Author stories http://www.proactiveinvestors.co.uk Proactiveinvestors Author stories RSS feed en Sat, 24 Feb 2018 02:27:28 +0000 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) Today's Market View - W Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/29423/today-s-market-view-w-resources-29423.html W Resources (LON:WRES) – La Parilla offtake agreements

Electric Vehicle revolution boosting profits across miners
• Rapid adoption of global electric vehicles is flowing through to the bottom line of growing battery miners, who are benefiting from elevated prices and higher profits. Major lithium miner, Orocobre Ltd., reported a net income growth of 11% in the December half while forecasting high-purity lithium prices to continue rising through the first half of 2018. The supplier joins global miners, including FMC Corp. and Mineral Resources Ltd., in posting earnings gains on growing volumes on tightening markets.
• Orocobre Chief Executive Officer notes “all of the international producers will have had increases in their contract pricing for this year’s deliveries. The outlook for further price gains is strong as rivals add higher cost-supply to meet accelerating demand”. The prices of battery-grade products are expected to continue to gain on tight markets and as auto makers including BMW, Daimler AG and Ford Motor Co. battle for long-term supply to expand ambitious EV production plans. The average global lithium carbonate prices rose 9% last month, according to Benchmark Mineral Intelligence data.
• The outlook remains strong for the entire battery minerals sector, with lithium, graphite and cobalt companies all delivering profit growth and focusing on exploration and expansion plans.
o FMC, a top five producer, announced annual revenue from lithium to jump approx. a third in 2017, while Albemarle and SQM, the No.1 and No.2 suppliers are scheduled to report earnings next week with a focus on expanding production across facilities.
o Orocobre is developing its partnership with Toyota Group’s trading unit on plans to construct a processing plant in Japan, and is also seeking to expand its Olaroz operation in Argentina. “We see ourselves stepping up a little bit in the next year”.
o Perth-based Mineral Resources said this month first-half net income jumped 16 percent, boosted by exports of lithium raw materials. Earnings from the company’s lithium division will become its biggest cash generator in fiscal 2019, overtaking the mining services business, according to Deutsche Bank AG forecasts.
o Galaxy Resources Ltd., which reports in March, boosted quarterly earnings from its Mt. Cattlin mine by almost 60 percent in the final three months of 2017, filings show. Neometals Ltd., a partner in an Australian mine with Mineral Resources and China’s top producer Ganfeng Lithium Co., is also scheduled to detail profits next month.
• Lithium-firms are well positioned with fast rising demand and the risk of weaker-than-expected supply response. “If you look at what’s required over the next 50 years, 60 years, and have a look at the known lithium on the planet, I don’t think it’s as much as everyone understands it to be”.

China air quality under further negotiation
• China’s top steel-making city could impose further output curbs following the close of the winter season in an effort to improve air quality. Tangshan city in northern China’s Hebei province is investigating implementing cuts of idle steel capacity of 9.875 million tonnes from March 16 to Nov. 14.
• Under the Tangshan plan, mills in the centre of the city, including HBIS Group Tangsteel Co. and Tangshan Guofeng Steel Corp., would be ordered to halt 15% of capacity during the period, while other mills would see cuts of 10-15% based on conditions including wind direction.
• The curbs aim to further build on unusually clean air in cities including the capital Beijing, while tightening suppliers, reducing exports and increasing steel prices.

Cobalt – Apple in talks to buy cobalt directly
• Reports that Apple is in talks to procure cobalt reveals concerns over an impending supply shortage as well as ethics and human rights.
• Apple is hoping to secure supply chain visibility through ensuring their cobalt isn’t sourced from illegal mining operations
• The move to secure cobalt may also save Apple save on procurement costs over the next two to three years

Dow Jones Industrials  +0.66% at 24,962
Nikkei 225   +0.72% at 21,893
HK Hang Seng   +0.98% at 31,270
Shanghai Composite    +0.63% at 3,289
FTSE 350 Mining   +0.22% at 18,981
AIM Basic Resources   -0.30% at 2,542

Economics
US – Equity indices closed higher on Thursday in a volatile trading and amid good earnings results released so far.
• S&P 500 companies are expected to have posted per-share profit growth of 15%yoy in the final three months of the year, according ot FactSet.
• Around 3/4s of reporting companies have beaten analyst estimates so far, ahead of the five-year average of 69%.
• Adding to positive business outlook are accelerating economy and the recent tax reform bill with the corporate rate reduced to 21% from 35%.
• Gains recorded yesterday helped to break a two-day streak of declines cutting weekly losses in the index to 1.0% as investors adjusted expectations for higher interest rates moving forwards.

Japan – Headline inflation surged to the highest level in almost three years in January on higher food and oil prices.
• Stripping out volatile components of the gauge, inflation remained subdued and significantly far off the 2% target.
• Cold January weather is reported to have contributed strongly to higher fruit and vegetable prices which climbed at the highest pace since 1970.
CPI (%yoy): 1.4 v 1.0 in December and 1.3 forecast.
• Core CPI (ex food and energy, %yoy): 0.4 v 0.3 in December and 0.3 forecast.

Germany – Q4 GDP increase has been confirmed at 0.6%qoq this morning with strong overseas demand behind growth last quarter.
• Exports climbed 2.7%qoq versus a 2.0%qoq increase in imports.
• 2017 saw the strongest GDP growth in seven years in Germany (+2.2%).
• While latest surveys show that growth momentum may start to slow down with the central bank warning of potential bottlenecks developing in the economy, market estimates are for growth to accelerate to 2.4% next year.

UK – Cabinet members may have reached a fragile compromise between Brexiters and Remainers as PM May is expected to give a public speech on her approach to Brexit next week,  FT reports.

Indonesia – The government issued $1.25bn in five year green sukuk bonds at 3.75% amid strong demand for environmentally responsible investment products.
• Additionally, the nation issued $1.75bn in standard sukuk debt at 4.40%.
• Proceeds of green bonds will be allocated to renewable energy, sustainable transport, waste management and green buildings.
• The green finance market has been growing rapidly lately with $155bn raised in funds in 2017, according to Moody’s estimates.

Russia – 850lbs of cocaine found in Russian diplomatic luggage in Argentina
• The Russian Ambassador has called in local authorities to catch a group of drug traffickers who where trying to ship cocaine to Russia.
• A tracking device was placed in the suitcase to be used to make the shipment enabling police to catch the gang who had links to Russia with the plot masterminded in Germany.
• A serving police offices and an accomplice have been arrested in Argentina.

Gabon – government seizes Veolia water and waste group
• There are always two sides to every expropriation but it is difficult to agree with Gabon’s seizure of French owned Veolia’s local water and waste subsidiary.
• Gabon took control of the subsidiary last Friday on the pretext of preserving the continuity and quality of the public provision of drinking water and energy.
• The capital, Libraville, has suffered frequent cuts in water supply due to a lack of investment and the move to seize the company may be seen as a populist move by the government.
• Problem for Gabon is that they renewed Veolia’s municipal contract for another five years in March.
• It will be interesting to see if there are any allegations of corruption. French companies used to be able to reclaim tax against payments used for corruption though we believe this practice is now banned under EU regulations.

Burkina Faso - Timis Mining unit, Pan African Minerals has been told to stop mining at its Tambao manganese mine in Burkina Faso
• The Burkina Faso government has withdrawn the company’s rights to the Tambao mine
• The Mining Minister has cited a breakdown of confidence between the government and the company stating that they didn’t respect their obligations
• Pan African Minerals which is run by Souleymane Mihin, is petitioning the International Court of Arbitration in Paris to prevent its permit from being withdrawn
• The move also follows a recent change of government.
• African Minerals formerly run by Frank Timis was placed into Administration in March 2015.

Canada is worlds overall top mining destination
• Canada is the world’s most attractive region for mining investment, based on the combined rankings of all its provinces and territories, the latest annual survey of mining executives released by Fraser Institute shows
• However, many of its providences and territories did not fare as well, with Manitoba simply disappearing from the top ten and British Columbia and Alberta continue to receive low marks from investors for regulatory uncertainty and concerns about disputed land claims
• In Australia, every jurisdiction received lower scores on policy this year, indicating increasingly unattractive government regulations across the country, Western Australia ranked 5th overall, followed by Queensland (12) and South Australia (14)

Currencies
US$1.2293/eur vs 1.2273/eur yesterday  Yen 106.93/$ vs 107.47/$  SAr 11.657/$ vs 11.723/$  $1.393/gbp vs $1.389/gbp  0.782/aud vs 0.780/aud  CNY 6.339/$ vs 6.359/$.

Commodity News

Precious metals:         
Gold US$1,328/oz vs US$1,322/oz yesterday
• The precious metal is set for its third weekly decline in four, contracting 1.5%, as Federal Reserve’s upbeat assessment of US economy raises the possibility of tighter monetary policy and supports a strengthening dollar.
• Chief economist at Australian Bullion Co. notes “concerns around tighter monetary policy, and a slight uptick in the dollar, have contributed to gold prices softening this week”. Fundamentals remain positive as “bulls still have the advantage though, with this pullback representing a buying opportunity in our view”.
   Gold ETFs 72.1moz vs US$72.1moz yesterday
Platinum US$995/oz vs US$988/oz yesterday
Palladium US$1,041/oz vs US$1,023/oz yesterday
Silver US$16.59/oz vs US$16.44/oz yesterday
           
Base metals:   
Copper US$ 7,144/t vs US$7,025/t yesterday
Aluminium US$ 2,180/t vs US$2,167/t yesterday
Nickel US$ 13,760/t vs US$13,440/t yesterday
Zinc US$ 3,504/t vs US$3,460/t yesterday
Lead US$ 2,543/t vs US$2,526/t yesterday
Tin US$ 21,485/t vs US$21,530/t yesterday
           
Energy:           
Oil US$66.4/bbl vs US$64.9/bbl yesterday
Natural Gas US$2.583/mmbtu vs US$2.655/mmbtu yesterday
Uranium US$22.00/lb vs US$22.00/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$77.6/t vs US$77.9/t
• Despite Chinese iron ore port holdings expanding to a record 155.88 million tonnes, according to Shanghai Steelhome E-Commerce Co., forecast prices are expected to remain elevated through 2018 says BMI Research in a latest report. While they cite demand sustaining and heavy restocking of inventory following the Lunar New Year to justify the raised $55/t forecast, prices are expected “to decline in subsequent years as Chinese economic growth refocuses away from heavy industry to services, dampening global demand for iron ore”.
Chinese steel rebar 25mm US$638.6/t vs US$636.6/t
• Raw materials for steelmaking show recovery after falling to their lowest levels in over a week on Thursday as Chinese investors broadly sell metals as their markets open after the holidays and steel prices dropped. Trading on the Shanghai Futures Exchange resumed yesterday after the week-long break for the Lunar New Year with “a flurry of sales. Probably traders, merchants and some arb players are behind this move, looking to capture some profit before buying interest returns”, according to head of metals research at Societe Generale.
• Nickel and zinc were hit the hardest as Chinese steel futures fell nearly 2%, recording their lowest levels in five weeks. Nickel which is mainly used in stainless steel closed down 0.1%, while zinc lost 0.3% as a main ingredient to galvanizing steel.
• The move isn’t expected to last however, as a late reversal in dollar trend recovered some loss while fundamentally the market is moving into peak season of demand, which runs from March to June.
Thermal coal (1st year forward cif ARA) US$83.0/t vs US$81.7/t
Premium hard coking coal Aus fob US$233.0/t vs US$231.6/t

Other:  
Tungsten APT European US$319-325/mtu unchanged
Cobalt LME 3m US$82,500.0/t vs US$81,250.0/t - Cobalt 27 buys royalty on world’s largest undeveloped nickel and cobalt reserve
• Cobalt 27 Capital Corp, a Canadian company created to buy the metal, said it has bought a royalty on all future nickel and cobalt production from the Dumont project in Quebec in a deal worth $70 million
• Transaction is for a 1.75 percent net smelter return royalty on output from Dumont, which contains the world’s largest undeveloped nickel and cobalt reserves, the project is jointly owned by RNC Minerals and private equity firm Waterton Global Resource Management
• RNC said last month that it is in talks with Japanese trading houses, mine operators and financiers to help secure $1 billion to build the project, which is expected to start production in 2020
• Cobalt 27 is also in talks for other cobalt streaming and royalty deals and plans over the next year

Company News
W Resources (LON:WRES) 0.625p, Mkt Cap £32.2m –La Parilla offtake agreements
• The Company reports that it has signed agreements to supply approximately 80% of the tungsten concentrate production of its phase T2 development at La Parilla.
• The agreements with Wolfram Bergbau und Hutten and “a leading supplier to the USA tungsten markets” are for the supply of “66% tungsten concentrate on competitive pricing terms”.
• Commenting on the agreements, Chairman, Michael Masterman, said “The agreements provide W with assurance of a solid revenue stream once production commences in early 2019 as we now focus on the implementation of the mine development plan…”
• The company also confirms that it has received the “first tranche of US$3.125 million” under its US$35m loan facility with BlackRock and that it has now repaid in full “the short term loans of €100,000 each provided by Symmall Pty Limited and Beronia Investments Pty Ltd ATF Duke Trust”.
• We observe that W Resources’ timing for the La Parilla development is either fortunate or astute as prices of the benchmark, intermediate product, ammonium paratungstate (APT) improved by around 50% during 2017 from approximately US$200/ metric tonne unit (mtu) to about US$300/mtu and that the improving price trend has continued into 2018 with the price currently around US$320/mtu.

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Fri, 23 Feb 2018 11:21:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29423/today-s-market-view-w-resources-29423.html
SP Angel . Morning View . Metals drift as China celebrates year of dog http://www.proactiveinvestors.co.uk/columns/sp-angel/29405/sp-angel-morning-view-metals-drift-as-china-celebrates-year-of-dog-29405.html African Battery Metals* (LON:ABM) – Kisinka cobalt project in DRC

Dalradian Resources (LON:DALR) – Drilling results from a further 16 holes at Curraghinalt

Kodal Minerals* (LON:KOD) – Gold anomaly in auger drilling at Nielle

SolGold* (LON:SOLG) – Latest drilling results from Alpala

Sunstone Metals (ASKSTM) – Results show potential of Bramaderos copper/gold project in Ecuador

 

European equities rise FTSE 100 off slightly as weaker than expected HSBC results weighed on the financial sector performance.

  • US indices futures are pointing to a weaker opening later today as markets reopen following a day off on Monday.
  • The US$ climbed for a third day as markets await Fed meeting minutes due tomorrow.
  • US sovereign bond yields are back on an increasing trend with the 10y benchmark trading above 2.9% ahead of a $258bn in government debt auction this week.
  • Brent is holding onto its gains recorded since mid last week amid signs of continued cooperation between major oil producing regions to control output; UAE Energy Minister said OPEC, Russia and other producers are looking at ways to “institutionalise” their cooperation beyond the end of this year.
  • Base and precious metals are lower on a stronger US$; despite a pull back by the LME index it continues to trade around highest levels in the last five years.

 

Lithium-ion batteries could be charged five times faster

  • New way of measuring internal temperatures of lithium ion batteries have revealed that they could safely be charged up to five times faster than currently recommended limits
  • Researchers at University of Warwick created a new sensor which works during battery’s normal operation without affecting its performance, previously have had to rely on unreliable external methods and have set very conservative limits as a result
  • The sensor uses miniature reference electrodes and Fibre Bragg Gratings along with an outer skin of fluorinated ethylene propylene to protect the device from the corrosive electrolyte inside the battery
  • The technology has been tested on commercially available vehicle batteries, but the researchers have said that more work would need to be done on battery management systems to take advantage of their findings

 

Lithium – The Lilium Jet, the world’s first electric vertical take-off and landing jet.

  • German company Lilium recently won “Early Stage Company of the Year” at the Global Cleantech 100 awards.
  • The team have developed a prototype electric plane that use turbo fans for Vertical Take Off and Landing (VTOL).
  • The VTOL capability makes the plane ideal for operations in urban locations and, dare we say it, military applications.
  • The team’s mission is to produce an affordable, clean, air taxi for 5 people.
  • Post early trials of their two seater prototype, Lilium claim performance of 300km/hr and 1 hour of flight on a single battery charge. 
  • The aircraft, constructed using light weight composites,  uses 12 flaps that are tilted to provide lift and direction.
  • Each flap carries 3 electric jet engines (source: Lilium) – all 36 engines generate 320kw of power.
  • LIlium raised $90m Series B funding in September 2017 to take it through regulatory approvals with the company aiming for manned test flights next year.
  • See more at: https://lilium.com/

 

Capital flows out of gold mining into Cobalt, Steel and Lithium

  • The gold sector may suffer as investment capital flows into other metals, according to a report from, accountants, Ernest & Young
  • The report shows that value of merger and acquisitions in the mining sector increased 15% in 2017 though the number of transactions declined by 6% last year
  • Specifically in the gold market, EY notes that M&A activity declined by 13% with the value of activity falling by 34% last year – whilst gold is suffering from lack of financing, EY said that with the growth in EV’s, demand is increasing for speciality metals like cobalt and lithium
  • EY also noted that the source of funding for the mining sector appears to be shifting, for the last two years industry participants accounted for nearly 70% of the financing deals; however, last year financial investors accounted for 22.4% of the transactions made last year, its highest level since 2015

 

Dow Jones Industrials

 

-

 

 

Nikkei 225

 

-1.01%

at

  21,925

HK Hang Seng

 

-

 

 

Shanghai Composite

 

-

 

 

FTSE 350 Mining

 

-0.31%

at

  18,755

AIM Basic Resources

 

-0.74%

at

   2,573

 

Economics

Germany – Producer prices growth beat estimates in January led by higher oil and electricity prices.

  • Annual price increase climbed 2.1%yoy last month beating analyst estimates for a 1.9%yoy reading but down on 2.7% recorded in FY17.

 

UK – PM May is considering to hold back UK contributions (£40bn) to the EU budget if EU officials refuse favourable trade deal terms.

  • A potential course of actions is discussed as an option if negotiations go wrong, people familiar with the matter told Bloomberg.
  • May is planning to announce details of a draft trade accord in a major speech next week with a draft ready by October and signed soon after Brexit in Mar/19.
  • EU officials argued that a full trade agreement would be impossible to finish before Brexit with October draft likely to only outline main principles rather than represent a legally binding contract.

 

Australia – The A$ is little changed against the US$ this morning amid the release of this month’s RBA policy meeting.

  • The RBA expects inflation to “only gradually” accelerate as the economy strengthens and labour market tightens.
  • Low interest rates have so far been supportive of reducing unemployment and bringing inflation closer to target levels.
  • Inflation has been stubbornly running at the 1.8%yoy rate, below the 2-3% target corridor.
  • The central bank remained cautious over the strength of the consumer demand growth in the wake of high household indebtedness highlighting that “consumption might be particularly sensitive to adverse developments in household income or wealth”.
  • On the other hand, business conditions remained at high levels with non-mining related investments prospects seen “more positive than they had been for some time”.
  • The bank held rates steady for the last 16 meetings with markets assigning a more than 50% chance to a rate hike only in November.

 

South Korea threatens WTO action if US hikes steel tariffs

  • South Korea will consider filing a complaint with the World Trade Organisation if President Donald Trump imposes high steel tariffs in line with recommendation made by the US Commerce Department
  • Whilst China does export a lot of steel and aluminium to the US, other countries import a lot more steel than China does
  • The recommendations call for tariffs on multiple countries, although Trump could determine that specific nations should be exempt, based on the economic or security interests of the United States
  • South Korea's trade ministry said in a statement that it had met with executives from steelmakers, and agreed to make outreach efforts until Washington reaches a final decision, Reuters reported
  • We find the news interesting given that South Korea may need to call on the US for its defence against North Korea at any moment

 

Currencies

US$1.2362/eur vs 1.2410/eur yesterday. Yen 107.09/$ vs 106.56/$. SAr 11.716/$ vs 11.671/$. $1.396/gbp vs $1.401/gbp. 0.792/aud vs 0.793/aud. CNY 6.342/$ vs 6.342/$.

