Today's Market View - Altus Strategies, Anglo American, BlueRock Diamonds and more...

SP Angel . Morning View . Wednesday 10 03 21 Gold prices rise as US stimulus draws closer and treasury yields fall   Altus Strategies* (LON:ALS) – BUY – High priority gold targets identified across properties in Egypt Anglo American (LON:AAL) - De Beers reports continuing signs of recovering demand at its second sales cycle of 2021 BlueRock Diamonds (LON:BRD) – BlueRock costs to fall as diamond production ramps up Kenmare Resources (LON:KMR) – 2020 production and 2021 guidance Petra Diamonds (LON:PDL) – Financial restructuring completed Serabi Gold* (LON:SRB) – Fatal accident at Palito Tertiary Minerals* (LON:TYM) – Exploration results from the Pyramid prospect   Gold prices lift gold equities bringing new investment back into the space Gold prices jumped higher overnight on falling US Treasury yields. Investors were selling gold on the potential for the Federal Reserve to raise interest rates but may have reversed the trade following Powell’s comments on rates staying lower for longer. Some investors may have also sold gold to meet margin calls as the Nasdaq Tech market fell. While gold may see resistance at around $1,750/oz there is potential for global events to cause a new seismic shift higher. Governments will eventually start to restrict the liquidity used to combat the COVID-19 crisis causing banks to reign in lending. This is when we will see who is still wearing their shorts when the tide of liquidity goes out (Warren Buffet). The withdrawal of liquidity could easily precipitate a new debt crisis exposing overleverage as seen in the Asian crisis.   Gold prices rise above $1,700/oz after biggest surge in two months Gold held onto Tuesday’s gains this morning as the dollar firmed and bond yields held a decline. The US is moving ever closer to passing its $1.9tn stimulus plan, which has raised fears over inflation and supported gold prices. Bullion has performed well throughout the pandemic driven by macroeconomic uncertainty and inflation woes, although the price has fallen in recent weeks as US bond yields moved higher and lowered the appeal of non-interest-bearing assets. Gold prices jumped over 2% on Tuesday to $1,715/oz, while US gold futures climbed 2.1% to $1,714/oz (Reuters).   Inflation – Chinese producer prices rise lifted by higher oil, copper, transport and semiconductor costs The Chinese producer price index rose 1.7% yoy in February up from 0.3% in January.   Cargo fraud hits Mercuria traders as containers arrive in China full of painted rocks Mercuria had bought 6,000t of blister copper in >300 containers for transport to China. The containers were switched with new cargos of copper coloured, spray painted kerb stones. Switching some 300 containers requires a level of organisation and complicity associated with a sophisticated fraud   Recent Interviews: IGTV:  Are we in a new commodity supercycle, or is one coming? https://youtu.be/sw6gLNnM1s0 Is this a new Supercycle for commodities: https://youtu.be/BIWb-wqoLpM Metals expected to continue the last-year gains into 2021 https://youtu.be/afrB9cJe8L0 Is 2021 the start of the new COVID-Supercycle or will Lockdowns delay the recovery? https://youtu.be/7LO0tDc-pNc   VOX Markets: 03/03/20: https://www.voxmarkets.co.uk/media/603f8a764ed39457176158df/?context=/listings/LON/BMN/multimedia/ 24/02/20:  https://www.voxmarkets.co.uk/articles/john-meyer-mining-talks-about-copper-bluejay-empire-metals-phoenix-copper-rainbow-rare-earths-rambler-metals-mins-tirupati-graphite-feb-24-1-18-pm-3b5e4d3 *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   Dow Jones Industrials +0.10% at 31,883 Nikkei 225 +0.03% at 29,037 HK Hang Seng +0.35% at 28,874 Shanghai Composite -0.05% at 3,358   Economics China – New bank lending data came in stronger than expected while consumer inflation posted another negative reading in February. The data follows official guidance focused on reigning debt levels in a measured approach avoiding a sudden policy shift and continuing to support ailing businesses. Consumer price deflation is unlikely to persist as pork prices rebalance, labour market tightens and energy inflation rebounds on the back of rising oil prices, Capital Economics said. CSI 300 equity index closed 0.6% higher on Wednesday following a heavy sell off seen in recent days that took the benchmark down more than 14% from its February 10 peak. Weak liquidity remains a concern for investors adding doubts over the strength of Wednesday’s rebound. While, China appeared to have banned the search for Chinese equivalent of “stock market” on social media today, suggesting the phrase had been censored, Bloomberg writes. New Bank Lending (bn CNY): 1,360 v 3,580 in January and 950 est. Aggregate Financing (bn CNY): 1,710 v 5,170 in January and 910 est. CPI (%yoy): -0.2 v -0.3 in January and -0.3 est. Trade data shows exports jumped 60.6% for the two months of January and February Imports into China rose 22.2% to give a trade surplus of US$103.25bn vs $78.17b in December. The data includes the Chinese New Year break, which was not much of a holiday this year COVID-19 travel restrictions and incentives persuaded many Chinese workers to remain in the state in which they are living in preference to going home.    