SP Angel . Morning View . Friday 16 04 21
Strong US and China data lift metals on rising risk sentiment
Anglo American (LON:AAL) – to power Peru copper mine by renewables
Galantas Gold (LON:GAL) – Underground operations delivering higher grades to plant
Gold $1,765/oz – Gold heads for second straight weekly gain as US dollar continues to slide
Gold prices have continued to climb this week to levels last seen in February, as the US dollar fell against its peers.
The dollar has slid -0.57% so far this week, weakening against high-beta and resource-linked currencies (Bloomberg).
Treasury yields have also continued to decline this week, responding to strong US retail sales data.
The sharp drop in yields has aided gold’s rise, as previous high yields meant that US paper was seen as a preferential safe haven asset.
Gold prices currently sit at $1,765/oz – up 1.1% so far this week.
Worldsteel raises 2021 steel demand growth forecast to 5.8%
A predicted growth of 5.8% in 2021 to reach 1.874bn metric tonnes.
This growth follows a slight decline of 0.2% in 2020.
The rebound from the impact of COVID-19 “has been greater and sooner than expected”, Edwin Basson, Worldsteel Director General.
Peru Presidential candidate seeks to renegotiate mining contracts
The first-round winner of Peru’s presidential election, Pedro Castillo, wants to renegotiate mining contracts rather than seize assets, according to party officials.
Free Peru’s official platform mentions taking control of natural resources, although the party have clarified that they want a bigger share of profits to benefit Peruvians.
Peru accounts for 11% of the world’s mined copper, and comments from the front runner in the election are likely to worry manufacturers as the world already braces for shortages of copper and an uptick in prices.
While changes to mining contracts may occur, we expect Peru to remain competitive and position itself as a favourable jurisdiction to attract investment.
BHP, Freeport-McMoRan and Southern Copper have mining operations in the country, while Anglo American is scheduled to begin mining at its Quellaveco mine next year.
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
VOX Markets: 24/03/20: https://audioboom.com/posts/7829467-john-meyer-on-arc-minerals-cornish-metals-rainbow-rare-earths-altus-stategies
*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
Dow Jones Industrials +0.90% at 34,036
Nikkei 225 +0.14% at 29,683
HK Hang Seng +0.58% at 28,959
Shanghai Composite +0.83% at 3,427
US – A raft of good economic data released yesterday fuelled optimism over the strength and sustainability of the recovery momentum.
Retail sales beat estimates jumping 9.8%mom on the back of a fresh round of stimulus checks and increased vaccination rates.
A separate report showed jobless claims came in significantly below market forecasts.
Industrial production climbed in March by the most in eight months following the weather-related setback in February.
US stocks hit new record highs as investors welcomed the data and earnings reports, Bloomberg reports.
Retail Sales (%mom): 9.8 v -2.7 in February and 9.8 est.
Core Retail Sales (%mom): 8.2 v -3.1 in February and 6.4 est.
Weekly Jobless Claims (‘000): 576 v 769 in the previous week (revised from 744) and 700 est.
Industrial Production (%mom): 1.4 v -2.6 in February (revised from -2.2) and 2.5 est.
China – The economy expanded 18.3%yoy in Q1/21 marking the fastest rate for any quarter on record.
While the number highlights the strength of the nation’s economic recovery, the increase is helped by the weak performance a year ago when the economy reported the first contract in decades.
Economic GDP growth hits 18.3% yoy v 6.5 in Q4/20 and 18.5 est.
The figures are distorted by the extreme lockdown seen in Wuhan (Hubei Province) this time last year.
We expect China to grow by 6-8% this year driven by the impact of ongoing stimulus programs and general economic development.
We note news reports of China looking to limit liquidity and control debt.
We are of the view that China will continue to support and empower manufacturing industry to raise quality, technology and capacity to lead foreign rivals.
There is little reason to slow the development and upgrade of China’s manufacturing industry as President Xi strives to lift more of the nation out of poverty.
Industrial Production (%yoy, YTD): 24.5 v 35.1 in February and 26.5 est.
Fixed Assets Investments (%yoy, YTD): 25.6 v 35.0 in February and 26.0 est.
Retail Sales (%yoy, YTD): 33.9 v 33.8 in February and 31.7 est.
Crude steel production rose to 94mt in March vs 83mt in February lifting Q1 steel production to 271mt a 15% rise yoy.
World steel production rose 4.1% to 150mt in February
Demand for steel is being driven by strong construction activity helped by record land sales last year particularly around new city clusters and extra-urban hubs.
Construction starts rose 28.2% yoy
Property sales / sqm rose 63.8% yoy
Funds raised by property developers rose 41.4% .
China’s top 11 auto manufacturers saw production fall by 5% to 488,000 vehicles in the first 10 days of April due to a shortage of semiconductor chips.