 

Commodity News

Precious metals:         

Gold US$1,338/oz vs US$1,348/oz yesterday

   Gold ETFs 72.1moz vs US$72.1moz yesterday

Platinum US$1,002/oz vs US$1,013/oz yesterday

Palladium US$1,029/oz vs US$1,049/oz yesterday

Silver US$16.50/oz vs US$16.69/oz yesterday

           

Base metals:   

Copper US$ 7,089/t vs US$7,182/t yesterday - BHP forecasts a finely balanced market for copper over the next few years with supply shocks potentially exposing it to shortages, particularly in the concentrate segment.

  • Peru is planning to launch an auction for the $2bn Michiquillay copper project which has been returned by Anglo American to the government amid an optimization of its capex programs in 2014.
  • The project is estimated to host 1.2bn tonnes of copper in mineral resources and to potentially produce 200kt of copper per annum; although, the ore reported to contain elevated levels of arsenic.
  • The government is reporting that 10 companies including ones from China, UK and the US expressed interest and presented pre-registration documents to take part.
  • This would mark the first major mining project auction in Peru in at least a decade.

Aluminium US$ 2,213/t vs US$2,193/t yesterday

Nickel US$ 13,535/t vs US$13,765/t yesterday

Zinc US$ 3,547/t vs US$3,559/t yesterday – Vedanta is considering accelerating expansion of its African zinc operations to take advantage of prices that have climbed to the highest level in a decade, according to the zinc business head.

Lead US$ 2,574/t vs US$2,609/t yesterday

Tin US$ 21,400/t vs US$21,850/t yesterday

           

Energy:           

Oil US$65.4/bbl vs US$65.2/bbl yesterday

Natural Gas US$2.637/mmbtu vs US$2.611/mmbtu yesterday

Uranium US$21.75/lb unch

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.4/t vs US$77.2/t - BHP Billiton report firm demand for high quality iron ore in six months’ through Dec/17 in its interims.

  • Demand has been driven by “high steel margins, which benefited from Chinese steel supply-side reforms and winter production restrictions”.
  • The miner forecasts premiums for high grade ore to persist in the medium to long term on “ongoing Chinese supply-side reforms, the shift of steel capacity to coastal regions and more stringent environmental policies”.
  • Same logic has been expressed regarding main drivers for robust demand for higher quality metallurgical coal.

Chinese steel rebar 25mm US$638.3/t unch

Thermal coal (1st year forward cif ARA) US$83.5/t vs US$80.2/t

Premium hard coking coal Aus fob US$233.1/t unch

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,250.0/t v US$81,500.0/t - The voracious appetite for electric cars is driving a boom in small scale cobalt production in the Democratic Republic of Congo, where some artisanal and other private-run mines have found to be dangerous and employ child labour.

  • Production from artisanal mines probably rose by at least 50% last year, according to the estimates of officials at three of the biggest international suppliers of the metal, who asked not to be named because they’re not authorized to speak on the matter with production estimates accounting for as much as a quarter of the DRC’s production last year.

 

Company News

African Battery Metals* (ABM LN) 0.06p, Mkt Cap £3.5m – Kisinka cobalt project in DRC

  • Exploration is now underway at the Kisinka cobalt/copper project in the DRC.
  • Field exploration and mapping is being combined with other remote sensing data to help direct on-the-ground exploration.
  • ABM start augur drilling this week in areas of stunted vegetation within the license. Augur drilling can cover as much as 100m per day in holes up to 20m deep.
  • The team are looking to test mineralisation in the ‘Grand Conglomerate’ which also hosts Kamoa-Kakula, the world’s largest undeveloped copper project run in jv by Ivanhoe Mines.
  • Kamoa-Kakula is scheduled to produce some 284,000tpa of copper from 6.4% copper ore over its first 10 years of operation.
  • Management are also conducting due-diligence on copper/cobalt licenses introduced by two further groups in the DRC.
  • The company is operating in a relatively safe part of the DRC, well away from the troubles in the East of the country.
  • Sierra Leone: a third party is undertaking due dilligence on the Ferensola Gold project in Sierra Leone with a second interested group looking for access to project data.
  • The DRC government has proposed raising the royalty on cobalt to 5% from 2% currently and on base metals to 3.5%.
  • Given the price rise in cobalt and other battery related metals over the past year it is unsurprising to see the royalty rates rise. The DRC parliament passed the new royalty rates though the President has yet to pass the new royalties into law. The Upper House in the DRC government has raised rates for strategic substances to 10%.
  • For further information and maps on Kisinka and Sakania see: www.abmplc.com

Conclusion: African Battery Metals is an exploration play with the potential for significant discovery. Cobalt and copper mineralisation is present on the licenses in artisanal workings with verification of this through X-ray Niton-gun analysis indicating a good start to the exploration program. We look forward to seeing the drill results in the next few weeks as the team works to better delineate and define the scale, grade and potential of the project.  

*SP Angel act as broker to African Battery Metals

 

Dalradian Resources (LON:DALR) 61p, Mkt Cap £217m – Drilling results from a further 16 holes at Curraghinalt

  • Dalradian Resources has reported the results of a further 16 drillholes (6,798m) from its infill programme at Curraghinalt. Thirteen of the holes were drilled from the underground workings.
  • The results “support delivery of a positive resource update in Q2 2018, which will then feed into an updated feasibility study planned for Q3 2018.”
  • The results are reported to “correlate with and improve the current geological model with respect to the continuity and smoothness of the individual wireframes.”
  • Among the results reported today are:
    • intersections of four individual veins in hole 17-CT-445 including 00.62m intersection of the T17 vein averaging 34.35g/t gold from a depth of 100m; a 0.32m wide section of the Slap Shot Vein averaging 69.7g/t from 232.62m; a0.72m wide section of the V75 Vein averaging 24.32g/t and a double intersection of the Bend Vein with 318g/t gold over 0.44m from a depth of 314.16m and 0.32m averaging 48.9g/t from 343.46m;
    • a 0.34m wide intersection of the No.1 Vein averaging 216g/t gold from a depth of 59.95m in hole 17-CT-452;
    • Intersections of eight individual veins in hole 17-CT-459, including a 1.14m wide intersection of the T17 Vein which averaged 45.54g/t gold from a depth of 132.49m, 0.73m of the V55 Vein which averaged 49.8g/t from a depth of 182.31m and 0.86m of the 106-16 Vein which averaged 41.85g/t gold. We note that with the exception of the T17 Vein all the mineralised structures in this hole are less than 1m wide
    • A 1.05m wide intersection of the Mullan-S Vein at an average grade of 53.64g/t from a depth of 465.63m in hole 17-CT-470 which also intersected the Road Vein 0.27m at 46.3g/t) and the Mullan Vein (0.4m averaging 29.6g/t) and
    • A 0.7m wide intersection of the Crow Vein which averaged 73.89g/t gold from a depth of 455.75m in hole 17-CT-471. This hole also intersected the No.1Vein (0.40m averaging 31.1g/t gold) and the Slap Shot-S Vein (0.27maveraging 61.3g/t gold).
    • A tabulation in today’s announcement and a map and cross section available on the company’s website and referenced in the announcement shows up to 13 individual mineralised structures which underlines the complexity of the geological setting and highlights the task facing the resource estimators assigned to the update of estimates for these multiple, high grade structures.

Conclusion: Drilling at Currghinalt continues to encounter multiple high grade gold veins. We look forward to the updated resource estimnate due during Q2 and the subsequent updated feasibility study in Q3.

 

Kodal Minerals* (LON:KOD) 0.19p, mkt cap £12.1m – Gold anomaly in auger drilling at Nielle

  • Kodal Minerals reports that auger drilling at the Nielle prospect located approximately 50km north of Randgold Resources’ Tongon mine in Cote d’Ivoire has identified a new area of gold anomalism.
  • The anomaly was discovered by Resolute Mining as a result of a 542 hole programme  of auger drilling to sample material below the base of transported cover and forms part of Kodal Minerals’ joint-venture where Resolute is earning a 75% interest through the expenditure of $3m.
  • Follow up reconnaissance work involving the completion of 7000m of aircore drilling has shown the mineralisation remains open along strike to both the north and south.
  • Among the results of the aircore programme highlighted in today’s announcement are:
    • 16m at an average grade of 1.14g/t gold from the surface;
    • 4m at an average grade of 3.4g/t from a depth of 12m;
    • 8m at an average grade of 1.53g/t from a depth of 16m;
    • 12m at an average grade of 2.39g/t from surface and
    • 4m at an average grade of 1.76g/t from a depth of 20m.
    • Further results are pending and a “programme of reverse circulation drilling is proposed to further test this area of new gold anomalism”.
    • We note that in its most recent quarterly report, Australian listed Resolute Mining emphasised its commitment to focussed growth through exploration and issued guidance that it proposed to spend A$28m on exploration in 2018. Although much of the budget is likely to be spent on Resolute’s own projects and expanding its existing resources in Ghana and Mali, it would appear that it has funds available and an aspiration to advance other projects such as Nielle.
    • Kodal Minerals has also announced that Newcrest Mining has withdrawn from its exploration joint venture on the Dabakala licence, also in Cote d’Ivoire, and that the licence has reverted to Kodal Minerals.
    • During its exploration programme at Dabakala, Newcrest “completed a regional stream sediment, rock chip and laterite sampling programme” and recovered 315 auger drilling samples which were analysed for “low level gold mineralisation(max 309ppb gold) and multi-element association (31 additional elements analysed)” and “also completed updated geological interpretation and interpretation of geophysical data for regional structural framework”.
    • The basic early stage exploration work completed by Newcrest at Dabakala should provide a solid database to help Kodal assess its future plans for the project or to aid other potential joint venture partners assess their level of interest.

Conclusion: Initial reconnaissance drilling at Nielle has shown relatively shallow gold mineralisation which remains open along strike in both directions. Exploration is currently being funded by Resolute Mining and we look forward to the remaining results of the aircore work and of the follow-up reverse circulation drilling when they become available.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

 

SolGold* (LON:SOLG) 22.7 p, Mkt Cap £385m – Latest drilling results from Alpala

The following text is a repeat of yesterday’s comment with minor amendment

(SolGold own 85% of Cascabel in Ecuador)

  • SolGold reports the latest drilling and assaying results from holes 26-D3 to 35 on the Alpala project at Cascabel in Ecuador. In addition to the results reported today, results from a number of other holes are pending and the company expects to incorporate this additional information to update the maiden mineral resource estimate within the next two months.
  • Among the results highlighted today, which unfortunately are reported only in terms of copper equivalent grades (CuEq) and from unspecified depths within the drillholes which consequently obscures the underlying tenor and location of the copper and gold assays are:
    • A 1,100m long intersection in Hole 26-D3, from an undisclosed depth, averaging 0.54% copper equivalent  and including 164m averaging 0.76% and 224m averaging 0.75%, also reported in copper equivalent terms; and
    • A 178m long intersection in Hole 29-D1 averaging 0.62% CuEq including 48m averaging 0.82% CuEq; and
    • An 824m long intersection in Hole 33 averaging 0.82% CuEq which includes 576m averaging 0.93% CuEq and a 262m long section averaging 1.15% CuEq though, in the absence of depth information,  it is unclear whether the 262m portion in included within the wider 576m long portion or additional to it, though we assume that the former is the case; and
    • A 604m long intersection in Hole 33-D1 averaging 0.73% CuEq which includes 146m averaging 1.71% CuEq and 106m averaging 2.13% CuEq; and
    • A 302m long section of Hole 35 which averages 0.60% CuEq and includes 160m averaging 0.76% CuEq.
  • In addition to the results reported today, partial results from Hole 36 “indicate very high grades at Alpala Northwest, returning an open ended 82m @ 1.57% CuEq (1494‐1576m). Assays beyond 1576m are pending”.
  • Assays are also awaited from a number of other holes including Hole 36 which intersected visual copper sulphide mineralisation over 568m between 1432m and 2000m;  Hole 37, still in progress where visual copper sulphide mineralisation was encountered between 1620m and the current depth of 1842m; Hole 39 which intersected 205m of visual copper sulphide mineralisation between 665-870m; Hole 42 with 602m of mineralisation, open at depth was found from a depth of 309m; and approximately 205m of visual mineralisation, also open at depth from 665m.
  • The company particularly highlights the significance of Hole 37 at Alpala as it implies “major system extensions northwest towards the Trivinio prospect”, the bornite-chalcopyrite-magnetite mineral assemblage is “characteristic of the high‐grade centres of many porphyry copper‐gold systems”.
  • Taken in conjunction with recent geophysical interpretation which “has demonstrated that mineralisation from Alpala North and Northwest may be continuous with the Trivinio and Moran Targets, which would extend the Alpala System northwards by approximately 1km” the company appears to be building evidence for a broader model linking some of the prospects previously interpreted as discrete individual occurrences into a larger, linked entity.
  • Drilling of the Trivinio prospect is scheduled “following the completion of Holes 34 and 37 at Alpala”.
  • Commenting on the progress of the 120,000m planned 2018 drilling programme at Alpala, the company emphasises that it is directed at “northwest and southeast extensions”. The addition of further drilling capacity, and particularly the track mounted rigs at Alpala, which are now “delivering up to 100m core per day” and the use of directional drilling is delivering significant cost savings reported to “have more than halved from USD1,100 per metre to USD500 per metre”. Simplistically this implies potential savings on the 2018 Alpala work programme of up to around US$70m.
  • The geological team in charge of and directing the exploration programme in Ecuador is made up of Solgold employees including Jason Ward, Chief Geologist and Nick Mather, the SolGold ceo. Newcrest are a 14.54% shareholder of Solgold and Craig Jones, a Mechanical Engineer, joined the board of Solgold on 03 March 2017 as a nominee of Newcrest. Their presence on the register is a testament to the success and opportunity at Cascabel.

Conclusion: We look forward to the forthcoming assay results and subsequent update to the mineral resource estimate for Alpala and further evidence of the possible extension towards Trivinio once drilling there commences.

*SP Angel act as UK broker to SolGold

 

Sunstone Metals (ASX:STM) A$0.03p, Mkt Cap £33m – Results show potential of Bramaderos copper/gold project in Ecuador

  • Malcolm Norris reports the identification of a number of mineralised porphyry and epithermal targets at Bramaderos in Ecuador.
  • The team have so far discovered 10 gold-copper and another 10 gold-silver targets .
  • The Limon gold-copper target now measures some 2km x 1km.
  • Targets are so far defined by soil and chip sampling supported by magnetic and radiometric data.
  • Sunstone is keen to get drilling permits for further target testing particularly at the Limon target where surface outcrops, rock chips, and geophysical signatures make the prospect look promising.
  • Sunstone has much of the renown team which discovered and advanced the Tujuh Bukit deposit for Intrepid Mining.
  • Previous trench assays at Bramaderos show: 74.3m grading 0.69g/t gold and 0.15% copper, including 51.1m at 0.81g/t gold and 0.18% copper.
  • Plus 248.1m grading 0.56g/t gold and 0.14% copper to the end of hole starting at just 9.14m depth with mineralisation at the end of the hole returned 0.93g/t gold and 0.22% copper over 2.2m.

Conclusion:  Sunstone appear to be making good progress in their early-stage exploration at Bramaderos. We suspect Ecuador has much to offer which has yet to be discovered.

 

 

]]>
Tue, 20 Feb 2018 10:45:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29405/sp-angel-morning-view-metals-drift-as-china-celebrates-year-of-dog-29405.html
Morning View . Gold pulls back ahead of Fed minutes http://www.proactiveinvestors.co.uk/columns/sp-angel/29413/morning-view-gold-pulls-back-ahead-of-fed-minutes-29413.html Glencore (LON:GLEN) 400p, Mkt Cap £58bn – Trading and marketing drives Glencore earnings

Mkango Resources* (LON:MKA) 9.3p, mkt 9.7m - Rare Earth Element prices hike higher

Patagonia Gold (LON:PGD) 1.3p, mkt cap £31.3m - Proceeding with Calcatreu option

Pathfinder Minerals plc (LON:PFP) £1p, mkt cap £2.4m –  Mozambique

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Raising £2.8m for growth plans at Gakara

 

Japan task force echoes foreign minister calls to back renewables over coal and nuclear

  • Energy task force advising Japan’s foreign minister has proposed boosting renewable energy and shifting away from coal fired and nuclear power at home
  • The task force report, presented to Kono on Monday, argues nuclear power has lost economic competitiveness and says the world’s third-biggest economy should cut reliance on atomic energy to as little as possible, and instead boost use of renewables
  • In its current official targets Japan, one of the world’s biggest importers of thermal coal and natural gas, aims for renewables to make up 22 to 24 percent of its energy mix in 2030, up from about 14 percent now

 

Dow Jones Industrials

 

-1.01%

at

  24,965

Nikkei 225

 

+0.21%

at

  21,971

HK Hang Seng

 

+1.81%

at

  31,432

Shanghai Composite

 

-

 

 

FTSE 350 Mining

 

-0.37%

at

  18,487

AIM Basic Resources

 

-0.91%

at

   2,573

 

Economics

US – Bond yields on 10y sovereign debt held up around 2.89% and the US$ index hovered around 5-day high ahead of Fed meeting minutes due later today.

  • US equities closed in red in Tuesday after returning from a long weekend break snapping a six-session winning streak.

 

Germany – Economic growth continued strong in February with the pace coming off a seven year high recorded in the first month of the year, Markit PMI numbers suggest.

  • Another increase in new orders has been recorded taking the series of gains to thirty-eight months; although, rates of growth slowed across both manufacturing and services for seven and six months, respectively.
  • Employment climbed higher although at a reduced pace.
  • Business sentiment was at a record high since Jul/12 led by the services sector; manufacturers were the least optimistic for three months.
  • Inflation climbed to the second-fastest level since Jul/08 with businesses passing higher input costs onto consumers.
  • “The performance so far in the first quarter remains better than that seen in final three months of 2017, which saw GDP rise 0.6%... HIS Markit is currently forecasting an improved outturn of 0.9% in quarter one,” the report read.
  • Manufacturing PMI: 60.3 v 61.1 in January and 60.5 forecast.
  • Services PMI: 55.3 v 57.3 in January and 57.0 forecast.
  • Composite PMI: 57.4 v 59.0 in January and 58.5 forecast.

 

UK – Unemployment inched up in three months through December as an gains in new jobs weakened; average pay growth was little changed from the previous period.

  • The pound dropped against the US$ on the back of weaker than forecast employment numbers and an unexpected pick up in the jobless rate.
  • With inflation currently running at 3% means real earnings are down year on year.
  • Real pay was down 0.3%yoy in 2017, according to ONS numbers.
  • Unemployment rate (%): 4.4 v 4.3 in the previous three months and 4.3 forecast.
  • Employment change: +88k from three months to September and +165k forecast.
  • Av weekly earnings (3m%yoy): 2.5 v 2.5 in the previous month and 2.5 forecast.

 

France – Private sector growth remained elevated in February, although both manufacturing and services recorded a dip in the pace of expansion through the month.

  • Production gained on the back of a 20th consecutive increase in new orders.
  • Contrary to the trend for output and new orders, the rate of employment growth accelerated from the previous month and was just slightly below November’s 16-and-a-half year high.
  • Stronger employment increase was driven by service providers which hired staff at the second-sharpest pace since mid-2001, while manufacturers recorded a slight moderation in new jobs available.
  • Inflation eased slightly from the previous month amid weaker increases in both manufacturing and services sectors.
  • “Private sector growth in France shifted down a gear in February, with the rate of expansion in output and new orders each hitting four-month lows… nonetheless, the headline composite output PMI number of 57.8 remained firmly in positive territory and greater than the long-run series average (53.9),” the report said.
  • Manufacturing PMI: 56.1 v 58.4 in January and 58.0 forecast.
  • Services PMI: 57.9 v 59.2 in January and 59.0 forecast.
  • Composite PMI: 57.8 v 59.6 in January and 59.2 forecast.

 

South Africa – The SA rand strengthened against the US$ this morning following the release of weaker inflation numbers in January.

