China woes deepen as Zhongzhi misses payments on investment products
MiFID II exempt information – see disclaimer below
Amaroq Minerals (AMRQ LN) – Progress to secure debt funding
Blencowe Resources (BRES LN) – Bulk sample from the Orom Cross graphite project, Uganda
Jubilee Metals Group (JLP LN) – Senior appointments
Premier African Minerals (PREM LN) – Amended offtake and prepayment agreement with Canmax
UK used EV sales soar according to latest data
- Used EV sales in the UK reached 30,645 in Q2 ’23, a 81.8% increase yoy, according to research by the Society of Motor Manufacturers and Traders (SMMT).
- Used EV sales accounted for a record 1.7% market share.
- SMMT also stated the rising proportion of EVs meant that market share for combustion engine cars marginally fell to 94.3% from 95.7% last year.
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 | +0.30% | at | 35,281 | |
| Nikkei 225 | -1.27% | at | 32,060 | |
| HK Hang Seng | -1.58% | at | 18,774 | |
| Shanghai Composite | -0.34% | at | 3,178 |
Economics
US – Markets now looking for Fed to continue to maintain higher interest rates .
- PPI rose 0.3% in July from 0% in June and 0.8% yoy in July vs 0.2% yoy in June
- Core PPI 0.2% (0.1%), yoy steady 2.4%.
- Housing costs have taken over as the key inflation drivers in the US driving >90% of the rise in CPI
- Used car and energy prices have declined but at some stage the higher cost of EVs has to have some impact
- Accommodation costs rose 7.7% driven by rent, hotels and other accommodation plus home insurance
- Uni of Michigan Consumer Confidence Index fell to 71.2 vs 71.6 in July
- US bond auction was well covered at 2.56 times demand for the US$38bn 10-year bond auction at 3.999%
- US 10-year government bonds are trading at a 4.158% yield highlighting the gain to be made on the auction.
- US 30-year bond auction at 4.189% was also well covered at 2.3 times and is trading at 4.26% this morning
China – More defaults expected in Chinese investment products
- Zhongzhi Enterprise Group Co., one of largest wealth managers with over 1tn yuan ($138bn) under management missed payments to clients on multiple high-yield investment products
- Four major Chinese wealth management firms managed by Zhongzhi Group are reported to have defaulted on their fixed-income products.
- Chinese banking regulator has set up a task force due to the scale of the default and the large number of affected clients.
- The move highlights the extent to which officials have been alarmed to the liquidity crunch at Zhongrong and an effort to minimise contagion risks, Bloomberg reports.
Country Garden suspended trading in 11 onshore notes issued as a troubled developer is working on restructuring its debt.
- Shares collapsed >17%$ on the news closing sub HK$1 for the first time on record.
- The company that has four times as many projects as defaulted China Evergrande Group is discussing with its bondholders a potential extension of repayments to the amount of CNY 3.9bn and due in early September over a 36 months period, Bloomberg writes.
- Further CNY 1.4bn and CNY 2.0bn is due in the middle and end of next month.
New bank loans collapse despite lower interest rates as economy struggles to maintain growth
- Chinese bank lending collapsed 89% in July to CNY346bn (US$48bn) of new yuan loans from CNY3.05tn in June (Reuters)
- Forecasts were for a fall to CNY 800 bn with the market already forecasting a dramatic decline in lending activity
- July 2022 saw CNY 679 bn ($93.5bn) by comparison.
- Household loans, mostly mortgages, fell CNY 201 bn yuan in July, after rising CNY 963.9 bn in June
- Corporate loans fell to CNY 237.8 bn in July from CNY 2.28 tn in June.
- Central bank officials have pledged to use policy tools such as reserve requirement ratio (RRR) cuts to ensure reasonably ample liquidity.
- Regional authorities have been instructed to issue bonds to fund infrastructure.
- M2 money supply grew 10.7% yoy in July from 11.3% yoy in June slightly slower than expected
- Outstanding yuan loans rose 11.1% yoy in July vs 11.3% yoyo in June
- Total social financing fell 8.9% to CNY 528.2 bn in July from CNY 4.22 tn in June
- Jul vehicle sales fell -1.4% yoy vs 4.8% in June
Singapore – Q2 GDP rose 0.1% vs Q1 at -0.4% and 0.5% yoy in Q2 vs 0.4% yoy in Q1.
France – Jul inflation rose 0.1% in July vs 0.2% in June and 4.3% yoy in July vs 4.5% yoy in June
- Q2 French unemployment 7.2% vs 7.1% in June.
India – Left Interest rates unchanged at 6.5%
Mexico – Left interest rates at 11.25%.
