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Today's Market View - China punishes officials for Green Shield failures

Published: 19:30 23 Apr 2019 AEST

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SP Angel – Morning View – Tuesday 23 04 19

China punishes officials in for failure to implement Green Shield Measures

Easing China stimulus measures hurts base metal prices

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MiFID II exempt information – see disclaimer below

 

Alexander Mining (LON:AXM) Lithium joint venture research on lithium leaves zinnwaldite as last hope for heap leach potential

IronRidge Resources* (LON:IRR) – Exploration licence granted at Zaranou gold project

Serabi Gold (LON:SRB) – Coringa mineral resource report

Sirius Minerals (LON:SXX) – Shaft sinking pictures show rapid development at Woodsmith mine in Yorkshire

Sunstone Metals (ASX:STM) – Bramaderos copper/gold project in Ecuador

Thor Mining* (LON:THR) – Moonta Copper project

Trans-Siberian Gold (LON:TSG) – Development and exploration license secured on the Rodnikova Au/Ag deposit

 

China to punish 163 officials in Shandong province for failing to enforce environmental and other restrictions on metal production

  • China’s environment ministry takes action and reprimands provincial officials in Shandong, the country’s largest aluminium producing hub, for failing to comply with policies to cut coal consumption and curb the growth of highly polluting aluminium output.

  • Shandong also produces some 78-80mtpa of steel or ~8% of 930mt of total Chinese steel production.

  • Struggling to find cleaner forms of growth, Shandong had been a key part of China’s efforts to curb pollution. One – Jining – out of seven of the province’s cities set targets to cut smog over winter succeeded.

  • In a review of the compliance record of eight regions published on Monday, China's Ministry of Ecology and Environment said Shandong officials not only failed to meet guidelines on industrial overcapacity, but also deceived central government inspectors and tried to cover up illegal behaviour.

  • Shandong was ordered to cap total aluminium production capacity at 4mt in 2017, but the province's "choices" and policy "adaptations" enabled the industry to expand out of control, with total capacity soaring to as much as 12.6mt, the ministry said in a statement.

  • Particular offending cities are home to China’s two largest private aluminium producers, China Hongqiao Group and Xinfa Group.

  • Shandong’s provincial government reports 163 officials have been held to account for a range of violations uncovered by central government inspectors. The environmental bureau report officials failed to supervise efforts to cut coal use, allowed land in protected nature reserves to be misused, and enabled “disorderly development” in the chemical sector.

  • The environmental bureau add it would carry out a one-month pollution “rectification” campaign across the province.

 

London Metal Exchange to ban brands not responsibly sourced by 2022

  • The London Metal Exchange launches an initiative that could see it ban or delist brands not responsibly sourced by 2022 on rising demand for ethical and sustainable products, reports CEO Matthew Chamberlain.

  • Producers will be required to complete a “red flag” assessment, with brands considered risky to adopt an OECD-aligned responsible sourcing standard by the close of 2022.

  • It is a big step,” Chamberlain said. “If you look at the last 100 years our brand lists have been maintained purely on the basis of metallurgical quality. We’re now introducing a new element, which is saying we also have expectations in the way metal is sourced”

 

Dow Jones Industrials

 

-0.18%

at

  26,511

Nikkei 225

 

+0.19%

at

  22,260

HK Hang Seng

 

-0.03%

at

  29,955

Shanghai Composite

 

-0.49%

at

   3,199

FTSE 350 Mining

 

+0.37%

at

  20,672

AIM Basic Resources

 

-0.94%

at

   2,060

 

Economics

WTO decides against China in Market-Economy Trade Case against US and EU

  • WTO has ruled that China should not have market-economy trade status in a ruling that may help other countries put up barriers against low-cost Chinese goods.

  • This is an important ruling for countries where millions of jobs have been lost to cheap Chinese imports causing significant hardship and destabilising governments who are battling to support their economies.

 

US – US futures are little changed this morning as companies continue to report quarterly earnings with reports Boeing, Amazon, Microsoft and Facebook among others due later this week.

  • So far, around 20% of S&P 500 companies released their earnings with quarterly EPS up 0.2%yoy marking the slowest growth rate since Q1/16.

  • S&P 500 profits are expected to drop 1.7%yoy in what would be the first earnings contraction since 2016, according to Refinitiv data.

  • Oil names are trading higher as prices hit the strongest level for 2019 on the back of the news the US will lift exemptions from sanctions for countries still buying oil from Iran as well as intensifying military confrontation between the Libyan National Army and Tripoli.

  • The White House said waivers for China, India, Japan, South Korea and Turkey will expire in May, after which they could be subject to US sanctions themselves.

 

China – Mainland equities were slightly lower extending Monday losses as investors took profit on +30% move since the start of the year and as many interpreted a statement issued late on Friday following a politburo meeting as authorities’ were less comfortable about adding stimulus.

