SP Angel . Morning View . Friday 05 06 20
Stimulus and strong demand for industrial metals lifts miners
ECB stimulus raises risk sentiment
MiFID II exempt information – see disclaimer below
Bushveld Minerals* (LSE:BMN) – Vanadium prices take off on news of strong demand from China
Caledonia Mining* (LSE:CMCL) – De-listing from TSX
Shanta Gold (AIM:SHG) – Gold recoveries to add 1pp by year end
SolGold* (AIM:SOLG) – £26m fundraising
IG TV interview on Mining Sector prospects with SP Angel analyst.
Miners continue to climb on base metal demand, a weaker dollar, strong Iron ore prices and solid dividend prospects
Rio Tinto, BHP Billiton, Anglo American, Glencore and most other miners seen moving higher on rising metals prices and weaker US dollar.
Base and other industrial metals looks significantly stronger than many had expected.
Strong demand is being seen particularly in China with inventory levels falling as manufacturers and processors restock.
US dollar weakness – the US dollar is expected to weaken from here, possibly for some time as the US grapples with sky-high unemployment and other tensions.
Iron ore prices Spot >$95.7/t in China – Rio Tinto produces iron ore in Australia at <$15 t="" that="" s="" a="" 80="" margin="" less="" 12="" shipping="" to="" china="" multiply="" by="" 1="" 3bntpa="" and="" you="" have="" nearly="" 6bn="" of="" cash="" flow="" li="">
Bond markets don’t look so attractive with interest rates set to remain low for an extended period as governments continue to borrow to fund Lockdown impact. This may be forcing new funds into Equities.
German stimulus to revolutionize EV travel
The government is allocating €130bn of its recovery allotment to have an EV charging station installed at every one of the 14,118 gas stations across the country. (The Drive)
The target is to install 70,000 charging stations and 7,000 faster charging stations across the network.
A lack of charging infrastructure is often cited by consumers as a barrier to purchasing EVs.
A program to electrify commercial and public bus and truck fleets worth £1.2bn until the end of 2021 will be introduced. (Teslarati)
The German government will also double existing subsidies on EVs to €6,000 for vehicles costing up to €40,000.
These subsidies are in addition to the OEM backed subsidy of €3,000. (Seeking Alpha)
A further staggered tax will be implemented for those still clinging to the combustion engine. From 2021 car emissions of greater than 95g/km will face higher taxes. (Automotive News)
EV tax exemption period will be extended from 2025 to 2030. New car buyers will also benefit from reduction in VAT from 19% to 16%.
$140bn - ChinaPBOC buying CNY1tn of bank loans issued by local lenders to small firms this week in an effort to ease the flow of credit.
We have previously assumed China at $909m $344bn of China stimulus + $565bn in special bonds for infrastructure by local authorities
$1.1tr - Japan - further stimulus to combat pandemic including significant direct spending to stop the coronavirus pandemic pushing the country's economy deeper into recession. The 117tn-yen stimulus, funded partly by a second extra budget, will be on top of another 117tn package already rolled out last month - and takes total spending in Japan at 234tn yen ($2.18tr) - 40% of Japans GDP. To fund the costs, Japan will issue an additional 31.9 tn yen in government bonds under the second supplementary budget for the current fiscal year ending in March 2021.
$825bn (€750bn) EU - European Commission aid package yesterday aimed at supporting EU nations hit by the pandemic.
This is an expansion on the previous $543bn (€500bn ) EU Crisis Recovery fund backed France and Germany + $963bn (€750bn) ECB scraps limits on sovereign bond purchases. ECB PEPP buying running at around €250bn
US$260bn - India representing 10% of GDP.
$62bn - South Korea – The government unveiled a 76tn won ($62bn) “New Deal” aimed at supporting the economy amid the pandemic focused on creating jobs and new industries through 2025.
$13.3bn - Saudi Arabia central bank will inject 50bn riyals ($13.3bn) into the banking system on top of US$43.7bn already pledged
South African reserve bank buys ZAR10.2bn (US$119m) South African government bonds in May
$56bn - The PBOC also announced a Rmb400bn ($56bn) purchase loan program to boost available credit by supporting bank loans to small businesses.
$1.55tn – China - Bloomberg estimates a ‘fiscal impulse of more than 11% of nominal GDP’ which was estimated at US$14.14tn
$2tn - US fiscal package approved by Congress. US may add $0.6t state aid for mortgage markets and travel industries
The House passed a $484bn aid package to rescue small small businesses, hospitals ($75bn) and coronavirus testing ($25bn).
$2tn US – Trump looking at $2tn infrastructure fund
$700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE to buy Treasuries and mortgage-backed securities.
