SP Angel . Morning View . Thursday 23 12 21
Base metals prices rise in China on potential for supply disruption
Anglo Asian Mining* (Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)) - BUY – 180p – Acquisition of a 19.9% stake in Libero with a portfolio of copper exploration assets in Americas
Libero Copper & Gold (Libero Copper Corporation (TSX-V:LBC))
Prospect Resources* – Prospect sells its 87% of the Arcadia Lithium project in Zimbabwe to Zhejiang Huayou Cobalt Co. subsidiary for US$378m
Strategic Minerals* (Strategic Minerals PLC (AIM:SML)) – Leigh Creek Copper Mine
Syrah Resources Ltd (ASX:SYR) (Syrah Resources Ltd (ASX:SYR)) - Tesla secures first graphite supply deal with Syrah Resources
IGTV: IG Outlook 2022, 23/12/21:: https://youtu.be/4w7nbjRdFyk
Interactive Investors: 22/12/21: https://www.youtube.com/watch?v=9xvA_3UXXYQ&ab_channel=interactiveinvestor
VOX Markets: 08/12/21: https://audioboom.com/posts/7993202- china-economy-plus-bluejay-centamin-cornish-metals
*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.
South Africa - Omicron disrupting mine production in South Africa
We already know of one mine were around 1/8th of the workforce have tested positive for Omicron.
But another 3/8 ths .of the workforce are also self isolating due to their contact with the first 1/8th.
So that’s 50% of the workforce either with Covid or isolating because of Covid.
We suspect this is going to become a major issue through January and February.
China continued to be relatively Covid-free and has lowered interest rates to stimulate their economy ensuring ongoing strong demand from the world’s major manufacturing nation.
But most mines will not be covid free and we see significant disruption to mine production through the first quarter increasing the potential for industrial and base metals prices to spike higher as consumers ask their traders to secure physical metal.
Omicron wave may be passing as quickly as it rose
South Africa is in the grip of the Omicron wave with a significant portion of some workforces either struck down with the illness or self-isolating due to contact with sufferers.
But, experts tell us that the rate of new infection is now falling as fast as it rose according to early figures.
We see South Africa as potentially running two-three weeks ahead of Western nations in terms of Omicron infections.
We are also wary of strong natural immunity within the population due to previous waves of other Covid variants through tight-packed townships and villages.
Either way, the news out of South Africa seems hopeful.
Dow Jones Industrials +0.74% at 35,754
Nikkei 225 +0.83% at 28,798
HK Hang Seng +0.39% at 23,192
Shanghai Composite +0.57% at 3,643
Economics
China – Rising inventories cap gains on iron ore following 6-week rally
Singapore iron ore fell 1.4% to $124/t following an 11% rise in iron ore inventories at China ports this quarter. (Mysteel)
Inventories are at their highest level in 3 years.
A record increase in Brazilian shipments has bolstered stockpiles. (Shanghai SteelHome E-Commerce)
China Nov. iron ore imports at their highest level in 13-months.
Iron ore prices have rallied 50% since Nov. 10.
Three doses of Sinovac vaccine shown to be ineffective against Omicron
A lab study has apparently shows that two doses and a booster of Sinovac's COVID-19 vaccine does not produce sufficient levels of neutralising antibodies to protect against omicron.
The study also shows that two doses of the BioNTech's vaccine is also insufficient, though the booster does raise protection to adequate levels.
China may need to come up with a better vaccine before relaxes its zero-Covid policies.
Europe - Energy shortage threatens post-pandemic economic recovery
European power and gas prices have hit record highs on Russian supply limitations, EDF’s nuclear shutdown and a cold snap across the continent.
Analysts expect power limitations to further exacerbate consumer price growth (quickest in 3 decades in Germany and Spain), further triggering deflationary effects.
Economists predict the shortage may slash euro-area GDP in 1Q22 by 0.3%. (Bloomberg)
Metals producers have also been hit, further stoking inflationary pressures.
Nyrstar is pausing production at its French zinc smelter next month and Aluminium Dunkerque has limited production.
Peru - Peruvian community agrees to lift blockade on MMG’s Las Bambas mine
The Chumbivilcas communities have agreed to lift their blockade on Las Bambas until Dec. 30th following a meeting with Prime Minister Vasquez.
The Hantun Collana community is yet to agree to the truce. (Bloomberg)
MMG has offered the villagers monetary compensation and trucking jobs.
The company had to shut Las Bambas down on Saturday owing to the blockade.
