Today's Market View - Russia joins the space race for mining asteroids

Proactive Published 08/03/2019

Share X in f @

SP Angel – Morning View – Friday 08 03 19

Russia joins the space race for mining asteroids

CLICK FOR PDF

MiFID II exempt information – see disclaimer below

Cora Gold* (LON:CORA) – Selin drilling returns high grade intersections of oxide gold mineralisation

Oriole Resources (LON:ORR) - Moving to X% NSR at Muratdere project

China – car sales fall for ninth month in a row

The fall in sales reflects government credit controls and pressure on banks
It may also reflect similar trends to that seen in the west with policymakers pushing the EV agenda ahead of consumer confidence in the technology
Consumers are understandably moving away from diesels and many are reluctant to jump into EVs without sufficient charging infrastructure, capacity and range.
China’s latest move to restrict power in EVs to 13.5Kw/100km will worry consumers as it suggests the government is concerned about how to power up the new EV fleet.
China may further restrict the availability of power for charging EVs in favour of state industry.

Russia joins the space race for mining asteroids

Russian Deputy Prime Minister Tatyana Golikova announces plans to join Luxembourg in the exploration of extra-terrestrial minerals – “In January we offered Luxembourg a framework agreement on cooperation in the use of (mining) exploration in space.”
The small Duchy of Luxembourg became the first country to adopt legal regulations relating to mining in space, including from asteroids.
While the return of metals to earth offers major technical challenges and risks to commodity prices, the focus of entrepreneur pursuing space mining is instead using space minerals create interplanetary "gas stations" that will build, support and fuel colonies on Mars.
Metals such as iron, cobalt and nickel are abundant in asteroids and critical components of space vehicles. Platinum group metals, also abundant, can be used for internal circuitry and electronics.
Luxembourg has said it is "eager to work with other countries" on a multilateral agreement on asteroid rights, but the prospect of several countries passing their own legislation raises the spectre of space mining becoming a new wild west land grab.
Let’s hope nobody drops an asteroid on Brussels. The total annihilation of the EU Political Elite would be a terrible thing?

Trump seeks ‘severe’ 70% renewable energy funding cut

Bloomberg reports the Office of Energy Efficiency and Renewable Energy could face a budget cut of roughly 70% from $2.3bn to £700m under President Trump’s fiscal 2020 budget request.
Thankfully the request is ‘unlikely’ to be granted, with Congress blocking last years request of $696m – instead granting $2.3bn.
The Office of Energy Efficiency and Renewable Energy says its mission is “to create and sustain American leadership in the transition to a global clean energy economy.”

Dow Jones Industrials

-0.78%

25,473

Nikkei 225

-2.01%

21,026

HK Hang Seng

-1.88%

28,238

Shanghai Composite

-4.40%

2,970

FTSE 350 Mining

-2.46%

18,944

AIM Basic Resources

-0.24%

2,125

Economics

US – A summit between the US/China leaders has been pushed back from the end of March with both sides trying to iron out differences and avoid a an embarrassing failure, FT reports.

US futures are following their Asian and European counterparts amid deteriorating growth outlook with China reporting worse than expected trade numbers and the ECB cutting growth estimates for the euro zone.
Safe haven assets are well bid today with gold up nearly $10/oz trading at $1,295/oz, the yen is up against the US$ (+0.5%) and 10y US bond yields down at 2.63%.

Eurozone – Falling productivity in the euro zone is not helping growth outlook.

Production per hour worked dropped 0.4%yoy in Q4/18 extending the 0.1% decline in Q3 and marking the fastest pace of contraction since 2009.
Interestingly, the productivity contraction was driven by an annual drop of 0.9%yoy in production per hour worked in Germany, the largest decline across eurozone’s economies and the biggest fall in the nation’s productivity since 2009, FT reports.

France – Industrial production climbs more than forecast in January.

This is welcome news and may potentially signal that the euro area slowdown is stabilising.
Speaking on Friday, Bank of France Governor Francois Villeroy de Galhau said France is better able to resist the slowdown in global economic outlook as it is less exposed to trade.
Industrial production grows by 1.3% month-on-month in January.
French Manufacturing Production rises by 1% month-on-month in January.

