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Today's Market View Including: PolyMet Mining, Wolf Minerals, Atalaya Mining, Gold Road Resources,

Published: 11:25 22 Apr 2016 BST

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PolyMet Mining* (PLM US) – Local support in evidence at community meeting
Wolf Minerals (LON:WLFE) – £25m standby facility approved.
Atalaya Mining (LON:ATYM) – Expansion of production to 9.5mtpa to start commissioning next month
Gold Road Resources (LON:GOR) – Further resource expansion at Gruyere to 6.2moz

Dow Jones Industrials                          -0.63%  at         17,983
Nikkei 225                                                +1.20% at         17,572
HK Hang Seng                                          -0.72%  at         21,467
Shanghai Composite                              +0.22% at         2,959
FTSE 350 Mining                                      -2.38%  at         10,378
AIM Basic Resources                             +0.63% at         1,920

Economic News
US – Weekly jobless claims dropped to the lowest level in decades beating expectations and offering evidence to continuing tightening in the labour market.
• The FOMC is holding a meeting next week with estimates for the central bank to avoid further tightening during the session.
• Economic news this week:
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Housing Starts Mar -8.8%mom -1.1%mom 6.9%mom (revised from 5.2%mom)
  Building Permits Mar -7.7%mom 2.0%mom -2.2%mom (revised from -3.1%mom)
Wednesday Existing Home Sales Mar 5.1%mom 3.9%mom -7.3%mom (revised from -7.1%mom)
Thursday Weekly Jobless Claims   247k 265k 253k
  Philly Manufacturing Index Apr -1.6 8.0 12.4
Friday Manufacturing PMI Markit Apr   52.0 51.5
Source: Bloomberg   

Japan – The BoJ is reported to be considering cutting the lending rate offered to financial institutions below zero raising the amount of liquidity in the system and eventually hoping to drive inflation higher.
• The Stimulating Bank Lending Facility has been used for ¥24.4tn (US$223bn) of loans as of Apr 10 with 0% interest currently charged on borrowings
• In addition, the central bank may further cut the rate it pays on some excess reserves further into the negative territory incentivising lenders to make the better use of available funds.
• The BoJ next meets to set policy Apr 27-28.
• The yen traded lower at ¥110.5 this morning compared to ¥109.5 recorded before the news.

Eurozone – Economic activity unexpectedly slowed in Apr v estimates for stronger growth; although the fall in the Composite PMI was only marginal.
• Markit Eurozone Composite PMI: 53.0 v 53.1 in Mar and 53.3 forecast.
• Markit Eurozone Manufacturing PMI: 51.5 v 51.6 in Mar and 51.9 forecast.
• Markit Eurozone Services PMI: 53.2 v 53.1 in Mar and 53.3 forecast.
• “The euro zone economy remains stuck in a slow growth rut in Apr, with the PMI once again signalling GDP growth of just 0.3% at the start of Q2, broadly in line with the meagre pace of expansion seen now for a full year,” Markit said.
• In Germany, both manufacturing and services sector continued to expand through Apr as industrial sector reported an acceleration in the growth pace (51.9 v 50.7 in Mar and 51.0 forecast).
• In France, services sector rebounded in Apr hitting the highest level in 5 months (50.8 v 49.9 in Mar and 50.1 forecast) and compensating for a decline in manufacturing sector (48.3 v 49.6 in Mar and 49.9 forecast).

ECB – Mario Draghi reiterated with his dovish outlook over the Eurozone monetary policy during the press conference after the decision to hold rates and the pace of bond purchases unchanged.
• The deposit rate left at -0.4%, the main refinancing rate at 0% and the marginal lending facility rate at 0.25%.
• Rates are guided to stay low or even lower for “an extended time”.
• While the near term forecast for inflation does not eliminate chances of price growth turning negative again, the monetary policy is expected to ramp up the pace once structural growth returns and external factors such as low oil prices fall away.

Greece – Eurozone finance ministers are meeting in Amsterdam today to discuss the latest Greek budget numbers and the release of further financial aid to Athens.
• The EU said yesterday that Greece posted a 2015 budget surplus excluding interest payments beating the target set for a slight deficit set by the euro area and the IMF.
• The IMF said it will scrutinize numbers given cases in the past when estimates have been revised downwards post initial publication.
• The IMF has been doubtful of Greece able to hit the 3.5% budget surplus in 2018 pushing for contingent austerity measures should the nation miss targets.
• New measures would be in addition to a belt-tightening package of €5.4bn over the coming three years.

Currencies
US$1.1273/eur vs 1.1296/eur yesterday. Yen 110.36/$ vs 109.66/$. SAr 14.386/$ vs 14.270/$. $1.434/gbp vs 1.434/gbp           
0.775/aud vs 0.782/aud. CNY 6.494/$ vs 6.477/$.

Commodity News
Precious metals:
Gold US$1,246/oz vs US$1,257/oz yesterday
• Sumitomo Metal Mining that owns the only gold mine in Japan is targeting an overseas expansion in the gold mining sector, Bloomberg reports.
• The Company is studying a potential investment in the A$455m Gruyere project in Western Australia owned by Gold Road Resources.
• Previously the Company expressed its interest in the base metals business after the US$1bn acquisition of additional interest in the Morenci copper mine in Arizona in Feb this year.
• Gold is the priority at the moment, President Yoshiaki Nakazato said.
• Sumitomo operates a well-known high grade (av 40g/t) underground Hishikari operation in the southern island of Kyushu as well as the Pogo mine in Alaska producing a combined output of 0.5moz pa.
• The Company is targeting to expand operation to a little under 1moz.
Newmont Mining is working with Sumitomo to sell their 56% stake in PT Newmont Nusa Tenggara, an owner of Batu Hijau, the second largest copper/gold mine in Indonesia.
Gold ETFs 56.5moz vs US$56.5moz yesterday
Platinum US$1,030/oz vs US$1,026/oz yesterday
Palladium US$608/oz vs US$597/oz yesterday
Silver US$17.16/oz vs US$17.37/oz yesterday

Base metals:
Copper US$ 5,008/t vs US$4,989/t yesterday
Aluminium US$ 1,643/t vs US$1,622/t yesterday
Nickel US$ 9,105/t vs US$9,340/t yesterday
Zinc US$ 1,905/t vs US$1,920/t yesterday
Lead US$ 1,779/t vs US$1,781/t yesterday
Tin US$ 17,200/t vs US$17,265/t yesterday

Energy:
Oil US$44.6/bbl vs US$45.7/bbl yesterday
Natural Gas US$2.088/mmbtu vs US$2.059/mmbtu yesterday
Uranium US$26.75/lb vs US$27.50/lb yesterday

Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$65.3/t vs US$63.0/t – Prices posted a tremendous recovery since the start of the year with iron ore delivered to the Chinese port of Qingdao trading at more than US$70/t overnight, up from a Dec low of US$38/t.
• Increasing steel prices have been leading a rebound in the iron ore market.
• Steel inventories are reported to have been contracting for a sixth week to mid-Apr.
• Steel prices surged to the highest level since 2014 in record volume yesterday with rebar prices up 15% in the last week and 48% since the start of the year.
• Local exchanges tightened trading rules including raising transaction fees and margin requirements in an effort to cool down the speculation in what is called abnormal trading.
Thermal coal (1st year forward cif ARA) US$45.5/t vs US$45.4/t yesterday

Other:
Tungsten - APT European prices stood at $190-200/mtu vs $175-190/mtu last week – a good pick up in tungsten prices as Hemerdon continues commissioning

Company News

PolyMet Mining* (US:PLM) US$0.91, Mkt Cap US$252.7m – Local support in evidence at community meeting
• Reports of a strongly supportive public meeting hosted by the Department of Natural Resources held in Aurora Minnesota indicate strong local backing for Polymet’s application to reinstate mining and processing on the NorthMet copper/nickel/PGE deposit.
• The local paper, “Mesabi Daily News”, reports that around 450 people attended the meeting and “the overwhelming majority …wore their support for what will be the state’s first copper/nickel/precious metals mine on their garments, with stickers backing PolyMet”
• The community meeting, held as part of the permitting process, was aimed at providing information on the company’s plans for a “mine and processing plant [that] will create 350 permanent jobs, hundreds more indirect positions and more than 2 million hours of construction.”
• Polymet’s CEO, Jon Cherry said that “the company is close to submitting applications for the various permits needed for construction and then production”
• The mayor of Aurora, is reported to be travelling to Washington DC to “register with federal officials the region’s support for mining.”
Conclusion: The permitting process for the Northmet project has been protracted, however it is encouraging to hear of local support for a mining project from the community and its elected representatives.
*SP Angel act as advisors and UK brokers to Polymet

