SP Angel – Morning View – Friday 05 07 19
Iron ore pulls back as Chinese steel lobby calls for state oversight
MiFID II exempt information – see disclaimer below
Acacia Mining (LON:ACA) – Reserve increase at Gokona underground mine
ARC Minerals* (LON:ARCM) – Increased holding in Zaco Limited
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Economics
US – Non-farm payrolls due later today (160k est v 75k in May).
- The report would be eagerly watched as to assess chances of the FOMC cutting rates at the end of the month.
China – China insists that for trade talks to proceed the US needs to lift all the tariffs placed on Chinese imports to date, Bloomberg reports.
- This is likely to delay negotiations and pull back the sentiment that got a boost last month that two US and China leaders agreed to re-start talks.
- “If the two sides are to reach a deal, all imposed tariffs must be removed,” Ministry of Commerce Spokesman said on Thursday.
Germany – Factory orders post a worse than expected drop in May on weaker overseas demand.
- Governing Council member Olli Rehn summed up latest poor economic data saying that growth has “slowed significantly” and its no longer possible to consider the downturn as temporary.
- Expectations for the ECB to cut rates the deposit rate are building up with 10y Bund yields hitting a record low of -0.41%.
- A rally in Eurozone bonds was also supported by the news that Lagarde will replace Draghi as the head of ECB who was an early supporter of regional QE, unlike another candidate Jens Weidman who previously opposed the monetary easing.
- The report showed domestic orders were up 0.7%mom while exports dropped 4.3%mom.
- Factory Orders (%mom/yoy): -2.2/-8.6 v 0.4/-5.3 in April and -0.2/-6.2 forecast.
South Korea – Samsung, the nation’s largest Company, is expecting to post a more than 56%yoy drop in operating profit in Q2/19 on the back of overcapacity leading to weak pricing in the memory chip market.
- Trade row between China and the US weighs on the overseas demand with the outlook remaining challenging as Japan decided to tighten the rules for exports of high-tech materials and chemicals needed for manufacturing semiconductors and displays.
- Revenue is guided to have dropped by 4%.
- Final numbers are due at the end of the month.
Iran – Britain seizes the Panamanian-flagged vessel with a capacity of 2m barrels that is believed to be have been shipping Iranian oil to Syria.
- Hours following the operation at 2am off the coast of Gibraltar, Tehran said it will not accept the “illegal” seizure of the tanker and summoned the British ambassador to express its objections, FT reports.
- The incident may weaken the support from Britain, France and Germany to save the 2015 nuclear accord after the US decided to withdraw from the agreement and impose sanctions on Tehran.
Currencies
US$1.1268/eur vs 1.1283/eur yesterday. Yen 107.97/$ vs 107.82/$. SAr 14.059/$ vs 14.039/$. $1.258/gbp vs $1.258/gbp. 0.702/aud vs 0.703/aud. CNY 6.873/$ vs 6.873/$.
Commodity News
Precious metals:
Gold US$1,415/oz vs US$1,414/oz yesterday
Gold ETFs 74.2moz vs US$74.2moz yesterday
Platinum US$832/oz vs US$838/oz yesterday
Palladium US$1,566/oz vs US$1,563/oz yesterday
Silver US$15.22/oz vs US$15.24/oz yesterday
Base metals:
Copper US$ 5,889/t vs US$5,913/t yesterday
Aluminium US$ 1,804/t vs US$1,791/t yesterday
Nickel US$ 12,280/t vs US$12,335/t yesterday
Zinc US$ 2,420/t vs US$2,450/t yesterday
Lead US$ 1,880/t vs US$1,890/t yesterday
Tin US$ 18,350/t vs US$18,215/t yesterday
Energy:
Oil US$63.1/bbl vs US$63.1/bbl yesterday
Natural Gas US$2.288/mmbtu vs US$2.277/mmbtu yesterday
Uranium US$24.50/lb vs US$24.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$116.0/t vs US$116.0/t – Prices are off on a report that the Chinese steel lobby urged the government to control the price of iron ore that surged to a five-year high on a supply squeeze.
- The China Iron & Steel Association “is reporting relevant problems in the industry to government ministries and regulators, urging a stronger investigation and supervision to maintain normal iron ore market order,” Vice Chairwoman said at a conference in Shanghai.
- The association wants to see prices back at “reasonable levels”.
- Iron ore is off as much as 6.2% to $107.2/t on the Singapore Exchange today after hitting a five-year high on Monday.
Chinese steel rebar 25mm US$621.2/t vs US$620.9/t
Thermal coal (1st year forward cif ARA) US$66.0/t vs US$64.6/t
Coking coal futures Dalian Exchange US$198.2/t vs US$207.8/t
Other:
Cobalt LME 3m US$29,000/t vs US$29,000/t
NdPr Rare Earth Oxide (China) US$50,193/t vs US$50,166/t
Lithium carbonate 99% (China) US$9,239/t vs US$9,306/t
Ferro Vanadium 80% FOB (China) US$36.9/kg vs US$37.1/kg
Antimony Trioxide 99.5% EU (China) US$5.6/kg vs US$5.6/kg
Tungsten APT European US$250-255/mtu vs US$250-255/mtu
*Pricing sourced from Bloomberg
Battery News
Company News
Acacia Mining (LON:ACA) 175.4p, Mkt Cap £719.3m – Reserve increase at Gokona underground mine
- Acacia Mining reports an interim mineral reserve increase at the underground Gokona mine within the North Mara operation in Tanzania following a continuing drilling programme which has confirmed the “predicted extensions of the orebody”.
- An additional 32,463m (95 drill holes) have been incorporated into the new estimate which is calculated based on a long term gold price of $1200/oz,
- At 31st May, proven and probable reserves are reported as 7.06mt at an average grade of 5.53g/t gold representing 1.257moz of contained gold. This compares to the 31st December 2018 reserve of 6.18mt at an average grade of 5.62g/t (1.117moz).
- Approximately 85% of the gold contained within the updated reserve estimate is classified as probable.
- The company reports that during the period between the two estimates, the mine produced some 76koz of gold implying that the drilling programme has identified an additional 216,000oz of gold.
- “Acacia plans to continue underground diamond drilling at Gokona and this is expected to further increase confidence in the continuity of the mineralisation of the deposit with the potential for further additions to inventory in the Lower West and Lower East, as well as in the Deep East in the year-end 2019 Mineral Reserve and Resource”.
- Offsetting the increase in the underground reserve base at Gokona to some extent, the company also reports that “slope stability issues at the Nyambirama open-pit earlier this year have necessitated a redesign of the pit which “indicates that, aside from depletion, there will likely be a further 70Koz to 130Koz decrease in open pit Mineral Reserves”.
ARC Minerals* (LON:ARCM) 4p, Mkt Cap £28.2m – Increased holding in Zaco Limited
- Following yesterday’s announcement of the West Lunga target in Zambia, Arc Minerals reports that it has increased its stake in the holder of the licence block which, based on the map published with yesterday’s announcement, includes West Lunga, Zaco Limited, through the purchase of an additional 5% bringing its interest to 47.5%.
- Arc Minerals has purchased the additional stake in Zaco “from Rémy Welschinger, a Non-Executive Director of Arc, for a total consideration of 1,414,000 New Ordinary Shares”.
- Yesterday’s announcement described a 6km long copper geochemical anomaly at West Lunga located in a structural geological and lithological setting analogous to known discoveries within the wider Central African Copper Belt and indicated that the company would review its exploration priorities in the light of West Lunga with the likelihood that it would emerge as “one of our highest priority targets.”
Conclusion: The acquisition of an additional 5% interest in Zaco Limited underlines the company’s enthusiasm for the West Lunga target.
*SP Angel acts as nomad and broker to Arc Minerals.
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Simon Beardsmore – 0203 470 0484
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James Mills -0203 470 0486
Sales
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Jonathan Williams – 0203 470 0471
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
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