SP Angel – Morning View – Friday 04 01 19

 

Metals climb as China-US trade talks are set to resume next week ​​​​​

MiFID II exempt information – see disclaimer below

 

Central Asia Metals (CAML LN) – Consolidation of Debt

KEFI Minerals* (KEFI LN) – Tulu Kapi update

Metals Exploration (MTL LN) – CEO appointment

Solgold* (SOLG LN) – Discovery of copper/gold mineralisation at Porvenir

 

Dow Jones Industrials

 

-2.83%

at

  22,686

Nikkei 225

 

-2.26%

at

  19,562

HK Hang Seng

 

+2.24%

at

  25,626

Shanghai Composite

 

+2.05%

at

   2,515

FTSE 350 Mining

 

+1.66%

at

  16,684

AIM Basic Resources

 

+0.41%

at

   2,059

 

Economics

US – European stock indices and US futures are trading higher this morning recovering from an earlier sell off on the back of poor economic data and weakening demand outlook in China.

  • Apple shares posted a 10% decline on Thursday following the first downward revision to its revenue forecasts in 16 years led by weaker than expected sales in China.
  • Investors bid up prices of safe haven assets yesterday with US 10y Treasury yields hitting 2.5429%, the lowest level since the start of 2018 and gold climbing to 1,292/oz on the way towards the $1,300/oz mark.
  • The Fed Funds futures market indicated that investors think there is no chance the Fed will lift rates in 2019, and a greater than 50% chance of the US central bank easing policy this year.
  • On a different note, House Democrats approved legislation that is aimed at ending a 13-day partial government shutdown (nearly a quarter of the federal government is currently closed affecting 800,00 employees) excluding funds for a $5bn border wall which is unlikely to get through Republicans’ controlled Senate; the White House has also issued a veto against both parts of the Democratic legislation.
  • On Friday, China confirmed that it would hold trade talks with the US next week providing a boost to equities with the Stoxx Europe 600 Index up 1% and S&P 500 futures Index up 1.2%.
  • An increase in Chinese private services PMI this morning also helped the sentiment.
  • US employment numbers are due later today with estimates for an increase in the number of jobs created in December (+184k v 155k in November) and a robust growth in labour earnings (+0.3%mom/+3.0%yoy v +0.2%mom/+3.1%yoy in November).

 

China – A pick up in the services sector helps to compensate for a weak manufacturing segment reading lifting the composite PMI index and reflecting easing downward pressure on China’s economic growth.

  • Headline index readings also reflected divergent trends in new business orders among service providers and goods manufacturers.
  • Both domestic and export new business orders performed weaker in the manufacturing sector while service providers recorded an increase in new work which on balance led to slightly softer increase in total new work.
  • Services Caixin PMI: 53.9 v 53.8 in November and 53.0 forecast.
  • Manufacturing Caixin PMI (released on Wednesday): 49.7 v 50.2 in November and 50.2 forecast.
  • Composite Caixin PMI: 52.2 v 51.9 in November.

 

Eurozone – Growth is slowing down in the single currency market with the general pace down at the weakest level in over four years according to the latest Markit PMI date for the region.

  • The slowdown in growth during December was partly driven by lower activity in France where the ‘gilets jaunes’ movement reportedly led to a first fall in economic output for two-an-a-half years.
  • In Germany growth slowed to the weakest pace in five-and-a-half years.
  • New business orders across manufacturers deteriorated to the greatest extent in over four years while inflows of new business to service providers rose only modestly; composite data showed the weakest growth in new work since the end of 2014.
  • Business sentiment continued to soften last month.
  • Inflation slowed in December reflecting lower oil prices, although wage and salary pressures from tight labour market remained a key driver for higher input costs.
  • Composite Markit PMI: 51.1 v 52.7 in November.

 

UK – Property prices growth slowed to a 0.5%yoy rate in December from 1.9% recorded in November marking the weakest pace since February 2013, according to Nationwide data.

