SP Angel - Morning View - Volatility persists as nations enact virus response

Vox Markets
SP Angel - Morning View
11:20, 11th March 2020

MiFID II exempt information – see disclaimer below   

Anglo Asian Mining* (AAZ) – FY20 guidance for 75-80koz GE and >$100m in revenues

Vast Resources* (VAST) – Baita Plai moves towards the start of production

Greatland Gold (GGP) –Further drilling results from the Havieron project

SolGold* (SOLG) – Project update on Alpala PFS and DFS


Demand for Chinese goods to pull back in Europe, the US and everywhere else as Coronavirus ravages the world

  • China is returning to work with field-hospitals dismantled in Wuhan with just 24 new cases reported in China
  • But have the Chinese authorities cracked the spread of the virus or they are economical with the truth?
  • While demand will slowly return in China, sales of Autos which collapsed over the New Year will struggle to catch up.
  • Consumers may also be cautious with their money as healthcare in China costs and there is no guarantee the government will continue to foot healthcare bills relating to the Coronavirus
  • Consumer demand will likely collapse in Italy and then in France, Germany, Spain, the UK, US etc.. as each nation Locks-down.
  • Online shopping may make up for some lost sales on the high-street through the Quarantine though anyone with the virus may not feel like clicking on anything other than drugstore sales.
  • We expect manufacturing PMI data to follow the collapse seen in China in February when it fell to 40.3 from 51.1 (CAXIN), China Services PMI fell to 26.5 from 51.8 in February.
  • This will hopefully be a very temporary shock to each economy.


Stimulus funding relating to the Coronavirus (Updates in bold)

  • $50bn - IMF
  • $28.3bn (€25bn) - EU
  • $15.4bn – Hong Kong relief package
  • $13.7bn - South Korea
  • $12bn - World Bank
  • $8.4bn – Italy doubles the stimulus package to $8.4bn (€7.5bn) breaking EU budget deficit rules. Expect other states to do the same.
  • Italy – looking to increase stimulus to ($18bn), not yet approved. This will be the 4th stimulus increase in the last month
    • The Italian banking sector will surely be under severe strain
  • $8.3bn – US House of Representatives – (US GFC stimulus totalled $2.8tr starting with $168bn in early 2008).
  • $5.5bn – Bank of Japan, ETF purchases and short term liquidity to Banks
  • $11.9bn – BoJ triples financing for small and mid-sized firms
  • $3.5bn - Ireland
  • $2bn – Taiwan stimulus
  • $0.75 - Indonesia
  • $14.2bn China, already spent. $113bn worth of bonds issued by China regional governments in January
  • China – much more stimulus to come
  • ECB ready to take targeted action
  • US – to announce new stimulus today
  • Australia – to announce new stimulus today
  • UK – Government advice: ‘Keep Calm & Carry On’
  • Germany – Angela Merkel’s CDU party continue to object to easing Germany’s strict fiscal deficit rules. We expect this to change as the Coronavirus spreads.
  • $174bn – TOTAL stimulus offered to-date - 


Coronavirus could cost passenger airlines up to $113bn in lost revenue (IATA)

  • We expect severe downgrades to airline profits this year with heavy losses expected a passengers postpone all but non-essential travel.
  • Singapore ordered a Turkish Airlines plane to fly back empty to Istanbul after a passenger who had arrived on the plane tested positive for the Coronavirus..


#SP Angel Mining research is the most read research in the Resources Sector according to statistics at Research Tree, a leading independent research distributor.


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US – The US is debating the form of the stimulus package in the wake of growing numbers of infected with virus people.

  • Trump administration is looking for payroll tax relief and small business support while Democrats are focused on sick leave and free testing, Bloomberg reports.
  • VP Mike Pence and Treasury Secretary Steven Mnuchin met with lawmakers yesterday to agree a stimulus programme.
  • The lack of details and agreement see equity futures trading lower and Treasury yields pulling back this morning.
  • Joe Biden appears as a favourite in the US Democratic presidential nomination following primary victories on Tuesday.


