logo-loader

Nickel prices near $19,000/t on Indonesia ore export ban news

Nickel prices hit record highs in Shanghai today, while prices in London were at a five-year high.

Avesoro Resources - Today's Market View - Nickel prices near $19,000/t on Indonesia ore export ban news

SP Angel – Morning View – Monday 02 09 19

Nickel prices near $19,000/t on Indonesia ore export ban news

MiFID II exempt information – see disclaimer below
 

Avesoro Resources (LON:ASO) – Major shareholder provides additional working capital facility

BlueRock Diamonds* (LON:BRD) – Interim results

Kavango Resources (LON:KAV) – Earning up to 90% in two licences in the Kalahari Copper Belt

Kodal Minerals* (LON:KOD) – Bougouni ESIA submitted

 

 

Economics

US – Markets are closed today as the nation celebrates the Labour Day.

  • Increased import tariffs of 15% on $125bn worth of Chinese goods took effect yesterday; the second part of the 15% tariffs on Chinese imports (for c.$175bn) will be scheduled to go into effect on December 15.
  • Additionally, the remaining $250bn worth of imports will be taxed at 30% from October 1.
  • In retaliation, China imposes additional 5-10% tariffs on a total of $75bn worth of US imports in two steps (September 1 and December 15); those will come on top of already existing tariffs of 5-25% on around $110bn worth of US products.

China – The financial stability and development committee of the State Council says growth risks are “controllable” while the government is planning to increase counter-cyclical adjustments in economic policy.

  • Private firms in the manufacturing recorded a marginal expansion in the industry in August following two consecutive months of declines, according to the Caixin PMI data.
  • Production increased at the quickest pace in five months with new orders remaining broadly stable.
  • On a downside, export orders decline accelerated while 12-month outlook hit the weakest level in the series history with respondents highlighting risks of the US/China trade spat and weaker global conditions.
  • “China’s manufacturing sector showed a recovery in August, mainly due to improved production activity… however, overall demand didn’t improve, and foreign demand declined notably,” Caixin said in the report.
  • “Amid unstable Sino-American relations, China needs to step up countercyclical policies.”
  • Caixin Manufacturing PMI: 50.4 v 49.9 in July and 49.8 forecast.
  • Official stats released over the weekend pointed to a continuing weakness in the manufacturing sector (a seventh below 50.0 reading in the last nine months) with relatively robust performance from the services sector last month.
  • In the manufacturing sector, both new domestic and overseas orders contracted in August.
  • Official Manufacturing PMI: 49.5 v 49.7 in July and 49.6 forecast.
  • Official Services PMI: 53.8 v 53.7 in July and 53.7 forecast.

UK – The UK manufacturing sector contracts at the fastest pace since 2012 amid a drop in new orders and optimist among firms at a record low.

  • The worse than forecast reading came in despite further weakness in the pound in August, which would typically benefit exporters.
  • The PMI reading suggested the sector is contracting at a quarterly rate of close to 2%, HIS Markit said.
  • The pound is off 0.5% against the US$ and the € this morning trading at 1.2099 and 1.1019, respectively.
  • Markit Manufacturing PMI: 47.4 v 48.0 in July and 48.4 forecast.

Eurozone – Spain and Italy released weak manufacturing data showing a contraction in the sector in both countries in August.

  • In Italy, output and new orders drop for 13th month in a row with the business confidence at its lowest in four months (Markit Manufacturing PMI 48.7 v 48.5 in July and 48.5 forecast).
  • In Spain, new orders dropped for a fourth consecutive month while production dropped the most since May/13 (Markit Manufacturing PMI 48.8 v 48.2 in July and 48.5 forecast).
  • Overall, the Eurozone manufacturing sector remained in a dire state last month with the PMI running in the contractionary territory for the last seven months (Markit Manufacturing PMI 47.0 v 46.5 in July and 47.0 forecast).
  • “Prices are falling as companies offer discounts in the face of disappointingly weak demand, and payroll numbers are being culled at one of the steepest rates seen over the past six years as companies increasingly seek to cut costs in the uncertain trading environment,” Markit report read.
  • “Trade wars and tariffs remain the biggest concerns among producers, and the escalation of global trade war tensions in August encouraged further risk aversion.”

South Africa – The manufacturing sector is back in the contraction mode signalling the surprising recovery in July was unsustainable, the PMI data showed.

  • Manufacturing PMI: 45.7 v 52.1 in July and 51.4 forecast.

Argentina – Rating agencies cut the sovereign credit rating while the government is introducing capital controls to stem rapid depreciation of the currency.

  • S&P cut the rating to SD (Selective Default) from B-; Fitch reduced it to RD (Restricted Default) citing a missed payment; while Moody’s downgraded Argentina to Caa2 from B2.
  • Companies are now needing to seek central bank approval to access the FX market to purchase foreign currency and make transfers abroad.
  • The rules limit the population to purchases of foreign currency to more than $10,000 a month as well as restrict people from making transfers exceeding that amount each month.
  • The IMF said it is monitoring the situation and is in constant dialogue with the government with little information on the future disbursements of the committed $57bn in bailout funds.
  • So far, the fund disbursed $44bn to the government of Macri.

