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Today's Market View - Rio Tinto, Kore Potash, Power Metal Resources and more...

Power Metal Resources* (LON:POW) 2.08p, Mkt cap £24.45m – Earn-in to acquire two Canadian lithium exploration properties Power Metal reports that its 100% owned Canadian subsidiary Power Metal Resources Canada has signed an earn-in agreement through which it may acquire a 100% interest in two Canadian lithium pegmatite exploration properties.

Rio Tinto PLC - T

SP Angel . Morning View . Friday 16 07 21

Tin, nickel and rare earth prices surge

 

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.

 

Adriatic Metals* (LON:ADT1) – Q2 report highlights progress of Vares DFS

Kodal Minerals* (LON:KOD) – Industry move towards direct lithium hydroxide production from hard-rock spodumene driven by cost of extracting impurities

Kore Potash (LON:K2) – New CFO

Power Metal Resources* (LON:POW) – Earn-in to acquire two Canadian lithium exploration properties

Rainbow Rare Earths* (LON:RBW) – Nd/Pr prices jump while Rainbow reports work continues unabated on Phalaborwa project in South Africa

Rio Tinto (LON:RIO) – Q2 production reports identifies signs of economic recovery in China, the United States and Europe

 

Tin prices surge towards record high amid production woes from key Asian producers

Tin prices continued to climb this morning, just $50/t short of the record $33,600/t reached in 2011.

Prices are up 65% year-to-date, as demand has continued to climb while freight disruption and output issues linked to the pandemic have restricted supply.

Malaysia Smelting Corp, the worlds no.3 producer, has previously commented that smelting activities are taking longer than usual due to pandemic disruptions.

Further fueling the rally in tin prices has been power rationing in the Chinese province and import hub of Yunnan, amid a heatwave.

Smelters are set to reduce activities again after a new spate of power shortages due to hot weather.

 

Copper prices – Expect copper prices to push higher as manufacturing growth continues to drive demand

Freeport to build new $2.7bn, 1.7mtpa copper smelter with Tsingshan in Indonesia

 

European automakers sold 2m fewer cars in H1 21 vs H1 19

Automakers sold almost 2m fewer cars in Europe during the first half compared with two years ago, totaling 6.49m cars, as the industry’s recovery in the sector begins to lag behind the US and China.

While sales are 27% higher than the same period last year, it is well below industry levels prior to the pandemic.

European automakers have been particularly affected by the semiconductor shortage, with German carmakers estimating that it has shaved 400,000 units from production figures this year.

The chief executives of VW, BMW and Renault have all commented that the lack of chips is expected to weigh on production for years to come.

 

China aluminium output falls for the second month in a row

Official data reveals that China’s primary aluminium output has continued to decline.

Output was recorded as 3.29m tonnes in June compared to 3.32m tonnes in May. This marks a two-month period of decline.  It is thought reduced power availability at a major smelting hub in Yunnan best explains the diminished supply.

Yunnan constitutes c.10% of China’s aluminium capacity. However, a severe drought in May affected the hydropower resources through which it generates considerable energy.

Output remains up 9.3% year on year.

The managing director of aluminium consultancy AZ China expects annual aluminium production to hit 40 million tonnes with an expected increase in smelting capacity due later this year.

 

Dow Jones Industrials +0.15% at 34,987

Nikkei 225 -0.98% at 28,003

HK Hang Seng +0.17% at 28,044

Shanghai Composite -0.71% at 3,539

 

Economics

US – The labour market normalisation continues with weekly jobless claims falling to a new pandemic low.

As economy rebounds and restrictions hit sectors reopen state governors are considering ending enhanced federal unemployment benefit programmes early ahead of the September deadline.

New York state manufacturing advanced at a record high on the back of the strongest orders and shipments in 17 years in July, according to the New York Fed Empire Manufacturing data.

Selling prices gauge climbed 6.1 points to 39.4 while a measure of prices paid for materials eased to a still elevated 76.8, Bloomberg reports.

