Global markets fall on weak demand out of China and the West
MiFID II exempt information – see disclaimer below
Atlantic Lithium* (ALL LN) – Drilling continues to define additional lithium in Ghana
Future Metals (FME LN) – Drilling underway at the Panton Project, WA
Kendrick Resources (KEN LN) – Exploration drilling results from Stormyra, Norway
Mkango Resources* (MKA LN) – Environment, health and safety and community relations expert appointed as NED
Oriole Resources* (ORR LN) – CLICK FOR PDF – Progress towards drill target generation at Mbe, Cameroon
Copper slides below $8,000/t on buoyant supply and global demand fears
- Copper prices hit $7,960/t overnight as inventories rose and concerns mount over base metal demand.
- Record levels of contango, suggesting further weakness ahead, triggered yesterday’s steep price decline.
- A rising US dollar is also weighing on base metals.
- However, SMM reports the refined copper market climbed to a surplus in March of 2kt vs 196kt surplus in February.
- The Yangshan copper premium, which gauges import demand to China for refined product, has also been climbing from 12-month lows, up $10/t to $35/t.
- Copper has now fallen 7.5% in May after a series of Chinese data points highlighted widespread weakness in Chinese manufacturing and housing.
- Analysts are expecting additional supply inflows from Australia to China, with Aus-China relations continuing to thaw.
- China has not imported copper shipments from Australia since June 2019 (China trade statistics).
- China imported c.$1.7bn worth of Cu in ore and concentrate from Australia in 2019.
Gold – $1,973 – Prices bounce from monthly lows on concerns of debt ceiling impasse
- Gold climbed marginally from May lows around the $1,956/oz mark.
- The move followed Republican House Speaker McCarthy’s statement that the negotiation table had yet to reach an agreement over raising the US debt ceiling.
- Gold has been a primary play for investors looking for safe haven protection in the case of a US debt default.
- The move came despite rallying Treasury yields, with the two traditionally moving asymmetrically.
Indonesia enables miners to export mineral concentrates despite downstream push
- Indonesia has agreed to allow miners to continue exporting semi processed concentrates up to May 2023.
- The Mineral Resources Minister stated in parliament yesterday that this would be limited to copper concentrate, iron, lead, zinc and anode slime.
- Furthermore, the extension will only be granted to projects with smelter development at least 50% by January 2023. (Bloomberg)
- The Indonesian government is currently on a drive to maximise value from its mineral reserves by encouraging investment in smelting and refining capacity.
- The additional allowance is expected to add further pressure to base metals currently seeing sizeable additional supply.
Argentina moves to close US deal for lithium supply agreement
- Argentina, which is currently boosting its lithium production rates, is working towards a free trade agreement with the US.
- Both Chile and Australia, the two largest producers, already hold an FTA agreement.
- The Country’s production is powered by Allkem and Livent, which are in the process of merging.
- Lithium Americas, who hold a supply agreement with Ganfeng, is also looking to boost production and processing.
Aluminium – IAI reports Apr global refined aluminium output rose 0.3% to 5.628mt
- Chinese output estimated at around 3.315mt representing potentially 59% of global output
| Dow Jones Industrials | -0.69% | at | 33,056 | |
| Nikkei 225 | -0.89% | at | 30,683 | |
| HK Hang Seng | -1.69% | at | 19,103 | |
| Shanghai Composite | -1.28% | at | 3,205 |
Economics
US S&P – Manufacturing PMI at 48.5 in May vs 50.2 in April
- Services PMI 55.1 in May vs 53.6 in April
- Composite PMI 54.5 in May vs 53.4 in April
- Richmond Fed manufacturing index -15 in May vs -10 in April
- US new home sales rose 4.1% to 0.683m units in April vs 4% 0.656m in March
Japan – Manufacturing PMI at 50.8 in May vs 49.5 in April
- Services PMI 56.3 in May vs 55.4 in April
- Composite PMI 54.9 in May vs 52.9 in April
EU – Manufacturing PMI at 44.6 in May 45.8 in April
- Services PMI 55.9 in May vs 56.2 in April
- Composite PMI 53.3 in May vs 54.1 in April
Germany – Manufacturing PMI fell to 42.9 in May vs 44.5 in April
- Services PMI rose to 57.8 in May vs 56.0 in April
- Composite PMI climbed slightly to 54.3 in May vs 54.2 in April
France – Manufacturing PMI at 46.1 in May vs 45.6 in April
- Services PMI 52.8 in May vs 54.6 in April
- Composite PMI 51.4 in May vs 52.4 in April
UK – CPI slows to 8.7% yoy in May from 10.1% in April vs expectations of 8.2% in the City
- Core CPI rose to 6.8% yoy from 6.2% yoy its highest level since 1992. CPI core excludes energy, food, alcohol and tobacco
- Goods CPI fell to 10.0% yoy 12.8% yoy
- Services CPI rose to 6.9% yoy from 6.6% yoy
- UK interest rates now forecast to rise above 5% this year.
