SP Angel . Morning View
Equities climb amid high volatility and improving Chinese economic data
Arc Minerals* (AIM:ARCM) –- Arc Minerals raises £2.37m at 1.7p per share
Aura Energy* - (AIM:AURA) – Further issue of shares
Ormonde Mining* (AIM:ORM) – Covid19 measures
Serabi Gold* (AIM:SRB) – Q1 results
Sibanye-Stillwater (JSE:SSW ) – CEO calls for South Africa to allow underground mines to run at full capacity
Gold prices rise further as World Health Organisation warns of second wave of Coronavirus infection
European countries should brace themselves for a deadly second wave of coronavirus infections and now is the "time for preparation, not celebration" according to the WHO
Two new studies say no more than 5% of the population of France and Spain have so far contracted the Coronavirus indicating that these nations have along way to go before herd immunity is reached
An Oxford University vaccine trial is heading into hospitals because Covid-19 may not be prevalent enough in wider society for a through test.
A "game-changing" Covid-19 antibody test has also been approved for use in the UK.
Two COVID-19 vaccine candidates have been proven safe by the China National Biotec Group
One in 400 people in England has coronavirus according to a swab-test survey.
Rumours of new Tesla long life battery to compete on cost with gasoline models
Tesla plan to introduce a new low cost, long life battery in their Model 3 sedan vehicles in China before a rollout across vehicles and markets. (Reuters)
The new battery is expected to compete on price with gasoline vehicles and enable second and third lives for the batteries in the power grid.
The ‘million mile’ battery is being jointly developed with CATL and will lean on innovations including low-cobalt/cobalt-free battery chemistries and techniques that will reduce internal stress.
As part of their plan to achieve a fleet of more than a million EVs capable of connecting to and sharing power with the grid Tesla is looking to become a power company. They recently applied to the British regulator to begin this process.
Separately Tesla has signed an engineering, procurement, and construction contract with Strata Solar for a state of the art Megapack battery system to be installed in place of a natural gas peaker plant in California. (Renewable Economy)
The 100MW/400MWH battery would be the world’s first grid-scale Tesla Megapack energy storage system.
The Actuaries got it right after all
There is little doubt that COVID-19 is going to reduce the average life expectancy in the UK and elsewhere.
We believe the Actuarial profession which calculates pensions provisions based on their estimated average life expectancy was criticised some years ago for significantly underestimating the average life span of British citizens .
Their error was a significant issue for pensions providers who needed to make significant additional provision for longer average life spans.
Very sadly, the expected reduction in average lifespan will reduce the cost of longer-term pensions provision and may lead to pensions surpluses depending on the value of portfolios as we emerge from the Coronavirus crisis. Sadly, we suspect this will not go unnoticed by the tax man.
Dow Jones Industrials
HK Hang Seng
Global trade could decline 32% this year (3x the GFC) according to the World Trade Organisation.
Developing nations - >US$100bn flowed out of the developing countries in Mch/Apr, three times the flow back in the same period during the ’08 GFC;
Remittances from nationals working abroad is expected to fall by US$100billion this year, developing countries oil and gas revenues are expected to decline 85%
India – announced US$260bnof stimulus representing 10% of GDP.
Mexico - Mining to restart next week
Mining is expected to fully resume next week as the government now consider mining a vital activity, after previously declaring it non-essential.
Newmont is gradually bringing its Penasquito mine back online, and expect it to take two weeks to reach stable production levels.
US – President Trump threatened China to “cut off the whole relationship” blaming authorities over the way it handled the disclosure of the virus.
Trump has also ordered the US Thrift Saving Plan with US$600bn to halt all investments in Chinese companies.
The Federal Reserve Chairman said ‘all evidence points towards a larger global contraction and slower recovery’
Weekly jobless claims continue to run in millions amid the pandemic with 2,981k people reported to have filed for unemployment benefits.
This number will need to be readjusted by nearly a quarter of a million down as one of the states said they experienced a “data entry reporting error” that led saw 299k claims added versus the correct number of 29.8k.
Governor of New York Andrew Cuomo extended stay-at-home order until June 13 while allowing separate regions to implement phase one of the reopening plan.
Four regions of the state will begin Phase 1 reopening today while the others will remain in lockdown until “they hit their benchmarks”.
The statewide shutdown was set to expire on May 15.
New York was the hardest hit state with more than 343k confirmed cases (~24% of total) and 27k deaths.
NYSE to reopen its trading floor later this month, two months after the pandemic forced its closure, WSJ reports.
