Today's Market View - Chaarat Gold and more...

SP Angel . Morning View . Friday 26 03 21

Copper, nickel and tin prices rise after recent pullback

CLICK FOR PDF

MiFID II exempt information – see disclaimer below

We are working with a private copper company which is raising funds for new exploration

• Please contact us for details of the investment opportunity
• The company intends to list in London and its valuation is at a suitable discount to reflect its private status and stage of exploration

Chaarat Gold* (AIM:CGH) – Endorsements from the government and investment promotion and protection agency

Kaz Minerals (LON:KAZ) – Nova raises it total offer to 869p

Sundance Resources (ASX:SDL) – seeks $8.76bn in damages from Congo Republic

Tertiary Minerals* (AIM:TYM) – Drilling results from the Lucky copper prospect

China / Australia – Tariffs on Australian wine for five years. Other tariff controls are sure to follow

• The Chinese really know how to hit the Aussies where it hurts.
• Thing is most Aussies will welcome the news as it will mean there is more local wine to drink at home due to lower exports.
• Joking aside, the Chinese are increasingly using Tariff Diplomacy to bully politicians into voting their way and we have to wonder what next.
• China will restrict exports of battery materials either to support growth in battery manufacturing in China or simply to disrupt production by competitors in the West:
• Lithium hydroxide for battery cathodes

- Graphite for battery anodes

- Cobalt which prevents cathode corrosion. We see the market as largely controlled by the Chinese.

- Nickel hydroxide

• China is adept and swift at applying tariffs on specific exports and imports and is also as good as the French at finding excuses for stopping exports for technical reasons.
• While Chinese traders often make better partners than their European counterparts the central government is using tariffs and controls on trade to pursue a political agenda to give advantage to Chinese manufacturing over its Western competitors.

Chinese copper smelters decide against setting treatment charge floor in Q2

• The CSPT, representing China’s biggest copper smelters, has decided not to set a floor price for treatment and refining charges (TC/RCs), according to Fastmarkets MB.
• While no official reason was given for the lack of a price floor, market participants expressed the difficulty in setting a suitable guidance against such weak market conditions.
• Copper TC/RCs are fees paid to smelters for processing concentrates into refined metal, with prices currently at 10-year lows.
• Sources told Fastmarkets that smelters may conduct unplanned maintenance this quarter if low rates continue, although there has been no evidence of this so far.

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

Economics

US -  Weekly jobless claims came in lower than expected coming in at a new pandemic low and highlighting positive momentum in the labour market.

• The recovery should accelerate on the back of increasing vaccinations, reopening of the economy and improving confidence, Bloomberg reports.
• Weekly Jobless Claims (‘000): 684 v 781 (revised from 770) the previous week and 730 est.
• Continuing Claims (‘000): 3,870 v 4,134 (revised from 4,124) and 4,000 est.
•  

Germany – Angela Merkel suggested that Germany will declare France a high-incidence virus area that would trigger a negative COVID-19 test requirement for anyone entering from France.

• Chancellor ruled out border controls.

UK car output falls 14% YoY in February

• British car production fell to its lowest February level since 2010 amid lockdown measures and global supply chain problems centered around semiconductor chip shortages.
• A total of 105,000 cars were produced in Britain last month, according SMMT.
•  

Canada tightens takeover rules for critical minerals

• Canada has tightened foreign investment rules to protect the security of critical mineral supply chains, according to government sources and reported by Reuters.
• The updated guidelines mean proposed takeovers of companies specializing in critical minerals and sensitive personal data, as well as investments by “state-owned or state-influenced investors” could trigger a national security review.
• Canada published its critical minerals list earlier this month, with 31 materials on the list including cobalt, copper and nickel.
• The move comes as the US government works with Canada to boost regional supply chains to counter China’s dominance in the sector.

Argentina – Quelle Surprise – Argentina cannot repay $45m IMF debt

• Vice President Cristina Fernandez de Kirchner said the current conditions for paying back the debt were ‘unacceptable’ (CityAM).
• If the political parties are not able to articulate a minimum agreement on structural issues such as external debt and the bi-monetary economy, it will be very difficult to govern Argentina, if not impossible”, she said.
• “With the terms and with the rates that are intended, it is not only unacceptable, it is a problem that we cannot pay because we do not have the money.”.
• Maybe de Kirchner could ask her former secretary of public works to hand back some of the bags of cash that he was caught throwing over the walls of a convent in 2016 and then clambered over the wall after them.
• José López was caught after concerned neighbours called the police fearing for the safety of the nuns inside. The issue is said to have omplicated relations between the Argentinian government and the Catholic church (The Guardian).
•  

Currencies US$1.1783/eur vs 1.1803eur yesterday.  Yen 109.41$ vs 109.08/$.  SAr 14.985/$ vs 14.962/$.  $1.377/gbp vs $1.369/gbp.  0.762/aud vs 0.760/aud.  CNY 6.539/$ vs 6.535/$.

