SP Angel . Morning View . Tuesday 18 01 22
Lithium, nickel and tin prices continue to rise despite pullback in copper
Ariana Resources (Ariana Resources PLC (AIM:AAU)) – 2021 production guidance exceeded
Atlantic Lithium* (Atlantic Lithium Limited (AIM:ALL)) formerly IronRidge* (IRR LN) – High-grade infill drilling results at Ewoyaa
BlueRock Diamonds* (Bluerock Diamonds PLC (AIM:BRD)) – Wet season dampens Q1 outlook as mine ramps up production to new levels
Caledonia Mining* (Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)) – Blanket mine achieves record gold production in 2021 to exceed production guidance
Petra Diamonds (Petra Diamonds Limited (LSE:PDL, OTC:PDLMF)) – H1 ends on positive diamond industry outlook and strong prices
Rio Tinto (Rio Tinto PLC (LSE:RIO)) – 2021 production performance and 2022 guidance
IGTV: IG Outlook 2022, China new year, winter Olympics may see metals prices soften: (12/01/2022): https://youtu.be/vNqDh74zW5I
VOX Markets: 12/01/22: https://audioboom.com/posts/8011559-john-meyer-on-china-s-factory-shut-downs-plus-news-from-bluejay-beowulf-atlantic-lithium
interactive Investors: FTSE 100 favourite stock: https://youtu.be/BomNRQJt-YA. 2022 outlook: https://youtu.be/SxMPiPEc_Rg
Three small-cap mining share tips for 2022: https://www.youtube.com/watch?v=9xvA_3UXXYQ&ab_channel=interactiveinvestor
*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 refining likely to take a further hit as colder weather in the US, Europe and China drives oil and gas prices higher
High gas prices in Europe and high energy prices around the rest of the world are causing significant disruption to zinc and aluminium smelting and refining.
Other metals may also see some impact as energy is redirected and conserved for other industries and domestic consumer use.
China’s Olympic Blue skies policy is also reducing metals output in Hubei (Beijing) and nearby regions.
While many fabricators in the Hubei area many also slow their working arrangements we would expect consumption to continue.
Major smelter closures include Nyrstar, a Trafigura zinc subsidiary with 150kt pa output.
Aluminium Dunkerque has also reduced production by 15%.
Analysts estimate 750kt of refined zinc smelting capacity and 820kt of aluminium capacity has been suspended. (FT)
Electricity accounts for up to 40% of non-ferrous smelting costs.
Europe’s metal industry urges EU to release gas reserves as energy concerns mount
Eurometaux, including Rio and Glencore, have pushed the EU to release gas reserves alongside limiting carbon prices to boost smelting output.
The letter expresses concerns over the ‘risk of further curtailments and closures’ in the metals sector.
Hydrogen: The UK gas network will be ready to take a 20% hydrogen / natural gas blend from next year with all five gas grid companies ready to deliver 20% hydrogen to homes and businesses from 2023. The move should cut CO2 emissions by the equivalent of 2.5m cars.
Gas grid companies are calling for the government to double hydrogen gas production to 10GW.
Copper prices weaken as inventories rise, dollar strengthens, and Chinese property investment slows
Copper prices have fallen 0.2% to 9,700/t.
LME copper inventories are at their highest level since November 2021 – 92,500t.
The dollar is providing an additional headwind to copper, with the index up 0.1%.
Demand for copper from China is also expected to weaken, with property investment falling 14% in December yoy.
Property investment grew at 4.4% in 2021, its slowest pace since 2016 indicating a slowdown in Chinese construction.
Rystad Energy predict copper demand will rise 29% to 52.9mt by 2030 while supply will decline 12% to 19.1mt due to low investment and local and environmental resistance.
Offer to end Las Bambas conflict rejected by Peru communities
Peruvian communities neighbouring MMG’s Las Bambas mine have turned down the government’s offer which sought to avoid future blockades.
Las Bambas has suffered blockades for over 400 days in total since 2016.
Las Bambas is one of the top copper producers in Peru, the world’s 2nd largest copper producing country.
De Beers hikes diamond prices in first 2022 sale
De Beers has hiked diamond prices by c.8% for its first 2022 sale. (Bloomberg)
Consumer demand for diamonds has been strong throughout the pandemic, whilst supply has been limited.
