SP Angel . Morning View . Thursday 06 01 22
Global markets falter on hawkish Fed minutes
Atalaya Mining (AIM:ATYM, TSX:AYM) (Atalaya Mining (AIM:ATYM, TSX:AYM)) – Electrochemical metal extraction process for Proyecto Riotinto
Culpeo Minerals* (Culpeo Minerals Ltd (ASX:CPO)) – Interest in Petacas Copper project increased to 66%
Glencore (Glencore PLC (LSE:GLEN)) – Sale of the Ernest Henry mine
KEFI Gold and Copper* (KEFI Gold and Copper PLC (AIM:KEFI)) - Hawiah mineral resource increase
Strategic Minerals* (Strategic Minerals PLC (AIM:SML)) – Revised PEPR submission for the Leigh Creek Copper Mine
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 -1.07% at 36,407
Nikkei 225 -2.88% at 28,488
HK Hang Seng +0.63% at 23,051
Shanghai Composite -0.25% at 3,586
Economics
US – Fed signals it may have to raise rates sooner than expected to fight inflation
Fed minutes released yesterday indicated that a "very tight" job market and unabated inflation might require the Federal Reserve to raise interest rates sooner than expected and begin reducing its overall asset holdings, policymakers said in their meeting last month.
The minutes indicated that inflationary concerns outweigh the risks potentially posed by the fast-surging Omicron variant of the coronavirus, seen by some Fed officials as likely adding further to inflation pressures.
The probability that the Fed would lift interest rates in March for the first time since the pandemic's onset rose to greater than 70%, according to CME Group (NASDAQ:CME).
Markets reacted swiftly following the release of the minutes, with the S&P 500 falling 1.6% while the yield on the 2-year treasury note shot to its highest level since March 2020.
The 5.7% annual increase in inflation was the ninth straight month that numbers overshot the 2% target ion November.
UK – Inflation concerns high the highest on record for businesses
More businesses than ever are worried about inflation and a record number are planning on increasing their own prices, according to a survey from the British Chamber of Commerce.
Almost 60% of companies expect to boost prices in the next three months, and two-thirds cites inflation as a concern.
More than a quarter of firms, including a record number of manufacturers, are worried that interest rates will rise.
Germany – Factory orders up 3.7% in Nov vs 2.3% expected
German factory orders beat estimates in November despite a quarter of record numbers of Covid-19 infections.
Demand increased 3.7% after declining a revised 5.8% in the previous month.
Orders from abroad helped drive the increase, while domestic demand fell.
Italy – Vaccination made mandatory for all over-50s
The Italian government announced yesterday that vaccination is to be made mandatory for everyone above the age of 50.
Workers older than 50 will also be required to show proof of vaccination to go to work.
Kazakhstan declares state of emergency as ex-Soviet alliance rally troops to quell unrest
Kazakh President Tokayev has declared a 2-week state of emergency, including a curfew, limitations on movement and a ban on mass gatherings.
Protestors have expressed dissatisfaction over the doubling of LPG prices.
Reports of gunfire at the presidential residence and the Almaty airport being seized by protestors. (WSJ)
Russia, who has considerable economic interest in Kazakhstan, is set to lead an alliance of ex-Soviet state troops to Kazakhstan to help find a ‘peaceful solution’ whilst the White House has encouraged ‘protestors to express themselves peacefully.’
The civil unrest has sent the uranium price up 8%, its largest price rise since Sept. 15th.
40% of global uranium supply is produced in Kazakhstan.
China services activity grows but Omicron concerns cloud outlook
China services PMI up to 53.1 in Dec. vs 52.1 in Nov. (Caixin/Markit)
Official non-manufacturing PMI rose to 52.7 in Dec. vs 52.3 in Nov.
China’s composite PMI, including services and manufacturing rose to 53.0 in Dec. vs 51.2 in Nov. (Caixin)
Both surveys reflect both small and larger scale services businesses enjoyed a boost from easing raw material costs and strong demand.
Input prices rose for an 18th month in a row but slower than the previous 17 months. (SCMP)
Employment rose at its fast rate since May.
Analysts point to the service sector’s vulnerability to lockdowns and Covid-19 outbreaks vs the manufacturing sector.
