SP Angel . Morning View . Thursday 25 02 21
EV and battery metals prices catching up fast with listed base metals
Anglo American (LON:AAL) – Iron ore performance underpins 2020 EBITDA
Horizonte Minerals (LON:HZM) – Araguaia granted power-line licence
Norilsk Nickel (MCX:MNOD) – Water inflow triggers partial suspension of operations in 2 Siberian mines
Impala Platinum (JSE:IMP) – Gross profit rises 263% in HY ended December 31st
EV and battery metals prices catching up fast with listed base metals
Battery metals and other industrial minerals prices are rising fast in Europe the US and China as new demand comes through
Cobalt, rare earth, lithium and ferro-vanadium are all moving higher as positive sentiment combined with rising demand feeds through into higher prices
Cobalt prices have risen today to $51,800/t from $51,000/t yesterday and $50,000/t on Tuesday
NdPr Rare Earth Oxide prices in China rose to $81,380/t today from $77,463/t yesterday and $73,288/t on Tuesday
Lithium carbonate rose in China to $11,781/t from $11,463/t yesterday and $11,144/t on Tuesday
Spodumene 6% Li2O rose in China to $455/t this week from US$395/t last week
Ferro Vanadium prices rose in China to $32.5/kg from $32.0/kg yesterday and $31.5/kg On Tuesday
LME copper prices continue to rally towards 10-year highs
Copper prices continued to rise on Thursday morning, as the US Federal Reserve reaffirmed its loose monetary policy to support growth.
Fed Chairman Powell told Congress that it may take more than three years to reach the central bank’s inflation goals- indicating rates may remain unchanged for a while.
Three-month copper prices on the LME rose 2.3% earlier this morning to $9,519/t, while prices on the Shanghai Futures Exchange rose as much as 4.5% to the highest level since March 2011 (Reuters).
Copper, aluminium and tin all set fresh multi-year/month gains this morning (Fastmarkets MB).
India/China – China conforms that four soldiers killed in the disputed Galwan River Valley died as martyrs last year.
India says it lost 20 troops. China’s PLA rarely admits losses and had not previously admitted to any losses in the clash.
China also maintains it has not had a single case of COVID-19 among military personnel including those deployed in Wuhan last year.
Recent Interviews:
VOX Markets:
24/02/20 https://www.voxmarkets.co.uk/articles/john-meyer-mining-talks-about-copper-bluejay-empire-metals-phoenix-copper-rainbow-rare-earths-rambler-metals-mins-tirupati-graphite-feb-24-1-18-pm-3b5e4d3
11/02/20 https://audioboom.com/posts/7803378-john-meyer-covers-arc-mins-cornish-metals-rambler-rainbow-rare-earths-mkango-bluejay
IGTV:
Is this a new Supercycle for commodities: https://youtu.be/BIWb-wqoLpM
Metals expected to continue the last-year gains into 2021 https://youtu.be/afrB9cJe8L0
Is 2021 the start of the new COVID-Supercycle or will Lockdowns delay the recovery? https://youtu.be/7LO0tDc-pNc
121 Conference panel: Investment Leader’s Discussion: Van Eck, Qora Capital, Nedbank, SP Angel
https://www.youtube.com/watch?v=AGzK4iqwfGk&feature=emb_title&ab_channel=121MiningInvestmentTV
iiTV: Mining stock to own 2021: https://www.youtube.com/watch?v=4x7SuSLQwCI&t=11s.
Mining share tips for 2021 - https://www.youtube.com/watch?v=G_6RKAp91k4
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.
We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
Metals price forecasting through 2020 - 2020 was probably the most difficult year for forecasting anything
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
Dow Jones Industrials +1.35% at 31,962
Nikkei 225 +1.67% at 30,168
HK Hang Seng +1.36% at 30,122
Shanghai Composite +0.59% at 3,585
Economics
US – US equity indices closed higher on Thursday supported by dovish comments from the US Fed Chairman during his two-day address to Congress.
Jay Powell reiterated that the central bank will continue with its accommodative policies playing down risks of climbing rates and rising inflation expectations.
EU leaders are scheduled to discuss their vaccination efforts as member states report different inoculation progress.
Delays in using available vaccine doses in Germany, France, Italy and Netherlands come in contrast with rapid deployment in Denmark, Estonia and Lithuania, according to FT.
Germany and France are aiming to vaccinate 70% of adults by September while nations like Denmark and Sweden are targeting to fully inoculate every adult that wants the vaccine by the end of June, although both countries are significantly smaller in terms of population.