UK – BoE cuts interest rates by 0.5% to 0.25% while also lowered capital buffer requirements for banks to zero and launched a new scheme to support lending to small businesses/

  • The BoE’s new term lending facility will support up to £190bn of new lending.
  • “Temporary but significant disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households for working capital from companies,” the BoE said.
  • The programme will allow lenders to access BoE funds equivalent to 5% of their lending to the real economy at an interest rate close to the 0.25% benchmark rate.
  • The scheme is designed to allow for a better transmission of the rate cut in the Bank Rate to the real economy.
  • The government is due to present the budget later today with expectations for billions of pounds in spending to help support the economy.
  • The Bank of England voted unanimously to cut rates by 50bp to 0.25% this morning ahead of the Coronavirus shut-down which is inevitably coming.
  • Many technology companies have already asked staff to work from home.
  • Some other companies are trialling home working to see how well their systems work.
  • We suspect the UK government is trying to keep everyone working till the week before Easter which is on 12 April this year.
  • Health experts are trying to flatten the virus infection curve to enable the health services to better manage the number of severe hospitalisations
  • See virus curve in link: https://www.vox.com/2020/3/10/21171481/coronavirus-us-cases-quarantine-cancellation
  • We expect much of London to shut down when the hospitals are overwhelmed with severe cases. This may start in the weeks of 16th , 23rd or 30th March.
  • The UK government expects around 20% of the population to have the coronavirus at the heat of the virus.
  • The leading indicator for the timing of the UK shutdown will be lock-downs in France and Germany. We see the UK as around a week behind our close European neighbours.

UK health minister diagnosed with Coronavirus

  • Arsenal football team in self-isolation having shook hands with the owner of Nottingham Forest who was later diagnosed with the Coronavirus.
  • Playing at Millwall is seen as more dangerous than the coronavirus


Italy reports 6% mortality rate. Experts estimate this could fall to 1% as the full scale of infection is not yet knows


South Korea has the most effective coronavirus testing at 3,8500 tests per 1m of population vs around 3.5 in the US

  • Working without adequate testing is like working in the dark without the lights on.


Czech Republic – The government is banning all public events with more than 100 people and is closing schools.

  • “We want to prevent what happened in Italy,” PM Babis said.


Poland – Authorities close all schools, museums and cinemas amid the virus outbreak.


Albania – Schools have been shut down for two weeks while all pubs, gyms and sporting events have been closed until early April.

  • Many public employees to work from home while football league matches to be held without fans.



US$1.1323/eur vs 1.1392/eur yesterday.  Yen 104.97/$ vs 104.19/$.  SAr 16.079/$ vs 15.905/$.  $1.294/gbp vs $1.307/gbp.  0.653/aud vs 0.657/aud.  CNY 6.949/$ vs  6.946/$.

Sterling has risen on the BoE rate cut today. Its not normal for currencies to rise on rate cuts so the market is taking this as a well-timed and proactive sign.


Commodity News

Gold US$1,662/oz vs US$1,663/oz yesterday - South Africa – Main stock index extends gains for a second day amid gold price rise

  • Gold’s recent bull run has seen investors look to increase exposure to the safe haven by buying shares in gold producers.  
  • The country’s index of gold stocks climbed as much as 5.3%, with AngloGold Ashanti up 7.2% yesterday and Gold Fields up 3.7%.

   Gold ETFs 86.9moz vs US$86.7moz yesterday


Platinum US$879/oz vs US$880/oz yesterday - BASF SE develop technology that could reduce automakers demand on palladium

  • The German chemical company has developed a new technology with Sibanye-Stillwater and Implats for gasoline cars that substitutes some of the palladium in the autocatalyst with platinum.
  • Platinum currently costs US879/oz compared to palladium costing $2,370/oz, so the partial substitution would see the cost of production of vehicles fall for automakers.
  • This breakthrough could help rebalance the PGM market, as the demand for palladium is currently about three times higher than the demand for platinum (Mining Weekly).
  • The new technology has already been tested and according to BASF, doesn’t compromise emissions standards.
  • The company expects the new technology to be implemented in 2023 models, with some applications possible by 2022 as government bodies would need to certify that the new autocatalysts meet regulations.  
  • According to Bloomberg, platinum rose as much as 3.2% on the news before paring some gains as the announcement marked one of the first signs that manufacturers can overcome technical barriers some of the technical barriers of substitution.