Philadelphia general activity index on the other hand slipped to 21.9 in July from 30.7 the previous month moderating after hitting the fastest pace in nearly half a century in April.

Jobless Claims (‘000): 360 v 386 (revised from 373) in the previous week and 350 est.

Continuing Claims (mln): 3.2 v 3.4 in the previous week and 3.3 est.

Empire Manufacturing: 43.0 v 17.4 in June and 18.0 est.

Philadelphia Fed Business Outlook: 21.9 v 30.7 in June and 28.0 est.

Jerome Powell reiterated his support for the current pace of asset purchases and monetary policy in the second date of the Congress address on Thursday.

“This is a shock going through the system associated with the reopening of the economy and it’s driven inflation well above 2%, and of course we’re not comfortable with that,” Powell told the Senate Banking Committee.

“To the extent that it’s temporary it wouldn’t make sense to react to it.”

The US will be ready “within the next several days” to say when it may lift Covid-related travel restrictions on European countries, President Biden said.

European countries within the Schenghen area have been on a US travel ban list since the early weeks of the pandemic last year.

University of California will require all students and staff to get vaccinated in order to return to campus in the autumn, FT reports.

Mandatory vaccination aims to “facilitate protection of the health and safety of the University community”.

Columbia, Harvard and Princeton who among the Ivy League universities have also required vaccines for returning students and staff.

The US is preparing to impose sanctions on Friday on a number of Chinese in regards of a crackdown on democracy in Hong Kong as well as issuing a warning to international businesses operating in the region over deteriorating conditions, Reuters reports.

Ahead of the announcement China said that it opposed the US interfering in Hog Kong affairs.

 

China – $170bn investment into new rail infrastructure planned for Sichuan province over next 10 years.

China State Council looking at illegal resale trades in metals

 

Japan – The central bank maintained policy rate at -0.1% and target 10y bond yield target at 0.0%, in line with expectations.

The bank adjusted its GDP and inflation projections to account for the state of emergency in Tokyo and a rally in commodity prices, Bloomberg writes.

GDP growth forecasts for fiscal 2021 dropped to 3.8% v 4.0% estimated previously and for fiscal 2022 increased to 2.7% from 2.4% implying a delay to the recovery.

Inflation projections were lifted to 0.6% from 0.1% in fiscal 2021 and to 0.9% in 2022.

 

UK - Mervyn King and former World Bank chief economist express concern over Bank of England’s monetary policy

Mervyn King, the former BoE governor, and Nicholas Stern, former chief economic advisor to the Treasury, have criticised the Bank of England’s lax attitude towards inflation and its continued quantitative easing programme.

Forming part of the House of Lords economic affairs committee, the two economists are concerned that the BoE is failing to justify its continued QE policy.

Lord Forsyth, the committee’s chair, stated that the bank “has become addicted’ to QE.

The BoE has hit back at the report, taking aim at the committee’s conclusion that QE was being used to finance the government.

The Bank stated that it will continue to monitor policy ‘in order to achieve a sustainable return of inflation to the 2% target’.

 

Mali - Norway to contribute to anti-jihadist task force in Mali

The Takuba operation is a European backed unit, commissioned to suppress increased Islamic extremist movements in the region.

The unit already consists of troops from 8 European countries and the addition of Norwegian support will help bolster the operation.

Emmanuel Macron has also demanded contributions from Lithuania to assist with the Takuba Task Force.

The French president stated to the Lithuanian leader that the task force ‘will remain a key element’ of European involvement in the Sahel region, which Macron hopes to ‘further strengthen’.

 

Currencies

US$1.1809/eur vs 1.1834/eur yesterday.  Yen 110.00/$ vs 109.82/$.  SAr 14.476$ vs 14.454/$.  $1.381/gbp vs $1.384/gbp.  0.743/aud vs 0.748/aud.  CNY 6.466/$ vs 6.460/$.

