SP Angel . Morning View . Wednesday 09 12 20
White House aid package proposal lifts equities
Elkem ASA (LON:ELK) NOK28.49, Mkt cap NOK16.25bn – Manufacturing advanced synthetic graphite anode materials
Phoenix Copper* (LON:PXC) 41.5p, Mkt Cap £25.6m – Empire Mine operational update
QuantumScape Corp (NYSE:QS) US$73.05, Mkt cap US$1.7bn – QuantumScape announce breakthrough in Solid state battery technology with 15min fast charge
Rambler Metals and Mining* (LON:RMM) 0.24p, Mkt Cap £19.5m – Completion of US$13.25m fund raising and restructuring
Vast Resources* (LON:VAST) 0.14p, Mkt Cap £24m – £4.8m equity raise
EU to introduce to recycling targets from 2030
EU Commissioner for Environment, Oceans and Fisheries told the Financial Times that the bloc will crack down on hazardous materials and propose battery material recycling targets.
Both EU and non-EU manufacturers hoping to sell their batteries into the single market will have to follow the tougher standards.
The legislation would force manufacturers to disclose the recycled content in their batteries to meet targets in 2030 and 2035. Those targets are yet to be set.
The EU is reportedly targeting 30m zero-emissions vehicles on its roads by 2030.
Bottlenecks in the lithium supply chain will likely mean that to reach these targets recycled materials will have to be used in some capacity given the lead times to build additional lithium capacity from mine to Gigafactory can be close to 10yrs.
China – the big winner in the COVID-Consumer-product war as it ships record numbers of products to the west to help people work from home
While we love a good conspiracy theory, we are interested in the coincidental ability of Chinese manufacturers to take advantage of the COVID WFH situation.
Total pledged stimulus to rise to >US$20tn if US comes through with new $2tn infrastructure fund
The US may add US$2.9tn to Japan’s recent $0.7tn with Joe Biden looking to push through a $2tn infrastructure fund
US – Bipartisan politicians also pressing for a $905bn emergency stimulus package
Japan – $708bn first fiscal stimulus package of new government
ECB – the market is waiting for news on ECB stimulus this month before Christmas
The ECB has a Eur1.35tn Pandemic Emergency Purchase Programme is due to run till June. We do not include the €1.1tn EU budget for 2021-27 as stimulus
IMF Credit Lines are adding to global stimulus, serving to stabilise credit markets and the global financial system through the crisis
+ former $825bn (€750bn) EU – European Commission aid package yesterday aimed at supporting EU nations hit by the pandemic which was itself an expansion on the previous $543bn (€500bn ) EU Crisis Recovery fund backed France and Germany + $963bn (€750bn)
ECB scraped limits on sovereign bond purchases. ECB PEPP buying running at around €250bn
The pandemic emergency purchase programme ‘PEPP’ and asset purchase programme ‘APP’ are capped at €750bn and €120bn.
$304bn – China Ministry of Finance Rmb550bn (US$77bn) of special purpose debt + Rmb1,600bn (US$226bn) available for issue before year end.
$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 SMEs
$1.55tn – China, Bloomberg estimates ‘fiscal impulse of more than 11% of nominal GDP’ ~US$14.14tn
We 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.
$298bn Japan parliament passed ¥31.9tn ($298bn) second extra budget today to help struggling economy.
¥117tn stimulus programme + ¥10tn as a coronavirus reserve fund
$825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
$934bn (£745bn) – UK Bank of England injects another £100bn ($125bn)
$387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia – RBA ready to buy bonds again.
US$260bn – India representing 10% of GDP.
€105bn – Italy announced a further €25bn yesterday in a third package taking the total to €105bn.
$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, $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.