Traders coming to work will not be allowed to use city’s public transit, must carry temperature checks, will maintain nearly a 2m distance from one another and “avoid shaking hands and unnecessary physical contact”.
China – The economy is recovering with industrial production posting an increase YoY in April with retail sales and investment continuing to contract, although at a slower pace.
China Peoples National Congress meets in Beijing (22May)
An improvement in the industrial sector reflect government stimulus efforts and lifting of virus containment restrictions.
Government led investment driven by infrastructure projects and the so-called technology-focused “new infrastructure” initiative contracted at a slower pace (-6.9%yoy v -12.8%yoy in March) compared to the private sector (-13.3%yoy v -18.8%yoy in March).
Industrial Production (%ytd): -4.9 v -8.4 in March and -5.4 est.
Retail Sales (%ytd): -7.5 v -15.8 in March and -6.0 est.
Fixed Assets Investment (%ytd): -10.3 v -16.1 in March and -10.0 est.
New restrictions imposed on China borders with Russia and North Korea, but NK has no cases of COVID-19? And China is apparently free of the disease, So who is protecting who here?
Germany – The economy entered a recession after posting a second consecutive quarterly drop in GDP in Q1.
Economic growth came in at -2.2%qoq versus -0.1%qoq recorded in Q4/19 with the worst likely to come in Q2 that captured most of the lockdown.
The data comes broadly in line with other abysmal GDP data from other European nations including Netherlands (-1.7%), Italy (-4.7%), France (-5.8%) and Spain (-5.2%).
Italy – Industrial orders fell 26.6%yoy in March as businesses hit breaks on investment as economies went into a lockdown.
France – Inflation is continuing to trend down driven by low oil prices and a drop in economic activity.
CPI (EU Harmonised, %yoy): 0.4 v 0.8 in March and 1.6 in February.
UK – The European Commission threatened the UK with legal action over its implementation of EU rules on free movement of people, FT reports.
The EU argues Britain is too onerous in the re-entry bans it imposes on people who are deported, that it sets unfair restriction on the right of EU citizens’ family members to live in the UK, and that it makes it too difficult to claim jobseekers’ allowance, FT reports.
“On substance, the commission is of the view that the UK has, over the last few years, limited the scope of beneficiaries of EU free movement law in the United Kingdom, as well as the possibilities for EU citizens and their family members to appeal administrative decisions restricting free-movement rights,” the commission said.
The UK has four months to address Brussels’ concerns.
UK – government borrowing to increase to £289.4bn
UK industrial production fell 4.2% (-0.1%), yoy -8,2% (-3.4%),
Manufacturing output -4.6% (0.3%), yoy -9.7% (-4.3%).
EU - Industrial production fell11.3% in March (-0.1%), yoy -12.9% (-1.9%).
Australia - net employment fell 594.3k in April
Consumer confidence recovered to 88.1 (75.6) in May.
US$1.0806/eur vs 1.0808/eur yesterday. Yen 107.14/$ vs 106.84/$. SAr 18.396/$ vs 18.520/$. $1.221/gbp vs $1.220/gbp. 0.646/aud vs 0.644/aud. CNY 7.100/$ vs 7.098/$.
Gold US$1,737/oz vs US$1,717/oz yesterday – Gold funds dominate whilst UK is under lockdown
The five best performing funds on AJ Bell's investment platform over the first 50 days of lockdown in the UK were all focused on precious metals (FT).
The ES Gold and Precious Metals fund run by Equity Trustees Fund delivered the highest return of 55.7%.
ES Gold and Precious metals was followed by: Ninety One - Global Gold, Blackrock - Gold & General, MFM - JuniorGold, Quilter Investors - Precious Metals Equity.
The success of gold focused funds reflects gold's price rally since the lockdown began.
Property funds have been among the worst performing, as the property market has been frozen during lockdown after the government announced that deals should be delayed until after the crisis.
Gold ETFs 98.2moz vs US$97.7moz yesterday
Platinum US$774/oz vs US$768/oz yesterday
Palladium US$1,847/oz vs US$1,837/oz yesterday
Silver US$16.22/oz vs US$15.57/oz yesterday
Copper US$ 5,242/t vs US$5,211/t yesterday – Copper prices rise on China factory output data
The price of copper advanced on Friday, as data showed China's factory output rose for the first time this year in April.
Three-month copper on the LME rose 1% to $5,254/t in Friday early trading, rebounding from the one-week low it hit in the previous session.
President Trump has announced that he is open to negotiations on another possible stimulus bill, which has raised hopes that more stimulus could help global economies and boost demand for metals (Reuters).