China – An unexpectedly severe contraction in trade data in February sent local benchmark indices down and highlights a sharp loss of growth momentum in China.

Outbound shipments in the first two months of the year combined dropped 4.7%yoy marking a sharp turn from an increase of 3.9%yoy in Q4/18, Bloomberg reports. Imports were down 3.1%yoy during the same period v a 4.4% in Q4/18.
Outlook remains weak with little understanding when a deal between the US and China might come through and both official and Caixin PMI reports highlighting further weakening in export components.
The CSI 300 index closed 4.0% down marking the worst daily performance since a drop of 4.8% recorded on October 11.
Exports (US$ terms, %yoy): -20.7 v 9.1 in January and -5.0 forecast.
Imports (US$, %yoy): -5.2 v -1.5 in January and -0.6 forecast.

Japan – Q4 GDP numbers revised higher, but the outlook remains weak.

The economy expanded at an annualised rate of 1.9%qoq in Q4, up on 1.4% estimated previously, partly driven by stronger business investment.
The data does little to calm concerns the economy is in for a significant slowdown in 2019 and even worse potentially slipping into a recession.
The latest PMI showed growth momentum at one of the lowest in nearly three years, industrial production recorded the third consecutive monthly drop, exports are diving deep into the negative territory while a potential sales tax planned by the government may dampen the nation’s consumer spending.

ECB – The central bank downgraded economic growth projections committing to extend the period of record low interest rates to next year and offering new cheap loans to lenders.

The economy is set to expand at 1.1% this year, a drop of 0.6pp from forecasts just three months ago.
“The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment… the risks surrounding the euro area growth outlook are still tilted to the downside,” Draghi said during the press conference.
The central bank reverts back to the monetary stimulus just three months after policy makers decided to end their bond buying programme highlighting rapidly deteriorating growth outlook in the single currency region.
The central judged the risk of a recession in the eurozone is “being very low” while growing wages, improving labour market and consumption remaining “by and large in good shape”.
The euro dropped more than 1% against the US$ on the back of the announcement.

South Africa – The SA power regulator Nersa announced to grant Eskom tariff increases but less than utility applied for.

The Nersa ruled the utility to increase tariffs by 9.42% this year, 8.1% in 2020 and 5.22% in 2021 for a combined hike of 24.5% over the period.
This compares to a 15% pa increase sought after for a 52.1% increase over the period.

Currencies

US$1.1211/eur vs 2.0000/eur yesterday Yen 111.07/$ vs 111.77/$ SAr 14.560/$ vs 14.263/$ $1.310/gbp vs $1.317/gbp 0.701/aud vs 0.704/aud CNY 6.724/$ vs 6.709/$

Commodity News

Precious metals:

Gold US$1,294/oz vs US$1,283/oz yesterday

Safe-haven demand boosted gold purchases as investors await the release of monthly US jobs for clues on the health of the economy and China signals attempts to slow down the country’s equity rally.
According to estimates the US jobs report could should hiring moderated through February, with nonfarm payrolls increasing by 180,000 while the jobless rate fell to 3.9%. Data points help fuel Federal Reserve policy makers decisions as they weigh up the outlook for rates in 2019.
Chinese stocks slumped the most in nearly five months as traders took a rare sell rating from the nation’s largest brokerage as a sign that the government wants to curbs gains.
Strong gold growth arrived in a week when China reduced its goal for economic expansion, the European Central Bank delivered fresh stimulus and cut its growth forecast for its region, the Bank of Canada dialed back its expectations for policy tightening and the Organisation for Economic Co-operation and Development lowered its global outlook.
In response to a falling global outlook, China has expanded its gold reserves for the third consecutive month putting the Asian nation on track to be the biggest buyer after Russia.
The People’s Bank of China increased holdings to 60.26moz in February from 59.94m a month earlier, according to data on its website. Last month’s inflow of 9.95t follows the addition of 11.8t in January and 9.95 tons in December, when buying restarted after a two-year pause. Russia leads the pack among central banks, taking in 274.3t in 2018.
China’s decision to boost purchases comes amid signals of slowing domestic growth and a transition to diversify total reserves away from the US dollar which has counterparty risk.
While China’s gold holdings are the sixth-largest by country, they account for only 2.4% of its reserves, compared with more than 70% in Germany and the U.S., WGC data show.
Future Central bank purchases are expected to be sustained through 2019 at similar levels considering the near-term elevated geopolitical and economics tension, with Kazakhstan adding 50t and Poland, India and Hungary picking up smaller quantities.

