SP Angel . Morning View . Thursday 01 04 21
Spodumene Lithium prices jump on growing downstream demand
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Amur Minerals* (LON:AMC) – $160k quarterly coupon on NRR convertible received
Bushveld Minerals* (LON:BMN) – Strong Buy 31p - Enerox investment to scale-up VRFB battery systems capacity by 2022
Cornish Lithium (Private) – Cornish Lithium adds to management team as it heads towards lithium production in the UK
Renascor Resources (ASX:RNU) – Major capacity upgrade planned for the Siviour Battery Anode manufacturing operation.
Savannah Resources* (AIM:SAV) – BUY, Target 11.5p - CLICK FOR PDF – Leveraging strategic location and an improving lithium market outlook
Gigafactory – Stimulus – Democrats plan to commit US$12.5bn to new Li-ion battery manufacturing capacity
- Who will get the money? - Ford, GM, Tesla, Fiat-Chrysler (now Stellantis)?
- What type of batteries will be made? - Cylindrical, Prysmatic (pouch cells)
- What chemistries will they use?
- LTO -Lithium–titanate, LFP -Lithium iron phosphate,LMNO –Lithium Manganese Nickel Oxide, LMO -Lithium Manganese Oxide , NMC -Lithium Nickel Manganese Cobalt Oxide, NCA -Lithium Nickel Cobalt Aluminium Oxide, LCO -Lithium Cobalt Oxide, NCMA -Nickel - - Cobalt Manganese Alumina
China set to launch nationwide inspection on steel-capacity cuts
- China will launch an inspection task force to check the implementation of policies on steel-capacity cuts this year, according to the National Development and Reform Commission.
- Top officials have vowed to reinforce pollution curbs after inspections found some steel mills in china were violating output restrictions and faking documents.
- We suspect the initiative is designed to close the worst polluting furnaces while allowing better producers to expand
- We expect these inspections to result in increased use of vanadium and higher-grade and cleaner Australian iron ore.
Copper prices rise as Oyu Tolgoi copper mine declared force majeure on concentrate shipments into China as COVID outbreak closes borders
Codelco strike wage deal at Radomiro Tomic mine
- Chilean state miner Codelco clinched a deal with workers at its Radomiro Tomic mine after they accepted a new contract offer on Wednesday, avoiding a strike at one of its largest operations.
- The union vote saw 263 in favor of strike action, while 258 favored the offer- although 670 votes were not cast, meaning support for a strike fell short of the 50% plus one vote that would have been needed.
- The new contract will be effective from the 1st of April 2021 for 36 months.
- Radomiro Tomic produced 261,000 tonnes of copper last year (Reuters).
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
US – S&P 500 closed just shy of 4,000 mark yesterday as President Biden unveiled his $2.3tn infrastructure spending plan.
- Biden is proposing a US$3bn infrastructure recovery package over 10years to be paid for through higher debt and taxes over 15-years
- The plan will address chronic infrastructure underinvestment in recent decades with the largest share of the proposal (~$620bn) to be directed towards roads, bridges, public transport, EV charging stations and other transportation infrastructure.
- The programme is expected to be funded by an increase in corporate tax to 28% from the 21% set by President Trump in a 2017 overhaul to be phased over the next 15 years.
- The infrastructure package is expected to be followed this month by another large investment scheme that is said to be around $1tn intended to focus on education and childcare and called the “American Family Plan”.
- The bill can be passed by a simple majority in the Senate but if any Democrats dissent it may struggle to pass as the Republicans voted against Biden’s Go Big stimulus plan to a man.
Japan – Manufacturers post a stronger than expected recovery in business sentiment in Q1/21, according to the Tankan index.
- The measure climbed 15 points to a reading of 5, ahead of market estimates for a -2 reading.
- The result even more surprising given that Japan’s largest cities were partially locked down since mid-January, FT reports.
- Industrial production -2.1% in February vs 4.3% in January
China – CAXIN Manufacturing PMI for March 51.9 in March vs 50.6 in February
- Nonmanufacturing 56.3 in March vs 51.4 in February
- Composite 55.3 in March vs 51.6 in February
- China and Iran signed a 25-year agreement for investment in Persian infrastructure and energy sectors.
South Korea - Industrial production rose 4.3% in February vs -1.2% in January
Eurozone – PMI rises at fastest pace in 24 years on March data
France – The government extends pandemic lockdown measures to the whole country from Saturday for four weeks with schools to shutdown from Monday as hospitalisations spike.
- The third lockdown will see all non-essential shops to close from Saturday and there will be a ban on travelling more than 10km from home without good reason.
