SP Angel . Morning View . Thursday 12 05 22
Copper prices drop below $9,000/t on global demand fears
MiFID II exempt information – see disclaimer below
AEX Gold Inc (AIM:AEXG, TSX-V:AEX) – Acquisition of additional exploration licences in Greenland
Arc Minerals Limited (AIM:ARCM)* – Agreement with Anglo American
Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)* – Record Q1 gold production from the Blanket mine, Zimbabwe
KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* – Progress report on Tulu Kapi project
Largo (TSE: LGO) – Stronger vanadium prices lift Q1 22 earnings
Serabi Gold (AIM:SRB, TSX:SBI)* – Palito delivers 2022’s highest monthly production in April
Sunrise Resources PLC (AIM:SRES) – Correction to our comment of 11th May on CS Pozzalan
Vedanta Resources plc (LSE:VED)– Company agrees to suspend lawsuit over Zambia copper mines
Versarien PLC (AIM:VRS, OTC:VRSRF)* – Interims highlights flurry of partnership deals
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 -1.02% at 31,834
Nikkei 225 -1.77% at 25,749
HK Hang Seng -2.08% at 19,413
Shanghai Composite -0.12% at 3,055
Economics
UK – Economy unexpectedly contracts in March as GDP falls 0.1%
- GDP fell 0.1% after flatlining in February, meaning growth in Q1 was 0.8% vs 1.0% expected.
- During Q1 the total trade deficit widened by £14.9bn to £25.2bn – the largest deficit since records began in 1997.
- Business investment fell by 0.5% and remains 9.1% below its pre-pandemic levels.
- Deputy Governor of the BoE has said that the central bank will have to raise rates further to control surging prices.
- With rates currently at 1%, market expectations show rates hitting 2.5% by the middle of 2023, Bloomberg reports.
US – US CPI at 8.3% in April vs 8.5% in March
- Inflation remained at a 40-year high last month, as prices rose by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021.
- The CPI food index increased 9.4% on the year, the largest 12-month increase since April 1981.
- The core price index increased 0.6% on the month, up from March’s 0.3% gain.
Brazil – President Bolsonaro removes Albuquerque as Mines and Energy Minister
- Bolsonaro removed Albuquerque from his role as mines and energy minister early on Wednesday, with Economy Ministry official Adolfo Sachsida set to replace him.
- Albuquerque had been in the role since the first day or Mr Bolsonaro’s administration in Jan 2019.
- The move comes after Bolsonaro mentioned Albuquerque last Thursday during a livestream on social media while urging state-run oil company Petrobras (NYSE:PBR) not to hike fuel prices again.
- Petrobras then announced on Monday it was raising refinery gate diesel prices by 8.9% to track rising international diesel prices amid tighter global supply.
Europe – Finland’s president and prime minister back Nato membership
- Finland’s President Sauli Niinistö and Prime Minister Sanna Marin both said on Thursday that Finland “must apply” for Nato membership within days.
- Sweden’s ruling Social Democrats will make a decision on Sunday whether to join Nato.
Currencies
US$1.0462/eur vs 1.0549/eur yesterday. Yen 129.09/$ vs 130.36/$. SAr 16.204/$ vs 16.112/$. $1.220/gbp vs $1.233/gbp. 0.689/aud vs 0.697aud. CNY 6.777/$ vs 6.725/$.
Commodity News
Copper prices drop below $9,000/t on global demand fears
- Copper prices fell 4.3% on Thursday morning, with base metals falling across the board on worsening sentiment regarding consumption.
- Concerns over US monetary tightening, sluggish European economic data and China’s covid policy are proving formidable headwinds to industrial metals.
- Copper prices are now down over -12% since this time last month, and below $9,000/t for the first time since September 2021.
- The US Fed hiked rates by 50bp to 0.75-1.00% range last month, the first such decision in more than 20 years that was largely priced in by markets.
- Investors are also pricing in at least two further rate hikes at the 50bp mark for the remainder of this year, with this lower-liquidity environment historically an environment where the dollar strengthens.
- Longer term, buoyant copper prices are expected to be aided in part by government stimulus packages that target copper-consumptive industries such as infrastructure, housing and renewable energy.
- Renewable power generation is also anticipated to take an expanding share of the global copper market, with offshore wind requiring 10kg/kw and onshore wind 3.5kg/kw.
