SP Angel . Morning View . Monday 04 07 22
Copper trades below $8,000/t as speculators push metal lower in thin trade
MiFID II exempt information – see disclaimer below
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It is great regret that we report on the passing of Willie McLucas
McLucas was the greatest of mining entrepreneurs, promoting promising exploration to the very end
In his career, Willie sold the Busang project to Bre-X and championed the Masbate gold mine in the Philippines
Willie was always a charming and entertaining friend
Anglo Pacific Group PLC (LSE:APF, TSX:APY, OTC:AGPIF) – Initial production from Piaui, Brazil
Beowulf Mining PLC (AIM:BEM)* – ~£1.76m loan financing agreed
Bluerock Diamonds PLC (AIM:BRD)* – 2021 results show increased mineral resource at Kareevlei and completion of plant expansion delivering improving quality and value of production
Tesoro Resources (ASX: TSO) – Encouraging sampling at El Zorro gold project
Strong US dollar helps gold and silver prices lower
- Bitcoin continues collapse falling another 1% today in US-dollar terms to US$19,108
Covid Lockdowns knock commodities despite reopening of major cities and strong EV sales in June
- Speculators are knocking commodities despite US 4th July Independence Day celebrations in the US.
- We believe current price moves are exacerbated by low liquidity and algorithmic trading causing stop loss selling winding down prices in the market.
- Metal stocks are rebuilding on new metal inflows into LME and SHFE warehouses as global logistics chains return to normal.
- Sanctions on key Russian oligarchs have simply displaced metals supply rather than cutting output, though there will be some ongoing disruption as miners struggle with spare parts from Russia and as Russian miners struggle with parts from the west.
- We also hear reports that some commodities are in short supply in China due to disruption on the importation of raw materials at ports in recent months.
- Manufacturing continued at reduced rates in China during many lockdowns indicating the Chinese manufacturing economy is not in such bad shape.
- China continues to give the appearance of a strict Zero-Covid policy but in reality, reports suggest, it is also easing up on how it applies the rules.
- Chinese EV manufacturers are shrugging off Covid disruption reporting strong sales in June.
- Nio, XPeng and Li Auto all reported healthy sales of EVs with XPeng delivering 15,295 vehicles vs 12,961 at Nio and 13,024 at Li Auto (SCMP)
- Li Auto reports received 30,000 orders as of June 24 for the full-size SUV L9 which it starts to deliver from August.
Copper – sold below $8,000/t as traders break for 4th July
- A stronger US dollar is depressing metals prices as many non-US consumers struggle to maintain margins
- Copper stocks are seen as growing around 4% this year as miners raise production by c. 2%-3% this year to c. 26mt.
- Higher interest rates and an uncertain outlook for the economy is discouraging and delaying new investment with some manufacturers delaying metal purchases while they work through inventories built up during lockdown disruption.
- While Chinese manufacturers show strong recovery Chinese construction activity remains at low levels with iron ore and steel prices continue to fall.
- Japan, Vietnam and South Korea are still recording sensible manufacturing growth, albeit at slightly lower levels than before as northern hemisphere economies break for summer.
- Taiwan’s PMI dipped to just below 50 in June indicating a very slight contraction.
- The S&P Global final manufacturing PMI fell to 52.1 in June from May's 54.6 though their new orders index continued to fall to 45.2 from 48.7.
- Eurozone inflation also rose to a record high at 8.6% in June vs 8.1% in May though much of this is energy related with over 40% price increases in June
- Food prices also rose c. 11% largely by higher fertilizer and fuel prices.
- Freight rates are falling fast from China indicating lower orders and less disruption
Over 500,000 EVs now on UK roads
- The number of EVs sold in the UK has passed 500,000, underlining the rapid growth in demand despite supply chain problems caused by the pandemic and Russia’s invasion of Ukraine.
- The UK reached this milestone in June and the number of EVs in the country is likely to overtake France later this year, according to Matthias Schmidt, a top automotive analyst.
