Base metals head for best week in six months on US$ weakness
MiFID II exempt information – see disclaimer below
Happy Bastille Day – Joyeux quatorze Juillet
- Happy Bastille Day to all Frenchmen, except the noblemen for whom Bastille Day was not such a happy event.
- We would prefer to celebrate a Happy end-of-Ukraine-War day?
BeMetals* (BMET CN) – Kato gold project hosts corridor of gold mineralisation in Japan
Strategic Minerals* (SML LN) – Progress report highlights critical minerals potential for Redmoor tin, tungsten project in Cornwall
Savannah Resources* (SAV LN) – Over £6m raised in equity placing to progress the Barroso Lithium Project
Pre-IPO financing for High-Purity Alumina project
Li-ion batteries use a separator membrane made out of High-Purity Alumina
- High-Purity Alumina (HPA) is an inert chemical with high thermal stability. It gives good heat resistance and insulation making it ideal as a coating for separator membranes.
- The project alumina has been shown to be suitable for Li-ion batteries, LED lighting and synthetic sapphire for smartphones and tablets,
- The resource contains a JORC inferred resource sufficient for 10,000 – 20,000tpa of HPA >30 years
- The process uses an innovative process flowsheet combining commercial proven technologies with recent metallurgical tests producing 99.995% alumina.
- CRU estimate demand for HPA powder could reach 187,000t in 2028 from 19,000t in 2018.
- CRU predict substantial demand growth led by Li-ion battery and LED production,
- Price: High-purity alumina sells for ~$30,000/t today up from $24,000/t in 2018,
- The company looking to fund HPA studies, metallurgical work, working capital and listing costs
*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.
The US could classify the UK a “domestic” source of some critical minerals, particularly tungsten and tin.
- ‘Atlantic Declaration’ agreed by the UK prime minister and the US president at the White House laid out a new action plan for cooperation in June.
- The declaration recognised the close UK-US relationship with a new action plan will see the UK and US strengthen supply chains and develop the technologies of the future and invest in one another’s industries
- The two nations agreed an innovative economic partnership across a full spectrum of economic, technological, commercial and trade relations.
- The declaration includes working together to reduce our vulnerabilities across critical technology supply chains
- See note on Strategic Minerals below.
| Dow Jones Industrials | +0.14% | at | 34,395 | |
| Nikkei 225 | -0.09% | at | 32,391 | |
| HK Hang Seng | +0.24% | at | 19,397 | |
| Shanghai Composite | +0.04% | at | 3,238 |
Economics
US – A rally in equities paused as earning season in Europe and the US kicks off.
- Christopher Waller, Fed Board member and a voting FOMC member, expects the central bank to raise rates at least twice this year.
- “I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target.”
- Separately, weekly jobless applications came in below estimates taking less volatile 4-week average to ~247k, down from ~257k, the highest since late 2021, in June.
- Weekly Jobless Claims (‘000): 237 v 249 (revised from 248) previous week and 250 est.
- Continuing Claims (‘000): 1,729k v 1,718k (revised from 1,720k) previous week and 1,720k.
- PPI 0.1% in June vs -0.4% in May and 0.9% yoy in June vs 1.1% yoy in May
- Core PPI 0.1% in June vs 0.1% in May and 2.4% yoy in June vs 2.6% yoy in May
China – The PBOC signalled more targeted support for the property market may be on the cards while downplaying risks in the banking sector, Bloomberg reports.
- The central bank will further support home buying demand on first homes and upgrades.
- Non performing loans to developers and mortgages that are risk are said to represent a relatively small fraction of total lending.
- Trade surplus US$70.6bn vs US$65.8bn in May
- Imports of crude rose 45% yoy to 12.6mbpd in June – growth is due to Russian imports
- Copper imports rose 1.3% mom in June to 449.649t but fell -16.4% yoy with a 12% fall year-to-date to 2.59mt
- Copper concentrate imports rose 3.2% mom to 2.13mt
- Refined copper output rose 14% in June to ~860kt from a fall of -2.4% in May (Antaike)
Japan – The central bank is likely to adjust its monetary policy at the coming meeting (July 28)
- This follows stronger than expected inflation data, Bloomberg cited a former executive director and BBOJ chief economist at the bank.
- “I expect they will make some kind of adjustment to YCC (Yield Curve Control) this month… if they don’t, it doesn’t make sense.”
South Korea – Central bank left rates unchanged at 3.25%.
India – India launches mission to land rocked on the Moon’s south pole
- The last Indian mission crashed on the mood in 2020.
- The moon lander is currying a series of experiments to be run over a two week period.
EU – Industrial production lifted 0.2% mom in June vs 1% in May but fell -2.2% yoy in June vs 0.2% yoy in May
France – Inflation rose 0.2% mom in June vs -0.1% in May and 4.5% yoy in June vs 5.1% yoy in May
Currencies
US$1.1211/eur vs 1.1142/eur yesterday. Yen 138.33/$ vs 138.47/$. SAr 17.990/$ vs 18.064/$. $1.310/gbp vs $1.302/gbp. 0.687/aud vs 0.683/aud. CNY 7.142/$ vs 7.170/$.
Dollar Index 99.94 vs 100.40 yesterday.
Commodity News
Precious metals:
Gold US$1,955/oz vs S$1,961/oz yesterday
Gold ETFs 92.1moz vs US$92.1moz yesterday
Platinum US$967/oz vs US$964/oz yesterday
Palladium US$1,280/oz vs US$1,306/oz yesterday
Silver US$24.74/oz vs US$24.21/oz yesterday
Rhodium US$4,350/oz vs US$4,350/oz yesterday
Base metals:
Copper US$ 8,625/t vs US$8,507/t yesterday
Aluminium US$ 2,268/t vs US$2,247/t yesterday
Nickel US$ 21,225/t vs US$21,335/t yesterday
Zinc US$ 2,436/t vs US$2,443/t yesterday
Lead US$ 2,107/t vs US$2,114/t yesterday
Tin US$ 28,575/t vs US$28,900/t yesterday
Energy:
Oil US$81.1/bbl vs US$80.4/bbl yesterday
- Crude oil prices moved higher supported by the weaker US dollar and an unplanned outage at the 0.25mb/d Sharara oilfield in Libya due to domestic political protests in the region.
- US natural gas prices edged lower as the EIA storage report detailed a 49bcf build to 2,930bcf last week, with storage levels now 14.2% above the 5-year average and 1H23 LNG exports up 4% y/y to average 12.8bcf/d.
- BP confirmed the award of three sites for building 2GW of wind power capacity in Germany’s first offshore tender, for which it bid €6.8bn payable over the next 20 years and expects project returns of between 6-8%.
- ExxonMobil has agreed a $4.9bn all-stock deal to buy CO2 transportation and enhanced oil recovery specialist Denbury, which currently produces 47kboe/d and owns and operates a 1,300-mile CO2 US pipeline network.
Natural Gas US$2.544/mmbtu vs US$2.653/mmbtu yesterday
Uranium UXC US$55.40/lb vs US$55.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$110.1/t vs US$109.9/t
Chinese steel rebar 25mm US$528.6/t vs US$525.1/t
Thermal coal (1st year forward cif ARA) US$101.0/t vs US$108.5/t
Thermal coal swap Australia FOB US$128.0/t vs US$128.0/t
Coking coal swap Australia FOB US$225.0/t vs US$225.0/t
Other:
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$61,892/t vs US$60,109/t
Lithium carbonate 99% (China) US$41,658/t vs US$41,491/t
China Spodumene Li2O 6%min CIF US$4,080/t vs US$4,080/t
Ferro-Manganese European Mn78% min US$1,127/t vs US$1,120/t
China Tungsten APT 88.5% FOB US$315/mtu vs US$315/mtu
China Graphite Flake -194 FOB US$685/t vs US$685/t
Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb
Europe Ferro-Vanadium 80% 32.25/kg vs US$32.25/kg
China Ilmenite Concentrate TiO2 US$309/t vs US$305/t
Spot CO2 Emissions EUA Price US$94.6/t vs US$94.0/t
Brazil Potash CFR Granular Spot US$335.0/t vs US$335.0/t
Company News
BeMetals* (BMET CN) – C$0.14, Mkt cap C$24m – Kato gold project hosts corridor of gold mineralisation in Japan
- BeMetals, the latest foal out of the Bema Gold and B2 Metals stable reports the identification of a corridor of gold mineralisation at Kato in Japan
- Drilling of 1,660m shows intersections from both the Seta and Kamitake veins with meaningful grades of gold
- on the Seta Vein with grades of:
- 6.40m @ 1.74 g/t gold and 5.4 g/t silver
- Inc. 1.70 m @ 5.58 g/t Au and 11.5 g/t Ag
- 5.60 m grading 3.29 g/t Au and 7.9 g/t Ag
- Inc. 1.00 m @ 9.46 g/t Au and 17.6 g/t Ag
- Also inc. 0.43 m @ 9.65 g/t Au and 8.7 g/t Ag
- 13.55 m grading 1.19 g/t Au and 18.32 g/t Ag
- Inc. 1.95m @ 3.55 g/t Au and 21.66 g/t Ag
- 10.54 m grading 1.28 g/t Au and 17.4 g/t Ag
- Inc. 1.37 m grading 4.48 g/t Au and 75.5 g/t Ag
- 6.70 m grading 2.48 g/t Au and 36.1 g/t Ag
- Inc. 1.90 m grading 7.50 g/t Au and 91.7 g/t Ag
- 3.60 m grading 2.12 g/t Au and 14.9 Ag
- Inc. 1.00 m grading 6.31 g/t Au and 17.8 g/t Ag
- 3.15 m grading 1.18 g/t Au and 7.7 Ag
- Inc. 0.75 m grading 3.32 g/t Au and 13.0 g/t Ag
- Previous drilling showed: 17.5m @ 8.15 g/t Au and 18.65 m @ 5.01 g/t Au
* True widths look like they could range between 55 to 65% of the drilled intersections
- The result show potential to “further extend the higher-grade zones within the Seta Vein.”
- Kato corridor appears to host around 200m x 1.3km of gold veining indicating the potential for large-scale mineralization.
