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Todays Market View - Weak Chinese trade data pull base metals lower

Todays Market View - Weak Chinese trade data pull base metals lower

SP Angel – Morning View – Monday 10 12 18

Weak Chinese trade data pull base metals lower

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Bluejay Mining* (LON:JAY) – STRONG BUY - Target Price 45p – HSBC Holdings PLC client goes over 8% stake

Europa Metals Limited (LON:EUZ) – Scoping study for the Toral zinc, lead, silver project in Spain

IronRidge Resources * (LON:IRR) – Update on Cape Coast lithium project

MOD Resources (LON:MOD) –Drilling results from the T23 Dome

W Resources (LON:WRES) – Mechanical completion of the La Parilla crushing plant

 

Base metals pull back as gold climbs close to 5-month high with markets focused on US/China trade tensions and a revision in the pace of Fed monetary tightening pace.

  • Additionally, weaker Chinese trade data has further exacerbated forecasts over slowing nation’s economic growth as well as weakening global demand.
  • China’s vice foreign minister summoned the US ambassador Terry Branstad in the wake of the arrest of Huawei Technologies Co’s CFO.
  • Republican Senator Marco Rubio is considering an introduction of a legislation that would bar Huawei from doing business in the US.
  • Chief US trade talks official Robert Lightizer opposed a total ban on Huawei and insisted that the arrest of Meng was a “criminal justice matter” unrelated to trade talks with Beijing.

 

Trump tariff negotiations – hard deadline confirmed for 1 March 2019

  • The US – China negotiations need to have reached a positive conclusion by 1 March next year to avert the threat of a significant expansion in US tariffs on goods from China..
  • The higher tariffs have the potential to slow or even potentially derail the Chinese economy which is already carrying elevated debt within corporations and municipalities.
  • The US is China’s major trading destination by value indicating that even the threat of a significant tariff increase could cause significant slowing of Chinese manufacturing growth.
  • The arrest of the CFO of Huawei in Canada on a US extradition order indicated the US is in no mood to compromise and is looking to prosecute corporations which disregard US sanctions and laws.

 

Airbotics – FAA waver to fly Automated Drones

  • Airbotics is the first drone company to receive a FAA certificate of waiver in the US for flying automated UAS operations.
  • Critically the operator does not need to maintain a visual line of sight.
  • Airbotics will operate its drones out of its Remote Operations Center in Scottsdale, Arizona and will primarily be used within the mining sector and also for other industrial facilities in the US
  • The company recently received $30m of funding to expand its activities and is now the only UAS company certified to fly drones beyond the line of sight in the US, Australia and Israel.

 

Tianqi CEO reckons stake in SQM will be good for both companies

  • Tianqi acquired a 23.77% stake in SQM last week for a trifling US$.1bn following approval by Chile’s antitrust court which placed conditions limiting Tianqi’s access to SQM business secrets (Reuters).

 

Dow Jones Industrials

 

-2.24%

at

  24,389

Nikkei 225

 

-2.12%

at

  21,220

HK Hang Seng

 

-1.19%

at

  25,752

Shanghai Composite

 

-0.82%

at

   2,585

FTSE 350 Mining

 

+0.14%

at

  16,267

AIM Basic Resources

 

-0.03%

at

   2,094

 

Economics

China – The renminbi is on track for the worst day in two months on the back of weaker than expected official inflation and export data.

  • Weaker export growth point to slowing global demand while slower growth in imports pointed to weaker local demand.
  • Exports to most regions slowed while shipments climbed the most as firms continued to front load deliveries ahead of a potential hike in tariffs.
  • Exports (US$, %yoy): 5.4 v 15.5 in October and 9.4 forecast.
  • Imports (US$, %yoy): 3.0 v 20.8 in October and 14.0 forecast.
  • China CPI (%yoy): 2.2 v 2.5 in October and 2.4 forecast.

 

Japan – The economy favoured worse than initially estimated with quarterly GDP down 2.5%qoq (annualised) in Q3 as business investment collapsed due to typhoon weather conditions and an earthquake in northern Japan.

