SP Angel . Morning View . Wednesday 08 03 23
Copper weakens on stronger dollar and lower Chinese imports in January and February
MiFID II exempt information – see disclaimer below
Anglo American PLC (LSE:AAL) – De Beers - Second sales cycle of the year sees continuing rough diamond apetite
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) - Scallywag exploration results identify multi-element geochemical anomalism
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* Suspended – Court decision expected today following ‘Comeback Hearing’ in Canada
Red Rock Resources PLC (AIM:RRR) – Plans for Zimbabwean lithium ore production progress.
Resolute Mining Ltd (ASX:RSG, LSE:RSG) – Syama North exploration helps deliver mineral resource and reserve growth.
Copper weakens on stronger dollar and continued concerns over Chinese demand
- Copper fell to $8,775/t, now down 6% from highs reached in February.
- The move lower followed Powell’s hawkish rhetoric before Congress, which pushed the dollar higher and weighed on commodities across the board.
- Suspicions of subdued Chinese demand for refined copper was confirmed in a data release yesterday, which highlighted muted inflows of industrial-quality copper.
- Prices are also sliding over expectations of a wave of halted concentrate shipments to Chinese smelters from Peru, as protests against Castillo’s impeachment in December have calmed.
- Chilean copper production climbed in January with a yoy increase of 2.9% to 438kt as Codelco ramped up production to 127kt (a 5.1% yoy jump). (Cochilco)
- Peruvian copper production fell 1.6% in Jan vs a 19% increase in December. (BNAmericas)
Gold slides as Powell triggers expectations of larger rate hikes
- Gold prices fell $40/oz to $1,810/oz on the back of Powell’s testimony.
- Powell noted that ‘the latest economic data have come in stronger than expected,’ highlighting the Fed’s ability to ‘increase the pace of rate hikes’ to calm inflation.
- The Comments saw a major repricing of hike expectations, with the market now expecting a 50bp rate hike at the Fed’s meeting this month.
- The dollar strengthened on the back of the testimony, whilst the short duration treasury bonds hit their highest level since 2007, reducing the appeal of non-interest-yielding bullion.
- Gold ETFs slashed holdings by 226.4koz yesterday, marking 6 straight days of selling. ETFs have now slashed holdings by 2% this year.
- Gold miners suffered as a result, with S&P/TSX Gold Index falling nearly 4%.
Metal demand – Ukraine conflict to increase demand for metals as world transitions towards green energy
- But it is worth pointing out that the metal ordinance and machinery being scrapped in Russia’s Special Military Operation will be replaced in future years.
- Increased demand for the replacement of ordinance, tanks, etc… will compete with new demand for wind farms, EV and other green energy initiatives.
- Ideally, care for the environment would take precedent but while the Putin’s of this world remain at large we suspect metal demand for ordinance will take priority.
- Please note, we do not encourage investors to profit from conflict
Trafigura warns of lack of copper threatening energy transition
- Trafigura’s CEO, Jeremy Weir, has stated that the lack of new copper production coming online is ‘one of my biggest fears with this energy transition.’
- He questioned whether a transition is possible ‘given the supply tightness’ and called for policymakers to ‘be more efficient in bringing things online.’
China iron ore imports rise 7.3% for Jan/Feb
- China imported 194mt of iron ore over Jan/Feb vs 181.1mt same period 2022.
- Analysts note weaker iron ore demand in other markets.
- Steel product exports from China grew 49% to 12.19mt in the period.
Dow Jones Industrials -1.72% at 32,856
Nikkei 225 +0.48% at 28,444
HK Hang Seng -2.35% at 20,051
Shanghai Composite -0.06% at 3,283
Economics
US - 10-year US Treasuries bonds rose to >4% last week, now resting at 3.98%
- The market is now pricing in a 0.5% for the next Fed rate hike
- The US$ index rose to 105.7
- Libor: Three-month Libor interbank offered rate for US$ rose >5% to 5.008%, its highest level since December 2007.
China – China’s new Foreign Minister Qin Gang commented the "invisible hand" is using the Ukraine crisis to serve certain geopolitical agendas in a comment at the side of the National Peoples Congress.
- Conflict, sanctions, and pressure will not solve the problem... We can only assume that Qin Gang is referring to the US with these comments.
