SP Angel . Morning View . Tuesday 08 11 22
Gold flatlines as traders weigh options before key US CPI data and midterm elections
MiFID II exempt information – see disclaimer below
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.
- 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.
- IPO documentation has been prepared for listing when market conditions improve.
*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
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* – Update on AO Kun-Manie transaction with Bering Metals
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)* – Progress report from South Crofty
GreenRoc Mining PLC (AIM:GROC) – Testwork with ProGraphite highlights potential for future spheronisation of Amitsoq graphite material
Petra Diamonds Limited (LSE:PDL, OTC:PDLMF) – Mine tailings escape at the Williamson mine
Tesoro Gold Ltd (ASX:TSO, OTCQB:TSORF) – Drill assays indicate high grade extension at Ternera
Tertiary Minerals PLC (AIM:TYM)* – Soil sampling reveals definition of copper soil anomalies at Jacks Copper Project in Zambia
Dow Jones Industrials +1.31% at 32,827
Nikkei 225 +1.25% at 27,872
HK Hang Seng -0.31% at 16,545
Shanghai Composite -0.43% at 3,064
Economics
US – Americans head to the polls for midterm elections as Democrats risk losing their House majority but are aiming to keep their narrow hold on the Senate.
Japan – The cabinet is set approve a JPY29.1tn ($198bn) extra budget to cover economic stimulus package to aims to help people to ease the impact of inflation.
- The second extra budget for the year ending in March will be partly funded by JPY22.9tn in new government debt, Bloomberg reports.
- Following the cabinet approval, the bill will head to parliament where its likely to pass given the ruling coalition holding the majority.
UK – Retail sales growth slowed in October as consumers delayed purchases ahead of November Black Friday deals and on warmer than expected weather.
- Rising inflation and higher borrowing costs are also weighing on consumer sentiment.
- Jeremy Hunt is considering raising more money from inheritance tax as he aims to fill a substantial fiscal deficit when he announces the UK budget on November 17.
- Chancellor is looking at freezing the threshold at which inheritance tax starts to be paid (currently £325k) and extending its expiry year from 2025-26 to 2027-28.
- Retail Sales (%mom): 1.2 v 1.8 September.
Treasury deficit of £50-60bn to be addressed with substantial cuts in public spending
- Rishi Sunak must be ruing the day he followed Boris Johnson’s liberal lead with massive spending through the Covid pandemic.
- Sources suggest the UK treasury needs to find around £30-35bn of spending cuts and £20-25bn of tax rises to fill the £50-60bn hole depending on estimated by the Office of Budget Responsibility.
- The Treasury will need to make many tough decisions such as whether to maintain its pledge for £28bn pa on renewables and green investments.
- The situation does point towards the application of ‘Windfall Taxes’ to lessen future economic austerity though windfall taxes are tough to apply to earnings made outside the UK. eg oil companies.
- Raising VAT might be another option.
China – The number of new cases climbed to ~7,500 yesterday marking the highest reading since early May.
- Guangzhou, capital of Guangdong province and the nation’s manufacturing hub, accounted for a third of the total.
- So far the city avoided a blanket lockdown like the one was implemented in Shanghai earlier this year with separate districts imposing varying levels of curbs and restrictions.
Covid starts to weigh on fiscal budgets in provinces as factories struggle
- China is probably two years behind the West in its war with Covid infections.
- While Chinese manufacturers gained market share in global markets when the West locked down, the nation now risks losing many overseas companies as the risk of ongoing lockdowns. Locking in workers risks their human rights.
- Is this an unfortunate consequence or is this a part of President Xi’s strategy to further insulate and separate China from the rest of the world.
- Chinese authorities have been unusually soft in their vaccination program, potentially indicating local uncertainty in the effectiveness of the SinoVac vaccine.
- They have also been stubbornly reluctant to import or even license Western vaccines with better proven efficacy, perhaps due to their desire to show confidence and profit from sales of Chinese vaccines overseas.
- Remember vaccines do not completely stop viruses, they only slow their spread and more importantly impart a degree of immunity to recipients.
- It is often said “The best vaccine for Covid is catching Covid” but it’s still better to have had the vaccine and its boosters first.
