SP Angel . Morning View . Friday 18 09 20

SP Angel . Morning View . Friday 18 09 20

Copper at the highest since H1 2018 on weak US$ and a recovery in demand

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Cornish Lithium (private) – Results of preliminary sampling of deep geothermal waters

Empire Metals* (EEE LN) – 2.7p, Mkt cap £6.7m – Soil sampling starts at Eclipse gold project

Eurasia Mining* (EUA LN) 19.8p, Mkt Cap £545m – Board and management changes

Gemfields (GEM LN) 5.75p, Mkt Cap £67.3m – Interim results show damaging impact of Covid19

Highland Gold (HGM LN) 298p, Mkt Cap £1,086m – FAS approves the proposed acquisition by Fortiana

Renascor Resources (RNU AU) A$0.01p, Mkt Cap A$16m –AU$3.6m to be raised to advance graphite and gold projects

Vast Resources* (VAST LN) 0.17p, Mkt Cap £21m – Baita Plai update

 

Dow Jones Industrials		+0.47%	at	27,902
Nikkei 225		+0.18%	at	23,360
HK Hang Seng		+0.45%	at	24,452
Shanghai Composite		+2.07%	at	3,338

 

Economics

US – New weekly jobless support applications pulled back slightly while continuing claims continued to decline in a welcome trend.

• The Congress will urgently need to agree to a new fiscal programme after previous initiative for extra jobless assistance expired at the end of July while the stopgap initiative implemented by President Trump at the start of August is capped at just six weeks.
• The Trump has been looking at ways to extend the programme ahead of the stimulus agreement in Congress.
• Jobless Claims (‘000): 860 v 884 in the previous week and 850 est.
• Continuing Claims (‘000): 12,628 v 13,385 in the previous week and 13,000 est.

 

Japan – A drop in economic activity as well as government funded discounts see consumer prices inflation slowdown in August.

• Core CPI (ex Fresh Food) came in negative compared to last year marking the first negative reading since May.
• The measure is likely to continue to run below zero  in September/October given high base comparison due to a hike in the sales tax while beyond that further declines may narrow gradually as business activity picks up if there is no pick new lockdowns, Bloomberg reports.
• CPI (%yoy): 0.2 v 0.3 in Jul and 0.2 est.
• Core CPI (ex Fresh Food, %yoy): -0.4 v 0.0 in July and -0.4 est.

 

UK – The pound briefly dipped against the US$ as the BOE said that policymakers were studying the effects of possible negative interest rates.

• With a number of threats on the horizon including the unwinding of the labour market support programmes, resurgence in C-19 cases and Brexit uncertainty, the BOW will start “structured engagement” with UK bank regulators on how it may implement negative rates.
• The central bank kept rates on hold at 0.1% and the bond buying programme at £745bn, in line with expectations.
• Separately, retail sales report for August showed a pick up in activity beating market estimates.
• Headline numbers mask different fortunes across the retail industry with online sales up 47% on pre-pandemic levels while clothing sales well below and many major retailers are under pressure.
• All risks highlighted before dim the outlook for the sector.
• Retail Sales (%mom/yoy): 0.8/2.8 v 3.6/1.4 in July and 0.8/2.7 est.
• Core Retail Sales (%mom/yoy): 0.6/4.3 v 2.0/3.1 in July and 0.4/4.2 est.

 

France – The number of new cases climbed to more than 10k marking the highest rate since the end of lockdown in May with Health Minister saying the disease “is again very active” in the country.

 

India – Economists cut growth estimates as the economy is hit by the pandemic with more than five million infections.

• India is approaching 100k in new cases per day rate limited which is also likely to be limited by the availability of tests.
• Goldman Sachs is expecting the economy to record a 14.8% drop in FY21 (YE in March) while the Asian Development Bank and the OECD expect GDP to decline 14.8% and 9% this year, respectively.
• The central bank is likely to release its own growth projections on October 1 when the MPC announces its interest rate decision.

 

EU considering issuing green bonds for the first time to fund Europe’s economic recovery from Covid-19, FT reports.

• An official from the European Commission told the FT that Brussels was exploring the possibility of selling sustainable bonds to raise funds to cover its €75obn borrowing spree. 
• The exercise is expected to begin early next year and are likely to attract investment from long-term investors such as Axa who have ESG targets to meet themselves. 
• The move contributes further to the huge surge in similar products, with a total of $263bn sold globally last year- up from $1bn less than a decade ago, according to Moody’s. 
• According to the head of the European Parliament’s environment committee, the recovery fund was an opportunity for the EU “to become by far the largest green bonds issuer worldwide”.

 

EU – Passenger car sales fall 18.9% YoY

• Car sales continued to decline in August, as uncertainty in the labour market means consumers are less willing to purchase big ticket items.
• New car sales in Europe totalled 770,000 in August, down from 949,000 units in the same period last year.
• The drop was sharper than in July, with only a relatively small overall decline of 5.7% YoY to 1.07m units.

 

Currencies

US$1.1860/eur vs 1.1784/eur yesterday.  Yen 104.64/$ vs 104.80/$.  SAr 16.131/$ vs 16.349/$.  $1.298/gbp vs $1.295/gbp.  0.732/aud vs 0.728/aud.  CNY 6.755/$ vs  6.768/$.

 

Commodity News

Precious metals:          

Gold US$1,953/oz vs US$1,946/oz yesterday

   Gold ETFs 109.8moz vs US$109.7moz yesterday

Platinum US$944/oz vs US$949/oz yesterday

Palladium US$2,345/oz vs US$2,375/oz yesterday

Silver US$27.13/oz vs US$27.83/oz yesterday

            

Base metals:    

Copper US$ 6,831/t vs US$6,704/t yesterday - LME copper price hit two-year high on weak dollar and Chinese demand

• Copper prices rose on Friday as the US dollar fell in overnight trading as US job data showed the labour market recover is slowing.
• Increased demand for metals from infrastructure projects is driving sentiment, with hopes of further Chinese stimulus providing a healthy pipeline of projects supporting prices in the longer term (Fastmarkets MB).
• LME copper prices rose 0.7% to $6,828/t earlier this morning, after hitting $6,850/t earlier in the session- its highest level since June 2018.

Aluminium US$ 1,795/t vs US$1,787/t yesterday

Nickel US$ 15,125/t vs US$14,9051/t yesterday

Zinc US$ 2,547/t vs US$2,484/t yesterday

Lead US$ 1,917/t vs US$1,884/t yesterday

Tin US$ 18,120/t vs US$18,120/t yesterday

            

Energy:            

Oil US$43.7/bbl vs US$41.7/bbl yesterday

Natural Gas US$1.976/mmbtu vs US$2.263/mmbtu yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$117.8/t vs US$119.6/t - Vale aims to reach iron ore capacity of 450mt

• The Brazilian miner announced this week that it plans to increase its iron ore capacity from 318mtpa to 450mtpa. 
• In 2018, Vale mined 385mt of iron ore followed by a 21.5% YoY decline to 302mt in 2019 as a result of the Brumadinho dam collapse and poor weather. 
• The miner did not provide an exact timeline to achieve the production target, and said it would create “capacity buffers” to reach the target in the future (Steel Orbis).

Chinese steel rebar 25mm US$553.7/t vs US$553.8/t

Thermal coal (1st year forward cif ARA) US$58.6/t vs US$58.5/t - India Q2 thermal coal imports slump 41.5% YoY

• India’s second quarter coal imports declined sharply, as power demand was heavily hit during the Covid-19 pandemic.
• Imports slumped to approximately 32.9t and coal represented 60% of India’s total power generation.
• Although Covid-19 reduced coal demand, imports fell as the government seek to scale down imports to boost domestic supply (China Coal).

