SP Angel . Morning View . Thursday 09 06 22
China exports grow as Shanghai locks down parts of city
MiFID II exempt information – see disclaimer below
Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)* - BUY– Record quarterly Caserones royalty payment
Anglo American PLC (LSE:AAL) – $100m sustainability linked loan issued
Atlantic Lithium Limited (AIM:ALL)* – Test-work completed on a total of 1,700kg of drill core in 64 composites tested across the Ewoyaa Project
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) – Drilling continues to expand the known mineralised extent of Havieron
Scotgold Resources Limited (AIM:SGZ)* - BUY – 154p – Record production reported in Apr/May at Cononish
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* – May’s operational results confirm continuing performance improvements with planned 1,350tpd processing rate achieved on 8 days during the month.
Hedge fund lobby group makes formal complaint to LME over nickel trades
- The Managed Funds Association has made a formal complaint to the London Metal Exchange, alleging the market operator failed to perform its regulatory functions when it cancelled thousands of nickel trades in March.
- The complaint follows moves from Elliot Management and Jane Street, seeking $456m and $15m respectively in damages.
- The cancelling of trades was essentially the LME bailing out a market participant known as “Big Shot” – owner of Tsingshan Holding Group, a major nickel and stainless-steel producer.
- Some market participants reported that Tsingshan had 200,000t of futures contracts in short position, while others suggested losses could be as much as $12bn.
- Separately, Britannia Global Markets reported that it will step down as a clearing member of the LME as a result of the chaos.
- Britannia will resign its membership and focus on providing clients with OTC exposure to metals markets.
Dow Jones Industrials -0.81% at 32,911
Nikkei 225 +0.04% at 28,247
HK Hang Seng -0.83% at 21,832
Shanghai Composite -0.76% at 3,239
Economics
China – Exports grow 16.9% YoY in May on improved global logistics
- China’s exports rebounded in May as covid-related bottlenecks on production and logistics clear up, however an economic slowdown this year is expected to reduce overall exports.
- The total value of exports for May came in at $308.3bn and imports were $229.5bn.
- China’s trade surplus was $78.8bn for the month, 82% larger than the same period last year.
- A survey of economists undertaken by Reuters forecast 8% growth for the month.
- Shanghai locks down parts of city on renewed virus fears
- Shanghai will lock down a district in the southwest on Saturday morning to conduct a mass Covid-19 testing drive.
- The decision follows an agonising two months for Shanghai residents who were shutdown from the start of June.
- Whilst the plan is to seal 2.6m people in Minhang for just the morning, this could easily escalate given China’s Covid Zero policy.
ECB – The central bank is expected to announce an end to its large scale asset purchases today paving the way for the first rate hike in more than a decade.
- Economists expect the bank to raise rates by 25bp at each of July and September meetings lifting the deposit rate from -0.5% at present.
UK – Demand for UK houses dropped for the first time since August last month reflecting higher interest rates and increasing cost of living, RICS survey showed.
- Mortgage approvals have dropped to their lowest since June 2020, according to the latest BOE data.
- “The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point, on buyer activity in the sales market,” RICS commented on the data.
Chile – Magnitude 5.6 strikes Antofagasta
- News outlets have reported mid-morning that the quake hit the region, at a depth of 100km.
- The Antofagasta region accounts for 53% of Chile’s mining output, and mining accounts for 93.7% of the region's exports.
Currencies
US$1.0711/eur vs 1.0685/eur yesterday. Yen 133.60/$ vs 133.46/$. SAr 15.234/$ vs 15.387/$. $1.250/gbp vs $1.256/gbp. 0.717/aud vs 0.720/aud. CNY 6.680/$ vs 6.674/$.
