Economic News
US – Q1/15 GDP growth rate has been revised downwards to -0.7%qoq from +0.2%qoq estimated previously.
• The downgrade was widely expected and was led by weaker exports, stronger imports and slower build up in inventories.
• Economic news due this week:
o Today: Apr Core PCE (+0.2%mom/+1.30%yoy v +0.1%mom/+1.3%yoy in Mar), May ISM manufacturing PMI (52.0 v 51.5 in Apr).
o Tuesday: Apr factory orders (-0.1% v +2.1% in Mar), New York manufacturing PMI
o Wednesday: May ADP employment change (200k v 169k in Apr)
o Thursday: Weekly jobless claims (278k v 282k in the previous week)
o Friday: May NFP (225k v 223k in Apr), unemployment rate (no change from 5.4% in Apr), average hourly earnigns (+0.2%mom/+2.2%yoy v +0.1%mom/+2.2%yoy in Apr)
China – Manufacturing PMI ticked up to 50.2 in May from 50.1 in Apr, according to official estimates.
• Market expectations were for a 50.3 reading.
• The index has been ranging around 50.0 in the last seven months implying little to no growth in the sector.
• HSBC/Markit measure of manufacturing PMI based on a survey completed by private companies showed the sector remained in contraction through May (49.2 v 48.9 in Apr).
• “Sustained job cut, ongoing destocking activities and reduced purchasing activity all suggest the sector may remain in contractionary territory as we head into mid-year,” the report said.
• “The latest survey data suggests that more stimulus measures may be required to help boost domestic demand and recover some growth momentum.”
China government warn population of impact of slower growth
India – Manufacturing is reported to have expanded at the highest rate in four months in May (52.6 v 51.3 in Apr).
• The sector has been growing since the end of 2013, with the industrial PMI holding above 50.
Spain – Manufacturing increased at a faster rate in May hitting the strongest reading in years.
• Manufacturing PMI: 55.8 in May v 54.2 in Apr and 54.5 forecast.
Greece – Alexis Tsiparis criticised other parties to negotiations saying creditors are unwilling to reach a compromise.
• Greek leader accused bailout monitors of making “absurd” demands.
• Earlier last week, the IMF granted Athens a permission to delay repayments of €1.6bn owed to the fund this month.
• Previously, the government was supposed to complete a €300m payment as early as this Friday.
Australia – non mining investment falls to new low level
• Australian non-mining investment is expected to fall to just 3.9% of GDP, a 40-year low according to the latest ABS survey
US$1.0900/eur vs 1.0962eur yesterday. Yen 124.04/$ vs 123.82/$. SAr 12.272/$ vs 12.155/$. $1.524/gbp vs 1.528/gbp
0.765/aud unch vs 0.765/aud
Commodity News
Precious metals:
Gold US$1,188/oz unch vs US$1,188/oz last week
Platinum US$1,108/oz vs US$1,116/oz last week
Palladium US$778/oz vs US$781/oz last week
Silver US$16.71/oz unch vs US$16.71/oz last week
Base metals:
Copper US$ 6,022/t vs US$6,100/t last week - Concentrate prices have come off since mid-May as smelters are turning to spot market to cover contractual shortfall.
• Weaker contractual availability is attributed to mine-side production losses, particularly at Sierra Gorda and Caserones.
• The MetalBulleting Copper Concetrates Index hit a 20-month low of US$91.20/9.12c on Friday last week.
• Market sources report BHP Billiton tendered two shipments from Antamina (Aug/Sep and Q4) for US$80-81/8-8.1c per dmt.
• On mine supply front, Chile’s copper production was slightly off in Apr (-0.7%mom/-0.1%yoy).
• Weaker production is “explained partly by the storm that occurred in late Mar in the north of the country, whose extended until Apr,” the national statistics institute said.
• Production is up 2.4%yoy in the first four months of the year so far.
Aluminium US$ 1,738/t vs US$1,764/t last week
Nickel US$ 12,540/t vs US$12,740/t last week
Zinc US$ 2,160/t vs US$2,218/t last week
Lead US$ 1,931/t vs US$1,977/t last week
Tin US$ 15,640/t vs US$15,490/t last week
Energy:
Oil US$65.0/bbl vs US$63.3/bbl last week
Natural Gas US$2.649/mmbtu vs US$2.715/mmbtu last week -
Uranium US$35.10/lb sharply unch vs US$35.00/lb last week
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$59.5/t vs US$60.2/t – last week
Thermal coal (1st year forward cif ARA) US$57.8/t unch vs US$57.4/t last week
Seaborne hard coking coal index (quarterly) US$109.5/t unch vs US$109.5/t
Other:
Tungsten APT European US$257.5/mtu unch vs US$257.5/mtu
FeCr lumpy Charge 52% Cr US$1.08/lb vs US$1.08/lb last week – Chinese stainless steel mills will be releasing their monthly offer prices this week.
• Estimates are for mills to announce a CNY 50 per tonne cut, equivalent to a reduction made in early May, MetalBulletin reports.
Company News
Aureus Mining (LON:AUE) 30.7 pence, Mkt Cap £112.7m – First Gold Pour at New Liberty Mine
• The company has achieved first gold pour at New Liberty as expected.
• Hot and cold commissioning continue as scheduled.
• Full scale commercial production is expected in Q3 2015.
• All civil works now completed with phase 1 of TSF has been completed.
Conclusion: First gold pour has been successfully achieved at the New Liberty Mine and we look forward to further news flow through the ramp up phase. It is good to see Aureus entering into production phase soon to be followed by Metals Exploration giving more choice in the AIM market for junior gold production companies.
Bacanora Minerals (LON:BCN) 85.5pence, Mkt Cap £72.3m – Q3 results
• Bacanora Minerals Q3 financial results show a net loss for the quarter of C$98,296 bringing the loss for the 9-months to C$1,706,533
• Interest income for the quarter came to C$18,108.
• Cash holdings were C$11,649,436 at end March up from C$1,115,687 a year earlier
• The rest of the statement appears to repeat news which has been previously released on the development of the mineral resource at the Somora lithium project.
Beowulf Mining (LON:BEM) 1.5 pence, Mkt Cap £5.7m – First Quarter Update
• The company continue to pursue the exploitation concession for Kallak North.
• The company reported a loss before and after tax of £154,000 and held £388,000 in cash at the end of the period.
Savannah Resources (LON:SAV) 2pence, mkt Cap £4.6m – Mining royalty rates increase to 10% from 5% in Oman
• Savannah Resources is to apply for an exemption to the new higher mining royalty rate in Oman.
• Royalties are to rise to 10% from 5% from 1 July 2015 in accordance with a Royal Decree.
• Rates had been previously reduced to 5% from 10% by decree in 2010 so the state is in effect just putting rates back to where they were.
• Savannah also expects to receive a five year tax holiday for any new mine in development and corporation tax of 12% thereafter
• The Kingdom of Oman appears to have a headline royalty rate but is thought to negotiate individual rates to help encourage investment where necessary
Sierra Rutile - (LON:SRX) 29.7 pence, Mkt Cap £154.7m – Scoping Study for Sembehun Deposit
• The Sembehun group of deposits is 45 km north of Sierra Rutile’s existing operations.
• They represent the largest resource at 3.6 Mt of rutile within the company’s current resource.
• A scoping study has been completed to mine the deposits using dry mining instead of dredge mining.
• The scoping study looked at a project to construct two 500 tph concentrator units and mining through an owner-operated mining fleet.
• The concentrate would be processed through an existing mineral separation plant with no capacity upgrade expected.
• Total capex is projected at US$126m with US$58m allocated to the construction of the concentrator units.
• Total operating costs for the first five years expected to be US$317/t for ROM production of 7 mtpa with average rutile production of 74 ktpa.
• The life of the project is expected to be 19 years with a construction period of 18 months.
• The parameters of the scoping study generated an after-tax IRR of 39% and after tax NPV of US$207m.
Conclusion: The price assumptions used to assess the economic returns of the project are not disclosed. Overall operating costs, however, are reasonable giving scope for reasonable margins even at current prices. The use of an existing mineral separation plant should help with project economics.