SP Angel . Morning View . Coronavirus disruption continues to knock oil and commodity prices

SP Angel . Morning View . Friday 28 02 20

Coronavirus disruption continues to knock oil and commodity prices


MiFID II exempt information – see disclaimer below   

Europa Metals Limited (EUZ LN) – Piezometer installation and hydrogeological plan at Toral zinc, lead, silver project in Spain

KEFI Minerals* (KEFI LN) – Quarterly update – successful exploration at Hawiah and development progress at Tulu Kapi

Shanta Gold (SHG LN) – FCF climbs on higher gold prices delivering a further reduction in net debt


Expect further volatility in commodity markets as Coronavirus disruption continues to affect demand

Oil prices fall another 4% this morning to $50.9/bbl down 23% YTD 

Copper prices have fallen 10% YTD as metal inventories rise in the LME

  • Oil prices continue to fall as the Coronavirus hits demand for oil due to transport disruption in China and a warm winter in the northern hemisphere.
  • Port calls by container carriers fell 30% yoy according to Clarksons
  • Oil shipment to China from the Middle East have fallen to just 12% of last year’s February deliveries (South China Morning Post)
  • The IEA expects oil demand to fall 435,000bpd in Q1 2020 due to the virus, its first contraction in 10 years (Hellenic Shipping News) .
  • Ships are avoiding Chinese ports due to logistical disruption and Coronavirus fears.
  • Port calls into China are estimated to have fallen by 30% in February. Container throughput is estimated to have fallen by 20-30% as containers are held up in the Lock-down and quarantined.
  • Movement of containers and other goods between the dockside to bonded warehouses is reported to be disrupted in certain Chinese ports.

We expect commodity premiums to rise in locations where there is continuing demand and where normal metal supply is disrupted despite lower LME price levels.

While demand has been hit in Hubei, China and European manufacturers maybe more cautious there is potential for a substantial swing in demand as policy makers move to stimulate economies with investment into new infrastructure.


Base metals prices continue to slide in Shanghai on mounting coronavirus concerns

  • The spread of the coronavirus outside of China has weighed on investor confidence and seen global equity markets fall (Fastmarkets MB).
  • The Dow Jones Industrial Average fell by more than 1,000 points below 26,000 on Thursday, its worst drop in a single session in history.
  • Mounting concerns over the economic impact of Covid-19 saw all base metals contracts on the SHFE falling on Friday morning.
  • Zinc’s most-traded May contract fell the most, ending the morning session down 2% compared to Thursday’s close at 16,145 yuan per tonne.
  • Copper’s most traded April contract fell 1.5% to 44,770 yuan per tonne, however rising inventories in both SHFE and LME approved warehouses are also partly responsible for the fall in price.
  • Other base metals which fell on the SHFE this morning include: June nickel -1.7%, June tin -1.9%, April aluminium -1.5%, April lead -0.5%.


Ferro-vanadium prices fall in China on very small volume traded

  • Vanadium prices are indicating lower in China, the US and Europe this week with very little material traded in China
  • Uncertainty in the market appears to be causing consumers and traders to hold back on transactions with sellers looking for demand without collapsing prices
  • While prices are likely to fall further in the short term, China is returning to work following an extended New Year break and Coronavirus lock-down
  • Fiscal stimulus should prompt new demand for Ferro-vanadium and many commodities which may drive prices higher again as seen in 2009 after the Global Financial Crisis
  • Ferro-vanadium prices have fallen -3.3% to $28-30/kg V in China FastmarketsMB
  • Vanadium pentoxide prices also fell 2.4% to $6.1-6.2/lb V2O5 in China
  • Ferro-vanadium prices fell -0.9% to $13.6-14/lb V in the US.


Israeli scientists claim Coronavirus vaccine within a few weeks (Jerusalem Post)

  • Israeli scientists are claiming they are within weeks of developing a vaccine for the Coronavirus.
  • Once a vaccine is developed it will take at least 90 days to complete the regulatory process to be declared safe for the marketplace.
  • A US Biotech firm, Moderna also claims to have a vaccine ready for first testing with initial trials on a potential vaccine maybe starting in April.
  • Moderna has sent its first batch of its novel coronavirus vaccine, mRNA-1273, sent to the National Institute of Allergy and Infectious Diseases (NIAID).
  • NIAID director Anthony Fauci commented that ‘even when proceeding at an “emergency speed,” a vaccine would not be available for use for at least a year or 18 months’.
  • Slowing the spread of the virus should allow vaccine developers time to develop a safe vaccine indicating that regional ‘Lock-downs’ will continue as governments move to impede its contagion.


