SP Angel . Morning View . Thursday 04 06 20
Markets pull back slightly ahead of the ECB meeting
MiFID II exempt information – see disclaimer below
Keras Resources () – Interim results highlight value created through Calidus shares
Pure Gold Mining LON:(PUR) –– Resumption of drilling at Red Lake mine
Strategic Minerals* () – Raising £1.1m to fund purchase of balance of Cornwall Resources
China daily crude steel output jumps 6.8% in May
The average daily crude steel output at Chinese steel mills in May jumped 6.8% to 2.07mt compared to April, and increased 2.2% compared to the same period in 2019.
Inventories of steel products at the end of May stood at 13.29mt, down 1.6mt, or 10.7% from the 20th of May. Stocks were 3.75mt higher than the beginning of the year (SMM News).
Artisanal miners in dire need of emergency support according to the LBMA
More than 83% of the world’s mining workforce (40.5-m people) rely on artisanal mining.
Higher gold prices should hopefully offset some of the negative impact of the Coronavirus.
Ongoing firm demand for cobalt, tin, coltan and other commonly mined artisanal minerals should help.
Artisinal miners mining diamonds may struggle to find buyers due to flight restrictions though Lebanese diamond buyers in West and central Africa may not worry so much about COVID-19.
Asteroid taller than the Empire State Buliding to skim Earth orbit this week
$140bn – ChinaPBOC buying CNY1tn of bank loans issued by local lenders to small firms this week in an effort to ease the flow of credit.
We have previously assumed China at $909m $344bn of China stimulus + $565bn in special bonds for infrastructure by local authorities
$1.1tr – Japan – further stimulus to combat pandemic including significant direct spending to stop the coronavirus pandemic pushing the country’s economy deeper into recession. The 117tn-yen stimulus, funded partly by a second extra budget, will be on top of another 117tn package already rolled out last month – and takes total spending in Japan at 234tn yen ($2.18tr) – 40% of Japans GDP. To fund the costs, Japan will issue an additional 31.9 tn yen in government bonds under the second supplementary budget for the current fiscal year ending in March 2021.
$825bn (€750bn) EU – European Commission aid package yesterday aimed at supporting EU nations hit by the pandemic.
This is an expansion on the previous $543bn (€500bn ) EU Crisis Recovery fund backed France and Germany + $963bn (€750bn) ECB scraps limits on sovereign bond purchases. ECB PEPP buying running at around €250bn
US$260bn – India representing 10% of GDP.
$62bn – South Korea – The government unveiled a 76tn won ($62bn) “New Deal” aimed at supporting the economy amid the pandemic focused on creating jobs and new industries through 2025.
$13.3bn – Saudi Arabia central bank will inject 50bn riyals ($13.3bn) into the banking system on top of US$43.7bn already pledged
$56bn – The PBOC also announced a Rmb400bn ($56bn) purchase loan program to boost available credit by supporting bank loans to small businesses.
$1.55tn – China – Bloomberg estimates a ‘fiscal impulse of more than 11% of nominal GDP’ which was estimated at US$14.14tn
$2tn – US fiscal package approved by Congress. US may add $0.6t state aid for mortgage markets and travel industries
The House passed a $484bn aid package to rescue small small businesses, hospitals ($75bn) and coronavirus testing ($25bn).
$2tn US – Trump looking at $2tn infrastructure fund
$700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE to buy Treasuries and mortgage-backed securities.
US Fed may soon start buying in up to $750 billion of corporate debt and ETFs
EU Finance Ministers have so far failed to agree on a strategy to mitigate the economic impact of the pandemic.
The pandemic emergency purchase programme (PEPP) and asset purchase programme (APP) have been reiterated with a cap of €750bn and €120bn, respectively.
The bank is reported to have used €100bn of the PEPP so far.
