SP Angel . Morning View . Tuesday 11 01 22
Expect volatility in metals prices till after China Winter Olympics
Beowulf Mining* (Beowulf Mining PLC (AIM:BEM)) – Beowulf’s Grafintec jv to site battery anode graphite production in GigaVaasa area
Bluejay Mining* (BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)) – Mineralised zones intersected in drilling at Enonkoski
Central Asia Metals (Central Asia Metals PLC (AIM:CAML, OTC:CAMLF)) – Q4/21 production and CY22 guidance
Katoro Gold (Katoro Gold PLC (AIM:KAT)) – Drill mobilisation underway at Haneti
Power Metal Resources* (Power Metal Resources PLC (AIM:POW))
Phoenix Copper* (Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)) – Acquisition of royalty
Pure Gold (Pure Gold Mining, Inc. (TSX-V:PGM, LSE:PUR, OTC:LRTNF)) – Introduction of further Covid19 containment measures
Talon Metals Corp (CVE:TLO) - Tesla strikes nickel deal with Talon Metals
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.
Metals prices likely to see substantial volatility till after the Winter Olympics in China
Expect increasing news flow from Chinese metals processors relating to disruption around the Winter Olympics.
Authorities have informed many metals processors to limit their activities and in some cases shut down to enable clean skies through the games.
Certain commodity traders have been seen shifting positions with respect to their commodity holdings reflecting increased uncertainty in physical demand.
While we still expect significant disruption to mine supply from Covid-19 related illness we also expect to see a slowdown in demand in China as a direct result of the extended break and Olympic Blue clear skies policy.
China is expected to report record an all-time high in refined copper output and ore feedstock imports over the next week.
A hike in treatment and refining charges by 9% suggests Chinese smelters expect an increase in overseas mine supply in 2022.
Some expect China to maintain its ‘Olympic Blue’ plan limiting particulates in the air to stringent levels till the end of the Paralympics.
It is also possible that China may not follow through with substantial stimulus as has been indicated in reports. If the central government does not extend stimulus then Chinese raw material consumption may slow.
The exception is for battery materials where China is keen to get ahead of its competitors and continues to promote strong investment in gigafactories and EV manufacturing.
Reuters report the rising of stainless steel futures prices today as producers cut production. Urea plants are also reported to be restricted.
Tangshan, near Beijing normally produces around 8% of global steel production.
The Chinese Spring Festival holiday starts on 1st February with the Spring Festival Golden Week holiday officially finishing on 15 February
The Chinese Winter Olympics dates are from 4th February to 20th February and are followed by the Paralympic dates from 4th March to 13th March.
Gold recovers as yields slide, all eyes turn to tomorrow’s inflation data
Gold bounced 0.6% to $1,810/oz from yesterday’s 6-week low of $1,791/oz.
US 10-year treasury yields receded from nearing a 2-year high at 1.808% to 1.757%, boosting gold’s appeal.
A weaker dollar has also provided a tailwind to the gold price.
Analysts have raised their expectations of 4 rate hikes this year as the Fed is accelerating its hawkish pivot.
Economists expect US CPI inflation to have risen by 5.4% yoy as of December, up from 4.9%. (Reuters)
Brazil - Miners forced to halt operations in southeast Brazil on heavy flooding
Top mining state Minas Gerais has been hit by heavy rainfall, with flooding forcing the closure of rail and roads.
Vale announced the suspension of some operations yesterday at its Southeastern and Southern iron ore systems.
The company has confirmed it does not expect production targets for its Northern system to be affected for 2022.
Vallourec has halted operations at its Pau Branco mine following a dike overflow and Steelmakers Usiminas and Companhia Siderurgica Nacional have paused their mining operations.
Port operations at the Itaguai coal terminal have also been suspended.
Dow Jones Industrials -0.45% at 36,069
Nikkei 225 -0.90% at 28,222
HK Hang Seng -0.18% at 23,703
Shanghai Composite -0.73% at 3,567
Economics
US – Richard Clarida, a member of the Federal Reserve Board, will resign two weeks before his term expires after revelations of stock trading in early 2020.
This follows two resignations of regional Fed Presidents last fall after reports around their trading activity.
In response to concerns over Fed Board members and Fed Presidents’ trading, Chairman Powell announced new investment guidelines in October last year including banning purchases or sales during periods of market stress.