Spot China TC/RC has
Aluminium US$ 1,480/t vs US$1,477/t yesterday - China primary aluminium output increased 2.4% in Jan-Apr
The first four months of 2020 saw China produce 11.83mt of aluminium, up 2.4% compared to the same period in 2019 according to the National Bureau of Statistics.
China produced 2.97mt of primary aluminium in April, barely changed from the previous month but up 1.5% compared to April 2019 (SMM News).
China started a new 500ktpa aluminium smelter in Yunnan last week,
Nickel US$ 12,005/t vs US$12,235/t yesterday
Zinc US$ 1,964/t vs US$1,946/t yesterday
Lead US$ 1,619/t vs US$1,601/t yesterday
Tin US$ 15,075/t vs US$15,135/t yesterday - LME tin inventories fall almost 18% this week
Tin inventories tracked by the LME fell 17.6% to 3,540 tonnes this week, the biggest decline since January 2019.
LME tin stocks have fallen 38% so far in May, on course for the biggest monthly decline since 2004 (Bloomberg).
Oil US$32.4/bbl vs US$29.7/bbl yesterday
Oil prices have stabilised due to a rebound in demand and the “spectacular” drop in supply, according to a new report from the IEA
The IEA noted that the reopening of major economies is “beginning a gradual-but-fragile recovery”
The extent of global lockdown orders peaked at 4bn people but will drop to 2.8bn people by the end of May
Global oil demand fell by around 25.2MMbopd in April, and the IEA forecasts that this will recover to a fall of 21.5MMbopd this month
This underlines that there is evidence that the tepid lifting of restrictions on movement has led to a slight rebound in oil consumption
The IEA revised up its global oil demand figure for 2020, projecting a decline of 8.6MMbopd for the year, which is slightly better than the decline of 9.3MMbopd that the agency saw last month
Still, that is the largest decline of demand in the history of the oil market
Natural Gas US$1.705/mmbtu vs US$1.628/mmbtu yesterday
Natural gas prices rebounded yesterday following the weekly inventory report released by the Department of Energy
The release showed that stockpiles increased by 103Bcf in line with expectations
The weather is expected to be warmer than normal over the next 6-10 and 8-14 days which should keep inventory withdrawals at the average rate
All eyes will be on today’s rig count data - while expectations are for only a 1-natural gas rig decline, the oil numbers will be more pertinent
Oil rig counts have dropped below the 2016 lows, which should spill over as natural gas production will decline if oil rigs are removed
Uranium US$33.45/lb vs US$33.45/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$87.6/t vs US$88.1/t
Chinese steel rebar 25mm US$533.3/t vs US$532.6/t – steel prices at 9-month high. Steel mills continue to ramp up.
Thermal coal (1st year forward cif ARA) US$52.7/t vs US$52.7/t
Coking coal swap Australia FOB US$117.0/t vs US$117.0/t
Cobalt LME 3m US$30,000/t vs US$30,000/t
NdPr Rare Earth Oxide (China) US$38,172/t vs US$38,042/t
Lithium carbonate 99% (China) US$5,141/t vs US$5,213/t
Ferro Vanadium 80% FOB (China) US$27.5/kg vs US$27.5/kg - Vanadium – Sichuan province to step up quality checks on rebar
The move is likely to create better compliance with increased vanadium content regulations and lift prices of ferro-vanadium (FastmarketsMB)
Sichuan is also looking to reduce water-quenching for steel hardening which is more brittle, rusts and is of greater risk of failure in earthquakes and under stress.
Regulations now require Chinese steel mills to add 0.03-0.05% of vanadium for HRB400 rebar and 0.05-0.08% for HRB500 rebar effective November 1, 2018. High vanadium prices following the new regulations is thought to have caused widespread non-compliance with the regulations.
Antimony Trioxide 99.5% EU (China) US$4.9/kg vs US$4.9/kg
Tungsten APT European US$215-225/mtu vs US$215-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$500/t vs US$510/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,350/t vs US$2,425/t
UK government to expand network of EV chargers
The UK transport secretary has announced the government will be increasing the number of charging points for EVs across the country. (Metro)
The points will include rapid charging facilities at motorway service stations.
The move is part of £2bn of investment into UK roads and railways in the 2020 budget. The ‘Rapid Charging Fund’ will provide capital for site costs to build out the charging network. (Driving Electric)
The hope is to maintain the improved air quality achieved while in lockdown. By 2023 the target is to have at least 6 open access points (minimum 150KW) at every service area.
