SP Angel Morning View - Markets bounce on Fed lending program and further stimulus expectations

SP Angel . Morning View . Tuesday 24 03 20

Markets bounce on Fed lending program and further stimulus expectations

MiFID II exempt information – see disclaimer below    

 

BlueRock Diamonds* (BRD LN) – Closure of Kareevlei mine for 21 days due to national shutdown

Bushveld Minerals* (BMN LN) – South Africa government orders underground miners and smelters to shutdown for 21 days

Oriole Resources (ORR LN) – Final Results

Rio Tinto (RIO LN) – Production curtailed at Richards Bay for 21 days

Vast Resources* (VAST LN) – Baita PLai and Chiadzwa Community Diamond update

 

Trial for tuberculosis  vaccine against coronavirus

• A Dutch trial aims to test a conventional tuberculosis vaccine to evaluate if it confers any protective effect against SARS-CoV-2, the causative agent of COVID-19. 
• 1000 healthcare staff will be vaccinated with either bacillus Calmette-Guérin (BCG), the TB vaccine, or placebo, with ‘unplanned absenteeism’ a proxy for COVID-19, being the endpoint. 
• The BCG vaccine consists of an attenuated (weakened) version of a relative of Mycobacterium tuberculosis, the causative agent of TB. 
• The trial is being conducted at Nijmegen’s Radboud University and Utrecht University.
• Researchers in Germany are also testing VPM1002, a genetically modified version of BCG, developed by the Max Planck Institute, in a Phase 3 trial.

The use of a vaccine which targets a bacterial disease seems somewhat surprising, however there have been reports that it may have protective effects on other pathogens, including influenza virus. The rationale is prior exposure to a related or unrelated pathogen, such as BCG, can boost the immune response to a new infection such as SARS-CoV-2. This is because the application of BCG is suggested to strengthen a function of the immune system known as the heterologous adaptive immune response. The use of a randomised controlled clinical trial should provide supporting evidence if there is any protective effect against COVID-19. Healthcare workers are at risk of being exposed to high viral doses and the repositioning of an existing vaccine could provide an interim fix until a COVID-19 vaccine is developed, which may be over 18 months away.

 

Expect a deep V shaped recession followed by rapid recovery through stimulus programs

• Opportunity for Private investors to make substantial gains on buying key recovery stocks in this crisis
• Many Private investors made strong gains buying oversold equity as Sovereign Wealth and other funds dumped stock in 2008-2009.
• This time more investors have been moving to cash as hedge funds are deleveraged, Sovereign Wealth funds dump stock and other investors move to hold more cash.
• Some companies will go into bankruptcy and we wold avoid the Airline, leisure and retail sectors which are hit hard. Online retail is ok for now but may be disrupted by logistical issues.
• Do not buy the indices, as they contain companies which will not survive. Smart investors will pick recovery stocks.
• Many miners are also being forced to move to care & maintenance on a very temporary basis as government’s enforce lock-downs and the virus rages through the workforce.
• It is difficult to know the precise timing of the recovery in economic and equity market terms but China gives a form of proxy for the duration of the lockdown
• Our current estimate is for economic recovery to begin early summer as Herd immunity starts to reduce the number of infections and as new treatments ease overcrowding in hospitals.
• We recommend investors consider the following sectors for recovery:
• Mining – for the building boom to restart many economies & it’s our core specialisation
• Oil & Gas – economic recovery still needs to be fuelled and powered with oil and gas
• Builders
• Building Materials

 

Stimulus funding relating to the Coronavirus (Updates in bold, figures converted to US dollars)

The US, Germany, Britain, France and Italy are estimated to have committed ~$7.4tn (23% of GDP) to fight the pandemic

Central banks have committed 4/5s of the $7.4tr (The Economist).

