SP Angel . Morning View . Wednesday 06 05 20

SP Angel . Morning View . Wednesday 06 05 20

Metals rise as on easing of lockdown restrictions

 

MiFID II exempt information – see disclaimer below

 

Cora Gold* (CORA LN) 5.3p, Mkt Cap £10m – First drilling results from the Madina Foulbe Permit in Senegal

Nano One Materials (NNO CN) C$1.28, Mkt cap C$101m - $3m of new funding from British Columbia

Ncondezi Energy (NCCL LN) 4.35p, mkt cap £12.8m – Agreement with GridX

 

LME base metals rise as nations ease lockdown restrictions

• The price of industrial metals rose on the hope that reduced restrictions in multiple countries will kick-start the global economy and result in improved order flow. 
• Nickel was the best performer yesterday, rising 1.95%. Copper advanced 0.92%, aluminium +0.37%, Zinc +1.03%, tin +0.4% and lead +0.58% (SMM). 
• This positive sentiment extended in to Wednesday morning, as all base metals extended gains seen yesterday. 
• Three-month base metals prices on the LME were up by an average of 0.4% this morning, led by a 1.1% increase in the price of zinc and a 0.5% increase in the copper price- followed by modest gains in other metals. 

 

Gold - 100 gram gold bars reported to have sold out in Chinese cities. 100grm bars are commonly used for investment

 

Moon Mining – US 'Artemis Accords' being drafted for mining on the moon 

• The US is working with NASA to work up an accord to prepare for mining on the moon by 2030 (Reuters).
• The US see the moon as a key strategic asset and are proposing an agreed accord with its allies which would propose safety zones around moon bases free from rival countries or companies.
• The accord will provide a framework for companies hold mineral licenses in agreement with Canada, Japan, Europe countries, the UAE and others.
• Russia, which is seen as making threatening satellite manoeuvres toward US spy satellites is currently excluded from the accord.
• Why do we think Robert Friedland will be one of the first miners staking claims?

 

Iron ore futures drive 62% iron ore prices higher to $84.5/t in Dalian, China

• Blast furnace utilisation rates at 247 steel mills rose to 81.68% in China as of April 30 (Mysteel)
• Steel producers expect a resumption of construction activity combined with government stimulus to boost demand for steel in the second half
• One Chinese city is already offering to rebate of half of all property purchase tax back to buyers this year to help kick start the property market
• The government is also looking to give Rmb1,000 cash ($128) to buyers as a further incentive. Not sure that’s going to make much of a difference but the idea is nice.
• We expect other governments to look to incentivise buyers to restart property markets.
• The city of Wuhan is also working to increase land supply and encourage new property construction for small and medium size apartments.
• Prices for steel products are also rising in China similarly with Steel inventories in China falling 5.4% in late April 
• Inventories of steel products continued to fall in the run up to the country's Labour Day holiday, according to the China Iron and Steel Association. 
• Steel inventories in 20 Chinese cities stood at 16.24mt at the end of April, down 930,000t from the 20th of April (SMM).
• Ferro-vanadium and coking coal should also start to rise as demand rises against limited production.

 

Dow Jones Industrials		+0.56%	at	23,883
Nikkei 225		-2.84%	at	19,619
HK Hang Seng		+1.34%	at	24,189
Shanghai Composite		+0.63%	at	2,878

 

Economics

Germany – Industrial orders fell to the lowest level since records began in 1991 as business activity collapsed both domestically and overseas.

• Domestic contracts dropped by 14.8%mom and orders from overseas were down by 16.1%mom.
• “It is to be expected that production will decline sharply from March onwards due to corona,” the ministry said in a statement.
• Factory orders (%mom): -15.6 v -1.2 in February and -10.0 est.

 

UK – Construction activity dropped to the lowest level on record beating financial crisis lows of 2008/09.

• Construction PMI fell from 39.3 in March to 8.2 in April as activity drew to a halt due to the virus outbreak.
• Respondents also highlighted a severe impact on construction supply chains with closures at builders merchants and stoppages of manufacturing production.
• Outlook equalled the survey-record low seen in Oct/08 with firms highlighting concerns beyond simply reopening sites, but also cash flow difficulties across the supply chain, rising costs and severely reduced productivity.

