US – The economy added 175k jobs last month beating expectations for 149k and up on 129k (revised from 113k) in Jan.
• Unemployment rate came in at 6.7%, up from 6.6% forecast and recorded in Jan.
• Labor force participation that measures the share of the labor force in the working age population held at 63.0%, well below the 66-67% on average over the last 20 years, although a significant portion of the recent decline is attributed to demographics.
• Growth in payrolls followed the weakest two-month hiring gain on winter storms.
• S&P 500limbed on good numbers closing at a record while the yield on 10-year treasuries gained on expectations of further tightening of monetary stimulus.
• Economic news due this week:
o Thursday: Feb core retail sales (0.1%mom v 0.0%mom in Jan), weekly jobless claims (330k v 323k in the previous week)
o Friday: Mar preliminary consumer confidence (82.0 v 81.6 in Feb)
China – Chinese trade balance surprisingly slips into a deficit in Feb as exports record the largest yoy decline in 2009.
• Overseas shipments fell 18.1%yoy versus estimates for a 7.5%yoy increase, although the timing of the Lunar New Year holiday (Feb in 2014 v Jan in 2013) as well as false invoices that inflated numbers last year have partly contributed to a larger than expected decline.
• Exports fell 1.6%yoy in the first two months.
• Imports climbed 10.1yoy nearly in line with the rate recorded in Jan. Estimates were for a 7.6% increase.
• Inflation slowed to 2%, the lowest in 13 months, providing more room for the government to stimulate growth should exports dwindle further and growth rates fall below official targets (“around” 7.5% for 2014).
• On a separate note, passenger-vehicle sales climbed 18%yoy to 1.31m unit in Feb, beating estimates for 1.7m units, driven by western brands such as Toyota and Ford.
• The local car association said Chinese cars are likely to see further declines in their market share this year being less competitive quality and service wise.
• Japanese brands have been demonstrating strong demand after customers returned into showrooms since Sep following a yearlong slump that started in 2012 on the back of a geopolitical crisis between two nations.
Japan – The economy advanced less than previously forecast last quarter on weaker growth in investments and consumer demand.
• Q4 GDP has been revised 0.1pp down to 0.2%qoq. Annualised growth rate totalled 0.7% versus 1.0% previously estimated and 0.9% forecast by analysts.
• Capital spending grew 0.8%qoq, down from 1.3%qoq estimates previously. Consumption climbed 0.4%qoq, down from 0.5%qoq increase.
• Businesses and consumer activity has picked this quarter ahead of the planned sales tax hike in Apr this year.
Germany – Industrial production growth accelerated in Jan, in line with market estimate, driven by construction sector.
• The report is adding to sign growth momentum continues in the largest EU economy.
• Previous reports showed business confidence is currently at the highest in at 2.5 year high, unemployment at a two-decade low, and factory orders rebounded in Jan.
UK – A third of BoE’s Nov Inflaton Attitudes survey respondents expect rates to go up in the next 12 months, the BoE said. That is slightly higher than 29% recorded in Aug last year.
• Inflation expectations increased to 3.6% in Nov from 3.2% in Aug. Five-year expectations were at 3.7%, up from 3.5% and the highest at least since 2009.
Zimbabwe – World Bank report on trade and competitiveness suggests Zim can attract US12bn
• A World Bank report in trade and competitiveness reveals that Zimbabwe could attract US12bn in new investment over the next five years.
• Mining companies operating in Zimbabwe are also said to require US$5bn in recapitalisation over the next five years.
• The report suggests that high taxes are putting off new investment and also that “using export taxes as an incentive to stimulate further value addition investment or beneficiation is a high risk strategy for which there are few successful stories".
US$1.3886/eur vs 1.3871/eur last week. Yen 103.24/$ vs 102.91/$. SAr 10.738/$ vs 10.608/$. $1.669/gbp vs 1.675/gbp
Gold US$1,334/oz vs US$/1,348oz last week - China Gold Association report gold demand in China may fall 17% this quarter (Bloomberg)
• The China Gold Association report that physical gold demand may fall in China by 17% this quarter following strong 41% growth in demand last year.
• The Association expect demand to rise again into the festive and marriage seasons later this year.
• Demand surged to a record high in Q1/13 as gold prices started to decline.
• Consumer demand may come in at 250t during the quarter, down from 300t recorded last year.
• This compares to an average of 180tpq demand recorded in the last five years (2009-2013).
• SPDR gold holdings remained climbed to 805.2t (25,888koz) valued at US$34.6bn from 803.7t (25,840oz) last week.
Platinum US$1,468/oz vs US$1,479/oz last week
Palladium US$775/oz vs US$777/oz last week
Silver US$20.80/oz vs US$21.36/oz last week
Diamonds - Zimbabwe – quality of diamonds seen declining according to local miners.
• Diamonds are forever, but not maybe for Zimbabwe where the value and quality of recovered stones are seen falling.
• Sources say they are only recovering low grade diamonds.
• Anjin, reported to be the biggest diamond miner in Marange, and half owned by China's Anhui Foreign Economic Construction Group with the other half held by ZMDC, produced some 7.8m cts over the last three years.
o The absence of quality stones from Marange may be one reason for a rise in prices for better quality diamonds in the market place.
Copper US$6,685/t vs US$6,977/t last week
Aluminium US$1,749/t vs US$1,790/t last week
Nickel US$15,031/t vs US$15,369/t last week
Zinc US$2,025/t vs US$2,090/t last week
Lead US$2,062/t vs US$2,129/t last week
Tin US$22,960/t vs US$23,200/t last week
Oil US$108.1/bbl vs US$108.2/bbl last week
Natural Gas US$4.570/mmbtu vs US$4.629/mmbtu last week
Uranium US$35.00/lb (07/03/14) vs US$35.00/lb (06/03/14)
Iron Ore - US$114.2 (07/03/14) vs US$116.9 (06/03/14) 62% Fe spot (cfr Tianjin)
• Amur Minerals moves a stage closer to project realisations at its Kun Maine nickel project with the signature of an MOU with Aeroscraft.
• The MOU is to explore the potential development and running of giant Kun Maine project using Aeroscraft’s heavy lift vehicles.
• Amur has shown the Kun Maine nickel project to be of ‘world class’ proportions but its remote location and cost of building a 320km road to site has held the project back.
• The potential use of the planned Aeroscraft ML868 250t vehicle to lift machinery and carry supplies could cut capital and potentially operating costs for the project as well as reducing construction and transportations times.
• The combined impact of reduced capital costs and transportation times as well as potentially a more reliable means of access should transform the project economics.
• Amur Minerals is reported to be a launch partner for Aeroscraft’s ML868 vehicle
• The two companies intend to enter into a service user/customer agreement to cover “the transport requirements, costs, benefits and structure of a commercial relationship on the successful launch of the ML868”.
• The Kun Maine project location in the Amur region of Russia is accessible through the winter but requires the construction of a more significant road and a number of bridges for year-round access.
• We wonder if we might see the development of a new television series of ‘Aeroship Pilots’ to replace ‘Ice-Road Truckers’ in due time though we suspect there will always be a role for ice-road trucking for shorter and more accessible routes.
*SP Angel act as Nomad and joint broker Amur Minerals
• Centamin Egypt have extended their offer to shareholders to buy Ampella stock.
• Centamin’s offer is unconditional as the company have gained over 51% of acceptances.
• The loss for six months was US$46.3m narrowing the loss last year of US$111.7m.
• Losses include non-cash charges of US$30.3m including an impairment loss of US$16.5m at Mooiplaats.
• In 2012 the company took an impairment charge of US$50m on the asset.
• Net foreign exchange losses of US$12.6m against US$19.9m for the last year.