• $2tn fiscal package currently debated in the US Congress
• $1,000bn - IMF available
• $963bn (€750bn) ECB no limits for Action for Europe. QE through bond purchases inc $28.3bn (€25bn) from the EU inc. $120bn - ECB increased bond purchases + ECB – targeted loans to companies at an interest rate of -0.75%
• ECB says it is ready to do more
• $700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE program is to buy Treasuries and mortgage-backed securities. The program in two parts $500bn + $200bn  
• $17.4bn Japan +  + Y300bn of inflation-linked bonds,
• $400bn (£330bn) UK - Government-backed loan scheme. New business interruption loan scheme up to £5m with no interest. Will add whatever is required in COVID-bill + $242bn (£200bn) UK QE from Bank of England.
• $39m – UK (£30bn) stimulus + $29bn (£20bn) – UK No business rates plus £25,000 cash grants for shops, pubs, clubs in hospitality sector inc. $5bn (£3.5bn)
• $383bn (€300bn) – France - loan guarantees for French business inc. $50bn (€45bn) + France to also pay half wages for employees in affected firms
• $200bn (€200bn) – Spain
• $127.2bn China - China stimulus was $586bn in 2009 to rescue itself and the global economy. This time it is simply lowering lending rates slightly and made $77bn of new loan capacity at banks,
• $48bn Australia inc. fresh AU$66bn,
• $15.4bn – Hong Kong relief package
• $13.7bn South Korea, $12bn World Bank, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
• The world was slow to recover from the 2008 GFC due to a lack of stimulus allowing China to get ahead
• This time the US and UK are likely to stimulate their economies to a far greater extent than seen in the GFC
• $6.68tr – TOTAL stimulus offered to-date vs G20 GFC stimulus of ~$2 trillion or 1.4% of global GDP (ILO, EU, IILS)
• >10tr expected if using the $7.4tr estimated by The Economist

 

South Africa – 21-day nationwide lockdown ‘Disaster Management Act’ starts midnight on Thursday to curb the spread of COVID-19.

• The lockdown will require all non-essential businesses and activities to be suspended severely affecting the mining sector.
• All underground mines and smelters in South Africa have been asked to move to Care & Maintenance which may allow maintenance work to be brought forward
• News of closure of the mines has helped lift gold, platinum, palladium and other metals prices as Chinese factories return to work which will help in the short term.
• Higher gold, platinum and palladium prices combined with a weaker rand were helping Sibanye-Stillwater and other miners but the impact of the virus will now cut profits due to fixed costs of operating mines
• While mines have good healthcare facilities they are not equipped for large numbers of cases of pneumonia.
• South Africa is known for having world-class healthcare with a very dedicated staff of professionals but even the best systems are being overrun by the rate of hospitalisations.
• While many South Africans are fit enough to withstand the disease its greatest impact will be with HIV patients and people with other health issues.
• The very deep gold mines may suffer if working faces are left unworked for several weeks as the build-up of rock stresses at around 4km depth will be huge and it is possible that some of the faces may be irretrievable
• The lock-down could result in some major capital expenditure to reopen certain deep-level shafts if these faces are left unworked for more than a few weeks, serious to the likes of Sibanye/Harmony
• Miners are at risk of passing infection as they assemble and ride in the cage to go underground. The virus may also spread in the underground workings.
• The infection will also result in significant lost time through sickness as it spreads
• Rio Tinto came out with an announcement this morning over suspension of its Richards Bay Minerals operations.
• South32 and Anglo American are currently studying the order and will provide a separate update on the way forwards for its local operations during the lockdown.
• Pan African Resources are putting its gold operations under a temporary care and maintenance during the lockdown period.
• Other companies with significant exposure to the region that are likely to be affected by the order:
  • Gold & PGMs – Sibanye-Stillwater, Harmony Gold, Impala Platinum, Northam Platinum, DRDGOLD.
  • Chrome/Ferrochrome & PGMs– Tharisa, Merafe Resources, Sylvania Platinum
  • Vanadium – Bushveld Minerals
  • Diamonds – Petra Diamonds
  • Coal – Exxaro Resources, MC Mining

 

Dow Jones Industrials		-3.04%	at	18,592
Nikkei 225		+7.13%	at	18,092
HK Hang Seng		+4.51%	at	22,674
Shanghai Composite		+2.34%	at	2,722

 

Economics

The Fed announced an unprecedented effort to support the economy and businesses by offering loans to both large and small companies.

