Today’s Market View – Canyon Resources; Marvel Gold; Metal Tiger

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SP Angel . Morning View . Tuesday 11 05 21

China raises Yuan fix as Chinese steel mills raise steel prices

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MiFID II exempt information – see disclaimer below – FCA looks to scrap MiFID research rules on small-caps in UK competitiveness drive (Investment Week)

Canyon Resources (ASX:CAY) – Minim Martap bauxite project mineral resource upgrade (Altus Strategies is invested in Canyon Resources)

Marvel Gold (ASX:MVL) – Chilalo Graphite Project spin out (Altus Strategies holds a JV agreement with Marvel Gold) 

Metal Tiger (AIM:MTR) – Drilling Commenced at KML copper project

Serabi Gold* (AIM:SRB) – Drilling confirms lateral and depth extensions to mineralisation at Palito

 

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).

 

China – steel prices rise to new record level as mills pass on higher iron ores prices

  • Chinese steel rebar 25mm US$963.1/t vs US$885.3/t yesterday and US$534.3/t a year ago
  • Iron ore 62% Fe spot (cfr Tianjin) US$221.9/t vs US$204.4/t yesterday and US$85.3/t a year ago
  • Ferro-Vanadium prices also continue to rise to $36.5/kg vs around $27/kg a year earlier for 80% feV

The PBOC raised the Yuan currency fix higher against the dollar at 6.4254 giving some small relief to importers of commodities

  • Around 100 steel mills in China have raised their prices reflecting strong demand and rising iron ore prices which are led by higher futures prices
  • The rise in steel prices may threaten a range of downstream industries which may struggle to pass on the higher input costs.
  • Baosteel, the listed part of Baowu Steel, China’s largest steelmaker is raising prices by >10% (SCMP)

Chinese iron ore prices drop 4.6% as exchange vows more supervision

  • Iron ore futures fell as much as 4.6% to 1,265 yuan/t on Tuesday, after jumping their daily limit in early trading on Monday. 
  • Chinese steelmakers are ramping up production despite government attempts to rein-in output in order to control pollution levels from the sector. 
  • The Dalian Commodity Exchange vowed to strengthen daily supervisions, severely punish various violations and safeguard market order- following recent price surges. 
  • The exchange also commented that it intends to raise trading limits and margin requirements for iron ore futures.
  • Futures also fell in Singapore on Tuesday, down 3.7% to $214/t (Bloomberg). 

 

South Africa – Preident Ramaphosa admits to deep problems in bruised ANC

  • Business Day reports why post-apartheid SA is unravelling and the failures of the ANC. 

 

Zambia – Botswana – $260m Kazungula bridge speeds up border crossing at the boarder with quadripoint

  • The new 923m Kazungula bridge at the quadripoint linking Botswana, Namibia, Zambia and Zimbabwe.
  • Around 600 trucks pass over the nearby Beitbridge in Zimbabwe each day plus 60 busses and 2,000 light vehicles bringing monthly revenue of $45m.
  • Botswana and Zambia have agreed in principle to incorporate Zimbabwe into the Kazungula bridge spanning the Zambezi River, and the one-stop border post linking the two countries. (Business Day).
  • The Kazungula bridge curves away from Zimbabwe to join Botswana directly with Zambia and avoid Zimbabwe due to past political objections.
  • We look forward to crossing the bride on our next investor road trip into Zambia from South Africa

 

Kyrgyzstan – The district court imposed a US$3.1bn fine on Kumtor Gold mine owned and operated by TSX listed Centerra Gold.

  • The court found that the Company placed its environmental laws by placing waste rock on glaciers.
  • The decision comes just a day after the national parliament passed a law allowing the state to temporarily takeover the project if its activities risk lives or the environment.
  • The Company called the charges “entirely meritless”.

 

 

Economics

US – Joe Biden says the US will see fastest economic growth for 40 years in the coming months

Equities pull back on worries of accelerating inflation and concerns monetary authorities may need to dial back the stimulus.

The Nasdaq fell 1.5% but the Dow hit a new all time high as technology stocks fell out of favour on inflation concerns.

