SP Angel . Morning View . Friday 05 03 21
US Fed Chairman comments steady markets as investors move to value stocks
Arc Minerals* (LON:ARCM) – Immediate appointment of Rothschild & Co as financial adviser
Chaarat Gold* (LON:CGH) – Fatal incident at Kapan in Armenia
Kodal Minerals* (LON:KOD) – Progress report on West African gold exploration
Copper knocked down in thin trading in New York last night
Copper trading is relatively quite this morning hovering around $8,840 having fallen further in light stop loss selling in New York trading last night.
Producer hedging returned to the market over the past few days putting more metal into futures market helping to turnaround the bull run.
Nickel continued its collapse with major liquidation believed to be due to funding problems at one of the major traders.
We see nickel prices finding new support at around $15,000/t once the dust settles.
Major support for copper expected at around $8,400/t.
More unwinding of Electric Vehicle trades looks likely though Tesla shares held a key resistance level at $600/s last night
A convincing break of this level could see Tesla shares fall to $400/s which combined with other tech market falls may weigh further on copper.
The Nasdaq market fell below 13000 on Wednesday with a poor finish last night, with major technology stocks close to bear territory (defined as a fall to >20%).
Investors are seen returning to mining and other value stocks, which are easier to see fundamental value in.
Comments by Jerome Powell, the Fed Chair saw bond yields climbing higher along with a selloff in equity markets (FT comment on WSJ event).
Powell said he would be “concerned” by a persistent tightening of financial conditions in markets, although, held back from suggesting that the central bank will step up or extend its monetary policy efforts to bring rates lower.
Powell does not appear overly concerned about inflation and is likely to continue asset purchases for another six months and sees interest rates holding near zero for some time which looks good for equity inflows.
US 10y Treasury yields climbed around 10bp to 1.56% yesterday.
Next FOMC meeting starts on 17 March.
IGTV: Are we in a new commodity supercycle, or is one coming? https://youtu.be/sw6gLNnM1s0
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
*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 -1.11% at 30,924
Nikkei 225 -0.23% at 28,864
HK Hang Seng -0.31% at 29,145
Shanghai Composite -0.04% at 3,502
China – The government sets GDP growth target of >6% for this year compared to market estimates for 8.4% focusing on controlling growth in credit as the pandemic is under control domestically.
A less aggressive growth target also allows the government to focus on its structural reforms while withdrawing pandemic stimulus slowly.
Market estimates are for the ECB to step up its pace of emergency asset purchases to counter increasing bond yields, according to Bloomberg.
The Bloomberg survey also showed that more than half of the respondents expect the €1.85tn programme to be extended beyond its current end-date of March 2022.
The Governing Council will hold its next meeting on March 11.
Germany – Factory orders bounced strongly in January beating estimates as manufacturing sector continues to support the economy through extended coronavirus lockdown.
Strong reading was led by overseas demand with domestic orders down.
Factory Orders (%mom): 1.4 v -2.2 (revised from -1.9) and 0.5 est.
France – Authorities may follow Italy and block vaccine exports amid local shortages, health minister Olivier Veran said on Friday.
The announcement comes on top of earlier news that Rome blocked shipments of 250,000 Oxford/AstraZeneca doses to Australia.
Australia asked the European Commission to review the decision while Italy requested the EC to block the shipment on the ground that the Pacific nation was not considered a “vulnerable country”.
FT COVID-19 tracker shows nearly 276m doses of coronavirus vaccines have been delivered globally.
Seven vaccines are currently being administered, a subset of more than 230 candidates that were developed over a year of research.
In terms of inoculation progress, Israel is leading the way with 93.2 doses given per 100 residents, followed by the UAE with 63.1 and the UK with 32.3 or 21.6m jabs.
Indonesia sets out fully-integrated battery supply chain ambitions
Indonesia has reaffirmed its ambitions to have a complete battery production line onshore, drafting an “end-to-end” development plan to lay down its commitments.
The plan would see four state firms supply nickel ore, processing nickel sulphate and cobalt sulphate, and then producing cathodes and batteries.
Indonesia is home to a quarter of the world’s nickel reserves and has been vocal in recent years on its intentions on moving up the supply chain to become a global hub for battery-making.
Miner PT Aneka Tambang will focus on nickel ore, while Inalum and energy holding company PT Pertamina will oversee the production of battery and cell components.
Pertamina and power producer PT Perusahaan Listrik negara will look after energy supply and infrastructure, with each of the state firms to hold a 25% in the new firm (Bloomberg).
