Metals prices slide as China construction woes persist and dollar pushes higher
MiFID II exempt information – see disclaimer below
Amur Minerals* (AMC LN) – Management has reviewed multiple opportunities following divestiture of Kun Manie
Anglo Asian Mining* (AAZ LN) – Interim Results as Micon review enters finalisation period
Arkle Resources* (ARK LN) – Interim results and project updates
Beowulf Mining* (BEM LN) – Roadmap for graphite anode materials plant targets 2024 DFS process for first production in 2027
Bushveld Minerals* (BMN LN) – Earnings pull back reflecting lower realised vanadium prices
CleanTech Lithium (CTL LN) – Francisco Basin scoping study
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
Gold prices slide as Treasuries and dollar push higher
- Gold prices cooled to $1,911/oz, giving up close to $20/oz in gains made over last week.
- The move followed another sell-off in US Treasuries, with the 10-year yield touching 4.56%.
- The dollar index pressed to 10-month highs, as the Yen sold off to intervention territory and sterling and euro weakness persists.
- Kashkari, Minneapolis Fed President, has been banging the higher-for longer drum, adding to concerns persistently elevated rates triggered at last week’s FOMC meeting.
- Gold ETFs continue to sell down holdings.
- PCE data due later this week will be of primary concern to bond and gold investors.
- However, China has been shopping, with net gold imports via Hong Kong up 51% to 39t vs 25.8t in July.
|Dow Jones Industrials||+0.13%||at||34,007|
|HK Hang Seng||-1.74%||at||17,420|
Ghana holds rates steady on lower inflation and economic growth
- Ghana has held its key interest rate at 30%.
- The Bank of Ghana expects GDP growth of 3% this year vs IMF forecasts of 1.6%.
- The Central Bank expects further disinflation and notes that ‘economic activity is rebounding strongly.’
Global trade volumes dropped at the fastest annual pace in nearly three years in July, according to the latest World Monitor figures released by the Netherlands Bureau for Economic Policy Analysis.
- Volumes were down 3.2%yoy marking the steepest decline since the start of the coronavirus pandemic in August 2020.
- The decline was registered in all major economies including China (-1.5%), the Eurozone (-2.5%) and the US (-0.6%)
- Along with higher borrowing costs and inflation weighing on economic growth, geopolitical tensions are also hitting trade, FT writes.
Evergrande subsidiary defaults on 4bn CNY ($547m) loan with payment missed yesterday.
- Separately, reports have been released that Evergrande ex CEO and former CFO were both detained by Chinese authorities.
US$1.0584/eur vs 1.0649/eur previous. Yen 149.04/$ vs 148.36/$. SAr 18.890/$ vs 18.800/$. $1.217/gbp vs $1.224/gbp. 0.640/aud vs 0.642/aud. CNY 7.312/$ vs 7.309/$.
Dollar Index 106.12 vs 105.61 previous.
Gold US$1,912/oz vs US$1,923/oz previous
Gold ETFs 88.7moz vs 89moz previous
Platinum US$908/oz vs US$927/oz previous
Palladium US$1,221/oz vs US$1,245/oz previous
Silver US$22.93/oz vs US$23/oz previous
Rhodium US$4,100/oz vs US$4,100/oz previous
Copper US$ 8,085/t vs US$8,189/t previous
Aluminium US$ 2,226/t vs US$2,231/t previous
Nickel US$ 18,960/t vs US$19,425/t previous
Zinc US$ 2,546/t vs US$2,537/t previous
Lead US$ 2,185/t vs US$2,194/t previous
Tin US$ 25,785/t vs US$26,140/t previous
Oil US$92.0/bbl vs US$93.8/bbl previous
- Crude oil prices pulled back from their recent highs ostensibly as markets reacted to a stronger dollar and concerns that central banks would hold interest rates higher for longer.
- European gas prices continue to be elevated due to Norwegian outages that have reduced its production volumes to the lowest level since 2015.
