Today’s Market View – Anglo Asian Mining, Atlantic Lithium, Caledonia Mining, And More…

SP Angel . Morning View . Wednesday 02 11 22

Optimism over China lockdown policies lifts base metals 

 

MiFID II exempt information – see disclaimer below 

Private Zambian copper exploration opportunity

• We are looking for investment into a private copper explorer with four highly prospective licences in Zambia, near major mines or significant exploration targets.
• One license is contiguous with First Quantum’s Sentinel copper and Enterprise nickel mines with whom they have a Technical Cooperation Agreement.
• Historic drilling on the licence includes 0.7% copper over 1m and 0.2% nickel over 3m. Geophysics in 2021 & 2022 advanced project toward identifying drill targets.
• A large licence with multiple copper targets. Samples from small artisanal mines assayed 15.8% copper, 0.57g/t gold and 4.87% copper, 18.3 g/t gold.
• A highly prospective licence acquired in 2022 on the Western Foreland trend which hosts the giant Kamoa-Kakula mine.
• IPO documentation has been prepared for listing when market conditions improve.
• All licences are 100% owned with Zambian partners significant shareholders 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

 

Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* – Exploration update highlights exciting organic growth pipeline potential
Atlantic Lithium Limited (AIM:ALL, OTCQX:ALLIF, ASX:A11)* – Latest drill results continue to extend known mineralisation at Ewoyaa
Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)* – Acquisition of additional exploration project in Zimbabwe
Gem Diamonds Limited (LSE:GEMD, OTC:GMDMF) – Lost time for Lesotho general election prompts easing of 2022 production and sales guidance
Lake Resources NL (ASX:LKE, OTCQB:LLKKF) – Lilac Solutions DLE demonstration plant delivers first lithium chloride at the Kachi Project
Oriole Resources PLC (AIM:ORR)* – Update on Directors’ salary sacrifice scheme
Sovereign Metals Ltd (ASX:SVM, AIM:SVML) – Rutile offtake MoU signed with Chemours
Shanta Gold Limited (AIM:SHG, OTC:SAAGF) – Takeover offer update and drilling results at the NLGM

 

Copper – Improving China sentiment lifts copper prices and triggers rally in mining majors

• Copper prices extended gains made yesterday on the back of news of a ‘reopening committee’ circulating on Chinese social media.
• The government is supposedly weighing up a slew of Covid policy easing, including shorter quarantine periods for visitors.
• Prices rallied 3.8% from Friday’s and have settled just shy of $7,700/t.
• An ETF tracking the copper mining giants spiked c.5% as inflows poured into the sector.
• Sentiment has continued to improve for the sector this morning despite China’s Foreign Minister stating ‘he was not aware’ of the decision.
• Speculation of a soothing of hawkish Fed policy into today’s rate hike decision has also supported the copper sector, with an easing in tightening expected to be supportive of growth and subsequently copper demand.

 

Dow Jones Industrials -0.24% at 32,653
Nikkei 225 -0.06% at 27,663
HK Hang Seng +2.41% at 15,827
Shanghai Composite +1.15% at 3,003

 

Economics

US – Factory activity drops 0.7pts to 50.2 in October, lowest since May 2020

• The overall manufacturing index has fallen in four of the last five months, as new bookings shrank and export orders contracted for a third month.
• Teen manufacturing industries reported a contraction in October, led by furniture, wood, paper and textiles.
• Eight industries expanded including apparel, machinery and transportation equipment.

Job openings rise unexpectedly in September, increasing to 10.7m from 10.3m in August

• US job openings rose in September amid low unemployment, likely fuelling further wage gains and adding pressure on the Fed to curb inflation.
• ISM Manufacturing PMI 50.2 in October vs 50.9 in September
• S&P – Manufacturing PMI 50.4 in October vs 52.0 in September

 

China – BHP tempers optimism over a recovery in China’s property market

• BHP expects China’s housing market to remain weak, even if other sections of the economy improve.
• The Company’s Chief Procurement Officer stated that ‘whilst stimulus produced growth in infrastructure and autos, we expect improvement in the housing sector to take a bit longer.’
• Beijing’s self-implosion of its China’s property market, a huge segment of the country’s GDP, has triggered a major sell-off in commodities including iron ore and copper.
• Iron ore prices hit their lowest since Jan 2019 on Monday following 7 months of consecutive declines.
• In a sign of optimism, BHP expects China to provide a source of stability amid slowing European and US economies hit by energy costs and rising interest rates.

