SP Angel . Morning View . Wednesday 17 06 20
Gold ticks higher on Second wave fears and increasing stimulus
Equities steady in volatile markets as investors reshuffle portfolios
MiFID II exempt information – see disclaimer below
Altus Strategies* (ALS LN) – Graphex Mining replaces Glomin in the Lakanfla and Tabakorole JV
BHP (BHP LN) – CFO appointment
Metal Tiger (MTR LN) – Encouraging results from drilling in S Korea
Bluejay Mining* (JAY LN) – Bluejay steps closer to mining license approval in Greenland
Congo - Mining provinces impose new Covid-19 lockdowns
- Authorities in the Congo's southeast have announced temporary lockdowns on Tuesday in an effort to widen coronavirus testing and prevent further spread of the virus.
- A new 48-hour lockdown will come into force in the Haut-Katanga province over the coming weekend.
- In the neighbouring Lualaba province, passenger traffic will be suspended between the 18th-22nd of June.
AstraZeneca report their potential coronavirus vaccine is likely to provide protection against contracting COVID-19 for about a year
- AstraZeneca has started human trials of the vaccine developed by the University of Oxford. The phase I trial is due to end soon and a phase III has already started.
- The company has signed contracts with the UK, US, France, Germany, Italy and the Netherlands to supply the European Union with up to 400m doses.
- Results of the clinical trials are due in August/September with manufacturing running in parallel to enable October delivery of vaccines if all goes well.
UK – MP calls on government to create £15bn recovery fund for investment into Small and Medium Sized companies ‘SMEs’ (Investment Week)
- Bim Afolami, MP for Hitchin and Harpenden and formerly at HSBC is calling for a £15bn recovery fund to allocate to FCA-regulated fund managers
- The fund would be to invest in ‘SMEs’ and we suspect this investment would attract further funds into the market to the benefit of the underlying stocks within it.
- While this looks like a good idea and many fund managers are well paced to manage the money the rules of many Investment Management groups might preclude their investment into the SMEs which most need the funds for recovery.
Stimulus
- $304bn - China Ministry of Finance has issued Rmb550bn (US$77bn) of special purpose debt
- + another Rmb1,600bn (US$226bn) is available for issue before the year end. Much of this will be for housing and connecting infrastructure
- $140bn - China PBOC buying CNY1tn of bank loans issued by local lenders to small firms this week in an effort to ease the flow of credit.
- $56bn - The PBOC also announced a Rmb400bn ($56bn) purchase loan program to boost available credit by supporting bank loans to small businesses.
- $1.55tn – China - Bloomberg estimates a ‘fiscal impulse of more than 11% of nominal GDP’ which was estimated at US$14.14tn
- We have previously assumed China at $909m comprised $344bn of China stimulus + $565bn in special bonds for infrastructure by local authorities
- $2tn - US fiscal package approved by Congress. US may add $0.6t state aid for mortgage markets and travel industries
- The House passed a $484bn aid package to rescue small small businesses, hospitals ($75bn) and coronavirus testing ($25bn).
- $2tn US – Trump looking at $2tn infrastructure fund
- $700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE to buy Treasuries and mortgage-backed securities.
- US Fed may soon start buying in up to $750 billion of corporate debt and ETFs
- US Fed has flooded all markets with dollar liquidity through repo and swap lines.
- US$1.02tn - Japan - BoJ injecting US$1.02tn into the economy through a variety of programmes. (will check if this is in addition to the Y117tn stimulus announced)
- US$1.1tn - 117tn-yen stimulus, funded partly by a second extra budget, will be on top of another 117tn package already rolled out takes total spending in Japan at 234tn yen ($2.18tr) - 40% of Japans GDP. Japan to issue Y31.9tn in government bonds.
- $825bn (€750bn) EU - European Commission aid package yesterday aimed at supporting EU nations hit by the pandemic.
- This is an expansion on the previous $543bn (€500bn ) EU Crisis Recovery fund backed France and Germany + $963bn (€750bn) ECB scraps limits on sovereign bond purchases. ECB PEPP buying running at around €250bn
- EU Finance Ministers have so far failed to agree on a strategy to mitigate the economic impact of the pandemic.
- The pandemic emergency purchase programme (PEPP) and asset purchase programme (APP) have been reiterated with a cap of €750bn and €120bn, respectively.
- The bank is reported to have used €100bn of the PEPP so far.
- $825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
- $298bn Japan parliament passed ¥31.9tn ($298bn) second extra budget today to help struggling economy.
