SP Angel . Morning View . Wednesday 15 03 23
Oil and base metals soften following SVB collapse on US economic concerns
MiFID II exempt information – see disclaimer below
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* – Amur confirms receipt of $35m of funds for sale of Kun-Maine nickel project in Russia
Ariana Resources PLC (AIM:AAU) – 2023 Production guidance
Ferrexpo PLC (LSE:FXPO) –2022 financial results hit by electrical power supply and logistical constraints of conflict in Ukraine
Petra Diamonds Limited (LSE:PDL, OTC:PDLMF) – Fourth tender of FY2023 delivers 12.5% like-for-like price increase as demand stays ‘robust’
Sovereign Metals Limited (ASX:SVM, OTC:SVMLF, AIM:SVML) – Kasiya graphite production expected to generate low CO2 emission levels.
Versarien PLC (AIM:VRS, OTC:VRSRF)*– New funding helps advance Versarien product development
Dow Jones Industrials +1.06% at 32,155
Nikkei 225 +0.03% at 27,229
HK Hang Seng +1.52% at 19,540
Shanghai Composite +0.55% at 3,263
Economics
US – Inflationary pressures are coming down as demonstrated by February CPI data with both headline and core measures coming in line with estimates.
- Equity indices climbed on the back of the report with consensus now the Fed will opt for a 25bp rate hike at the coming meeting and potentially a rate cut in H2/23.
- S&P and Nasdaq closed up 1.65% and 2.14% yesterday.
- CPI (%yoy): 6.0 v 6.4 January and 6.0 est.
- Core CPI (%yoy): 5.5 v 5.6 January and 5.5 est.
China – Private spending recovers on the back of pandemic related restrictions easing while the government steps up investment and property continues to struggle.
- Industrial production growth picked up to 2.4% in the first two months of the year compared to 1.3% in December.
- The economy is estimated to run at 4.1% GDP growth in the first two months, Bloomberg reports.
- Industrial Production (YTD %yoy): 2.4 v 2.6 estimated.
- Retail Sales (YTD %yoy): 3.5 v 3.5 estimated.
- FAI (YTD %yoy): 5.5 v 4.5 estimated.
- Property Investment (YTD %yoy): -5.7 v -8.5 estimated.
China Sees ‘Rapid’ Economic Recovery After Covid Reopening (Asia Financial)
- China is looking towards a rapid economic recovery through 2023 following stronger than expected
- Industrial output in January-February period rose 2.4% yoy from 1.3 yoy in December according to the NBS ‘National Bureau of Statistics’
- Consumption and infrastructure investment appears to be driving the recovery.
Eurozone – The ECB is looking to hike rates by another 50bp on Thursday amid ongoing inflationary pressures, Reuters reported citing unidentified person close to the bank’s Governing Council.
Russia/US – A Russian fighter jet collided with a US surveillance drone in international airspace over the Black Sea seeing the American aircraft crashing, the Pentagon reported.
- Russian defence military reported a different set of events saying that the drone flew out of control and crashed “as a result of sharp manoeuvring” with its jest returning safely to their base.
- The incident highlights risks of a potential accidental direct confrontation between US and Russian armies causing a new spike in strains between Moscow and Washington.
Mongolia - Rio Tinto starts underground mine extension at the giant Oyu Tolgoi copper mine
- When completed the expansion should make You Tolgoi the world’s fourth largest copper mine with production of >500,000tpa after 2028
- The mine produced 140,000t last year
Silicon Valley Bank – Daily Mail highlights failure of SVB bank
- In a statement to DailyMail.com, Will Hild, the executive director for Consumers' Research, said: 'The bank suffered from a combination of senior officers more focused on identity politics than risk management and investments in unprofitable virtue signaling boondoggles, like reportedly financing 62 percent of all US solar projects.
- 'It's also poetic that SVB would be the first bank to fail from "going woke," as the general business culture in Silicon Valley itself is notoriously far left and similarly out-of-step with the rest of the country,' he said. 'Let this be a warning, not just to other banks, but all of corporate America: Focus on serving your customers, not woke politicians.'
- Meanwhile, Republican presidential candidate Vivek Ramaswamy wrote in an op-ed that 'SVB intentionally decided not to hedge its interest-rate risk.'
