SP Angel . Morning View . Monday 15 02 21
Risk sentiment is gaining momentum on vaccine hopes and stimulus
AfriTin* (LON:ATM) – Offtake arrangements for tin and tantalum
Aura Energy* (LON:AURA) – AGM, rights issue and resolution of disputes
Bluejay Mining* (LON:JAY) – STRONG BUY - Valuation raised to 40p – US$208m letter of interest in debt funding from the Export-Import Bank of the US
Strategic Minerals* (LON:SML) – Grant funding for geophysical and geochemical data collection at Redmoor
Copper prices rally above 8-year high despite Lunar New Year holiday
Copper prices kept up their bullish run on Monday morning, despite thin trading as a result of both Chinese and US markets being shut.
Industrial commodities have rallied on infrastructure spending expectations, with Treasury Secretary Yellen saying that the US has to “go big” with its impending stimulus package.
The US dollar continued to slide on Monday, down 0.15% - making dollar-priced metals relatively cheaper.
Three-month copper prices rose 0.8% to $8,488/t earlier this morning, with base metals on the LME up across the board with the exception of zinc (Fastmarkets MB).
The European STOXX 600 rose 0.6% this morning, with Rio Tinto, BHP and Anglo American bolstering the index on as copper prices continued to rally (Reuters).
US – President’s Day holiday
China and Hong Kong are closed for the Lunar New Year holiday
The Lunar New Year holiday festival runs for 16 days from 11th to 26th February.
Covid-19 restrictions on travel and festival activities combined with strong demand from the west may see a shorter holiday period than normal at many factories as workers are discouraged from travelling back to their families rural villages.
Recent Interviews:
IGTV: Is this a new Supercycle for commodities: https://youtu.be/BIWb-wqoLpM
Metals expected to continue the last-year gains into 2021 https://youtu.be/afrB9cJe8L0
Is 2021 the start of the new COVID-Supercycle or will Lockdowns delay the recovery? https://youtu.be/7LO0tDc-pNc
VOX Markets: 11/02/20 https://audioboom.com/posts/7798441-john-meyer-talks-about-the-commodities-super-cycle
03/02/20 https://www.voxmarkets.co.uk/media/601c12cc40dc224b8b88a9ec/?context=/listings/LON/IKA/multimedia/
121 Conference panel: Investment Leader’s Discussion: Van Eck, Qora Capital, Nedbank, SP Angel
https://www.youtube.com/watch?v=AGzK4iqwfGk&feature=emb_title&ab_channel=121MiningInvestmentTV
Africa set to gain from Covid stimulus as East and West compete for metals in the new COVID-Supercycle: https://www.theassay.com/the-assay-africa-edition-2021/
iiTV: Mining stock to own 2021: https://www.youtube.com/watch?v=4x7SuSLQwCI&t=11s. Mining share tips for 2021 - https://www.youtube.com/watch?v=G_6RKAp91k4
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.
We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
Metals price forecasting through 2020 - 2020 was probably the most difficult year for forecasting anything
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
Dow Jones Industrials +0.09% at 31,458
Nikkei 225 +1.91% at 30,084
HK Hang Seng Closed at 30,174
Shanghai Composite Closed at 3,655
Economics
Record $58 have been invested into stock funds last week on COVID-19 vaccination programme hopes as well as optimism over the confirmed $1.9tn stimulus package, according to EPFR data.
The US accounted for majority of the inflow with $36bn invested in local stocks.
Technology-focused funds led in terms of sector allocations with net inflows reaching an all-time high of $5.4bn.
US – President Trump was acquitted by the 100-set Senate in a 57-43 vote that came in below the 67-vote threshold necessary for conviction.
Robinhood, Melvin Capital, Citadel and Reddit executives will testify before the US House Financial Services Committee on Feb 18 following a trading turmoil in GameStop and other names.
Markets are closed today as the nation celebrates President’s Day.
China – The nation celebrates Lunar New Year holidays until mid-week.
Japan – Economic growth beat estimates as Q4 GDP came in at 3.0%qoq vs 2.4%qoq expected on gains in household spending, trade and business investment.
The latter recorded the strongest increase in more than five years.
The Nikkei 225 was up 1.9% climbing past the 30,000 mark for the first time since 1990 on the back of the economic results as well as the news of the start of the inoculation programme after the government approved its first vaccine on Sunday.