UK – Treasury looking at cutting furlough support to 60% from 80% as costs spiral to £8bn for ~25% of all employees

• Currently each worker is paid up to £2,500/month by the government (The Sun)
• Shift patterns could also see offices split with teams working of four days in office followed by 10 days at home according to a new study by Imperial College

 

US-China trade deficit falls to $12bn in March from $16bn in February

 

Bank of China may compensate up to 20% of investments in oil WTI ETF products (Reuters)

• The Bank of China which may have sold >$9bn of ETFs products may compensate some $1.84bm of investors losses
• Some traders reckon the BoC has much of the loss on its own books despite rules banning the bank from prop trading in such instruments.

 

Hong Kong - retail sales fall 42% yoy in March 

• Q1 retail sales fell 35% yoy
• Q1 GDP fell  8.9% yoy

 

Spanish headline Business Activity Indexsaw further losses in April, 

• The index fell to a record 7.1 in April from 23.0 in March as the service sector suffered an unprecedented fall in activity.

 

Italy and Spain posted severe declines in the services sector PMIs with most of the lockdown toll falling on April.

• In Italy, Services PMI dropped to 10.8 v 17.4 in March what is the sharpest drop in more than 22 years of data collection.
• This drove the Composite PMI index down to 10.9, nearly half of 20.2 recorded in March.
• In Spain, Services PMI fell to 7.1, down from 23.0 in March, with the Composite PMI coming in at 9.2

 

India – Composite PMI nosedived into single digits in April as the entire nation remains under a lockdown.

• Orders fell, demand for goods and services was down with unemployment levels seen rising.
• Input and output prices dropped compared to March with respective rates of deflation more pronounced at manufacturers than service providers.
• Bloomberg estimates the economy to have contracted by 25% in Q2 assuming a gradual opening of the economy during the quarter.
• Markit Composite PMI: 7.2 v 50.6 in March.

 

Standard Bank South Africa PMI Apr: 35.1 (est 38.0; prev 44.5)

• Comair enters business rescue.

South Africa resumes wine exports but still not able to sell back home

• The good news is that South African vineyards are now able to export their wine
• The irony of the South African lockdown is that domestic sales are still banned
• We suspect that when the ban is lifted South African’s will be racing to bottle stores faster than Usain Bolt runs for a bucket of chicken nuggets

Kroondal chrome mine in South Africa will not restart after lockdown

• The mine near Rustenburg will not restart after lockdown measures are relaxed due to financial challenges in the market. 
• Kroondal is part of the Glencore-Merafe Chrome Venture, and has a production capacity of 1mtpa. 
• Chromite prices have risen by $10-20 per tonnes since the 14th of April to $200-220 per tonne on the 28th of April- however prices are down 47% compared to a year ago (Fastmarkets MB).

 

Ocado, an online grocery retailer, reported a 40.4%yoy increase in Retail Revenue in three months to the end of April as people increased online purchases during the lockdown.

• This compares to a 10.3%yoy in the previous quarter.

 

Airbnb will be cutting 25% of its workforce and is expecting sales to come in at less than half the levels recorded in 2019.

 

Currencies

US$1.0833/eur vs 1.0890/eur yesterday.  Yen 106.28/$ vs 106.77/$.  SAr 18.383/$ vs 18.369/$.  $1.245/gbp vs $1.246/gbp.  0.645/aud vs 0.645/aud.  CNY 7.089/$ vs 7.063/$.

 

Commodity News

Precious metals:          

Gold US$1,705/oz vs US$1,695/oz yesterday - South Africa's Rand Refinery to restart 

• Africa's top gold refinery is restarting its gold smelting plant as the country relaxes its national lockdown (Bloomberg).
• The refinery is Africa's only refiner accredited by the LBMA, and the return of the smelter is likely to contribute to easing physical supply disruptions in the gold market. 
• The announcement comes after yesterday's announcement that Swiss refineries are ramping up production to ease supply concerns in the gold market. 

   Gold ETFs 96.6moz vs US$96.4moz yesterday

Platinum US$773/oz vs US$766/oz yesterday

Palladium US$1,820/oz vs US$1,863/oz yesterday

Silver US$15.16/oz vs US$14.78/oz yesterday

            

Base metals:    

Copper US$ 5,213/t vs US$5,146/t yesterday - Copper prices rise whilst gold falls on easing virus restrictions 

• Copper prices neared one-week highs this morning, as the easing of restrictions raised the demand prospects of industrial metals. 
• The price of copper has risen 18% since the 19th of March, as increased demand from China and supply issues have supported prices- however copper is down 16% so far this year. 
• Benchmark three-month copper on the LME was up 0.9% at $5,203/t, having hit its highest since the 30th of April at $5,212/t earlier in the session (Reuters). 
• Gold prices fell this morning, as the prospect of increased global economic activity reduced the precious metal's safe-haven appeal. 
• The price of gold has fallen this week due to increased sentiment among traders and investors, as seen by rallies in global stock markets and gains in crude oil prices (Kitco). 
• Spot gold eased 0.3% to $1,701/oz earlier this morning, whilst US gold futures were steady at $1,711/oz. 

Aluminium US$ 1,486/t vs US$1,483/t yesterday

Nickel US$ 12,235/t vs US$11,845/t yesterday

Zinc US$ 1,938/t vs US$1,912/t yesterday

Lead US$ 1,638/t vs US$1,642/t yesterday

Tin US$ 15,250/t vs US$15,150/t yesterday

            

Energy:            

Oil US$30.9/bbl vs US$29.2/bbl yesterday

Natural Gas US$2.063/mmbtu vs US$2.121/mmbtu yesterday

Uranium US$34.05/lb vs US$34.05/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$80.9/t vs US$80.1/t

Chinese steel rebar 25mm US$528.8/t vs US$527.0/t

Thermal coal (1st year forward cif ARA) US$52.5/t vs US$51.9/t – US Coal companies receive $31m in US stimulus loans for small businesses 

• The US Small Business Administration has given more than $31m in loans from the Paycheck Protection Programme to publicly-traded coal mining companies, according to Securities and Exchange Commission filings. 
• The allocation of funds has been met with criticism from environmentalists and people who think that other industries such as healthcare should have preferential treatment over receiving the funds. 
• Coal companies argue that coal is "critical to supporting hospitals, health care providers and others on the front line", and also that coal is absolutely critical and should be preserved for national security reasons (Bloomberg). 

Coking coal swap Australia FOB US$108.5/t vs US$106.0/t

 

Other:   

Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$37,170/t vs US$37,306/t

Lithium carbonate 99% (China) US$5,290/t vs US$5,309/t

Ferro Vanadium 80% FOB (China) US$27.5/kg vs US$27.5/kg

Antimony Trioxide 99.5% EU (China) US$4.9/kg vs US$5.0/kg

Tungsten APT European US$215-225/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$520/t vs US$530/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,425/t vs US$2,450/t

 

Battery News

Pioneering use of MRI on sodium ion batteries

• Birmingham and Nottingham University teams have developed an MRI technique to observe movement and deposition of sodium metal ions in a sodium battery under reaction conditions. (The Engineer)
• The team has been able to observe what is going on inside the battery while it is operational providing insights into the behaviour of the sodium as it interacts with anode and cathode materials.
• Technique also enables observer to monitor the growth of dendrites which can cause the battery to fail.
• It is hoped the technique will enable faster evaluation of new battery materials and accelerate route to market. (ChemEurope)
• The results are published in Nature Communications.

 

EV holds up as auto market collapses

• As new car registrations collapse to a post war low 4231 in April EVs experienced a surge in popularity with the Tesla Model 3 at the top of the charts. (Telegraph)
• Auto sales plunged 97.3% from the same time last year while production fell 40% to 79,000 cars in March.
• In comparison battery powered EV’s sales declined just 10% and accounted for 30% of total sales. (Business Green)
• 658 Model 3’s was delivered to customers last month, 15% of total auto sales. The Tesla numbers were boosted by UK pre-orders arriving to customers.
• The Tesla Model 3 and Jaguar I-Pace accounted for 75% of BEV registrations in the month. (Inside EVs)

 

US takes up the clean energy cause as pandemic clears the air (Electrek)

• As the Federal government weakens emissions standards local authorities and business have stepped up the push towards clean energy.
• Tucson Electric Power in Arizona is covering up to 85% of costs of installing EV charging stations for businesses and local non-profits.
• The Chicago City Council has passed an ordinance mandating new commercial developments are equipped to support EVs. 20% of parking spots must be ready for EV chargers and the bus fleet in the city will be all electric by 2040.
• Connecticut is forging a path towards 10x the current number of EVs on roads by 2025. The state continues to process rebates of up to $1500 depending on range under their CHEAPR scheme.
• By 2025 Denver wants EV’s to make up 15% of vehicle registrations in the city as revealed in their EV action plan released this month.
• New Jersey Governor Phil Murphy has signed Bill 2252 into law which provides a rebate of up to $5000 per EV for the next 10yrs among other measures.

 

Company News

Cora Gold* (CORA LN) 5.3p, Mkt Cap £10m – First drilling results from the Madina Foulbe Permit in Senegal

• The Company released the first set of drilling results from the 2,000m RC drilling programme at the Madina Foulbe Permit in eastern Senegal.
• The team completed 642m of the programme so far before works have been temporarily suspended due to COVID-19 restrictions.
• Drilling is focused on two priority targets including Tambor and Madina, 2.5km and 2km long gold-in-soil anomalies.
• At Tambor, shallow RC drillholes returned broad mineralised intersections with grades ranging from around 0.1g/t to around 0.7g/t, while in places grades reach up to 16.4g/t over 1m.
• Results support historic RAB drilling data that showed intersections of up to 41.2g/t over 3m.
• Current selected results include:
  • 47m at 0.63g/t from 27m including 1m at 16.4g/t from 40m (MFC007);
  • 36m at 0.53g/t from 6m including 3m at 3.78g/t from 12m (MFC001);
  • 27m at 0.47g/t from 45m (MFC002).
  • Drilling at the Madina target is yet to be started.

Conclusion: First results from the Madina Foulbe return wide although low grade intersections with the team looking forward to resuming drilling once virus related restrictions are lifted.

*SP Angel acts as Nomad and Broker to Cora Gold

 

Nano One Materials (NNO CN) C$1.28, Mkt cap C$101m - $3m of new funding from British Columbia

• Nano One Materials reports the Province of British Columbia is contributing $3m to their ‘caling of Advanced Battery Materials Project’ adding to the $5.25m previously announced.
• The funds from the Ministry of Energy, Mines and Petroleum Resources are to leverage project milestones, due diligence and reporting structures and will directly support scale up activities with VW, Pulead, Saint-Gobain and others.
• The company has developed a technology platform to improve the production and performance of cathode powders used in lithium-ion batteries. The technology makes a range of lithium based composite powders for batteries

 

Ncondezi Energy (NCCL LN) 4.35p, mkt cap £12.8m – Agreement with GridX

• Ncondezi Energy reports that it has completed an agreement with GridX Africa Development (GridX) to develop commercial and industrial solar and battery storage projects.
• The company says that it has an initial portfolio of seven ʺprojects with a combined potential installed solar capacity of 2.8 MWp and 4.5 MWh of battery storageʺ.
• The company says that the ʺInitial Project investments into qualifying projects, subject to funding, represent an annuity revenue stream potential of over US$750,000 per annumʺ.
• The projects are to be funded individually taking into consideration that they should meet specific criteria, including the existence of a signed offtake agreement, the use of established proven technology, that required permits and consents are in-place and that they ʺGenerate an ungeared equity post tax IRR to Ncondezi of at least 10%ʺ.
• Welcoming the agreement with GridX, Ncondezi’s CEO, Hanno Pengilly said that ʺThe Initial Project pipeline includes 7 potential projects covering a diverse range of sectors from hospitality and tourism to food and drink manufacturing and retail centres ensuring a wide range of potential offtakers and securing against any downturn in a single industry. These projects, along with our existing solar and energy storage facility currently under construction, represent a combined installation potential of 3.2 MWp of solar PV and 5.5 MWh of storage with potential revenues of over US$950,000 per annum. The Initial Projects are expected to be developed in a phased approach with no immediate funding requirements until the end of the yearʺ.

 

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.

 



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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