Copper climbs on better-than-expected Chinese GDP although the property sector remains a drag
MiFID II exempt information – see disclaimer below
Antofagasta (ANTO LN) – Q3 production results as Los Pelambres and Centinela ramp up
BHP (BHP LN) – Q1 performance keeps BHP on track to achieve FY 2024 production guidance
Capital Limited (CAPD LN) – Quarterly trading update
Greatland Gold (GGP LN) – Quarterly update on Havieron as decline surpasses 2,800m
Trident Royalties (TRR LN) – Resource upgrade for Anson Resources Paradox Lithium Project
Gold pushes higher despite Treasury sell-off as concerns continue to mount over Middle East escalation
- Spot gold prices pressed higher to $1,935/oz, their highest since Sept. 20th.
- The move followed the hospital bombing in Gaza, which fuelled concerns over further escalation in the region.
- The jump defies yesterday’s sharp move higher in US Treasury yields, which have held a tight correlation to gold prices historically.
- Stronger-than-expected retail sales pushed yields higher, as the market continues to price in higher for longer Fed rates.
| Dow Jones Industrials | +0.04% | at | 33,998 | |
| Nikkei 225 | +0.01% | at | 32,042 | |
| HK Hang Seng | -0.18% | at | 17,742 | |
| Shanghai Composite | -0.80% | at | 3,059 |
Economics
US – Consumer spending continued strong in the last month of Q3/23 raising odds of another rate hike from the central bank over the course of next several meetings.
- In Q3/23, control group sales, the measure used to calculate GDP and exclude food services, auto dealers, building materials stores and gasoline stations, climbed at an annualised 6.4%, the largest end of quarter increase since June 2022.
- Retail Sales (%mom): 0.7 v 0.8 August (revised from 0.6) and 0.3 est.
- Treasury yields and the dollar rose, while the S&P 500 Index fell following the release of the data.
- Retail Sales Control Group (%mom): 0.6 v 0.2 August (revised from 0.1) and 0.1 est.
- Industrial Production (%mom): 0.3 v 0.0 August (revised from 0.4) and 0.0 est.
- NY Fed Empire State manufacturing index -4.6 in October vs -1.9 for September.
- Preliminary Uni of Michigan consumer sentiment dipped to 63.0 vs 68.1 previously.
- NAHB housing market index continues to fall to 40 in October vs 44 in September and off a high of 56 in July.
China – Q3 GDP came in ahead of expectations helped by resilient consumer spending compensating for a drag from the property crisis putting the economy on course to hit the annual target of around 5% for 2023, Bloomberg writes.
- Headline numbers got a boost form strong retail sales growth last month that posted the biggest increase since May.
- On a less positive front, property investment contraction accelerated during September.
- Home sale continued to decline, falling 3.2%YTD, while construction of new homes dropped almost 24% in the first nine months of the year.
- Funding for property development dropped 13.5% on-year in the first nine months, after plunging 12.9% in the January-August period.
- GDP (%qoq): 1.3 v 0.5 Q2/23 (revised from 0.8) and 0.9 est.
- GDP (%yoy): 4.9 v 6.3 Q2/23 and 4.5 est.
- Industrial Production (%yoy): 4.5 v 4.5 August and 4.4 est.
- Retail Sales (%yoy): 5.5 v 4.6 August and 3.9 est.
- FAI (%YTD): 3.1 v 3.2 August and 3.2 est.
- Property Investment (%YTD): -9.1 v -8.8 August and -8.9 est.
Germany – Wholesale prices rose slightly to 0.25 in September vs 0.2% in August and -4.1% yoy in September vs -2.7% in August.
- German ZEW economic sentiment -1.1 in October vs -11.4 in September.
EU – ZEW economic sentiment recovered to +2.3 in October vs -8.9 in September.
UK – Inflation came in ahead of expectations as climbing oil prices offset downward pressures from food costs, Bloomberg reports.
- The data supports the case for leaving rates unchanged at current 5.25% at the coming meeting next month.
- Markets are pricing in a roughly 25% chance of a 25bp move in November and >60% of such a move by February next year.
- “As we have seen across other G-7 countries, inflation rarely falls in a straight line, but if we stick to our plan then we still expect it to keep falling this year,” Chancellor of the Exchequer Jermey Hunt said.
- CPI (%mom): 0.5 v 0.3 August and 0.5 est.
- CPI (%yoy): 6.7 v 6.7 August and 6.6 est.
- Core CPI (%yoy): 6.1 v 6.2 August and 6.0 est.
