SP Angel . Morning View . Friday 07 01 22
Gold prices fall on rising treasury yields and stronger USD
Gemfields (Gemfields Group Limited (AIM:GEM)) – Unbundling of Sedibelo Platinum
Red Rock Resources (Red Rock Resources PLC (AIM:RRR)) – Drilling and sampling results from the Mikei gold project
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 -0.47% at 36,236
Nikkei 225 -0.03% at 28,479
HK Hang Seng +1.74% at 23,474
Shanghai Composite -0.18% at 3,580
Uranium price continues to climb as Kazakhstan unrest intensifies
Uranium prices have climbed to $47/lb from $42/lb at the beginning of the week.
Kazakhstan produces 40% of the world’s uranium supply and is a major supplier to the US, Europe and China.
State-owned miner Kazatomprom which produces 23% of global primary uranium supply, has stated that ‘of course there’s going to be an impact.’
A spokesperson from major Canadian uranium supplier, Cameco, has stated that production may be reduced on logistical difficulties.
Analysts hope the presence of Russia-led CSTO troops will calm the situation, although this is far from certain.
Gold endures most severe weekly fall since November on US Treasury yield strength
Gold has seen a 2.1% weekly drop to $1,789/oz – its largest since late November.
US Treasury yields on the 10-year note hit their highest since March 2021, touching 1.749%.
High yields reduce investors’ incentive to holding non-interest yielding gold.
Focus will now turn to US Jobs date due today with 550/600k jobs predicted to further encourage the Fed’s hawkish momentum and weigh on gold.
Alternatively, weaker non-farm payroll data of c.250k could be bullish for gold by incentivising a delay in rate hikes.
Economics
UK – House prices show biggest cash rise since March 2003
UK house prices have risen by the most amount in cash terms in nearly two decades due to a lack of housing supply, accumulated savings and low interest rates, Halifax figures have shown.
The average price for a property rose 9.8% to £276,091 last month - an increase in cash terms of £24,500 YoY.
US / Japan – More defence cooperation vowed to counter China threat
The US and Japan on Friday voiced strong concern over China’s recent foreign policy, notably its attitude towards Taiwan.
In a joint statement, ministers expressed concerns over China's efforts "to undermine the rules-based order" presented "political, economic, military and technological challenges to the region and the world"
The ministers also said they had "serious and ongoing concerns" about human rights in China's Xinjiang and Hong Kong regions and stressed the importance of peace and stability in the Taiwan Strait.
China – Beijing calls on banks to boost real estate lending on default fears
China has called on banks to boost property lending in Q1 and has eased a key debt restriction amid concerns about the industry’s liquidity crisis.
Regulators told banks to step up lending to developers after two consecutive quarters of declines.
At the same time, borrowing by major property firms used to fund M&A will no longer be counted toward the metrics that limit debt.
Regulators are dialling back the intensity of a crackdown on the nation’s real estate which was implemented due to huge developers such as Evergrande and Kaisa missing payments on bonds.
Additional Chinese property developer defaults as sector continues to suffer
A Shimao Group subsidiary has defaulted on a $101m project loan.
The China Credit Trust had only received $23m of the $101m payment which was due on Dec. 27th.
Shimao shares are down an additional 17% this morning having fallen 77% last year.
Poland – Inflation hits 21-year high to 8.6% in December
Inflation was higher than economist estimates in December and jumped from 7.8% in November.
Central banker Adam Glapinski said he favoured at least one more 50 basis point rate hike.
Food prices rose 8.6% YoY in December, Energy costs +14.3, fuel +32.9%.
Germany – Restrictions on restaurants and cafes to be implemented amid Omicron surge
Germany is set to tighten restrictions on access to restaurants in and effort to keep a lid on surging Omicron cases in the country.
Chancellor Olaf Scholz is expected to agree with regional leaders today that people who are vaccinated or recovered will still have to provide a negative test.
People who have had a booster shot would be exempt from the testing requirement, which is to take effect from Jan 15th.
