SP Angel . Morning View . Tuesday 23 03 21
Nickel, tin, iron ore and rare earth prices continue to rise
MiFID II exempt information – see disclaimer below
Altus Strategies* (AIM:ALS) - BUY – Drilling intersects potential new parallel gold zone at Tabakorole
Oriole Resources (LON:ORR) – Senala exploration plan
Rio Tinto (LON:RIO) – Rio Tinto’s plan to strengthen “Cultural Heritage management”
Battery Manufacturer Northvolt receives $14bn order from VW
- Swedish battery manufacturer Northvolt has signed a huge 10-year battery order deal worth $14bn.
- The deal follows on from VW’s Power Day last week, and clears up questions over where the automaker would be getting batteries from for its huge push into the EV space.
- As part of the partnership agreement, Northvolt’s gigafactory in Sweden will be expanded and Northvolt agreed to sell its joint venture share in its Salzgitter, Germany factory to Volkswagen.
- The agreement between Northvolt and VW brings the battery maker’s total contracts to $27bn in the two years since it raised $1bn in financing in 2019 (Tech Crunch).
- A Northvolt spokesman commented: “In view of Northvolt’s recent supply order from Volkswagen, Northvolt Ett gigafactory will be significantly expanded beyond the 40GWh capacity we were targeting,”
- “To be distributed across several gigafactories, we’re aiming for 150GWh annual cell production in 2030 and we expect roughly 20% of those cell volumes to be committed to Northvolt Systems, with the majority of that directed to grid solutions.”
Volvo shares fall 7% as automaker predicts ‘substantial hit to production’ in Q2
- Shares in Volvo fell 7% on Tuesday after the company warned of substantial production cuts due to the global shortage of semiconductors.
- The company has 18 production facilities globally, and has recently been forced to cut production at its facilities in Belgium and Brazil (Reuters).
Tin - The Defense Logistics Agency may offer >400t tin into US markets between April and September
- The DLA is offering 40t in April (Fastmarkets)
- The agency purely acts to stabilise prices and alleviate shortages. We suspect it also turns a nice profit from time to time
- China’s SRB acts in a similar manner and is likely to be offering Copper and a number of other metals into the market in China.
- Chinese tin imports fell 16.8% YoY in Jan-Feb
- China imported 20,535mt of tin ore over the period, with the decrease mainly due to pandemic prevention measures caused by the slowdown in cargo transportation (SMM News).
Palladium - Norilsk cuts palladium production guidance for 2021 by 685,000oz representing >10% of 2020 global production
Disruption to Norilsk’s two mines is seen disrupting production
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
Economics
Chile – The government announced a $6bn emergency spending programme (~2% of GDP) taking the total to $18bn as authorities are expanding quarantine amid the nation’s most severe virus wave yet.
- As of Thursday, nearly 80% of the 18m population will be under full lockdown as the country reports record numbers of daily infections and patients hospitalised.
- The nation delivered at least one shot to 29% of the population to date.
China - Crackdown on crime might end China’s $522bn private credit market
- China has just sentenced a woman to life imprisonment for ‘debt entrapment’ in China.
- While the sentence might seem harsh, China has a very long history of debt entrapment as the practice of handing down debt through families was commonplace, possibly for hundreds of years, effectively enslaving parts of the population.
- Ironically, China appears to use Deb-trap diplomacy with predatory lending practices to control politicians and nations particularly in Africa.
Sanctions against China seem unlikely to have any real economic consequences for now
- The US, EU and UK have sanctioned China for its detention and treatment of the Ugur community in China.
- While China has pushed back on the sanctions and has sanctioned EU politicians and companies we feel the issue is unlikely to spill into a full trade war
US – Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell will face two days of congressional hearings over the economic policy response during the pandemic.
- Lawmakers will focus over the impact of the enacted $1.9tn package as well as plans for the next one.
- Biden advisers are considering a long term infrastructure investment package to be as much as $3tn, though no decisions have been made so far, Bloomberg reports.
- The plan will presented to President Biden this week, one person asking not to be named said as the discussions are private.
- Some $400bn for so-called green spending involving climate change initiatives is said to be included in the plan, Bloomberg writes.
