SP Angel . Morning View . Friday 13 05 22
New credit sharply drops in China raising calls for more stimulus
MiFID II exempt information – see disclaimer below
Beowulf Mining PLC (AIM:BEM)* – CEO Budge progressing Kallak project
Condor Gold PLC (AIM:CNR, TSX:COG, OTC:CNDGF)* – La India Project Q1/22 update highlights progress on the FS with completion guided for Q3/22
SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF)* – Quarterly update highlights progress to release of PFS
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Dow Jones Industrials -0.33% at 31,730
Nikkei 225 +2.64% at 26,428
HK Hang Seng +2.33% at 19,832
Shanghai Composite +0.96% at 3,084
Economics
US – The Fed is set to raise rates by 50bp at its June and July meetings with Chairman Powell saying it wasn’t “actively considering” a 75bp move, Bloomberg report.
- “If the economy performs about as expected,” Powell said on Thursday, “it would be appropriate for there to be additional 50-basis point increases at the next two meetings.”
- “If things come in better than we expect, then we’re prepared to do less. If they come in worse than when we expect, then we’re prepared to do more.”
- The US$ index the highest level since early 2000’s yesterday amid concerns over slowing global growth on high energy costs amid war in Ukraine and covid lockdowns in China.
- The S&P 500 index closed lower on Thursday taking YTD losses a little short of 20%; futures are bouncing back slightly this morning.
China – Beijing officials denied reports that the city may be locked down and urged its ~20m residents not to hoard food.
- Instead of a lockdown, authorities are planning to conduct three rounds of mass testing for people living in the city’s 11 main districts and one economic zone during the weekend.
- The city reported 36 new Covid cases in the last 24 hours with a thousand of infections recorded since late April and ~45% of patients considered at high risk of developing severe disease.
- China credit volumes come in less than half compared to market estimates in April marking the worst level in years reflecting the impact of covid lockdowns.
- The report follows weak April PMI numbers also showing a sharp deceleration in growth.
- Aggregate Financing (CNY bn): 910 v 4,653 in March and 2,200 est.
- New Yuan Loans (CNY bn): 645 v 3,125 in March and 1,530 est.
- M2 Money Supply (%yoy): 10.5 v 9.7 in March and 9.9 est.
Hong Kong – Economic growth rate cut to 1-2% in 2022, down from 2-3.5% estimated previously, according to official estimates.
- The downgrade is driven by covid outbreaks in China, tighter monetary conditions globally and weak domestic consumer spending and trade.
Peru – The central bank hikes rates to 5%, in line with market estimates, to tame soaring food and energy costs inflation.
- Inflation accelerated to 8% in April, the highest level since late 1990s.
Argentina – The central bank increased rates for the fifth time this year in a 200bp move to 49%.
- National CPI hit 58.0% in April.
Currencies
US$1.0397/eur vs 1.0462/eur yesterday. Yen 128.59/$ vs 129.09/$. SAr 16.204/$ vs 16.204/$. $1.221/gbp vs $1.220/gbp. 0.689/aud vs 0.689aud. CNY 6.795/$ vs 6.777/$.
Commodity News
Peru community resettled for Las Bambas wants land back
- The Fuerabamba was settled eight years ago to make way for the $1.2bn Chinese-owned mine, however a U-turn from the locals means they want their ancestral land back.
- In mid-April, more than a hundred Fuerabamba community members stormed the Las Bambas mine and pitched tents near the open pit.
- MMG, the mine owner, attempted in late April to remove the camp which led to clashes in which dozens of people were injured and failed to end the protest.
- Copper production remains suspended with no restart in site.
- Las Bambas, when fully operational, accounts for about 2% of the world’s mined copper.
US Dept. of Defense looks to UK and Australia to plug critical minerals mining processing gap
- The U.S. Department of Defense has asked Congress to let it fund facilities in the United Kingdom and Australia that process strategic minerals, calling the proposal crucial to national defense.
- The specific request was to alter the Cold War-era Defense Production Act (DPA), which would allow such investment to be made.
- Washington is trying harder to reduce America's dependence on China for lithium, rare earths and other minerals used to make a range of technologies.
- Currently, only facilities in the US and Canada are eligible for DPA funding.
