SP Angel . Morning View . Friday 18 02 22
Gold hits $1,900/oz on Russia-Ukraine crisis and inflation concerns
MiFID II exempt information – see disclaimer below
PRIVATE – financing for advanced copper exploration in Zambia
We are raising funds for a copper exploration company with three advanced prospective license areas in Zambia - all near producing mines or active exploration programs by majors.
The company has a joint venture with one major mining company and is working in cooperation with another major copper miner.
Assays close to a historic copper mine show 15.8% copper and 0.57g/t gold in an artisanal pit. The company plan to IPO later this year
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.
Albemarle (NYSE:ALB) – Share price falls as forecast earnings below market expectations
Yamana Gold (TSX:YRI, LSE:AUY) (Yamana Gold (TSX:YRI, LSE:AUY)) – Strong Q4 production, results for 2021 and 2022 guidance
IGTV: Are commodities becoming weaponised? https://www.youtube.com/watch?v=jCoPpdNPMpQ
IG Outlook 2022, China new year, winter Olympics may see metals prices soften: (12/01/2022): https://youtu.be/vNqDh74zW5I
VOX Markets: 10/02/22: https://audioboom.com/posts/8028992-john-meyer-talks-about-copper-gold-plus-atlantic-lithium-bluejay-empire-metals-rainbow-rare
*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.
Gold hits $1,900/oz as Russia-Ukraine concerns overshadowed by persistent inflation
Gold prices hit $1,900/oz yesterday propelled by safe-haven demand as shells are fired in Ukraine.
Gold has shrugged off rising US Treasury yields, with the 10-year note holding around the 2% mark. The dollar remains flat.
China – Authorities to ramp up commodity price controls to aid industrial growth
Beijing’s state planner is looking to strengthen its commodity market monitoring in a bid to stabilise soaring prices.
The move comes alongside a push to accelerate construction projects to boost industrial growth.
The NDRC will introduce 18 measures including additional environmental, financial, and fiscal policies to aid the industrial sector.
The announcement parallels recent efforts to cool the iron ore market which rallied 70% from its November lows.
China vehicle sales rise in January after eight months of consecutive declines
China’s January auto sales posted their first monthly rise in eight months with 2.53m vehicle sales. (CAAM)
New energy vehicle (NEV) sales hit 431k units – up 135.8% yoy.
NEV sales, including battery-powered EVs, plug-in petrol-electric hybrids and vehicles with hydrogen fuel-cells saw an 18.6% mom decline.
The downtrend in NEV sales comes as China slashed subsidies by 30% in January.
Analysts point to a ramp up in December buying to take advantage of the subsidy, with sales up 160% yoy.
Nickel hits 3.5-week high on low stocks and continued Russia supply concerns
Nickel prices rose 4.2% this week to $24,065/t.
Russia exports c. 5.5% of global nickel production, with concerns of retaliatory western sanctions on Russian products adding to supply concerns.
LME nickel stocks are at 84kt, their lowest since Dec. 2019 and down 67% since April.
Premiums for LME cash nickel are at $368/t and cancelled warrants are at 50% pointing to the metal’s tight market.
LME cuts storage capacity as available metals supply shrinks
LME storage capacity shrunk by 290,000 square meters in 2H21 following 5 consecutive quarters of expansion. (Reuters)
The move comes as total LME registered stocks (including off-warrant) fell by 56%/2.2mt in 2021 to 1.73mt.
The LME continues to shrink its storage capacity, with 9 units delisted in January.
Copper shadow stocks (stocks with contracts tied to LME warranting) fell 90% in December.
Nickel shadow stocks fell 92% and zinc shadow stocks fell 81%.
Potash – Top potash producer in Belarus declares force majeure
JSC Belaruskali has reported that it won’t be able to meet its contracts, according to a letter from the company.
Potash prices have already risen sharply as soaring natural gas price forced some European plants to curtail production.
The US recently sanctions on Belarus potash come into effect from 1st April with the news driving potash prices higher.
This affects some 10-12mt of Belarus potash exports accounting for a fifth of global supply. Brazil Potash CFR price are 160% higher yoy.
Dow Jones Industrials -1.78% at 34,312
Nikkei 225 -0.41% at 27,122
HK Hang Seng -1.80% at 24,346
Shanghai Composite +0.66% at 3,491
Economics
Global trade rose 13% to $28tr record last year despite chip shortage and logistics issues
Unctad’s latest update on global trade reached a record high in 2021, but expects global trade to slow in Q1 2022.
Supply chain delays are expected to slow global trade in Q1
Q4 trade rose ~$200-billion to $5.8tn, a new quarterly with the trade in services rising ~$50bn to $1.6tn.