Coking coal futures Dalian Exchange US$158.3/t vs US$148.0/t

            

Other:   

Cobalt LME 3m US$34,200/t vs US$34,200/t

NdPr Rare Earth Oxide (China) US$49,437/t vs US$49,351/t

Lithium carbonate 99% (China) US$5,032/t vs US$5,024/t

Ferro Vanadium 80% FOB (China) US$30.1/kg vs US$30.3/kg

Antimony Trioxide 99.5% EU (China) US$5.3/kg vs US$5.2/kg

Tungsten APT European US$220-225/mtu vs US$212-220/mtu 

Graphite flake 94% C, -100 mesh, fob China US$430/t vs US$430/t

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

 

Battery News

ABB to supply Gridserve forecourt chargers

• Gridserve has chosen ABB to supply the EV chargers for its first Electric Forecourt in Braintree, Essex. ABB has collaborated with Gridserve for more than two years on the project, with ABB offering technical advice on charging and installation.
• The 30 ABB charging stations that will be installed on the site will include 12 Terra 94 units, providing a quick charge up to 90kW, 12 Terra HP 175/350kW units and 6 Terra AC 22kW chargers.
• The forecourt is the first in a £1bn nationwide network of 100 forecourts by Gridserve. The site will have space for 24 EVs to simultaneously charge at a rate of up to 350kW with charge times of 20-30 mins.
• Gridserve is also developing an App to support the driver experience enabling customers to plan journeys, reserve charging slots and pay for ancillary on site services like a car wash.
• The network of electric forecourts is a significant step forward for the UK EV charging network. The options provided to customers via the app could be a glimpse of the future of charging services and could be a major contributor to breaking down resistance to the EV transition.

 

Evergrande plans to go public in Shanghai

• Just days after a $516m private funding round Evergrande New Energy Vehicle Group has submitted a stock filing to list shares on Shanghai’s Science and Technology Innovation Board, Nikkei Asian Review reports.
• The Company is already listed on the Hong Kong Stock Exchange and investors include Tencent and Jack Ma backed PE fund Yunfeng Fund.
• Evergrande’s charge into to the EV sector has seen huge amounts of money invested and huge amounts of money lost so far. The EV business of Chinese real estate developer Evergrande Group has totalled 4.9bn yuan ($690m) in losses since inception in 2018.
• The Company has heavily invested in acquisitions, acquiring several European EV companies (National Electric Vehicle Sweden, Protean Holdings and e-Traction) and Shanghai-based EV battery supplier CENAT New Energy Co.    
• A milestone moment for the Company will be the release of its range of vehicles under the Hengchi brand, revealed in August and slated for mass production in 2021. The success of these vehicles may indicate whether investors money is well placed or not……

 

LG Chem to spin off battery business in December 

• Last year LG Chem announced their intention to spin off the battery business. The COVID-19 pandemic forced a change of plans with the Company suggesting they may not spin the Company off in 2020.
• The Company has now announced that they will spin off the business in December. The battery business will be called LG Energy Solutions, it will be 100% owned by LG Chem and will be a separated as of Dec 1.
• There is the possibility of LG Chem will IPO the unit, the Company is said to be considering this and if so will seek approval to do so at the shareholder meeting in October.  
• The Company has led the battery market in 2020, deploying 13.4GWh of capacity up to August while its market share has doubled to 25.1%.  
• LG Chem reported quarterly sales and profit records in Q2. The Company achieved 2.82trn won in sales and 155.5bn won in profit. LG Chem supply Tesla, Hyundai Motor, Kia Motors, GM, Ford, VW, Renault, Volvo, Audi, Daimler, Jaguar and Porsche.

