SP Angel . Morning View . Monday 21 06 21
Copper continues to leads metals lower on stronger dollar and threat of SRB sales
Graphene producer funding – EIS scheme approval applied for
The company wishes to fund a ramp up in graphene production to get ahead of demand and to develop markets for a number of new, graphene products
The business is also able to upgrade graphite to a higher grade/specifications using its process – rolling out this process also requires funding
Please email if you wish to invest in the company
*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.
KEFI Gold and Copper* (LON:KEFI) – Progress report on Tulu Kapi and Saudi Arabian project
Panther Metals (LON:PALM) – Exploration target for laterite nickel cobalt mineralisation at Coglia
Sunstone Metals (ASX:STM) – Reports over 500m of copper gold mineralisation in recent drilling at Brama
China’s May EV sales hit all-time-high once again
China’s new energy vehicle production and sales once again set new monthly records in May, producing 217,000 NEVs in May- up 150% YoY and 0.5% from April.
NEV sales were also 217,000 – up 160% YoY and 5.3% compared to month prior.
Total NEV production during January – May reached 967,000, up 220% YoY (Argus Media).
Copper continues to leads LME and precious metals lower on stronger dollar and China threat of SRB sales
Ongoing profit taking by long funds in copper are continues to lead metals markets lower.
Investors are locking in profits and reducing downside risk at high levels against the threat of further action from the Chinese authorities.
It is not just the potential release of metal from State Reserve Bureau stockpiles but it is the potential for coordinated action from the authorities which has prompted investors to move from copper to other asset classes.
China last sold copper from its stockpiles in 2005 and also released aluminium and zinc in 2010 to stabilise prices.
Some slowing of demand in China is also seen as the authorities move to slow the pace of stimulus programs.
Manufacturers and traders also appear to be taking a more careful approach to the market as prices pull back and Stimulus-driven growth gives way to more cautious economic activity.
Logistic delays caused by Semiconductor shortages, port congestion and container availability is also slowing manufacturing as goods pile up in factories and production lines slow.
Renewed US dollar strength is also serving to reduce metals prices following Fed hints at the potential for normalisation implying potentially higher interest rates sooner than anticipated by investors.
Transport costs rise six-fold from China as container costs ramp up to $16,000 from $2,500 if available
Low cost goods from China are being priced out of the market by rising container costs (BBC.com)
The massive increase in container rates and a lack of available containers is stranding lower value goods at factories and warehouses in China
Margins for importers and western retailers are being crushed a they try to absorb shipping costs.
The BBC reports the cost of transporting a chair from China has risen to £100 from £12 previously.
This adds to further logistics and admin costs for sales into the EU for UK retailers as EU customs officials disrupt imports arguing over paperwork while containers incur rising storage costs.
We believe the situation is crippling UK furniture retailers which sell Asian made goods into Europe.
Operating profits for the 11 largest deep-sea container carriers of $16.2bn compare with just $13.3bn in H2 2020 according to Sea Intelligence as rates jumped higher.
The 11 carriers earned more in Q1 than in the same period of the previous 10 years combined.
The situation will likely accelerate the reshoring of manufacturing to the West from China
China turns attention to iron ore in its bid to tame commodities boom
China’s national economic planning agency and the market regulator visited the Beijing iron ore trading center on Monday in a bid to stabilize prices of iron ore.
Officials from the NDRC and State Administration for Market Regulation told a seminar that China will closely watch iron ore spot price changes, while reiterating that they will firmly crack down on iron ore monopoly, price speculation and hoarding.
China has already rolled out measures from trading curbs to releases from state stockpiles in an effort to keep a lid on runaway copper and aluminum prices.
Shanghai copper prices are currently at two-month lows as China’s strategic stockpiler pledged to release inventories and warned state firms to reduce exposure to overseas commodities markets.
Iron ore prices on the Dalian Commodity Exchange are currently up 27.5% YTD and 60.4% compared to this time last year, hence China’s motivation to try and reign in prices of the key steelmaking ingredient.
The most-traded contract in Dalian ended daytime trading 8.8% lower on Monday, while futures in Singapore fell as much as 5.7% (Reuters).
