SP Angel . Morning View . Thursday 05 05 22
Copper, tin, zinc, gold and platinum prices gain as the FOMC limits rate rises
Gold climbs as Fed rules out 75bp rate move
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Caerus Mineral Resources PLC (LSE:CMRS) – Exploration sampling results from the Kalavasos project, Cyprus
Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) – Drilling results from the Sisters Prospect at Broken Hill
OreCorp Ltd (ASX:ORR) – Nyanzaga development timeline update and Kilimani new MRE
Power Metal Resources PLC (AIM:POW)* – Ditau programme expanded following initial result
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) – Ditau programme expanded following initial result
Copper, tin and zinc prices rose yesterday as the FOMC raised interest rates by 0.5%
- Equities rose on a softer tone from the Fed Chairman
- Base metals remain supported by strong demand for EVs and for new renewable energy infrastructure (Windfarms and solar) to replace natural gas
- China remains gripped with 43 cities and >340m people under some form of lockdown but appears to be supporting manufacturing as workers are locked-in rather than locked down
- China manufacturing PMI fell to 47.4 in April highlighting the impact of the Olympics and the Shanghai lockdown in April. The figures suggest China’s manufacturing activity might get worse before they get better.
Gold prices rebound after Fed signals rate hikes won’t be as severe as some anticipated
- Gold prices rallied on Thursday after closing up 0.7% on Wednesday, after the Federal Reserve eluded that the tightening path won’t be as severe as many investors were anticipated.
- Chairman Powell said that the Fed isn’t actively considering a 75-basis point rate hike in the near future.
- Powell said only 50 basis-point increases were on the table for the next couple of meetings – a relatively positive scenario for bullion as some investors were expecting a 75bps hike in June.
- Bullion has been gradually moving lower since mid-April on concerns of aggressive rate hikes, which ahs in turn driven US Dollar and treasury yields up
- Rising yields reduce investors’ incentive of holding non-interest yielding gold, while a stronger dollar makes gold more expensive for holders of other currencies.
- Spot gold rose 1.1% to $1,901/oz earlier this morning, before retreating slightly to back under the $1,900/oz mark.
Dow Jones Industrials +2.81% at 34,061
Nikkei 225 closed at 26,819
HK Hang Seng +0.37% at 20,948
Shanghai Composite +0.68% at 3,068
Economics
US – Equities posted a strong increase as Treasury yields and US$ index pulled back on dovish commentary from the Fed.
- The US Fed hiked rates by 50bp to 0.75-1.00% range, the first such decision in more than 20 years that was largely priced in by markets.
- Futures markets are expecting 2.8% by the end of the year.
- The central bank ruled out raising rates by 0.75bp at one of its forthcoming meetings saying that its was not “actively considering” more aggressive than 50bp hikes at this point.
- 2 year yields dropped more than 15bp to 2.6% after the press conference while S&P 500 and Nasdaq Composite closed 3.0% and 3.2% higher on the day.
- The Fed will also start reduce its holdings of fixed income securities stopping reinvesting the proceeds of maturing securities in June.
- The central bank will start off at $30bn a month for Treasuries and $17.5bn got agency MBS increasing the threshold over three months to as much as $60bn and $35bn.
China - Beijing continues to tighten Covid-19 restrictions but is also allowing Shanghai to reopen in areas.
- The FT reports some 43 cities remain under restrictions with >340m under some form of lockdown
ECB – 10y Bund yields climbed past 1.0% mark for the time since mid-15 as ECB Governing Council member Isabel Schnabel suggested that a hike in July is “possible”.
EU – The European Commission has banned the import of oil from Russian in six months and refined oil products by the year end.
- Russian gas imports are allowed to continue albeit with nations reducing their Russian gas imports
- Germany is making strides in this direction and looking to import LNG
- We suspect the EC is banking on regime change in Russia allowing the bloc to take more time over changing its energy supply mix.
Germany – Manufacturers post a much stronger than expected decline in factory orders in March reflecting full month of the Ukraine/Russia war as well as dwindling availability of components.
- Factory Orders (%mom): -4.7 v -0.8 (revised from -2.2) in February and -1.1 est.
UK – The BOE is expected to announce another rate hike later today raising the benchmark rate by 25bp to 1.0%.
