MiFID II exempt information – see disclaimer below
Amur Minerals* (LON:AMC) – £1.5m convertible loan note
Aura Energy* (LON:AURA) – Issue of shares
Bushveld Minerals* (LON:BMN) – Agreement with redT energy plc to supply electrolyte for Vanadium Redox Flow Batteries
Condor Gold* (LON:CNR) – Looking ahead to production at La India
MC Mining (LON:MCM) – Interim results highlight a drop in earnings reflecting weak coal prices
Equity markets may be on edge of cataclysmic collapse as leveraged investment unwinds
Market volatility driven by:
Automated program trading exacerbating market moves,
Investor move to cash and similar instruments (gold),
Unwinding of leverage,
Short selling followed by short covering,
We may be about to discover just how much leverage (borrowing) has been used to buy major dividend paying companies and indices in recent years.
Sophisticated investors have been taking advantage of low borrowing costs and relatively high dividend yields to earn a significant margin between the two.
The music has now stopped for many leveraged investors with the result that their lending banks will likely enforce the sale of leveraged and underlying investments to reduce their borrowing ratios and market risk.
Enforced and voluntary stock sales are driving the market lower helped by short sellers and automated trading systems which serve to exacerbate the effect of the sales.
The NYSE circuit breakers halted trading twice this week as futures markets indicated the market would open limit down.
Fundamentally: the impact of the Coronavirus is going to wipe out profits and drive losses in the first half for many businesses.
Many businesses will come close to or end up in bankruptcy despite lower interest rates and other forms of government support:
Most sectors will suffer significant disruption:
Airlines – Flybe in bankruptcy
Automotive – China saw an 80% fall in auto sales in the
Banks – Italian banks on the brink
Oil & Gas – oil prices have fallen 25% this week
Building – construction sites will suffer disruption as staff self-isolate and go off sick
Insurance – insurers will suffer huge claims from airlines and travellers. Medical policies may see elevated payouts
Retail – Intu, the giant shopping centre owner in crisis with close to £5bn debt
Hotels and Leisure – significant reduction in demand
Shipping and logistics – significant disruption
Tobacco – many will give up smoking
Some sectors will gain such as Healthcare, Medicine and Biotech Research, IT Services, Media, Mobile Telecoms
Apple reopens all 42 stores in China after shutting them down last month due to the virus outbreak.
Stimulus funding relating to the Coronavirus (Updates in bold, figures in US dollars)
$50bn - IMF
$50bn – US – in the form of low-interest loans to companies in affected areas through the Small Business Administration.
$39m – UK (£30bn) stimulus to support the economy through the coronavirus – Govt. pledged to do more if needed. (any excuse to spend money through Brexit)
$120bn - ECB increased bond purchases + ECB – targeted loans to companies at an interest rate of -0.75%
$28.3bn (€25bn) - EU
$15.4bn – Hong Kong relief package
$13.7bn - South Korea
$12bn - World Bank
$11.4bn – Australia
$8.4bn – Italy doubles the stimulus package to $8.4bn (€7.5bn) breaking EU budget deficit rules. Expect other states to do the same.
Italy – looking to increase stimulus to ($18bn), not yet approved. This will be the 4th stimulus increase in the last month
The Italian banking sector will surely be under severe strain
$8.3bn – US House of Representatives – (US GFC stimulus totalled $2.8tr starting with $168bn in early 2008).
$5.5bn – Bank of Japan, ETF purchases and short term liquidity to Banks
$11.9bn – BoJ triples financing for small and mid-sized firms
$3.5bn - Ireland
$2.8bn – Spain coronavirus stimulus
$2bn – Taiwan stimulus
$0.75 - Indonesia
$14.2bn China, already spent. $113bn worth of bonds issued by China regional governments in January
China – much more stimulus to come
ECB ready to take targeted action
US – to announce new stimulus today
Australia – to announce new stimulus today
UK – Government advice: Wash your hands while singing the national anthem and get ready for the starting gun on self-isolation but only after you have placed your bets at the Cheltenham.races.
