Todays Market View - China stimulus to support local commercial banks

Proactive Published 25/01/2019

Share X in f @

SP Angel – Morning View – Friday 25 01 19

China stimulus to support local commercial banks

China to charge past US as energy storage champion

MiFID II exempt information – see disclaimer below

Asiamet Resources (LON:ARS) – Progress report on BKM resource drilling

Blushveld Minerals (LON:BMN) - Vanadium prices rise again as China continues crackdown on sub-standard steel rebar producers

Connemara Mining* (LON:CON) – Progress report on Stonepark

KEFI Minerals (LON:KEFI) – TKGM project partners update

Kodal Minerals (LON:KOD) – Further high-grade lithium intersections

Tertiary Minerals* (LON:TYM) – Raising £250,000

Tri-Star Resources* (LON:TSTR) – Imminent production of the first antimony at the SPMP project

Unprecedented investor demand extends meeting schedules at 121 Mining Investment Conference in Cape Town

Monday 4th February & Tuesday 5th February

The organisers of the 121 Mining Investment Cape Town have been forced to extend the opening hours available for companies to meet with investors due to amazingly strong demand.
Over 450 investors have registered to meet with the 115 mining companies which are presenting through the one-on-one planner.
Each company now has 18 meetings on average meaning it’s going to be a gruelling two days of back-to-back meetings.
Luckily the event is located in the historic and beautiful gardens of the historic Welgemeend farm house on the slopes of Table Mountain close to the infamous and somewhat overpriced Mount Nelson Hotel.
The organisers have already extended the meeting schedules by another two sessions per company and this may be extended further to accommodate investor demand.
Sign up at: https://www.weare121.com/121mininginvestment-cape-town/registration/register-investor
The 121 conference is by-far the best event in town!

China announces massive potential stimulus in commercial bank to PCOB bond swaps

The Peoples Bank of China (PBOC) has announced Central Banks Bills swap (CBS).
CBS will enable primary dealers on the open market to exchange perpetual bonds (fixed income, no maturity date) for the central bank bills.
Post the announcement of the launch, the China Banking and Insurance Regulatory Commission announced that it had eased restrictions on insurers looking to invest in perpetual debt (source: Caixin news Jan. 25th 2019).
PBOC envisage that this will increase the liquidity of perpetual bonds, enable banks to issue more to replace capital and expand lending to boost the economy.
The Central Bank has also announced that only bonds rated AA will be considered aas collateral for a medium-term lending (MLF).
China has some $280bn worth of perpetual bonds (Bloomberg)

Beijing tells officials to prepare for the worst on continuing trade negotiations

The swapping of commercial bank perpetual debt for central bank bills is a simple and effective mechanism for China Inc. to support bank balance sheets
The news indicates to us that the fall off in Chinese exports is having a dramatic impact on the financial stability of the nation’s banks as they support state, parastatal and independent businesses.
Growth in Industrial sales for export has fallen from a 6-year peak of near-20% last year to 0% yoy. Chinese auto sales growth is now around -15% yoy.
China has responded by ramping up infrastructure and residential construction with property prices rising, though residential floor space growth is currently around 0% despite a relatively good consumer confidence index.
So while Wang Qishan is telling the world that the Chinese economy is fine, the stats tell us that there is ‘Trouble at Mill’ and today’s stimulus says officials are deeply worried that the Chinese economy could precipitate a massive collapse under the weight of so much debt.
Capital Economics tell us that the Chinese slowdown is one of many reasons for concern and they have a point.
But the fall off in export sales on which China has so heavily relied is no laughing joke and the Chinese which has promised to stimulate domestic in the past will need to deliver on this often-broken promise or they may have to scale back allot of factories post the Chinese New Year break.
2019 is the year of the Pig in China but the Chinese will need to become a little less piggy if they want a sweet trade deal with the US and fairer trade with the rest of the world.

