MiFID II exempt information – see disclaimer below
Altus Strategies (LON:ALS) – BUY, Target 132p – 10,000m of drilling underway at Diba
KAZ Minerals (LON:KAZ) – Buyout faces growing opposition from minority shareholders
Petra Diamonds (LON:PDL) – Reports signs of an improving diamond market
Tietto Minerals (ASX:TIE) – Extended 70,000m drilling programme for PFS/DFS at Abujar
US dollar -to weaken up to 20% next year according to Citi analysts
Analysts at Citibank reckon the distribution of vaccines next year will help the US dollar fall by up to 20% next year (Reuters)
They also see potential for the US dollar weakness to be front-loaded effectively accelerating losses in the dollar
Citi assume the Federal Reserve will maintain loose monetary policy even if inflation rises alongside economy recovery
This will allow US bond yields to rise.
The outlook suggests investors may look to rotate funds out of the US and into other recovering markets
Conclusion: the prognosis is good for US-dollar denominated commodities and mining companies which stand to benefit from rising commodity prices, lower dollar-denominated costs and strengthening demand from economic growth
UK – Boris Johnson lays out plans for ‘green industrial revolution’
Boris Johnson lays out plans this week for a “green hydrogen industrial revolution”. The Cumbrian trial, led by energy consultancy DNV GL, is a hydrogen project currently taking place in the UK.
It involves 3 houses fitted with boilers running on just hydrogen to research if it can remove emissions from polluting economy sectors.
Governments and companies intend to produce hydrogen without releasing CO2 – either through electrolysis of water (green hydrogen) or by capturing safely securing carbon emissions when it’s produced form natural gas (blue hydrogen).
Hydrogen supporters want the government to produce a hydrogen strategy. UK ministers said they will respond early next year, and an energy white paper should be released before Christmas.
Some warn of hydrogen risks including leakage. British Gas has backed out the rollout of electric heat pumps in homes as it is unclear when hydrogen will be ready for domestic use.
Tianqi Lithium, a Sichuan-based lithium producer says it may not be able to repay a US$1.88 billion loan this month (SCMP)
Loan helped fund the company’s US$4.1 billion acquisition of Chilean producer SQM in May 2018, just before lithium prices crashed.
Recent interviews:
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.
APEX survey rankings for SP Angel commodity forecasts: 2nd in Gold, 2nd in Copper, 2nd in Nickel, 1st in Tin, 5th in Iron ore.
The survey takes forecast from 21 analysts from commodity traders, banks, economics and specialist commodity forecasters
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Economics
RCEP – The Regional Comprehensive Economic Partnership creates the world’s biggest trading bloc
The new Trading alliance includes the 10 members of the ASEAN ‘Association of South-East Asian Nations’ plus Australia, China, Japan, New Zealand and South Korea.
The new trading bloc covers around 30% of the world’s population, trade and GDP but has no dramatic liberalisation of regional trade.
The deal still needs to be ratified by nine of the 15 nations.
China is the winner here as it extends its belt and road transport links through the region.
China – Property investment rose 6.3% yoy for the year to date to October vs +5.6% in September
The year-to-date house price index also rose 4.3% yoy vs 4.6% in the previous month
Home sales rose +8.2% for the year-to-date yoy by end October vs +6.2% in September and 1.6% in August (Mingtiandi)
Chinese housebuilders invested Rmb8.84tn ($1.3bn) to end August up 12% yoy.
China’s top five property developers saw >Rmb100bn yuan of sales milestone through September and October which is seen as the peak season for home sales in China.
Alibaba’s giant ‘Singles Day’ promotional deals is expected to lift sales still further
US – Hospitalisations continue to rise with more than 70,000 recorded on the latest count marking a record high since the pandemic began with more states and cities announcing new restrictions.
The number of infections exceeded 11 million on Monday, a little more than a week after crossing the 10m mark, which is the fastest time it has taken for the national tally to grow by a million cases, Reuters reports.
Moderna released positive trial results yesterday boosting a risk on sentiment and raising hopes the treatment may help to reduce infections in the future and avoid future COVID-19 related lockdowns/restrictions.
The experimental vaccine is reported to be ~95% effective based on interim data involving 30,000 people with 95 infections recorded (90 in the pacebo group and 5 among vaccinated).
Unlike Pfizer‘s vaccine, Moderna has logistical advantages as the shot can be stored at normal fridge temperatures making it easier to transport and distribute.
UK – Road tax to plug the EV tax shortfall
The British government is mulling a national road tax to mitigate the GBP40bn tax shortfall created by the switch to EVs.
