SP Angel . Morning View . Wednesday 23 06 21
Copper leads metals higher on relatively small SRB stockpile release
Graphene producer funding – EIS scheme approval applied for
The company wishes to fund a ramp up in graphene production to get ahead of demand and to develop markets for a number of new, graphene products
The business is also able to upgrade graphite to a higher grade/specifications using its process – rolling out this process also requires funding
Please email if you wish to invest in the company
*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). This offer is open to professional investors only and is not offered to retail investors.
Anglo American (LON:AAL) – De Beers reports continuing robust demand for diamond jewellery from China and the US
Ariana Resources (LON:AAU) – Resource drilling at Derya shows potential for resource expansion at Kiziltepe
Condor Gold* (LON:CNR) – Appointment of lead engineer for La India processing plant design
Lucara Diamonds (CVE:LUC) – Karowe mine yields 1,174 carat diamond
Nordgold (Private) London IPO pulled citing volatility in the price of the precious metal, FT reports.
Savannah Resources* (LON:SAV) – Portuguese Association for the Battery Cluster membership
Base metals prices rise as China plays down first stockpile release
Base metals prices rose on Wednesday morning, after China’s state reserves bureau said it would sell only relatively small quantities in its first release of stockpiles to cool prices.
The first batch for release next month will include 20kt of copper, 30kt of zinc and 50kt of aluminum.
With the exception of zinc, many market participants say the volumes look light compared with expectations.
While China’s metal reserves are not known, they are assumed vast, however they will at some point be in need of replenishment and releasing stockpiles isn’t seen as a long term solution to keep a lid on runaway commodity prices.
Metals prices were also helped by Fed comments, with Jerome Powell reaffirming the central bank’s intent to encourage a ‘broad and inclusive’ recovery of the job market, and not to raise interest rates too quickly.
Copper – China’s SRB sold 20,000t for 5th July delivery Yesterday
Bloomberg report that China’s State Reserve Bureau sold 20,000t of copper for delivery on 5th July.
It’s not a huge sale at around $185m worth of copper but news of SRB sales has hit sentiment reducing prices over the past week
Chinese coking coal futures surge 5% as safety authorities halt production
Coking coal futures closed 5% higher on Wednesday on supply concerns as safety inspections by authorities halted production at some mines.
China’s state planner and the market regulator sent teams to various areas amid a spike in mine accidents leading to a number of fatalities across multiple regions in China.
Australia’s Darwin port ships first iron ore cargo in 6 years amid record prices
Iron ore will leave the Northern Territory port of Darwin this week for the first time since 2015, as persistently strong iron ore prices drive more marginal producers into production across Australia.
Australian mining firm NT Bullion plans to ship around 30,000t from Darwin this week, with its mine preciously closing in 2015 when iron ore prices fell below $50/t cfr China.
Darwin's shipments of iron ore peaked at around 2mt in 2014 before weak prices closed all the iron ore mines in the NT (Argus Media)
Iron ore prices have rallied 37% year-to-date, driven by Chinese steelmakers ramping up production and supply worries in Brazil.
Dow Jones Industrials +0.20% at 33,946
Nikkei 225 -0.03% at 28,875
HK Hang Seng +1.95% at 28,861
Shanghai Composite +0.25% at 3,566
Economics
US – The Fed Chairman Powell eased concerns of a sooner-than-expected rate increase arguing the central bank wants to see a “broad and inclusive” recovery of the job market first.
“We will not raise interest rates pre-emptively because we fear the possible onset of inflation… we will wait for evidence of actual inflation or other imbalances,” Powell said.
The recent pickup in inflation “don’t speak to a broadly tight economy” that would require higher interest rates, Powell commented, referring to a “perfect storm” of rising demand for goods and services and bottlenecks in the supply chain.
The S&P 500 closed higher yesterday with 10y Treasury yields slightly lower.
The US is likely to miss its July 4 Independence Day target that involved delivering at least one Covid-19 vaccine to 70% of adults.
The nation is expected to meet the target for adults 27 and older but will fall short of Biden’s goal for adults 18 and older.
Separately, Dr Fauci highlighted risks of the new Delta variant that is more transmissive than previous variant.
