SP Angel . Morning View . Monday 08 11 21
US infrastructure bill approval and strong Chinese exports help risk sentiment
Ariana Resources (Ariana Resources PLC (AIM:AAU)) – Due Diligence drilling completed at Apliki Project
Keras Resources* (Keras Resources PLC (AIM:KRS)) – Funding issues with local partner stall Diamond Creek organic phosphate production
Kodal Minerals* (Kodal Minerals PLC (AIM:KOD)) – Mining license granted for Bougouni lithium project in Mali
Thor Mining (Thor Mining PLC (AIM:THR, OTCQB:THORF, ASX:THR)) – Drilling commences at Molyhil Tungsten-Molybdenum Project
IGTV: Cornish Metals*, Mkango *, Kodal * - Fed to consider potential China slowdown when looking at rates https://youtu.be/FjIMHHXKzXg
VOX Markets: 03/11/21: https://audioboom.com/posts/7973357-john-meyer-on-iron-ore-china-s-slowing-growth-cornish-metals-kodal-minerals-ramble-metals
*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.
China officials warn of ‘grave challenge’ ahead as Covid cases rise
China confirmed 65 local Covid cases on Sunday. 44 cities in 20 provinces have recorded cases. (SCMP)
Beijing will retain its ‘zero-covid’ approach to tackling the pandemic.
Severe cases have fallen to 28 from 35 last week according to official figures.
Henan’s CCP secretary stated plans to ‘contain and kill’ the province’s outbreak in 1 week. Henan is one of China’s most populous provinces.
2.3bn vaccine doses have been administered in China. (FT)
Gold hits 2-month high on central banks’ rate hike patience
Gold hit a high of $1821/oz despite strong US payrolls data. (531k rise) Sept. revised – 312k vs 194k.
The dollar index fell 0.4% on Friday as the House approved Biden’s $1tn infrastructure bill.
Central banks are exercising patience regarding hiking interest rates despite improving economic data.
2-year US yield fell 5.37% on Friday. 10-year yields receded to 1.4450%.
Indian gold demand jumped 25% vs 2019’s festival season. (India Times)
EV sales – Plug-in electric vehicles represent nearly 25% of all new vehicles sold in the UK
Consumers, wary of rising regulation and taxes are either putting off new car purchases or are going straight for electric vehicles in nearly 25% of sales in the UK.
New vehicles sales fell around 25% in October to 106,000 with new van sales falling by >4% in October.
Sales of diesel vehicles fall 60% to 11,500 in October representing just over 10% of the market.
Gasolene vehicle sales fell 26%.
PEVs represented 95,000 out of the 141,000 of EV sales so far this year
Hybrids now represent 8% of the total market full electric vehicles now at 15% of all new registrations.
Dow Jones Industrials +0.56% at 36,328
Nikkei 225 -0.35% at 29,507
HK Hang Seng -0.45% at 24,758
Shanghai Composite +0.20% at 3,499
Economics
US – US equities ended the week at record highs last week following better than expected labour data , Pfizer reporting positive late-stage trials for its antiviral Covid-19 pill and the Fed pledging “patience” towards interest rate increases, FT writes.
Labour data released on Friday showed the economy added 531k jobs in October, compared to 450k estimated, and September total revised upwards to 312k, up from 194k.
Unemployment rate pulled back 0.2pp to 4.6% amid stable labour force participation rate.
Monthly earnings growth slowed to 0.4%mom, in line with estimates.
The numbers support the Fed decision last week to start scaling back its pandemic-era pace of bond-buying helping to keep borrowings rates low.
US Auto sales 12.99m vehicles in October vs 12.18m in September
Challenger job losses 22,800 in October vs 17,900 in September
US reopened borders to UK visitors for the first time in nearly two years on Monday with passengers required to show proof that they had two Covid-19 jabs on arrival.
US Congress passed Joe Biden’s $1.2tn bipartisan infrastructure bill after the House voted 228-206 in support of the legislation on Friday.
The bill construction of US roads, rails, ports, rural broadband, water supply and the build our of an electric car charging network.
Unlike the infrastructure package, the $1.75tn “build back better” bill has not yet been approved.
The $1.75bn social spending bill includes $555bn aimed at fighting climate change, mainly through tax-incentives for renewable and low-emision sources of energy and $150bn to build one million affordable housing units, BBC writes.
