Today’s Market View – Bushveld Minerals; Caerus Mineral Resources; Cornish Metals and more…

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SP Angel . Morning View . Friday 11 06 21

 China to utilise state reserves to rein in surging commodity prices

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MiFID II exempt information – see disclaimer below – FCA looks to scrap MiFID research rules on small-caps in UK competitiveness drive (Investment Week)

We are raising funds for a private Graphene producer – EIS scheme approval applied for 

The company is selling a number of graphene products to industrial and retail customers.

·         Sales of certain products have sold out unexpectedly quickly.

·         The company wishes to fund a ramp up in 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

·         The company has also applied for EIS scheme approval from HMRC

·         Please let me know 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.

 

Bastion Minerals+ (ASX:BMO) – Rock chip assays 

Bushveld Minerals* (LON:BMN) – Vanadium prices rise in China to ~$37/kgV

Caerus Mineral Resources (CMRS LN) – Completion of acquisition in Cyprus

Cornish Metals*+ (AIM:CUSN) – Tin prices continue to rise following MSC suspension 

Nordgold – IPO is being priced at $5.1-6.6bn equity value

 

China to utilise state reserves to rein in surging commodity prices 

China is set to offer copper, aluminium, and zinc, along with other commodities, directly to end users in order to curb the rally in commodity prices, according to state sources in China and reported by Bloomberg. 

China is also planning on expanding pork inventories and accelerating the construction of coal reserve infrastructure in order to have greater control over both markets.

While China doesn’t publish information about the volumes it holds in its state reserves, the government does set aside commodities in a bid to control price spikes.

Under the new shift, the minimum amount of copper that can be requested is 500t, and the offer will be monthly an last throughout the year.

The higher cap on purchases suggests take-up will be limited to larger firms.

A report form CRU said that China is looking to release 800,000 to 900,000t of aluminum from its state reserves as soon as next month.

Previous instances of the gov releasing material into the market include selling vast amounts of pork to cool inflation concerns due to shortages of meat.

Conclusion: We expect the impact of China’s state reserves to be minimal offering a form of effective, temporary, subsidy to local manufacturers

 

Gold $1,902/oz – Prices rise on weaker dollar and lower yields after US inflation data

Gold prices rose back above $1,900/oz on Friday morning, as the dollar weakened, and bond yields fell after US inflation data was deemed inadequate to alter the Federal Reserve’s easy monetary policy.

The CPI index climbed 0.6% in May, the second largest advance in more than a decade. 

Benchmark US treasury yields dropped to a three-month low, reducing the opportunity cost of holding non-interest-bearing gold. 

The US dollar continued to tick lower this morning after falling 0.1% on Thursday and is currently hovering at a three-year low. 

Total gold ETF holdings have been slowly rising since April, after a sell-off which began in October last year saw holdings fall from 111Moz to below 100Moz.

Total holdings have risen from 99.3Moz at the end of April to 101.2moz this morning, as money continues to flow back into bullion.

 

Ganfeng Lithium to raise $630m to fund expansion

Ganfeng announced this morning that it would raise around HK$4.9bn in new shares to boost capacity and fund potential investments. 

The company aims to increase its lithium production capacity fivefold to 600,000t of lithium carbonate per year. 

The shares will be placed at a price of HK$101.35 per share, a 5% discount to the closing price in Hong Kong on Thursday. 

The company intends to use 80% of the net proceeds for capacity expansion and 20% for replenishing working capital and general corporate proceeds. 

 

Euro 2021 kicks off today at the Stadio Olimpico in Rome with a Italy/Turkey match this evening.

The UEFA decided to keep the original name for the event that was delayed by the pandemic with millions of items or merchandise already printed and prepared.

The 24 competing national teams will now have to travel across the continent to play matches in 11 stadiums from Glasgow to Baku.

Although matches’ attendance will vary depending on local restrictions in place with stadiums in St Petersburg and Baku to operate at 50% while some others will be a quarter full.

Contingency plans are also in place to move games to other cities if a Covid-19 increase forces a country to pull out of hosting them.

The competition will be watched closely by organisers of the Tokyo Olympics that are set to commence just two weeks after Euro 2020 final at London’s Wembley Stadium on July 11.

 

Dow Jones Industrials +0.06% at 34,466

Nikkei 225 -0.03% at 28,949

HK Hang Seng +0.35% at 28,841

Shanghai Composite -0.49% at 3,593

 

Economics

Three days G7 summits starts in Cornwall today with leaders set to discuss vaccination, climate change and the economic recovery, FT reports.