Wolf Minerals (LON:WLFE) 8.625 pence, Mkt Cap £69.8m – £25m standby facility approved.
• Shareholders have approved the £25m standby subscription facility with its major shareholder, Resource Capital Fund (RCF).
• RCF will subscribe for shares at a price of 9.19p/share, representing a 21% premium to yesterday’s closing price.
• The subscription offer will remain open for a period six months and Wolf Minerals is expecting to draw an initial £16m imminently.
• The subscription potentially takes RCF’s interest in Wolf Minerals to over 55%.
• “The approval of the facility enables Wolf to continue the ramp up of the Drakelands mine to enable the project to reach its true potential.W
• The benchmark ammonium paratungstate (APT) price has edged off its recent lows over the last few weeks, however, we believe that trading conditions remain challenging as the mine ramps up to full production. The support of RCF enables the company to proceed with the fine tuning of the operation which should leave Wolf Minerals “well positioned when the market recovers.”
Conclusion: With the placing at a premium to the market, it is clear that Wolf Minerals continues to enjoy the support of its major shareholder, RCF. We consider that, with the closure of Canada’s major tungsten operation at Cantung, there is an opportunity for the Drakelands mine to emerge as one of the major western world tungsten producers and for Wolf Minerals to take a leading role in the world’s tungsten industry. RCF’s continuing support could be a decisive feature in delivering this outcome.

Atalaya Mining (LON:ATYM) 103.5 pence, Mkt Cap £120.8m – Expansion of production to 9.5mtpa to start commissioning next month
• Atalaya Mining reports a loss of €15m (17.9€cents) for 2015. The company held cash of $18.6m at 31st December 2015.
• The reopening of the Rio Tinto mine in southern Spain achieved its first production in July 2015 and formal commercial production was declared in February 2016.
• A further expansion of the mine from the initial 5mtpa rate to 9.5mtpa, missing out an earlier proposed intermediate expansion, is already well advanced with the company announcing earlier this month that it was 92% complete and that it expected to start commissioning the expansion in early May and ramp up production during the second and third quarters.
• The company completed a 31,000 metres infill drilling campaign at the Cerro Colorado during February. The data from the 2 year long programme is currently part of a resource and reserve update being conducted by an independent consultant.  The updated estimates are expected to be released by the end of Q2.
• The speedy move from the initial restart of the mine through to the expansion programme suggests that operations are proceeding well and we note that the company has stated that “Consolidation of project expansion [is] expected to result in further capital savings, a faster timeline to production and potential lower operating costs.”
Conclusion: 2015 was a transformational year for Atalaya as it achieved the long standing goal of restating production at the Proyecto Rio Tinto. The mine is now formally in commercial production and the expansion programme is due to start commissioning early next month. We look forward to detailed production statistics and news of the commissioning of the expansion in due course.

Gold Road Resources (ASX:GOR) A$0.485c, Mkt Cap A$339.5m – Further resource expansion at Gruyere to 6.2moz
• Gold Road Resources has announced the further expansion of its resource base at the Gruyere deposit in Western Australia to 6.2m oz of gold. The estimate, which is based on over 87,000 metres of reverse circulation and diamond drilling data,  was prepared at a gold price of A$1700/oz (approximately US$1315/oz at current exchange rates) in accordance with the JORC Code (2012).
• The 10% increase from the previously announced 5.6m oz has taken less than a year and sees a 15% increase in the overall resource tonnage to 148mt at a slightly lower average grade of 1.30g/t gold (previous 1.36 g/t).
• Approximately 70% of the new resources (4.3moz) are classified as measured or inferred and 0.5m oz, or around 2 years output at the production rate envisaged in the pre-feasibility study, are classed as measured and occur within the upper 100 metres of the deposit which should facilitate initial mine development.
• The company notes that, as the geological and resource modelling has developed through infill drilling and a more thorough understanding of the mineralisation, it has reduced the 0.7g/t cut-off grade used in the earlier estimate to 0.5 g/t gold. It has also become apparent that primary mineralisation occurs at shallower depths than previously interpreted and “that the zones of most continuous mineralisation … are encountered only 2 to 10 metres below surface in the southern half of the Stage 1 PFS Pit Design”.
Conclusion: The new resource estimate underlines Gruyere’s standing as one of the more significant gold discoveries of recent years. Although resource grades are relatively low, the identification of significant, shallow, primary mineralisation at shallow depths could, in our opinion, facilitate early mine development to exploit the 0.5m oz of measured resource which lie in the southern portion of the pit defined by the pre-feasibility study.

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