SP Angel . Morning View . Friday 19 11 21
Gold holds as Covid restrictions increase across Europe
Greatland Gold (Greatland Gold PLC (AIM:GGP, OTC:GRLGF)) – US$16m fundraising to accelerate W Australian exploration effort and progress Havieron development
IronRidge Resources* (IronRidge Resources Ltd (AIM:IRR, OTCQX:IRRLF)) – highly prospective lithium license granted adjacent to Ewoyaa
Kodal Minerals* (Kodal Minerals PLC (AIM:KOD)) – Firefinch plans to start lithium spodumene production at end 2023 / early 2024 at Goulamina in Mali
Tesoro Resources (ASX:TSO) – Drill results extend known gold mineralisation at Ternera
Ford sets ambitious 600,000 EV target by 2023 despite battery and mineral bottlenecks
Ford’s CEO announced the company’s plans to double EV production to overtake Tesla and VW.
The company hopes to produce 600k battery vehicles pa by end of 2023.
Tesla forecast sales volume of 1m EVs by 2023.
Tesla is estimated to have sold 200k vehicles last year. (FT)
Analysts have questioned the carmakers access to key parts, including lithium-ion batteries.
Ford is estimated to have contracts for 1.5m batteries by 2030 with a significant increase required to meet the above targets. (Benchmark Mineral Intelligence)
Gold holds new level as Fed plots early rate hike
Gold steady around $1,860/oz despite increasingly hawkish sentiment from the US Federal Reserve.
US inflation expectations have dropped from their 11-year high - dollar index sustaining its 16-month high.
The Fed’s determination to keep rates at rock bottom to boost the US economy is being tested by soaring CPI.
Dovish Chicago Fed President Charles Evans has become ‘open-minded’ to a 1H22 interest rate hike. (WSJ)
Interest rate futures have priced in 3 rate hikes in 2022 vs a previously anticipated 2.
Biden has signalled an announcement on J Powell’s position due today.
Swiss gold exports to mainland China rose in October. India shipments fell from September as festival season-linked buying peaked. (Reuters)
China’s copper premium spikes to highest in six years as inventories plummet
The premium for spot copper over futures jumped to 2,200 yuan ($345)/t on Friday, the highest since SMM began tracking the data in 2015.
The spike came as inventory level have sank to their lowest since 2009 this month, currently at 35,000t vs 230,000t in May 2021.
Investors are betting on a shortage of industrial metals due to supply chain issues and strong demand.
Positive news from Chinese media outlets that several cities have eased rules for land sales has breathed optimism into China’s property sector – a key consumer of industrial metals such as copper.
Aluminium prices rise on supply limitations and China smelter explosion
Shanghai aluminium up 3.7% to $3k/t.
A 300kt capacity smelting plant in Yunnan has stopped production following an explosion. (Shanghai Metals Market)
China’s electricity curbs have reduced domestic aluminium capacity by 7%. (WoodMac)
Aluminium LME premiums at $17/t – highest since August 31.
Aluminium LME inventories fell to 588kt – lowest since December 2005.
Dow Jones Industrials -0.17% at 35,871
Nikkei 225 +0.50% at 29,746
HK Hang Seng -1.17% at 25,024
Shanghai Composite +1.13% at 3,560
Economics
China – The central bank warned financial institutions to step up exchange rate risk management and avoid one-way bets on the national currency as yuan climbs to a six-yea high, Bloomberg writes.
The currency has been trading higher on the back of increasing trade surplus and prospects of cuts in US tariffs.
The comment following the meeting organised by China Foreign Exchange Committee.
The last time the group met in May, days before PBOC raised the amount of FX banks must hold as reserves for the first time in more than a decade that curbed the yuan’s rally, according to Bloomberg.
US – Continuing unemployment claims continued to trend lower reaching 2,080k in the week to November 6 suggesting improving labour market in the US.
This compared to ~1,700k average registered in pre-covid 2019.
