SP Angel . Morning View . Friday 24 12 21
Seven days of Gigafactory Christmas*
Atlantic Lithium* (Atlantic Lithium Limited (AIM:ALL)) / formerly IronRidge* (IRR LN) – Completion of Ricca resources demerger
CATL seeking to regain NIO business with new 'ultrahigh' nickel' battery
Rio Tinto (Rio Tinto PLC (LSE:RIO)) – Rio to pause Jadar development after protests
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.
Seven days of Gigafactory Christmas*
On the first day of Christmas
An Electric Vehicle manufacturer came to me
A one gigafactory somewhere near Coventry
On the second day of Christmas
A battery-metals buyer came to me asking for
800t of lithium hydroxide
For a gigafactory somewhere near Coventry
On the third day of Christmas
Three Gigafactories came to me
2,400t of natural flake spherical graphite
1,600t of lithium hydroxide
For gigafactories somewhere near Coventry
On the fourth day of Christmas
Four Gigafactories came to me
3,240t of nickel hydroxide
4,800t of natural flake spherical graphite
3,200t of lithium hydroxide
For gigafactories somewhere near Coventry
On the fifth day of Christmas
Five European Union officials came to me looking for 360GWh of materials by 2025
36,000t of cobalt
291,600t of nickel hydroxide
792,000t of natural flake spherical graphite
288,000t of lithium hydroxide
For gigafactories across Europe to the sea
On the sixth day of Christmas
Six European Automotive manufacturers came to me for 779GWh of materials by 2030
77,900t of cobalt
630,990t of nickel hydroxide
1,713,800t of natural flake spherical graphite
623,200t of lithium hydroxide
70,110t of manganese
For gigafactories across Europe to the sea
On the seventh day of Christmas
260 gigafactories came to me looking for >3,000GWh of battery materials by 2025
3,600,000t of synthetic graphite
300,000t of cobalt
2,450,000t of nickel hydroxide
6,600,000t of natural flake spherical graphite
2,400,000t of lithium hydroxide
270,000t of manganese
For gigafactories globally
On the eight day of Christmas
260 gigafactories came to me looking for >5,000GWh of battery materials by 2030
All buyers panicking because they just all can’t buy:
6mt of synthetic graphite
0.5mt of cobalt
4mt of nickel hydroxide
11mt of natural flake spherical graphite
4mt of lithium hydroxide
0.45mt of manganese
For gigafactories globally
*Sources: SP Angel calculations based on 811 battery technology approximate assumptions, Rhomotion and Benchmark Minerals forecasts
We hope you have a happy Christmas, especially if you are a gigafactory raw materials buyer!
Base metals post strong gains as supply disruption threatens and US dollar weakens
European energy prices and potential shortages are crippling what is left of the European smelting industry
It makes us wonder how Europe is going fire up newly planned Lithium/spodumene furnaces in such an environment.
A number of new spodumene converters are being planned in Europe. All will need access to substantial energy sources.
Iron ore futures continue to show strength as China restocks and demand for steel rises as the construction sector recovers
China iron ore futures up 4% on Friday’s trading close.
Steel mills have been restocking going into the New Year holidays.
Prices have also been boosted by China’s environmental regulator quashing rumours of a major industrial shutdown in the north before the Winter Olympics. (Reuters)
Blast furnace capacity utilisation has remained strong at c. 75% this week. (MySteel)
Gold climbs alongside stocks as dollar closes in on 4-month low amid Omicron fears
Gold rose to $1,810/oz on low volume Christmas Eve trading.
Silver up 0.5% to $22.89 and platinum has climbed 4.2%. Palladium is up 9.2% this week to $1,943.68.
The dollar has had its worst week since September – dollar index down 0.6% this week.
Gold has shown strength despite US 10-Year Treasury yields hitting a one-week high of 1.5010%.
S&P 500 and Nasdaq futures up 0.66% and 0.8% respectively.
Traders are still weighing up the severity of the Omicron variant before making any considerable bets going forward.
ETF assets gain $1tn in 2021 to near $10tn of assets held
ETF inflows saw yet another record year through 2021 with >$1tn of funds added to Exchange Traded Funds (FT).
ETF popularity was helped by .
Record inflows seen into specialist ESG, Environmental Social and Governance ETFs
Many ETFs are traded commission-free across digital platforms on smartphones and tablets as well as PCs
Index ETFs are seen exacerbating valuations in technology and other key index stocks particularly in the US
A number of high-profile asset managers are warning of significant overvaluation in US technology stocks partially as a result of ETF and other index buying
Copper - China copper stockpiles fall to lowest level since 2009
Chinese copper stocks fell 7,409t last week to 21,717 tonnes, while zinc and lead stocks also dropped to fresh lows.