Smaller diamond prices were hiked the most, up 20% in some cases whilst larger diamond prices were raised c.5%.
Baltic dry index slides as iron ore and coal demand weakens
The Baltic Dry Index is at its lowest level since March 2021.
The capesize index is at its lowest level since February 2021.
Increased iron ore supply and Chinese economic weakness has hit dry bulk freight rates.
Dow Jones Industrials -0.56% at 35,912
Nikkei 225 -0.27% at 28,257
HK Hang Seng -0.51% at 24,094
Shanghai Composite +0.80% at 3,570
Economics
China - Annual GDP at 8.1% feels stronger than many expected
The PBoC cut a token 0.1% off the one year loan rates reducing it to 2.85% while also adding liquidity.
The move signals that China is ready to cut rates though is cautions in its signalling possibly due to an acceleration in business ahead of the extended Spring Festival and Winter Olympic shutdown.
Q4 capacity utilisation was 77.4% vs 77.1% in Q3. This is good for profitability
Unemployment 5.1% in December vs 5.0% in November
China’s population growth slows in threat to country’s economic development
10.62m babies were born in China in 2021 – a 11.5% drop from 2020.
China’s population growth hit a record low of 0.34/1000.
New births numbers have now fallen for 5 consecutive years.
Beijing is trying to fight the threat to its economy that a declining population poses by introducing a 3rd child policy and clamping down on abortions.
US – S&P 500 and Nasdaq futures are down 1.3% and 2.0% this morning on rising market yields as investors revise their monetary policy outlook.
Yields on two- and ten-year Treasuries are trading at over 1.0% and 1.8%, level last seen before the pandemic hit the market.
Even German debt suffered from the prospect of tighter policy with benchmark yields on the verge of a positive reading of the first time since early 2019, Bloomberg writes.
Rising oil prices add to inflationary pressures amid easing concerns over the impact of the omicron virus strain coupled with tightening oil inventories contributing to forecasts of $100/bbl later thie year.
Japan – The central bank left the monetary policy unchanged staying put on negative interest rates, bond yield target and asset purchases.
While the BOJ recognised accelerating inflation, unlike measures in the US and EU, local increases in prices is far behind its peers.
The BOJ estimates suggest inflation will still only be 1.1% in the year ending Ma/24.
Economists expect GDP to return to growth in the final quarter of 2021 supported by a rebound in consumer spending after summer restrictions were flited.
Estimates are for a 6.1%qoq (annualised) growth vs -3.6%qoq recorded in Q3/CY21.
European sales of EVs overtook those of diesel vehicles for the first time in December, FT reports.
More than 20% of new cars sold across 18 European markets, including the UK, were powered by batteries.
Diesel cars including diesel hybrids accounted for less than 19%.
Sales picked up on government subsidies as well as strict regulations introduced in 2020 forcing EU manufacturers to sell more low-emissions vehicles.
176k BEVs were sold in western Europe last month, an all-time high, and more than 6% higher than in Dec/20.
VW maintained the leading market position for EVs in western Europe last year selling more than 310k EVs.
UK – A continuing recovery in the labour market in three months reported through November.
Unemployment rate was estimated at 4.1%, 0.4pp points lower than in three months to August and only 0.1pp higher than the pre-pandemic level.
Estimates were for a 4.2% reading.
The number of people on company payrolls climbed 184k in December, stronger than expected.
Good employment number may encourage the central bank to further raise rates after the first post pandemic hike in December (+15bp to 0.25%).
Currencies
US$1.1400/eur vs 1.1424/eur yesterday. Yen 114.79/$ vs 114.33/$. SAr 15.452/$ vs 15.376/$. $1.364/gbp vs $1.368/gbp. 0.720/aud vs 0.721/aud. CNY 6.352/$ vs 6.348/$.