US Fed may soon start buying in up to $750 billion of corporate debt and ETFs
EU Finance Ministers have so far failed to agree on a strategy to mitigate the economic impact of the pandemic.
The pandemic emergency purchase programme (PEPP) and asset purchase programme (APP) have been reiterated with a cap of €750bn and €120bn, respectively.
The bank is reported to have used €100bn of the PEPP so far.
$825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
$996bn (108.2tn yen) – Japan + BoJ pledge for unlimited quantitative easing
400bn (£330bn) UK + $242bn (£200bn) UK QE from BoE & no business rates plus £25,000 cash grants for hospitality sector
$387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia Australia - RBA ready to buy bonds again.
$78bn (C$107bn) Canada, $32bn, Singapore, $22.6bn India, $19.3bn HK, $13.7bn South Korea, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
Argentina to default on $10bn of dollar debt issued til the end of the year. Does not affect the $70bn that Argentina is currently in talks to restructure.
$1,000bn - IMF available + $12bn World Bank,
>15tn from 14.8tn
Dow Jones Industrials
HK Hang Seng
US – Unemployment data is due later today with market expectations for the rate to hit almost 20% in May, a new post WW2 record.
Weekly jobless claims reported another 1.9m new applications with estimates suggesting that a total of nearly 30m having lost their job since March.
The ECB delivered an expansion the pandemic emergency purchase programme (PEPP) capacity by €600bn to a total of €1,350bn.
The programme has also been extended to at least the end of June 2021 while maturing proceeds will be reinvested at least until the end of 2022.
“In response to the pandemic-related downward revision to inflation over the projection horizon, the PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households,” the ECB said.
The news saw yields on more leveraged eurozone members such as Italy drop to the lowest level in two months yestrrerday.
the ECB left rates unchanged while increasing QE by a further €600billion.
The World Steel Association that represents 85% of global output expects global steel demand to decline 6.4% this year to 1.65billion tonne, then recover 3.8% next year.
continued weakness in the US$
Apr Australian retail sales fell 17.7% (Mch 8.5%), as the balance of payments came in at A$8.8bill (A$10.4bill), as exports fell 11% (13.9%) and imports off 10% (-3.4%).The May Irish services PMI was 23.4 (13.9), Apr EU retail sales declined 11.7% (-11.1%), yoy -19.6% (-8.8%). In the US weekly jobless claims came in at 1.877million from previous 2.126mill, with the 4week average 2.248mill (2.608mill)..
Europe - one million beers await drinkers as bars reopen
One million free or pre-paid beers are waiting to lure back customers, as beer makers set up schemes to buy drinks in advance to support bars- often with the reward of free beer.
InBev has sold over 200,000 beers, whilst Heineken estimate the number of drinks sold through its various schemes totals 270,000.
Germany – April factory orders fell by a quarter from the previous the previous month building up on a 15.0%mom decline in March.
The drop was the sharpest since the Federal Statistics Agency started the survey in 1991.
Capital goods orders fell the most posting a just over 30% decline while orders for intermediate goods including car parts and chemical additives were down 22.7%mom.
Consumer goods 11.4%mom.
Factory Good Orders (%mom): -25.8 v -15.0 in March and -19.9 est.
Italy – Retail sales posted a 26.3%yoy drop in April following a 18.4%yoy fall in March as the nation remained in a lockdown.
Shipping volumes fall as Lockdown causes retailers to cancel orders
South Africa – Reserve bank buys ZAR10.2bn (US$119m) South African government bonds in May in asset purchase programme
South Africa - Miners seek return of foreign workers
South Africa's mining industry is in talks with the government over allowing foreign mineworkers to return to work.
Mines have been allowed to run at full capacity since the 1st of June, however foreign workers make up 10% of the country's mining workforce.
The industry has so far requested the return of about 9,500 workers, mostly from Mozambique and Lesotho, which would all require screening and a 14-day quarantine.
UK - England's coronavirus outbreak estimate halves to just 53,000 people with the virus – Office for National Statistics
This is down from 133,000 last week representing just 0.1% of the population
Office for National Statistics suggests 25,000 to 99,000 people infected with some 5,500 people catching the virus each day according to test results
The ONS data is based on 21 positive swab tests from 19,723 study participants
US$1.1359/eur vs 1.1205/eur yesterday. Yen 109.33/$ vs 109.06/$. SAr 16.809/$ vs 17.041/$. $1.266/gbp vs $1.252/gbp. 0.700/aud vs 0.689/aud. CNY 7.083/$ vs 7.118/$.
Gold US$1,708/oz vs US$1,700/oz yesterday - WGC - ETF inflows in first five months more than in any previous full year
According to the World Gold Council, gold-backed ETFs added 623 tonnes worth $34bn to their stockpiles from January to May.
