SP Angel . Morning View . Monday 20 12 21
Metals pull back on property developer default and European energy shortage
AfriTin Mining (AfriTin Mining Ltd (AIM:ATM)) – Michael Rawlinson appointed a new Non-Executive director
Arc Minerals* (Arc Minerals Limited (AIM:ARCM)) – Arc discussions at advanced stage with major mining company
Bluejay Mining* (BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)) – Bluejay receives VAT repayment from HMRC
Empire Metals* (Empire Metals Ltd (AIM:EEE)) – New round of exploration drilling to start at Eclipse in Q1/22
Hummingbird Resources (Hummingbird Resources PLC (LSE:HUM)) – Yanfolila drilling results point to LOM extension potential
Keras Resources* (Keras Resources PLC (AIM:KRS)) – Interims highlight sales from Diamond Creek organic phosphate mine
Power Metal Resources* (Power Metal Resources PLC (AIM:POW)) – Athabascan Basin exploration programme returns up to 3.86 U3O8 in rock samples
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.
Iron ore hits two-month high on China fiscal policy easing
Iron ore has bounced back 50% since its November lows as borrowing costs were lowered by Chinese banks for the first time in 20 months.
Singapore iron ore trading at $125/t.
Chinese banks cut interest rates for 1-year loans from 3.85% to 3.8% - first cut since April 2020.
The looser policy has added to momentum from the PBOC’s decision to slash the RRR earlier this month.
Crude steel output has increased 12% this month vs 1 month earlier.
Chile - Copper miners slide on leftist Chilean Boric’s election victory
35yo Chilean Boric was elected President yesterday, vowing to hike taxes on the mining sector and prioritise greener industries.
BHP and Rio Tinto shares fell 1.5% and 1.4% respectively.
MMG fell 5.7% and Zijin Mining fell 2%.
Copper, nickel, lead and tin stocks fall on SHFE and LME
Official warehouse stocks continue to fall on as economic activity overtakes available mine and smelter supply.
Copper stocks fell 16.4% (6,800t) to 34,580t on the SHFE while stocks also fell a further 150t to 89,000 on the LME
Nickel stocks fell 9.7% (545t) to 5,082t on the SHFE while stocks also fell 738t to 8,880t on the LME
Lead stocks fell 5.1% (5,881t) to 110,197t on the SHFE with LME stocks also falling 75t to 55,100t
Tin stocks fell 4.9% (108t) to 2,089t on the SHFE with LME stocks resting at just 1,755t.
REEs - Rare Earth Elements = Further Chinese rare-earth co-operation suggests increasing consolidation of the sector
China Northern Rare Earth and China Rare Earth Holdings announced plans to co-operate with mining, trade and processing this weekend.
Beijing recently announced plans to consolidate the sector into two giant conglomerates, one in the north and one in the south.
The Ministry of Industry announced plans to boost exploration of the Bayan Obo mine in Inner Mongolia today.
The Minister intends to ‘improve overall rare earths quota management and regulate the utilisation of imported ore and other waste containing rare earths resources.’
The consolidation will make it easier for the authorities to monitor and control production and pollution from the rare earth mines in Inner Mongolia.
Neodymium and praseodymium hit record highs this month at US$132,872/t for NdPr Rare Earth Oxide today
Dow Jones Industrials -1.48% at 35,365
Nikkei 225 -2.13% at 27,938
HK Hang Seng -1.89% at 22,754
Shanghai Composite -1.07% at 3,594
Economics
China – Another major property developer defaults in China
Kaisa has announced it has defaulted on several dollar-denominated bonds.
The developer is in discussions with creditors regarding a restructuring plan.
Kaisa failed to pay the principal and interest on a $400m 6.5% coupon maturing on Dec. 7th alongside a $105m payment in overdue interest payments on an additional 3 bonds. (WSJ)
Kaisa has hired Houlihan Lokey (NYSE:HLI) for its restructuring who are also advising Evergrande and Fantasia.
Evergrande has had 2 land parcels in Chengdu reclaimed by local government without compensation.
The developer’s shares fell 7% to record lows this morning following S&P slashing its rating to default.
