Toyota’s game changer EV battery spells good things for Lithium market
• Moves towards solid state battery technology replacing liquid electrolyte with solid conductive material to offer more safety and better capacity
• Toyota appears to have developed know-how to produce the battery but don’t yet have a way to mass produce the battery for Electric Vehicles
Copper China 2018 copper demand to raise to 11.15mt
• Predicted growth of 3.6% from this year and to remain world’s key copper driver with domestic power largest consumer
• Future demand to come from investment in clean energy and new energy vehicles
iPhone X goes on sale in Apple stores today while the Company Q4FY17 beats market estimates propelling the stock to a new all-time high.
• Sales and EBITDA came in at $52.6bn and $15.6bn during the quarter beating market estimates by 3.7% and 3.3%.
• The Company sold 46.7m iPhones during the quarter, up 3%yoy and just ahead of market expectations.
• Despite previously voiced concerns over potential supply disruptions to iPhone X ahead of the holiday sales season, the Company said that production is ramping up every week and clients who pre-ordered the phone might receive devices sooner than expected.
• Apple forecasts Q1/FY18 to be the biggest quarter in the Company’s history with revenues expected to range between $84bn and $87bn, implying a year-on-year increase of as much as 11% compared to $78.4bn recorded last year.
Dow Jones Industrials +0.35% at 23,516
Nikkei 225 +0.53% at 22,539
HK Hang Seng +0.30% at 28,604
Shanghai Composite -0.34% at 3,372
FTSE 350 Mining +0.19% at 17,978
AIM Basic Resources +0.66% at 2,566
Economics
US – Trump has nominated Jay Powell as the next Chairman of the Fed with the candidature now subject to the approval by the Senate.
• Expectations are for Mr Powell to continue with gradual tightening of the policy with unlikely departures from the strategy followed by the FOMC to date.
• December hike is considered to be a done deal with markets currently pricing in a 87.5% chance of that happening.
• Non farm payrolls are due later today with market estimates for a 313k reading, up from -33k, reflecting a volatile series of data on the back of hurricane related disruptions in states of Texas and Florida.
China – Services sector growth slightly increased in October with a modest pick up in new orders, little changed from the previous month.
• Overall business activity increased at a slower pace in October on the back of a further weakening in manufacturing production growth.
• October PMIs “showed that the economy had a relatively weak start to the fourth quarter…however, monetary policy is unlikely to be loosened unless major downside risks emerges”, Markit/Caixin wrote.
• Markit/Caixin Services PMI (released today): 51.2 v 50.6 in September.
• Markit/Caixin Manufacturing PMI (released on Wednesday): 51.0 v 51.0 in September and 51.0 forecast.
• Markit/Caixin Composite PMI: 51.0 v 51.4 in September.
UK – In line with expectations, the BoE hiked the benchmark rate by 25bp to 0.50% yesterday marking the first increase in a decade.
• The MPC voted 7-2 in favour of the hike.
• The Bank has also slightly adjusted its growth and inflation projections with GDP marginally downgraded for this year with no changes onwards while CPI was brought up for 2017 and cut for 2018.
• GDP projections (%): 1.6 in 2017 (1.7 in August); 1.6 in 2018 (1.6); 1.7 in 2019 (unchanged from August estimates).
• CPI inflation projections (%): 3.0 in 2017 (2.8); 2.4 in 2018 (2.5); 2.2 in 2019 (unchanged from previous estimates).
• Markets treated the announcement as a “dovish hike” with the pound dropping 1.6% on the announcement against the US$ and 10y UK gilts yields falling 10bp.
• “Future increases in the bank rate would be at a gradual pace and to a limited extent,” Carney said during the meeting yesterday.
• The Governor suggested that the MPC is currently comfortable with the market pricing of future rate rises which imply rates to hit 1% by the end of 2020.
• On a different note, services PMI released this morning showed the sector expanded at the fastest pace in six month in October; however, business outlook remained subdued which weighed on the labour market as businesses grow concerned over little clarity on the Brexit deal.
• On inflation, “selling prices rose at an increased rate, but cost pressures eased, the latter suggesting selling future price inflation may cool, taking pressure off any need for further rate hikes any time soon,” Markit said.
• Markit Services PMI (released today): 55.6 v 53.6 in September and 53.3 forecast.
• Markit Manufacturing PMI (released on Wednesday): 56.3 v 56.0 in September and 55.9 forecast.
• Markit Composite PMI: 55.8 v 54.1 in September and 53.8 forecast.
Currencies
US$1.1644/eur vs 1.1638/eur yesterday. Yen 114.09/$ vs 114.09/$. SAr 14.083/$ vs 13.976/$. $1.304/gbp vs $1.326/gbp.
0.768/aud vs 0.771/aud. CNY 6.629/$ vs 6.605/$.
Commodity News
Precious metals:
Gold US$1,276/oz vs US$1,276/oz yesterday
• Gold prices initially swelled as Republicans in the U.S. House of Representatives unveiled legislation to overhaul the tax system. U.S. Treasury yields and the dollar index contracted to two-week lows after House Republicans announced the new 20 percent corporate tax rate, dropped from 35 percent, while reducing the number of tax brackets for individuals.
• Market expectations for the December interest rate rise increases to 97 percent (CME Group’s Fedwatch tool), while the Republican tax proposal could increase the pace of further 2018 rises if effective in developing U.S. economic growth.
• The nomination of the dovish Federal Reserve Governor Jerome Powell signaled a continuation of cautious monetary policies.
• Recovery in the gold price may be reversed as market expectations grow for a significant increase of 315,000 by the US non-farm payroll data later today which would see a dollar strengthening.
Gold ETFs 69.2moz vs US$69.3moz yesterday
Platinum US$922/oz vs US$931/oz yesterday
Palladium US$998/oz vs US$997/oz yesterday
Silver US$17.10/oz vs US$17.08/oz yesterday
Base metals:
Copper US$ 6,945/t vs US$6,917/t yesterday
Aluminium US$ 2,177/t vs US$2,170/t yesterday
• Strong demand from the EV boom is extending beyond crucial battery raw materials, as carmakers seek to broaden vehicle range via weight saving measures.
• Emilio Braghi, senior vice president and Europe president at Novelis, the world’s largest maker of rolled aluminium products, noted automotive sheet shipments were up 16 percent in the first quarter of 2018 fiscal year. The delivery of 785,000 tonnes of rolled product represents a global rise of 4 percent, highlighting the automotive industry growth significantly outstripping other sectors.
• In order to match the swelling automotive demand, Novelis boosted European production with an additional 240,000 tonnes aluminium sheet production line in Germany to enhance the existing 400Kt facility. With the advent of the first electric model of Jaguar Land Rover, the I-PACE, the supplementary capacity from the German site is expected to support developing vehicle production goals.
• Despite strong demand for value-added products, a leap in raw material costs has clipped aluminium producers’ robust margins. Head of Sales Steve Hodgson of aluminium giant Rusal identified large gains in alumina, caustic soda and carbon electrodes offsetting the 25 percent rise in benchmark aluminium prices.
Nickel US$ 12,690/t vs US$12,645/t yesterday
Zinc US$ 3,232/t vs US$3,248/t yesterday
Lead US$ 2,456/t vs US$2,465/t yesterday
Tin US$ 19,570/t vs US$19,460/t yesterday
Energy:
Oil US$60.9/bbl vs US$60.2/bbl yesterday
Natural Gas US$2.946/mmbtu vs US$2.915/mmbtu yesterday
Uranium US$20.30/lb vs US$20.20/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$59.6/t vs US$58.5/t
• The Chinese winter war on smog may not live up to expectation as production levels in the country’s biggest steel producing city of Tangshan do not match proposed air pollution reduction targets. The unexpected physical demand for coking coal and iron ore has initiated strong buying of futures as investors forecast the gap between physical and future prices to close on higher consumption.
Chinese steel rebar 25mm US$627.1/t vs US$629.0/t - China steel cuts fail to meet expectations
• China’s biggest steel producing city Tangshan has ordered various levels of capacity cuts though there is speculation that output may not be curtailed as much as expected
• There is little financial incentive to shut capacity with profit margins >Rmb1,000/t
Thermal coal (1st year forward cif ARA) US$86.3/t vs US$87.0/t
Premium hard coking coal Aus fob US$177.3/t vs US$177.3/t
Other:
Tungsten APT European US$275-285/mtu vs US$280-285/mtu last week
Company News
Kodal Minerals* (LON:KOD) 0.23p, mkt cap £14.8m – Chinese lithium processor completes equity subscription
• Kodal Minerals reports the completion of the Suay Chin International subscription agreement.
• Suay Chin have now completed the full £4.825m subscription and now hold some 20% of the company’s enlarged issued share capital.
• The subscription is a significant event for Kodal as it brings a valuable and expert offtake partner into the business.
• Management expect Suay Chin to help with the delineation and potential development of the Bougouni lithium project in Mali.
Conclusion: Results from ongoing drilling should continue to keep us entertained as the directors prepare to put together a JORC resource sometime next year.
*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.
Ortac Resources* (LON:OTC) 2.8p, £6.4m Mkt Cap – Akyanga drilling results
• Ortac Resources has announced results from the current expansion and infill drilling programme at Casa Mining’s Akyanga gold prospect in the DRC. Ortac holds an effective 45% economic interest in Casa Mining.
• The company reports that these results include the “highest ever grade and intersected thickness drilled at the Akyanga Deposit – 24.75m @ 8.04 g/y Au from 200.75m incl. 5m @22.63 g/t Au from 2017.10m” in hole MSDD0110, which also includes a second intersection of 3.30m at an average grade of 2.27 g/t gold higher in the hole from a depth of 142m.
• Hole MSDD0110 which was “drilled approximately 100m down dip of hole MSDD0076 (which reported 10m at 4.20 g/t Au from 126.55m) has reported deeper than expected mineralisation and supports the down dip potential to the east.”
• A second hole, MSDD0112 also reports a twin intersection of 7.15m averaging 1.1g/t from a depth of 100.15m and a second mineralised horizon averaging 5.8 g/t averaging 3.49g/t from a depth of 118.4m. This hole was drilled “approximately 100m down dip of hole MSDD0069 (which reported 16.9m at 2.35 g/t Au from 100m down the hole) confirms the down dip continuity of >2g/t mineralisation in this southern part of the deposit”
• A third hole reported today, MSDD0111 intersected 8m at an average grade of 1.14 g/t gold from a depth of 129m and “the mineralisation intersected … confirms that the southern extents are still open.”
• The results come from a programme of 8 diamond drill holes totalling over 1920m. “Results are pending for completed holes MSDD0114 and MSDD0115 and are expected within 2 to 3 weeks. Drill holes MSDD0116 and MSDD0117are in progress testing northern extensions to and continuity of grade within, the current open pittable resource, with visible gold logged in diamond drill hole MSDD0117.”
Conclusion: The results reported today suggest that mineralisation at Akyanga remains open both at depth and to some extent laterally at least towards the east and the south. The high grades intersected in in hole MSDD0110 and the visible gold logged in MSDD0117, yet to report assays, suggests that a portion of the gold mineralisation may be relatively coarse which could potentially be amenable to gravity recovery.
*SP Angel acts as nomad and broker to Ortac Resources
Patagonia Gold (LON:PGD) 1p, Mkt Cap £15.9m –Cap Oeste Este resource estimate and revised 2017 production guidance
• Patagonia Gold reports an updated mineral resource estimate for its Cap –Oeste deposit, prepared by the independent consulting company, Cube Consulting. The new estimate amounts to an attributable measured and indicated resource of 9.5mt at an average grade 2.07g/t gold (908koz of contained gold).
• The attributable measured/indicated resource contains approximately 87,000 oz of oxide ore at an average grade of 1.06g/t gold and a further 265,000 oz of free milling, cyanide recoverable ore at an average grade of 12.6g/t. The remaining “Fresh refractory sulphide” ore comprises 7.3mt at an average grade of 1.7g/t gold.
• In addition, the company has updated it production guidance for 2017 to reflect “a series of significant setbacks” arising from what appear to be delays in commissioning the agglomeration plant at Cap Oeste which have “materially impacted” production. Although the issues are now reported to have been resolved and the “leach pad is now producing from a fully commissioned agglomeration plant, with recovery issues having been resolved”, the company now expects to produce “24,850 oz AuEq for 2017 full year, with 10,000oz AuEq for the final quarter of 2017” at Cap Oeste.
• The revised production estimate of 30,950 oz Au Eq, which includes 6,100 oz from the Lomada operation, compares with actual production of 25,800 oz in 2016 and 21,521 oz in 2015 but still falls well short of the 68,500 oz guidance confirmed in May this year.