China to charge past US as energy storage champion

China will overtake South Korea and the US to become the world’s largest energy storage market within four years as state-owned utilities continue to integrate renewables into their energy mix – by 2040 it will account for 23% global capacity, according to Bloomberg NEF.
Bloomberg NEF 2018 long-term energy storage outlook forecasts global energy storage will expand to 943GW in 2040 from 10GW in 2018, attracting $620bn over the period.
Falling battery prices will result in wind turbines and solar panels selling power even when energy isn’t generated, while EVs will plug in for fast-charging at road-side batteries.
In the near-term, utilities such as State Grid Corp. and China Southern Power Grid Co. will drive demand as they integrate clean energy into their mix.
China will account for 214GW of energy storage capacity by 2040, 23% of the total, compared with 146GW in the U.S. The Asian nation will be overtaking South Korea and the United States in cumulative energy storage capacity by 2022 and 2023.
A distinct shift in sources of demand is expected to see utilities targeting renewable energy integration (energy shifting) and the provision of capacity to meet system’s peak (peaking capacity).
Energy storage saw explosive growth in China in 2018, led by state utilities. China has 22% share of global energy storage projects (announced, commissioned or under construction) approaching that of the U.S. at 25%, including the pipeline for 2019 and 2020.
State Grid and China Southern Power, China’s two monopolistic power network operators, account for 43% of China’s total commissioned deployments, with 805MW of projects announced or under construction.
China’s key challenge focuses on the integration of existing renewable energy generation into a reliable and cheap system. In 2019, the government want to implement peak shifting nationwide, encouraging thermal power plants to lower output to allow more renewable energy dispatch.

2Km hole drilled in ice in Antarctica

The hole took 63 hours to drill to reach sediment indicating that it was through the ice sheet just over 2.1km below the surface.
The drill hole effectively gives the scientists a window back in time to see what climatic conditions existed in the Artic .

Dow Jones Industrials

-0.09%

24,553

Nikkei 225

+0.97%

20,774

HK Hang Seng

+1.65%

27,569

Shanghai Composite

+0.39%

2,602

FTSE 350 Mining

+1.16%

17,342

AIM Basic Resources

-0.76%

2,149

Economics

Currencies

US$1.1324/eur vs 1.1353/eur yesterday Yen 109.79/$ vs 109.68/$ SAr 13.684/$ vs 13.823/$ $1.309/gbp vs $1.304/gbp 0.711/aud vs 0.710/aud CNY 6.763/$ vs 6.795/$

Commodity News

Precious metals:

Gold US$1,284/oz vs US$1,280/oz yesterday

Gold ETFs 72.5moz vs US$72.4moz yesterday

Platinum US$805/oz vs US$793/oz yesterday

Palladium US$1,323/oz vs US$1,353/oz yesterday

Silver US$15.40/oz vs US$15.29/oz yesterday

Base metals:

Copper US$ 5,951/t vs US$5,930/t yesterday

Aluminium US$ 1,892/t vs US$1,899/t yesterday

World primary aluminium production, excluding China, is expected to rise +5.6% (1.5Mt) in 2019 – the largest expansion since 1984, according to Harbor Intelligence.
Production seen outpacing consumption by 1.1mt in 2020, the most since 2009, when it touched 3.1mt.
2019 production growth is driven by expansions in the Middle East, plant restarts in the US, and return to normal operations across Brazil and Europe.

Nickel US$ 11,810/t vs US$11,635/t yesterday

Zinc US$ 2,644/t vs US$2,616/t yesterday

Lead US$ 2,077/t vs US$2,035/t yesterday

Tin US$ 20,915/t vs US$20,725/t yesterday

Energy:

Oil US$61.5/bbl vs US$60.9/bbl yesterday

Natural Gas US$3.146/mmbtu vs US$3.054/mmbtu yesterday

Uranium US$29.00/lb vs US$28.90/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$74.5/t vs US$73.8/t

Chinese steel rebar 25mm US$594.8/t vs US$590.9/t

Thermal coal (1st year forward cif ARA) US$84.3/t vs US$86.9/t

Coking coal futures Dalian Exchange US$211.7/t vs US$210.7/t

Other:

Cobalt LME 3m US$38,000/t vs US$38,000/t

China NdPr Rare Earth Oxide US$46,058/t vs US$45,845/t

China Lithium carbonate 99% US$9,980/t vs US$9,934/t

China Ferro Vanadium 80% FOB US$70.6/kg vs US$70.5/kg

China Antimony Trioxide 99.5% EU US$6.9/kg vs US$6.9/kg

Tungsten APT European US$260-270/mtu unchanged from previous week

Battery News

Bipolar battery setups

Flexible bipolar plates made of polymers make it possible to build compact batteries.
Whether used for power supply or in electric cars, current battery systems are based on a series of interconnected individual cells, which has certain disadvantages in terms of efficiency and manufacturing.
Bipolar battery setups, in contrast, comprise compact stacks of individual cells. A new type of flexible and extremely thin bipolar plate allows batteries to be manufactured cost effectively.

