Bushveld Minerals (LON:BMN) BUY – Target Price 11.6p – Full settlement of Barak Financing
Sirius Minerals (LON:SXX) – Shares issued on conversion of convertible bond
Vast Resources (LON:VAST) – Start of drilling at Carlibaba
Miners as well as base metals are trading higher on the back of strong Chinese trade numbers.
• Pound is slightly higher against the US$ amid growing expectations for Conservatives to secure overall majority today with market odds currently standing at around 85% of that happening.
• Gold is relatively flat with the US$ index rangebound ahead of the ECB announcement and UK general elections results.
• Brent is up today (+1.0) after a sharp drop the previous trading session (-3.3%) on the back of reports showing an increase in US inventories, the first rise in the last nine weeks.
• Iron ore futures are down near the lowest level since Oct, although the latest imports data showed China increased purchases of the ore 7.9% (in volume terms) in Jan-May from last year; in value terms, iron ore purchases climbed 67.7%yoy in the first five months of 2017 due to a sun up in futures prices in H1/17.
• The data on major commodities’ imports is provided below:
Commodity Import Volume (mt) YTD change (%yoy)
Coal 22.19 29.6
Crude oil 37.20 13.1
Iron ore 91.52 7.9
Steel 1.11 6.5
- Steel exports 6.98 -25.7
Copper 0.39 -20.3
Cobalt prices fail to maintain high levels as Chinese traders look to sell metal domestically
• Prices dipped to $50,759 – 58,116/t yesterday according to the Metal Bulletin
• The market is looking for relatively stable prices through the summer with some destocking to come.
• It is possible that by-product cobalt supply may be restricted through cuts to nickel production as nickel prices remain challenging for many producers.
Renewable energy sources outweigh coal and gas fired power generation in UK for first time
• Wind, solar, nuclear, hydrowpower and other renewable energy sources have contributed >50.7% of energy sources for the first time.
• 18.7GW came from non-fossil fuels yesterday at lunchtime.
• The trick now will be to store a portion of that energy so that it may be used when demand is higher and when the wind is not blowing.
Dow Jones Industrials +0.18% at 21,174
Nikkei 225 -0.38% at 19,909
HK Hang Seng +0.32% at 26,057
Shanghai Composite +0.32% at 3,150
FTSE 350 Mining +0.42% at 14,812
AIM Basic Resources -0.33% at 2,644
Date Index Period Actual Est Previous
Monday ISM Services PMI May 56.9 57.1 57.5
Factory Orders (%mom) Apr -0.2 -0.2 1.0 (revised from 0.2)
Factory Orders (ex Auto) Apr 0.1 0.2 (revised from -0.3)
Tuesday JOLTS Job Openings ('000) Apr 6,044 5,750 5,743
Thursday Weekly Jobless Claims ('000) Jun-03 240 248
UK Labour win or Hung parliament will be good for UK miners
• We are not trying to forecast the election result but we are aware that a hung parliament or a labour win is likely to cause sterling to fall.
• We advise investors to buy miners and or commodities in general in this event as a way to protect capital against a fall in sterling
China – Good trade data for May point to a strengthening overseas and domestic demand.
• A recovery in exports/imports comes on the heels of declines during much of 2015 and 2016.
• Exports (US$, %yoy): 8.7 v 8.0 in Apr and 7.2 forecast.
• Imports (US$, %yoy): 14.8 v 11.9 in Apr and 8.3 forecast.
Japan – Q1 growth numbers have been strongly revised downwards with most of the decline attributed to weaker inventories.
• Private inventories of oil and other raw materials subtracted 0.1pp from quarterly growth down from previously forecast a 0.1pp growth contribution.
• Private spending has also been revised down to 0.3pp from 0.4pp seen previously.
• Net exports contributed 0.1pp to growth, unchanged from the initial release supported by the weaker yen.
• Overall, GDP grew 1.0pp (annualised) in the three months to Mar compared with a preliminary reading of 2.2pp and economists forecast of 2.4pp.
Eurozone – The ECB is set to release its monetary policy statement today with forecasts for rates to remain flat at current levels and asset purchases programme continuing to run at €60bn per month.
• The announcement will come on the back of good economic growth and sentiment numbers reported by the single currency region lately; although, core inflation remained weak running at 0.9% according to latest reports.
• In Mar, the ECB guided for asset purchases to “run until the end of Dec/17, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim”.
Germany – Incoming economic data continues to show strengthening growth momentum with the latest numbers on industrial production coming in better than expected in Apr.
• Industrial Production (%yoy): 2.9 v 2.2 (revised from 1.9 in Mar) and 2.1 forecast.
Colombia – FARC hands over 30% of weapons
• FARC rebels are reported to have handed over 30% of their weapons to UN monitors in Colombia.
• The deal is remarkable for Colombia which has struggled to gain broad popular support for the peace treaty.
• The initiative has been driven by the families of former kidnap victims who want to see an end to the cycle of violence and extortion after 50 years of conflict.
• FARC leaders and former fighters will now integrate into Colombian politics and society.
• It is hoped that other smaller rebel groups will follow the FARC in its agreement and forthcoming integration.
• Having met with family members of victims of the FARC we are hopeful for the success of this initiative.
• Colombia is very much open for business though visitors should remain careful in remote areas.
US$1.1260/eur vs 1.1252/eur yesterday. Yen 109.60/$ vs 109.25/$. SAr 12.855/$ vs 12.865/$. $1.297/gbp vs $1.290/gbp.
0.755/aud vs 0.755/aud. CNY 6.793/$ vs 6.793/$.