Congo mines minister seeks to cancel artisanal cobalt monopoly
- The DRC Mines Minister Antoinette N'Samba Kalambayi is seeking to cancel a decree granting Entreprise Generale du Cobalt (EGC) a monopoly over artisanal cobalt produced in the country, she told Reuters on Wednesday.
- EGC was created by government decree in December 2019 and officially launched on March 31 last year but has yet to purchase any cobalt.
- Artisanal miners are the second largest source of cobalt worldwide after the Congo's industrial mines.
Colombia targets first offshore wind projects
- Two offshore projects with a combined capacity of 550MW are at the pre-feasibility stage in Colombia, as part of plans to build 1GW of turbines by 2030.
- Denmark-based Copenhagen Infrastructure Partners and Barranquilla electricity firm APBAQ in March signed an initial agreement for the construction of the project.
- The $1bn project is expected to be completed by 2026.
- Wind turbines consume 600-830kg of Rare Earth Oxide per Megawatt, each 3MW direct-drive wind turbine using around 1.7t of NdFeB magnets.
- After growing at a CAGR of 6.4% from 2015 through 2019, the value of global magnet rare earth oxide consumption will rise five-fold by 2030 from $2.98bn in 2020 $15.65bn in 2029, according to Adamas Intelligence
Precious metals:
Gold US$1,849/oz vs US$1,847/oz yesterday
Gold ETFs 105.6moz vs US$105.8moz yesterday
Platinum US$985/oz vs US$984/oz yesterday
Palladium US$2,011/oz vs US$2,076/oz yesterday
Silver US$21.34/oz vs US$21.61/oz yesterday
Rhodium US$15,400/oz vs US$15,700/oz yesterday
Base metals:
Copper US$ 8,971/t vs US$9,302/t yesterday
Aluminium US$ 2,755/t vs US$2,786/t yesterday
Nickel US$ 28,025/t vs US$28,030/t yesterday
Zinc US$ 3,570/t vs US$3,650/t yesterday
Lead US$ 2,099/t vs US$2,120/t yesterday
Tin US$ 33,300/t vs US$35,425/t yesterday
Energy:
Oil US$105.1/bbl vs US$104.7/bbl yesterday
- Crude oil prices whipsawed violently yesterday to no real effect as markets continue to weigh sanction-based disruptions to Russian supply against the darkening mood regarding global economic growth.
- The EIA reported an 8.5mb build in US crude stockpiles for last week, with a large 3.5mb draw on gasoline, and forecast that U.S. refinery utilisation would top out at 95% this summer in response to high product prices.
- European energy prices rose on increasing concerns over Russian supplies even as Italian Prime Minister Mario Draghi said European companies will be able to pay for gas in roubles without breaching sanctions.
Natural Gas US$7.522/mmbtu vs US$7.345/mmbtu yesterday
Uranium UXC US$52.75/lb vs $54.15/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$130.8/t vs US$128.6/t
Chinese steel rebar 25mm US$733.2/t vs US$737.1/t
Thermal coal (1st year forward cif ARA) US$245.0/t vs US$245.0/t
Thermal coal swap Australia FOB US$355.0/t vs US$349.0/t
Coking coal swap Australia FOB US$485.0/t vs US$490.0/t
Other:
Cobalt LME 3m US$82,000/t vs US$82,000/t
NdPr Rare Earth Oxide (China) US$135,010/t vs US$131,618/t
Lithium carbonate 99% (China) US$63,078/t vs US$63,578/t
China Spodumene Li2O 5%min CIF US$3,820/t vs US$3,720/t
Ferro-Manganese European Mn78% $1,861/t vs US$1,861/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% 10.3/lb vs US$10.3/lb
Europe Ferro-Vanadium 80% 40.75/kg vs US$40.75/kg
China Ilmenite Concentrate TiO2 US$367/t vs US$370/t
Spot CO2 Emissions EUA Price US$90.3/t vs US$91.1/t
Brazil Potash CFR Granular Spot US$1,220/t vs US$1,220/t
Battery News
Vehicle sales in China down due to Covid impacts
- Sales of all vehicles in China totalled 1.181m units in April, down 47.6% y-o-y, and down 47.1% from March, according to data from the China Association of Automobile Makers (CAAM).
- NEV sales, which have been continuing strong growth in 2022, totalled 299,000 units up 44.6% y-o-y, but down 38.3% from March.
- NEV production was down for the month – the 312,000 units manufactured is down 33% from March.
