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Fairfax Marketing Report including Bellzone Mining, Shanta Gold, Avocet Mining, Beacon Hill Resources plus others

22nd Dec 2011, 10:08 am

Morning View:

Jingle Bells

 

Mining through the snow

In a one mine company

O’er the fields we go

Mining all the way

Profits on gold bars ring

Making shareholders bright

What fun it is to buy and sell

A mining stock tonight

 

Oh, golden bells, golden bells

Profits all the way

Oh, what fun it is to hold

a one mine stock today

 

A day or two ago

I thought I’d buy a stock

And soon a whole bunch of AIM stocks

Were seated by my side

The company was lean and lank

Misfortune seemed his lot

We got into a European bank

And then we got upsot (see original lyrics)

 

Oh, Euro banks, Euro banks

Losses all the way

Oh, what fun it is to short

a Euro bank today

 

Economic news:

US – Figures released yesterday show that existing home sales increased in November to a 10 month high.

· Sales rose by 4% to 4.42m on an annualised rate. 

· Final Q3 GDP figures will be released later today. Forecasts suggest no change from initial estimates of 2%

· Initial jobless claims figures will be released later today. Forecasts suggest that claims rose to 380k from 366k the week before. 

Europe – The ECB has provided €489bn in 3 year loans to more than 500 banks. The figure gives a bleak assessment of the state of the Eurozone and emphasises how much damage has already been caused to the financial system. 

· The figure is comfortably a record for a single ECB liquidity operation. 

· Reports are emerging that Greece’s creditors are resisting pressure from the IMF to take bigger hair cuts. 

· Investors reportedly want a coupon of about 5% in return for €70bn of bonds. 

· The IMF is reportedly pushing for creditors to accept a smaller coupon. 

China – Figures released today show that China’s money market rate rose to a 3 week high as speculation increases that banks will hoard cash to meet year end capital requirements. 

· The money market came under increased pressure as the central bank removed 10bn yuan from the system for a 4th week in a row. 

· Bloomberg is reporting that more Chinese bankers are predicting a further loosening in monetary policy as economic growth slows. 

UK – Revised figures released today show that GDP rose 0.6% in Q3 more than previously forecast – Happy Christmas! 

· According to new estimates UK commercial property values will probably fall by 4.9% next year as the European debt crisis impacts confidence and companies reduce office space.

· Similarly British house prices are expected to drop in 2012 but will be partially held up on the back of a lack of new supply coming to the market. 

Iraq – Tragically it is being reported that nine explosions rocked Baghdad today killing 31 people and injuring 143 less than a week after the American troop withdrawal. 

· Tensions have been escalating between PM Nouri al-Maliki’s Shiite Muslim led allies and Sunni politicians who have been at odds for over a year over the formation of a unity government.  

Egypt – The government bond rating has been cut for a 4th time this year as 10 months of political unrest takes its toll. 

Commodity news:

Precious:

Gold US$1,614/oz vs US$1,632/oz yesterday – Prices are marginally off this morning as dollar strengthens on the back of further concerns about the Eurozone – highlighted by the ECB borrowing figures. 

· SPDR gold trust holdings dropped to 1,267t (40.763moz) value US$66.382bn from 1,279t (41.152moz).

Platinum US$1,431/oz vs US$1,447/oz yesterday – 

Palladium US$631/oz vs US$634/oz yesterday

Silver US$29.52/oz vs US$29.76/oz yesterday –

Rhodium US$1,350/oz vs US$1,350/oz yesterday

Base metals:

Copper US$ 7,534/t vs US$7,505/t yesterday – Japan’s output of Copper and Copper alloy fabricated products, including sheets and tubes slumped 10.4% in November yoy, falling for a 6th month as demand for exports slowed. 

Aluminium US$ 1,991/t vs US$2,006/t yesterday

Nickel US$ 18,880/t vs US$18,950/t yesterday

Zinc US$ 1,871/t vs US$1,886/t yesterday – 

Lead US$ 1,978/t vs US$1,985/t yesterday

Tin US$ 19,160t vs US$19,400/t yesterday –

Energy: 

Oil US$108.20/bbl vs US$107.20/bbl yesterday- Brent lifted to a one week high and U.S. crude rises to US$99.24 after falling U.S. stockpiles countered European debt crisis woes. 

· African Union-led negotiations have asked domestic and foreign oil companies to join in the next round of talks between Sudan and South Sudan in a bid to resolve revenue sharing issues. 