Gold US$1,287/oz vs US$1,293/oz yesterday
Gold ETFs 60.6moz vs US$60.1moz yesterday
Platinum US$949/oz vs US$960/oz yesterday
Palladium US$842/oz vs US$857/oz yesterday
Silver US$17.68/oz vs US$17.71/oz yesterday
Copper US$ 5,675/t vs US$5,597/t yesterday – Freeport-McMoRan fires 3,000 workers at its Grasberg operations as staff fails to report to work amid a continuing labour action at the mine site.
• Local subsidiary said workers did not return after being asked five times and were now considered to have resigned.
• This compares to around 30,000 people at the mine, including 11,000 direct employees.
• The Company said the strike which started on May 1 is affecting mining and milling rates.
• Chinese copper concentrate imports fell to the weakest level since Oct/15 on overseas supply disruptions.
• YTD copper concentrate imports totalled 1.84mt in the first five months of the year, down 20%yoy, with a weak outlook for coming several months due to off-peak summer season.
Aluminium US$ 1,918/t vs US$1,904/t yesterday
Nickel US$ 8,890/t vs US$8,945/t yesterday
Zinc US$ 2,483/t vs US$2,453/t yesterday -
Lead US$ 2,086/t vs US$2,076/t yesterday
Tin US$ 19,330/t vs US$19,580/t yesterday – Yunnan Tin gets license to export tin metal tax free. Previously Chinese exporters were not able to reclaim VAT on tin exports
Oil US$48.5/bbl vs US$49.9/bbl yesterday
Natural Gas US$3.013/mmbtu vs US$3.055/mmbtu yesterday
Uranium US$19.65/lb vs US$19.15/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$54.5/t vs US$55.3/t – China iron ore imports rose 11% from April low. China Steel exports rise 7.6% from April
Chinese steel rebar 25mm US$566.8/t vs US$568.4/t
Thermal coal (1st year forward cif ARA) US$68.3/t vs US$68.5/t yesterday
Premium hard coking coal Aus fob US$148.8/t vs US$149.5/t
Tungsten - APT European prices $220-225/mtu vs $215-225/mtu
Bushveld Minerals (LON:BMN) 9.2p, £70m Mkt Cap – Full settlement of Barak Financing
BUY – Target Price 11.6p
• Bushveld Minerals report the full settlement of short-term, bridge, financing drawn from the Barak Fund.
• The remaining US$1m has now been repaid out of the US$11m which was borrowed.
• The funds were used to pay for 78.8% of Strategic Minerals Corporation ‘SMC’ which holds the Vametco, vanadium mine, process plant and associated infrasctucture.
• Bushveld will repay any outstanding fees and interest by 30 June as previously announced.
• Vanadium prices continued to rise through April and May to a peak of US$6.18/kg on 12th May before pulling back to US$5.32/kg today.
• Bushveld first announced the deal to buy the ‘SMC’ on 9 May 2016 when the vanadium price was around US$3.5/kg. The deal was consummated at end November as vanadium prices rose towards US$5/kg when the SA Competition Commission approved the acquisition. Prices have since risen to a peak of US$6.18/kg effectively accelerating the cash flow and enabling Bushveld to repay the cost of the deal within six months of its effective acquisition.
• We expect China and Japan to continue to roll out Vanadium Flow batteries for utility scale energy storage. We expect further news to come from The International Flow Battery Forum to be held in Manchester, UK on 27-29th June.
Conclusion: The rapid US$11m loan repayment highlights the strength of cash flow coming from the Vametco plant. Shareholders can now look forward to reports on strong cash generation and on the further improvement of the business through increasing production, improved cost efficiencies and innovative new product generation.
Sirius Minerals (LON:SXX) 30.5 pence, Mkt Cap £1,290m – Shares issued on conversion of convertible bond
• Sirius Minerals has announced that it has issued a further 112,488,739 shares as a result of the conversion of a further 173 of its convertible bonds issued late last year.
• To date, the company has issued a total of 176,853,045 new shares valued at US$54.4m through conversion of 272 of the 2000 convertible bonds issued as part of the stage 1 financing to raise US$400m in November last year. So far, 13.6% of the of convertible bonds have been redeemed for shares.
• The shares issued to date fir the convertible bond represent approximately 4.1% of the shares in issue.
Vast Resources (LON:VAST) 0.395 pence, Mkt Cap £18.5m – Start of drilling at Carlibaba
• Vast Resources reports that it has started a 10-hole drilling programme comprising 1000 metres at its Carlibaba prospect in Romania. The programme is expected to be concluded in June and the results should be available by September.
• Carlibaba is “the proposed location of a second open pit mining operation at the Manaila Polymetallic Mine” and “We believe that Carlibaba will become central to our overall plan to develop a significant new metallurgical complex at Manaila. Carlibaba not only presents an opportunity to materially increase resource tonnages and extend the life of our 100% owned Manaila Polymetallic Mine life, but could also become a key hub through which we can unlock the significant resource potential of the wider area.”
• “This drilling programme is accordingly of paramount importance to not only unlocking the inherent potential of this significant asset but will also be valuable in helping us secure potential joint venture or debt financing opportunities being considered to accelerate development of the proposed enlarged mining complex.”
• The Carlibaba site is connected by 2km of underground development to the company’s existing mining operation at Manaila and is “envisaged as the possible site of a new metallurgical processing facility to replace the Iacobeni facility, 34 km away from the Manaila mine.”
• In addition to the work at Carlibaba, the company reports that feasibility work on the Faneata Tailings Storage Facility, which contains material from the Plai polymetallic mine accumulated over more than 40 years, is nearing completion. Hinting strongly that it expects a positive outcome, the company reports that “Once the Feasibility Study is completed, the Company will apply for a permit to operate at Faneata”
Conclusion: The new drilling programme at Carlibaba seems designed to determine whether the company’s plans to develop a second open-pit and new metallurgical plant to serve the expanded mining operation will proceed. We look forward to results as they become available.