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SP Angel . Morning View . Tuesday 21 07 20

Markets climb on prospects for more stimulus


Anglo Asian Mining* (LON:AAZ) – BUY, Target 209p – JV with Conroy Gold and Natural Resources

BHP (LON:BHP) – FY2020 sees record iron-ore production while exploration focusses on copper

Tietto Minerals (ASX:TIE) – Drilling probes deeper at Abujar


BHP see steel and pig iron production rising next year with blast furnace capacity utilization >90% in June from 80% in February

But demand for copper may be slightly lower

Oil demand likely to return with return to pre-COVID-19 levels expected by end of next year


Oxford vaccine – Coronavirus vaccine developed by Oxford University appears safe and trains the immune system, key early trials show (BBC)

The UK government has ordered 100m vaccine doses from various vaccine manufacturers to get the machinery up and running

The race is on to see which vaccine or vaccines will be manufactured


China – Yangtze River flooding impacting demand within China

China has already blown up one levee on a Yangtze river tributary to ease flooding further downstream flooding farmland

A third wave of flooding expected to hit the Three Gorges Dam in next 24 hours with the largest surge of floodwater so far

This will be a significant test for the dam structure.

Nanjing has raised its flood alert to its maximum level as record flows are recorded on the Yangtze river

744,000 people have been displaced across 26 provinces (Ministry of Emergency Management)

38m residents affected in 27 provinces

28,000 houses collapsed – far fewer than were destroyed in the building of the Three Gorges Dam

Flooded regions  include the upper and middle river basin of the Yangtze and its tributaries. With more rain floods started to extend to lower regions of the Yangtze basin such as Anhui, Jiangxi, and Zhejiang.[1] In addition, Hunan, Fujian, and Yunnan were affected (Wikipedia)

The flooding may have a bigger impact on economic activity than the Coronavirus which has, so far, been relatively well contained within China.

We expect the government to move to build very substantial new flood defences along the Yangtze and other 442 rivers flooded requiring many millions of tonnes of concrete and reinforced steel rebar.

This is likely to be good for iron ore, steel and vanadium demand.

Mountain collapses in Yunnan killing two almost certainly due to heavy rainfall and unstable ground


Stimulus tally

$860bn – EU Stimulus package for EU economic recovery

+ former $825bn (€750bn) EU – European Commission aid package yesterday aimed at supporting EU nations hit by the pandemic which was itself an expansion on the previous $543bn (€500bn ) EU Crisis Recovery fund backed France and Germany + $963bn (€750bn)

ECB scraped limits on sovereign bond purchases. ECB PEPP buying running at around €250bn

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 ECB bank was reported to have used €100bn of the PEPP so far.

$304bn – China Ministry of Finance Rmb550bn (US$77bn) of special purpose debt.

+ another Rmb1,600bn (US$226bn) is available for issue before the year end. Much of this will be for housing and connecting infrastructure

$140bn – China PBOC buying CNY1tn of bank loans issued by local lenders to small firms this week in an effort to ease the flow of credit.

$56bn – The PBOC also announced a Rmb400bn ($56bn) purchase loan program to boost available credit by supporting bank loans to SMEs

$1.55tn – China – Bloomberg estimates a ‘fiscal impulse of more than 11% of nominal GDP’ which was estimated at US$14.14tn

We previously assumed China at $909m comprised $344bn of China stimulus + $565bn in special bonds for infrastructure by local authorities

$438m Zambia – Government approves $438m stimulus package 

$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

US Fed has flooded all markets with dollar liquidity through repo and swap lines.

US$1.02tn – Japan – BoJ injecting US$1.02tn into the economy through a variety of programmes. (will check if this is in addition to the Y117tn stimulus announced)

US$1.1tn – 117tn-yen stimulus, funded partly by a second extra budget, will be on top of another 117tn package already rolled out takes total spending in Japan at 234tn yen ($2.18tr) – 40% of Japans GDP.  Japan to issue Y31.9tn in government bonds. 

$298bn Japan parliament passed ¥31.9tn ($298bn) second extra budget today to help struggling economy.

¥117tn stimulus programme + ¥10tn as a coronavirus reserve fund

$825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds

$934bn (£745bn) – UK Bank of England injects another £100bn ($125bn)

$387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia – RBA ready to buy bonds again.

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. South Korea – New Deal will create jobs and foster new industries like 5G.

$13.3bn – Saudi Arabia central bank will inject 50bn riyals ($13.3bn) into the banking system on top of US$43.7bn already pledged

$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, Philippines further $26bn proposed, Indonesia – adding $43bn,  Thailand creating a corporate bond fund.