Palladium US$2,371/oz vs US$2,520/oz yesterday

Silver US$17.02/oz vs US$17.15/oz yesterday


Base metals:    

Copper US$ 5,575/t vs US$5,614/t yesterday

Aluminium US$ 1,694/t vs US$1,692/t yesterday

Nickel US$ 12,660/t vs US$12,985/t yesterday

Zinc US$ 2,013/t vs US$2,013/t yesterday

Lead US$ 1,806/t vs US$1,834/t yesterday

Tin US$ 16,845/t vs US$16,885/t yesterday



Oil US$36.8/bbl vs US$36.3/bbl yesterday – Whilst we note today’s Saudi Aramco’s release that it has received a directive from the Ministry of Energy to increase its maximum sustainable capacity from 12MMbopd to 13MMbopd, oil prices have ticked up

  • That level of output is believed to be beyond what Aramco can produce on a sustainable basis, and are tapping into reserve stock
  • In other words, Saudi Arabia is going all-out to flood the market
  • The immediate victims of such depressed pricing will be the US shale producers, with Diamondback Energy and Parsley Energy having already announced plans to cut spending and reduce drilling activity
  • This week has also seen a number of London listed producers cutting/postponing dividends and 2020 capex plans including TransGlobe and Pharos (below); in addition to many reiterating their abilities to withstand lower for longer pricing
  • The only hope on the immediate horizon is for OPEC+ to capitulate and tighten the supply valves at their next meeting in June
  • Brent futures are up 0.4% to $37.8/bbl, whilst WTI futures are up 0.6% at US$34.9/bbl

Natural Gas US$1.940/mmbtu vs US$1.831/mmbtu yesterday - Natural gas prices rebounded 7% yesterday on the notion that the decline in oil prices will lead to a reduction in oil rigs, which should reduce drilling capacity for natural gas

  • Production in 2019 grew by 9.8Bcf to a record, which has put significant downward pressure on prices
  • The weather is expected to remain warmer than normal on the US east coast for the next 6-10 and 8-14 days which could generate headwinds for natural gas prices

Uranium US$24.25/lb vs US$24.35/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$88.8/t vs US$85.2/t

Chinese steel rebar 25mm US$528.8/t vs US$527.2/t - Italy’s coronavirus lockdown brings steel trading activity to almost zero (Fastmarkets MB)

  • This week’s lockdown ordered by the Italian authorities has put trading activity in the country on hold as buyers are concerned about further restrictions and anticipated price reductions.
  • Despite the lack of trading, market sources told Fastmarkets that the lockdown will not have any effect on the output of steel products.
  • However transportation difficulties have begun to arise due to a shortage of truck drivers, however suppliers will switch to rail transport wherever possible.


Thermal coal (1st year forward cif ARA) US$55.9/t vs US$55.2/t - Indian thermal coal imports rise 12.6% to 200mt in 2019

  • Last year was the second straight year of growth in shipments of coal despite attempts to cut imports (Reuters)
  • Coking coal for steel manufacturing fell slightly to 51.33mt vs 51.93mt in 2018 according to the government data.
  • Indonesia accounted for nearly 60% of India’s thermal coal imports; with South Africa 22%, and Russia over 5% each.


