SP Angel . Morning View . Friday 03 07 20

 

SP Angel . Morning View . Friday 03 07 20

162 miners killed in landslide in Myanmar

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MiFID II exempt information – see disclaimer below 

Power Metals Resources* (POW LN) – Test-pit results from Kisinka

Rio Tinto (RIO LN) – Oyu Tolgoi project update 

Tertiary Minerals* (TYM LN) – Issue of shares to Precious Metal Capital Group

 

Landslide at Myanmar jade mine kills at least 162 people

https://www.bbc.co.uk/news/world-asia-53260834

• At least 162 people were tragically killed yesterday in a landslide at a jade mine in Northern Myanmar.
• This is the latest disaster to heap pressure on the Myanmar government to take action against unsafe mining conditions.
• Myanmar’s Jade industry is said to have generated $31bn in 2014, although much of its product is smuggled illegally into China.

 

Inventory drawdowns may indicate some stockpiling ahead of further COVID-19 disruption at mines and processing facilities 

• Economists will tell you that a fall in GDP will result in lower demand for goods and services.
• But this time, the fall in demand for many services is caused by the Lockdown preventing people from going to shops, restaurants, hotels and other leisure activities.
• While workers in this sector are hit hard, workers in manufacturing and less-badly affected services are thought to be doing ok.
• Manufacturers appear to be recovering well while applying social distancing, though local Lockdowns may still hit factories.
• So manufacturers are restocking is drawing down inventories at a time when mine supply is being hit, particularly in Latin America.
• LME copper stocks fell 4,325t this morning to 206,375. Shanghai copper inventories rose this week by 14.4% to 114,318t.
• Chinese copper smelters have cut the floor price on Treatment and Refining charges TC/RC again by 3.6% yoy (Refinitiv).
• Note: While the movement of copper in an out of warehouses is useful good indicator for general economic activity we remain wary of the key players and stocks held outside official warehouses for collateral and financing purposes.

 

IG TV interview on gold and gold companies

•    https://youtu.be/lszustZe7_U

VOX Markets podcast on mining

https://www.voxmarkets.co.uk/media/5ed8e9a49f98da001bbc4afb/?context=/series/daily-podcast/

 

Dow Jones Industrials		+0.36%	at	25,827
Nikkei 225		+0.72%	at	22,306
HK Hang Seng		+1.22%	at	25,431
Shanghai Composite		+1.98%	at	3,152

 

Economics

US – 4.8m new jobs added in June as state economies reopened led by leisure and hospitality and retail.

• The figures highlight the very fast hire and fire culture in the US
• The compensating factor is that wages are generally higher in the US than elsewhere
• We suspect US employees will be looking for greater compensation from their employers going forward as seen historically post-pandemics.

• On a downside, concerns are remaining over the sustainability of employment gains as a surge in new cases see many of those states to halt or even scale back reopening plans while the state’s extra $600 per week unemployment benefits are coming to an end this month.
• Unemployment still rides high with around 17.8m American remaining unemployed, down from 23.1m in April, but suggesting that only around a third of the jobs lost during the pandemic have been recovered..
• Unemployment rate came down to 11.1% in June compared to the pre-pandemic half-century low of 3.5%.
• New COVID-19 cases hit new daily high yesterday with more than 57k people diagnosed with the virus, more than double the pace recorded in mid-June.
• US markets are closed today as the nation celebrates the Independence Day.
• Non-Farm Payrolls (‘000): 4,800 v 2,699 in May and 3,230 est.
• Unemployment Rate: 11.1% v 13.3% in May and 12.5% est.
• US Fed's Total Balance Sheet falls to $7.06tn on 1st July vs $7.13tn a week earlier

 

China – Private sector PMIs climbed in June offering signs of improved growth momentum helping the market risk sentiment in the region.

• Caixin Manufacturing PMI (released on Wednesday): 51.2 v 50.7 in May and 50.5 est.
• Caixin Services PMI: 58.4 v 55.0 in May and 53.2 est.
• Caixin Composite PMI: 55.7 v 54.5 in May.

 

Eurozone – The economy is seen recovering with the regional PMI hitting four-month high in June and indicating weaker pace of contraction.

