SP Angel . Morning View . Monday 25 07 22
US$ pulls back amid weak US PMIs helping gold higher
MiFID II exempt information – see disclaimer below
Anglo American Platinum (JSE: AMS) – Interim results highlight challenge for second half
BHP Group Ltd (LSE:BHP, ASX:BHP) – MoU signed with Ford over nickel supply
Cobra Resources PLC (LSE:COBR) – Additional exploration licenses awarded in South Australia
East Star Resources PLC (LSE:EST) – Apmintas drilling
Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* – BUY, 17.9p – Land dispute legal case commentary
Call for Private financing - Lithium prospects (Africa)
We are raising funds for a highly experienced geological team who have access to a number of prospective lithium licenses in Africa
- We are looking for very early stage funding to support the discovery and delineation of a number of potential spodumene occurrences on these licenses.
- The licenses are close to another successful lithium project company and are believed to contain spodumene occurrences.
- Please contact us if you are interested in investing in this early stage and highly speculative venture
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.
Iron ore prices jump 7% in two days on China Real Estate Fund
- Iron ore prices have bounced back over the $100/t level on optimism for China’s construction sector following the establishing of a real estate fund to support developers.
- The fund has secured 50bn yuan ($7.4bn) in initial backing.
Port Hedland iron ore exports hit highest level for 2022 in June
- Iron ore shipments through Australia’s Port Hedland and Dampier port hit their highest level for 2022 in June.
- Port Hedland shipments increased to 49.8mt in June, from 47.8mtt in May, but was down from 50.38mt in June 2021.
- BHP, Fortescue and Mineral Resources each ramped up production in May-June, ahead of the end of their financial year on 30 June.
Codelco restarts some mining construction projects following safety review
- Last week, Chile’s state-owned miner, Codelco, halted all its mining construction projects pending a safety review due to two deaths which took place at different mining sites.
- Codelco halted mining works after two deaths occurred at the Chuquicamata underground expansion and the small Salvador mine.
- Works will now ‘gradually’ restart, with copper mining at the Andina and Rodomiro Tomic mines recommencing on Monday.
- Codelco has agreed together with its worker unions to create a joint commission to investigate safety matters inside the company.
Dow Jones Industrials -0.43% at 31,899
Nikkei 225 -0.77% at 27,699
HK Hang Seng -0.38% at 20,531
Shanghai Composite -0.60% at 3,250
Economics
US – A steep drop in services sector activity sees composite private sector output contracting for the first time in over two years amid muted client demand.
- The pace of decline was the sharpest since the initial stages of the pandemic in May/20 with both manufacturers and service providers highlighting subdued demand conditions on the back of strong inflation and rising interest rate.
- Employment growth slowed down to the weakest rate since February.
- Business confidence slipped to the lowest since Sep/20.
- Weakening demand saw inflationary pressured cooling down to the lowest rate since Mar/21.
- “The preliminary PMI data for July point to a worrying deterioration in the economy… Excluding pandemic lockdown months, output is falling at a rate not seen since 2009 amid the global financial crisis, with the survey data indicative of GDP falling at an annualised rate of approximately 1%,” S&P Global Market Intelligence commented on PMI data.
- Manufacturing PMI: 52.3 v 52.7 in June and 52.0 est.
- Services PMI: 47.0 v 52.7 in June and 52.7 est.
- Composite PMI: 47.5 v 52.3 in June and 52.4 est.
- US Jul Philadelphia Fed manufacturing index -12.3 in July vs -3.3 in June
- Weekly jobless claims rose to 251k from 244k previously.
China reports 982 new Covid-19 cases for 23 July vs 853 a day earlier
- 853 of the cases were asymptomatic
- Cases have been discovered in 78cities in 21 provinces
ECB – One of the most hawkish ECB officials argues for another big hike at the coming meeting in September following the banks 0.5% rate rise last week to 0%.
- “I would not say that this was the only front-loading… I would say that the rate increase in September also needs to be quite significant,” Martin Kazaks commented on the monetary policy outlook.
- If bond yields are a measure of the economic success of a nation then Greece and Italy are not doing so well
10year bond rates:
- Germany 1.01%
- France 1.61%
- UK 1.93%
- Portugal 2.15%
- Spain 2.23%
- US 2.786%
- Greece 3.07%
- Italy 3.27%
EU – Manufacturing PMI 49.6 (52.1 in June,
Services PMI 50.6 in July vs 53.0 in June,
Composite PMI 49.4 in July vs 52.0 in June,
Germany – Business sentiment gauge comes short of market estimates dropping to a two-year low.