Germany – Angela Merkel’s CDU party continue to object to easing Germany’s strict fiscal deficit rules. We expect this to change as the Coronavirus spreads.
$398bn – TOTAL stimulus offered to-date
Lithium carbonate 99% (China) US$5,733/t vs US$5,725/t - Spillway for electrons could make lithium metal batteries safer (Science Daily)
Nanoengineers at the University of California San Diego have adapted the battery separator to slow the flow of energy that builds in the battery when it short circuits.
Battery failure often occurs as a result of dendrite growth on the anodes after repeated charging. The dendrites grow and pierce the separator creating a bridge between anode and cathode, causing a short circuit.
The separator developed by the UCSD team has a side covered in a partially conductive web of carbon nanotubes that intercept dendrites as they form. When a dendrite punctures the USCD separator the electrons have a pathway to drain out in a controlled manner rather than heading towards the cathode.
The modifications are not designed to prevent the battery failing, rather to prevent the unit catching fire and potentially exploding.
The paper was published in Advanced Materials
SP Angel Mining ranks first in Research Tree research rankings for the Resources Sector
Dow Jones Industrials
HK Hang Seng
AIM Basic Resources
Australian government's stimulus package 'good news' for small-cap miners
Members of the junior mining company met in Canberra yesterday to discuss the extent to which the coronavirus will affect their industry.
The CEO of the Minerals Council of Australia said that the stimulus package was good news for junior miners due to how vital the mining industry is to maintaining Australia's national economic strength.
Australia's minister for Resources and Water stressed the importance of companies activating adequate contingency plans to ensure that supply chains are maintained, as so far export demands are persisting (Australian Mining).
Burundi – to enforce 14 day quarantine for anyone arriving from the EU and countries most affected by the coronavirus including China and Iran
UK - Coronavirus loan scheme to be introduced to cover Coronavirus impact
The UK chancellor is to offer loans to small and medium business to cover the cost of salaries and bills of up to £1.2m
The government will offer a generous guarantee on the loans to support up to 80% of losses, with no fees to enable bank lending
The move should unlock up to £1bn of working capital in loan form to support small businesses.
US$1.1169/eur vs 1.1262/eur yesterday. Yen 106.20/$ vs 103.60/$. SAr 16.146/$ vs 16.449/$. $1.260/gbp vs $1.279/gbp. 0.631/aud vs 0.645/aud. CNY 6.977/$ vs 6.987/$.
Gold US$1,583/oz vs US$1,643/oz yesterday - Gold set for biggest weekly drop in seven years
Gold continued to fall on Friday morning as many traders sold gold to cover the sharp losses in equities seen this week.
Earlier this morning, spot gold was on track for a weekly decline of 6.6%, the most since June 2013 (Reuters).
Gold saw a huge sell off as investors were forced to sell to meet liquidity needs as equity markets (FX Street).
Some analysts believe the recent government stimulus is going to support the gold price, as excess capital floods the market and results in investors buying gold to hedge against inflation (Kitco).
Gold ETFs 86.9moz vs US$86.9moz yesterday
Platinum US$801/oz vs US$858/oz yesterday
Palladium US$1,978/oz vs US$2,242/oz yesterday - Palladium experiences biggest-ever intraday loss yesterday
Palladium fell as much as 30% yesterday, the biggest-ever intraday loss since records began in 1986, before regaining some ground (Bloomberg).
Falling car sales of up to 92% in some places has led to a sharp reduction in demand for vehicles, the market which vastly dominates palladium use.
Palladium fell to its lowest since October last year at $1,654/oz, before recovering to over $1,800/oz.
Despite the moderate recovery, the metal is on track for its biggest ever weekly loss of around 28% (Reuters).