- The number of EVs on UK roads has risen from fewer than 100,000 in 2019.
- The figures mean that pure EVs account for about 1.2% of the 40.5m cars on British roads, but that share is expected to grow rapidly.
- Automakers have started to produce EVs in large volumes to meet tightening regulations on carbon dioxide emissions, and impending bans on petrol and diesel cars that will come in by 2035 in the UK and EU.
Dow Jones Industrials +1.05% at 31,097
Nikkei 225 +0.84% at 26,154
HK Hang Seng -0.15% at 21,827
Shanghai Composite +0.53% at 3,405
Economics
China – The outbreak of new Covid infections increased over the weekend with 290 of 389 nationwide cases reported in the Anhui province.
- Lingbi county, in Anhui province’s north-east, imposed a strict lockdown on Friday to limit the spread, while nearby Si county, launched a sixth round of compulsory testing.
- Anhui is #7 province in China by population (>65m people) and #13 by income levels (based on GDP per capita).
Germany – The nation reported the first monthly trade deficit in three decades after exports unexpectedly contracted in May.
- The deficit came in at €1bn with overseas shipments down 0.5%mom, compared with estimates for a 0.7%mom increase.
- Exports (%mom): -0.5 v 4.4 in April and 0.7 est.
- Imports (%mom): 2.7 v 3.5 in April and 0.8 est.
Turkey – Consumer price inflation hit another high in June coming in at ~79%yoy in June, up from ~74% in May.
- Producer prices have been increasing by more than 100% for four straight months.
- Despite accelerating inflation, the central bank has been reluctant to raise rates keeping the benchmark rate flat at 14% through 2022 after a series of cuts in H2/21.
- The currency was little changed this morning trading next to an all time low of 16.8, down >20% year to date and >60% since early 2020.
- CPI (%mom): 4.95% v 2.98% in May and 5.73% est.
- CPI (%yoy): 78.62% v 73.50% in May and 79.95% est.
Ukraine – Ukrainian forces withdrew from the eastern city of Lysychansk ceding control of the last major Kyiv controlled holdout in the Luhansk region to Russian forces, Bloomberg writes.
- Russian militaries claimed to have now established control of the Luhansk region with alleged plans now to proceed and take control of the Donetsk region.
- Kyiv said the city’s defence would have led to “fatal consequences” in the face of Russian advantages in artillery, aviation, ammunition and personnel.
Argentina – President Fernandez appointed leftish economist Silvina Batakis as new head of economic ministry following a resignation of the predecessor over the weekend after two and half years in the job.
- Batakis inherits the economy at challenging times with inflation running at over 60% and nearly 40% of the population living in poverty with the country forecast to enter recession this year.
Mali – Leaders of the Economic Community of West African States (ECOWAS) lifted sanctions on Mali’s military regime as Mar/24 was agreed as the new date for presidential elections and a return to civilian rule.
- After discussion, the heads of state took a firm first decision to lift the economic and financial sanctions," ECOWAS said.
- The ECOWAS added that no representative of the military junta can run as a candidate in 2024 elections.
- Presidential elections will be preceded by a referendum on a revised constitution in March 2023 and legislative elections in late 2023.
- Sanctions previously implemented included preventing Mali from making debt payments and curbing regional trade.
- Mali has recently ended military cooperation with France and forging closer ties with Russia whose Wagner mercenary group has replaced the French military.
- Ecowas says the election should be held in March 2024 and “demands the non-participation of the transitional authorities”
- Mali is Africa’s third-largest gold producer after Ghana and South Africa.
- Separately, Burkina Faso that went through a coup in January this year is expected to hold a vote on 1 July 2024 while Guinea that had a coup in Sep/21 and suggested a 36-month transition plan should offer a new date for elections over the next four weeks or face sanctions.
