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SP Angel – Morning View – Metal prices mixed on investors cautious risk stance

10:29, 26th March 2019
Paul Kettle Kettle
SP Angel
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SP Angel – Morning View –Tuesday 26 03 19

Metal prices mixed on investors cautious risk stance

MiFID II exempt information – see dsclaimer below 

Galantas Gold (GAL LN) – Building up production at the Omagh mine

SolGold* (SOLG LN) – Project and corporate update

 

Dow Jones Industrials

 

+0.06%

at

25,517

Nikkei 225

 

+2.15%

at

21,428

HK Hang Seng

 

+0.05%

at

28,536

Shanghai Composite

 

-1.51%

at

2,997

FTSE 350 Mining

 

+0.47%

at

19,399

AIM Basic Resources

 

+0.52%

at

2,163

 

Economics

US – US equities closed marginally lower on Monday as investors remained wary of the economic growth outlook.

  • 10y Treasury yields edged up this morning after shedding 5bp yesterday and 17.5bp in total since the US Fed last week dropped projections for increasing rates this year and announced the end of its balance sheet reduction.
  • Softer growth outlook saw the 10y yield falling below the 3m bills rate for the first time since 2007 on Friday, one of the indicators that signals a risk of recession. The spread remains negative (c.3bp).
  • Charles Evans, a voting FOMC member, argued yesterday that it is understandable that markets have been nervous over the flattening of the yield curve but highlighted that he remain confident growth is to recover from weak Q1/19 and average around 2% for the year.
  • Commenting on the monetary policy, Evans said it was a good time for the US Fed to pause and adopt a cautious stance, adding he did not expect any interest rate hikes until H2/20.

 

Germany – Business confidence unexpectedly improved this month following six consecutive drops offering some relief from the latest series of weak economic data.

  • The economy has narrowly avoided a recession last year as the export-oriented nation has been battling with headwinds in the form of US/China trade disputes and the prospects of a no deal Brexit.
  • The Ifo economic institute said its business climate index increased to 99.6 from an upwardly revised 98.7 in the previous month; this beat a consensus forecast for a reading of 98.5.

 

UK – British Parliament takes control of Brexit timetable and potential options following a 329 to 302 vote including three ministers supporting the motion.

  • The PM abandoned her plans to hold a third vote on her deal amid resistance from Conservative Eurosceptics and the Democratic Unionist Party.
  • A series of so-called indicative votes are to follow tomorrow designed to test the will of Parliament to see what commands a majority with options including ‘softer Brexit’, a customs union and another referendum.
  • PM noted she was ‘sceptical’ about the process and she would not commit the government to abiding by the result saying that “the votes could lead to an outcome that is un-negotiable with the EU, BBC reports.
  • The European Commission said the uncertainty over the plan of action makes it “increasingly likely” the UK will leave the EU without a deal in less than three weeks time as the bloc is getting ready for a hard Brexit.
  • The Commission highlighted that it had completed a no-deal planning “as it is increasingly likely that the UK will leave the EU without a deal on 12 April”.

 

France – Growth held up steady in the final quarter of the year despite a series of anti-government protests that weighed on business and consumer confidence.

  • The economy grew 0.3%qoq, in line with the previous quarter and market expectations.
  • Strong exports, as companies such as Airbus rushed to complete shipments before the end of the year, helped offset weak consumer spending.
  • Consumer spending growth came in flat after growing 0.4%qoq in Q3/18 as an increase in real disposable incomes during the quarter was compensated by a rise in savings rate.
  • Investment growth came in weak at 0.3%qoq, down from 1.7%qoq recorded in Q3/18, amid slowing global growth momentum and region wide uncertainty.
  • In aggregate, the economy grew 1.6% over the course of the year, marginally better than the 1.5% expected previously.

 

Currencies

US$1.1307/eur vs 1.1300/eur last week. Yen 110.14/$ vs 110.09/$. SAr 14.379/$ vs 14.471/$. $1.320/gbp vs $1.319/gbp. 0.713/aud vs 0.709/aud. CNY 6.712/$ vs 6.714/$.

 

Commodity News

Precious metals:         

Gold US$1,317/oz vs US$1,317/oz yesterday

   Gold ETFs 72.1moz vs US$72.1moz yesterday

Platinum US$853/oz vs US$851/oz yesterday

Palladium US$1,568/oz vs US$1,548/oz yesterday

Silver US$15.48/oz vs US$15.50/oz yesterday

           

Base metals:   

Copper US$ 6,332/t vs US$6,311/t yesterday

Aluminium US$ 1,891/t vs US$1,897/t yesterday

Nickel US$ 12,880/t vs US$12,875/t yesterday

Zinc US$ 2,847/t vs US$2,804/t yesterday

Lead US$ 2,019/t vs US$2,031/t yesterday

Tin US$ 21,295/t vs US$21,375/t yesterday

           

Energy:           

Oil US$67.6/bbl vs US$66.7/bbl yesterday

Natural Gas US$2.744/mmbtu vs US$2.728/mmbtu yesterday

Uranium US$25.75/lb vs US$26.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$84.0/t vs US$83.8/t