Silver US$15.76/oz vs US$16.69/oz yesterday
Copper US$ 5,545/t vs US$5,440/t yesterday
Aluminium US$ 1,704/t vs US$1,671/t yesterday
Nickel US$ 12,690/t vs US$12,255/t yesterday
Zinc US$ 2,027/t vs US$1,974/t yesterday
Lead US$ 1,806/t vs US$1,753/t yesterday
Tin US$ 16,285/t vs US$16,585/t yesterday
Oil US$35.1/bbl vs US$34.0/bbl yesterday - Despite the expected oversupply slated for next month, oil prices ticked up again this morning
The key question is how long can these artificially low prices last?
Clearly Russia’s goal is to retrieve market share back from US shale producers, whose debt-fuelled growth caused Russia to lose its title as the world’s largest oil producer
With the UAE the latest OPEC member to announce a 1MMbopd increase alongside Saudi Arabia’s additional 3MMbopd uplift, many market commentators are prediction sub-US$30/bbl oil prices in April
Whilst both Saudi and Russia can operationally produce oil at very low breakeven prices, the key issue is the country’s fiscal breakeven given the overreliance on energy production on their respective economies
The IMF estimated that in 2020 oil would need to be priced at US$78.30/bbl for Saudi Arabia to balance its budget. Russia’s breakeven budget point is said to be in the US$40/bbl range.
However, the countries seem willing to absorb the short-to-medium term pain to regain market share from the US
By lowering oil prices, Russia and Saudi Arabia will disrupt the US industry and likely force some companies into bankruptcy, and by extension hurt US lenders
Brent futures are up 0.8% to $36.9/bbl, whilst WTI futures are up 1.4% at US$33.8/bbl
Natural Gas US$1.909/mmbtu vs US$1.805/mmbtu yesterday - Natural gas prices moved lower yesterday following a smaller than expected draw in natural gas stockpiles
The EIA reported that working gas in storage was 2,043Bcf representing a net decrease of 48Bcf from the previous week
Expectations were for a 65Bcf draw according to survey provider Estimize
Stocks were 796Bcf higher than last year at this time and 227Bcf above the five-year average of 1,816Bcf
Subsequently gas prices fell 2%, as the dollar surged generating headwinds for commodities priced in US dollars
The weather is expected to be warmer than normal on the east coast of the US for the next 2-weeks and much colder than normal throughout most of the west coast
Uranium US$24.10/lb vs US$24.25/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$86.2/t vs US$86.8/t
Chinese steel rebar 25mm US$528.6/t vs US$527.7/t
Thermal coal (1st year forward cif ARA) US$55.6/t vs US$54.8/t - Investors in coal plants risk losing more than $600bn
Research from market watchdog Carbon Tracker has shown that $640bn of investment in coal power capacity worldwide is at risk because it is cheaper to generate electricity from new renewables (Hellenic Shipping News).
The report also found that over 60% of global power plants are generating electricity at higher cost that it could be produced by building new renewables (World Coal).
Nearly 500 GW of new coal power is currently under planned or under construction at a total cost of $638bn.
Coal remains critical for power supply in most countries. Eg. coal accounts for 55% of electrical power in India's despite huge investment in wind farms
Coal is particularly important for where there is an intermittent energy supply as seen with ESKOM's in South Africa.
Vanadium Redox Flow batteries may help renewable energy to provide more reliable and balanced power supply supporting wind and solar in future years
Coking coal swap Australia FOB US$160.0/t vs US$151.5/t
Cobalt LME 3m US$32,100/t vs US$33,500/t
NdPr Rare Earth Oxide (China) US$38,697/t vs US$38,787/t
Ferro Vanadium 80% FOB (China) US$28.0/kg vs US$28.0/kg
Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/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
K+S to sell salt business and focus on potash
The company announced week that it intends to sell its American salt business, to achieve the 'urgently required reduction of the company's debt' according to the company's chairman.