  • Amazon sets a new record with a $18.5bn bond issue
  • The US Treasury launched $350bn of Coronavirus State and Local Fiscal Recovery Funds 
  • New infections in the US dropped to the lowest level in 11 months, though, the vaccination pace has also slowed down to ~2.1m/d av. from a high of 3.4m in mid-April.

 

China – Producer prices climbed at the fastest pace in three-and-a-half years in April reflecting a surge in input costs.

  • PPI climbed 6.8%yoy in April, up from 4.4% in March.
  • Whether suppliers will be able to translate higher input costs into higher consumer prices remains to be seen.
  • CPI climbed increased 0.9%yoy in April with demand continuing to improve compared to a 0.4%yoy reading recorded in March.

 

Tesla halts buying land in Shanghai as US-China relations worsen

  • Tesla has halted its process of buying land around its Shanghai factory threatening plans to make The plant a major export hub

China has administered 333m doses of its Covid-19 vaccines as of yesterday

  • But at a potential 50% efficacy will they have much impact in preventing hospitalisation and slowing the spread of the disease. 

China’s ‘Uber For Trucks’ may file for a $30bn IPO in the US next week

China says population still growing at 0.53% 1.41bn in once-a-decade census

  • There were only 12m births in 2020, down from 18m and 17m in 2016 and 2017 (SCMP)
  • The number of working-age people age 16 to 59 decreased by 40m since 2010 with the average age of the Chinese population at 38.8, higher than the US at 38. 

 

ECB – policymaker says the bank will continue with the PEPP Programme till March 2022 with accommodative monetary policy 

  • This is even if the PEPP asset purchase programme is eased

Germany – Investor confidence picked up in May seeing through the latest round of Covid-19 related restrictions and anticipating a nearing pickup in business activity amid accelerating vaccinations.

  • Zew Survey Expectations: 84.4 v 70.7 in April and 72.0 est.
  • Zew Survey Current Situation: -40.1 v -48.8 in April and -41.6 est.

Inflation could rise over 3% according to ECB 

  • Wholesale Price Index rises 1.1% mom in April and and 7.2%yoy
  • The rise in the wholesale price index indicates a substantial rise in inflation from last year and is still ahead of prior years on a seasonally adjusted basis. 

Italy – Industrial Production falls -0.1% mom in March

India – Foxconn iPhone production falls 50% in India as Covid-19 pandemic hits families and logistics

Japan – Household Spending rose 6.2% yoy in March reflecting the Covid-19 lockdown last year

 

UK – The government announces the next phase of lifting COvid-19 restrictions with infection rates at their lowest level since September and hospital admissions down substantially.

  • Indoor hospitality will reopen on May 17 with up to six people or two households able to meet inside.
  • Heathrow Airport called for authorities to expand the “green” list of destinations to which UK holiday makers can travel and avoid quarantine on return in the UK, according to FT.
  • “The Government’s green list is very welcome, but they need to expand it massively in the next few weeks,” CEO John Holland-Key said.
  • Passenger numbers dropped more than 90% in April compared to pre-pandemic levels.

 

Chile – Unionized workers at two major copper mines set to vote on strike action 

  • Workers at BHP’s Escondida and Spence copper mines in Chile are set to vote on a strike after contract negotiations stalled on Monday.
  • The workers in question run BHP’s Integrated Operations Centre (IOC), who are responsible for managing pits as well as cathode and concentrator plants in the north of Chile. 
  • The IOC alleges that BHP fired dozens of workers in 2019, only to rehire them with lower wages and benefits. 
  • Last month, employees began negotiating with the company in order to approve current working terms, although lack of progress has meant that a strike has been called.
  • Chilean labour laws require the two parties to undergo government-led mediation for five to ten days if a strike is voted for by workers.  