• Country level numbers showed that all countries recorded their best Composite PMI readings since February.
• Nevertheless, economic conditions remain challenging with underlying demand staying weak, both domestically and abroad, while private sector continued to cut staff.
• Confidence returned to positive territory last month and hit the highest level in four months, although, it remained well below levels seen at the start of the year.
• “Having sunk to an unprecedented low in April amid widespread business closures to fight the virus outbreak, the PMI has risen to a level indicative of GDP contracting at a quarterly rate of just 0.2%, suggestive of strong monthly GDP gains in both May and June,” Markit commented on the data.
• Eurozone Manufacturing PMI (released on Wednesday): 47.4 (Final) v 46.9 (Flash) and 39.4 in May.
• Eurozone Services PMI: 48.3 (Final) v 47.3 (Flash) and 30.5 in May.
• Eurozone Composite PMI: 48.5 (Final) v 47.5 (Flash) and 31.9 in May.

ECB – Isabel Schnabel predicts severe economic downturn with medium-term consequences 

• Schnabel is definitely forecasting a V shaped recovery

https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200702_1~977101f696.en.pdf?9d8f2f095d607386840fa45fc1ec0636

 

Germany - Lawmakers ruled the ECB bond-buying programme as adequate meeting the Constitutional Court’s demand for parliament to review whether asset purchases were “proportionate”.

• In May, the court decided that the €2.2tn Public Sector purchase Program (PSPP) that was launched in 2015 could be illegal.
• The alliance vote that includes the Markel’s coalition parties together with the Greens and the pro-business Liberal Democrats supporting the explanation the ECB provided means that the German central bank can remain in the programme.

German Engineering Orders fell 28% in yoy in May (VDMA)

• Domestic Orders also fell 23%,
• Overseas Orders fell 31%

 

Italy – Services PMI 46.4 in June vs 47 est 

• Composite PMI 47.6 in June vs 46.9 est

 

UK – Services Business Activity PMI 47.1 in June vs 29.0 in May (HIS Markit)

• This is an extraordinary recovery in June from a record low in April
• Services make up around 80% of UK GDP with the data indicating a very rapid recovery for UK plc
• 42% of UK manufacturers plan now redundancies, up from 25% in May in the next 6m as government furlough scheme winds down (MakeUK)
• UK manufacturing sales sill down by between 25-50%
• June UK manufacturing survey sales expected to be -9.1% lower
• Bank of England survey shows most sectors expect a massive hit to sales from COVID in 2020 (Reuters)

UK to open holiday bridges from 10 July 

• Travellers from around 60 countries and overseas territories will not need to quarantine when they arrive in the UK.
• The UK government will also require anyone visiting pubs, restaurants and other venues to submit their phone number for tracing in the event of an outbreak.
• The USA remains on the UK redlist for quarantine risk

UK – Welsh pub with car park in England unable to reopen

• The Old Hand and Diamond Inn, which straddles the Anglo-Welsh border has been told to remain shut, because of differences in lockdown easing.
• Pubs in England can reopen on Saturday, whereas in Wales pubs can open from the 13^th of July.

 

France – Prime Minister, Édouard Philippe, resigns due to poor election results for the ruling La République En Marche party

• Services PMI 50.7 June vs 50.3 est (Markit).
• Composite PMI 51.7 June vs 51.3 est
• Budget Balance €-117.9bn YTD May vs €-92.1bn previously

 

Botswana – mystery illness killing hundreds of elephants in Botswana

• Some 275 elephants are reported to have died mysteriously in Botswana this year.
• The elephants are not being killed by poachers but appear to be suffering from a mystery illness.

 

India – to launch COVID-19 vaccine developed By Bharat Biotech 

 

Venezuela – Britain recognises Guaido as country’s president 

• Britain has recognised Venezuela’s opposition leader Juan Guaido as the country’s president in a high court ruling.
• Nicolas Maduro has requested that the Bank of England send the $1bn worth of gold stored in the bank, to help fight the pandemic.
• Guaido has asked the BoE not to send the gold, claiming that Maduro wants to use it to pay off his foreign allies.

 

Fake air travel – a Taiwan airport is offering a fake itinerary, check-in, passport control, security and aircraft boarding 

• You just never leave the airport – bonkers or what?

 

Currencies

US$1.1245/eur vs 1.1266/eur yesterday Yen 107.48/$ vs 107.53/$.  SAr 16.924/$ vs 17.004$.  $1.248/gbp vs $1.249/gbp.  0.694/aud vs 0.692/aud.  CNY 7.063/$ vs 7.066/$.

