SP Angel . Morning View . Tuesday 22 12 20
EV raw materials prices hike higher in China
BlueRock Diamonds (LON:BRD) – Progress report on Kareevlei expansion and mineral resources
IronRidge Resources* (LON:IRR) – NED appointed
Power Metal Resources* (LON:POW) – Planning to deepen its second hole at Molopo Farms
Scotgold Resources* (LON:SGZ) – BUY – 182p – Cononish ramp up in progress with 9.9koz in FY21 reiterated
Versarien* (LON:VRS) – Graphene production assets and IP acquired along with £3.5m raised
W Resources (LON:WRES) – Improving recovery rates at La Parilla
EV raw material prices rise in China as sellers hike offers for graphite and lithium carbonate
Chinese refiners / producers are raising prices for battery related raw materials (FastmarketsMB)
Cobalt hydroxide +1.4%, manganese flake +1.5% and nickel sulfate +8% prices have also been raised
Lithium carbonate prices rose 3.4% off low levels in China on a lack of material and higher prices asked by most producers
Graphite flake 94% -100 mesh prices rose 2% with suppliers raising offers and rising freight prices due to a shortage of containers
Vanadium pentoxide prices also rose by 4.3% last week
The price rises are of no surprise to us. We believe it reflects stronger demand, tightening inventory chains and potential deficits.
Automotive and battery manufacturers accustomed to working with ‘just-in-time supply chains’ will need better inventory management to ensure supply.
Quality issues, which are critical for good quality production, need to be addressed to avoid expensive recalls and battery fires.
Management will need to balance evolving battery chemistries with supply chains to ensure the right raw materials are in place as production ramps up.
Vanadium pentoxide prices jump 4.3% in Europe to $5.3-5.5/lb V2O5 last week
Ferro-vanadium also prices rose 2.5% in the US to $11/15-11.4/lb V2O5
Ferro-vanadium prices also rose in Europe to $25-25.5/kgV
The European price rise follows similar price rises for vanadium pentoxide in China.
China is importing increasing quantities of vanadium and other steel alloys to meet strong demand for steel products.
The recent fall in steel inventories in China across most if not all products is down to s
Steel producers and traders have also raised prices for steel billet and other products
Base metal prices slump on Monday as more infectious Covid-19 strain rattles markets
Industrial metals prices fell across the board on Monday, as a more infectious strain of Covid-19 caused many countries to shut-up-shop for Christmas, dampening the global economic outlook .
LME copper prices fell -1.7% yesterday to $7,847/t as a result of UK medical professional’s findings’, with lead the worst performer of the LME base metals complex- falling 3.9% (Fastmarkets MB).
Copper rallied over $8,000/t last week to its highest level since 2013 amid Chinese demand, stimulus and vaccine-rollout progress.
The dollar rose for a second day as the pound collapsed, rising 0.37%.
The International Copper Study Group estimated the global refined copper market was in a deficit of 293,000 tonnes in January- August, compared to 302,000 in the same period last year.
Yesterday on the LME: aluminium -1.7% to $2,023/t, zinc -1.4% to $2,833/t, nickel -1.2% to $17,275/t, tin -0.6% to $19,935/t.
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 +0.12% at 30,216
Nikkei 225 -1.04% at 26,436
HK Hang Seng -0.75% at 26,110
Shanghai Composite -1.86% at 3,357
Economics
US – The latest $892bn COVID-funding package was cleared by the Congress and was passed on to President Trump.
Joe Biden, 78, received the first of two coronavirus Pfizer/BioNTech vaccine shots on a live television on Monday in an effort to boost public confidence in the jab.
Japan – The next fiscal year starting in April will see a record budget that tops US$1tn, a 3.8% increase from the previous one.
Actual spending may exceed that given a chance of extra budgets, three of which were drafted this year in the course of the pandemic, adding 73tn yen (~US$0.7tn) to total spending.
UK – State borrowing climbed to £285bn in the first eight months of the year (Apr-Nov) marking the highest number since comparable records began in 1984, FT reports.
This is ~3x the highest funding gap in any other Apr-Nov period since records began.