- The package includes aid for struggling companies, payroll subsidies and aid to the medical system.
- The nation is setting aside ¥10tn as a coronavirus reserve fund to be used to address needs such as a potential second wave of infections.
- The budget will help fund a ¥117tn stimulus programme unveiled last month doubling the scale of nation’s virus response.
- $996bn (108.2tn yen) – Japan + BoJ pledge for unlimited quantitative easing
- 400bn (£330bn) UK + $242bn (£200bn) UK QE from BoE & no business rates plus £25,000 cash grants for hospitality sector
- $387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia - RBA ready to buy bonds again.
- US$260bn - India representing 10% of GDP.
- $62bn - South Korea – The government unveiled a 76tn won ($62bn) “New Deal” aimed at supporting the economy amid the pandemic focused on creating jobs and new industries through 2025. South Korea - New Deal will create jobs and foster new industries like 5G.
- $13.3bn - Saudi Arabia central bank will inject 50bn riyals ($13.3bn) into the banking system on top of US$43.7bn already pledged
- $78bn (C$107bn) Canada, $32bn, Singapore, $22.6bn India, $19.3bn HK, $13.7bn South Korea, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, Philippines further $26bn proposed, Indonesia - adding $43bn, Thailand creating a corporate bond fund.
- South African buys ZAR10.2bn (US$119m) government bonds in May. Argentina to default on $10bn of dollar debt issued till the end of the year.
- $1,000bn - IMF available + $12bn World Bank,
>15.3tn from 15tn - Total stimulus reported. Figures may include some political double counting and some funds may not be spent
Recent interviews:
Gold sector interview with interactive investor
IG TV interview on Mining Sector prospects with SP Angel analyst.
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Dow Jones Industrials |
+2.04% |
at |
26,290 | |
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Nikkei 225 |
-0.56% |
at |
22,456 | |
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HK Hang Seng |
+0.35% |
at |
24,428 | |
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Shanghai Composite |
+0.14% |
at |
2,362 |
Economics
Japan - BoJ injecting US$1.02tn into the economy through a variety of programmes.
Exports fall 28.3% in May vs -17.9% expected and -21.9% last
- The sharp drop in exports marked the 18th consecutive month of decline and the steepest annual fall since September 2009.
- Imports fell 26.2% vs -12.9% expected and -7.1% from the previous month- the 13th consecutive monthly fall.
- As a result, the country recorded a merchandise trade deficit of JPY833.40bn in May vs -970bn expected and -931.9bn last.
China - Industrial production rose 4.4% in May yoy vs 3.9% in April
- Retail sales are recovering and are just 2.8% yoy in May vs -7.5% in April,
- Fixed asset investment ex rural was -6.3% yoy in May ytd vs -10.3% ytd in April,
- House prices rose 4.9% yoy in May vs 5.1% in April.
US - Fed indicates it will buy corporate debt as part of a ‘broad, diversified market index’ rather than just ETF instruments.
- The Fed chair said profound economic uncertainties remain.
- The comments caused the US dollar to fall though equities recovered strogly.
Retail sales rebound 17.7% in May vs -14.7% in April as consumers resume spending
- US retail sales rebounded in May as states gradually reopened economies following the pandemic lockdown.
- The rebound was the biggest monthly gain on record surpassing the October 2001 reading of 6.7% and followed a decline of 14.7% in the previous month.
- Sales of clothing, accessories, electronics, sporting goods, home furniture and motor vehicles all surged.
- Despite the monthly surge retail sales were down 6.1% from the same period a year ago.
- US NY Empire State manufacturing index recovered to -20 in June vs -48.5 in May
- Retail sales are -6.1% lower yoy vs -19.9% yoy last month
- Retail sales rose when disastrous autos are excluded ex auto to 12.4% in May vs -15.2% the previous month
- Industrial production rose 1.4% in May vs -11.2% in April, yoy -15.3% and -15.0%,
- Manufacturing production rose 3.8% in May vs -13.7% in April, yoy -16.5% (-18.0%) and
- Capacity utilisation 64.8% in May vs 64.9% in April
- Business inventories fell 1.3% in April vs -0.2% in March
- NAHD house price index recovered to 58 in June vs 37
Europe - trade surplus was €2.9bn in April vs €15.5bn yoy
- Imports fell 24%
- exports fell 29.3%.
- Jne ZEW economic sentiment index 58.6 (46.0)
German - ZEW sentiment index recovered to 63.4 in June vs 51.0
UK - Inflation rate slows to 0.5% in May
- A record fall in fuel prices pushed the UK's inflation rate down to 0.5% from 0.8% in April, the lowest rate in four years.
