SP Angel . Morning View . Wednesday 24 08 22
Lithium prices rise as rare earths prices pull back
MiFID II exempt information – see disclaimer below
Alien Metals Ltd (AIM:UFO, OTC:ASLRF) – Increased holding in Hamersley iron-ore project
CleanTech Lithium PLC (AIM:CTL) – MoU Signed with SunResin
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)* – Valuation 48p/s – Remaining results from the Phase 1 drilling at the United Downs project
Impala Platinum (JSE: IMP) – Ministry of Trade & Industry approves Framework Agreement for RB Platinum acquisition
China lithium prices near record highs amid power squeeze
- Prices of lithium in China near a record high as shutdowns at refineries threaten to cut supply further in what is already a very tight market.
- Sichuan is home to more than a fifth of China’s lithium production and has extended industrial power cuts this week amid an intense heat wave.
- Lithium carbonate prices hit the highest level since April on Monday, at 484,500 yuan ($70,610) / tonne, according to Bloomberg.
Copper prices hold firm as supply side woes intensify
- Copper prices remain over $8,000/t – a good result given the constant stream of economic data sapping confidence out of markets.
- Chinese copper output has been affected by industrial power curbs, with sky high energy prices set to remain for the medium term, market participants are worried about the copper market continuing to tighten.
- On the demand side, defaults by Chinese property developers have surged while companies are reluctant to expand while Covid restrictions remain in place.
- Copper prices have rebounded strongly from last month’s lows, up 16% from a 20-month low touched in mid-July but are down 17% so far this year.
- Shanghai copper stocks continue to decline, currently sitting at 33,000 tonnes – the lowest level since January.
Dow Jones Industrials -0.47% at 32,910
Nikkei 225 -0.49% at 28,313
HK Hang Seng -1.07% at 19,294
Shanghai Composite -1.84% at 3,216
Economics
US – Business activity contracts again in August, falling 2.7pts to 45
- US Business activity fell for a second straight month in August, amid softer demand from both manufacturers and service providers.
- The S&P flash PMI Output index reading of 45 is the lowest reading since May 2020.
- Excluding the pullback in the early months of the pandemic, the figure is the weakest since 2009.
- New home sales at slowest pace since early 2016
- Sales of new US homes fell in July for the sixth time this year to the slowest pace since early 2016 amid high borrowing costs and a pullback in demand.
- Purchases of new single-family homes decreased 12.6% to 511k from 585k in June.
- House purchase applications in the US continue to fall while construction activity is also slowing amid high energy prices and market uncertainty.
- S&P Manufacturing PMI 51.3 in August vs 52.2 in July
- Services PMI 44.1 in August vs 47.3 in July
- Composite PMI 45.0 in August vs 47.7 in July
- New home sales fell 12.6% in July to 0.55m units vs -7.1% in June at 0.85m units
- Richmond Fed manufacturing index -8 in August vs 0 in July
- Fed meeting at Jackson Hole, Texas
Japan – Manufacturing PMI 51.0 in August vs 52.1 in July
- Services PMI 49.2 in August vs 50.3 in July
- Composite PMI 48.9 in August vs 50.6 in July
- Covid rest requirement scrapped for vaccinated travellers
- The rule change will go into effect from the 7th of September
Singapore - CPI rose to 7% in July its highest level since 2008 vs 6.7% in June
EU – Manufacturing PMI 49.7 in August vs 49.8 in July
- Services PMI 50.2 in August vs 51.2 in July
- Composite PMI 49.2 in August vs 49.9 in July
- Flash consumer confidence -24.9 in August vs -27 in July – we can’t believe there is any real improvement
- European energy prices continue to be impacted by unplanned outages in both Norway (Troll field) and the US (Freeport LNG), with Russian gas supplies stable at just 20% of capacity.
- Dutch TTF gas prices (day ahead) pull back ~10% from yesterday’s high to €260/MWh. Prices are now ~60% higher on the month
- UK gas prices NBP gas price up 65% on the month
Europe – worst drought for 500 years according to the BBC
- UK farmers generally not faring so badly according to our sources.
- Farmers above the M40 seem to have managed quite well though the drought is delaying the replanting of crops
Germany – Manufacturing PMI in August vs 49.8 49.3 in July
- Services PMI 48.2 in August vs 49.7 in July
- Composite PMI 47.6 in August vs 48.1 in July
France – Manufacturing PMI 49.0 in August 49.5 in July
- Services PMI 51.0 in August vs 53.2 in July
- Composite PMI 49.8 in August vs 51.7 in July
- French nuclear reactors fall to 43% capacity
UK – Manufacturing PMI 46.0 in August vs 52.1 in July
- services 52.5 in August vs 52.6 in July
- Composite PMI 50.9 in August vs 52.1 in July
UK/Europe – Man-Up for winter
- Russia is likely to continue to restrict gas, oil and diesel supplies into Europe through the winter as it puts pressure on Western politicians and their economies
- Some commentators reckon Russia will continue to make gas available to Europe, but at 10 times world prices.
