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Today's Market View - Panther Metals, Kobold Metals and Scotgold Resources.

SP Angel . Morning View . Wednesday 08 07 20 Gold breaks through the $1,800/oz mark as virus cases climb Kobold Metals – to use data analytics to map the earth’s crust to find cobalt in northern Quebec Panther Metals (LON:PALM) – Early exploration results from Annaburroo Scotgold Resources* (LON:SGZ), BUY – 119p – Cononish project development update

Panther Metals PLC - Today's Market View -

SP Angel . Morning View . Wednesday 08 07 20

Gold breaks through the $1,800/oz mark as virus cases climb

MiFID II exempt information – see disclaimer below 

    

Kobold Metals – to use data analytics to map the earth’s crust to find cobalt in northern Quebec

Panther Metals (LON:PALM) – Early exploration results from Annaburroo

Scotgold Resources* (LON:SGZ), BUY – 119p – Cononish project development update

 

Gold breaks over $1,800/oz as risks to global economy drive investors to safety of gold

Risks are:

Currency volatility – the US dollar looks set to weaken further helping gold and other metals rise in US dollar terms

China unemployment - high migrant unemployment has potential to spark unrest. New security legislation in Hong Kong are also of concern

Flooding on the Yangtze River is disrupting Wuhan and other cities putting further pressure on businesses and the state

Dubai & Singapore – likely to see further financial scandal as volatile markets expose issues in trading groups, banks and funds

Coronavirus outbreaks – causing further regional lockdowns and slowing the reopening of air travel, leisure and tourism

 

Chinese Rare Earth equities ‘limit up’ today as stimulus likely to be directed to new Wind Farm developments using larger direct drive motors

We are waiting on news of further stimulus for new substantial offshore windfarm developments

These, larger windfarms use direct drive windmills due to their efficiency and better reliability and lower servicing needs

These windmills use significant amounts of REEs namely Praseodymium (Pd), Neodymium (Nd), Dysprosium (Dy) and Terbium (Tb)

 

EV and hybrid vehicles 23.7% of UK sales in June  

SMMT sales data shows BEV, PHEV and hybrid vehicles accounted for 23.7% of the UK auto market in June. (Business Green)

New car registrations fell 34.9% in June YoY, but BEV, PHEV and hybrid sales rose 73% to 24,470 units.

Demand for petrol vehicles fell 39.9% YoY.

BEV sales increased 262% YoY and PHEV sales doubled, accounting for ~10%of the market. 

 

V-shaped, W-shaped, L-shaped recovery – it all depends on what sectors / parts of the economy you are looking at

There is much debate among economists on the shape of the economic recovery

Our view is that many will be correct depending on their perspective and which parts of the economy they are looking at

Commodities and mining companies appear to be in a ‘V’-shaped recovery, similar to that seen in after the GFC ‘Global Financial Crisis’

Stimulus measures and lessons learnt from the GFC and the cost of the collapse of Lehman Bros provide an instruction manual for policy makers

While, politicians and policymakers may not wish to admit to following the GFC stimulus playbook the stimulus looks similar if not enhanced

Thankfully, it is widely accepted the cost of unemployment outweighs the cost of getting people back to work and new infrastructure makes good stimulus

 

Dubai – Collapse of businesses in Dubai likely to lead to further major scandals threatening financial stability

The rapid expansion of business in Dubai combined with lax regulation has led to a number of significant financial failures in recent years

The Abraaj private equity fund was forced into liquidation and fined $315m by Dubai for the misappropriation of funds

EY was accused last year of legal and ethical violations in its audit work for a Dubai gold refiner in alleged money laundering by Kaloti Jewellery International.

Kabul Bank scandal in relation to the Kabul to Dubai pipeline where it is alleged $1bn has been embezzled in fraudulent loan schemes

 

Dow Jones Industrials -1.51% at 25,890

Nikkei 225 -0.78% at 22,439

HK Hang Seng +0.38% at 26,074

Shanghai Composite +1.74% at 3,403

 

Economics

US – New study shows Americans are not prepared to return to pre-pandemic spending levels just yet, Bloomberg reports.