US – The House is set to approve the $1.9tn stimulus programme later sending the bill to President Biden to be signed off paving the way for $1,400 stimulus checks arriving in Americans’ accounts this month. Young retail investors plan to spend half of their stimulus checks on equities, CNBC reports. A survey of 430 investors who use online broker platforms found that half of respondents between 25 and 34 years old plan to spend 50% of their stimulus payments on stocks. 18-24 year old retail investors involved in the survey planned to use 40% of any stimulus checks on stocks. 35-54 year olds planned to invest 37%. The over 55s surveyed planned to invest 16%.   EU – Pfizer/BioNTech will step up deliveries of the vaccine and provide 4m doses on top of planned shipments over the next two weeks, the European Commission said. Region like Tyrol in Austria, Nice and Moselle in France, Bolzano in Italy and some parts of Bavaria and Saxony in Germany have seen rising infections and hospitalizations in recent weeks, the EC highlighted.   Australia – The central bank governor pushed back against rising market rates suggesting may be getting ahead of themselves with regards to the start of monetary policy tightening, Bloomberg reports. “Over the past couple of weeks market pricing has implied an expectation of possible increases in the cash rate as early as late next year and then again in 2023,” Governor Philip Lowe said. “This is not an expectation that we share.” The benchmark three year bond yield briefly dipped as low as 0.087%, below the RBA’s 0.1% target, following RBA Governor comments. The central bank stepped up its bond purchases in recent weeks, including an unscheduled operation, in an effort to bring market rates lower.   Japan - machine tool orders rose 36.7% yoy in February vs 9.7% in January   Germany – Industrial Production fell 2.5% in January vs 1.9% in December     Currencies US$1.1878/eur vs 1.1880eur yesterday.  Yen 108.81/$ vs 108.94/$.  SAr 15.263/$ vs 15.389/$.  $1.388/gbp vs $1.386/gbp.  0.769/aud vs 0.768/aud.  CNY 6.510/$ vs 6.519/$.   Commodity News Precious metals:   Gold US$1,712/oz vs US$1,697/oz yesterday Gold ETFs 102.1moz vs US$102.2moz yesterday Platinum US$1,163/oz vs US$1,162/oz yesterday Palladium US$2,309oz vs US$2,324/oz yesterday Silver US$25.73/oz vs US$25.53/oz yesterday   Base metals:   Copper US$ 8,820/t vs US$8,837/t yesterday - China copper imports rose 4.75% in Feb to 884,000t vs 844,000 in January Iron ore imports rose 2.8% yoy in February at 181.5mt Rare earths exports rose 28% yoy in February   Copper prices rebound as strike threat increases at top Antofagasta mine Copper prices rose from the lowest in almost three-weeks on Wednesday morning, as workers at Antofagasta’s biggest copper mine, Los Pelambres, rejected the company’s final wage offer. The mine produced 372,100t of copper last year, and the disagreement is the latest in a long line of labour negotiations at Chilean mines, which account for a quarter of global copper output (Bloomberg). LME copper rose as much as 1.1% to $8,880/t on Wednesday morning.   Aluminium US$ 2,170/t vs US$2,131/t yesterday Nickel US$ 16,040/t vs US$15,730/t yesterday Zinc US$ 2,759/t vs US$2,758/t yesterday Lead US$ 1,961/t vs US$1,976/t yesterday Tin US$ 24,815/t vs US$24,235/t yesterday   Energy: Oil US$66.7/bbl vs US$68.1/bbl yesterday Oil prices have come off in early trading today (Brent: US$67.5/bbl and WTI US$64.1/bb at the time of writing) as the API reported a build in crude oil inventories of 12.792MMbbls for the week ending March 5 Analysts had predicted an inventory build of 816kbbls for the week In the previous week, the API reported a major build in oil inventories of 7.356MMbbls after analysts had predicted a 928kbbl draw But that was nothing compared to the EIA's report a day later of a 21.6MMbbl build It is unclear whether today’s reported stock build is part of EIA’s large build reported last week, or whether we will see another large build from the EIA tomorrow Oil prices slid further on Tuesday ahead of the data after a couple days of price rallying courtesy of the Houthi rebels, who claimed Sunday's attack on Saudi oil infrastructure Last week’s EIA report showed the US production at 10MMbopd, 3.1MMbopd below its level a year ago Under the current production scenarios, prices are expected to trade above US$70/bbl in March supported by prospects of market over-tightening, the increasing rate of global vaccination, and the increasing likelihood of certain countries returning to pre-crisis normality Fuel demand in the US is currently improving, especially gasoline and kerosene whose demand rose by 942,000bopd and 305,000bopd respectively, to stand at 8.15MMbopd and 1.29MMbopd   Natural Gas