SP Angel – Morning View – Friday 26 07 19

Copper pulls back on less dovish ECB comments

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MiFID II exempt information – see disclaimer below

 

Dow Jones Industrials

 

-0.47%

at

  27,141

Nikkei 225

 

-0.45%

at

  21,658

HK Hang Seng

 

-0.69%

at

  28,396

Shanghai Composite

 

+0.24%

at

   2,945

FTSE 350 Mining

 

-1.12%

at

  19,851

AIM Basic Resources

 

+0.13%

at

   2,127

 

Condor Gold (CNR LN) – Completion of fundraising

Renascor Resources (RNU AU) – Siviour Graphite Project

 

Economics

US – Equities closed lower on Thursday on the back of downbeat corporate earnings.

  • GDP data is due later today with estimates for growth to have slowed to 1.8% in Q2/19 from 3.1% in the previous quarter.
  • Slowing growth is expected to be attributed to destocking and a fall in business investments with private consumption forecast to come in strong.
  • The House passed a debt ceiling extension yesterday offering $324bn in additional spending during the period.
  • The Senate ix expected to approve the bill for president’s signature next week.
  • Also, durable goods topped market expectations in June and climbed 2.0%mom v 0.7% forecast following declines in three of the last four months.

 

ECB – Draghi suggested a series of potential monetary stimulus measures to revive ailing eurozone economic growth before he departs in October.

  • “A considerable mass of inflation expectations are moving towards (a belief that there will be) lower inflation… we don’t like it and therefore we are determined to act.”
  • While support measures including rate cuts, a commitment to keep policy loose for year or a potential new QE programme may be announced during the next meeting in September, the central bank left rates unchanged for now.
  • The decision came on a less dovish side with many expecting a rate cut to be announced during the meeting with the € now trading somewhat flat versus the pre-press conference levels with German Bund yields slightly higher.

 

UK – The pound is trading close to a two-year low against the US$ reflecting market concerns with an increasing chance of a no-deal Brexit on 31 October.

  • PM Johnson appointed top roles to Brexiteers including Priti, Patel, Dominic Raab and former aide Dominic Cummings raising the question of whether he is preparing for an early elections, Bloomberg reports.
  • Jacob Rees-Mogg, new Leader of the House of Commons, said Wednesday that although general election is not a government objective, it is impossible to rule out given the arithmetic of getting a Brexit deal passed in Parliament.

 

Turkey – New central bank chief cut the benchmark rate by 425bp to 19.75% marking the first cut since 2016 and significantly exceeding market projections for 250bp cut.

  • The bank referred to better inflation outlook as the reason for the rate cut with latest forecasts pointing to better than the 14.6% predicted in the inflation report earlier this year.
  • The lira finished stronger against the US$ yesterday with risky market sentiment bolstered by dovish ECB comments.
  • Geopolitical risks remain in the form of potential US sanctions in retaliation for Turkey’s purchase of a Russian missile system.

 

Currencies

US$1.1139/eur vs 1.1128/eur yesterday.  Yen 108.63/$ vs 108.05/$.  SAr 14.165/$ vs 13.928/$.  $1.244/gbp vs $1.248/gbp.  0.694/aud vs 0.697/aud.  CNY 6.879/$ vs  6.873/$.

 

Commodity News

Precious metals:         

Gold US$1,420/oz vs US$1,426/oz yesterday

   Gold ETFs 75.2moz vs US$75.4moz yesterday

Platinum US$865/oz vs US$881/oz yesterday

Palladium US$1,530/oz vs US$1,539/oz yesterday

Silver US$16.44/oz vs US$16.54/oz yesterday

           

Base metals:   

Copper US$ 5,976/t vs US$6,003/t yesterday

Aluminium US$ 1,816/t vs US$1,824/t yesterday

Nickel US$ 14,120/t vs US$14,050/t yesterday

Zinc US$ 2,423/t vs US$2,441/t yesterday

Lead US$ 2,091/t vs US$2,082/t yesterday

Tin US$ 17,760/t vs US$17,675/t yesterday

           

Energy:           

Oil US$63.5/bbl vs US$63.5/bbl yesterday

Natural Gas US$2.227/mmbtu vs US$2.225/mmbtu yesterday

Uranium US$25.65/lb vs US$25.70/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$112.5/t vs US$111.3/t

Chinese steel rebar 25mm US$611.1/t vs US$611.7/t

Thermal coal (1st year forward cif ARA) US$69.4/t vs US$70.0/t

Coking coal futures Dalian Exchange US$213.2/t vs US$213.4/t

           

Other:  

Cobalt LME 3m US$28,000/t vs US$28,000/t

NdPr Rare Earth Oxide (China) US$42,083/t vs US$42,558/t

Lithium carbonate 99% (China) US$8,940/t vs US$9,094/t

Ferro Vanadium 80% FOB (China) US$37.5/kg vs US$37.4/kg

Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg

Tungsten APT European US$210-225/mtu vs US$210-225/mtu

 