• The programme covers investment grade companies.
• For smaller firms, without access to corporate credit markets, the programmes is still being worked out with Congress and the Small Business Administration.
• The programme is unlimited, suggesting the central bank is willing to do whatever it takes to fix markets and the economy.

 

IMF forecasts global recession “at least as bad as during the global financial crisis or worse” in 2020.

• IMF MD Kristina Georgieva added the economy is likely to recover in 2021.
• This marks a significant revision on a 3.2% growth forecast in 2020.

 

Regional PMIs slump to record lows in March as governments implement shutdowns to find the spread of the virus.

• Eurozone Composite PMI dropped to 31.4 this month coming in below 38.8 forecast and beating the prior low of 36.2 recorded in Feb/09.
• France and Germany recorded 30.2 and 37.2 respective readings with the rest of the single currency region posting even steeper declines.
• Services sector was hit the hardest (28.4 v 44.8 for manufacturing).
• In Japan, Composite PMI declined to 35.8, down from 47.0 in February, with services recording sharper drop than the manufacturing index.
• In the UK, Composite PMI slid to 37.1 from 53.0 as services posted a drop to 35.7 and manufacturing was down at 48.0.

 

DRC - Lockdown imposed in mining area

• The DRC imposed a two-day lockdown in part of its Haut-Katanga province yesterday, known as the copper and cobalt heartland of the country - after two people vested positive for coronavirus. 
• Companies such as Ivanhoe, MMG and Chemaf operate in the region, however some have already taken steps to reduce staff in response to the virus outbreak. 
• Mines in other provinces in the DRC have also been locked-down. In Lualaba province, Glencore sent 26 foreign workers home from its KCC mine as a result of the outbreak. 
• China Molybdenum also announced yesterday it would place its TFM copper mine in the DRC in isolation effective from today. 

 

Australia - BHP creates AU$50m fund to support regional communities 

• BHP will support regional communities facing significant challenges as a result of the coronavirus pandemic. 
• The company has pledged $50m to concentrate on BHP's key operational areas such as the Pilbara and Goldfields regions, and comes in addition to the $100m that the company has pledged to small, local and indigenous communities. 
• BHP's CEO Mike Henry has vowed to stand by the regional communities in which the company operates and continue to support them throughout the pandemic.

Toyota and Ford to suspend production in Asia 

• The automakers are spending their production lines in: Japan, India, Vietnam and Thailand as a result of the pandemic (Fastmarkets MB). 
• Toyota will stop seven production lines at its five domestic demand for between 3-9 days due to a decline in overseas demand. 
• Ford will suspend its vehicle and engine production in India, Vietnam and Thailand indefinitely from the 21st of March. 

 

Currencies

US$1.0829/eur vs 1.0692/eur yesterday.  Yen 110.64/$ vs 110.14/$.  SAr 17.619/$ vs 17.837/$.  $1.165/gbp vs $1.161/gbp.  0.595/aud vs 0.579/aud.  CNY 7.078/$ vs  7.115/$.

 

Commodity News

Gold US$1,570/oz vs US$1,489/oz yesterday - Gold prices rise as US Fed announce unprecedented support measures 

• Gold prices continued to rise on Tuesday, following a 4% jump in the previous session after the US reserve increased measured to support the US economy as a result of the global pandemic. 
• Spot gold climbed 1.7% earlier this morning to $1,579/oz after rising 3.7% on Monday - its highest percentage gain since June 2016 (Reuters). 
• The price increase has been partly driven by supply constraints, as three of the world's largest gold refineries announced yesterday they has suspended production in Switzerland for at least a week due to the virus. 
• Many gold producers have withdrawn 2020 guidance due to mine operation disruptions such as the world's largest producer Newmont, driving further uncertainties on the supply-side (Kitco). 

   Gold ETFs 88.0moz vs US$87.7moz yesterday

Platinum US$668/oz vs US$615/oz yesterday - PGM metal prices rise on South African mining shutdown

• Both platinum and palladium rose this morning after the government announced a 21-day nationwide lockdown as a result of the global pandemic. 
• Last year, South Africa supplied roughly 75% of the world's platinum and 40% of the world's palladium (Forbes). 

Palladium US$1,848/oz vs US$1,669/oz yesterday

Silver US$13.69/oz vs US$12.49/oz yesterday

            

Base metals:    

Copper US$ 4,744/t vs US$4,575/t yesterday

Aluminium US$ 1,566/t vs US$1,555/t yesterday

Nickel US$ 11,095/t vs US$11,025/t yesterday

Zinc US$ 1,853/t vs US$1,826/t yesterday

Lead US$ 1,638/t vs US$1,643/t yesterday

Tin US$ 13,675/t vs US$13,045/t yesterday

            

Energy:            

Oil US$28.1/bbl vs US$26.0/bbl yesterday

• Oil prices are up c.4% today on hopes that the US will soon reach a deal on a US$2tn Coronavirus aid package that could blunt the economic impact of the outbreak and in turn support oil demand
• Prices are also being supported by the weaker dollar that stemmed from the Fed’s unprecedented measures
• The overall crude demand outlook remains low as long as travel restrictions are in place and governments curtail commercial activities to prevent the coronavirus spread.
• Prices and profit margins for motor and aviation fuels globally are under severe pressure from a plunge in demand as countries enforce lockdowns and airlines ground planes, forcing more refineries to reduce output and lower their crude oil demand

• Global energy companies cut FY20 spending

• International benchmark prices have more than halved since the start of the year, falling to below US$30/bbl
• In response, the broad majority of listed companies have cut forward spending budgets:
• BP – will reduce capital and operational spending, which was about c.US$15bn last year
• CHEVRON - will trim spending and lower oil output in the near term. 2020 organic capital expenditure guidance had been US$20bn
• DNO – will cut its FY20 budget by 30% or US$300m and lower its dividend for the first half of the year
• ENERGEAN - cut its investments by US$155m in Greece and Israel and could reduce its budget for Egypt by another US$140m if needed
• ENI - cancelled share buyback of €400m until Brent is at least US$60/bbl
• ENQUEST - cutting operating costs by 30% to US$375m and investment will be lowered by US$80m to US$150m
• EQUINOR - suspended its ongoing US$5bn share buyback programme
• EXXONMOBIL – TBC but confirmed significant cuts to spending. It had previously budgeted US$30bn to US$33bn for projects in FY20
• GENEL -reduce investments to US$60m this year, but expected the number to be US$100m
• KOSMOS ENERGY - dividend suspended, will reduce FY20 capex by 30%
• OIL SEARCH - cutting FY20 investment by 38% and capital spending by 44%
• PREMIER OIL - identified at least US$100m in potential savings on its FY20 capital spending plans
• SAUDI ARAMCO – will cut capital spending for FY20 to between US$25bn - US$30bn, compared with US$32.8bn in FY19
• ROYAL DUTCH SHELL – cut FY20 capex by US$5bn and suspended the next tranche of its share buyback plan
• TOTAL - cut capex by 20% and find additional cost savings of around US$400m this year
• TULLOW OIL – cut capex by US$350m this year and reduce exploration spending by 50%
• WINTERSHALL – 20% cut in capex to at least US$1.3bn

Natural Gas US$1.603/mmbtu vs US$1.533/mmbtu yesterday - Natural gas prices are trading up this morning after short-sellers covered positions following the announcement of

• more monetary stimulus from the U. Federal Reserve and as they await Congress’ decision on new fiscal
• stimulus

• Current consensus estimates a near-term rally early next week due to a slight increase in demand, but gains are

• likely to be limited because the overall fundamental picture is still bearish

• Gas prices are still trading near their lowest levels in years as near-record production and months of mild weather

• enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely

Uranium US$24.35/lb vs US$24.10/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$78.1/t vs US$84.6/t - Chinese iron ore futures hit three-week low

• Chinese iron ore futures continued to fall this morning, as demand worries exceeded the supply shortages as a result of the coronavirus pandemic. 
• The most-traded May iron ore contract on the Dalian Commodity Exchange fell 3.1% to 619 yuan ($87.43)/t earlier this morning, as spot prices dropped to six-week lows yesterday (Reuters). 
• Despite the steep decline in demand, iron ore has also experienced supply-side restrictions. Vale announced yesterday it will close its Malaysian iron ore distribution centre until the 31st of March.
• The Brazilian company expect first quarter sales to be 500,000 tonnes short of its previous guidance (Fastmarkets MB). 

