SP Angel . Morning View . Wednesday 15 01 20
Base metals pause ahead of the US China trade deal announcement
MiFID II exempt information – see disclaimer below
Amur Minerals* (LON:AMC) – Kun Manie environmental assessment complete and approved
Aura Energy* (LON:AURA) – A$475,000 fundraising
Endeavour Mining (CVE:EDV) – Withdraws from proposed Centamin offer
Resolute Mining (LON:RSG) – Sale of Ravenswood
Sirius Minerals (LON:SXX) – Anglo is likely to confirm its deal to buy Sirius (Reuters)
China announces no more major subsidy cuts for EVs (Electrive)
China’s Minister of Industry and Information Technology (MIIT) announced that the country will not make significant cuts in subsidies for electric cars this year.
Subsidy cuts in July 2019 had a major impact on the NEV market as 100,000 fewer vehicles were sold than the year before – the first decline in many years.
Government subsidies for EVs with a range of 400km and more were halved to 25,000 yuan, with no subsidy in place for vehicles with a range of less than 250km.
The general principle for the policy announcement is to stabilize market expectations, guarantee healthy and sustainable development, and build confidence in the NEV industry, the MIIT said in a conference (Fastmarkets MB).
Electrification focus to shift from China to Europe in 2020 (Bloomberg)
Bloomberg reports that the Europe will become the centre of electrification in 2020 as governments and automakers move to cut carbon emissions.
BloombergNEF report estimates 2.5m electric passenger vehicles will be sold in 2020, 20% more than 2019. 800,000 will be sold in Europe.
China’s move to reduce subsidies and new models from European car makers will shift the growth momentum to Europe.
Cost reductions in lithium-ion batteries and an increase in public charging connectors will facilitate growth.
Technique used to extract useful metals from recycled technology could be a more cost effective carbon capture method (New Scientist)
Carbon capture and storage is often a very expensive process.
A team from the University of Lyon, France has developed a method of injecting CO2 into used smartphone batteries.
The team found cooling collected CO2 and then pumping it into a mix of chemicals called polyamines could sort the mixture of metals in the battery.
In a series of experiments they separated lanthanum, cobalt and nickel, each used in a number of applications including batteries and smartphones .
Dow Jones Industrials +0.11% at 28,940
Nikkei 225 -0.45% At 23,917
HK Hang Seng -0.39% At 28,774
Shanghai Composite -0.54% at
3,090 FTSE 350 Mining -0.22% at 19,273
AIM Basic Resources +0.17% at 2,119
US – President Trump is expected to sign a “big, beautiful monster” of a deal with China today.
The US agreed to half 15% duties on $120bn of imports and delay others in return for Chinese commitment to implement structural reforms and purchase an additional $200bn in American goods and services over the next two years.
The deal is set to leave ~2/3s of tariffs on Chinese exports until at least presidential elections in November and will penalise Beijing for failing to deliver on promises regarding its currency, IP and trade balance.
The question remains whether the Phase One deal will lead to further de-escalation in protectionist policies between two countries.
The Commerce Department is reported to have drafted a rule that would block exports to Huawei if US components make up more than 10% of product value, according to Reuters.
Currently, the US can block exports of many high tech products to China from other countries if US components account for more than 25% of the value.
December inflation data came in lower than expected suggesting the Fed may remain on hold regarding future rate hikes driving US debt prices higher and paring US$ gains.
FOMC reduced the target range for the benchmark rate three times last year and signalled the central bank will remain on hold for the near future until the economic outlook improves.
The central bank’s preferred measure of inflation (core PCE) released earlier for November showed an increase of 1.6%yoy, remaining below the 2% target of the better part of seven years, Bloomberg reports.
CPI (%mom/yoy): 0.2/2.3 v 0.3/2.1 in November and 0.3/2.4 forecast.
Core CPI (%mom/yoy): 0.1/2.3 v 0.2/2.3 in November and 0.2/2.3 forecast.
Germany – Economic growth slowed to the weakest in six years in 2019 amid trade tensions and a broader slowdown in demand.
2020 outlook remains fragile as latest reports show a continuing decline in industrial orders with auto output at its lowest in almost a quarter of a century and exports also down.
“After a dynamic start to the year, and a decline in the second quarter, there were signs of a slight recovery in the second half,” the statistics office summarised economy dynamics through 2019.
GDP: 0.6 v 1.5 in 2018 and 0.6 forecast.
UK – Weak December inflation data offers the central bank room for a potential stimulus should the economic growth fail to kick start this year.
The pound slipped below the 1.30 mark following the announcement.
Money markets are pricing in a ~60% of a 25bp rate cut during the coming January 30 MPC meeting.
