SP Angel . Morning View . Wednesday 04 05 22
Base metals continue to slide on China lockdowns and weakening PMI data
MiFID II exempt information – see disclaimer below
Graphene / graphite purification – private financing
- We are inviting investors to finance a private company which produces high-grade graphite and graphene from low grade graphitic material.
- The company also sells: Graphene paint, and is developing Li-ion battery anodes along with a Concrete modifier
*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.
Botswana Diamonds PLC (AIM:BOD) – Ground geophysical anomalies at Thorny River
Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF) – Drilling at Clontibret
Kodal Minerals PLC (AIM:KOD)* – Kodal raises £3m in oversubscribed placing to advance Bougouni Lithium Project in Mali
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* - NPV Valuation: 168p/s – Updated Ming mine resources show improved confidence levels and increased copper and gold content
Sunrise Resources PLC (AIM:SRES) – Progress report on the search for a new partner to develop the CS Pozzolan Perlite project
Today is International Star Wars day - May the 4th be with you.
- Star Trek day is on Thursday September 8th for Trekkies who want to celebrate the vision of the man who created Star Trek, Gene Roddenberry.
Potash - EU proposes sanctions on main Belarus potash companies
- The EU has proposed sanctioning Belarus’s main potash producer, Belaruskali OAO, and its export arm, Belarus Potash Co, as part of a sixth package of measures to be discussed later today.
- The EU also proposed sanctions on the Belarusian oil refinery Naftan.
- All three companies provide significant revenue to President Lukashenko’s regime and have previously been sanctioned by the US.
- Belaruskali OAO is the world’s second-largest producer of potash and controlled about 20% of the global market until restrictions.
Dow Jones Industrials +0.20% at 33,129
Nikkei 225 closed at 26,819
HK Hang Seng -1.20% at 20,849
Shanghai Composite closed at 3,047
Copper – Production fell 6% in Chile to 462,000t in March
- In Peru efforts by the government to reopen the Las Bamba mine have failed.
Economics
JP Morgan global composite manufacturing 52.2 for April vs 58.8 in March
US – Expect 0.5% increase to 1% from FOMC today
- The US dollar is slightly off today against US dollar index on Bloomberg
China – Official PMI 47.4 for April vs 49.5 in March
- Non-manufacturing PMI 41.9 in April vs 48.4 in March
- Composite index 42.7 in April vs 48.8 in March
- Caixin China manufacturing PMI 46.0 for April vs 48.1 in March
Australia - Reserve Bank of Australia today raised rates to 0.35% from 0.25%
UK - Bank of England expect to raise rates by 0.25% to 1%
- Manufacturing PMI 55.8 for April vs 55.2 in March
- Food inflation rise to 3.5% in April from 1.5% in March
- Non-food inflation jumped by 2.2% in April from 1.5% in March
- Growth in mortgage lending is expected to fall to 3.8% this year and 3.3% in 2023 from 4.3% last year as interest rates rise
- Big increases in the cost of living will make securing new mortgages mor difficult and will likely slow the property market more than expected as lenders tighten up on credit criteria in our view.
- BoE and FOMC interest rates may rise to 2-2.5% this year but are likely to be limited due to the high cost of servicing government debt along with the damage it could do to the property market.
- London Crossrail (Elizabeth Line) to open 24th May
Japan – Manufacturing PMI 53.5 for April vs 54.1 in March
South Korea – Manufacturing PMI 52.1 for April vs 51.2 in March
EU - Economic sentiment 105.0 in April vs 106.7 in March
- Industrial sentiment fell to 7.9 in April vs 9.0 in March
- Service sentiment rose to 13.5 in April vs 12.6 in March as lockdown rules abated
- Consumer sentiment -22 in April vs -21.6 in March as consumers
- Manufacturing PMI 55.5 for April vs 56.5 in March
Germany – Exports to Russia fall 62% YoY in March
- Germany’s Federal Statistical Office said on Wednesday the 62.3% fall in German exports to Russia to €900m was a result of sanctions imposed as a result of the invasion of Ukraine.
- German imports from Russia fell a mere 2.4%.
- The disruption to trade with Russia led to a 3.3% fall in overall German exports in March.
- Manufacturing PMI 54.6 for April vs 56.9 in March
France – Manufacturing PMI 55.7 for April vs 54.7 in March
India – Seeking discount of less than $70/bbl on Russian oil
- India is trying to get even deeper discounts on Russian oil to compensate for the risk of dealing with the producer.
- India is seeking Russian cargoes at less than $70/bbl on a delivered basis, according to Bloomberg.
- Both state and private refiners have bought more than 40m barrels of Russian crude since the invasion of Ukraine – 20% more than Russia-to-India flows in 2021.
- Manufacturing PMI 54.7 for April vs 54.0 in March
South Africa – Manufacturing PMI 50.7 for April vs 60.0 in March
Brazil – Manufacturing PMI 51.8 for April vs 52.3 in March
VW expects chip shortage to ease in second half and contribute to surge in output
- VW foresees the semiconductor shortage ending in H2, projecting those deliveries will rise as much as 10% this year.
- This production forecast is particularly bullish given the 12% slump in the first three months of this year.
- The company warned that it’s upbeat forecast hinged on further developments from the war in Ukraine and China’s strict covid policies.
Currencies
US$1.0510/eur vs 1.0513/eur yesterday. Yen 130.15/$ vs 130.21/$. SAr 15.824/$ vs 16.040/$. $1.249/gbp vs $1.253/gbp. 0.710/aud vs 0.711/aud. CNY 6.609/$ vs 6.609/$.
Commodity News
Precious metals:
Gold US$1,869/oz vs US$1,858/oz yesterday
Gold ETFs 106.4moz vs US$106.55moz yesterday
Platinum US$977/oz vs US$943/oz yesterday
Palladium US$2,278/oz vs US$2,235/oz yesterday
Silver US$22.62/oz vs US$22.65/oz yesterday
Rhodium US$18,200/oz vs US$18,200/oz yesterday
Base metals:
Copper US$ 9,483/t vs US$9,596/t yesterday
Aluminium US$ 2,923/t vs US$3,035/t yesterday
Nickel US$30,885/t vs US$31,940/t yesterday
Zinc US$ 3,898/t vs US$4,025/t yesterday
Lead US$ 2,277/t vs US$2,275/t yesterday
Tin US$ 40,105/t vs US$40,495/t yesterday
Energy:
Oil US$107.5/bbl vs US$106.6/bbl yesterday
Natural Gas US$7.946/mmbtu vs US$7.658/mmbtu yesterday
Uranium UXC US$54.35/lb vs $54.35/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$144.6/t vs US$144.6/t
Chinese steel rebar 25mm US$764.2/t vs US$764.2/t
Thermal coal (1st year forward cif ARA) US$215.0/t vs US$225.0/t
Thermal coal swap Australia FOB US$313.0/t vs US$271.5/t
Coking coal swap Australia FOB US$525.0/t vs US$525.0/t - Europe’s largest coking coal producer declares force majeure following two fatalities
Europe’s largest coking coal producer, Poland’s JSW, has declared force majeure after two fatalities at its mines, the company reported earlier this week.
The mining company expects its coal output to be reduced by approximately 400,000t from its previous plan.
Last year, JSW produced 11mt of coking coal and prior to the accidents, reported that intended to increase output.
The force majeure is set to add to coking coal supply tightness in the region, with Russian exports to Europe banned from August and the majority of European buyers having already halted spot purchases.
Stocks of coking coal in Polish mines fell to 176,000t at the end of February from more than 750,000t a year earlier.
JSW produced 2.86mt of coking coal in the first quarter of this year.
Other:
Cobalt LME 3m US$82,000/t vs US$82,000/t
NdPr Rare Earth Oxide (China) US$128,244/t vs US$128,244/t
Lithium carbonate 99% (China) US$65,446/t vs US$65,446/t
China Spodumene Li2O 5%min CIF US$3,510/t vs US$3,510/t
Ferro-Manganese European Mn78% $2,034/t vs US$2,034/t
China Tungsten APT 88.5% FOB US$340/t vs US$340/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 11.1/lb vs US$11.1/lb
Europe Ferro-Vanadium 80% 45.25/kg vs US$45.25/kg
China Ilmenite Concentrate TiO2 US$376/t vs US$376/t
Spot CO2 Emissions EUA Price US$87.6/t vs US$86.1/t
Brazil Potash CFR Granular Spot US$1,250/t vs US$1,250/t
Battery News
US battery start-up to aim for mass production of ‘next-generation’ materials
- Sila Nanotechnologies, founded by former Tesla engineer, Gene Berdichevsky, wants to drive US-based mass production of next-generation battery materials aimed at cutting costs, boosting driving ranges and reducing reliance on China.
- The company will invest an undisclosed amount, thought to be in the low hundreds of millions of dollars in a new plant in Washington state due to open in 2024.
- Berdichevsky said Sila would use the new plant in the city of Moses Lake to make silicon-based anode materials that can store 20% more energy than anodes that typically use graphite, 70% of which comes from China.
- The facility will aim to deliver sufficient silicon-based anode material to power 10GWh of batteries in 100,000 electric vehicles annually, with a goal to increase the capacity to power 2m EVs a year.
Tesla reportedly to build new plant in Shanghai to add 450,000 cars to annual capacity
- Tesla will build a new factory on land near its existing Shanghai plant which will add an annual capacity of 450,000 cars (Reuters)
- Once the new plant is fully operational, Tesla will have the ability to produce up to 2m EVs a year at its expanded Shanghai plant.
- The letters sent by Tesla to officials also detailed how Shanghai authorities helped Tesla transport over 6,000 workers and carry out necessary disinfection work to reopen its factory last month amid the city's lockdown.
Company News
Botswana Diamonds PLC (AIM:BOD) 1.33p, Mkt Cap £9.7m – Ground geophysical anomalies at Thorny River
- Botswana Diamonds reports that ground geophysical work, including gravity surveying and electrical resistivity tomography, at its Thorny River diamond project in South Africa has identified anomalies consistent with kimberlite pipes which may be potentially diamond-bearing.
- The survey, covering five target areas identified from analysis of historical information, “produced results consistent with kimberlite with three of the targets being within 200m of the River Blow”.
- The company says that “The largest target is a circular anomaly consistent with a kimberlite pipe of up to 25m in diameter. This is the largest anomaly encountered during the Company's work on the property to date”.
- Botswana Diamonds confirms that a “detailed drilling programme is planned for the South African dry season which is July - August 2022”.
- Welcoming the discovery of the largest anomaly identified to date, Chairman, John Teeling, said that it was “an important development for Thorny River as this could add significant additional kimberlite tonnage to the developing mine plan”.
- The Thorny River project area includes the Marsfontein kimberlite which was initially discovered in 1993 and started relatively short-lived production in mid-1998 before closure in the early 2000s however it was considered to be one of the highest-grade diamond deposits at that time.
Conclusion: Botswana Diamonds’ confirmation of geophysical anomalies consistent with kimberlite mineralisation at Thorny River includes the largest anomaly identified so far on the site. We look forward to results from drilling, planned for later this year, to establish whether the newly discovered anomalies represent kimberlite and if it is mineralised.
Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF) 33.5p, Mkt Cap £13.2m – Drilling at Clontibret
- Conroy Gold reports the start of a 3,000m, 8-holes, drilling programme at its Clontibret prospect in the Longford-Down Massif in Ireland.
- The programme, which forms part of the €4.5m earn-in by Demir Export aims to extend “the eastern gold Lodes and the Stockwork gold mineralisation, both of which are open in all directions and to depth”.
- The company says that “Seven of the drill holes are step-out. One hole is targeting an up-dip gold mineralisation zone” and that the drilling “is projected to increase the Stockwork gold mineralisation to the northeast and also to extend the depth of the Stockwork”.
