- Bradda Head reports a dispute over certain federal unpatented mining claims in Mohave County with Arizona Lithium Ltd. has been resolved.
- The dispute, ongoing since 2021, has concluded with a final binding confidential settlement and mutual release.
- The claim exchange comes in lieu of litigation dispute resolution proceedings.
- Bradda Head will receive 66 federal lode unpatented mining claims from Arizona Lithium.
- 55 federal lode unpatented mining claims will be transferred from Bradda Head to Arizona Lithium.
Empire Metals Ltd (AIM:EEE)* 2.75p, Mkt Cap £9m – Appointment of Ex-Rio Tinto geologist as Exploration Manager
- Empire has appointed Andrew Faragher as its Exploration Manager.
- Andrew will be responsible for supervising exploration fieldwork, exploration strategy, project evaluation and giving technical guidance to the team on the ground.
- Andrew has 25 years’ experience as an exploration geologist and spent 7 years with Rio Tinto.
- Andrew’s team in WA discovered over 5bt of iron ore in the Pilbara and he has a strong understanding of Iron Oxide Copper Gold exploration in Australia.
- He was part of the team that identified the 150Mt of Cu at the Mt Roseby project.
Conclusion: Empire continues to progress its West Australian assets and the appointment of Mr Faragher marks an exciting development as the Company looks to further develop its flagship Pitfield project in WA.
*SP Angel acts as nomad and broker to Empire Metals
First Quantum Minerals (TSX:FQM) 29.8, Mkt cap £20.6bn – Panamanian officials reject FQM’s move to suspend worker contracts but agreement looms (Media Reports)
- The Panama Labour Ministry has rejected FQM’s request to suspend 4,051 worker contracts. (Bloomberg)
- The request was submitted on Feb.27th.
- Reuters reports that Ebrahim Asvat, a lawyer advising the government on its FQM negotiations, believes an agreement is imminent as regards a new contract.
- He told Reuters that an agreement could be reached within the fortnight.
- FQM was forced to halt ore processing last week following a ban on concentrate shipments.
Polymetal International PLC (LSE:POLY) 232.5p, Mkt Cap £1.16bn – Ore reserves show depletion while resources grow
- Polymetal reports a 9% decline in its 1st January 2023 proven and probable ore reserves to 233.5mt at an average grade of 3.6g/t gold (27.3moz).
- The company says that the reduction from the 29.9moz reported at 1st January 2023 is “mostly due to mining depletion … partially offset by the successful exploration results at Omolon hub (Burgali and Nevenrekan), Pesherny (Voro hub), as well as initial reserve estimates at Galka and Tamunier”.
- Approximately 22% of the reserves (6.0moz) is classed as ‘Proven’ under the JORC (2012) Code with the balance classified as ‘Probable’.
- In addition, Polymetal reports mineral resources of 176.8mt at an average grade of 4.5g/t on a gold-equivalent basis for a further 25.8moz.
- Approximately 40% (10.4moz) of the resources are classed as ‘Measured & Indicated’ with the balance ‘Inferred’.
- Polymetal says that “Mineral Resources … grew by 5% y-o-y to 25.8 Moz of GE due to positive revaluation at Kyzyl, Omolon, and Nezhda, as well as initial resource estimates at Kegali and Tumanin (Omolon hub). The average GE grade in MR was up by 10% y-o-y to 4.5 g/t”.
- Outlining its exploration objectives for 2023 Polymetal says that it “will continue to invest in both near-mine and greenfield exploration projects” with priority for the re-evaluation of the ore-reserves at Kyzyl, and to initial ore reserves estimates for Talgiy (Albazino) and at Pavlov.
Conclusion: Depletion during 2022 has reduced Polymetal’s gold equivalent ore reserves by around 9% (2.6moz to 27.3moz) while the company’s additional ‘Measured & Indicated’ mineral resources have increased by 1.2moz to 25.8moz.
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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
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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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