 

SA rand supported by optimism for a less corrupt political order following widespread violence

The South African rand has remained firm in the face of unprecedented violence across the nation supported by high commodity prices driving export values alongside high local interest rates.

Port disruption: Port health services have been closed at Durban and Richards Bay delaying Covid-19 testing so vessels cannot berth while racking demurrage fees.

The Transnet, national rail line has been closed alongside roads into and out of the Durban and Richards Bay.

The Natcor rail line from Durban to the Johannesburg area has declared force majeure.

Mersk closed cold storage and warehouses in Durban and Johannesburg while Hapag Lloyd have closed a number of container facilities.

The riots are thought to have been largely instigated by Jacob Zuma’s former spymaster Thulani Dlomo using a network of agitators within local communities in a potential attempt to overthrow the government.

Many hope President Zuma will be able to use the crisis to force through his anti-corruption reforms, clear criminal elements out of the ANC and reform the nation.

President Cyril Ramaphosa is due to visit a number of areas today as the violence abates showing that the potential coup has so far failed.

The nation risks shortages of food and fuel if the violence continues. Bread prices have risen to R70 from R20 in the Norhtern Cape.

 

Commodity News

Precious metals:  

Gold US$1,824/oz vs US$1,832/oz yesterday

Gold ETFs 100.4moz vs US$100.5moz yesterday

Platinum US$1,134/oz vs US$1,140/oz yesterday

Palladium US$2,736/oz vs US$2,830/oz yesterday

Silver US$26.22/oz vs US$26.36/oz yesterday

           

Base metals:  

Copper US$ 9,459/t vs US$9,440/t yesterday

Aluminium US$ 2,519/t vs US$2,530/t yesterday

Nickel US$ 19,015/t vs US$18,680/t yesterday

Zinc US$ 2,979/t vs US$2,955/t yesterday

Lead US$ 2,327/t vs US$2,323/t yesterday

Tin US$ 33,415/t vs US$32,745/t yesterday

           

Energy:           

Oil US$73.2/bbl vs US$73.8/bbl yesterday - Oil prices are broadly flat following yesterday’s announcement the OPEC members UAE and Saudi Arabia had struck a production quota deal

OPEC produced 26.03MMbopd in June, which is an increase of 590,000bopd from May, as it predicts demand for its crude at 27.7MMbopd this year, suggesting that the market would need more OPEC oil

In its latest monthly report released yesterday, OPEC said that crude oil output rose mainly in Saudi Arabia, the UAE, Angola, Iran, and Kuwait

June was the second month in which OPEC gradually eased the production cuts and the Saudis have been unwinding their unilateral extra 1MMbopd over three months to the end of July 

In June, Saudi produced 8.906MMbopd, up by 425,000bopd compared to May

The UAE boosted its production by 40,000bopd to 2.68MMbopd, and Kuwait raised output by 25,000bopd to 2.383MMbopd 

OPEC’s second-largest producer and a big underperformer when it comes to sticking to its share of the cuts, saw its production fall in June; Iraq’s output was down by 10,000bopd at 3.938MMbopd

Iran, exempted from the OPEC+ pact, raised its crude oil production by 33,000bopd to 2.47MMbopd

OPEC’s June production data suggests that the group sees a tight market that is able to absorb additional OPEC supply

 

Natural Gas US$3.595/mmbtu vs US$3.671/mmbtu yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$212.7/t vs US$210.0/t - Rio Tinto fails to fill iron ore guidance after a series of setbacks

The world’s largest iron ore producer has struggled to achieve its optimistic quarterly targets for exports of the crucial steelmaking ingredient.

Rio’s shipments of Iron Ore are down 12% compared to 2020 in the quarter.

Whilst the mining giant still achieved exports of 76.3m tonnes of iron ore, the three months to June have seen the company face a series of hurdles.

Its Pilbara operation in Western Australia has been faced with unusually high rainfall, with a lack of staff owing to recent coronavirus lockdowns causing a further reduction in production capacity. Australian iron ore extraction has also seen increased costs, with production costs of $18.50 per tonne up from forecasts of $16.70 to $17.70 excluding shipping and government royalty fees.

