Gold climbs as Fed hints at potential end to interest rate tightening cycle
MiFID II exempt information – see disclaimer below
Beowulf Mining* (BEM LN) – Encouraging exploration activity in Kosovo
Calidus Resources (CAI AU) – Tabba Tabba exploration with SQM accelerates
Albemarle Corporation (ALB US) – Earnings Results as forecasts cut on weaker lithium prices
PYX Resources (PYX LN) – Zircon sales increase on demand from China and India
Shanta Gold (SHG LN) – Infill drilling results at the West Kenya Gold Project
Sovereign Metals* (SVML LN) – Sovereign upscales graphite bulk sample program at Kasiya project in Malawi
Nickel to bounce back to deficits by 2028 on battery demand
- Analysts anticipate Class 1 nickel market to hit a deficit by 2028. (BloombergNEF)
- The market has been hit in recent months by a glut of Indonesia supply following the development of HPAL processing technologies for laterites.
- The deficit forecasts are reliant on limited refinery capacity expansion.
Panama Congress approves bill to repeal Cobre Panama contract in hit to First Quantum
- The Panama Congress approved a bill yesterday to repeal the recently-signed contract for FQM to operate the Cobre Panama mine.
- The proposal also limits the approval of new mining concessions.
- Panama is fast becoming the least attractive investment jurisdiction for mining majors, with FQM’s stock down 50% since last week.
Capital costs blow out at Quebrada Blanca mine QB2 expansion
(Teck 60%, Sumitomo 30%, Enami 10%)
- Capital costs jump 85% to US$8.7bn from US$4.7bn in 2019.
- Management blame logistical challenges based on Russia’s invasion of Ukraine along with regulatory approvals, additional costs for safety and environmental management and extra road and maintenance costs.
- Teck’s contractors also get blamed for below planned performance.
- Russia previously produced much of the world’s heavier process plant machinery with Chinese manufacturers capitalising on Russia’s absence from this market.
- We also suspect a combination of Covid disruption, sky-high prices through the Covid period and general inflation have conspired to hike capital costs.
- While rising capital costs have killed off some previously promising projects further project optimisation can often lead to simpler processing and a better way of building projects.
- We now feel many costs are normalising from the crazy high levels seen through Covid and expect new Feasibility Studies to reflect more reasonable cost in their quotations.
| Dow Jones Industrials | +0.67% | at | 33,275 | |
| Nikkei 225 | +1.10% | at | 31,950 | |
| HK Hang Seng | +0.75% | at | 17,231 | |
| Shanghai Composite | -0.45% | at | 3,009 |
Economics
US – The Fed left rates on hold at 5.25-5.50% in a unanimous decision in line with expectations with a balanced outlook on the policy delivering gains in equity and bond markets.
- “We are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring down inflation to 2% over time and we’re not confident yet that we have achieved such a stance,” Jerome Powell said.
- 2y Treasury yields dropped to 4.94%, the lowest level in three weeks while 10y debt rates were down at 4.76%, the weakest in two weeks.
- Markets also cut back their expectations for a rate hike in December.
- Commenting on future rate cuts, Powell said that “the committee is not thinking about rate cuts right now at all”.
- Core PCE measure slowed down to 3.7% in September, the lowest since H1/21 and down from highs of 5.6% recorded in February.
- Wage earnings have been also coming off and are running at 4.2% as of September, down from 4.8% at the start of the year, although, the labour market continued to post strong growth as seen by above pandemic gains in NFPs.
China – CCP Central Financial Work Conference in Beijing is now done. Key takeaways courtesy of John Browning of BANDS Financial:
-
- Tightening the Party control throughout the financial infrastructure,
- strengthening financial regulation
- reforming property and local government debt.
- We suspect the CCP will do whatever it takes to restore order to the property sector with more focus on the administration and implementation of existing financial policies.
- We suspect this means greater regulation and stricter compliance.
Japan – PM Fumio Kishido announced a stimulus package worth more than ¥17tn ($113bnn) amid higher costs of living and declining popularity, FT reports.
