SP Angel . Morning View . Tuesday 18 05 21
Metals prices continue to rise on indications of ongoing US stimulus
Copper prices rise on prospect of tighter regulations in top producer Chile
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).
Ariana Resources (LON:AAU) – Drilling results from the Banu vein at Kiziltepe
Bastion Minerals* (ASX:BMO) – Geophysical anomalies at the Cometa copper project, Chile
Conroy Gold & Natural Resources (LON:CGNR) – Drilling at Clontibret
Tertiary Minerals* (LON:TYM) – Copper exploration in Zambia
Copper prices rise on prospect of tighter regulations in top producer Chile
On Tuesday, copper prices rose towards a record high set earlier in the month over fresh concerns regarding tighter regulation and higher taxes in Chile.
Chile just elected an assembly that places the writing of a new constitution largely in the hands of the left wing, who want mining companies to share more of their profits.
Across two days of voting, Chileans cast votes for the 155 delegates who will write a new constitution to replace Augusto Pinochet’s 1980 document.
The new constitution is expected to include language that tightens guidelines for mining concessions and their environmental impacts, along with stepping up community engagement in mining areas.
Chile’s lower house has already approved a progressive tax on copper sales, with rates as high as 75% when copper prices surpass $4/lb (Bloomberg).
Peru’s leading presidential candidate, Pedro Castillo, has announced that he wants to impose a similar measure if elected.
Copper prices rose as much as 1.2% to $10,500/t earlier this morning in London, just below the record high of $10,734/t set on the 10th of May.
Copper – demand to continue to rise 4.9% in 2021 and 3.3% in 2022 (IWCC)
Demand for copper is forecast to rise by 4.9% in 2021 and 3.3% in 2022 according to the International Wrought Copper Council (Reuters)
Demand for refined copper is expected to rise to 25.275mt in 2022 vs a 5.4% rise in supply to 25.25mt roughly balancing the market.
The IWCC expect a copper market demand to rise to 24.458 vs supply of 23.95mt leading to a deficit of 500,000t this year
The IWCC see demand in China rising 2.6% to 13.306mt in 2021
Gold prices hit three-month-high on inflation worries and falling yields
Gold prices continued to rise on Tuesday, hitting their highest level in over three months to sit at the $1,870/oz mark.
Hedge fund managers increased their gold long-only position in US futures and options by 12% from a week earlier and the most since June, Bloomberg reports.
While the Federal Reserve called the latest inflation data ‘transitory’, expectations for further increases in consumer prices could further boost gold’s appeal.
US 10-year yields extended declines this week, following a report on Friday that showed retail sales were essentially unchanged in April.
Bullion has risen 9% so far in Q2, reversing last quarter’s sharp fall, which was gold’s worst quarter since 2016.
Rare Earths - China April rare earth exports fell 23% on month prior
China’s REE exports fell 23% to 3,737t in April.
Exports declined despite growing overseas demand. Mainly due to the shortage of shipping containers (SMM News).
Rare earth exports to Japan, US, the Netherlands and France accounted for nearly 90% of China’s total exports in Q1.
Chinese steel production rose 20% to 453mt in first four months of 2021 with average daily output at 3.77mt
China crude steel output hits record high in April
Crude steel output rose to 97.85mt last month, exceeding the previous record high of 94.85mt in August 2020, according to China’s NBS.
Average crude steel output rise by 7.6% to 3.26mtpd vs 3.03mtpa in March (Argus Media).
The authorities are concerned at the high price of iron ore and the potential for overproduction of steel particularly by less efficient and polluting steel mills.
We suspect to see further news on steel mill capacity being taken off line .
Government policy appear to be to force less efficient furnaces to close to favor better quality producers.
We suspect parastatal companies may find better favor and higher margins as the culling of excess capacity begins.
SQM shares collapse on Chile as socialist candidates win majority of votes in election
Political power is poised to swing to the left in Chine opening the way to constitutional change.
Radical left leaders have been demanding a re-drafting of Chile’s constitution in a move which may see result in changes to SQM and other miners in the region.
Chile’s IPSA stock index its largest daily fall since the pandemic .
The prospect of political power shifting further to the left raises uncertainty for manufacturers and miners and may hold back new investment into the region
Dow Jones Industrials -0.16% at 34,328
Nikkei 225 +2.06% at 28,407
HK Hang Seng +1.28% at 28,555
Shanghai Composite +0.30% at 3,528
Economics
US – Fed Vice Chair Richard Clarida highlighted latest weak labour numbers arguing the economy continues to require monetary policy support.
“We have not made substantial further progress” on the central bank’s goals for employment and inflation to begin scaling back stimulus, Clarida said during a webinar on Monday.