Gold ETFs 71.7moz vs US$71.8moz yesterday

Platinum US$817/oz vs US$826/oz yesterday

Palladium US$1,522/oz vs US$1,536/oz yesterday

Silver US$15.11/oz vs US$15.05/oz yesterday

Base metals:

Copper US$ 6,397/t vs US$6,426/t yesterday

China’s imports of unwrought copper and products fell to 790,000t in the first two months, down 0.6% on the year, according to China’s General Administration of Customs, as domestic output climbed to offset the shortfall.
The figures compares with an 8.2% gain in January and a 9.8% surge in the same period last year. Imports in February fell to 311,000t, the lowest since April 2017.
Rising stockpiles have weakened domestic prices and shut the arbitrage window for overseas purchases, according to Ye Jianhua, an analyst with SMM Information & Technology Co. Imports are likely to fall this year as the expansion in domestic refining has outpaced demand growth, Ye said.
China’s refined copper output rose 8% to a record high last year, while copper holdings at warehouses have more than doubled since mid-January as demand remains lower-than-expected after February’s Lunar New Year break.

Aluminium US$ 1,861/t vs US$1,866/t yesterday

Nickel US$ 13,105/t vs US$13,425/t yesterday

Zinc US$ 2,715/t vs US$2,777/t yesterday

Lead US$ 2,095/t vs US$2,107/t yesterday

Tin US$ 21,480/t vs US$21,425/t yesterday

Energy:

Oil US$65.6/bbl vs US$66.2/bbl yesterday

Natural Gas US$2.868/mmbtu vs US$2.832/mmbtu yesterday

Uranium US$28.10/lb vs US$28.15/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$84.2/t vs US$83.4/t

Chinese steel rebar 25mm US$611.8/t vs US$612.8/t

Thermal coal (1st year forward cif ARA) US$77.7/t vs US$77.1/t

Coking coal futures Dalian Exchange US$196.5/t vs US$196.9/t

Other:

Cobalt LME 3m US$35,000/t vs US$33,000/t

China NdPr Rare Earth Oxide US$44,840/t vs US$44,943/t

China Lithium carbonate 99% US$9,890/t vs US$10,062/t

Australian FOB 6% spodumene prices have taken a recent tumble, falling approx. $150/t since the beginning of the year to settle at $725/t, equivalent to 17%.
Broad expansions across four new spodumene operations, totaling 175,000t, has placed downside pressure as material is more readily available.
Spodumene producers “experienced more pressure as 2018 contracts expired, ushering in a difficult period of negotiation for suppliers, as Chinese converters sought to receive significant discounts due to increased supply” says Benchmark.
Benchmark note the worst might be over for chemical prices as “lower feedstock costs leave room for more reductions in Chinese chemical prices, any further decreases are expected to be marginal with many producers already operating at close to cost”.
As demand is catching up with supply, particularly across Europe, prices are expected to stabilise.

China Ferro Vanadium 80% FOB US$74.5/kg vs US$74.0/kg

China Antimony Trioxide 99.5% EU US$6.8/kg vs US$6.9/kg

Tungsten APT European US$270-280/mtu vs US$268-275/mtu

Benchmark prices for tungsten, ammonium paratungstate (APT) reached a four-year high of $350/mtu in June last year with improving demand and tight supply amid environmental inspections in China cited as key drivers for the price increases.
While prices have subsequently fallen, market analysts remain optimistic for price improvement as demand (consumed in the manufacturing sector for machine tools) and supply re-balance post the Chinese New Year. “Any pick up in global demand or impact from environmental inspections in China are likely to effect the demand/supply balance and have the potential to push prices higher,” reports Tungsten Mining chief executive Craig Ferrier.
Mine supply from China dominates, with 75% global material produced domestically.
However, “most of their mines are believed to be very mature, quite deep, and with both ore grades and costs heading in the wrong direction for them,” Thor Mining executive chairman Mick Billing adds.
Medium-term outlook is expected to boost prices, as “China has also closed a number of operations for environmental reasons, and those ‘in the know’ expect more of this.”

