SP Angel . Morning View . Wednesday 05 10 22
Gold holds ground following a rally on Fed pivot hopes
MiFID II exempt information – see disclaimer below
Anglo American PLC (LSE:AAL) – De Beers reports continuing strength in rough diamond demand ahead of the traditionally quieter Diwali holiday season
Atalaya Mining (AIM:ATYM, TSX:AYM) – Filing of Technical Report on Proyecto Riotinto
Fortescue Metals Group (ASX:FMG) – FFI to invest $130m in German gas import terminal
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) – US$80m fundraising to advance the Araguaia project and progress feasibility work at Vermelho
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 settles around 1-month high after dollar rally cooled and yields slid
- Gold jumped c.4% over the past two days alongside a weakening dollar and US Treasury yields.
- The correlation between the three has been very tight in recent weeks, with a sudden uptick in the dollar and yields this morning causing gold to weaken slightly from its monthly high of $1,726/oz.
- Focus for gold turns to US employment data due on Friday which will offer more guidance to the Fed’s next step in taming inflation.
- A weaker US economy will give the Fed an excuse to ease up on aggressive rate hikes, however this week’s equity rally may offset that decision.
Dow Jones Industrials +2.80% at 30,316
Nikkei 225 +0.48% at 27,121
HK Hang Seng +6.02% at 18,108
Shanghai Composite CLOSED at 3,024
Economics
US – US job opening fell by the most since early in the pandemic and underperforming all market estimates in August signalling deteriorating labour market conditions.
- The news was taken as positive by markets as weaker labour data suggests the Fed may start dialling back its rapid policy tightening.
- A drop in vacancies may help temper wage pressures that central bankers are trying to bring down in an effort to slowdown the rate of inflation, Bloomberg writes.
- The ratio of vacancies per every single unemployed person came down to 1.7 from 2.0 in July marking the smallest ratio since November last year.
- The government is planning to announce restrictions that would limit US companies from selling semiconductors and chipmaking equipment to Chinese firms as well as significantly undermine the ability of non-US companies to sell products that use US technology.
- The plan is to prevent Chinese companies from providing American technology to the Chinese army through Beijing’s “civil-military” plan.
Eurozone – Regional economic contraction deepened in September with most major economies positive sub 50 PMIs.
- Regional PMI dropped to the lowest level in 20 months extending the downturn into a third straight month.
- New orders fell to the greatest extent in almost two years, while a significant decline was recorded in export sales.
- Employment continued to slow down further on a lack of incoming new orders and a decline in the level of outstanding business.
- Inflation remained strong supported by rising energy costs and tight labour market.
- Business confidence is at its lowest since the first Covid wave in 2020.
- “Any hopes of the eurozone avoiding recession are further dashed by the steepening drop in business activity signalled by the PMI.. not only is the survey pointing to a worsening economic downturn, but the inflation picture has also deteriorated, meaning policymakers face an increasing risk of a hard landing as they seek to rein in accelerating inflation,” S&P Global commented on the data.
- Composite PMI: 48.1 September v 48.2 August.
South Korea – Inflation slowed down slightly for a second month on lower oil prices, although, the central bank is likely to maintain its tightening stance, FT writes.
- CPI came in at 5.6% in September, down on 5.7% in the previous month.
- The central bank expects inflation to remain in the 5-6% range for a significant period of time on a weaker won and oil production cuts.
Russia – EU member states are close to finalising a price cap on Russian oil as they aim to reduce Kremlin’s revenues condemning Vladimir Putin’s invasion of Ukraine.
- Ambassadors met in Brussels on Tuesday evening to agree the final details of the bloc’s 8th package of sanctions against Moscow, FT reports.
- Separately, Saudi Arabia and Russia along with other OPEC+ cartel members are expected to announce deep cuts to production at a meeting today.
- The size of the cut is still to be agreed by two countries who are pushing for reductions of 1-2mm barrels a day or more.
Currencies
US$0.9954/eur vs 0.9881/eur yesterday. Yen 144.42/$ vs 144.68/$. SAr 17.658/$ vs 17.736/$. $1.144/gbp vs $1.139/gbp. 0.650/aud vs 0.653/aud. CNY 7.116/$ vs 7.116/$
Dollar Index 111.26 / -2.00% on week
Commodity News
Chilean state copper producer Codelco sees output fall 30% YoY in August
- Codelco produced 101,800t of copper in August, vs 128,000t in July and 144,500t in August 2021.
- The figure is Codelco’s lowest monthly figure in three years and is attributed to lower production from the company’s northern mines.
Copper rallies on weaker dollar and resurfacing rumours of an ease to China’s zero-covid policy
- Copper has now rallied 6% from September lows, settling around the $7,700/t mark.
- Copper, alongside gold, had been beaten down by the dollar’s rally, and the slight reversal has supported the metal.
- Analysts point to support for copper potentially stemming from a reversal of China’s zero-covid policy after the National Congress meeting starting on the 16th October, however this remains speculative.
- Global inventories continue to tick up but remain near record lows on major exchanges.
- Trading volumes are expected to remain subdued this week, owing to China’s 10-day Golden Week holiday.
Iron ore strengthens as traders turn optimistic on China property and zero-covid policy easing
- Iron ore climbed 1% on hopes of a boost to China’s construction-related steel sector.
- The steelmaking ingredient has suffered from a double whammy of China’s property sector slump and disruptions to steel mills by China’s covid restrictions.
- Rumours regarding an ease in covid restrictions may be supporting the price, alongside improving sentiment over the recent round of property stimulus measures.
Wheat and corn prices extend gains on concerns over Ukraine/Russia Black Sea export deal
- Crop futures have rallied again as Ukraine continues negotiations over exports of its grain from Black Sea ports.
- The deal, reached with Putin via the UN and Turkey this summer, expires next month.
- 6mt of foodstuffs and grain have been exported from the ports since the deal in August.
- Lower US supplies have added to food security concerns, coming in lower than expectations.
- Soaring food prices have been a significant contributing factor to inflationary pressures this year.
Port and rail strikes threaten South African supply chains as state-owned company doubles wage hike offer
- Transnet SOC Ltd, owner of South Africa’s port and freight-rail, has raised its pay increase offer from 1.5% to 3% to avert strike action.
- The country’s inflation rate is currently 7.6% and the unions were demanding 13.5%.
- The Company is fundamental to South Africa’s exports of coal, iron ore, manganese and chrome.
- The major Transport Union stated plans to strike on Oct. 10th unless modifications to wage agreements were made.
Precious metals:
Gold US$1,720/oz vs US$1,709/oz yesterday
Gold ETFs 97.0moz vs US$97.0moz yesterday
Platinum US$930/oz vs US$916/oz yesterday
Palladium US$2,322/oz vs US$2,312/oz yesterday
Silver US$20.83/oz vs US$20.96/oz yesterday
Rhodium US$14,000/oz vs US$14,000/oz yesterday
Base metals:
Copper US$ 7,712/t vs US$7,669/t yesterday
Aluminium US$ 2,364/t vs US$2,276/t yesterday
Nickel US$ 22,035/t vs US$21,740/t yesterday
Zinc US$ 3,046/t vs US$2,990/t yesterday
Lead US$ 1,961/t vs US$1,887/t yesterday
Tin US$ 20,190/t vs US$20,315/t yesterday
Energy:
Oil US$92.0/bbl vs US$89.4/bbl yesterday
Crude oil prices edged higher again on raised expectations that the OPEC+ meeting today would decide on a significant output cut to output to bolster oil prices.
The US American Petroleum Institute reported a 1.8mb crude oil draw for the week ending September 30, compounded by material product draws of 3.5mb from gasoline and 4mb from distillate inventories.
Natural Gas US$6.693/mmbtu vs US$6.492/mmbtu yesterday
Uranium UXC US$49.20/lb vs US$49.20/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$94.0/t vs US$92.6/t
Chinese steel rebar 25mm US$581.4/t vs US$581.4/t
Thermal coal (1st year forward cif ARA) US$278.0/t vs US$278.0/t
Thermal coal swap Australia FOB US$410.0/t vs US$370.5/t
Coking coal swap Australia FOB US$281.0/t vs US$281.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$94,155/t vs US$94,155/t
Lithium carbonate 99% (China) US$69,492/t vs US$69,492/t
China Spodumene Li2O 5%min CIF US$5,590/t vs US$5,590/t
Ferro-Manganese European Mn78% min US$1,229/t vs US$1,220/t
China Tungsten APT 88.5% FOB US$32.3/kg vs US$32.3/kg
China Graphite Flake -194 FOB US$835/t vs US$835/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$320/t vs US$320/t
Spot CO2 Emissions EUA Price US$65.2/t vs US$64.9/t
Brazil Potash CFR Granular Spot US$670.0/t vs US$670.0/t
Battery News
Schlumberger and MIT to collaborate on greener lithium processing campaign
- Schlumberger, the world’s largest oilfield contractor, are teaming up with an MIT spin off with the aim of limiting the amount of water needed to produce lithium.
- The spinoff, Gradiant, is aiming to use technology already in use in copper and nickel mines to help reduce the environmental footprint of lithium brine extraction.
- Gradiant claims its process can vastly improve lithium recovery and allow almost all wastewater to be recycled, developed in connection with Schlumberger’s NeoLith Energy Venture.
- Last year, NeoLith reported it had entered into a collaboration agreement with Panasonic for the “validation and optimization of the innovative and sustainable lithium extraction and production process”
- Gradiant is seeking to raise $100m by the middle of 2023 to fund expansion plans, including acquiring companies involved in clean-technology, water and sustainability.
Long-Duration, iron-air battery start-up completes $450m raise
- Form Energy has raised $450m with backing from ArcelorMittal and TPG to develop its long-duration iron-air battery storage technology.
- Iron-air batteries are hoped to offer a longer-term storage solution than lithium-ion batteries.
