SP Angel – Morning View – Trade deal optimism sees commodities higher
Paul Kettle
SP Angel Research Note -4 min read
10:13, 3rd April 2019

SP Angel – Morning View –Wednesday 03 04 19

Trade deal optimism sees commodities higher

MiFID II exempt information – see dsclaimer below 

African Battery Metals* (ABM LN) – Cameroon Cobalt Nickel Project

Aura Energy (AURA LN) – Mauritania gold exploration licences

Bushveld Minerals (BMN LN) Target Price 87p – Eskom signs US$180m loan for renewable energy expansion

Griffin Mining (GFM LN) – Resource uplift at Caijiaying zinc mine’s Zone III in China

redT energy plc (RED LN) – Oxford ‘superhub’

Strategic Minerals* (SML LN) – Fluffing up heaps at Leigh Creek copper project

Trans-Siberian Gold (TSG LN) – Rodnikova deposit, Kamchatka

 

WTO cuts global trade growth projection for 2019 to the weakest in three years on the back of increasing commercial tensions and tariffs.

  • World merchandise trade growth will slow to 2.6% this year and 3% next year, after notching 3% in 2018, the WTO said in a report released on Tuesday.
  • The report follows on the heels of similar revisions from the World Bank and the IMF.

 

Dow Jones Industrials

 

-0.30%

at

  26,179

Nikkei 225

 

+0.97%

at

  21,713

HK Hang Seng

 

+1.16%

at

  29,968

Shanghai Composite

 

+1.24%

at

   3,216

FTSE 350 Mining

 

+0.82%

at

  20,798

AIM Basic Resources

 

-0.01%

at

   2,113

 

Economics

US – Trade talks optimism has been given a boost by new comments from White House economic adviser Larry Kudlow yesterday that the office expects “to make more headway” in talks this week.

  • US Trade Representative Robert Lightizer and treasury Secretary Steven Mnuchin are due to resume talks with Chinese VP Liu He today, days after two sides reported progress int talks last week in Beijing.
  • Chinese trade talks team is coming to the US today.
  • Commodities climb (copper +1.1%, brent +0.7%) driven by a risk on sentiment.
  • Fitch reaffirmed the US sovereign debt rating at AAA with a stable outlook citing the nation’s debt tolerance being higher than that of other countries.
  • The agency highlighted that rising deficits and debt could eventually test the credit strength in the absence of reform.
  • Core durable goods orders, a proxy for business investment plans, slipped 0.1%mom in February, a little worse than expected (+0.1%mom).
  • The economy is losing momentum as stimulus from a $1.5tn tax cut fades and US/China trade negotiations failed to yield a deal yet.

 

China – Private business sentiment indices climbed in March which combined with positive manufacturing PMI released earlier this week point to a stabilisation in the growth slowdown amid government led stimulus.

  • Caixin Services PMI: 54.4 v 51.1 in February and 52.3 forecast.
  • Caixin Composite PMI: 52.9 v 50.7 in February.

 

Eurozone – Revised PMI data points to modest growth in March helped by the services sector that more than compensated for a continuing slump in the manufacturing segment.

  • Services reading climbed to the highest since last November led by gains in Germany and Spain with solid growth recorded in Italy; France returned to marginal contraction.
  • Manufacturing PMIs painted a more worrying picture with indices hitting multiyear lows last months including Italy (47.5), France (49.7) and Germany (44.1).
  • New work was only marginally higher last month as manufacturing firms saw the sharpest fall in new orders since late-2012 reflecting deteriorating demand conditions both at home and abroad.
  • Outlook wise, manufacturing sector recorded the worst reading in over six years while services firms were the most optimistic in the last six months.
  • The worry is sluggish manufacturing may drag services industry growth lower.
  • “At current level, the PMI remains consistent with GDP rising by 0.2%qoq in Q1, but unless manufacturing pulls out of its downturn the overall pace of economic growth will likely weaken in the Q2 as the malaise spreads to the service sector… in this respect, with forward-looking indicators from the manufacturing sector suggesting goods production will fall further in the coming months, downside risk to the outlook have intensified.

 

UK – PM May is considering working with the opposition Labour leader on softer Brexit options including a customs union with the EU.

  • Prime Minister is hoping to negotiate a new Brexit plan before next Wednesday’s emergency meeting of EU leaders when she is planning to seek an extension to Britain’s current April 12 deadline.

British soldiers caught using pictures of Jeremy Corbyn for target practice in Kabul

  • While the MoD sees the practice as unacceptable, we see this as a green alternative to shooting more solid objects.

