SP Angel . Morning View . ECB restarts QE and urges governments to step in
Paul Kettle
SP Angel Research Note -4 min read
09:52, 13th September 2019

SP Angel – Morning View – Friday 13 09 19

ECB restarts QE and urges governments to step in


MiFID II exempt information – see disclaimer below


Australian Vanadium (AVL AU) – MOU for VSUN grant and instillation of a new Solar and VRFB battery solution in Pilbara

Chaarat Gold* (CGH LN) – Interims: acquisition of producing Kapan and de-risking of Tulkubash development project

Rambler Metals & Mining* (RMM LN) – General meeting

Serabi Gold (SRB LN) – Presentation highlights pathway to 100,000oz gold production


ECB – The central bank announced the largest stimulus in three years in an attempt to revive growth and inflation expectations.

  • The ECB cut interest rates further into negative territory and is set to restart its QE programme for an unlimited period.
  • Mario Draghi has also urged governments to embark on fiscal support measures including tax cuts and increase in spending.
  • The deposit rate has been cut by 10bp to -0.5% while QE will begin at the €20bn per month rate from November until inflation expectations came “sufficiently close to, but below, 2%”.
  • Additionally, the ECB cut its growth and inflation forecasts for the single currency zone.
  • GDP is set to grow 1.1% this year (-10bp on the previous forecast) and 1.2% in 2020 (-20bp).
  • Inflation is expected to average 1.2% (-10bp) and 1.0% next (-40bp).
  • Euro dipped against the US$ on the news, but has since recouped its losses on profit taking and renewed hopes than US and China might be close to agreeing a deal.


US – Reports that US President Trump is not ruling out an interim trade deal with China lifts equity markets hurting safe-haven assets including bonds and gold.


China – EV market share said to be trending higher despite reduction in incentives

  • Platts have produced a chart which shows Plug-in Passenger Light Duty Electric Vehicle Sales as a percentage of Total Light Duty Vehicles Sales.
  • The chart shows the trend for the Plug-in market share rising in recent months despite a reduction in government incentives.
  • The Plug-in share is just over 6% in May and June. China vehicle sales have fallen from a peak of around 2.75m units sold a month at end 2017 to around 1.6m in July.


Potash giant Nutrien to lay off up to 750 employees next month

  • The world’s biggest producer of potash is temporarily laying off workers and closing down three of its Saskatchewan mines in response to a short-term slowdown in global markets (mining.com).
  • The layoff is a result of downturn in the global potash markets and the measure could cut into the company’s earnings by up to C$150 million.
  • The company blamed international producers dumping potash on the market at very cheap rates.
  • This is the second company this week to announce it will slow or stall fertilizer production. Earlier this week Mosaic announced it will reduce phosphorus supplies by 500,000 in a single-plant slowdown.


Evergreen orders 10 23,000 TEU Megaships worth $1.4-1.6bn

  • Evergreen don’t sound worried about the US / China Trade war.
  • The company has confirmed orders for 10 massive container vessels each capable of carrying 23,000 Twenty Foot equivalent Unit containers.
  • These are amongst the world’s largest vessels offering significant cost and environmental benefits in the movement of goods around the world.


Dow Jones Industrials





Nikkei 225





HK Hang Seng










FTSE 350 Mining





AIM Basic Resources







Saudi Arabia - IMF reckon a $1tr sovereign wealth fund is insufficient



US$1.1097/eur vs 1.1016/eur yesterday.  Yen 107.99/$ vs 107.95/$.  SAr 14.552/$ vs 14.605/$.  $1.243/gbp vs $1.233/gbp.  0.688/aud vs 0.688/aud.  CNY 7.079/$ vs 7.086/$.


Commodity News

Gold US$1,505/oz vs US$1,503/oz yesterday

   Gold ETFs 79.0moz vs US$79.1moz yesterday

Platinum US$955/oz vs US$951/oz yesterday

Palladium US$1,610/oz vs US$1,595/oz yesterday - Palladium prices hit all-time high

  • Concerns over tight supplies of the autocatalyst metal due to labour concerns in South Africa saw palladium climb 3% to $1,617 after hitting a record high of $1,621.55 (seeking alpha).
  • Supply is tight already in the palladium industry, so further uncertainty regarding the supply of palladium is only going to tighten the market further.
  • Palladium’s main use is in catalytic converters for automobiles and the price of the metal has risen 28% this year despite auto sales slowing.

Silver US$18.15/oz vs US$18.17/oz yesterday


Base metals:   

Copper US$ 5,892/t vs US$5,867/t yesterday - Copper hits six-week high as Trump delays tariffs (Reuters)

  • Copper jumped to its highest level in six weeks in response to the United States declaring that it would delay imposing a new round of tariffs on China.
  • US President Donald Trump will delay a planned tariff hike on $250bn of Chinese goods as a "gesture of good will".
  • A resolution between the two countries would most likely lead to improved demand for the metal, which is used mainly in power and construction and mostly consumed in China.
  • Benchmark copper on the London Metal Exchange (LME) gained 1% to $5,832/t after touching its highest level since the 1st of August at $5,898.

Aluminium US$ 1,798/t vs US$1,822/t yesterday

Nickel US$ 17,560/t vs US$18,180/t yesterday

Zinc US$ 2,366/t vs US$2,366/t yesterday

Lead US$ 2,091/t vs US$2,091/t yesterday

Tin US$ 17,200/t vs US$17,600/t yesterday



Oil US$60.2/bbl vs US$61.0/bbl yesterday

Natural Gas US$2.583/mmbtu vs US$2.548/mmbtu yesterday

Uranium US$24.90/lb vs US$25.10/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$94.7/t vs US$91.0/t

Chinese steel rebar 25mm US$562.3/t vs US$561.7/t

Thermal coal (1st year forward cif ARA) US$68.3/t vs US$67.7/t

Coking coal futures Dalian Exchange US$236.9/t vs US$236.7/t



Cobalt LME 3m US$36,500/t vs US$36,500/t

NdPr Rare Earth Oxide (China) US$46,689/t vs US$46,641/t

Lithium carbonate 99% (China) US$7,063/t vs US$7,056/t

Ferro Vanadium 80% FOB (China) US$38.7/kg vs US$38.7/kg

Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/kg

Tungsten APT European US$195-205/mtu vs US$198-205/mtu


Battery News

Brazilian lithium start-up in talks with Tesla

  • Sigma Lithium Resources has held talks with Tesla regarding supplying the electric automaker with the key battery ingredient according to the companies chief executive, Calvyn Gardner on Thursday.
  • Sigma mines lithium in the Brazilian state of Minas Gerais and met with Tesla’s current supplier Ganfeng Lithium (China’s number one producer of lithium), at Tesla’s request.
  • Ideally Sigma would ship lithium to Tesla in California, however this is only possible if the makers of cathodes for the lithium-ion batteries establish a plant in the US.
  • Tesla is holding off on a deal at the minute as the deal would mean they were exporting exclusively to China, and “It’s not really what we think we should be doing over the long term.” According to Gardner.


Bosch – to offer an electric vehicle rolling chassis

  • The new rolling chassis will enable manufacturers to make new models based on the new platform.
  • The new chassis has the potential to multiply the number of new EV models available over the next few years.
  • Some 214 EV models are expected to be available to the market by 2021 led by ambitious plans at VW closely followed by Peugeot-Citroen-Opel whcih is expected to overtake Daimler, Hyundai-Kia and BMW.


UK – Scottish police plan on going electric

  • The good news is that the cost of running police vehicles should reduce.
  • The bad news for speeding motorists and criminals is that not only will you not hear them coming till it’s too late but their electric vehicles will likely be faster than yours.


Electric Vehicles – dominate the Frankfurt Motor show

  • News from the Frankfurt Motor show is that Electric Vehicles are the focus of the show with new models shown and promises for many more new hybrid and Battery Electric Vehicles to come.
  • Word from the rival Battery Show in Detroit is that the Auto industry is set for a tough five years where it will be difficult to make EVs profitable but where sales are likely to take off as battery technology improves.
  • News from material .


Chile – Santiago to put 100 new electric busses on the road in bid to cut costs and emissions

  • The busses are said to cost 70% less to run that diesel busses.
  • We suspect their maintenance and breakdown downtime will be far less due to the better reliability of electric motors.
  • Colombia has ordered 125 electric busses for the city of Cali.
  • Shenzhen in China has replaced 16,000 diesel busses and 20,000 taxis with electric equivalents
  • The news from the World Economic Forum highlights progress in moving from diesel to electric in public transport.


World’s first ocean-powered data centre


  • The power-hungry data centre will be supplied via a private network from tidal turbines at the MeyGen project off Scotland’s northern coast, the largest planned tidal stream project in the world and is the only commercial multi-turbine array to have commenced construction.
  • It is expected that the data centre would be connected to multiple international subsea fibre optic cables, offering a fast and reliable connection to Europe and the US.  
  • The MeyGen project has a seabed lease and consents secured for a further 80MW of tidal capacity, in addition to the 6MW operational array which has now generated more than 20,000MWh of electricity for export to the grid (elektrek).
  • The target operation date for the centre is 2024, which falls in line with the scheduled completion of the MeyGen expansion plan.
  • Tim Cornelius, CEO of Simec Atlantis Energy, who is building the project, said “Data is being touted as the new oil. It is arguably becoming the world’s most valuable resource, and the amount of data requiring storage is increasing at a staggering pace. However, data centres are undeniably power-hungry, and the clients of data centre operators are rightly demanding power be sourced from renewable and sustainable sources.”


Company News

Australian Vanadium (AVL AU) A$0.014, A$28m – MOU for VSUN grant and instillation of a new Solar and VRFB battery solution in Pilbara

  • Australian Vanadium report their subsidiary VSUN is applying for a grant for the installation of a new photovoltaic and Vanadium Redox Flow Battery instillation for a school in East Pilbara in Australia.
  • The instillation could prove to be a new model for solar / battery instillations across Australia in remote areas where the combination of solar with reliable and long-life battery backup can make a real difference to local communities.


Chaarat Gold* (CGH LN)  FOLLOW29p, Mkt Cap £120m – Interims: acquisition of producing Kapan and de-risking of Tulkubash development project

  • The Company completed the acquisition of the producing Kapan polymetallic mine in Armenia as well continued to de-risk the Tulkubash Oxide Gold Project in Kyrgyzstan during the period.
  • At Tulkubash, the team expanded the mineral resource (1.6moz at 1.20g/t in the M&I category), prepared updated BFS and mineral reserves growing contained ounces by ~40% and extending the life of mine to current 5.3 years.
  • Drilling at Tulkubash continues with more than 12,000m of the planned 20,000m completed this year and results consistently returning mineralised intersections in areas within and adjacent to current pit outlines.
  • The objective of the current drilling programme to grow the M&I category adding more ounces into Tulkubash reserves and extending the oxide gold project life of mine to a minimum of 15 years.
  • The Company has today successfully formally entered into a JV with Ciftay, the Turkish mining and mine construction contractor, to develop the Tulkubash and Kyzyltash projects as Ciftay is set to invest up to $31.5m for a 12.5% equity stake in both projects.
  • The Ciftay equity contribution coupled with a reduced development capital requirement at Tulkubash ($110m , down from $132m) allows the Company to minimise further dilution to shareholders and seek debt funding for the remaining part of the capex (expected closure in Q4/19 or Q1/20).
  • The Kapan operation generated $31m in revenues for five months to Jun/19 contributing $3.2m in EBITDA.
  • The Company sold 23.3koz payable GE during the period continued in 4.0kt of copper concentrate and 5.3kt of zinc concentrate.
  • The team is forecasting the operation to reach 65kozpa run rate before YE19 with a number of improvements expected in mining fleet availability, grades, recoveries, operating costs as well as alternative ore sourcing.
  • In July, the Company released updated Kapan mineral resource statement building on 69,000m of underground drilling completed in 2018 (1.8moz at 6.20g/t GE in the M&I category).
  • Operating loss amounted to $7.5m (H1/18: -$3.7m) reflecting higher G&A and corporate development expenses ($10.5m v $3.7m in H1/18).
  • Net loss came in at $12.3m (H1/18: -$5.1m) including $4.9m incurred in finance costs relating to higher debt levels that funded the acquisition of the Kapan mine in Jan/19.
  • The Group raised $46.4m during the period most of which came in bank funding to acquire Kapan and other borrowings to fund the Chaarat activities in Kyrgyzstan.
  • Net debt climbed to $78.5m (FY/18: $25.3m) including $4.9m in cash balances held as of Jun/19.
  • Following H1/19, Polymetal converted $10m worth convertible bonds in shares, while the Company secured additional $7m in working capital funding as well as extending the maturity of the expanded $17m loan to Mar/20. A further $2.5m was drawn from the existing Labro Investments facility with current outstanding amount of $5.5m.