“The health minister today gave a special approval to the Pfizer vaccine,” the PM office said in a tweet.
A bit of controversy emerged few days ago, as the government reported that currently available syringes will not be able to extract six full dosages from each vial manufactured by the US drugmaker suggesting that the 144m shots order of the Pfizer vaccine may be nearly 20% short.
“The syringes used in Japan can only draw five doses… we will use all the syringes we have that can draw six doss, but it will, of course, not be enough as more shots are administered,” Health Minister said.
The government requested medical equipment producers to increase supply of the specialist syringes.
GDP (%qoq): 3.0 v 5.3 in Q3/20 and 2.4 est.
UK – The government reports that more than 15m first doses were delivered in 69 days through to February 13.
More than 3m doses were completed in the last seven days alone.
Authorities are now panning to roll out the programme outside the initial four priority groups.
Having offered a vaccine to everyone over 70, all frontline health and social care workers, and everyone with a condition that makes them extremely vulnerable to the virus – a total of 14.6m people – the programme moves on to 65-60 age group (~2.9m) and 16-64yo with underlying health conditions (7.3m).
The next phase is targeted for the February to April period offering 17.2m people their first jab before expanding the programme to all adults by autumn, according to UK COVID-19 vaccines delivery plan.
Separately, 63 MPs in a letter to PM Johnson argued that given reached milestones there is “no justification” for not lifting all COVID restrictions by the end of April.
Starting from Monday, passengers arriving in the UK for33 countries on a travel ban list will need to quarantine in government-managed hotel rooms for 10 days, Bloomberg reports.
Russia – The nation completes phase two clinical trials of the Sputnik V Light vaccine, a single-dose version developed to reduce the likelihood of sever forms of the disease.
The vaccine is planned to be sued “in the countries that are currently incapable of developing similar vaccines and that are short of funds to purchase vaccines that are being developed in other countries,” director of the Gamaleya National Research Centre that developed Sputnik V vaccine said.
The vaccine will not be used in Russia.
Currencies US$1.2137/eur vs 1.2109eur last week. Yen 105.17/$ vs 105.12/$. SAr 14.442/$ vs 14.676/$. $1.390/gbp vs $1.379/gbp. 0.779/aud vs 0.773/aud. CNY 6.458/$ vs 6.458/$.
Commodity News
US Judge has no plans to intervene in Rio Tinto land transfer
A federal judge said on Friday that he would not stop the US Forest Service from transferring government-owned land in Arizona to Rio Tinto for its Resolution Copper project.
The judge has denied a request from the Native American Apache Tribe, who say the land has religious and cultural importance.
The ruling means that the land transfer can now take place by mid-March under a timeline approved by Congress and ex-President Obama.
Rio and minority partner BHP have spent more than $1bn so far on the project without producing any copper.
Precious metals:
Gold US$1,819/oz vs US$1,818/oz last week
Gold ETFs 106.2moz vs US$106.2moz last week
Platinum US$1,287/oz vs US$1,226/oz last week - Zimplats – Fatality at Ngwarati mine as Highwall collapse will cut production into an already tight market
Zimplats, the Zimbabwean platinum miner run by Implats has suffered an unfortunate fatal highwall collapse at its Ngwarati Mine in Mhondoro-Ngezi, Zimbabwe.
Workers in the underground workings were safely evacuated.
Impala Platinum is a leading and major proponent of health and safety in the mining industry and will work to reduce the risk of further accidents at Ngwarati and its other platinum and palladium mines.
The incident will reduce the available supply of platinum and palladium into an already tight market.
Palladium US$2,396/oz vs US$2,350/oz last week
Silver US$27.53/oz vs US$26.99/oz last week
Base metals:
Copper US$ 8,378/t vs US$8,215/t last week
Aluminium US$ 2,091/t vs US$2,074/t last week
Nickel US$ 18,725/t vs US$18,365/t last week
Zinc US$ 2,825/t vs US$2,799/t last week
Lead US$ 2,133/t vs US$2,115/t last week
Tin US$ 23,945/t vs US$23,400/t last week
Energy:
Oil US$63.4/bbl vs US$60.5/bbl last week
Natural Gas US$3.026/mmbtu vs US$2.855/mmbtu last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$160.5/t vs US$161.3/t
Chinese steel rebar 25mm US$668.0/t vs US$668.0/t
Thermal coal (1st year forward cif ARA) US$66.1/t vs US$66.3/t - Earthquake shuts down 9.5GW of Japan’s thermal coal operations
A 7.3 magnitude earthquake hit Japan on Saturday, causing many thermal coal operations to shut down which resulted in blackouts in the Tonoku region.
