Today’s Market View – Ariana Resources, Greenland Minerals, Premier African Minerals, and more…


SP Angel . Morning View . Tuesday 26 07 22

Copper climbs on Chinese property relief fund and ahead of the Fed rate decision

 

MiFID II exempt information – see disclaimer below 

Ariana Resources PLC (AIM:AAU) – Exploration licence awarded in Kosovo

Aston Bay Holdings* (CVE: BAY) – Somerset Island drilling shows visual copper mineralisation in first two holes of the current campaign at Storm Copper project, Nunavut
Greenland Minerals Ltd (ASX:GGG, OTC:GDLNF) – Government issue draft decision to reject Kvanefjeld exploitation license

Kumba Iron Ore (JSE: KIO) – Interims – EBITDA falls as production and realised prices decline
Premier African Minerals Ltd (AIM:PREM) (PREM LN) – Additional drilling results from the Zulu Lithium project

 

Call for Private financing – Lithium prospects (Africa)

We are raising funds for a highly experienced geological team who have access to a number of prospective lithium licenses in Africa

  • We are looking for very early stage funding to support the discovery and delineation of a number of potential spodumene occurrences on these licenses.
  • The licenses are close to another successful lithium project company and are believed to contain spodumene occurrences.
  • Please contact us if you are interested in investing in this early stage and highly speculative venture

*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). This offer is open to professional investors only and is not offered to retail investors.

 

Copper prices rise for third session in London while market remains tight in China

  • Copper prices continue to recover on Monday, rising 1.9% to $7,622/t earlier this morning.
  • Prices have risen 4.1%, or $300/t since Friday morning.
  • China’s copper market is showing signs of immediate tightness, with the spot premium almost doubling to 490 yuan ($73)/t on Monday from Friday.
  • Copper has been climbing higher on news that Beijing will establish a $7.4bn fund to support struggling property developers.
  • China accounts for over 50% of global copper demand and the price is sensitive to material news form the Chinese construction sector.
  • It remains to be seen how these funds will be distributed, over what timeline and whether this will have a material impact on copper demand.

 

Dow Jones Industrials +0.28% at 31,990

Nikkei 225 -0.16% at 27,655

HK Hang Seng +1.81% at 20,936

Shanghai Composite +0.83% at 3,277

 

Economics

US – The Fed is expected to hike rates by 75bp to 2.25-2.50% at its monetary policy meeting this week with an announcement due Wednesday.

  • There is currently a 10% chance of a larger hike while market will be also closely watching for commentary on whether economic growth slowdown prompts a shift in outlook, Reuters reports.
  • Chicago Fed national activity index held steady at +0.19 in June from an initial +0.26 in May
  • Dallas Fed manufacturing index collapsed further to -22.6 in July vs -17.1 in June

 

China – The government is establishing a real estate fund of up to CNY300bn (~$44bn) to fight a liquidity crisis in the sector, FT cites financial news outlet REDD.

  • China Construction Bank and China’s central bank will inject CNY80bn into the new fund to help distressed real estate companies complete stalled projects with the firepower potentially expanded to CNY300bn.
  • The news comes shortly after property buyers across the country threatened to suspend their mortgage payments on uncompleted flats if construction stalled.
  • The sector reported slumping sales, lower prices in majority of cities, falling investment and construction starts this year.
  • A 7%yoy contraction in the real estate sector in Q2 was a major factor behind the slowdown in GDP growth to 0.4% from 4.8% in Q1, Bloomberg writes.

     

Europe – Putin reduces gas flow into Europe to prevent restocking through the summer

  • Russia has resumed gas exports into Europe but is restricting flow to ~20% of capacity from Wednesday
  • Gazprom could supply at least 40% of capacity following maintenance
  • The Kremlin claims that a turbine has not yet been returned following maintenance due to sanctions
  • Germany is probably drawing up plans on which gas consumers should be sacrificed so as to maintain its more valuable industries.
  • We expect base metal smelting and refining to be hit hard in the region such as the Glencore’s Nordenham zinc smelter and   
  • Aurbuis which recently upgraded its copper smelter in Hamburg with the relining of its flash smelting furnace may be able to use coal or liquid fossil fuels to replace gas as an auxiliary fuel.