$438m Zambia – Government approves $438m stimulus package
$1,000bn – IMF available + $12bn World Bank,
$20tn of total stimulus expected including $2.9bn to come from the US
*Figures may include some political double counting and we suspect some funds may not be spent
IGTV: Copper price rise: https://youtu.be/mdPXTup15VY
VOX – 25/11/20: https://www.voxmarkets.co.uk/media/5fc0b908bc74c922485f4fb0/?context=/listings/LON/EEE/multimedia/
US Election, China growth policies Solgold*, Mkango*, Rainbow Rare Earths*: https://youtu.be/YKk5-kVpVGE
EV revolution, gold and other ideas (Interactive Investor): https://www.youtube.com/watch?v=ja0IdjszfCc
Metals Markets: Are they totally dependent on stimulus? (IG TV): https://youtu.be/TOiSwRpgfKM
*SP Angel act as nomad or broker or nomad and broker to companies mentioned in the above videos.
Dow Jones Industrials +0.35% at 30,174
Nikkei 225 +1.33% at 26,818
HK Hang Seng +0.75% at 26,503
Shanghai Composite -1.12% at 3,372
Economics
US – The administration suggested a $916bn coronavirus aid package yesterday addressing issues previously raised by the Senate’s Republican Majority Leader Mitch McConnell, Reuters reports.
The package would include money for state and local government which is a Democratic priority and liability protections for businesses, a Republican priority.
Earlier on Tuesday, McConnell suggested that lawmakers pass a relief plan that did not include both of those points as those have been among the contentious provision during months of arguments in Washington.
China – Inflation dipped in the negative territory in November reflecting falling pork prices as supply recovered after last year’s swine disease.
For this reason the slump is considered temporary and is unlikely to see the central bank reconsidering its plans to gradually reduce the pace of credit growth.
African Swine Fever has greatly affected China’s pig herd last year with the nation posting a record amount of imported pork this year.
Food price were down 2%yoy in November, while pork prices fell 12.5%yoy.
Separately, credit growth accelerated in November as the economy is recovering.
CPI (%yoy): -0.5 v 0.5 in October and 0.0 est.
Aggregate Financing (CNY bn): 2,130 v 1,420 in October and 2,075 est.
Germany – Export growth slowed to 0.8%mom in October marking the weakest pace since a sharp drop in March and April.
In the first 10 months of the year Germany exports were off 11.2%yoy reflecting the effect of the pandemic on global trade.
On a positive note, German exports to China YTD were up 0.3%yoy while shipments to the US are down 10.5%yoy and off 12.5%yoy to other Eurozone countries
Exports (%mom): 0.8 v 2.3 in September and 1.3 est.
Imports (%mom): 0.3 v -0.1 in September and 1.2 est.
UK – BREXIT – Boris Johnson is expected in Brussels for crisis talks over dinner with EC President Ursula von der Leyen in an attempt to avoid no-trade deal Brexit in three week’s time.
It is typical in Europe that important issues are settled over lunch or dinner
UK downgrades COVID figures used to persuade Johnson into second lockdown
We had heard anecdotally that hospitals were quieter than expected as the UK went into its second lockdown.
Now we read that the COVID stats used to persuade the Prime Minister to order the lockdown have been downgraded.
The ONS reported the number of new infections of 51,900 used by scientists to justify the lockdown on 17 October
The ONS have since revised the estimates to just 4.89 per 10,000 or 26,600 cases for this date
Pfizer vaccine – causes two patients to suffer allergic reaction on the first day of vaccinations
Regulators advise that patients with a history of significant allergic reactions should not take the vaccine.
Currencies
US$1.2128/eur vs 1.2126/eur yesterday. Yen 104.23/$ vs 104.07/$. SAr 14.967/$ vs 15.124/$. $1.341/gbp vs $1.335/gbp. 0.746/aud vs 0.742/aud. CNY 6.545/$ vs 6.527/$.
