SP Angel – Morning View – Tuesday 18 12 18
Xi speech may attract Twitter backlash from Trump
Metals falter as China speech omits new policy
Orosur Mining (LON:OMI) – Q1 results and Newmont investment in Anzá gold project in Colombia
Rainbow Rare Earths (LON:RBW) – Maiden JORC Mineral Resource Estimate
Savannah Resources (LON:SAV) – Cooperation agreement with Porto University and LNEG
Thor Mining (LON:THR) – Positive hydrological studies at Kapunda
China – Xi speech, hard-line stance may attract tough rhetoric from Trump as Xi tells the world / America not to dictate to Beijing
- Xi’s speech, which was short on detail and long on political self-congratulation has the potential to further destabilise markets.
- Xi focussed on the supremacy of the ruling Chinese Communist party in a speech designed for a domestic audience.
- The speech refers to resolutely reforming what should be changed and not to reform what shouldn’t be changed.
- An indication that China will continue to pursue growth plans but is not going to be pushed around.
- China is pushing an industrial plan to further upgrade the value of Chinese manufacturing, ‘Made in China 2025’, which is treading on the toes of powerful Western Corporations.
- Intellectual theft and Cyber security issues are also a major problem for the US and Xi’s seemingly hard-line stance may well attract some tough rhetoric from Trump.
- The arrest of the Huawei CFO and barring of Huawei equipment from many new 5G networks highlights how the West is moving to keep China out of sensitive technology areas.
Metals falter as China speech omits new policy
- Base metals broadly tumbled as Chinese President Xi Jinping announced the country plans to stick to its policy agenda, despite pressure from the US and others to allow more competition in its economic system.
- While the Asian nations leader address was being watched for potential policy announcements, he offered no new ideas to boost the economy or assuage US concerns.
- Asian equities slide as President Xi’s speech on the country’s four decades of reforms did little to raise sentiment. Specifically the speech lacked mention of tax cuts and rule of law, signalling more control by the centralised government.
- Falling sentiment follows indications of easing trade war tensions as China halts US auto import tariffs, boosting metals earlier in the week.
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
US – Trump criticises Fed for even considering another interest rate hike
- “It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!.”
Australia looks to capitalise on US need for ‘critical metals’
- Australia is set to sign a preliminary deal with the US to support joint research and development of minerals deemed critical to the US economy, according to government minister. Diversification looks to reduce the dependence on supply for 35 minerals consumed across high-tech industries amid a festering trade war with China.
- Resource minister Matt Canavan said “this week I will sign a letter of intent with my counterpart…on critical minerals. (This) will mean Geoscience Australia and the United States Geological Survey (USGS) will work closely on exploration, extraction, processing and research and development,”, referring to the arms of respective governments that handle minerals exploration.
- “For 14 of those 35 critical minerals, we are in the top fiver (holders) of world reserves, so they are the ones we’d like to focus on”. The list includes lithium fundamental for rechargeable batteries, alongside rare earths such as neodymium, gallium, bauxite and alumina.
- China dominates supply, with the nation supplying more than 80% of global requirements for rare earths.
US$1.1375/eur vs 1.1315/eur yesterday Yen 112.51/$ vs 113.41/$ SAr 14.254/$ vs 14.363/$ $1.265/gbp vs $1.260/gbp 0.720/aud vs 0.718/aud CNY 6.896/$ vs 6.901/$
Englehard withdrawing from physical commodity trading in coal, oil and cotton
- The move follows some key departures.
Gold US$1,248/oz vs US$1,238/oz yesterday
- Safe haven gold climbs as a sell-off in equities spreads across to Asia while investors awaited the Federal Reserve’s final policy-setting meeting of the year and clues on its path into 2019. The Fed’s been facing push back before this week’s expected rate increase, with President Donald Trump tweeting on Monday it was “incredible” the bank was considering a hike given low inflation and a strong dollar.
- After raising three times in 2018, policy makers open the year’s final meeting on Tuesday amid expectations for a fourth hike. It’s rare for the central bank to boost rates when stocks are moving with volatility and concerns spread over the bond market.
- As falling equities were triggered by softer-than-expected US economic data, “gold remains one of the few places for investors to wait out this storm”, according to head of Oanda Corp Asia Pacific trading.
Gold ETFs 69.6moz vs US$69.6moz yesterday
Platinum US$794/oz vs US$784/oz yesterday
- Platinum future reach near 15-year lows, as holdings in ETFs drop to five year lows, however the outlook begins to get brighter on the back of growing hydrogen fuel cell requirements.
- Korean carmaker Hyundai announced a $6.7bn program to raise production of fuel cells 200-fold going from 3,000t this year to 700,000tpa by 2030.