Australia – Central Bank Governor admitted it is difficult to bring inflation down due to a number of supply shocks from global events including Russia/Ukraine war and now a conflict in the Middle East along with tight labour markets.
- “There are a few things that are suggestive that it’s going to be difficult to get inflation down,” the Reserve Bank chief said during her first public appearance since taking the job.
- “The problem is that we’ve got shock after shock after shock and the more that keeps inflation elevated, even if it’s a supply shock, the more people adjust their thinking, the more entrenched inflation is likely to become, so that’s the challenge.”
- The central bank raised rates by 4% since May 2022 with estimates for a >50% chance that the RBA will announce another 25bp rate hike before year end.
Currencies
US$1.0576/eur vs 1.0549/eur previous. Yen 149.73/$ vs 149.61/$. SAr 18.727/$ vs 18.735/$. $1.220/gbp vs $1.218/gbp. 0.639/aud vs 0.636/aud. CNY 7.312/$ vs 7.315/$.
Dollar Index 106.20 vs 106.34 previous.
Commodity News
Precious metals:
Gold US$1,937/oz vs US$1,920/oz previous
Gold ETFs 86.5moz vs 86.7moz previous
Platinum US$907/oz vs US$895/oz previous
Palladium US$1,143/oz vs US$1,144/oz previous
Silver US$23.08/oz vs US$23/oz previous
Rhodium US$5,400/oz vs US$5,250/oz previous
Base metals:
Copper US$ 8,037/t vs US$7,923/t previous
Aluminium US$ 2,190/t vs US$2,173/t previous
Nickel US$ 18,570/t vs US$18,465/t previous
Zinc US$ 2,446/t vs US$2,410/t previous
Lead US$ 2,098/t vs US$2,084/t previous
Tin US$ 25,365/t vs US$25,235/t previous
Energy:
Oil US$91.4/bbl vs US$89.8/bbl previous
- Energy prices edged higher after President Biden’s visit to Jordan to meet Arab leaders was cancelled following a deadly explosion at the al Ahli hospital in Gaza, which both Israel and Hamas blamed on each other.
- The API reported a 4.4mb draw (vs 1.3mb/d expected) on US crude stocks last week, which included a 1.6mb draw on gasoline stocks and 1mb draw at Cushing.
- Tourmaline Oil plans to increase its presence in the Deep basin natural gas play in western Canada by buying 60kboe/d E&P Bonavista Energy for C$1.5bn ($1.1bn), split 50:50 between cash and stock, which is at a slight premium to the Company’s after-tax PDP reserve base NPV10 of C$1.4bn.
- Ørsted has signed an agreement to divest 50% of the 253MW Gode Wind 3 Offshore Wind Farm in Germany to funds managed by Glennmont Partners for €473m, which comprises the acquisition price and 50% of the capex costs. Gode Wind 3 has a weighted average feed-in tariff of $81/MWh and is expected online in 2024.
Natural Gas €49.000/MWh vs €47.050/MWh previous
Uranium UXC US$69.00/lb vs US$72.75/lb previous
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$117.5/t vs US$117.4/t
Chinese steel rebar 25mm US$537.3/t vs US$537.7/t
Thermal coal (1st year forward cif ARA) US$137.0/t vs US$137.8/t
Thermal coal swap Australia FOB US$152.0/t vs US$152.0/t
Coking coal swap Australia FOB US$321.0/t vs US$321.0/t
Other:
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$71,669/t vs US$71,426/t
Lithium carbonate 99% (China) US$22,636/t vs US$22,624/t
China Spodumene Li2O 6%min CIF US$2,230/t vs US$2,230/t
Ferro-Manganese European Mn78% min US$1,021/t vs US$1,018/t
China Tungsten APT 88.5% FOB US$300/mtu vs US$300/mtu
China Graphite Flake -194 FOB US$635/t vs US$635/t
Europe Vanadium Pentoxide 98% 6.3/lb vs US$6.4/lb
Europe Ferro-Vanadium 80% 26.75/kg vs US$27.25/kg
China Ilmenite Concentrate TiO2 US$314/t vs US$314/t
Spot CO2 Emissions EUA Price US$85.5/t vs US$86.9/t
Brazil Potash CFR Granular Spot US$340.0/t vs US$340.0/t
Battery News
EU-made EVs to cost £3400 more under post-Brexit rules
- If post-Brexit trade rules dictating local content in EVs traded between the bloc and the UK, are not postponed, average EU-made car prices will rise £3400.
- The Society of Motor Manufacturers and Traders (SMMT) said those same rules will also add £3600 to the average British-built EV sold in Europe.
