Metal Tiger (LON:MTR) – Exploration update
SolGold* (LON:SOLG) – SolGold confirms 85% interest in Cascabel
Precious and base metals prices steady ahead of the US jobs data.
• Copper prices is on course for first weekly decline in three as BHP is reported to have agreed a deal with workers at Escondida following a number of resolution with local unions at other operations.
• Brent is off 2.5% this morning and on course for a 0.8% weekly decline despite reports showing contracting US stockpiles.
• Iron ore futures are up 1.4% today while Australia iron ore exports do not show signs of slowing down with 43.1m shipped in June, a little off the record 44.1mt level recorded in May and up on 41.8mt recorded in Jun/16.
Tesla – to build world’s largest lithium-ion battery
• This week, Elon Musk announced that Tesla, will build the world’s largest lithium ion battery to store renewable energy in South Australia. This would be done in partnership with French energy utility Neoen. The 129 MWh battery will be paired with a wind farm, the is designed to improve the security of electricity supplies across South Australia.
• The deal forms a key part of the government’s $550m energy plan. He said Musk had confirmed his Twitter claim made in March that he could deliver the battery within 100 days of signing the contract or it would be delivered free.
• This battery will be built near Jamestown, in the state’s mid-north, and will be paired with Neoen’s Hornsdale wind farm to provide stability for renewable power being fed into the grid.
• On Friday Musk said to the reporters that the project was not without technical challenges, given it would be the largest battery installation in the world “by a significant margin”.
• The 100Mw (129Mwh) battery and is essentially made up of thousands of small battery cells, like the Li-ion batteries used in high-power torches etc…
• We note; each battery carries a risk of failure in its connections and composition raising the risk of thermal runaway. The more batteries you put in the greater your risk.
• Keeping the plant cool will be important in Jamestown, Australia, where it can get really hot.
• The Battery University reckon the failure rate for lithium-ion battery cells has improved to 1 in 10 million indicating that out of 2 billion cells produced by Tesla that 200 cells could fail. Sony recalled 6m batteries in 2006 on a 1 in 200,000 failure rate.
• High energy 18650 cells rate at around 3,000mAh. At 100Mw of cells there is would appear to be a relatively high chance of a battery failure with potentially catastrophic thermal runaway.
Dow Jones Industrials -0.74% at 21,320
Nikkei 225 -0.32% at 19,929
HK Hang Seng -0.31% at 25,386
Shanghai Composite +0.17% at 3,218
FTSE 350 Mining -0.26% at 15,139
AIM Basic Resources -0.43% at 2,445
Economic News
ECB – Bond yields on debt of major European countries climbed yesterday on the back of speculation the ECB might soon be considering stepping down its asset purchases.
• Yields on 10y German Bunds climbed 10bp to as high as 0.56% yesterday, while yields on French 10y debt were up 10bp at 0.92%; 10y Italian yields climbed 12bp to 2.26%.
• ECB June meeting minutes released yesterday showed officials discussed prospects to slow down its QE programme; although, the ECB concluded not to change the pace of the monetary easing and indicating that the bank will maintain the stimulus and increase bond buying if needed.
Germany – A series of strong industrial output reports for May released by Germany, France and Spain this morning.
• Production in Germany climbed for a fifth consecutive month marking the best run in seven years.
• The latest data suggest the economy is likely to sustain growth momentum through Q2/17 (estimates are for a 0.5%qoq increase) after hitting 0.6%qoq rate in the first quarter.
• Industrial Production (%mom/yoy): 1.2/5.0 v 0.7/2.8 in May and 0.2/4.0 forecast.
France – Stronger industrial production numbers in May come in line with latest optimistic private manufacturing sentiment reports.
• The quarterly average of the business sentiment from the Banque de France, the manufacturing confidence from INSEE as well as the PMI manufacturing index are at their highest in a number of years after having climbed for three consecutive quarters.
• The sector is set to make a positive contribution to growth in Q2/17 after contracting by 0.3%qoq in Q1/17.
• Industrial Production (%mom/yoy): 1.9/3.2 v -0.6/+0.1 in May and 0.6/1.4 forecast.
Spain – Industrial production beats market estimates in May offering more evidence of a strong growth momentum the economy enjoyed this year.
• Growth was broadly distributed with production climbing in every sector besides energy.
• Industrial Production (%mom/yoy): 1.2/3.0 v 0.0/0.5 in Apr and 0.5/2.0 forecast.
UK – House prices fell for the second month this year in June posting a worse than expected 1.0%mom decline, according to Halifax data.
• Three month growth rate slowed to 2.6% from 3.3% in June marking the lowest pace in four years.
• The average cost of UK home came in at £218,290.
• “Although employment levels continue to rise, household finances face increasing pressure as consumer prices grow faster than wages… combined the new stamp duty on buy to let and second homes in 2016, appears to have weakened housing demand in recent months,” Halifax reported.
Zambia – President Edgar Lungu launched the state of emergency for a seven day period to deal with “acts of sabotage” blamed on the political opposition.
• “This (state of emergency) power I have invoked is only for seven days,” Lungu said.
• “Parliament will within the next seven days determine whether it will be there for one week, one month, three months or six months.”
• Reported incidents included taken down power pylons on a high-voltage line a week ago supplying electricity to a number of mining areas, arsons at courts in Lusaka and the towns of Kabwe, Mongu and Monze.
Currencies
US$1.1420/eur vs 1.1352/eur yesterday. Yen 113.74/$ vs 113.34/$. SAr 13.518/$ vs 13.427/$. $1.296/gbp vs $1.294/gbp.
0.759/aud vs 0.760/aud. CNY 6.801/$ vs 6.803/$.
Commodity News
Precious metals:
Gold US$1,222/oz vs US$1,224/oz yesterday
Gold ETFs 60.2moz vs US$60.1moz yesterday
Platinum US$905/oz vs US$908/oz yesterday
Palladium US$838/oz vs US$842/oz yesterday
Silver US$15.89/oz vs US$15.99/oz yesterday
Base metals:
Copper US$ 5,863/t vs US$5,844/t yesterday
Aluminium US$ 1,943/t vs US$1,927/t yesterday
Nickel US$ 9,065/t vs US$9,125/t yesterday
Nickel – An explosion incident at the Zapolyarny mine owned and operated by Norilsk Nickel just outside the city of Norilsk in the Arctic Circle killed three and left “several” injured.
• The Company said a build-up in methane gas caused the accident.
• The mine accounts for under 1% of the company’s total nickel production last year and 2% of copper.
Zinc US$ 2,796/t vs US$2,780/t yesterday
Lead US$ 2,303/t vs US$2,274/t yesterday
Tin US$ 19,925/t vs US$19,680/t yesterday
Energy:
Oil US$47.5/bbl vs US$48.3/bbl yesterday
Natural Gas US$2.911/mmbtu vs US$2.869/mmbtu yesterday
Uranium US$20.25/lb vs US$20.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$61.1/t vs US$61.8/t
• In the Australian’s newly released Resources and Energy Quarterly report, the Department of Industry, Innovation and Science forecasts the price of iron ore will average $62 a tonne this year falling to $48 a tonne in 2018.
• Moreover, Australia, the world’s largest exporter of the commodity, also forecasts that the price of iron ore will fall to $47 a tonne in 2019 as demand from China for steel production is expected to decline.
• In terms of value, steel-making commodities account for more than half of the Australia’s resources and energy exports. A rise in metallurgical coal and iron ore prices helped support a 25% jump in export values in 2016-2017 to US$1.5bn as steel mills in China increased output.
• It is forecasted that Australian’s iron ore exports will fall to A$54.7bn in 2018-19 from $65bn in 2016-17 and the overall resource and energy export earnings will “decline marginally” in 2017-18 and 2018-19, the department forecasts with coal exports are expected to decline to A$43.5bn in 2018-19, while LNG exports are predicted to grow to A$37bn in 2018-19.
Chinese steel rebar 25mm US$581.2/t vs US$583.6/t
Thermal coal (1st year forward cif ARA) US$72.7/t vs US$71.9/t yesterday
Premium hard coking coal Aus fob US$153.8/t vs US$153.8/t
Other:
Tungsten APT European US$212-222/mtu vs US$220-226/mtu
Titanium – Kenya’s decision to dig into its enormous mineral wealth has started to pay off with titanium emerging top as the country’s number one mineral earner in this year’s Q1.