  • Poor results have been attributed to economic outlook uncertainty despite currently low unemployment levels and borrowing costs.
  • “Near term prospects will be heavily dependent on how quickly this uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy – especially the labour market,” Nationwide commented.
  • “If the economy continued at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single digit pace in 2019”.

 

Currencies

US$1.1409/eur vs 1.1360/eur yesterday.  Yen 107.94/$ vs 107.93/$.  SAr 14.164/$ vs 14.500/$.  $1.266/gbp vs $1.255/gbp.  0.703/aud vs 0.696/aud.  CNY 6.864/$ vs  6.873/$.

 

Commodity News

Precious metals:         

Gold US$1,294/oz vs US$1,290/oz yesterday

   Gold ETFs 71.5moz vs US$71.5moz yesterday

Platinum US$803/oz vs US$796/oz yesterday

Palladium US$1,271/oz vs US$1,266/oz yesterday

Silver US$15.72/oz vs US$15.59/oz yesterday

           

Base metals:   

Copper US$ 5,842/t vs US$5,850/t yesterday

Aluminium US$ 1,860/t vs US$1,789/t yesterday

Nickel US$ 11,000/t vs US$10,750/t yesterday

Zinc US$ 2,427/t vs US$2,396/t yesterday

Lead US$ 1,955/t vs US$1,964/t yesterday

Tin US$ 19,550/t vs US$19,420/t yesterday

           

Energy:           

Oil US$56.8/bbl vs US$54.2/bbl yesterday

Natural Gas US$2.963/mmbtu vs US$2.908/mmbtu yesterday

Uranium US$28.85/lb vs US$28.85/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$70.6/t vs US$69.6/t

Chinese steel rebar 25mm US$581.5/t vs US$580.0/t

Thermal coal (1st year forward cif ARA) US$80.5/t vs US$80.0/t

Coking coal futures Dalian Exchange US$208.8/t vs US$207.6/t

           

Other:  

Cobalt LME 3m US$47,000/t vs US$47,000/t

China NdPr Rare Earth Oxide US$46,180/t vs US$46,196/t

China Lithium carbonate 99% US$9,979/t vs US$9,982/t

China Ferro Vanadium 80% FOB US$71./kg vs US$73./kg

China Antimony Trioxide 99.5% EU US$7./kg vs US$6.9/kg

 

Battery News

 

Company News

Central Asia Metals (CAML LN) 219.5 pence, Mkt Cap £386.3 – Consolidation of Debt

  • Central Asia Metals reports that it has consolidated its debt into a single facility with its offtake partner, Traxys.
  • The $402.5m acquisition of the Sasa in late 2017 mine was partially financed with a loan facility of $120m from Traxys and Sasa itself brought a further $67m of debt leading to gross debt in CAML of $187m in November 2017.
  • The company has now “made contractual debt repayments of $36 million since the acquisition” and further discloses that it “increased the size of the Traxys facility in December 2018 by $60 million to$151 million and used the proceeds to repay the Sasa facility in full and a local bank working capital facility, plus accrued interest.”
  • The facility “carries a 4.75% interest plus 1- month US Libor and will be repaid monthly on a straight-line basis within four years with no requirement for cash sweeps.”
  • Commenting on the restructuring of the company’s debt into a single facility, CEO, Nigel Robinson, said “Removal of the Sasa debt will enable CAML to restructure and simplify its Sasa corporate structure, which is expected to be completed in Q1 2019.”

 

KEFI Minerals* (KEFI LN) 1.4p, Mkt Cap £8.2m – Tulu Kapi update

  • The Company reported yesterday that expected timing over the receipt of the government regulatory consents leading to the release of the first tranche ($9m) of the ANS investment has been moved to end of January 2019 from previously targeted December 2018.
  • While the government has provided a number of formal consents, a number of other conditions which have been verbally agreed require additional time to be formally processed.
  • The management highlights that the deadline extension will have only a minimal impact on the progression of the Tulu Kapi Gold Project.
  • In the meantime, the Company is progressing with preparatory works for the resettlement programme which is due to commence on the receipt of the ANS tranche.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Metals Exploration (MTL LN) 0.80p, Mkt Cap £16.6m – CEO appointment

