Anglo Asian Mining* (LON:AAZ) – New corporate presentation for ProActive Investor presentation tonight highlights development of new mine at Ugur
European stocks are trading at the highest in two years on the back of positive corporate earnings and pro economic growth Macron win in France.
• Chinese equities are relatively flat capping the latest series of losses that shed $500bn off local equities amid a state crackdown on financial leverage.
• Gold prices are trading lower at $1,225/oz on the back of a rebound in the US$ index from nearly a six month low it hit Friday last week.
• Base metals are in the black taking a break in the latest round of losses led by raising interest rates in China and increasing inventories.
• Iron ore futures are lower with the benchmark spot 62% Fe trading at $60.15/t following a five day losing streak, according to Metal Bulletin.
• Weakness in the bulk commodity prices is attributed to traders trimming their positions amid escalating borrowing costs in the Chinese market.
China C919 commercial airliner to rival Boeing is going to use more aluminium, titanium and other speciality metals
• Building factories to make commercial aircraft is a major undertaking and one which requires massive state sponsorship as well as large scale machinery and tool shops.
• China’s determination to develop production the C919 and presumably to build significant numbers of aircraft is going to absorb quantities of speciality metals, alloys and metals for the machines for manufacturing these components. It may also boost the use of metal powders for 3D printing if the Chinese opt to go this route for certain components.
• The C919 had a maiden 80-minute flight on 5th May so its still early days but this is a first step into a $2tr jet market.
• The plane is built by Commercial Aircraft Corporation of China (COMAC) a Chinese state-backed company and we suspect that state support and low costs in China will enable COMAC to undercut Boeing and Airbus to radically transform the aviation industry.
• The plane is manufactured in China except for the engines which are sources abroad. However it may still take several years to gain certification in China, the US and Europe.
• The plane can carry 158-168 passengers and COMAC is already looking to develop a wide body long-haul jet in joint venture with Russian partners.
• Preference will be given within China for the sourcing of these metals restricting their availability for export and to other internal buyers.
• If the C919 flys well and there are significant orders for its production then we can expect there to be some disruption to the supply chains of certain key metals.
• This combined with China’s increasingly strictly applied environment and health and safety policies could continue to drive prices for many speciality metals higher
• Mitsubishi and Toyota have also developed a new Regional Jet for 70-90 passengers which had its first flight in 2015. Deliveries are expected to start in 2020 using Pratt & Whitney PW1000G geared turbofan engines.
Argentina – new legislation to encourage mining expected this week
• The government is expected to sign a new federal mining agreement this week to unify legislation across Argentina this week.
• The aim is to encourage investment and to better compete with Chile and Peru which benefit from substantial taxes and employment from mining.
• Argentina has had a disparate array of punitive local regulations with 23 provinces operating a full ban on the use of cyanide.
• The government has already revoked a 5% tax on mining and energy companies and a prohibition on the remittance of profits out of Argentina by foreign mining companies.
• The question is how long will the initiatives of the Macri government survive beyond his tenure. If Argentina returns to its Peronist past then much of Macri’s good work may easily be undone.
Phillipines – new environment minister indicated more moderate stance and approval for responsible mining
• The new environment minister ‘General Cimatu’ who is now retired from the army has indicated that he can allow mining so long as it does not destroy the environment.
• General Cimatu admits he does not have enough experience in environmental conservation but is willing to learn.
• We hope the General maintains the ban on the mining and shipping of unprocessed nickel laterites which we see as unnecessarily damaging to the environment.
• We also hope the General is able to enforce international standards for environmental practices and rehabilitation.
121 Mining Investment conference – sponsored by SP Angel - 10–11 May 2017
• The 121 team are running the London 121 Mining Investment conference at No 8 Fenchurch Street in The City on 10-11 May.
• The event is for registered investment professionals, mining and exploration companies and mining analysts and brings the industry together alongside a series of investor briefings.
• 65 quality producers, developers and explorers attending / presenting
• I’m talking at 3:00 on the Thursday on: ‘UK mining outlook - A new era of UK funded exploration and production’.
• Follow link for investor passes - http://www.weare121.com/121mininginvestment-london/registration/register-investor/
Dow Jones Industrials +0.03% at 21,012
Nikkei 225 -0.26% at 19,843
HK Hang Seng +1.02% at 24,829
Shanghai Composite +0.06% at 3,081
FTSE 350 Mining +1.36% at 14,269
AIM Basic Resources -0.42% at 2,607
US – Loretta Mester, a Cleveland Fed President and an alternate FOMC voting member, supported the continuation in the gradual policy tightening during her Bloomberg interview yesterday.
