SP Angel . Morning View . Thursday 19 12 19
Zambia suspends export duty on gemstones
MiFID II exempt information – see disclaimer below
Aura Energy Limited* (AURA LN) – Seeking authority to delay EGM
Beowulf Mining* (BEM LN) – letter to Sweden minister for Enterprise and Innovation
Lucara Diamonds (LUC CN) – Positive news from December diamond tender
Premier African Minerals* (PREM LN) – Power supply to RHA
Zambia suspends 15% duty on gemstones (Reuters)
- The Zambian government has suspended a 15% export duty on gemstones, excluding diamonds, from the 1st of January 2020 according to South Africa’s Gemfields.
- According to the country’s finance minister, the suspension of the export duty was a concession to miners after the upfront tax had hurt output.
- The tax which was intended to raise more revenues instead undermined production, as Zambia attempts to deal with high levels of debt and low growth.
US - Wakanda removed from US Department of Agriculture list of countries with which the US has free trade agreements
- Wakanda is a fictional nation from the film Black Panther
- The USDA has not explained how Wakanda secured a free trade deal with the US
- We wonder if it was related to supplies of Vibranium, a critical material with the ability to absorb, store, and release large amounts of kinetic energy according to Marvel Comics!
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Dow Jones Industrials |
-0.10% |
at |
28,239 | |
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Nikkei 225 |
-0.29% |
at |
23,865 | |
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HK Hang Seng |
-0.30% |
at |
27,800 | |
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Shanghai Composite |
+0.00% |
at |
3,017 | |
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FTSE 350 Mining |
+0.35% |
at |
19,067 | |
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AIM Basic Resources |
+0.46% |
at |
2,042 |
Economics
US – President Trump was impeached by the house of Representatives for abuse of power and obstruction.
- This paves the way for the vote in the Senate with expectations for President to be acquitted.
- Markets were largely unchanged with S&P 500 closing flat on the day and gold trading in a tight range.
Automakers to pay $3bn in new US tariffs under USMCA (Reuters)
- Trump’s rewrite of North American trade rules will cost automakers nearly $3bn more in tariffs over the next decade for cars and parts, according to the Congressional Budget Office (CBO).
- The projection was contained in the cost estimate for the impeding legislation for the new US-Mexico-Canada agreement, which will be considered by the US House of Representatives on Thursday.
- USMCA will replace the North American Free Trade Agreement (NAFTA), and is expected to pass through the House.
- For autos to receive tariff-free access between the three countries, the USMCA imposes a 75% regional content requirement, up from 62.5% in NAFTA, along with new mandates to use North American steel and aluminium.
- Furthermore, 40-45% of vehicle content must come from areas paying over $16/h, namely the US and Canada.
Japan – The central bank left the monetary policy unchanged, in line with expectations, as the economic growth and inflation struggle to pick up.
- Near term outlook is being weighed down by the aftermath of typhoons and a sales-tax hike that are widely expected to see the economy contracting in Q4.
- Fiscal stimulus announced earlier should provide some support for economic outlook, although, market estimates growth rates to remain subdued through 2020.
UK – The pound is pulls back on weak November retail sales data reflecting subdued consumer spending in the run up to general elections.
- Retail Sales (%mom/yoy): -0.6/+0.8 v -0.1/2.7 in October and 0.4/2.0 forecast.
- Core Retail Sales (%mom/yoy): -0.6/+1.0 v 0.0/3.1 in October and 0.2/2.1 forecast.
Bank of England’s audio feed hacked of market-sensitive information
- According to the bank, one of its suppliers had ‘misused’ the feed, which is used as a fall back in case the video broadcast fails.
- This meant some traders had access to information between five and eight seconds early, allowing high-speed traders to gain an advantage.
- The BoE have referred the matter to the FCA, to investigate whether rules had been broken and trading had occurred on the basis of early information from the feed.
- According to The Times, the supplier hacked into the audio feed at least since the start of this year, and documents showed that the service had been sold on to high-speed trading companies.
- Clients were charged between £2,500 and £5,000 per press conference for access to the audio feed.
South Korea – The government cut its growth forecasts for this year and next reflecting slower global growth momentum amid a rise in protectionist policies.
- GDP is set to grow 2.0% and 2.4% in 2019 and 2020, respectively, marking a downgrade from 2.4-2.5% and 2.6% estimated previously.
- “The global economy is looking better than a month ago… we’re cautiously anticipating it will improve next year,” Finance Ministry said.
Sweden – Riksbank raised rates by 25bp in a widely anticipated move as the central bank ends nearly half a decade of subzero easing.
- While inflation has been around the 2% target since 2017, growth outlook remains fragile suggesting the raise is a one-off with rates to remain zero level for quite some time.
Currencies
US$1.1129/eur vs 1.1137/eur yesterday. Yen 109.57/$ vs 109.43/$. SAr 14.343/$ vs 14.385/$. $1.310/gbp vs $1.312/gbp. 0.687/aud vs 0.685/aud. CNY 7.009/$ vs 6.997/$.