Brazil – Inflation held steady month-n-month at 0.1% in July vs 0.1% in June but rose 4% yoy in July vs 3.2% in June
Russia – The rouble dives past the 100 mark despite central bank abandoning its budget rule that would have involved buying foreign currency for the remainder of the year.
- The currency is down ~25% year to date placing it among the three worst emerging market performers after the Turkish lira and the Argentine peso.
- The move is driven by weakening trade balance (-68%yoy in H1/23) on the back of lower exported volumes and prices as well as some relaxation in capital controls.
Space mission looks more like a PR attempt to convince its people that it is still a superpower.
- We suspect Russia is heading into economic meltdown and its show of strength into space is an economic folly it can ill afford.
Ecuador – Assassination of anti-corruption campaigner Fernando Villavicencio ahead of election
- President Guillermo Lasso is blaming a group of six Colombians but Lasso also recently disbanded congress to avoid impeachment.
- Lasso has also declared a state of emergency.
Niger – Democratically elected president Mohamed Bazoum to be tried for high treason and undermining national security
- Last year a group of Nigerian NGOs accused Bazoum over alleged losses of $99m worth of state funds.
- Bazoum had used the fight against fraud and corruption as one of his core pledges in the last election accusing 30 seniour state officials of embezzlement or misappropriation.
Currencies
US$1.0949/eur vs 1.0996/eur last week. Yen 144.89/$ vs 144.61/$. SAr 18.934/$ vs 18.840/$. $1.270/gbp vs $1.271/gbp. 0.650/aud vs 0.653/aud. CNY 7.255/$ vs 7.190/$.
Dollar Index 102.88 vs 102.51 last week.
Commodity News
Precious metals:
Gold US$1,914/oz vs US$1,917/oz last week
Gold ETFs 90.7moz vs US$90.7moz last week
Platinum US$916/oz vs US$916/oz last week
Palladium US$1,303/oz vs US$1,297/oz last week
Silver US$22.72/oz vs US$22.76/oz last week
Rhodium US$4,100/oz vs US$4,100/oz last week
Base metals:
Copper US$ 8,304/t vs US$8,315/t last week
Aluminium US$ 2,154/t vs US$2,182/t last week
Nickel US$ 20,220/t vs US$20,400/t last week
Zinc US$ 2,357/t vs US$2,418/t last week
Lead US$ 2,105/t vs US$2,130/t last week
Tin US$ 25,595/t vs US$26,885/t last week
Energy:
Oil US$86.4/bbl vs US$86.6/bbl last week
- Crude oil prices were stable over the weekend supported by the IEA reporting that global oil demand hit a record 103mb/d in June driven by stronger Chinese demand than expected.
- The US Baker Hughes rig count was down 5 units to 654 rigs last week (-109 or 14% y/y), with oil rigs flat at 525 units (-76 y/y) and gas rigs down 5 to 123 units (-37 y/y).
Natural Gas US$2.799/mmbtu vs US$2.787/mmbtu last week
Uranium UXC US$56.75/lb vs US$56.75/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$102.2/t vs US$100.9/t
Chinese steel rebar 25mm US$513.3/t vs US$518.5/t
Thermal coal (1st year forward cif ARA) US$123.0/t vs US$123.0/t
Thermal coal swap Australia FOB US$149.5/t vs US$148.5/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$65,677/t vs US$66,152/t
Lithium carbonate 99% (China) US$33,149/t vs US$344,324/t
China Spodumene Li2O 5%min CIF US$3,560/t vs US$3,560/t
Ferro-Manganese European Mn78% min US$1,046/t vs US$1,052/t
China Tungsten APT 88.5% FOB US$310/t vs US$310/t
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$311/t vs US$311/t
Spot CO2 Emissions EUA Price US$91.3/t vs US$91.5/kg
Brazil Potash CFR Granular Spot US$345.0/t vs US$352.5/kg
Battery News
BYD chairman calls for Chinese automakers global push
- BYD’s founder Wang Chuanfu made the declaration after his company delivered its five millionth EV, as he claimed the “time has come for Chinese brands”.
- He signed off his speech by encouraging China’s car firms to “demolish the old legends and achieve new world-class brands” – an ominous message for legacy automakers in the West.
- Despite rapidly growing production in China, slowing market conditions in China have led to the country’s carmakers looking to the West for new customers.
- You can be sure the EU will find new ways to frustrate Chinese imports, remember the ‘Battle of Poitiers’ where the French demanded all Japanese video recorders be checked through a warehouse in Poitiers in the middle of France at the end of a very bumpy track. Few video recorders survived the journey.
- More recently the EU imposed measures which are alleged to have discriminated against Dyson vacuum cleaners to the benefit of its German rivals.
- Any similar move with Chinese automotive manufacturers will inevitably lead to a new trade war.
