Todays Market View - US Fed dovish comments drive precious metals higher

Proactive Published 21/12/2018

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SP Angel – Morning View – Friday 21 12 18

US Fed dovish comments drive precious metals higher

MiFID II exempt information – see disclaimer below

Cora Gold* (LON:CORA) – Drill rig mobilization to Sanankoro

PolyMet Mining (NYSE:PLM) BUY – Target US$1.56/s – Polymet received last permit for Northmet mine from state of Minnesota

That’s your lot – SP Angel morning notes will resume in the new year

But please note it’s not safe to announce bad news when we are away as we will be watching and saving the best bits for the new year.

Vanadium price falls further as China continues to produce non-compliant steel rebar

Vanadium prices continue to pull back with a further 14.7% fall to $70-75/kgV seen in China according to Fastmarkets MB
‘China Ferro Vanadium 80% FOB US$90.5/kg vs US$93./kg’ from Asiammtals.com via Bloomberg.
Ferrovanadium prices have also slipped a further 9.7% in Western Europe to $82-85/kgV.
We reckon there is a good chance the Chinese authorities will close loopholes, increase inspection and ensure compliance which should raise vanadium prices again in the new year.
If not China risks significant embarrassment from some dramatic construction failures particularly in earthquake prone zones.
Bridge and building failures are particularly visible alongside the human cost of when schools and other state infrastructure collapses.
Not to mention the huge cost of repairing and fixing collapsed infrastructure just because some idiot in a steel mill decided not to add a few kilos of vanadium into the melt.

Largo expansion

Largo Resources announce expansion of its Novo Amparo Norte (NAN) vanadium deposit in response to rapidly appreciating vanadium prices – drilling 24 holes totalling 4,223m during the second phase of exploration.
The deposit lies 6.5 km north of Largo’s Campbell pit at its Maracas Menchen vanadium mine in Bahia State, Brazil. NAN is the northernmost zone of known mineralization at the project.
Highlights from the program’s first 20 holes include: 1.18% vanadium oxide over 13m 1.12% vanadium oxide over 14m.
Its latest program extended that zone north and south along strike to 1.84 km. The deposit remains open to the south and at depth.
The company are expected to release the remaining results by the end of December 2018, with a subsequent programme targeting 25,000m in 2019.
The company expects to produce as much as 10,150t vanadium oxide at Maracas Menchen this year, equivalent to ~12% global production.

Global Demand for batteries multiplies

Global battery prices have fallen 85% since 2010, BloombergNEF reports in its annual Lithium-Ion Battery Price Survey, and storage is forecast to grow to 14 times its current level by 2030 as millions of electric vehicles hit the roads.
BNEF predicts demand will total 1,851 gigawatt-hours in 2030, up from the current 132.
EV batteries are expected to account for 84% of that.

Swedish Research Multiplies the Life of Rechargeable Batteries

Researchers at Stockholm University have developed a method to multiply the lifespan of nickel-metal hydride batteries.
The new method also means that the batteries can easily be restored once they have begun to wear out, unlike other rechargeable batteries that must be melted down for recycling.
The breakthrough came when the research group discovered that they could counteract the aging process almost completely by adding oxygen, which restores the lost electrode equilibrium and replaces the lost electrolyte.

Norway sees boom in electric cars, fuelled by the government

Generous subsidies and perks offered by the government in the form of waived hefty vehicle import duties and registration and sales taxes for electric vehicle purchases have allowed Norway to achieve significantly higher than average uptake, it has been reported.
Some 30% of all new cars sold in Norway are now electric, compared with 2% across Europe overall and 1-2% in the U.S.