- Toyota was the first to back the technology for passenger vehicles, launching its Mirai – "future" in Japanese – back in 2015. Honda is bringing the Clarity back to its line-up and Hyundai’s Nexo SUV is launching in North America next year. Hyundai also inked a collaboration on fuel cells with Volkswagen in June.
- The intensity of platinum loadings climbs for fuel cells, consuming a full ounce versus 2-4 grams per average gasoline or diesel car.
Palladium US$1,261/oz vs US$1,249/oz yesterday
Silver US$14.70/oz vs US$14.60/oz yesterday
Copper US$ 6,064/t vs US$6,119/t yesterday
Aluminium US$ 1,939/t vs US$1,924/t yesterday
Nickel US$ 10,955/t vs US$11,045/t yesterday
Zinc US$ 2,545/t vs US$2,548/t yesterday
Lead US$ 1,932/t vs US$1,946/t yesterday
Tin US$ 19,170/t vs US$19,400/t yesterday
Oil US$58.5/bbl vs US$60.3/bbl yesterday - Oil prices fall as investors worry about potential for economic hard landing if China slows growth if Trump raises China Tariffs
- The potential for a trade war is rising.
- If Trump responds to Xi’s speech with a barrage of hard-line tweets then markets may be in for a tough time.
Natural Gas US$3.600/mmbtu vs US$3.658/mmbtu yesterday
Uranium US$28.60/lb vs US$28.70/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$68.4/t vs US$68.5/t
Chinese steel rebar 25mm US$592.3/t vs US$591.8/t
- The rise in rebar futures pause as investors weigh the impact of stricter limitations across the steel-making hub of Tangshan against weakening construction demand over the winter. The operating rate of blast furnaces in Tangshan has fallen to the lowest since Nov. 23, according to Custeel.
- Tighter anti-pollution curbs in production centers constrains steel supply from mills, aiding product prices.
- Since Tangshan started an intensified anti-pollution drive, blast furnace operations have dropped, however halting construction activity limited rising prices. There are signals stimulus aimed at countering the slowdown is beginning to seep through to property investments, as sales by area has their steepest drop in 13 months in November. The curbs also fall as the country’s November activity data highlighted weakening in the economy, according to Bloomberg economists.
- The Asian nation will open its annual economic policy-setting meeting on Wednesday as top leaders signal campaigns against pollution, financial risk and poverty continue.
Thermal coal (1st year forward cif ARA) US$89.0/t vs US$89.5/t
Coking coal futures Dalian Exchange US$208.4/t vs US$208.5/t
Cobalt LME 3m US$58,000/t vs US$55,000/t
China NdPr Rare Earth Oxide US$45,971/t vs US$46,226/t
China Lithium carbonate 99% US$10,151/t vs US$10,144/t
China Ferro Vanadium 80% FOB US$98./kg vs US$100.5/kg
China Antimony Trioxide 99.5% EU US$6.9/kg vs US$6.9/kg
Tungsten APT European US$275-290/mtu vs US$275-295/mtu
Electric vehicles get another boost from tighter EU carbon dioxide restrictions
- Brussels has agreed tighter 2030 carbon dioxide targets for cars and vans in an important contribution to help the bloc meet its commitments under the Paris climate accord.
- The rules require that new cars sold in 2030 will need to emit 37.5% less CO2 on average, compared to 2021 levels; vans emissions will need to fall by 31%.
- The rules also offer incentives for zero- and low-emission vehicles and are expected to accelerate the EU’s shift to electric vehicles.
Britain in electric slow lane after grant cut
- Electric cars are likely to cost more in the UK than other European countries after the government’s decision in November to cut electric vehicle subsidies.
- A study has shown that incentives are more generous in countries such as France and Germany and researchers have warned of the potential for the UK to lag behind in terms of EV uptake as a consequence of the drop in grants from £4,500 to £3,500.
- Research published yesterday by Carwow found that one of the most generous regimes was in France where incentives of up to €10,000 are offered on pure electric cars. In Germany, these cars are eligible for a €4,000 grant.
Worst new diesel cars emit toxic fumes 11 times the pollution limit
- Renault and Nissan are the worst performing motor manufacturers for air pollution, with the average new diesel car they produce emitting 11 times the legal limit, a study has found.
- Jaguar Land Rover is the best performing auto manufacturer in terms of NOX emissions (g/km) by quite a margin although its new diesels still emit more than double the legal limit of 0.08g per km for nitrogen oxides, according to the largest roadside testing programme to date. Renault/Nissan were the worst. See Today’s Times.
- The average new diesel car emits six times as much NOx on the road as in the official laboratory test, which does not reflect real world conditions.
- The research also found that black taxis in London were some of the highest polluting vehicles. The capital’s buses showed the biggest improvement in emissions of any type of vehicle, down by 65% on average compared with five years ago.