  • Business spending fell 2.8%qoq v -1.8%qoq forecast.
  • Consumer spending was down 0.2%qoq v -0.1% forecast.
  • With global economic growth outlook being revised down and a proposed sales tax increase next year, Japan is forecast to post no change or a contraction in the nation’s GDP next year, according to most respondents of the Reuters survey.

 

ECB – The central bank is expected to leave rates unchanged and provide economic growth estimates update this Thursday.

  • The bank is forecast to reiterate its target to withdraw QE this month although headline inflation slowed last month on the back weaker oil prices and latest Eurozone economic data pointed to a weakening in growth momentum.
  • Eurozone PMI data released last week showed a drop in the headline index to 52.7, the lowest level since Sep/16.
  • ““Output and order books are growing at the slowest rates for over two years as a manufacturing-led slowdown showed further signs of spreading to the service sector… the survey responses highlighted intensifying headwinds of Brexit and trade war worries, a struggling autos sector and rising uncertainty regarding the economic and political outlook,” Markit wrote in the report.

 

EU - The European Court of Justice has ruled that the UK can cancel Brexit without consent of other EU states

 

UK – GDP growth slowed to 0.4%qoq, in line with expectations, in three months to October with the ONS warning potential downward revisions due to a big increase in British trade deficit.

  • YoY GDP expanded 1.5% supported by consumer spending from an unusually warm summer.
  • With Brexit deadline looming, growth outlook remains weak weighing on business investment; the latest October data does not provide details of business capex which fell sharply in the three months to September.
  • Parliament is set to vote on the latest Brexit deal this Tuesday which is widely expected to be voted down.
  • Should the government not come up with a plan B chances of crashing out of the UE with no deal, going to the second referendum or not leaving at all increase.
  • The pound is trading lower this morning on the way to slip past the 1.27 mark.

 

France – Finance Minister called Yellow Vests protest a “catastrophe” for business and retailers that are expected to cost €1bn in lost revenue, even before the most recent incidents on December 8.

  • The government estimates demonstrations will knock around 0.1pp off quarterly growth rate.
  • Bank of France estimates growth to come in at 0.2%qoq in Q4/18, down 0.2pp on this year’s highest 0.4% reading.

 

Turkey – Economic growth slowed to 1.6%yoy in Q3 from 5.3%yoy recorded in the previous quarter and 7.2%yoy recorded in Q1.

  • Growth for the full year is expected to come in at 2.8%, down from 7.4% in 2017, as plunging lira cut into consumer demand and business investments.
  • Economists forecast a recession in Turkey next year as higher interest rates (currently at 24%) weigh on demand for new loans.

 

Currencies

US$1.1416/eur vs 1.1372/eur yesterday.  Yen 112.69/$ vs 112.84/$.  SAr 14.172/$ vs 14.069/$.  $1.272/gbp vs $1.275/gbp.  0.722/aud vs 0.722/aud.  CNY 6.914/$ vs  6.879/$.

 

Commodity News

Precious metals:         

Gold US$1,246/oz vs US$1,241/oz last week

   Gold ETFs 68.8moz vs US$68.8moz last week

Platinum US$789/oz vs US$790/oz last week

Palladium US$1,218/oz vs US$1,207/oz last week

Silver US$14.53/oz vs US$14.51/oz last week

           

Base metals:   

Copper US$ 6,112/t vs US$6,155/t last week - China November copper imports rose 8.6% mom to 456,000t according to customs data

  • Pan Pacific Copper (Japan) is offering Chinese customers copper cathode supply 19% higher representing a $86/t premium cif Shanghai (Fastmarkets MB).