Japan – domestic car production falls in January on global semiconductor shortage
Output of passenger cars fell 10% YoY to 646,000 units in January, with output falling 9% compared to the month prior.
Automakers have announced that they have been forced to curb production during the month due to the shortage of semiconductors.
Japan's biggest carmaker Toyota said its domestic car output had dropped for the first time in five months compared with year-earlier levels.
Austria chancellor Sebastian Kunz called for EU to consider a special “green passport” to prove citizens were either vaccinated or had a negative COVID-19 test result, FT writes.
UK – Chancellor Rishi Sunak is urged to announce a £100bn fiscal aid next week including £70bn of targeted stimulus on top of extending existing pandemic support programmes, Bloomberg reports.
On a less positive note, Chancellor is also expected to announce a corporation tax increase during the coming budget address.
UK government officials proposed a rise from 21% to 28%, FT reports.
Officials involved with the budget say Sunak wants British business taxes to be “competitive” with other G7 nations suggesting rates may go up to 25% or higher.
Qantas, an Australian airline company, pushed back a resumption of international flights to October when government is expected to have completed its vaccination programme.
The airline recorded a 75% drop in sales in 6m to the end of December on a drop in demand for travel, the closure of the Australian border to foreign visitors, strict quarantine restrictions and limits on travel between states, FT reports.
Australia – The central bank steps up purchases of government debt in an effort to bring climbing yields down.
The RBA bought A$5bn of bonds yesterday including A$3bn in extra purchases, matching the record last March when it started QE.
The move brought the targeted three-year yield down after it hit a two-month high.
Increasing local yields are likely to see the central bank to enlarge its recently-expanded bond purchases programme to limit additional currency appreciation, according to Bloomberg.
Currencies US$1.2198/eur vs 1.2159eur yesterday. Yen 106.06/$ vs 105.55/$. SAr 14.556/$ vs 14.569/$. $1.416/gbp vs $1.417/gbp. 0.799/aud vs 0.792/aud. CNY 6.451/$ vs 6.455/$.
Commodity News
Precious metals:
Gold US$1,791/oz vs US$1,808/oz yesterday
Gold ETFs 104.7moz vs US$104.9moz yesterday
Platinum US$1,259/oz vs US$1,256/oz yesterday
Palladium US$2,415/oz vs US$2,368/oz yesterday
Silver US$27.81/oz vs US$27.76/oz yesterday
Base metals:
Copper US$ 9,479/t vs US$9,192/t yesterday
Aluminium US$ 2,219/t vs US$2,146/t yesterday
Nickel US$ 19,600/t vs US$19,220/t yesterday
Water inflow triggers partial suspension of operations in two Norilsk mines (see Norilsk comment below)
Zinc US$ 2,875/t vs US$2,830/t yesterday
Lead US$ 2,136/t vs US$2,112/t yesterday
Tin US$ 27,095/t vs US$26,500/t yesterday
Energy:
Oil US$67.6/bbl vs US$65.4/bbl yesterday
Reports from Reuters confirm that OPEC+ will discuss the possibility of increasing its oil production levels at the next meeting
The group is set to meet on 4 March, where it will discuss raising output as much as a half a million barrels per day starting in April
OPEC+ members are currently suppressing oil production by more than 7MMbopd, but with oil prices now on the rise and the markets getting the idea that the market could be tightening, OPEC+ may consider loosening the reins
The last Joint Ministerial Monitoring Committee Meeting of OPEC+ met in February ended without many surprises.
For the month of February, another 75,000bopd was added to the quotas—65,000bopd to Russia and 10,000bopd to Kazakhstan.
For the month of March, production quotas were eased again by another 75,000bopd—again to Russia (65,000bopd) and Kazakhstan (10,000bopd).
But Saudi Arabia had announced in January that in February and March, it would voluntarily cut an additional 1MMbopd.
Saudi Arabia has not committed to cutting this additional cut beyond March, so it’s very possible that this OPEC+ meeting will end with an additional 1.5MMbopd added into the mix: an additional 500,000bopd added to the production quotas, and an additional 1MMbopd from Saudi Arabia.
