SP Angel . Morning View . Friday 11 02 22
Rare Earth and lithium prices hit new highs
US inflation drives US dollar higher taking shine off gold and copper
MiFID II exempt information – see disclaimer below
PRIVATE - Pre-IPO financing for Zambian copper exploration company
We are raising funds for a private copper exploration company with three prospective license areas in Zambia, all near producing mines or active exploration programs by majors.
The company has a joint venture with one major mining company and is working in cooperation with another major copper miner.
Recent assays show 15.8% copper and 0.57g/t gold in an artisanal pit close to an historic copper mine on one license. Six significant copper soil anomalies identified in latest field work.
Targets were also generated by BHP before they withdrew from Zambia and lie close to ongoing drilling by another company.
First Quantum’s geological team is providing data and technical advice, on the license contiguous with their largest Zambian mine.
Copper and nickel mineralisation has been identified on the license through historic drilling. The company plan to IPO later this year
*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.
Anglo American Platinum (JSE:AMS) – Strong full-year earnings on higher PGM sales
IGTV: Are commodities becoming weaponised? https://www.youtube.com/watch?v=jCoPpdNPMpQ
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
*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.
Indonesian government suspends 1,000 mining operations in hit to tin and coal supply
The Minerals and Coal directorate of the mining ministry has ordered 1000 miners to suspend operations, Reuters reports.
The document suggests the miners failed to submit key 2022 work plans.
An official in the department stated that ‘the companies had been given a warning but still have not submitted the 2022 plan.’
Indonesia is the second largest tin producer in the world at c.80kt per annum.
Tin prices have risen to $43,455/t.
Gold prices hold firm as US inflation jumps to 7.5%
Gold prices rose to $1,842/oz yesterday on higher-than-expected US inflation data
Prices then settled back to $1,826/oz on concerns the Fed may raise rates faster than previously anticipated and the US dollar gained strength
Fortunately, the cost of servicing US government debt is likely to limit the overall extent of forthcoming rate rises
Copper pulls back on profit taking, stronger dollar and rise in Shanghai inventories
LME copper pulled back to $9,956/t from yesterday’s high as the US dollar gained on Fed rate rise expectations
The metal has also been pressured by rising stocks, with Shanghai copper inventories rising 164% today.
US unveils $5bn EV charging network plan
The Biden administration has unveiled a plan to award $5bn over five years to build thousands of electric vehicle charging stations.
Congress approved the funding to states as part of a $1 trillion infrastructure bill in November.
The administration will make $615m available in 2022 but states must first submit plans and win federal approval.
By 2030, Biden wants 50% of all new vehicles sold to be electric or plug-in hybrid electric models and 500,000 new EV charging stations.
Dow Jones Industrials -1.47% at 35,242
Nikkei 225 +0.42% at 27,696
HK Hang Seng -0.36% at 24,833
Shanghai Composite -0.66% at 3,463
Economics
US – As promised inflation accelerated to the highest in decades in January sending US market interest rates higher.
The headline reading came ahead of estimates.
10y Treasury bond yields jumped above 2% on Thursday after the announcement implying a 13bp move; yields pulled back this morning trading just sub the 2% mark.
2y climbed ~30bp yesterday marking the strongest move since 2009 and hitting 1.64%.
S&P 500 and NASDAQ closed -1.8% and -2.1% yesterday.
James Bullard, St Louis Fed President and a voting FOMC member, supports raising rates by a full percentage point by the start of July implying the first 0.5pp hike since 200 in response to the strongest inflation reading in four decades.
“I’d like to see 100 basis points in the bag by July 1 … I was already more hawkish but I have pulled up dramatically what I think the committee should do,” Bullard said on Thursday.
1pp increase over three meetings although he was undecided on whether a 0.5pp increase should come as early as March.
CPI (%yoy): 7.5 v 7.0 in December and 7.3 est.
Core CPI (%yoy): 6.0 v 5.5 in December and 5.9 est.
China - January money supply jumps as Beijing injects liquidity to stimulate economy
Yuan loans for January surged to 9.8% vs the expected 9.2%, equalling ¥3.98 trillion vs ¥3.69 trillion expected.
Beijing called for an ease in loan restrictions to inject fiscal stimulus into the economy currently struggling with the zero-Covid protocol and the ailing property sector.
However, lenders in China often ramp up loans in Q1 to win market share.
Analysts expect further fiscal easing going forward as China looks to shore up its economy against multiple headwinds.
UK – GDP dropped 0.2%mom in December on the back of a pullback in retail and hospitality sectors following a pickup in new cases.
The drop came was better than expected -0.6% reading.
The economy has nearly recovered from the pandemic related dip with the GDP coming in 0.4% below the Q4/19 level.
Q4/21 GDP (%qoq): 1.0 v 1.0 (revised from 1.1) in Q3/21 and 1.1 est.
Q4/21 GDP (%yoy): 6.5 v 7.0 (revised from 6.8) in Q3/21 and 6.4 est.
Volvo reported improving conditions along the supply chain but warned over rising raw material costs, FT reported.