HK stocks have fallen to 22-month lows despite China slashing rates
Southeast Asia suffers port closures and fatalities on severe weather
Malaysia and the Philippines have been hit by a super typhoon, displacing 440,000 people, and killing 208.
11,000 people have been displaced in Malaysia with the two days over Dec. 17th-18th amounting to 1-month’s average total rainfall.
Southeast Asia’s second largest port, Malaysia’s Port Klang, has been severely disrupted.
Access roads to and from the port have been damaged and analysts expect delays to cargo delivery and berthing.
US – Equities pull back on weak investor sentiment amid growing global omicron infections and little progress in getting the ~$2tn Biden’s bill through the Senate.
A US lockdown will probably be unnecessary despite surging number of new infections, although, hospitals will be tested, Anthony Fauci said earlier.
Manchin blocks Biden’s $2tn Build Back Better bill on soaring inflation and $29tn debt
Manchin has refused to vote through Biden’s $2tn social spending bill.
The White House had expected Manchin to vote it through.
He claimed he could not risk passing the bill ‘with a staggering debt of more than $29tn and inflation taxes that are real and harmful.’
Biden had slashed the bill from $6tn to a minimum $1.75tn to appease Manchin among others.
S&P futures slid 1.1% on the news.
Europe – Western Europe faces energy shortages as cold weather looms
A combination of nuclear outages in France, low wind speeds and soaring gas prices are to be met by sub-zero temperatures across Europe this week.
European gas prices are already up 600% this year. (Bloomberg)
Power for delivery prices in France hit their highest levels since 2009.
German prices at their third highest on record.
Gas storage sites average 60%, record low for December, and Russia has suggested inflows via the Yamal-Europe pipeline may remain capped.
Soaring electricity costs are expected to fuel inflationary pressures whilst also limiting metal smelter and refining capacity.
Germany – The country joined Cyprus and France imposing stricter rules for travelers from Britain who will now have to undergo a mandatory 14-day quarantine upon arrival.
France temporarily banned entry for many Britons last week, and Cyprus will require visitors from the U.K. ages 12 or above, regardless of vaccination status, to self-isolate.
UK – Health Minister Sajid Javid did not rule out pre-Christmas restrictions but said that any new measures will need to be voted on by Parliament.
London Mayor Sadiq Khan Saturday declared a “major incident” due to a rapid spread of the omicron variant providing him more powers to fight the virus spread and seek government support.
Netherlands – The nation announced reintroduced strict lockdown over the weekend with schools and non-essential shops closed.
The new restrictions will remain in place until at least January 14.
Turkey – Lira is down more than 6% this morning trading around the 17.5 mark after President Erdogan pledged to continue cutting rates.
The currency has retreated 57% this year versus the dollar.
"We're lowering interest rates. Don't expect anything else from me. As a Muslim, whatever (Islamic teaching) requires I will continue to do that," he said, referring to Islamic finance in which high interest, or usury, is typically avoided.
Inflation is currently running at >20% and is expected to pass 30% next year.
UAE to crack down on gold refineries over allegations of illicit imports
The UAE will force refineries to complete audits in a bid to prove provenance of bullion deliveries. (Reuters)
The guidelines will be in line with the OECD and will begin in Feb. 2022.
Switzerland had raised concerns of the sale of illicit African gold from conflict zones.
Currencies
US$1.1258/eur vs 1.1320/eur last week. Yen 113.48/$ vs 113.64/$. SAr 15.859/$ vs 15.888/$. $1.320/gbp vs $1.332/gbp. 0.709/aud vs 0.717/aud. CNY 6.378/$ vs 6.375/$.
