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Morning View – European Metal Holdings and more…

SP Angel . Morning View . Wednesday 08 04 20

Risk sentiment weakens with Euro members unable to agree on coronabonds

European Metal Holdings (AIM:EMH) – CEZ investment

Ormonde Mining* (AIM:ORM) – 2019 results

Sunstone Metals Limited (ASX:STM) – Identification of high-priority drilling target at Espiritu

Tri-Star Resources* (LON:TSTR ) – SPMP progress report

SP Angel Healthcare team

Amphista Therapeutics raises $7.5m in Series A round

Novacyt* (AIM:NCYT): COVID-19 test included in WHO procurement list and collaboration with AstraZeneca, GSK and University of Cambridge

Avacta (AIM:AVCT): Collaboration with Cytiva to develop a COVID-19 test

Is it too soon to call the end of the Coronavirus?

Economists call for shortened lockdowns to limit economic damage and avert the depression which historically follows pandemics

Mortality rates and details in each country will be critical to the shape and potential repetition of this years lock-downs

Equity markets are forecasting a return to a new normality but remain volatile

Germany indicates lifting lockdown on 19 April.

Sweden has so far refused to enforce a lockdown but its sparse population and most of the population have voluntarily opted to work from home and are practicing social distancing.

China reported no cases of COVID-19 yesterday, but do we believe them. Maybe just allot of people dying from pneumonia.

Samsung report strong chip sales in Q1 helped by workers moving to work from home.

Russia and Saudi Arabia may settle their differences over cutting oil production as demand starts to return, which would remove much of the reason for their argument.

Stimulus funding pledged

US – debating another $250bn help to businesses (not agreed with the Congress yet)

EU Finance Ministers failed to agree on a strategy to mitigate the economic impact of the pandemic. Further talks scheduled for Thursday

$2tn US fiscal package approved by Congress. US may add $0.6t state aid for mortgage markets and travel industries

$2tn US – Trump looking at $2tn infrastructure fund

$700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE to buy Treasuries and mortgage-backed securities.

$963bn (€750bn) ECB scraps limits on sovereign bond purchases. ECB PEPP buying running at around €250bn

$825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds

$344bn – China stimulus + $127.2bn. China stimulus was $586bn in 2009

$996bn (108.2tn yen) was. $544bn (¥60tn) – Japan

$400bn (£330bn) UK + $242bn (£200bn) UK QE from BoE & no business rates plus £25,000 cash grants for hospitality sector

$387bn (€304bn) France, $200bn (€200bn) Spain, $214bn (A$320bn) Australia, $78bn (C$107bn) Canada, $32bn Saudi Arabia, US$43.7bn Singapore, $22.6bn India, $19.3bn HK, $13.7bn South Korea, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,

Argentina to default on $10bn of dollar debt issued til the end of the year. Does no affect the $70bn that Argentina is currently in talks to restructure.

$1,000bn – IMF available + $12bn World Bank,

>11.9tn Total

Dow Jones Industrials

-0.12%

at

22,654

Nikkei 225

+2.13%

at

19,353

HK Hang Seng

-1.23%

at

23,954

Shanghai Composite

-0.23%

at

2,814

Economics

US – The administration is seeking an additional $250bn in emergency economic aid for small US businesses.

Should that be approved by the Congress, the package would come in addition to the $349bn aid in the form of forgivable loans to small businesses enacted on March 27 as part of a $2.3t economic stimulus.

Feds balance sheet could rise to $9-12tn (42%-57% GDP from 20% GDP six months ago) having already risen to US$5.6tn from US$1.1tn in the two weeks to end March as Fed moves to rescue the economy. For comparison the Bank of Japan holds 107% its GDP in assets.

US – 2.66% of US mortgage holders stopped paying vs 0.25% a month earlier.

NY Times reckons US is understating the true number of COVID-19 fatalities.

Larry Kudlow of the Fed says he sees no reason why H2 cant resume strong growth. Problem is we are likely to still be dealing with Coronavirus outbreaks through this year till a safe, tested vaccine or treatment is released.