Norsk hydro to sell aluminium rolling business for $1.6bn
One of the world’s top aluminium producers is selling its rolling business to private equity firm KPS Capital Partners, as Hydro seeks to improve profitability and focus on low-carbon products.
Hydro will sell the operations including seven plants an about 5,000 employees to KPS for €1.38bn, following a two-year review of the struggling business.
The Norwegian aluminium maker aims to grow its recycling, renewables and better operations.
Gold ETF holdings slide 2% in February as bullions sinks to 9-month low
Global gold ETFs lost 84.7 tonnes in November, or $4.6bn, marking outflows for the third time in four months, according to the World Gold Council.
Total AUM now stands at 3,681t ($207bn), levels last seen in June 2020.
North American funds has the largest outflows, declining 3.4% to 1,925t- while Asia saw strong net inflows of 8.4% to 596.3t.
Total holdings stood at 3,681t, or $206.5bn, at the end of February.
Gold prices continued to decline on Friday, looking set for a third straight weekly decline as the US$ and bond yields rose following the latest Federal Reserve meeting.
Spot gold has declined 2% this week, falling below $1,800/oz this morning, while US gold future fell 0.5% to $1,693/oz (Reuters).
New Caledonia leaders agree to terms of sale for Vale’s nickel business
Political leaders in New Caledonia agreed to new terms for the sale, including a majority stake holding for local interests and Tesla to become a partner.
The deal signed by pro-independence and loyalist leaders cited an “technical and industrial partnership” with Tesla, which will see the EV maker source raw material for its batteries.
Vale previously reached an agreement to sell its nickel mine and processing plant to a consortium led by Trafigura, which was met with fierce opposition from pro-independence groups.
The new deal will see authorities hold a 51% stake and Trafigura hold a 19% stake.
Tesla will act as an industrial partner for the operation to help the product and sustainability standards as well as taking some supply for its battery production (Reuters).
Currencies US$1.1940/eur vs 1.2049eur yesterday. Yen 108.29/$ vs 107.21/$. SAr 15.267/$ vs 15.061/$. $1.386/gbp vs $1.395/gbp. 0.769/aud vs 0.780/aud. CNY 6.476/$ vs 6.467/$.
Gold US$1,692/oz vs US$1,718/oz yesterday
Gold ETFs 102.9moz vs US$103.2moz yesterday
Platinum US$1,121/oz vs US$1,165/oz yesterday
Palladium US$2,341oz vs US$2,363/oz yesterday
Silver US$25.20/oz vs US$26.10/oz yesterday
Copper US$ 8,835/t vs US$8,921/t yesterday
Aluminium US$ 2,153/t vs US$2,159/t yesterday
Nickel US$ 16,220/t vs US$16,230/t yesterday
Zinc US$ 2,753/t vs US$2,717/t yesterday
Lead US$ 2,034/t vs US$2,028/t yesterday
Tin US$ 23,660/t vs US$23,250/t yesterday
Oil US$67.7/bbl vs US$64.6/bbl yesterday
Natural Gas US$2.722/mmbtu vs US$2.814mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$168.5/t vs US$169.8/t
Chinese steel rebar 25mm US$728.3/t vs US$735.2/t
Thermal coal (1st year forward cif ARA) US$68.5/t vs US$69.6/t
Coking coal swap Australia FOB US$134.0/t vs US$137.0/t
Cobalt LME 3m US$52,610/t vs US$52,610/t
NdPr Rare Earth Oxide (China) US$91,076/t vs US$90,840/t
Lithium carbonate 99% (China) US$12,349/t vs US$12,370/t
Spodumene 6% Li2O min, cif (China) US$510/t vs US$455/t
Ferro Vanadium 80% FOB (China) US$34.5/kg vs US$34.0/kg
Ferro-Manganese high carbon 78% Mn US$1,625/t vs US$1,625/t
Tungsten APT European US$260-265/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
EVs account for 13% of total UK car sales in February
Electric Vehicles continued to gain market share of the total autos market in February 2021, with the % of total market share rising to 13% from 5.7% in February 2020.
BEV sales increased 40.2% to 3,516.
PHEV sales increased 52.1% to 3,131.
Despite the continued YoY growth of EV sales, total vehicle sales fell 35.5% in February as a result of closed showrooms due to lockdown.
Arc Minerals* (LON:ARCM) – 6.2p, Mkt cap £65m – Immediate appointment of Rothschild & Co as financial adviser
(Arc holds 72.5% of Zaco and 66% of Zamsort in Zambia. Zamsort has a portfolio of copper-cobalt prospects close to FQM’s new Trident mine on the Copperbelt in Zambia. The Cheyeza project is 66% owned by Arc Minerals through its holding in Zamsort.)