The earthquake’s epicenter was located of the coast of Fukushima, with 7.8GW of capacity still offline.
The unexpected shutdown of thermal power units left around 880,000 households in Tohoku and Kanto areas without electricity.
Tohoku Electric said there were no leak of radioactive material from reactors at its Onagawa and Higashi Dori nuclear plants (Argus Media).
Coking coal swap Australia FOB US$157.0/t vs US$157.0/t
Other:
Cobalt LME 3m US$47,000/t vs US$47,000/t
NdPr Rare Earth Oxide (China) US$72,543/t vs US$72,543/t
Lithium carbonate 99% (China) US$10,607/t vs US$10,607/t
Spodumene 6% Li2O min, cif (China) US$455/t vs US$395/t
Ferro Vanadium 80% FOB (China) US$30.5/kg vs US$30.5/kg
Ferro-Manganese high carbon 78% Mn US$1,610/t vs US$1,575/t
Tungsten APT European US$250-255/mtu vs US$250-255/mtu
Graphite flake 94% C, -100 mesh, fob China US$560/t vs US$560/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,625/t vs US$2,625/t
Battery News
Tesla to set up EV manufacturing unit in Southern India
Tesla intends to set up an EV manufacturing unit in the state of Karnataka, according to government documents seen by Reuters.
Musk has tweeted several times about the company’s impending ventures into India, with Tesla also looking to open an R&D unit in Bengaluru.
India plans to offer $4.6bn in incentives to companies setting up advanced battery manufacturing facilities in order to boost investment.
First hydrogen ambulance with fuel cell REx
The first hydrogen ambulance will come to London this year built by conversion specialist Ulemco.
Named Zerro (short for Zero Emission Rapid Response Operations), Ulemco teams up with lyra Electronics, Ocado and Promech Technologies for realising the fuel-cell-range-extended EV. Ulemco aims to deliver the Zerro prototype to the London Ambulance Service Trust in Autumn.
The fuel cells for the ambulance come from Ballard with 30kW. There is also 8-kilo hydrogen storage and a 92kWh battery onboard with Promech Technologies adding its existing battery technology expertise.
The fuel cell acts as a range-extender to charge the battery when needed, making the Zerro a battery-electric vehicle.
Research team create solar cells with unprecedented flexibility and resistance.
Traditionally conducting materials used in solar cells lack flexibility.
An international research team have identified a solution in single-walled carbon nanotube (SWNT) films, due to their high transparency and mechanical resilience.
The scientists then embedded the conducting layer into a polyimide (PI) substrate, filling the void spaces in the nanotubes.
By introducing small impurities into the SWNT-PI nanocomposite layer, the energy needed for electrons to move across the structure is much smaller, and hence more charge can be generated for a given amount of current.
Their resulting prototype was only 7 micrometres thick, the composite film exhibited exceptional resistance to bending, almost 80% transparency, and a power conversion efficiency of 15.2%.
Company News
AfriTin* (LON:ATM) – 4.25p, Mkt cap £33m – Offtake arrangements for tin and tantalum
AfriTin reports that it has agreed an extension and renewal of its tin concentrate off-take arrangements with its existing partner, Thaisarco.
Afritin will continue to supply tin concentrates for a further three years until 30th November 2023 for delivery at Walvis Bay.
Thaisarco Managing Director, Andrew Davies, confirmed that “Thaisarco remains a strong supporter of AfriTin and we are pleased to sign the new offtake agreement for responsibly sourced and conflict-free tin concentrate production for a further three years. It remains a pleasure to work with the team at AfriTin and we look forward to a long business relationship as the Company looks to unlock the true value potential at Uis”.
In addition to the renewal of the tin off-take agreement, Afritin has secured an offtake agreement for its tantalum concentrates production from the Uis mine.
The one-year agreement, which is for an initial year with an option to renew for a further three years by mutual consent, is with Afrimet Resources, described as “a strategic African commodity trading company and 100 percent owned subsidiary of the Zug (Switzerland) based ferrous and non-ferrous commodity merchant, Vanomet AG. AfriMet is a leader in trading the 3T metals (tin, tantalum and tungsten) and minerals sourced from Africa”.
