SP Angel . Morning View . Monday 10 05 21
Copper and Gold continue to rise as US labour data disappoints
We are raising funds for a private copper company in Chile which has grabbed our interest
The company has a historic ‘high-grade’ copper mine which was abandoned >100 years ago.
Drilling is planned to test two large geophysical targets underneath the historic mine may be mineralised porphyry structures.
There is also potential to reopen the historic mine which lies relatively close to a number of the world’s major copper mines
Please let us know if you are interested in participating in this opportunity.
* SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors).
Castillo Copper (LON:CCZ) – Resumption of field exploration in Queensland
Gem Diamonds (LON:GEMD) – Recovery of 370 carat white diamond from Letšeng
Oriole Resources (LON:ORR) – Drilling at Bibemi, Cameroon
W Resources (LON:WRES) – Receipt of regional government grant
Gold prices near three-month high on worse-than-expected US jobs data
Gold prices were steady near three-month highs this morning, as week US job growth figures supported the case for continued economic stimulus and low interest rates.
Non-farm payroll numbers showed the US added 266,000 jobs in April vs Bloomberg’s economist survey predicting a 1m hiring surge.
Gold prices posted their biggest weekly gain since November last week, as the dollar index fell over 1%- making gold cheaper for holders of other currencies.
Spot gold rose 0.2% earlier this morning to $1,834/oz, while US gold futures also rose 0.2% to $1,834/oz (Reuters).
Covid – Indian double mutant strain in India may be resistant to vaccine protection according to a top WHO scientist.
The Indian Covid strain which has been declared a ‘variant of concern’ by Public Health England
Inflation – CPI inflation is expected to rise sharply in Q3 in the UK this year (BoE)
The BoE expects inflation to rise to 2% in Q3 as households say they will spend at least some part of their savings as the economy opens up
Survey results suggest households plan to spend a portion of their lockdown spending on property, home improvements and the repayment of debt as well as investment in financial products.
The news should be good for equities which have seen elevated private investor inflows since the lockdown
Iron ore futures surge more than 10% in Singapore on Monday
Iron ore futures surged past $226/t in Singapore, extending the all-time-high price and fueling the boom in commodities that has triggered inflation concerns.
Prices jumped by $20.74/t or 10.1%, by midday in Singapore on Monday- extending this year’s gains by 40%.
Contracts on the Dalian Commodity Exchange climbed by the maximum daily limit of 10% in the first 10 minutes of its open today.
Iron ore imports into China fell 3.5% to 98.57mt as loading was disrupted at Australian ports due to weather issues
One ton of steel requires around 1.6t of iron ore indicating a substantial inflationary impact from the ongoing rise in iron ore prices
Copper ($10,708/t) - prices power ahead on stimulus demand
Copper prices are powering ahead having broken through key technical support levels last week
There now appears to be little to stop the metal rising beyond $11,000/t and maybe onto $12,000/t over the coming months
Joe Biden’s comments on Friday that ‘More Help For Economy Is Needed’ helped prices higher, indicating no let up in his push to invest trillions in the US economy
Unwrought copper imports into China rose 5.1%yoy to 552,317t despite falling 12.2% mom
Concentrate imports fell 5.3% yoy to 1.921,t while falling 11.5% mom due to Mongolian border issues and logistics out of Latin America
Chile – The Lower House of the Chilean parliament approved the introduction of a new and progressive tax on copper sales
The legislation, if approved, could see taxes on copper rise to 75% from 2024
Fortunately for copper miners the government opposes the proposal and further debate is likely to either water down or refuse the proposal.
Dow Jones Industrials +0.66% at 34,778
Nikkei 225 +0.55% at 29,518
HK Hang Seng -0.29% at 28,529
Shanghai Composite +0.27% at 3,428
Economics
US – S&P closed at new all-time high on Friday despite disappointing labour numbers.
Non-farm payrolls came in at 266k in April compared to a 1,000k reading.
Unemployment ticked up to 6.1% vs a consensus of 5.8% as labour force participation rate also climbed.