- The technology is hoped to advance the wind and solar energy storage sectors.
- The company is using low-cost iron pellets, using oxygen to convert iron to rust, charging the battery.
- It hopes to begin commercial production by late 2024.
Company News
Anglo American PLC (LSE:AAL) 2,890.5p, Mkt Cap £39bn – De Beers reports continuing strength in rough diamond demand ahead of the traditionally quieter Diwali holiday season
- Anglo American reports that the eighth De Beers sales cycle of 2022 realised US$500m on a provisional basis and that the previously reported provisional sales of US$630m for the seventh sales cycle of 2022 have now been confirmed as US$638m matching those of the sixth cycle.
- The latest provisional sales figures are US$8m ahead of the US$492m reported for the equivalent eighth sales cycle of 2021 and bring sales so far in 2022 to approximately US$4.9bn which, we estimate, is the highest level achieved by this stage of the year for more than 5 years and over 20% ahead of the equivalent stage last year.
- De Beers Chief Executive, Bruce Cleaver, said that diamond demand for cycle 8 was “in line with expectations at what is a traditionally quieter time of year for the diamond industry as polishing factories in India prepare for closures ahead of the Diwali holidays”.
- He also pointed out that the “steady overall demand for De Beers Group rough diamonds is reflected in the ongoing consumer demand for diamond jewellery ahead of the key holiday sales season in the US”.
Atalaya Mining (AIM:ATYM, TSX:AYM) 215p, Mkt Cap £294m – Filing of Technical Report on Proyecto Riotinto
- Atalaya Mining (AIM:ATYM, TSX:AYM) reports that it has filed an NI-43-101 compliant technical report covering its Proyecto Riotinto including the San Dionisio and San Antonio deposits with the Canadian SEDAR system.
- The technical report “includes independent Mineral Resource Estimates for the Company's San Dionisio and San Antonio deposits, which form part of Proyecto Riotinto and are located adjacent to the Company's operating Cerro Colorado open pit and 15 Mtpa processing plan” and details an open-pit measured & indicated resource of 56.1mt at an average grade of 0.91% copper, 1.14% zinc and 0.23% lead and an underground, inferred resource of 12.4mt averaging 1.01% copper, 2.54% zinc and 0.62% lead at San Dionisio.
- In addition, the report covers an underground inferred resource of 11.8mt at an average grade of 1.32% copper, 1.79% zinc and 0.99% lead at San Antonio, including the adjacent Planes deposit.
Conclusion: We imagine that the technical report will improve insight into the satellite deposits which are higher grade than the main Cerro Colorado deposit and consequently provide Atalaya with an increasing range of options to increase copper production from its new 15mtpa Proyecto Riotinto process plant without further plant expansion. We look forward to examining the report.
Fortescue Metals Group (ASX:FMG) A$17.62, Mkt cap A$54bn – FFI to invest $130m in German gas import terminal
- Fortescue Metal’s Future Industries unit will invest $130m for a 30% stake in Tree Energy Solutions, to become a partner in a gas import terminal and planned green energy hub in Wilhelmshaven, Germany.
- The investment will be funded by previously unutilized capital commitments, and CAPEX in fiscal year 2023 for FFI as a whole is now $230m, up from $100m.
- First delivery of green hydrogen into the TES terminal is expected in 2026, with partners aiming to supply 300,000t in the initial phase.
- According to Fortescue, The collaboration will combine FFI’s market leading expertise in developing large scale renewable energy production, with TES’s unique sustainable business model and access to the European green hydrogen market.
Horizonte Minerals PLC (AIM:HZM, TSX:HZM, OTC:HZMMF) 88.5p, Mkt Cap £190m – US$80m fundraising to advance the Araguaia project and progress feasibility work at Vermelho
- Horizonte Minerals reports that it has completed a £70.5m fund-raising (approximately US$80m) through the placing of approximately 77.9m shares which “represent 40.9 per cent. of the issued ordinary share capital of the Company prior to the Fundraise”.
- The oversubscribed funding prompted the company to increase the size of the originally planned £61.7m raising to £70.5m and reduces “the participation by La Mancha from approximately £23.8 million (approximately US$27 million) to £22.0 million … [with] … shares representing approximately 19.9%” of the company.
- CEO, Jeremy Martin, thanked “all existing shareholders for their continued support and welcome our new shareholders as we work towards first production at Araguaia in Q1 2024 and in parallel progress feasibility work at Vermelho”.
- He also explained that Horizonte Minerals has made “Significant progress … since we broke ground at Araguaia in May and we remain well positioned to transition into a scalable Tier 1 nickel producer”.
- We understand that Vermelho is located approximately 80km northwest of the Araguaia ferronickel project in Para Stare, Brazil. Independent metallurgical testing by SGS Lakefield, reported in 2019, indicated that the saprolite-hosted nickel/cobalt mineralisation at Vermelho is amenable to “conventional Rotary Kiln Electric Furnace ("RKEF") … [similar to Araguaia] … for processing”.
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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