Q4 trade in goods rose 27% yoy vs 17% ypy for services with developing nations seeing a larger 30% yoy rise in trade vs developed nations at +15% yoy
Unctad reckons the rise in trade last year was largely a result of higher commodity prices combined with lesser covid restrictions and a strong recovery in demand for goods and services from stimulus policies.
The organisation sees global trade following macroeconomic trends driven by new demand for products that are environment-friendly supported by emissions and other policies.
US – Jobless claims unexpectedly climbed for the first time since mid-January mainly concentrated in a few states.
Nevertheless, the trend is of improving labour market with continuing claims currently standing below pre pandemic levels.
Separately, new housing starts dropped 4.1%mom in a first decline in four months in January on winter weather, high construction costs and challenges in attracting skilled labour.
Although, growth in building permits (+0.7%mom v -7.2%mom est.) suggests residential construction will remain healthy in coming months.
Initial Jobless Claims: 248k v 225k (revised from 223k) in the previous week and 218k est.
Continuing Claims: 1,593k v 1,619k (revised from 1,621k) in the previous week and 1,605k est.
S&P 500 and Nasdaq closed 2.1% and 2.9% down yesterday on comments from President Biden that Russia was set to move troops in Ukraine within several days.
Futures are trading higher this morning on hopes of a potential diplomatic solution with the US Secretary of State Blinken agreeing to a meeting with Russia’s Foreign Minster Lavrov.
On the ground, both sides (Ukraine and Russia-backed separatists) report violation of cease fire agreements.
EU - European leaders are discussing contingent plans to mitigate the impact of sanctions on Russia including potential exemptions for the energy sector, Bloomberg writes.
Germany, France, the Netherlands and Poland are among the EU countries to express concerns over the consequences of sanctioning certain sector including energy, raw materials and banks.
Italy has asked the European Commission to develop a compensation mechanism to soften the effect of sanctions on EU countries.
France – Unemployment pulled back further averaging 7.2% in Q4/21, a shy away from pre-pandemic lows of 7.1%.
Unemployment Mainland (%): 7.2 v 7.8 (revised from 7.9) in Q3/21 and 7.6 est.
UK – British retail sales rebound +1.9% vs 1% expected in January
The volume of retail sales grew 1.9% between December and January, following a contraction of 4% the month prior, according to the ONS.
Demand for fuel and home improvement items rebound more than expected in January to post the largest monthly increase since the reopening of non-essential stores last April.
The proportion of retail purchases made online fell to 25% in January, its lowest since March 2020.
Energy Storage market to grow by over 50000MW
The latest market research from Technavio forecasts that the energy storage market will grow to over 50000MW by 2026.
The report predicts that the market growth will accelerate with a CAGR of 61.52% between 2021 and 2026.
The report also highlights that Asia-Pacific (APAC) will be responsible for 58% of the new capacity added over this period.
We can expect that the forecasted new capacity to be a mix of battery technologies including Li-ion and VRFB.
Currencies
US$1.1371/eur vs 1.1380/eur yesterday. Yen 115.12/$ vs 115.32/$. SAr 14.972/$ vs 15.014/$. $1.363/gbp vs $1.359/gbp. 0.722/aud vs 0.721/aud. CNY 6.327/$ vs 6.334/$.