- If China rolled out an effective vaccine across the nation it would still take a year or two or even three for the virus to circulate sufficiently through the population to produce the natural immunity required for the nation to resume normal social operation.
- For now, the CCP leadership appear determined to stick to their Zero-Covid strategy – is there something we don’t know about the virus? We hope not!
Foxconn iPhone shipments hit by Covid lockdown disruption to Foxconn plant
- The exodus of workers from Foxconn’s giant factory in Zhengzhou has slowed production of Apple’s new iPhone 14 Pro and iPhone Pro Max phones.
Australia - Goldman Sachs (NYSE:GS) says Australia’s “large and protracted” inflation overshoot combined with the Reserve Bank’s decision to stick with smaller interest-rate increases will result in a higher terminal rate.
Plant breakdown in South Africa sees Eskom slash additional power capacity
- A generating unit at the Duvha power plant has broken down, causing Eskom to remove 2,000MW from the grid until further notice.
- Eskom has currently implemented power rationing over 151 days of this year, Bloomberg.
- Blackouts are forecast to hit SA’s economic growth by 0.40% in 2023, slashing it from 1.9% this year.
Currencies
US$1.0002/eur vs 0.9963/eur yesterday. Yen 146.60/$ vs 147.13/$. SAr 17.765/$ vs 17.913/$. $1.148/gbp vs $1.137/gbp. 0.646/aud vs 0.644/aud. CNY 7.256/$ vs 7.237/$.
Dollar Index 111.15 / -0.93% on week
Commodity News
LME faces challenge from Chicago’s CME for metals business after nickel crisis hit confidence
- Open interest in CME’s COMEX aluminium and cobalt contracts has jumped 400% and 500% respectively since the start of 2022.
- LME has long been the dominant market for metals trading, however a controversial short squeeze in nickel contracts this spring caused players to look for alternative markets in which to trade.
- Bloomberg reports traders have lost confidence following the exchange’s decision to suspend contracts at the height of the nickel drama.
Precious metals:
Gold US$1,670/oz vs US$1,674/oz yesterday - Gold flatlines as traders weigh options before key US CPI data and midterm elections
- Gold is hovering around the $1,670/oz mark, having rallied last week on sustained weakness in the US dollar.
- The dollar index has eased 0.8% in the early stages of this week, supporting gold prices.
- US 10 Year Treasury yields have remained buoyant, weighing on a further move upwards in gold prices.
- We expect traders are holding off from major directional bets on gold before the US CPI data on Thursday.
- Economists are expecting a slight slowdown in CPI readings for October, with Wall Street forecasting an 8% increase vs September’s 8.2%.
- Core CPI is forecast to remain the same as September’s at 6.6%, supporting Powell’s announcement last week of higher rates for longer to tackle stickier inflation pressures.
- Gold ETF holdings have sold off for an 8th straight day, ETF holdings have fallen 3.6% this year. This has added downward pressure to gold prices, but central bank purchases have supported further major declines.
Gold ETFs 94.3moz vs US$94.4moz yesterday
Platinum US$984/oz vs US$960/oz yesterday
Palladium US$1,879/oz vs US$1,887/oz yesterday
Silver US$20.66/oz vs US$20.57/oz yesterday
Rhodium US$13,500/oz vs US$13,500/oz yesterday
Base metals:
Copper US$ 7,950/t vs US$8,038/t yesterday - Copper pares gains as investor optimism of a China reopening cools
- Copper prices cooled from highs of $8,140/t on Friday to hover around $7,950/t this morning.
- Copper remains well above the past 4 months’ average closer to $7,500/t as inventories remain depleted.
- Chinese import data on Monday showed a drop in copper imports as liquidity in the property market continues to contract.
- Orders for rods and pipes used in housing development projects have slumped according to Mysteel, renewable energy project demand for copper wiring remains robust, however.
- Traders report that very little physical business was done in copper contracts last week, with much of the price action developing from hedging at the higher level.
Aluminium US$ 2,344/t vs US$2,344/t yesterday
Nickel US$ 23,445/t vs US$23,500/t yesterday
Zinc US$ 2,898/t vs US$2,936/t yesterday - Zinc – demand is so poor in Europe that producers are cutting back
If demand returns there will be a natural lag in the market
Lead US$ 2,023/t vs US$2,031/t yesterday
Tin US$ 19,285/t vs US$18,785/t yesterday
Energy:
Oil US$97.6/bbl vs US$97.5/bbl yesterday
Natural Gas US$6.544/mmbtu vs US$6.888/mmbtu yesterday
Uranium UXC US$50.00/lb vs US$50.60/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$86.6/t vs US$86.7/t - China imports 95mt of iron ore in October, down 4.8% on the month and 3.7% on year
- Imports were lower due to some government-imposed restrictions to ensure cleaner atmospheric conditions for the CCP meeting on Oct 16th.
- From Jan-Oct, China imported 917mt or iron ore, down 1.7% on last year.
Chinese steel rebar 25mm US$527.9/t vs US$531.1/t
Thermal coal (1st year forward cif ARA) US$208.0/t vs US$208.0/t
Thermal coal swap Australia FOB US$335.0/t vs US$350.0/t
Coking coal swap Australia FOB US$316.0/t vs US$316.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$89,201/t vs US$89,330/t - China October rare earths exports at 3,600t, down 17% YoY
- China’s rare earth exports fell on the month and the year, down 17% from September’s exports of 4,330t.
- For January to October, China shipped out 41,471 tonnes of the minerals, up 3.8% from a year earlier.
- Lithium carbonate 99% (China) US$79,558/t vs US$79,382/t
- China Spodumene Li2O 5%min CIF US$6,110/t vs US$6,100/t
- Ferro-Manganese European Mn78% min US$1,234/t vs US$1,230/t
- China Tungsten APT 88.5% FOB US$31.7/kg vs US$31.7/kg
- China Graphite Flake -194 FOB US$880/t vs US$875/t
- Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb
- Europe Ferro-Vanadium 80% 31.95/kg vs US$31.95/kg
- China Ilmenite Concentrate TiO2 US$309/t vs US$310/t
- Spot CO2 Emissions EUA Price US$77.1/t vs US$76.3/t
- Brazil Potash CFR Granular Spot US$600.0/t vs US$600.0/t
Battery News
French battery start-up raises €250m to fund battery megafactory
- French battery startup Verkor has raised €250m to help fund a battery magafactory in Europe, with Renault already lined up for offtake.
- The initial site will be situated at the company technology and innovation centre in Grenoble called Verkor Innovation Center (VIC).
- Chief Executive Benoit Lemaignan said the megafactory was a crucial step in the startup's development and will help it raise a further €1.6bn for a 16GWh factory in Dunkirk that should start production in 2025.
- According to Verkor, funds were raised from industrial partners in the battery sector, commercial banks, investment funds and public banks.
IMF – IMF head reckons price of carbon needs to exceed $75/t by 2030 to meet global climate targets (Reuters)
- The head of the IMF reckons the price of carbon needs to average at least $75/t by 2030 to achieve targeted climate goals.
- The EU benchmark price is leading the way with a carbon price of ~€76/t but prices are under $30/t in California.
- There is no carbon price in many other regions with far less adherence to climate goals in these areas.
Company News
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* 1.28p, Mkt Cap £17.8m – Update on AO Kun-Manie transaction with Bering Metals
- Amur Minerals released an update on the progress of its $35m Kun Manie divestment deal with Bering Metals, the buyer of the AO Kun-Manie asset and a Russian incorporated company.
- Amur reported yesterday that, as a result of Western restrictions, international fund transfers from Russia are becoming increasingly restrictive.
- Amur’s bank has prohibited transactions in accordance with internal compliance protocols, forcing the Company to seek alternative banking services.
- Amur’s CEO Robin Young confirms that both ‘Amur and Bering are keen to complete the sale of AO Kun-Manie as soon as possible’.
- The Company adds that the projected timeline is ‘dependent upon banking institutions completion of Know Your Client protocols’.
- The transaction was previously anticipated to be completed in early November 2022.
*SP Angel act as Nomad and Broker to Amur Minerals
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)* – 14p, Mkt cap £73m – Progress report from South Crofty
Valuation 48p/s
- Cornish Metals has issued a progress report on activity at the South Crofty mine since the completion of the £40.5m funding in May.
- Today’s announcement describes advances on the design and construction of the £6.5-7m water treatment plant and dewatering of the flooded mine workings where installation of two submersible pumps 370m below surface at the New Cooks Kitchen shaft is due to start this month for completion by the end of February 2023.
- The company confirms that the detailed design work for the water treatment plant is now 75% completed and plant construction is on schedule “for planned commissioning in June 2023”.
- In addition to the dewatering and water treatment, drilling to obtain sample for metallurgical testing is underway with three rigs deployed to investigate the North Pool, Roskear and Dolcoath areas of the mine.
- “Drilling to the North Pool Zone is nearing completion of the directional drilling phase, and sample collection for metallurgical testwork is expected this month”.
- Drilling into the No 4 and No 8 Lodes in the central section of the mine shows, visually, “good cassiterite (tin) mineralisation” in both structures and Cornish Metals confirms that it expects to complete the No 4 and No 8 Lode drilling “before year end”.
- At Roskear, in the western part of the mine, “samples are currently being collected for the metallurgical studies … [and] … Encouraging visible tin mineralisation has been encountered, in line with expectations for this area of the South Crofty Mineral Resource”.
- The metallurgical samples will incorporate “ore sorting, process design confirmation and paste backfill” evaluations.
- The results of the metallurgical testing will contribute to the Feasibility Study currently underway and Cornish Metals comments that initial work, “including hydrogeology, geotechnical studies, ventilation, shaft refurbishment, and initial groundwork investigations for the process plant foundations” has been started.
- Cornish Metals also confirms that it has incurred no lost time incidents in the work to date and that among other safety matters it will commence training of two recently recruited mine rescue teams later this month.
- Local community support for the project remains positive and “very supportive of plans to progress South Crofty towards production” and it is encouraging to hear that “many services and skills required for the current work at South Crofty are available within Cornwall and UK”.
- CEO, Richard Williams, welcomed the progress and acknowledged “the pride and dedication that our team displays, knowing that they are contributing to the success of a project that means a lot to the local community and a restart of the Cornish tin industry”.
Conclusion: The injection of funds in May has facilitated progress on the dewatering and water treatment at South Crofty where installation of the required pumping capacity is expected to be completed by the end of February 2023. Drilling to obtain samples for metallurgical testing as part of the Feasibility Study is well underway while work on other aspects of the Study, including hydrological, geotechnical and ventilation studies have started. We look forward to further positive news as the work progresses.
*SP Angel acts as Nomad and Broker to Cornish Metals.
GreenRoc Mining PLC (AIM:GROC) 3.8p, Mkt Cap £4.2m – Testwork with ProGraphite highlights potential for future spheronisation of Amitsoq graphite material
- GreenRoc Mining report results of spheronisation test work done by ProGraphite GmbH a graphite research and testing lab based in Germany.
- Sample material from the Lower Graphite Layer at the Amitsoq Graphite Project in Greenland was tested to assess its ability to produce spherical graphite for Li-ion battery anodes in EVs.
- The shape, nature and conductivity of the spheroids is critical in the processing and use of graphite material for EV anodes to enable the movement of electrons without the growth of dendrites with the battery cell.
- ProGraphite’s micronisation and spheronisation test work in the Amitsoq graphite is reported to confirm the material will upgrade to a spherical graphite product.
- Management state they can produce a 96.5% cg primary concentrate product through the use of four flotation cleaning stages.
- Micronisation of concentrate is reported to use relatively little energy while resulting in a uniform micronised material.
- The ProGraphite team produced two spherical graphite products of 15μm and 19μm from material taken from a 45kg composite made up of quarter core intersections from five drill holes at Amitsoq.
- The tests appear to show the Amitsoq graphite can be processed into anode-grade graphite with tap density and narrow size distributions meeting key metrics for anode material.
- While spherical graphite is mainly produced in China, Talga, Renascor and Syrah Resources have all tested their concentrate product for its spheronisation properties.
- Syrah Resources plans to become the first major integrated producer of natural graphite anode material outside of China in the US in Q3 2023, though this might be a close run contest with Talga which produced its first Talnode®-C anodes in commissioning of its anode qualification plant in Sweden with commercial anode production due in 2024.