Aluminium US$ 1,952/t vs US$1,952/t last week – Chinese exports aluminium rose 11.7% mom to 536,000t in November highlighting the reason for Trump’s focus on aluminium tariffs

Nickel US$ 10,835/t vs US$10,950/t last week

Zinc US$ 2,587/t vs US$2,638/t last week

Lead US$ 1,991/t vs US$1,993/t last week

Tin US$ 18,945/t vs US$18,990/t last week

           

Energy:           

Oil US$62.0/bbl vs US$59.9/bbl last week - Russia’s Oil Production Cuts To Take Months To Implement

  • After Russia agreed on Friday to cut its oil production as part of the non-OPEC group tasked with cutting 400,000 bpd of oil production, Energy Minister Alexander Novak said it would take Russia “months” to get down to its requested level.
  • While there were no specific figures or targets released to the public for each individual member of the OPEC and non-OPEC groups to hit, non-OPEC was saddled with a 400,000 bpd burden, while OPEC itself agreed to cut 800,000 bpd. Unofficial sources have Russia’s portion of the cuts pegged at 228,000 bpd, which is 2% of its October levels.
  • Shortly after the meeting concluded on Friday, Alexander Novak dampened high spirits among the oil bulls. “The oil production will be reduced, just as two years ago, as quickly as possible in terms of technology. I think it will take several months,” Novak said at the after-meeting press conference.

Natural Gas US$4.504/mmbtu vs US$4.263/mmbtu last week

Uranium US$28.95/lb vs US$28.95/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$65.1/t vs US$63.9/t

Chinese steel rebar 25mm US$595.6/t vs US$605.2/t

Thermal coal (1st year forward cif ARA) US$86.8/t vs US$86.0/t – Protests against the Adani coal mine in Australia call on the state to stop the mine development

  • The project has already been downsized to a 10-16mtpa with a US$16.5m capex from a proposed 60mtpa costing $2bn

Coking coal futures Dalian Exchange US$199.6/t vs   US$200.6/t

           

Other:  

Cobalt LME 3m US$55,000/t vs US$55,000/t

China NdPr Rare Earth Oxide US$46,285/t vs  US$46,520/t

China Lithium carbonate 99% US$10,125/t vs US$10,176/t

 

Battery News

Canada Moose Cree First Nation to get drone deliveries

  • Residents of a remote First Nation island in northern Ontario will begin receiving goods by drone next year.
  • The Moose Cree First Nation has signed a C$2.5m commercial deal with a drone delivery company to transport supplies, medicine, food and mail from the mainland town of Moosonee.
  • Moose Factory island is only accessible by boat in summer, ice road in winter and helicopter at other times.
  • The drone delivery service will begin next spring, after a year of planning.
  • Drones will have a 5kg maximum payload for the roughly 10-minute journey across the Moose River

 

A solution to fracture for durable solar cells

  • Building on the pioneering research conducted by another project granted by the European Research Council, researchers working on PHYSIC concluded that all causes of cracking in silicon solar cells are primarily related to the brittleness of the material.
  • Therefore, the industrial trend to reduce the thickness of solar cells to save material can enhance the effect of cracking and be detrimental to the durability of the photovoltaics module.
  • By applying an innovative pre-stressing technique on the backsheet material researchers managed to increase the amount of compressive stresses in silicon and achieve a crack closure for the majority of cracks. 
  • Electroluminescence data of cracked solar cells before and after treatment provided clear evidence that the solar cell dark portions become electrically conductive again after the newly proposed pre-stressing technique.

 

Chile drives electric vehicle rollout in Latin America

  • Chile is on the verge of introducing a new wave of electric public transportation systems, having recently imported 100 electric buses from China.
  • Chile’s ambitious plan to face down its capital Santiago’s notorious smog problem includes the rollout of electric scooters, cars and taxis, as well as lorries for use in the mining industry.
  • The country aims to increase the number of electric vehicles tenfold by 2022.
  • Energy minister Susana Jiménez told Reuters the government wanted electric vehicles to account for 40% of Chile’s private fleet and 100% of public transportation on the roads by 2050.
  • The initiative puts Chile at the forefront of clean mobility in Latin America as well as among developing countries worldwide.
  • The busses should make a significant difference to air quality on congested roads in Santiago

 

Company News

Bluejay Mining* (LON:JAY) 11.9p, Mkt Cap £101m – HSBC Holdings PLC client goes over 8% stake

