Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Morning View . Zinc falls on shock LME delivery

Morning View . Zinc falls on shock LME delivery

Anglo American (LON:AAL) –De Beers diamond sales

Bluebird Merchant Ventures* (LON:BMV) – Team reaches next level at Kochang gold mine

Great Western Mining (LON:GWM) – Permission to expand infill drilling programme at M2

SolGold* (LON:SOLG) – New minister of mines looks set to further incentivise exploration in Ecuador

Strategic Minerals* (LON:SML) – Settlement of the Leigh Creek Acquisition

 

Zinc – US$687m worth of zinc delivered to LME shocks market (see zinc comment below)

 

EV’s could be charged in 10 minutes

  • Researchers have discovered a new material that could boost the performance of a carbon-based ‘ultra-capacitor’
  • The material, originally used for soft contact lenses, is surprisingly good at holding an electrostatic field through which it can store electricity
  • Researchers are working to develop supercapacitors using the new polymer and hopes that they could eventually rival, or even surpass, lithium-ion (li-ion) batteries, so long as they manage to replicate prototype performance on a larger scale
  • Seoul in South Korea is hoping to have 3,500 Supercapacitor-powered buses operating by 2020, and they're also being used in Shanghai, China. PSA Peugeot Citroen has been using supercapacitors in its cars since 2010 – Supercapacitor manufacturer Maxwell Technologies says more than a million vehicles now incorporate its products
  • Previous supercapacitors have not been good at holding charge for long enough for a meaningful role in electric vehicle

 

Dow Jones Industrials

 

+1.37%

at

24,875

Nikkei 225

 

+1.79%

at

21,418

HK Hang Seng

 

+2.17%

at

30,535

Shanghai Composite

 

+1.00%

at

3,290

FTSE 350 Mining

 

+0.96%

at

17,623

AIM Basic Resources

 

-0.29%

at

2,517

 

Economics

US – Equities gained recovering from days of losses as top Republicans criticised proposed import tariffs on aluminium and steel.

  • “We are extremely worried about the consequence of a trade war and are urging the White House to noe advance with this plan,” Paul Ryan spokeswoman said in a statement yesterday.
  • “The new tax reform law has boosted the economy and we certainly don’t want to jeopardise those gains.”
  • Gary Cohn, an economic advisor to the White House, has been organising meeting between Trump and US executives in a bid to stop the order.
  • US authorities are expected to make an announcement on tariffs in the next couple of days.
  • The EU has prepared a draft of US sourced products to be put under retaliatory tariffs including US steel, apparel, textile and footwear; EU authorities are considering a 25% import charge on those sectors.
  • The US$ index is little changed and sovereign bond yields slightly off this morning.
  • February labour data is due later this week with expectations for a strong series of numbers (200k NFPs v 200k in January, 4.0% v 4.1% unemployment rate, +2.8%yoy v +2.9%yoy earnings growth)

 

UK – Household spending growth rate slowed in February as uncertainty over the Brexit deal weighed on the sentiment, the latest Barclaycard data showed.

  • “Consumers are cautious about the potential ramifications of whatever settlement the UK achieves, and half of us fear that the outcome will leave us worse off than we are now,” Barclaycard said.
  • A separate report said that while overall retail sales climbed on the month, sales of non-food items fell in the three months through February on a like-for-like bases on British Retail Consortium numbers.

 

Italy – Former PM Matteo Renzi resigned from the governing centre-left Democratic Party leadership following upsetting general election results.

  • The anti-establishment Five Star Movement emerged as the party with the largest number of seats in the Parliament securing 32.7% of the vote.
  • The conservative and Eurosceptic League party led by Matteo Salvini who praised Brexit and voiced opposition to the euro appeared to be in the driving seat of the centre-right coalition with the largest number of votes (17.4%) coming ahead of Berlusconi’s Forza Italia (14.0%).
  • Results launch a period of negotiations between parties to form a coalition government.

 

Australia – The RBA held rates unchanged at 1.5%, in line with market estimates.

  • The central bank highlighted that inflation is “likely to remain low for some time reflecting low growth in labour costs and strong competition in retailing”.
  • Monetary policy authorities also appeared to be less optimistic on growth outlook compared to the previous meeting.
  • Last month, the RBA guided for growth to average “a bit above 3%” over the next few years, while latest economic outlook comments referred to growth only outpacing the performance in 2017 which is estimated at 2.3%, down from 2.6% recorded in 2016.
  • The A$ was down slightly against the US$ following the announcement.