 

Turkey – The election commission will recount votes in eight districts of Istanbul as the President Erdogan’s AK Party appealed results.

  • The opposition claimed a slim victory in Istanbul during municipal elections held last Sunday with Republican People’s Party (CHP) coming only 25,000 votes ahead.
  • The AKP is also contesting the CHP victory in Ankara.

 

Currencies

US$1.1237/eur vs 1.1203/eur yesterday. Yen 111.53/$ vs 111.37/$. SAr 14.117/$ vs 14.222/$. $1.319/gbp vs $1.305/gbp. 0.712/aud vs 0.708/aud. CNY 6.711/$ vs 6.719/$.

 

Commodity News

Precious metals:         

Gold US$1,291/oz vs US$1,287/oz yesterday - Gold prices are steady amid an investors’ optimism over the US/China trade talks outlook.

   Gold ETFs 71.7moz vs US$71.9moz yesterday

Platinum US$861/oz vs US$848/oz yesterday

Palladium US$1,436/oz vs US$1,420/oz yesterday

Silver US$15.18/oz vs US$15.06/oz yesterday

           

Base metals:   

Copper US$ 6,495/t vs US$6,477/t yesterday

Aluminium US$ 1,899/t vs US$1,895/t yesterday

Nickel US$ 13,345/t vs US$13,170/t yesterday – use in batteries to rise to 15-20% of total batter demand from 3-4% today in new 10-year outlook by Roskill

  • Nickel going into Stainless Steel accounted for some 69% of total consumption in 2017 with China accounting for 53% of global consumption.
  • ‘Over the outlook period, Roskill forecasts that nickel use in batteries will grow from around 3–4% of nickel demand, to account for as much as 15–20% of the market.’
  • ‘2017 saw the emergence of Indonesia as a new producer of stainless steel. The stainless mill that was commissioned in mid-2017 is owned by a Chinese company and was designed and built from the outset to exploit locally-available nickel ores that are converted into NPI on-site. The Indonesian mill (which will ultimately have a design capacity of 3M tpy of stainless steel) will, therefore, also be a major consumer of primary nickel.’
  • Roskill do a good job in their metals analysis. Order the report through roskill.com
  • Nickel prices climbed for a fourth day as inventories at both LME and SHFE hit multi-year lows.
  • LME stocks more than halved from 2017 to 182.1kt, the lowest since 2013; SHFE inventories stood at 10.9kt, close to 2015 lows.
  • Further price gains may be limited as shipments from Philippines are set to recover following the end of the rainy season in March and Chinese stainless steel stocks are at record highs, market commentators say.

Zinc US$ 2,900/t vs US$2,900/t yesterday

Lead US$ 1,998/t vs US$2,015/t yesterday

Tin US$ 21,245/t vs US$21,480/t yesterday

           

Energy:           

Oil US$69.8/bbl vs US$69.1/bbl yesterday

Natural Gas US$2.680/mmbtu vs US$2.705/mmbtu yesterday

Uranium US$25.60/lb vs US$25.45/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$88.6/t vs US$85.8/t - Iron ore shipments disruptions from Brazil and Australia see rates for capsize freight continue to slide after losing 95% since January 24, the day the Brumadinho dam wall collapsed.

  • The Baltic Capesize Index is currently standing at 92.0 v around 2,000 at the beginning of January.
  • Shipments of iron ore account for around a third of seaborne volumes on the larger capesizes that typically transport 170-180kt cargoes.
  • “There is a lack of cargoes from Brazil after Vale’s mine closure and fixtures from Australia in the aftermath of cyclone Veronica, which certainly has been depressing capsize index,” Peter Sand, chief shipping analyst at BIMCO said.
  • “We expect much more hardship for capsize segment until there is more clarity and more exports out of Brazil and Australia,” Sand said.

Chinese steel rebar 25mm US$623.7/t vs US$617.3/t

Thermal coal (1st year forward cif ARA) US$70.8/t vs US$71.3/t

Coking coal futures Dalian Exchange US$187.6/t vs US$187.3/t

           

Other:  

Cobalt LME 3m US$31,500/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$41,890/t vs US$42,042/t

Lithium carbonate 99% (China) US$9,690/t vs US$9,673/t

Ferro Vanadium 80% FOB (China) US$57.5/kg vs US$59.0/kg

Antimony Trioxide 99.5% EU (China) US$6.5/kg vs US$6.5/kg

Tungsten APT European US$271-282/mtu vs US$271-282/mtu

 

Battery News

 

Company News

African Battery Metals* (ABM LN) FOLLOW 0.43p, Mkt Cap £1.5m – Cameroon Cobalt Nickel Project

  • African Battery Metals reports that a review of its cobalt/nickel licences at Ngoila Nord, Ngoila Est, Ebok and N’dja and its licence applications at Ntam Est and N’Gaoundere in Cameroon has confirmed the continuing interest in the project area which lies close to and exhibits many of the same geological characteristics as the Nkamouna deposit which remains, to the Company's best knowledge, the largest undeveloped cobalt resource globally outside the Democratic Republic of Congo”.
  • Work by Geovic at Nkamouna established an NI-43-101 compliant resource of 323mt at an average grade of 0.21% cobalt, 0.61% nickel  and 1.26% manganese.
  • The review, completed during 2018 and including site visits, has confirmed that the Cameroon Project should be continued by ABM and a forward work programme is now being devised by the Company and will be announced shortly”.
  • An efficient and economical work programme will be undertaken, prioritising the highest profile targets, as determined from the work undertaken and reviewed to date”.
  • Commenting on the review, Executive Director, Paul Johnson confirmed that The proximity and geological similarity of our interests to the Nkamouna deposit is highly attractive, particularly give the scale of Nkamouna. Furthermore, the Company's team have identified what appears to be a cost effective exploration methodology to test mineralisation on our license areas which should, without too much further delay, demonstrate the potential prospectivity of the license ground”.

Conclusion: The attractions of the Cameroon cobalt/nickel project have been confirmed and exploration work is expected to be started shortly.

*SP Angel act as broker to African Battery Metals

 

Aura Energy (AURA LN) FOLLOW 0.625p, Mkt Cap £7.1m – Mauritania gold exploration licences

  • Aura Energy reports that it has been granted 175km2 of exploration licences covering under-explored greenstone belts in Mauritania, lying along strike from Kinross Gold’s operating Tasiast mine.
  • The prospects cover parts of the Tasiast and Tijirit greenstone belts. Previous work by another operator on the Tasiast South area included airborne geophysics as well as reverse circulation and aircore drilling and ampling.
  • Broad zones of gold mineralisation have been identified with strong similarities to the Tasiast Gold Mine mineralisation and alteration”.
  • At the Ghassariat Zone previous work, including low-density aircore drilling identified anomalous gold mineralisation including intersections of 5m averaging 1.2g/t gold within a 70m wide intersection averaging 0.3g/t in hole TGRC022 and 38m averaging 0.4g/t in hole TGRC-007 which included 6m averaging 0.6g/t gold.

Conclusion: The licences have taken a while to be awarded however work by previous operators has already identified promising targets for Aura Energy to follow-up.

 

Bushveld Minerals (BMN LN) FOLLOW 32p, Mkt cap £364m – Eskom signs US$180m loan for renewable energy expansion

STRONG BUY (from BUY) - Target Price 87p

CLICK FOR BUSHVELD MINERALS PDF

(Bushveld Minerals now hold 74% of Vametco and 84% of Bushveld Energy it’s vanadium redox battery unit)

  • Eskom, the South African state power utility, has secured a US$180m loan facility for the expansion of renewable energy.
  • New Development Bank’s ‘NDB’ COO Xian Zhu signed the deal with the Eskom CFO on Monday.
  • The New Development Bank is a multilateral development bank established by Brazil, Russia, India, China and South Africa.
  • The project will integrate a total of 670 MW of renewable energy into the power utility’s grid..
  • The news does not include any comment on grid storage which will become an important part of future renewable energy projects.
  • Bushveld Energy is currently running a trial 450kWh vanadium-redox flow battery at an Eskom test site in South Africa.
  • They have also initiated development of a smallish 1MW mini PV grid paired with a 4MWh vanadium flow battery at the Vametco plant. This will supply around 8% of Vametco’s electrical power consumption and in theory, should be sufficient to supply several thousand houses in South Africa.
  • Eskom is preparing to roll-out 1,400MWh of battery storage this year with completion by 2022.

Conclusion:  The advance of renewable energy in South Africa will create greater need for more battery storage for grid support and balancing. This should be good for Bushveld Energy assuming the Eskom trial supports the use of Bushveld Energy’s vanadium-redox flow battery.