Growth in new jobs was hampered by weak manufacturing payrolls (-18k) reflecting supply chain bottlenecks.
On a positive note, jobs numbers showed meaningful gains in leisure and hospitality.
Labour Force Participation Rate: 61.7% v 61.5% in March and 61.6% est.
Av Hourly Earning (%yoy): 0.3 v 4.2 in March and -0.4 est.
US 10-year bond yields fell sharply initially but have since recovered and have continued to strengthen following the news
US Consumer Credit came in at 25.841bn in March vs an estimate of $20.000bn
China - Trade surplus $43bn in April vs US$14bn in March
Exports rose 32.3%yoy (30.6%) and
Imports 43.1%yoy (38.1%) with
Japan – Services PMI revised higher to 49.5 in April vs 48.3 in March )
Composite PMI was also revised higher to 51.0 in April vs 49.9 in March
Germany - Trade surplus €20.5bn in March vs €18.2bn in April
Exports rose 1.2% mom in March vs a fall of 1% in April
Imports up 6.5% in March vs 3.6% in April
Industrial production rose 2.5% in March vs -1.9% in April as the recovery feeds through
A ransomware cyber-attack closes of the Colonial pipeline carrying almost half the fuel consumed on the US east coast.
The US government issued emergency legislation on Sunday lifting limits on the transport of fuels by road to ease the supply as the pipeline remains offline.
“This Declaration addresses the emergency conditions creating a need for immediate transportation of gasoline, diesel, jet fuel and other refined petroleum products and provides necessary relief,” the US transportation department said on Sunday.
The Colonial is the largest refined products pipeline in the US that transports 2.5m barrels of fuel a day from refineries on the Gulf Coast to markets such as Atlanta, Washington and New York, FT writes.
Fosun Pharma, a Chinese Chinese pharmaceuticals company, will set up a JV with BioNTech for the manufacture and marketing of the German company’s mRNA Covid-19 vaccine, FT reports.
BioNTech will license its production technology to the JV and Fosun will provide a manufacturing facility with an annual capacity of up to 1bn doses.
UK – The government is expected to announce the third stage of lifting the Covid-19 lockdown from next Monday.
Under the next stage of reopening people will be able to meet in groups of up to 30 outdoors, while six people or two households can meet indoors.
House prices gained the most in seven months in April on the back of a stamp duty holiday extension and an improving economic outlook.
Average price climbed 1.4%mom last month vs +1.1%mom recorded in March, Halifax said.
That marks a 8.2%yoy increase, the largest annual gain in five years.
South Korea – The government is set to accelerate its vaccination programme with 192m doses ordered.
“The government will complete the administration of the first doses of vaccinations to all eligible people by the end of September and advance the target date of achieving herd immunity from the initially planned November,” President Moon Jae-in said.
More than 13m people are planned to be inoculated in the first half of the year or ~25% of its over 50m population.
Currencies
US$1.2143/eur vs 1.2073/eur last week. Yen 109.05/$ vs 109.17/$. SAr 14.055/$ vs 14.247/$. $1.407/gbp vs $1.392/gbp. 0.785/aud vs 0.777/aud. CNY 6.429/$ vs 6.461/$.
