SP Angel . Morning View . Gold poised for major bull run
Paul Kettle
SP Angel Research Note -4 min read
09:31, 22nd July 2019

SP Angel – Morning View – Monday 22 07 19

Gold poised for major bull run


MiFID II exempt information – see disclaimer below 


Galantas Gold (GAL LN) – Kearney Vein intersected on 1060 level of the Omagh mine

Petra Diamonds (PDL LN) – Meets production guidance for year to 30th June

Serabi Gold (SRB LN) – Production guidance maintained following Q2 results

Tri-Star Resources* (TSTR LN) – SPMP report first antimony metal production


Gold - poised for major bull run

  • The gold market looks poised to enter a major bull market, with the precious metal trading above $1,400/oz for the first time since 2013 for more than 12% growth year to date.
  • While growth of 20% strictly defines a bull market, some market participants are suggesting a rally could involve significant higher gains that last for years. The gold market has only surged twice since World War II, rising +1,755% through 1980 and +611% through 2011.
  • The precious metal could build on recent gains as the Federal Reserve gets set to lower rates, US economic activity slows and trade tensions remain. Historically, gold has rallied when Fed cuts occur because the move depresses bond yields and the US dollar.
  • Investors are betting the Fed will cut interest rates at its July 30-31 policy meeting. Market expectations for a 25 basis-point cut are at 58.9%, according to the CME Group’s FedWatch tool. Expectations for a 50 basis-point decrease are at 41.1%.
  • Fed Chairman Jerome Powell said on July 10 that business investments have slowed across the U.S. recently as “crosscurrents ” from the ongoing U.S.-China trade war and slower economic growth overseas dampen the outlook on the U.S. economy.
  • European growth mirrors faltering global growth, with manufacturing activity contracting last month, according to data from HIS Markit. Data sets are leading European Central Bank President Mario Draghi to clear the path for more stimulus in the region.
  • Gold thrives and core consumer price inflation tends to rise in an environment where policymakers are deliberately and persistently keeping policy rates and bond yields anchored below nominal GDP growth (i.e. fueling growth and inflation with an easy policy), which was the case of the 1960s and 1970s”, according to MRB Partners.


China debt levels and bank nationalisation threatens to undermine economy as repo rates spike >1,000%

China debt levels rise to 303% of GDP and 15% of global total debt

  • China’s debt pile has risen to >300% of its GDP according to the Institute of International Finance ‘IIF’.
  • The debt estimate includes total corporate, household and government debt in Q1.
  • "While authorities' efforts to curb shadow bank lending (particularly to smaller companies) have prompted a cutback in non-financial corporate debt, net borrowing in other sectors has brought China's total debt to over $40 trillion - some 15% of all global debt,” according to the IIF report ..
  • Unconfirmed reports suggest a leading sports shoe retailers may be struggling to get supply chain financing
  • Shanghai 4-day Repo rates spiked to >1000% on Friday, though rates have pulled back to between 2.75-3.1%.
  • Baoshang Bank and another bank have been nationalised causing a repricing of risk as China may be changing its long-standing policy on supporting local banks.
  • While there may be internal issues at Baoshang Bank which have prompted the nationalisation of the bank the government’s refusal to simply bail out the organisation may cause the repricing of funding to many small and medium sized banks and the effective withdrawal of easy money into the broader market.
  • The bank nationalisation is at a time when China should least want to upset its financial system as it struggles with slower exports to the US due to Trump’s Trade War Tariffs.


Dow Jones Industrials





Nikkei 225





HK Hang Seng





Shanghai Composite





FTSE 350 Mining





AIM Basic Resources







US – 25% of the S&P 500 index companies are due to report their quarterly results this week including Facebook, Alphabet and Amazon.

  • So far, more than 15% of the index haver reported with 79% of those posting better than expected earnings, according to FactSet data.
  • Analysts expected earnings to post a 3% decline during the quarter.


China – The first day of trading on the new science and technology-focused Shanghai stock exchange brought gains of 84-400% for 25 companies on the exchange on Monday.

  • The Star Market was announced by President Xi less than a year ago aiming to become an alternative to the US Nasdaq and promote investment in domestic tech companies.
  • More than 140 companies have signed up to list on the new facility run by the Shanghai Stock Exchange, aiming to raise a total of CNY 128.8bn.
  • The first 25 companies to list on the exchange on Monday raised CNY 37bn ahead of the start of trading on Star and posted strong gains on Monday with four recording more than 200% at the close of the day, FT reports.


UK – PM May successor to be announced tomorrow with Boris Johnson expected to become the new Conservative leader and PM.

  • The pound is off 0.2% trading at the session’s low against the US$ this morning.


Eurozone – The ECB will announce its policy rate decision on Thursday with expectations for authorities to signal their readiness to cut rates and potentially expand stimulus.

  • Estimates are for the ECB to cut the deposit rate by 10bp to a record low of -0.5% in September.
  • Several economists guide for a second cut before year end.


Italy – Salvini and Di Maio, leaders of coalition parties, are set to meet on Tuesday in an effort to avoid the collapse of the government and snap elections.

  • Salvini has been critical of the Five Star Movement for backing Ursula von der Leyen as the new EC president and for blocking the League’s priority reforms including tax cuts and stronger powers for northern regions.
  • Bonds are trading close to the lowest in over a year as concerns over the nation’s budget deficit subsided and expectations for the ECB to restart another round of QE and rate cuts strengthened.


South Korea – Preliminary exports data point to a continuing weakness in overseas markets.

  • Overseas shipments in the first 20 days of July dropped 14%yoy putting it on course for an eighth straight monthly decline.
  • Semiconductor sales plunged 30%yoy.
  • Shipments to China, the biggest trading partner, dropped 19%yoy.
  • GDP numbers are due later this week with estimates for the economic growth to have picked up slightly to 1.9%yoy in Q2/19 from 1.7%, the lowest since the trough recorded during the 2008/09 financial crisis, in Q1/19.


Turkey – The lira is off 0.3% this morning with the new central bank governor expected to cut rates by 200bp to 22% this Thursday.


Iran – The Iranian Revolutionary Guard is reported to have seized a British ship in the strait of Hormuz on Friday in retaliation for the British capture of an Iranian tanker two

weeks ago.

  • PM May said she would chair a meeting of Britain’s COBR emergency response committee this morning to discuss the crisis.



US$1.1219/eur vs 1.1264/eur last week  Yen 107.94/$ vs 107.59/

nbsp; SAr 13.946/$ vs 13.836/
nbsp; $1.249/gbp vs $1.252/gbp  0.704/aud vs 0.707/aud  CNY 6.878/$ vs 6.872/$


Commodity News

Precious metals:         

Gold US$1,426/oz vs US$1,419/oz last week

   Gold ETFs 75.2moz vs US$75.0moz last week

Platinum US$850/oz vs US$847/oz last week

Palladium US$1,508/oz vs US$1,520/oz last week

Silver US$16.34/oz vs US$16.08/oz last week


Base metals:   

Copper US$ 6,042/t vs US$5,995/t last week

  • Colombia is setting its sights on becoming a notable producer of copper within the next few years, with the head of the national mining agency reporting a bid to diversify its mining output without neglecting production of coal and gold.
  • Mining in Colombia has historically been focused on large coal mines along its northern coast and relatively small scale gold and emerald operations in the Andes, however a 2016 peace deal between government and the largest Marxist rebel group is encouraging exploration for new minerals in previously inaccessible regions.
  • Agency president Silvana Habib adds “we’re located in a favorable geological environment, the Andean range, we share that copper belt with neighboring countries which are more advanced in copper.”
  • Initial estimates by companies show measured or indicated copper resources of close to three mt and more than a million tonnes of potential reserves in provinces along Colombia’s northern and western coasts, Habib said.
  • A single mine is so far producing copper, Atico Mining Corp’s project in northwestern Choco province, Habib said, with an output of 10,000 equivalent tonnes per year.
  • While local opposition has grown, a 2018 court ruling stops local votes from halting projects has given investors more security, and efforts to get community support and smoothing licensing has been well received.

Aluminium US$ 1,843/t vs US$1,851/t last week

Nickel US$ 14,315/t vs US$14,880/t last week

Zinc US$ 2,423/t vs US$2,485/t last week

Lead US$ 2,011/t vs US$2,031/t last week

Tin US$ 17,865/t vs US$17,905/t last week



Oil US$63.4/bbl vs US$62.8/bbl last week

Natural Gas US$2.284/mmbtu vs US$2.289/mmbtu last week

Uranium US$25.20/lb vs US$25.70/lb last week



Iron ore 62% Fe spot (cfr Tianjin) US$114.6/t vs US$114.1/t

Chinese steel rebar 25mm US$616.9/t vs US$615.8/t

Thermal coal (1st year forward cif ARA) US$71.0/t vs US$68.5/t

Coking coal futures Dalian Exchange US$207.9/t vs US$207.0/t



Cobalt LME 3m US$28,000/t vs US$28,000/t

NdPr Rare Earth Oxide (China) US$43,983/t vs US$45,128/t

Lithium carbonate 99% (China) US$9,160/t vs US$9,156/t

  • Specialist mining investment firm, Pallinghurst, announce a letter of intent for a $460m investment in junior Nemaska Lithium to complete the construction of its Whabouchi hard rock lithium mine in the James Bay region and Shawinigan processing plant north of Montreal.
  • Pallinghurst is contemplating C$200m private placement at C$0.25 per share and a stand-by purchase agreement to fully guarantee the successful completion of a rights offering of up to C$400m at the same issue price, according to a press release.
  • Stock in Nemaska had been depressed since February as the company report it was facing a budget overrun of C$375m on the project, but surged as much as 45% on the news.
  • Last year, Nemaska arranged $1.1bn financing for the lithium project. SoftBank’s Vision Fund, the largest tech investment fund ever assembled, entered the mining sector for the first time in May 2018, buying up to 9.9% of the Quebec City-based company.

Ferro Vanadium 80% FOB (China) US$37.2/kg vs US$37.2/kg - Vanadium prices rise in Europe and China but fall heavily in the US

  • Ferro-vanadium prices recovered 2.7% in Europe on Friday to $29.55-31.05/kgV.
  • Vanadium prices appear to be reflecting strengthening production of steel in China with prices rising last week for ferro-vanadium and vanadium pentoxide.
  • Ferro-vanadium rose by 1.4% to $35-37/kgV in China while vanadium pentoxide also rose by 0.6% to $8-8.2/lb.
  • Meanwhile ferro-vanadium fell by 9% in the US to 15-15.5/lb ($3334/kgV) in the US as they appear to play catch up with European pricing.

Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg

Tungsten APT European US$210-225/mtu vs US$210-225/mtu


Battery News

Consortium of companies led my Pivot Power LLP and including Habitat Energy Ltd, Kensa, Oxford City Council, redT Energy and the University of Oxford receive planning permission in respect of the Cowley substation site, the proposed location for the Energy Superhub Oxford project.

  • The development represents an important milestone which has now been achieved, allowing the project to advance to the next phase.
  • The £41m grid-scale project in Oxford focuses on a 5MWh (72 units) of vanadium redox flow machines as part of a grid-connected 50MW vanadium/lithium-ion hybrid energy storage system which will be connected at transmission level.
  • redT Executive Chairman, Neil O’Brien, adds “this is the first UK grid-scale project for redT and will be the largest deployment of vanadium redox flow technology in the UK to date”.
  • Other UK sites have already been identified as potential sites for replication.


Toyota partners with BYD to make all-electric cars for China market

  • Just days after announcing a Chinese battery deal, Toyota has announced that it will partner with another company, BYD, to develop all-electric cars in China.
  • Together, Toyota and BYD will develop all-electric sedans and low-floor SUVs. The vehicles will be launched under the Toyota brand name “in the first half of the 2020s.”
  • Toyota previously announced its intention to partner with BYD on batteries, which the carmaker now says will be developed both for the new all-electric vehicles, and other vehicles.
  • Toyota also reached a deal to partner with another battery company in China, Contemporary Amperex Technology Co., Limited (CATL). The CATL deal is solely a battery deal, involving no EV development. Toyota also has a battery partnership with Panasonic.
  • Toyota’s release about its new partnership touches on the need to put its rivalry with BYD aside, “To curb global warming, both BYD and Toyota seek to reduce CO2 emissions by promoting the widespread use of BEVs. To accomplish these goals, both companies believe there is a need to put aside their rivalry and collaborate; therefore, the two companies have agreed to jointly develop BEVs.”
  • It debuted two nearly similar subcompact crossover vehicles in China earlier this year, the C-HR and IZOA. Those cars are expected to hit the Chinese market next year.
  • BYD broke ground on a 20GWh battery gigafactory earlier this year. The company produces a number of its own electric vehicles, including electric cars for China, electric trucks, and electric buses.
  • BYD also already has a partnership with Daimler for making electric cars for the Chinese market under the Denza brand name.


Company News

Galantas Gold (GAL LN) FOLLOW 4.8p, Mkt Cap £14.4m – Kearney Vein intersected on 1060 level of the Omagh mine

  • Galantas Gold reports that underground mine development on the fourth, 1060, level of builds up at its Omagh gold mine in Northern Ireland has intersected the Kearney vein.
  • Channel sampling of the vein described as strongly mineralised, showed an average grade of 8.35g/t gold over an average true width of 2.65 metres.
  • “The vein intersection is expected to allow in-vein development both north and south on the fourth (1060) level … [while] … Development on the third (1072) level continues southwards with gold grades within the expected range”.
  • Work on the 1072 level now extends for approximately 40 metres  and is to be extended further towards the north as the mineralisation “was shown to be persistent and has been followed in an in-vein development”.
  • At this stage, much of this mineralisation encountered in underground workings has not yet been included in the mineral resource estimate “due to paucity of data”.


Petra Diamonds (PDL LN) FOLLOW 17.54p, Mkt Cap £151.8m – Meets production guidance for year to 30th June

  • Petra Diamonds reports that it produced 3.87m carats of diamonds during the year to 30th June 2019 (2018 – 3.84m carats) – in line with the company’s guidance range of 3.8-4.0m carats.
  • Guidance for the year to June 2020 is 3.8m carats.
  • The largest share of production was delivered from the Finsch mine which despite a 15% decline produced 1,755,768 carats (2018 – 2,073,477 carats) where ROM grade of 56.1 carats per hundred tonnes (cpht) “was towards the lower end of guidance (56-59 cpht) due to lower grades of the ROM surface stockpiles … which are nearing depletion”.
  • The company advises that next year it expects “negligible” production from tailings stockpiles in the current year to June 2020 butt that it is looking at a lower than expected ramp-up of production from the sub-level cave at Finsch.
  • At the Cullinan mine, production grew by 21% to 1,655,929 carats (2018 – 1,368,720 carats). Cullinan produced a total of four gem diamonds in excess of 100 carats in size during the year “including the 425.1 carat D colour Type II gem quality diamond that was sold for US15 million”.
  • Since the end of the financial year, Cullinan has yielded another 132 carat D colour Type II diamond..
  • Production from Koffiefontein of 63,635 carats was 21% above the 52,537 carats in the year to June 2018 despite a lower than expected ROM grade “due to the delayed ramp-up of higher grade ore facies on 60 level”, while at the Willamson mine in Tanzania, production was 17% higher than 2018 at 399,615 carats (2018 – 341,102 carats).
  • The 72,000 carats parcel of diamonds from Williamson still appears to be blocked by the Tanzanian Government.
  • The company comments that operating capital expenditures “reduced to US$81.7million (FY 2018: 129.6 million), within budget and in line with the Company’s reducing capital expenditure profile.”
  • Commenting on the diamond market, Petra Diamonds says that “The diamond market remains difficult with rough prices as measured by the Bloomberg Rough Diamond Index down 4% in the period January to June 2019”.
  • The company also highlights the negative impact of “Trade tensions between the US and China … [which] … weighed on rough sales and pricing, with subdued pricing particularly in lower value stones”.

Conclusion: Petra Diamonds has achieved its production guidance and is targeting similar levels of output in the year to June 2020. Capital expenditure is declining however the diamond market is under some pressure partly reflecting the US/China trade tensions.


Serabi Gold (SRB LN) FOLLOW 62p Mkt value £36.5m – Production guidance maintained following Q2 results

  • Serabi Gold reports the production of 9,527 oz of gold during the quarter ending 30th June, bringing H1 output to 19,691 oz (H1 2018 – 18,751 oz). The company confirms its 2019 production guidance rage at 40-44,000oz (2018  actual 37,108 oz).
  • Production comes from the treatment of 43,451 tonnes of ore derived from the Palito and Sao Chico orebodies at an average grade of 6.72g/t gold.
  • Commenting on the results, CEO, Mike Hodgson, confirmed that “the third quarter has started with similarly excellent performance, leaving the Company well placed to meet our 2019 production guidance and significantly improve on our 2018 production level of 37,108 ounces of gold.”
  • Describing the operation as “plant constrained” Mr. Hodgson went on the underline the focus on planned maintenance as a means to improve plant availability and also to describe plans to install an ore-sorter to enhance plant performance. He said that “Whilst we are not forecasting production benefits from the ore sorter in 2019, we do expect a significant impact in 2020.”
  • Mr. Hodgson also discussed the forthcoming Preliminary Economic Assessment (PEA) for the Coringa deposit where  “an announcement of the initial results … [is expected] …  before the end of July 2019”.
  • In March, the company updated the mineral resource estimate for Coringa to an indicated resource of 845,000t at an average grade of 7.95g/t gold for 216,000oz of contained gold plus an additional 1.436mt classed as inferred at an average grade of 6.46g/t (298,000oz of gold).
  • Progress is also being made with the permitting aspects of Coringa where the company plans “to replace a conventional tailings dam with installing a filtration plant allowing for the dry stacking of tails”. The company reports that this approach “has been well received by the state environmental agency, SEMAS, who had already approved the original environmental impact assessment (“EIA”) on the basis of a conventional dam.”

Conclusion: Serabi Gold is confirming its 2019 production guidance of 40-44,000oz, implying growth of 8-18% as it implements measures to maximise plant throughput. The company also reports that it expects to announce the initial findings of the PEA for Coringa before the end of July -  we look forward to these results in the near future.


Tri-Star Resources* (TSTR LN) FOLLOW 44.5p, Mkt Cap £41.9m – SPMP report first antimony metal production

(Tri-Star holds 40% of jv company SPMP alongside The Oman Investment Fund at 40% and Dutco Natural Resources which holds 20%)

(Odey Asset Management, holds a 72.06% interest in TriStar Resources)

  • Tri-Star Resources reports production of antimony metal from the SPMP plant in Oman following nine months of remedial and other work to overcome significant technical issues which had delayed first pure antimony metal production.
  • SPMP has completed remedial works to one of the two SPMP antimony smelting furnaces along with the installation of a new gas cooling solution to produce its first 98% pure antimony metal.
  • Purity should rise to 99.65% as required for commercial sale. 
  • SPMP will now begin similar remedial works on the second furnace to bring the antimony-gold complex to full production next year.
  • While the ‘gold recovery circuit is now also proven and operational’ this part of the plant is still at the testing phase and not yet at commercial production. 
  • Gold dore production should rise as the antimony plant ramps up.
  • Tri-Star has appointed Mr Wally Channon as an advisor to the Company.  Wally has an MSc in metallurgical engineering and has over 40 years' experience operating and running metal processing plants including 25 years at Anglo American and also at Zimbabwe Platinum Mines and Shanta Gold.
  • Tri-Star comments that SPMP is looking at options for further debt funding.
  • Antimony metal prices remain relatively steady at $5,800-6,000/t in Europe last week after pulling back on a lack of reported business on stalling demand (FastmarketsMB)

Conclusion: We look forward to further announcements on the ramp-up and purity of antimony metal from the first furnace. We also look forward to reports on the progress of work on the second furnace and on the future operating cost of running the plant following the remedial work done.

*SP Angel acts as Nomad to Tri-Star Resources. David Facey, a former partner at SP Angel is the CEO & CFO at Tri-Star Resources.



John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486



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



*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


Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt


Oil Brent


Natural Gas, Uranium, Iron Ore


Thermal Coal

Bloomberg OTC Composite

Coking Coal




Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal


Metal Bulletin



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