SP Angel . Morning View . Monday 23 11 20
Copper, nickel, iron ore and REEs continue to rise
MiFID II exempt information – see disclaimer below
Ariana Resources* (AIM:AAU) – Strong Q3 production at Kiziltepe
Bluejay Mining* (AIM:JAY) – Bluejay joins ERMA as interest develops in Finland licenses
Galileo Resources (AIM:GLR) – Initial encouragement in Kalahari Copper Belt exploration
Kodal Minerals* (AIM:KOD) – Interim results highlight progress at Bougouni
Vast Resources* (AIM:VAST) – First Commercial sale of concentrate confirmed at Baita Plai
EU - slowly waking up to the threat of raw material supply from China as Auto manufacturers rush to EVs
Europe is so far behind China in mine production and mineral processing it is very hard to see how the EU is going to stimulate sufficient European production to meet new demand from its automotive, wind turbine and other manufacturers.
Price squeeze: Auto manufacturers are now faced with having to compete with a number of new rapid-growth, Chinese manufacturers for commodities which are almost exclusively processed in China and where the mines are also often under Chinese control.
All the world’s hard-rock, spodumene, lithium production is processed in China into battery grade lithium hydroxide indicating the stranglehold the Chinese have on critical raw material supply.
REEs: some 70-77% of the World’s REE are processed in China with that proportion rising when it comes to REE supply control according to the Foreign Policy Research Institute in their analysis on 7 October 2020.
While auto manufacturers are expert at cutting costs and thrifting they are not so used to competing with China inc. for raw materials and will need to offer firm contracts to miners and refiners to stimulate sufficient new raw material supply to avert serious shortages in Europe as EV manufacturing ramps up.
121 EMEA Mining Investment Conference - Well done to the organisers
We had a full schedule of meetings with very interesting mining companies, project developers and explorers
We look forward to the 121 Investment Africa Online conference in February
The virtual event sadly replaces the very beautiful 121 conference in Cape Town which occurs in the same week as the Mining Indaba.
US – Trump administration drafts list of 89 Chinese firms with military ties
The US government is close to declaring 89 Chinese companies with military ties which would restrict them from buying a range of US goods and technology, Reuters reports.
Commercial Aircraft Corp of China is on the list, as is Aviation Industry Corporation of China and 10 of its related entities.
The list identifies Chinese and Russian companies the US considers “military end users” – meaning US suppliers must seek licenses in order to sell to them.
European Flash PMI data released this morning shows economies on track for a double-dip recession, with November’s data the first since severe lockdown measures were re-introduced in many regions. Manufacturing data beat services across all major economies, as many workers in the sector continue to work in a social distanced fashion, compared to many jobs in the services sector deemed non-essential and therefore closed.
Euro zone – Flash Composite PMI falls to 45.1 in November vs 50.0 in October
Manufacturing PMI fell to 53.6 vs 54.8 last and 53.1 expected.
Services PMI fell to 41.3 vs 46.9 last and 42.5 expected.
Germany – Flash Composite PMI falls to 52.0 in November vs 55.0 in October
Manufacturing PMI fell to 57.9 vs 58.2 last and 56.5 expected.
Services PMI fell to 46.2 vs 49.5 last and 46.3 expected.
France – Flash Composite PMI falls to 39.9 in November vs 47.5 in October
Manufacturing PMI fell to 49.1 vs 51.3 last and 50.1 expected.
Services PMI fell to 38.0 vs 46.5 last and 38.0 expected.
UK – Flash Composite PMI falls to 47.4 in November vs 52.1 in October
Manufacturing PMI fell to 55.2 vs 53.7 last and 50.5 expected.
Services PMI fell to 45.8 vs 51.4 last and 42.5 expected.
Singapore – Q3 GDP falls -5.8% YoY vs -5.5% expected
The Singapore economy is now expected to shrink between 6-6.5% in 2020, before expanding between 4% and 6% next year, according to the Ministry of Trade and Industry.
China’s economic recovery endangers climate pledge
China’s reliance on coal powered industry to drive its economic recovery threatens to undermine President Xi Jinping’s goal of reaching net zero carbon dioxide emissions by 2060.
China’s economic recovery has been led by the state dominated industrial sector. Construction demand has led to a rise in steel, aluminium and cement production.
