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Today's Market View - Gold jumps above $1,450/oz on Trump tariffs news

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SP Angel – Morning View – Friday 02 08 19

Gold jumps above $1,450/oz on Trump tariffs news

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MiFID II exempt information – see disclaimer below

 

BlueRock Diamonds* (LON:BRD) – Diamond recovery to improve on crusher upgrade and instillation of larger cone crusher

Ivanhoe Mines (CVE:IVN) – Exceptionally high grade intersections in drilling at the Kamoa North Bonanza Zone.

Kavango Resources (LON:KAV) – Check assays verify results from Ditau

 

Whaley Bridge Dam potential collapse threatens Derbyshire town

  • Widely reported news of dam failures on mines in Brazil and elsewhere must seem a lot more pertinent to residents of the town of Whaley Bridge in Derbyshire this morning as rain induced damage to the Toddbrook reservoir as some residents are evacuated in the face of what is being described as a potential “mortal danger”.
  • Chinook helicopters of the RAF are being used to assist in the delivery of aggregate to shore up the damaged dam and divert water away from the residential areas. We wish the residents and the emergency teams well in the coming days..

 

Dow Jones Industrials

 

-1.05%

at

  26,583

Nikkei 225

 

-2.11%

at

  21,087

HK Hang Seng

 

-2.43%

at

  26,895

Shanghai Composite

 

-1.41%

at

   2,868

FTSE 350 Mining

 

-2.84%

at

  18,725

AIM Basic Resources

 

-1.22%

at

   2,106

 

Economics

US – Trump will place 10% import tariff on the remaining $300bn of Chinese goods as negotiations between two countries are reported to have not progressed as expected.

  • President Trump suggested China failed to follow through on its pledge to more US farm products and restrict the flow of fentanyl to America.
  • “The US will start, on September 1, putting a small additional Tariff of 10% on the remaining $300bn of goods and products coming from China into our country… this does not include the $250bn already tariffed at 25%,” Trump said.
  • The announcement followed by a sell off in equity markets (S&P500 -0.9%) and a rally in safe haven assets including US Treasuries (-16bp for 2y yields) and gold (+18$/oz trading at $1,450/oz).
  • Non farm payrolls are due later today with estimates for a 165k reading v 224k in June.
  • Earnings are expected to grow at a robust 0.2%mom/3.1%yoy rate, unchanged from the June pace.

 

China – The government promised countermeasures if the US follows through with new tariffs.

  • “If the US is going to implement the additional tariffs, China will have to take necessary countermeasures,” Foreign Ministry said at a briefing in Beijing on Friday.

 

Italy – Industrial production continued to slide in June registering a fourth consecutive monthly decline.

  • July is likely to record another decline as the industry remains weak and last month’s manufacturing PMI posted another sub 50 reading.
  • Industrial Production (%mom/yoy): -0.2/-1.2 v 1.0/-0.6 in May and -0.3/-0.8 forecast.  

 

Russia – President Trump signed an executive order imposing new sanctions on Russia for its use of chemical weapons in the 2018 attack on Sergei Skripal and his daughter, according to people familiar with the matter.

  • New series of sanctions follows the first round announced last year as US intelligence agencies were unable to confirm if Russia stopped using weapons.
  • Russia continues to deny responsibility for the attack.
  • While the first round involved termination of foreign assistance, some arms sales as well as denial of export of security-sensitive goods and technology.
  • The new package is reported to include limitations on US banks to lend funds to Russia, opposition to international financial institutions extending loans to the country, export of US goods and import of Russian goods into the US as well as a ban on air traffic with state owned airlines.
  • The stock index is off this morning (RTSI -2.6%) and the rouble is off1.5%.

 

Currencies

US$1.1094/eur vs 1.1046/eur yesterday. Yen 106.91/$ vs 109.17/$. SAr 14.650/$ vs 14.420/$. $1.212/gbp vs $1.212/gbp. 0.680/aud vs 0.685/aud. CNY 6.938/$ vs 6.900/$.