- The UK has several proposed processing facilities for lithium and rare earths, with Pensana and Peak Resources both looking to develop REE refineries in the north of England.
- The Pentagon last year awarded a DPA grant worth $30.4m to Australia-based Lynas Rare Earths to build a processing facility in Texas, and also granted at least $45m to MP Materials.
Precious metals:
Gold US$1,825/oz vs US$1,849/oz yesterday
Gold ETFs 105.4moz vs US$105.6moz yesterday
Platinum US$985/oz vs US$985/oz yesterday
Palladium US$1,965/oz vs US$2,011/oz yesterday
Silver US$20.85/oz vs US$21.34/oz yesterday
Rhodium US$15,400/oz vs US$15,400/oz yesterday
Base metals:
Copper US$ 9,125/t vs US$8,971/t yesterday
Aluminium US$ 2,793/t vs US$2,755/t yesterday
Nickel US$ 27,580/t vs US$28,025/t yesterday
Zinc US$ 3,544/t vs US$3,570/t yesterday
Lead US$ 2,088/t vs US$2,099/t yesterday
Tin US$ 33,295/t vs US$33,300/t yesterday
Energy:
Oil US$108.5/bbl vs US$105.1/bbl yesterday
- Crude oil prices edged higher going into the weekend with the IEA reporting that diesel inventories in the OECD are the lowest since 2008.
- European energy prices remain elevated following Finland’s decision to join NATO prompted a warning from Moscow that it would face consequences.
- This week’s US natural gas storage report was up 76bcf to 1,643 (vs +78bcf expected), according to EIA estimates, which is 18.5% lower y/y and continues to linger near the bottom of its five-year range.
Natural Gas US$7.777/mmbtu vs US$7.522/mmbtu yesterday
Uranium UXC US$52.75/lb vs $52.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$127.0/t vs US$130.8/t
Chinese steel rebar 25mm US$727.1/t vs US$733.2/t
Thermal coal (1st year forward cif ARA) US$248.5/t vs US$245.0/t
Thermal coal swap Australia FOB US$369.5/t vs US$355.0/t
Coking coal swap Australia FOB US$494.0/t vs US$485.0/t
Other:
Cobalt LME 3m US$82,000/t vs US$82,000/t
NdPr Rare Earth Oxide (China) US$135,171/t vs US$135,010/t
Lithium carbonate 99% (China) US$62,982/t vs US$63,078/t
China Spodumene Li2O 5%min CIF US$3,920/t vs US$3,820/t
Ferro-Manganese European Mn78% $1,804/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$366/t vs US$367/t
Spot CO2 Emissions EUA Price US$91.6/t vs US$90.3/t
Brazil Potash CFR Granular Spot US$1,220/t vs US$1,220/t
Battery News
Company News
Beowulf Mining PLC (AIM:BEM)* 6.05p, Mkt Cap £50m – CEO Budge progressing Kallak project
- Beowulf reports that the company’s CEO, Kurt Budge, has been active in the project area of Kallak in progressing the timeline to production.
- Mr Budge has met with legal advisers to discuss environmental permitting and its place in the overall development timeline for Kallak.
- The company is currently preparing a detailed plan for the project in parallel to a scoping study and PFS which is currently underway.
- The Company's overall objective is to have Kallak in production in 3-4 years, developing the mine alone or in partnership.
- Mr Budge also provided an update on Kallak at the Swedish Mining Innovation and Research Day in Luleå on 12 May.
- Discussions between the Company and EPC contractors are ongoing, with a key focus on a sustainable mining operation.
- The awarding of the Exploitation Concession enables Beowulf to have more substantive discussions with consultants and stakeholders over making progress at Kallak.
- The awarding of the concession at Kallak follows the appointment of Karl-Petter Thorwaldsson as Minister of Trade and Industry, who is widely viewed as pro-mining and someone who sees value in developing domestic, word class natural resources for the benefit of the Swedish people.
- Kallak’s particularly clean magnetite concentrate should enable steel makers to reduce carbon emissions further, improve energy efficiency and reduce waste leading to cleaner and greener steel production.
- The Kallak North area concession is also designated as an Area of National Interest for minerals and is located just 80km southwest of the major iron ore mining centre of Malmberget.