- UK CPI top risers: Sugar +47%, Olive oil +46%, Car insurance: +41%, Eggs +37%, Natural gas +37% Sauce/condiments +34%, Milk +34%, Small electrical household appliances: +32%, Frozen veg +31%, Cheese +31%, Sausages +28%, Pasta +28%, Pork +27%, Non-fiction books +27%, Potatoes +25%
- M&S earnings beat expectations as supermarkets profit from higher prices
- Construction: Natural England quango within DEFRA blamed for blocking 160,000 new homes by the Home Builders Federation
- Further evidence is apparent of wholesalers, supermarkets and stores raising product prices beyond underlying inflation
Currencies
US$1.0779/eur vs 1.0791/eur yesterday. Yen 138.64/$ vs 138.48/$. SAr 19.240/$ vs 19.280/$. $1.243/gbp vs $1.241/gbp. 0.657/aud vs 0.663/aud. CNY 7.057/$ vs 7.052/$.
Dollar Index 103.50 vs 103.40 yesterday.
Commodity News
Precious metals:
Gold US$1,973/oz vs US$1,956/oz yesterday
Gold ETFs 94.1moz vs US$94.1moz yesterday
Platinum US$1,049/oz vs US$1,063/oz yesterday
Palladium US$1,454/oz vs US$1,474/oz yesterday
Silver US$23.33/oz vs US$23.30/oz yesterday
Rhodium US$7,000/oz vs US$7,000/oz yesterday
Base metals:
Copper US$ 7,972/t vs US$8,057/t yesterday
Aluminium US$ 2,200/t vs US$2,248/t yesterday
Nickel US$ 20,910/t vs US$21,000/t yesterday
Zinc US$ 2,317/t vs US$2,395/t yesterday
Lead US$ 2,060/t vs US$2,082/t yesterday
Tin US$ 23,950/t vs US$24,185/t yesterday
Energy:
Oil US$77.5/bbl vs US$75.9/bbl yesterday
- Crude oil prices jumped higher yesterday after a warning from the Saudi Energy Minister that short-sellers “will be ouching” again and the API reported a 6.8mb draw in US crude oil and fuel stocks (vs 0.5mb build expected).
- European energy prices were flat as French nuclear reactors’ operating levels was reported as decreasing from 62% yesterday to 61% of capacity from 35 available reactors out of 56 units.
- Gazprom announced a 40% y/y fall in net profit for 2022 due to Russian tax hikes and gas export volumes almost halving to 101bcm, causing the Company to scrap plans for a full-year final dividend.
Natural Gas US$2.335/mmbtu vs US$2.394/mmbtu yesterday
Uranium UXC US$53.40/lb vs US$53.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$100.1/t vs US$102.1/t
Chinese steel rebar 25mm US$521.9/t vs US$528.3/t
Thermal coal (1st year forward cif ARA) US$110.0/t vs US$110.0/t
Thermal coal swap Australia FOB US$160.0/t vs US$161.0/t
Coking coal swap Australia FOB US$228.0/t vs US$228.0/t
Other:
Cobalt LME 3m US$34,930/t vs US$34,930/t
NdPr Rare Earth Oxide (China) US$68,019/t vs US$66,924/t
Lithium carbonate 99% (China) US$40,032/t vs US$40,055/t
China Spodumene Li2O 6%min CIF US$4,010/t vs US$4,010/t
Ferro-Manganese European Mn78% min US$1,310/t vs US$1,311/t
China Tungsten APT 88.5% FOB US$325/mtu vs US$325/mtu
China Graphite Flake -194 FOB US$765/t vs US$775/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$322/t vs US$323/t
Spot CO2 Emissions EUA Price US$91.8/t vs US$91.8/t
Brazil Potash CFR Granular Spot US$370.0/t vs US$370.0/t
Battery News
Tesla to decide location for new gigafactory later this year as it continues to expand global output
- Elon Musk has said Tesla (TSLA.O) would “probably” have picked a location for a new factory by the end of this year.
- India is a very possible destination as Tesla has shown interest in establishing itself in the largely untapped market.
- Tesla is “serious” about its plans to establish a manufacturing base in India, the country’s deputy minister for technology told Reuters.