 

Commodity News

Precious metals:         

Gold US$1,439/oz vs US$1,407/oz yesterday

   Gold ETFs 75.8moz vs US$75.6moz yesterday

Platinum US$849/oz vs US$855/oz yesterday

Palladium US$1,427/oz vs US$1,515/oz yesterday

Silver US$16.18/oz vs US$16.06/oz yesterday

           

Base metals:   

Copper US$ 5,829/t vs US$5,906/t yesterday

Aluminium US$ 1,778/t vs US$1,793/t yesterday

Nickel US$ 14,440/t vs US$14,305/t yesterday

Zinc US$ 2,371/t vs US$2,409/t yesterday

Lead US$ 1,972/t vs US$1,988/t yesterday

Tin US$ 17,300/t vs US$17,300/t yesterday

           

Energy:           

Oil US$61.7/bbl vs US$64.4/bbl yesterday

Natural Gas US$2.190/mmbtu vs US$2.241/mmbtu yesterday

Uranium US$25.40/lb vs US$25.30/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$107.4/t vs US$110.7/t

Chinese steel rebar 25mm US$594.2/t vs US$603.1/t

Thermal coal (1st year forward cif ARA) US$68.5/t vs US$67.4/t

Coking coal futures Dalian Exchange US$211.3/t vs US$212.5/t

           

Other:  

Cobalt LME 3m US$26,000/t vs US$26,000/t

NdPr Rare Earth Oxide (China) US$42,441/t vs US$42,393/t

Lithium carbonate 99% (China) US$8,575/t vs US$8,768/t

Ferro Vanadium 80% FOB (China) US$39.5/kg vs US$39.3/kg

Antimony Trioxide 99.5% EU (China) US$5.3/kg vs US$5.3/kg

Tungsten APT European US$210-225/mtu vs US$210-225/mtu

 

Battery News

Audi unveils cheaper e-tron electric SUV with smaller battery pack

  • Audi presented a new cheaper version of e-tron electric SUV featuring smaller battery pack and slower charging.
  • The previous version of the e-tron, called e-tron 55, comes with a 95 kWh battery pack for a 204-mile EPA-rated range.
  • The new model, the e-tron 50, is equipped with a 71 kWh battery pack weighing around 120kg less than the previous version.
  • Smaller battery pack means smaller driving range (186 miles v 248 mile, using the WLTP range, which is known to be more optimistic than the EPA range).
  • Charging will take longer as advertised top charge rate in the new e-tron 50 is reported at 120kW v 150kW for the other model.
  • As for the motors, the model is still equipped with a dual-motor all-wheel-drive system, although the power is reduced from 402 hp to 308 hp (230 kW) which in turn means weaker acceleration from 0mph to 62mph of 7sec and a top speed (electronically limited) at 118mph.

 

Company News

BlueRock Diamonds* (LON:BRD) 66.5p, Mkt Cap £2.2m – Diamond recovery to improve on crusher upgrade and instillation of larger cone crusher

  • BlueRock report the Crusher upgrade and instillation of larger cone crusher now complete.
  • The crushing circuit has also been reconfigured to handle more material and the plant should move to full capacity shortly.
  • The new circuit has additional capacity to enable the development of a run of mine stockpile of crushed ore to enable better plant utilisation on days when ore feed from the open pits may be interrupted. Eg during heavy rain and other in-pit work.
  • The new management team led by Mike Houston, the man who fixed the plant at Shanta Gold, and Gus Simbanegavi, the CEO and a Zimbabwean mining engineer are leading the reconfiguration of the plant and the move to greater production and probably better diamond recoveries.
  • We note the company is already reporting the recovery and sale of some better quality diamonds since Gus Simbanegavi joined on 28 June last year and Mike Houston joined the board on 9 October 2018. Gus was made CEO of the local subsidiary on 16 May this year.
  • The pits are now mining deeper into more competent kimberlite with less clay content which should help the operation and there is a sense that the average size of the diamonds recovered is also getting larger, increasing the value per carat and improving the economics of the mine.
  • June saw production increase to 34,000t vs 29,200t in May with 40,000t a month considered to be achievable offering potential to develop a significant 20,000t stockpile relatively quickly to smooth out any issues in mine production.
  • BlueRock reported an average grade of 4.46 cpht in Q2 vs 4.1 cpht in the first half and 3.34 cpht through last year.
  • If the company produce at 30,000t per month at a grade of 4.46 cpht, the recovery of some 16,056 diamonds if sold at an average price of US$430/ct could realise some US$6.9m in sales for the group. 
  • Geological theory: Looking at the two pits at KV1 and KV2 which are just 20m apart, it may be that these pits are part of a larger kimberlite fissure with the five mapped kimberlite pits at surface forming surface blowouts from a much larger underground fissure.
  • KV1 may now appear to be a larger kimberlite than previously estimated.
  • KV3 has a number of phases of kimberlite within the pit, as is typical for a diamond mine. It is possible that some of these phases may be reassessed to enable a change to the grade and estimated tonnage of the diamondiferous kimberlite in the pit.
  • BlueRock recently reported the sale of a 12.2ct diamond sold for US$105,000. The sale should help to lift their average sales price to over $400/ct for the quarter.
  • Share consolidation: BlueRock recently consolidated its shares in a 1 for 500 share consolidation announced on 8 July.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Ivanhoe Mines (CVE:IVN) C$1.55, Mkt Cap C$1.08bn – Exceptionally high grade intersections in drilling at the Kamoa North Bonanza Zone.