Natural Gas US$3.13$/mmbtu vs US$3.17/mmbtu yesterday– South Korea plans to invest US$11.8bn into oil and gas resources in 2012 to secure sufficient energy for future economic and industrial growth.

· It will be South Korea’s largest annual investment according to Yonhap news reports. 

Uranium US$52.25/lbs vs US$52.25/lbs yesterday– 

Coal – Yancoal is reportedly preparing a takeover bid as trading in share of Gloucester Coal were suspended today.

· The offer is estimated to worth $2bn and the latest in this year’s international push into Australia’s coal-mining sector. 

Company news:

Beacon Hill Resources (LON:BHR) – JV to develop new coal licence in Tete Province

· The company has signed a JV with Midwest Africa to fund the exploration and development of a coal licence covering 184 km2  in the Songo Area of Tete Province in Mozambique. 

· The consideration for the JV is the issue of 60 m shares in Beacon Hill. 

· The licence offers the opportunity for Beacon Hill to widen its existing the company’s resource based with 80 mt in situ in Minas Moatize. 

· The Songo Area in located close to other prospective areas for thermal and coking coal south of the licence held by ENRC and close to the large Jindal Steel & Power Ltd Chingodzi Coal Project. 

· Remote sensing and GIS studies undertaken by Midwest Africa so far indicate 100 km2  of coal bearing Karoo sediments north-east of the licence area. 

Bellzone Mining (LON:BZM) – Forecariah JV Progress Update

· The company updated on their fast track Forecariah project which is scheduled to achieve production in Q1 2012. 

· All purchased mine and plant equipment has arrived in Guinea and offloaded and cleared through to site such as the crushing and screening plant, drilling and blasting equipment and road haulage truck. 

· The company has also started construction at the mine with the main accommodation camp, HV and LV workshops, health and emergency clinics and catering. 

· The dredging of the barge access channel has commenced with completion expected in Feb 2012. 

· Delivery of the Panamax to serve the floating stockpile and transhipping vessel was taken on 15 Dec 2011 with the vessel currently in Japan. 

· Delivery of Cape vessel handling tugs have been delivered in Singapore and are planned to arrive in Guinea with the Panamax. 

· The transhipping and marine management contract have been awarded. 

· The 75 km road development (20 km new and 56 km existing) are on schedule to permit haulage of ore in Feb 2012. 

· Resource development continues on the project with 30,000 m of RC drilling programme at Yomoboyeli which has intersected surface oxide up to 12m thick – results are expected to add to the current oxide resource of 46 mt. 

· The mining licence is still awaited – the company has submitted its environmental and social impact assessment and the project feasibility studies. 

Conclusion: The company appears to be making good progress on the Forecariah project – the receipt of the mining licence in a timely fashion will be key. The market is assigning little value to the company for this project – the shares are trading at around and EV/tonne in the low 20s on a cents/tonne which puts them in the bottom end of the group of iron ore juniors. Should they achieve their Q1 2012 production target, there is significant room for upside.

Mining this week: 

Beacon Hill Resources (LON:BHR) – First Export shipment of Seabourne Coal from Minas Moatize in Mozambique

European Goldfields (LON:EGU) – Recommended Offer of C$2.5bn by Eldorado Gold

Frontier Mining (LON:FML) – Official Opening of Benkala Copper Project

London Mining (LON:LOND) – Update on Operations at Marampa Mine

IRC Ltd (1029 HK) – ICBC Drawdown and First Production from Vanadium Plant at K&S Project

Zanaga (LON:ZIOC) – Correction to comment on 16th Dec 2012 on Site Visit

Condor Resources (LON:CNR) – Drilling Update at La India Project

Ferrex (FRX LN) – Final Results

Trans-Siberian Gold (LON:TSG) – Asacha mining and production update

Diamond Corp (LON:DCP) – Update on Botswana Exploration

Avocet Mining (LON:AVM) - Updated resource at Tri-K Block exceeds expectations

Ncondezi Coal (LON:NCCl) - Resource Update at South BlockGMA Resources (GMA LN) – Sonatrach, the Algerian state oil producer, to acquire GMA’s Algerian gold mine

Shanta Gold* (LON:SHG) – Debt funds for larger New Luika and to accelerate Singida mine

West African Minerals (LON:WAFM) – interim statement 

*Fairfax employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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