SP Angel . Morning View . Wednesday 25 05 22
Rare Earth and lithium prices rise as base metals pull back
MiFID II exempt information – see disclaimer below
American West Metals (PRIVATE-AU:AW1) – Step out drilling intersects new polymetallic mineralised zone 250m away from West Desert
Glencore PLC (LSE:GLEN) – Glencore to pay $1.5bn penalty amid bribery charge
Ivanhoe Electric - Robert Friedland to IPO battery metal focused Ivanhoe Electric
Pensana PLC (LSE:PRE) – Completion of design and engineering studies for Angolan mine and UK rare-earths processing facilities.
Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)* – Phoenix Copper bolsters its PR and IR team
Sunstone Metals Ltd (ASX:STM)– Assay results for El Palmar Cu-Au project
Lithium - Pilbara Minerals reports another increase for its lithium concentrate sold via Battery Material Exchange indicating a further tightening in the market as battery producers aim to secure raw materials supply
- BMX 5 auction for the 5kt concentrate shipment and delivery in early June reached a price of $5,955/t SC5.5 (FOB Port Hedland), equivalent to $6,586/dmt SC6.0 (CIF China).
- This follows on BMX 4 auction for same size shipment conducted 27 April 2022 that secured a price of $5,650/t and $6,250/dmt, respectively.
- Pilbara currently runs at 360-380ktpa SC6 with Mar/22 quarter sales averaging $2,650/dmt SC6 (CIF China) price for its shipments.
Dow Jones Industrials +0.15% at 31,929
Nikkei 225 -0.26% at 26,678
HK Hang Seng +0.55% at 20,223
Shanghai Composite +1.19% at 3,107
Economics
US – Growth momentum pulled back with flash May PMI survey reporting elevated inflationary pressures, a further deterioration in supplier delivery times and weaker demand growth.
- Composite PMI measure dropped to 53.8 in May from 56.0 in April marking the weakest growth rate in four months and below the series long-run average of 54.8.
- New orders across the private sector reported the softest pace of expansion since August 2020.
- Price pressures intensified with respondents highlighting higher interest rates, wage bills, fuel costa and transportation fees as causes.
- Labour market remained strong with firms expanding staff levels at the fastest pace for 13 months.
- “The early survey data for May indicate that the recent economic growth spurt has lost further momentum… Growth has slowed since peaking in March, most notably in the service sector, as pent up demand following the reopening of the economy after the Omicron wave shows signs of waning… Companies report that demand is coming under pressure from concerns over the cost of living, higher interest rates and a broade3r economic slowdown,” S&P Global commented.
- New home sales posted a more than 16% drop in April on the back of higher borrowing costs and rising property prices.
- The average mortgage rate on the 30-year fixed loan climbed from 4.88% at the start of April to 5.41% towards the end of last month, CNBC quotes Mortgage New Daily numbers.
- The median price of a new home sold in April was $450,600, up nearly 20% on the previous year.
- S&P Manufacturing PMI: 57.5 v 59.2 in April and 57.7 est.
- S&P Services PMI: 53.5 v 55.6 in April and 55.2 est.
- New Home Sales (%mom): -16.6 v -10.5 (revised from -8.6) in March and -2.0 est.
Germany – Consumer confidence improved slightly in June but remained at “an absolute low”, GfK reports.
- "Despite further easing of coronavirus-related restrictions, the Ukraine war and above all the high inflation are weighing heavily on the mood of consumers," GfK commented on the data.
- GfK Consumer Sentiment: -26.0 v -26.6 (revised from -26.5) in May and -25.5 est.
France – Consumer sentiment hit the lowest since 2014 in May mimicking the dynamic reported in the neighbouring Germany.
- Consumer Confidence: 86 v 87 (revised from 88) in April and 89 est.
Russia – The central bank moved the date for its next monetary policy meeting by more than two weeks amid a strong recovery in the national currency.
- The rate decision is expected this Thursday with the benchmark rate currently standing at 14% and the next scheduled meeting was not expected until June 10.
- The bank did not comment on potential announcements but officials said further rate cuts are likely as inflation dropped lately, Bloomberg reports.
- The ruble trades just below the 57.0 mark, the strongest its been since 2018 and up on over 80 just before the invasion in Ukraine, supported by high trade surpluses, regulations requiring exporters to sell 50% of their FX proceeds (reduced form 80% only recently) and capital controls limiting demand for foreign currency.
- The central bank delivered a bigger than expected cut of three percentage points at its last meeting in April.