South African buys ZAR10.2bn (US$119m) government bonds in May. Argentina to default on $10bn of dollar debt issued till the end of the year.

$1,000bn – IMF available + $12bn World Bank,

>16.86tn from ($16tn) – Total stimulus reported. Figures may include some political double counting and we suspect some funds may not be spent


IG TV interviews on copper and gold

VOX Markets podcast on mining

Dow Jones Industrials +0.03% at 26,681

Nikkei 225 +0.73% at 22,884

HK Hang Seng +2.06% at 25,575

Shanghai Composite +0.20% at 3,321



US – Administration is considering $1tn in additional stimulus, although, the government did not want to see the programme that currently pays extra $600 per week in unemployment benefit continue at current levels.

“We’re going to make sure that we don’t pay people more money to stay home that got to work… we want to make sure that people who can go to work safely to so… we’ll have tax credits that incentivise businesses to bring people back to work,” Treasury Secretary Mnuchin said.

Democrats suggested that extra unemployment related payments should continue saying they have helped American to service their debts and offered an alternative source of income amid double-digit unemployment levels.

Republicans argued that the enhanced unemployment benefits have disincentivised some Americans from returning to work.


EU – Members agreed on the €750bn recovery fund to be comprised of €390bn in grants and €360bn in low interest loans.

The spread between German and Italian bonds is reported to have narrowed to the lowest level in four months on the back of the news, FT reports.


China – China Development Bank and China Construction Bank to make $62bn of loans available over 5 years

Chinese insurers now allowed to invest up to 45% of assets in equities (National Banking Regulator)

Chinese cities seen raising capacity levels for leisure to help services businesses recover

Sinopec to reduce refining rates as Yangtze flooding slows economic recovery and hits fuel demand


Germany – PPI 0% in June vs -0.4% in May. Year on year PPI was -1.8% in June vs -2.2% in May.


Australia – The state of Victoria reported an increase in new cases and accounting for 374 of the 387 new infections announced today.

Growth comes a day before the wearing masks outdoors becomes mandatory in the state capital, Melbourne, and a neighbouring municipality.

Local authorities launched an official inquiry into the new wave of infections which officials have said most likely caused by deliberate breaches of hotel quarantine procedures, according to FT.


South Korea – Exports dropped for a fifth consecutive month as the pandemic weighs on global demand.

Government announced a series of measures to stimulate the economy with a $230bn fiscal support package as well as $130bn in five-year spending plan announced last week.

Exports (%yoy): -12.8 v -7.5 in June.

Imports (%yoy): -13.7 v -12.0 in June.


Hong Kong – CPI Composite 0.7% yoy in June

Unemployment rose to 6.2% in June vs 5.9% in May


Poland – industrial production rose 0.5% yoy in June vs -17% in May



US$1.1458/eur vs 1.1452/eur yesterday.  Yen 107.32/$ vs 107.22/$.  SAr 16.525/$ vs 16.710/$.  $1.270/gbp vs $1.257/gbp.  0.705/aud vs 0.699/aud.  CNY 6.992/$ vs 6.990/$.


Commodity News

Precious metals:         

Gold US$1,822/oz vs US$1,810/oz yesterday – Gold hits nine-year high on virus worries and stimulus hopes

The price of gold continued to rise on Tuesday, as rising coronavirus cases in the US continued to cast doubts over a global economic recovery. 

Gold is also benefitting from widespread stimulus implemented to combat the coronavirus, as the metal is viewed as a hedge against inflation. 

EU leaders have confirmed that they have agreed a €750bn economic recovery package intended to fund post-pandemic reconstruction efforts in Europe (FT). 

Spot gold was up 0.2% at $1,818/oz, whilst US gold futures were also up 0.2% at $1,821/oz earlier this morning (Reuters). 

Silver gained almost 3% in trading yesterday, rising above $20/oz and closing at the highest level since 2016 (Kitco). 

