SP Angel . Morning View . Gold ETFs climb to fresh high as global growth fears continu
Paul Kettle
SP Angel Research Note -3 min read
12:18, 11th February 2019

 

SP Angel – Morning View – Monday 11 02 19

Gold ETFs climb to fresh high as global growth fears continue

MiFID II exempt information – see disclaimer below

  

Altus Strategies* (ALS LN) – Cameroon bauxite licenses vended to Canyon

Bluebird Merchant Ventures* (BMV LN) – Kochang update

BlueRock Diamonds* (BRD LN) – Raising £575,000

Galantas Gold (GAL LN) –Kearney Vein intersected on a second underground mine level

Savannah Resources* (SAV LN) – Further drilling confirms continuity of lithium mineralisation

 

Dow Jones Industrials

 

-0.25%

at

  25,106

Nikkei 225

 

-2.01%

at

  20,333

HK Hang Seng

 

+0.71%

at

  28,144

Shanghai Composite

 

+1.36%

at

   2,654

FTSE 350 Mining

 

+1.01%

at

  18,722

AIM Basic Resources

 

-0.84%

at

   2,203

 

Economics

Global equities are trading higher this morning as Chinese markets re-opened following a week-long holiday and on expectations for a resolution in US/China trade tensions.

  • Chinese Vice Premier Liu He will join US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lightizer in Beijing for a series of negotiations later this week.
  • Earlier, President Trump ruled out a meeting with Chinese President Xi Jinping before March 1 deadline escalating concerns over a potential increase in tensions when the truce ends..

 

China – Economic growth is tipped to slow to the weakest level on record in Q1/19, according to a state owned newspaper.

  • “It is not difficult to determine that this year our country’s economy will continue to bear pressure, with a conservative estimate for full-year cumulative growth of around 6.3% and the possibility that growth for the present quarter could reach 6%,” the Economic Information Daily, a newspaper run by China’s official Xinhua news agency, wrote in a front-page commentary.
  • This compares to 6.4% recorded in the final quarter last year.

 

UK – GDP growth slows to 1.3%yoy (0.2%qoq) in the final quarter of the year on the back of weaker private spending an accelerated contraction in business investment.

  • In December alone, the economy fell by 0.4%mom, the most since before the 2016 vote to leave the EU.
  • Business cut investments for a fourth consecutive quarter amid uncertainty over the final terms of UK/EU trade relationship marking the longest stretch since the financial crisis.
  • In addition, waning growth outside the UK also weighs on demand for British goods.
  • Net trade cut 0.12pp (in qoq terms) from growth in the fourth quarter as the trade deficit hit the highest level in more than two years.
  • In 2018, growth slowed to 1.4%, down from 1.8% in 2017, with the BoE forecasting a further slowdown to 1.2% in 2019. A number of economists are expecting a recession this year in case of a no deal Brexit.
  • The pound is off this morning on the back of the announcement.
  • GDP (%qoq/yoy): 0.2/1.3 v 0.6/1.5 in Q3/18 and 0.3/1.4 forecast.

 

Currencies

US$1.1313/eur vs 1.1332/eur last week  Yen 110.00/$ vs 109.79/

nbsp; SAr 13.616/$ vs 13.637/
nbsp; $1.292/gbp vs $1.293/gbp  0.710/aud vs 0.709/aud  CNY 6.780/$ vs 6.745/$

 

Commodity News

Precious metals:         

Gold US$1,311/oz vs US$1,309/oz last week

  • The latest report from the World Gold Council indicate holdings in global gold-backed ETFs climbed 72t during January to reach 2,513t – the highest levels in nearly six years.
  • January was  the fourth consecutive month of net inflows, according to WGC data and thanks to a blockbuster December 2018, 185t or $8bn was injected into the scores of funds listed around the world over the past four months.
  • The precious metal interest continued to climb in the new year with WGC noting that global gold trading volumes increasing in January on par with 2018 averages.
  • Inbound shipments of gold swelled by 64% yoy in January to 46t as jewelers start to restock for the wedding season. However, elevated local prices floating at the highest in more than five years kept a lid on suppliers, which were lower than the 60t shipped in December.
  • Indians consider buying gold auspicious for marriages as part of the bridal trousseau or to be given as a gift in the form of jewelry. The wedding season starts this month and purchases will jump during the second-biggest gold-buying day of Akshaya Tritiya in early May.
  • The World Gold Council, a London-based promotion body, expects a recovery in demand in India this year on increased spending with elections due by May. “Elections mean expenditure, which means redistribution of income,” Managing Director for India P.R. Somasundaram said last month.
  • Steps in this direction have already been seen by the Indian Prime Minister Narendra Modi’s populist push in his final budget on Feb. 1 before the elections. The government will allocate 750bn-rupee ($10.6bn) a year in a cash handout plan for about 120m farmers and give taxpayers 185bn rupees of tax relief in the year to March 2020.
  • Last year “wasn’t great as far as Indian imports were concerned, largely because of depleting rural income and higher prices due to weaker rupee,” said Harish Galipelli, head of commodity and currencies at Inditrade Derivatives & Commodities Ltd. “But, given the direct cash benefits to farmers and elections round the corner, there could be increased liquidity among the rural population and that may drive demand this year.

   Gold ETFs 72.7moz vs US$72.8moz last week

Platinum US$794/oz vs US$796/oz last week

Palladium US$1,380/oz vs US$1,398/oz last week

Silver US$15.76/oz vs US$15.70/oz last week

           

Base metals:   

  • Global growth worries hampered by the ongoing US-China trade dispute broadly drags base metals lower during the first trading session for the Chinese market after a week-long national holiday.
  • A new round of trade talks began in Beijing on Monday, after the most recent set of negotiations concluding in Washington last week without a deal, and with top US negotiators declaring that more work is needed to clear a deal. "... the absence of a planned meeting between the two heads of state before (the March 1 deal deadline) is overshadowing sentiment," ANZ said in a note, referring to U.S. President Donald Trump and Chinese President Xi Jinping.
  • U.S. negotiators are preparing to press China this week on longstanding demands that it reform how it treats American companies' intellectual property in order to seal a trade deal that could prevent tariffs from rising on Chinese imports.
  • The most-traded Shanghai Futures Exchange zinc contract lead the loss, falling as much as -3.3%, its sharpest intraday drop in 11 weeks.

Copper US$ 6,141/t vs US$6,234/t last week

Aluminium US$ 1,867/t vs US$1,892/t last week

Nickel US$ 12,520/t vs US$12,810/t last week

Zinc US$ 2,646/t vs US$2,708/t last week

Lead US$ 2,060/t vs US$2,081/t last week

Tin US$ 21,020/t vs US$21,025/t last week

           

Energy:           

Oil US$61.8/bbl vs US$61.4/bbl last week

Natural Gas US$2.675/mmbtu vs US$2.594/mmbtu last week

Uranium US$28.85/lb vs US$28.90/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$91.0/t vs US$90.3/t

Chinese steel rebar 25mm US$593.8/t vs US$596.9/t

Thermal coal (1st year forward cif ARA) US$76.5/t vs US$78.4/t

Coking coal futures Dalian Exchange US$195.1/t vs US$196.1/t

           

Other:  

Cobalt LME 3m US$33,000/t vs US$33,000/t

China NdPr Rare Earth Oxide US$45,947/t vs US$46,182/t

China Lithium carbonate 99% US$9,956/t vs US$10,007/t

China Ferro Vanadium 80% FOB US$70.9/kg vs US$70.9/kg

China Antimony Trioxide 99.5% EU US$6.9/kg vs US$7./kg

Tungsten APT European US$260-270/mtu unchanged from previous week

 

Battery News

Tesla Model 3 reaches new record charge rate

  • The first European production Tesla Model 3 stopped at a 175 kW CCS charging station and recorded a new charge rate record for the electric vehicle: 126 kW, which is about 6 kW higher than on Tesla’s own Superchargers.
  • The initial batch of Model 3 with CCS plugs are hitting the road across Europe, with Netherlands-based charging network operator FastNed spotting the record charging cycle.
  • Tesla recently noted that Model 3 owners, and Model S and Model X owners with a CC adapter, are going to be able to charge at up to 120 kW and that the limitation is “by the car and not the adapter” or the CCS connector.

 

Morocco boosting renewable energy capacity

  • Morocco looks on track to meet its aims for 42% energy generation by renewables by 2020, with projects like the world’s largest concentrated solar farm, the Noor Ouarzazate complex, boosting capacity. The country achieved 35% from renewable technologies during 2018.
  • The 580 MW complex takes up more than 13.5 square miles (3500ha) and includes a 797ft (243m) tower. The complex relies on curved mirrors to heat tubes of fluids, rather than relying on photovoltaics.
  • A number of U.S. concentrated solar plants are among the largest in the world, including the Ivanpah Solar Plant in the Mojave desert, but they now fall behind Noor Ouarzazate.

 

Company News

Altus Strategies* (ALS LN) FOLLOW3.4p, Mkt Cap £6.0m – Cameroon bauxite licenses vended to Canyon

  • The Company finalised the sale of Birsok (198km2) and Mandoum (174km2) bauxite licenses in central Cameroon to Canyon Resources.
  • The deal follows on a letter of intent signed in October last year.
  • Licenses were subject to JV agreement with Canyon which has recently secured claims to the Minim Martap bauxite deposit.
  • Altus is set to receive up to 30m shares in Canyon Resources (A$0.2, Mkt Cap £82m) with a current value of C$6.0m (£3.5m).
  • 15m shares to be received straight away;
  • 10m shares to issued 12 months following the issue of the first tranche of shares and are to be subject to a 12 month voluntary escrow;
  • 5m shares to issued upon execution of a mining convention on the Minim Martap Project and are also subject to a 12 month voluntary escrow.
  • Additionally, Altus secured a $1.5/t “life of mine” royalty on ore sales from Birsok and Mandoum Licenses.
  • Consideration shares come on top of 8m shares already held by Altus as part of the previous JV arrangement. Under the JV, Canyon completed a series of drilling programmes as part of the earn in process into the project.
  • Licenses are contiguous to the 0.6bn tonnes Minim Martap bauxite deposit and is only 10km away from the existing rail line

Conclusion: The finalisation of the deal allows to monetise bauxite assets in the Altus portfolio while also retaining exposure through a lifetime royalty should licenses get incorporated into the future mining plan at Minim Martap. The sale reflects an attractive investment return for Altus given that the Company spent only $125k on generating the Project prior to the JV while Canyon covered all of the following exploration expenses.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Bluebird Merchant Ventures* (BMV LN) FOLLOW2.75p, Mkt Cap £6.3m – Kochang update

  • Bluebird Merchant Ventures reports a comparison of its results from the Kochang mine in South Korea with those from a survey in 2018 by a South Korean Government owned company, Korean Resources Company (KORES).
  • Based on 195 samples taken by KORES and assayed by SGS in Canada, KORES developed a total indicated and inferred resource estimate (Korean resource terms) of 113,280 oz Au from their results” while “Bluebird had reported on 20 November 2018 that the resource potential was 116,880 oz Au”.
  • KORES’ grade estimate of 6.55g/t gold and 35.97g/t silver compares with Bluebird’s own estimates of 5.94g/t gold and 31.54g/t silver. The results are reported to cover “a very small area of the mine, which itself operated on only a small part of the identified gold and silver system”.
  • Commenting on the comparison between the Company’s estimates and those of KORES, Colin Patterson, CEO of Bluebird, said It is always pleasing to see corroboration of one's technical work. These results reinforce our opinion that Kochang has a good deal of life left in it.”

Conclusion: Bluebird Merchant Ventures’ estimate of the gold resource within this part of the Kochang mine is around 3% higher than that of KORES with estimates of both the gold and silver grade around 10% lower than the KORES estimate, implying that Bluebird has identified a larger tonnage. We are not familiar with the finer detail of the Korean minerals reporting system but the closeness of the two estimates should provide comfort that Bluebird’s assessment has a level of independent corroboration.

*SP Angel act as broker to Bluebird Merchant Ventures

 

BlueRock Diamonds* (BRD LN)FOLLOW 0.345p, Mkt Cap £1.5m – Raising £575,000

  • BlueRock Diamonds reports that it has raised £575,000 by placing approximately 191.67m additional shares at a price of 0.3p/share. The company is also issuing a 2 year unlisted warrant at a price of 0.4p with each of the new shares. The new shares represent approximately 30% of the enlarged company.
  • The additional funds will be used to “further the development of KV1 and KV2 and also to fund minor improvements to the Company’s operating plant which took place during the Christmas shut down period.”
  • The company also reports that “The main development to the KV2 will take place in the second half of 2019” and waste stripping amounting to 340,000 tonnes in KV1 prepares “the pipe for efficient long term mining”.
    • Commenting on recent developments at Kareevlei, CEO, Adam Waugh, said “The quality of Kareevlei diamonds has been highlighted by the recovery of several high-quality high carat stones, the latest of which was a 16.28 carat diamond recovered on Friday.”
    • The announcement goes on to elaborate that “The recent recovery of large, high quality gem diamonds has encouraged the Company to look at ways to fast track its production targets.  Further investment in the crushing circuit will be necessary to achieve this and discussions with industry partners are taking place to address this.  A number of options are being considered including outsourcing and external funding from industry partners.”

Conclusion: The additional funds should assist in development of the KV! And KV2 pipes while the company explores opportunities to accelerate its production targets through a possible expansion of the crushing circuit at Kareevlei.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Galantas Gold (GAL LN) FOLLOW6.125p, Mkt Cap £18.4m –Kearney Vein intersected on a second underground mine level

  • Galantas Gold reports that underground mine development on the 1084 level in addition to the in addition to earlier intersection on the 1096 level.
  • Decline development is continuing towards the 1072 level with a further 43m remaining. “On vein drivage on the 1072 level, which is the third level in the vertical sequence, is planned to provide future mining access.”
  • The company highlights that drill-core OM-DD-06-14 intersected strong gold mineralisation some 7 metres to the south of the junction of the 1084 access and the Kearney vein. This core returned an intersection of grade 10.3 g/t Gold over a down-hole length of 3 metres. This included 1 metre at 27.42 g/t gold, 170.84 g/t silver and 6.52% Lead (reported Jan 30, 2007). The exposure in the on-vein development is visually well mineralised across an approximate 2 metre true width.”
  • In addition to the intersections of the Kearney Vein in the underground workings, An access tunnel westwards from the decline tunnel, towards the Joshua vein has been continued and currently has been driven a total of 56 metres out of an anticipated 344 metres”. This tunnel is intended to provide an additional exit route from the underground workings as well as linking up the ventilation of the mine.

Conclusion: The identification of one of the principal mineralised veins on a second level of the underground mine provides reinforcement to the geological modelling which should be further enhanced if the Kearney Vein is also picked up on the 1072 level.

 

Savannah Resources* (SAV LN) FOLLOW4.9p, Mkt Cap £43.6m – Further drilling confirms continuity of lithium mineralisation

  • Ongoing RC and diamond drilling continues to yield positive lithium mineralisation at the Mina do Barroso Lithium Project in northern Portugal, with the programme focusing on building confidence in the continuity of mineralisation and geological modelling at Grandao and Reservatorio.
  • A total of 307 holes for 25,757m have been drilled to date at the project, which primarily focuses on the Grandao, Reservatorio and NOA deposits.
  • Drilling at the Grandao deposit has concentrated on both gaining further confirmation of the down dip extension of the main pegmatite body and acquiring representative samples for metallurgical testing. Exploration efforts indicate the ore body lithium concentration increases with thickness to the west, as the pegmatite increases to approx. 50m true width, while continuing to be open to the west.
  • Key lithium intersections at Grandao include:
    • 46.11m at 1.04% Li₂O from 157.44m in 18GRARC125 (diamond tail)
    • 19.70m at 1.28% Li₂O from 174m in 18GRARC0122 (diamond tail)
    • 15.27m at 1.37% Li₂O from 137.73m in 18GRARC125 (diamond tail)
    • Diamond tail drilling also confirms mineralisation at depth in an interpreted steep dipping pegmatite body, providing a viable target to increase the resource.
    • Geotechnical drilling at Reservatorio deposit aimed to test the structural characteristics of the rock defining the proposed pit wall, with the diamond rig extracting oriented core for structural measurements. The results have been sent to consultants Knight Piesold to analyse and assess the suitability of the proposed pit design.
    • Results from the assaying continue showing significant mineralisation at depth, including:
      • 36m at 1.15% Li₂O from 62m in 18RESDD008
      • The last of the results from the RC drill programme at Pinheiro were received at the end of 2018 and further confirm the presence of lithium mineralisation in the larger pegmatite bodies and indicate the possibility of a reasonably sized resource at the prospect.
      • Further drilling will be planned to define the extent of the pegmatite field with the aim of increasing the size of the defined mineralisation.
      • The diamond drill rig continues to work on the collection of metallurgical samples at the Grandao Deposit
      • The RC rig commenced drilling on the Aldeia ground in mid-January 2019 with 20 RC holes for 1,268m drilled to the week ending 1 February

Conclusion: We continue to be impressed with the positive lithium mineralisation from the ongoing drilling programme and efforts towards expanding the resource at the Mina do Barroso project. We look forward to understanding the scale of the prospect in the Definitive Feasibility Study as the Company progress the project towards Europe’s most significant lithium spodumene producer.

*SP Angel acts as Nomad to Savannah Resources

 

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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This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

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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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