Expectations are for G7 leaders to pledge to provide 1bn coronavirus vaccine doses to poorer countries as part of a plan to “vaccinate the world” by the end of 2022.

The US is planning to purchase 500m Covid-19 BioNTech/Pfizer vaccines and donate those to some of the world’s poorest countries including 200m this year and the rest in H1/22.

The EU has separately pledged 100m doses for African countries and other developing nations by the end of the year.

 

China – Air traffic rose 97.6% yoy in May to carry 51m passengers (Civil Aviation Administration of China)

 

Italy – Unemployment Rate in Q1 rises to 10.4% vs 9.2%

 

US – Headline and core inflation data climbed more than forecast in May raising concerns that building up price pressures may less transitory than suggested by central bank.

Although, MoM price increases slowed down slightly last month.

Markets’ reaction suggest investors keep faith the Fed will stick to its rhetoric and maintain stimulus for now.

S&P 500 index closed at record high while 10y US Treasury yields pulled back more than 5bp to 1.44%.

Separate report showed labour market continued to improve with weekly jobless claims trending lower; however, the reading came in slightly higher than expected

CPI (%yoy): 5.0 v 4.2 in April and 4.7 est.

Core CPI (%yoy): 3.8 v 3.0 in April and 3.5 est.

Initial Weekly Jobless Claims (‘000): 376 v 385 in the previous week and 370 est.

 

UK – GDP climbed 2.3%mom in April following a lockdown driven contraction of 1.5%qoq in Q1/21 and setting the economy for a good quarter.

“Strong growth in retail spending, increased car and caravan purchases, schools being open for the full month and the beginning of the reopening of hospitality all boosted the economy in April,” the ONS said.

GDP is expected to expand furter in May following the reopening of indoor hospitality and other businesses with BOE estimates for a 4.2%qoq growth in Q2/21.

The economy is closing the gap with its pre-pandemic level and is currently 3.7% lower compared to Feb/20.

Bloomberg reports PM Johnson might announce a delay to the planned easing of remaining curbs next Monday

Ministers discussed different options this week including delays ranging from nine days to a month, and allowing some planned relaxations to ahead and other not, Bloomberg cites people familiar with discussions.

7,540 new cases were reported on Wednesday with the number of patients in hospitals now exceeding 1,000 for the first time since May 12.

While selected measures picked up over the last several days, those remain considerably below levels seen at the height of the January lockdown when the number of people in hospitals at one point hit >39,000.

 

Euro 2020 kicks off today at the Stadio Olimpico in Rome with a Italy/Turkey match this evening.

The UEFA decided to keep the original name for the event that was delayed by the pandemic with millions of items or merchandise already printed and prepared.

The 24 competing national teams will now have to travel across the continent to play matches in 11 stadiums from Glasgow to Baku.

Although matches’ attendance will vary depending on local restrictions in place with stadiums in St Petersburg and Baku to operate at 50% while some others will be a quarter full.

Contingency plans are also in place to move games to other cities if a Covid-19 increase forces a country to pull out of hosting them.

The competition will be watched closely by organisers of the Tokyo Olympics that are set to commence just two weeks after Euro 2020 final at London’s Wembley Stadium on July 11.

 

Currencies 

US$1.2186/eur vs 1.2167/eur yesterday.  Yen 109.36/$ vs 109.52/$.  SAr 13.528/$ vs 13.721/$.  $1.416/gbp vs $1.409/gbp.  0.777/aud vs 0.774/aud.  CNY 6.389/$ vs  6.388/$.

 

Commodity News

Precious metals:  

Gold US$1,902/oz vs US$1,883/oz yesterday

   Gold ETFs 101.2moz vs US$101.1moz yesterday

Platinum US$1,161/oz vs US$1,145/oz yesterday

Palladium US$2,789/oz vs US$2,774/oz yesterday

Silver US$28.22/oz vs US$27.66/oz yesterday

            

Base metals:   

Copper US$ 9,981/t vs US$9,895/t yesterday

Aluminium US$ 2,500/t vs US$2,447/t yesterday

Nickel US$ 18,350/t vs US$17,930/t yesterday

Zinc US$ 3,039/t vs US$2,994/t yesterday

Lead US$ 2,197/t vs US$2,192/t yesterday

Tin US$ 31,495/t vs US$31,125/t yesterday

            