- So consumers need to Man-Up and get ready for a cold winter.
- Heat pumps are energy efficient but take time to install, still use electricity and work better in well insulated houses.
- Log burners are a great supplement / alternative for those where burning logs or smokeless fuels are allowed – we highly recommend the use of kiln-dried logs to avoid smoky fires.
- Britons need to get used to cooler shops, houses, restaurants, offices, and pubs to ensure the available energy is more efficiently used.
- Our government does not appear capable to addressing the problem, so we suggest households make their own arrangements to diversify their energy sources.
Inflation - Prices for non-essential / luxury items appear to be falling as retailers and consumers prepare for hard winter.
- Prices for many non-essential items appear to be pulling back as retailers struggle to shift stock.
- We suspect many retailers, buoyed by strong demand on the emergence from lockdown overordered stock from China and elsewhere ahead of the European energy crisis
- Consumers and retailers are now battening down the hatches in preparation for a hard and potentially expensive winter.
- If ever there was a year to take a sabbatical and head off for warmer climes, this maybe it.
Mexico – Gov creates decentralised body responsible for lithium
- The entity is named LitioMx, and will be responsible for the exploration, exploitation, and use of lithium in the country.
- LitioMx will have a board of directors made up of the heads of the Energy, Finance, Government and Environment industries.
Currencies
US$0.9953/eur vs 0.9913/eur yesterday. Yen 136.79/$ vs 137.10/$. SAr 17.018/$ vs 17.037/$. $1.182/gbp vs $1.174/gbp. 0.691/aud vs 0.687/aud. CNY 6.865/$ vs 6.863/$.
US Dollar index – 108.70 / +0.07% on week
Euro trades below US dollar – lowest since November 2002 as energy crisis looms
Chinese currency also weakening as lockdowns and property crisis weigh on growth
Commodity News
Precious metals:
Gold US$1,747/oz vs US$1,737/oz yesterday
Gold ETFs 100.2moz vs US$100.4moz yesterday
Platinum US$879/oz vs US$877/oz yesterday
Palladium US$1,982/oz vs US$2,020/oz yesterday
Silver US$19.08/oz vs US$18.97/oz yesterday
Rhodium US$13,950/oz vs US$13,950/oz yesterday
Base metals:
Copper US$8,085/t vs US$8,012/t yesterday
Aluminium US$ 2,438/t vs US$2,396/t yesterday
Nickel US$ 21,745/t vs US$22,343/t yesterday
Zinc US$ 3,480/t vs US$3,514/t yesterday
Lead US$ 1,959/t vs US$2,019/t yesterday
Tin US$ 24,400/t vs US$24,400/t yesterday
Energy:
Oil US$100.2/bbl vs US$97.2/bbl yesterday
Crude oil prices rose on OPEC+ cut posturing and as the American Petroleum Institute (API) reported a large 5.6mb draw, with the SPR releasing a massive 8.1mb in the week ending August 19.
US natural gas prices fell on news that the operators of the Freeport LNG export terminal in Texas damaged in an explosion earlier this year will delay its restart to November, versus a previous target of October.
European energy prices continue to be impacted by unplanned outages in both Norway (Troll field) and the US (Freeport LNG), with Russian gas supplies stable at just 20% of capacity.
Natural Gas US$9.311/mmbtu vs US$9.925/mmbtu yesterday
Uranium UXC US$49.00/lb vs US$48.95/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$101.3/t vs US$101.3/t
Chinese steel rebar 25mm US$611.5/t vs US$611.7/t
Thermal coal (1st year forward cif A RA) US$308.0/t vs US$300.0/t
Coking coal swap Australia FOB US$296.0/t vs US$296.0/t
Other:
Cobalt LME 3m US$49,455/t vs US$49,455/t
NdPr Rare Earth Oxide (China) US$92,864/t vs US$96,603/t
Lithium carbonate 99% (China) US$69,265/t vs US$68,852/t
China Spodumene Li2O 5%min CIF US$4,840/t vs US$4,720/t
Ferro-Manganese European Mn78% min US$1,220/t vs US$1,215/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% 7.3/lb vs US$7.3/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg
China Ilmenite Concentrate TiO2 US$343/t vs US$345/t
Spot CO2 Emissions EUA Price US$88.8/t vs US$94.7/t
Brazil Potash CFR Granular Spot US$900.0/t vs US$900.0/t
Battery News
First EV models with CATL Qilin Battery to be announced soon
- CATL unveiled its cell-to-pack 3.0 Qilin Battery on 23rd June, with claims on bringing battery system integration to a new level.
- Qilin Battery allows volume utilization to exceed 72% and energy density to reach 255Wh/kg, which can support vehicles to have a range of 1,000km.
- CATL will officially announce the first models equipped with Qilin Battery at the 2022 World New Energy Vehicles Congress, which will be held from 26th to 28th August.
- Automakers including Li Auto, Neta, and Lotus have indicated that they will use CATL's Qilin Battery.
VW, Mercedes strike deal with Canada for battery materials
- Volkswagen and Mercedes-Benz have struck battery material cooperation agreements with Canada as they seek to secure a diverse supply of lithium, nickel, and cobalt.
- The move comes as automakers continue to expand EV strategies globally in a bid to challenge sector leader Tesla – global expansion is dependent on sufficient supplies of vital battery materials.
- "The supply of battery raw materials and the production of precursor and cathode materials with a low carbon footprint will allow for a fast and sustainable ramp-up of battery capacity - a key lever for our growth strategy in North America," said outgoing Volkswagen Chief Executive, Herbert Diess.
- Volkswagen is looking to build six battery cell factories in Europe by 2030 with a capacity of around 240GWh, as well as a 20GWh facility in North America for which it is currently examining potential sites.
- VW aims to announce the North American plant location and potential mining and refining partners by the end of the year.
- Mercedes-Benz is preparing to go fully electric by the end of the decade wherever market conditions allow, and recently struck a deal with China's CATL to ensure battery cell supply in Europe.
- As part of the MoU, Mercedes-Benz will explore a strategic partnership with Rock Tech Lithium under which the Canadian firm would supply the carmaker with up to 10,000t of lithium hydroxide a year from 2026.
Conclusion: The idea of signing a deal with a government in the western world strikes us as strange as commodities are produced by companies and not governments in almost every case. While the German chancellor might feel his involvement with Justin Trudeau is important, it is unlikely to have much influence when it comes to working with the underlying producing companies. The new indicates to us that VW and Mercedes are using every influence to find the raw materials they need, though we suspect involving politicians will be relatively ineffective.
Chinese airline owner Juneyao to enter EV market
- Juneyao Group, the parent of Chinese carrier Juneyao Airlines has plans to start making EVs as it seeks to diversify from businesses that have been hit hard by COVID.
- The Group, owned by Chinese billionaire Wang Junjin, is setting up a team internally to explore EV manufacturing.
- The Chinese EV market is the biggest in the world – EVs, including pure-electric and plug-in hybrids, accounted for 22% of sales in the first seven months of the year, according to Chinese industry data, the highest proportion among major global markets.
- Juneyao would join a growing list of high-profile Chinese companies with little or no automotive experience that are rushing into the sector including property group Evergrande, smartphone maker Xiaomi and search engine giant Baidu.
Company News
Alien Metals Ltd (AIM:UFO, OTC:ASLRF) – 0.53p, Mkt cap £25m – Increased holding in Hamersley iron-ore project
- Alien Metals reports that it has concluded a binding agreement with Windfield Metals to acquire an additional 39% interest in the Hancock and Brockman direct-shipping iron ore projects in the Hamersley region of Western Australia.
- The acquisition, which will cost approximately £1.8m including £60,000 in cash with the balance in shares and is in the form of an option exercisable over the next 18 months, increases Alien Metals’ interest in the project to 90%.
- Non-Executive Chairman, Dan Smith, said that the “execution of the revised binding option agreement with Windfield is a key milestone in the development of both the Hancock and Brockman iron ore projects, as we can now drive both forward knowing the Company has de-risked the projects with the ability to move to a 90% project interest”.
CleanTech Lithium PLC (AIM:CTL) 37p, Mkt Cap £29m – MoU Signed with SunResin
- CleanTech lithium, the early-stage lithium brine development company, has entered into a Memorandum of Understanding with SunResin New Materials – who they call a leader within Direct Lithium Extraction (DLE).
- SunResin will work with the Company and its DLE technical partner, Beyond Lithium, on the planned pilot scale production tests on Laguna Verde brine.
- SunResin has over 10 years of experience in DLE, having executed nine commercial DLE contracts representing a total capacity of 73,000tpa of lithium.
- CleanTech comments that it will work with SunResin refining its own proprietary DLE adsorption process.
- SunResin provides pilot scale units which can be deployed to site with a view to commencing pilot scale production at Laguna Verde by early 2023.
Conclusion: CleanTech have partnered with an established player in this albeit nascent technology field, and we look forward to progress on the construction of the pilot plant and latterly results.
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)*– 19p, Mkt cap £94m – Remaining results from the Phase 1 drilling at the United Downs project
Valuation 48p/s
- Cornish Metals has released assay data from the remaining four holes of its Phase 1 drilling programme at its United Downs project located approximately 8km east of the South Crofty mine in Cornwall where the company is working to establish the feasibility of resuming production.
- The drilling announced today from United Downs comprised 2 holes (MW22-001 and 002) testing down-dip extensions of mineralisation at the Mount Wellington mine which is located on the eastern edge of the exploration area and where mining was curtailed in 1978.
- The drilling at the Mount Wellington area intersected multiple mineralised zones including:
- 6.05% zinc over an intersection of 2.05m from a depth of 87.03m in hole MW22-001 which intersected further, deeper mineralised zones grading 5.51% zinc over a width of 4.25m from 249.40m depth and 6.48% zinc over 0.80m from 362.53m depth; and
- Polymetallic mineralisation in hole MW22-001A including an intersection of 1.49m at an average grade of 6.17% copper and 67g/t silver from 326.00m depth as well as 4.89m averaging 2.21% copper and 19g/t silver from 548.36m and 1.66m averaging 1.09% tin from 560.61m depth and 2.42m at an average grade of 3.7% tin and 9.09% zinc from 649.41m depth.
- The remaining two holes (UD22-001 and UD22-001A) were drilled in the central part of the United Downs project area to test depth potential of the mineralisation mined at the historic United Mines and Consolidated Mines which operated for more than 150 years between “the early 1700s and the 1870s” mining to “depths of up to 500m below surface”.
- Results highlighted from the United Downs drilling confirm “a potential transition from high grade copper to high grade tin at depth, similar to the mineralisation transition seen at South Crofty Mine” and include:
- An intersection of 2.20m averaging 0.90% tin, 0.04% copper and 0.10% zinc from a depth of 82.71m in hole UD22-001 which also intersected deeper mineralised intersections at 622.31m (0.81m averaging 0.49% tin, 0.12% copper and 0.13% zinc), 0.43m averaging 0.87% tin from 698.82m depth and 1.09m averaging 0.92% tin from 700.32m depth.
- An intersection of 2.36m averaging 1.13% tin and 0.15% copper from 619.66m depth in hole UD22-001A which also intersected 0.81m averaging 0.36% tin from 696.22m depth.
- Cornish Metals confirms that “High-grade copper and tin intersections beneath United Mines have now been observed over a strike length of approximately 1,350m and the zone is open along strike and to depth”.
- The company explains that the “high-grade zinc intersections in MW22_001 require further work to determine continuity along strike and to depth to establish the Mineral Resource potential”.
- Cornish Metals also expresses the view that drilling results from the Phase 1 programme “support management’s belief that tin grades increase with depth, similar to the mineralisation transition seen at South Crofty”.
- CEO, Richard Williams said that “Results from the United Downs drill programme confirm the potential to develop a Mineral Resource, especially the down dip section of the United Mine where we encountered high-grade copper, tin, and silver.”
- He also confirmed that Cornish Metals “is now considering the next steps for United Downs”.
- Results from a previous nine drill holes of the Phase 1 programme targeting the Trenares Lode located 320m south of the historic United Mines area and 720m south of the Consolidated mines were released in June.
Conclusion: The release of the remaining drilling results from the Phase 1 programme at United Downs includes relatively wide intersections with grades of up to around 6% copper and up to 5% tin with potentially significant zinc mineralisation intersected at depth beneath the old Mt Wellington mine. Geological complexities require further analysis before the resource potential of the zinc intersections can be established but the continuation of tin and copper mineralisation at depth beneath the previously mined areas provides encouragement for future mineral resource estimation at United Downs.
*SP Angel acts as Nomad and Broker to Cornish Metals.
Impala Platinum (JSE: IMP) ZAR18,618, Mkt cap ZAR158bn – Ministry of Trade & Industry approves Framework Agreement for RB Platinum acquisition
- Impala Platinum reports that it has reached an agreement with the South African Ministry of Trade & Industry for its proposal to acquire Royal Bafokeng Platinum (RB Platinum).
- The company also confirms that the South African Competition Commission has recommended that “the Competition Tribunal should approve the proposed transaction” saying that “it would be unlikely that the proposed transaction would give rise to any substantial lessening or prevention of competition in any of the relevant markets, and would be likely to result in public interest benefits”.
- The transaction remains subject to shareholder approval but the company says that the sole remaining “substantive condition to the Offer … [is] … Competition Tribunal approval” and that it has also reached a “Memorandum of Understanding … with the National Union of Mineworkers, RBPlat’s majority union and support from the host communities”.
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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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