Timber prices fall in the US
The DIY boom in the US is giving way to a return to more normal spending in the US.
Nuclear fusion – Oxfordshire chosen for new nuclear fusion pilot plant
General Fusion have agreed to build a new $400m nuclear fusion pilot plant with the UK Atomic Energy Authority at Culham (The Erta).
Culham is the site of the current UK Taurus nuclear fusion facility.
General Fusion, founded in 2002, has raised around $300m and is backed by Jeff Bezos
Dow Jones Industrials -1.58% at 33,290
Nikkei 225 -3.29% at 28,011
HK Hang Seng -1.34% at 28,415
Shanghai Composite +0.12% at 3,529
EU – Covid progress threatened as Delta Variant starts to dominate in Portugal Germany, France and Spain
New Covid variants threaten to slow economic recovery in Europe as vaccination programs struggle to keep pace with the outbreaks.
The Delta variant which is said to be >40% more infectious than the Alpha (Kent) variant is posing a particular risk with new clusters of cases seen across the EU.
Worse still the Delta variant appears to increase the risk of hospitalisation by 2.2 times compared with the Alpha variant and vaccines appear less effective against it according to the Lancet medical journal,
Original China variant has an infection rate of 3 requiring a vaccination rate of 67% for herd immunity
Alpha variant has an infection rate of 4 requiring 75% vaccination
Delta variant has an infection rate of 6 requiring 83% vaccination
It is little wonder the UK government has delayed the total reopening of the UK economy.
We suspect we will continue to Work From Home for longer as recommended by the UK government and suffer the required wearing of masks on public transport for some time.
EU/ Belarus – EU governments set to approve more sanctions over Ryanair flight
The EU is set to sanction several sectors of Belarus’s economy as the bloc increases pressure on President Alexander Lukashenko.
Josep Borrell, the EU’s foreign policy chief, said ministers meeting in Luxembourg later today will approve measures targeting people and companies.
The EU will discuss a separate package of economic sanctions which will be presented to EU leaders at a summit later this week.
The most significant of economic sanctions could be restrictions imposed on potash sales.
Potash is Belarus’s only abundant mineral resources, and exports of the fertilizer rose 18% in Jan-April to $834m.
China – Bitcoin price tumbles as government intensifies crackdown on crypto mining
China’s largest bitcoin producing provinces have intensified a crackdown on bitcoin mining due to risks of using it for payments and concerns over energy usage.
Earlier this month, global regulators called for digital currencies to carry the toughest bank capital rules of any asset, while the chief of the Bank of England said that investors should be prepared to lose all of their money betting on crypto.
Officials in all of China’s hubs for mining bitcoin have followed Inner Mongolia and released further measures targeting bitcoin miners.
The northern region had banned mining and introduced a telephone hotline for reporting on suspected operations in May.
Sichuan province has ordered the 26 largest local mines to stop operating as an investigation is conducted.
Bitcoin fell as much as 9% on Monday morning to $32,605 on Monday morning.
UK – House price growth slowed in June as record prices deter buyers
UK house price growth slowed in June as record prices and a lack of properties drained momentum from the market, according to Rightmove.
Prices grew 0.8% this month vs 1.8% in May, with the average cost of a home at £336,073.
The increase is still the largest at tis tine of year since 2015, reportedly boosted by people seeking to leave London.
BoE split after higher inflation figures
Hong Kong – pro-democracy media outlet Apple Daily set to close in matter of days
Newspaper Apple Daily will be forced to shut “in a matter of days” after authorities froze the company’s assets under a national security law, Reuters reports.
Chief Editor Ryan Law, 47, and Chief Executive Cheung Kim-hung, 59, were denied bail on Saturday after being charged with collusion with a foreign country.
Three other executives were also arrested on Thursday when 500 police officers raided the newspaper’s offices
Japan – Tokyo Olympics set to allow up to 10,000 spectators per venue
Monsoon – South Asia’s monsoon may be exacerbated by Climate Change
A bad monsoon can cut economic growth by a third according to the Economist.