The Swedish carmaker expects semiconductor shortages to continue for the fist half but the impact on production is waning.
“The supply chain was a problem in the fourth quarter, but on the production side it was worse in the third quarter… we are on the way to improving,” CEO Hakan Samuelsson said.
Commenting on climbing costs the Company said they increased “pricing more than we normally would”.
BEVs accounted for 6% of its total with production expected to climb to ~10% over 2022 on course for the Volvo’s pledge to sell only EVs by 2030.
Australia - Miners warn of further labour disruption caused by Western Australia border closures due to Covid
WA provides 70% of China’s iron ore imports and 30% of global supply.
The state planned to open its borders last Saturday but cancelled this on concerns over Omicron, with no alternative date set.
Rio Tinto’s chief executive Trott expects 1H22 ‘to be particularly challenging’, having already commented on the ‘really tight labour market.’
BHP has cited WA labour disruptions as the primary reason behind the hit to its quarterly production.
Fortescue has also noted shortages in ‘key specialist skill areas’ and has warned the WA government of damage a further delay could cause.
The state has ruled that mine workers must be triple vaccinated, and workers must quarantine for 7 days.
Currencies
US$1.1378/eur vs 1.1429/eur yesterday. Yen 115.92/$ vs 115.63/$. SAr 15.120/$ vs 15.144/$. $1.352/gbp vs $1.355/gbp. 0.713/aud vs 0.719/aud. CNY 6.362/$ vs 6.358/$.
Commodity News
Precious metals:
Gold US$1,826/oz vs US$1,833/oz yesterday
Gold ETFs 99.4moz vs US$99.4moz yesterday
Platinum US$1,024/oz vs US$1,036/oz yesterday
Palladium US$2,227/oz vs US$2,289/oz yesterday
Silver US$22.98/oz vs US$23.36/oz yesterday
Rhodium US$18,350/oz vs US$18,350/oz yesterday
Base metals:
Copper US$ 9,975/t vs US$10,163/t yesterday
Aluminium US$ 3,179/t vs US$3,279/t yesterday
Nickel US$ 23,120/t vs US$23,345/t yesterday
Zinc US$ 3,667/t vs US$3,705/t yesterday
Lead US$ 2,253/t vs US$2,267/t yesterday
Tin US$ 43,455/t vs US$43,635/t yesterday
Energy:
Oil US$91.2/bbl vs US$91.8/bbl yesterday
Oil prices have pulled back in early trading today as US inflation caused concern about aggressive interest rate hikes and investors await the outcome of US-Iran talks that could lead to increased global crude supply
The benchmark oil prices are also in line for their first weekly decline after seven consecutive weekly gains
The US and Iran are currently in discussions to revive a nuclear deal, which resumed this week after a 10-day break
A deal could see the lifting of sanctions on Iranian oil and ease global supply tightness
Tight supply was seen in US crude oil stockpiles which unexpectedly fell 4.8MMbbls in the week to 4 February to 410.4MMbbls as overall refined product demand reached an all-time record
This compares with a consensus forecast of a 369kbbl rise
OPEC has forecasted that world oil demand might rise even more steeply this year
The group has forecast an increase of 4.15MMbopd this year, as the global economy posts a strong recovery from the pandemic
Natural Gas US$3.954/mmbtu vs US$4.000/mmbtu yesterday
UK Natural Gas prices have risen to 3.3% to £1.87/therm, after weeks of stagnation, while the Dutch TTF Futures benchmark has increased a similar 3% to €78.50/MwH
Prices spiked after data from German network operator Gascade showed that flows on the Yamal-Europe pipeline were suspended
Flows had moved eastwards towards Russia since 21 December, piling further pressure on European supplies
While flows have now stopped moving away from Europe, the pause has dashed last night’s hopes of more exports into the continent
Gazprom booked transit capacity for eight hours on Tuesday evening, and the pipeline even recorded an hour of western flows, before coming to a standstill in both directions
Uranium UXC US$43.60/lb vs $43.30/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$153.0/t vs US$146.4/t
Chinese steel rebar 25mm US$783.6/t vs US$781.4/t
Thermal coal (1st year forward cif ARA) US$117.8/t vs US$117.8/t
Thermal coal swap Australia FOB US$214.0/t vs US$221.0/t
Coking coal swap Australia FOB US$398.0/t vs US$398.0/t - China coking coal slides as Beijing warns of price stability, iron ore prices rise
Dalian coking coal futures fell 5.4% today, thermal coal down 7.5%.
The NDRC has summoned major coal producers this week to encourage a ramp up in supply.
The state planner also called on local authorities to keep prices reasonably low.
Iron ore prices up 3.2% to $154/t.
Stainless steel prices up 1.4%, rebar prices up 1.5%, HRC prices up 0.7%.
Other:
Cobalt LME 3m US$71,000/t vs US$71,000/t
NdPr Rare Earth Oxide (China) US$156,405/t vs US$152,573/t - Researchers at Rice University extract REE from electronic waste using novel heating process
Researchers at Rice University have successfully extracted REE from waste at quantities the researchers have deemed economical.