- Many automakers have experienced difficulties with production over the last months, with forced closures, logistics and transportation leading to a decline in supply capacity.
- The CAAM also noted that consumer confidence has dropped significantly because of the Covid impact.
Subaru to build first EV factory
- Japanese automaker, Subaru, will build a dedicated EV factory in Japan before the end of the decade.
- The plan is part of a $1.9bn response to surging demand for EVs in its main North American market.
- Subaru has plans to launch a mixed production line of ICE vehicles and EVs around 2025, before opening an EV-only production line in the new factory after 2027.
Toyota cautiously rolls out first BEV
- Toyota has rolled its first mass-produced battery EV in Japan – for lease only.
- The automaker believes the decision will help to ease driver concerns about battery life and resale value.
- Hybrid EVs continue to be far more popular in the Japanese market – EVs accounted for just 1% of passenger vehicle sales last year.
- Toyota will lease the bZ4X sport utility vehicle (SUV) for the equivalent of $39,000 for the first four years and cancelling within this first period will incur an additional fee.
- Despite the cautious start, Toyota announced in December that it would invest $62bn to electrify its fleet by 2030.
Company News
AEX Gold Inc (AIM:AEXG, TSX-V:AEX) 42p, Mkt Cap £74m – Acquisition of additional exploration licences in Greenland
- AEX Gold reports that it has acquired an additional 3,527km2 of exploration licences bringing its total south Greenland licence area to 7,616km2.
- The additional land “means the Company will become the largest licence holder in South Greenland, and the third largest in Greenland, after Anglo American and Greenfield Exploration”.
- The new area increases “the Company's exposure to metals such as nickel, copper, zinc, lead, titanium, vanadium, graphite and rare earth minerals, as well as additional gold resources across the Nanortalik and Tartoq gold belts”.
- AEX Gold is acquiring the licences from the Orano Group for a “zero upfront consideration” and a royalty on future production. The 0.5% gross-revenue royalty capped at US$10m.
- The licences include:
- The 8km diameter Stendalen Iron-Vanadium-Titanium layered intrusive which “has provided historical samples yielding between 1-10.5% Titanium Dioxide (TiO2) (average of 4.8%) and 226-5,753ppm Vanadium (V) (average 2,335ppm). Stendalen also host the potential for Nickel (Ni), Copper (Cu) and Platinum Group Element (PGE) mineralisation with grab samples proving grades of 0.8% Copper (Cu), 0.5% Nickel (Ni) and 0.1% Cobalt (Co)”; and
- Ground in “a newly identified IOCG (Iron Ore, Copper Gold) and Porphyry Copper belt situated in close proximity to the international airport at Narsarsaq” at North Sava; as well as other potential uranium, lead, nickel, zinc, titanium and rare-earths exploration opportunities.
- CEO, Eldur Olaffson said that the acquisition, which is subject to Greenland Government approval, provides the opportunity to “expand exploration for strategic minerals following this deal… utilising our existing camp and infrastructurethird largest in the country.
Conclusion: The acquisition of additional licence gives AEX Gold the largest exploration licence holding in southern Greenland and the third largest in the country.
Arc Minerals Limited (AIM:ARCM)* – 5.3p, Mkt cap £52m – Agreement with Anglo American
(Arc holds 72.5% of Zaco and 66% of Zamsort in Zambia. The Cheyeza license is 66% owned by Arc Minerals through its holding in Zamsort.)
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- Arc Minerals has announced that it has agreed to form a joint-venture with Anglo American under which investment by Anglo American of up to US$88.5m, including up to US$14.5m in cash, earns Anglo a 70% interest.
- Today’s announcement describes Anglo American’s right to “retain an Ownership Interest of 51%” by funding US$24m of exploration within 3½ years and phased cash payments of US$14.5m with US$3.5m due on signing the agreement, further payments of US$1m on each of the next three anniversaries of the agreement and US$ 8m at the end of the period.
- When the first phase is complete, “Anglo American will have the right to retain an additional ownership interest equal to 9% (for a total ownership interest of 60%) by funding USD 20,000,000 of additional exploration expenditures within 2 years of the Phase I” and an additional 10% by “funding USD 30,000,000 within 2 years of the Phase II”.
- Drilling by Arc Minerals has revealed significant showings of copper indicating strong potential for significant discovery in the region west of First Quantum’s’ Sentinel mining complex near Solwezi.