Omicron continues to concern Chinese businesses, with a Caixin measure for business expectations at its lowest since Sept. 2020.
Beijing considers delaying property tax implementation as additional property giants faulter and home sales crash
Guangzhou R&F does not expect it will be able to sell the required assets to meet a bond repurchase commitment on Jan. 10th.
China’s home transaction volume hit its lowest in 5 years, with new home sales contracting 57% year-on-year. (Zhuge Zhaofang)
Banks expect China’s high-yield dollar bond default rate to rise from 38% in 2021 to 42-45% in 2022.
Analysts expect China to delay the imposition of a major property tax levy to help support the ailing sector.
The tax forms part of Xi Jinping’s ‘Common Prosperity’ drive.
Currencies
US$1.1292/eur vs 1.1304/eur yesterday. Yen 115.83/$ vs 115.99/$. SAr 15.864/$ vs 16.053/$. $1.351/gbp vs $1.355/gbp. 0.716/aud vs 0.723/aud. CNY 6.375/$ vs 6.372/$.
Commodity News
Indonesian coal miners look for exemptions from export ban as costs jump
Indonesian coal miners are looking to gain exemptions to export their coal following a ban.
100 loaded cargo ships carrying 5.9mt are accruing significant costs as they wait offshore Kalimantan. (Refinitiv)
Talks with energy ministry officials have been delayed and the government has expressed ambivalence over the end date for the ban. (Reuters)
Japan imports 2mt per month from Indonesia, the world’s largest thermal coal exporter.
India, Japan, China, India, and South Korea received 73% of Indonesia’s total coal exports last year.
We expect China to fair better than its importing neighbours following a major ramp up in domestic production in 4Q21, with state rail coal transportations up 35% y-o-y from Nov. 1-26th.
Perth Mint 2021 gold sales see 10-year high despite dire December.
The Perth Mint’s gold products saw a decade high in sales for 2021.
The Perth Mint refines 90% of Australia’s gold.
December sales of gold coins and minted bars were down 28.6% yoy and 52.7% month on month but failed to dampen a bumper year.
Silver sales in December rose 84% yoy and 13.2% month on month.
Analysts point to strong buying from central banks, consumers but a weak year for global gold ETF demand.
Strong 2022 India steel demand expected on infrastructure push
Analysts expect a combination of subdued prices and strong government-backed infrastructure demand to boost India’s steel consumption in 2022.
National consumption expected to jump 17% to 111mt in 2022 from an expected 104mt in 2021. (CARE Ratings)
Precious metals:
Gold US$1,800/oz vs US$1,815/oz yesterday
Gold ETFs 98.1moz vs US$98.0moz yesterday
Platinum US$975/oz vs US$974/oz yesterday
Palladium US$1,857/oz vs US$1,878/oz yesterday
Silver US$22.42/oz vs US$22.94/oz yesterday
Rhodium US$16,300/oz vs US$14,750/oz yesterday
Base metals:
Copper US$ 9,548/t vs US$9,738/t yesterday
Aluminium US$ 2,912/t vs US$2,865/t yesterday
Nickel US$ 20,340/t vs US$20,640/t yesterday
Zinc US$ 3,537/t vs US$3,592/t yesterday
Lead US$ 2,285/t vs US$2,296/t yesterday
Tin US$ 39,080/t vs US$39,085/t yesterday
Energy:
Oil US$80.7/bbl vs US$80.1/bbl yesterday
Oil prices rose again yesterday, extending gains even after OPEC+ producers stuck to an agreed output target rise for February and US fuel inventories surged due to sliding demand as COVID-19 cases spiked
The market steadied later in yesterday’s session after the release of minutes from the latest US Federal Reserve meeting, that showed policymakers may have to raise rates more quickly than markets anticipated
Oil dropped, following other risk assets like stocks
US crude stocks dropped by 2.1MMbbls, owing in part to tax incentives for producers to reduce inventories before year-end
In the UK, people being hospitalised with COVID-19 were generally showing less severe symptoms than previously
While in France, the finance minister said some sectors were being disrupted by the surge of the fast-spreading Omicron variant, but there was no risk of "paralysing" the economy and stuck to a forecast of 4% GDP growth in 2022
Global manufacturing activity remained strong in December, suggesting Omicron's impact on output had been subdued
Nevertheless, OPEC+ may have to change tack if tensions between the West and Russia over Ukraine flares up and hits fuel supplies, or if Iran's nuclear talks with major powers make progress, which would lead to an end to oil sanctions on Tehran
The US State Department said talks with Iran have shown modest progress and that there are hopes to build on that this week
Libyan output is likely to be about 500,000-600,000bopd lower in the coming weeks, more than offsetting the planned monthly increase in OPEC+ production
Natural Gas US$3.887/mmbtu vs US$3.759/mmbtu yesterday
Europe is facing continued volatility in its wholesale gas markets, prompting concerns across the region that an energy crisis could be about to get even worse
The front-month gas price at the Dutch TTF hub, a European benchmark for natural gas trading, was around 5% higher yesterday, with the price reaching €93.3/MWh
Contracts for March and April delivery were also up by 5% on Wednesday, according to New York’s Intercontinental Exchange
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$45.40/lb vs $43.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$126.2/t vs US$123.3/t
Chinese steel rebar 25mm US$739.7/t vs US$739.5/t
Thermal coal (1st year forward cif ARA) US$98.0/t vs US$92.8/t
Thermal coal swap Australia FOB US$166.0/t vs US$139.0/t
Coking coal swap Australia FOB US$346.0/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$136,087/t vs US$133,832/t
Lithium carbonate 99% (China) US$43,218/t vs US$41,982/t
China Spodumene Li2O 5%min CIF US$2,590/t vs US$2,560/t
Ferro-Manganese European Mn78% min US$1,801/t vs US$1,803/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$385/t vs US$385/t
Spot CO2 Emissions EUA Price US$95.3/t vs US$95.4/t
Battery News
Offshore wind capacity expected to reach 120GW by 2026
The latest forecast from the International Energy Agency (IEA) predicts that offshore wind capacity will reach 120GW by 2026.
Total installed capacity in 2021 reached 11GW, almost double installed capacity in 2020 - this was driven by expansion in China, where developers have rushed to secure a Feed-in-Tariff before the initiative expired at the end of 2021.
China's growth is expected to slow down over the next five years, but yearly growth is expected to reach 21GW with rapid expansion in Europe, the US, and other parts of Asia.
France is forecast to expand offshore wind capacity to 3.7GW by the end of 2026.
Japan is expected to reach 8GW by 2026, adding 1.5GW in the forecast period.
Installed offshore wind capacity in the US is expected to reach 8GW by 2026 - the US currently has two commercial scale wind farms operational, the 30MW Block Island Wind and the 12MW Coastal Virginia project.
Wind turbines consume 600-830kg of REO per MW, each 3MW direct-drive wind turbine using around 1.7t of NdFeB magnets.
Honda to build battery production plant in China's Hubei province
Dongfeng Honda, a 50:50 joint venture between Honda and China's Dongfeng Motor, aims to build a 120,000unit/yr EV production plant.
The firm will buy batteries mainly from Chinese battery manufacturer CATL through a contract to obtain 56GWh of batteries to equip Honda's all-EV and plug-in hybrid vehicles until 2027.
Honda plans to sell EVs manufactured at the new plant in the Chinese market - the company sold 10,151 EVs in China during 2021.
EVs make up 65% of vehicle sales in Norway in 2021
65% of new vehicle sales in Norway were EVs in 2021.
Overall new sales in Norway rose by 25% in 2021 to a record 176,276 cars, of which 65% were fully electric. This market share was up from 54% in 2020.
Tesla was the top selling auto manufacturer with 11.6% of the overall market, ahead of Volkswagen (9.6%)
Norway has encouraged the switch to zero emission cars by exempting EVs from taxes imposed on internal combustion engines.
The tax break is expected to help drive the proportion of overall electric sales as high as 80% in 2022, ahead of a deadline to end petrol- and diesel-powered car sales by 2025.
Company News
Atalaya Mining (AIM:ATYM, TSX:AYM) (Atalaya Mining (AIM:ATYM, TSX:AYM)) 431.5p, Mkt Cap £601m – Electrochemical metal extraction process for Proyecto Riotinto
Atalaya Mining has announced that it is to construct a plant to enhance recoveries of copper, zinc, lead and precious metals from complex ores at its Proyecto Riotinto site using an electrochemical process known as E-Lix.