CPI (%mom/yoy): 0.0/1.3 v 0.2/1.5 in November and 0.2/1.5 forecast.
US$1.1129/eur vs 1.1135/eur yesterday. Yen 109.93/$ vs 110.04/$. SAr 14.398/$ vs 14.429/$. $1.302/gbp vs $1.297/gbp. 0.689/aud vs 0.690/aud. CNY 6.888/$ vs 6.885/$.
Gold US$1,552/oz vs US$1,543/oz yesterday – Gold gains as investors doubt aspects of US-China trade deal (Reuters)
Gold rose on Wednesday morning as investors assessed the effectiveness of the Phase-1 deal, after a top US official said tariffs on Chinese goods would stay in place.
Spot gold rose 0.4% to $1,552/oz, whilst gold futures gained 0.5% to $1,553/oz.
Treasury Secretary Mnuchin said tariffs on Chinese goods will be in place until the completion of a Phase-2 agreement.
Analysts now see the importance of the Phase-1 deal as diminished, and more of a symbolic agreement rather than one which will have significant impact on the market.
Gold ETFs 81.0moz vs US$81.1moz yesterday
Platinum US$997/oz vs US$969/oz yesterday
Palladium US$2,208/oz vs US$2,145/oz yesterday
Silver US$17.84/oz vs US$17.75/oz yesterday
Most ShFE base metals prices edge higher on trade talk optimism (Fastmarkets MB)
Base metals in Shanghai were mostly up at the close of morning trade on Wednesday amid overall optimism for the signing of the Phase-1 trade deal.
Tin rose 1.2% to 139,870 yuan/t and lead rose by 0.8% to 15,030 yuan.
Nickel and Zinc both rose by 0.2% to 109,160/t and 18,215 yuan/t respectively.
Copper was the only metal to fall, by just 20 yuan/t to 49,140 yuan.
Trade deal optimism softened this morning following overnight reports that existing tariffs on Chinese goods are likely to remain in place until after the US election in November.
Copper US$ 6,260/t vs US$6,285/t yesterday – Codelco reportedly uncovers $22m insurance fraud involving unions (Reuters)
Codelco has filed a lawsuit over the alleged scam in insurance contracts drawn up by unions for workers at its Chuquicamata and Radomiro Tomic mines.
The firm said in a statement that inflated premiums had cost $22m between 2005 and 2018, a cost which has been split by both the company and its workers.
Relations between the unions and Codelco are already strained, as the miner is transforming its Chuquicamata mine to an underground mine which is likely to result in job losses.
The union has responded to the fraud claims, stating that all insurance agreements had been signed off by Codelco’s HR division.
According to the El Mecurio publication, an audit conducted by Chile’s Copper Commission Cochilco put premiums at 68% higher than the market rate.
Aluminium US$ 1,808/t vs US$1,796/t yesterday
Nickel US$ 13,745/t vs US$13,725/t yesterday
Zinc US$ 2,365/t vs US$2,359/t yesterday
Lead US$ 1,971/t vs US$1,914/t yesterday
Tin US$ 17,450/t vs US$17,385/t yesterday
Oil US$64.2/bbl vs US$64.0/bbl yesterday – The de-escalation of the US-Iran conflict last week and heightened hopes of a ceasefire in Libya weighed on crude oil prices so far this week
Further downside pressure comes as the API estimates a surprise crude oil inventory build of 1.1MMbbls for the week ending January 10, compared to analyst expectations of a 474kbbl draw in inventory
Last week saw a large draw in crude oil inventories of 5.95MMbbls according to API data
Brent futures were down 0.1% to $65.3/bbl, whilst WTI futures were down 0.2% to US$59.0/bbl
Natural Gas US$2.155/mmbtu vs US$2.198/mmbtu yesterday – The weather is expected to be much colder than normal in the US mid-west and east coast over the next 6-10 days but then moderate with only colder than normal temperatures appearing
Hedge funds remain short and will not likely allow prices to push higher without significant cold weather
The supply of natural gas is on the rise according to the EIA
The latest European model still shows colder air into the northern US January 17-24 for stronger demand, just not nearly as cold
Uranium US$24.60/lb vs US$24.50/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$94.6/t vs US$93.4/t
Chinese steel rebar 25mm US$572.2/t vs US$572.2/t
Thermal coal (1st year forward cif ARA) US$63.5/t vs US$64.9/t
Coking coal futures Dalian Exchange US$178.1/t vs US$179.9/t
Cobalt LME 3m US$32,750/t vs US$32,750/t
NdPr Rare Earth Oxide (China) US$40,506/t vs US$40,521/t – Geomega Resources confirms site for rare earth demo plant (Mining Weekly)
The company has selected an industrial site in Saint-Bruno-de-Montarville as the location for its rare earth magnets recycling demonstration plant.