• Recently released data from Kenya National Bureau of Statistics, demonstrates that the country’s foreign earnings from exports increased by 3.5% to Sh135bn in Q1 of this year from Sh130.5bn in a similar period last year.
• Accrording to the report: “This was due to increase in prices of tea, coffee and titanium ore in the international market”. Price of titanium almost doubled to Sh31,828.23 per tonne in Q1 of 2017 compared to the same period in 2016.
• Ken Gichinga, Chief Economist Mentoria Consulting asserted: “Increase in the export of titanium is expected to earn Kenya higher royalties and even encourage further exploration of the mineral, whose extraction started barely four years ago”.
• Furthermore, Raphael Matu, a director at the Royal Business School said that “increased foreign earnings will lead to an increase in the foreign exchange reserves which can be used by the government to import other things, payment of foreign debts or as contributions to the International Monetary Fund” thus further demonstrating how advantageous it is for Kenya to explore titanium.
Company News
Metal Tiger (LON:MTR) 2.0p, Mkt Cap £36.4m – Exploration update
• Yesterday Metal Tiger PLC announced that an airborne electromagnetic survey which was carried out at its Kalahari copper-silver project in Botswana identified more “distinctive” anomalies similar to that found at the T3 deposit.
• Last year’s study suggested that the T3 deposit was host to more than 210,000 tonnes of copper and 6.65mln ounces of silver. The company along with its joint venture partner MOD Resources, asserted that the anomalies identified could be potential targets for vein-hosted mineralisation.
• Metal Tiger chief executive Michael McNeilly said: “We are delighted to report that high-resolution airborne electro-magnetic geophysics appears to be an important new tool in the JV’s copper exploration arsenal, successfully identifying a distinct geophysical anomaly consistent with the T3 Deposit”.
SolGold* (LON:SOLG) 36.8p, Mkt Cap £556m – SolGold confirms 85% interest in Cascabel
• SolGold reported to the market yesterday to confirm its 85% actual and economic interest in the Cascabel project in Ecuador.
• The company also reminds us that the raising of US$41.2m at 41p/s represented a premium of 6p/s or 15% over the market at the time.
• They go on to say that “share issues in Cornerstone do not affect the underlying ownership of Cascabel or Solgold’s issued share capital.
• The statement is in response to speculation over the arrangement whereby Dmyant (Bob) Sangha of Maxit Capital and Greg Chamandy swapped SolGold shares for new shares in Cornerstone Resources which holds 15% in SolGold’s Cascabel project through the local joint venture company. Cornerstone will hold 11.25% of SolGold on the closing of the transaction giving it an approximate 25% economic interest according to the Cornerstone press release.
• SolGold held 11% of Cornerstone which will be slightly diluted the issuance of new shares.
Exploration:
• Three new new drill rigs recently arrived at site and should add another 5,000m per month mainly at Alpala.
• There are another 22 potential porphyry centres throughout Ecuador and SolGold reckon they will make further discovery on other 100% owned prospects.
Director shares
• SolGold report that Nick Mather and Brian Moller have respectively exercised options over 1,5m and 1,1m new shares today resulting in the allotment of 2.6m new shares. The shares should be admitted on 12 July.
• The exercise takes Nick Mather’s shareholding to 90.77m shares representing 5.99% of the company and Brian Moller’s shareholding to 5.19m shares representing 0.34% of the company.
• The drilling program and potential future development of the Alpala project at Cascabel has been driven by Nick Mather, the founder of SolGold. Mather has relentlessly driven the project and assembled and inspired a top quality team of geologists, geophysical experts and drillers to work at the Cascabel site in Ecuador at a time when Ecuador was seen as an unlikely destination for mining.
• The success of Fruta del Norte and Cascabel has inspired a new rush of majors and explorers into Ecuador after many years of relative inactivity.
Conclusion: We look forward to further drill results from the Alpala project and for further exploration success from other parts of the Cascabel license area.
*SP Angel acts as broker to SolGold. The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.