Jubilee Platinum (LON:JLP) – Proposed acquisition of copper tailings project
Better than forecast US ADP payroll numbers lift chances for a rate hike next week leading the US$ and bond yields higher.
• Gold is down for a fourth day now ahead of NFPs on Friday and the FOMC monetary policy announcement on Wednesday next week.
• Iron ore futures hit one-month low amid declines in steel prices and a weaker demand outlook in China.
• BHP Billiton expects a moderation in demand from the impact of 2016 Chinese stimulus this year with fundamentals said to “point to a softening” with the Company to “be ready for a much lower iron ore price”.
• Brent prices are up 1.2% this morning after losing nearly 5% on Wednesday as the US energy department showed local crude stockpiles climbed for a ninth consecutive month to a record high of 8.2mmbbl.
Dow Jones Industrials -0.33% at 20,856
Nikkei 225 +0.34% at 19,319
HK Hang Seng -1.18% at 23,502
Shanghai Composite -0.74% at 3,217
FTSE 350 Mining -2.36% at 15,443
AIM Basic Resources -0.56% at 2,566
US – ADP nonfarm payrolls hit the highest level in almost three years which drove market estimates for the official NFPs on Friday upwards.
• While there is a low historic correlation between the two, a positive momentum in the labour market as measured by the ADP report should give more confidence to the FOMC to lift rates on Wednesday.
China – Inflation data released this morning showed a build-up in producer prices inflation momentum in Feb on the back of stronger commodity prices and a weaker renminbi.
• Consumer prices inflation gauge has been affected by seasonal factors with a 4.3%yoy decline in food prices after the lunar New Year holiday accounting for a low headline number (0.8%yoy).
• Excluding food prices, cosumer prices were up 2.2%yoy, down from 2.5% in Jan.
• PPI (%yoy): 7.8 v 6.9 in Jan and 7.7 forecast.
• CPI (%yoy): 0.8 v 2.5 in Jan and 1.7 forecast.
ECB – Mario Draghi is set to deliver the ECB monetary policy announcement today with estimates for the pace of QE to remain unchanged at €870bn per month.
Philippines environment minister still has president’s support (Reuters)
• The battle to save mines ordered to close by the new minister of mines is heating up in the Philippines
• A congressional panel is looking to delay a decision on the confirmation of the new environment and natural resources secretary, Regina Lopez
• According to Lopez, the president has said he will reappoint her if there are problems with the confirmation. Confirmation of ministers can take place long after ministers start work
US$1.0549/eur vs 1.0560/eur yesterday. Yen 114.58/$ vs 113.90/$. SAr 13.209/$ vs 12.993/$. $1.216/gbp vs $1.218/gbp.
0.752/aud vs 0.756/aud. CNY 6.908/$ vs 6.907/$.
Gold US$1,205/oz vs US$1,225/oz yesterday
Gold ETFs 58.5moz vs US$58.6moz yesterday
Platinum US$946/oz vs US$974/oz yesterday – The World Platinum Investment Council (WPIC) released its quarterly report today.
• Platinum supply climbed only slightly last year (+1%yoy/+60koz at 8.0moz) as an increase in recycling more than compensated for a drop in mine supply.
• A decline in mine supply (-2%yoy/-120koz at 6.0moz) was led primarily by a weaker production in South Africa, the world’s largest supplier of the metal.
• South Africa mine supply was down 5% to 4.2moz “owing to a higher number of safety-related stoppages, price-induced restructuring on the Western Limb and more general operational challenges which resulted in lower underground ore volumes being hoisted at other Western Limb mines”.
• Mine supply climbed in Zimbabwe (+19%yoy/+75koz at 480koz) and North America (+6%yoy/+25koz at 410koz) with production in Russia flat (715koz).
• Platinum demand was virtually flat (0%/-5koz at 8.2moz) as stronger industrial sector demand (+5%yoy/+90koz at 1.6moz) mostly driven by an expansion of petroleum refining capacity (+80koz), good investment interest (+66%/+200koz at 0.5moz) and robust automotive industry demand (+1%yoy/+20koz at 3.4moz) were matched by a reduction in platinum jewellery demand (-11%yoy/-315koz at 2.6moz).
• In the automotive sector, higher loadings of the metal in autocatalysts made up for a drop in the share of diesel engines in total car sales in Western Europe, one of the world’s largest diesel cars markets.
