SP Angel . Morning View . Friday 26 06 20
Base metals continue recovery on inventory drawdowns and US dollar slide
CLICK FOR PDF
MiFID II exempt information – see disclaimer below
* (AMC LN) – 2019 results
* (SML LN) – Debt free after repaying NAE
Sunstone Metals (STM AU) – Drilling success at Viscaria
Gold – prices set to breakout as fiscal stimulus combined with Second wave coronavirus risk brings in new funds
- Vast money printing by virtually every government in the world is making investment into currencies more uncertain than ever.
- Some stimulus may never be spent and some capital programs will be cancelled by treasuries bringing financial reality to bear.
- In the US, Trump has long wanted to spent a trillion dollars on new and refurbishing infrastructure to ‘make America great again’.
- But the money has to come from somewhere and this time European and Asian investors are not buying Securitised SubPrime mortgage to fund it.
Base metals stocks continue to fall on the LME
- Copper stocks fell 3,975t to 221,675t
- Aluminium stocks rose 14,275t to 1.65mt
- Zinc stocks fell 250t to 123,025t
- Lead stocks fell 2,975t to 69,175t – biggest fall since January
- Nickel stocks rose 384t to 233,970t
- Tin stocks were unchanged at 3,585t
Artisanal miner sells tanzanite gems for $3.3m
- A Tanzanian man has sold two of the largest tanzanite gems ever discovered to the government for 7.7bn shillings (US$3.3m).
IG TV interview on gold and gold companies
VOX Markets podcast on mining
Dow Jones Industrials
HK Hang Seng
IMF revises global GDP forecast to -4.9% from -3%.
- Global Economy forecast to contract by 3.7% this year according to a Reuters Poll
- Global growth is forecast to recover to 5.4% next year vs
- Global Economic Recovery Outlook Has Worsened Or Stayed The Same Over The Past Month, Said 80% Of 89 Economists
US Trade deficit $74bn in May vs $70bn in April
- US weekly jobless claims 1.48m from previous 1.5m
- Durable goods orders rose 15.8% in May vs -17.2%in April
- US Q1 GDP adjusted to -5% vs 2.1%.
- Exports fell 5.8% in May
- Imports fell 1.2% in May
- Wholesale inventories fell 1.2% in May
- Kansas City Fed manufacturing index +2 in June vs -25 in May
US Airline traffic rises 13% this week
- Airline passenger numbers in the US rose 13% from the week before to 494,826 this week, although the total was down 79% compared to the same period last year.
ECB – Christine Lagarde says EU recovery will be a complicated matter
- Reading between the lines that says Germany may be holding back approval for the stimulus that is required by many Southern states for their recovery.
- So far Germany has suffered far fewer fatalities from the Coronavirus at around 9,012 deaths than Italy at 34,678 and Spain at 28,330
- The collapse in sales for the auto industry is in many ways a bigger issue for Germany than the rest of the EU
- Germany’s focus is more on how to re-orientate its automotive output towards Electric Vehicles than some other issues
- Lagarde also comments that the EU is probably past the lowest point of the Crisis.
Sweden - PPI falls 0.9% in May mom vs 0.0% in April and falls 3.8% yoy vs a 3.0% fall in April
- Household borrowing rose 5.1% yoy in May vs 5.2% in April
- Retail Sales rose 0.5% mom in May vs 0.2% in April
- Retail Sales ‘Wholesale Distribution Authorisations’ rose 2.4% yoy in May vs -1.3% previously
Germany - GfK consumer confidence was -9.6 for July vs -18.6 in June and +9.8 yoy
- Import Price Index rose 0.3% in May mom vs -1.8% in April
- Import Price Index fell -7.0% mom in May vs -7.4% in April
Lufthansa shareholders approve $10bn bailout
- The bailout from the German government has secured the survival of Europe's largest airline, as 98% of shareholders voted to approve the plan.
- The deal features the sale of a heavily discounted 20% stake to the German government.
- Lufthansa shares rose 7.1% to €9.59 yesterday, reducing the decline for the year to 42% and valuing the company at €4.6bn.
- Elsewhere, Air France-KLM are set to receive a $3.8bn bailout from the Netherlands.
