OreCorp (ASX:ORR) A$0.8, Mkt Cap A$316m – Quarterly update

Works on the Nyanzaga DFS continued during the quarter on track for completion in Q2/22.

The project is located in the Lake Victorian Goldfields in Tanzania and hosts ~3.1moz at 4.0g/t in total resource.

SP Angel . Morning View . Friday 21 01 22

Copper and nickel climb on China stimulus and likely delays to US rate rises

 

Kavango Resources (Kavango Resources PLC (LSE:KAV, OTC:KVGOF)) – Gravity anomaly identified at KSZ project

Metals Exploration (Metals Exploration PLC (AIM:MTL)) – Record gold production in FY21 seeing net debt down ~$21m to ~$99m

OreCorp (OreCorp Ltd (ASX:ORR)) – Quarterly update

Rio Tinto (Rio Tinto PLC (LSE:RIO)) – Jadar project’s future drawn into tennis row

Tertiary Minerals* (Tertiary Minerals PLC (AIM:TYM)) – Broker option raises £100,000

 

IGTV: IG Outlook 2022, China new year, winter Olympics may see metals prices soften: (12/01/2022): https://youtu.be/vNqDh74zW5I

VOX Markets: 12/01/22: https://audioboom.com/posts/8011559-john-meyer-on-china-s-factory-shut-downs-plus-news-from-bluejay-beowulf-atlantic-lithium

interactive Investors: FTSE 100 favourite stock: https://youtu.be/BomNRQJt-YA. 2022 outlook: https://youtu.be/SxMPiPEc_Rg

Three small-cap mining share tips for 2022: https://www.youtube.com/watch?v=9xvA_3UXXYQ&ab_channel=interactiveinvestor

*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.

 

Gold steadies after hitting 2-month high as other precious metals post gains on strong inflation

Gold has eased slightly to $1,837/oz having touched $1,847/oz yesterday.

Gold is up 1.3% this week.

10-yr US Treasury Yields have cooled from 1.833% yesterday to 1.783% today, helping gold hold its ground.

We note that gold rose 15% in the first quarter of 2014 when geopolitical tensions between Russia, Ukraine and the West were intensifying.

Palladium is set for a weekly gain of 9.2%.

Platinum is enjoying its best week since June.

Silver is up 7% this week to $24.54/oz.

Eyes now turn to Jan 25-26th when the Federal Reserve is expected to provide more clarity on its rate hike plans going forward.

 

Copper and nickel climb as greater confidence in China stimulus and likely delays to US interest rate rises

LME Nickel jumps 5.4% to $24,410/t, past its August 2011 highs and $27,787/t in China.

Indonesian plans to add an export levy on nickel products is a driver as has been regulations on adding value to ores in country.

Shanghai stocks appear critically low at just 4,711t while LME inventories are close to a 2-year low of 94,800kt.

LME cash premiums of $330/t remain high but off their 13-year peak of $495/t.

Stainless steel prices were limit up rising 8% in Shanghai overnight.

Copper climbed to $9,956/t, continuing yesterday’s 2.3% rally to $9,900/t.

Prices are being driven by a double rate cut from the PBoC, new state rail infrastructure plans and a likely acceleration in special purpose debt issuance to raise new investment in the first quarter.

London copper stocks remain relatively high at 95kt.

 

Dow Jones Industrials -0.89% at 34,715

Nikkei 225 -0.90% at 27,522

HK Hang Seng -0.17% at 24,909

Shanghai Composite -0.91% at 3,523

  

Economics

China ramps up recycled steel imports following 2-year hiatus

Imports of recycled steel to China hit 553kt in 2021, following Beijing’s approval of raw material inflows after a 2-year gap.

China had banned foreign waste products from Jan. 2018 and ferrous scrap from Dec. 2018.

70.4%/389kt of the total was contributed by Japan.

China imported an additional 95,915t of scrap from South Korea.

Recycled steel imports fell dramatically in October as Beijing cracked down on steel production, hitting an 8-month low of 12kt.

Chinese stimulus plans boost iron ore prices

Chinese iron ore prices have continued to climb, up 2.8% to $135/t.

The PBoC’s stimulus efforts are expected to boost infrastructure spending, boosting steel demand.