Anglo American (LON:AAL) 1695 pence, Mkt Cap £21.9bn – De Beers sees continuing US demand for diamond jewellery
- Anglo American reports that De Beers achieved sales of US$540m for its 10th diamond sale of 2018. The figure is provisional at this stage and brings sales for the full year to approximately US$5.4bn which is marginally higher than the US$5.3bn achieved in 2017.
- The company comments that rough diamond sales “continued to be in line with expectation”.
- De Beers also noted the restart of cutting and polishing factories in India following the Diwali holiday.
Asiamet Resources (LON:ARS) 3.925p, Mkt Cap £39.2m –BKM infill and geotechnical drilling well underway
- Asiamet Resources reports that the 4,500m programme of infill resource drilling and geotechnical drilling at its Beruang Kanan Main (BKM) deposit is now “well underway” and that the company’s two drilling rigs have now completed approximately 495m and are to be supplemented by two additional rigs from a contractor “with significant prior experience on the BKM project”.
- The additional rigs have been mobilised site and are expected to commence work shortly.
- The company comments that “Initial drilling is focussed on two key mineralised zones within and as extensions of the current open pit design … where an upgrade in Resource confidence from the Inferred category to the Indicated and Measured category (JORC 2012) is targeted.”
- The “Resources upgraded in the current drill program will then be economically assessed for potential conversion to Ore Reserves. Increasing Ore reserves available for integration into mine planning and design optimisation studies is expected to increase mine life and enhance overall robustness of the project from a financing perspective.”
- Commenting on the additional work, CEO, Peter Bird said that “This additional piece of study work is expected to significantly enhance the robustness of the BKM copper project and positively impact outcomes from both a project financing and strategic partnering perspective. We look forward to providing results and further updates from the drilling and study program as the work programs progress over the coming weeks".
Conclusion: The additional drilling at BKM is being augmented by the addition of further rigs from contractors and is aimed at upgrading existing resources and assisting in the definition of ore reserves which are expected to enhance the financial returns of the project. We look forward to further information as the infill drilling progresses.
Cradle Arc Plc* (LON:CRA) SUSP – Provisional liquidation of Leboam Holdings
- Cradle Arc has announced that it has applied to the Botswana High Court for the provisional liquidation of its 60% owned Botswana subsidiary, Leboam Holdings which operates the Mowana copper mine. The Court application is due to be heard on Wednesday 19th December.
- The application for provisional liquidation is intended to allow “parallel talks on an alternative funding arrangement to continue” and comes after planned working-capital funding of US$4m by Fujax failed to materialise after the initial US$1m amid disagreement with holders of the company’s secured loan notes over the provision of security over the assets of the Mowana mine.
- “The Company has been notified that Fujax and Leboam's 40 per cent. shareholder have made a separate application to the Botswana High Court, to be heard today, 18 December 2018, for judgement to consider placing Leboam under judicial management and in the alternative, that is after the Court refuses to grant judicial management order, to place it under, provisional liquidation”
- Commenting on the reasons for the application for provisional liquidation, Cradle Arc’s CEO, Kevin van Wouw, said “While it is unfortunate that we have had to take this step, provisional liquidation as opposed to final liquidation is by no means the end for Mowana, but rather provides the Company an opportunity to continue talks, along with the provisional liquidator, for a sustainable funding solution at the mine”.
Conclusion: The future of efforts to re-open the Mowana mine now lie with the Botswana courts.
*SP Angel acts as Joint Broker to Cradle Arc plc
Orosur Mining (LON:OMI) 6.4 pence, Mkt Cap £9.6m – Q1 results and Newmont investment in Anzá gold project in Colombia
- Orosur Mining reports that its wholly owned Uruguayan subsidiary, Loryser “has negotiated and reached an Agreement with the majority of its creditors”.
- “The Agreement contemplates that net proceeds from the sale of Loryser’s assets in Uruguay together with the issuance of 10 million common shares of Orosur shall fully satisfy all amounts owing to Loryser’s creditors as well as provide funds for Loryser to conduct this process and close operation responsibly”. The closure process is expected to be completed within two years.
- The company reports that it contacted creditors representing 90% of the outstanding value and “was successful in obtaining execution of the Agreement by the majority of its creditors. To date, approximately 68% of the creditors by value have executed the Agreement”.
- Although the Agreement is subject to court approvals and other procedures, with over 50% of creditors now acceding to the Agreement it seems likely to go ahead enabling Orosur Mining to put its affairs in Uruguay in order and pursue its exploration activities in Colombia where Newmont Mining is investing between $10-30m in a three stage earn in process for the Azna gold project located west of Medellin.
- Newmont, which also owns a direct 19.4% interest in Orosur Mining, will earn a 51% interest from an initial $10m investment and a further 14% interest in the project on expenditure of an additional $20m.
Conclusion: Orosur Mining has reached agreement with its creditors in Uruguay. This is a good moment for management and enables the company to move forward unimpeded.