- Renascor also plan production for Q3 2023 from the Siviour mine in South Australia using a cleaner HF-free process. Renascor produced 99.98% cg concentrate in recent tests with 99.98% Dorfner Anzaplan.
- Tap densities of 0.98 and 0.96 kg/ltr for the coarse and fine fractions exceed standard minimum requirements of 0.96 kg/l for the coarse fractions and 0.93 kg/l for finer fractions.
- Yields were 54% for the coarse fraction and 55% for the fine fraction, at the higher end of the typical range for batch spheronisation suggesting minimal loss of material in processing.
Conclusion: ProGraphite appears to have run a successful test campaign on 45kg of Amitsoq graphite with regard to its potential future sales as a simple graphite concentrate or for further processing to spheronised material.
Petra Diamonds Limited (LSE:PDL, OTC:PDLMF) 111p, Mkt Cap £214m – Mine tailings escape at the Williamson mine
- Yesterday, Petra Diamonds reported a breach of the eastern wall of the tailings storage facility at its 75%-owned Williamson diamond mine in Tanzania.
- The leak has resulted in flooding which has extended beyond the boundaries of the mine lease
- The company said that “no injuries or fatalities have been confirmed and the teams on the ground are engaging with community members to keep them away from the affected area”.
- “Mine production has been suspended pending an investigation into the incident”.
- During the three months to 30th September, Petra Diamonds Q1, the mine produced a total of 100,750 carats of diamonds and sold approximately 71,000 carats generating US$21m revenue.
- Previously issued production guidance envisaged Petra Diamonds’ FY 2023 production totalling 3.3-3.6m carats with the Williamson mine’s contribution ranging between 319-358,000 carats. We imagine that if there is a lengthy suspension of production at Williamson following the tailings leakage the guidance would be subject to review.
Tesoro Gold Ltd (ASX:TSO, OTCQB:TSORF) A$0.035, Mkt cap A$35m – Drill assays indicate high grade extension at Ternera
- Tesoro reports that it has received assay results for seven holes at its Ternera Gold Deposit.
- Of particular interest was Hole ZDDH0309, approximately 200m south of the existing Ternera MRE.
- Highlights from Hole ZDDH0309:
- 53.50m @ 1.17g/t Au from 57.00m including;
- 13.50m @ 3.63g/t Au from 70.50m
- Mineralisation remains open to the south, with hole ZDDH0311 drilled a further 60m to the south and awaiting assay.
- All holes returned significant intercepts of gold, mostly shallow high-grade intercepts near service, including 1m @ 17.50g/t Au from 69m.
- Tesoro currently has a mineral resource of 30.5 Mt @ 1.12g/t Au for 1.1Moz of gold at 0.3g/t Au cut-off, defined by 148 drill holes – though the company is expecting to increase this given recent step out and infill drilling.
Tertiary Minerals PLC (AIM:TYM)* 0.22p, Mkt cap £3.38m –Soil sampling reveals definition of copper soil anomalies at Jacks Copper Project in Zambia
- Tertiary Minerals has announced the provisional results from its detailed soil sampling campaign in Zambia at its Jacks Project.
- The Company completed the campaign both on schedule and on budget, with multiple soil anomalies defined:
- A peak value of 535ppm copper was defined.
- Sufficient ground control has been identified for drill testing.
- The Company notes the soil anomalies bear notable similarities to soil anomalies of ore zones at producing or previously producing mines across the Zambian Copperbelt.
- 1,807 samples were collected over four separate grids on a 200m x 40m spacing.
- Follow up sampling was executed on three of the four preliminary grids at 100m x 40m spacing.
- The results using pXRF elemental analysis in the field are provisional and samples are currently being sent for traditional wet chemical analysis in South Africa.
- Tertiary’s Executive Chair Patrick Cheetham states he is ‘delighted with the results obtained to date, which.. have defined multiple soil anomalies in favourable Lower Roan stratigraphy.’
Conclusion: We congratulate Tertiary on further positives updates from the Jacks Copper Project in Zambia following the successful JV agreement with Mwashia announced on Friday. We look forward to additional updates as the Company develops its assets in Zambia, with Jacks representing one of Tertiary’s five areas of interest in the attractive copper mining jurisdiction.
*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
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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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