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Today’s Market View – Bluejay Mining, Bacanora Lithium, Alba Mineral Resources and more…

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SP Angel . Morning View . Friday 21 05 21

Services industry growth picks up alongside inflation driven by used car prices

 

Arkle Resources* (LON:ARK) – Multiple gold intersections in first hole of the new campaign at Mine River project

Alba Mineral Resources (LON:ALBA) – Phase-2 underground drilling commences at Clogau

Bacanora Lithium (LON:BCN) – Sonora Lithium Project update

Bluejay Mining* (LON:JAY) – BUY – Valuation 37.7p – New Minister for Mineral Resources reaffirms government support for Mineral Strategy 2020-2024

BlueRock Diamonds (LON:BRD) – Contractor puts £1.61m into Bluerock

 

Ford unveil electric F-150 pickup truck

Ford has unveiled an electric version of its F-150 pickup truck, which it has named the F-150 Lightning.

Ford’s F-series trucks make up the top-selling vehicle line in the United States, and typically generate $42bn a year in revenue.

EV truck sales will be watched closely, with Ford targeting a market segment as yet untouched on a commercial sale by other EV makers.

Orders for Tesla’s Cybertruck are estimated at ~535,000 or ~6,000 a day outpacing reservations for Tesla’s Model 3 (Forbes).

Most cybertruck sales are for the dual or tri-motor trucks costing >$50,000. Deliveries are due late this year but may be delayed till 2022.

 

Gold prices rise as markets wobble following China ban on Cryptocurrency transactions

Inflation pressures may cause Fed to slow asset purchases

A 61% rise in second-hand car prices is driving inflation, though prices should fall when production lines recover from chip shortages.

 

IBM – develops 2nm transistor leading to potential 45% increase in performance and energy savings vs 7nm processors

An alliance between Intel and IBM may be about to pay off with IBM’s development of a new 2nm transistor (Forbes).

Intel plans to develop its next-generation 7nm technology next year ranking around 2 years behind Taiwan Semiconductor Manufacturing which leads the world but is threatened with Covid-19, power and water issues in Taiwan.

Intel is already spending $20bn in investment in new 7nm semiconductor manufacturing and is likely to work alongside Global Foundries and Samsung which also ally with IBM.

 

Covid-19 – Rare, life-threatening Covid-19 complications appear to be escalating in India, including an invasive fungal infection

Mcormycosis is seen as a dangerous inflammatory syndrome in children (Bloomberg).

 

Dow Jones Industrials +0.55% at 34,084

Nikkei 225 +0.78% at 28,318

HK Hang Seng +0.04% at 28,461

Shanghai Composite -0.58% at 3,487

 

Economics

US – Weekly jobless claims dropped to a fresh pandemic low pointing to an improvement in the job market as remaining business restrictions are being lifted, Bloomberg reports.

Weekly Jobless Claims (‘000): 444 v 478 in the previous week and 450 est.

Philadelphia Fed manufacturing index fell more than expected to 31.5 in May vs 50.2 expected

 

China – Vaccination rates pick up as the nation administered 125m shots in the ten period through to May 19 taking the total number of vaccinated to nearly 500m, FT reports.

 

Japan – Private sector growth turns negative dragged by a slump in the services sector on a resurgence in Covid-19 cases and the reimposition of state of emergency measures.

Manufacturing PMI: 52.5 v 53.6 in April.

Services PMI: 45.7 v 49.5 in April.

Composite PMI: 48.1 v 51.0 in April.

Factory orders rose 3.7% in March vs -8.5% in February but fell -2% in March vs a fall of -7.1% in February

 

Eurozone – Preliminary PMI numbers beat estimates in May with growth in services sector accelerating markedly.

Services sector index hit a nearly three year high as economies continued to lift restrictions.

Generally, firms highlighted stronger orders, business outlook and payroll numbers.

“Growth would have been even stronger had it not been for record supply chain delays and difficulties restarting businesses quickly enough to meet demand, especially in terms of re-hiring… the shortfall of business output relative to demand is running at the highest in the survey’s 23-year history,“ Markit wrote.