  • Earlier this week, Ivanhoe Mines reported high grade results from drilling on the Kamoa North Bonanza Zone north of its Kamoa-1.4bn tonne indicated resource (at 2.64% copper)  Kamoa-Kakula deposit in DRC.
  • Although the term “bonanza” grade is sometimes over used, few would dispute that it was not appropriate for results which included:
    • An 11.82m wide intersection averaging 10.41% copper from 185m depth in hole DD1508;
    • A 13.49m wide intersection at an average grade of 13.69% copper from 193.5m in hole DD1520;
    • A 16.24m wide intersection at an average grade of 13.41% copper from 198.7m in hole DD1522;
    • A 15.50m wide intersection at an average grade of 13.80% copper from 205m in hole DD1527;
    • A 4.37m wide intersection at an average grade of 12.37% copper also from 205m in hole DD1531
  • The company says that “The Kamoa North Bonanza Zone represents a new style of copper mineralisation at Kamoa-Kakula, where massive to semi-massive chalcopyrite, bornite and chalcocite have locally replaced pyrite in the Kamoa Pyritic Siltstone (KPS) -  a pyritic siltstone that lies immediately above the basal diamictite unit that hosts the copper mineralisation at Kamoa-Kakula”.
  • We note that, earlier this week in a conference call for investors, Arc Minerals*, whose Cheyeza East prospect is located to the south of Kamoa-Kakula and in Zambia also described intersecting copper mineralisation in a geological setting atypical of the conventional Central African Copperbelt model. Arc Minerals’ geologist described the higher grade intersections from its widely spaced drilling at Cheyeza as located within a black saprolite thought to be the result of deep oxidation and supergene processes have formed an apparent sub-surface, secondary oxide tabular shaped body, that appears to have been influenced meteoric waters.
  • Although there is no suggestion that the two deposits are comparable, we observe that applying new geological thinking in a well-established mineral province appears to be finding previously undetected copper mineralisation.
  • Although individual drilling intersections will need to be incorporated into future mineral resources estimates to represent a meaningful extension to the deposit, in our opinion results like these confirm the status of the Kamoa-Kakula as one of the world’s most significant copper discoveries

*SP Angel acts as nomad and broker to Arc Minerals.

 

Kavango Resources (LON:KAV) 4.1p, Mkt Cap £6.7m – Check assays verify results from Ditau

  • Kavango, Resources reports that check assaying by SGS Laboratories in Johannesburg of samples from the first two holes drilled at the Ditau project in Botswana has confirmed that the “original Genalysis [Australian laboratory] results are correct and reliable”.
  • The company explains that “Although the assay results show lower than expected values from the altered Karoo sediments in both holes, the gabbroic rocks appear to be more mineralized with anomalous values of gold and base metal occurring towards the bottom of hole DitDDH2 (478m to 557m).”
  • The tenor of the assay results is not reported, however, at this relatively early stage of exploration the geochemical data from the initial two holes “supports the existence an alkaline igneous complex featuring a number of ring structures. This would explain the large volume of alteration encountered in both holes (1.8km apart)”.
  • Chief Executive, Michael Foster, described the confirmation of the results as “an exciting development in the continuing exploration of the Ditau Prospect. Some of the world's biggest copper and rare earth deposits are associated with such intrusives.”
  • The company also clarifies that the magnetic anomaly which identified the Ditau prospect as a drilling target is “just one of at least 10 similar magnetic "ring structures" all lying within Kavango's PL 169/2012 and the newly acquired PL 010/2019 (916.4km2).”
  • Follow up work at Ditau is expected to include “ground based geophysics will be undertaken followed by drilling to advance the investigation of this intriguing prospect”.

Conclusion: Check assaying has confirmed the original assays from the first two holes at Ditau where extensive, buried, alteration zones associated with large scale igneous intrusions, detected by geophysics are being investigated as potential hosts for mineralisation. Future geological interpretation and follow up exploration will be built on this early work and hence establishing the reliability of these early assay results should stand the company in good stead as the exploration programme develops.

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

 

Sources of commodity prices

 

Gold, Platinum, Palladium, Silver

BGNL (Bloomberg Generic Composite rate, London)

Gold ETFs, Steel

Bloomberg

Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt

LME

Oil Brent

ICE

Natural Gas, Uranium, Iron Ore

NYMEX

Thermal Coal

Bloomberg OTC Composite

Coking Coal

DCE

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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