SP Angel . Morning View . Tuesday 02 08 22
Copper prices fall on rising US-China tensions
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Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)* – Diba & Lakanfla Project MRE expanded 67% with new PEA delivering $150m NPV
Atlantic Lithium Limited (AIM:ALL, OTCQX:ALLIF)* – Latest drill results continue to extend known mineralisation
Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) – Broken Hill metallurgical results
Power Metal Resources PLC (AIM:POW)* – Exploration target estimated at Ajax
Rio Tinto PLC (LSE:LON:RIO) – US$525m sale of Cortez Gold Royalty
Rockfire Resources PLC (LSE:ROCK) – Further exploration targets identified at the Plateau project, Queensland
Copper prices fall on rising US-China tensions
- Copper prices fell for the second straight day on Tuesday, retreating from a one-month high which had seen prices move $1,000/t higher in recent weeks
- Nancy Pelosi, Speaker of the US House of Representatives, is expected to land in Taiwan today, the highest-ranking US official to set foot on the island in 25 years.
- China has warned of “grave consequences” if Pelosi visits.
- Weaker Chinese economic data released yesterday is also weighing on copper prices, with factory output and new orders slowing to a two-month low.
- Prices declined throughout June and July on fears that monetary tightening to rein in inflation will lead to a global recession.
- A weaker US dollar and commitments to infrastructure stimulus by China has helped moved prices higher in recent weeks.
Dow Jones Industrials -0.14% at 32,798
Nikkei 225 -1.42% at 27,595
HK Hang Seng -2.37% at 19,689
Shanghai Composite -2.26% at 3,186
Economics
Inflation, distraction and ticker tape
- The West is heading towards a gas crisis that looks wholly inevitable unless there is dramatic change in Russian policy
- But there are pockets of good news such as recent Ukrainian victories in the South
- Russian also need to sell gas to the west as it is simply not possible to divert enough gas into China, India and others and its economy is said to be in trouble
- Reports indicate the financial crisis in Russia is worsening as the impact of Russia’s isolation from the West hits so much of its industry
- Germany is said to be well ahead in preparations with terminals to import LNG and avert some of the crisis it is heading into.
- Oil prices have significantly lagged inflation over the past 15 years allowing the cost of living to rise quietly in the background in other areas, so we should not be surprised prices are catching-up with real-world inflation.
- Central banks have had to move from fighting deflation to containing runaway inflation as oil prices start to catch up with other goods on the cost front..
- But, Russia was just the spark that ignited fuel inflation as years of underinvestment in Saudi and other oil rich nations was always going to lead prices higher as the West emerged from its Covid cocoons.
- The West and then China refilled supply chains as they emerged from Covid restrictions before demand stalled on higher US interest rates.
- Equity markets have seesawed in reaction as policymakers react to soften the impact of higher interest rates.
- China is moving to boost consumption through property, electric vehicle sales, energy efficient and renewable energy products.
China - foreign direct investment yoy rose 17.4% year-to-date vs 17.3% in May
Russia – Putin threatens unrivalled lightening supersonic missiles
- President Putin has announced that the Russian navy will soon receive hypersonic missiles.
- While this sounds like good news for the Russian navy, Russian missiles rarely seem to hit their intended targets.
US – Equity futures are trading lower this morning amid increased geopolitical risks as US House speaker Nancy Pelosi is expected to land in Taiwan later today.
- This would be the highest-ranking American politician visit in 25 years.
AP Møller-Maersk, the second largest container shipping group, expects supply chain disruptions to alleviate by the end of the year, rather than mid-2022 expected previously.
- The Company revised its full year guidance for operating profit from $24bn to $31bn benefiting from higher freight rates on the back of congestion in global supply chains.
UK – Property prices climbed 11%yoy in July, slightly up from the 10.7%yoy recorded in June, despite rising interest rates, high inflation and low affordability, FT writes.
- “Demand continues to be supported by strong labour market conditions… at the same time, the limited stock of homes on the market has helped keep upward pressure on house price,” Nationwide commented on numbers.
South Korea – Consumer prices inflation picked up in July to 6.3%yoy, up from 6.0% recorded in the previous month.
- This marks the highest level since the Asian financial crisis in late 1990s.
- The central bank Governor said inflation is likely to remain above 6% for the time being and signalled a 25bp hike at the coming meeting on August 2.
- Monetary authorities delivered a number of rate increases this year taking the base rate from 1.00% at the end of 2021 to 2.25% currently.
Australia – The central bank delivers a 50bp rate increase, in line with expectations, taking the benchmark rate to 1.85%.