• While auto sales in the EU climbed to the highest in nine years in 2016 with all five largest markets (Germany, UK, France, Italy and Spain) posting growth, the share of diesel cars fell 2.5pp to 49.6% in 2016.
• Jewellery demand fell victim to a significant drop in China amid sluggish retail demand and jewellers working through their stockpiles from 2015.
• Investment demand held up well thanks to close to no liquidations in ETFs holdings last year (-10koz v -240koz in 2015).
• Despite the market posting the fifth consecutive deficit, 2016 was the year when average platinum prices recorded a fifth consecutive annual decline amid ample inventories available in the marketplace.
• Outstaying above ground stocks stood at 2.1moz as of 2016, according to the WGIC.
• 2017-wise, the WGIC forecasts the market to remain in a structural deficit (-120koz v -270koz in 2016) which should help to cut outstanding stocks further (2.0moz as of 2017e).
• Mine supply is forecast to post another annual decline in 2017 (-2%yoy/-110koz) with South African production down due to the “closure of loss making production and depletion at a handful of small-scale UG2 operations on both the Western and Eastern limbs”.
• Automotive demand is set to remain flat amid a slowdown in auto sales in Europe on the back of regional political uncertainty.
• Investment demand is forecast to moderate, although it may to be too conservative as it has been in the past.
• “The platinum price is expected to be somewhat higher in 2017 than 2016 and ETF hlidngs are estimated to increase modestly”.
Palladium US$764/oz vs US$772/oz yesterday
Silver US$17.19/oz vs US$17.72/oz yesterday
Copper US$ 5,695/t vs US$5,830/t yesterday
Aluminium US$ 1,871/t vs US$1,870/t yesterday
Nickel US$ 10,125/t vs US$10,965/t yesterday
Zinc US$ 2,655/t vs US$2,705/t yesterday
Lead US$ 2,212/t vs US$2,221/t yesterday
Tin US$ 19,130/t vs US$19,350/t yesterday
Oil US$53.7/bbl vs US$56.0/bbl yesterday
Natural Gas US$2.909/mmbtu vs US$2.874/mmbtu yesterday
Uranium US$25.65/lb vs US$25.75/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$81.2/t vs US$81.8/t
Chinese steel rebar 25mm US$570.8/t vs US$573.0/t
Thermal coal (1st year forward cif ARA) US$64.3/t vs US$66.4/t yesterday
Premium hard coking coal Aus fob US$163.1/t vs US$163.1/t
Tunsgten APT European US$210-217/mtu (from the 03Mar week) v US$197-207/mtu previously
Birimian Limited (ASX:BGS) A$0.30, mkt cap A$50.8m – Current phase of drilling at Goulamina lithium project in Mali completed
• Birimian reports that it has completed the latest phase of drilling at its Goulamina lithium project has now been completed following 11,483m of diamond-drilling in 90 holes. The drilling is reported to have demonstrated “Continuous high grade lithium mineralisation … to depths of approximately 200m down dip”
• The results reported today include, a 38m intersection averaging 1.8% from a depth of 116m downhole in hole GMRC043Dand 33m averaging 1.99% from 174m downhole in GMRC050D.
• The company expects to complete a revised mineral resource estimate later this month. The current resource estimate reports 15.5mt at an average grade of 1.48% lithium oxide of which 6.2mt at an average grade of 1.4% are classed as indicated with the remaining 9.3mt at 1.53% classified as inferred. At the time of this resource estimate in October 2016, the maximum depth of drilling was 160m below surface and with the current campaign testing to over 200m, we would expect the update to demonstrate increased resources as well as, perhaps, an upgrade to resource classifications as a result of infilling any gaps in the earlier drill pattern.
• In addition to the resource estimation work, “Birimian continues to advance a number of studies as it works towards completion of the PFS [Pre-Feasibility Study]”. These include optimisation of open-pit mine designs, improvements and optimisation to the process flowsheet as well as work on the logistics and transport issues relating to mine possible development.
Conclusion: Birimian is continuing to deliver high grade lithium intersections from the Goulamina project in Mali. We look forward to the new resource estimate later this month and, subsequently, to the PFS results which should provide an insight into the potential scale and economic returns of a possible future mine development
Bushveld Minerals (LON:BMN) 3.8p, Mkt Cap £26.1m – Completion of acquisition of Strategic Minerals Corporation by Bushveld Vametco expected by end March
• Bushveld Minerals has provided the proof of funding for the US$14.8m required under the terms of the acquisition of Strategic Minerals Corporation from Evraz, the Russian steel producer. Bushveld Vametco will acquire all the shares in Strategic Minerals Corporation under the terms of the deal.