Commodity News
Precious metals:
Gold US$1,864/oz vs US$1,866/oz yesterday
Gold ETFs 106.8moz vs US$106.7moz yesterday
Platinum US$1,030/oz vs US$1,024/oz yesterday
Palladium US$2,313/oz vs US$2,336/oz yesterday
Silver US$24.36/oz vs US$24.65/oz yesterday
Base metals:
Copper US$ 7,766/t vs US$7,695/t yesterday
November unwrought copper imports into China fell 9.2% to 561,311t but remain 16.2% higher yoy vs 618,000t in October
Copper concentrate imports rose 8.3% mom to 1.83mt but were 15.1% lower yoy
Aluminium US$ 2,014/t vs US$2,012/t yesterday
Nickel US$ 16,465/t vs US$16,395/t yesterday
Zinc US$ 2,845/t vs US$2,795/t yesterday – Zinc prices rise amid falling Chinese production
Zinc is heading for its highest close in over a year, as concerns over falling Chinese production and hopes for a US stimulus deal aided sentiment.
Refined zinc output in China fell 6,900t to 562,300t last month, with production expected to drop further this month (SMM News).
Zinc rose 1.6% to $2,844/t on the LME earlier this morning, up for a fifth straight day (Bloomberg).
LME zinc stocks fell 1,200t this morning to 217,150t.
Lead US$ 2,110/t vs US$2,085/t yesterday
Tin US$ 19,265/t vs US$19,150/t yesterday
Energy:
Oil US$49.5/bbl vs US$48.7/bbl yesterday
Oil continues to swing between gains and losses as the market weighs the outlook for demand as coronavirus vaccines begin
Futures in the US traded below US$46/bbl, driven by fluctuations in the dollar and equities
The UK issued its first Covid-19 vaccinations on Tuesday and there are signs that European demand is recovering after a renewed wave of lockdowns in the winter
Poland’s road use, for example, has climbed sharply since the start of last month
WTI prices have been capped in the mid US$40s since OPEC+ agreed on a slow return of production last week
The United Arab Emirates will provide Asian buyers with a little more crude next month after the deal
API data showed US crude stocks rose 1.14m barrels, a significant move in the opposite direction to expectations of a 1.42m barrel draw. EIA data is due tomorrow
Vaccine news is propping up prices as the medium-term outlook brightens ahead of expectations of improved demand in H2’21 as the global population is provided with vaccinations against COVID-19
There are also hopes of a US pandemic aid package as momentum behind the US$908bn bipartisan bill grows despite the Democrats holding concerns it does not go far enough
A tough winter appears to be ahead with suspicions London might be moved into Tier 3 restrictions, France delaying easing of its restrictions and California enforcing stay at home measures
The EIA has forecast crude oil production will fall by 240,000bopd to 11.10MMbopd in 2021, a smaller decline than previously expected (-290,000bpd)
Prices have also been impacted by news that the US is preparing to impose sanctions on at least 12 Chinese officials for their roles in disqualification of elected opposition legislators in Hong Kong (Reuters)
It is being reported Iran has instructed its oil ministry to prepare installations for production and sale of crude oil at full capacity within three months
OPEC+ agreed to ease oil output cuts by 500,000 barrels in January last week which provides hope of a controlled exit from the production cuts.
Natural Gas US$2.477/mmbtu vs US$2.460/mmbtu yesterday
Warmer weather across the lower 48 in the US has led to heating demand 12% below the long-term average while gas stocks have remained above the 5yr average
The outlook does not look to be improving through December as warmer weather is forecast to persist in the US over the next 8-14 days.
Temperatures are not expected to fall until beyond 22 December
The spread between March and April futures has fallen to below zero, the first time it has done so since 2015, as long-term models show warmer than average conditions persisting through the winter
The spread signals we may emerge from the winter period with strong inventories according to a Tradition Energy director
Uranium US$29.75/lb vs US$29.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$144.0/t vs US$144.0/t
Chinese steel rebar 25mm US$611.6/t vs US$613.7/t
Thermal coal (1st year forward cif ARA) US$62.9/t vs US$62.8/t
Coking coal swap Australia FOB US$123.3/t vs US$125.0/t
Other:
Cobalt LME 3m US$32,000/t vs US$32,390/t
NdPr Rare Earth Oxide (China) US$66,848/t vs US$67,025/t
Lithium carbonate 99% (China) US$6,417/t vs US$6,434/t – IGO invest $1.4bn in Tianqi Lithium Australia
Perth-based nickel and gold miner IGO will invest $1.4bn in the unit that controls Greenbushes, the world’s largest hard-rock lithium mine.