 

Company News

Cornish Lithium (private) – Results of preliminary sampling of deep geothermal waters

• The  Company has announced results from sampling at the United Downs Deep Geothermal Power Project in Cornwall, with initial results indicating some of the world’s highest grades of lithium and best overall chemical qualities encountered in published records for geothermal waters anywhere in the world.
• Average lithium concentrations of 220mg/L with concentrations of up to 260 mg/L were described by rob Bowell of SRK Consulting as “globally significant”.
• Total Dissolved Solids concentrations amounted to 29,000 mg/L- an order of magnitude lower than many other geothermal waters worldwide.
• Cornish Lithium in partnership with Geothermal Engineering Ltd (GEL) have developed the United Downs Geothermal Power Project which was recently awarded funding from the UK Government’s Getting Building Fund’ to build a pilot lithium extraction plant at the United Downs site.
• The £4m pilot plant will allow the company to trial Direct Lithium Extraction (‘DLE’) technology to extract lithium from the geothermal waters which circulate naturally at depth in the granite rock that underlies Cornwall.
• Jeremy Wrathall, CEO & Founder of Cornish Lithium, said: “This is an exciting step towards the realisation of low-carbon lithium extraction from geothermal waters in Cornwall, and compliments Cornish Lithium’s work to date on exploring for lithium contained within shallower geothermal waters in the County” and “These results show that Cornish deep geothermal waters, unlike others around the world, have low salinity, meaning much lower concentrations of elements such as magnesium and sodium. When these elements are present in high concentrations it can make it difficult and more expensive to separate out the lithium compounds. Cornish geothermal waters should therefore be highly suitable for extraction methods using DLE technology.”

 

Empire Metals* (EEE LN) – 2.7p, Mkt cap £6.7m – Soil sampling starts at Eclipse gold project

(Empire hold a 75% interest in the Eclipse gold license)

• Empire Metals reports plans to start drilling at its Eclipse gold project, located 55km north-east of Kalgoorlie, WA, on 28^th September.
• CEO, Mike Struthers, explained that the company was fortunate to secure the services of a suitable drilling contractor “as rigs and crew are generally difficult to secure at the moment”.
• The company also reports that it has now completed its programme of geochemical soil sampling, with samples now delivered to the laboratory in Kalgoorlie for assay.
• Follow up geophysical work is expected to start shortly and the results, combined with those from the geochemical survey, “will be used to highlight additional drill targets at the Eclipse Project for the second phase of drilling”.

• The former Eclipse mine produced some 954t of high-grade ore grading 24.6 g/t for 754.25oz of gold according to historic records.

• Drilling in 2014 identified high grade mineralisation all within a 30-metre zone either side of the main Eclipse shaft including:

• • GD008: 7m @ 13.07 g/t Au from 34 metres
  • GD014: 12m @ 5.13 g/t Au from 39 metres
  • ERC03: 8m @ 3.11 g/t Au from 66 metres
  • ERC019: 6m @ 3.92 g/t Au from 87 metres
• Mineralisation is open along strike in both directions and at depth and mineralisation at Eclipse can be traced for around 2.5km on the licence with Jack’s Dream 230m from the Eclipse which produced 197t grading 23.8 g/t Au for 150.7oz of gold over four years. The Steinhobel shaft is another 100m further on though no records remain.
• High-grade gold mineralisation occurs in a quartz-carbonate vein with an average width of 2.2m.

Conclusion: Empire Metals is shortly moving into a drilling phase at its Eclipse gold project in Western Australia while results from a recently completed geochemical soil-sampling programme and a soon to be started programme of geophysics will be used together to help identify targets for the next round of drilling. We look forward to results from this former mining area as they become available

*SP Angel act as Nomad and Broker to Empire Metals

 

Eurasia Mining* (EUA LN) 19.8p, Mkt Cap £545m – Board and management changes

• James Niewenhuys is appointed as CEO and Executive Director of the Company with immediate effect.
• James was formerly a Non-Executive Director on the Company’s Board.
• He is a mining engineer with more than 40 years in the mining industry and has previously held senior management positions in the sector including CEO at South African Lesego Platinum Mining and COO at Polyus Gold, the largest gold producer in Russia.
• “James's focus will be to work with our advisers on the sale process… since joining Eurasia in November 2019 after completing due diligence on behalf of a potential buyer, James has got detailed knowledge of Eurasia's assets and he is of immense help both in terms of the sale process and in terms of demonstrating to the interested parties the strength of our own management team and its capacity to execute,” the Company said.
• Christian Schaffalitzky will remain as Executive Chairman.
• Additionally, Dmitry Suschov, a 17% shareholder in the Company, will step down from the Board for the role of Chief M&A Officer to focus on the sale process.

Conclusion: The Company optimises the executive team as work on the sale process continues.

*SP Angel act as Nomad and Broker to Eurasia Mining

 

Gemfields (GEM LN) 5.75p, Mkt Cap £67.3m – Interim results show damaging impact of Covid19

• Reporting on a six month period that reflect what CEO, Sean Gilbertson described as  “the immense impact which Covid-19 and its associated travel, quarantine and other restrictions have had on Gemfields' operations and our ability to host gemstone auctions” Gemfields has announced a net loss of US$56.7m for the six months to 30^th June 2020 (H1 2019 – US$12.4m profit).
• Gemfields has also recognised impairment charges of US$11.5m against Faberge and of US$12.5m against the asset value of Sedibelo Platinum.
• Although Gemfields “entered the pandemic with a strong balance sheet” the company now reports a 30^th June net cash balance of US$9.3m representing a 74% reduction on the US$35.5m reported for 30^th June 2019 and some US$15m below the US$25,4m at the beginning of 2020.
• The company confirms that “Due to the ongoing levels of uncertainty, Gemfields is unable to provide reliable guidance as to when it might be able to next host auctions or generate meaningful revenue from gemstone sales”.
• The company is seeking to implement measures to address the restrictions on auctions and says that “Work on an online auction platform is nearing completion, but this approach would still require in-person viewings of the gemstones by our clients, potentially via 'shuttle viewings' in different cities”.

• Chairman, Martin Tolcher, expressed measured optimism, however, saying that the “Gemfields’ Board is confident that, by managing costs and maintaining readiness to return to operational excellence, the Group is well-positioned to navigate the challenging months that lie ahead”.
• Mining operations at both Kagem and Montepuez remain restricted to essential operations only and all non-essential capital expenditure has been suspended.

Conclusion: Gemfields has been unable to bring its gemstones to auction as a result of Covid19 restrictions and has written down assets in Faberge and Sedibelo by a total of US$24m.

*An SP Angel mining analyst has previously visited the Kagem emerald mine and Montepuez ruby mine

 

Highland Gold (HGM LN) 298p, Mkt Cap £1,086m – FAS approves the proposed acquisition by Fortiana

• Russian Federal Antimonopoly Service (FAS) granted Fortiana regulatory clearance for the proposed acquisition of Highland Gold.
• Securing the approval means that the pre-condition for the offer has now been satisfied.
• Fortiana is expected to make a 300p/share cash offer to remaining shareholders of the Company within the next 28 days.

 

 Renascor Resources (RNU AU) A$0.01p, Mkt Cap A$16m –AU$3.6m to be raised to advance graphite and gold projects

• Renascor has received firm commitments from professional and sophisticated investors to raise approximately $3.6m at 1.1 cents per share with one attaching option for every two shares issued.
• The money raised will fund the next important milestones in advancing the Siviour Battery Anode Material Project towards production, and the exploration and development of the Carnding Gold Project.
• The Placement will be completed by the issue of up to 324,818,184 fully paid ordinary shares in the Company, whilst the options have a two year expiry and an exercise price of 2.0 cents per share.
• The Placement price of 1.1 cents per share represents a 14.4% discount to the 5- day VWAP.

 

Vast Resources* (VAST LN) 0.17p, Mkt Cap £21m – Baita Plai update

• The Company reports that new steel bridge construction works at Baita Plai remain on schedule with the bridge being installed today.

*SP Angel acts as Broker to Vast Resources

 

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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