Economics US – Washington and Beijing are struggling to schedule a meeting this month to renew trade talks after the US rejected China’s requests to delay the latest set of tariffs, Bloomberg reports. • S&P 500 futures are pointing to a 0.8% drop once the market re-opens following a long weekend in the US later this afternoon.

3M - Today's Market View - Gold prices edge higher with no US-China dispute resolution in sight

SP Angel – Morning View – Tuesday 03 09 19

Gold prices edge higher with no US-China dispute resolution in sight

MiFID II exempt information – see disclaimer below

Economics

US – Washington and Beijing are struggling to schedule a meeting this month to renew trade talks after the US rejected China’s requests to delay the latest set of tariffs, Bloomberg reports.

S&P 500 futures are pointing to a 0.8% drop once the market re-opens following a long weekend in the US later this afternoon.

UK – The pound passed through 2016 Brexit vote related lows against the US$ this morning on concerns the UK may be heading into a snap election.

PM Johnson threatened to call an October 14 general election if rebel Tory MPs support Labour on Tuesday to block a potential no-deal Brexit.

The UK currency was down 0.5% and 0.3% against the US$ and the €, respectively.

Around 15-20 Conservative MPs may work with Labour and other opposition parties to change the agenda of the parliament.

Labour leader Jeremy Corbyn is expected to host a meeting with opposition MPs this morning before parliament reconvenes to finalise the strategy.

Australia – The central bank held the benchmark rate at its record low of 1.0% on Tuesday, largely in line with expectations.

The rate was brought down by a combined 50bp over June and July meetings.

The RBA highlighted some early signs of a turnaround in the economy following a series of stimulus measures including lower interest rates, tax cuts and spending on infrastructure.

“Looking forward, growth in Australia is expected to strengthen gradually to be around trend over the next couple of years,” Governor said.

Although, no quick shift is expected with low interest rates likely to remain at low levels for extended period of time, the RBA added.

The A$ pared some of its earlier losses to trade 0.1% lower v the US$ at $0.6707.

Currencies

US$1.0945/eur vs 1.0984/eur yesterday. Yen 106.05/$ vs 106.26/$. SAr 15.225/$ vs 15.148/$. $1.200/gbp vs $1.213/gbp. 0.672/aud vs 0.673/aud. CNY 7.179/$ vs 7.169/$.

Commodity News

Precious metals:         

Gold US$1,531/oz vs US$1,522/oz yesterday

   Gold ETFs 78.9moz vs US$78.9moz yesterday

Platinum US$936/oz vs US$937/oz yesterday

Palladium US$1,536/oz vs US$1,538/oz yesterday

Silver US$18.51/oz vs US$18.30/oz yesterday

Base metals:   

Copper US$ 5,589/t vs US$5,681/t yesterday

Aluminium US$ 1,740/t vs US$1,748/t yesterday

Nickel US$ 18,000/t vs US$18,785/t yesterday

Zinc US$ 2,211/t vs US$2,224/t yesterday

Lead US$ 2,008/t vs US$2,018/t yesterday

Tin US$ 16,530/t vs US$16,620/t yesterday

Energy:           

Oil US$58.1/bbl vs US$59.1/bbl yesterday

Natural Gas US$2.326/mmbtu vs US$2.284/mmbtu yesterday

Uranium US$25.30/lb vs US$25.30/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$81.7/t vs US$81.7/t

Chinese steel rebar 25mm US$544.4/t vs US$538.2/t

Thermal coal (1st year forward cif ARA) US$63.9/t vs US$63.6/t

Coking coal futures Dalian Exchange US$201.3/t vs US$201.9/t

Other:  

Cobalt LME 3m US$34,000/t vs US$32,600/t

NdPr Rare Earth Oxide (China) US$44,716/t vs US$44,289/t

Lithium carbonate 99% (China) US$7,174/t vs US$7,254/t

Ferro Vanadium 80% FOB (China) US$38.5/kg vs US$38.5/kg

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

Tungsten APT European US$195-205/mtu vs US$198-205/mtu

Battery News

Chinese companies pushing for Japanese battery storage market share

Major Chinese energy companies BYD and CATL are both manoeuvring to take advantage of Japan’s growing household energy storage market (Nikkei Asian Review).

CATL has reportedly joined forces with Japanese solar panel equipment manufacturer Next Energy & Resources to build battery storage technology for the Japanese market.

The Japanese energy storage market appears attractive to new entrants given recent deregulation and the heightened need for energy security and energy stability given the risk of natural disasters.

Developments in Asian markets could have a positive effect globally, driving the cost of battery storage technology down, with Next Energy president Atsushi Ito saying: “We want to cut prices to about a quarter of current levels in three to five years.”

Company News

Highland Gold (HGM LN) 231p, Mkt Cap £842m – Earnings climb reflecting stronger sales in H1/19

Revenue climbed 18.9%yoy to $174.7m as GE sales climbed to 142.6koz (H1/18: 121.2koz) on the back of the contribution from newly acquired Valunisty mine and higher production at MNV.

Average realised gold equivalent price remained little changed at $1,204/oz (H1/18: $1,204/oz).

EBITDA climbed to $86.5m (H1/18: $71.4m) reflecting relatively stable operating cash costs.

PAT increased to $45.7m (H1/18: $28.6m).

TCC averaged $540/oz during the period (H1/18: $536/oz).

AISC climbed to $778/oz (H1/18: $697/oz) due to the inclusion of higher cost Valunisty operation and higher maintenance capex for purchases of new equipment.

Net cash flow from operations (post tax) increased to $72.6m (H1/18: $65.7m) more than covering $36.4m in capital expenditures ($31.3m v $26.5m in H1/18) and capitalised stripping ($5.1m v $0.7m in H1/18).

Capital expenditures largely reflected sustaining capex at MNV ($8.5m) for replacing ageing equipment and development capex at Kekura ($10.9m); the next largest item in the capex breakdown was Novo-related spend ($4.9m) where the Company is expanding its mining and processing capacity.

FCF (ex interest and lease payments) amounted to $36.1m (H1/18: 38.4m).

Net debt was little changed at $216.9m or 1.3x times EBITDA as of H1/19 v $211.4m or 1.4x times EBITDA as of YE18.

The Board approved 5p per share interim dividend (4.3% annualised yield).

The management reiterated 2019 production guidance of 290-300koz GE.

Conclusion: Robust earnings results benefited from increased level of production with operations delivering $36.1m in FCF and allowing the Board to approve the 5p interim dividend. The management expects operating cash flows to improve in H2/19 given stronger output forecast and better gold price.

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Sales

Richard Parlons – 0203 470 0472

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

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

DCE

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

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