- “Germany is on the brink of a recession,” IFO President commented on the data.
- “High energy prices and the threat of gas shortages are weighing on the economy… Companies are expecting significantly worse business activity in the coming months.”
- IFO Business Climate: 88.6 v 92.2 (revised from 92.3) in June and 90.1 est.
- IFO Current Assessment: 97.7 v 99.4 (revised from 99.3) in June and 97.5 est.
- IFO Expectations: 80.3 v 85.5 (revised from 85.8) in June and 83.0 est.
- Manufacturing PMI 49.2 in July vs 52.0 in June,
- Services PMI 49.2 in July vs 53.4 in June,
- Composite PMI 48.0 in July vs 51.3 in June,
Japan – Manufacturing PMI 52.2 in July vs 52.7 in June,
- Services PMI 51.2 in July vs 54.2 in June,
- Composite PMI 50.6 in July vs 53.2 in June
France – Manufacturing PMI 49.6 in July vs 51.4 in June,
- Services PMI 52.1 in July vs 53.9 in June,
- Composite PMI 50.6 in July vs 52.5 in June
- French business confidence was 106 in July vs 108 in June
- Consumer confidence 103 in July vs 104 in June
UK – Manufacturing PMI 52.2 (52.8) in June,
- Services PMI in June in July vs 54.3 in June,
- Composite PMI 52.8 in July vs 53.7 in June
- UK GfK consumer confidence -41 a record low level
- Retail sales fell 0.1% in June vs -0.8% May and -5.8% yoy in June vs -4.7% yoy in May
South Korea - PPI rose 0.5% in June vs 0.7% in May and at 9.9% yoy
Containers - Drewry World Composite Container index fell 2.6% last week and 24% yoy.
- Container rates $8,269 for a 40ft unit vs $3,554 as the five-year average
Ecuador – Zaruma suffers major sinkhole collapse as unregulated mining undermines town
- In an extensive article on Bloomberg, authors Peter Millard and Stephan Kueffner describe the impact of illegal gold mining on a community the town of Zaruma in southern Ecuador where unregulated mining produced a ground collapse or ‘sinkhole’ some 90feet (27)m across) and extending to a depth of 100feet (30m) destroying houses and leaving scores of people homeless. The article quotes Interpol estimates that illegal mining represented US$48bn of annual global gold supply six years ago and also cites Gaston Schulmeister, who heads up the Organization of American States’s anti-crime department, saying “The growth of the illegal mining phenomenon in the region in recent years is clear,” Schulmeister says, “and that growth has occurred in parallel with other organized crime activities such as drug trafficking, smuggling and corruption”.
- Illegal and unregulated mining is certainly not a new phenomenon, and neither is it confined to South America or to gold (Illegal diamond mining for example is widely believed to have helped to fuel the Sierra Leone civil war an unrest in LIberia for example) being widespread throughout Africa and parts of Asia where it claims the lives of both participants and of local residents and contributes to the funding of other forms of illegality.
Russia signs agreement to allow grain exports out of Ukraine – in negotiations brokered by the United Nations
- Russia then attacks Odesa port with cruise missiles just hours after signing the deal. Is this incompetence or barbarism?
- Its going to take some brave captains to sail out of Odesa with shipments of grain
Currencies
US$1.0212/eur vs 1.0147/eur last week Yen 136.40/$ vs 137.61/$. SAr 16.864/$ vs 17.068/$. $1.199/gbp vs $1.194/gbp. 0.692/aud vs 0.690/aud. CNY 6.755/$ vs 6.771/$.
Commodity News
Precious metals:
Gold US$1,728/oz vs US$1,717/oz last week
Gold ETFs 101.6moz vs US$101.7moz last week
Platinum US$878/oz vs US$881/oz last week
Palladium US$1,987/oz vs US$1,898/oz last week
Silver US$18.62/oz vs US$18.75/oz last week
Rhodium US$15,400/oz vs US$15,400/oz last week
Base metals:
Copper US$ 7,422/t vs US$7,364/t last week
Aluminium US$ 2,443/t vs US$2,437/t last week
Nickel US$ 21,122/t vs US$21,620/t last week
Zinc US$ 2,983/t vs US$2,969/t last week
Lead US$ 2,000/t vs US$1,994/t last week
Tin US$ 24,460/t vs US$24,650/t last week
Energy:
Oil US$102.2/bbl vs US$105.0/bbl last week
Crude oil prices started the week lower as concerns of an economic slowdown continue to eclipse signs of a tight physical crude market.