China – Trade continued strong in October with exports beating estimates suggesting external demand remained robust and despite ongoing supply-chain constraints.
On another note, headline imports data came in strong due to a lower year-earlier base and increasing commodity prices but underperformed estimates suggesting domestic demand has not fully recovered, Bloomberg writes.
Latest travel and social distancing restrictions amid new virus flareups may weigh on demand further.
Exports (US$, %yoy): 27.1 v 28.1 in September and 22.8 est.
Imports (US$, %yoy): 20.6 v 17.6 in September and 26.2 est.
Eu - Construction PMI rose to 51.2 in October vs 50.0 in September
Retail sales fell 0.3% in October vs 1% in September and rose 2.5% yoy in October vs 1.5% in September
UK - Construction PMI rose to 54.6 in October vs 52.6 in September
Halifax price index rose 0.9% in October vs 1.7% in September and rose 8.1% yoy in October vs 7.4% in September
Chile – Final polls are showing Jose Antonio Kast, a right wing candidate, will beat both of his main leftist contenders in a presidential runoffs.
Polls suggest Kat to take 44% of votes while leftist challenger Gabriel Boric to take 40% in a second round vote.
The right wing candidate extended his lead in an outlook for the first round with predicted 25% support trailed by Boric with 19%.
Kast, who is a former congressman, backs tax cuts, stronger immigration controls and a smaller government presence, Bloomberg reports.
Gabriel Boric advocates for higher levies, greater social equality and the end to private pensions.
Polls showing pro market candidate leading in the race saw local treasury yields pulling back and the nechmark S&P IPSA index climbing 7.2% last week.
Top presidential candidates are self isolating at the moment after Boric reported positive Covid-19 test last week.
General and presidential elections are scheduled for November 21.
Nicaragua - Biden derides ‘sham’ Nicaraguan elections as Ortega set to win re-election
Biden has accused Nicaraguan President Ortega as orchestrating a ‘pantomime election that was neither free nor fair’.
Ortega jailed 39 of his political opponents, labelling them as ‘terrorists’ who ‘finance war’ and ‘sow terror’ and ‘death’.
International observers and foreign media were denied access during the elections.
Ortega and his ‘co-president’ wife control Congress and all government institutions. This coming term will be his 4th.
Neighbouring Costa Rica will not recognise the election.
The US is considering further targeted sanctions on Nicaragua’s leadership.
Novikov, a representative of Russia’s Duma, observed ‘respect for the principle of non-interference’. (Euronews)
Peru’s largest copper producer looks to defuse tensions and remove blockade
Antamina’s CEO, Victor Gobitz, has met with local residents to address the blockade.
The mine suspended operations last week. Glencore/BHP both have stakes in Antamina.
Gobitz stated that formal talks begin today, hoping to ‘find the formula for a development plan for the whole town of Aquia’ (Reuters).
Protests have been encouraged by President Castillo’s socialist rhetoric and rising copper prices.
Currencies
US$1.1554/eur vs 1.1557/eur last week. Yen 113.56/$ vs 113.81/$. SAr 15.007/$ vs 15.289/$. $1.347/gbp vs $1.346/gbp. 0.740/aud vs 0.738/aud. CNY 6.398/$ vs 6.400/$.