Cobalt - Mopani copper mine to resume production of cobalt as higher prices and demand persuades ZCCM-IH to restart cobalt processing
- Starting next year Mopani will start to process around 4,000-5,000tpa of cobalt concentrates
Platinum – Nornickel expect a mild deficit in palladium
- Nornickel, the Russian PGM producer forecasts a mild deficit in palladium where it leads global production and is guiding to 2,451-2,708oz of palladium this year
- The team forecast global palladium demand to rise by 3% to 10.3 million ounces in 2022
- Nornickel highlighted that the future stability of supply from Russia and the pace of recovery in the automotive sector are unclear.
- We are in a particularly uncertain environment for production due to supply chain issues and Russian sanctions which could impact critical components in mining and smelting at Norilsk
- Demand for palladium which is principally used in gasoline catalysts is expected to rise 8% to 10,290koz this year including 8,495koz for autocatalysis leading to a -90,000oz deficit according to SFA Oxford
- Nornickel also see a 37,000t surplus in nickel in 2022, down from Nov 2021 estimate of 59,000t
- Norilsk Nickel expects the global nickel market surplus to widen to about 100,000t next year though some speculate they may be helping their Chinese customer at Tsingshan who were caught short when the nickel prices ran to $101,365/t on 7th March.
- Regarding sanctions against Russian companies, Norlisk commented: “Despite the rumours, Russian nickel exports have not been affected and Nornickel continues to fulfil all contractual obligations”
- Norilsk expects the palladium market to be largely balanced in 2022.
Currencies
US$1.0692/eur vs 1.0726/eur yesterday. Yen 127.22/$ vs 127.38/$. SAr 15.668/$ vs 15.752/$. $1.255/gbp vs $1.259/gbp. 0.711/aud vs 0.709/aud. CNY 6.671/$ vs 6.675/$.
Commodity News
Precious metals:
Gold US$1,858/oz vs S$1,857/oz yesterday
Gold ETFs 105.2moz vs US$105.2moz yesterday
Platinum US$953/oz vs US$957/oz yesterday
Palladium US$2,029/oz vs US$1,992/oz yesterday
Silver US$21.97/oz vs US$21.85/oz yesterday
Rhodium US$15,600/oz vs US$15,300/oz yesterday
Base metals:
Copper US$ 9,414/t vs US$9,478/t yesterday
Aluminium US$ 2,851/t vs US$2,937/t yesterday
Nickel US$ 26,155/t vs US$26,605/t yesterday
Zinc US$ 3,760/t vs US$3,763/t yesterday
Lead US$ 2,163/t vs US$2,179/t yesterday
Tin US$ 34,100/t vs US$34,070/t yesterday
Energy:
Oil US$114.6/bbl vs US$111.9/bbl yesterday
Natural Gas US$8.826/mmbtu vs US$8.750/mmbtu yesterday
Uranium UXC US$46.70/lb vs $46.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$129.6/t vs US$134.2/t
Chinese steel rebar 25mm US$710.6/t vs US$717.6/t
Thermal coal (1st year forward cif ARA) US$248.5/t vs US$248.5/t
Thermal coal swap Australia FOB US$375.0/t vs US$411.0/t
Coking coal swap Australia FOB US$485.0/t vs US$485.0/t
Other:
Cobalt LME 3m US$75,000/t vs US$75,000/t
NdPr Rare Earth Oxide (China) US$141,662/t vs US$140,454/t
Lithium carbonate 99% (China) US$64,385/t vs US$64,197/t
China Spodumene Li2O 5%min CIF US$4,380/t vs US$4,260/t
Ferro-Manganese European Mn78% min US$1,855/t vs US$1,861/t
China Tungsten APT 88.5% FOB US$336/t vs US$336/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 9.6/lb vs US$9.7/lb
Europe Ferro-Vanadium 80% 38.25/kg vs US$38.25/kg
China Ilmenite Concentrate TiO2 US$371/t vs US$371/t
Spot CO2 Emissions EUA Price US$86.4/t vs US$83.7/kg
Brazil Potash CFR Granular Spot US$1,200/kg vs US$1,200/kg
Battery News
South Korean battery makers investing heavily in US
- Since 2018, South Korean battery makers have made investments totalling $13bn, within the US.
- This year alone, plans worth $5.5bn have been announced, encouraged by incentives that come with Biden’s plan to shift more of the EV supply chain to the US away from China.
- Plans in the pipeline from the big three South Korean battery manufacturers, LGES, SK On and Samsung SDI, would see an additional capacity of 320GWh built over the next few years.
- Samsung SDI and Stellantis has announced this week that they will invest more than $2.5bn to build a JV battery plant in Indiana.
- Targeted to start in 2025, the plant aims to have an initial annual production capacity of 23GWh with an aim to increase to 33GWh.
CATL partners with European electric bus maker Solaris
- CATL have entered a partnership with European electric bus maker Solaris to drive the transition to electric urban mobility in Europe.
