SP Angel . Morning View . Tuesday 05 01 21
December PMIs show strong recovery as Gold and Nickel prices jump
MiFID II exempt information – see disclaimer below
Bluejay Mining* (AIM:JAY) – BUY, Valuation 29.4p – Board reorganisation sees Dr. Bo Moller Stensgaard takeover as CEO with McIllree taking over as Chairman
Lucara Diamonds (TSX:LUC) – Karowe licence renewal
Mkango Resources* (LON:MKA) – Talaxis moves to 11.3% following exercise of warrants on amended terms
Shanta Gold (AIM:SHG) – Appointment of exploration manager
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Economics
China – Official Chinese nonmanufacturing PMI was 55.7 for December vs 56.4
Manufacturing made up 27% of GDP in 2019
PMI 51.9 in December vs 52.1 in November
Caixin China 53.0 in December vs 54.9
PBOC allows small and micro companies to extend principal + interest payments till end March
China has authorised 64 major new infrastructure projects worth around $42bn
China CSI 300 Stock benchmark closes at 13-year high
China’s CSI 300 Index rose 1.9% on Tuesday to close at its highest level since 2008, with the benchmark surging more than 50% from March last year.
The equity rally in China surged last year after Beijing made it easier to buy stocks using borrowed money.
The advance seen in recent weeks has pushed the value of Chinese domestic equities to $11 trillion.
Chinese equities have benefitted from a strong onshore renminbi, as well as data showing that China’s economy was rebounding faster than other major economies.
China – continues to press ahead with new infrastructure developments
The NDRC approved an US$13bn 340 mile high speed rail link from Xiong’an to Henan province (Xinhuanet)
The new high-speed line follows the opening of the Beijing-Xiong’an line which connects Beijing to Xiong’an New Area in just 50 mins down from 90 mins
It now takes just 19mins to travel from Beijing Daxing International Airport to Xiong’an connecting the New Area to the capital and its airports.
The Beijing-Xiong’an high-speed line will also extended to connect with other high-speed lines across the country.
The idea is for Xiong’an in Hebei Province to relieve Beijing of non-essential functions to its role as China’s capital reducing traffic and pollution.
London tried to do something similar when it created Milton Keynes. We sincerely hope Xiong’an turns out better and will less roundabouts.
Xiong’an New Area, is seen as China’s ‘city of the future’ with the station roof generated some 5.8mkWh of power through photovoltaic cells highlighting China’s drive to greener power generation.
Xiong’an has a planned area of 1,770 square km giving some idea of the scale envisaged as a new area of national significance following the Shenzhen Special Economic Zone and the Shanghai Pudong New Area.
Planners want 70% of the Xiong’an New Area to be covered by water or trees for strong competitiveness and harmonious human-environment interaction.
>100,000 workers are currently working on some 300 construction sites in Xiong’an with >18m trees planted over 22,246Ha
World – JP Morgan global manufacturing unchanged at 53.8 in December
US – December Manufacturing PMI at 57.1 vs 56.7 last indicates better-than-expected recovery
US manufacturing activity expanded at its quickest pace in more than six years last month, further extending the factory recovery in the States.
According to IHS Markit, the improvement was driven largely by a strong pricing environment, with firms partially passing on higher input prices to consumers.
Data released on Monday also showed US construction spending rose to a record high in November, as a result of a robust housing market amid historically low mortgage rates.
Construction spending increased 0.9% to $1.459tr- the highest level since the government started tracking such a statistic in 2002.
US – Markit PMI 57.1 in December vs 56.7
Nov US construction spending 0.9% (Oct 1.3%).
Germany – PMI rose to 58.3 in December vs 57.8
Retail sales rise 1.9% in November as Germans spend through pandemic
Data released this morning shows that retail sales climbed 1.9% on the month prior, as a result of strong growth in online sales and home improvements.
German unemployment unexpectedly fell in December, with jobless numbers falling by 37,000 compared to the previous month.
German hospitals reporting an ‘extremely difficult situation due to Coronavirus’ according to a government spokesman
Japan – PMI 50.0 in December vs 49.0 in November
South Korea – PMI 52.9 in December unchanged
Taiwan – PMI 59.4 in December vs 56.9
Singapore – PMI 50.5 in December vs 50.4
India – PMI 56.4 in December vs 56.3
Turkey – PMI 50.8 in December vs 51.4
France – PMI 51.1 in December vs 49.6
EU – PMI 55.2 in December vs 53.8
UK – PMI 57.5 in December vs 55.6
Brazil – PMI 61.5 in December vs 64.0
Mexico – PMI 42.4 in December vs 43.7
Canada – PMI 57.9 in December vs 55.8
Australia – PMI 55.7 in December vs 55.8
UK – Third lockdown begins in UK as government aim for swift vaccine rollout
The UK have been ordered to now stay at home except for a handful of permitted reasons, with England’s rules to be reviewed on the 15th of February.