 

Peru – More investor-friendly presidential candidate narrows gap on rival, according to opinion polls

  • The latest opinion poll in Peru shows Pedro Castillo’s lead over former lawmaker Keiki Fujimori shrank- with mining companies in the country emboldened by the news.
  • Mining stocks in Peru have previously been hurt by Castillo’s nationalistic rhetoric, who has promised to channel more mining profits into social programs. 
  • Fujimori has presented herself as a pro-business candidate, and is the daughter of jailed former President Alberto Fujimori. 
  • Sunday’s poll from Datum showed a significant narrowing of Castillo’s lead – with the survey showing Castillo had 41% of voter preferences vs 36% for Fujimori.
  • A survey by the Instituto de Estudios Peruanos gave Castillo the backing of 36.2% of potential voters vs 30% for Fujimori. 

 

Currencies 

US$1.2128/eur vs 1.2143/eur yesterday.  Yen 108.91/$ vs 109.05/$.  SAr 14.065/$ vs 14.055/$.  $1.412/gbp vs $1.407/gbp.  0.783/aud vs 0.785/aud.  CNY 6.431/$ vs 6.429/$.

 

Commodity News

Precious metals:  

Gold US$1,833/oz vs US$1,835/oz yesterday – Bitcoin slides to under $55,000 but Ethereum breaks through $4,000 to all-time high

   Gold ETFs 99.7moz vs US$98.3moz yesterday

Platinum US$1,247/oz vs US$1,261/oz yesterday

Palladium US$2,965/oz vs US$2,942/oz yesterday

Silver US$27.31/oz vs US$27.67/oz yesterday

            

Base metals:   

Copper US$ 10,454/t vs US$10,708/t yesterday

Aluminium US$ 2,553/t vs US$2,581/t yesterday

Nickel US$ 17,875/t vs US$18,025/t yesterday

Zinc US$ 3,002/t vs US$3,048/t yesterday

Lead US$ 2,218/t vs US$2,246/t yesterday

Tin US$ 29,600/t vs US$29,630/t yesterday

            

Energy:            

  • Oil US$67.8/bbl vs US$68.7/bbl yesterday
  • Money managers continue to take a bullish stance in oil futures and options contracts, estimating that oil prices will increase later this year as economies reopen and travel and fuel demand rise
  • In the week to 4 May, hedge funds bought the equivalent of 40MMbbls in both Brent and WTI according to Reuters
  • This was the fourth week in a row in which portfolio managers have added long positions in oil futures
  • In the week to 27 April, hedge funds added the equivalent of 30MMbbls in the six most important petroleum futures and options contracts
  • At the time, this was the most bullish position in the oil complex in more than two and a half months, with the net long in crude oil futures jumping to the highest in six weeks
  • In the past few weeks, signs of oil demand recovery outweighed bearish news such as India’s records in daily coronavirus cases as market participants expect the reopening of major developed economies to lead to increased travel and fuel demand for the rest of the year
  • Both Brent and WTI saw increased net long position, the difference between bullish and bearish positions, in the week to 4 May
  • The increased net long was predominantly driven by fresh longs entering the market
  • Oil prices posted weekly gains in the past two weeks, for a first such back-to-back weekly gain in nearly two months

 

Natural Gas US$2.908/mmbtu vs US$2.938/mmbtu yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$221.9/t vs US$204.4/t

Chinese steel rebar 25mm US$963.1/t vs US$885.3/t

Thermal coal (1st year forward cif ARA) US$79.0/t vs US$78.2/t

Coking coal swap Australia FOB US$126.0/t vs US$126.0/t

            

Other:  

Cobalt LME 3m US$45,165/t vs US$45,165/t

NdPr Rare Earth Oxide (China) US$82,205/t vs US$82,836/t

Lithium carbonate 99% (China) US$12,751/t vs US$12,756/t

China Spodumene Li2O 5%min CIF US$630/t vs US$630/t

Ferro-Manganese European Mn78% min US$1,704/t vs US$1,694/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 

 

Battery News

South Korean battery material maker, SKIET sees shares debut at double IPO price

  • SK IE Technology saw its stock debut at double the IPO, amid rising expectations EVs will soon displace vehicles powered by fossil fuels.
  • The company raised $2b in its IPO, floating 21.4m shares at ₩105,000 (approx. $94) per share.
  • Inventory value jumped after the opening bell, reaching ₩222,500 before falling to ₩165,500, 1.5 times the IPO price.

 

Renewables capacity grows by 280GW in 2020

  • New renewable electricity capacity rose by 45%, compared with 2019, to 280GW for the year, the fastest growth rate since 1999.
  • It is predicted that another 270GW will be added in 2021 and 280GW in 2022.
  • Governments have auctioned record levels of capacity and companies have signed record-level purchase agreements as the race to meet climate targets continues to intensify.
  • The renewables growth rate in China is expected to stabilise in 2021-2022, but the IEA expects strong growth in the US, India, Latin America and Europe to compensate.

 

Company News

Canyon Resources (ASX:CAY) A$0.12, Mkt Cap A$75m – Minim Martap bauxite project mineral resource upgrade

(Altus Strategies (LON:ALS), a mining project and royalty generation company, is an investor in Canyon having been previously issued 25m shares in satisfaction of the Birsok bauxite JV project that was acquired and integrated into Minim Martap by Canyon in Feb/19.)

  • The Company upgraded Mineral Resource Estimate at the flagship Minim Martap bauxite project in central Cameroon.
  • The update brings over a third of the total Minim Martap resource into the Measured category significantly improving confidence in the resource following the grade definition infill drilling programme.
  • Latest Minim Martap MRE includes: 

    • 382mt at 47.3% Al2O3 and 2.7%SiO2 in the Measured category
    • 597mt at 44.2% Al2O3 and 2.7%SiO2 in the Indicated category
    • 48mt at 43.2% Al2O3 and 3.7%SiO2 in the Inferred category
  • This marks compares to the previous MRE (35% Al2O3 cut-off): 

    • 943mt at 45.2% Al2O3 and 2.8% SiO2 in the Indicated category
    • 60mt at 43.8% Al2O3 and 3.1% SiO2 in the Inferred category.
  • The team is planning a two stage project development plan with initial production exported through the port of Douala using the existing rail and port infrastructure before expanding operation along with a planned rail extension to access the deep-water port of Kribi.

 

Marvel Gold (ASX:MVL) A$0.05, Mkt Cap A$27m – Chilalo Graphite Project spin out

(Altus Strategies (ALS LN) operates Tabakorole and Lakanfla gold projects in Mali under the JV agreement with Marvel Gold)

  • The Company will spin out the Chilalo Graphite Project (Tanzania) into a separate vehicle, wholly owned subsidiary Evolution Energy Minerals, to be listed on the ASX.
  • The IPO will involve a proposed minimum raise of A$13m and is expected to close no later than July 2021.
  • The transaction will allow the Company to primarily focus on gold exploration in Mali with Marvel reducing its interest in Chilalo to 28-43% post IPO.
  • IPO proceeds to cover: 

    • A$6.5m debt repayment to Castlelake with the balance of the Loan Note Debt of A$3.0m to be converted into Evolution shares;
    • A$6.5m for the advancement of the Chilalo Project and for working capital purposes.
  • The Proposed Transaction is subject to shareholder and regulatory approvals with a general meeting to be held on 11 June 2021.

 

Metal Tiger (AIM:MTR) 26.25p, Mkt Cap £41.9m – Drilling Commenced at KML copper project

  • Metal Tiger reports that drilling has commenced at its Botswana focused copper explorer, Kalahari Metals Limited, of which it currently holds a 50.1% interest.
  • Drilling has now commenced at on the Kitlanya East (“KIT-E”) Project area in Botswana, with the programme focussed on the discovery of copper/silver deposits on the Kalahari Copper Belt.
  • Drilling is targeting structurally controlled trap-sites for prospective copper/silver deposits previously identified in airborne electromagnetic, geophysics and soil sampling surveys along with stratigraphic drilling.
  • The KIT-E drill programme will include stratigraphic DC drilling (circa 800m) into the core of the ‘Perseverance Prospect’, while RC drilling (circa 4,000m) is designed to test for mineralisation associated with several structurally controlled targets at the ‘Endurance Prospect’.
  • Michael McNeilly, Chief Executive Officer of Metal Tiger, commented: We are very pleased to report that following the efficient mobilisation of equipment and personnel to the KIT-E Project site, drilling has now commenced at the start of an exciting new drilling programme, focussed on the discovery of new copper/silver deposits, located in close vicinity to existing mine infrastructure, which is currently under construction and commissioning, in the Kalahari Copper Belt.

