SP Angel . Morning View . Tuesday 06 07 21
Tin and copper prices lead metals higher as Covid cases hit Yunnan and investors buy back in
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.
Altus Strategies* (LON:ALS) - BUY - 118p – New ground secured at the Tabakorole Gold Project
Caledonia Mining* (LON:CMCL) – Q2 record production at the Blanket mine and announcement of a further dividend increase
Conroy Gold & Natural Resources (LON:CGNR) – Completion of due-diligence drilling at Clontibret
Cornish Metals*+ (LON:CUSN) – United Downs drilling results identify new mineralised structures
Orosur Mining* (LON:OMI) – Spectacular drill results including 59.55m @ 9.61g/t Au at Anzá project
Rainbow Rare Earths* (LON:RBW) – Rare earth producers rally on hopes of new-energy demand
Tirupati Graphite (LON:TGR) – MoU signed with global trading & investment company
Copper leads tin, nickel and zinc higher as funds reverse short positions on Comex and buy back in
Platinum and palladium led gold higher as investors bought industrial metals despite increasing short positions in the gold market.
Gold is being held back by the US Federal Reserve’s aggressive policies on holding interest rates lower for longer.
OPEC is a wildcard that should not be ignored as higher oil prices = higher inflation putting greater pressure on the Fed’s interest rate policies.
Higher natural gas prices in the US due to the heatwave is also raising energy costs at a time of relatively low inventory levels.
Financing of new green power projects in the US is taking precedence over fracking in the US as evidenced by the recent Baker Hughes rig count of 470 vs 1,052 in 2017.
Biden wants to produce 100% carbon-free electricity sector by 2035 and reach net zero emissions fifteen years later. Admirable but probably an impossible targets.
Joe Biden’s proposed $2tn stimulus includes $100bn on upgrading and reenergising US power infrastructure replacing the aging electric grid.
The investment will undoubtedly require more battery backup for wind and solar generation as well as copper and aluminium for cabling.
Tin prices continue to rise amid surging coronavirus cases in southern China
Tin prices have continued to hold at the highest level in a decade on concerns that rising covid cases in southern China will curb production.
A series of disruptions in Asia has already tightened supply in the marker while the global economic recovery boosted demand for solder.
The demand for personal electronics in the pandemic has seen solder demand increase, with global semiconductor shipments rising 4% per year over the past decade.
New infections in the southwestern province of Yunnan are giving fresh impetus to the rally, with concerns building that there’ll be disruptions to operations as authorities try to contain the spread of the virus.
The area previously closed factories due to a power shortages in May, while flows of tin ore from neighbouring Myanmar have already slumped on a worker shortage – falling 42% in May.
Tin prices rose 0.6% to $31,850/t on the LME earlier this morning, and up more than 55% this year – the most since contracts started trading in 1989.
Anecdotal evidence suggests Covid-19 is also causing disruption to aluminium smelting in Yunnan indicating higher levels of infection or more serious regulation.
Official statistics indicate just 11 new cases in China yesterday beating the seven-day average of four.
Migrant workers are being blamed for reintroducing outbreaks of Covid-19 in the province
Reuters also recently reported that six labourers became ill at the Mojiang mine after scrubbing a copper seam clean of bat faeces in 2012.
Three of the six labourers died. The mine is about 1,500km from Wuhan.
Dow Jones Industrials Closed at 34,789
Nikkei 225 +0.16% at 28,643
HK Hang Seng -0.13% at 28,107
Shanghai Composite -0.11% at 3,530
Economics
US – Investors are awaiting the release of the FOMC June meeting to dissect the sentiment among members over monetary policy outlook.
In June the Fed left rates and the pace of bond buying programme unchanged, although, officials brought forward their expectations of when rates to be raised to 2023.
The latest jobs report while coming in stronger than forecast failed to raise market rates suggesting the markets are not expecting the central bank to taper its asset buying anytime soon.
China – Shares of Didi Global, a Chinese ride hailing service, are down 25% in US premarket following a 5% drop on Friday after China stared a cybersecurity review of the company.
Authorities claim the company committed serious violations in the collection and usage of personal information and ordered smartphone app stores to pull its application.
Didi Global was listed in New York last week raising $4.4bn marking the largest Chinese overseas IPO in H1/21.
