SP Angel . Morning View . Friday 18 12 20
Copper hits $8,000/t on better outlook and weak US$
AEX Gold Inc (LON:AEXG) – Mineral license increased at highly prospective gold license
Anglo Asian Mining* (LON:AAZ) – BUY, 200p – NED appointment
GoldStone Resources (LON:GRL) – Exercise of warrants
Rainbow Rare Earths* (LON:RBW) – Rainbow completes acquisition of Phalaborwa tailings and REE pilot plant
Yamana Gold (LON:AUY) – Agua Rica integration with Alumbrera
Shortage of containers has potential to disrupt metal supply into China
Many copper and other high-value mineral producers use containers to transport product into China where stock levels are relatively low due to new stimulus demand.
Sometimes they use dedicated containers but often these containers are en-route back to China having dropped other goods off in the West.
Disruption by EU customs officials ahead of Brexit alongside with record container shipments into the US West coast is not helping the situation
Few miners or traders will want to risk transporting copper cathode in a less secure form due to its value.
The disruptive impact of a multitude of delayed shipments may be to raise prices further from here.
Old Australian coal mine to be transformed into pumped hydro facility
Australia is trialing an initiative to transform an old disused coal mine into a pumped hydro facility as part of a wider effort to use retired fossil fuel sites for renewable energy generation.
The A$13m pilot trial at Newstan Colliery could offer a blueprint for the dozens of expiring coal mines in the country.
Studies will test whether the Centennial Coal Co site can eventually support a 600MW pumped hydro facility (Bloomberg)
Old coal workings are ideal for such facilities due to their grid connection and available water source.
Miners set to benefit from sustained period of high copper prices
Producing and near-producing copper miners are poised to benefit from the recent copper price surge, with LME prices up 38% so far this year and trending upwards.
Vast stimulus measures in response to Covid-19 related shutdowns has seen the US dollar slump to multi-year lows, making dollar-denominated assets such as base metals on the LME relatively cheaper.
The unprecedented levels of government spending are positive for companies involved in infrastructure, who are going to require enormous amounts of raw materials.
The ‘green tinted’ nature of the planned infrastructure boom by environmentally-conscious governments will result in more copper, nickel and vanadium amongst other metals being demanded to fulfil state-financed projects.
The bottleneck in supply has mining companies scrambling to prepare themselves to make up the supply shortfall, which in the short and medium term is expected to lead to elevated prices.
Mine workers in Chile seem to have cottoned on to the incoming supply deficit, and are demanding higher levels of compensation which has led to strikes at various operations.
Rio Tinto is progressing with its Olu Tolgoi project despite a plethora of issues, while BHP attempts to ramp up its Chuquicamata operation.
Rambler Metals & Mining* are now fully funded and poised to bring their Ming Copper-Gold Mine back to its former glory and evaluate expansion opportunities in due course.
SolGold* is continuing to progress its world class Cascabel project in Ecuador, with the Alpala target returning 1560m grading 0.59% copper and 0.54 g/t gold including, 1044m grading 0.74% copper and 0.54 g/t gold.
*SP Angel act as Nomad and broker to Rambler and as financial advisor and broker to SolGold
IGTV: As traders continue to bid up Tesla, is the EV sector approaching a bubble? https://youtu.be/LaDWBpTZ7SQ
Copper price rise: https://youtu.be/mdPXTup15VY
VOX – 10/12/20: https://www.voxmarkets.co.uk/media/5fd228d9bc74c922485f501e/?context=/listings/LON/ARCM/multimedia/
US Election, China growth policies Solgold*, Mkango*, Rainbow Rare Earths*: https://youtu.be/YKk5-kVpVGE
EV revolution, gold and other ideas (Interactive Investor): https://www.youtube.com/watch?v=ja0IdjszfCc
Metals Markets: Are they totally dependent on stimulus? (IG TV): https://youtu.be/TOiSwRpgfKM
*SP Angel act as nomad or broker or nomad and broker to companies mentioned in the above videos.
Dow Jones Industrials +0.49% at 30,303
Nikkei 225 -0.16% at 26,763
HK Hang Seng -0.67% at 26,499
Shanghai Composite -0.29% at 3,395
Economics
The US drugs regulator will grant emergency approval for Moderna’s vaccine in the coming days making it the first country to have authorised two inoculations against the virus.
People close to the process say that the US FDA had made the positive decision and is now working on the written information to doctors and patients to accompany it.
Singapore study showed that babies born to mothers infected with COVID-19 have respective antibodies, FT reports.