A probe of Fed trading is under way by the central bank’s inspector general, which declined to comment on whether Clarida is part of the investigation, Bloomberg writes.
Following the resignation, the Board will have three vacancies with the White House expected to soon announce a series of candidates to fill those seats.
China – Auto sales in China climbed in 2021 for the first time since 2018, supported by demand for low-emission cars.
Total sales were up 4.5% at 20.5m with new energy vehicles deliveries climbing ~170%yoy to nearly 3.0m implying a drop in other ex NEV category.
Of the latter pure battery EV sales accounted for 2.44m.
Anyang, a city of 5.5m residents in central China’s Henan province, went into a lockdown after a dozen of Covid-19 cases reported.
All vehicles are orders off roads and all residents must stay at home while mass coronavirus testing takes place.
The city government also suspended bus, train and taxi services outside the city and stopped school classes and dine-in services, FT writes.
The city reported two cases on Monday and 26 on Tuesday.
Japan – Inflation expectations jumped to the highest in 13 years on the back of higher energy costs.
Households see inflation of 5% in one year, according to the quarterly survey by the central bank.
That sharply contrasts with current core inflation that is running well below 1%.
Kazakhstan – President Tokayev said the Russia led CSTO (Collective Security Treaty Organisation) military mission is over and the foreign contingent should leave the country within 10 days.
The main mission of the CSTO peacekeeping mission has been successfully completed… In two days, a gradual withdrawal of the united CSTO peacekeeping contingent will begin,” Tokayev said.
Separately, President ordered the government to increase taxes for the mining sector amid high commodity prices.
"I am ordering the government to come up with a plan (to bring) additional revenues to the budget. In exchange we can provide large incentives for the exploration and development of new deposits for large mining and other companies."
UK – The number of passengers at Heathrow airport dropped 12.3%yoy to 19.4m in 2021 as people cancelled trips amid a surge in new cases and the spread of the Omicron variant.
2021 passenger numbers were less than one quarter of the pre-pandemic level of 2019.
The international Air Transport Association forecasts suggest passenger numbers will not reach pre-pandemic levels until 2025.
UK energy firm tells customers to eat porridge or buy socks made of merino wool
The firm also suggests customers should do a "few star jumps" and "have a cuddle with pets or loved one" to keep cosy during the winter months (The Telegraph)
The gas price crisis is expected to raise the average household bill by 56$ to over £2,000pa in April.
The advice suggests UK energy policy offers no real near-term solution to the crisis and indicates that higher energy bills are here to stay.
The strike price for power from the new Hinkley Point C nuclear plant was set with EDF at £92/MWh from when the reactor is finished in 2023-2025.
Wind power was selling last year for around £40/MWh but this may be is proving to be less reliable than first thought with wind speeds across Europe said to be lower than estimated.
There is very little grid-scale battery backup leaving the nation to rely on gas power to top up its generation capacity following the destruction of the coal fired power generators.
Indonesia turns to coal levy as alternative to eased export ban
Indonesia has eased its ban on overseas thermal coal exports.
China thermal coal futures fell 3% on the news.
Over 120 vessels are waiting to leave Indonesia’s coast, with 14 ships given the green lit to depart. (Refinitiv)
The Indonesian government is discussing a potential levy system on coal miners to stop the state power utility firm PLN from running out of coal again.
A government document suggested a potential $3.87/t levy on thermal coal, potentially raisin $2.5bn pa for PLN. (Reuters)
Currencies
US$1.1346/eur vs 1.1324/eur yesterday. Yen 115.25/$ vs 115.76/$. SAr 15.584/$ vs 15.657/$. $1.361/gbp vs $1.358/gbp. 0.719/aud vs 0.719/aud. CNY 6.372/$ vs 6.374/$.
Commodity News
LME metal trading volumes hit decade low in 2021 despite soaring prices
LME volumes fell for their 3rd consecutive in 2021.
Fee-payable trading volume for options and futures fell 4.7% to 138.65m contracts.
The closure of the open-outcry pit and reduced industrial output is considered the primary reason for the decline.
