US - More data on housing market will be released today. Existing home sales are forecast to grow 1.2%mom to annualised 5.1m units in Dec, the highest since 2009.
Japan - The Bank of Japan raised its inflation target to 2%, a pace last seen in early 1990s. Surprisingly, the Bank refrained from adding immediate stimulus announcing a planned 13tn yen a month stimulus through extra securities buying will stay on hold until Jan 2014.
• The yen rebounded from near its weakest level in 2.5 years and Japanese equities fell following a strong run as the BoJ made its announcement.
Europe - German economic sentiment released this morning showed investor and analyst expectations improved to the highest in 2.5 years with ZEW index beating estimates and climbing to 31.5. Analysts estimates were for an increase to 12 in Jan, up from 6.9 in Dec.
• Finance discussed yesterday when ESM funds should be made available to direct lending with few calls for the aid to start only after the ECB takes up its new role as a single supervisor in the euro area in 2014.
• Euro finance ministers said they don’t expect a rescue deal with Cyprus to happen until Mar.
• Another tranche of funds agreed earlier last year were released to Greece.
UK - Cameron is looking to give its long-awaited speech on the nation’s sole in the EU tomorrow in London.
Australia - Consumer prices are estimated to have gained pace in Q4 and climbed 2.4%yoy, up from 2.0%yoy in Q3. Inflation report will be released later today.
Other - Investors are the most bullish on equities in at least 3.5 years as nearly 2/3 of respondents are planning to raise their holdings of stocks during the next six months. (Bloomberg)
US$1.3346/eur vs 1.3317/eur yesterday. Yen 88.86/$ vs 89.57/$. SAr 8.833/$ vs 8.881/$. $1.583/gbp vs 1.589/gbp
Gold US$1,693/oz vs US$1,691/oz yesterday - Gold edged upwards this morning on the news the BoJ will raise its inflation target and will provide more monetary stimulus to boost growth.
• India raised import tax on gold bars and ores to 5% from 2%, a day after increasing duty on processed gold to 6%, in a move to combat current account deficit on high gold shipments.
• Industry groups diverge on the effects of the tax. All India Gems and Jewellery Trade Federation said duty may lower gold imports and consumption. The Bombay Bullion Association estimate import tax increase is too small to discourage buyers.
• Higher import taxes may spur more smuggling and the government should better focus on raising domestic production rather than controlling for overseas purchases, Rajesh Exports, India’s largest gold jewellery exporter, said.
• SPDR gold holdings remained unchanged 1,333t (42,845koz) valued at US$72.3bn yesterday.
Platinum US$1,687/oz vs US$1,675/oz yesterday
Palladium US$720/oz vs US$719/oz yesterday
Silver US$32.04/oz vs US$31.96/oz yesterday
Copper US$ 8,105/t vs US$8,065/t yesterday - Prices are slightly up this morning and should find further support from better-than-estimated German economic sentiment data.
• Chinese refined copper production grew 9.2%mom and 22.4%yoy to 580,000t in Dec. (National Bureau of Statistics)
Aluminium US$ 2,049/t vs US$2,048/t yesterday
Nickel US$ 17,515/t vs US$17,425/t yesterday
Zinc US$ 2,044/t vs US$2,037/t yesterday
Lead US$ 2,308/t vs US$2,297/t yesterday
Tin US$ 25,075/t vs US$24,970/t yesterday
Oil US$111.8/bbl vs US$111.9/bbl yesterday
Natural Gas US$3.627/mmbtu vs US$3.597/mmbtu yesterday
Uranium US$42.00 (close 21/01/13) unch on previous close
Iron ore - China imported a historical high of 70.94mt of the steelmaking raw material in Dec while Australia and Brazil made record deliveries.
• FY2012 Chinese imports totaled record 743.55mt, an 8.4%yoy increase.
• Australian shipments came in at 33.67mt, up 1%mom from Nov.
• Brazilian exports were 20.02mt, up 42.2%mom from Nov.
• Australian Port Hedland will be shut today due to a tropical storm threatening operations. Port Hedland is used by BHP, Fortescue and Atlas Iron to ship around 200mt of material per annum accounting for 20% of world seaborne trade in iron ore.
• Cyclone season normally runs from November until April.
• Vale estimates 2013 iron ore prices of at least US$130/t.
Steel - China is seen consolidating the industry and plans to bring around 60% of total nation’s steel capacity to fall under the control of its top 10 steel mills by 2015. (Ministry of Industry and Information Technology)
• Steel capacity is estimated at c. 980mt at the moment. (China Iron and Steel Association)
• Consolidation will also take place in auto, machinery manufacturing, agriculture, cement and rare earths industries.
African Eagle Resources (LON:AFE) – Positive Results from Beneficiation Test Results from Dutwa
• The company has released further results from beneficiation work on ore from both Dutwa deposits Wamangola and Ngasamo.
• Beneficiation test work has been done on both principal and transition ore which has provided basis of understanding of the processing of the ore body.
• Beneficiation before processing will help to improve the processing and capital costs of this nickel project.
