SP Angel . Morning View . Monday 06 07 20

SP Angel . Morning View . Monday 06 07 20

Miners lead markets higher as inventories draw down

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MiFID II exempt information – see disclaimer below 

  

Altus Strategies* (ALS LN) – >400koz mineral resource at Diba gold project 

Beowulf Mining* (BEM LN) – Grab sampling results from Madjan Peak in Northern Kosovo

Cora Gold* (CORA LN) – H1/20 exploration update

Eramet (ERA PA) – Eramet to sell Aubert & Duval subsidiary

Hochschild Mining (HOC LN) – Immaculada mine suspends operations as Covid19 hits S American mines

Kazatomprom (KAP LN) – Extension of reduced uranium operational activity due to pandemic-related risks

 

FTSE100 gains 2% as economy reopens

• Equity markets are posting strong gains today led by the FTSE100 +2% and Wall Street +1.5% as economic activity returns
• While there will still be much trading out of the worse affected sectors many investors are positioning for recovery.
• Investors appear to be looking through the prospect of some very tough earnings reports to come in the H1 results.

 

Chinese steel production rises 2.7% mom and 4.03% yoe in June

• Crude steel production rose 2.74% mom and 4.03% yoy to 2.13mt/d in June (China Iron and Steel Association).
• Steel product inventories fell 6.9% or ~1mt to 13.62mt vs 20^th of June though stock levels were 2.8% higher than at end May (SMM News).

 

Copper inventories continue to fall on the LME

• Copper prices continue to rise with inventory levels falling by 8,525t to 197,850t this morning
• Aluminium (-4,500t to 1.6mt), zinc (-250t to 122,275t), lead (-1,875t to 62,300t) and nickel (-48t to 234,216t)inventory levels all fell with the exception of tin which rose 300t.

 

Brazil – federal court orders eviction of 20,000 illegal gold miners

• The Brazilian government have been ordered to expel miners from the Yanomami indigenous reservation to protect a Amazon tribe from the spread of coronavirus.
• There have been more than 160 confirmed cases of COVID-19 among the Yanomani people and five deaths.
• Yanomani leaders say the number of prospectors on their land has surged since Bolonsaro was elected president in 2018 vowing to develop the Amazon’s rich minerals (Reuters).

 

IG TV interview on gold and gold companies

•    https://youtu.be/lszustZe7_U

VOX Markets podcast on mining

• https://www.voxmarkets.co.uk/media/5ed0fab0243d7b001b3e0381/?context=/series/daily-podcast/

 

Dow Jones Industrials		+0.36%	at	25,827
Nikkei 225		+1.83%	at	22,714
HK Hang Seng		+3.98%	at	26,384
Shanghai Composite		+5.71%	at	3,333

 

Economics

China - official Chinese nonmanufacturing came in at 54.4 in June vs 53.6 in May

• China Caixin index came in at 58.4 in June vs 55.0 in May reflecting more private companies
• Composite index 55.7 in June vs 54.5 in May

 

Spain – locks down second region on fresh coronavirus outbreak 

• 14 municipalities in La Marina in Spain are in Lockdown.

 

US – 39 shootings in New York in 4^th July celebrations

 

UK – government reported to be planning stamp duty holiday to restart housing market

• The threashold where buyers start paying stamp duty is likely to be raised in the Chancellors budget on Wednesday.
• Stamp duty brought some £12bn into HMRC in 2018/19 just off its peak of £13bn in 2017/18
• Receipts fell to £4.8bn in 2008/09 after the GFC and the Lehman Bros crash from £10bn a year earlier.
• The UK Treasury will be looking to avoid a similar crash in the property market and loss of income from stamp duty.
• Total UK government revenue was £792bn in FY 2019. UK budget revenue forecast for £839bn is likely to fall substantially short.
• The UK government has also announced an emergency support package of £1.57bn to help the arts sector, eg museums, theatres etc…

 

Currencies

US$1.1292/eur vs 1.1245/eur last week.  Yen 107.60/$ vs 107.48/$.  SAr 16.918/$ vs 16.924/$.  $1.249/gbp vs $1.248/gbp.  0.697/aud vs 0.694/aud.  CNY 7.032/$ vs 7.063/$.

 

Commodity News

Precious metals:          

Gold US$1,776/oz vs US$1,776/oz last week - India – Man spends $4k on custom gold face mask 

• A businessman from the city of Pune has spend 289,000 rupees on a custom gold face mask, as the government made the wearing of face masks mandatory (News.com)
• Whilst the man isn’t sure if will prevent him from contracting the infectious disease, he says that people are “awe-struck” when they see him in markets.
• The design of the mask resembles a disposable mask, and one wonders if Mr Kurhade has been throwing masks away after each use.
• This would explain the 35% increase in gold recycling in areas of India since the onset of the coronavirus.

   Gold ETFs 103.5moz vs US$103.5moz last week

Platinum US$820/oz vs US$816/oz last week

Palladium US$1,931/oz vs US$1,903/oz last week

Silver US$18.10/oz vs US$18.02/oz last week

            

Base metals:   

Copper US$ 6,088/t vs US$6,035/t last week - Codelco temporarily suspend El Teniente copper mine expansion

• Codelco announced on Saturday that it would temporarily halt construction on the mine to combat the spread of COVID-19 in the country.
• The mine will continue to operate a staggered shift pattern, although so far it has reduced its workforce by 4,500.
• The move comes in response to increased pressure from unions to protect miners in Chile- who say that at least 2,300 of Codelco’s workers have been infected.
• It’s currently unclear to what extent these measures will affect Codelco’s production in 2020, and on Friday the company said production rose 3% in May to 144,200 tonnes- although this was before the virus fully took hold in the country.

Aluminium US$ 1,620/t vs US$1,623/t last week

Nickel US$ 13,250/t vs US$13,065/t last week

Zinc US$ 2,047/t vs US$2,038/t last week

Lead US$ 1,798/t vs US$1,767/t last week

Tin US$ 17,020/t vs US$16,900/t last week

            

Energy:            

Oil US$43.7/bbl vs US$42.8/bbl last week

Natural Gas US$1.812/mmbtu vs US$1.730/mmbtu last week

Uranium US$32.90/lb vs US$32.90/lb last week

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$95.4/t vs US$95.4/t

Chinese steel rebar 25mm US$524.3/t vs US$521.1/t - China daily crude steel output up 2.7% in June 

• The China Iron and Steel Association reported crude steel output across major mills in June came in at 2.13mt- up 2.74% from May and 4.03% from the same month last year.
• As of the end of June, inventories of steel products stood at 13.62mt- down 6.9% compared to the 20^th of June (SMM News).

Thermal coal (1st year forward cif ARA) US$57.3/t vs US$57.9/t - US coal exports drop to 3.5-year low

• Exports fell to 4.28mt in May, down 13.9% from April and the lowest since 3.88mt was exported in September 2016.
• Thermal coal exports fell to 1.58mt in May, down 14.6% from April and 54.2% lower year-on-year.
• Year-to-date thermal coal exports are down 35.6% compared to last year at 10.96mt (Hellenic Shipping News).

Coking coal futures Dalian Exchange US$123.0/t vs US$130.0/t

            

Other:  

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

NdPr Rare Earth Oxide (China) US$41,241/t vs US$41,057/t

Lithium carbonate 99% (China) US$4,764/t vs US$4,743/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

Tepco to launch battery energy storage business

• Toyota Electric Power (Tepco) is to launch a battery energy storage business using recycled EV batteries. (Nikkei)
• Tepco Power Grid (TPG)will purchase used EV batteries from trading companies in China and combine them into a container type battery.
• The transmission and distribution unit TPG will then sell batteries at a 30-50% discount to solar and renewable energy plants.
• Trials begin with a company in September with plans to distribute the batteries nationwide by 2021.
• Tepco has teamed up with NExT-e Solutions, a Toyota based battery system developer to develop the technology.

 

Norway continues to break ground as BEV leader

• Norway’s transition to electric vehicles continues to lead the world as BEV registrations reached 48% of new car registrations in Jan-June. (Climate Change News)
• This is an increase from 45% in H1’19 and 42% for 2019. Sales of BEV and PHEV reached a 60% share of new vehicle sales. (Electrek)
• This news is the continuation of the trend in 2020 of auto sales reducing significantly but BEV sales making up a greater proportion of those sales in Europe.  
• Norwegian auto sales fell 24.3% during the period compared to the same time last year but BEVs fared better, sales falling just 19% compared to the same time last year.
• Despite the significant gains the Norwegian Electric Vehicles association has said sales continue to lag behind the 2025 target that all new vehicles sold should be zero emissions.
• The Audi-e-tron was the most successful vehicle with 5,500 registrations from Jan-June.