Currencies
US$1.0438/eur vs 1.0446/eur last week. Yen 135.48/$ vs 135.05/$. SAr 16.311/$ vs 16.397/$. $1.213/gbp vs $1.211/gbp. 0.686/aud vs 0.681/aud. CNY 6.695/$ vs 6.704/$.
South African rand weakens as gold and other metals prices pull back
- The South African rand is quietly weakening as the US raises interest rates and metals prices pull back in US dollar terms.
Sterling trades at GBP 1.21 / USD
- Sterling is reflecting disparity between higher US interest rates and expect.
Commodity News
Precious metals:
Gold US$1,810/oz vs US$1,797/oz last week
Gold ETFs 104.0moz vs US$104.4moz last week
Platinum US$888/oz vs US$914/oz last week
Palladium US$1,951/oz vs US$1,914/oz last week
Silver US$19.84/oz vs US$19.91/oz last week
Rhodium US$13,800/oz vs US$14,000/oz last week
Base metals:
Copper US$ 7,948/t vs US$8,258/t last week
Aluminium US$ 2,447/t vs US$2,446/t last week
Nickel US$ 22,800/t vs US$22,698/t last week
Zinc US$ 3,068/t vs US$3,157/t last week
Lead US$ 1,915/t vs US$1,908/t last week
Tin US$ 26,210/t vs US$26,451/t last week
Energy:
Oil US$111.8/bbl vs US$108.7/bbl last week
Crude oil prices edged higher on media reports that June volumes from the 10 members of OPEC fell 0.1mb/d to 28.52mb/d, compared to their pledge to boost volumes by c.0.28mb/d.
European energy prices continue to reflect concerns regarding ongoing Russian gas supplies, with German storage levels reportedly at c.61%, still significantly below the federally mandated target of 90% by November.
The US rig count fell for the first time in five weeks by 3 to 750 rigs last week, split between a loss of 4 units targeting gas and an addition of 1 unit for oil, as data showed US oil production at 12.1mb/d.
Natural Gas US$5.665/mmbtu vs US$5.680/mmbtu last week
Uranium UXC US$51.25/lb vs US$50.85/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$113.7/t vs US$115.5/t
Chinese steel rebar 25mm US$650.4/t vs US$649.4/t
Thermal coal (1st year forward cif ARA) US$251.0/t vs US$252.0/t
Thermal coal swap Australia FOB US$374.0/t vs US$367.0/t
Coking coal swap Australia FOB US$285.0/t vs US$308.0/t
Other:
Cobalt LME 3m US$65,445/t vs US$70,460/t
NdPr Rare Earth Oxide (China) US$138,547/t vs US$139,088/t
Lithium carbonate 99% (China) US$68,041/t vs US$67,940/t
China Spodumene Li2O 5%min CIF US$4,500/t vs US$4,500/t
Ferro-Manganese European Mn78% min US$1,696/t vs US$1,739/t
China Tungsten APT 88.5% FOB US$327/t vs US$327/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 9.1/lb vs US$9.4/lb
Europe Ferro-Vanadium 80% 36.25/kg vs US$36.25/kg
China Ilmenite Concentrate TiO2 US$362/t vs US$362/t
Spot CO2 Emissions EUA Price US$91.1/t vs US$90.2/kg
Brazil Potash CFR Granular Spot US$1,100.0/t vs US$1,100.0/kg
Battery News
UK launches data centre for critical minerals
- The UK has launched a centre to gather data and analyse supply chains of critical minerals, including those needed for EV batteries.
- The centre, which will be run by the British Geological Survey, will use the data to find ways to source minerals needed for green technologies such as EVs and wind turbines, national defence, and mobile phones.
- The first work of the new Critical Minerals Intelligence Centre will be a study into future demand for and supply of minerals needed for EV batteries.
Tesla releases Q2 figures
- Tesla has opened more than 1200 supercharger stations on mainland China, to date, offering more than 8700 superchargers.
- Tesla announced the figures in its Q2 production and delivery report, which was shared on Weibo.
