SP Angel . Morning View . Nickel Sulphate demand forecast to over 900000mt by 2029
Paul Kettle
SP Angel Research Note -4 min read
09:38, 11th June 2019

SP Angel – Morning View – Tuesday 11 06 19

Nickel Sulphate demand forecast to over 900,000t by 2029

Gold pauses despite fresh China tariff threats

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MiFID II exempt information – see disclaimer below 

Cadence Minerals (KDNC LN) – Yangibana rare earth joint venture signs second offtake MOU with Schaeffler AG

Strategic Minerals* (SML LN) – AGM, presentation and shareholder evening at Rutland Arms next Tuesday

Thor Mining* (THR LN) – Pilot Mountain metallurgical tests

 

Nickel Sulphate demand forecast to over 900,000t by 2029 on new demand for lithium-ion batteries (Roskill)

  • Production of nickel sulphate rose by around 21% last year to some 160,000t from just 50,000t in 2010.
  • BHP’s Nickel West operations forecast to produce 22,000tpa of nickel sulphate next year rising to 45,000tpa thereafter.
  • Tsingshan is also building a new hydrometallurgical plant in Indonesia to produce a nickel and cobalt sulphate intermediate products.
  • New demand for nickel sulphate provides a great opportunity for certain nickel companies to step in to directly produce nickel sulphate for the battery market without bearing the cost of processing to nickel metal.
  • Nickel sulphate may well fetch a premium price to nickel metal if any sort of deficit develops in the product as conversion of nickel metal to the sulphate product incurs time and cost.

Graphite - "... rapid growth in demand for natural flake graphite and synthetic graphite in the lithium-ion battery industry is now forecast to underpin total graphite demand growth of 5–7%py between 2017 and 2027." According to a recent Roskill report on graphite..

  • China introduced tariffs on Graphite products from 1st June in retaliation for US tariffs.

 

Heavy rains cause flooding in UK, Germany and Fujan, China

  • Fujan province suffering from landslides following heavy rain. Chinese construction appears to be standing firm for now.

 

Dow Jones Industrials

 

+0.30%

at

  26,063

Nikkei 225

 

+0.33%

at

  21,204

HK Hang Seng

 

+0.86%

at

  27,815

Shanghai Composite

 

+2.58%

at

   2,926

FTSE 350 Mining

 

+2.15%

at

  19,661

AIM Basic Resources

 

-0.31%

at

   1,958

 

Economics

US – Trump threatens further tariffs if President Xi of China avoids meeting with him at the G20 summit

  • Trump is threatening the immediate application of $300bn of tariffs on additional imports.

 

China – to retaliate if US imposes further tariffs

 

UK – employment gains 32,000 jobs

  • Unemployment remains at a 44-year low at 3.8%
  • Basic pay also rises unexpectedly by 3.4%.
  • If the BoE raises rates it may be at odds with the US Fed and ECB which are both looking at lowering interest rates due to Tariff, Trade War concerns.

 

South African rand leads emerging market currencies higher as political tensions ease

 

Currencies

US$1.1300/eur vs 1.1262/eur yesterday  Yen 108.66/$ vs 108.49/

nbsp; SAr 14.921/$ vs 15.104/
nbsp; $1.271/gbp vs $1.270/gbp  0.697/aud vs 0.697/aud  CNY 6.933/$ vs 6.909/$

 

Commodity News

Precious metals:         

Gold US$1,326/oz vs US$1,332/oz yesterday

  • Gold retraces some gains despite latest threats by Donald Trump to raise tariffs on China if President Xi Jinping doesn’t meet with him at the upcoming G-20 summit in Japan.
  • Trump told reporters at the White House on Monday that he could impose tariffs of 25%, or “much higher than 25%,” on $300bn in Chinese goods. “China is going to make a deal because they’re going to have to make a deal,” Trump said Monday
  • This comes just after Trump suspended his plans for tariffs on Mexico, boosting global equities and curbing safe haven demand for gold.

   Gold ETFs 72.1moz vs US$71.5moz yesterday

Platinum US$804/oz vs US$804/oz yesterday

Palladium US$1,385/oz vs US$1,351/oz yesterday

Silver US$14.71/oz vs US$14.88/oz yesterday

           

Base metals:   

Copper US$ 5,921/t vs US$5,842/t yesterday

Aluminium US$ 1,782/t vs US$1,776/t yesterday

Nickel US$ 11,840/t vs US$11,660/t yesterday

Zinc US$ 2,514/t vs US$2,519/t yesterday

Lead US$ 1,898/t vs US$1,879/t yesterday – Nyrstar’s Port Pirie lead smelter to restart at end June

  • Lead prices rose 1% yesterday leading other base metals higher.