Conclusion: The commissioning delays for the Cap Oeste agglomeration plant have had a significant impact on the build up of production, and although 2017 output is still expected to exceed that in 2016 it falls well short of the original guidance. The issues are now reported to be resolved and almost one-third of the revised 2017 production guidance is now expected to be delivered in the final quarter.
Strategic Minerals* (LON:SML) 2.3p, Mkt Cap £29.8m – Hanns Camp drilling results
• Strategic Minerals has reported the initial results from its recently completed aircore drilling programme at its wholly owned Hanns Camp nickel/cobalt project eat of Laverton, Western Australia.
• The assay results from 4m long composite samples taken from the 1915 metres of drilling show laterite-hosted nickel cobalt mineralisation in 23 of the 49 shallow holes drilled to an average depth of 39m. A second phase of assaying will be undertaken using the individual 1m samples within the higher grade areas.
• The drilling has identified a “substantial zone of anomalous Co-Ni mineralisation extends approximately 1,000m x 500m.”Among the results highlighted by the company are:
o 24m at an average grade of 0.75% nickel and 0.069% cobalt from a depth of 40m in hole HCA049
o 24m at an average grade of 0.72% nickel including a 4m wide section averaging 0.104% cobalt from a depth of 28m in hole HCA048
o 21m at an average grade of 0.97% nickel and 0.059% cobalt from a depth of 28m in hole HCA028 and
o 12m at an average grade of 0.77% nickel and 0.142% cobalt from a depth of 28m in hole HCA039
o “SML has commenced the Phase 2 of its exploration programme with a review of the historic nickel sulphide potential”. This will focus on targets generated by electro-magnetic geophysical work “but will initially review the extensive database of geological information that was acquired from the previous owners.”
o In order to support this evaluation and a review of the broader Laverton project area, the company has secured the services of “Dr Martin Gole, an internationally recognised nickel sulphide expert”.
Conclusion: Initial drilling at Hanns Camp has confirmed the area’s potential for nickel and cobalt mineralisation within the near surface laterite layer. We look forward to the more detailed sampling results from analysis of 1m samples within the higher grade laterite areas as well as indications of the underlying sulphide mineral potential following the review of historical data.
*SP Angel act as Nomad and broker to Strategic Minerals
Stratex International* (LON:STI) 1.1p, Mkt cap £5m – Stratex CEO removed from board by shareholder vote but remains as an employee as CEO
Crusader (CAS AU) Suspended at A$0.092, Mkt cap A$27.7m
(Stratex’s offer: 6.6 new Stratex shares for each Crusader share giving Crusader shareholders ‘81%’ of the enlarged company and valuing Crusader at A$0.127/s)
(Thani Stratex merger proposal gives Stratex shareholders ‘56%’ of the new group, see Thani Stratex presentation for more details)
• Stratex shareholders voted for the resolution to remove the current CEO from the board which is now done.
• We note that the CEO remains as an employee of the company despite his insistence to push through the, now discredited, Crusader acquisition proposal.
• Shareholders also voted against the proposed Crusader acquisition, However, we note the following statement by Stratex:
• “The board will consider the outcome of the meeting including the proposed acquisition of Crusader Resources Ltd and will make further announcements in due course..”
• A majority of voting Shareholders have clearly indicated their opposition to the board’s proposal for the acquisition of Crusader and we would be shocked if the board then chose to disregard the vote and continue with the proposed acquisition.
• Given that the proposal involved the giving of a majority of new Stratex shares to Crusader shareholders then we see this as an expensive potential ‘Reverse Takeover’ offering little benefit for Stratex shareholders.
• We suggest that a better course of action would be to enact shareholders’ wishes, abandon the Crusader deal and demand the immediate repayment of loans made to the company.
• While this might cause Crusader to fall into Administration, we feel this is the appropriate action to be taken given the Stratex shareholder vote against the deal.
• We hope the Stratex board might then use the US$8m of cash from the sale of their stake in the Altintepe Gold mine for more worthwhile and appropriate exploration and asset development in Africa where there is ample opportunity for new discoveries and asset development.
• We hope the non-executive directors will now have the backbone to vote down any attempt to recast the Crusader acquisition and that the Company’s AIM Nomad will ensure the board continues to act in the interests of the majority of voting shareholders.
*SP Angel are completely independent with regard to Stratex, Thani Stratex, Crusader Resource or any of their directors, staff and advisors.