Natural Gas €42.450/MWh vs €40.050/MWh previous
Uranium UXC US$65.50/lb vs US$65.50/lb previous
Iron ore 62% Fe spot (cfr Tianjin) US$115.5/t vs US$118.1/t
Chinese steel rebar 25mm US$538.6/t vs US$538.1/t
Thermal coal (1st year forward cif ARA) US$130.0/t vs US$130.0/t
Thermal coal swap Australia FOB US$160.8/t vs US$158.0/t
Coking coal swap Australia FOB US$324.0/t vs US$324.0/t
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$71,256/t vs US$71,280/t
Lithium carbonate 99% (China) US$20,994/t vs US$21,001/t
China Spodumene Li2O 6%min CIF US$2,350/t vs US$2,370/t
Ferro-Manganese European Mn78% min US$1,027/t vs US$1,033/t
China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu
China Graphite Flake -194 FOB US$645/t vs US$645/t
Europe Vanadium Pentoxide 98% 6.6/lb vs US$6.6/lb
Europe Ferro-Vanadium 80% 29.25/kg vs US$29.25/kg
China Ilmenite Concentrate TiO2 US$315/t vs US$315/t
Spot CO2 Emissions EUA Price US$86.7/t vs US$87.2/t
Brazil Potash CFR Granular Spot US$350.0/t vs US$350.0/t
Nissan confirms all European models will be electric by 2030
- The Japanese automaker has announced all its new European models will be fully electric and it plans to sell only EVs on the continent by 2030.
- One of two new EV models it has confirmed for Europe will be manufactured at its Sunderland plant in northeast England.
- Despite recent the recent announcement by Rishi Sunak that the 2030 ban on ICE vehicles would be pushed back 5 years, automakers are still pushing on with plans to go electric.
- “There is no turning back now,” Nissan CEO Makoto Uchida said in a statement.
- Ford and Stellantis also plan to be fully electric in Europe by 2030. Volvo plans to sell only EVs globally by 2030.
- We suspect plans for fully-electric production might be delayed in the normal course of business.
- Consumers are likely to increasingly buy for EVs now that electricity prices have dropped from around 44p/Kwh to 28p/Kwh
- New models with increased safety and entertainment features will attract buyers as will ongoing incentive schemes.
- The challenge is now for the UK government to generate sufficient power for millions of new EVs while installing millions of electric heat pumps
- We are told many older houses are supplied with three-phase power cables but where only a single phase is connected making it easier to install heat pumps and fast car chargers than we had previously thought. Having said that the UK grid will still need substantial upgrade to meet government ambitions.
Carmakers call on EU to delay tariffs on EV exports
- The likes of Renault, BMW and Mercedes-Benz have called for the EU to delay plans for the 10% export tariff on EVs.
- The tariff is due to be enforced from January 2024, but carmakers in the UK and Europe are pushing to delay its introduction by at least three years.
- It was agreed in 2020 Brexit trade and cooperation discussions when it was believed that car giants across the UK and the EU would quickly make significant progress in EV manufacture.
- The rule of origin clause imposes a 10% tariff on any EV that was less than 45% made in the UK or the EU and it has quickly become apparent that automakers will not meet that target before the tariff is imposed.
- EU manufacturers are concerned that the tariff will further open the door to Chinese automakers who are already growing their share of the European market.
- Carmakers in the EU still account for 70% of vehicle sales in Europe, China now accounts for 8% of the market, with manufacturers offering entry-level EVs at under €30,000.
- The formal request to cut the tariff has been made by the European Automobile Manufacturer’s Association (ACEA)
Amur Minerals* (AMC LN) Suspended – Management has reviewed multiple opportunities following divestiture of Kun Manie
- In its interim results for the six-months to 30th June, released yesterday, Amur Minerals confirms the completion of its US$35m sale of the Kun Manie project in the Russian Federation.
- Amur Minerals explains that the “divesture price represented a premium of 119% to the Group’s market capitalisation of 3 August 2022 (GBP13.2 million) and 44% to the current Kun-Manie book value of US$24.3 million as at 31 December 2021 in Amur’s latest annual report”.
