SP Angel . Morning View . Tuesday 26 01 21
Chinese provinces set high growth targets as Beijing drives infrastructure development
MiFID II exempt information – see disclaimer below
Anglo Asian Mining* (AIM:AAZ) - BUY – 1.5c special dividend
Petropavlovsk (LON:POG) – FY20 production report
Rambler Metals and Mining* (AIM:RMM) – 2020 production results and outlook
Chinese New year – Lunar New Year trips are forecast to fall by 40% as China restricts travel as it clamps down on new COVID-19 infections (Bloomberg)
The Ministry of Transport has estimated there will be 1.7bn trips over the period with people traveling to rural areas will have to present a negative Covid-19 test result.
Chinese authorities are looking to restrict travel over the annual migration that is the Chinese New Year where millions of Chinese workers return to their home villages
Some areas are also offering incentives to remain, including rent rebates in Zhejiang and free meals and tickets to tourist attractions in Guangdong.
Travellers may also be required to quarantine, possibly without pay when they return.
Children advised not to leave Beijing by their schools
The CAAC ‘Civil Aviation Administration of China' is offering full refunds for flights from 28th January to 8th March
More families will drive to see their relatives avoiding public transport over the festive period.
The advice on not to travel and restrictions may help lift domestic consumption in China particularly with
China - Provinces set confident targets for 2021 on stimulus support as foreign direct investment rises to US$163bn vs USA FDI of US$134bn.
Beijing has directed the provinces to stick to an employment priority policy.
China’s underlying growth capacity was still close to 6% this year according to the chief economist at the State Information Centre
Hubei sets growth target at 10%
Guangdong is targeting >6% through 2021 as are Shanghai and Beijing.
Hainan, which looks set to become a free-trade port like Hong Kong is targeting growth of no less than 10% up from ~6.5%.
Henan and Shanxi set targets of >7% and 8%
Fujian is targeting 7.5%
The targets are a prelude to the NPC meeting which starts on 4th March 4 in Beijing.
Covid-19 caused China’s economy to contract by 6.8% in Q1 2020.
China’s unusually cold winter and destruction of crops along the Yangtze river is raising domestic food prices
Wholesale food index levels rose to an all-time high yesterday in China according to the Ministry of Agriculture and Rural Affairs (SCMP)
The price of cauliflowers and cabbages rose more than 90 per cent last week compared to a year earlier, while the cost of eggs also rose.
The daily wholesale price of vegetables has jumped to Rmb6.2/kg from Rmb4.5/kg in November.
China – Former Vice-Premier Zeng Peiyan asks for Joe Biden to meet China halfway to build trust and ease conflict
Zeng said two sides needed to work to abolish trade tariffs, remove restrictions on people-to-people exchanges and cooperate on global leadership for issues such as pandemic control and climate change (SCMP).
China - PBOC withdrew $12b of liquidity out of the market via open-market operations this morning
We suspect the PBOC is keen to hold back any overexuberance while continuing to support stimulus projects
The PBOC may be keen to hold back in case there are further outbreaks of COVID-19 spread over the Chinese New Year – this seems likely
China is intent on restoring 6% GDP growth with some provinces going for more
China – Land transactions rise to $917bn in 2020
Chinese developers are looking to maintain or ramp up spending through 2021 (Bloomberg Intelligence)
“Bidding premiums for government land tenders in tier-1 and tier-3 cities didn't decline significantly since reports of the leverage rule in August, while land transaction prices, at an average 10% above the starting bid for tier-2 cities in August, eased only slightly to 6% in December.”
Officials are also keen to increase land supply to help fund new infrastructure projects as China uses money from land sales to help fund growth and local infrastructure
Land sales are also offered to politburo officials at preferential rates enabling big profits on key developments.
The state has recently introduced a ‘Three Red Lines’ rule to cut back competition for urban development projects and push poorer developers out to less prestigious developments.
Cities and provinces are looking to use funds from land sales to help support new infrastructure as part of the latest 14th5-year government plan.
Beijing looking is to expand its urban rail network to 1,600km in the next five years from around 700km system.
Chongqing is going for a new 2,000km high-speed railway, 1,000km for a light-rail metro system and 4,600km of highway / 7000km of local road constructions.
