Britain

Today’s Market View – Condor Gold, Kavango Resources and Strategic Minerals.

SP Angel . Morning View . Friday 22 11 19

Gold gains due to US-China uncertainty

BMW to spend over €10bn on battery cells from Chinese manufacturer

MiFID II exempt information – see disclaimer below

Condor Gold (LON:CNR) – Permit submissions for high grade feeder pits

Kavango Resources (LON:KAV) – Drilling intersects high-level gabbroic intrusive at 53m

Strategic Minerals* (LON:SML) – Leigh Creek feasibility progress

BMW to spend over €10bn on battery cells from Chinese manufacturer (Tech Crunch)

  • Manufacturers Contemporary Amperex Technology Co. and Samsung SDI will supply the cells.
  • The deal comes just days after BMW unveiled its first purely electric premium mid-size sedan, called the i4 which will be available in 2021.
  • The automaker also signed a long-term supply contract with Samsung SDI for its fifth-generation electric drivetrains.
  • BMWs contract with Samsung SDI is worth €2.9bn and valid from 2021 to 2031.

Gold gains due to US-China uncertainty (Reuters)

  • Fresh doubts today over the prospects of an interim trade deal being struck between the US and China has seen gold rise.
  • Gold was up 0.2% at $1,467.26/oz earlier this morning, and US gold futures rose 0.3% to $1,467.40/oz.
  • According to an analyst at SMC Comtrade, the market doesnt have faith in a trade deal, and doesnt think that the second round of trade talks will be very successful.
  • This is despite Beijing inviting top US trade negotiators for a new round of face-to-face talks.
  • The Fed has cut interest rates three times this year to help shield the economy from the effects of the trade war, however this increases the appetite for gold as it reduces the opportunity cost for holders of bullion.

Vanadium prices rise further in the US as market recovers from recent low

  • Consumers are seen returning to the vanadium market with prices rising in the US.
  • Ferro-vanadium prices rose 4.3% in Pittsburgh to $10.75-11/lb yesterday according to FastmarketsMB.
  • Offered prices in Europe are rising indicating that traders sense new buying interest in the market and may be able to command higher prices.
  • Ferro-Vanadium prices in China appear stable with pricing indicated at $28-30/kb fob China. Vanadium Pentoxide remain around $6.2-6.4/lb fob China.

121 Mining Conference – optimism on future metals demand and high prices shines through

  • Our team of four mining analysts met with many of the more interesting companies at the 121 Mining conference event this week.
  • Please contact one of our mining analysts for our best mining ideas in town.
  • Commodity experts appear hugely optimistic about the prospects for metals with strong demand forecast to come through particularly for the battery metals.
  • Metals markets are seen as being manipulated by China and its agencies to the benefit of their manufacturers and stockpiles.
  • The event hosted a record number of companies in attendance (>140 corporates) taking over two floors of the old GLC building.
  • There were also many more family offices and sophisticated investors (>400 at the event) looking for mining ideas but with fewer analysts and independent experts to help in their direction.
  • Curiously, there seemed to be a level of optimism amongst junior miners which seemed at odds with the sector given the lack of recently available funding from institutions for smaller companies.
  • Jamie Strausss new venture on helping growing companies to meet new ESG Environmental, Social & Governance requirements for funds looks like an important service in a world where investment funds are under increasing pressure to only hold companies which conform to these requirements. Sadly the agencies which give ESG scores are said to be making mistakes in their assessment of many smaller firms and companies need to be aware of their ratings if they want new investment from institutional funds.
  • Specialist research services like Roskill, Benchmark Minerals Intelligence and Adamas are bringing confidence to the market supporting statistics on growth in the battery metals sector.

Dow Jones Industrials -0.20% at 27,766

Nikkei 225 +0.32% at 23,113

HK Hang Seng +0.48% at 26,595

Shanghai Composite -0.63% at 2,885

FTSE 350 Mining +1.83% at 18,263

AIM Basic Resources +0.75% at 2,114

Economics

US/China – Vice Premier Liu He invited Robert Lighthizer to Beijing for further talks later this month.

  • Washington is likely to postpone further tariffs scheduled for mid-December if there is no Phase One deal before then, according to the South china Morning Post.
  • Chinese President Xi thrown his support behind the preliminary agreement arguing it should be on the “basis of mutual respect and equality” in a first comment on the matter.
  • The mood remains somewhat cautiously optimistic and hopeful that both sides to negotiations will reach an agreement and avoid further escalation.
  • US equity index futures are pointing to a slightly stronger opening while both copper and gold are broadly flat this morning.

Eurozone – Manufacturing remained weak while services recorded a slowdown in growth rates dragging the composite PMI index for the Eurozone lower in November, Markit reports.

  • Steep decline in manufacturing seems to be spreading to the services sector (Services PMI at a 10 month low) with composite new orders dropping for a third consecutive month and employment declined to the lowest in almost five years.
  • Inflation cooled further, running at the lowest for over three years.
  • In Germany, the fourth quarter so far appears to be the worst since the third quarter of 2012 with manufacturing contraction pace moderating slightly as services growth slowed to the weakest since Sep/16.
  • France performed better with business activity climbing to the strongest level in three months putting it on course for the best quarter of the year.
  • The rest of the euro area saw production in decline, albeit only marginally, for the first time since Jul/13 with increased pace of decline in manufacturing output accompanied by a near-stalling of service sector growth.
  • “…a fresh concern is that the rest of the region has slipped into decline for the first time since 2013,” Markit wrote.
  • “Business remains concerned by trade wars, Brexit and a general slowdown in demand, with heightened uncertainty about the economic and political outlook driving further risk aversion.”
  • Eurozone Manufacturing PMI: 46.6 v 45.9 in October and 46.4 forecast.
  • Eurozone Services PMI: 51.5 v 52.2 in October and 52.4 forecast.
  • Eurozone Composite PMI: 50.3 v 500.6 in October and 50.9 forecast.

UK – Labour Leader Jeremy Corbyn presented the most radical manifesto in recent history that involves a wide nationalisation programme and billions of government spending paid by higher taxes.

  • Total spending commitments are estimated at £83bn and would include nationalisation of Royal mail, the water industry, rail, the national grid and substantial parts of BT.
  • Additionally it would cover a 5% increase in pay for public sector workers and a vast expansion of free social care and cancellation of tuition fees.
  • Introduction of rent controls is on the agenda as well as the proposal requiring firms to transfer 10% of their shares into an “Inclusive Ownership Fund” with dividend proceeds to be distributed between employees.
  • The party plans to raise the corporation tax to 28% up from planned 18% starting from Apr/20 and hike taxes for those earning above £80-125k per annum.
  • An increase in capital gains tax as well as a one-off £11bn “windfall tax” levied on the UKs oil companies are considered.
  • Commenting on the manifesto, the nations Institute for Fiscal Studies commenting on Labour plans argued tax increases are unlikely to be limited to “companies and the rich” and would have to be more widely shared.
  • Meanwhile, the UK has been suffering from lack of business investment as companies paused any significant project capital commitments in the wake of increased uncertainties over Brexit and general elections outcome.
  • Growth of 0.6% and 1.9% in 2020 and 2021 in investments forecast by markets may be significantly overestimated should Labour manage to win the coming general elections.
  • On latest elections polls, Conservatives are reported to be leading Labour by 16pp.

UK PMI data slumps to a 40-month low in November ahead of general elections next month.

  • “New orders fell at the fastest pace since Ju;y 2016, as domestive and overseas clients, worn-out by continuing political indecision withdrew from the marketplace, reducing overall activity in the manufacturing and services sectors,” Markit commented on the data.
  • “The weak survey data puts the economy on course for a 0.2% drop in GDP in the fourth quarter, and also pushes the PMI further into territory that would normally be associated with the Bank of England adding more stimulus to the economy.”
  • The pound dropped ~0.5% against the US$ following the release of the data.
  • UK Manufacturing PMI: 48.3 v 49.6 in October and 48.9 forecast.
  • UK Services PMI: 48.6 v 50.0 in October and 50.1 forecast.
  • UK Composite PMI: 48.5 v 50.0 in October and 50.2 forecast.

Germany – fines BMW, Daimler and VW over steel cartel (Deutsche Welle)

  • The three automakers were together fined €100m on Thursday for forming a cartel to fix steel prices.
  • Authorities said that the companies met regularly with steel producers between 2004 and the end of 2013" to discuss uniform surcharges for purchasing the raw material.
  • Unlawful prices resulting from these cartel meetings were in place until at least 2016, referring specifically to “long steel”.

Currencies

US$1.1061/eur vs 1.1073/eur yesterday. Yen 108.55/$ vs 108.53/$. SAr 14.628/$ vs 14.771/$. $1.288/gbp vs $1.294/gbp. 0.679/aud vs 0.680/aud. CNY 7.039/$ vs 7.037/$.

Commodity News

Gold US$1,472/oz vs US$1,472/oz yesterday –

Gold ETFs 81.0moz vs US$81.0moz yesterday

Platinum US$913/oz vs US$915/oz yesterday – Sibanye-Stillwater to quit World Platinum Council (FT)

  • The industry body seeking to promote investor demand has been dealt a blow as the worlds largest producer of the metal has decided to leave.
  • The miner has decided to leave the World Platinum Investment Council because investment demands would be unlikely to grow as much as demand from automobiles, industry and jewellers.

Palladium US$1,776/oz vs US$1,760/oz yesterday

Silver US$17.21/oz vs US$17.11/oz yesterday

Base metals:

Copper US$ 5,850/t vs US$5,830/t yesterday

Aluminium US$ 1,741/t vs US$1,743/t yesterday

Nickel US$ 14,285/t vs US$14,404/t yesterday

Zinc US$ 2,289/t vs US$2,303/t yesterday

Lead US$ 1,972/t vs US$1,980/t yesterday

Tin US$ 16,445/t vs US$16,252/t yesterday – Tin jumps 2.4% yesterday (Fastmarkets MB)

  • Three month tin rose by 2.4% at the close of trading on Thursday.
  • Tins outright price on the LME closed at $16,400/t up from Wednesdays closing price of $16,020/t.
  • The price of tin is down by more than 20% since the start of the year, largely due to poor demand, weakening end-use consumption, macroeconomic tensions and a significant increase in LME stocks.
  • LME stocks are at 5,790t, compared to just 555t in May.

Energy:

M&A activity builds momentum across the sector

  • The past 12 months has seen the acquisition of Faroe Petroleum (FPM.L) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA.L) by Seplat Petroleum (SEPL.L); and Amerisur Resources (AMER.L) currently engaged in a competitive bid.
  • Aramcos proposed IPO is another good barometer for sector sentiment in our view. Saudi Arabia has yet again delayed the much-hyped listing by at least several weeks, with international investors seemingly not buying the Saudi insistence that the biggest oil company in the world is worth US$2tn.

Oil US$63.9/bbl vs US$62.2/bbl yesterday –

  • Reuters have reported that OPEC+ are likely to extend existing oil output cuts when they meet next month until mid-2020, with non-OPEC oil producer, Russia, supporting Saudi Arabias push for stable oil prices amid the listing of state oil giant Saudi Aramco.
  • OPEC meets on 5 December in Vienna, followed by talks with a group of other oil producers, led by Russia. The current oil supply cuts run through to March 2020.
  • US crude futures were up 0.7% at US$62.3/bbl on the New York Mercantile Exchange

Natural Gas US$2.570/mmbtu vs US$2,575.000/mmbtu yesterday

  • Natural gas prices rebounded yesterday following a larger than expected draw in natural gas inventories according to a report from the Department of Energy
  • There is one tropical disturbance in the lower Atlantic that NOAA projects 10% chance of turning into a tropical cyclone over the next 48-hours

Uranium US$26.00/lb vs US$26.00/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$85.1/t vs US$85.1/t

Chinese steel rebar 25mm US$608.1/t vs US$599.0/t

Thermal coal (1st year forward cif ARA) US$64.7/t vs US$64.5/t

Coking coal futures Dalian Exchange US$186.9/t vs US$184.8/t

Other:

Cobalt LME 3m US$36,000/t vs US$36,000/t

NdPr Rare Earth Oxide (China) US$40,050/t vs US$39,833/t

Lithium carbonate 99% (China) US$6,675/t vs US$6,686/t – SQM – profits fall by 30% in Q3 (FT)

  • The second largest lithium producer has suffered due to sustained weak prices and particularly weak Chinese demand for the metal.
  • Earnings in Q3 dropped 28% to $60.5m and revenue fell almost 13% to $473.1m.
  • The price of lithium is currently trading at $9,500 compared to $18,000 according to S&P.

Ferro Vanadium 80% FOB (China) US$29.5/kg vs US$29.5/kg

Antimony Trioxide 99.5% EU (China) US$5.2/kg vs US$5.2/kg

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

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

Battery News

Teslas new Cybertruck smashed during demonstration (BBC)

  • Embarrassingly, the trucks windows were smashed during a demonstration supposed to show how hard they were to break.
  • The pickup truck which looks like a futuristic armoured vehicle, would have a starting price of $39,900 and a maximum range of 500 miles or more.

Company News

Condor Gold (LON:CNR) 20p, Mkt Cap £18.9m – Permit submissions for high grade feeder pits

  • Condor Gold reports that it has submitted Environmental and Social Impact Assessments for environmental permits to develop the America and Mestiza high-grade feeder pits at its La India project in Nicaragua.
  • The proposed pits contain around 200,000t of high grade mineralisation at an indicated grade of around 10g/t gold which “has the potential to increase annual production from open pit material by 50% to 120,000 oz gold p.a. for a seven year life of mine”.
  • The company comments that “The addition of the feeder pits will mean over 1 million oz gold mineral resource will be permitted for production. … [in addition they] … have the potential to materially enhance the Project economics as the head grade for the Mestiza open pit of 120,000 oz contained gold is expected to be circa 5.8 g/t gold."
  • Permits to develop the feeder pits would supplement the already permitted development of the main La India pit where pre-feasibility level analysis shows average production of approximately 79,00oz pa of gold production at an average all-in sustaining cost of US$690/oz.
  • In addition to the improved grades, the America and Mestiza location “approximately 3km and 4km, respectively, from the location of the processing plant for the permitted La India open pit” provide what appears to be an obvious bolt-on addition to the larger La India project which already shows a competitive estimated production cost. The proximity to already permitted development in a project that the regulators alreRead More – Source