- EVs need to have 45% EU or UK content from 2024, with a 50%-60% requirement for their battery cells and packs, or face British or European Union import tariffs of 10%.
- EU and British supply chains for EVs are not advanced enough for EVs produced to meet those rules, so automakers will face a 10% tariff.
- Stellantis has said it will be forced to close British car plants, with the loss of thousands of jobs, unless the Brexit deal is swiftly renegotiated.
- Ford has said that not renegotiating the deal will slow the transition to electric in Europe.
Amazon has 10,000-strong Rivian van fleet
- Amazon has 10,000 Rivian electric delivery vehicles making routes across the US and Europe.
- According to Amazon, it has completed 150m deliveries with its Rivian fleet.
- The global giant has partnered with EV maker Rivian to have at least 100,000 electric delivery vans on the road by 2030.
- Rivian, who have struggled with production over the last year has raised its production forecast for 2023, to 52,000 vehicles.
- Amazon have also partnered with Volvo to add heavy-duty electric trucks to its delivery fleet – Volvo in 2022 said it would provide 20 EV trucks to Amazon.
Volkswagen and Stellantis to use new Chinese Leapmotor platform in their cars
- Stellantis is set to sign an investment agreement with Leapmotor, a Chinese EV startup.
- The agreement will include licensing of the LEAP 3.0 platform for new Stellantis vehicles.
- Leapmotor unveiled the LEAP 3.0 platform in July, aiming to use it in their products and license it to other automakers.
- Leapmotor’s CEO, Zhu Jiangming, envisions the company as both an EV brand and a core EV technology supplier.
- Discussions with the Chinese office of Volkswagen have also been held regarding the use of the LEAP 3.0 platform.
- In September, Leapmotor introduced its first global model, the C10 mid-size crossover.
Volkswagen Group EV sales up 45% in first 9 months of 2023
- In the first nine months of 2023, Volkswagen Group reported a 45% increase in EV sales, totalling 531,500 units worldwide.
- The BEV share of total deliveries rose to 7.9%, up from 6.1% in the prior year period.
- Europe received about 64% of the Group’s BEV deliveries, followed by China with 22% and the USA with 10%. The remaining 4% went to other markets.
- The Volkswagen passenger cars brand delivered 273,000 all-electric vehicles by the end of September, slightly more than half of all BEVs of the Group.
- Despite some reluctance in the EU market for EVs, Volkswagen maintained market leadership and gained market share in the EV segment.
Schneider Electric announces multi-million-pound expansion in Leeds
- Schneider Electric plans a £7.2 million expansion at its Leeds site, investing in facility upgrades and creating 110 new jobs over the next five years.
- The expansion is driven by increased demand in the energy transition and EV markets.
- The Leeds site specializes in designing and manufacturing medium- and low-voltage switchgear solutions for public, commercial, and industrial installations.
- Work on the expansion is expected to start in early 2024 and be completed by August 2024.
- Schneider Electric’s investment aligns with the UK’s push for decarbonization and infrastructure development, particularly in EV charging.
Company News
Antofagasta* (ANTO LN) 1,396p, Mkt Cap £13.7bn – Q3 production results as Los Pelambres and Centinela ramp up
- Antofagasta provides a quarterly production report for the period to September 30th.
- Copper production up 16% qoq to 173.6kt, standing at 469kt ytd, up 4.1% yoy.
- Copper sales increased 8.2% to 158kt, standing at 453.8kt ytd.
- Gold production up 30% qoq to 57.4koz, standing at 143.6koz ytd – up 19%. (Centinela driving increased production)
- Cash costs before by-product credits fell 8.1% qoq to $2.27/lb, up 5.7% yoy for the period ytd.
- Net cash costs fell 25% qoq to $1.47/lb, down 6.3% yoy for the year to data at $1.65/lb.
- The Company maintains their FY guidance at 640-670kt, with FY cash cost guided at $2.3/lb and net costs at $1.65/lb.
- FY CAPEX guidance at $2bn, up $100m from previous expectations.
- 2024 copper production expected at 670-710kt as Los Pelambres production ramps up.
*An SP Angel mining analyst has previously visited a number of Antofagasta’s copper mines.
BHP (BHP LN) 2,370p, £50bn – Q1 performance keeps BHP on track to achieve FY 2024 production guidance
- BHP reports that after a positive three months operating performance to 30th September it remains on track to meet its FY 2024 production and cost guidance across its suite of assets.
- Today’s announcement highlights an 11% increase in copper production to 457,000t (Q1 2023 – 410,100t), including record quarterly production from the Spence mine which increased by 19% to contribute 69,000t “largely as a result of improved concentrator performance and recoveries”.
- Integration of the Carapateena and Prominent Hill operations with Olympic Dam helped drive a 44% rise in South Australian copper output to 72,000t.
- Copper output at Escondida increased by 8% to 273,000t “primarily due to higher concentrator feed grade of 0.85%, compared to 0.83% in the September 2022 quarter. Concentrator feed grade is expected to be between 0.85% and 0.90% during FY24”.
- Copper production guidance for the full year remains intact in the range 1.72,t – 1.91mt.
- Iron ore production in WA declined by 3% to 63mt “due to tie-in activity for the Rail Technology Programme (RTP1), the ongoing ramp up and maintenance at the Central Pilbara hub (South Flank and Mining Area C), and the timing of track renewal maintenance”.
- BHP says that “Since its initial investment over 30 years ago to the end of FY23” it has shipped 3bn tonnes of iron ore to China delivering “15% average annual returns and, over the past decade, has increased production by >50% and lowered costs by >30%”.
- Guidance for 2024 remains intact in the range of 254-264.5mt of iron ore.
- Metallurgical coal output declined by 16% to 5.6mt “due to planned wash plant maintenance at Goonyella, mining in higher strip ratio areas, an extended longwall move at Broadmeadow, and a stoppage at Peak Downs”.
- Full year guidance is maintained in the range 28-31mt of metallurgical coal.
- Production of energy coal from NSW increased by 38% to 3.6mt as a result of “favourable weather conditions and eased labour constraints, which enabled record annualised truck hours for the quarter”.
- Energy coal production guidance remains between 13mt and15mt.
- BHP reports that its 4.35mtpa Jansen Potash project in Saskatchewan is now 32% complete and is expected to deliver first production at the end of calendar year 2026.
Conclusion: BHP’s operations have delivered strong Q1 performance across all operations leaving production and cost guidance intact. Integration of the S Australian copper operations at Prominent Hill and Carapateena is reported to be going well and BHP’s iron ore operations have now delivered 3bn tonnes of iron ore to China over the last 30 years.
Capital Limited (CAPD LN) 78p, Mkt Cap £150m – Quarterly trading update
- Mining services and drilling company Capital Limited provide their results from Q3.
- Revenue increased 9% for the quarter yoy to $79.7m and 4.2% qoq from the previous quarter.
- Drilling and associated revenue fell 2.1% yoy and 2.7% qoq at $51.2m.
- Mining revenue for the period jumped 38.5% to $18m, up 25.9% qoq.
- The company notes that fleet utilisation for drilling is down 6.5% vs last year and 1.4% qoq, pointing to seasonal effects and lower activity in Mali.
- Average rig operating revenue fell 1.6% yoy to $179k per month, down 2.2% qoq from $183k.
- The Company won contracts from Nevada Gold Mines and Allied Gold Corp over the period.
- Management notes activity ramping up at Reko Diq and Ivindo SA, backed by FMG.
- Operations at Perseus’ Meyas Sand Project have been paused and are expected to resume in 2024.
- The Company is guiding towards $320-340m in revenue for the year, with improved momentum going forward into 2024.
Greatland Gold (GGP LN) 6.35p, Mkt Cap £328m – Quarterly update on Havieron as decline surpasses 2,800m
- Greatland provides an update on the Havieron project for the quarter to September 2023.
- As regards the decline development, total development has now passed 2,820m.
- The Company also highlights that the Newmont-Newcrest takeover has been approved.
- The Havieron project is currently under JV with Newcrest, with Newmont now the official Havieron JV partner.
Trident Royalties (TRR LN) 36p, Mkt Cap £105m – Resource upgrade for Anson Resources Paradox Lithium Project
- Mining royalty company Trident highlights the announcement from Anson Resources regarding the MRE update for the Paradox Lithium Project in Utah.
- Trident holds a 2.5% NSR royalty over the Paradox and Green River Lithium Projects.
- The MRE shows
-
- Indicated: 562m Brine tonnes at 123ppm Li for 367kt LCE and 1.9mt Bromine
- Inferred: 1,954m Brine tonnes at 109ppm Li for 1.14mt LCE and 6.7mt Bromine.
- Total Resource: 2,500m Brine tonnes at 112ppm Li for 1.5mt LCE and 7.6mt Bromine.
- The update reflects a 6% increase in indicated Resource and 117% increase in inferred Resource.
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
SP Angel
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
*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 |
DISCLAIMER
This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.
Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.
Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.
SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA is registered in England and Wales with company number OC317049. The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.
MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.
A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).
SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%