• She also remained convinced that the Fed should begin to shrink the outstanding $4.5tn balance sheet this year.
• “We could probably end re-investments and not see a big impact, as long as we articulate it well,” the Mester said.
Asia Pacific region – The IMF released economic growth estimates for the region to 5.5% in 2017, up from 5.3% previously forecast in Oct/16.
• An upgrade was driven by estimates for stronger growth in China (+6.6%) and Japan (+1.2%) on the back of continued government support policies.
• Prospects “remain robust – the strongest in the world, in fact – and recent data point to a pickup in momentum”.
• The fund highlighted that the balance of risks remains “tilted to the downside” with medium term growth for the region facing “secular headwinds”.
• In particular, the IMF noted decelerating productivity growth which has hit the region.
Germany – Trade data record all time high value of exports and imports with trade balance coming in just a shy away from the strongest reading reported in March last year.
• Exports climbed 10.8%yoy to €118.2bn while imports were up 14.7%yoy to €92.9bn in Mar/17.
UK – Retail sales post the biggest increase in 11 years; although, a share of gains is likely to be attributed to retailers reluctant to raise prices attracting new shoppers, most of the increase has to do with the timing of Easter holidays.
• “Shop prices are still down overall although other items of consumer spending are increasing headline inflation and hence driving a tightening of purse strings,” the British Retail Consortium (RBC) said.
• Outlook for consumer spending remains subdued amid increasing inflation expectations and slowing wage growth.
• Retail sales (%yoy): 5.6 v -1.0 in Mar and 0.5 forecast.
France – The Bank of France forecasts growth to accelerate to 0.5%qoq in Q2/17, up from 0.3%qoq recorded in Q1/17.
• Incoming president Emmanuel Macron promised to restart growth by liberalising the nation’s labour laws and reducing taxes for the entrepreneurs.
South Korea – goes to the polls to elect a new president following the removal of Park Geun-Hye for corruption
US$1.0913/eur vs 1.0967/eur yesterday. Yen 113.61/$ vs 112.65/$. SAr 13.691/$ vs 13.474/$. $1.294/gbp vs $1.298/gbp.
0.734/aud vs 0.740/aud. CNY 6.908/$ vs 6.904/$.
Gold US$1,227/oz vs US$1,231/oz yesterday – Gold buying is forecast to climb to the highest level in four years in China in 2017 as investors reposition themselves from weakening stock and property markets and increasing tensions with North Koreans, the China Gold Association said.
• Demand could surpass 1,000t compared to 975t recorded last year.
• Gold buying has already climbed 15%yoy in Q1/17 with gold bars reported an increase of 60%.
Gold ETFs 59.7moz vs US$59.6moz yesterday
Platinum US$914/oz vs US$916/oz yesterday
Palladium US$811/oz vs US$815/oz yesterday
Silver US$16.24/oz vs US$16.34/oz yesterday
Copper US$ 5,510/t vs US$5,490/t yesterday
Aluminium US$ 1,877/t vs US$1,890/t yesterday
Nickel US$ 9,205/t vs US$9,035/t yesterday
Zinc US$ 2,629/t vs US$2,552/t yesterday
Lead US$ 2,181/t vs US$2,158/t yesterday
Tin US$ 19,800/t vs US$19,650/t yesterday
Oil US$49.6/bbl vs US$49.4/bbl yesterday
Natural Gas US$3.188/mmbtu vs US$3.237/mmbtu yesterday
Uranium US$22.65/lb vs US$22.75/lb yesterday – Rossing Uranium scheduled to close in 2025. Now is the time to plan for production to replace that lost from Rossing.
Iron ore 62% Fe spot (cfr Tianjin) US$59.5/t vs US$60.9/t
Chinese steel rebar 25mm US$540.3/t vs US$533.5/t
Thermal coal (1st year forward cif ARA) US$63.7/t vs US$65.0/t yesterday
Premium hard coking coal Aus fob US$199.4/t vs US$211.8/t
Tungsten - APT European prices $210-219/mtu vs $212-219/mtu
Lithium – scientists reveal how lithium relieves symptoms of bipolar disorder
• Scientists have worked out how lithium works on cells using the lithium response as a molecular can opener.
• The work means that lithium may be more effectively used to treat patients who respond better to lithium than other newer mood stabalizers.
• While the work is hugely important in psychiatry we don’t think it will have much impact on the market for lithium which is now dominated by the ramp up in Li-ion battery manufacturing capacity and their suppliers..