- Providing additional details of the programme’s objectives, the company says that “Three of the drill holes are focused primarily on the eastern Lodes of the Clontibret gold resource, with a view to extending these Lodes to the north”.
- Prof. Richard Conroy, Chairman, said that the drilling “is a further important step toward the development of a gold mine at Clontibret”.
Conclusion: We await results from the latest drilling programme at Clontibret with interest
Kodal Minerals PLC (AIM:KOD)* – 0.30p, Mkt cap £51m – Kodal raises £3m in oversubscribed placing to advance Bougouni Lithium Project in Mali
- Kodal Minerals reports the placing of £3m of new shares at 0.28p/s for the advancement of the Bougouni Lithium Project.
- Suay Chin International Pte Ltd invested in the placing and continues to offer technical support. Their ongoing funding seems meaningful from a technical perspective.
- Funds will be used to complete the Engineering and the important Environmental, Social and Community Engagement programmes along with more infill and extension drilling.
- The new drilling should increase and upgrade the current JORC resource giving greater confidence and certainty in the resource.
- Kodal will also drill other areas with potential to add further to the resource base.
- Metallurgical test work has confirmed recoveries of 75% vs 71% as assumed in the feasibility study with recoveries of >80% possible.
- Bougouni is fully permitted in Mali for development with an approved Mining licence and an Environmental permit.
- Spodumene prices have been driven higher by a supply/demand deficit for lithium products and feedstock.
- Prices are currently US$3,510/t for 5% Li2O CIF versus Kodal’s assumed price of $680/t in their 2020 Feasibility Study.
- Pilbara Minerals recently sold 5,000t of 5.5% spodumene concentrate at auction for $5,650/t equivalent to $6,164/t for 6% Li2O
- Bougouni lithium project key stats:
- 220,000tpa of 6% spodumene concentrate over an initial 8.5 years
- 68% recovery for the open pit
- 71% recovery rate of contained lithium based on laboratory metallurgical recoveries of 75%;
- >USD$1.4bn of total revenue at $680/t starting H2 2021 and rising 2%pa
- 2mtpa throughput with DMS and conventional flotation circuit. Recoveries are acceptable with the DMS on its own.
- USD$431/t C1 cash costs or USD$466/t inc. royalties and sustaining capital.
- US$117m Capex est. plus contingency:
- 1.7 year payback est.
- LoM production of 1.94mt of concentrate. Sales >$1.4bn assuming spodumene concentrate sales price of $680/t increasing 2% year-on-year;
- 58% IRR pre-tax
- 51% IRR post tax
- US$300m NPV7% pre-tax
- US$200m NPV7% post-tax
- Gold: exploration drilling will continue on advanced targets focussing on higher grade opportunities at Nielle in the Ivory Coast and Fatou in Mali
- Management supported the placing with new funds from the CEO and key executives including the project and country managers.
Conclusion: Management have been approached by a number of parties and are currently assessing opportunities which may lead to the required funding and offtake for project development. Increasing the spodumene price assumption in the feasibility study will lead to a significant increase in the project NPV and IRR. Higher prices will be offset to a minor extent by assumptions on higher fuel and capital costs.
*SP Angel acts as Financial Advisor and Broker to Kodal Minerals. The analyst holds shares in Kodal Minerals. A partner of SP Angel is non-executive Chairman of Kodal Minerals.
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* 28.5p, Mkt Cap £45m – Updated Ming mine resources show improved confidence levels and increased copper and gold content
NPV Valuation: 168p/s
- In its latest mineral resources estimate, Rambler Metals & Mining reports a measured and indicated 23.76mt at an average grade of 1.80% copper, 0.35g/t gold and 2.78g/t silver using a 1% copper cut-off grade. Inferred resources add a further 6.43mt at an average grade of 1.86% copper, 0.38g/t gold and 2.60g/t silver.
- The updated resource estimate follows an interim estimate for copper only which was released in December 2021 when precious metals grades were unavailable and incorporates the results of last year’s drilling.
- The update shows a “5% and 8% increase for contained copper and gold respectively” compared to the estimate released on 26th May 2021.
- We note that, the measured part of the resources of 8.41mt at an average grade of 1.71% copper, 0.46g/t gold and 3.56g/t silver have risen by 32% since 2021 and now represent 35% of the overall measured and indicated resources compared to only around 26% in earlier, 2021, estimate.
- We are also encouraged by the grade improvements since the 2021 estimate with the average grade of the measured & indicated resources improving by 7% for copper (to 1.80%), by 9% for gold (to 0.35g/t) and by 7% for silver (to 2.78g/t).
- Commenting on the new estimate, Rambler Metals’ President and CEO, Toby Bradbury, explained that the new estimate includes “the two new discoveries … [the LP East and the Jennings Zones] … reported in Q1 2022”.
- He clarified that “further, closely spaced drilling, will be required to improve the mineral resource confidence level, these new discoveries carry valuable potential as they are close to established infrastructure at higher levels in the mine”.
- He also said that “all the work we have completed has confirmed and improved the overall quality and quantity of our resources, all of which are open at depth”.
- Today’s announcement reaffirms the significance of the Lower Footwall Zone (LFZ) of mineralisation which contains “77% of the total contained copper for the property”.
- The company says that “For production planning and scheduling, the operation continues to use a 1.5% copper cut-off grade, providing access to 9.4M tonnes of … [LFZ] … mineral resource to be evaluated for mineral reserve” and points out that “At a 1% copper cut-off the number of available tonnes doubles with contained copper increasing by over 60%”.
- Rambler Metals explains that “With further increases in production, and reductions in unit costs, the operation will continue its efforts access the full potential of the Lower Footwall Zone at lower cut-off grades”.
- In addition to the updated mineral resources estimate, the company reports a 31st March 2022 fully depleted and diluted mineral reserve estimate of 7.4mt at an average grade of 1.74% copper, 0.38g/t gold and 2.53g/t silver.
- We note that, at the targeted 1,350tpd processing rate, these reserves support a 15 year mine-life.
Conclusion: The latest mineral resources estimates for the Ming mine show continuing grade improvements and rising confidence levels in the quality of the estimates. The update also identifies further resource expansion opportunities both at depth and through further evaluation of the recently identified LP East and Jennings Zones, both of which are located close to existing mine infrastructure and hence offer near-term development possibilities.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining)
Sunrise Resources PLC (AIM:SRES) 0.12p Mkt Cap £4.3m – Progress report on the search for a new partner to develop the CS Pozzolan Perlite project
- Following its announcement in March of the withdrawal of a potential development partner for its CS Pozzolan-Perlite project in Nevada, Sunrise Resources reports that its’ Chairman, Patrick Cheetham, held discussions with “multiple parties” during a recent visit to the United States.
- These include:
- “two cement & ready-mix companies,
- one major fly-ash distributor,
- a large building materials company, and
- a new cement clean-tech company”
- The company confirms that due-diligence site visits to the property were “undertaken with certain parties” and that it believes that “a broad reach of discussions helps mitigate project risk and creates competitive interest … [and so it is continuing to contact] … other potentially interested parties”.
- Expressing confidence that Sunrise Resources will be able to identify a new development partner for the project, Mr. Cheetham explained that “Globally, over 4 billion tonnes of cement are produced every year and this results in 8% of man-made CO2 emissions. The industry in the US is committed to net-zero emissions and our recent discussions have underlined the role of natural pozzolan in meeting these targets”.
- He explained that, against this background, “we are seeing an upsurge of interest in natural pozzolan, not just from the traditional cement and concrete companies, but also from the building materials companies that supply to those companies, as well as new generation clean-tech cement companies developing new types of carbon-neutral cements and concretes using natural pozzolans in their formulations”.
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
Coking Coal - SSY
RRE - Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite - Asian Metal
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