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Today's Market View Including Afferro Mining, Nyota Minerals, Randgold Resources, Xstrata and others

January 21 2013, 10:37am

Economic View

US - Consumer confidence measured by Thomson Reuters/University of Michigan fell to 71.3 in Jan, the lowest since Dec 2011, from 72.9 in the previous month. Analysts’ estimates were for an increase to 75.0.

Higher payroll taxes agreed by the Congress are blamed for a weakening consumer outlook.

Euro zone - Finance ministers will meet today to start talks on how to provide financial help to struggling banks directly from the €500bn European Stability Fund by-passing governments.

Although, funds available to banks may be less than €100bn as the rest is set aside for sovereign bailouts.

A series of economic data will be released this week in Spain.

Spanish trading data due today, followed by house prices released tomorrow that may show a fourth consecutive year of declines. The Central Bank might announce its estimates for Q4 GDP . Analysts’ estimates for a 1.4% decline in FY2012. Unemployment numbers will be announced on Jan 24 that are expected to show around 26% of Spaniards without a job.

China - Economic growth potential will limited to 7-8% due to a decline in the working-age population and shrinking resources, head of the National Bureau of Statistics said last week after announcing Q4 GDP numbers.

UK - David Cameron will today announce a new date for his speech on Britain’s future in the European Union.

The speech should have been given three days ago but got delayed due to the hostage crisis in Algeria.

The UK finance industry may lose 43,000 jobs in the next six months, according to a study by the Confederation of British Industry and PWC.

Japan - All economists in a Bloomberg survey forecast the Bank of Japan to expand monetary stimulus in the meeting that concludes tomorrow.

Expectations are for an upward revision of its inflation target rate to 2% replacing current 1% and adding another Y10tn (US$111.3bn).

Taiwan - Export orders increased by 8.5%yoy in Dec, down from 11.1%yoy in Nov, as the economy gained pace on stronger demand from the US and China. This is a fourth monthly gain.

US$1.3317/eur vs 1.3378/eur last week. Yen 89.57/$ vs 90.06/$. SAr 8.881/$ vs 8.852/$. $1.589/gbp vs 1.598/gbp

Commodity News

Precious:

Gold US$1,691/oz vs US$1,691/oz last week - Prices are little changed this morning ahead of the results of the BoJ meeting. Prices have been supported recently by expectations of further monetary easing by developed nations and strong physical buying in China ahead of the upcoming Lunar New Year.

Harmony Gold started talks with its employees and related labour unions with regards of the retrenchment of its miners at the still-closed 260-300kozpa Kusasalethu gold mine, South Africa.

Around 6,000 jobs are at stake. Only 200 employees will be retained should the mine be shut.

The Company said the mine will remain shut before all the conditions of the reopening are agreed by all parties.

Pacific Group is converting 1/3 of its hedge fund assets into physical gold.

SPDR gold holdings remained unchanged 1,333t (42,845koz) valued at US$72.3bn last week. 

Platinum US$1,675/oz vs US$1,696/oz last week

Palladium US$719/oz vs US$728/oz last week                           

Silver US$31.96/oz vs US$31.84/oz last week

Holdings in silver backed ETPs posted another record last week and advanced to 19,699t.

Base metals:

Copper US$ 8,065/t vs US$8,074/t last week - Prices are range bound today as a decline in Chinese copper imports weighed on momentum from the end of last weeks’ positive economic data from the US and China.

Chinese refined copper imports fell 4.7%mom to 238,828t in Dec. Shipments were down 41%yoy from a record 46,937t recorded last year.

Japanese copper wire and cable shipments dropped 1.2%yoy to 58,000t in Dec on weaker demand from the auto, electric-machinery and export sectors.

Aluminium US$ 2,048/t vs US$2,061/t last week

Nickel US$ 17,425/t vs US$17,625/t last week

Zinc US$ 2,037/t vs US$2,034/t last week

Lead US$ 2,297/t vs US$2,312/t last week

Tin US$ 24,970/t vs US$25,189/t last week

Energy:

Oil US$111.9/bbl vs US$111.0/bbl last week

Natural Gas US$3.597/mmbtu vs US$3.516/mmbtu last week

Uranium US$42.00 (close 18/01/13) unch on previous close

Energy:

Iron ore - Prices fell for the first time in seven weeks to US$145.1/t  last week, down from a 15-month high, after Chinese steel mills slowed down purchases after a period of aggressive restocking.

