SP Angel – Morning View – Monday 26 11 18
Battery boom to attract $620bn investment by 2040
MiFID II exempt information – see disclaimer below
Kodal Minerals* (LON:KOD) – Bougouni Lithium assay results follow appointment of project manager
Rio Tinto (LON:RIO) – Sale of Rossing Uranium
Solgold* (LON:SOLG) – Newcrest tops up its holding
Thor Mining (LON:THR) – Bonya copper resource estimate
Battery boom to attract $620bn investment by 2040
- The global surge towards clean, sustainable energy is expected to boost the global energy-storage market to a cumulative 942 gigawatts by 2040, according to the latest Bloomberg NEF report; highlighting the requirement for $620bn sustained investment.
- Sharply falling battery costs are the key driver for the boom, as BNEF forecast capital cost of utility scale lithium-ion storage systems falling another 52% by 2030.
- “Costs have come down faster than we expected,” Yayoi Sekine, a New York-based analyst at BNEF. “Batteries are going to permeate our lives.”
- Two markets are dominating global development. China, which is building up its battery-manufacturing capacity, will be a central player in the boom. California, meanwhile, has pushed through a series of measures in recent years that will directly or indirectly spur more batteries, including legislation that would require all of the state’s electricity to come from carbon-free sources by 2045.
- The rate of development is accelerating, with cumulative energy-storage deployments forecast to exceed 50 gigawatt-hours by 2020; shifting the scale of deployment three years earlier than the outlook a year ago. This has major implications for global raw material requirements, with concerns of lithium market oversupply falling as demand growth accelerates and project ramp-ups undergo complications and delays.
Goldman predicts commodities sentiment could turn bullish into 2019
- Commodity bull Goldman Sachs Group Inc. remains undaunted by the sell-off in raw materials and is forecasting returns around 17%, describing the current situation as unsustainable and highlighting this week’s G-20 meeting in Buenos Aires as an important inflection point.
- “Given the size of dislocations in commodity pricing relative to fundamentals -- with oil now having joined metals in pricing below cost support -- we believe commodities offer an extremely attractive entry point for longs in oil, gold and base,” analysts including Jeffrey Currie said in a report.
- Concerns of slowing growth across metals and investors fretting about the outlook for the trade war between the US and China have battered raw material prices throughout November, but the gathering of leaders from the G-20 in Argentina offer presidents Donald Trump and Xi Jinping a chance to address their trade spat.
- “Many of the political uncertainties weighing on commodity markets have a significant chance of being addressed in Buenos Aires,” Goldman said. “This includes some improvement on the China-U.S. relationship and, like in the 2016 G-20 meetings, some greater clarity on a potential OPEC cut.”
- The report continues to suggest the market has priced in 10 out of 12 of the Federal Reserve’s hikes that the bank expects, and the strong dollar trend is seen reversing. “If US growth slows down next year, as expected, gold would benefit from higher demand for defensive assets”, adding support from central bank purchasing.
Graphene – Nobody producing real Graphene according to a reports in The Times and Science Daily.
- Cheap graphite being relabelled and sold as graphene according to Professor Castro Neto at the University of Singapore.
- Graphene is most often produced by either chemical vapour deposition of synthetic carbon, reduction of oxidised graphite feedstock or exfoliating graphite into a powder and then separating graphene flakes using sound energy.
- Pure graphene is normally considered to be just one atomic layer thick, but the International Organization for Standardisation (ISO) states ‘stacks of graphene flakes up to ten layers thick can still behave like graphene’.
- Prof Castro Neto uses a broad range of analytical techniques to test samples from over 60 suppliers the majority containing <10% graphene="" flakes="" with="" the="" rest="" made="" up="" of="" poorly="" exfoliated="" graphite="" powder="" li="">
- Graphite powder and graphene have vastly differing properties with proper testing of the materials used required before. Only one of the samples tested in the study contained >40% graphene while some samples were also contaminated with chemicals used in their production.