US Senate passes bill to inject >$100bn into US research and development to develop American technology
The bi-partisan ‘Endless Frontier Act’ is expected to finally pass through government by the end of the month despite ‘an unresolved feud over the roles the National Science Foundation and Department of Energy should play in the flagship R&D initiative the legislation proposes.’ (aip.org)
US and China to invest in semiconductor chip manufacturing due to shortages from Taiwan
Taiwan’s domination of the global semiconductor market is causing the US and China to look at how to develop manufacturing back at home.
The recent shortage of chips, due, in part to demand for games consoles and other internet-connected devices continues to slow production lines for new vehicles and other machinery just when policymakers are stimulating new economic activity.
Joe Biden has proposed government support of US$50bn for semiconductor manufacturing and research with negotiations underway on the proposed funding.
US sanctions restrict mainland China from accessing advanced chip design and research is holding back Chinese semiconductor manufacturing.
The chip shortage is expected to continue into next year and is a useful reminder of how reliance on a single center of excellence for a critical products carries additional systemic risk.
For now China’s reliance on semiconductor imports gives the West some leverage over Chinese manufacturing despite the nation’s long-term goal for self-sufficiency.
Japan – Economic growth came in worse than expected falling 1.3%qoq on the back of a 1.4%qoq drop in private consumption amid continuing lockdown restrictions including state of emergency curbs.
Additionally, capital expenditure dropped unexpectedly and export growth slowed sharply.
Consumer spending deducted 1.1pp from headline growth while net exports knocked 0.2pp off the rate.
With restrictions remaining in place constraining consumer demand worries are the economy may slip back into recession through Q2/21.
PPI rose 0.7% in April vs 1% in March and rose 3.6% yoy in April vs 1.2% yoy in March
UK – The unemployment rate pulled back during the March quarter as economic recovery gains pace.
The rate averaged 4.8%, down from 5.1% in the previous quarter, according to the Office for National Statistics.
While the number of employed employees increased for a fifth consecutive month in April, the number of employed remained 772,000 below pre-pandemic levels.
UK ministers are considering local restrictions in parts of England reporting increased cases of new coronavirus variant, environmental secretary George Eustice said.
“Our preferred outcome is that we really double down and get the vaccination rates up in those areas that are seeing these problems… (so that) we won’t have to have any such local lockdowns”.
Cases of the variant first identified in India had increased to 2,323, up 796% since last Thursday with 86 local authorities having reported more than five cases of the strain.
The strain is reported to be more transmissible than the one that was first recorded in Kent.
India - Inflation rose 0.4% in April vs 0.3% in March and rose 1.1% yoy in April vs 0.8% yoy in March
Italy – The government to start phasing out a national curfew from June 21 in low infection areas.
Italy that recorded the second-highest Covid-19 death toll in Europe after Britain has seen its daily deaths and cases decline in recent weeks and more people being vaccinated, Reuters reports.
As of start of the week, 8.8m people or ~15% of the population have been fully vaccinated with slightly over 30% having received at least one shot.
The government is running tier system (from white to high-risk red zones) with some 19 of 20 Italian regions currently in yellow tier and one region in orange category, the third highest risk level.
Six regions will become white by the end of the first week of June.
Restaurants will allow to serve customers inside as of June 1 and sports facilities will reopen on May 24 in yellow and white regions.
In an effort to support summer tourism, Italy lifted mandatory quarantine for visitors from the EU, Britain and Israel who test negative for Covid-19.
Brazil – Delays to supply of active pharmaceutical ingredients of the China’s Coronovac jab see Sao Paulo based lab suspending production completely
Currencies
US$1.2196/eur vs 1.2143/eur yesterday. Yen 109.01/$ vs 109.19/$. SAr 14.037/$ vs 14.152/$. $1.419/gbp vs $1.411/gbp. 0.781/aud vs 0.776/aud. CNY 6.425/$ vs 6.437/$.