Commodity News

Precious metals:  

Gold US$1,729/oz vs US$1,733/oz last yesterday

   Gold ETFs 100.3moz vs US$100.4moz yesterday

Platinum US$1,163/oz vs US$1,169/oz yesterday

Palladium US$2,647oz vs US$2,635/oz yesterday

Silver US$25.20/oz vs US$24.97/oz yesterday

Base metals:  

Copper US$ 8,908/t vs US$8,772/t yesterday

Aluminium US$ 2,272/t vs US$2,230/t yesterday

Nickel US$ 16,405/t vs US$16,050/t yesterday

Zinc US$ 2,814/t vs US$2,773/t yesterday

Lead US$ 1,936/t vs US$1,924/t yesterday

Tin US$ 25,235/t vs US$25,000/t yesterday

Energy:

Oil US$63.1/bbl vs US$63.7/bbl yesterday

• Despite the recent sell down in oil prices, investors appear to be returning to the energy sector following last years’ correction
• The sector has been the top performer in the S&P 500 index year to date, despite the pull back last week and earlier this week
• Some ETFs tracking oil prices have surged since the start of 2021 as investors turned their attention to industries expected to benefit the most from the economic recovery
• Debt investors are also more bullish on the oil sector as higher oil prices lifted the yields of existing high-yield bonds of lower-rated companies in the sector
• Investor appetite for high-yield bonds of low-rated US energy firms is back, while the American shale patch is enjoying what is believed to be the best opportunity to borrow at record-low interest rates since oil prices traded above US$100/bbl back in the first half of 2014
• US consumer sentiment rose this month to its highest level in a year thanks to the progress in vaccinations and the coronavirus relief bill
• In addition, travel statistics show that US consumers are driving and flying this month at the highest rate since the pandemic forced the US into lockdown a year ago. Despite persistent concerns about near-term oil demand in Europe, expectations of economic recovery, especially in the world’s largest economy (US), appears to have boosted investor confidence in the sector

Natural Gas US$2.578/mmbtu vs US$2.519mmbtu yesterday

• Natural gas prices moved higher during trading yesterday, rising 2%, following a larger than expected draw in natural gas stockpiles
• Natural gas in storage was 1,746Bcf as of Friday 19 March, according to the EIA. This represents a net decrease of 36Bcf from the previous week
• Expectations were for a 10Bcf draw according to survey provider Estimize
• Stocks were 263Bcf less than last year at this time and 78Bcf below the five-year average of 1,824Bcf
• At 1,746Bcf, total working gas is within the five-year historical range
• According to the National Oceanic Atmospheric Administration, the weather is expected to be warmer than normal in the US and Europe over the next 8-14 days which should boost demand

Bulk:   

• Iron ore 62% Fe spot (cfr Tianjin) US$154.0/t vs US$155.9/t - Chinese iron ore stocks rise to highest level since 2019
• Iron ore stocks at major ports rose 0.3% to 130.7mt this week, the highest level since May 2019 according to Mysteel.
• Despite the uptick in inventories, prices are on course for a weekly advance after three weeks of losses.
• Prices have gained this week as factory activity in China accelerated amid strong global orders and recovering domestic demand.
• The most active contract on the Dalian Commodities Exchange closed 2% higher on Friday, advancing 4.5% this week (Bloomberg).

Chinese steel rebar 25mm US$731.6/t vs US$729.0/t

Thermal coal (1st year forward cif ARA) US$72.2/t vs US$72.2/t

Coking coal swap Australia FOB US$123.0/t vs US$128.0/t

Other: 

Cobalt LME 3m US$52,250/t vs US$52,250/t

NdPr Rare Earth Oxide (China) US$89,536/t vs US$89,141/t

Lithium carbonate 99% (China) US$12,845/t vs US$12,855/t

Spodumene 6% Li2O min, cif (China) US$510/t vs US$455/t

Ferro Vanadium 80% FOB (China) US$35.0/kg vs US$35.0/kg

Ferro-Manganese high carbon 78% Mn US$1,625/t vs US$1,625/t

Tungsten APT European US$270-275/mtu vs US$268-275/mtu

Graphite flake 94% C, -100 mesh, fob China US$550/t vs US$560/t                

Graphite spherical 99.95% C, 15 microns, fob China US$2,525/t vs US$2,525/t

Iridium surges 131% year-to-date to become best performing commodity so far this year

• Iridium has outperformed all commodities with the minor metal produced as a byproduct of platinum and palladium and traded directly between miners and consumers.
• Prices have rallied as a result of supply disruptions, namely Norilsk’s mine flooding accident in the Arctic circle.

           - The metal is used in electronic screens and spark plugs, and has climbed to more than $6,000/oz but is likely to see demand in spark plugs fall as electric vehicle sales rise

           - Production is relatively inelastic due to its by-product nature

Battery News

EV startup Arrival sparks record valuation  

• An electric van and bus start-up that has yet to build its first production vehicle has secured the highest valuation ever for a British company on its stock debut.  
• Arrival was valued at $13.6 billion when its shares began trading in New York yesterday.  
• It is the latest to take advantage of a boom in “blank-cheque” funds, commonly known as Spacs, which list their shares on the stock exchange before buying a company and hoisting it straight onto the market.  
• Arrival’s backers include Kia, Hyundai and BlackRock. It aims to start bus production by the end of the year and its vans by the third quarter of next.  
• It went public on the Nasdaq exchange through a reverse takeover by CIIG, a New York-based blank-cheque fund. The deal provided Arrival with $660 million to expand its network of “microfactories”, which it says are key to plans to produce as many as 10,000 vans a year.  

Company News

Chaarat Gold* (AIM:CGH) 24.9p, Mkt Cap £171m – Endorsements from the government and investment promotion and protection agency

BUY – 62p

• The Company held a series of meetings with the new president (Sadyr Japarov) and new prime minister (Ulukbek Maripov) last week and highlighted positive feedback it received from the authorities supporting development of gold projects in the country.
• “I am pleased with the positive feedback received during the meetings in country and it was a great honour to meet the new leaders of the Kyrgyz Republic in person… the meetings confirmed that Chaarat as an investor and our projects in the Chatkal valley are seen as a major step forward for the communities and are important to the country,” Executive Chairman Martin Andersson commented on discussions.
• Additionally, the Company signed a memorandum of partnership and cooperation with the Investment Promotion and Protective Agency aimed at attracting investment in the local economy.
• The agreement covers the planned $110m Tulkubash project and aims to promote further regional investment and improve the national investment climate overall.

*SP Angel act as Broker to Chaarat Gold

Kaz Minerals (LON:KAZ) 865p, Mkt Cap £4,086m – Nova raises it total offer to 869p

• Nova Resources, controlled by major shareholders Oleg Novachuk and Vladimir Kim, raised its cash offer price to 850p plus a 27c dividend payment for a total of ~869p.
• That marks an increase on the previous increased price of 780p and an original offer of 640p.
• Nova holds ~40% interest in the Kaz and has now got acceptances from nearly 60% of shareholders, including their own stake.
• Nova needs to secure approval from 75% of shareholders with the offer to remain open until April 9.
• “We remain convince that the final increased offer represents a highly attractive return for Kaz Minerals Shareholders” and fully reflected the change in “copper dynamics” since the original bid, Nova commented on the announcement.

Sundance Resources seeks $8.76bn in damages from Congo Republic

• Australia’s Sundance Resource has referred its dispute with the Congo Republic over the Nabeba iron ore project to arbitration in London, the company reports.
• Congo’s government revoked the companies permit in December and awarded it to a little known company backed by Chinese investment (Mining Weekly).
•  

Tertiary Minerals* (AIM:TYM) – 0.4p, Mkt cap £4.8m – Drilling results from the Lucky copper prospect

1. Tertiary Minerals has announced the results of its initial drill hole, 21TLRC001, from the Lucky copper prospect in Nevada.
2. The hole is reported to have intersected two magnetic gossan zones containing low grade mineralisation including:
3. A 4.57m wide intersection averaging 0.2% copper and 0.12g/t gold from a downhole depth of 15.24m; and
4. A 3.05m wide intersection averaging 0.40% copper from 33.53m depth.
5. In addition, the company reports that the hole intersected “Highly anomalous copper (average 325ppm copper) over 24.38m from 83.82m to the base of hole” at a depth of 108.24m.
6. Sampling is continuing and a follow-up magnetic survey is now planned.
7. Commenting on the results, Executive Chairman, Patrick Cheetham, explained that The geological setting of the mineralisation is not yet defined but trace element geochemistry suggests the gossans are developed from skarn-style mineralisation … Detailed evaluation of the drill samples is underway to define the host rock stratigraphy and a magnetic survey is planned to define additional drill targets”.

Conclusion: The first drill hole on the Lucky prospect has demonstrated low grade copper/gold mineralisation in gossans thought to be related to skarns.  A follow-up magnetic survey is planned to help with geological interpretation and to assist in the definition of targets for future targets for drilling.

*SP Angel act as Nomad and Broker to Tertiary Minerals

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, Antimony – Asian Metal

Tungsten – Metal Bulletin

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins ([email protected]).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%

Story by ProactiveInvestors