SP Angel . Morning View . Wednesday 12 05 21
Copper holds high levels as Biden approves first new Offshore Windfarm in Decarbonisation program
Gold prices flat ahead of much awaited US inflation data
We are raising funds for a private copper company in Chile which has grabbed our interest
The company has a historic ‘high-grade’ copper mine which was abandoned >100 years ago.
Drilling is planned to test two large geophysical targets underneath the historic mine may be mineralised porphyry structures.
There is also potential to reopen the historic mine which lies relatively close to a number of the world’s major copper mines
Please let us know if you are interested in participating in this opportunity.
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors).
AfriTin* (LON:ATM) – £13m raised to expedite Phase 1 expansion of the Uis mine in Namibia
Greatland Gold (LON:GGP) – Decline development underway at Havieron
Oriole Resources (LON:ORR) – Iamgold drilling at Faré, Senegal
Supercycle – Rising prices highlight new commodities Supercycle
We highlighted the potential for a new Supercycle a year ago on 7th May 2020.
Back then, China has already started making more land available for housing for kids who are desperate to move out of their family apartments and by cutting stamp duty.
The US and UK were set to build their way out of the looming recession and we suspected then that Chinese growth would accelerate followed by the US.
The UK was faced with 14% fall in GDP and Professor Siegel at Wharton described US bond markets as doomed.
We foresaw rising inflation from this stimulus as good for copper and gold and most other metals
Today, the FT comments on expectations that a new commodities Supercycle has arrived suggesting that a full cycle can last anything from 20-70 years.
Capital Economics comments that ‘commodity price supercycles are typically triggered by “some sort of structural boost to demand” that is large enough to “move the needle at a global level” — and to which supply is slow to respond’.
The FT refers to the first supercycle starting in the 1880s with the emergence of the US as an economic powerhouse.
Then came the rearmament drive of the 1930s followed by WWII reconstruction.
A third supercycle came from the oil price shock in the 1970s, which indirectly boosted the prices of other commodities by increasing production costs.
The fourth supercycle started with China’s emergence as a major manufacturing nation in the late 1990s but only really manifesting itself in higher prices from around 2004 till the Subprime Crisis ended the credit party in the US in late 2008.
In many respects this current supercycle feels like an extension of the New China Supercycle though it might one day be named ‘The Great Stimulus’, the ‘Covid-19 Supercycle’ or the ‘Great Decarbonisation’.
The US is keen to maintain its economic lead over China while also stimulating a new era of infrastructure development and social welfare reform.
This latest Supercycle is not just about economic recovery, it is about keeping pace with China
It’s about the transition to Electric Vehicles, Renewable Energy generation and limiting global warming.
It’s about the De-Carbonisation of economies which is creating a Structural Shift in demand for key metals which we forecast can easily outstripped supply as so few oven-ready mining projects are available to fill the gap even with the encouragement of higher prices.
China continues to secure the commodities it needs for the transition with a possible offer for Bacanora Lithium from Ganfeng, the Chinese lithium giant, last week.
The US Administration are looking to finance new ventures, the UK is looking at the creation of a strategic stockpile and EU has created a list of critical materials.
While there is always potential for another Asian Crisis type event to tip the world back into ex-growth we suspect stronger metals prices will remain with us for longer than seen in recent supercycle events.
First large offshore wind farm in US approved by Biden administration
The 800MW project is the first utility-scale wind development in federal waters and part of the Biden administration’s ambitious plans to be generating 30GW from offshore wind by 2030.
The Vineyard Wind project is expected to cost around $3b and will create 3600 jobs and produce enough power for 400,000 homes.
A second project has also been proposed for a 1.1GW farm off the coast of New Jersey.
Insights in the IEA’s “Role of Critical Minerals in Clean Energy Transitions” highlight the difficulties of these plans due to the increased demand leading to supply shortages of the critical minerals needed for the production of renewable energy sources.
Copper prices hold near record highs on expected strong demand and inflation concerns
Copper prices rose on Wednesday, hovering around record highs hit earlier in the week, as investors bought commodities to hedge against the purported rising risk of inflation.
Prices on the LME rose 1.1% to $10,579/t, just below the all-time high of $10,747/t hit on Monday (Reuters).
On the supply side, the threat of Chilean industrial action remains, as workers mull strike action at BHP’s Escondida and Spence mines.
Alongside inflation, the short term demand outlook remains bright as the world economy recovers from the global pandemic.
Longer term, the green transition is expected to drive demand from the EV and renewable energy sectors.
Standard EVs contain approx. 1km of copper wiring- translating to 60-83kg of copper per car compared to ICE vehicles which require requires 15-20kg.