West Africa – plans new ‘Eco’ currency in 2027
ECOWAS the Economic Community of West African States will launch the ’Eco’ in 2027
“We have a new road map and a new convergence pact that will cover the period between 2022-2026, and 2027 being the launch of the Eco,” he said, referring to the name of the new currency.
Eight of the 11 countries currently use the CFA while Nigeria, Africa’s largest economy operates its own managed currency.
The new economic bloc should help drive trade and economic growth across the region.
South African ‘diamond rush’ only quartz, according to officials
Last week various news outlets reported that unidentified stones were luring thousands of fortune seekers to a rural South African village in the KwaZulu-Natal province.
Over 3,000 people began mining the site with hand tools over an area of around 50 hectares.
Testing conducted over the weekend concluded that the stones discovered in the area are not diamonds and instead are quartz crystals.
US$1.1867/eur vs 1.1900/eur last week. Yen 109.99/$ vs 110.10/$. SAr 14.386/$ vs 14.064/$. $1.381/gbp vs $1.387/gbp. 0.749/aud vs 0.753/aud. CNY 6.470/$ vs 6.444/$.
Gold US$1,776/oz vs US$1,786/oz last week
Gold ETFs 101.3moz vs US$101.0moz last week
Platinum US$1,036/oz vs US$1,075/oz last week
Palladium US$2,497/oz vs US$2,559/oz last week
Silver US$25.94/oz vs US$26.24/oz last week
Copper US$ 9,045/t vs US$9,238/t last week
Aluminium US$ 2,362/t vs US$2,388/t last week
Nickel US$ 17,270/t vs US$17,330/t last week
Zinc US$ 2,818/t vs US$2,887/t last week
Lead US$ 2,143/t vs US$2,124/t last week
Tin US$ 29,700/t vs US$30,280/t last week
Oil US$73.4/bbl vs US$72.6/bbl last week
Oil prices edged higher during early trading today, underpinned by strong demand during the summer driving season in the US and a pause in talks to revive the Iran nuclear deal that could lead to a resumption of crude supplies from the OPEC producer
Both core benchmarks (Brent and WTI) have risen for the past four weeks on optimism over the pace of global COVID-19 vaccinations and expected pick-up in summer travel
The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs
Indirect talks between Tehran and Washington on reviving the 2015 Iran nuclear deal have come closer than ever to an agreement, but essential issues remain to be negotiated
Iran is heading to presidential polls today, with hard-line judiciary chief Ebrahim Raisi among the front runners
It is very possible that nuclear talks could fall apart if a deal is not done by August when the current reform president Hassan Rouhani will leave the government
Washington has sanctioned Raisi for alleged involvement in executions of political prisoners
His election would make it tougher for the US and Iran to come to an agreement on Iran’s uranium enrichment that would allow US sanctions on Iran’s oil exports to be lifted
Iran could boost oil supplies by up to 2MMbopd in short order if sanctions are lifted
Another drag on crude prices has been the decline in the US 3-2-1 and gasoline crack spreads – a measure of refining profit margins – to their lowest since February on recent weakness in products markets
US gasoline stocks increased by an unexpected 2MMbbls last week, on a forecast consensus of a 600,000bbl decline
Natural Gas US$3.186/mmbtu vs US$3.180/mmbtu last week
Iron ore 62% Fe spot (cfr Tianjin) US$206.6/t vs US$210.1/t
Chinese steel rebar 25mm US$778.0/t vs US$786.3/t
Thermal coal (1st year forward cif ARA) US$83.0/t vs US$83.0/t
Coking coal swap Australia FOB US$151.0/t vs US$150.0/t
Cobalt LME 3m US$44,540/t vs US$44,540/t
NdPr Rare Earth Oxide (China) US$72,494/t vs US$72,776/t
Lithium carbonate 99% (China) US$12,520/t vs US$12,569/t
China Spodumene Li2O 5%min CIF US$680/t vs US$680/t
Ferro-Manganese European Mn78% min US$1,786/t vs US$1,791/t
China Tungsten APT 88.5% FOB US$270/t vs US$270/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% 8.8/lb vs US$8.7/lb
Europe Ferro-Vanadium 80% 42.75/kg vs US$42.25/kg
Volvo and Northvolt to team up for new gigafactory
The Swedish carmaker and Northvolt will aim to build a new battery gigafactory with capacity of up to 50GWh per year, the equivalent of approx. 500,000 EVs.
