Today's Market View - US dollar rally trigger precious metal sell off


SP Angel – Morning View – Thursday 28 03 19

US dollar rally trigger precious metal sell off


MiFID II exempt information – see dsclaimer below   

Mkango Resources* (LON:MKA) 8.8p, Mkt Cap £10.4m – Receipt of £7m Talaxis investment

MOD Resources (LON:MOD) Price & MV - Feasibility Study confirms viability of T3 copper project

Metal Tiger (LON:MTR) 1.30 pence, Mkt Cap £18.5m – (Metal Tiger holds ~12.5% of MOD following the sale of its 30% interest in the T3 copper project in Botswana)

Rambler Metals & Mining (LON:RMM) Price & MV - Open Offer for £1.7m


Lithium imports rise into Japan and South Korea despite fall in China

  • Lithium hydroxide imports into Japan rose by 79% in in February yoy to 2,687t according to (S&P Global)
  • Lithium carbonate import into Japan also rose by 53% to 2,707t
  • South Korean imports of lithium hydroxide also rose by 45% to 950t and for lithium carbonate by 28% to 3,353t
  • China imports fell by nearly 100% to 45kg of lithium hydroxide from 656t a year earlier and by 58% for lithium carbonate to 720t from 2,517 a year earlier


Renewable energy generation cheaper than 74% existing US coal plants

  • New research from energy and climate policy firm Energy Innovation and Vibrant Clean Energy report the US has entered the ‘coal cost crossover’ period in which existing coal is increasingly more expensive than cleaner alternatives.
  • Constructing new wind and solar projects would be less expensive than continuing to run 74% existing US coal plants, rising to 86% by 2025.
  • The study claims that in 2018, 211GW of existing U.S. coal capacity (74% of the fleet) “was at risk from local wind or solar that could provide the same amount of electricity more cheaply.”
  • The cost crossover raises substantial questions for regulators and utilities as to why these coal plants should keep running instead of new renewable power plants.
  • The study’s ‘conservative analysis’ compared a coal plant’s marginal cost of energy against the lowest levelised cost of energy for wind or solar resources local to the coal plant.


Peru – protestors turn away government negotiators over Las Bambas blockade (Reuters)

  • The Peruvian government is trying to end the 51-day blockade to MMG’s giant Las Bambas copper mine.


Organisms seen surviving in space on outside of the space station

  • We wonder a number of politicians might also survive in this environment


Dow Jones Industrials





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HK Hang Seng





Shanghai Composite





FTSE 350 Mining





AIM Basic Resources







China – Premier Li Keqiang said domestic economy is showing signs of stability amid targeted stimulus support while global growth is losing momentum.

  • “Global trade and investment are lacklustre, and protectionism is on the rise… the global economy is losing momentum. There are a lot of uncertainties, and market confidence has been impacted.”

China trade talks tonight with senior US officials

  • Progress is being made though some investors don’t see settlement till the summer.
  • Villagers are demanding the release of their leader and lawyers jailed for organising the blockade and demanding compensation for the relocation of their village as well as compensation for the transport of copper through their farmland.
  • Protests in Peru often result in violence and long-standing conflict between miners and villagers.
  • Monterrico Metals’ Rio Blanco copper project is still stalled 12 years after its acquisition by Zijin Mining in Feb 2007
  • Zijin paid some US$186m for the project


US – US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are arriving in Beijing on Thursday for a new round of trade talks with Chinese counterparts.

  • These are the first in-person talks to be followed by a round of meetings in Washington next week after an initial end-of-March goal for a summit between Trump and Xi Jinping to sign the deal fell through.
  • On of sources said China is considering to drop the need for forced technology transfer in return for a market access.
  • “They’re talking about forced technology transfer in a way that they’ve never wanted to talk about before – both in terms of scope and specifics,” one of official with access to negotiations told Reuters.


Eurozone – Key euro zone inflation expectation gauge dropped to the lowest level since September 2016 as markets revise growth outlook estimates down, Reuters reports.

  • The five year, five year forward rate dropped to 1.31% as markets speculate that the ECB may be keeping rates lower for longer.


Germany – In a sign of waning risk appetite in the market, 10y Bund yields dropped below its Japanese counterparts for the first time since 2016.

