SP Angel . Morning View . Tuesday 04 01 22
China coal futures rise 8% on Indonesia export ban
Caledonia Mining (Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)) – Quarterly dividend
Conroy Gold & Natural Resources (Conroy Gold and Natural Resources PLC (AIM:CGNR)) – Demir joint-venture agreement
GoldStone Resources (AIM:GRL)* (GoldStone Resources (AIM:GRL)) – gold production & loan update
Walkabout Resources (Walkabout Resources Ltd (ASX:WKT)) – Walkabout acquires 100% of JDH Exploration
IGTV: IG Outlook 2022, 23/12/21:: https://youtu.be/4w7nbjRdFyk
interactive Investors: FTSE 100 favourite stock: https://youtu.be/BomNRQJt-YA
2022 outlook: https://youtu.be/SxMPiPEc_Rg
Three small-cap mining share tips for 2022: 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.
Dow Jones Industrials +0.68% at 36,585
Nikkei 225 +1.77% at 29,302
HK Hang Seng -0.02% at 23,270
Shanghai Composite -0.20% at 3,632
Indonesia export ban sees coal futures soar on supply worries
China coal futures up 8% to $111.1/t – its biggest daily jump since Nov. 25th.
Indonesia announced on Saturday plans to ban coal exports in January.
Indonesian authorities are concerned about limited supplies at domestic power plants.
China imported 60% of total coal imports from Indonesia in 2021 - over $180mt.
China has ramped up domestic output, with November coal output hitting a record 370mt.
Analysts do not expect a 1-month ban to severely impact Chinese coal supplies.
Gold bounces back following major sell off on strong Treasury yields
Gold slid 1.5% from $1,831/oz to $1,799/oz yesterday before climbing back to $1,806/oz this morning.
US 10-year Treasury yields hit a 6-week high on Monday, erasing gold’s recent gains.
Investors are ramping up bets that the Fed will initiate a first rate-hike in March 2022.
Major Chinese steelmaking city Tangshan orders production cut on smog alert
China’s top steelmaking hub Tangshan initiated an orange pollution alert yesterday.
The alert forces industrial companies to slash production however the timeline is yet to be announced.
Analysts expect further anti-pollution measures as the 2022 Winter Olympics is set to begin in February.
Economics
Evergrande shares suspended after report it was told to destroy buildings
Trading of Evergrande Group shares was suspended in Hong Kong on Monday, days after Chinese media reported the company would be forced to demolish a residential development in the southern province of Hainan.
Cailian, a Chinese media outlet, reported that Evergrande had been ordered to demolish 39 buildings within 10 days because its planning permit was obtained illegally and had been revoked.
Evergrande missed a series of bond payments from September but had previously transferred the money owed before the 30-day grace periods ended.
The firm was formally declared to have defaulted on its debts in December by rating agency Fitch after it failed to transfer funds due at the end of one such grace period.
Evergrande has $186m in payments due to offshore bond holders this month, $2bn in March and an additional $1.5bn in April.
Shares of Evergrande resumed trading on Tuesday, closing higher after a volatile day in Hong Kong.
China - manufacturing activity grows at fastest pace in 6 months
China Caixin PMI rose to 50.9 in Dec. vs 49.9 in Nov.
Official PMI rose to 50.3 in Dec. vs 50.1 in Nov.
Industrial growth due to easing supply chain conditions and cooler raw material prices.
Input prices recorded at their lowest level since May 2020, boosting factory output.
Germany – unemployment falls by more than expected in December
The German Labour Office reported that the number of people out of work fell by 23,000 to 2.4m in December.
This was a larger decline than the 15,000 fall forecast by economists and pushes the German unemployment rate to 5.2% - the lowest since March 2020.
Currencies
US$1.1298/eur vs 1.1310/eur last week. Yen 115.77/$ vs 115.15/$. SAr 15.895/$ vs 15.898/$. $1.350/gbp vs $1.351/gbp. 0.721/aud vs 0.726/aud. CNY 6.375/$ vs 6.373/$.
Commodity News
India sees record $55.7bn gold buying year
India bought over $55bn worth of gold in 2021 – more than double the 2020 levels of $22bn worth of imports. (Reuters)
Retail buyers were incentivised as gold prices slid from record highs.
Postponed weddings following Covid-19 disruptions also boosted appetite for the precious metal.
The previous import record stood at $54bn in 2011.
Peru extends legalisation process for small-scale miners
Peru’s lawmakers have extended the legalisation process for artisanal miners through to December 2024.
