SP Angel . Morning View . Friday 03 12 21
Chinchillas hold up Gold Fields mine expansion in Chile
DRC - China embassy calls for nationals to leave 3 DRC provinces
Gold Fields Limited (LON:GFI) - Gold Fields expansion plan at Salares in Chile held back by 20 Chinchillas
GreenRoc Mining (GreenRoc Mining PLC (AIM:GROC)) – High-grade graphite intercepts at Amitsoq
Kore Potash (Kore Potash PLC (AIM:KP2, ASX:KP2, JSE:KP2)) - US imposes sanctions on Belarus potash supplier
Hochschild (Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF)) – C$276m valuation targeted for Aclara IPO
Savannah Resources* (Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)) – BUY, Target price 17.9p FLASH NOTE - 20% in Mutamba disposed of in a $9.5m cash deal
Gold - $1,773/oz - Gold extends losses on increasingly hawkish Fed
Gold prices are reacting to more Fed officials calling for a more aggressive taper to the $120bn/month asset-purchasing program.
The Atlanta Fed President Bostic called for an earlier interest rate hike supposing inflation stays elevated.
DRC - China embassy calls for nationals to leave 3 DRC provinces
Chinese nationals have been told to leave eastern Ituri, North Kivu and South Kivu.
Concerns are increasing over ‘heightened insecurity’, with 5 Chinese citizens kidnapped on Nov. 20 from a mine in South Kivu. (The Northern Miner)
4 people were killed in an attack on an artisanal gold mine on Nov. 24th, including 2 Chinese nationals. (Statfor)
China is currently undergoing negotiations for renewed mining contracts with DRC President Felix Tshisekedi.
Alphamin operate the Bisie tin mine in North Kivu province.
Dow Jones Industrials +1.82% at 34,640
Nikkei 225 +1.00% at 28,030
HK Hang Seng -0.42% at 23,690
Shanghai Composite +0.94% at 3,607
Economics
US – November employment numbers are due later today with estimates for a 550k reading, up on 531k in October.
Unemployment is expected to tick down to 4.5% from 4.6% while labour force participation estimated to improve slightly to 61.7%, up from 61.6%.
Strong NFPs is likely to add further evidence to a recovering labour market and see the Fed taking a more pro monetary policy tightening stance, although, the omicron variant does present downside risks in coming months.
China publishes 5-year plan for green industrial development
China’s industry ministry has vowed to lower carbon emissions and pollutants to meet the country’s peak carbon commitment by 2030.
The ministry has also announced plans to promote emerging industries.
The plan highlights the country’s commitment to lower Co2 emissions by 18% and limit energy intensity by 13.5% by 2025 (Reuters)
The plan underlines intentions to limit output in the steel, cement, and aluminium sectors primarily.
The ministry will focus on hydrogen energy, biofuels and increasing the use of recycling in the steel, chemical and cement sectors.
The plan aims to promote ‘rational’ mining projects for iron ore and nonferrous.
China Covid port quarantine triggers supply chain delays
Service suspensions of key feeder operators, which transport cargoes between vessels, are expected to trigger supply disruptions going into the Lunar New Year holiday.
Major shipping firms have limited operations due to Beijing’s strict quarantine policy.
Crews usually return home for the 7-day holiday starting Jan-31.
Port rates in China are also rising, with Ningbo Port hiking loading/unloading fees by 10% from 2022.
China services sector growth slows on Covid disruptions and inflationary pressures
China Caixin/Markit PMI slid to 52.1 in Nov. from 53.8 in Oct.
The survey focuses on small to medium size enterprises in the private sector.
The Zero-Covid policy has hit leisure and tourism.
Input prices increased for the 17th month in a row on rising raw material and labour costs.
A new business tracker grew at the slowest pace since August.
The Caixin November composite PMI (includes manufacturing and services) fell to 51.2 from 51.5.
ECB – President Christine Lagarde reiterated the ECB’s stance that “inflation will decline in 2022”, Bloomberg writes.
Oil, gas and electricity account for a big share of current inflation and “by the end of 2022 it will have declined significantly”.
The bank highlighted first signs of delivery times reducing in November and “if these reduced delivery times are confirmed in December it could be indication that we’re going into a normalization phase”.
Turkey – Inflation hit 21.3% in November marking the highest rate since late 2018 as President Erdogan pushed ahead with interest rate cuts.
The measure came in ahead of market expectations for a 20.7% reading and up on 19.9% in October.
The lira is down 0.9% this morning on course to hit 14.0 units to a US$.
South Korea – PM has introduced new restrictions on private gatherings and expanded requirements for proof of vaccination or a negative test amid an increase in new Covid-19 cases, FT reports.
Private gatherings would be limited to six people in the greater Seoul area and to eight people in the rest of the country.
Bars and restaurants will require customers to show proof of vaccination or a negative Covid test.
The nation reported record number of new cases and critically ill patients this week.
Currencies
US$1.1293/eur vs 1.1317/eur yesterday. Yen 113.40/$ vs 113.19/$. SAr 15.976/$ vs 15.922/$. $1.327/gbp vs $1.328/gbp. 0.706/aud vs 0.711/aud. CNY 6.370/$ vs 6.373/$.
Commodity News
Precious metals:
Gold US$1,768/oz vs US$1,773/oz yesterday
Gold ETFs 98.4moz vs US$98.5moz yesterday
Platinum US$946/oz vs US$942/oz yesterday
Palladium US$1,801/oz vs US$1,748/oz yesterday
Silver US$22.31/oz vs US$22.35/oz yesterday
Rhodium US$14,000/oz vs US$14,000/oz yesterday
Base metals:
Copper US$ 9,540/t vs US$9,426/t yesterday
Aluminium US$ 2,636/t vs US$2,650/t yesterday
Nickel US$ 20,100/t vs US$19,965/t yesterday
Zinc US$ 3,210/t vs US$3,185/t yesterday
Lead US$ 2,259/t vs US$2,285/t yesterday
Tin US$ 39,100/t vs US$38,810/t yesterday
Energy:
Oil US$71.4/bbl vs US$69.7/bbl yesterday
Oil prices rebounded from yesterday’s session lows after OPEC+ decided to keep its oil production policy unchanged and add another 400,000bopd on the market in January
Both benchmarks erased the losses of 3% right after first news reports suggested the monthly increase was on for January
OPEC+ is sticking to its production plan noting that the meeting remains in session
The group “agree that the meeting shall remain in session pending further developments of the pandemic and continue to monitor the market closely and make immediate adjustments if required”
The next regularly scheduled meeting of OPEC+ is set for 4 January 2022
Expectations were that OPEC+ would opt for a pause in the monthly increases because of the still high uncertainty over the Omicron COVID variant, the SPR releases led by the US, and an anticipated oil surplus early next year
With still little information on the new variant and whether it escapes vaccine protection, OPEC+ looks ready to take further action, if necessary, but it is showing it is not over-reacting to Omicron
Initial reactions to the rollover of the production policy suggest that OPEC+ could also believe that global demand will remain resilient during the winter season
Natural Gas US$4.258/mmbtu vs US$4.236/mmbtu yesterday
Natural gas appears to be largely immune to the potential impact of the new Omicron coronavirus variant, with prices in all three major regions trading more on expectations around winter supply and demand
For Asian liquefied natural gas futures remain steady, albeit at historically high prices
For Europe, prices are still trending up amid low inventories, worries over pipeline supplies from Russia and forecasts for a colder-than-usual winter
For the US, natural gas futures are trending lower as milder-than-usual weather is forecast for December
Outside of modest increases in LNG feed gas demand, the sharp move higher Friday occurred despite notable further deterioration in the fundamental picture for natural gas
European prices continue to hold up on last week’s news that Germany's energy regulator has suspended the approval process for the Nord Stream 2 pipeline last week
Vladimir Putin continues to exert pressure on Europe with declining gas flows amid the onset of the Northern Hemisphere winter
Uranium UXC US$46.35/lb vs $47.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$102.3/t vs US$103.3/t - China iron ore futures fall on 7th week of falling utilisation rates
Iron ore futures down 5% as government curbs continue to dent demand.
Capacity utilisation rates for blast furnaces at 74.8%, marking 7th weekly decline. (Mysteel)
Construction rebar up 2.1% and HRC up 1.6%.