Onshore wind requires 4 tonnes of copper per MW, while offshore wind requires 13.5 tonnes per MW.
Iron ore – Dalian Exchange proposes revising iron ore contracts amid price rally
The Dalian Commodity Exchange published proposed revisions to futures contracts and related rules on Tuesday, thought to be an attempt to keep a lid on prices.
The exchange proposed to lower standard iron ore requirements in ore delivered against its flagship futures to 61%, seeking to broaden supply sources to include lower grades.
Proposed adjustments also include adding rolling settlements for iron ore futures contracts.
The proposed revisions are open to public feedback until Saturday, Bloomberg reports.
Miners need to invest nearly $1.7tn in the next 15 years to help supply enough copper, cobalt, nickel and other metals for the shift to a low carbon world
Reuters report that mining companies may need to invest another $1.7tn in exploration and development of mines to supply sufficient metal to enable the transition to a low carbon economy to limit the rise in global temperatures to 2°C according to Julian Kettle at Wood Mackenzie.
Dow Jones Industrials -1.36% at 34,269
Nikkei 225 -1.61% at 28,148
HK Hang Seng +0.55% at 28,167
Shanghai Composite +0.61% at 3,463
IEA cut its oil demand projections for 2021 as new coronavirus outbreak in India and weaker than anticipated demand in Europe and the US offset successful global vaccination campaigns.
Demand is forecast to come in at 96.4mmbbl per day, up 5.4mmbbl on the previous year and 270,000bbl lower than its previous forecat.
US – Inflation data due later today with markets to be watching closely amid increasing concerns that the Fed may need to tighten its monetary policy.
Market estimates are for CPI to come in at +0.2%mom and +3.6%yoy in April compared to 0.6%mom and 2.6%yoy in March.
Fed officials have previously reassured investors that they would follow a “patient” approach to adjusting the policy calling the recent surge in inflation as “transitory”, FT cited Lael Brainard, a voting member of the FOMC.
“The outlook is bright, but risks remain, and we are far from our goals… the latest employment report reminds us that realised outcomes can diverge from forward projections and underscores the value of patience,” Brainard said on Tuesday.
“Remaining patient through the transitory surge (in inflation) associated with reopening will help ensure that the underlying economic momentum that will be needed to reach our goals… is not curtailed by a premature tightening of financial conditions.”
China – Credit growth slowed more than expected in April as the government aims to slowdown loan growth to more moderate levels after a record first quarter, Bloomberg reports.
China inflation: factory-gate prices surge by most in over three years
PPI rose 6.8% yoy in April (National Bureau of Statistics)
CPI rose 0.9% yoy vs a 0.4% yoy rise in March
In March, the central bank asked banks to curtail loan growth in the coming months and keep it at roughly the same level as last year, Bloomberg reported last month.
China’s M2 money supply rose 8.1% yoy in April, vs expected 9.2% growth.
Aggregate Financing (CNY): 1,850bn v 3,342bn in March and 2,290 est.
New Yuan Loans (CNY): 1,470bn v 2,730bn in March and 1,600 est.
UK – Q1 GDP drop came in line with expectations on the back of a third national lockdown.
Growth pace started to recover towards the end of the quarter with GDP climbing 2.1%mom in March marking the fastest monthly growth rate since last August.
The economy was only 5.9% smaller at the end of Q1 compared to February 2020 before the pandemic struck.
Q1 GDP (%qoq): -1.5 v 1.3 in Q4/20 and -1.6 est.
Q1 GDP (%yoy): -6.1 v -7.3 in Q4/20 and -6.1 est.
National Express is expecting a recovery in passengers boarding its buses and coaches in the second half of the year as vaccination programme progresses allowing for more regional travel.
The group reported that its passenger numbers for its UK coach business in the first four months of the year run at 8% of pre-Covid levels.
Numbers are unsurprising given strict lockdown rules that were in place in the UK through Q1.
Reminds us of the lyrics: “When your life’s in a mess take National Express” The Divine Comedy
India – The nation accounts for nearly half of global new Covid-19 infections over the past week, according to the WHO.
5.5m new cases were recorded in the last seven days to May 9 globally, down 4% on the previous period.
India accounted for more than 2.7m cases during the same period.
The nation also accounted for ~30% of global deaths caused by the virus.
South Africa – Manufacturing activity rose 4.6% year on year in March, much better than the 1% gain expected, largely due to the food and beverage industry
Airbus – tells suppliers to get ready for 18% output hike in 2022
US$1.2133/eur vs 1.2128/eur yesterday. Yen 108.79/$ vs 108.91/$. SAr 14.018/$ vs 14.065/$. $1.414/gbp vs $1.412/gbp. 0.781/aud vs 0.783/aud. CNY 6.441/$ vs 6.431/$.