- 'Either SVB was incompetent or this is a case of moral hazard, taking excessive risk and expecting political favors and bailouts,' he wrote as he railed against the idea of a bailout for the bank — something Treasury Secretary Janet Yellen said on Sunday is not on the table.
- 'Silicon Valley entrepreneurs want to move fast and break things, but we shouldn't let them break public trust as a long-shot manoeuvre for a special bailout,' Ramaswamy said. That isn't how capitalism works.'.
Currencies
US$1.0731/eur vs 1.0705/eur yesterday. Yen 134.69/$ vs 134.11/$. SAr 18.202/$ vs 18.247/$. $1.216/gbp vs $1.217/gbp. 0.668/aud vs 0.666/aud. CNY 6.897/$ vs 6.882/$.
Dollar Index 103.68 vs 104.01 yesterday.
Commodity News
Precious metals:
Gold US$1,888/oz vs US$1,904/oz yesterday
Gold ETFs 92.2moz vs US$91.9moz yesterday
Platinum US$979/oz vs US$993/oz yesterday
Palladium US$1,498/oz vs US$1,459/oz yesterday
Silver US$21.60/oz vs US$21.68/oz yesterday
Rhodium US$9,300/oz vs US$9,300/oz yesterday
Base metals:
Copper US$ 8,755/t vs US$8,856/t yesterday
Aluminium US$ 2,352/t vs US$2,306/t yesterday
Nickel US$ 23,055/t vs US$23,120/t yesterday
Zinc US$ 2,910/t vs US$2,950/t yesterday
Lead US$ 2,097/t vs US$2,068/t yesterday
Tin US$ 22,685/t vs US$22,630/t yesterday
Energy:
Oil US$78.6/bbl vs US$79.6/bbl yesterday
- Crude oil prices fell to their lowest levels this year as global markets continued to waver and the API reported a 1.6mb build (vs 0.6mb exp) in US crude stocks last week.
- European energy prices edged lower as the futures price of US LNG exports to Europe and Asia continues to fall, with the netback price spread between JKM and TTF at $0.34/mmBtu (or €1.09/MWh) for April.
- All eyes in the UK will turn to the Chancellor of the Exchequer’s Spring budget at noon today, where there is limited expectation for changes to the scope and reach of the Energy Profits Levy.
Natural Gas US$2.585/mmbtu vs US$2.644/mmbtu yesterday
Uranium UXC US$50.30/lb vs US$50.65/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$132.5/t vs US$131.5/t
Chinese steel rebar 25mm US$635.9/t vs US$658.5/t
Thermal coal (1st year forward cif ARA) US$139.0/t vs US$139.0/t
Thermal coal swap Australia FOB US$185.0/t vs US$188.0/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$83,662/t vs US$86,065/t
Lithium carbonate 99% (China) US$39,076/t vs US$39,873/t
China Spodumene Li2O 5%min CIF US$5,090/t vs US$5,110/t
Ferro-Manganese European Mn78% min US$1,326/t vs US$1,321/t
China Tungsten APT 88.5% FOB US$328/mtu vs US$328/mtu
China Graphite Flake -194 FOB US$790/t vs US$790/t
Europe Vanadium Pentoxide 98% 10.0/lb vs US$10.1/lb
Europe Ferro-Vanadium 80% 41.25/kg vs US$41.25/kg
China Ilmenite Concentrate TiO2 US$343/t vs US$344/t
Spot CO2 Emissions EUA Price US$99.2/t vs US$101.3/t
Brazil Potash CFR Granular Spot US$460.0/t vs US$460.0/t
Company News
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* 1.7p, Mkt Cap £24m – Amur confirms receipt of $35m of funds for sale of Kun-Maine nickel project in Russia
- Amur Minerals confirms it has received the $35m of funds due under its agreement for the sale of 100% interest in the Kun Manie nickel/copper sulphide project in Russia.
- The dividend will cost £25m or US$30.3m in cash leaving around $5m in the treasury.
- Amur had $5.3m of cash reserves at end June so we would expect the company to have $8-9m of cash to fund its next venture depending on transaction and other expenses.
- Amur is looking for near-development mineral assets in less challenging locations with a number of assets under consideration.