The group's net debt stood at €3.1bn at the end of 2019, and the sale of the company's salt business is expected to reduce debt by more than €2bn euros.
Tesla become the largest industrial company in the US
The Californian EV maker has overtaken Boeing as the most valuable industrial company in the US. (Yahoo Finance)
Its biggest one day fall in 40yrs saw Boeings market cap decrease to $106.5bn, $10bn below Tesla’s value.
Tesla has already surpassed Volkswagen AG, becoming the #2 automaker behind Toyota Motor Corp.
Boeing has experienced ongoing issues with it 737 Max Jetliner and been negatively impacted by the spread of the coronavirus. (Teslarati)
Tesla meanwhile has at times a standout year but also a turbulent one. The Company has managed two consecutive quarters of better than expected earnings which saw the share price rise dramatically, China sales have remained robust despite the coronavirus; delivery 3958 cars in February (1/3rd of all market sales) and the Company is on track to delivery Model Y vehicles later this month.
It has not all been plain sailing though, Tesla’s German Gigafactory was delayed by protests, short sellers profited as the stock fell from record highs with the rest of the market and the coronavirus has impacted Chinese operations. (Financial Times)
Tesla is up 30% YTD.
UK budget provides boost to clean transport with £2bn allocation
The Conservative party budget for 2020/21 includes a number of polices and spending pledges which should be beneficial to the EV market and continue the shift to greener fuel alternatives.
Pro clean energy measures: (Electrek)
£500m has been pledged to build out an DC-supercharging network
£300m has been allocated to tackle air pollution, the current EV-purchase grant has been extended to 2023
The tax on electricity is being reduced whilst increasing the tax on natural gas
A further £300m will go towards tackling toxic nitrogen dioxide emissions in towns and cities.
On the flip side: (The Driven)
EV-purchase grant will be cut from £3500 to £3000 and is no longer available to cars costing more than £50,000
No changes to taxation of the fossil fuel industry and fuel duty remains frozen
A further £27bn has been pledged for new roads.
Amur Minerals* (LON:AMC) 1.3p, Mkt Cap £11m – £1.5m convertible loan note
The Company agreed a convertible loan note for up to £1.5m with Plena Global Opportunities LLC.
Proceeds will be used to progress development works at Kun Manie towards completion of the Permanent Conditions TEO including:
Metallurgical testwork for the copper concentrate;
Development of an optimised production schedule;
Update of the current economic model including all latest technical data;
General corporate expenses.
Funds may be drawn down in three stages with the first tranche expected to be received today.
Proceeds are repaid in three months from the drawdown with an option to extend the repayment date by another 12 months.
Notes are redeemed at 5% premium to the face value plus 10% of the principal amount in three months.
If the Company elects not to repay the amount in three months the lender can elect to convert the outstanding advance at any time into new shares at 90% of the daily VWAP over the three trading days immediately before the conversion.
Additionally, at each advance, the lender will be issued warrants for a number of new ordinary shares with a value equal to £750k with share price equal to the previous business day close.
Warrants are exercisable for a period of three years.
As such, the Company issued 52.4m three year warrants with an exercise price of 1.43p in respect of the first £0.5m drawdown.
Conclusion: The staged funding package allows the team to continue Permanent Conditions TEO work that is due for completion in Q4 this year.
*SP Angel act as Nomad and Broker to Amur Minerals
Aura Energy* (LON:AURA) 0.225p, Mkt Cap £3.6m – Issue of shares
Aura Energy reports a loss of A$ 1.2m for the six months ending 31st December 2019 and a calendar year end cash balance of A$0.16m.
The company’s Chairman, Peter Reeve, in his letter to shareholders confirms that it is continuing to ʺadvance its exploration and development projectsʺ at the Tiris uranium project in Mauritania and the Häggån vanadium project in Sweden.