The project is planned to start production in 2026 as part of Volvo’s push to sell only EVs by 2030.
Volvo will buy an additional 15GWh of batteries from Northvolt’s first gigafactory that is under construction in the north of Sweden.
Carmakers globally are working to get a strong foothold in the EV battery supply chain with VW also a major investor in Northvolt and with plans for 6 gigafactories by 2030.
VW are also part of a joint venture with Customcells to produce high-performance batteries with significantly reduced charging times for their Porsche vehicles.
Investigations underway for 3GW offshore wind farm in UK
Geophysical, geotechnical, and environmental surveys at sites awarded to BP and EnBW earlier this year are set to start.
The proposed 3GW project consists of two sites in the Irish Sea of the coast of North West England and Northern Wales and could be one of the largest offshore projects in the UK.
IKEA and Rockefeller foundations to make $1b clean energy push
The IKEA and Rockefeller foundations will each provide $500m of risk capital with the hope of attracting $10b of additional funds from international development agencies.
The foundations are hoping to fund $10b of small-scale renewable energy projects to lift more than 1 billion people out of energy poverty.
President of the Rockefeller Foundation, Rajiv Shah said “The pandemic has set back development in poorer countries by up to 2 decades and there is a great need to encourage economic growth in an environmentally-friendly way.”
KEFI Gold and Copper* (LON:KEFI) 1.8p, Mkt Cap £39m – Progress report on Tulu Kapi and Saudi Arabian project
Kefi Minerals has taken the opportunity on the day of Ethiopian elections “widely regarded as the most important elections in the country’s history” to provide a progress report on its Tulu Kapi Gold Project and to confirm that the project development “remains on track”.
The company confirms that, following a rigorous and protracted due-diligence by the lenders it has “presented its Project finance syndicate and submitted its Project finance plan to the Ethiopian central bank … for permission that it may proceed as outlined”.
The company stresses that commencement of “the Project is the highest priority for KEFI and the Ethiopian Government” and confirms that it “will push to financial closing by the end of July 2021, or as near as possible thereto given the local document registration procedures and the COVID-affected limitations of syndicate parties’ physical locations”.
In a review of the progress of the physical progress of the project, Kefi Minerals highlights that it is “Overseeing the early works programme of detailed engineering and procurement, by principal construction contractor Lycopodium” and working with the mining services contractor, Corica, to plan and support procurement as well as recruiting key personnel for the next stage of the project.
Progress is also reported on clearing of “new host lands for community members to be resettled” and on “Triggering compensation procedures for the first resettlers at the Tulu Kapi electrical substation site”.
In Saudi Arabia, Kefi Minerals confirms continuing work on the Preliminary Feasibility study for the Hawiah gold project and aiming for a Q3 completion of the latest phase of drilling “with the goal of reporting an expanded and upgraded Mineral Resource”.
*SP Angel act as Nomad and Broker to KEFI Gold and Copper
Panther Metals (LON:PALM) 13.75p , Mkt Cap £8.1m – Exploration target for laterite nickel cobalt mineralisation at Coglia
Panther Metals has announced that, following an independent review of historical exploration data, including drilling completed in the period 2001-03 and in 2018, it has identified a JORC compliant Exploration Target for the Coglia Nickel-Cobalt Project in Western Australia.
The Target is reported to amount to between “30Mt-50Mt of nickel-cobalt laterite mineralisation, grading at between 0.6-0.8% nickel and 400-600ppm cobalt … over an interpreted strike of approximately 5.5km”’.
The company cautions that “The potential quantity and grade of the nickel laterite mineralisation at Coglia is conceptual in nature, to date there has been insufficient exploration to estimate a Mineral Resource and it is currently uncertain if further exploration will result in the estimation of a Mineral Resource”.
