SP Angel . Morning View . Friday 17 06 22
Metals recover despite rising interest rates and weaker equity market
MiFID II exempt information – see disclaimer below
Arkle Resources PLC (AIM:ARK)* – Stonepark drilling locates a promising structural target
Sibanye-Stillwater* (JSE: SSW) – River levels falling in Montana following flooding earlier this week
Vital Metals Limited (ASX:VML) – Commissioning commences at Vital’s Saskatoon REE extraction plant
Copper – Strike treat at Ventanas smelter in Chile shows dark side of Codelco
- Unions representing workers at Codelco’s Ventanas smelter are appealing to management to invest in the plant to meet environmental standards.
- We understand the smelter is not in compliance with environmental standards and is considered to be a a source of contamination in the region.
- We are told that testing in the adjoining town of Punchancavi has revealed concentrations of heavy metals in the internal organs of children at three times acceptable levels.
- A campaign to close the smelter may prove successful under Gabriel Boric’s new presidency affecting 3,000 jobs.
- The smelter was first commissioned in 1966 and now runs at 189,000tpa of copper cathode.
- Codelco is unlikely to tick many ESG boxes with this sort of operation
- Chilean legislation abolished the law requiring Codelco to pay 10% of its export sales directly to the Chilean Military.
- While payments continue, the government set up a new fund which will effectively phase out the direct payments to the military over 10 years.
Dow Jones Industrials -2.42% at 29,227
Nikkei 225 -1.77% at 25,693
HK Hang Seng +1.11% at 21,077
Shanghai Composite +1.03% at 3,319
Economics
US – S&P futures are up this morning after the index posts a more than 3% drop in the previous trading session taking losses to ~6% this week.
- The sell off was driven by concerns over recessions risks as well as accelerating of monetary tightening amid strong inflation.
Japan – In contrast to other major economies’ central banks, the BOJ reiterated its commitment to ultra loose monetary policy.
- The central bank will keep its short term policy rates at -0.1% and the bank will continue to buy government debt to keep 10y yields within the 0-0.25% range.
- The BOJ said current inflation pressures in the economy are being driven by supply side constraints and higher energy prices on the back of Russia/Ukraine war while not so much on the demand side.
- In an unexpected reference, the BOJ said it is monitoring FX market closely highlighting the degree of concern over the yen’s depreciation with the currency trading at multi decade lows against the US$.
- The yen dropped and yields on 10y bonds dropped below the 0.25% cap on the back of the announcement.
UK – The BOE raised rates by 0.25% to 1.25%, in line with expectations, while warning that inflation is set to climb past 11% by the end of the year.
- The 6-3 vote marks the fifth consecutive rate hike with three members voting for a more aggressive 50bp move.
- The BoE said it would be “particularly alert to indications of more persistent inflationary pressures” and would “act forcefully” if needed, FT wrote.
- Market commentators suggested the bank may be open to a potential 50bp increase at the August 4 meeting.
Currencies
US$1.0509/eur vs 1.0393/eur yesterday. Yen 134.38/$ vs 134.62/$. SAr 15.998/$ vs 15.941/$. $1.228/gbp vs $1.207/gbp. 0.698/aud vs 0.696/aud. CNY 6.702/$ vs 6.709/$.
Commodity News
Precious metals:
Gold US$1,844/oz vs US$1,828/oz yesterday
Gold ETFs 104.8moz vs US$104.7moz yesterday
Platinum US$948/oz vs US$932/oz yesterday
Palladium US$1,902/oz vs US$1,852/oz yesterday
Silver US$21.82/oz vs US$21.54/oz yesterday
Rhodium US$13,450/oz vs US$13,450/oz yesterday
Base metals:
Copper US$ 9,075/t vs US$9,197/t yesterday
Aluminium US$ 2,505/t vs US$2,594/t yesterday
Nickel US$ 25,259/t vs US$25,950/t yesterday
Zinc US$ 3,578/t vs US$3,657/t yesterday
Lead US$ 2,101/t vs US$2,085/t yesterday
Tin US$ 32,000/t vs US$32,705/t yesterday
Energy:
Oil US$119.7/bbl vs US$119.4/bbl yesterday
Natural Gas US$7.370/mmbtu vs US$7.525/mmbtu yesterday
Uranium UXC US$48.95/lb vs $49.45/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$127.1/t vs US$131.1/t
Chinese steel rebar 25mm US$688.8/t vs US$694.3/t
Thermal coal (1st year forward cif ARA) US$230.0/t vs US$228.0/t
Thermal coal swap Australia FOB US$346.0/t vs US$345.0/t
Coking coal swap Australia FOB US$385.0/t vs US$385.0/t
Other:
Cobalt LME 3m US$72,415/t vs US$72,415/t
NdPr Rare Earth Oxide (China) US$142,128/t vs US$143,693/t
Lithium carbonate 99% (China) US$68,226/t vs US$68,180/t
China Spodumene Li2O 5%min CIF US$4,500/t vs US$4,500/t
Ferro-Manganese European Mn78% min US$1,771/t vs US$1,782/t
China Tungsten APT 88.5% FOB US$327/t vs US$329/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 9.8/lb vs US$9.8/lb
Europe Ferro-Vanadium 80% 36.75/kg vs US$36.75/kg
China Ilmenite Concentrate TiO2 US$366/t vs US$366/t
Spot CO2 Emissions EUA Price US$88.8/t vs US$86.1/kg
Brazil Potash CFR Granular Spot US$1,150/t vs US$1,150/kg
Battery News
BMW to trial dual-chemistry LFP-LMO battery
- BMW has agreed to trial the battery produced Michigan startup Our Next Energy in a prototype BMW iX all-electric SUV.
