By 
SP Angel . Morning View . Wednesday 30 12 20
Copper prices continue to rise on strong demand from EVs and stimulus projects
Berkeley Energia Ltd (LON:BKY) – Permitting and licensing payments to Spanish government entities
Bluejay Mining* (AIM:JAY) – BUY, Valuation 29.4p – Research & Development Tax Credit
Bushveld Minerals* (LON:BMN) – BUY, Valuation 37.7p – Vanadium price rise in China suggests tightening of supply chain
Katoro Gold (AIM:KAT) – Haneti RAB drilling underway
Power Metal Resources* (AIM:POW)
Keras Resources* (AIM:KRS) – Manganese ore prices hit 10-week high
Pure Gold Mining (LON:PUR) – Gold pour at Red Lake
Chinese New Year – the year of the Metal Ox – starts 12th February
- The Metal Ox is seen as a particularly strong symbol. The Ox is seen as hardworking, positive and honest, delivering dedicated, consistent labor.
- China may see the symbol as offering a positive and productive year and the opportunity to reap the benefits of the nation’s hard work.
- 2020 was the year of the Rat – though we think it was more a Pig of a year.
US dollar hits two-year low despite stimulus delays
- The US dollar sank to its lowest in 32 months on Wednesday, despite delays in issuing additional stimulus to the US public.
- US Senate majority leader Mitch McConnell blocked a vote on increasing Covid-19 relief payments to $2,000, although investors remained optimistic that a deal can be reached.
- Gold prices gained modestly on Wednesday as a result of the weaker dollar.
- The greenback fell against all off its G10 peers, with the Bloomberg Dollar Index sliding 0.4%.
- Ongoing optimism around the recently concluded Brexit deal is thought to be buoying the Pound and the Euro, which in turn is weighing on USD.
Oxford / AstraZeneca vaccine approved
- The approval of the vaccine is great news as the Oxford vaccine is very much easier to handle and manage than the Pfizer vaccine.
- The Pfizer vaccine is reported to be fragile and needs to be stored at -70 degrees, well beyond the capacity of your normal fridge.
- The Oxford / AstraZeneca vaccine can be stored in a normal fridge and is not so prone to mechanical impact making the vaccine the preferred choice for the majority of medical practices.
- The approval should make for a more rapid roll-out of the vaccine through the UK and the rest of the world and may be particularly important for developing nations which would have struggled with the Pfizer vaccine.
Economics
US – House price index rises 7.9% YoY at fastest rate in six years
- A measure of home prices in 20 large US cities showed that the US housing market is still booming despite the pandemic, rising 7.9% YoY in October and up from 6.6% the month prior.
- The S&P CoreLogic Case-Shiller index indicates that prices have risen the fastest since 2014 as a result of record-low mortgage rates and an influx of people moving further out of cities in order to find more space.
UK – Drugs watchdog approves the Oxford/AstraZeneca Covid vaccine
- The UK is the first country to approve the vaccine, which is likely to be key for mass immunizations.
- The vaccine will be rolled out from Monday and will be prioritised for the country’s most vulnerable groups- the same as the Pfizer vaccine approved in early December.
- This should help the UK ramp up vaccination, with the government purchasing 100m doses.
Japan – Governor of Tokyo warns of possible explosion of Covid-19 cases
Croatia – 6.4 magnitude earthquake hits 28 miles southeast of Zagreb
- Tuesday’s quake follows Monday’s 5.2 magnitude tremor, both of which have caused deaths and severely injured several people.
- The town of Petrinja, 31 miles from Zagreb, is said to be completely destroyed.
- Slovenia’s sole nuclear power plant has been shut down as a precaution.
Chile – Covid-19 sniffer dogs report for duty
- A team of Labradors and Golden Retrievers are currently being tasked with sniffing out passengers infected with Covid-19.
- Passengers wipe their necks and wrists with gauze pads that are then put in glass containers and sent to the dogs to see if they can detect the virus.
Germany – Daily death toll surpasses 1,000 for the first time
- Germany recorded a total of 1,129 deaths from coronavirus within the last 24 hours.
- The country also registered 22,459 new coronavirus infections within the same period.
Currencies
US$1.2259/eur vs 1.2257/eur yesterday. Yen 103.32/$ vs 103.63/$. SAr 14.650/$ vs 14.638/$. $1.354/gbp vs $1.351/gbp. 0.765/aud vs 0.761/aud. CNY 6.528/$ vs 6.530/$.