Dow Jones Industrials





Nikkei 225





HK Hang Seng





Shanghai Composite

















China to deploy 100,000 ducks to Pakistan to help tackle locust swarm (BBC)

  • Millions of insects have been devastating crops across Africa and Asia, with Pakistan declaring an emergency and saying that locust numbers were the worst in more than 20 years.
  • An agricultural expert behind the scheme says a single duck can eat more than 200 locusts a day, and be more effective then pesticides. Chicken on the other hand, can eat about 70 locusts a day.
  • A senior researcher at the Zhejiang Academy of Agricultural Sciences told Chinese media that ducks are preferred to other animals, as they like to stay in a group and are easier to manage than chickens.
  • A trial involving ducks will take place in Xiniang province in the coming months, however some agricultural professors question the initiative due to duck’s reliance on water, and many areas of Pakistan being arid.



US$1.1038/eur vs 1.0945/eur last yesterday.  Yen 108.62/$ vs 109.97/$.  SAr 15.668/$ vs 15.332/$.  $1.288/gbp vs $1.294/gbp.  0.653/aud vs 0.657/aud.  CNY 6.986/$ vs  7.014/$.


Commodity News

Gold US$1,634/oz vs US$1,647/oz yesterday

   Gold ETFs 84.4moz vs US$84.3moz yesterday

Platinum US$882/oz vs US$918/oz yesterday

Palladium US$2,768/oz vs US$2,800/oz yesterday

Silver US$17.23/oz vs US$18.01/oz yesterday


Base metals:    

Copper US$ 5,542/t vs US$5,648/t yesterday

Aluminium US$ 1,675/t vs US$1,696/t yesterday

Nickel US$ 12,215/t vs US$12,435/t yesterday

Zinc US$ 1,987/t vs US$2,036/t yesterday

Lead US$ 1,785/t vs US$1,818/t yesterday

Tin US$ 16,165/t vs US$16,420/t yesterday



Oil US$50.9/bbl vs US$52.7/bbl yesterday

Natural Gas US$1.659/mmbtu vs US$1.783/mmbtu yesterday

Uranium US$24.80/lb vs US$24.80/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$83.6/t vs US$85.8/t – Vale preparing for potential fuel leak from damaged ore carrier (Reuters)

  • The Brazilian iron ore miner has begun preparing for a potential fuel leak from the damaged iron ore carrier off the Brazilian coast.
  • The company have requested that oil company Petrobas appropriate ships to deal with the possible leak.  


Chinese steel rebar 25mm US$531.7/t vs US$534.2/t – Chinese steel inventories reach record levels (Hellenic Shipping News)

  • Steel inventories in China have continued to build this month as government efforts to stimulate demand have so far failed to revive steel demand.
  • Steel makers and traders held a total of 34.3m tons of finished steel products at the end of last week- the highest ever recorded according to Shanghai-based Mysteel.
  • The China iron and steel association warned said in a press conference on Sunday that mills should actively cut back on production or risk causing oversupply and rising debt levels in the industry.
  • According to Reuters, some steel mills in China have decided to carry out backlogs of maintenance in response to the slack demand.
  • Prices of steel products and raw materials tumbled on Friday, with iron ore dropping nearly 5%.


Thermal coal (1st year forward cif ARA) US$56.7/t vs US$57.5/t

Coking coal swap Australia FOB US$160.0/t vs US$159.5/t



Cobalt LME 3m US$33,500/t vs US$33,500/t

NdPr Rare Earth Oxide (China) US$40,225/t vs US$40,065/t

Lithium carbonate 99% (China) US$5,726/t vs US$5,632/t – Sotech Smarter Equipment to acquire Guangdong based Super Components

  • Chinese automation solutions provider Sotech Smarter Energy to take an 88% stake in lithium battery company Super Components. (Deal Street Asia)
  • Sotech will pay 774m Yuan ($110m) for the majority stake, paying 310m ($44) Yuan in cash and settling the remainder through issuing 82.97m share at 5.6 Yuan ($0.8).  The offer values Super Components at  ~881m Yuan ($126).
  • Sotech expects the deal to improve profitability through integration of technical expertise and economies of scale.


Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$29.0/kg

Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.1/kg

Tungsten APT European US$240-245/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t


Battery News

Tesla and Panasonic halt solar cell manufacture in Buffalo 

  • Panasonic has decided to withdraw from its US based solar cell manufacturing operations, ending its partnership with Tesla in the space. Operations will come to a halt in May and the Company will exit the site in September. (Power Technology)
  • The decision is part of a wider move by Panasonic to streamline its global solar operations, to optimise development and production. It may also be in part a result of Panasonic becoming frustrated with Tesla linking up with South Asian competitors such as Chinese battery maker CATL and South Korea’s LG Chem. (Financial Times)
  • Panasonic’s decision to curtail operations at the Buffalo facility, Gigafactory 2, is not expected to have a major impact on either Tesla’s operations or Panasonic’s annual profit forecasts. (Reuters)
  • It has also been suggested the decision might down to Tesla being disappointed with the solar panels produced by the Japanese electronics company, the panels not sufficiently resembling regular roof tiles. (Financial Times)
  • The duo will continue to collaborate in their battery partnership but Panasonic has come out and said they have no plans to build an automotive battery plant in China.
  • Panasonic’s share price is down 3.9% since the news was announced.


Company News

Europa Metals Limited (EUZ LN) 0.019 pence, Mkt Cap £2.3m – Piezometer installation and hydrogeological plan at Toral zinc, lead, silver project in Spain

  • Europa Metals reports that as part of its hydrogeological assessment of the Toral  zinc/lead/silver project it has installed a network of eight piezometers to monitor water levels and flow rates across the site of its proposed new underground mine.
  • The data collected will assist in pre-feasibility level work and, in our view, is likely to be required by the regulatory authorities as part of a future application for mining and environmental approvals. The mineralisation at Toral is hosted in limestones which have the potential to carry large volumes of ground water, particularly if there has been the development of extensive cave systems in areas of karst type geomorphology.
  • As part of its planning of the hydrogeological work, Europa Metals commissioned an independent conceptual study by Ingeneria y Consultoria en Recursos del Subsuelo to assess parameters including the permeability and flow rates and likely water inflows “during potential future mining works”.
  • The study determined that there are two areas of water saturation below the water table. The shallower zone, which is 60-100m thick, is characterised by greater karstification and, therefore, permeability (2.3×10-6 m/s). It is the most transmissive level of the saturated area of the karst”. The deeper area, which is expected to host the proposed mining, at depths of between 300m above to 300m below sea level, is “characterised by a drastic decrease in the density of karstification and, therefore, of permeability (1.3×10-8 m/s), as compared to the abovementioned shallow area”.
  • The company explains that “Underground water contributions are expected to occur within this saturated area but, as the underground water will tend to decrease at depth (as demonstrated by the permeability of the area), potential mining operations have been assessed as being within manageable operating parameters”.
  • The company also mentions that There are smaller mining voids [presumably from historic mining] located to the east of the deposit” and we speculate that these could be flooded and require monitoring and water management measures during future mining operations.
  • Follow up work, including monitoring of the piezometer data, will require a borehole test to gain further information for the pre-feasibility study.
  • Commenting on the conceptual assessment, Executive Director, Laurence Read, said that “The results from the initial conceptual hydrogeological study on the Toral Project are positive, outlining a water management scenario that falls well within acceptable boundaries for mine development in terms of economic viability and environmental management. Additional work will need to be undertaken in order to test the conceptual study’s findings, but the initial results indicate that Toral should have limited impact on the local water conditions and that it does not suffer from any significant water issues that could impact on the future economic development of the project.”

Conclusion: Europa Metals is starting the hydrogeological work to understand the water regime in and around its proposed Toral underground mining project in Castilla y Leon, Spain. The information gathered should inform the future mine design, contribute to the pre-feasibility work and assist in the permitting applications.


