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Today's Market View - Bezant Resources PLC

SP Angel . Morning View . Friday 11 10 19New mood of optimism for China trade talks and Brexit lifts marketsBezant Resources (LON:BZT)  0.20p, Mkt Cap £2m

3M - Today's Market View - New mood of optimism for China trade talks and Brexit lifts markets

SP Angel . Morning View . Friday 11 10 19

New mood of optimism for China trade talks and Brexit lifts markets

 

Bezant Resources (LON:BZT)  0.20p, Mkt Cap £2m – Bezant calls General Meeting to approve sale of 80% of Mankayan copper project in Philippines

 

Bridge collapse in China kills three

A bridge in the city of Wuxi has collapsed falling on cars and killing three people in two vehicles.

Cars fell from the bridge as it collapsed while other vehicles were crushed below.

We recommend investigators should test for the vanadium content in the rebar steel in the concrete structure.

Chinese steel producers have long scrimped on the use of vanadium preferring to produce Quench & Temper steel which is hard but brittle and prone to catastrophic failure.

Vanadium

Legislation in October last year brought in new requirements for vanadium content in steel causing vanadium prices to rise to $140/kg in China.

A degree of non-compliance by Chinese steel mills combined with some relaxation of the rules amid tight vanadium supply has caused vanadium prices to pull back to US$35.5-38/kg this week

We expect vanadium prices to rise again on better enforcement of the new Chinese legislation

New economic stimulus programs to restore economic growth in China, Europe and the UK should lift demand and prices again as the vanadium market appears to remain in structural deficit.

Structural steels for bridges and other major infrastructure require greater vanadium content while China’s Green Shield policies drive use of low-vanadium content iron ore and scrap steel.

Chinese Slag producers provided some extra vanadium into the market this year driven by higher prices but are said to have no further capacity to add to the market.

We also expect production of Vanadium Redox Batteries to support renewable energy generation to create very substantial new demand for vanadium in competition with growing demand from steel producers.

Bushveld Minerals* is extraordinarily well placed as a primary vanadium producer to supply vanadium into the market as well as to leverage off new demand for vanadium electrolyte for VRFB batteries

*SP Angel acts as Nomad and broker to Bushveld Minerals

 

Ethiopia – PM Abiy Ahmed wins the 2019 Nobel Peace Prize for his “efforts to achieve peace and international cooperation… in particular, for decisive initiative to resolve the border conflict with neighbouring Eritrea”.

PM has also earned praise for helping to secure a power-sharing agreement in Sudan, after a political crisis that led to the arrest of the nation’s long-time ruler Omar al Bashir.

The prize comes as a recognition of efforts to reform Ethiopia by the new administration as well as an encouragement for local authorities to continue with pro-market policies leading to peace, economic growth and development in the region.

Kefi Minerals* is looking to develop the Tulu Kapi gold mine in Ethiopia. Today’s news on the Ethiopian PM is great news for the nation and should lift its standing in international circles.

Earlier this year, PM Abiy Ahmed offered full support to the project and issued relevant state agencies instructions to enable start of development works.

We expect the Tulu Kapi gold mine to produce some around 135,000oz of gold per year at a cash cost of US$701/oz AISC inc initial capex US$973/oz.

With gold at $1,400/oz, estimates for the open pit only are:

Project export revenues are projected at c. US$200m per annum which would likely make it the country's largest single-enterprise export generator;

TKGM NPV on start of production in 2021 is estimated at £196m (US$249m). And from KEFI's viewpoint, the Company's planned 45% beneficial interest in the Project NPV at start of production would be £88m (US$112m);

Today, at start of construction, KEFI's planned beneficial interest in the NPV is estimated at £59m ($74m); and

Project free cash flow is estimated at £31m per annum (US$40m), of which KEFI's beneficial interest would be c. £14m per annum (US$18m).