Las Bambas doesn’t expect temporary truce to enable full-scale production
The truce between the government, MMG and the Chumbivilcas reached on Thursday is not expected to allow production to restart.
Las Bambas has had to limit production since Nov. 20th due to a road blockade.
Las Bambas provides 2% of the global copper output.
Dow Jones Industrials +0.55% at 35,951
Nikkei 225 -0.05% at 28,783
HK Hang Seng +0.13% at 23,224
Shanghai Composite -0.69% at 3,618
Economics
China – Over 13m people in city of Xi'an ordered to lockdown
The northern city has recorded 143 infections since 9 December.
Under the new restrictions announced on Wednesday, only one person per household is allowed to leave home every two days to buy essential goods.
China - plans to keep the yuan ‘basically stable’ to boost exports and limit economic headwinds
Beijing is looking to limit the current price appreciation of the yuan to aid exporters. (SCMP)
The strong yuan against the dollar reduces exporters’ profits.
Banks have been called on to ramp up longer-term forex settlement agreements.
Beijing has recently highlighted China’s three major economic headwinds: shrinking demand, supply shocks and ‘weaker expectations.’
China approves merger of 3 major rare earth companies under state-owned conglomerate
Beijing has further consolidated its dominance over the rare earth sector by approving a merger between Chinalco Rare Earth, Ganzhou Rare Earth Group and China Minmetals Rare Earth.
The conglomerate will be under direct control of the government and will control 70% of the country’s rare earth output. (FT)
Beijing pursued similar consolidation tactics with their rail and shipping industries.
A person close to the matter stated that China ‘can’t let market force determine how much rare earths should cost given their strategic importance.’
The conglomerate will look to acquire Guangdong Rare Earth Group and Xiamen Tungsten going forward.
We expect this to further increase Western manufacturing demand for non-Chinese-backed rare earth mining projects as buyers look to diversify their supply.
US/China – Biden signs law over China Uyghur abuse
President Biden signed a law on Thursday banning goods from China’s Xinjiang region unless companies can prove they aren’t made with forced labour.
The bill passed with unanimous backing in both the House and the Senate.
US – Consumer purchases of goods and services little changed at 0.0% in November as inflation woes persist
US consumers took a breather in November a month after an early holiday spending surge.
Purchases of goods and services were little changed following a 0.7% gain in October.
Data showed that money spent on housing, utilities, gasoline and food increased this month – as inflation rates soar.
The personal consumption expenditures price gauge, which the Fed uses for its 2% inflation target, increased 0.6% from a month earlier and 5.7% compared to November 2020 – the highest reading since 1982.
Core CPI rose 0.5% from the prior month and 4.7% from a year earlier.
US Q3 GDP rose 2.3% qoq vs 6.7% in Q2
5-year inflation expectation pulled back to 2.9% vs 3% previously
Durable goods orders rose 2.5% in November
led by transport which rose to $82.1bn
motor vehicles and parts rose by 1% to $53.8bn
orders for commercial aircraft and parts jumped 34% to $13.3bn
orders for fabricated metal products rose 0.6% $36.7b
orders for primary metals rose 0.3% to $24.5bn
orders for machinery fell 1% to $38.2 bn
Durable goods ex transport orders rose 0.8% vs 0.3% in October
Uni of Michigan consumer sentiment improved 70.6 in December vs 67.4 in November
Chicago Fed national activity index fell back to 0.37 in November vs 0.75 in October
Existing home sales rose 1.9% to 6.46m units vs 0.8% at 6.34m units
Weekly jobless claims steady at 205k,
Personal income rose 0.4% in November vs 0.5% in October
Personal spending rose 0.6% in November vs 1.4% in October
UK - Q3 GDP rose 1.1% qoq vs 5.4% in Q2 and rose 6.8% yoy in Q3 vs 24.2% yoy in Q2
Friedland looks to London for listing of major Guinean iron ore project
Robert Friedland’s High Power Exploration has stated London is the ‘natural place’ to list his Nimba project. (FT)
Friedland as described the project as the ‘beluga caviar of iron ore’ owing to its high grades and limited impurities.
Higher grade iron ore demand is increasing as steelmakers look to cut emissions through electric arc furnaces.
Currencies
US$1.1333/eur vs 1.1322/eur yesterday. Yen 114.36/$ vs 114.27/$. SAr 15.640/$ vs 15.752/$. $1.341/gbp vs $1.338/gbp. 0.724/aud vs 0.723/aud. CNY 6.370/$ vs 6.370/$.