$825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
$996bn (108.2tn yen) – Japan + BoJ pledge for unlimited quantitative easing
400bn (£330bn) UK + $242bn (£200bn) UK QE from BoE & no business rates plus £25,000 cash grants for hospitality sector
$387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia Australia – RBA ready to buy bonds again.
$78bn (C$107bn) Canada, $32bn, Singapore, $22.6bn India, $19.3bn HK, $13.7bn South Korea, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
Argentina to default on $10bn of dollar debt issued til the end of the year. Does not affect the $70bn that Argentina is currently in talks to restructure.
$1,000bn – IMF available + $12bn World Bank,
>15tn from 14.8tn
Dow Jones Industrials
HK Hang Seng
US – A 17.7%mom drop in durable goods orders in April highlight weak business investment amid weak consumer spending and economic growth rates.
Transportation sector accounted for most the decline with vehicle orders subtracting over 12pp from the headline number.
The number of employed people dropped by 2,760k in May, according to the ADP payrolls data; NFPs numbers are due this Friday with estimates for a -8.0m reading and unemployment reaching 19.5%.
ECB – The central bank monetary policy meeting will be held later today focusing on a possible extension of the €750bn bond buying programme.
Most economists expect policy makers to increase the €750bn Pandemic Emergency Purchase Program and extend it past the year end, Bloomberg reports.
So far, the programme is reported to have been used by a third in a little more than two months since announcing it suggesting the remaining balance likely to last to October.
A number of commentators expect the ECB to add €500bn to the programme taking asset purchases under all active vehicles to €1.6tn this year, a record amount.
Germany – The coalition government agreed on a €130bn ($145bn) stimulus package, exceeding expectations for a previously considered €100bn programme.
The plan includes a VAT reduction to 16% from 19% through the end of 2020 (worth €20bn), infrastructure related investments including 5G data networks and railway upgrades as well as incentives for EVs.
Eurozone construction sector decline slowed down in May as restrictions were lifted and most construction sites were allowed to reopen.
The Markit Construction PMI climbed to 39.5 last month, up from 15.1 in April.
Italy has even posted a marginal increase during the period with the regional PMI coming in at 51.0.
UK – Auto sales have dropped by 90%yoy with 20,247 vehicles sold in May, according to the Society of Motor Manufacturers and Traders.
Hopes are the reopening of dealerships this week will help to revive demand and support the industry.
Australia – The government announced a A$680m (US$469m) stimulus package to support the construction and home building industries.
Under the programme, homeowners can apply for a A$25k grant to subsidise the cost of renovating an existing property or building a new house, FT reports.
The scheme will provide around 27,000 grants and support 140,000 direct jobs and up to 1m related jobs in the residential construction sector.
Mexico – mine production is expected to fall by 17% this year (Reuters)
Mining output in the country will likely fall about 17% this year due to the impact of the coronavirus, but should recover in Q1 2021 according to the head of the country’s mining chamber.
This gives us some indication of how COVID-19 will impact the supply / demand balance.
Chile – Magnitude 6.8 earthquake hits Antofagasta region
An earthquake struck mine-heavy northern Chile early on Wednesday, though mining companies told Reuters their operations were not impacted.
Russia – State of emergency declared after Arctic Circle oil spill
Over 20,000 tonnes of oil (146,600 barrels) have leaked into a river within the Arctic Circle, after a fuel tank collapsed last Friday.
The plant is owned by a subsidiary of Norilsk Nickel – the world’s largest nickel and palladium producer.
President Putin is reportedly furious at the situation due to the timeliness of the company’s response, and a manager at the plant has since been detained.
The leaked oil has drifted 12km from the accident site, and extra forces are being sent to the area to assist with the clean-up operation.
The accident is believed to be the second largest in modern Russian history in terms of volume, according to an expert from the WWF.
Hong Kong – evacuation of housing estate on fears over COVID-19 super spreader
Hong Kong has manage to limit Coronavirus infections amazingly well.
It is always possible the authorities are clamping down harder than normal to keep people from demonstrating on the streets.
