SP Angel – Morning View – Monday 21 01 19
China stimulus holds GDP growth at 6.4 in Q4
MiFID II exempt information – see disclaimer below
Lithium Power International (ASX:LPI) – Definitive Feasibility Study confirms positive outcome for Maricunga lithium brine project
Trans-Siberian Gold (LON:TSG) – Special Interim Dividend as higher grades at Ash
BBC Newsnight on the situation in Zimbabwe with comments from Zanu-PF, The Morgan Tsvangirai’s Chief of Staff, the MDC and SP Angel
https://www.bbc.co.uk/iplayer/episode/b0c13fdg/newsnight-21012019
New Periodic Table to show scarcity of natural elements and Rare Earth Elements ‘REEs’
- Scientists are concerned that a number of critical elements are being used and then thrown away in the 10 million smartphones disposed of every month.
- The rise in the development of Gigafactories will exacerbate shortages of many critical metals with new battery capacity is seeing as rising to 1,103Gwh pa by 2028 from 145GWh pa in 2017
- ‘Many of the 30 elements included in smartphones are becoming increasingly scarce thanks to limited supplies, their source in conflict zones, and a failure to recycle.’ according to SKY news’
- Scientists will unveil a new periodic table showing the scarcity of the natural elements.
- Elements in phones include yttrium, terbium, dysprosium, lithium, cobalt, copper, gold, silver, aluminium, silicon, oxygen and potassium.
- Almost everything made in the world is made up from just 90 elements, some of which are significantly scarse and look likely to run out within 100 years
- The new periodic table below will be announced in the EU by two UK MEPs in the hope of galvanising the EU into action over the discovery and development of new sources of critical element supply
Conclusion: Investors should look at investing in projects to find and develop REEs such as Mkango*, Peak Resources, Lynas Corp for sensible REE metals projects
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The new periodic table highlights the scarcity of elements used in must-have tech gadgets (Source: University of St Andrews).
Rwanda – 14 miners killed in Rwanda after hill collapses in heavy rain
- The dangers of mining are highlighted yet again with 14 miners killed in Rwanda.
- The 14 miners were getting ready for work when part of a nearby hill collapsed following heavy rains.
- The mine site is owned by Piran Resources which is part of the Pella Resources Group which was founded by Adonis Pouroulis of Petra Diamonds
- Shawn McCormick is Chairman, Piran Resources Ltd and James Beams, CEO, Piran Resources Ltd.
- It is not known if the miners were working for Piran Resources
Dow Jones Industrials
+1.38%
at
24,706
Nikkei 225
-0.47%
at
20,623
HK Hang Seng
-0.70%
at
27,005
Shanghai Composite
-1.18%
at
2,580
FTSE 350 Mining
-1.14%
at
17,454
AIM Basic Resources
-0.34%
at
2,201
Economics
China GDP breakdown shows service sector softening on weaker consumer expenditure
- GDP figures are a poor guide to China’s economic performance according to Capital Economics.
- The figures show that construction picked up supported by a pick up in cement production
- Figures also show a slowing of real estate service and retail trade.
- A pick-up in transport, post & storage sector growth shown by the GDP data is consistent with the rebound in freight volumes and passenger numbers growth.
- An uptick in financial sector growth coincides with stronger equity market turnover.
- The IT sector remains the star performer with growth still close to 30% y/y though this rate of growth is not likely to be sustained.
Currencies
US$1.1357/eur vs 1.1382/eur yesterday Yen 109.42/$ vs 109.61/$ SAr 13.902/$ vs 13.878/$ $1.288/gbp vs $1.286/gbp 0.713/aud vs 0.717/aud CNY 6.808/$ vs 6.790/$
Base metals:
Copper US$ 5,973/t vs US$6,024/t yesterday
- Copper briefly held above $6,000 level before the rally ran out of steam after data highlights China’s economy grew at its slowest pace in a decade through the last quarter. Physical stockpiles tracked by the London Metal Exchange rose to the highest since late November, driven primarily by deliveries into warehouses in New Orleans, yet are still near two-year lows.
- China’s economy expanded 6.4% in the fourth quarter, matching economists’ estimates, and compared with 6.5% in the previous three-month period, according to government data on Monday.
- The market is waiting for further direction as policy chiefs and business leaders arrive in Davos for the World Economic Forum. Bloomberg also reports little progress has been made toward the key issue of intellectual property protection, which has driven the escalating trade tensions between the US and China.
- Acknowledging that “the market is generally pessimistic about the outlook for China and the world’s other major economies,” Tongling’s General Manager Jiang Peijin said in an interview that Chinese stimulus, cost supports, and the growth of electric vehicles will backstop prices.
- The outlook for copper is expected to remain robust as China’s No. 2 producer announces it will defy economic gloom and strive to churn out higher levels of the red metal. Tongling Nonferrous Metals Group Co.’s plans for the year ahead also include getting its long-awaited operation in Ecuador up and running, starting a trading business in Europe, and keeping an eye out for more overseas acquisitions, particularly mines to feed its smelters in the world’s biggest user of copper.
- Tongling notched output of 1.33mt last year, close to its capacity of 1.4mt, and aims to increase output further this year, said Jiang. It’s seeking to profit from higher volumes even as prices have sunk from a peak of nearly 55,000 yuan in June due to a cooling economy and trade tensions with the U.S.
- While China’s economy has signaled contraction, the central government “has a lot of resources at hand” and will “release them gradually”, Jiang said, referring to fiscal and monetary supports.
- Further out, prices are likely to be supported by more stringent environmental protections that make mining more expensive, while the take-up of electric vehicles, where China leads the world and which consume three to five times more copper than traditional cars, will also stimulate demand, said Jiang.
Aluminium US$ 1,860/t vs US$1,884/t yesterday
Nickel US$ 11,685/t vs US$11,775/t yesterday
Zinc US$ 2,574/t vs US$2,587/t yesterday
Lead US$ 2,012/t vs US$2,012/t yesterday
Tin US$ 20,550/t vs US$20,615/t yesterday
Energy:
Oil US$62.1/bbl vs US$62.6/bbl yesterday
Natural Gas US$3.283/mmbtu vs US$3.319/mmbtu yesterday
Uranium US$28.85/lb vs US$28.85/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$75.3/t vs US$75.3/t
Chinese steel rebar 25mm US$588.2/t vs US$589.9/t
- Steel futures rose while iron ore futures eased from the highest since October as investors weigh the impact of additional production curbs across China’s steel hub of Tangshan.
- The city ordered graded output controls on sintering plants and some furnaces to be enforced until Jan. 25, according to SMM Information and Technology Co., citing the Tangshan local government. Curbs are being enacted as an “emergency measure” to deal with prospect of rising pollution in March, it said.
- In some cases, anti-pollution curbs will be extended through to September, adding a subsequent 6 months of controls.
Thermal coal (1st year forward cif ARA) US$86.1/t vs US$85.9/t
Coking coal futures Dalian Exchange US$210.3/t vs US$210.8/t
Other:
Cobalt LME 3m US$38,000/t vs US$38,000/t
China NdPr Rare Earth Oxide US$45,752/t vs US$45,878/t
China Lithium carbonate 99% US$9,914/t vs US$9,941/t
China Ferro Vanadium 80% FOB US$70.5/kg vs US$70.3/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
Company News
BHP Billiton (LON:BLT) 1,583p, £86.7bn - H1 Production in line with guidance
- BHP reports that first half year production during the six months to 31st December was in line with production guidance and that, with a minor upward adjustment in the case of copper, guidance for the full year remains intact.
- Costs for the full year are also expected to meet guidance. Although up to December they were running at higher levels as a result of a combination of planned maintenance and unforeseen production disruption"stronger anticipated volumes in the second half of the year" are expected to bring them back on course during the second half of the year.
- Guidance for copper output has been increased slightly from the range 1620-1705kt to1645-1740kt reflecting the retention of the Cerro Colorado mine in Chile after "BHP and EMR Capital agreed to terminate their agreement for the sale and purchase of Cerro Colorado after it became clear that the financing conditions of the transaction would not be satisfied by the end of the 2018 calendar year."
- Elsewhere the copper operations at Spence have recovered from the fire during September and Olympic Dam has resumed normal operations following the planned maintenance at the smelter and the unplanned acid spill during August.
- Iron ore production "production increased by two per cent to 119 Mt (135 Mt on a 100 per cent basis). Guidance for the 2019 financial year remains unchanged at between 241 and 250 Mt, or between 273 and 283 Mt on a 100 per cent basis." Production was impacted by the planned maintenance schedule and by the widely reported rail disruption following the train derailment in November, offset by record output from Jimblebar and the recovery of Mt Whaleback following a fire during the previous period.
- Iron ore production guidance for the full year remains at 241-250mt for the full financial year and iron ore operations at Samarco remain suspended.
- BHP spent US$81m on exploration during the six-month period "predominantly focused on advancing copper targets within Chile, Ecuador, Peru, Canada, South Australia and the South-West United States."
- BHP highlights its investment in the Ecuador focussed, Solgold*, saying "Consistent with our exploration focus on copper, in September 2018, BHP acquired an initial 6.1 per cent interest in SolGold plc (SolGold), the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador. On 15 October 2018, BHP entered into an agreement to acquire an additional 100 million shares in SolGold, for an investment of US$59 million, with our total interest now approximately 11.2 per cent."
- Conclusion: BHP is on track to meet its annual production guidance targets. Exploration focus is on copper and the company highlights its investment in Ecuador focussed Solgold.
* SP Angel acts as broker to Solgold
Lithium Power International (ASX:LPI) A$0.24, Mkt Cap A$63.0m – Definitive Feasibility Study confirms positive outcome for Maricunga lithium brine project
- Lithium Power International, through its Joint Venture Company, Minera Salar Blanco S.A., report project NPV of US$1.3bn before tax (8% discount rate), providing IRR of 29.8% and 3.5 year Payback, for its Maricunga lithium brine project in northern Chile.
- Brine production is expected to support 20,000tpa lithium carbonate equivalent (LCE) over 20 years, providing the crucial EV battery metal. Favourable conditions support effective evaporation rates, placing the lithium producer as one of the most efficient producers, with OPEX of US$3,772/t without credits from potassium chloride (KCl) by-product.
- Project’s total CAPEX of US$563m is derived from direct development costs estimated US$456m and indirect costs of US$45m, with contingency costs of US$63m.
- LPI apply a base case lithium carbonate price of US$17,280/t. While research bodies including Roskill are forecasting prices to rise to US$17,616/t by 2032, we recognise there is a significant price appreciation from current levels to DFS assumed prices.
- DFS was completed by Tier-1 engineering consultancy WorleyParsons to international standards, with the Reserve estimate prepared by FloSolutions. Accuracy of operating and capital cost estimated within a +/- 15% range.
- Maiden Mining Reserve estimate, reported in accordance with JORC and NI 43-101 guidelines, account for a total pumping extraction of 742,000t LCE, exceeding the project mine life production estimate.
- Project infrastructure, including water rights, are secured through long-term contracts for project construction and operation. Access to the National Power Grid has been granted by the Chilean authorities, ensuring future power supply to the remote project.
- LPI have commenced discussion with major Chilean and international financial institutions to secure project development finance, and are expected to be finalised during 2019.
- The company are also entering negotiations for off-take agreements and future participation, with approaches from international companies.
- The company continue to work closely with the Chilean Government and other corporate bodies to finalise all remaining licences, agreements and operational relationships. Currently LPI are working to obtain the final environmental approval, necessary licences and permits and additional risks focusing on pending government regulation with respect to lithium exploitation and royalty rates.
Conclusion: Lithium Power International have demonstrated robust project economics for the Maricunga lithium brine project, supplying crucial EV battery carbonate. We look forward to progress during 2019 as the company continue to de-risk the project finalising environmental permitting and exploitation licences. With project financials underpinned by an elevated lithium carbonate price, it will be crucial for the global lithium market to tighten and prices to appreciate from current levels.
Trans-Siberian Gold (LON:TSG) 40p, Mkt Cap £44m – Special Interim Dividend as higher grades at Ash
- Trans-Siberian Gold have announced a Special Interim Dividend payout of US$5.7m equating to US$0.052c per share.
- TSG will have paid out US$18.5m in dividends in a little over 2 years.
- The ex-dividend date is 31 January 2019
- Improved gold grades at the Asacha gold mine have helped with full year production which rose to 42,128oz for the year exceeding guidance.
- The mine has also negotiated a new electricity supply agreement with Kamchatskenergo for the supply of power at a reduced price of RUR 4.69/kWh (US$0.07/kWh) for 12 months following the implementation of incentive measures to support the development of the Far East of Russia introduced by the government
- ‘The Board's approach to dividend payments is to maintain a balance between sustainable and attractive shareholder returns, investment in growth opportunities and balance sheet strength.’
- Q4 numbers: The company reports 5.8% rise in gold grades to 9.1g/t leading to a Q4 gold production of 13,069oz vs 11,698oz for Q3 ’18.
- The company also sold much more gold in Q4 at 16,399oz following a poor quarter of sales at 9,085oz in Q3.
- Revenues rose to US$59.792m
- Production guidance for 2019 is estimated to be 40,000-44,000oz
Conclusion: Profits and dividends should continue to be supported by the weak Rouble and lower power costs in the current benign gold price environment assuming mine grades remain at around current levels.
Commenting on the power supply agreement, CEO, Alexander Dorogov, said that “Power is a significant production cost and we are pleased to have secured a substantial cost saving with the support of the regional Government of Kamchatka. We are grateful for this which affirms the Far East of Russia as an attractive place for gold mining'.”