The oil markets have improved in recent weeks, with crude oil inventories in the world’s most visible oil market, the US, finally returning to its five-year average resulting in the highest-level oil prices have seen in over a year
Natural Gas US$2.840/mmbtu vs US$2.840mmbtu yesterday
Natural gas futures are continuing to drift as warmer weather in Texas is helping production to recover faster than previously expected from last week’s Arctic freeze that rattled the energy markets last week
Falling spot gas prices are also weighing on the futures markets as well as forecasts calling for improving weather conditions
Nonetheless, traders shouldn’t become complacent with volatility expected to return with the March contract roll-off on Wednesday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$167.7/t vs US$169.0/t
Chinese steel rebar 25mm US$721.0/t vs US$720.3/t
Thermal coal (1st year forward cif ARA) US$68.5/t vs US$67.4/t - HSBC and Barclays challenged over bond linked to Vietnamese coal project
HSBC and Barclays, which have pledged to stop financing coal projects, have been challenged by a legal group over a Japanese bond it says will contribute to the financing of coal-fired power in Vietnam.
Legal experts say this could be the first in a series of challenges to banks over indirect financing at odds with their climate commitments.
The bond, a £250m issue by the Japan Bank for International Cooperation, will support expansion of the Vung Ang 2 power project.
HSBC declined to comment and Barclays and JBIC did not return requests for comment.
Coking coal swap Australia FOB US$154.5/t vs US$153.5/t
Other:
Cobalt LME 3m US$51,800/t vs US$51,000/t
NdPr Rare Earth Oxide (China) US$81,380/t vs US$77,463/t
Lithium carbonate 99% (China) US$11,781/t vs US$11,463/t
Spodumene 6% Li2O min, cif (China) US$455/t vs US$395/t
Ferro Vanadium 80% FOB (China) US$32.5/kg vs US$31.5/kg
Ferro-Manganese high carbon 78% Mn US$1,610/t vs US$1,610/t
Tungsten APT European US$250-255/mtu vs US$250-255/mtu
Graphite flake 94% C, -100 mesh, fob China US$560/t vs US$560/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,625/t vs US$2,625/t
Battery News
Hyundai to replace battery systems in $900m EV recall
Hyundai will replace battery systems in 82,000 EVs globally due to fire risks in one of the first mass battery pack replacements conducted by a major automaker.
The recall mostly concerns the Kona EV, Hyundai's biggest-selling electric car which was first recalled late last year for a software upgrade after a spate of fires.
Battery maker LG chem has quickly deflected criticism, saying that Hyundai misapplied LG’s suggestions for fast-charging logic in the battery management system (Auto News).
China close to overtaking UK in offshore wind capacity rankings
China installed a record 3,060MW of new offshore wind capacity in 2020, corresponding to over half of the offshore wind capacity added globally last year,
Overall, China had 9,898MW of installed offshore wind capacity at the end of 2020, and was just 308MW shy of taking top spot from the UK which had 10,206MW.
It was the third year in a row that China led the world in new annual offshore wind capacity.
Over 6GW of new offshore wind capacity was added globally in 2020, according to GWEC.
Company News
Anglo American (LON:AAL) 2,971p, Mkt Cap £38.7bn – Iron ore performance underpins 2020 EBITDA
Anglo American reports that strong metal priced during the latter part of 2020 offset pandemic-related disruption earlier in the year to deliver US$9.8bn of EBITDA during 2020 (2019 – US$10.0bn) at a margin of 43% (2019 – 42%).
In common with other major mining companies which have reported recently, the group’s iron-ore business is the principal contributor to EBITDA delivering US$4.6bn (US$3.4bn) or around 47% of the total.
Anglo American’s diverse portfolio saw its platinum group metals business deliver a further US$2.6bn (2019 – US$2.0bn) and its copper operations contribute US$1.9bn (2019 – US$1.6bn) to the overall EBITDA total.
The diamond operations of De Beers contributed a further US$0.4bn (2019 – US$0.6bn) and the contribution from the nickel & manganese business also declined to US$0.5bn from the US$0.6bn recorded in 2019.
The group’s net debt increased by US$949m during the year to US$5.8bn.
Anglo American is maintaining its previously announced 2021 production guidance across all product groups:
Iron-ore production in the range 64-67mt rising to 65-68mt in 2022
Platinum production in the range 1.9-2.1moz in both 2021 and 2022 with 1.4-1.5moz of palladium and 0.9-1.0moz of other platinum group metals.