Commodity News
Precious metals:
Gold US$1,893/oz vs US$1,876/oz yesterday
Gold ETFs 99.8moz vs US$99.6moz yesterday
Platinum US$1,092/oz vs US$1,078/oz yesterday
Palladium US$2,329/oz vs US$2,312/oz yesterday
Silver US$23.93/oz vs US$23.58/oz yesterday
Rhodium US$18,200/oz vs US$18,100/oz yesterday
Base metals:
Copper US$ 10,010/t vs US$9,965/t yesterday
Aluminium US$ 3,265/t vs US$3,234/t yesterday
Nickel US$ 24,075/t vs US$23,455/t yesterday
Zinc US$ 3,644/t vs US$3,575/t yesterday
Lead US$ 2,344/t vs US$2,333/t yesterday
Tin US$ 44,250/t vs US$43,675/t yesterday
Energy:
Oil US$92.4/bbl vs US$94.2/bbl yesterday
Brent and WTI continue to trade above US$/90/bbl as investors weigh conflicting statements on the possible withdrawal of some Russian troops from around Ukraine
Futures fell after the settlement, however, after US and Iranian officials said they were much closer to an agreement on the latter's nuclear weapons development that would allow it to ramp up global oil sales
Russia's threatening posture toward Ukraine has dominated oil markets for several weeks, with concerns that supply disruptions from the major producer in a tight global market could push oil prices to US$100/bbl
Russia’s confirmation of a partial pullback in troops from Ukraine's borders was met with scepticism, as US President Joe Biden warned that more than 150,000 Russian troops were still massed near the borders
Tight supply was seen in US crude oil stockpiles which unexpectedly fell 4.8MMbbls in the week to 4 February to 410.4MMbbls as overall refined product demand reached an all-time record
This compares with a consensus forecast of a 369kbbl rise
OPEC has forecasted that world oil demand might rise even more steeply this year
The group has forecast an increase of 4.15MMbopd this year, as the global economy posts a strong recovery from the pandemic
Natural Gas US$4.462/mmbtu vs US$4.685/mmbtu yesterday
After climbing more than 77 cents in the prior three sessions, US natural gas futures fell yesterday after the latest government inventory report surprised to the downside
The approaching winter storm is set to deliver a hefty dose of wintry weather to the eastern US in the coming days
Temperatures are forecast to plunge below zero in parts of the country, with overnight lows dropping into Texas
UK Natural Gas prices have risen to 3.3% to £1.87/therm, after weeks of stagnation, while the Dutch TTF Futures benchmark has increased a similar 3% to €78.50/MwH
Prices spiked after data from German network operator Gascade showed that flows on the Yamal-Europe pipeline were suspended
Flows had moved eastwards towards Russia since 21 December, piling further pressure on European supplies
While flows have now stopped moving away from Europe, the pause has dashed last night’s hopes of more exports into the continent
Gazprom booked transit capacity for eight hours on Tuesday evening, and the pipeline even recorded an hour of western flows, before coming to a standstill in both directions
Uranium UXC US$44.05/lb vs $44.05/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$131.9/t vs US$140.2/t
Chinese steel rebar 25mm US$774.3/t vs US$773.4/t
Thermal coal (1st year forward cif ARA) US$110.5/t vs US$109.8/t
Thermal coal swap Australia FOB US$206.0/t vs US$212.0/t
Coking coal swap Australia FOB US$388.0/t vs US$390.0/t
Other:
Cobalt LME 3m US$71,000/t vs US$71,000/t
NdPr Rare Earth Oxide (China) US$173,060/t vs US$173,660/t
Lithium carbonate 99% (China) US$66,774/t vs US$65,912/t
China Spodumene Li2O 5%min CIF US$2,710/t vs US$2,710/t
Ferro-Manganese European Mn78% min US$1,814/t vs US$1,815/t
China Tungsten APT 88.5% FOB US$333/t vs US$333/t
China Graphite Flake -194 FOB US$805/t vs US$805/t
Europe Vanadium Pentoxide 98% 10.6/lb vs US$10.6/lb
Europe Ferro-Vanadium 80% 42.25/kg vs US$41.75/kg
China Ilmenite Concentrate TiO2 US$394/t vs US$394/t
Spot CO2 Emissions EUA Price US$101.6/t vs US$101.7/t
Brazil Potash CFR Granular Spot US$815/t vs US$815/t
Battery News
World’s largest lithium-ion battery is down, again
The Moss Landing Energy Storage Facility Phase II, in the US, set off fire alarms that activated a fault water suppression system, triggering a series of events that resulted in around 10 battery packs melting down.
Vistra Energy, who operate the facility, has suggested that the event might be a similar event to an incident that took down the Phase I of the facility in September last year.
Vistra says that they had been bringing the first facility back online incrementally but have now decided to pause those activities while they investigate the incidents.
Redwood Materials plans EV recycling program for Ford and Volvo
Redwood Materials, who specialise in battery recycling, have plans to collect used electric and hybrid vehicle battery packs from Ford and Volvo vehicles in California.
The company, founded in 2017, is planning to recycle batteries to recover critical materials from batteries at the end of their life.
Redwood has launched a software portal to identify end-of-life battery packs and arrange for them to be shipped to its recycling facility – it will extract valuable lithium, cobalt, nickel and other elements that are mainly mined abroad, and prepare them to be used again for new lithium-ion cells at U.S. plants.
Redwood aims to become a leading supplier of recycled metals and materials and estimates it can already recover about 6GWh of used batteries, battery scrap and electronics per year – enough to supply battery packs for 60,000 EVs.
Nissan to convert US factory for EVs and build new EV facility
Nissan have announced that they will invest $500m to retool their assembly plant Mississippi to build two new EVs by 2025.
A top executive has also said that it is on the hunt for a site to build a battery factory in the US as well.
The automaker said it aims to have electric vehicles make up 40% of its US sales by 2030.
Nissan has outlined plans to invest $18bn to expand its global electric vehicle fleet through 2030.
Company News
Albemarle (NYSE:ALB) $1.97, Mkt cap 23bn – Share price falls as forecast earnings below market expectations
Albermarle shares fell nearly 20% on Friday as the Company forecast its annual earnings below market estimates.
The company forecast its full-year earnings between $5.65 and $6.65 per share, the midpoint of which was slightly below estimates of $6.19, according to Refitnitiv.
Albemarle posted a loss of $3.8m in the quarter ended 31st December, compared with a profit of $85m in the same quarter last year.
The loss was attributed to labour- and pandemic-related issues at its Kemerton project in Australia.
Sales of lithium, rose 13% to $405m in the Q4.
The share price fell as investors were optimistic that the company would beat estimates by some margin given how lithium prices are at record highs.
Separately, the company recently raised its lithium market forecast by 30%, as it now expects lithium demand to reach about 1.5mt by 2025 and 3mt by 2030.
Yamana Gold (Yamana Gold (TSX:YRI, LSE:AUY)) 347.5p Mkt Cap £3.2bn – Strong Q4 production, results for 2021 and 2022 guidance
Yamana Gold reports that strong production performance during the final quarter of 2021 resulted in full year production of approximately 885,000oz of gold (2020 – 780,000oz) and a further 9.2moz of silver (2020 – 10.4moz) at a cash cost of US$689.oz of equivalent gold (GEO) sold (2020 -US$701/oz).
The company reports net attributable earnings for the year of US$147.5m (2020 – 203.6m)
The company is maintaining its 2022 production guidance of not “less than 1,000,000 gold equivalent ounces ("GEO"). For 2023, the Company is increasing its production guidance from 1,000,000 GEO to 1,030,000 GEO. The Company sees further near-term growth continuing in 2024 with production increasing to 1,060,000 GEO”.
Yamana Gold says that cash costs in 2022 are expected to be US$725/GEO and that it “anticipates that it will continue to incur some costs in relation to COVID-19 in the near future. Total costs are expected to be approximately $10.0 million for 2022, or approximately $10 per GEO sold on a consolidated basis” with the bulk of these costs incurred at Cerro Morro and El Peñón.
The company has declared a first quarter dividend of US$0.03/share
Production was dominated by Yamana Gold’s 50% share of output from the Canadian Malartic mine which produced around 358,000oz (2020 – 284,000oz) at a cash cost of US$647/GEO (2020 -US$702/GEO) which “had a strong fourth quarter in line with plan … [and]… benefited from higher grade and recoveries compared to the fourth quarter of 2020 from ore deeper in the Malartic pit”.
Production at the mine is moving to the Barnat pit where “As previously disclosed, the Company expects that the average strip ratio will normalize over the coming years as the mine transitions from the Malartic pit to the Barnat pit, and then decrease as the Barnat pit goes deeper”.
Annual production of ~186,000oz at Jacobina (2020 – 178,000oz) at US$566/GEO (2020 – US$544/GEO) reflected “record quarterly gold production of 48,228 ounces” resulting from record mining rates and the company says that “Production in 2021 increased for the eighth consecutive year, a trend that is expected to continue in the coming years, as a result of the phased expansion strategy and the exploration programs aimed at generating significant value from the remarkable geological upside of the property”.
The Cerro Morro mine produced approximately 80,000oz of gold and 5.6moz of silver during the year at an average cash cost of US$848/GEO (2020 – 67,000oz of gold and 5.4moz of silver at US$868/oz) delivering its strongest quarterly performance of the year in Q4 as production “continued to benefit from access to additional mining faces, which supported the increase in mill feed coming from higher-grade underground ore and stable throughput”.
El Peñón also had its strongest quarter in Q4 to deliver annual output of approximately 176,000 oz of gold and 3.6moz of silver during the year (2020 – 161,000oz of gold and 4.9moz of silver ) at a cash cost of US$673/oz (2020 – US$657/oz) as it accessed higher grade ore from “the La Paloma and Pampa Campamento mining sectors”.
Minera Florida produced a total of ~85,000oz of gold during the year (2020 - ~90,000oz) at a cash cost of US$881/oz (2020 – US$862/oz) “in line with the previously provided guidance range”. The company comments that “Production was partially affected in December by a strike which ended in January when the Company entered into a long term collective bargaining agreement with its unions”.
Exploration “is currently refocusing … on regional exploration projects, with greater efforts being placed on Jacobina and Lavra Velha, which represent the best opportunities for advancement of the goals of the generative exploration program”.
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 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