Anglo Asian Mining* (LON:AAZ) 17.8p, Mkt Cap 20m – New corporate presentation for ProActive Investor presentation tonight highlights development of new mine at Ugur
• Anglo Asian has published a new corporate presentation today ahead of a presentation tonight at a ProActive Investor forum.
• The copper and gold mining company is currently reworking its mine plan to develop new production at the Ugur discovery just 3km along from the Gedabek lease.
• The team will move people and equipment onto the development of Ugur to ensure the longer term development of the company.
• Anglo Asian is a relatively low cost gold producer with AISC costs of $703/oz in H1 2016.
• The company now operates a flotation plant to treat copper rich ores, a heap leach pad for lower grade gold ores as well as agitation leach and SARt plants for the treatment of more challenging copper gold ores. This gives the team great flexibility and the ability to maximise recovery rates from differing mineralogies.
• The company recently lowered guidance for gold and copper production for the year to 64-72koz (65.4koz in 2016) as the team moves to start mining from the Ugur discovery.
• The team will continue to drill in and around the Gedabek open pit to better understand the resource.
• A new JORC resource will be prepared for publication in Q3
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Asiamet Resources (LON:ARS) 5.2p, Mkt Cap £36m – Asiamet sells Jelai project for US$0.8m
• Asiamet Resources has sold its Jelai project to Ship Ocean Lte for US$0.8m.
• The license is currently being converted from an IUP Exploration license to a IUP production license , “an intensive process that consumes considerable time and resources”.
• “IUP” (Mining Business License) replaced the old ‘Basic Regulation on Mining Law No. 11’. The new law from 2009 is designed to ensure a continuous national development policy .
• The company is now better able to dedicate its attention to advancing the KSK and Beutong projects.
• Management also report on progress at the Beutong IUP where Indonesian Ministry of Energy and Mineral Resources (ESDM) requested further revisions to be made.
• The revised documents have since been updated and resubmitted to the ESDM and the team believe this is the final requirement prior to the grant of the Beutong IUP production license.
• Asiamet holds an attributable 40% of the Beutong project which has a measured and indicated resource of 93mt grading 0.81% copper and 0.13ppm gold, 1.97ppm silver and 97ppm molybdenum. The company is able to earn into an 80% interest.
Medusa Mining (LON:MML) A$0.355, mkt cap A$73m – Revised production guidance
Following the revised guidance issued late on Friday I caught up with Boyd Timmler this morning. Below the key points:
• Guidance for the full year was reduced from 85k-90koz to 77k-80kozs.
• This was a result of the delays they have suffered, key being the extra maintenance required for the L8 shaft which meant they could not shift as much ore out of the mine as they wanted.
• The knock-on impact affected both the installation of the new pumps and development at Level 9 which in turn meant that flooding became an issue and they did not access the very high grade ore when planned.
• Level 9 is the sweet spot of the mine with the highest grade ore / vertical metre. Since accessing it in the last week of April the head grade going to the mill has increased from just under 5g/t in the March quarter to 6.2g/t. They expect to see this head grade maintained going forward and as a result are confident they will hit the 20k-23k oz for the June quarter.
• The water pumps will be installed in the coming months with commissioning scheduled for the end of June/early July ahead of the next wet season which starts Sept/Oct time.
• The higher than normal levels of absenteeism were down to Easter falling close to Labour Day on the 1st May and workers taking extra unlogged holiday (the Philippines in majority Catholic). Given it was effectively all in the same month it had an impact on production.
• The other piece of news is that Gina Lopez the controversial Secretary of the Environment has been replaced by Roy Climatu who it appears is more mining friendly having taken a more moderate stance than Gina, which can only be good news.
• Cash wise the major capex items have all been paid for and the only big money capital items they still have are mine development and resource drilling, both of which could be slowed if absolutely necessary. They do have a small working capital facility with Metro Bank which they could extend rather than come back to the market again if necessary.
Conclusion: While frustrating to suffer more negative news in the short term, the infrastructure programme they set out last year is nearing completion and we should start to see this have a positive impact, all be it 3mths later than originally thought. The current share price offers an attractive entry point assuming no further issues over the coming months.
* An SP Angel analyst has previously visited the Co-O mine in the Philippines
URU Metals (LON:URU) 3 pence, Mkt Cap £3.4m – Apology
• On Friday we inadvertently republished an old comment on URU Metals which we had first published in 2013.
• The mistake arose because I copied an old comment over and then did not get time to write up something new in its place.
• Am sorry for any misunderstanding which may have arisen from the republishing of this comment.