India’s Covid-19 cases hit 7-month high as Omicron hits major cities
Covid cases in India up 11x over the past fortnight.
80% of cases in Mumbai and Delhi are Omicron based.
Reports suggest that large numbers of healthcare workers in New Delhi are currently infected. (SCMP)
Weekend curfews and bans on night-time gatherings have been imposed in Mumbai, Delhi, Karnataka, and Tamil Nadu.
McDonald’s Japan to sell smaller French fries on shipping disruptions
McDonald’s Japan has suffered shipping disruptions as flooding damaged a key Vancouver port, hitting potato shipments.
Currencies
US$1.1305/eur vs 1.1292/eur yesterday. Yen 115.91/$ vs 115.83/$. SAr 15.707/$ vs 15.864/$. $1.354/gbp vs $1.351/gbp. 0.715/aud vs 0.716/aud. CNY 6.374/$ vs 6.375/$.
Commodity News
Indonesia minister claims coal supply ‘emergency is over’ following export ban this week
The Indonesian authorities are set to meet with coal miners today with a decision expected imminently on the export ban going forward.
The Minister for Maritime and Investment Affairs stated, ‘for now the emergency is over.’
The ban has had little impact on major importer China, whose coal stockpiles are 57% higher vs Jan 2021.
Conversely, analysts suggest the potential for a crash in Chinese domestic coal prices following a major ramp up in production in 4Q21.
Japan has made an official request to the Indonesian authorities to scrap the ban.
Copper suffers on strong dollar with worst weekly fall since November
Copper has fallen 1.5% this week, settling around $9,575/t.
The metal has shown strength today, up 0.5%.
Copper’s rally has been restricted by the Fed’s minutes which show continued hawkish momentum, with the anticipation of 3 rate hikes this year set to weigh on copper demand.
LME copper stocks remain low at 80,525t.
Precious metals:
Gold US$1,789/oz vs US$1,800/oz yesterday
Gold ETFs 98.1moz vs US$98.1moz yesterday
Platinum US$963/oz vs US$975/oz yesterday
Palladium US$1,868/oz vs US$1,857/oz yesterday
Silver US$22.09/oz vsUS$22.42/oz yesterday
Rhodium US$17,000/oz vs US$16,300/oz yesterday
Base metals:
Copper US$ 9,572/t vs US$9,548/t yesterday
Aluminium US$ 2,964/t vs US$2,912/t yesterday
Nickel US$ 20,650/t vs US$20,340/t yesterday
Zinc US$ 3,581/t vs US$3,537/t yesterday
Lead US$ 2,316/t vs US$2,285/t yesterday
Tin US$ 39,495/t vs US$39,080/t yesterday
Energy:
Oil US$82.2/bbl vs US$80.7/bbl yesterday
Natural Gas US$3.865/mmbtu vs US$3.887/mmbtu yesterday
Uranium UXC US$47.00/lb vs $45.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$126.8/t vs US$126.2/t
Chinese steel rebar 25mm US$739.6/t vs US$739.7/t
Thermal coal (1st year forward cif ARA) US$98.0/t vs US$98.0/t
Thermal coal swap Australia FOB US$183.0/t vs US$166.0/t
Coking coal swap Australia FOB US$360.0/t vs US$346.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$70,500/t
NdPr Rare Earth Oxide (China) US$137,274/t vs US$136,087/t
Lithium carbonate 99% (China) US$44,320/t vs US$43,218/t
China Spodumene Li2O 5%min CIF US$2,610/t vs US$2,590/t
Ferro-Manganese European Mn78% min US$1,803/t vs US$1,801/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% 32.85/kg vs US$32.75/kg
China Ilmenite Concentrate TiO2 US$385/t vs US$385/t
Spot CO2 Emissions EUA Price US$97.5/t vs US$95.3/t
Brazil Potash CFR Granular $830/t vs $830/t
Battery News
State of New York to hold 2GW+ offshore wind auction in 2022
New York will host an offshore wind auction with over 2GW of new projects, as well as invest $500m into ports, manufacuring and supply chain infrastructure for offshore wind, in 2022.