More than 40% of people who spent money on movies, event tickets or at bars before the virus outbreak now plant to spend less on those activities, according to CreditCars.com.

Separately, the US launched the process of withdrawing from the WHO.

 

Japan – Bankruptcies climbed in the first half of the year for the first time in 11 years as courts resumed work.

Interestingly, only 240 firms of 4,001 cases are reported to have been pushed into bankruptcy by the pandemic related issues, according to the report.

“While coronavirus is one of the reasons of the rise in bankruptcy, most of the them are ascribed to increase in labour costs and October’s sales tax hike”, the research firm (Tokyo Shoko Research) that carried the survey said.

 

India – Mumbai is planning to ease restrictions on testing allowing walk-in check-ups without a doctor’s prescription, the move that may be taken up by other cities and regions of the country, FT reports.

Highly restrictive protocol was implemented to preserve scarce test kits and laboratory manpower, FT reports.

India has ramped testing recently but remains among countries with the lowest number of tests carried (7,398 per million v 20,500 in Brasil and 117,200 in the US).

The nation is the currently trailing only behind the US and Brazil on the number of confirmed cases.

 

China - Flooding along the Yangtze River likely to lead to further construction of flood defences and reconstruction of damaged property

We suspect the flooding will not lead to a collapse of the Three Gorges Dam though there is always some risk

China Railway invests $46bn in fixed assets in H1 2020 (China Daily)

China Railway increased spending on construction of fixed assets by 1.2% to spent $46.1bn in H1 202 according to the China People's Daily.

The company invested +3.7% yoy ($35bn) in in railway infrastructure with 1,178km of new rail opened including 605km of high-speed rail

Q1 investment fell 21% yoy due to a lack of construction workers and disruption to the raw material supply chain through the COVID-crisis but was more than made up in Q2

China Railway has ‘started preliminary works on a number of key projects including the Sichuan – Tibet line, Yanjiang high-speed line and the Xining – Chengdu line. (Insurance Journal)

Work is progressing on the Lhasa – Linzhi line, Beijing – Shenyang high-speed line, Beijing – Hebei line, Taiyuan – Jiaozuo high-speed line, Lianyungang – Xuzhou high-speed line, Ganzhou – Shenzhen high-speed line, Guiyang – Nanning high-speed line and the Hetian – Ruoqiang line.

A number of key projects, including the Yinchuan – Xi’an high-speed line, the Hebei section of the Hebei – Xiongan inter-city line, the Hefei – Anqing high-speed line, and the Huai’an – Zhenjiang line, are also on track to open in the second half of the year as scheduled.’

China Railway expects to open 4,400km of new line in 2020, including 2,300km of high-speed lines.

This equates to around 230,000t of steel for conventional rail plus 320,000t for the high-speed rain to raise steel demand to over 550,000t not including the bolts, overhead gantries, bridges, stations, wagons, trains etc

China – state reserve to sell more frozen pork from state reserves to stem a rally in prices and hold back food inflation

Maybe one day the UK could do this with fish & chips

 

UK – The government outlined more than £4bn of measures to support jobs, skills and energy efficiency over the past week, Bloomberg reports.

Additionally, PM Johnson announced £5bn of infrastructure spending on schools, hospitals and roads.

Authorities have further outlined a £1.6bn bailout earlier this week to help struggling theatres and music venues that are yet to be reopened.

Chancellor is expected to further unveil a £2bn programme to pay wages of more than 200,000 young workers.

On a different note, PM Johnson told German Chancellor Merkel that the UK will leaving without a trade deal if the EU is not prepared to compromise.

Negotiations are stuck over questions including fishing rights, the future influence of EU courts in U.K. laws, and how far Britain will be able to loosen its rules and still enjoy access to the single market, according to Bloomberg.

The UK government may make Face Masks compulsory in shops

 

Brazil – President Bolsonaro announced yesterday he had tested positive for COVID-19 and started taking hydroxychloroquine to treat the virus.

 

Australia – The cabinet will discuss enacting a potential limit on the number of international arrivals into the country amid an outbreak in Melbourne and the state of Victoria closing its borders.

Victoria reported a further 134 coronavirus cases today with the state gong into a lockdown for six weeks.

 

Currencies

US$1.1291/eur vs 1.1285/eur yesterday.  Yen 107.45/$ vs 107.57/$.  SAr 17.088/$ vs 17.140/$.  $1.256/gbp vs $1.247/gbp.  0.695/aud vs 0.694/aud.  CNY 7.018/$ vs 7.024/$.

 

Commodity News

Precious metals:         

Gold US$1,795/oz vs US$1,782/oz yesterday - Gold briefly surpasses $1,800/oz mark

The price of gold rose above the key level of resistance which it has so far failed to break since 2011, with investors preparing for the rise above $1,800/oz for the last couple of weeks.

Despite the rise, the price of gold has been relatively unchanged this week, trading above $1,790/oz but not willing to rise above the round number.

Investors are monitoring the Fed and assessing the likelihood of further stimulus, which is supportive of metals prices as they are historically a hedge against inflation (Kitco).

Spot gold hit a previous high of $1,797/oz yesterday- whilst US gold futures eased 0.2% to $1,807/oz (Reuters).

South Africa – Main stock index hits four-month high

Gold stocks have driven the Johannesburg benchmark index to the highest level in more than four months (Bloomberg).

Miners gaining on Wednesday include: Gold Fields +1.4%, Harmony +2.7%, AngloGold +0.7%, DRDGold +2.4%, Pan African Resources +0.3%.

Gold ETFs 104.0moz vs US$103.6moz yesterday

Platinum US$843/oz vs US$821/oz yesterday

Palladium US$1,931/oz vs US$1,933/oz yesterday

Silver US$18.35/oz vs US$18.12/oz yesterday

           

Base metals:  

Copper US$ 6,200/t vs US$6,110/t yesterday - China approves ninth round of scrap metal import quotas

China has issued a further round of scrap import quotas for 2020, approving considerably larger volumes than in previous rounds.

A total of 176,746 tonnes of copper scrap has been approved for import into China in the ninth round of quotas, compared to 1,570 tonnes allowed in the eighth batch.

So far in 2020, China has allowed importers to buy up to 718,500 tonnes of copper scrap from abroad.

The latest batch of quotas also permits an additional 209,660 tonnes of aluminium scrap imports, and 4,990 tonnes of steel scrap.

China’s Ministry of Ecology and Environments said the country will continue to release import quotas until the end of 2020 and then will ban all imports of solid waste from next year (Fastmarkets MB).

Aluminium US$ 1,644/t vs US$1,631/t yesterday

Nickel US$ 13,430/t vs US$13,310/t yesterday

Zinc US$ 2,100/t vs US$2,046/t yesterday

Lead US$ 1,832/t vs US$1,787/t yesterday

Tin US$ 16,995/t vs US$17,100/t yesterday

           

Energy:           

Oil US$43.0/bbl vs US$42.6/bbl yesterday

In another positive development, the EIA raised its price outlook for Brent to US$41/bbl for the second half of 2020, US$4/bbl (or 11%) higher than the EIA’s forecast last month

In its Short-term Energy Outlook report, the agency expects that global oil inventories will continue to decline in the second half of the year and throughout next year.

In addition, the EIA expects high inventory levels and surplus crude oil production capacity will limit upward price pressures in the coming months, but as inventories decline into 2021, those upward price pressures will increase

Specifically, the EIA is forecasting that global liquid fuel inventories will rise at a rate of 6.7MMbopd in H1 2020, and then decline at a rate of 3.3MMbopd in H2 2020

Finally, in 2021, the EIA expects that inventories will decline further by 1.1MMbopd

The EIA expects US oil production to fall this year and next, with WTI prices sitting below US$50/bbl through next year

The EIA’s expectation is that oil production in the US will average 11.6MMbopd this year, and 11.0MMbopd next year

This is off from an average of 12.2MMbopd last year

The agency also expects US liquid fuels consumption to fall this year by an average of 2.1MMbopd from 2019, to 18.3MMbopd

Natural Gas US$1.868/mmbtu vs US$1.854/mmbtu yesterday

Natural gas prices moved higher yesterday but were unable to pierce through the US$1.9/MMbtu resistance level

Demand increased last week due to an uptick in power generation

The weather is expected to be warmer than normal over the next two weeks, which should further buoy power generation

There no tropical cyclone activity in the lower Atlantic or the Gulf of Mexico, while a Tropical storm Christina continues to move away from land in the Pacific which will not impact any energy installation.