- In Q2, Tesla produced more than 258,000 vehicles and delivered more than 254,000 vehicles despite ongoing supply chain challenges and factory shutdowns "beyond our control," the company said.
- It was the first quarterly decline in Tesla's deliveries since Q222.
- The company highlighted that June was the highest month for production in Tesla's history, suggesting that its deliveries are expected to rebound significantly in the following quarters if there are no surprises.
Company News
Anglo Pacific Group PLC (LSE:APF, TSX:APY, OTC:AGPIF) 142 pence, Mkt Cap £305m – Initial production from Piaui, Brazil
- Anglo Pacific draws attention to the announcement of initial production at Brazilian Nickel’s Piaui nickel production in Brazil where Anglo Pacific “was an early-stage sponsor of the … project, investing US$2 million in September 2017, in return for a 1.25% royalty on the project”.
- Anglo Pacific explains that it “has the option to acquire, for an additional US$70 million consideration, an incremental 3% royalty rights to part fund the construction of a mine with an expected annual production capacity of up to 24 Kt of nickel and 1 Kt of cobalt”.
- Anglo Pacific also explains that “The Piauí project has the potential to become a significant asset in the Group's portfolio, with a full-scale operation contributing annual royalty income ranging between US$12.5-17.5 million at current long-term broker consensus forecasts”.
- Brazilian Nickel’s announcement First Nickel from PNP1000 - Brazilian Nickel PLC describes that the 18-months ramp up of its construction and commissioning of its PNP1,000 project has produced its first nickel hydroxide product from the processing of laterite nickel ore.
- The company, which is “a privately held UK company established in May 2013 to develop nickel laterite heap leach projects worldwide” says that it expects to produce “300 tonnes of nickel and 3 tonnes of cobalt” during 2022 and 1,400 tpa of nickel and 35tpa of cobalt from 2023.
- Describing the initial production from Piaui as “a great achievement for the Company”, Brazilian Nickel’s CEO, Mike Oxley, acknowledged the professionalism and dedication of the delivery team, many of whom “are from the local project area”.
- He said that they have “shown how the simplicity of the heap leach processes can lead to rapid commissioning and start-up such that the challenge of supplying ever increasing demand for nickel to global markets can be met”.
- Brazilian Nickel says that “Further work is to be completed on the cobalt circuit over the next four to six months. As there is much less cobalt in the ore than nickel, it takes some time for cobalt tenors in solution to reach the required levels for Cobalt Hydroxide Production (“CHP”) to begin”.
Beowulf Mining PLC (AIM:BEM)* 4.5p, Mkt Cap £47m – ~£1.76m loan financing agreed
- Beowulf reports that it has agreed terms for loan financing of SEK 22 million before expenses with the Nordic institutional investor Formue Nord Markedsneutral A/S.
- Funds will be used to progress the three strands to Beowulf’s business – Sweden, Finland and Kosovo, although the focus will be on the Kallak project, Sweden.
- The Loan has an interest rate of 1.5% per each started 30-day period during the duration of the loan to maturity with accrued interest compounding and payable at maturity.
- The Loan has a commitment fee of 6% and a Maturity Date of 28 February 2023, and Beowulf can repay the Loan and accrued interest at any time prior to the Maturity Date.
- If the Loan and accrued interest is not repaid by 28 February 2023, the Creditor has the right to convert the Loan and accrued interest into Swedish Depository Receipts at a 15% discount to the VWAP over the five previous trading days.
- Sweden: Funds will be used to support the completion of the Kallak scoping study due Q4 2022.
- Beowulf is targeting production at Kallak by 2026, and has recently appointed Ulla Sandborgh as CEO of Jokkmokk Iron following the awarding of an exploitation concession for Kallak North.
- Kosovo: The ~3,400m drill programme is now complete, with the bulk of samples taken at the Madjan Peak gold license.
- Assay results should be received by the end of July 2022.
- Finland: Beowulf continues to progress its downstream anode processing facility, having signed an MoU with the City of Vaasa for the establishment of an anode materials production facility to be located in the GigaVaasa area.