Donald Trump threatened to put on hold funding for the World Health Organization

Around 40% of all oil and gas producers faced with insolvency if crude remains near $30/bbl according to Kansas City Fed survey.

The UN International Labour Organization reports a 7% loss in working hours equivalent to loss of 195m full-time workers with >1bn workers facing pay cut or redundancy

China – A number of influential Chinese economists and officials are discussing a potential reduction in target GDP growth rates, Bloomberg writes.

The National Peoples Congress that was due for early March has been postponed due to the virus lockdown with some commentators arguing a correction to the GDP target may be announced.

Targeted support measures as opposed may see GDP slowing down to 3% this year as opposed to a significant stimulus that may be required to keep the economy on target for an around 6% target.

PBOCs policy adviser and former Deutsche Bank economist Ma Jun said a target of “around 6%” is very likely unachievable and will see a flood of stimulus, state-run Economic Daily reported on March 31.

China Finance 40 Forum, a Beijing-based think tank that includes PBOC Deputy Governor Chen Yulu, suggested that this years growth target may be brought down to “around 3%”.

Japan – Services sector sentiment plunged to the weakest on record since the survey was launched in 2002, according to Economy Watchers data.

The gloom outpaced declines during 2011s deadly tsunami disaster and during the global financial crisis.

The sentiment is likely to weaken further as the government enacted a state of emergency covering major Japans cities.

A separate report showed the number of bankruptcies climbed 12% from the previous year.

Some economists are expecting GDP to post a >20%qoq drop in Q2, Bloomberg reports.

EU – Finance ministers failed to reach an agreement over potential financial support to troubled nations with further talks scheduled for Thursday.

The disagreement involved hawkish northern states and hardest- hit south countries regarding the potential split of rescued packages costs.

The main reason for the breakdown was a dispute between the Netherlands and Italy over the conditions attached to the potential use of credit lines from the Eurozones bailout fund, according to two officials familiar with the discussion.

France proposed a creation of a temporary reserve fund to the tune of 3% of EU GDP funded by the joint issuance of debt to allow economically weaker to benefit from lower borrowing costs.

Germany said it is in support of measures to support an economic recovery, but was against so-called coronabonds that would see countries sharing debt.

Germany – Nations leading economic research institutes expect German economy to contract by 4.2% this year before rebounding by 5.8% in 2021.

This compares to a contraction of 5.7% recorded in 2009 and pre-crisis government estimates for a 1.1% growth this year.

On a separate note, the government agreed to tighten rules for takeovers of domestic firms by non-EU companies.

Regulations will require a review of a potential deal if there is “likely harm” to the public system of security to Germany and its EU partners; this compares to an “actual danger” envisaged previously.

The economy ministry is considering putting in place regulations requiring investors in AI, robotics, semi-conductors, biotechnology and quantum technology to make public any purchases of 10% or more and allow Germany to screen them.

France – The economy contracted 6%qoq in Q1/20 marking the largest drop since WWII, according to the Bank of France estimates.

The outlook for the remainder of the year remains weak as the government stepped up lockdown efforts to limit the spread of the coronavirus.

In the manufacturing sector, the sharpest declines were recorded in the automotive and machine-making sectors, while hotels and restaurants were the hardest hit in the services sector.

Estimates suggest that factories are running at just 56% of capacity, a record low, and down from 78% in February.

The central bank estimates that for every two weeks of confinement, 2020 GDP will lose 1.5pp.

Italy – The nation reported fewest new virus cases since March 13.

UK – The nation is nowhere near lifting the lockdown measures with the peak of the virus is still “probably a week and a half away”, according to London Mayor Sadiq Khan. Sadiq Khan is a Labour party politician.

Local Labour mayors have been frustrating government efforts to keep major infrastructure projects on track in towns, such as HS2 and roadworks.

PM Johnson previously guided for the lockdown status to be reviewed in three weeks after announcing the lockdown on March 23.

The PM is reported to be in a stable condition after spending a second night in intensive care unit.

Hong Kong – The government to announce fresh HK$30bn ($3.9bn) stimulus to support businesses, according to the South China Morning Post.

The package would be directed towards companies that so far have been left out of support measures.

