SP Angel . Morning View . Tuesday 01 11 22
Copper prices edge higher on China reopening rumours and resumption of Dollar weakness
MiFID II exempt information – see disclaimer below
Private Zambian copper exploration opportunity
- We are looking for investment into a private copper explorer with four highly prospective licences in Zambia, near major mines or significant exploration targets.
- One license is contiguous with First Quantum’s Sentinel copper and Enterprise nickel mines with whom they have a Technical Cooperation Agreement.
- Historic drilling on the licence includes 0.7% copper over 1m and 0.2% nickel over 3m. Geophysics in 2021 & 2022 advanced project toward identifying drill targets.
- A large licence with multiple copper targets. Samples from small artisanal mines assayed 15.8% copper, 0.57g/t gold and 4.87% copper, 18.3 g/t gold.
- A highly prospective licence acquired in 2022 on the Western Foreland trend which hosts the giant Kamoa-Kakula mine.
- IPO documentation has been prepared for listing when market conditions improve.
- All licences are 100% owned with Zambian partners significant shareholders in the company.
*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.
Capital Limited (LSE:CAPD) – New CFO announced
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)* – Additional mineral rights at South Crofty
Ferrexpo PLC (LSE:FXPO) – Operations update following Russian missile strikes on Ukrainian infrastructure
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* suspended – Mining operations carry on as normal as negotiations with NewGen to resolve the financial restructuring continue
Copper prices edge higher on China reopening rumours and resumption of Dollar weakness
- Copper prices jumped 2.73% from yesterday’s lows, touching $7,635/t before paring gains slightly.
- Copper prices had weakened over the weekend on a short-term bounce in the Dollar index.
- A combination of the resumption of the Dollar’s downward trend and rumours from China of a potential reopening committee have supported copper prices.
- We expect continued volatility from copper prices lacking structural direction. TC/RC hikes are suggesting ample mined supply for Chinese buyers whilst global copper stocks fell 20% over the past fortnight.
Gold - Central Banks quadruple their gold purchases as mystery buyer hoovers up bullion
- The World Gold Council has reported ‘substantial’ unreported buying, as central bank bullion purchases hit a record in Q3.
- 400t of gold were bought by central banks last quarter, pushing purchases up to their highest since 1967.
- ETF selling amid soaring US Real Yields has pushed prices lower, whilst central bankers have been meeting depressed prices with open arms.
- The WGC reports Turkey and Qatar both ramped up purchases, with China and Russia also expected to be partaking, although their purchases are not reported.
- Gold prices have hovered around the $1,645/oz mark in recent weeks as traders await the Fed meeting starting today.
Dow Jones Industrials -0.39% at 32,733
Nikkei 225 +0.33% at 27,679
HK Hang Seng +5.23% at 15,455
Shanghai Composite +2.62% at 2,969
Economics
Chinese equities rally on rumours of an official ‘reopening committee’ formed to bring the country out of lockdown
- Chinese equities rallied 7% this morning on rumours of Beijing officials forming a ‘reopening committee’ to guide the country out of its lockdown doldrums.
- Prices have subsequently sold off slightly following Foreign Minister Zhao Lijian stating he is ‘not aware’ of the committee.
- Rumours were spread via unverified social media posts.
- Markets had sold off heavily following the National Congress in which Xi consolidated power with a hard-line, loyalist Politburo.
- Chinese securities have been desperate for some positive news regarding Covid, with the Yuan jumping 0.7% on the rumours.
- Covid cases rise to 2,871 at end October giving a total number of all-time cases of >1m and official mortality of 5,226
- China has not enforced vaccination on its population and has taken a softer approach to vaccine rollout
- India appears to have managed better, perhaps due to a better developed pharmaceutical industry and greater health awareness
- We wonder if China’s insistence on the use of its own, substandard, vaccines was also a part of the problem.
- Foxconn iPhone factory in Zhengzhou suffers covid outbreak
- Workers are reported to have been seen fleeing the stricken factory which employs around 200,000 people
- Foxconn, a Taiwanese company, is moving iPhone production to other sites to protect production. Foxconn accounts for around 70% of all iPhone production
- The Zhengzhou factory assembles the majority of Foxconn’s iPhone global output.
- Restrictions within the factory complex could see November production fall by 30%
China – Manufacturing sector remained in contraction for a third consecutive month in October, albeit, the pace of contraction slowed, according to private businesses’ Caixin survey.
- The activity was weighed down by Covid 19 containment measures.
- Local and foreign demand continued to struggle with new orders falling for a third consecutive month.
- Employment continued to struggle falling for 14 of the past 15 months, although, the rate of decline was softer than in the previous three months.
- Caixin Manufacturing PMI: 49.2 v 48.1 September and 48.5 est.
ECB – Christine Lagarde offered somewhat hawkish comments regarding the pace of future rate hikes during her interview to the Latvian website Delfi Bizness.
- ECB President said the current cycle of interest rate increases should ensure inflation returns to the 2% target adding that “the destination is clear, and we haven’t reached it yet”.
- Lagarde acknowledged that the likelihood of a recession has increased but warned of the dangers of not stepping in to tame inflation, Bloomberg writes.
- “Inflation is still too high throughout the eurozone… The longer inflation remains at this high level, the greater the risk that it will spread throughout the economy.”
UK – The BOE is planning to auction the first £750m in short maturity securities today as part of a larger programme to winddown its £838bn stimulus accumulated over a 13-year period.
- The central bank is proposing to sell around £40bn worth of bonds in the first 12 months on top of securities that are maturing.
- The MPC monetary policy announcement is Thursday with estimates for a 75bp hike taking benchmark rates to 3.0%.
- Property prices pulled back for the first time in more than a year in October on the back of higher mortgage rates.
- Prices were down 0.9%mom with an annual increase slowing down to 7.2% from 9.5% in the previous month, according to Nationwide data.
South Korea – The nation reported the first decline in exports in two years signalling deteriorating global economic outlook.
- Headline exports fell 5.7%yoy compared to a 2.1%yoy drop forecast.
- In particular, shipments of semiconductors, Korea’s biggest source of income, dropped the most since 2019 with exports to China falling by double-digits for the first time since the start of the pandemic.
Australia – The central bank raised rates for a seventh consecutive month taking rates to a nine-year high of 2.85%.
- That was the second 25bp rate increase in a row with the central bank opting for less aggressive tightening on the back of a deteriorating economic outlook.
- Nevertheless, the central bank continued to acknowledge high inflation and reiterated that it “expects to increase interest rates further over the period ahead”.
- The A$ is trading higher this morning following the announcement.
- Inflation continued to climb in Q3/22 averaging 7.3%, up from 6.1% in the previous quarter, with the central bank expecting the rate to peak around 8%.
US - Chicago PMI fell further to 45.2 in October vs 45.7 in September and a long way off the high of 65.0 in January as the US emerged from Covid
- Expect the Fed to raise rates another 0.75% tomorrow to 4%.
- Dallas Fed manufacturing -19.4 in October vs -17.2 in September vs its February high of +14)
Brazil - Luiz Lula da Silva, the former left wing president won by a slim margin at 50.9% of the vote vs Bolsonario at 49.1%
- Lula has pledged to protect the Amazon – which is a massive relief for the world
Eurozone - Q3 GDP slowed to 0.2% qoq vs 0.8 in Q2 and 2.1% yoy in Q3 vs 4.3% yoy in Q2
- EU GDP also grew 0.2% qoq too but was slower than Q2 at 0.7% qoq.
Italy - Q3 GDP pulled back to 0.5% vs 1.1% in Q2 and 2.6% yoy in Q3 vs 4.9% yoy in Q2
Chile – copper production falls 2.6% yoy to 440kt in September
- China refined production rises 6% yoy to 946kt
Japan - Consumer confidence slipped to 29.9 in October vs 30.8 in September
Ghana aiming to be key supplier of critical minerals, according to Minister
- Ghana’s minister of lands and natural resources, Samuel Jinapor, told attendees at a conference in Perth that the country is working hard to take up a role as a key supplier of critical minerals.
- Ghana has about 500 active exploration projects focused on a range of mineral opportunities, with Mr Jinapor commenting: “The priority of the government of Ghana continues to be the translation of these volumes of minerals production into wealth to benefit all stakeholders, equitably, including the larger populace as optimally as possible,”
- The minister described how the country is also well endowed with minerals that are being keenly sort for the global push for new energy solutions, such as lithium.