- Petrol and diesel dropped by a record 16.7% in May after oil prices slumped dramatically.
- April unemployment came in unchanged at 3.9% which looks like a great result considering the environment
- job seekers allowance payments rose 528k in May vs Apr 1mill
- company payrolls fell 2.1% or 612k
Russia - New coronavirus cases at lowest since 30th of April
- Russia reported 7,843 new cases of Covid-19 on Wednesday, the lowest daily register since the 30th of April.
- The government say 194 people have died in the last 24 hours, bringing the official death toll to 7,478.
Turkey – Sovereign wealth fund buys around 20 precious metals mines (seenews.com)
- Turkey’s Sovereign wealth fund is reported to have bought nearly 20 precious metals mines as part of a plan to establish a large metal holding company.
- The Turkey Wealth Fund ‘TWF’ is also looking to develop its own projects to reduce the cost of commodity imports.
- The ‘TWF’ fund is also looking at developing a coal mine
- The fund bought up all six public insurance companies for US$963m in April as part of a finance ministry plan to consolidate all public insurance companies.
Currencies
US$1.1289/eur vs 1.1335/eur yesterday. Yen 107.33/$ vs 107.36/$. SAr 17.167/$ vs 17.085/$. $1.258/gbp vs $1.263/gbp. 0.690/aud vs 0.692/aud. CNY 7.088/$ vs 7.079/$.
Commodity News
Precious metals:
Gold US$1,728/oz vs US$1,725/oz yesterday – Gold steadies on virus concerns and positive US data
- Gold prices held steady on Wednesday morning as concerns over a fresh coronavirus outbreak in China countered a surge in equities driven by a record rise in US retail sales.
- Beijing reported further Covid-19 cases yesterday, making this the worst outbreak in the Chinese capital since early February.
- Comments from the Fed Chairman Jerome Powell also supported the gold price, as he stressed the uncertain future for the US economy with lingering concerns over further coronavirus outbreaks, as well as escalating geopolitical tensions (Blomberg).
- Limiting golds appeal, US retail sales jumped a record 17.7% in May- significantly better than the 8% increase analysts expected.
- Spot gold and US gold futures were both flat this morning at $1,727/oz and $1,737/oz respectively (Reuters).
Gold ETFs 100.9moz vs US$100.9moz yesterday
Platinum US$820/oz vs US$822/oz yesterday
Palladium US$1,926/oz vs US$1,957/oz yesterday
Silver US$17.43/oz vs US$17.35/oz yesterday
Base metals:
Shanghai Futures Exchange to begin trading aluminium and zinc options
- The SHFE will start trading the options from the 10th of August, after receiving approval from the China Security Regulatory Commission last week (Fastmarkets MB).
Copper US$ 5,757/t vs US$5,794/t yesterday
Aluminium US$ 1,599/t vs US$1,598/t yesterday
Nickel US$ 12,995/t vs US$12,930/t yesterday
Zinc US$ 2,026/t vs US$2,014/t yesterday
Lead US$ 1,778/t vs US$1,760/t yesterday
Tin US$ 16,855/t vs US$16,975/t yesterday - World largest tin producer sees refined sales fall 18.8% YoY
- Indonesian producer PT Timah is targetting refined tin sales of around 55,000 tonnes in 2020 compared with 2019 sales of 67,704 tonnes according to company data.
Energy:
Oil US$40.6/bbl vs US$39.8/bbl yesterday
- Oil prices continue their steady rise as the FTSE and NYSE saw healthy gains and the International Energy Agency (IEA) increased its oil demand forecast for 2020
- However, gains appear to be capped by worries about a second wave of coronavirus cases
- Brent crude futures are up 59 cents, or 1.5%, to US$40.31/bbl at the time of writing, whilst WTI is up 51 cents, or 1.4% to US$37.63/bbl
- Oil prices were bolstered as US stocks opened higher yesterday after a record increase in May retail sales across Europe and the US revived hopes of a swift post-pandemic economic rebound, with sentiment also lifted by data showing reduced COVID-19 death rates in a trial of a generic steroid drug.