• Drill core samples for the beneficiation test were taken from each deposit in accordance with the expected mining schedule.
• At Wagamangola beneficiated primary ore showed the most upgrade with close to doubling of the grade to 1.99% nickel whereas the grade upgrade of the transition ore was 1.36 and at Ngasamo both the primary and transition ore upgraded by a factor of 1.49 and 1.43 respectively.
• Nickel recoveries were on average 76-77% at Wagamangola and around 60% at Nagasamo with an economic cut off point for material to be rejected wa 3.35mm
• The transition ore showed less of an uplift from of benefication than the primary ore through the wet scrubbing and screening process used and the company will conduct further work on the cost benefit analysis of using beneficiated and unbeneficiated transition ore in the leaching process.
• The company is planning to use an atmospheric tank leaching process where previous work showed good nickel recoveries from transition ore.
Conclusion: The company is making good progress on the Dutwa project to improve the operating and capital costs with beneficiation giving them a better understanding of the processing costs and use of reagents. Scrubbing and water screening is low energy with half to two thirds of the ore being rejected which should result in a smaller plant for the same nickel output. There should be reduced acid consumption, shorter leach times, reduced acid concentration minimising neutralisation requirements and potentially better throughputs – these should all help with opex. Results from further testwork on the cost benefit analysis of using transition ore in the leaching process could also help to improve economics.
Amara Mining (LON:AMA) – Production results fro Kalsaka Gold Mine
• The Kalsaka mine produced 53,444 oz down 25% from 71,505 oz in 2011 with average realised gold prices up by 5% to $1,666/oz.
• The fall in production reflected the end of its mine life and a heavy wet season in Burkina Faso.
• Head grades were down 15% in 2012 with the company are targeting 50-60,000 for 2013 with trucking from Sega expected in mid-2013.
Conclusion: Sega permits need to come through in a timely fashion for the company to be able to meet its production targets. The company concede that this is an aggressive target but they are reliant on the authorities coming through. We prefer the odds on Mwana.
Base Resources (LON:BSE) – Highlights 50% milestone achieved at Kwale Project
• The company has announced that the Kwale project has passed the milestone for 50% completion.
• Physical construction started in Jan 2012.
Conclusion: Good progress is being at the project and so far Kwale seems to be protected from the changing attitude of the Kenyan government towards licencing.
Coal of Africa (LON:CZA) – Flooding at Limpopo has Impacted Vele Operations
• Heavy rains in Limpopo have stopped operations at the Vele Colliery.
• Operations are expected to resume in around 7 days.
• The company currently has 5,500 tonnes of stockpile of thermal coal available which will cover some of the saleable tonnage of 7,000 t a week.
Conclusion: This should not have a material impact on operations is more bad news and highlights the vulnerability of the Vele Colliery to flooding.
Glencore/Xstrata Merger Update – South African competition tribunal clears merger
Mwana Africa (LON:MWA) - Update on Operations and Exploration in Dec 2012
• Freda Rebecca sold 16,506 oz for the quarter which was 43% up from the same quarter in 2011.
• Production for nine months stands at 52,840 oz giving them an annualised run rate of 70,000 oz.
• Cash costs are up by 11% at $884/oz with total cash costs up 12% with internal dilution from waste ore contributing to a lower head grade.
• The mill throughput was also affected by a breakdown in the primary crusher during December and issues in the leach circuit.
• BNC is on target for first sale of concentrate in Q2 2013.
• At Kodo results six holes for a total of 2,244m were completed during the quarter and results were received from 8 holes of their ongoing drill programme.
• Drill result should provide a basis of a resource upgrade at Kodo expected in Q1 2013.
• At BNC 1,337m has been blasted and developed to restart underground development with 71,000 t of ore and waste hoisted.
• 41,000t of ore has been crushed and stockpiled and a total of 52,000 to of crushed ore is now available for the mill feed.
• Refurbishment of the surface milling and concentrator circuits is on track.
• Phase 1 resource drilling programme at Trojan has confirmed the down dip extension of the resource.
Conclusion: The production at Freda Rebecca continues to improve significantly despite the short term operational problems and is on target to reach 70,000 oz pa – cash costs have been impacted by operational issues which will impact margins. We are pleased to see the improvement in disclosure on costs. BNC is on target to achieve concentrate sales in the second quarter of this year. The current valuation is well underpinned just on Freda Rebecca with upside offered from BNC and other exploration activities which are progressing well. The shares continue to offer good value.
Mining this week:
Afferro Mining (LON:AFF) – Resignation of Ousmane Kane as NED
Blackthorn Resources (ASX:BTR) – Commissioning of Perkoa Zinc Mine
Golden Rim Resources (ASX:GMR) – Starts scoping study at Balogo could fast track project
Nyota Minerals (LON:NYO) – Trading Update shows potential for feeder zone and also a funding gap
Peak Resources (ASX:PEK) – Appointment of Advisors to Identify Strategic Partners
Randgold Resources (LON:RRS) – Production at Tongon Mine returns to normal