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Today's Market View -Caledonia Mining, Gemfields and Rambler Metals

Published: 10:31 01 Dec 2016 GMT

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Caledonia Mining (LON:CMCL) – Gold sales arrangements remain intact.
Gemfields (LON:GEM) – Emerald auction rescheduled
Rambler Metals (LON:RMM) – FY 2016 production results as production from LFZ builds up

Bucket of gold flakes stolen in New York
• The gold flakes are said to be worth $1.6m
• We understand flakes are sometimes sold out of ice cream vans for similar prices in London to unsuspecting tourists

Oil and copper price surge higher
• OPEC have agreed a production cut, thought given OPEC’s history of not sticking to quotas its unlikely to last
• Copper prices continue to rise on better sentiment towards global growth.
• Gold prices are hit by new Chinese restrictions on gold imports in an effort to halt the weakening Yuan.

Dow Jones Industrials  +0.01% at 19,124
Nikkei 225        +1.12% at 18,513 
HK Hang Seng   +0.39% at 22,878 
Shanghai Composite    +0.72% at   3,273
FTSE 350 Mining   +0.15% at 14,561 FTSE 350 +98% since 1st January
AIM Basic Resources   -0.15% at  2,381 AIM Basic Resources +46% since 1st January

Economic News
                                                                                                 
Currencies
US$1.0615/eur vs 1.0637/eur yesterday.   Yen 114.31/$ vs 113.07/$.   SAr 14.077/$ vs 13.993/$.   $1.251/gbp vs $1.248/gbp.     
0.739/aud vs 0.746/aud.   CNY 6.894/$ vs 6.883/$ –

Commodity News
Precious metals:
Gold US$1,168/oz vs US$1,186/oz yesterday –
     Gold ETFs 60.4moz vs 60.5moz yesterday –
Platinum US$906/oz vs US$920/oz yesterday –
Palladium US$770/oz vs US$769/oz yesterday –
Silver US$16.36/oz vs US$16.68/oz yesterday

Base metals:   
Copper US$ 5,786/t vs US$5,740/t yesterday –
Aluminium US$ 1,728/t vs US$1,722/t yesterday –
Nickel US$ 11,205/t vs US$11,120/t yesterday –
Zinc US$ 2,720/t vs US$2,735/t yesterday
Lead US$ 2,370/t vs US$2,375/t yesterday
Tin US$ 21,235/t vs US$20,700/t yesterday – ITRI reckons tin prices may rise to $30,000/t in 2018/19

Energy:
Oil US$52.0/bbl vs US$48.8/bbl yesterday –
Natural Gas US$3.373/mmbtu vs US$3.305/mmbtu yesterday
Uranium US$17.75/lb vs US$18.15/lb yesterday –

Bulk:    
Iron ore 62% Fe spot (cfr Tianjin) US$72.0/t vs US$69.0/t –
Chinese steel rebar 25mm US$470.9/t vs US$474.6/t –
Thermal coal (1st year forward cif ARA) US$66.5/t vs US$66.0/t yesterday
Premium hard coking coal Aus fob US$308.8/t vs US$308.8/t – unch

Other:
Tungsten - APT European prices $188-198/mtu vs $198-203/mtu last week – a surprise fall in tungsten prices

Company News
Caledonia Mining (LON:CMCL) 87.5 pence, Mkt Cap £45.9m – Gold sales arrangements remain intact.
• Caledonia Mining has confirmed that its gold sales and settlement arrangements for the Blanket mine remain unchanged following the Reserve Bank of Zimbabwe’s introduction of the “Bond Note”.
• Gold from the mine has, since January 2014, been sold to a subsidiary of the Reserve Bank, with the mine receiving the proceeds, based on 98.75% of the London pm gold fix on the day following delivery, within 48 hours.
• The company recently issued guidance that, in  2017, it expects the mine to produce some 60,000 oz of gold at a cash cost in the range US$600-630/oz and an all in sustaining cost of US$810-850/oz.

Gemfields (LON:GEM) 48.875p, mkt cap £270.9m – Emerald auction rescheduled
• Gemfields has announced that the forthcoming auction of high quality emeralds from its Kagem mine, originally due to take place during December will be deferred until February 2017 in order to allow customers to accommodate the effects of India’s new de-monetisation programme.
• The company comments that the majority of its emerald customers are based in India, and have welcomed the decision to allow them time to adjust to the new arrangements.
• A wider customer base for rubies means that Gemfields ruby auction programme for the output of its Montepuez mine in Mozambique will not be affected and will continue as planned. The company has previously indicated that it would hold a ruby auction in Singapore during December.
• Gemfields has also confirmed that “There is no change to our revenue guidance for the 2016 financial year.”
Conclusion: Gemfields is continuing to build the market in coloured gemstones through its attention to customers’ requirements and we interpret the decision to delay the latest emerald sales in this context as part of building that relationship with its customers.

Rambler Metals (LON:RMM) 9.5 pence, Mkt Cap £39.8m – FY 2016 production results as production from LFZ builds up
• Rambler Metals reports that its Ming mine in Canada produced 4,006 tonnes of concentrate containing 1,057 tonnes of copper and 1,619 oz of gold during the 3 months to 31st October - the first quarter of its 2017 financial year.
• The result represents a 1% increase in copper production and a 12% increase in gold output compared to Q4 2016 and is described as “comparable with last quarter which was a record for the Company.”
• Recovery rates of both copper (96.5%) and gold (65.9%) show improvements on the previous quarter which helped to generate the increased production despite a planned 6% decrease in the head grades of both copper and gold as the mining programme moves into the Lower Footwall Zone (LFZ) where larger production areas (stopes) will enable the company to “increase mill throughput to ensure that all existing infrastructure, at both the mine and mill, are fully optimised in conjunction with sustainable production from the LFZ.”

Sierra Rutile (LON:SRX) 28.5p, Mkt Cap £169.8m – Dam leak worries Iluka as takeover stumbles
• Shareholders in Sierra Rutile will have to wait a little longer to see if Iluka will come through with their offer for the company.
• Reports indicate that heavy rainfall in an unusually wet, wet season had caused a seeping dam to become more of a leak.
• Dams are used in mineral sands operations to create the ponds for dredging large tonnages of mineral sands with virtually all the material deposited back into the pond after the titanium, zircon and other minerals have been extracted.
• It is normal to move the dam walls for these types of operations as the dredge moves through the deposit extracting just a few percent of the material along the way.
• Events at Samarco have highlighted the issue of potential liquefaction and we do not need reminding of the consequences, however, the dams, tonnages and situation at Sierra Rutile are vastly different from those at Samarco.
• While any dam should be checked these should not be insurmountable issues though we can understand if the board of Illuka are reluctant to take on anything which might present a problem later on.
Conclusion:  Sierra Rutile’s dams will need to be checked and perhaps better drained through periods of heavy rains but should not present an insurmountable issue going forward.  It may be that the sale price is adjusted to account for the remediation, perceived risk and insurance associated with taking on these tailings dams.

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