Chinese power consumption rose 19% to 663kWh in March
UK – New cases of 501Y.V2 variant that was first identified in South Africa and now detected in the UK cause concern as several of those infected had received at least one shot of either the AstraZeneca or Pfizer vaccine, FT writes.
This suggests the variant may have been able to resist vaccine protection, according to one test and trace official.
India – The nation reports another anti-record with 200,000 new infections recorded on Thursday raising pressure on the local healthcare system.
Russia – The Biden administration barred US financial institutions from participating in new sovereign roble bond issues from June 14, Reuters reports.
Although, the order does not cover purchases in the secondary market or prohibit holding existing debt.
The rouble fell more than 2% when the news came out but recovered almost all of its losses on Thursday as announced measures were considered the mildest that could have been taken against Russia’s debt, FT writes.
Additionally, the US government blacklisted 32 Russian entities and officials accused of trying to influence the 2020 US presidential elections and “other acts of disinformation”.
10 diplomats are being expelled.
The US warned Russia that more penalties were possible but argued it did not want to escalate.
Germany – CPI rose 0.5% in March vs 0.7% in February rising 1.7% yoy in March and 1.3% yoy in February
France – CPI rose 0.6% in March vs 0% in February and 1.1% yoy in March vs 0.6% yoy in February
Norway – The government resisted advice from its public health authority to discontinue the AstraZeneca vaccination and appointed an expert committee to look further into the case, according to FT.
The government is concerned that suspending the vaccine will slowdown the inoculation programme as other vaccines like J&J are being delayed due to investigation of side-effects recorded in the US.
The expert group will investigate risks with both vaccines and provide a report by May 10.
AstraZeneca rollout will remain suspended until then.
Earlier, Denmark became the first nation to drop AstraZeneca completely; although, the Social Democrat government has been coming under intense pressure from the centre-right opposition to allow Danes to decide if to have the AstraZeneca jab or not.
Coal – The Board of Evraz, an integrated steel, iron ore and vanadium company, agreed to move ahead with a potential demerger of its coal assets allowing each business unit to focus on respective ESG objectives.
Currently all Evraz coal assets are owned by Raspadskaya subsidiary with coal mining and enrichment facilities located in the Kemerovo region and Tyva Republic in Russia.
Operations include eight underground mines, two open pit operations and three processing facilities valued at ~$1.8bn.
Raspadskaya contribution to Evraz EBITDA stood at $2.2bn in 2020 or ~18% of the total.
US$1.1967/eur vs 1.1985/eur yesterday. Yen 108.89/$ vs 108.84/$. SAr 14.213/$ vs 14.338/$. $1.374/gbp vs $1.379/gbp. 0.774/aud vs 0.774/aud. CNY 6.527/$ vs 6.535/$.
Gold US$1,766/oz vs US$1,747/oz yesterday
Gold ETFs 99.2moz vs US$99.3moz yesterday
Platinum US$1,203/oz vs US$1,185/oz yesterday
Palladium US$2,749/oz vs US$2,711/oz yesterday
Silver US$25.90/oz vs US$25.57/oz yesterday
Copper US$ 9,255/t vs US$9,172/t yesterday
Aluminium US$ 2,326/t vs US$2,352/t yesterday
Nickel US$ 16,410/t vs US$16,110/t yesterday
Zinc US$ 2,859/t vs US$2,843/t yesterday
Lead US$ 2,038/t vs US$2,014/t yesterday
Tin US$ 26,400/t vs US$25,975/t yesterday
Oil US$67.2/bbl vs US$66.5/bbl yesterday
Oil prices continue to advance Crude during the APAC morning session after gaining 1.36% overnight
The API reported a larger than expected draw in crude oil inventories earlier this week, sending prices higher
Stockpiles fell 3.608MMbbls for the week ending 9 April, compared to a 2.889MMbbls decline forecast
This marks a third consecutive weekly fall in US crude inventories, pointing a recovery in refinery activity and underlying demand
OPEC raised its forecast for global oil demand growth this year to 5.95MMbopd in its monthly report released on Tuesday, saying that “the recovery is very much leaning towards the second half of 2021”
This marks a 70,000bopd rise from its prior forecast
The group’s recent decision to gradually unwind production cuts to meet rising energy needs, alongside a brighter demand outlook, boosted investor confidence
In addition, the US Bureau of Labour Statistics released stronger than expected inflation figures on Tuesday, underscoring robust economic activity as businesses gradually returned to normal
The headline Consumer Price Index climbed 2.6% YoY, largely attributed to rising energy (+13.2%) prices
On a seasonally adjusted basis, the CPI index rose 0.6% YoY, marking an eight-year high
When taken with the EIA’s report of crude inventories that fell by 5.9MMbbls, strong economic data in China, and geopolitical tensions rising in Russia/Ukraine and Israel/Iran, the overarching sentiment in the oil market is particularly bullish, even though US crude inventories are still above the five-year average for this time of year, at 492.4MMBbls
According to OPEC, 2021 global oil demand is now expected to average 96.46MMbopd
The IEA is now estimating that global oil demand will average 96.7MMbopd, it said in its April report published Wednesday, on the back of improved economic forecasts and the outlook for accelerating vaccination programs
Natural Gas US$2.668/mmbtu vs US$2.618/mmbtu yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$172.0/t vs US$166.7/t
Chinese steel rebar 25mm US$780.2/t vs US$779.5/t
Thermal coal (1st year forward cif ARA) US$73.6/t vs US$72.2/t
Coking coal swap Australia FOB US$147.5/t vs US$148.5/t – Chinese coking coal futures surge nearly 6% on heightened safety inspections
Chinese coking coal futures surged on Friday to a three-month peak, after some major coal producing regions in China ramped up their safety inspections.
Regions including Shanxi, Henan and Inner Mongolia have stepped up inspections at coal mines following several accidents in the past few months.
Coking coal inventories at Chinese steel mills fell 1.5% this week (Reuters).
Cobalt LME 3m US$49,750/t vs US$49,750/t
NdPr Rare Earth Oxide (China) US$87,410/t vs US$87,603/t
Lithium carbonate 99% (China) US$12,564/t vs US$12,547/t – Lithium mining set for staggering performance through 2025; EVs play out as key catalyst
Projected a 26.3% CAGR over the period 2021 to 2025.
Predicted valuation of $1.63bn by 2025.
Affordability of Li-ion batteries is increasing EV sales and driving the demand for lithium.
China Spodumene Li2O 5%min CIF US$630/t vs US$630/t
Ferro-Manganese European Mn78% min US$1,585/t vs US$1,588/t
China Tungsten APT 88.5% FOB US$267/t vs US$267/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
RWE’s first European battery goes live
The 8.5MWh project has gone live in Dublin.
One of several battery projects that has completed recently in Ireland:
26MW and 11MW projects by Statkraft
100MW facility by Lumcloon
Target of supplying 70% of electricity demand to be met by renewables by 2030.
Anglo American (LON:AAL) 3200p, Mkt cap £43bn – to power Peru copper mine by renewables
Anglo American will power the Quellaveco copper mine with 100% renewable energy.
Quellaveco is one of the world’s larger undeveloped copper deposits in the world is expected to start production in 2022.
The move marks another step towards 70% greenhouse gas production by 2030.
Galantas Gold (LON:GAL) 18.5p, Mkt Cap £8.2m – Underground operations delivering higher grades to plant
Galantas Gold reports that, following limited resumption of underground blasting, it is continuing underground mining on a single shift basis at its Omagh gold mine in Northern Ireland.
The company confirms that “As expected, development of the Kearney vein has produced a feed of higher gold grade for the processing plant than the existing feed, which comes from low grade stock”.
The low grade stockpiles processed during January and February are estimated at grades of 1.8g/t and 1.1g/t gold respectively while “the limited feed produced from underground (based upon concentrate production) is estimated at 5.7 g/t gold and that material has supplemented the low grade material processed during the last week of the first quarter”.
The company says that it estimates that it processed 6,262.5t during the quarter to produce 87.3t of concentrate containing 358.5oz of gold implying a concentrate grade of approximately 92g/t.
Shipments during the quarter of 96.7t of concentrate with an estimated gold content of 304.6oz realised approximately US$575,000.
President and CEO, Roland Phelps, said that “I am pleased with how the re-start of mining operations has gone so far. When underground feed is processed in the mill the expected increase in concentrate production is demonstrated. The Company is actively working with third parties to finance an expansion of the business going forward”.
Tirupati Graphite (LON:TGR) 94.5p Mkt Cap £73.7m – £10m raised to fast track development plan
Tirupati reports that it has completed an oversubscribed placing of 11,111,111 ordinary shares of £0.025 each in the Company at a price of £0.90 per Placing Share to raise an aggregate gross amount of £10 million.
The placing price was an 8.6% discount to the closing price of £0.985 on 15 April 2021.
The net proceeds of the Placing will primarily be used to expedite the Company’s modular medium-term development plan, including accelerating the development of the next 18,000 tpa module at the Sahamamy primary flake graphite project in Madagascar.
Total capacity across both Madagascan projects is anticipated to be 30,000 tpa by Q1 2022, a ten-fold increase since the Company’s admission to the Official List in December 2020.
Funds will also be used to redevelop hydro power facilities at Sahamamy to meet the power requirements of current operations through renewable energy and carry out a feasibility study for c.900-kilowatt of additional hydro power facilities.
Capacity of the Company’s downstream specialty graphite projects from 1,200tpa to 16,200tpa by H1 2022 with the setup of an integrated, multi-product 15,000 tpa Speciality Graphite Project is also expected.
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