KEFI Minerals* (KEFI LN) 1.1p, Mkt Cap £14m – Quarterly update – successful exploration at Hawiah and development progress at Tulu Kapi

  • The company released a quarterly update highlighting latest progress at the development ready Tulu Kapi gold project in Ethiopia as well as an exploration stage Hawiah polymetallic project in Saudi Arabia.
  • At Tulu Kapi, the Company secure all the government permits and independent consultants reports to proceed to development of offsite infrastructure and start of resettlement operations.
  • In February, project equity partners passed the required shareholder resolutions with subscription to respective shares and release of the equity tranche expected during March.
  • Additionally, the team signed a terms sheet for a project debt finance with two leading African banks acting as underwriters and co-lenders.
  • The package is an alternative to the previously considered bond-lease option that is expected to yield material savings from the cost of debt-servicing and administration, especially during the project development and start-up period.
  • Reflecting the latest strong run in gold prices, the Company estimates Tulu Kapi NPV at $333m using the $1,650/oz gold price at the start of construction period and $436m when the PEA-level NPV of the underground extension is included.
  • With KEFI having already invested its contribution into the Project equity, the Company’s 45% interest in Tulu Kapi is valued at $196m or ~7 times the current market capitalisation.
  • At Hawiah, the latest drilling programme intersected the large-scale VMS style mineralisation returning high grade polymetallic intervals of up to 5% CuEq.
  • $5 holes identified three distinct massive sulphide lodes underlying the 4km+ long surface gossanous ridgeline with the system remaining open at depth and along strike.
  • The Company suggested that preliminary results may validate a 12mt at ~2% CuEq mineral inventory with the JORC-compliant mineral resource expected to be released mid-2020.

Conclusion: The highlight of the quarter has been drilling results at the greenfield Hawiah polymetallic project where the team confirmed the presence of VMS type mineralisation with a series intersections returning high grade intervals and maiden mineral resource  expected to be prepared around mid-2020. In Ethiopia, the Company is continuing to advance the Tulu Kapi towards the release of the first ANS tranche that would kick off the community resettlement programme while working with lenders to close a potential project debt funding package.

*SP Angel act as Nomad and Broker to KEFI Minerals


Shanta Gold (SHG LN) 8.6p, Mkt Cap £68m – FCF climbs on higher gold prices delivering a further reduction in net debt

  • Revenues climbed 8.7%yoy to $112.8m reflecting stronger realised gold prices of $1,377 (2018: $1,259/oz).
  • Gold sales totalled 80.9koz with 2.8koz in transit (2018: 82.5koz).
  • Operating cash costs and AISCs averaged $544/oz and $777/oz, respectively (2018: $538/oz and $730/oz), coming in line with the 2019 guided range.
  • Earnings have been hit by losses booked on gold hedging contracts and processing of lower grade stockpiles during the year.
  • The Company has flexibility to the settlement of forward sales and secured full exposure to an increase in the gold price in 2019 apart from 5koz delivered into the forward contract.
  • Post year end, the total amount of forward sales commitments amounted to 37.0koz at an average price of $1,244/oz as of Jan/20.
  • $9.8m loss (2018: -$1.3m) was booked on commodity derivatives.
  • Additionally, the Company booked $5.0m in pre-production revenues from the commissioned underground Ilunga mine (commercial production launched in Jul/19) at zero-margin.
  • Operating profit amounted to $5.1m implying a 4.5% margin (2018: $19.3m/18.5%) impacted by items described above.
  • Adjusted EBITDA totalled $47.7m (2018: $45.7m).
  • Loss for the year amounted to $9.5m and -1.2USc EPS (2018: +$8.0m and +1.0USc EPS).
  • Free cash flow (post interest) climbed to $13.4m (2018: $9.8m) allowing to reduce outstanding debt levels.
  • Net debt reduce to $14.3m (2018: $31.5m) with available liquidity as at the end of the year f $13.7m.
  • Outstanding VAT refunds stood at $21.9m (2018: $21.7m) as $2.7m has been collected in cash and an additional $4.8m of the balance was offset against corporate taxes.
  • 2020 guidance of 80-85koz at $830-880/oz in AISCs.
  • Exploration budget has been increased by 65% in 2020 to $5.0m (2018: $2.6m) aiming to extend the life of mine at New Luika beyond 2024.

Conclusion: Robust gold production recorded last year delivered further deleveraging of the business while also generating cash to be directed towards exploration with a view to extend the Luika life of mine. Available liquidity will also come in handy for the recently announced acquisition of the West Kenya Project in the prospective Lake Victoria gold fields area. Earnings wise, Shanta booked a loss last year on the back of losses recorded on gold hedging contracts and processing of lower grade stockpiles as well as nil-margin Ilunga ore during the ramp up period.




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 


SP Angel                                                             

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


Oil Brent


Natural Gas, Uranium, Iron Ore


Thermal Coal

Bloomberg OTC Composite

Coking Coal




Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal


Metal Bulletin



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