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Today's Market View - Vale disaster impact offset by slowing China demand

Today's Market View - Vale disaster impact offset by slowing China demand

SP Angel – Morning View – Thursday 07 02 19

Vale disaster impact offset by slowing China demand

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Altus Strategies* (LON:ALS) – Joint Venture term sheet signed on Lakanfla and Tabakorole gold projects in Mali

Anglo Asian Mining* (LON:AAZ) – 2019 full year production guidance builds on record 2018 production

 

Vale loses license following deadly dam disaster

  • Vale SA’s license to operate has been revoked by Brazilian state regulator on Feb. 5th, adding a key operating hurdle to efforts by the iron ore king to return to normal operation. The world’s top miner of the steelmaking ingredient declared force majeure on a number of contracts following suspension of operations at its Brucutu mine.
  • Brucutu’s restart is now conditional on both overturning the court injunction and the reinstatement of the dam’s license, Vale said in a statement, potentially impacting on 30Mt lost annual production.
  • The revocation of its dam license has dampened optimism for resumption of normal operation, but has been deemed necessary following the accident that left at least 150 people dead.
  • Prior to imposing the force majeure, the company had already said it would be cutting 40mt of production as part of a plan to improve safety by decommissioning dams similar to the two that have failed in recent years. Vale also said it will partially offset the losses by lifting output at other mines.

 

Dow Jones Industrials

 

-0.08%

at

  25,390

Nikkei 225

 

-0.59%

at

  20,751

HK Hang Seng

 

+0.21%

at

  27,990

Shanghai Composite

 

+1.30%

at

   2,618

FTSE 350 Mining

 

+0.10%

at

  18,926

AIM Basic Resources

 

+0.17%

at

   2,242

 

Economics

Eurozone – Growth forecast cut, inflation to slow

  • The European Commission sharply cut on Thursday its forecasts for economic growth in the euro zone this year and next because of an expected slowdown in the largest countries of the bloc caused by global trade tensions and growing public debt.
  • The Commission said euro zone growth will slow to 1.3% this year from 1.9% in 2018, and is expected to rebound in 2020 to 1.6%.
  • Growth in the 27-nation European Union - without Britain which is planning to leave in March - is expected to slow to 1.5% this year from 2.1% in 2018. Next year, the bloc is forecast to expand by 1.8%.
  • In Germany, the bloc's largest economy, growth is expected to slow to 1.1% this year from 1.5% in 2018.
  • The Commission cite global trade tensions and China’s slowdown as the focus on revised growth forecasts.
  • Inflation forecasts have also been revised downwards to 1.4% this year, further away from the bank’s target rate close to 2%.

 

Currencies

US$1.1351/eur vs 1.1386/eur yesterday  Yen 110.05/$ vs 109.68/$  SAr 13.602/$ vs 13.463/$  $1.291/gbp vs $1.294/gbp  0.710/aud vs 0.713/aud  CNY 6.745/$ vs 6.745/$

 

Commodity News

Precious metals:         

Gold US$1,304/oz vs US$1,315/oz yesterday

   Gold ETFs 73.0moz vs US$73.1moz yesterday

Platinum US$804/oz vs US$818/oz yesterday

Palladium US$1,369/oz vs US$1,376/oz yesterday

Silver US$15.67/oz vs US$15.81/oz yesterday

           

Base metals:   

Copper US$ 6,246/t vs US$6,240/t yesterday

Aluminium US$ 1,905/t vs US$1,933/t yesterday

Nickel US$ 12,890/t vs US$13,085/t yesterday

Zinc US$ 2,716/t vs US$2,738/t yesterday

Lead US$ 2,082/t vs US$2,108/t yesterday

Tin US$ 21,015/t vs US$20,895/t yesterday

           

Energy:           

Oil US$62.3/bbl vs US$61.8/bbl yesterday

Natural Gas US$2.609/mmbtu vs US$2.676/mmbtu yesterday

Uranium US$28.95/lb vs US$28.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$87.3/t vs US$86.0/t

Chinese steel rebar 25mm US$596.9/t vs US$597.1/t

  • World’s top steelmaker, ArcelorMittal, announces it is forecasting a fall in Chinese steel demand and weakness across the US and Europe, reinforcing concerns that dark clouds are gathering over the global economy.
  • The steel industry faces macro-economic risks and persistent oversupply, ArcelorMittal said in a statement. Smaller steelmakers around the world have recently raised the alarm on a darkening outlook, with Salzgitter AG earlier this week pointing to “gloomier sentiment and numerous economic and political uncertainties.”
  • ArcelorMittal, which reported fourth-quarter earnings that missed analyst estimates, projects global steel demand growth of 0.5 – 1% this year, compared with 2.8% in 2018.
  • Steel demand in China is forecast to fall by 0.5 - 1.5% in 2019, reversing direction after growth of 3.5% last year. Relatively stable demand from automotive and construction in China will be offset by declining machinery output, ArcelorMittal said.
  • China’s not the only region showing signs of weakness. The U.S. and Europe are expected to grow at a slower pace than last year, also partly thanks to weaker demand for machinery, ArcelorMittal said.