  • Previously, Mario Draghi highlighted that the euro area risks remain biased to the downside.
  • The drop in German debt yields has led to fears of a so-called Japanification of the euro area, where inflation, growth and yields remain permanently low, Bloomberg reports.
  • Yields are slightly up this morning at -0.07% (+1bp on yesterday) after hitting a low of -0.09% on Wednesday.


UK – The pound is weaker against the US$ for a second day as Parliament failed to find a consensus on the preferred Brexit scenario leaving PM May deal as one of the few ready options, although it has been voted down twice by lawmakers in the past.

  • PM May promise to her Conservative members on Wednesday that she will leave the office should they back her deal did little to secure enough votes to have her deal voted through.
  • The UK has two weeks to present a plan to the EU or face the prospect of leaving without a deal.


Turkey – Turkish lira overnight borrowing costs surged to 1,200% yesterday up from 330% on Tuesday and 24% last week as the government directed the nation’s banks to withhold lira liquidity from the offshore swap market in an attempt to keep the lira from falling sharply.

  • Squeezed out of the FX swap market investors sold stocks and bonds to get hold of lira and close out positions.
  • The nation’s BIST 100 Index tumbled 7% while local 10y bond yields rose to 18.7%, the highest level since the FX crisis recorded last year.
  • The lira restarted its decline against the US$ this morning as investors continued to reduce exposure to local assets and new data showed the nation’s FX reserves were coming down.
  • The latter suggests the central bank has been intervening in the FX market trying to keep lira stable ahead of crucial local elections.



US$1.1236/eur vs 1.1261/eur yesterday  Yen 110.12/$ vs 110.58/$  SAr 14.672/$ vs 14.468/$  $1.315/gbp vs $1.320/gbp  0.709/aud vs 0.710/aud  CNY 6.732/$ vs 6.723/$


Commodity News

Precious metals:         

Gold US$1,310/oz vs US$1,317/oz yesterday

  • Gold back-tracks as the dollar extends gains and bonds continue to rally.
  • The yield on 10-year Treasuries dropped to the lowest since December 2017, with recent data showing weakness in U.S. housing and consumer sentiment stoking concerns over the health of the economy.
  • Fed funds futures are also now pricing in more than 30 basis points of easing by the end of 2019, suggesting at least one quarter-point cut.
  • The safe haven asset also falters as China’s economy signals the beginning of a recovery as a Bloomberg Economics gauge aggregates the earliest available indicators on market sentiment and business conditions. A Standard Chartered gauge of more than 500 small and medium businesses surged to the highest in 10 months as the government directed credit and announced the largest tax reduction on record.
  • Stocks and smaller business sentiment led gains, while a trade gauge and sales manager survey also signaled a broader pickup.
  • News that China and the U.S. are closing in on a trade deal also offers reasons for optimism, though a grim outlook for global commerce is a lingering basis for caution.
  • Deflated copper prices and the worst profits since the global financial crisis across Chinese industrial companies highlight underlying concerns.

   Gold ETFs 72.3moz vs US$72.1moz yesterday

Platinum US$863/oz vs US$853/oz yesterday

Palladium US$1,445/oz vs US$1,568/oz yesterday

  • The rally in the US dollar triggered an investor exodus from previous metals broadly, with spot palladium posting the biggest decline since August.
  • The slump accelerated as the price of the least-liquid asset among its peers broke below the $1,500-an-ounce level, triggering “a barrage of selling.”

Silver US$15.28/oz vs US$15.48/oz yesterday


Base metals:   

Copper US$ 6,358/t vs US$6,332/t yesterday – smelters lower Q2 TC/RC charges by >20% to 73:7.3 from 92:9.2 as China adds further 950,000t of capacity (Antaike) (Reuters)

  • China’s 10-member China Smelters Purchase Team (CSPT) has set the Treatment Charge floor for Q2 at $73/t and the RC floor at 7.3c/lb down from $92/t and 9.2c/lb in Q1
  • The CSPT sets a floor price which its members are supposed to adhere to, though as with many other cartels its members may deviate in the detail of its deals.
  • Last year annual TC/RCs were set at $80.80/t and 8.08c/lb for 2019.
  • Lower minimum charges for processing indicate a tighter copper concentrate market but spot TC/RCs have fallen sharply this year as smelting capacity continues to grow in China.