Afrimet will pay 90% of the tantalum pentoxide value of the concentrate based on the two-month trailing average price, less a US$1/lb deduction, once the concentrate departs Walvis Bay, with “The final 10% payment, as well as any quality adjustments, is paid upon finalisation of the assay and weights by the receiving third party”.
Afrimet has also converted its loan note of £1.6m plus accrued interest of approximately £196,000 into shares in Afritin giving it a 5.1% interest in the company.
Afritin’s CEO, Anthony Viljoen, explained that the company’s success in achieving its Phase1 objectives at Uis during the last year lay behind the extension of the contract with Thaisarco and the ability to secure the tantalum pentoxide agreement with Afrimet and confirmed that Afritin “looks forward to continuing these relationships”.
Mr. Viljoen also welcomed Afrimet as a shareholder and characterised the decision “to convert their interest in the convertible note to ordinary equity” as a “vote of confidence”.
Conclusion: The extension of the Thaisarco offtake agreement and securing a new agreement to supply tantalum pentoxide concentrate underline the successful plant commissioning at Uis.
*SP Angel act for Bushveld Minerals which holds around 9.5% of AfriTin
Aura Energy* - (LON:AURA) 0.58p, Mkt Cap £13m – AGM, rights issue and resolution of disputes
Aura Energy has confirmed that its previously rescheduled AGM will now take place, as a virtual meeting, on 17th March.
The company reports that it has reached an agreement over the protracted disagreement with a dissident shareholder group comprising ASEAN, Pre-Emptive Trading, and Sartingen, which collectively hold around 23%,“to settle outstanding litigation and have executed a Term Sheet which will result in the Company issuing both Shares and Options to ASEAN Sartingen and PET at the Rights Issue price of $0.004 per Share …[and that] … The parties will formalise the agreed terms set out in the Term Sheet during the course of January 2021 with the execution of Settlement Agreements”.
The company is also announcing a proposed recapitalisation which is to include an A$2.2m underwritten rights issue on a 1:3 basis to be followed 3 months later by a ”1:3 underwritten Loyalty Options Rights Issue … [to] … provide approximately $1.4 million in … [further] upfront proceeds”.
The company explains that A$1.68m of the proceeds will be deployed on the advancement of its projects including A$0.98m to progress the flagship Tiris uranium project in Mauritania, A$0.40m for the Haggan vanadium project in Sweden and A$0.30m to advance the Tasiast gold projects, also in Mauritania.
In addition to in-country costs of A$0.28m including licence fees, Aura Energy is proposing to spend A$0.3m on resources definition drilling at Tiris uranium plus a similar amount on water drilling with the balance to be used for the employment of consultants.
At Haggan, the company plans to spend A$0.2m on further metallurgical test-work with an additional A$0.15m on consulting fees plus A$50,000 on in-country costs.
The bulk of the expenditure on the Mauritanian gold projects will be deployed to a geophysical induced-polarisation survey (A$0.25m) and the use of consultants (A$50,000).
The company reconfirms the plans to spin-off the Mauritanian gold assets, however, with a previously announced proposed transaction which “effectively values the gold assets at C$9 million and therefore, at a significant premium to the costs incurred by the Company in assembling very prospective ground in Mauritania”.
The company’s management roles will include the appointment of a new, non-executive Chairman, Mr. Martin Rogers, a new non-executive director, Mr. Peter Ward, the retirement of all the current non-executive directors and the move of the current Executive Chairman, Peter Reeve, to the role of CEO/MD.
Conclusion: It is encouraging to hear that the protracted disputes are to be resolved and that an underwritten rights issue should make funds available to advance the company’s projects in Mauritania and Sweden. We look forward to news of progress on advancing the operational agenda.
*SP Angel are Nomad and broker to Aura Energy
Bluejay Mining* (LON:JAY) 10.22p, Mkt cap £99m – US$208m letter of interest in debt funding from the Export-Import Bank of the US
STRONG BUY - Valuation raised to 40p
Bluejay Mining have received a letter of interest for US$208m in debt funding for the capital cost of the Dundas Ilmenite project in Greenland.
The Offer by way of a Letter of Interest is from EXIM, the Export-Import Bank of the United States. The repayment would be over a maximum term of 8 years and 6 months..
“Bluejay is also advancing discussions with European Export Credit Agencies as well as other traditional commercial lenders to ensure the highest quality and most favourable commercial terms available for the development of Dundas.”
