logo-loader

Today's Market View Including Stratex International, Noricum Gold, Iofina, Anglo Asian Mining and others

Last updated: 12:02 09 Oct 2013 BST, First published: 11:02 09 Oct 2013 BST

no_picture_pai

IMF – either too late or just a negative indicator

The IMF are upgrading UK growth to 1.4% for this year and 1.9% for 2014 and are now congratulating Osborne on his austerity policy. 

The IMF previously that Osborne was playing with fire in his efforts to reduce UK debt.

Osborne has slashed around £20bn in restructuring and cost cutting bring new efficiency gains into government and is working to bring in external investment into the UK by attracting funds from China and the US.

The IMF comment on the reduction on material intensity in China to reduce imports of coal, gas, oil, copper and iron ore .

UK debt is now up to £1.2 trillion though this is a far cry from the US$16.7 trillion supported by the US.

Commentators are now talking openly about the potential for a US government default and banks are drawing up plans in case this event might actually happen.

Corruption charges prompt arrest of Chairman of Yunnan Tin Co.

Chinese authorities are getting serious over bribery and corruption issues.

While President Xi Jinping is making his mark on tackling corruption we have to wonder how far the anti-corruption drive is going or if it is being specifically targeted for other reasons.

There is some suggestion that the Chairman of Yunnan Tin had helped an entity which is supported by a well known American Bank to acquire a private college set up by Yunnan Tin in 2009.

We wonder in President Xi is really serious about corruption then there may be millions more arrests to come

Economic View

IMF - The Fund has downgraded its world economic growth forecasts for 2013 and 2014 on the back of deteriorating prospects in emerging markets and US monetary tapering.

GDP growth rates were cut by 0.3pp to 2.9% in 2013 and by 0.2%pp to 3.6% in 2014.

US - Barack Obama is scheduled to nominate the new chair of the Federal Reserve in a White House press conference today. Janet Yellen is set to replace the outgoing Ben Bernanke and serve a four-year term as chair subject to the US Senate approval, a spokesman confirmed the news.

Yellen, 67, spent 15 years at the Fed and served as president of the Fed of San Francisco during 2004-2010 before becoming Bernanke’s vice-chairman.

Ben Bernanke will step down as the Fed Chairman in Jan after serving two full terms since 2006.

Yellen is seen as a proponent of a loose monetary policy.

Fed will release its Sep 17-18 meeting minutes today that should show the committee’s discussions regarding the monetary easing programme and possible changes to its policy forward guidance. The report is said to be definitely released despite the state shutdown unlike labour market stats and retail sales numbers due to an independent funding.

China - IMF cut its Chinese GDP growth forecasts to 7.6% in 2013 and 7.3% in 2014, down from previous estimates for 7.8% and 7.7% growth rates, respectively.

"Although this expansion spurred financial deepening and provided a timely global growth impulse after the Great Recession, policymakers are now reluctant to continue stimulating the economy given the risks of inefficiency, deteriorating asset quality, and financial instability," the Fund said.

Germany - Factory orders unexpectedly contracted in Aug led by a slow down in export markets.

The index fell 0.3%mom in Aug compared with a 1.9%mom decline recorded in Jul and a 1.1%mom increase forecast.

Domestic orders gained 2.2%mom, while foreign demand declined 2.1%mom.

UK - IMF raised economic growth forecasts on the back of recent positive economic data showing improving consumer and business confidence.

2013 GDP growth forecast has been revised to 1.4%, up from 0.7% estimated in Apr ad 0.9% in Jul. The economy is expected to expand at 1.9% in 2014.

Aug industrial and factory production numbers disappointed this morning although recent manufacturing PMIs signalled expansion in the sector.

Industrial production contracted 1.1%mom from no change recorded in Jul and a 0.4%mom increase forecast.

Manufacturing output declined 1.2%mom compared with a 0.2%mom growth in Jul and a 0.4%mom gain expected.

US$1.3530/eur vs 1.3568/eur yesterday. Yen 97.29/$ vs 97.10/$. SAr 9.969/$ vs 9.994/$. $1.605/gbp vs 1.607/gbp

Commodity News

Precious metals:

Gold US$1,318/oz vs US$1,326/oz yesterday - Prices are range bound this morning around the US$1,320/oz level as investors watch closely US budget discussions in Washington.