The phase1 plant, which is estimated to cost €12m, is expected to have the capacity to “produce between 3,000 to 10,000 tonnes of copper or zinc metal per year depending on the ratio of copper to zinc in the concentrate feed”.
The phase 1 plant is capable of “unlimited capacity expansion through the addition of multiple lines in parallel … and it is expected that the plant will be operational in 2022, including commissioning”.
Additional benefits of the technology, which was developed by “by Lain Technologies Ltd ("Lain Tech") with the financial support of Atalaya” include the potential to reduce Atalaya’s carbon footprint through the production of “high-purity metals on-site” and the resulting reduction of emissions arising from concentrate transport and the costs for delivery to external smelters as well as the elimination of third-party treatment and refining charges.
CEO, Alberto Lavandeira, explained that “The E-LIX System offers Atalaya a unique opportunity to unlock significant value from its portfolio of deposits that contain complex polymetallic mineralisation. Atalaya has worked together with Lain Technologies for many years in order to test, refine and demonstrate the E-LIX process, providing the Company with confidence in its potential. In addition to enhancing recoveries, E-LIX will eliminate penalties associated with deleterious elements and reduce the costs of transportation and energy, thereby improving the Company's carbon footprint.”
Atalaya Mining says that following extensive pilot-plant testing during 2020 and 2021, “long run continuous tests demonstrated the feasibility of leaching complex polymetallic concentrates with global recoveries of over 95% for copper and zinc while producing clean metal precipitates and/or high purity metals … [and has the]… potential to unlock the significant value from the polymetallic sulphides contained within Atalaya's mineral resources, including … The polymetallic deposits of San Dionisio, San Antonio, Masa Valverde and Majadales, all of which are located … within trucking distance of Proyecto Riotinto's modern 15 Mtpa processing facility.”
Culpeo Minerals* (Culpeo Minerals Ltd (ASX:CPO)) 0.165p, Mkt cap £9m – Interest in Petacas Copper project increased to 66%
Culpeo reports that it has increased its interest in the Las Petacas Copper Project by 8% to 66% following the satisfaction of certain conditions of the earn-in agreement.
Culpeo has the right to earn a maximum 85% interest in the Las Petacas Project, through payments totalling $850k and drilling commitments.
Recent drill results at Las Petacas released last month included highlights:
3.5m @ 0.74% Cu and 0.55g/t Au from 71.5m
3.5m @ 0.43% Cu and 0.25g/t Au from 79.5m
1.0m @ 1.00% Cu and 0.10g/t Au from 324.2m
21m @ 0.41% Cu and 0.10g/t Au from 41m
5m @ 0.49% Cu and 0.03g/t Au from 68m
11m @ 0.32% Cu and 0.02g/t Au from 85m
37m @ 0.23% Cu and 0.02g/t Au from 99m
20m @ 0.23% Cu and 0.01g/t Au from 168m
To date all holes have intercepted broad visible copper mineralisation present as copper oxide and sulphide minerals, while the bulk of the >6km copper mineralised trend remains untested.
*An analyst at SP Angel holds shares in Culpeo Minerals
Glencore (Glencore PLC (LSE:GLEN)) 389p, Mkt cap £52bn – Sale of the Ernest Henry mine
Glencore has announced the closure of its sale of the Ernest Henry mine (EHM) in Queensland to Evolution Mining.
“Glencore has received A$800 million and will receive a further A$200 million in 12 months time … [and will] … offtake 100% of the copper concentrate produced at EHM”.
KEFI Gold and Copper* (KEFI Gold and Copper PLC (AIM:KEFI)) 0.8p, Mkt Cap £22m - Hawiah mineral resource increase
As indicated in the company’s announcement in December, Kefi Minerals has now announced an updated mineral resource estimate for its Hawiah deposit in Saudi Arabia.
The new estimate of 24.9mt of indicated and inferred resources at an average grade of 0.90% copper, 0.85% zinc, 0.62g/t gold and 9.81g/t silver represents a 29% increase in tonnage (+5.6mt) over the previous, August 2020, estimate of 19.3mt at an average grade of 0.87% copper, 0.81% zinc, 0.56g/t gold and 10.25g/t silver.
Approximately 44% (10.9mt) of the total resource is classified as indicated with 7mt of this indicated total described as amenable to open-pit mining based on a net-smelter return (NSR) cut-off of “USD12/t for oxide and USD20/t for transition and fresh” ore.
Within the inferred resource category, approximately 90% (12.6mt) is said to be amenable to underground mining based on an NSR cut-off of $54/t for both transition and fresh ore.
As well as the increased tonnage, with the exception of silver, all of the updated resource grades have increased compared to the previous estimate by between 11% for gold, 5% for zinc and 3% for copper.
The company attributes the increased estimate to a combination of the
“expansion of the Camp Lode at depth
expansion of Crossroads Extension at depth
Kefi Mining clarifies the significance of the deeper parts of the Camp Lode which it says “has an elevated copper grade, on average 1.2% Cu, making it the highest copper grade area outside of the copper enriched transition zones. The final and deepest drillhole into the mineralisation within this area … intersected 5.45m (estimated true width of 4.4m) at approximately 1.6% copper, demonstrating that this high-grade area of the Hawiah deposit remains open at depth (down plunge) in the Camp Lode”.
Further drilling is to be started in January “to increase drilling density in the areas of the Inferred Resource that report to the Open-Pit Scenario”.
inclusion of a greater portion of the oxide material based on updated optimisation parameters used to generate the open-pit Resource open-pit shell”
Conclusion: Kefi Minerals has increased its estimated mineral resource tonnage at Hawiah by 29% and shown slightly improved grades for copper, zinc and gold. Further drilling to improve the estimates of the inferred open-pittable part of the resource is to start in January.
*SP Angel act as Nomad and Broker to KEFI Gold and Copper
Strategic Minerals* (Strategic Minerals PLC (AIM:SML)) 0.33p, Mkt Cap £7.1m – Revised PEPR submission for the Leigh Creek Copper Mine
Yesterday, Strategic Minerals confirmed that it had submitted its revised Programme for Environmental Protection and Rehabilitation (PEPR) for the Leigh Creek (LCCM) copper mine project to the South Australian Department of Energy and Mining (DEM).
The revision addresses the conditions raised in the Department’s provisional approval issued in July 2021 and in particular relates to the potential for acid generation from the waste and ore as well as the analysis of “samples of cover for the waste rock dumps and the subsequent testing and analysis of this material in an erosion model to evaluate cover designs”.
The additional work, which “required selecting and then collecting samples from the 2019 drilling program and undertaking Acid Rock Drainage and kinetic testing” has “identified that the waste rock at Paltridge North has a low capacity to produce acid, and this low capacity PAF … [Potentially Acid Forming] … material can be co-disposed with run of mine waste, which has adequate neutralising capability”.
This finding should simplify operational procedures and, in our view, help to contain costs through the elimination of a requirement to separate any PAF material from other waste rock.
The company confirms that it “expects to receive DEM's approval for the oxide only case, which should cover the first 12+ months of production and then follow up with … [a further] … revision … of the PEPR, which will address only the additional mining of the transitional ore. The Company considers that this process will not impact the expected timing or economics for the Project.”
Commenting on the submission, Non-Executive Chairman, Alan Broome, explained that “Whilst no guarantees can be provided, the Company is hopeful that, after this revision has been assessed by the DEM and subject to receipt of Project funding, it will be in a position to commence operations at LCCM”.
In addition to the resumption of production at Leigh Creek, the company has also indicated in recent announcements the exploration potential of its licences within the Adelaide geosyncline. Additional oxide copper targets include those at Mt Coffin however, exploration is also likely to address the potential of underlying of primary sulphide mineralisation within a belt known to host large scale primary copper mineralisation including the well known Olympic Dam deposit of BHP as well as Oz Minerals’ Carapateena deposit and Coda Minerals’ Elizabeth Creek project.
Conclusion: The submission of the revised PEPR for Leigh Creek paves the way for regulatory approval for production, which the company has previously indicated is expected in March subject to the formal permitting process. The supporting work for the revised submission has also demonstrated that production is unlikely to generate significant volumes of material with the capacity to generate acid drainage which, in our opinion, should aid operational simplicity and help to contain costs.
*SP Angel acts as Nomad and Broker to Strategic Minerals
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
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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
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SSY
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Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite
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