“The Export-Import Bank of the United States (EXIM) is the official export credit agency of the United States.
EXIM is an independent Executive Branch agency with a mission of supporting American jobs by facilitating the export of US goods and services.”
Potential 1.46% Interest rate: There is good reason to expect the interest rate on funding through EXIM Bank to come through at a similar rate to the 1.46% rate proposed to Ironbark for up to $216m of funding for its Citronen Zinc-lead project in the north of Greenland by EXIM.
The Dundas mine site is close to and within line of site of the strategic US military airbase in Greenland at Thule.
Prices: Titanium minerals sands (Ilmenite) prices climbed higher in January to US$240-260/t reflecting ongoing strong demand for ilmenite feedstock in an already tight market.
Ilmenite prices rose from $230-350/t in early January and from $200-230/t a year ago.
Rio Tinto’s RTIT subsidiary in Canada has a bulk sample to process in their furnaces from the shipment of 44,000t of sieved ilmenite ore from the Dundas mine site.
Optimisation: Bluejay continue to optimise elements of the Dundas mining project with aim of reducing the cost of the construction and process plant commission. The process plant is relatively simple from a mining perspective requiring sieving, spirals and magnetic separation.
The mine’s remote location is similar in many respects to many other ilmenite mines with equipment and supplies shipped and landed to the Dundas mine beach site though sea ice will prevent shipping through the winter months.
Valuation: We are raising our valuation in Bluejay Mining to 40p from 24.7p through reducing our applied discount rate on the Dundas mine to 6% as we see the EXIM Bank letter as significantly de-rising the project.
Recommendation: We are raising our recommendation to STRONG BUY as a result of the potential offer of significant low-cost funding for the Dundas ilmenite project.
Assumptions: We have also reduced our mine financing interest rate assumption to a blended 5% rate. We have not dared go as far as to apply the 1.46% rate proposed for Ironbark’s project in Greenland as the cost of other elements of the mine financing may be more expensive.
We have further raised our assumed ilmenite price to the current US$250/t. We assume 70% of the ilmenite concentrate is shipped to Asia with the remaining 30% shipped to North America or Europe. Reports indicate that spot ilmenite prices have risen to >$300/t cif in China.
Demand growth: Sales at Chemours’ titanium technologies business saw a rise of 8% in volumes last year primarily driven by titanium dioxide sales driving a 2% increase in division turnover.
Chemours, a major consumer of ilmenite and producer of titanium dioxide for paint and pigments, announced EBITDA growth of 22% last week at $879m for 2020 while raising expectations for EBITDA earnings for 2021 to $1.0-1.15bn.
Conclusion: We see Exim Bank’s letter of Interest as a significant step forward in the financing and de-risking of the Dundas project as it indicates a level of interest by the United States government in the project. The low 1.46% interest rate offered to Ironbark appears typical of the low-cost financing offered by EXIM Bank on behalf of the US government in order to increase its presence in Greenland.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Dundas Mine site in Greenland as well as the Enonkoski mine site in Finland.
Strategic Minerals* (LON:SML) 0.53p, Mkt Cap £9m – Grant funding for geophysical and geochemical data collection at Redmoor
Strategic Minerals has announced that its Redmoor licence area is to be used as a field laboratory site for the collection of geophysical and geochemical data by the Camborne School of Mines.
The project is being funded by The European Development Fund as part of the “£4.1m Deep Digital Cornwall” project and Strategic Minerals subsidiary “CRL … [is] … to receive up to £446,063 of grant funding for its part in the project from the ERDF, in return for a contribution from CRL of 20% (from existing budget)”.
The project “aims to create a world-leading cluster of research-active, highly innovative businesses in Cornwall and the Isles of Scilly, applying digital solutions to a wide range of below ground and related business opportunities including mining and geothermal”.
Executive Director, Peter Wale, welcomed the project and its potential to stimulate a resurgence of interest in the mineral potential of Cornwall and said that it would “provide CRL with further information regarding the potential for broader and additional targets in close proximity to the already internationally significant Redmoor deposit”.
Conclusion: Participation in the Deep Digital Cornwall project should aid in the understanding of Redmoor’s geological setting and provide Strategic Minerals with access to additional technical data and academic expertise.
*SP Angel acts as Nomad and Broker to Strategic Minerals
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
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
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
SP Angel
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
*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, Antimony
Asian Metal
Tungsten
Metal Bulletin