NY governor Kathy Hochul's plans will build on more than 6800 direct jobs and more than 4.3GW of new energy statewide, enough to power nearly 3m NY homes.
The state laid plans in 2019 to reach 9GW of offshore wind by 2035.
Governor Hochul also announced that the NY State Energy Research and Development Authority will start to develop floating wind in the state.
GM to compete with Ford and Rivian with electric pickup
GM will test its $35bn electrification strategy when it launches its electric Chevrolet Silverado pickup to compete with rivals Ford and Rivian.
Chief Executive Mary Barra told the annual CES technology conference via video on Wednesday that the electric Silverado will launch in two stages in 2023.
A $39,900 truck will be delivered to a limited number of commercial fleets before a consumer model starting at $105,000 is made available.
India plans $1.61bn investment to connect grid to more green energy projects
India’s cabinet has approved a $1.61bn bill to connect 20 GW of renewable projects with the grid over the next 5 years. (Reuters)
The world’s 3rd largest greenhouse gas emitter plans to cut emissions by 1bn tonnes by the end of the decade.
It hopes to boost renewable power to half the country’s energy mix by 2030 – 430GW.
The scheme will add 10,750km of transmission lines across 7 states.
Such infrastructure projects are major drivers of electrification-related metals, with the scheme adding a further tailwind to global copper demand.
Company News
Gemfields (Gemfields Group Limited (AIM:GEM)) 13.75p, Mkt Cap £158m – Unbundling of Sedibelo Platinum
In a move which should facilitate the proposed sale of its 27.6% stake in Sedibelo Platinum (SPM), which was announced in November 2020, Gemfields reports that it has unbundled its interest passing shares to its own shareholders and leaving Gemfields with a direct interest of 6.5%.
Sedibelo Platinum, which is described as a non-core asset, operates the Pilanesburg Platinum mine in S Africa which “dispatched and sold approximately 128,800 4E PGM ounces (comprising platinum, palladium, rhodium and gold) and generated EBITDA of approximately USD113 million in its financial year ending 31 December 2020” and approximately 69,000oz of PGMs during the first nine months of 2021.
“Gemfields understands that SPM is planning an IPO in 2022”.
Red Rock Resources (Red Rock Resources PLC (AIM:RRR)) 0.55p, Mkt cap £7m – Drilling and sampling results from the Mikei gold project
Red Rock Resources reports that it has completed 20 drill holes (2,093m) of reverse-circulation drilling (RC) at the KKM prospect within its wholly-owned Mikei gold project in the Migori greenstone belt, Kenya.
Results from the first 9 drill holes, of which 7 intercepted gold mineralisation with five “at good grades”include:
An intersection of 17m averaging 1.02g/t gold from a depth of 116m in hole KKRC-102; and
An intersection of 8m at an average grade of 1.17g/t gold from 8m depth in hole KKRC-082; and
A 4m wide intersection averaging 1.37g/t gold from a depth of 83m in hole KKRC-101.
The company says that samples from the remaining holes are “awaiting customs clearance”.
The current mineral resource is estimated at a total of 15.13mt of indicated and inferred mineralisation at an average grade of 1.49g/t gold containing 723,000oz at a cut-off grade of 0.5g/t and today’s announcement clarifies that “Due to the uncertain lateral extent and depth of artisanal mining at the Mikei prospects, and the lack of topographic data to accurately deplete the Mineral Resource, all oxidised material was classified as Inferred Mineral Resources”.
The recent drilling “was designed to test possible extensions of the mineralised zones and to infill some possible gaps where holes might previously have been drilled too far apart to allow an assumption of continuity of mineralisation in the Resource calculation”
Describing the results from the first 9 holes as “extremely encouraging”, Chairman, Andrew Bell, explained that “A comprehensive picture of the results of the programme awaits the results of the final eleven holes, including some deeper holes”.
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
W1S 2PP
*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