Regulatory risk may cool down investor sentiment at a time when there are as many as 34 pending filings for US listing by firms based in China or Hong Kong announced this year, Bloomberg reports.
Germany – Factory orders post a sharp drop in May as weak export demand for autos dropped following a steep rise in the previous month.
Factory Orders (%mom): -3.7 v 1.2 (revised from -0.2) in April and 0.9 est.
UK – The government is set to lift remaining coronavirus restrictions in England on July 2019 ending legal limits on social gatherings along with legal requirements on the wearing of masks and social distancing.
A final decision will be taken on July 12.
The “work from home” guidelines for businesses would be dropped.
All remaining businesses, including nightclubs, would reopen, with pubs, theatres and sporting venues to be able to operate at full capacity.
Authorities are due to set out plans to allow travellers from England who were fully vaccinated to travel to amber-list countries without the need to quarantine on arrival.
Australia – The central bank left rates unchanged but guided to slightly reduced QE programme seeing the A$ higher.
Cash rate target was left at 0.1% while current A$5bn a week asset buying pace that ends in September will be reduced to A$4bn after that with a revied in November.
“The bond purchase programme is playing an important role… the bank will continue to purchase bonds given that we remain some distance from the inflation and employment objectives… however, the board is responding to the stronger-than-expected economic recovery and the improved outlook by adjusting the weekly amount purchased,” the RBA said.
The RBA “will not increase the cash rate until actual inflation is sustainably within the 2 and 3% target… the bank’s central scenario for the economy is that this condition will not be met before 2024”.
Bloomberg estimated inflation to average 2.1% and 1.9% in 2021 and 2022, respectively.
Currencies1
US$1.1886/eur vs 1.1869/eur yesterday. Yen 110.89/$ vs 111.00/$. SAr 14.210$ vs 14.280/$. $1.389/gbp vs $1.384/gbp. 0.759/aud vs 0.752/aud. CNY 6.462/$ vs 6.460/$.
Commodity News
Precious metals:
Gold US$1,805/oz vs US$1,791/oz yesterday
Gold ETFs 100.5moz vs US$100.5moz yesterday
Platinum US$1,111/oz vs US$1,103/oz yesterday
Palladium US$2,826/oz vs US$2,803/oz yesterday
Silver US$26.61/oz vs US$26.57/oz yesterday
Base metals:
Copper US$ 9,585/t vs US$9,510/t yesterday
Antofagasta have agreed $50/t treatment and charges with a Chinese smelter for the second half which is lower than the $55/t minimum set by the CSPT ‘China Smelters Purchase Team’.
Aluminium US$ 2,560/t vs US$2,571/t yesterday
Nickel US$ 18,525/t vs US$18,465/t yesterday
Zinc US$ 2,972/t vs US$2,961/t yesterday
Lead US$ 2,306/t vs US$2,302/t yesterday
Tin US$ 31,990/t vs US$31,500/t yesterday
Energy:
Oil US$77.5/bbl vs US$76.3/bbl yesterday
Natural Gas US$3.781/mmbtu vs US$3.743/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$203.9/t vs US$203.9/t
Chinese steel rebar 25mm US$765.1/t vs US$757.5/t
Thermal coal (1st year forward cif ARA) US$88.5/t vs US$88.3/t
Coking coal swap Australia FOB US$197.0/t vs US$197.0/t
China Ilmenite Concentrate TiO2 46% US$379.90/t vs US$381.60
Other:
Cobalt LME 3m US$50,500/t vs US$50,500/t
NdPr Rare Earth Oxide (China) US$75,136/t vs US$75,158/t
Lithium carbonate 99% (China) US$12,381/t vs US$12,384/t
China Spodumene Li2O 5%min CIF US$690/t vs US$690/t
Ferro-Manganese European Mn78% min US$1,943/t vs US$1,940/t
China Tungsten APT 88.5% FOB US$273/t vs US$273/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% US$8.8/lb vs US$8.8/lb
Europe Ferro-Vanadium 80% US$40.75/kg vs US$41.25/kg
Spot CO2 Emissions EUA $60.40/t vs $60.30/t
Company News
Altus Strategies* (LON:ALS) 61p, Mkt Cap £49m – New ground secured at the Tabakorole Gold Project
BUY - 118p
CLICK FOR PDF
Altus Strategies/Marvel Gold JV increased Tabakorole Gold Project area by 56% to 292km2.
The 100km2 Sirakoroble Sud license area expands the project area adding new ground hosting a potential north-westerly extension of the 5km long “Asgard trend”.
The trend is defined by strong, and often coincident, geochemical and geophysical anomalies.
Soil survey will now be carried to generate next drill targets.
Separately, Marvel Gold is expected to have completed 9,000m of RC and DD drilling and is planning to prepare an updated Tabakorole MRE later this year.
The project currently hosts 23.9mt at 1.18g/t for 910koz in total mineral resource.
Marvel Gold is in the Stage 3 of the JV earn in taking its interest to 70%, up from current 51% on spending of $3m and ~$150-200k payment to Altus.
Conclusion: Tabakorole Gold Project area expanded by 56% securing prospective ground along the identified geophysical and geochemical anomaly as Altus/Marvel JV continues with exploration works to grow the scale of the discovery.
*SP Angel acts as Nomad and Broker to Altus Strategies
Caledonia Mining* (LON:CMCL) 960p, Mkt Cap £110m – Q2 record production at the Blanket mine and announcement of a further dividend increase
Caledonia Mining reports record Q2 gold output of 16.710oz of gold from the Blanket mine in Zimbabwe bringing H1 gold output to 29,907oz – an increase of almost 8% over the 27,732oz produced in H1 2020.
The result reflects the impact of the newly completed Central Shaft and keeps Caledonia Mining on track to achieve its previously published production guidance of 61-67,000oz in 2021.
Explaining that the year had “got off to a slow start”, CEO, Steve Curtis, said that “for production to be 7.8% above the first half of 2020 and 23% ahead of the corresponding quarter is an outstanding achievement”.
Mr Curtis also described the bringing of the new Central Shaft to operational status as “a huge feat by the team” and confirmed that “We are currently working hard to achieve the expansion and we remain on track to hit our 80,000 ounce target in 2022.”
Caledonia Mining has also announced the sixth increase in its quarterly dividend over the last two years with an 8% increase over April’s dividend to US$0.13/share.
The latest increase “represents a cumulative 89 per cent rise in the dividend since the first increase in October 2019”. We have previously pointed out that Caledonia Mining is one of a comparatively small number of dividend-paying, AIM-listed mining companies and the latest dividend increase reinforces those credentials.
Conclusion: A record level of Q2 production at Blanket underlines the importance of the recently completed, five year, US$67m Central Shaft project which places the mine on course to achieve its 80,000oz pa long term production target next year and secures the future of the mine into the 2030s. Managements growing confidence is reflected in the sixth increase in quarterly dividend over the last 2 years.
*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe
Conroy Gold & Natural Resources (LON:CGNR) 22.75p, Mkt Cap £8.1m – Completion of due-diligence drilling at Clontibret
Conroy Gold reports that the programme of due-diligence drilling by the Turkish mining company Demir Export A.S. for a proposed earn-in to a joint venture at Clontibret has now been completed.
Two holes were drilled as part of the “overall process leading to the finalisation of definitive documentation, including the final JV agreement.”
Demir Export “will make a cash payment of €1 million to the Company upon final approval of the definitive agreement in recognition of prior work carried out in relation to the project” and then earn its interest in the project through a series of 3 staged payments:
An initial “€4.5 million to earn a 25% interest in the project”; followed by
A further “€4.5 million to earn an additional 15%”; and
“will earn an additional 17.5% interest” by providing “ the additional funds required to reach declaration of construction-ready status” and delivering a bankable feasibility study or equivalent giving Demir Export an overall 57.5% interest.
In addition, Conroy Gold has announced that it has completed drilling a single hole at its Clay Lake prospect and that “The drilling programme on the Company’s licences in the Longford-Down Massif is continuing”.
The hole at Clay Lake is “designed to intersect a gold zone between two previous intersections of 6.6m @ 6.2 g/t Au and 5.3m @ 0.7 g/t Au, and to provide additional information on the width and grade of the gold mineralisation and other geological characterisation in this section of the Clay Lake gold target”. At this stage, the company is not reporting the results of the new hole and we assume assay results are still awaited.