- In its monthly report, the IEA forecast oil demand at 91.7MMbopd in 2020, 500,000bopd higher than its estimate in May's report, citing higher than expected consumption during coronavirus lockdowns
Natural Gas US$1.620/mmbtu vs US$1.674/mmbtu yesterday
- Natural gas prices declined by nearly 3% as industrial production rose less than expected
- The EIA estimates that total US working natural gas in storage ended May at almost 2.8Tcf, 18% more than the five-year average
- Inventories are expected to rise by 85Bcf on Thursday when the Energy Department releases its estimates according to survey provider Estimize
Uranium US$33.15/lb vs US$33.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$102.3/t vs US$100.5/t
Chinese steel rebar 25mm US$527.8/t vs US$527.2/t - Japan's April steel orders fall 28.9% YoY to 4.1mt
- Construction steel orders fell 19.7% to 734,000 tonnes.
- Manufacturing steel orders fell 36.5% to 1.05mt.
- Steel dealer's orders fell 21.6% to 853,000 tonnes.
- Domestic orders fell 27.8% to 2.6mt.
- Exports fell 31.6% to 1.4mt.
Thermal coal (1st year forward cif ARA) US$54.0/t vs US$53.9/t
Coking coal swap Australia FOB US$114.5/t vs US$114.5/t
Other:
Cobalt LME 3m US$29,000/t vs US$29,000/t
NdPr Rare Earth Oxide (China) US$40,423/t vs US$40,654/t
Lithium carbonate 99% (China) US$4,868/t vs US$4,862/t
Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.5/kg
Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/kg
Tungsten APT European US$215-225/mtu vs US$215-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$460/t vs US$460/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,350/t vs US$2,350/t
Battery News
Tesla signs pricing deal with Panasonic
- Tesla has inked a 3-yr pricing deal with Japanese firm Panasonic for the supply of lithium ion battery cells. (Reuters)
- The deal signed last week is effective from April 1, 2020, formalizes the production capacity commitments of Panasonic and purchase volume commitments of Tesla.
- The requirements cover the first two years of the agreement which has been amended to expire 10yrs after Panasonic achieves certain manufacturing milestones.
- The battery venture at the Nevada Gigafactory between the pair made a quarterly profit for the first time in Q3’19. (Financial Times)
- The relationship has at times been strained, earlier this year the Panasonic halted working on solar cells at Gigafactory 2, part of their streamlining of global operations. (techcrunch)
Volkswagen invests $200m into solid state batteries
- VW is investing a further $200m into QuantumScape, increasing its stake in the company. (techcrunch)
- The additional investment will be used to expedite the work undertaken as part of the JV penned in 2018.
- QuantumScape is a Stanford University spin out developing solid state batteries. VW has been involved with the firm since 2012.
- The pair have been working together in a JV since 2018, looking to accelerate solid state technology towards commercial viability. In 2018 VW invested $100m.
- Plans for a pilot plant are expected to become concrete later this year. (Reuters)
CATL tops table in EV battery deployment for April
- CATL produced the most MWh of batteries in April, topping the charts at 1896MWh and 34.9% share. (The Korean Herald)
- LG Chem were a distant second at 988.1MWh and 18.2% share. Panasonic and BYD are in a close battle for 3rd with 13.4% and 10.2% share, respectively.
- The rest of the field including SK Innovation and Samsung SDI is some way behind, producing 189.1MWh and 187.2MWh, respectively.
- Volumes were down on April 2019 as battery makers have been hit by pandemic shutdowns and a lack of demand in 2020.
- Growth contracted as much as 67.1% for BYD and 68.4% for Guoxuan. CATL saw growth reduce 25.6% on the same time last year. LG Chem has weathered the storm, seeing 6.9% growth from the same time last year.
Company News
Altus Strategies* (ALS LN) XXp, Mkt Cap £XXm – Graphex Mining replaces Glomin in the Lakanfla and Tabakorole JV
- Graphex Mining acquired the JV earn-in rights previously held by Glomin Services with regards to Altus’ 100% owned Lakanfla and Tabakorole gold projects, located in western and southern Mali.
- The Graphex JV is largely based on the commercial terms as those previously agreed with Glomin with Graphex having an option to earn up to 80% in the each project by completing DFS.
- Glomin is expected to get shares in Graphex for selling its JV interest.
- Altus to retain 2.5% NSR royalty on both projects.
- Graphex has currently appointed Andrew Pardey, former CEO of Centamin, to the Board as a non-executive director and will be looking to raise A$5m through an equity placement.
- Graphex is also planning to change its name to Marvel Gold.
- The 1,600m diamond drilling programme funded by JV and focused on the 2.7km long FT prospect as well as a potential 200m northwest extension defined by recent ground magnetics and AC drilling is underway.