The location provides capacity for future expansion for what will be the first REM recycling operation in North America.
Lithium carbonate 99% (China) US$5,590/t vs US$5,592/t
Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.5/kg
Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg
Tungsten APT European US$235-245/mtu vs US$235-245/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
Tata Motors to release Nexon EV in India, a budget friendly electric vehicle (Gulf News)
The car will be Tata’s first electric SUV and is expected to have a range of 250-300km.
The car has a high-density, liquid cooled battery pack designed for Indian conditions. The battery pack is underneath the body providing a centre of gravity similar to that of a sedan.
Charging options include fast charging, 80% charge in 60 minutes. A regular full charge using a 15-Amp plug point takes up to 8hrs.
The vehicle is priced at $21,200, significantly cheaper than Tesla’s model 3 which starts at $35,000.
Amur Minerals* (LON:AMC) 1.9p, Mkt Cap £15.8m – Kun Manie environmental assessment complete and approved
The Company completed the Base Line Environmental Assessment (BLEA) on the Kun Manie nickel copper sulphide project as part of its Permanent Conditions TEO.
The study has been reviewed and approved by the necessary Russian state authorities
The assessment confirmed that the large scale Kun Manie project will not need any “extraordinary programmes or procedures beyond those already planned by the Company to undertake the implementation of our operation”.
*SP Angel act as Nomad and Broker to Amur Minerals
Aura Energy* (LON:AURA) 0.275p, Mkt Cap £3.9m – A$475,000 fundraising
Aura Energy reports that it has raised A$475,000 (£252,600) via the issue of approximately 105.4m additional shares at 45 A¢ per share. In addition, Aura Energy is issuing a share option for every 2 new shares, valid for 2 years to acquire a further share at price of 80 A¢.
The proceeds are to be used for working capital purposes and we estimate that the new shares represent approximately 6.9% of the enlarged capital of the company.
Peter Reeve, Executive Chairman, commented that while market conditions are difficult, Aura Energy “has four distinct activities …[in progress] … The Tiris DFS remains poised for execution, the Häggån Scoping Study is complete allowing corporate transactions, the gold assets are attracting good corporate interest and the compensation action in Sweden is progressing well.”
Conclusion: Aura Energy is not alone among smaller mining companies seeking to advance promising assets in difficult market conditions. The additional funds should facilitate further progress and we look forward to news as the projects develop.
*SP Angel act as Nomad & Broker to Aura Energy
Endeavour Mining (CVE:EDV) C$24.96, Mkt Cap C$2,744m – Withdraws from proposed Centamin offer
Endeavour Mining reports that it will not seek an extension to the 14th January deadline to make a firm offer for Centamin.
The company said that “We remain convinced about the strategic rationale of combining Endeavour and Centamin to create a diversified gold producer with a high-quality portfolio of assets. The quality of information received during the accelerated due diligence process has been insufficient to allow us to be confident that proceeding with a firm offer would have been in the best interests of Endeavour shareholders”.
As a result, Endeavour Mining, will not now be able to make an offer for Centamin for a period of six months unless there is a change in conditions including the announcement of a third party offer for Centamin or with the agreement of Centamin.
Resolute Mining (LON:RSG) 62.29p, Mkt Cap £566.2m – Sale of Ravenswood
Resolute Mining the sale of its Ravenswood gold mine in Queensland for A$300m comprising an initial A$100m made up of A$50m in cash and a similar sum in promissory notes and up to a further A$200m contingent on future gold prices over a four year period and “up to A$150 million linked to the investment outcomes of Ravenswood”.
The purchasers, a consortium made up of EMR Capital and Singapore-listed Golden Energy and Resources has committed to continue with the Ravenswood Expansion project which aims to expand gold production from the current (FY2018) 90,000oz level to “deliver approximately 200,000oz of gold annually for 15 years from 2022“.
Commenting on the transaction, Managing Director, John Welborn, said that “The transaction delivers a fair share to all parties from the future value of the Ravenswood Expansion Project and effectively balances risk and reward.”
He also explained that the sale has “strengthened our balance sheet with a combination of immediate cash and the potential for future upside as well as removing the requirement of a large near-term capital investment. The divestment has strong strategic merit for Resolute. We have delivered on our objective of ensuring a new long-life future for Ravenswood under a world-class operator and can now focus our attention and energy on our African portfolio and the abundant opportunities our experience provides for further growth and value creation.”