Cornish Metals*+ (LON:CUSN) 14.65p, Mkt cap £38.5m – United Downs drilling results identify new mineralised structures
Cornish Metals has published results from its drilling at the United Downs property in Cornwall where drilling has now tested around 200m of a potential mineralised strike length of 900m.
Drill hole UD21-001, which drilled to a depth of 260.24m, has intersected two mineralised horizons:
An upper zone of tin mineralisation with an intersection of 1.04m from a depth of 47.57m which assayed at 7.9% tin; and
A 2.61m wide lower mineralised intersection interpreted as a deeper level of the previously known “Lithium Lode” encountered in the 2020 drilling which averaged 5.2% copper, 1.3% tin and 77g/t silver.
The deeper intersection of the Lithium Lode is interpreted as extending “the mineralised zone … [to] … a vertical extent of at least 180m” and the company also explains that this “is the first time that silver grades have been observed”.
Cornish Metals explains that as well as the results from hole UD21-001 “Drill holes UD21_002 through UD21_006 intersected similar zones of mineralisation, currently interpreted as the extension of Lithium Lode - assays for these holes are pending”.
Another new zone of mineralisation has also been intersected in hole UD21-007 “between approximately 204m and 209.6m, containing native copper (assays pending). This zone is approximately 100m above the target depth of Lithium Lode and could represent a completely new target.”
CEO, Richard Williams, welcomed the results of the drilling, particularly the previously unrecorded presence of silver, and explained that “The high-grade nature of the tin and copper mineralisation is similar to what was mined here between 1700 - 1870 and, subject to proving continuity of mineralisation, has the potential to support delineation of a mineral resource”.
He also confirmed that “the United Downs project has numerous additional targets that we will be testing throughout the course of this year, including the downdip extension of the historic Mount Wellington Mine, which operated until 1978, and a further lode to the south of Mount Wellington, which was discovered in the 1970s but never followed up after the mine closed”.
The results come at a time of buoyant tin prices and an increasing recognition of tin as a strategic metal in the push for a green economy.
Conclusion: The initial results from the current drilling are showing extensions to the previously identified Lithium Lode and also identifying previously unrecorded mineralisation in an area with a long and prestigious mining history. We look forward to the assays from the holes where results are pending and to further news as Cornish Metals works towards a formal mineral resources estimate at United Downs.
*SP Angel act as Nomad and broker to Cornish Metals.
Orosur Mining* (LON:OMI) 22.5p, Mkt Cap £42.1m – Spectacular drill results including 59.55m @ 9.61g/t Au at Anzá project
(The Anza Project is subject to an Exploration Agreement with Venture Option between Orosur’s 100% subsidiary Minera Anzá S.A and Minera Monte Águila, a 50/50 joint venture between Newmont Corporation and Agnico Eagle Mines Limited. Minera Anza can earn-in up to 75% in Anza.)
Orosur reports assay results for nine additional drill holes at the Company’s Anzá project in Colombia.
Significant results from these holes include:
MAP-086 3.90m @ 6.13g/t Au, 17.27g/t Ag, 0.79% Zn from 179.2m ; 18.72m @ 2.85g/t Au, 2.95g/t Ag, 1.59% Zn from 215.4m.
MAP-089 4.3m @ 9.31g/t Au, 5.4g/t Ag, 6.14% Zn from 251.1m ; 59.55m @ 9.61g/t Au, 6.23g/t Ag, 3.75% Zn from 275.1m.
MAP-090 3.1m @ 12.96g/t Au, 2.56g/t Ag, 4.66% Zn from 174.3m ; 6.05m @ 9.91g/t Au, 1.56g/t Ag, 0.48% Zn from 180.2m ; 3.70m @ 7.43g/t Au, 1.38g/t Ag, 0.08% Zn from 206m.
MAP-091 61.75m @ 2.05g/t Au, 3.3g/t Ag, 0.82% Zn from 222.6m
The company notes that the nine holes have been successful in providing greater guidance as to the shape and nature of gold mineralisation at Anza, identifying a number of thick, high-grade, plunging shoots, surrounded by a lower grade halo.
Mineralisation thus far extends over a strike length in excess of 800m and remains open in several directions according to the most recent interpretation of the mineralisation.