Commodity News
Precious metals:
Gold US$1,810/oz vs US$1,807/oz yesterday
Gold ETFs 97.8moz vs US$97.9moz yesterday
Platinum US$979/oz vs US$974/oz yesterday
Palladium US$1,951/oz vs US$1,862/oz yesterday
Silver US$22.81/oz vs US$22.87/oz yesterday
Rhodium US$14,100/oz vs US$14,100/oz yesterday
Base metals:
Copper US$ 9,578/t vs US$9,638/t yesterday
Aluminium US$ 2,840/t vs US$2,845/t yesterday
Nickel US$ 20,085/t vs US$20,065/t yesterday
Zinc US$ 3,518/t vs US$3,548/t yesterday
Lead US$ 2,286/t vs US$2,321/t yesterday
Tin US$ 39,410/t vs US$38,825/t yesterday
Energy:
Oil US$76.5/bbl vs US$75.1/bbl yesterday
Natural Gas US$3.731/mmbtu vs US$3.893/mmbtu yesterday
Uranium UXC US$43.95/lb vs $43.95/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$126.2/t vs US$123.2/t
Chinese steel rebar 25mm US$761.8/t vs US$761.7/t
Thermal coal (1st year forward cif ARA) US$123.0/t vs US$128.2/t
Thermal coal swap Australia FOB US$171.5/t vs US$177.7/t
Coking coal swap Australia FOB US$352.0/t vs US$350.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$70,500/t
NdPr Rare Earth Oxide (China) US$132,271/t vs US$132,254/t
Lithium carbonate 99% (China) US$37,130/t vs US$36,184/t
China Spodumene Li2O 5%min CIF US$2,460/t vs US$2,410/t
Ferro-Manganese European Mn78% min US$1,808/t vs US$1,806/t
China Tungsten APT 88.5% FOB US$315/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$384/t vs US$381/t
Spot CO2 Emissions EUA Price US$83.1/t vs US$90.6/t
Company News
Atlantic Lithium* (Atlantic Lithium Limited (AIM:ALL)) 22.9p, Mkt cap £131.4m – Completion of Ricca resources demerger
Formerly IronRidge* (LON:IRR)
Atlantic Lithium reports that the distribution of all of the shares held by the Company in Ricca Resources to eligible Atlantic Lithium shareholders has now completed, and thus the demerger has been completed.
The demerger of Ricca and the Company's gold assets completes the process that allows Atlantic Lithium to focus exclusively on lithium to realise the full potential of its asset portfolio and deliver value to Atlantic Lithium shareholders.
Ricca will receive an initial start-up capital injection of A$7m as part of the agreement for the transfer of the gold assets from the Company to Ricca.
Following the demerger, Ricca will have a closing cash balance of A$14.2m before costs with an issued capital of 143,436,062 Shares.
IronRidge’s gold assets are located in Côte d’Ivoire and Chad, and the Company’s most advanced project is the Zaranou gold project which includes high-grade gold drilling intersections along 8km strike including:
6m at 6.44g/t gold from 132m
6m at 15.11g/t gold from 26m
4m at 5.16g/t gold from 110m
*SP Angel acts as nomad to Atlantic Lithium
CATL seeking to regain NIO business with new 'ultrahigh' nickel' battery
CATL had lost out on business making 600+ mile battery packs for the NIO ET5 and ET7 sedan.
NIO had initially approached CATL to produce a 150kWh semi-solid battery to hit a range of 600+ miles.
CATL declined the proposal due to the size of investment into R&D for this new battery technology.
NIO worked with agile battery manufacturer WeLion New Energy Technology to develop the first semi-solid state 150kWh battery pack.
CATL have reportedly come back to the negotiation table, having seen the success of the new smei-solid battery, and is now developing one for NIO, too - CATL's semi-solid battery, however, will be using a different, "ultrahigh nickel" technology.
Any further details of the chemistry for the battery have yet to be released.
Rio Tinto (Rio Tinto PLC (LSE:RIO)) – 4,898p, Mkt cap £81bn - Rio to pause Jadar development after protests
Rio Tinto plans to pause development of its Jadar lithium project in western Serbia after a municipality in the west of the country scrapped a plan to allocate land for the mine.
For three consecutive weekends, thousands of protesters in Belgrade and elsewhere in Serbia blocked main roads and bridges to oppose the £1.4bn lithium project.
According to local media, Rio now plans to pause developing Jadar while it engages in a public dialogue over the project.
A spokesman for Rio commented: “We won’t take any step that can cause additional concern to residents and we appeal for rational and joint analysis of all aspects of our project”
Earlier this week, Rio signed an agreement to buy the Rincon lithium project in Argentina from Rincon Mining for $825m.
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
Prince Frederick House
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