Conclusion: The Company welcomes new JV partner at Lakanfla and Tabakorole gold projects and highlights the new partner’s operating experience, technical skills and shareholder support to deliver on the exploration programme with drilling currently underway.
*SP Angel acts as Nomad and Broker to Altus Strategies
BHP (BHP LN) –1,650p, £34.8bn CFO appointment
- BHP has announced the appointment of David Lamont as Chief Financial Officer to replace Peter Beaven who will leave the company in early 2021. Mr. Beaven is to remain in post until 30th November and will be available to support Mr. Lamont during the interval until his departure early next year.
- ʺMr Lamont holds a Bachelor of Commerce degree, is a qualified Chartered Accountant and is a member of the Institute of Chartered Accountants (Australia) and a Director of Financial Executives Institute of Australia.ʺ His previous experience includes director level appointments with a number of Australian and international public companies including the ASX-listed global biotech company CSL Limited and mining company OZ Minerals.
- Chief Executive, Mike Henry, thanked Mr. Beaven ʺfor both the significant contribution he has made to BHP and the support and friendship he has shown me over many years. His leadership, passion for continuous improvement and strategic approach have made BHP safer, more sustainable and more valuable.ʺ
- Welcoming Mr. Lamont, Mr. Henry said ʺDavid has built a strong track record of financial management with publicly traded multinational organisations over many years. He will bring broad global experience across a diverse range of industries, including mining, deep financial knowledge and a clear focus on delivering strong results for the company and shareholders. I welcome David to BHP and look forward to him joining the team."
Metal Tiger (MTR LN) 2.18p, Mkt Cap £32.7m – Encouraging results from drilling in S Korea
- Metal Tiger draws attention to the ASX release made by Southern Gold https://www.asx.com.au/asxpdf/20200617/pdf/44jq46chvblcs3.pdf concerning recent drilling at the Aphae project in South Korea. Metal Tiger owns a 17.1% interest in Southern Gold.
- A total of 506.4m in three holes was drilled at the Aphae prospect and ʺmineralised breccia … has been intersected in all three planned holes … including a wider than anticipated intercept in the third hole and prompting a fourth drill hole to test the down-dip depth extent of the breccia. Assays from the Aphae programme are pending.ʺ
- At Southern Gold’s other projects, four holes drilled at Beopseongpo intersected ʺSignificant quantities of low sulphidation epithermal multi-phase veining … in all holes, with several elevated gold assays received. Further testing however has confirmed that economic grades of gold and silver were not presentʺ.
- ʺSouthern Gold has also confirmed that scout drilling is ongoing at Shin Hill, Deokon Project, which is planned to test down-dip of well-focused vein and lode mineralisation observed in the Shin Adit historical underground workings. A more detailed update is expected be provided on this programme in late August.ʺ
- Metal Tiger’s CEO, Michael McNeilly, commented that ʺToday’s results from Southern Gold’s Aphae project are very encouraging and suggest a larger potential to the North of the project, surpassing expectationsʺ
- Also commenting on the results at Aphae, Southern Gold’s Managing Director, Simon Mitchell, said ʺwe have been pleasantly surprised by the extent of the mineralised breccia we have seen in drill core at Aphae, particularly in APDD003. That’s the nature of mineral exploration: prepare to be surprised!ʺ
Conclusion: Wider than expected mineralised intervals from initial drilling at Aphae are encouraging but assay results are still pending we look forward to these and to the results from the fourth hole currently underway.
Bluejay Mining* (JAY LN) – 6.4p, Mkt Cap £62m - Bluejay steps closer to mining license approval in Greenland
- Bluejay Mining report the company has been advised by the Ministry of Mineral Resources in Greenland that the Dundas Public Consultation Process will be tabled at this week's ministerial meeting to be held on Thursday 18th June 2020.
- Management have been in discussion with Greenland Ministries to finding an alternative method of handling and delivering the Public Consultation process in light of COVID-19.
- ‘Once the Stakeholder Consultation process is complete, usually within an 8-week period, all responses inclusive of company comments to each point raised are compiled into a White Book prior to presentation to the Governmental for decision on awarding an exploitation licence for Dundas.’
- ‘The company is also required to complete an Impact Benefit Agreement with the local municipality on the development, which it has been advancing for some time.’
*SP Angel act as Nomad to Bluejay Mining. The SP Angel analyst holds shares in Bluejay Mining
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 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 |
SSY |
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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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SP Angel
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This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. S P Angel Corporate Finance LLP does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.
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