European energy markets edged higher on comments by Russian President Vladimir Putin that warned Nord Stream 1 pipeline flows could decline from 40% to 20% capacity if a turbine that’s stuck in transit isn’t received in time to replace another that’s likely to need repairs.
The EU continues to debate a proposal to cut natural gas use by 15%, with some members complaining it would inflict more pain than necessary on householders to protect gas-hungry industrial users in other regions.
Germany’s Uniper also ended storage withdrawals and resumed gas injections on Saturday. Germany’s total gas inventories are now at 65.9% and set to reach the 75% storage level by September 1st.
The US rig count rose by 2 to 758 rigs last week, with gas rigs adding 2 units to 155 rigs, oil rigs remaining stable at 599 rigs and four rigs miscellaneous.
Natural Gas US$8.369/mmbtu vs US$7.860/mmbtu last week
Uranium UXC US$46.95/lb vs US$46.95/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$105.6/t vs US$98.0/t
Chinese steel rebar 25mm US$593.8/t vs US$593.7/t
Thermal coal (1st year forward cif ARA) US$254.0/t vs US$254.0/t
Coking coal swap Australia FOB US$235.0/t vs US$245.0/t
Other:
Cobalt LME 3m US$50,460/t vs US$50,460/t
NdPr Rare Earth Oxide (China) US$121,032/t vs US$119,995/t
Lithium carbonate 99% (China) US$67,438/t vs US$67,271/t
China Spodumene Li2O 5%min CIF US$4,720/t vs US$4,720/t
Ferro-Manganese European Mn78% min US$1,353/t vs US$1,343/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% 7.7/lb vs US$7.9/lb
Europe Ferro-Vanadium 80% 34.25/kg vs US$34.75/kg
China Ilmenite Concentrate TiO2 US$356/t vs US$358/t
Spot CO2 Emissions EUA Price US$84.6/t vs US$83.9/t
Brazil Potash CFR Granular Spot US$1,050.0/t vs US$1,050.0/t
Battery News
Solid-state batteries give EVs 1000km range potential
- Svolt Energy, a division of China’s Great Wall Motors, has created a prototype 20Ah solid-state sulphide batter cell with an energy density of 350-400Wh/kg.
- The prototype cells have successfully passed nail puncture and thermal runaway tests at temperatures of up to 200° C.
- Once the cells are mass-produced, they could allow electric vehicles to achieve a range of more than 1,000km on a single charge, according to Svolt.
- Nio has been working with Chinese battery developer WeLion to develop a hybrid solid-liquid battery, that will also have a range of 1000km on a single charge, for the automakers ET7 model.
- The pack, which has a capacity of 150kWh and an energy density of 360Wh/kg, is expected to start mass production by the end of this year or the first half of next year, Li said.
- Battery giant CATL announced a battery which will give an 1000km range to EVs last month – the ‘Qilin’ battery will have an energy density of ≥255Wh/kg and a battery utilisation rate of 72% and is expected to be commercially available next year.
Chile to build electric buses to ease fossil fuel dependency
- Reborn Electric Motor will produce 200 electric buses per year to keep some 65,000t of carbon out of the atmosphere.
- Chile's environment ministry is driving a new law that would commit the country to net zero carbon emissions by 2050.
- Reborn's electric heavy-duty buses are already shuttling workers at copper giant Codelco's Teniente mine.
- Reborn build electric buses from scratch, but also converts old diesel buses in a process that the company says is both sustainable and economical.
Company News
Anglo American Platinum (JSE: AMS) ZAR119,283, Mkt cap ZAR316bn – Interim results highlight challenge for second half
- Anglo American Platinum report a 20% fall in sales to ZAR 85,580m for the six months to end June vs ZAR 107,532m a year earlier
- The fall in sales was principally due to lower Refined PGM ‘Platinum Group Metal’ production 16% lower at 1,959,100oz vs 2,326,700oz yoy.
