SP Angel – Morning View – Wednesday 07 08 19
Markets stabilise as investors digest Trade War implications
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MiFID II exempt information – see disclaimer below
Amur Minerals* (LON:AMC) – Thomas Bowens joins Amur as Non-Executive Director
Cora Gold* (LON:CORA) – Selin infill drilling results
Shanta Gold (LON:SHG) – Singida funding update
Sirius Minerals (LON:SXX) – Share collapse on failure to place $500m bond offering
W Resources (LON:WRES) – La Parilla moving towards production from new concentrator
Wolf Minerals (LON:WLFE) SUSPENDED – Liquidators selling spirals from Drakelands
Funds go risk-off as markets are becalmed indicating that something is going wrong in the global economy
Funds are taking a tougher view on the US–China Trade War as the US names China as a currency manipulator and Trump imposes further trade tariffs.
The last time markets felt like this was in the run up to the collapse of Lehman Brothers.
We recall a well-known US hedge fund unloading is small-cap holdings through the summer before the collapse of Lehman.
We wonder what the next major casualty will be in the current market shakeout?
Will it be the much talked about hedge book of a major German bank which is rumoured to pose significant risk to market stability.
Europe: Could it be an Italian bank given slow growth in the region will there be other banking casualties due to negative interest rates in Germany.
Top European banks are warning of weaker earnings as escalating trade tensions take a toll on clients and the prospect of lower interest rates erodes their main source of income (Bloomberg)
US/China Trade War: Will US Tariffs and their impact on Chinese exports break China’s indebted banking sector, stall it’s manufacturing boom or even topple President Xi.
HK: China is ramping up its response to the rioting in HK as protestors object to tightening rule from China in their ninth-week of protests. China’s threats of force and use of criminal gangs to beat rioters is serving to inflame the situation. Tensions in other Chinese cities are reported to be rising as the US Tariff war causes Chinese unemployment to rise.
Japan: is looking at how to compete with a weaker Chinese Renminbi, slower global growth and Korean boycott of Japanese goods.
Also, the ‘Japanese bank lobby head warns BOJ against deepening negative rates’ (Reuters).
Interest rates; policymakers have changed the direction of interest rate moves with the Fed cutting 25bp and the ECB likely to follow due to slower Eurozone and the existential threat to the European economy of a no-deal Brexit.
Subprime crisis: the collapse of Lehman Bros in 2008 caused financial markets to fall creating a significant buying opportunity for investors who were brave enough to buy into equity markets following their brief collapse.
Dow Jones Industrials
HK Hang Seng
FTSE 350 Mining
AIM Basic Resources
US – The administration tried to play down concerns over protracted trade dispute with China.
Larry Kudlow, director of the White House National Economic Council, suggested the White House wants to continue trade talks with China and is still planning to host a Chinese delegation for talks in September.
China – The PBoC eased its reference rate further setting it at marginally weaker 6.9996 level.
The onshore opened at 7.0369 and was changing hands at 7.0458, down 0.3%, later in the morning.
Germany – Industrial production came in weaker than expected in June extending a series of poor economic data from the largest EU economy.
Output dropped 5.2%yoy v a 3.1%yoy drop expected and a 3.7%yoy decline in May.
New Zealand – The central bank cuts the benchmark rate by more than forecast 50bp and does not rule out further easing in the future.
The official cash rate has been reduced to record low of 1%.
“It is easily within the realms of possibility that we might have to use negative interest rates,” RBNZ Governor Adrian Orr said at a news conference.
The kiwi got sold off tumbling 2% to $0.6378, the lowest level since early 2016, and marking the steepest decline in a year.
Venezuela – US freezes Venezuelan state assets in the US
We have to wonder what took them so long?
US$1.1201/eur vs 1.1205/eur yesterday. Yen 106.21/$ vs 106.53/$. SAr 14.899/$ vs 14.812/$. $1.218/gbp vs $1.217/gbp. 0.672/aud vs 0.680/aud. CNY 7.043/$ vs 7.035/$.
Gold US$1,490/oz vs US$1,461/oz yesterday
Gold ETFs 76.5moz vs US$76.4moz yesterday
Platinum US$856/oz vs US$857/oz yesterday
Palladium US$1,441/oz vs US$1,435/oz yesterday
Silver US$16.76/oz vs US$16.41/oz yesterday
Copper US$ 5,675/t vs US$5,697/t yesterday
Aluminium US$ 1,760/t vs US$1,765/t yesterday
Nickel US$ 14,760/t vs US$14,915/t yesterday
Zinc US$ 2,289/t vs US$2,333/t yesterday
Lead US$ 1,989/t vs US$1,986/t yesterday
Tin US$ 17,030/t vs US$17,015/t yesterday
Oil US$58.7/bbl vs US$60.2/bbl yesterday
Natural Gas US$2.094/mmbtu vs US$2.095/mmbtu yesterday
Uranium US$25.30/lb vs US$25.35/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$93.2/t vs US$95.6/t – Iron ore prices continue to fall on expectations for higher shipments from Brazil to China.