Commodity News
Precious metals:
Gold US$1,879/oz vs US$1,882/oz yesterday
Gold ETFs 106.7moz vs US$106.6moz yesterday
Platinum US$1,062/oz vs US$1,043/oz yesterday
Palladium US$2,341/oz vs US$2,367/oz yesterday
Silver US$26.24/oz vs US$26.30/oz yesterday
Base metals:
Copper US$ 7,857/t vs US$7,843/t yesterday – Chile expect to hit peak copper output of 7.35mt in 2028
- Chile’s copper commission, Cochilco, expects copper production to peak in 2028 at 7.35mt- a 27% increase from the 5.79mt produced in 2019.
- Output will start to retract from 2028 due to depletion to reach 7.09mt in 2031, with an average growth per annum of 1.7% from 2020 until then.
- Cochilco forecasts output to increase 0.6% this year to 5.82mt (Fastmarkets MB).
Aluminium US$ 1,987/t vs US$1,989/t yesterday
Nickel US$ 16,890/t vs US$17,140/t yesterday
Zinc US$ 2,765/t vs US$2,786/t yesterday
Lead US$ 1,975/t vs US$1,970/t yesterday
Tin US$ 20,275/t vs US$20,190/t yesterday
Energy:
Oil US$51.4/bbl vs US$51.5/bbl yesterday
Natural Gas US$2.431/mmbtu vs US$2.320/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$160.8/t vs US$162.9/t – Dalian iron ore futures fall 6% on Wednesday after steel output-cut appeal
- Iron ore futures on the Dalian Commodity Exchange fell nearly 6% on Wednesday, after the country urged the steel industry to produce less crude steel next year amid the government’s carbon neutrality scheme.
- The Ministry of Industry and Information Technology called on the steel sector to “resolutely” cut crude steel output and ensure an annual drop in 2021.
- Data this morning showed that shipments from Australia rose to 20.1mt last week compared to 15.8mt in the week prior, also weighing on iron ore prices (Bloomberg).
Chinese steel rebar 25mm US$660.5/t vs US$662.4/t
Thermal coal (1st year forward cif ARA) US$69.0/t vs US$69.0/t – Japanese Group to Lend $1.8bn to Vietnam for Coal Fired Power
- A Japanese-led group said it would extend nearly $1.8bn in loans to build a coal-fired power plant in Vietnam.
- Plans call for a total of 1.2GW of electricity output at the plant.
- The govt. owned Japan Bank for International Cooperation said it would lend more than a third of the total $1.767bn in financing for the project.
- It has become a flashpoint in the debate over whether rich nations should support coal-fired power in developing nations with growing electricity demand.
Coking coal swap Australia FOB US$125.3/t vs US$125.3/t
Other:
Cobalt LME 3m US$32,190/t vs US$32,190/t
NdPr Rare Earth Oxide (China) US$62,419/t vs US$61,865/t
Lithium carbonate 99% (China) US$7,352/t vs US$7,350/t – Tianqi lithium secures loan extensions
- Tianqi Lithium has managed to extend maturity dates on $1.884bn of its loan debt.
- The repayment deadline on two loan tranches totalling $1.884bn have been extended out to November 26, 2021, pending shareholder approval on Jan 5.
- Earlier this month Australian nickel and gold miner IGO ltd invested $1.4bn in Tianqi Lithium Energy. The investment increased IGO’s stake in the mine to 24.99%.
- The deal also provides Tianqi with the funds to pay down $1.2bn owed as part of a loan used to purchase a stake in Chilean miner SQM in 2018.
- If Tianqi pays down $1.2bn of the loan principal the extension can be moved out to November 2022.
India begins first lithium refinery
- India’s first lithium refinery is being built in Gujarat, it is expected to be operational by 2021. Manikaran Power Limited is investing around Rs 1000 crore (~£100m) in the refinery.
- India currently imports all of its lithium, relying on imports from China, Japan and Taiwan.
- The feasibility study conducted on the project used a nameplate capacity of 20,000 tonnes of lithium carbonate equivalent per annum for the facility.
- The Lithium ore for the refinery will be imported from Australia, Manikaran Power signed a JV with Neometals in 2019 to fund the evaluation of the refinery.
Ferro Vanadium 80% FOB (China) US$30.0/kg vs US$30.0/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
Britain reaches wind energy milestone
- Britain hit a milestone last week when wind farms generated more than half of the island’s energy needs.
- The impetus for this was Storm Bella which generated winds of up to 106mph.