- The project is also ~120km southwest of the giant Kiruna iron ore mine which LKAB claims to be the first source of green iron in the Europe.
*SP Angel acts as Nomad and Broker to Beowulf
Condor Gold PLC (AIM:CNR, TSX:COG, OTC:CNDGF)* 35.5p, Mkt Cap £52m – La India Project Q1/22 update highlights progress on the FS with completion guided for Q3/22
- Operationally, work continued on the La India feasibility study covering mining, processing, TSF and project infrastructure.
- The team currently reviewing the metallurgical testwork, geotechnical data and capital costs estimates.
- The FS is expected to be released Q3/22 helping the Company to secure project funding.
- The Company secured 99.6% of land for the La India open pit and associated mine site infrastructure.
- In March, the Company reported it received all assay results from the ~8,000m infill drilling programme at the Mestiza open pit mine that will be used for the updated MRE.
- Both high grade Mestiza and America open pit feed will be incorporated into the mine plan during the project construction phase.
- Financially, administrative costs totalled £0.7m (Q1/21: £0.5m) during the quarter.
- PAT -£0.7m (Q1/21: -£0.5m) reflecting administrative expenses during the period.
- Capitalised exploration and development costs amounted to £1.1m (Q1/21: £1.9m).
- Cash balance was £0.4m (Dec/21: £2.1m) and no debt.
*SP Angel act as a broker to Condor Gold
SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF)* 27p, Mkt Cap £591m – Quarterly update highlights progress to release of PFS
- SolGold has released its unaudited results for the three months to 31 March 2022.
- Solgold reports a net loss of $9.0m vs $5.6m during the same period last year.
- Administrative expenses for the period rose to $4m vs $3.5m last year.
- At 31 March 2022 the Group had cash and cash deposits of US$38m a decrease of US$71m from US$110m at 30 June 2021.
- Post period, the company has issued details of its pre-feasibility study for the development of its 85% owned Cascabel project in northern Ecuador where it plans to develop the Alpala deposit as a 25mtpa underground block-caving operation producing an average of 132,000tpa of copper, 358,000ozpa of gold and 1mozpa of silver over an initial 26 year mine life.
- The company’s study shows that pre-production capital investment of US$2,746m followed by post-production sustaining capital of a further US$2,136m is expected to generate an after-tax NPV8% of US$2,907m and an IRR of 19.3% using base case commodity prices of US$3.60/lb for copper, US$1,700/oz for gold and US$19.90/oz for silver.
- Pre-production mine capital development is expected to cost US$900m with a further US$465m for the process plant, US$309m for tailings storage and the estimates include a contingency allowance of US$391m.
- The major elements of post-production capital expenditure include an additional US$748m for further mine development, US$695m for additional tailings storage capacity and a further US$219m for the process plant.
- The project is expected to payback in 4.7 years and the company says that at “current spot commodity prices” of US$4.74/lb for copper, US$1,933/oz for gold and US$24.50/oz for silver, the “After-tax NPV would be US$4.1bn (US$7.9bn pre-tax) and IRR 23.4% (30.5% pre-tax)”.
- The initial development targets a ‘Probable’ ore-reserve of 558mt at an average grade of 0.58% copper, 0.52g/t gold and 1.65g/t silver which, the company explains, “represents only 21% of Measured and Indicated Resources tonnes and approximately 38% of contained metal”.
- Solgold also identifies additional opportunities for future expansion through the development of additional mineral resources within the broader Cascabel project area, including at the Tandayama-America (TAM) project, located approximately 3km north of Alpala, where it identified indicated resources of 233mt a at an average grade of 0.23% copper and 0.16g/t gold (reported as 0.33% copper equivalent CuEq) plus inferred resources of 197mt averaging 0.39% CuEq in October last year.
- Separately, SolGold reports that Executive Director Mr. Jason Ward has today resigned as a Director of SolGold effective immediately.
- The Company is in the final stages of recruiting a new Head of Ecuador and Mr. Ward will transition his country responsibilities to continue as SolGold's Head of Exploration as well as representing the Company with local communities.
*SP Angel acts as Financial Advisor to SolGold
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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)
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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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