- Anglo appear to have a very definite plan for development of copper to the west of Zambia inspired by Dave Wood, discovery manager for Zambia for Anglo.
- According to reports in the industry publication, the ‘Mining Journal’, Anglo American may also be planning further investment in copper in sub-Saharan Africa with rumours that it may be examining a potential bid for the Khoemacau copper mine in Botswana.
*SP Angel acts as Nomad and broker. An SP Angel analyst has driven across the Zambian copper belt, flying the British flag, to visit Arc’s licenses West of Solwezi.
Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)* 1055p, Mkt Cap £135m – Record Q1 gold production from the Blanket mine, Zimbabwe
- Following record Q1 production of 18,515oz of gold at its Blanket mine in Zimbabwe during the 3 months ended 31st March 2022, Caledonia Mining reports US$7.6m of after tax profit for the quarter (Q1 2021 – US$5.4m).
- The results reflect higher operating cash flow of US$10.2m for the quarter Q1 2021 – US$2.0m) offset by increased investment expenditure of US$10.0m (Q1 2021 – US$6.2m) and leave the company with a 31st March cash balance of US$14.4m.
- Costs, on an all-in-sustaining basis, declined to US$968/oz compared to the Q1 2021 level of US$1,044/oz reflecting “higher production, which means that fixed costs are spread over more production ounces; costs were also helped by reduced diesel consumption following the installation of equipment in late 2021 which allows us to manage the poor-quality grid power.”
- CEO, Steve Curtis, explained that “The higher production reflects increased tonnes milled, better grade and improved recovery”.
- Confirming the “2022 gold production guidance of between 73,000 and 80,000 ounces”, Caledonia Mining reports that “6,797 ounces of gold were produced in April 2022 which is an annualised production rate of approximately 81,500 ounces”.
- Expressing confidence that the guidance would be achieved, Mr. Curtis explained that the new Central Shaft “is operating as planned. The shaft is now hoisting waste material arising from the final development to connect the shaft to the production areas. This has relieved pressure on the Number 4 Shaft which can focus on hoisting ore until Central shaft takes over this role later in the year”.
- He also explained that Caledonia's immediate strategic focus is to convert the commissioning of Central Shaft project into higher production, lower costs and increased cash generation. We have made an excellent start in each of these objectives”.
Conclusion: Following the successful completion of the 5 year long, US$67m, Central Shaft project at the Blanket mine, Caledonia reports a 40% rise in Q1 profit, a 7% decline in all-in-sustaining costs and reaffirms its 2022 production guidance range of 73- 80,000oz of gold production.
*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe
KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* 0.7p, Mkt Cap £24m – Progress report on Tulu Kapi project
- Kefi Gold & Copper has provided information on the progress of the Tulu Kapi gold project in Ethiopia.
- The company says that it expects to execute the umbrella agreement with the financing syndicate next month “enabling full construction to commence from October, at the end of the wet season”.
- Kefi also describes further operating progress at Tulu Kapi including the receipt of an independent report on the safety aspects of the project which concludes that the “proposed risk-staged Project launch is appropriate and lays the security foundation for long term successful operation”.
- Design work for the front-end engineering and procurement aspects of the process plant is now complete and the company is “Updating pricing for mining services and the process plant” ahead of an independent review” and “Electricity supply equipment … [is] … arriving in Ethiopia ahead of installation”.
- Executive Chairman, Harry Anagnostaras-Adams confirmed that “This week an all-parties meeting of the Tulu Kapi Gold Project finance syndicate confirmed the plan and timetable to senior officers of the Ministry of Mines, with the recently announced KEFI fund-raisings forming part of the full finance plan for development”.
Conclusion: Kefi Minerals is looking to start full construction at the Tulu Kapi project in Ethiopia in the autumn and is expecting to reach agreement with the financing syndicate next month.
*SP Angel act as Nomad and Broker to KEFI Gold and Copper
Largo (TSE: LGO) C$9.68, Mkt Cap C$627m – Stronger vanadium prices lift Q1 22 earnings
- Revenues climbed 7% YoY to $42.7m, with realised prices up 34% to $8.67/lb.
- Total V2O5 equivalent sales of 2,232 tonnes vs. 2,783 tonnes in Q1 2021 due to ongoing global logistical challenges and lower production in Q4 2021
- V2O5 production during the quarter rose to 2,442t vs 1,986t.
- Operating costs of $29m vs. $28.2m in Q1 2021, and cash operating costs excluding royalties per pound of $3.97 vs. $2.87 in Q1 2021.