Commodity News
Precious metals:
Gold US$1,798/oz vs US$1,809/oz last week
Gold ETFs 98.0moz vs US$98.1moz last week
Platinum US$924/oz vs US$945/oz last week
Palladium US$1,703/oz vs US$1,772/oz last week
Silver US$22.31/oz vs US$22.66/oz last week
Rhodium US$14,000/oz vs US$14,000/oz last week
Base metals:
Copper US$ 9,349/t vs US$9,523/t last week
Aluminium US$ 2,687/t vs US$2,698/t last week
Nickel US$ 19,250/t vs US$19,715/t last week
Zinc US$ 3,350/t vs US$3,439/t last week
Lead US$ 2,295/t vs US$2,329/t last week
Tin US$ 38,400/t vs US$39,425/t last week
Energy:
Oil US$71.4/bbl vs US$74.6/bbl last week
Oil prices fell over 3% in early trading today as surging cases of the Omicron coronavirus variant in Europe and the US increased concerns that new restrictions on businesses to combat its spread may hit fuel demand
The Netherlands went into lockdown on Sunday and the possibility of more COVID-19 restrictions being imposed ahead of the Christmas and New Year holidays looms over several European countries
US health officials urged Americans on Sunday to get booster jabs, wear masks and be careful if they travel over the winter holidays, as the Omicron variant surged across the world and was set to take over as the dominant strain in the US
Meanwhile, US energy firms this week added oil and natural gas rigs for a second week in a row
The oil and gas rig count, an early indicator of future output, rose by three to 579 in the week to 17 December, its highest since April 2020, according to Baker Hughes
However, lower exports are expected from Russia with exports and transit of oil from the country planned at 56.05m tonnes in the first quarter of 2022 versus 58.3m tonnes in the fourth quarter of 2021
China's diesel exports in November fell 69% from a year ago as refineries prioritised domestic supply to ease a fuel crunch with state-backed refineries having raised oil processing rates.
Natural Gas US$3.770/mmbtu vs US$3.723/mmbtu last week
Asian LNG prices rose last week, despite tepid Asian demand, tracking strong gains in Europe on its tightening gas market ahead of peak winter months amid supply concerns
The average LNG price for February delivery into Northeast Asia rose to US$43.35/mmbtu, up US$7.55, or 21.1%, from the previous week
German power prices have increased to a record high while French power prices jumped to a decade high
Concerns that Nord Stream 2 pipeline will not operate this winter season comes as the new German chancellor Olof Scholz said his government would do everything possible to make sure natgas flows continue through Ukraine and not the latest Russian to German undersea pipeline
Last month, German energy regulators suspended Nord Stream 2's certification process
The US has also sanctioned companies affiliated with the pipeline's construction
On top of the geopolitical uncertainties, mixed with tight natgas supplies across Europe, some of the lowest in a decade, a new 14-day weather forecast shows cooler than average weather, which will boost natgas demand.
Uranium UXC US$44.1/lb vs $44.15/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$121.4/t vs US$120.1/t
Chinese steel rebar 25mm US$760.7/t vs US$761.1/t
Thermal coal (1st year forward cif ARA) US$124.3/t vs US$124.3/t
Thermal coal swap Australia FOB US$181.3/t vs US$180.5/t
Coking coal swap Australia FOB US$336.0/t vs US$336.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$69,815/t
NdPr Rare Earth Oxide (China) US$132,872/t vs US$132,935/t
Lithium carbonate 99% (China) US$34,727/t vs US$33,802/t
China Spodumene Li2O 5%min CIF US$2,360/t vs US$2,360/t
Ferro-Manganese European Mn78% min US$1,796/t vs US$1,828/t
China Tungsten APT 88.5% FOB US$314/t vs US$314/t
China Graphite Flake -194 FOB US$765/t vs US$765/t
Europe Vanadium Pentoxide 98% 8.7/lb vs US$8.7/lb
Europe Ferro-Vanadium 80% 32.75/kg vs US$32.75/kg
China Ilmenite Concentrate TiO2 US$380/t vs US$380/t
Spot CO2 Emissions EUA Price US$90.6/t vs US$91.1/t
Battery News
UK’s largest flow battery goes online
Invinity Energy Systems and Pivot Power, an EDF Renewables subsidiary, have fully energised the UK’s largest flow battery at Energy Superhub Oxford.
Invinity has installed 27 of its VS3 vanadium flow batteries at the site to deliver 5MWh.
The 5MWh flow battery system, manufactured in the UK by Invinity, is combined with a 50MWh Wartsila li-ion battery to operate as a single storage asset.
The battery is the largest direct-transmission-connected battery installed in the UK and is the largest vanadium flow and li-ion hybrid battery ever developed.