House of Representatives approval of Biden’s $2tn Social Spending and Climate bill imminent
Democrats look set to approve the $2tn bill in the House despite staunch opposition from Republicans.
House Minority Leader McCarthy described the bill as ‘the single most reckless and irresponsible spending in the history of this country.’
The bill will require approval in the evenly divided Senate following House approval.
The CBO suggests it will contribute an additional $367bn to the deficit in 10 years.
Europe ramps up restrictions as Covid infections jump
Coronavirus deaths in Europe rose 5% last week. (WHO)
Austria is going into a full lockdown from Monday amid record number of new infections.
Around 65% of the Austrian population is fully vaccinated, although, the seven-day infection rate is more than 800 cases per 100,000 people, one of the highest in the region.
Germany recorded 65k cases yesterday – health officials suggest it may be 3x this.
Germany will impose new restrictions for offices and public transport for those unvaccinated following a vote from the Bundesrat.
Czech Republic cases rising to highest level to date – unvaccinated barred from public events.
Ireland has restricted workplace attendance unless ‘absolutely necessary’, ramped up Covid-19 pass requirements and introduced a midnight curfew for on-licensed premises.
Belgium has mandated mask-wearing in public places with hospital admissions rising 30%/week.
Italian covid-related deaths are rising although infections fell from 7.5k to 5.1k Sunday to Monday.
Ukraine daily Covid death toll hit record levels on Tuesday – vaccination levels between 20-28%. (Euronews)
Netherlands have entered a partial lockdown after cases rose 44% to 110k on Tuesday.
French cases rose by 20k on Wednesday. (Reuters)
Germany – Authorities are putting pressure on citizens to seek vaccination proposing a series of restrictions for the unvaccinated to slowdown the spread of the virus (Bloomberg)
Restrictions include restricted access to restaurants, bars and public events in areas with high hospitalization rates.
“We are in the midst of the fourth wave and have to deal with a dramatic situation and draw the needed conclusions,” Chancellor Merkel said.
New rules come into force if local hospitalization rates exceed three per 100,000 people suggesting that almost all of the country will be subject to restrictions.
The nation reported more than 65,000 infections in a day for the first time yesterday with hospitalisation seen picking up fast (>3k) from summer lows (<0.5k).
UK – Retail sales climbed in October helped by early Christmas shopping marking the first increase after five months of consecutive declines.
Retail sales volumes increased 0.8%mom vs 0.5%mom forecast.
The share of online sales dropped to 27.3%, the lowest since Mar/20, as increasingly more people preferred to go shopping in person.
Separate report showed GfK consumer sentiment improved in October, despite increasing inflation, reflecting dropping Covid-19 infections and the end of the fuel crisis.
GfK Consumer Confidence: -14 v -17 in October and -18 est.
Turkey – In line with expectations, the central bank cut the rate for a third consecutive month despite accelerating rate of inflation.
The MPC reduced its one-week repo rate by 100bp to 15% taking total cuts in the rate to 4pp since February.
The lira hit new record lows after the decision.
The central bank said there may be a room for another rate cut in December with current inflationary pressures described as temporary.
Inflation hit nearly 20%yoy in October.
South Africa – The central bank raised rates by 25bp to 3.75% from record low 3.5% in a first hike since Nov/18 and following 300bp of easing last year.
Currencies
US$1.1340/eur vs 1.1335/eur yesterday. Yen 114.36/$ vs 114.08/$. SAr 15.606/$ vs 15.497/$. $1.349/gbp vs $1.350/gbp. 0.728/aud vs 0.729/aud. CNY 6.384/$ vs 6.378/$.
Commodity News
Precious metals:
Gold US$1,858/oz vs US$1,867/oz yesterday
Gold ETFs 97.9moz vs US$97.9moz yesterday
Platinum US$1,055/oz vs US$1,064/oz yesterday
Palladium US$2,141/oz vs US$2,180/oz yesterday
Silver US$24.82/oz vs US$25.11/oz yesterday
Rhodium US$14,350/oz vs US$14,350/oz yesterday
Base metals:
Copper US$ 9,645/t vs US$9,337/t yesterday
Aluminium US$ 2,683/t vs US$2,596/t yesterday
Nickel US$ 19,935/t vs US$19,205/t yesterday
Zinc US$ 3,192/t vs US$3,154/t yesterday
Lead US$ 2,228/t vs US$2,235/t yesterday
Tin US$ 38,870/t vs US$37,915/t yesterday
Energy:
Oil US$82.0/bbl vs US$79.4/bbl yesterday
Oil prices rose in early trading today as investors bet that potential coordinated releases by major economies of their official crude reserves may have less of an impact on markets than expected
The bid by the US to move markets, asking China to join a coordinated action for the first time, comes as inflationary pressures, partly driven by surging energy prices, start to produce a political backlash, as the world recovers from the pandemic
Prices hit seven-year highs in October as the market focused on the swift rebound in demand that has come with lockdowns to halt the coronavirus spread being lifted while OPEC+ have slowly brought back supply after large cuts last year
US oil producers have also been reluctant to overspend on drilling after they were punished by investors for leveraging up to pay for new exploration
The IEA and OPEC confirmed in recent weeks that more supply will be available in the next several months
OPEC+ is maintaining an agreement to boost output by 400,000bopd every month so as not to flood the market with supply
The US and allies have coordinated strategic petroleum reserve releases before, for example in 2011 during a war in OPEC member Libya
But the current proposal represents an unprecedented challenge to OPEC, the cartel that has influenced oil prices for more than five decades, because it involves China, the world's biggest importer of crude
China's strategic reserve bureau confirmed it was working on a release of crude oil reserves although it declined to comment on the US request
A Japanese industry ministry official said the US has requested Tokyo's cooperation in dealing with higher oil prices, but he could not confirm whether the request included coordinated releases of stockpiles
In its weekly stockpile report, the US Department of Energy confirmed that crude inventories fell unexpectedly last week as refineries, enjoying profitable processing rates, ramped up output before the winter heating season
Natural Gas US$4.977/mmbtu vs US$4.904/mmbtu yesterday
Natural gas futures remain broadly flat ahead following the latest round of US government inventory data as strong liquefied natural gas (LNG) takeaway continued to lend support to prices
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$48.1/lb vs $48.05/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$86.2/t vs US$88.6/t
Chinese steel rebar 25mm US$730.6/t vs US$732.0/t
Thermal coal (1st year forward cif ARA) US$111.5/t vs US$111.5/t
Thermal coal swap Australia FOB US$156.0/t vs US$152.3/t
Coking coal swap Australia FOB US$311.0/t vs US$332.0/t
Other:
Cobalt LME 3m US$61,550/t vs US$61,550/t
NdPr Rare Earth Oxide (China) US$122,574/t vs US$122,684/t
Lithium carbonate 99% (China) US$28,274/t vs US$28,300/t
China Spodumene Li2O 5%min CIF US$2,110/t vs US$2,060/t
Ferro-Manganese European Mn78% min US$1,990/t vs US$2,023/t
China Tungsten APT 88.5% FOB US$313/t vs US$313/t
China Graphite Flake -194 FOB US$665/t vs US$655/t
Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg
China Ilmenite Concentrate TiO2 US$388/t vs US$388/t
Spot CO2 Emissions EUA Price US$74.8/t vs US$74.8/t
Company News
Greatland Gold (Greatland Gold PLC (AIM:GGP, OTC:GRLGF)) 15.05p, Mkt Cap £634m – US$16m fundraising to accelerate W Australian exploration effort and progress Havieron development
Greatland Gold reports that it has raised US$16m (approximately £11.9m) through the placing of 82m shares at a price of 14.5p/share.
The scale of the issue has been increased from the previously announced US$10m (approximately £7.4m) as a result of “strong demand in the bookbuild”.
The additional funds are being raised to progress the development of the flagship Havieron deposit in the Paterson region of W Australia in partnership with Newcrest Mining as well as to finance “growth drilling at Havieron and to explore the wider Havieron breccia system”.
Prior to the enlargement of the fundraising, the company’s previous announcements stated that “any net proceeds from the Fundraise in excess of US$10 million to accelerate Havieron growth drilling expenditure and accelerate certain planned exploration activities on Greatland's 100% owned tenements”.
Conclusion: The enlarged fund-raising boosts the resources available for accelerated exploration both in and around Havieron and on the wholly-owned exploration ground in the Paterson Province of WA in an emerging area of increasing exploration interest including from, among other Greatland Gold’s partner at Havieron, Newcrest Mining, which also has a joint venture with Antipa Minerals at Wilki, and from Rio Tinto at its wholly-owned Winu project and in association with Antipa at Citadel and at Antipa’s wholly owned Minyari Dome project.
IronRidge Resources* (IronRidge Resources Ltd (AIM:IRR, OTCQX:IRRLF)) 22p, Mkt cap £123m – highly prospective lithium license granted adjacent to Ewoyaa
IronRidge reports that its application for an exploration license at Cape Coast been granted, providing the company with access to 139.23km2 of highly prospective lithium ground.
The newly granted license is adjacent to the Mankessim exploration license which hosts the Ewoyaa Lithium Project, where the company has a JORC resource of 14.5Mt at 1.31% Li2O in the inferred and indicated category, including 4.5Mt at 1.39% Li2O in Ghana.
Limited previous exploration has been completed over the Cape Coast license area, however work completed by the Ghana Geological Survey during the 1960s defined multiple pegmatites and beryllium stream sediment anomalies..
Areas of beryllium are associated with mineralised pegmatites, and mapped pegmatites provide an initial targeting tool to help prioritise exploration in this area.
IronRidge will extend its current airborne geophysical survey over the new license area in addition to 100m x 100m soils geochemistry survey.
Highlights from the scoping study at Ewoyaa, based on a 2.0mtpa include:
Pre-tax NPV8% of US$539m
Pre-tax EBITDA of US$854m
Post-tax NPV8% of US$345m
Post-tax IRR of 125%
EBITDA of US$105mpa average
Costs: US$247/t of spodumene concentrate
Price: US$650/t assumed for 6% spodumene concentrate.
Payback is expected to be <1 year.
Recovery rates: currently up to 72% for the P1 Fresh ore and average 51% for the P2 Fresh after re-crushing and gravity middlings,
Waste:ore stripping ratio of 1.5:1, and 4.4:1 over the life of the mine.
This new award of license brings the total Ghana Cape coast Lithium Portfolio to 560 km2.
*SP Angel acts as Nomad and Broker to IronRidge Resources
Kodal Minerals* (Kodal Minerals PLC (AIM:KOD)) – 0.32p, Mkt cap £52m – Firefinch plans to start lithium spodumene production at end 2023 / early 2024 at Goulamina 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 Mineral’s next-door neighbour in Mali is targeting to start production of lithium in spodumene by end 2023 early 2024 according to their country director on Reuters.
Production should run at >436,000tpa (450,000tpa LOM) making Goulamina one of the world’s larger spodumene mines.
Construction is planned to start in Q2 next year following a Final Investment Decision on the Goulamina in December.
Firefinch signed a deal with Ganfeng of China for a total potential investment of $130m for 50% of the project including the provision of total funding up to US$194m.
A recent updated DFS by Firefinch Shows NPV8% of A$1.7bn assuming a spodumene price of US$666/t for 6% minimum LiO2 spodumene content.
Spodumene prices are currently US$2,100-2,120/t CIF China versus US$630-650/t a year ago.
Ganfeng deal terms: Ganfeng is to invest: $130m in a 50:50 jv ‘MLB’ to develop the Goulamina lithium project.
US$2.5m deposit already paid
US$39m initial investment (less the Deposit) for 15% of MLB with proceeds to fund long lead capital items; - this should get the project ot the FID
US$91m on Goulamina FID ‘Final Investment Decision’ taking Ganfeng’s equity interest in MLB to 50% (assuming the IRR is >15%).
Ganfeng will either provide up to US$194m in funding comprising $130m in equity in two installments and by arranging up to $64m in debt to build the project
Ganfeng will receive life of mine (LOM) offtake – 50% on receipt of the full US$130m and 100% after debt financing is provided (assuming commercial production within 4 years of the deal)
Funds received from Ganfeng will be retained in MLB to fund project development capex
Goulamina has a spodumene (lithium) mineral Resource of 109mt at 1.45% Li2O for 1.57mt contained Li2O with a mineral reserve of 52mt grading 1.51% Li2O.
The initial PFS worked on a production rate of 362,000tpa of 6% Li2O spodumene concentrate with an initial PFS capex of US$166m, cash cost of A$374/t.
Firefinch will update the capital cost of the project in the DFS update to be presented to Genfeng as part of the FID.
Kodal has a JORC mineral resource of 21.3mt grading 1.11% Li2O with a FS showing production of 220,000tpa of 6% spodumene
Kodal’s Bougouni Capex is estimated at US$117m, with C1 cash costs of USD$431/t, capex of $117m and an IRR of 58% (51% post tax).
Firefinch are demerging their Goulamina into a new vehicle called Leo Lithium in Q1 2022 through an in-specie distribution of shares at no cost to Firefinch shareholders.
Trucking: We note 450,000tpa could result in 25 50t articulated lorry loads travelling by road to port each and every day from this mine.
The benefit is that this will serve to increase capacity and cut haulage charges for goods destined for Mali and will hopefully be seen as a benefit from a jobs and transport perspective.
Conclusion: It will be interesting to see the new capital, operating and trucking cost estimates on the Goulamina project when they come. These will determine if Ganfeng will commit to construction of a major mine in the region or will go for a smaller-scale option.
Kodal’s Bougouni project should offer similar economics and its cooperative agreement with Goulamina to share local services should benefit both companies in time.
*SP Angel acts as Financial Advisor and Broker to Kodal Minerals. The analyst holds shares in Kodal Minerals.
Tesoro Resources (ASX:TSO) A$0.081, Mkt cap £53m – Drill results extend known gold mineralisation at Ternera
Tesoro report drill results from its Ternera Gold Deposit and the new Ternera East discovery in the Coastal Cordillera region of Chile, where the company is currently undertaking a 60,000m extensional and infill drilling programme.
Tesoro currently has a maiden mineral resource of 25.1 Mt @ 0.8g/t Au for 661 koz of gold at 0.3g/t Au cut-off including 15.4Mt @ 1.1g/t Au for 540koz at 0.5g/t Au cut-off, defined by 148 drill holes.
Highlights from Ternera East include:
ZDDH0219: 7.00m @ 2.37g/t Au from 130.00m including;
1.15m @ 8.84g/t Au from 130.85m
ZDDH0218: 0.50m @ 6.98g/t Au from 232.50m; and
4.60m @ 1.76g/t Au from 246.90m including;
2.42m @ 2.85g/t Au from 248.58m
Results received for four holes from infill and extensional drilling include:
ZDDH0215: 2.10m @ 5.83g/t Au from 98.40m; and
32.00m @ 0.86g/t Au from 196.98m
ZDDH0214: 28.73m @ 0.54g/t Au from 109.27m including;
2.20m @ 2.97g/t Au from 111.30m
ZDDH0220: 14.00m @ 0.69g/t Au from 109.00m including;
2.25m @ 2.06g/t Au from 109.00m; and
4.00m @ 2.41g/t Au from 290.00m
The latest round of assay results confirms gold mineralisation over 600m of strike and open in all directions.
Drilling continues at El Zorro with rigs drilling at Ternera, Drone Hill and Toro Blanco, while assay remain outstanding for 42 diamond drill holes.
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
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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