It is expected that all care home residents and their carers, frontline health staff, the extremely vulnerable, and everyone over the age of 70 will be vaccinated by mid-February.
This morning, Chancellor Rishi Sunak announced a GBP4.6bn support package for struggling UK companies.
The treasury will provide one-off “top-up grants” for an estimated 600,000 businesses, each of which can claim up to GBP9,000.
China – offering trade talks to the Joe Biden administration
NYSE – U-turn on delisting Chinese telecoms companies
Yesterday we heart the NYSE was to delist three Chinese telecoms companies.
Today the NYSE is not according to the BBC
President Trump signed an executive order in November barring American investments in Chinese firms owned or controlled by the military.
The NYSE announced on 31 December that it would delist China Mobile, China Telecom and China Unicom.
The decision is reported to be based on further consultation with the regulatory authorities.
Maintaining the listing will allow non-US investors to still invest in these companies though a US listing.
We suspect the NYSE will wait to see if Joe Biden might overturn Trump’s more aggressive policy towards China
While we understand the Democrats share many Republican views on China we may see Biden take a more diplomatic approach towards China
US telecoms companies are still required to replace Huawei equipment
Conclusion: US investors have a long history of investing in China with both nations closely linked in terms of trade and finance. Breaking the two apart is like separating Siamese twins, eg it’s a long operation which could result in killing one or both patients.
US – Rental property assets may become toxic in Manhattan as tenants in bankrupt apartment buildings demand cash through the courts to fix buildings
Tenants in a bankrupt Manhattan apartment block have applied to court for cash to immediately address rats and bed bugs.
If the court awards the funds, which it is likely to do, then similar rental properties will become liable to provide certain services despite bankruptcy
Saudi Arabia – Borders reopened with Qatar for the first time in three years
Saudi Arabia has reopened its land, air and sea borders with Qatar ahead of a regional summit this week.
Currencies
US$1.2270/eur vs 1.2282/eur yesterday. Yen 102.91/$ vs 102.79/$. SAr 14.745/$ vs 14.552/$. $1.359/gbp vs $1.368/gbp. 0.771/aud vs 0.774/aud. CNY 6.462/$ vs 6.462/$.
Commodity News
Precious metals:
Gold US$1,943/oz vs US$1,932/oz yesterday
Gold ETFs 107.3moz vs US$106.8moz yesterday
Platinum US$1,073/oz vs US$1,106/oz yesterday
Palladium US$2,392/oz vs US$2,453/oz yesterday
Silver US$27.37/oz vs US$27.28/oz yesterday
Base metals:
Copper US$ 7,925/t vs US$7,937/t yesterday
Aluminium US$ 2,030/t vs US$2,002/t yesterday
Nickel US$ 17,475/t vs US$17,330/t yesterday – Nickel surges over 5% on Wednesday amid panic-buying after Sulawesi earthquake
Nickel prices jumped the most in nine months on Monday, extending last year’s 18% gain, after earthquakes shook the Indonesian island of Sulawesi.
The earthquake caused minor damage to buildings in the Morowali Industrial Park, where Tsingshan Holding Group produces nickel pig iron.
Most of Indonesia’s proven nickel reserves are located on the islands of Sulawesi and Halmahera, and the country has the largest annual production and reserves of nickel in the world.
Along with nickel’s surge, all metals advanced on the first trading day of the year on the LME, with commodities benefitting from a weaker dollar- which sank to its lowest level since February 2018 on Monday (Bloomberg).
Despite the earthquake, Reuters reports that the panic-buying of nickel is a “knee-jerk reaction” and that production is not expected to be affected.
We suspect the market was looking to rise in any event.
Zinc US$ 2,799/t vs US$2,796/t yesterday – Zinc – Closure of Young Poong smelter could remove 350ktpa if the smelter is not allowed to reopen
Lead US$ 2,049/t vs US$2,048/t yesterday
Tin US$ 21,240/t vs US$20,700/t yesterday
Energy:
Oil US$51.1/bbl vs US$53.3/bbl yesterday
Natural Gas US$2.680/mmbtu vs US$2.614/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$161.4/t vs US$155.7/t – Iron ore prices rise as concerns over tight supply increase
Chinese iron ore futures rose for a third straight session on Tuesday, with prices rising to a one-week high and back over $160/t.