Trade war tensions may also be taking their toll though China is likely to ramp up infrastructure spending to compensate for slower exports to the US.
Chinese steel rebar 25mm US$573.6/t vs US$576.6/t
Thermal coal (1st year forward cif ARA) US$65.8/t vs US$66.9/t
Coking coal futures Dalian Exchange US$208.4/t vs US$208.4/t
Cobalt LME 3m US$28,300/t vs US$26,000/t – Glencore puts Mutanda cobalt mine on temporary care and maintenance due to low cobalt prices
NdPr Rare Earth Oxide (China) US$43,987/t vs US$42,996/t
Lithium carbonate 99% (China) US$8,314/t vs US$8,315/t - Australian lithium miners take evasive action in face of oversupply
Australian miners are acting to curb production of hard rock lithium in response to falling prices (CRU).
Investment in Australia, home to a fifth of the world’s stated lithium reserves, has driven rapid growth: Australian mines provided nearly half of global lithium mine supply last year.
Rising mine supply has pulled prices of spodumene concentrate lower, however, resulting in evasive action by Australian mines.
Pilbara Minerals has moderated production and development at its Pilgangoora site in adjustment to reduced requirements.
Other firms have taken similar steps in moderating capital expenditure.
Further adjustment to Australian hard rock lithium production is likely given the downward trend in spodumene concentrate prices.
Ferro Vanadium 80% FOB (China) US$40.0/kg vs US$40.0/kg
Tungsten APT European US$210-225/mtu vs US$210-225/mtu
UK risks losing out to Europe in home battery boom
“Unfavourable” policy frameworks and a VAT increase for solar-battery packs this October risks leaving the UK behind Europe in booming home battery capacity (Guardian).
Wood Mackenzie predict that Europe’s home battery capacity could increase fivefold in five years, forecasting annual home battery installations in Europe in 2024 totalling more than 500MW.
The UK government has vowed to improve UK clean energy storage, including a £246m pledge to develop battery technology.
However VAT increases on solar batteries installed from October risks limiting access to low-cost renewable energy.
Amur Minerals* (AMC LN) 1.95p, Mkt Cap £14.2m – Thomas Bowens joins Amur as Non-Executive Director
Thomas Bowens is joining the Board as a Non-Executive Director with immediate effect.
Thomas is a geologist with over 25 years of international experience in the minerals exploration sector.
In Oct/18, Bowens successfully sold IG Copper, the company he founded in 2009 and an owner of the Malmyzh copper-gold porphyry in Khabarovsk Krai (1.4bn tones of ore with 5.6mt contained Cu and 9.4moz contained gold on Russian resources).
IG Copper was acquired by Russian Copper Company for $200m.
He has substantial experience working in Mongolia and Russia and has been directly responsible for tow major deposit discoveries in the Russian Far East in the past 12 years including Svetloye and Malmyzh.
*SP Angel act as Nomad and Broker to Amur Minerals
Cora Gold* (LON:CORA) 5.8p, Mkt Cap £5.8m – Selin infill drilling results
The Company released infill core drilling results from the exploration programme at Selin.
9 RC holes for 866m tested the oxide domain along the structure at Selin with selected results included:
9m at 2.37g/t form 72m;
25m at 2.81g/t from 28m including 7m at 3.37g/t from 29m ant 4m at 9.47g/t from 44m;
Results correlate with results of previous drill programmes with depth of oxide mineralisation confirmed to extend 80-90m at the southern end, shallowing to 50-60m towards the north.
Continuity of oxide mineralisation gold mineralisation is traced for around 2,250m now.
Additionally, the Company used AC drilling testing extensions of Selin 500m to the north and south from the main structure as well as a separate structure around 1km to the south of Selin.
The reconnaissance programme included 2,528m in 31 holes with quartz veining and anomalous gold intercepts of up to 31m in length recorded providing guidance on the location of primary gold bearing structures, although in places the principal structure may have been missed.
Results from the 1,000m of drilling are yet to be released.
Conclusion: Released drilling results confirm the continuity of the oxide mineralisation at Selin. The Company is going through assay results for its 6,500m drilling field season that would be used in preparation of the Sanankoro maiden mineral resource.
*SP Angel acts as Nomad and Broker to Cora Gold
Shanta Gold (LON:SHG) 8.9p, Mkt Cap £70m – Singida funding update
The Company received a non-binding term sheet for an unsecured, non-recourse loan facility of $10m.
The facility is conditional on a minimum equity raise of $15m at IPO that the Company is planning on the Dar es Salaam stock exchange.
Shanta is targeting a minimum equity offering of $20m while retaining at least 51% ownership and full operational control of the project.
The loan will be repaid over three years from Singida cash flows and is offered at 10% interest rate.
Pre-development works at Singida continue with the project having recently received the EIA certificate from the authorities.
Inhouse economic projections for the project released in Dec/18 guided for 0.4mtpa at 2.3g/t for 26kozpa operation over a little over six year period with preproduction capex of $19m (including $3m working capital requirement) and NPV8%/IRR of $31m/67%.
Sirius Minerals (LON:SXX) 9.2p, Mkt cap £648m – Share collapse on failure to place $500m bond offering
Sirius Minerals shares continue their collapse falling to below 10p/s from 38p/s last October.
We apologies to investors for not sharing our thoughts on the company with the market due to MiFID II regulations.
It is a direct consequence of the MiFID II regulations that we have not been able to freely share our thoughts on Sirius Minerals with the market.
It is fair to say we have never been fans of the mining, processing and marketing of polyhalite.
W Resources (LON:WRES) 0.415p, Mkt Cap £25.0m –La Parilla moving towards production from new concentrator
W Resources reports that it expecting the new concentrator plant at La Parilla to deliver its first production during the September quarter.
The “team is completing the final electrical connections in the lead up to full commissioning of the large-scale Concentrator Plant.” In the meantime, processing through the existing plant at La Parilla, has reached 19.8 tonnes of concentrate, comprising 16 tonnes of tungsten concentrate and 3.8 tonnes of tin concentrate.
The company confirms that this is “slightly lower than earlier guidance of 20t WO3 concentrate, reflecting the constraints on efficient pre-concentrate movement between plants and, in particular, due to the limitations of the old Concentrator Plant which was designed for tailings and not ore feed”.
On the positive side, however, operating the old plant has “provided critical information to enhance and fine-tune the performance of the new large-scale Concentrator Plant”.
Among the enhancements resulting from this work the company cites its purchase of a further “72 spirals from the Wolf Minerals Limited ("Wolf Minerals") liquidator and expanded the spirals' processing capacity at La Parrilla at very limited cost”.
We observe that, despite past optimism that Wolf Minerals’ Drakelands tungsten mine in Devon might reopen under new ownership, the sale of some of the processing equipment may be an indication that this outcome may be proving difficult to achieve, at least in the short term.
Commenting on the progress at La Parilla, where he said that “The team has delivered a fantastic mine, at low-cost”, Chairman, Michael Masterman, explained that “Production from the old Concentrator Plant was below expectations in July, but importantly is greatly assisting with the enhancement of the new large-scale Concentrator Plant, which has been designed for full scale operation. We are close to finalising this process and the priority is that the commissioning is completed thoroughly”.
Wolf Minerals (LON:WLFE) SUSPENDED – Liquidators selling spirals from Drakelands
The announcement today by W Resources included the information that the liquidators of Wolf Minerals had sold 72 spirals from the mothballed Drakelands mine in Devon.
It is unclear whether all of the spirals from Drakelands have been sold or whether some remain on site but their disposal suggests that efforts to reopen the mine under new ownership are proving difficult.
In our opinion, as long as the principal items of the crushing and grinding circuit remain on site, the re-opening of Drakelands remains relatively achievable as spirals should be comparatively inexpensive and straightforward to replace. However, with the current price of the benchmark ammonium paratungstate price languishing at levels last seen in early 2017, potential purchasers may be few and far between – or may simply be taking a hard-headed view of the acquisition price.
In addition to the continuing difficulties at Drakelands, yesterday’s news of the setback to funding the Sirius Minerals project in Yorkshire casts a further shadow over hopes of a resurgence in the UK mining industry.
To comply with MiFID II we are withdrawing forecasts and research coverage.
As of today, we are no longer acting as Nomad and joint broker to Xpediator PLC.
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
James Mills -0203 470 0486
Richard Parlons – 0203 470 0472
Jonathan Williams – 0203 470 0471
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
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35-39 Maddox Street London
*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.
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