Energy:            

Oil US$72.5/bbl vs US$71.7/bbl yesterday

Oil prices continue to tick up with WTI now over US$70/bbl

Despite the COVID crisis in India, global oil demand remained higher than supply in May, which extended the global inventory drawdown of crude and fuels, although the withdrawal is estimated by the EIA at 1.2MMbopd last month, compared with average monthly withdrawals of 2.1MMboopd since June 2020

EIA’s latest price outlook is close or slightly below current levels and “incorporates the recent price increases and our forecast of mostly balanced oil markets in the coming months,”

Global production is set to increase more rapidly in the second half of this year to catch up with rising demand, according to the EIA

Earlier this week, the API reported a draw in crude oil inventories of 2.1MMbbls yesterday for the week ending 4 June

Last week, the API reported a draw in oil inventories of 5.4MMbbls after analysts had predicted a draw half that size of 2.1MMbbls

Crude oil inventories have fallen by more than 14MMbbls since the start of this year, according to API data, but are still up 43MMbbls barrels since January 2020

While crude oil inventories fell yet again this week, US oil production fell to an average of 10.8MMbopd for the week ending 28 May, according to the latest data from the Energy Information Administration

This is down 200,000bopd from the week before

The API reported a build in gasoline inventories of 2.405MMbbls for the week ending 4 June, on top of the previous week’s 2.51MMbbl build

Distillate stocks saw an increase in inventories this week of 3.752MMbbls for the week, on top of last week’s 1.585MMbbl increase

Cushing inventories fell this week by 420,000bbls

 

Natural Gas US$3.253/mmbtu vs US$3.161/mmbtu yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$207.3/t vs US$205.9/t

Chinese steel rebar 25mm US$801.9/t vs US$798.7/t

Thermal coal (1st year forward cif ARA) US$83.4/t vs US$82.4/t

Coking coal swap Australia FOB US$147.0/t vs US$146.0/t

            

Other:  

Cobalt LME 3m US$42,535/t vs US$43,535/t

NdPr Rare Earth Oxide (China) US$73,409/t vs US$73,418/t

Lithium carbonate 99% (China) US$12,678/t vs US$12,680/t

China Spodumene Li2O 5%min CIF US$650/t vs US$650/t

Ferro-Manganese European Mn78% min US$1,810/t vs US$1,807/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% $8.4/lb vs US$8.3/lb

Europe Ferro-Vanadium 80% $40.05/kg vs US$39.75/kg

 

Company News

Bastion Minerals+ (ASX:BMO) A$20c, Mkt cap A$11m – Rock chip assays 

Rock-chip assays confirm extensive and widespread surface high-grade copper mineralisation at Cometa in Chile

This second set of chip sampling at the Cometa Copper-Gold Project in the Atacama, Chile supports previous work on the property.

Samples show: 

3.08% Copper,

0.75g/t Gold,

16.6g/t Silver,

The previously unsampled areas were identified using satellite alteration mapping and airborne magnetic data.

This combined with previous rock-chips, alteration mapping and geophysics show multiple zones of high-grade copper associated with regional Iron Oxide Copper Gold (IOCG) related mineralisation.

Further work is being done in preparation for trenching and drilling in the third quarter this year.

+A number of SP Angel personnel hold shares in Bastion Minerals

 

Bushveld Minerals* (LON:BMN) 15.25p, Mkt cap £182m – Vanadium prices rise in China to ~$37/kgV

(Bushveld Energy holds an indirect interest of 25.25 per cent in Enerox. Bushveld is invested in Enerox alongside a <3% in Invinity Energy Systems.)

Vanadium prices continue to rise in China with prices rising another 0.5% to $37/kgV according to prices on Asianmetal.com.

This translates into a price of $32.3/kgV for companies selling into China due to 13% import duties applied to vanadium which serve to protect local vanadium producer.

Prices have risen in China between 12-19% this year depending on the grade being sold

Prices have risen by 24% in the US and 28% in Europe so far this year

Renewed steel production growth in the US and Europe for new stimulus-driven projects is raising prices in the West due to greater competition with China which has turned into a net importer of vanadium over the past year.

Data from manufacturers of construction machinery indicate that many projects in China have completed ground clearance and concrete pumping and are now busy with above ground work.

Strong import data for Australian iron ore continues to suggest steel production should continue to rise requiring greater vanadium input for structural steel.

Media coverage of the wobbly skyscraper at SEG Plaza in Shenzhen serves to highlight the importance of using good quality structural steel with the proper vanadium content as ‘quench & tempered’ steel is brittle and might have failed by now. Experts believe China’s very rapid building techniques are to partly blame for the wobble in the structure.

Conclusion:   We view recent price gains as an indication of a tightening market where primary vanadium producers are limited in their scope for raising production.

We are currently looking for vanadium prices to average $35/kgV this year and $40/kgV from 2022 driven by strong demand for structural steel.

New demand for vanadium redox batteries should also start to help demand and prices higher as utilities increasingly look for grid-scale batteries to support new wind and solar farms which need other forms of rapid power backup.

*SP Angel acts as Nomad and broker to Bushveld Minerals.

Bushveld is leading a consortium of investors in Enerox which are investing US$30m to scale up VRFB production capacity to 30MW by 2022. Bushveld

 

Caerus Mineral Resources (LON:CMRS) 28p, Mkt Cap £13.6m – Completion of acquisition in Cyprus

Caerus Minerals has announced the completion of its previously announced £750,000, all share, acquisition of the private, Cypriot registered PR Plutonic Resources.

The acquisition “provides Caerus with access to a further suite of advanced copper – gold exploration licences in the Republic of Cyprus”, including the Trouli, Kokkinapetra and St Nicholas licences each of which are described as having “excellent potential for discovery of further high-grade VMS copper-gold and epithermal gold deposits”.

The company describes each of the licences: 

Trouli “comprises both a former small-scale high-grade, open pit gold mine last operated in the 1930’s, and a separate open-pit operation that mined a high-grade copper-gold VMS deposit, ceasing production prematurely in 1974” and Kokkinapetra “represents the geological extension of the Troulli deposits“; and

The St Nicholas “comprises two sulphide copper – gold orebodies partially drilled by Noranda in 1977, returning a peak intercept of 5m @ 4.82% Cu and 6g/t Au from 11m depth. More recently, in 2011, Katla (Northern Lion) reported intercepts including 28.6m @ 1.06% Cu and 4.5g/t Au from 10m depth”.

Caerus Minerals says that since it announced the proposed acquisition in April, work undertaken at Trouli as part of its due diligence assessment has made progress in evaluating “the extent and depth of the gold-bearing epithermal zones and the Volcanogenic Massive Sulphide (“VMS”) mineralisation”.

CEO, Martyn Churchouse described the acquisition as “an important addition to our licence portfolio. We are especially excited about the very promising initial exploration observations at Troulli that indicate the presence of both an epithermal Au deposit and scope for a further Cu-Au VMS deposit. The objective is to quickly establish the physical limits of both mineralisation types before undertaking work to determine a Mineral Resource”.

 

Cornish Metals*+ (AIM:CUSN) – 17.20p, Mkt cap £42m – Tin prices continue to rise following MSC suspension 

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Tin prices continued to trend upwards on Friday, extending 10-year highs, after top producer Malaysia Smelting Corporation (MSC) suspended operations and declared force majeure on deliveries. 

MSC is the third largest producer of refined tin and issued a notice of force majeure after the Malaysian government did not grant the company’s appeal for status as an essential service during lockdown. 

Under the government’s order, operations have been suspended until at least the 14th of June after halting production on June 3rd.

MSC was already operating under restrictions since April 2021, because of furnace failure and maintenance work.

MSC accounted for around 6% of global refined tin production in 2020, according to Reuters.

* SP Angel acts as broker and financial advisor to Cornish Metals. +The Analyst holds shares in Cornish Metals.

 

Nordgold IPO is being priced at $5.1-6.6bn equity value according to three sources cited by Reuters.

The Company is expecting to start building order books on June 21 and close on June 29.

The Nordgold is a diversified gold producer with mines in Russia, Kazakhstan and West Africa.

The Company produced 1,046koz at $1,024/oz AISC generating $1,017m EBITDA last year.

The Company intends to pay out 50% of its FCF in dividends (subject to Net Debt/EBITDA remaining below 1.5x) and is looking to grow production by 20% over the next five years.

Nordgold is expected to pay a minimum of $400m this year in two instalments implying a +6.5% yield assuming mid-range valuation.

 

Recent Interviews:

No.1 in Copper:  “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an  accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

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 – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Joe Rowbottom – [email protected] – 0203 470 0486

 

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – [email protected] – 0203 470 0471

 

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*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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