SP Angel . Morning View . Tuesday 10 05 22
Copper climbs though demand outlook uncertain amid escalating restrictions in China
MiFID II exempt information – see disclaimer below
Caerus Mineral Resources PLC (LSE:CMRS) – Exploration sampling results from the Kambia-Kapedes project, Cyprus
First Quantum Minerals (TSX:FQM) – $1.25bn Kansanshi expansion approved
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) – Exploration grant for the Rudall licence
Rockfire Resources PLC (LSE:ROCK) – Re-analysis of historic core from Molaoi zinc project detects germanium
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) – Gold recovery expected to recover in 2022 following geological challenges in 2021
Versarien PLC (AIM:VRS, OTC:VRSRF)* – Deal with global sportswear brand Umbro
SP Angel mining team at 121 in Cape Town this week
- The SP Angel mining team will be reporting from the 121 Mining investment conference in Cape Town this week.
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.
Dow Jones Industrials -1.99% at 32,246
Nikkei 225 -0.58% at 26,167
HK Hang Seng -1.95% at 19,612
Shanghai Composite +1.06% at 3,036
Economics
Sri Lanka – Protestors torch leader’s homes as country essentially bankrupt
- Mobs in Sri Lanka have burned down several homes belonging to the ruling Rajapaksas and MPs as the company remains embroiled in an economic crisis.
- Sri Lanka is down to its last $50m of reserves and has vast shortages of food and fuel.
- The Prime minister resigned on Monday although his brother remains President.
- The resignation reportedly makes bailout talks with the IMF more complex as it raises questions over political instability.
- Sri Lanka has turned to India or China to provide up to $4bn in bridge financing, Bloomberg reports.
UK – Retail sales fall for the first time since Jan 2021 amid cost-of-living crisis
- UK retail sales declined 0.3% in April from a year earlier, the first drop since the country was in lockdown.
- Figures show the squeeze on household budgets, with the BoE forecasting inflation to hit 10% later this year.
China – Record amount of infrastructure bond sales planned by end of June
- China’s provinces are set to sell a historic amount of new special bonds by the end of June as part of an infrastructure push which aims to rescue the struggling Chinese economy.
- Authorities have asked local governments to issue all of this year’s new special bonds by the end of next month – equating to 2.25 trillion yuan ($336bn).
- The move shows how authorities are relying on fiscal spending and infrastructure projects to help bolster the economy.
- It remains to be seen how easily this can be implemented given the issues Chinese developers are currently having.
- Persisting supply chain issues around metals other goods could also make this huge investment push harder to implement.
Philippines – Ferdinand Marcos Jr wins by landslide victory in presidential election
- The Dictator’s son, whose father fled the country over 30 years ago, has won the presidential election.
- Marcos Jr has pledged to carry on with Duterte’s policies, most notably the “Build Build Build” infrastructure programme.
- The incoming leader is set to be sworn in on June 30th for a six-year term.
US – Retail gasoline prices hit new record on supply bottlenecks
- Retail gasoline prices in the US hit an all-time high of $4.374/gallon on Tuesday, according to the American Automobile Association.
- Since the 30th of March, Brent crude futures have lost 7%, but gasoline futures are up 9.4%
Currencies
US$1.0558/eur vs 1.0517/eur yesterday. Yen 130.36/$ vs 131.20/$. SAr 16.112/$ vs 16.136/$. $1.229/gbp vs $1.233/gbp. 0.696/aud vs 0.701aud. CNY 6.709/$ vs 6.724/$.
Commodity News
Copper prices edged higher on Tuesday following sell-off across base metals on Monday
- Copper rose this morning, with LME prices moving as much as 1.9% higher following Monday’s sell off which saw the LME’s index down 3.1%.
- Copper moved cautiously higher although investors see tightening restrictions in China as a significant headwind going forward.
- Recession worries in US; Germany and the UK are also keeping a lid on any significant move higher.
- Yesterday’s slump in copper prices saw a bottom of $9,137/t, an eight-month low, although from a longer-term price perspective still a healthy price over $9,000/t.