Analysts expect further rate cuts and lowering of lending benchmarks in China as the property sector downturn continues.

Prices remain well below May 2021 highs.

Major Chinese property developer raises $501m as investor sentiment improves

China’s largest developer by sales, Country Garden, raised $501m through a convertible bond sale.

The raise suggests investor sentiment in the sector is improving although the bonds were sold with a comparatively high interest rate at a 16% premium to the share price.

The flailing sector has been boosted by the PBoC’s decision to cut lending rates.

 

US jobless claims jumped to 286,000 last week on Omicron disruption

US initial jobless claims rose by 55,000 to 286,000 last week, the highest since October.

8.8m Americans were unable to work in early January as a result of Covid sickness or complications. (Census Bureau)

Benefit claims rose by 84,000 to 1.64m in the week ended Jan. 8th.

Housing starts rose 1.4% in December to 1.072m units vs 8.1% in November at 1.6788m units

Building permits rose 9.1% in December to 1.873m units vs 3.9% in November at 1.717m units

Existing home sales fell 4.6% in December at 6.18m units vs 1.9% in November at 6.46m units

Philadelphia Fed manufacturing index 23.2

 

EU – CPI 0.4% in December vs 0.4% in November and 5% yoy in December and 4.9% yoy in November

 

UK – CPI 0.5% in December vs 0.7% in November and 5.4% yoy in December and 5.1% yoy in November

PPI input -0.2% in December vs 1.5% in November and 13.5% yoy in December and 15.2% yoy in November

PPI output 0.3% in December vs 1% in November and 9.3% yoy in December and 9.4% yoy in November

 

Germany – CPI rose 0.5% in December vs -0.2% in November and 5.3% yoy in December and 5.2% yoy in November

PPI 5% in December vs 0.8% in November and 24.2% yoy in December and 19.2% yoy in November

 

Lithuanian exports to China crash 91.4% following Taiwan dispute

Shipments from Lithuania to China have fallen 91.4% after China initiated an unofficial blockade on shipments.

Beijing stated it will import goods from countries that ‘attack China’s sovereignty.’

Lithuania’s top export in 2020 was unwrought copper-zinc alloy.

Peat shipments from Lithuania fell 92%.

The case reflects Beijing’s willingness to initiate aggressive trade embargoes over political spats.

 

Ghana – At least 17 killed after truck carrying mining explosives crashes

Local police say a vehicle carrying mining explosives collided with a motorcycle near the town of Bogoso.

The truck carrying explosives was en route to the Chirano gold mine, run by the Toronto-based Kinross.

 

Baltic index sees 10-day losing streak as dry bulk demand weakens

The Baltic Index has fallen 6.1% to its lowest level since February 2021.

The capesize index, which primarily tracks iron ore and coal cargo rates, has fallen 16%.

Analysts note capesize rates usually weaken in January.

Indonesia’s recently imposed limits on coal exports have also hit dry bulk rates.

 

Intel to spend $20bn on Ohio chipmaking hub

Intel is to spend $20bn on a chipmaking hub which the company expects to be the world’s biggest silicon-manufacturing site.

The 1,000-acre site will also be used as an R&D hub alongside manufacturing Intel’s most advanced chips.

The plant is expected to be operational by 2025.

This year Intel has budgeted a record amount of spending on new factories and equipment as manufacturers try and reduce reliance on East Asian manufacturing hubs.

 

Currencies

US$1.1334/eur vs 1.1363/eur yesterday. Yen 113.92/$ vs 114.34/$. SAr 15.157/$ vs 15.245/$.  $1.357/gbp vs $1.364/gbp. 0.720/aud vs 0.724/aud. CNY 6.341/$ vs 6.343/$.

 

Commodity News

LME CEO to step down

The London Metal Exchange CEO Matthew Chamberlain will step down after five years of leading the world’s largest industrial metals market.

Adrian Farnham, the head of LME clear, will become interim LME and group head of commodities.