- The New York Times and Washington Post earlier reported on discussions of a $3tn programme that is likely to be split into two separate packages.
- The head of the CDC argued that states are lifting restrictions too early and called on Americans to continue to wear masks, avoid crowds and wait to travel.
- Rochelle Walensky said cases have started to rise slightly again, while hospital admissions remain stable and deaths continue to decline.
Sinovac Biotech CEO said its vaccine manufacturing capacity will be expanded to 2bn doses a year soon.
- The company supplied 160m shots globally so far.
Japan – The government left its assessment of the overall economy unchanged saying that while business conditions and bankruptcies did better than the previous month, exports did worse.
- The nation lifted restrictions last weekend, although restaurants and bars are still being asked to close early.
Germany – The government will extend the hard lockdown over Easter in an effort to restrain a “third wave” of COVID-19 infections.
- Restrictions will be extended for four more weeks through to April 18.
- “The case numbers are rising exponentially and intensive-care beds are filling up again,” Chancellor Merkel said commenting on the decisoni.
Taiwan – Manufacturing output rose 3.8% YoY in February
- Electronic parts output rose 16.3% YoY, with integrated circuits +16.3% and LCD panels +49.8%.
- Basic materials fell -3.0% and motor vehicles -4.3%.
UK – Preliminary employment reports show an improvement in the labour market with the number of employees on payrolls climbing 68k in February.
- Meanwhile, reports for three months to Jan/21 show total employment pulled back 147k during the period driven by a drop in part-time category.
- The total number of employed people remains nearly 700k below pre-pandemic levels in Feb/20.
- Unemployment rate came in higher than anticipated in Jan/21
- Employment Change (3m/3m): -147k v -114k in 3m to Dec/20 and -167k est.
- ILO Employment Rate: 5.0% v 5.1% in Dec/20 and 5.2%.
- London records two Covid-19 deaths in lowest daily jump since September - CityAM.
- London recorded two Covid deaths in the past 24 hours, signalling the lowest daily fatality count since the beginning of September.
EU – to use all tools to get vaccine doses from AstraZeneca
- The problem for the EU is that certain critical components required for production of the Oxford AstraZeneca vaccine are made in the UK.
- While the UK would not wish to withhold critical components the situation does highlight the ongoing interconnectivity and interdependency of the UK and Europe.
- Those of us who witnessed the collapse of the Former Soviet Union remember the near-total decimation of industry outside Russia as Moscow focused on restoring economic growth with little or no regard to its former satellite nations. We witnessed factories being cut up and transported to China for scrap reversing decades of industrial development.
- While we hope the EU/Europe will never fail in the manner of the USSR collapse in 1991 we are wary of the potential for contagion if one part of the EU bloc does fail.
Denmark – The nation will ease more restrictions next month and will end its lockdown completely after all Danes over the age of 50 have been vaccinated by June, PM Frederiksen said.
- The government will allow some businesses, including shopping malls and hairdressers, top open in stages next month.
Currencies
US$1.1902/eur vs 1.1898eur yesterday. Yen 108.76$ vs 108.70/$. SAr 14.797/$ vs 14.839/$. $1.383/gbp vs $1.386/gbp. 0.768/aud vs 0.772/aud. CNY 6.511/$ vs 6.509/$.