Coking coal swap Australia FOB US$152.8/t vs US$154.0/t



Cobalt LME 3m US$33,500/t vs US$33,500/t

NdPr Rare Earth Oxide (China) US$39,142/t vs US$39,158/t

Lithium carbonate 99% (China) US$5,756/t vs US$5,759/t - Lilac receives delivery of 20,000 litres of brine for testing from the Kachi Lithium Project

  • Lilac has taken delivery of 20,000 litres of brine samples from explorer, developer and partner Lake Resources from their Kachi Lithium Brine Project in Argentina.
  • The samples have arrived at Lilac’s direct extraction ion exchange pilot plant module in Oakland, California, and will be used to complete commissioning of Lilac’s pilot-scale ion exchange module.
  • Lilac will process the brine samples from the Kachi Project to produce high purity lithium chloride for conversion to high purity lithium carbonate samples. These samples will be made available to prospective off-takers from late March to start the qualification process.
  • Lake hopes to produce a high quality, low impurity product capable of attracting premium pricing from its Kachi Project.
  • The direct extraction process extracts lithium from brine using ion-exchange, without use of traditional evaporation ponds, dramatically shortening the time to process.
  • The method re-injects brine back into the aquifer without changing the brine chemistry and significantly reducing waste water.
  • It could provide a sustainable solution for electric vehicle and battery makers under pressure to demonstrate they have access to a sustainable and scalable supply of raw materials.


Ferro Vanadium 80% FOB (China) US$28.0/kg vs US$28.0/kg

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

Tungsten APT European US$240-245/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t


Battery News

Samsung – claims 900Wh/l solid state lithium ‘metal’ battery in new study

  • Samsung report the development of a new generation solid state lithium battery with 900Wh/l power density. (we estimate ~300Wh/kg)
  • The density of lithium batteries varies but appears to run at close to 3 litres per Kg.
  • Samsung’s Advanced Institute of technology (SAIT) and R&D Institute Japan (SRJ) have published a study on their next generation lithium metal solid state battery. (Cleantechnica)
  • The new lithium ‘metal’ formulation does not include liquid electrolytes, preventing chemical degradation and improving the safety of the battery.
  • The battery includes a 5 micrometre silver-carbon (Ag-C) coating on the anode which both halts the build-up of dendrites, increasing battery longevity and improving energy density up to 900Wh/L. (TechXplore)
  • We expect development to continue for some years.
    • Tesla 2179 cells run at 711Wh/l (246Wh/kg) 
    • Tesla P11D 18650 cells run at 721Wh/l (250Wh/kg)
    • Chevy Bolt cells run at 444Wh/l (237Wh/kg)


Anglo American signs 15-year solar energy contract in Brazil 

  • The miner has signed a 15 year contract in Brazil to buy 70MW of solar power from Atlas Renewable Energy as of 2022 for its operation in Minas Gerais.
  • Atlas will invest $190m in a solar farm in Minas Gerais state to cover the contract as Anglo aim to be using 100% renewable energy by 2022.


Tesla to increase production at its Shanghai Gigafactory to 250,000 cars per annum

  • The Californian EV maker plans to ramp production up to 250,000 cars per annum at its Shanghai factory. Model 3 production began at the facility in December 2019. (Fox Business)
  • A filing by the environmental assessment firm that conducted the feasibility study for the project suggested Tesla planned to manufacture Model 3 and Model Y vehicles at the plant with an annual production capacity of 250,000 vehicles. (Reuters)
  • The Company plans to begin Model Y production in 2021 and is reportedly adding a new stamping line that should increase body part production capacity. (Electrek)
  • Tesla was forced by government order to temporarily halt production at the facility following the Chinese Lunar New Year as coronavirus began to spread throughout the country. The factory remained resumed production February 10th whilst Tesla informed customers deliveries of the Model 3 vehicles would be delayed. (Business Insider)
  • Tesla sales in China remained stable through February as the Company delivered 3958 cars, 400 more than January. (Electrek)


