SP Angel . Morning View . Monday 21 12 20
New virus strain news overshadow US $900bn fiscal aid deal
Amur Minerals* (LON:AMC) – Change of CFO
Beowulf Mining* (LON:BEM) – Beowulf to raise GBP7.4m to continue work on Kallak in Sweden and copper, gold and zinc properties in Kosovo
BlueRock Diamonds (LON:BRD) – BlueRock recovers two more larger diamonds from its Kareevlei Diamond mine
Alba Mineral Resources (LON:ALBA) – Progress on drilling at the Clogau mine
Shanta Gold (LON:SHG) – Hedge book closed regaining full exposure to strong gold prices
China – Chinese government continue to push urbanisation, transportation and new consumer demand
The Chinese government continue to drive their renewed urbanisation strategy with new city clusters and pricing of appartments
The government is looking to develop more regional transportation infrastructure and to develop markets in rural areas
The strategy is likely to drive new levels of consumer demand.
Support for the buying of consumer appliances will create new levels of consumer demand and lower exports to the west of cheap Chinese white goods
Inflation: Chinese air conditioning manufacturers have increased prices three times this year due to rising cost inputs
Steel inventories fall in China. Construction steel, hot rolled coil, plate, cold rolled coil and galvanized steel inventories all continue to fall (MySteel)
Steel producers and traders raise prices for steel billet and other products
China to lift restrictions on foreign investment in coal, oil, gas, power (excluding nuclear) and new energy (Reuters)
Recent power shortages in China appears to have persuaded the government to lift restrictions on foreign investment in the power sector.
BYD’s plugin electric car sales rose 139% YoY in November
Chinese automaker BYD more than doubled its plug-in electric car sales in November to 25,553 units- almost half of the total sales for the brand.
BYD sold 18,220 BEVs- up 128% YoY and 7,333 PHEVs – up 174% YoY (Inside EVs).
Iron ore futures continue to rise on new supply issues in Brazil
Iron ore prices continued to rise this week, with the steelmaking ingredient set to be this year’s best-performing major commodity.
Top Brazilian producer Vale has had its operating licenses suspended for seven days by the municipality of Brumadinho following the death of a worker in a landslide.
Futures in Singapore rose as much as 8.7% on Monday, the largest daily rise since March 2019- while prices on the Dalian Commodity Exchange climbed as much as 6.9% (Bloomberg).
Chinese lithium carbonate prices rise 3.4% last week on encouraging fundamentals
The Chinese domestic battery-grade lithium carbonate price continued to rise last week, after most producer insisted on higher scale prices, while buyers reported difficulty acquiring material below the new range.
According to Fastmarkets MB, buyers say that it is becoming increasingly harder to achieve cheaper deals and with market participants acknowledging the bullish outlook on prices.
Prices concluded at 45,000-47,000 yuan/t last week, although lots of buyers were offering higher prices up to 50,000 yuan/t as the market is moving into a tighter position (Fastmarkets MB).
IGTV: As traders continue to bid up Tesla, is the EV sector approaching a bubble? https://youtu.be/LaDWBpTZ7SQ
Copper price rise: https://youtu.be/mdPXTup15VY
VOX – 10/12/20: https://www.voxmarkets.co.uk/media/5fd228d9bc74c922485f501e/?context=/listings/LON/ARCM/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 -0.41% at 30,179
Nikkei 225 -0.18% at 26,714
HK Hang Seng -0.72% at 26,307
Shanghai Composite +0.76% at 3,421
Economics
US – Congress reached an agreement over a ~$900bn fiscal aid bill with the House expected to vote on it Monday, followed by the Senate.
The plan will provide direct payments of $600 to most Americans and $300 per week in extra unemployment benefits through March, Bloomberg reports.
The programme left contested points such as a liability shield for companies and aid for state and local governments out.
UK – PM Johnson imposed tougher restrictions on London and southeast England over the weekend amid an increase in new cases and the spread of a new, more transmissible (up to 70% more than the original) kind of the coronavirus.
Poland and Turkey joined Germany, France, Italy and Ireland to suspend travel links with the UK.
Belgium, Austria, Finland and the Netherlands have also blocked UK arrivals.