South Korea – Q4 GDP fell 0.4% vs 0.3% in Q3 and 1.3% yoy in Q4 vs 3.1% yoy in Q3
UK grid suffers worst supply crunch this winter; back-up coal used for first time
- Back-up coal-fired reserves were called on last night by the National Grid after the UK was hit by a cold snap.
- Electricity supplies are currently limited on a trifecta of freezing temperatures, low wind, and lack of supply from French plants as workers strike.
- UK Halifax home price index rose 1.1% in February vs 0.2% in January but held steady at 2.1% yoy in February
- These figures may reflect prices for previously agreed sales.
- The numbers definitely do not tally with higher interest rates reducing offer prices in London due to unaffordability.
- Anecdotal evidence suggests sellers are rapidly marking prices down and buyers are offering cheeky prices as interest rates rise.
Australian - RBA upped official rates 0.25% to 3.60%.
Currencies
US$1.0544/eur vs 1.0672/eur yesterday. Yen 137.59/$ vs 135.78/$. SAr 18.618/$ vs 18.306/$. $1.183/gbp vs $1.202/gbp. 0.660/aud vs 0.668/aud. CNY 6.970/$ vs 6.929/$.
Dollar Index 105.73 vs 104.26 yesterday.
Commodity News
Precious metals:
Gold US$1,814/oz vs US$1,846/oz yesterday
Gold ETFs 91.8moz vs US$92.1moz yesterday
Platinum US$943/oz vs US$972/oz yesterday
Palladium US$1,392/oz vs US$1,431/oz yesterday
Silver US$20.04/oz vs US$21.04/oz yesterday
Rhodium US$10,100/oz vs US$10,100/oz yesterday
Base metals:
Copper US$ 8,755/t vs US$8,887/t yesterday
Aluminium US$ 2,322/t vs US$2,365/t yesterday
Nickel US$ 23,930/t vs US$24,300/t yesterday
Zinc US$ 2,941/t vs US$3,027/t yesterday
Lead US$ 2,091/t vs US$2,092/t yesterday
Tin US$ 23,715/t vs US$24,380/t yesterday
Energy:
Oil US$83.0/bbl vs US$86.5/bbl yesterday
Natural Gas US$2.679/mmbtu vs US$2.564/mmbtu yesterday
Uranium UXC US$50.80/lb vs US$50.60/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$127.0/t vs US$124.4/t
Chinese steel rebar 25mm US$641.6/t vs US$643.6/t
Thermal coal (1st year forward cif ARA) US$126.5/t vs US$139.0/t
Thermal coal swap Australia FOB US$185.0/t vs US$190.0/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$89,674/t vs US$90,557/t
Lithium carbonate 99% (China) US$43,689/t vs US$46,541/t
China Spodumene Li2O 5%min CIF US$5,260/t vs US$5,580/t
Ferro-Manganese European Mn78% min US$1,302/t vs US$1,318/t
China Tungsten APT 88.5% FOB US$331/mtu vs US$331/mtu
China Graphite Flake -194 FOB US$795/t vs US$815/t
Europe Vanadium Pentoxide 98% 10.2/lb vs US$10.2/lb
Europe Ferro-Vanadium 80% 40.95/kg vs US$40.95/kg
China Ilmenite Concentrate TiO2 US$339/t vs US$341/t
Spot CO2 Emissions EUA Price US$96.6/t vs US$95.1/t
Brazil Potash CFR Granular Spot US$480.0/t vs US$480.0/t
Company News
Anglo American PLC (LSE:AAL) 2,851.5p, Mkt Cap £38bn –De Beers - Second sales cycle of the year sees continuing rough diamond apetite
- Anglo American reports that, provisionally, the second De Beers sales cycle of 2023 realised US$495m and that the previously reported provisional sales of US$450m for the first sales cycle of 2023 have now been confirmed as US$454m.
- The initial year-to-date provisional sales for 2023 of US$949m are around 27% lower than the US$1.3bn achieved during the first two sales cycles of 2022 and the announcement says that “the provisional rough diamond sales figure quoted for Cycle 2 represents the expected sales value for the period 20 February and 7 March and remains subject to adjustment based on final completed sales.”
- Al Cook, CEO, De Beers Group, commented on the results of his first sight in the role saying that he saw "continued steady demand for rough diamonds in line with our expectations for sales as the year progresses”.
- Mr, Cook said that “we know that Sightholders planned more of their purchases for later in 2023, given the economic uncertainty at the time they were taking their planning decisions at the end of 2022. It is also encouraging to see some positive trends in end client demand for diamond jewellery at the start of the year.”
