SP Angel . Morning View . Wednesday 17 03 21
Metals hold steady on strong China data and mixed US and European figures
Altus Strategies* (LON:ALS) – Bikoula iron ore strategic review completed
BlueRock Diamonds (LON:BRD) – Happy days at BlueRock as plant recovers three large gem-quality diamonds
GoldStone Resources* (LON:GRL) – Initial term of unsecured bond notes extended
Kavango Resources (LON:KAV) – Positive initial results from airborne geophysics
Power Metal Resources* (LON:POW) – Granting of licenses at Victoria Goldfields project
New $300m SPAC launched by Sir Mick Davis for battery metals investment
The ESM Acquisition Corp. SPAC is listed on the NYSE under ESM.
Davis’ who built Xstrata left the firm following its merger with Glencore which valued Xstrata at $39bn.
Sir Mick has since built new businesses at X2, Niron Metals and Vision Blue Resources which recently invested in a graphite mine in Madagascar.
The ESM Acquisitions SPAC is looking to invest in battery metals related projects and production.
The news highlights the inflow of new funds looking for investment in the battery metals space and the mining sector
We suspect other, well-funded, investment vehicles will follow as the investment community wakes up to the urgent need for greater funding in mining.
Recent Interviews:
VOX Markets: 12/03/20: https://audioboom.com/posts/7820173-john-meyer-bluerock-kodal-minerals-orosur-mining-bluejay-mining
03/03/20: https://www.voxmarkets.co.uk/media/603f8a764ed39457176158df/?context=/listings/LON/BMN/multimedia/
*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.
IGTV: Are we in a new commodity supercycle, or is one coming? https://youtu.be/sw6gLNnM1s0
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
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 -0.39% at 32,826
Nikkei 225 -0.02% at 29,914
HK Hang Seng -0.04% at 29,017
Shanghai Composite -0.03% at 3,446
Economics
US – US equity futures and 10y bond yields are relatively flat this morning ahead of the Fed policy announcement.
The central bank will also be releasing its forecasts for GDP, unemployment and inflation.
The outlook is likely to have improved since last December estimates amid ongoing vaccination although the Fed is likely to reiterate that unemployment continues to run high suggesting the current monetary policy should be maintained despite concerns of accelerating inflation.
Estimates are for rates to remain near zero, and the Fed to continue buying at least $120bn a month in bonds to keep rates low.
US retail sales are down 3.0%mom in February versus a -0.5%mom estimate as the effects of the previous stimulus fizzled out.
That marked the fourth decline in the last five months with a January increase attributed to $600 direct payments included in the stimulus bill passed by President Trump in December.
Industrial production also disappointed yesterday with output down 2.2%mom in February v a 0.3%mom increase forecast.
Export price index rose 1.6% in February vs 2.5% in January
Imports fell to 1.3% in February vs 1.4% in January
Manufacturing output dropped -3.1% in February vs 1% in January
Capacity utilisation pulled back to 73.8% ), and 75.6% in January
Business inventories fell to 0.3% in January vs 0.8% in February
Germany – Investment outlook strengthened more than forecast in March as firms are looking forward to a gradual reopening of the economy, according to the ZEW Institute numbers released yesterday.
“Economic optimism continues to rise… experts expect a broad-based recovery of the German economy… they anticipate that at least 70% of the German population will be offered a vaccine against COVID-19 by autumn… however, a large majority also expects inflation to continue to grow, as well as higher longt-term interest rates,” ZEW commented on the data.
ZEW Expectations: 76.6 v 71.2 in February and 74.0 est.
ZEW Current Situation: -61.0 v -67.2 in February and -62.0 est.
China - Sandstorms hit Beijing raising air pollution and causing policymakers to restrict other types of pollution
Retail sales rose 33.8% yoy vs 4.0%
Industrial production 35.1% yoy vs 7.3%
Fixed asset investment ex rural rose 35.0% vs 2.9%
Unemployment rose 5.5% yoy in February vs 5.3% in January
House prices rose 4.3% yoy in February vs 3.9% in January
Japan - Tertiary industry activity index fell 1.7% in February vs -0.3% in January
Industrial production rose 4.3% in February vs 1.0% in January
Currencies US$1.1890/eur vs 1.1927eur yesterday. Yen 109.16/$ vs 109.21/$. SAr 14.934/$ vs 14.901/$. $1.392/gbp vs $1.383/gbp. 0.773/aud vs 0.772/aud. CNY 6.501/$ vs 6.500/$.
