SP Angel . Morning View . Markets await new stimulus in the Eurozone and US
Paul Kettle
SP Angel Research Note -4 min read
13:31, 9th September 2019

SP Angel – Morning View – Monday 09 09 19

Markets await new stimulus in the Eurozone and US

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MiFID II exempt information – see disclaimer below

 

Ariana Resources (AAU LN) – Tavsan Far North discovery

Aston Bay Holdings* (BAY CN) – Option on mineral rights at Buckingham Gold project in Virginia, USA

Australian Vanadium (AVL AU) – awarded ‘major project status’

Bluejay Mining* (JAY LN) BUY – Target price 21.3p Bluejay ships 42,000t bulk sample from Greenland to Canada

Mkango Resources* (MKA LN) – Appointment of lead engineer for the Songwe Hill Feasibility Study

Rambler Metals & Mining* (RMM LN) – Closure of convertible loan

Strategic Minerals* (SML LN) – R & D Grant for Leigh Creek copper mine

 

Dow Jones Industrials

 

+0.26%

at

  26,797

Nikkei 225

 

+0.56%

at

  21,318

HK Hang Seng

 

+0.03%

at

  26,700

Shanghai Composite

 

+0.84%

at

   3,025

FTSE 350 Mining

 

+0.20%

at

  18,244

AIM Basic Resources

 

-1.06%

at

   2,242

 

Economics

China exports to US fall by 16% to $44.4bn in August as impact of Trade War takes hold

  • Chinese exports to the US fell by 6.5% in July.
  • Chinese imports of goods from the US also fell by 22% to $10.3bn.

 

US – Jerome Powell is expecting resilient consumer spending and support from the monetary policy to help deliver economic growth between 2-2.5% this year.

  • The remarks came on the back of mixed US labour report and an escalation in the US/China trade dispute with new tariffs coming into effect this month.
  • “The most likely outlook for our economy remains a favourable one with moderate growth, a strong labour market and inflation moving back up close to our 2% goal,” Powell said.
  • “Our main expectation is not at all that there will be a recession.”
  • Powell avoided the term “mid-cycle adjustment” during his hour-long Q&A session in Zurich suggesting the Fed may be taking a more dovish view over the path of future interest rates.
  • The central bank is widely expected to cut the benchmark rate by 25bp on Wednesday next week.

 

China – Positive news of Chinese monetary stimulus have been tempered by weak trade data released over the weekend.

  • The PBoC announced on Friday a 0.5pp cut to the required reserve ratio as well as a 1pp cut for the reserve ratios for some city commercial banks.
  • Lower rates will take effect over September-November and mar the third RRR rate cut decision for this year.
  • Cuts are estimated to release $126bn of liquidity.
  • Poor trade data released recently showed a 1.0%yoy drop In Chinese outbound shipments (in US$ terms) versus a 2.2%yoy growth forecast.
  • Shipments to the US contracted 16%yoy last month highlighting the damaging effect of the tariff dispute between Washington and Beijing.
  • Exports (US$ terms, yoy): -1.0 v 3.3 in July and 2.2 forecast.
  • Imports (US$ terms, yoy): -5..6 v -5.3 in July and -6.4 forecast.

 

Japan – The economy grew at a reduced pace in Q2/CY19 revised data showed (1.3%, down from a preliminary reading of 1.8%).

  • Consumer spending was the driving force behind the expansion compensating for weak trade data affected by the US/China trade dispute.
  • Domestic consumption is expected to continue strong through this quarter as people bring forward purchases ahead of the sales tax increase scheduled for October.
  • Q2 GDP (%qoq, annualised): 1.3 v 2.8 in Q1/19
  • Personal Consumption (%qoq, annualised): 2.5 v 0.0 in Q1/19.
  • Business Investment (%qoq, annualised): 0.8 v -1.0 in Q1/19.
  • Exports (%qoq, annualised): -0.1 v -7.6 in Q1/19.

 

Germany  - The nation recorded the strongest trade surplus in four months as exports posted a surprise increase while imports showed another sharp drop in July.

  • The data comes on the back of poor factory orders and industrial production numbers as well as weak PMI that got many concerned the economy might be heading toward a technical recession in Q3/19.
  • Exports (%mom): 0.7 v  -0.1 in June and -0.5 forecast.
  • Imports (%mom): -1.5 v 0.7 in June and -0.3 forecast.

 

ECB – The monetary policy decision is due this Thursday with Draghi expected to announce a new stimulus package at his penultimate meeting.

  • The central bank is expected to cut the deposit rate and announce a new round of asset purchases, Bloomberg writes.
  • Growth and inflation forecasts are forecast to be revised down.

 

UK – Parliament is expected to hold another vote on an early general election today, although, it is unlikely to gather the required support from MPs.

  • Labour indicated they will not support a snap election unless the no-deal Brexit on 31 October option has been removed.
  • The economy expanded 0.3%mom and was stagnant over the last three months, according to July GDP numbers.
  • Additionally, Industrial production is reported to have favoured better than expected, although, the pace of growth remained modest.
  • Monthly GDP (%mom): 0.3 v 0.0 in June and 0.1 forecast.
  • Industrial Production (%mom/yoy): 0.1/-0.9 v -0.1/-0.6 in June and -0.3/-1.1 forecast.

 

Turkey – The central bank is making a monetary policy announcement on Thursday.

  • Expectations are for monetary authorities to cut the benchmark one-week repo by 275bp to 17.0% amid a continuing slowdown in the inflation rate.
  • CPI averaged 15% in August, the weakest reading in more than a year and down on 25% recorded in October last year.
  • Earlier Recep Erdogan expressed his conviction that the central bank will reduce rates to single digits “in the shortest period”.

 

Currencies

US$1.1028/eur vs 1.1037/eur last week. Yen 106.94/$ vs 107.05/$. SAr 14.792/$ vs 14.782/$. $1.224/gbp vs $1.231/gbp. 0.686/aud vs 0.683/aud. CNY 7.132/$ vs 7.118/$.

 

Commodity News

Gold US$1,507/oz vs US$1,508/oz last week

   Gold ETFs 79.4moz vs US$79.3moz last week

Platinum US$950/oz vs US$941/oz last week

Palladium US$1,544/oz vs US$1,555/oz last week

Silver US$18.04/oz vs US$18.28/oz last week

           

Base metals:   

Copper US$ 5,816/t vs US$5,822/t last week

Aluminium US$ 1,785/t vs US$1,780/t last week

Nickel US$ 17,735/t vs US$17,405/t last week

Zinc US$ 2,315/t vs US$2,324/t last week

Lead US$ 2,071/t vs US$2,031/t last week

Tin US$ 17,110/t vs US$17,325/t last week

           

Energy:           

Oil US$62.1/bbl vs US$61.0/bbl last week

Natural Gas US$2.502/mmbtu vs US$2.410/mmbtu last week

Uranium US$25.20/lb vs US$25.20/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$85.4/t vs US$87.5/t

Chinese steel rebar 25mm US$556.0/t vs US$555.5/t

Thermal coal (1st year forward cif ARA) US$66.0/t vs US$65.5/t

Coking coal futures Dalian Exchange US$203.3/t vs US$208.6/t

           

Other:  

Cobalt LME 3m US$35,500/t vs US$35,500/t

NdPr Rare Earth Oxide (China) US$45,917/t vs US$46,013/t

Lithium carbonate 99% (China) US$7,010/t vs US$7,025/t

Ferro Vanadium 80% FOB (China) US$38.7/kg vs US$38.6/kg

Antimony Trioxide 99.5% EU (China) US$5./kg vs US$5./kg

Tungsten APT European US$195-205/mtu vs US$198-205/mtu

 

Battery News

Tesla unveil new cell that can last one million miles (Electrek)

  • Tesla’s battery research partner, Dalhousie University, have released a paper on a battery cell that can last over one million miles.
  • Test results released along with the paper show that the new battery cell is going to be Tesla’s first million- mile battery. The new battery tested is a Li-Ion battery cell with a next-generation “single crystal” NMC cathode and a new advanced electrolyte.
  • This technology will be especially useful in ‘robot taxis’- a self-driving taxi service Tesla are currently developing as the longevity of these vehicles is going to be a big differentiating factor in the cost.
  • The development of this battery comes as Tesla is working to build its own cell manufacturing line in order to try and improve battery technology and cost.

 

Company News

Ariana Resources (AAU LN) FOLLOW 2.30p, Mkt Cap £24.4m –Tavsan Far North discovery

  • Ariana Resource reports the discovery of a new zone of mineralisation, known as Tavsan Far North, approximately 5km north of the existing Tavsan resource within the 50% owned Red Rabbit joint-venture area in Turkey. The current mineral resource estimate for Tavsan amounts to a combined measured, indicated and inferred 4mt at an average grade of 1.3g/t gold and 4.5g/t silver.
  • Initial geochemical soil sampling and follow up rock chip sampling has identified two anomalous zones, the first measuring some 330m x 80m which “corresponds to an area where historic samples were taken.”  The second zone, “with dimensions of 200m x 175m, was defined 600m northwest of the first and represents a completely new and untested zone.”
  • The rock chip sampling “returned with several significantly anomalous results from both areas, including: 3.59g/t Au + 8.1g/t Ag, 2.13g/t Au + 5.0g/t Ag, 1.65 g/t Au + 4.7 g/t Ag and 1.50 g/t Au  + 3.9 g/t Ag.  In total, 9 rock-chip samples exceeded 1 g/t Au. All of these samples were taken from outcrop and float material of intensely gossanous and limonitic altered schists, at the contact of an interpreted thrust zone.”
  • Further follow-up included “a four hole reconnaissance diamond drill hole programme, testing the periphery of the largest anomaly in which outcrops of the known mineralisation are exposed”.  The company highlights the following results:-
    • Hole TAV-D03-19 intersected 4m of mineralisation averaging 1.46g/t gold, with 3.8g/t silver and 0.45% copper from 1m below surface, including a 1.8m wide copper-rich section averaging 0.42g/t gold, 2.8g/t silver and 2.40% copper; and
    • Hole TAV-DO4-19 intersected 1m of mineralisation averaging 0.4g/t gold, 1.1 g/t silver and 1.12% copper from an undisclosed depth.
  • The company now plans a second phase of soil sampling to “fully define the extents of the surface geochemical anomalies within the licence area, but also the extents of a structural corridor which appears to control and focus the mineralisation”. This is to be supplemented by a programme of rock saw channel sampling as part of a resource update. These programmes are expected to start in late September.
  • Commenting on the recent work, Dr, Kerim Sener, Managing Director said that “The latest discovery shows that there is significant potential for the project to yield additional resources.  Furthermore, work on the Feasibility and EIA is continuing successfully and we are looking forward to completing these studies in the coming months.”

 

Aston Bay Holdings* (BAY CN) $0.01, Mkt cap C$7.6m – Option on mineral rights at Buckingham Gold project in Virginia, USA

  • Aston Bay Holdings reports that it has formalised its option to lease mineral rights covering 4,445 hectares of land at the Buckingham Gold project in Central Virginia.. This follows on the news announced on 23rd January that it had reached a Memorandum of Understanding.
  • The company comments that “The Buckingham Property and the 4,873 acres of newly acquired land lie within a significant regional gold-in-stream anomaly that is approximately 9.5 miles (15 kilometres) in length defined by placer gold in pan concentrates from 75 stream samples.  Only a portion of this trend has received any known modern exploration.”
  • Aston Bay will make annual lease payments and undertake minimum exploration expenditure commitments for the three-year term of the agreement.
  • Recent drilling results include an intersection of 2.03m averaging 35.61g/t gold in hole BUCCK 19-01, an intersection of 3.30m averaging 20.44g/t gold in hole BUCK-19-003 and 3.57m averaging 24.73g/t gold in hole BUCK-19004.
  • CEO, Thomas Ullrich explained that the additional land “allows us to greatly expand exploration beyond the significant mineralization encountered in drilling and sampled in nearby outcrops on the Buckingham Gold Property, as well as begin exploration on several previously identified gold and base metals targets”.

Conclusion: The expanded land holding gives Aston Bay scope to conduct a wider programme of exploration in an area of historic gold mining which has previously been ignored by modern exploration. Initial drilling results have been promising and we look forward to further news as the programme develops.

*SP Angel were formerly acting as broker to Aston Bay

 

Australian Vanadium (AVL AU) A$0.015, Mkt Cap A$29.6m - awarded ‘major project status’

  • Major project status is a formal recognition of the national strategic significance of a project. This project has been awarded special status through its contribution to economic growth, employment and to regional Western Australia according to the Minister for Industry, Science and Technology.
  • The Australian federal government also provided the project with a A$74-million loan through the Northern Australia Infrastructure Facility. The project is expected to create 400 direct construction jobs and 200 ongoing jobs.
  • The award highlights the importance of the project, as vanadium is on the critical minerals list for Australia and the US.
  • The project has an initial 17 year mine life, and has a total mineral resource of 3.6Mt at 0.76% vanadium pentoxide (V2O5) consisting of a measured mineral resource of 10.2Mt at 1.11% V2O5, an indicated mineral resource of 40.7Mt at 0.66% V2O5, and an inferred mineral resource of 132.7Mt at 0.77% V2O5 (mining.com).

 

Bluejay Mining* (JAY LN)  FOLLOW8.9p, Mkt cap £76m – Bluejay ships 42,000t bulk sample from Greenland to Canada

BUY - Target price 21.3p (Dundas Ilmenite project, Greenland, 100% owned)

  • Bluejay Mining have loaded some 42,000t of sieved ilmenite mineral sand from its proposed Dundas mine in Greenland.
  • The Handymax shipment is destined for Rio Tinto Iron & Titanium ‘RTIT’ in Canada where it will be further refined into two parcels of 5,000t of heavy mineral concentrate. One of which will be sent to RTIT’s Sorel-Tracy plant in Canada.
  • Each concentrate sample should have an estimated ilmenite content of 4,500t.
  • The test work designed to confirm suitability for long term commercial use at this facility.
  • Ship loading took less than three days indicating that ship loading from the Dundas site is relatively simple when using experienced operators.
  • The simplicity and speed of the loading operation also indicates to us that the site can load as much heavy mineral sand as it practically wants directly onto bulk carriers in the deep-water fjord at the Dundas site loading point once a more permanent infrastructure is installed.
  • The bulk shipment utilised specialist Canadian, Danish and US expertise supported by the Greenland government and highlights the ease at which bulk carriers can be directly loaded on the Greenland coast.
  • This is also the most northern bulk cargo shipment loaded so far in the world and was made possible by the preparatory work done by the team in surveying the fjord and near-shore environment and in the assessment of the ilmenite resource at Dundas.
  • Bluejay have fifteen years of in-country expertise on the geology and logistics of working in Greenland.
  • The team look forward to receiving an exploitation license on the Dundas mine from the Greenland government and are also exploring for nickel and other metals further to the south on the Disko project using data from former geological surveys.
  • Bluejay’s team consisted of:
    • Mid Ship Group
    • Pangaea Logistic Solutions subsidiary Phoenix Bulk Carriers
    • Nordic Bulk carriers (Copenhagen)
    • Guy J. Bailey, partner to Phoenix Bulk Carriers
    • The loading was supported by Bluejay’s Greenland staff
  • Greenland’s mining industry is developing fast with Bluejay’s shipment following closely on from Hudson Resources’ (HUD CN) first bulk shipments from its new mine in the South of Greenland.
  • While Bluejay’s shipment is nearly three times as large as the 14,400t of anorthosite shipped in August the process for ship loading look similar indicating that ship loading should be low cost and reliable through the summer months in Greenland.
  • US State Department officials visited Hudson’s White Mountain mine and it’s Sarfartoq Rare Earth Project in Greenland in July demonstrating US interest in Greenland and its potential for new mineral exports. Hudson’s anorthosite product is destined for Charleston, South Carolina .
  • Hudson’s new mine is fully permitted with a low capital cost of just $45m highlighting the ability to build low-cost mining operations relatively easily and quickly in Greenland.
  • Target price: 21.3p is based on our production assumption of 440,000tpa of ilmenite concentrate and an ilmenite price of $207/t based on Bloomberg’s Chinese TiO2 50% ilmenite Fe 30% ilmenite price.
  • See the full press release and pictures at http://www.rns-pdf.londonstockexchange.com/rns/6250L_1-2019-9-9.pdf
  • Further info is available on Bluejay’s new corporate website:  www.bluejaymining.com

Conclusion: It is great to see Bluejay ship 42,000t so quickly and efficiently from its Dundas site in Greenland. We look forward to further news on the success of the bulk-sample processing grades and smelter test.

*SP Angel acts as nomad and broker to Bluejay Mining

 

 

Mkango Resources* (MKA LN) FOLLOW 6.85p, Mkt Cap £9.1m – Appointment of lead engineer for the Songwe Hill Feasibility Study

  • Mkango Resources has announced the appointment of the  well-known project management and engineering company, Senet, to lead the feasibility study for its Songwe Hill rare earths project in Malawi.
  • The study, which is being funded by Talaxis Limited under its earn-in agreement with Mkango Resources which gives Talaxis the right to earn a 49% interest in the project through the feasibility study and with the option to increase its holding by a further 26% to 75% by arranging funding for project development including funding the equity component thereof.
  • Senet is a wholly owned subsidiary of the DRA Global group and has an established track record in Africa having “successfully completed more than 500 projects and studies in Africa and has completed more copper-cobalt solvent extraction (SX) and electrowinning (EW) plants on the African Copperbelt than any other firm in the market”.
  • Chief Executive of Mkango Resources, William Dawes, expressing pleasure at the appointment explained that “The selection of SENET was measured against a range of criteria, and its technical capabilities and African experience were key factors in the decision. Mkango has the right financial and technical partnerships in place to enable development of Songwe into Africa’s leading producer of rare earths.”
  • David Mamadou, Executive Director of Talaxis confirmed that “Songwe Hill plays an important part in Talaxis’ upstream investment portfolio, as we aim to become a global leader in technology metals project development and the partner of choice for the technology metal and rare earth industry.”

Conclusion: The appointment of Senet to lead and project manage the Songwe Hill feasibility study brings an industry expert with a long history of African projects to the Songwe Hill team. We look forward to news as the project progresses.

*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.

 

Rambler Metals & Mining* (RMM LN) FOLLOW 0.10p, mkt cap £14.3m – Closure of convertible loan

  • Rambler Metals reports that it has now closed the previously announced US$2.5m loan-note financing with CE Mining III.
  • The previous announcement disclosed that the loan notes bear interest at 7%pa and mature after one year and, assuming the conversion rights were exercised in full would increase Lombard Odier’s interest in the company to approximately 9.2%. The conversion price is “equal to GBP£0.014” per share
  • On 22nd August the company confirmed that the US$2.5m financing with Lombard Odier which was announced at the same time had closed .
  • The previous announcement explained that the additional funds would be used for working capital as the production profile builds up at the Ming Mine and Nugget Pond concentrator in Newfoundland.

Conclusion: The increased working capital requirements of higher mine and mill throughput arising from operational improvements are being funded by the company’s principal shareholders through the issue of loan notes.

*SP Angel act as Nomad and broker to Rambler Metals & Mining

 

Strategic Minerals* (SML LN) FOLLOW 1.025p, Mkt Cap £15.0m – R & D Grant for Leigh Creek copper mine

  • Strategic Minerals has confirmed receipt of A$269,564 as a research grant and reimbursement of expenditure at the Leigh Creek copper mine in South Australia where Strategic Minerals has produced  and sold an initial consignment of copper cement and is working to bring the mine back into full scale production in late 2019 / early in 2020
  • The payment recognises a portion of works conducted at LCCM and a subsequent claim is expected next year. Management is currently evaluating funding alternatives to bring forward a portion of this anticipated payment”.
  • Commenting on the grant, John Peters, Managing Director said that "The Research and Development re-imbursement reflects the substantial works being undertaken at Leigh Creek in preparation for restoring full operations in 2020.  The receipt confirms our expectation of cash flow from the Australian Taxation Office and reinforces our expectation of a higher amount next year."

Conclusion: Strategic Minerals’ work at its Leigh Creek operation in South Australia is being recognised by the Australian tax authorities as eligible for reimbursement of research and development expenditure

*SP Angel act as Nomad and Broker to Strategic Minerals

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

Richard Parlons – 0203 470 0472

Abigail Wayne – 0203 470 0534

Rob Rees – 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

DCE

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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