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) 7.4p, Mkt Cap £371m - Scallywag exploration results identify multi-element geochemical anomalism
- Greatland Gold reports results from its Scallywag exploration programme in the Paterson region of Western Australia.
- Scallywag lies adjacent to the Company’s Havieron gold-copper project, where it shares a JV agreement with Newcrest.
- The exploration programme constituted a ground electromagnetic survey, following up on work completed in 2021.
- Greatland used a specialised RC rig to drill eight pre-collars for 1,238m and diamond hole with a depth of 488m constituting a total of 1,726.6m.
- Pre-collar drilling at the A35 prospect intersected 2m @ 2.04g/t Au from 70m within a mineralised gold halo of 12m @0.48g/t.
- The Company also reports anomalous gold, silver and copper noted whilst testing a conductor at Pearl.
- The team suggests that diamond drilling will be prioritised to test deeper geophysical targets with the possibility of finding a new style of deposit.
- Shay Day, MD at Greatland, states that the results increase the team’s ‘confidence in the prospectivity of the ground,’ and their ‘ability to vector towards intrusion related styles of mineralisation.’
- Going forward, the Company will execute infill and extensional surface geochemistry following up on the 2022 geochem programme whilst further testing the Pearl and A35 prospects with diamond drilling.
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* Suspended – Court decision expected today following ‘Comeback Hearing’ in Canada
(Rambler holds 100% of the Ming copper, gold mine and 100% of the Little Deer Mining complex 150km from the Ming Mine in Newfoundland, Labrador, Canada)
- Rambler ‘Comeback Hearing’ decision:
- Extends Stay of Proceedings to 19 May
- Increases Administration Charge to C$1.35m
- DIP ‘Debtor In Possession’ charge increased to US$2.87m
- Next hearing set for 15 March 2023 for the Court to consider a proposed SISP ‘Sale or Investment Solicitation Plan
- Further materials including the Amended and Restated Initial Order, and additional information will be available shortly on the Monitor's website at www.GrantThornton.ca/Rambler
- The materials published on the website are as follows ("Materials"):
- 1) Stay Extension Order dated 6 March 2023
- http://www.rns-pdf.londonstockexchange.com/rns/2214S_1-2023-3-7.pdf
- 2) Amended and Restated Initial Order dated 7 March 2023
- http://www.rns-pdf.londonstockexchange.com/rns/2214S_2-2023-3-7.pdf
- Management are targeting mine production to meet mill capacity of 1,350tpd with a target grade of 2% copper.
- Rambler produced an operating profit of $1m in 2022 turning around from a loss of $7m in 2021
- Sales nearly doubled to $54.4m last year from $28.2m a year earlier
- Operating margins improves substantially coming in at $53.5m vs $35.7m
- The Net loss after expenses came in at $13.7m from $14m a year earlier.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining
Red Rock Resources PLC (AIM:RRR) 0.28p, Mkt cap £4.2m – Plans for Zimbabwean lithium ore production progress.
- In a review of its suite of assets, Red Rock Resources reports “progress with bringing initial lithium production on stream in Zimbabwe” where it plans initially to “produce and sell Lithium ore with a target grade of 2% (1.5%-3%) into the local market, on a pick-up basis” firstly from “ALR's … [African Lithium Resources] …Tin Hill property, 29 km North-West of Bikita in South-East Zimbabwe … [and later from] … its Beatrice site where there are lithium ore stockpiles and test results have been positive”.
- Although the proposed timetable for lithium production is unclear from today’s announcement, the company Chairman’s letter in the 2022 Annual Report says that Red Rock Resources expects “to bring into test production one or more of the lithium assets held by our Zimbabwe subsidiary. An Environmental Impact Assessment has already been initiated and in January 2023 we will be focused on advancing these assets into small-scale production”.
- Today’s announcement says that “When the operation has been stabilised, ALR plans to introduce a flotation unit in order to beneficiate the ore to 4.5%-5%, so that it may be sold into the export market. There are no immediate plans to delineate a mineral resource estimate”.
