SP Angel . Morning View . Monday 13 12 21
Industrial metals to rise on Beijing vow to strengthen economy
Anglo Asian Mining* (Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)) BUY, 180p – Options issued to management
Aura Energy* (Aura Energy Ltd (ASX:AEE, AIM:AURA)) – Drilling confirms the discovery of substantial water resources for Tiris Uranium project in Mauritania
Renascor Resources (Renascor Resources Ltd (ASX:RNU)) – Testing confirms efficiency of purification process up to 99.9% Carbon
Rio Tinto (Rio Tinto PLC (LSE:RIO)) – Rio to cancel Mongolia’s debt after cost blowouts at Oyu Tolgoi
Sunstone Metals (Sunstone Metals Ltd (ASX:STM)) – Two satellite targets identified by soil sampling results at El Palmar
VOX Markets: 08/12/21: https://audioboom.com/posts/7993202- china-economy-plus-bluejay-centamin-cornish-metals
IGTV: China slows down but invests heavily in renewable capacity: https://youtu.be/d6PtLxNgtPc
*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.
Cornwall – copper, tin, tungsten, zinc, sliver, lithium and rare earths
The world is running short of a number of strategic raw materials with LME and SHFE inventories are falling to critically low levels.
Some automotive manufacturers are desperately trying to encourage and attract supplies of key commodities to ensure supply for new gigafactories and EV manufacturing
These manufacturers appear to have little comprehension of what is really needed for full mine-market supply chains and look likely to run into supply challenges.
Curiously, many of the commodities we seek are, right under our noses, in Cornwall.
Recent drill results from Cornish Metals* show high grade copper and tin along with zinc and silver.
Results from Cornish Lithium also show relatively good lithium grades in geothermal brines alongside a lithium-in-mica hard rock opportunity.
Strategic Minerals* are also active at the Redmoor tin/tungsten project near in the east of Cornwall.
Other critical raw materials also exist in Cornwall and elsewhere in the UK. Sometimes, we should remember to look closer to home.
Iron ore futures jump on Beijing vows to strengthen the economy
China iron ore futures closed up 6% this morning having been weak in previous sessions.
The Central Economic Work Conference highlighted China’s intentions to prioritise economic stability in 2022, bolstering demand outlook for iron ore.
Analysts expect little change from domestic mine outlook and mainstream miners are expected to continue steady shipments. (SinoSteel Futures)
Construction rebar steel up 2.5%.
HRC up 2.2%.
Coke prices up 1.9%.
Stainless steel up 1.8%.
Copper - ICSG expects copper market surplus in 2022 following minor 2021 deficit
The International Copper Study Group expects a small deficit of 42kt in 2021.
2022 is expected to supply exceed demand by 328kt.
2020 saw a deficit of 479kt.
2022 refined output is expected to increase 3.9% - it’s biggest in 8 years.
Copper demand is expected to increase 2.4%.
Major projects include Anglo’s Quellaveco in Peru, Teck’s QBII in Chile, Ivanhoe’s DRC project and Freeport’s Indonesian Grasberg project ramping up supply by 110kt.
Gold inches higher on record US inflation data
Gold climbs to $1,787/oz, up 0.8% since Friday’s data release.
US Nov. CPI hit 6.8% y-o-y on Friday, the largest annual gain since 1982.
All eyes will now turn to the Fed’s meeting on Wednesday 15th, where analysts expect J Powell to announce an acceleration to the taper program.
Dow Jones Industrials +0.60% at 35,971
Nikkei 225 +0.71% at 28,640
HK Hang Seng -0.17% at 23,955
Shanghai Composite +0.40% at 3,681
Economics
US Inflation Data
Consumer prices up 0.8% to 6.8% vs a year ago.
6th straight month of US inflation over 5%.
Fastest pace increase since 1982.
Core price index, which excludes volatile categories including food and energy, up 4.9% in Nov – sharpest increase since 1991.
New vehicles up 11.1% - largest price increase on record.
7.9% jump in fast-food prices – sharpest rise on record.
Biden looks to shore up key Democrat support to pass $2tn spending plan
Biden requires the support of key Democrat Sen. Joe Manchin to pass his $2tn Build Back Better stimulus plan.