 

Tesla sales demand increased supply LG Chem

• Tesla’s 90,650 vehicle sales in Q1, ahead of expectations has led to them ask suppliers for more supplies.   
• The increased demand has prompted LG Chem to assign capacity to produce more batteries for Tesla domestically.
• A source with knowledge of the situation has suggested LG Chem will be converting some of its production in S. Korea to produce batteries for the Californian EV giant. LG Chem’s Nanjing factory already produces batteries for Tesla’s Model 3. (Nasdaq)
• LG Chem shares rose 2.6% on Friday following the news.
• Tesla’s production remains battery cell constrained for the foreseeable future even with reports of the Company working towards producing their own cells. Model Y, Cybertruck and Semi production will place added stress on suppliers. (Electrek)

 

Company News

Altus Strategies* (ALS LN) 34p, Mkt Cap £24m – >400koz mineral resource at Diba gold project 

• The Company released a NI 43-101 compliant Mineral Resource Estimate on the Diba gold project in Western Mali prepared by Mining Plus.
• Diba mineral resource is estimated at 4.8mt at 1.39g/t for 217koz in the Indicated category and 5.5mt at 1.06g/t for 187koz in the Inferred category.
• Oxide material accounts for 216koz or 54% of the total resource.
• This marks a 31% increase on the historic resource estimate of 308koz at 1.35g/t.
• PEA is currently being finalised that assesses the potential for an open pit oxide operation.
• The mineralisation comprises a series of shallow-dipping stacked lenses over a 700m by 700m area starting within 8m from surface and remains open at depth.
• Additionally, seven priority prospects that are yet to be systematically drill tested have been identified with the 7km radius of the current mineral resource offering the potential for a significant expansion of the project.
• The team is planning to ramp up exploration at Diab testing the significant growth potential.

Conclusion: The team completed the mineral resource on the Diba gold project for 404koz, a 31% increase on the previous estimate, with more than half of ounces hosted within oxide material and a significant growth potential remaining with mineralisation remaining open at depth and seven additional preiority targets identified in the 7km radius of the current MRE.

*SP Angel acts as nomad and broker to Altus Strategies

 

Beowulf Mining* (BEM LN) 4.4p, Mkt cap £26.5m – Grab sampling results from Madjan Peak in Northern Kosovo

(Beowulf holds 42.2% of Vadar. Beowulf also holds 100% Kallak iron ore in Sweden, 100% of Aitolampi graphite in Finland and 40% of the Mitrovica and Viti projects in Kosovo)

• Beowulf Mining reports the results of a programme of grab sampling covering its an area of 1.4km x 700m within the Madjan Peak prospect in the Mitrovica licence area of northern Kosovo. The target zone is reported to remain open towards the east.
• The results show 42 of the 96 samples taken assayed above 0.1g/t gold with individual assays of up to 7.1g/t gold and the announcement today listing eight results in excess of 1g/t.
• The company also says that ʺIn addition to the primary gold target, a new multi-element anomaly has been delineated to the south of the main peak. This anomaly correlates well with anomalous rock grab samples (including individual samples with 0.79 g/t gold), with galena (lead sulphide) veins apparent in some of the outcropping gossansʺ.
• Madjan Peak has previously been described as an epithermal gold target and the ʺextensive blanket of advanced argillic alteration which forms the hilltopʺ appears consistent with that exploration model.
• The company explains that Madjan Peak ʺforms a prominent peak in the centre of an area notable for its significant lead-zinc-silver ("Pb"-"Zn"-"Ag") deposits, likely related to the same hydrothermal system, including the Stan Terg Pb-Zn-Ag mine which dates back to the 1930s (historical production records: 34 million tonnes at 3.45 per cent lead, 2.30 per cent zinc and 80 g/t silver).ʺ
• CEO, Kurt Budge, explained that 42.2% owned Vardar Minerals ʺis now finalising plans for ground and airborne geophysical surveys over the target, which will get underway as soon as COVID-19 restrictions allow resources to be fully mobilised.  Drilling would follow target definition and, all being well, could start in the coming monthsʺ.
• He also commented that ʺThe targets at Mitrovica, and considering the Stan Terg mine, show potential for a much larger porphyry style mineralised system being presentʺ.

Conclusion: Although grab sampling is a relatively early-stage exploration tool, the promising results and proximity to an area of significant scale historic mining provide considerable encouragement for the outcome of the planned ground and airborne geophysical surveys and for the eventual definition of viable drilling targets. We look forward to further news as the Covid19 restrictions ease.

*SP Angel acts as Nomad and Broker to Beowulf

 

Cora Gold* (CORA LN) 8.9p, Mkt Cap £16.9m – H1/20 exploration update

• The Company provided an update on exploration work completed at its regional portfolio of permits in Mali and Senegal in the first half of the year.
• In Senegal, the team identified new target areas at Madina Foulbe where exploration returned high grade samples including 57.2 g/t Au, 11.8 g/t Au, 5.99 g/t Au and 3.97 g/t Au.
• RC drilling programme (launched in May and currently paused due to Covid-19 related guidelines having completed ~640m of the 2,000m plan) identified broad zones of mineralisation including 47m @ 0.63 g/t Au and 36m @ 0.53 g/t Au.
• In Western Mali, two key targets were identified with grab samples returning 14.1g/t Au and 12.1g/t Au at Diangounte Project Area.
• In Southern Mali, the Company completed 3,000m in shallow RAB drilling over Tagan (1,600m) and Winza (1,400m) permit areas where previous surface exploration identified anomalous gold areas.
• Results received results point to the presence of primary gold structures with potential strike length of 800m and >1,000m, respectively, that warrant further reconnaissance drilling.

Conclusion: The Company is moving ahead with an exploration programme across its portfolio of projects in Mali and Senegal located within highly prospective the Yanfolila and Kedougou-Kenieba Inlier gold belts with a number of new prospective targets having been identified that warrant further exploration work.

*SP Angel acts as Nomad and Broker to Cora Gold

 

Eramet (ERA PA) 33.4, Mkt cap €890m – Eramet to sell Aubert & Duval subsidiary

• Eramet is looking to sell its Aubert & Duval business in France.
• The business which makes speciality and superalloys normally receives some 70% of its sales from the Aerospace industry with Airbus as a major buyer.
• The company has one of the world’s largest presses for the transformation of metal alloys under pressure.
• These alloys form the components that attach the wings onto aircraft and the metal pillars supporting the landing gear.
• They also make vacuum alloys for the containment vessels for nuclear power stations and rocket nose cones.
• Aubert & Duval is a world-leading metallurgical engineering groups.

 

Hochschild Mining (HOC LN) 175.1p, Mkt Cap £966m – Immaculada mine suspends operations as Covid19 hits S American mines

• Hochschild Mining reports that following positive Covid19 tests for a number of workers at its wholly owned Immacualda precious metals mine in the Ayacucha Department of southern Peru it is suspending operations and placing the mine on care and maintenance.
• The underground mine produced around 5.7moz of silver and 190koz of gold from the processing of some 1.mmt of ore during 2019. The company confirms that its Pallancata  mine in southern Peru and the San Jose mine in Argentina remain in operation.
• Covid19 has affected a number of the major mine in S America, with reports of the suspension of the expansion of state-owned Codelco’s El Teniente copper mine in Chile where, press reports on the industry website mining.com indicate that 4,500 workers have been suspended. Reports attributed to the labour unions say that Codelco has at least 2,300 confirmed Covid19 cases amongst its workforce.
• It is understood that El Teniente remains operational with worketrs adopting a 14 days-on, 14 days-off roster to help contain infection risk.
• Also in Peru, BHP’s 34% owned Antamina copper zinc mine in while on 24^th June, the ‘Melbourne Age’ newspaper reported that there had been 150 cases from the Escondida copper mine in Chile and a further 59 cases at the Spence mine.

 

Kazatomprom (KAP LN) – Extension of reduced uranium operational activity due to pandemic-related risks

• Kazatomprom, the Kazak uranium producer, reports the extension of reduced operational activity for another month.
• Production staff are practicing social distancing while office staff are mostly working from home.
• Today’s extension is not expected to have a material impact on 2020 production volumes of 19,000- 19,500t of uranium (attributable - 10,500-10,800tU
• Management continue to manage its supply sources including spot market buying where necessary to meet sales commitments which remain unchanged at 13,500-14,500tU.
• The next trading update is due on 03 August 2020.

 

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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