Gold US$1,834/oz vs US$1,833/oz yesterday
Gold ETFs 99.9moz vs US$99.7moz yesterday
Platinum US$1,241/oz vs US$1,247/oz yesterday
Palladium US$2,959/oz vs US$2,965/oz yesterday
Silver US$27.47/oz vs US$27.31/oz yesterday
Copper US$ 10,573/t vs US$10,454/t yesterday
Aluminium US$ 2,535/t vs US$2,553/t yesterday
Nickel US$ 18,030/t vs US$17,875/t yesterday
Zinc US$ 3,017/t vs US$3,002/t yesterday
Lead US$ 2,225/t vs US$2,218/t yesterday
Tin US$ 29,800/t vs US$29,600/t yesterday
Oil US$68.9/bbl vs US$67.8/bbl yesterday
Crude oil prices continue to tick up with Brent now in touching distance of US$70/bbl and WTI hitting US$66/bbl at the time of writing
This following another major supply shock, this time in the US
Over the weekend, a major fuel pipeline, running from the Gulf Coast to the Atlantic Northeast, was shut down due to a ransomware attack
That has also forced the US government to declare a state of emergency across many east coast states.
Colonial Pipeline, the company that runs the passage, which carries around 2.5MMbbls of refined fuel product per day, aims to restore operations later this week
However, a big question mark hangs over the timeline, and the longer the pipeline remains shutdown, the larger the impact will be on US energy prices
The emergency order implemented by the Biden administration loosens restrictions on alternate delivery methods to blunt the shutdown’s impact, but compensating fully for the supply shortfall is not possible with the current infrastructure
The pipeline cyberattack is the second major supply shock to energy markets this year following the Suez Canal blockage
Year-to-date, crude oil prices are up over 30%, with May on track to extend gains from April
The global economic reopening from the pandemic continues to drive bullish energy into oil markets
As major economies continue to reopen as vaccination rates improve, oil-hungry industries will come back online, bolstering demand
The situation in India, while not yet making a major impact on global sentiment, is endangering that thesis
In fact, the World Health Organisation reclassified the dominant Covid variant in India to a “variant of concern”
As such, energy traders will be closely monitoring the situation in India as the worsening situation’s fallout may start to seep into market sentiment, which would likely present a headwind for oil prices
Alternatively, a bright spot for the Covid picture appeared earlier this week when the US Food and Drug Administration (FDA) approved the Pfizer-BioNTech vaccine for use in children aged 12-15
Natural Gas US$2.940/mmbtu vs US$2.908/mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$221.4/t vs US$221.9/t
Chinese steel rebar 25mm US$961.6/t vs US$963.1/t
Thermal coal (1st year forward cif ARA) US$79.4/t vs US$79.0/t – Chinese thermal coal futures hit fresh all-time-high
Thermal coal futures on the Zhengzhou Commodity Exchange closed at 900.2 yuan ($140)/t on Tuesday – surpassing the 900 yuan mark for the first time.
The market has become increasingly undersupplied in recent months, amid a ramp up in safety inspections at Chinese operations in response to an increasing number of fatalities at coal sites.
A unofficial ban on Australian coal has also weighed on supply, with China banning imports in response to worsening diplomatic relations between the two countries.
Supply shortages have helped thermal coal futures rally 34% year-to-date, while Chinese power producers continue to build stockpiles ahead of the summer months (Bloomberg).
Coking coal swap Australia FOB US$125.0/t vs US$126.0/t
Cobalt LME 3m US$44,635/t vs US$45,165/t
NdPr Rare Earth Oxide (China) US$81,118/t vs US$82,205/t
Lithium carbonate 99% (China) US$12,731/t vs US$12,751/t
China Spodumene Li2O 5%min CIF US$630/t vs US$630/t
Ferro-Manganese European Mn78% min US$1,705/t vs US$1,704/t
China Tungsten APT 88.5% FOB US$272/t vs US$272/t
China Graphite Flake -194 FOB US$505/t vs US$505/t
Europe Vanadium Pentoxide 98% $7.4/lb vs $7.4/lb
Tesla halts Shanghai factory expansion on US-China tensions
Tesla has halted plans to buy land to expand its Shanghai plant and make it a global export hub as US-China tensions once again escalate.
Trump’s 25% levies of imported Chinese EVs imposed on top of existing levies are still in place, and Tesla now intends to limit the proportion of Chinese output in its global production.
Reports out of China detail that Tesla refrained from bidding on a plot of land across the road from the plant as it no longer aimed to boost China production capacity significantly for now.