Argentina targets $500m lithium exploration drive

Argentina are encouraging companies to nearly double exploration expenditure to explore the world’s largest resource of lithium as it jostles to pole position in the supply for electric-vehicle revolution. Miners in the South American nation are already forking out about $270m a year on exploration, but the government is working to spur investments of up to $500m, Mining Secretary Carolina Sanchez and Undersecretary for Mining Development Mariano Lamothe said.
“Argentina is the biggest receiver of lithium exploration spending in the world,” Lamothe said in Buenos Aires. “But we’re clearly still a long way from the levels we desire.”
Argentina -- where lithium is extracted from brine in high-altitude Andean salt flats -- is emerging as a rival to its more established mining neighbour Chile. That’s because licenses to operate over the border are hard to obtain as the mineral, considered a strategic resource by the government, requires special authorisation including from the nuclear energy commission.
Two projects are in full production in Argentina, with Australia’s Orocobre Ltd. joining what is now Livent Corp. in 2015. A further 60 projects are in different stages of development, with five close to coming on stream, according to an analysis by the Economist Intelligence Unit.
The country aims to draw in investment through enhanced mining policy, increasing transparency, expedite procedures for permits, and improved competitiveness through arrangements with trade unions.
Argentina’s industry has been struck by financial and economic crisis, which has seen rampant inflation, a second recession in three years and returning export taxes. Falling lithium prices, dropping to ~$10,800/t in the last quarter from $12,470 earlier in the year, only served to hamper lithium stocks.
Ex-president Cristina Fernández de Kirchner is to face trial in Argentina after a court rejected her appeal. Kirchner stands accused of taking millions of dollars in bribes over a 12-year period.
The allegations stem from a batch of records kept by Oscar Centeno, a driver for a public works official, between 2005 and 2015.
Kirchner has immunity from imprisonment but nor prosecution but if Kirchner was to ever get back into power in Argentina then capita will flow out of the country.
Kirchner and her husband ran Argentina from 2003 to 2015 during which the nation suffered significantly from corruption at many levels.
Rio Tinto walked away from the Rio Colorado potash project in Argentina for $850m in cash partly due to costs and corrupt practices in Argentina we believe

Czech coal mine explosion kills 13

A coal mine near Karvina in Czechoslovakia has suffered a fire and methane explosion killing some 13 miners.
OKD is the only producer of hard coal in the region. The miners are mainly from Poland.

Dow Jones Industrials

-1.99%

22,860

Nikkei 225

-1.11%

20,166

HK Hang Seng

+0.51%

25,753

Shanghai Composite

-0.79%

2,516

FTSE 350 Mining

+1.04%

17,066

AIM Basic Resources

-1.31%

2,057

Economics

Currencies

US$1.1470/eur vs 1.1426/eur yesterday Yen 111.06/$ vs 111.90/$ SAr 14.320/$ vs 14.337/$ $1.269/gbp vs $1.266/gbp 0.711/aud vs 0.711/aud CNY 6.902/$ vs 6.898/$

Commodity News

Precious metals:

Gold US$1,262/oz vs US$1,249/oz yesterday

Gold remains on track for a weekly advance as the dollar hovered near a six-week low following the US Federal Reserve lowering its projection for rate hikes in 2019 and Chairman Jerome Powell pledging to keep shrinking the central bank’s balance sheet.
Equities fell after President Donald Trump insisted on funding a wall or other barrier along the southern U.S. border as tensions over a possible partial government shutdown intensify. The administration is seeing more personnel changes after Defense Secretary Jim Mattis resigned on Thursday, citing differences over policy with Trump.
A growing number of gold traders and analysts remain bullish for gold on the as the prospects of slowing economic growth and the end of Fed tightening should support prices of the precious metal.
Prospects for global growth remain uncertain int 2019 amid the ongoing US-China trade spat, worsened as the US Justice Department announced indictments accusing Chinese officials of coordinating a decade-long espionage campaign to steel intellectual property and other data from dozens of companies.

Gold ETFs 70.0moz vs US$70.0moz yesterday

Platinum US$796/oz vs US$790/oz yesterday

Palladium US$1,261/oz vs US$1,264/oz yesterday

Silver US$14.75/oz vs US$14.63/oz yesterday

Base metals:

Base metals broadly edged higher to pare a weekly decline, amid expectations of favourable policy announcements from China’s annual working conference. The Asian nation is expected to release details of its economic plans for 2019 from the annual Central Economic Work Conference.
LME Metals Index, tracking six base metals, closed at a four-month low on Tuesday, and is poised for a third weekly drop, as the trade war between China and the U.S. and the slowing Chinese economy dampen global demand outlook for commodities.
Information may start trickling in from the state-run Xinhua News Agency in the afternoon, followed by a statement in the evening that lays out the basics for all key economic policies
Leading the rebound is nickel as stockpiles extend declines. A slump in prices has also crushed margins of high nickel-pig-iron grades, restraining new capacity from the market.

