SP Angel. Morning View. Wednesday 14 06 23
Global EV sales exceed 1m vehicles a month despite global growth concerns
MiFID II exempt information – see disclaimer below
Boliden AB (STO: BOL) SEK319.5, Mkt cap SEK87bn – Fire at Rönnskär smelter and Tara zinc mine placed under care and maintenance
Castillo Copper Ltd (ASX:CCZ, LSE:CCZ) – Metallurgical test results from the BHA project.
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)* – Progress report from South Crofty
Galantas Gold Corp (AIM:GAL, TSX-V:GAL, OTCQX:GALKF)* – Mining contractors complete due diligence process
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) – £1.4m financing for working capital, exploration and acquisition opportunities
Scotgold Resources Limited (AIM:SGZ) – Board appointment
Zinnwald Lithium PLC (LSE:ZNWD, OTC:ZNWLF) – Zinnwald Lithium Project operational update
Global EV sales exceed 1m vehicles in May and >4.5m vehicles tor the year to end-May
- EV sales are rising at 45% yoy and 13% mom according to Rhomotion a leading research group
- Sales were led by BYD which exceeded Tesla (NASDAQ:TSLA) when including PHEVs as well as pure battery EVs
- Battery chemistry: LFP, Lithium Iron Phosphate batteries lead the way at 37% market share though if we add all NCM battery chemistries together they reach a combined 54% of the market.
- We expect NCM 811 to continue to gain market share as European EV manufacturing starts to gain traction.
Gold whipsaws on US inflation data and expectations of Fed pause this afternoon
- Gold prices fell from weekly highs of $1,966/oz yesterday to $1,944/oz in the spot market.
- The move followed the release of monthly US CPI data, which came in inline with expectations at 4% yoy in May vs 4.9% in April.
- US Treasury yields rose yesterday as markets priced in expectations of a Fed hike in July, despite a pause expected today.
- The Fed is expected to take advantage of falling inflation data by pausing this afternoon, providing some respite to the US banking and property sectors.
- A pause will also enable Yellen to refill the TGA, the US Government bank account.
Copper prices soften from seven-week high after Chinese liquidity boost
- Copper prices have held around $8,450/t, having climbed to April highs on Monday.
- China’ PBoC slashed its short-term lending rates for the first time since August 2022 as the recovery from the pandemic continues to disappoint.
- The move followed a Beijing-encouraged lowering of commercial deposit rates.
- Analysts suggest the move may offer additional stimulus measures to come, with a slashing of longer-term rates also possible.
- China’s Yuan has depreciated rapidly since January, dragged down by a debt drag with total debt as a share of GDP standing at 295% vs the US’ 257%.
- The yuan is also weakening in line with lower China government bond yields as US Treasury yields rise.
- Refined copper output in China fell 1.2% mom in May to 958.8kt alongside sliding imports, encouraging bets on tighter domestic supply in line with higher prices.
- LME spreads have been moving towards backwardation, whilst refined premiums have been rising, both suggesting tighter Chinese supply.
- The dollar has eased from its recent highs, also adding some momentum to copper’s rally.
- Codelco’s CEO resigned yesterday after
Vanadium - European vanadium pentoxide continued to drift down to 7.1/lb this week as prices head lower
- Vanadium Pentoxide flake (92%) prices peaked in February at ~$8.65/lb as China reopened along with government statements on ambitious growth targets.
- Pentoxide prices then fell heavily in April and May and continue to drift as orders are cut across the manufacturing supply chain and with chemicals producers.
- Ferro-Vanadium (80%) prices popped up to 31.75/kg in China this week marking a second recent upturn in prices indicating some potential for restocking at lower levels in preparation for fresh government stimulus.
Ilmenite – Prices for ilmenite concentrate continue to rest at ~US$308/t from $332/t in April
- The fall in ilmenite prices in China followed the pull back in many other commodities.
- Ilmenite prices still remain relatively buoyant and close to prices seen 12-months ago due to ongoing demand for titanium dioxide for paint and new demand for China’s growing aircraft manufacturing industry.
- The Commercial Aircraft Corporation of China, a Chinese state-owned aerospace manufacturer which started in 2008 in Shanghai, expects to produce 150 C919 passenger aircraft a year in five years with >1,200 orders in the books.
- Chengdu Aircraft Industry Group recently delivered 140 J-20 fighter jets though annual production numbers are not yet known.
- Paint: Chinese paint sales rose to US$93bn last year and are expected to exceed US$98bn this year.
