SP Angel . Morning View . Friday 06 12 19
Markets trade higher ahead of US Non Farm Payrolls
MiFID II exempt information – see disclaimer below
Glencore (LON:GLEN) – Serious Fraud Office investigation starts in addition to US DoJ enquiry
Kodal Minerals* (LON:KOD) – Interim results and Bougouni progress report
Metal Tiger (LON:MTR) – Okavango copper project drilling
Dow Jones Industrials +0.10% at 27,678
Nikkei 225 +0.23% at 23,354
HK Hang Seng +1.07% at 26,498
Shanghai Composite +0.43% at 2,912
FTSE 350 Mining +0.67% at 17,771
AIM Basic Resources -0.37% at 2,030
US – Equities are trading higher this morning ahead of the US labour data and as investors are looking for cues on US-China trade talks while new set of tariffs is due to come into effect mid-December.
US NFPs are expected to come in at 183k v 128k in October with average hourly earnings continuing at a strong 3.0%yoy growth rate.
On a Trump impeachment issue, House Speaker Nancy Pelosi announced Thursday that she will seek House committees’ approval to proceed with articles of impeachment on the back allegations that President requested Ukraine to launch an investigation targeting Joe Biden, a top contender for the Democratic presidential race nominee.
China – Beijing will waive import tariffs for some soybeans and pork imports from the US without disclosing the quantities involved.
China imposed tariffs of 25% on both US soybeans and pork in July 2018 as a countermeasure to US tariffs.
The waiver is seen as a positive signal in a protracted trade row between the US and China.
Japan – PM Abe launched a ¥13.2tn ($121bn) fiscal stimulus programme to cover typhoon related costs, upgrade infrastructure and invest in new technologies, FT reported yesterday.
This marks one of the largest financial support packages since the 2008-09 financial crisis as the nation aims to fend off weakness in the global economy and the drag from a hike in local sales tax.
The programme amounts to ~1.9% of the nation’s GDP over 15 months, significantly higher than last year’s supplementary budget of ¥3tn.
“The three pillars of this stimulus package are recovery, reconstruction and security from natural disasters; support to overcome the risk of an economic slowdown; and investment for a future beyond the Tokyo Olympics and Paralympics,” Abe commented on the initiative.
Germany – Industrial production declines accelerated in October to rates last seen in 2009.
Tense US-China trade stand off and Brexit uncertainty heavily weighed on business activity in the sector.
Auto makers fared particularly badly contributing to the planned 100k in job cuts in the manufacturing sector.
The Ministry of Economy acknowledged the waning growth momentum but highlighted a more optimistic outlook saying that “recent developments in orders and business expectations signal that a stabilisation trend could take hold in the coming months”.
The Bundesbank does expect the economy to grow this quarter after posting a 0.1% increase in Q3/19.
Industrial Production (%mom/yoy): -1.7/-5.3 v -0.6/-4.5 in September and 0.1/-3.6 forecast.
France – Hundreds of thousands of French workers protested in Paris and other cities on the first day of an indefinite strike on Thursday in what is expected to the largest walkout in almost quarter of a century.
Protesters are opposing the pension reform proposed by President Macron that aims to set up a single points-based system in which each day worked earns points for a worker’s future pension benefits.
That compares to the existing set-up with 42 different sector-specific pension schemes, each with different levels of contributions and benefits.
France spends ~14% of GDP on public pensions marking one of the highest percentages in the world while the official retirement age of 62 is among the lowest in OECD countries.
Rail services have been suspended across France along with Paris’s metro and bus networks.
US$1.1107/eur vs 1.1090/eur yesterday. Yen 108.62/$ vs 108.96/$. SAr 14.639/$ vs 14.652/$. $1.314/gbp vs $1.313/gbp. 0.684/aud vs 0.683/aud. CNY 7.034/$ vs 7.041/$.
Gold US$1,474/oz vs US$1,474/oz yesterday – World Gold Council – Gold ETFs saw $1.3bn of net outflows last month
According to the WGC, outflows were driven by a stronger dollar, the Brexit extension, and stronger equity markets compared to September and October highs.
Global gold-backed assets are still up 35% this year as a result of increased investment demand and price appreciation- 385t have been added y-t-d due to strong inflows between June and October.
North American funds saw the greatest outflows- losing 17.3t as a result of a strong dollar and equity markets reaching all-time highs.
Decline in Europe was driven by UK-based funds, losing 18.8t due to the extended Brexit deadline.
Outflows increased as the gold price fell 3.4% from October highs, however prices are still up 14% y-t-d.
Gold ETFs 81.0moz vs US$81.0moz yesterday
Platinum US$898/oz vs US$892/oz yesterday
Palladium US$1,870/oz vs US$1,861/oz yesterday
Silver US$16.90/oz vs US$16.83/oz yesterday
Copper US$ 5,927/t vs US$5,895/t yesterday
Aluminium US$ 1,744/t vs US$1,753/t yesterday
Nickel US$ 13,435/t vs US$13,105/t yesterday
Zinc US$ 2,264/t vs US$2,230/t yesterday
Lead US$ 1,909/t vs US$1,907/t yesterday
Tin US$ 16,875/t vs US$16,820/t yesterday
M&A activity builds momentum across the sector
UK oil and gas continues to thrive this quarter, demonstrated by the recent £5m Union Jack* (UJO LN) placing which follows Reabold Resources’ (RBD LN) £24m fundraise announced in October, primarily for the same West Newton conventional field onshore UK
Further institutional support has been demonstrated by the £10m raise and IPO of Longboat Energy, or Faroe Petroleum mark II, to build a new full-cycle North Sea E&P
The past 12 months has seen the acquisition of Faroe Petroleum (FPM LN) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA LN) by Seplat Petroleum (SEPL LN); and a £242m bid for Amerisur Resources (AMER LN) by Geopark
*SP Angel acts as Nominated Advisor and Broker to Union Jack Oil
Oil US$63.5/bbl vs US$63.2/bbl yesterday – Oil production increasing, but at a slower rate than last year
US oil production growth increased by less than 1% during the first six months of the year, compared to 7% growth for the same period last year, according to WSJ’s interpretation of Energy Department data
Oil prices remained stable going into day two of the OPEC+ meeting in Vienna
There remains anticipation of some type of extension of cuts, or perhaps even more of a cut coming down the road
U.S. crude futures were up 0.1% at $63.2/bbl on the New York Mercantile Exchange
US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view
Natural Gas US$2.418/mmbtu vs US$2.423/mmbtu yesterday – Natural gas prices continued to consolidate, despite a smaller than expected draw in natural gas inventories.
The weather is expected to be colder than normal over the next 6-10 days, but then turn normal during the 8-14 day period
The market remains heavily short, which could lead to a short-squeeze if the weather forecast begins to show cooler than normal weather
Uranium US$25.90/lb vs US$25.95/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$86.7/t vs US$86.8/t
Chinese steel rebar 25mm US$589.0/t vs US$594.9/t
Thermal coal (1st year forward cif ARA) US$60.9/t vs US$62.0/t
Coking coal futures Dalian Exchange US$188.4/t vs US$188.2/t
Cobalt LME 3m US$34,750/t vs US$35,750/t – Cobalt lung – Vape users seen contracting Cobalt Lung
A woman in the US has been diagnosed with Cobalt lung and incurable disease normally contracted by metal workers
It appears the hard-metal pneumoconiosis, Cobalt Lung which is normally contracted by workers sharpening tools, polishing diamonds or in the manufacturer of dental prosthetics is being contracted by vapers.
The case study published in the European Respiratory Journal highlights toxic metals in vape liquids including nickel, aluminium, lead and cobalt.
The condition can cause a lifetime lung problems.
NdPr Rare Earth Oxide (China) US$41,014/t vs US$40,973/t
Lithium carbonate 99% (China) US$6,184/t vs US$6,249/t
Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$29.0/kg –
Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg
Tungsten APT European US$225-245/mtu vs US$225-245/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
Solar cars – Squad 2-seater solar car
Squad Mobility is selling a new solar-electric car which may never need to be plugged in, assuming you park in a sunny spot and don’t need to do too many miles.
The ‘neighbourhood electric vehicle’ with its own anachronism ‘NEV’ has a top speed of 28mph with a 50mph version planned.
It will be registered as a L6e light four-wheeled EV in Europe.
The planned price is compelling at just €5,750, though it does look like a robust golf buggy with no doors or side panels so will be better suited to Mediterranean rather than British weather.
The manufacturers reckon the car can charge up to an impressive 9.000km a year in a sunny climate using its own solar roof, making it completely emission free assuming you drive around 30 km or 1 hour a day for 300 days a year.
Statistically, most vehicles in town don’t drive more than 6000km a year.
The small scale of the car at just 20% of the footprint of the average parked car makes it great for the urban environment and a fabulous run around for the shops with easy parking.
The 50mph model will make a big difference but we can see this being a big hit in towns due to its substantially lower cost though crime and weather issues may force the manufacturers to put doors on the vehicle in the UK.
We see the Squad 2 as an additional vehicle for families in town.
Conclusion: The development of power efficient technologies will generate further demand for Rare Earths such as Neodymium and Praseodymium and for lighter and more
Entech (China) – reports it will make a commercial fluoride battery with a range of 2,000km representing 8x the range of existing Li-ion batteries
The prototype fluoride-ion cell is reported to use a fluorine-based electrolyte in a similar structure similar Li-ion batteries.
We are intrigued at the chemistry of the fluoride-ion battery and what type of electrodes are robust enough to work with fluoride ions (negatively charged fluoride anions).
We suspect this type of battery may be some way from commercialisation.
Nikola, Li-ion alternative records energy density of 1.1kWh/kg >2x current high-capacity Li-ion batteries
Nikola, an electric vehicle developer reports it is to build higher-density batteries for its new electric trucks
production cells are said to manage an impressive 500Wh/kg and are also thought to be 40% lighter
The Nikola prototype cell uses a free standing cathode for greater energy storage removing binder material and current collectors
It is also seen as less flammable than standard Li-ion batteries.