Copper output of 640-680,000t in 2021 rising to 680-790,000t in 2022
32-34m carats of diamonds in 2021 falling slightly to 30-33m carats in 2022
Coal output of 18-20mt of metallurgical and around 24mt of thermal coal in 2021 and 22-24mt of metallurgical and 24mt of thermal coal in 2022
42-44,000t of nickel production in both 2021 and 2022
Capital expenditure on growth projects is expected to be in the range US$2-2.5bn in 2021 including US$0.5bn expected for the further development of the Woodsmith polyhalite mine in North Yorkshire which was acquired with Sirius Minerals in March 2020.
Commenting on the progress of the Woodsmith mine, Anglo American reports that it spent US$292m on the project during the year and that “By the end of December, the excavation of the conveyor tunnel had reached almost 12 kilometres and continues to progress well. At the mine head, the first shaft-boring machine has been assembled within the service shaft and is being commissioned, while good progress is also being made on the production shaft”.
Additional capital expansion projects include the new US$2.7.2.8bn Moquequa mine at Qullaveco in Peru, due to start production in 2022 producing around 300,000tpa of copper and phased expansion of the Collahuasi operation to potentially add an additional 50,000tpa of copper production in 2023/4 aas well as the switch to underground mining at the Venetia mine.
Sustaining capital across the group is expected in the order of US$3.7bn for 2021 and US$4.2bn in 2022.
Chief Executive, Mark Cutifani, applauded the efforts of Anglo American’s employees in their response to the challenges of the Covid19 pandemic and said that in the longer term Anglo American would “benefit from a sequence of high returning growth options, mainly in copper, PGMs, and now also crop nutrients. Our business is increasingly positioned to supply those products that are fundamental to enabling a low carbon economy and catering to global consumer demand trends”.
Horizonte Minerals (LON:HZM) 7.9p, Mkt Cap £127m –Araguaia granted power-line licence
Horizonte Minerals reports that it has been granted the “construction licence package for the development of the power line to 1ts 100% owned Araguaia Ferronickel project” in Para State, Brazil.
The power line, which will connect the project to grid power, consists of a 120km long 230kV line and the associated substations.
Reminding readers that the Aragauia project itself is already permitted, CEO, Jeremy Martin, explained that “The award of the power licence package is a critical step in our path to production, and further de-risks the Project by securing the full power requirement for commercial operation”.
Mr. Martin also explained that “The power supply will be hydroelectric which is a key factor in the ability to produce a low CO2 per tonne of product, in line with other Brazilian ferronickel producers, placing Araguaia in the lowest half of carbon emitters globally for nickel production”.
Norilsk Nickel (MCX:MNOD) US$32.81, Mkt Cap US$37,086m – Water inflow triggers partial suspension of operations in 2 Siberian mines
Norilsk Nickel is reported to have ordered a partial suspension of operations as a preventative measure at its Oktyabrsky and Taimyrsky nickel mines in Siberia following the detection of water inflow into underground workings at Oktyabrsky which is connected underground to Taimyrsky.
Water inflow is said to have occurred at a depth of 350m and remedial measures are reported to include the construction of a barrier to prevent further ingress.
Reports by Reuters indicate that the two mines account for around 36% of Norilsk’s Russian mined ore.
Uncontrolled water inflow into underground mine workings can be particularly serious however, the reports so far indicate that in this case the hazard was detected in time for preventative action to be taken which may minimise the duration of the preventative suspension of operations.
Impala Platinum (IMP JSE) R25,264, Mkt cap R200bn – Gross profit rises 263% in HY ended December 31st
Implats reports strong results for its half-year ended December 31st, with gross profit rising 263% to R22.4bn and EBITDA rising 231% to R25.1bn.
The company said it benefitted from “higher received dollar PGM basket prices, the weaker rand and operational momentum which resulted in higher sales volumes in the period, despite the ongoing challenges and uncertainty in the operating environment due to Covid-19.”
Revenue increased 107% to R58.2bn.
Headline earnings rose 328% to R14.4bn or 1,855c per share.
Free cash flow rose 304% to R20.1bn.
Refined production of platinum rose 20% YoY to 787,000oz, while palladium production rose 47% to 576,400oz.
Impala has declared a record interim dividend of R7.9bn on a strong production safety and sales performance, translating to 1,000c per share- up from 125c per share YoY.
Implats expect that persistent market tightness in rhodium and palladium markets will support elevated pricing in the medium term, while improving investor sentiment will drive renewed platinum strength.
There has been no material change during the half year assessment of the Implats Mineral Resource and Reserve Estimates.
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, Antimony
Asian Metal
Tungsten
Metal Bulletin