China makes up nearly 60% of global output in these three sectors, this is a 10% rise from 2019. Exports have plummeted so most of the products are being used domestically.
Therefore, it is hard for China to phase out fossil fuels. The 5.8% rise in electricity demand from May to October was too fast for new wind, solar, hydro and nuclear investment to keep up with.
The polluting of industries for economic growth has raised challenges for the Communist Party’s agenda-setting economic plan which will be released in March. Analysts say this document would be crucial if CO2 emissions are to peak before 2030 and reach zero emissions by 2060.
US$1.1875/eur vs 1.1872/eur last week. Yen 103.79/$ vs 103.88/$. SAr 15.325/$ vs 15.431/$. $1.326/gbp vs $1.326/gbp. 0.733/aud vs 0.729/aud. CNY 6.566/$ vs 6.575/$.
Gold US$1,871/oz vs US$1,867/oz last week
Gold ETFs 109.3moz vs US$109.3moz last week
Platinum US$949/oz vs US$959/oz last week
Palladium US$2,334/oz vs US$2,334/oz last week
Silver US$24.06/oz vs US$24.16/oz last week
Copper US$ 7,249/t vs US$7,146/t last week - Lundin copper workers accept wage offer to end strike
Union members at Lundin’s Candelaria copper mine in Chile are returning to work after more than a month, as workers accept the latest wage offer from the company.
Leaders of the AOS union signed a 30-month contract on Friday, with almost 550 members returning to work after going through the necessary Covid-19 precautions.
While another union at Candelaria continues to strike, the agreement with AOS opens the door for the mine to resume operations (Bloomberg).
Candelaria produced 111,400t of copper last year, and the stoppage has raised concerns over future supply disruptions from other mines in the country which produces a quarter of the world’s mined copper.
A worker’s union at Antofagasta’s Centinela copper mine in Chile is preparing to vote next week on a contract offer but says it will likely reject it, paving the way for a strike at the deposit (Reuters).
Aluminium US$ 1,994/t vs US$1,995/t last week
Nickel US$ 16,200/t vs US$15,880/t last week
Zinc US$ 2,784/t vs US$2,783/t last week
Lead US$ 2,017/t vs US$2,000/t last week
Tin US$ 18,690/t vs US$18,720/t last week
Oil US$46.0/bbl vs US$44.2/bbl last week
Brent Crude futures are currently trading up 0.4% at US$45.13/bbl and WTI up 0.1% to US$42.46/bbl
Prices are being bolstered by positive sentiment regarding vaccine efficacy trials and potential rollouts following regulatory approval
It now appears likely the FDA will grant approval for the Pfizer/BioNTech vaccine in mid-December (11/12), rollout could begin within days of this according to Moncef Slaoui, head of US Operation Warp Speed
Even with vaccines on the horizon, a recovery in oil demand faces obstacles with governments under pressure to tighten restrictions and curb the spread of the virus
Boris Johnson’s officials are considering tougher pandemic rules placed on broader regions of England next month after a national lockdown is set to end and the country returns to its tiered system
Meanwhile, the shift toward working from home may have an overhang on gasoline demand, according to Federal Reserve Bank of Kansas City President Esther George
US figures remain high at around 110,000 cases per day while the proposed Hong Kong-Singapore travel bubble has been delayed due to rising case numbers in the region
Elsewhere in support of prices, expectations are for OPEC+ who meet early this week will look to delay prospective January production increases, and Houthi Rebels have claimed to have fired a missile at a fuel distribution centre in Jeddah
Natural Gas US$2.711/mmbtu vs US$2.617/mmbtu last week
Natural gas futures are trading higher this morning after plunging to their lowest level since 23 March the previous session
Prices fell on Thursday on weak weather driven demand and a bigger than expected storage build in the latest government storage report
The outlook remains bearish with national weather forecasts pointing to weak heating demand over the near-term
Iron ore 62% Fe spot (cfr Tianjin) US$125.6/t vs US$124.3/t - Annual global output of iron-nickel to increase by 3.2% in 2020
The forecasted global output of iron-nickel is expected to increase to 429,000t (Ni content) from 415,000 (Ni content) compared to a year ago, according to SMM.
The rise in global output is attributed to production recover at Onça Puma, along with the stable operating rates at the major NPI plants and the enhanced productivity in the reconstructed plants.