Commodity News
Precious metals:
Gold US$1,817/oz vs US$1,822/oz yesterday
Gold ETFs 97.9moz vs US$97.9moz yesterday
Platinum US$970/oz vs US$974/oz yesterday
Palladium US$1,877/oz vs US$1,894/oz yesterday
Silver US$22.98/oz vs US$23.05/oz yesterday
Rhodium US$16,500/oz vs US$16,400/oz yesterday
Base metals:
Copper US$ 9,693/t vs US$9,741/t yesterday
Aluminium US$ 3,040/t vs US$2,987/t yesterday
Nickel US$ 22,200/t vs US$21,960/t yesterday
Zinc US$ 3,526/t vs US$3,529/t yesterday
Lead US$ 2,346/t vs US$2,364/t yesterday
Tin US$ 41,930/t vs US$40,650/t yesterday
Energy:
Oil US$87.9/bbl vs US$86.2/bbl yesterday
Benchmark oil prices climbed to their highest level since 2014 in early trading today, as possible supply disruption after attacks in the Mideast Gulf added to an already tight supply outlook
Supply concerns have risen this week after Yemen's Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition
After launching drone and missile strikes which set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to "respond to these terrorist attacks"
A rapid increase in oil purchases, driven by supply outages and signs the Omicron variant will not be as disruptive as feared for fuel demand, has pushed some crude grades to multi-year highs, suggesting the rally in Brent futures could be sustained a while longer
China plans to release oil reserves around the Lunar New Year holidays as part of a plan coordinated by the US with other major consumers to reduce global prices
China agreed in late 2021 to release an unspecified amount of oil depending on price levels
The US Energy Department confirmed last week that it had sold 18MMbbls of strategic crude oil reserves to six companies, including Exxon and a unit of refiner Valero Energy (NYSE:VLO)
China has also posted in 2021 its first annual decline in crude oil shipments in two decades as Beijing clamped down on the refining sector and drew down massive inventories
There were also concerns about fuel demand at the world's second-biggest oil consumer as the highly transmissible Omicron coronavirus variant has spread to the northeastern city of Dalian
China has suspended some international flights and stepped-up efforts to rein in a virus outbreak at Tianjin
Many cities, including Beijing, have also urged people not to travel during the Lunar New Year holiday, which could cool demand for transport fuel during a peak travel season
Natural Gas US$4.297/mmbtu vs US$4.312/mmbtu yesterday
The European weather model has shifted “decidedly colder”, a development that was “clearly capturing market sentiment” in early trading today, according to Bespoke Weather Services
Concerns that Nord Stream 2 pipeline will not operate this winter season comes as the new German chancellor Olof Scholz said his government would do everything possible to make sure natgas flows continue through Ukraine and not the latest Russian to German undersea pipeline
Last month, German energy regulators suspended Nord Stream 2's certification process
The US has also sanctioned companies affiliated with the pipeline's construction
On top of the geopolitical uncertainties, mixed with tight natgas supplies across Europe, some of the lowest in a decade, a new 14-day weather forecast shows cooler than average weather, which will boost natgas demand
Uranium UXC US$46.50/lb vs $46.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$126.4/t vs US$126.4/t
Chinese steel rebar 25mm US$747.5/t vs US$748.4/t
Thermal coal (1st year forward cif ARA) US$106.2/t vs US$93.0/t
Thermal coal swap Australia FOB US$201.0/t vs US$201.0/t - China orders producers to maintain coal output following December’s record levels
Beijing has given Chinese coal producers orders to maintain coal output over the Lunar New Year to avoid blackouts.
Thermal coal stocks hit record levels following Beijing’s push to ramp up output in October.
China’s power consumption grew 10.3% in 2021. (NDRC)
Coal producer output in China hit a record 166mt in the month to Jan. 16th. (Reuters)
The government is also moving to approve a number of cross-region electricity grids to augment the power system following the scare in late 2021.
Coking coal swap Australia FOB US$415.0/t vs US$415.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$70,500/t
NdPr Rare Earth Oxide (China) US$142,079/t vs US$142,162/t
Lithium carbonate 99% (China) US$49,983/t vs US$49,225/t
China Spodumene Li2O 5%min CIF US$2,690/t vs US$2,690/t
Ferro-Manganese European Mn78% min US$1,818/t vs US$1,822/t
China Tungsten APT 88.5% FOB US$320/t vs US$317/t
China Graphite Flake -194 FOB US$805/t vs US$805/t
Europe Vanadium Pentoxide 98% 8.9/lb vs US$8.8/lb
Europe Ferro-Vanadium 80% 33.25/kg vs US$33.25/kg
China Ilmenite Concentrate TiO2 US$390/t vs US$390/t
Spot CO2 Emissions EUA Price US$93.0/t vs US$91.5/t
Brazil Potash CFR Granular Spot US$800/t vs US$810/t
Battery News
China State Grid Corp to spend $79bn on power grid in 2022
China’s dominant electricity supplier plans to invest a record 501bn yuan ($79bn) on the power grid out of a total capital expenditure of 580bn yuan in 2022, according to state media.