In addition to these setbacks, increased concern over Rio’s treatment of cultural heritage sites has caused the company to reassess their exclusion zones. It is estimated that this has reduced production capacity by 2m tonnes.

Jefferies analysts have noted that Rio’s target range of between 325m and 340m tonnes was ambitious considering first-half shipments were around 154m tonnes.

Despite this, Rio Tinto are enjoying a buoyant year, with analysts expecting the company to declare a dividend payment of around $8bn.

Such success stems primarily from strong Chinese iron ore demand in addition to lockdown-related supply issues in Rio’s primary income source

 

Chinese steel rebar 25mm US$809.3/t vs US$808.6/t - Steel – China likely to raise steel imports to make up for shortfall if still mills stick to quotas at 2020 level

Chinese steel mills appear to be playing a game of chicken with the authorities.

Steel mills are supposed to match 2020 steel production but produced 563mtpa in the first half indicating a scale back of production in H2 and a local market deficit according to demand forecasts.

China, which has been a net exporter of steel, may drive inflation in other markets in steel if it starts to draw in imports

 

Thermal coal (1st year forward cif ARA) US$91.5/t vs US$90.8/t - China to release 10mt of coal from state reserves as industrial production rises 8.9% in Q2 to alleviate power shortages

The release comes on the back of four previous sales amounting to 5mt released into the market (SCMP).

We expect China to produce around 350mt of coal this year offsetting much of the loss of Australian thermal coal which was barred from import in retaliation for Australia’s refusal to accept Huawei 5G technology.

China’s NDRC has pledged to build some 120mt of thermal coal stocks while increasing imports from Mongolia, Russia and Indonesia to offset the loss of Australian coal.

Given that China is hugely commercial in its transactions we suspect they are trying to limit their imports from Australia so as to hold back the Australian dollar while they continue to buy so much Australian iron ore.

Yunnan and Henan provinces are power rationing particularly to smelters which are heavy power users.

 

Coking coal swap Australia FOB US$207.0/t vs US$207.0/t

China Ilmenite Concentrate TiO2 46% US$375.0/t vs US$375.4

           

Other: 

Cobalt LME 3m US$52,500/t vs US$52,500/t

NdPr Rare Earth Oxide (China) US$85,443/t vs US$82,427/t

Lithium carbonate 99% (China) US$12,372/t vs US$12,383/t - US Army back Enovix’s Lithium-Ion technology

The Department of Defense has awarded Enovix Corp a contract to gain access to their advanced 3D ™ Silicon Lithium-ion batteries.

The batteries will be applied in conjunction with Inventus Power, which manufactures Li-ion battery packs and smart chargers among other applications.

Enovix’s technology will be utilised for the U.S. military’s WarFighter project as the primary power source. This will enable soldiers to have a centralised power source on their person, used to charge both worn and carried equipment.

According to Enovix’s own estimates, the wearable military battery market could be valued around $350m annually, according to military programs already established.

The average U.S. soldier currently carries around 15 pounds of batteries on their person. Enovix hopes its lithium-ion technology will not only lighten the load, but also offer increased run-time by almost double.

China Spodumene Li2O 5%min CIF US$700/t vs US$700/t

Ferro-Manganese European Mn78% min US$1,954/t vs US$1,958/t

China Tungsten APT 88.5% FOB US$289/t vs US$289/t

China Graphite Flake -194 FOB US$515/t vs US$515/t

Europe Vanadium Pentoxide 98% US$9.0/lb vs US$9.0/lb

Europe Ferro-Vanadium 80% US$39.25/kg vs US$39.25/kg

Spot CO2 Emissions EUA $57.6/t vs $57.7/t

 

Battery News

Toyota-Panasonic battery venture slashes costs to challenge Chinese rivals 

Prime Planet Energy & Solutions, a Toyota Motor Corp and Panasonic Corp battery joint venture are revamping operations to slash up to 50% from the cost of their batteries by 2020. 