Commodity News
Precious metals:
Gold US$1,738/oz vs US$1,730/oz last yesterday
Gold ETFs 100.8moz vs US$100.9moz yesterday
Platinum US$1,178/oz vs US$1,173/oz yesterday
Palladium US$2,597oz vs US$2,607/oz yesterday
Silver US$25.54/oz vs US$25.49/oz yesterday
Base metals:
Copper US$ 9,043/t vs US$9,048/t yesterday
Aluminium US$ 2,232/t vs US$2,272/t yesterday
Nickel US$ 16,580/t vs US$16,395/t yesterday
Zinc US$ 2,847/t vs US$2,875/t yesterday
Lead US$ 1,969/t vs US$1,975/t yesterday
Tin US$ 25,980/t vs US$25,550/t yesterday
Energy:
Oil US$63.6/bbl vs US$64.2/bbl yesterday
- Despite a sell down last week, factors have started to emerge in recent weeks that point to a correction in oil demand and which point to a rebound to stronger levels in the second half of this year
- Currently, oil demand trends in different regions are mixed, with the picture in Europe clouded by renewed lockdowns and sluggish vaccination programs in many countries
- But travel and consumption patterns in the world’s top oil consumer, the US, and in the world’s top oil importer, China, point to recovering demand for petroleum products
- Those two countries, major consumers of crude, could lead global oil demand out of the woods and lead the global consumption rebound later this year
- Travel statistics show that US consumers are driving and flying this month at the highest rate since the pandemic forced the US into lockdowns in March last year
- Chinese demand for road fuels is back to pre-COVID levels, with airline travel also rebounding from last year’s lows
- As recent months have shown, the global oil demand recovery will not be a straight line up, with unknowns around virus variants and vaccination passports
Natural Gas US$2.545/mmbtu vs US$2.508mmbtu yesterday
- Natural Gas Prices moved higher yesterday, testing resistance levels and rising more than 1.8%
- The rally came despite the forecast of moderating temperatures that is expected to move eastward and keep the climate above normal for the next 8-14 days
- Demand declined last week in the US as the heating season approaches the end
- Asian demand for US exports was strong throughout the winter and now, heading into spring, European demand is mounting as storage levels on the continent dwindled substantially in recent months
- Since Winter Storm Uri resulted in reduced outages and gas conversation for residential use in Texas, LNG demand has risen 10.0Bcf/d in the past month
- Further demand gains are possible – perhaps even eclipsing 12.0Bcf/d if all terminals achieve maximum demonstrated demand levels at the same time
- Gains in LNG feed gas and Gulf Coast industrial demand for natural gas this week may help offset declines in weather-driven demand, allowing small withdrawals to continue near-term
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$154.3/t vs US$153.1/t
Chinese steel rebar 25mm US$731.5/t vs US$735.7/t - German crude steel production falls 10.4% YoY in February
- Crude steel output dipped year-on-year last month after four consecutive months of recovery, according to the German steel federation WV Stahl.
- Crude steel production totaled 3.09mt in Feb, down from 3.46mt in Feb 2020.
- Adverse weather is thought to have affected production last month, with Salzgitter declaring force majeure due to weather conditions that resulted in disruptions to deliveries, while Thyssenkrupp was reported to have faced similar issues.
Thermal coal (1st year forward cif ARA) US$72.5/t vs US$71.3/t - China Jan-Feb thermal coal imports fall 39.5% YoY
- China imported 17.25mt in the first two months of 2021, falling 39.5% compared to the same period last year, according to official customs data.
- The value of thermal coal imports over the period fell 38% to $1.11bn.
- Coking coal imports over the period fell 58% to 6.35mt, while the value of coking coal imports fell 86% to $772m (sx coal).
Coking coal swap Australia FOB US$127.0/t vs US$127.0/t
Other:
Cobalt LME 3m US$52,610/t vs US$52,610/t
NdPr Rare Earth Oxide (China) US$88,998/t vs US$88,722/t
Lithium carbonate 99% (China) US$12,900/t vs US$12,905/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$270-275/mtu vs US$268-275/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$2,525/t vs US$2,625/t
Company News
Altus Strategies* (AIM:ALS) 83p, Mkt Cap £58m – Drilling intersects potential new parallel gold zone at Tabakorole
BUY
The Company released final results from a 6,300m RC drilling programme at the Tabakorole gold project in southern Mali.
Drilling discovered a potential new and parallel gold zone with an intersection of 2.0g/t over 16m from 75m located some 50m east of the current deposit.
Selected results include:
2.0 g/t over 16m from 75m (potential new parallel zone, 50m east of the deposit);
5.8 g/t over 6m from 61m (anticipated to improve the modelled grade of the deposit);
2.0 g/t over 15m from 25m (extending the deposit strike length to the northwest);
1.5 g/t over 28m from 121m.
The deposit remains open along strike in both directions.
A 6,000m AC drilling programme is currently in progress in the southeast testing on strike extensions.