 

Germany – Ifo business climate index 88.6 in July vs 92.2 in June

 

Turkey – Business confidence fell to 103.7 in July vs 106.4 in June

 

Inflation – Unilever raising product prices as its faces biggest surge in decades with ‘truly unprecedented’ surge in inflation in many of its key markets

  • Unilever hiked prices for its products 11%yoy in Q2/22 as the Company tries to pass on higher costs to consumers.
  • Higher prices were partly compensated by lower sales volumes (-2.1%yoy) that delivered sales growth of 8.8%yoy for the quarter.
  • The Company guided for lower margins for the remainder of the year with cost inflation expected to peak in the second half.

 

UK Regulator energy accused of being negligent and incompetent in its regulation

  • Ofgem, the UK energy regulator has been accused of being negligent and incompetent by MPs following their recent review (The Times).
  • The regulator allowed companies with glaringly ‘inadequate financial arrangements and high risk business models’ to enter the market, failed to enforce its own rules and did not heed repeated warnings about poorly run suppliers, according to MPs on the Commons’ business, energy and industrial strategy committee.

 

Walmart, the world’s largest retailer, cut its profit outlook again yesterday weeks ahead of its earnings report sending the share price down ~9% in after hours trading.

  • Operating profit and adjusted EPS are expected to drop 11-13% this financial year (Jan YE) as US shoppers cut spending n big ticket items and focus on less profitable groceries as consumer prices soar.
  • This compares to guidance released two months ago that estimated that EPS will be down only 1% this year.

 

Russia – Natural gas prices climbed sharply again on the news that Gazprom will cut its Nord Stream shipments to ~20% of its capacity from Wednesday on turbine maintenance issues, Bloomberg reports.

  • Only one major turbine at Russia’s Portovaya compressor station is currently online, down from six, based on Gazprom’s statements.
  • The return of one turbine that has recently completed maintenance works in Canada and is currently in transit should allow flows at 40% of capacity.

 

Mysterious life forms discovered in Hawaiian lava caves

  • Scientists have discovered complex colonies of microbes living in a network of underground lava tunnels and caves. (Metro)
  • The caves are cold, dark and full of toxic gasses and minerals considered to be inhospitable to most forms of life.

 

Currencies

US$1.0227/eur vs 1.0212/eur yesterday. Yen 136.58/$ vs 136.40/$.  SAr 16.750/$ vs 16.864/$.  $1.205/gbp vs $1.199/gbp. 0.697/aud vs 0.692/aud.  CNY 6.755/$ vs 6.755/$.

 

Commodity News

Precious metals:         

Gold US$1,727/oz vs US$1,728/oz yesterday

   Gold ETFs 101.5moz vs US$101.6moz yesterday

Platinum US$891/oz vs US$878/oz yesterday

Palladium US$2,022/oz vs US$1,987/oz yesterday

Silver US$18.65/oz vs US$18.62/oz yesterday

Rhodium US$15,000/oz vs US$15,400/oz yesterday

 

Base metals:   

Copper US$ 7,646/t vs US$7,364/t yesterday

Aluminium US$ 2,443/t vs US$2,437/t yesterday

Nickel US$ 22,228/t vs US$21,122/t yesterday

Zinc US$ 3,038/t vs US$2,983/t yesterday

Lead US$ 2,016/t vs US$2,000/t yesterday

Tin US$ 25,100/t vs US$24,460/t yesterday

 

Energy:           

Oil US$107.0/bbl vs US$102.2/bbl yesterday

Natural Gas US$8.856/mmbtu vs US$8.369/mmbtu yesterday

Uranium UXC US$47.15/lb vs US$46.95/lb yesterday

         

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$106.3/t vs US$105.6/t

Chinese steel rebar 25mm US$593.9/t vs US$593.8/t

Thermal coal (1st year forward cif ARA) US$270.0/t vs US$254.0/t

Coking coal swap Australia FOB US$235.0/t vs US$235.0/t

 

Other:  

Cobalt LME 3m US$50,460/t vs US$50,460/t

NdPr Rare Earth Oxide (China) US$121,765/t vs US$121,032/t

Lithium carbonate 99% (China) US$67,730/t vs US$67,438/t

China Spodumene Li2O 5%min CIF US$4,720/t vs US$4,720/t

Ferro-Manganese European Mn78% min US$1,355/t vs US$1,353/t

China Tungsten APT 88.5% FOB US$327/t vs US$327/t

China Graphite Flake -194 FOB US$815/t vs US$815/t

Europe Vanadium Pentoxide 98% 7.6/lb vs US$7.7/lb

Europe Ferro-Vanadium 80% 34.25/kg vs US$34.25/kg

China Ilmenite Concentrate TiO2 US$356/t vs US$356/t

Spot CO2 Emissions EUA Price US$77.9/t vs US$84.6/t

Brazil Potash CFR Granular Spot US$1,040.0/t vs US$1,050.0/t

 

Battery News

General Motors and LG Energy Solutions to receive $2.5bn loan from DoE

  • The US Department of Energy has announced that it will loan General Motors and its joint venture partner LG Energy Solution $2.5bn to help finance the construction of new EV battery cell manufacturing plants – in total, GM and LGES are investing more than $7bn via the venture to build the three battery plants.
  • The conditional loan to Ultium Cells LLC (the name of the JV) for facilities in Ohio, Tennessee, and Michigan is expected to close in the coming months.
  • The funds come from the government’s Advanced Technology Vehicles Manufacturing program which has not funded a loan since 2010.
  • The plan, first reported by Reuters, will also be the Department of Energy’s first loan exclusively for a battery cell manufacturing project under the vehicle program.
  • Ultium Cells hope for production to begin at the Ohio plant in August this year and at its Tennessee plant in late 2023 and in Michigan in 2024.

 

LG Energy Solution sign JV with Zhejiang Huayou Cobalt for battery recycling plants

  • LG Energy Solution said it has signed a joint venture agreement with Chinese mining company, Zhejiang Huayou Cobalt, to build a battery recycling plant to secure raw materials for lithium-ion batteries.
  • The joint venture deal with Zhejiang Huayou Cobalt Co. will commit the two companies to build two factories to extract nickel, cobalt and lithium from scrap batteries and used batteries.
  • The facilities will span China’s Jiangsu Province, with a pre-treatment plant in the city of Nanjing dedicated to collecting and processing waste and used batteries and a post-treatment plant, located in Quzhou, will be used to extract the cathode materials.
  • LGES have yet to disclose any information regarding the scale of the facilities.

 

US and Indonesian environmental groups urge Tesla to reconsider plans for nickel investments

  • Environmental groups have penned an open letter to Elon Musk and Tesla’s shareholders urging the carmaker to reconsider its plans for nickel investment in Indonesia.
  • Around 50 organisations signed the letter, who warn of “systemic, large-scale environmental damage, a rise of criminalization threats against indigenous communities and the environmental defenders protecting their lands from nickel mines”
  • The letter claims that nickel mining in Indonesia leads to deforestation and rainforests can be destroyed due to pollution from waste tailings.
  • Tesla have not commented on the letter, released yesterday.

 

Company News

Ariana Resources PLC (AIM:AAU) 3.1p, Mkt Cap £35.4m – Exploration licence awarded in Kosovo

  • Ariana Resources reports that its 75% owned Western Tethyan Resources has been granted the 58km2 Hertica exploration licence in north eastern Kosovo.
  • The new licence brings Western Tethyan Resources’ exploration licence holding to 297km2 with a further 161km2 under application.
  • The Hertica licence contains a 6km2 area “zone of advanced argillic alteration, with several quartz-diorite porphyry intrusions containing associated copper, gold and antimony mineralisation” and the company confirms that “Reconnaissance work has returned several highly anomalous gold-bearing samples across several different alteration styles of the epithermal-porphyry target” including;
    • “Up to 0.4 g/t Au and 0.5% Cu from Quartz-Sericite-Pyrite (QSP) alteration zone”, and
    • Up to 0.12 g/t Au from the vughy silica samples”.
  • Ariana Resources says that the area is “highly prospective” and “hosts the Tulare porphyry (300Mt @ 0.27% Cu and 0.26 g/t Au) and the Drazhnja polymetallic deposit (4.7Mt @ 7% Pb-Zn and 45 g/t Ag)”.
  • Managing Director, Dr. Kerim Sener, described the award of the Hertica licence as “an important step in the development of our exploration pipeline in Kosovo” which comes as “exploration activities in the country are gearing up, through our partnership with Newmont Corporation”.

Conclusion: Ariana Resources is expanding its exploration areas in Kosovo with the award of a new licence and with others still under application.  The areas cover part of the prospective Tethyan belt already known to contain large deposits and we look forward to results as the exploration work proceeds

 

Aston Bay Holdings* (CVE: BAY)  $0.035, Mkt cap C$6.2m – Somerset Island drilling shows visual copper mineralisation in first two holes of the current campaign at Storm Copper project, Nunavut

  • Aston Bay Holdings reports that the first two holes drilled at the Storm project by the project operator, American West Metals, have intersected extensive widths of visible copper sulphide mineralisation from near the surface.
  • The company confirms that the drilling is continuing with a further 15-20 holes planned “to test priority high-grade copper targets, including a number of new electromagnetic (EM) conductors that have the potential to deliver new sulfide copper discoveries”.
  • Visual inspection of drill core shows the copper sulphide mineral, chalcocite with:
  • Hole ST22-01 intersecting “over 72.1m of chalcocite and chalcopyrite mineralization hosted within dolomite of the Allen Bay Formation” and
  • over 81m of similar mineralization visible in ST22-02”.
  • Laboratory assays are pending and required to confirm the copper content in the drill core”.
  • Thomas Ulrich, CEO, said that “These are significant results and demonstrate the continuity between historical copper intersections at the 2750N Zone, where our partners are working to define a copper resource”.
  • Previous drilling of the 2750N Zone “encountered significant copper mineralization, including 110m core length at 2.45% copper (Cu) from surface (drill hole ST97-08), and 56.3m core length @ 3.07% Cu from 12.2m (drill hole ST99-19)” with the mineralisation remaining open both laterally along strike and at depth.
  • Aston Bay says that the latest drilling confirms “the continuity of the near-surface mineralization in this area and provide strong support for the potential to delineate a shallow, high-grade resource at the 2750N Zone”.
  • In addition to the Storm project, “there are numerous underexplored targets within the 120-kilometre strike length of the mineralized trend, including the Tornado copper prospect where 10 grab samples yielded >1% Cu up to 32% Cu in gossans”.
  • American West has an option to earn an 80% interest in the Storm and Seal projects.

Conclusion: Visual inspection of drill core from the first two holes of the current drilling campaign shows wide intersections of copper sulphide mineralisation and confirm continuity of mineralisation with earlier drilling results on the 2750N Zone.  The mineralised zone remains open laterally and at depth and we await assay results with interest.

Examination of the geology indicates sediment hosted DRC-style geology with hydrocarbon remobilisation with hydrocarbons as the reductant. The team see mineralization in the breccias in the 2750N Zone associated with a subvertical fault, a feeder that would have been filled with hydrocarbons.

There is significant scale in these feeders with the team now looking for other flat-lying ex-petroleum reservoirs that could host high-grade copper. The team are going to drill out the resource at 2750N, then look to drill to test some flat-lying EM conductors which may host these structures later this summer. The project offers huge potential in our view.

 

Greenland Minerals Ltd (ASX:GGG, OTC:GDLNF), 5.4c, mkt cap A$73m – Government issue draft decision to reject Kvanefjeld exploitation license

  • Greenland Minerals reports that it has received a draft decision on the Company’s application for an exploitation licence for the Kvanefjeld Project.
  • According to the draft, the license cannot be granted because it would involve exploitation of an ore body that contains more than 100 ppm of uranium.
  • This threshold was brought in as of 1 December 2021 to ban uranium prospecting, exploration and exploitation.
  • The company comments that it has been given four weeks to submit a response to the draft decision, after which a consultation will take place and a final decision.

 

Kumba Iron Ore (JSE: KIO) ZAR45,700, Mkt Cap Zar 147bn – Interims – EBITDA falls as production and realised prices decline

  • Kumba Iron Ore has released its interim results for the six months ended 30 June 2022.
  • Total revenue decreased by 32% to R43.0bn (H1 2021: R63.6bn), mainly as a result of lower realised prices, partially offset by a weaker Rand/US$ exchange rate.
  • EBITDA decreased by 48% to R23.1bn, driven by significantly lower market prices and ‘operational headwinds’ leading to higher costs.
  • Total production decreased by 13% to 17.8mt for the period, driven by a 7% decrease at Sishen to 12.9mt and a 25% decrease at Kolomela to 4.8mt.
  • Kolomela recorded close to double the rainfall at Sishen in the first quarter and continued to be hampered by low truck availability due to saturated pit conditions
  • Operating expenses: costs increases to R20.5bn (H1 2021: R18.6 billion), due to an increase in contractor fees, repairs and maintenance and fuel costs.
    • Sishen’s unit cash costs increased by 11% to R481/dmt
    • Kolomela’s unit cash costs increased by 47% to R475/dmt
    • Increases were in part driven by the decrease in production
  • Prices were lower in the period, with the Platts 62% Fe price averaging $140/dmt for the first six months of the year, down 23% compared to the same period last year.
  • Kumba received a lump premium of US$13/dmt and a Fe premium of US$4/dmt contributing to an average realised price over the period to US$138/dmt, a decrease of 37% against the US$220/dmt achieved for the period last year.

 

Premier African Minerals Ltd (AIM:PREM) (PREM LN) 0.3p, Mkt Cap £65m – Additional drilling results from the Zulu Lithium project

  • Premier African Minerals has released further drilling results from its Zulu Lithium project, located in the Fort Rixon greenstone belt in Zimbabwe.
  • The current drilling campaign is “intended to elevate the resource confidence level from Inferred to Indicated”.
  • The results “are just a few of more than 2,000 outstanding assays that we are chasing laboratories for” and today’s announcement reports the results from hole ZDD-075 which intersected multiple mineralised pegmatite horizons with:
    • An intersection of 3.74m averaging 1.29% LiO2 and 62ppm Ta2O5 from a downhole depth of 53.22m; and
    • A further 2.38m at an average grade of 0.92% Li2O and 36ppm Ta2O5 from 61.14m depth; and
    • 3.89m at an average grade of 1.16% Li2O and 15ppm Ta2O5 from 102.00m depth
  • The company also reports that it expects to close the previously announced agreement with Suzhou TA&A Ultra Clean Technology (NASDAQ:UCTT) for the establishment of a “large-scale pilot plant at Zulu … in the coming days”.
  • CEO, George Roach, explained that, in addition to progress on the drilling and on the pilot plant agreement, “good progress continues with early mine build. Site earthworks and camp construction is progressing well”.

 

 

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

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

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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