Eurozone – Eurozone recovery accelerates with growth climbing to 15-year high as coronavirus restrictions are eased across the region in June.
This marked a third consecutive month of increasing output growth with employment climbing at the quickest pace in three years.
New orders growth increased to the fastest since June 2006.
“Although manufacturing reported the stronger pace of growth, it was the service sector that again reported the biggest improvement in performance, with business activity growth accelerating to a pace not exceeded since July 2007,” Markit wrote.
On inflation front, input prices in manufacturing and services sectors run at the highest level since Sep/00 and Jul/08, respectively, reflecting higher supplier costs, increased fuel and transport prices as well as rising wage pressures.
Final goods and services prices increased the most since comparable data for both sectors was first available in 2002.
“The data set the scene for an impressive expansion of GDP in the second quarter to be followed by even stronger growth in the third quarter,“ Markit commented.
Eurozone Markit Manufacturing PMI (Preliminary): 63.1 v 63.1 in May and 62.3 est.
Eurozone Markit Services PMI (Preliminary): 58.0 v 55.2 in May and 58.0 est.
Eurozone Markit Composite PMI (Preliminary): 59.2 v 57.1 in May and 58.8 est.
Germany
Germany Markit Manufacturing PMI (Preliminary): 64.9 v 64.4 in May and 63.0 est.
Germany Markit Services PMI (Preliminary): 58.1 v 52.8 in May and 55.7 est.
Germany Markit Composite PMI (Preliminary): 60.4 v 56.2 in May and 57.6 est.
France
France Markit Manufacturing PMI (Preliminary): 58.6 v 59.4 in May and 59.0 est.
France Markit Services PMI (Preliminary): 57.4 v 56.6 in May and 59.5 est.
France Markit Composite PMI (Preliminary): 57.1 v 57.0 in May and 59.0 est.
UK – Growth continues strong coming off only slightly off the record pace recorded in the previous month in May.
Employment growth hit record high, although inflationary pressures also strengthened.
Final goods and services inflation hit a fresh high for second month running.
“Businesses are reporting an ongoing surge in demand in June as the economy reopens, led by the hospitality sector, meaning the second quarter looks to have seen economic growth rebound very sharply from the first quarter’s decline,” Markit commented on data.
UK Markit Manufacturing PMI (Preliminary): 64.2 v 65.6 in May and 64.0 est.
UK Markit Services PMI (Preliminary): 61.7 v 62.9 in May and 62.8 est.
UK Markit Composite PMI (Preliminary): 61.7 v 62.9 in May and 62.5 est.
Currencies
US$1.1936/eur vs 1.1897/eur yesterday. Yen 110.86/$ vs 110.38/$. SAr 14.226/$ vs 14.286/$. $1.398/gbp vs $1.389/gbp. 0.755/aud vs 0.751/aud. CNY 6.483/$ vs 6.473/$.
Commodity News
Precious metals:
Gold US$1,782/oz vs US$1,780/oz yesterday
Gold ETFs 101.1moz vs US$101.1moz yesterday
Platinum US$1,093/oz vs US$1,064/oz yesterday
Palladium US$2,599/oz vs US$2,601/oz yesterday
Silver US$25.93/oz vs US$25.85/oz yesterday
Base metals:
Copper US$ 9,326/t vs US$9,188/t yesterday
Aluminium US$ 2,414/t vs US$2,409/t yesterday
Nickel US$ 17,795/t vs US$17,735/t yesterday
Zinc US$ 2,868/t vs US$2,837/t yesterday
Lead US$ 2,173/t vs US$2,161/t yesterday
Tin US$ 30,505/t vs US$30,150/t yesterday
Energy:
Oil US$75.3/bbl vs US$75.2/bbl yesterday
Oil prices continue to track higher as the American Petroleum Institute (API) reported another draw in crude oil inventories of 7.2MMbbls for the week ending 18 June
The market had predicted a much smaller draw of 3.9MMbbls for the week
In the previous week, the API reported a draw in oil inventories of 8.5MMbbls after on forecasts of a draw of 3.3MMbbls
Crude oil inventories have fallen by more than 29MMbbls since the start of 2021, according to API data, but are still up 27MMbbls since January 2020
While crude oil inventories fell yet again this week, US oil production rebounded to an average of 11.2MMbopd for the week ending 11 June, according to the latest data from the Energy Information Administration
This is up 200,000bopd from the week prior
The API reported a build in gasoline inventories of 959,000bbls for the week ending 18 June, on top of the previous week's 2.9MMbbl build
Distillate stocks saw an increase in inventories this week of 992,000bbls for the week, on top of last week's 1.9MMbbl increase.