Commodity News
Precious metals:
Gold US$1,870/oz vs US$1,853/oz yesterday
Gold ETFs 100.4moz vs US$100.2moz yesterday
Platinum US$1,244/oz vs US$1,232/oz yesterday
Palladium US$2,918/oz vs US$2,899/oz yesterday
Silver US$28.55/oz vs US$27.67/oz yesterday
Base metals:
Copper US$ 10,481/t vs US$10,271/t yesterday
Aluminium US$ 2,495/t vs US$2,474/t yesterday
Nickel US$ 18,155/t vs US$17,675/t yesterday
Zinc US$ 3,066/t vs US$2,962/t yesterday
Lead US$ 2,219/t vs US$2,180/t yesterday
Tin US$ 29,990/t vs US$29,605/t yesterday
Energy:
Oil US$70.0/bbl vs US$68.6/bbl yesterday
Natural Gas US$3.118/mmbtu vs US$3.038/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$207.7/t vs US$202.6/t
Chinese steel rebar 25mm US$895.8/t vs US$929.6/t
Thermal coal (1st year forward cif ARA) US$77.8/t vs US$79.4/t
Coking coal swap Australia FOB US$138.0/t vs US$138.0/t
Other:
Cobalt LME 3m US$44,095/t vs US$44,095/t
NdPr Rare Earth Oxide (China) US$78,985/t vs US$79,615/t
Lithium carbonate 99% (China) US$12,684/t vs US$12,738/t
China Spodumene Li2O 5%min CIF US$630/t vs US$630/t
Ferro-Manganese European Mn78% min US$1,726/t vs US$1,706/t
China Tungsten APT 88.5% FOB US$270/t vs US$270/t
China Graphite Flake -194 FOB US$505/t vs US$505/t
Europe Vanadium Pentoxide 98% $7.6/lb vs $7.5/lb
Europe Ferro-Vanadium 80% $33.75/kg vs $33.45/kg
Battery News
Ganfeng signs MoU with Argentinian government to build lithium battery factory
Chinese lithium producer, Ganfeng Lithium, has signed a memorandum of understanding with Argentina’s Mining Ministry for the development of a lithium-ion battery factory in the north of the country.
Ganfeng has previously partnered with junior miner Lithium Americas for the development of the Caucharí-Olaroz lithium brine project in Argentina.
The project is on track to start production in mid-2022, which once operational is expected to produce 40,000t per year of battery-grade lithium carbonate equivalent.
Company News
Ariana Resources (LON:AAU) 5.3p, Mkt Cap £54.2m – Drilling results from the Banu vein at Kiziltepe
Ariana Resources reports recent results from eleven holes of its continuing resource drilling of the Banu vein system at its 23.5% owned Kiziltepe mine in Turkey.
The results are reported to confirm a zone of higher-grade mineralisation at the south-eastern end of the vein system and to open up the potential to expand “the open-pittable strike continuity of the vein system from 300m to c. 700m”.
Among the results highlighted today are:
An 4.1m long intersection averaging 3.58g/t gold and 78.9g/t silver from a depth of 98.9m in hole KTP-D38-21, which also contains a shallower intersection of 1m averaging 0.87g/t gold and 33g/t silver from 90.1m depth; and
A 7.1m wide intersection averaging 2.01g/t gold and 70.6g/t silver from a depoth of 42.9m in hole KTP-D26-21; and
A 2.6m wide intersection at an average grade of 5.08g/t gold and 102.5g/t silver from a depth of 20.5m in hole KTP-D28-21.
The company explains that “Hole KTP-D38-21 represents the second deepest hole drilled into the Banu structure to date, testing a vertical depth of 90m … [and that] … The deepest hole at Banu (KTP-RC32-07, 7m @ 1.4 g/t Au + 57.7g/t Ag), intercepts the Banu vein at a vertical depth of 105m. These holes are separated by approximately 200m and both holes demonstrate that the mineralisation remains well developed to these depths and maintains the potential for high grades”.
Ariana Resources explains that “the Banu vein has been tested by drilling to a strike length of 540m and to a vertical depth of 105m. The mineralisation remains open at depth and along strike to the northwest” although, drilling in 2016 confirmed that, towards the south east “the host structure eventually narrows (0.2 - 0.5 metres) and shows lower grades”.
The recent drilling “provides sufficient additional data to:
add confidence to allow a deeper open-pit to be considered, capturing a larger proportion of the current resource,
reduces the reliance of historic surface rock-saw channel sampling on the resource estimation, allowing a more robust optimisation study to be completed, and
potentially increase the overall resource by expanding the data into more sparsely explored areas of the vein”.
Ariana Resources confirms that “Banu and surrounding area will continue to remain a focus for future exploration at Kiziltepe. To date, only 25% (840 meters) of known veins in the Banu area have been sufficiently tested for resource definition. The remaining 75% (2,500m) of less tested veins (primarily the Fidan-Gamze and Vein 7 structures), will remain the subject to future drilling plans, subject to approval and expansion of new exploration permits”.
The results from the Banu part of the Kiziltepe mine follow results of drilling in the Arzu area of the mine, published in April, which suggested that the grade of Arzu Far North increases to the northwest, while also demonstrating the continuity of the vein system along strike and at depth beyond the current permitted areas.
Managing Director, Dr. Kerim Sener, explained that the results from Banu “demonstrate the continuity of the vein system to at least 100m below surface over more than 200m of strike. The higher-grade zone at Banu, like those on Arzu South, appears to plunge moderately towards the south-east. This finding, in particular, highlights the opportunity to identify other plunging shoots containing high-grade mineralisation elsewhere along strike”.
