SP Angel . Morning View . Tuesday 09 11 21
Chinese property market woes hit Chinese junk bonds
Private financing – We are raising funds for a new gold mine and project development in Ghana
We are raising funds for an advanced gold project in Ghana with good upside exploration potential. The project offers potential to fast-track gold production using a low-cost heap leach.
Management are experienced and are looking to IPO within 18 months. Please contact us if you are interested in pre-IPO funding of the opportunity
Altus Strategies* (Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)) – BUY, target 125p – New hard rock artisanal gold workings discoveries in Egypt
Arc Minerals* (Arc Minerals Limited (AIM:ARCM)) – BUY – Zambian court rules ex-parte order restricting mineral tenements to be set aside
Castillo Copper (Castillo Copper Ltd (LSE:CCZ, ASX:CCZ)) – Project summaries
Newcrest Mining Ltd (Newcrest Mining Limited (ASX:NCM)) – Offer to buy Pretium Resources for $2.8bn
Orosur Mining* (Orosur Mining Inc (AIM:OMI, TSX-V:OMI)) – Further encouraging assay results at Anza
Rainbow Rare Earths* (Rainbow Rare Earths Ltd (LSE:RBW)) BUY, Valuation raised to 46p – Investor meeting highlights progress at Phalaborwa and Gakara and value generation potential
New investment vehicle to boost trader access to diamond market
Diamond Standard, sponsored by Horizon Kinetics, to launch $50mn investment trust for diamond trading. (WSJ)
It will be backed by Diamond Standard’s physical coins and bars.
The physical-backed trust will offer more investors access to the diamond market.
he firm hopes the trust will create a new source of demand for diamonds and support prices.
Dow Jones Industrials +0.29% at 36,432
Nikkei 225 -0.75% at 29,285
HK Hang Seng +0.19% at 24,811
Shanghai Composite +0.24% at 3,507
Economics
China – Chinese property market woes were highlighted in the latest Fed’s stability report.
“Stresses in China could strain global financial markets through a deterioration of risk sentiment, pose risks to global economic growth, and affect the United States,” the report read.
The stress is seen spreading from property to other sectors and more secure higher grade dollar bonds in China.
Spreads on investment grade notes widened about 8-10bp yesterday marking the sharpest increase since April, when markets were shook by troubles at the China Huarong Asset Management, and taking the total move to some 27p over four straight days.
Evergrande is due a $150m coupon payment after the 30-day grace peris
Chinese junk bond yields hit 25% - Investors in China’s junk-bond market have suffered 33% losses over the past half-year hitting their lowest since March 2009, at 26.6% yesterday.
Concerns over the highly leveraged property sector caused Beijing to instigate regulatory curbs on borrowing with four property developers defaulting since Sept.
The market estimates Chinese junk borrowers have c. $197bn of USD debt outstanding.
Kaisa missed a payment on one of its wealth-management products last week. Its 2024 bonds trade at 29c/dollar. Kaisa was downgraded by Fitch this morning.
Developers’ sales have been hit. Sunac reports October contracted sales fell c.28% vs Oct. 2020. (WSJ)
Evergrande raises $145mn through sale of HangTen Networks stake
Evergrande continues its fire sale of assets having sold 2 jets last month.
The developer faces a deadline on Nov. 11 of $148mn in payments. (CreditSights)
It missed coupon payments due on Nov. 6th for 2 bonds. (Lucror)
Global Covid-19 cases hit 250mn as China and Europe’s outbreaks intensify
The virus is infecting 50mn people every 90 days as the delta variant takes hold. (Reuters)
Infections currently rising in 55/240 countries. Russia, Ukraine and Greece have seen record cases.
Eastern Europe seeing 1mn new infections every 4 days.
Russia reported 39,400 new cases yesterday. 5,000 in Moscow.
China administered an additional 8.6mn doses of the vaccine on Sunday.
Low-income countries have seen 5% vaccination rates on average. (SCMP)
Investors eye inflation data as gold holds strong
Gold has held a key level above $1,820, hitting $1,828/oz.
It has been supported by weak US bond yields and a sliding dollar.
The dollar index slid from 94.645 on Friday before the Fed’s announcement to current levels of 93.938.
10-year yields remain below 1.5%
Tomorrow’s CPI data could raise the potential for a U-turn in the Fed’s dovish approach to rate hikes.
Germany – Retailers expect supply chain issues to persist through Christmas and “well into the summer” next year, Ifo institute survey found.
The number of businesses struggling to restock fell to 60% last month from 74% in the previous month.
“The range of products on offer will be limited over the Christmas period and long thereafter,” Ifo said.
Many businesses saying they will raise their prices.
Supply bottlenecks are reflected in weak trading data released this morning showing exports falling for a second consecutive month (-0.7%mom in September) and imports little changed during the month (0.1%mom v 0.5%mom est.)
France – The economy is was around 0.5% larger than in pre-pandemic early 2020 in October and continued rising since helped by a strong recovery in the service sector, according to a Bank of France’s survey of businesses.
“This return to pre-crisis levels has come sooner than we expected previously – we’ve gained about one quarter in time,” the central bank said.
If Q4 growth forecasts hold up (+0.75%qoq), growth for the year would be around 6.75%, according to the central bank estimates.
Growth gained pace recently after the removal of Covid-19 restrictions led to a boom in consumer spending, Bloomberg reports.
Denmark – The government re-introduced some restrictions as daily infections have more than doubled in the past two weeks.
Danes will be required to show so-called corona passports to attend public places (eg restaurants, theatres, concert halls, night clubs).
The passport will verify if the attendee was vaccinated, had tested negative or had recently recovered from the disease.
The nation is one of the most vaccinated (~75% of total population).
Major cryptocurrencies like bitcoin ($68,642) and ether ($4,857) hit new all-time highs with the global market cap of the digital assets surpassing $3.0tn.
Currencies
US$1.1594/eur vs 1.1554/eur yesterday. Yen 112.93/$ vs 113.56/$. SAr 14.935/$ vs 15.007/$. $1.357/gbp vs $1.347/gbp. 0.742/aud vs 0.740/aud. CNY 6.396/$ vs 6.398/$.
Commodity News
Top Royal Bafokeng Platinum investor agrees Northam Deal after rejecting Implats
Royal Bafokeng Platinum (RB Plat)’s main shareholder shas withdrawn support ofr a takeover by Impala Platinum and instead agreed to sell its stake to Northern Platinum Holdings.
Northam will acquire 32.8% of RB Plat for about 17bn rand ($1.14bn), through cash and Northam shares, with the option to increase the stake to 33.3%.
Northam is offering to buy the stake for about 180.5 rand a share, 90% higher than the level at which RB plat was trading before Impats announced talks to buy 1005 of the company on October 27th.
Implats announced on October 27 that it was in talks to buy 100% of RB Plat, however, talks never materialised.
RB Plat has a market value of about $2.3bn and owns mine and a processing plant in South Africa.
A spokesman for Northam said the stake purchase: “provide a strategic platform for Northam to pursue a possible combination of Northam and RB Plat’s business operations in the medium-term”
Precious metals:
Gold US$1,822/oz vs US$1,816/oz yesterday
Gold ETFs 98.0moz vs US$98.0moz yesterday
Platinum US$1,052/oz vs US$1,045/oz yesterday
Palladium US$2,061/oz vs US$2,045/oz yesterday
Silver US$24.33/oz vs US$24.19/oz yesterday
Rhodium US$14,350/oz vs US$14,350/oz yesterday
Base metals:
Copper US$ 9,616/t vs US$9,487/t yesterday
Aluminium US$ 2,574/t vs US$2,528/t yesterday
Nickel US$ 19,595/t vs US$19,355/t yesterday
Zinc US$ 3,258/t vs US$3,190/t yesterday
Lead US$ 2,360/t vs US$2,336/t yesterday
Tin US$ 37,425/t vs US$36,935/t yesterday
Energy:
Oil US$83.5/bbl vs US$83.6/bbl yesterday
Oil prices continue to track higher on news that Saudi Arabia has raised the price differential of its flagship crude to Asia by more than double in December versus November, exceeding market expectations and sending a bullish signal to the global oil market
The sharper-than-expected price hike comes after OPEC+ agreed last week to maintain a production hike of 400,000bopd for December despite consumers' calls for higher output
Over the weekend, Saudi Aramco increased the official selling price (OSP) for Arab Light crude by US$1.40 to US$2.70/bbl above the average of Platts Dubai and DME Oman prices in December, its highest level since September
This far exceeds a hike of 30-90 cents a barrel forecast for Arab Light in a Reuters survey on 29 October
Both Brent and WTI crude futures gained more than US$1/bbl following the news yesterday
Brent has risen 60% from the start of the year as global oil demand recovers from the pandemic
Saudi Aramco also hiked OSPs for heavier grades by more than US$1/bbl despite weaker fuel oil margins
These prices will set the trend for other medium and heavy grades from Kuwait, Iraq and Iran
The price hikes come even as Middle East producers are increasing output as previously agreed in a pact to raise output starting from August
Saudi oil production will exceed 10MMbopd in December, for the first time since the coronavirus pandemic
Middle East benchmarks jumped higher last week after Brent's premium to Dubai quotes stretched to its highest since 2013
That made Brent-linked crude from the Atlantic Basin and Latin America more expensive than those from the Middle East and Russia
Natural Gas US$5.394/mmbtu vs US$5.614/mmbtu yesterday - US supply of natural gas increased slightly last week
Uranium UXC US$45.6/lb vs $45/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$93.0/t vs US$91.3/t
Chinese steel rebar 25mm US$770.5/t vs US$775.5/t
Thermal coal (1st year forward cif ARA) US$115.3/t vs US$106.8/t -
Beijing intervention helps ease China’s coal shortage
Chinese provinces suffering power shortages fell from 18 on Oct. 1st to 2 mid-October.
Stockpiles at power stations of less than 7 days have fallen 90%. (Commonwealth Bank of Australia)
The coal crisis helped shift China’s PMI into contraction Sept-Oct.
Beijing’s intervention saw coal imports jump 76% in Sept. and boosted national coal production by 600t/day.
Thermal coal prices down 50% (Wind Information).
Thermal coal swap Australia FOB US$161.5/t vs US$153.8/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$59,500/t
NdPr Rare Earth Oxide (China) US$121,568/t vs US$121,520/t
Lithium carbonate 99% (China) US$27,441/t vs US$27,430/t
China Spodumene Li2O 5%min CIF US$1,720/t vs US$1,630/t
Ferro-Manganese European Mn78% min US$2,139/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% 7.5/lb vs US$7.6/lb
Europe Ferro-Vanadium 80% 32.25/kg vs US$32.45/kg
China Ilmenite Concentrate TiO2 US$387/t vs US$387/t
Spot CO2 Emissions EUA Price US$69.6/t vs US$69.3/t
Battery News
Super-sized turbines can bring ‘game-changing’ cost saving to offshore wind
New research from the US National Renewable Energy Laboratory has found that larger wind turbines and larger offshore wind projects can reduce the Levelised Cost of Energy by more than 23%.
The team of researchers combined three models to compare the cost of a 2019 fixed-bottom offshore wind farm, using 100 6MW wind turbines, with various wind turbines and wind farm sizes – up to a maximum of 20MW wind turbines with a plant capacity of 2.5GW.
The models showed that scaling up both wind turbine and wind farm size can reduce balance-of-system and maintenance costs while reducing losses from wakes (turbine-made turbulence)
Turbines are expected to keep growing in size, with MingYang announcing their plans for a 16MW turbine.
The turbine will have three 118m blades and sweep and area of 46,000sqm.
Siemens Gamesa is preferred supplier of turbines for 3.6GW project off UK
Siemens Gamesa has been named as the preferred supplier by Vattenfall for its 3.6GW offshore wind project in the UK.
The agreement covers Vattenfall’s Norfolk Vanguard and Norfolk Boreas projects, each site with a capacity of 1.8GW.
Both projects will use Siemens Gamesa’s newest turbine model, SG 14-236 DD, a 14MW turbine with a 236m diameter.
The SG 14-236 DD is compatible with Siemens Gamesa RecyclableBlades, the world’s first recyclable wind turbine blades for commercial use.
Company News
Altus Strategies* (Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)) 72p, Mkt Cap £58m – New hard rock artisanal gold workings discoveries in Egypt
BUY – 125p
The Company announced the discovery of further hard rock artisanal gold workings from field reconnaissance at Gabal Al-Shaluhl (348 km2 ) and Wadi Jundi (696 km2 ) projects in the Eastern Desert of Egypt.
14 hard rock artisanal gold workings were discovered that are up to 30m wide and 100m long with several mechanically excavated.
This brings the total number of gold workings to over 50 across four gold exploration projects to date with at least 35 further remote sensing targets remaining to be assessed.
The plan is to evaluate and prioritise targets for follow up reconnaissance mapping as well as detailed structural, alteration and mineralisation mapping, along with grad and channel sampling.
Conclusion: New discoveries of hard rock artisanal workings highlight the significant prospectivity of the project area that was recently secured by the team and largely underexplored in the past.
*SP Angel acts as Nomad and Broker to Altus Strategies
Arc Minerals* (Arc Minerals Limited (AIM:ARCM)) – 3.04p, Mkt cap £34m – Zambian court rules ex-parte order restricting mineral tenements to be set aside
(Arc holds 72.5% of Zaco and 66% of Zamsort in Zambia. The Cheyeza license is 66% owned by Arc Minerals through its holding in Zamsort.)
BUY - CLICK FOR PDF
Arc Minerals reports today on a court ruling in Zambia setting aside a previous court ex-parte order restricting the sale of or alienating or encumbering of mineral tenements held by Zamsort and Handa Resources.
Zamsort and Handa Resources are subsidiaries of Arc Minerals.
Zambia is one of our favourite destinations in Africa due to its strong rule of law and independent justice.
While the legal system is sometimes used to frustrate mineral ownership, challenges to mineral rights invariably are normally overturned in the higher courts in favour of the rightful owners from our experience.
This is what makes Zambia a good place to do business and gives confidence to majors like Rio Tinto, BHP, FQM and others to invest in exploration and mining in the region.
The system of Chieftainship and tradition in Zambia also appears to support expert and socially responsible companies which invest in Zambia with local chiefs and elders supporting Western companies working in Zambia.
The local tradition of wearing High-viz for a night out in Solweizi and other parts of the Copperbelt not only serves from a health and safety perspective but also highlights that jobs with mining companies are very well respected in the region.
*SP Angel acts as Nomad and broker. An SP Angel analyst has driven across the Zambian copper belt, flying the British flag, to visit Arc’s licenses West of Sloweizi.
Castillo Copper (Castillo Copper Ltd (LSE:CCZ, ASX:CCZ)) 2.05p, Mkt Cap £25.3m – Project summaries
Castillo Copper has issued a progress report on its North Queensland copper project, its’ due-diligence on the Picasso and Litchfield lithium projects and on the Zambian copper exploration and Luanshya and Mkushi.
The company says that it has overcome “challenging operational conditions” to advance its drilling of the Arya copper prospect in Queensland’s Mt Isa Copper Belt which Castillo Copper describes as attracting growing exploration interest, including from Rio Tinto which Castillo Copper reports, has recently acquired ground “on the eastern boundary of the NWQ Copper Project which is proximal to the Arya Prospect”.
Castillo Copper also reports that it has completed desk-top due diligence work on the Litchfield lithium project in the Northern Territory and the company is awaiting assay results from more than 650 surface samples while, following a site visit to the Picasso lithium project in Western Australia, samples have been “collected and assessed for the extent of pegmatite outcropping along the eastern boundary” of the property.
In Zambia, work is continuing on an initial drilling campaign to cover the 14 potential targets at Luanshya identified by the induced polarisation geophysical survey (IP) and further IP work is underway at the Mkushi project.
Newcrest Mining Ltd (Newcrest Mining Limited (ASX:NCM)) A$24.96, Mkt Cap A$20bn – Offer to buy Pretium Resources for $2.8bn
Newcrest has agreed to buy Pretium resources in a cash and shares deal valuing the Canadian gold producer at $2.8bn.
Newcrest will offer Pretium holders C$18,50 per shares, a 23% premium to the target’s closing price on Monday.
Pretium’s board has unanimously recommended the transaction, although it still requires the approval of two-thirds of the company’s shareholders.
Pretium owns and operates the Brucejack operation in British Columbia, and the acquisition would immediately add more than 300,000ozpa of gold output taking annual production to more than 2Moz.
Orosur Mining* (Orosur Mining Inc (AIM:OMI, TSX-V:OMI)) 13.6p, Mkt Cap £28m – Further encouraigng assay results at Anza
(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 that it has received assay results for five additional holes from drilling undertaken at Anza from October 2020 through to June 2021.
In September 2021, Orosur reported that it had been served notice by its Colombian JV partner Minera Monte Águila that it has elected to exercise its right to assume operatorship of the Anzá Project in Colombia.
Monte Águila is a 50/50 JV between Newmont and Agnico Eagle and is the vehicle by which these two companies exercise their rights and obligations with respect to the Exploration Agreement.
Once Monte Aguilla had sufficient information to progress with the exploration agreement, the number of drill rigs was reduced from five to one, with focus shifting to better understanding the regional picture and to mapping and sampling of the other licences and applications to identify targets for the next phase of work.
Highlights from the latest round of drill results include:
MAP 093 - 14.85m @ 1.60g/t Au, 1.08g/t Ag, 0.79% Zn from 281.8m
MAP 094 - 8.55m @ 0.96g/t Au, 5.88g/t Ag, 0.34%Zn from 62.4m
MAP 094 - 5.35m @ 1.17g/t Au, 2.18g/t Ag, 0.79% Zn from 159.5m
MAP 094 - 10.70m @ 1.08g/t Au, 0.24g/t Ag, 0.03% Zn from 213.4m
MAP 096 - 2.70m @ 2.84g/t Au, 1.12g/t Ag, 0.07%Zn from 211.4m
MAP 096 - 51.55m @ 1.32g/t Au, 1.34g/t Ag, 0.35%Zn from 225.5m.
The two additional holes, MAP 092 and Map 095 were drilled away from known mineralisation at APTA and drilled in the opposite direction to current drilling in order to assess the regional geology and to test the idea that the target stratigraphy identified at APTA represented the eastern limb of an anticline and would be repeated to the west.
Orosur CEO Brad George commented: “The decision by our partners to take over operatorship of Anzá was both positive and welcome, being testament to how two of the world’s largest gold miners see the region. The handover process is substantially complete. The financial and technical resources that can now be brought to bear are without parallel and we look forward to them substantially ramping up activity.”
*SP Angel act as Nomad and Broker to Orosur Mining
Rainbow Rare Earths* (Rainbow Rare Earths Ltd (LSE:RBW)) 15.8p, Mkt Cap £81m – Investor meeting highlights progress at Phalaborwa and Gakara and value generation potential
BUY – Valuation increased to 46p from 43p
(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates)
(Neodymium Nd, Praesidium Pr, Terbium Tb, Dysprosium Dy. Rainbow holds 100% of the Gakara mine and associated licenses in Burundi)
Rainbow Rare Earth management hosted an analyst and major investor meeting in London yesterday.
The team expect demand for the critical rare earths to double by 2030 due to strong demand from electric vehicles, wind farms etc…
91% of the value of rare earth elements is driven by demand for permanent magnets with Terbium and Dysprosium used to ensure these magnets retain their properties at high operating temperatures.
Phalaborwa (South Africa): Management are focussed on testing and refining the flowsheet for the Phalaborwa project for the extraction of three rare earth oxide streams, NdPr, Tb and Dy.
These products should be sold at market prices and may even fetch a premium in the market due to the independence of their location.
Processing should be able to utilise surplus sulphuric acid generated from a nearby planned copper mine lowering operating costs.
Each process stream should require just three stages for extraction with the feasibility study work expected towards the latter quarter of next year.
Management now expect the capital cost of the project to be around $150-170m, though much work is still to be done on the cost estimation.
Gakara (Burundi): The team continue to talk to the government of Burundi on the reopening of the mine and resumption of exports. Other mines in the country were also stopped pending renegotiation of the mining convention.
Management expect the mining convention to be renegotiated and for the Gakara mine to reopen early next year.
The value of the concentrate stockpile should have increased substantially since it was blocked by the ban on REE concentrate exports helping with the working capital cost of the restart.
Valuation: We are raising our valuation to 44p from 43p on the rise in rare earth prices though this is largely offset by the increase in our capital cost assumption to $170m.
We have also raised our discount rate to 12% to reflect the impact of the stoppage in Burundi and have raised the discount we apply to NdPr prices to 20% from 10%. We have also raised our discount to Tb and Dy prices to 30% from 25%.
Conclusion: Rainbow is one of three rare earth producers to have supplied rare earth concentrates in recent years. We expect the company to realise substantial additional value as it progresses towards restarting the Gakara mine and development of the Phalaborwa process plant.
*SP Angel act as broker and financial advisor to Rainbow Rare Earths
Recent Interviews:
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.
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