China puts Apple hub Zhengzhou into lockdown in blow to US tech giant

• The area surrounding the Foxconn Technology Group’s main plant, the world’s largest Iphone factory, has been placed into lockdown.
• The plant will be placed under lockdown for 7 days. According to Bloomberg it produces 4/5 of Apple’s latest iphones.
• Officials will allow the plant to continue to operate in a ‘closed loop’.

 

Japan – Manufacturing PMI 50.7 in October vs 50.8 in September supported by weaker yen / dollar rate

 

Taiwan – Manufacturing PMI 41.5 in October vs 42.0 in September as semiconductor sales slip, possibly due to some destocking after so much panic buying in recent years. Also, the Russians appear to be taking chips and lenses out of stolen speed cameras in Sweden at a great rate of knots.

 

UK – Mortgage approvals fell 10% in September amid the rate uncertainty and pressures on affordability.

• Manufacturing PMI 46.2 in October vs 48.4 in September – UK manufacturers may have been unbalanced by government changes in policy direction

 

India – Manufacturing PMI 55.3 in October vs 55.1 in September

 

Turkey – Manufacturing PMI 46.4 in October vs 46.9 in September – this is despite Lira depreciation and not helped by +65% inflation

 

Mexico – Manufacturing PMI steady at 50.3 in October

 

Brazil – Manufacturing PMI 50.8 in October vs 51.1 in September

 

South Africa – Manufacturing PMI 50.0 in October vs 48.2 in September – SA rand is weakening but ESKOM power outages are a huge problem for miners, processors and manufacturers.

 

Russia – Manufacturing PMI 50.7 in October vs 52.0 in September

 

North Korea – 17 missiles fired in largest singular testing day since Kim Jong Un took office

• North Korea fired the missiles on Wednesday, including one that flew over the national border with South Korea.

 

Currencies

US$0.9886/eur vs 0.9938/eur yesterday. Yen 147.22/$ vs 147.74/$. SAr 18.144/$ vs 18.170/$.  $1.150/gbp vs $1.154/gbp. 0.642/aud vs 0.644/aud. CNY 7.281/$ vs 7.272/$.

Dollar Index        111.39 / -1.51% on week

 

Commodity News

Gold prices rise alongside risk assets in optimistic speculation of an easing of Fed policy today

• Gold prices have held higher around $1,650/oz , up 1.3% from yesterday’s lows, amid trader speculation in the run up to the Fed’s rate hike decision this afternoon.
• Traders seem to be betting on the ‘pivot’ narrative in which the Fed eases its aggressive policy, with equities rallying alongside a weaker dollar.
• Although the dollar has weakened 2.5% from September highs, it remains 25% higher than lows in June.
• Further signals of a muted response see policy-sensitive 2-year yields remaining firm, pointing to some disparity in opinion.
• Much will be made of Jerome Powell’s comments following the decision, with traders noting the language used as a gauge for rate hikes going forward.
• Jerome Powell finds himself in an unappealing position in which core inflation remains hot whilst US job openings continue to surprise on the stronger side.
• We remain bullish on gold over the longer term following its 12% decline year to date, with bullion providing a traditionally lucrative opportunity during periods of Fed policy easing.

 

Precious metals:         

Gold US$1,653/oz vs US$1,648/oz yesterday

Gold ETFs 95.1moz vs US$95.1moz yesterday

Platinum US$956/oz vs US$946/oz yesterday

Palladium US$1,915/oz vs US$1,875/oz yesterday

Silver US$19.69/oz vs US$19.71/oz yesterday

Rhodium US$14,000/oz vs US$14,000/oz yesterday

 

Base metals:   

Copper US$ 7,685/t vs US$7,617/t yesterday

Aluminium US$ 2,269/t vs US$2,251/t yesterday

Nickel US$ 23,800/t vs US$22,490/t yesterday

Zinc US$ 2,760/t vs US$2,730/t yesterday

Lead US$ 1,995/t vs US$1,987/t yesterday

Tin US$ 18,100/t vs US$17,855/t yesterday

 

Energy:

Oil US$95.5/bbl vs US$94.5/bbl yesterday

• Crude oil prices edged higher on speculation that China is preparing to phase out the country’s Covid-Zero policy and as weekly API data reported a 6.5mb draw in US crude stocks.
• European energy prices moved higher this morning despite expectations for above seasonal norms in most of Western Europe for the next two weeks, and with gas storage sites reportedly nearly 95% full.