- The painting and completion of millions of new and pre-sold apartments in China should continue to help drive growth in this key area with paint representing around 90% of global ilmenite demand.
Dow Jones Industrials +0.43% at 34,212
Nikkei 225 +1.47% at 33,502
HK Hang Seng -0.81% at 19,363
Shanghai Composite -0.14% at 3,229
Economics
Equity markets continue to gain as companies take advantage of inflation to push through price gains
- Margins increasing as price inflation combines with lower material input and energy costs despite staff wage hikes
- Many services and manufacturers are weathering the inflation storm much better than expected with very little resistance from consumers
US - Fed FOMC meeting later today
- CPI rose 0.1% in May vs 0.4% in April and 4% yoy in May vs 4.9% yoy in April
- Core inflation also rose 0.4% in May vs 0.4% in April and 5.3% yoy in may vs 5.5% yoy in April
- US heat wave causing soyabeans and other crops to wilt in the US alongside wildfires in Canada
- NASDAQ closes at 13-month high as Dow Jones also breaks higher
China - The weather is also warming up in China with temperatures due to hit 41oC this week in Beijing
- China has been hit by both floods and droughts in recent years, both exacerbated by the development of roads, dams and other infrastructure.
- Western sanctions hit over 9,000 Chinese firms.
- >40 countries hit by US sanctions.
- Chinese sanctions apply to 3-7 nations, though China’s dominance of key raw materials threatens meaningful disruption for many more
Japan - Nikkei hit a 33-year high at >33,000.
EU – ZEW sentiment -10.0 in June vs -9.4 in May
Germany - CPI -0.1% in May vs 0.4% in April and 6.1% yoy in May vs 7.2% in April
- ZEW economic sentiment -8.5 in June vs -10.7 in May
UK – Economic growth picked up in April, in line with expectations, driven by the services sector recovering from poor weather and strikes in the previous month.
- The positive reading in the start of Q2 reduces the risk of recession for now, although, persistently high inflation is likely to lead the central bank to press on with restrictive monetary policy for longer weighing on consumer demand.
- Inflation is “taking a lot longer” than hoped to come down, BOE Governor said yesterday and ahead of the monetary policy meeting next week.
- “As I’m afraid this morning’s (Tuesday) numbers illustrate, we’ve got a very tight labour market… we still think the rate of inflation is going to come down but it’s taking a lot longer than we expected.”
- 2-year bond yields hit 4.89%, up on their peak of 4.64% in the aftermath of the unfunded tax cuts announced in the “mini” Budget by the previous government in late September.
- Monthly GDP (%mom): 0.2 v-0.3 April and 0.2 est.
- Monthly GDP (%3m/3m): 0.1 v 0.1 April and 0.1 est.
Covid - A report suggests Covid cases increase with rising PM 2.5 smoke particles as particles make people more prone to lung infections.
- We suspect that a combination of smoke and covid causes covid cases to become more serious and therefore increases their reporting alongside higher mortality rates.
- This might be why Wuhan suffered so badly (our assumption as there were no official figures) due to pollution and high levels of smoking.
- India and Pakistan have begun coastal evacuations
South Africa - Guptas offer to repay IDC ‘Industrial Development Corporation’ ZAR 300m to settle unpaid mining loan by Oakbay Resources
- Problem is the IDC can not accept proceeds of crime and it might be difficult to prove the ZAR 300m is not related to criminal activities in South Africa
Saudi Arabia - Chinese companies inked $10bn in investment deals at the 10th Arab-China Business Conference as Saudi moves to import manufacturing technology
- The Human Horizons EV deal accounted for $5.6bn of the total.
Currencies
US$1.0789/eur vs 1.0803/eur yesterday. Yen 140.09/$ vs 139.51/$. SAr 18.544/$ vs 18.609/$. $1.260/gbp vs $1.257/gbp. 0.677/aud vs0.678/aud. CNY 7.163/$ vs 7.148/$.
Dollar Index 103.33 vs 103.28 yesterday.