 

Serabi Gold* (AIM:SRB) – 72.5p, Mkt Cap £53m – Drilling confirms lateral and depth extensions to mineralisation at Palito

Serabi Gold reports that surface and underground drilling at the Palito mine has demonstrated that mineralisation on the Mogno and Ipe veins extends over 100m below the deepest level currently being mined and that it has detected lateral extensions to mineralisation of up to 600m along strike in both directions.

  • Among the down-plunge intersections on the Mogno Vein, the company highlights: 

    • A 0.75m wide intersection averaging 39.96g/t gold from a depth of 209.5m in underground drill-hole PUD0578; and
    • A 0.5m wide intersection averaging 12.52g/t gold from a depth of 284.55m in underground drill-hole PUD0635; and
    • A 1m wide intersection averaging 51.76g/t gold from a depth of 68.3m in underground drill-hole PUD0679; and
    • An intersection of 0.85m averaging 35.31g/t gold from a depth of 35.1m in underground drill-hole PUD0681; and
    • An intersection of 1.25m averaging 17.29g/t gold from a depth of 132.85m in underground drill-hole PUD0684
  • The company also highlights down-plunge intersections of the Ipe Vein from its underground drilling including: 

    • An intersection of 2.05m averaging 13.54g/t gold from a depth of 199.5m in underground drill-hole PUD0684; and
    • A 0.89m wide intersection averaging 36.62g/t gold from a depth of 281.08m in drill-hole PUD0566
  • Surface drilling has also intersected both veins along strike towards both the north-west and south-east “opening up the possibility of a very significant resource increase” with the Mogno Vein located 600m to the south-east of the current mining area and the Ipe Vein picked up a similar distance towards the north-west of the workings.
  • ·         CEO, Mike Hodgson, explained that “The Ipe and Mogno lodes are increasing their contribution of the Palito Mine ore feed due to their relative shallow depth and high grades. Both these veins are being mined less than 200metres from surface so are easily accessed and with the main ramp already deepened to over 350 metres from surface, both Ipe and Mogno do not require much capital development”.
  • Mr. Hodgson also said that “confirmation that these veins are continuing at depth is excellent news and bodes well for the future of the operation. Furthermore, the drill results indicate significant potential to extend resources laterally along strike. We will continue drill testing these strike extensions over the coming months, and if we see a replication of the ore shoots currently being mined, this will confirm the potential for these two vein structures to continue make a major long-term contribution to gold production”.
  • The company also confirmed that drilling is continuing at its Sao Chico and Sao Domingos prospects with an additional drilling rig to be deployed in June.
  • In a separate announcement today, the company has confirmed that further investigation of the financial irregularities which led to the dismissal of two Brazilian managers, which the company reported in April, indicates that “the total level of unsubstantiated cash withdrawals … [amounts to] … approximately US$200,000”.
  • Serabi Gold confirms that, while “further details regarding the on-going enquiries in respect of these matters may be restricted so as not to prejudice any future legal proceedings” it expects that the company’s “Financial Statements will be issued prior to 30 June 2021”.

Conclusion: Serabi Gold’s exploration of depth and lateral extensions to the Mogno and Ipe Veins at the Palito mine shows that mineralisation extends to depths of at least 100m below the deepest current mine workings and laterally for around 600m along strike to the south-east and to the north-west. We imagine that over time the high grade drilling results reported today will be incorporated in a revision to the current mineral resources estimate for Palito which currently stands at a measured and indicated total of 1.12mt at an average grade of 4.98g/t gold.

*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil

 

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 – [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

 

Sales

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

 

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*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, Tungsten, Spodumene, Ferro-Manganese, Graphite -Asian Metal

 

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