SP Angel . Morning View . Monday 17 02 20
PBoC cuts rates to support economic growth
MiFID II exempt information – see disclaimer below
Amur Minerals* (LON:AMC) – Metallurgical testwork update
Beowulf Mining* (LON:BEM) – Vardar discovers new copper-zinc target on Mitrovica license
Ormonde Mining* (LON:ORM) – Completion of disposal
Versarien* (LON:VRS) – Researchers observe unique way in which graphene prevents copper corrosion (Graphene-info)
Talga Resources* (ASX:TLG) – Graphene testing
Coronavirus disrupts supply chains and holds up crude oil, iron ore and coal unloading at Chinese ports
China’s coronavirus is holding up imports of crude oil, iron ore and coal as shipments into Chinese ports fall (Reuters).
The unloading of bulk commodities has fallen causing ships to queue outside ports awaiting unloading.
Data shows the unloading of 28.2mt from 211 vessels in the first 12 days of February down from 33.4mt yoy.
China car sales could fall by 1.2m vehicles this year on virus
The CEO of Faurecua, a French-based company which develops automotive technology and has worked in China for >25 years reckons Chinese auto sales could fall by 1.2m vehicles this year.
Dow Jones Industrials -0.09% at 29,398
Nikkei 225 -0.69% at 23,523
HK Hang Seng +0.52% at 27,960
Shanghai Composite +2.28% at 2,984
FTSE 350 Mining +0.83% at 18,379
AIM Basic Resources -0.46% at 2,262
US – The White House is considering a package of tax cuts including incentives for US households to invest in the stock market, according to four senior administration officials CNBC reports.
Under the proposal, a 10% cut for middle-income taxpayers that may be finalised before September.
US markets are closed today as the nation celebrates Washington’s Birthday, also known as President’s Day.
Retail sales climbed 0.3%mom in January, up from 0.2%mom in the previous month, with growth largely concentrated in the building materials category.
The latter is likely the result of higher winter temperatures that is boosting construction activity relative to seasonal trends, Bloomberg reports.
Consumer confidence measure have also picked up with a February reading climbing to the highest level since early 2018 led by gains the expectations sub-index, according to the University of Michigan.
On a less positive side of things, industrial production came down 0.3%mom in January reflecting the stoppage of the Boeing 737 Max production as well as disruptions to supply chains due to efforts to contain the coronavirus.
China – The central bank cut the interest rate on medium term loans this morning attempting to soften the economic blow of the virus outbreak.
The announcement follows the decision to cut the reverse repo rate by 10bps earlier this month and paves the way for a cut in the nation’s benchmark loan prime rate, expected to be announced on Thursday.
Moody’ dropped its 2020 GDP growth estimates for China to 5.2% compared to 5.7% required for the nation to meet its long-term goal to double the economy over the decade to 2020.
2,048 new cases or coronavirus are reported in China taking the total to 70,548.
The death toll increased by 105 to 1,770 with the vast bulk of infections and deaths in the Hubei region, at the centre of the outbreak.
China’s standing committee will meet on February 24 to discuss whether to delay the annual parliamentary meeting that is currently set to start on March 5.
Japan – The economy may slip into a recession in Q1/20 after positive a quarterly decline of 6.3%qoq in Q4/19 as coronavirus affects manufacturing and trade.
China may delay National Peoples Congress due to virus fears
European Commission opens anti-dumping investigation into Chinese aluminium (Fastmarkets MB)
The investigation follows a complaint by European Aluminium, which claimed that member companies are negatively affected by the dumping of Chinese exports of aluminium extrusions.
The association said it supports the EC’s decision to open an investigation, and urges the swift adoption of appropriate anti-dumping measures.
Chinese exports to the EU have more than doubled in the past five years, with European Aluminium stating that the EU is one of the last major markets unprotected from dumped Chinese exports of aluminium extrusions.
Gerd Götz, director general of European Aluminium said “If no urgent action is taken, Chinese production will further substitute European production and the EU risks losing a strategic value chain that is crucial to many low carbon applications,”
Donald Trump to raise tariffs on European aircraft imports (FT)
The Trump administration has announced that it will raise tariffs on plane imports from 10 to 15%.
The office of the US trade representative made the announcement on Friday which is likely to hurt airbus. The US previously threatened tariff increases due to what it calls illegal state support for the European aircraft maker.
However, the US decided against raising the 25% tariff it has also put in place on a wide range of European and British goods in retaliation given to Airbus.
The action by the office of the US Trade Representative is targeted mainly at the countries where Airbus is built - primarily the UK, France, Germany and Spain (BBC).