Chinese steel rebar 25mm US$620.2/t vs US$619.5/t

Thermal coal (1st year forward cif ARA) US$73.5/t vs US$73.1/t

Coking coal futures Dalian Exchange US$187.5/t vs US$199.2/t

           

Other:  

Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$42,832/t vs US$42,826/t

Lithium carbonate 99% (China) US$9,758/t vs US$9,757/t

Ferro Vanadium 80% FOB (China) US$65.5/kg vs US$67.0/kg

Antimony Trioxide 99.5% EU (China) US$6.7/kg vs US$6.8/kg

Tungsten APT European US$271-282/mtu vs US$271-282/mtu

 

Battery News

UK – solar car parks to start trials – new sites wanted

  • The UK is to see a number of new Smart Hubs trialled for the charging of electric vehicles.
  • A number of companies are involved in the project and are looking for sites for trials
  • Part of the trial may require battery storage solutions to provide sufficient power to charge a number of automotive charging points using regular infrastructure.
  • We expect providers to use Lithium-ion batteries for smaller sites and possibly vanadium-redox battery solutions for larger sites.
  • Red-T and Bushveld Minerals* both have vanadium redox battery solutions.

 

Company News

Galantas Gold (GAL LN) FOLLOW 5.1p, Mkt Cap £15.3m – Building up production at the Omagh mine

  • Galantas Gold reports that as underground mine development builds up at its Omagh gold mine in Northern Ireland it is batch processing stockpiled material using froth flotation to produce a gold and silver concentrate.
  • Currently dayshift operations are planned to continue for the remainder of the current quarter and Extended dayshift operations are planned to continue until late in the second quarter, when a second milling shift is expected to be added to process increasing quantities of feed expected to be available. Additional milling shifts are planned to be added in the third quarter”.
  • The company confirms that Target production is 2,000 to 2,500 troy ounces of gold in concentrate per month, planned to be achieved in 2020 /2021. This is in line with the production rates outlined in the Galantas Technical Report, July 2014”.
  • Longer term, “further expansion may be possible, targeting 50,000 ounces of gold per year. Any expansion will be dependent on and driven by the definition of additional resources, for which hard targets are already well identified”.
  • The company also comments that, as the mine reaches deeper levels ground conditions are improving which we speculate may reduce mining costs and improve productivity over the longer term.

 

SolGold* (SOLG LN) FOLLOW 38.75p, Mkt Cap £715.4m – Project and corporate update

  • SolGold has provided a progress report on its continuing work at the Cascabel project in Ecuador as well as on the status of its previously announced intention to bid for Cornerstone Capital Resources which holds the 15% of the project which Solgold deos not already own.
  • The company reports that the Preliminary Economic Assessment (PEA) for the Alpala project at Cascabel is “at a very advanced stage and the Company expects to complete and release it following peer review and QAQC procedures”.
  • Citing the importance of delivering a high quality study, Solgold explains that the preliminary“mine plan assessments and preliminary metallurgical data has been more complex than originally anticipated and the Company’s consultants have conducted a number of initiatives to ensure the identification of best mining and metallurgical practices and development alternatives”.
  • On site, 11 drilling rigs are in operation, generating approximately 10,000m of additional drill core each month as the continuing exploration programme focusses on “higher grade mineralisation to the North West and South East of the Alpala resource. In addition, the Company is conducting sterilization drilling and geotechnical drilling of the proposed plant site and proposed decline route.”
  • We note that, although not addressed specifically in today’s announcement, in addition to the Alpala project itself, Solgold has identified and is following up a number of other highly promising targets within the wider Cascabel licence area and is also advancing exploration on several earlier stage, wholly owned, projects elsewhere in Ecuador.
  • Addressing the growing recognition of the wider exploration potential in Ecuador, Solgold points to the increasing interest of the major mining companies including BHP’s recently announced letter-of-intent to earn up to a 70% interest in Luminex Resources’ Taqui project and “the announcement of the pending agreement between the Chilean state copper mining giant Codelco and Ecuadorian Government owed Corporation Enami, for the development of the 990mt 0.9% copper Llurimagua copper project 60km south of Cascabel”.
  • Both BHP and Newcrest Mining are investors in Solgold.
  • Providing news on its proposed bid for Cornerstone, the company confirms that it is finalising the documentation and expects to complete it shortly although it has “taken longer than anticipated, allowing for the complexity of the taxation and other considerations to ensure the most advantageous treatment of Cornerstone shareholders, and the requirement for translation of the entire document into French.”
  • Solgold also states that it “wishes to refute Cornerstone’s various assertions contained in the CGP Release and will do so in detail when the formal bid documentation is released”.

Conclusion: We look forward to the publication of results from the Alpala PEA and we speculate that the continuing focus of the drilling programme on possible extensions of the higher grade mineralisation may eventually result in further extensions to the overall 2.05bn tonnes resource at an average grade of 0.6%copper equivalent which was announced in November 2018 and/or to the 420mt averaging 0.86% copper and 0.91g/t gold contained within the higher grade core.

*SP Angel acts as broker and advisor to Solgold. SP Angel have raised funds for SolGold on eight previous occasions.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

 

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.

 

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The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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