Conclusion: The Company has brought producing Kapan mine into the Group and is working on streamlining operations to ramp up production to 65koz GE while continuing with extensive drilling programme at Tulkubash growing the scale of the project and readying for the start of development works. The team has been successful in attracting Ciftay as a JV partner for its Kyrgyzstan portfolio of assets moving Tulkubash closer to the completion of funding (currently expected end of 2019 or early  2020). The potential to grow the resource as well as stronger gold price environment (BFS assumed long term $1,300/oz) suggests Tulkubash economics are set to improve on the ones featured in the latest feasibility study.

*SP Angel acts as Broker to Chaarat Gold


Rambler Metals & Mining* (RMM LN) FOLLOW 1.2p, mkt cap £16m – General meeting

  • Rambler Metals has announced a General Meeting, to be held on 30th September, to authorise the directors to issue sufficient shares to satisfy the full conversion of the US$5m loan notes to be issued to Lombard Odier and to CE Mining III.
  • “Following the completion of its recent productivity improvement initiative Rambler's focus is on sustaining mine and mill production at over 1,350 metric tonnes per day at 2% Copper at the Ming Mine” which is expected to deliver a “return to profitability and positive cash flow”.
  • The company has previously disclosed that it is evaluating a further production increase to 2000tpd.

Conclusion: We welcome the support of the major shareholders in funding the increased working capital requirements of higher mine and mill throughput arising from operational improvements at the Ming mine and Nugget Pond mill in Newfoundland.

*SP Angel act as Nomad and broker to Rambler Metals & Mining


Serabi Gold (SRB LN) FOLLOW 84.5p Mkt value £50m – Presentation highlights pathway to 100,000oz gold production

  • Serabi Gold presented at the Beaver Creek Precious Metals Summit yesterday in Colorado.
  • The company expects to produce some 40-44,000oz of gold at Palito in the Para state of Brazil and is looking to add a further 38,000oz of production when the new Coringa gold mine.
  • Construction of the new Coringa gold mine is planned to start in H2 2020 with an AISC cash cost of US$852/oz and an initial capex of US$25m.
  • The measured and indicated resource is 195,000oz grading 8.24g/t.
  • Serabi’s pathway to >100,000oz assumes gold production at Palito and the newer Sao Chicio mine will rise to 60,000ozpa and production at the newly planned Coringa gold mine will also rise to >40,000ozpa in 2024.
  • Both mines are located deep in the Amazon around 500km from Manaus where Serabi is the only hard rock miner in the gold rich Tapajos district.
  • A recently published PEA at Coringa shows base case capex of US$24.7m and further US$9.2m of sustaining capital
  • Coringa post-tax NPV10% comes in at US$30.7m assuming a relatively modest gold price of US$1275/oz with an IRR of 31%.
  • Raising the gold price assumption to US$1,450/oz raises the post-tax NPV10% by ~80% to US$56.1m and IRR to 46%.
  • A 10% reduction in operating costs is estimated to improve the after tax NPV10% US$41.1m while a 10% increase in operating costs is expected to reduce the NPV to US$20.2m. A 10% higher level of capex reduces the NPV to US$28.4m while a similar reduction in capex increases the NPV to approximately US$33m.

Conclusion:  It is good to see management targeting 100,000oz of gold production in Brazil. Now the plan is set the challenge is for the team to ramp up production at Palito and Sao Chico while building the new Coringa gold mine.

Both mines are located in the middle of the Amazon where Serabi’s long-term operation at Palito give the team unrivaled expertise at operating in this remote location.

*The author of this note has previously visited the Palito gold mine in Brazil with Serabi



John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474



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



*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


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