Sweden to ban Sale Of gasoline & diesel cars after 2030

Sweden now joins Denmark, India, the Netherlands, Ireland, and Israel on the list of nations which say they will ban the sale of cars with internal combustion engines by that date.
UK and France aren’t scheduled to ban gasoline & diesel cars until 2040 at the earliest. Germany is also considering a similar ban but not until 2050 at the earliest.

Electric cars 'won't stop rising oil demand'

Electric car use may be growing exponentially, but they are doing little to curb rising carbon emissions and oil demand, the head of the International Energy Agency (IEA) said on Tuesday.
Last year, the IEA predicted that the number of electric cars globally would grow from 3 million today, to 125 million by 2030. But Birol (of the IEA) said the number paled in comparison to the 1 billion cars powered by internal combustion engines.
Birol also highlighted the problem of powering electric cars when two thirds of global generation comes from fossil fuels.

Company News

Asiamet Resources (LON:ARS) 4.3p, Mkt Cap £43.1m –Progress report on BKM resource drilling

Asiamet Resources reports that it has now completed 2.975m of core drilling in 22 holes at its BKM copper property in Central Kalimantan. An additional 1,825m remain to be completed under the plan for additional mineral resource drilling as part of the bankable feasibility study.
The company has five drilling rigs in operation on the site and expects to “complete all of the proposed drilling, including a number of additional geotechnical holes, in Q1 2019.”
“Results confirm continuity of mineralisation in the southern part of the BKM deposit consistent with the proposed pit shell, and are also consistent in tenor to previous moderate to strong results from this particular zone in the southern end of BKM”.
Describing the objectives of the programme, CEO, Peter Bird, said “This limited programme of infill drilling, data assessment and rework of the mine design aims to upgrade and capture additional Inferred Resource currently sitting both inside and on the edges of the current pit shells for assessment and incorporation into the mine plan”.
Mr. Bird went on to say that “A successful outcome from this work is expected to significantly enhance project economics and the robustness of the BKM BFS ahead of project financing.”
The company highlights the results from the first four holes drilled in the southern part of the deposit, including:
An intersection of 58.5m at an average grade of 1.11% copper from a depth of 32m in hole BKM31650-11, which also included a shallower intersection of 2m averaging 1.21% copper from 24m depth;
An intersection of 22.5m at an average grade of 1.19% copper from a depth of 42m in hole BKM31650-12 (including 5m averaging 1.51% copper from 42m), which also intersected shallower mineralisation of 16m averaging 0.42% copper from 10m depth and 10m averaging 0.34% from 29m depth ;
An intersection of 45m at an average grade of 0.69% copper from a depth of 8.5m in hole BKM31700-11, which also intersected deeper intersection of 2m averaging 0.24% copper from 60.5m and 1m at 1.1% copper from 38.5m depth; and
An intersection of 18.7m at an average grade of 0.72% copper from a depth of 24.5m in hole BKM31700-12, which also included shallower intersections of 3m averaging 0.58% copper from 24m and 1m at 0.75% from 18.5m depth and deeper mineralisation over 3.7m at an average grade of 0.27% from 34.8m, 1m at 0.3% from 80.5m and2m at 0.7% from 83.5m depth.
Additional assay results are expected “over the coming weeks” as the programme proceeds.

Conclusion: The additional infill drilling is aimed at firming up parts of the existing inferred resource and contributing to a refining of the mine plan as the company moves to its bankable feasibility study. We imagine that the results of the current campaign will be incorporated into an updated mineral resource estimate which currently comprises a measured 20.5mt averaging 0.7% copper, plus 28.7mt classed as indicated at 0.6% copper and 17.7mt classed as inferred at an average grade of 0.6% copper.

Blushveld Minerals (BMN LN) 38.5p, Mkt cap £438m - Vanadium prices rise again as China continues crackdown on sub-standard steel rebar producers

Ferro-vanadium prices have picked up 0.8% to $77-78.75/kgV for 78% material in Western Europe (Fastmarkets MB).
Prices in China have risen similarly to 0.7% to $70-72/kgV for the same grade (Fastmarkets MB).
We expect the Chinese authorities to determinedly crackdown on non-compliance for strengthening steel rebar.
The effect should be for steel producers to move to buy more vanadium in, what looks like, a relatively tight market environment.
Chinese rebar prices hit a 12-month high last week but have since settled back at $545-551/t.
Producers are closing production ahead of the Chinese New Year which starts on 4th February and marks the largest annual migration since the David Attenborough covered the wildebeest migration across the Serengeti plains of Tanzania.

See interview on the mining sector

Reuters: https://reut.rs/2MtJV3y
IG Player: https://bcove.video/2MC3s1X

*SP Angel act as nomad and broker to Bushveld Minerals

Connemara Mining* (LON:CON) 1.5p mkt cap £1.7m – Progress report on Stonepark

Connemara Mining reports that drilling is continuing on the fourth hole of the current campaign at its 23.4% owned Stonepark zinc project in Limerick. The company notes that “analysis and interpretation [is] expected by the end of Q1 2019”.
The company points out that Glencore’s Pallas Green project is adjacent to Stonepark, where Connemara Mining is in joint-venture with Group Eleven Resources, and that “These two deposits are the largest and second largest undeveloped zinc-lead deposits in Ireland, one of the world’s best mineralised zonc provinces and is considered highly prospective for new zinc discoveries”.
The Stonepark project contains an inferred resource of 5.1mt at an average grade of 8.7% zinc and 2.6% lead while Glencore’s Tobermalug/Pallas Green contains a larger 44mt inferred resource which averages 7.2% zinc and 1.2% lead.
Group Eleven is also planning to “drill an additional hole on their PG West project which lies adjacent to the Stonepark licences”.
In addition to the update on the drilling, the company reports that the government sponsored Tellus airborne geophysics programme over the area is now over 80% complete and expected, subject to weather conditions, to be available during Q2/Q3 this year.
Commenting on progress, Chief Executive, Patrick Cullen, said “We look forward to the drilling results, and expect that the incorporation of new Tellus airborne data will lead to the identification of further targets on this highly prospective project.”

Conclusion: We look forward to further drilling results from Stonepark and the possible identification of additional targets arising from the airborne geophysical programme..

*SP Angel is Nomad and Joint-Broker to Connemara Mining

KEFI Minerals (KEFI LN) 1.8p, Mkt Cap £10.1m – TKGM project partners update

Gold exploration and development company, KEFI Minerals, report its Ethiopian private-sector project partner ANS Mining Share has increased investment commitment to subscribe to new shares in project company Tulu Kapi Gold Mines Share Company ("TKGM") to the Birr equivalent of US$38m (from US$30m).
Leading local businessmen and officials have also be appointed to the TKGM board:
Ato Hailemelekot Teklegeorgis (former Federal State Minister of Finance and Economic Cooperation and current chairman of a major Ethiopian bank)
Ato Wondwossen Zeleke (long-standing natural resources senior executive in Ethiopia and internationally).
In addition ANS have nominated as special advisers to the TKGM Board:
Ato Zafu Eyessuswork Zafu (former chairman of Ethiopian Chamber of Commerce and current chairman of a major Ethiopian bank and insurance group)
Major General Alemshet Degife (former head of the Ethiopian Air Force).
Outstanding government consent has been granted, allowing KEFI to trigger Project Development upon ratification by the Prime Minister.
KEFI also confirm its Ethiopian Government-sector Project partner, the Federal Ministry of Finance and Economic Cooperation, has now started (via the relevant government instrumentalities) carrying out the engineering for its construction of off-site infrastructure of an estimated total cost of US$20 million (Ethiopian Birr-equivalent) in exchange for shares in TKGM.
Finally, drilling at Tulu Kapi has completed testing of plant and TSF sites for design of foundations. Results were as expected and will help the Company move quickly into construction upon Financial Close.

Kodal Minerals (LON:KOD) 0.2p, Mkt Cap £15.0m – Further high-grade lithium intersections

Final set of array results for the diamond drilling completed at the Company’s 450km2 Bougouni Lithium Project report high-grade lithium from four diamond drill holes from the Sogola-Baoule and Ngoualana prospects, and seven RC drill results from the Sogola-Baoule and Boumou prospects.
Diamond drill holes at the Sogola-Baoule and Ngoualana prospects continue to return high-grade mineralisation confirming geological interpretation, including:
11.5m at 1.76% Li2O from 88.2m in drill hole MDDH009
14.5m at 1.74% Li2O from 113.85m in drill hole KLDH015
RC drilling at the Sogola-Baoule and Boumou prospect continued to define and extend mineralisation. Multiple mineralised intersections include:
28m at 1.33% Li2O from 76m in drill hole MDRC122
11m at 1.32% Li2O from 114m in drill hole KLRC145
Final assay results are expected within the next two weeks with RC drill holes remaining for Sogola-Baoule and Boumou to report.
Mineral Resource estimate remains on schedule for announcement by the end of February 2019.

Conclusion: Drill results continue to yield high-grade lithium intersections which support the continuity of mineralisation. With grades reported as high as 1.76% Li2O, we look forward to understanding the impact of the drilling campaign on the updated JORC Mineral Resource estimate.

Tertiary Minerals* (LON:TYM) 0.325p, Mkt Cap £1.2m – Raising £250,000

Tertiary Minerals has confirmed that it has raised £250,000 through the placing of approximately 83.3m new shares at 0.3p/share.
The additional shares represent around 18.8% of the enlarged company and the funds raised provide working capital for the development of the company’s fluorspar projects at Storuman in Sweden, where the company is planning a legal challenge to the Government’s rejection of its exploitation permit application and the MV Project in Nevada where additional bench-scale metallurgical testing is expected to lead to a scoping study.
Commenting on the success of the fund-raising “in the current challenging market conditions”, Managing Director, Richard Clemmey welcomed raising the “funds necessary to commence the next important phase of development work on our MB Fluorspar project in Nevada. Alongside this we continue to progress the Storuman Mine Permit appeal with the Swedish Government and increase our focus on potential acquisition targets as the appeal progress runs its course”.

Conclusion: The additional funds enable Tertiary Minerals to continue the evaluation of the MB Fluorspar Project in the US and seek to overturn the obstacles to development of the Storuman project in Sweden as well as evaluate potential acquisitions.

*SP Angel act as Nomad and broker to Tertiary Minerals

Tri-Star Resources* (LON:TSTR) 41p, Mkt Cap £38.6m – Imminent production of the first antimony at the SPMP project

(Tri-Star holds 40% of jv company SPMP alongside The Oman Investment Fund and Dutco Natural Resources)

(Odey Asset Management, holds a 72.06% interest in TriStar Resources)

TriStar Resources reports that it “expects the initial production of pure antimony metal to take place in the next week” at its 40% owned SPMP facility in Oman.
The company describes this as “a key milestone for SPMP as it proves all aspects of this technologically advanced facility are functional and the country of Oman can boast a world-class, strategic industrial asset” and also describes how “production of first metal is also a key requirement in obtaining a long-term finance package for the plant and the board of Tri-Star understands that SPMP is well advanced in these discussions.”
In addition to the imminent production of its first antimony in Oman, TriStar Resources has announced that it has completed the US$500,000 disposal of its interest in the Goynuk mine in Turkey. The disposal is a cash transaction and the first US$200,000 instalment has already been received at the signing of the agreement on 21st January. A further payment is due on transfer of the shares and a final US$100,000 falls due on “the first sale of material from the mine.”
The purchaser of the mine intends to bring Goynuk back into production before the end of 2019.
Commenting on the sale of Goynuk, Acting CEO, Karen O’Mahony said that “We look forward to continuing to work with the purchaser post completion so that we can establish an offtake agreement for SPMP for the Göynük production.”
Ms O’Mahony while welcoming the forthcoming production of antimony also highlighted the “exceptional support” of the Oman Government in the development of SPMP.
The company also refers to its earlier announcement that SPMP had requested an additional US$10.5m from its shareholders and confirms that it “is confident that an equity placing will not be required in order to meet its 40% share of the funding requirement.”

Conclusion: The long-awaited production of antimony will be a vindication of the technical team at SPMP and its implementation of environmentally advanced antimony production technology.

*SP Angel acts as Nomad to Tri-Star Resources