Strong demand from stainless steel has resulted in global operating rates in FeNi plants reaching 73%, a relatively high level, whilst the COVID-19 pandemic did not have a significant impact on output.
Chinese steel rebar 25mm US$631.2/t vs US$628.6/t
Thermal coal (1st year forward cif ARA) US$56.5/t vs US$55.5/t
Coking coal swap Australia FOB US$111.2/t vs US$110.0/t
Cobalt LME 3m US$32,390/t vs US$32,395/t
NdPr Rare Earth Oxide (China) US$55,745/t vs US$54,674/t
Lithium carbonate 99% (China) US$5,940/t vs US$5,931/t - SQM promises improving sales
Chilean miner SQM saw lithium sales jump 56% in Q3 vs the same period in 2019 to 17,7000 tonnes and expects sales to improve again in 2021.
The Company expects to sell 30% more lithium in 2020 than it did in 2019 with a similar up swing in 2021.
Prices remain depressed, net income down 97% YoY to $1.7m for the quarter.
The Company plans to ramps production capacity to 180,000 and 30,000 metric tonnes of lithium carbonate and lithium hydroxide by 2023 in response to strong sales and a recovery in China.
Ferro Vanadium 80% FOB (China) US$27.0/kg vs US$27.0/kg
Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg
Tungsten APT European US$220-225/mtu vs US$220-225/mtu - Ferro-tungsten prices rose 4.2% last week to $29-31/kgin Rotterdam (Fastmarkets)
Graphite flake 94% C, -100 mesh, fob China US$445/t vs US$430/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,475/t vs US$2,275/t
Spodumene 6% Li2O min, cif (China) US$375/t vs US$385/t
Hyundai and Ineos hydrogen cooperation
Hyundai and Ineos have joined together to investigate new ways to speed up the growth in hydrogen technology, especially with regards to making a hydrogen fuel cell edition of the upcoming Ineos Grenadier off roader.
The agreement means Ineos will gain an insight into Hyundai’s knowledge about fuel cell technology in cars, and Hyundai will benefit from Ineo’s experience in hydrogen infrastructure and production.
Ineos is concentrating on hydrogen fuel cell technology for the Grenadier, rather than battery power, due to the nature of where the car will spend its time. It will be a 4x4 that can function in the middle of nowhere.
Production for the Grenadier should start by the end of 2021.
South Korean stranglehold on EV market tightens
Hyundai Motor and Kia Motors move into 4th place in EV unit sales for 2020.
The pair have sold a combined total of 130,000 EVs from January to September, up 40.7% from the same time last year. Tesla took the top spot with 316,000 vehicles sales.
South Korea battery makers Panasonic, LG Chem and SK Innovation hold 50.4% of EV battery market share in 2020. (Inside EVs). The 3 companies supply EV producers including Tesla, Ford, VW and Daimler.
Providing competition to Chinese EV start-ups and CATL, these South Korean producers benefit from tensions between the US and China, providing an attractive option as companies look to reduce their reliance on China.
Ariana Resources* (AIM:AAU) 5.35p, Mkt Cap £53.5m – Strong Q3 production at Kiziltepe
Ariana Resources reports the production of 5,125oz of gold and 63,339oz of silver at an operating cash cost of US$352/oz from its 50% owned Kiziltepe mine in Turkey for the three months ending 30th September 2020.
Sales during the quarter realised an average gold price of US$1,915/oz generating revenue of US$11.4m inclusive of silver credit.
The company reports that mine production averaged almost 30,000tpd during the quarter and peaked at over 40,000tpd during July with operations in the Arzu North and Derya area “continuing as planned and production during the quarter” showing “a >200% increase in mined gold over the Reserve block-model but at slightly lower than modelled grades; this trend is currently continuing in to the current quarter”.
Managing Director, Dr. Kerim Sener, said that production guidance for the full year is being maintained and that “While the quarter marked the end of production from the high-grade Arzu South open-pit, operations have continued exceedingly well at the Arzu North and Derya areas. In particular, open-pit material movements have remained very high and the JV has built up a very large ore stockpile which provides for over ten months of mill feed”.
