SP Angel . Morning View . Friday 10 01 20
Focus shifts from US-Iran conflict to US NFPs and US China Phase One deal
MiFID II exempt information – see disclaimer below
Condor Gold* (CNR LN) – Condor appoints SP Angel as sole broker as company moves towards production and development of a potential 5moz gold district
Mkango Resources* (MKA LN) – Mkango completes acquisition of 25% stake in Hypromag Rare Earth recycling
Sterling falls as UK BoE considers near-term stimulus program
- Sterling fell vs the US$ and the € yesterday on comments by Mark Carney that the central bank is considering a near-term stimulus programme “to reinforce the expected recovery in UK growth and inflation”.
China – Migration of people for Spring Festival started today
- >300m train tickets have been sold in advance for the migration as workers return to their home villages to visit ageing relatives
- These visits remind workers of the living conditions in the villages that their parents worked in under the Cultural Revolution and is in stark contrast to China’s new economic development
- The efficient operation of the railway is an important showcase for the government which continues to spend substantial sums on ongoing rail development across China
- China spent US$81.5bn on the construction of urban rail transport up 14.9% yoy adding some 6,370km of new rail.
- This equates to expenditure of $13m/km compared with the estimated $140bn cost for HS2 line at 225km indicating a potential cost of $31.6m/km
Galaxy Resources lithium exports slump 26% in 2019 (Financial Review)
- The slump is attributed to changes to EV subsidies in China resulting in weaker demand from consumers and six new mines opening in Australia creating a supply glut.
- This rounds off a year of extreme difficulty for the Company which included a $220m non-cash impairment charge (Motley Fool), poor production and unit cost results in April, and lower margins on their Argentinian lithium project.
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Dow Jones Industrials |
+0.74% |
at |
28,957 | |
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Nikkei 225 |
+0.47% |
at |
23,851 | |
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HK Hang Seng |
+0.27% |
at |
28,638 | |
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Shanghai Composite |
+0.08% |
at |
3,092 | |
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FTSE 350 Mining |
+0.23% |
at |
19,007 | |
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AIM Basic Resources |
-0.92% |
at |
2,121 |
Economics
US – Non farm payrolls are due later today with estimates for an increase in employment numbers in line with the average of the decade-long economic expansion.
- Jobs are expected to climb by 160k in December v 266k recorded during the previous month.
- Unemployment rate and earnings growth are expected to remain unchanged at 3.5% and 3.1%yoy, respectively.
- The House of Representatives yesterday voted to stop president Trump using US armed forces against Iran without Congress’ consent.
- The resolution that was 224-194 in the House is now going to the Senate, which is controlled by Republicans.
UK – Total value of UK M&A deals rises by £15bn in 2019
- According to EY, M&A deals completed by UK firms rose to £39.8bn, up from £24.9bn.
- The substantial increase came despite the total number of deals falling from 236 to 211.
Liberty Steel announces 355 job cuts to UK workforce (Fastmarkets MB)
- The company announced yesterday that jobs will be lost in Stockbridge and Newport due to “challenging market conditions”.
- Fastmarkets’ steel hot-rolled coil index domestic exw Northern Europe fell continuously in 2019, from €522/t in January to €435/t in December.
- Liberty took over the plants in Wales and Yorkshire in 207 after it bought out Tata Steel's speciality steels division for £100m.
France – Industrial production picked up in November beating expectations before nationwide public sector strikes hit last month.
- Protests continue strong, although, turnout numbers have come down lately with the interior ministry estimating 452,000 people to answer the union leaders’ protest call, marking a significant drop from 806,000 recorded on the first day of action on December 5.
- Industrial Production (%mom/yoy): 0.3/1.3 v 0.5/-0.1 in October and 0.1/0.4 forecast.
Iran – A missile strike is considered to have been the cause of the UIA Flight 752 crash, Canadian PM Justin Trudeau told reporters citing intelligence sources.
- “This may well have been unintentional,” Trudeau said.
- PM called for an international probe of the disaster.
- Meanwhile, Tehran granted access to Ukrainian investigators to the site and invited Boeing and the US accident investigation agency to help in the probe of the accident.
South Africa – Finance Minister Tito Mboweni warned the government that delays to necessary structural reforms risk the last-remaining investment grade credit rating.
- “If you cannot effect deep structural economic reforms, then game over… stay as you are and you are downgraded to Junk Status,” Mboweni wrote on his twitter account on Thursday.