- Talga Resources’ electrochemical exfoliation of graphene yields consistent manufacture of 1-5 layer graphene from the highly homogeneous Vittangi graphite ore, with ~76% input graphitic carbon reporting to high-purity graphene products (verified by industry measures including Raman spectroscopy and atomic-force microscopy). The company are scaling-up Phase 3 circuit stages at the Advanced Materials GmbH process test facility in Rudolstadt, Germany for bulk production.
- The development of new testing procedures may now enable better standards to be met.
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Economics
Good online retail sales during the start of the holiday season reflect strong consumer sentiment.
- Online US Black Friday sales hit a record of $6.22bn, up 23.6%yoy.
- Average order value has also gone up 8.5%yoy to reach $146.
- Additionally, online sales during the Thanksgiving Day (Thursday) have also posted strong results with $3.7bn turnover, up 28%yoy, of which a little under a third came from sales of smartphones ($1bn).
- For the first time, according to Adobe Analytics, which tracks transactions for 80 of the top 100 internet retailers in the US including Walmart and Amazon, online prices Thanksgiving Day “were as low as on Black Friday” potentially pulling orders one day forward.
- Adobe forecasts Cyber Monday sales online to also set a new record of $7.8bn, up nearly 18%yoy.
US – US President and Chinese leader are set to hold talks on the side-lines of a G20 summit in Argentina (30 Nov – 1 Dec) at the end of this month.
- The meeting will be watched closely as the US is set to hike import tariffs on $200bn worth Chinese goods to 25% from current 10% from January 1.
- So far, the US has already slapped tariffs on $250bn worth of Chinese products, and has threated tariffs on $267bn more.
Japan – Manufacturing sector growth slowed to the weakest level in two years in November with producers’ confidence sliding for a sixth consecutive month, according to the HIS Markit data.
- “The fall in new orders is a worrying development as easing global growth momentum coupled with a weak domestic backdrop could spell further demand woes for Q4,” Markit read.
- Manufacturing PMI: 51.8 v 52.9 in October.
Germany – Business confidence ticked down in November amid cooling of foreign demand and rising trade tensions, according to the Ifo Institute.
- This marked a third consecutive decline with both components of the index (current assessment and expectations) pulling back during the month.
- Ifo Business Climate: 102.0 v 102.9 (revised from 102.8) in October and 102.3 forecast.
UK – The pound is little changed this morning after EU leaders sealed a Brexit deal on Sunday.
- Markets will now be focussed on the British parliament vote which is set to vote on the proposed deal before the next EU summit on December 13-14.
- PM May is expected to pitch the deal to UK lawmakers arguing that a rejection of the deal would mean talks coming “back to square one” which in turn would “open the door to more division and more uncertainty, with all the risks that will entail”.
- In turn, EC president Juncker argued that “it is the best deal possible for Britain, this is the best deal possible for Europe, this is the only deal possible”.
Russia/Ukraine – Russian navy is reported to have captured two Ukrainian gunboats and a tug off the Crimean peninsula yesterday accusing involved of illegally entering its waters.
- The incident occurred as Ukraine’s ships tried to sail from the Black Sea port of Odessa to Mariupol in the sea of Azov through the Kerch Strait.
- Russia argued the ships have been proceeding illegally as the traffic in the area had been suspended for security reasons.
- The Kerch Strait and the Sea of Azov are shared territorial waters, under a 2003 treaty between Moscow and Kiev.
- However, following the annexation of the Crimean Peninsula in 2014, Russia claimed territorial waters off the peninsula’s coast that Ukraine does not recognise.
- The Ukrainian parliament was set to hold a declaring martial law amid an incident while the Russians had requested an emergency meeting of the UN Security Council.
- A number of commentators argued the current escalation may be beneficial for both sides of the conflict amid plunging both nations’ leaders approval ratings.
- In particular, some wondered if President Poroshenko could use the the incident to delay a presidential election scheduled for March that polls suggest he is unlikely to make it in the second round, the New York Times reported.
- “This whole story grows more complicated by the fact that during martial law, it is forbidden to hold presidential, parliamentary or local elections, as well as strikes, protests, rallies and mass actions,” a member of the Ukrainian parliament, Mustafa Nayyem commented on the news.
Currencies
US$1.1368/eur vs 1.1385/eur last week Yen 113.33/$ vs 112.86/$ SAr 13.741/$ vs 13.802/$ $1.283/gbp vs $1.284/gbp 0.727/aud vs 0.724/aud CNY 6.937/$ vs 6.945/$
Commodity News
Precious metals:
Gold US$1,226/oz vs US$1,223/oz last week
Gold ETFs 68.9moz vs US$68.8moz last week
Platinum US$847/oz vs US$844/oz last week
Palladium US$1,137/oz vs US$1,147/oz last week
Silver US$14.39/oz vs US$14.29/oz last week
Base metals:
Copper US$ 6,200/t vs US$6,201/t last week
Aluminium US$ 1,944/t vs US$1,945/t last week
Nickel US$ 10,850/t vs US$10,795/t last week
Zinc US$ 2,511/t vs US$2,545/t last week
Lead US$ 1,960/t vs US$1,976/t last week
Tin US$ 18,845/t vs US$19,115/t last week
Energy:
Oil US$60.1/bbl vs US$58.8/bbl last week
Saudi Daily Oil Output Surpasses Record 11m Barrels
- Saudi Arabia is reportedly pumping as much as 11.2m bpd, the most since the kingdom extracted its first oil eight decades ago
- The increase comes after the kingdom’s production was running at about 10.8m to 10.9m whilst also using crude from domestic and overseas stockpiles to supplement supply.
- It’s unclear if Saudi Arabia plans to keep increasing production, or if it is still supplementing supply from inventories. A Saudi Arabian oil official declined to comment.
Natural Gas US$4.091/mmbtu vs US$4.247/mmbtu last week
UAE to invest in Israeli plan to pipe gas to Europe
- The media in Tel Aviv have reported that the UAE has invested as much as $100m in an ambitious Israeli project to pipe natural gas to Europe.
- The investment would be made by a company based in Abu Dhabi for a pipeline project which is internationally known to be unique given its record length as well as the extreme depths it would be laid toward Europe, Lebanon’s al-Mayadeen quoted Israeli media as reporting.
- Israel has signed a multilateral deal over the scheme – called the East Med Pipeline Project - with Greece, Italy and Cyprus. The European Union also supports the project.
Uranium US$29.00/lb vs US$29.00/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$67.5/t vs US$70.6/t
- Iron ore routed as China’s mills’ profitability gets crushed, prompting steelmakers to cut their consumption and pitch the raw material into a steep sell-off following slumps across crude oil and copper. Futures sunk as much as -6.2% to $62.95/t on the Singapore Exchange, heading for the lowest close since July, while futures on the Dalian Commodity Exchange tumbled by the daily limit.
- The raw materials’ decline is expected to hit major miners including BHP Group, Rio Tinto Group and Vale SA, and comes as investors have been shunning industrial metals amid speculation of slowing global growth into 2019. The retreat has been spurred by a weakening of steel prices in China on concern about an oversupply this winter, which has hammered mills’ profitability. The drop is the latest sign of renewed volatility in the global iron ore market after prices were becalmed between March and October before a short-lived run-up.
- Margins have “fallen now to the point where they are changing mills’ purchasing strategies,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd. Steelmakers are “in no rush to buy and they’re more focused on cost than on boosting output,” he said, adding that steel could fall further.
- Rebar in Shanghai has posted the longest losing run since 2016 last week, while a gauge of profitability at Chinese steel manufacturers has fallen to the lowest since May 2017, according to Bloomberg Intelligence Index.
- The backdrop in China to iron ore’s slide has been another round of winter curbs on industrial activity to clamp down on pollution. This year’s restrictions on mills cover a wider area but also offer more flexibility, with the severity of the limitations not fully understood.
Chinese steel rebar 25mm US$600.4/t vs US$623.9/t
Thermal coal (1st year forward cif ARA) US$82.9/t vs US$83.9/t
Coking coal futures Dalian Exchange US$190.8/t vs US$197.5/t
Other:
Cobalt LME 3m US$55,000/t vs US$55,000/t
China NdPr Rare Earth Oxide US$45,697/t vs US$45,500/t
China Lithium carbonate 99% US$10,091/t vs US$10,079/t
Tungsten APT European US$275-295/mtu vs US$275-295/mtu
Battery News
Developing graphene infused electrodes for lithium-ion batteries
- Elcora has reportedly developed a new low-cost, scalable process for converting graphite to graphene that boasts a much higher yield.
- The firm has partnered with a ‘commerical manufacturer’ to test its new graphite anode powder, which showed that the graphite is of commercial quality and ready for implementation in large scale battery manufacturing.
- In addition to the natural graphite anode powder, Elcora is also developing high-rate, high-capacity electrode for lithium-ion batteries.
BIO launches battery swap network
- NIO has announced the launch of its battery swap network in China on the G4 Expressway, which runs for 2,285 km
- NIO is implementing 18 battery swap stations along the highway which connects the major cities of Shijiazhuang, Zhengzhou, Wuhan, Changsha, and Guangzhou, as well as several other large cities.
- NIO plans to expand its battery swap station network to other major highways soon in order to link to China’s central eastern region next year.
Company News
Kodal Minerals* (LON:KOD) 0.16p, Mkt Cap £12.3m – Bougouni Lithium assay results follow appointment of project manager
- Kodal Minerals report assay results for an additional three diamond drill holes at the Boumou prospect located on the Company’s 450km² Bougouni Lithium Project in Southern Mali. Lithium reported pegmatite intersections assay grades up to 3.54% Li2O for individual samples and 6.5m @ 1.42% Li2O and 1m @ 2.07% Li2O.
- Diamond core drilling at the Bougouni prospect targeted both the ‘northern’ and ‘southern’ zones, with exploration returning lithium mineralisation supporting early surface geochemical sampling returning assay results of over 2.0% Li2O.
- The Boumou prospect is characterized by multiple lithium mineralised pegmatite veins with an overall strike trending east-northeast/south-southwest and dipping to the north. The diamond core holes are confirming our geological interpretation and highlighting areas for additional targets for drilling.
- The Boumou prospect will be targeted by RC drilling in the next campaign with a focus on continuing to expand the mineralised zone and define mineralisation with potential to support open pit mining. CEO Bernard Aylward adds “we are pending additional results from the diamond core drilling and have commenced the RC drilling that will continue through to Christmas and we expect regular newsflow over this period”. Diamond core drilling also continues at the Sogola-Baoule prospects with a focus on mineral resource definition and extension.
- Kodal are also pleased to announce the appointment of Mr. Steven Zaninovich as the Project Manager; a highly accomplished senior executive in the resources sector with more than 25 years’ experience encompassing all phases of mine development. Mr. Zaninovich's most recent experience has been with the delivery and successful commissioning of ASX-listed lithium producer Tawana Resources Ltd.'s Bald Hill Lithium Project in Western Australia. His appointment reflects the Company's transition into the development phase as it targets initial production from Bougouni in 2020.
- Moving into a full-time role within three months, Mr. Zaninovich will be responsible for all aspects of the development including planning, licensing, design, construction and commissioning.
- The company has entered into a warrant agreement with Mr. Zaninovich for up to 180 million warrants. If the warrants are all exercised it would result in the issue of 180 million new ordinary shares which represents approximately 2.34% of the current issued share capital of the Company.
*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.
Rio Tinto (LON:RIO) 3623p, Mkt cap £63.9bn – Sale of Rossing Uranium
- Rio Tinto reports that it has concluded a binding agreement with China National Uranium Corporation for the sale of its 68.62 percent interest in Rossing Uranium for up to $106.5m.
