SP Angel . Morning View . Wednesday 23 12 20
Markets pick up as Trump argues for larger stimulus
Almonty Industries Inc (TSE:AII) – Mine opposition lobby publishes art book to fund its resistance to Spanish mine development
Bluejay Mining* (LON:JAY) – BUY, Valuation 29.4p – Offtake distribution agreement rises to 340,000tpa following signing of mining license for Dundas
Hummingbird Resources (LON:HUM) – Drilling programme extended after good grades encountered in new mineralised areas at Yanfolila
TMAC Resources (TSE:TMR) – Canadian Government rejects sale of TMAC resources to Shandong Gold
Recent TV interviews
ii TV: – Small Cap Mining Share tips for 2021 – https://www.youtube.com/watch?v=G_6RKAp91k4
ii TV: – Miners for a green industrial revolution – https://www.youtube.com/watch?v=rXlNS6JIDvg&t=3s
ii TV: – A Mining megatrend and three solid dividend stocks – https://www.youtube.com/watch?v=sH5r-QbTRwg
IGTV: – As traders continue to bid up Tesla, is the EV sector approaching a bubble? https://youtu.be/LaDWBpTZ7SQ
IGTV: – 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 -0.67% at 30,016
Nikkei 225 +0.33% at 26,525
HK Hang Seng +0.86% at 26,343
Shanghai Composite +0.76% at 3,382
Economics
US – President Trump refused to sign the latest $900bn stimulus package calling it a “disgrace” and argued for larger stimulus payments for individuals.
Trump said he would ask Congress to “amend” the bill and “increase the ridiculously low $600 (direct payment) to $2,000, or $4,000 for a couple”.
The increase is estimated to add nearly $340bn to the bill growing the cost of this provision to more than $500bn, up from current $160bn.
The aid package came together with a wider federal government budget through next September and if the president does not sign the legislation by December 28, the government may go into a partial shutdown.
Nancy Pelosi said the House will try and pass this additional measure during a pro forma session on Thursday.
Separately, consumer confidence recorded a slump in December amid increasing number of new COVID cases and widening restrictions.
Although, the expectations’’ sub-index posted a modest pickup reflecting the start of the vaccination programme.
Conference Board Consumer Confidence: 88.6 v 92.9 in November and 97.0 est.
France and the UK agreed to reopen borders reinstating the flow of traffic and ending a blockade intended to stop the spread of a new coronavirus variant.
Late on Tuesday a deal was reached with Paris to allow French and other EU residents to return home, given they have a negative COVID test that is less than three days old.
UK officials persuaded Paris that on-the-spot 20-minute lateral flow tests for COVID cold be used for hauliers, rather than PCR tests that typically take at least a day to return results.
Lorries are seen crossing borders again, although, it will take some time to clear the backlog accumulated over the last couple of days.
The pound is up against the € this morning recovering some of its losses from previous trading sessions on a restart of transportation links between UK and France as well as hopes for Brexit trade deal.
Michel Barnier said both sides were ready t make “a final push” while PM Johnson has been discussing the deal with EC President Ursula von der Leyen over Monday and Tuesday.
Australia – The nation reported four cases if new COVID variant (B.1.1.7) with all cases said to being monitored and managed with a quarantine.
Australia – Goods surplus hits two-year low on Chinese trade tensions
Australia’s goods trade surplus fell to A$1.9bn in November vs A$4.7bn in October, according to the Australian Bureau of Statistics.
The drop was led by a A$1.2bn, or 10% decrease in exports to China combined with an A$889m, or 11% increase in imports.
Codelco strikes early labour deal at Chuquicamata copper mine
Chile’s state-owned miner has reached a labour agreement ahead of schedule with the union of supervisors at the Chuquicamata mine.
The 36-month agreement enters into force on the 1st of April, with a signing bonus worth nearly $5,000 agreed- although no increase to worker’s salaries.
The mine produced 385,000t of copper in 2019.
Global November crude steel production rises +6.6% YoY
Global crude steel production rose to 158.3mt last month, according to the World Steel Association.
China produced 87.7mt of crude steel, up +8% compared to the same period last year.
SQM announces 8-year lithium supply deal with South Korea’s LG Chem
SQM are to supply approximately 55,000t of lithium carbonate equivalent between 2021 and 2019 to LG Energy Solution- LG Chem’s battery making business arm.
EV makers are scrambling to lock in future supply of battery metals due to anticipated supply shortages.
SQM plans to increase its production capacity to 180,000t and 30,000t of lithium carbonate and lithium hydroxide respectively, by 2023 (Reuters).
Republic of Congo (not the DRC) government abruptly cancels three Australian-run iron ore projects
The Republic of Congo has cancelled iron ore projects with three Australian miners, and handed them to a firm that nobody knows anything about.
Sundance Resources and Equatorial Resources have both said this week that they had been notified through an official journal that their mining or exploration permits had been cancelled.
Mining permits for their projects were awarded to a company called Sangha Mining Development Sasu- who were also awarded a mining permit for the Avima iron ore project.
The three projects together have about 1,000mt of high grade iron ore.
According to Giulio Casello, MD of Sundance Resources, there are rumors from in-country that the new companies are Chinese-backed.
Sundance has spent A$400m over a decade on its Mbalam-Nabeba iron project, while Equatorial has spent A100m on its Badondo project.
Equatorial said if the issues were not resolved in the next six months, it would seek international arbitration for full compensation from the Congo government (Hellenic Shipping News)
Currencies
US$1.2174/eur vs 1.2211/eur yesterday. Yen 103.49/$ vs 103.42/$. SAr 14.601/$ vs 14.620/$. $1.341/gbp vs $1.343/gbp. 0.756/aud vs 0.755/aud. CNY 6.537/$ vs 6.547/$.
Commodity News
Precious metals:
Gold US$1,867/oz vs US$1,871/oz yesterday
Gold ETFs 106.5moz vs US$106.5moz yesterday
Platinum US$1,014/oz vs US$998/oz yesterday
Palladium US$2,330/oz vs US$2,318/oz yesterday
Silver US$25.51/oz vs US$25.83/oz yesterday
Base metals:
Copper US$ 7,803/t vs US$7,804/t yesterday
Aluminium US$ 1,993/t vs US$2,013/t yesterday
Nickel US$ 16,655/t vs US$17,025/t yesterday
Zinc US$ 2,788/t vs US$2,821/t yesterday
Lead US$ 1,974/t vs US$1,947/t yesterday
Tin US$ 19,935/t vs US$20,000/t yesterday
Energy:
Oil US$49.7/bbl vs US$50.0/bbl yesterday
The price of crude has now settled well above the March high (US$48.66/bbl) as it continues to track the upward trend carried over from November, and recent developments in the Relative Strength Index (RSI) point to higher crude prices as the indicator pushes into overbought territory for the first time since 2019.
The Fed recently announced that it will continue buying US$120bn of debt/month until further progress had been made towards recovery.