Iron ore prices slump on signs of further distress in China’s property sector
- Iron ore futures fell as much as 6.3% to 756 yuan/t in China on Tuesday, on news that China’s fourth-largest developer is approaching a possible default.
- Sunac China Holding’s 30-day grace period to make a $29.5m interest payment ends Wednesday.
- The company currently has $7.7bn of dollar notes outstanding.
- More than a dozen property developers in mainland Chinas have defaulted this year, and nearly all of this year’s missed bond payments among Chinese issues have been by builders.
Precious metals:
Gold US$1,861/oz vs US$1,870/oz yesterday
Gold ETFs 106.1moz vs US$106.3moz yesterday
Platinum US$976/oz vs US$958/oz yesterday
Palladium US$2,157/oz vs US$2,121/oz yesterday
Silver US$22.04/oz vs US$22.20/oz yesterday
Rhodium US$16,350/oz vs US$16,700/oz yesterday
Base metals:
Copper US$ 9,337/t vs US$9,248/t yesterday
Aluminium US$ 2,757/t vs US$2,800/t yesterday
Nickel US$ 27,920/t vs US$29,520/t yesterday
Zinc US$ 3,655/t vs US$3,716/t yesterday
Lead US$ 2,165/t vs US$2,210/t yesterday
Tin US$ 36,600/t vs US$38,480/t yesterday
Energy:
Oil US$105.6/bbl vs US$111.2/bbl yesterday
Natural Gas US$7.121/mmbtu vs US$8.157/mmbtu yesterday
Uranium UXC US$55.10/lb vs $55.35/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$127.4/t vs US$141.0/t
Chinese steel rebar 25mm US$739.4/t vs US$745.3/t
Thermal coal (1st year forward cif ARA) US$245.0/t vs US$250.0/t
Thermal coal swap Australia FOB US$360.0/t vs US$360.0/t
Coking coal swap Australia FOB US$465.0/t vs US$465.0/t
Other:
Cobalt LME 3m US$82,000/t vs US$82,000/t
NdPr Rare Earth Oxide (China) US$130,379/t vs US$128,239/t
Lithium carbonate 99% (China) US$63,6669/t vs US$63,562/t
China Spodumene Li2O 5%min CIF US$3,720/t vs US$3,720/t
Ferro-Manganese European Mn78% $1,863/t vs US$1,888/t
China Tungsten APT 88.5% FOB US$338/t vs US$338/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 10.4/lb vs US$10.6/lb
Europe Ferro-Vanadium 80% 41.75/kg vs US$42.75/kg
China Ilmenite Concentrate TiO2 US$370/t vs US$369/t
Spot CO2 Emissions EUA Price US$2.9/t vs US$95.3/t
Brazil Potash CFR Granular Spot US$1,220/t vs US$1,220/t
Battery News
Tesla woes continue at Shanghai plant
- According to reports, Tesla has been forced to operate its Shanghai plant well below capacity due to supply chain issues.
- The latest setback comes just two weeks after the plant reopened following a 22-day closure due to China’s strict ‘zero-covid’ policy.
- In a memo seen by Reuters, the plant will manufacture less than 200 vehicles a day, less than the roughly 1,200 units a day it has been building since reopening.
- At the end of last week, Tesla had plans to increase output to pre-lockdown levels, and add second shift at the plant to increase output to around 2600 vehicles a day from 16th May.
Anglo American hydrogen truck produces no CO2
- Anglo American have been testing its prototype hydrogen truck – the 220-ton vehicle, with a carrying load of 290 tons, is capable of operating without producing any CO2 emissions
- The company invested up to around $70m of its own money in the development of the new truck after struggling to find industry partners to support the project.
- Replacing the mine haul trucks with hydrogen-fuelled ones would slash emissions at Anglo’s open-pit mines by 80%, a key step in reaching the company’s target of carbon neutrality by 2040.
- The prototype, a converted Komatsu 930E, is powered by a 1.2MW battery pack and eight 100kW hydrogen fuel cells.
- The plan is to convert Mogalakwena’s 40 diesel-fuelled trucks to hydrogen by 2026 – a plan that will need 140MW of solar power and a massive expansion of the hydrogen conversion and storage facilities on site.
Company News
Caerus Mineral Resources PLC (LSE:CMRS) 12.5p, Mkt Cap £8m – Exploration sampling results from the Kambia-Kapedes project, Cyprus
- Caerus Minerals has released partial assays from chip and channel samples taken recently from the former pyrite mining area at Kambia and the Kokkinovounaros (Red Hill) auriferous gossan which was discovered and mined briefly during the 1930's.
- Among the results reported today are peak assays of 7.4, 6.5 and 5.3g/t gold taken from chip samples and the company says that “A total of 9 samples returned Au grades above 1g/t and a total of 12 samples were above 0.5g/t Au”.
- Encouraged by these results, Caerus Minerals plans “detailed follow up work including detailed structural/geological mapping to generate targets for future drill testing”.
- The company confirms that “multi-element assays have … [not] … yet been returned from the laboratory but are expected soon, providing further detailed information on potential copper and other base metal content”.
- CEO, Martyn Churchouse, said that the “combination of high-grade gold assays at regular intervals all along the 175 m strike length of the target defined to date makes for a readymade drill target”.
- He explained that “encouraging results with scope for the development of a new stand-alone operation based around dumps and stockpiles from previous mining in conjunction with the newly discovered gold potential and any other copper-gold mineralisation remaining in the ground that was not exploited between 1930 and 1960”.
Conclusion: Encouraging early-stage partial sample results from the Kambia-Kapedes project show gold grades along 175m of strike length. Assays for other elements are awaited.
First Quantum Minerals (TSX:FQM) C$31.2, Mkt cap C$22bn – $1.25bn Kansanshi expansion approved
- Frist Quantum has approved a $1.25 billion expansion of the company's Kansanshi copper mine in Zambia, with the decision prompted by “renewed confidence” in Zambia’s investment climate.
- The investment will extend the life of mine until the 2040s and increase copper and gold production by ~25%.
- In parallel with the mine expansion, the Company plans to expand smelter capacity from 1.38mtpa to 1.65mtpa for production of 400,000tpa of copper anode.
- As well as the investment at Kansanshi, FQM also said it approved a further $100m investment in its Enterprise nickel project in Zambia.
- Enterprise should be producing in 2023, eventually targeting 30,000 tonnes of nickel in concentrate annually.
Conclusion: First Quantum’s investment in Zambia is the biggest single foreign direct investment in the country in a decade, and a meaningful display of confidence in the country’s mining sector. We expect to see more activity in Zambia in the coming years, from explorers to producers, given the highly prospective nature of the Zambian Copper Belt and the large structural deficit forecast in the copper market.
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) 12.9p, Mkt Cap £527m – Exploration grant for the Rudall licence
- Greatland Gold has been awarded an A$200,000 exploration grant by the Western Australian Government in order to progress the wholly owned Rudall licence area located 20km south-east of the company’s flagship Havieron project in the Paterson province.
- The grant will help to fund the mobilisation of drilling equipment to the 65km2 licence area where “Greatland has completed geophysical modelling to enhance preliminary targets identified at the Rudall licence, including the Ramses magnetic anomaly. The modelling suggests the depth to top of the magnetic anomaly is approximately 700m below surface”.
- The company confirms that it plans further geophysical work later this year “to refine the Ramses anomaly before an exploration drill program is undertaken”.
Conclusion: We await further information on the significance of the Ramses anomaly and the wider Rudall licence area as exploration advances.
Rockfire Resources PLC (LSE:ROCK) 0.49p, Mkt Cap £5m – Re-analysis of historic core from Molaoi zinc project detects germanium
- Rockfire Resources reports that analysis of historic drill core from the Molaoi zinc project in Greece has shown the presence of the metal germanium which is classified by the European Commission as ‘critical’,.
- The company says that the “weighted average grade of the 51 samples collected during the reanalysis of core from Molaoi is 51 grams per tonne (g/t) Ge, with a peak value of 197 g/t Ge. 41% of samples returned germanium values above 50 g/t Ge”.
- Germanium is used “in the manufacture of everyday technology including mobile phones, electronics, solar cells, camera lenses, satellites, computer screens, as well as steering and parking sensors for vehicles. Germanium is also used in numerous military applications including weapons-sighters (scopes) and infrared night vision”.
- Rockfire Resources is currently “working towards a maiden mineral resource estimate for Molaoi, however germanium will not be included in this initial JORC resource estimate, due to the absence of germanium analysis in the historical data”.
- CEO, David Price, explained that “Our geologists elected to include the analysis for germanium based on a geological paper written in 2012, which suggested that Molaoi might be prospective for germanium. It has now been confirmed that germanium is present at Molaoi and at potentially commercial grades. The economics and recovery of the germanium is yet to be determined, however the grades returned from the laboratory in our resampling indicate potential for valuable additional metals to be recovered in any future concentrate from Molaoi”.
- Mr. Price confirmed the company is continuing work to secure permits for “inaugural drilling in Greece”.
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) 9.75p, Mkt Cap £102m – Gold recovery expected to recover in 2022 following geological challenges in 2021
- Shanta Gold reports an operating profit of US$4.7m in the year to 31st December 2021 (2020 – US$43.8m) and an after-tax loss of US$6.2m (2020 – after tax profit of US$17.2m).
- The company attributes the result to lower than anticipated grades and a “29.7% decrease in sales … driven by the fall in gold ounces recovered … [from 82,978oz to 55,280oz] …. The company sold 57,517 oz of gold in 2021 (2020: 83,228 oz)”.
- Explaining the nature of the operational challenges of 2021, Shanta Gold explains that “During the first half of 2021, underground mining at the Bauhinia Creek deposit intersected a structure that dragged and pinched the ore zone for approximately 17 meters along strike at the 600 level (360 vertical metres below the underground portal) and approximately 37 meters at the 585 level”.
- All-in-sustaining costs of US$1,439/oz were “higher than anticipated“ as a result of recovering fewer ounces of gold than expected.
- During the year, Shanta Gold repaid its US$10m convertible loan note “reducing gross debt to US$2.4 million”.
- Shanta Gold reports that during 2022 it expects to produce “approximately 68,000 - 76,000 oz at AISC of US$1,050 - 1,250 /oz … weighted approximately 65% towards the second half of the year reflecting mining of the high-grade Bauhinia Creek crown pillar which began in April 2022”.
- At the New Luika mine, ore reserves were replenished for the third consecutive year “with 110,000 oz of new reserves added in 2021 … [and the] … Reserve-based mine life at New Luika has been extended again, now to the end of 2026”.
- The company also confirms that “construction of the Singida mine is progressing on schedule. Several major project milestones have now been completed on site with construction at approximately 45% completion”.
- Chairman, Anthony Durrant, confirmed that the first gold production from Singida is expected to occur during Q1 2023. The initial gold-pour at Singida is expected to progress Shanta Gold’s transformation “into a +100,000 oz/p.a. producer with a diversified resource base”.
Conclusion: Shanta Gold expects a recovery in gold production in 2022 following a 30% reduction in 2021 resulting from unexpected geological conditions. The new Singida mine is progressing with initial gold expected during Q1 2023.
Versarien PLC (AIM:VRS, OTC:VRSRF)* 18p, Mkt cap £35m – Deal with global sportswear brand Umbro
- Versarien reports that Umbro will integrate Versarien's Graphene-Wear™ technology into its Elite Pro-Training Kit range, initially for the 2023 spring/summer collection.
- The two companies have been working together since 2018, and the Graphene-Wear™ formula features novel properties that will allow wearers to experience enhanced thermal transmittance, increased moisture management, with improved drying rate, without compromising air or water vapor permeability.
- The garments will also have Versarien's Graphene-Wear™ trademark applied.
*SP Angel act as Nomad and Broker to Versarien
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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
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Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
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Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
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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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