India – The central bank announced a surprise rate hike, the first one in nearly four years, on the back of general inflation in commodities including crude and edible oils.
- The Reserve Bank of India increased the benchmark repo rate to 4.4%, up from a record low of 4.0%.
- The 40bp move was the largest since 2011 and more than usual 25bp increments.
- Consumer inflation came in at 6.95%yoy in March, exceeding the 6% upper limit of the RBI’s target inflation range.
Turkey – Headline inflation hit nearly 70%yoy in April on the back of high energy and food costs among other categories as well as weak lira raising the cost of imported goods.
- The rate marks the highest level of inflation in Turkey since early 2002.
- Core CPI that excludes the cost of energy and food was up >52%yoy suggesting that inflationary pressures have gone beyond those two major categories.
- The lira is down ~10% YTD and more than 40% from last year.
Currencies
US$1.0600/eur vs 1.0510/eur yesterday. Yen 129.54/$ vs 130.15/$. SAr 15.631/$ vs 15.824/$. $1.253/gbp vs $1.249/gbp. 0.722/aud vs 0.710/aud. CNY 6.616/$ vs 6.609/$.
Commodity News
Precious metals:
Gold US$1,894/oz vs US$1,869/oz yesterday
Gold ETFs 106.5moz vs US$106.4moz yesterday
Platinum US$994/oz vs US$977/oz yesterday
Palladium US$2,270/oz vs US$2,278/oz yesterday
Silver US$22.97/oz vs US$22.62/oz yesterday
Rhodium US$17,500/oz vs US$18,200/oz yesterday
Base metals:
Copper US$ 9,638/t vs US$9,483/t yesterday
Aluminium US$ 2,975/t vs US$2,923/t yesterday
Nickel US$ 30,780/t vs US$30,885/t yesterday
Zinc US$ 3,998/t vs US$3,898/t yesterday
Lead US$ 2,301/t vs US$2,277/t yesterday
Tin US$ 40,590/t vs US$40,105/t yesterday
Energy:
Brent Oil US$110.1/bbl vs US$108.2/bbl yesterday
WTI Oil US$107.8/bb vs US$105.3/bbl yesterday
Henry Hub Gas US$8.51/mmbtu vs US$7.91/mmbtu yesterday
UK NBP Futures 164p/therm vs 167p/therm yesterday
TTF Dutch Futures €106.0/MWh vs €102.9/MWh yesterday
- Crude oil prices extended gains yesterday as the potential impact of Chinese lockdowns on global demand were unable to offset supply risks stemming from EU proposals for an embargo on Russian oil.
- OPEC+ meets today and is expected to agree to stick to plans for a gradual ramp-up of monthly production with a 432kb/d boost planned for June and every month until the end of September.
- The EIA reported a modest 1.3mb build in US crude stockpiles for last week, with draws on both gasoline and middle distillates inventories as refineries’ operable capacity contracted 1.9% to 88.4%.
- US Henry Hub natural gas prices surged to a new post-2008 Financial Crisis high on expectations that soaring temperatures in the South would raise cooling demand as customers turned on air conditioners.
- European energy prices edged higher as German wind power fell to its lowest level since September.
Natural Gas US$8.540/mmbtu vs US$7.946/mmbtu yesterday
Uranium UXC US$54.55/lb vs $54.35/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$140.2/t vs US$144.6/t
Chinese steel rebar 25mm US$772.9/t vs US$764.2/t
Thermal coal (1st year forward cif ARA) US$215.0/t vs US$215.0/t
Thermal coal swap Australia FOB US$344.0/t vs US$313.0/t
Coking coal swap Australia FOB US$488.0/t vs US$525.0/t
Other:
Cobalt LME 3m US$82,000/t vs US$82,000/t
NdPr Rare Earth Oxide (China) US$128,087/t vs US$128,244/t
Lithium carbonate 99% (China) US$64,610/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% $2,051/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% 10.8/lb vs US$11.1/lb
Europe Ferro-Vanadium 80% 44.25/kg vs US$45.25/kg
China Ilmenite Concentrate TiO2 US$376/t vs US$376/t
Spot CO2 Emissions EUA Price US$86.3/t vs US$87.6/t
Brazil Potash CFR Granular Spot US$1,250/t vs US$1,250/t
Battery News
VW ‘sells out’ of electric cars in Europe and US
- Volkswagen, the second-largest EV manufacturer by volume, has “sold out” of battery-powered models in the US and Europe for this year, as persistent supply chain bottlenecks hit global production.