- Mr Jinapor detailed how the government is keen to diversify away from gold along, though recognising its importance to Ghana, with bullion providing approximately 40% of export earnings, and accounting for more than 90% of gross mineral revenues.
Saudi Arabia looks to Australian Miners for $170bn worth of investment
- Saudi Arabia’s Minister of Industry and Mineral Resources is currently in Australia to drum up major miner enthusiasm for what it says is £1.3tn worth of untapped mineral deposits in the Kingdom.
- Saudi’s Vision 2030 Project, which looks to diversify the KSA’s economy away from oil, has placed mining as a central pillar.
- It hopes 60% of the $170bn sought for mining will come from private firms.
- The Minister hopes Saudi will be able to attract junior mining explorers to help develop early-stage exploration targets.
- Saudi’s State Owned firm Maaden stated in 2021 that it plans to spend ‘a huge amount of money’ for domestic battery metals exploration.
Tata Steel sees profits fall 87% on tumbling steel prices
- Indian steel giant Tata Steel reported net profit of $183m for the quarter, down 87%.
- Steel prices have continued to fall on cooling demand from China’s property sector and a slowdown in economic growth amid rising interest rates and soaring inflation.
- Input costs, including coking coal, hit production but management expects ‘favourable movement in raw material prices.’
Currencies
US$0.9938/eur vs 0.9917/eur yesterday. Yen 147.74/$ vs 148.20/$. SAr 18.170/$ vs 18.272/$. $1.154/gbp vs $1.156/gbp. 0.644/aud vs 0.640/aud. CNY 7.272/$ vs 7.297/$.
Dollar Index 110.855 / -0.08% on week
Commodity News
Banks expand metals-trading operations in bid to profit from whipsawing price volatility
- Bloomberg reports Bank of America and Morgan Stanley (NYSE:MS) have been on a hiring spree for their metals trading desks as volatility presents opportunities for gains.
- Deutsche Bank is reportedly also considering a return to the sector following a morose decade.
- Base metals trading earnings have climbed up to 30% this year amid whipsawing prices, best since the GFC.
- JPMorgan remains the largest metals trading bank, however they have reduced exposure following the dramatic ‘short squeeze’ in nickel earlier this year.
Precious metals:
Gold US$1,648/oz vs US$1,638/oz yesterday
Gold ETFs 95.1moz vs US$95.2moz yesterday
Platinum US$946/oz vs US$932/oz yesterday
Palladium US$1,875/oz vs US$1,914/oz yesterday
Silver US$19.71/oz vs US$19.02/oz yesterday
Rhodium US$14,000/oz vs US$14,100/oz yesterday
Base metals:
Copper US$ 7,617/t vs US$7,454/t yesterday
Aluminium US$ 2,251/t vs US$2,190/t yesterday
Nickel US$ 22,490/t vs US$21,930/t yesterday
Zinc US$ 2,730/t vs US$2,737/t yesterday
Lead US$ 1,987/t vs US$1,976/t yesterday
Tin US$ 17,855/t vs US$17,625/t yesterday
Energy:
Oil US$94.5/bbl vs US$94.7/bbl yesterday
Natural Gas US$6.168/mmbtu vs US$6.117/mmbtu yesterday
Uranium UXC US$52.80/lb vs US$53.05/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$76.2/t vs US$79.4/t
Chinese steel rebar 25mm US$521.2/t vs US$522.9/t
Thermal coal (1st year forward cif ARA) US$225.0/t vs US$225.0/t
Thermal coal swap Australia FOB US$357.0/t vs US$380.0/t
Coking coal swap Australia FOB US$329.0/t vs US$329.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$89,738/t vs US$90,645/t
Lithium carbonate 99% (China) US$76,672/t vs US$75,435/t
China Spodumene Li2O 5%min CIF US$6,100/t vs US$6,000/t
Ferro-Manganese European Mn78% min US$1,228/t vs US$1,225/t
China Tungsten APT 88.5% FOB US$31.8/kg vs US$31.8/kg
China Graphite Flake -194 FOB US$875/t vs US$875/t
Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.4/lb
Europe Ferro-Vanadium 80% 31.95/kg vs US$31.75/kg
China Ilmenite Concentrate TiO2 US$309/t vs US$308/t
Spot CO2 Emissions EUA Price US$79.2/t vs US$78.4/t
Brazil Potash CFR Granular Spot US$595.0/t vs US$595.0/t
Battery News
Tesla mass production of Cybertruck from end of 2023
- Tesla aims to start mass production of its Cybertruck at the end of 2023, two years after the initial target for the EV pickup.
- It has not announced final pricing on the Cybertruck, though the company projected an initial price of $40,000 when the vehicle was announced in 2023.
Breaking China’s rare earth monopoly is a “pipe dream”, according to Australia’s resources minister
- Australia’s resources minister, Ms King, has told Bloomberg that Western Countries are nowhere near ending their reliance on China for rare earths and critical minerals.
- Ms King reaffirmed Australia’s commitment to boosting investment, commenting that it was Canberra’s aim “to make the most of the natural endowment we have of these resources, so that we can provide an alternative source of them from China”
- The Biden Administration recently approved a $2.8bn package to boost domestic critical mineral production.
- Unlike the US, Ms King said Australia was not considering any direct investment in critical minerals supply chains, instead preferring to provide loans.
- In our view, if governments are serious about breaking Chinese dominance in the rare earths market, more investment is needed into projects willing to integrate all aspects of the value chain in order to create a truly independent market.
- Mkango Resources* (Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF)) has recently released its feasibility study for its Songwe Hill project in Malawi, targeting ~2,000tpa of high value rare earth oxides.
- The company initially intends to produce a Mixed Rare Earth Carbonate which will require further processing, though the eventual goal is the development of a rare-earths separation plant at Pulawy in Poland fed by Songwe.
- The adjacent Azoty plant is able to provide acid reagents required for the rare earth purification process and is also able to utilise the waste products from the process minimising both the cost of the process and its output of non-productive waste materials.
- REE recycling is also a strategy for Mkango, who are currently collaborating with various UK institutions such as the University of Birmingham and Jaguar Land Rover with the aim of establishing a recycled source of permanent magnets in the UK.
*SP Angel acts as nomad and broker to Mkango
Company News
Capital Limited (LSE:CAPD) 83p, Mkt Cap £1m – New CFO announced
- Capital reports the appointment of Mr. Rick Robson as Chief Financial Officer from the 1st of January 2023.
- Mr Robson will replace Mr. Giles Everist following a two-month transition period.
- Mr. Robson, a chartered accountant, has been a member of Capital's senior management team since 2019 and is currently Head of Corporate Development & CFO of MSALABS. He has 20 years of experience across corporate finance, M&A advisory and operational finance.
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)* – 15p, Mkt cap £80m – Additional mineral rights at South Crofty
Valuation 48p/s
- Cornish Metals reports that it has leased additional mineral rights covering 49 hectares located on the southern edge of its mining permit at South Crofty in Cornwall.
- The lease, which initially covers a 5-year period, has been agreed with Roskear Minerals and covers an area underlain by the ‘Great Flat Lode’ which was mined, initially for copper and subsequently for tin, during the 18th and 19th centuries.
- “The terms of the Prospecting Lease require Cornish Metals to pay an annual rent to Roskear Minerals, plus a tin price-based sliding scale net smelter return royalty on production of any minerals recovered from the leased area under a subsequent Mining Lease”.
- The Great Flat Lode is known to extend over a strike length of around 3.2km and is located around 1km south of the South Crofty mine.
- Historic mining of the structure “developed into one of the most productive areas of tin production in Cornwall during the latter part of the 19th century, with workings extending down to a vertical depth of 600m from surface”.
- The newly leased area is also underlain by a tin-bearing structure located to the north of the Great Flat Lode and known as “the Wide Formation, a structure interpreted to exist parallel to and beneath the Great Flat Lode” which was intersected by limited drilling during the 1960s and 1970s.
- The mineral resource estimate for South Crofty published in June 2021 contains an Indicated resource of approximately 2.1mt at an average grade of 1.6% tin and an inferred resource of a further 1.9mt at a grade of 1.7% tin in the granite-hosted ‘Lower’ mine plus an indicated resource of 0.3mt averaging 1.01% tin equivalent and an inferred resource of approximately 0.5mt averaging 0.9% tin equivalent in the ‘Upper’ mine.