Commodity News
Gold US$1,475/oz vs US$1,479/oz yesterday
Gold ETFs 81.1moz vs US$80.9moz yesterday
Platinum US$928/oz vs US$931/oz yesterday
Palladium US$1,931/oz vs US$1,939/oz yesterday
Silver US$16.95/oz vs US$17.05/oz yesterday
Base metals:
Copper US$ 6,172/t vs US$6,157/t yesterday
Aluminium US$ 1,781/t vs US$1,770/t yesterday
Nickel US$ 14,110/t vs US$13,860/t yesterday
Zinc US$ 2,323/t vs US$2,307/t yesterday
Lead US$ 1,934/t vs US$1,888/t yesterday
Tin US$ 17,245/t vs US$17,270/t yesterday
Energy:
Oil & Gas - M&A activity builds momentum across the sector
- UK oil and gas continues to thrive this quarter, demonstrated by the recent £5m Union Jack* (UJO LN) placing which follows Reabold Resources’ (RBD LN) £24m fundraise announced in October, primarily for the same West Newton conventional field onshore UK
- Further institutional support has been demonstrated by the £10m raise and IPO of Longboat Energy, or Faroe Petroleum mark II, to build a new full-cycle North Sea E&P
- The past 12 months has seen the acquisition of Faroe Petroleum (FPM LN) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA LN) by Seplat Petroleum (SEPL LN); and a £242m bid for Amerisur Resources (AMER LN) by Geopark
- See our take on 2020’s outlook at: https://www.proactiveinvestors.co.uk/companies/news/909122/sp-angel-s-sam-wahab-discusses-hurricane-energy-eco-atlantic-tullow-and-union-jack-oil-909122.html
*SP Angel acts as Nominated Advisor and Broker to Union Jack Oil
Oil US$66.1/bbl vs US$65.7/bbl yesterday –
- Oil prices continue their upward trend given that pressure is easing between Washington and Beijing and the latter’s record-breaking oil imports.
- Brent and WTI have both been on a cautious rise for the past four weeks
- During that period, OPEC+ agreed to deepen its production cuts by 500,000bopd, China continued importing crude at record-breaking rates, and US industrial production rebounded in November
- Even Trump’s impeachment couldn’t dampen spirits moving into today’s trading session
- Brent futures were up 0.3% to $65.8/bbl, whilst WTI futures were up 0.1% to US$60.0/bbl
Natural Gas US$2.274/mmbtu vs US$2.298/mmbtu yesterday
- Natural gas prices moved lower yesterday ahead of today’s inventory report from the Department of Energy
- Expectations are for a 79Bcd draw in stockpiles according to survey provider Estimize
- While the weather is expected to be colder than normal in the eastern cities of the US this week, the forecast over the next 6-10 days and 8-14 days shows that the weather will likely have a negative impact on prices
- Supply is seen flat during the past week, according to the Energy Information Administration
Uranium US$25.45/lb vs US$25.45/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$91.5/t vs US$91.9/t - Iron ore leads Australia’s record A$281bn mining exports (Australian Financial Review)
- Resource and energy earnings are forecast to reach a record $281bn this year, according to the government’s official resources and energy forecaster.
- However, record highs driven by iron ore, LNG and coal are set to ease back next financial year, which would hit nominal GDP.
- The overall mining sector accounts for 9.5% of Australia’s $1.8tn GDP, and in September accounted for over a third of the growth in the country’s GDP.
Chinese steel rebar 25mm US$570.5/t vs US$573.6/t
Thermal coal (1st year forward cif ARA) US$58.9/t vs US$59.3/t
Coking coal futures Dalian Exchange US$178.1/t vs US$177.7/t
Other:
Cobalt LME 3m US$32,750/t vs US$32,750/t
NdPr Rare Earth Oxide (China) US$41,307/t vs US$41,378/t
Lithium carbonate 99% (China) US$5,921/t vs US$5,932/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
Tesla’s stock (TSLA) hits all-time high (Electrek)
- Tesla’s stock closed at $393/s yesterday, as the automaker pushes for a record quarter.
- TSLA was up 3% yesterday, up 11% in the last five days, and 73% over the last six months.
- According to Electrek, the automaker is in a massive ‘end of quarter delivery push’.
- Delivery centres in the US where the federal tax credit for Tesla Vehicles is ending, are delivering cars at an extremely high rate.
- Tesla’s third quarter deliveries only just missed the companies 100,000 deliveries milestone (FT), however this end of year push could see Q4 results achieving that.
Company News
Aura Energy Limited* (AURA LN) 0.275p, Mkt Cap £3.6m – Seeking authority to delay EGM
- Aura Energy reports that it is seeking the authority of Australia’s regulator, ASIC (Australian Securities and Investments Commission) to delay the general meeting scheduled for 6th January to consider the appointment of Mr. John Bennett as a non-executive director.
- The company says that it “has determined that the election will, at this time, create an unmanageable conflict of interest over the entire affairs of the Company. In such circumstances, the board has concluded that it is inappropriate for shareholders to consider a resolution for the appointment of Mr Bennett as a non-executive director of the Company when the entity in which he is the principal is subject to an action for damages by the Company”.
- Mr. Bennett has been nominated by Pre-Emptive Trading (PET) which owns/ed approximately 5.9% of the company, however, Aura Energy points out that PET has failed “to respond to two Letters of Demand for payment of Subscription Deed monies totalling $456,000” and is subject of “a Writ in the Supreme Court of Victoria by the Company to recover damages from PET for its failure to complete its obligations under the Subscription Deed.”
- Aura Energy also questions whether Mr. Bennett has “appropriate experience … as a director of a listed entity and work experiences in exploration, project development and mining operations and diverse geo-political environments.”
- Executive Chairman, Peter Reeve, said that “The Board of Directors of Aura has continued to act and deliberate on this difficult issue in good faith and in the best interests of the Company. The Board continues to see the proper resolution of this matter, in the interests of all shareholders, as extremely important to Aura’s future as a producer and developer of mineral projects.”
Conclusion: The timing of the EGM now awaits the ruling of ASIC.
*SP Angel act as Nomad & Broker to Aura Energy
Beowulf Mining* (BEM LN) 5p, Mkt Cap £30m – letter to Sweden minister for Enterprise and Innovation
(Beowulf holds 41.5% of Vadar. Beowulf also holds 100% Kallak iron ore in Sweden, 100% of Aitolampi graphite in Finland and 40% of the Mitrovica and Viti projects in Kosovo)
- Beowulf has written again to Mr. Ibrahim Baylan, the Minister of Enterprise and Innovation.
- The letter states that two and half months have passed without any new information on what is happening, since the Minister wrote in his letter, dated 30 September 2019, that a decision by the Government on Beowulf's application was 'forthcoming'.
- It seems evident that the coalition Government has been struggling to reach consensus on Kallak and that politics are standing in the way of a decision being taken.
- The government claims that Swedish law is sufficient for assessing the Kallak application and that any assessment of Kallak should be 'by the book'.
- Beowulf submitted a concluding statement for Kallak to the Government on 8 November 2019, prepared by the law firms Mannheimer Swartling and Fröberg & Lundholm, which should have been sufficient for the issue of the mining license according to the legal process.
- The statement summarised all circumstances relevant to a judicial review of whether the Company should be awarded the Exploitation Concession for Kallak. The statement demonstrates that the Government has sufficient facts for an Exploitation Concession to be awarded.
- Beowulf also notes that Aura Energy* is seeking compensation over the uranium ban introduced in Sweden on 1 August 2018 and the financial loss to Aura resulting from this decision.
- The Aura case is another example of the goalposts being moved after a company has made a significant investment in developing a mineral project.
Conclusion: If Sweden does not issue a mining license for Kallak or offer sufficient explanation as to why it is not approving the license then Sweden will look increasingly like a no-go-zone for international mining companies looking to operate in the area.
*SP Angel acts as nomad and broker to Beowulf Mining.
Lucara Diamonds (LUC CN) C$0.79, Mkt Cap C$313.5m – Positive news from December diamond tender
- Lucara Diamonds reports that its December diamond tender exceeded its expectations generating “sales proceeds of US$52.9 million, 16% higher than expected”.
- The company says that “Market pricing improvements were noted in all size classes”.
- CEO, Eira Thomas said that “Though it is too early to call a trend, prices achieved in our final sale of the year reflect a stronger, more stabilized market environment and continued strong demand for Karowe diamonds”.
- Ms. Thomas also explained that Lucara “remains well positioned and highly levered towards further strengthening in diamond prices over the next 12-24 months”.
- The news from Lucara comes the day after De Beers announced improvements in sales at its 10th sales sight of the year and also commented that it was seeing signs of “steady demand for rough diamonds”.
Conclusion: Lucara’s more optimistic view of the rough diamond market echoes similar views expressed by De Beers yesterday.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Premier African Minerals* (PREM LN) 0.085p, Mkt Cap £9.6m – Power supply to RHA
- Premier African Minerals reported yesterday that the Zimbabwe Electricity Supply Authority (ZESA) has provided a temporary transformer and associated equipment allowing the supply of grid power to its 49% RHA tungsten project.
- Although the installation of a permanent transformer and switchgear has yet to be achieved, “The overall effect of the [temporary arrangement outlined] above is that RHA will have access to electricity to power all facets of the operations from early January 2020.”
- Commenting on the news, CEO, George Roach, said that the availability of grid power “will significantly reduce operating expenditure and generally further de-risk planned return to production.”
Conclusion: The company expects that access to grid power at RHA will benefit operating costs as it works to return the mine to production.
*SP Angel have an agreement with Premier African Minerals as a result of the acquisition of Northland Capital Partners
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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