- The move takes total volume of raises to 175bp since May, although, the RBA dialled back its guidance on further hikes as it forecast faster inflation by also a slowdown in the economy, Reuters reports.
- RBA Governor said that the outlook for policy will be more conditional and “is not on a pre-set path”.
- Comments were taken as a dovish move by market that with a weaker general risk sentiment saw the A$ pull back against the US$ and trade ~1.5% lower today.
- Inflation is expected to peak around 7.75% compared to 7% previously and 6.1% in the June quarter.
- GDP growth estimates were revised lower to 3.25% and 1.75% in 2022 and 2023, down from 4.2% and 2.0% estimated previously.
Currencies
US$1.0241/eur vs 1.0238/eur yesterday. Yen 130.81/$ vs 132.42/$. SAr 16.506/$ vs 16.521/$. $1.221/gbp vs $1.220/gbp. 0.693/aud vs 0.701/aud. CNY 6.766/$ vs 6.749/$.
Commodity News
Precious metals:
Gold US$1,772/oz vs US$1,764/oz yesterday
Gold ETFs 101.4moz vs US$101.3moz yesterday
Platinum US$911/oz vs US$905/oz yesterday
Palladium US$2,203/oz vs US$2,129/oz yesterday
Silver US$20.24/oz vs US$20.22/oz yesterday
Rhodium US$14,600/oz vs US$14,350/oz yesterday
Base metals:
Copper US$ 7,794/t vs US$7,919/t yesterday
Aluminium US$ 2,426/t vs US$2,463/t yesterday
Nickel US$ 23,575/t vs US$24,770/t yesterday
Zinc US$ 3,328/t vs US$3,299/t yesterday
Lead US$ 2,055/t vs US$2,050/t yesterday
Tin US$ 24,470/t vs US$25,300/t yesterday
Energy:
Oil US$99.5/bbl vs US$103.4/bbl yesterday
Crude oil prices fell below $100/bbl as poor manufacturing figures stoked concerns that a global economic slowdown would reduce crude demand growth.
European energy markets remain at elevated levels with no end in sight to the restriction of Russian gas flows into the Nord Stream I pipeline.
The five remaining Majors (Exxon (NYSE:XOM), Chevron (NYSE:CVX), Shell (LON:RDSa), BP (LON:BP) & Total) have announced c.$59bn in 2Q22 profits, up almost 100% y/y, and returned c.45% of this to shareholders during the quarter. Based on their aggregate $1.1 trillion market cap, this quarter would represent an annualised profit margin in excess of 20%.
Natural Gas US$8.205/mmbtu vs US$7.942/mmbtu yesterday
Uranium UXC US$49.50/lb vs US$49.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$114.1/t vs US$113.9/t
Chinese steel rebar 25mm US$623.1/t vs US$624.9/t
Thermal coal (1st year forward cif ARA) US$272.0/t vs US$283.0/t
Coking coal swap Australia FOB US$200.0/t vs US$200.0/t
Other:
Cobalt LME 3m US$50,460/t vs US$50,460/t
NdPr Rare Earth Oxide (China) US$117,499/t vs US$119,601/t
Lithium carbonate 99% (China) US$67,765/t vs US$67,910/t
China Spodumene Li2O 5%min CIF US$4,720/t vs US$4,720/t
Ferro-Manganese European Mn78% min US$1,316/t vs US$1,314/t
China Tungsten APT 88.5% FOB US$329/t vs US$329/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 7.4/lb vs US$7.4/lb
Europe Ferro-Vanadium 80% 33.55/kg vs US$33.55/kg
China Ilmenite Concentrate TiO2 US$352/t vs US$353/t
Spot CO2 Emissions EUA Price US$82.1/t vs US$79.9/t
Brazil Potash CFR Granular Spot US$1,000.0/t vs US$1,000.0/t
Battery News
CATL continues to dominate global battery market
- Global EV battery installed capacity reached 203.4GWh in H1 2022, up 76.8% y-o-y, according to data from South Korean
- Chinese battery manufacturing giant CATL has continued to dominate the market, contributing 70.9GWh, a 34.8% share of the market.
- Companies including CATL and BYD led the market growth, with CALB and the other top 10 Chinese companies showing high triple-digit growth rates.
- On the other hand, most Japanese companies, including Panasonic, had growth rates below the market average and continued to decline.
- CATL’s position in the global market looks to only be strengthening after a recent supply deal with Ford to supply LFP batteries for the Ford Mustang Mach-E and F-150 Lightning. Kia will also use CATL batteries for its Niro SUV.
BP to invest £50m on battery testing lab in the UK
- BP has unveiled plans to invest up to £50m in a state-of-the-art EV battery testing center and analytical laboratory in the UK.
- The investment is part of the company’s intention to invest £18bn in the UK’s energy system by the end of the decade.
- The new facilities will be located at BP’s existing global headquarters for its Castrol business in Pangbourne, Berkshire – the site already undertakes research and development of fuels, lubricants and EV fluids and aims to become a leading hub for fluid technologies and engineering in the UK.
Company News
Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF)* 45.5p, Mkt Cap £54m – Diba & Lakanfla Project MRE expanded 67% with new PEA delivering $150m NPV
- The Company released an updated MRE following a series of drilling across Diba, NW Diba and Lakanfla as well as a revised PEA on the project located in western Mali.
- Updated MRE is estimated at 20.6mt at 1.02g/t for 675koz (0.5g/t COG) marking a ~67% increase in contained ounces on the previous estimate and is comprised of:
- 7.8mt at 1.24g/t for 312koz in the Indicated category and;
- 12.7mt at 0.87g/t for 362koz in the Inferred category.
- Breaking it down based on weathering profile, total MRE is comprised of:
- 6.8mt at 1.02g/t for 274koz in oxides;
- 1.9mt at 0.95g/t for 58koz in transitional rock and;
- 11.9mt at 0.90g/t for 343koz in fresh rock.
- Total MRE covers the resource over three deposits including:
- 12.6mt at 1.11g/t for 451koz at Diba;
- 4.1mt at 0.90g/t for 118koz at Diba NW and;
- 3.7mt at 0.88g/t for 105koz at Lakanfla.
- NW Diba extends
- Updated MRE compares to the previous estimate of 10.3mt at 1.22g/t for 403koz (0.5g/t COG, Jul/20) that included 216koz at 1.39g/t in oxides and was estimated based on the Diba deposit only.
- The team also issued a revised PEA on the project updating the scale of the operation in the view of a larger assumed mineral inventory and using higher unit operating and development capital costs.
- Highlights of the updated PEA include:
- Life of mine extended to 4.7 years and scale expanded to 2.0mtpa adjusting for nearly a 2x the size of mineral inventory (3.3y at 1.5mtpa, previously).
- Production rate was largely unchanged at 54.4kozpa (57.0kozpa) with 95% gold recoveries assumed for oxides in the heap leaching operation.
- Implied processed grades reduced to 0.89g/t (1.24g/t).
- AISC estimated at $686/oz ($544/oz).
- Development capital cost remained low at $28m ($20m) accounting for the use of mining contractors and low capital intensity of heap leaching gold projects.
- NPV8% (after tax) and IRR (after tax) of $150m and 683%, respectively, using $1,700/zo gold price (Updated PEA 2020: $107m and 715% using 10% DR and $1,500/oz gold price).
Atlantic Lithium Limited (AIM:ALL, OTCQX:ALLIF)* 31.5p, Mkt Cap £183m – Latest drill results continue to extend known mineralisation
- Atlantic Lithium has released its latest round of drill results for at the Ewoyaa Main target.
- High grade highlights from the latest results include:
- GRC0667: 69m at 1.34% Li2O from 129m
- GRC0666: 67m at 1.2% Li2O from 112m
- GRC0670: 59m at 1.07% Li2O from 125m
- GRC0669: 59m at 0.95% Li2O from 113m
- At the Grasscutter North Target (NYSE:TGT), additional results have extended mineralisation a further 40m to the west.
- Approximately 27,000m of the planned 37,000m programme has been completed with planned completion in Q3 22, increasing both resource definition and expansion.
- Results from the current drill campaign fall out of the Ewoyaa MRE, and assays to date have extended mineralisation a further 75m downdip at the Ewoyaa Main deposit.
- The team continues to work on the PFS targeted for completion in Q3/22.
*SP Angel acts as nomad to Atlantic Lithium. An SP Angel mining analyst recently visited the Ewoyaa Lithium Project in Ghana
Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) 0.83p, Mkt Cap £10.7m – Broken Hill metallurgical results
- Castillo Copper has announced results of metallurgical flotation tests on historical drill core samples from the Sisters Prospect in the BHA East Zone at Broken Hill, New South Wales.
- Preliminary ‘rougher’ tests were conducted by ALS Metallurgy in Perth using material from BH1 “drilled by Falconbridge in 1970” and held in custody by the Geological Survey of NSW, which assayed 424ppm cobalt over a width of 24m from a depth of 103m
- The tests were conducted on a composite sample of “about 14m goes around 494ppm cobalt (inc. a 1m sample as high as 1,120ppm), with some copper (0.1%) and a little bit of silver and maybe some TREO present. The main target is cobalt which is probably interspersed and locked within pyrite”.