  • The CSI 300 equity index dropped 2.3% yesterday with property developers leading losses; the index is down 0.2% today.

  • A statement late on Friday was seen as that the government considers the economy to be on a stable enough footing and extended support is not needed; instead there was a focus on deleveraging and avoiding speculation in the housing market, Bloomberg reports.

China held a grand naval parade to celebrate the 70th anniversary of the Peoples Liberation Army

  • Shame the fog was so dense not much of it could be seen.

 

Japan – The central bank will easy policy further as needed if momentum for hitting price target threatened, the BoJ Executive Director told the parliament.

 

Malawi – new Malaria vaccine to be tested in Malawi

  • The vaccine is said to give partial protection to children according to the WHO.

 

Ukraine – Volodymyr Zelenskiy, 41, claims a landslide victory in the second round of the presidential race running against incumbent Petro Poroshenko.

  • Nearly three quarters of voters supported Zelenskiy who promised to end the war in the eastern Donbass region and to root out corruption amid widespread dismay over rising prices and sliding living standards.

 

Philippines – The magnitude 6.1 earthquake struck 60km northwest of Manila on the Luzon island yesterday.

  • The worst of the damage was in the province of Pampanga where most of the 11 fatalities occurred.

  • This was followed by a 6.5 magnitude earthquake on the island of Samar registered today, according to the USGS.

  • There were no immediate reports of casualties or damage.

 

Hot news - McDonald’s is pulling its Signature Crafted burgers, will double down on Quarter pounders

  • It appears the better quality burgers took longer to put together, slowing down service times at drive-thrus.

  • Is convenience or profit giving over to quality, personally we would rather wait for quality.

 

Currencies

US$1.1243/eur vs 1.1297/eur last week  Yen 111.87/$ vs 111.91/$  SAr 14.167/$ vs 14.031/$  $1.299/gbp vs $1.304/gbp  0.712/aud vs 0.718/aud  CNY 6.713/$ vs 6.697/$

 

Commodity News

Precious metals:         

Gold US$1,274/oz vs US$1,273/oz last week

   Gold ETFs 71.4moz vs US$71.8moz last week

Platinum US$898/oz vs US$886/oz last week

Palladium US$1,383/oz vs US$1,388/oz last week

Silver US$14.97/oz vs US$14.98/oz last week

  • Research published in the journal Environmental Science and Pollution Research states increased demand for solar panels is linked to spiking silver prices. Analysis of London Bullion Market data suggests rising silver prices coincide with demand for solar between 1990 and 2016.

  • Examples of such situations are the years following the 2008 global recession when silver prices rose to $18.99/oz, and shortly after 2011, when there was worldwide concern oil prices were becoming too high and silver prices climbed to $48.03/oz.

  • Rising silver prices can impact project viability, with expensive raw materials could “require intervention from governments such as with energy credits or sales tax waivers to make them more cost-effective to encourage a transition to more renewable energy resources”.

  • Silver has the highest electrical and thermal conductivity with commercial panels incorporating around 20g silver per unit.

  • The study suggests the metal is responsible for around 6.1% of the total cost of building each panel.

           

Base metals:   

Copper US$ 6,433/t vs US$6,520/t last week

Aluminium US$ 1,877/t vs US$1,847/t last week

Nickel US$ 12,570/t vs US$12,720/t last week

  • Base metals broadly retreat amid concerns China may ease its stimulus measures after its economy signalled early recovery.

  • While a top party decision-making meeting in China on Friday affirmed authorities’ support for the economy, they also said they would push forward structural de-leveraging and prevent speculation in the property market, suggesting attention may be turning back to debt risks that any further major stimulus measures may create.

  • China should fine-tune monetary policy in a pre-emptive way based on economic growth and price changes, the official Xinhua News Agency said on Monday, citing a top-level meeting chaired by President Xi Jinping.

  • Falling prices were opposed as the global nickel market deficit narrowed to 2,000t in February from a revised deficit of 3,700t in January, and was much smaller than a 7,200t deficit in the same month last year, the International Nickel Study Group.

Zinc US$ 2,775/t vs US$2,780/t last week

Lead US$ 1,935/t vs US$1,936/t last week

Tin US$ 20,235/t vs US$20,390/t last week

           

Energy:           

Oil US$74.6/bbl vs US$71.4/bbl last week

Natural Gas US$2.530/mmbtu vs US$2.506/mmbtu last week

Uranium US$25.80/lb vs US$25.95/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$91.3/t vs US$90.2/t

Chinese steel rebar 25mm US$652.0/t vs US$651.2/t

Thermal coal (1st year forward cif ARA) US$74.2/t vs US$75.4/t

Coking coal futures Dalian Exchange US$181.2/t vs US$182.5/t

           

Other:  

Cobalt LME 3m US$35,000/t vs US$35,000/t

NdPr Rare Earth Oxide (China) US$39,844/t vs US$39,945/t

Lithium carbonate 99% (China) US$9,682/t vs US$9,632/t

  • Battery metals tracker Adamas Intelligence reports 76% higher lithium carbonate equivalent was deployed globally in February, the highest growth amongst metals and materials found in EV battery cathodes.

  • Adamas says the surge in lithium use per kWh of battery capacity deployed is due to an ongoing shift from lithium iron phosphate (LFP) to nickel-cobalt-manganese (NCM) cathodes among Chinese vehicle makers.

  • Globally, the top five cell suppliers by LCE deployed in February 2019 were Panasonic, LG Chem, CATL, BYD and Samsung SDI. Collectively, these five suppliers were responsible for almost 75% of all lithium deployed globally in passenger EVs around the world.

  • EV manufacturing capacity continues to surge, with Bloomberg reporting there are 486 manufacturers registered in China – more than three times the number two years ago.

Ferro Vanadium 80% FOB (China) US$51.5/kg vs US$48.5/kg

Antimony Trioxide 99.5% EU (China) US$6.3/kg vs US$6.3/kg

Tungsten APT European US$270-282/mtu vs US$270-282/mtu

 

Battery News

 

Company News

Alexander Mining (LON:AXM) 0.06p, Mkt cap $1.1m Lithium joint venture research on lithium leaves zinnwaldite as last hope for heap leach potential

  • Alexander Mining reported results on Thursday afternoon of their lithium jv research and development on lithium heap leaching.

  • “Four samples of different lithium minerals, spodumene, petalite, lepidolite and zinnwaldite, were obtained from confidential industry sources.  A series of preliminary test work runs were made which gave encouraging results for a small set of reagents.  Further runs were then made from which the two most promising reagents were selected for a larger scale series of runs of longer duration.

  • The results from these runs showed that leaching of lithium from all four minerals was achieved at ambient temperature and pressure.  However, the rates of dissolution of the lithium were lower than required for the targeted heap leach.  Of the minerals tested, only zinnwaldite appears to have any promise for heap leaching using the envisaged process.

  • No further work is planned at this stage.” “the use of heap leaching as a possible processing method for the low-cost extraction of lithium remains of interest to Alexander”

 

IronRidge Resources* (LON:IRR) 17.0p, Mkt Cap £55.8m – Exploration licence granted at Zaranou gold project

  • IronRidge Resources report the exploration licence for the 397km2 Zaranou gold project has been granted ahead of schedule.

  • The Company also announce a two-month extension to the exclusive due diligence period, giving the vendor additional time to complete in country administrative process which have taken longer than anticipated.

  • The extension is further to the announcement IronRidge has secured the right to acquire up to 100% of the Project via staged earn-in arrangements.

  • The Zaranou Project hosts 8 high priority targets, with coincident large-scale artisanal workings over 40km strike.

*SP Angel act as nomad and broker to IronRidge Resources

 

Serabi Gold (LON:SRB) 39p Mkt value £22.9m – Coringa mineral resource report

  • Serabi Gold has now filed the technical report on its previously announced mineral resource estimate upgrade which increased the overall estimate by 37% to an indicated resource of 845,000t at an average grade of 7.95g/t gold for 216,000oz of contained gold plus an additional 1.436mt classed as inferred at an average grade of 6.46g/t (298,000oz of gold).

  • The company also reports that “Further drilling has been completed and the results from this will be included in the Preliminary Economic Assessment (“PEA”), which is underway and the result of which the Company expects to announce before the end of June 2019.”

  • The resource estimate covers seven of nine identified deposits in the area as there “is insufficient geological data to include the Domingo and Pista zones as a mineral resource at this time.”

Conclusion: We look forward to the forthcoming PEA for Coringa and, in due course, for initial results for the other deposits at Domingo and Pista

 

Sirius Minerals (LON:SXX) 21p, Mkt Cap £1bn – Shaft sinking pictures show rapid development at Woodsmith mine in Yorkshire

  • Sirius Minerals’ show rapid progress in its shaft sinking at its Woodsmith polyhalite potash mine in North Yorkshire.

  • The company is also planning on building port handling and storage facilities at Teesside.

  • Management are currently pursuing a Stage 2 senior debt financing with a group of lenders as part of a US$3bn multi-tranche structure.

  • The company sold a US$250m royalty to Hancock British Holdings Ltd last September along with a US$50m equity component to align with the Stage 2 financing commitments..