Natural Gas US$5.892/mmbtu vs US$6.168/mmbtu yesterday

Uranium UXC US$52.65/lb vs US$52.80/lb yesterday

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$78.3/t vs US$76.2/t

Chinese steel rebar 25mm US$521.0/t vs US$521.2/t

Thermal coal (1st year forward cif ARA) US$225.0/t vs US$225.0/t

Thermal coal swap Australia FOB US$361.0/t vs US$357.0/t

Coking coal swap Australia FOB US$315.0/t vs US$329.0/t

 

Other:  

Cobalt LME 3m US$51,955/t vs US$51,955/t

NdPr Rare Earth Oxide (China) US$88,937/t vs US$89,738/t

Lithium carbonate 99% (China) US$76,575/t vs US$76,672/t

China Spodumene Li2O 5%min CIF US$6,100/t vs US$6,100/t

Ferro-Manganese European Mn78% min US$1,221/t vs US$1,228/t

China Tungsten APT 88.5% FOB US$31.7/kg vs US$31.8/kg

China Graphite Flake -194 FOB US$875/t vs US$875/t

Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb

Europe Ferro-Vanadium 80% 31.95/kg vs US$31.95/kg

China Ilmenite Concentrate TiO2 US$308/t vs US$309/t

Spot CO2 Emissions EUA Price US$78.8/t vs US$79.2/t

Brazil Potash CFR Granular Spot US$595.0/t vs US$595.0/t

 

Battery News

REE Magnets – Adamas Intelligence indicates global consumption of NdFeB magnets jumped 18.1% in 2021 boosted by some latent 2020 demand and rising EV production.

• The commodity forecasting ground see global demand for NdFeB magnets increasing  at CAGR of 8.6% supported by strong, double-digit growth from EVs and wind power.
• Global production of neodymium, praseodymium, dysprosium and terbium is expected to rise at a CAGR of just 5.4%. See Adamas for the full detailed report.

 

Company News

Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 78p, Mkt Cap £89m – Exploration update highlights exciting organic growth pipeline potential

BUY

• At Zafar, mine design works are well advanced with decline development to start December 2022.
• Mine portal to be located close to existing processing facilities improving productivity of operations.
• Geotechnical drilling completed to de-risk mine access and decline development.
• The Company is planning to use semi-bulk mining method (sub-level caving) with mining equipment selected and mine design ongoing including stope designs.
• At Gilar, the team completed 30 surface diamond drillholes for a total of ~9,600m YTD with assay results expected shortly.
• The discovery comprises three mineralisation zones found at a depth of ~300m and located ~7km from the Company’s processing facilities.
• Surface magnetic induced polarisation geophysics is underway with additional drilling planned for Q4/22.
• The development of an exploration adit to access the mineralisation for more cost effective sampling, drilling and potentially production is planned to start in Nov/22.
• Maiden mineral resource estimate is expected to be published by end Q4/22.
• At Vejnaly, exploration and evaluation works accelerated following the establishment of a camp.
• Underground stopes are being accessed, mapped and sampled.
• Narrow but high grade intersections are being reported at Vejnaly with a series of samples grading >50g/t over 0.1-0.5m widths.
• Additionally, surface mapping identified a new gold bearing zone hosted by ematite-quartz-kaolin mineralisation and located in the north-west of the Vejnaly mine area.
• The team is planning to launch small scale mining from the Vejnaly underground mine this quarter.

Conclusion: Zafar development and exploration across a series of properties progressed well as the team is working on extending Gedabek life of mine and de-risk organic growth pipeline. Zafar is expected to supply first polymetallic ores in 2023. Small but high grade tonnage is expected to come from Vejnaly this quarter as the team is continuing to assess the size and potential scale of the mining operation. The team is also in the process of validating exploration data on Xarxar and Garadagh properties that was recently acquired from the previous owner, properties prospective in precious and base metals are key for the Company’s growth plans.