 

Currencies

US$1.2338/eur vs 1.2305/eur yesterday  Yen 106.11/$ vs 105.43/$  SAr 11.838/$ vs 11.999/$  $1.382/gbp vs $1.378/gbp  0.776/aud vs 0.774/aud  CNY 6.343/$ vs 6.341/$

 

Commodity News

Precious metals:         

Gold US$1,322/oz vs US$1,328/oz yesterday

   Gold ETFs 72.3moz vs US$72.2moz yesterday

Platinum US$962/oz vs US$968/oz yesterday

Palladium US$984/oz vs US$991/oz yesterday

Silver US$16.44/oz vs US$16.57/oz yesterday

           

Base metals:   

Copper US$ 6,949/t vs US$6,886/t yesterday

Aluminium US$ 2,147/t vs US$2,143/t yesterday

Nickel US$ 13,465/t vs US$13,380/t yesterday

Zinc US$ 3,287/t vs US$3,343/t yesterday

  • Zinc’s rally through 2017 is unwinding with prices retreating 8% since peaking in mid-February. London Metal Exchange data raises concerns as inventory levels showed the biggest increase in almost three decades. Rising stockpiles reverse the broad trend over the last five years, as the zinc price climbed more than 60% as LME inventories shrunk more than 80%.
  • The zinc market has been extremely tight in recent months, creating competition for suppliers to access the metal, however signs of a loosening market caused zinc prices to fall 2.3% to $3,277/t. On Monday, the LME’s report showed stockpiles jumping 59% to 209,050 tonnes.
  • However, the metal is expected to find some support as global inventories remain at severely depressed levels, with LME warehouses across Asia and Europe almost out of metal. New Orleans now holds more than 99% of all zinc in the exchange’s warehouse network, but high shipping costs will restrict movement outside of domestic US markets.

Lead US$ 2,420/t vs US$2,447/t yesterday

Tin US$ 21,465/t vs US$21,575/t yesterday

           

Energy:           

Oil US$65.6/bbl vs US$64.5/bbl yesterday

  • Accelerated market rebalancing and sentiment-driven support have driven upward revisions in Brent crude price forecasts, with BMI raising 2018 prices from $65/bbl to $67/bbl. The oil price is expected to “move into a sustained uptrend” for the remained of the year as seasonal fuels consumption accelerates, while expectations follow the market entering a sustained deficit from 2018 to place further upside pressure on prices.

Natural Gas US$2.709/mmbtu vs US$2.688/mmbtu yesterday

Uranium US$22.25/lb vs US$22.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.9/t vs US$75.8/t

Chinese steel rebar 25mm US$681.1/t vs US$687.3/t - Kobe Steel chief Hiroya Kawasaki quits after data scandal

  • Chief executive of Kobe steel has resigned in the aftermath of a data falsification scandal after the firm released a long awaited report into the wrongdoing
  • The report confirms staff changed or made up data on the quality of some of its products before they were shipped
  • Kobe said the departure of Mr Kawasaki, as well as executive vice president Akira Kaneka, reflected "the company taking to heart the troubles we have caused our customers, suppliers, shareholders and many other people in connection with the misconduct that took place"
  • Other details in the report showed there were  688 cases of "misconduct" 525 announced when the problem was first revealed in October last year and 163 fresh cases, the firm had a management style that overemphasised profitability and had inadequate corporate governance

Thermal coal (1st year forward cif ARA) US$79.0/t vs US$77.5/t

Premium hard coking coal Aus fob US$234.1/t vs US$234.9/t

 

Other:  

Tungsten APT European US$322-330/mtu vs US$319-326/mtu

Cobalt LME 3m US$80,500.0/t vs US$79,250.0/t - UK firm trials using blockchain to help BMW source ethical cobalt

  • BMW is working with a London-based start-up to use transaction-recording technology blockchain to ensure that BMW batteries contain ethically-sources cobalt
  • Competition is intensifying to use blockchain to help eliminate battery materials produced by child labour and sometimes sold by warlords in the DRC
  • The start-up is working on a trial for BMW to map cobalt that is already assumed to be clean because it comes from jurisdictions such as Australia and Canada or from registered companies in the DRC. The technology gives clean cobalt a barcode with a an immutable ledger using blockchain technology used to track the material.

Lithium - Chile updates government lithium contracts

  • Chile’s government is negotiating an updated contract with state-owned Codelco which is set to become the new industry standard for the world’s largest national lithium reserves. “This contract will set a standard” according to Mining Minister Aurora Williams, and “includes a number of elements that go beyond just mining, such as resources for research and development”. The nation is aiming to dominate global supply and boost production of the key ingredient in rechargeable batteries with the authorisation of higher quotas for Albemarle Corp. and Soc. Quimica & Minera de Chile SA, while developing clear legislations to encourage further output.
  • While specific terms remain confidential, it has been revealed the contracts extend for around 40 years and gives Codelco 8.5 years to explore its properties in the Maricunga salt flat of northern Chile. The government is hoping to approve new lithium regulations before its term ends on March 11, with a draft being sent for the comptroller’s office, and approval beginning during Pinera’s term.

