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Today's Market View including: Randgold Resources & Pan African Resources

Published: 10:29 08 Feb 2016 GMT

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Economic News
US – Better than forecast earnings raised chances for another rate hike by the Fed this year contributing to an increase in the US dollar index and a drop in major equity indices on Friday.
• Economic news this week:
Date Index Period Actual Expected (Bloomberg) Previous
Friday Non Farm Payrolls Jan 151k 190k 262k (revised from 292k)
  Unemployment Rate Jan 4.90% 5.0% 5.0%
  Av Hourly Earnings Jan 0.5%mom/2.5%yoy 0.3%mom/2.2%yoy 0.0%mom/2.7%yoy
Tuesday JOLTS Jobe Openings Dec   5,350k 5,431k
Wednesday Budget Statement Jan   US$22.8bn  -US$17.bn
Thursday Weekly Jobless Claims     280k 285k
Friday Reatail sales/Core Jan  0.1%mom/0.0%mom  -0.1%mom/-0.1%mom
  UoM Consumer Confidence Feb   92.5 92.0
Source: Bloomberg   

Japan – Weak labour earning numbers are expected to weigh on consumption growth.
• Labour cash earnings climbed a modest 0.1%yoy in Dec compared with no change in Nov and forecasts for a 0.7%yoy increase.
• When adjusted for inflation, earnings were down 0.1%yoy in Dec marking a four year long stretch of negative growth.
• Q4/CY15 GDP numbers are due next week with estimates for a 0.6%qoq decline in consumption. This would be a second decline in consumer demand in 2015 after a contraction recorded in the Apr-Jun period.
• Current account posted the 18th consecutive monthly surplus in Dec driven by weak commodity prices and oil, in particular; although, it was the lowest reading since mid-2015.
• Current account surplus: ¥960.7bn v ¥1,144bn in Nov and ¥1,590bn forecast.

France – Business sentiment hit a nearly five-year high in Jan despite latest PMI data pointing to a stagnating manufacturing sector and only marginal growth in services industry.
• The index prepared by Banque de France climbed to 101 last month, a little higher from revised 100 in Dec.
• Estimates were for 99, unchanged from pre-revised Dec number.

Australia – Moody’s cut credit rating of Western Australia credit rating on the back of weak metal and energy prices.
• “The drop in the price of iron ore and the sluggish performance in state taxes have led to declines in revenue, and, absent corresponding expenditure measures, budget deficits are widening significantly,” Moody’s said.
• The credit rating has been brought down by one notch to Aa2 making it the lowest among Australian states and two levels lower than Aaa rated New South Wales and Victoria.
• Ongoing budget deficits are estimated to push the state’s debt burden to 140% of revenues in the 2016-17 fiscal year.

South Africa – 50% of iron ore and coal mines and 8% of platinum operations are loss making at current prices, Chamber of Mines told reporters in Cape Town.
• Significant cost pressures with operating costs up an average of 20%pa in past five years combined with soft demand growth erode miners’ profit margins.
• Rising power bills have been named as major contributor to costs’ inflation.

Argentina – The government is on a way to resolve a decade-long dispute with its creditors who refused debt restructuring after the 201 default on US$100bn worth of bonds.
• Finance Minister said on Friday that the government offered to around US$6.5bn in regards of about US$9bn of outstanding claims.
• A number of “holdout” creditors are reported to have accepted the offer.
• A resolution of the dispute may pave the way for Argentina to regain access to the international capital markets.

Currencies
US$1.1178/eur vs 1.1195/eur yesterday. Yen 116.84/$ vs 116.88/$. SAr 16.016/$ vs 15.921/$. $1.451/gbp vs 1.452/gbp
0.709/aud vs 0.719/aud. CNY 6.574/$ vs 6.571/$

Commodity News
Precious metals:
Gold US$1,174/oz vs US$1,156/oz yesterday – China added c.0.5moz of gold to its holdings through Jan on the People’s bank of China numbers.
• Holdings climbed 0.9%mom to 57.2moz last month.
Platinum US$907/oz vs US$906/oz yesterday
Palladium US$499/oz vs US$517/oz yesterday
Silver US$15.00/oz vs US$14.85/oz yesterday

Base metals:
Copper US$ 4,610/t vs US$4,680/t yesterday
Aluminium US$ 1,507/t vs US$1,533/t yesterday
Nickel US$ 8,110/t vs US$8,535/t yesterday
Zinc US$ 1,695/t vs US$1,707/t yesterday
Lead US$ 1,786/t vs US$1,789/t yesterday
Tin US$ 15,545/t vs US$15,050/t yesterday

Energy:
Oil US$33.7/bbl vs US$34.2/bbl yesterday
Natural Gas US$2.114/mmbtu vs US$2.060/mmbtu yesterday
Uranium US$34.40/lb vs US$34.45/lb yesterday

Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$44.0/t vs US$44.4/t
Thermal coal (1st year forward cif ARA) US$37.7/t vs US$38.3/t yesterday - A third of Queensland coal mines are reported to be running at a loss, according to the Queensland Resources Council.
The report by the QRC wants mining companies to pay less royalties and laws that would limit council rates.

Other:
Tungsten - APT European prices stood at $160-175/mtu last week
Ferrochrome – Benchmark prices collapsed to 92c/lb in December for Q1/16, down 11.5% from 104c/lb in Q4/15.

Company News

Pan African Resources (LON:PAN) 11.25 pence, Mkt Cap £209m – Trading Statement for 6 months
Total production over the period was 106,290 oz up 16.3% from the same time last year.
• Production from Evander mines was up 34.4% at 45,350 oz with Barbeton mines producing 56,447 oz up 6.6%.
• PGM oz from Phoenix Platinum was down 4.6% at 4,493 oz.
• EPS for the period is expected to be 0.57 pence a significant improvement on the prior period.
Conclusion: The trading statement would suggest a much better performance at the interim stage than the same time last year.

Randgold Resources (LON:RRS) 5300 pence, Mkt Cap £4.94 bn – Strong 4th Quarter Results bringing in good performance over the year
• Gold production for the fourth quarter was 328,430 oz up 7% quarter on quarter and 8% year on year.
• Gold sales were US$354.8m up 4% quarter on quarter and US$1.394bn for the full year down 3%.
• The average gold price was down 3% for the quarter at US$1,081/oz and down 10% on a year on year.
Total cash costs at US$205m for the quarter and US$822.673m for the full year generated profits of US$149m up 18% quarter on quarter  and up 9% to US$572m year on year.
• Cash cost per oz was US$632/oz down 10% for the quarter and down 3% for the full year at US$679/oz.
• There was good performance from the Loulo-Gounko complex and Tongon offsetting weaker performance from Kibali.
• Net cash generated for the quarter was US$114.1m up 4% on the previous quarter with net cash for the year of US$397m up 25%.
• Final dividend per share of 66 US cents up 10%.
Conclusion: This is strong performance for Randgold in terms of production and costs helping to offset a lower gold price for the quarter and the full year. With cash generation remaining strong, a higher dividend has been declared. The company continues to perform well and is the default gold stock for investors looking for gold exposure in the sector.

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