- The transaction, which is subject to the approval of Namibia’s Competition Commission, comprises “an initial cash payment of $6.5 million, payable at completion, and a contingent payment of up to $100 million following completion. The contingent payment is linked to uranium spot prices and Rössing's net income during the next seven calendar years. In addition, Rio Tinto will receive a cash payment if CNUC sells the Zelda 20 Mineral Deposit during a restricted period following completion. The total consideration is subject to a maximum cap of $106.5 million.”
- The Rossing uranium mine, which has been in operation since 1976, is reported to be the world’s longest running uranium mine and it “has produced the most uranium of any single mine”.
- Commenting on the transaction, Rio Tinto’s Chief Executive, J-S Jacques said that “The sale of our interest in Rössing once again demonstrates our commitment to strengthening our portfolio and focussing on our core assets, which deliver sector leading returns in the short, medium and long term.”
Conclusion: The disposal of Rossing is a continuation of Rio Tinto’s strategic focus on its strategic assets in iron ore, copper, titania and aluminium.
Solgold* (LON:SOLG) 37.3p, Mkt Cap £686m – Newcrest tops up its holding
- Solgold has announced the issue of a further 6.7m shares to Newcrest under the terms of the August 2016 subscription agreement.
- The new shares were placed at a price of 37.14p/share representing an additional investment of approximately £2.5m and, we estimate, increase Newcrest’s stake slightly from the previously reported 13.6% to approximately 13.7%.
- Last week, the company upgraded its maiden mineral resource estimate for the Alpala deposit to a headline indicated resources of 2.05bn tonnes at an average grade of 0.6% copper equivalent, at a 0.2% cut-off and an additional 900mt classed as inferred at an average grade of 0.35% copper.
- The updated study also significantly expanded the high grade core of the deposit, defined by the 0.9% copper equivalent cut-off grade, to 420mt at an average grade 0.86% copper and 0.9g/t gold for an equivalent copper grade of 1.47%.
Conclusion: The continuing involvement of Newcrest, which brings particularly relevant mining expertise, is an endorsement of Solgold and of the Cascabel project which also, in October, attracted further investment from BHP.
*SP Angel acts as broker and advisor to Solgold
Thor Mining (LON:THR) 1.95p, Mkt Cap £13.2m – Bonya copper resource estimate
- Thor Mining has announced the results of a maiden mineral resource estimate at its 40% owned Bonya copper deposit located adjacent to the company’s Molyhil tungsten mine project in the Northern Territory of Australia.
- The company has defined a small, relatively high grade inferred resource of 230,000t at an average grade of 2% copper. Over 90%, 210,000t, is said to be fresh ore with around 20,000t of oxidised material. The deposit “outcrops at surface, and remains open at depth”, implying that there may be scope to expand on this initial estimate. The company points out that this is “Situated in close proximity to the Bonya tungsten deposits, scheduled for drill testing early in 2019.”
- Commenting on the copper resource at Bonya, Executive Chairman, Mick Billing, said that “Our primary incentive to acquire an interest in the Bonya exploration licence was, and still remains, the tungsten deposits in the licence area, therefore this “free” copper resource could be considered a bonus.”
- Mr. Billing went on to point out that “The Molyhil processing plant design is amenable to the treatment of copper ores of this nature, without modification, and we expect this material will flow through the plant with no additional investment, other than mining and haulage.”
- The company is likely, however, to need to weigh the relative economic merits of displacing some of the tungsten feed with copper ore from Bonya. We believe that the Molyhil resource grades approximately 0.3% tungsten trioxide suggesting that the in situ value of copper ore grading 2% is probably more valuable, however, we do not have information on the likely relative recovery rates of copper in comparison to tungsten.
Conclusion: The identification of a relatively small high grade copper resource adjacent to Molyhil may provide an additional revenue stream.