Achieving this target would see the company overtake industry leaders CATL and LG Energy Solution, said Hiroaki Koda, President of Prime Energy Solutions. 

The firm currently holds the top share – around 25% - of the hybrid battery market, but it is still a long way behind its rivals when it comes to higher capacity EV batteries. 

Prime Planet also has plans to increase output – last year it produced hybrid and EV batteries for 1.4m vehicles – the company announced a new facility to produce an extra 500,000 hybrid batteries. 

Koda says he’s aware of the speed at which competitors are working to expand their own operations. By 2025 he aims to further refine Prime Planet’s activities and reduce costs by 65% to 70%. 

 

India to open bids for 4GWh grid-scale battery storage 

As the clean energy transition takes hold in India, the Indian government is planning to call bids for a 4GWh grid-scale battery storage system. 

The battery storage “will act as instant intervention mechanism wherever and whenever there are sharp fluctuation because of renewables,” renewables minister, Raj Kumar Singh said. 

Based on an analysis conducted by PwC, the total cumulative potential for battery storage in India will be 550MWh by 2030. 

 

SK Group continue to invest in U.S. EV market with $300m investment in Michigan

South Korean semiconductor giant SK Siltron has announced plans to invest $300m in Michigan in an effort to boost U.S. EV production.

SK Siltron’s CSS unit produces silicon carbide wafers used in semiconductors. These enable increased efficiency in the transfer of power in electric vehicles.

The company has suggested that these can increase the driving range by up to 10% as well as reducing charging times.

The plan would bring expected investments in Michigan up to around $9b relating to the EV industry.

The news provides further evidence of the SK Group’s commitment to distancing itself from investment in fossil fuels with the decision to increase investment in the US promising for the American automotive industry.

The U.S. Secretary of Commerce expressed her excitement ‘to see companies like SK Siltron CSS expanding to help support the transition to a green future’.

 

Company News

Adriatic Metals* (LON:ADT1) 139p, Mkt cap £296m – Q2 report highlights progress of Vares DFS

Adriatic has continued to develop its Vares Silver Project in Bosnia & Herzegovina, including the demolition of the Old Processing Plant Site and the completion of a geotechnical drilling program to test the structural integrity of the original concrete pad.

The company also received an urban planning permit for the Rupice underground deposit from the Bosnian Federal Ministry of Spatial Planning.

The Company has since applied to the Federal Ministry of Energy, Mines and Infrastructure for the Rupice Exploitation Permit, the last remaining permit required in order for construction to commence and the right to mine and process ore, from Rupice and Veovaca, in accordance with the Concession Agreement.

Adriatic also received an exploration permit in respect of the 32km2 extension to the concession, comprising of Semizova Ponikva, Brezik and Vares East. Initial results from the recent heliborne magnetics and radiometric survey covering the total concession area had been received with data analysis and interpretation ongoing.

At the Rasa project in Serbia, more than 6,500m of exploration drilling was completed during the quarter.

Paul Cronin, Adriatic’s Managing Director and CEO commented: "During the second quarter of 2021, we received the Urban Planning Permit for the Rupice underground deposit, which is an important permit and significant step forward in the development of the Vares Silver Project. This marked the penultimate step in completing the permitting requirements to commence construction. In addition, we received an Exploration Licence for 32km2of additional concession areas along the 22km of strike length, which we look forward to systematically exploring.”

“This is a transformational year for the Vares Silver Project and we look forward to the completion of the Definitive Feasibility Study within a matter of weeks."

*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia

 

Kodal Minerals* (LON:KOD) – 0.37p, Mkt cap £59m – Industry move towards direct lithium hydroxide production from hard-rock spodumene driven by cost of extracting impurities

Recent news on the financing of hard rock lithium projects by Piedmont and Ganfeng is creating renewed interest in Lithium hard rock (spodumene) projects.

The Joint venture agreement signed between Ganfeng and Firefinch on their Goulamina project in Mali was quickly followed by a very similar agreement on IronRidge’s Ewoyaa spodumene project in Ghana with Piedmont the US lithium company.

Li-ion battery manufacturers are using lithium hydroxide ‘LiOH’ for battery manufacturing requiring lithium carbonate to be converted into lithium hydroxide adding a second stage to the production process.

Many hard rock, spodumene projects offer the advantage of producing Lithium hydroxide directly from spodumene concentrate.

Lithium processors also prefer to produce lithium hydroxide ‘LiOH’ close to their end users due to problems with transporting LiOH. LiOH is, dangerous, highly corrosive and can easily move into a solid phase making shorter trucking distances important.

While it is generally cheaper to extract lithium carbonate from brines in the Atacama and Nevada deserts with the help of natural evaporation these projects still need to support the cost of converting their output into LiOH either at source or preferably closer to the battery manufacturers.

Impurities are a major issue with brines with removal of Na, Cl, K, Mg and Boron seen as essential in the production of high-end battery grade lithium hydroxide.

The removal of these impurities results in significant losses on recoveries adds substantially to capital costs, power and fresh water consumption rendering the process impractical in many desert regions.

We are waiting on news from Sinohydro on a potential joint venture deal with Kodal Minerals on its Bougouni lithium project plans in Mali.

Sinohydro was introduced by a Chinese lithium processing company which has taken a keen interest in Kodal’s Bougoumi project and is a subsidiary of PowerChina (mkt cap $60bn).

Shandong Ruifu Lithium Industry Co Ltd, which produces lithium carbonate is expected to take the Bougouni spodumene concentrate if production goes ahead.

Bougouni lithium project key stats:

220,000tpa of 6% spodumene concentrate over an initial 8.5 years

71% recovery rate of contained lithium based on laboratory metallurgical recoveries of 75%;

>USD$1.4bn of total revenue at $680/t starting H2 2021 and rising 2%pa

2mtpa throughput with DMS and conventional flotation circuit. Recoveries are acceptable with the DMS on its own.

USD$431/t C1 cash costs or USD$466/t inc. royalties and sustaining capital.

US$117m Capex est. plus contingency:

1.7 year payback est.

LoM production of 1.94mt of concentrate. Sales >$1.4bn assuming spodumene concentrate sales price of $680/t increasing 2% year-on-year;

58% IRR pre-tax

51% IRR post tax

US$300m NPV7% pre-tax

US$200m NPV7% post-tax

*SP Angel acts as Financial Advisor and Broker to Kodal Minerals. The analyst holds shares in Kodal Minerals.

 

Kore Potash (LON:K2) 0.8p, Mkt Cap £28m – New CFO

Jean Michel Bour, the Companys acting CFO, informed the Board of his intention to leave the Company due to personal reasons.

Jean Michel was appointed as CFO in early June this year and will be leaving immediately.

Ms Amanda Farris has been appointed as interim CFO as a search from a permanent CFO is conducted.

Ms Farris has been with the Company since May 2021 and is an Australian Chartered Accountant with over 20 years’ experience in the mining industry.

She held corporate and operations management roles in Australia, Indonesia, Cote d Ivoire and the Democratic Republic of the Congo with companies including Newcrest Mining, De Grey Mining, Tiger Resources and Iluka Resources.

 

Power Metal Resources* (LON:POW) 2.08p, Mkt cap £24.45m – Earn-in to acquire two Canadian lithium exploration properties

Power Metal reports that its 100% owned Canadian subsidiary Power Metal Resources Canada has signed an earn-in agreement through which it may acquire a 100% interest in two Canadian lithium pegmatite exploration properties.

The two properties, Authier North and Duval East, are situated in the Val D'Or mining camp in Quebec, Canada.