The Target area is located the southern end of the company’s Merolia Gold Project in the Eastern Goldfields which Panther Metals acquired from White Cliff Minerals in December 2020. The underling geology is reported to consist of “a layered sequence of mafic and ultramafic rocks within a broadly NW-SE oriented greenstone belt … delineated by “high magnetic intensity within …newly acquired magnetic geophysical data”.
The review included a compilation of the results of 68 drillholes including 20 reverse-circulation holes drilled by Heron Resources in the 2001-03 period totalling 1562m and a further 48 aircore holes (2,866m) by White Cliff Minerals in 2018 which “intersected a layer of nickel enrichment in the weathered, lateritic material at a depth of between 40m to 70m”.
The company says that it “will set out our planned next steps to advance the Coglia Nickel-Cobalt Project to the market shortly.”
Sunstone Metals (ASX:STM) A$0.015, Mkt cap A$30.9m – Reports over 500m of copper gold mineralisation in recent drilling at Brama
In an announcement to the ASX, Sunstone Metals has reported results from its drilling at the Brama project in southern Ecuador where a ‘daughter’ hole, BMDD008/W1, has intersected 505.1 m at an average grade of 0.43g/t gold, 0.1% copper and 25.8ppm molybdenum virtually from the surface at 0.55m depth.
The intersection includes higher grade sections of 434.6m at an average grade of 0.48 g/t gold, 0.10% copper and 27ppm molybdenum from 2.5m depth within which 84.3m from 179.7m depth averaged 0.80h/t gold and 0.11g/t gold and 42.1ppm molybdenum.
The hole was diverted from the parent hole, BMDD008, which reported an intersection of 450m at an average grade of 0.47g/t gold and 0.1% copper, at a depth of 347.1m. As the exploration programme develops, It may prove significant that Sunstone Metals says that both the parent and daughter holes “extended towards a deeper magnetic anomaly but failed to intersect that target”.
A further hole, “BMDD009 was drilled in the east and central parts of the Brama porphyry system … towards a modelled deep magnetic anomaly … Visual inspection of the drill core … reveals it intersected a strongly and continuously veined porphyry system … with visual chalcopyrite associated with intense stockwork veining. The drillhole continued to test the deeper magnetic domain, that corresponds to the deeper target of BMDD008 and BMDD008W1 and encountered peripheral stockwork magnetite veinlets that likely explain the magnetic anomaly in the wall rocks south of the main mineralised body”.
Sunstone Metals says that “The relationship between the main Brama stockwork porphyry stockwork style mineralisation and the intrusive breccia intersected in BMDD008 is still to be established, and hole BMDD010 will go some way to exploring that relationship”.
BMDD010 has just been started and aims to explore:
A magnetic anomaly around the eastern rim of the system;
The potential for an extension towards the southwest of “the high grade pod intersected in holes BMDD001, BMDD002 and CURI-03, in the strongly veined diorite”; and
The potential continuity of high-grade mineralisation “between BMDD01 and BMDD005/BMDD008/CUR13, i.e. the relationship between the stockwork mineralisation and the intrusive breccia mineralisation”.
The company also reports that its preparations for drilling at its El Plamar project in northern Ecuador are well advanced with drill pads prepared at three locations and some equipment now on site. Pending the start of drilling, however, soil sampling is continuing with 70% of the planned coverage now completed over the main El Palmar target area.
Conclusion: Relatively early-stage drilling at Brama is still investigating the geological relationships between the various lithologies and mineralisation, however, with long mineralised intersections in these early holes the possibility of sizeable targets emerging is strengthening. We look forward to assay results of hole BMDD009 and the recently started BMDD010 to provide further insight into these relationships.
IGTV: Stock picks in the small-cap mining space: https://youtu.be/TxtMf6B2t8Q
Evolution of Chinese construction and implications for commodity demand: https://youtu.be/jB2nURL8uPw
VOX Markets: 10/06/21: https://audioboom.com/posts/7884446-john-meyer-talks-about-cornish-metals-empire-metals-anglo-american-ncondezi-energy-mkango-r
BBC: Catalytic converters https://www.bbc.co.uk/sounds/play/p09jl6c9
*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.
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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 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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite