SP Angel . Morning View . US$ index at three week high weighs on gold prices
Paul Kettle
SP Angel Research Note -4 min read
10:07, 9th July 2019

SP Angel – Morning View – Tuesday 09 07 19

US$ index at three week high weighs on gold prices

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MiFID II exempt information – see disclaimer below

 

Anglo Asian Mining* (AAZ LN) – Final dividend (4USc) payment

Base Resources (BSE LN) – Mining moves to the Kwale South Dune area

IronRidge Resources* (IRR LN) – Board changes

Orosur Mining* (OMI LN) – Anza exploration update

 

Dow Jones Industrials

 

-0.43%

at

  26,806

Nikkei 225

 

+0.14%

at

  21,565

HK Hang Seng

 

-0.69%

at

  28,137

Shanghai Composite

 

-0.18%

at

   2,928

FTSE 350 Mining

 

-0.82%

at

  20,239

AIM Basic Resources

 

+1.08%

at

   2,076

 

Economics

Japan – The government is not planning to ban exports of chemicals used by South Korean chipmakers and would grant shipment approvals for all civil use goods.

  • Tokyo imposed trade restrictions after South Korea courts ruled that Japanese companies must compensate Koreans for wartime forced labour.
  • Exporters now need to get specific clearance for each sale of the three chemicals (incl. fluorinated polyamide, photoresists and hydrogen fluoride etching gas), according to FT.
  • Trade Ministry of Japan told reporters today that Tokyo is open to working-level talks but has no intention of withdrawing the measures put in place last week on specialist materials.
  • “We believe this really depends on South Korea’s response… there is of course a possibility the current restrictions will tighten, but if export controls are firmly managed, things may also loosen… both are possible,” Trade Minister said.

 

UK – The pound is at the weakest since H1/17 against the US$ on different nations’ growth outlook.

  • The UK economy is estimated to have recorded a 0.1%qoq growth in Q2, the weakest since early 2018, amid reports showing another drop in retail sales and dismal PMI data.
  • Retail sales are down 1.6%yoy in June marking a worse than the average change in the past 12 months.
  • PMIs released last week showed services industry was nearly flat while manufacturing and construction recorded deepening contraction in June.
  • Mark Carney last week warned that global trade tensions, and the growing threat of a no-deal Brexit, had increased downside risks to growth.
  • Markets are currently almost fully pricing in a rate cut for  mid-2020.

 

ECB – Speculation that the central bank will restart QE (bond purchases were halted in Dec/18) is growing as growth outlook remains weak and inflation fails to pick up to 2% target.

  • ECB Executive Board member Benoit Coeure said on Monday that the bank may “hypothetically” restart net asset purchases if circumstances make it necessary.
  • “Its all the more necessary today as we have a slowdown in global activity, we have linked global risks that are significant – that aren’t linked to Europe, which are linked to trade tensions that were created by different countries which affects confidence – so in this environment we need an accommodative monetary policy more than ever,” Coeure reported.
  • The euro extended losses against the US$ trading at 1.12 this morning (-0.06%).

 

DRC – soldiers fire on illegal miners in protest outside Glencore Kamoto Copper mine in the DRC

  • Soldiers fire to disperse around 80 protestors near the Kamoto copper mine in the DRC
  • Glencore evicted some 2,000 illegal miners last week following the deaths of some 37 miners at the mine a week earlier
  • Local reports indicate around 170,000 artisanal miners are working in the region.

 

Iran – Iran condemned the seizure of an oil tanker by the British last week over accusations it was breaking sanctions by shipping oil to Syria.

  • “Capture of the Iranian oil tanker based on fabricated excuses… will not be unanswered and when necessary Tehran will give appropriate answer,” Iran’s armed forces chief of staff, Major General Mohammad Bagheri, said.

 

Currencies

US$1.1206/eur vs 1.1225/eur yesterday. Yen 108.87/$ vs 108.34/$.  SAr 14.184/$ vs 14.188/$.  $1.248/gbp vs            $1.252/gbp.  0.695/aud vs 0.699/aud.  CNY 6.882/$ vs  6.888/$.

