SP Angel . Morning View . Monday 29 03 21
Platinum group metal and rare earth prices continue to rise
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
BlueRock Diamonds (LON:BRD) – Large diamonds sold for $214,000
Kavango Resources (LON:KAV) – Acquiring additional prospecting licences in Botswana.
Power Metal Resources* (LON:POW) – Acquiring additional prospecting licences in Botswana.
Serabi Gold* (LON:SRB) – 2020 resource & reserve statement
SolGold* (LON:SOLG) – Progress of regional exploration in Ecuador
US Hedge fund default on margin calls hits Normura and Credit Suisse
Nomura lost 16% on Monday in Tokyo recording the worst single day loss on record after the bank said the potential loss may amount to $2bn.
Credit Suisse is down 14% this morning with FT reporting losses may come in the $3-4bn range citing two people close to the bank.
An unnamed US hedge fund client is said to have defaulted on margin calls causing significant hit to profits at Credit Suisse and Nomura
Archegos Capital Management is reported to be at the center of margin calls that led to the forced liquidation of >$20bn of shares on Friday (Bloomberg)
Affected shares are thought to be mainly Chinese technology stocks and a few US technology companies.
The situation highlights the use of leverage by hedge funds in larger and more liquid stocks and may lead to a tightening of lending controls in the ‘prime brokerage’ and ‘stock lending’ departments of the major banks.
Two-thirds of UK EV’s are purchased by businesses
According to SMMT, two-thirds of all new electric cars bought in the UK are purchased by businesses rather than private buyers.
Private consumers registered 34,324 new EVs in 2020, compared to businesses which registered 73,881 new electric cars.
Evergreen ship partially freed from Suez Canal
Salvage teams have partially freed and refloated the 1,300 vessel stuck in the Suez Canal.
The blockage is currently holding up $9.6bn of goods a day, according to Shipping data.
The longer the delay the longer it will take to reschedule unloading at end destination ports
A lack of available berths at UK ports and existing container congestion will not help.
Some containers destined for the UK may be unloaded in Rotterdam which has substantially greater capacity.
The UK possibly needs to build extra Berths at UK ports to better manage surges in capacity
Recent Interviews:
VOX Markets: 24/03/20: https://audioboom.com/posts/7829467-john-meyer-on-arc-minerals-cornish-metals-rainbow-rare-earths-altus-stategies
12/03/20: https://www.ig.com/uk/market-insight-articles/volkswagen_s-electric-vehicle-expansion-plans-drive-a-record-hig-210317
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
*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 +1.39% at 33,073
Nikkei 225 +0.71% at 29,385
HK Hang Seng -0.04% at 28,324
Shanghai Composite +0.50% at 3,435
Economics
US - Joe Biden is due to unveil his new Stimulus Infrastructure program on Wednesday.
US household spending and incomes pulled back in February after the initial boost from stimulus checks at the start of the year faded (Bloomberg).
Both measures came broadly in line with market expectations.
With the new stimulus programme recently approved spending and incomes are posited to climb this month.
As of mid-last week, the government sent out around 127m stimulus checks worth around $325bn.
Personal Income (%mom): -7.1 v 10.1 in Jan (revised from 10.0) and -7.2 est.
Personal Spending (%mom): -1.0 v 3.4 in Jan (revised from 2.4) and -0.8 est.
China – Industrial profits surge 179%yoy in the first two months of the year reflecting low base in 2020.
Profits have seen a robust recovery through 2020 following a shar decline in Q1/20 with December reading coming in at +20.1%yoy.
South Africa – The government is considering further lockdown restrictions ahead of coming Easter and other religious holidays.
The nation is currently in the Phase I of the vaccine rollout targeting more than 1.5m healthcare workers.
Phase 2 that is expected to be carried from May to October will cover vulnerable groups, essential workers, and occupational health and safety groups, including people working in mines, hospitality, taxi industry, retail and corner shops, fruit and vegetable vendors and media.
Australia sees record $104bn of iron ore exports this financial year
Australia expects to log A$136bn from iron ore exports this financial year, amid a global steelmaking recovery and iron ore prices at multi-year highs.
Iron ore shipments are expected to rise from 900mt in 2020-21 to 1,100mt by 2025-26.
The country’s most valuable export is expected to earn more than A$100bn per year for the next 50 years.