 

Company News

Anglo American (LON:AAL) 1748 pence, Mkt Cap £22.6bn – De Beers diamond sales

  • Anglo American reports that De Beers achieved sales of US$555m for its 2nd diamond sale of 2018. The sales are broadly comparable with the US$553m achieved in the equivalent second sale of 2017 and US$117m lower than the US$672m confirmed for the first sale of 2018 which benefitted from post-Christmas/New Year re-stocking.
  • Commenting on the result, CEO of De Beers, Bruce Cleaver, commented “The second sales cycle of the year saw the continuation of good rough diamond demand. This was in line with expectations, following strong retail sales of diamond jewellery during the US holiday season and positive early signs for consumer demand over Chinese New Year."
  • Conclusion: De Beers reports good demand for rough diamonds at it second sale of 2018. We note that sales on a year to date basis at US$1,227m are approximately 4% lower than the US$1,282m at the same time last year.

 

Bluebird Merchant Ventures* (LON:BMV) 2.9p, Mkt Cap £5.3m – Team reaches next level at Kochang gold mine

(Bluebird has a 50:50 jv with Southern Gold Ltd at the Gubong, Taechang and Kochang gold mines)

  • Bluebird’s team of mining experts have reached the next level of the Kochang gold mine in South Korea.
  • Visible ore: The team report the presence of visible ore in situ, in pillars and in remnant areas with broken ore discovered in old production areas.
  • This is typical of what we would expect from most closed mines of this type as ore is often left in situ when a mine is closed.
  • Broken ore in-situ: The good part is that having broken ore in situ should accelerate the move to first production and lower early extraction costs .
  • The team also report excellent ground conditions at Kochang with 10m spans between pillars and no timber supports seen. There is a smooth and very planar contact between the mineralised vein and the footwall which is helpful from a mining and ore recovery perspective.
  • Gubong tailings: Bluebird has report results of 0.8g/t to 1.15g/t in assay samples from the tailings dams at Gubong. The results are from two shallow 1m auger drill holes indicating that a significant scale resource may exist within the historic tailings.
  • Bluebird also report results of 1.24g/t to 10.50g/t in grab samples of waste material. A fuller study will be carried out later in the year.
  • Environmental rehabilitation: The South Korean government are said to be offering to pay for up to 80% of the cost of rehabilitation and other environmental measures indicating their willingness to help Bluebird with the mine restoration.

Conclusion: Bluebird are making rapid progress at the Gubong and Kochang gold mines. The presence of ore available for early extraction is good and we can see potential for a relatively rapid start to mining and gold production.

 

Great Western Mining (LON:GWM) 0.9p, Mkt Cap £5.2m – Permission to expand infill drilling programme at M2

  • Great Western Mining reports that it has agreed with the US Bureau of Land Management that it can drill additional infill holes at its M2 exploration project in Nevada and that as a result, the company “has decided to drill three holes in addition to the five previously announced”.
  • The fifth hole, presumably the final of the originally planned programme is currently underway “despite significant sub-zero night time temperatures and recent snow storms”.
  • The infill programme is designed to upgrade the current resource estimate (indicated & inferred) of 16.99mt at an average grade of 0.52% copper to measured and indicated.
  • Following severe weather which has limited the ability to pump adequate volumes of water for diamond drilling, the company has also “decided to await the better weather forecast from the beginning of next month” before continuing with the preparation of drilling sites and subsequent drilling of its nearby Sharktooth prospect which is being investigated for potential “deeply buried sulphide, porphyry-related copper mineralisation”

 

SolGold* (LON:SOLG) 23p, Mkt Cap £390m – New minister of mines fights to cut tax and encourage exploration and development in Ecuador

(SolGold own 85% of Cascabel in Ecuador)