- The Group that includes brands such as Porsche, Audi and Skoda, sold >99,000 EVs in Q122
- The company has a backlog of orders in Europe of around 300,000 EVs and customers in Europe and the US placing orders will not receive their EV until 2023.
- Herbert Diess, VW Chairman, said “[The company] are basically sold out on electric vehicles in Europe and in the United States. And in China, it’s really picking up.”
- VW targeted sales of at least 140,000 EVs in China in 2022, however, production has been hampered amid coronavirus lockdowns, and the automaker has sold just 28,800 vehicles in Q1.
BEV sales nearly double EU market share in Q122
- Battery-electric vehicles (BEVs) accounted for 10% of total passenger car sales in the EU, in Q122, according to data from the European Automobile Manufacturers’ Association (ACEA), surpassing plug-in hybrid electric vehicles, which took an 8.9% share.
- In total, 224,145 BEVs were sold across the EU in the January-March period, up from 146,125 in the same period last year.
- Cars powered by petrol and diesel lost market share but still accounted for 52.8% of the EU market during the period.
Porsche invests in battery startup Group14
- EV battery startup, Group14, has raised $400m from a group of investors led by Porsche.
- The startup specialises in the manufacture of silicon-carbon anode material, which it believes is a ‘transformational technology’.
- Most lithium-ion batteries in today's EVs use anodes made of graphite, which mostly comes from China with smaller quantities from Canada and Japan.
- The silicon-carbon anode material enables lithium-ion batteries to hold up to 50% more energy, and Group14 CEO, Rick Luebbe said they can provide the same range as current graphite-based batteries, but with fewer cells, thus reducing the overall cost and size of the battery pack.
- Group14 will use part of the money raised to build a second battery materials factory in eastern Washington state.
Company News
Caerus Mineral Resources PLC (LSE:CMRS) 14.25p, Mkt Cap £9m – Exploration sampling results from the Kalavasos project, Cyprus
- Caerus Minerals has released assays from grab samples taken recently near the Platies mine area of its Kalavasos project in Cyprus.
- CEO, Martyn Churchouse explained that “Kalavasos hosts 14 former producing mines and as such there is a large volume of surface material that needs to be assessed that could contain residual copper and gold values”.
- The company says that “The Kalavasos Project area includes several abandoned mines including Platies, associated waste dumps and exposed gossans. Widespread ancient mine workings and slag dumps remain from pre-Roman era exploitation”.
- Among the results reported today are grades of up to 0.48% copper from a sample mixed waste dump material, which also contained 0.88g/t gold and of up to 7.65g/t gold (and 0.11% copper) in a sample described as “Leached Sulphide Zone - Platies pit”.
- The Kalavasos area is described as an area of “significant structural complexity with faults mapped in various geometries” and will be likely to require a significant amount of geological follow-up to adequately understand the context of the encouraging initial sampling work.
- In addition, we comment that, of the eleven samples reported today, five are described as “Mixed waste dump” material which, although they are probably close to its original site, are not in-situ underlining the need for additional geological mapping and assessment.
- Mr. Churchouse confirmed that “A comprehensive programme of work has been planned for Kalavasos”.
Conclusion: Encouraging early-stage sample results from Kalavasos suggest that considerable additional geological work will be needed to form a full understanding of the opportunity.
Caerus Mineral Resources PLC (LSE:CMRS) 1.23p, Mkt Cap £15.3m – Drilling results from the Sisters Prospect at Broken Hill
- Castillo Copper reports that drilling at the Sisters Prospect within its BHA project at Broken Hill has verified the presence of cobalt which had been previously reported from analysis of historic core.
- Assay results from holes BH1 and BH2 show:
- An intersection of 24m at an average grade of 424ppm cobalt from a depth of 103m in hole BH1, including 2m averaging 1,120ppm from a depth of 107m as well as 1m averaging 873ppm at 120m depth and 2m averaging 486ppm from 125m;
- Hole BH1 also returned shallower assays of a single metre averaging 119ppm from a depth of 12m and 5m averaging 153ppm from 19m depth; and
- An intersection of 3m at an average grade of 192ppm from 137m depth in hole BH2.
- Managing Director, Dr. Dennis Jensen, said that after examining the results “the Board is now convinced the underlying cobalt system within the BHA Project's East Zone could extend beyond the Defined Target Area”.
- He explained that “Whilst this will be the subject of future exploration campaigns, the geology team are aiming to complete the primary cobalt MRE shortly”
- Dr. Jensen also said that “In a welcome left field development, diamond core assays from the Iron Blow Prospect highlight significant REE mineralisation was intersected which further bolsters the BHA Project's exploration potential”.
- The announcement discloses rare-earth-element (REE) assays of:
- 12m at an average grade of 383ppm TREO (Total Rare Earth Oxides) from a depth of 80m in hole BH2 at the Sisters Prospect as well as
- 8m at an average grade of 1,270ppm TREO from a depth of 150m in hole DD90-IB3 at the Iron Blow prospect as well as 12m at an average grade of 297ppm TREO from a depth of 199m also in hole DD90-IB3.
Conclusion: We look forward to the release of the mineral resources estimate which should provide further insight into the cobalt potential of the historic Broken Hill mining area. The unexpected detection of rare-earths will, in our opinion, require further investigation to establish whether it represents a realistic commercial opportunity or a subtler geological feature.
OreCorp Ltd (ASX:ORR) A$0.68, Mkt Cap A$271m – Nyanzaga development timeline update and Kilimani new MRE
- The Company reviewed the timeline for the Nyanzaga Project moving the schedule out by one quarter quoting ongoing skills and labour shortages leading to delays in key deliverables and documentation.
- The DFS is expected to be concluded in Q3/22 compared to previously guided Q2/22.
- The Project commissioning and production are guided for Q4/24 and Q1/25, respectively, compared to Q3/24 and Q4/24 expected previously.
- The Company also released an updated MRE on the Kilimani Project, located 450m northeast of the Nyanzaga Project and within the 24km2 Special Mining License.
- The MRE stands at 6.3mt at 1.06g/t for 213koz (0.4g/t COG) including:
- 3.4mt at 1.09g/t for 119koz in the Indicated category;
- 2.9mt at 1.02g/t for 94koz in the Inferred category.
- This compares to 5.6mt at 1.21g/t for 220koz all Inferred in the previous MRE.
- The estimate includes infill diamond and RC drilling upgrading the confidence level of the resource that will be included in the Nyanzaga DFS.
- There is potential to grow the resource in the saddle area between two deposits with the team aiming to test it through upcoming drill programme.
Conclusion: DFS timing is being moved out by a quarter to Q3/22 with delays driven skills and labour shortages. Separately, an updated MRE on the Kilimani Project, amenable to open pit mining, is now >50% in the Indicated category and will be included in the DFS for the high grade Nyanzaga Project.
Power Metal Resources PLC (AIM:POW)* 1.65p, Mkt Cap £23m – Ditau programme expanded following initial result
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) 3.1p, Mkt cap £12m
(Ditau is held within Kanye Resources, a 50/50 joint venture between Power Metal and Kavango, with Kavango being the operator of the project)
- The JV has this morning announced that following the completion of drillhole DITDD003, which was drilled into the i10 target, Kavango have decided to expand the ongoing exploration programme.
- The hole was completed to a total depth of 300m, which the Company's technical team believes has tested the geophysical target at this specific location, along with intersecting units including a breccia of 20m from 84, and a dolomitic carbonate rock from 155m.
- Kavango’s technical team are currently assessing these results, which it believes may represent either a weathered carbonatitic ash flow or a weathered Dwyka tillite.
- The expanded exploration programme will include 16.1 line-km of Audio-Magnetotelluric ("AMT") geophysics surveys over various target areas.
- The AMT modelling introduced is expected to enable it to further optimise the location of planned drill collar locations.
- To date 12 targets from geophysics have been identified at the Ditau Project which Kanye believes could be carbonatites and/or intrusive complexes that may host carbonatites pipes - the primary source of mined rare-earth elements
- DITDD003 was the first of six planned exploration drillholes to be completed at the Ditau Project as part of the ongoing drilling campaign
- Kavango also notes the commencement of drilling of drillhole DITDD004 which is also targeting the i10 Target geophysical anomaly.
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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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