Exports of natural gas are set to rise into Mexico according to a recent report by the EIA

Uranium US$33.00/lb vs US$33.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$99.4/t vs US$97.7/t

Chinese steel rebar 25mm US$529.1/t vs US$525.2/t - Japan’s steel production to fall to the lowest level since 2009

Japan’s steel output is expected to drop 28% from a year earlier to 17.7mt in the three months through September, according to the Ministry of Economy.

The outlook is a fresh warning for the global steel industry, which has been struggling in most countries outside of China.

The chairman of Japan’s steel federation and head of top producer Nippon Steel says that annual output could fall below 80mt this year, a level not seen in over 50 years (Bloomberg).

Thermal coal (1st year forward cif ARA) US$59.0/t vs US$58.9/t -

Indian thermal coal imports decline 36% in April-May

Thermal coal imports fell to 12.29mt across April and May, as the country locked-down to mitigate COVID-19 which resulted in a drop in energy demand.  

Coking call imports fell by 24% to 7.47mt over the same period (Economic Times of India).

Coking coal swap Australia FOB US$123.5/t vs US$123.0/t

           

Other: 

Cobalt LME 3m US$28,500/t vs US$28,500/t

NdPr Rare Earth Oxide (China) US$41,393/t vs US$41,098/t

Lithium carbonate 99% (China) US$4,773/t vs US$4,764/t

Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.5/kg

Antimony Trioxide 99.5% EU (China) US$4.9/kg vs US$4.9/kg

Tungsten APT European US$205-215/mtu vs US$215-225/mtu

Graphite flake 94% C, -100 mesh, fob China US$460/t vs US$460/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,350/t

 

Battery News

Promising room-temperature liquid battery metal

University of Texas team has developed the first all liquid metal battery. (New Atlas)

The battery contains metallic electrodes which remain liquid at temperatures as low as 20 degrees Celsius, the lowest recorded temperature for a liquid metal battery. (The Engineer)

This liquid metal battery is capable of greater energy capacity, increased stability, and is more flexibility than traditional chemistries.

The anode is a sodium-potassium alloy and the cathode a gallium-based alloy. The two liquid metal electrodes are separated by an organic electrolyte center, also liquid.

The liquid components enable easy scalability and the flexibility provides multiple uses from small devices to infrastructure.

The study is published in Advanced Materials.  

 

Hitachi sign UK rail battery traction agreement

Hitachi and Hyperdrive Innovation have signed an MOU to jointly develop a battery pack suitable for powering trains. (Railwaygazette)

The battery packs would be manufactured at Hyperdrives HYVE plant in Sunderland. The facility currently supplies lithium-ion batteries for automotive and energy applications.

The batteries would be installed at Hitachi Rails plant at Newton Aycliffe.

Hitachi estimates the PMO to be ~400+ battery trains in the UK.

The Italian transport company wholly owned by Hitachi has previously supplied electric battery units to Japan’s Kyushu Railway and First Group for their London to Edinburgh route.

 

Company News

Kobold Metals – to use data analytics to map the earth’s crust to find cobalt in northern Quebec

Kobold Metals is using Artificial Intelligence to examine data over ~1,000sqkm in close to Raglan in northern Quebec

The company is looking for cobalt and attempting to use data analytics to build a map for the Earth’s crust to direct it to a discovery

The company is backed by Bill Gates, Jeff Bezos and Ray Dalio to find conflict free cobalt while also opening up new methods of discovery.

The idea is to bring together more data than you’re a team of geologists can handle and to statistically analyse this for discovery.

