Today’s Market View – Anglo American, Cornish Metals, Rockfire Resources and more…

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SP Angel . Morning View . Wednesday 19 05 21


Joe Biden unveils $174bn EV proposal as Global NEV sales rose 88% in March


Gold prices climb as market volatility picks up




Anglo American (LON:AAL) – De Beers reports robust demand for diamond jewellery from China and the US


Cornish Metals* (LON:CUSN) – LME tin prices hit ten-year high


Rockfire Resources (LON:ROCK) – Geophysical interpretation identifies deep drilling targets at the Plateau project


Sunrise Resources (LON:SRES) – Grinding test on pozzolan from the CS Project




We are raising funds for a private copper company in Chile which has grabbed our interest


The company has a historic ‘high-grade’ copper mine which was abandoned >100 years ago.


Drilling is planned to test two large geophysical targets underneath the historic mine may be mineralised porphyry structures.


There is also potential to reopen the historic mine which lies relatively close to a number of the world’s major copper mines


Please let us know if you are interested in participating in this opportunity.


*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).




Gold prices rise to four-month high as Bitcoin falls and US dollar steadies at weaker levels


China has banned finance firms from transactions in cryptocurrencies.


Banks and online payments services may not offer clients any services in cryptocurrencies including trading, clearing and settlement (Al Jazeera)


Bitcoin has fallen a further 6% today to $40,500 hitting a low of 38,571 this morning


The US dollar index is at 89.9 having fallen to 88.0 yesterday




Joe Biden unveils $174bn EV proposal


President Biden made the case on Tuesday for his huge EV proposal while urging automakers not to build zero emission vehicles abroad for US consumers.


The bulk of support will come from GBP100bn earmarked for consumer rebates, while a further $10bn will come in the form of new tax credits for zero-emission medium- and heavy-duty work vehicles


The president wants $15bn to build 500,000 EV charging stations by 2030, and $45bn to electrify a significant number of school and transit buses.


Biden ruled out consumer incentives for high-priced electric luxury models, according to a White House fact sheet.


The US’ federal fleet is expected to shift to electric, including the Postal Service expected to begin using EV delivery trucks.




Global NEV sales rose 88% in March


A total of 467,100 new energy passenger vehicles were sold globally in March, up 88.5% on the month and 200.2% on the year (SMM News).


The ranking of the top three NEV models in terms of global sales was unchanged in March, with sales of Model 3s increasing in both China and Europe to total 58,700 units – up 137% on the month.


Sales of Hongguang MINI surged 97.08% on the month to 39,700 units, with the vehicle only sold in China.




Semiconductor crisis worsens as automakers expected to lose out on $100bn of sales


Taiwan power cuts due to generator failure linked to heatwave and spike in power demand.


Taiwan is already suffering from a severe water shortage that has the potential to exacerbate the global semiconductor chip shortage.


Chip lead times increasing to 17 weeks in April – the longest wait since at least 2017, when the Susquehanna begun tracking data.


Automakers are now expected to lose out on $100bn in sales this year, up from earlier estimates of $61bn (Bloomberg).


Virtually all major automakers including ford, GM and VW have had to idle certain factories due to lack of essential components.


The chip industry and its customers watch lead times as an indicator of the balance between supply and demand, with a lengthening lead time indicating that buyers are more willing to commit to future supply to avoid a recurrence of shortfalls.


The shortage has been exacerbated by a resurgence of coronavirus cases in Taiwan – a key location for chip manufacturing.




Rare earths – Chinese exports fell 23% in April to 3,737t with 90% of exports going to Japan, the US, Holland and France in Q1.


There is a suggestion that REE exports fell due to container availability.


We wonder if this is the whole story or if Chinese consumers are beginning to take up more of the available material locally leaving less for export


We can see a situation where export volumes of rare earths are squeezed in favour of domestic consumers


Western nations are looking to build stockpiles in critical materials to ensure security of supply for new EV and wind farm and Li-ion battery component manufacturing




China – Smelters in Yunnan being encouraged to cut power consumption according to reports


Smelting capacity is being encouraged to move to locations with available hydropower




Antofagasta shares collapse as independent candidates win lions share of the votes


The new candidates have been voted in on an agenda to change the Chilean Constitution


Reports suggest potential for a new windfall tax on copper with a new 75% tax applied when copper is >$4/lb or $8,815/t


The constitution may also impose stricter regulations over water and community rights.


Mining companies are thought to have stability agreements protecting them till 2023


Rio Tinto and BHP both have




Dow Jones Industrials -0.78% at 34,061


Nikkei 225 -1.28% at 28,044


HK Hang Seng +1.42% at 28,594


Shanghai Composite -0.51% at 3,511




Economics


US – Markets are pulling back this morning as investor optimism about an economic rebound is giving way to worries about inflation, Bloomberg writes.


10y Treasury rates are up 2bp this morning trading at 1.66%.