Tesla – Cybertruck – solar roof charging systems adding to range and economy for electric vehicles
Tesla’s Cybertruck solar roof is an interesting addition to this beast of a pick-up
In reality is probably not going to make much difference unless you live in California and do just a few miles a week on a vehicle of this weight but at least you know it will be recharging your batteries from the sun while its parked in the sun.
Some other innovative motor manufacturers are also working on new solar-power assisted vehicles such as the Lightyear One, Sono Sion and Squad Mobility.
GM and LG Chem to build EV batteries in the US (engadget.com)
GM are to enter a joint venture with LG Chem, to supply battery cells for the automakers upcoming EV range according to the group’s CEO.
The Company is expecting to have 20 EVs for sale by 2023.
The plant will be based in Lordstown, Ohio and is expected to create over 1,100 jobs.
The two companies will invest $2.3bn, and the plant will produce more than 30 gWh per year.
LG Chem are currently a major supplier of lithium-ion batteries to Audi and Mercedes-Benz (The Verge)
Glencore (LON:GLEN) 214p, Mkt cap £28.5bn – Serious Fraud Office investigation starts in addition to US DoJ enquiry
Glencore is being investigated by the Serious Fraud Office ‘SFO’ in the UK on suspicion of bribery.
This is in addition to an ongoing US DoJ enquiry into corruption in the DRC, Nigeria and Venezuela.
We expect Glencore’s lawyers to argue robustly in the company’s defence but suspect there will be some out-of-court settlement to end the massive cost of legal fees.
The only real winners here will be the lawyers as western companies are already acutely aware of the risks of corruption.
It will be interesting to know how far back law makers are investigating corruption at Glencore, eg will they go back to before the US Foreign Corrupt Practices Act of 1977
The UK Finance Act 2002 gave jurisdiction over bribery offences by UK nationals and UK companies abroad.
France: Bribery of foreign public officials became an offence in 2000 and was previously tax deductible, indicating that certain nations positive encouraged the practice
Australia, bribes also became non-tax deductable in early 2000
Belgium brought in its bribery act in 1999
Brazil tax laws do not expressly deny tax deductability for bribes to foreign officials though the tax authorities reckon they don’t allow tax deductability
Kodal Minerals* (LON:KOD) 0.05p, Mkt Cap £4.2m – Interim results and Bougouni progress report
Kodal Minerals reports a pre and post-tax loss of £0.33m for the six months ending 30th September 2019 (2018 – loss £0.36m) as it progresses the development of its Bougouni lithium project in southern Mali.
Highlighting recent progress, CEO, Bernard Aylward, pointed to the award of the Environmental Permit in November which will pave the way for the ʺthe preparation of a Mining Licence application for the Bougouni Lithium project and intends to lodge this as soon as possibleʺ.
The company also comments on the shipment of an 800 tonnes bulk sample of mineralised material from the Ngoulana prospect to China for metallurgical testing to help refine flowsheet design parameters, as well as the securing of an additional 150km2 of exploration licences within the Bougouni project area.
Chairman, Robert Wooldridge, explained that the ʺnext stage of our progress is achieving the granting of a Mining Licence to develop the Bougouni Lithium projectʺ which he said the company expects to achieve ʺin the first half of 2020ʺ.
Conclusion: Kodal Minerals has made important progress on the technical and permitting aspects of its Bougouni lithium project and expects to be granted a mining licence during the first half of 2020.
*SP Angel acts as Financial Adviser and broker to Kodal Minerals A partner at SP Angel acts as Chairman to the company.
Metal Tiger (LON:MTR) 1.2p, Mkt Cap £18m – Okavango copper project drilling
Metal Tiger reports the completion of 6 holes (1656m) at its Okavango Copper Project in Botswana where drilling has successfully located the contact between the D’Kar (DKF) and Ngwako Pan (NPF) Formations which form the preferred host for copper mineralisation elsewhere in the Kalahari Copper Belt in all but one of the holes completed..
Visible sulphide minerals, including copper sulphides have been observed in a number of intersections although the grades reported at this stage are in the ppm range rather than the percent figures which have underpinned successful discoveries including those at MOD Resources’ (now Sandfire Resources) T3 deposit and Cupric Canyon’s Zone 5 deposit.
The company highlight the results of hole OCP06 which intersected 2 mineralised zones between 240-255m and 272-342m depth, totalling around 85m, with visible copper sulphide minerals including bornite and chalcocite ʺhosted in veins, fractures and disseminated forms, with increased intensity proximal to the DKF-NPF contactʺ. The company says that samples have been sent for assay.
Other holes, OCP01 to 05 display anomalous levels of lead, zinc and silver as well as ʺelevated Cu values based on portable XRF analysis and loggingʺ.
The company also confirms that it has received the relevant authorisations from Botswana’s Department of Environmental Affairs to drill at the Kitlanya West and Kitlanya East prospects located close to the T3 deposit. Drilling is expected to start early in 2020.
Conclusion: Initial drilling at the Okavango Copper Project has successfully identified the same geological setting which has proved to host economic mineralisation elsewhere in the Kalahari Copper Belt. We look forward to further news as the exploration programme advances.
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