Commodity News
Precious metals:
Gold US$1,835/oz vs US$1,819/oz last week
Gold ETFs 98.3moz vs US$98.3moz last week
Platinum US$1,261/oz vs US$1,246/oz last week
Palladium US$2,942/oz vs US$2,955/oz last week
Silver US$27.67/oz vs US$27.31/oz last week
Base metals:
Copper US$ 10,708/t vs US$10,236/t last week
Aluminium US$ 2,581/t vs US$2,534/t last week
Nickel US$ 18,025/t vs US$17,975/t last week
Zinc US$ 3,048/t vs US$2,968/t last week
Lead US$ 2,246/t vs US$2,222/t last week
Tin US$ 29,630/t vs US$29,825/t last week
Energy:
Oil US$68.7/bbl vs US$68.3/bbl last week
There was a slight pullback in oil prices following last week’s highs, but the rally is still very much on and bullish sentiment is palpable as summer driving season nears in the US
According to Bloomberg, OPEC kept its crude oil production essentially flat in April, just before the OPEC+ alliance is set to raise output by 600,000bopd this month
The 13 members of OPEC saw their total production at 25.27MMbopd in April, which was around 50,000bopd lower compared with March, as a reduction in oil supply from Libya, exempted from the cuts, were mostly offset by rising production from another OPEC member exempted from the OPEC+ pact
Crude oil production from the OPEC+ group is set to grow by over 2MMbopd over the next three months to July
In early April, OPEC+ decided to gradually increase collective oil production by 350,000bopd in each of May and June and by more than 400,000bopd in July
Additionally, Saudi Arabia will also gradually ease its extra unilateral cut of 1MMbopd over the course of the next few months, beginning with monthly production increases of 250,000bopd in both May and June
According to the Bloomberg survey, the biggest rises and declines at individual OPEC members in April were seen at two of the oil-producing countries exempted from the pact, Libya and Iran
Libya’s production fell by 80,000bopd to 1.14MMbopd
Meanwhile, Iran ramped up its output by 60,000bopd to 2.41MMbopd
Last week, the monthly Reuters survey showed that OPEC likely raised its oil production in April, driven by another supply increase from Iran
Iran raised its oil production by as much as 200,000bopd in April compared to March to reach an output of 2.5MMBopd
As a result of Iran’s higher output, the total production of all 13 members of OPEC rose by 100,000bopd to 25.17MMbopd in April
Natural Gas US$2.938/mmbtu vs US$2.937/mmbtu last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$204.4/t vs US$194.4/t
Chinese steel rebar 25mm US$885.3/t vs US$840.1/t
Thermal coal (1st year forward cif ARA) US$78.2/t vs US$78.0/t
Coking coal swap Australia FOB US$126.0/t vs US$124.0/t
Other:
Cobalt LME 3m US$45,165/t vs US$45,165/t
NdPr Rare Earth Oxide (China) US$82,836/t vs US$82,412/t
Lithium carbonate 99% (China) US$12,756/t vs US$12,691/t
China Spodumene Li2O 5%min CIF US$630/t vs US$630/t
Ferro-Manganese European Mn78% min US$1,694/t vs US$1,684/t
China Tungsten APT 88.5% FOB US$272/t vs US$272/t
China Graphite Flake -194 FOB US$505/t vs US$505/t
Chinese magnesium prices hit 12-year high - Chinese magnesium prices rose to their highest levels since October 2008, driven by rising feedstock costs, (Argus Media).
The range for 99.9% grade magnesium metal rose by Yn1,400/t from 7 May to 19,000-19,400 yuan/t ($2,955-3,017/t).
Domestic prices have risen by Yn1,700/t since 7 May as producers continued to offer prices to keep pace with rising coal feedstock prices.
Keras Resources* is currently developing its Nayega Manganese Project in Togo, where it has a JORC Resource of 13.97mt @12.4% Mn.
*SP Angel act as Nomad and Broker to Keras Resources
Battery News
South Korea plans to build largest floating wind complex by 2030
South Korea announced plans to invest $32.1b in the construction of what would be the world’s largest floating offshore wind farm.
The project will have a total capacity of 6GW and will generate enough energy for 5.76 million households.
A portion of the output could be used for hydrogen production in the long run.
BMW and Ford bet on solid-state batteries
The two manufacturing giants are leading investment in US-based solid-state battery start-up Solid Power.
The second investment of $130m follows a $20m investment made by the companies in 2018.
Solid Power’s solid-state cells can be manufactured using existing Li-ion manufacturing equipment but do not need to undergo the electrolyte filling and cycling phase.
CNPC plans $1.5bn investment for renewables
China’s largest oil company, China National Petroleum Corporation (CNPC), plans to create an investment vehicle with capital of $1.54b to focus on investments in ‘emerging’ industries.