The changes would be to cover the tax hole left by a reduction in fuel demand and VAT on fuel and excise duty.
UK motorists currently pay 57.95p in fuel duty per litre, providing 1.3% of the national income (GBP28bn).
A similar ban was suggested under Tony Blair’s government but was quashed following overwhelming resistance and a petition with 1.8m signatures.
Christmas may still be cancelled – Public Health chief warns that households might not be allowed to mix after the lockdown ends
Coronavirus infection rates climbed higher in data presented yesterday in an unexpected rise in the statistics.
The UK government like many others is looking at .
UK – The Moderna vaccine will not be available for the UK until spring , while the Pfizer/BioNTech jab is likely to be available from as early as the end of the year, according to the UK housing secretary.
Separately, the secretary added that any extension of lockdown or reintroduction of the tier system in England would not be made until the end of the month.
Grenfell Towers – Celotex deliberately cheated to pass fire safety test in 2014
Staff at Celotex added non-flammable magnesium oxide boards into a testing rig to reduce the speed and height of the fire spread and removing reference to the boards in marketing material about the insulation. (Grenfell Enquiry and BBC)
The reference was changed to win the Grenfell Tower contract over Celotex’s competitors.
We remain unsure over who will pay the massive bill for the removal and replacement of flammable cladding material on thousands of flats in the UK.
France – Capacity of hospitals and intensive care units remain under stress, although, the number of new hospitalisations has started to level off recently with three weeks into the latest lockdown, French Health Minister said.
South Africa – South Africa has arrested ANC Secretary General, Ace Magashule
His former personal assistant has turned states witness and is reported to have directly implicated Magashule in requests for money from slain businessman Igo Mpambani. Magashule is also accused of a R255m asbestos audit corruption case.
South Africa’s hospitals are reported to be likely under-reporting COVID-19 figures (Bloomberg)
The report speculates that the COVID-19 death toll may be much higher than official figures.
A previous report suggested Townships may have seen >40% infection indicating that herd immunity may not be so far away..
Social distancing and isolation are virtually impossible in close-knit Township communities.
South Africa preparing to reopen to all tourists who can present a negative COVID-19 test.
The move is a clear sign that rescuing the economy is a priority for the South African government
Germany – Foreign Minister to continue to look for solution to unblock EU Recovery funds
The situation highlights how slow the EU is in its effective response to crises.
By contrast China has an immediate and effective response with >4,000 construction projects started in October
The US is slower than China, but we estimate is normally six months to a year ahead of the EU in effective stimulus to crises.
The UK appears to be somewhere in between the US and EU in terms of effective stimulus as the BoE and Treasury move quickly but planning permission for new infrastructure and construction is slow.
Ethiopia – The northern region of Tigray has been warned that a three-day deadline for local rebel forces to lay down arms had expired paving the way for government forces for a final push on the capital, PM Abiy said.
“The three-day ultimatum given to Tigray Special Forces and the militia to surrender… has ended today… the final critical act of law enforcement will be done in the coming days,” PM said on Facebook.
The conflict between government forces and the local ruling party armed units has been going for two weeks now with the Tigray People’s Liberation Front accused of armed mutiny.
Nicaragua – Hurricane Iota hits north-eastern coast of Nicaragua
Zambia expect to strike deal with Glencore over Mopani despite debt crisis
Zambia expect to conclude talks over buying Glencore’s stake in Mopani within a month, according to an official from the country’s Ministry of Mines.
The country wants to raise its holding after clashing with Glencore earlier this year over the company’s plan to place Mopani under care & maintenance- causing Zambia to threaten to revoke Glencore’s mining license in April.
The Zambian government’s investment vehicle ZCCM-IH own 10% of Mopani, with Glencore holding 73.1% and First Quantum owning 16.9%.
The secretary of the Mining Ministry expects a deal to be announced in the coming weeks, although no money will come from the treasury- however according to the ministry’s spokesman, “financing is the least of the worries for the Zambian government”.
Zambia relies on copper for about 70% of its export earnings and expects output to amount to 764,000 tonnes this year, short of the nation’s target of 1mt (Bloomberg).
Currencies
US$1.1864/eur vs 1.1862/eur yesterday. Yen 104.35/$ vs 104.37/$. SAr 15.365/$ vs 15.404/$. $1.321/gbp vs $1.321/gbp. 0.731/aud vs 0.730/aud. CNY 6.556/$ vs 6.572/$.
Commodity News
Precious metals:
Gold US$1,890/oz vs US$1,894/oz yesterday
Gold ETFs 110.0moz vs US$110.3moz yesterday
Platinum US$925/oz vs US$906/oz yesterday
Palladium US$2,324/oz vs US$2,349/oz yesterday
Silver US$24.62/oz vs US$24.93/oz yesterday
Base metals:
Copper US$ 7,097/t vs US$7,137/t yesterday
Aluminium US$ 1,957/t vs US$1,943/t yesterday
Nickel US$ 15,780/t vs US$16,110/t yesterday
Zinc US$ 2,679/t vs US$2,661/t yesterday
Lead US$ 1,918/t vs US$1,901/t yesterday
Tin US$ 18,865/t vs US$18,655/t yesterday
Energy:
Oil US$44.0/bbl vs US$43.7/bbl yesterday
Natural Gas US$2.724/mmbtu vs US$2.873/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$120.3/t vs US$119.2/t – Iron ore arrivals at Chinese ports fell 980,000t last week
Imports of iron ore amounted to 13.35mt last week- down 0.98mt from the week prior, although this was 1.8mt higher than the same period last year (SMM News).
Total stocks of iron ore in China has continued to decline in October and November, with stocks at 1.9mt on the 5th of November- down 9.1% over a two-week period and the lowest since Mysteel expanded its survey in January 2019.
Chinese steel rebar 25mm US$623.5/t vs US$619.7/t – Stainless Steel – Chinese futures for stainless steel have fallen to a 5-month low on concerns over high output
Stainless steel makers have cut prices in anticipation of high production levels and new capacity coming online (Reuters).
Producers of 300 series austenitic chrome-nickel (17-19% Cr, 8-10Ni) stainless cut prices further
If nickel prices continue to rise then stainless steel producers may move to Ferritic stainless steel with more chrome and virtually no nickel
Iron ore prices continue to rise on strong demand for high-grade seaborne iron ore.
Thermal coal (1st year forward cif ARA) US$57.1/t vs US$57.3/t
Coking coal swap Australia FOB US$112.0/t vs US$114.3/t
Other:
Cobalt LME 3m US$32,835/t vs US$32,835/t
NdPr Rare Earth Oxide (China) US$52,623/t vs US$52,492/t
Lithium carbonate 99% (China) US$5,720/t vs US$5,630/t
Ferro Vanadium 80% FOB (China) US$27.0/kg vs US$27.0/kg – European vanadium alloy prices near two-month highs
Vanadium prices in Europe jumped on Friday, with spot market interest increasing and the alloy market trading close to a two-month high, according to Fastmarkets MB.
Fastmarkets’ latest price assessment of ferro-vanadium, basis 78% V min, 1st grade, ddp Western Europe, was $24.0-24.9/kg on Friday, the highest since the end of September when prices were $24.45-25.0/kg.
Prices have risen on increased buying appetite from end-users within the market, along with traders also being short of material.
Last Thursday, Ferro-Vanadium prices rose 3.8% in Western Europe as prices rise to $23.5-24.9/t, whilst rising 2% in China rise to $24-26.5/t.
Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg
Tungsten APT European US$220-225/mtu vs US$220-225/mtu
Graphite flake 94% C, -100 mesh, fob China US$440/t vs US$440/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,300/t vs US$2,275/t
Spodumene 6% Li2O min, cif (China) US$375/t vs US$385/t
Battery News
Electric tractors allow farmers to participate in EV revolution
Ideonomics recently acquired 15% of the electric tractor company Solectrac’s capital.
One of the best parts of the electric tractors is that they do not need the huge amount of infrastructure necessary for solar power and electric cars.
By putting a solar panel on an electric tractor not only powers the tractor but removes the need for maintenance that are needed for moving parts of a diesel engine.
With the introduction of lithium batteries, electric vehicle engines on tractors can operate for much longer without maintenance. Switching to electric also eliminates noise pollution and immediate exhaust emissions and particles that come from diesel emissions.
The global agricultural tractor market is currently valued at $75 billion, with the North American agricultural tractor market expected to reach $20 billion by 2023.
Zenobe Energy secures funding from Infracapital
Zenobe has received GBP150m in funding from Infracapital, the infrastructure equity investment division of M&G.
The funding is to support the growth of Zenobe’s grid-scale battery services and EV charging infrastructure. GBP350m of debt facilities provides Zenobe with GBP450m of total capital for such projects.
Zenobe has 170MW of grid scale batteries in operation or under construction.
The additional funding could enable the Company to deliver an additional 500MWh of battery capacity and 1000 electric buses as they look to expand internationally.
Infracapital has previously invested in Recharge Infra which provides public vehicle charging in the Nordics alongside other renewable energy projects.
New York announces further investment in charging infrastructure
New York has announced $11m of funding for fast charging infrastructure in the state, focusing on areas with limited access to fast charging.
The funding will cover 80% of construction costs, with 25% of stations to be located with 0.5 miles of a disadvantaged community.
A minimum of four charging stations will be required to be installed per site at four or more locations.
In July New York announced $701m of funding for EV charging infrastructure, covering the installation of 53,773 Level 2 and 1,500 DCFC stations by 2025.
In both cases the funding is drawn from the proceeds of the Volkswagen diesel emissions scandal.
New York has 5,212 public charging points installed, 2nd only to California with 28,381 public charging points (AFDC Energy).
Ford considering following Tesla’s lead
Ford CEO Jim Farley has suggested the Company is considering making EV batteries in house.
In the short term Ford is likely to continue sourcing batteries from existing suppliers, relying on LG Chem and SK Innovation batteries electric Mustang and F-150 Models respectively (Green car reports)
Elon Musk revealed at Tesla’s battery day that the Company intends to start making battery cells in-house, supplemental to cells received from existing suppliers.
Musk cited potential bottlenecks in the supply chain as the motivating factor behind moving some production in house and a desire to vertically integrate the supply chain.
Elsewhere GM has its Ultium cells produced in collaboration with LG Chem while VW and Nissan are also working on in-house battery production (Inside EVs)
Company News
Altus Strategies (LON:ALS) 58p, Mkt Cap GBP41m – 10,000m of drilling underway at Diba
BUY – 132p
The Company is launching 10,000m RC drilling programme at the 100% owned Diba gold project in western Mali.
The programme will be focused on growing the scale of the project testing on strike and down dip extensions as well as five priority targets identified within 3km of the current resource.
Results from the programme are expected to be available over the coming weeks and will be used to update the current MRE and PEA studies.
The Company released Diba MRE earlier this year estimating 4.8mt at 1.39g/t for 217koz in the Indicated category and 5.5mt at 1.06g/t for 187koz in the Inferred category.
The PEA study assumed a low cost heap leaching operation that thanks to low waste stripping and good gold recoveries generated $81m NPV10 (post-tax) at $1,500/oz gold price.
Conclusion: The team is starting 10,000m drilling programme at the wholly owned Diba gold project with a view to grow the resource and further de-risk the asset before considering future development/monetisation options.
*SP Angel acts as Nomad and Broker to Altus Strategies
KAZ Minerals (LON:KAZ) 647p, Mkt Cap GBP3.05bn – Buyout faces growing opposition from minority shareholders
A proposed buyout of Kaz Minerals by its chairman Oleg Novachuk and Director Vladimir Kim has run into opposition from minority shareholders who plan to vote against the GBP3bn bid to take the company private.
The Chairman and Director launched a bid to buy the remaining 61% of the company it does not already own at the end of October, and an independent committee of directors said it would recommend the offer to shareholders.
CFC Management, who represent shareholders with a 3.6% stake in Kaz, said that the offer of 640p/share does not “fair value and growth potential”
Similarly RWC Partners, with a stake of just under 3.3% also said it would vote against the deal, commenting: “We are deeply underwhelmed by the offer, as we believe it materially undervalues the company’s existing and future projects,”
Because of the way the offer is structured, it may only take a small group of shareholders with a collective holding of about 12% to scupper the deal, assuming a 75% turnout at a meeting scheduled for December, the FT reports.
Petra Diamonds (LON:PDL) 1.65p, Mkt Cap GBP13.9m – Reports signs of an improving diamond market
Petra Diamonds reports an after tax loss of US$223.0m for the year to 30th June 2020 (2019 – loss 258.1m).
The result includes a non-cash impairment charge of US$91.9m “largely driven by an increase in the discount rates used and reduced pricing assumptions (FY 2019: US$246.6 million largely driven by more conservative rough diamond pricing estimates)”.
The company reports 30th June net debt of US$696.6m (2019 – US$595.2m) “due to lower sales and the capitalisation of the deferred coupon payment on the Company’s US$650 million loan notes of US$23.6 million.”
The results reflect production of 3.59m carats of diamonds (2019 – 3.87m carats) and the company reports that it achieved the “highest ROM production recorded in the Company’s history for the nine months up to 31 March 2020, but overall performance for the full Year was negatively impacted by the COVID-19 measures affecting Q3 and Q4 production” with overall “on-mine cash costs down 12% to US$235.0 million (FY 2019: US$266.9 million), with a weaker ZAR versus the USD for the Year offsetting ongoing inflationary pressures”.
Petra Diamonds’ recent report on Q1 showed “production was down 10% to 974,346 carats (Q1 FY 2020: 1,082,764 carats), mainly due to the Williamson mine remaining on care and maintenance”.
Production guidance for the current financial year remains suspended as a result of the uncertainty associated with Covid19 although the company says that “the South African mines are generally operating at planned levels, due to the “continuous operations” agreements in place at Cullinan and Finsch”.
Commenting on the condition of the diamond market, Petra Diamonds says that “diamond market conditions have been improving in recent months, further to a period of constrained supply and restocking ahead of the seasonally stronger jewellery retail season, all participants in the industry recognise that risks to a sustained recovery remain, particularly in light of the current resurgence of COVID-19 in key diamond markets which could see additional restrictions on international travel; much will depend on the level of consumer activity in the coming months, especially in the major US market. The longer term market outlook remains positive due to the trend of constrained and falling production supply which is demonstrated in part by the closing of the Argyle mine in Australia in 2020”.
The company has previously announced the agreement, in principle, to restructure “with each of the ad-hoc group of holders of the US$650 million 7.25% Senior Secured Second Lien Notes (the “AHG”) and the providers of the Company’s bank debt facilities in South Africa”.
“The Restructuring is expected to become effective in Q1 calendar year (“CY”) 2021. In order to become effective, the Restructuring is subject to execution of the Lock-Up Agreement and will need to be approved by shareholders at a Special General Meeting. For the purposes of convening the SGM, the Company will publish a circular and prospectus to shareholders. The Company currently anticipates publishing the combined circular and prospectus before the end of the calendar Year”.
Tietto Minerals (ASX:TIE) A$0.42, Mkt Cap A$189.8m – Extended 70,000m drilling programme for PFS/DFS at Abujar
Tietto Minerals is following up the resource upgrade announced last month, which took the JORC indicated and inferred mineral resources estimate at its Abujar project to 3.02moz, with an announcement to the ASX today that it has started a new 70,000m programme of drilling “designed to underpin 2021 gold resource growth and a Definitive Feasibility Study on proposed large-scale open pit mining”.
The programme will involve up to six rigs drilling between 7-11,000m monthly with four currently working and the remaining two to be mobilised before the end of the year.
As well as 2,500m of geotechnical drilling to assist pit design for the DFS, the company plans an additional 28,000m of infill drilling and 40,000m ” for new resource growth and exploration”.
The recent resource work concentrated on three zones, Abujar-Gludehi (AG ), Abujar Pischon and Golikro (APG), and South Gamina (SG) all of which lie within the Central Corridor of mineralisation.
The October 2021 mineral resources update for Abujar, located around 30km from the regional town of Daloa in central-western in Cote d’Ivoire, comprises:
2.3m oz at the AG deposit within 49.6mt of indicated and inferred resources at an average grade of 1.5g/t gold. Approximately 49% of the tonnage is classified as indicated; and
0.7moz of inferred resources at the APG deposit within 31.0mt at an average grade of 0.7g/t gold; and
0.02m oz of inferred resources at the SG deposit within 0.5mt at an average grade of 1.4g/t gold.
The company says that the “combined strike length of these three prospects accounts for approximately 10% of the overall strike length of the 70km mineralised Abujar gold corridor”.
The Central Corridor is, however, only one of three mineralisaed zones identified to date with a West Corridor and East Corridor still to be explored in detail.
The new programme will include exploration of the Koflankro, Vingt-Deux and Agokro prospects within the West Corridor as well as follow up work within the Central Corridor to test additional targets and assess depth extensions of known mineralisation at the AG deposit which reported 2.3moz at an average grade of 1.5g/t gold in the recent resource upgrade including “a high-grade core of 22.8Mt @ 2.2 g/t Au for 1.60 Moz of contained gold”.
Tietto Minerals explains that mineralisation at AG “gold mineralisation remains open at depth with a number of high-grade shoots identified from what is currently widely spaced drilling, below any proposed open pit at current gold prices … [and that consequently it] has planned a program of deep holes in the coming months to define more gold resources at depth and increase the resource category from the current Inferred to Indicated classification”.
The company confirms that a preliminary feasibility study is “expected to be released early in Q1 2021”.
Conclusion: Additional drilling on the Abujar project area, where resource estimates were recently increased from 2.2moz to 3.02moz of gold, may lead to further increases as exploration drilling moves onto the evaluation of parallel structures as well as infilling and upgrading existing resources as Tietto Minerals moves towards a PFS in Q1 2021.