Chinese steel rebar 25mm US$526.6/t vs US$525.6/t

Thermal coal (1st year forward cif ARA) US$55.1/t vs US$55.5/t

Coking coal swap Australia FOB US$149.0/t vs US$149.0/t

            

Other:   

Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$38,429/t vs US$38,369/t

Lithium carbonate 99% (China) US$5,651/t vs US$5,622/t - Lithium on lockdown in Argentina

• Argentina has gone into nationwide lockdown, enacting the Decree of Necessity and Urgency (DNU). (Kalkine Media)
• This move has forced a number of lithium players with operations  in the region to act:
• Galaxy Resources: announced a slowdown of onsite activities at is Sal De Vida Project. Only a skeleton crew remain on site. Following the announcement of these measures the stock fell 14% to $0.765. (Kalkine Media)
• Orocobre: has suspended operations at their Borax site in Argentina. Operations at the Olaroz Lithium facility have moved to care and maintenance and stage 2 expansion has been halted. Construction at Lithium hydroxide plant in Naraha continues unabated. (Reuters)
• Argosy Minerals has suspended pilot operations at its Rincon Lithium Project. The Company will continue to progress with finding funding to scale up the project. (The Market Herald)

Ferro Vanadium 80% FOB (China) US$27.7/kg vs US$27.8/kg

Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/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

More EVs with South Korean batteries to receive subsidies in China

• Tesla’s Model 3 and Chongqing Jinkang’s pure electric SUV, both equipped with batteries supplied by South Korean companies have been included on the list for energy vehicle subsidies announced on the 6th of March. (The Korean Herald)
• In December the Chinese government reintroduced subsidies for EVs with foreign batteries for the first time since 2015. The amount of subsidy had decreased by half to around $3500 and the range requirements increased to 250km/155miles. (Inside EVs)
• EVs with South Korean batteries had been left off the list since 2015 as a result of a dispute over deployment of US anti-missile systems in the country.
• Korean Herald industry sources suggest SK Innovation and Panasonic have been receiving subsidies from automaker clients.
• A significant cut in subsidies followed by full scale repeal is likely in 2021 for all EVs in China.

 

Evergrande Group digs a hole to become an EV player

• The EV business of Chinese real estate developer Evergrande Group has totalled 4.9bn yuan ($690m) in losses since inception in 2018. (Automotive News)
• The unit lost 3.2bn yuan in 2019 and 1.8bn yuan in 2018 according to estimates from Evergrande Health the groups EV business. The Company profit warned in March 2019 with losses on its Investment in Smart King Ltd. (Inside EVs)
• The Company has made tracks in the industry through 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.
• Evergrande Group plans to build two major EV plants in Guangzhou and Shenyang and hope to unveil its first EV model later this year.

 

Company News

BlueRock Diamonds* (BRD LN) 65p, Mkt cap £3.4m – Closure of Kareevlei mine for 21 days due to national shutdown

• BlueRock Diamonds reports it is to close the Kareevlei diamond mine and process plant for 21 days.
• Management have also decided to withdraw diamonds for sale from the March 2020 diamond tender due to an absence of international bidders.
• Management may be able to continue to work on the improvement of certain aspects of the mine and process plant through the shutdown
• SP Angel acts as Nomad and broker to BlueRock Diamonds

 

Bushveld Minerals* (BMN LN) 7.94p, Mkt cap £92m – South Africa government orders underground miners and smelters to shutdown for 21 days