- The spending will be funded by a supplementary budget in this year’s budget (Mar/24).
UK – BOE rates announcement day.
- Markets are largely expecting the central bank to keep rates unchanged for a second consecutive meeting at 15 year high of 5.25% under the so called ‘higher for longer’ or “Table Mountain’ strategy.
- Expectations are for the next move to be a cut towards H2/24 amid mounting evidence that the UK economy, labour market and inflation are pulling back.
Turkey – The central bank revised its inflation forecasts higher implying more monetary tightening ahead.
- End-2023 inflation is expected to come at 65%, up from a previous estimate of 58%, with the gauge to peak at 75% before finishing 2024 at 36%, up on 33% estimated previously.
- “Monetary tightening will continue until a marked improvement in inflation,” Governor said.
- The central bank hiked rate by 5% to 35% last time in late October
Currencies
US$1.0598/eur vs 1.0558/eur previous. Yen 150.45/$ vs 151.30/$. SAr 18.443/$ vs 18.735/$. $1.217/gbp vs $1.215/gbp. 0.643/aud vs 0.634/aud. CNY 7.319/$ vs 7.319/$.
Dollar Index 106.41 vs 106.78 previous.
Commodity News
Precious metals:
Gold US$1,986/oz vs US$1,978/oz previous
Gold ETFs 87.2moz vs 87.3moz previous
Platinum US$934/oz vs US$926/oz previous
Palladium US$1,114/oz vs US$1,113/oz previous
Silver US$22.99/oz vs US$23/oz previous
Rhodium US$4,250/oz vs US$4,350/oz previous
Base metals:
Copper US$ 8,084/t vs US$8,141/t previous
Aluminium US$ 2,247/t vs US$2,261/t previous
Nickel US$ 18,025/t vs US$18,360/t previous
Zinc US$ 2,409/t vs US$2,464/t previous
Lead US$ 2,082/t vs US$2,115/t previous
Tin US$ 23,735/t vs US$24,585/t previous
Energy:
Oil US$85.9/bbl vs US$85.6/bbl previous
Natural Gas €47.850/MWh vs €46.700/MWh previous
Uranium UXC US$74.00/lb vs US$73.00/lb previous
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$120.9/t vs US$118.7/t
Chinese steel rebar 25mm US$535.4/t vs US$534.9/t
Thermal coal (1st year forward cif ARA) US$118.0/t vs US$119.3/t
Thermal coal swap Australia FOB US$127.0/t vs US$128.5/t
Coking coal swap Australia FOB US$333.0/t vs US$333.0/t
Other:
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$69,888/t vs US$69,883/t
Lithium carbonate 99% (China) US$21,110/t vs US$21,108/t
China Spodumene Li2O 6%min CIF US$2,010/t vs US$2,010/t
Ferro-Manganese European Mn78% min US$1,023/t vs US$1,019/t
China Tungsten APT 88.5% FOB US$300/mtu vs US$300/mtu
China Graphite Flake -194 FOB US$625/t vs US$630/t
Europe Vanadium Pentoxide 98% 6.2/lb vs US$6.2/lb
Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg
China Ilmenite Concentrate TiO2 US$311/t vs US$311/t
Spot CO2 Emissions EUA Price US$83.1/t vs US$82.7/t
Brazil Potash CFR Granular Spot US$342.5/t vs US$342.5/t
EV & Battery News
Tesla NACS on course to become US charging standard
- More automakers have signed up to access Tesla’s EV charging infrastructure across the United States, taking the company’s superchargers closer to the industry standard.
- Texas has joined Kentucky, Washington and Florida is outlining mandates EV charging companies to include Tesla’s plug if they want to be eligible for federal funds.
- Tesla’s NACS is more widely available and reliable than rival charging network CCS, which is backed by automakers such as Volkswagen.
- In the last year or so, Ford, GM, Rivian, Volvo, Polestar, Mercedes-Benz, Nissan, Honda, Jaguar, Hyundai, Kia, BMW NA, Rolls Royce, Toyota and Subaru have adopted the NACS.