Current mapping and sampling work underway includes geological mapping, BLEG sampling and soil and stream sediment sampling. Mapping has identified favourable lithologies, quartz veins and pervasive sulphide development, while soil and stream sediment samples have been sent to commercial laboratories for analysis.
Orosur is currently planning a large IP survey in order to help identify high sulphide-bearing zones and to assist in drill targeting, with the company expecting work to commence in early August 2021.
The Company is now nearing the end of its planned 9,500m drilling program that commenced in November 2020, with one rig remaining on site. The rig will remain at APTA, continuing to drill in order to gradually expand the zone of mineralisation.
The next major phase of drilling will be targeted at identifying additional centres of mineralisation along the 20km strike of the Aragon Fault, and other anomalous zones.
Brad George, CEO commented: "While a long time coming, these drill results are spectacular and give us great comfort that Anzá has the potential to be a major gold system. Further assays are expected in due course. We are now directing our teams to identifying the next drill targets - work that has so far shown great promise."
Conclusion: Orosur’s 9,500m drill programme at Anza been a resounding success and achieved its aim of determining significant high grade gold mineralisation. The Company’s backing by two of the world’s top ten gold producers has de-risked Orosur’s position with respect to funding of the project, although we suspect that there would be no shortage of backers given this latest very encouraging development at Anza. Orosur have commented that their project is geologically very similar to the Buritica deposit recently taken over by Zijin Mining – a 5.7 M&I AuEq @ 11 g/t from 16.02mt, which the company bought for C$1.4bn in cash.
*SP Angel acts as Nomad and Broker to Orosur Mining
Rainbow Rare Earths* (LON:RBW) 14.7p, Mkt Cap £70m – Rare earth producers rally on hopes of new-energy demand
(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates. There is currently no BEE requirement as this is a retreatment processing operation)
Major Chinese rare earth producers are receiving renewed interest from investors looking to increase exposure to rising Electric Vehicle production, offshore wind farms and other green energy initiatives.
Shares in Northern Rare Earth Group, a Chinese company rose is up 74% this year.
JL Mag Rare Earth stock has also risen 47% this year.
Ganfeng Lithium which recently raised $630m on 10 June shares are up 22% this year.
EV sales are expected to exceed expectations as Joe Biden pushes for the US to reinstate Obama era emissions targets and to go further to incentivise EV sales
Biden is keen to ensure that EVs make up the majority of vehicles sold by
“Governors from a dozen states have urged the president to set standards that ensure that all new passenger cars and light-duty trucks sold by 2035 are electric.” The Times
“California, has already pledged to end the sale of traditional gasoline-powered cars by that year.”
Rare Earths prices recently rose to $75,136/t from $63,064/t at the beginning of the year
Conclusion: Rare earths prices look likely to continue to rise further from here with much new demand for permanent magnet metals in EVs and wind turbines to come from stimulus and environmental initiatives.
*SP Angel act as broker and financial advisor to Rainbow Rare Earths
Tirupati Graphite (LON:TGR) 146.5p Mkt Cap £123.7m – MoU signed with global trading & investment company
Tirupati reports that it has signed a Memorandum of Understanding with Hanwa Co, to expand markets for its suite of flake and speciality graphite products in the Far East.
Hanwa is a leading Japan-based global trading and investment company and one of the larger traders of battery chemicals and steel products in the Asian region.
Hanwa reported Net sales in 2020 of over ¥1,745bn (£11.37bn), and the company has extensive market penetration in the battery metals and steel sector, along with strong relationships with industrial end users in Asia.
Hanwa has a proven appetite as a strategic JV partner and investor in battery metals projects including AIM listed Bacanora Lithium Plc and an Indonesian Nickel Cobalt project alongside Tsingshan, the world's largest stainless-steel producer.
Following the ongoing engagement, the Company and Hanwa have identified various prospective buyers in the Territory.
Initial discussions with prospective buyers have resulted in extensive interest in the Company's products owing to its green processes and suitability with applications of end users.
The MoU is expected to lead to deeper engagements with industrial end users and enhance the development of markets for the Company's graphite products in the Territory including flake graphite from Madagascar and specialty graphite from its upcoming downstream specialty graphite project in India.
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: 30/06/21: https://audioboom.com/posts/7896916-john-meyer-on-amur-bluejay-bluerock-bushveld-rambler-rainbow
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