Battery News

Fluoride-based batteries seek to surpass lithium cells

With a fluoride-based electrolyte that’s liquid at room temperature, along with suitable electrodes, researchers hope to exploit the high energy-storage potential of this otherwise challenging element for a better rechargeable battery.
Lithium-based chemistries dominate today’s battery technologies due to their high energy density by volume and by weight. They may not be the only option, as researchers at Caltech, the Jet Propulsion Laboratory, the Honda Research Institute, and Lawrence Berkeley National Laboratory and others are working together to develop rechargeable batteries based on fluoride, the anion (negatively charged form) of elemental fluorine.
The fluoride ions used in the new study bear a negative charge (anions), while lithium ions are positive (cations). "For a battery that lasts longer, you need to move a greater number of charges. Moving multiple charged metal cations is difficult, but a similar result can be achieved by moving several singly charged anions, which travel with comparative ease," noted Simon Jones, a chemist at JPL involved in the project.
The low atomic weight of fluorine could result in batteries with very high energy density.

Tesla told to stop listing Model 3 prices ‘after gas savings’ in Germany

Tesla has been told by the German industry association for fair competition practice to stop listing Model 3 prices after incentive and gas savings in Germany by March 20.
They wrote to the automaker (via Reuters): “Even if ‘savings’ could be realized, such an amount cannot be deducted from the purchase price or the monthly rate … because customers must pay the full price at the time of purchase or financing,”
The automaker has used this controversial way of displaying prices on its website on and off for years. After some complaints, Tesla stopped using it for a while but the company brought it back last year.

Company News

Cora Gold* (LON:CORA) 5.8p, Mkt Cap £3.8m – Selin drilling returns high grade intersections of oxide gold mineralisation

The Company released drilling results from the Selin Prospect, an exciting exploration target in the north of the Sanankoro Permit where 2018 drilling returned wide and high grade intersections.
Results confirmed the presence of oxide mineralisation with selected drill holes intersections including:
4.48g/t over 46m from 49m (hole ended in the mineralisation);
3.68g/t over 7m form 30m;
12.68g/t over 6m from 36m;
2.33g/t over 13m from 43m (hole ended in the mineralisation);
2.58g/t over 9m from 39m.
The Selin Prospect extends for over 2.4km in strike and remains open in both directions and at depth with a number of holes ending in mineralisation.
The current series of drilling involving 27 AC/RC drill holes for a total of 1,928m focused on the oxide extent of the structure over vertical depths of 60-80m.
The programme consisted of infill as well as step out holes testing the entire 2,400m strike length at around 80m fence spacing.
The latest round of results show correlation with previous reconnaissance drilling undertaken by the Company in the past.
The Company has completed a JV over the adjacent Kodiou Permit covering northern edge of the Sanankoro Permit potentially hosting the Selin extension.

Conclusion: This is a good set of results worth a follow up drilling of Selin structure north/south extensions. The Company is continuing with the focused exploration programme testing higher grade targets that could form the base for mineral resources/reserves and potentially become starter pit areas for future production.

Oriole Resources (LON:ORR) 0.4p, Mkt cap £2.5m - Moving to X% NSR at Muratdere project

Oriole Resources reports that, it will shortly move to a 1.2% net smelter royalty (post Turkish tax) as its residual interest in the project drops below the 10% level.
In 2012, the company realised US$1.7m in return for a 51% interest in the project and, in 2015, a further US$0.5m for a further 19% interest,
As the company's focus subsequently shifted to African exploration projects its interest has now diluted below the 10% threshold and its joint-venture partner Lodos Maden Yatırım Sanayii ve Ticaret A.Ş. ('Lodos') is now exercising its right to convert the residual interest to a royalty.
Welcoming the progress of the project and expressing the expectation of a positive outcome to the permitting process for Muratdere, Oriole's CEO, Tim Livesey, pointed out that "In addition to the royalty with Lodos, we have several other assets in Turkey which we continue to monitor and support, with a view to future value creation for Oriole."
Conclusion: The company has realised some US$2.3m from the progressive sale of its interest in Muratdere. As it shifts its focus to African exploration projects, the residual NSR could, in future, still provide either a future income stream or an asset of potential value to specialist royalty investors