Angel . Morning View . Tuesday 21 12 21
Copper and iron ore gain on China easing and new property development
Altus Strategies* (Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)) - BUY – First Close of Newcrest Gold Royalty Portfolio acquisition
Atalaya Mining (AIM:ATYM, TSX:AYM) (Atalaya Mining (AIM:ATYM, TSX:AYM)) – Acquisition of new exploration properties in Spain
Beowulf Mining* (Beowulf Mining PLC (AIM:BEM)) – Kallak update
Caledonia Mining (Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)) – CEO to step down mid next year
Eurasia Mining* (Eurasia Mining PLC (AIM:EUA)) – Mr. Kotaro Kosaka elected as non-executive director
Jangada Mines (Jangada Mines PLC (AIM:JAN)) - AVOID – Jangada delays feasibility to add TiO2 evaluation into Pitombeiras feasibility following fall in iron ore price
Magnis Energy Technologies (ASX:EGY) (Magnis Energy Technologies Ltd (ASX:MNS, OTCQX:MNSEF)) – Magnis Energy Technologies enters off-take agreement for Tanzanian natural graphite supply
Pilbara Minerals Ltd (ASX:PLS) (Pilbara Minerals Ltd (ASX:PLS)) - Pilbara slashes lithium shipments forecast in further hit to EV supply chain
Rambler Metals and Mining*+ (Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)) – Expect gold assays to add to inventory in updated reserve. Modest loss of copper production due to safety work
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 extends rally as China’s fiscal stimulus boosts optimism
Iron ore prices have risen 3.3% today to $129/t driven by renewed optimism China’s property sector growth and government-backed stimulus.
Beijing is encouraging banks to boost funding for project acquisitions as well as encouraging developers with stronger balance sheets to ramp up purchases. (Bloomberg)
Domestic banks are also cutting interest rates for the first time in nearly two years.
Increasing Chinese steel production is also driving new physical demand for iron ore.
Copper gains on loosening Chinese monetary policy
Copper bounced 2% to $9,535/t as China moved to stimulate its economy.
A slowdown in China has been weighing on copper’s rally in recent months despite low inventories.
The US Fed’s asset-purchasing taper and 3 interest hikes next year are also providing a headwind for the metal.
Tin prices expected to stay elevated next year on buoyant semiconductor market and supply limitations
Tin prices hit a record high last month of $40,680/t.
Tin stocks remain at record lows despite LME inventories rising 1,755t this month.
The ITA expects a tin market deficit of 9kt this year on a 380kt market.
Production has been hit by extreme rains in major producer Indonesia alongside Covid-related border disruptions in Myanmar.
Production cuts at Malaysia Smelting Corp have further exacerbated supply limitations.
2022 demand is expected to be strengthened by the booming semiconductor industry which grew 26% this year and a further 9% in 2022. (World Semiconductor Trade Statistic)
Analysts have noted the need for both brownfield expansion and greenfield discoveries to balance the tin market.
Dow Jones Industrials -1.23% at 34,932
Nikkei 225 +2.08% at 28,518
HK Hang Seng +1.13% at 23,002
Shanghai Composite +0.88% at 3,625
Economics
US – Equity futures are trading higher this morning on optimism a conversation between Senator Manchin and President Biden helped optimism that the ~$2tn economic package may be revived.
UK – The government holds off pre-Christmas lockdown as ministers stressed the need to balance public health with protecting the economy, Bloomberg reports.
“We’re saying to people they should continue with Christmas, but in a cautious way,” Cabinet Office Minister Steve Barclay said.
Chancellor of the Exchequer Rishi Sunak will speak later today over financial support for companies challenged by the latest phase of the pandemic.
Turkey – The lira climbed more than 30% on announced President Erdogan plans to shore up the currency.
The government is planning the introduction of a programme to protect savings from the lira’s fluctuations including compensating holders of lira deposits from declines against hard currencies from the federal budget.
Measures are intended to mitigate investors’ demand for dollars and cool demand for hard currency.
“We can say that the budget -- the last remaining anchor -- has been sacrificed to claim that a rate hike has been avoided,” a former deputy governor of the Turkish central bank who is now an opposition politician commented on the announcement.
Currencies
US$1.1290/eur vs 1.1258/eur yesterday. Yen 113.63/$ vs 113.48/$. SAr 15.811/$ vs 15.859/$. $1.324/gbp vs $1.320/gbp. 0.712/aud vs 0.709/aud. CNY 6.370/$ vs 6.378/$.
