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Fairfax Market Report Including Lonmin, Aquarius Platinum, Coal of Africa, Metminco and others
Morning View
Economic News
US – Jobless claims unexpectedly rose to the highest level since November. The number of people claiming benefits rose by 12,000 to 500,000 suggesting the employers are not as optimistic about the sustained recovery as previously thought.
• The Philadelphia Manufacturing index contracted for the first time in a year falling to -7.7 from +5.1 in July. Mirroring the manufacturing sectors negative news, Ford Motor Co. announced it has no plans to increase production throughout the year further implying that automakers are not bullish on the feasibility of the economic recovery.
• The Congressional Budget Office stated a warning in a report released on Thursday that prolonging tax cuts and stimulus measures could lead to major budget deficit problems in the long run, reflecting cohesion of opinions with European leaders who widely favor the implementation of austerity measures globally. The Obama administration and many Democrats have proposed extending the tax cuts for Americans earning up to $250,000 a year.-
China – Investor expectations that inflation will delay monetary easing, led stocks lower in early trading as concerns resurfaced over the banking sector’s exposure to poor local government loans. Recent estimates suggest that Chinese banks may have to set aside as much as US$88.4 billion for bad local government loans
Japan – Further speculation has been circling suggesting that the central bank may increase the credit program to 30 trillion yen to lower short-term interest rates and weaken the currency.
Taiwan – Reports released yesterday showed that the island’s economy expanded more than forecast last quarter, bolstering the case for further interest rate increases as export levels appeared to successfully weather the downturn. Gross domestic product grew 12.53% in the three months through June from a year earlier. Taiwan’s exports are equivalent to more than half of its US$355.5 billion economy
Shipping - The Baltic Index, a measure of commodity shipping costs, jumped the most in six sessions as a surge in iron-ore transportation costs led rents higher.
Currency - Renewed worries about the global outlook are spurring risk aversion. Demand for a refuge after the poor manufacturing data was released in the US helped the yen rise toward a seven week high against the Euro. Gains in the yen were tempered on speculation the Japanese government will take steps to counter this week’s 1% appreciation versus the dollar. Australia’s dollar approached a four-week low versus the yen as polls signalled tomorrow’s election may result in a hung parliament.
Commodity News
Precious Metals:
Gold US$1,231/oz vs US$1,230/oz – Concerns over the validity of the US economic recovery have held up prices. Worries over inflation in Asia likely will increase demand for the metal as a safe haven investment.
• SPDR gold holdings down slightly at 1,299.47t (41.779moz) from 1,296.60t (41.622moz) yesterday. Current value US$51,521bn.
Platinum US$1,517/oz vs US$1,536/oz yesterday – Platinum and palladium prices could rise on concerns about changes to mining rules in South Africa.
• Concern about rule changes have intensified in recent weeks as miners claim that the government has been denying them mining rights. Gains by the South African currency have also helped to increase local production costs.
Silver US$18.27/oz vs US$18.46/oz yesterday –
Palladium US$481/oz vs US$491/oz yesterday –
Rhodium US$ 2,125/oz vs US$2,125/oz yesterday
Base metals:
Copper US$7,4276t vs US$7,439/t yesterday – The poor manufacturing data released yesterday in the US has checked prices as concerns increased about the second largest consumer of the metals’ ability to maintain its economic recovery.
Aluminium US$2,066/t vs US$2,125/t yesterday
Nickel US$21,579/t vsUS$22,075yesterday – China's largest nickel producer, Jinchuan Group is expected to lose between10,000-20,000 tonnes of output due to furnace repairs.
• Operations are to resume in September nearly a month ahead of Schedule according to news reports.
Zinc US$2,072/t vs US$2,142 yesterday –
Lead US$2,081/t vs US$2,14/t yesterday –
Tin US$20,950/t vs US$21,400t yesterday –
Energy:
Oil US$75.40/bbl vs US$77.04/bbl – Crude oil traded near a six week low yesterday as the worse-than-expected data coming out of the US added to concern growth in the world’s biggest oil-consuming nation is slowing.
• Korea National Oil Corp. plans to make a hostile 1.7 billion-pound ($2.7 billion) bid for U.K explorer Dana Petroleum Plc after its takeover offer was rejected
Gas US$4.174 /MMBTU vs US$ 4.239/MMBTU yesterday –
Coal – Maputo port in Mozambique could see investment of US$800m over next five years as the port is expanded to take Panamax vessels. The port could be an attractive alternative to Richards Bay
Other:
Company News
Mining:
Lonmin (LSE:LMI) – Fatality at Rustenburg mine
• News out yesterday report death of a locomotive operator at a ventilation door at Lonmin’s Rowland Shaft outside Rustenburg. Investigations under way.
Aquarius Platinum (LSE:AQP) – Company to pay Moolman SAr87m in settlement
• Company has settled dispute with Moolmans that sees Aquarius paying mining contractor Moolman and its MD SAr86.8m (US$12m) relating to damages claims from 2005 announced yesterday afternoon.
• The settlement follows on from Aquarius backing out of a mining contract with Moolman whilst suing for damages of SAr1bn based on misrepresentation on the part of Moolman in respect to a foreign exchange component of the contract (Rise and Fall clause). Moolman then lodged counter claims totalling SAr486.3m plus interest on all the counter claims at 15.5%pa since December 2005.
• The final payment settled represents work actually done by Moolman at the Marikana Open pit that had not been paid for. The news pulled Aquarius down in yesterday’s trading.
Coal of Africa (LSE:CZA)
News reports indicate that CoAL will ask workers to leave Vele construction site by the end of next week if the government doesn’t lift a suspension on development. This would mean 100-200 of 800 workers could go in the next few days.
• Talks with the government are reported to be proceeding well and some solution to be found within weeks. The mine was scheduled to start production in Q3 ramping up to 1mtpa of coking coal over a 6 month period. Management remains confident that the operation will start this year.
Metminco (LSE:MNC) – Company increases stake in Hampton
• Metminco has increased its stake in Hampton Mining slightly from 71.9% to 72.3% as Metminco accepted its full entitlement in accordance with Hampton pro rata rights offer on 26th July and was allotted 3.5m shares for A$983k.
• Hampton’s main asset is the Los Calotos copper moly porphyry in Southern Peru with a current JORC resource of 926mt at 0.39% Cu and 380ppm Mo at a 0.2% cut off. The company also has other projects in Chile.
• Los Calotos appears to be a significant major target suitable for a mid/large copper producer to develop.
Mining this week:
Ampella+ (ASX:AMX) – Drilling confirms 2km extension to Konkera
Capital Drilling (LSE:CAPD) – half year results
Medusa Mining (LSE:MML) – Exploration update
Petropavlovsk (LSE:POG) – Iron ore division to raise $500-800m in KH IPO