This equates to 2500 charging points on motorways and A-roads by 2030 and 6000 by 2035.
Arc Minerals (ARCM LN) – 1.74p, Mkt cap 16.8m Arc Minerals raises £2.37m at 1.7p per share
Arc Minerals has placed £2.37m worth of stock at 1.7p/s.
Proceeds will be used to continue drilling at the Zamsort and Zaco licenses in Zambia.
Further technical studies are to be done at Cheyeza East where the company has drilled.
Arc is also converting US$1.5m of convertible loans into equity at 1.7p/s leaving just US$200,000 of convertible debt on the balance sheet.
Each new share issued in the placing and gets a warrant which is exercisable at 3p over two years.
The convertible loan loan notes get a longer dated warrant exercisable over 4 years and exercisable at 4.5p.
Arc has also issued some 10m new shares at 2.58p (£260,634) to the drillers for their work in Q4 2019.
Drilling was suspended due to the wet season and to analyse the assay results from the campaign at Cheyeza West.
*SP Angel act as Nomad and broker to Arc Minerals
Asiamet Resources (ARS LN) 2.65p, Mkt Cap £35.8m – Progress on permitting the BKM copper project
Asiamet Resources reports that the Governor of Central Kalimantan has recommended that the BKM copper project should proceed.
The Governor’s approval is an important step towards the ʺdevelopment and construction phase as part of the process required to secure a forestry borrow-to-use permit ("Pinjam Pakai", or "IPPKH-OP") from the Government of Indonesiaʺ.
Asiamet’s Executive Chairman, Tony Manini, said that ʺThe receipt of this approval from the Governor is very timely and while the value of this work is often under-estimated, the receipt of key approvals and permits serves to significantly de-risk and add substantial value to the project.ʺ
The company points out that ʺMovement of personnel and government officials has been limited in light of Covid-19 and social distancing. The Company continues to monitor the situation with work on all permitting related workstreams above progressing with various surveys being scheduled and undertakenʺ.
Aura Energy* - (AURA LN) 0.21p, Mkt cap £4.4m – Further issue of shares
Aura Energy reports the issue of a further 280m shares on the conversion of Convertible Notes issued to the Lind Global Macro Fund.
ʺThe issue of shares referred to above relates to the thirteenth Conversion Notice received from Lind to convert A$560,000 of convertible notes into fully paid ordinary shares. Lind has now converted $2,330,000 of the Convertible Security Facility.ʺ
ʺThe amount outstanding on the Convertible Security Financing Agreement is $490,000ʺ.
We estimate that the new shares represent approximately 11% of the enlarged capital of Aura Energy.
*SP Angel are Nomad and Joint-Broker to Aura Energy
Ormonde Mining* (ORM LN) 0.65p, Mkt Cap £3.1m – Covid19 measures
Ormonde Mining reports that, in order to conserve its cash reserves during the current pandemic, its directors and executive management have agreed to salary reductions of 25% with effect from 1st May.
A total of 16.5m options have been granted to directors. The options are exercisable at €0.01 ʺbeing 43% above the closing share price of an Ordinary Share on the Euronext Growth Market of the Euronext Dublin Exchange ("Euronext") on the day prior to award of the options, being 14 May 2020, and 37% above the average Euronext share price for the thirty day period prior to the award date.ʺ
The company also explains that, in the light of restrictions aimed at containment of the pandemic, ʺonly desk-study work will be ongoing on the Company's Spanish projectsʺ.
Following the disposal of its remaining interest in the Barruecopardo tungsten mine, Ormonde Mining is focusing on the identification of further opportunities and reports that it has reviewed over 80 resources projects. ʺA small number of these opportunities remain promising, being of an appropriate scale whereby the Company's cash would aid meaningful development, and which the directors believe could have the potential to add materially to shareholder value. Work on advancing these opportunities towards a successful conclusion will continue over the coming period.ʺ
Conclusion: Ormonde Mining continues to evaluate new resources sector projects followings its exit from the Barruecopardo tungsten mine. Despite travel restrictions related to virus control are limiting some activities, the company has a small number of projects under active investigation having reviewd more than 80 potential opportunities.
*SP Angel acts as Broker to Ormonde Mining
Serabi Gold* (SRB LN) – 83p, Mkt Cap £52.5m – Q1 results
Serabi Gold has reported a post-tax profit of US$0.77m for the three months to 31st March 2020 (Q1 2019 – US$1.55m) and EBITDA of US$3.20m (Q1 2019 – US$4.34m).