- It appears that mineralisation from either the Great Flat Lode or from the Wide Formation is not included in the 2021 resource estimates suggesting that future exploration of the newly leased ground, if successful, has the potential to expand the overall mineral resource inventory at South Crofty.
- Comments from CEO, Richard Williams, that the “lease agreement with Roskear Minerals opens up an area we believe has significant exploration potential, covering a large section of the historic Great Flat Lode, and any other potential zones of tin mineralisation between the Great Flat Lode and South Crofty” seems to confirm that resource expansion potential underlies the decision to lease the additional mineral rights.
Conclusion: The acquisition of additional mineral rights adjacent to South Crofty provides access to two mineralised structures, one of which was extensively mined historically, which do not contribute to the current mineral resource and hence offer resource expansion potential. We will be interested to hear of Cornish Metals’ plans for the exploration of this area in due course.
*SP Angel acts as Nomad and Broker to Cornish Metals.
Ferrexpo PLC (LSE:FXPO) 105p, Mkt Cap £620m – Operations update following Russian missile strikes on Ukrainian infrastructure
- The Company is partially resuming its operations in central Ukraine as repair works progress aiming at restoring power supply following Russian missile strikes of key electrical infrastructure in Ukraine.
- In the meantime, the Company is using available on site stockpiles to meet customer demand.
Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* suspended – Mining operations carry on as normal as negotiations with NewGen to resolve the financial restructuring continue
NPV Valuation: Under review
- Following its announcement last week, Rambler Metals has confirmed that it remains in discussions, which it describes as ‘constructive’ with NewGen Resource Lending concerning the financial restructuring.
- The company confirms that as no principal repayment of debt was made on 31st October it is in technical default of its loan agreement with Newgen.
- Rambler Metals confirms that “operations at the mine site are continuing as normal”.
- The company’s shares remain suspended as the discussions with NewGen proceed.
Conclusion: We await a speedy resolution of the financing discussion to clarify the situation and are reassured to have confirmation that mining operations are continuing uninterrupted.
*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining.
Tertiary Minerals PLC (AIM:TYM)* – 0.22p, Mkt cap £3.2m – Completion and results of Nevada summer exploration campaign
- Tertiary reports the completion of its trenching, sampling, geochemical analysis, petrological evaluation and field follow up work at the Brunton Pass Project, Nevada.
- 386m worth of trenching was completed across 6 trenches to explore copper, mercury and arsenic anomalies discovered in prior surface sampling.
- T7 Trench
- 27.4m grading 1,010ppm copper (0.1% Cu), open to the east.
- T8 Trench
- 77.7m grading 473ppm copper, open to the east.
- The Company suggests the wide, low-grade copper intervals present the possibility of a halo to more significant mineralisation, raising the potential of a deeper porphyry copper target.
- The exploration campaign also tested the north and south ends of an identified 1.2km long zone of mercury-arsenic soil anomalies intersected by hydrothermally altered rock containing c.1,000x background content of the gold indicator elements, arsenic and mercury.
- T1 Trench
- 9.1m grading 1,930ppm arsenic and 102 ppm mercury
- T11 Trench
- 32m grading 1,622ppm arsenic and 110ppm mercury
- T2 Trench, located between T1 and T11
- intersected 2.65g/t gold over 2.7m
- The Company will now drill test the zone explored by T1, T2 and T11 for epithermal gold mineralisation at deeper levels.
- Tertiary believes up to 1,000x background values for mercury and antimony within the clay altered rocks, 900m apart, may be positioned in the upper levels of a high sulphidation epithermal gold deposit.
- Brunton Pass is neighbouring other potentially similar deposits. For example, the Paradise Peak deposit 25km south producing 1.6moz of gold and 44moz of silver up to closure in 1993.
Conclusion: We congratulate Tertiary on a successful summer field campaign in Nevada and look forward to further drill testing of the potential porphyry copper target and possible deeper epithermal gold mineralisation.
*SP Angel act as Nomad and Broker to Tertiary Minerals
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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