Commodity News
Precious metals:
Gold US$1,735/oz vs US$1,732/oz yesterday
Gold ETFs 101.5moz vs US$101.6moz yesterday
Platinum US$1,210/oz vs US$1,219/oz yesterday
Palladium US$2,490oz vs US$2,401/oz yesterday
Silver US$26.01/oz vs US$26.12/oz yesterday
Base metals:
Copper US$ 9,019/t vs US$9,028/t yesterday - Codelco secures approval to extend life of Radomiro Tomic copper mine
Codelco has secured approval from the Antofagasta Region Environmental Assessment Commission to extend the life of mine until 2030 in what is expected to be an $882m project.
The open pit mine was expected to close in 2022 although this will now be extended due to the incorporation of new mining resources.
The miner plans to implement bioleaching technology at the Radomiro Tomic mine for enabling the treatment of low-grade minerals in the future.
The mine produced 261,000 tonnes of copper in 2020.
Copper TC/RCs hit fresh 10-year lows – falling 27% in two weeks
Treatment and refining charges for copper concentrates fell to new 10-year lows in the week ended Friday 12th March – with Fastmarkets’ copper concentrate index dropping to less than $30 per tonne/3 cents per lb for the first time.
TC/RCs are the discounts to exchange prices paid to smelters for processing ores into metal, and prices are currently at levels last seen at the end of the last commodities supercycle, when Chinese demand was rapidly outpacing supply.
Historically, smelters average break-even TC would be around $60 per tonne / 6 cents per lb, although in the current environment smelters are making money buying in the $30/t range.
At these price levels smelters, especially in China, could go even lower – even being profitable at TCs of $0 per tonne / 0 cents per lb (Fastmarkets MB).
Aluminium US$ 2,207/t vs US$2,210/t yesterday
Nickel US$ 16,075/t vs US$16,050/t yesterday
Zinc US$ 2,813/t vs US$2,829/t yesterday
Lead US$ 1,937/t vs US$1,954/t yesterday
Tin US$ 25,000/t vs US$24,990/t yesterday
Energy:
Oil US$68.7/bbl vs US$68.2/bbl yesterday
Following the price rally seen last week, oil prices have retreated to slightly lower levels, below US$70/bbl (Brent) and US$64/bbl (WTI)
The main drivers of this correction have been the build-up in US oil inventories for a second consecutive week by 13.8MMbbls, which is attributed to the continued closure of many refineries on the Gulf coast
The outages continue even this week as refineries on the gulf coast continue to operate below their full capacity
Refineries on the gulf coast are currently 2.59MMbopd below their processing levels a year ago, the hardest affected among refineries elsewhere in the US
Furthermore, total crude input to refineries is 3.39MMbopd below its levels a year ago which was attributed not only to the COVID-19 pandemic but also to the oil freeze seen in Texas last month
In addition, gasoline and diesel inventories declined by 11.9MMbbls and 5.5MMbbls week on week, respectively
Currently, US commercial oil inventories are 46.6MMbbls above their levels before the pandemic
Furthermore, US production rose by 900,000bopd last week to stand at 10.9MMbopd
Prices were also affected by the concerns of the rising number of COVID-19 cases in Europe where lockdown measures are extended in key economies such as Germany, Italy, France and the UK
The suspension of vaccinations with the Astra-Zeneca jab in many European countries is also raising concerns about the safety and availability of COVID-19 vaccines
The World Health Organisation just announced that there could be a possibility of a third vaccine dose to counteract new variants of the virus
Natural Gas US$2.548/mmbtu vs US$2.485mmbtu yesterday
Natural gas markets continue to look weak due to oversupply
Fundamentally, the short-term outlook remains bearish with forecasts calling for spring weather and tapered heating needs over the remainder of this month and into April, according to Natural Gas Intelligence
Bespoke Weather Services yesterday cited “notable declines” in gas-weighted degree days (GWDD) in its updated forecast for the remainder of March, with a warming trend developing next week for the US Midwest and East
EBW Analytics Group said the warmer outlook cut “projected demand for natural gas by more than 50Bcf” and effectively shattered “hopes for another cool shot” before the end of March
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$159.7/t vs US$158.6/t
Chinese steel rebar 25mm US$724.5/t vs US$725.1/t
Thermal coal (1st year forward cif ARA) US$69.2/t vs US$69.2/t
Coking coal swap Australia FOB US$128.0/t vs US$132.0/t
Other:
Cobalt LME 3m US$52,610/t vs US$52,610/t
NdPr Rare Earth Oxide (China) US$87,829/t vs US$87,848/t
Lithium carbonate 99% (China) US$12,305/t vs US$12,308/t
Spodumene 6% Li2O min, cif (China) US$510/t vs US$455/t
Ferro Vanadium 80% FOB (China) US$35.0/kg vs US$35.0/kg
Ferro-Manganese high carbon 78% Mn US$1,625/t vs US$1,625/t
Tungsten APT European US$268-275/mtu vs US$263-268/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
Germany and Canada to explore green hydrogen development
Germany and Canada have agreed to explore the joint development of green hydrogen from Canadian hydroelectric power for export to Germany.