The White House is looking to pass the bill before Christmas but requires Manchin’s support.
Manchin has questioned the effect of the spending plan on inflation as the Senate is set to vote on raising the debt limit this week.
CBO analysts have found the bill will add $231bn to the deficit over the decade.
China looks to ease energy restrictions to boost economy
Beijing will replace energy consumption targets with a cap on overall CO2 emissions from overall energy use. (Reuters)
Leaders are worried that blanket restrictions to meet climate targets are limiting economic growth.
A statement reveals China in 2022 will ‘prioritise stability’, suggesting ‘all regions and departments should shoulder the responsibility of stabilising the macroeconomy.’
Consumption caps will be removed from ‘feedstock energy’ and renewable capacity.
Analysts expect a relaxation of energy usage for heavy industries including petrochemicals and coal-chemicals.
Currencies
US$1.1289/eur vs 1.1292/eur last week. Yen 113.62/$ vs 113.60/$. SAr 15.929/$ vs 16.042/$. $1.324/gbp vs $1.321/gbp. 0.715/aud vs 0.715/aud. CNY 6.365/$ vs 6.368/$.
Commodity News
Precious metals:
Gold US$1,787/oz vs US$1,773/oz last week
Gold ETFs 98.3moz vs US$98.3moz last week
Platinum US$950/oz vs US$945/oz last week
Palladium US$1,770/oz vs US$1,811/oz last week
Silver US$22.26/oz vs US$21.85/oz last week
Rhodium US$14,000/oz vs US$14,000/oz last week
Base metals:
Copper US$ 9,511/t vs US$9,562/t last week
Aluminium US$ 2,640/t vs US$2,635/t last week
Nickel US$ 19,790/t vs US$19,810/t last week
Zinc US$ 3,337/t vs US$3,319/t last week
Lead US$ 2,303/t vs US$2,264/t last week
Tin US$ 39,420/t vs US$39,685/t last week
Energy:
Oil US$75.7/bbl vs US$74.1/bbl last week
Oil prices have extended Friday’s gains in early trading today as investor appetite improved amid growing relief the Omicron coronavirus variant may not cause severe illness and will likely have a limited impact on global fuel demand
South African scientists see no sign that the Omicron variant is causing more severe illness, as officials announced plans to roll out vaccine boosters with daily infections approaching an all-time high
The UK government has also reenforced that COVID-19 booster shots significantly restore protection against mild disease caused by the Omicron variant
Global benchmark Brent has risen 38% this year, supported by output curbs led by OPEC+, though it has fallen from a three-year high above US$86/bbl in October
Iraq's Oil Minister confirmed he expects oil prices to reach over US$75/bbl, according to state news agency INA
Last Sunday, Saudi Arabia raised January official selling prices for all crude grades sold to Asia and the US by up to 80 cents from the previous month
Last week OPEC+ decided to continue increasing monthly supply by 400,000bopd in January, even after a slide in prices driven by Omicron concerns
Oil was also buoyed by diminishing prospects of a rise in Iranian oil exports after indirect US/Iranian talks on saving the 2015 Iran nuclear deal broke off last week
Natural Gas US$3.995/mmbtu vs US$3.864/mmbtu last week
US natural gas futures climbed on Friday on forecasts calling for higher heating demand in a couple of weeks due to seasonal cooling temperatures
The market’s strength came as a surprise because the overall weather outlook is still calling for milder than normal temperatures through late December
The current contract for January delivery trades at US$3.99/mmbtu
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 news that Germany's energy regulator has suspended the approval process for the Nord Stream 2 pipeline
Uranium UXC US$45.65/lb vs $45.85/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$109.6/t vs US$110.6/t
Chinese steel rebar 25mm US$755.7/t vs US$754.3/t
Thermal coal (1st year forward cif ARA) US$106.5/t vs US$106.5/t
Thermal coal swap Australia FOB US$163.5/t vs US$160.0/t
Coking coal swap Australia FOB US$324.0/t vs US$322.0/t
Other:
Cobalt LME 3m US$69,815/t vs US$69,815/t
NdPr Rare Earth Oxide (China) US$133,959/t vs US$134,668/t
Lithium carbonate 99% (China) US$32,606/t vs US$31,802/t
China Spodumene Li2O 5%min CIF US$2,340/t vs US$2,310/t
Ferro-Manganese European Mn78% min US$1,868/t vs US$1,891/t
China Tungsten APT 88.5% FOB US$313/t vs US$310/t
China Graphite Flake -194 FOB US$735/t vs US$715/t
Europe Vanadium Pentoxide 98% 8.4/lb vs US$8.4/lb
Europe Ferro-Vanadium 80% 32.55/kg vs US$32.55/kg
China Ilmenite Concentrate TiO2 US$381/t vs US$382/t
Spot CO2 Emissions EUA Price US$90.5/t vs US$98.9/t
Battery News
Ford to strike deal for battery supply with CATL
According to cls.cn, Ford China has confirmed that its EVs will be fitted with batteries from BYD and CATL.
It is reported that Ford has already started using BYD’s NCM 811 battery cell in the Ford Escape and Mustang Mach-E produced locally.
There is no info as to which models will be powered by CATL-batteries and by what type, as the company offers various chemistries.
UK open biggest round for UK’s renewable energy support
The biggest round of the UK’s renewable energy support scheme opened on Monday 13th December, with £200m a year allocated for fixed-bottom and £24m for floating offshore wind projects.
Renewable energy projects across the UK can now bid for funding in the fourth round of the CfD scheme, which is aiming to secure 12 GW of electricity capacity – more renewable capacity than the previous three rounds combined.
Company News
Anglo Asian Mining* (Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)) 114p, Mkt Cap £130m – Options issued to management
BUY – 180p
Anglo Asian reports that it has agreed to issue options to two persons discharging managerial responsibility, Wiliam Morgan, CFO and Ilham Khalilov, Director of Finance.
Mr Morgan and Mr Khalilov are to be issued total of 120,000 and 100,000 Ordinary Shares respectively, with 50% vesting on the 13th of December 2022 and the remaining 50% vesting on the 13th December 2023.
The exercise price of £1.15 is the closing mid-market price of the shares on Thursday, 9 December 2021, and the options expire on the 13th of December 2026.
The options represent in aggregate 0.19%. of the existing share capital of the Company and have been issued to William Morgan and Ilham Khalilov in line with the Company's on-going incentive plans.
*SP Angel act as nomad and broker to Anglo Asian Mining
Aura Energy* (Aura Energy Ltd (ASX:AEE, AIM:AURA)) 12p, Mkt Cap £54m – Drilling confirms the discovery of substantial water resources for Tiris Uranium project in Mauritania
Aura Energy have confirmed the identification of substantial water in eight boreholes close to the Tiris Uranium project in north-east Mauritania.
The C22 water occurrence may contain several giga-litres of water, more than sufficient for Tiris which requires around 0.5 giga-litre.
The 8 boreholes confirm work that was done in 2019 and highlights strong water flow with borehole yields ranging from 3,000-57,000ltrs per hour
The drill program started in 2019 with four holes completed before very heavy rain caused local flooding delaying the completion of the borehole drilling.
Drilling resumed in August this year to complete the results shown today.
Aura has also drilled five monitoring holes to model aquifer permissivity, drawdown and recharge characteristics.
Tiris uranium: The August DFS confirmed a cash operating cost est. US$25.43/lb of U3O8 and AISC of US$29.81/lb assuming 1.25mtpa ore throughput and production of 823,000lbs pa of U3O8
Assuming a uranium price of US$60/lb the project is expected to generate an after tax NPV8% of US$79.9m and IRR of 22% and pay-back in 4 years.
Presentation: Aura has also published an updated presentation today highlighting the company’s gold and base metal exploration potential in Mauritania.
Aura’s Tasiast South tenements are just 36 km south of Kinross’ 20 Moz Tasiast Gold Mine and show promising first pass exploration results.
The prospect shows high-grade gold intersections from a wide gold system showing similar geology to Kinross’ Tasiast gold mine.
The presentation also indicates strong nickel and cobalt values in thick zones of ultramafic rock at Touerig Taieuh and Hadeibet Belaa.
https://www.rns-pdf.londonstockexchange.com/rns/4184V_1-2021-12-13.pdf
Management changes: Aura also plans to elect Phil Mitchell, as non-executive Chairman at its 2021 AGM on 21st December.
Mitchell was formerly Head of Business Development and Strategy at Rio Tinto and Chief Financial Officer of Rio Tinto's iron ore business. Phil most recently leading the acquisition of the Nimba Iron Ore project for Robert Friedland's High Power Exploration (HPX), the purchase arrangements with BHP, Newmont and Orano, and the negotiation of the agreements with the Governments of Guinea and Liberia.
Warren Mundine a former director of the Australian Uranium Association is also to be elected at the AGM as an Independent Non-Executive Director
Bryan Dixon, a Chartered Accountant with over 20 years of expertise in mining is also proposed to be elected at the AGM as Independent Non-Executive Director.
Conclusion: Aura have a well timed uranium project at a time of rising demand for nuclear feedstock. The company also have a number of promising gold and base metal targets for further investigation. Mauritania is also seen as a stable and mining friendly country in which to work.
*SP Angel acts as Nomad and Broker to Aura Energy
Renascor Resources (Renascor Resources Ltd (ASX:RNU)) A$0.12p, Mkt Cap A$217m – Testing confirms efficiency of purification process up to 99.9% Carbon
Renascor reports that locked cycle purification trials undertaken German independent battery mineral consultancy group Dorfner ANZAPLAN have validated Renascor’s purification process and offered increased operational efficiencies for Renascor’s planned Purified Spherical Graphite (PSG) manufacturing facility in South Australia.
Renascor’s purification process avoids the use of hydrofluoric acid, generally used in Chinese PSG operations, instead using more environmentally friendly reagents to purify natural flake graphite for use in lithium-ion battery anodes.
The recently completed locked cycle program exceeded lithium-ion battery anode purity specifications, with results of up to 99.99% Carbon vs anode industry standard of 99.95% C.
The results were achieved with decreased reagent consumption in comparison to previous bench-scale tests – offering the potential for improved efficiencies.
The revised reagent regime is also expected to result in less chemical, energy and water consumption during the leaching and water treatment phases.
Data generated from the locked cycle tests will now permit the commencement of engineering works for the planned PSG facility.
Rio Tinto (Rio Tinto PLC (LSE:RIO)) – 4,805p, Mkt cap £79bn – Rio to cancel Mongolia’s debt after cost blowouts at Oyu Tolgoi
Rio Tinto will cancel $2.3bn in debt owed by Mongolia as the miner seeks to push forward with the expansion of the You Tolgoi copper project.
A letter published on Mongolia’s government website shows that Rio has proposed improved terms for a 2015 financing agreement, which writes off debt and speeds up the timeline for when the country can start to receive dividends.
Oyu Tolgoi is one of the largest known copper-gold deposits in the world, 34% owned by the Mongolian Government with the rest held by Turquoise Hill Resources, which is 51% owned by Rio.
The project represents huge growth potential for Rio Tinto, although cost have come in a lot higher than expected – with investment needed for the underground expansion $1.4bn higher than originally thought.
Sunstone Metals (Sunstone Metals Ltd (ASX:STM)) A$0.1, Mkt cap A$212.8m – Two satellite targets identified by soil sampling results at El Palmar
Sunstone reports that soil sampling has defined two priority targets for immediate drilling adjacent to the El Palmar discovery, in northern Ecuador.
The south-east satellite anomaly returned significant copper, gold, and silver in soils coincident with a modelled magnetic body – the same scenario that defines the main El Palmar area.
The north-east satellite anomaly has returned metal anomalism interpreted to sit above a porphyry system that correlates well with a deeper modelled magnetic body which appears connected to the main El Palmar body at depth.
The latest targets significantly grow the scale of the opportunity at El Palmar, with the cluster of targets now defined over an area of 1.5km x 700m.
Drilling is also underway at the Alba gold target on the Bramaderos Project in southern Ecuador, with the first hole intersecting 29.2m at 7.68g/t gold within 111m at 2.35g/t gold.
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
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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