Copper, nickel and tin rise as China PBOC pledges more monetary policy support
MiFID II exempt information – see disclaimer below
BacTech Environmental Corporation (BAC CN) – Response to Temporary Suspension of Decree 754 in Ecuador
Europa Metals Limited (EUZ LN) – Positive drill results and mining licence application update
MP Materials (MP US) – Quarterly results show weak REO prices as downstream move progresses
China – Chinese investments and new contracts in metals and mining rose 131% yoy to >US$10bn in H1 (Green Finance and development Centre at Fudan University)
- > US$1tn cumulative BRI ‘Belt and Road Initiative’ engagement involving 148 countries (https://greenfdc.org/)
- China now owns more than 50% of global lithium, nickel, cobalt and graphite processing capacity.
Uranium prices likely to jump higher as Niger situation escalates
- Russian complicity increasingly evident in Niger as Mali and Burkina Faso military leaders tell ECOWAS not to overthrow coup leaders
- The situation is more complex than is immediately apparent with the Niger army now backing the Coup.
- Strong anti-French demonstrations are accompanied by some Russian flags indicating Russia’s influence on the gatherings
- Military leaders in Mali, Burkina Faso and now Niger are all working with Wagner which is more interested in enriching itself in the region than fighting Islamic insurgents.
- The situation is likely to generate greater instability according to BBC Security correspondent Frank Gardner.
Gold consolidates losses as US Treasuries sell off on sustained labour market strength
- Gold prices are holding lower around the $1,933/oz mark following a volatile week of trading.
- Prices are set for their worst week in over six following a repricing of US Treasuries.
- US 10-year yields rallied to close to 4.2%, their highest since October.
- Interestingly, when long duration yields were at these levels last Autumn, gold prices were sitting around the $1,650/oz mark.
- The US economic resilience continues to surprise investors, with a strong ADP number on Wednesday pushing bonds lower.
- Today’s nonfarm payroll data will be crucial for both gold and bonds in the short term, with a beat expected to add further downward pressure to gold prices.
- Alternatively, any sign of weakness in US labour and yields should ease from current levels, weighing on the dollar and supporting gold prices.
VOX Markets:
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
| Dow Jones Industrials | -0.98% | at | 35,283 | |
| Nikkei 225 | -1.68% | at | 32,159 | |
| HK Hang Seng | -0.05% | at | 19,508 | |
| Shanghai Composite | +0.58% | at | 3,280 |
Economics
US – Nonfarm payrolls are in focus this afternoon
- The market is looking for a 200k increase in jobs in July marking the weakest reading since the end of 2020 with steady 3.6% unemployment.
- Equity index futures traded stronger this morning as better than expected Amazon results released in after-hours trading offset a drop in Apple shares after the Company undershoot revenue expectations.
- 10-year bond yields are little changed this morning trading around 4.18% after climbing 10bp the day before to a fresh nine-month high.
- NFPs (‘000): 200est. v 209 June.
- Unemployment Rate: 3.6% est. v 3.6% June
- Av Hourly Earnings (%mom): 0.3 est. v 0.4 June.
- Av Hourly Earnings (%yoy): 4.2 est. v 4.4 June.
- ISM Services PMI fell to 52.7 in July from 53.9
- Business activity / production fell to 57.1 from 59.2
- New orders fell to 55.0 from 55.5
- Employment rose to 55.9 from 53.1
- Prices rose to 56.8 from 54.1
- Factory orders rose 2.3% in June vs 0.3% in May
- Factory orders ex-transport rose 0.2% in June vs -0.5% in May
- Preliminary US Q2 unit labor cost rose 1.6% vs 3.3% in Q1
- Q2 nonfarm productivity bounced to 3.7% vs 2.1% in Q1
China – The PBOC said it will step up its monetary policy support and will coordinate the use of tools at its disposal including reducing the reserve requirement ratio and injecting liquidity into the financial system, Bloomberg writes.
- The National Development and Reform Commission, the nation’s economic planning agency, and the Ministry of Finance also pledged support for the economy.
- The NDRC will study and plan more targeted policies while the Ministry of Finance will increase tax breaks for smaller firms, the representatives said.
China proposing eight-minute limit on smartphone use by kids (Asia Financial)
- The nation is struggling to tackle rising rates of myopia and internet addiction.
- Policing the policy could require a simple age-related limit on internet use on smartphones.
- Parents might be required to ensure the state had effective control over smartphones used by people under the age of 18.
- Gaming Apps in China already have time limiting modes limiting use to under 40 minutes in the case of ByteDance’s and Douyin.
- The eight-minute limit proposed by the CAC ‘Cyberspace Administration of China’ seems severe
- The CAC also propose barring access for <18 yr-olds from accessing the internet on mobile devices from 10pm to 6am.
- It’s seems a small step from controlling kids phones to controlling the rest of the population.
Germany – Orders surprisingly jumped in June, although, on a three month basis orders were only up 0.2% offering further evidence of an economic stagnation in Q2/23.
- The data was also skewed by a major order in the aerospace industry.
- Factory Orders (%mom): 7.0 v 6.2 (revised from 6.4) May and -2.0 est.
France – Industrial production pulled back more than expected in June, in line, with a continuing slump in the sector as demonstrated earlier by post pandemic low PMIs.
- Industrial Production (%mom): -0.9 v 1.1 May (revised from 1.2) and -0.3 est.
- Industrial Production (%yoy): -0.3 v 2.2 May (revised from 2.6) and 1.7 est.
UK – The central bank raised rates by 25bp to 5.25%, in line with market expectations, while offering a hawkish outlook saying that “last mile” of UK’s inflation flight will take time.
- “It’s the last mile which obviously is where policy is really doing the work, and we’re going to have to see policy stay restrictive… t’s going to have to remain restrictive to have this effect of bringing inflation down, and particularly next year,” Governor Andrew Bailey said.
- Expectations are currently for rates to peak at ~5.75% in early 2024.
- The MPC voted 6-3 in favour of a 25bpp move with two members calling for 50bp move and one member arguing for no change in rates.
- The central bank cut back its year end inflation rate to 4.9% marking a faster decline it had predicted in May.
- The BoE, which noted the economy’s recent “surprising resilience”, changed its growth forecasts little from three months ago, with the economy due to expand a meagre 0.5% in 2023 and 2024, and just 0.25% in 2025, Reuters writes.
Russia/Ukraine – Ukrainian sea drones attacked a Russian navy base next to the Black Sea port of Novorossiysk, a major hub for Russian exports, early on Friday.
- The attack saw the Novorossiysk port to temporarily suspend all ship movements, according to the Caspian Pipeline Consortium that operates an oil terminal there.
- If confirmed it would be the first Ukrainian attack on one of Russia’s main commercial ports, Reuters reports.
JP Morgan global services 52.7 for July vs 53.9 in June
- Global composite 51.7 in July vs 52.7 in June
Russia – GDP 5.3% yoy in June vs 5.4% May
Brazil – Central bank cut rates 0.5% to 13.25%
Turkish inflation rose 9.5% yoy for the month of July vs 3.9% yoy in June
- That is still very high with inflation running at 47.8% yoy in July vs 38.2% in June but still much lower than it was
Currencies
US$1.0917/eur vs 1.0988/eur yesterday. Yen 143.30/$ vs 142.71/$. SAr 18.548/$ vs 18.403/$. $1.270/gbp vs $1.277/gbp. 0.653/aud vs 0.657/aud. CNY 7.194/$ vs 7.184/$.
Dollar Index 102.48 vs 102.80 yesterday.
Commodity News
Precious metals:
Gold US$1,933/oz vs US$1,934/oz yesterday
Gold ETFs 91.1moz vs US$91.1moz yesterday
Platinum US$919/oz vs US$921/oz yesterday
Palladium US$1,253/oz vs US$1,230/oz yesterday
Silver US$23.47/oz vs US$23.57/oz yesterday
Rhodium US$4,100/oz vs US$4,100/oz yesterday
Base metals:
Copper US$ 8,584/t vs US$8,469/t yesterday
Aluminium US$ 2,212/t vs US$2,212/t yesterday
Nickel US$ 21,860/t vs US$21,435/t yesterday
Zinc US$ 2,495/t vs US$2,461/t yesterday
Lead US$ 2,149/t vs US$2,136/t yesterday
Tin US$ 28,080/t vs US$27,700/t yesterday
Energy:
Oil US$85.3/bbl vs $82.9/bbl yesterday
- Crude oil prices gapped higher after Saudi Arabia Saudi Arabia announced it would extend its unilateral 1mb/d oil production cut into September, which comes ahead of today’s online OPEC+ review of the market.
- US natural gas prices edged higher as the EIA storage report detailed a 14bcf build to 3,001bcf last week, with storage levels decreasing to 22.4% above last year and 12.0% above the 5-year average.
- Strathcona Resources (private) has agreed to acquire Pipestone Energy in an all-stock deal, with the group listing on the TSX with 185kboe/d (70% liquids) and a C$11.5bn enterprise value. Pipestone provides a natural hedge to the gas and condensate consumed in its Cold Lake thermal and Lloydminster heavy oil operations.
Natural Gas US$2.567/mmbtu vs US$2.487/mmbtu yesterday
Uranium UXC US$56.25/lb vs US$56.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$102.1/t vs US$103.2/t
Chinese steel rebar 25mm US$527.4/t vs US$534.4/t
Thermal coal (1st year forward cif ARA) US$115.0/t vs US$115.0/t
Thermal coal swap Australia FOB US$142.0/t vs US$137.8/t
Coking coal swap Australia FOB US$236.0/t vs US$236.0/t
Other:
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$65,573/t vs US$65,479/t
Lithium carbonate 99% (China) US$35,850/t vs US$35,798/t
China Spodumene Li2O 6%min CIF US$3,710/t vs US$3,710/t
Ferro-Manganese European Mn78% min US$1,045/t vs US$1,054/t
China Tungsten APT 88.5% FOB US$310/mtu vs US$310/mtu
China Graphite Flake -194 FOB US$675/t vs US$675/t
Europe Vanadium Pentoxide 98% 7.6/lb vs US$7.6/lb
Europe Ferro-Vanadium 80% 31.85/kg vs US$31.85/kg
China Ilmenite Concentrate TiO2 US$313/t vs US$312/t
Spot CO2 Emissions EUA Price US$92.4/t vs US$91.1/t
Brazil Potash CFR Granular Spot US$345.0/t vs US$345.0/t
Battery News
BHP signs deal with Toyota to electrify mine site vehicles
- BHP and Toyota Australia have signed a memorandum of understanding (MoU) to electrify the mining giant’s fleet of 5000 vehicles.
- BHP’s mine sites host predominantly diesel-powered Toyota LandCruisers and HiLuxes.
- The EV push is part of a wider agreement between the two companies to decarbonise BHP’s Australian operations and deliver safety gains on site.
Global EV battery market share H1 ’23
- In H1 ’23 EV global battery consumption totalled 304.3GWh according to data from South Korean research firm SNE Research.
- China continues to dominate: Top five battery makers by market share were CATL (36.8%), BYD (15.7%), LG Energy Solutions (14.5%), Panasonic (7.5%), SK On (5.2%)
- CATL’s battery installations totalled 112.0GWh up 56.2% on the same period last year.
- BYD showed quicker growth with installations totalling 47.7GWh up 102.4% on H1 ’22.
- BYD has gained popularity in China’s domestic market with its price competitiveness by establishing vertically integrated supply chain management, including battery self-sufficiency and vehicle manufacturing.
Company News
BacTech Environmental Corporation (BAC CN), C$0.085, Mkt Cap C$12m – Response to Temporary Suspension of Decree 754 in Ecuador
- BacTech, which specialises in bioleaching for recovering precious and base metals/removing arsenic, provides an update on Ecuador.
- The Company notes the suspension of a Decree regarding environmental consultation, following a claim filed by an Indigenous group.
- BacTech’s CEO notes that it is the Company’s ‘intention to significantly raise the level of compensation to our workers compared to what they earn today,’ whilst also mitigating ‘the amount of arsenic that goes to the tailings.’
- The bioleaching plant uses naturally occurring bacteria, according to BacTech.
- The Tenguel plant currently in question is hoping to produce an initial 31koz pa.
Europa Metals Limited (EUZ LN) 4.6p, Mkt Cap £3.5m – Positive drill results and mining licence application update
- Europa metals reports assay results from its validation and infill diamond drilling programme at the Toral Pb, Zn & Ag project.
- The programme is set to total 7,000m targeting confirmatory and infill drilling.
- Seven holes reported significant mineralisation.
- Highlights include:
- TOD-044: 7.95m@4.46% ZnEq(PbAg) from 490m.
- TOD-045: 4.95m @ 22.71% ZnEq(PbAg) from 592m.
- TOD-048: 4.7m @ 6.68% ZnEq(PbAg) from 505m.
- TOD-048: 6.65m @ 8.12% ZnEq(PbAg) from 513m
- TOD-049: 5m @ 6.91% ZnEq(PbAg) from 745m
- Management notes that the programme is nearing its completion, with intersections correlating as expected with the known resource.
- The current resource hold c.7mt @ 8.1% ZnEq.
- As regards the Mining Licence Application, Europa notes that 95% of the requisite reports have been submitted to the Regional Mining Authority.
MP Materials (MP US) $22, Mkt cap $4bn – Quarterly results show weak REO prices as downstream move progresses
- Major US rare earth miner MP Materials reports its Q2 earnings results.
- Revenue for the quarter fell 55% to $64m, with net income falling 90% vs the same period last year.
- REO production rose 5% in the quarter yoy to 10,863t, with realised REO prices falling 55% vs same period last year.
- The Company are noting rising production costs partially offset by lower shipping costs.
- Production costs rose 11% yoy to $1,983/t. realised prices at $6,231/t.
- MP Materials is ramping up investment into the downstream magnetics business in Texas and began producing refined NdPr oxide production this quarter.
- The separated rare earth production milestone reflects Stage II of the MP’s down streaming ambitions, with the Company looking to begin metal alloy production in Stage III.
- Negative free cash flow at $64m for the first six months of the year.
- The earnings call noted that there was a significant glut of supply following the shutdown of the border between Myanmar and China, which has subsequently flowed into Chinese refineries. They believe this to be transitory.
- Management noted sustained EV and e-mobility demand, which they expect will grow 20-30% pa going forward.
- However, they note weak demand for industrial applications, wind turbines, hard disk drives, consumer electronics throughout this year.
- They believe soft market factors ’seem mostly behind us.’
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474
Sales
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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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*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, Tungsten, Spodumene, Ferro-Manganese, Graphite | Asian Metal |
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