STRONG BUY - included in MSCI index

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Target Price 45p

  • HSBC Holdings PLC which most probably acts as a cover for a major corporation or investor has raised its stake in Bluejay Mining PLC.
  • The company has not been able to identify the ultimate owner of the shares which first disclosed a notifiable holding on 20th March this year.
  • We speculate that the potential owner could be an ilmenite processing company such as:
    • Tronox which is acquiring Cristal in the US,
    • Eramet (EU)
    • A Chinese processor
  • A mining company:
    • Rio Tinto – which has the QIT ilmenite processing operations in Canada
    • Iluka Resources – a major ilmenite producer listed in Australia which has been corporately active in recent years buying Sierra Rutile for A$375m (£215m)
    • Kronos Worldwide Inc
  • A mining engineering, or dredging company.
  • An investor with expertise in the minerals sands space
  • Ilmenite prices have risen to US$186/t from a low of around US$171/t in August. Ilmenite prices recorded a year high of US$216/t in April this year but fell back as ilmenite processors struggled with furnace fires and other outages. The resulting restriction in processor capacity is said to have tightened stock levels for pigment consumers indicating that ilmenite prices should continue to rise as processing capacity returns to higher levels.
  • Ongoing economic growth in the US and China as well as elsewhere is also expected to drive end-user demand growth for pigments for paints and printing where titanium (ilmenite) is used to whiten pain and create opacity.

Conclusion: The continued acquisition of shares in Bluejay Mining in uncertain markets indicates the investor has a strategy to build a significant stake in the company. Bluejay will incorporate an expected resource increase into its new feasibility study adding both tonnes and probably grade to the modelling. We are looking for the Iterlak Delta area to offer a significant sweetener in terms of grade to the project and to potentially add significant additional value.

*The SP Angel mining analyst has visited the Dundas, Itelak ilmenite sands project in Greenland.

*SP Angel act as nomad and broker to BlueJay Mining. 

 

Europa Metals Limited (LON:EUZ) 0.07 pence, Mkt Cap £4.0m – Scoping study for the Toral zinc, lead, silver project in Spain

  • Europa Mining reports what it describes as a positive scoping study for its wholly owned Toral zinc-lead-silver project in the Castilla y Leon region of northwest Spain.
  • The study includes a revised mineral resources estimate of 16mt at an average grade of 3.9% zinc, 3.1% lead and 24g/t silver all at the JORC inferred level.
  • Mining is expected to use decline access to an underground operation using mechanised cut and fill mining in 50m high stopes extending up to100m along strike.
  • Ore is expected to be processed via a conventional three stage crushing circuit followed by grinding, milling and flotation to produce azinc and lead flotation concentrates.
  • The company points out that “since 100% of the Mineral Resources at Toral are currently in the Inferred resource category, in accordance with Section 8.5 of ASX Guidance Note 31, the Company is not able to publish a production target or forecast financial information at this time.”
  • Europa Metals does, however say that “The findings of the Study are positive with a recommendation that the Toral Project should be progressed towards a feasibility study to determine full economics, technical and environmental parameters for an underground mining operation focussed on near-term recovery of the higher-grade mineralised zones.”

Conclusion: Although, under JORC rules, Europa Metals is unable to publish the production forecasts or economic conclusions of its scoping study as it is based on a an inferred mineral resource estimate the company is sufficiently encouraged to be moving on to prepare a feasibility study -  we await the results with interest.

 

IronRidge Resources * (LON:IRR) 19.5p, Mkt Cap £60.2m – Update on Cape Coast lithium project

  • IronRidge Resources has provided a progress report on the exploration of its Cape Coast lithium project in Ghana where drilling is now underway at the Abonko and Ewoyaa project areas as well as mapping, pitting of other sites and geophysical interpretation of the recently completed helicopter borne magnetic and radiometric survey over the Saltpond licence
  • A 3000m programme of reverse-circulation drilling is in progress at the Abonko target and on the northern extension of the Ewoyaa area where pegmatite mineralisation of the northern extension area remains open.
  • On completion of the reverse-circulation drilling, the company plans to undertake a more limited, 1000m long programme of diamond drilling in order to obtain metallurgical samples for further testing and density determinations as well as to “twin” a number of the reverse-circulation holes.
  • The company notes that continuing “exploration pitting along strike of the Ewoyaa north extension and north-east zone has uncovered additional strike extensions of spodumene bearing pegmatites [which] will be drill tested as part of the Ewoyaa RC drilling programme”.
  • Pitting is also underway at the Hweda target area where the company has identified coincident geochemical and geophysical anomalies to follow up.
  • Geophysical interpretation of the recently obtained airborne data is in progress “to generate final datasets and maps. The survey was designed to adjoin the existing survey over the Barari licence and will assist in ongoing targeting of new pegmatite targets wihin the portfolio”.
  • Commenting on the exploration programmes, Vincent Mascolo, CEO of IronRidge Resources said “We are advancing on multiple fronts including exploration and resource drilling, implementing metallurgical sampling and test work and advancing regional exploration programmes”.

