SP Angel . Morning View . Iron ore pulls back as Chinese steel lobby calls for state oversight
Paul Kettle
SP Angel Research Note -4 min read
09:23, 5th July 2019

SP Angel – Morning View – Friday 05 07 19

Iron ore pulls back as Chinese steel lobby calls for state oversight

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MiFID II exempt information – see disclaimer below

 

Acacia Mining (ACA LN) – Reserve increase at Gokona underground mine

ARC Minerals* (ARCM LN) – Increased holding in Zaco Limited

 

Dow Jones Industrials

 

-

 

  26,966

Nikkei 225

 

+0.20%

at

  21,746

HK Hang Seng

 

-0.09%

at

  28,770

Shanghai Composite

 

+0.19%

at

   3,011

FTSE 350 Mining

 

-1.39%

at

  20,345

AIM Basic Resources

 

-0.13%

at

   2,064

 

Economics

US – Non-farm payrolls due later today (160k est v 75k in May).

  • The report would be eagerly watched as to assess chances of the FOMC cutting rates at the end of the month.

 

China – China insists that for trade talks to proceed the US needs to lift all the tariffs placed on Chinese imports to date, Bloomberg reports.

  • This is likely to delay negotiations and pull back the sentiment that got a boost last month that two US and China leaders agreed to re-start talks.
  • “If the two sides are to reach a deal, all imposed tariffs must be removed,” Ministry of Commerce Spokesman said on Thursday.

 

Germany – Factory orders post a worse than expected drop in May on weaker overseas demand.

  • Governing Council member Olli Rehn summed up latest poor economic data saying that growth has “slowed significantly” and its no longer possible to consider the downturn as temporary.
  • Expectations for the ECB to cut rates the deposit rate are building up with 10y Bund yields hitting a record low of -0.41%.
  • A rally in Eurozone bonds was also supported by the news that Lagarde will replace Draghi as the head of ECB who was an early supporter of regional QE, unlike another candidate Jens Weidman who previously opposed the monetary easing.
  • The report showed domestic orders were up 0.7%mom while exports dropped 4.3%mom.
  • Factory Orders (%mom/yoy): -2.2/-8.6 v 0.4/-5.3 in April and -0.2/-6.2 forecast.

 

South Korea – Samsung, the nation’s largest company, is expecting to post  a more than 56%yoy drop in operating profit in Q2/19 on the back of overcapacity leading to weak pricing in the memory chip market.

  • Trade row between China and the US weighs on the overseas demand with the outlook remaining challenging as Japan decided to tighten the rules for exports of high-tech materials and chemicals needed for manufacturing semiconductors and displays.
  • Revenue is guided to have dropped by 4%.
  • Final numbers are due at the end of the month.

 

Iran – Britain seizes the Panamanian-flagged vessel with a capacity of 2m barrels that is believed to be have been shipping Iranian oil to Syria.

  • Hours following the operation at 2am off the coast of Gibraltar, Tehran said it will not accept the “illegal” seizure of the tanker and summoned the British ambassador to express its objections, FT reports.
  • The incident may weaken the support from Britain, France and Germany to save the 2015 nuclear accord after the US decided to withdraw from the agreement and impose sanctions on Tehran.

 

Currencies

US$1.1268/eur vs 1.1283/eur yesterday.  Yen 107.97/$ vs 107.82/$.  SAr 14.059/$ vs 14.039/$.  $1.258/gbp vs $1.258/gbp.  0.702/aud vs 0.703/aud.  CNY 6.873/$ vs  6.873/$.

 

Commodity News

Precious metals:         

Gold US$1,415/oz vs US$1,414/oz yesterday

   Gold ETFs 74.2moz vs US$74.2moz yesterday

Platinum US$832/oz vs US$838/oz yesterday

Palladium US$1,566/oz vs US$1,563/oz yesterday

Silver US$15.22/oz vs US$15.24/oz yesterday

           

Base metals:   

Copper US$ 5,889/t vs US$5,913/t yesterday

Aluminium US$ 1,804/t vs US$1,791/t yesterday

Nickel US$ 12,280/t vs US$12,335/t yesterday

Zinc US$ 2,420/t vs US$2,450/t yesterday

Lead US$ 1,880/t vs US$1,890/t yesterday

Tin US$ 18,350/t vs US$18,215/t yesterday

           

Energy:           

Oil US$63.1/bbl vs US$63.1/bbl yesterday

Natural Gas US$2.288/mmbtu vs US$2.277/mmbtu yesterday

Uranium US$24.50/lb vs US$24.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$116.0/t vs US$116.0/t – Prices are off on a report that the Chinese steel lobby urged the government to control the price of iron ore that surged to a five-year high on a supply squeeze.

  • The China Iron & Steel Association “is reporting relevant problems in the industry to government ministries and regulators, urging a stronger investigation and supervision to maintain normal iron ore market order,” Vice Chairwoman said at a conference in Shanghai.
  • The association wants to see prices back at “reasonable levels”.
  • Iron ore is off as much as 6.2% to $107.2/t on the Singapore Exchange today after hitting a five-year high on Monday.

 

Chinese steel rebar 25mm US$621.2/t vs US$620.9/t

Thermal coal (1st year forward cif ARA) US$66.0/t vs US$64.6/t

Coking coal futures Dalian Exchange US$198.2/t vs US$207.8/t

           

Other:  

Cobalt LME 3m US$29,000/t vs US$29,000/t

NdPr Rare Earth Oxide (China) US$50,193/t vs US$50,166/t

Lithium carbonate 99% (China) US$9,239/t vs US$9,306/t

Ferro Vanadium 80% FOB (China) US$36.9/kg vs US$37.1/kg

Antimony Trioxide 99.5% EU (China) US$5.6/kg vs US$5.6/kg

Tungsten APT European US$250-255/mtu vs US$250-255/mtu

*Pricing sourced from Bloomberg

 

Battery News

 

Company News

Acacia Mining (ACA LN)  FOLLOW 175.4p, Mkt Cap £719.3m – Reserve increase at Gokona underground mine

  • Acacia Mining reports an interim mineral reserve increase at the underground Gokona mine within the North Mara operation in Tanzania  following a continuing drilling programme which has confirmed the “predicted extensions of the orebody”.
  • An additional 32,463m (95 drill holes) have been incorporated into the new estimate which is calculated based on a long term gold price of $1200/oz,
  • At 31st May, proven and probable reserves are reported as 7.06mt at an average grade of 5.53g/t gold representing 1.257moz of contained gold. This compares to the 31st December 2018 reserve of 6.18mt at an average grade of 5.62g/t (1.117moz).
  • Approximately 85% of the gold contained within the updated reserve estimate is classified as probable.
  • The company reports that during the period between the two estimates, the mine produced some 76koz of gold implying that the drilling programme has identified an additional 216,000oz of gold.
  • “Acacia plans to continue underground diamond drilling at Gokona and this is expected to further increase confidence in the continuity of the mineralisation of the deposit with the potential for further additions to inventory in the Lower West and Lower East, as well as in the Deep East in the year-end 2019 Mineral Reserve and Resource”.
  • Offsetting the increase in the underground reserve base at Gokona to some extent, the company also reports that “slope stability issues at the Nyambirama open-pit earlier this year have necessitated a redesign of the pit which “indicates that, aside from depletion, there will likely be a further 70Koz to 130Koz decrease in open pit Mineral Reserves”.

 

ARC Minerals* (ARCM LN) FOLLOW 4p, Mkt Cap £28.2m – Increased holding in Zaco Limited

  • Following yesterday’s announcement of the West Lunga target in Zambia, Arc Minerals reports that it has increased its stake in the holder of the licence block which, based on the map published with yesterday’s announcement, includes West Lunga, Zaco Limited, through the purchase of an additional 5% bringing its interest to 47.5%.
  • Arc Minerals has purchased the additional stake in Zaco  “from Rémy Welschinger, a Non-Executive Director of Arc, for a total consideration of 1,414,000 New Ordinary Shares”.
  • Yesterday’s announcement described a 6km long copper geochemical anomaly at West Lunga located in a structural geological and lithological setting analogous to known discoveries within the wider Central African Copper Belt and indicated that the company would review its exploration priorities in the light of West Lunga with the likelihood that it would emerge as “one of our highest priority targets.”

Conclusion: The acquisition of an additional 5% interest in Zaco Limited underlines the company’s enthusiasm for the West Lunga target.

*SP Angel acts as nomad and broker to Arc Minerals.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

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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