SP Angel . Morning View . Monday 26 09 22
Gold trades lower as dollar soars amid FX volatility and spiking yields
MiFID II exempt information – see disclaimer below
Beowulf Mining PLC (AIM:BEM)* – Grafintec Signs new MoU for establishing anode materials European hub
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) – Brazilian Government designates the Araguaia project as strategic
Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* – Interim results highlight progress on environmental work and flowsheet design improvements
Serabi Gold (AIM:SRB, TSX:SBI)* – Underground drilling results from the Zonta Vein at extend the mineralised envelope at Palito
Versarien PLC (AIM:VRS, OTC:VRSRF)* – BiaBrazil to utilise Graphene-Wear Technology
Private Equity / joint venture opportunity
We are looking for investors / jv partners for an exploration opportunity on a newly discovered copper / moly porphyry system with two adjacent non-porphyry gold and silver deposits over 6km in South-East Asia
- 2,000m in 8 holes already drilled with intersections of visible chalcopyrite and molybdenite both disseminated and in B-veins
- Positive indications of grade at shallow depths. Total funding $2.34m to date. Current implied valuation $4.4m. Best drill result:
- 60m grading 0.4% copper, 0.2% gold plus molybdenum from 24m eg. below the leached cap
- 3m grading 0.51% copper, 9.2g/t gold, and 49g/t silver from 64m down hole
- 2m grading 0.3% copper, 6% zinc and 9g/t gold, 40 g/t silver from 33m down hole related to a massive pyrite-magnetite-sphalerite-chalcopyrite vein
*SP Angel’s role is limited to making introductions. No due diligence or verification of information supplied by the company has been performed. 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.
Gold trades lower as Dollar soars amid FX volatility and spiking yields
- Gold saw a minor flash crash this morning, touching $1,627/oz before steadying around the $1,640s mark.
- The metal continues to get hammered by the dollar, with the greenback marching past 20-year highs, climbing c. 21% this year.
- Gold has now fallen 6% over the same period against the dollar.
- Foreign exchange volatility is rising, with the pound passing its record low in 1984, the Renmimbi nearing 2008 lows.
- Traders are ramping up short positions on gold, with fund managers more bearish on the metal than any other time over the past 4 years. (Bloomberg)
- US Treasury yields have been a major headwind to the gold price, with 2-year Treasury yields hitting 4.3% this morning.
- Gold ETF outflows continue, with holdings near their 2-year lows.
Dow Jones Industrials -1.62% at 29,590
Nikkei 225 -2.66% at 26,432
HK Hang Seng -0.91% at 17,771
Shanghai Composite -1.15% at 3,053
Economics
Germany – Ifo business confidence at 84.3 vs 88.6 last month, a 28-month low
- The president of the Ifo commented that Companies assessed their current business as clearly worse.
- Sentiment worsened among companies in all industries.
Chinese central bank moves to prop up Yuan as 2008 lows loom, threatening commodity prices
- The PBOC has reinstated a risk reserve requirement of 20% on Chinese banks’ FX forward sales to clients.
- The Renmimbi has weakened on concerns over the impact of extended Covid lockdowns, slumping property markets and the dollar’s strength.
- A weaker Yuan is bearish for commodity prices, putting pressure on Chinese importers buying raw materials in dollars.
Pressure on Sterling mounts as bonds tumble on Kwasi Kwarteng’s ‘mini-budget’
- The pound is nearing parity with the dollar at $1.07 having touched $1.035.
- UK 10-year gilt yields rallied to 12-year highs, jumping over 4%.
- Traders are now pricing in a BoE rate hike to 6% by November 2023.
- Newly-appointed Chancellor Kwasi Kwarteng announced a swathe of tax cuts last week, sending UK gilts lower alongside the Pound.
Currencies
US$0.9678/eur vs 0.9793/eur last week. Yen 143.80/$ vs 142.22/$. SAr 17.989/$ vs 17.694/$. $1.068/gbp vs $1.121/gbp. 0.651/aud vs 0.662/aud. CNY 7.152/$ vs 7.102/$.
Dollar Index 113.58 / +3.41% on week
Commodity News
Major Chinese metals trader Maike to restructure following liquidity crisis
- The FT reports that China’s copper giant Maike is looking at a ‘shareholding restructuring, asset restructuring and debt restructuring.’
- The move follows a series of margin calls, raising concerns from lenders over Maike’s ability to repay its debts.
- Liquidity has been a major issue for commodity traders over the past year amid whipsawing volatility.
- JP Morgan and ICBC Standard Bank pulled financing for Maike and several other Chinese metal traders this month over liquidity concerns.
- The flow of metals via trading houses requires considerable levels of bank financing currently under threat.
Copper slides as global economic woes mount and dollar wrecking ball continues to wreak havoc
- Copper has fallen c.10% from its August rebound, hitting $7,370/t and nearing its yearly low.
- Global copper inventories have jumped 13% from September lows, but remain significantly depleted on a seasonal and multi-year basis.
- Copper futures backwardation has fallen over 50% over the past week, pointing to easing supply tightness and cooling physical demand.
- Long-term supply concerns persist, with Anglo American cutting production guidance for Quellaveco from 150kt to 80-100kt this year.
Precious metals:
Gold US$1,641/oz vs US$1,670/oz last week
Gold ETFs 98.2moz vs US$98.4moz last week
Platinum US$859/oz vs US$897/oz last week
Palladium US$2,065/oz vs US$2,150/oz last week
Silver US$18.62/oz vs US$19.64/oz last week
Rhodium US$14,000/oz vs US$14,000/oz last week
Base metals:
Copper US$ 7,371/t vs US$7,610/t last week
Aluminium US$ 2,152/t vs US$2,212/t last week
Nickel US$ 23,160/t vs US$23,950/t last week
Zinc US$ 2,958/t vs US$3,061/t last week
Lead US$ 1,808/t vs US$1,839/t last week
Tin US$ 20,320/t vs US$21,250/t last week
Energy:
Oil US$85.4/bbl vs US$89.7/bbl last week
- Crude oil prices fell again on US dollar strength and recession fears as market sentiment moves rapidly towards expectations of a global downturn impacting near-term crude oil demand growth.
- European and US natural gas prices also moved lower in response to deteriorating market sentiment.
- The US Baker Hughes rig count rose by 1 to 764 rigs last week, with oil rigs up 3 at 602 rigs and gas rigs falling by 2 unit to 160 rigs.
Natural Gas US$6.788/mmbtu vs US$7.180/mmbtu last week
Uranium UXC US$49.65/lb vs US$50.15/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$96.1/t vs US$97.1/t
Chinese steel rebar 25mm US$571.1/t vs US$575.1/t
Thermal coal (1st year forward cif ARA) US$282.0/t vs US$282.0/t
Thermal coal swap Australia FOB US$410.0/t vs US$411.0/t
Coking coal swap Australia FOB US$268.0/t vs US$264.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$88,778/t vs US$89,415/t
Lithium carbonate 99% (China) US$68,436/t vs US$68,505/t
China Spodumene Li2O 5%min CIF US$5,460/t vs US$5,310/t
Ferro-Manganese European Mn78% min US$1,195/t vs US$1,209/t
China Tungsten APT 88.5% FOB US$325/t vs US$325/t
China Graphite Flake -194 FOB US$825/t vs US$825/t
Europe Vanadium Pentoxide 98% 7.2/lb vs US$7.2/lb
Europe Ferro-Vanadium 80% 30.75/kg vs US$30.75/kg
China Ilmenite Concentrate TiO2 US$318/t vs US$320/t
Spot CO2 Emissions EUA Price US$67.3/t vs US$68.1/kg
Brazil Potash CFR Granular Spot US$680.0/t vs US$750.0/t
Battery News
VW and Umicore SA accelerate plans for $2.9bn battery materials pact
- VW’s battery unit and Umicore hope to start producing cathode materials from a European plant by 2025.
- The JV hopes to power 2.2m EVs by 2030.
- The partners plan to work together on sourcing ‘sustainable’ raw materials.
Company News
Beowulf Mining PLC (AIM:BEM)* 4.25p, Mkt Cap £45m – Grafintec Signs new MoU for establishing anode materials European hub
- Beowulf’s wholly-owned subsidiary, Grafintec, has signed a new MoU with Qingdao Hensen Graphite regards to establishing an anode materials hub in Vaasa, Finland.
- Hensen has been operating in the graphite industry for 37 years with increasing focus on natural flake graphite-based anode materials and synthetic graphite-based anode materials.
- Hensen has been producing graphite-based anode materials since 2003, with plans to increase production to 50,000tpa in 2023 from a current 10,000tpa.
- The two groups have already submitted a joint-proposal to the City of Vaasa with respect to the establishment of an anode materials production facility to be located in the GigaVaasa area.
- Grafintec's ambition is to create a sustainable value chain in Finland from high-quality natural flake graphite resources to downstream anode material production.
- Last year, Grafintec was granted €791,000 funding by Business Finland as part of the BATCircle2.0, Finnish based Circular Ecosystem of Battery Metals consortium.
- The funding will be used to develop a sustainable technological solution, utilizing renewable energy, to spheronise and purify graphite within a Finnish industrial ecosystem, for use in the manufacture of lithium-ion battery anodes.
*SP Angel acts as nomad and broker to Beowulf Mining
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) 105.8p, Mkt Cap £207m – Brazilian Government designates the Araguaia project as strategic
- Horizonte Minerals reports the Brazilian Federal Government has designated the company’s Araguaia nickel project as a ‘Strategic Minerals Project.
- The approval “will ensure that the Araguaia Nickel Project is treated on a priority basis by the various Government agencies engaged in the construction and operation of the mine, through the support of an Inter-ministerial committee”.
- Governmental Strategic Minerals Policy aims to ensure that projects deemed strategic to national development are given priority in their dealings with government bodies to help a smoother path to production.
- CEO, Jeremy Martin, explained that the “selection of the Araguaia Nickel Project as a Strategic Minerals Project further demonstrates the global importance of nickel as a critical metal of the future as well as the project's strategic importance to Brazil.”
- He said that Horizonte Minerals recognises “the positive steps the Brazilian Government are taking to help expedite these strategically important projects and we look forward to working closely with them as we advance Araguaia towards production”.
Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF)* 2.4p, Mkt Cap £41m – Interim results highlight progress on environmental work and flowsheet design improvements
BUY – 17.9p
- In its interim results released today, Savannah Resources reports an operating loss of £1.3m for the six months to 30th June 2022 and a half-year end cash balance of £9.4m.
- The company reports progress on the Portuguese Government’s review of its Environmental Impact Assessment for the Barroso lithium project where it is revising “elements of the Project's design for resubmission of the EIA” ahead of a “resubmission deadline set at 17 March 2023”.
- Clarifying the process, Savannah Resources confirms that it expects to make the submission during Q1 2023 following which the authorities “will then have up to 50 business days to issue its Declaration of Environmental Impact ('DIA') decision”.
- The company also reports that additional work on the flowsheet has established a “metallurgical process that will be used to produce the spodumene lithium concentrate and quartz-feldspar products at the Project” which can deliver “recoveries as high as 81% with the potential for lower reagent consumption rates than first expected”.
- Additional opportunities for further enhancements to recovery rates have been identified which “will be investigated along with completion of pilot plant test work, once fieldwork is underway again and sufficient ore samples are available from the planned infill drill programme”.
- Savannah Resources explains that it will be able to complete the Definitive Feasibility Study “once both the Project's final design has been agreed through the environmental licencing process, and necessary fieldwork has been undertaken” leading us to infer that the environmental and metallurgical progress reported today has advanced the DFS which the company says is expected to take “around 12 months to complete from the point when fieldwork is restarted”.
- Savannah Resources confirms that it its cash resources “should be sufficient to see the Company through the Article 16 … [environmental approval] … process and into the DFS/RECAPE … [Relatório de Conformidade Ambiental do Projeto de Execução] … completion phase of the Project's development”.
- Today’s announcement also confirms that the results of an initial decarbonisation study are expected “shortly”.
Conclusion: Savannah Resources reports progress on both technical and environmental work for the Barroso Lithium Project in Portugal and confirms that it has adequate finances for completion of the current environmental and technical work and that it expects to resubmit its environmental documents in Q1 2023.
*SP Angel act as Nomad to Savannah Resources
Serabi Gold (AIM:SRB, TSX:SBI)* 25p, Mkt Cap £18m – Underground drilling results from the Zonta Vein at extend the mineralised envelope at Palito
- Serabi Gold (AIM:SRB, TSX:SBI) reports drilling results from the Zonta Vein at its Palito gold mine in Brazil which it describes as a “an orebody that we had previously identified with limited surface drilling but had never properly drill tested”.
- The Zonta Vein is the most westerly vein at Palito lying around 100m west of the Senna Vein, currently in production, and the company says that at “at approximately 400 metres below surface” the results include “the deepest intersection anywhere within the Palito Mine, boding well for future resource growth”.
- Among the results highlighted in today’s announcement are:
- An intersection of 0.55m at an average grade of 55.99g/t gold from a depth of 397.15m in hole PDD-0289; and
- 0.75m averaging 34.75g/t from 217.00m in hole PUD-0793; and
- A single metre intersection averaging 36.46g/t gold from 223.55m in hole PUD-0801; and
- 1.20m at an average grade of 10.65g/t gold from 300.80m in hole PUD-0803 which is the deepest intersection encountered so far at Palito; and
- A single metre at an average grade of 10.69g/t gold from 234.45m in hole PUG-009.
- CEO, Mike Hodgson, confirmed that “Access and development of the Zonta vein is already underway with a simple cross-cut from the Senna Vein. and the resulting resource will make a meaningful contribution to our forthcoming mineral resource update and gold production in 2023 and 2024”.
- Additional expansion opportunities may come from the Piaui Sector which is located a further 500m to the southwest and where “an area that has been successfully drilled but does not have any underground mine development or infrastructure”.
Conclusion: The identification of additional mineralisation to the west of the existing production areas and at depths below any previously drilled provides Serabi Gold with opportunities to expand its mineral resource inventory as the drilling results are incorporate into future mineral resources estimates.
*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil
Versarien PLC (AIM:VRS, OTC:VRSRF)* 16p, Mkt cap £32m – BiaBrazil to utilise Graphene-Wear Technology
- Versarien reports that BiaBrazil, a leading Brazilian sports and active wear manufacturer, has announced it has signed a commercial agreement with the company.
- The agreement sees the integration of Versarien's Graphene-Wear™ technology into a new range of women and men's active wear garments.
- The Graphene-Wear™ formula will enable wearers to experience enhanced thermal transmittance, increased moisture management and faster drying rates.
- It is anticipated that further announcements will be made on launch dates in due course with garments expected to be available for sale in Q1 2023 in the UK, along with existing retailers worldwide.
- Earlier this year, Versarien reported that Umbro will integrate Versarien's Graphene-Wear™ technology into its Elite Pro-Training Kit range, initially for the 2023 spring/summer collection
*SP Angel acts as Nomad and Broker to Versarien
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
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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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