- The Chinese battery manufacture will supply LFP batteries using cell-to-pack (CTP) technology to drive the electrification of buses.
- The long life and thermal stability of CATL’s LFP system will provide significant advantages in safety and temperature resilience.
- Solaris, based in Poland, is one of Europe's leading bus and trolleybus manufacturers, having built more than 22,000 vehicles in the past 25 years.
Company News
American West Metals (PRIVATE-AU:AW1) A$0.2, Mkt Cap A$31m – Step out drilling intersects new polymetallic mineralised zone 250m away from West Desert
- First exploration drillhole (WD22-19) intersected polymetallic mineralisation 250m south west of the existing resource at the flagship West Desert Deposit in Utah.
- The drillhole was designed to test a strong magnetic anomaly with a similar geophysical signature as the West Desert Deposit.
- The anomaly that was not previously drilled is interpreted to be a potential faulted and offset extension of the West Desert Project.
- The Company reports wide intervals of magnetite skarn mineralisation with elevated zinc, copper and silver identified with a portable XRF gun.
- Higher zinc and silver readings are reported towards the bottom of the ~630m deep drillhole and strong molybdenum readings (XRF readings up to 1.97% Mo) recorded in veinlets within porphyry from ~619m.
- Laboratory assay results are underway with exploration drilling to further test regional targets including eastern extensions to the West Desert and a number of other West Desert “look alike” geophysical targets.
Glencore PLC (LSE:GLEN) 532p, Mkt cap £68bn – Glencore to pay $1.5bn penalty amid bribery charge
- Glencore will plead guilty to multiple counts of alleged bribery and market manipulation and pay penalties of up to $1.5bn following US, UK and Brazilian investigations.
- The UK Serious Fraud Office charged the group’s subsidiary Glencore Energy UK with seven cases of profit-driven bribery and corruption in connection to oil operations in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria and South Sudan.
- Glencore also pleaded guilty in two separate US cases and agreed to pay approximately $1.1bn in criminal fines and forfeiture.
- Glencore said it would pay about $1.5bn in overall penalties, including the $1.1bn to US authorities, $40m to Brazilian prosecutors and an amount due to the UK to be finalised at a sentencing hearing.
Ivanhoe Electric - Robert Friedland to IPO battery metal focused Ivanhoe Electric
- Robert Friedland intends to list Ivanhoe Electric on the NYSE American and Toronto stock exchanges.
- Ivanoe Electric has interests in mines producing copper, gold and silver and has a focus on developing mines from mineral deposits principally located in the United States in order to support American supply chain independence.
- The company’s two main projects are the Santa Cruz Copper Project in Arizona and the Tintic Copper-Gold Project in Utah.
- The company intends to raise $200m on IPO.
Pensana PLC (LSE:PRE) 80p, Mkt Cap £192m – Completion of design and engineering studies for Angolan mine and UK rare-earths processing facilities
- Pensana reports the completion of Front End Engineering Design (FEED) and Value Engineering studies for the Longonjo mining operation in Angloa and the rare-earths separation plant at Saltend, UK.
- The study envisages production of “12,500 tonnes per annum of separated rare earths including 4,500 – 5,000 tonnes of neodymium and praseodymium (NdPr) oxides … [from the treatment of] … material sourced from the Longonjo Operations in Angola and third-party feedstock from a variety of other sources … [at theSaltend facility] … representing around 5% of the projected world demand in 2025”.
- The studies demonstrate “sustainable operations with strong economics based on the most recent independent base case NdPr oxide price forecasts” with initial capital investment of US$494m generating “an unleveraged post-tax NPV8% of US$3.5 billion … [and an] … IRR of 71%” and payback within 1.5 years.
- Chairman, Paul Atherley, characterised completion of the studies as “another important step for Pensana in its plans to establish an independent and sustainable rare earth processing hub in the UK … [and said that] … The strong fundamentals and robust economics provide a solid platform for the financing and development of the project”.
- He also highlighted “growing concerns over supply chain resilience and the burgeoning demand for magnet metals from the electric vehicle and offshore wind sectors is reflected in the growing customer demand for our products”.
Phoenix Copper Ltd (AIM:PXC, OTCQX:PXCLF)* 47.5p, Mkt Cap £59m – Phoenix Copper bolsters its PR and IR team
(Phoenix holds 80% of the Empire mining property in Idaho)
- Phoenix Copper reports the strengthening of its Public and Investor relations representation with the appointment of a Public Relations Manager and an Investor Relations Coordinator.