- The company reports a loss of US$1.97m from its continuing operations and recognises a US$7m loss on the sale of Kun Manie comprising US$24.6m fair value of assets and US$17.4m of cumulative losses offsetting the US$35m consideration.
- The company also confirms that it has “paid a one-time special dividend from the US$35 million payment for the sale of AO Kun-Manie. Paid at 1.8p per ordinary share, a total of GBP25.1 million (US$31.7 million at an exchange rate of 1.26 US$ to the UK Pound Sterling) was allocated”.
- Cash resources at 30th June are reported at US$6.3m and Amur Minerals “remains debt free”.
- As the divestiture of Kun Manie turned Amur Minerals into a “cash shell” its shares “will remain suspended until the completion of a reverse takeover”.
- Yesterday’s announcement confirms that it has reviewed a “total of 17 opportunities … [including potential projects] … located in Canada, the US, Scandinavia, Spain, Brazil, Peru, Chile, Ghana, Mali, Kenya and Australia. Commodities have included potash, silica, alumina, copper, nickel, gold, silver, metallurgical coking coal, energy fuels substitutes, lime and lithium”.
Conclusion: Seeking new project opportunities following the disposal of Kun Manie.
*SP Angel act as Nomad and Broker to Amur Minerals
Anglo Asian Mining* (AAZ LN) 39p, Mkt Cap £50m – Interim results as Micon review enters finalisation period
BUY – TP under review
- Anglo Asian reports its six-month interim results for the period to 30th June 2023.
- Revenues fell to $30.8m vs $31.5m for the same period last year.
- Total production for the period was 23.4koz GEOs vs 28.7koz same period last year.
- Copper production climbed to 1.9kt and gold production was 14.6koz.
- Gold bullion sales fell to 10.5koz vs 11.3koz for the same period last year, although the reduction in sales was somewhat offset by higher gold prices.
- Realised gold prices averaged $1,939/oz vs $1,901/oz for same period last year.
- Copper concentrate sales rose to $10.4m vs $9.8m same period last year.
- The rising costs, visible in an AISC of $1,357/oz ($983/oz last year), is a factor of inflationary pressures and a drop in processed grades.
- PAT totalled $1.4m vs $5.7m same period last year.
- No interim dividend was declared for 2023 as Gedabek flotation and agitation leaching operations remain suspended.
- The Company continued to invest over the period in long-term growth, with $6.6m spent on CAPEX and mine development and $3.8m spent on exploration and evaluation activities.
- FY23 updated production guidance is for 30.0-34.0koz GEOs including 22.0-23.0koz gold and 2.1-2.2kt copper.
- The reduction in output is a result of the curtailment of agitation leaching and flotation processing, however heap leaching continues.
- Updated guidance assumes restart of agitation leaching and flotation processing in Q1/24.
- In the meantime, extensive maintenance works are being carried out at Gedabek including relining of all its mills.
- Blasting has been temporarily suspended at Gilar and Zafar over August and September with development works expected to be resumed in October.
- As regards to the curtailment of agitation leaching and flotation processing, Micon is currently conducting a health, safety and environmental management review of the Gedabek tailings dam.
- Commenting on the status of environmental review, the Company reports “the curtailment of our agitation leaching and flotation processing whilst an environmental inspection was carried out, whilst regrettable, was understandable… the Company has fully cooperated with all Government requests to ensure the environmental inspection was carried out properly and to expedite other related matters… the report by Micon of the environmental inspection is currently being finalised”.
- Anglo Asian had a $9.6m cash balance at the end of the reporting period and no bank debt, alongside $4.9m worth of gold and $4.2m worth of copper concentrate.
*SP Angel acts as Nomad and Broker to Anglo Asian Mining
Arkle Resources* (ARK LN) 0.35p, Mkt Cap £1.4m – Interim results and project updates
- Arkle provides their interim statement for the period to 30th June 2023.
- The Company reports that their partner, Group Eleven, has decided to drill a deep hole at Stonepark.