This inflow in five months exceeded every full-year increase on record, and in May alone 154 tonnes was added.
Over the past 12 months, assets in global hold-backed ETFs have increased by 90%, boosting global holdings to a new all-time high of 3,510 tonnes.
Two UK-based funds have led European-inflows - the iShares Physical and Invesco Physical gold, adding 23.3t and 6.9t respectively.
UK-gold funds continue to take regional and global market share, now representing 48% of European assets and 21% of global assets.
Gold ETFs 100.6moz vs US$100.7moz yesterday
Platinum US$840/oz vs US$833/oz yesterday
Palladium US$1,944/oz vs US$1,942/oz yesterday
Silver US$17.70/oz vs US$17.50/oz yesterday
LME inventories fall across the board this week
Copper inventories fell 4,525 tonnes to 243,750 tonnes.
Aluminium inventories fell 4,925 tonnes to 1.52mt.
Zinc inventories fell 1,600 tonnes to 94,675 tonnes.
Lead inventories fell 25 tonnes to 75,525 tonnes.
Nickel inventories fell 396 tonnes to 232,410 tonnes.
Tin inventories fell 20 tonnes 2,500 tonnes.
Copper US$ 5,585/t vs US$5,452/t yesterday
Aluminium US$ 1,575/t vs US$1,557/t yesterday
Nickel US$ 12,975/t vs US$12,585/t yesterday
Zinc US$ 2,040/t vs US$1,993/t yesterday
Lead US$ 1,764/t vs US$1,701/t yesterday
Tin US$ 16,140/t vs US$15,900/t yesterday
Oil US$40.4/bbl vs US$39.1/bbl yesterday
Natural Gas US$1.829/mmbtu vs US$1.821/mmbtu yesterday
Uranium US$33.35/lb vs US$33.45/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$95.7/t vs US$98.4/t - China iron ore set for fifth straight weekly gain
China's iron ore futures are set for a fifth weekly gain, despite falling on Friday morning.
Iron ore prices have rallied recently, due to strong Chinese demand and supply concerns from Brazil- although the price has fallen this morning as many deem prices above $100/t unsustainable (Refinitiv).
Iron ore's most-traded September contract the Dalian Commodity Exchange ended down 2.1% at 737 yuan ($103.49)/t (Reuters).
Chinese steel rebar 25mm US$534.1/t vs US$530.9/t - US steel imports fall 25% in May
The US imported 2.03mt of steel products in May, down 25% from 2.7mt in April- but up 7.8% from 1.88mt in May 2019.
The month-on-month losses were almost entirely attributed to the steep declines in blooms, billets and slab imports, with volumes down 55.6% to 629,696 tonnes in May from 1.42mt in April (Fastmarkets MB).
Thermal coal (1st year forward cif ARA) US$54.7/t vs US$54.7/t
Coking coal swap Australia FOB US$105.5/t vs US$105.5/t
Cobalt LME 3m US$30,000/t vs US$30,000/t
NdPr Rare Earth Oxide (China) US$38,753/t vs US$38,352/t
Lithium carbonate 99% (China) US$4,871/t vs US$4,917/t
Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.0/kg
Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.0/kg
Tungsten APT European US$215-225/mtu vs US$215-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$460/t vs US$485/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,350/t vs US$2,350/t
General Motors to work closely with CATL
Senior GM executive says GM will work closely with CATL as it ramps its EV production in China. (Reuters)
GM’s President Julian Blissett said “We are not planning on importing any major components for new energy vehicles. The drive units, motors, etc., will be made locally in China”.
GM recently announced they will invest $20bn into electric vehicles by 2025.
This deal would help to cement CATL position in the Chinese EV market. They already have deals with Tesla and Volkswagen to whom they supply batteries.
GM sells electric vehicles in China through its partner organizations:
SAIC Motor sells the electric Velite 6
SGMW sells electric Wuling minivans and the Baojun E-series mini cars
BMW and State Grid working together on EV charging network expansion
German auto maker BMW is partnering with Chinese company State Grid on a charging network expansion. (Technode)
The companies target doubling the number of charging piles for BMW’s vehicles in China.
The deal is the first between an international car maker and State Grid which is China’s largest highway charging operator.
The deal will enable BMW customers access to more than 270,000 charging pillars by the end of 2020.
Bushveld Minerals* (BMN LN) 13.75p, Mkt cap £158m – Vanadium prices take off on news of strong demand from China
Bushveld Minerals shares look set to recover on rising ferro-vanadium prices.
Strong demand for steel and particularly structural steel in China is expected to drive demand for ferro-vanadium which is used to strengthen steel.