- The company became an AIM Rule 15 cash shell on 6 March following the disposal of the Kun-Maine project and has six months in which to acquire a new asset within six months or become an investing company under AIM Rule 8.
*SP Angel act as Nomad and Broker to Amur Minerals
Ariana Resources PLC (AIM:AAU) 2.9p, Mkt Cap £33m – 2023 Production guidance
- Ariana Resources expects to produce around 18,000oz of gold in 2023 from the processing of approximately 350,000t of ore at a grade of ~1.7g/t gold at its 23.5% owned Kiziltepe gold mine in Turkey.
- Mine production is planned from the Arzu North, Derya and Banu open-pits at Kiziltepe.
- The company observes that the planned output is “more than twice the production levels estimated in the feasibility plan for this approximate stage of mine life … [although lower than the 2022 production of] … 28,421 ounces”.
- The reduced output expectation results from “processing typically lower-grade ore and at a slightly reduced mill throughput, according to the current mine plan”.
- Managing Director, Dr. Kerim Sener, said that the 2022 performance was “the most successful period of mining ever and the sixth year of guidance-beating output … [which followed] … the introduction of the processing plant expansion which was completed in 2021”.
- He also noted that “Kiziltepe has now produced 50% more gold over its life than projected in our Feasibility Study and has done so within only three-quarters of the time.”.
- Dr. Sener explained that exploration success underpinned the production performance and said that “recent exploration successes have highlighted the potential to make further discoveries in the area, such as beneath Kiziltepe Hill at Kepez Main, albeit they represent deeper targets”.
- He said that “While Kiziltepe represents our oldest project, we are encouraged that even 18 years since we purchased it from Newmont, it still yields significant exploration upside”.
Conclusion: The Kiziltepe mine in Turkey continues to outperform the company’s original expectations although 2023 is expected to see lower output as a result of lower mill throughput and grades. Recent exploration success raises the possibility of additional discoveries.
Ferrexpo PLC (LSE:FXPO) 123.5, Mkt cap £785m –2022 financial results hit by electrical power supply and logistical constraints of conflict in Ukraine
- Ferrexpo reports that as a result of the operational and logistical constraints imposed by the Ukraine conflict, 2022 revenues declined by 50% to US$1.2bn (2021 – US$2.5bn), EBITDA fell by 47% to US$765m (2021 – US$1.4bn) and cash costs increased by 49% to US$83.3/tonne (2021 – US$55.8/t).
- The financial performance reflects a 46% decline in the production of 6.05mt of pellets (2021 – 11.22mt) and a matching 46% reduction in sales volumes to 6.18mt (2021 – 11.35mt).
- Average prices based on the Platts price for 65% iron-ore fines declined by 25% to US$139/t (2021 – US$18/t) “as a result of post-Covid stimulus packages during 2021”.
- The higher costs “reflect lower production volumes in 2022, higher input prices for key consumables and constraints imposed as a result of the conflict in Ukraine”.
- Ferrexpo confirms that “As of late February 2023, the Group has resumed operations at the second (of four) pelletiser lines, following progress made in the stabilisation of Ukraine's electricity network. The Group intends to continue producing at between one and two pelletiser lines for the coming months, assuming that the war in Ukraine does not deteriorate the operating environment”.
- The company says that its operations “continued to ship products to customers throughout 2022, despite electricity shortages experienced in 4Q 2022”.
- Non-executive Chair, Lucio Genovese, said that “Looking to the future, we see positives in Ukraine's potential as a supplier of high grade, high quality iron ore to the global steel industry, particularly in Europe, which is taking significant steps to reduce its greenhouse gas emissions footprint and embark on decarbonisation pathways”.
- He explained that “As a company with existing capacity to be one of the world's largest producers of blast furnace iron ore pellets, we are well situated to serve this shift in the near-term. Beyond blast furnaces, a number of steelmakers worldwide are looking towards a longer term pathway to Green Steel and electric arc furnaces, with direct reduction pellets representing a known pathway for Green Steel production”.
- He summarised 2022 saying that “We have navigated a difficult year with resilience. Our team has shown commitment to our stakeholders - ranging from our humanitarian efforts, to supporting the Ukrainian government through their need for industry to keep operating. … We look forward to a brighter future for Ukraine, whereby Ukrainians can realise their country's true potential, and we look forward to supporting this next phase of growth”.