Spain – retail sales fell 20.2% in May yoy a recovery from 31.5% seen in AprilX
- Total Mortgage Lending fell -17.8% in April vs -7.1% in March
- House Mortgage Approvals fell -18.4% in April vs -14.6% in March
UK - Intu shopping centres to appoint administrators
- The shopping centre owner is set to become the latest casualty of the coronavirus pandemic's onslaught on the country's retail sector.
- The lockdown has meant rent collection has plummeted for retail landlords, and on Wednesday just 14% of the £2.5bn due was paid, according to Re-Leased (FT).
Mexico - Central bank cuts key interest rate to 5.0%
- The Bank of Mexico has cut its key interest rate by 50 basis points, to cushion the significant economic impact of the COVID-19 pandemic.
US$1.1214/eur vs 1.1237/eur yesterday Yen 107.07/$ vs 107.17/$. SAr 17.186/$ vs 17.476$. $1.241/gbp vs $1.242/gbp. 0.688/aud vs 0.686/aud. CNY 7.078/$ vs 7.078/$.
Gold US$1,764/oz vs US$1,767/oz yesterday - Gold set for third straight weekly gain as virus worries persist
- Gold prices were flat this morning, however have risen more than 1% so far this week, with prices at eight-year highs of $1,779/oz on Wednesday (Reuters).
- The amount of money offered in fiscal stimulus by governments alongside the persistent threat of coronavirus which has seen cases rise across the US this week, is supportive of the gold price.
- The pandemic is now in its fourth month, and businesses around the world are still shutting down. The United States and other countries still have double digit unemployment rates.
- The fundamental factors which have taken the gold price from $1,460/oz in March still largely remain, and it seems highly likely that until the pandemic has run its course, gold prices will remain at this level or higher (Kitco).
Gold ETFs 102.6moz vs US$102.6moz yesterday
Platinum US$805/oz vs US$807/oz yesterday
Palladium US$1,844/oz vs US$1,887/oz yesterday
Silver US$17.81/oz vs US$17.57/oz yesterday
Copper US$ 5,942/t vs US$5,885/t yesterday - Codelco halts Chuquicamata smelter and refinery
- Codelco is suspending its operation as it aims to prevent further spread of the coronavirus, after the company's third employee died of the disease yesterday.
- Operations are to be wound up gradually as shifts come to an end, and 400 people are expected to be temporarily stood-down.
- Chuquicamata is Codelco's second largest mine, and produced over 25% of the company's total output in 2019.
Aluminium US$ 1,576/t vs US$1,569/t yesterday
Nickel US$ 12,595/t vs US$12,515/t yesterday - China nickel ore imports fall -67% in YoY
- Nickel ore imports sharply fell in May compared to a year earlier due to production curbs from major suppliers, according to customs data released today.
- Imports stood at 1.7mt in May, down 5.2mt compared to May 2019, although up from 1.3mt in April (Bloomberg).
Zinc US$ 2,062/t vs US$2,032/t yesterday
Lead US$ 1,776/t vs US$1,763/t yesterday - LME lead stocks drop most since January 2019
- Lead stocks in warehouses monitored by the LME saw the sharpest decline since January 2019 this morning, whilst the other based metal stocks were mixed.
Tin US$ 16,635/t vs US$16,605/t yesterday
Oil US$41.2bbl vs US$39.9/bbl yesterday
- Oil prices are up in early trading today, extending gains from the previous day on optimism about recovering fuel demand worldwide, despite surges in COVID infections in some US states and indications of a revival in US crude production
- WTI crude futures gained 0.4%, to US$39/bbl whilst Brent rose 0.5% to US$41/bbl, due to strong pick-ups in traffic in China, Europe and across the US, which pointed to a recovery in fuel demand
- Congestion in Shanghai in the past few weeks was higher than in the same period last year, while in Moscow traffic was back to last year's levels according to Reuters
- However, sentiment has been dented by fears a spike in COVID-19 infections in southern US states could stall the demand recovery, especially given that some of those states such Florida and Texas, are among the biggest gasoline consumers
Natural Gas US$1.450/mmbtu vs US$1.575/mmbtu yesterday
- Natural gas prices near a 25-year low as the summer heat in the US has yet to materialise, and oversupplied conditions persist.