US$1.0844/eur vs 1.0850/eur last week. Yen 109.85/$ vs 109.80/$. SAr 14.919/$ vs 14.850/$. $1.304/gbp vs $1.303/gbp. 0.672/aud vs 0.673/aud. CNY 6.980/$ vs 6.985/$.
Gold US$1,581/oz vs US$1,577/oz last week
Gold ETFs 83.5moz vs US$83.4moz last week
Platinum US$970/oz vs US$974/oz last week
Palladium US$2,447/oz vs US$2,446/oz last week
Silver US$17.80/oz vs US$17.72/oz last week
Copper US$ 5,812/t vs US$5,772/t last week - Copper rises to three-week high on Chinese stimulus (Reuters)
The price of copper hit three week highs early on Monday morning as China lowered a key interest rate to cushion the impact of the coronavirus outbreak.
China’s central bank lowered the rate on 200bn yuan worth of one-year MLF loans and announced that Chinese lenders will tolerate a higher level of bad loans to support firms hit by the epidemic.
Three month copper on the LME hit the three-week peak of $5,828/t in early trade. It was up 0.9% at $5,813/t by 0730 GMT.
Copper was the biggest gainer on the SHFE this morning, with its most-active April contract ending 46,270 yuan per tonne, up 0.3% from last Friday’s closing price (Fastmarkets MB).
Prices could continue to be maintained as the market is still in deficit. According to the International Copper Study Group, the global refined copper market was in an apparent deficit of 439,000t in the first ten months of 2019.
Aluminium US$ 1,721/t vs US$1,737/t last week
Nickel US$ 13,165/t vs US$13,150/t last week - Nickel use in EV batteries on the rise
Global use of nickel in passenger EV batteries increased 39% to 59,271 tonnes in 2019 according to Adamas Intelligence. (Green Car Congress)
China was the demand driver with a 38% share of the total nickel deployed used in vehicles purchased in the country despite weak electric vehicle growth in 2019. (Economic Times, Auto.com) This amounted to 22,297 tonnes. China was closely followed by the US (22%), Japan (9%), Netherlands (4%) and Germany (4%) shares.
Despite passenger EV sales increasing just 5% the increase in the amount of nickel used is a result of demand for BEVs with higher capacity batteries and a longer term shift to battery chemistries containing higher concentrations of nickel.
69% of nickel is used in stainless steel, 16% in alloys, 9% plating and only 3% in batteries. (MSN)
Zinc US$ 2,182/t vs US$2,152/t last week
Lead US$ 1,895/t vs US$1,869/t last week
Tin US$ 16,630/t vs US$16,530/t last week
Oil US$57.3/bbl vs US$56.4/bbl last week
Natural Gas US$1.896/mmbtu vs US$1.799/mmbtu last week
Uranium US$24.50/lb vs US$24.50/lb last week
Iron ore 62% Fe spot (cfr Tianjin) US$86.1/t vs US$85.7/t
Chinese steel rebar 25mm US$545.4/t vs US$546.2/t
Thermal coal (1st year forward cif ARA) US$61.0/t vs US$60.7/t
Coking coal swap Australia FOB US$159.5/t vs US$161.0/t
Cobalt LME 3m US$33,750/t vs US$33,750/t
NdPr Rare Earth Oxide (China) US$40,685/t vs US$40,663/t
Lithium carbonate 99% (China) US$5,587/t vs US$5,512/t
Ferro Vanadium 80% FOB (China) US$30.5/kg vs US$30.5/kg - Ferro-vanadium prices remain unchanged in China despite the impact of the Coronavirus on the construction industry
The Chinese government has pledged support for housebuilders and new infrastructure to compensate for disruption caused by the virus.
Ferro-vanadium prices rose in the US by 2.8% to $13.25-14/lb ($19.15-30.8/kg).
Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/kg
Tungsten APT European US$240-245/mtu vs US$240-245/mtu
Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t
Germany – court rules that clearing of forest near Berlin for a new Tesla factory must halt immediately
We wonder if the court can’t see the wood for the trees?
Rio Tinto to build US$100m solar power plant (mining-journal)
The miner has approved a US$98m investment n a new solar plant at the $2.6bn Koodaideri iron ore development in Western Australia.
The 34MW plant is expected to supply all of the mines electricity demand during peak solar power generation times, and 65% of the mine’s average electricity demand when the 43mtpa operation comes online next year.
Rio Tinto also plan to build a 12MWh lthium-ion battery energy storage system to support a stable and reliable network.