Precious metals:
Gold US$1,810/oz vs US$1,793/oz yesterday
Gold ETFs 98.0moz vs US$98.0moz yesterday
Platinum US$951/oz vs US$957/oz yesterday
Palladium US$1,930/oz vs US$1,925/oz yesterday
Silver US$22.65/oz vs US$22.27/oz yesterday
Rhodium US$17,500/oz vs US$17,500/oz yesterday
Base metals:
Copper US$ 9,635/t vs US$9,658/t yesterday
Aluminium US$ 2,941/t vs US$2,943/t yesterday
Nickel US$ 21,385/t vs US$20,890/t yesterday
Zinc US$ 3,500/t vs US$3,543/t yesterday
Lead US$ 2,287/t vs US$2,282/t yesterday
Tin US$ 40,200/t vs US$39,895/t yesterday
Energy:
Oil US$81.5/bbl vs US$82.1/bbl yesterday
Natural Gas US$4.027/mmbtu vs US$4.124/mmbtu yesterday
Uranium UXC US$46.50/lb vs $46.35/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$125.5/t vs US$126.7/t
Chinese steel rebar 25mm US$740.3/t vs US$740.7/t
Thermal coal (1st year forward cif ARA) US$101.0/t vs US$101.0/t
Thermal coal swap Australia FOB US$178.3/t vs US$177.0/t
Coking coal swap Australia FOB US$389.0/t vs US$389.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$70,500/t
NdPr Rare Earth Oxide (China) US$139,674/t vs US$138,852/t
Lithium carbonate 99% (China) US$46,846/t vs US$45,578/t
China Spodumene Li2O 5%min CIF US$2,640/t vs US$2,640/t
Ferro-Manganese European Mn78% min US$1,810/t vs US$1,806/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% 8.8/lb vs US$8.8/lb
Europe Ferro-Vanadium 80% 32.95/kg vs US$32.85/kg
China Ilmenite Concentrate TiO2 US$385/t vs US$385/t
Spot CO2 Emissions EUA Price US$97.8/t vs US$97.6/t
Brazil Potash CFR Granular Spot US$810.0/t vs US$830/t
Battery News
Rio Tinto purchases battery-electric trains for Pilbara operations
Rio Tinto has an agreement to purchase four battery-electric trains to use in the Pilbara region, Western Australia, as part of the company’s strategy to reduce carbon emissions by 50% by 2030.
Rio Tinto purchased the four 7MWh FLXdrive battery-electric locomotives from Wabtec (NYSE:WAB) Corporation with production due to commence in the United States in 2023 ahead of initial trials in the Pilbara in early 2024.
The locomotives will be used to carry ore from the company’s mines to its ports and will be recharged at purpose-built charging stations at the port or mine.
China test ‘artificial sun’ nuclear fusion reactor
The Experimental Advanced Superconducting Tokamak (EAST), known as an “artificial sun”, reached temperatures of 70,000,000C during the experiments, the Xinhua News Agency reported.
The reactor set a record for sustained the temperature, five times hotter than the sun, for more than 17 minutes, according to state media.
“The recent operation lays a solid scientific and experimental foundation towards the running of a fusion reactor,” said Gong Xianzu, a researcher at the Institute of Plasma Physics of the Chinese Academy of Sciences, who led the latest experiment.
The EAST project, has already cost China more than £700m, will run the experiment until June.
China will also provide technical support to the nuclear fusion reactor megaproject in Marseille, France - the International Thermonuclear Experimental Reactor (ITER) will be the world’s largest reactor once completed.
The UK is also looking into fusion - the Spherical Tokamak for Energy Production (STEP) project aims to produce a concept design by 2024 and deliver power to people’s homes at some point in the 2040s.
Company News
Beowulf Mining* (Beowulf Mining PLC (AIM:BEM)) 11.10p, Mkt cap £92m – Beowulf’s Grafintec jv to site battery anode graphite production in GigaVaasa area
Things are moving fast in the world of developing gigafactories and battery materials supply.
The world has finally woken up to the challenge of feeding extraordinary new demand from over >260 gigafactories with planned capacity of >3 terrawatt hours of battery production.
Beowulf Mining is doing its bit with the signing of an MoU for Locating a new plant for Anode Materials Production in the GigaVaasa Area through its Grafintec Oy subsidiary in Finland.
The Grafintec and Epsilon Advanced Materials Private Limited joint venture has agreed to establish an anode materials production facility close to Freyr Battery’s proposed battery cell plant.