Gridserve begins development of nationwide network of dedicate charging stations

  • The first dedicated EV service station is to open in summer 2020. The solar powered site near Braintree, Essex is being built by Gridserve as part of their £1bn nationwide network of charging facilities. (Autocar)
  • The site will have space for 24 vehicles to charge simultaneously at a rate up to 350kW. Charge times will be 20-30 minutes but the Company hopes this will shorten as battery technology evolves.
  • Gridserve unveiled plans for 100 charging forecourts last year. They later announced that planning permits had been submitted for the Electric Forecourts that will provide rapid charging for fleets, commercial and private vehicles. (Electrive)
  • Solar farms are to be constructed to supply the forecourts with clean power and multi-megawatt batteries will be provide grid services. (Current-news)


Company News

Anglo Asian Mining* (AAZ) 123p, Mkt Cap £141m – FY20 guidance for 75-80koz GE and >$100m in revenues

  • FY20 guidance is for 75-80koz GE(FY19: 81.4koz GE) including:
  • 65-67koz in gold (FY19: 70.1koz)
  • 2.2-2.4kt in copper (FY19: 2.2kt).
  • Marginally weaker gold production is attributed to lower processed grades as more Gedabek open pit material is expected to be processed compared to the Ugur feed during the year.
  • Turnover is expected to increase to >$100m at current prices (FY19: ~$95m SPA est).
  • The forecasts uses the following commodity prices: $1,480/oz Au, $17/oz Ag and $5,700/t Cu.

Conclusion: The team forecasts robust FY20 production rate generating more than $100m in turnover using current metal prices. An increase in gold prices bodes well for the strong FCF generation moving forwards with revenues exposed ~85% to the precious metal.

*SP Angel acts as nomad and broker to Anglo Asian Mining


Vast Resources* (VAST) 0.22p, Mkt Cap £23m – Baita Plai moves towards the start of production

  • Chinese equipment has been loaded on to a vessel bound for Romania and is scheduled to depart on 16 March with further shipments booked for 20 March.
  • Arrival of initial shipments will allow to commence production within the six months timeline following the completion of the financing in Jan/20.
  • Baita Plai underground drilling progresses and is reported to have intersected the Antonio Skarn below 18 level with preliminary results using a handheld Niton XRF pointing to grades consistent with management expectations.
  • The team noted that logistics and drilling proved difficult with works undertaken by the only local drilling company and spare parts availability being limited.
  • Drilling will be completed in Apr/20 with samples of core to be shipped to the ALS laboratories at Rosia Montana for assays.
  • Results to be released as they are made available.

Conclusion: Despite logistical challenges driven by the outbreak of the coronavirus, the team confirmed the loading of the equipment in China with the vessel scheduled to depart early next week. The Company reiterated the start up of production at Baita in the first six months following the closure of the financing package in Jan/20.

*SP Angel acts as Broker to Vast Resources


Greatland Gold (GGP) 4.75p, Mkt Cap £173.5m –Further drilling results from the Havieron project

  • Greatland Gold draws attention to new drilling results from Newcrest Mining which is earning a 70% interest in the company’s Havieron project in the Paterson region of Western Australia.
  • The results, disclosed in Newcrest Mining’s “Exploration and Guidance Update” to the ASX which says that  “High-grade copper-gold mineralisation has been outlined within a folded sub vertical arcuate sulphide zone over 450m in extent, and in excess of 600m vertically. It remains open at depth and to the north-west. This zone is supported by 25 mineralised intercepts to date”.
  • The results reported today are:
    • A 142m wide intersection averaging 1.9g/t gold and 0.38% copper from a depth of 534m in hole HAD022 including a higher grade sulphide zone of 15.7m averaging 9.8g/t gold and 0.61% copper from a depth of 572.3m: and
    • A 124m wide intersection of mineralised breccia averaging 3.9g/t gold and 0.21% copper from a depth of 734m in hole HAD042 including a higher grade zone of 17.3m averaging 19.0g/t gold and 0.62% copper from a depth of 790.7m: and
    • An 83.3m wide intersection of high grade sulphide mineralisation averaging 5.0g/t gold and 1.1% copper from a depth of 489.5m in hole HAD044: and
    • An 82m wide intersection averaging 6.1g/t gold and 0.41% copper from a depth of 461m in hole HAD049 including a higher grade sulphide zone of 34.8m averaging 9.2g/t gold and 0.64% copper from a depth of 461.2m.
  • The gold and copper mineralisation is “hosted in breccia, vein and massive sulphide replacement styles, typical of intrusion-related and skarn types of mineralisation”.
  • Newcrest says that number of environmental, geotechnical and metallurgical studies are continuing in order to support a potential mineral resource estimate and future permitting requirements”.
  • Welcoming the new results from Havieron and confirming that Newcrest “will shortly complete Stage 2 of the Farm-in” Greatland Gold’s CEO, Gervaise Heddle, said that “These latest results represent one of the best sets of drilling results at Havieron since Newcrest began its exploration campaign and reinforce the potential to accelerate the timetable for commercial production”.
  • We understand that Stage 2 of the Farm-In agreement entails Newcrest having spent $20m and earning a 40% interest in the project.

Conclusion: As drilling progresses at Havieron and with 25mineralised intercepts to date, the geology of the deposit is becoming clearer


SolGold* (SOLG) 14.78p, Mkt cap £284.3m – Project update on Alpala PFS and DFS

  • Solgold has provided a progress report on its advanced Alpala copper gold project and portfolio of wholly-owned exploration projects in Ecuador.
  • At Alpala, the company expects to complete the pre-feasibility study (PFS) by Q3 2020 and to finish the definitive feasibility study (DFS) by the end of Q1 2021.
  • The studies build on the preliminary economic assessment (PEA) on the project which was published in May 2019 and which estimated that pre-production capital investment of US$2.4-2.8bn generates an NPV8% (and IRR of 24.8-26.5%) of US$4.1-4.5bn at a copper price of US$3.30/lb and a gold price of US$1300/oz from the treatment of up to 50mtpa of ore over approximately 55 years.
  • The main tasks for the studies include further technical work on finalising the independent mineral resource assessment, which is expected over the next four weeks, as well as additional geotechnical work and revised metallurgical studies and marketing studies for the copper gold concentrates.
  • Further logistics studies will focus on tailings disposal, port and power infrastructure and concentrate handling systems while additional financial modelling and work on the social and economic impact is in progress to “provide a basis for Ecuadorean assessment of the project impact nationally”.
  • The company explains that it is in discussions on the funding where Solgold is seeking “up to USD $150 million in the shorter-term for two years funding for completion of the DFS at Alpala, and SolGold's 85% share of both pre-development costs and the longer-term development capital expenditure (circa $2.7 billion per the PEA estimate)”.
  • “The funding is targeted to involve debt packages backed by Sovereign Export and Import Credit facilities (supported by conditional concentrate off take agreements) plus equity raised from a corporate capital issue at development and targeted to be priced with reference to the NPV of the Alpala Project at DFS stage, and project related interests tied to copper and gold metal production.”
  • Providing an update on the wider exploration programme throughout Ecuador six porphyry type targets have been identified for drilling on wholly-owned licences at Rio Amarillo and Chical in northern Ecuador and Timbara, La Hueca, Prorvenir and Santa Martha (Sharug) in southern Ecuador.

Conclusion: Solgold has clarified the timetable for the PFS and DFS for Alpala. We look forward to the updated mineral resource estimate, which is expected over the next 4 weeks.

*SP Angel act as Financial Advisor and broker to Solgold



John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474 



Richard Parlons – 0203 470 0472 

Abigail Wayne – 0203 470 0534 

Rob Rees – 0203 470 0535 


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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.


Sources of commodity prices


Gold, Platinum, Palladium, Silver

BGNL (Bloomberg Generic Composite rate, London)

Gold ETFs, Steel


Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt


Oil Brent


Natural Gas, Uranium, Iron Ore


Thermal Coal

Bloomberg OTC Composite

Coking Coal




Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal


Metal Bulletin



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