  • Consumer prices climbed 4.4%yoy v a 4.7%yoy increase recorded in December.
  • Moderating inflation eases pressure on the central bank to maintain a tight monetary policy.
  • The reserve bank held the benchmark repo rate unchanged at 6.75% in the last three meetings after cutting it by 25bp in mid-2017 as inflation came back into the target range of 3-6%.
  • Core CPI slowed to 4.1% in January, from 4.2%yoy recorded in December.

 

Currencies

US$1.2313/eur vs 1.2362/eur yesterday. Yen 107.67/$ vs 107.09/$. SAr 11.704/$ vs 11.716/$. $1.396/gbp vs $1.396/gbp. 0.785/aud vs 0.792/aud. CNY 6.342/$ vs 6.342/$.

 

Commodity News

 

Precious metals:         

Gold US$1,328/oz vs US$1,338/oz yesterday

   Gold ETFs 72.1moz vs US$72.1moz yesterday

Platinum US$997/oz vs US$1,002/oz yesterday

Palladium US$1,027/oz vs US$1,029/oz yesterday

Silver US$16.43/oz vs US$16.50/oz yesterday

           

Base metals:   

Copper US$ 7,043/t vs US$7,089/t yesterday - BHP says copper best way to play EV revolution

  • Copper is the best way to benefit from growth in electric cars and renewable energy according to BHP, the world’s largest mining company
  • Chief Executive said that the miner will concentrate on boosting its copper production rather than venturing into smaller markets such as lithium and cobalt, he argued that ‘copper market is order of magnitude greater even when you allow for EV’s’  
  • According to consultancy CRU, electric cars will require a global infrastructure revolution that will drive increase in global copper demand, with forecast that demand for copper in charging in distribution upgrades will reach 1.2m tonnes

Aluminium US$ 2,168/t vs US$2,213/t yesterday

Nickel US$ 13,440/t vs US$13,535/t yesterday

Zinc US$ 3,521/t vs US$3,547/t yesterday

Lead US$ 2,569/t vs US$2,574/t yesterday

Tin US$ 21,500/t vs US$21,400/t yesterday

           

Energy:           

Oil US$64.6/bbl vs US$65.4/bbl yesterday

Natural Gas US$2.609/mmbtu vs US$2.637/mmbtu yesterday

Uranium US$21.75/lb vs US$21.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.3/t vs US$77.4/t - Fortescue Metals wants to drive production costs lower

  • After production costs hit record low in the last quarter, Fortescue Metals, wants to drive its production costs even lower this fiscal year
  • Company is relying on automation and innovation to do so, using automated drills and an automated haulage system
  • Company says they are on track for a guidance of between $11 and $12 a tonnes for the financial year
  • Company has recently seen its interim net profit slump by almost half because of weaker prices and less demand in China for its lower quality iron ore

Chinese steel rebar 25mm US$638.3/t unchanged

Thermal coal (1st year forward cif ARA) US$83.3/t vs US$83.5/t

Premium hard coking coal Aus fob US$231.6/t vs US$233.1/t

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,250.0/t unchanged

 

Company News

Glencore (LON:GLEN) 400p, Mkt Cap £58bn – Trading and marketing drives Glencore earnings

  • Glencore report a triumphantly strong set of earnings for 2017 driven by strong recovery in their mining business supported by another good performance from their trading (Marketting) activities.
  • Debt which so haunted the group back in December 2015 when the shares hit a low of 69p on rumours of potential debt refinancing issues has been cut.
  • Net debt is reduced to a more manageable US$10.7bn from US$15.5bn yoy though it is good to see Glencore’s appetite for expansion and asset acquisition remains undimmed.
  • Glencore has proven that its policy of aggressive expansion into some higher-risk areas, eg the DRC has worked well for the business creating growth that other mining majors can but envy.
  • Recent moves mean that Glencore is well placed in terms of production of cobalt and other battery metals required to feed the massive expansion in electric vehicle production that is to come.
  • The Marketing division, which refers to the trading business reported an EBIT of US$3bn. While this was just 3% better than last year investors should remember that it was the marketing business which led the company out of its downturn and effectively rescued the company at a time when a number of aggressive hedge funds were against it.
  • Industrials, consisting of mining and energy products, saw a major 60% rise in EBITDA to US$11.5bn highlighting the impact of higher prices across almost all commodities particularly through the second half.
  • The rise in metals prices has continued into the new year and we would look forward to another strong first half for Glencore this year.
  • Glencore continues to expand in areas which other majors are shying away from with Glencore taking up a 49% stake in the acquisition of Rio Tinto’s Hunter Valley coal operations in cooperation with Yancoal retaining a 51% stake giving Glencore access to coking and other high quality coal.
  • Agriculture improved to EBIT of US$990m from US$909m last year
  • Dividends have increased to 20c/s distributing some US$2.9bn for the year.
  • Net income rose to US$5.8bn from US$1.4bn last year highlighting the turnaround and the massive contribution from the mining business.

Conclusion: Glencore goes where others fear to tread. While this increases its risk profile it also raises the potential reward. 2018 should be a great year for Glencore’s mining business with ongoing support from growth in its trading business.

 

Mkango Resources* (LON:MKA) 9.3p, mkt 9.7m - Rare Earth Element prices hike higher

  • Rainbow Rare Earths have noted this morning that the basket price of the company's suite of rare earth elements has risen dramatically by 8% since the year and around 26% since H1 ’17.
  • The market is partially driven by growth in production for electric vehicles as well as other new technologies.
  • REE prices are also recovering from depressed levels caused by the collapse of a number of REE investment schemes in China. The collapse in prices forced Molycorp to close the Mountain Pass REE mine in California and file for Chapter 11 bankruptcy protection in June 2015. The Mountain Pass REE mine sold in June 2017 for $20.5m to a Chinese led consortium .
  • Molycorp was acquired by Oaktree Capital Management and reorganised into Neo Performance Materials which was listed on the TSX on 8 December last year at $18/s. The shares have since pulled back to $15.30/s.

*SP Angel act as nomad and broker

 

Patagonia Gold (LON:PGD) 1.3p, mkt cap £31.3m - Proceeding with Calcatreu option

  • Patagonia Gold reports production of 26,005oz of gold equivalent vs 25,800ozeq last year and 21,521ozeq in 2015.
  • Production guidance is for 59,000ozeq driven by the ramp up at the Cap Oeste project which is reported to be on schedule to exceed 4,200ozeq in February
  • Cap Oeste production 82,000ozeq gold equivalent within a range of US$800-850/oz.
  • Cash costs in January are stated at US$711ozeq which is just as well because the company’s other administrative costs of US$8.7 served to wipe out what remained of the company’s US$15m gross profit last year to create a US$0.9m total comprehensive loss for the year. The 2015 other admin charge was US$11.4m.

Conclusion: It is good to see new gold and silver production coming from Cap Oeste. The company now needs to get a grip on its administrative expenses which include an element of local taxes to enable returns to shareholders.

 

Pathfinder Minerals plc (LON:PFP) £1p, mkt cap £2.4m –  Mozambique

  • Pathfinder Minerals, which lost its mineral sands licenses in Mozambique in 2011 in a dispute with General Veloso continues to seek to recover control of the mineral licenses.
  • The company updates today that it continues to pursue a dual-track process to recover control of the licenses by way of enforcement in Mozambique or by way of a negotiated settlement with the General.
  • The company issued 19m shares on 1 December at 1.3p and the issued a further 3m shares on 22 December to Linkwood Holdings.
  • It is remarkable that a company should exist for so long while advancing so little.

 

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Raising £2.8m for growth plans at Gakara

  • Rainbow Rare Earths has reported a loss of US$1.1m for the six months to 31st December 2017 2016 Loss - US$0.4m) as it ramps up mine production at its Gakara mine in Burundi and moved the Kabezi plant through commissioning.
  • The 31st December cash balance is reported at US$2.7m and at US$2.4m net cash.
  • The company expects to achieve formal handover of the plant this month and be able to declare full commercial production during Q2 2018 so that during the second half of the calendar year it can build up to a production rate of 5000tpa of concentrate.
  • Two 25t consignments of concentrate were shipped during December with a further 75t consignment in January and "February's export Figure is due to be higher still."
  • Exploration work including mapping and geochemical stream sediment sampling has identified 69 potential rare earth target while ground based gravity and airborne magnetic geophysical surveys have " indicated the presence of four sizeable and highly prospective magnetic anomalies, the largest of which covered an area which includes the Gashirwe and Kiyenzi prospects." 
  • Drilling is currently underway on these targets.

 

Commenting on the state of the rare earths market, the company points out that rare earths prices "increased considerably in the second half of 2017" after "two years of inactivity". The basket price of the company's suite of rare earths "ranged between US$10-11 per kg TREO in the first six months of 2017, reached a peak in excess of US$18per kg in September, before ending the year at US$12.27per kg and strengthening further to US$13.24per kg as at 20th February 2018."

]]>
Wed, 21 Feb 2018 11:01:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29413/morning-view-gold-pulls-back-ahead-of-fed-minutes-29413.html
Morning View . Metals continue retreat following Fed Reserve minutes http://www.proactiveinvestors.co.uk/columns/sp-angel/29419/morning-view-metals-continue-retreat-following-fed-reserve-minutes-29419.html SP Angel morning note readership numbers rise significantly since introduction of new MiFID II regulations

  • Restrictions on the publication of research under the new MiFID II regulations appear to have significantly increased readership of our morning note

 

Anglo American (LON:AAL) – H1 recovery and dividend resumption as net debt almost halved in a year

Golden Star Resources (LON:GSC) – 2017 results confirm the operational turnaround resulting from the underground strategy

Kodal Minerals* (LON:KOD) – Drill results confirm continuity, high-grade and potential of Bougouni lithium project

Click link for Flash Note

Mkango Resources* (LON:MKA) 8.9p, mkt 9.3m - EV Automakers look to optimise use of rare earths on forecast demand growth

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Results

Xpediator PLC* (LON:XPD) – Buy, Target price 44p – Full Year trading update shows strong growth in line with market expectations

Click link for Flash Note

 

Miners reward shareholders with cash returns while slashing debt

  • The four major London-listed mining companies have released earnings this month and its clear they are doing what shareholders have demanded of them by rewarding shareholders through pay-outs and pay down debt
  • Glencore impressed investors with a $2.9bn in dividends, Rio Tinto is offering $5.2bn plus a $1bn buy-back facility, Anglo are paying $618m and BHP Billiton paid $2.9bn in interim dividends.
  • Free Cash Flow generation from the majors of $26.7bn is made up of: BHP $11.1, Anglo $4.9bn, Rio Tinto $9.5bn, Glencore $1.2bn (after adjusting for $5.0bn changes in working capital)
  • Funds which are short of the miners are likely to continues to show lesser returns as the sector continues to outperform in terms of cash generation and strong earnings

 

Dow Jones Industrials

 

-0.67%

at

24,798

Nikkei 225

 

-1.07%

at

21,736

HK Hang Seng

 

-1.31%

at

31,020

Shanghai Composite

 

+2.17%

at

3,269

FTSE 350 Mining

 

+2.08%

at

18,941

AIM Basic Resources

 

-0.01%

at

2,550

 

Economics

 

Currencies

US$1.2273/eur vs 1.2313/eur yesterday  Yen 107.47/$ vs 107.67/$  SAr 11.723/$ vs 11.704/$  $1.389/gbp vs $1.396/gbp  0.780/aud vs 0.785/aud  CNY 6.359/$ vs 6.342/$

 

Commodity News

 

Precious metals:         

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

  • Spot gold continues to retreat, falling 1.7% this week so far as the last US Fed Reserve meeting showed policymakers are confident in the need to keep raising interest rates. The more upbeat take on inflation in the minutes of the Jan. 30-31 policy meeting has convinced market participants that the new Fed chief Jerome Powell will lead his colleagues in raising interest rates next month. The USD rose to an over one-week peak to extend its weekly recovery, helped by the Fed minutes and higher short-term Treasury yields.

   Gold ETFs 72.1moz vs US$72.1moz yesterday

Platinum US$988/oz vs US$997/oz yesterday

Palladium US$1,023/oz vs US$1,027/oz yesterday

Silver US$16.44/oz vs US$16.43/oz yesterday

           

Base metals:   

Copper US$ 7,025/t vs US$7,043/t yesterday

  • Investors withdraw from global equities and commodities into the safety of the dollar ahead of the release of the minutes from the US Federal Reserve’s most recent policy meeting. The Bloomberg dollar index continued its positive surge against the basket of currencies to 1% this week so far, with global stocks falling for the third consecutive trading day and as the two-year US Treasury yield touched its highest since 2008.
  • Crucial January US data highlights higher than expected US wages and inflation, driving up the USD and US yields, with the Fed minutes signaled the potential for additional increases in interest rates this year on the back of an expanding US economy. The policy meeting minutes “increased expectations for further rate hikes”, boosting the dollar and hurting metals, said an analyst with Guotai Junan Futures Ltd.
  • However, sentiment continues to be positive for metals as “the bullish fundamentals haven’t changed”, while advice that “investors should buy on the dips” remains. Banks including Goldman Sachs Group Inc and JP Morgan Chase & Co. have reiterated that renewed inflation as the economy expands may boost commodity prices and raw materials will do well in the late stage of the economic cycle. Synchronised global growth and constrained mine supplies are also supporting metals. In the near-term, Chinese demand is set to recover as manufacturers return after the Lunar New Year holiday.

Aluminium US$ 2,167/t vs US$2,168/t yesterday

Nickel US$ 13,440/t vs US$13,440/t yesterday

Zinc US$ 3,460/t vs US$3,521/t yesterday

Lead US$ 2,526/t vs US$2,569/t yesterday

Tin US$ 21,530/t vs US$21,500/t yesterday

           

Energy:           

Oil US$64.9/bbl vs US$64.6/bbl yesterday

Natural Gas US$2.655/mmbtu vs US$2.609/mmbtu yesterday

Uranium US$22.00/lb vs US$21.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.9/t vs US$77.3/t - Glencore iron ore trading volumes rise to 47.7mt as EBIT rises to +$7m from a loss of $9m yoy

  • Said that iron ore trading volume increased marginally in 2017 as it rebounded to profit for the business among a widening in pricing by grade with less low grade demand in China expected
  • Traded 47.7mt of ore in 2017, up from 47.1mt in 2016, booked adjusted EBIT of $7m for iron ore, from a loss of $9 million in 2016 on the same basis
  • Glencore said while the overall supply of iron ore may increase in 2018, a decrease in low grade cargoes exported to China may be seen, as steel margins incentivised purer less-polluting grades

Chinese steel rebar 25mm US$636.6/t vs US$638.3/t

  • The most-active steel rebar futures fell almost 2% as investors return from a week-long Lunar New Year holiday, touching its weakest level in five weeks at 3,841 yuan ($605)/tonne. While steel demand is expected to firm when construction activity resumes at full swing, but is not expected until next months with many workers still away. “Traditionally, most of the construction workers will stay at their hometown until early March” according to a Shanghai-based trader.
  • The peak season in China’s construction begins next month with encouraging order books at steel plants and traders for February and March. Low steel inventories along with abundant liquidity across China following a substantial increase in new loans in January “will fuel steel demand”.
  • Chinese steel producers are actively restocking raw material inventories, eager to unleash full mill capacity following the winter’s output curb ending next month, with hopes for a repeat of last year’s record margins. BHP Billiton Ltd. Forecast mills to boost run rates through the second quarter to make up for the curtailments. Chief Commercial Officer Arnoud Balhuizen forecasts a gradual resumption as provinces step back from restrictions designed to fight air pollution, noting “our base case is that the winter restrictions expire in staggered fashion across localities, with the blast furnace fleet expected to return to the high utilisation rates that prevailed prior to the winter curtailments sometime in the June quarter. This is required due to the gap in construction steel supply left by the permanent closure of induction furnaces”.
  • The move toward air emission improvements also brought a focus on higher-grade ore, with demand expected to remain high following the output lift, although average prices may drop as China’s demand growth may fall this year given a slowdown in housing and autos. “While it will be challenging to maintain the same average prices as those achieved in the half year just concluded, we are optimistic that the 62% index price can be relatively resilient”. Support for lower-grade ore has fallen, as the discount on 58% content ore has widened to more than 40%, from less than 15% in 2016.  

Thermal coal (1st year forward cif ARA) US$81.7/t vs US$83.3/t - Adani Group facing renewed claims of $600m fraud in India

  • India’s customs office has revived allegations of a US$600m financial fraud against the Adani Group, challenging an order clearing the mining giant last year as “erroneous, illegal and improper”
  • Adani has been fighting allegations for the past four years that it used a shell company in Dubai to siphon hundreds of millions of dollars from the company’s books into Adani family companies based in overseas tax havens
  • Adani has plans to build one of the world’s largest coal mines in Australia though their ability to finance and run the operation may now be in some doubt

Premium hard coking coal Aus fob US$231.6/t vs US$231.6/t

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,250.0/t unchanged

  • Chinese cobalt companies rally as much as 10% with Apple Inc. becoming the latest major consumer to seek long-term supply deals for the battery metal. China Molybdenum Co., which has operating mines across the world’s largest producer, the Democratic Republic of Congo, climbed as much as 10% in Hong Kong, with mainland stocks Zhejiang Huayou Cobalt Co., GEM Co., Nanjing Hanrui Cobalt Co. following suit.
  • Even Apple is trying to secure cobalt supply for its mobile batteries (direct from miners)” according to Argonaut Securities Asia analyst, and “it indicates that future global demand for cobalt from electric vehicles will be really huge”. While consumption from individual electronic devices remains relatively low compared to Tesla vehicle batteries, the favoured Lithium-Cobalt-Oxide (LCO) compounds represent up to 60% cobalt, compared to the 6-19% for Nickel-Manganese-Cobalt (NMC) variations.
  • Benchmark cobalt metal price rose yesterday to its highest since 2008, climbing 145% last year.

 

Company News

Anglo American (LON:AAL) 1726.8 pence, Mkt Cap £22.3bn –H1 recovery and dividend resumption as net debt almost halved in a year

  • Anglo American has reported a doubling of attributable profit during 2017 to US$3,166m (2016 US$1,594m). Earnings per share doubled to $2.48/share from US$1.24/share in 2016.
  • The company reports that it “exceeded our cost and volume improvement target for the year, achieving $1.1 billion of underlying EBITDA benefit.”
  • Attributable free cash flow almost doubled to US$4,943m from US42,562m in 2016 and, as a result, the group net debt almost halved to US$4.5bn at the year-end (2016 – US$8,487m) reducing gearing from 26% to 13%.
  • In terms of EBITDA, the contribution of Anglo American’s coal operations, which generated an EBITDA margin of 46%,  rose by over 70% to US$2,868m (2016 – US$1,646m) and contributed 33% of the total US$8,823m. Metallurgical coal dominated with sales of 19.8mt generating US$1,977m of EBITDA from revenue of US$3,675m at a 54 % margin.
  • Coal sales of 10.6mt from Cerrejon in Colombia generated a further US$385m of EBITDA at a margin of 49% while to lower margin South African coal business sold 18.6mt at a margin of 32% to generate US$588m from sales revenue of US$2,746m
  • The second largest contributor were the iron ore and manganese businesses which contributed US$2,357m of EBITDA from revenues of US$5,831m (2016- US$1,536m EBITDA from revenues of US$3,426m). The S African iron ore business of Kumba dominated providing over 60% (US$1,474m) of EBITDA at a margin of 42% on sales of 44.9mt.
  • Anglo American’s copper business recovered strongly rising from EBITDA of US$903m in 2016 to US$1,508m with what were described as “solid performances at Los Bronces and Collahuasi partly offset by the impact of lost production at El Soldado, owing to temporary suspension of mining operations in the first half.”
  • The De Beers diamond business improved both sales and margins to deliver EBITDA of US$1,435m (2016 – US$1,406m)  at a margin of 25% (2016 – 23%) despite lower sales revenues as a result of the anticipated destocking of the middle part of the supply chain.
  • The company is declaring a final dividend 54 cents bringing the total to US$1.02/share (2016 – nil).
  • Commenting on the results, Chief Executive, Mark Cutufani, said “These strong financial results benefit from transformed productivities and efficiencies across our business” and went on to highlight that “Over the last five years, we have now delivered a $4.2 billion annual underlying EBITDA improvement. While we have already driven a material operational turnaround, we believe there is significant additional upside within the business both through further operating gains and from selected organic growth options”.