Petra Diamonds Limited (LSE:PDL, OTC:PDLMF) 76.5p, Mkt Cap £150m – Fourth tender of FY2023 delivers 12.5% like-for-like price increase as demand stays ‘robust’
- Petra Diamonds reports that its fourth diamond sales tender of FY 2023 has delivered a 12.5% like-for-like price increase compared to the previous tender held in December 2022.
- The increase in like-for-like prices was “driven by double-digit increases in all categories, except for the 2 to 5ct size ranges which increased by some 3.5%”.
- Petra Diamonds says that “Prices decreased by 11.9% compared to Tender 4 of FY 2022 reflecting the significant, but temporary, upward price movements seen at the commencement of the Russian/Ukraine conflict … [and it ascribes] … the positive pricing trends to a recovery in demand from China as COVID-19 restrictions continue to dissipate, coupled with a more buoyant outlook from the recent Hong Kong International Jewellery Show”.
- The company reports the sale of 505,398 carats of diamonds generating revenues of US$72.1m with sales of ‘Exceptional’ stones exceeding US$5m each contributing US$7m.
- The fourth render brings “YTD revenue from rough diamond sales to US$278.5 million, including US$7 million from Exceptional Stone sales, compared to US$405.3 million in the first four tenders of FY 2022, which included a US$83.4 million contribution from Exceptional Stones”.
- Diamonds from the Cullinan mine realised an average of US$154/carat, inclusive of the exceptional stones, with the Finsch and Koffiefontein mines realising averages of US$121/carat and US$461/carat respectively.
- Koffiefontein sales “comprised the final 1,927 carats of diamonds recovered prior to steps being taken to place the mine on care and maintenance”.
- Commenting on the market fundamentals for rough diamonds, CEO, Richard Duffy, said that Petra Diamonds expects “a supportive diamond market in the medium to longer-term as a result of the structural supply deficit. Current levels of demand remain robust, though we are cognisant of possible near-term volatility owing to recent geopolitical and macroeconomic uncertainty”.
Conclusion: Improving rough diamond prices are supported by robust demand and a widely recognised future supply deficit.
Sovereign Metals Limited (ASX:SVM, OTC:SVMLF, AIM:SVML) 25.5p, Mkt Cap £120m –Kasiya graphite production expected to generate low CO2 emission levels
- Sovereign Metals reports that its graphite co-product from the Kasiya project in Malawi is expected to deliver the world’s cleanest production in terms of the CO2 emissions of “currently known and planned future natural graphite projects”.
- Based on “Independent benchmarking” Kasiya’s “Global warming potential (GWP) of producing one tonne of flake graphite concentrate at Kasiya estimated to be 0.2 tonnes of CO2 equivalent emissions … [is expected to be] … Up to 60% lower than currently reported GWP of graphite producers and developers”.
- It is expected to be “3x less polluting than proposed Tanzanian natural graphite production from hard rock sources … [and] … 6x less polluting than current Chinese natural graphite production which accounts for up to 80% of current global graphite supply”.
- Managing Director, Dr. Jukian Stephens, commented that “our graphite co-product from planned rutile production at Kasiya will not only be potentially one of the lowest cost flake graphite projects in the world but now can also be considered to have one of the lowest global warming potentials of current and future graphite mines”.
- He also said that “Producers and users of lithium-ion batteries are already taking note of the carbon footprint associated with the raw materials that feed into battery technology - so to be developing Kasiya at this time is truly exciting”.
Versarien PLC (AIM:VRS, OTC:VRSRF)* 3.6p, Mkt Cap £7.6m – New funding helps advance Versarien product development
- Versarien, which manufacturers and develops graphene products reports the raising of £318,000 through the issue of new equity at 3p per share.
- Funds will be used to continue the commercialisation of Versarien’s graphene products many of which are being developed in joint venture with much larger companies.
- Management are principally focussed on the incorporation of graphene into construction and leisure wear.
Conclusion: Versarien continues to advance the commercialisation and development of its graphene within a number of products. The board is streamlining the business to focussing commercialisation in the construction and leisure (textile) sectors.
*SP Angel acts as Nomad and Broker to Versarien
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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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