*SP Angel act as Nomad and broker to Anglo Asian Mining

 

Atlantic Lithium Limited (AIM:ALL, OTCQX:ALLIF, ASX:A11)* 47p, Mkt Cap £270m – Latest drill results continue to extend known mineralisation at Ewoyaa

• Atlantic Lithium reports that it has received the latest round of assay results, this time for 5,668m of infill and exploration RC drilling at the Ewoyaa Main, Grasscutter East, Grasscutter West and Anokyi deposits.
• Newly reported drilling results fall both within and outside the currently defined 30.1Mt @ 1.26% Li2O MRE.
• Highlights within the current MRE:
  • GRC0697: 95m at 1.48% Li2O from 5m
  • GRC0703: 87m at 1.61% Li2O from 0m
  • GRC0701: 78m at 1.67% Li2O from 12m
  • GRC0710: 74m at 1.65% Li2O from 15m
  • GRC0692: 76m at 1.43% Li2O from 14m
• Highlights outside the current MRE include:
  • GRC0721: 45m at 1.16% Li2O from 274m
  • GRC0695: 29m at 1.72% Li2O from 141m
  • GRC0705: 25m at 1.49% Li2O from 171m
  • GRC0699: 14m at 1.66% Li2O from 213m
• Atlantic Lithium also reported its highest assay result to date of 4.52% Li2O over 1m in hole GRC0704 from 54m (infill).
• These latest results are part of a wider 47,000m programme with approximately 21,000m of assay results reported to date.

Conclusion: Atlantic Lithium continue to report broad, high grade intersects at its Ewoyaa Lithium Project. We expect results from the 47,000m programme to an increase in scale and improvement in confidence when the company updates their MRE.

*SP Angel acts as nomad to Atlantic Lithium

 

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL)* 905p, Mkt Cap £117m – Acquisition of additional exploration project in Zimbabwe

• Caledonia Mining reports the acquisition of the Motapa gold project which covers a mining lease of around 2,200 hectares located around 75km north of Bulawayo.
• The project, which adjoins the Bilboes project acquired by Caledonia Mining in July 2022, “has been mined throughout most of the second half of the 20th century … [and has] … produced as much as 300,000oz of gold”.
• Motapa “was formerly owned and explored by Anglo American Zimbabwe prior to its exit from the Zimbabwean gold sector in the late 1990s … [and Caledonia Mining explains that] … Whilst none of the mining infrastructure remains, the evidence of historical mining will provide guidance to our exploration team in best understanding the prospectivity of the region”.
• CEO, Mark Learmonth, explained that the “acquisition of Motapa following the signing of a sale and purchase agreement to acquire Bilboes and the acquisition of Maligreen demonstrates that over the last 12 months Caledonia has established a pipeline of high-quality exploration and development projects”.
• He commented that “With the central shaft at Blanket now fully operational and production targeting 80,000 ounces of gold per year …[and explained that Caledonia Mining envisages] … potential for further growth at Blanket where we are optimistic about its exploration potential”.
• The previous mining history at both Motapa and Bilboes provides encouraging evidence for the existence of gold mineralisation in the area and we look forward to information on Caledonia Mining’s exploration plans to establish the mineral resource potential.

Conclusion: The completion of the Central Shaft project at the Blanket mine has secured its future into the 2030s and allowed Caledonia Mining to build its project pipeline where the latest addition, at Motapa, seems a logical addition to the Bilboes project which was acquired in July.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

 

Gem Diamonds Limited (LSE:GEMD, OTC:GMDMF) 29.2p, Mkt Cap £41m – Lost time for Lesotho general election prompts easing of 2022 production and sales guidance

• Gem Diamonds reports that it produced 25,018 carats of diamonds from its Letšeng mine in Lesotho during the 3 months to 30th September bringing the YTD total to 80,174 carats (2021 – 82,266 carats).
• The company explains that since the end of the September quarter, “the Lesotho general election required a compulsory two-day site wide shutdown at Letšeng to allow the workforce to vote in their respective constituencies, resulting in loss of production” which was exacerbated by a crusher breakdown and “continued power disruption on the energy supply network”.
• While the company confirms that it has completed its repairs and the “the plant is running at normal capacity”, it is now expecting to treat approximately 5.45mt of ore this year, compared to the previously indicated 5.6-5.8mt and that consequently “guidance with respect to carats recovered and carats sold has been reduced to approximately 104k (previously 112k to 116k) and approximately 105k (previously 110k to 114k) respectively”.
• Quarterly diamond production results from the processing of approximately 1.25mt of ore at a recovered grade of 2.01cpht (carats per hundred tonnes).
• Diamond sales of 27,913 carats realised US$56.6m at an average price of 2,028/ct and Gem Diamonds comments that the “downturn in the global economy has impacted the diamond market. However, the tenders in Antwerp, together with a Dubai tender viewing in September 2022, were well-attended and contributed positively to the prices achieved during the Period”
• The Letšeng mine continues to yield large, high value stones with 10 individual diamonds sold for more than US$1m each during the quarter and “Four diamonds greater than 100 carats were sold during the Period generating revenue of US$15.6 million. Three of these diamonds were recovered in Q2 2022”.
• A 10.07 carat pink diamond realised US$79,543/ carat; the highest price achieved during the quarter.
• Gem Diamonds confirms that it “ended the Period with US$17.4 million cash on hand (excluding US$15.2 million of September tender proceeds that were received after Period end)”.