Gold has the potential to transform countries and improve the living of communities, a 50-page WGC-commissioned study reads.

Production of gold has contributed more than US$210bn to the world’s economy in 2012, equivalent to the GDP of Ireland, Czech Republic or city of Beijing.

The number does not include indirect boosting effect the production has on related industries.

Mainland Chinese net imports of gold from Hong Kong fell 5%mom to 110.5t in Aug, but continued to run above 100t level for a fourth straight month.

Total net gold inbound shipments stood at 744.8t for the first eight months of the year as China is on track to become the world’s largest consumer of gold.

Indian imports totalled a little less than 600t during the same period.

SPDR gold holdings continued to decline and came in at 898.2t (28,876koz) valued at US$38.4bn, down from 900.0t (28,935koz), yesterday. Holdings lost nearly a third of the total from the start of the year.

Platinum US$1,398/oz vs US$1,406/oz yesterday

Palladium US$709/oz vs US$711/oz yesterday

Silver US$22.25/oz vs US$22.36/oz yesterday

Base metals:

Copper US$ 7,172/t vs US$7,266/t yesterday - Prices are off today on US debt concerns.

Chile, the world’s biggest copper producer, reported a 7.1%yoy growth in copper output in Aug.

Total production came in at 492.6kt as gains at Escondida (+17.6%yoy  to 104kt), Collahuasi (+137%yoy to 46.4kt) and Anglo American Sur (+23% to 40.6kt) more than compensated for a yoy decline at Codelco operations (-5% to 137.4kt).

Antofagasta’s Los Pelambres produced 36.3kt during the month, little changed from output in the same period last year.

Total Chilean production in the first eight months of the year gained 7%yoy to 3.74mt.

Exports climbed 2.7% to 3.69mt in the Jan-Aug period.

Aluminium US$ 1,859/t vs US$1,869/t yesterday

Nickel US$ 13,840/t vs US$13,965/t yesterday

Zinc US$ 1,884/t vs US$1,885/t yesterday

Lead US$ 2,086/t vs US$2,079/t yesterday

Tin US$ 23,450/t vs US$23,800/t yesterday 

Energy:

Oil US$110.0/bbl vs US$109.7/bbl yesterday

Natural Gas US$3.717/mmbtu vs US$3.641/mmbtu yesterday

Uranium US$35.00/lb (08/10/13) unchanged on the previous close 

Others:

Iron Ore - US$131.7/t (08/10/13) vs US$131.4/t (07/10/13) 62% Fe spot (cfr Tianjin) 

Coal demand heading for further fall

News is emerging of the further closure of coal power plants around the world.

Recent news suggests that Beijing are closing coal fired power stations in favour of LNG gas.

We now see news that a 1.5Gw coal fired plant is due to close in Massachusetts.

LNG prices have collapsed internationally due to new shale gas production in the US prompting utilities to switch off polluting coal plants in favour of lower cost and less polluting LNG plants.

US coal, displaced by US shale gas, continues to depress international coal prices with Euro Coal futures now at a 46-month low $82.10.

Indonesia continues to increase coal production towards 410-420mt creating supply side pressure to further depress thermal coal prices.

Company News

Alcoa (NYSE:AA) – Q3 Beats expectations

The company’s third quarter earnings were at 11 cents a share against concensus of 5 cents.

Third quarter of net income is $24m against a loss of $143m the same time last year.

Strong results came through in the Engineered Products and Solutions and Global Rolled products accounting for 57% of revenues and 79% of after tax operating income.

The company continue to maintain good growth in aerospace (9-10%) and commercial building and construction markets (4-5%).

Growth in the heavy trucks market is also being upgraded to 5-9% from the previous outlook of 3-8%.

Improvements are seen in the European market and China remaining strong.

Anglo Asian Mining* (LON:AAZ) – US$37m of debt refinanced with a cheaper loan facility

Anglo Asian has agreed a US$37m loan facility with Amsterdam Trade Bank.