This hybrid approach utilises the strengths of the two technologies to increase grid resiliency and create a smarter, more flexible energy system, to support the integration of renewable energy generation into the UK grid.
MingYang to enter UK offshore wind market
Chinese wind turbine manufacturer MingYang Smart Energy has signed an MoU with the Department for International Trade to bring MingYang’s investment plans for the UK’s offshore wind sector to realisation.
The agreement will focus on MingYang investing in a blade manufacturing factory, a service center and potentially a turbine assembly factory in the UK.
MingYang had only recently entered the European wind market supplying turbines for the Taranto wind farm in Italy.
In October, the company said it had secured a contract for a floating wind project in Europe, for which it would supply its 11MW hybrid drive offshore wind turbines.
The Chinese turbine manufacturer also launched a 16MW turbine earlier this year, and is scheduled for full prototype rollout in 2022.
RWE (ETR:RWE) investigating floating offshore wind and hydrogen production in the UK
RWE has signed a contract with Jacobs to investigate the production and supply of hydrogen at the Pembroke Power Station in Wales.
The study will take include investigations into the feasibility of initially installing a 100 MW electrolyser to produce green hydrogen from local and grid-connected renewable energy.
The project has the potential to grow to several GW in scale, linked to floating offshore wind in the Celtic Sea, and would become one of the UK’s largest green hydrogen plants in development, RWE said.
RWE is committing to investing £15bn in the UK in green energy projects by 2030.
Company News
AfriTin Mining (AfriTin Mining Ltd (AIM:ATM)) 4.95p, Mkt Cap £55m – Michael Rawlinson appointed a new Non-Executive director
Michael Rawlinson has been appointed as a new non-executive director of AfriTin.
Rawlinson worked as a mining analyst for many years at Cazenove later to become JP Morgan Cazenove and was a founder of Liberum Capital.
Michael is also Chairman at Adriatic Metals PLC (LSE:ADT1, ASX:ADT, OTCQX:ADMLF), a Senior Independent Non-Executive Director at Hochschild Mining and an Independent Non-Executive Director at Capital Limited (LSE:CAPD)..
Arc Minerals* (Arc Minerals Limited (AIM:ARCM)) – 2.32p, Mkt cap £27m – Arc discussions at advanced stage with major mining company
(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.)
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· Arc Minerals reported at their AGM that the company “is in discussions with two major mining companies regarding potential commercial transactions.”
· “One of these discussions is at an advanced stage”
Drilling is currently suspended with Arc’s licenses are currently bogged down in the rainy season.
We expect drilling to restart next year with drilling likely to focus on new targets based on more recent drill results.
*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.
Bluejay Mining* (BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)) 8.75p, Mkt cap £85m – Bluejay receives VAT repayment from HMRC
Bluejay Mining report the receipt of >£1m in reclaimed VAT from the UK revenue authorities.
The recent ruling in favour of Bluejay means the company is able to continue to reclaim VAT across the board on its activities.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland. The analyst holds shares in Bluejay Mining.
Empire Metals* (Empire Metals Ltd (AIM:EEE)) 1.2p, Mkt Cap £4m – New round of exploration drilling to start at Eclipse in Q1/22
The Company completed a technical review of the Eclipse Gold Project, WA, exploration data developing a better understanding of the structural controls of the gold mineralisation.
The Company highlights the potential for mineralization below the gold-depleted regolith zone with only 20% of RC holes drilled to date having reached the underlain fresh rock.
The team is planning a new drilling programme (RC and DD) to start Q1/22 and test areas around the Eclipse shaft and Jack’s Dream shaft as well as the gold mineralisation below the gold depleted regolith zone of weathering.
The design of a larger-scale exploration programme is also underway to test gold targets to the north and northwest areas of the licence area.
*SP Angel acts as nomad and broker to Empire Metals
Hummingbird Resources (Hummingbird Resources PLC (LSE:HUM)) 14.2p, Mkt Cap £56m – Yanfolila drilling results point to LOM extension potential
The Company released assay results from ~12,800m of drilling completed at the Sanioumale West as well as greenfield deposits, Kama and Diaban, at the Yanfolila gold mine in Mali.