 

Commodity News

Precious metals:         

Gold US$1,394/oz vs US$1,407/oz yesterday

   Gold ETFs 74.2moz vs US$74.1moz yesterday

Platinum US$812/oz vs US$813/oz yesterday

Palladium US$1,558/oz vs US$1,562/oz yesterday

Silver US$15.06/oz vs US$15.07/oz yesterday

           

Base metals:   

Copper US$ 5,881/t vs US$5,886/t yesterday

Aluminium US$ 1,808/t vs US$1,804/t yesterday

Nickel US$ 12,585/t vs US$12,570/t yesterday

Zinc US$ 2,377/t vs US$2,392/t yesterday

Lead US$ 1,886/t vs US$1,880/t yesterday

Tin US$ 18,470/t vs US$18,430/t yesterday

           

Energy:           

Oil US$64.0/bbl vs US$64.4/bbl yesterday

Natural Gas US$2.390/mmbtu vs US$2.426/mmbtu yesterday

Uranium US$24.80/lb vs US$24.55/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$115.0/t vs US$109.3/t

Chinese steel rebar 25mm US$616.2/t vs US$619.3/t

Thermal coal (1st year forward cif ARA) US$68.5/t vs US$67.7/t

Coking coal futures Dalian Exchange US$204.1/t vs US$204.0/t

           

Other:  

Cobalt LME 3m US$27,050/t vs US$29,000/t

NdPr Rare Earth Oxide (China) US$49,045/t vs US$49,020/t

Lithium carbonate 99% (China) US$9,228/t vs US$9,223/t

Ferro Vanadium 80% FOB (China) US$36.7/kg vs US$36.7/kg – Ferro-vanadium nitrogen producers stabilise prices as European consumers hold back in summer slowdown

  • Worsening sentiment towards construction activity in Europe may be holding back buying of ferro-vanadium in Western Europe.
  • Ferro-vanadium prices fell a further 5.6% in Western Europe last week to $31-32/kgV.
  • Prices also pulled back in China by 0.7% to 34.5-36.5/kgV.
  • China’s export price for vanadium pentoxide also pulled back this week after pulling back in China (Fastmarkets MB).
  • A cautious outlook by ferro-vanadium producers in relation to future orders from steel mills for hardened steel products has held buyers back
  • Fastmarkets assessed the export price of 98% V2O5 min, fob China, at $7.90-8.00 per lb on July 4, narrowing from $7.90-8.10 per lb in the previous week.
  • Vanadium nitrogen producers such as Bushveld Minerals with its Nitrovan product are seen as reluctant to sell at current prices suggesting the market may try to form a new floor at around current levels.
  • Demand for chemicals is reported to be good indicating that this segment should continue to pay good prices for vanadium products such as vanadium electrolyte for Vanadium Redox Flow Battery instillations.

Antimony Trioxide 99.5% EU (China) US$5.5/kg vs US$5.6/kg

Tungsten APT European US$230-242/mtu vs US$250-255/mtu

*Pricing sourced from Bloomberg

 

Battery News

 

Company News

Anglo Asian Mining* (AAZ LN) FOLLOW 115p, Mkt Cap £132m – Final dividend (4USc) payment

BUY – TP Under Review

  • The final dividend of 4USc will be paid on 25 July 2019 to shareholders on the share register on 28 June 2019.
  • Using the average GBPUSD exchange rate of 1.2580 the sterling amount payable in cash will be 3.1797p per share.
  • Together with a 2.29p interim dividend, that amounts to nearly 5.5p paid in dividends in respect of the 2018 year, equivalent to 10.4% dividend yield on an average price of 53p.

Conclusion: The first full year of dividend payments reflects the Company’s strong free cash flow generation and net debt free balance sheet. The Company is expected to remain highly profitable this year with the Board committed to pay at least 6USc in respect of 2019 which yields around 4.2% on the current share price of 115p. In addition to the dividend income, the Company is offering an exciting exploration exposure with the latest geophysics survey identifying a series of new prospective targets within the Gedabek Contact Area.

*SP Angel act as Nomad and broker to Anglo Asian Mining

 

Base Resources (BSE LN) FOLLOW 13p, Mkt Cap £151.7m – Mining moves to the Kwale South Dune area

  • African mineral sands producer, Base Resources, reports that it has now “completed the transition of mining operations to the South Dune orebody at its Kwale Operations in Kenya” on schedule.
  • As a result, “mining rates are now back to nameplate capacity with all three hydraulic mining units fully operational.  The Kwale Operations mineral separation plant operated on stockpiled heavy mineral concentrate throughout the transition period to ensure uninterrupted production.”
  • The transition of the mining into the new area appears to have been a complex process involving “the installation of 7,400m of slurry and water piping, an 8,500m 11kV power line, a bridge across the Mukurumudzi Dam spillway, a 1.25MW slurry booster pump and a 1MW process water booster pump.” In our opinion, it reflects considerable credit on the operational team that the transition was implemented on time and incident-free.
  • The company describes how the “transition of mining operations from the fully depleted Central Dune orebody to the South Dune orebody took place over a two-week period and involved moving the hydraulic mining units and the commissioning of the new pumps, pipes and power supply”.
  • Executive Director Operations and Development, Colin Bywe. Said “We have been planning for this transition of mining for over 12-months and it is a testament to the professionalism of the team that the move was completed on schedule and without incident.”

 

IronRidge Resources* (IRR LN) FOLLOW 14.25p, Mkt Cap £44.3m – Board changes

  • IronRidge Resources has announced the appointment of Mr. Tetsunosuke (Teddy) Miyawaki to its Board as a non-executive director replacing Mr. Kenichiro (Ken) Tsubaki as a representative of 10.2% owner, Sumitomo Corporation.
  • Teddy Miyawaki is a Johannesburg resident, and trained economist who has previously served as alternate director for Mr. Tsubaki. The role of alternate director is to be filled by Mr. Thomas Ueda who served in the capacity “as a nominated Director for Sumitomo Corporation between 26 May 2015 and 31 March 2016.”
  • Commenting on the appointment, CEO, Vincent Mascolo, welcomed Mr. Mitawaki saying “His insights and expertise will be highly valuable and comes at a compelling time for the Company, as we seek to develop and enhance our portfolio of projects.“
  • He also said that “the Directors of the Company would like to extend their sincere thanks to Ken Tsubaki for his contribution to date.  Ken has been a highly valued member of the IronRidge Board and the entire Company has benefited from his knowledge and counsel during the transition from explorer to developer.”

Conclusion – The representatives of Sumitomo on IronRidge’s Board are changing, with the previous alternate director moving up to the non-executive role which should maintain continuity.

*SP Angel act as nomad and broker to IronRidge Resources

 

Orosur Mining* (OMI LN) FOLLOW 3.8p, Mkt Cap £5.7m – Anza exploration update

  • Orosur Mining reports that, following relogging of some 2400m of drill core generated from work north of the APTA prospect during 2018 it is working in conjunction with Newmont Goldcorp’s Colombian subsidiary on a reinterpretation of the geological model.
  • The 2018 drilling campaign identified “a new broad zone of gold mineralization covering a continuous strike of 450m”.
  • As previously announced (September 2018), Newmont can “earn up to a 75% ownership interest in the Anzá Project by making cash payments to Orosur equaling a total of $4 million over Phases 1 and 2, spending a minimum of $30 million in qualifying expenditures over twelve years, and in addition completing NI 43-101 compliant pre-feasibility and feasibility studies”.
  • The company also reports that “Although the process … [of reaching agreement with creditors of its former mining operations in Uruguay] … has run its course without any significant incidents, it is progressing slower than expected due to the high number of national and international creditors involved; totalling approximately 200, of which some 30 filed a late claim. As a result of this and also the Uruguayan judiciary holidays in July, the Company now expects the ratification process to be extended well into the second half of calendar 2019“.
  • Work, including remediation of the tailings dam in Uruguay has already started and “The dewatering of the tailings dam was almost completed during the recent summer months in the Southern hemisphere (which made the activity significantly more efficient), having successfully dewatered and treated approximately 1,000,000 cubic metres of material. This work represents approximately 40% of the total remediation work in the tailings dam.”

Conclusion: The reassessment and updating of the geological model at Anza, in conjunction with Newmont, appears to be a fundamental first step towards identifying the detailed exploration strategy as Newmont deploys $10-30m to earn up to 75% of the project. We look forward to further news as the exploration strategy evolves to follow up the discovery made in 2018.

*SP Angel act as Nomad and broker to Orosur Mining

 

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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