A new law is also under consideration which will offer permanent legalisation for artisanal miners under a sustainable development approach. (Mining.com)
Increased collaboration between large-scale and artisanal miners is expected to be encouraged by lawmakers.
Artisanal miners contributed 20% of Peru’s exports in 2018.
200-300k artisanal miners are thought to be operating in Peru.
Precious metals:
Gold US$1,805/oz vs US$1,816/oz last week
Gold ETFs 97.9moz vs US$97.8moz last week
Platinum US$959/oz vs US$965/oz last week
Palladium US$1,835/oz vs US$1,949/oz last week
Silver US$22.85/oz vs US$23.12/oz last week
Base metals:
Copper US$ 9,646/t vs US$9,696/t last week
Aluminium US$ 2,827/t vs US$2,817/t last week
Nickel US$ 20,760/t vs US$20,685/t last week
Zinc US$ 3,542/t vs US$3,521/t last week
Lead US$ 2,289/t vs US$2,283/t last week
Tin US$ 38,460/t vs US$39,245/t last week
Energy:
Oil US$79.0/bbl vs US$79.7/bbl last week
Oil prices continue to hold up ahead of today’s OPEC+ meeting
The market largely expects major producers to agree to stick to the planned output increase amid diminishing concerns over the spread of the Omicron variant of COVID-19
OPEC+ is expected to increase oil output by 400kbopd for February as the group assesses only a short-lived impact on demand from Omicron
The UK’s vaccine minister said people being hospitalised with COVID-19 were broadly showing less severe symptoms than before
French Finance Minister Bruno Le Maire said although the surge of the fast-spreading Omicron variant was disrupting some sectors, there was no risk of it "paralysing" the economy, and stuck to a forecast of 4% growth for France's GDP in 2022
Factory activity also rose in Asia last month, suggesting the direct hit from the variant on output appeared subdued
However, OPEC+ may have to change tack if tension between the West and Russia over Ukraine flares up and hits fuel supplies, or Iran's nuclear talks with major powers make progress, which would lead to an end to oil sanctions on Iran
Natural Gas US$3.846/mmbtu vs US$3.669/mmbtu last week
Bulgaria's energy regulator said on Saturday it has approved a 30.4% increase of the wholesale natural gas price for this month, following a request by Bulgargaz, the Balkan country's main gas provider and public supplier
Natural gas prices have soared in Europe in the past year, adding to inflationary pressure and threatening to dent consumer confidence
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$43.65/lb vs $43.70/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$120.1/t vs US$119.4/t
Chinese steel rebar 25mm US$739.0/t vs US$740.8/t
Thermal coal (1st year forward cif ARA) US$123.0/t vs US$123.0/t
Thermal coal swap Australia FOB US$136.0/t vs US$156.8/t
Coking coal swap Australia FOB US$352.0/t vs US$352.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$70,500/t
NdPr Rare Earth Oxide (China) US$132,584/t vs US$132,081/t
Lithium carbonate 99% (China) US$41,489/t vs US$41,503/t
China Spodumene Li2O 5%min CIF US$2,560/t vs US$2,560/t
Ferro-Manganese European Mn78% min US$1,802/t vs US$1,804/t
China Tungsten APT 88.5% FOB US$315/t vs US$315/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$384/t
Spot CO2 Emissions EUA Price US$89.7/t vs US$83.3/t
Battery News
Tesla defies expectations with record 2021 deliveries
Tesla delivered a total of 936,172 vehicles in 2021 vs 500,000 in 2020.
Tesla delivered 308,600 vehicles in Q4, 28% higher than the previous record quarter.
The company expects two additional plants to begin production this year.
Tesla has circumvented global bottlenecks and disruptions by securing supplies of semiconductor chips and key battery metals including lithium and nickel.
EVs take 65% share of total Norway car sales
C. 1/3rd of total vehicle sales in Norway in 2021 were electric – up 25% to 176,276 cars.
EVs’ market share in 2020 was 54%.
Analysts expect Norway’s tax break on BEVs to push electric vehicle sales to 80% of the total in 2022. (Reuters)
Norway is seeking to end petrol- and diesel-powered car sales by 2025.
Company News
Caledonia Mining (Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)) 890p, Mkt Cap £114m – Quarterly dividend
Caledonia Mining has declared a quarterly dividend of 14US¢/share maintaining the increased level announced in October 2021.
Announcing that the company expects gold production in the range of 73-80,000oz during 2020, Caledonia Mining also highlights that its quarterly dividend has risen by 104% from the 6.875¢ps level of October 2019.
Chief Executive, Steve Curtis, commented that “In January 2020, we announced our first dividend increase and over the last two years we have more than doubled the dividend while always balancing the importance of returning money to shareholders and investing in the Company's growth”.
