SP Angel . Morning View . China trade talks optimism lifts base metals prices
Paul Kettle
Morning Research Note -4 min read
12:10, 9th January 2019

SP Angel – Morning View – Wednesday 09 01 19

China trade talks optimism lifts base metals prices


MiFID II exempt information – see disclaimer below


Centamin (CEY LN) – Q4 and full 2018 production results

Central Asia Metals (CAML LN) – 2018 operations results and 2019 guidance

Cora Gold* (CORA LN) – Metallurgical tests update


Dow Jones Industrials





Nikkei 225





HK Hang Seng





Shanghai Composite





FTSE 350 Mining





AIM Basic Resources







US – Risk sentiment is stronger this morning led by US-China trade talks optimism.

  • “Talks with China are going very well,” Trump twitted yesterday.
  • The negotiations have been extended by another day which further fueled speculation of productive dialogue between two nations.
  • US and China have until March 1 before American tariffs on some $200bn in Chinese goods are set to increase to 25% from 10%.
  • Meanwhile, no resolution on a disputable wall project has been reached between the government and Democrats with government shutdown being extended to 19 days now.
  • S&P 500 closed up 0.97% yesterday and emerging markets equities are up 1.3% this morning (as per MSCI Emerging Market Index) marking the strongest performance in almost five weeks.


China – The government is planning to increase budget deficit target this year, according to two people familiar with the matter Bloomberg reports.

  • The Finance Ministry is looking to aim for 2.8% of GDP this year, up on 2.6.% in 2018.
  • This compares to market estimates for 2.6-3.0% target.
  • “We expect most of the extra fiscal stimulus will be reflected in reductions in personal income and corporate taxes… a 2.8% deficit target would be a calibrated policy response aimed at camobating continued weakness in domestic demand, flagging external demand and uncertainties associated with a trade war with the US,” Bloomberg Economics reported.
  • Of note, China recorded wider fiscal deficit than the target in all years since 2015.


Japan – Good labor earnings data is a welcome news for the government aiming to ramp up consumer spending and help revise inflation expectations higher.

  • Headline job earnings increased 2%yoy in November, up from 1.5%yoy recorded in October, marking the fourth increase of at least 2% in the last nine months.
  • PM Shinzo Abe has continuously called on companies to make bigger pay increases, however, despite the tightest labor market in decades, wages in Japan have demonstrated only modest gains.
  • “Stronger bonus payments are likely to buoy overall labor cash earnings into December… but further out, wage growth is likely to slow (as) corporate profits – which helped to drive growth in wages last year – are facing increased downside risks,” Bloomberg Economics said.


Germany – More poor economic data released this morning with both exports and imports contracting through November.

  • Weak exports have been predominantly driven by poor demand outside the EU.
  • Drops in exports/imports follow weak industrial production and factory orders reported earlier this week fueling concerns the economy may record a second quarterly GDP contraction.
  • Exports (%mom): -0.4 v 0.9 (revised from 0.7) in October and -0.5 forecast.
  • Imports (%mom): -1.6 v 0.8 (revised from 1.3) in October and 0.0 forecast.


UK – Parliament is set to restart debates on the Brexit withdrawal bill with PM seeking to avoid defeat in a vote expected on 15 January.

  • Previously, Theresa May pulled a vote on the deal fearing it would be voted down.
  • Government weak position have been highlighted by a loss in parliament yesterday when lawmakers approved the motion that the office will need explicit parliamentary approval to leave the EU without a deal before it can use certain powers relating to taxation law.


Tanzania – Tanzanian industry clash results in new mining minister.

  • Tanzania appoints a new mining minister amid a prolonged spat between the government and gold producer Acacia over a $190bn tax bill, which has severely limited operations in the East African nation.
  • Dotto Biteko is the third mining minister President John Magufuli has appointed since he was elected in 2015.
  • “He knows the mining sector well, so we expect continuity of policy”, according Tanzania Chamber of Minerals and Energy executive secretary Gerald Mturi. Biteko has previously lead a parliamentary investigation that concluded there was widespread tax evasion and smuggling in the gemstone business.
  • In 2017, the government passed laws that the industry complained would be costly and onerous. Among other things, the laws hike taxes on mineral exports, mandate a higher government stake in mining operations and force the construction of local smelters to encourage domestic value-add.
  • The reforms are part of a wider push by African governments to claw back revenues from mining, which have initially negatively impacted listed foreign firms working in Tanzania.



US$1.1465/eur vs 1.1443/eur yesterday. Yen 108.84/$ vs 108.96/$. SAr 13.945/$ vs 13.976/$. $1.275/gbp vs $1.277/gbp. 0.716/aud vs 0.712/aud. CNY 6.834/$ vs 6.857/$.