 

Precious metals:         

Gold US$1,837/oz vs US$1,841/oz yesterday

Gold ETFs 98.0moz vs US$98.2moz yesterday

Platinum US$1,042/oz vs US$1,042/oz yesterday

Palladium US$2,054/oz vs US$2,032/oz yesterday

Silver US$24.48/oz vs US$24.17/oz yesterday

Rhodium US$16,600/oz vs US$16,600/oz yesterday

 

Base metals:   

Copper US$ 9,956/t vs US$9,900/t yesterday

Aluminium US$ 3,095/t vs US$3,050/t yesterday

Nickel US$ 23,850/t vs US$23,810/t yesterday

Zinc US$ 3,646/t vs US$3,609/t yesterday

Lead US$ 2,363/t vs US$2,369/t yesterday

Tin US$ 43,520/t vs US$43,465/t yesterday

 

Energy:           

Oil US$87.1/bbl vs US$87.9/bbl yesterday

Natural Gas US$3.930/mmbtu vs US$3.990/mmbtu yesterday

Uranium UXC US$46.00/lb vs $46.30/lb yesterday

         

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$135.4/t vs US$130.6/t

Chinese steel rebar 25mm US$751.5/t vs US$750.2/t

Thermal coal (1st year forward cif ARA) US$109.3/t vs US$109.3/t

Thermal coal swap Australia FOB US$211.0/t vs US$214.5/t

Coking coal swap Australia FOB US$432.0/t vs US$430.0/t

 

Other:  

Cobalt LME 3m US$72,000/t vs US$70,500/t

NdPr Rare Earth Oxide (China) US$145,484/t vs US$144,244/t

Lithium carbonate 99% (China) US$54,014/t vs US$52,574/t

China Spodumene Li2O 5%min CIF US$2,690/t vs US$2,690/t

Ferro-Manganese European Mn78% min US$1,808/t vs US$1,813/t

China Tungsten APT 88.5% FOB US$320/t vs  US$320/t

China Graphite Flake -194 FOB US$805/t vs US$805/t

Europe Vanadium Pentoxide 98% 9.1/lb vs US$8.9/lb

Europe Ferro-Vanadium 80% 35.25/kg vs US$34.25/kg

China Ilmenite Concentrate TiO2 US$390/t vs US$390/t

Spot CO2 Emissions EUA Price US$93.4/t vs US$90.5/kg

Brazil Potash CFR Granular Spot US$800/t vs US$800/t

 

Battery News

Britishvolt receives $1.7bn funding for Blyth battery factory

The battery start-up has received backing of around £1.7bn, from warehouse provider Tritax and investment group Arbdn, to construct its planned gigafactory in the North of England.

The gigafactory, which Brithvolt says will produce enough batteries annually to power 300,000 EVs and create 8000 jobs on site and in the local area. 

The project has also been backed by a grant, thought to be £100m, from the government’s Automotive Transformation Fund.

The investment from the fund was originally £200m, as reported in the FT, but the sum has since been scaled back to keep funding available to attract other projects.

Peter Rolton, Britishvolt’s chairman, said the funding announced on Friday was a “first step in creating a commercialised battery ecosystem” for the UK.

 

Tianqi Lithium progresses with HK listing, expected mid-2022

Bloomberg reports that Tianqi lithium has selected banks for a share offering in Hong Kong that could take place as soon as mid-2022.

The company is already listed in Shenzhen and is reportedly looking to raise $1bn-$2bn.

Tianqi applied for a Hong Kong listing in 2018, although the plan was shelved amid falling lithium prices.

The recent surge in lithium prices resulted in Tianqi returning to profit in Q3 and Q4, while the share price more than doubled since mid-March.

 

Company News

Kavango Resources (Kavango Resources PLC (LSE:KAV, OTC:KVGOF)) 5.6p, Mkt cap £23m – Gravity anomaly identified at KSZ project

Kavango reports that it has completed a ground gravity survey over the Great Red Spot in Target Area B of the Company’s Kalahari Suture Zone project.

The GRS is a previously identified large-scale ~11km diameter magnetic anomaly that has been subject to limited historic exploration.

The Gravity Survey has identified a strong gravity anomaly, roughly 7km in diameter, which is coincident with the roughly 2250 nanoTesla positive magnetic anomaly of the GRS.