*SP Angel act as nomad and broker to Bushveld Minerals

 

Griffin Mining (GFM LN)FOLLOW  112 pence, Mkt Cap £192m – Resource uplift at Caijiaying zinc mine’s Zone III in China

  • Griffin Mining have reported an increase of almost 80% in the Measured, Indicated and Inferred mineral resource estimate for the Zone III part of the company’s Caijiaying zinc mine in China.
  • The new estimate, overseen by the consultants, CSA Global, totals 48.7mt at an average grade of 4.2% zinc, 0.2% lead, 21.4g/t silver and 0.6g/t gold. This compares with the previous Zone III estimate of 27.3mt averaging 4.6% zinc, 0.2% lead, 22.9g/t silver and 0.7g/t gold.
  • The resource was estimated at a zinc cut-off grade of 1% and 0.5g/t for the gold domains. We observe that, in terms of the resource tonnage, approximately 40% is classed as Measured, 20% as Indicated and 40% as Inferred, with the highest zinc grades (4.6%) reported within the Measured portion of the resource.
  • The company attributes the resource increase to the combination of additional drilling and a far improved understanding of the controls and the distribution of ore within the deposit”.
  • Griffin Mining stresses that Zone III is only one of a number of zones of mineralisation within the Caijiaying licence area and that work on a revised Zone II resource model as well as the maiden estimate for Zone VIII (the recently identified northern resource extension of the Zone III deposit)” is well advanced and that “Resource announcements for those zones should be forthcoming in the near future”.
  • Describing the new resource estimate for Zone III as truly an outstanding result”, Chairman, Mladen Ninkov, commented that “One only wonders what the revised resource statements for Zone II and Zone VIII will reveal and the size of the increase to the global resource at Caijiaying”.

Conclusion: A more detailed  insight into the geological controls to the Zone III mineralisation as a result of drilling has delivered a meaningful increase to resources. Continuing work on other mineralised bodies at Caijiaying using the insights gained from the Zone III studies is expected to be completed soon. We look forward to further updates when the current work is completed.

 

redT energy plc (RED LN) FOLLOW 2.3p, Mkt Cap £18m – Oxford ‘superhub’

  • Two energy storage projects appear to have been announced this morning in the Oxford area
  • While it is possible that SKY news and redT are referring to the same project, it is possible that there may be two
  • redT is part of a consortia involved in building the Energy Superhub Oxford ‘ESO’ project for 100 Ultra Rapid and Fast chargers
  • Sky news reports separately on a Sky refers to 4,000 charging stations.
  • The ESO project is for a grid-connected 50MWh vanadium lithium-ion hybrid energy storage system.
  • The £41m project should include 5MWh of vanadium redox machines in 72 units.
  • redT recently reported their 1MWh vanadium flow / lithium-ion hybrid battery is now live in Australia with 900kWh of vanadium storage capacity using 12 tank units of vanadium running alongside a 120kWh C1 rated lithium battery.
  • The system is designed to work with 1MW of solar panels and Electric Vehicle charging stations as part of a Net Zero initiative.

 

Strategic Minerals* (SML LN) FOLLOW 1.6p, Mkt Cap £23m – Fluffing up heaps at Leigh Creek copper project

  • Strategic Minerals’ twitter account shows a picture of a digger fluffing up the heap leach pads at the Leigh Creek copper project.
  • A second picture also shows the start of wet commissioning at Leigh Creek including the commissioning of the Kennecott Cones .
  • Management recently reported that its operating contractor, PPM Global, had mobilised to the Mountain of Light project area at Leigh Creek in order to refurbish the existing Mountain of Light and “manage the trial restart of operations”, including the reactivation of the existing copper heap leach pads “as a trial for later full scale production”.

*SP Angel act as Nomad and broker to Strategic Minerals

 

Trans-Siberian Gold (TSG LN) FOLLOW 55.5p, Mkt Cap £61m – Rodnikova deposit, Kamchatka

  • Trans-Siberian Gold reports that it has been advised by the Russian Government agency Rosnedra, that its $3m bid for the Rodnikova deposit located in the Kamchatka region of the Russian Far East was the highest in a recent auction and that It is anticipated that Rosnedra will confirm the award of the licence shortly and that the licence for the Rodnikova deposit will be issued within the next month”.
  • The Rodnikova deposit, which is located approximately 50km from Tran Siberian Gold’s operating Asacha gold mine, is reported to contain a GKZ Russian classified resource of 1m oz of gold at an average grade of 5.3g/t and 8.3moz of silver at an average grade of 44.6g/t.
  • The project area is reported to be served by good infrastructure with “sealed road access to within 5km of the site and is situated in close proximity to the Mutnovskaya Geothermal Power Station” which is “believed to be the largest geothermal power plant in Russia”.

Conclusion: The successful bid for the Rodnikova deposit is expected to see Trans Siberian Gold awarded the licence within the next month.

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abagail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

 

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

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*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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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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