Thermal coal (1st year forward cif ARA) US$81.6/t vs US$80.3/t

Coking coal futures Dalian Exchange US$196.1/t vs US$196.2/t

           

Other:  

Cobalt LME 3m US$33,000/t vs US$33,000/t

China NdPr Rare Earth Oxide US$46,182/t vs US$46,202/t

China Lithium carbonate 99% US$10,007/t vs US$10,012/t

China Ferro Vanadium 80% FOB US$70.9/kg vs US$70.9/kg

China Antimony Trioxide 99.5% EU US$7.0/kg vs US$7.0/kg

Tungsten APT European US$260-270/mtu unchanged from previous week

 

Battery News

Honda that it is  to source batteries from Contemporary Amperex Technology (CATL)

  • China based CATL has announced that it will supply 58 GWh of batteries to Honda through to 2027.
  • CATL is also to set up a facility at the Honda  R&D hub in the Tochigi Prefecture
  • CATL was only founded in 2011, listed in 2018 at a value of $12.3 billion and is to supply automotive makers VW, Daimler, Nissan and Renault.
  • CATL is expanding into Europe and announced in July 2018 an investment of €240m to build a production facility in Erfurt, Germany.
  • The factory is planned to produce 14 GWh of production by 2022.
  • German auto maker BMW plans to source €4 billion of battery cells from CATL over the next few years.
  • CATL batteries will be used in the BMW iNEXT car which is set for production in 2021.         

 

Company News

Altus Strategies* (LON:ALS) 2.9p, Mkt Cap £5.2m – Joint Venture term sheet signed on Lakanfla and Tabakorole gold projects in Mali

  • Altus Strategies announce signature for a Joint Venture with Australian ASX-listed Indiana Resources Ltd. Subject to entering a definitive agreement with Altus, Indiana will have the option to earn up to an 85% interest in Legend Mali II Inc., a wholly owned subsidiary of the Company.
  • Legend holds a 100% interest in the Lakanfla and Tabakorole gold projects located in western and southern Mali. The projects are located adjacent to the world renowned but exhausted oxide resources of the Sadiola gold mine, and are associated with historical drill results including:
    • Lakanfla – 26.0m @ 5.10g/t and 12.0m @ 9.78g/t
    • Tabakorole – 60.0m @ 2.92g/t and 44.0m @ 3.30g/t
  • The Lakanfla and Tabakorole are two of six exploration projects owned by Altus in Mali.
  • Current interpretation follows that Lakanfla hosts a “potentially substantial karst-style gold target, analogous to the adjacent FE3 and FE4 pits of the Sadiola mine” while the Tabakorole project “targets a shear zone which has reportedly been mapped for 2.7km long and up to 200m wide”, according to Altus Chief Executive.
  • Altus milestones focus on four definitive phases of development:
    • Stage 1 (exploration) – Initial Indiana 25% interest associated with 3,000m drilling and exploration programmes with Altus receiving US$100,000 of Indiana shares.
    • Stage 2 (Resource definition) – Indiana have the option to increase interest to 51% through subsequent drill programmes and JORC compliant resource definition at Lakanfla for US$100,000 in cash and US$200,000 of Indiana shares.
    • Stage 3 (Definitive Feasibility Study) – Completion of the DFS for Lakanfla and release of a potential JORC compliant resource at Tabakorole will increase interest to 70% for US$100,000 in cash and US$200,000 of Indiana shares.
    • Stage 4 (Mine Construction) - Altus will have the option to co-finance Stage 4 pro rata to its interest in the JV, or grant Indiana the right to sole finance Stage 4 and increase its interest in the Projects (or Lakanfla only) to 85%. Altus will receive US$500,000 in cash and US$750,000 of Indiana shares on commencement of Stage 4 if Indiana is sole funding Stage 4.
    • Subject to entering a definitive agreement, terms will incorporate a retained 2.5% Net Smelter Return royalty while Altus will be the operator of the JV during initial earn-in periods.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Anglo Asian Mining* (LON:AAZ) 82.0p, Mkt Cap £93.8m – 2019 full year production guidance builds on record 2018 production

BUY – Target Price Under Review

  • Azerbaijan annual production guidance between 82,000-86,000 gold equivalent ounces (“GEOs”) is the highest ever for the year ended 31 December 2019. This compares to FY 2018 production of 83,736 GEOs.
  • Forecast production for FY 2019 of between 65,000-67,500oz of gold (FY 2018: 72,798oz of gold produced) and between 3,100-3,300t of copper (FY 2018: 1,645t of copper produced)
  • Rising copper production during 2019 results from a full-year stand-alone operation of the floatation plant offset by lower gold grades of ore processed by the agitation leach plant.
  • 28,000-30,000 GEOs of FY 2019 production in the form of copper and gold concentrate compared FY 2018 production of 17,791 GEOs.
  • The company recognise budgeted metal prices for 2019:
    • Gold: $1,250/oz
    • Silver: $15/oz
    • Copper: $6,100/t

 

*SP Angel act as Nomad and broker to Anglo Asian Mining

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