- In addition, according to the EIA, LNG exports declined substantially in 2020
- The lack of demand for export in conjunction with the lack of demand for electricity has put substantial pressure on prices
- 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$32.95/lb vs US$33.15/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$101.0/t vs US$101.5/t
Chinese steel rebar 25mm US$525.1/t vs US$525.1/t
Thermal coal (1st year forward cif ARA) US$57.0/t vs US$56.4/t
Coking coal swap Australia FOB US$116.0/t vs US$116.0/t - China coking coal imports from Australia up 51% YoY
- Coking coal imports from Australia stood at 2.07mt in May vs 1.37mt the year before, and 4.47mt in April, according to customs data.
- Australia has taken market share from other exporters such as Mongolia, who are only now gradually resuming shipments to China after suspending them in early Feb to avoid the spread of coronavirus.
- Mongolia exported 1.71mt to China last month vs 3.53mt in May 2019 (Bloomberg).
Cobalt LME 3m US$28,500/t vs US$28,500/t
NdPr Rare Earth Oxide (China) US$40,971/t vs US$40,971/t
Lithium carbonate 99% (China) US$4,803/t vs US$4,803/t
Ferro Vanadium 80% FOB (China) US$30.0/kg vs US$30.0/kg
Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/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$2,350/t vs US$2,350/t
Carbon dioxide coating makes batteries more durable and efficient
- Aalto University researchers have produced an electrode coating using carbon dioxide in molecular layer deposition. (Phys Org)
- The team has created a coating that mimics a solid electrolyte interphase (SEI) using organic materials.
- The study succeeded in building an organic SEI and now will test how well it protects the battery.
- The addition of the artificial layer has been found to be of a higher quality than a naturally developed layer.
- An artificial layer has been found to both protect the electrode material increasing battery durability and will enable the use of new more efficient electrode materials.
- Until now inorganic materials have been used in atomic layer deposition.
- The study is published in Nanoscale Advances (May 2020).
Ampcera reveals low cost, scalable technology for solid state batteries
- Ampcera, a solid electrolyte (SE) technology company has developed a low-cost SE membrane for solid state batteries (SSBs). (PR Newswire)
- The Company has filed multiple US patent applications and an international CT patent application on its flexible SE membranes and low-cost manufacturing method.
- 25 microns thick
- 1mS/cm room temperature lithium ionic conductivity
- Stable against a lithium metal anode
- Facilitate an energy density of 500 watt-hours per kg
- Vertically integrated manufacturing provides significant cost advantages and could lay a path to $100/kWh SSBs, a key target for commercial viability.
Advanced Propulsion Centre provides £73.5m EV investment
- Joint government-industry venture the Advanced Propulsion Centre has announced 10 multiple million-pound grants for zero emissions technologies. (Business Green)
- The grants have been delivered to 10 projects selected by the APC to develop technology for next generation clean technology vehicles.
- Those projects selected include:
- LEVC developing a high-performance battery for electric taxis
- Ford’s project developing new lightweight materials for vehicle manufacturing
- A Consortium led by Jaguar Land Rover creating a more cost effective and lighter electronic system for vehicles and a project to develop a 400kW hydrogen fuel cell EV.
- BMW Motorsports project developing cost-efficient powertrains
- Costellium creating a lightweight crash resistant battery enclosure for EVs
- Tevva designing a new axle for 7.5-14 tonne commercial EVs
Amur Minerals* (AMC LN) 1.5p, Mkt Cap £13.3m – 2019 results
- Amur Minerals reports a reduced loss of $2.3m for the year ending 31stDecember 2019 (2018 loss - $3.3m). The company attributes the reduced loss to a combination of a reduction of administrative expenses of $0.17m, a reduction of $0.42m in finance charges ʺAdditionally, the Company reports a fair value gain of $342,000 in 2019 on derivative financial instruments.ʺ
- The company’s balance sheet remained debt free at 31st December 2019 with a cash balance of $0.4m.
- The company highlights the completion of the pre-feasibility study for the Kun Manie project in in February 2019 which showed a combined open-pit and underground mine development and examined two possible processing routes:
- The production of low-grade matte at an estimated capital cost of $695m which was expected to generate an NPV of $987m and an IRR of 34.7%; and
- The use of toll smelting which was expected to require a lower level of capex at $570m and generate an NPV of $570m and an IRR of 29.3%.
- ʺThe PFS also provided the platform for planning the work programme for the TEO report. This independently compiled Russian feasibility report is a mandatory study due in December 2020 which will allow the Company to proceed to the next stage of developmentʺ.