The flow of freight now faces delays as France imposed a 48-hour ban on all manned shipments coming from the UK with the decision announced on Friday.
“it has been decided to suspend… all movements of people, including those related to freight transport, by road, air, sea or rail coming from the UK… the flow of people and transport into the UK is not affects, the office of the French PM said.
The port of Dover that handles around 10,000 lorries a day during peak periods such as Christmas will be closed for traffic leaving the UK “until further notice”, BBC reports.
New disruptions come at the time as the UK and the EU aim to negotiate Brexit terms ahead of the 31 December deadline.
The pound is off 1.4% against the EUR this morning.
Yields on 2-year gilts fell to record lows today as investors reduced risk.
European ski resorts face challenging winter season with Austria, Italy and France being closed.
Switzerland that cautiously opened is under pressure from its European neighbours to close again.
The European Alps are reported to account for a third of the global 2,084 ski resorts generating around EUR28bn in revenues and accounting for ~7% o fthe total velud of the EU’s tourism market, FT reports.
South Korea – Early trade data showed exports continued to grow in December, although the pace of gains slowed as some nations imposed new virus related restrictions.
Shipments climbed 1.2%yoy in the first 20 days of December (+4%yoy in November) with exports of semiconductor and wireless equipment up 26.4% and 38.3%, respectively.
Japan – BoJ left monetary policy unchanged, reviewing lack of inflation.
Hawaii – Kilauea Volcano erupts spewing ash over the big island
The volcano had erupted continuously for 25 years till 2018 so its not surprising that it has started again
Father Christmas – Sadly, Due to Tier 4 restrictions, Father Christmas is returning to the North Pole according to one London Club
Which means he must be returning to the North Pole on business – because if it’s for pleasure with all those Elves then he isn’t allowed to travel
Currencies
US$1.2212/eur vs 1.2255/eur last week. Yen 103.55/$ vs 103.53/$. SAr 14.784/$ vs 14.31/$. $1.327/gbp vs $1.354/gbp. 0.754/aud vs 0.761/aud. CNY 6.549/$ vs 6.543/$.
Commodity News
Precious metals:
Gold US$1,895/oz vs US$1,880/oz last week – Gold prices rises on $900bn US stimulus deal
Gold prices climbed to a six-week high on Monday on news that US congressional leaders have reached an agreement on a Covid-19 aid package to help the US economy through the pandemic.
A new strain of the virus originating in the UK has caused the country to go into lockdown, which has dampened risk sentiment in global markets.
Spot gold rose 0.9% to $1,897/oz while US gold futures gained 0.8% to $1,904/oz (Reuters).
Gold ETFs 106.5moz vs US$106.5moz last week
Platinum US$1,033/oz vs US$1,042/oz last week
Palladium US$2,331/oz vs US$2,344/oz last week
Silver US$26.66/oz vs US$25.77/oz last week
Base metals:
Copper US$ 7,940/t vs US$8,001/t last week
Aluminium US$ 2,027/t vs US$2,071/t last week
Nickel US$ 17,645/t vs US$17,610/t last week
Zinc US$ 2,877/t vs US$2,875/t last week
Lead US$ 1,988/t vs US$2,053/t last week
Tin US$ 19,80/t vs US$20,010/t last week
Energy:
Oil US$50.4/bbl vs US$51.3/bbl last week
US WTI futures are trading sharply lower early Monday after finishing higher on Friday for the seventh straight week
The headlines are telling us that oil prices are sliding in the early trade because a fast-spreading new coronavirus strain in the UK is raising concerns that tighter restrictions there and in other European countries could stall a recovery in the global economy and its need for fuel, however, I think the stronger US Dollar is driving down foreign demand for the dollar-denominated asset
A US stimulus package edges closer as congressional leaders suggests substantial progress has been made on a US$900bn coronavirus relief bill and a funding bill to prevent a government shutdown
The Fed announced yesterday that it will continue buying US$120bn of debt/month until further progress had been made towards recovery.