Commodity News

Precious metals:         

Gold US$1,283/oz vs US$1,283/oz yesterday – Gold imports to tumbled in ’18 as prices bite

  • Gold imports across the second-biggest consuming nation tumbled by a fifth last year, deterred by high domestic prices, highlighting a headwind to global demand even as bullion gains on renewed haven buying.
  • Overseas purchases fell to 762t in 2018, a 20% slump. The figure represents the second smallest amount shipped into the country this decade.
  • In December, imports shrank 23% to about 60t a year earlier.
  • Demand for gold across the Asian nation has tumbled as a slump in the rupee made the metal more expensive in the price-sensitive market. A liquidity crunch and government measures to curtail consumption have exacerbated the decline.
  • The near-term outlook remains positive, however, with demand expected to rise up to 20% as purchases for investment may pick up.

   Gold ETFs 71.7moz vs US$71.7moz yesterday

Platinum US$822/oz vs US$822/oz yesterday

Palladium US$1,338/oz vs US$1,306/oz yesterday – Palladium smashes another premium record over platinum

  • Palladium continues to track upwards into the new year, building on its ranking as the best-performing metal of 2018.
  • Shortages of the metal consumed for autocatalysts for gasoline-fueled vehicles boosted prices, widening the premium with rival substitute platinum to more than $500/oz.
  • Both metals are applied in catalytic converters to reduce vehicle emissions, falling in and out of favour with manufacturers with price movements.
  • Platinum, the more expensive of the twin metal for most of this century, has seen declining usage across key consumers in diesel carmakers.
  • Demand has tumbled as consumers shied away from diesel vehicles in the wake of Volkswagen AG’s emissions-cheating scandal.
  • While many suggest automakers will begin adopting cheaper platinum in gasoline catalysts, Norilsk Nickel PJSC head of analysis and market development highlights features of palladium which benefit, including better resistance to higher temperatures.
  • Further, switching to platinum would take at least two years and would need additional work and costs to adjust engines and car-exhaust systems.
  • The premium is, however, expected to narrow, with the market potentially facing a deficit if investment demand is sufficient, including bar and coin sales.

Silver US$15.62/oz vs US$15.57/oz yesterday


Base metals:   

Copper US$ 5,966/t vs US$5,904/t yesterday – Chile’s copper production expected to top record levels in 2019

  • Copper output in Chile, the leading producing nation, is expected to exceed 6mt for the first time this year, and continue rising by 30% over the next 10 years, according to state copper agency, Cochilco.
  • Production of the crucial metal for the growing electric economy could top 7.25mt as early as 2025, thanks to new project development and planned expansions, even as miners confront falling ore grades at older mines.
  • Production from existing, ageing mines are likely to decline by 19% to 4.46mt annually, but will be offset by new ventures and mine expansions.
  • However, sustained investment is required to support development plans.
  • The No. 1 copper producer recently launched a $39bn, 10-yr investment plan to boost productivity at its mines. The company is set to have more funds available as the Finance Commission of Chile’s Senate unanimously approved a motion to overturn a dictatorship-era law that forces Codelco to transfer 10% of its export sales to the military.
  • Teck Resources, Canada’s largest diversified miner, is also going ahead with a $4.8bn expansion of its Quebrada Blanca copper mine.
  • While projections are positive for the copper industry, the nation has been stung by repeated union action. The market balance has been historically impacted by extended strikes or stoppages.

Aluminium US$ 1,871/t vs US$1,857/t yesterday

Nickel US$ 11,280/t vs US$11,120/t yesterday

Zinc US$ 2,498/t vs US$2,491/t yesterday

Lead US$ 1,980/t vs US$1,949/t yesterday

Tin US$ 20,065/t vs US$19,730/t yesterday



Oil US$59.2/bbl vs US$57.4/bbl yesterday

Natural Gas US$3.005/mmbtu vs US$3.009/mmbtu yesterday

Uranium US$28.90/lb vs US$28.90/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$73.1/t vs US$73.0/t

Chinese steel rebar 25mm US$585.9/t vs US$584.0/t

Thermal coal (1st year forward cif ARA) US$81.3/t vs US$79.8/t

Coking coal futures Dalian Exchange US$209.9/t vs US$208.5/t



Cobalt LME 3m US$44,000/t vs US$44,000/t

China NdPr Rare Earth Oxide US$46,165/t vs US$46,233/t

China Lithium carbonate 99% US$10,023/t vs US$9,990/t

China Ferro Vanadium 80% FOB US$70.5/kg vs US$70.5/kg

China Antimony Trioxide 99.5% EU US$7.0/kg vs US$7.0/kg

Tungsten APT European US$270-280/mtu


Battery News


Company News

Centamin (CEY LN) FOLLOW117.9p, Mkt Cap £1,364m – Q4 and full 2018 production results