Commodity News
Precious metals:
Gold US$1,796/oz vs US$1,798/oz yesterday
Gold ETFs 98.0moz vs US$98.0moz yesterday
Platinum US$940/oz vs US$924/oz yesterday
Palladium US$1,802/oz vs US$1,703/oz yesterday
Silver US$22.52/oz vs US$22.31/oz yesterday
Rhodium US$14,000/oz vs US$14,000/oz yesterday
Base metals:
Copper US$ 9,517/t vs US$9,349/t yesterday
Aluminium US$ 2,686/t vs US$2,687/t yesterday
Nickel US$ 19,570/t vs US$19,250/t yesterday
Zinc US$ 3,377/t vs US$3,350/t yesterday
Lead US$ 2,295/t vs US$2,295/t yesterday
Tin US$ 38,195/t vs US$38,400/t yesterday
Energy:
Oil US$71.8/bbl vs US$71.4/bbl yesterday
Oil prices steadied in early trading today after a sharp fall yesterday as investors worried about the rapid spread of the Omicron coronavirus variant and the impact of renewed restrictions on 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$3.725/mmbtu vs US$3.770/mmbtu yesterday
European natural gas prices jumped more than 8% yesterday, nearing an all-time high, with Russian deliveries to Germany through the Yamal-Europe pipeline at very low levels
A rapid rise in gas prices in Europe in 2021 has caused power price rises, concerns about the knock-on effect on inflation and triggered the collapse of suppliers in the UK
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 $44.1/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$127.6/t vs US$121.4/t
Chinese steel rebar 25mm US$761.7/t vs US$760.7/t
Thermal coal (1st year forward cif ARA) US$124.3/t vs US$124.3/t - Coal mining production slump sees Mongolia mining industry revenue crash 20.5% yoy
Mongolia’s mining and quarrying revenue fell 20.5% yoy in November.
Soaring Covid cases and border closures by Chinese officials weighed on both sales and production.
Mongolia is a major supplier of coal to China, with supply limitations in September and October causing energy prices to soar.
Thermal coal swap Australia FOB US$182.0/t vs US$181.3/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$70,500/t
NdPr Rare Earth Oxide (China) US$133,046/t vs US$132,872/t
Lithium carbonate 99% (China) US$35,243/t vs US$34,727/t
China Spodumene Li2O 5%min CIF US$2,360/t vs US$2,360/t
Ferro-Manganese European Mn78% min US$1,801/t vs US$1,796/t
China Tungsten APT 88.5% FOB US$314/t vs US$314/t
China Graphite Flake -194 FOB US$785/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$381/t vs US$380/t
Spot CO2 Emissions EUA Price US$83.3/t vs US$90.6/t
Battery News
Siemens Gamesa confirm big offshore wind deal in the US
Siemens Gamesa and Dominion Energy Virginia have reached an agreement for the delivery of offshore wind turbines and ten years of service for the 2.6GW Coastal Virginia Offshore Wind project.
The project would use 176 units of Siemens Gamesa SG 14-222 DD 14GW turbine.
The deal is likely to strengthen Siemens plans for a $200m blade manufacturing facility – the first facility specifically for the manufacture of the SG 14-222 DD
Siemens Gamesa installed an SG 14-222 DD prototype at the test centre in Østerild, Denmark, in November, making it the world’s largest and most powerful turbine to be installed, taking the mantle from GE Haliade-X 14MW prototype operating in the Port of Rotterdam.
A quick evaluation of the project suggests potential consumption of 260,000-325,000t of steel, 33,264t of copper and 1,000-1,500t of NdPr.
Company News
Altus Strategies* (Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)) 59p, Mkt Cap £69m – First Close of Newcrest Gold Royalty Portfolio acquisition
BUY – Valuation under review
The Company announced closure of the first stage of the Newcrest royalty portfolio acquisition announced earlier in December.
Under the First Close, Altus and its JV partner AlphaStream transferred $32.5m of the total $37.5m ($24m payable by Altus) to the vendor.
First Close secures royalties on two underground operating mines (Ballarat and SKO), one near producing mine (Bonikro) and 12 development/exploration stage assets.
Second Close of up to $5.0m with a number of pre-emptive rights on nine exploration stage royalties either expired or exercised is expected to close at the end of Jan/22 and to be paid in Feb/22.
Any exercise of pre-emptive rights will cause the consideration ($24m) to be reduced.
“The portfolio provides Altus with immediate cash flow, portfolio diversification and is heavily weighted towards gold in Australia, a 'top tier' jurisdiction,” the Company commented on the news.
First cashflow from the Newcrest portfolio is expected in early 2022.
*SP Angel acts as nomad and broker to Altus Strategies
Atalaya Mining (Atalaya Mining (AIM:ATYM, TSX:AYM)) 405p, Mkt Cap £560m – Acquisition of new exploration properties in Spain
The Company secured a significant exploration ground covering 1,114km2 in the Ossa Morena Metallogenic Belt, SW Spain.