Germany wants to scale up hydrogen as an alternative for fossil fuels for mass applications in industry and energy to meet climate targets but lacks land resources to produce enough green power for use in the necessary electrolysis process.
Deputy ministers from the two countries will meet in May for the first time to work out a work schedule for the endeavour.
Liquefying Canadian gas for export as so-called LNG for regasification in Germany could also be part of the cooperation, for the time that gas was serving as a “bridge technology” towards hydrogen, where the planned Goldboro LNG terminal project on Canada’s East Coast could come to play.
'Skybrators' – bladeless turbines which minimise environmental impacts
A tech start-up has developed a bladeless turbine it says can generate clean energy without the harmful environmental impact of large wind farms.
Vortex Bladeless is hoping to reinvent wind power with its 10ft tall vibrating turbines which generate electricity by oscillating within wind range.
It is said to create a noise frequency that is virtually undetectable to humans and it does not pose the same dangers as wind turbines to wildlife.
Vortex Bladeless is looking for an industrial partner to help scale up its plans to create a 140-metre turbine with a power capacity of 1 megawatt.
Company News
Altus Strategies* (LON:ALS) 81p, Mkt Cap £57m – Bikoula iron ore strategic review completed
BUY
The Company reports the completion of a strategic review on the 97% owned Bikoula project in southern Cameroon.
The study was carried by Mining Plus and included a review of capital/operations costs as well as transportation expenses by road to the recently completed Kribi deep water port.
Additionally, Mining Plus looked at product specifications, processing routes and shipping options.
Results of the review will be used to identify next project development steps.
The project hosts 46mt at 44% Fe in a historic JORC MRE with exciting exploration upside as at least 75% of the 13km long priority target area remains untested.
Management internal estimates pointed to 65-100mt at 40-64% Fe in a “conceptual exploration target”.
Previous metallurgical testwork pointed to a potential for production of a 62.3% Fe concentrate using gravity separation.
The project is located 350km on the road from Kribi.
Conclusion: The team completed a third party review of its Bikoula iron ore property in Cameroon to identify next strategic development options as iron ore prices trade around multi year highs.
*SP Angel acts as Nomad and Broker to Altus Strategies plc
BlueRock Diamonds (LON:BRD) 39.5p, Mkt cap £4.2m – Happy days at BlueRock as plant recovers three large gem-quality diamonds
BlueRock report the recovery of three large diamonds at its Kareevlei mine in Kimberley, South Africa.
The three stones weigh in at:
10.6ct
9.8ct
8.4ct.
Previous large stones recovered sold for .
Date Cts $ Value $/ct
Oct-19 20.7 236,000 11,400
Feb-19 24.9 190,000 7,900
Dec-20 14.8 167,000 11,000
Jul-19 12.2 105,000 8,600
Sept-20* 12.1 104,000 8,600.
Jan-21 14.8 167,000 11,283
* based on valuation as sold as part of a parcel.