Cushing inventories fell this week by 2.6MMbbls
Natural Gas US$3.261/mmbtu vs US$3.200/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$204.3/t vs US$198.1/t
Chinese steel rebar 25mm US$755.7/t vs US$763.5/t
Thermal coal (1st year forward cif ARA) US$84.0/t vs US$82.9/t
Coking coal swap Australia FOB US$151.0/t vs US$151.0/t
Other:
Cobalt LME 3m US$44,555/t vs US$44,540/t
NdPr Rare Earth Oxide (China) US$71,961/t vs US$72,459/t
Lithium carbonate 99% (China) US$12,341/t vs US$12,514/t
China Spodumene Li2O 5%min CIF US$690/t vs US$680/t
Ferro-Manganese European Mn78% min US$1,856/t vs US$1,814/t
China Tungsten APT 88.5% FOB US$270/t vs US$270/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% 8.9/lb vs US$8.9/lb
Europe Ferro-Vanadium 80% 43.25/kg vs US$42.75/kg
Battery News
London launches first hydrogen-powered buses
20 hydrogen-powered double decker buses will join the 500 electric buses that are currently in the Transport for London (TfL) fleet.
The hydrogen fuel cell buses are another step towards trying to reduce TfL’s carbon footprint and harmful emissions to ensure cleaner air on London roads.
By 2023 it is expected that the hydrogen powering these buses will be produced through electrolysis powered by a direct connection to an offshore wind farm.
LG steers away from phones towards EV supply chain with new joint venture
LG will end its smartphone business at the end of July after seeing it lose money for six consecutive years.
The partnership with Canada’s Magna International to manufacture motors and other auto components for EVs, announced in December 2020, is expected to be formalised at the end of July.
The joint venture will make use of Magna’s experience in electric powertrain systems and automotive manufacturing, and LG’s expertise in component development for EVs.
LG will also be able to draw on the strength of other members of the LG Group, which includes LG Chem – the world’s second largest producer of EV batteries.
Magna already supply auto components to General Motors, BMW and Ford and is a member of Apple’s Project Titan to develop an EV. CEO Swamy Kotagiri has previously said the company would be willing to manufacture the ‘Apple Car’
Korean scientists develop cheap, high-performance anode for sodium-ion batteries
Korean researchers have developed a high-performance, economic anode material for use in sodium-ion batteries – a more cost-effective option compared to lithium-ion batteries.
In the published study, the scientists explain that the new material can store 1.5 times more electricity than current graphite anodes used in commercial Li-ion batteries.
The performance was also shown to be the same after 200 cycles of fast charge/discharge rates of 10 A/g.
Little development has been done into sodium as a high-capacity anode material as it can’t be stored as stably with current silicon or graphite anodes.
Sodium is over 500 times more abundant in the Earth’s crust than lithium, making sodium-ion batteries 40% cheaper that li-ion counterparts.
Lead Researcher Sang-Ok Kim said, “Our method uses cost-effective, eco-friendly materials and, if adapted for the large-scale manufacturing of anode materials, can lower production costs and, hence, boost the commercialization of sodium-ion batteries for large-capacity power storage devices.”
It is important to note that most laboratory innovations in battery chemistry do not pass the various hurdles required for commercialisation and if they do it will take many years for battery manufacturers to gain sufficient confidence and set up the requisite accreditation and supply chains needed for commercialisation.
Company News
Anglo American (LON:AAL) 2,841.5p, Mkt Cap £38.1bn – De Beers reports continuing robust demand for diamond jewellery from China and the US
Anglo American has reported that the fifth De Beers sales cycle of 2021 realised US$470m and that the previously reported sales for the fourth sales cycle of the year have now been confirmed at US$385m rather than the provisional figure of US$380m reported in May.