  • Centamin reports a 17% improvement in gold production during the final quarter of 2018 to 137,600oz (September quarter 117,720 oz) of gold bringing the total for the full year to 472,418oz.(June quarter output 92,803oz).
  • This is somewhat lower than the “2018 annual production of approximately 480,000 ounces” indicated at the time of the third quarter results and certainly lower than the published guidance earlier in the year which started at 588,000 oz before being reduced, initially to 505-515,000oz as the mine experienced a testing first half encountering lower than expected grades in the open-pit and “disruption to the underground stoping sequence in in Q2, resulting from a damaged rig; and unplanned dilution from the cascading stopes in the Amun underground” mine.
  • Grades mined in the open pit mine improved from 0.64g/t gold to 0.75g/t during the quarter and total tonnes mined increased from 19.9mt to 21.1mt although ore tonnages declined to 5.0mt (Q3 2018 – 6.6mt) as waste stripping picked up as development moved to access “the higher grade sulphides at depth in Stage 4”.
  • In the underground mine, total ore mined declined by 4% during the quarter to 314,000t but this was more than offset by a 20% quarter-on-quarter improvement in grades to 6.2g/t. This appears, in part, to reflect an increasing proportion of ore derived from stoping (63%) as opposed to development.
  • In the plant, the company reports a record throughput of 3.2mt during the quarter with higher head grades of 1.45g/t gold (Q3 2018 – 1.29g/t) and slightly improved recovery rates of 89.1% (Q3 2018 – 88.7%).bringing the overall recovery rate for 2018 to 88.7%.
  • Commenting on the results of what he described as “an operationally challenging year”, CEO Andrew Pardey pointed out that “the fourth quarter delivered further improvement in the grade from both the open pit and the underground stoping, whilst underground development focused on longer term production access.  We look forward to 2019, where the focus remains on ensuring delivery of grade and as such gold production from Sukari, supported by tight cost control across all areas of the organisation”.

Conclusion: After a difficult first half, production at Sukari picked up during the second half delivering almost 55% of the 2018 gold output. Although the production recovery appears to have been slower than first thought, after three consecutive quarters of rising output, it now appears to be on an upward trend and we look forward to the company’s production guidance for 2019 in due course.


Central Asia Metals (CAML LN) FOLLOW228 pence, Mkt Cap £403.9m – 2018 operations results and 2019 guidance

  • Central Asia Metals reports that it produced 14,049t of copper from its Kounrad operation -  earlier this year the company issued production guidance of 13-14,000 tonnes. Copper production guidance for 2019 is 12,500-13,500 tonnes.
  • The company also met its guidance for zinc production (22,532 tonnes in concentrate) and lead (29,388 tonnes in concentrate) for the Sasa mine. Guidance for 2019 is for 22-24,000t of zinc in concentrate and 28-30,000t of lead in concentrate from underground ore production in the range 800-825,000t.
  • The company also reports that “During H2 2018, CAML commenced a 'Life of Mine' study at Sasa. This work programme will entail an in-depth review of each aspect of the Sasa operation and is expected to be completed throughout the course of 2019”.
  • This programme included diamond drilling at the existing operating site at Svinja Reka where there is an existing, JORC compliant, inferred resource of 2.7mt at an average grade of 3.2% lead and 2.1% zinc, and at Golema Reka “which was mined between 1981 and 2010”.
  • A total of more than 3,000m of diamond drilling below the 830m level at Svinja Reka has “confirmed extensions to mineralisation down to and beneath the 750m level” over a 150m strike length. “CAML is encouraged that the grades identified in the area below the 830 metre level appear to be higher than the current inferred resource demonstrates” and results presented in today’s announcement include individual intersection of over 9% lead and up to 10% zinc. It appears that these drilling results have yet to be reflected in the mineral resource estimates.
  • Drilling at Golema Reka, where there is an inferred, JORC compliant, resource estimate of 7.4mt at an average grade of 3.7% lead and 1.5% zinc also comprised over 3000m “over a 350m strike length that demonstrates an extension to mineralisation beneath the 700 metre level. Golema Reka is accessible from the current mine infrastructure.” Individual drill intersections reported today include intersection of up to 15m width and grades in the range of 1.7-10.4% lead and 0.2-4.2% zinc.

Conclusion: Central Asia Metals’ 2019 production guidance indicates that existing levels of lead and zinc production are likely to be maintained and that copper output from Kounrad may decline slightly. Drilling at Sasa has produced results which may lead to mineral resource updates, as part of a continuing life of mine study, later this year.


Cora Gold* (CORA LN)FOLLOW 6.3p, Mkt Cap £4.2m – Metallurgical tests update

  • The Company appointed Wardell Armstrong International to carry preliminary metallurgical test work on Sanankoro samples.
  • The test work will include both cyanide in leach and heap leach gold processes testing oxide mineralisation amenability to standard leaching extraction technologies.
  • Two composite samples of c.80kg each were collected from core holes drilled at the “Zone A” and “Selin” areas at Sanankoro.
  • Results are due in Q2/19.

*SP Angel acts as Nomad and Broker to Cora Gold



John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481



Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471


SP Angel                                                            

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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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