  • Yesterday Metals Exploration announced that Darren Patrick Bowden (49) will be replacing Ian Holzenberger as CEO of the Company.
  • Mr Holzenberger will move to become Non-Executive Chairman.
  • Mr Bowden has 25 years’ experience in the mining sector and is moving from Minesa SAS (Gold) where he acted as CEO and managed the designing, developing and licesensing the Sorto Norte underground gold project in north central Columbia.
  • Prior to Minesa, Darren held senior operational and technical positions including Board Director and Contract CEO at DuSolo Fertilizers in 2015, Vice President Operations for Nyrstar USA Inc. (Zinc), January 2014 to July 2015, and six years with Glencore at Falconbridge Dominicana SA (Nickel) and Prodeco SA Colombia where he held the positions of President and Vice President of Operations between 2007 and 2013.

 

Solgold* (SOLG LN) 39.2p, Mkt Cap £723.8m – Discovery of copper/gold mineralisation at Porvenir

  • Solgold has announced the discovery of copper/gold porphyry style mineralisation along the La Cachaposa Creek within its wholly owned Porvenir licence area in southern Ecuador.
  • The Porvenir licence covers 136.45km2 in an area “characterised by a sequence of prospective intrusive porphyry bodies … [where] … regional geochemical sampling and detailed geological mapping has identified a north-easterly zone over 6km long and 1 km wide in the northern part of the project area”.
  • Rock-saw channel sampling along mineralisation of the “Target 15” exposed by the creek has “returned an open-ended intersection of:
    • 62.4m @ 0.71% Cu and 0.71g/t Au (open-ended), including
    • 29.5m @ 1.01% Cu and 0.89g/t Au from 12.1 to 41.6m”
  • The exposed outcrops of mineralisation along the La Cacharposa Creek “lie within copper, gold, molybdenum, Cu/Zn and Mo/Mn geochemical anomalies that cover an area approximately 1200m long and 800m wide”.
  • Additional rock chip sampling of mineralised outcrops has returned assays ranging as high as 2.35% copper and 1.67g/t gold in sample number RO300986 and the company plans to follow up these samples, initially through further rock-saw channel sampling. “SolGold geologists plan to develop the target towards drill ready status in the coming quarter” as well as conducting a programme of surface and airborne geophysical magnetic surveying over the Porvenir project.
  • The company considers the mineralisation it has identified within the Porvenir licences to exhibit similar geological characteristics and age profile to those at its 85% owned Alpala licences in northern Ecuador where, in November 2018, the company announced an updated mineral resource estimate of indicated resources of 2.05bn tonnes at an average grade of 0.6% copper equivalent, at a 0.2% cut-off and an additional 900mt classed as inferred at an average grade of 0.35% copper equivalent representing a major increase over the 1.08bt of indicated and inferred maiden resource estimate reported at an average copper equivalent grade of 0.7% which was announced at the beginning of the year.
  • Commenting on the significance of the results from Porvenir, CEO, Nick Mather, said that “The high grades and strong gold endowment at Alpala and Porvenir provides SolGold with a unique opportunity to develop this Company”.
  • SolGold holds 72 regional concessions and the Porvenir project area is one of 11 targets identified for priority exploration “with a view to progress to drill testing as soon as possible … Drilling is scheduled to commence on regional prospects in Q1 2019, subject to finalisation of relevant permits”.

Conclusion: Initial results from Porvenir provide sufficient encouragement to progress to the identification of potential drill targets during the early part of 2019 and show the benefits of SolGold deploying its expertise from Alpala to its wholly owned project areas throughout Ecuador. We look forward to further news as exploration proceeds at Porvenir and the other priority targets.

*SP Angel acts as broker and advisor to Solgold. SP Angel have raised funds for SolGold on eight previous occasions.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

 

SP Angel                                                            

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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.

 

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