- The rand is off 0.1% this morning trading at 14.26.
Congo – 2019 copper output up 16% as cobalt production falls by 18% (Reuters)
- Copper production in the DRC rose 15.9% yoy to 1.31mt in the first 11 months of 2019, according to central bank data.
- Cobalt production fell 18.3% in the same time to 82,000t.
- Gold output also fell 6.3% to 32,000kg.
Sudan opens up gold market in effort to raise revenue (Reuters)
- Sudan has begun allowing private traders to export gold in a bid to crack down on smuggling and attract foreign currency.
- Until now, Sudan’s central bank has been the sole body allowed to buy and export gold, however now private mining companies can export up to 70% of their production providing they deposit proceeds in local banks.
- Companies would also have to sell any foreign currency they earned directly to the central bank at the official exchange rate, currently 45 Sudanese pounds to the dollar. The black market rate is 88 pounds to the dollar.
- According to the Sudanese Mining Minister, the country produced 93t of gold in 2018, making it Africa’s third largest producer.
Currencies
US$1.1095/eur vs 1.1103/eur yesterday. Yen 109.61/$ vs 109.37/$. SAr 14.252/$ vs 14.132/$. $1.307/gbp vs $1.304/gbp. 0.687/aud vs 0.686/aud. CNY 6.923/$ vs 6.934/$.
Commodity News
Gold US$1,549/oz vs US$1,548/oz yesterday - Gold inches lower amid apparent de-escalation in the Middle East (Reuters)
- The price of gold fell earlier this morning, after declining as much as 1% in the previous session as tensions calmed and investors developed a risk-on sentiment.
- On Thursday, the US house of representatives passed a resolution to stop Trump from further military action against Iran.
- Meanwhile, Trump announced yesterday ahead of the trade meeting with China on the 15th of January that ‘a big deal with China’ could be signed ‘shortly thereafter’, further lessening the appetite for gold.
Gold ETFs 81.5moz vs US$81.6moz yesterday
Platinum US$973/oz vs US$956/oz yesterday
Palladium US$2,117/oz vs US$2,122/oz yesterday
Silver US$17.91/oz vs US$17.94/oz yesterday
Base metals:
Copper US$ 6,180/t vs US$6,183/t yesterday
Aluminium US$ 1,804/t vs US$1,799/t yesterday
Nickel US$ 14,130/t vs US$14,190/t yesterday
Zinc US$ 2,363/t vs US$2,392/t yesterday
Lead US$ 1,934/t vs US$1,917/t yesterday
Tin US$ 17,280/t vs US$17,250/t yesterday
Energy:
Oil US$65.1/bbl vs US$65.9/bbl yesterday - Oil Price News
- Oil prices continue to retreat from three-month highs as tensions between the US and Iran continue to ease following comments from Senior Iranian Commander Hajizadeh confirming that the aim of the missile strikes was to cause damage to US military architecture and not to target the lives of US servicemen
- Hajizadeh added that expelling US troops was the appropriate revenge for the killing of General Soleimani
- These comments have served to tone down the revenge rhetoric that came from top members of the Iranian regime and appear to have cooled the markets.
- The global inventory indicator reported a build of 50MMbbls of oil for Q418, while the last quarter came it at only 9MMbbls, indicating that the market is tighter on a fundamental with regards to the supply/demand dynamic
- Brent futures were down 0.7% to $66.3/bbl, whilst WTI futures were down 0.9% to US$60.2/bbl
Natural Gas US$2.150/mmbtu vs US$2.127/mmbtu yesterday - Gas Price News
- US natural gas prices remain steady despite a smaller than expected draw in natural gas inventories as reported by the Energy Information Administration yesterday
- The weather is expected to remain colder than normal in the west and warmer than normal in the east of the US during the next 6-10 days
- The 8-14 day forecast is showing cooler air moving into down from Canada which is the first sign of a ridge trough pattern that could take prices higher
Uranium US$24.50/lb vs US$24.665/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$92.1/t vs US$93.7/t
Chinese steel rebar 25mm US$569.1/t vs US$568.3/t -
Thermal coal (1st year forward cif ARA) US$64.9/t vs US$64.5/t
Coking coal futures Dalian Exchange US$181.1/t vs US$178.7/t
Other:
Cobalt LME 3m US$33,000/t vs US$31,750/t
NdPr Rare Earth Oxide (China) US$40,372/t vs US$40,306/t
Lithium carbonate 99% (China) US$5,561/t vs US$5,696/t
Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.5/kg
Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg
Tungsten APT European US$235-245/mtu vs US$235-245/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
Rocky Mountain Institute report reveals high cost of soft parts in EV infrastructure (Green Tech Media)
- Report clarifies costs for components and suggests how to reduce charging infrastructure costs.
- Level 2 commercial charger components cost between $2,500 and $7,210 and 50-KW DC fast chargers cost between $20,000 and $35,800.
- Suggested cost solutions include multiple charging points at the same site and geographical placement on a property.
Company News
Condor Gold* (CNR LN) 21.5p, Mkt Cap £20.4m – Condor appoints SP Angel as sole broker as company moves towards production and development of a potential 5moz gold district
- Condor Gold is working towards gold production of gold starting with the development of two high-grade gold pits at the La India gold project in Nicaragua.
- Production of 100,000ozpa is targeted from plant throughput of 2,800tpd with ability to expand to 120,000oz on the addition of two new satellite pits.
- AISC costs are estimated at US$690/oz.
- Capex currently estimated at US$110m for phase one for 79,300ozpa average gold production over 8 years on throughput of 800,000tpa.
- La India has already been granted an Environmental Permit for the development, construction and operation of a processing plant with capacity to process up to 2,800tpd with capacity to produce approximately 100,000ozpa.
- La India open pit reserves and resources:
- Probable reserve: 6.9mt grading 3.1 g/t for 675,000oz of gold
- Indicated resource: 9.85mt grading 3.6 g/t gold for 1.14moz gold
- Inferred resource: 8.5mt grading 4.3g/t gold for 1.23moz
- Underground:
- There is significant merit in the future development of an underground mine at La India
- The underground mineral resource is 1.27moz grading 5.8g/t for 238,000oz of gold in the inferred category.
- Expansion:
- The Condor team are also working on a PFS for the satellite America and Mestiza pits which contain around 200,000oz of gold grading ~10g/t.
- Bringing in material from the two pits could raise production to around 120,000ozpa over a seven-year period.
- Test work for the PFS at the two pits confirmed 91% gold recoveries while demonstrating amenability for CIL and CIP processing.
- Condor has submitted EIA and SIAs for permits for the two pits in November.
- Exploration:
- The team also continue to explore the La India gold project area with a view to adding another 1moz of gold to the resource.
- Management are hoping to prove up some 5moz of gold in the region over time within 588sqkm concession package.
- Condor recently agreed the sale of the Poterillos concession to Nicoz Resources for US$555,000 after tax.
- Condor Gold has appointed SP Angel as sole broker representing the company for investors.
Conclusion: Condor is working towards the financing and development of a substantial gold mine in Nicaragua. The team have permits for the first two pits and are likely to add look likely to add two more satellite pits to the mine plan in the near term. Our examination of the geology supports the companies view of further significant expansion potential to the gold resources in the region.
*SP Angel act as sole broker to Condor Gold
Mkango Resources* (MKA LN) 8.35p, Mkt Cap £11m – Mkango completes acquisition of 25% stake in Hypromag Rare Earth recycling
- Mkango Resources reports it has acquired a 25% interest in HyProMag Limited a private, UK-based REE recycling business for an initial £300,000
- Mkango can raise its stake to 49% for an investment of £1.1m.
- Mkango is supported by Talaxis a wholly-owned subsidiary of Noble Group Holdings Limited which has supported Mkango for some years now.
- HyProMag, developed at the the School of Metallurgy at the University of Birmingham builds on the work of Professor Rex Harris and others in the recycling of permanent magnets using the hydrogen decrepitation method.
- The process reduces NdFeB alloys to a powder, a process which is now used worldwide in magnet processing.
Conclusion: The acquisition looks to be a positive move in the future expansion of rare earth production at Mkango
*SP Angel act as Nomad and broker to Mkango Resources
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
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.
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Sources of commodity prices |
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Gold, Platinum, Palladium, Silver |
BGNL (Bloomberg Generic Composite rate, London) |
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Gold ETFs, Steel |
Bloomberg |
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Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt |
LME |
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Oil Brent |
ICE |
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Natural Gas, Uranium, Iron Ore |
NYMEX |
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Thermal Coal |
Bloomberg OTC Composite |
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Coking Coal |
DCE |
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RRE |
Steelhome |
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Lithium Carbonate, Ferro Vanadium, Antimony |
Asian Metal |
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Tungsten |
Metal Bulletin |
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