Company News
Amaroq Minerals (AMRQ LN) 44.5p, Mkt Cap £117m – Progress to secure debt funding
Geophysical survey identifies additional exploration targets in southern Greenland.
(Formerly AEX Gold (AEXG LN))
- In an announcement last week Amaroq Minerals confirmed that it expects to complete its US$50.9m senior secured debt funding by the end of August.
- The planned funding comprises US$18.5m of senior debt in the form of “revolving credit facilities provided by Landsbankinn hf and Fossar Investment Bank as well as a US$22.4m convertible note ECAM LP, JLE Property Ltd. And Livermore Partners LLC and an overrun loan facility of up to US$10m, also with JLE Property.
- Amaroq has previously reported that a helicopter based airborne geophysical survey over its Nanoq, Siku and Jokum’s Shear gold exploration projects in southern Greenland has identified promising targets west of Nanoq and at Jokum’s Shear.
Blencowe Resources (BRES LN) 5.25p, Mkt Cap £10.7m – Bulk sample from the Orom Cross graphite project, Uganda
- Blencowe Resources confirms that a 100t bulk sample of material from its Orom Cross graphite project in Uganda is currently undergoing tests at the facilities of Jilin New Technology in Yanji Province, northern China.
- The test work, which is expected to be completed by the end of August, forms part of the DFS work currently underway “and to date it is confirming the commercial processing viability of the Orom-Cross ores”.
- The company says that Jilin “has been conducting similar test work on several other leading East African graphite projects over the past few years”.
- Blencowe Resources confirms that it has met potential “large downstream offtake processors … to discuss timing and availability of the high-grade, low impurity concentrates from the Orom-Cross project”.
- “The offtake meetings involved firms seeking substantial quantities of both larger flake concentrates and fines feedstock for the SPG processors … [and the company says that] … Several downstream processing firms have expressed interest in opportunities to explore in-country downstream processing of the Orom-Cross concentrates and Blencowe will consider this within the DFS that is underway”.
- The Orom Cross Graphite Project in Uganda hosts shallow open-pittable graphite mineralisation containing an indicated and inferred JORC resource of 24.5mt at an average grade of 6% total graphite, which the company has previously characterised as having “a low strip ratio and free dig operations, thereby ensuring lower operating and capital costs”.
Jubilee Metals Group (JLP LN) –7p, Mkt cap £187m – Senior appointments
- Jubilee Metals reports senior appointments to strengthen and expand its management team.
- South African qualified Chartered Accountant, Neal Reynolds, will join as Chief Financial Officer on 1st October following “more than 14 years of experience in mostly African focused mining and metals operations”.
- Mr. Reynolds “was most recently Chief Operational Officer at Chemaf, an established copper and cobalt producer in the Democratic Republic of the Congo” following previous senior roles with Pan African Mining and as “CFO of Mopani Copper Mines and later … [as] … CFO of Glencore Copper Africa”.
- Today’s announcement confirms that “Pedja Kovacevic, the current acting CFO, will continue in his role as Chief of Strategy and Advisory once Neal has joined the Company”.
- In addition, mining engineer, Ricus Grimbeek, will lead “Jubilee’s expansion drive into energy metals with a specific focus on the roll-out of the Company’s Zambian Copper Strategy”.
- He is described as having “more than 30 years of experience in the mining industry holding various executive management and technical roles with global mining houses” including the management and “implementation of projects, across various mining jurisdictions”.
- Welcoming the appointments, CEO, Leon Coetzer, said that he looked forward to working with Neal Reynolds to “build capacity and grow our footprint in Zambia and investigate new opportunities in South Africa”.
- Mr. Coetzer also welcomed Ricus Grimbeek saying that “with more than 30 years of experience in various management and technical roles, he will make an invaluable contribution to the team and will assist in achieving our goal of rapid growth and expansion specifically in Zambia”.
Premier African Minerals (PREM LN) 0.61p, Mkt Cap £128m – Amended offtake and prepayment agreement with Canmax
- Premier African Minerals’ General Meeting, held on 12th August, approved an amended offtake and prepayment agreement with Canamax Technologies which is a 13.38% shareholder in the company.
- We understand that Canamax’s offtake agreement relates to spodumene concentrate from the Zulu lithium project in Zimbabwe where, earlier this year, completion of a 40tph pilot plant suffered construction delays and was reported to require modifications to achieve its design performance.
- Today’s announcement confirms that “a further announcement … [in relation to the offtake and prepayment agreements] … will be made shortly”.
- The company also says that it has “now elected to draw down on the entire £2 million Amended Facility entered into with George Roach (as previously announced on 9 August 2023) immediately on announcement of the full terms of the amended Offtake and Prepayment Agreement with Canmax”.
- Mr. Roach is CEO of Premier African Minerals.
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The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
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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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