- Wind farms across the UK generated 5.14GW of electricity. That was 50.7% of all electricity generated in Britain that day.
- The Boxing day breakdown between onshore and offshore wind was about 60/40%.
- Factor in nuclear, solar, and hydropower, and nearly three quarters of all power generated on 26th December came from clean sources.
Indonesia building out integrated EV supply chain following $9.8bn LG Group deal
- The Indonesian government and LG Group have signed an MOU on a $9.8bn EV battery investment which will be used for the construction of an integrated electric battery factory.
- It is understood the project will be located in North Maluku, Central Java.
- The MOU requires 70% of the nickel ore used to be processed in Indonesia.
- Indonesia appears to be in the early stages of a rapid build out of an EV supply chain. The country has abundant nickel resources (550,000 tonnes, Electrek) attracting the interest of Tesla.
- Tesla is reported to be planning to send representatives to Indonesia in January to discuss battery facilities and materials sourcing.
- CATL looks set to invest $5bn in a lithium battery plant and has agreed a deal with Indonesian state miner PT Aneka Tambang confirming 60% of the required nickel will be processed locally.
Sichuan Yahua Industrial Group agrees deal to supply Tesla
- Chinese company Sichuan Yahua Industrial Group has agreed a deal to supply lithium hydroxide to Tesla for the next 5yrs. (Reuters)
- The Company estimates the value of the contract to be $630m-$880m.
- The deal translates to 63,000-88,000 tonnes of lithium hydroxide, 12,000-17,600 tonnes per annum according to analysts.
- Tesla also sources lithium hydroxide from Ganfeng Lithium, Kidman Resources, Pure Energy Minerals and through a JV with Cadence Minerals and Bacanora Minerals.
Company News
Berkeley Energia Ltd (LON:BKY) 34.5p, Mkt Cap £95m – Permitting and licensing payments to Spanish government entities
(Salamanca uranium mining project, Spain)
In its annual disclosure of payments to government entities Berkeley Energia reports that it paid a total of A$183,514 to Spanish government entities in respect of permits and licence fees during the year to 30th June 2020.
The total reported is slightly lower than the A$193,868 reported for the year ended 230th June 2019 and in both cases the payments relate solely to the Salamanca mine where the plans to develop a uranium mining operation are currently the subject of permitting applications and where opposition to the development is slowing the process. The company has previously stated that it is continuing “to engage with the relevant authorities in a collaborative manner in progressing the approval process for the Salamanca mine”
At this stage, there does not appear to be a public timetable for resolution of the various issues raised although in the last year, Berkeley Energia has stated that “the Spanish Supreme Court has rejected the appeal filed by a group of opposition parties against … Authorisation for Construction for the uranium concentrate plant as a radioactive facility”.
Bluejay Mining* (AIM:JAY) 12.33p, Mkt cap £120m – Research & Development Tax Credit
BUY, Valuation 29.4p
Bluejay Mining report the receipt of a £264,775 R&D cash rebate from the UK government for scientific research.
The research was carried out on the Dundas ilmenite project over the last two field seasons.
Eric Sondergaard, the Geology manager at Bluejay in Greenland is to continue to evaluate future strategic R&D credit opportunities in the area as he plans the exploration campaign for 2021.
Bluejay’s qualification for the funding indicate the company has passed a number of checks to qualify for the finance and also highlights British government support for R&D in the resources sector.
Bluejay recently received approval for a full mining license at Dundas from the Greenland government.
The new mining license enables Bluejay to finance and start construction of the 440,000tpa Dundas ilmenite mine..
Management recently also announced the expansion of their offtake agreement with a large and long established Asian conglomerate for up to 340,000tpa of ilmenite concentrate.
The pricing of this will be close to the prevailing ilmenite price at the time of sale, currently at ~$240/t and rising.
Optimisation of the project feasibility in Greenland should hopefully reduce the estimated $245m capital cost and may also cut forecast operating costs.
Dundas is a relatively simple project in mining terms. Ilmenite will be dry-mined off the beach and concentrated using simple gravity and magnetic separation.
The very high grade and clean nature of the ilmenite at Dundas should make this a relatively simple project in mining and processing terms.
Bluejay had previously shipped a bulk sample of ilmenite to Canada for Rio Tinto Iron and Titanium. This sample was concentrated further in preparation for a smelter test at RTIT. The sample is worth around $1.25m.