Crude inventories in the week to 11 Dec were up 2MMbbls to 495MMbbls according to API data
The International Energy Agency expects oil demand to remain weaker both this year and into 2021, the Agency revised down its estimates by 50,000bopd for 2020 and 170,000bopd in 2021
The US has begun roll out of the Pfizer vaccine stating yesterday and the Moderna vaccine is expected to be approved by the FDA later this week
Global energy consumption is expected to be 96.9MMbbls in 2021 (2020: 91.2MMbopd)
OPEC has postponed it Joint Technical Committee and Ministerial Monitoring Committee meetings until Jan 3 and 4
The group has also revealed its expectations of a slower demand recovery than originally expected, lowering its forecasts by 350,000bopd for 2021
Natural Gas US$2.759/mmbtu vs US$2.713/mmbtu yesterday
Natural gas prices moved higher yesterday as supplies fell slightly in the latest week
Despite warmer than expected weather throughout most of the US, prices edged higher
Natural gas inventories are expected to decline by 120Bcf according to survey provider Estimize
Prices in Asia continue to move higher, congestion in the Panama Canal, supply outages and colder weather forecast for China, Japan and South Korea has seen the JKM move above US$8.075/mmbtu
Demand in Asia is helping to support prices in Europe as supply gets redirected. European storage drew by 146Bcf last week, above average for this time of year (108Bcf)
Uranium US$30.30/lb vs US$30.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$163.8/t vs US$174.3/t
Chinese steel rebar 25mm US$682.7/t vs US$694.4/t
Thermal coal (1st year forward cif ARA) US$69.1/t vs US$68.1/t
Coking coal swap Australia FOB US$125.3/t vs US$124.0/t
Other:
Cobalt LME 3m US$32,200/t vs US$32,200/t
NdPr Rare Earth Oxide (China) US$61,341/t vs US$61,098/t
Lithium carbonate 99% (China) US$6,960/t vs US$6,797/t
Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.0/kg
Ferro-Manganese high carbon 78% Mn US$1,330/t vs US$1,325/t
Tungsten APT European US$230-235/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
Aircraft detachable hydrogen airpods
Airbus has a new design that builds entire hydrogen propulsion units, tanks and all, into detachable pods along the wings.
Each of the six pods on the wings of the ZEROe concept includes a liquid hydrogen tank, a. cooling system, a fuel cell, power electronics, electric motors, and eight-bladed lightweight, composite propeller and all the auxiliary equipment needed to run a standalone propulsion unit.
The pods are removable so that if something goes wrong with one, you can shut it down.
Airbus has taken patents out on this design, but it is just one of many concepts they are evaluating for the ZEROe program.
Company News
Almonty Industries Inc (TSE:AII) 0.65c, Mkt cap C$119 – Mine opposition lobby publishes art book to fund its resistance to Spanish mine development
The Spanish opposition to the development of Almonty’s Valtreixal tin/tungsten project in north-west Spain have come up with a novel method for raising fund to oppose the mine development (Mining.com)
The opposition group has collected the works of over 100 Spanish and Portuguese artists, writers, poets, photographers and naturalists in a book entitled “Heaven, open up” to raise funds to oppose the development of the.
Almonty Industries, which is listed in Canada is currently seeking permits to develop ~2.5mt reserve grading 0.34% tungsten trioxide equivalent in an area which those opposed to the mine development describe as an important ecosystem which includes “the most important habitat for the Iberian wolf”.
Proceeds from sales of the 246 page book are to be used to fund opposition to the plan.
http://www.edicionesinvasoras.com/
Bluejay Mining* (LON:JAY) 13.65p, Mkt cap £135m – Offtake distribution agreement rises to 340,000tpa following signing of mining license for Dundas
BUY, Valuation 29.4p
Bluejay Mining report the signing of an offtake distribution agreement with a large and long established Asian conglomerate for up to 340,000tpa of ilmenite concentrate.
The Master Distribution Agreement covers a minimum 250,000tpa of ilmenite rising to a maximum 340,000tpa for a minimum of five years.
The price will be referenced to independent industry data for ilmenite such as TZMI pricing less a small handling commission suggesting that pricing will be close to the prevailing ilmenite price at the time of sale. Currently the price of ilmenite is around $240/t and rising.
Bluejay plans to produce 440,000tpa of high-grade ilmenite concentrate off the beach in Greenland with very simple, low-cost gravity and magnetic concentration.
Ship loading is via a simple conveyor directly onto a handymax or panama bulk carrier in deep water close to the Wolstenholme Fjord.
Bluejay made history in 2019 when it moved the most northerly bulk sample from Greenland (see link https://youtu.be/M0751JPXYX8 )
The ilmenite concentrate is virtually clay free and does not hold water meaning it does not freeze reducing storage and loading costs.
Optimisation: We expect the optimisation program to have a material impact on key components of the construction and on the valuation of the project
Capex: We expect the capital cost of the project to reduce from the current $245m estimate which has been raised by the consultants due to the project’s location.
The lower capex should be due to the benefits of mining high-grade material with very little in the way of clay or other undesirable elements.
It is the unusually clean nature of the ilmenite mineralisation and material around it that allows for more simple processing and concentration.
Financing: We expect a number of multilateral development agencies to participate in the funding alongside project finance, conventional funds and offtake finance from the unnamed Asian trading conglomerate.
Offtake: The offtaker will take bulk shipments for distribution in smaller lots to other buyers. This should reduce shipping costs and improve efficiency.
The Asian conglomerate is not currently named due to commercial sensitivity though they may be named closer to the time of offtake.
Management continue to talk to other offtakers for the remaining tonnage planned from the Dundas project.
Ilmenite market: Mine production is running at around 7mtpa ilmenite and another 0.6mt of rutile which also contains titanium.
There is no listed market for the material meaning that concentrates are normally shipped directly from producer to the consumer often with the assistance of traders.
Reports from the latest TMZI industry conference indicate demand growth of 1.7% CAGR though this may well prove conservative given the ongoing urbanisation and economic growth in China and increased use of paint by furloughed workers in the west.
Critically, growth in demand for ilmenite feedstock is making room for new production from Dundas, particularly for high-grade clean material.
Conclusion: Bluejay are progressing quickly through the steps needed to fund and construct the Dundas mine helped by the simplicity of the project and its location next to a deep-water fjord. We look forward to further news on the project financing.
Rio Tinto recently took an option to form a joint venture agreement with Bluejay over the Enonkoski nickel project in Finland and may acquire a 75% interest through $20m worth of expenditure.
Bluejay also has a pilot plant in Canada where it is progressing a 5,000t metallurgical sample for smelter testing.
The value of this sample is around US$1.25m and the concentrate may now be sold given the company has received its exploitation licence.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Hammaslahti, Enonkoski and Outukumpu mines in Finland as well as Bluejay’s Dundas mine site in Greenland.
Hummingbird Resources (LON:HUM) 28p, Mkt Cap £101m – Drilling programme extended after good grades encountered in new mineralised areas at Yanfolila
The Company reported drilling results at the Sanioumale East deposit at Yanfolila, Mali.
Selected intersections included:
7 m at 3.72 g/t from 45 m depth (SNERC0308)
16 m at 9.64 g/t from 47 m depth (SNERC0317)
18m at 2.83 g/t from 49 m depth (SNERC0338)
7 m at 7.83 g/t from 21 m depth (SNERC0342)
8 m at 3.57 g/t from 36 m depth (SNERC0370)
8 m at 2.68 g/t from 112 m depth (SNERC0370)
The last intersection was reported at the new zone of mineralisation outside of the mineral resource model and given better grades encountered at depth, the team decided to extend the SE drilling programme.
The programme is expected to be completed shortly with an updated mineral resource expected to be ready by the end of Q1/21.
Conclusion: Drilling at the Sanimoule East deposit focused mostly on infill drilling encountered new mineralisation zones that are expected to be drill tested shortly ahead of the MRE update targeted for Q1/21.
TMAC Resources (TSE:TMR) C$1.20, mkt cap C$156.3m – Canadian Government rejects sale of TMAC resources to Shandong Gold
The Canadian government has blocked the sale of TMAC Resources and its Hope Bay gold mine to Chinese state-owned company Shandong Gold Mining.
The C$230m deal was approved by 97% of TMAC shareholders on the 26th of June, however the Company announced on Monday that the deal did not receive Canadian regulatory approval due to a national security review of investments under the Investment Canada Act.
TMAC produced 139,510oz of gold last year, with a pre-feasibility study published last March exploring the possibility of more than doubling its output of ore, at an estimated cost of more than $683m.
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
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BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
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LME
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ICE
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NYMEX
Thermal Coal
Bloomberg OTC Composite
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SSY
RRE
Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony
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Metal Bulletin