We estimate that this brings year-to-date sales to approximately US$2.5bn, marginally ahead of the US$2.4bn achieved at this stage in, pre-Covid19, 2019.
Commenting on the sales figures De Beers Chief Executive, Bruce Cleaver, said that “With demand for diamond jewellery in the key consumer markets of the US and China continuing to be positive, and midstream capacity in India returning, we have seen strong demand for rough diamonds during the fifth sales cycle. Overall sentiment is increasingly optimistic as we move towards the second half of the year and, while risks as a result of the global pandemic persist, we have been encouraged by the condition of the market”.
Ariana Resources (LON:AAU) 4.85p, Mkt Cap £50.4m – Resource drilling at Derya shows potential for resource expansion at Kiziltepe
Ariana Resources has released results from recent resource drilling from the Derya area of its 23.5% owned Kiziltepe mine in Turkey.
The company says that the drilling concentrated on around 670m of the strike length of the south-eastern part of the Derya vein system and investigated to depths of around 130m below surface.
Managing Director, Dr. Kerim Sener, explained that “Derya is continuing to yield higher gold grades, particularly in the central part of the vein system and in an area within about 50m vertical depth below the current pit bottom”.
Exploration drilling since December 2020 has totalled 10,052m of core-drilling in over 70 holes in a programme “which aims to expand on the open-pittable and potential underground resources, in addition to systematically testing several significant exploration targets within the Kiziltepe area” including “two additional parallel structures to the Derya main vein exceeding 1m in true width” identified from grade-control data.
Among the results highlighted in today’s announcement are:
A 4.2m wide intersection averaging 6.07g/t gold and 98.2g/t silver from a depth of 73.7m in hole KTP-D02-21; and
A 7.1m wide intersection at an average grade of 2.23g/t gold and 11.3g/t silver from a depth of 44.7m in hole KTP-D05-21; and
An intersection of 2.5m averaging 6.07g/t gold and 71.8g/t silver from 68.5m depth in hole KTP-D04-21
The company says that holes KTP-D04-21 and 05-21, along with holes KTP-D02-21 and 03A-21 “represent resource infill along the Derya main vein, and specifically target depths exceeding the current design pit limits (approximately 60-70m). The results show that there is significant scope for a deeper pit to be developed in the longer term“.
Dr. Sener also explained that ”as the Derya pit continues to be developed, specifically towards the northwest, the pit is likely to be deepened to enable access to these higher-grade areas. Further pit optimisation will be undertaken in the coming months to determine the next stage of open-pit development in this area” and that “It is also apparent that the Derya vein system links up with the Arzu structure, suggesting further potential to extend the limits of known gold and silver mineralisation between the Arzu and Derya open pits, the pit rims of which are only about 300m apart based on the current mine plan. In addition, it is now apparent that the vein system, like Arzu North, comprises several sub-parallel vein structures and the gold mineralisation is not confined to a single structure”
Conclusion: Recent drilling within the Kiziltepe mine area at Derya is demonstrating potential for resource expansion and is linking up mineralisation between Arzu and Derya. We look forward to the drilling results being incorporated in a revised mineral resources estimate in the future.
Condor Gold* (LON:CNR) 47p, Mkt Cap £63.4m – Appointment of lead engineer for La India processing plant design
Condor Gold has announced the selection of Tucson-based Hanlon Engineering, a wholly owned subsidiary of GR Engineering as the lead-engineer to produce a feasibility level design for its processing plant at the La India gold project in Nicaragua.
The design, which is expected to enable capital and operating costs to be estimated to ±15% accuracy, will be based around the recently acquired SAG mill which has a “nominal capacity of 2300 tpd, but have the built- in capacity in several key areas to potentially upgrade throughput to 2,850 tpd”.
The design, which is expected to deliver gold production of between 80-100,000oz pa of gold at the 2,300tpd rate, is expected to be delivered within 12 weeks.
Chairman and CEO, Mark Child, explained that “Hanlon Engineering was engaged by First Majestic Silver, the vendor of the SAG Mill, to help design the new SAG Mill recently purchased by Condor. Their knowledge of the SAG Mill and involvement with many similar process plant designs completed to date will help fast track the delivery of the Feasibility Study design”.