Gold ETFs 105.3moz vs US$105.0moz yesterday

Platinum US$848/oz vs US$840/oz yesterday

Palladium US$2,080/oz vs US$2,020/oz yesterday

Silver US$20.33/oz vs US$19.32/oz yesterday


Base metals:  

Copper US$ 6,489/t vs US$6,411/t yesterday – Indonesia primary cu output was 3mt

Aluminium US$ 1,669/t vs US$1,656/t yesterday

Nickel US$ 13,315/t vs US$13,205/t yesterday –

Indonesian nickel exports 517,000t of ferronickel and 136,000t nicel pig iron

ferronickel 666,696t in H1 vs 517,000t in H1 2019

nickel pig iron 418,995t vs 364,000t yoy

Zinc US$ 2,207/t vs US$2,174/t yesterday

Lead US$ 1,849/t vs US$1,814/t yesterday

Tin US$ 17,425/t vs US$17,300/t yesterday



Oil US$43.6/bbl vs US$42.7/bbl yesterday

US demand for petroleum and liquid fuels is expected to remain below the 2019 average from before the COVID-crisis until August 2021, despite the uptick in consumption in recent weeks, according to the latest report from the EIA  

Total demand for motor gasoline, distillate fuel oil, and jet fuel crashed in March and April due to the stay-at-home orders and reduced travel as states were trying to curb the spread of the coronavirus

Demand has increased since the lows in April and will continue to rise in the second half of this year as economic activity picks up

Yet, total demand levels will continue to trail the pre-crisis levels until August next year, the EIA has estimated

In April, consumption of liquid fuels reached its all-time monthly low since the early 1980s at an average of 14.7MMbopd according to the administration

In terms of volumes, nearly half of the plunge in fuel consumption in 2020 has come from low gasoline use

This year, gasoline demand is expected to average 8.3MMbopdm down by 1.0MMbopd from 2019

Next year, with rising employment, gasoline consumption is set to increase to 9.1MMbopd, or to be some 2% less than the 2019 average

Natural Gas US$1.652/mmbtu vs US$1.695/mmbtu yesterday

Natural gas futures are trading lower again today shortly after the regular session opening

The market is being pressure by moderating weather patterns, rising storage and weak demand for LNG

However, some weather services are calling for hot temperatures through the end of July and into early August

Specifically, the weather is expected to be warmer than normal over the next two weeks which should help buoy cooling demand

There is no tropical cyclone activity currently in the Atlantic or Gulf of Mexico.

Uranium US$32.60/lb vs US$32.60/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$106.0/t vs US$107.0/t – Chinese iron ore arrivals rose 9.4% last week

China imported 16.89mt of iron ore last week, a 1.45mt increase compared to the week before and 5.36mt compared to the previous year. 

For the same week, Australian iron ore exports increased 790,000t to 16.72mt, whilst Brazilian shipments fell 400,000t to 5.82mt due to port maintenance (SMM News). 

Chinese steel rebar 25mm US$533.7/t vs US$534.7/t – Ukraine H1 steel output falls 4.6%

Ukraine’s steel output in the first half of this year fell to 9.03mt, according to the country’s National Steel Union. 

The drop in production volumes has been attributed to lower demand from Ukraine’s export markets, and stronger protectionist policies. 

The total volume of steel products exported from Ukraine in H1 2020 was 7.43mt, 8.3% lower than the same period last year (Fastmarkets MB).

India crude steel output falls 27% in June

Crude steel output fell to 6.8mt in June, 27% lower than the same period last year- as a lockdown to prevent the spread of COVID-19 curbed production

Consumption also fell in June, down 41% to 5.1mt, according to India’s Steel Ministry (Bloomberg).

Thermal coal (1st year forward cif ARA) US$59.3/t vs US$59.9/t

Coking coal swap Australia FOB US$111.0/t vs US$111.0/t



Cobalt LME 3m US$28,500/t vs US$28,500/t

NdPr Rare Earth Oxide (China) US$42,190/t vs US$42,198/t – China formally announced that it would sanction Lockheed Martin last week.

The decision, in retaliation over Taiwan, may limit Lockheed’s access to rare earth metals from China.

While Lockheed will have first call on stocks in the US ‘DLA’ Defence Logistics Agency stockpile it is yet another sign of China’s willingness to hold back key metals to enforce its strategy. China is thought to currently supplies around 80% of US rare earth metal consumption. (

Lithium carbonate 99% (China) US$4,934/t vs US$4,935/t

Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.5/kg

Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/kg

Tungsten APT European US$205-210/mtu vs US$205-215/mtu

Graphite flake 94% C, -100 mesh, fob China US$430/t vs US$430/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,275/t


Battery News

VW: Korean battery dispute could lead to ‘catastrophic’ supply disruption

Volkswagen and Ford have warned that a dispute between South Korean battery makers could cause severe disruptions to the EV supply chain. 

Last year, LG Chem sued small rival SK Innovation over alleged trade secret theft, seeking to bar SK from producing battery cells in the US and importing components. 

VW say that the commission should allow SK to manufacture the EV batteries and say that a prolonged dispute could cost US jobs.

SK is currently building a battery plant in Georgia to serve VW’s EV base in Tennessee, and also plans to add a second US plant to supply Ford’s EV pickup trucks (Reuters). 


BAE Systems considering hybrid or fully electric power systems for next UK fighter jet

The new jet is being planned for 2050-2060 (Bloomberg)

Rolls Royce has been developing the E-Fan X hybrid electric aircraft with Airbus


Company News

Anglo Asian Mining* (LON:AAZ) 135p, Mkt Cap £154m – JV with Conroy Gold and Natural Resources

BUY – 209p

The Company entered into a non-binding Head of Terms Agreement with Conroy Gold and Natural Resources for a proposed JV.

Under the agreement, the Company will acquire up to 55% interest in the Longford Down Massif gold project in Ireland in return for meeting a number of spending commitments.

The project covers over 8000km2 in a major gold district in the north east of Ireland with a number of gold targets identified to date:

Clontibret hosting a refractory gold deposit with a JORC resource of 517koz at 2.0g/t (including 320koz at 2.0g/t in the Indicated category and 197koz at 2.0g/t in the Inferred) and located in County Monaghan, in the Republic of Ireland;

Clay Lake in County Armagh, a gold target extending over 2km by 1km area at the north-eastern end of the 40 mile Longford Down gold trend and located in Northern Ireland.

An additional 8.8moz in gold exploration targets in the Longford Down trend providing significant upside potential.

Licenses will be segregated upon formation of the JV into three separate companies with Anglo Asian earning an interest in those licenses on completing a set of payments/work.

A 17.5% interest will be earned on conducting the JV agreement and completion of a €2m investment in exploration (Primary Expenditure Programme);

A further 7.5% interest will be granted (pro-rata) for an additional investment of up to €2m (ie a maximum of 25% for a total of €4m under the Primary Expenditure Programme over 18 months);

The full 55% interest in each company will earned should the Company commit to the Secondary Expenditure Programme that includes taking the project to the “Construction Ready” status involving technical studies and permitting and an additional exploration expenditure for ex Clontibret licenses for €3m.

Anglo Asian will retain an interest in each of three companies should it not be willing to proceed with the Secondary Expenditure Programme.

The JV is subject to satisfactory due diligence, concluding a binding JV agreement between two companies as well as regulatory approvals and the approval of Conroy Gold shareholders.

Managerial control of the JV will reside with Anglo Asian until the Company elects not to proceed or does not complete the Secondary Expenditure Programme.

Anglo Asian has been issued 325k warrants at 16p upon the release of the announcement (exercisable immediately) with a further 1,625k warrants (975k with an exercise price of 16p and 650k at 26p) to be issued on conclusion of the JV Agreement.

“The proposed joint venture is in keeping with the Company’s stated strategy and ambitions and will complement the Company’s existing pipeline of projects in Azerbaijan. It is of sufficient scale to considerably add to the Company’s operations, but of a size which will not adversely impact the development of our assets in Azerbaijan,” Reza Vaziri CEO commented on the announcement.

A Scoping Study completed on the project by Conroy Gold suggests challenging metallurgy at Clontibret with the bulk of the gold occurring as sub-microscopic inclusions within arsenopyrite and the proposed processing method including BIOX treatment.

Anglo Asian’s metallurgical team are among the world’s best in tackling challenging metallurgy in our view and will hopefully refine economic solutions for the gold recovery.

Conclusion: The Company signed a non-binding agreement with Conroy Gold and Natural Resources for a number of licenses located in Northern Ireland and Republic of Ireland including the flagship Clontibret refractory gold deposit. The agreement also covers early stage exploration licenses where previous work identified a number of prospective targets. The deal is subject to due diligence and involves a number of staged payments with the Company potentially gradually building its interest in respective licenses.


BHP (LON:BHP) 1,1769p, £38bn – FY2020 sees record iron-ore production while exploration focusses on copper

BHP reports what the company describes as a strong operational performance during the year to 30th June 2020 with record production from its Western Australian iron-ore business contributing to the achievement of production guidance which was also met for the group’s metallurgical coal and operated copper and energy coal businesses.

The company reports lower than expected gas demand as a result of the Covid19 pandemic and reduced production from the Antamina copper/zinc mine and Cerrejon coal mines as a result of temporary suspensions of operations to contain the spread of the virus although production at the two mines is now reported to be “ramping back up”.