LG Chem develops flame-retardant material for EV batteries
- There has been recent discussion around the safety of EVs following the car park fire at Luton Airport – the fire service later confirmed the fire started from a diesel vehicle.
- LG Chem has developed a new battery casing material that can withstand flames up to 2732 Fahrenheit for more than 20 mins.
- The new thermoplastic can withstand flames and the ensuing pressure 14 times better than existing materials and has been designed to retard thermal runaway.
Difficult EV market complicating Renault EV business IPO
- Weaker demand, increased competition from China and market volatility are complicating French carmaker Renault’s plans to list its EV business Ampere, sources to Reuters.
- Renault aims to extract more value from Ampere through an IPO but is unlikely to go ahead if the final valuation falls below €7bn, according to one source.
Company News
Beowulf Mining* (BEM LN) 1.6p, Mkt Cap £18m – Encouraging exploration activity in Kosovo
Beowulf Mining owns 61.1% of the Vardar Minerals Project
- Beowulf provides an update from its Vardar Minerals project in Kosovo.
- At the Shala Central Licence, mapping, surface sampling and drone magnetics have been conducted.
- Promising grab sample results collected from gossans included:
- 3.3% Zn
- 1% Pb
- The team have now identified geochemical anomalies over a two kilometre strike, with elevated arsenic, copper and lead/zinc soil samples.
- The team is targeting gossanous outcrops at Shala Central, with potential for sulphide mineralisation and elevated base metal values.
- Results from mapping, soil and grab samples at Shala East are ongoing.
- Going forward, infill sampling will be completed at Shala Central to capitalise on the recent results.
- Mapping and sampling has begun at Shala East, with soil, float and rock-chip sampling being conducted.
*SP Angel acts as Nomad and Broker to Beowulf Mining
Calidus Resources (CAI AU) A$0.195, Mkt Cap A$186m – Tabba Tabba exploration with SQM accelerates
- Calidus and SQM, who hold respective 40% stakes in Tabba Tabba project, have begun exploration for lithium.
- The group have completed a first soil sampling programme for lithium.
- The Project lies down strike from Wildcat Resources’ Tabba Tabba discovery.
- Wildcat announced in September it had hit intersections including:
- 85m @ 1.1% Li20 from surface,
- 218m @ 0.8% Li20 from 16m
- 21m @ 1.1% Li20 from 42,
- Wildcat’s pegmatite zone stretches over 1.2kkm at true widths between 50m and 132m.
- Chris Ellison’s MinRes took a 19.85% stake in Wildcat on Tuesday, as he and Gina continue to ‘hoard the rocks’ with their aggressive spodumene acquisition strategy/
- Calidus’ asset also lies downs trike of De Grey’s King Col discovery and ground acquired by Andrew Forrest’s Fortescue Metals.
- De Grey hit 17m @ 2.55% Li20 and 8m @ 1% Li20.
- Calidus has identified muscovite pegmatite and pegmatite scree outcropping.
Albemarle Corporation (ALB US) $122, Mkt Cap $9.7bn – Earnings Results as forecasts cut on weaker lithium prices
- Albemarle reported net sales of $2.3bn for the quarter, up 10%, and net income of $302.5m.
- EBITDA forecasted to be flat/down yoy for full year 2023 and net sales expected to increase 30-35% yoy.
- The Company held $600-800m in cash by year end.
- Forecasts have been lowered for lithium sales owing to lower index pricing.
- The Company invested $82m in Patriot Battery Metals over the period as it continues to explore options for lithium M&A.
- Market Commentary
- The Company notes that lithium carbonate inventories for lithium traders and cathode producers are sitting at sub 10 day levels.
- Lithium hydroxide inventories for China downstream cathode producers are also sitting at sub 10 day levels for cathode producers.
- However, hydroxide inventories at lithium converters are more elevated, over 30 days. These are sliding.