Mr. Child also commented on Hanlon Engineering’s experience of designing and building over fifteen gold plants during the last 20 years and its “contacts within the region for construction contractors with current experience with the costs of construction for the area” as factors in its selection as the appropriate lead engineer.
Conclusion: The appointment of an engineering company with direct experience of the specific equipment to be used at La India and detailed regional expertise for the process plant feasibility study is a prudent and risk-minimising approach to the development which should help Condor Gold to deliver La India in a smooth transition from mine-development into production. We note that Condor Gold is taking a similarly prudent approach with its current infill drilling which will aid pit optimisation and help to ensure predictable initial ore delivery to the plant. We look forward to the results of the technical studies currently underway as Condor Gold moves towards production at La India.
*SP Angel act as a broker to Condor Gold
Lucara Diamonds (CVE:LUC) C$0.80, Mkt Cap C$318m – Karowe mine yields 1,174 carat diamond
Lucara Diamonds reports that an 1,174-carat diamond has been recovered from its wholly owned Karowe diamond mine in Botswana.
The diamond, which is described as a “clivage gem of variable quality with significant domains of high-quality white gem material”, was recovered from the “EM/PK(S) unit of the South Lobe” of the mine.
Lucara says that this is the third diamond larger than 1,000carats “recovered from the South Lobe of the AK6 kimberlite since 2015 including the 1,758 carat Sewelô and 1,109 carat Lesedi La Rona”.
The company also reports that “During an 11 day production run in June of EM/PK(S), which sourced the 1,174 carat stone, several other high quality white gems were also recovered (148 carat, 90 carat, 88 carat, 86 carat, 67 carat” diamonds.
Lucara Diamonds CEO, Eira Thomas, commented that “Although complex, these diamond recoveries do contain large domains of top colour white gem that will be transformed through our partnership with HB Antwerp into valuable collections of top colour polished diamonds, very much in high demand in the market today. Besides the 1,174 carat stone, several other high quality white gems were recovered up to 148 carats in size, and year to date Karowe has produced 17 diamonds greater than 100 carats, including 5 diamonds greater than 300 carats”.
Nordgold (Private) London IPO pulled citing volatility in the price of the precious metal, FT reports.
The Company planned to sell a 25% stake to investors, including via a secondary listing in Moscow.
Nordgold CEO argued that latest Fed outlook on interest rates added to uncertainty and volatility in the resources sector “in particular impacting gold and gold equities”.
The Company did not plan to raise new capital and was looking to sell existing shares suggesting it may wait for a better listing window, according to people familiar with the deal.
Gold price is off ~4% since last week’s Fed announcement while the NYSE Arca Gold Bugs Index is down 9%.
Savannah Resources* (LON:SAV) 3.6p, Mkt Cap £61m – Portuguese Association for the Battery Cluster membership
BUY
The Company joined the newly created Portuguese Association for the Battery Cluster as a founding member and has been elected to the Association's Board.
The association brings together 23 entities active in the renewable energy space and is being coordinated by the International Iberian Nanotechnology Laboratory, the international organisation jointly created by the governments of Portugal and Spain specialising in nanoscience and nanotechnology research.
BATPower will initially focus on Li-ion batteries covering development of such areas as refining and recycling, component manufacturing, cells, control electronics and complete batteries, applications, integration and certification.
The agency also plans to fund research and development of new technologies.
The association will be headed by the renewable energy company, DST Solar, along with four founding members including he integrated energy company, Galp, electrical equipment manufacturer, Efacec, technology and services group, Bosch and Prio, the owner of the largest private EV charging network in Portugal.
*SP Angel act as Nomad to Savannah Resources
Recent Interviews:
IGTV: Stock picks in the small-cap mining space: https://youtu.be/TxtMf6B2t8Q
Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw
VOX Markets: 10/06/21: https://audioboom.com/posts/7884446-john-meyer-talks-about-cornish-metals-empire-metals-anglo-american-ncondezi-energy-mkango-r
BBC: Catalytic converters https://www.bbc.co.uk/sounds/play/p09jl6c9
*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.
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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
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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