Mr. Reeve also says that while significant progress has been made in progressing these projects, ʺsustained shareholder activation was a distraction for management, the board and for shareholders alikeʺ.
Although expressing the view that market conditions had ʺincreased the cost of equity for Aura, contributing to significant dilution in the companyʺ the Chairman’s letter highlights a number of achievements including the securing of what are described as ʺtwo highly prospective gold exploration licences near the massive Kinross Tasiast Projectʺ in Mauritania, the completion of the definitive feasibility study for the Tiris uranium project and the definition of a high grade portion within the Häggån vanadium resource in Sweden where following positive leach test results the scoping study was completed in September.
ʺAura continues to press for the release of the Häggån Project Study as soon as possible. This remains an important step for the company’s most valuable project and its ambition to pursue battery manufacturing initiatives with that projectʺ.
The company also says that as a result of re-examining its gold projects it has concluded that these are ʺa key asset and discussions continue with multiple parties on advancing these projectsʺ.
Conclusion: Aura Energy has faced a difficult period but continuing progress on the uranium and vanadium projects and the addition of promising gold exploration licences close to Kinross Mining’s operations in Mauritania provide a portfolio of active projects to underpin the company.
*SP Angel act as Nomad & Broker to Aura Energy
Bushveld Minerals* (LON:BMN) 10.1p, Mkt Cap £117m – Agreement with redT energy plc to supply electrolyte for Vanadium Redox Flow Batteries
(Bushveld Minerals owns 74% of Vametco, 100% of Vanchem, 84% of Bushveld Energy in South Africa, 100% of Lemur Holdings, 9.5% of Afritin)
Vanadium – 5MWh Vanadium Redox Flow Battery approved for Energy Superhub Oxford showcase in England
Bushveld Minerals is to provide vanadium electrolyte for the world’s largest hybrid / VRFB / Li-ion integrated battery project
redT has been given a provision notice by Pivot Power to manufacture 2MW / 5MWh of VRFB ‘vanadium redox flow batteries’ for the Energy Superhub Oxford project
The VRFBs will run alongside Li-ion batteries for rapid EV charging, low carbon heating and smart energy management.
The project is backed by the Industrial Strategy Challenge Fund funded by the British government.
Bushveld is committed to support vanadium around 15MW of VRFB batteries with redT and Avalon
Bushveld Minerals has a Vanadium Financing Partnership with redT Energy for the supply of vanadium electrolyte to be used in third party-owned Vanadium Redox Flow Batteries developed by redT as part of Bushveld’s VIP, Vanadium Investment Program.
VRFB batteries offer a number of key advantages:
Reliability – should be better than Li-ion given low fire risk,
Fire risk – negligible, unlike Li-ion,
Simple recycling of vanadium electrolyte and also vanadium from the electrolyte
Temperature sensitivity – very low,
No need to cool batteries in heat – avoids costs related to cooling
No need to warm batteries in the cold – avoids costs related to heating
Better for longer-term energy release
Ferro-vanadium prices: Ferro-vanadium prices fell a further 1.1% this week to $25.5-26.5/kgV in Westerm Europe (FastmarketsMB)
There is relatively little trade in the market to base prices on suggesting that any uptick in demand could be accompanied by a significant move in ferro-vanadium prices
Conclusion: This great news for Bushveld Minerals and should serve to accelerate the sale and construction of other VRFB instillations around the world. We see particular expansion of VRFBs into California to support wind and solar instillations as VRFBs are seen as significantly safer from a fire perspective.
*SP Angel acts as Nomad & Broker to Bushveld Minerals.
Condor Gold* (LON:CNR) 29.5p, Mkt Cap £27.9m – Looking ahead to production at La India
Condor Gold has reported a loss of £1.5m for the year ending 31st December 2019 as it moves forward with plans to bring its La India gold project in Nicaragua into production.
Underlining the commitment to the production objective, Mark Child in his Company Chairman’s statement made the point that ʺThe key objective for 2020 is to start the site preparation before year endʺ.