US$1.1205/eur vs 1.1224/eur yesterday. Yen 109.06/$ vs 108.68/$. SAr 17.041/$ vs 17.082/$. $1.252/gbp vs $1.260/gbp. 0.689/aud vs 0.694/aud. CNY 7.118/$ vs 7.106/$.
Gold US$1,700/oz vs US$1,721/oz yesterday – China gold sales jumped 54% in May
According to the China Gold Association, gold sales jumped 54% in May compared to a month earlier.
Gold consumption in China almost halved in Q1 due to falling demand as a result of coronavirus containment measures and rising prices.
The easing of restrictions saw the Chinese public able to spend money on items such as jewellery once again, and many may have bought gold for its safe haven appeal.
Gold ETFs 100.7moz vs US$100.5moz yesterday
US$833/oz vs US$841/oz yesterday
Palladium US$1,942/oz vs US$1,980/oz yesterday
Silver US$17.50/oz vs US$17.85/oz yesterday – Great Panther Mining restarting operations at Topia and Guanajuato mines in Mexico
The mines are restarting in a phased manner to work under new social distancing and safety and health protocols
Great Panther also runs the Tucano Gold Mine in Brazil which has not been impacted despite two employees suffering mild symptoms of COVID-19
Copper US$ 5,452/t vs US$5,510/t yesterday
Aluminium US$ 1,557/t vs US$1,549/t yesterday
Nickel US$ 12,585/t vs US$12,815/t yesterday
Indonesian nickel ore export ban set to remain
Indonesia’s Director of Minerals has announced that the country will keep in place the nickel ore export ban even as it relaxes exports of other minerals under revisions to its mining law.
The government revised its mining law last month, allowing miners building smelters to export ore for the next three years however the government has now confirmed that this will not be applicable to nickel.
The new mining law will also allow miners to extend permits and seek expansion of mining beyond current legal limits (Reuters).
The Indonesian Nickel Miners Association recently proposed that the country allow exports of nickel ore to cushion the economic impact of coronavirus – however this was rejected by the Ministry for Maritime Affairs and Investment.
Zinc US$ 1,993/t vs US$2,001/t yesterday
Lead US$ 1,701/t vs US$1,708/t yesterday
Tin US$ 15,900/t vs US$16,065/t yesterday
Oil US$39.1/bbl vs US$40.2/bbl yesterday
Natural Gas US$1.821/mmbtu vs US$1.793/mmbtu yesterday
Uranium US$33.45/lb vs US$33.55/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$98.4/t vs US$98.2/t
Chinese steel rebar 25mm US$530.9/t vs US$531.8/t –
Thermal coal (1st year forward cif ARA) US$54.7/t vs US$54.6/t
Coking coal swap Australia FOB US$105.5/t vs US$105.5/t
Cobalt LME 3m US$30,000/t vs US$30,000/t
NdPr Rare Earth Oxide (China) US$38,352/t vs US$38,418/t
Lithium carbonate 99% (China) US$4,917/t vs US$4,925/t
Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$28.5/kg
Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/kg
Tungsten APT European US$215-225/mtu vs US$215-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$485/t vs US$485/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,350/t vs US$2,350/t
testing geofence technology in Turin
Fiat Chrysler (FCA) is taking part in the “Turin Geofencing Lab” project to test whether such technology could be used to safely force PHEVs into electric mode when entering certain zones. (Electrek)
There is a split amongst auto makers strategies with some like GM and VW focused on pure electric vehicles as a long-term play while others including FCA, Toyota and Ford buy into PHEVs.
The geofencing project will use onboard sensors to detect when the vehicle, in this case a Jeep Renegade, enters a designated restricted zone.
When the vehicle enters the zone, the vehicle will switch off the combustion engine and move into electric mode.
If successful PHEVs could qualify for cities with congestion zones and special parking. (Reuters)
A similar project was run in 2019 between BMW and the city of Rotterdam. A smart-phone reminder to switch off combustion engines was tested when a virtual boundary to the ‘electric-only zone’ in the city was crossed.