Tin US$ 19,305/t vs US$19,250/t yesterday

           

Energy:           

Oil US$62.6/bbl vs US$62.6/bbl yesterday

Natural Gas US$2.368/mmbtu vs US$2.342/mmbtu yesterday

Uranium US$24.90/lb vs US$24.60/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$97.4/t vs US$95.4/t

  • On surging iron ore prices, which have reached a five-year high last month, Asia’s leading steelmakers has warned it will seek to pass on costs to customer to protect its margins.
  • There’s no immediate risk of an inability to secure iron ore supplies or make steel due to supply bottlenecks,” JFE Holdings Inc. Chief Financial Officer Masashi Terahata said. “The problem is the price.
  • Iron ore climbed to the highest since 2014 in May following a fatal dam disaster at a Vale SA site triggered a series of closures that’s curbed global supply. While benchmark prices have since eased, they’re still near $100/t as the tightness is exacerbated by record steel production in China and a slump in stockpiles at ports in the Asian nation.
  • Japan’s second-largest steelmaker resorted to purchases on spot contracts during the Chinese Lunar New Year holidays to increase stockpiles and, while Vale has committed to shipping agreed volumes, JFE is considering additional sourcing from Australia.
  • Supplies from Brazil make up 25% of JFE’s iron ore needs, while Australia accounts for 55%

Chinese steel rebar 25mm US$599.7/t vs US$603.7/t

Thermal coal (1st year forward cif ARA) US$66.8/t vs US$64.3/t

Coking coal futures Dalian Exchange US$197.1/t vs US$197.3/t

           

Other:  

Cobalt LME 3m US$28,000/t vs US$31,000/t

NdPr Rare Earth Oxide (China) US$51,333/t vs US$50,654/t

Lithium carbonate 99% (China) US$9,616/t vs US$9,624/t

  • London Metal Exchange has partnered with Fastmarkets to develop the reference price for planned lithium futures contract, giving analysts and executives a full sense of the global market.
  • In recent years there has been unprecedented price volatility in the lithium market, driven particularly by explosive electric vehicle battery demand,” the exchange said. Prices remain opaque due to the private nature of negotiated contracts.
  • In a bid to develop an effective price-risk management tool, the futures contract is highly desired by industry players, including producers, end-users and leading automotives.
  • Last year, the LME asked companies that assess prices of battery-grade lithium to submit proposals to supply a reference for cash-settled contracts it planned to launch in the fourth quarter of this year.

Tianqi sees prices stable following ‘crazy peak’

  • Lithium giant and the world’s third-largest producer believe prices aren’t going back to the historic highs of recent years but won’t plummet to pre-boom levels as global miners boost production capacity to match soaring demand from automakers.
  • In 2015, an explosive demand for EVs happened and that caused almost a supply shock" in the lithium market, Wu told reporters in Santiago. “A lot of new projects have now come into the industry and that adjustment has to most extent already happened."
  • Prices for Asian lithium carbonate have fallen more than 40% from a record reached in October 2017, to $12,625/t in May, according to Benchmark Mineral Intelligence.
  • Prices will not go back to the highest, crazy peak of the last few years," she said. “New supply will come, but only good-quality and lower-cost production will survive."

Chinese discovery to limit reliance on lithium imports

  • An estimated 5Mt lithium deposit has been discovered in China’s southwestern province of Yunnan, potentially curbing reliance on imported materials.
  • The Institute of Geochemistry, under the Chinese Academy of Social Sciences estimated that roughly 340,000t lithium oxide were deposited in a test site of 7.2km2, giving early indications for >5Mt.
  • With society’s expectations of longer lasting battery power for portable devices and the increase in electric vehicles, the demand for lithium has increased sharply,” the China Daily quoted Wen Hanjie, a researcher involved in the discovery. “But we also see a high dependence on lithium imports as about 80 percent of lithium used in China between 2011 and 2015 was from overseas ... To find our own lithium resources is an urgent need.”

Ferro Vanadium 80% FOB (China) US$36.5/kg vs US$35.7/kg

Antimony Trioxide 99.5% EU (China) US$5.8/kg vs US$5.8/kg

Tungsten APT European US$260-270/mtu vs US$260-270/mtu

 

Battery News

US renewable capacity surpasses coal for the first time

  • US electricity generation capacity from renewable energy sources surpassed coal for the first time this April, and that gap looks to grow substantially during the next three years.
  • The Federal Energy Regulatory Commission released its latest Energy Infrastructure Update, and the numbers reveal that the total installed capacity of renewables, including hydropower, wind, solar, geothermal, and biomass, hit 257.53GW in April 2019 - 21.56% share of installed generating capacity.
  • Coal checked in with 257.48GW and a 21.55% share.
  • Wind and solar added 178 MW in new installations to surpass the fossil fuel.
  • When it comes to installed capacity for renewables alone, hydropower is still the leader, but it won’t be for long as wind is now just 1.82 GW behind hydro, and should pass it in the near future.
  • FERC also shared the proposed additions and retirements in total installed capacity over the next three years, to May 2022, and by that time, the gap between renewables and coal will be vast.
  • In those three years, coal is expected to install just 867 new MW of capacity, while 13,276 MW of coal capacity will be retired.
  • Meanwhile, wind and solar alone should push renewables far, far ahead of coal. FERC expects there to be a “high probability” of 40,203 MW of new wind and solar installed by May 2022.
  • If you include all proposed additions, the US could see more than 186,000 MW of installed wind and solar capacity added in those next three years.
  • Natural gas is still the leader in total installed capacity for electricity generation in the US, with a 44.44% share as of April.

 

Company News

Cadence Minerals (KDNC LN) FOLLOW 0.14p, Mkt Cap £13.0m – Yangibana rare earth joint venture signs second offtake MOU with Schaeffler AG

  • Joint venture partner Hastings Technology Metals reports signing a second offtake MOU agreement with Schaeffler AG at the Yangibana Rare Earth Project in the Gascoyne region of Western Australia.
  • Probable Ore Reserves on the entire Yangibana project recently increased 34% to 10.35Mt @ 1.22% TREO including 0.43% Nd+Pr.
  • Cadence owns 30% of the Yangibana North., Gossan, Hook, Kanes Gossan, Lions Ear and Bald Hill North Rare Earth Deposit which form part of the Yangibana Rare Earth Deposit. Probable Ore Reserves of some 2.1 million tonnes at 1.66% total rare earth elements are contained within 30% owned joint venture tenements.
  • Schaeffler is a global automotive and industrial supplier of high-precision components and systems in engine, transmission and chassis applications with 2018 sale of approx. €14.2bn.
  • Under the MOU, parties outlined the intent to enter into a binding commercial offtake agreement within the next 6 months for the sale and purchase of MREC produced from Yangibana. The intent is to offer 10 year commercial offtake contract to supply MREC which contains the critical raw materials of neodymium (Nd) and praseodymium (Pr).  NdPr is a critical raw material used in the manufacture of permanent magnets, the key component in electric motors.
  • Schaeffler is also supporting Hastings in its eligibility for the German government's untied loan guarantee scheme (known as UFK) in its project financing for the construction of its mine and processing plant in the Upper Gascoyne of Western Australia.

 

Strategic Minerals* (SML LN) FOLLOW 1.65p, Mkt Cap £23m – AGM, presentation and shareholder evening at Rutland Arms next Tuesday

  • Strategic Minerals is hosting its AGM, company presentation and shareholder evening at the Rutland Arms in Hammersmith, London next Tuesday 18th June.
  • Hrett Grist and James Blight of Cornwall Resources Limited will be presenting on progress at the Redmoor tin, tungsten, copper project in Cornwall.
  • The company is also developing the Leigh Creek copper project in Australia from which the company recently sold five tonnes of copper cement as part of the ramp up of the Mountain of Light plant.
  • Plans to re-establish full production by late 2019, when achieved, will provide Strategic Minerals with a second cash generating asset and reduce its reliance on Cobre.

Conclusion: The evening is worth attending for shareholders. Food is good too.

*SP Angel act as Nomad and Broker to Strategic Minerals

 

Thor Mining* (THR LN)FOLLOW  0.775p, Mkt Cap £6.3m – Pilot Mountain metallurgical tests

  • Thor Mining has reported the results from tests on a 600kg sample of material derived from three cored drill holes at its wholly owned Pilot Mountain tungsten project in Nevada.
  • The material which is “considered to be representative of the potential processing feed from the first few years of open pit mining at the Desert Scheelite deposit” produced a scheelite concentrate grading over 68% tungsten trioxide at a recovery rate of 73.6% implying that there is a feasible processing option available for the deposit’s development.
  • The results also show the presence of gold, at a grade of 0.29g/t in the initial test feed. Earlier work on the deposit has not, routinely, assayed for gold and the company is “following up the gold potential via extraction of sample pulps from previous testwork which will be re-assayed for gold" although “it remains unknown at this stage whether gold will have an economic impact or not on the project”.
  • Executive Chairman, Mick Billing explained that further evaluation of the gold potential of the tungsten tailings “may improve project economic outcomes.”
  • The company’s principal focus remains “securing off-take and finance agreements for our flagship Molyhil project, and we will keep investors appraised of progress as appropriate. However our other projects, including Pilot Mountain, have significant value and we are committed to continuing to take these forward”.

Conclusion: Metallurgical testing shows that the production of a tungsten concentrate from Pilot Mountain is feasible at potentially economic rates of recovery. The presence of gold in the tungsten tailings may, subject to further testing, provide scope to generate a by-product revenue stream. We are encouraged to hear the company reiterate that, while seeking to advance other projects such as Pilot Mountain, its primary focus remains with the Molyhil tungsten deposit in Australia.

*SP Angel act as joint broker to Thor Mining

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

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.

 

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