Authier North Property is adjacent to Sayona Mining's (ASX: SYA) flagship Authier Lithium Project which has reported JORC compliant Total Reserves of 12.1Mt at 1.0% Lithium Oxide (0.55% Li2O cut-off grade). 

The Duval East Property is immediately adjacent and east of a northwest-southeast trending lithium pegmatite dyke which  was drilled in 1955 with reported intersections equivalent to 2m @ 1.38 Li2O

The easternmost historical drill hole on this lithium bearing pegmatite dyke falls within the Duval East Property boundary, with the dyke expected to extend into the claim.

In year 1, Power Metal will make initial earn in payments to the Vendors including a cash payment of CAD$15,000 and a share based payment of CAD$50,000 through the issue of 1,063,891 new ordinary shares in Power Metal at a price of 2.75p per share.

During the first year Power Metal must expend CAD$25,000 (circa £14,628) on exploration costs on the Properties.

In year 2, cash payments of CAD$25,000 will be made and a further share based payment of CAD$50,000 with the number of new Ordinary Shares based on the ten consecutive trading day volume weighted average Power Metal share price prior to the delivery of written confirmation to the Vendors that Power Metal Canada wishes to proceed to year 2 payments. During the second year Power Metal must expend CAD$50,000 on exploration costs on the Properties.

In year 3, cash payments of CAD$25,000 will be made and a further share based payment of CAD$75,000 based on the 10 day VWAP prior to the delivery of written confirmation to the Vendors that Power Metal Canada wishes to proceed to year 3 payments. During the third year Power Metal must expend CAD$100,000 on exploration costs on the Properties.

Should all payments be made above the total cost to Power Metal would be £242,832 over a maximum 3 year period, and following that expenditure Power Metal Canada will hold a 100% interest in the Properties.

There is an existing 1% NSR over the Properties that will remain in place. In addition on completion of the Earn-in Power Metal will grant to the Vendors a further 1.25% NSR and 0.5% of the Vendor NSR may be bought back by Power Metal Canada at any time for a cash payment of CAD$500,000.

*SP Angel act as Nomad and Broker to Power Metal Resources

 

Rainbow Rare Earths* (LON:RBW) 12.35p, Mkt Cap £59m – Nd/Pr prices jump while Rainbow reports work continues unabated on Phalaborwa project in South Africa

(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)

Rainbow Rare Earths reports the company is unaffected by recent unrest in South Africa.

Work on the Phalaborwa project continues on the process flow sheet based on the previously run SASOL process supported by ongoing metallurgical test-work being done at the ANSTO test process facilities in Australia.

Our financial modelling of the Phalaborwa project shows multiple upside potential on our modelled assumptions on the simple recovery of Nd/Pr. Returns are further enhanced by the additional recovery of Tb/Dy assuming an additional $30m to the capital cost of the project.

NdPr Rare Earth Oxide prices have jumped higher in China to US$85,443/t from US$82,427/t today on stronger demand for permanent magnets for wind farms and electric vehicles.

*SP Angel act as broker and financial advisor to Rainbow Rare Earths

 

Rio Tinto (LON:RIO) – 6,041p, Mkt cap £77bn – Q2 production reports identifies signs of economic recovery in China, the United States and Europe

Reporting what he described as a six month period which has presented “some challenges”, Rio Tinto’s Chief Executive, Jakob Stausholm, pointed to a recovering global economy with a particularly strong recovery in China.

The company says that it expects “continued global recovery with most key indicators of economic activity back to pre COVID-19 levels” with increasing economic confidence in the United States and “Economic indicators in Europe show a strong recovery is already underway” while “China's economic growth is becoming more balanced on fading stimulus-related demand and tightening credit conditions”.

The company explains that unusually high rainfall and the impact of temporary shutdowns in order to tie-in replacement production on some of its Pilbara iron-ore operations in Western Australia, notably at Gudai Dam, leads to the expectation that iron ore shipments will “be at the low end of the guidance range” of 325-340mt in 2021, subject no further serious disruption related to Covid19.