The government has previously announced a HK$30bn anti-epidemic fund and HK$120bn relief package in this years budget.

Brazil – president continues to oppose lockdowns in contravention of his Health Minister

Currencies

US$1.0857/eur vs 1.0871/eur yesterday. Yen 108.81/$ vs 108.84/$. SAr 18.373/$ vs 18.422/$. $1.231/gbp vs $1.233/gbp. 0.614/aud vs 0.618/aud. CNY 7.063/$ vs 7.061/$.

Commodity News

Gold US$1,652/oz vs US$1,653/oz yesterday – Safe-haven demand will continue to support gold prices but not silver

According to the executive director of the JP Morgan Centre for Commodities, safe-have demand will continue to support gold prices while weak industrial demand will weigh on silver.

Traditionally, gold and silver prices have been closely correlated as both are seen as important monetary metals. Since 2018, that correlation has broken down and silver is slightly more correlated to copper.

Physical demand data for silver shows nearly 60% of demand came from industrial use, compared to only 7% for gold.

Last month, silver prices fell to an 11-month low as the global pandemic brought recession fears. Conversely, gold prices have risen in this time due to its safe-haven appeal (Kitco).

Silver's 5% rally on Monday to $15.27/oz saw the gold:silver ratio currently trading at 111 points, down from its all-time highs of 125 – however analysts at the JPMCC don't expect the ration to fall below 100 in the near-term.

Base metals:

Copper US$ 5,027/t vs US$5,043/t yesterday – LME copper inventories surge 20%

Copper stockpiles tracked by the LME jumped by 43,350 tonnes to 259,850 tonnes according to data from the bourse.

Glencore places Mopani copper mine in care and maintenance

Glencore will transition its operations to care & maintenance status from today, but will continue to process on-site material at the associated Zambian smelter until further notice.

The repercussions of the Covid-19 pandemic along with a weaker copper price are the reasons cited for temporarily closing the mine (Fastmarkets MB).

The move has plunged Glencore into a dispute with the Zambian government, who describe the move as unjustified and illegal.

The decision to halt production comes as Zambia struggles to service a growing debt burden, and the shutdown has not gone down well with the government as the country earns most of its foreign exchange from copper exports (FT).

Aluminium US$ 1,470/t vs US$1,487/t yesterday

Nickel US$ 11,545/t vs US$11,460/t yesterday – Philippines top nickel miners halt operations

The country's top nickel ore producers – Nickel Asia Corp and Global Ferronickel Holdings are suspending mining and export operations in a southern province to comply with measures to contain the spread of Covid-19.

Nickel Asia has said that its two operations in the Surigao del Norte province have been suspended until the end of April, however it will continue to process stockpiled ore.

The country's largest nickel mines are situated in the province, which supply ore to Chinese nickel pig iron producers and smelters.

The move to halt operations comes just two days after announcing they were resuming operations because an earlier local suspension order had been lifted (Reuters).

Zinc US$ 1,918/t vs US$1,938/t yesterday

Lead US$ 1,714/t vs US$1,703/t yesterday – Chinese lead production jumps 12% in March

Primary lead output in China expanded significantly last month, as smelters recovered from being placed under care and maintenance once the spread of the coronavirus came under control.

China's primary lead output rose 12% to 240,000 tonnes in March.

Lead output fell 7% compared to March 2019, and output in the first three months of 2020 was 6% lower than the same period the year before (SMM).

Tin US$ 14,600/t vs US$14,810/t yesterday

Energy:

Oil US$32.2/bbl vs US$34.1/bbl yesterday – Being one of the last supermajors to make a cut, ExxonMobils CEO announced that the Company is expecting oil demand to decline by 20-30% because of the global pandemic and economic downturn

In response, Exxon has announced that the Company will cut spending by 30% this year, with much of the pullback concentrated on its Permian operations Exxon had held out longer than its rivals, waiting a month after the collapse in prices to revise down its spending program

Elsewhere, the market is braced for tomorrows emergency OPEC+ meeting and what can be done to support pricing

Saudi Arabia delayed its release of its monthly pricing list, an influential data point that offers both a pricing benchmark and also offers a window into Saudi strategy