Conclusion: We expect Bluejay to finance the Dundas titanium mineral sands project next year with strong support from multilateral and government agencies along with project and offtake finance. The company is also developing a number of other exciting exploration projects in Finland and Greenland.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Hammaslahti, Enonkoski and Outukumpu mines in Finland as well as Bluejay’s Dundas mine site in Greenland.
Bushveld Minerals* (LON:BMN) 19.90p, Mkt cap £237m – Vanadium price rise in China suggests tightening of supply chain
BUY – Valuation 37.7p
Bushveld Minerals shares are, at long last, recovering on news of vanadium price rises in Europe as well as the US and China.
Strong demand in China is drawing vanadium pentoxide and ferro-vanadium away from the West and into China lengthening and tightening supply chains.
The shipment of so much vanadium into China may potentially lead to shortages in Europe and possibly the US as stimulus and other construction projects start up in the new year.
Better enforcement of recently imposed minimum vanadium content levels in China may also lead to increasing take up of vanadium for structural steel used in government-financed projects as failure to comply could result in harsh punishment.
Vanadium prices:
Vanadium pentoxide prices jump 4.3% in Europe to $5.3-5.5/lb V2O5 in the week before Christmas
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 with steel producers and traders have also raising prices for steel billet and other products.
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 strong demand for transport infrastructure and new extra-urban hub construction
FOREX: The year has been a rollercoaster ride for the South African rand.
The currency started the year at ZAR 14.2/USD falling to ZAR 19.2/USD before clawing back almost all its losses to SAR 14.6/USD today
The rand has strengthened on the back of high commodity prices and the continuation of exports from South Africa has a substantial impact on company earnings forecasts and our valuation based on these earnings.
Valuation: We continue to adjust our model according to currency and commodity price conditions.
Assumptions: We use the current South African rand rate for our forecasts for 2021 and beyond tempering our earnings forecasts for future years.
We continue to forecast a higher ferro-vanadium price of $35/kgV for 2021 and $40/kgV thereafter due to the expense of bring in new vanadium production to meet rising global demand.
We have adjusted our assumption for vanadium production to 3,632mtV in line with company guidance.
We have also adjusted our total vanadium sales estimate to 3,682mtV due to the impact of lengthened shipping and sales times for more material going to meet stronger demand in China.
If demand and prices in Europe rise significantly next year then much of the inventory for this year may be reported in the 2021 sales figures.
Conclusion: We believe significant new demand for vanadium electrolyte will start to come into the market for Vanadium Redox Flow Batteries over the next few years and that this should support vanadium prices at higher levels as steel producers compete with this new form of demand.
*SP Angel acts as Nomad and broker to broker to Bushveld Minerals.
Source: SP Angel, Company. +Vametco & Vanchem figures combined.
Katoro Gold (AIM:KAT) 2.25p, Mkt Cap £6.7m -– Haneti RAB drilling underway
Power Metal Resources* (AIM:POW) 2.85p, Mkt cap £23.4m
(Katoro Gold holds 65% of the Haneti nickel project alongside Power Metal Resources which holds 35%)
Katoro Gold Reports that its previously announced 2000m maiden drilling programme of shallow reverse-air-blast (RAB) drilling at its 65% owned Haneti project in Tanzania (Power Metals 35%) where the company targeting nickel and platinum group metals (PGM) mineralisation is now underway.
The initial target areas for the RAB programme are at Milhanza Hill, Mwaka Hill and Igari Hill which have been selected “based on the recommendations of the 2012 AEM survey, the detailed field programme undertaken in 2013, and further supplementary exploration findings”.
The programme is expected to comprise around 50 holes to approximately 40m depth and “will be drilled on profiles across the three target areas in order to provide enhanced information of the subsurface shape and orientation of the ultramafic rock bodies being targeted and allowing for the optimisation of a planned follow-on diamond drill programme”.
The company says that “One of the key exploration objectives for the JV partners at Haneti is to delineate the potential for economic nickel mineralisation on the linear dyke-like, Haneti-Itiso Ultramafic Complex (“HIUC”), which sporadically crops out over a strike length of 80 km through the centre of the tenement holding”.
Describing the geological background and exploration history behind the drilling programme, the company explains that “The Haneti area was first explored in 1931 by a private prospector who collected a nickel‐rich magnetite sample at Mihanza Hill. Later trenching uncovered a few discontinuous green‐stained veins rich in nickel‐silicates and containing several percent nickel” and that this work was followed up during the early 1960s with mapping, trenching and rock chip sampling by the Geological Survey of Tanzania.