- A short drilling programme is set to get underway imminently at Donegal, where the focus is on gold, which the team believes bears similarities to the Dalradian discovery at Tyrone.
- Arkle is looking to attract a ‘farm-out partner’ to support a more expansive drilling campaign at the Donegal asset.
- The Company has applied for additional licences in Wicklow for spodumene pegmatite exploration.
- Work in Zimbabwe has been paused owing to title difficulties, whilst two additional licence blocks in ‘another jurisdiction,’ targeting lithium exploration, have been acquired.
- Arkle had €63k in cash and cash equivalents at the end of the reporting period
*SP Angel are Nomad and Broker to Arkle Resources
Beowulf Mining* (BEM LN) 1.5p, Mkt Cap £17m – Roadmap for graphite anode materials plant targets 2024 DFS process for first production in 2027
- Beowulf provides an update on its graphite anode materials plant in the GigaVaasa Area in Finland.
- The Company reported a successful PFS for the project in July showing an NPV8 of $242m and a post-tax IRR of 39%.
- The team is currently executing an Environmental Impact Assessment, which it expects to complete in 1Q24.
- Following the completion of the EIA, the process for an Environmental Permit approval will begin.
- Alongside environmental assessments, Beowulf and Grafintec will start to conduct bench-scale test work from October.
- Upon successful bench-scale test work, pilot-scale test work will be conducted.
- This should enable Beowulf to begin the DFS work from mid-2024.
- If the roadmap listed above proves the operation is feasible, the GAMP project will see first production targets of 2027.
Conclusion: It is reassuring and exciting to see the Beowulf and Grafintec teams present a clear and concise roadmap of targets and deadlines for the graphite anode materials plant in Finland. The EU is focused on securing a sustainable supply chain of critical minerals, as evinced by the Critical Raw Materials Act. In line with this, Beowulf has moved quickly to position itself to benefit from the EU’s ambitious targets for graphite extraction and processing and we expect emphasis on domestic supply chains to continue to amplify as geopolitical concerns persist with China. The environmental impact assessment is a key milestone, and we look forward to its completion early next year before the Company can accelerate the DFS process.
*SP Angel acts as Nomad and Broker to Beowulf Mining
Bushveld Minerals* (BMN LN) 1.8p, Mkt Cap £23m – Earnings pull back reflecting lower realised vanadium prices
BUY – TP under review
- Revenue totalled to $78.4m (H1/22: $76.2m) as higher sales compensated for a drop in realised vanadium prices.
- Sales were 2.1ktV (H1/22: 1.6ktV) reflecting higher production of 1.8ktV (H1/22: 1.6ktV) as well as some destocking.
- Sales into premium markets were prioritised during the period to optimise revenues with sales into sectors like aerospace and specialty chemicals.
- Sales into the US and Europe accounted for 49% and 29% (H1/22: 45% and 27%).
- Realised vanadium prices averaged $37.4/kgV (H1/22: $46.4/kgV)
- AISC are reported at $33.4/kgV (H1/22: $37.8/kgV) on the back of stronger production as well as a fall in South African rand to an average of 18.2 (H1/22: 15.4).
- EBITDA amounted to $10.3m (H1/22: $15.6m) reflecting lower realised prices and higher costs associated with increased sales.
- Operating profit came in at $2.1m (H1/22: $6.1m).
- CFO (post tax) and FCF totalled -$0.9m and -$5.3m (H1/22: $8.7m and $0.0m)
- PAT and EPS came in at -$12.5m and -1.09USc, respectively (H1/22: -$0.3m and -0.27USc).
- Net Debt closed at $89.6m (H2/22: $76.5m) including $4.8m in cash and investments as well as $94.4m in gross debt (H1/22: $13.9m and $90.4m, respectively) including $35.1m in Orion PFA.
- FY23 guidance reiterated at 3.7-3.9ktV and $26.6-26.9kgV (R481-487) production cash cost (C1) using ~18ZAR exchange rate.
- Orion convertible refinancing (~$45m) discussions are ongoing and the team expecting to finalise the deal before the 21 December deadline.