Lake Resources NL (ASX:LKE, OTCQB:LLKKF) A$1.1, Mkt Cap A$1.6bn – Lilac Solutions DLE demonstration plant delivers first lithium chloride at the Kachi Project

• The Company provided an update regarding the demonstration plant processing lithium bearing brines to produce lithium chloride using DLE technology at the Kachi Lithium Project in Argentina.
• Construction completion and the wet and dry commissioning process took place over September and October.
• Lilac Solutions representative has been on site to oversee final adjustments to the plant during construction and commissioning.
• The demonstration plant is reported to be achieving similar lithium recoveries recorded in the Oakland pilot plant in California.
• First samples of lithium chloride will be shipped for conversion to the lithium carbonate within two weeks.
• Lithium carbonate is expected to be then provided to a tier one battery maker to validate product specifications.
• Testwork and results of the demonstration plant will be incorporated into the ongoing DFS.
• The project hosts ~4.4mt LCE at 223mg/L in total resource.

 

Oriole Resources PLC (AIM:ORR)* 0.117p, Mkt cap £3.16m – Update on Directors’ salary sacrifice scheme

• Oriole Resources announces that the last two tranches of gross salary sacrificed by the Directors, totaling £51,000, have been converted to shares.
• The £51k worth of sacrificed tranches have been converted using the 30-day VWAP on 31 August of 0.1784p and 30 September at 0.194p.
• The tranches have been converted to 17,427,633 new ordinary shares of 0.1p each, resulting in the Directors collectively holding 4.01% of the issued share capital.
• The Directors have decided to further extend the salary sacrifice scheme over the next 6 months, sacrificing 20% of their gross salaries, £43k in aggregate, as of November.

Conclusion: The Oriole team’s decision to extend the salary sacrifice scheme reflects their commitment to maximizing the exploration and development potential of the Company’s Cameroonian assets. We look forward to updates from the upcoming campaigns at Bibemi and the Central License Package.

*SP Angel act as a broker to Oriole Resources

 

Sovereign Metals Ltd (ASX:SVM, AIM:SVML) 24p, Mkt Cap £111m – Rutile offtake MoU signed with Chemours

• Sovereign reports that it has entered into a non-binding Memorandum of Understanding with chemical company Chemours for the supply of 20,000 tonnes of natural rutile per annum from Kasiya.
• Chemours is one of the world’s largest producers of high-quality titanium dioxide (TiO2) pigment, operating 29 manufacturing sites globally.
• It operates four TiO2 pigment production facilities: two in the United States, one in Mexico, and one in Taiwan totalling TiO2 pigment capacity of 1.25mtpa.
• The MoU covers the potential supply of 20,000tpa at natural rutile at Stage 1 capacity, and an option to take additional product of an unspecified quantity when Kasiya reaches Stage 2 capacity.

 

Shanta Gold Limited (AIM:SHG, OTC:SAAGF) 10p, Mkt Cap £105m – Takeover offer update and drilling results at the NLGM

• The Company has been informed that Yintai will not be making an offer for Shanta.
• The announcement follows the statement released on 18 October saying that Shanta received approaches from Shandong Gold Group, Yintai Gold and Chaarat Gold.
• Under Takeover Code interested parties had to announce a firm intention to make an offer for the Company no later than 15 November.
• Separately, Chaarat Gold said on October24 that it is in discussions regarding a potential acquisition of Lydian Armenia suggesting the offer for Shanta is unlikely to happen.
• The Company released a separate announcement covering exploration drilling results at the New Luika Gold Mine in Tanzania.
• A total of nearly 8,000m of drilling covering 47 holes was completed at BC North, Ilunga, Luika Deep, Black Tree Hill, Elizabeth Hill and Porcupine South targets.
• Most of the these newly reported drilling intersections are outside existing mineral reserves.
• The team is confident drilling results will allow the Company to extend NLGM life of mine past the current timeline of H1/27.
• The Company is expecting to release an updated mineral reserve and resource statement in Jan/23.

 

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 – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

Joe Rowbottom – Joe.Rowbottom@spangel.co.uk – 0203 470 0486

 

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 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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