Later mapping during the early part of the 21st century was followed up with airborne geophysics over Mihanza Hill and Mwaka Hill and a consulting geological report “identified the nickel, copper, platinum, palladium anomaly at Mihanza Hill as a drill ready target. This report suggested that the Itiso‐Haneti Ultramafic body may fit the Chonolith-Type Nickel exploration model which would imply that the main ultramafic belt may have small discrete sulphide bodies associated with it”.
Conclusion: Initial drilling is now underway at the Haneti project area following up sporadic exploration undertaken since the 1930s and more recent targeted work, including geophysics which highlighted the potential for nickel and PGM mineralisation. We await the results with interest and speculate that if the RAB work is successful, it is likely to be followed by diamond drilling.
*SP Angel act as Nomad and broker to Power Metal Resources plc formerly African Battery Metals
Keras Resources* (AIM:KRS) 0.115p, Mkt cap £6m – Manganese ore prices hit 10-week high
(Keras also hold an 85% interest in Societé General des Mines which holds the Nayega manganese project license in Togo. Keras now holds 40% of Falcon which holds 100% of the Diamond Creek phosphate mine which is operating in Utah, USA)
Manganese ore index prices jumped a further 4.6% this week in China to $4.12/dmtu from $3.94/dmtu a week earlier (FastmarketsMB).
Prices in South Africa rise by 5.2% to $3.44/dmtu from $3.27/dmtu.
Spot prices continue to strengthen with Chinese buyers waiting for the release of offer prices for seaborne cargoes for shipping in February.
Chinese imports fell by 6.14% to 3.04mt of manganese ore in November indicating that shipments will need to increase to replenish stocks as steel production rises.
Port side prices also continue to rise in China though some alloy smelters are said to be sitting on the side-lines having already stocked up.
Keras continue to await a license to mine the Nayéga Manganese Project in Togo.
Recent changes to government and the minister in charge of mining should enable the mining application to proceed.
Management travelled to Togo in November for meetings with key government officials on the Nayéga project.
The team continue to expand the work done on the manganese resource at Nayéga following the success of the bulk shipment last year.
The company reported best intercepts of 1.76m @ 18.6% Mn from 0m, 2.05m @ 15.8% Mn from 0m and 2.00m @ 16.2% Mn from surface.
While 90% of manganese is used in steel it is also a major component in the two most prominent types of Li-ion batteries in production with around 61% of manganese content in the cathode.
Rising demand for manganese in NMC batteries will result in increasing buying activity in this area and may have some impact on prices.
The Lockdown in South Africa which hosts around 90% of global manganese resources saw manganese ore prices early double to $6.3/dmtu in South Africa earlier this year with ferro-manganese prices jumping to $1,000/t in China.
Conclusion: Keras looks significantly undervalued assuming it will receive a mining license for Nayéga. The team shipped a bulk sample to a manganese alloy processor last year proving the quality and suitability of the ore for alloying.
*SP Angel act as Nomad and Broker to Keras Resources
Pure Gold Mining (LON:PUR) 157.5p, Mkt Cap £637m – Gold pour at Red Lake
Pure Gold Mining reports its first gold-pour at its Red Lake mine in Ontario on 29th December.
President and CEO, Darin Labrenz said that this transition to a producing operation has brought the mine to life and that it delivers “on our promise to build Canada’s newest gold mine in the heart of Red Lake Ontario, on budget and on schedule”.
Mr. Labrenz recognised the efforts of the development team saying that “To build a mine at any time requires a complete team effort comprised of dedicated, driven, and focussed individuals. To do so under the unique challenges of 2020 speaks to the quality and dedication of the entire team. With this first gold bar, we are now focussed on ramping up the operation to steady state production”.
On-site, optimisation of the operation is expected to bring the mine to formal commercial production “by the end of Q1 2021 at which time the Company will be providing guidance”.
Exploration drilling from surface and underground is continuing with a view to updating “mineral resources to include drilling completed over the last two years, and incorporation of significant improvements in mine design and mine plan”.
The company has previously described exploration along a 7km long mineralised trend exhibiting similar mineralisation and geological setting to that encountered at the mine while closer to the mine workings, grade-control work has shown mineralisation close to planned stopes which may be extended in future mine-planning as a result.
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
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
Oil Brent
– ICE
Natural Gas, Uranium, Iron Ore
– NYMEX
Thermal Coal
– Bloomberg OTC Composite
Coking Coal
– SSY
RRE
– Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony
– Asian Metal
Tungsten
– Metal Bulletin
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