• Miners are appealing to the government for clarification on the nationwide order to shutdown all underground mines and smelters for 21 days.
• The government has ordered these companies to move to Care and Maintenance
• If the South African government allows miners and smelters to conduct maintenance on plants and furnaces then the 21-day shutdown may have relatively little overall impact on production. If the full shutdown is enforced then we will need to adjust our production forecasts and unit costs accordingly.
• This would minimise the cost of any disruption assuming the government allows Bushveld to wind down the furnaces in the correct sequence.
• South Africa is following other governments in advice to its citizens following the identification of Coronavirus and COVID-19 in the country.
• It is too early for us to reassess new company guidance for 2020 though management are reassessing the financial impact and will update the market when able.
• Supply chains in South Africa are as yet unaffected with sales of vanadium continuing worldwide and ongoing sourcing of consumables and equipment.
• The virus has had a significant impact on Chinese consumer demand and on industrial growth but appears to have had relatively little impact on iron ore prices though these have pulled back a little in the past two weeks.
• Ferro-vanadium prices continued to rise for ferro-vanadium in China, the US and Europe this year till 20^th February. Since then prices have pulled back a little.
• Vanadium pentoxide prices jumped 6.8% in Rotterdam on Friday though ferro-vanadium pulled back 2.1% to $23.5-14/kgV in Western Europe.

*SP Angel act as Nomad and broker to Bushveld Minerals

 

Oriole Resources (ORR LN) 0.271p, Mkt cap £1.9m – Final Results

• Oriole Resources reports an operating loss of £1.4m for the year to 31^st December 2019. The loss is substantially lower than that recorded during 2018 which amounted to £2.6m.
• After tax losses have been reduced from £4.7m in 2018 to £1.7m in 2019 and the company also reports that its ʺUK Administration expenses reduced by 22% to £1.03 millionʺ.
• Among the operational highlights of the year, Oriole Resources points to the continuing work by Iamgold to earn in to the Senala licence in in south-east Senegal where Iamgold recently confirmed the start of a three year exploration programme including 10,000m of aircore drilling at the Fare target in the northern part of the licence. Iamgold has already spent over US$1.5m on the exploration earn-in at Senala.
• Elsewhere, exploration, including 12,500m of trenching at the Bibemi and Wapouze licences in Cameroon delivered anomalous gold assay results including a trench intersection of 9m at an average grade of 3.14g/t.
• Asset rationalisation, including the ʺsale of its [12.3%] holding in Tembo Gold Corpʺ for £0.17m and the post-period end £0.24m fund-raising  bolstered year-end cash of £0.16m.
• Chairman, John McGloin, explained that in 2020, Oriole Resources plans ʺto continue the progress we have made, and to drive shareholder value through the targeted exploration and development of our position in Cameroon. Funding remains difficult for exploration companies in general but with a well-advanced programme of asset realisation and a strong gold price, we believe we can procure the funds we need whilst minimising shareholder dilution and ultimately driving shareholder valueʺ.

 

Rio Tinto (RIO LN) 3245p, Mkt cap £55bn – Production curtailed at Richards Bay for 21 days

• Rio Tinto reports that in response to Covid19 containment measures announced by President Ramaphosa ʺRichards Bay Minerals (RBM) in South Africa Rio Tinto will curtail production in compliance with a directive from the Government aimed at containing the spread of COVID-19. As a result, all mining operations at RBM will be halted by midnight on Thursday, 26 March, for 21 days.ʺ
• As a result, the ʺthe furnaces to be put on care and maintenance in order to avoid damage to their continuous operations. At this time, it is too early to speculate on when operations will resume or on 2020 production guidance. Resumption of the construction of the Zulti South project will be delayed.ʺ
• In addition, in Canada, the Quebec Government has announced ʺthe closure of all non-essential businesses from midnight on 24 March 2020 to 13 April.  Rio Tinto understands that the Quebec government has designated industrial complexes including the aluminium sector and the mining industry as essential industries but instructed that they must reduce their business activity to the minimum.ʺ
• Rio Tinto confirms that it ʺwill work with the [Quebec] government to comply with its directive in relation to our Quebec operations.  Any impacts to operations or production guidance will be reported to the market in due course.ʺ

 

Vast Resources* (VAST LN) 0.17p, Mkt Cap £17m – Baita PLai and Chiadzwa Community Diamond update

• Following announcements of equipment shipments from China, the Company reiterates plans to launch production at Baita Plai within six months of completing financing in Jan/20.
• The team also added the Chiadzwa Community Diamond Project JV is expected to be completed by the end of Mar/20.
• The JV includes the Company’s majority owned Katanga Mining, a JV between Vast and the Chiadzwa Community Development Trust (CCDT), and Zimbabwe Consolidated Diamond Company.

*SP Angel acts as Broker to Vast Resources

 

Healthcare team notes: Vadim Alexandre, Liam Gascoigne-Cohen

Trial for tuberculosis  vaccine against coronavirus

• A Dutch trial aims to test a conventional tuberculosis vaccine to evaluate if it confers any protective effect against SARS-CoV-2, the causative agent of COVID-19. 
• 1000 healthcare staff will be vaccinated with either bacillus Calmette-Guérin (BCG), the TB vaccine, or placebo, with ‘unplanned absenteeism’ a proxy for COVID-19, being the endpoint. 
• The BCG vaccine consists of an attenuated (weakened) version of a relative of Mycobacterium tuberculosis, the causative agent of TB. 
• The trial is being conducted at Nijmegen’s Radboud University and Utrecht University.
• Researchers in Germany are also testing VPM1002, a genetically modified version of BCG, developed by the Max Planck Institute, in a Phase 3 trial.

The use of a vaccine which targets a bacterial disease seems somewhat surprising, however there have been reports that it may have protective effects on other pathogens, including influenza virus. The rationale is prior exposure to a related or unrelated pathogen, such as BCG, can boost the immune response to a new infection such as SARS-CoV-2. This is because the application of BCG is suggested to strengthen a function of the immune system known as the heterologous adaptive immune response. The use of a randomised controlled clinical trial should provide supporting evidence if there is any protective effect against COVID-19. Healthcare workers are at risk of being exposed to high viral doses and the repositioning of an existing vaccine could provide an interim fix until a COVID-19 vaccine is developed, which may be over 18 months away.

 

EKF Diagnostics Holdings plc (EKF.L): Trading update

Share price: 19.8p; Market Capitalisation: £ 87m

• EKF Diagnostics provided a trading review for the year ended 31 December 2019 (FY19).
• Revenue grew 6% to £44.9m (FY18: £42.5m) with Gross profits of £23.7m (FY18: £22.7m)
• Profit before tax was £5.5m (FY18: £5.8m excluding exceptional gain from Renalytix AI spinout)
• Cash at period end was £12.1m (FY18: £10.3m), with net cash levels of £14.3m at 20th March 2020.

With trading in 2020 to date in-line with management expectations, EKF remains well capitalised for the current period of uncertainty driven by the coronavirus pandemic. There remains a demand for the Group’s diabetes and haemoglobin tests, with these patient groups being in a higher risk category for COVID-19. Furthermore, EKF has a contract manufacturing opportunity with Longhorn Vaccines and Diagnostics LLC, a US molecular testing group, for specimen collection tubes for COVID-19 testing with initial orders of c. $1m.

 

MaxCyte (MXCT.L): Clinical and commercial license agreement with Allogene

Share price: 122.5p; Market Capitalisation: £70.3m

• MaxCyte, Inc., a cell-based therapies developer struck an agreement with Chimeric Antigen Receptor T cell (CAR-T) developer Allogene Therapeutics, Inc. (ALLO.NQ), 
• As part of the agreement, Allogene gains the right to use Maxcyte’s gene editing and cell manufacturing platforms to develop and advance its pipeline of “off-the-shelf” CAR-T therapy candidates through to commercialisation. 
• MaxCyte will receive milestones payments (undisclosed) and other licensing fees. 

This agreement highlights the interest in Maxcyte’s cell engineering platform for drug developers. Allogene initially intends to use Maxcyte’s platforms for two oncology candidates which target CD19 and BCMA biomarkers. CAR-T is an immunotherapy which involves the reprogramming of immune cells to target a specific cell (i.e cancer). London-listed Hemogenyx Pharma (HEMO.L*), is developing a CAR-T cell therapy for the potential treatment of acute myeloid cancer (AML), an aggressive blood cancer. HEMO previously demonstrated in a mouse model that its candidate was able to programme T cells, a form of immune cell, to identify and destroy human AML-derived cells.

*SP Angel act as Broker to Hemogenyx Pharma

 

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474 

 

Sales

Richard Parlons – 0203 470 0472 

Abigail Wayne – 0203 470 0534 

Rob Rees – 0203 470 0535 

 

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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

 

DISCLAIMER

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.

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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.

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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%