Kobold is to collect geophysical data in the next 3-6 months with drilling estimated within two years south of Glencore’s Raglan nickel mine in an area which is prospective nickel, cobalt and PGMs.

So far this looks more like near-ology than Artificial Intelligence but data from Raglan may provide clues depending on the quality and quantity of the data. Eg ‘garbage in – garbage out’. However, we feel sure they will kobold something together.

We have seen a number of ‘black box’ solutions applied to exploration over the years, none have worked from our recollection with discoveries still made more by artisanal miners and field geologists.

Conclusion: The company already has an idea of its area of exploration but may struggle to get sufficient data for accurate modelling.

Experience suggests Geology is as much an art form as a science. Given limited regional data the Earth’s crust and it would be interesting to compare the results of experienced geologist with Kobold’s data analytics. Either way we suspect the data will need a good geologist to assist in its interpretation.

 

Panther Metals (LON:PALM) 7p, Mkt Cap £3.3m – Early exploration results from Annaburroo

Panther Metals has reported the results of early stage exploration from the Annaburroo gold project located approximately 70km southest of Darwin in the Northern Territory, Australia,

The prospect was originally discovered in the early 1990s by Newmont Australia as a result of following up anomalous stream sediment geochemical samples and by subsequent mapping and prospecting in the Donkey Hill area.

Rock chip assays reported today range ʺup to 9.4 g/t Au, 33.1 g/t Au, 39.4 g/t Au and 61.2 g/t Au, with up to 6.5 g/t Ag and 9.0 g/t Agʺ though it is not clear whether these are results from the historic prospecting or from recent work.

The company reports that ʺHistorical reverse circulation drilling results have yielded encouraging gold results from surface such as 7m @ 1.2 g/t Au including 2m @ 3.1 g/t Auʺ and that ʺTrenching at Donkey Hill provided results including 5m @ 6.7 g/t Au and 5m @ 3.5 g/t Auʺ.

Commenting that the area remains highly underexplored and that the central and western parts of the almost 150km2 licence remain completely untested the company explains that  ʺMajor fault, anticlinal and synclinal structures remain completely untested in the southern portion of the licence, which remain high priority structural targets for future explorationʺ.

CEO, Darren Hazelwood, explained that ʺOver 95% of the current tenure remains underexplored with historical exploration having been focused almost exclusively on the Donkey Hill Gold Prospect. Major structural zones, which are known to host economic gold deposits elsewhere within the Pine Creek Orogen, remain completely untestedʺ and said that ʺPanther has commenced the acquisition of all geophysical data over the licence area.  Following reprocessing, this will allow the delineation of new gold targets associated with the regional structures.  In particular, anticlinal structures elsewhere within the region host major gold deposits such as Brock's Creek, Chinese Howley, Cosmo Howley, Enterprise, Glencoe and Woolwonga, which have produced collectively 1.6Moz of goldʺ.

Conclusion: The follow up of historic exploration in a known gold producing geological setting and region may prove fruitful for Panther Metals. We await further results as exploration proceeds.

 

Scotgold Resources* (LON:SGZ) 72p, Mkt Cap £37m – Cononish project development update

BUY – 119p

Full underground development team returned to work with blasting activities currently in progress.

The team has also secured a second new T1D drill rig and a second hand ST2G scooptram on a rental with an option to purchase basis.

A set second set of equipment improves mechanical availability, helps with the future ramp up to Phase 2 (from 36ktpa to 72ktpa) that would now require only an additional truck as well as allows the team to provide more training to its staff.

Other on-site activities include supporting processing plant infrastructure works, ROM ore stockpiles pad earthworks and a new settlement pond for the site and tailings stacks drainage system construction.

The Company is expecting to provide a revised development plan in due course.

Conclusion: The Company provides an update on resumed construction activities at the high grade Cononish Gold and Silver project with an updated development plan to be released shortly.

*SP Angel acts as Nomad and Broker to Scotgold Resources

 

Analysts

John Meyer – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] - 0203 470 0474

 

Sales

Richard Parlons –[email protected] - 0203 470 0472

Abigail Wayne – [email protected] - 0203 470 0534

Rob Rees – [email protected] - 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

SSY

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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