Commodity News
Precious metals:
Gold US$1,947/oz vs US$1,965/oz yesterday
Gold ETFs 93.8moz vs US$93.8moz yesterday
Platinum US$980/oz vs US$999/oz yesterday
Palladium US$1,356/oz vs US$1,367/oz yesterday
Silver US$23.80/oz vs US$24.25/oz yesterday
Rhodium US$6,100/oz vs US$6,200/oz yesterday
Base metals:
Copper US$ 8,402/t vs US$8,436/t yesterday
Aluminium US$ 2,244/t vs US$2,236/t yesterday
Nickel US$ 22,150/t vs US$21,140/t yesterday
Zinc US$ 2,397/t vs US$2,380/t yesterday
Lead US$ 2,084/t vs US$2,074/t yesterday
Tin US$ 26,140/t vs US$26,040/t yesterday
Energy:
Oil US$74.5/bbl vs US$72.5/bbl yesterday
- Oil prices bounced back from Monday’s lows as volatility in the market persists without definitive visibility on the outlook for global crude demand growth.
- European gas prices surged higher as operations at the Nyhamna gas processing plant in Norway were suspended, adding to the existing unplanned outage from the Hammerfest LNG plant.
- Shell (LON:RDSa) announced plans to increase its dividend by 15% and buy back $5bn of shares commencing in 3Q23, funded by removing a commitment to cut oil production by 1% to 2% annually, reducing capex by $1-2bn per annum (implicitly in low carbon) and targeted savings as part of CEO Wael Sawan’s CMD update in New York.
Uranium UXC US$55.50/lb vs US$55.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$111.5/t vs US$107.9/t
Chinese steel rebar 25mm US$530.2/t vs US$527.4/t
Thermal coal (1st year forward cif ARA) US$107.0/t vs US$106.0/t
Thermal coal swap Australia FOB US$136.0/t vs US$139.0/t
Coking coal swap Australia FOB US$220.0/t vs US$224.0/t
Other:
Cobalt LME 3m US$29,525/t vs US$29,525/t
NdPr Rare Earth Oxide (China) US$69,945/t vs US$70,084/t
Lithium carbonate 99% (China) US$42,651/t vs US$42,736/t
China Spodumene Li2O 6%min CIF US$4,090/t vs US$4,090/t
Ferro-Manganese European Mn78% min US$1,257/t vs US$1,259/t
China Tungsten APT 88.5% FOB US$320/mtu vs US$320/mtu
China Graphite Flake -194 FOB US$740/t vs US$745/t
Europe Vanadium Pentoxide 98% 7.1/lb vs US$7.1/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg
China Ilmenite Concentrate TiO2 US$308/t vs US$308/t
Spot CO2 Emissions EUA Price US$93.2/t vs US$91.4/t
Brazil Potash CFR Granular Spot US$340.0/t vs US$340.0/t
Battery News
Lithium - Argentina and EU sign lithium supply and green infrastructure MoU
- Argentina has signed an MoU with the EU on ‘a strategic partnership on sustainable raw materials value chains.’
- The deal will enhance cooperation on research and investment into Argentina.
- Lithium is a primary focus in the MoU, with Argentina’s the fourth largest producer globally and ramping up production rapidly.
- The EU estimates a 12x rise in European lithium demand by 2030.
- The MoU encourages JVs, investment linkages, facilitation of trade.
- Both parties are working on a supplementary road map.
Australian lender ANZ to boost financing of battery metals sector
- ANZ has announced its intentions to boost investment in ‘transition metals’ ‘to do more in decarbonisation.’
- The lender has traditionally stuck to iron ore, gold, aluminium, copper and nickel projects.
- ANZ’s executive director noted that it has funded a stand-alone lithium project, without giving additional details.
UK battery makers could move overseas for better subsidies
- Alan Hollis, chief executive of AMTE Power, one of Britain’s few remaining homegrown battery manufacturers has said the government must offer more financial support to be competitive with the EU and US.
- The EU has offered hundreds of billions of euros in response to the US administration providing $370bn of incentives through the Inflation Reduction Act.
- The company has plans to build a £250mn facility in its preferred site of Dundee to mass produce sodium-ion batteries, but without more UK help it could consider sites in Europe or the US.
- “For gigafactory-scale production, we have to consider other options,” he said. “It’s well known that the incentives that are available in Europe and North America are significant.”
Saudia Arabia signs $5.6bn deal with Chinese EV company, Human Horizons
- Saudi Arabia's Ministry of Investment has signed a $5.6b deal with Chinese EV maker Human Horizons to collaborate on the development, manufacture, and sale of EVs, according to the Saudi state news agency.
- Saudi Arabia’s relations with China still largely revolve around energy, in particular oil, but as part of its Vision 2030 plan to diversify the economy, Riyadh is planning to boost investments in non-oil sectors, including in electric cars.