• At the end of the period the company had cash and cash equivalents of US$4.2m compared to cash and cash equivalents of US$29.9m at 30 June 2013.
• Including restricted cash the company had US$5.98m.
• Good progress is said to be made with Mooiplaats now on care and maintenance with start of a formal sale process.
• Semi-soft coking coal at Vele colliery can be processed subject to requisite funds raised for plant modifications.
• The granting of the NOMR (New Order Mining Right) on the Makhado project is expected in CY 2014.
Conclusion: Cash has come down considerably from $29.9m on 30 June 2013 to US$4.2m at the end of December. Net cash flow is still being used in the operations of $3.5m with a net cash flow of $12.4m for financing activities. The company has a number of assets up for sale including Mooiplaats which now has a net asset value of $19m following write downs (compared to US$34m in the same period 2012).
• Frontier Mining today announce the sale of the Naimanjal license area for US$30m in cash subject to regulatory approval in Kazakhstan.
• Proceeds are to be used to repay maturing debt and capital expenditure on the ramp up of the Benkala copper project in Kazakhstan.
• Benkala produced 1,702 tonnes of copper cathode last year and is ramping up to produce 7,000tpa.
*An SP Angel analyst has visited the Naimanjal gold mine in Kazakhstan
Goldplat (LON:GDP) – Interim Results Weak with better Second Half Expected
• Group Revenues were £9.645m down from £15.48m in the same period last year.
• The company made a gross profit of £251,000 against a gross profit of £2.965m in the same period last year.
• The company reported a net loss of £912,000 against a net profit of £1.559m (before impairment charges).
• The fall in revenues and losses resulted from weak trading conditions highlighted in the company’s recent trading update against a lower gold price.
• Cash and cash equivalents were £634,000 at the end of the period.
• Recovery Operations
• Revenues for the recovery operations were £9.45m down 37% on the same period last year.
• Profits for recovery operations were £270,000.
• Gross Profit and net profits were down significantly reflecting difficult trading conditions at GPL (SA recovery operations).
• This was against a weaker back drop for the gold price with gold prices down 23% over the same period last year.
• South Africa (GPL) is likely to have reported a small net loss for the period against a profit at Ghana (GRG).
• As highlighted previously in their trading statement South African recovery operations have had a difficult first half.
• Operations have been impacted by the fall in the gold price as material bought in through contracts was struck at high prices against prices actually realised at the time of sale due the fall and volatility in the gold price.
• In addition, processing of by products through Rand Refinery was temporarily held up in the first half as the company achieved its accreditation status.
• By products constitute a third of their South African profits - this has been a temporary stop to the processing of by products which has since been normalised.
• Now that Goldplat has achieved the accreditation status, they are now well positioned relative to other “secondary” producers to send material to the Rand Refinery offering scope for future business opportunities.
• By products acquired over the first half were of lower grade and higher price making it difficult to process profitability.
• A number of initiatives have been introduced by Hansie van Vreden who took over as the Managing Director of the South African operations last year which should partially mitigate a fall off in profits in the operations.
• Contracts are being renegotiated so that customers receive the gold price achieved at point of sale.
• By products which are currently stockpiled will be processed over a 24 hour shift improving returns.
• Costs are being saved through the introduction of liquid cyanide in the CIL circuits which will result in cost savings as this is much cheaper than granulated cyanide.
• GRG (Gold Recovery In Ghana) – GRG restarted operations at Tema through the treatment of stockpiles on site.
• The procurement of artisanal tailings at more commercial rates is slowly being achieved – these form part of the material being treated through the Adamus toll treatment plant.
• GRG’s targeting of the higher value carbon business is continuing.
• Kilimapesa: The mine continues to run on care and maintenance with losses likely to continue but at a lower pace than last year.
• Kilimapesa reported net revenues of £271,000 with net losses of £415,000 for mining and exploration 70% of this likely to be at Kilimapesa.
• The board is currently reviewing options for Kilimapesa.