The study involves 16 women, five of whom have already given birth with newborns demonstrating immunity to the pathogen.
Supreme court in Brazil ruled that COVID-19 vaccines can be made compulsory although it said that government authorities could not force people to take it, according to FT.
The decision led some to speculate that officials may impose fines and restrictions on those who do not take the vaccine.
Lancet study shows nearly twice as many people contracted COVID-19 at the height of the first wave of infections in March and April when compared to season flu with the death rate coming in almost three times higher.
The research was based on ~90k French patients hospitalised with COVID-19 this spring with ~46k patients with seasonal influenza in the country in three winter months of 2018/19.
Some 16.9% of hospitalised COVID patients died during the study compared to 5.8% for the influenza group with median age of patients being 68 years and 71 years respectively.
“The finding that the COVID-19 death rate was three times higher than for seasonal influenza is particularly striking when reminded that the 2018-2019 flu season had been the worst in the past years in France in terms of number of deaths,” Professor Catherine Quantin, who jointly the study, said.
US – Weekly jobless claims picked up again last week coming in above expectations pointing to a faltering recovery in the labour market.
The increase in initial claims reflects increasing filings in California and Illinois, two states where government have imposed particularly restrictive lockdowns in the wake of accelerating growth in new cases, Bloomberg reports.
Initial Jobless Claims: 885k v 862k in the previous week and 818k est.
Continuing Claims: 5,757k v 5,781k in the previous week and 5,700k est.
Germany – Business sentiment picked up in December reflecting positive vaccine related news while industrial sector appears to be less affected by the latest round of restrictions compared to the services companies.
Sentiment in manufacturing climbed markedly, and confidence in the services sector recovered “somewhat”, IFO President Clemens Fuest commented on the data.
IFO Business Climate: 92.1 v 90.9 (revised from 90.7) and 90.0 est.
UK – Retail sales pulled back 3.8%mom in November as the government announced a second lockdown.
Household goods and food shops were the only areas to see their monthly sales increase in the month while clothing and footwear sales dropped 19%mom.
Brexit negotiation outlook may improve as Macron suffers COVID-19 fevers and fatigue
Macron and his emissary Michael Barnier who is also a French politician appear to have a tougher line on the negotiations than most other EU states.
Brexit negotiations were reported to have proceeded extremely well in the week when Barnier was self-isolating but took a severe turn for the worse on his return.
Japan – The central bank is launching a monetary policy review for the first time since 2016 as the pandemic dialled down inflation expectations.
The report is expected in March 2021 looking at “further effective and sustainable monetary easing”.
Ghana – Main opposition party wins final seat creating hung parliament
The NDC party won Sene West in the east of the country, giving it 137/275 seats according to electoral commission figures.
President Nana Akufo-Addo was re-elected for a second term, although a hung parliament will complicate the President’s efforts to act decisively and restore the economy after the Covid-19 pandemic.
The crisis has driven Africa’s biggest gold producer’s ratio of debt to GDP to 71% in September- the highest in four years.
Zambia – President calls for greater government role in mining projects
Africa’s second largest copper producer is seeking to increase its control over the mining sector as it navigates its debt crisis.
President Lungu commented: “Owning a stake in some strategic mines gives the state the leverage required to utilise the defined mineral resources to benefit the nation. “I must mention that this is not nationalisation of the mines, on the contrary, it is the state acquiring majority stakes in selected mines while allowing private investors to also participate in the sector,
Zambia will aim for a real economic growth of more than 3% by 2022, while aiming to cut the fiscal deficit to 9% of GDP in 2021, 6.1% in 2022 and 4.9% in 2023.
Currencies
US$1.2255/eur vs 1.2238/eur yesterday. Yen 103.53/$ vs 103.21/$. SAr 14.631/$ vs 14.750/$. $1.354/gbp vs $1.358/gbp. 0.761/aud vs 0.762/aud. CNY 6.543/$ vs 6.531/$.
Commodity News
Precious metals:
Gold US$1,880/oz vs US$1,883/oz yesterday
Gold ETFs 106.5moz vs US$106.6moz yesterday
Platinum US$1,042/oz vs US$1,055/oz yesterday
Palladium US$2,344/oz vs US$2,353/oz yesterday
Silver US$25.77/oz vs US$25.77/oz yesterday
Base metals:
Copper US$ 8,001/t vs US$7,917/t yesterday
Aluminium US$ 2,071/t vs US$2,046/t yesterday
Nickel US$ 17,610/t vs US$17,560/t yesterday
Zinc US$ 2,875/t vs US$2,870/t yesterday – Lead and zinc prices to rise if China restricts imports of concentrates from Australia.
Margins are said to be under pressure at smelters in China which may cause maintenance issues
Lead US$ 2,05 /t vs US$2,053/t yesterday
Tin US$ 20,010/t vs US$19,985/t yesterday
Energy:
Oil US$51.3/bbl vs US$51.8/bbl yesterday
Natural Gas US$2.679/mmbtu vs US$2.695/mmbtu yesterday
Uranium US$30.10/lb vs US$30.10/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$157.7/t vs US$154.8/t
Chinese steel rebar 25mm US$640.5/t vs US$631.4/t – Rio Tinto and Nippon Steel to decarbonise steel value chain
Rio Tinto and Nippon Steel Corp signed a memorandum of Understanding to jointly explore, develop and demonstrate technologies to transition to a low-carbon emission steel value chain.
The intent of this partnership is in line with Japan’s climate ambition to be carbon neutral by 2050.
The partnership model is in line with the long term and complex nature of the transition to carbon neutrality for the steel industry which allows them to take a long-term view to enable the pursuit of new technologies as the global steel transition evolves.
Thermal coal (1st year forward cif ARA) US$67.1/t vs US$67.4/t
Coking coal swap Australia FOB US$124.0/t vs US$123.3/t
Other:
Cobalt LME 3m US$32,200/t vs US$32,000/t
NdPr Rare Earth Oxide (China) US$60,752/t vs US$61,013/t
Lithium carbonate 99% (China) US$6,725/t vs US$6,737/t
Ferro Vanadium 80% FOB (China) US$28.0/kg vs US$27.5/kg
Ferro-Manganese high carbon 78% Mn US$1,330/t vs US$1,325/t
Tungsten APT European US$220-230/mtu vs US$220-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$520/t vs US$510/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,475/t vs US$2,475/t
Spodumene 6% Li2O min, cif (China) US$380/t vs US$375/t
Battery News
Airbus announces hydrogen ‘plane pods’ design
Airbus has given more details about the propeller concept for its hydrogen aircraft, which could be powered by three ‘pods’ on each wing.
The self-contained units would include all of the liquid hydrogen, fuel cells, propeller blades and electronics needed to lift the aircraft.
The pods will be designed so that they can be assembled, installed, removed and disassembled quickly. This solves refuelling worries.
A patent application for the pod concept will be filed this month and several more are expected over the coming months as R & D continues.
Tesla joins S&P 500 on Monday
Californian EV giant Tesla is set to join the S&P 500 on Monday.
The Company will be the most valuable to be admitted to the index, and will make up 1%< of the benchmark.
Tesla’s entry will force S&P 500 index tracking funds to take position worth over $80bn in the Company to correctly reflect the index. It will also force them to sell positions in other index constituents to rebalance. (Reuters)
Tesla’s stock is up 700% YTD, valued at over $600bn.
Report suggests 30GW of EV virtual power plants (EVVPPs) will balance grid
Guidehouse Insight report suggests a fleet of grid-connected vehicles controlled through an online platform could transfer electricity from V2G at times of high demand or low output.
Unidirectional (VIG) smart charging could be used to reduce strain on local distribution grids when power demand is low or charging demand high.
The report estimates 261.5MW of EV batteries could support EVVPPs globally today, capacity will increase to 29.9GW by 2029.
Hitachi and Eversholt Rail intercity battery hybrid train
Hitachi and Eversholt Rail sign exclusive agreement to develop intercity hybrid train for Great Western railway for London to Penzance route.
Partnership plans to replace the diesel engine with a battery as the power source for an existing Hitachi-built 5 carriage train. Currently the train is b-mode, capable of switching between diesel and electric.
The battery will take over on non-electrified parts of the line, reducing carbon emissions by 20%. Battery power will also be used when arriving into and leaving stations.
Trials are expected to begin in 2020, testing passenger service and safety standards.
Hitachi hopes to produce a 100% electric battery intercity train that can complete the journey to Penzance by the late 2040s. This would be inline with the UK’s 2050 zero emissions target.
Company News
AEX Gold Inc (LON:AEXG) – 44.5p, Mkt cap GBP78.4m – Mineral license increased at highly prospective gold license
The Greenland-focused gold company has been granted an increase to Mineral Exploration License 2020-36, Anoritooq, by the Mineral Licence and Safety Authority.
The additional 179km2 area north of Ippatit Valley means that the amended licence covers an area of 1,889 km2 in South Greenland, with AEX drawing similarities to the Company’s Vagar license.
Several historic stream sediment and heavy mineral concentrate gold anomalies indicate the potential for further gold discoveries at AEX’s Greenland licenses, and the new area is included in a regional prospectivity assessment being conducted by GoldSpot Discoveries Corp.
The Company also report that the terms of reference for Nalunaq’s Environmental Impact Assessment and Social Impact Assessment have been translated and approved for upload to the Government’s hearing portal and the public pre-consultation period of 35 days has commenced.
Eldur Olafsson, CEO of AEX, commented: ” I am very pleased to be able to announce this expansion of the Anoritooq licence. Early indications are that Anoritooq shows very similar geography to our Vagar licence, one of the most exciting exploration targets in our current portfolio with numerous high-grade discoveries, including an historic grab sample grading 2533 g/t gold. This region will be the focus of our exploration efforts next year.
Anglo Asian Mining* (LON:AAZ) 129p, Mkt Cap GBP147m – NED appointment
BUY – 200p
Michael Charles Sununu, 53, is joining the Board as a Non-Executive Director with immediate effect.
Michael has a B.Sc. from the Massachusetts Institute of Technology and an MBA from The Kellogg School at Northwestern University majoring in finance and accounting.
He previously worked at JP Morgan on debt restructuring and equity funding of oil and gas companies as well as managed trust funds throughout his successful career, including Hudson Seven LLC, where he was a founder.
Michael is currently a manager of Sununu Enterprises LLC and Sununu Holdings LLC, which specialise in planning and project development for major corporations and medium-sized firms, as well as providing strategic advisory services.
Michael is the son of Governor John Sununu, a director of Anglo Asian.
New appointment follows the departure of Richard Round from the Board announced earlier this year.
*SP Angel act as Nomad and broker to Anglo Asian Mining
GoldStone Resources (LON:GRL) 7.5p, Mkt Cap GBP18.5m – Exercise of warrants
GoldStone reports that it has received notice of exercise of warrants from Asian Investment Management Services (AIMS) to subscribe for a total of 30,000,000 new ordinary shares of 1 penny each in the capital of the Company.
The New Ordinary Shares are being issued at an exercise price of 3 pence per share, for a total subscription to the Company of GBP900,000, and relate to warrants issued as part of the gold loan provided by AIMS announced on the 22nd of June 2020.
On admission, AIMS will hold 30,000,000 Ordinary Shares in the Company representing approximately 10.65% of the Company’s issued share capital and will also hold 90,000,000 warrants to subscribe for 90,000,000 ordinary shares.
Regarding the AIMS gold loan, GoldStone will defer payment of the interest due to AIMS on 31 December 2020 to 31 March 2021. The interest due on the outstanding balance of the Gold Loan will accrue at a rate of 17% as opposed to 14% for the period 31st December 2020 to 31st of March 2021.
Rainbow Rare Earths* (LON:RBW) 8.9p, Mkt Cap GBP41m – Rainbow completes acquisition of Phalaborwa tailings and REE pilot plant
(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates. There is no BEE holding as this is a processing operation)
Rainbow Rare Earths report the completion of due diligence on the Phalaborwa tailings project next to the Kruger national park in Limpopo, South Africa
The company are paying US$0.25m initially with a further two equal payments due over the next 12 months in cash or shares.
The Phalaborwa tailings result from the processing and reprocessing of phosphate for fertilizer.
The gypsum residue is stacked in chemical form having been ‘cracked’ by the Foskor and Sasol processes to release refined phosphate.
The Foscor process creates gypsum and also concentrates other elements within the residue.
The Sasol built pilot plant reported a 80% REE recovery producing ~3t of REE carbonate sold to a Japanese company.
Sasol Nitrates were forced to abandon the phosphate mine and plant along with the REE project due to a South African anti-competition ruling in 2011.
50 years of mining and processing has resulted in 35mt of concentrated tailings grading 0.6% Total Rare Earth Oxides offering potential for low cost recovery.
The Phalaborwa grades appear to run at around 10 times that seen in ionic clay deposits mined in China.
Critically, the tailings are reported to be rich in Neodymium and Praseodymium which are reported to be contained in chemical form
Capital costs should be lower than for a normal REE process plant with the material already in chemical form
Rainbow should be able to refurbish and restart this plant relatively quickly and for minimal cost to further confirm the process for the extraction of the REEs and to take this further to a more value added carbonate product.
Operating costs for a commercial-scale plant costs should be significantly lower particularly from a mining and processing perspective.
The value of the Rare Earth Carbonate product may also be higher than for normal spodumene carbonate products due to its chemical state.
Rainbow estimate the product should sell for around 80% of the total contained REE metal value vs just 30% of metal value for other REE carbonate offtake contracts.
Production of ~2mtpa of gypsum should realise ~10,000tpa of mixed rare earth carbonate
This is expected to realise around 3,100tpa of Neodymium and Praseodymium equivalent metal oxide over a 17 years.
Conclusion: Rainbow have the opportunity to acquire a high grade NdPr project with an unusually simple route to extraction.
The gypsum tailings should contain ~210,000t of REEs with ~63,000t of NdPr available for recovery assuming an 80% recovery rate.
NdPr Oxide prices are currently US$60,752/t in China though carbonate producers are lucky to get close to half this price on sales.
Rainbow expect to sell a higher-value NdPr-rich carbonate product which should generate significantly higher revenue than selling a conventional REE oxide.
Management continue to advance further work for the JORC resource at Gakara in Burundi
The team recently brought in new machinery for more efficient mining at Gakara and to ramp up production.
Funding: Rainbow recently raised GBP2.56m at 6p/s
*SP Angel act as broker and financial advisor to Rainbow Rare Earths
Yamana Gold (LON:AUY) 417.5p Mkt Cap GBP3,953m – Agua Rica integration with Alumbrera
Yamana Gold reports the successful completion of the integration of its wholly owned Agua Rica project in the Catamarca province, Argentina, with the plant and infrastructure of Minera Alumbrera.
Yamana Gold will be the operator of a new joint-venture, to be known as the MARA Project, with a controlling interest of 56.25% while Glencore holds 25% and Newmont the residual 18.75%
Agua Rica contains a proven and probable ore reserve of 1.1bn tonnes at an average grade of0.48% copper, 0.21g/t gold, 2.84g/t silver and 0.03% molybdenum.
The company explains that the “integration creates significant synergies by combining existing substantive infrastructure which was formerly used to process ore from the Alumbrera mine during its mine life, including processing facilities, a fully permitted tailings storage facility, pipeline, logistical installations, ancillary buildings, and other infrastructure, with the future open pit Agua Rica mine”.
Describing the future operation, Yamana Gold says that “Relatively modest modifications to the existing processing circuit will be implemented to process Agua Rica ore in order to produce copper and by-products concentrate, which will then be transported to port for commercialization. Distance between mine and plant is approximately 36 kilometres and ore will be transported to the plant by overland conveyor”.
Commenting on what the announcement describes as “a significantly de-risked project with a smaller environmental footprint and improved efficiencies”, Yamana Gold’s Executive Chairman, Peter Marrone, said that “The integration effectively turns what was a greenfield project into a much lower risk brownfield project,… Leveraging existing infrastructure enhances project economics, simplifies permitting, and reduces the project’s environmental footprint, thereby significantly enhancing the value of the project”.
In July 2019, Yamana Gold announced that the pre-feasibility study for Agua Rica that capital investment of US$2.4bn including “significant synergies from using the infrastructure and facilities of Alumbrera” was expected to generate an after-tax NPV8% of US$1.935bn and IRR of 19.7% from a 28 years mine life generating “average annual production over the first 10 years of approximately 533 million pounds of copper equivalent … [approximately 240,000tpa] … including 107,000 ounces of gold and contributions of molybdenum and silver. Costs are expected to fall well within the lower half of the cost curve, with average cash costs over the first 10 years estimated at $1.29 per pound and competitive AISC(of $1.52 per pound for the same period”.
The pre-feasibility study was based on treating 110,000tpd of ore at an average life-of -mine waste:ore ratio of 1.66:1.and copper prices of US$3.00/lb, gold at US$1300/0z, silver at US$18.00/oz, and a molybdenum price of US$11.00/lb.
Commenting on the de-risking impact of integrating the Alumbrera facility Mr. Marrone said that “We are very pleased to have worked with our partners, Glencore and Newmont, on the integration, and we look forward to working with them on the development of the project”. The company’s current presentation indicates that a full feasibility study for Agua Rica is expected to be completed during 2021 and that this is regarded as one of a series of catalysts for the further growth of the company.
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
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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
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BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
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LME
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NYMEX
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SSY
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Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony
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