 

Golden Star Resources (NYSEAMERICAN:GSS) C$0.92, Mkt Cap C$350.5m – 2017 results confirm the operational turnaround resulting from the underground strategy

  • Reporting a reversal of the US$39.6m loss in 2016 to an attributable profit of US$38.8m in 2017, Golden Star Resources underlined that it had met or exceeded its guidance for gold production cash and all-in sustaining costs and capital expenditure.
  • Gold production of 267,565oz during the year included a contribution of 137,234oz from Wassa and 130,331oz from Prestea and exceeded 2016’s 194,054oz by 38%.
  • Consolidated cash costs declined by around 13% to US$763/oz, below the 2017 guidance range of US$780-860/oz,  with Wassa declining by 6% to US$880/oz while Prestea delivered a 21% reduction to US$632/oz.
  • Consolidated all-in sustaining costs fell by 14% to US$944/oz which was also below the guided US$970-1070/oz.
  • Capital expenditure during the year of US$69.6m represents a decline of around 17% compared to 2016.
  • The company’s production guidance for 2018 is for 230-225,000oz of gold production at an average cash cost of US$650-730/oz. In detail, Wassa is expected to produce 137-142,000oz of gold at between US$600-650/oz while Prestea is forecast to produce 93-113,000oz of gold at a cash cost in the range US$740-880/oz.
  • Capital cost guidance for 2018 shows a substantial reduction to US$36.5m, of which US$18.8m is classed as development capital and US$17.7m as sustaining capital. The breakdown by operating unit is for US$20.6m to be spent at Wassa (US$5.9m of development capital with the balance to sustain operations); US$9.3m at Prestea (US$6.3m development) and the remaining US$6.6m on exploration.
  • At 31ST December 2017, the company held cash of US$27.8m leaving net debt of US$67.8m (December 2016 US$83.1m).

Conclusion: Golden Star’s move away from its historic low grade, high cost open-pit mining operations to focus on higher grade, lower cost underground mining has reversed 2016’s losses and delivered a profit of US$38.8m. As the transition continues following the milestone of commercial production at the Prestea underground mine which was achieved on 1st February, a reduction in expected capital expenditure and continuing cost reduction at both Wassa and Prestea, the trend looks set to continue.

 

Kodal Minerals* (LON:KOD0.18p, mkt cap £12m – Drill results confirm continuity, high-grade and potential of Bougouni lithium project

Click link for Flash Note

  • Kodal Minerals continues to report good quality drill results from the Ngoualana prospect at its Bougouni Lithium project in Southern Mali.
  • The drilling indicates that the scale, grade and continuity of the project now make Bougouni look like a potentially viable prospect.
  • Work done nearby by Birimian Limited gives some indication as to the economic potential of the region for lithium production.
  • Significantly, results from metallurgical work indicate that Kodal’s Bougouni project may produce cheaper and more viable Lithium Carbonate concentrate product directly in country.
  • High-purity spodumene: Kodal’s ‘naturally’ high purity spodumene formed in massive pegmatite intrusions hosted in metasediments which may be bulk mined to enable extraction of the whole pegmatite with particularly high grades seen where pegmatite dykes intersect. The pegmatite veins are spodumene rich at 20-30% spodumene content in low mica pegmatite bodies.
  • So far drilling shows a strike length of some 850m of remarkably consistent spodumene in pegmatite with a number of associated parallel veins.
  • Drilling is done at around 50 degrees to the vertical to give good intersections of the vertical or near vertical vein material.  Intersections show the major vein to have a true width of around 20m.
  • Drill spacing’s are around 50m apart with infill drilling closing this up to 20m in some areas. Consistency of the vein material may enable a JORC resource to be done on the current drill pattern.
  • A newly discovered vein some 250m to the south also appears to provide a further zone of material.
  • Drill results: today’s results show high grade lithium of up to 1.75% in Li2O.
  • The team have drilled some 45 RC drill holes covering 5,619m since October with assays returned for some 26 of the holes by ALS Laboratories.
  • Results have been calculated with a rigorous 1% Li2O lower cut-off and maximum 2m internal dilution and only reporting intersections of >5m width.
  • Notable results are:
    • 18m at 1.75% Li2O;
    • 20m at 1.71% Li2O;
    • 17m at 1.63% Li2O;
    • 18m at 1.54% Li2O;
  • Bulk sample: Kodal is looking to ship a 5,000t bulk sample to China for further testing. The cost of the sample will be around £350,000 though a portion of this will be recouped through the sale of the contained lithium after processing.
  • Concentrate: Battery grade lithium carbonate concentrate of >6% Li2O should be producible at Bougouni. Recent prices are reported by Kodal to be running at around US$600/t
  • Cash: Kodal is relatively well funded for an exploration company with £3.6m cash in the bank and relatively low overhead costs running at around £360,000pa.
  • Drilling costs extra but this is also at a relatively modest $60/m.
  • Feasibility Study: Kodal is working on the key elements for a Feasibility Study, eg drilling, bulk sampling and metallurgical testing. The data should enable the development of a suitable study for more accurate economic assessment of the project for further financing and potential future development.
  • Location: Bougoumi is unusually well located for a project in Mali with the town of Bougouni just 7km to the north which is just 180km from Bamako.
  • Power: there is a power line running through the license area though the project is likely to require its own power plant. Advances in solar power mean that much of this could be generated simply and locally with grant funding available to help projects get going.

Conclusion: The relative purity of Kodal’s Bougouni project ores combined with low associated mica levels should make concentrates from the Bougouni project relatively simple to produce and easy to sell. So far Suay Chin PTE based in in Singapore has contributed £4.8m to Kodal. The group is affiliated with the Shandong Ruifu Lithium Company, a lithium processing and chemical business based in China. We see this as a beneficial, strong and meaningful partnership for Kodal and its shareholders.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

 

Mkango Resources* (LON:MKA) 8.9p, mkt 9.3m - EV Automakers look to optimise use of rare earths on forecast demand growth

  • Toyota Motor Corp., Asia’s number 1 automaker, is developing a new wave of electric vehicles which are more affordable and less vulnerable to price fluctuations for key elements in short supply. The next generation electric motor permanent neodymium batteries look to reduce the dependency on expensive rare earths including neodymium, terbium and dysprosium.
  • Magnet development in the future aims to reduced neodymium consumption by up to 50% and eliminated terbium and dysprosium from 4th generation Prius motor permanent magnets, in favour of more abundant lanthanum and cerium, which cost about 20x less.
  • With rising neodymium prices and exports from China dropping 30%, next-generation magnets prices are expected to be more sustainable.
  • Toyota expects that the magnets will be put to first use in electrified vehicle drive motors and generators and electric power steering in the first half of the 2020s. The International Energy Agency estimates the number of electric vehicles to reach around 40 million, while the mining Giant BHP Billiton forecast 8% global fleet (140 million vehicles) by 2035.

Conclusion: The adjustments to the mix of rare elements to be used appears to favour the mix of rare earth metals within Mkango’s Songwe Hill project in Malawi

*SP Angel act as nomad and broker

 

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Results

We apologise for issuing an old headline in yesterday’s comment

  • Rainbow Rare Earths has reported a loss of US$1.1m for the six months to 31st December 2017 2016 Loss - US$0.4m) as it ramps up mine production at its Gakara mine in Burundi and moved the Kabezi plant through commissioning.
  • The 31st December cash balance is reported at US$2.7m and at US$2.4m net cash.
  • The company expects to achieve formal hanDover of the plant this month and be able to declare full commercial production during Q2 2018 so that during the second half of the calendar year it can build up to a production rate of 5000tpa of concentrate.
  • Two 25t consignments of concentrate were shipped during December with a further 75t consignment in January and "February's export Figure is due to be higher still."
  • Exploration work including mapping and geochemical stream sediment sampling has identified 69 potential rare earth target while ground based gravity and airborne magnetic geophysical surveys have " indicated the presence of four sizeable and highly prospective magnetic anomalies, the largest of which covered an area which includes the Gashirwe and Kiyenzi prospects." 
  • Drilling is currently underway on these targets.

Commenting on the state of the rare earths market, the company points out that rare earths prices "increased considerably in the second half of 2017" after "two years of inactivity". The basket price of the company's suite of rare earths "ranged between US$10-11 per kg TREO in the first six months of 2017, reached a peak in excess of US$18per kg in September, before ending the year at US$12.27per kg and strengthening further to US$13.24per kg as at 20th February 2018."

 

Xpediator PLC* (LON:XPD) 38.5p, mkt cap £45.2m – Full Year trading update shows strong growth in line with market expectations

Buy - Target price 44p

  • Adjusted net profits double and cash is ahead- UK based freight management company, Xpediator, has issued a trading update for the Full Year ending December 2017. We estimate that 2017 adjusted net profits more than doubled from £1.4m to £3.1m. Year-end cash closed at £1.5m (vs. our forecast net debt of £1.5m) on strong working capital performance. Our 2018 adjusted EPS estimates (unchanged) rate the shares on a p/e 9.9x with a yield of 4.4%.
  • Group margins are rising - the Group continues to invest in operations to expand margins and add value. Xpediator has today announced the appointment of a new Chief Information Officer to drive IT strategy. We forecast rising adjusted EBIT margins - from 3.8% in 2017 to 4.6% in 2018 and 4.8% in 2019. 
  • Expanding European presence and e-commerce capability - three acquisitions were undertaken during 2017, management resource is in place to support integration and IT infrastructure is being expanded.  
  • Brexit and shipping via UK ports - Dover handled more than 2.6 million trucks in 2017 and Calais 2 million – both ports are now campaigning for a free flow trade system post Brexit. Without this, HMRC estimate customs declarations rising from 55 million to 255 million per annum. The existing customs declaration system CHIEF is 25 years old and HMRC is in the process of developing and testing a replacement, the Customs Declaration System (CDS). This is to be phased in from August 2018. The Group recently acquired UK port offices at Dover and Felixstowe for potential post Brexit customs work.
  • Growth opportunities - the Freight Forwarding division is seeing strong CEE freight demand, supported by strong regional GDP growth and is investing in new routes. Newly acquired Regional Express is an Amazon Global preferred supplier providing VAT registration and shipping for e-commerce operators in the U.S. and Asia selling into UK and Europe. This brings upside opportunity. The Warehousing & Logistics division’s new Romania warehouse has reached full capacity helped by growth of the Pall-Ex franchise. Further capacity is being sought. The Transport Services division, with a network of 1,500 CEE haulage firms, provides fuel cards, breakdown recovery and ferry bookings. It has high margins and steady growth.

Valuation - the UK sector trades on a p/e multiple range of 10.0x – 13.0x and the wider international sector on a p/e of 16.0x. Xpediator trades on a 2017 p/e of 12.5x falling to 9.9x in 2018 and 8.6x in 2019. Coupled with an attractive 2018 yield of 4.4%, market opportunity and upside from the effective integration and development of the recent acquisitions, we believe that the current share price is undervalued. 

 

*SP Angel act as Nomad and joint broker

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Thu, 22 Feb 2018 12:59:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29419/morning-view-metals-continue-retreat-following-fed-reserve-minutes-29419.html
Base Metals pull back on stronger dollar http://www.proactiveinvestors.co.uk/columns/sp-angel/29399/base-metals-pull-back-on-stronger-dollar-29399.html No 1 Integrated Nomad and Broker for Mining on AIM*

Petra Diamonds (LON:PDL) – Interim results

SolGold* (LON:SOLG) – Latest drilling results from Alpala

Sub-sea mining started off as CIA plot in 1970’s (Nautilus Minerals)

  • A BBC report today tells a remarkable story of a CIA plot to recover a lost Soviet submarine which was carrying nuclear ballistic missiles.
  • Russia’s K-129 submarine had sunk 1,500 miles north-west of Hawaii.
  • The US sent a ship which was said to be financed by billionaire, Howard Hughes, to recover the submarine which was closely watched by Soviet spy ships.
  • Manganese nodules were recovered from the sea floor as a diversion to the Russians, while the American’s grabbed the Soviet sub.
  • The operation showed the way to potential mining of the sea-bed in deep water as is planned by Nautilus Minerals.
  • http://www.bbc.co.uk/news/resources/idt-sh/deep_sea_mining

 

Four nation alliance rising to counter China’s belt and road

  • The US, Japan, India and Australia may join forces to establish an alternative to China's Belt and Road Initiative in attempt to counter Beijing’s growing influence
  • The multi-billion dollar initiative aims to connect Asia, Europe, the Middle East and Africa with a vast logistics and transport network, using roads, ports, railway tracks and fibre optic lines for trade network
  • Control of the logistical network could give significant advantage to trade flows in certain directions to the advantage of the sponsoring economies
  • Donald Trump is meeting with The Australian Prime Minister, Malcolm Turnbull, to discuss the matter this week

 

Dow Jones Industrials

 

+0.08%

at

25,219

Nikkei 225

 

+1.97%

at

22,149

HK Hang Seng

 

-

 

 

Shanghai Composite

 

-

 

 

FTSE 350 Mining

 

+0.06%

at

19,057

AIM Basic Resources

 

+0.28%

at

2,592

 

Economics

Europe - European equities climbed this morning driven by baking and travel shares with both US and Chinese markets shut today.

  • US markets closed higher on Friday with the S&P 500 index reporting the best week in five years (+3.5%) after a strong correction recorded earlier in the month.
  • Gold prices were rangebound around $1,350/oz after briefly touching $1,360/oz on Friday.
  • Base metals are off this morning on the back of a rebound in the US$ index which bounced off a three year low recorded on Friday.

 

US – Consumer sentiment gauge climbed to second-strongest level since 2004 beating market estimates on back of a drop in personal-income tax withholding rates, according to the UoM survey

  • The negative effect of increased stock market volatility has been dominated by reports of “rising incomes, employment growth, and by net favourable perceptions of the tax reforms”.
  • “Purchase plans have been transformed from the attraction of deeply discounted prices and interest rates that outweighed economic uncertainty, to being based on a sense of greater income and job security as the fewest consumers in decades mentioned the favourable impact of low prices and interest rates,” report read.
  • Markets are closed today for President’s Day.

 

Japan – Strong exports growth point to robust overseas demand, although the recent pick up in the yen is likely to put some pressure on outbound shipments.

  • Exports to China were up 30.8%yoy, to the EU up 20.3%yoy and to the US up 1.2%yoy.
  • Imports were also up strongly which saw trade balance posting the first monthly deficit since mid-17.

 

Germany – 464k SPD members are voting in a postal ballot from Tuesday this week on whether the party should form the coalition agreement with Christian Democrats.

  • Local daily Bild polled the mayors of the 35 biggest towns and cities governed by the SPD reporting 26 in favour of the grand coalition.

 

UK – National property prices growth climbed slightly in February recovering from one of the lowest levels in more than five years, Rightmove numbers showed this morning.

  • Despite a slight rebound, monthly sales growth remained below the 10-year average for the time of the year.
  • In London asking prices fell 1%yoy this month marking a sixth consecutive decline with an average time to sell a property in London having climbed to 83 days from 73 days a year ago.
  • Month on month, London prices were up 4.4% amid a seasonal increase.
  • Average asking price in the capital was almost £630k versus a national average of £300k.
  • Rightmove House Prices (%mom/yoy): 0.8/1.5 v 0.7/1.1 in January.

 

South Africa – The Chamber of Mines agreed to postpone a court challenge against new changes to the mining code including an increase black ownership of mines to allow for negotiations with President Cyril Ramaphosa.

 

DRC – Glencore and Randgold are partnering together to lobby a replacement of the existing Chamber of Mines arguing it “was unable to satisfactorily consolidate and communicate” wishes of the industry regarding changes to the Mining Code.

  • China Molybdenum, Ivanhoe Mins, MMG, Zijin Mining and AgnloGold Ashanti have all joined the notion.
  • “Watching people shoot themselves in the head, not even in the foot, is frustrating for me… the mining environment in the DRC needs to be improved, but improved in construction with the main investors, which are China Molybdenum, Glencore and ourselves, Randgold CEO Mark Bristow said.
  • Miners asked President Joseph Kabila for a meeting “to once again put forward our positions” about changes to the mining code approved by lawmakers on January 27.

 

Currencies

US$1.2410/eur vs 1.2534/eur last week. Yen 106.56/$ vs 105.84/$. SAr 11.671/$ vs 11.612/$. $1.401/gbp vs $1.413/gbp. 0.793/aud vs 0.798/aud. CNY 6.342/$ vs 6.342/$.

 

Commodity News

Noble group warns of growing losses

  • Noble Group has warned it is on track for a net loss of $5bn for 2017 with a net loss of $1.9bn in Q4 due to challenging operating conditions
  • The group is reported to be lining up some $700m of financing
  • The board hopes the restructuring plan should restore shareholders equity and create a sustainable capital structure
  • Noble is a major trader of iron ore and coal and has invested in Mkango Resources for its potential future Rare Earth Element supply

 Precious metals:         

Gold US$1,348/oz vs US$1,360/oz last week

   Gold ETFs 72.1moz vs US$71.9moz last week

Platinum US$1,013/oz vs US$1,011/oz last week

Palladium US$1,049/oz vs US$1,027/oz last week

Silver US$16.69/oz vs US$16.92/oz last week

           

Base metals:   

Copper US$ 7,182/t vs US$7,244/t last week - Freeport-McMoRan has secured a one year extension to the permit to export copper/gold concentrate from the Grasberg operation.

  • The Energy and Mineral Resources Ministry approved an application for the export of 1.2mt in the next 12 months.
  • The Company and the government remain in negotiations over the nationalisation of the 51% stake in the operation and the valuation of the stake.

Aluminium US$ 2,193/t vs US$2,173/t last week

Nickel US$ 13,765/t vs US$14,165/t last week

Zinc US$ 3,559/t vs US$3,591/t last week

Lead US$ 2,609/t vs US$2,634/t last week

Tin US$ 21,850/t vs US$21,700/t last week

           

Energy:           

Oil US$65.2/bbl vs US$64.8/bbl last week

Natural Gas US$2.611/mmbtu vs US$2.565/mmbtu last week

Uranium US$21.75/lb vs US$21.75/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.2/t unchanged

Chinese steel rebar 25mm US$638.3/t vs unchanged - Rio Tinto and BlueScope Steel nervously await Trump tariffs

  • Rio Tinto and Bluescope are reported to be facing a nervous wait as Donald Trump considers the imposition of new tariffs and quotas on foreign steel and aluminium
  • Three proposals released last week include blanket tariffs of at least 24% on all foreign steel and 7.7% on all aluminium shipped to US, putting Bluescope and Rio in the firing line
  • The Australian prime minister is likely to ask for an exemption for Australia to exempt Bluescope from the new tariffs
  • We suspect the tariffs are more aimed at the dumping of cheap steel and aluminium from China

Thermal coal (1st year forward cif ARA) US$80.2/t vs unchanged

Premium hard coking coal Aus fob US$233.1/t vs unchanged

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,500.0/t unchanged

Lithium – New Water purification technology provide source for lithium

  • Scientists have come up with a new desalination technique to catch lithium ions and purify ocean water
  • The technology uses metal organic frameworks with sub-nanometer particles to catch lithium ions whilst purifying sea water
  • Sadly the technology is not yet ready for the real world but if it does prove to be commercial then it could provide some by-product lithium

 

Company News

Petra Diamonds (LON:PDL) 72p, mkt cap £385m – Interim results

  • After non-cash impairment charges of US$118m arising from the impact of a strong Rand on the carrying value of its Koffiefontein and Kimberley Ekapa Mining joint-venture “compounded by continuing operational underperformance”, Petra Diamonds reports a net after tax loss of US$117.7m for the six months to 31st December 2017 (2016 US$35.2m profit).
  • Although diamond production increased by 10% to 2.2m carats (2016- 2.0m carats), sales volumes declined by approximately 5% to 1.8m carats “mainly due to the blocked Williamson parcel not sold”.
  • Net debt increased to US$644.7m at 31st December (30th June 2017 – US$555.3m) and the “Company's financial position remains highly sensitive to the ZAR:US$ exchange rate; net debt for 30 June 2018 is targeted to fall to ca. US$600 million, assuming an exchange rate of ZAR12:US$1 and the sale of the blocked Williamson parcel in H2.”
  • Capital expenditure reduced by 43% to US$77.5m as the major capital programmes at the Group’s South African mines have been completed.
  • “Petra's main underground expansion projects remain on track, with both Finsch's Block 5 SLC and Cullinan's C-Cut Phase 1 continuing to ramp up during the Period. Finsch's ROM carat production rose 14% to 931,859 carats and Cullinan's ROM carat production rose 68% to 602,594, demonstrating the significant progress made at both assets. Due to the nature of sub level caving and block caving, each month Petra grows the footprint of the existing mining areas and opens up more access to the respective orebodies. These expanding footprints deliver higher production volumes each month, thereby growing access to undiluted ore.”
  • The company expects to produce 2.4-2.5m carats of diamonds during H2 maintaining its revised production guidance in the range 4.6-4.7m carats for the full year to end June 2018.
  • Petra Diamonds comments that “The diamond market is currently experiencing positive momentum post the healthy Christmas sales period, with pricing up ca. 3 - 4% on a like-for-like basis at the Company's first tender of H2 when compared to average prices achieved in H1.” As the Finsch and Cullinan mines produce increasingly from the new mining areas, the product mix is improving and as a result, the company expects improved prices from these mines during H2.