Gold Recovery Operations to recover in the second half
• We expect both GPL and GRG to perform better in the second half.
• At GPL by products held up in the first half can now be sent on to Rand Refinery.
• In addition, the company is implementing a 24 hour treatment process for by products building up at the plant.
• The company are also restructuring contracts on more commercial terms and while we do not expect these to come through all in the second half, we expect less of an impact from the gold price.
o South Africa is expected to recover in the second half, we do not expect this division to regain the same level of profitability achieved last year against a lower gold price environment and less flexibility in the stock price.
o Ghana has held up better with operations resuming at Tema and the currency offering a better hedge against lower gold prices.
o Artisanal tailings which constitute part of the business at Adamus is being bought at more commercial prices.
o We expect a full year gross profit of £2.58m at the recovery operations and a net contribution from the recovery operations of £1.79m after G&A cost at the operations.
Kilimapesa remains on care and maintenance while options are being sought
The company continue to look at options for Kilimapesa but based on the small scale of production at the mine and high royalties at the state and community level, the mine is expected to be loss making.
• Losses are likely to be reduced significantly from last year but are still expected to be around £461,000 for the full year.
• The company is in discussions with the government to improve the terms of running the mine including participation rules in the new Mining Act.
• The company is in discussions with JV partners to invest in capital in a larger plant which would improve the profitability of the mine.
Next year should be a better year but will be one of bedding down existing initiatives
• We expect the initiatives being put into place by the new team to lead to increased profitability being re-established at the recovery operations.
• Initiatives are being introduced to improve margins and the profitability of the company through the introduction of a more disciplined approach to sourcing of material, structuring of contracts and improvements in costs.
• Profits are likely to recover at both South African and Ghana but are unlikely to achieve the levels reached last year against a more muted gold price environment.
• Options being considered for Kilimapesa could also provide a respite from losses and potential for value.
• We expect the operations to be close to cash neutral for this year, retaining most of the cash balance from last year with scope to build this up in the following year.
• The Mine Development Agreement has now been signed by the Minister of Mineral Resources.
• The agreement is subject to ratification by the Sierra Leone Parliament before the fiscal terms come into effect.
• This agreement sets the legal, fiscal and operating regimes for development and mining of Nimini.
• A PEA is expected to be announced shortly followed by NI43-101 PEA.
Conclusion: Nimini is a significant part of the the Polo Resources portfolio. It is a good quality asset with good grades and prospects. It is good to see the Mine Development Agreement in place and look forward to the PEA. The company is also seeking ratification of the fiscal terms in Parliament which should provide an additional level of confidence in the terms should there be a change in government.
• SolGold now hold 85% of the project.
• SolGold has completed five deep drill holes into the Cascabel project. Each of the holes show long intersections of mainly gold, copper mineralisation with generally. Grade generally increases with depth and the data so far indicates the presence of a very large mineralised porphyry orebody of economic significance.
Conclusion: The results are sufficiently interesting to attract the attention of a number of major mining companies and we expect to see further good intersections from the continuation of drilling.
*SP Angel acts as broker to SolGold
• Tertiary Minerals report good results from drilling at the MB fluorspar project in Nevada, USA.
o 51.82m grading 10.73% CaF2 from 27.43m depth, including
o 21.34m grading 14.66% CaF2 from 36.58m depth
§ 24.38m grading 10.13% CaF2 from 62.48m depth.
§ 10.67m grading 13.82% CaF2 from 91.44m depth
§ 4.57m grading 14.81% CaF2 from 129.54m depth
§ 4.57m grading 15.54% CaF2 from 140.21m depth.
§ Wardell Armstrong, respected mineral consultants, are to prepare a maiden JORC mineral resource for completion by the end of this quarter.
§ The company are also working on a PFS for the Storuman Fluorspar project in Sweden to prepare for an exploitation concession and environmental permit. Storuman should produce an acid grade fluorspar based on early test work to date.