• Evraz acquired 73% of Strategic Minerals Corporation in 2006 for around US$110m though SMC also contained a number of other assets at the time which are not included in the Evraz sale.
• A qualifying BEE company, Jaxson 640 led by Bill Chipane, has previously agreed to acquire an effective 21.2% stake in Vametco from its previous BEE partner for ZAR47m ($3.6m).
Conclusion: Bushveld Vametco’s deal to acquire the assets of SMC in South Africa was very well timed. The confirmation of this deal is great news and should be transformational for the company in time. Our recent site visit confirmed the view that the assets have significant potential to outperform on the assumption of rising vanadium price and demand.
China’s recent announcement that it would seek to reduce steel and in particular scrap steel capacity should be good for primary vanadium producers as competition from vanadium slag production falls.
China, India and the US all have significant infrastructure investment plans/proposals which will require greater tonnages of vanadium-rich structural steel and rebar. This should continue to raise demand for vanadium particularly with China focussing on improving the quality of its steel production.
*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Jubilee Platinum (LON:JLP) 5.7p, Mkt Cap £59.7m – Proposed acquisition of copper tailings project
• Jubilee Platinum has announced plans to acquire a copper tailings re-treatment project and associated exploration opportunities at the Leigh copper mine in South Australia.
• The project is reported to be capable of being in production within “four months of the Transaction and able to produce cash flow within 6 months of acquisition.”
• Jubilee Platinum estimates that there are “Near surface resources of 35,000t Cu in combination of JORC compliant category and mineral inventory”, and the company highlights its “Project production forecast of 12,000 tonnes (t) of copper (Cu) at production cost AUD3,381/t Cu (USD 2,569/t Cu) – Current Cu price USD6,000/t Cu.”
• The transaction, which is subject to a period of due-diligence expected to be completed by the end of April 2007, is phased, with Jubilee acquiring an initial 20% for A$500,000. Jubilee can acquire a further 20% shareholding for a subscription of A$1m. Once commercial production is achieved from the “processing of existing surface material” it will “have the option to acquire a further 11% … for a purchase price of AUD500,000”.
• Embarking on the second phase of the project, targeting 3,000 tonnes of copper sales and moving up to 9000 tonnes, will trigger an A$2m loan from Jubilee to fund the expansion. “At any time after having acquired a 51% shareholding … and electing to proceed with Phase 2 objectives, Jubilee will have the option of acquiring a further 29% … for AUD500,000 takings its shareholding in the Project Company to 80%.”
• Two deferred purchase considerations each of A$1m are triggered when the targets of 3000t and 9000t of copper sales are reached. Jubilee is also to offer the vendors an option, valid for 5 years, to sell their residual 20% interest for a further A$1m in Jubilee shares.
Conclusion: Jubilee Platinum has previously been better known for its African businesses; the foray into Australia broadens their geographical footprint while enabling it to deploy its technical expertise in metal recovery.
Rio Tinto (LON:RIO) – 3193p, Mkt Cap £59.6bn – Chairman to stand down and lead BT
• Rio Tinto reports that its Chairman, Jan du Plessis, is to retire “after completion of an orderly succession process. … a successor is expected to be announced before the end of 2017 with Mr du Plessis retiring as chairman no later than the 2018 annual general meeting in Australia.”
• “BT Group plc announced today that Mr du Plessis will join their board as a non-executive director on 1 June 2017 and become chairman with effect from 1 November 2017.” where he will succeed Sir Mike Rake.
• In an announcement today from BT, Mr du Plessis expressed his enthusiasm to be joining “a great British company with excellent people” at “an important time for the company … to help BT continue to support Britain's digital future."
Conclusion: Mr du Plessis has chaired Rio Tinto since 2009; from the point of view of mining investors it is to be hoped that, as he plans for his departure, he also regards Rio Tinto as a great British company with excellent people. We look forward to Mr du Plessis overseeing the sale of copper from copper cables at BT which was once calculated at the height of the last copper boom to have more value contained in its copper cabling than in the rest of its business.