Conclusion: Continuing drilling at Kiziltepe is identifying potential for extensions to known mineralisation, both laterally and at depth, which may in due course extend the mine life and expand the resource.
Bastion Minerals* (ASX:BMO) A$0.212, Mkt Cap A$13.3m – Geophysical anomalies at the Cometa copper project, Chile
In an announcement to the Australian Stock Exchange, Bastion Resources reports that helicopter-borne magnetic and radiometric data from its early stage exploration Cometa project in the Atacama region of Chile has identified “multiple high-quality copper targets across a range of geological and structural settings”.
Director, Ross Landles, explained that alteration zones associated with surface copper mineralisation and coincident geophysical anomalies reinforce “the potential for high-grade IOCG and large scale porphyry copper-gold systemns within the Cometa district”.
He confirmed that the company is looking forward to “defining drill targets and furthering the Cometa Copper Project”.
Cometa covers an area of 56km2 of granted exploration and mining permits located around 10km south of Hot Chilli’s Cortadera Project which hosts a JORC compliant indicated and inferred resource of 451mt at an average grade of 0.37% copper, 0.13g/t gold, 0.7g/t silver and 61ppm molybdenum (0.46% copper equivalent CuEq) and close to Hot Chilli’s Productora 273mt development project which grades around 0.5% CuEq
Bastion Minerals says that “Initial field observations are showing numerous areas with broad zones of copper oxide mineralisation at surface … [and that] … Assay results for the first field campaign are imminent and results for the second campaign are expected early June”.
*Certain SP Angel staff and partners hold shares in Bastion Minerals
Conroy Gold & Natural Resources (LON:CGNR) 25p, Mkt Cap £9.5m – Drilling at Clontibret
Conroy Gold has announced that drilling is underway at its Clontibret gold target in Co. Monaghan where the company has defined a JORC (2012) compliant 4.9mt indicated resource of approximately 260,000oz of gold at an average grade of 1.64g/t and an inferred resource of approximately 6.8mt at an average grade of 1.56g/t gold (340,000 oz).
The company explains that “Some of the current drilling programme at Clontibret will form part of the technical due diligence process” by the Turkish mining company Demir Export A.S. for a proposed earn-in to a joint venture at Clontibret which was announced in February. Expenditure of €4.5m earns Demir a 25% interest with subsequent expenditure of a further €4.5m increases its stake by a further 15% to 40%. Demir can then increase its interest to 57.5% by bringing the project to “construction-ready status”.
Welcoming the start of the latest phase of drilling at Clontibret, Chairman, Professor Richard Conroy, explained that “We believe that Demir Export has the mining expertise and the financial resources not only to bring the Clontibret gold deposit to construction ready status and into operation as a mine, but also to advance the significant gold potential of the other licences along the gold trend to the same status”.
Conclusion: The resumption of drilling at Clontibret forms part of Demir Export’s due diligence for earning an initial 25% interest in Clontibret. We look forward to the results of the exploration.
Tertiary Minerals* (LON:TYM) – 0.34p, Mkt cap £3.9m – Copper exploration in Zambia
Tertiary Minerals has announced the formation of a subsidiary in Zambia, Luangwa Minerals, to explore for and develop copper opportunities.
At this stage, the company is not identifying specific targets of its interest suggesting that exploration and project identification may still be at an early stage.
Today’s announcement explains that it has retained the services of geologist, Marcel Nally, formerly of Moxico Resources, who will own 3% of Luangwa and is expected to become exploration manager.
Luangwa will also retain the services of Mr. Shangwa Chime as Luangwa's Government Liaison Officer. Mr. Chime will own 1% of Luangwa Resources with Tertiary Minerals holding the remaining 96%.
Chairman, Patrick Cheetham, explained that “Copper is increasingly a focus for the Company and with Zambia one of the world's top 10 copper producing countries, producing nearly 900,000 tonnes of copper in 2020, we expect Luangwa to be a valuable addition to the Tertiary asset portfolio”.
Conclusion: Zambia’s established copper provenance and exploration potential is attracting increasing interest as interest in copper is sparked by the global awareness of the raw materials requirements of the accelerating shift towards environmentally benign energy.
*SP Angel act as Nomad and Broker to Tertiary Minerals
Recent Interviews:
VOX Markets: 28/04/20: https://www.voxmarkets.co.uk/media/60896b3f017903524c8e0936/?context=/listings/LON/BMN/multimedia/
21/04/20: https://www.voxmarkets.co.uk/listings/LON/BMN
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
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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