The plant will comprise 100,000 panels covering 105 hectares, and is estimated to lower annual carbon dioxide emissions by about 90,000t.
What to do about Tesla……
The California EV makers eventful year continues with both positive and negative news over the weekend. The Company raised $2.03bn in last week’s dilutive common stock offering having previously suggested they were not looking to raise money. Elon Musk participated in the offering, purchasing ~$10m in new shares. (Cleantechnica)
On the flip side work on Tesla’s German Gigafactory has been put on hold after environmentalists from the Green League group won a court injunction on Sunday. Tesla has been clearing 225 acres of forested land on its Grunheide site near Berlin. (BBC news)
The court released a statement on Sunday cautioning “it should not be assumed that the motion seeking legal protection brought by the Green League lacks any chance of succeeding”. The court has emphasized the injunction is temporary and subject to further hearings.
If Tesla is unable to clear the required area of forest by mid-March before wildlife breeding begins construction could be delayed 6-9 months warn officials. The injunction is therefore threatening Tesla’s mid-2021 completion timeline. (Bloomberg Green)
On Friday the EV giant faced more negative headlines as the Company was forced to withdraw thousands of Model X SUV vehicles in North America due to power steering problems. In March 2018 Tesla was forced to recall 123,000 Model S vehicles over a similar issue with steering.
No injuries of crashes have been caused as a result of the issue but the Company did admit they “observed excessive corrosion” on the aluminium bolts that attach the electric power steering gear assist motor to the gear housing. (This is money)
The stock closed on Friday at $804 giving Tesla a market cap of $145.08bn. The stock is up 89% YTD.
EDF Energy continues to grow presence in EV, acquiring Pod Point in £110m deal
The UK energy provider has closed a deal to acquire Pod Point, an EV charging solutions firm. The acquisition has been long rumoured. (Current Hub)
EDF has purchased Pod Point together with Legal and General, the latter taking a 23% stake in the JV. The acquisition follows EDF’s purchase of Pivot Point in November, both deals part of its long term strategy to grow its presence in the EV space. The acquisition is EDF’s largest such move in the EV market.
Pod Point was founded in 2009 and since has installed 62,000 charging points in the UK and 6,600 in Norway. 2018 saw the Company sign a deal with Tesco to install 2400 charging points at 600 Tesco supermarkets around the UK. (Fleet News)
EDF has touted that the acquisition will provide cost reductions for customers as EDF merge their energy solutions and Pod Point’s charging infrastructure.
Amur Minerals* (LON:AMC) 1.8p, Mkt Cap £15m – Metallurgical testwork update
The Company is in the middle of metallurgical testwork studying the potential to generate a copper concentrate at the Kun Manie sulphide nickel/copper project.
Establishing a copper concentrate production circuit will significantly improve Kun Manie economics as the latest PFS fully excluded any consideration for copper by-product revenues.
A metallurgical processing flowsheet has been identified for processing of a 10t representative bulk sample (0.76% Ni) derived from planned mining areas.
Girponickel estimates nickel and copper recoveries to average 79.5% and 82.9%, respectively, over the life of mine at Kun Manie (PFS used 80.2% and 79.9%).
Nickel concentrate is estimated to contain 7.9% Ni and 2.1% Cu (9.7% Ni and 2.6% in PFS).
By establishing the copper concentrate production option, the Company may monetise some 137kt of copper that is projects to be contained within the nickel concentrate.
Using the $2.5/lb ($5,510/t) copper price, the total value of contained copper in the concentrate would be ~$750m excluding payable metal adjustments and smelters’ TC/RCs.
Conclusion: Establishing copper concentrate circuit viability would significantly improve Kun Manie economics with metallurgical testwork currently in progress. We are looking forward to results of the Gipronickel work.
*SP Angel act as Nomad and Broker to Amur Minerals
Beowulf Mining* (LON:BEM) 5.3p, Mkt Cap £32m – Vardar discovers new copper-zinc target on Mitrovica license
(Beowulf holds 42.2% of Vadar. Beowulf also holds 100% Kallak iron ore in Sweden, 100% of Aitolampi graphite in Finland and 40% of the Mitrovica and Viti projects in Kosovo)
Beowulf Mining reports the discovery of a further copper-zinc target at Vardar Minerals’ Mitrovica license in Kosovo and is investing another £50,000 into the company taking its stake to 42.2% from 41.5%.
The funding will be used for a drone survey for magnetic and magnetic IP data to determine targets for drilling.
Vardar, run by Luke Bryan has identified further mineralised gossans, which may indicate underlying hydrothermal breccias and stockworks to the north and east of Vardar's Wolf Mountain prospect
Rock sample assays show >1% copper and up to 3% lead with soil samples of over 500ppm copper and up to 1% lead and zinc.