Aluminium US$ 1,908/t vs US$1,891/t yesterday

Nickel US$ 12,970/t vs US$12,880/t yesterday

Zinc US$ 2,886/t vs US$2,847/t yesterday

Lead US$ 2,023/t vs US$2,019/t yesterday

Tin US$ 21,340/t vs US$21,295/t yesterday



Oil US$67.5/bbl vs US$67.6/bbl yesterday

Natural Gas US$2.741/mmbtu vs US$2.744/mmbtu yesterday

Uranium US$25.50/lb vs US$25.75/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$83.6/t vs US$84.0/t

Chinese steel rebar 25mm US$616.6/t vs US$620.2/t

Thermal coal (1st year forward cif ARA) US$74.0/t vs US$73.5/t

Coking coal futures Dalian Exchange US$187.0/t vs US$187.5/t



Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$42,727/t vs US$42,832/t

Lithium carbonate 99% (China) US$9,734/t vs US$9,758/t

Ferro Vanadium 80% FOB (China) US$63.5/kg vs US$65.5/kg

Antimony Trioxide 99.5% EU (China) US$6.6/kg vs US$6.7/kg

Tungsten APT European US$271-282/mtu vs US$271-282/mtu


Battery News

CATL to profit as high energy density batteries win favour in EVs

  • Fueled by subsidies and credits, enhanced energy density batteries will emerge as the power source of choice in China’s new energy vehicles, with Contemporary Amperex Technology Co.’s scale positioned to capture major market share.
  • CATL are expanding plans to roll out lithium nickel-manganese-cobalt (NMC) batteries with energy densities as high as 250-280Wh/kg this year, advancing to 270Wh/kg in 2020.
  • CATL's highest-density battery currently being shipped -- its lithium NMC version -- packs up to 170Wh/kg, higher than BYD's 160Wh/kg and Guoxuan's 143Wh/kg.
  • The Chinese battery maker's R&D spending lead should widen as it outpaces competitors such as Guoxuan, Optimum Energy, Sichuan Changfei and EVE Energy in revenue growth. CATL's R&D expenditures were already 3.3-8.7 times greater than rivals' in 2017, whose outlays were already 5.2-9.6% of their revenue.
  • The transition to higher energy dense batteries will favour nickel over cobalt, giving material cost cuts as nickel is about 60% cheaper than cobalt.


‘Negative emissions’ carbon capture tech attracts $68m

  • Canadian company has received $68m in funding to bring its CO2 capturing technology to market on a commercial scale. The tech is able to pull carbon dioxide directly out of the atmosphere for storage or use.
  • Carbon Engineering, a clean energy company based in British Columbia, announced the completion of an equity financing round. The company said it’s the largest private investment ever made in a Direct Air Capture company.
  • The company plans on using the money to “commercialise and enter mainstream markets with its fully demonstrated DAC technology that is able to capture and purify atmospheric carbon dioxide (CO2) for under US$100/tonne.”


Company News

Mkango Resources* (LON:MKA) 8.8p, Mkt Cap £10.4m – Receipt of £7m Talaxis investment

  • Malawi rare earth explorer and developer, Mkango Resources, report Talaxis has invested an additional £7m into Lancaster Exploration which is the holder of the licence for Songwe. The investment follows publication of the NI 43-101 Technical Report and will fund completion of the Feasibility Study for Songwe which is currently underway and expected to be completed in 2020.
  • As a result of the investment, Talaxis’ equity interest in Lancaster will increase from 20% to 49%, with Mkango holding the remaining 51%.
  • The updated resource, increasing 60% in total Measured and Indicated Resource to 21Mt @ 1.41% TREO, forms the basis for the Feasibility Study.
  • Following completion of the Feasibility Study, Talaxis has an option to acquire a further 26% interest in Songwe by arranging financing for project development including funding the equity component thereof.
  • CEO William Dawes adds "Mkango is uniquely positioned in the rare earths sector with an advanced stage rare earths project in a favourable jurisdiction and a strong strategic partnership with Talaxis providing the financial means and network of relationships throughout Asia and elsewhere to deliver a successful project."

Conclusion: SP Angel continue to be impressed with the level of support from strategic partners Talaxis, extending their investment in a fundamental technology metal for high performance electric motors and permanent magnet applications. The Technical Report supports the upgraded mineral resource and we look forward to understanding improvements to the project economics with the Feasibility Study.

*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.


MOD Resources (LON:MOD) 19p, Mkt cap £58m - Feasibility Study confirms viability of T3 copper project

Metal Tiger (LON:MTR) 1.4p, Mkt Cap £21m –

(Metal Tiger holds approximately 12.5% of MOD following the sale of its 30% interest in the T3 copper project in Botswana)

  • MOD Resources has released details of its feasibility study to develop the T3 copper/silver project located approximately 80 km northeast of Ghanzi in western Botswana.
  • The study describes a 3mtpa open-pit mining operation producing an average of approximately 28,000tpa of copper and 1.1mozpa of silver over a mine life of 11.5 years. Overall recovery rates are expected to be 92.9% for copper and 88% for silver.
  • Pre-production capital expenditure of US$182m, plus additional sustaining capital of US$84m over the mine's life, is expected to produce a pre-tax NPV8% of US$368m and generate an iRR of 33% at a copper price averaging US$3.08/lb (US$6,790/t).
  • Sensitivity analysis included in the announcement indicates that the project is most sensitive to variations in the copper price assumptions with a 10% change is price resulting in a change of US$121m in the pre-tax NPV8%.
  • Ten percent changes in capital and operating cost assumptions are reflected in changes to NPV of US$13m and US$77m respectively.
  • The pre-production capital cost estimate includes US$40m of pre-stripping costs to access the ore zone.
  • Life of mine operating costs are expected to be US$1.35/lb of copper (net of silver credits) and US$1.56/lb on an all-in-sustaining cost basis.
  • Subject to financing, the company expects initial production from T3 in Q1 2021.
  • Earlier this month, the company updated the probable mineral reserve estimate for the project to 34.4mt at an average grade of 1.0% copper and 13.2 g/t silver.
  • Extraction of the 34.4mt of reserves includes stripping 195.9mt of waste at an overall waste:ore ratio of 5.7:1 to create an ultimate pit measuring round 1400m long, 700m wide and 250m deep.
  • Welcoming the outcome of the study, Managing Director, Julian Hanna, said that "The strong economics clearly demonstrate the value of this high-quality asset located within the excellent mining and investment jurisdiction of Botswana."
  • Mr Hanna went on to comment on the "very favourable geometry, grade and metallurgical characteristics of the orebody" which provided the opportunity to develop "a relatively straightforward open pit mine and processing plant, requiring moderate capital expenditure to bring into production"

Conclusion: The T3 feasibility study demonstrates a viable project requiring relatively simple mining and processing to produce a high quality concentrate.  Follow up exploration work in the wider area and studies for future underground mining at T3 are underway and we look forward to further news for both MOD and Metal Tiger PLC.


Rambler Metals & Mining (LON:RMM) 1.6p, mkt cap £21m - Open Offer for £1.7m


  • Rambler Metals & Mining, the owner of the Ming copper/gold mine in Newfoundland is raising up to approximately £1.7m through an Open Offer to shareholders of an additional 121.5m shares at a price of 1.4p/share.
  • Shares are offered to existing shareholders on a !:1 basis and the company states that the "Issue Price represents a discount of approximately 13.9 per cent to the closing price per Ordinary Share as at 25 March 2019, the last practicable date prior to the date of the Circular, and a discount of 15.0 per cent to the seven day VWAP prior to such date".
  • The Open Offer is priced at the same level as the subscription completed on 1st March which raised £8.4m or approximately US$11m
  • The company comments that "Following the completion of its recent productivity improvement initiative Rambler's focus is on sustaining mine and mill production at 1,250 metric tonnes per day.  With a return to profitability and positive cash flow, Rambler will continue advancing Phase III engineering studies with a view to further increase production to 2,000 mtpd at the Ming Mine
  • Conclusion: The additional funds will strengthen the company's finances as it works to consolidate the recent productivity improvements and looks ahead to increasing production rates towards 2000tpd.

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