 

Sunstone Metals (ASX:STM) A$0.04p, Mkt Cap £53m – Bramaderos copper/gold project in Ecuador

  • Sunstone Metals reported last week the identification of a number of mineralised porphyry and epithermal targets at Bramaderos in Ecuador.

  • The team have so far discovered 10 gold-copper and another 10 gold-silver targets in Ecuador with the Limon gold-copper property at ~2x1km as

  • defined by soil and chip sampling along with magnetic and radiometric data.

  • Drilling is now underway at Limon where previous surface trenching shows 97.6m at 0.71g/t gold and 0.23% copper over porphyry outcrop.

  • Sunstone reported 174m drilled by last Wednesday and is keen to get drilling permits for further targets at Limon to test more porphyry outcrop.

  • Trench assays at Bramaderos previously show: 74.3m grading 0.69g/t gold at 0.15% copper, including 51.1m at 0.81g/t gold and 0.18% copper.

  • Plus 248.1m grading 0.56g/t gold and 0.14% copper to the end of hole starting at just 9.14m depth with mineralisation at the end of the hole returned 0.93g/t gold and 0.22% copper over 2.2m.

Conclusion:  It is great to hear that the Sunstone team are drilling at Limon, in a country where drilling permits can be hard to get. Sunstone has much of the team which discovered and advanced the Tujuh Bukit deposit for Intrepid Mining.

 

Thor Mining* (LON:THR) 0.75p, Mkt Cap £6.1m – Moonta Copper project

  • Thor Mining reports that mineral resource estimation work has started at the Moonta Copper in-situ leach project in South Australia.

  • Enviro Copper, where Thor Mining hold rights to 60%, is earning a 75% interest in the project, subject to due diligence. The company has previously announced that Enviro Copper may be listed as a stand-alone entity with Thor Mining holding “up to 30% equity in Enviro Copper prior to any listing activities”.

  • The project, which lies “entirely under sedimentary cover” is described as comprising “steeply dipping zones of copper oxide mineralisation hosted within a deep weathering trough interpreted to extend over 11 kilometres strike length, and potentially beyond”. Mineralisation within this trough “is in the order of 50 to 75 metres width with drill intersections in excess of 350 metres deep. I areas where there is enough drill information grades appear to be in the order of 0.18-0.23% copper”.

  • The property benefits from drilling data accumulated “over several decades … [which should] … provide [a] basis for resource estimation”. Historical copper mining in the district “from the 1860s until the 1920s [produced] a reported 300,000 tonnes of copper”.

  • Subsequent work has identified two zones; the Bruce and Wombat zones which “are considered to have a number of critical attributes which may allow copper production via in-situ recovery (ISR) techniques.  Both deposits are characterised by deeply developed weathering troughs that extend hundreds of metres below surface.  The rocks to both the north and south are fresh and impermeable while the trough material contains copper mineralisation that is oxidised, porous, and likely permeable, and is situated below both the water table and sea level.  Both deposits remain open along strike, presenting opportunities to find further mineralisation in the trough extensions.”

  • Thor Mining’s Executive Chairman, Mick Billing, explained that the proposed in-situ recovery methods are a “non-invasive technique … [for copper recovery which] … has the potential to co-exist without significant disruption to farming and once completed, have little to no impact on future agricultural land use”.

  • Although in-situ leaching of copper is relatively unusual, we believe that in-situ leaching of copper is currently underway under test conditions at Taseko’s Florence operation in Arizona and that the current construction of another in-situ leach project at Excelsior Mines’ Gunnison project, also in Arizona is expected to deliver initial copper production in Q4 2019.

Conclusion: Historical drilling information and a history of previous copper mining in the area should assist in the preparation of the Moonta mineral resource estimate  We imagine that resource estimation will need to consider recovery and depletion rates as well as flow rates between wells and we look forward to the forthcoming estimate to fill in some of the technical detail which may harness techniques more familiar in the oil and gas industry than to conventional mining extraction.

*SP Angel act as joint broker to Thor Mining

 

Trans-Siberian Gold (LON:TSG) 57p, Mkt Cap £63m – Development and exploration license secured on the Rodnikova Au/Ag deposit

 

  • Rosnedra issued a license to ZAO Trevozhnoye Zarevo (TZ), the Company’s wholly owned subsidiary, for the development and exploration of the Rodnikova deposit.

  • The tenure is for 20 years.

  • Russian GKZ standard classified resources (C1+C2) are currently estimated at 1moz gold at 5.3g/t and 8.3mo0z silver at 44.6g/t.

  • Both producing Asacha and Rodnikova deposits are believed to have similar geology, mineralogy and metallurgy, the Company reports.

  • The team is planning to test if existing processing facilities at Asacha located in a 50km trucking distance would be suitable for processing of Rodnikova ores.

  • The Rosnedra decision marks a renewal of the license that expired back in September 2014.

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