US$2.626/mmbtu vs US$2.651mmbtu yesterday Natural gas prices were nearly unchanged yesterday This comes despite colder than normal weather that is expected to cover most of the United States for the next two weeks The weather is expected to be much colder than normal in Texas which is somewhat concerning The EIA forecasts that US production of natural gas declined in February as a result of the freeze-off in the southern US Perhaps underpinning prices, at least over the short-term, was optimism over export demand The calendar is now moving into the end of the withdrawal season, and prices will likely remain rangebound unless there is another disruption or a cold spell   Bulk:    Iron ore 62% Fe spot (cfr Tianjin) US$157.5/t vs US$166.9/t Port Hedland February iron ore exports 37.5mt vs 42.2mt last and 38.8mt January 2020 Shipments fell due to a tropical storm causing the port to briefly close, and the Chinese market was closed in the month due to the Lunar New Year. Of last month’s flows, 30.7mt were to China.   Chinese steel rebar 25mm US$720.5/t vs US$727.1/t Thermal coal (1st year forward cif ARA) US$68.4/t vs US$67.5/t Coking coal swap Australia FOB US$1311.0/t vs US$136.0/t – Shanxi province tells local financial institutions to support coal bonds Authorities in one of China’s top coal producing provinces have instructed local financial institutions to purchase bonds of the region’s coal miners when prices drop. The government has ordered firms to buy the regional coal firms’ notes if they fall to around 90 yuan, with face value being 100 yuan. Local authorities have stepped up support following the default from a state-run miner in neighbouring Henan province (Bloomberg). Coal carrier forced to wait 269 days outside Chinese port finally gets to unload China is so desperate for coal that it has finally allowed a small number of vessels to unload Australian coal The trade dispute which stated when Australia banned Huawei 5G equipment caused China to bar 70 vessels from unloading stranding some 1,400 shipworkers.(Bloomberg)            Other:  Cobalt LME 3m US$52,610/t vs US$52,610/t NdPr Rare Earth Oxide (China) US$90,619/t vs US$91,270/t Lithium carbonate 99% (China) US$12,287/t vs US$12,272/t Spodumene 6% Li2O min, cif (China) US$510/t vs US$455/t Ferro Vanadium 80% FOB (China) US$34.5/kg vs US$34.5/kg Ferro-Manganese high carbon 78% Mn US$1,625/t vs US$1,625/t Tungsten APT European US$263-268/mtu vs US$260-265/mtu Graphite flake 94% C, -100 mesh, fob China US$560/t vs US$560/t                 Graphite spherical 99.95% C, 15 microns, fob China US$2,625/t vs US$2,625/t     Battery News Ganfeng acquires 49% stake in Chinese lithium salt lake project Major Chinese lithium producer Jiangxi Ganfeng is to acquire a 49% stake in Minmetals Salt Lake in China’s Qinghai province. Ganfeng will pay $225m to acquire the stake, with China Minmetals holding the remaining 51%. The project has 69,820t of lithium chloride and 713,600t of potassium chloride left that are accessible, Argus Media reports.   Tesla to become key advisor to New Caledonia government on nickel project Political leaders in New Caledonia agreed to new terms for the sale of the Goro nickel mine, including a majority stake holding for local interests and Tesla to become a partner. The deal signed by pro-independence and loyalist leaders cited an “technical and industrial partnership” with Tesla, which will see the EV maker source raw material for its batteries. Vale previously reached an agreement to sell its nickel mine and processing plant to a consortium led by Trafigura, which was met with fierce opposition from pro-independence groups. The new deal will see authorities hold a 51% stake and Trafigura hold a 19% stake. Tesla will act as an industrial partner for the operation to help the product and sustainability standards as well as taking some supply for its battery production (Reuters).   Three out of five new cars in China to be electric by 2030  UBS forecasts that three out of five new cars in China will be powered by battery packs by 2030.   HSBC has predicted similar figures and said that almost six in ten new cars sold into the Chinese auto market could be electric by 2030.  UBS expects China to sell 6.6 million electric cars in 2025, about 25% of all new cars, rising to 18 million, or 60%, by 2030.  Under Beijing’s plan, 20% of new cars on the streets by 2025 will be new-energy vehicles. That would translate into about 4 million such cars on the road by then.    Company News Altus Strategies* (LON:ALS) 80p, Mkt Cap £56m – High priority gold targets identified across properties in Egypt Remote sensing across recently secured four gold exploration properties covering 1,565km2 in the Eastern Desert of Egypt identify a series of priority targets. The programme identified over 100 potential hard rock gold workings with selected ones traced over 375m in length including at least two major historical mining camps. All four project (Wadi Jundi 696km2, Bakriyah 348km2, Abu Diwan 346km2, Wadi Dubur 175km2) are located within the highly prospective but relatively underexplored Arabian Nubia Shield (ANS) hosting a number of major gold and copper deposits including Sukari, Bisha and Jabal Sayid. Licenses have been recently acquired during a competitive bidding process earlier in the year. The Company is assembling a technical team in Egypt to kick start on the ground exploration following on identified priority tagrgets. Conclusion: Results from the inhouse remote sensing programme identified a series of hard rock gold workings on recently secured gold properties in the Eastern Desert of Egypt highlighting a highly prospective but relatively underexplored nature of the area. A technical team is expected to commence fieldwork following up on identified targets shortly. *SP Angel acts as Nomad and Broker to Altus Strategies plc   Anglo American (LON:AAL) 2910,p, Mkt Cap £39.3bn De Beers reports continuing signs of recovering demand at its second sales cycle of 2021 Anglo American has announced that the second sales cycle of 2021 realised US$550m (2020 – US$362m) and that the previously reported provisional sales for the first sales cycle of 2021 have now been confirmed at US$663m. On a year to date basis, we estimate that sales of US$1.2bn over the first two sales cycles of the year are running around 33% ahead of the US$0.9bn achieved at this stage in 2020. Commenting that the industry is now entering “what is traditionally a period of lower seasonal demand”, De Beers Chief Executive, Bruce Cleaver, said that “We saw the continuation of good rough diamond demand during our second sales cycle of 2021 on the back of positive consumer demand for diamond jewellery. Midstream buyers continued to express healthy demand following better than expected retail sales of diamond jewellery over Christmas, Chinese New Year and Valentine's Day”. De Beers is maintaining its “more flexible approach to rough diamond sales” in order to accommodate the current Covid19 restrictions on “the movement of people and products” with the sight process “extended beyond the normal week long duration”.   BlueRock Diamonds (LON:BRD) 42p, Mkt cap £4.5m – BlueRock costs to fall as diamond production ramps up BlueRock updated the market in an open presentation to investors yesterday. Management have been working to ensure delivery of new plant and equipment to the Kareevlei diamond mine in South Africa. Higher diamond prices for BlueRock’s local sales are great news with the first two sales done at an average price of US$423/ct this year Restocking by rough diamond buyers and the return of competitive tendering in Kimberley should lead to a more stable market. Management report jewellery sales are strong in Asia with a number of US retailers also recording record sales in November and December. India, which is a major centre for diamond cutting and polishing is said to be back to 70-80% of capacity with COVID-19 social distancing measures in place. Management will revisit selling into Antwerp in the second half when production levels should rise to meet minimum parcel size requirements on a regular basis. Prices are thought to be +/- 10% higher in Antwerp but may delay tenders to every two months due to the larger size of parcels required for sale. Covid-19: The Covid-19 lockdown last year gave management a good chance to relook and resize the Kareevlei Mine and new process plant with around 50 days lost last April/May. Costs are forecast to fall to around $200/ct including all local South African based costs. The instillation of a new grid-connected power line later this year will contribute materially to this cost reduction. A second mining fleet has just arrived at the mine as part up of the ramp of production A new crushing circuit  was commissioned in February improving on what had been a problematic part of the processing facility giving extra capacity and redundancy so as to better manage future breakdowns and maintenance. Instillation and commissioning was delayed by exceptional rains through December and January in the Northern Cape region of South Africa. The rains, were the worst for 30-years paralysing mining and transport in the region led to 29 days of downtime and the ability to crush/process ore at the time. Management forecast: Run of mine diamond prices of $330-350/ct for 34,000-44,000cts Ore grades of 4.0 to 4.6cpht are forecast Production is forecast to rise to a rate of 850-950tpa this year with 34000-45,000cts achievable. Production should rise to a run rate of 1m tpa in 2022 to give diamond production of 46,000cts assuming an overall grade of 4,6cpht from the KV1 and KV2 kimberlite pipes. Resources: The latest resource of 10,368,300 containing 516,200cts should give the mine more than 10 years of operation This resource only includes around 40% of the KV3 diamond pipe which is around twice the scale of the current open pit. Bringing in part of the KV3 diamond pipe into the resource should result in a material increase in the total resource significantly extending the