Ravenswood is the smallest of Resolute Mining’s current mining operations with recent production guidance indicating production of 80,000oz of gold at an all-in-sustaining cost of US$1,200/oz is expected in 2020. It has, however, been a solid performer since opening in 1987, initially under the management of Carpentaria Gold where it started as a 250,000tpa heap leach operation.
Resolute Mining acquired the mine in 2004 for A$58m and has since produced over 1.9moz of gold from the operation. The company’s website summarises a current mineral resource of 5.9moz of gold at Ravenswood, a reserve of 2.7moz and a residual mine life of 10 years at a 5mtpa processing rate for annual gold production of around 200,000oz
The disposal of Ravenswood underlines Resolute Mining’s commitment to its African strategy where it operates the 250-300,000ozpa Syama mine in Mali and the 140-160,000oz pa Mako mine in Senegal. The future of the venerable, currently mothballed, Bibiani mine in Ghana, where a strategic review was announced in December 2019.
Sirius Minerals (LON:SXX) 5.45p, Mkt cap £383m – Anglo is likely to confirm its deal to buy Sirius (Reuters)
Confirmation of a firm offer for Sirius by Anglo will express confidence in the future of the market for the polyhalite product to be produced at Woodsmith
Presumably Anglo will have verified the firm intentions of the offtake partners which have signed up to take future polyhalite supply
We would expect Anglo to rework some elements of the development which may impact the capital cost and economics of the Woodsmith project.
Scheduling and placement of new polyhalite production into the market is a major issue as Woodsmith’s planned 10mtpa of polyhalite production is so much larger than current global supply.
Expanding a market to take so much new production normally requires substantial marketing and discounting to persuade consumers to accept so much new product.
Rival production and alternative products may impact the sale of Woodsmith’s polyhalite causing a slower ramp up of production rates
ICL’s Boulby mine near-by produces around 0.7mtpa of product into a market which CRU estimated at just 1.7mt in 2017 indicating to us that Sirius would need to increase the market size by more than five times to place all its planned production.
While we see significant future demand for fertiliser products, we are wary that BHP are reviewing the prospects of their Jansen potash mine in Canada where they have already spent nearly $3bn out of a potential $17bn in capex.
Jansen has been suspended for around two years indicating the difficulty in making a decision on this scale and type of project.
Legend has it that Consolidated Gold Fields’ Whitby Potash project which was never developed was known as a ‘Punishment Station’ for staff who were unlucky enough to be sent there.
Consolidated Gold Fields’ initial plan was to solution mine the Whitby deposit but the economics of evaporating the solution to extract the potash didn’t work at the time meaning they are highly unlikely to work now
Some companies think they can extract minerals out of brines using a process of ‘osmosis’ but while the technology works in the lab companies have struggled to finance their economics these beyond pilot plant scale.
While we don’t see Woodsmith as a ‘Punishment Station’ we do see it as a technically challenging project.
Conclusion: Anglo have the cash flow, financing ability, expertise and corporate patience to make Woodsmith work and an offer from Anglo looks like the best option for the project. The deal appears to fit with Anglo’s expertise in underground and bulk mining while adding commodity and geographical diversification. We see this as a massive and very welcome favour to the workers at Woodsmith and the UK government.
Trans-Siberian Gold (LON:TSG) 57.5p, Mkt Cap £63m – Discovery of new vein extension at Asacha
The 2019 drilling discovered a new zone, Vein 25 North, as well as intersected new vein system east of Vein 25 North at the Asacha Gold Mine.
New mineralised zone lies 400m north along strike of Vein 25, within the East zone (not yet mined), with selected narrow high grade intersections including:
C1915: 133 g/t Au, 57 g/t Ag over 4 m
C2006: 10 g/t Au, 244 g/t Ag over 2.5 m
C2009A : 13 g/t Au, 194 g/t Ag over 2.3 m
C2010 : 59 g/t Au, 99 g/t Ag over 1.8 m
The mineralisation remains open to the north and at the depth.
400m between Vein 25 North and Vein 25 was largely undrilled with one hole returning 22g/t Au, 56g/t Ag over 0.8m (SRK-001).
Additionally, the Company intersected a new vein system ~150m east of Vein 25 North:
C2006: 28 g/t Au, 42 g/t Ag over 3.4 m
The Company has mobilised the second drilling rig to the site targeting 25,000m for the 2019-2020 programme that may be further expanded conditional on results.
Apart from Vein 25, five other target areas will be drill tested during the year.
Conclusion: Narrow high grade intersections see a potential to extend known mineralised zones laterally as well as along strike at the Asacha mine as the Company ramping up exploration activity in 2020 with a series of prospective targets in the area.
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