Conclusion: The drilling work on the Cape Coast lithium project will provide samples for metallurgical and geotechnical testing as well as investigate strike extensions to know mineralisation as the company works towards defining the extent of its lithium portfolio in Ghana.

*SP Angel act as nomad and broker to IronRidge Resources

 

MOD Resources (LON:MOD) 19.4, Mkt Cap £48.2m –Drilling results from the T23 Dome

  • MOD Resources reports that a third hole drilled on the T23 Dome area in Botswana has intersected wide zones of disseminated copper mineralisation between depths of 85-385m down hole in hole MO-T23-003D which also “intersected a strongly mineralised vein at 268.1m down hole depth, confirming the potential for high grade vein hosted mineralisation similar to other copper discoveries in the Kalahari Copper Belt”.
  • Assay results from the drilling are still awaited, but the visual intersections represent a validation of the company’s exploration model particularly with results from the first two holes drilled at T23 also encountering significant copper mineralisation as reported on 21st November.
  • Assay results from the first of the holes at T23 include 25m of mineralisation from a depth of 65m at an average grade of 0.36% copper and 4g/t silver and include a number of higher grade sections within the mineralised zone including 3m averaging 0.7% copper and 10g/t silver from 65m depth, 1m averaging 1% copper and 13g/t silver from 80m and 2m averaging 0.6% copper and 7g/t silver from 88m depth.
  • The company points out that “The T23 Dome is the first new target drilled within the regional scale T20 Exploration Project (Figure 1), which forms part of the extensive landholdings held by MOD (70%) and Joint Venture (JV) partner, Metal Tiger Plc (30%) (AIM: MTR).”
  • The company is already working on a feasibility study for its 60mt T3 project, located approximately 100km to the east and, following up widespread electromagnetic anomalies similar to those at T3 “suggests the Kalahari host sequence may occur within a number of well-defined domes and folds at shallow depth, below the entire 390km2 of the EM survey area interpreted to date. A substantial drilling campaign is planned for early 2019 to target some of the most compelling domes and structural targets in the T23 Dome area.”
  • The T23 dome is also “located immediately north of a very large, as yet unexplained target with multiple copper and zinc soil anomalies, extending ~60km along the centre of the T20 Exploration Project. The soil anomalies remain open to the west towards the Namibian border and the area is completely covered by MOD JV licences (Figure 1). These soil anomalies are a high priority for drilling starting in early 2019.”

Conclusion: MOD Resources continuing success in the Kalahari Copper Belt of Botswana is a strong endorsement of their exploration model and we look forward to further results from this emerging district as the exploration programme continues into 2019.

 

W Resources (LON:WRES) 0.54p, Mkt Cap £31.2m – Mechanical completion of the La Parilla crushing plant

  • W Resources reports that it has completed the installation of the crushing plant at its La Parilla tungsten mine in Spain in preparation for “commissioning of mined ore in January 2019.
  • The crushing circuit at La Parilla is described as a 350tph facility comprising a primary jaw crusher and secondary cone crusher with associated screening capacity and two tertiary cone crushers.
  • “The high level of automation in the design and robust wear liner packages will permit strong operational control and minimise maintenance requirements going forwards.” The “circuit has been designed for modular expansion to 700tph requiring no modifications to the installed infrastructure in the future and is currently configured to feed X-Ray ore sorting going forwards.”
  • Commenting on the progress, Chairman, Michael Masterman, said “We are looking forward to first mined ore into the crusher early in the new year which will contribute to an increase in production rates from La Parrilla in line with the planned ramp-up programme"

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