- In the meantime, in line with earlier announced SPR transaction, the Company secured the $8.1 working capital facility.
- Operationally, the Company is reporting improvements in monthly production rates with Vanchem hitting 160mtV and 175mtV output in months of July and August, up on an average of ~120mtV recorded in Q2/23.
- Vanchem plant completed an eight-day maintenance with production expected at 130mtV in September bringing Q3/23 production to ~465mtV.
- The team is aiming for reaching ~180mtV run rates by YE23.
- Vametco recorded higher output through August with production ramping up to 215mtV, up from an average of ~160mtV in Q2/23.
- Although, leach plant reliability challenges encountered recently are expected to see output coming in to 180mtV in September taking Q3/23 production to ~530mtV
- The team is expecting output to recover to 200mtV per month run rates from October.
- On BELCO, construction of the electrolyte manufacturing facilities was completed with first batches of product sent to international customers to qualify BELCO as an approved supplier of electrolyte.
Conclusion: Earnings pull back reflecting nearly a 20% drop in realised prices in H1/23 from the previous year with some of the decline compensated for a rand depreciation and higher sales volumes. With vanadium prices continuing to pull back as general growth momentum concerns remain and Chinese property market continues to struggle, H2/23 is expected to underperform first six months of the year. With high operational and financial leverage, Company’s fortunes are highly geared to vanadium prices which we expect to start recovering on potential stimulus measures in China and VRFB related demand growth.
New management team is focused on two immediate goals including reaching design production rates at Vametco and Vanchem and completing Orion convertible loan facility refinancing ahead of the December due date.
At Vanchem, 9M23 production estimated at ~1.1ktV implying Q4/23 target for 300-400mtV (100-130mtV per month) to reach guided 1.4-1.5ktV for FY23 should be comfortably within reach. The team is expecting to hit ~180mtV run rates by YE23. At Vametco, the team is also expecting production rates to ramp up to 200mtV per month from October allowing the Company to reach its 2.3-2.4ktV FY23 target. 9M23 production at Vametco is estimated at ~1.7ktV suggesting the Q4/23 should come in at 600-700mtV (200-230mtV per month). The Company reiterated its FY23 production and cost guidance.
Regarding refinancing, the team remains in discussions with Orion ahead of the targeted completion later in the year while also having separately agreed a deal with SPR to address its previously flagged near term liquidity challenges.
*SP Angel act as nomad and broker to Bushveld Minerals
CleanTech Lithium (CTL LN) 52p, Mkt Cap £59m – Francisco Basin scoping study
- CleanTech Lithium reports the results of a recently completed scoping study on its Francisco Basin lithium project located in the northern Atacama Region of Chile approximately 200km east of the regional capital, Copiapo and south west of the company’s Laguna Verde lithium project.
- Based on annual production of 20ktpa of battery grade lithium carbonate by direct lithium extraction technology over a 12 years mine life, the company estimates that capital expenditure of US$450m generates an after tax NPV8% of US$1.1bn and IRR of 43.5% at a ”long-term lithium carbonate price of US$22,500 per tonne”.
- The Francisco Basin salar deposit is located at an elevation of more than 4,000m with a JORC compliant ,mineral “resource estimate for the Francisco Basin project of 919,346 tonnes of LCE … [lithium carbonate equivalent] … was published on 24 August 2023”.
- The company “plans to undertake another resource drill programme at Francisco Basin, commencing Q4 2023, aiming to further upgrade the current resource estimate” before starting a pre-feasibility study.
- The scoping study envisages utilising 236,000t of the contained LCE resource of which 68% (160,500t) is derived from ‘Indicated’ Resources with the balance from the ‘Inferred’ resource.
- Based on a 1.5-year construction period, the scoping study “assumes production commences in 2027” one year later than “the more advanced Laguna Verde project, where production is targeted for 2026”.
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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
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
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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|
|Natural Gas, Uranium, Iron Ore||NYMEX|
|Thermal Coal||Bloomberg OTC Composite|
|Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite||Asian Metal|
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