Drilling SW was focused on both resource expansion as well as infill drilling with selected results including:
8m at 20.28 g/t from 61m (SNWRC0482)
7m at 12.18 g/t from 14m (SNWRC0506)
6m at 5.53 g/t from 76m (SNWRC0514)
7m at 4.98 g/t from 40m (SNWRC0507)
5m at 3.72 g/t from 40m (SNWRC0482)
6m at 3.67 g/t from 72m (SNWRC0490)
31m at 3.32 g/t from 55m (SNWRC0500)
20m at 2.96 g/t from 23m (SNWRC0501)
SW mineralisation remains open at depth.
At greenfield targets, drilling confirmed the presence of mineralisation at Kama that remains open to the north with new zones of gold mineralisation intersected at the Diaban deposit.
The Company is analysing future exploration potential in these areas, in particular, at Kama, to further prove up their resource potential.
Selected Kama and Diaban results include:
4m at 4.47 g/t from 59m (KARC0020)
3m at 3.87 g/t from 35m (KARC0019)
1m at 4.0 g/t from 23m (DBRC0049)
1m at 2.11 g/t from 16m (KARC0002)
The team is interpreting results of the 44,000m 2021 exploration drilling programme at Yanfolila to release an updated resources and reserves statement in Q2/22.
“With today's positive drilling results from SW, in addition to the greenfield drilling results, we see potential for additional Resources and Reserves growth, taking us one step closer to the Company's strategic goal of achieving a +10-year Reserve mine life at Yanfolila,” the Company commented on the announcement.
Keras Resources* (Keras Resources PLC (AIM:KRS)) 0.05p, Mkt cap £2.8m – Interims highlight sales from Diamond Creek organic phosphate mine
(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 interims for the six-months to end September.
Sales from the Diamond Creek mine rose to £311,000 vs £31,000 for the previous six months.
Production costs came in at £229,000 vs £74,000 previously.
Operating profits rose to £82,000 vs a loss of £43,000 in six-months to end March 2021.
Administrative expenses fell to £426,000 vs £446,000.
The total loss came to £345,000 vs £560,000.
Diamond Creek organic phosphate mine, Utah; operations currently suspended. Discussions to resolve the impasse with the joint venture partner in the US are ongoing.
The business sells its phosphate for $260/t for rough crushed and prosized #10 mesh, rising to $300/t (Bulk) and $420/t (50lb bags) for #350 mesh for hydroponics.
The mine also sell granulates for $360/t (bulk) and $450/t (50lb bags).
The phosphate mine at ‘Spanish Fork’ has been put on hold as a result of a funding shortfall from Kera’s local partner in the project.
Keras are now a major creditor to Falcon Isle, are now seeking to enforce their rights under the terms of their original transaction and are also looking at restructuring the operation.
Processing of organic phosphate stockpile continues with ongoing sales to customers.
The mine has stockpiled 8,500t of organic phosphate rock in the laydown area in front of the Spanish Fork processing plant.
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.
Nay éga Manganese Project, Togo; remains ready to start production.
The employment of a local country manager in May will hopefully serve to accelerate the receipt of an exploitation permit.
SP Angel act as Nomad and Broker to Keras Resources
Power Metal Resources* (Power Metal Resources PLC (AIM:POW)) 1.4p, Mkt Cap £20m – Athabascan Basin exploration programme returns up to 3.86 U3O8 in rock samples
The Company released assay results from rock samples collected as part of Phase I exploration programme over three of the seven Athabascan uranium properties in northern Saskatchewan, Canada.
A total of 20 rock samples were collected at Tait Hill (8 samples), Thibaut Lake (7) and Clearwater (5).
Assay results returned grades of up to 38,600ppm (3.86% U3O8) recorded at the Thibaut Lake property.
Additionally, the Company secured a high resolution magnetics, electromagnetic and radiometric survey results completed by Terraquest for Canalaska Uranium in 2008 over the entire Tait Hill property.
The data includes 4,290 line-km flown at 150m-line spacing identifying ten radiometric anomalies that were never followed up on.
Surface samples results and the magnetic/EM data will assist the team in planning future work programmes in 2022.
*SP Angel acts as Nomad and Broker to Power Metal Resources
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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*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