"Mills are not in the mood to buy anything at the moment. They are probably waiting for prices to fall further before they go back to the market,"  one physical iron ore trader in Shanghai said.

Prices dropped 6.3% last week, but were up 67% from a three-year low touched in Sep.

Risks of more production disruptions in Australia due to cyclone season hitting in Feb may cap further losses in iron ore prices.

Lower raw materials costs cut steel prices. The most-traded rebar contract for May delivery on the Shanghai Futures Exchange fell 0.3% to CNY 3,992/t today. Prices hit a six-month high of CNY 4,047 on Jan 07.

Company News

Afferro Mining (LON:AFF) – Resignation of Ousmane Kane as NED

Ousmane Kane has resigned from the board with immediate effect.

Mr Kane is a Vice Chairman of African Iron Ore Group which is related to IMIC.

Conclusion: This is not surprising given the IMIC has signalled its interest in bidding for Afferro. While we do not treat IMIC on its own as a credible bidder it makes Ousmane Kane’s position on the board untenable. Afferro continue to be in talks with interested parties – while we see good value in the project the process of securing the right partner for this project will take time.

Blackthorn Resources (ASX:BTR) – Commissioning of Perkoa Zinc Mine

Blackthorn has a 39.9% stake in the Perkoa project with Glencore who has a 50.1% stake.

The project had its commissioning ceremony over the weekend.

Conclusion: It is good to see that Glencore has got this mine to commissioning stage. It is the largest zinc project in Burkina Faso and is projected to production 170,000 dmt of zinc concentrate pa with a concentrate grade of 53%. The government of Burkina Faso has a 10% interest in the project and should see benefits coming through.

Glencore/Xstrata (LON:GLEN, LON:XTA) – Ruling from South African Regulator on merger expected tomorrow

The South African regulator is expected to come out with its ruling on the merger tomorrow.

There is an expectation that the merged group with come up with a solution to the concerns on coal supply expressed by Eskom.

Conclusion: A positive ruling by the South African tribunal would be a positive for the merger which has been dragging on.

Golden Rim Resources (ASX:GMR) – Starts scoping study at Balogo could fast track project

The company has started a scoping study at the Netiana Lodes deposit which it expects to complete at the end of Feb 2013.

The Balogo project has shown one of the highest gold intercepts from Burkina Faso with RC drill hole of 57m at 40.6 g/t gold.

Good results from the scoping study would enable the company to fast track this project through DFS with the objective of first gold production at the end of 2014.

Conclusion: The scoping study will be watched with interest to see how good the resource is – progress in this project will also open up interest for other gold projects in Burkina Faso. Should the situation with Mali get resolved, projects in Burkina Faso could find renewed interest.

Nyota Minerals (LON:NYO) – Trading Update shows potential for feeder zone and also a funding gap

Drill results from feeder zone include some new high grade intersections of 5 – 15 g/t over 9-12m widths.

An in house estimate of the resource is for 1.1 Mt at an average grade of 5.4 g/t giving 188,000 oz to a potential underground mine.

The company is seeking interim funding to help in completing negotiation on fiscal and legal terms for the issue of a mining licence.

The company faces a working capital shortfall upon completion of the DFS.

Conclusion: The inclusion of the feeder zone with better grades could help with the economics of this project with the DFS on the open pit at Tulu Kapi using an aggressive discount rate of 5% to achieve NPVs – finding funding will be challenging.

Peak Resources (ASX:PEK) – Appointment of Advisors to Identify Strategic Partners

The company has appointed Citic Securities and Moser Capital to advise on strategic partners for its Ngualla Rare Earth project.

The company is also in discussions with a number of parties in institutions in North America, Europe and Hong Kong on partnerships, investments and off-take arrangements.

Conclusion: Peak Resources have demonstrated potential for their the Ngualla project which has 54% of the ground value in 5 critical REE. The recent announcement of a pilot plant to assess the processing potential will be the next key step and securing a strategic partner who is an industrial player/offtake partner will be important in progressing the project. Targeting partners in Asia makes sense.

Randgold Resources (LON:RRS) – Production at Tongon Mine returns to normal

Production at the Tongon mine has returned to normal after the fire in the mill section three weeks ago.

The mine produced 210,000 oz of gold in 2012 with both mill circuits expected to be operational in two weeks.

 

 

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