The Ossa-Morena Metallogenic Belt has strong exploration potential for a range of base and precious metals and is north of the Iberian Pyrite Belt where Atalaya operates its flagship Proyecto Riotinto mine.
The Company is acquiring a 51% interest in Rio Narcea Nickel holding 17 exploration permits and a 100% interest in three exploration permits located along the Ossa-Morena Metallogenic Belt.
In addition to highlighted 20 permits to be collectively called Proyecto Ossa Morena (POM), the Company is also securing a 51% in four exploration permits in the Sevilla province and a 100% interest in two exploration permits in the Almeria province, both in the south of Spain.
The consideration includes a €2.5m cash payment (three instalments conditional on securing environmental and mining permits) and a 1% NSR royalty over all acquired properties.
Alconchel copper-gold-iron project is among the most advanced in the POM portfolio with a NI 43-101 total mineral resource estimate on the property of 23mt at 0.53% Cu, 0.15g/t Au and 11.2% Fe (Oct/17).
Additional prospective targets include two advanced-stage Au and Cu-Au exploration projects, Guijarro and Vicaria respectively, and several drill-ready coincident geochemical and geophysical anomalies.
The team is planning to carry infill and step out drilling at Alconchel, and additional exploration drilling at Pallares, Vicaria and Guijarro projects among others.
The aim of that work is to expand the known resources at Alconchel and advance the Pallares, Vicaria and Guijarro projects to the resource definition stage.
The POM exploration budget for 2022 is estimated at up to €2m including ~10,000m of core drilling.
Beowulf Mining* (Beowulf Mining PLC (AIM:BEM)) 11.2p, Mkt Cap £118m – Kallak update
The Company released comments to the letter from Sami villages written earlier in December to the Mining Inspectorate of Sweden.
Comments with regards to the application of a processing concession for the Kallak iron ore project highlight the regulatory standing and economic potential of the project.
The Company reports that to their knowledge the Sami villages have asked a Swedish translation of the UNESCO letter (Jun/21) before providing comments to the Government on the Kallak’s license application.
The team is unsure on what is an updated timing on the response from the Sami villages, although, originally a deadline was set for 16 December.
"In the New Year, Beowulf is looking forward to continuing dialogue with stakeholders in Jokkmokk, including reindeer herders, and working with the same, to create the partnerships critical for maximising the benefits that will be generated by a mining operation at Kallak and felt by all,” the Company concluded.
*SP Angel acts as Nomad and Broker to Beowulf Mining
Caledonia Mining (Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)) 895p, Mkt Cap £114m – CEO to step down mid next year
Steve Curtis (65) will be stepping own as CEO with effect from June 30 2022 and to be succeeded by Mark Learmonth, Company’s current CFO.
Steve will continue as a director of the Company transitioning from an executive to a non-executive role by the end of 2022.
Additionally, Steve will assist the Company as a consultant until the end of 2023.
Steve successfully managed The Central Shaft project at the Blanket Mine that started construction in Feb/15 and was commissioned in Mar/21.
The shaft is estimated to almost double production rate from 2022 onwards to 80kozpa from the levels recorded in 2014 while lowering operating and capital costs and helping with more time and cost efficient deep-level exploration.
Mark Learmonth who will be replacing Steve joined the Company in 2008 and acted as CFO since Nov/14.
Eurasia Mining* (Eurasia Mining PLC (AIM:EUA)) 21.94p, Mkt Cap £626m – Mr. Kotaro Kosaka elected as non-executive director
(NKT is held within TGK, Eurasia’s 80% owned subsidiary operating in Kola, Russia)
Eurasia Mining has elected Mr. Kotaro Kosaka to be as non-executive director to its board.
Mr Kotaro holds a masters degree from Stanford University in the US.
He is also the JP market representative of Auto21 which covers high-tech venture capital management
Kotaro is also ceo of Invero Technology Solutions Co. and is a representative of the Kono foundation
Mr Kotaro formerly worked for Mitsubishi Corp launching automotive manufacturing and sales joint ventures in the South East Asian area and China
He also managed CO2 credit deals with the Estonian Government and Spanish electric companies and was formerly a marketing executive of GMMC Mitsubishi.
Conclusion: Mr Kosaka’s appointment to the board reflects increasing interest in nickel, PGMs, battery and hydrogen-related metals.
*SP Angel act as Nomad and Broker to Eurasia Mining
Jangada Mines (Jangada Mines PLC (AIM:JAN)) 11.93p, Mkt cap 29m – Jangada delays feasibility to add TiO2 evaluation into Pitombeiras feasibility following fall in iron ore price
AVOID
Jangada reports it is to evaluate the potential extraction of TiO2 into the feasibility study for the Pitombeiras project in Brazil.