Better enforcement of the higher-vanadium content regulations introduced in October 2018 should also increase demand particularly for new state-sponsored infrastructure projects.
We expect Beijing to shortly announce a raft of new construction initiatives and projects to restore economic growth
FastmarketsMB trade log shows ferro-vanadium prices indicated at $29-30.50/kg in China
Ferro-vanadium 78% fob China rose $3.5% to $29 - 30.5 /kgV this week (FastmarketsMB)
Vanadium pentoxide 98% rose 8.4% to $6.5 – 7/lb V2O5 this week (FastmarketsMB)
Ferro Vanadium 80% FOB (China) rose to US$29.5/kgV vs US$29.0/kgV (Asia Metals)
Vanadium prices suffered relatively little negative impact through the coronavirus due to the interruption of production of secondary by-product vanadium from the smelting of other concentrates.
Increased use of higher-grade Australian iron ore which carries less vanadium content means that steel producers need to add more ferro-vanadium into their feedstock.
This is expected to drive steel producers to buy more ferro-vanadium in the open market.
Demand for vanadium electrolyte for VRFB systems is also expected to rise.
Bushveld is a significant stakeholder in Invinity Energy Systems PLC which was created through the merger of RedT and Avalon. Invinity shares have more than doubled since the companies were combined.
Bushveld now holds 8.71% in Invinit indicating the value of its stake has risen to £5.8m.
Conclusion: Bushveld Minerals has restarted its mine and processing plant following the 21 day lockdown in South Africa. While this will impact earnings in the first half we expect the company to make a strong recovery from here.
*SP Angel acts as nomad and broker to Bushveld Minerals. The analyst holds shares in Bushveld Minerals
Caledonia Mining* (CMCL LN) 1287.5, Mkt Cap £146.8m – De-listing from TSX
Caledonia Mining reports that it has applied for voluntary de-listing from the Toronto Stock Exchange.
The company explains that since its shares ʺwere listed on the NYSE American in 2017, trading on that market has become increasingly dominant, and it now provides the most liquid market for Caledonia's shares. Accordingly, the Company believes that the financial and administrative costs associated with maintaining its listing on the TSX are no longer justified.ʺ
London-based investors will be interested to know, however, that ʺDepositary interests representing shares will also continue to trade on AIM of the London Stock Exchange plc under the symbol "CMCL".ʺ
Conclusion: Caledonia Mining’s decision to de-list from the TSX is a commercially driven response to the trading dominance of the NYSE for its shares. The company retains its London exposure on AIM.
*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe
Shanta Gold (SHG LN) 11p, Mkt Cap £88m – Gold recoveries to add 1pp by year end
The Company twitted this morning an oxygen plant is being assembled at New Luika that should add 1pp to gold recoveries by year end.
SolGold* (SOLG LN) – 22p, Mkt cap £462m - £26m fundraising
SolGold reports that it has raised a total of £26.1m via the issue of approximately 121.4m new shares to new and existing investors at a price of 21.5p/share.
In addition, ʺretail investors have subscribed in an offer made by the Company via the PrimaryBid platform for 4,813,527 new ordinary shares in the capital of the Company (the "Retail Shares") at the Placing Priceʺ and certain directores ahave also subscibed for a total of 162,790 shares.
The company says that ʺIn addition to the Placing, Subscription and the Retail Offer, the Company remains in dialogue with a potential investor for an additional subscription of up to US$5 million at the Placing Price. The Company will make a further announcement regarding this potential subscription on Monday 8th June.ʺ
Expressing appreciation for the institutional support CEO, Nick Mather, said that in addition to ʺthe completion of the FNV Royalty Financing, the new capital will see SolGold fully funded through to the delivery of the DFS study, whilst at the same time, allow our award winning geologists to rapidly explore the high priority regional exploration targets throughout Ecuador along the spine of the Andean Copper Belt.ʺ
Conclusion: Securing finance to ensure the completion of the DFS provides Solgold the security to press on with the technical work at Alpala.
*SP Angel act as financial advisor and broker to SolGold
Trans-Siberian Gold (TSG LN) 89p, Mkt Cap £97m – Refinancing increases the revolving credit line capacity and secures lower rates
The Company singed a new revolving secured credit line with a limit of $10m for a period of three years with VTB.
The new agreement replaces the existing credit line for $5m which has been repaid.
The interest rate has been reduced to 5.2%, down from 6.2%.
The new facility has been used yet.
Additionally, VTB agreed to lower the interest on a separate existing RUB-denominated credit line provided in 2019 with a current balance of R604.5m ($8.8m).
The lender will charge a floating interest rate (3.5%+lending rate of Russian central Bank) currently estimated at 9% or 1.7% lower that the previous rate.
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
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