Phase 1 of the jv intends production capacity of 10,000tpa
Phase 2 adds another 40,000tpa
Beowulf is contributing its expertise and graphite resources / licenses within its 100% held Grafintec subsidiary which holds:
Aitolampi: Indicated and Inferred Mineral resource 26.7mt grading 4.8% Total Graphitic Carbon for 1,275,000t of carbon
Rääpysjärvi: exploration focussing on graphite intersected in drilling and exploration around a historic graphite quarry
Karhunmäki: exploration of area with high metamorphism, known coarse flake graphite findings and extensive interpreted graphite schist zones
The proposed plant plans to supply battery cell manufacturers across Europe, complementing Epsilon Advanced Materials’ existing growing anode materials business in India.
GigaVaasa is dedicated to battery value chain manufacturing and is well placed logistically, with good rail and road connections and a short distance to the harbor.
More than 160 energy technology companies are located in the Vaasa region.
Conclusion: The Beowulf team are making rapid progress on their graphite projects in Finland. This could easily become a lead project for the company given its rapid development.
Bluejay Mining* (BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF)) 9.08p, Mkt cap £88m – Mineralised zones intersected in drilling at Enonkoski
(Bluejay holds 100% of the Enonkoski licenses with a US$20m exploration jv agreement on the Enonkoski Ni-Cu-Co project)
Bluejay Mining report the completion of its 2021 exploration campaign in joint venture with Rio Tinto on the Enonkoski project in Finland.
The joint venture drilled 12 diamond drill holes for a total of 4149m from October to December just southeast and west of the historic Enonkoski Ni-Cu-Co mine.
Mineralisation were intersected in the drilling and are known to be typical of the mine and surrounding orebody.
A downhole electromagnetic survey on 22 drillholes was also done with ongoing modelling of the results.
Diamond drill core and surface sample assay results are due soon.
Sulphide droplet zones were intersected in gabbroic and noritic rocks in close vicinity to the old mine.
The team have also taken 99 sample points in ‘Top of Bedrock’ drilling along forest tracks and small roads in the area for 1.5-4.5m cores to map the contacts between the intrusions and surrounding gneisses under till cover for the direction of further drilling.
Conclusion: We await further news on the potential scale of the future resources around the Enonkoski mine and if they are large enough to warrant Rio Tinto’s ongoing attention.
While the simplicity of the Dundas titanium ilmenite mine and plant should ensure this is the first to move into production the group could well see a second mine start at Enonkoski.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland. The analyst holds shares in Bluejay Mining.
Central Asia Metals (Central Asia Metals PLC (AIM:CAML, OTC:CAMLF)) 233p, Mkt Cap £410m – Q4/21 production and CY22 guidance
Q4/21 production amounted to 3.7kt Cu, 5.1kt Zn and 6.5kt Pb.
CY21 output totalled 14.0kt Cu, 22.2kt Zn and 27.2kt Pb (CY20: 13.9kt Cu, 23.8kt Zn and 29.7kt Pb).
The Company reports operations at Kounrad were not affected by the recent unrest in Kazakhstan that currently appears to have stabilised.
Kounrad production for 2022 is in line with estimates so far.
The Company refers to challenging ground conditions encountered at the Sasa underground polymetallic operation during the year that further reinforced the Company’s decision to transition to the Cut and Fill mining method in 2023.
The Company allowed for continued ground support challenges in its 2022 guidance and will maintain its enhanced approach to underground safety risks.
CY22 guidance is for 12.5-13.5kt Cu, 20.0-22.0kt Zn and 27.0-29.0 Pb.
Dec/21 closing cash balance stood at $59.2m with gross debt at $33.0m.
Katoro Gold (Katoro Gold PLC (AIM:KAT)) 0.63p, Mkt Cap £2.5m – Drill mobilisation underway at Haneti
Power Metal Resources* (Power Metal Resources PLC (AIM:POW)) 1.63p, Mkt cap £23.4m
(Katoro Gold holds 65% of the Haneti nickel project alongside Power Metal Resources which holds 35%)
Katoro Gold reports that it expects mobilisation for a 1,000m diamond drilling programme at Haneti, located NNE of Dodoma in central Tanzania to be completed “on or around the 17th January 2022” with drilling to start around 20th January.
The programme, which follows up on a reverse-air-blast (RAB) programme completed early in 2021, is expected to include “three deep diamond core … [holes] … targeting magmatic nickel (Ni) copper (Cu) platinum group element (PGE) sulphide mineralisation. The work will constitute the first diamond drilling conducted out by the JV within the Haneti Project area”.