- “Drill hole KT23-17 was collared close to the outcrop of an extensive sinter unit. Such units represent the surface expression of epithermal systems, and their existence shows the full system is preserved. “
- Kato gold mineralization style is similar in style to the Hishikari Gold Mine in Japan, Lihir in PNG and Kupol and Julietta in Russia which were discovered and developed by Bema gold.
- *Please refer to technical report entitled, “Kato Gold Project Japan NI 43-101 Technical Report” with an effective date of July 13, 2021.
Conclusion: Some companies and geologists are said to be lucky though we reckon there is a certain skill and determination involved with geological success. Bema Gold had it with the development of Kupol, B2 Gold had it with Masbate and Fekola, now, hopefully, BeMetals are about to continue with the tradition.
The team are also due to test a series of targets in Zambia.
*SP Angel act as broker to BE Metals
Strategic Minerals* (SML LN) 0.14p, Mkt Cap £2.8m – Progress report highlights critical minerals potential for Redmoor tin, tungsten project in Cornwall
- Strategic Minerals report on progress at its Cornwall Resources subsidiary in Cornwall, UK
- Redmoor: Work continues on re-logging and sampling of existing Redmoor drill core while negotiating to expansion the company’s mineral rights and work programs.
- Management are also preparing to resubmit its application for grant funding as Redmoor should come within the UK Government Critical Minerals Strategy.
- Redmoor could, in time, become a significant employer and tax payer within the region as well as proving critical minerals for the UKs manufacturing and defense industries.
- Strategic Minerals also highlight that the US could classify the UK a “domestic” source of some critical minerals, including tungsten and tin.
- We know certain funds which are backed with US government funds which are already investing in critical minerals to help the US Department of Defense in its efforts to source non-Chinese and Russian raw materials.
- The US is particularly interested in the sourcing of non-Chinese and Russian tungsten in its components by 2027.
- The US consumers some 45% of the world’s tungsten, but 90% of this comes from Russia and China.
- This makes Redmoor one of just a few, former mines in the west offering potential for redevelopment.
- Talks are also ongoing with respect to potential collaboration to progress Redmoor at the asset level with “multiple groups accessing the Redmoor data room”.
- Leigh Creek (South Australia): two parties have exchanged confidentiality agreements for access to the Leigh Creek Copper Mine data room.
- Management continue to wait on news from the South Australia Department of Energy and Mining in relation to the Programme for Environmental Protection and Rehabilitation in December.
- Leigh Creek should be a relatively quick project to bring into production once permits are in place. The surrounding area also offers significant potential for exploration and discovery which could extend the life and production of the Leigh Creek operations.
- Cobre (USA): access to the Cobre magnetite tailings site has been extended to end-March 2027.
- “The Board is currently in Cornwall reviewing CRL’s planned operations and looks forward to seeing shareholders at its upcoming AGM” on 18 July.
- Cobre sold $2.45m worth of magnetite last year having secured a 20% increase in its sales price though sales reduced in Q4 due as the US economy slowed. The client for Cobre magnetite is also said to have a large stockpile of material.
- Cash: The company continues to run a cash generative iron ore project in New Mexico, USA. The company generated $0.77m in cash last year and held $0.34m at the year end.
Conclusion: Strategic Minerals has two critical metals projects, both offering collaboration potential and paths to potential production.
*SP Angel acts as Nomad and Broker to Strategic Minerals
Savannah Resources* (SAV LN) 4.7p, Mkt Cap £79m – Over £6m raised in equity placing to progress the Barroso Lithium Project
BUY – Under Review
- The Company raises £6.1m through a placing ~130m of new shares at 4.7p with further proceeds expected from the ongoing retail offer using the PrimaryBid platform.
- The PrimaryBid offer remains open to individual investors on same terms (ie 4.7p) until 4.30pm Monday 17 July.
- Combined with ~£5.0m in cash, the proceeds will be used for DFS and RECAPE application related work including:
- DFS related resource infill and geotechnical drilling;
- Processing plant and infrastructure engineering studies and design;
- Next stage of environmental permitting process (RECAPE);
- Ongoing land acquisition and community engagement initiatives;
- Expansion of the on the ground team in Portugal and general working capital needs.
- Four directors subscribed for 1.7m shares while Al Marjan, a ~16% shareholder in the Company, took up 7.5m shares.
- The Barroso Lithium Project hosting the Europe’s largest hard rock spodumene deposit is expected to have permitting and DFS completed in H2/24.
Conclusion: The placing completed essentially at the market price reflects strong support from existing and new investors as well as attractive investment case of the project strategically located next to the second largest EV market. Proceeds together with existing £5m cash balance (no debt) allows the team to accelerate DFS and permitting related workstreams with both milestones targeted for H2/24.
Our target valuation is being revised to account for results of retail offer and final dilution, although, strong investment case remains with a series of rerating catalysts lying ahead (permitting, DFS, FID, offtakes and strategic partnerships, start of construction, first production).
*SP Angel acts as nomad and broker to Savannah Resources
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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
Sales
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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, Tungsten, Spodumene, Ferro-Manganese, Graphite | Asian Metal |
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