· China’s manufacturing contracted last month, prompting a sell off in commodities.
· In contrast the US labour market appears to be improving – if slowly.
· Private Sector payrolls increased by 206,000 according to figures released yesterday.
· Focus will be on the Nonfarm payroll figures tomorrow. Expectations are for an increase of 125,000.
· German PMI Manufacturing was inline with expectations at 47.9 – Anything below 50 indicates contraction.
· UK November PMI came in ahead of expectations at 47.6. The figure beat expectations but is still on the wrong side of the equation.
China – China’s manufacturing recorded the weakest performance since the 2009 according to official figures released today.
· The PMI compiled by the China federation of logistics and purchasing dropped to 49 last month.
· A reading above 50 indicates expansion.
· The HSBC manufacturing index paints a even more depressing picture – 47.7 compared to 51 in October.
· Yesterday it emerged that China would reduce the reserve requirements for Banks for the first time since 2008.
· From December the 5th Reserve Ratio’s will decline by 50 basis points.
· The move is a considerable step by officials and indicates that the Chinese are willing to lead by example and encourage substantial global intervention.
Europe – Markets soared yesterday on the back of the Central Bank action
· Spain and France will auction €8.25bn of bonds today
· The spread for Spanish bonds compared to German was 395 basis points today.
· If there is any problem getting the auction away or yields climb to unsustainable levels it will likely intensify the crisis and brush away the optimism of yesterday.
US – Expectations ahead of a report due for release later today suggest that Manufacturing in the US probably grew in November at the fastest pace in 5 months.
· Estimates are that the ISM expanded to 51.8 last month.
· Corporate investment on new equipment, has laid the groundwork for a pickup in production.
· The Fed yesterday led the global move to ease borrowing costs for financial firms.
· Expectations are increasing that the Fed could use additional tools in the coming months including cutting the US discount lending rate to aid recovery.
· The dollar is up this morning as the markets react to the poor figures emerging from China and risk aversion increases.
Japan – Vehicle sales increased by 24% yoy according to figures released today.
· Yields on Japan’s benchmark 10yr bonds reached a four month high yesterday.
Australia – Building approves fell by 10.7% mom according to official figures
Brazil – The country’s central bank has indicated that it will review and likely cut interest rates at by 0.5% as it struggles to stem the fallout from the European debt crisis hampering the economy.
· According to policy makers “a moderate rate cut can mitigate the effects of the worsening global economy without putting the inflation target at risk.
Egypt – The Muslim Brotherhood claims that it is on track for a historic election victory. The Group claims that it is set to win 40% of the ballots countered so far.
Philippines – The country’s officials kept its benchmark interest rate unchanged for a 5th meeting as persistent inflation remains.
Thailand – The country’s inflation rate held above 4% for an 8th month in November – as food prices rose on the back of the flooding.
Zambia – Officials have announced that they will not re-introduce a mine windfall tax that was previously abolished in 2009 – citing the potential implications it could have for negatively impacting the economy.
Currency – The yen was in touching distance from a two week low against the euro as demand for safe haven investments declined.
· The dollar is up today against its most traded counterparts.
US$1.3457/eur vs 1.3294/eur yesterday. Yen 77.68/$ vs 77.92/$. SAr 8.142/$ vs 8.424/$. $ 1.569/gbp vs 1.556/gbp
Gold US$1,745/oz vs US$1,718/oz yesterday – Gold is slightly off this morning after a strong advance in the previous session after major central Banks’ coordinated action to boost US$ liquidity.
· Top 3 Chinese jewellers increased their purchases of gold from the exchange to 90t in the first 11 months this year. The total delivery might rise 10-15%yoy in 2011 according to chairman of the Shanghai Gold & Jewellery Trade Association.
· AngloGold Ashanti announced a fatality after a “fall of ground” accident at its Kopanang mine in South Africa.
· Newmont Mining postponed its construction activities at the Conga project due to ongoing protests in Peru. It is the 4th company this year to suspend investments in the region.
· Harmony Gold Mining, Africa’s 3rd biggest gold producer, is “unlikely” to link its dividends to spot prices company’s CEO said.
· Gold holdings in ETPs advanced towards a record 2,356t yesterday.
· SPDR gold trust holdings increased to 1,299t (41.749moz) value US$72.869bn from1,297t (41.710moz).
Platinum US$1,555/oz vs US$1,529/oz yesterday
Palladium US$614/oz vs US$582/oz yesterday
Silver US$32.73/oz vs US$31.66/oz yesterday
· HSBC increased its silver prices forecasts to US$34 in 2012 and US$32 in 2013 supported strong retail demand for coins and small bars. Silver is forecasted to average US$28 in 2014 and US$25 in 2015.
Rhodium US$1,590/oz vs US$1,630/oz yesterday
Copper US$ 7,853/t vs US$7,355/t yesterday – Copper rallied to US$8,000 yesterday as world central Banks lowered interest of US$ liquidity swap lines and China lowered reserve requirement ratio for Banks by 50 bp. Prices are off this morning as China’s manufacturing contracted in Nov for the first time since 2009.