Input costs pressures saw average prices charged for goods and services climbing the fastest pace since comparable data was first available in 2002.

Regionally, growth picked up strongly in France reaching the highest since July 2020 led by both manufacturing and services industries (Manufacturing PMI 59.2 v 58.9 in April; Services PMI 56.6 v 50.3).

Eurozone Manufacturing PMI: 62.8 v 62.9 in April and 62.5 est.

Eurozone Services PMI: 55.1 v 50.5 in April and 52.5 est.

Eurozone Composite PMI: 56.9 v 53.8 in April and 55.1 est.

Apr EU final CPI 0.6% (0.9%), yoy 1.6% (1.3%),

 

Germany – In Germany, manufacturing continued to grow at a strong pace

Manufacturing PMI 64.0 v 66.2 in April) while services have also returned to growth during the month (Services PMI 52.8 v 49.9).

PPI rose 0.8% in April vs 0.8% in March and rose 5.2% yoy in April vs 3.7% yoy in March

Construction output rose 18.3% (-5.4%),

New car regos jumped 218% (87%),

 

UK – CPI rose 0.6% in April vs 0.3% in March and 1.5% yoy in April vs 0.7% yoy in March

Input PPI 0.4% in April vs 0.8%), yoy 9.9% yoy in April vs 6.4% yoy in March

Output PPI up 0.4% in April vs 0.8% in March and 3.9% yoy in April vs 2.3% yoy in March

CBI Industrial Trends orders rose to 17

 

UK – Consumer confidence picks up beating market estimates as the economy emerges from the lockdown.

Separately, PMI data showed private sector grew at the quickest pace for more than two decades this month reflecting strong contributions from both manufacturing and services.

The recovery is being driven by looser pandemic restrictions and high levels of pent up demand.

Goods and services prices hit series-record high with respondents highlighting shortages of raw materials, high shipping costs as well as increased staff salaries.

“The output and order book growth seen in May, and record level of business optimism, are consistent with GDP rising sharply in the second quarter and for strong momentum to be sustained through the rest of the year, albeit with the current quarter likely representing a peak in the growth rate,“ Markit commented on the data.

GfK Consumer Confidence: -9 v -15 in April and -12 est.

Markit Manufacturing PMI: 66.1 v 60.9 in April and 60.8 est.

Markit Services PMI: 61.8 v 61.0 in April and 62.2 est.

Markit Composite PMI: 62.0 v 60.7 in April and 61.9 est.

 

South Korea – Early export data reflect recovering global demand with shipments of memory chips as well as cars, wireless devices and machinery growing.

Exports in the fist 20 days of the month gained 53.3%yoy, although, reading s would have been skewed by last year’s low base.

Shipments to China, its largest overseas trade partner, increased 25.2%yoy while exports to the US, the EU and Japan were up 87.3%yoy, 78.1%yoy and 30.6%, respectively.

 

China’s refined copper output expected to be lower in May-June on smelter maintenance

China’s refined copper output is likely to fall in May and June compared to April as smelters conduct maintenance, Bloomberg reports.

A small portion of smelters already started maintenance checks in April, however some delayed and instead ramped up production to meet quarterly targets.

May-June is the time that smelters tend to conduct bi-annual smelter checks.

Lower output of Chinese refined copper will require less copper concentrate, which could lift spot-treatment charges (TC) from their 11-year low hit in April.

Tight overseas supply of concentrate and rising demand from China’s smelters dragged down spot TC to $30.5/t in mid-April – 40% lower than the beginning of the year.

China produced 878,100t of refined copper in April, up 2.1% from March (SMM News).

 

Currencies

US$1.2218/eur vs 1.2195/eur yesterday.  Yen 108.72/$ vs 109.03/$.  SAr 13.981/$ vs 14.070/$.  $1.418/gbp vs $1.413/gbp.  0.774/aud vs 0.776/aud.  CNY 6.435/$ vs 6.439/$.

 

Commodity News

Precious metals:  

Gold US$1,874/oz vs US$1,872/oz yesterday

Gold ETFs 100.5moz vs US$100.3moz yesterday

Platinum US$1,198/oz vs US$1,207/oz yesterday

Palladium US$2,833/oz vs US$2,886/oz yesterday

Silver US$27.66/oz vs US$27.78/oz yesterday

           

Base metals:  

Copper US$ 9,943/t vs US$10,133/t yesterday – Refined copper output rose 16.6% to 901,000t in April (Chinese National Bureau of Statistics)

Aluminium US$ 2,378/t vs US$2,423/t yesterday

Nickel US$ 16,835/t vs US$17,310/t yesterday – Chinese refined nickel output rose to 13,014t in April and 53,000t ytd (Antaike)

Zinc US$ 2,978/t vs US$2,970/t yesterday – Chinese refined production rose 3.4% to 544,000t in April (Chinese National Bureau of Statistics)

Lead US$ 2,212/t vs US$2,210/t yesterday – Chinese refined production rose 9% in at 546,000t in April (Chinese National Bureau of Statistics)

Tin US$ 29,635/t vs US$29,765/t yesterday           

Energy:           

Oil US$65.1/bbl vs US$67.1/bbl yesterday

Oil prices dropped again yesterday after Iran’s president said that the world powers had accepted during the latest round of talks that sanctions against the country would be lifted

Earlier this week Brent briefly touched US$70/bbl but failed to hold on to that handle as reports of a breakthrough in the indirect talks about the nuclear deal between the US and Iran (later clarified that there has been no breakthrough) 

Yesterday, Iranian President Hassan Rouhani was quoted as saying that global powers taking part in the indirect US-Iranian talks on a return to the nuclear agreement had accepted that the US sanctions on Iran, including on its oil exports, would be removed.

The report sent crude oil prices down for the third day in a row as the market anticipates a legitimate return of Iranian oil supply

The market would likely be able to absorb additional barrels from Iran, but traders and speculators continue to react to any reported breakthrough in the talks

Oil prices tumbled to a three-week low on Wednesday, after the broader market slump was exacerbated by the prospect of a boost in Iranian supply as nuclear talks continue and the EIA reported a 1.3MMbbl rise in crude stocks

 

Natural Gas US$2.968/mmbtu vs US$2.964/mmbtu yesterday    

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$201.0/t vs US$206.3/t

Chinese steel rebar 25mm US$833.3/t vs US$841.2/t

Thermal coal (1st year forward cif ARA) US$78.4/t vs US$77.0/t

Coking coal swap Australia FOB US$144.0/t vs US$142.0/t

           

Other: 

Cobalt LME 3m US$43,650/t vs US$43,650/t

NdPr Rare Earth Oxide (China) US$74,981/t vs US$75,715/t

Lithium carbonate 99% (China) US$12,665/t vs US$12,658/t

China Spodumene Li2O 5%min CIF US$640/t vs US$640/t

Ferro-Manganese European Mn78% min US$1,754/t vs US$1,750/t

China Tungsten APT 88.5% FOB US$270/t vs US$270/t

China Graphite Flake -194 FOB US$505/t vs US$505/t

Europe Vanadium Pentoxide 98% $8.0/lb vs $7.8/lb

Europe Ferro-Vanadium 80% $34.75/kg vs $34.05/kg

 

Battery News

 

Company News

Arkle Resources* (LON:ARK) 0.95p, Mkt Cap £2.7m – Multiple gold intersections in first hole of the new campaign at Mine River project

Arkle Resources has announced results from the first drill-hole of the current campaign at its wholly owned Mine River project in Co. Wexford and Co. Wicklow.

The company explains that it has now completed 3 holes of the 12 planned in the 1000m programme and that assay results from the first hole, located around 750m west of its Tombreen prospect has returned the following assay results:

An intersection of 0.8m from a down hole depth of 5.2m at an average grade of 0.25g/t gold; and

An intersection of 1.8 m averaging 4.69g/t from 12.6m depth; and

An intersection of 2.05m averaging 0.52g/t gold from 20.3m depth; and

An intersection of 1.6m from 34.3m depth at an average grade of 0.18g/t; and

1m, also averaging 0.18g/t, from 78.3m depth.