Copper US$ 6,021/t vs US$5,984/t yesterday

Aluminium US$ 1,912/t vs US$1,909/t yesterday

Nickel US$ 10,870/t vs US$10,875/t yesterday

Zinc US$ 2,541/t vs US$2,525/t yesterday

Lead US$ 1,971/t vs US$1,949/t yesterday

Tin US$ 19,310/t vs US$19,285/t yesterday

Energy:

Oil US$55.0/bbl vs US$56.2/bbl yesterday

Natural Gas US$3.674/mmbtu vs US$3.744/mmbtu yesterday

Uranium US$28.60/lb vs US$28.60/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$69.5/t vs US$68.7/t

Chinese steel rebar 25mm US$590.4/t vs US$590.2/t

Thermal coal (1st year forward cif ARA) US$87.8/t vs US$88.3/t

Coking coal futures Dalian Exchange US$205.9/t vs US$209.1/t

Other:

Cobalt LME 3m US$55,000/t vs US$55,000/t

China NdPr Rare Earth Oxide US$45,928/t vs US$45,958/t

China Lithium carbonate 99% US$10,069/t vs US$10,076/t

China Ferro Vanadium 80% FOB US$90.5/kg vs US$93./kg

China Antimony Trioxide 99.5% EU US$7./kg vs US$7./kg

Tungsten APT European US$275-290/mtu vs US$275-295/mtu

Company News

Cora Gold* (CORA LN) 5.9p, Mkt Cap £3.9m – Drill rig mobilization to Sanankoro

West African focused gold exploration company announce mobilization of a multipurpose drill rig to recommence its drill programme at the Sanankoro Gold Discovery in Southern Mali.
The anticipated Q1 2019 drill programme targets 3,000m aircore / reverse circulation at the Selin and Zone A prospects with the objective of continuing to define higher-grade zones. A parallel 200m core drilling programme will provide further geological information controls to gold mineralisation.
Previous drilling highlights include:
2.53g/t Au over 34.5m at Zone A
2.41g/t Au over 52m and 3.54 g/t Au over 32m at the northern end of the Selin prospect
Drill targets have been determine by results of previous drill programmes conducted during 2017-2018 dry seasons, where an Exploration Target for Sanankoro of 1-2moz with significant material upside was independently determined by consultants SRK Consulting
In addition, Cora Gold has mobilised a small rotary air blast drill rig to Sanankoro which is planned to commence drilling short (approximately 40m length) reconnaissance holes early in Q1 2019
CEO Jonathan Foster adds “Following our recent successful fundraise we have swiftly begun preparations to continue our drill programme at Sanankoro with a view to unlocking the significant value potential in the Project.”

*SP Angel acts as Nomad and Broker to Cora Gold

PolyMet Mining (NYSE:PLM) US$0.8c, Mkt Cap US$258m – Polymet received last permit for Northmet mine from state of Minnesota

BUY – Target US$1.56/s

Polymet Mining reports it has received the last required state approval required t build and start mining at the Northmet mine in Minnesota.
The last and probably most important permit comes from the Minnesota Pollution Control Agency which has issued certification for the NorthMet mine in relation to water quality air quality permits.
We were all somewhat younger when Polymet first started the permitting and mine planning process.
Presidents have come and gone, management has restructured and Polymet has continued to work through the permitting process.
The project survived the Global Financial Crisis, the collapse of Lehman Bros. Europe’s double dip recession, a collapse in oil prices, Asian currency devaluation not to mention a couple of sharp pullbacks in the mining sector.
Polymet’s supporters have remained loyal and true through the struggle backed by Glencore which has continued to financially support the project.
Glencore stumped up a further $80m of cash in March this year following the restructuring of $152m of Glencore debt into the company.
Few companies have the benefit of such long-term financial support but Glencore gets the strategic importance of the Lake Erie process plant and its proximity to Northmet and other potential mine sites along the Masabi Range.
Construction of the mine will cost >$500m in capital

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

SP Angel

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.