Management see “rising demand for TiO2 due to its increasing use in renewable energy technologies including electric batteries.”
They also highlight the decline in the iron ore price since the publication of the Pre-Feasibility Study.
“the Board believes that it is prudent to invest further in the evaluation of the TiO2 component; accordingly, the publication of the FS is now anticipated to be in Q1 2022.”
The feasibility study is now anticipated to be published in Q1 2022.
We note: The principal use for Titanium Dioxide ‘TiO2’ is for pigments for paints with less than 5% of material converted into titanium metal. A quick google search shows very little about TiO2 in batteries with most articles more than five years old though there is a suggestion that titanium dioxide might be used to replace electrodes in Li-ion batteries in future years by the Titanium Dioxide Manufacturers Association. When it comes to renewable energy we suspect there will be more TiO2 used in painting the legs for windfarm instillations that in any other application.
Magnis Energy Technologies (Magnis Energy Technologies Ltd (ASX:MNS, OTCQX:MNSEF)) A$0.43, Mkt Cap, A$420.8m – Magnis Energy Technologies enters off-take agreement for Tanzanian natural graphite supply
Power storage solution company Magnis Energy Technologies has entered a binding off-take agreement for natural graphite products supply through commodity broker Traxys Europe SA.
The Nachu Graphite Project in Tanzania will supply Magnis with graphite products from 2024.
Magnis issued Traxys 700,000 fully paid-in common stock alongside 1.3m options.
The agreement will require Magnis shareholder approval.
The options can be exercised at $0.60 each before the 24-month anniversary of the issue date.
Magnis describes the prepayment to Traxys as a ‘marketing fee.’
The Nachu Graphite Project is currently raising funding for construction.
Magnis’ unit Uranex (ASX:UNX) has a mining licence for Nachu and the agreement aims to consolidate financing for the Tanzanian project.
Walkabout Resources (Walkabout Resources Ltd (ASX:WKT)) signed a similar off-take seat contract for its Lindi Jumbo Tanzania project in April 2019 with a Chinese graphite consumer.
Pilbara Minerals Ltd (Pilbara Minerals Ltd (ASX:PLS)) A$2.51, Mkt Cap A$7.5bn - Pilbara slashes lithium shipments forecast in further hit to EV supply chain
Pilbara Minerals Ltd. has slashed its spodumene concentrate shipments guidance from 440-490kt to 380-440kt in the year ending June 30. (Bloomberg)
The Australian lithium producer cited worker shortages, shutdowns, and delays in attempts to boost processing capacity.
Pilbara received an average price between $1,650-1800 per dry metric ton in the December quarter.
Rambler Metals and Mining*+ (Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)) 31.5p, Mkt cap £45m – Expect gold assays to add to inventory in updated reserve. Modest loss of copper production due to safety work
(Rambler owns 100% of the Ming Copper-Gold Mine)
Rambler Metals & Mining report the definition of 23.663mt of Measured and Indicated Resources grading 1.81% copper.
The resource contains 428,113t of copper representing a 5% increase in contained copper vs the May 2021 mineral resource.
This is good news as it highlights how new discovery is exceeding mine depletion.
Inferred Mineral Resources include 6.395mt grading 1.70% copper at a 1% copper cut-off.
Gold and silver assays from the 2021 drill campaign have been delayed due to a shortage of third party assay capacity.
Ming Mine: work continues at the Ming Mine with higher grades produced from the deeper levels.
Work to stabilise an alternative transport route has effectively cut off a section of the mine and is expected to cut production to 300t from a planned 496t of copper in December.
Much of the lost production will be made up from mining higher grades out of The Ming North Zone next year where there is 19,068 t of contained copper, grading 5.31%.
“Production guidance for 2022 will be released in January 2022 which will reflect the updated mine plan incorporating the upgraded resources.”
The work to secure this part of the mine, which was mined in the 1980s is estimated to take up to four weeks with Rambler working through its remaining copper hedge in January.
Rambler has recently appointed a new mine superintendent and a highly experienced safety superintendent to oversee safety and efficiency in the mine.
“Although we will be delayed in producing ore from certain areas of the mine by around four weeks relative to our previously announced intent (see press release of 15 November, 2021), this does not diminish the value that we expect to create with the access to the world class mineral resources that we have at Rambler.”
“The robustness of the mineral resource is further highlighted by the uplift of copper contained in resources “
Management are particularly excited about the gold assays they are due to receive, particularly for the massive sulphide zones, as these are expected to further add gold into the resource.
The team will then declare a new updated mineral reserves.
*SP Angel act as Nomad and broker to Rambler Metals & Mining. The analyst holds shares in Rambler Metals & Mining
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