 

Commodity News

Precious metals:          

Gold US$1,776/oz vs US$1,769/oz yesterday - Bank of America raises its target price for gold to $3,000/oz

• We assume BoA are not holding any of the 83 tonnes of fake gold bars used as collateral in China by Kingold Jewelry, based in Wuhan.
• Kingold is reported to have used the fake bars to obtain loans of around $2.8bn from 14 Chinese financial institutions
• Kingold Jewelry is one of the world's largest private gold processor. The company is listed in Nasdaq, market cap $5m and falling today.
• This is just one of many commodity related scandals seen in China in the past ten years

Gold ETFs 103.5moz vs US$103.1moz yesterday

Platinum US$816/oz vs US$823/oz yesterday

Palladium US$1,903/oz vs US$1,927/oz yesterday

Silver US$18.02/oz vs US$17.92/oz yesterday

            

Base metals:   

Copper US$ 6,035/t vs US$6,101/t yesterday – LME copper prices set for seventh weekly gain

• London copper prices are set to rise for a seventh straight week- the longest consecutive gain in nearly three years.
• Supply worries from top producer Chile have driven prices higher this week, as cases of COVID-19 in the country has risen sharply.
• Three-month LME copper was down 0.4% at $6,048/t earlier this morning, as Chile assured traders of a steady output- but was heading for a weekly gain of 1.5% (Reuters).
• State run miner Codelco saw production rise 3% year-on-year in May to 144,200 tonnes, although this was before the virus fully took hold in the country.

Aluminium US$ 1,623/t vs US$1,616/t yesterday

Nickel US$ 13,065/t vs US$12,775/t yesterday - LME Nickel prices hit three-week high

• Nickel prices rose this morning, tracking gains in stainless steel on the Shanghai Futures Exchange, which rose as much as 3% to 13,470 yuan/t (Bloomberg).
• Three-month nickel prices on the LME rose 0.9% this morning to $13,030/t (Fastmarkets MB).

Zinc US$ 2,038/t vs US$2,064/t yesterday

Lead US$ 1,767/t vs US$1,776/t yesterday

Tin US$ 16,900/t vs US$16,825/t yesterday

            

Energy:            

Oil US$42.8bbl vs US$42.3/bbl yesterday

• Oil prices continue a steady rise following the latest rig figures reported by Baker Hughes showing the number of oil and gas rigs in the US fell again this week to 263
• This is the second small loss in the number of active rigs in as many weeks after a long streak of major losses
• The total oil and gas rigs is now sitting at 700 fewer than this time last year
• The number of active oil and gas rigs in the US has continued to decline over the last seventeen weeks
• The number of oil rigs decreased for the week by 3 rigs, according to Baker Hughes data, bringing the total to 185, compared to 788 active rigs this time last year.
• The total number of active gas rigs in the US rose this week by a single rig, landing at 76 total rigs, compared to 174 rigs a year ago.
• To compare active rigs with supply figures, the EIA’s estimate for oil production in the US, which rose for the first time in eleven weeks for week ending 19 June, held fast for the second week at 11MMbopd for week ending June 26
• Oil production in the US is still 2.1MMbopd less than the all-time high
• Canada’s overall rig count rose this week by 5, settling at 18 active rigs
• Oil and gas rigs in Canada are now down 102 yoy 

Natural Gas US$1.730/mmbtu vs US$1.703/mmbtu yesterday

• Natural gas prices rallied 3.5% yesterday following a smaller than expected build in natural gas inventories
• Stronger than expected US jobs data helped lift natural gas with several states scaling back their reopening up efforts, the demand for electricity is likely to remain subdued as few commercial buildings are likely to come back up during this period
• The weather is expected to be warmer than normal but the increase in demand is not strong enough to offset many of the commercial buildings that are not using electricity
• The spread of COVID-19 in the US is likely to stall the back to work effort, and put downward pressure on prices
• Also capping gains are concerns over a cooler short-term weather pattern and low LNG demand

Uranium US$32.90/lb vs US$31.40/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$95.4/t vs US$95.3/t - China iron ore stockpiles rise 1.3% this week 

• Iron ore stockpiles rose to 109.8mt compared to a week prior, according to Steelhome.
• Imports from Australia rose 2.1% to 58.5mt, whereas Brazilian imports rose 0.9% to 22.5mt (Bloomberg).