Crude inventories in the week to 11 Dec were up 2MMbbls to 495MMbbls according to API data
The International Energy Agency expects oil demand to remain weaker both this year and into 2021, the Agency revised down its estimates by 50,000bopd for 2020 and 170,000bopd in 2021
The US has begun roll out of the Pfizer vaccine stating yesterday and the Moderna vaccine is expected to be approved by the FDA later this week
Global energy consumption is expected to be 96.9MMbbls in 2021 (2020: 91.2MMbopd)
OPEC has postponed it Joint Technical Committee and Ministerial Monitoring Committee meetings until Jan 3 and 4
The group has also revealed its expectations of a slower demand recovery than originally expected, lowering its forecasts by 350,000bopd for 2021
Natural Gas US$2.705/mmbtu vs US$2.679/mmbtu last week
Natural gas futures finished higher on Friday, underpinned by consistent LNG demand and a bullish government report for the week-ending 11 December
Helping to generate a small spike to the upside during the session were forecasts calling for freezing temperatures
According to the EIA, natural gas in storage was 3,726Bcf as of 11 December
This represents a net decrease of 122Bcf from the previous week
Expectations were for a 107Bcf draw according to survey provider Estimize
The weather is expected to be cooler than normal on the east coast for the next two weeks while the weather is expected to be warmer than normal throughout most of the west coast
Monthly LNG exports hit a fresh record in November, according to the EIA According to NOAA, the weather is expected to be warmer than normal throughout most of the US
Prices in Asia continue to move higher, congestion in the Panama Canal, supply outages and colder weather forecast for China, Japan and South Korea has seen the JKM move above US$8.075/mmbtu
Demand in Asia is helping to support prices in Europe as supply gets redirected. European storage drew by 146Bcf last week, above average for this time of year (108Bcf)
Uranium US$30.10/lb vs US$30.10/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$161.2/t vs US$157.7/t
Chinese steel rebar 25mm US$675.4/t vs US$640.5/t
Thermal coal (1st year forward cif ARA) US$68.0/t vs US$67.1/t
Coking coal swap Australia FOB US$124.0/t vs US$124.0/t
Other:
Cobalt LME 3m US$32,200/t vs US$32,000/t
NdPr Rare Earth Oxide (China) US$60,696/t vs US$60,752/t
Lithium carbonate 99% (China) US$6,719/t vs US$6,752/t
Ferro Vanadium 80% FOB (China) US$28.5/kg vs US$28.0/kg
Ferro-Manganese high carbon 78% Mn US$1,330/t vs US$1,325/t
Tungsten APT European US$230-235/mtu vs US$220-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$520/t vs US$510/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
EV news
World’s first hydrogen double-decker bus trials
Aberdeen is preparing to launch a fleet of the world’s first hydrogen powered double-decker busses.
The 15 vehicles emit water vapour instead of carbon monoxide and are in the final stages of testing before being put into service on the city’s most popular routes.
They will use an existing hydrogen production and refuelling station.
The busses were built by the Wrightbus company in Northern Ireland and cost GBP500,000 each.
Scotland is also currently testing the world’s first hydrogen fuelled ferry at the European Marine Energy Centre on Orkney.
Company News
Amur Minerals* (LON:AMC) 1.4p, Mkt Cap GBP19m – Change of CFO
Paul McKay will be stepping down as the Company’s CFO on 31 December 2020.
The Company engaged Heytesbury Corporate, an independent financial consulting and corporate management firm that acts in a similar capacity for a number of AIM quoted companies in the mining space, to provide it secretarial and accounting services.
Paul assisted Heytesbury during the handover process.
Heytesbury is known to be a professional firm City circles
*SP Angel act as Nomad and Broker to Amur Minerals
Beowulf Mining* (LON:BEM) 5.2p, Mkt cap GBP43.1m – Beowulf to raise GBP7.4m to continue work on Kallak in Sweden and copper, gold and zinc properties in Kosovo
(Beowulf holds 46.1% 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 Mining report it has raised GBP6.5m by way of an Open Offer and Capital raising in the UK and Sweden.
The company have also raised a further GBP0.9m through the placing of shares not taken up in the open offer.
The current exchange rate prices the open offer shares at 3.3p/s though the open offer was carried out at the equivalent of 3.16p/s at the time.
Beowulf continues to lobby the Swedish government for the issuance of a mining license for the Kallak North iron ore project in Sweden.
There is hope that the intransigence of the Swedish government which has held up license applications for a number of mines may be unlocked sometime soon.
Iron ore prices are at an incredible record US$161.2/t having risen through the year on strong ongoing Chinese demand for stimulus and other projects
Beowulf continue to invest in the exploration of a number of copper, gold and zinc properties in Kosovo through Vadar where it holds a 46.1% stake.
Management continue to advance work at Wolf Mountain where soil samples show up to 1% Zn & 0.5% Pb, and rock samples show 3.5% Zn, 1.8% Pb and 93 g/t Ag on the Mitrovica license in Kosovo.
The use of proceeds are as follows:
GBP1.1m to repay bridge loan,
GBP0.719m for Vardar drilling.
GBP0.430m for the Aitolampi graphite project scoping study, pilot plant/test mining studies in Finland (Fennoscandian)
GBP0.204m for Kallak drilling, scoping/technical studies
GBP0.811m for general working capital
Conclusion: The funding puts Beowulf in a good position to continue to work on the Kallak North iron ore project and to continue to develop a number of prospects in Kosovo.
It is very good news to see so much support for the company in Sweden as well as follow up support from other international investors.
*SP Angel act as nomad and broker for Beowulf Mining.
BlueRock Diamonds (LON:BRD) 47.9p, Mkt cap GBP4.35p – BlueRock recovers two more larger diamonds from its Kareevlei Diamond mine
BlueRock Diamonds reports the recovery of a 14.8ct and 8.7ct diamonds from its Kareevlei Diamond Mine near Kimberley in South Africa.
The new diamonds add to the 12.8ct diamond reported on 4th December and just sold for $76,000 (US$6,000/ct) well above the company’s $50,000 base-line estimate
The recovery of more larger diamonds so soon after the 12.8ct stone indicates the mine is in a higher-value phase.
The mine and plant may also now be working at a greater rate, thus accelerating the number of diamonds recovered.
Management also add: “recent diamond sorts at Kareevlei indicate an increased incidence of diamonds of 3 carats and above, which is another significant driver of pricing”
This suggests that the pricing of Kareevlei diamonds may come in at over the $350/ct we would have previously assumed
Conclusion: The recovery of three larger diamonds in under three weeks is great news for the mine and the values received.
We think the higher recovery rate is down to the mining of a richer phase of kimberlite material following a period of mining a lower grade phase.
Management plan to more than double the mining and throughput rate next year indicating a doubling of diamond production and a very substantial increase in profit for the year.
*SP Angel act as nomad and broker to BlueRock Diamonds
Alba Mineral Resources (LON:ALBA) 0.34p, Mkt cap GBP21.7m – Progress on drilling at the Clogau mine
Alba Minerals reports that it is suspending its drilling work at the Clogau St David site in north Wales ahead of the holidays and that drilling will resume early in January.
Three holes have already been completed for a total of approximately 400m with the 4th hole currently at a depth of 54.6m and to be completed when drilling restarts.
Each of the holes completed so far, has hit “significant veins … [which the Company believes … indicate the presence of a vein system some 30m below the deepest previously worked zone at the Llechfraith mine area”.
A further 2 holes are planned to “intersect the projected pay-shoot some 20 metres or so below the intercepts” in the first phase of drilling.
The core recovered to date is not to be assayed until the current phase of drilling is completed.
A further phase comprising 8-10 holes and around 2000m of drilling to target the Main Lode extension the depth extensions of the Grandfathers, and 7-10 Lode is now planned for 2021.
The pilot plant testing is expected to be in operation from mid-January.
Shanta Gold (LON:SHG) 17p, Mkt Cap GBP181m – Hedge book closed regaining full exposure to strong gold prices
The Company delivered 1.9koz into the hedge book and cash settled the final outstanding 0.8koz last week.
This marks the completion of gold forward sale commitments that stood at 40koz at an average price of $1,244/oz as of early 2020.
The hedge was a condition of the Company’s senior lending facility.
With forward sales now out of the way, the Company regains full exposure to strong spot gold prices.
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