- Platinum production fell 14% to 934,500oz vs 1,083,600oz
- Palladium output falling 19% to 602,900ox from 744,500oz yoy
- Rhodium sales also fell 16% 132,700oz vs 157,300oz yoy
- Cash operating costs rose 16% to ZAR 14,604m vs ZAR 12,572m yoy
- Gross profits fell 32% to ZAR 42,064m vs ZAR 61,516m yoy
- Headline earnings fell 42% to ZAR 26,694m vs ZAR 46,406m yoy
Conclusion: Robust PGM basket prices at $2,671/oz helped to prevent Amplats earnings from outright collapse the first half despite lower Refined PGM production.
Lower platinum, palladium and rhodium prices combined with a rising cost base are going to make it a difficult second half though better weather should enable production to recover. An uncertain economic outlook combined with falling consumer and business confidence is currently weighing on commodity prices though palladium prices have held up remarkably well against the strength of the US dollar.
BHP Group Ltd (LSE:BHP, ASX:BHP) 2,189p, £111bn – MoU signed with Ford over nickel supply
- BHP reports that it has entered into a Memorandum of Understanding (MoU) with Ford.
- No specific figures were reported regarding quantity of supply, although it was reported that the agreement could start as early as 2025.
- BHP will look to supply Ford with nickel from its Nickel West asset in Western Australia.
- On Friday, Ford reported it has secured its battery supply until late next year, signing a deal with China’s CATL.
- The supply will be a mix of Lithium-Iron-Phosphate (LFP) and Nickel-Manganese-Cobalt (NMC) batteries, depending on the model.
Cobra Resources PLC (LSE:COBR) 2.05p, Mkt Cap £8.3m – Additional exploration licences awarded in South Australia
- Cobra Resources reports that it has been granted additional exploration licences totaling 893km2 adjacent to its existing licences at Wudinna in the Gawler Craton of S Australia.
- The new licences bring the company’s total exclusive licence holding to 1,429km2 with an additional 1,832km2 “held under the Wudinna Heads of Agreement with Andromeda Metals Limited”.
- CEO, Rupert Verco, confirmed that the company’s “immediate focus remains on defining value through ongoing exploration at the Wudinna Project” but he explained that the “the southern Gawler Craton has already produced several defined precious metal resources, its extent remains largely under explored … [and that the additional licence areas] … enables the Company to strategically define a pipeline of high-value new exploration targets”.
East Star Resources PLC (LSE:EST) 3.75p, Mkt Cap £6.8m – Apmintas drilling
- East Star Resources reports that it is starting drilling at its Apmintas licence area in the Chu-Ili orogenic gold belt of central Kazakhstan.
- The drilling aims to “extend past intersections and grades along strike” and comes after “an extensive predrilling field programme which included geological surveys, soil sampling and ground-based magnetics”.
- Previous drilling results reported in today’s announcement include:
- A 63m wide intersection in the Novoe target area, reported in an announcement in January this year as from surface, averaging 4.51g/t gold in hole AP-008; and
- Several intersections in the Southern Shabdar target area from undisclosed holes and holes and depths with widths ranging up to almost 25m and grades of nearly 25g/t gold; and
- A 14m wide intersection, reported in an announcement in May this year from 40m depth and average grade of 2.54g/t gold in hole AP-021 from the Eshkilitau area
- CEO, Alex Walker explained that in addition to testing potential extensions of the mineralised area along strike, the diamond drilling will provide material for mineralogical and metallurgical analysis “including conducting 'gravity recovered gold' testing”.
Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* 2.7p, Mkt Cap £46m – Land dispute legal case commentary
BUY – 17.9p
- The Company released a commentary on the recent press coverage in Portugal relating to a legal action launched by the Covas do Barroso Baldios with to regards to Savannah’s acquisition of land packages from private landowners for the Barroso Lithium Project.
- The Baldios Management Commission lodged a civil claim against certain landowners saying that they overstated their land during the registration and occupying property that is actually Baldios land.
- Savannah was named in those claims with Baldios requesting that the acquisition of these properties by the Company be declared null and void.
- Disputed property covers only 8ha of the Project’s 593ha accounting for ~1.4% of the total area.
- The Company countered that acquired properties match official registration records in the cadastral information office and that Savannah purchased exactly what is registered with the Land Registry Office.
- The Company was asked to submit its defence to the legal case before the end of September 2022.
Conclusion: An unfortunate set of news on the proposed legal action relating to the acquisition of the land for the Barroso Lithium Project released this morning. Although, the Company argues that the property in dispute accounts for just under 1.5% of total project area and highlights that at the time of acquisition acquired properties were verified and registered with the local land registry office.
*SP Angel act as Nomad to Savannah Resources
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
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
*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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