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Today's Market View Including Hummingbird Resources, Jubilee Platinum, Obtala Resources and SolGold

Published: 10:33 30 Jun 2015 BST

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Greece Eldorado Gold Corp have updated us on how they are managing in Greece following the introduction of Capital Controls yesterday
• Eldorado continue to operate the Skouries< Olympias and Stratoni mine sites with employees paid by wire transfer
• Problem is that Greeks are limited to €60 per day out of ATM machines and there are long queues at those machines which still have cash in them
• It would be interesting to know if the government were printing Drachma in case of today’s probable default on Greece’s IMF loan

Question – if Chinese state cyber espionage cost Rio Tinto some $800m then how much has this cost other miners and could there ever be a case for suing to recover lost funds?
• It would make a good case for Arbitration with the potential to seize Chinese assets abroad to cover, costs and damages

Economic News

US – Economic news due this week:
• Today: Apr property prices measured by S&PCS (5.50%yoy v 5.04%yoy in Mar)
• Wednesday: Jun ADP employment change (+218k v 201k in May)
• Thursday: Jun NFPs (230k v 280k in May), Unemployment rate (5.4% v 5.5% in May), Average hourly earnings (+0.2%mom/+2.3%yoy v +0.3%mom/2.3%yoy in May), Weekly jobless claims (270k v 271k in the previous week)
• Friday: Bank holiday

Germany – Retail sales climbed more than forecast mom in May, but disappointed on yoy basis.
• Sales were up 0.5%mom last month, slowing down from +1.3%mom in Apr. Estimates were for no change.
• Consumer sentiment has been growing in the eurozone following the start of the ECB QE, but has been weighed down recently on the back of Greek debt crisis.
• In line weaker consumer spending, inflation slowed to 0.1%yoy in Jun compared with +0.7%yoy in May. This is significantly less than market forecasts for a +0.4%yoy increase.
• MoM prices were down 0.2%mom this month, versus +0.1%mom increase in May.

Italy – Unemployment unchanged at 12.4% in May despite estimates for a second monthly improvement (-10bp to 12.3%).
• Nevertheless, the government remains upbeat on the economic outlook expecting the nation to gain momentum through the year.
• GDP growth forecast has been upgraded to 0.7%, up from 0.6%, for 2015.

Greece – Bank withdrawals have been limited at €60/day.
• As withdrawals gained pace amid speculation caps may be cut further, the Finance Ministry released an annucnent denying rumours that withdrawals will be cut to €20/day.
• PM Tsiparis said banks will re-open once th ECB restarts the ELA programme which he expects to happen following the referendum this Sunday.
• If opinion polls is anything to go by, Greeks are likely to vote in favour of the bailout and related reforms during the referendum.
• As it stands, Athens are not making the €1.6bn payment to the IMF today.

US$1.1154/eur vs 1.1106/eur yesterday.   Yen 122.12/$ vs 122.93/$.   SAr 12.241/$ vs 12.263/$.   $1.572/gbp vs 1.570/gbp
US$0.768/aud vs0.766/aud

Commodity News

Precious metals:

Gold US$1,177/oz unch vs US$1,179/oz yesterday – China to introduce Rmb-denominated gold fix by year-end
• Wage negotiations among gold producers in South Africa are set to continue as parties submit their proposals.
• AngloGold, Sibanye and Harmony offered to increase entry-level compensation by 13%, 11% and 7.8%, respectively.
• In addition, proposals include profit sharing agreement by which 3-5% of profits earned on average over the preceding six months will be equally shared among all employees.
• All mines promised to guarantee employment to employees over the five year term agreement, effective though Jun/20.
• Offers remain a long way off unions’ demands. The AMCU advocated for a more than double increase in wages for entry level workers. The UASA demanded a more than 40% increase.
Platinum US$1,083/oz vs US$1,074/oz yesterday –
Palladium US$671/oz vs US$674/oz yesterday –
Silver US$15.73/oz vs US$15.86/oz yesterday

Base metals:

Copper US$ 5,724/t vs  US$5,789/t yesterday –
Aluminium US$ 1,685/t vs US$1,684/t yesterday
Nickel US$ 11,625/t unch vs US$12,020/t yesterday –
Royal Nickel, an owner of the Dumont sulphide nickel project in Canada, will receive a US$10m investment from Orion Mine Finance.
• In return, Orion receives 0.75% NSR royalty in the project and 10m shares (c.8% of outstanding stock).
• The Company has an option to repurchase 50% of the royalty for US$15m on 3rd, 4th or 5th anniversary.
Royal Nickel is in the process of securing funding for the project and is planning to start construction in early 2016.
Zinc US$ 1,973/t vs US$2,013/t yesterday –
Lead US$ 1,758/t vs US$1,766/t yesterday
Tin US$ 14,100/t vs US$14,625/t yesterday

Energy:

Oil US$62.4/bbl vs US$61.9/bbl yesterday
Natural Gas US$2.794/mmbtu vs US$2.752/mmbtu yesterday
Uranium US$36.75/lb unch vs US$36.75/lb yesterday –

Bulk commodities:

Iron ore 62% Fe spot (cfr Tianjin) US$62.50/t unch vs US$62.50t –

Steel – China slowing steel production as domestic demand falls
• China is slowing steel output as the number of steel mills shutdown for summer maintenance rises to >50 cutting capacity utilisation to 88% from around 89%
• Only a small proportion of China’s steel mills are said to be profitable at current price levels
• Stockpiles at the major Chinese ports rose 1% to 80mt on the week with offtake of around 2.5mt per day

Thermal Coal $59.8 unch vs $59.35 cif ARA Europe
Tungsten - APT European prices price $217.5/mtu vs $225/mtu last week

Potash – PotashCorp offered US$8.7bn (in cash) to buy German rival K+S AG valuing the Company just over €40 per share.
• A merger would yield the combined company nearly 27% of global potash capacity by 2017, when both companies are expected to complete new mines.

Company News

Jubilee Platinum (LON:JLP) 2.15 pence, Mkt Cap £16.1m – Second tranche of shares for acquisition of Pollux Investment
Jubilee Platinum has announced that it is issuing R4m (£0.207m) of shares to satisfy the second tranche of its 3 staged payments to acquire the outstanding 25% interest in Pollux Investment Holdings which it does not already own.
• Pollux holds exclusive rights to treat ACA Metals’ chrome tailings for platinum group metals at the DCM Project.
• Following the initial announcement of the transaction, on 3rd November 2014 to acquire the third party interest in Pollux from Liposet Proprietary Limited for a total of 25m shares, the first payment of R5.3m in shares was made on 30th November 2014; “Further announcements will be made in due course regarding the issue of the balance of the Tranche 3 Consideration Shares”.
• “In addition, The Company will, on a share based payment basis, issue Ordinary Shares on behalf of its subsidiaries, Braemore Resources Limited, RST Special Metals Proprietary Limited and Pollux, in lieu of debt for services provided … towards the development and implementation of the platinum beneficiation strategy targeted at bringing into operation of the two Platinum Surface Processing projects estimated to process 80,000 tons per month of platinum containing surface material.”
• The company has also received an offer of credit funding to assist in bringing the surface platinum projects into operation. The offer is still under review by Jubilee Platinum which is looking to dispose of non-core, non-platinum assets as a means of funding the development and delivering its strategy to focus on growing its surface platinum interests.

Hummingbird Resources (LON:HUM) 34 pence, Mkt Cap £36.4m – Sale of Asheba licence in Ghana
• The company reports that it has agreed the sale of its wholly owned subsidiary, Ensign Resources, which holds the Asheba licence in Ghana.
• Ensign is to be sold to a private west African exploration company, Taoudeni Resources, for a 10% interest in Taoudeni and a US$1/oz discovery bonus. Hummingbird retains the right to buy back a 10% interest in the project for US$7m upon the publication of a Feasibility Study by Taoudeni.
• The Asheba licence area was part of the asset package Hummingbird acquired from Gold Fields along with its flagship Yanfolila project. Internal estimates by Gold Fields estimate that Asheba contains 176,000 oz of gold at an average grade of 1.8 g/t, however these estimates do not meet contemporary resource reporting standards.
• Taoudeni plans to use the historic data generated by Gold Fields, including over 20,000 metres of reverse circulation drilling and re-sampling of existing drill core, to assist it in developing an initial JORC compliant resource estimate.
Conclusion: Hummingbird Resources has taken the opportunity to retain a 10% interest in any future upside of the Asheba licence without further financial exposure.  The divestment should allow the company to focus its own efforts on delivering the flagship Yanfolila project where construction is already underway and initial gold production at a rate of 100,000 oz of gold per year is expected in H1 2016.