Conclusion: Operational and diamond market improvements are positive indicators for H2, however the company remains sensitive to the recent strengthening of the Rand, particularly in achieving its debt reduction targets.

 

SolGold* (LON:SOLG) 22 p, Mkt Cap £377m – Latest drilling results from Alpala

(SolGold own 85% of Cascabel in Ecuador)

  • SolGold reports the latest drilling and assaying results from holes 26-D3 to 35 on the Alpala project at Cascabel in Ecuador. In addition to the results reported today, results from a number of other holes are pending and the company expects to incorporate this additional information to update the maiden mineral resource estimate within the next two months.
  • Among the results highlighted today, which unfortunately are reported only in terms of copper equivalent grades (CuEq) and from unspecified depths within the drillholes which consequently obscures the underlying tenor and location of the copper and gold assays are:
    • A 1,100m long intersection in Hole 26-D3, from an undisclosed depth, averaging 0.54% copper equivalent  and including 164m averaging 0.76% and 224m averaging 0.75%, also reported in copper equivalent terms; and
    • A 178m long intersection in Hole 29-D1 averaging 0.62% CuEq including 48m averaging 0.82% CuEq; and
    • An 824m long intersection in Hole 33 averaging 0.82% CuEq which includes 576m averaging 0.93% CuEq and a 262m long section averaging 1.15% CuEq though, in the absence of depth information,  it is unclear whether the 262m portion in included within the wider 576m long portion or additional to it, though we assume that the former is the case; and
    • A 604m long intersection in Hole 33-D1 averaging 0.73% CuEq which includes 146m averaging 1.71% CuEq and 106m averaging 2.13% CuEq; and
    • A 302m long section of Hole 35 which averages 0.60% CuEq and includes 160m averaging 0.76% CuEq.
  • In addition to the results reported today, partial results from Hole 36 “indicate very high grades at Alpala Northwest, returning an open ended 82m @ 1.57% CuEq (1494‐1576m). Assays beyond 1576m are pending”.
  • Assays are also awaited from a number of other holes including Hole 36 which intersected visual copper sulphide mineralisation over 568m between 1432m and 2000m;  Hole 37, still in progress where visual copper sulphide mineralisation was encountered between 1620m and the current depth of 1842m; Hole 39 which intersected 205m of visual copper sulphide mineralisation between 665-870m; Hole 42 with 602m of mineralisation, open at depth was found from a depth of 309m; and approximately 205m of visual mineralisation, also open at depth from 665m.
  • The company particularly highlights the significance of Hole 37 at Alpala as it implies “major system extensions northwest towards the Trivinio prospect”, the bornite-chalcopyrite-magnetite mineral assemblage is “characteristic of the high‐grade centres of many porphyry copper‐gold systems”.
  • Taken in conjunction with recent geophysical interpretation which “has demonstrated that mineralisation from Alpala North and Northwest may be continuous with the Trivinio and Moran Targets, which would extend the Alpala System northwards by approximately 1km” the company appears to be building evidence for a broader model linking some of the prospects previously interpreted as discrete individual occurrences into a larger, linked entity.
  • Drilling of the Trivinio prospect is scheduled “following the completion of Holes 34 and 37 at Alpala”.
  • Commenting on the progress of the 120,000m planned 2018 drilling programme at Alpala, the company emphasises that it is directed at “northwest and southeast extensions”. The addition of further drilling capacity, and particularly the track mounted rigs at Alpala, which are now “delivering up to 100m core per day” and the use of directional drilling is delivering significant cost savings reported to “have more than halved from USD1,100 per metre to USD500 per metre”. Simplistically this implies potential savings on the 2018 Alpala work programme of up to around US$70m.

Conclusion: We look forward to the forthcoming assay results and subsequent update to the mineral resource estimate for Alpala and further evidence of the possible extension towards Trivinio once drilling there commences. Newcrest Mining geologists are overseeing the project and are said to be closely involved in its direction. The Newcrest team are expert in the evaluation of deep level, block cave mining.

*SP Angel act as UK broker to SolGold

 

 

]]>
Mon, 19 Feb 2018 11:51:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29399/base-metals-pull-back-on-stronger-dollar-29399.html
Morning View . Ganfeng listing to boost China’s dominance in global lithium http://www.proactiveinvestors.co.uk/columns/sp-angel/29391/morning-view-ganfeng-listing-to-boost-chinas-dominance-in-global-lithium-29391.html Galantas Gold (LON:GAL) – Hearings completed on judicial review of planning consent

Hummingbird Resources (LON:HUM) – Yanfolila ramp up progress shows full capacity on track for the end of Q1/18

Petropavlovsk (LON:POG) – Management change and new Board member

Rio Tinto (LON:RIO) – Evaluating power supply options at Oyu Tolgoi

 

Lithium - Ganfeng Lithium files for $1bn HK IPO

  • Ganfeng Lithium, China’s largest lithium producer, has filed for an initial public offering in Hong Kong
  • The share sale comes as carmakers are scrambling for supplies of lithium to meet their plans for EV’s
  • Genfent will use funds for acquisitions, further exploration and to expand capacity to meet rapidly growing demand for EV’s
  • Ganfeng, plans to extend its global dominance in production of the electric economy metal by deploying proceeds on acquisitions ranging from Ireland to Australia.
  • Based in Jiangxi in China’s southeast the company aims to target expansions through further exploration, and plans “to continue to actively explore the possibility of acquiring further sources of lithium in order to enrich our core portfolio”, according to a filing lodged with the Hong Kong stock exchange.
  • “The lithium industry in 2018 will be characterized by M&A”, notes energy metal analyst at Horse Mountain Partners LLC, and that “Ganfeng’s strategy of vertical integration is the way to survive and thrive as the lithium market grows dramatically”. Proceeds are expected to focus on increasing battery production capacity, particularly targeting next-generation solid-state technology, and to expand a recycling unit able to retrieve raw materials from spent cells.
  • The company aims to remain ahead of the surge in new lithium discoveries, with the requirement from global lithium production needing to quadruple within a decade for electric vehicles. According to Bloomberg New Energy Finance, the industry is likely to require a second wave of new projects beyond the mid-2020s to keep pace with demand.
  • The acquisitions aim to increase its market share to about 17% this year and increase the company’s global standing to second-largest producer. The supplier’s plan to add new production lines in China in 2018 will boost capacity and add a recycling facility capable of handling 34,000 tonnes of spent batteries. The boost to output also aims to expand the sale of products beyond its current 10 countries, and is in discussion with leading global vehicle manufacturers. Funds from the listing will also be used to offer financial assistance to Lithium Americas Corp., a project developer, and to boost research work on solid-state battery technology.
  • It has hired Citi for the IPO and could raise at least $1bn to $1.5bn.
  • Other potential targets are: Birimian Limited, Kodal Minerals*, Plymouth Minerals, Savannah Resources, European Metals, Lithium Power International, Neolithium, Lithium Americas

 

Sweden on the hunt for Cobalt

  • Sweden is to set up efforts to find precious minerals such as cobalt and lithium, government will invest 10 million kronor ($1.26 million) over the next two years to map for metals
  • In addition to the government funded initiative, Sweden has also seen a rise in private investments in the exploration of minerals used in batteries
  • Geological Survey of Sweden has a collection of 18,000 core samples to be analysed and although extraction so far has not proved cost effective it is believed this could change due to research
  • Might we suggest that if Sweden is serious about encouraging the mining of cobalt that it also supports Beowulf in its Kalak North iron ore mining proposal.

 

Bank 2017 commodities revenues fall 42% to lowest since 2006

  • Commodity related revenue at the 12 biggest investment banks fell by 42% last year to its lowest level since 2006 according to a report by Coalition.
  • Revenue from commodity trading, selling derivatives to investors and other activities in the sector fell to $2.5bn in 2017 from $4.3bn the previous year, it said in the report
  • We view the move as partially driven by banks being forced by regulators to de-risk as well as split retail from investment banking.
  • The reduction of the available balance sheet for commodity trading has hit bank’s ability to fund trading activities, reduced volatility and probably by the impact of China inc. and Glencore as dominant forces in the movement and trading of commodities.

 

Cyril Ramaphosa – sworn in as President of South Africa

  • Cyril Ramaphosa is now president of South Africa.
  • He was previously supported by Mandela and respected for his role in negotiating the peaceful transition of power from the Nationalist government to the ANC.
  • Ramaphosa has promised to root out the corruption which became so endemic under Zuma?
  • Will Zuma now face trial on the many charges relating to graft?
  • Will Ramaphosa replace the minister of mines, who is thought not to be popular with mining companies?
  • Will Ramaphosa adjust the BEE scorecard rules to attract investment back into South Africa?
  • Can South Africa fix the many problems at ESKOM and other state-led utilities to improve the functioning of the economy.
  • Will the ANC now focus on improving living standards in the townships?
  • Some talk of Ramaphosa’s reputation being tarnished when he was a NED director at Lonmin at the time of the Marikana strike, though he would have had no involvement in the massacre that followed. While we see this as fundamentally unfair to Ramaphosa it does highlight to us the risk of allowing issues of debt and debt collection from workers to fester in the community.
  • As a former leader of the NUM and later as a company director Cyril Ramaphosa understands well the benefits and issues associated with mining.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

+1.23%

at

25,200

Nikkei 225

 

+1.19%

at

21,720

HK Hang Seng

 

+1.97%

at

31,115

Shanghai Composite

 

+0.45%

at

3,199

FTSE 350 Mining

 

+0.66%

at

19,254

AIM Basic Resources

 

+1.36%

at

2,585

 

Economics

US –Latest regional business sentiment measures point to improving outlook with forecast for stronger capital investment and employment; reports also point to increasing cost pressures.

  • Both Philly and New York business surveys reported stronger new orders as well as an increase in prices paid component.
  • Respondents to both surveys highlighted considerable optimism regarding the economic outlook.
  • Empire Manufacturing Index: 13.1 v 17.7 in January and 18.0 forecast.
  • Philly Fed Business Outlook: 25.8v 22.2 in January and 21.8 forecast.
  • In a separate report, industrial production growth moderated in January on the back of lower construction activity and mining and minerals production while colder than usual temperatures led an increase in electrical and natural gas production.
  • A pick up in industrial production translated into an increased pressure on existing capacity the utilisation ratios climbing to 77.5% in January versus 75.7% last year
  • Industrial Production ($mom): -0.1 v 0.4 (revised from 0.9) in December and 0.2 forecast.
  • US Treasury yields paused at around 2.9% after having climbed on the back of strong inflation numbers released previously.
  • The US$ index is hovering around a three year low following six straight daily declines.

 

Japan – Kuroda candidature has been nominated by PM Abe to head the BoJ for another five years with the parliament set to confirm the reappointment.

  • Two deputy governors have been suggested to join the Policy Board including central bank insider Masayoshi Amamiya and university professor Masazumi Wakatabe.
  • Amamiya, 62, has been with the BoJ for almost four decades pointing to an extensive experience in the field after having served under governors with different monetary policy approaches.
  • Wakatabe, 53, is a pro-stimulus future member who previously argued that tightening the policy prematurely would be a mistake and indicated that more monetary policy support may be needed to overcome a planned sales-tax hike in 2019.
  • Next policy meeting is on March 8-9 with new term for the Governor to start on April 9.

 

Germany – Producer prices growth accelerated slightly in January matching earlier reports of intensifying businesses’ cost pressures.

  • Stronger input inflation has been recorded by both manufacturing and services industries on the back of higher salary pressures, oil and fuel prices as well as rental fees.
  • Supportive demand allowed firms to pass on some of the higher costs onto consumers which bodes well for the inflation outlook.
  • PPI (%mom/yoy): 0.9/2.0 v -0.3/+1.8 in December.

 

UK – Retail sales growth recorded subdued performance in January with monthly purchases (in volume terms) increasing the slowest pace since Apr/17.

  • YoY purchases were up 1.6%yoy (volume terms) v 2.4%yoy increase recorded in Jan/17.
  • “Retail sales growth was broadly flat at the beginning of the New Year with the longer-term picture showing a continued slowdown in the sector… this can partly be attributed to a background of generally rising prices,” ONS said commenting on numbers.
  • The main contribution to the YoE growth was in non-food stores category with sports equipment, games and toys increasing sales by 10.9%yoy.
  • The latter category has benefited from the New Year’s resolutions to “get fit and lose weight”, retailers said.
  • Retail sales (%mom/yoy, value): 0.1/1.5 v -1.5/+1.3 in December and 0.6/2.4 forecast.

 

Recovery in metals gives reassurance of underlying fundamentals

  • Goldman Sachs Group Inc. remains reassured in bullish forecasts as broad recovery across metals follows the “stress test” during last week’s global market slump. “To the extent that last week’s sell off was triggered by inflation worries, this week’s experience suggests that higher inflation can be a tailwind, rather than a headwind, for metals”.
  • The resilience to investor panic suggests robust market fundamentals supported by sustained global growth, with both metal producer stocks and commodity futures offering good returns in terms of exposure to higher metal prices.

 

Currencies

US$1.2534/eur vs 1.2494/eur yesterday  Yen 105.84/$ vs 106.48/$  SAr 11.612/$ vs 11.665/$  $1.413/gbp vs $1.405/gbp  0.798/aud vs 0.797/aud  CNY 6.342/$ vs 6.342/$

 

Commodity News

Precious metals:         

Gold US$1,360/oz vs US$1,355/oz yesterday

  • Creeping US inflation and slumping USD are supporting gold’s biggest weekly advance since April 2016, recording 3.2%. The US dollar index recorded its worst performance since March 2015, dropping 2.1% as inflationary expectations return. Confluence of positive factors are driving gold higher with forecasts of $1,430 by June, with the weaker dollar the “bigger trigger” according to director at Commtrendz Risk Management Services.
  • Despite bullion prices rising, North American gold mining stocks reported quarterly earnings losses, highlighting the challenges faced containing costs and defending margins.
  • Kinross Gold Corp. fell as much as 10 percent Thursday after reporting weaker-than-expected fourth-quarter results due to lower production and sales, and higher taxes. Agnico Eagle Mines Ltd. fell as much as 3.3 percent a day after its earnings, while Barrick Gold Corp. slid as much as 5.1 percent, with Chief Operating Officer Richard Williams citing new inflationary trends in inputs from fuel to labor. “There’s inflationary trends that didn’t exist three years ago, be they in fuel, power, consumables, labor costs, contracting, and the works”, according to Williams.

   Gold ETFs 71.9moz vs US$72.0moz yesterday

Platinum US$1,011/oz vs US$1,005/oz yesterday

Palladium US$1,027/oz vs US$1,017/oz yesterday

Silver US$16.92/oz vs US$16.95/oz yesterday

           

Base metals:   

Copper US$ 7,244/t vs US$7,186/t yesterday

  • Copper’s weekly advance is on track for its best since November 2016 as the combined impact of a slumping dollar, global growth and inflation fears stock demand for metals. LME copper rose 0.4% to $7,213/t to support 6.8% growth for the week. “Stronger global growth coupled with weaker dollar will continue to attract a lot of funds in commodities and base metals”, according to head of commodities research at Nirmal Bang Securities Pvt. Ltd.
  • The number of bulls outweigh bears in the weekly Bloomberg poll of copper traders and analysts, with respondents favouring support from accelerating inflation and the potential for supply disruptions (Bullish: 6; Bearish: 3; Hold: 0)

Aluminium US$ 2,173/t vs US$2,190/t yesterday

Nickel US$ 14,165/t vs US$14,330/t yesterday

Zinc US$ 3,591/t vs US$3,586/t yesterday

Lead US$ 2,634/t vs US$2,602/t yesterday

Tin US$ 21,700/t vs US$21,600/t yesterday

           

Energy:           

Oil US$64.8/bbl vs US$64.8/bbl yesterday

Natural Gas US$2.565/mmbtu vs US$2.546/mmbtu yesterday

Uranium US$21.75/lb vs US$21.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.0/t vs US$76.8/t

Chinese steel rebar 25mm US$638.3/t vs US$638.3/t

Thermal coal (1st year forward cif ARA) US$80.0/t vs US$81.7/t

Premium hard coking coal Aus fob US$233.1/t vs US$233.1/t

 

Other:  

Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week

Cobalt LME 3m US$81,500.0/t vs US$81,250.0/t

  • Swedish government looks to commit 10 million Kronor ($1.26 million) in ramping up efforts to explore for key domestic battery component metals, that are increasingly in demand among electric vehicle manufacturers. The investment aims support the Geological Survey of Sweden to map the potential existence of minerals across a nation experienced in base metal mining; expanding the output for more uncommon metals like battery metals, tungsten and rare earths.
  • Enterprise Minister notes “Sweden has unique assets in it bedrock. Historically we have mainly explored minerals such as copper, iron, silver and gold. But the shift to green technologies means there’s an increased need for other minerals.”
  • The move follows manufactures positioning themselves for a post-fossil fuel world, with Sweden’s Volvo Cars recently making global headlines with plans to make all of its new models electric from 2019.
  • Further to government commitment to green technology, Sweden has also seen a rise in private investment in the exploration of minerals used in batteries. For example, Australia’s Talga Resources is actively running exploration activities aiming to extract cobalt and graphite in northern Sweden.
  • The Geological Survey of Sweden aims to build upon 18,000 historical core samples dating back to 1858, which can be analyzed for traces of minerals previously overlooked.

 

Company News

Galantas Gold (LON:GAL) 5.5p, Mkt Cap £10.3m – Hearings completed on judicial review of planning consent

  • Galantas Gold reports that the legal hearings in connection with the third-party appeal against the “positive judicial review judgment, given by Madam Justice McBride, regarding the grant of planning permission at the Omagh gold mine in July 2015” have now been completed and that the Northern Ireland Court of Appeal “will deliver its judgement at a later date, currently unknown.”
  • In September 2017, the company announced that the judicial review supported its planning consent for the underground mine development of gold veins previously worked in an open pit. At that time, the company also reported that “The third party’s request for a quashing of the Consent was denied.”
  • “During the first quarter of 2016 Galantas confirmed that a third party had obtained leave from Belfast High Court to bring a judicial review challenging the actions of the Department of Environment Northern Ireland  in granting planning permission for underground mining beneath the existing open pit.”
  • The original consent was granted in June 2015 and in October 2015 company announced that it had “been made aware of what purports to be pre-action correspondence from an individual who intends to challenge, by judicial review, the actions of the Department of Environment Northern Ireland (DOENI) in granting planning permission for underground mining beneath the existing open pit.” The specific ground for the original challenge are not, however, clear though the drawn out process underlines the strength of opposition by at least one challenger and the difficulties of obtaining permitting.
  • Galantas Gold also encountered a setback last year, now apparently resolved, when concerns over the adequacy of security over the transport and use of explosives led to a temporary suspension of development work. It is tempting to infer that this issue may have been raised as a part of the wider opposition to mine development.

Conclusion: The protracted dispute over the planning consent for underground mining at the Omagh mine appears to be drawing towards an end.

 

Hummingbird Resources (LON:HUM) 36p, Mkt Cap £122m – Yanfolila ramp up progress shows full capacity on track for the end of Q1/18

  • The Company reports on the ramp up progress of the recently commissioned Yanfolila gold mine in Mali.
  • The plant is currently running at 90% capacity with gold recoveries reported at 96% versus budgeted 93%.
  • The Company is processing lower grade stockpiles during the ramp up period before feeding high grade material once the plant is finetuned and is run at planned capacities.
  • 10.7koz of gold has been produced since the start of operations in mid-December with 6.2koz poured in dore (5.5koz shipped to refiners) and 4.5koz estimated to remain in circuit.

 

Petropavlovsk (LON:POG) 7.5p, Mkt Cap £249m – Management change and new Board member

  • Andrey Maruta, CFO, will be leaving the Company and the Board on April 1, but will advise the Company during several months of transition before a successor is found.
  • Adrian Coates will be joining the Board as an Independent Non-Executive Director with immediate effect.
  • Mr Coates has many years of experience in investment banking having previously worked for HSBC and UBS as well as serving on boards of a number of resources companies including Polyus Gold, Kazakhgold and Regal Petroleum.

 

Rio Tinto (LON:RIO) 4,130p, Mkt Cap £74.5bn –Evaluating power supply options at Oyu Tolgoi

 

  • Rio Tinto reports that, following the decision by the Government of Mongolia to cancel the Southern Region Power Sector Co-operation Agreement (PSCA), it is, in conjunction with its partners at the Oyu Tolgoi mine, working to identify the optimum power supply solution.
  • Rio Tinto is the mine operator and owns 51% of Turquoise Hill which owns 66% of Oyu Tolgoi with the Mongolian Government holding the remaining 34% interest.
  • The mine is moving from the existing open-pit mine towards underground operations to exploit the 499mt copper reserve which grade 3.4% copper and is expected to bring the production of mined copper to over 500,000tpa by the early 2020s. We understand that the project requires around US$5bn of capital.
  • The company comments that “Oyu Tolgoi, Rio Tinto and Turquoise Hill Resources are committed to fulfilling all of the commitments under the Investment Agreement and are continuing to evaluate all viable power options, including the construction of an Oyu Tolgoi site-based power plant.” The company also notes that “Rio Tinto will continue to review its capex forecasts for the project but has already earmarked $250 million a year for the development of a power station in Mongolia in its 2019 and 2020 capex forecasts.”
  • Rio Tinto already operates on-site power generation at a number of its iron ore mines in Western Australia as well as in some of its aluminium operations and at the Kennecott copper operations in Utah and will certainly have both the in-house expertise and the wider industry contacts to develop a practical and cost-effective power supply solution for Oyu Tolgoi. 
]]>
Fri, 16 Feb 2018 10:52:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29391/morning-view-ganfeng-listing-to-boost-chinas-dominance-in-global-lithium-29391.html
Morning View . Next-generation batteries to sustain cobalt demand http://www.proactiveinvestors.co.uk/columns/sp-angel/29375/morning-view-next-generation-batteries-to-sustain-cobalt-demand-29375.html Amur Minerals* (LON:AMC) – £10m convertible loan issued

Atalaya Mining (LON:ATYM) – Settling royalty for shares

Kodal Minerals* (LON:KOD) – Confirmation of Sogola-Baoule extension at Bougouni lithium project

MC Mining (formerly Coal of Africa) (LON:MCM) – Integrated water use licence secured for Vele Colliery

 

Lunar New Year

  • Trading activity is winding down ahead of the week-long Lunar New Year break that kicks off on Thursday. Many traders and workers across mills in China, the world’s top commodity producer, have taken leave and expectations are the market may only see a sharp revival in appetite next month.
  • Iron ore and steel demand is expected to remain in a lull into March, with no “major restocking activity soon after the holiday” according to a Shanghai iron ore trader.
  • Gold demand is expected to remain high during the festive period, building on the 3% rise in annual jewelry demand throughout 2017.

Demand growth combined with low stock levels and inelastic supply could make 2018 a good year for base metals

ABC News comments today that renewed demand and low stockpiles could make 2018 the year of the base metal

  • They highlight that wide industrial application and new technologies are driving demand, particularly from China which uses 50% of all base metals globally

BMW still looking for 10 year’s worth of Cobalt and Lithium supply

  • BMW’s procurement department continue to look ahead to secure 10 year supply of cobalt and lithium for EV batteries as part of new strategy according to comments to Germany’s Frankfurter Allgemeine Zeitung last week.
  • The head of supply chain, Markus Duesmann, said that ‘aim is to supply all the way down to the level of the mine, for 10 years. The contracts are ready to be signed,’
  • BMW is looking to release a series of all new electric vehicles starting with an electric mini next year, with plans for all 12 electric cars to be on the market by 2025

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

 

Dow Jones Industrials

 

+1.70%

at

24,601

Nikkei 225

 

-0.65%

at

21,245

HK Hang Seng

 

+1.29%

at

29,840

Shanghai Composite

 

+0.98%

at

3,185

FTSE 350 Mining

 

+0.42%

at

18,147

AIM Basic Resources

 

+1.72%

at

2,529

 

Economics

US – The volatility in equity market is seen subsiding after the worst week in years has been followed by the strongest two-day increase in just over two years on Monday.

  • The S&P 500 closed 2.9% over the past two sessions.
  • The volatility index based on the CBOE VIX measure has come down to 27.2 this morning, down from a high of 37.3 recorded last week.

 

China – New credit surged in January ahead of Chinese New Year, although, the trend in money supply growth remains downward as the government continues with the deleveraging programme.

  • Despite stronger than forecast new credit numbers for January, the gauge was down 17.2%yoy.
  • Aggregate Financing (CNYbn): 3,060 v 1,140 in December and 3,150 forecast.
  • M2 Money Supply (%yoy): 8.6 v 8.2 in December and 8.2 forecast.

 

UK – Inflation data came in stronger than forecast in January raising expectations for a rate hike this year.

  • Weak price pressures in auto fueld and food prices were compensated by increasing costs in the recreation and culture sectors; additionally, clothing prices recorded weaker losses than last year as seasonal discounts failed to match those in 2017.
  • Markets currently price in around three interest rate hikes over the next three years, with the first coming as early as May.
  • The pound jumped past the 1.39 mark on the back of the news before coming off slightly trading at 1.388.
  • CPI (%mom/yoy): -0.5/+3.0 v 0.4/3.0 in December and -0.6/+2.9 forecast.
  • Core CPI (%yoy): 2.7 v 2.5 in December and 2.6 forecast.

 

South Africa – The ANC party has asked President Jacob Zuma to resign paving the way for Cyril Ramaphosa to take power, according to people familiar with the decision BBC report.

  • The ANC national executive committee has reached the decision following a 13-hour meeting with an official letter confirming the ousting of Mr Zuma to be sent later today.
  • Interestingly, the NEC has not legal binding power to remove Mr Zuma from the office and should the President disagree with the decision the official no-confidence vote will have to be launched through parliament.
  • In case of a resignation, Mr Ramaphosa will immediately replace the President for a period of up to 30 days before parliament confirms his candidature.
  • The rand has been little changed against the US$ this morning hovering around the strongest level since mid-2015 on the back of expected changes in the government.

 

Currencies

US$1.2326/eur vs 1.2263/eur yesterday  Yen 107.65/$ vs 108.54/$  SAr 11.930/$ vs 11.967/$  $1.386/gbp vs $1.382/gbp  0.787/aud vs 0.781/aud  CNY 6.343/$ vs 6.324/$

 

Commodity News

Precious metals:         

Gold US$1,329/oz vs US$1,321/oz yesterday

  • Gold advances for its second day as the dollar retreats and equity markets begin to stabilize following last week’s selloff. The S&P 500 regained 1.4% during yesterday’s trading following the biggest weekly rout in two years. Oanda trading analysis note “prices were supported by a weaker dollar and physical demand ahead of the Chinese Lunar New Year. The equity market carnage has abated, and the waves of cross-assets selling to replenish equity margins have temporarily decreased, providing calmer market to reestablish gold longs”.
  • Investors await tomorrow’s US consumer-price index data as a signal on inflation views and indication of the pace of monetary tightening. “Prices should remain within a range ahead of this weeks’ US inflation data as the CPI will be a monster print for the markets’ inflation views, and could provide a catalyst for gold to bounce higher”.
  • As yields on 10-year Treasuries sit near 2014 highs at 2.83%, billionaire hedge fund manager Ray Dalio notes the risk of recession in the next 18 to 24 months is rising.

   Gold ETFs 71.8moz vs US$71.8moz yesterday

Platinum US$974/oz vs US$968/oz yesterday

Palladium US$984/oz vs US$987/oz yesterday

Silver US$16.64/oz vs US$16.43/oz yesterday

           

Base metals:   

Copper US$ 6,919/t vs US$6,825/t yesterday

  • Higher copper prices and new labour rules in Chile are driving broad wage negotiations across the world’s top supplier of the red metal. One of the most anticipated at BHP Billiton’s Escondida mine lies in the hands of the company, according to Union No.1 spokesman Carlos Allendes. Despite the historically fractious relationship, the doors are open to dialogue. If the company maintains the same position as the last negotiation, the union doesn’t rule out actions including a strike.
  • This intensifies concerns over significant supply disruptions as wage talks between Union No.1 and BHP failed in February last year and workers went on a 44-day strike that ended with no accord.

Aluminium US$ 2,144/t vs US$2,130/t yesterday

Nickel US$ 13,185/t vs US$13,030/t yesterday

Zinc US$ 3,416/t vs US$3,385/t yesterday

Lead US$ 2,510/t vs US$2,520/t yesterday

Tin US$ 21,200/t vs US$21,140/t yesterday

           

Energy:           

Oil US$62.9/bbl vs US$63.4/bbl yesterday

  • Hedge funds have begun liquidating record bullish positions in crude oil and refined fuels as the recent rally reverses amid signs that US shale production is surging. The hedge funds and other money managers cut their combined long position in six most important futures and options contracts linked to petroleum by the equivalent of 41 million barrels in the week to Feb. 6.

Natural Gas US$2.610/mmbtu vs US$2.575/mmbtu yesterday

Uranium US$21.65/lb vs US$21.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.9/t vs US$74.0/t

Chinese steel rebar 25mm US$638.2/t vs US$640.1/t

Thermal coal (1st year forward cif ARA) US$78.8/t vs US$75.8/t

Premium hard coking coal Aus fob US$231.7/t vs US$228.4/t

 

Other:  

Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week

Cobalt LME 3m US$81,250.0/t vs US$81,250.0/t

  • Despite next-generation lithium-ion batteries evolving towards higher nickel consumption, markers of electric vehicle batteries will have to continue using the scarce, expensive cobalt for the foreseeable future according to materials technology company Umicore. Manufacturers are trying to redesign battery compositions to increase the proportion of nickel used in electric vehicle batteries to boost energy density, while reducing cobalt use to cut costs.
  • South Korea’s SK Innovation and LG Chem have recently announced plans to produce NMC (nickel-manganese-cobalt) 811 batteries (80%-10%-10%) this year. However, Umicore chief executive Marc Grynberg noted that while the technology was evolving toward higher nickel loadings, it was not possible to design cobalt out of the batteries. “If you increase the nickel proportion, you reduce the stability of the battery and so it has an impact on cycle life, the ability to charge it fast. Cobalt is the element that makes up for the lack of stability of nickel. There isn’t a better element than nickel to increase energy density, and there isn’t a better element than cobalt to make the stuff stable. So (while) you hear about designing out cobalt, this is not going to happen in the next three decades.”
  • Belgium’s Umicore raised $1.1 billion in an equity placing to fund investment in its fast expanding rechargeable battery material business, supplying broad materials including cobalt.
  • In the near-term, enough cobalt is being produced to meet demand from the electric vehicle industry, with Umicore sourcing Congolese metal via a responsible supply agreement audited by PwC. Long-term supply will require significant advancement in recycled material. The company expects to ramp up recycling of spent electric vehicle batteries to “significant” levels in the next seven to nine years, when more feedstock returns to the market. “If you look at a more mature market, like the market for catalysts that contain platinum group metals, about half of our supply is coming from recycling”.
  • Further minor metals trading house Darton Commodities forecast a 40% growth in cobalt usage in electric vehicle batteries to 12,600 tonnes in 2018. This represents a 1,500 tonne surplus this year as global supply increases.
  • Deficits are expected to return in 2021, and deepen in following years as EV sales surge. “Any surplus availability, be it as unrefined feed or refined downstream products, is likely to be absorbed and stockpiled by other market players in anticipation of renewed, future supply constraints”.

 

Lithium

  • South Korean entities are “moving faster than just about everybody else”, including Europe and North America to lock in sources of lithium supply; second only to China in seeking deals. Pilbara Minerals Ltd. CEO Ken Brinsden has been in discussions with LG Chem Ltd. and Polaris Shipping Co. on a potential South Koreas JV. Meanwhile, the company has multiple engagements with other SK entities not focused on vehicle manufacture, and is continuing to work on potential supply deals with the aim of being a diversified supplier by customer, segment and country.
  • The major Australian spodumene hard rock producer has ~200,000 tonnes of output from its expansion project that is currently uncommitted, with Pilgangoora on track to begin commissioning in 2Q, with first shipment by end of July.  

 

Company News

Amur Minerals* (AMC LN) 6.0p, Mkt Cap £38.1m - £10m convertible loan issued

  • The Company agreed a 8% up to $10m loan facility with an investment consortium of Cuart Investments and Y A II PN arranged by RiverFort Global Capital.
  • Loan proceeds will be used for resources/reserves update, update of the economic model, metallurgical test work and G&A.
  • The loan will consist of three tranches ($4m, up to $3m and the remainder of $10m) to be made available to the Company through the year and to be drawn at the Company discretion, approximately 120 days apart between each tranche.
  • The first $4m drawdown to be made tomorrow with a maturity of 13 March 2019.
  • Each drawdown is repayable in 12 equal instalments, including accrued interest.
  • Should the Company elect not to make a periodic repayment, loan providers can convert the instalment into new shares at own discretion.
  • The conversion price is the lower of 130% of the Reference Price (the 20 trading days VWAP immediately prior to the date of each drawdown) or 90% of the lowest daily VWAP over the five trading days before the conversion.
  • The Company can repay all outstanding amounts of an advance before the end of the loan facility if VWAP for five trading days prior to the redemption notice comes in below 130% of Reference Price, but the amount payable will be 110% of the amount due.
  • Additionally, investors will receive warrants for 30% of the value of each drawdown with an exercise price of 130% of the price of the advance and an exercise period of three years.
  • Following the draw down of the first $4m tranche, the Company will issue 9.3m warrants with an exercise price of 9.3p (implying 7.2p the Reference Price).
  • At no point investors can convert into new shares if doing so will take their stake in the Company to 25% or more.

Conclusion: The funds secured will help the Company to advance the Kun Manie nickel/copper sulphide project as the management is studying long term financing alternatives with Medea Financial Partners. Using the 7.2p Reference Price for the first tranche and 1.4 GBPUSD exchange rate as well as assuming share price trades around the Reference Price during the conversion period, we estimate the first tranche (including accrued interest) potentially amounting to 47.6m in new shares or 7.5% of outstanding share capital (excluding 9.3m in warrants).

*SP Angel act as Nomad and Broker to Amur Minerals

 

Atalaya Mining (LON:ATYM) 191 pence, Mkt Cap £258m – Settling royalty for shares

  • Atalaya Mining reports that it has issued 192,540 shares at a price of 186.7p/share in settlement of a US$500m outstanding royalty to the former owner of certain plots of land at its Proyecto TioTinto mine.
  • The royalty holder, Rumbo, “is entitled to receive a royalty payment of up to US$250,000 per quarter if the average copper sales price or LME price for the period is equal to or above $2.60/lb. As such, and given the fact that the average copper price for the third and fourth quarter of 2017 was above $2.60/lb, the Company is obliged to pay US$500,000 to Rumbo”.
  • The company and Rumbo “remain engaged in discussions over how to satisfy future payments, should they be required as per the Royalty Agreement.”

Conclusion: The company’s website discloses that at 1st January 2017, it had 116,679,555 shares in issue. The issue of shares to Rumbo to settle the outstanding royalty represents, therefore, less than 0.2% of the capital of Atalaya Mining. We look forward to further news on the outcome of the discussions regarding future royalty payments to Rumbo.

 

Kodal Minerals* (LON:KOD) 0.19p, mkt cap £12.6m – Confirmation of Sogola-Baoule extension at Bougouni lithium project

  • Kodal Minerals reports that the final assay results from its recently completed 1263m of reverse circulation drilling in ten holes at the Sogola-Baoule prospect have confirmed the south-western extension of multiple mineralised pegmatite veins which were previously identified in drill hole MDRCO15 including 12m at an average grade of 1.68% Li2O from a depth of 216m, a second 12m long intersection averaging 1.59% Li2O from 241m and 17m at an average grade of 1.79% Li2O from 277m depth.
  • The recent programme was intended to explore the “continuity of these intersections, to target the up-dip and potential near-surface mineralisation and extend the project.”
  • “Geological logging and evaluation of the drilling has confirmed multiple mineralised pegmatite veins and extensions to the defined bodies.” Among the new results highlighted in today’s announcement are:
    • A 24m long intersection at an average grade of 1.58% Li2O from a depth of 115m in hole MDRC026;
    • An 8m long intersection at an average grade of 1.50% Li2O from a depth of 133m in hole MDRC025, which also contained a second 2 metres wide zone of mineralisation averaging 1.71% Li2O from 148m;
    • A 13m long intersection at an average grade of 1.17% Li2O from a depth of 101m in hole MDRC027, which contained three additional mineralised zones at shallower depths, including 1m averaging 1.16% Li2O from 23m, 6m averaging 1.12% Li2O 33m and 7m averaging 0.70% Li2O from 86m; as well as
    • 3 separate intersections exceeding 1% Li2O in hole MDRC021B - 5m averaging 1.50% from a depth of 81m; 6m averaging 1.0% from 91m and 12m averaging 1.69% Li2O from a depth of 110m.
  • The company points out that the mineralisation lies beneath up to 14m of alluvial cover and that “Additional drill testing is proposed to target the extensions both to the southwest and northeast and provide additional data to allow an evaluation of the prospect.”
  • Confirming that “The geological interpretation is showing continuity of high-grade pegmatite bodies that currently remain open along strike”, CEO, Bernard Aylward noted that Sogola Baoule was the second of the targets at Bougouni “that we have now been able to drill test over a consistent strike length”. He went on to comment that “As our exploration campaign continues at Bougouni we anticipate further results from the Ngoualana prospect where geological logging of drill holes indicates further strike extensions, and geological reconnaissance has located evidence of pegmatite bodies beyond the current drilling”.

Conclusion: The recent drilling by Kodal Minerals continues to extend the footprint of the lithium mineralisation at Bougouni. Although there is not yet a resource estimate and consequently no mine plan, the identification of multiple mineralised structures within the licence has the potential to generate operational cost savings through a possible future bulk mining development.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

 

MC Mining (formerly Coal of Africa) (LON:MCM) 39.5 pence, Mkt Cap £55.6m –Integrated water use licence secured for Vele Colliery

  • MC Mining , which changed its name from Coal of Africa in December 2017, has announced that the South African Department of Water and Sanitation has granted its Vele Colliery an Integrated Water Use Licence for colliery’s “stream diversion and associated infrastructural activities.”
  • The company comments that “This approval completes the full regulatory suite of all authorisations required for the Vele Colliery.”
  • This now clears the way for the MC Mining Board to consider “the final decision on whether to proceed with the Plant Modification Project”.
  •  The Vele Colliery, which lies close to the Zimbabwe border, has been on care and maintenance since October 2013, however with 362mt of mineable resources and a planned 16 year mine life as an open-pit mine with the potential to extend into underground operations, it represents a significant asset. The plant Modification project, if approved, enables upgrading of the previously produced thermal coal product to include a semi-soft coking product.

