SP Angel . Morning View . Thursday 12 12 19

Equities climb as Fed signals stable rates through 2020



MiFID II exempt information – see disclaimer below

Base Resources (BSE LN) – Toliara DFS confirms PFS estimates  

Premier African Minerals* (PREM LN) – Fundraising

Resolute Mining (RSG LN) – Drilling results from Tabakoroni


South African power disruption may lift ferro-alloy and other metals prices

  • Unprecedented load shedding is going to cause significant disruption to many mines and EAFs ‘electric arc furnaces’ in South Africa
  • While the loss of power for hours at a time on a daily basis should not overly impact open cast mines it will impact process plants and it will particularly disrupt EAFs.
  • South Africa is home to much of the world’s ferrochrome and other ferroalloy production which will see significant disruption if Stage-6 load-shedding continues for any length of time.
  • Some furnaces have become more energy efficient with off-gas capture and co-generation but these systems don’t work if you can’t power the furnace in the first place.
  • Underground mines have to cut shifts and bring workers to surface early in anticipation of load shedding for health and safety reasons and the deep level mines will suffer increased incidence of fatal rock-bursts if the pattern of shift work is disrupted.
  • Reports indicate that ESKOM is not even able to keep to its schedule of times for load shedding making the disruption even harder to manage for industrial and domestic power users
  • President Ramaphosa has indicated South Africa may go into recession as a result which will cause the South African rand to collapse further
  • On the plus side a weaker SA rand will be good for open cast miners which are able to better manage the load shedding while.
  • Many mines and other industries are now looking at the instillation of giant batteries to better manage what is seen as ongoing power disruption.
  • While Grid-scale Li-ion batteries offer one solution we also expect Vanadium Redox Batteries to be an important part of this solution.


UK – Labour manifesto threatens to delist companies that fail to show they are tackling the climate emergency.

  • It would be unusual for government to interfere in the listing rules of the London Stock Exchange
  • New ESG rules being implemented at institutional funds may also serve to restrict investment into companies that do not meet new environmental guidelines
  • ESG certification and accreditation is fast becoming important for companies seeking institutional investment so even if Labour don’t get to enforce environmental legislation it’s coming anyway through other processes


Dow Jones Industrials





Nikkei 225





HK Hang Seng





Shanghai Composite





FTSE 350 Mining





AIM Basic Resources







US – The Fed kept rates unchanged at 1.5-1.75%, in line with expectations, following cuts at the previous three meetings.

  • Meanwhile, most policymakers (13 of 17) expect rates to remain at current levels until at least 2021.
  • “Our economic outlook remains a favourable one, despite global development and ongoing risks.. as the year progressed we adjusted the stance of monetary policy to cushion the economy and provide some insurance… this shift has helped support the economy and has kept the outlook on track,” Powell said in the press conference following the monetary policy decision.
  • On rates outlook, Powell said it would take an unexpected and “persistent” increase in inflation for the Fed to think of increasing rates any time soon.
  • New economic projections showed little change from those in September.
  • US GDP median projections point to 2% next year and 1.9% in 2021.
  • Inflation is expected to remain well tamed at 1.9% through next year.
  • Treasury yields came off while the US$ index dropped to an almost-five-month low.
  • Equities closed higher a little short of record highs while gold held on to its gains supported by a weaker US$.
  • On tariffs note, President Trump is meeting his senior trade advisers later on Thursday to discuss plans over previously flagged next round of import duties on Chinese goods due in mid-December.


Japan – Machine orders collapse in October hit but a super typhoon and a sales tax.

  • Machine orders, a leading indicator of business spending, have been in decline for four consecutive months marking the worst series since the financial crisis.
  • Retail sales, industrial production and now October’s machinery orders have all significantly underperformed expectations.
  • Machine Orders (%mom/yoy): -6.0/-6.1 v -2.9/5.1 in September and 0.5/-1.9 forecast.


UK – The pound is rangebound against the US$ and € around 1.32 and 1.86, respectively, as the nation heads to polling stations.


Brazil – The central bank cut the benchmark rate for a fourth straight meeting to a record low of 4.5%(-50bp).

  • The decision should help accelerate growth rates next year with economists surveyed by the central bank expecting GDP to grow 1.1% this year and 2.2% in 2020.
  • Inflation is expected to be well contained given ample spare capacity following Brazil’s 2015-16 recession.


Turkey – Central bank decision due later today with estimates for a 150bp rate cut to 12.5%.

  • President Erdogan has previously indicated that he would like rates to move to single digits next year.
  • While inflation fuelled by a crash in the currency slowed down considerably through 2019, it picked up recently averaging  10.6% in November.
  • Heavy rate cuts to single digits would be challenging without further accelerating the inflation rate.
  • The lira is slightly stronger against the US$ this morning trading at 5.80 (-8.4% YTD).


Zimbabwe – ESKOM just woke up to the realisation that they have been supplying electricity to their comrades in Zimbabwe who have not been paying for it

  • While this is not a surprise to most observers ESKOM is reigning surprise at the realisation that Zimbabwe has not been paying its electricity bills
  • But Zimbabwe is not alone in its non-payment. ESKOM provides power to South African townships which are thought to distribute electricity freely without much effort to collect, though we note their power consumption is unlikely to be substantial when compared with the heavy industrial users which have benefitted from low cost power contracts with ESCOM for many years.
  • Press reports that ~US$133mpa of electricity supplied was unaccounted for.
  • Other reports also indicate lucrative contracts for the supply of diesel at inflated rates to power stand-by generators which were run in constant use despite the availability of cheaper coal.
  • The World Bank has long recognised problems at ESKOM and its threat to the South African economy with pledges of funds to support new renewable energy generation to be supported by battery power.
  • The virtual collapse of power supply in South Africa which has moved to Stage-6 load shedding is a wake up call for the government highlighting the need to clean up improper contracts where Black Economic Empowerment has been used as an excuse for corrupt practices.
  • President Ramaphosa who at first blamed sabotage for the load shedding at ESKOM may now need to deregulate the power market breaking ESCOM’s monopoly on power supply in South Africa.
  • If the provision of power is deregulated then the market will be open for new energy sources to take over the provision of energy.
  • This should be good for South Africa and good for the environment if new wind, solar and battery farms are installed to provide new distributed power storage and generation.



US$1.1128/eur vs 1.1084/eur yesterday.  Yen 108.66/$ vs 108.69/$.  SAr 14.650/$ vs 14.786/$.  $1.320/gbp vs $1.314/gbp.  0.688/aud vs 0.683/aud.  CNY 7.034/$ vs  7.040/$.


Commodity News

Gold US$1,473/oz vs US$1,467/oz yesterday

   Gold ETFs 80.9moz vs US$80.9moz yesterday

Platinum US$941/oz vs US$920/oz yesterday

Palladium US$1,928/oz vs US$1,901/oz yesterday

Silver US$16.86/oz vs US$16.68/oz yesterday


Base metals:   

Copper US$ 6,130/t vs US$6,116/t yesterday - Bougainville votes for independence (FT)

  • Almost 98% of votes supported independence, rather than remaining part of Papua New Guinea.
  • A decade-long civil war between the Island, population 250,000, and PNG saw 20,000 people die and the Island have a autonomy.
  • Despite the result, the poll was none-binding, meaning Bougainville will have to negotiate its future relationship with the PNG government.
  • Independence could see the development of the island’s copper-gold deposit, the previously small scale Panguna mine (mining.com).
  • BCL who previously mined the site, say that Panguna has an estimated 5.3Mt of copper and 19.3Moz of gold.
  • Bougainville’s Vice President told Reuters that the government plan to overhaul the region’s mining laws after the independence referendum.
  • The overhaul would see Bougainville would take a 60% share in all projects and retain all mining licences, leaving a 40% share that investors can bid for. 

Aluminium US$ 1,764/t vs US$1,753/t yesterday

Nickel US$ 13,785/t vs US$13,470/t yesterday - Nickel prices hit 2-week highs due to investors covering short positions and Indonesian royalty hike (Reuters)

  • Three month nickel on the LME climbed as much as 0.9% to $13,980/t.
  • In Shanghai, nickel jumped as high as 3.5% to $15,708/t.
  • According to Reuters, nickel prices rose as investors who bet on falling prices had to buy in at a strong support level.
  • On Tuesday, Indonesia announced it will double royalties on the sales of the ore to 10%.

Zinc US$ 2,236/t vs US$2,229/t yesterday

Lead US$ 1,937/t vs US$1,921/t yesterday

Tin US$ 17,175/t vs US$17,375/t yesterday



Oil US$64.1/bbl vs US$64.1/bbl yesterday

Natural Gas US$2.285/mmbtu vs US$2.277/mmbtu yesterday

Uranium US$25.85/lb vs US$25.85/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$92.4/t vs US$91.3/t

Chinese steel rebar 25mm US$584.1/t vs US$587.1/t - China’s 2020 crude steel output  expected to fall (Reuters)

  • China’s crude steel output in 2020 is expected to fall from its 2019 record high of 988mt, to 981mt according to a government research body.
  •  China has produced 829mt of steel in the first ten months of this year, up 7.4% compared to last year.
  • Steel demand is expected to rise 11.2% this year to 478mt, but is seen slipping 0.6% in 2020.
  • The automobile sector looks to be the biggest reason for this decline, as steel usage in the sector falls from 50mt to 48.2mt in 2020.

Thermal coal (1st year forward cif ARA) US$59.5/t vs US$59.4/t

Coking coal futures Dalian Exchange US$183.9/t vs US$183.7/t



Cobalt LME 3m US$34,750/t vs US$34,750/t

NdPr Rare Earth Oxide (China) US$41,440/t vs US$41,122/t

Lithium carbonate 99% (China) US$6,042/t vs US$6,037/t

Ferro Vanadium 80% FOB (China) US$29.0/kg vs US$29.0/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

Tungsten APT European US$230-245/mtu vs US$225-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t


Battery News

BMW Group signs €540m supply contract with Ganfeng Lithium (Green Care Congress)

  • The automaker is deepening its existing business relationship with Ganfeng, and the two companies have signed a five year supply contract (Yicai Global).
  •  The deal sees Ganfeng supplying battery grade lithium for BMW’s battery cells until 2024.
  • Sustainability and security of supply are important for BMW and as a result the company say they want to purchase ethically responsible raw materials.
  • Ganfeng extract lithium by mining hard-rock deposits in Australia under strict sustainability standards.


Company News

Base Resources (BSE LN) FOLLOW 12.25p, Mkt Cap £143.0m – Toliara DFS confirms PFS estimates  

  • Base Resources report results for the Toliara mineral sands project in Madagascar.
  • The DFS figures are remarkably close to the PFS demonstrating the quality of management’s previous estimates.
  • Key figures are:
  • Production:
  • 780kt ilmenite (sulphate, slag and chloride)
  • 53kt zircon
  • 7kt rutile
  • Throughput:
  • 13mtpa - Stage 1
  • 19mtpa - Stage 2
  • Revenue split estimates: total US$248.2m
  • US$161m – 65% ilmenite,
  • US$79m - 32% zircon
  • US$7.5m - 3% rutile
  • Recoveries:
  • 94.6% ilmenite,
  • 79.4% zircon
  • 58.4% rutile.
  • Capex:
  • Stage 1 - US$442m
  • State 2 – US$69m.
  • Op costs:
  • US$4.31/t of ore mined.
  • US$94/t produced inc. 2% royalty
  • IRR:
  • 21.4%.
  • NPV:
  • US$652m post tax at @ 10% discount
  • US$461m post tax at @ 12% discount
  • Payback:
  • 4.25 years
  • Life of Mine – 33 years.
  • Total workforce est. 980 including contractors of 226
  • Base Resources price assumptions*:

Product Prices

2022 – 2030




Sulphate ilmenite





Slag ilmenite





Chloride ilmenite















  • *Price assumptions: Base Resources’ supply forecast is generally aligned with TZMI’s five year outlook for existing producers, but Base Resources forms its own view on the anticipated timing of new brownfield and greenfield projects coming into production.  Base Resources’ medium to long term supply forecast is based on the Company’s internal view of future production from existing operations as well as new brownfield and greenfield projects.  For each new project forecast to commence production in the future, Base Resources considers the stage of development, estimated economics, mine life, applicable risks and the forecast market supply gap to determine a likely start-up date.

Conclusion: It is good to see close confirmation of Base’s PFS estimates reflected in the DFS figures published today. The next challenge is now to gain approval from a government to start mining and to manage the small but inevitable number of local objections in an area which has been known for past security issues.

There is a risk that the government may exploit some  minor local objections but we expect Base management to deal with this in the appropriate manner. If the 980 future employees and their associated dependents have any voice with the government then these issues should be settled relatively quickly. We have little doubt this project will greatly benefit the Toliara region if Base is able to finance the US$442m capital for the project.


Premier African Minerals* (PREM LN) FOLLOW 0.105p, Mkt Cap £11.6m – Fundraising

  • Premier African Minerals reports that it has raised £262,293 through the issue of approximately 263m new shares at 0.1p per share.
  • The new shares represent approximately 2.3% of the enlarged capital base of the company.

*Premier African Minerals has a research agreement in place with SP Angel.


Resolute Mining (RSG LN) FOLLOW 62p, Mkt Cap £560m – Drilling results from Tabakoroni

  • Resolute Mining reports that drilling in the vicinity of its Syama gold mine in Mali has encountered high grade ore shoots at depths down to around 250m at the Tabakoroni deposit where the company announced a maiden 850,0000z resource within 5.2mt at an average grade of 5.1g/t gold in April 2019.
  • Drilling is expected to continue during 2020 along the 1.8km of mineralised strike length identified so far with the aim of expanding the known resources which are known to remain open at depth and possibly also laterally within the Tabakoroni Main Shear Zone (TMSZ)
  • Among the results reported in today’s announcement are:
  • A 12m wide zone at an average grade of 93.6g/t gold from a depth of 133m in hole TADD729; and
  • 34m averaging 3.4g/t gold from a depth of 210m in hole TADD726; and
  • 13m averaging 10.7g/t from 235m in hole TADD725;and
  • 21m averaging 3.2g/t gold from 340m in hole TADD686 in what is described as a  ʺfrom a hanging wall mineralised zone and 11m at 3.51g/t Au from within the TMSZʺ.
  • As well as the work at Tabakoroni, the company has also identified additional oxide mineralisation at Cashew NE located some 5km south of the Syama processing plant which have ʺthe potential to provide additional feed for the oxide circuit and extend oxide processing mine life at Syamaʺ.



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


SP Angel                                                            

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


Oil Brent


Natural Gas, Uranium, Iron Ore


Thermal Coal

Bloomberg OTC Composite

Coking Coal




Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal


Metal Bulletin



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