Commodity News
Precious metals:
Gold US$1,816/oz vs US$1,798/oz last week
Gold ETFs 98.0moz vs US$98.1moz last week
Platinum US$1,045/oz vs US$1,038/oz last week
Palladium US$2,045/oz vs US$2,034/oz last week
Silver US$24.19/oz vs US$23.89/oz last week
Base metals:
Copper US$ 9,487/t vs US$9,500/t last week
Aluminium US$ 2,528/t vs US$2,558/t last week
Nickel US$ 19,355/t vs US$19,230/t last week
Zinc US$ 3,190/t vs US$3,163/t last week
Lead US$ 2,336/t vs US$2,356/t last week
Tin US$ 36,935/t vs US$36,695/t last week
Energy:
Oil US$83.6/bbl vs US$81.1/bbl last week
Oil prices saw gains in early trading today as positive signs for global economic growth supported the outlook for energy demand, whilst Saudi Arabia's Aramco has raised the official selling price for its crude
Joe Biden on Saturday welcomed congressional passage of a long-delayed US$1 trillion infrastructure bill, which may boost growth and demand for fuel
China's export growth slowed in October but beat forecasts, buoyed by rising global demand ahead of the winter holiday seasons and improvements in coronavirus-hit supply chains
Saudi Arabia late on Friday raised the price of its benchmark crude for customers in Asia in December, exceeding market expectations
The move by Aramco suggests demand remains strong as the OPEC producer and other major oil exporters keep the reins on supply
Demand for jet fuel also increased last week as more governments make air travel easier with reduced restrictions for coronavirus
The Biden administration had called on OPEC+ to produce more crude to dampen rising prices and on Saturday said his administration has "other tools" to deal with the higher price of oil
Elsewhere, China's oil imports slumped in October to the lowest in three years, as state-owned refiners withheld purchases due to higher prices, while independent refiners were restrained by limited quotas for bringing in crude
Natural Gas US$5.614/mmbtu vs US$5.591/mmbtu last week
Natural gas futures saw a small gain last week as traders bet early in the week on cooler mid-month temperatures in the US and Europe
Freezing overnight temperatures hit parts of the Northern Plains and Upper US Midwest early in the week, but they were offset by mild temperatures in much of the South and West
This was enough to limit strong national heating demand
US supply of natural gas increased slightly in the last week
The EIA expects Henry Hub prices will decrease after the first quarter of 2022, as production growth outpaces growth in LNG exports, and will average US$4.01/mmbtu for the year
US exports of LNG are establishing a record high this year, a new record high anticipated for next year
The EIA expects LNG exports to average 9.7Bcf/d this year (3.2Bcf/d more than the 2020 record high of 6.5Bcf/d) and to exceed annual pipeline exports of natural gas for the first time
The year-on-year increase in LNG exports coincides with slight growth in US natural gas production
US dry natural gas production is expected to average 92.6Bcf/d this year, which is 1.1Bcf/d more than in 2020 but 0.3Bcf/d less than in 2019
Uranium UXC US$45/lb vs $43.8/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$91.3/t vs US$92.5/t - Iron ore struggles under $100/t as China inventories rise
Dalian iron ore down to $87/t marking 8 consecutive session losses.
Shipments from Australia and Brazil down 4.5mt last week.
Analysts point to low iron ore prices hitting high marginal cost producers.
Iron ore stocked at Chinese ports at 2.5-year highs of 145mt. (SteelHome)
Construction steel rebar up 4.6%. HRC down 1.9%. Stainless Steel up 1.2%.
Chinese steel rebar 25mm US$775.5/t vs US$781.6/t - China’s largest steelmaker sees profits surge on strong demand
China Steel Corp reports Q3 profit of US$708.7mn vs $25mn losses Q3 last year. EPS of NT$1.28 marked an all-time high for the company.
The company noted increasing contributions from Malaysian and Indian subsidiary’s as Covid complications ease.
CSC expects strong Q4 demand.
Thermal coal (1st year forward cif ARA) US$106.8/t vs US$109.0/t - China ramps up daily coal output, aluminium prices hit
China coal output neared 12mt last week – multi-year high. (NDRC)
Beijing is looking to stock up, with China’s State Grid Corp warning of a ‘tight balance’ going into winter.
Average daily coal output up 1.2mt from end-Sept.
Power plant stockpiles hit 117mt on Sat. Portside inventories rose 1.5mt to 5.39mt.
The state grid operator states electricity supplies have stabilised. It is concerned about a lack of hydropower.
Thermal coal prices down 3% to $144/t. Down 52% since Oct. 19/
Aluminium prices have hit a 3-year low as prospects of further power outages diminish.
LME price hit $2.5kt – down 20% from 13-year high.
China coal imports double in October amid domestic power shortage
China’s overseas purchases of coal nearly doubled in October compared to a year ago as the government ordered energy suppliers to secure supplies at all costs to ease the nationwide power shortage.
However, imports of 27mt were still 18% below the annual high reached in September, after Beijing boosted its efforts to raise domestic production.
The ramp up in domestic production and increase in imports is part of a strategy at bringing down prices from record levels while also tackling widespread blackouts which have hampered several provinces in recent months.
Only a handful of provinces are still contending with power outages, although a colder than usual winter could increase pressure on a market which usually sees its worst shortfalls in January.