The company is now preparing an Audio-Magnetotelluric (“AMT”) survey over the GRS to further refine its understanding of this target

 

Metals Exploration (Metals Exploration PLC (AIM:MTL)) 1.5p, Mkt Cap £32m – Record gold production in FY21 seeing net debt down ~$21m to ~$99m

FY21 gold production hit record high of 72.4koz (FY20: 68.5koz) as stronger gold recoveries ( 83.7% v 72.2% )more than compensated for lower processed grades (1.26g/t v 1.41g/t).

FY 21 gold sales also reached all time high with $129.8m reported (FY20: $122.1m) at $1,792/oz realised gold price (FY20: $1,782/oz).

AISC climbed to $1,281/oz (FY20: $1,259/oz), presumably reflecting consumables and maintenance parts inflation.

Runruno generated ~$38m in FCF during the year (FY20: ~$33m) with proceeds enabling to accelerate debt repayments.

FY21 closing net debt position stood at ~$99m (FY20: ~$120m).

New Covid-19 cases increased during the final quarter of the year amid the spread of the more contagious Omicron variant.

Over 95% of employees are reported to have had at least one vaccination dose.

No serious illnesses were reported, although, the Company contacted local government agencies to reduce required isolation protocols.

New cases have not affected operations significantly with the main disruption from the pandemic continuing to be the ongoing and regularly changing restrictions on the movement of people in and out of the country, increases in the cost of production inputs and supply delays.

FY22 guidance is for 67.0-71.0koz production at $1,275-1,325/oz AISC.

Conclusion: Record production delivered in FY21 with estimates for little change in output and AISC in FY22 implying +$30m in FCF (using $1,800/oz gold price) expected to be generated this year with proceeds likely to be directed towards further reduction in the outstanding debt.

 

OreCorp (OreCorp Ltd (ASX:ORR)) A$0.8, Mkt Cap A$316m – Quarterly update

Works on the Nyanzaga DFS continued during the quarter on track for completion in Q2/22.

The project is located in the Lake Victorian Goldfields in Tanzania and hosts ~3.1moz at 4.0g/t in total resource.

Special Mining License was secured during the quarter with the property owned the newly incorporated JV, Sotta mining Corporation, owned by the Company (84%) and the government (16%).

Key work completed during the quarter included:

Confirmation of the operation scale at 4mtpa sourced from open pit and underground mine;

Advancement with open pit and underground mine designs;

Issued pricing enquiries for OP and UG mining contracts;

Completed TSF design and finalised processing plant layout.

The Company completed the final payment of $8.1m to Barrick Gold in regards of the Nyanzaga acquisition in Dec/21.

OreCorp reiterated its plans to demerge its Western Australian exploration assets in a separate listed vehicle subject to final Board, regulatory and shareholder approval.

WA assets comprise four projects prospective in orogenic-style gold mineralisation with the one also prospective for kamtiite hosted nickel sulphide mineralisation located with 250km of Kalgoorlie.

Cash balance stood at A$50.2m as of YE21 with no debt on the balance sheet.

 

Rio Tinto (Rio Tinto PLC (LSE:RIO)) – 5,580p, Mkt cap £70bn – Jadar project’s future drawn into tennis row

Newspapers including the Australian Financial Review and the Guardian in the UK are reporting that Serbia’s Government is cancelling licenses for the US$2.4bn Jadar lithium project in the aftermath of the deportation of the Serbian tennis player, Novak Djokovic.

Development of the project has sparked local opposition with objectors said to include Djokovic himself.

The incumbent Serbian government of Aleksandr Vucic faces elections later this year and has faced criticism for its handling of the proposed mine development.

 

 Tertiary Minerals* (Tertiary Minerals PLC (AIM:TYM)) – 0.18p, Mkt cap £2.1m – Broker option raises £100,000

Tertiary Minerals confirms that it has raised £100,000 following 100% take-up of its previously announced broker option at 0.17p/share.

The broker option accompanied the recent £500,000 placing and as a result, “the total amount raised under the Placing and Broker Option” is £600,000 gross.

The company’s previous announcement said that the funds would be used for drilling and other exploration work in Zambia and Nevada and Managing Director, Patrick Cullen, explained that the additional balance sheet strength would be deployed to fund “drilling programs targeting silver and gold at Pyramid in Nevada and copper at Jacks in Zambia”.

*SP Angel act as Nomad and Broker to Tertiary Minerals

 

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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