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.
SP Angel – Morning View – Tuesday 03 09 19
Gold prices edge higher with no US-China dispute resolution in sight
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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
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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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