Dr. Sener also explained that “The potential at Kiziltepe for larger tonnage, lower grade orebodies is evident already based on our experience of exploring and now mining of the Arzu North and Derya areas. The mine is currently producing over 200% more gold in these areas than was projected in the mine plan. We are confident that further ore will be defined in this area with future drilling programmes”.
Conclusion: The Q3 results demonstrate that Kiziltepe contains a larger resource that estimated. This has enabled large stockpiles to be built up which should provide a buffer against any adverse weather conditions during the winter, should they arise.
*An SP Angel mining analyst has visited Ariana’s licenses in Turkey
Bluejay Mining* (AIM:JAY) 10.95p, Mkt cap £106m – Bluejay joins ERMA as interest develops in Finland licenses
BUY - Valuation 27.4p (Bluejay Mining holds 100% stakes in all its mineral licenses)
Bluejay Mining reports the company has joined the ERMA (European Raw Materials Alliance).
ERMA was launched by the European Commission as part of its outlined Action Plan on Critical Raw Materials.
The alliance has been formed to help Europe diversify and strengthen supply chains and decrease dependency on other countries, namely China.
The group also intends to reduce the reliance on critical raw materials by securing access to sustainable raw materials.
Bluejay has been selected as a founding member of ERMA due to its strategic license holdings in Finland and Greenland and its proactive management who have experience with the licensing and potential development of certain critical raw materials.
Bluejay’s Dundas mine is the highest-grade titanium mineral sands project in the world.
Titanium is listed as a Critical Raw Material by the EC in their 2020 list.
Bluejay’s licenses over the old Hammaslahti, Enonkoski copper, nickel mines and around the historic Outukumpu mine are of significant interest and potential strategic importance within the EU.
Rio Tinto recently took an option to form a joint venture agreement with Bluejay over Enonkoski project and may acquire a 75% interest in Enonkoski through $20m worth of expenditure.
Rios also plan to run a 5,000t smelter test on Dundas ilmenite concentrate at their furnaces in Canada early next year. We believe the Dundas ilmenite concentrate is very similar to that produced in Rio’s local mines in Canada and may prove to be a suitable source for future material.
Titanium mineral sand (Ilmenite) market: Participants at the recent TZMI congress are forecasting supply/demand gap as mine interruptions struggle to meet demand.
Ilmenite prices have risen to US$240/t from $200/t this year for 47-49% TiO2 cif China. The consistent rise in prices through the year is due to ongoing firm demand for pigments and titanium dioxide and delays to the mining of new sources of supply by some producers.
Producers now expect stronger demand for ilmenite than the 3% fall previously predicted for 2020 due to a faster than expected return to the growth.
Slower mine production and a lack of new projects is now forecast to create a significant deficit in the market from 2025 though Iluka, the world’s largest ilmenite producer, expects inventory build to unwind next year.
Conclusion: Bluejay’s founder membership of ERMA highlights the strategic significance of the company’s projects and licenses in Finland and Greenland.
Membership of the ERMA may also provide a route to the project financing of the Dundas project at advantageous interest rates with development finance.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Hammaslahti, Enonkoski and Outukumpu mines in Finland as well as Bluejay’s Dundas mine site in Greenland.
Galileo Resources (AIM:GLR) 0.95 pence, Mkt Cap £7.2 m – Initial encouragement in Kalahari Copper Belt exploration
Galileo Resources reports that initial results from its helicopter based electromagnetic (EM) geophysical surveys over its licences on the Kalahari Copper Belt in Botswana have indicated geological settings similar to those known to host copper/silver mineralisation elsewhere in the belt.
Detailed interpretation of the results is underway with a view to identify “prospective EM targets for early drill testing”.
The company mentions that two of its licence areas, located 30km west of Sandfire Resources’ A4 Dome project “contain “several EM anomalies, the most prospective of which display similar conductive dome geometry” – presumably to that seen at A4.
The announcement also says that results from a licence 25km west of the Zone 5 and 5N deposits of Cupric Canyon also suggest a comparable favourable geological setting.
Chairman, Colin Bird, confirmed that “Preliminary overview of the EM results highlights several EM conductors which could lead to immediate drilling targets”.
Conclusion: Galileo Resource is applying established geophysical exploration techniques which appear to work well in the metallogenic and structural setting of the Kalahari Copper Belt to identify targets within its licences. Initial results are encouraging and we look forward to further announcements when the detailed geophysical interpretation is complete.