The delay suggests that Riyadh will wait and see if there is any progress on OPEC+ talks before taking action one way or another

Natural Gas US$1.877/mmbtu vs US$1.781/mmbtu yesterday – Natural gas prices spiked yesterday as colder than normal weather helped buoy prices

The fact that oil rigs will come offline due to prices falling below the breakeven level, has generated a bullish case for natural gas

While demand remains steady, supply for the first time could come offline allowing prices to rebound

Current inventories are 17% below the 5-year average while current natural gas prices are 33% lower than the current 5-year average

This would mean there is some upside to prices if inventories are able to stabilize as production declines

Uranium US$28.70/lb vs US$27.60/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$79.3/t vs US$79.9/t

Chinese steel rebar 25mm US$523.2/t vs US$522.8/t – Nippon Steel to halt two blast furnaces

Japan's biggest steelmaker will temporarily shut two blast furnaces to cope with declining demand due to the coronavirus pandemic.

This move will cut about a tenth of Nippon's capacity, and is the latest in a series of production cuts by various industries as the pandemic weighs on industrial demand.

Nippon Steel has 15 blast furnaces in total, and shutting these two equates to a 10% cut in output capacity, a reduction of about 6mt in crude steel production if they remain closed for a year (Reuters).

Gold ETFs 91.7moz vs US$91.5moz yesterday

Platinum US$742/oz vs US$747/oz yesterday

Palladium US$2,196/oz vs US$2,230/oz yesterday

Silver US$15.07/oz vs US$15.30/oz yesterday

Thermal coal (1st year forward cif ARA) US$56.2/t vs US$55.5/t

Coking coal swap Australia FOB US$142.0/t vs US$142.0/t

Other:

Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$37,167/t vs US$37,320/t – Noble Group close remnants of base metal and REE trading desks.

Lithium carbonate 99% (China) US$5,593/t vs US$5,594/t – Eramet mothballs Argentina lithium project

French Group Eramet, has placed their Argentinian project on hold. The Company has cited economic and regulatory uncertainty in Argentina as the reasons for the move. (Mining Weekly)

The planned construction of a lithium production plant at the site will not go ahead. (Wallstreet Online)

The Company said they hope to preserve cash through a reduction in their investments in these stressed circumstances.

The Company highlighted that the ore deposit remained a valuable asset and the pilot plant will finish collecting the process results.

The move will see the company recognize an expense of €150m, including an asset impairment charge. Cash outflows would total €90m, reflecting the investment made to date in the project. (Reuters)

Ferro Vanadium 80% FOB (China) US$26.5/kg vs US$26.5/kg

Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/kg

Tungsten APT European US$240-245/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

Battery News

Blink launches mobile EV charging station

Blink Charging Co. announced the launch of its mobile EV charging station on Monday.

The module is designed for roadside charging, made available to Blink members and EV drivers. (NGT New)

The design is compatible with all vehicles although an adapter is required for Tesla models. (Inside EVs)

The unit provides up to 9.6kW of continuous power with a charge rate of 0.5-1 mile per minute. (Blink)

It has a 10.9-gallon fuel capacity and can run for 9hrs at 50% load. The module estimated weight is 353.9lbs.

The unit comes in either a networked or non-networked configuration. The latter enables roadside assistance companies to provide a roadside EV charge as part of their services.

Blink is an EV charging equipment provider that has deployed over 23,000 charging stations worldwide.

Rivian delays the releases of the R1T and R1S

The Michigan EV adventure vehicle company has announced delays to the release of the R1T pickup and the R1S SUV.

Production was originally scheduled to kick off in late 2020 with deliveries beginning soon after. The company was reluctant to specify when the vehicles will be delayed to, but it will be 2021 at the earliest. (Carscoops)

The announcement follows on from Rivians suspension of operations at its facility in Illinois last month. (Cnet)

Both the suspension of operations and vehicle delivery delays are a direct result of the coronavirus which has halted 93% of US auto production. (Cnet)

Amazon invested $700m into Rivian in 2019 and ordered 100,000 electric vans. (Autocar)

Tesla cuts pay for employees and furloughs factory workers

The Californian EV maker hope to have its main facility in California open by May 4th but in the short term has moved to cut costs. (Forbes)

Employees below Vice President level will take a 30% pay cut while those at Director level or higher will take a 20% pay cut. All other US employees will take a 10% pay cut. (Yahoo Finance)

The Company also informed in employees in a letter from Tesla HR official Valerie Workman that those who cannot work remotely and are not involved in onsite work will be furloughed. (Business Insider)

It is expected the pay reduction will remain place until the end of Q2. The layoffs start from April 13th.