The company explains that the lower after tax profit reflects ʺlower level of gold sales realised during the period compared with 2019 offset by higher average gold prices in 2020.ʺ
Cash resources at 31st March stood at US$9.15m compared to US$14.23m at 31st December 2019.
The results reflect quarterly gold production of 9,020oz of gold at a cash cost of US$996/oz and all-in-sustaining cost (AISC) of US$1,257/oz compared with Q1 2019 output of 10,164oz at a cash cost of US$796/oz and AISC of US$1,021/oz.
CFO, Clive Line, explained that ʺGold revenue in the first quarter of 2019 was higher but included approximately 2,200 ounces resulting from the sales of gold inventory carried over from the preceding year … [and that] … The lower production has impacted unit costs for the period. In addition to incurring the unexpected costs for the mill repairs, in the first quarter we also brought in contractors to give a short term boost to our underground drilling capacity used particularly for longer term mine development and planning purposes.ʺ
Mr. Line also said that ʺThe average exchange rate for the period was BrR$4.46 to US$1.00, so the effect of the more recent declines in the exchange rate have not yet flowed through into the costsʺ.
In what we interpret as a reference to the impact of the Covid19 virus, Mr. Line said that ʺWhilst supply chains have not yet been an issue, we have nonetheless increased holdings of key consumables, where we can, to help insulate the operation from any interruptions that may arise. At the same time, we have temporarily suspended capital investment and exploration programmes to conserve cash resources, though I anticipate that we will pick these up again over the coming months as the outlook becomes clearerʺ.
Conclusion: Serabi Gold remains profitable and cash generative. The company is supported by investment from Greenstone Capital and is achieving meaningful exploration success at Sao Chico and is progressing development of the Coringa project which is described as ʺa key element of the Group’s growth plans.ʺ
*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil
Sibanye-Stillwater (SSW JSE) SAR3464, Mkt cap SAR92.6bn – CEO calls for South Africa to allow underground mines to run at full capacuty
Effective social distancing is virtually impossible in most underground mines
The economics of South Africa’s deep-level underground mines do not work well at reduced capacity and need to operate at above 75-80% capacity to be economic.
Neal Froneman, ceo at Sibanye-Stillwater has asked South Africa’s president to allow underground mines to run at full capacity to avert economic collapse.
Open cast mines and processing plants are already back at work with underground mines as South Africa moves to save the economy from collapse and its workers from destitution.
South African mines are expert at implementing healthcare advice with TB and HIV and are hugely respected for the work they do in supporting the health and wellbeing of the local communities which depend on them.
Some 456,438 people were employed in the mining sector in South Africa in 2018 according to the Minerals Council of South Africa
The weaker South African Rand is helpful to Sibanye but we are not aware that Eskom have cut power rates to match lower oil and other energy prices.
We also wonder how stable the power grid will be in South Africa as companies return to work with the 1.6MW Camden power plant closed for three months due to an unstable dam holding back ash from the power plant in Mpumalanga.
Sunrise Resources Plc (SRES LN) 0.12 pence, Mkt Cap £4.0m – CS Project environmental assessment
Sunrise Resources has announced that its environmental assessment and accompanying reports for the CS pozzolan-perlite project in Nevada has now been released for public comment. Public consultation provides a 30 days period for opinions to be expressed on the company’s plans to develop the project and manage the associated environmental implications.
The project ʺenvisages a 27-year mine life where both perlite and natural pozzolan are mined from the Main Zone in Phases 1-3 (years 1-15) with pozzolan continuing to be mined in the Tuff Zone in a new Phase 4 (years 16-27).ʺ
The environmental work was ʺprepared at the direction of the BLM by the Company's environmental consultants EM Strategies, Inc., under a contract with the Company. These documents set out the impact of the Project on various resources (e.g. water, air quality, wildlife, soils and vegetation etc.) on a project-specific and cumulative basis taken with other existing or proposed developments in the Project's wider area. These impacts are considered by the Company's environmental consultants to be minor or negligible in most cases, except in respect of the mine area itself where there is a moderate but localised impact on soils and geology as would be expected for any mining operationʺ.
Expressing satisfaction over the culmination of more than 2 years’ work on the environmental assessment, Executive Chairman, Patrick Cheetham, highlighted ʺ the contribution of our Project to a reduction in carbon emissions … [and he confirmed that] … We will move to initiate first production of perlite and natural pozzolan for larger scale customer trials as soon as possible after we receive a positive permitting decision with the expectation that this will transition to commercial production in due course on the commitment of potential customers to sales contracts."
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474