Chinese steel rebar 25mm US$750.5/t vs US$748.8/t
Thermal coal (1st year forward cif ARA) US$105.5/t vs US$105.5/t
Thermal coal swap Australia FOB US$155.0/t vs US$155.0/t
Coking coal swap Australia FOB US$268.0/t vs US$266.0/t
Other:
Cobalt LME 3m US$67,050/t vs US$66,150/t
NdPr Rare Earth Oxide (China) US$134,611/t vs US$134,554/t
Lithium carbonate 99% (China) US$29,905/t vs US$29,735/t
China Spodumene Li2O 5%min CIF US$2,310/t vs US$2,310/t
Ferro-Manganese European Mn78% min US$1,892/t vs US$1,896/t
China Tungsten APT 88.5% FOB US$313/t vs US$313/t
China Graphite Flake -194 FOB US$695/t vs US$680/t
Europe Vanadium Pentoxide 98% 8.1/lb vs US$8.1/lb
Europe Ferro-Vanadium 80% 32.55/kg vs US$32.55/kg
China Ilmenite Concentrate TiO2 US$385/t vs US$385/t
Spot CO2 Emissions EUA Price US$89.7/t vs US$86.4/t
Battery News
Company News
Gold Fields Limited (GFI SJ) ZAR17,801, Mkt Cap ZAR158bn - Gold Fields expansion plan at Salares in Chile held back by 20 Chinchillas
Gold Fields is required to move over 20 Chinchillas to continue its $860mn expansion project at its Salares Norte site in Chile.
The company is providing plans to the environmental authority to relocate the Chinchilla family to a neighbouring colony 3 miles away.
The company expects to start producing gold at Salares Norte in early 2023 despite the rodent hiccup.
We hope the Chinchillas will enjoy their new home. We suggest they don’t move to Argentina where they are considered to be a local delicacy.
Chinchilla are currently listed as Endangered by the IUCN Red List of Threatened Species.
GreenRoc Mining (GreenRoc Mining PLC (AIM:GROC)) 7.15p, Mkt Cap £7.3m – High-grade graphite intercepts at Amitsoq
Greenroc reports assay results from its drilling and channel sampling programme undertaken at the Amitsoq Island deposit from June to August 2021.
The Lower Graphite Layer (LGL) returned drill intercepts grading up to 23.01% C(g) and channel samples grading up to 30.35% C(g).
The Upper Graphite Layer (UGL) returned drill intercepts grading up to 19.83% C(g) and channel samples grading up to 27.40% C(g).
In the LGL, significant true width thickness of graphite layers confirmed by drilling, including:
15.60m @ 22.34% C(g) from 93.61m
14.95m @ 22.82% C(g) from 102.19m
GreenRoc comments that the results confirm the high-grade nature of the Amitsoq Island deposit as well as showing the graphite layers to be both thicker, and more consistent, than previously thought.
Step-out drilling is expected to occur along strike as the deposit is open along strike and down dip in the Phase 2 drilling programme.
GreenRoc's CEO, Kirk Adams, commented: “the consistency of grades, combined with the increasing true widths observed down dip at both graphite layers, represents particularly encouraging news and bodes well for the resource potential at the Amitsoq Island deposit.”
Kore Potash (Kore Potash PLC (AIM:KP2, ASX:KP2, JSE:KP2)) 0.9p, Mkt cap £30m - US imposes sanctions on Belarus potash supplier
The US has imposed sanctions on Belaruskali’s marketing arm Belarus Potash Company (BPC), blaming Minsk for creating a migration on the EU-Belarus border.
The sanctions mean that US companies have to wind down business dealings with Belarus Potash by April 2022, the deadline to end all business dealings with BPC, as well as with its subsidiary Agrorozkvit.
BPC is the country’s main foreign currency earner and accounts for 16% of global production.
Belaruskali is the world's second largest producer of the crop nutrient after Nutrien and expects to produce 12.5mt this year.
The sanctions are expected to lend further support to the potash price, which is already at a 13-year high.
Hochschild (Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF)) 127p, Mkt cap £657m – C$276m valuation targeted for Aclara IPO
Hochschild reports that Aclara will issue 35m shares in the IPO at a price of C$1.70/share in order to raise $59.5m.
The market cap of Aclara would be C$276.4m based on the offering price.
Hochschild and Pelham Investment Corporation (controlled by Eduardo Hochschild) have agreed to maintain their pro rata equity ownership in Aclara on completion of the primary offering.
Upon completion of the Demerger and the listing of Aclara on the TSX, Hochschild and Pelham Investment Corporation will hold approximately 20.0% and 30.7%, respectively, of the listed entity.
Hochschild bought Aclara, based in Chile, for about $56m in 2019.
Aclara is an ionic clay rare earth project which will produce heavy rare earth elements (HREE) Terbium and Dysprosium.
Dysprosium and Terbium have been proven to complement LREE in order to enhance performance to operate permanent magnets at higher temperatures
Savannah Resources* (Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)) 3.9p, Mkt Cap £66m – 20% in Mutamba disposed of in a $9.5m cash deal
BUY – 17.9p
FLASH NOTE
Recent Interviews:
IGTV: Stock picks in the small-cap mining space:
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.
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No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
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Sales
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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