Thermal coal swap Australia FOB US$153.8/t vs US$152.3/t
Coking coal swap Australia FOB US$341.0/t vs US$341.0/t
Other:
Cobalt LME 3m US$59,500/t vs US$58,500/t
NdPr Rare Earth Oxide (China) US$121,520/t vs US$118,748/t
Lithium carbonate 99% (China) US$27,430/t vs US$27,421/t -
Eramet to build $400m lithium plant in Argentina
Eramet and Chinese company Tsingshan Holding Group have announced plans to build a $400m lithium plant in Argentina.
The 24,000tpa LCE processing plant is expected to be commissioned in early 2024, with Tsinghan financing as much as $375m in exchange for a 49.9% stake.
China Spodumene Li2O 5%min CIF US$1,630/t vs US$1,630/t
Ferro-Manganese European Mn78% min US$2,132/t vs US$2,132/t
China Tungsten APT 88.5% FOB US$315/t vs US$315/t
China Graphite Flake -194 FOB US$635/t vs US$635/t
Europe Vanadium Pentoxide 98% 7.6/lb vs US$7.6/lb
Europe Ferro-Vanadium 80% 32.45/kg vs US$32.45/kg
China Ilmenite Concentrate TiO2 US$387/t vs US$387/t
Spot CO2 Emissions EUA Price US$69.3/t vs US$69.2/t
Battery News
Hyphen Hydrogen Energy wins tender for 3GW hydrogen project in Namibia
British-German developer, Hyphen Hydrogen, has been selected to build a 3GW green hydrogen project powered by 5GW of wind and solar energy in southern Namibia.
The Namibian government signalled its intention to appoint Hyphen Hydrogen Energy as the preferred bidder to develop the $9.4bn Southern Corridor Development Initiative Green Hydrogen project in the Tsau Khaeb national park.
The combination of strong winds and high solar irradiation in the park, could produce some of the cheapest renewable H2 in the world.
Green hydrogen produced in the area would be cost-competitive with high-polluting grey hydrogen made from fossil fuels, at $1.73-2.30/kg.
“The first phase, which is expected to enter production in 2026, will see the creation of 2GW of renewable electricity generation capacity to produce green hydrogen for conversion into green ammonia,” said the Hyphen CEO.
Germany signed the €40m partnership deal with Namibia as part of a bid to secure supplies of green hydrogen – Germany believes it will be cheaper to import than produce itself, due to the space required to build the giga-scale projects for commercial hydrogen production.
World’s largest coal port planning hydrogen initiative
Australia is looking to build a hydrogen and ammonia hub at the world’s largest coal export facility at the Port of Newcastle in New South Wales.
The Port of Newcastle and Macquarie’s Green Investment Group have launched a $2.2m feasibility study into the development of a green hydrogen hub at the port that includes the backing of an approx. $1m funding grant from the Australian Renewable Energy Agency.
The study will assess the suitability for an optimal site within the port which has a range of options for developing and scaling-up hydrogen and ammonia infrastructure that can be successfully linked into existing supply chains, given its large size and existing infrastructure.
The hub, which will be called the Port of Newcastle Hydrogen Hub, will initially be supported by a 40MW electrolyser that would increase to a capacity of over 1GW.
Company News
Ariana Resources (Ariana Resources PLC (AIM:AAU)) 4.7p, Mkt Cap £51m – Due Diligence drilling completed at Apliki Project
Ariana reports encouraging drill results from the Apliki project in Cyprus, of which it now owns a 50% interest.
Significant results include:
44.5m @ 0.77% Cu from 51.5m, including 8m @ 1.40% Cu
28.0m @ 0.86% Cu from 16.0m including 6m @ 1.59% Cu
The completion of the drilling means that Ariana has completed its earn-in to 50% of Venus Minerals, which is in discussions with leading Cypriot mining company Hellenic Copper Mines for a 50:50 JV agreement for the development of Apliki.
Apliki is a VMS deposit which was partly mined in the 1960s. A Hydrometallurgical plant used 3km from the deposit was decommissioned in 2019 and is expected to be relocated to Apliki for the new operation.
Previous drill campaigns for the Apliki DD which have been reviewed by Venus and Ariana include:
VMD006 (62m to 70m) for 8m @ 1.40% Cu
VMD007 (20m to 26m) for 6m @ 1.59% Cu
VMD008 (34m to 57m) for 23m @ 0.39% Cu
Diamond drilling undertaken by Venus earlier this year has confirmed the presence of near surface thick zones of medium to low grade copper mineralisation which will form a significant component of the ore to be heap-leached at the Apliki hydrometallurgical operation.