Company News

European Metal Holdings (AIM:EMH) 9.9p, Mkt Cap £14.7m – CEZ investment

European Metals Holdings reports that it is issuing a formal notice of a shareholder meeting, to be held on 23rd April, to consider the proposed €29.1m investment by one of Central and Eastern Europes largest power utilities, CEZ, to acquire a 51% interest in EMHs wholly owned subsidiary, Geomet which owns the Cinovec lithium project in the Czech Republic.

CEZ, whose ʺcore business is the generation, distribution, trade in, and sales of electricity and heat, trade in and sales of natural gas, and coal extraction. CEZ Group has 33,000 employees and annual revenue of approximately EUR 7.24 billion.ʺ is 70% owned by the Czech Government.

ʺCEZ is also a market leader for E-mobility in the region and has installed and operates a network of EV charging stations throughout Czech Republic. The automotive industry in Czech is a significant contributor to GDP and the number of EV's in the country is expected to grow significantly in coming yearsʺ. The company is also described as intending to ʺdevelop several projects in areas of energy storage and battery manufacturing in the Czech Republic and in Central Europe.ʺ

A Preliminary Feasibility study issued in June 2019 indicted that the Cinovec project generated ʺa return post tax NPV of USD1.108B and an IRR of 28.8% and confirmed that the Cinovec Project is a potential low operating cost, producer of battery grade lithium hydroxide or battery grade lithium carbonate as markets demand.ʺ

The deposit is described as Europes largest lithium deposit and the fourth largest non-brine lithium deposit in the world.

Conclusion: The proposed investment by a major Czech power company with strong links to the Czech Government should provide momentum to the development of Cinovec which has the benefit of a European location close to potential large scale industrial purchasers of lithium carbonate and hydroxide.

Ormonde Mining* (AIM:ORM) 0.72p, Mkt Cap £3m – 2019 results

Ormonde Mining reports a loss of €11.3m for 2019 (2018 loss of €1.65) including a €10.3m charge relating to the loss on disposal of the Barruecopardo tungsten mine.

Subsequent to the year end, and following shareholder approval in February, Ormonde Mining received €6m from the sale of its residual interest in the mine to Oaktree Capital, which supplements the €130,000 year end cash balance while the company explores future opportunities under a restructured management team.

Executive Chairman, Jonathon Henry explained that ʺFollowing the disposal of our interest in the Barruecopardo Mine, Ormonde's new Board and Executive Management have focussed on identifying opportunities in the resource sector capable of transforming shareholder value. This work has progressed rapidly with a number of opportunities being actively considered.ʺ

He also explained that ʺOrmonde continues to retain its exploration and development assets in Spain, being the Salamanca and Zamora Gold Projects and its assets relating to the La Zarza Copper-Gold Project. While we continue to seek ways to maximise value for shareholders from these assets, including the sale of the La Zarza Copper-Gold project, any material expenditure on advancing these assets will not be incurred until a decision has been made in respect of new opportunitiesʺ.

Conclusion: Although hampered by the restrictions of the Covid19 virus, Ormonde Mining is seeking a new direction in the aftermath of its exit from Barruecopardo.

*SP Angel acts as Broker to Ormonde Mining

Sunstone Metals Limited (ASX:STM) A$0.008, Mkt cap A$11m – Identification of high-priority drilling target at Espiritu

Sunstone Metals has released an announcement to the ASX describing the identification of a high priority drilling target at Espiritu within its Bramaderos gold-copper project area in the Loja Province, southern Ecuador.

The Espiritu target has been identified as a result of integrated exploration using geological mapping, soil and rock chip sampling associatedRead More – Source