Commodity News
Precious metals:
Gold US$1,850/oz vs US$1,848/oz yesterday
Gold ETFs 105.0moz vs US$105.0moz yesterday
Platinum US$991/oz vs US$1,010/oz yesterday
Palladium US$1,948/oz vs US$1,985/oz yesterday
Silver US$21.98/oz vs US$22.10/oz yesterday
Rhodium US$14,350/oz vs US$14,500/oz yesterday
Base metals:
Copper US$ 9,625/t vs US$9,679/t yesterday
Aluminium US$ 2,803/t vs US$2,771/t yesterday
Nickel US$ 28,110/t vs US$29,200/t yesterday
Zinc US$ 3,782/t vs US$3,797/t yesterday
Lead US$ 2,223/t vs US$2,226/t yesterday
Tin US$ 36,310/t vs US$37,200/t yesterday
Energy:
Oil US$123.1/bbl vs US$120.8/bbl yesterday
Crude oil prices edged higher as mixed data from the US EIA weekly inventory report continued to point to SPR releases only just keeping up with oil demand, reflected by refinery utilisation now at 94.2%.
European energy prices surged and US HH gas prices fell following a fire at the Freeport liquefied natural gas facility in Texas (c.2bcf/d of the US’ c.12bcf/d LNG export capacity) that will likely close the facility for at least three weeks.
Natural Gas US$8.204/mmbtu vs US$9.341/mmbtu yesterday
Uranium UXC US$52.30/lb vs $51.55/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$143.1/t vs US$145.1/t
Chinese steel rebar 25mm US$720.6/t vs US$720.1/t
Thermal coal (1st year forward cif ARA) US$230.0/t vs US$230.0/t
Thermal coal swap Australia FOB US$359.5/t vs US$370.0/t
Coking coal swap Australia FOB US$395.0/t vs US$402.0/t
Other:
Cobalt LME 3m US$72,900/t vs US$72,900/t
NdPr Rare Earth Oxide (China) US$144,450/t vs US$144,693/t
Lithium carbonate 99% (China) US$67,734/t vs US$67,799/t
China Spodumene Li2O 5%min CIF US$4,500/t vs US$4,500/t
Ferro-Manganese European Mn78% min US$1,858/t vs US$1,854/t
China Tungsten APT 88.5% FOB US$333/t vs US$333/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 9.6/lb vs US$9.6/lb
Europe Ferro-Vanadium 80% 36.75/kg vs US$36.75/kg
China Ilmenite Concentrate TiO2 US$367/t vs US$368/t
Spot CO2 Emissions EUA Price US$85.4/t vs US$87.5/kg
Brazil Potash CFR Granular Spot US$1,200.0/t vs US$1,200.0/kg
Battery News
Rio Tinto seeking 4GW of renewables to power operations in Queensland
- Anglo-Australian mining giant Rio Tinto has opened a request for proposals (RfP) for at least 4GW of wind and solar projects to power its operations in Queensland, Australia.
- The RfP is expected to help Rio Tinto secure the power supply with renewable eenergy for two aluminium refineries and one smelter in Queensland’s Gladstone region by 2030.
- According to the mining group, its Boyne smelter, Yarwun alumina refinery and Queensland Alumina refinery will require 1.14GW of reliable power to operate, which equates to at least 4GW of “quality wind or solar power.”
- Last year, Rio Tinto pledged to reduce its Scope 1 and 2 carbon emissions by 50% by 2030, more than triple its previous target – the company is aiming to be net-zero by 2050.
Company News
Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)* 48p, Mkt Cap £56m – Record quarterly Caserones royalty payment
BUY
- The Company reports record quarterly payment from its effective 0.418% NSR royalty on the Caserones copper mine in Chile.
- Pre tax income reported at $1.5m in respect of Q1/22 production, ~24% increase on the previous quarter.
- That takes total royalty income received since acquisition in Sep/21 to $5.1m (pre tax).