- Beowulf’s wholly-owned subsidiary Grafintec continues to exploring for more natural flake graphite, contracting the Geological Survey of Finland for an EM survey over the Räpysjärvi exploration permit, 8km away from the Aitolampi graphite project.
*SP Angel acts as nomad and broker to Beowulf Mining
Bluerock Diamonds PLC (AIM:BRD)* – 12.5p, Mkt cap £2.7m – 2021 results show increased mineral resource at Kareevlei and completion of plant expansion delivering improving quality and value of production
- On Friday, BlueRock Diamonds issued its annual results for 2021 reporting an annual loss of £1.35m (2020 - £2.99m) from the production of 53% more carats of diamonds during the year.
- In January, the company reported its 2021 production of 23,497carats.
- The company highlights the increasing recovery of large diamonds from its Karevlei mine with the mine worth more than US$50,000 each with “twelve larger stones … recovered for an aggregate sales value of $1,764,000” including a record 58 carat diamond.
- The improving quality of the production is reflected in a doubling of revenue to £7.85m (2020 - £3.60m) and a 13% improvement in average revenues per carat to US$470/carat and the company confirms that “So far in 2022 sales prices have averaged over USD600, an increase of 29% on 2021 prices”.
- BlueRock Diamonds says that it expects “the supply side of quality diamonds, as those recovered by Kareevlei, to remain tight for the foreseeable future, with the ongoing conflict in Ukraine affecting the supply of rough diamonds”.
- During 2021, BlueRock Diamonds reported a 49% increase the resource tonnage at Kareevlei, to 10.4mt including a “53% increase in net carats to 516,200 and notably 19% of the Resource was upgraded from the Inferred to Indicated category” which, at the planned 1mtpa processing rate “provides a minimum 10-year life-of-mine, however, we remain confident that the Resource will increase further once more work is completed on KV3, our largest pipe, where at present only 40% of this pipe’s volume is included”.
- BlueRock Diamonds also completed its plant expansion from 400,000tpa capacity to 1mtpa during December 2021 although “Since the end of the year the ramp up in production has been hindered by the excessive rain fall in Q1 and Q2 2022”.
- Executive Chairman, Michael Houston, explained that “Despite the advances made in 2021, there is still work to be done for Kareevlei to benefit fully from the potential of the new plant. The fundamentals for Kareevlei remain solid”.
- The company is in continued discussions over funding of £1.6m as well as the provision of a debt funding facility to Kareevlei for up to ZAR30m (c. £1.51m)
Conclusion: BlueRock is delivering larger, higher value diamonds from its’ Kareevlei mine following the completion of its expanded processing plant. Excessive rain during the early months of 2022 slowed the ramp up of production but is now expected to build up over the latter part of the year.
*SP Angel act as Nomad and broker to Bluerock Diamonds.
Tesoro Resources (ASX: TSO) A$0.047, Mkt cap A$36m – Encouraging sampling at El Zorro gold project
- Tesoro reports positive channel sampling results at its El Zorro project, with samples including:
- R11629_COQ_A – 3.00m @ 4.58g/t Au;
- TR1370_COQ_A - 18.00m @ 0.49g/t Au including 3.00m @ 1.37g/t Au and 3.00m @ 1.22g/t Au;
- TR1555_COQ_A - 2.00m @ 5.01g/t Au;
- TR1735_COQ_A - 39.00m @ 0.34g/t Au including 3.00m @ 2.42g/t Au and 3.00m @ 1.63g/t Au;
- TR1807_COQ_A - 30.00m @ 0.20g/t Au including 3.00m @ 0.77g/t Au.
- The company comments that it has now identified the presence of gold bearing intrusions over 33km, confirming El Zorro as a new Chilean Intrusive Related Gold System.
- Tesoro also reports that drilling at Ternera, which has a resource of 1.1Moz contained gold, will commence in the coming days.
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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