PYX Resources (PYX LN) 18p, Mkt Cap £78m – Zircon sales increase on demand from China and India
- PYX Resources reports production of 4,000t of zircon from its mineral sands operations in Kalimantan during the three months to 30th September 2023 bringing year to date output to 9.700t representing a 43% increase on the 6,800t produced during the first 9 months of 2022.
- Demand for zircon from both India and China is reported to have aided an 88% increase in quarterly zircon sales to 4,200t (Q3 2022 – 2,300t) bringing YTD sales to 9,400t (2022 – 6,100t).
- Despite the reported demand strength from India and China, quarterly sales prices dipped 19% compared to Q3 2022 to US$2,116/t (Q3 2022 – US$2,606/t) bringing the YTD average to US$2,012/t (2022 – US$2,697).
- Welcoming the growth in both production and sales, Chairman and CEO, Oliver Hasler, said that as the company enters “the second half of the year, we are optimistic about our strategic plan and the continued rise of Mineral Sands prices”
- The company also highlights the renewal of “a 10-year … Mining Operation and Production Licence) exploration and mining licence agreement for the Tisma project … [which it describes as holding] … immense potential] … [and] … a significant milestone for the Company”.
Shanta Gold (SHG LN) 11p, Mkt Cap £113m – Infill drilling results at the West Kenya Gold Project
- The Company released results from ~5,100m of mostly infill drilling at Isulu and Bushiangala as well as Ramula conducted over Q2/23.
- Drilling continued to return narrow high grade mineralised intersections boding well for MRE conversion.
- Additionally, the team carried sterilisation drilling conducted around Ramula successfully testing the area for the potential infrastructure location with a total of 3,700m of drilling from 12 holes completed.
- Shanta has now completed 45% of total planned 2023 drilling at Isulu and Bushiangala.
Sovereign Metals* (SVML LN) 24.55p, Mkt Cap £132m – Sovereign upscales graphite bulk sample programme at Kasiya project in Malawi
- Sovereign Metals has upscaled work on the graphite mineralisation within the Kasiya rutile and graphite deposit in Malawi.
- The team are looking to process >1,000kg of natural graphite from a 100t bulk sample of material extracted from the Kasiya deposit.
- The graphite will then be tested for its suitability for Li-ion battery anodes with work towards its qualification as an accredited anode material product.
- Sovereign and Rio Tinto are collaborating on project with a particular focus on the supply of SPG ‘spherical purified graphite’.
- Testwork shows Kasiya high-purity graphite to have near perfect crystallinity with unusually low CO2 footprint.
- Potential to produce 244ktpa of graphite with world’s lowest cash operating costs estimated at US$404/t.
- The team are using a custom-made 300mm diameter spiral auger with sampling to 20m depth.
- The graphite pre-concentrate is expected to grade 4-5% Ct whilst the HMC is expected to grade ~30% contained rutile.
- Preparatory processing of the samples will be at Sovereign’s lab in Lilongwe, Malawi before final processing in Canada and Australia to a target >96% Ct which can be used as a pre-cursor for Li-ion anodes followed by further purification via an optimised HF-free reagent to >99.95% Ct.
- The test work should also produce a +95% TiO2 natural rutile product.
- The graphite process should go through, micronisation, spheronisation and carbon coating to Li-ion anode production and electrochemical characterisation where the lab will measure the potential charge of the anode.
- This raw graphite flake and final CSPG ‘coated spheronised graphite products’ will be offered to potential offtakers for assessment and pre-qualification.
Conclusion: News on China’s ban for natural flake graphite and related products has galvanised Sovereign’s graphite sampling and processing test work.
China now requires export permits for some graphite products from 1st December including natural graphite and natural graphite products which are preferred for EV production.
China has not banned the more expensive and more polluting synthetic graphite which is also more often used for electrodes for ARC furnaces (52%) and batteries (14%)
China currently produces 61% of all flake graphite used in the production of lithium-ion battery anodes and accounts for 93% of all graphite anode production globally.
*SP Angel act as Nomad and broker to Sovereign Metals.
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Analysts
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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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