  • SolGold should stand to benefit from changes to legislation governing exploration and future project development in Ecuador.
  • Rebeca Illescas, Ecuador’s new minister of mines, is negotiating with the government of President Lenin Moreno to abolish the sizable windfall profits tax. Illescas hopes to abolish the infamous 70% windfall profits tax and a series of other unfavourable provisions to position the nation as an up-and-coming mining investment destination in Latin America.
  • Illescas couldn’t confirm if or when the windfall tax will be removed, but believes the newly elected Moreno is keen to develop the mining sector and may also consider the tax does more harm than good; “the president has talked about the importance of private investment because the country needs private investment”.
  • The nation, which relies heavily on revenues from oil and gas, “need another important sector for the economy of Ecuador. I’m very positive about that and I think the mining sector will become the second biggest driver of our economy over the next few years”.
  • There has been a recent resurgence in exploration with several junior mining companies increasing activity across the nation. Further, Ecuador is looking to create a mining venture exchange with the focus on linking trading in junior mining stocks on the Toronto and Quito exchanges as part of a bid to finance US$488 million in exploration.
  • Illescas aims to build on the recent progress in awarding 237 new concessions to local and international mining companies following a 6 year hiatus in exploration concessions. “Only a small part of the country has ever been explored, and we have excellent geology, infrastructure, and competitive prices for electricity and water.”
  • The minister has reassured “no company needs to be worried” by the proposed rule changes that could undermine the nation’s status as a burgeoning copper and gold mining hub. She continued to suggest that rather than demanding more from prospectors and developers who have flooded into the country, the proposed changes are intended to make licensing simpler and boost incentives to invest. The new rules also encourage environmental and social sustainability.
  • Across 2017, 28 companies established a presence in Ecuador including SolGold, BHP Billiton Ltd. and Fortescue Metals Group Ltd. as producers increases efforts to boost resource statements amid recovering prices. Majors Anglo American Plc., Barrick Gold Corp., and Rio Tinto are also in discussion over exploration opportunities.
  • The newly elected team are currently reviewing the nations mineral registry, with the goal of cleaning out inactive claims and improving control over the small and informal mining sector. Contracts and judicial stability will be respected, Rebeca said, and at the same time the mining ministry is working with environmental and water authorities, communities and local governments in a bid to harmonise regulations. Actions follow last month’s referendum, where Ecuadorians gave overwhelming support to tighten restrictions on mining in protected areas.
  • The government is also working on changes to tax conditions to provide greater clarity and more benefits to mining as part of a broader investment bill. The minister notes the plan is to become a major mining country as work focuses on “improv(ing) the tax conditions. It’s important that everyone wins – companies, communities and the state”.
  • Four proposed projects, including Vancouver-based Lundin Gold Inc.’s Fruta del Norte – are expected to generate $4.5bn investment through 2021, significantly boosting mining’s share of gross domestic product to 4% from just 1.3% currently. Newcrest recently announced further investment in Ecuador through its purchase of a 27.1% stake in Lundin Gold for US$250m. Lundin Gold raised a total of US$400m to fund the development of Fruta del Norte and for further exploration in Ecuador. Newcrest can earn up to 50% in up to eight Ecuadorean exploration concessions by spending $20m over five years.
  • SolGold’s Alpala project could potentially add significantly to inward investment in Ecuador.

*SP Angel act as UK broker to SolGold

 

Strategic Minerals* (LON:SML) 2.1p, Mkt Cap £28.1m – Settlement of the Leigh Creek Acquisition

  • Strategic Minerals reports that it has now settled its acquisition of the Leigh Creek Copper Mine in South Australia.
  • The cash element of the acquisition cost, A$1.5m or approximately £850,000, has now been made and the share element of the payment, which is to be based on the volume-weighted price during March is to be made in early April.
  • The company has confirmed, as previously announced, that these shares are to be subject to dealing restrictions with “one third being locked-up for three months after issue, and another third being locked-up for six months after issue.”
  • As we have commented before, the near term opportunity for the company to develop a second cash generative asset in addition to the Cobre operation in New Mexico makes the Leigh Creek acquisition a potentially pivotal transaction for Strategic Minerals.
  • There are expansion opportunities both to increase the existing planned 2000tpa copper production capacity to 4000tpa for a very low additional capital cost and in the longer term, once the processing plant is restarted,  there is also the potential to create a local copper production hub drawing in additional copper oxide raw material from a number of known deposits within a practical transport radius of the Leigh Creek plant.
  • Conclusion: The completion of the Leigh Creek acquisition provides an asset which is capable of generating a second significant cash flow for Strategic Minerals within a year. This has the potential to underpin further growth through continuing exploration of its CARE project in Australia and the Redmoor project in Cornwall, the ability to, perhaps, consider further acquisitions once Leigh Creek is up and running or, as the company has already speculated in public announcements, consider the payment of dividends to shareholders.
  • *SP Angel act as Nomad and broker to Strategic Minerals

 

 

Join our Crypto, Blockchain and Cannabis Telegram group here

DISCLAIMER

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use