SP Angel . Morning View . Thursday 25 03 21
Minor metals surge on strong China demand, tight supply and improving global economy
We are working with a private copper company which is raising funds for new exploration
Please contact us for details of the investment opportunity
The company intends to list in London and its valuation is at a suitable discount to reflect its private status and stage of exploration
Atalaya Mining (LON:ATYM) –Proyecto Riotinto expansion completed successfully and additional resource potential under investigation
BeMetals (CVE:BMET) – JOGMEC invest $1.5m for Pangeni Copper Project in Zambia
Talga Group* (ASX:TLG) – Vittangi DFS timing update
Tirupati Graphite (LON:TGR) – Team strengthened across key business areas
Minor metals markets surge in Q1 – driven by strong demand China, tight supply and improving global economy.
Tantalite basis 25% min Taa2O5 up +27.3% YTD.
Manganese 99.7% electrolytic manganese flake up +27.3%.
Cobalt up +52.7%.
Antimony up +73% (Fastmarkets MB).
Tungsten APT 88.5% WO3 prices up +17.2% YTD.
Iron ore futures rise for third day as production worries ease in Tangshan
Iron ore futures continued to rise on Thursday as spot prices in China stabilised following improved demand and easing worries in the country’s steelmaking hub Tangshan.
Futures have bounced around over the past few weeks as the Chinese government kept bringing in and loosening production cuts in order to reduce air pollution in the area.
Developments in the Suez Canal are also fuelling uncertainty in commodities markets, with vessels unable to navigate one of the world’s most important shipping routes.
On the supply side, it is feared that terrible flooding in Australia could tighten the availability of iron ore from one of the world’s most important producers (Reuters).
Global crude steel output rose 4% YoY in February
Total crude steel output amounted to 150.2mt last month, up 4% compared to February 2020 but down 8% compared to the month prior.
New wind capacity ‘hits 93GW in 2020’
The wind industry installed 93GW of new capacity in 2020, a 53% year on year increase, according to a new report from the Global wind Energy Council.
The global wind power market has nearly quadrupled in size over the past decade with record growth in 2020 driven by a surge of installations in china and the US.
Together, the US and China installed 75% of new installations in 2020 and account for over half of the world’s total wind power capacity.
Copper – Morgan Stanley’s utility team forecast 2,800GW of new renewable energy capacity from 2021-2030
They reckon solar and wind power will account for 89% of the new capacity driven by the decarbonisation targets.
Offshore wind is increasingly gaining traction with utility scale solar farms are taking share over from distributed smaller scale installations.
The firm also forecasts battery EV sales of 131m vehicles from 2021-2030
They see EVs, and renewable generation doubling copper demand over the next ten years for the two sectors at a CAGR of 6.9% to reach 5.2mt by 2030.
But this will be offset by recycling and the displacement of other copper intensive generators to give overall copper demand growth to a 2.3% CAGR 2021-2030 up from 1.7% previously.
Morgan Stanley see copper mine supply rising by 1.6Mt to 2023 as new projects enter production, but forecast a 6.5mt supply gap to be filled by 2030.
Zinc - ILZG International Lead Zinc Study Group reports refined zinc market saw a 11.7kt surplus in January vs a surplus of 536kt yoy
The market is around 13.5mtpa
Recent Interviews:
IGTV: VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw
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
VOX Markets: 12/03/20: https://www.ig.com/uk/market-insight-articles/volkswagen_s-electric-vehicle-expansion-plans-drive-a-record-hig-210317
*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.
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 -0.01% at 32,420
Nikkei 225 +1.14% at 28,730
HK Hang Seng -0.06% at 27,901
Shanghai Composite -0.10% at 3,364
Economics
US – Business activity continued strong through March largely driven by service providers with its subindex PMI climbing to 80-month high.
Manufacturing also performed well, although, some input shortages and supplier delays were reported limiting the expansion of manufacturing production capacity.
New orders for both manufacturing and services sectors climbed at the strongest pace since June 2014 with export orders also continuing to rise, up for the third month running.
Input prices climbed at the fastest pace on record amid supply chain disruptions as well as an increase in raw materials and fuel costs.
“Another impressive expansion of business activity in March ended the economy’s strongest quarter since 2014… the vaccine roll-out, the reopening of the economy and an additional $1.9 trillion of stimulus all helped lift demand to an extent not seen for over six years, buoying growth of orders for both goods and services to multi-year highs,” Markit wrote.
Markit Manufacturing PMI: 59.0 v 58.6 in February and 59.5 est.