- Nationwide 19.00 curfew will remain in place and people are being asked to work from home.
- The nation reported 59,038 new cases on Wednesday.
EU - Flash CPI rose 0.9% in March vs 0.2% in February
Currencies US$1.1740/eur vs 1.1735eur yesterday. Yen 110.67$ vs 110.68/$. SAr 14.770/$ vs 14.886/$. $1.377/gbp vs $1.376/gbp. 0.755/aud vs 0.761/aud. CNY 6.572/$ vs 6.557/$.
Commodity News
Precious metals:
Gold US$1,718/oz vs US$1,687/oz last yesterday
Gold ETFs 99.8moz vs US$100.0moz yesterday
Platinum US$1,194/oz vs US$1,177/oz yesterday
Palladium US$2,631oz vs US$2,630/oz yesterday
Silver US$24.44/oz vs US$24.18/oz yesterday
Base metals:
Copper US$ 8,714/t vs US$8,823/t yesterday
Aluminium US$ 2,224/t vs US$2,233/t yesterday
Nickel US$ 16,060/t vs US$16,025/t yesterday
Zinc US$ 2,792/t vs US$2,797/t yesterday
Lead US$ 1,962/t vs US$1,971/t yesterday
Tin US$ 25,155/t vs US$25,200/t yesterday
Energy:
Oil US$63.3/bbl vs US$64.8/bbl yesterday
- Oil prices have dipped slightly ahead of today’s OPEC+ meeting on reports that a large increase in Iranian oil production pushed overall OPEC oil output higher in March compared to February, suggesting that higher supply from members exempt from the OPEC+ cuts could spoil the cartel’s efforts to rebalance the market
- OPEC’s crude oil production increased by 180,000bopd from February to stand at 25.07MMbopd in March
- The biggest contributor to the higher OPEC production this month was Iran, whose supply increased by 210,000bopd to 2.3MMbopd, offsetting cuts from other OPEC members
- Iran’s production rise was also the single-largest jump in production among OPEC members
- The second-biggest increase came from OPEC’s second-biggest producer, Iraq, which boosted production by 40,000bopd
- Libya and Venezuela, the other two OPEC members exempted from the OPEC+ cuts along with Iran, also saw small rises in their respective production
- Last month, total OPEC oil production averaged 24.85MMbopd, a drop of 650,000bopd compared to January, thanks to the extra cut from top producer and de facto leader Saudi Arabia, according to the cartel’s Monthly Oil Market Report (MOMR) for March
- In February, all three OPEC members exempted from the OPEC+ cuts had also increased their oil production
- In March, the Saudis achieved the 1MMbopd additional cut, the Reuters survey found
- In recent months, Iran is estimated to have started to increase its oil production and significantly raise its oil exports to China, the world’s top oil importer
- Currently, Iran is masking the crude it sells to China as originating from other countries to avoid US sanctions
- It is also undermining the efforts of its fellow OPEC members to keep prices stronger
Natural Gas US$2.599/mmbtu vs US$2.624mmbtu yesterday
- Natural gas prices moved lower yesterday ahead of today’s inventory report from the Department of Energy
- Expectations are for stockpiles to climb by 4Bcf, according to survey provider Estimize
- This reading comes a week ahead of the unofficial injection season
- The weather is expected to be warmer than normal over the next two weeks, which is likely to reduce heating demand
- 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$156.7/t vs US$161.4/t
Chinese steel rebar 25mm US$743.5/t vs US$745.2/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$126.0/t
Other:
Cobalt LME 3m US$50,500/t vs US$51,000/t
NdPr Rare Earth Oxide (China) US$88,639/t vs US$88,831/t -
Rare earths become focus of Greenland’s snap election next week
- Rare earth mining is set to take center stage at Greenland’s snap election next week, with the previous government collapsing in Feb over disagreements about a proposed project in the south of the country.
- The Kvanefjeld project is the proposed mine in question, with the country divided on the financial benefits the project can bring versus the potential environmental impacts of the project.
- Advocates of the proposed mine see its as key to greater financial independence for the autonomous Danish territory.
- The mine would represent a significant source of revenue for the country and help diversify an economy overwhelmingly dependent on fisheries, tourism and the Danish government.
- The Kvanefjeld project is owned by Greenland Minerals, and has the potential to become “the most significant western world producer of rare earths,” according to the company.
- The Inuit Ataqatigiit (IA) party has led in the opinion polls and has said it will scrap the project altogether if it wins the election- although such a move is likely to shake investor confidence in Greenland.