FOMC April meeting minutes are out later today, although, policymakers continued to signal that no tightening is expected any time soon.


Housing starts fell 9.5% in April to 1.569m units vs 19.4% in March at 1.739m units


Building permits rose 0.3% to 1.76m units revised to 1.7% at 1.755m units from 2.7% at 1.766m units




UK – Consumer inflation more than doubled to 1.5%yoy in April matching market expectations and driven by an increase in domestic energy prices and clothing.


Concerns over accelerating inflation and expectations that the central bank may need to act soon are building up.


Inflation expectations have been increasing since the start of the year with the so-called 10y breakeven rate measuring market estimates for the rate over the next 10 years up 50bp this year and currently hovering around 3.5%.


CPI (%yoy): 1.5 v 0.7 in March and 1.5 est.


CPI (%mom): 0.6 v 0.3 in March and 0.6 est.

Core CPI (%yoy): 1.3 v 1.1 in March and 1.3 est.


Three month rolling unemployment at 4.8% in March vs 4.9% in February


Q1 labour productivity rose 0.8% vs -4.3% in Q4


Average earning ex-bonus rose 4.6% yoy in March vs 4.4% in April




Iran – Talks over a revival of the Iran nuclear deal and a potential easing of sanctions see oil prices pulling back this morning.


A Russian envoy in Vienna said a significant progress has been made in efforts to broker an agreement between Iran and the US, Bloomberg cited BBC Persian news channel.




Kyrgyzstan – The government seized control of the Kumtor gold mine and is planning to install external management.


Centerra Gold, an owner of the mine, released a statement saying that it is “no longer in control of the Kumtor mine and no longer ensure the safety of the mine’s employees or operations”.


The move follows the national parliament decision to allow for the temporary nationalisation of foreign companies that were found to have violated local laws.


The court later found Centerra in violation of environmental laws imposing a $3.1bn fine on the Canadian company.


The stand off with the Canadian miner began shortly after Sadyr Japarov, an acting president, came to power in Bishkek having previously campaigned for the nationalisation of the mine.


Centerra initiated arbitration proceeding against the government.




Japan – Q1 GDP fell 1.3% qoq and -5.1% yoy




Currencies


US$1.2236/eur vs 1.2196/eur yesterday. Yen 109.04/$ vs 109.01/$. SAr 13.988/$ vs 14.037/$. $1.419/gbp vs $1.419/gbp. 0.788/aud vs 0.781/aud. CNY 6.429/$ vs 6.425/$.




Commodity News


Precious metals:


Gold US$1,871/oz vs US$1,870/oz yesterday


Gold ETFs 100.5moz vs US$100.4moz yesterday


Platinum US$1,225/oz vs US$1,244/oz yesterday


Palladium US$2,908/oz vs US$2,918/oz yesterday


Silver US$28.07/oz vs US$28.55/oz yesterday




Base metals:


Copper US$ 10,265/t vs US$10,481/t yesterday


Aluminium US$ 2,450/t vs US$2,495/t yesterday


Nickel US$ 17,850/t vs US$18,155/t yesterday


Zinc US$ 3,026/t vs US$3,066/t yesterday


Lead US$ 2,219/t vs US$2,219/t yesterday


Tin US$ 30,200/t vs US$29,990/t yesterday




Energy:


Oil US$67.9/bbl vs US$70.0/bbl yesterday


Natural Gas US$2.990/mmbtu vs US$3.118/mmbtu yesterday




Bulk:


Iron ore 62% Fe spot (cfr Tianjin) US$214.0/t vs US$207.7/t


Chinese steel rebar 25mm US$882.3/t vs US$895.8/t


Thermal coal (1st year forward cif ARA) US$77.9/t vs US$77.8/t


Coking coal swap Australia FOB US$137.0/t vs US$138.0/t




Other:


Cobalt LME 3m US$43,650/t vs US$44,095/t


NdPr Rare Earth Oxide (China) US$76,984/t vs US$78,985/t


Lithium carbonate 99% (China) US$12,675/t vs US$12,684/t


China Spodumene Li2O 5%min CIF US$640/t vs US$630/t


Ferro-Manganese European Mn78% min US$1,756/t vs US$1,726/t


China Tungsten APT 88.5% FOB US$270/t vs US$270/t


China Graphite Flake -194 FOB US$505/t vs US$505/t


Europe Vanadium Pentoxide 98% $7.7/lb vs $7.6/lb


Europe Ferro-Vanadium 80% $33.95/kg vs $33.75/kg




Company News


Anglo American (LON:AAL) 3,224p, Mkt Cap GBP45.1bn – De Beers reports robust demand for diamond jewellery from China and the US


Anglo American has announced that the fourth De Beers sales cycle of 2021 realised US$380m US$440m and that the previously reported sales for the third sales cycle of the year have now been confirmed at US$450m rather than the provisional figure of US$440m reported in April.


The company confirms that it is continuing to practice its flexible approach to diamond sales “with the Sight event extended beyond its normal week-long duration”.


Referring to the impact of the continuing Covid19 pandemic, De Beers Chief Executive, Bruce Cleaver, said that “We continue to see robust demand for diamond jewellery in the key US and China consumer markets. However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases”.




Cornish Metals* (LON:CUSN) – 13.1p, Mkt cap GBP35m – LME tin prices hit ten-year high


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The price of tin rose to its highest level since May 2011 on Tuesday, with an intraday high of $30,650/t.


LME tin closed at $30,455/t – up 1.9% from Monday’s closing price of $29,895/t.


Cornish Metals is currently drilling to confirm the discovery of high-grade copper and tin at United Downs in Cornwall.


We are hopeful that a new resource at United Downes may prove to be economic and easily accessible from a decline at the Wheal Maid mine which we believe to run close to the original discovery drill hole at United Downes.


The company also owns the historic South Crofty tin mine near to the United Downes site.


The South Crofty mine may be dewatered in future years to further expand production.


* SP Angel acts as broker and financial advisor to Cornish Metals. The analyst holds shares in Cornish Metals.




Rockfire Resources (LON:ROCK) 1.03p, Mkt Cap GBP9.6m – Geophysical interpretation identifies deep drilling targets at the Plateau project


Rockfire Resources reports that 3D interpretation of geomagnetic data from its helicopter-borne survey conducted in April, has identified strongly magnetic targets, interpreted as characteristic of alteration associated with porphyry copper mineralisation, at depth beneath its Copper Dome prospect in northern Queensland.


The company says that the target zone of interest starts at a depth of approximately 500m below surface and that the “larger target is 1.5 km long, 700 m wide and occurs between 400 m and 1.3 km deep and remains open beyond that depth”.


A smaller target “is 900 m long, 250 m wide and occurs between 600 m and at least 1 km deep”.


The company explains that historic diamond drilling, conducted from the 1970s, “intersected typical porphyry grades including 88 m @ 0.23% Cu and 75 m @ 0.13% Cu, with most holes ending in copper mineralisation” and that alteration zones identified in the core from this drilling suggests that “the current surface is at the upper-mid levels of a copper/gold porphyry system”.


David Price, Chief Executive, confirmed that “After nearly 50 years with no significant exploration at Copper Dome”,drilling is planned during the forthcoming exploration season and explained that “Both targets deepen towards the south, suggesting that the source may lie to the south. The closest they come to the surface is around 500 m depth, but historical drilling has hit copper much closer to surface”.


Initial drilling is planned for the Copperhead target followed by work on the Copper Dome target. The depth of the targets suggests that only limited initial work will be possible within the GBP650,000 budget outlined at the time of the recent fundraising, however, success in vindicating the exploration model could generate additional interest as momentum builds for copper exploration to supply metal for the transition to environmentally benign energy


Conclusion: Modern geophysical methods have identified deep drilling targets at the Plateau project some 50 years after the area was last investigated. The company recently raised GBP850,000 to help fund a GBP650,000 budget for drilling and is now moving to deploy these funds. We await the results with interest.




Sunrise Resources (LON:SRES) 0.26p Mkt Cap GBP8.7m – Grinding test on pozzolan from the CS Project


Sunrise Resources reports that grinding tests on a 500t bulk sample of natural pozzolan material from its CS Project in Nevada has now been completed by an un-named “large cement and ready-mix concrete company” has now been completed successfully with the material ground to the target size range.


Concrete test trials are now being organised to test the suitability of the ground pozzolan “product in some commercial scale concrete pours”.


The company also confirms that the mining manager for the concrete company has recently undertaken a site visit to the Project.


Describing the cement and ready-mix company as “an internationally recognised Company … [that] …has a substantial ready-mix concrete business that is a captive customer for its cement products, and which could also use CS natural pozzolan as a replacement for the large volumes of fly ash it has traditionally used in its concrete business” Executive Chairman of Sunrise Resources, Patrick Cheetham, said that the capacity to use a “surplus facility … will allow for a low capital cost, low risk start up to production”.


Conclusion: The successful grinding tests on pozzolan from the CS Project are to be followed up by commercial scale tests of concrete produced from the resulting material. If successful these could open the way for a wider cooperation between Sunrise Resources and the un-named producer to substitute natural pozzolan in commercial cement and concrete production.




Recent Interviews:


VOX Markets: 28/04/20: https://www.voxmarkets.co.uk/media/60896b3f017903524c8e0936/?context=/listings/LON/BMN/multimedia/


21/04/20: https://www.voxmarkets.co.uk/listings/LON/BMN


IGTV: Improved global economic forecasts from the IMF provides trading opportunities: https://www.youtube.com/watch?v=_GXKPqzuCG0


VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw


*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.




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 – [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




Sales


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






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




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