Markit Services PMI: 60.0 v 59.8 in February and 60.1 est.
Markit Composite PMI: 59.1 v 59.5 in February.
The US securities regulator adopted the Holding Foreign Companies Accountable Act that was signed into law by then-President Trump in December last year.
The rule allows to delist Chinese companies from US exchanges if they fail to comply with American auditing standards for three years in a row.
The rules also require firms prove to the SEC that the foreign government does not own or control the entity and tin name any board members who are Chinese Communist Party officials.
The new rules come amid simmering tensions between the US and China, with bipartisan support for a tough US approach.
The news saw a sharp sell off in the US listed Chinese companies in Hong Kong including companies like Baidu (-8.85%), Alibaba (-4.2%), JD.Com (-4.45%) and Netease (-3%).
US surpassed 30m coronavirus cases since the start of the pandemic, although, the rate of the spread is seen slowing down.
The nation hit new milestone nearly 12 weeks after reaching 20m while it had taken the US less than two months to go from 10m to 20m cases.
Daily new cases tallied around 48k over the past week, below a peak of 250k in early January.
Hospitalisations are also down at around 37,000 as of March 12, compared with a high of ~128,000 recorded at he start of the year.
46.3m Americans have vaccinated so far.
$4.5tn is the cost of the pandemic registered by the global travel and tourism sector in 2020, according to the World Trave; and Tourism Council.
GDP contribution of the industry halved to $4.6tn during the year.
The UK and EU released a joint statement to calm tensions over access to coronavirus vaccinations committing “ to create a win-win situation and expand vaccine supply for all our citizens”.
The news comes as EU leaders prepared to discuss at a EC meeting today controversial new rules aimed at tightening restrictions on vaccine exports, FT reports.
Under the new rules exports to countries that are failing to share their production of vaccines may be reduced.
Germany – Consumer sentiment continued to improve for a second month in a row heading into April on easing of lockdown measures at the beginning of March.
Although, the optimism may pull back following a recent decision to extend restrictions through to mid-April since the survey was carried between March 3 and 15, before the government announced the change of course.
Restaurants, bars and entertainment venues remained shut since early November now.
“Another hard lockdown will seriously damage the consumer climate and the current improvement will remain a flash in the pan,” GfK commented on the data.
GfK Consumer Confidence: -6.2 v -12.7 (revised from -12.9) in March and -12.1 est.
India – New cases growth accelerated past 50,000 to the highest reading since October as the nation’s second wave builds momentum.
Cases have climbed since a low in February, when India was recording around 10,000 new infections per day, and in some parts of the country have surpassed the first wave’s September peak.
Chile – Congress seeks mining royalty reform to boost government finances
Chile’s lower house approved a proposed royalty on copper and lithium sales in order to fund social and environmental projects.
The proposal includes a 3% tax on copper and lithium in order to help fund regional development.
The bill would require the approval of President Pinera given that it was introduced by the opposition party.
The World Steel Association reports the global steel output rose 4.1% yoy to 150mill tonne, China’s output rose 10.9% to 83mill tonne, that is 55%.
Mch EU consumer confidence improved to -10.8 before recent new lockdowns (Feb -14.8),
Feb UK CPI rose 0.1% (Jan -0.2%), yoy 0.4% (0.7%). Input PPI 0.6% (1.0%), yoy 2.6% (1.6%) and PPI outputs 0.6% (0.8%), yoy 0.9% (1.0%).
Feb US durable goods orders fell 1.1% (Jan 3.5%).
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Peru – Front running political candidate claims miners are taking too much wealth
Yonhy Lescano, a professor of law, and front running presidential candidate wants to close tax loopholes and bring in profit-sharing agreements with miners.
Lescano has 14% of the vote according to polls and is well ahead of his rivals.
Lescano is proposing a 50-50 profit sharing agreement to be agreed between miners and the state.
His words are likely to stall new investment into copper mines in the region.
China – to include Hong Kong in new maglev train network
Chinese officials have elected to extend the maglev train network down to Hong Kong according to the transport ministry (SCMP)
The news indicates that China sees HK as critical to future development and should be good news for Hong Kong.
But, transport links often serve to suck busines out of regions drawing commerce towards the center so the maglev news may prove to be bitter sweet for Hong Konger.
The link will be installed as soon as possible
China is trailing a new maglev train and track system following prototype testing last year.
China plans a new maglev network with up to nine interconnected lines covering >1,000km with maglev trains running up to 603kmph or 374mph.
Current maglev trains in Shanghai run up to 431kmph. These were designed by German engineers.
Guangdong province has already set aside land for two maglev railways to connect Shanghai with Guangzhou, the provincial capital, and Beijing with Hong Kong and Macau in its latest 15-year development plan.
Currencies US$1.1803/eur vs 1.1819eur yesterday. Yen 109.08$ vs 108.65/$. SAr 14.962/$ vs 14.862/$. $1.369/gbp vs $1.369/gbp. 0.760/aud vs 0.760/aud. CNY 6.535/$ vs 6.524/$.
Commodity News
Precious metals:
Gold US$1,733/oz vs US$1,729/oz last yesterday
Gold ETFs 100.4moz vs US$100.6moz yesterday
Platinum US$1,169/oz vs US$1,173/oz yesterday
Palladium US$2,635oz vs US$2,620/oz yesterday
Silver US$24.97/oz vs US$25.15/oz yesterday
Base metals:
Copper US$ 8,772/t vs US$8,969/t yesterday
Aluminium US$ 2,230/t vs US$2,234/t yesterday
Nickel US$ 16,050/t vs US$16,115/t yesterday
Zinc US$ 2,773/t vs US$2,813/t yesterday
Lead US$ 1,924/t vs US$1,955/t yesterday
Tin US$ 25,000/t vs US$25,295/t yesterday
Energy:
Oil US$63.7/bbl vs US$61.8/bbl yesterday
Natural Gas US$2.519/mmbtu vs US$2.536mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$155.9/t vs US$153.5/t
Chinese steel rebar 25mm US$729.0/t vs US$727.8/t
Thermal coal (1st year forward cif ARA) US$72.2/t vs US$72.0/t
Coking coal swap Australia FOB US$128.0/t vs US$127.0/t
Other:
Cobalt LME 3m US$52,250/t vs US$52,610/t
NdPr Rare Earth Oxide (China) US$89,141/t vs US$89,293/t
Lithium carbonate 99% (China) US$12,855/t vs US$12,877/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
Battery News
Floating wind farm records UK’s top results for potential output
The world’s first full-scale floating wind farm off Peterhead has been recorded as having the UK’s best results for capturing potential output offshore for the third year.
Five giant wind turbines make up the Hywind Scotland development. It reached an average of 57.1% of its potential output over the past year.
During its first two years of operation, the wind farm achieved an average capacity factor of 54%. Access to deeper waters meant higher and more consistent wind speeds and an efficient way to generate electricity.
Norwegian miner Nussir to build world’s first fully electric mine
Nussir ASA reports that it has signed an agreement with the local municipality to develop what it claims will be the world’s first fully electric mine in Kvalsund, Norway.
The private company expects production to begin later this year, with first production by around 2023.
CEO Oystein Rushfeldt told media outlets that the project has expected capex of US$116m, and the mine should produce 22,000t – 25,000t of copper per year.
Company News
Atalaya Mining (LON:ATYM) 314p, Mkt Cap £452m –Proyecto Riotinto expansion completed successfully and additional resource potential under investigation
In a year which saw Atalaya Mining successfully complete the expansion of its processing capacity at Proyecto Riotinto in the demanding operating environment of the Covid19 pandemic, Atalaya Mining reports a 35% increase in revenues to €253m (2019 - €188m) and deliver largely unchanged profits of €30.4m (2019 - €30.7m)
EBITDA rose by 10% to €67.4m (2019 - €61.3m) and the company reports a 56% rise in operating cash-flow to €59.1m
In part due to the completion of the plant expansion, investing cash outflows reduced to €30.2m (2019 - €62.4m) with investments related to “tailings dams, capitalised stripping costs and enhancements to the processing systems”.
“The net cash increase and cash equivalents during the year amounted to €29.7m, compared to a net decrease of €25.0m in the prior year”.
The results arise from the processing of 14.8mt of ore (2019 – 10.5mt) at an average grade of 0.45% copper (2019 – 0.49%) in order to produce 256,001t of copper concentrate containing 55,890t of copper (2109 – 195,072t containing 44,950t of copper).
Copper concentrate sales during the year realised an average price of US$2.72/lb (2019 - US$2.73/lb) while cash costs rose by around 8% to US$1.95/lb (2019 – US$1.80/lb) and all in sustaining costs increased to US$2.21/lb (2019 – US$2.14/lb).
The company attributes the increased unit cash costs to exchange rates and “challenging recoveries as a result of lower ore grades and costs associated with expansion start-up”.
The company reiterates its production guidance for 2021 of copper production in the range 52-54,000t at an all-in-sustaining cost in the range US$2.50-2.65/lb and cash costs between US$2.25-2.35/lb.
Atalaya Mining confirms that its current drilling at the Atalaya Pit, Cerro Colorado Pit and at San Dionisio, all at Proyecto Riotinto, is showing “encouraging initial results” and that an independent consultant is finalising an updated reserve and resources estimate for Cerro Colorado.
“The San Antonio deposit is located east of the Cerro Colorado open pit, currently being mined, and would require underground mining methods. The San Dionisio deposit is located west of the Cerro Colorado pit and current indications show there is good potential for it to be mined with a combination of open pit and underground methods. San Dionisio contains copper as well as polymetallic mineralisation”.
Exploration is also underway at the recently acquired Masa Valverde property “and will continue through 2021. First scoping studies are also planned during the year”.
The future development options for Proyecto Touro in Galicia is currently being reassessed in the aftermath of “the local government in Galicia rejecting the plan to develop Proyecto Touro, based on a negative environmental impact statement … The Company continues to be confident that its world class approach to Proyecto Touro, which includes fully plastic lined tailings with zero discharge, will satisfy the most stringent environmental conditions that may be imposed by the authorities prior to development of the project”.
Conclusion: The expansion of Proyecto Riotinto to 15mtpa capacity has been successfully delivered and Atalaya Mining is investigating additional nearby potential ore sources at San Dionisio, San Antonio and Cerro Colorado where a consultant is finalising a new mineral reserve and resource estimate. An initial scoping study for the recently acquired Masa Valverde property is expected later this year.
BeMetals (CVE:BMET) – C$0.34, Mkt cap C$40m - JOGMEC invest $1.5m for Pangeni Copper Project in Zambia
BeMetals report the signing of a $1.5m investment by JOGMEC, the Japan state Oil, Gas and Metals National Corporation.
The agreement is for JOGMEC to invest $1m into exploration at Pangeni and a further $0.5m into BeMetals to earn a 27.8% stake in BeMetal’s stake in the project.
This values BeMetals’ stake at $5.4m and the whole project at $7.5m.
The Pangeni Copper Project has continued to deliver very encouraging drill results offering the potential for large-scale copper mineralization under a thin veneer of Kalahari sand.
BeMetals is committed to spend US$2.5m on the Pangeni project over five years incurring cash payments of US$1.45m and issuing 500,000 shares, and delivering a PEA for the project.
Following acquisition of the initial 67.5% interest, BeMetals can acquire an additional 4.5% (aggregate 72%) interest by completing a feasibility study and making a further cash payment of US$750,000.
Exploration at Pangeni shows anomalous cobalt grades associated with the predominant copper mineralization as is often seen in the copperbelt.
BeMetals also has a number of other projects making up the bulk of its valuation in Idaho, USA
Conclusion: The deal for exploration funding gives a good valuation metric for early stage exploration in licenses in Zambia. Pangeni is a large-scale exploration license covering 575.68sq km and is comparable in scale with Arc Mineral’s Zamsort and Zaco licenses.
Talga Group* (ASX:TLG) A$1.2, Mkt Cap A$370m – Vittangi DFS timing update
The Company is expecting to deliver Vittangi Anode Project DFS in late Jun/21 on the back of unexpectedly long restrictions on travel and site access due to COVID-19.
Updated timing on the DFS delivery is not expected to impact the overall completion of the Project.
Additionally, the data collected so far is considered sufficient to complete UK anode production plant feasibility studies to provide to UK state agencies in May/21.
*SP Angel acted as UK broker to Talga Resources. SP Angel also act for Oxis Energy a leading Lithium metal battery development company.
Tirupati Graphite (LON:TGR) 101p Mkt Cap £73.4m – Team strengthened across key business areas
Tirupati has appointed Dr S. K. Biswal, an eminent scientist and technocrat specialising in the fields of graphene and mineral processing technology, as head of the Tirupati Graphene and Mintech Research Centre ('TGMRC').
The company has also engaged Dr S. K Sathpathy, an ex-executive director of National Aluminium Company Ltd., as an advisor to the Company, specially focussed on application of graphene in aluminium manufacturing smelters and graphene aluminium composites development.
Tirupati has appointed Dr P. Dash, who is also focused on graphene engineering science and was awarded a PhD under the guidance of Dr S. K. Biswal.
Over thirty engineers, geologists, technologists, and specially trained technicians have been appointed in recent months across all three business units.
In a separate announcement, Tirupati reports that it has won CFI.co's 2021 global award for Best Sustainable Value Creation Strategy.
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
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*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