IGO will take a 49% stake in Tianqi Lithium Energy Australia (TLEA), with Tianqi retaining control with 51%.
Tianqi plan to use the proceeds mostly to repay $1.2bn of the principal on a loan used to buy a stake in Chile’s SQM in 2018.
The company put up US$726m of its own capital and borrowed US$3.5bn to buy SQM.
Lithium prices have plunged by about 60% to US$116.23/t from a peak of US$296 in May 2018.
Tianqi’s H1 sales fell 27.4% to Rmb1.88bn yuan yoy.
Ferro Vanadium 80% FOB (China) US$27.2/kg vs US$27.2/kg
Ferro-Manganese high carbon 78% Mn US$1,320/t vs US$1,265/t
Tungsten APT European US$220-225/mtu vs US$220-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$510/t vs US$480/t –
Graphite spherical 99.95% C, 15 microns, fob China US$2,475/t vs US$2,475/t
Spodumene 6% Li2O min, cif (China) US$380/t vs US$375/t
Battery News
Mirai hydrogen fuel cell car
Toyota has released its Mirai hydrogen fuel cell car, with 30% greater range in a push to promote zero-emission technology amid growing demand for electric vehicles.
Until now, Toyota has failed to win drivers over to fuel cell vehicles which remain a niche despite the Japanese government backing.
It will cost about 5 million yen after subsidies.
Toyota is looking to China, which has just about 7000 FCVs, versus more than 4 million EVs, to boost demand.
Support measures for FCVs announced in September included requiring projects with government subsidies to boost the number of hydrogen charging stations and efforts to cut fuel prices.
UK offshore wind manufacturing site secures planning permit
Planning permission has been granted for a manufacturing zone for the offshore wind industry on the site of the former SSI steelworks in Redcar, northeast England.
The development of the 4.5 million sq ft manufacturing space will see more than 430 acres of land alongside the River Tees remediated and developed into a manufacturing zone
It could welcome its first tenants by 2022.
The contract for the £4 million project has been awarded to Hall Construction
Green Hydrogen Catapult
The world’s biggest “green” hydrogen developers have come together in what they call the Green Hydrogen Catapult.
Their plan is to expand production by 50 times in under 6 years to drive down the cost.
The companies include ACWA Power, CWP Renewables, Envision, Iberdrola, Orsted, Snam, and Yara.
The firms hope that their economies of scale can drive the cost down to $2 a kg.
The new initiative will see industry leaders deploy 25GW of renewables-based production through 2026.
If the target is reached it would make a substantial contribution to world attempts to decarbonise society by helping transform carbon-intensive industries.
Company News
Elkem ASA (LON:ELK) NOK28.49, Mkt cap NOK16.25bn – Manufacturing advanced synthetic graphite anode materials (Benchmark conference)
Elkem report they are working on graphite anodes for the faster charging batteries building a 200MWh capacity plant to be operational in the beginning of 2021.
The new plant will move quickly to 20,000tpa of graphite anode production to start
Elkem are working on advanced graphite for fast charging with anodes that can now charge a 75kWh battery pack to about 50% capacity for around 250km range in about 10mins
The company estimates 1kWh of battery production requires ~1kg of graphite
Elkem engineered graphite material can do ~2,800cycles >75% capacity retention in non-optimised cells shows the power of the graphite
Phoenix Copper* (LON:PXC) 41.5p, Mkt Cap £25.6m – Empire Mine operational update
(Phoenix holds 80% of the Empire mining property in Idaho)
Phoenix Copper has updated mineral resource estimate for the Empire open-pit in Idaho following a 32-hole drilling programme completed earlier this year.
The new NI 43-101 compliant resource has risen by 19% to 22.9mt grading 0.38% copper, 0.19% zinc, 10.3g/t silver and 0.324g/t silver to give a copper equivalent grade of 0.75%.
The resource is now estimated to contain some 129,641t copper, 58,440t zinc, 10,133,772oz silver and 355,523oz gold.
The increased resource represents a US$122m increase in the value of the contained metal assuming a $3.00/lb ($6,612/tonne) copper price
Laboratory and bench scale metallurgical test work is underway on the Empire Mine magnetite ore.
Leach testing using sodium cyanide and ammonium thiosulfate (ATS) was conducted, targeting gold and silver.
Gold recoveries show in 97.8% and 97.7% using ATS on the two bench samples.
Silver recoveries came in at 69.8% and 78.2% after six hours of leaching.
Phoenix shipped 12mt of ore for sampling, representing various ore types from the pit to estimate capital and operating costs for use in a PEA, and ultimately used to develop a full process design for the Empire Mine open pit deposit.
Initial met testing on all metals necessary to complete the PEA level studies is expected to be completed in the next few weeks, allowing the Company to complete and publish an updated PEA shortly thereafter.
Phoenix has also updated its corporate presentation, available on the Company’s website.
*SP Angel act as Nomad for Phoenix Copper
QuantumScape Corp (NYSE:QS) US$73.05, Mkt cap US$1.7bn – QuantumScape announce breakthrough in Solid state battery technology with 15min fast charge
QuantumScape Corp stock jumped yesterday on the announcement of its new Solid State battery technology.
EV start-up QuantumScape performance data suggests its lithium-metal solid state batteries charge to 80% in just 15 minutes and also have an 80% longer range than Li-ion batteries used today.
QuantumScape’s battery includes a unique solid ceramic separator developed by the Company with an anode and electrolyte absent in the battery. The Company has not released details of the makeup of the separator or the manufacturing process but suggests it is production ready.
Any sound bites from the latest performance data are not signs of an imminent shift to solid state batteries in EVs. QuantumScape which has been developing such a battery for close to a decade is yet to build a factory to build these batteries on a commercial scale.
The Company has formed a JV to build such as factory and once built will start 12 months of production testing. “It’ll be 2024 before you’ll see cars with these batteries in them” according to Founder Jagdeep Singh.
Commercially viable solid state batteries would be viewed as a step change for the EV space as described by Venkat Viswanathan Associate Professor of the Department of Mechanical Engineering at Carnegie Mellon University “this would mean that for mass-market EVs, for the same weight of battery pack, you can get about 5 percent additional range”.
Rambler Metals and Mining* (LON:RMM) 0.24p, Mkt Cap £19.5m – Completion of US$13.25m fund raising and restructuring
(Rambler owns 100% of the Ming Copper-Gold Mine)
CLICK FOR PDF
The Rambler market capitalisation was £19.5m following the US$13.5m fund raising and restructuring and not the £3.1m we quoted
*SP Angel act as Nomad and broker to Rambler Metals & Mining
Vast Resources* (LON:VAST) 0.14p, Mkt Cap £24m – £4.8m equity raise
The Company raised £4.8m through a placing of 3,671m shares at 0.13p.
The raise was driven by one of the major conditions of the refinancing currently being agreed with the international banking institution.
The lender asked the Company to raise at least a further $6.2m to be invested in equity as part of the refinancing.
The lender’s executive team is reported to have agreed detailed Term Sheet with the Company and the bank’s final credit approval is scheduled for 15 December 2020.
Conclusion: The Company raises new equity as refinancing is drawing to a close and Baita Plai is ramping up concentrate production.
*SP Angel acts as Broker to Vast Resources
Analysts
John Meyer – [email protected] – 0203 470 0490
Simon Beardsmore – [email protected] – 0203 470 0484
Sergey Raevskiy –[email protected] – 0203 470 0474
Joe Rowbottom – [email protected] – 0203 470 0486
Sales
Richard Parlons –[email protected] – 0203 470 0472
Abigail Wayne – [email protected] – 0203 470 0534
Rob Rees – [email protected] – 0203 470 0535
Grant Barker – [email protected] – 0203 470 0471
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.
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