Dr. Kerim Sener, Managing Director, commented: "These drilling results confirm Venus' expectations of the Apliki Copper Project in Cyprus. The results have yielded several high-grade copper intercepts within an overall envelope comprising mineralisation which appears to be represented by dominantly oxidised material containing secondary sulphides.”
“Recent exploration results are continuing to provide confidence in the development of a long-life mining opportunity utilising the very latest technologies for the efficient extraction of high-purity copper via electrowinning.”
“Venus is well positioned as a first mover in the resurgence of Cyprus' renowned mining industry and we look forward to providing further updates with regards to its intended joint venture agreement with Hellenic Copper Mines in due course."
Keras Resources* (Keras Resources PLC (AIM:KRS)) 0.065p, Mkt cap £4m – Funding issues with local partner stall Diamond Creek organic phosphate production
(Keras also hold an 85% interest in Societé General des Mines which holds the Nayéga manganese project license in Togo. Keras also holds 51% of Falcon Isle Holdings which holds 100% of the Diamond Creek phosphate mine which is operating in Utah, USA)
Keras Resources reports problematic issues with its local partner in the US over the funding of the expansion of the Diamond Creek organic phosphate mine and processing operations.
Operations at the mine have stopped and Keras management are now seeking to enforce their rights under the terms of their original transaction.
Keras has provided US$625,000 in additional working capital to Falcon Isle, the company which operates the Diamond Creek mine, out of Keras’ cash reserves.
Keras are now a major creditor to Falcon Isle and the team are also looking at the option of restructuring the operation and have appointed local legal representatives.
The mine has stockpiled 8,500t of organic phosphate rock in the laydown area in front of the Spanish Fork processing plant.
Diamond Creek started commercial production of organic phosphate in July targeting 10,000t of organic rock phosphate through to end October.
Nayega manganese (Togo): Keras continue to wait for a mining license for their Nayega manganese mine from the Ministry of Mines in Togo.
*SP Angel act as Nomad and Broker to Keras Resources
Kodal Minerals* (Kodal Minerals PLC (AIM:KOD)) – 0.36p, Mkt cap £57m – Mining license granted for Bougouni lithium project in Mali
(Kodal Minerals currently hold 100% of the Bougouni lithium Mine. The Mali Government requires a 10% free carry on any mining project in Mali)
Kodal Minerals report the granting of a mining license covering the Bougouni lithium project in Mali.
The license is for 12 years and is also conditional on the issuance of a 10% stake to the Mali government as required on all mines in Mali.
Management have started a six-month program to update their 2020 feasibility study with the aim of securing funding for the mine development and construction.
The study is to include metallurgical test work and viability testing of the process flowsheet alongside work for the tailings dam.
The study will also update the capital and operating cost estimates for the Bougouni mine, process plant and transport to port in the Ivory Coast.
Spodumene ore prices have risen to >$1,250/t from the $680/t used in the feasibility study published in 2020.
Bougouni lithium project key stats:
220,000tpa of 6% spodumene concentrate over an initial 8.5 years
68% recovery for the open pit
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.
Thor Mining (Thor Mining PLC (AIM:THR, OTCQB:THORF, ASX:THR)) 0.85p, Mkt Cap £14.9m – Drilling commences at Molyhil Tungsten-Molybdenum Project
Thor reports that it has commenced drilling at the Molyhil tungsten-molybdenum Project, in the Northern Territory.
The 1000m programme is designed to test a newly identified magnetic target adjacent to the Molyhil magnetite skarn, host to the tungsten-molybdenum-copper mineralisation.
Thor was recently awarded A$110,000 from the Northern Territory Government as part of the Resourcing the Territory, Geophysics and Drilling Collaborations (GDC) program.
The project is located 220km north-east of Alice Springs, and the company recently completed a revised Mineral Resource estimate comprising Measured, Indicated, and Inferred Mineral Resources, totalling 4.4 million tonnes at 0.27% WO, 0.10% Mo, 0.05% Cu.
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
Prince Frederick House
35-39 Maddox Street London
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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
LME
Oil Brent
ICE
Natural Gas, Uranium, Iron Ore
NYMEX
Thermal Coal
Bloomberg OTC Composite
Coking Coal
SSY
RRE
Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite
Asian Metal