This marks the first time CNPC has put new energy development on a par with oil and gas as a business priority.
Company News
Castillo Copper (LON:CCZ) 2.3p, Mkt Cap £24.5m – Resumption of field exploration in Queensland
As the wet-season in north-west Queensland draws to a close, Castillo Copper’s Managing Director, Simon Paull has outlined the company’s exploration plans for its Mt Oxide project including the Big One and Arya prospects,
A geophysical team is currently on site at the Big One prospect and “Once the geophysical results are interpreted and new targets formulated, our drilling team will complete the remainder of the campaign that was designed in late 2020”.
Mr. Paull said that “The drilling crew will then move to the Arya Prospect, where there are two shallow targets around 25m deep. However, most of the intrigue is focused on the huge interpreted 130m thick potential massive sulphide target that is 1.5km long and 450m wide at a depth of around 430m”.
Subject to the assay results from this drilling “further drilling may be required to build our understanding of these two primary targets. However, there is no shortage of exploration potential for the Mt Oxide Project as there are another 19 targets that warrant investigation”.
Conclusion: The resumption of field exploration and drilling should generate additional insights into Castillo Copper’s Mt Oxide project and help to refine the exploration priorities. We await results as the work proceeds.
Gem Diamonds (LON:GEMD) 67.6p, Mkt Cap £94.9m – Recovery of 370 carat white diamond from Letšeng
Gem Diamonds has reported the recovery of a 370 carat white Type IIa diamond from its Letšeng mine in Lesotho.
The announcement follows the news last week that the mine had yielded a similar 254 carat diamond.
The Letšeng mine has a track record of producing large, high quality diamonds and today’s announcement is further confirmation of its ability to produce type Type IIa stones including a 233 carat stone in September last year and a 442 carat diamond in August and a total of over 760 diamonds larger than 10 carats in size produced during 2020.
Oriole Resources (LON:ORR) – 0.78p, Mkt cap £11.3m – Drilling at Bibemi, Cameroon
Oriole Resources reports the completion of3,118m of diamond drilling its initial 29 holes programme at the Bibemi prospect in Cameroon.
The company reports that “Since reporting results from the first hole, which confirmed orogenic-style gold mineralisation to a depth of more than 90 metres below surface … [it] … has been made aware of delays at the assaying laboratory in Cote d'Ivoire that have impacted turnaround times for the remaining results, predominantly due to the widely-reported national power outages. The Company has been reassured that measures have been put in place so that normal turnaround times (14 days from receipt/clearance from customs for gold analysis) have now resumed. The results of subsequent multielement analysis will be longer, due to that analysis being completed in Canada”.
Oriole Resources confirms that completion of the analysis will “satisfy the conditions to earn a 90% interest in RMC Cameroon SARL which owns the Bibemi project”.
Regional scale mapping and stream sediment sampling within the “Central Licence project which covers a continuous land package of 3,592 square kilometres” has started and results are expected in H2 2021.
W Resources (LON:WRES) 9.5p, Mkt Cap £7.4m – Receipt of regional government grant
W Resources has confirmed the receipt of an €5.2m grant from the regional government of Extremadura in Spain where its La Parilla tungsten/tin operation is located.
W Resources’ Michael Masterman said that “Receipt of the €5.2m grant proceeds is a long awaited and extremely timely outcome. It's a true credit to the team to have been awarded this grant and received the cash funds. We have immediately used the funds to reduce debt and strengthen our balance sheet.”
Mr. Masterman continued by saying that “With tin prices up 100% in the last six months, strong tungsten prices and materially improved plant performance we expect a strong second half of 2021.”
Recent Interviews:
VOX Markets: 06/05/20: https://audioboom.com/posts/7861994-john-meyer-on-copper-afritin-kodal-minerals-phoenix-copper-power-metals
28/04/20: https://www.voxmarkets.co.uk/media/60896b3f017903524c8e0936/?context=/listings/LON/BMN/multimedia/
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%”
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
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
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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, Tungsten, Spodumene, Ferro-Manganese, Graphite
Asian Metal