- Musk led US automaker talks with Indian officials last week on various topics including incentives for car and battery manufacturing.
- The automaker has already announced a new assembly plant that will open in Monterrey, northeast Mexico.
Company News
Atlantic Lithium* (ALL LN) 32.2p, Mkt Cap £196.5m – Drilling continues to define additional lithium in Ghana
- Keith Muller, the new CEO at Atlantic Lithium says, “Every time we put a drill bit in the ground we find something.”
- The team have drilled just 3% of their total tenement package in Ghana.
- https://twitter.com/i/status/1660926036714967041
- https://www.youtube.com/watch?v=uYBEDLBUEgg
- We expect further detail from Atlantic Lithium by end June on the DFS.
- Atlantic is backed by Piedmont which has pledged US$103m towards the development of the Ewoyaa lithium project and holds 50% of the offtake at market prices.
- Ewoyaa PFS shows exceptional economics at 255,000tpa of 6% Li2O spodumene concentrate from a 2mtpa throughput over a 12.5-year operation:
- NPV8 of US$1.33bn Post-tax,
- IRR of 224%
- Capex $125m, Payback <5 months,
- EBITDA $248m pa average
- C1 cash operating costs $278/t of 6% spodumene concentrate per tonne of 6% lithium spodumene concentrate FOB, after by-product credits
- LoM 12.5 years, LOM revenues >$4.84bn,
- Assumption: spodumene price of $1,359/dmt SC6% with US$1,200/dmt long term pricing
- JORC Resource Ewoyaa:
- Total Mineral Resource Estimate: 35.3mt at 1.25% Li2O
- Measured: 3.5Mt at 1.37% Li2O, Indicated: 24.5Mt at 1.25% Li2O, Inferred: 7.4Mt at 1.16% Li2O
- Spodumene prices for SC6% min have risen to US$4,010/t from US$3,990/t CIF as expanding Gigafactories drive processors to compete for spodumene feedstock
*SP Angel acts as Nomad to Atlantic Lithium.
Future Metals (FME LN) 2.35p, Mkt Cap £9.7m – Drilling underway at the Panton Project, WA
- Future Metals reports that reverse-circulation (RC) drilling has started at its Panton Project approximately 60km north of Halls Creek in the Kimberley region of WA.
- Drilling will test coincident nickel/copper/platinum group metals geochemical anomalies and geophysical targets at the Panton North, BC1 and Panton West prospects.
- The company explains that the Panton North prospect “is located adjacent to the Company’s wholly owned Panton Project (“Panton” or “the Project”) and is subject to a Farm-In Agreement with Octava Minerals”.
- Existing JORC compliant minerals resources estimates for the Panton Project are 129mt at an average grade of 1.2g/t combined platinum/palladium and gold with 0.19% nickel, 0.04% copper and 154ppm cobalt.
- According to the company’s website Mineral Resource Estimate – Future Metals NL (future-metals.com.au), approximately 8mt (6%) of the resource tonnage is classed as ‘indicated’ with the balance as ‘inferred’.
- Mineralisation at the Panton Project is located “within a layered, differentiated mafic-ultramafic intrusion referred to as the Panton intrusive which is a 12km long and 3km wide, south-west plunging synclinal intrusion … [and the resources include] … a high-grade reef of 25Mt @ 3.57g/t PGM3E1, 0.24% Ni, 0.07% Cu and 192ppm Co”.
- The drilling at the BC1 prospect will test “the newly interpreted basal contact for the Panton sill, which is supported by EM and magnetic anomalism” while work at the “Panton West Prospect is targeting discrete magnetic features coincident with EM anomalism at depth”.
- “The drill programme … [ which is partially funded by an A$147,000 grant under the WA Government’s Exploration Incentive Scheme] … is expected to run through June and up to early July”.
Conclusion: Further drilling at Panton will test coincident geochemical and geophysical targets beyond the existing, largely, inferred mineral resources envelope including the ‘farm-in’ area at Panton North.
Kendrick Resources (KEN LN) 1.1p, Mkt Cap £2.6m – Exploration drilling results from Stormyra, Norway
- Kendrick Resources has announced drilling results from its 19-hole maiden drilling programme at the Stormyra nickel/copper project in Espedalen, Norway.