- In October, Saudi Arabia unveiled its own homegrown brand of electric cars, called Ceer, which it expects will churn out electric SUVs and sedans from 2025
- Human Horizons manufactures EVs under the HiPhi brand in China and announced in March it would launch its premium HiPhi brand in some European markets this year as it looks to expand overseas.
- The investment was signed on the first day of an Arab-China business conference in Riyadh, with focus in sectors spanning technology, renewable energy, agriculture, real estate, metals, tourism, and healthcare.
- $10b in investments were signed on day one of the conference including a $533m deal for establishing an iron factory in Saudi Arabia, and a $500m cooperation agreement on copper mining in the kingdom.
Company News
Boliden AB (STO: BOL) SEK319.5, Mkt cap SEK87bn – Fire at Rönnskär smelter and Tara zinc mine placed under care and maintenance
- Boliden reports a fire at its Rönnskär copper smelter in Sweden. No injuries reported but the plant’s cell house was ‘completely destroyed.’
- Production at the smelter has stopped until further notice, with resumption expected ‘within a few weeks.’
- Rönnskär produced 218kt of copper in 2022, 33kt of Zinc clinker and 29kt of lead alongside 12t of gold.
- The setback is expected to take a negative $65m hit to Q2 EBIT.
- Alongside the press release, Boliden announce that it has placed its Tara zinc mine under care and maintenance, ‘due to a combination of factors.’
- Tara had been cash flow negative following a decline in zinc prices, rising cost inflation and energy prices.
- Ore grades have been on the decline at Tara, further weighing on earnings.
Castillo Copper Ltd (ASX:CCZ, LSE:CCZ) 0.58p, Mkt Cap £8.1m – Metallurgical test results from the BHA project.
- Castillo Copper reports that it has received preliminary results from the Australian Nuclear Science & Technology Organisation (ANSTO) on six samples tested for the rare-earth elements potential of its BHA East Zone project in New South Wales.
- The samples taken from the Fence Gossan, Reefs and Tors Tanks prospects showed “Total Rare Earth Element ("REE") plus Yttrium ("TREY") grades for the six samples … [ranging] … from 227 to 1,632 ppm TREY”.
- The company says that the “proportion of high-value Magnetic Rare Earth Oxides (MREO; Nd+Pr+Dy+Tb) to Total REO ("TREO") across the six samples ranged from 22% to 27% … [and that the] … best TREY extraction, using a direct leach process at pH 1, was 30%”.
- Castillo Copper is now “reviewing next steps, including trialing alternate leach tests proposed by ANSTO1 to improve extraction results”.
- Chairman, Ged Hall, said that while reviewing results from ANSTO, “The Board's focus is now on the Australian copper assets, with critical reports due on Cangai Copper Mine and Big One Deposit that could aid materially in securing development partners”.
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF)* – 11.75p, Mkt cap £60m – Progress report from South Crofty
Valuation 48p/s
- Cornish Metals has provided a progress report on its operations at the South Crofty mine, including the dewatering of the historic workings and on its feasibility study work for the resumption of mining.
- The first of two submersible pumps capable of moving 25,000m3/day is currently being installed in the New Cook’s Kitchen shaft with the installation of a second pump expected to start before the end of June.
- The company explains that the “pumps will be lowered to immediately below the 195 fathom level (360 metres below surface) suspended from one hundred and twenty x 3-metre long pipes that will form the temporary rising main”.
- A second phase of the dewatering “When the water level reaches 195 fathom level, (360m below surface) … [involves the installation of] … a permanent set of pumps … [and lowering of the submersible pumps] … to the 400 (approximately 700m below surface) fathom level for Stage 2 of the dewatering”.
- Work on the feasibility study is advancing on multiple workstreams including, metallurgical and process design studies, underground mining, and geotechnical design studies, as well as hydrogeological work and costing studies.
- Metallurgical testing on the gravity characteristics of the No4, No 8 and Roskear Lodes has been completed and the company says that the initial “gravity response results have been very good and are in line with previous operational results”.
- A “first bulk composite sample of the metallurgical testwork programme has arrived in Germany for XRT ore sorter testing at TOMRA Sorting GmbH”.
- Optimisation of the process plant design, incorporating the results of the continuing metallurgical testing is now nearing completion of its second phase and the company says that the “final plant design will incorporate potential future throughput expansions”..
- Underground mining and stope design modelling studies are also now approaching completion with confirmation of “the historical operating data and that the ground conditions and excavation stability are expected to be very good”.
- Preliminary results “on paste backfill options and physical testing … show samples gain sufficient strength at target densities”.
- Further work is continuing to incorporate historical assay data “into the South Crofty Mineral Resource model. Recent work has focussed on No.1 and No.2 Lodes, and a new Mineral Resource estimate including these lodes together with data from the metallurgical drilling programme, is targeted for release at the end of Q3 this year”.
- Cornish Metals confirms that further mineral resource work “between now and the end of the summer will concentrate on the "MING" zone, located immediately south of No.1 and No.2 Lodes, and comprising Main, Intermediate, North and Great Lodes”.
- Current (2021) mineral resource estimates show an indicated resource of 2.08mt at an average grade of 1.59% tin and an inferred resource of 1.94mt at 1.67% tin within the ‘Lower Mine’ and an additional indicated and inferred resource of around 770,000t at an average grade of 0.65% tin and a tin equivalent grade (including copper and zinc) of approximately 1% in the ‘Upper Mine’.
- Managing Director, Richard Williams, confirmed that dewatering of South Crofty is expected to start “later this summer … [and that] … Good progress is also being made with many aspects of the Feasibility Study to examining the re-opening of South Crofty”.
- He said that initial results of the feasibility work are “very encouraging”.
*SP Angel acts as Nomad and Broker to Cornish Metals. An SP Angel analyst formerly worked in the South Crofty tin mine in the 1980s and holds shares in Cornish Metals.
Galantas Gold Corp (AIM:GAL, TSX-V:GAL, OTCQX:GALKF)* 17.5p, Mkt Cap £19m – Mining contractors complete due diligence process
- Mining contractors (QME Mining Services) completed its due diligence process at the Omagh Gold Project in Northern Ireland ahead of the new mine plan completion.
- Updated mine plan is expected to be completed in Jul/23 incorporating mining from the dilation zones that have potential for higher grade across wider parts of the mineralisation.
- The plan will include mining both from the Kearny and Joshua veins.
- At the same time, the team will continue with exploration works aimed at growing the resource at Omagh.
- QME holds ~2.8% in the Company and has an extensive background in the mining industry having worked on projects in the Republic of Ireland, Northern Ireland and Scotland.
*SP Angel acts as Broker to Galantas Gold
Kavango Resources PLC (LSE:KAV, OTC:KVGOF) 1.1p, Mkt cap £7.8m –£1.4m financing for working capital, exploration and acquisition opportunities
- Kavango reports it has raised £1.4m through the issue of 140m new ordinary shares as first announced on May 9th.
- The placing was issued at 1p/share to Purebond Limited.
- The subscription marks the first tranche of a £6m equity investment by Purebond Limited.
- In advance of the placing, Purebond Limited held 12.05% of the issued equity.
- Following the second tranche of the raise, Purebond and Solai Pension Schemes will hold 52.5% of Kavango.
- Kavango is currently focusing on the Kalahari Copper Belt and their Karakubis licence block.
- The Company also notes it is in the final stages of at least one acquisition.
Scotgold Resources Limited (AIM:SGZ) 12.3p, Mkt Cap £10m – Board appointment
- Maurice Mason joins the Board as a Non-Executive Director.
- Maurice has over 20 years’ experience in the mining industry having been previously worked in Anglo American (LON:AAL) and lately acting as VP of Corporate Development at Caledonia Mining.
- Maurice and Nicole Mason participated in the latest equity placing and hold 8.6% in the Company.
Zinnwald Lithium PLC (LSE:ZNWD, OTC:ZNWLF) 11.1p, Mkt Cap £53m – Zinnwald Lithium Project operational update
- The Company released an operational update at the flagship Zinnwald Lithium Project in Germany.
- The team ramped up drilling works following a £18.8m equity fundraise in March this year.
- The Company completed ~16,900m of drilling over 56 drill holes focused on infill and step out.
- Higher drilling density will assist with revising the geological model to support the Feasibility Study level mine planning, hydrogeological and geotechnical engineering workstreams.
- The new drill core was also used to provide a representative bulk sample for metallurgical work by Metso and UVR FIA.
- Bench scale testing will be followed up with a pilot test trials to be conducted in late summer or early autumn this year.
- Resource upgrade is planned for later in the year with a FS due in early H1/24.
- The Zinnwald Lithium Project hosts ~40mt at 0.76% Li2O for ~760kt LCE in zinnwaldite mica mineralisation with the latest PEA (2022) based on a 900ktpa underground operation feeding an integrated processing circuit for production of ~12ktpa LiOH.
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
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
Prince Frederick House
35-39 Maddox Street London
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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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