- The company also discusses its management restructuring aimed at strengthening project and finance and transactional expertise, which has seen the appointment of Tom Bowens as a non-executive director bringing in his experience of the successful development and sale of the Malmyzh copper gold project for US$200 million and the appointment of a former senior banker, Adam Habib as an advisor to the Board.
- Commenting on the impact of measures to control Covid19, Amur Minerals acknowledges the disruption caused to financial markets, although it has not experienced any negative impact on its fund-raising abilities. The company also says that with its remote working protocols in place it does not expect to require it will need to apply for an extension to the submission timetable for its TEO report.
- Significant developments in the preparation of the TEO include updates mineral resource and reserve estimates, optimisation of the mine development schedule and further metallurgical test work where the company says that ʺShould a separate copper only concentrate be achievable the increased market payability for both the copper and nickel streams will substantially increase the project economicsʺ and updating the impact of these changes on the economic model for the project.
Conclusion: Amur Minerals has cut administrative costs and finance charges to reduce 2019 losses by around $1m and the company has also confirmed that it expects the TEO to be complete by December 2020.
*SP Angel act as Nomad and Broker to Amur Minerals
Strategic Minerals* (SML LN) 0.45p, Mkt Cap £7.8m – Debt free after repaying NAE
- Strategic Minerals reported yesterday that it has repaid A$1.8m plus accrued interest of approximately A$22,500 to redeem loans due to New Age Exploration.
- Redemption of the loan leave Strategic Minerals debt-free.
- Commenting on the repayment, Managing Director, John Peters, said that ʺThe repayment of the NAE loan removes overhang issues for the Company and places it in a comfortable position from which to pursue potential joint venture partners for the commencement of production at its Leigh Creek Copper Mine project and to progress the Redmoor Project."
Conclusion: Strategic Minerals has cleaned up its balance sheet and is now debt free as it moves forward to becoming fully operational at Leigh Creek by the end of 2020.
*SP Angel acts as Nomad and Broker to Strategic Minerals
Sunstone Metals (STM AU) A$0.008c, Mkt cap A$13.3m – Drilling success at Viscaria
- Sunstone Metals reports drilling results from the Viscaria project in northern Sweden where 25% owned Copperstone Resources has completed an 8000m drilling programme and expects to resume drilling during in Q3 to follow up these results from the ‘D Zone’ and to extend drilling to the ‘A’ Zone and ‘B’ Zone which lie sub-parallel and to the southeast of the ‘D’ Zone..
- Among the results highlighted today are:
- An 18.9m intersection grading 1.3% copper from a depth of 468.1m in hole VDD212; and
- A 7.1m wide intersection averaging 3.8% copper from a depth of 615.2m in hole VDD213 and including a higher grade section of 0.6m averaging 20.1% copper from 617.6m depth; and
- A 9.3m wide intersection averaging 1.0% copper from a depth of 689.5m in hole VDD215.
- True widths are ʺexpected to be approximately 60% of the downhole widthʺ.
- The company says that ʺEight diamond drill holes have now been completed on the Viscaria D Zone North shoot in the past eight months and the results to date strongly reinforce the interpreted geometry of thicker and higher-grade steep shoots extending to depth. It is expected that multiple shoots will be defined as drilling progressesʺ.
- Geological sections presented in the announcement indicate that mineralisation within the ‘D’ Zone is currently expected to remain open towards the northeast and at depth.
- As well as the technical results from the recent drilling, Sunstone Metals also points out that ʺSunstone’s interest in Copperstone is currently valued at ~A$16.8 million, compared to Sunstone’s market capitalisation at close on June 25, 2020 of A$13.3million (at a share price of A$0.006). Sunstone’s unaudited cash position at 25 June 2020 was A$3.7 millionʺ.
- At Sunstone Metals’ 87.5% owned Bramaderos project in southern Ecuador, as measures to control the spread of Covid19 are eased ʺDrilling is expected to start … in Septemberʺ.
Conclusion: The drilling results from Viscaria show broad and consistent copper intersections at depth and we look forward to further results when the drilling programmes resumes during Q3.
*A SP Angel analyst has formerly visited the Viscaria project in Sweden.
John Meyer – John.Meyer@spangel.co.uk – 07943031001
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
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
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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony
This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.
Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.
MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.
A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (email@example.com).
SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%