 

Conclusion: We understand that the project has suffered issues of product quality and relatively poor yields in the past, and we await further news of the Board’s decision on whether to proceed with the development following resolution of the regulatory issues.

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Tue, 13 Feb 2018 12:01:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29375/morning-view-next-generation-batteries-to-sustain-cobalt-demand-29375.html
Today's Oil and Gas Update - Union Jack Oil http://www.proactiveinvestors.co.uk/columns/sp-angel/29377/today-s-oil-and-gas-update-union-jack-oil-29377.html In Brief
• Union Jack Oil*** (LON:UJO) – $37.4mm (0.65p) – Brighter 2018 to Follow Disappointing 2017: Today’s update from the company reminds us that a lot of progress was made in 2017, all of which, however, was overshadowed by Wressle’s planning rejection. While this is undoubtedly disappointing, it is by no means the only flight in the company's quiver. With an active programme over the coming 12 months, such as Biscathorpe, Holmwood and the results of the Fiskerton workover, not to mention the revision to Wressle’s development, there is a lot planned for 2018. We are reiterating our $37.4mm (0.65p) valuation.

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Wed, 14 Feb 2018 08:55:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29377/today-s-oil-and-gas-update-union-jack-oil-29377.html
Market Briefing - Botswana Diamonds and SolGold http://www.proactiveinvestors.co.uk/columns/sp-angel/29379/market-briefing-botswana-diamonds-and-solgold-29379.html Botswana Diamonds (LON:BOD) – Raising £500,000 

SolGold* (LON:SOLG) – Initial Aguinaga drilling programme imminent

South Africa – Gupta business family compounds in South Africa are raided by police forces once President Zuma has been handed the resignation order by the ANC executive committee.
• Guptas are accused of using close connections to Mr Zuma violating anti-corruption regulations.
• The rand continued to strengthen against the US$ and is currently trading 11.85 (+5% YTD) on increasing expectations for Zuma to announce resignation later today.

Stockpiles swell ahead of Lunar New Year
• SHFE inventories of base metals rise as restocking ahead of tomorrow’s Chinese new year festivities. Deliverable aluminium stockpiles in Shanghai Futures Exchange warehouses extend multi-month gains to fresh records, growing 7,544 tonnes to 811,286 tonnes; increasing every week since late June.
• Deliverable zinc stockpiles also grow 4% to 102,557 tonnes, up for the 7th week.
• Deliverable copper inventories boosted levels 5.8% to 197,759 tonnes.
• Levels are expected to continue to rise as traders and mill workers have taken leave during the national holiday running 15th-21st Feb.

Dow Jones Industrials  +0.16% at 24,640
Nikkei 225   -0.43% at 21,154
HK Hang Seng   +2.47% at 30,577
Shanghai Composite    +0.45% at 3,199
FTSE 350 Mining   +0.15% at 18,402
AIM Basic Resources   -0.13% at 2,526

Economics
US – CPI numbers are due later today with markets trying to understand if there is a build-up in inflation pressures.
• Core CPI is expected to come in at 1.7%yoy in January compared with 1.8%yoy the previous month.
• Benchmark 10y bond yields are little change this morning (2.83%) after coming off recent highs hit on Monday (2.89%) while stock markets futures are pointing towards modest equity gains once trading starts later today.
• Fed funds futures markets imply that traders expect at least two rate increases by the end of the year, with a 50% chance of three.

Japan – Weak GDP and inflation numbers point to an extension of the supportive monetary policy
• Positive effect of stronger consumer spending and business investments has been dented by a drop in government spending, weaker inventories and an increase in imports.
• GDP (%qoq annualised SA): 0.5 v 2.2 (revised from 2.5) in Q3/17 and 1.0 forecast.
• GDP deflator (%yoy): 0.0 v 0.2 in Q3/17 and 0.0 forecast.

Germany – The economy recorded robust growth in the final quarter of 2017 driven by strong overseas demand, according to Destatis.
• The statistics agency said “exports increased substantially” while government spending climbed while household consumption was essentially flat.
• Market estimates are for the economic growth to accelerate to 2.4% next year, 2pp up on 2017.
• GDP (%qoq SA): 0.6 v 0.8 in Q3/17 and 0.6 forecast.
• GDP (%yoy WDA): 2.9 v 2.8 in Q3/17 and 3.0 forecast.

Sweden – One of the central banks that keep short term interest rates in the negative territory voted to leave repo rates at -0.50% during today’s meeting.
• Although, one of the six members’ Executive Board voted for an increase in the benchmark rate by 25bp despite downwards revisions to future inflation forecasts.
• The Riksbank highlighted that labour earnings have been growing at a slower pace than previously forecast despite strong labour market and GDP growth data.
• As such the central bank does not see repo rate increases before the start of the second half of the year.

Currencies
US$1.2366/eur vs 1.2326/eur yesterday  Yen 107.37/$ vs 107.65/$  SAr 11.868/$ vs 11.930/$  $1.388/gbp vs $1.386/gbp  0.787/aud vs 0.787/aud  CNY 6.346/$ vs 6.343/$.

Commodity News

Precious metals:         
Gold US$1,332/oz vs US$1,329/oz yesterday
• Gold rises for the third consecutive day as investors eagerly await key US inflation data which may offer fresh clues on monetary tightening. Bullion for immediate delivery climbed as much as 0.6% to $1,337.02 to add almost 2% to yearly gains for the precious metal. Gold’s increase was matched by a fourth day of losses for the Bloomberg Dollar Spot index, its worse run in a month to fall more than 3% lower for the year to date.
• “Some G-10 traders (are) arguing this is the most significant economic release in the past three years” according to Oanda analysts, with the looming inflation print “critical” following “last week’s market carnage in the wake of an inflationary uptick in wage growth”. “With the US dollar once again striking a bearish chord among G-10 traders, the long gold set up looks favourable. However, with nearly 100% of gold’s appeal trading off the back of US dollar weakness, the US CPI reading could be a day of reckoning for gold bulls”.
• Economists at Oversea-Chinese Banking Corp. suggest “gold’s reaction to inflation data is profoundly hard to predict. Given how markets have been pricing in more Fed rate hikes into 2018, faster-than-expected inflation pressures would likely persuade higher policy rates across key central banks and pressure prices lower, rather than lift gold’s status as an inflation hedge”.
• Data this week also indicates Dalio’s Bridgewater Associates raised its stakes across SPDR Gold shares and iShares Gold Trust in the final quarter of 2017, with recommendations for investors to consider placing 5-10% of assets in gold.
   Gold ETFs 72.0moz vs US$71.8moz yesterday
Platinum US$977/oz vs US$974/oz yesterday
Palladium US$989/oz vs US$984/oz yesterday
Silver US$16.58/oz vs US$16.64/oz yesterday
           
Base metals:   
Copper US$ 6,982/t vs US$6,919/t yesterday
Aluminium US$ 2,125/t vs US$2,144/t yesterday
Nickel US$ 13,500/t vs US$13,185/t yesterday
Zinc US$ 3,459/t vs US$3,416/t yesterday
• Zinc prices are expected to fade in the second-half of the year, as the metal reaches a 10-year closing high of $3,557/t on Feb. 1. Expectations for a slowdown in China’s property sector is forecast to soften demand for ferrous commodities according to senior research analyst at Macquarie Group Ltd, with Lloyd seeing prices drop to $2,850/t.
• Zinc will also face “headwinds from substitution pressure” as the price surges higher than aluminium, a common substitute metal.
Lead US$ 2,545/t vs US$2,510/t yesterday
Tin US$ 21,600/t vs US$21,200/t yesterday
           
Energy:           
Oil US$62.6/bbl vs US$62.9/bbl yesterday
Natural Gas US$2.582/mmbtu vs US$2.610/mmbtu yesterday
Uranium US$21.65/lb vs US$21.65/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$76.3/t vs US$74.9/t
• Iron ore futures in China surged to their strongest in three-weeks on expectations for firm steel demand in the world’s top consumer during 1H 2018. The most-traded iron ore contract for May delivery on the Dalian Commodity Exchange jumped as far as $85/t, the highest since Jan. 23. The climb marked the second straight session of sharp gains in steelmaking raw materials, as price movements become exaggerated by low liquidity as many market players have taken off for the week-long Lunar New Year holiday.
• “Many mills have good profit expectations for the first and second quarter, so they have increased purchase of iron ore” according to a Beijing trader.
• A Chinese government think-tank warned earlier that the debated “unfair and unreasonable” US trade measures on steel will be met with “counter-measures” under World Trade Organization rules.
Chinese steel rebar 25mm US$637.9/t vs US$638.2/t
• Industrial buyers of steel in the US are appealing to President Donald Trump to protect the US steelmaking industry by directly negotiating with China, the main culprit driving global overcapacity, instead of instating trade restrictions on imported steel. Executive director of American Wire Producers Association penned the president a letter on behalf of steel consumers in the US arguing that restrictions on imports of foreign metal could be potentially ‘disastrous’.
• “We should be dealing with the overcapacity situation, not trying to plug one part of the industry that’s going to harm another industry”. The appeal follows on on-going investigation by the Commerce Department to prove whether imports of steel and aluminium represent a threat to US national security, under the premise of a seldom-used law, Section 232 of the Trade Expansion Act of 1962.
• Steel-import restrictions being considered by the US could have “unintended and disastrous consequences” for the domestic economy and manufacturers in his address written on behalf of 15 US industrial groups. The association represent more than 1 million jobs spread across 30,000 facilities. “Restrictions on basic steel imports will actually adversely impact national security, the economy, and the steel industry itself because it will undermine our competitiveness and limit our ability to make value-added products here”. 
China urges US to exercise restraint on steel trade actions
• China's Ministry of Commerce has urged the US to exercise restraint in using trade restrictions on steel imports ahead of a meeting between President Donald Trump and US lawmakers to discuss steel and aluminium trade issues
• Director of Chinese Ministry of Commerce, Wang Hejun, said ‘China is worried about the serious tendency of US protectionism in the field of steel products’
• He urged the US to exercise restraint in using trade restrictions and abiding by the multilateral trading rules with all parties so as to give a positive impetus to the development of world economy

Thermal coal (1st year forward cif ARA) US$79.7/t vs US$78.8/t - Global thermal coal demand to outstrip supply in 2018
• Powered by Asia’s continuing demand, the global seaborne thermal coal market is expected to grow by around 48mt or 5% from 2017 to 974mt in 2018, trading house Noble Group said
• While the spike in demand will largely come from Asia, the market is contemplating the supply to be short by about 10 million mt
• China is at the beginning of a new construction cycle looking at the increase in land purchase, also Indian steel production was expected to increase by about 10% in 2018, which would have a knock-on effect on power demand and hence coal consumption
Premium hard coking coal Aus fob US$230.2/t vs US$231.7/t

Other:  
Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week
Cobalt LME 3m US$81,250.0/t vs US$81,250.0/t - Cobalt cannot be eradicated from electric car batteries – Umicore
• Makers of electric vehicle batteries will have to keep using scarce, expensive cobalt in their products for the foreseeable future despite a push towards higher nickel compositions, materials technology company Umicore said
• Whilst technology was evolving towards higher nickel loadings, not possible to completely design out cobalt as cobalt is the element that gives nickel stability
• Reducing cobalt has impact on cycle life and charging

Company News
Botswana Diamonds (LON:BOD) 1.1 pence, Mkt Cap £4.8m – Raising £500,000
• Botswana Diamonds has raised £500,000 through the placing of 50m new shares at 1p/share. The new shares represent approximately 9.8% of the enlarged capital of the company.
• The funds are to be used for continuing diamond exploration in Botswana, where Botswana Diamonds is working with the Russian diamond major, Alrosa, on projects in the Orapa region and in the central Kalahari, and in South Africa, where the company is evaluating ground in close proximity to the former Marsfontein diamond mine.
• Speaking in Cape Town last week, Managing Director, James Campbell, indicated that, among other initiatives, the company intended to commence drilling  to determine the size and shape of the kimberlite body at its Ontevreden project in South Africa within the next three months.

SolGold* (LON:SOLG) 22.25p, Mkt Cap £377m – Initial Aguinaga drilling programme imminent
(SolGold own 85% of Cascabel in Ecuador)
• Solgold has announced plans to mobilise two man-portable diamond drilling rigs to the Aguinaga prospect within its Cascabel exploration area in Ecuador. The Aguinaga area is located approximately 3km northeast of the Alpala project area where the company announced a maiden resource estimate in January.
• The initial programme, which is expected to start in early March, is planned to consist of five holes to depths up to 1200m although success at this relatively early stage of exploration will no doubt trigger further drilling.
• Aguinaga is one of 15 priority targets which Solgold has identified within the Cascabel project area and the recent arrival of five large rigs to continue the detailed deep drilling work at Alpala has freed up the man-portable rigs for deployment on the initial drilling at Aguinaga.
• The Aguinaga discovery occurred in 2015 when “field teams discovered porphyry copper-gold, quartz stock-work veining and telescoping of epithermal-gold style veining within potassic altered porphyritic diorite.  Rock saw-channel sampling over the limited exposure, returned an open-ended nine metres grading more than 1.0% copper and 0.7 g/t gold” in the upper part of the Aguinaga Creek.
• Since the original discovery, follow up exploration has assembled a compelling body of coincident geological, structural, geochemical and geophysical evidence which characterises Aguinaga as a potentially significant large porphyry centre located at the junction of “a deep seated regional north-west trending structure with major north-east- and north-trending lineaments”.
• A large scale positive magnetic anomaly some 500m x 500m in size, surrounded by an annular magnetic low is also “characteristic of a large porphyry centre … similar to magnetic signatures at the Bajo de la Alumbrera, Grasberg and Batu Hijau porphyry deposits”
• Additional chargeability and magneto telluric resistivity anomalies reinforce the geophysical case for an underlying porphyry beneath Aguinaga while “Coincident highs in copper, gold, molybdenum and the Cu-Zn ratio in soil and auger results are supported by a surrounding zone of low manganese-in-soil, which is likely to be related to intense late-stage hydrothermal alteration above the centre of the Aguinaga porphyry system.  These soil geochemical relationships are characteristic of the metal zonation around porphyry copper-gold deposits”.
• The Cascabel area hosts a number of high priority targets in addition to the Alpala cluster and the Aguinaga target and Solgold has also secured a number of other licences elsewhere in Ecuador including the Timbara prospect where the company recently announced the discovery of copper porphyry style mineralisation in outcrop.
• The company has budgeted for 120,000m of exploration drilling in 2018 with the majority focused on infill and expansion work at Alpala where a maiden resource of 1.08bn tonnes at an average grade of 0.68% copper equivalent was announced in January.
Conclusion: The imminent commencement of early stage drilling at the Aguinaga property is supported by a substantial body of geological, structural , geophysical and geochemical evidence and is no doubt also informed by the detailed knowledge and understanding of the controls to mineralisation the exploration team has accumulated during the continuing exploration of Alpala. We look forward to the initial drilling results from Aguinanga as well as results from the continuing drilling at Alpala.
*SP Angel act as UK broker to SolGold

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Wed, 14 Feb 2018 10:57:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29379/market-briefing-botswana-diamonds-and-solgold-29379.html
Fundamentals remain supportive of commodities in 2018 http://www.proactiveinvestors.co.uk/columns/sp-angel/29386/fundamentals-remain-supportive-of-commodities-in-2018-29386.html Botswana Diamonds (LON:BOD) – Scoping study for the Thorny River Project

Bushveld Minerals* (LON:BMN) – Vanadium demand set to rise further as China raises standards for steel for vanadium in high-strength rebar for earthquake resistance

Golden Star Resources (LON:GSC) – Recent drilling implies Wassa may be more extensive than currently thought

SolGold* (LON:SOLG) – Half-year financial report highlights progress at Alpala, Ecuador and other copper exploration

Stratex International (LON:STI) – Exploration agreement for Hasancelebi and Dogala prospects in Turkey

 

Fundamentals remain supportive of commodities in 2018

  • Australia & New Zealand Banking Group Ltd. remain bullish on commodities throughout 2018 despite downward pressure last week following the broad global equity and bond rout. Strategist see “the levels many markets are now trading at present an opportune time for consumers to lock in prices, as we see fundamentals remain supportive of commodities in 2018”.
  • The bank focuses on supply-constrained metals such as copper and zinc, while rising inflation expectations and weaker USD should push gold prices towards $1,400/oz later this year.
  • Despite surging US crude oil output reaching record levels, ANZ remain positive on Brent crude with prices hovering around $70/bbl in the medium term.
  • Constrained supply of mined PGMs combined with robust auto and jewelry demand will drive platinum and palladium prices higher, forecasting $1,100/oz and $1,150/oz respectively.

 

South Africa – Jacob Zuma resigned as South Africa’s President ending his nine year term paving the way for Cyril Ramaphosa to be voted into the office by the parliament.

  • “I have come to the decision to resign with immediate effect, even though disagree with the leadership of my organisation,” Zuma said.
  • South African equities are likely to rerate higher on news of Ramaphosa’s election and if Ramaphosa moves to combat corruption within the ANC and the state in general

 

Tesla’s China factory could hit a roadblock over disagreement

  • Tesla and the Chinese government are reportedly not seeing eye-to-eye with regards to the ownership of the electric car maker’s proposed factory in Shanghai
  • China's central government says the plant must be a joint venture with local partners, while Tesla wants to own the factory completely
  • Tesla could face punitive import taxes if it is not able to open a factory in China

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

+1.03%

at

24,893

Nikkei 225

 

+1.47%

at

21,465

HK Hang Seng

 

+1.97%

at

31,115

Shanghai Composite

 

+0.45%

at

3,199

FTSE 350 Mining

 

+1.94%

at

19,139

AIM Basic Resources

 

+0.96%

at

2,550

 

Economics

US – Strong inflation numbers led to a selloff in US Treasury bonds with benchmark 10y bond yields hitting fresh four year highs.

  • Rising interest rates had little effect on equity markets with both S&P 500 and Dow Jones indices closing higher on the day (+1.3% and 1.0%, respectively).
  • CPI (%mom/yoy): 0.5/2.1 v 0.2/2.1 in December and 0.3/1.9 forecast.
  • Core CPI (%mom/yoy): 0.3/1.8 v 0.2/1.8 in December and 0.2/1.7 forecast.
  • White House officials said there is currently no plan in the works for placing trade tariffs on imported steel and aluminium, despite Mr Trump raising the issue several times this week, Bloomberg reports.
  • Additionally, a number of Republican lawmakers argued that tariffs are likely to cause more harm than good costing jobs in auto, aircraft, wiring and beverages industries.
  • Steel and aluminium users argued that proposed tariffs will hike input costs which would inevitably eat in their margins and place a large number of US jobs at risk.

 

Eurozone – Growth momentum is strong in the single currency region with quarterly GDP growth rate confirmed at 2.7%yoy in Q4/17, the data released yesterday showed.

  • The pace is off 0.1pp from the previous quarter when GDP rate hit the strongest level since the eurozone sovereign debt crisis.
  • Growth slowed slightly in Germany and Italy, while the pace accelerated in the Netherlands and Portugal.
  • The latest Makrit PMI data showed composite activity increased to the highest nearly in 12 years on the back of strong new business orders leading firms to expand staff numbers.
  • “The outlook for the eurozone economy also remained bright, with business confidence improving to an eight-month high,” the Markit report read.
  • A good set of sentiment indicators point to a sustained robust momentum through 2018.
  • GDP (%qoq/yoy): 0.6/2.7 v 0.7/2.8 in Q3/17 and 0.6/2.7 forecast.