Iron ore production of 75.9mt during Q2  brings YTD output to 152.3mt, around 5% below the performance in H1 2020 and “Shipments of 76.3 million tonnes (100% basis) were 12% lower than the second quarter of 2020 with some additional drawdown of inventories”.

In the aftermath of the Juukan Gorge incident where blasting at the Brockman 4 iron ore Pit 1 in the Pilbara destroyed an archaeological site, it is encouraging that “Blast management plans have been developed to create smaller, higher controlled blasts to minimise vibration and protect heritage sites (approximately 11% of blasts in the first half), which has had some impact on mining productivity and materials handling”.

Rio Tinto also says that “Mined copper and bauxite production is expected to be at the low end of the guidance range” of 500-550,000t of copper and 56-59mt of bauxite.

“Mined copper production of 115.5 thousand tonnes was 13% lower than the second quarter of 2020, with lower recoveries and throughput at Escondida as a result of the prolonged impact of COVID-19, and a planned relocation of the in-pit crusher at Kennecott in April”.

Operations at Kennecott were also subject to “an anticipated slope failure occurred in the south east wall of the Bingham Canyon pit at Kennecott. There were no injuries or damage to equipment as the slide was accurately predicted by our geotechnical experts. Mining in the affected area restarted progressively in June. No ore has been sterilised and we expect to recover the material from the slide which is largely copper bearing ore. Mining rates will however be slower due to the size distribution of the material, and therefore some high-grade production scheduled for late 2021 will be deferred to 2022”.

At Oyu Tolgoi, Q2 copper production “from the open pit was 1% higher than the same quarter of 2020 with higher head grades and copper recovery, partly offset by lower manning levels due to COVID-19” while work on the You Tolgoi underground development was slowed as a result of “heightened COVID-19 constraints in Mongolia”.

Bauxite production was also adversely affected by the continuing impact of “severe wet weather in Eastern Australia in the first quarter”.

“Aluminium production of 0.8 million tonnes was 4% higher than the second quarter of 2020, underpinned by the ISAL smelter in Iceland and the Becancour smelter in Quebec operating at full capacity, and the Kitimat smelter in British Columbia nearing completion of its pot relining cycle.”.

Rio Tinto explains that it is “closely monitoring the impact of global chip shortages on the automotive industry, and so far strong demand in other sectors has offset any impact on overall demand for aluminium.”

Consistent production at it’s Fer et Titane metallurgical complex in Quebec helped a 14% increases in titanium dioxide production. Sadly, the continuing violence in South Africa, which included the murder of Rio Tinto employee Nico Swart at the Richards Bay Minerals complex, has led to the suspension of operations at Richards Bay and “titanium dioxide slag production guidance has been removed as a result of risks around the timing of resumption of operations. We are working with the local and federal governments and police to nsure we can safely resume operations.”.

Rio Tinto reports increased exploration and evaluation expenditure of US$324m during H1 (H1 2020 US$280m) with “41% of this expenditure was incurred by central exploration, 35% by Copper, 18% by Minerals and 6% by Iron Ore”.

The company says that it has exploration operations in 19 countries seeking eight different commodicties including bauxite exploration in Brazil and Laos, base metals in Australia, the United States, Peru, Kazakhstan, Eirope Africa and central America, diamonds in Canada and industrial minerals in Serbia, Canada, and Mozambique as well as for iron ore in Australia and Guinea.

Among the most advanced projects, studies are underway on the Resolution copper/molybdenum project in the US, the Winu copper/gold project in Western Australia, the Falcon diamond project in Canada, borates at Jadar in Serbia as well as the Western Australian iron ore and on the Simandou iron-ore project in Giunea.

Conclusion: Rio Tinto describes a Q2 with some challenges but is cautiously optimistic on economic recovery in Chine, the US, and parts of Europe. Iron ore, copper and bauxite production in 2021 is expected to be towards the lower end of published guidance.

 

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.

 

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

W1S 2PP

 

*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

 

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%


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