- Commenting on its arbitration case in DRC, the company says that in 2022 it was awarded “an executory judgment for $2.5m (being 50.1% of $5m paid to local partner VUP by a buyer) … [and that] … A further claim by the Company's subsidiary for $2m costs and damages is currently under appeal, with a result expected in the next weeks. The buyer retains a further $15m unpaid consideration pending determination of legal claims including that of the Red Rock group”
- Gold exploration in Burkina Faso, Kenya and Cote d’Ivoire is continuing with additional drilling planned at 4 prospects in the Mikei project in Kenya and drill sites selected in Burkina Faso and initial sampling carried out on targets in Burkina Faso where “an initial MMI (mobile metal ion) programme will be undertaken immediately upon grant” of additional licences.
- In Australia, “a modest initial diamond drill programme” at the 50.1% owned New Ballarat licences in Victoria produced what are describes as encouraging results and the joint venture added to its holdings following the award of additional licences covering “the historic Ajax Mine with recorded production of 312,789 oz at 14.8 g/t, and … [the purchase of] … the historic Berringa Mines, with recorded production of just under 300,000 oz at 8.3 g/t”.
- Red Rock Resources says that the partners in New Ballarat Gold are “seeking a listing for NBGC, as and when market conditions permit”.
- Red Rock Resources expresses concerns that the proposed US listing of Elephant Oil, where it holds “c397,873 shares” has taken longer than the expected date of “early in 2023”.
Resolute Mining Ltd (ASX:RSG, LSE:RSG) 15.68p, Mkt Cap £334m – Syama North exploration helps deliver mineral resource and reserve growth.
- In its annual mineral reserve and resources statement, Resolute Mining reports an increase of 1.7m oz (to 11.2moz) in its mineral resources and an increase of 0.6moz (to 4.6moz, net of depletion) in its 31st December 2022 mineral reserves.
- Reserves and resources are reported to the standards of the JORC (2012) Code.
- Proven and probable ore reserves at the Syama mine in Mali total 4.1moz of gold within 49.1mt at an average grade of 2.6g/t with over 96% of the contained gold classed as ‘Probable’.
- Reserves at Syama are contained within an overall mineral resource of 123.66mt at an average grade 2.6g/t gold containing 10.5moz. Over 80% of the resource (8.2moz) of the Syama resource is classified as ‘Measured’ or ‘Indicated’ with the balance as ‘Inferred’.
- Resolute Resources explains that the ore-reserves at Syama “increased due to an expansion in the Ore Reserves at Syama North. Overall 40% of the Measured and Indicated Mineral Resources were converted into Ore Reserves”.
- Commenting on resource expansion at Syama, the company says that “Exploration success at Syama North in 2022 led to a significant increase in Mineral Resources after completing intensive drilling programs throughout the year. The large increase in Measured and Indicated Mineral Resources led to a substantial increase in Ore Reserves at Syama North to 10.6 million tonnes (Mt) at 2.5g/t Au for 854,000oz. Drilling is continuing at Syama North with the expectation of significant increases in the Ore Reserves during the year”.
- The company says that its “highly successful drilling programs in 2021 and 2022 at Syama North have outlined a company significant Mineral Resource which has the potential to transform the mining operation at Syama. During 2022 the Syama North Mineral Resource increased to 34Mt @ 2.9g/t Au for 3.2 Moz an increase of 2 Moz”.
- At the Mako mine in Senegal, total proven and probable ore reserves of 520,000oz of gold are contained within 9.5mt at an average grade of 1.7g/t gold. Around two-thirds of the contained reserve ounces (348,000oz)are classed as ‘Probable’ with the balance as ‘Proved’.
- The Mako reserve is contained within an overall resource of 683,000oz (14.1mt at an average grade of 1.5g/t gold) and approximately 97% of the resource is within the ‘Measured & Indicated’ classes.
- The company explains that “the Mineral Resources at Mako decreased in line with mining depletion”.
- In the longer term, we estimate that between 2019 and 2022, mineral resources replenishment at Syama added more than 2.5moz of M&I resources over a period when mining depleted the resource by slightly more than 1moz.
- On a similar basis, over the same period, we estimate that the Mako mine depleted around 450,000oz of resources while replenishing some 60,000oz.
Conclusion: Resolute Mining has added 1.7moz of mineral resources and 600,000oz of gold to its reserves in the last year with the Syama mine in Mali now hosting 4.1moz of reserves within an overall resource of 10.5moz following successful exploration of the Syama North area. We estimate that since the beginning of 2020, Resolute Mining has added around 2.5moz of gold to Syama’s M&I resources while depleting around 1moz through mining.
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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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