EU looking at raiding corporate tax receipts to fill Eur15bn black hole left by Brexit

  • News in the FT today highlights radical options being considered by the EU to fill the EUR15bn black hole when the UK finally leaves the union.
  • The EU is considering siphoning a portion of corporate tax receipts from national treasures into the EU common pot. Can not see member states enjoying that.
  • “The plan is linked to EU proposals to harmonise how nations calculate companies’ taxable profits but does not involve imposing a single EU corporate tax rate. The commission believes the levy could bring in between €21bn and €140bn over the seven-year life of the budget. Another plan involves raiding the money that governments collect from issuing CO2 permits to airlines, energy companies and other polluters.” According to the FT.
  • We wonder if Luxembourg and Monaco might be exempt from the tax.

 

France – Unemployment rate recorded the steepest decline since the 2008 financial crisis in the final quarter of last year.

  • Strong uptick in labour numbers match reports of improved business outlook through the quarter with the latest Composite PMI (January) standing close to the highest in years.
  • Unemployment change (‘000): -205 v +66 in Q3/17.
  • Unemployment rate (%): 8.9 v 9.6 (revised from 9.7) in Q3/17 and 9.5 forecast.

 

Australia – Unemployment edged lower in January amid higher participation rate from increased number of women actively looking for job.

  • Part time jobs climbed strongly (+65.9k v +19.5 in Dec) more than offsetting a drop in the number of full time roles (-49.8k v +12.7k in Dec).
  • The national statistics body estimates 292k full time jobs have been added since the start of 2017 with women accounting for 55% of that.
  • The increase is attributed among other things to regulatory changes allowing paid parental leave and more flexible working arrangements.
  • Despite the jobless rate hovering around the lowest level since early 2013, market commentators are estimating unemployment should come down below 5% to sufficiently tighten the labour market to generate upward pressure on wages and prices.
  • Employment change (‘000): +16.0 v +33.5 in December and 15.0 forecast.
  • Unemployment rate (%): 5.5 v 5.6 (revised from 5.5) in December and 5.5 forecast.

 

Currencies

US$1.2494/eur vs 1.2366/eur yesterday  Yen 106.48/$ vs 107.37/$  SAr 11.665/$ vs 11.868/$  $1.405/gbp vs $1.388/gbp  0.797/aud vs 0.787/aud  CNY 6.342/$ vs 6.346/$

 

Commodity News

Precious metals:         

Gold US$1,355/oz vs US$1,332/oz yesterday

  • Spot gold advanced as much as 2% in yesterday’s trading to record the biggest intraday gain since May last year, as the precious metal nears its highest level in almost three weeks. The main culprit fell to USD weakness as investors weigh the impact of rising inflation, disappointing retail sales and concerns over US fiscal and current-account deficits.
  • US consumer prices rose more than expected in January as Americans paid more for gasoline, rental accommodation and healthcare. Inflation fears are prompting investors to purchase precious metals, although a rise in increase rates is expected to make non-yielding gold less attractive.
  • The Commerce Department announced yesterday that US retail sales decreased 0.3% last month, the largest decline since Feb. 2017, as households cut back on purchases of motor vehicles and building materials.

   Gold ETFs 72.0moz vs US$72.0moz yesterday

Platinum US$1,005/oz vs US$977/oz yesterday

  • Falling platinum demand, seeing a sharp contraction in Japanese investment and Chinese jewelry buying as well as a slowdown in consumption by carmakers, is expected to place the market into oversupply with Johnson Matthey estimating a 110,000 ounce excess.

Palladium US$1,017/oz vs US$989/oz yesterday

Silver US$16.95/oz vs US$16.58/oz yesterday

           

Base metals:   

Copper US$ 7,186/t vs US$6,982/t yesterday

Aluminium US$ 2,190/t vs US$2,125/t yesterday

Nickel US$ 14,330/t vs US$13,500/t yesterday

  • Nickel rises to its highest level in more than two years as metals climb on sliding USD which is under threat from widening US fiscal and current-account deficits. The metal climbed as much as 1.4% to $14,275/t, to record its best level since May 2015. Stockpiles tracked by LME shrunk to their lowest levels since 2014, helping the metal rise 12% ytd.

Zinc US$ 3,586/t vs US$3,459/t yesterday

Lead US$ 2,602/t vs US$2,545/t yesterday

Tin US$ 21,600/t vs US$21,600/t yesterday

           

Energy:           

Oil US$64.8/bbl vs US$62.6/bbl yesterday

Natural Gas US$2.546/mmbtu vs US$2.582/mmbtu yesterday

Uranium US$21.65/lb vs US$21.65/lb yesterday

  • Uranium’s recent price rally may be artificially upheld by Japan’s significant stockpile of the nuclear fuel, according to industry consultants Ux Consulting Co. Utilities stockpiled enough fuel to power the nation’s nuclear fleet for at least 6 years, while some generators remain active in accepting deliveries despite the near-total shuttering of the country’s reactors almost seven years earlier following the Fukushima disaster.
  • Japan’s large and growing inventories are certainly something that overhangs the uranium market. If any Japanese utility tries to sell some or all of its nuclear fuel inventory, it will probably try to do so in a discrete manner. The first choice is to sell to another Japanese utility so as to minimise the global market impact” comments Ux. Reintroduction into global markets could have a devastating impact on the recent rally in uranium prices after suppliers cut production across major projects, and reverse the effect of the recovery from the lowest annual average in a decade.
  • Spot uranium slipped more than 68% since the Fukushima disaster, falling to the lowest level in 12 years in November 2016. Coordinated production cuts by miners across Canada and Kazakhstan, the world’s biggest producer, brought spot price to average $22 in 2017.
  • Ux estimate Japanese generators have stockpiled at least 130 million pounds. Domestic sale of the product remains limited with Kansai Electric Power Co. and Kyushu Electric Power Co. representing the only companies with operating reactors, producing electricity from three atomic plants out of a nationwide fleet of 40.
  • Remaining utilities firms are reducing or deferring shipments as stockpile levels climb, with Tohoku Electric Power Co., Hokuriku Electric Power Co., and Tokyo Electric Power Company Holdings, Inc. all in negotiation with their suppliers. Chubu Electric Power Co. has secured enough uranium to operate the Hamaoka plant, while Chugoku Electric Power Co. has no plans to sell its stockpiles.
  • Momentum is on the rise for growing nuclear energy generation, with four more plants due to come online in the next four months.

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$76.8/t vs US$76.3/t

  • Speculation of sustained demand for higher-grade ore is expected to sustain prices as iron ore futures plough onto the highest close in more than five months. In Singapore, most-active SGX AsiaClear futures rose as much as 0.7% to $77.25/t, closing near the highest since Sept. 1, as the high-grade 62% content material surges 5.3% year to date.
  • Iron ore (or at least high-quality iron ore) will be well supported over the medium term. A significant part of the quality premium for iron ore is driven by the change in Chinese steel making philosophy, and we expect this to be permanent”, according to Sanford C. Bernstein Ltd. The benchmark iron ore remains in a sweet spot as China’s curbs on steel supply to fight pollution have underpinned demand for higher-quality ore, supporting preferential output from miners including Rio Tinto Group and Vale SA. Speculation follows that when restrictions are lifted in mid-March, the likely resurgence in activity by mills will be a plus for iron ore.
  • Further, steel inventories remaining low across China and improving mills’ profitability will enable a boost in usage of high-grade ore, according to Citigroup Inc.
  • In addition to the winter production restrictions, policy makers are advancing the drive toward overcapacity across the Asian nation.

Chinese steel rebar 25mm US$638.3/t vs US$637.9/t - China steel demand to aid prices as winter idling ends

  • Seasonal steel demand in China will absorb additional steel production, supporting steel prices
  • As local mills restart in the spring after winter curbs, the bank expects inventory levels may be too low, and lags to rebuild supply to meet higher demand may mean there is upside risk to steel prices
  • The potential constraints to supply contrast with the bank's expectation for Chinese steel demand to grow 25%, or 13 million mt in March from February, and further 1% month-on-month growth in April

Thermal coal (1st year forward cif ARA) US$81.7/t vs US$79.7/t

Premium hard coking coal Aus fob US$233.1/t vs US$230.2/t

 

Other:  

Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week

Cobalt LME 3m US$81,000.0/t vs US$81,250.0/t - Umicore says cobalt recycling will be growing source of metal in coming years

  • Chief Executive Marc Grynberg told Financial Times that ‘recycling is an amazing mine of cobalt that is totally untapped’
  • Around 10% of global production goes into smartphones and if it is not extracted from dead batteries, the cobalt is lost forever
  • In order to meet increasing demand for electric car batteries, cobalt supply will need to reach 180,000 tonnes by 2026, up from 48,000 tonnes in 2016, Benchmark Mineral Intelligence says. By that time, recycling will start to make up a growing portion of supply

 

Company News

Botswana Diamonds (LON:BOD) 1.3 pence, Mkt Cap £5.9m – Scoping study for the Thorny River Project

  • Botswana Diamonds reports that it has started a scoping study to evaluate its Thorny River diamond project in the Limpopo Province of S Africa. The work is expected to take up to six months.
  • The project area totalling 2,771 hectares is a consolidation of the Frischgewaagt, Hartebeestfontein and Doornrivier properties which comprise “the eastern extension of the kimberlite dyke/pipe systems on which the Klipspringer & Marsfontein Mines are located, both of which have been economically mined.”
  • The company points out that “Extensive drilling, geophysics and sampling work has been undertaken at Thorny River during the last twelve months” although “The estimated diamond grade range remains at 46-74cpht” and “The estimated volume range remains at 1.2 -2.1 million tonnes of kimberlite”.
  • The company does, however note that “Further analysis of the work completed to date has led to an updated estimate of the diamond value range of US$120-US$220 per carat”. Botswana Diamonds comments that  the grade and value per carat “compares favourably with the published Indicated Resource grade of the neighbouring Klipspringer Mine of 49 carats per hundred tonnes and diamond value of US$130 / carat (2010 value), and value per tonne of US$64 / tonne.”

Conclusion: We look forward to the findings of the scoping study on the Thorny River diamond project in due course.

 

Bushveld Minerals* (LON:BMN) 8.5p, mkt cap £75m – Vanadium demand set to rise further as China raises standards for steel for vanadium in high-strength rebar for earthquake resistance

BUY – Target price 18.28 - (Bushveld Minerals now holds 59.1% of Vametco)

Click here for last Flash note

  • The People’s Republic of China is working to cut the use of substandard steel and improve standards for new high strength rebar.
  • The move is to help make buildings better resistant to earthquakes with the standards coming in to effect on 1 November
  • The standards released last week eliminates low strength Grade 2 (335MPa) rebar and brings in three high-strength standards:
    • Grade 3 (400MPa),
    • Grade 4 (500MPa),
    • Grade 5 (600MPa).
  • Hot-rolled HS rebar,
    • V content will be at 0.03%
    • V in Grade 3, 0.06%
    • V in Grade 4,
    • >0.1% Grade 5 rebar
  • The implementation of the new standard will significantly promote the application of vanadium in Chinese rebar products.

*An SP Angel Mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa. 

 

Golden Star Resources (TSX:GSC) C$0.95, Mkt Cap C$360m – Recent drilling implies Wassa may be more extensive than currently thought

  • Golden Star Resources has released results from drilling undertaken during the second half of 2017 which suggest that the Wassa deposit in Ghana may be more extensive than is reflected in the current resource estimate, which the company’s website reports as 44.3m tonnes at an average grade of 2.33 g/t gold, equivalent to 3.3m oz of contained gold.
  • Investigation of the “B” Shoot and “F” Shoot to the south of the current resource envelope comprise a total of 6,818m of drilling and was undertaken from hole the BS17DD385M “mother” hole, collared 180 metres to the south of Wassa Underground’s current inferred resources, and four “daughter” holes.
  • Results from the “mother” hole, which have been reported  previously, “confirmed that the high grade zone extended 180m to the south of Wassa's Inferred Mineral Resources”. The results from the follow-up “daughter” hole programme tested the extension of the mineralisation in what is interpreted as the “F” Shoot “over approximately 400m of dip extension and intersected the “thickest zone of gold mineralization drilled to date at Wassa … [of] 94.0m averaging 4.4 g/t Au from 1,305.7m” in the third of the daughter holes.
  • The 94m long intersection covered higher grade sections including a 14m long section averaging 18.1g/t gold from a depth of 1305.7m and another 14m long interval averaging 8.6g/t gold from a depth of 1495m. We observe that the 94m long intersection is reported as the true width represented by a 211.3m long down hole intersection which indicates that the drilling is intersecting the mineralisation at an oblique angle of, we estimate, around 25⁰, and may complicate geological interpretation somewhat.
  • Overall, the company interprets the drilling has extended the orebody by “approximately 600m to the south of the current Mineral Reserves and remains open.”
  • Further southward drilling of the “B” Shoot and “F” Shoot is planned during Q2 2018
  • In addition to the drilling towards the south, underground drilling of two holes (612m) has shown continuity of gold mineralisation in the “B” Shoot North to extend 50m further north than the current planned mining area and opened up the possibility of adding additional production stopes in the near term.
  • The first of the new [underground] holes (BS17-720-29), which was drilled across the top of the interpreted zone, confirmed the grades and thicknesses intersected in the earlier hole, including 27.1m1 grading 8.7 g/t Au from 209.9m. The second new hole, (BS17-745-17), drilled approximately 20m up dip of the first new hole, also reported a significant intercept: 11.4m1 grading 7.3 g/t Au from 219.0m. This confirmed the continuity of the gold mineralization 50m to the north of the planned stoping area.”
  • Three holes, extending approximately 300m below the area previously mined were drilled on the 242 FW zone, which is located in the flatter dipping western limb of the Wassa fold structure. The most northerly of these holes “(242-17-DD006) returned an intercept of 6.8m1 grading 8.2 g/t Au from 488.0m and as a result, further drilling has been included in the 2018 exploration budget.” The company comments that “If further drilling of 242 FW is successful, it has the potential to supply additional underground ore to the Wassa processing plant and increase production”
  • Commenting on the results from the “B” and “F” Shoot drilling, CEO, Sam Coetzer, pointed out that the results “continue to support our belief that Wassa has substantial potential at depth … [and that they] … provide further confirmation that the ore body extends approximately 600m to the south of the current Mineral Reserves and remains open.  Importantly, they also suggest that it may widen at depth”. He went on to underline that “Wassa Underground is a central part of our exploration strategy in 2018 and I look forward to releasing further information about our other exploration targets during this quarter."

Conclusion: Drilling results are showing potential to increase the overall resource at the Wassa mine beyond the current 3.3moz of gold as the mineralised structures are being identified laterally well outside the existing resource envelope and at depth. We look forward to results from the future exploration and, in due course to an updated mineral resource estimate.

 

SolGold* (LON:SOLG) 22.7p, Mkt Cap £384m – Half-year financial report highlights progress at Alpala, Ecuador and other copper exploration

(SolGold own 85% of Cascabel in Ecuador)

  • SolGold report the drilling and assaying of holes 26 to 35 on the Alpala project at Cascabel in Ecuador.
  • The project is still open and so far indicates a true width of up to 700m with mineralisation down to 1,600m down hole.
  • The team is directed and supported by Newcrest who are funding some A$60m worth of exploration on the project.
  • Newcrest are expert in block cave mining and are considered to have world-class expertise when it comes to this sort of mining and project evaluation.
  • The recently accelerated drilling program continues to define and expand the mineralised envelope and to increase the scale of the project.
  • Management are preparing to release details on the new Mineral Resource estimate which was announced to the market on 3rd January.
  • The resource estimates: 1.08bnt grading an average 0.4% copper and 0.3g/t gold to give 0.6% copper equivalent.
  • Cascabel other targets; Solgold has only tested five of the 15 targets on the Cascabel license area. Alpala is one of these targets. The others are due for testing this year and may prove significant in adding to the effective resource inventory in the Cascabel area.
  • Other projects: SolGold expanded its licenses in Ecuador significantly last year and now holds 100% interests in some 77 concessions though a number of local subsidiaries. SolGold is using knowledge gained from its work at Cascabel alongside more traditional geological methods to target mineralisation on these concessions.
  • Solomon Islands; SolGold continue negotiations with landowners to gain access to project areas as Kuma and Mbetilonga. The company will start field work on the grant of the relevant licenses and access rights. Several strong copper anomoloies remain untested here.
  • Australia, Queensland; SolGold plan to follow up on numerous anomalous areas including the Mt Compton breccia pope at the Normanby project.
  • Funding: SolGold raised some A$78.4m in the second half last year to give the company a cash balance of A$138.4m at the year end.  This is an almost unprecedented sum for an exploration company.
  • Cash burn; the company spent A$26.6m on exploration and evaluation mainly at Alpala in Ecuador. The work principally covered the drilling and assaying of nine deep drill holes including daughter holes covering some 38,250m
  • Admin expenses; came in at A$9.8m through the second half.
  • Profit / loss; the company recorded a total comprehensive loss of A$14.9m through the second half due to increased exploration activity at Alpala and at a number of other, mainly copper/gold prospects.

Conclusion: SolGold with advice from Newcrest are working tremendously hard to fully evaluate the Alpala project. The company has also added personnel to ramp up other exploration in Ecuador which in our view is highly prospective and may well provide future targets for significant discoveries. SolGold’s very healthy cash balance is also enabling the company to reactivate exploration in Australia and the Solomon Islands.

*SP Angel act as UK broker to SolGold

 

Stratex International (LON:STI) 0.8p, Mkt cap £3.7m – Exploration agreement for Hasancelebi and Dogala prospects in Turkey

  • Stratex reports that it has reached an agreement with a private Turkish company, TET Madencilik Ltd, for TET to fund, over the next two years,  up to US$1.5m of exploration on the Hasancelebi  gold prospect located approximately 500km southeast of Ankara in Turkey.
  • Stratex will manage the exploration and drilling campaigns on behalf of TET, however, the agreement will “significantly reduce … [Stratex’s] operational overheads in Turkey through the transfer off licencing and staffing costs to TET.”
  • Under the agreement, Stratex is to receive US$50,000 within a week of signing the agreement. Provided that the exploration generates “a minimum JORC-compliant indicated or measured gold resource of 100,000oz (with a 0.3g/t cut off) is defined within the oxide and transition zones” within the 2 year exploration period, Stratex will receive a further US$500,000 success fee. Stratex will also receive a 1.5% NSR on any future precious metals production.
  • The trigger for payment of the success fee carries a number of practical conditions including the amenability of the deposit to surface mining, and satisfactory metallurgical test results and Environmental Impact Assessment. In the event that these criteria are met but TET does not proceed to development within a further 2 years, the properties revert to Stratex.
  • In the event that the exploration at Hasancelebi reaches the 100,000oz resource target within the agreed US$1.5m exploration budget, the balance of the funds will be used for exploration of the greenfield Dogala project which is located approximately 225km west of Hasancelebi, and is considered to be prospective for high sulphidation gold.
  • The Hasancelebi project area has been previously drilled in joint-venture with Teck Resources and “has demonstrated the potential for low-grade, high-tonnage gold mineralisation extending over a distance of between 1,000m and 2,000m, and vertical continuity of the system is confirmed down to 300m in some areas”.
  • Commenting on the agreement, interim CEO and founder of Stratex, Bob Foster described the projects as “non-core to Stratex's portfolio over the last few years” and noted that it would start to realise value on behalf of shareholders while it “allows us to share in any upside potential that might be realised, through a success-based payment and a royalty on future production”.
  • Earlier this month, Stratex enunciated its strategy as resting on the fast tracking of its exploration of the Dalafin deposit in Senegal with a reduction of the company’s financial exposure “through the conclusion of a joint-venture arrangement to bring in third party funding and additional expertise”; earning in to or acquiring new projects; monitoring of “its investment in other companies and support of further exploration as appropriate”; and to continue “the realisation of value from existing lower priority projects which are converting to royalty arrangements”. Today’s  announcement represents tangible delivery on the last of these strategic criteria.

Conclusion: Stratex’s agreement with TET over Hasancelebi and Dogala delivers on the recently announced strategy by generating value from a non-core asset while retaining the exploration management of the projects and exposure to exploration success through a discovery bonus and continuing royalty.

 

 

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Thu, 15 Feb 2018 11:21:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29386/fundamentals-remain-supportive-of-commodities-in-2018-29386.html