First Vietnamese EV to be powered by LG Chem battery
LG Chem li-ion batteries are to be used in Vietnamese domestic car maker VinFast’s first EV. (The Korean Herald)
The first model is expected to debut at the Los Angeles auto show in November 2020 with mass production of the vehicle by June 2021.
The two companies signed a memorandum of understanding in (MoU) in September 2018 and set up a JV in April to produce li-ion batteries for electric scooters and EVs. (Reuters)
It is unknown what type of battery will be used but LG Chem predominantly sells nickel-cobalt-manganese (NCM) 523 and NCM 622 batteries.
It has been suggested the vehicle could travel up to 500km on a single charge which would be at the top end of what is currently possible.
Tesla ramping up construction on its Gigafactory’s around the world
Tesla is to adapt its construction of its German Gigafactory to satisfy environmental critics. (Bloomberg)
Blueprints to be presented in the next week or so will address concerns relating to wastewater.
The project has already suffered a setback as protestors halted work on the site in opposition to the deforestation occurring to clear the area.
The hope is these adaptations will enable the project to move forward and be ready for vehicles to roll off the production line next year.
The Californian EV maker has also completed the shell of new Model Y factory, which has taken less than 5 months to complete. (Teslarati)
The shell design is very similar to that of the Model 3 factory, also in Shanghai.
Keras Resources () 0.14p, Mkt cap £3.9m – Interim results
Keras Resources interim results highlight progress towards production of manganese in Togo in West Africa
The company spent some £810,000 in admin and exploration through the six-months to end March. There was no revenue through the period resulting in a post tax loss of £809,000.
Management shipped 10,000t of manganese from the Nayega Manganese mine to a manganese alloy processor last year demonstrating the quality of the product and the logistics of the operation.
The shipment serves to materially de-risk the project in our minds.
Nayega will be expanded to 300,000tpa from the current capacity of 75,000tpa on receipt of the relevant mining permits.
Keras is in discussion with offtakers for a prepayment to fund the expansion of the plant to 300,000tpa limiting the issue of further equity to fund the expansion.
Mining license: we are waiting on the Ministry of mines in Togo to approve and issue the mining permit for the new Nayega Manganese mine.
“A decree permitting Société Générale de Mines SA (‘SGM’) to undertake large scale mining was promulgated following a meeting of the Council of Ministers of the Republic of Togo held on 18 October 2019”
Calidus demerger: Keras demerged shares in Calidus Resources Limited.
Calidus Resources shares have risen to A$0.46 since the demerger resulting in significant gains for shareholders.
Calidus market capitalisation is now A$100m.
Calidus produced a positive pre-feasibility study on the Warrawoona gold project in Western Australia in July last year.
The project has a 1.25moz gold resource grading 1.83g/t with 795,000oz indicated.
Project cost estimates at A$1,159/oz (US$799/oz) vs today’s gold price of A$2,467/oz (US$1,700/oz) gives a healthy US$901/oz margin and an IRR of well over 50% with the mine paying back its capital in under 18 months.
There is also lots of additional expansion potential from exploration at Calidus so it looks like a good gold stock to hold though the value of the shares will be impacted by the value of the Australian dollar as well as the gold price.
Keras “continues to focus on identifying near term, cashflow generative resource projects that have a low capital intensity and have a clear path to production.”
Conclusion: Management have created a substantial uplift in value for investors in terms of their Calidus shares. The team are now focussed on cash flow generation from the Nayega manganese mine and on the payment of dividends.
Pure Gold Mining () – 77.5p, Mkt cap £276.4m – Resumption of drilling at Red Lake mine
Pure Gold Mining reports that it is starting its 2020/21 campaign comprising over 30,000m of planned underground and surface drilling at its wholly owned Red Lake mine in Ontario.
The programme is intended to assist with the optimisation of the mine plan and to expand the resource base with targeting of ʺnew high-grade discoveries.ʺ
The company says that its drilling ʺhas been designed with the goal of: increasing indicated mineral resources through infill drilling, with potential to convert to future reserves; expand our gold resources through step-out drilling and make new high-grade discoveries through regional explorationʺ.
The company says that underground drilling, which started today, is intended to infill and extend existing mineral resources, particularly in areas expected to be mined over the next two years, and where previous drilling has intersected high grade mineralisation including:
ʺ232.4 g/t gold over 5.2 metres from drill hole PGU-0109ʺ; and
ʺ50.2 g/t gold over 4.0 metres from hole PG16-154ʺ; and
ʺ28.2 g/t gold over 7.0 metres from drill hole PGU-0061ʺ; and
ʺ26.4 g/t gold over 12.7 metres from drill hole PGU-0051ʺ; and
ʺ19.4 g/t gold over 9.8 metres from PGU-0028ʺ; and
ʺ10.9 g/t gold over 9.8 metres, including 27.0 g/t gold over 3.8 metres from PG16-093ʺ
The surface drilling, which is expected to start in July, ʺwill focus on expanding new discoveries along our 7+ kilometre gold corridorʺ with the objective of expanding known resources within ʺareas where we believe strong potential exists for mineral resources to convert to future reserves and form part of an expanded mine planʺ.
The company says that a ʺthird aspect of our exploration strategy is unveiling and establishing the growth potential of high-grade zones such as our 8 Zone. Open up and down-plunge for expansion, the 8 Zone has previously returned extraordinary drill results such as 466.0 g/t gold over 4.3 metres and 342.4 g/t gold over 5.5 metres and forms an important part of our phase 1 mineʺ.
Recent drilling in the up-plunge section of the 8 Zone ʺhas identified quartz veining with visible gold within a strong alteration footprint around the clearly defined structure which also hosts the 8 Zone. With the average gold grade in the 8 Zone indicated resource of 20.5 g/t, clearly the expansion of this zone, and discovery of similar zones, provide the opportunity for explosive transformative growth at the PureGold Red Lake Mine.ʺ
Strategic Minerals* () 0.47p, Mkt Cap £9.2m – Raising £1.1m to fund purchase of balance of Cornwall Resources
Strategic Minerals reports that it has raised £1.1m through the placing of approximately 244.4m new shares at a price of 0.45p/share.
We estimate that the new shares represent around 14% of the enlarged capital of the company.
The funds raised will be used to complete the acquisition of the balance of Cornwall Resources, which owns the Redmoor tin/tungsten project in Cornwall, from New Age Exploration where £990,000 of the agreed price remains outstanding.
In order to enable the company’s existing shareholders to participate in the funding, the company has also issued approximately 22.2m options ʺto its broker SP Angel Corporate Financeʺ also exercisable at 0.45p. If the options are exercisable in full they would raise an additional £100,000.
Chairman, Alan Broome, explained that ʺThe Company continues to limit equity raisings to only fund projects it believes will value add over time. Today’s raise not only achieves this, through securing the balance of the Redmoor acquisition, but the Board considers that it will also remove a perceived market overhang associated with the need to fund this liabilityʺ.
Mr. Broome also said that ʺThe Board is especially pleased that, after repeated requests from shareholders to be involved with equity raises, it has been able to identify an efficient, cost effective method of allowing shareholders access to an issue.”
We welcome the ownership consolidation of the Redmoor project in Strategic Minerals’ hands and look forward to further news on the project when relaxation of working restrictions to contain the corona infection allows.
Conclusion: The completion of the acquisition of Cornwall Resources provides Strategic Minerals with outright ownership of the Redmoor project where previous work by Cornwall Resources has defined a total Inferred Mineral Resource of 11.7mt at an average grade of 0.56% tungsten, 0.16% tin and 0.50% copper.
*SP Angel acts as Nomad and Broker to Strategic Minerals
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
Richard Parlons – 0203 470 0472
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony
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