A suspension of manned freight from the UK into France offer Britain a preview of the border chaos to come in the absence of a Brexit deal, Bloomberg reports.
While this temporary restriction caused no trucks entering France, traffic into the UK is also being affected as drivers often run supplies in both directions.
UK PM said current logistic disruption is reportedly affecting 20% of the total coming from Europe.
“The vast majority of food, medicines and other supplies are coming and going as normal,” the PM said.
More parts of England may go into a Tier 4 lockdown in the new year on the back of the news of the new more transmissible strain of the virus, according the government’s chief scientific adviser.
New measures risk the economy to slip into a doble dip recession over the Q4/Q1 period.
UK Government exploring Freedom Passports
The idea is that people testing negative for the Coronavirus could go to school, pubs and work not necessarily in that order
A QR code is being developed to enable Britons to easily verify their Coronavirus-free credentials. George Orwell was right after all!
PM says risk of truck drivers transmitting the new mutant strain of Covid-19 is “very low.”.
Clearly Boris Johnson has never seen maps of HIV transmission along key transport routes in Africa
If truck drivers are forced to drive from pickup to destination with no ‘unexplained’ stopovers then Boris might be correct!
Mutant virus drives concern for double dip recession
The new variant Coronavirus has caused most European nations to close their boarders to the UK.
Scientists reckon the mutation may have first occurred in the US accounting for why the coronavirus has spread so fast in the USA.
The new strain is estimated to be 70% more transmissible by scientists who reckon it spreads more among children.
A former head of the FDA reckons the new strain is already in the US and a travel ban would not keep it out CNBC.
European health regulators grant Pfizer/BioNTech vaccine its approval paving the way for the start of vaccinations before the end of the year.
Currencies
US$1.2211/eur vs 1.2212/eur yesterday. Yen 103.42/$ vs 103.55/$. SAr 14.620/$ vs 14.784/$. $1.343/gbp vs $1.327/gbp. 0.755/aud vs 0.754/aud. CNY 6.547/$ vs 6.549/$.
Commodity News
Precious metals:
Gold US$1,871/oz vs US$1,895/oz yesterday
Gold ETFs 106.5moz vs US$106.5moz yesterday
Platinum US$9,98/oz vs US$1,033/oz yesterday
Palladium US$2,318/oz vs US$2,331/oz yesterday
Silver US$25.83/oz vs US$26.66/oz yesterday
Base metals:
Copper US$ 7,804/t vs US$7,940/t yesterday
Aluminium US$ 2,013/t vs US$2,027/t yesterday
Nickel US$ 17,025/t vs US$17,645/t yesterday
Zinc US$ 2,821/t vs US$2,877/t yesterday
Lead US$ 1,947/t vs US$1,988/t yesterday
Tin US$ 20,000/t vs US$19,860/t yesterday
Energy:
Oil US$50.0/bbl vs US$50.4/bbl yesterday
Despite renewed fears about oil demand due to the new coronavirus strain, reports in Russia confirm that the country is in favour of another 500,000bopd increase in OPEC+’s oil production from February
Earlier this month, the OPEC+ group managed to avoid a no-deal outcome at its meetings, which went on for days amid disagreements over how the OPEC members and its Russia-led non-OPEC partners would act next year with the pandemic still depressing fuel demand in the world
Saudi Arabia was inclined to roll over the existing cuts, but several other members of the alliance, including Russia, were pushing for increased oil production from January
The original plan for a 2MMbopd increase of OPEC+ production as of January was watered down to a 500,000bopd rise for January in a compromise agreement, largely seen as a positive outcome that avoided a break-up of the OPEC+ pact or even of OPEC
The total production cut for January will therefore be 7.2MMbopd, compared to the current 7.7MMbopd collective cut, while the ministers agreed to hold monthly meetings to decide the oil production policy for the following month.
