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Morning View – Altus Strategies, Arc Minerals, Caledonia Mining and more…

SP Angel . Morning View . Friday 29 06 20

Fears of second wave continue to drive gold higher

MiFID II exempt information – see disclaimer below

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Shanghai Composite -0.59% at 2,962

Gold gains this morning as virus cases surpass ten million

Gold prices rose on Monday as worries over a surge in COVID-19 infections drove investors toward safe-havens such as bullion.

Spot gold was 0.1% higher at $1,772/oz this morning, sustaining the uptick in price seen on late on Friday. US gold futures rose 0.3% to $1,786/oz (Reuters).

Bullion is heading for its best quarter since 2016 as deaths surpass 500,000 worldwide and confirmed cases exceed 10 million, and the precious metal is up 17% so far this year (Bloomberg).

Many analysts expect gold to breach the $1,800/oz level this week, after prices hit 7.5-year highs climbing to $1,796/oz on Wednesday (Kitco).

Economics

Australia – Biggest daily rise in COVID-19 cases in two months

Australia has recorded 85 new cases in the past 24 hours, its biggest daily outbreak since the 11th of April.

The recent surge has sparked fears of a second wave after several weeks of fewer than 20 cases a day.

The state of Victoria has reported 75 cases in 24 hours and is considering reimposing social distancing restrictions.

Chile – mine output forecast to fall by 250,000t this year to around 5.56mt despite limited impact so far from COVID-19 (Capital Economics)

We expect further disruption to supply as the virus works its way through the population causing selective lockdowns as seen with Codelco closing sites in the Atacama.

Japan – Retail sales drop -12.3% YoY in May

Retail sales fell -12.3% vs -13.9% previous and -11.6% expected.

Peru – Coronavirus loss affects ~2mt of copper capacity

UK – auto production fell 95.4%yoy in May vs a fall of 99.7% in April

Consumers were not able to visit showrooms, are confused about more expensive EVs vs combustion engine vehicles and are cautious in an uncertain environment

US – personal income fell 4.2% in May vs 10.8% in April (due to helicopter money)

Personal spending rose 8.2% in May (Helicopter money) vs -12.6% in April

Uni of Michigan consumer confidence index was 78.1 in June vs 72.3 in May

Singapore – industrial production fell 16.5% in May vs -0.5% in April

industrial production fell 7.4% in May yoy

Sweden – Top virus expert has said the 'world went mad' with coronavirus lockdowns which 'fly in the face of what is known about handling virus pandemics' (Daily Mail).

Tegnell said the WHO had 'totally misinterpreted' the data, saying the 'spike' is down to improved testing and pointing to falling deaths as evidence.

He pointed to a steady fall in deaths, hospital admissions and ICU admissions as evidence that Sweden's outbreak is actually retreating, not getting worse.

UK Health Secretary Matt Hancock threatens to CLOSE beaches despite bright sun and >35c temperatures which kill viruses.

WHO chief warned last week that the world is entering a 'dangerous new phase' of coronavirus.

Baltic index up for sixth straight week

The Baltic Exchange's main sea freight index rose 0.6% on Friday, taking total gains for the week to 12.5%.

The index has surged 60% so far this year, and recouped losses brought about by the coronavirus pandemic (Reuters).

The year-on-year industrial production data for China highlights the recovery that the country has made- as production is already 4.4% higher than the same time last year (Hellenic Shipping News).

China's recovery, along with relentless stimulus implemented by the US is bolstering commodity prices and driving shipping prices higher.

Pet prices have surged through the lockdown with the Kennel club reporting a 168% increase in enquiries

Most pets are for families with kids who are bored in the Lockdown

But be warned, there are many scammers out there and you might get sold a pup.

IG TV interview on gold and gold companies

VOX Markets podcast on mining

https://www.voxmarkets.co.uk/media/5ed0fab0243d7b001b3e0381/?context=/series/daily-podcast/

Currencies

US$1.1257/eur vs 1.1214/eur yesterday Yen 107.17/$ vs 107.07/$. SAr 17.211/$ vs 17.186$. $1.237/gbp vs $1.241/gbp. 0.689/aud vs 0.688/aud. CNY 7.076/$ vs 7.078/$.

Commodity News

Precious metals:

Gold US$1,769/oz vs US$1,764/oz yesterday

Gold ETFs 102.8moz vs US$102.6moz yesterday

Platinum US$812/oz vs US$805/oz yesterday

Palladium US$1,886/oz vs US$1,844/oz yesterday

Silver US$17.82/oz vs US$17.81/oz yesterday

Base metals:

Copper US$ 5,977/t vs US$5,942/t yesterday – China refined copper imports grew 22.7% YoY in May

Imports of refined copper increased 6.2% compared to April and 22.7% compared to May 2019, totalling 505,700 tonnes according to Chinese customs data.

Chile remained the top supplier of refined copper last month, with deliveries of 81,700t in May- up 21.6% YoY while down 4.1% from April 2020 (SMM News).

The price of copper was up 0.6% this morning at $5,979/t, driven by concerns over supply as South American producing nations are struggling to contain the spread of COVID-19 (Fastmarkets MB).

Aluminium US$ 1,607/t vs US$1,576/t yesterday

Nickel US$ 12,765/t vs US$12,595/t yesterday – China nickel ore imports rose 25% in May month-on-month

Imports of nickel ore and concentrate rebounded from a month ago to 1.68mt, as deliveries resumed from top supplier the Philippines as the country eased lockdown measures.

Nickel exports were 67.6% lower compared to the same period last year.

China imported 1.34mt of nickel ore and concentrate from the Philippines last month, up 22.4% from April but 60% lower than May 2019 (SMM News).

Zinc US$ 2,035/t vs US$2,062/t yesterday

Lead US$ 1,793/t vs US$1,776/t yesterday

Tin US$ 16,730/t vs US$16,635/t yesterday

Energy:

Oil US$40.4bbl vs US$41.2/bbl yesterday

Natural Gas US$1.598/mmbtu vs US$1.450/mmbtu yesterday

Uranium US$33.05/lb vs US$33.05/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$100.8/t vs US$101.0/t

Chinese steel rebar 25mm US$524.7/t vs US$525.1/t

Thermal coal (1st year forward cif ARA) US$57.9/t vs US$57.0/t

Coking coal swap Australia FOB US$117.5/t vs US$116.0/t

Other:

Cobalt LME 3m US$28,500/t vs US$28,500/t

NdPr Rare Earth Oxide (China) US$40,984/t vs US$40,971/t

Lithium carbonate 99% (China) US$4,805/t vs US$4,803/t

Ferro Vanadium 80% FOB (China) US$30.0/kg vs US$30.0/kg

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

Tungsten APT European US$205-215/mtu vs US$215-225/mtu

Graphite flake 94% C, -100 mesh, fob China US$460/t vs US$460/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,350/t vs US$2,350/t

Battery News

CATL 21C Lab to work on battery technologies

CATL has announced their 21C Lab which will develop batteries technologies including:

Metal lithium batteries

All solid-state batteries

Sodium-ions batteries (Inside EVs)

Construction at the site has begun and the 3.3bn yuan ($466m) facility will be partially operational by the end of 2021. (Electrive)

Built on 18 hectares of land in Ningde, Fujian Province, China the lab will focus on next-gen electrochemical energy conversion and storage systems and commercial applicability of the technology.

The lab will also develop reliability models and non-destructive testing technology.

CATL will also begin construction on a new battery cell factory in Ningde in the next 2yrs and construction has begun on a battery cell factory in Yibin. CATL plans to build 52GWh of battery cell production capacity.

Volvo and Waymo announce autonomous EV project

Volvo and Waymo will partner on a new electric vehicle platform for ride-hailing services. (Cnet)

The partnership is an exclusive arrangement where Waymos self-driving technology will be integrated onto Volvos vehicle platform. (Forbes)

The vehicles will be capable of SAE Level 4 autonomy: no driver engagement in a geofenced area or specific road, weather, and traffic conditions.

It is not yet clear who will operate the ride-sharing platform for which the new technology will be developed.

Company News

Altus Strategies* (LON:ALS) 31.5p, Mkt Cap £22.1m – Sale and royalty agreement on Cote dIvoire gold properties

Altus Strategies reports a non-binding agreement for the sale of its Prikro and Zenoula gold properties in Cote dIvoire to TSX-V listed Stellar Resources.

· Subject to final agreement and a 30 days period of due diligence, Altus Strategies ʺwill receive an initial payment of:

o 2,500,000 Stellar shares, with a current value of approximately C$87,500 and 2,500,000 share purchase warrants exercisable for a period of 24 months at C$0.07 per share

o A 2.5% Net Smelter Return (“NSR”) royalty on the Projectsʺ

Altus Strategies will, subject to progress, receive stage payments amounting to US$250,000 in shares on the definition of a 500,000oz resources estimate, including 250,000oz classed as indicated and a further US$250,000 in shares on the completion of a definitive feasibility study.

Steven Poulton, Chief Executive, said that ʺWe believe that the proposed Transaction not only validates the value we have identified in the Projects but that in Stellar, we have the right company to progress these Projects through to the next key phasesʺ.

Conclusion: The proposed sale of two gold properties in Cote dIvoire for a combination of shares in the acquirer and a long term NSR exemplifies the Altus Strategies model in action

*SP Angel acts as Nomad and Broker to Altus Strategies

Arc Minerals* (LON:ARCM) – Drilling starts at new Fwiji target in Western Zambia

Arc Minerals has restarted drilling in Zambia following the end of the rainy season within its license area

The team plan to drill 8,000m this year starting with the Fwiji target following promising exploration work

Follow up work at Cheyeza East and Muswema is also ongoing where we expect the better definition of the scale and extent of the resource.

Drilling will extend to 100m – 250m below surface to test deeper structures and follow mineralisation in the down-plunge hinge component to the anticline.

The current interpretation for Fwiji postulates that the copper mineralization is hosted in the hinge of plunging south westerly anticline.

Near surface oxide mineralization is expected to intersect with the primary sulphide mineralization down plunge.D

Zambia has suffered relatively little in terms of COVID-19 fatalities with just 22 recorded deaths so far.

We understand from a major mining company which has been regularly testing its staff in the region that the government statistics appear accurate and are in accordance with the very low incidence seen on a number of significant mines in the region.

One theory is that Zambias BCG vaccination programs have helped boost immunity to the disease in the population.

Conclusion: ARC Minerals is well funded and likely to make good progress with drilling this field season.

*SP Angel acts as Nomad and broker to Arc Minerals. The analyst holds stock in Arc Minerals.

Caledonia Mining* (LON:CMCL) 1280, Mkt Cap £138.3m – Increased quarterly dividend

Caledonia Mining reports a 13% increase in its quarterly dividend to US8.5ȼ per share from the US7.5ȼ per share declared in January 2020, which was itself an increase on the previously established quarterly distribution level of US6.875ȼ per share

The company confirms that its 2020 production guidance range of 53-56,000oz of gold production remains intact as does the longer term target of 80,000ozpa from 2022.

Work on the new Central Shaft, which is a key element of the longer term production increase giving access to deeper level mineralisation remains on course for completion during Q4 2020.

Commenting on the twin benefits to the company of increased production and higher gold prices, CEO, Steve Curtis, said that "As we approach the end of the five-year investment programme at Blanket Mine, we anticipate the rate of capital expenditure will begin to reduce towards the end of 2020, which gives us greater flexibility to consider deploying some of our cash reserves on an increased dividend.ʺ

Looking forward to the commissioning of the new shaft later this year and the resulting expected increased production and cash flow Mr. Curtis also explained that ʺThe Board will review Caledonia's future dividend distributions as appropriate while considering the balance between delivering returns to shareholders, pursuing the significant growth opportunities within Zimbabwe and maintaining a prudent approach to financial management."

Conclusion: Caledonia Mining remains one of the comparatively few AIM listed mining companies which consistently delivers dividends to its shareholders. The increased distribution is further confirmation of the Boards confidence as a five-year long capital programme at the Blanket mine nears completion.

*SP Angel mining analysts have visited Caledonias mining operations in Zimbabwe

Oriole Resources (LON:ORR) 0.35p, Mkt cap £2.6m – Drilling underway at Senala gold project

Oriole Resources reports that a 10,000m Read More – Source

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