Battery News

BMW, Ford, Honda, and VW strike deal with California on vehicle emissions

  • Four automakers reach a deal with California regarding the state’s vehicle emissions rules in a compromise agreement, sidestepping the Trump administration’s plan to freeze fuel economy standards.
  • The automakers described the agreement as a way to maintain a nationwide set of fuel economy requirements, Reuters reports.
  • The deal strikes a middle ground between more stringent Obama-era efficiency requirements that called for an average annual increase of nearly 5% before reaching 47.6 mpg for all vehicles by 2025 and Trump proposed lower standards requiring a 1% efficiency increase each year until 2026.
  • This new framework will increase greenhouse gas stringency requirements at an average rate of 3.7% from 2022 to 2026.
  • The deal ends concerns of a “split market” as other automakers will be allowed to adopt the compromise agreement making the California deal the de facto set of national fuel economy rules.
  • “These terms will provide our companies much-needed regulatory certainty by allowing us to meet both federal and state requirements with a single national fleet, avoiding a patchwork of regulations while continuing to ensure meaningful greenhouse gas emissions reductions,” companies said in the joint statement.

 

Company News

Condor Gold (CNR LN)  17.25p, Mkt Cap £14.6m – Completion of fundraising

  • Condor Gold reports that, following the £4.04m fundraising announced on 8th July,  it has now completed “the second and final tranche of the Placement, comprising a subscription for 9,842,520 new ordinary shares … by Nicaragua Milling Company Limited.”
  • Following the placement of these shares Nicaragua Milling holds a 10.4% interest in the company making it the second largest shareholder after director Jim Mellon with 14.9% and ahead of Ross Beaty (6.9%) and Chairman and CEO, Mark Child (4.4%).
  • The announcement on 8th July explained the background to the fundraising was that “The placement proceeds will be used to advance the La India Project towards production following the grant of an Environmental Permit to construct and operate a 2,800 tonne per day processing plant with capacity to produce 100,000 oz gold per annum from La India open pit. The proceeds will also be used to meet conditions of the Environmental Permit including the completion of engineering and other technical studies and for the acquisition of some or all of land for the mine site infrastructure.”
  • A more recent announcement, on 23rd July, disclosed that Condor Gold was also progressing Environmental Impact Assessments for satellite pits at Mestiza and America “which have the potential to increase annual production from open pit material by 50% to 120,000oz gold pa for a seven year life of mine”.

Conclusion: The provision of additional funds should help maintain momentum on the permitting and development  work for the main La India pit as well as the higher grade America and Mestiza pits.

 

Renascor Resources (RNU AU) A$0.015, Mkt Cap A$17.3m – Siviour Graphite Project

  • In its quarterly report for the 3 months ending 30th June (https://renascor.com.au/wp-content/uploads/2019/07/20190726-Quarterly-Activities-Report-1951223.pdf) , Australian listed Renascor Resources describes the Siviour graphite project, located on the Eyre Peninsula in South Australia as “Australia’s Largest Graphite Deposit”.
  • The project, which has an advanced Definitive Feasibility Study based on a Measured mineral resource estimate of 15.8mt at an average grade of 8.8% TGC (within an overall measured, indicated and inferred  resource of 87.4mt at 7.5% TGC) was granted a mineral lease during the quarter. The DFS is expected to be completed in September 2019.
  • The project is reported to be attracting the interest of the Netherlands Export Credit Agency where “Up to approximately 60% of initial Siviour Graphite Project capital expenditure is expected to qualify for Dutch export credit cover”.
  • The company explains that “The Dutch ECA scheme was identified as applicable to Renascor’s Siviour Graphite Project based on the sourcing of Dutch content through Renascor’s Dutch strategic engineering partner, Royal IHC”.
  • A summary of the main points of the project included in the quarterly report shows a Stage 1 project of 3 years duration producing 83,400tpa of graphite concentrate from the processing of 825,000tpa of ore at an average grade of 11.0% TGC at a cash cost of A$477/t of graphite concentrate (US$344/t).
  • The second stage of the project doubles production rates to 1.65mtpa at a grade of 9.1% TGC for a further 37 years mine life.
  • Based on total project capital of A$108m (US$78m) for Stage 1 followed by a further A$77m (US$56m) for the stage 2 expansion, the company reports the project generating an after-tax NPV10% of A$435m (US$313m) and an IRR of 40% using an assumed basket price for graphite of A$1366/t (US$984/t).

Conclusion: The interest of the Dutch ECA in an advanced, large scale graphite project in a stable jurisdiction with established infrastructure and mining expertise underlines the search for long term sources of graphite supply. We look forward to more of the details in the forthcoming Definitive Feasibility Study.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

James Mills -0203 470 0486

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

Abigail Wayne – 0203 470 0534

Rob Rees – 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

DCE

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

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