This will be to assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5MMbopd
At the monthly OPEC+ meeting on 4 January to set the production policy for February, Russia is now likely to support another 500,000bopd increase
Natural Gas US$2.713/mmbtu vs US$2.705/mmbtu yesterday
US natural gas prices ticked up in early trading today but remain rangebound and continue to consolidate
The weather is expected to warmer than normal for the next two weeks throughout most of the US mid-west and the east coast reducing heating demand
The EIA estimates that US LNG exports hit a record in November
Closer to home, UK wholesale natural gas prices are rising sharply this winter, as the country’s increased reliance on LNG imports has left it exposed to rallying prices in Asia.
The price of natural gas in the UK is already a third higher than the level of a year ago, as LNG prices have risen to the highest in at least two years in Asia, where economies such as China are already close to full-speed after getting a handle on the coronavirus pandemic.
UK day-ahead gas prices traded between 40p and 48p/therm this week, compared with almost 30p last December.
The price increase illustrates how the UK’s growing reliance on natural gas imports, including a rising volume of LNG, has given it greater exposure to global trends in what was once a regional market for gas supplies.
Uranium US$30.25/lb vs US$30.10/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$174.3/t vs US$161.2/t – Iron ore futures fall as Dalian Exchange announces tighter trading rules
Iron ore futures in China fell the most since August on Tuesday after the Dalian Commodity Exchange imposed tighter trading limits on market participants, which caused the price to slump 6.4%.
Investors who are not formally a futures member or client of the Dalian Commodity Exchange won’t be allowed to trade more than 2,000 lots a day for iron ore contracts from today.
Volumes intended for hedging along with market making volumes will be exempted.
In a separate notice, the exchange is also surveying public opinion on possible new fixed-position limit rules.
Chinese steel rebar 25mm US$694.5/t vs US$675.4/t – Japan – November steel production falls -5.9% YoY to 7.26mt
Pig iron production fell -11.6% to 5.14mt.
Thermal coal (1st year forward cif ARA) US$68.1/t vs US$68.0/t
Coking coal swap Australia FOB US$124.0/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$61,098/t vs US$60,696/t
Lithium carbonate 99% (China) US$6,797/t vs US$6,719/t
Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$28.5/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
Vestas invest €500m in new wind partnership
Vestas is investing €500m in a new tie up with fund manager Copenhagen Infrastructures Partners, expanding a push into project development from the world’s largest wind turbine maker.
The new tie up will launch a new Energy Transition Fund next year which will focus on expanding markets outside Europe and ‘Power to X’ projects which convert wind power into other forms of energy.
Vestas is also planning to expand its business in offshore wind after a transaction this month to acquire full ownership of its subsidiary, MHI Vestas Offshore Wind.
Oxford scientists reach new world record for solar cells
Scientists at Oxford University have developed a solar cell that can convert 29.5% of solar energy into electricity.
This outstrips the performance rate of average solar cells that convert just 15-20% of solar energy into electricity.
Oxford PV uses perovskite to supercharge the power of its solar cells.
It will be incorporated into solar panels for residential roofs and should be on sale in the UK and Europe in 2022. A solar installation on a rooftop will produce 20% more power with Oxford PV’s technology.
Our view: We are wary of similar claims offering enhanced energy recovery from solar cells. We wait to see if this new technology may be simply applied to large scale PV production.
Company News
BlueRock Diamonds (LON:BRD) 47.5p, Mkt cap £4.3m – Progress report on Kareevlei expansion and mineral resources
BlueRock Diamonds has provided details on the progress of its expansion project at the Kareevlei diamond mine in South Africa and confirmed that its previously announced 2021 production guidance range of 850,000 to 1m tonnes remains intact.
The company says that installation of the crushing circuit will be completed by the end of 2020 and commissioned during Q1-2021 and that it also intends to integrate the rest of the plant in phases during the first quarter of 2021 to ensure that production is not disrupted.
Executive Chairman, Mike Houston, explained that “During the course of the expansion project at Kareevlei the BlueRock management team decided to upgrade certain elements of the plant to ensure optimum production levels going forward. Whilst this has slowed the expansion project down slightly, we are pleased to say that the decision has had no impact on our internal target for output for Q1 2021 and on the earlier production guidance given for the full year of 2021”
The company also reports, in a separate announcement, that following the completion of a recent drilling programme, it has, provisionally, increased its estimated, SAMREC compliant, mineral resource at Kareevlei by 43% in terms of tonnes (from 7mt to 10mt) and taking into account a 6% improvement in grade (from 4.83cpht to 5.13cpht), by 52% in terms of the contained carats to 513,500 carats.
BlueRock Diamonds confirms that a detailed mineral resource report by the competent person is “expected to be published in January”.
The new drilling has shown that the kimberlite underlying the Main Pit extends to 140m below surface and that the surface area of the KV1 zone is approximately 25% larger than previously thought.
Mr. Houston described the new drilling results as “a very important development for BlueRock. The provisional resource estimate would provide for a mine life of a minimum of 10 years operating at our targeted annual rate of 1,000,000 tonnes of material processed a year.”.
He also confirmed that the company will “to undertake further work in 2021 to prove the continuation at depth of the KV2 section of the Main Pit and to establish the true size of KV3 both of which are expected to increase the resource life and the life of mine further”.
Conclusion: BlueRock Diamonds expects to commission its expanded plant during Q1 2021 bringing treatment capacity to 1mtpa. In addition, recent drilling has extended the mineral resource at depth and laterally resulting in a provisional increase in resource tonnage of over 40% and in diamond content of over 50% to 513,500 carats. Further work on the KV2 and KV3 zones is expected to be undertaken next year. We look forward to the detailed mineral resources report which is to be published in January.
*SP Angel act as nomad and broker to BlueRock Diamonds
IronRidge Resources* (LON:IRR) 12p, Mkt cap £50.9m – NED appointed
IronRidge has appointed Christelle Van Der Merwe to the board of the Company as a non-executive director, following the retirement of Mr Alistair McAdam.
Christelle joins the Board as part of the Company’s strategic alliance with mining company Assore Limited, which as a 25% interest in IronRidge. Ms Van Der Merwe brings extensive resources industry experience in strategic exploration, mining development and environmental management.
Christelle’s key roles included leading the mining-related geology and resources of the Assore subsidiary companies, comprising the pyrophyllite and chromite mines, along with the company’s iron and manganese mines. She has been Assore’s group geologist since 2013.
*SP Angel acts as Nomad for IronRidge Resources
Power Metal Resources* (LON:POW) 2.1p, Mkt cap £17.8m – Planning to deepen its second hole at Molopo Farms
Power Metal Resources reports that, following the completeion of its second drill hole on the Molopo Farms Complex in Botswana it has reinterpreted its geophysical interpretation.
Although assays are not yet available, drilling intersected a conductor which “may be the sheared and serpentinised ultramafic rock encountered in the drill core, however there can be no certainty of this until full core analysis, including a review of mineralogy, has been undertaken”.
The hole is now “to be deepened to 600-650m as recommended by KKME’s geophysicist on both geological and geophysical grounds” and the drilling will be resumed when the crews “return from their Christmas break in January 2021”.
Chief Executive, Paul Johnson, characterised the news that “we have intersected at least one conductive target in the over 500 metres of ultramafic rock through which we drilled in the second hole of our programme” as most encouraging and said that “Detailed logging and analysis of the core will continue, and further sections of interest may be identified in the 26 major units intersected. We are told that with ultramafic rock in this area it is difficult to see sulphides on the core surface, and easier on a cut surface, so there remains work to be done to determine metal content”.
He also confirmed that “We now know that we should look deeper for a further significant target and that additional drilling work will start after the Christmas break”.
Conclusion: Power Metals has decided to deepen its second drill on the Molopo Farms Complex when drill crews return from the Christmas break. The hole has intersected a conductive zone and the additional drilling is prompted by geophysical and geological interpretations suggesting that a “significant target” may lie deeper. We await assay results and the news of the further drilling with interest
*SP Angel act as Nomad and Broker to Power Metal Resources
Scotgold Resources* (LON:SGZ) 104p, Mkt Cap £56m – Cononish ramp up in progress with 9.9koz in FY21 reiterated
BUY – 182p
The Company updated the market on the course of the Cononish high grade gold mine ramp up process.
Work during the December month included supplier commissioning of the outstanding circuits, principally the flotation and dewatering circuits as well as operator training among other things.
The plant has been operated at the design throughput rate of 7.5tph with 24 hour processing expected to start in January.
Additionally, dry stacking of tailings in the TSF commenced.
As operations ramp up, more operational data will be available, although, preliminary indications suggest the flotation circuit is successfully recovering the sulphide minerals with overall recoveries expected to come in as planned.
The team reiterated FY21 production guidance of 9.9koz based on the Phase 1 36ktpa scenario.
Phase 2 expanding mining and processing capacity to 72ktpa and more than doubling annual gold production to 23.5koz should be commissioned in May 2022.
Conclusion: The team continues to successfully ramping up operations at the Cononish high grade gold mine following the recent first gold pour with FY21 target reiterated at 9.9koz. The mine is being brought into production in strong gold price environment with production rates set to double from May/21 onwards.
*SP Angel act as Nomad and broker to Scotgold Resources. A number of SP Angel analysts have visited the Cononish gold mine.
Versarien* (LON:VRS) 38p, Mkt cap £66m – Graphene production assets and IP acquired along with £3.5m raised
Versarien has agreed to acquire certain graphene production related assets and intellectual property from South Korean company Hanwha Aerospace.
Versarien has acquired the assets for consideration comprising 11,000,000 ordinary shares of 1 pence each in the Company, equivalent to £4.34m at the 39.475p/s closing mid-market price on 18 December 2020.
The acquisition comprises a portfolio of over 100 patents and patent rights, many originally developed by Samsung in South Korea, covering CVD graphene manufacturing methods and related applications, along with manufacturing equipment suitable for producing high quality large format electronics grade graphene.
The Company’s directors believe that the patents will complement Versarien’s existing 2D materials portfolio, with patents covering areas including using CVD methods to produce high quality single and dual layer graphene and methods to produce graphene based thin film laminates which are likely to have applications in the electronics sector.
The acquisition also comprises manufacturing equipment suitable for producing high quality large format electronics grade graphene.
Versarien plans to establish operations in South Korea via its new subsidiary which will be overseen initially by Versarien’s Head of International Strategy and Government Relations, Matt Walker.
Of the 11m Versarien shares issued to Hanwha Aerospace, Hanwa have agreed to a six month lock-in on 2m shares and a 12-month lock-in on another 2m shares and will hold approximately 5.79% of Vesarien.
Versarien has also entered into a subscription agreement with Lanstead Capital Investors for 8.75m Versarien shares at 40p/s for a total of £3.5m.
The net proceeds from the Lanstead subscription agreement will be used to establish operations in South Korea following the Acquisition, as well general working capital.
Neil Ricketts, CEO of Versarien, commented: “We are delighted to have agreed the Acquisition which complements our existing portfolio of graphene materials technology. In particular, it will provide us with access to patented technology and equipment to produce high quality single and dual layer graphene that has particular applications in the electronics sector, together with other areas, including in relation to some of our existing collaborations. The Acquisition will also help facilitate our planned future Asian development. We are pleased that we have received additional support from Lanstead to provide the funding and additional working capital required for our international expansion strategy.”
*SP Angel acts as nomad and Broker for Versarien. An SP Angel analyst has visited Versarien graphene manufacturing facilities.
W Resources (LON:WRES) 0.12p, Mkt Cap £8.5m – Improving recovery rates at La Parilla
W Resources reports improving rates of tungsten recovery at its La Parilla mine in Extremadura in Spain where the rate for December is running at 58.7% compared with the 40% rate achieved during November.
The company confirms that it has shipped one 20t consignment of tungsten concentrate so far during December, expects to “make at least one more 20t shipment of tungsten concentrate this month” and that it also has 25t of tin concentrate “awaiting collection by the customer”.
W Resources confirms plans to move from its current 4 day per week, 3 shifts per day working pattern “to a five-day working week in early 2021”.
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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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
Asian Metal
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