Mr. Curtis also highlighted the company’s commitment to the “huge geological potential in Zimbabwe” as Caledonia Mining pursues a de-risking and growth strategy anchored on the expanded Blanket mine and pursuing the country’s exploration potential including the Maligreen project which was acquired last year and which he described as “one of the more significant exploration opportunities in Zimbabwe”.
Conroy Gold & Natural Resources (Conroy Gold and Natural Resources PLC (AIM:CGNR)) 35.25p, Mkt Cap £13.6m – Demir joint-venture agreement
Conroy Gold has confirmed the signing of its previously announced joint venture agreement with Demir Export for the exploration of Conroy Gold’s licences in the Longford-Down Massif in Ireland.
“The JV remains conditional on the necessary regulatory consents being granted in the Republic of Ireland and Northern Ireland for the transfer of the licences to the respective joint venture companies that have been established under the JV”.
Demir Export is described, in Conroy Gold’s 30th November 2021 announcement as “a long established mining company with interests in iron, coal, gold and base metals, including zinc and copper, in Turkey”.
The November announcement clarifies that Demir will earn an initial 25% interest in the joint-venture companies by spending an initial €5.5m during Phase 1. A further €4.5m of expenditure during Phase 2 will earn an additional 15% interest while Phase 3 expenditure sufficient to “reach Construction Ready Status will earn an additional 17.5% interest in the JV Company which has reached Construction Ready Status in respect of any Licence thus increasing Demir Export’s holding to a total of 57.5% in that JV Company”.
GoldStone Resources* (GoldStone Resources (AIM:GRL)) 9.6p, Mkt Cap £53m – gold production & loan update
GoldStone reports that a further gold pour is targeted for early January 2022, and it has been agreed with AIMS that, in order to minimise shipment costs, the October and November 2021 payments will be shipped in January 2022, with no additional interest incurred.
The December 2021 Gold Loan Payment, 8kg of gold bullion, due to AIMS will accrue interest until shipment.
The Company has to date recovered approximately 37kg of gold, of which 14.46kg are held as gold doré and the remainder in concentrate.
The Company has stacked 108,000 tonnes of ore onto the heap leach pads which, at the grade of approximately 1.7g/t, equates to approximately 184kg of contained gold.
GoldStone has recovered approximately 20% of the contained gold, was less than the expected recovery rate due to agglomeration issues.
The company is currently in the process of carrying out detailed test work and cost analysis to understand the leach kinetics within the heap so as to optimise the recovery the remaining contained gold.
The final engineering stages for Cell 3 of the heap leach pad, approximately 7,000m2, is being completed, and the geofabric and geomembrane will be laid.
The test work being undertaken on the existing leach pads, including our understanding of the previously encountered agglomeration issues, will feed into the stacking process design for Cell 3, so as to optimise recovery and ensure the cell is ready for stacking late in January 2022.
The initial planned mining rate for the first six months of 2022 is expected to be approximately 60,000 tonnes per month, which the Company then expects to increase in H2 2022.
The board expects that by optimising the heap leach process and ramping up production the planned production rate of 25,000tpa will be achieved.
A geochemical soil sampling programme within the Homase and Akrokeri Licence areas has been undertaken, and a drilling programme has been set out at the former Arokeri underground mine.
*SP Angel acts as Nomad to GoldStone Resources
Walkabout Resources (Walkabout Resources Ltd (ASX:WKT)) A$0.25, Mkt Cap A$107m – Walkabout acquires 100% of JDH Exploration
Walkabout reports that it has acquired the remaining 25% ownership of JDH Exploration, which holds two Mines Royal options with the Crown Estate Scotland covering 500km2 in Dumfries and Galloway.
The Company has acquired the remaining 25% in JDH through a one-off payment of £100k.
The addition of the two JDH Exploration licenses to the 100% owned Gatehouse of Fleet license will give the Company a combined wholly owned exploration footprint of approximately 750km2.
The JDH project areas are known or their historic mining of lead-zinc-silver, but have not undergone any modern systematic exploration since a regional programme was conducted by the BGS in the 1980s – which identified several anomalies.
A review of historic data has outlined several prospective areas for both base and precious metals, with a maiden drilling programme underway at the Blackcraig Lead-Zinc-Silver Project.
Another project that Walkabout are excited about is the Glenhead Gold Project, where previous drillholes undertaken by the BGS gave results including 1m at 5.9g/t Au, 1m at 4.6g/t Au and 4.5m at 1.5 g/t.
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