Iron ore arrivals at Chinese ports declined over Dec 28-Jan 3 by 4.3% from the week before, according to Mysteel.
Meanwhile, portside inventories shrank to 126.8mt, down 4% compared to November last year.
The most traded iron ore contract on the Dalian Commodity exchange rose as much as 4.5% to 1,044 yuan ($162)/t (Reuters).
Brazil’s iron ore exports rose 33% YoY in December to 33.17mt, with miners taking advantage of higher prices due to strong Chinese demand (Fastmarkets MB).
Chinese steel rebar 25mm US$675.5/t vs US$672.7/t
Thermal coal (1st year forward cif ARA) US$72.8/t vs US$69.0/t
Coking coal swap Australia FOB US$136.0/t vs US$136.0/t
Other:
Cobalt LME 3m US$33,000/t vs US$32,190/t
NdPr Rare Earth Oxide (China) US$63,294/t vs US$63,064/t
Lithium carbonate 99% (China) US$7,660/t vs US$7,506/t
Ferro Vanadium 80% FOB (China) US$30.0/kg vs US$30.0/kg
Ferro-Manganese high carbon 78% Mn US$1,370/t vs US$1,330/t
Tungsten APT European US$230-235/mtu vs US$230-235/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$395/t vs US$380/t
Battery News
Foxconn to start mass production of new Electric Vehicle in early 2022 in joint venture with Byton.
Byton is investing $200m into manufacturing facilities for Byton’s EV M-Byte SUV
Byton investors include state-owned China FAW Group Corp. and EV battery maker Contemporary Amperex Technology Co. Ltd., which supplies batteries to Tesla.
Tesla Model Y receives strong interest after launch in China, puts pressure on competition
Tesla Model Y is receiving strong interest from the Chinese market following its launch, according to local reports, and it is putting pressure on the competition in an important segment..
The Model Y is being produced in Shanghai for the local market following approval from the Ministry of Industry & Information Technology in November.
Chinese Tesla’s will cost Rmb339,900 for the Long Range Dual Motor SUV and 369,900 yuan ($56,600) for the Model Y Performance version.
Electrek reports Tesla stores with the Model Y on display were flooded with potential buyers over the weekend.
Model 3 production deliveries started a year ago just one year from the start of factory construction in Shanghai. The Model 3 is now the nation’s best selling EV sedan.
Tesla offering 30% discounts on China-built vehicles to stimulate demand for deliveries after the Lunar New Year
Local analysts reckon Tesla’s new Model Y is going to sell well in China leading new interest in EVs
Panasonic is to produce the new-design Tesla 4680 cells with 5x more energy, >16% range and 6x the power
We are still not sure how 5x energy and 6x power only translates into +16% range but maybe Tesla is being cautious with the numbers
Tesla sales increase 36% in 2020 as automaker delivers just under 500,000 vehicles
Delivery and sales from the US automaker saw strong growth last year, despite economic setbacks and logistical disruptions as a result of Covid-19.
Tesla produced 509,737 vehicles and delivered 499,550 EVs in 2020, just under its target of 500,000 for the year.
This year saw Tesla ramp up production at its factory in China, which has fueled sales in the world’s largest EV market.
The automaker also began building factories in Berlin and Austin, Texas.
Airbus detachable hydrogen fuel cell wing ‘pods’ may revolutionise commercial aviation
Airbus has revealed a design for detachable hydrogen fuel cell wing ‘pods’ that could enable large commercial aircrafts to fly long distances without generating CO2 emissions.
They attach beneath the aircraft wing and contain propellers, motors and fuel cells.
The pods can be disassembled and reassembled quickly so they can be easily maintained and refuelled.
Engineers aim to scale up this technology for larger aircrafts on long haul flights. Currently, smaller experimental hydrogen aircrafts up to 20 seats can rely on a traditional configuration with two propellers.
Pods away!
Company News
Bluejay Mining* (AIM:JAY) 12.16p, Mkt cap GBP118m – Board reorganisation sees Dr. Bo Moller Stensgaard takeover as CEO with McIllree taking over as Chairman
BUY, Valuation 29.4p
Bluejay has reorganised its board so that Dr. Bo Moller Stensgaard, Bluejay’s Chief Operating Officer can take over as CEO.
Bo Moller Stensgaard has been leading the Dundas ilmenite project in Greenland and is well placed to take the project through funding and development.
Bo’s connections within Greenland and Denmark should help with the organisation of multilateral funding from the Greenland, Danish and EU to support the offtake and project finance.
Bluejay continue to optimise the Dundas project with the expectation of firming up and reducing the $245m capital cost of the project.
Mr. Rod McIllree has moved to Executive Chairman of the Board, while Mr. Mike Hutchinson becomes a Non-Executive Director and Chair of the Remuneration Committee.
Ian Henderson is retiring from his non-executive board position while Mr. Peter Waugh, a respected titanium market expert, remains a Non-Executive Director.
Share transaction: Rod McIllree was also reported to have sold 20m shares yesterday at 14.5p representing a significant 2.225p/s premium price to the previous closing price via an off-market transaction. ‘The purchasing entity has also expressed an interest in acquiring further shares “on market” during 2021.’
McIllree continues to hold 7.69% of Bluejay shares.
Conclusion: We see Bo Moller Stensgaard as well placed to lead the Dundas project and company forward with his local and multilateral connections. It is also good to hear that the purchasing entity which bought Rod McIllree’s shares is interested in acquiring more stock during 2021.
*SP Angel act Nomad and broker to Bluejay. The analyst has previously visited the Hammaslahti, Enonkoski and Outukumpu mines in Finland as well as Bluejay’s Dundas mine site in Greenland
Lucara Diamonds (TSX:LUC) C$0.56, Mkt Cap C$222m – Karowe licence renewal
Lucara Diamonds reports that it has received a renewal of its Karowe Mining Licence in Botswana for a further 25 years until January 2046.
President and DEO, Eira Thomas, explained that the renewal “is an important milestone for the Karowe underground expansion project, paving the way for the completion of a supplemental debt financing and full project sanction later this year”.
The planned “underground expansion program has an estimated capital cost of $514 million and a five-year period of development, with first ore anticipated from underground in 2026”.
Lucara continues to investigate “debt financing options for the underground expansion for those amounts which are expected to exceed the Company’s cash flow from operations during the construction period”.
Mkango Resources* (LON:MKA) 17.25p, Mkt cap GBP23.3m – Talaxis moves to 11.3% following exercise of warrants on amended terms
(Mkango’s 75.5% subsidiary, Maginto Ltd holds a 25% stake in HyProMag which is a partner in the ‘Rare-Earth Recycling for E-Machines’ RaRE project)
Mkango Resources announced yesterday that it had agreed amended terms for the exercise of warrants held by Talaxis which increase Talaxis’ interest in the company from 10.7% to 11.3%.
“Under this amendment Talaxis has agreed to a cashless exercise of the Warrant for 1,000,000 common shares (“New Shares”) in lieu of payment for 12,000,000 Shares at 6.6 pence”.
The company explains that it will issue 1m new shares and that dilution will be reduced as it avoids “issuing 12,000,000 shares at a significant discount to the current market price of Mkango Shares”.
The company also reports that a non-executive director, Mr. Shaun Treacy, “has exercised warrants for 1,200,000 New Shares at a price of 6.6 pence each, for total proceeds to Mkango of GBP79,200 (US$107,000). Following the warrant exercise, Mr. Treacy will own a 1.4% interest in Mkango” and the company confirms that “After these two transactions, there are no further warrants outstanding”.
*SP Angel act as Nomad and Broker to Mkango Resources
Shanta Gold (AIM:SHG) 18.38p, Mkt Cap GBP177m – Appointment of exploration manager
Shanta Gold has announced the appointment of Mr. Yuri Dobrotin as Group Exploration Manager.
Mr. Dobrotin, who joins from Barrick Gold where he was a Senior District Geologist in Tanzania, is described as “a global expert in gold exploration with 35 years’ experience” including in “the world-famous Red Lake, Abitibi, Kalgoorlie and Lake Victoria greenstone belts”.
Commenting on the exploration potential at the New Luika mine, Mr. Dobrotin explained that “It is not improbable that the Luika, Bauhinia Creek, Shamba and Illunga deposits are different orebodies of the larger single hydrothermal cell, and with more exploration and modelling could be seen as just separate limbs of one deposit which could significantly increase contained gold resources”.
He also highlighted the potential of the Lake Victoria Goldfields explaining that “The district is young and prospective for multiple new deposits.”
Welcoming the appointment, CEO, Eric Zurrin, said that Yuri Dobrotin was joining Shanta Gold at “an exciting time” and confirmed that “Exploration is expected to be the primary driver for delivering shareholder value in the coming years”.
Conclusion: The appointment of a new exploration manager brings a fresh perspective on the geological potential of the area surrounding New Luika and more widely across the company’s exploration portfolio.
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.
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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
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