Vadar is testing the potential for copper, gold porphyry mineralisation can be accompanied by other overlying and flanking epithermal mineralisation carrying gold, copper and other metals.
The near-by Stan Terg lead-zinc mine is estimated to have produced 34mt of 3.45% lead, 2.3% zinc and 80 g/t silver.
The team at Vadar reckon the mineralisation seen so far may relate to a potentially much larger porphyry style mineralised system.
Vadar’s Wolf Mountain prospect appears to share similarities with:
Crnac lead-zinc deposit which has a non-JORC compliant 3.5mt of 8.1% lead, 3.2% zinc, 120 g/t silver
Zijaca led-zinc deposit which has non-JORC compliant 5.2mt of 2.83% lead, 2.83% zinc and 16 g/t silver).
Sweden: Beowulf recently reported that has been in discussions with its lawyers over the status of its Kallak iron ore project in Sweden but that no decision over legal action against the Swedish government has been taken.
• Sweden’s standing as a country for investment in the mining industry and in other industries is being damaged by the situation whereby the government appears to be failing to follow its own procedures and legislation.
• The Swedish Government appear to agree on when it comes to mining applications, it is Swedish law that should determine whether an application is successful or not.
Sweden’s State Secretary later wrote that the "decision regarding the application is currently in preparation and I am afraid that we are not able to comment on when a decision is expected to be taken".
Conclusion: Beowulf appear to be making solid progress with exploration at Vadar. We also look forward to further news on a decision by the Swedish government in relation to the Kallak magnetite iron ore project in Sweden where Beowulf have invested some SEK80m over the past 13 years.
*SP Angel acts as nomad and broker to Beowulf Mining.
Ormonde Mining* (LON:ORM) 0.75p, Mkt Cap £3.5m – Completion of disposal
Ormonde Mining report the completion of the disposal of their remaining stake in the Barruecopardo tungsten mine in Spain.
Low tungsten prices and ongoing problems for the operation in Spain makes this look like a well timed and beneficial disposal from an Ormonde Mining perspective.
The disposal is accompanied by the retirement of Mike Donoghue and John Carroll from the board on 13 February.
*SP Angel acts as Broker to Ormonde Mining
Versarien* (LON:VRS) 59p, Mkt Cap £91m – Researchers observe unique way in which graphene prevents copper corrosion (Graphene-info)
Talga Resources* (ASX:TLG) A$0.435, Mkt Cap A$106m – Graphene testing
Scientists from Chung-Ang University in Korea have observed a unique way in which graphene forms a hybrid layer that prevents copper corrosion.
Graphene has been studied extensively as a candidate for anti-corrosive coating, however previous studies into its use showed that graphene appeared to increase the rate of copper corrosion.
The study found that despite the graphene coated copper experiencing larger amounts of corrosion originally, after 13 days of exposure corrosion had significantly slowed down where a new hybrid of graphene and Cu2O layer had formed.
Meanwhile, the unprotected copper continued to corrode at a consistent rate, until it had penetrated far deeper than the corrosion under the graphene shield.
This study showed that graphene protects copper from deep penetrating oxidation unlike what previous studies had concluded, proving that graphene significantly slows down the oxidation of copper in the long term, as compared to bare copper.
Versarien also reports it has appointed SP Angel as the company’s sole nomad and broker today.
The company is developing processes for the production and development of graphene into many different applications.
Graphene is seen as a novel new material which is able to enhance and improve other materials through its exceptional strength and thermal and electrical conductivity.
A number of battery developers are testing graphene within their batteries to determine how well it supports and regulates thermal and electrical conductivity within anode materials.
Graphene’s ability to remove heat from hot-spots in batteries could enable better and safer li-ion and other lithium battery chemistries.
Versarien holds majority stakes in a number of businesses related to the advance and development of graphene materials with activities in Manchester, Cambridge, Cheltenham and the US.
See SP Angel Graphite report for further details
Talga Resources are currently running the world’s single largest application of graphene in its coating of two ships with its new Talcoat commercial graphene coating trial on two cargo ships.
Click for Talga Resources note PDF
*SP Angel act as nomad and broker to Versarien. An SP Angel analyst recently visited Versarien’s Cheltenham graphene manufacturing facilities
*SP Angel acts as UK broker to Talga Resources. An SP Angel analyst has visited the leading battery R&D institution WMG partnering with Talga.
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
Richard Parlons – 0203 470 0472
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
Prince Frederick House
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.
Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony