Gold steady as traders hold trades before US labour data
MiFID II exempt information – see disclaimer below
Allied Gold (AAUC CN) – US$175m financing agreement with Wheaton for Kurmuk gold project, Ethiopia
Iluka Resources (ILU AU) – Funding update on Eneabba rare earths
Gold steady as traders hold trades before US labour data
- Gold prices are edging lower but within their past week’s range of $6,620-6,650/oz.
- Traders are likely expressing caution before the US NFP data, which is set to show 220k job additions.
- A lower number is likely to fuel further buying of US Treasuries, pushing yields lower and supporting gold prices.
- The 10-year yield has fallen from 4.5% to 4.17% over the past month.
- Alongside lower yields, the dollar has weakened against a basket of currencies, with the Yen leading the charge and the Euro and Pound bouncing form November lows.
- A beat would likely push yields higher, weighing on gold, however weakness has been bought recently, likely by Chinese buyers amid a weak Yuan.
Swing in power from windfarms in Xinjiang, in August threatened China’s power network
- A potentially devastating power oscillation hit Xinjiang which hosts some of the world’s biggest solar and wind farms according to the South Chia Morning Post.
- The NEA ‘National Energy Administration reports that a low-frequency power oscillation was caused by inadequate management and a failure to activate a system stabiliser, as required by safety standards.
- Xinjiang has >80GW of installed renewable energy capacity sufficient for >60m households.
- In 2015, a 0.1-hz power oscillation incident in Hami, triggered severe vibrations in thermal power plant turbines, tripping generators and causing over a gigawatt of power loss within two minutes.
- In 2011 and 2012, Oklahoma Gas and Electric in the US reported 14-hz oscillations from wind farms leading to significant reactive power fluctuations.
- In 2020, Australia’s West Murray zone reported 17-hz voltage oscillations due to high penetration of solar and wind farms in areas with low system strength.
- The news indicates further diversification of power networks will be required to create more robust grid systems.
- This becomes all the more important as transport becomes increasingly dependent on electrical power.
| Dow Jones Industrials | -0.55% | at | 44,766 | |
| Nikkei 225 | -0.77% | at | 39,091 | |
| HK Hang Seng | +1.56% | at | 19,866 | |
| Shanghai Composite | +1.05% | at | 3,404 | |
| US 10 Year Yield (bp change) | +1.2 | at | 4.19 |
Economics
US – NFPs day with expectations for a 220k headline number, up on 12k recorded in October.
- Labour earnings growth is expected to slowdown slightly with jobless rate unchanged.
- Av hourly Earnings (%mom, Nov/Oct/Est): NA/0.4/0.3
- Av hourly Earnings (%mom, Nov/Oct/Est): NA/4.0/3.9
- Unemployment Rate (Nov/Oct/Est): NA/4.1/4.1
Earthquake off coast of California records magnitude 7.0
- Limited damage. Tsunami warning cancelled.
- Nature is a significant risk to parts of the US and a major earthquake
China – CEWC ‘Central Economic Work Conference’ next week 11th-13th December
- The conference is convened by the CCP Central Committee and the State Council of the PRC.
- The CEWC will set the agenda and targets for the economy for 2025 with targets due for release in March during the Two Sessions.
- The 2025 GDP target is likely to be set at either “above 4.5%” or “around 5%.” according to John Browning of Bands Financial.
- We suspect the meeting will set the way for a multitude of proposals to encourage and help business with particular support in the property market.
- China is not going to want to suffer a decade of Japan-style economic stagnation and will work to lift critical parts of its economy.
- Today we see news that China is to give local products support in bids for government contracts (SCMP).
Germany – Industrial production continues to struggle unexpectedly contracting in October.
- Weak data has been driven by declines in the energy sector and the automotive industry.
- The industry is weighed down by the loss of Russian energy supplies, soft Chinese demand and a shortage of skilled labour.
- Industrial Production (%mom, Oct/Sep/Est): -1.0/-2.0 (revised from -2.5)/1.0
- Industrial Production (%yoy, Oct/Sep/Est): -4.5/-4.3 (revised from -4.6)/-3.3
France – The euro is little changed this morning and CAC 40 equity index up 1.1% as President Macron is meeting with lawmakers to pick new government.
- Priority of the new government will be to pass the budget addressing high deficits which is estimated at 6.1% in 2024.
UK – House prices climbed at their fastest pace in two years on expectations for lower borrowing costs.
- Average price climbed 4.8%yoy in November, the strongest reading since Nov/22, Halifax data showed.
- “Positive employment figures and anticipated decreases in interest rates” are driving demand, Halifax commented on numbers.
South Korea – Defence ministry suspends three major commanders following a brief imposition of martial law earlier this week.
- The defence commander, special warfare commander and the defence counter intelligence commander were suspended for their alleged key roles during the martial law, FT reports.
Argentina – The central bank cut rates by 3pp to 32% on falling inflation expectations.
- Annual inflation is expected to slow down to 119% by the end of the year.
- This compares to 193% recorded in October and a peak of nearly 300% in April this year.
- This was the eighth rate cut and the smallest since President Milei took office a year ago when rates were at 133%.
Huge cave in China turned into luna research facility (SCMP)
- The idea is to see if volcanic lava tubes could support a moon base.
- The large-scale closed cave ecosystem spans ~3km x 130m and is 108m at its highest point.
- The moon is thought to have similar tubelike caves.
- We suggest the researchers to look into the South African gold mines around Johannesburg to observe conditions for miners who are sometimes forced to work underground by gangs for months at a time.
Currencies
US$1.0582/eur vs 1.0537/eur previous. Yen 150.32/$ vs 149.96/$. SAr 18.035/$ vs 18.072/$. $1.276/gbp vs $1.273/gbp. 0.643/aud vs 0.645/aud. CNY 7.260/$ vs 7.263/$.
Dollar Index 105.74 vs 106.09 previous
Precious Metals
Gold US$2,640/oz vs US$2,646/oz previous
Gold ETFs 83.0moz vs 82.9moz previous
Platinum US$938/oz vs US$950/oz previous
Palladium US$976/oz vs US$987/oz previous
Silver US$31.3/oz vs US$31.3/oz previous
Rhodium US$4,575/oz vs US$4,575/oz previous
Base metals:
Copper US$9,128/t vs US$9,143/t previous
Aluminium US$2,615/t vs US$2,642/t previous
Nickel US$16,040/t vs US$15,955/t previous
Zinc US$3,103/t vs US$3,126/t previous
Lead US$2,099/t vs US$2,097/t previous
Tin US$29,110/t vs US$29,205/t previous
Energy:
Oil US$72.0/bbl vs US$72.5/bbl previous
Natural Gas €46.1/MWh vs €47.3/MWh previous
- US Henry Hub natural gas prices fell as the EIA reported a smaller-than-usual 30bcf w/w draw to 3,937bcf, with gas storage inventories rising to 4.9% above last year and 7.8% above the 5-year average.
Uranium Futures $77.2/lb vs $77.5/lb previous
Bulk:
Iron Ore 62% Fe Spot (cfr Tianjin) US$104.6/t vs US$104.7/t
Chinese steel rebar 25mm US$489.9/t vs US$491.5/t
HCC FOB Australia US$205.0/t vs US$204.0/t
Thermal coal swap Australia FOB US$132.5/t vs US$134.5/t
Other:
Cobalt LME 3m US$24,300/t vs US$24,300/t
NdPr Rare Earth Oxide (China) US$56,749/t vs US$57,003/t
Lithium carbonate 99% (China) US$10,124/t vs US$10,258/t
China Spodumene Li2O 6%min CIF US$790/t vs US$790/t
Ferro-Manganese European Mn78% min US$985/t vs US$985/t
China Tungsten APT 88.5% FOB US$338/mtu vs US$338/mtu
China Graphite Flake -194 FOB US$440/t vs US$440/t
Europe Vanadium Pentoxide 98% US$5.0/lb vs US$5.0/lb
Europe Ferro-Vanadium 80% US$26.3/kg vs US$26.3/kg
China Ilmenite Concentrate TiO2 US$300/t vs US$301/t
China Rutile Concentrate 95% TiO2 US$1,123/t vs US$1,122/t
Spot CO2 Emissions EUA Price US$64.9/t vs US$64.9/t
Brazil Potash CFR Granular Spot US$287.5/t vs US$287.5/t
Germanium China 99.99% US$2,825.0/kg vs US$2,825.0/kg
China Gallium 99.99% US$430.0/kg vs US$430.0/kg
Company News
| Overnight Change | Weekly Change | Overnight Change | Weekly Change | ||
| BHP | 0.3% | 0.3% | Freeport-McMoRan | -0.6% | -2.2% |
| Rio Tinto | -0.8% | 1.3% | Vale | 1.1% | -2.6% |
| Glencore | 0.3% | -0.4% | Newmont Mining | -0.8% | -2.3% |
| Anglo American | -1.1% | -2.2% | Fortescue | -1.1% | 2.6% |
| Antofagasta | -0.9% | 1.3% | Teck Resources | -1.1% | -2.4% |
Allied Gold (AAUC CN) C$3.4, Mkt Cap C$1.1bn – US$175m financing agreement with Wheaton for Kurmuk gold project, Ethiopia
- Allied Gold has announced a streaming agreement with Wheaton, to support funding of the Kurmuk project.
- Wheaton will pay Allied upfront cash consideration of US$175m in four installments over the construction period.
- Wheaton will have the right to purchase 6.7% of payable gold from Kurmuk, falling to 4.8% of payable gold after delivery of 220koz Au.
- Wheaton will pay 15% of the spot gold price for each ounce delivered.
- The stream covers 225koz of gold from the current Kurmuk mining licence and any mineral interests within a 50km radius of the licence.
- Wheaton also participated in Allied’s equity financing from October 18th for C$20.2m, with total gross proceeds of C$221m.
- Allied now expects a gold prepay to be the ‘final component of our planned comprehensive financing package for the construction of the mine.’
- Allied is aiming ot produce 240kozpa Au over a ‘multi-decade mine life.’
- Company is currently delivering a US$7.5m exploration programme at Kurmuk.
- Kurmuk has 2.7moz in reserves with exploration intended to boost the mine life over 15 years.
- The mine is permitted and first gold is planned 2Q26.
Iluka Resources (ILU AU) A$4.93, Mkt Cap A$2.11bn – Funding update on Eneabba rare earths
- Iluka is progressing financing discussions with the Australian Government over the Eneabba rare earths refinery.
- The two parties have agreed additional funding of A$400m on the original A$1.25bn non-recourse loan, with Iluka set to contribute an additional A$214m in cash equity.
- Loan agreed at BBSY + 3% and repayment extended to 2038.
- The funding is subject to offtake agreements approved by the Government.
- CAPEX is estimated at A$1.7-1.8bn.
- The Australian Government has also agreed a A$150m cost overrun facility, contributed on a 50/50 basis.
- The Australian Government has
- The Company expects a higher utilisation of the refinery can boost the NPV8.25 to A$3,366m from A$1,703m and IRR from 48% to 51%.
- Adamas forecasts suggest an NPV of A$1.7bn using US$108/kg, using internally available feedstock.
LSE Group Starmine awards for Q3 commodity forecasting:
No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Previous Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024
No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024
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
Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535
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, Rutile | Asian Metal |
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