*SP Angel act as Nomad and broker to Kefi Minerals

 

Dow Jones Industrials +0.57% at 26,497

Nikkei 225 +1.15% at 21,799

HK Hang Seng +2.34% at 26,308

Shanghai Composite +0.88% at 2,974

FTSE 350 Mining +0.40% at 17,825

AIM Basic Resources +0.06% at 2,133

 

Economics

US – Trump indicates positive progress in China Trade Talks

A positive mood in financial markets is led by latest optimism over the status of US-China negotiations as President Trump said talks are going “really well” and planned to meet Liu He in person today.

This is the first senior-level in person negotiations since late July.

Inflation data released yesterday came in line with expectations with the headline measure up 1.7% (unchanged from the pace in August) and core index up 2.4% (again unchanged).

 

China – Authorities are launching a new audit over environmental compliance in the northern industrial province of Hebei surrounding Beijing.

Officials are checking if local authorities are turning a blind eye to pollution in order to provide growth and employment.

 

EU – Final readings on inflation confirmed weakening trend highlighting risks of sliding inflation expectations that may potentially translate into the threat of deflation.

CPI in Germany averaged 0.9%yoy in September while consumer prices in Spain hit 0.2%yoy rates, weakest levels since end of 2016.

 

Brexit – new hope for EU trade deal following talks with Irish Prime Minister

EU Brexit negotiator, Michael Barnier meeting with UK representative to discuss Pathway to Brexit deal

Our view; it’s about time!

UK pound jumps over 1.7% against the € on increasing Brexit hopes as UK and Ireland said there is potential pathway to a deal.

Johnson and Varadkar believe the agreement is possible by the Oct 31 deadline and urged the EU to resume talks in Brussels.

UK Is said to have proposed a “pared-down free trade agreement” switching away from a fully formed withdrawal agreement and focusing on a more limited free trade agreement, according to Sky News.

Michel Barnier, the EU’s chief negotiator, is set to meet his British counterpart Steve Barclay in Brussels on Friday.

 

Iran – Brent jumped 1.7% this morning past the $60/bbl mark on the news of an explosion on an Iranian tanker in the Red Sea near the Saudi Arabian port of Jeddah.

The incident took place 60 miles from the Saudi shores as the ship’s two main storage tanks were damaged causing an oil spill into the Red Sea.

Iranian officials claimed the ship was hit by two missiles without clarifying where those might have been launched from.

No human casualties are reported.

The Iranian state TV identified the ship as oil tanker Sinopa that was regularly used to ferry oil to the Syrian government, despite international sanctions, according to the Tanker Trackers.

 

South Africa – Jacob Zuma corruption trial to go ahead. Gupta Brothers caught by US sanctions

The South African High Court in Pietermaritzburg took less than five minutes to dismiss Zuma’s application for a permanent stay of prosecution.

This is going to be a very interesting trial and will hopefully broaden to involve many other corrupt government ministers and officials involved with Zuma and the Guptas.

The US has imposed financial sanctions on the three Gupta brothers and Salim Essa under the Global Magnitsky Act.

The US law is also being used to catch the 17 Saudi officials who are implicated in the murder of Jamal Kashoggi in the Saudi embassy in Istanbul.

 

Japan - Bank of Japan reckons it is able to continue to stimulate consumer prices

 

Taiwan president rejects China offer for ‘one country, two systems’

Given how well the policy is working in Hong Kong we are surprised China even made the offer. Timing is everything!

 

Currencies

US$1.1007/eur vs 1.1016/eur yesterday.  Yen 107.97/$ vs 107.42/$.  SAr 14.938/$ vs 15.128/$.  $1.244/gbp vs $1.223/gbp.  0.679/aud vs 0.675/aud.  CNY 7.099/$ vs 7.126/$.

South African rand breaks through R15/US dollar on renewed trade optimism

 

Commodity News

Gold US$1,499/oz vs US$1,508/oz yesterday

Gold ETFs 81.8moz vs US$81.8moz yesterday

Platinum US$903/oz vs US$892/oz yesterday

Palladium US$1,702/oz vs US$1,685/oz yesterday

Silver US$17.68/oz vs US$17.79/oz yesterday

           

Base metals:   

Copper US$ 5,790/t vs US$5,741/t yesterday

Aluminium US$ 1,738/t vs US$1,746/t yesterday

Nickel US$ 17,655/t vs US$17,645/t yesterday

Zinc US$ 2,392/t vs US$2,356/t yesterday

Lead US$ 2,165/t vs US$2,154/t yesterday

Tin US$ 16,380/t vs US$16,390/t yesterday

           

Energy:           

Oil US$60.6/bbl vs US$58.4/bbl yesterday - Whilst oil prices nudged higher, the still unresolved U.S.-China trade dispute, mounting evidence that global economies are slowing, and rising U.S. oil production will continue to keep a glass ceiling on oil prices in a market that has factored in very little geopolitical risk premium

Near term drivers will focus on Vladimir Putin’s visit to Saudi Arabia to discuss the production cut pact that OPEC and its Russia-led allies have been implementing for nearly three years next week

U.S. crude futures were up 1.15% at $54.7/bbl on the New York Mercantile Exchange, on the back of small drift in the dollar

Longer term, US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view

 

Natural Gas US$2.225/mmbtu vs US$2.246/mmbtu yesterday - US natural gas prices made a lower high and a lower low closing yesterday’s session down 0.6%.

Prices are likely to hover at the current levels as demand will likely remain subdued during the shoulder season

This will last until either there is a supply disruption, from a storm, or the weather becomes colder than normal

There are three storms that NOAA (National Oceanic Atmospheric Administration) is watching. All three storms are in the Atlantic and none are expected to hit any areas that could cause a natural gas supply disruption.

 

Uranium US$24.90/lb vs US$24.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$88.5/t vs US$86.3/t

Chinese steel rebar 25mm US$564.2/t vs US$565.0/t

Thermal coal (1st year forward cif ARA) US$69.1/t vs US$68.5/t

Coking coal futures Dalian Exchange US$183.1/t vs US$182.4/t

           

Other:  

Cobalt LME 3m US$36,000/t vs US$35,250/t

NdPr Rare Earth Oxide (China) US$44,725/t vs US$44,555/t

Lithium carbonate 99% (China) US$6,973/t vs US$6,946/t

Ferro Vanadium 80% FOB (China) US$37.7/kg vs US$37.9/kg

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

Tungsten APT European US$205-215/mtu vs US$205-215/mtu

 

Battery News

 

Company News

Bezant Resources (LON:BZT)  0.2p, Mkt Cap £2m – Bezant calls General Meeting to approve sale of 80% of Mankayan copper project in Philippines

Bezant Resources has posted a Circular and Notice of General Meeting with regard to the proposed sale of 80% of its Mankayan copper project in the Philippines.

This looks like a sensible deal to us given the substantial capital costs relating to the differing scenarios for the Mankayan project and it makes sense for Bezant to effectively farm this out.

We now expect Bezant to focus on its Buffalo project in Zambia where it holds a 50% interest.

The Buffalo project is interesting following the assaying of a grab sample from blasted ore material which assayed 3.17% copper and 0.97g/t gold with minor silver a traces of cobalt.

Much work needs to be done to determine the potential scale and nature of a resource here but the grab sample is a good start.

Bezant has an agreement to earn into 50% of the Buffalo project for an initial assessment of the license area at at a cost of up to US$200,000 by 1 February 2020.

Bezant’s management team have substantial expertise in Zambia following Colin Bird’s evaluation and then sale of the Kirwara PLC to First Quantum for US$260m in 2010.

Bird and the Kirwara team drilled and estimated a resource of 1.38bt grading 0.78% copper at Kiwara’s Kalumbila copper project which was later adjusted to 1.027bt grading 0.51% copper (10.8mt copper) by First Quantum.

Kalumbila is now First Quantum’s Sentinel mine which has produced >500,000t of copper since opening and recently updated its resource to 0.88bnt grading 0.53% copper containing 4.66mt of copper

 

 

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

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