Chief Executive, Mike Henry, recognised the contribution of BHP’s workforce in response to the current pandemic and said “This performance, achieved in the face of COVID-19 and other challenges, is a result of the outstanding effort of our people and the support of our communities, governments, customers and suppliers. We have sought to support those who rely on BHP through the pandemic with increased hiring, shorter payment terms for small, local and indigenous suppliers, support for contract workers and community funding for health and social services”.

Group copper production rose 2% during the financial year to 1.72m tonnes despite workforce reductions in the Chilean operations of up to 35% during the final quarter as part of the Covid19 containment measures although the Escondida mine increased production by 4% to 1,185,000t for the year and achieved record quarterly concentrate production of 382,000t during the June quarter offsetting “the impact of a three per cent decline in copper grade, stoppages associated with the social unrest in Chile (7 kt impact) and a reduced workforce due to COVID-19 preventative measures.”

Copper production also increased at Olympic Dam with a 7% rise attributed to “172 kt supported by solid underground mine performance with strong development metres achieved, record grade and the prior period acid plant outage.”

The company guides towards a 5-14% reduction in copper output (1.65-1.48mt) in the forthcoming 2021 year with expected grade declines at Escondida of around 4% and lower output from Pampa Norte partially offset by increased production to 180-205kt at Olympic Dam.

Western Australian iron-ore production of 248mt during FY 2020 is expected to be broadly matched in 2021 with the company’s guidance range of between 244-253mt.

The company says that “Mining and processing operations at Samarco remain suspended following the failure of the Fundão tailings dam and Santarém water dam on 5 November 2015. Operation readiness activities for Samarco’s restart have been slowed as a result of a reduced workforce, as part of the COVID-19 response”.

Metallurgical coal output declined by 3% to 41mt reflecting poor weather during the March quarter and “geotechnical constraints at South Walker Creek”. The company expects 2021 output to remain at similar levels next year in the range 40-44mt.

Energy coal production declined by 16% to 23mt during the year reflecting a 23% reduction, to 7mt, at Cerrejon in Colombia where the mine suffered a temporary, Covid19 induced, shut-down during the final quarter.

Thermal coal output for FY 2021 is expected in the range 22-24mt, in line with FY 2020.

“Nickel West production decreased by eight per cent to 80 kt due to the major quadrennial maintenance shutdowns at the Kwinana refinery and the Kalgoorlie smelter, as well as planned routine maintenance at the concentrators, in the December 2019 quarter. Operations ramped back up to full capacity during the March 2020 quarter and ran at full capacity during the June 2020 quarter.”

BHP reports the expenditure of US$176m on mineral exploration during the year. “Greenfield minerals exploration is predominantly focused on advancing copper targets within Chile, Ecuador, Mexico, Peru, Canada, South Australia and the south-west United States”.

Conclusion: BHP delivered record iron ore production and met guidance targets in many of its commodity groups during FY 2020. It’s grass roots exploration efforts focussed largely on copper with targets in the Americas and South Australia.


Tietto Minerals (ASX:TIE) A$0.67, Mkt Cap A$232m – Drilling probes deeper at Abujar

In a release to the ASX, Tietto Minerals reports further deep, intersections from its drilling of the Abujar-Gludehi (AG) gold deposit in Cote d’Ivoire.

The results extend the mineralisation to a depth of 180m below the existing 2.2moz mineral resources and follow an announcement earlier this month that the structure had been drilled to depths of 150m below the resource envelope.

Among the results highlighted in today’s announcement are results from two holes:

Hole ZDD254 intersected a 1m wide section averaging 35.14g/t gold from a depth of 368m; and

Hole ZDD258 intersected 5m at an average grade of 2.41g/t gold from 368m and a deeper 5m section averaging 8.31g/t gold from 417m depth.

The structure is reported to remain open both laterally and at depth and the results reported today are  “expected to result in a positive uplift in the next Abujar Mineral Resource Estimate, on track for September 2020”.

The drilling is part of a 50,000m programme using, currently, five diamond drilling rigs investigating “depth extensions … up to 650m downhole, to provide 550m vertical cover over a 650m strike length”.

Managing Director, Dr. Caigen Wang,  said that the latest drilling, which comes on Section 22B has “successfully delineated a high-grade footwall lode that stretches more than 180m down-dip that would be attractive for an underground mine below a future open pit operation.”

Conclusion: Today’s results and other previous announcements are demonstrating the depth and lateral continuity of mineralisation within the AG system. We note that some of the intersections, although high grade are relatively narrow and these intersections in particular may present challenges to the mineral resource estimation work currently underway. We look forward to the revised mineral resource estimate due in September.



John Meyer – – 0203 470 0490 / 07943031001

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


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