SP Angel – Morning View – Tuesday 30 04 19
Weakening auto sales draws down overbought catalyst metals
MiFID II exempt information – see disclaimer below
Aura Energy (LON:AURA) – A$2.0m financing
Glencore (LON:GLEN) – Q1 production performance impacts 2019 guidance
Thor Mining* (LON:THR) – Preliminary drilling results from Bonya tungsten project
Vast Resources* (LON:VAST) – Funding update and new GM resolution
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
US – US Treasury Secretary Mnuchin hopes to make “substantial progress” with Chinese negotiator in the next two rounds of trade talks.
- Mnuchin and Lighthizer arrived in Beijing this week for talks while Chinese VP Liu is scheduled to fly to Washington next week.
China – Official PMIs disappointed this morning coming in weaker than expected in April.
- Composite measure pulled back to 53.4 from 54.0 in March.
- Manufacturing report showed both production and new orders dropped this month.
- In a sign of an uncertain trade outlook, new export orders remained in a contractionary territory.
- Manufacturing PMI: 50.1 v 50.5 in March and 50.5 forecast.
- Services PMI: 54.3 v 54.8 in March and 54.9 forecast.
Germany – A set of strong employment data released this morning with labour agency reporting demand for workers continuing to remain high.
- Unemployment dropped 12,000 in April beating market estimates and hitting a record low of 2.22m.
- Jobless rate: 4.9% in April v 4.9% in March and 4.9% forecast.
UK – Consumer confidence held close to the weakest level since 2013 despite low employment, rising wages and modest inflation.
- The GfK consumer confidence index that was conducted mostly in the run-up to a Brexit deadline that was eventually pushed back held stead for a third month at -13 in April.
- Business confidence gauge estimated by Lloyds Bank bounced from a multi year low in April, while continued to hover below the long-term levels.
Spain – Growth accelerated to the strongest pace since 2017 driven by business investment while consumer spending growth continued to slow and both imports and exports dropped.
- GDP (qoq/yoy): 0.7/2.4 v 0.6/2.3 in Q4/18 and 0.6/2.3 forecast.
France – Growth rate held at 0.3%qoq in Q1 as President Macron’s tax cuts helped the consumer spending (0.4%qoq)
- Business investment slowed to 0.3%qoq while exports drove nearly to a halt following a surge at the end of 2018.
- GDP (qoq/yoy): 0.3/1.1 v 0.3/1.0 in Q4/18 and 0.3/1.1 forecast.
US$1.1188/eur vs 1.1161/eur yesterday Yen 111.38/$ vs 111.71/$ SAr 14.373/$ vs 14.330/$ $1.295/gbp vs $1.294/gbp 0.704/aud vs 0.705/aud CNY 6.739/$ vs 6.730/$
Gold US$1,284/oz vs US$1,283/oz yesterday
Gold ETFs 70.9moz vs US$71.0moz yesterday
Platinum US$899/oz vs US$898/oz yesterday
- Weakening auto sales across Western Europe, coupled with diesel vehicle market share losses could see platinum demand fall by 120koz in 2019, with prices moving back towards $800/oz over the next few weeks, according to refiner Heraeus.
- “This is particularly likely if the market realizes that substitution in place of palladium is not likely in the short term due to the risk of failing stricter emissions tests,” it says in a weekly market note
- The refiner also reports rhodium and palladium showing a stabilisation level after being overbought in March.
Palladium US$1,372/oz vs US$1,459/oz yesterday
- Palladium futures continue to fall from record highs, spurring the wildest price swings since late 2015 as investors turn towards cheaper sister metal platinum.
- The auto-catalyst metal climbed sharply as supply shortages boosted prices of near-term contracts, giving investors the incentive to sell futures closer to delivery and buy those that are further along the curve as producers struggle to meet demand from carmakers.
- Palladium futures for delivery in June settled in New York on Monday at a premium of more than $3 to the September futures. The spread between the two contracts has shrank from more than $20 in February.
- The decline in the lease rate for palladium means there’s less incentive for industrial consumers to buy the metal outright, according to Orion Commodities Fund.
Silver US$14.96/oz vs US$15.03/oz yesterday
Copper US$ 6,396/t vs US$6,400/t yesterday
- Sustained copper demand is expected to continue outstripping supply for years, encouraging strong ratcheting up investments in new output. Southern Copper Corp. is set to benefit from a global structural shortage of copper as it pushes ahead with plans to boost production 70% to 1.5mt by 2025, reports Chief Financial Officer Raul Jacob.
- The company, a unit of Grupo Mexico SAB, expects global demand to increase 2.5%, while Chinese consumption climbs 3.5%. The market will end the year in deficit following supply disruptions in Peru and Chile due to heavy rains earlier in the year, he said.
- Southern Copper is expected to invest $1.8bn this year, with $300m destined for the first phase of construction of the Tia Maria greenfield project.
- Building on the first of the pipeline of projects, Southern Copper expects the Pilares and Buenavista Zinc projects in Sonora, Mexico, will start producing in 2020 and 2021, respectively – together adding 55,000t copper.
- Other projects in the pipeline include El Pilar and El Arco in Mexico and Los Chancas and Michiquillay in Peru. They represent a potential 680,000t of additional annual copper capacity.
Aluminium US$ 1,828/t vs US$1,837/t yesterday
- A growing number of industrial suppliers are trimming 2019 demand outlooks amid concerns surrounding global growth, adding United Co. Rusal and Norsk Hydro ASA to the list.
- Hydro said global aluminum usage could grow by as little as 1%, while Rusal cut its forecast to about 3%. Either figures would represent the slowest growth in at least a decade, mirroring warnings from other major producers.
- Unexpected decline in China’s manufacturing gauge in April and disappointing Europe data compounded growing concerns.
- The aluminum market will remain under pressure in the first half amid trade talks between China and the U.S., with the auto industry likely to be particularly hard hit, Rusal said.
- The Norwegian company also reiterated its forecast for the global primary aluminum market to be in deficit in 2019. Both Hydro and Rusal reported a drop in first-quarter production.
Nickel US$ 12,410/t vs US$12,424/t yesterday
Zinc US$ 2,792/t vs US$2,768/t yesterday
Lead US$ 1,969/t vs US$1,952/t yesterday
Tin US$ 19,655/t vs US$19,925/t yesterday
Oil US$72.3/bbl vs US$71.8/bbl yesterday
Natural Gas US$2.593/mmbtu vs US$2.576/mmbtu yesterday
Uranium US$25.30/lb vs US$25.30/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$91.5/t vs US$91.1/t
Chinese steel rebar 25mm US$645.6/t vs US$645.6/t
Thermal coal (1st year forward cif ARA) US$71.2/t vs US$71.1/t
Coking coal futures Dalian Exchange US$173.1/t vs US$180.2/t
Cobalt LME 3m US$34,500/t vs US$34,500/t
NdPr Rare Earth Oxide (China) US$39,841/t vs US$39,749/t
Lithium carbonate 99% (China) US$9,719/t vs US$9,733/t
Ferro Vanadium 80% FOB (China) US$51.0/kg vs US$51.5/kg
Antimony Trioxide 99.5% EU (China) US$6.1/kg vs US$6.1/kg
Tungsten APT European US$270-282/mtu vs US$270-282/mtu
- Democratic presidential candidate Beto O’Rourke has introduced his plan to combat climate change — a $5tr plan with a requirement of net-zero emissions by 2050.
- O’Rourke unveiled his four-part framework for addressing climate change:
1) Start Cutting Pollution on Day One and Taking Executive Actions to Lead on Climate
2) Mobilize $5tr for Climate Change with Investment in Infrastructure, Innovation, and Our People and Communities
3) Guarantee our Net-Zero Emissions Ambition by 2050
4) Defend our Communities That Are Preparing for and Fighting Against Extreme Weather
- O’Rourke’s plan aims to re-enter the Paris agreement and seek a “more ambitious global plan for 2030 and beyond.”
- O’Rourke’s website, which has a full breakdown of the plan says “we need a guarantee that we will, in fact, achieve net zero emissions by 2050 and get halfway there by 2030.”
- He aims to enact a “legally enforceable standard” within his first 100 days of president that would “send a clear price signal to the market while putting in place a mechanism that will ensure the environmental integrity of this endeavour.”
- Additional notes in the framework include goals to reduce methane leakage, the introduction of service grants to deploy clean energy, and a net zero carbon budget for federal lands by 2030.
- O’Rourke’s plan also looks to strengthen fuel economy standards, and to set “a trajectory to rapidly accelerate the adoption of zero-emission vehicles.”
Altus Strategies* (LON:ALS) 3.75p, Mkt Cap £6.7m – Annual results
- The Company reported £1.6m loss in 2018 (2017: £1.9m) mostly led by £0.6m expensed exploration costs (2017: £0.6m) and £1.2m administration expenses (2017: £1.5m).
- In terms of exploration costs distribution, Cameroon (gold, bauxite, iron ore), Mali (gold), Ethiopia (copper) and Liberia (gold) accounted for most of the spend (c.75%).
- £2.1m in free cash outflow (Net CFO less PPE and exploration) recorded for the year (2017: -£1.6m).
- Payables climbed to £0.5m (2017: £0.3m) reflecting an accrued unpaid fees and salaries to directors during 2018 accounting for c.£0.3m that are later expected to be paid in cash or equity (subject to the necessary regulatory approvals).
- The Board currently owns 36% of the Company while a number of directors (Mr Milroy, Mr Pas and Mr Burne) are reported to no longer be considered to be members of the Concert Party allowing the latter which mainly includes Mr Poulton, Mr Grainger and Mr Netherway to potentially increase their combined interest to 29.99% from current 25.32%.
- Altus remained debt free with closing cash and marketable securities balance as of Dec/18 at £1.6m (including £0.7m in cash and £0.9m in Canyon Resources shares).
- On corporate side, the team closed the merger with Legend Gold acquiring a portfolio of prospective gold licenses in western and southern Mali as well as secured a dual listing on the TSX-V.
- The team was granted a new license for gold exploration in eastern Cote d-Ivoire, three new licenses for copper and zinc in Morocco and had three further applications pending as at the end of the year including two in Cote d-Ivoire (gold, nickel-cobalt) and one in Ethiopia.
- The Company agreed to vend in its Birsok bauxite licenses to Canyon Resources in exchange for 30m shares (worth £3.6m at A$0.22p/share) as well as $1.5/t royalty.
- Following the end of reporting period, the team has signed a Terms Sheet with ASX-listed Indiana Resources in respect of two gold projects in Mali and a Terms Sheet with unlisted Australian company Corben Resource over gold projects in Liberia and Cameroon.
*SP Angel acts as Nomad and Broker to Altus Strategies plc
Aura Energy (LON:AURA) 0.6p, Mkt Cap £7.2m – A$2.0m financing
- Aura Energy secures funding for the completion of the final elements of the Tiris DFS and finalising the Häggån Scoping Study, with A$2m financing from Lind Partners LLC in the form of a convertible note.
- The Company anticipates the latest financing, supporting a placement in early Feb. 2019 and Share Purchase Plan, will allow the remaining work on the Tiris DFS to be completed in a timely manner.
- While delays in the Tiris study have required more technical work to accommodate the discovery of clays in the design of the relevant parts of the process plant and the adjustment of costs, resolutions within this phase of the study are allowing ongoing optimisation work.
- Aura’s Principal Metallurgist, Dr. Will Goodall, has diagnosed a materials handling issue caused by clays, allowing him to understand the detailed clay mineralogy, root cause and provide a solution to prevent its occurrence during operation.
- Additional funding allows prioritised substantial evaluation for water in the surrounding area, including a recent successful geophysical program to delineate the relevant structures and drill targets for the water sourcing program.
- Drilling planned closer to site aims at lowering the capital and operating costs against the initial Taoudeni Basin. For long-term project expansion studies, the Taoudeni Basin water may be revisited.
- Funding will allow Aura to finalise details of the study, with completion now expected around July 2019.
- The uranium price performed very well in 2018 however fell strongly at the end of March 2019 to around $25.80/lb U3O8. Aura has developed significant offtake contracts for Tiris, with the management team focused on launching the project in a positive uranium price environment.
- Aura maintain an IPO or corporate transaction will lead to stronger, more consistent project development activity and autonomous funding for the project, giving the best outcome for shareholders in the long-term.
- Drilling on the High-Grade Zone of Häggån Vanadium was completed in the second week of April 2019 and when assays are returned, resource estimation can be commenced for the potential upgrade to the Measured and Indicated Resource category.
- Aura will then be in a position to release the Häggån Vanadium Scoping Study which will incorporate the capital and operating estimates, completed by an independent engineering group last year.
Glencore (LON:GLEN) 303.9p, Mkt cap £41.9bn – Q1 production performance impacts 2019 guidance
- Glencore has published its Q1 production results and reduced its full-year production guidance for a number of commodities including copper, nickel, ferrochrome and oil.
- Glencore’s copper operations produced 320,700t of metal during the quarter (down 24,700t or 7% compared to Q1 2018) as a result of reduced production from Queensland where operations where rail services have only recently been reinstated following serious flooding. Queensland production was down around 30% as a result.
- The copper business was also adversely affected by “safety-related stoppages and smelter outages at Mopani” as well as depletion at the Alumbrera mine in S America. As a result, Glencore is reducing its full-year production guidance by around 5% to 1.46mt (± 30,000t) compared to the earlier guidance of 1.54mt (±45,000t) issued on 1st February.
- Cobalt output rose by 3,900t (56%) to 10,900t although the company points out that this increase “includes 3,500 tonnes from Katanga which is managing through a period of generally excess uranium content in its cobalt material, thereby constraining exports”. Full year guidance for cobalt production is maintained at 57,000t (± 5,000t).
- An 8% increase in zinc production to 262,300 tonnes reflects the resumption of production from the Lady Loretta mine in Australia, partially offset by a 19% fall in the contribution from Kazzinc “reflecting the impact of a safety-related investigation at one mine. Zinc production guidance for 2019 is unchanged at 1,195,000t (± 30,000t).
- Nickel production reflected severe weather conditions in Canada as well as maintenance and January’s industrial action at Koniambo, falling by 3,000t to 27,100t. The production difficulties in Canada “impacted the timing of deliveries to the Nikkelverk refinery”. Annual production guidance has been reduced by approximately 7% to 128,000t (± 5,000t).
- Attributable “ferrochrome production of 402,000 tonnes was in line with Q1 2018”, however, full-year production guidance has been eased back by around 3% to 1.64mt (± 25,000t).
- Glencore’s coal production rose by 2.5mt (8) to 33.2mt with production guidance for the year unchanged at 154mt (± 3mt). The Q1 production increases reflect the acquisition of the HVO and Hail Creek operations and “a recovery from Prodeco, following mine plan optimisation and development undertaken last year, partly offset by the sale of Tahmoor in April 2018.”
- Glencore expects 2019 oil production to be some 11% lower than the 6.2mbbl previously forecast at 5.5mbbl “reflecting the offsetting effects of natural field decline in Equatorial Guinea and the drilling campaign in Chad.”
Thor Mining* (LON:THR) 0.7p, Mkt Cap £5.43m – Preliminary drilling results from Bonya tungsten project
- Thor Mining has announced preliminary results from its drilling programme at its 40% owned Bonya project in the Northern Territory of Australia. The assay results, which at this stage come from portable X-Ray fluorescence analysis and are hence subject to laboratory confirmation
- The company has announced results from 23 reverse-circulation drill holes today and highlights the results from five holes, including 3 from the White Violet deposit which it considers particularly exciting.
The results highlighted include:
- A 27m wide intersection averaging 0.32% tungsten trioxide from a depth of 71 metres in hole 19RC 020 at White Violet. The hole also includes a 16m wide intersection averaging 0.43% copper from a depth of 43m; and
- A 12m wide intersection averaging 0.70% tungsten trioxide from a depth of 35m in hole 19RC021 which contains a second intersection of 25m width averaging 0.42% tungsten trioxide from a depth of 63m; and
- A 29m wide intersection averaging 0.75% tungsten trioxide from a depth of 81 metres in hole 19RC 020 at White Violet. The intersection includes a higher grade section of 13m from a depth of 91m which averages 1.43% tungsten trioxide; and
- A 2m wide intersection averaging 0.43% tungsten trioxide from a depth of 16 m in hole 19RC001 at the Tashkent deposit; and
- A 2m wide intersection averaging 0.52% tungsten trioxide from a depth of 31 m in hole 19RC008. at the Jericho deposit;
- Commenting on the results from the early drilling, which he described as “better than expectations”, Executive Chairman, Mick Billing, said that “The inclusion of attractive copper interim assays from several holes also elevates the potential of the Bonya area in general, but White Violet especially”.
Conclusion: The encouraging initial results from the Bonya drilling will need to be confirmed by laboratory assay, however, the intersection of wide zones of tungsten mineralisation at Bonya, which is located adjacent to Thor Mining’s wholly owned Molyhil tungsten deposit should enhance the potential of Molyhil
*SP Angel act as joint broker to Thor Mining
Tri-Star Resources* (LON:TSTR) 39p, Mkt Cap £36.7m – Mark Wellesley-Wood
(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)
- Tri-Star Resources has announced the sad news of the demise of its former Non-Executive Chairman, Mark Wellesley-Wood who oversaw the development of the company “from a start-up, to the ground-breaking Antimony and Gold roasting project at its principal operating subsidiary in Oman”.
- Mark also served as Chairman of Kefi Minerals (KEFI LN) 39p, Mkt Cap £36.7m where he is replaced by Harry Anagnostaras-Adams, MD, as Executive Chairman at KEFI Minerals.
- Mark’s many friends at SP Angel are reflecting on the passing of a man who has touched all our lives
- Mark Wellesley-Wood was a Royal School of Mines trained mining engineer whose long career spanned operational and senior management roles within mining the industry as well as a distinguished career in the financial markets and mining corporate finance. Many on both sides of the industry will mourn his passing and miss his wise counsel, sound judgement and good company.
Vast Resources* (LON:VAST) 0.16p, Mkt Cap £12.3m – Funding update and new GM resolution
- Vast announced a receipt of a draft indicative term sheet from a Swiss bank for a $10m lending facility planned to be used to refinance the existing Mercuria $4m facility plus accrued interest.
- Additionally, the Company will be calling a GM in order to propose a Resolution to increase the authority for the Directors to issue warrants to Mercuria should the Company default on the loan.
- Warrants should cover $4.4m acting as a security for the Mercuria loan.
*SP Angel acts as Broker to Vast Resources