The Company will draw down the amount immediately to repay part of outstanding US$48.2m debt (as of Jun 2013) with the International Bank of Azerbaijan.

The facility has 58 month term and costs 8.25% quarterly over 3m LIBOR USD (0.24% as of 08 Oct).

Frist repayment is due on the 25th day of the 16th month from the first draw down date. The draw down amount shall be repaid in equal quarterly instalments.

Prepayments are possible under certain conditions and incur additional fees.

Conclusion:  The refinancing reduces Anglo’s annual finance costs from the fixed 12% interest currently being paid on the IBA loan on the current.

The refinancing should save around US$1.3m assuming spot 3-month LIBOR rate of 0.24%.

There is ‘no’ early repayment penalty for the IBA loan.

Avocet Mining (LON:AVM) – Production Guidance for 2013 revised down

Q3 Production at the Inata mine was 30, 987 oz which gives them year to date production of 92,713 oz.

Based on lower than expected production in the quarter the company is downgrading its full year target to 125 – 130,000 oz  from 135,000 oz.

At the lower end of the range the company needs to achieve production of 32,387 oz and 37,387 oz respectively at the low and high end of their range.

H2 production had been to be higher as a result of mining higher grade oxide from the Minfo East pit.

In Q2 2013 head grades had increased to 1.84 g/t from 1.75 g/t in Q1 as a result of mining from Minfo East.

As a result of the lower production, cash cost are likely to be at the same level of H1 2013 of $1,204/oz.

Mining costs are likely to have gone up as a result of the reduced availability of the mobile fleet.

Mining costs were $1.88/t of mined ore in Q2 against $1.66/t in Q1.

Conclusion: This downgrade in production is not likely to unsettle the market who will be looking towards their new mine plan to be implemented next year. The plan includes the use of a carbon blinding circuit to increase efficiency of processing more carbonaceous ores which have been depressing recoveries. The new circuit to be implemented at a relatively modest capex of $6m is targeting recoveries of 83% from previous estimates of 78%. Recoveries before the mining of carbonaceous material became a problem has been running at 90-95% at the mine.

The circuit is to become operational in mid-2014 will involve installing a kerosene pre-conditioning tank in the front end with an excess kerosene scavenging circuit positioned ahead of the main CIL circuit. This new circuit has been reviewed by CSA in their recent Competent Persons Report and they believe these plans are sound. They have alerted to the condition to the Sag mill which is an unrelated issue.

The ability to treat carbonaceous ore from Inata should in theory improve mine flexibility in terms of scheduling and also cash flows as it does not require capital being tied up in expensive stock piles which would have been around 6 mt over the LOM.

Over the short term cash is likely to be tight with total cash cost remaining at the same level as the first half with gold prices remaining subdued. The $15m facility with Elliot of which $10m had been drawn down as at the 30 June 2013 is due on 30 Dec 2013. The company is in advanced discussions with banks on refinancing. With Elliot being a significant shareholder there should also be scope for the facility to be rolled forward if competitive alternative funding is not available.

Against a sideways move in gold prices, the share prices is unlikely to gain momentum till new mine plans are implemented when value can be created by bringing down cash costs. Upside also remains from permitting of Souma and taking forward Tri-K from feasibility – an update is expected to be published shortly.

Centamin (LON:CEY) – Good Q3 Production Results 

Gold production for the quarter was 84,757oz up 39% on the same period last year but 9% lower than Q2 2013.

Throughputs over the quarter improved with 1,463kt processed at a process plant productivity of 715tph up 15% on 624tph in Q3 2012.

The company expect to exceed FY guidance of 320,000 oz.

Conclusion: With 265,397oz achieved year to date, the Q4 bar for production is not high at 54,600oz although Q4 production is expected to be marginally impacted by commissioning of Stage 4 expansion. Operationally things are going well with reduced stoppages. Political risk remains high with no settlement of on going issues.

Iofina (LON:IOF) – Operational Update

The company expect to start commissioning IO#3 next week with construction now close to completion.

Production from the plant is expected shortly afterwards.

Application on water usage permit is expected to progress to the final determination stage which should take up to 120 days.