“Two diamond core holes are planned at the Mwaka Target for a combined total of approximately 505m. The holes have current planned depths of 264m and 241m and are designed to test two discrete high-priority conductors which were identified during the 2012 electromagnetic ("EM") geophysics survey”.
In addition, “A single 495m deep diamond core drill hole is planned at the Mihanza Target. The Mihanza target was subject to a shallow Rotary Air Blast ("RAB") drill programme that was completed in early 2021; the programme confirmed the presence of near-surface Ni-Cu-PGE sulphide mineralisation. The Mihanza Target is centred around coincident magnetic high geophysical and nickel geochemical anomalies”.
Executive Chairman, Louis Coetzee, explained that “In the process of planning and preparing for the … drill programme, the Company also successfully renewed all the prospecting licences that cover the Haneti project area. This means that the Haneti project now has another 7 years active life”.
Conclusion: We look forward to the results of the diamond drilling at Haneti
*SP Angel acts as Nomad and Broker for Power Metal Resources
Phoenix Copper* (Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)) 48.5p, Mkt Cap £56m – Acquisition of royalty
(Phoenix holds 80% of the Empire mining property in Idaho)
Phoenix Copper reports that it is acquiring the balance of the 2.5% net smelter royalty (NSR) payable on production arising from the Honolulu licences at its Empire mine licence area in Idaho.
The company is acquiring the outstanding 1.25% of the 2.5% NSR covering the Honolulu licence block for a total of US$450,000 plus “1% of the 2.5% NSR payable to Mackay LLC ("Mackay") for a total consideration of $1.3 million, $800,000 of which has been paid with $500,000 payable in two further installments of $250,000 each, due on 31 December 2022 and 31 December 2023 respectively”.
In October last year, Phoenix Copper made an initial acquisition of part of the royalties at Empire through the purchase of 1.25% of the Honolulu NSR and 1% of the Mackay NSR.
Chief Financial Officer, Richard Wilkins, explained the rationale saying that “The entirety of the Honolulu 2.5% NSR now payable to Phoenix, plus the 1% NSR purchased from Mackay LLC, should therefore represent significant additional revenue to Phoenix over the same period and is intended to contribute additional funds to the corporate dividend policy which we plan to adopt for the benefit of our shareholders in due course”.
Conclusion: The acquisition of the royalties in Idaho should simplify the holding structure at Empire and ensure that, once in production, funds which would have been paid to the royalty holders will be available for potential distribution as dividends to shareholders.
Pure Gold (Pure Gold Mining, Inc. (TSX-V:PGM, LSE:PUR, OTC:LRTNF)) 38p, Mkt Cap £171m – Introduction of further Covid19 containment measures
PureGold Mining has announced the introduction of a range of measures to help mitigate the impact of a “small but increasing number of positive Covid-19 cases at the Company's PureGold Mine over the last several days”.
The measures, which supplement existing testing, screening and contact tracing procedures, include the temporary implementation of remote working for administrative staff and a reduction of on-site staff at its Red Lake mine to essential workers only.
The company confirms that “During this time, production is expected to continue albeit at a slightly reduced rate. While the ultimate impact on monthly or quarterly production, if any, is not yet known, the Company expects to make up any production shortfall shortly after returning to full production”.
Talon Metals Corp (CVE:TLO) C$ 0.60 Mkt Cap C$418.5m - Tesla strikes nickel deal with Talon Metals
Tesla has agreed to buy 75kt of nickel concentrates over 6 years from Talon Metals’ Tamarack project.
The purchase price is tied to the LME nickel price.
Tesla has reserved the right to negotiate additional nickel concentrate purchases and will work with Talon to ‘optimize nickel concentrate grades and metal recoveries.’
Talon’s Tamarack project is a nickel, copper and cobalt JV project with Rio Tinto, located in Minnesota.
Talon has a 51% stake in the high-grade development stage nickel project.
Tesla struck a nickel-supply deal with BHP 6 months ago with Elon highlighting the EV sector’s need for the metal.
Talon hopes to reach production at the Tamarack project by January 2026.
Given the location of Talon’s Tamarack project in Minnesota it will be interesting to see if Tesla’s involvement will enable the project to pass the substantial permitting hurdles present in the state.
The Tamarack project lies close to a heavy duty freight rail line which passes to Polymet’s Lake Erie taconite processing facilities at Hoyt Lakes. This site may be suitable for the processing of Tamarack ores.
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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
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Sales
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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
Coking Coal
SSY
RRE
Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite
Asian Metal