Chile’s president-elect expected to place further strain on global copper supplies
Chile’s new leftist president Boric has vowed to crack down on ‘projects that destroy our country’ and ‘destroy communities.’
He has already singled out Andes Iron’s $2.5bn Dominga mine project, stating ‘no to Dominga’ in a speech.
Chile is the world’s largest copper supplier, producing 5.7mt of copper in 2020.
Analysts expect Boric’s election to delay investments in Chile-focused mining projects.
Boric has softened his original message, highlighting his wish to maintain ‘an orderly economy.’
Russia – Russia seen ramps up military presence on Ukraine border as US talks loom
Russia is reported to have 122k troops within 120 miles of the Ukraine border.
Janes’ satellite imagery shows a mass build-up of tanks, air-defence systems and artillery increasing in presence since Nov.
Russia is demanding the US avoid enabling Ukraine from gaining membership in NATO.
The US has agreed to hold talks with Russia in January despite some ‘unacceptable’ proposals.
Russian Foreign Minister Lavrov suggests the actions they are ‘taking to ensure our defensive capability’… ‘will be taken seriously.’
Conclusion: Putin is currently keeping gas shipments to Europe capped and we expect any escalated tension on the Ukraine border to further impact the current European energy shortage.
Myanmar - 70 people missing following jade mine landslide
3 people have died and 70 people remain missing following a landslide at a Myanmar jade mine.
A landslide last year killed 300 people in a similar accident.
Jade gems are highly sought after in China, but Myanmar’s mining industry is highly unregulated.
Artisanal miners pick through industrial miners’ tailings.
Currencies
US$1.1322/eur vs 1.1275/eur yesterday. Yen 114.27/$ vs 114.18/$. SAr 15.752/$ vs 15.856/$. $1.338/gbp vs $1.328/gbp. 0.723/aud vs 0.715/aud. CNY 6.370/$ vs 6.372/$.
Commodity News
Precious metals:
Gold US$1,807/oz vs US$1,788/oz yesterday
Gold ETFs 97.9moz vs US$98.0moz yesterday
Platinum US$974/oz vs US$937/oz yesterday
Palladium US$1,862/oz vs US$1,814/oz yesterday
Silver US$22.87/oz vs US$22.50/oz yesterday
Rhodium US$14,100/oz vs US$14,100/oz yesterday
Base metals:
Copper US$ 9,638/t vs US$9,584/t yesterday
Aluminium US$ 2,845/t vs US$2,802/t yesterday
Nickel US$ 20,065/t vs US$19,690/t yesterday
Zinc US$ 3,548/t vs US$3,469/t yesterday
Lead US$ 2,321/t vs US$2,295/t yesterday
Tin US$ 38,825/t vs US$38,600/t yesterday
Energy:
Oil US$75.1/bbl vs US$74.0/bbl yesterday
Natural Gas US$3.893/mmbtu vs US$3.887/mmbtu yesterday
Uranium UXC US$43.95/lb vs $43.95/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$123.2/t vs US$127.4/t
Chinese steel rebar 25mm US$761.7/t vs US$761.4/t
Thermal coal (1st year forward cif ARA) US$128.2/t vs US$124.3/t
Thermal coal swap Australia FOB US$177.7/t vs US$180.5/t
Coking coal swap Australia FOB US$350.0/t vs US$349.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$70,500/t
NdPr Rare Earth Oxide (China) US$132,254/t vs US$132,209/t
Lithium carbonate 99% (China) US$36,184/t vs US$35,230/t
China Spodumene Li2O 5%min CIF US$2,410/t vs US$2,360/t
Ferro-Manganese European Mn78% min US$1,806/t vs US$1,798/t
China Tungsten APT 88.5% FOB US$314/t vs US$314/t
China Graphite Flake -194 FOB US$805/t vs US$805/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$381/t
Spot CO2 Emissions EUA Price US$90.6/t vs US$90.2/t
Battery News
Company News
Anglo Asian Mining* (Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)) 111p, Mkt Cap £127m – Acquisition of a 19.9% stake in Libero with a portfolio of copper exploration assets in Americas
Libero Copper & Gold (Libero Copper Corporation (TSX-V:LBC)) C$0.50, Mkt Cap C$25m
BUY – 180p
The Company is acquiring 19.9% stake in Libero Copper & Gold Corp (LBC CN) for C$6.3m/US$4.9m investment.
5.6m shares at C$0.5 representing an initial 9.9% interest will be subscribed for straightaway.
7.0m shares representing the remaining 10.0% to be secured on the regulatory approval by the TSX Venture Exchange expected in Q1/22.
Additionally, the Company will be granted half a warrant for each share (6.3m warrants) with a C$0.75 exercise price and valid for two years.
The Shares issued are subject to a four month statutory hold period.
The Company nominate one of its existing board members to join the Libero Board.
A technical committee will be established with representatives from both companies managing the strategy for the Libero’s exploration programme.
Libero holds and has the option to acquire a number of copper exploration properties in North and South America including Mocoa in Columabia, on the world’s largest undeveloped Cu/Mo deposit.
Libero’s potfolio of assets includes:
Mocoa is a 100% owned porphyry copper-molybdenum project located in Putumayo, Colombia, in the structural porphyry belt running through Ecuador and Colombia and hosting Mirador and Waritza deposit.
Mocoa NI 43-101 mineral resource estimate currently stands at 636mt at 0.45% CuEq (0.33% Cu and 0.04% Mo) for 2.1mt copper and 0.2mt molybdenum (all Inferred, 0.25% CuEq COG, Oct/16).
Libero is planning to launch a drilling campaign in Q1/22 following up on Mocoa extensions as well as new potential porphyry targets identified following a high-resolution airborne magnetic-radiometric and LiDAR surveys on the property.
Libero acquired Mocoa in Sep/18 from B2 Gold for 2.1m shares in the Company and a 2% NSR royalty.
Esperanza is a pre-resource porphyry copper-gold and epithermal gold project located in the Huachi mining district, San Juan province, Argentina.
In 2018, the drill program intercepted 387 metres of 0.78% copper equivalent from surface through to the end of hole, which was never followed up on due to market conditions.
Libero holds an option to earn in to 70% in Esperanza and needs to make ~US$2.4m in option payments as well as incur US$2m in exploration expenditures.
Big Red is a new porphyry copper-gold discovery in the Golden Triangle, British Columbia.
The property lies 70km north of Teck and Newmont’s Galore Creek and 80km west of Newmont’s Saddle deposit, and Newcrest’s Red Chris mine.
The initial drill programme was completed during the 2020 field season resulting in the Terry discovery.
The discovery hole at Terry in Oct/20 returned 120m at 0.41% CuEq from surface including higher grade interval of 73m at 0.49% CuEq from surface.
Libero completed ~4,600m diamond drilling programme in October.
Libero holds an option to acquire 100% in Big Red property through a series of cash payments and equity issues for a total of C$440k and 400k shares until early 2023 (C$350k and 280k shares remain outstanding).
Big Bulk is a fully permitted porphyry copper-gold target located 50km southeast of Stewart, British Columbia, also in the Golden Triangle area.
Big Bulk is a multiphase late Triassic intrusion hosted in Hazelton and Stuhini volcanics and sediments analogous to Galore Creek and KSM.
Libero has recently completed a ~1,700m diamond drilling programme.
Libero holds an option to acquire 100% interest in Big Bulk property until Dec/25 for a total of C$1m in cash or equity equivalent as well make further cash payments and incur exploration expenses during the period to maintain its rights under the option agreement.
Conclusion: The Company secures a minority stake in a copper explorer with a portfolio of prospective projects across Americas. The deal adds to its copper exposure and diversifies its asset base with new projects outside Azerbaijan.
*SP Angel act as nomad and broker to Anglo Asian Mining
Prospect Resources* - A$0.81/s, Mkt cap A$345m – Prospect sells its 87% of the Arcadia Lithium project in Zimbabwe to Zhejiang Huayou Cobalt Co. subsidiary for US$378m
Prospect Resources has agreed to sell it’s 87% in the Arcadia Lithium project to a subsidiary of Zhejiang Huayou Cobalt Co.
The transaction price of US$377.8m equates to A$1.23/s and a premium of 78%.
There are still a few hoops to jump through before management start buying their Lamborghinis
Key conditions include:
Prospect shareholder approval,
Requisite Chinese regulatory approvals being obtained by Huayou,
Requisite Zimbabwean regulatory approvals and exemptions being obtained by both parties, including:
(i) exchange control approvals,
(ii) merger control approvals,
(iii) capital gains tax clearance, and
(iv) PLZ obtaining necessary amendments to its Special Economic Zone Licence;
PLZ’s existing offtake agreement (to which Prospect is also a party) (Existing Offtake) being terminated,
No material adverse change to PLZ’s key mining tenements, environmental impact assessment certificate or the terms of its Special Economic Zone Licence,
No material breach of certain pre-completion, ordinary course conduct of business obligations,
Receipt of a US$20m deposit which is non-refundable in certain circumstances where the Transaction does not complete,
A break fee of US$20m payable by Prospect in certain circumstances where the transaction does not complete
The A$20m deposit will not be refunded if:
Requisite Chinese regulatory approvals not being obtained,
Huayou electing to terminate the SSA due to PLZ not being able to obtain certification to export lithium products directly on terms acceptable to Huayou,
Huayou failing to carry out its obligations to complete after all conditions precedent have been satisfied or waived (other than as a result of default by PMPL),
Huayou or its guarantor being or becoming insolvent.
Prospect expects to retain a US$50m cash balance to advance its other battery metals projects in Zimbabwe and potentially look for other battery metals opportunities elsewhere.
The remaining funds are to be distributed to shareholders equating to around A$1.07/s
The transaction is expected to complete in the H1 2022.
Zhejiang Huayou Cobalt Co. is also acquiring further stakes in the Arcadia Lithium project from Professor Kingston Kajese and the Tamari Trust
Conclusion: Prospect received seven non-binding proposals to advance the Arcadia project in late November with Zhejiang Huayou Cobalt Co. offering the winning bid.
Completion of the transaction will be a big confidence booster for Zimbabwe and should demonstrate to international investors that Zimbabwe is open for business from a mining perspective. China, also, appears increasingly desperate to secure lithium feedstock with new giga-factories thought to be running short of graphite and lithium feedstock.
*The analyst has visited Prospect’s Arcadia Lithium project in Zimbabwe.
Strategic Minerals* (Strategic Minerals PLC (AIM:SML)) 0.28p, Mkt Cap £5.6m – Leigh Creek Copper Mine
Strategic Minerals are seeking US$10m to fund the Leigh Creek Copper mine at the LCCM project level.
Funding negotiations have “moved to discussions on a convertible note / joint venture basis after debt negotiations with a top global bank ceased.”
Around US$6m is required to restart production at Leigh Creek with a further US$4m sought for exploration of copper oxide and sulphides.
US$1.0m for capital items, US$2.5m for earthmoving and mining ahead of first production and US$2.5m for the required environmental bond.
The $4m exploration program is for drilling into mineralisation at Mount Coffin with twinning of existing drill holes to help define a new JORC resource to extend the life of the Leigh Creek project, potentially adding $40m to the EBITDA.
Further drilling is to focus on a significant intersection drilled by Bridge Minerals in 1974 which showed high-grade copper sulphide intersection from 137.2-144.8m gradin g 1.34% copper.
Strategic Minerals estimate EBITDA of US$68m on a $9,370/t copper price and a 0.75 AUD:USD exchange rate.
A South Australian government grant has been applied for to assist with the cost of drilling next year.
Resubmission of the Program for PEPR ‘Environmental Protection and Rehabilitation’ for the South Australian Department of Energy and Mines is due to for submission in January.
This could reduce the funding required for the environmental bond for the Leigh Creek site
Redmoor: recent drill intersections show 0.46% tin with 0.04% copper and 0.04% tungsten over 2.6m width with a a single metre assaying 0.68% tin with 0.03% copper and 0.05% tungsten.
Trenching also shows a 20m wide zone of tin mineralisation including a peak assay of 0.38% tin over a 2m wide interval and a separate 4m wide intersection averaging 0.32% tin.
Internal projections also show an NPV8% of US$163m and IRR of 33.1% on assumptions: tin US$37,660/t, tungsten at $313/mtu copper at US$9,748/t
Conclusion: The Leigh Creek projects shows strong revenue generation with a short 18 month payback. Revenues could exceed US$132m over nine years giving an EBITDA of $68m.
*SP Angel acts as Nomad and Broker to Strategic Minerals
Syrah Resources Ltd (Syrah Resources Ltd (ASX:SYR)) A$1.63, Mkt Cap A$812.9m - Tesla secures first graphite supply deal with Syrah Resources
Tesla has struck a deal with Syrah Resources Ltd for a 4-year supply deal for graphite anode materials.
The graphite will be produced to battery-ready grade at a production facility in Louisiana.
Syrah supplies its Louisiana plant with graphite from its Mozambique mine.
The plant will be the first US-based source of graphite anodes.
China has a dominant market share of graphite production; a market analysts expect to increase 5x by 2030. (BloombergNEF)
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