Additionally, Marvel Gold has completed a five hole (750m) infill diamond drilling programme covering the south-eastern part of the deposit with results due in April.
Conclusion: Tabakorole drilling extends the strike of the known deposit with an expected improvement in grades while one of the holes in the latest set of results returned good grades intersected in a potential new parallel gold zone. Additional 6,000m AC drilling is underway testing south-eastern extension of the deposit.
*SP Angel acts as Nomad and Broker to Altus Strategies plc
Oriole Resources (LON:ORR) – 1.05p, Mkt cap £14.0m – Senala exploration plan
Oriole Resources has announced agreement with its earn-in partner, IAMMGOLD, at the Senala project in Senegal for the 4th year exploration programme budget totalling approximately £1.8m.
The work will be undertaken in two phases with the initial Phase 1 work comprising 5,000m of reverse-circulation (RC) drilling and 1,000m of diamond-drilling to follow up geochemical anomalies on the Faré prospect in the north of the licence area. The work is expected to be completed before the end of Q2 2021.
The second phase is for 5,000m of RC drilling plus 600m of diamond drilling “focused on re-testing the system at the southernmost Madina Bafé prospect … [which lies approximately 10km from IAMGOLD’s 2.5moz Boto development project and] …, where previous drilling by the Company had returned 9.60 m grading 16.08 grammes per tonne (‘g/t’) gold (‘Au’)”.
On completion of the work programme, “IAMGOLD will have the right to acquire a 51% interest in the Project”. The wider agreement with IAMGOLD allows it to earn a 70% interest in Senala through the expenditure of a further US$4m over the subsequent 2 years.
The agreed 4th year expenditure includes US$172,000 underspent in the agreed 3rd year programme.
CEO, Tim Livesey, explained that “With the Senala exploration programme continuing its fourth year in the safe hands of the IAMGOLD team … [Oriole Resources is looking] … forward to maintaining our focus on Cameroon through our ongoing maiden drill programme at Bibemi and at the newly-granted Central Licence Package, where a programme of regional stream sediment sampling is scheduled to commence next quarter”.
Rio Tinto (LON:RIO) 5358p, Mkt Cap £67bn – Rio Tinto’s plan to strengthen “Cultural Heritage management”
Rio is to hold virtual seminars today to describe its plans for working with the cultural and community issues highlighted by the Juukan Gorge incident where mining at the Brockman 4 iron ore Pit 1 in the Pilbara led to the destruction of 46,000 years old rock shelters of cultural significance to the local traditional communities and more widely in Australia and beyond.
The seminars, to be led by Chief Executive, Jakob Stausholm and the Chief Executive, Australia as well as senior technical and community affairs specialists, are to be held between 10:30 and 12:00 GMT and are to be available on the company’s website at www.riotinto.com/invest/presentations/2021/cultural-heritage-seminars and can also to be accessed via telephone in the UK on 0800 279 6619
Mr. Stausholm confirmed that it is establishing an Indigenous Advisory Group (IAG) “to ensure Rio Tinto has a better understanding of Indigenous culture and issues in Australia, including at Board level. It follows broad consultation with Traditional Owners and Indigenous leaders with the aim to introduce more diversity and breadth of views, including external perspective, in decision-making”.
Among its roles, the IAG is to assist Rio Tinto in defining “best practice for cultural heritage management in the mining industry” and in identifying areas where the company’s current practices can be improved.
Mr. Stausholm also underlined that “One thing is clear - building meaningful and trusting relationships is fundamental. And that starts with Traditional Owners. We must focus on real engagement with our communities, understanding their felt experience and never forgetting that, ultimately, we are guests on their land. And, as guests, we must respect our hosts and work with them to understand their priorities and concerns and minimise our impacts”.
Conclusion: The Juukan Gorge incident has cast a long shadow, not only at Rio Tinto where it has led to high profile departures, but also over the entire industry. Improved and transparent practices relating to local community engagement and the management of culturally significant artefacts and landscapes are likely to be sought by legislators and permitting authorities as well as local communities as a pre-requisite for mining operators in the future. Rio Tinto’s initiative in formalising its practices and establishing the IAG may well become a template that others will follow.
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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