Gold pulls back on hawkish comments from central bankers
MiFID II exempt information – see disclaimer below
Atlantic Lithium* (ALL LN) – BUY – DFS highlights exceptional economics for upgrading spodumene at Ewoyaa lithium project in Ghana
Imerys (NK FR) and British Lithium (private) have agreed to form a 80/20 JV to accelerate development of the British Lithium Project in Cornwall.
Sunrise Resources (SRES LN) – Analytical Results from Reese Ridge Project
Gold – $1,905/oz – Prices continue downtrend after central bankers call for more rate hikes
- Gold continues its march lower, holding at a three-month trough.
- The extension of the downtrend came after a panel event with major central bankers, which saw J Powell raising the potential for rate hikings in both July and September.
- Powell stated that there is still a ‘long way to go’ before the 2% inflation target is reached, and that ‘it will take take’ for the impact of tighter monetary policy to quell inflation.
- The statement pushed the yield curve into deeper levels of inversion, with shorter term rates rising and weighing on investors’ incentives to hold non-interest-bearing gold.
- The yield curve has inverted to its deepest level since 1981, raising the prospect of a US recession.
- Personal Consumption Expenditure data is due tomorrow from the US, which should give the gold price an additional catalyst in either direction.
China ramps up steel exports as property contraction weighs on domestic demand
- Steel prices fell to a three year low in May, with a property contraction and a weak yuan weighing on domestic demand.
- Steel exports jumped 41% Jan-May, as overseas demand improves in Africa and Asia ex-China.
- Steel exports rose to 8.36mt in volume in May but values fell 27.5% yoy.
- China benefits from lower energy costs vs Southeast Asia and Africa, making their steel exports more attractive.
- Indonesia’s industrial ramp up has supported ‘strong demand for flat and sectional steel products…driven by the building of factories.’ (China State Construction)
Copper weakness accelerates on China weakness, dollar strength rising concentrate supply
- Copper fell again to $8,235/t, before recovering slightly to $8,255/t.
- The move followed a strengthening of the US dollar against the yuan following Powell’s roundtable discussion yesterday.
- Copper took a hit yesterday morning after disappointing data from China’s industrial firms, showing double digit decline rates in profits.
- Economists expect China’s factory activity to remain in contraction for June.
- China treatment charges are close to $90/t, pointing to buoyant supply of copper concentrate waiting to be smelted.
| Dow Jones Industrials | -0.22% | at | 33,853 | |
| Nikkei 225 | +0.12% | at | 33,234 | |
| HK Hang Seng | -1.37% | at | 18,910 | |
| Shanghai Composite | -0.22% | at | 3,182 |
Economics
US – New potential ban semiconductors into China being considered by Biden administration
- New potential restrictions considered by the Commerce Department could include a ban on Nvidia A800 chip without a special US export licence.
Japan – Consumer spending surprised on the upside with retail sales growth bouncing back in May helped by the return of overseas tourists.
- Tourism is supported by the removal of pandemic border controls as well as the yen’s recent drop to a seven-month low.
- The number of overseas visitors hit almost 70% of pre-pandemic levels as of May, according to Japan National Tourism Organisation estimates.
- Retail Sales (%mom): 1.3 v -1.1 (revised from -1.2) April and 0.8 est.
- Retail Sales (%yoy): 5.7 v 5.1 (revised from 5.0) April and 5.2 est.
Germany – Regional inflation data released so far this morning point to a pick up in the national CPI in June.
- Estimates are for headline CPI growth to climb to 6.8% this month, up from 6.3% in May.
- National numbers are due later this afternoon.
Spain – Headline inflation numbers pull back in June to the lowest in two years and below the 2% ECB target, although, core measure comes in high and ahead of expectations.
- CPI (%yoy): 1.6 v 2.9 May and 1.5 est.
- Core CPI (%yoy): 5.9 v 6.1 May and 5.5 est.
UK – Mortgage approvals climbed more than expected in May but remained well below pre-pandemic average.
- Net mortgage approvals for house purchases increased to 50k in May, up from 48.7k in the previous month, the BOE data showed.
- This compares to a pre-pandemic average of 66k (2015-2019).
- With rates at their highest since 2008, expect those numbers to pull back.
India – India is looking to introduce substantial subsidies for companies making batteries and battery storage systems
- A draft proposal by the power ministry indicates a potential $2.6bn incentive scheme for manufacturers to set up battery production in India (FT).
Currencies
US$1.0918/eur vs 1.0950/eur yesterday. Yen 144.58/$ vs 144.12/$. SAr 18.687/$ vs 18.587/$. $1.264/gbp vs $1.274/gbp. 0.662/aud vs 0.665/aud. CNY 7.241/$ vs 7.234/$
Dollar Index 103.05 vs 102.59 yesterday.
Commodity News
Precious metals:
Gold US$1,905/oz vs US$1,910/oz yesterday
Gold ETFs 92.8moz vs US$92.9moz yesterday
Platinum US$920/oz vs US$923/oz yesterday
Palladium US$1,253/oz vs US$1,277/oz yesterday
Silver US$22.76/oz vs US$22.78/oz yesterday
Rhodium US$5,000/oz vs US$5,100/oz yesterday
Base metals:
Copper US$ 8,255/t vs US$8,363/t yesterday
Aluminium US$ 2,168/t vs US$2,204/t yesterday
Nickel US$ 20,005/t vs US$20,580/t yesterday
Zinc US$ 2,377/t vs US$2,379/t yesterday
Lead US$ 2,071/t vs US$2,091/t yesterday
Tin US$ 26,170/t vs US$26,315/t yesterday
Energy:
Oil US$73.8/bbl vs US$72.5/bbl yesterday
- Crude oil prices moved higher as the EIA reported a large 9.6mb w/w US crude draw, as well as small product builds to both distillate and gasoline stocks, with refinery utilisation falling from 93.1% to 92.2%.
- European energy prices fell as natural gas storage levels rose 1.8% w/w to 76.7% full (vs 60.6% 5-year average), as strong builds in Germany, Italy and the Netherlands contributed to aggregate storage of 863TWh.
- Engie announced plans to pay €15bn to transfer all nuclear waste liabilities to the Belgian government as part of a deal to extend the life of two nuclear reactors, which removes a key element of risk from the balance sheet.
Natural Gas US$2.677/mmbtu vs US$2.790/mmbtu yesterday
Uranium UXC US$56.50/lb vs US$56.50/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$114.2/t vs US$112.6/t
Chinese steel rebar 25mm US$523.4/t vs US$523.3/t
Thermal coal (1st year forward cif ARA) US$118.0/t vs US$118.0/t
Thermal coal swap Australia FOB US$145.0/t vs US$143.0/t
Coking coal swap Australia FOB US$237.0/t vs US$237.0/t
Other:
Cobalt LME 3m US$29,525/t vs US$29,525/t
NdPr Rare Earth Oxide (China) US$64,567/t vs US$66,626/t
Lithium carbonate 99% (China) US$41,779/t vs US$41,814/t
China Spodumene Li2O 6%min CIF US$4,090/t vs US$4,090/t
Ferro-Manganese European Mn78% min US$1,119/t vs US$1,122/t
China Tungsten APT 88.5% FOB US$315/mtu vs US$315/mtu
China Graphite Flake -194 FOB US$735/t vs US$735/t
Europe Vanadium Pentoxide 98% 7.4/lb vs US$7.4/lb
Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg
China Ilmenite Concentrate TiO2 US$302/t vs US$302/t
Spot CO2 Emissions EUA Price US$91.3/t vs US$92.7/t
Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t
Battery News
Company News
Atlantic Lithium* (ALL LN) 28p, Mkt Cap £170m – DFS highlights exceptional economics for upgrading spodumene at Ewoyaa lithium project in Ghana
BUY
- Atlantic Lithium report improved economics on their Ewoyaa lithium project in the Cape Coast area of Ghana.
- The project is close to the coast offers relatively short-haul trucking to the port of Takoradi, which is just over 100km from the mine site.
- Management are planning to produce 365,000tpa of spodumene concentrate over 12-years though we expect the resource to grow beyond the current defined JORC resource.
- The use of the DMS and a later flotation plant means the mine should produce half 6% Spodumene Concentrate (SC6) and half 5.5% Spodumene Concentrate (SC5.5)
- DFS project economics vs previous PFS estimates as published 22/09/2022:
- Total mined ore 30.6mt vs 25mt in the PFS
- Throughput: ~2-2.7mtpa
- Production: ~300,000tpa (SC5.5 and SC6) – vs 255,000tpa of (SC6)
- Price assumption US$1,587/t (from $1,359/t with $1,200/dmt long term pricing) for SC6% FOB Ghana Port – Lithium price is
- NPV8 post-tax: US$1.5bn from $1.33bn
- IRR: 105% formerly 224%
- Payback: 19 months from 5 months
- Free cash flow: US$2.4bn
- EBITDA: US$316mpa from $248mpa average
- Revenue US$550mpa from
- C1 Op costs US$377/t from $278m for FOB after by-product credits
- AISC US$610/t from $460/t
- Capex: US$185m – increased from $125m
- LOM: 12 years was 12.5 years
- LOM revenues increased to $6.6bn from US$4.84bn
- Modular DMS: ‘Dense Media separation’ to accelerate production and generate early cash flow and increased throughput from 2Mtpa to 2.7Mtpa at low capital intensity of US$64/t.
- Commissioning and ramp up: management plant to process ~450,000t of ore in the first nine months, starting Q2 2025 using the modular DMS plant with ore from the Ewoyaa South 2 pit.
- Mining and processing will then scale up to 2.7Mtpa from Q1 2026 for the next 11 years.
- The team are also investigating the potential to produce feldspar for local ceramics as a by-product from the DMS modules.
- Mining: The early production phase covering the first 14 months results in relatively little waste material at 6.5:1 as the pegmatite to be mined forms a series of small hills in the area.
- Waste material will be placed back into the mined pits in time. The total strip ratio is estimated at 12.3:1 with waste ratios increasing with time and pit depth.
- Tailings: ‘Three to five years’ worth of tailings will be stored in an Integrated Waste Landform Tailings Storage Facility (IWLTSF) within the north-eastern waste dump.’
- Capex: capital costs have risen largely due to increased use of DMS modules to accelerate production
- The use of modular DMS processing should enable the mine to repay its capital before the full processing plant is completed.
- Mineralogy: a simple flowsheet enables Atlantic to use a simple 3-stage crushing/DMS plant to produce 5.5% and 6% spodumene concentrate in approximate equal proportions
- Ore Reserve increased by 35% to 25.6mt @ 1.22% Li2O from 18.9mt.
- The DFS incorporates the estimated JORC Mineral Resource Estimate of 35.3Mt @ 1.25 Li2O
- An additional 4.7Mt of secondary product should come out of the DMS plant grading 1.16% Li2O
- Job creation: >600 direct jobs in Ghana
- FID: Final Investment Decision to follow issue of the mining lease for the Ewoyaa project
- Power: The main open pit is located directly under several high-tension power lines. While these lines will be moved, they will also provide access to hydropower power for the process plant.
- People: Ghana currently has a surplus of keen, skilled miners and processing experts mainly from the gold mining industry. The recent closure of many informal mines has led to a surplus of skilled local workers.
- ESG: Ghana produced some 6,200GWh of hydropower in 2020. Atlantic plan to apportion 1% of retained earnings for local initiatives and for the creation of employment opportunities. Management see Ewoyaa as offering long-lasting benefits for the region.
- Water: Ground water inflow rates rising from 184m3/d should rise to 10,585m3/d mean the project will only use local lake water in the short term.
- Mining license approval process: Atlantic is currently waiting for approval of the Mankessim licence consolidation ahead of resubmission of Mining Lease application for the Project. In order to facilitate a smoother approvals process and simplified operational structure, the Company was advised by the Minerals Commission Technical Committee to consolidate the Project’s proposed mine and processing plant site (formerly covering the Mankessim and Mankessim South licences) into the single Mankessim licence.’
Conclusion: Management have worked fast and hard to produce a comprehensive Definitive Feasibility Study for the Ewoyaa lithium project which optimises and extends the PFS published last September. We see Atlantic as probably the world’s most promising, undervalued, near-term, hard-rock, lithium mining project.
*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel recently visited the Ewoyaa mine site in Ghana and drove onto Takoradi to check the quality of the road to port. Our intrepid analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund.
Imerys (NK FR) €36, Mkt Cap €3bn and British Lithium (private) have agreed to form a 80/20 JV to accelerate development of the British Lithium Project in Cornwall.
- The investment grants Imerys access to the British Lithium bespoke lithium mica processing technology, its technical team and its lithium pilot plant.
- The project is expected to cost £575m in development expenses suppling ~20ktpa LCE over 25-year life of mine.
- The deposit is estimated to host 161mt at 0.54% Li2O in total resource (all Inferred).
- The drilling programme is in progress to infill and grow the resource as well as providing data for the PFS.
- Imerys is a specialty minerals producer with a €4.4bn in revenue (2022) and ~14,000 employees and is currently developing the EMILI Mica Lithium Project in central France (Echassieres).
- The €1bn project is expected to see start of construction works in 2025 and start of production in 2028 designed to run at 34ktpa LiOH for at least 25 years.
Sunrise Resources (SRES LN) 0.1p Mkt Cap £4m – Analytical Results from Reese Ridge Project
- Sunrise Resources provides a project update for its Reese Ridge Project in Nevada.
- Following an unexpectedly high mapping sample of 15.9% Zn, the Company has completed a field visit to the site.
- Two additional grab samples from the sample site returned similarly high-grade zinc of 143.6% Zn, 12.8% Pb (No 52303) and 29.6% Zn (No.52304).
- The Company is working off the assumption that the samples form part of a wider Carbonate Replacement Deposit.
- Sunrise draws attention to the Taylor Hermosa deposit in Arizona, a CRD deposit bought by South 32 for $1.6bn in 2018 and currently under development.
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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
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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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SPA research ratings – Based on a time horizon of 12 months: Buy = Expec
