Gold – Greece is close to default on €360bn of debt and gold prices are doing nothing
• Investors are wary of the impact of a rise in US interest rates and strengthening US dollar
• Greece needs gold reserves now more than ever but the Germans nicked it during WWII
• Greece may move to buy gold to support its new currency following its Grexit
Economic News
Greece – Grexit coming as Greece sinks under €360bn of total government debt
No progress in negotiations over the release of the €7.2bn to Greece in bailout funds weigh on the market sentiment.
• Francois Hollande said there is “little time” to prevent Greece from leaving the Eurozone.
• Peripheral Eurozone debt rates climb on the back of a potential Greek default. Portuguese, Spanish and Italian bonds all weakened early today.
o We expect the Greek government to introduce a parallel currency quite soon in order to manage its default on its Euro-denominated debt
o Policy makers appear to have given up negotiating with the Greek government
o Creditor nations have asked for cuts in Greek government expenditure of around 0.5%pa of GDP more than the government is prepared to deliver according to a BBC report
o Greece owes €56bn to Germany, €79bn to France and Switzerland, €38bn to the European Union, €45bn to Eurosystem SMP, €15bn to the IMF and €111bn to everyone else according to various reports.
US – Industrial production unexpectedly fell 0.2%mom in May as weak commodity prices weighed on the oil sector.
• This compares to +0.2%mom increase forecast and a revised 0.5%mom contraction in Apr.
• Worse than numbers come ahead of the Fed momentary policy meeting starting today.
EU – European car sales growth slowed to the weakest pace in nearly two years due to fewer selling days in May.
• Passenger car sales in the EU climbed 1.3%yoy, down from the 6.9%yoy increase recorded in Apr.
• May advance marked the 21st consecutive month of growth, according to the European Automobile Manufacturers Association.
• Auto registrations benefited from growing consumer confidence, lower oil prices and an expanding regional economy.
• Market commentators note, registration numbers may be affected by so called “self –registration” when auto dealers sell vehicles to themselves to categorise them as used cars and offer at steep discount.
• S&P rule book says if Athens miss its Jul and Aug payments to the ECB it will not qualify as a default given the difference between the classification of the lender.
• Non-payment to an official body as opposed to commercial creditor does not constitute a default.
Russia – The central bank cut the benchmark rate by 100bp taking it down to 11.5%.
• This is the fourth cut this year from 17% set in Nov on the back of a quick depreciation in the Russian rouble against the dollar.
US$1.11292/eur vs 1.1243/eur yesterday. Yen 123.55/$ vs 123.51/$. SAr 12.443/$ vs 12.398/$. $1.561/gbp vs 1.553/gbp
US$0.773/aud vs0.772/aud
Commodity News
Precious metals:
Gold US$1,182/oz unch vs US$1,179/oz yesterday
Platinum US$1,089/oz vs US$1,085/oz yesterday
Palladium US$736/oz vs US$734/oz yesterday – prices continue to fall
Silver US$16.05/oz vs US$15.94/oz yesterday
Base metals:
Copper US$ 5,784/t vs US$5,812/t yesterday –
Aluminium US$ 1,710/t vs US$1,716/t yesterday
Nickel US$ 12,750/t vs US$12,925/t yesterday
Zinc US$ 2,091/t vs US$2,099/t yesterday
Lead US$ 1,815/t vs US$1,823/t yesterday –
Tin US$ 14,610/t vs US$14,550/t yesterday
Energy:
Oil US$64.1/bbl vs US$63.6/bbl yesterday
Natural Gas US$2.914/mmbtu vs US$2.827/mmbtu yesterday
Uranium US$36.50/lb vs US$36.25/lb yesterday
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$64.25/t unch vs US$63.7/t –
• Chinese port iron ore stocks fall 20mt to 79mt in mid June despite relatively consistent daily offtake volumes.
• We assume anticipation of a pullback in steel production and tightening liquidity to have led traders to a more conservative approach to stockholdings.
Thermal Coal $58.6 vs $58.6 cif ARA Europe – Strong demand from India for cleaner coals driving Australian thermal coal production
Tungsten - APT price in China at $232.5/mtu vs $230-240/t now running ahead of European prices of $230-235/t
Company News
Amplats Zar 28,988, Zar 78,175m – Helping use of platinum fuel cells
• The company has been involved in installing hydrogen fuel cell technology as standby power in some schools in Eastern Cape.
• This is part of a pilot project led by the Dept of Science and Technology.
• Amplats is sponsoring the three platinum based fuel cell systems including installation, ongoing maintenance and operations.
• Air Products did feasibility work on the systems and put up the hydrogen storage facilities according to international standards.
Conroy Gold & Natural Resources (LON:CGNR) 0.825p, mkt cap £3.6m – Identification of a new gold target in Co Monaghan
• Conroy Gold & Natural Resources reports that it has identified an “extensive (700m by 300m) gold-in-soil anomaly near Rockcorry in County Monaghan”.
• The Rockcorry anomaly is located approximately 7 km southwest of Conroy Gold’s Glenish target and some 14 km south west of the company’s Clontibret deposit “where the Company proposes to develop its first gold mine in the area.”
• The anomaly contains four gold-in-soil samples grading over 20 ppb (parts per billion) and a further 5 samples recording over 10 ppb gold. It is not clear how many samples were recovered in total as a result of this work, however, we would expect that, encouraging as they are, 9 samples would not represent a major proportion of the total number of samples required to outline an anomaly measuring 700m by 300m.
• The company considers that this new anomaly adds further weight to its guiding geological model of a 50km long trend of gold mineralisation extending along the Orlock Bridge Fault from Co Armagh in Northern Ireland, across the border into Cavan and Monaghan in the Irish Republic.
Conclusion: Conroy continues to locate additional sites of interest within its extensive exploration area. The proposed Clontibret mine development has the possibility of moving the company from an explorer to a miner – we consider that although further encouraging exploration results are welcome, the focus should remain on advancing Clontibret towards production.
Kefi Mnerals* (LON:KEFI) 0.875p, Mkt Cap £15.3m (fully diluted) – Placing raises £2.9m at 0.8p/s
• Kefi Minerals has raised £2.9m in a placing to professional investors at 0.8 pence per share.
• Placing proceeds are primarily intended to fund the Company through the next phase of its development with the majority of funds to be expended on progressing the flagship Tulu Kapi project in Ethiopia and on further exploration..
*SP Angel act as Nomad to Kefi Minerals. An SP Angel analyst has visited the Tulu Kapi mine site with Kefi Minerals.
Metminco (LON:MNC) 0.325 pence, Mkt Cap £7.8m – Update on Los Calatos
• The company have remodelled the resource at Los Calatos using existing information from drill data used to compile the 2013 JORC resource done by SRK.
• The original mineral resource at a 0.15% cut off copper equivalent grade provided for an open pittable mineral resource of 493mt at 0.38% copper and 0.023% Mo.
• The open pit was to be at a vertical depth of 700m with underground bulk mining operation for 926mt at 0.51% copper (0.35% copper equivalent cut off grade).
• Underground mining was to start at an elevation of 2,300m.
• The re-logging of core is said to have improved the spatial and temporal development of the main geological components of the porphyry complex.
• The most significant development has been the delineation of a series of laterally and vertically persistent hydrothermal breccia which host the high grade mineralisation.
• These hydrothermal breccias are said to extend from surface to depths in excess of 1,800m.
• The new modelling has used a cut off grade of 0.5% copper to give a measured and indicated resource of 137 Mt at 0.73% copper and 434 ppm Mo.
• The inferred resource is 216 Mt at 0.78% copper and 244 ppm Mo.
• This company expect this work to form the basis of a mine plan to mine smaller higher grade tonnages.
• At a cut off grade of 0.75% the hydrothermal breccias have a mineralisation of 126 Mt at 1.03% copper and 351 ppm Mo.
• This is the copper grade required for the head grade to deliver targeted tonnages of 50,000 tonnes a year based on ROM of 6 mtpa.
• Capital costs are expected to come down by 50% with copper recoveries of 92%.
Conclusion: Increasing the cut off grade to delineate higher grade mineralisation is the way forward with this deposit where previous lower cut off grades was too ambitious against the current copper price outlook. We look forward to further detail on capex and opex based on a new mine plan.
Thor Mining (LON:THR) 0.09 pence, Mkt Cap £2.7m – Placing to raise £525,000
• The company has raised funds to progress their Spring Hill project and the Molyhill tungsten project.
• The company are looking to test tungsten mineralisation at selected targets close to Molyhill.
W Resources (LON:WRES) 0.32 pence, Mkt Cap £10.2m – La Parilla Definition Study
• The company has announced the completion of its “Definition Study” for the development of the La Parilla tungsten deposit north of Seville in Spain where it has been processing tungsten tailings from the former mining activity on an intermittent campaign basis.
• W Resources has developed a phased approach to bringing the main hard rock deposit to production with an initial US$16m “fast track mine development” designed to produce around 1200-1300 tpa of tungsten concentrates and 110 tpa of tin concentrates from mid 2016.
• The tailings production should have enabled W Resources to develop market links with concentrate purchasers and demonstrate the suitability of the La Parilla product.
• The second phase, costing an estimated US$36m, is designed to increase production to over 5,000 tpa of tungsten concentrates and approximately 440 tpa of tin concentrates in 2017/18.
• The company estimates that the second phase project generates an after tax NPV of $124m using a 10% discount rate and an IRR of 70%.
• The La Parilla project benefits from its amenability to low-cost shallow open pit mining and the relatively coarse size of the mineralisation which facilitates the rejection of waste rock early in the treatment process thereby reducing the required size of the downstream processing equipment and hence the necessary capital.
Conclusion: W Resources has developed a comprehensive plan to develop the La Parilla tungsten/tin deposit which goes a long way to minimising development risks and the required capital. The tailings retreatment programme is likely to have provided considerable practical insight into the metallurgical and material handling characteristics of the mineralisation and will be available to treat production from the fast track mine development. This should provide additional operating know-how which may be applicable for the larger plant required for the second phase development.