Obtala Resources (LON:OBT) 8.5 pence, Mkt Cap £22.4m – Final Results
• Obtala have extended their agri and timber business to a downstream retail business in Tanzania and Mozambique.
• The focus of the last two years has been in building a farming business with a processing facility to produced dried fruits under the Mama Jo brand.
• In Mozambique the company have built a timber business to supply the construction industry and to provide processed timber products.
• A retail chain has since been built in Lesotho to provide an additional route to market for their products and to build an African Home Stores business.
• A new branch was opened over the period giving them a total of 6 branches.
• Across the businesses the company generated revenues of US$2.63m and reported a loss of US$21.6m including a paper loss of US$20.9m from the disposal of Paragon.
• Stripping out the loss from disposal, the company made an operating loss of US$4m.
• Cash at the end of the period stood at US$5.06m.
Conclusion:  Obtala which originated from mining activities moved on to develop an agri and timber business with ambitions now to develop a more integrated home stores business. There is little visibility on how much revenue or profits/losses are being generated in their various divisions.

SolGold* (LON:SOLG) 2.35 pence, Mkt Cap £17.9m – Hole 11 confirms strike extension at Alpala Central
• Results have come through on CSD-15-011 at the Alpala prospect which was completed to a depth of 1,668m.
• An interval of 640m shows copper grades of 0.58% and 0.4 g/t gold from 996m to 1,636m depth.
• This included 58m of higher grade copper grading 1.45% and 1.44 g/t gold from 996m to 1,054m.
• At greater depths between 1,110 to 1,322m, an interval of 212m showed copper grades of 0.6% and 0.31 g/t gold – see below:

Hole 11 From (m) To   (m)   Interval(m) Cu Grade - % Gold Grade - g/t
Interval 996 1636 640 0.58% 0.40
including 996 1054 58 1.45% 1.44
1110 1322 212 0.60% 0.31
  1416 1518 102 0.74% 0.50
  1562 1636 74 0.47% 0.26

• Hole 11 passed along the NW margin of the copper porphyry system being tested at Alpala Central.
• The intersections at Hole 11 and surface mapping data support a lateral strike extension of copper and gold mineralisation at Alpala to 450m.
• The announcement includes two useful prospect maps which show drill hole locations and results including the positioning of the Hole 12 which is now in progress.
• Hole 12 is being drilled to test the SE side of the central part of the Alpala zone.
Conclusion:  Results from Hole 11 confirm the extension of mineralisation along the Alpala Structural Zone to the NW and a strike extension of 450m at Alpala.  Hole 12 is to test the extension to the SE and we look forward to further assay results as drilling progresses.  The announcement also includes a graphical representation of how well the team’s visual estimates correlate with the corresponding assay results confirming the quality of the work done at the Alpala prospect.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.

Trafigura sells half of Aguas Tenidas and two other Spanish mines to Abu Dhabi’s Mubadala in new joint venture
• Trafigura, the commodity trading house, is creating a jv company with the Abu Dhabi state investment fund, Mubadala to hold three of Trafigura’s Spanish mines
• Mubadala is paying around $0.5bn for a 50% stake in Minas de Aguas Teñidas (Matsa) which holds three mines in southern Spain producing copper, zinc and lead concentrates.
• Trafigura appears to be looing to emulate Glencore’s success in trading off the ownership of mines and new development
• The group also hold 18% in EMED Mining which is redeveloping the RioTinto copper mine in Spain as well as a 15.3 per cent stake at Nyrstar, the world’s largest zinc producer.
• Mubadala has some $66bn worth of cash and assets under management, mainly in oil and gas and Aluminium

X2 Resources – Mick Davis in talks to buy Australian coal mines off Rio Tinto (Bloomberg)
• Mick Davis’ X2 Resources is talking to Rio Tinto over the purchase of three coal mines in New South Wales, Australia
• The three mines produced some 28mt of thermal coal last year plus another 6mt of semi-soft coking coal
• Bloomberg quote a price range of $2-4bn for the mines which are said to be in positive cash flow
• Glencore paid $1bn for Rio’s half of the Claremont thermal coal mine in Queensland last year which produces some 10-15
• X2 Resources is likely to slash the burden of Head office costs and other expenses that come with being part of a major mining group to restore profitability
• Davis acquired coal mines within Xstrata as part of his strategy to build the group and may be looking to repeat past success through a strategy of devolved and expert mine management

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