- The company reports nickel/copper intersections “over a strike length of 1.2 kilometres” including:
- An intersection of 3.5m at an average grade of 1.73% nickel, 0.88% copper and 0.06% cobalt (reported as 2.18% on a nickel equivalent basis -NiEq) from a depth of 61.50m in hole ES-2317; and
- An intersection of 9.2m at an average grade of 0.31% nickel, 0.21% copper and 0.01% cobalt (reported as 0.41% NiEq) from a depth of 31.50m in hole ES-2318; and
- An intersection of 2.1m at an average grade of 1.25% nickel, 2.75% copper and 0.05% cobalt (2.43% NiEq) from a depth of 53.60m in hole ES-2319; and
- Today’s announcement explains that a previous operator of the project, “Drake Resources Limited (now renamed Ragnar Metals Limited)” identified a JORC (2012) compliant mineral resource of 1.16mt at an average grade of 1% nickel, 0.42% copper and 0.04% cobalt and a resource of 7.8mt at an average grade of 0.28% nickel, 0.12% copper and 0.02% cobalt at the Dalen prospect which we understand is also within the Espadalen project area.
- Kendrick Resources says that todays’ results which are the final batch of results from the drilling programme confirm “the untested southerly extension of the Stormyra orebody represents a viable drill target likely to further increase the resource”.
- Kendrick Resources also says that as well as Stormyra and Dalen, the historical exploration “identified 10 prospects where drilling … [was] … never followed up. A detailed compilation of all past mineral exploration and drilling data and recognised that the Stormyra Mineral Resource is not closed off and a number of intersections warrant follow up drilling, to determine if the Mineral Resource can be expanded”.
- Executive Chairman, Colin Bird, confirmed that “We are investigating each target and prioritising them ahead of further drilling”.
Mkango Resources* (MKA LN) 11.25p, Mkt Cap £27.5m – Environment, health and safety and community relations expert appointed as NED
- Mkango Resources has appointed Ms. Philipa Varris as an independent non-executive director.
- Ms Varris is described as having held “leadership positions in environment, health, safety and community management in the mining sector for over 25 years, primarily in Africa, Australasia and Latin America”.
- She “holds a Master of Science in Natural Resources from Curtin University of Technology, is an AusIMM Chartered Environmental Professional and UK Committee member, and is qualified with Corporate Directors International”
- Ms Varris “has been awarded the Australian Centenary Medal for leadership in Australia’s largest community consultation and strategic vision development initiative and was recognized in 2020 as one of the Women in Mining’s 100 Global Inspirational Women in Mining”.
- Welcoming the appointment, Chairman, Derek Linfield, said that “her background in sustainability, health and safety will be of enormous value to Mkango as we progress the Songwe Hill project in Malawi and our recycling business in the United Kingdom, Germany and the United States”.
- She will chair “the newly formed Sustainability Committee of the Board … [which Mr. Linfield said] … reflects Mkango’s desire for deeper Board level oversight of this increasingly technical arena, as the company positions itself for production in both mining and recycling”.
- Mr. Linfield confirmed that “Sustainability has deep roots in Mkango’s corporate culture and is a key driver of our success in Malawi”.
*SP Angel acts as nomad and broker to Mkango Resources
Oriole Resources* (ORR LN) 0.2p, Mkt cap £5.6m – CLICK FOR PDF – Progress towards drill target generation at Mbe, Cameroon
- Oriole Resources provides an update on its exploration programme at its Mbe prospect in Cameroon.
- The Team has been conducting follow-up exploration work after selective rock-chip sampling delivered 17 samples at >1g/t Au over a 3km corridor.
- Veins within this corridor returned grades up to 134g/t.
- Oriole has been conducting channel-chip sampling enabled by previous artisanal workings.
- The team notes dipping, shear-parallel, massive silica veins within these zones, with alterations in the clay wall rock.
- Quartz veins intersect these zones, dipping to the northeast and trending to the north-west.
- The altered host rock holds grade up to 3g/t whilst the primary vein systems hold grades over 100g/t in some parts.
- The Company has taken 22 channel-chip samples and hopes to report results in Q3-23.
- Visible gold has been identified in the extensional veins, and both the silica and quartz structures are reported to host ‘abundant sulphides, predominantly pyrite.’
- The Company continues its discussions with strategic partners for project-level funding of the Eastern CLP project where Mbe lies, aiming to finalise an agreement this quarter.
- Oriole is confident that these results will provide encouraging targets warrant drill testing in the second half of this year.
Conclusion: Further exploration work at Mbe continues to yield encouraging results, with visible gold and high-grade chip sampling from near surface warranting the generation of drill targets. We look forward to the results from the 22 samples and an update on Oriole’s discussions for $1m in financing for a 10% non-carried interest in the Eastern CLP shareholding.
*SP Angel acts as Broker to Oriole Resources
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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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