- Referring to the project, Javier Arnaut, economics professor at the University of Greenland said “It’s the most important issue in the election,” (qz.com).
Lithium carbonate 99% (China) US$12,782/t vs US$12,810/t
Spodumene 6% Li2O min, cif (China) US$660/t vs US$510/t
Ferro Vanadium 80% FOB (China) US$35.2/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
BMW and Volvo vow to exclude use of ocean-mined metals
- BMW, Volvo and Google have all announced that they will not buy any metals produced from deep sea mining before the environmental risks are “completely understood”, the FT reports.
- The companies say that they would exclude deep sea minerals from their supply chains and also not finance any deep sea mining companies.
- Deep sea mining has been promoted as an alternative to land-based mining for EV metals including cobalt and nickel.
- The most high profile of such companies is DeepGreen, who plans to pick up mineral-rich nodules that sit deep on the seabed.
Gayam Motor Works announced $50Mn Investment Commitment from GEM
- Gayam Motor Works (GMW)have announced a US$50Mn investment commitment from Luxemburg based GEM Global Yield LLC SCS as the company plans to go public. The commitment will be made available on the first day of trading or in tranches to be drawn at the company’s option over a 3-year period.
- GMW is a pioneer in the Indian electric mobility space and is the largest export of electric 3Ws from India. GMW’s SmartAuto is the first Indian e-3W to be designed with a modular battery swapping system.
- The combined value of 3Ws and 3W refuelling market is at US$32B. They are now looking at electric 3Ws as the future of intra-city mobility.
- GMW’s future plans also call for the production of electric 4W trucks to follow from next year, which will have a longer range and larger volume.
Company News
Amur Minerals* (LON:AMC) 1.5p, Mkt Cap £20m – $160k quarterly coupon on NRR convertible received
- The Company collected a third quarterly coupon of ~$161k on the $4.7m convertible loan note issued by Nathan River Resources in Aug/20.
- The three year note pays 14% interest and is convertible to 13.43% of the current share capital of NRR.
- NRR is reported to have loaded and sent three iron ore vessels to China during the first quarter of the year taking the total number of shipments to five since the issue of the convertible loan note.
*SP Angel act as Nomad and Broker to Amur Minerals
Bushveld Minerals* (LON:BMN) 17.3p, Mkt cap £206m – Enerox investment to scale-up VRFB battery systems capacity by 2022
(Bushveld is invested in Enerox alongside a <3% in Invinity Energy Systems)
Strong Buy 31p
- Bushveld Mineral is investing a further $7.5m into Enerox Holdings as part of a $30m funding to scale up production capacity.
- Bushveld currently holds 25.25% of Enerox through VRFB Holdings Limited which holds a 50% interest in Enerox.
- The funding is by way of two staged payments of $5m paid yesterday and a further $2.5m to be paid this month.
- The strategy is for Bushveld to co-fund the development of the VRFB systems developers alongside external investors.
- Utilities are monitoring VRFB developments such as the new UK ESS project in Oxford which is trialling the world’s largest Li-ion-VRFB hybrid project.
- The plan is to decarbonise the city of Oxford using a 50MW hybrid Li-ion / VRFB battery with smart energy management being installed by Pivot Power.
- The £41m ($54m) Energy Superhub Oxford consortium will combine energy storage with electric vehicle charging stations.
- The project has a 48MW/50MWh Li-ion battery combined with a 2MW/5MWh VRFB built redT (Invinity) flow machine.
- US VRFBs: The US Secretary of Energy recently commented that ‘Flow batteries are good for grid storage’ with the DoE announcing funding to support domestic manufacturing of energy storage technology. VRFB batteries will support US aims to become an emissions-free economy by 2050.
- China VRFBs: China is also reported to be accelerating its drive for energy efficiency and lower emissions using VRFB batteries.
- China’s new 14th five-year economic plan for 2021-2025 is seen as raising demand and imports of vanadium into China as energy companies move to develop new VRFB battery systems.
- China recently announced a new 100MW PV and VRFB battery system using a 100MW PV supported by a 500MWh VRFB integrated power station at Xiangyang in Hubei Province.
- Vanadium prices:
- Ferro-vanadium prices also rose slightly in China yesterday to US$35.2/kg from US$35.0/kg as imports continue to rise into China.
- Ferro-vanadium rose 4.5% in Western Europe last month to $32.93-34.03/kgV (FastmarketsMB)
Conclusion: Bushveld continued to work to support VRFB systems developers. The company supported the development of Invinity Energy Systems through the merger of Avalon and RedT and is now focussed on the expansion of capacity at Enerox.
*SP Angel acts as Nomad and broker to Bushveld Minerals.
Cornish Lithium (Private) – Cornish Lithium adds to management team as it heads towards lithium production in the UK
- Cornish Lithium have announced a significant expansion to their management team this morning.
- Neil Elliot has joined as Corporate Development Manager. Neil formerly worked at the Bank of Montreal in the UK.
- Kate Harcourt joins as the ESG officer, a role we are more likely to see much more of in future years. Kate has experience in the mining industry of helping companies through exploration to construction and operation focussing on ESIA, permitting and environmental management.
- Ms Harcourt is also a NED at Condor Gold, Roxgold and Orezone Gold and also advises on ESG at Hummingbird.
- Kathy Hicks joins the company’s ESG team as an environmental consultant. Kathy has 17 years in the hard rock mining industry and UK ground engineering sector.
- Ms Hicks is also a director of the Cornish Chamber of Mines and Minerals and a member of the Cornwall Mining Alliance Steering Committee.
- Cornish Lithium plans on accelerating its Treavor hard rock lithium project near St Austell following the successful production of nominal battery-grade lithium hydroxide.
- The Treavor project plans to use L-Max® and LOH-Max® technology to extract lithium from lithium micas following promising test work.
- The Treavor Will run in parallel with the company’s plans to extract lithium from geothermal waters in Cornwal.
- Construction of a new lithium pilot plant at United Downs should enable the Company to trial Direct Lithium Extraction technology on these solutions adding to the value of the heat recovery.
Renascor Resources (ASX:RNU) A$0.012p, Mkt Cap A$20m – Major capacity upgrade planned for the Siviour Battery Anode manufacturing operation.
- Renascor are planning a major upgrade to their Siviour Battery Anode manufacturing operation.
- See https://renascor.com.au/asx-announcements/
- Anyone who bought these shares on the back of our last research note should have made 10 times their money.
Savannah Resources* (AIM:SAV) 4.6p, Mkt cap £66m – Leveraging strategic location and an improving lithium market outlook
BUY – 11.5p
A copy of the note released yesterday
Key points
- Lithium market sentiment has improved with spodumene prices up at >$500/t, ~+35% on Oct/20 lows, with anecdotal evidence pointing to further gains amid a strengthening demand outlook driven by green and circular economy focused stimulus programmes narrowing the gap between supply and demand.
- The EU announced the largest climate change budget to date of €1.8tn mid-2020 as part of the European Green Deal; the US has re-joined the Paris Agreement with President Biden targeting $2tn for transition to 2050 climate neutral status.
- Corporates are seeking exposure to lithium market opportunities, validating the strong growth outlook (A$1.9bn IGO/Tianqi deal, €30m Sibanye-Stillwater/Keliber, Codelco to start exploration at the Maricunga brines project in Chile, US$6.4m Galp/Savannah).
- Lithium market demand to swell from ~300kt LCE in 2020 to 0.8-1.0mt in 2025 and +1.75mt in 2030 predominantly driven by LIB in EVs as transport electrification gains pace with LiOH (lithium hydroxide) expected to gain market share from Li2CO3 (lithium carbonate) as the preferred lithium compound on increasing adoption of more energy dense higher nickel cathode chemistries; this is especially the case for more premium and longer-range vehicles sold in Europe; spodumene set to benefit being a cheaper feedstock source for LiOH.
- EV sales up >40%yoy with overall auto demand down 14%yoy in 2020 on the back of new/extension of subsidies in Europe and China; estimates for 3m EV market in 2020 (~4% market share) to grow to 11/31m in 2025/30 (~12%/32% share).
- Most stringent emission standards and high subsidies see Europe as #2 by EV sales (>25% of global sales and 40% of regional sales) and LIB production capacities (from 50GWh in 2021 to >550GWh, +27% CAGR) by 2030.
- Lithium added to EU Critical Raw Materials in 2020 as the EU currently imports 100% of its battery grade lithium supply.
- The DFS stage Mina do Barroso hard rock deposit demonstrates robust economics (~24ktpa LCE, ~$240/t ex by-products, C1 FOB Portugal first 5y) with good infrastructure such as roads, grid connection (~60% of power demand covered by renewables in Portugal) and port facilities (only 145km to port Leixoes) with a potential for EU-based LiOH refining minimising lithium supply carbon footprint.
- We see significant strategic value in the MdB project with a fast, well understood and technically low risk path to production of low impurity spodumene concentrate and an option to supply both future local refining plants or the seaborne market.
We maintain our BUY recommendation with a risk adjusted TP of 11.5p.
*SP Angel acts as Nomad to Savannah 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
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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
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