Stratex* (LON:STI) – Stratex supports exploration near Barrick’s Bulyanhulu Mine in Tanzania

Stratex has elected to support a strategic financing of up to C$8.657m for exploration near Barrick’s Bulyanhulu Mine in Tanzania.

The ground is held by Tembo Gold and the funding is by way of support for Tembo’s new issue of stock in Canada.

Stratex is co-investing with the New Africa Mining Fund II and Concept Capital Management Ltd

The financing comes with a restructuring of the board which will now include Bob Foster, ceo of Stratex plus two others from the new investor group.

Stratex is to invest up to C$1.657m to earn into 10.3% of the company.  Stratex’s stake could rise to 18.7% on the exercise of warrants from the issue.

‘The new investor Group , through a voting pool arrangement, could control up to 60.5% of Tembo on a fully diluted basis.’

The funding is subject to a minimum subscription of C$7.0m.

Tembo Gold has been run by David Scott, formerly at Shanta Gold.  Scott, who lives in Tanzania, is stepping down from the board though he will continue with the company.

Tembo holds 101sqkm of property next to the Bulyanhulu Mine.  Drill results and assays from artisanal workings offer tantalising potential but so far nothing holds together along strike and the next big discovery has eluded the geological teams who have dared to cross the area.

Drilling has produced a number of high grade hits with nugget style mineralisation but the new team will need some luck and to stretch their geological genius to work out where to drill next to identify a coherent resource.  No doubt they have some good ideas.

The team have the luxury of working off the results of some 35,000m of historic drilling in the area though no resource has yet been proven off this work. 

The new partners are looking to better guide the next set of infill and step-out drilling before moving to potential resource estimation.

Stratex see the Tembo licenses as a potential “tipping point” opportunity though we are not sure when or where the tipping point will come.

Conclusion:  The Stratex team have a good track record but looking for a major gold discovery in Tanzania is like trying to find forest elephants in the Congo, eg you knew the elephants were there but still took years to find them.  Stratex are in good company with their co-investors and with Tambo’s team in Tanzania but it will take some very smart geological interpretation to work up a coherent gold resource. 

* SP Angel acts as broker to Stratex

Noricum Gold* (LON:NMG) – Rotgulden mine site visit highlights continuation of gold bearing mineralisation

We have initiated on Noricum Gold this morning, we summarise the key points in the note below. 

Please see link for full note

Key points

High-grade mineralisation drilled from within Rotgulden gold mine.

Thick intersections of high-grade mineralisation seen in drilling.

Anticlinal, nose shaped structure offers potential for bonanza grades.

Drilling confirms 3D geological modelling of orebody.

Good infrastructure to and around mine.

Metallurgy needs further work to confirm potential recovery rates.

Target for 1moz gold resource worth approximately $50m (£31m) in our view.

FIRST ROUND DRILL RESULTS:

o Significant gold (‘Au’), silver (‘Ag’) and copper (‘Cu’) mineralisation include:

o 3.9m @ 51.53 g/t Au, 237.77 g/t Ag and 2.69 % Cu from 4.7m

o 3.2m @ 5.36 g/t Au, 17.17 g/t Ag from 12m

o 7.2m @ 2.13 g/t Au, 12.16 g/t Ag from 12.8m

o 6m @ 17 g/t Au and 27.8 g/t Ag from 9m

o 2m @ 41.4 g/t Au and 198 g/t Ag + 3.96% Cu from 20m

Funding 

The company has issued 200m new shares on 3 October 2013 at a price of 1 pence per share to new and existing shareholders in an oversubscribed issue.

Funds raised are to be used to fund the company through their following up drill programs planned at Rotgulden but also at Altenberg.

*SP Angel acts as Nomad and Broker to Noricum

** SP Angel analyst has visited the Rotgulden gold mine this week.

*** SP Angel recently raised £2m for Noricum Gold

HANetf founder and co-CEO discusses shift to active management in ETF market

HANetf founder and co-CEO Hector McNeil tells Proactive's Stephen Gunnion about shifting trends in the exchange-traded fund (ETF) market in the United States, indicating a big move towards active management within ETFs. Despite the European market lagging behind the US by three to five years,...

13 hours, 19 minutes ago