The lab’s flash Joule heating process has currently been used on three sources of REE—bauxite residue, coal fly ash (CFA), and electronic waste.
The waste was heated to about 3,000 degrees Celsius and combined with carbon in order to convert the waste into highly soluble "activated REE".
The technology has now been licensed to a company called Universal Matter that will seek to scale it up and extract commercial quantities of rare earth elements.
Extracting REE from electronics in the US is important given the scarcity of supply and the strategic nature of the metals.
Currently, the US only has one rare earth mine in operation, Mountain Pass, while the world relies on China for much of its REE mining and processing.
Mkango Resources* owns a 42% stake in pioneering REE metals recycler HyProMag, with an option to increase its stake up to 49%.
HyProMag is pioneering the commercialisation of short loop magnet recycling via HPMS technology – a patented process for extracting and demagnetising neodymium iron boron (NdFeB) alloy powders from magnets embedded in scrap and redundant equipment.
The development of domestic sources of recycled rare earths via HPMS is particularly important given the UK has no domestic source of primary rare earths.
Rare earths from HyProMag’s recycled production require 88% less energy compared to the conventional production of magnets and generate an estimated 98% saving in human toxicity.
HyProMag's strategy is to establish recycling facilities for NdFeB magnets at Tyseley in Birmingham and other locations to provide a sustainable solution for the supply of NdFeB magnets and alloy powders for a wide range of markets.
*SP Angel acts as Nomad and Broker to Mkango Resources
Lithium carbonate 99% (China) US$60,911/t vs US$59,378/t
China Spodumene Li2O 5%min CIF US$2,710/t vs US$2,710/t
Ferro-Manganese European Mn78% min US$1,815/t vs US$1,823/t
China Tungsten APT 88.5% FOB US$325/t vs US$320/t
China Graphite Flake -194 FOB US$805/t vs US$805/t
Europe Vanadium Pentoxide 98% 10.3/lb vs US$10.1/lb
Europe Ferro-Vanadium 80% 39.75/kg vs US$39.55/kg
China Ilmenite Concentrate TiO2 US$391/t vs US$391/t
Spot CO2 Emissions EUA Price US$102.2/t vs US$110.0/t
Brazil Potash CFR Granular Spot US$805/t vs US$805/t
Renewable News
Powin announces 5.4GWh of battery storage supply agreements
Powin, a leading developer of battery energy storage systems (BESS), has announced that it has signed framework agreements for with four developers for a total of 5.8GWh of BESS for projects across the US and in Taiwan.
The projects will utilise Powin’s Centipede platform and are expected to be completed over 2022, 2023 and 2024.
The Centipede platform is a modular, scalable platform, complete with pre-integrated segments containing batteries, thermal management equipment and other essential safety systems.
The Centipede storage system is thought to be at the forefront of lithium-ion battery storage safety according to the GM of American Fire Technologies and an NFPA-855 board member.
Vestas installs mould for world’s biggest turbine blades
Vestas has installed the mould for the 115.5m long turbine blades which will be installed on the V236-15 MW prototype offshore wind turbine this year.
The V236-15 MW turbine will stand 280m tall and will generate 80GWh/year when it is installed at the Osterild National test centre.
The turbine is said to offer 65% higher annual energy production than the V174-9.5 MW, and for a 900 MW wind farm it increases production by 5% with 34 fewer turbines.
If prototype testing goes according to plan, the V236-15 MW turbine will be used for the 900MW He Dreiht project in Germany and for Equinor’s 2.1GW Empire Wind 1 and Empire Wind 2 offshore New York.
New molecule could pave way for long-life lithium-oxygen batteries
Clean energy researchers at the University of Technology Sydney (UTS) have designed a molecule that boosts the performance of lithium-oxygen batteries and give EVs the same driving range as ICE vehicles.
Lithium-oxygen batteries employ cutting-edge technology aimed to deliver maximum energy density through air to generate electricity – however, they have faced numerous challenges, including low discharge capacity and poor energy efficiency.
Professor Guoxiu Wang, who led the research team, said the discovery resolved several existing obstacles and created the possibility of developing a long-life, energy-dense lithium-oxygen battery that was highly efficient.
In early-stage testing, the battery exhibited a 46-fold increase in discharge capacity, a low charge overpotential of 0.7V, and an ultralong cycle life greater than 1400 cycles.
Company News
Anglo American Platinum (JSE:AMS) – ZAR191,593, Mkt cap ZAR508bn – Strong full-year earnings on higher PGM sales
Amplats has reported that full year earnings for 021 would be more than double the previous year after it sold a backlog of PGMs and benefitted from a 22% increase in rand basket prices.
Earnings for the year are expected to be between R74.8bn-80.8bn – vs R30.3bn in FY20.
PGM sales were 82% higher YoY after the company cleared out an inventory of metal in concentrate that couldn’t be refined in the previous financial year owing to technical faults at the firm’s Rustenburg-based processing facilities.
Amplats production came in higher than expected at 5.0- 5.1Moz PGM vs 4.8-5.0moz expected.
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