The company expects results from the next two holes of the programme to be available in mid-June but Chairman, John Teeling said that “Visual inspection of the core in these two holes indicates that the vein has been intersected”.

Describing the next part of the drilling programme, Arkle Resources says that “The rig has now been moved along strike toward Tombreen, which has demonstrated substantial mineralised thickness and when previous Arkle drilling indicated significant strata-bound gold mineralisation associated with the contacts between Ordovician volcanic rocks and metasedimentary rocks”.

Mr. Teeling said that the results of the first hole of the programme “further strengthens our confidence in the Mine River project”.

Conclusion: The first hole of the new drilling campaign at the Mine River project has intersected gold mineralisation around 750m along strike from the company’s previous drilling at the Tombreen prospect. Drilling is moving back along strike towards Tombreen and results from the second and third hole of the programme are expected to be available in mid-June.

*SP Angel are Nomad and broker to Arkle Resources

 

Alba Mineral Resources (LON:ALBA) 0.27p, Mkt cap £17.8m – Phase-2 underground drilling commences at Clogau

Alba reports that it has commenced Phase-2 underground drilling at its Clogau-St David’s Gold Mine in north Wales, following the successful 559m drilling programme which was completed at the end of October 2020.

Phase-1 drilling saw drill hole L002 intersected a quartz lode which returned a significant gold value of 1.79 g/t over a width of 0.25 metres. Alba interpret this intersection as belonging to the Jack Williams Lode, thus representing a projected 550m extension to the Main Lode.

The Phase 2 programme is scheduled to comprise 12 holes drilled from 3 platforms for a total of 1460m.

Drilling aims to target exploration and delineation of the Main Lode to the north, however three holes will also be drilled to the south to test for a southern lode structure the surface expression of which is marked by soil sample anomalies.

Phase-2 surface drilling commenced last month, consisting f an 8-10 hole programme for around 2,000 metres in total.  This phase of drilling is targeting the 550m Main Lode extension indicated by the underground drilling last year.

Initial intersections from the first two completed holes have intersected projected lodes as predicted.

 

Bacanora Lithium (LON:BCN) 56p, Mkt Cap £185m – Sonora Lithium Project update

Tender packages for site bulk earthworks, construction accommodation and access road has been prepared with construction expected to begin in Q3/21.

Recruitment process of the remaining key management personnel necessary to deliver the project has started.

Construction team commenced upgrading the temporary construction access road.

The Company removed and stored the surface vegetation and topsoil preparing the area for lithium processing plant construction as part of environmental project management process.

Ganfeng, a project partner and major shareholder, is in the process of starting the tendering process in China for the larger engineering packages.

Additionally, Ganfeng completed the subscription for 53.3m shares at 45p equivalent to ~$34m with proceeds reported to have been received by the Company.

The Company signed an agreement regarding the terms of a possible cash offer by Ganfeng at 67.5p, valuing the Company at £260m, earlier in May.

 

Bluejay Mining* (LON:JAY) 9.23p, Mkt cap £95m – New Minister for Mineral Resources reaffirms government support for Mineral Strategy 2020-2024

BUY – Valuation 37.7p

Bluejay, CEO, Bo Stensgaard, and MD, Hans Jensen met with the Deputy Minister for the Ministry of Mineral Resources Jørgen Hammenken-Holm and Ms. Naaja Nathanielsen the newly appointed Minister for Housing, Infrastructure, Mineral Resources and Gender Equality in Greenland this week.

Ms, Nathanielsen, reaffirmed the Government’s support for the Mining Industry and confirmed that government continues to support the Mineral Strategy 2020-2024

This provides a framework for the further development of mineral resources in country.

The Dundas ilmenite project is unusually simple involving the dry mining of beach sands and simple concentration of the heavy mineral concentrate before loading directly onto bulk carriers at site using mobile ship-loading conveyors.

Ilmenite prices for concentrates from Mozambique TiO2 52%min are $340-345/t CIF and Kenyan 48%min are at $305-310/t CIF.

Conclusion:  It is good to hear of the new minister’s positive approach towards the mining industry in Greenland.

*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Enonkoski mine site in Finland. The analyst recently bought shares in Bluejay Mining.

 

BlueRock Diamonds (LON:BRD) 46 p, Mkt cap £6m – Contractor puts £1.61m into Bluerock

BlueRock Diamonds reports the investment of £1.61m by way of a convertible loan note by Teichmann Group raising their holding to ~49% of the group.

Teichmann are the, supportive, principal contractor to BlueRock at the Kareevlei Diamond Mine in Kimberley, South Africa.

Management also report the completion of ~80% of their planned mine and plant expansion due for commissioning in July.

Expansion plans to raise throughput to 1mtpa of ore and sales to ~$16mpa going forward assuming grades of 4cpht and an average sales values of $400/ct.

Average sale prices for the first three months rose to an impressive $446/ct including sales from some larger stones.  

We expect diamond sales and per carat prices to rise further as the world emerges from the Covid-19 crisis.

Costs are also expected to fall to around $220/ct though this will vary with the South African rand and local costs.

Pit expansion: further review of the pit expansion to has led to some higher upfront costs to meet the 750,000t required to meet targets this year and 1mtpa from 2022

Eg the contractor needs to start mining a third kimberlite pipe, KV3, to ensure sufficient working areas to meet the new 1mtpa production regime which will require additional flexibility in the mine plan and working capital to develop stock piles to cover the rainy season.

Rob Croll of Minexec has been proposed as a Non-Executive Director and Teichmann appointee to boost board strength and head up a board level technical committee.

Croll is based in South Africa and will be able to regularly visit the operations. 

Minexec,led by Meiring Burger will also work alongside BlueRock’s local ceo, Gus Simbanegavi, to ensure the delivery of the required tonnage to the plant.

BinVic: BlueRock appointed BinVic in February to review the expansion plan and project manage resulting leading to a rise in costs of ZAR15m ($1.1m) to around ZAR64m ($4.6m)

The cost overrun is due to advance ground work needed for consistent and more flexible production, environmental and sustainability considerations and price increases in steel, electronic equipment, an underestimate of labour and equipment hire costs for fabrication and construction as well as some changed project specifications.

The team are also looking to ensure there is sufficient inventory of ore to maintain processing rates during the wet season when mining typically slows in the pits.

Convertible loan note

The convertible note issued to Teichman has a 40p strike price along with a 3.5-year term and a 14.5% coupon compounding annually.  This looks to be a sensible rate for a small mining business in South Africa where the lending rate is typically >10%

The note CLN will be convertible six months after issue at any time by Teichmann and by BlueRock if the Company’s share price is above 60p. 

BinVic costs are capped at ZAR 13.9m (~£0.7m) and are to be settled in with the issue of 1,223,332 new shares at 45.5p representing 80% of their costs with the rest of their costs to be settled in cash or shares at the prevailing share price.

Conclusion:  The hiring of BinVic to manage the project should pay dividends in terms of the timely completion of the new expansion as well as with the future operation of the mine. Their costs combined with a relatively small cost overrun in mining terms should be seen as small beer compared with the value of securing future revenues from the Kareevlei Diamond Mine.

*SP Angel act as nomad and broker to BlueRock Diamonds

 

Recent Interviews:

VOX Markets:  28/04/20: https://www.voxmarkets.co.uk/media/60896b3f017903524c8e0936/?context=/listings/LON/BMN/multimedia/

21/04/20: https://www.voxmarkets.co.uk/listings/LON/BMN

IGTV:  Improved global economic forecasts from the IMF provides trading opportunities:  https://www.youtube.com/watch?v=_GXKPqzuCG0

VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw

*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.

 

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

 

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).

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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%

 

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