Exports of new energy materials such as copper, lithium and nickel are expected to offset lower contributions from thermal coal, according to the Department of Industry.
Gold exports are expected to rise to A$29bn from A$25bn, and copper exports to rise to A$12bn from A$10bn (Reuters).
Four more Brazilian automakers suspend production as Covid-19 cases continue to rise rapidly
Renault, Daimler, Nissan and Toyota are the latest manufacturers to suspend operations, following VW and Volvo who have already cut production in the country this month.
Renault has suspended activities at its Ayrton Senna facility until at least the 5th of April, while Daimler will temporarily cease production of trucks and buses, citing supply chain issues as another reason to cut production.
Nissan is halting its Brazilian operations until the 9th of April, while Toyota plans to open not before the 6th of April.
Brazil reported a record 97,586 new confirmed cases of Covid-19 on March 25, bringing the total up to 12.32 million people (Fastmarkets MB).
UK rejects £170m bailout request from Sanjeev Gupta’s GFG
The UK government has rejected a request from GFG Alliance for a £170m bailout as it struggles to stay afloat following the collapse of its biggest lender.
Without the funding boost, thousands of jobs may be under threat at GFG’s Liberty Steel, which employs 3,000 people across the UK.
England is is lifting COVID-19 restrictions. From today UK government advice is:
Stay local
Six people or two households can meet up outside, including private gardens
Outdoor sports facilities and open-air swimming pools are allowed to reopen. If you survive the cold of the pool there is a good chance you will survive Covid.
From 12 April
All shops to reopen
Resturants and pubs to serve food and alcohol to customers sitting outside
Gyms, spas, zoos, theme parks, libraries and community centers
Households can holiday in England
Weddings can take place with up to 15 people
Montenegro is asking the EU for help to repay billion euro loan to China Exim banks
The Deputy Prime Minister of Montenegro Is asking the EU for help to repay a billion-euro loan from China which was used to build a first section of highway through the country. The minister is proposing the replacement of the Chinese ‘bad loan’ with funds from the EU on more favourable terms (EURACTIV).
The loan is said to have made Montenegro dependent on Beijing. The government is looking at alternative models to finance the construction of two more sections of highway to effectively complete the road project.
China provided €12bn of loans for construction to 16 European nations with around €4bn going to Serbia, €2.5bn going to Bosnia and Herzegovina and €1bn to Montenegro, according to the EIB.
Currencies US$1.1784/eur vs 1.1783eur last week. Yen 109.58$ vs 109.41/$. SAr 15.006/$ vs 14.985/$. $1.378/gbp vs $1.377/gbp. 0.764/aud vs 0.762/aud. CNY 6.557/$ vs 6.539/$.
Commodity News
Precious metals:
Gold US$1,726/oz vs US$1,729/oz last last week
Gold ETFs 100.1moz vs US$100.3moz last week
Platinum US$1,185/oz vs US$1,163/oz last week
Palladium US$2,657oz vs US$2,647/oz last week
Silver US$24.85/oz vs US$25.20/oz last week
Base metals:
Copper US$ 8,923/t vs US$8,908/t last week
Aluminium US$ 2,294/t vs US$2,272/t last week
Nickel US$ 16,330/t vs US$16,405/t last week
Zinc US$ 2,828/t vs US$2,814/t last week
Lead US$ 1,958/t vs US$1,936/t last week
Tin US$ 25,510/t vs US$25,235/t last week
Energy:
Oil US$63.6/bbl vs US$63.1/bbl last week
Oil prices rose sharply on Friday as efforts continue to dislodge a giant container ship blocking the Suez Canal, possibly squeezing supplies of crude and refined products
Prices, however, still booked a third consecutive weekly loss, with the outlook for demand dented by fresh coronavirus lockdowns in Europe
The trapped container ship is blocking traffic in the Suez Canal, one of the world’s busiest shipping channels for oil and refined fuels, grain and other trade between Asia and Europe
Fears of supply tightness grew as the key Suez Canal remained blocked by the giant ship, outweighing concerns over weak demand due to lockdowns in Europe and Asia
Of the 39.2MMbopd of total seaborne trade in crude in 2020, 1.74MMbopd went through the Suez Canal, according to tanker tracking firm Kpler
Additionally, 1.54MMbopdof refined oil products such as gasoline and diesel fuel flow through the canal, about 9% of global seaborne product trade
Elsewhere, OPEC+ will meet on Thursday to decide the group’s approach to May supplies, with expectations to broadly stick to current lower levels, as the outlook for demand has deteriorated due to new lockdowns in Europe
Acting a week ahead of the OPEC+ meeting, Abu Dhabi National Oil Company (ADNOC) has deepened crude oil supply cuts to Asian customers in June to 10-15% from 5-15% in May
Countries in Europe are renewing restrictions to curb the spread of COVID-19, which will likely reduce fuel demand from the region
Germany, Europe’s largest economy, has seen its biggest increase in coronavirus cases since January
In parts of western India, authorities ordered people indoors as new infections hit the highest level in five months
Natural Gas US$2.571/mmbtu vs US$2.578mmbtu last week
Natural gas prices were nearly unchanged on Friday after rallying 2% on Thursday and closing the week up 1.2%
Prices were buoyed by a larger than expected draw in stockpiles reported on Thursday by the Department of Energy
This draw was greater than expected
Warmer than normal weather is expected to cover most of the US and Europe over the next two weeks according to the National Oceanic Atmospheric Administration
Natural gas in storage was 1,746Bcf as of Friday 19 March, according to the EIA. This represents a net decrease of 36Bcf from the previous week
Expectations were for a 10Bcf draw according to survey provider Estimize
Stocks were 263Bcf less than last year at this time and 78Bcf below the five-year average of 1,824Bcf
At 1,746Bcf, total working gas is within the five-year historical range
According to the National Oceanic Atmospheric Administration, the weather is expected to be warmer than normal in the US and Europe over the next 8-14 days which should boost demand
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$157.3/t vs US$154.0/t
Chinese steel rebar 25mm US$729.6/t vs US$731.6/t
Thermal coal (1st year forward cif ARA) US$72.2/t vs US$72.2/t
Coking coal swap Australia FOB US$125.0/t vs US$123.0/t
Other:
Cobalt LME 3m US$51,750/t vs US$52,250/t
NdPr Rare Earth Oxide (China) US$89,674/t vs US$89,536/t
Lithium carbonate 99% (China) US$12,811/t vs US$12,845/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$1,665/t vs US$1,625/t
Tungsten APT European US$270-278/mtu vs US$270-275/mtu
Graphite flake 94% C, -100 mesh, fob China US$550/t vs US$560/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,525/t vs US$2,525/t
Battery News
805 HP Hydrogen Race Car
Hyundi announced that it is partnering up with Forze Hydrogen Racing, a tea, of 60 students from the technische Uniiversiteit Delft in the Netherlands to build a light, 805 horsepower hydrogen race car.
Once completed, the Forze IX is expected to be the fastest fuel cell electric car with specs as follows: over 3,300 lbs, top speed of 186 mph, 0-62 mph in less than three seconds, two fuel cells with combined power output of 240 kW, accumulator with maximum boost power of 600kW and all-wheel drive.
The first iteration should be ready in 2021.
UK set for a new generation of giant onshore wind turbines
The UK is about to see the appearance of a new generation of onshore wind turbines to achieve its green energy targets.
Turbines deployed early in Scotland were described as higher than the Statue of Liberty – 93 metres. Reaching 250 metres or more from ground to tip height, the new towers are 50 metres short of the Eiffel Tower.
The Vestas V162-6.0 MW turbine is taller than two football pitches and produces around 22 GWh a year – enough to power more than 6,150 homes. The offshore version puts out a bumper 80GWh. Other manufacturers such as Siemens Gamesa and Enercorn have their own mega turbines.
Larger turbines produce more power due to large rotor spans and vertical reach to access higher, more consistent currents, increasing the turbine’s efficiency.
Company News
BlueRock Diamonds (LON:BRD) 42.75 p, Mkt cap £5.5m – Large diamonds sold for $214,000
BlueRock diamonds reports the sale of the three large diamonds announced on 17th March.
The three stones sold for US$214,000 at auction in Kimberley.
Sales:
8.4ct stone sold for $88,000 (10,476/ct)
10.6ct stone sold for $73,000 (6,887/ct)
9.7ct stone sold for $53,000. (5,464/ct)
Prices per carat vary hugely according to the clarity, colour and size of each stone.