- Separately, the Company reports that reserves at the Caserones mine were revised extending life of mine has been by 11 years or 65% on previous estimates to 28 years
Conclusion: The Company reports a ~24%qoq increase in quarterly royalty payment from the Caserones copper mine to record $1.5m (pre tax) reflecting strong production and copper price environment. Additionally, Altus reports an upwards revision to Caserones reserves that extended the life of mine by 65% highlighting upside potential of the royalty agreement in place that benefits from longer life of mine, stronger production and higher copper prices.
*SP Angel acts as Nomad and Broker to Altus Strategies
Anglo American PLC (LSE:AAL) 3,965p, Mkt Cap £54bn – $100m sustainability linked loan issued
- Anglo has signed a $100m 10-year loan agreement with the International Finance Corporation (IFC), linked to the delivery of sustainability goals.
- Anglo comments that the loan is the first in the mining sector globally that focuses exclusively on social development indicators.
- The goals tied to the loan are aimed at supporting community development in rural communities close to Anglo American's mining operations across South Africa, including by promoting the creation of jobs as well as improving education quality.
- Anglo has committed to contributing additional funds to agreed social causes if it falls short of fully achieving its education and livelihood targets under the terms of this loan.
Atlantic Lithium Limited (AIM:ALL)* 49.2p, Mkt Cap £282m – Test-work completed on a total of 1,700kg of drill core in 64 composites tested across the Ewoyaa Project
Link to recent flash note: CLICK FOR RESEARCH PDF
- Atlantic Lithium report the completion of a total of 1,700kg of drill core in 64 composites tested across the Ewoyaa Project footprint with a focus on the first five years of planned mine production.
- The company also reports the completion of test-work in support of the Pre-Feasibility Study which is now underway and is due for completion in the third quarter.
- Lithium prices continue to hold high levels at $67,734/t vs $41,503/t at end 2021 driven by strong ongoing growth from Gigafactories in China and elsewhere.
- Lithium from spodumene remains the worlds core growth area for lithium bearing feedstock with hard rock sources seeing greater growth than brines, which are mainly processed in the Atacama, Chile.
- Production costs are also substantially lower for the conversion of spodumene into lithium carbonate equivalents according to a report by S&P Global.
*SP Angel acts as nomad to Atlantic Lithium. An SP Angel mining analyst recently visited the Ewoyaa Lithium Project in Ghana
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) 12.25p, Mkt Cap £497m – Drilling continues to expand the known mineralised extent of Havieron
- Greatland Gold reports that an additional 6,174m of drilling since the company’s last update in April has continued to expand the mineralised envelope of its 30% owned Havieron project in the Paterson district of WA with the depth extent of the South East Crescent zone extended by a further 100m to over 1,000m while continuing to remain open at depth.
- The company plans further drilling to extend “up to 400 metres below the Updated Mineral Resource” in the South East Crescent zone.
- In addition, “High grade results in the Northern Breccia reinforce the potential for further high-grade sulphide mineralisation adjacent to the South East Crescent Zone”.
- Among the results highlighted in today’s announcement are:
- An intersection of the South East Crescent Zone of 85.8m from a depth of 1,604m in hole HAD-133W9 at an average grade of 3.0g/t gold and 0.06% copper. Hole HAD-133W9 also contained a shallower intersection of 25.3m, from 1,471m depth, which averaged 1.1g/t gold and 0.08% copper; and
- A 149.9m wide intersection of the Northern Breccia zone from a depth of 877.4m in hole HAD-055W4 which averaged 2.7g/t gold and 0.12% copper and included 13.9m averaging 22.8g/t gold and 0.46% copper from 1,013.4m depth; and
- A 39.6m wide intersection, also of the Northern Breccia zone, which averaged 2.8g/t gold and 0.07% copper from a depth of 983.6m in hole HAD-055W5 and also included a high-grade section of 0.5m at an average grade of 96.0g/t gold and 0.10% copper from 1,020.7m depth.