estimated mine life. See link for updated company presentation: https://www.bluerockdiamonds.co.uk/files/CorporatePresentation08.03.21FINAL.pdf Conclusion:  BlueRock appear well set on the path to new profitability. The new process plant should be fully operational by the end of May and able to take over from the existing machinery. Costs should then fall to enable a significant rise in operating margins for  significant turnaround in the company’s fortunes. *SP Angel act as nomad and broker to BlueRock Diamonds   Kenmare Resources (LON:KMR) 400p, Mkt Cap £439m – 2020 production and 2021 guidance Kenmare Resources reports that, following a rise in Covid19 infection rates in Mozambique, it currently has 177 people quarantined in isolation at its Moma mineral sands mine “with the majority of positive cases being asymptomatic”. The company confirms that it is stepping up its current virus containment measures and that it has “has initiated blanket testing of the workforce on the site every two weeks and is targeting a reduction of this interval … [in an effort to] … identify and isolate positive cases more quickly and limit the spread of the virus.” Kenmare says that “The larger number of cases is limiting availability of the workforce, including senior management, at the site. However, the business is being managed to mitigate the impact and production has continued at normal levels.” Conclusion: Kenmare Resources is stepping up its measures to contain the Covid19 virus and introducing blanket testing of its workforce  following increasing cases in Mozambique.  At this stage, management confirms that production is continuing at normal rates.   Petra Diamonds (LON:PDL) 1.3p, Mkt Cap £122m – Financial restructuring completed Petra Diamonds reports that it has now completed the financial restructuring announced in October 2020. The restructuring leaves the former holders of the company’s debt holding 91% of the equity capital of the company and the deal includes a “partial reinstatement of the Notes debt and the contribution by holders of the existing Notes of US$30.0 million in New Money…The New Notes amount to approximately US$337.0 million”. CEO, Richard Duffy thanked “our noteholders, lenders and shareholders for their continued support. … [and said that] … The Restructuring will provide Petra with a stable and sustainable capital structure, significantly reduced financial burdens and greater liquidity”. Conclusion: Petra Diamonds has completed the financial restructuring which leaves its Noteholders owning 91% of the company.   Serabi Gold* (LON:SRB) – 70p, Mkt Cap £56m – Fatal accident at Palito Serabi Gold has announced a fatality arising from an underground accident at the Palito mine. The company confirms that “No other personnel have suffered any injury”. Investigation of the circumstances of the accident, which occurred at an underground production face, is underway and the company confirms that “Production in the area of the incident has is expected to be resumed within a few days once the authorities have completed their enquiries.” Conclusion: While we are all looking at the impact of Covid19, the tragic accident at Palito is a timely reminder of the sometimes hazardous realities of underground mining and we echo management’s comments in expressing “our sincere condolences to the family and friends of the deceased” *An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil   Tertiary Minerals* (LON:TYM) – 0.46p, Mkt cap £5.4m – Exploration results from the Pyramid prospect Tertiary Minerals has announced the results of a follow up sampling programme over its Pyramid gold/silver project in Nevada. The company says that it has taken 31 rock-chip samples from the North Ruth, Western Line and Western Splay precious metals soil geochemical anomalous areas. Assays from these rock-chip samples range up to 314g/t silver in a sample from the North Ruth area and 158g/t silver from a sample in the Western Line anomaly with gold grades of up to 0.45g/t at North Ruth and 6.29g/t from the Western Line anomaly. The company says that “Field evidence suggests the Western Line Anomaly may extend along strike to the southeast over a total of 1,700m” and that it is planning further infill sampling and follow up trenching within the North Ruth and Western Line areas. Executive Chairman, Patrick Cheetham, explained that “Where exposed and sampled to date, the mineralisation comprises narrow veins within broader zones of volcanic breccia suggesting potential for both high grade vein and lower grade bulk tonnage targets. Follow-up work is planned to start later this month”. Conclusion: Early stage exploration and sampling in the geochemical anomalies defined at the Pyramid prospect have picked up gold and silver mineralisation which is to be followed up with additional exploration, including trenching, later this month. *SP Angel act as Nomad and Broker to Tertiary Minerals     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, Antimony Asian Metal Tungsten Metal Bulletin