The company is accelerating its build-out of the ultra-high voltage transmission lines that will connect energy hubs in the interior with major population centres in the east.
State Grid has 26 lines in operation now, and investment through 2025 will include constructing another 38 at a cost of 380bn yuan.
State Grid has 27GW of pumped hydro in operation and another 48GW under construction, aiming for 120GW of capacity by 2030.
The vast amounts of investment are set to benefit power equipment makers, copper companies and vanadium miners as we expect China to ramp up its VRFB capacity in order to mitigate the fluctuating production associated with some forms of green energy.
The V-flow battery outcompetes Li-ion, and any other solid battery, for utility-scale applications. They’re safer, more scalable, longer-lasting and cheaper – less than half the cost per kWh.
European car sales fall 22% in December YoY
European car sales plunged 22% in December, falling for a sixth month in a row to 950,218 units.
New car sales fell 1.5% last year, with automakers clocking their worst year of sales since sales began being tracked in the early 1990s.
Automakers are blaming the global chip shortage and the subsequent loss in production as the reason sales are lower.
The chip shortage is expected to remain in 2022, with some analysts expecting shortages to run into Q4 2022.
Germany led the decline in Europe with a 27% drop in sales in December.
Automaker’s sales in Europe are as follows for the full year 2021:
VW Group -3.7%
Renault -10.9%
BMW Group +1.3%
Daimler (ETR:DAI) -11%
CATL to enter battery swap market
The Chinese battery giant has confirmed rumours that they will be entering the battery swap market.
The company announced, that it will be launching a new battery swap venture, to be named EVOGO, on its official WeChat account.
Although no details of the venture are known, CATL signed a partnership agreement with Guizhou province to cooperate on an EV battery swap in the region.
CATL will use a new modular battery swap solution – the Choco-SEB (swapping electric block).
The battery will have a weight energy density of 160Wh/kg, with a single block able to provide a 200km range.
CATL say the battery will be compatible with 80% of BEVs currently available on the market.
Equinor and BP finalise deal for 2.5GW offshore wind with New York State
Equinor and BP have finalised the Purchase and Sale Agreements for the Empire Wind 2 and Beacon Wind 1 projects.
The partnership two companies were selected as the winner of the states second offshore wind leasing round.
They will provide 2.5GW of generation capacity – 1.26GW of power from Empire Wind 2, and another 1.23MW of power from Beacon Wind 1.
Company News
Ariana Resources (Ariana Resources PLC (AIM:AAU)) 4.25p, Mkt Cap £44m – 2021 production guidance exceeded
Ariana Resources reports that 20,737oz of gold production from the 23.5% owned Kiziltepe mine in Turkey exceeded its 19,000oz guidance target by 9%.
The result, largely derived from production from the Arzu North and Derya sections augmented by “additional high-grade (7 to 8 g/t Au) material being trucked from Kepez” follows the completion of a threefold expansion of plant capacity early in H2 2021.
Production resulted from the processing of approximately 286,000t of ore at an average grade of 2.44g/t gold with a recovery rate of 96% (2020 – 223,000t at 2.72g/t and 93.5% recovery).
We note that, since 2017, the Kiziltepe plant has delivered increased throughput year on year averaging approximately 24%pa resulting in 2017’s 119,316t throughput more than doubling by 2021.
Managing Director, Dr. Kerim Sener, explained that the mine, now in its fifth operating year “has performed flawlessly and consistently above guidance since day one, and … is a direct reflection on the capabilities of the operational team, who continue to operate at the top of their game”.
He commented that “within a period of less than 5 years, total production from Kiziltepe comprised more gold than the original 8-year life of mine production estimated from the feasibility study, highlighting the significant upside generated from Kiziltepe and surrounding prospects such as Kepez”.
The company confirms that mineral resource drilling at Tavsan in western Turkey continued through the winter and that “construction of the mine … [is]… expected to commence later in 2022”.
At Salinbas in northeastern Turkey drilling is also continuing with a single rig “with other environmental, community and permitting activities proceeding across the project as a whole”.
Venus Minerals’ Cypriot exploration projects saw completion of drilling and a move to “completing mineral resource estimates for the Magellan and Apliki Projects, prior to the commencement of a planned IPO in London”. (Ariana Resources owns 50% of Venus Minerals).
Elsewhere, exploration is active in eastern Europe with 300km2 currently under application in Kosovo and further opportunities sought.
Atlantic Lithium* (Atlantic Lithium Limited (AIM:ALL)) 30p, Mkt cap £164m – High-grade infill drilling results at Ewoyaa
Formerly IronRidge* (LON:IRR)
Atlantic lithium reports its latest round of assay results from the Ewoyaa Lithium Project in Ghana, where the company recently announced an updated Scoping Study and increased JORC resource of 21.3Mt @ 1.31% Li2O.
The results are comprised of 4,769m from 42 holes, and approximately 22,500m of infill, extensional and exploration drilling assay results are to be reported.
High grade drill results at a 0.4% Li2O cut-off and maximum 4m of internal dilution include:
GRC0501: 45m at 1.54% Li2O from 78m
GRC0478: 33m at 1.61% Li2O from 72m
GRDT0455: 31.2m at 1.66% Li2O from 78.4m
GRDT0451: 24.3m at 1.65% Li2O from 123m
GRDT0457: 24.7m at 1.39% Li2O from 117.3m
GRDT0449: 20.8m at 1.64% Li2O from 100.7m
GRC0477: 23m at 1.48% Li2O from 33m
GRC0482: 22m at 1.41% Li2O from 38m
GRDT0405: 18.2m at 1.4% Li2O from 77.8m
Highlights from the recently completed updated scoping study at Ewoyaa, based on a 2.0mtpa include:
Pre-tax NPV8% of US$1,227m
Pre-tax EBITDA of US$2,024m
Post-tax NPV8% of US$789m
Post-tax IRR of 194%
Average EBITDA of US$178m per annum
Conclusion: Drill results at Ewoyaa continue to confirm grade and continuity, with mineralisation occurring in flat lying sill structures favourable for tonnage addition and low strip ratio. We look forward to the release of additional assay results pending.
*SP Angel acts as Nomad to Atlantic Lithium
BlueRock Diamonds* (Bluerock Diamonds PLC (AIM:BRD)) – 40p, Mkt cap £5.68m – Wet season dampens Q1 outlook as mine ramps up production to new levels
Bluerock report a significant increase in recovered grades and diamond production through the fourth quarter.
The Kareevlei mine produced 6,866cts in Q4 raising full year production to 23,497cts.
Grades also improved to 5.05cpht in Q4 vs 4.24cpht in Q3 and 4.55cpht for the full year. Grades were 3.83cpht in 2020 by comparison.
Diamond values continue to increase following the shock of Covid lockdowns in 2020 with a significant lift in value to $431/ct in Q4 and $470/ct for the full year.
Values were lifted through generally higher market prices and by the sale of a number of special stones of significantly greater per carat value.
Sales rose to $10.8m in the year and were slightly ahead of our expectations due to the inclusion of a last minute sale of stones in December in a private tender to ease cash flow constraints.
Omicron: The spread of the Omicron virus in South Africa caused the team to shut most of the mine’s operations in late December. Thankfully, the full workforce is now back in action.
Wet season: The mine is working through the wet season for which it is better prepared this year though operators still have to be more careful in the wet. Mine and plant production will still see some impact and much of the first quarter will be used to “make minor refinements on the plant and focus on sustaining production at the increased volumes.”
Stockpiles should be sufficient to compensate for any lost production in the mine though wet ore into the plant still presents issues.
The team is now working on bypassing the stockpiles and loading dry ore directly into the plant.
Production was hit in Q4 through the loss of 20 days of mining in Q4 though stockpiles were used to compensate and keep the process plant running.
January sale: Kareevlei now has 2,200cts of diamonds for sale including two larger stones of 8.9 and 6.8cts valued at over USD50,000 each.
The mine sold 13 larger stones last year totalling 184cts and worth $1.861m. This represents 17% of revenue for the year.