The company reports a 31ST December 2019 cash balance of £2.9m.
The principal focus of 2019 ʺhas been on fulfilling the conditions of an Environmental Permit granted in August 2018 by the Ministry of the Environment and Natural Resources ("MARENA") for the development, construction and operation of an open pit mine, a 2,800 tpd or 1.0 Mt per annum CIL processing plant and associated infrastructure at the La India Project, Nicaragua. The permitted La India open pit is estimated to produce between 80,000 oz to 100,000 oz gold per annum or a total of 600,000 oz gold over a 6 to 7-year period.ʺ
Condor Gold reports significant progress in this permitting phase saying that ʺThe mine schedule, waste dump schedule, water and sewage management studies for the processing plant offices and accommodation have been completedʺ and also confirming that power supply is available to the project with Government ʺbuilding a new electricity sub-station 12km from the processing plant; … [and that] …designs for supplying grid power via the new sub-station are underwayʺ.
Among the highlights of 2019, Condor Gold points to the updated mineral resource estimate issued in January 2019 showing an indicated resource of 8.58mt at an average grade of 3.3g/t gold containing 902,000oz of gold with an additional 3mt classed as inferred containing a further 290,000oz of gold at an average grade of 3g/t.
The overall resource contains four higher grade satellite deposits totalling some 66,000oz of gold at an average grade of 9.9g/t including the proposed Mestiza pit with 92,000t t an average grade of 12.1g/t, which provide opportunities to enhance mill feed to a future process plant and lift production rates to around 120,000oz pa over a shorter, seven years, mine life.
In an indication of the longer term potential beyond initial open-pit mining, the company says that ʺThe intention is to permit the underground Mineral Resource after open pit mining beginsʺ.
Longer term exploration potential of the broader district surrounding La India is enhanced by the acquisition of permits for an additional 132km2 (29%) of exploration and exploitation concessions at Cerro Los Cerritos adjacent to La India towards the NNW and where ʺNumerous geophysics, soil geochemistry and surface rock chips indicate the possibility for further mineralisation along strike.ʺ
Conclusion: Condor Gold is pressing ahead with plans to start site preparation for the La India development by the end of 2019. We look forward to further news as this initiative advances.
*SP Angel act as sole broker to Condor Gold
MC Mining (LON:MCM) 10.5p, Mkt Cap £15m – Interim results highlight a drop in earnings reflecting weak coal prices
Uitkomst ROM coal production climbed 11%yoy to 263kt reflecting optimisation measures and management changes.
Sales of high grade coking and thermal coal were down 7% at 147kt.
Additionally, the Company sold 15kt of high-ash middlings coal.
Revenues were down 25% at $11.4m reflecting lower sales volumes and a 23% drop in realised coal prices.
Benchmark HCC and API4 thermal coal prices averaged $148/t and $69/t, respectively (H1/FY19: $206/t and $99/t), reflecting challenging global economy environment.
Mine level EBITDA dropped to $1.2m (H1/FY19: $3.1m).
PAT came in at -$7.1m (H1/FY19: -$3.6m).
Cash balance dropped to $3.8m from $8.8m as of Jun/19.
On Makhado Phase I development side, the Company concluded a term loan facility with the IDC for R245m ($17.4m) with the debt/equity funding package for the $37m project anticipated to be completed in H1/CY20.
Subject to securing funding, construction works are expected to commence in Q3/CY20 with first coal due in the following nine months.
On corporate side, Brenda Berlin replaced David Brown as CEO on 31 of January.
Conclusion: Weak coal markets weighed on Uitkomst revenues and earnings in H1/20. The Company is working on securing the balance of the $37m Makhado Phase I coking coal project funding paving the way to the start of construction works. Commissioning the second operating mine with exposure to a higher value metallurgical coal should help the Company with FCF generation and put the business on a more sustainable footing.