Telsa sold 25,845 China-made vehicles in China and overseas in April, down from 35,478 in March, according to CAAM.
Tesla’s Shanghai factory is designed to make up to 500,000 cars per year, and has the capacity to produce Model 3 and Model Y vehicles at a rate of 450,000 total units per year.
AfriTin* (LON:ATM) – 6.45p, Mkt cap £60.1m – £13m raised to expedite Phase 1 expansion of the Uis mine in Namibia
AfriTin has announced the successful placing of approximately 216.7m additional shares at a price of 6p/share to raise £13m for the Phase 1 expansion of its Uis tin mine in Namibia.
We calculate that the additional shares represent approximately 19.9% of the company’s enlarged capital.
Welcoming the outcome of the oversubscribed placing, CEO, Anthony Viljoen, explained that in addition to the expansion at Uis, “The proceeds also allow us to further investigate the exciting, significant lithium and tantalum by-product potential we have across our extensive resource base, and further exploration on our regional assets”.
Mr. Viljoen pointed out that “these two by-products …are becoming increasingly essential components in the new technologies industry”.
Conclusion: Uis Stage 1 achieved nameplate capacity in November and the expansion should upgrade of capacity by 50%. Afritin has previously reported that it is looking at boosting revenue opportunities through the recovery of by-product tantalum and lithium to enhance the project’s economic returns and now the additional funds are available we look forward to further news on the progress of these investigations.
*SP Angel act for Bushveld Minerals which holds around 9.5% of AfriTin
Greatland Gold (LON:GGP) 19.75p, Mkt Cap £769m – Decline development underway at Havieron
Greatland Gold has announced that decline development is underway at its Havieron project in the Paterson area of Western Australia.
The decline will provide initial underground access to the upper part of the mineralisation which lies beneath post-mineralisation cover rocks.
Greatland Gold’s partner, Newcrest Mining, which is managing the underground development, is earning an interest of up to 70% by spending up to US$65m on exploration on Havieron which “is located approximately 45km east of Newcrest’s Telfer gold mine, processing plant and existing infrastructure”.
CEO, Shaun Day, described the start of the decline development as “a momentous step in the development of Havieron as a world-class gold-copper mine” and explained that “Alongside the ongoing growth drilling, the next key milestone will see the completion of a Pre-Feasibility Study and we are on track to deliver this in the second half of 2021”.
Conclusion: The start of decline development at Havieron opens a new phase in the project’s life and we expect that the pre-feasibility study due in the second half of this year will provide insight into the proposed scale, mine life, and economic returns of developing the project. We look forward to further news as the work progresses.
Oriole Resources (LON:ORR) – 0.95p, Mkt cap £12.5m – Iamgold drilling at Faré, Senegal
Oriole Resources reports that Iamgold has started the 4th year drilling programme at the Faré Prospect which lies within the Senala Project area in Senegal where Iamgold has the option to spend US$8m in order to earn a 70% interest in the project.
The programme is expected to include 5,000m of reverse circulation (RC) drilling at Faré where today’s announcement also confirms the completion of 609 of diamond drilling in 2 holes.
The diamond drilling tested “the depth extension of the main mineralised zone at Faré South … [while the RC drilling] … will follow-up on the strongest anomalies (up to 2.58 g/t Au) identified by a recent AC drilling programme”. Results are expected during Q3 2021.
Iamgold is also planning a further 5,000m of RC drilling, to commence in June, at “the southernmost Madina Bafé prospect, located within 10 kilometres (‘km’) distance of IAMGOLD’s Boto 2.5 million ounce (‘Moz’) mine development project”.
The drilling at Madina Bafé “will be focussed on re-testing a northeast-trending structural corridor at the southernmost Madina Bafé prospect, where recent artisanal mining activity has been identified in the immediate vicinity of the Company’s previous drilling that returned best grades of up to 9.60 m grading 16.08 g/t Au”.
The company advises that “Subject to completion of the Year 4 expenditure plan, IAMGOLD will have the right to acquire a 51% interest in the Project”. Expenditure of “a further US$4 million over two years … [will] … earn … [Iamgold] … a 70% interest”.
Conclusion: Iamgold’s 4th year of drilling on the Senala Project area in Senegal is now underway. Successful completion of the programme will earn it a 51% in the project where it has an option to earn up to 70% through the expenditure of a total of US$8m.
VOX Markets: 06/05/20: https://audioboom.com/posts/7861994-john-meyer-on-copper-afritin-kodal-minerals-phoenix-copper-power-metals
IGTV: Improved global economic forecasts from the IMF provides trading opportunities: https://www.youtube.com/watch?v=_GXKPqzuCG0
VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.
We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
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
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
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
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite