SP Angel . Morning View . Monday 26 04 21
Copper prices and iron ore premiums hit new high levels
Bluejay Mining* (LON:JAY) - BUY - Valuation 37.7p – 3,000m drill program scheduled for Enonkoski jv with Rio Tinto in Finland
Chaarat Gold* (LON:CGH) – Q1 operational summary and Tulkubash update
Goldplat (LON:GDP) – Sale of Kilimapesa gold mine completed
KAZ Minerals (LON:KAZ) – Bidders win shareholder support to take miner private
Copper hits new high at - $9,679/t – as price heads towards $10,000/t
Strong ongoing demand for copper is lifting prices in China and the US.
A weaker US dollar, industrial action in Chile, logistical disruption in Peru due to Covid-19.
Demand is currently being driven by strong GDP growth in China and the US, led by ongoing construction and consumption of domestic appliances.
New demand from manufacturers of Offshore Wind Turbines for rotor windings and for subsea cables to transport power to grid connections on shore.
EVs also use substantially more copper than conventional autos and are thought to require more copper than manufacturers thought was required.
Eg. there is a difference between real-world operation on a daily basis and theoretical tolerances.
Iron ore – record premiums for higher grade iron ore over lower grade material
Chinese steelmakers are paying record premiums for 65% at $66.5/t over the price for 58% grade iron ore (Reuters).
62% grade iron ore, the benchmark standard, which currently sells for $183.3/t is selling for ~$33.50/t over the 58% grade.
Steel mills in China are buying better quality iron ore to meet stricter environmental standards through the winter months and to avoid ‘relegation’ whereby less efficient mills may be forced to close by policies designed to promote better practice.
Rebar prices climbed to $803.6/t today from US$786.3/t on Friday indicating price strength throughout the supply chain enabling steel mills to pay more for better quality iron ore.
Iron ore inventory levels at Chinese ports have fallen below normal levels due to supply disruption from Australia and stronger than usual demand.
Rising costs will inevitably be passed onto customers which will feed through into inflation.
Chinese steel futures close at record highs amid robust demand
Chinese steel futures closed at all-time highs on Monday, underpinned by robust demand and concerns over production cuts.
Officials in Shaanxi and Hebei Provinces urged local departments to verify steelmakers’ crude output in 2020 explain those whose production exceeded designated capacity.
Hebei officials have recently issued a notice asking mills to implement production-control measures in the second quarter.
The most-active construction rebar on the Shanghai Futures Exchange rose as much as 4.3% to 5,475 yuan ($843.6)/t (Reuters).
Question: will the rise in theft of Autocatalyst accelerate the move to Electric Vehicles
It seems somewhat ironic that crime might serve to accelerate the clearing of air quality in our cities
The other irony is that the more people move to EVs the less demand there will be for stolen Platinum and palladium autocatalysts
Dow Jones Industrials +0.67% at 34,043
Nikkei 225 +0.36% at 29,126
HK Hang Seng -0.40% at 28,962
Shanghai Composite -0.95% at 3,441
Economics
Germany – April IFO Business Confidence index 96.8 vs 96.9 last and 97.8 expected
Germany’s business confidence rose for a third straight month in April, although the figure came in lower than expected.
Strong demand from the US and China has filled order books in the manufacturing sector and driven strong momentum in industrial production.
The services sector is lagging somewhat as a result of lockdowns and other restrictions hampering activity.
UK – Pandemic has caused biggest annual fall in employment for older workers since 1980s
The decline in the employment rate for the over-50s has been twice as big as for those aged between 25 and 49, according to the ONS.
The fall in employment among those aged over 50 has been a 1.4 percentage point decline vs a 0.7 pp dip for those aged between 25 and 49.
ONS stats show that there were 109,000 more unemployed workers aged 50-64 between December and February 2021 than the same period a year before.
For those in the age group to get new jobs, typical hourly earnings fell 9.5% compared before being unemployed.
India – Countries pledge support as Covid-19 crisis worsens
Countries including the US and UK have pledged support to India as the country’s management of the covid pandemic continues to spiral out of control.
Oxygen concentrators and ventilators are being sent from the UK, with the first load due to arrive tomorrow.
India recorded 349,691 new infections and 2,767 deaths on Sunday – the highest since the start of the pandemic.
Czech Republic – EU Audit demands return of EU subsidies from Agrofert Holding due to control by Czech President
The Check Prime Minister has described EU Auditors as ‘mafia’ after they demanded the return of subsidies granted to Agrofert Holding, an agrochemical giant formerly owned by Prime Minister Babiš.
The PM had been forced to put the company in trust funds to be in line with Czech law but the Audit found that Babiš still controls Agrofert and should repay > €10m iun subsidies.
Babiš claims he does not have any influence on the payment of EU subsidies.
Currencies
US$1.2091/eur vs 1.2052/eur last week. Yen 107.77/$ vs 107.89/$. SAr 14.267/$ vs 14.289/$. $1.392/gbp vs $1.389/gbp. 0.777/aud vs 0.774/aud. CNY 6.490/$ vs 6.492/$.
Commodity News
SHFE ‘Shanghai Futures Exchange’ market will be closed from 3-5 May
Precious metals:
Gold US$1,778/oz vs US$1,784/oz last week
Gold ETFs 99.1moz vs US$99.1moz last week
Platinum US$1,239/oz vs US$1,213/oz last week
Palladium US$2,894/oz vs US$2,844/oz last week
Silver US$25.96/oz vs US$26.08/oz last week
Base metals:
Copper US$ 9,679/t vs US$9,493/t last week
Aluminium US$ 2,382/t vs US$2,385/t last week
Nickel US$ 16,460/t vs US$16,150/t last week
Zinc US$ 2,871/t vs US$2,805/t last week
Lead US$ 2,070/t vs US$2,043/t last week
Tin US$ 27,200/t vs US$26,940/t last week
Energy:
Oil US$65.5/bbl vs US$65.9/bbl last week
Natural Gas US$2.714/mmbtu vs US$2.759/mmbtu last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$183.3/t vs US$180.1/t
Chinese steel rebar 25mm US$803.6/t vs US$786.3/t
Thermal coal (1st year forward cif ARA) US$73.8/t vs US$74.3/t
Coking coal swap Australia FOB US$141.5/t vs US$146.5/t
Other:
Cobalt LME 3m US$49,750/t vs US$49,750/t - McAra deposit mineral resource surpasses 450 tonnes of cobalt
Battery Mineral Resources announced that it has defined a cobalt mineral resource in excess of 450 tonnes.
First new cobalt-mineral dominant resource found in the Sudbury region in the past 50 years.
NdPr Rare Earth Oxide (China) US$85,523/t vs US$85,487/t
Lithium carbonate 99% (China) US$12,636/t vs US$12,631/t
China Spodumene Li2O 5%min CIF US$630/t vs US$630/t
Ferro-Manganese European Mn78% min US$1,627/t vs US$1,621/t
China Tungsten APT 88.5% FOB US$272/t vs US$272/t
China Graphite Flake -194 FOB US$510/t vs US$515/t
Battery News
Germany aims to increase tenders for renewables in 2022
The additional tenders could take the allocations for solar from 1.9GW to 6GW for 2020.
They are also aiming to increase tendered onshore wind power from 2.9GW to 4GW.
Vattenfall granted permit for Swedish wind farm
Vattenfall have been granted a Natura 2000 permit to build a wind farm in Kriegers Flak.
Permit only given after environmental studies to facilitate coexistence between wind power and environmental considerations.
The 640MW farm will have 40-50 turbines.
Part of the regions plans to increase renewable energy generation and consumption. The new wind farm will generate approx. 20% of Skåne County annual consumption.
Company News
Bluejay Mining* (LON:JAY) 8.96p, Mkt cap £87m – 3,000m drill program scheduled for Enonkoski jv with Rio Tinto in Finland
BUY - Valuation 37.7p
Bluejay Mining report the scheduling of a 3,000m drill program on the Enonkoski license in the Enonkoski mine area in Finland.
The new targets at Tevanjoki and Laukunsuo show nickel anomalies and historical observations of mineralised noritic outcrops and boulders.
These are similar to the rock-package at the nearby former Laukunkangas (Enonkoski) mine which produced 6.7mt grading 0.78% nickel and 0.22% copper.
Drilling is to be done by ALS with the results evaluated by Bluejay and Rio Tinto.
Further exploration is planned within the Enonkoski project area this summer along the >15km project area.
The first phase of the drilling is scheduled to start in early May focussing on Tevanjoki and Laukunsuo where outcropping norites show up to 1.1% nickel
Drilling is to be done within a three-km radius of the former Outokumpu, state-run, polymetallic mine which operated from 1984-1994 till low metals prices and rising mining costs forced its closure.
Previous drilling at the mine showed 32.90m grading 4.09% Nickel, 0.56% Copper, 0.17% Cobalt and 19.70m grading 6.12% Nickel, 1.94% Copper, 0.29% Cobalt highlighting concentrations of high-grade material within the larger orebodies.
We believe the Enonkoski orebodies are made up of large remobilised VMS deposits resulting in a chain of separated metals along a decent strike length.
Under the joint venture agreement Rio Tinto may acquire up to a 75% of Enonkoski through $20m of expenditure on the property.
Stage One – allows Rio Tinto to gain a 51% stake in the old mine by spending US$5m over three years with $0.4m to be spent by 30 March 2021
Stage Two – gives 65% ownership for another $5m of expenditure by November 2025
Stage Three – allows Rio Tinto to take 75% for a further $10m by November 2029
Beyond Stage Three, each party shall fund its respective 75%:25% share of project expenditure or be diluted
Dundas ilmenite project: a further rise in the ilmenite price this month is positive news for the project.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland. The analyst recently bought shares in Bluejay Mining.
Chaarat Gold* (LON:CGH) 24.9p, Mkt Cap £171m – Q1 operational summary and Tulkubash update
Chaarat Gold reports that its Kapan gold mine in Armenia produced 16,174oz of gold equivalent during the three months ending 31st March at an all-in-sustaining (AISC) cost of US$1,024/oz.
The output represents a 21% increase over the 13,353oz produced, and an almost 5% reduction in the US$1,074/oz AISC, compared Q1 2020.
The company does, sadly, record a fatal injury at the mine as a “drilling contractor's employee walked over a blocked ore pass against basic general safety practices and behavioural safety principles”.
The company confirms that it remains on track to deliver its current production guidance of 57,000oz of gold equivalent production during 2021. Chaarat Gold also confirms that it expects vaccination of its workforce against Covid19 to start during Q2.
At the Tulkubash project in Kyrgyzstan, project preparation work has progressed in line with expectations and “mobilisation after the winter period … [is] … planned for May. Full stage construction activities … [are expected] … to commence once project financing is completed”.
Exploration at Tulkubash is also to re-commence shortly with resource drilling planned for areas close to the planned pit and to establish the potential of previously drilled areas to the north-east of the current reserve to extend the planned resource life.
The company expects to publish information on the updated BFS for Tulkubash during May “along with a revised Mineral Resource estimate and Ore Reserve.”
Chaarat Gold says that it “is on track to secure a debt facility that, together with an equity contribution from the Company, will fully fund the USD110 million required for the construction of Tulkubash and enable the asset to be brought into production during H1 2021”.
Goldplat (LON:GDP) 7.85p, Mkt Cap £13.1m – Sale of Kilimapesa gold mine completed
Goldplat confirms the completion of its sale of the Kilamapesa gold mine in Kenya to Mayflower Gold Investments following the agreement of both parties to the transaction to waive “the requirement that Papillon Holdings … completes its proposed reverse takeover of Mayflower Gold … and re-admission to trading on the London Stock Exchange”.
Goldplat’s subsidiary,GMR, is to receive an initial consideration of US$1.5m as an unsecured debenture “to be satisfied by cash and/or the issue of shares to that value in Papillon payable on Papillon's re-admission to trading on the LSE following completion of the RTO, with 30% (USD450,000) of the initial consideration payable in cash”.
In addition “Mayflower has agreed to pay USD150,000 of the loan balance outstanding from Kilimapesa to GMR and Mayflower Gold and Mayflower have waived all further conditions, specifically the conditions with regard to the renewal of the prospecting license”.
GMR will also receive a 1% NSR on production from Kilamapesa up to a maximum of US$1.5m.
KAZ Minerals (LON:KAZ) 849.2p, Mkt Cap £4.14bn – Bidders win shareholder support to take miner private
Kaz Mineral’s chairman has finally won enough investor support to take KAZ Minerals private, after being forced twice to raise the bid.
Mr Novachuk and fellow board member Mr Kim have been trying to buy out the company since October, and the pair’s latest bid has now reportedly secured 93% of shareholder approval.
The company’s initial offer of 640p was met with resistance, as was a bid of 780p- with a deal of 869p receiving support.
The private entity will now seek to develop its Baimskaya project, one of the largest undeveloped copper deposits in the world.
Recent Interviews:
VOX Markets: 21/04/20: https://www.voxmarkets.co.uk/listings/LON/BMN
14/04/20: https://audioboom.com/posts/7844265-john-meyer-talks-about-china-afritin-kefi-minerals-strategic-minerals
IGTV: Improved global economic forecasts from the IMF provides trading opportunities: https://www.youtube.com/watch?v=_GXKPqzuCG0
VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw
*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%”
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The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
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Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
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Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
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