Guidance: is for:
40-43,000cts for the year almost double the 23,497cts seen in 2021.
Grades should be similar at 4.0-4.3cts vs 4.55cpht in 2021
Values are cautiously set at $400/ct vs 470cts in 2021
Sales are cautiously guided at 16.0-17.2m for the year.
Conclusion: The team have spent significant time and funding on upgrading the mine and the processing plant at Kareevlei particularly in the fourth quarter. The situation was not helped by the very badly timed Section 54 stoppage imposed by the Department of Mineral Resources and Energy for a safety breach on 11 November and the loss of half the workforce to Omicron in 22nd December. Mine production and processing will be slower than normal in the first quarter due to the wet season but should not be as badly impacted as in previous years. 2022 should be a turnaround year for BlueRock and we look forward to new guidance on operating costs.
*SP Angel act as nomad and broker to BlueRock Diamonds
Caledonia Mining* (Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)) 930p, Mkt Cap £111m – Blanket mine achieves record gold production in 2021 to exceed production guidance
Caledonia Mining reports that its Blanket mine produced 18,604oz of gold during the three months to 31st December 2021 bring full year production to a record 67,476oz.
The annual performance exceeds the revised production guidance range of 65-67,000oz and represents a 17% increase on 2020 output while the quarterly performance showed a 24% improvement over the 15,012oz produced during the December 2020 quarter.
Caledonia Mining is indicating 2022 production in the range 73-80,000oz of gold.
CEO, Steve Curtis, thanked the team for their “outstanding performance and a tremendous team effort” and described the “commissioning of the Central Shaft, record gold production, along with a continued commitment to safety, all in one year… [as]… an outstanding achievement and testament to the quality of the Caledonia technical team”.
Mr. Curtis confirmed that the completion of the Central Shaft project allows the company to “focus on other areas of its growth strategy, as we continue to evaluate investment opportunities, with a vision of becoming a multi asset gold producer”.
Conclusion: Record 2021 gold production following the successful delivery of the Central Shaft project at the Blanket mine positions Caledonia Mining on a firm foundation to pursue its expansion strategy. We welcome management’s recognition of the technical team’s contribution in successfully delivering this outcome with the project’s technical challenges compounded by those of the Covid19 pandemic.
*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe
Petra Diamonds (Petra Diamonds Limited (LSE:PDL, OTC:PDLMF)) 77p, Mkt Cap £145m – H1 ends on positive diamond industry outlook and strong prices
Petra Diamonds reports an 2% increase in H1 diamond production during the 6 months to 31st December 2021 to approximately 1,777,000carats (H1 2021 – approximately 1,741,000carats).
The company attributes the increase “to Williamson resuming production during the Period, following an extended period of care and maintenance”.
Sales revenue increased by 49% to US$264.7m (H1 2021 – US$178.1m) as a result of “the sale of Exceptional Stones totalling US$77.9 million” (H1 2021 – US$40.4m) “and further supported by the strong diamond market, with rough diamond prices on a like-for-like basis up ca. 16% compared to the preceding six-month period to 30 June 2021”.
Among the exceptional stones sold were a 39.34 carat blue diamond from Cullinan which realised US$40.2m, white diamonds also from Cullinan including a 343 carat, which sold for US$10m and a 296 carat diamond which sold for US$13.9m and a 32 carat pink diamond from Williamson which sold for US$13.8m.
The production resulted from a 27% increase in the volume of ore treated to 5.6mt (H1 2021 – 4.4mt).
Petra Diamonds is maintaining its full year production guidance of 3.3-3.6m carats for the year to 30th June 2022.
The company has previously disclosed “convergence” on the eastern side of the C-Cut Block Cave which has affected 18 of the 187 draw points used to extract the ore. Petra Diamonds says that “Mitigating steps were rapidly introduced which are now largely offsetting the impact on Cullinan’s production for FY 2022, resulting in the mine’s production guidance remaining unchanged at 1.7 to 1.9 Mcts for FY 2022”.
Petra Diamonds says that the omicron variant of Covid19 has had “a limited impact on our South African and Tanzanian operations during this wave, which is generally perceived to have now passed its peak in South Africa” however, travel restrictions “may impact some of our customers’ ability to attend South African based tenders … [and says that] …we will continue our flexible approach in planning upcoming sales events”.
Commenting on the diamond market, Petra Diamonds says that it ended 2021 “in a strong state, with evidence of buoyant jewellery sales during the important festive retail period as consumers released pent-up demand for luxury items”.
“Polished prices appeared to end 2021 around the year’s highs and some industry commentators are predicting record jewellery sales for 2021.”
Rio Tinto (Rio Tinto PLC (LSE:RIO)) – 5,344p, Mkt cap £67bn – 2021 production performance and 2022 guidance
Reporting what he described as a year of strong demand for its products, Rio Tinto’s Chief Executive, Jakob Stausholm, stressed the continuing challenges of the Covid19 disruption and said that the company had progressed a number of projects including the replacement mines in the Pilbara.
Rio Tinto describes “broadly positive” market dynamics for most commodities with “Fiscal and monetary support and successful vaccine campaigns … [contributing] … to strong demand growth that ultimately stretched global supply chains to their limits and created challenging conditions for many of the world's producers. We are encouraged by growth prospects in the coming year but remain vigilant in relation to potential disruption from new COVID-19 variants and geopolitical tensions”.
The company describes an easing of Chinese policies in support of “property, infrastructure and consumption” while momentum eased in the United States towards the end of the year and “Economic activity in the eurozone weakened significantly in late 2021”.
Rio Tinto says that “China's crude steel production and iron ore imports were stable year on year, with steel production exceeding 1 billion tonnes for a second time, despite numerous steel mill operating restrictions and a slowing property sector. Steel consumption and production rates in China decelerated significantly during the fourth quarter of 2021”,
The company’s Pilbara iron ore production declined by 4% in 2021 to 319.7mt partly as a result of “above average rainfall in the first half of the year, cultural heritage management and delays in growth and brownfield mine replacement tie-in projects”.
At Gudai Dam, the first iron ore was loaded on to the rail line during December using mobile crushing and the company expects initial “production from the main plant … in the second quarter of 2022”.
Iron ore production guidance for 2022 is in the range 320-355mt.
Bauxite production “of 54.3 million tonnes was 3% lower than 2020 due to severe wet weather in the first quarter impacting system stability throughout the year, equipment reliability issues and overruns on planned shutdowns at our Pacific operations”.
Bauxite production guidance for 2022 is in the range 54-57mt.
Mined copper output declined by 7% to 494,000t as a result of a 17% reduction in throughput and lower recovery rates at Escondida “partly offset by higher recoveries and grades at Oyu Tolgoi in Mongolia … [where open-pit production increased by 9%] … and Kennecott in the US”.
At Oyu Tolgoi the underground development “is technically and operationally ready for undercut commencement” although a “delay to the commissioning of shafts 3 and 4 is still expected to be approximately nine months per prior guidance based on known COVID-19 impacts to date”. The company says that additional project costs arising from Covid19 containment measures at Oyu Tolgoi are estimated at US$175m.
The group’s mined copper output is expected to increase during 2022 to the range 500-575,000t.
The curtailment and subsequent suspension of operations at Richards Bay where there has been prolonged “community disruptions” contributed to a 9% decline in titanium dioxide output to 1.014mt.
Unplanned maintenance and “equipment reliability issues” at Rio Tinto Fer et Titane in Canada and “prolonged labour and equipment availability issues” reduced pellet production by 6% to 9.7mt.
Operations resumed at Richards Bay in late August and Rio Tinto is guiding 1.1-1.4mt of titanium dioxide production in 2022 and iron ore pellet output is expected to be in the range 10-11mt.
Expenditure on exploration and project evaluation “in 2021 was $726 million, compared with $625 million in 2020. Approximately 40% of this expenditure was incurred by Copper, 35% by central exploration, 16% by Minerals and 9% by Iron Ore.”
“The bulk of the exploration expenditure in the fourth quarter focused on copper in Australia, Canada, Kazakhstan, United States and Zambia, nickel projects in Canada, and diamonds projects in Canada”.
Conclusion: Rio Tinto describes an operationally challenging year in 2021 with continuing Covid19 containment measures required. Demand remains strong, however and company guidance for 2022 indicates higher production is expected for most of the group’s commodities.
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