- Results showed that cobalt upgraded from a head grade of 200ppm to “up to 2,500ppm” in the rougher concentrate with copper upgrading from “520ppm head-grade up to 16,000ppm (1.6%) post-test-work” and gold from “0.02g/t Au head-grade up to 3.87g/t Au post-test-work”.
- Today’s announcement explains that “the preliminary rougher testing was biased toward establishing a viable process configuration and recovery rather than grade” suggesting that improved grade enhancement may be achievable as the process is optimised.
- Encouraged by these results, Castillo Copper says that it “will soon undertake an inaugural drilling campaign across several prospects within the BHA Project's East Zone” aimed at improving the “confidence in the current inferred Mineral Resource Estimate (MRE) which stands at 21,556t cobalt (64Mt @ 318 ppm Co) and 44,260t copper (63Mt @ 0.07% Cu)” and potentially extend known mineralisation.
- The results announced today are from a small sample of 16.27kg and we imagine that, in addition to providing exploration and mineral resource data, the new drilling will generate sample material for further metallurgical testing
Power Metal Resources PLC (AIM:POW)* 0.875p, Mkt Cap £12m – Exploration target estimated at Ajax
(NBGC is a JV between Power Metal (49.9%) and its partner Red Rock Resources PLC (AIM:RRR) - RRAL(50.1%))
- Power Metal provides an update for its Ajax Target, part of the company’s Victorian Goldfields Joint Venture.
- Following the awarding of license EL007330 on the 24th of May 2022, RRAL have continued to refine exploration targets on the site using historical data.
- Review of the historical Ajax mines has revealed a series of nine stacked reverse fault hosted lodes that dip between 45o and 90o to the west, with the faults striking oblique to bedding and consisting of laminated quartz that is highly mineralised in places.
- From the data available, RRAL have outlined an initial exploration target for the historical Ajax mines ranging from 0.25mt to 1.4mt at a grade of 6.4 g/t to 18.8g/t Au.
- This target is not bound by industry standard resources or reserves and is conceptual in nature.
- Historic production: RRAL estimate that the Daylesford goldfield produced in excess of 1.29Moz of gold.
- Further exploration: RRAL continue to evaluate extensive literature on the area and expect to follow up on the most prospective areas with a diamond drilling campaign.
Rio Tinto PLC (LSE:RIO) – 4,835.5p, Mkt cap £61bn – US$525m sale of Cortez Gold Royalty
- Rio Tinto confirms that it has sold its 1.2% gross production royalty on the Cortez gold mine in Nevada to the Royal Gold subsidiary, RG Royalties, for US$525m cash.
- The royalty arises from the 2008 sale of Rio Tinto’s 40% interest in the mine to Barrick Gold and commences “once the Cortez Complex has produced a total of 15 million ounces of gold since 2008. This is expected to occur imminently”.
- Chief Financial Officer, Peter Cunningham, explained that the sale of the royalty interest “unlocks hidden value from our portfolio and releases cash immediately”.
Rockfire Resources PLC (LSE:ROCK) 0.39p, Mkt Cap £4.4m – Further exploration targets identified at the Plateau project, Queensland
- Rockfire Resources reports it plans to drill favourable targets located within structural geological corridors identified by mapping and sampling in its wholly-owned Plateau project area in Queensland.
- The company emphasise that these targets are located “outside the 208,000 ounces of gold already drilled at Plateau, with future drilling to be designed to increase near-surface, open cut gold resources”.
- In January 2021, the company reported an updated Indicated and Inferred mineral resource at the Plateau gold deposit of 11.4mt at an average grade of 0.57g/t gold (208,000oz), of which around 37% (3.4mt at a grade of 0.71g/t) is classed as indicated at a 0.2g/t cut-off grade.
- Rockfire has reassessed the structural geology of the area and identified what it believes are the geological faults which control the mineralisation and provide dilation zones “for heated and mineralised fluids to percolate through and deposit gold, silver and other metals”.
- Chief Executive, David Price, explained that Rockfire Resources has identified “five new targets showing similar surface grades and dimensions to those in the two resource areas … [at the Central and Eastern Breccia Zones and said that] … it is realistic to target multiples of the resources already drilled”.
- Mr. Price confirmed that the “Company is sourcing a drilling rig for the planned work and we will update the market with progress on our exploration at Plateau in due course”
- The company has previously announced that it had outlined a gold-in-soil geochemical anomaly extending for at least 200m at the Plateau gold project and that the anomaly was open along strike.
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 – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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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
Gold, Platinum, Palladium, Silver - BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel - Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt - LME
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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