- Construction of the Company’s ilmenite concentration plant commenced in April as part of its previously announced titanium dioxide pigment project.
- TiO2 content is expected to be sourced from the vanadium ore created from the Company’s ongoing operations, which is expected to contribute to the Company's “two-pillar” business strategy as a low-cost vanadium supplier with an emerging vanadium battery business.
Serabi Gold (AIM:SRB, TSX:SBI)* 39p, Mkt Cap £27m – Palito delivers 2022’s highest monthly production in April
- Serabi Gold (AIM:SRB, TSX:SBI) reports that its Palito mine produced 2,919oz of gold in April - the highest monthly total so far in 2022.
- CEO, Mike Hodgson, explained that “we experienced production challenges in the first quarter on the Julia Vein at Sao Chico, and this resulted in us moving away from sublevel long-hole mining method, for the more selective, albeit slower shrink stoping method. So it is really pleasing to see this change bearing fruit coupled with continued excellent performance at Palito. The mining teams are working hard to maintain this level of production over the coming months”.
- The company also confirms progress at the Coringa project with “underground on-lode development extended for a total of over 60 metres” and underground channel samples returning “better than anticipated grades” and an initial “bulk sample generated from Coringa development project of 894 tonnes at 8.25 g/t including a high grade stockpile of 366 tonnes at 17.76g/t”.
- Mr.Hodgson confirmed that the underground vein at Coringa “ has been mapped and sampled as we advance providing us with an excellent 3-dimensional understanding of the ore zone. So far it is shaping up better than we could have expected. Not only have grades consistently exceeded our expectations but also parts of the vein are sufficiently wide and continuous to allow for split blasting where we blast the ore and waste separately. This enables us to remove a less diluted and therefore higher grade product from the mine”.
- He also commented on the completion of three exploration drill-holes at the Matilda prospect “to test the 4km by 4km target with each intersecting porphyry material with significant sulphide content. Although we are awaiting assay results, hitting a mineralised porphyry with the first three holes ever drilled on such a large target is fantastic. The core is being logged in detail and we look forward to updating the market when the assay results are received.”
*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil
Sunrise Resources PLC (AIM:SRES) 0.14p Mkt Cap £5.6m – Correction to our comment of 11th May on CS Pozzalan
- In our comments yesterday, we erroneously reported that the California Department of Transport had approved the use of natural pozzalan from its CS deposit in Nevada for use in concrete for State-funded infrastructure projects.
- We should clarify that Sunrise Resources has applied for approval and that it has not yet received such approval.
- We apologise for any confusion arising from our comments.
Vedanta Resources plc (LSE:VED) 305INR, Mkt cap INR1,135bn – Company agrees to suspend lawsuit over Zambia copper mines
- Vedanta reports that it has agreed to suspend legal action to reclaim copper mines in Zambia seized by the government three years ago.
- Konkola Copper Mines was placed under provisional liquidation after the previous Zambian government accused Vedanta of lying about expansion plans and paying too little tax.
- The Company plans to invest $1.5bn to revive the operations if they are given the mines back.
- The Zambian President Hakainde Hichilema who took office last August is seeking to repair relationships with mining companies in a bid to repair relationships and attract more foreign investment.
Versarien PLC (AIM:VRS, OTC:VRSRF)* 15.9p, Mkt cap £31m – Interims highlights flurry of partnership deals
- Versarien has released its unaudited interim results for the twelve months ended 31 March 2022.
- The company reported a loss of £5.2m for the period vs £8.1m last year.
- Group revenues from continuing operations up 34% to £7.6m.
- Graphene revenues up 170% to £1.9m.
- Adjusted LBITDA for continuing operations reduced by 45% to £1.0m.
- The company’s cash position at the end of the period was £3.1m.
- Operational highlights during the period include the relocation to new dedicated graphene production facility in Longhope, Gloucestershire to significantly expand capacity.
- The company also acquired a suite of Spanish graphene manufacturing assets transferred to Longhope during the year and in process of commissioning to provide up to an additional 100 tonne powder capacity per annum.
- Partnership highlights include deals with the Defence Science and Technology Laboratory, Gerdau S.A and US-based Flux Footwear; as well as Umbro and GoToGym post-period.
- The company secured £1.93m worth of funding by GrapheneLab, a South Korean company, during the period.
*SP Angel acts as Nomad and Broker to Versarien
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
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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
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