Given the average value per carat of BlueRock’s larger stone sales above we could estimate the three stones might sell for around $9,797/ct.
This would give potential sales values of $282,162.
We also suspect the September and December stone sales above were at significantly lower per carat prices than we would now expect to see in the market.
Conclusion: The news of the recovery of three larger gem-quality diamonds adds significant additional value to the business. Not only should they bring >$282,162 in additional sales but the recovery of three more larger gem-quality stones this quarter raises the incidence of larger stone recovery as well as the overall per carat valuation.
If the mine continues to recover larger stones at the rate seen so far in the first quarter we could be adding a further $42/ct to our overall sales estimate or around $1.8mpa to sales each year or another 19% to our valuation.
*SP Angel act as nomad and broker to BlueRock Diamonds
GoldStone Resources* (LON:GRL) 10.25p, Mkt Cap £33.2m – Initial term of unsecured bond notes extended
GoldStone reports that it has agreed to extend the initial term for 20 of the unsecured bonds of US$50,000 each in issue to the 15th of June 2021, with the remaining six bonds redeemed in full through cash settlement.
Paracale Gold and BCM Investments which each own six bonds, have agreed to the extension.
The extension of the initial period which was originally 12 months means that the company does not need to issue the additional 1,000,000 warrants at 3 pence per share, per outstanding bond, which would have been required if the bonds entered the second period.
The remaining bondholders retain the flexibility to receive repayment of the Bonds in gold, at a fixed price of US$1,450 per troy ounce, or in cash, or in new ordinary shares, with the number of ordinary shares to be issued based on the volume weighted average price of an ordinary share for the 15 business days prior to the end of the Extension period.
*SP Angel acts as Broker to GoldStone Resources
Kavango Resources (LON:KAV) 3.45p, Mkt cap £10.3m – Positive initial results from airborne geophysics
Kavango reports this morning that initial interpretation of an airborne electromagnetic survey over its licences in the Kalahari Copper Belt (KCB) of Botswana has shown a correlation with its other exploration efforts including both its regional structural interpretation and a confirmation of the areas of interest identified by previous soli geochemical and ground magnetic surveys.
The airborne survey comprised traverses totaling 2,389 km covering the company’s 50% interest in the 1,294km2 South Ghanzi project (50% Power Metal Resources) and its 90% owned LVR licence (1,091km2).
The company reports that “The preliminary … anomalies are associated with a number of plunging fold hinges that represent potential drill targets. Follow up work will require the development of geological models to determine the stratigraphic location of these anomalies and potential drill collar locations and orientations.”
Kavango Resources explains that it expects results from the detailed analysis of the data to be available “later in the spring” and confirms that its goal is “to identify targets for test drilling in H2”.
Chief Executive, Michael Foster, said that “it is pleasing to see different early data sets correlate to one another. Over the coming months our priority remains to identify targets for drilling campaigns in the KCB later this year”.
Conclusion: Preliminary analysis of the recent airborne geophysical survey in the Kalahari Copper Belt shows a promising correlation with other exploration results and geological interpretation as further analysis aimed at identifying potential drill targets continues.
Power Metal Resources* (LON:POW) 2.4p, Mkt cap £25m – Granting of licenses at Victoria Goldfields project
Power Metal reports that it has received formal license grants for a further two of its license applications in respect of Red Rock Australasia, a joint venture company with gold exploration interests near the historic mining centre of Ballarat in the Victoria Goldfields. Power Metal has a 49.9% interest in RRAL, with Red Rock Resources PLC (LON:RRR) holding a 50.1% interest.
The two license grants relate to the 60 sq km "Blue Stocking" license to the south west of Ballarat (EL007327) and the 4 sq km "Sardinia" license to the north of Daylesford (EL007385).
Both licenses have been granted for a period of five years, and to date RRAL has now received five granted licenses covering 279 km2 with further license grants awaited.
RRAL exploration programmes are now underway targeting a large scale gold discovery or discoveries and we expect to be in a position to announce first exploration results in the near future.
Paul Johnson, CEO of Power Metal Resources commented: "It is good to see the strategic license application footprint steadily converting into granted status and we look forward to the receipt of further grants.”
*SP Angel acts as Nomad and Broker to Power Metal Resources
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
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