Kodal Minerals* (AIM:KOD) – 0.08p, Mkt cap £8.66m – Interim results highlight progress at Bougouni
Kodal Minerals reported a loss in the six-month period ended 30 September of £255k vs £339k in the six-months to 30 September 2019 and £630k for the year to 31 March 2020.
Admin expenses of £171k over the period were lower than last year’s £314k.
The pre-tax loss was reduced to £255k compared to £339k recorded over the same period last year.
A positive currency translation gain of £110k helped reduce the total comprehensive loss for the year to £146k.
Kodal’s mining license application is proceeding through the new Mali transitional government, which has been confirmed by the relevant authorities, and all technical and compliance requirements completed by the company.
Following the grant of this necessary mining license, the Bougouni Lithium Project will be fully permitted for development.
The Company entered a Memorandum of Understanding with Sinohydro Corporation Limited, part of Power China, a massive Chinese parastatal engineering and construction contractor, to work together to develop the Bougouni Lithium Project.
Sinohydro will work with Suay Chin and Shandong Ruifu Lithium Industry Co Ltd, which produces lithium carbonate and lithium hydroxide in China and is expected to take the Bougouni spodumene concentrate.
Kodal entered into two financing agreements with Riverfort Global Opportunities over the six-month period, meaning the Company is now well-funded to continue its Bougouni Lithium Project in Mali and its gold exploration licenses in the Mali and Ivory Coast.
Funding comprised of an equity sharing agreement announced in April 2020 which concluded 7 September, with Kodal receiving total proceeds of £654k vs the £500k subscription entered into the commencement of the ESA; and secondly an unsecured convertible loan note facility for US$1.5m drawn down in two tranches of $750k in July and October 2020.
Bougouni key stats:
220,000tpa of 6% spodumene concentrate over an initial 8.5 years
71% recovery rate of contained lithium
>USD$1.4bn of total revenue at $680/t starting H2 2021 and rising 2%pa
2mtpa throughput with DMS and conventional flotation circuit. Recoveries are acceptable with the DMS on its own.
USD$431/t C1 cash costs or USD$466/t inc. royalties and sustaining capital.
US$117m Capex est. plus contingency:
1.7 year payback est.
58% IRR pre-tax
51% IRR post tax
US$300m NPV7% pre-tax
US$200m NPV7% post-tax
Bernard Aylward, CEO of Kodal Minerals, commented: "The six months ending 30 September have been a busy time for the Company in spite of the impact of the COVID-19 pandemic, associated travel restrictions and the political changes in Mali. Kodal has continued to focus on its flagship Bougouni Lithium Project and the progress of its Mining Licence application.”
"The focus of the Company over the next six months will be on working with the Government of Mali to secure the Mining Licence for the Bougouni Lithium Project and continuing to advance the development of the Project. In addition, the Company will continue field work on its gold assets with work planned to commence in late November in Cote d'Ivoire at the Dabakala project. The Company is maintaining its suite of gold assets in Mali and Cote d'Ivoire, and is continuing to assess opportunities to generate value from them for the Company."
*SP Angel acts as Financial Advisor and Broker to Kodal Minerals
Vast Resources* (AIM:VAST) 0.18p, Mkt Cap £25.15m – First Commercial sale of concentrate confirmed at Baita Plai
The Company has confirmed the first commercial of concentrate produced at its Baita Plai in Romania is expected to conclude on Wednesday the 25th of November.
The Company’s offtake partner, Mercuria, informed the company that the sale will conclude on this date, due to the availability of the nominated independent technical inspectors who are required to be present on site on behalf of the buyer in order to release the shipment.
Last week, Vast reiterated its production and cashflow forecasts released in early September.
*SP Angel acts as Broker to Vast Resources
John Meyer – [email protected] – 0203 470 0490
Simon Beardsmore – [email protected] – 0203 470 0484
Sergey Raevskiy –[email protected] - 0203 470 0474
Joe Rowbottom – [email protected] - 0203 470 0486
Richard Parlons –[email protected] - 0203 470 0472
Abigail Wayne – [email protected] - 0203 470 0534
Rob Rees – [email protected] - 0203 470 0535
Grant Barker – [email protected] – 0203 470 0471
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony
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