Currencies

US$1.0984/eur vs 1.1036/eur last week. Yen 106.26/$ vs 106.40/$. SAr 15.148/$ vs 15.278/$. $1.213/gbp vs $1.217/gbp. 0.673/aud vs 0.671/aud. CNY 7.169/$ vs 7.151/$.
 

Commodity News
 

Precious metals:         

Gold US$1,522/oz vs US$1,528/oz last week

Gold ETFs 78.9moz vs US$78.9moz last week

Platinum US$937/oz vs US$926/oz last week

Palladium US$1,538/oz vs US$1,487/oz last week

Silver US$18.30/oz vs US$18.34/oz last week

           

Base metals:   

Copper US$ 5,681/t vs US$5,703/t last week

Aluminium US$ 1,748/t vs US$1,753/t last week

Nickel US$ 18,785/t vs US$16,630/t last week – Nickel price surge continues.

  • Nickel prices hit record highs in Shanghai today, while prices in London were at a five-year high, following news that Indonesia will expedite an ore export ban (Reuters).
  • Benchmark three-month nickel prices on the LME reached $18,470 early this morning, while Shanghai nickel peaked at the maximum daily limit of 6%, hitting >$19,300.
  • Indonesia announced on Friday that it would bring forward by two years an ore export ban originally scheduled for 2022, ending several weeks of speculation that such a move was imminent.

Zinc US$ 2,224/t vs US$2,259/t last week

Lead US$ 2,018/t vs US$2,043/t last week

Tin US$ 16,620/t vs US$15,795/t last week

           

Energy:           

Oil US$59.1/bbl vs US$60.9/bbl last week

Natural Gas US$2.284/mmbtu vs US$2.284/mmbtu last week

Uranium US$25.30/lb vs US$25.30/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$81.7/t vs US$81.5/t

Chinese steel rebar 25mm US$538.2/t vs US$538.7/t

Thermal coal (1st year forward cif ARA) US$63.6/t vs US$64.3/t

Coking coal futures Dalian Exchange US$201.9/t vs US$200.8/t

           

Other:  

Cobalt LME 3m US$32,600/t vs US$32,600/t

NdPr Rare Earth Oxide (China) US$44,289/t vs US$44,405/t

Lithium carbonate 99% (China) US$7,254/t vs US$7,273/t – Lithium miners struggle with low prices.

  • The global lithium market continues to struggle following a recent price contraction (Reuters).
  • Prices fell on oversupply as Australian hard-rock lithium miners ramped up production, and demand in the electric vehicle market dropped.
  • Sales of hard-rock lithium are winding back as China, the main buyer of hard-rock lithium concentrate, doubled their stocks of the raw material.
  • Tonnages that have been sold thus far in 2019 have been running at a lower average price per tonne.
  • Miners have reacted by scaling back capital expenditure and re-evaluating development plans.

Ferro Vanadium 80% FOB (China) US$38.5/kg vs US$38.5/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.2/kg

Tungsten APT European US$195-205/mtu vs US$198-205/mtu
 

Battery News
 

Company News
 

Avesoro Resources (LON:ASO) 92p, Mkt Cap £75.0m – Major shareholder provides additional working capital facility

  • Avesoro Resources has announced that its major shareholder, Avesoro Jersey Limited (AJL), which currently owns 72.9% of the company and has expressed a (non-binding) interest in acquiring the balance of the company has granted it an additional US$5m working capital facility. The facility, earns interest at 3%pa and is to be repaid within one year.
  • “Following drawdown of the New Facility, the balance of working capital loans provided by AJL is US$42,235,025.”
  • In respect of the proposed takeover of Avesoro by AJL, a special committee of the Board is commissioning an independent valuation report. In the meantime, “AJL has agreed that it will use its reasonable endeavours to commence a formal Take-Over Bid by circular as soon as it has received the formal valuation and in such time as would allow the Takeover Bid to complete by January 1, 2020”.

BlueRock Diamonds* (LON:BRD) 67.5p, Mkt Cap £2.2m – Interim results

  • BlueRock Diamonds reports an operating loss of £0.47m for the six months ending 30th June 2019 (2018 – loss of £0.79m) and a pre and post-tax loss of £0.38m (2018 – loss of 1.29m).
  • Under a new mine-management team, the Kareevlei mine improved the processing of ore by 65% to 120,426 tonnes and more than doubled the production of diamonds to 4,936 carats (2018- 2,438 carats).
  • The company comments that “the first half of 2019 should be considered in two parts: prior to and post the appointment of the new and strengthened management team at the end of April 2019 … the results of May and June 2019, which achieved monthly levels of production at a rate of twice the average for 2018, led to record levels of carats produced and, consequently, revenue being doubled.  The improvement was achieved without the benefit of the upgrade to the crushing circuit, which was completed at the end of July 2019, and solely by the implementation of better management controls.”
  • The average price received rose to US$405/ carat  (2018 US$340/carat) and as a result revenue rose to US$1.77m (2018 – US$0.82m). Sales included a 24.9 carat diamond which was sold for US$190,000 in June.
  • BlueRock Diamonds explains that “The Kareevlei mine remains in the top 10 by average value per carat diamond mines in the world” and that over 90% of its stones are of gem quality which, the company suggests, should provide a level of insulation in a weakening diamond market.
  • The company also comments that “We now have an operational plan for the next five years which currently targets production at approximately 400,000 tonnes per annum, operating at 40,000 tonnes a month in the non-rainy season. As part of our product management, it is planned to create stockpiles of run of mine and crushed ore to minimise the impact of the rainy season which largely affects the first quarter results”.

Conclusion: The introduction of new mine management at Kareevlei has addressed a number of operating issues and lifted throughput and diamond production.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds
 

Kavango Resources (LON:KAV) 1.8p, Mkt Cap £2.9m – Earning up to 90% in two licences in the Kalahari Copper Belt

  • Kavango Resources reports that it has signed a Memorandum of Understanding with a Botswana company, LVR GeoExplorers, to farm in to up to a 90% interest in two exploration licences in the Kalahari Copper Belt in Botswana.
  • Over the first 12 months, Kavango is obliged to spend approximately £92,000 on each of the licences in order to acquire a 25% interest. Kavango, which will manage the exploration programme, can increase its interest in either licence by advancing the project to a bankable feasibility level.
  • The first of the licences (PL082/2018) is located approximately 30km north of MOD Resources’ T3 mine development project and is “completely surrounded by MOD/Metal Tiger exploration licences including their T5, T6, T9, T10, T14 and T15 targets. The PL lies astride the main Ghanzi - Maun Highway.”
  • The second licence, PL083/2018, is close to the Namibian border “south of the Trans-Kalahari Highway and adjacent to the block of licences held by Kapore Metals Limited.”
  • Chief Executive, Michael Foster, described the agreement as “an excellent opportunity for Kavango to acquire an interest in some highly prospective ground in the KCB area, which is now regarded as one of the world's most promising under-explored copper provinces. We believe that the proposed Joint Venture with LVR represents excellent value for shareholders, who now have the prospect of acquiring an interest of up to 90% in these licences.”
  • He also confirmed that “We will continue to consider other opportunities in this exciting copper province, while our main focus remains the KSZ Project".

Conclusion: The offer by Sandfire to acquire MOD Resources has highlighted the exploration potential of the Kalahari Copper Belt. Kavango Resources’ success with its own exploration at KSZ and the expansion of its portfolio of exploration property within the Kalahari Copper Belt via the MoU with LVR GeoExplorers may prove to be particularly timely.

Kodal Minerals* (LON:KOD) 0.057p, Mkt Cap £6.7m – Bougouni ESIA submitted

  • Kodal Minerals reports a pre-tax loss of £0.71m for the year ending 31st March 2019 (2018 – loss of £0.86m) as it progresses the Bougouni Lithium project in southern Mali.
  • The company highlights the submission of its Environmental and Social Impact Assessment (ESIA) whch, as announced last week, is an important initial step in securing the relevant permits for mine development.
  • The application is currently undergoing “a process of review and discussion with the government department following which an updated and final EISA report will be submitted with a final decision to be delivered within the statutory 45-day approval period from this final submission date”.
  • The company explains that it has built “strong relations with the local community and relevant government departments” which gives it confidence in its ability to navigate the permitting process. We also note that last week the owner of the nearby Goulamina, Mali Lithium (formerly Birimian Limited) received an operating permit which may indicate that the authorities are well-versed in the minutiae of lithium mine development  which could ease the permitting process for Bougouni.
  • Kodal Minerals is progressing its feasibility work, including mine design, engineering and metallurgical studies. ”The feasibility study will form the basis of our submission for a mining licence at Bougouni, which we expect to file before the end of 2019”.
  • In addition to the environmental and feasibility work, updated JORC compliant mineral resource estimates released in February show that approximately 55% of the total resource of 21.3mt at an average grade of 1.11% LiO2 is now classed as indicated

Conclusion: The updated mineral resource estimate, submission of the ESIA to the regulatory authorities in Mali, and expectations that the feasibility study will be submitted by the end of the year underline the progress and increasing momentum of the Bougouni Lithium Project. We look forward to the feasibility study later in the year.

*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474
 

Sales

Richard Parlons – 0203 470 0472

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

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins ([email protected]).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, H

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: Bacanora Lithium CEO hails completion of strategic...

Bacanora Lithium PLC's (LON:BCN) Peter Secker speaks to Proactive London's Andrew Scott following approval from the relevant Chinese authorities for Gangfeng Lithium Co Ltd to complete its strategic investment in the company. Bacanora is now in receipt of £21.9mln of funds from Ganfeng, and...

7 hours, 54 minutes ago

15 min read