Chinese steel rebar 25mm US$521.1/t vs US$520.5/t

Thermal coal (1st year forward cif ARA) US$57.9/t vs US$57.4/t - Coal India output falls for third straight month

• Coal India saw production fall 12.8% in June, as national coronavirus lockdowns cut demand for the fuel.
• Output fell to 39.2mt in June vs 45.0mt in June 2019 (Hellenic Shipping News).
• The world’s largest coal miner saw its annual production fall in the year ended 2020- the first yearly decline in over 20 years.

Coking coal swap Australia FOB US$130.0/t vs US$121.0/t

            

Other:  

Cobalt LME 3m US$28,500/t vs US$28,500/t 

NdPr Rare Earth Oxide (China) US$41,057/t vs US$40,325/t

Lithium carbonate 99% (China) US$4,743/t vs US$4,812/t

Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.5/kg

Antimony Trioxide 99.5% EU (China) US$4.9/kg vs US$4.9/kg

Tungsten APT European US$205-215/mtu vs US$215-225/mtu 

Graphite flake 94% C, -100 mesh, fob China US$460/t vs US$460/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,275/t vs US$2,350/t

 

Battery News

European Commission rules in favour of battery separator investment

• Hungary’s €46.5m of investment aid to chemical company Toray has been ruled to be in line with EU state aid rules. (Indiaeducationdiary)
• The investment supports Toray’s €397m investment in a new lithium-ion battery separator production plant in the Central Transdanubia region of Hungary. 
• The project started in 2019 with a planned completion date in 2023, it is Toray’s first battery separator facility in Europe. (neweurope)
• The European Commission found that without the public funding the project would not have been completed in an EU country, the aid is the minimum required to trigger the investment in Hungary.
• Toray has similar battery separator production facilities located in Nasu, Japan and in the Republic of Korea.

 

BMW to bet big on EV

• BMW is set to ramp up its EV production capacity in Germany as the company pumps €500m into complying with strict EU emissions standards.
• At their Dingolfing facility the Company has opened its Competence Centre for E-Drive production which will produce electric powertrain components.
• The Company’s Bavarian plant will be able to produce half a million vehicles a year by 2022 according to the Chairman of the board of management.
• Four production lines are to be added to the facility’s 8 current lines to enable production capacity to increase tenfold.
• BWM has opted for a flexible EV platform, vehicle models can be fitted with either a combustion engine, PHEV system or battery power train.
• BWM have also revealed their new BWM e-drive, a highly integrated system which combines the electric motor, transmission, and power trains in a central housing. It will get its first run out in the new BMW iX₃ model.
• The Company hopes to have 13 fully electric models on the market by 2023.

 

SK Innovation became the 5^th largest EV battery maker in April

• South Korean battery maker SK Innovation broke into the top 5 EV battery producers in April. (Business Korea)
• The Company recorded 189.1MWh of global EV battery production in April, outperforming domestic competitor Samsung SDI.
• The Company remains some way behind top producer CATL which produced 1896MWh and has 34.9% market share.
• LG Chem, Panasonic and BYD were 2^nd, 3^rd and 4^th.

 

Company News

Power Metals Resources* (POW LN) 0.48p, Mkt cap £2.6m – Test-pit results from Kisinka

(Power Metals holds a  49.9% interest in Red Rock Australasia Pty Ltd)

• Power Metal Resources has provided a progress report on its programme of test-pitting at the Kisinka copper-cobalt prospect located approximately30km east of Lubumbashi in the DRC.
• Twenty-one of the planned twenty four pits were completed totalling 174.3m with 16 reaching the targeted depth and five abandoned as a result of encountering water. The 3 holes not attempted were the result of wet conditions.
• The company reports that the water-table was encountered at shallower than expected depths and also that the overburden cover was less than expected.
• In total the programme recovered 211 samples (including field duplicates) and initial XRF analysis ʺconfirm the copper anomalous zones identified in the previous geochemical survey, with higher values and a wider zone detected, and open to the north west and south eastʺ.
• The company says that the ʺCopper anomalous zones are quite well correlated with major structures inferred from the detailed mapping, and in the south east with a brecciated zone situated between two strike-slip faultsʺ.
• Power Metals says that anomalous cobalt was present in each of the zones with stronger anomalies towards the north-west.
• Follow-up ICP (inductive coupled plasma) analysis is to be undertaken in Johannesburg when air transport links are reinstated and it is expected that ground magnetic and electromagnetic geophysical surveys will ʺdetect both low magnetic and chargeable lithologies and indicate structures and faulting and areas of carbonate rocksʺ.
• CEO, Paul Johnson, commented that ʺThe confirmation and in fact enlargement of the copper anomalous areas detected in previous exploration enables us now to go forward with confidence. The laterization and leaching that we encountered support the theory that there may be supergene enriched mineralisation at a lower level, so we particularly want to investigate thisʺ.

Conclusion:  Power Metals Test pits at Kisinka have confirmed and extended the copper cobalt anomaly. Follow-up geophysics and confirmatory analysis of the test-pit samples is expected to refine the exploration target definition.

*SP Angel acts as Nomad and broker to Power Metals Resources

 

Rio Tinto (RIO LN) £45.18p, Mkt cap £56.7bn – Oyu Tolgoi project update 

• Rio Tinto confirms the completion of a revised feasibility study for the Oyu Tolgoi project. The study is being submitted to the Mongolian Government in accordance with provisions ʺwhich require mining companies to submit updated feasibility studies every five yearsʺ.
• The study includes a new mine design for the Hugo Dummett North underground mine and ʺconfirms that the caving method of mining remains valid and that the underground schedule and costs remain within the ranges previously disclosed.ʺ
• The company says that ʺThese ranges include a delay of 21 to 29 months for first sustainable production compared to the original feasibility study guidance in 2016 and an increase of $1.3 billion to $1.8 billion from the original $5.3 billion development capital.  Detailed study, design, engineering and optimisation work is ongoing to support the definitive estimate of Panel 0 for the development of this world-class orebody, which remains due in the second half of 2020ʺ.
• The new design for the underground operation includes enhanced geotechnical work to enhance the stability of the underground mine and reclassifies some of the material contained within the stability pillars ʺfrom Ore Reserves to Mineral Resources.  It is expected that part of the material contained in these pillars will be recoverable at a later stage following additional studies which are currently underwayʺ.
• The design changes result in an increase of 69mt of resources at an average grade of 2.43% copper, 0.57g/t gold and 4.81g/t silver at the Hugo Dummett orebody bringing the overall resource estimate to 1.224bn tonnes at an average grade of 1.03% copper, 0.31g/t gold and 2.73g/t silver. The resources estimate for the Hugo Dummett North Extension orebody remains unchanged at 254mt at an average grade of 1.21% copper, 0.42g/t gold and 3.24g/t silver.
• The company confirms that ʺOptimisation of mine designs for Panels 1 and 2 is ongoing and it is anticipated that this next phase of study may result in further movements in classifications of Ore Reserves and Mineral Resourcesʺ.

Conclusion: The revised mine design for the underground Hugo Dummett North orebody confirms the validity of a bulk caving mining method and incorporates more stringent geotechnical data to enhance the stability of the underground workings. Schedules remain consistent with previously announced changes as does the US$1.3-1.8bn increase in the original capital development cost of US$5.3bn. 

 

Tertiary Minerals* (TYM LN) – 0.27p, Mkt cap £2.1m – Issue of shares to Precious Metal Capital Group

• Tertiary Minerals reports that it has been requested to issue £70,000 of shares to the recent investor, Precious Metals Capital Group (PMC) as part of its £600,000 investment announced on 2^nd April.
• Approximately 38.9m shares are to be issued to Precious Metals Capital Group representing approximately 5% of the enlarged capital of the company.
• The balance of the PMC investment, £420,000 remains outstanding.
• The earlier announcement explained that PMC was investing ʺto fund ongoing exploration once the recently announced exploration programmes at the Pyramid Gold and Paymaster Polymetallic Projects in Nevadaʺ where Tertiary Minerals announced on 14^th May that preliminary results from what is described as ʺfirst pass sampling … show a best intersection of 0.55m grading 2.01 g/t Au from 82.6m down holeʺ.
• While these initial results ʺare lower than those from the historic drill hole (PYR9), … [in May Tertiary Minerals pointed out that] … the results do confirm that the target zone is gold-mineralisedʺ. When the results were announced in May Tertiary Minerals also said that ʺThere is also a poor correlation between holes in the position of the better assay results and so a second programme of core sampling will now be carried out to ensure that no significant gold bearing sections were missed in first pass samplingʺ.

*SP Angel act as nomad and broker to Tertiary Minerals

 

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474

 

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk - 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	SSY
RRE	Steelhome
Lithium Carbonate, Ferro Vanadium, Antimony	Asian Metal
Tungsten	Metal Bulletin

 

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