- Welcoming the continuing expansion of the mineralised envelope at Havieron, Greatland Gold’s Managing Director, Shaun Day, confirmed that “The existing high grade mineralised zone of the South East Crescent now extends a further 100 metres below our previous Mineral Resource estimate. Testament to the scale of Havieron, there is now continuous mineralisation observed over 1,000 metres of vertical extent with the system remaining open at depth”.
- He said that “With an extensive growth drilling programme planned over the next twelve months, there is tremendous potential to further expand the Havieron resource and unlock the true scale and value of the broader system”.
- The company confirms that the exploration decline had advanced to 377.5m by the end of May and is now encountering “better ground conditions”.
- Today’s announcement also confirmed that “The Feasibility Study is still forecast to be delivered in the December 2022 quarter”.
- The joint-venture with Newcrest Mining has now completed over 240,000m of drilling in 295 holes since June 2019 and is continuing to increase with seven drill rigs “targeting an extensive growth drilling programme in the 12 months to 30 June 2023 which has the potential to again expand the Havieron resource”, which was updated in March this year to a total of 92mt at an average grade of 1.9g/t gold and 0.24% copper of which the indicated resource stands at 35mt at an average grade of 2.8g/t gold and 0.42% copper with the balance classified as inferred.
- Describing the background to the project, Greatland Gold says that the discovery, in 2018, resulted from the drilling of a deep magnetic geophysical anomaly which discovered “gold and copper ore under 420 metres of post mineralisation cover”.
Conclusion: Drilling continues to extend the mineralised envelope at Havieron with over 1,000m vertical extent now defined at the South East Crescent zone which still remains open at depth. We look forward to the Feasibility Study in the final quarter of 2022.
Scotgold Resources Limited (AIM:SGZ)* 74p, Mkt Cap £44m – Record production reported in Apr/May at Cononish
BUY – 154p
- The Company reported record production for April and May at the Cononish Gold Mine, Scotland.
- Total production for two months amounted to 1.9koz gold and 11koz silver with flotation concentrate grades reaching >300g/t.
- Operations are on track to reach or exceed Q2/22 target of 2.6-3.2okz.
- The mine supplied high grade material with cut and fill stoping performing well through Q2 months.
- The Company prepared a third cut and fill stope for mining in Q3/Q4 while development works for the start of higher volume and lower cost open stoping continued.
- Revenues amounted to £2.4m on the sale of ~227t of gold concentrate in April and May.
- Tailings thickener designed to debottleneck back end of the processing plant has been pre-built in Turkey and is currently in transit with installation planned for Aug/22.
- The team noted that delivery times for the thickener slipped by a month or two on the back of global shipping issues.
- Once operational, production run rates are expected to climb to 16.5-17.5kozpa.
- The Company drew down on £1.9m of the £3.0m Fern Wealth Debt facility with proceeds funding optimisation initiatives at the mine and processing plant to reach targeted 23.5kozpa by Q1/23.
Conclusion: Production is ramping up at Cononish with record output reported for April/May as the team implements outlined optimisation initiatives in the underground mine and processing plant. Q2/22 is expected to come in line or exceed guided 2.6-3.2koz with ~2.0koz produced in the first tow months of the quarter.
*SP Angel acts as nomad and broker to Scotgold Resources
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* 26.5p, Mkt Cap £40m – May’s operational results confirm continuing performance improvements with planned 1,350tpd processing rate achieved on 8 days during the month.
NPV Valuation: 168p/s
- Rambler Metals & Mining reports a continuing improvement in operating performance during May 2022 with mill throughput at the Nugget Pond Plant rising by approximately 20% during the month to 36,319 t (April 30,195t and March – 26,172t).
- Concentrate production also rose by approximately 22% to 1,944t (April – 1,599t) with saleable copper output rising by around 29% to 532t (April – 413t) and gold production increasing by 46% to 234oz (April – 160oz).
- Mine development totalled 353m (April – 366m) with “the underground mine … brought to a position to support full production through the mill”.