UK – Unemployment rate reaches 5% as payrolls lose 830,000 workers since start of the pandemic
Unemployment reached 5% in the three months to November for the first time since early 2016 after another 202,000 lost their jobs, according to the ONS.
December figures also showed 828,000 fewer people on company payrolls since last February.
The number of people claiming unemployment-related benefits has risen to more than 2.6m, up 113% since March last year.
Employers and employees will now be eyeing the end of April, when the furlough scheme is due to end which has so far supported people across industries, most notably hospitality and entertainment.
EU – Growing anger towards AstraZeneca sees EU threatening export controls on vaccines made in the bloc
The EU has threatened to halt exports leaving the bloc intended for other countries, as AstraZeneca is unable to deliver the promised number of doses to the bloc.
German Health Minister Jens Spahn told German TV on Monday that Vaccines leaving the EU “need a license, so we know at least what’s produced in Europe and what leaves Europe, where it goes, and if there’s fair distribution”
Britain’s vaccine minster warned the Eu against engaging in “vaccine nationalism”, while Britain is still confident of hitting a mid-February target to inoculate its most vulnerable citizens.
US – Janet Yellen confirmed as US Treasury chief
Janet Yellen became leader of the US treasury on Monday, and is expected to get straight to work with congress on coronavirus relief, reviewing U.S. sanctions policy and strengthening financial regulation, according to Reuters.
Shortly after the vote, House of Representatives Democrats delivered to the Senate a charge of impeachment against former President Donald Trump.
Chicago Fed national activity index 0.52 in December vs 0.27% in November
Dallas Fed manufacturing index 7.0 in January vs 9.7 in December
Italy – Prime Minister Conte to resign in tactical move
Giuseppe Conte is set to hand in his resignation on Tuesday following criticism of his handling of the coronavirus pandemic.
Mr Conte hopes to be then given a mandate by the president to forma a stronger government after losing his majority in the Senate.
Conte has been prime minister since 2018, and narrowly survived a vote of no confidence in the lower house last week.
Taiwan - Industrial production rose 9.9% yoy in December vs 7.5% in November
German - Ifo business climate index 90.1 in January vs 92.2 in December
Poland - Industrial output 11.25% yoy in December vs 5.4% in November
Currencies US$1.2125/eur vs 1.2172eur yesterday. Yen 103.77/$ vs 103.75/$. SAr 15.334/$ vs 15.173/$. $1.362/gbp vs $1.370/gbp. 0.768/aud vs 0.773/aud. CNY 6.476/$ vs 6.477/$.
Gold US$1,856/oz vs US$1,852/oz yesterday
- Gold ETFs 107.2moz vs US$107.2moz yesterday
Platinum US$1,090/oz vs US$1,103/oz yesterday
- Palladium US$2,332/oz vs US$2,359/oz yesterday
Silver US$25.37/oz vs US$25.51/oz yesterday
Copper US$ 7,936/t vs US$8,007/t yesterday
Aluminium US$ 2,012/t vs US$1,998/t yesterday
Nickel US$ 18,155/t vs US$18,335/t yesterday
Zinc US$ 2,687/t vs US$2,730/t yesterday
Lead US$ 2,053/t vs US$2,086/t yesterday
Tin US$ 22,665/t vs US$22,380/t yesterday
Oil US$55.7/bbl vs US$55.6/bbl yesterday –
US shale activity has ramped up in line with the oil price recovery with the number of drilled but uncompleted wells (DUCs) that accumulated at the height of the pandemic has already subsided to pre-Covid-19 levels
After swelling to a multi-year high of 6,548 wells in June 2020, the number of such wells in the country’s major oil regions slimmed down to around 5,700 wells by the end of December 2020
The inventory of live DUCs, which excludes tentatively abandoned wells drilled a long time ago, also declined by around 800 wells in the same period, from 4,353 in June to 3,528 in December
The current level of horizontal oil ‘live’ DUC count is comparable to the level seen in early 2020, just before the market downturn started
Given the recent recovery in oil prices, the industry is enjoying the flexibility of further accelerating fracking activity beyond current levels in the first half of the year.
Such an acceleration could be delivered, as can be implied from the ratio of the current ‘live’ DUC inventory to the run rate of fracking, which is still in the six-to-eight-month range, compared to the normal level of about three months seen in 2018-2019
Currently 626 started frac operations in North America for December 2020 and we expect the month’s fact-based coverage to be almost complete
Natural Gas US$2.676/mmbtu vs US$2.526/mmbtu yesterday
Soaring natural gas prices in European markets could be seen as a boon for Russian giant Gazprom to increase its gas exports towards the Old Continent
But instead, somewhat surprising, Gazprom is adopting the exact opposite strategy, drastically reducing its physical deliveries of natural gas to the EU
Since the end of December 2020, Gazprom gas volumes transiting through Ukraine have fallen by a third to 130mcbm/d
Iron ore 62% Fe spot (cfr Tianjin) US$165.9/t vs US$166.2/t - Port Hedland clears all large vessels in preparation for Cyclone Lucas
All large vessels have been cleared from the iron ore hub as the Australian Bureau of Meterology anticipate the storm to intensify into a category 2 cyclone system and make landfall by Saturday.
The Pilbara Ports Authority issued a cyclone warning on Wednesday as it commenced the clearing of anchorages from the port in anticipation of the cyclone.
From Saturday morning, heavy wind and rain is expected along the Kimberley and Pilbara coasts which will extend in land over the weekend.
Last week, Chinese iron ore imports from Australia fell 1.27mt on the week prior to 12.43mt (SMM News).
Chinese steel rebar 25mm US$665.2/t vs US$664.6/t - Chinese steel production rose +12.3% YoY in the second 10-days of January (CISA).
Inventory levels are reported to be 30% higher at 14mt as mills get ahead of the wave of new construction projects and build stock ahead of ‘anti-pollution’ winter shutdowns.X
Chinese stainless steel prices rise on post-holiday demand expectations
Stainless steel prices in jumped 3% in Shanghai on Tuesday, fueled by expectations of strong demand after the Chinese New Year holidays next month.
Rising raw material prices, notably iron ore and nickel, is elevating stainless steel costs meaning that prices are expected to remain at high levels.
Thermal coal (1st year forward cif ARA) US$67.5/t vs US$68.0/t
Coking coal swap Australia FOB US$149.0/t vs US$149.0/t
Cobalt LME 3m US$40,040/t vs US$39,625/t
NdPr Rare Earth Oxide (China) US$70,491/t vs US$70,474/t
Lithium carbonate 99% (China) US$10,191/t vs US$9,957/t
Ferro Vanadium 80% FOB (China) US$30.5/kg vs US$30.5/kg
Ferro-Manganese high carbon 78% Mn US$1,490/t vs US$1,430/t
Tungsten APT European US$240-245/mtu vs US$235-240/mtu
Graphite flake 94% C, -100 mesh, fob China US$530/t vs US$530/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,475/t vs US$2,475/t
Spodumene 6% Li2O min, cif (China) US$395/t vs US$380/t
EV chargers - US plans to raise EV charging points to 550,000 by 2030 from 90,000 currently in 28,000 charging stations
Biden vows to replace US government fleet with EVs
President Joe Biden announced that he will replace the U.S. government’s fleet of roughly 650,000 vehicles with electric models as the new administration shifts its focus towards clean energy.
It would cost the U.S. more than $20 billion or more to replace the fleet.
As of 2019, the U.S government owned 645,000 vehicles that were driven 4.5 billion miles consuming 375 million gallons of gasoline and diesel fuel. Of these, only 3215 were electric vehicles as of July 2020.
The idea is to support the sale of around 25m EVs with chargers covering 55-60% the US EV market by 2030
SQM to raise $1.1bn to fund expansion plan
Chilean lithium miner SQM’s shareholders have approved a plan to raise $1.1bn through the sale of common stock in order to fund its ambitious expansion plan.
SQM expect to reach production capacity in Chile to reach 120,000t of lithium carbonate and 21,500t of lithium hydroxide by the end of 2021.
By the end of 2023, the miner expects to reach 180,000t of lithium carbonate production and 30,000t of lithium hydroxide production.
Lithium demand is currently around 320,000tpa, however this is expected to triple by 2025 due to the EV battery revolution.
Shell buys UK’s largest EV charging network
Royal Dutch Shell has agreed to buy Ubitricity, owner of the largest public charging network for electric vehicles in the UK, as the oil major expands its presence along the power supply chain.
Shell said it would buy 100% of the company for an undisclosed amount.
Ubitricity has more than 2700 charge points in the UK, giving it a market share of 13%.
Shell said the acquisition would help it expand on-street charging. It already has more than 1000 fast and ultrafast charging points at 430 Shell retail stations.
The deal is expected to close later this year.
Altus Strategies* (AIM:ALS) 89p, Mkt Cap £62m – High grade drilling results to grow Diba MRE
BUY – 132p
The Company updated on the course of the latest drilling programme at the 100% owned Diba gold project in western Mali.
The team completed 10,308m of RC drilling over 114 holes testing up dip, down dip and along strike extensions of the deposit, infill drilling the MRE area with a further 5,376m drilled at a number of of adjacent priority targets within 3km of Diba.
Step out drilling extended the area of the mineralisation 100m to the west as drilling returned near surface high grade intersections.
Around 25% of the assays form the drilling programme are currently pending.
Results from 30 holes (2,572m) have been released this morning with selected intersections including:
Step out drilling around the Diba MRE area
11.03 g/t Au over 3m from 37m down hole (20KSRC-053)
Infill drilling of the MRE including the NE trending high grade zone
3.21 g/t Au over 3m from 5m down hole (20KSRC-066)
43.83 g/t Au over 5m from surface (20KSRC-067)
2.13 g/t Au over 6m from 25 m downhole (20KSRC-069)
2.11 g/t Au over 14m from 21m downhole (20KSRC-072)
2.32 g/t Au over 5m from 12m downhole (20KSRC-073)
Drilling at five satellite prospects within 3km of the MRE
A total of 5,375m in 57 holes were completed at priority targets (Diba NW, Central Plateau, Diba SW, Twin Plateau, Diva East Plateau) with current 9 holes following up on 31 holes results’ released earlier in Janruary.
No significant mineralisation has been encountered in the latest 9 holes, although, results from another 17 are still pending.
The team is planning a ground magnetic survey which will start shortly and be used to guide the next phase of drilling.
Conclusion: Drilling results returned high grade intersections both within the MRE area boding well for the future upgrade of the maiden resource as well as encountered mineralisation outside the MRE area extending it further 100m to the west. Results from around 25% of holes will be released in due course with further drilling to follow at the Diba gold project.
*SP Angel acts as Nomad and Broker to Altus Strategies plc
Anglo Asian Mining* (AIM:AAZ) 169p, Mkt Cap £193m – 1.5c special dividend
The Company announced a cash special dividend of 1.5c in respect of FY20.
Ex-dividend and record dates are 11 and 12 February, respectively, with the dividend to be paid on 11 March.
Commenting on the size of special dividend the Company said “the restoration of the three contract areas in the formerly Occupied Territories and Nagorno Karabakh, subsequent to our interim results announcement for 2020, has opened-up significant opportunities for the Company and the special dividend is therefore smaller than originally anticipated… these projects are likely to require considerable investment and the Company has developed a strong balance sheet over the past several years to take advantage of these kind of opportunities”.
Conclusion: The special dividend comes on top of the 4.5c interim dividend. Lower than initially planned special dividend makes sense from the capital allocation efficiency point given latest developments around Restored Contract Areas that potentially unlock access to significant proven resources of precious and base metals offering substantial organic growth upside. The Company is well placed to capitalise on potential opportunities given strong balance sheet, local expertise in developing and running projects as well as favourable commodity prices environment.
*SP Angel act as Nomad and broker to Anglo Asian Mining
Petropavlovsk (LON:POG) 31p, Mkt Cap £1,213m – FY20 production report
Production totalled 548.1koz (FY19: 517.3koz), down on 560-600koz guidance on the back of lower production from own mines and third-party concentrate.
Own mined gold production amounted to 385.6koz (FY19: 471.6koz), down on 395-415koz guidance, driven predominantly by weaker output at Malomir and Albyn.
Third party concentrate production increased to 162.5koz (FY19: 45.7koz), down on 165-185koz planned, due to logistical issues related to the COVID-19 pandemic.
FY20 gold sales totalled 546.5koz (FY19: 514.0koz) with average realised gold prices of $1,748/oz, up 33.6%yoy reflecting higher spot prices and no forward sales commitments recorded during the year.
Pioneer flotation plant commissioning scheduled for Q2/21that would double refractory ore processing capacity of the Group to 7.2mtpa reducing its reliance on lower-margin third party concentrate processing.
Third milling line at the Malomir flotation plant adding further 1.8mtpa to existing 3.6mtpa is expected ot be ready in Q1/22 expanding refractory ore processing capacity to 9.0mtpa.
The Company had $538m of debt (including the effect of conversion of a share of outstanding convertible bonds during the year) and $64m in interest-bearing gold prepayments outstanding as of YE20 with $35m in cash (FY19: $610m, $187m and $48m, respectively).
The new management team is currently carrying a comprehensive review to update 2021 production guidance and budgets.
Rambler Metals and Mining* (AIM:RMM) 0.39p, Mkt Cap £31.7m – 2020 production results and outlook
(Rambler owns 100% of the Ming Copper-Gold Mine)
Rambler Metals and Mining reports that, following production of 917t of copper in concentrate during the final quarter of 2020, production for the full year amounted to 3,769t of metal in concentrates (2019 – 5,299).
The company says that “In response to the collapse of the copper price in March 2020, Rambler scaled back operations and cut production from March 2020 to 50% of capacity to meet its forward sales commitment. Accordingly, for the half year and full year, the operation produced 6,401 and 14,550 tonnes of concentrate containing saleable metal of 1,661 and 3,769 tonnes of copper, respectively”.
Quarterly production figures presented in today’s announcement show that following a decline to 744t of copper in concentrate production during Q3, output picked up during the final quarter and President & CEO, Toby Bradbury, confirmed that “2021 is a year of re-birth for the Company. There is a period of rebuilding and redevelopment to give confidence in the future delivery. Over the last three months, we have successfully engaged core competencies needed to operate an efficient mining business and we now have the capacity to move forward”.
He also reaffirmed “the considerable potential upside of the Ming Mine resource, particularly through further exploration and expansion opportunities of a high-grade copper asset with a valuable gold bi-product. These aspects will be progressively evaluated through the course of 2021 and beyond and are expected to yield value upside for all stakeholders in the medium to long term” and confirmed that the company expects to produce between 6,600-7,400t of copper in 2021 with “a year of accelerating mine development and increasing rates of higher-grade production to meet full mill capacity of 1,350 tonnes/day by year end.”
The company expects increasing mine development during the year to establish developed reserves capable of supporting 115,000t of ore production at a 2% copper grade during Q4 2021.
As part of the effort to establish these reserves “Infill diamond drilling is set to re-commence in the Ming Mine with mobilisation at the end of January. This drilling will provide essential detail for improved development, stope design and grade control for operations and will also provide an opportunity for resource upgrades in certain areas”.
Ore-sorting studies to enhance the mill feed are to continue during the current quarter with sorting expected to be implemented during 2022 “to capture the cost and revenue benefit of an upgraded ROM feed”.
As previously disclosed, dismantling and relocation of the Duck Pond mill to the Ming mine site is expected to start during Q3 as part of the “strategy to further expand operations and reduce operating costs”.
The Company reports that Newfoundland and Labrador have been relatively free of Covid19 infections and that currently there are only three known cases in the province and confirms that there have been no cases amongst its workforce.
Following the December 2020 financing, which “provided a platform from which to deliver the true potential of the Ming Mine”, Rambler Metals & Mining reports a 31st December cash balance of US$6.2m
Conclusion: The December financing positions Rambler Metals to restore production at the Ming mine and Nugget Pond mill back to 1,350tpd capacity by the end of 2021. Infill drilling to develop and expand the mineral reserve and resources inventory is expected to start in late January while ore sorting to upgrade feed continues to be evaluated and is expected to be implemented during 2022.
*SP Angel act as Nomad and broker to Rambler Metals & Mining
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*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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