- Idaho born, Brittany Lock, is taking on the role of Public Relations Manager. Prior to Phoenix Copper, Ms Lock “worked as an Emmy winning journalist for Idaho's most-watched television news station. During her career in public relations, she has managed and supported communication strategies for three mining and exploration companies operating in the state of Idaho”.
- She is also “a founding member of the Idaho Woman Advocates of Mining organisation where she leads statewide education efforts”.
- In addition, Phoenix Copper has appointed Paul de Gruchy as Investor Relations Co-ordinator. He is “a graduate of Queens' College Cambridge” and described as having “over 20 years' experience in the legal sector, including advising government and regulators, and as Head of Legal for BNP Paribas Offshore”.
*SP Angel acts as nomad to Phoenix Copper
Sunstone Metals Ltd (ASX:STM) A$0.057, Mkt cap A$137m – Assay results for El Palmar Cu-Au project
- Sunstone has released assay results from four holes at El Palmar, located in the upper 500m of the orebody.
- Reported results include:
- EPDD007 – 162m at 0.38g/t and 0.13% Cu from 10m
- EPDD008 – 305m at 0.47g/t and 0.15% Cu from 19m
- EPDD010 – 166m at 0.58g/t and 0.15% Cu from 19m
- EPDD011 – 166m at 0.34g/t and 0.11% Cu from 5m.
- The results extend the known, continuous mineralisation to an area of at least 500m x 300m by 500m vertical extent, from surface.
- Sunstone MD Malcolm Norris commented: “The targets in the upper 500m in the south-east and eastern sectors have a clear relationship between gold, copper and magnetite and so drill targeting is aided by our robust 3-D magnetic model. The success of this approach is shown by the results in this release from holes EPDD007, 008, 010 and 011.”
- Two highly promising satellite targets, located adjacent to the main El Palmar magnetic complex, have been identified by strong soil sampling results.
SP Angel and Digbee ESG joint initiative for mining companies
https://www.uploadlibrary.com/SPAngel_JohnMeyer/DIGBEE_Press_release.pdf
- SP Angel and Digbee, a specialist ESG group, wish to announce their joint initiative in bringing ESG accreditation to mining companies in their drive to meet institutional investment and rapidly evolving ESG standards and regulatory requirements.
- We are rapidly approaching a point where a company’s ESG profile will not simply be a positive investment factor but will become a precondition to investment by many investment funds.
- The guidance and ratings process developed by Digbee is specifically designed to assist mining companies meet the new expectations and ensure directors meet their ESG compliance objectives.
- The initiative will not only quantify and score the ESG profile of qualifying companies but will also highlight ESG improvements and positive performance as companies develop.
- Importantly, the process will enable investment funds to demonstrate the positive results of their investments to their underlying investors and stakeholders which can, in turn, lead to further funding.
- It is imperative that any ESG Rating is seen to be credible. Digbee’s solution was developed to address this: it is mining specific, right sized and future looking, based on an independent assessment of a submission that is supported by evidence and approved by the company’s board of directors. It will also address investor frustration at a lack of comparable or meaningful data.
- For companies at an earlier stage of their ESG journey, recording improvements over time through the Digbee initiative is likely to prove attractive to investment funds as a demonstration of their ESG commitment permitting institutional investment at an earlier stage.
- The direction of travel is now firmly towards renewable sources of energy and a transition to environmental sensitivity. Historically, regardless of the individual facts, miners have collectively been identified as bad actors in this regard. Digbee engagement and ratings should improve the visibility of the good work being done.
- For example, installing, wind and solar generation to displace oil and gas should not only cut energy costs but also reduce carbon emissions. Sharing this energy with a local community may further reduce emissions, strengthen community engagement and lead to long-term sustainable benefits well beyond the end of the mine life. Similarly, a mine closure, thoughtfully done, can leave a positive community legacy that will stand a company in good stead when it is seeking new mining opportunities. Having a third party ESG specialist incorporate these initiatives into a rating accepted by investors will help secure the credit such initiatives deserve.
Jamie Strauss, Founder & CEO, Digbee Ltd: “We are delighted with this joint initiative with SP Angel, the number one ranked advisor to the AIM Mining sector*. SP Angel has acknowledged the importance of presenting their corporate clients to institutional investors with credible ESG disclosure as an increasing prerequisite to encourage new investment. We look forward to working together to achieve a more sustainable mining industry that is recognised for its positive actions ”
John Meyer, Mining Analyst & Partner at SP Angel “Working with Jamie Strauss and Digbee will help prepare our corporate clients for ESG-orientated investment. Mining, exploration, and development companies contribute much to local communities which combined with the potential benefits of increasingly sustainable operations is worthy of recognition. Quantifying the benefits, improvements and legacies of these operations should act a catalyst to further improvement to the benefit of all stakeholders.
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 – – 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
SP Angel
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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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