- Head grades rose to 1.58% copper (April – 1.46%) and 0.34g/t gold (April – 0.29g/t) and CEO/President, Toby Bradbury, explained that “Our approach has been to “fill the mill, optimise the grades”. We have achieved the first part and we are now focused on the second”.
- He clarified that “Saleable copper production for the month is the highest that has been achieved since August 2019 and, unlike in the past, we fully expect to continue to increase monthly production from here to meet our 7,000 tonnes Cu guidance for 2022”
- Based on the monthly operating statistics tabulated in today’s announcement, year to date copper production amounts to 2,011t, implying that monthly saleable copper production will need to average over 700tpm for the balance of the year.
- Mr. Bradbury also commented that “There has been a conscious effort in the month to get the mine into balance between ore production and backfill. It is evident from the figures presented in this release that Rambler has the capacity and the capability to do what is required to sustain production at the levels required and the grade is now picking up”.
- Mine production of 32,262 ore tonnes (April – 35,535t) was supplemented by a drawdown of stockpiles from 22,527t to 18,471t with production sources from the Lower Footwall Zone on 510 level, the Upper Footwall Zone on 770 and 790 levels and from the Lower Footwall Zone on 735 and 760 levels.
- The company says that “All three mining zones at the bottom of the mine experienced backfilling cycles during May, totalling 16,296 tonnes fill placed. This necessary step in the mining sequence also benefits the operation by reducing or eliminating haulage of waste rock to surface and is the reason why ore tonnes were lower for the month”.
- “As discussed in last month’s update, the grade delivered to the mill has increased over April’s results with the mined grade picking up in May to 1.65% copper, although milled grades were lower at 1.58% copper as feed material was processed from stockpile”.
- The Nugget Pond Mill was restored to full operation on 6th May following the stopgap use of temporary mobile crushing facilities with the company reporting “Plant availability from 6-31 May was 99.2%, resulting in an average throughput of 1,303 tpod during that 26-day period. Eight of those days saw throughput at or exceeding the daily target of 1,350 tpod, with a peak throughput of 1,400 tpod achieved on 16 May”.
- Rambler Metals has also taken the opportunity to describe several appointments and management re-deployments to strengthen the senior management team.
- Gus Simbanegavi has been appointed as Vice President and General Manager of the Ming Mine replacing Peter Mercer who will now focus on “the advancement of Rambler’s mineral resource portfolio” in a continuing Vice-Presidential capacity.
- Mr. Bradbury said that “We are delighted to have engaged Gus Simbanegavi. The delivery of the underground mining is the key to unlocking Rambler’s value. The quality of the Ming mineral resource is known, and the metallurgy reflected by our excellent copper recovery is well proven. Providing the level of expertise in mining should be seen as further evidence of Rambler’s strategy to ensure its future success” and he explained that Gus’s work had resulted in “an Alliance Agreement with Hancon Construction Co. Ltd. (“Hancon”) to work with the Company in the delivery of the underground mining function at Ming Mine”.
- Hancon has worked as mine development contractor at the Ming mine since December last year and the “mining contract with Hancon has enabled the Ming Mine to advance its development in a way that would not have been achievable otherwise. As an indication of its confidence in the future upside of the Company, Hancon has agreed to receive up to C$1million of its account due from Rambler in equity, subject to shareholder approval at the AGM to be held later today”
- In a promotion which Mr. Bradbury described as “well deserved “,Rambler has also promoted Bonnie Mathews who has served as “HR Manager for the past 4 years” to the position of Vice President Human Resources.
Conclusion: Operations at the Ming mine and Nugget Pond plant continue to improve with multiple underground production areas providing operational resilience and flexibility and delivering a 29% increase in saleable copper output during May, continuing a trend of rising month-on-month output in 2022. The company confirms its 7,000t guidance for 2022 copper output implying that further increases in output are expected over the balance of the year.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining
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Analysts
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Sales
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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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