· Miners at the Cerro Verde mine operated by Freeport-McMoRan in Peru may hold a 48-hour strike this month if no wage revision takes place according a union official.
· Codelco said Copper prices will be supported by Chinese demand led by its spending on infrastructure projects.
· Codelco filed a court request for information on Anglo American’s sale of a stake in Chilean assets to Mitsubishi Corp as the company prepares to take a legal action against a US$5.39 deal.
Aluminium US$ 2,094/t vs US$1,990/t yesterday
· Automakers’ plans to double fuel consumption efficiency to 54.5 miles per gallon by 2025 may lead to a US$157bn investment in turbochargers and aluminum body panels.
Nickel US$ 17,420/t vs US$16,902/t yesterday
Zinc US$ 2,029/t vs US$1,929/t yesterday
Lead US$ 2,089/t vs US$2,001/t yesterday
Tin US$ 20,451/t vs US$20,200/t yesterday
Oil US$109.13/bbl vs US$110.51/bbl yesterday – Investors take confidence after Central Banks announce a co-ordinated plan to improve lending.
· U.S. crude oil for January delivery hits U.S.$100.82bbl
· Tensions mount for oil rich Iran as European foreign ministers meet today to discuss imposing an oil import embargo on Iran
· The $1 billion bet by Cairn Energy has failed to find commercial quantities of oil in its exploration in the Arctic area off Greenland.
· Unless new risk takers can be found there’s unlikely to be any exploration drilling next year.
Natural Gas US$3.568$/mmbtu vs US$3.633/mmbtu yesterday
Uranium – US$51.75 vs US$51.75 yesterday
Coal – Australia’s Queensland government approves the expansion of Abbot Point coal export port.
· The A$ billion development will increase capacity in order to meet the demand from producers
· Indian company Aditya Birla Group have purportedly made a bid for Australian coal miner New Hope.
· New Hope has no debt and A$1.6bn in cash with a market value of circa A$5bn
· The deal would give control of the Acland thermal coal mine and an export terminal in Queensland.
· Indian companies have been increasing there overseas assets as supplies in the domestic market deplete.
· China increased retail and wholesale electricity prices for the first time in six months and said it will cap the cost of power- station coal in a move that may reduce outages in coming months.
Steel – Japan’s steelmakers plan to cut total production by 890,000t in the final quarter of 2011 according to Nippon Steel. Total nation’s output is expected to equal 27.3Mt this quarter compared with an Oct forecast of 28.2Mt.
· Husab is expected to produce 15mlb of U308 per annum through open pit mining.
· Currently the project has a resource in excess of 500m lbs.
· Solomon Gold has increased its gold equivalent resource at the Rannes project in Australia to 812,000oz from 675,779oz.
· The Inferred mineral resource at Rannes now runs at 25.5mt grading 1g/t equivalent gold with a gold to silver ratio of 1:40. The silver value is around $1,280/t so it not quite equal to the gold value within the ore.
· A 0.3g/t gold equivalent cut-off grade is used and could apply to simple bulk tonnage open pits.
· Examination of the maps and data given in the press release indicate that larger scale, near surface, open pits may be possible for the project in time and given a beneficial operating cost environment.
· The Rannes resource upgrade is made up of an inferred resource increase at the Kauffmans prospect of 102,000oz and Crunchie at 34,000oz. The two prospects are within 5km of each other making a centralised processing plant a likely option with potential to include other gold occurrences into the operation if shown to have sufficient grade and scale.
· Management highlight that the total project discovery cost on a per ounce basis is just A$6.70/oz, a good figure by today’s standards.
· Drilling is relatively shallow with drilling down to just 170m depth. The implication is that further gold resources may lie below this level although their economic recovery may be questionable at current grades.
· Crunchie: 6.9mt grading 1.5g/t
· Kauffmans: 15.5mt grading 0.8g/t.
Conclusion: Solomon Gold are delivering ounces as promised in Australia. The prospects were brought into the portfolio to diversify the portfolio to help during the slower drilling campaign in the Solomon Islands. Work is ongoing in the Solomon islands which is more difficult to interpret geologically and where recent results are enticingly tempting from an exploration perspective.
Solomon Gold is presenting at next week’s Mines & Money conference in London
* Fairfax acts as broker to Solomon Gold
· The Moteke Dyke Prospecting License comprises a 23km2 (9km by an average 2.5km) area for a period of 2 years effective from 28th Nov 2011.
· The License is located 10km of the company’s Lemphane kimberlite project and 23km of Letseng mine operated by Gem Daimonds.
· The License is centred on a significant sub-vertical kimberlite dyke. The dyke is accessible and has been traced over at least 1km and with an average width of more than 1m.
· The area has been mined previously by artisanal workers.
· Exploration activity in the area is expected to commence in the remainder of 2011.
Mining this week:
Rangold Resources (LON:RRS) – Production downgrade on Tongon and other mines
Sable Mining (LON:SBLM) – Kakoulima Project Update