Arc Minerals report the immediate appointment of Rothschild & Co as its retained financial adviser.
The company is currently in discussions with Anglo American following extensive due technical diligence by the Anglo team.
The due diligence exercise has since passed onto commercial due diligence.
Nick von Schirnding, Arc’s CEO was a former executive at Anglo American working alongside and closely with successive CEO’s.
Von Schirnding, was brought in to rescue and restructure Bumi, the Indonesian coal business founded by Nat Rothschild and James Campbell, former head of Anglo American’s Coal business.
Nick appointed Rothschild as Bumi’s advisor working closely with Rothschild to succesfully closing a $501m all-cash transaction for one of the company’s coal assets
The $501m deal took the market by surprise given its perceived low probability of success. Von Schirnding subsequently relaunched the company as Asia Resource Minerals .
The deal established Nick’s reputation as a deal maker able to lead complex corporate restructuring along with the establishment of corporate governance.
Conclusion: The appointment of Rothschild & Co is unusual for a junior mining company indicating the potential for a significant offer for the company or it’s assets
*SP Angel acts as Nomad and broker. Our mining analyst has visited Arc’s license and pilot process plant at Kalaba in Zambia. The analyst holds shares in Arc Minerals
Chaarat Gold* (LON:CGH) 25.9p, Mkt Cap £178m – Fatal incident at Kapan in Armenia
The Company reports the loss of life at its mining contracting company that happened yesterday during an assessment of a blocked ore chute at the Kapan underground mine.
Initial investigation was carried by authorities and operations were temporarily suspended during the recovery operation.
The team will be working with the contractor and local authorities to facilitate their formal investigation of the accident.
Normal operations have since resumed at other parts of the mine.
*SP Angel act as Broker to Chaarat Gold
Kodal Minerals* (LON:KOD) – 0.1p, Mkt cap £11.7m – Progress report on West African gold exploration
Kodal Minerals has issued a progress report on its west African gold exploration projects in Mali and Cote d’Ivoire.
The company confirms that its exploration priorities are to
Undertake definition drilling at its Fatou project in Mali, where there is an historic, NI43-101 compliat resource estimate of 350,000oz of gold; and to
Conduct exploration drilling of the Nielle gold project in Cote d’Ivoire where mineralisation remains open both at depth and along strike; as well as
Infill geochemical sampling to help identify reconnaissance drilling targets within an “extensive” new geochemical anomaly at the Dabakala prospect, also in Cote d’Ivoire
Kodal Minerals also confirms that, following the termination of its Corvette joint-venture with Resolute Mining, it retains a 100% interest in the Nielle, Tiebissou and M’Bahlakro projects in Cote d’ivoire and that its geologists are currently on the ground at Nielle “to confirm historic drilling, geological setting and confirm planning for the new drilling campaign”.
As well as the technical information, Kodal Minerals also confirms that it expects to conclude a final binding agreement with Riverfort Global Capital in relation to the previously announced US%2,5m funding proposal in the near future.
“The Funding Proposal is for a 24-month secured convertible loan note (the ‘CLN’) with no repayments before 18 months, and a 10% per annum interest, rolled up and payable on maturity”.
Each tranche of the loan note will be subject to a 5% implementation fee and Riverfort “retains the right but not the obligation, to convert all or part of any outstanding balance of the CLN, up to a maximum US$1.25m for a 20% shareholding of the Company’s subsidiary that will hold all of the Company’s gold assets.”
CEO, Bernard Aylward explained that “By progressing the Funding Proposal with the Investor we are moving towards being fully funded to complete our focussed programme at our advanced Fatou and Nielle projects, including an exploration drilling campaign designed to delineate Mineral Resources”.
Mr. Aylward also confirmed that Kodal Minerals plans “to complete a significant amount of field exploration in this current dry season while we await the granting of the Mining Licence application for the Company’s flagship asset, the Bougouni Lithium Project. Kodal maintains regular communications with the Mali Transition Government and we look forward to working with the Government on the development of a new lithium mine in Mali in due course”.
Conclusion: Kodal Minerals is continuing its gold exploration programme in Mali and Cote d’Ivoire while it awaits the grant of a licence to develop its principal asset at the Bougouni Lithium project in Mali.
*SP Angel acts as Financial Advisor and Broker to Kodal Minerals
Phoenix Copper* (LON:PXC) 36p, Mkt Cap £26.1m – Raising £16.45m to develop the Empire mine open pit development project
(Phoenix holds 80% of the Empire mining property in Idaho)
Phoenix Copper has announced that it has raised £16.45m through a placing and subscription in order to advance the development of its Empire mine open-pit project near Mackay, Idaho as well as progressing the exploration of its nearby Red Star and Navarre Creek projects.