To make matters more confusing, buyers judge larger diamonds, guessing what size of diamond might be cut from its shape.
If a diamond has significant inclusions or fractures then then this often alters the value of the stone and the value of the resulting cut diamond.
BlueRock’s Kareevlei kimberlite diamond pipes produce an unusual proportion of gem quality diamonds resulting in a particularly high average value per carat sold.
Prices at the Kimberley Diamond Exchange appear to be recovering after a particularly difficult 2020 due to Covid-19 travel restrictions.
The ability for BlueRock to continue to sell parcels of stones through the last 12 months bears testament to the quality of the stones from the Kareevlei Kimberlites and the ongoing trust and presence of a particular HK buyer at the market.
Date Size $ 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
Sep-20* 12.1 104,000 8,600
Jan-21 14.8 167,000 11,284
Mar-21 8.4 88,000 10,476
Mar-21 10.6 73,000 6,887
Mar-21 9.7 53,000 5,464.
* based on valuation as sold as part of a parcel.
The total value of larger stones sold since October 2019 is $1,183,000.
It is not possible for us to judge the state of the diamond market from these sales as we do not know the quality of the stones sold.
Conclusion: The ongoing sale of larger stones is good news for BlueRock and indicates 2021 should see materially sales than in previous years.
*SP Angel act as nomad and broker to BlueRock Diamonds
Kavango Resources (LON:KAV) 3.45p, Mkt cap £10.3m – Acquiring additional prospecting licences in Botswana.
Power Metal Resources* (LON:POW) 2.2p, Mkt cap £25m – Acquiring additional prospecting licences in Botswana.
Kavango Resources and Power Metals Resources have announced that their 50:50 owned Kanye Resources has acquired an additional eight prospecting licences in the Kalahari Copper Belt (KCB) of Botswana giving it a total of ten licences covering 4,255km2.
The acquisition comprises two separate transactions:
Four licences, located near Ghanzi in the central part of the KCB, have been acquired from Shongwe Resources for US$200,000; and
An additional four licences, near Mamuno on the Namibian border, have been acquired from Ninmarsh Enterprises for US$230,000
Both transactions, which are subject to due diligence and to the approval of the authorities in Botswana, are for cash with both Kavango Resources and its partner Power Metals Resources contributing equally.
Chief Executive of Kavango, Michael Foster, described the acquisition of the additional licences as “a major step forward” in the company’s development as a” significant player in the exploration for copper in the highly prospective KCB” and explained that the combination of Kavango’s experienced local exploration capacity and “financial expertise and assets of Power Metal” would support progress of its KCB exploration.
The results of and airborne electromagnetic geophysical survey over the company’s Ghanzi South licences, completed in early March, are expected during April.
Conclusion: The expansion of its exploration licences on the Kalahari Copper Belt in Botswana, in association with Power Metal Resources, provides further exposure to the exploration potential of an emerging copper/silver mineralised belt and we await results of the continuing exploration effort with interest.
Serabi Gold* (LON:SRB) – 70p, Mkt Cap £56m – 2020 resource & reserve statement
Serabi Gold’s 2020 mineral reserves and resources statement details continued replenishment of the ore reserves at the Palito mine and a doubling of the measured and indicated resources at Sao Chico.
At 31st December 2020, the proven & probable reserves at Palito amount to almost 240,000t at an average grade of 6.88g/t gold (53,000 contained oz) which, combined with reserves of 44,000t at an average grade of 6.1g/t gold (9,000oz) at Sao Chico gives Serabi proven and probable reserves totalling 62,000oz of which around 13,000oz is classified as probable.
Measured and Indicated resources amount to 1.1mt at an average grade of approximately 5g/t gold (180,000oz) at Palito with a further 480,000t at a grade of 5.4g/t (83,000oz) at Sao Chico.
CEO, Mike Hodgson, said that “The Palito Complex has a long history of reserve and resource replenishment and it is pleasing to demonstrate this once again”.
He also confirmed plans for the “2021 exploration programme which will include 32,000 meters of diamond drilling over the course of the year. Much of this drilling will be focused on extensions to the Palito and Sao Chico orebodies which remain open along strike, laterally and at depth. This exploration programme will be the largest in the Company’s history and we are confident that it will deliver resource growth”.
Serabi Gold is planning accelerated underground development and exploration programmes in order to catch up on the slower rates achieved during the peak of Covid19 containment measures and is “confident these will lead to a growth in both our reserves and resources and demonstrate that the Palito and Sao Chico deposits remains long-life assets”.
*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil
SolGold* (LON:SOLG) 23p, Mkt Cap £563m – Progress of regional exploration in Ecuador
SolGold has released information on the progress of its continuing regional exploration programme throughout Ecuador where it is currently focusing on 13 high priority targets within its portfolio of 75 exploration licences.
The company highlights the results from its Porvenir licence in southern Ecuador where it announces the following assay results from holes 5, 6 and 7 at the Cacharposa target where drilling is initially targeted on a 1.7km long mineralised target up to 1km wide:
Hole 5 reported 528m at an average grade of 0.16% copper and 0.23g/t gold (0.35% CuEq) from surface including 102m averaging 0.46% copper and 0.26g/t gold (0.66% CuEq) from a depth of 78m; and
Hole 6 is reported to have intersected 818m at an average grade of 0.33% copper and 0.11g/t gold (0.41% CuEq) from a depth of 46m including 138m averaging 0.63% copper and 0.14g/t gold (0.74% CuEq) from 540m depth; and
Hole 7 intersected 570m at an average grade of 0.58% copper and 0.23g/t gold(0.75% CuEq) from 288m depth including 204m at an average grade of 0.90% copper and 0.48g/t gold(1.23% CuEq) from a depth of 316m.
The results appear consistent with previously reported results from Cacharposa where, for example, hole 1 intersected 644m at an average grade of 0.47% copper and 0.24g/t gold (0.65% CuEq) between 10m and 654m depth) and was terminated in mineralisation at a depth of 909m.
Mineralisation at Cacharposa “remains open to the north, the south and at depth” and is currently interpreted as a sub-vertical structure “dipping approximately 75 degrees to the northwest … [and the company explains that] … The true width of down-hole intersections reported are therefore expected to be approximately 55-75% of the down-hole lengths, depending on the orientation of any given drill hole”.
In addition to the drilling results from Porvenir, Solgold summarises progress at a number of its other exploration properties in Ecuador, including assays from borehole 4 at its Cerro Quiroz target within the Blanca project area in northern Ecuador where it intersected 9m averaging 3.12g/t gold, 7.5g/t silver and 0.74% zinc from 440m depth.
The company explains that the “Gold mineralisation encountered at Cerro Quiroz occurs coincident with anomalous silver, copper and tellurium geochemistry. The presence of gold-telluride mineralisation is conspicuous at the nearby Cielito narrow-vein gold prospect, which lies approximately 500m to the northeast”.
Drilling is planned to test “a coincident alteration, geochemical and magnetic anomaly characteristic of a copper-gold-molybdenum porphyry system” at the Martha target within the Sharug area following the recent approval of a required water extraction licence.
Geophysical and geochemical modelling of the Varela target within the Rio Amarillo area of northern Ecuador has highlighted similarities with the signature of the Alpala project area suggesting that Varela may contain “a full complement of porphyry plume elements, the classic signature of a large scale strongly mineralised porphyry copper-gold(-molybdenum) system. Drilling is planned for commencement in Q2 2021 following an assessment post the Ecuador presidential elections”.
Solgold also explains that, in early March, it initiated “a process to identify potential JV/earn-in partners over 10 of 1ts 100%-owned early stage exploration projects containing 20 prospective concessions covering 86,000 hectares across Ecuador”. The company confirms that “These concessions were highly sought after during the original bidding process” and that due diligence by “several well-regarded counterparties” is underway.
Conclusion: Solgold’s Ecuador-wide exploration is showing potentially significant results at Porvenir and elsewhere with long intersections of mineralisation from close to the surface indicating significant scale potential while other prospects in northern Ecuador also show considerable promise at a relatively early stage. The company’s decision to investigate exploration participation by un-named third parties could accelerate the exploration efforts and provide initial indications as to the value independent partners ascribe to Solgold’s dominant licence position in Ecuador.
*SP Angel act as Financial Advisor to SolGold.
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
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Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
LME
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Natural Gas, Uranium, Iron Ore
NYMEX
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SSY
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