- The automaker claims the vehicle could reach a range of 600 miles on a single charge.
- Lithium Iron Phosphate (PFP) batteries are becoming more popular, especially in China.
- These batteries have a longer life and are deemed safer than NMC chemistry, although they have a lower energy density compared to NMC.
- Lithium magnesium oxide (LMO) are usually used in medical devices and equipment, power tools and electric bikes.
Tianqi Lithium set for $1bn Hong Kong listing
- Tianqi got approval for the listing following hearing Thursday with the Hong Kong bourse’s listing committee.
- Various news outlets report that the company is considering raising $1 billion to $1.2 billion in the share sale.
- According to company filings, the company’s current annual production is 1.2mt of lithium concentrate.
Company News
Arkle Resources PLC (AIM:ARK)* 0.75p, Mkt Cap £2.6m – Stonepark drilling locates a promising structural target
- Yesterday, Arkle Resources reported on progress of the current drilling at its 23.44% owned Stonepark zinc project in Limerick, Ireland which is being run by Arkle Resources’ partner, Group Eleven Resources.
- The 2,600m, six-hole programme is now 82% complete and Arkle Resources reports that hole G11-1253-01 discovered a major fault showing “a vertical displacement … of at least 150 metres from 544 metres” while hole G11-450-03, located 3.7km away “intersected a thick package of extensive brecciation and pyrite”.
- Arkle Resources says that the “results may point to a large and compelling zinc target a few hundred metres to the north of hole G11-450-03”
- The company explains that “The intense pyrite-mineralised breccia is similar to that found 5-10km away associated with the Pallas Green zinc deposit … [and also that the] … major fault that cuts the Waulsortian limestone will be the focus of future exploration as these structures are highly prospective in Irish Style Zinc deposits”.
- Speaking on behalf of Arkle Resources, John Teeling said this was the first identification of a fault system at Stonepark and that “It needs to be drilled and will be”.
- Based on the genesis of other Irish zinc deposits, we concur that the conjunction of faulting, which provides a conduit for mineralising fluids, and brecciated limestone which provides a site for mineral precipitation has proved fruitful for exploration elsewhere is an encouraging development at Stonepark and we look forward to news of follow-up exploration.
- Mr. Teeling encouraged “shareholders to look at the detailed results provided by Group Eleven” which are available on the following link https://www.groupelevenresources.com/news/news/2022/
Conclusion: Recent drilling has identified a similar geological setting to that which hosts several of Ireland’s zinc deposits and we look forward to news of follow-up exploration to investigate the specific setting at Stonepark.
*SP Angel are Nomad and broker to Arkle Resources
Sibanye-Stillwater* (JSE: SSW) US$10.8, Mkt cap US$7.7bn – River levels falling in Montana following flooding earlier this week
- We are grateful to Sibanye-Stillwater for allowing our trainee mining analyst to visit the Sibanye-Stillwater East Boulder mine in Montana this week despite major flooding on Monday in the region which has restricted access to the nearby Stillwater mine.
- River levels are already falling in the area and access to Sibanye’s East Boulder operation remains undisturbed.
- Production is reported to continue without any significant disruption.
- The mine which produces ~240,000oz pa of platinum/palladium concentrate.
- Monday’s water levels are the highest on record in the region and access to the Stillwater mine remains limited with the main access route to the nearby Stillwater mine damaged by flooding and river erosion.
- Numerous bridges were also washed away, further disrupting access to the Stillwater mine for the local workforce.
- While water levels are falling locals note expected weekend temperatures of 35C could cause further snow melt and presenting further flood risk.
- This could be exacerbated by additional snowfall forecasted next week.
- So far Sibanye-Stillwater’s operations appear relatively unaffected by the flooding
*An SP Angel mining analyst is visiting Sibanye’s Montana mines this week.
Vital Metals Limited (ASX:VML) A$0.043, mkt cap A$197m – Commissioning commences at Vital’s Saskatoon REE extraction plant
- Vital reports that it has commenced feeding ore into the DMS plant at its rare earth extraction facility in Saskatoon, Saskatchewan, Canada.
- The company comments that commissioning will be done incrementally over the coming months with plans to produce a 2.5t rare earth carbonate sample for offtake partner REEtec AG in the next step.
- Vital is processing ore from the Company’s Nechalacho operation in Canada’s Northwest Territories, where mining commenced in mid-2021.
- The plant will have initial throughput capacity of 1,000tpa of REO, equivalent to ~470t NdPr per year.
- Under the ottake with REEtec, Vital will incrementally deliver 187.5t NdPr (contained within approximately 500t TREO) to REEtec by October 2023 and a minimum of 750t/year NdPr over five years (total 3,750t NdPr) contained within approximately 2,000t/year TREO.
- Vital has also signed an MoU with Ucore Rare Metals for Vital to supply rare earth carbonate feedstock for Ucore’s ALASKA2023 project.
- Under the MOU, Vital will sell to Ucore a minimum of 500t REO (ex-cerium)/year, commencing H1 2024.
- Unfortunately, many investors will remember Evan Cranston, former Chairman at Ampella Mining and now non-executive Chairman at Vital Metals.
- Unfortunately Ampella shares collapsed after the revelation of stock sales by the Cranston Family Trust in the annual report.
- Cranston subsequently left the board in April 2012.
Conclusion: Vital is making the transition from a developer to producer at a time of very, very healthy NdPr prices. Other REE developers should take confidence from the two offtake agreements Vital have signed reflecting the demand for long term REE contracts from operations outside of China.
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Analysts
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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
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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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