The company is placing approximately 35.1m new shares at a price of 35p/share to raise £12.3m and a subscription offer for a further 11.9m shares to raise £4.15m. Directors have, collectively, subscribed for approximately £0.25m of shares.
The issue of the new shares is conditional on the approval of shareholders at a meeting to be held on 25th March.
The new shares to be issued under the placing and subscription represent 42.5% of the enlarged capital of the company.
Qualifying shareholders are to be offered the opportunity to subscribe for a further £1.95m of shares via an open-offer.
Phoenix Copper has recently announced an updated economic study for the development of its Empire mine open pit copper project located close to Mackay, Idaho.
The new study describes an initial ten-year mine life involving the extraction of a total of 14.3mt of mineralised material to produce an average of 8,550tpa of copper, 1,970tpa of zinc, 17,235oz pa of gold and 680,050oz pa of silver at a life-of mine copper equivalent cash cost of US$1.83/lb or US$1,190/oz of equivalent gold.
The study envisages pre-production capital for the first phase of the mine’s development of US$52.6m (approximately £38m) will generate a pre-tax NPV7.5% of US$105m and IRR of 57% and the company’s analysis shows an after-tax NPV7.5% of US$88m and IRR of 47% based on the company’s assumed commodity prices of US$3.60/lb for copper, US$1.20/lb for zinc, US$1,825/oz for gold and US$27/oz for silver. We comment that, particularly for the base metals, these price estimates are below both the current market prices of copper and zinc and below SP Angel’s current long-term price expectations of US$8,950/t (US$4.06/lb) for copper and US$2,850/t (US$1.29/lb) for zinc.
As well as injecting significant equity for the mine development, the funds raised are to be used to advance the exploration of the Red Star silver/lead deposit located to the WNW of the Empire pit, initial drilling of the underlying sulphide potential beneath Empire and of the Navarre Creek licences which the company has indicated bear significant geological similarities to those seen in the prolific Carlin gold-trend in Nevada.
Commenting on the fund-raising, Phoenix Copper’s Chairman, Marcus Edwards-Jones, expressed gratitude for the support received and said that “the Directors believe this Fundraising provides the Company with a clear line of sight to production and cash flow, without the need for further equity raises in the foreseeable future. With that in mind we are delighted to be able to offer this Fundraising to our existing shareholder base by way of an Open Offer on the same terms as those offered to institutional and other investors in the Fundraising, and we hope as many of our shareholders as possible will participate”.
Conclusion: Phoenix Copper has raised the equity portion needed to develop its Empire mine open-pit copper mine project in Idaho, a US State with a reputation for its encouragement and support of the mining industry which was recently recognized by the prestigious Fraser Institute’s Annual Survey as the world’s best jurisdiction in terms of policy perception of mining.
*SP Angel act as Nomad for Phoenix Copper
Trans-Siberian Gold (LON:TSG) 92p, Mkt Cap £80m – High grade Vein 25 mining operations resume after accident investigation is completed
The Company was granted permission to resume mining operations at Vein 25 following a rock fall accident in underground workings announced on 06 January this year.
All repairs at the site were completed and preventive safety measures were put into place with mining operations restarting with immediate effect.
The team completed modification of ground support protocols, new ground support applications, site inspection, staff training and development supported by geotechnical software and additional underground equipment.
Operations continued at the lower grade Main Zone during the investigation with the plant running at full capacity, processing 5.1g/t material and producing 5.1koz over the January-February period.
Operations are reported to have been profitable during the period at an average realised gold price of $1,819/oz.
With Vein 25 operations resuming, the team is expecting grades to recover with FY21 production guidance to be released once the Company receives the outcomes and recommendations of the investigation that is expected around end of March.
Conclusion: Operations restart at higher grade Vein 25 following completion of the accident investigation with processed grades expected to pick up and FY21 guidance to be announced at the end of the month.
John Meyer – [email protected] – 0203 470 0490
Simon Beardsmore – [email protected] – 0203 470 0484
Sergey Raevskiy –[email protected] – 0203 470 0474
Joe Rowbottom – [email protected] – 0203 470 0486
Richard Parlons –[email protected] – 0203 470 0472
Abigail Wayne – [email protected] – 0203 470 0534
Rob Rees – [email protected] – 0203 470 0535
Grant Barker – [email protected] – 0203 470 0471
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony