SP Angel . Morning View . Tuesday 07 01 20

Gold  may rise as US Fed allows inflation to rise above target

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MiFID II exempt information – see disclaimer below  

Altus Strategies* (ALS LN) – Acquisition of Lakanfla NSR

Aura Energy* (AURA LN) – EGM result

Landore Resources (LND LN) – BAM gold project resources update

Mkango Resources* (MKA LN) – Interim CFO

 

Gold – prices may rise further on US Fed willingness to allow inflation to run above target

  • Fed officials are looking to keep interest rates steady till there is a pick-up in inflation >2%.
  • The move implies inflation will be allowed to overshoot target levels indicating potential for significantly higher inflation to come.
  • Our in-house estimation is that personal cost inflation is already well above the official rate of inflation and the official figures in the UK are skewed by the fall in cost of items like Pyrex dishes and colour TVs.

 

Happy Russian Orthodox Christmas

  • Having just said Happy Christmas we notice that the Ukrainian Orthodox Church is comparing Russia's treatment of believers in Crimea to Stalin-era repressions. (The Telegraph)
  • Metropolitan Epiphaniy, the primate of the Orthodox Church of Ukraine said “In Crimea, the Russian authorities, the temporary authorities, are trying to completely supplant us,” Officials are trying to evict the congregation from the peninsula’s Ukrainian cathedral and at the end of last year ordered the “absurd” destruction of another church building in Crimea, he said.
  • In his Christmas address on Monday, Patriarch Kirill of Moscow called for the unity of Orthodoxy and “multiplying love”..

 

Dow Jones Industrials

 

+0.24%

at

28,703

Nikkei 225

 

+1.60%

at

23,576

HK Hang Seng

 

+0.34%

at

28,332

Shanghai Composite

 

+0.69%

at

3,105

FTSE 350 Mining

 

-0.40%

at

18,838

AIM Basic Resources

 

-0.08%

at

2,153

 

Economics

Equities bounce back as investors’ worries over an escalation in geopolitical tensions subside.

  • Crude is down for the first time in four days with Brent trading around $68.4/bbl this morning (-0.7%).
  • Both VIX index and US Treasury prices are trading lower this morning.
  • Gold is rangebound holding onto its earlier gains and trading in the $1,565-1,570/oz range.

 

US – Former Fed Chairman Ben Bernanke said over the weekend that the central bank should not shy away from negative interest rates during the next downturn.

  • In addition to negative rates, he supported aggressive asset purchases known as QE.
  • “Categorically ruling out negative rates is probably unwise, as future situations in which the extra policy space provided by negative rates could be useful are certainly possible,” Ben Bernanke commented on the subject.

 

China – The renminbi climbed to the highest level in five months as a Chinese delegation is planning to travel to Washington on January 13 to sign the Phase One trade deal.[

  • President Trump twitted earlier that he will be travelling to Beijing at a later date to begin talks on Phase Two.

 

Hong Kong - The "one country, two systems" principle is Hong Kong's greatest advantage, says Luo Huining, the new director of the Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region (HKSAR).

 

UK –UK Treasury proposes £14bn increase in sales of government bonds for the 2019/20to £137bn.

  • This is £22.7bn over the forecast by the Office for Debt Management last year.

 

Japan – Private sector output contracts at the strongest pace since April 2014 driven by a number of headwinds the economy is faced with.

  • New order intakes were flat in December as declining demand for manufactured products offset new business wins in the service sector.
  • Consumer prices dropped for the first time in three years, despite an increase in input costs.
  • On a separate note, Transport Minister ordered checks for large luggage pieces at airports following the stunning escape of ex-Nissan boss Carlos Ghosn from the country.
  • Composite PMI: 48.6 v 49.8 in November.

 

Germany – Germany is moving some of its military personnel from Iraq to neighbouring countries over security concerns, the government said.

  • Around 30 of the 120 German soldiers in Iraq who mainly train Iraqi security forces will be relocated to Jordan and Kuwait, the German government told parliament on Monday.

 

Iran – 35 people killed and another 48 injured in stampede during the Suleimani funeral procession

  • In an effort to diffuse the situation the US-led coalition has informed the Iraqi government it will withdraw from Iraq out of respect for the nation's sovereignty.
  • Tehran is assessing 13 scenarios to respond to the US killing of Qassem Soleimani.
  • The head of Iran’s national security council, Ali Shamkhani, stressed that the weakest of those options would be a “historic nightmare” for the US.
  • Mohammad Javad Zarif, Foreign Minister of Iran, warned the US of a military encounter should they leave troops in the region.
  • Earlier President Trump criticised the Baghdad’s decision to suspend US troops presence in the country threatening Iraq with sanctions and demanding reimbursement for investments the US made in the country over the past two decades if the government follows through on parliament’s vote.
  • “We have a very extraordinarily expensive air bases that’s there… it cost billions of dollars to build… we’re not leaving unless they pay us back for it,” Trump said on Sunday.

 

South Africa – Business activity dropped to the lowest level in 14 months in December on the back of rolling significant power cuts, according to the latest Markit PMI data.

  • The headline index dropped to 47.6, down from 48.6 in November.
  • “With the country’s electricity supplier Eskom implementing Stage 6 load shedding in December, many South African businesses saw activity and trade brought to a standstill,” the report read.
  • “Eskom has warned that further load shedding could occur in January and beyond, placing greater headwinds on domestic firms.”

 

Currencies

US$1.1181/eur vs 1.1178/eur yesterday.  Yen 108.43/$ vs 107.96/$.  SAr 14.201/$ vs 14.291/$.  $1.318/gbp vs $1.312/gbp.  0.689/aud vs 0.695/aud.  CNY 6.937/$ vs  6.974/$.

 

Commodity News

Gold US$1,566/oz vs US$1,577/oz yesterday

   Gold ETFs 81.6moz vs US$81.6moz yesterday

Platinum US$967/oz vs US$987/oz yesterday

Palladium US$2,026/oz vs US$2,022/oz yesterday

Silver US$18.12/oz vs US$18.37/oz yesterday

           

Base metals:   

Copper US$ 6,154/t vs US$6,104/t yesterday - Copper prices inch upwards amid low inventories, although geopolitical uncertainty caps gains (Reuters)

  • London copper prices were up this morning as inventories continued to fall.
  • Copper in LME- monitored warehouses has fallen nearly 60% since late august, currently at 143,000t.
  • Three-month copper on the LME rose 0.6% to $6,175/t, extending a 0.2% gain from the previous session.
  • A lack of clarity regarding the US-China phase one trade deal has left traders waiting for more information on the extent of the trade agreement.
  • Iran’s vow to retaliate against the US after the killing of its military commander has sparked a wave of de-risking in stocks and metals, however gold and bonds have moved higher.

Aluminium US$ 1,830/t vs US$1,816/t yesterday

Nickel US$ 13,930/t vs US$13,665/t yesterday

Zinc US$ 2,337/t vs US$2,315/t yesterday

Lead US$ 1,928/t vs US$1,907/t yesterday

Tin US$ 16,920/t vs US$16,800/t yesterday

           

Energy:           

Oil US$68.6/bbl vs US$70.0/bbl yesterday

Natural Gas US$2.125/mmbtu vs US$2.145/mmbtu yesterday - China’s first transnational gas pipeline runs for 1,833km and delivered >47.9bn cubic meters of gas last year

Uranium US$24.80/lb vs US$25.85/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$92.8/t vs US$92.3/t

Chinese steel rebar 25mm US$567.7/t vs US$565.8/t

Thermal coal (1st year forward cif ARA) US$63.7/t vs US$63.7/t

Coking coal futures Dalian Exchange US$176.9/t vs US$180.1/t

           

Other:  

Cobalt LME 3m US$32,250/t vs US$32,250/t

NdPr Rare Earth Oxide (China) US$40,362/t vs US$40,147/t

Lithium carbonate 99% (China) US$5,694/t vs US$5,664/t

Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.5/kg

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

Tungsten APT European US$235-245/mtu vs US$235-245/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

The five biggest battery innovations of 2019 (Tech Republic)

  • University of Chicago’s lithium-carbon dioxide battery – researchers were the first to show that lithium-carbon dioxide batteries can be designed to operate in a fully rechargeable manner, and able to run up to 500 consecutive cycles of charge/ recharge.
  • IBM’s sea water battery – IBM’s research division came up with a new kind of battery made of never before used components that can all be extracted from sea water.
  • MIT’s Carbon Dioxide Battery – Researchers created a specialized battery that they have proven can absorb CO2 from the air passing over its electrodes as it is being charged up, and then release that gas as it is being discharged.
  • University of Adelaide’s non-toxic zinc and manganese – The innovative battery combined the two metals, as well as having an incombustible aqueous electrolyte. The two scientists signed a $700,000 research deal with manufacturer Zhuoyue Power New Energy.
  • Nikolas free-standing electrode automotive battery – According to the company, the battery doesn’t use nickel or Cobalt and can provide double the energy density at just 40% of the weight. The battery uses a whole different type of chemical with a lithium component.

 

Company News

Altus Strategies* (ALS LN) FOLLOW 7.0p, Mkt Cap £14.7m – Acquisition of Lakanfla NSR

  • The Company issued 2m shares to AGMEX for a 2% NSR held on the Lakanfla gold project in western Mali.
  • Altus retains an option to acquire the remaining 1% AGMEX NSR through to 14 January 2023 in return for a US$350k cash payment.
  • Lakanfla, located within a trucking distance (6km southeast) of the Sadiola gold mine, is subject to an earn-in and royalty JV with Glomin Services
  • A 3,500m drilling programme is underway at Lakanfla where the management believes the area hosts a potentially significant karst-style gold deposit, analogous to the adjacent FE3 and FE4 pits  of the Sadiola mine and the former Yatela mine with historical drilling results returning wide high grade intersections including 26m at 5.10g/t, 12m at 9.78g/t and 14.5m at 5.61g/t.

*SP Angel acts as nomad and broker to Altus Strategies

 

Aura Energy* (AURA LN)  FOLLOW0.25p, Mkt Cap £3.6m – EGM result

  • Aura Energy reports that the 6th January EGM resulted in the election of Mr. John Bennett as a non-executive director, however, the company points out that The vote today was passed by a slim margin of approximately 33.4 million shares representing approximately 2% of the issued share capital of the Company. The Board notes that the motion would have been defeated by over 200 million shares had it not been for the voting of a single shareholder”.
  • The company also says that it “is extremely concerned at this development given the ongoing legal action against Pre Emptive Trading Pyt Ltd, an entity controlled by Mr Bennett and his family that are now the subject of a writ with the Supreme Court of Victoria where the company is seeking damages … [and that] … With only 26% of the Company shares voted in favour of the resolution, the Board does not consider this result to be a clear indication of the wishes of the majority of the Company's shareholders”.
  • In the light of these concerns over the election of Mr. Bennett, “The Aura Board today resolved, given the unprecedented situation of having ongoing litigation against a subsequently- elected Director, to assess, with the appropriate legal advice, the degree to which Mr Bennett can be included in the Company's activities and the degree to which information can be released to him. At this stage the Board believes that this will be very limited until the litigation has been resolved.

Conclusion: The election of Mr. Bennett appears likely to distract executive management from the development of the company’s projects in Mauritania and Sweden and to incur additional legal expenses.

*SP Angel act as Nomad & Broker to Aura Energy

 

Landore Resources (LND LN) FOLLOW 0.70p, Mkt Cap £9.1m – BAM gold project resources update

  • Landore Resources has released an updated mineral resource estimate for its BAM Gold project in Ontario. The new estimate shows an increase of approximately 7% in the indicated and inferred gold content compared with the earlier, January 2019, estimate.
  • Using a 0.3g/t cut-off, the new estimate shows a total of 31.1mt at an average grade of 1.02g/t gold (1.015moz) compared to the 28.8mt averaging 1.03g/t (0.951moz) reported in January 2019 and which formed the basis of the Preliminary Economic Assessment (PEA) announced in February 2019.
  • Approximately 74% (21.9mt at an average grade of 1.06g/t gold or 747,000oz) is defined as indicated under the JORC code with the balance classed as inferred -  a similar ratio to that reported in January 2019 when 701koz of the overall 951 koz was defined as indicated.
  • The new estimate incorporates the results of the company’s 2019 summer drilling which consisted of a further 24 infill holes totalling 3,966m bringing the total drilling used in the estimate to 37,540m in 207 holes.
  • Landore Resources reports that the BAM Gold Deposit now extends for 3,700 metres … and remains open down dip and along strike to the east and the west. In addition the recently completed Soil sampling program has identified widespread gold mineralisation along strike to the west for a further 7 kilometres.”
  • Chief Executive, Bill Humphries, explained that the exploration effort for 2019 concentrated on establishing the potential growth of the BAM Gold Project along strike towards the existing Lamaune Gold project through the highly successful Soil Sampling campaign together with exploration drilling”.
  • The company also takes the opportunity to outline the impact of the current gold price on the preliminary economics of the project explaining that The February 2019 Preliminary Economic Assessment (PEA) for the BAM Gold project provided a price sensitivity analysis of the 'Extended case' which, at a gold price of US$1,300, would produce a Post Tax, Net Present value (NPV) of US$123.71m.  At the current gold price of US$1,560 that Post tax NPV would be elevated to US$227.37m.”

 

Mkango Resources* (MKA LN) FOLLOW 8.15p, Mkt Cap £10.8m – Interim CFO

  • Mkango Resources has announced the appointment of Tim Slater, “an ACA CTA trained accountant and has previously served as Interim CFO for several AIM- and TSXV-listed companies” as its interim Chief Financial Officer.
  • Mr. Slater, who replaces Ms Sandra Evans as CFO, is described as having “over 10 years’ experience in the mining and manufacturing sectors with responsibility for business plans, budgetary control, audits, forecasting and International Financial Reporting Standards and their application to multi-national groups.”
  • Welcoming the appointment of Mr. Slater, Mkango Resources’ President, Alexander Lemon, said “We are building a team that will enable Mkango to fulfil the undoubted potential of our asset base and to further grow Mkango Resources.”
  • Mr. Slater will also take on the Company Secretarial role.

Conclusion: As feasibility study work on Mkango Resources’ Songwe Hill rare earths project progresses, a refreshing and strengthening of the management team should lay the groundwork for the evolution of the company from an exploration company towards project development.

*SP Angel act as Nomad and broker to Mkango Resources

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

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

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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