Economic News
US – Q1/15 economic growth has been revised led by a stronger consumer spending than previously estimated.
• Third and final reading of the Q1/15 GDP growth showed a 0.2%qoq decline versus 0.7% fall included in the previous announcement.
• Consumer spending has been revised up to +2.1%qoq versus the 1.8%qoq increase reported previously.
• Economic news due today:
o May PCE core (+0.1%mom v +0.1%mom in Apr), Weekly jobless claims (273k v 267k in the previous week), Jun Markit services PMI (56.5 v 56.2 in May)
China – The government is planning to invest CNY 500bn (US$80bn) in 193 major domestic aviation projects, according to the nation’s regulator.
• The plan is to increase the number of airports from current c.200 to 240 by 2020.
• The government continues with de-regulation of the banking sector suggesting to remove the 75% loan-to-deposit cap ratio for commercial banks.
• New legislation is expected to boost credit growth and provide additional economic stimulus.
• The law limiting lending to 75% of deposits as been in place since 1995.
China – Ever wondered why you got sick when travelling in China
• It emerges that traders have been selling meat which has been frozen for 40 years
• Worse still, the traders had allowed the meat to defrost in transit to save on cost before refreezing the meat before delivery.
• The authorities have seized some $0.5bn worth of meat this month with some dating back to the 1970s
• 40-year old beef, pork and chicken wings have entered the country through the China/Vietnam border.
• The meat has then been transported in unrefrigerated trucks to save costs and refreeze it several times before it reached customers.
• After being refrozen, the meat has then been on sold to retailers, supermarkets and restaurants across the country.
• Customs reckoned that one-third of all meat in the largest wholesale market in Changsha was found to be illegally imported
Greece – Alexis Tsiparis and troika fail to reach an agreement.
• Both sides are reported to resume talks today with a group of eurozone finance ministers on standby ready to finalise the deal once creditors agree the list of proposed reforms.
• As IMF deadline approaches, Greece risks to run out of time to legislate all economic reforms needed to extend the EU bailout programme.
• One particular issue with the latest proposal, was a lack of reforms in the pension system as IMF pressed for an increase in retirement age and eliminating exemptions that allow people to retire early.
South Africa – is busy doing its best to kill off parts of its mining industry
• The nation should be one of the world’s best destinations for mining with so much expertise in country and so many experienced miners at hand
• ESKOM power tariff rises, BEE legislation and strike action are just a few of the additional challenges presenting to miners in South Africa these days
• ESKOM’s latest application for an effective 25.3% increase in tariffs including the 12.68% already granted for 2015/16 is going to cut margins further at a time when miners are under pressure from lower commodity prices
• If ESKOM gets approval for the tariff increase then its power costs are going to be significantly higher than some other commodity producing nations and is surely another nail in the coffin of a once great South African mining industry
US$1.1196/eur vs 1.1221/eur yesterday. Yen 123.73/$ vs 123.87/$. SAr 12.124/$ vs 12.155/$. $1.570/gbp vs 1.580/gbp
US$0.774/aud vs0.776/aud
Commodity News
Precious metals:
Gold US$1,175/oz unch vs US$1,177/oz yesterday - ‘IS’ Islamic State is minting gold and silver coins in its ‘caliphate’
• The terrorist group claims the coins are free from the ‘Satanic’ global economy
• The new gold dinars are said be basing on the currency of the Caliphate of Uthman in 634 CE
Platinum US$1,076/oz vs US$1,071/oz yesterday – Amplats cuts >400 jobs
Palladium US$695/oz vs US$703/oz yesterday –
Silver US$15.85/oz vs US$15.86/oz yesterday
Base metals:
Copper US$ 5,696/t vs US$5,767/t yesterday –
Aluminium US$ 1,710/t vs US$1,726/t yesterday
Nickel US$ 12,675/t unch vs US$12,885/t yesterday
Zinc US$ 2,034/t vs US$2,058/t yesterday –
Lead US$ 1,784/t vs US$1,806/t yesterday
Tin US$ 14,885/t vs US$15,270/t yesterday
Energy:
Oil US$63.7/bbl vs US$64.8/bbl yesterday
Natural Gas US$2.758/mmbtu vs US$2.743/mmbtu yesterday
Uranium US$36.75/lb unch vs US$36.75/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$62.70/t vs US$62.80t –
Thermal Coal $59.9 unch vs $59.8 cif ARA Europe
Tungsten - APT European prices price $225-230/mtu on Friday vs $225.3/mtu
Lithium – 24M, a lithium technology spin off from MIT in the US reckons it has come up with a new lower cost method of producing lithium batteries
• The group, ‘24M’, led by Yet-Ming Chiang, a leading authority on Lithium-ion technology, and has re-engineered the construction design and production process for lithium-ion batteries
• The new ‘semisolid flow’ lithium-ion cell holds about 5x more material between each layer within the battery cell.
• ‘24M’ reckon they can build lithium-ion battery plants for just $11m a unit enabling the rapid development of the industry within the US
• The cost of the batteries could also fall to less than $100/kWh once the process is developed by 2020
Company News
Amur Minerals (LON:AMC) 25.8p, Mkt cap £112m – Mining license payment completed
• The Company completed the acquisition of the mining license for the flagship 100% owned Kun Manie polymetallic project.
• The “Detailed Exploration and Production License” covers 20 years through to Jul/35 with an option to extend the license if additional mineralisation is discovered.
• The 23.6m RUB payment (c.US$0.4m) was made to Dalnedra, a subsidiary of Rosnedra.
• As previously announced, the Company is now moving to 6,000m infill drilling programme at Flangovy and the metallurgical test works.
BlueRock Diamonds* (LON:BRD) 21.5 pence, Mkt Cap £6.8m – Operational Update
• The company has sold 116 carats produced during May and the first week in June for US$440/carat.
• This is higher than the valuation achieved during trial mining where 575 carats were sold at US$248/carat.
• The 116 carat parcel included a 4.7 carat stone which achieved a prices of US$3,885 per carat.
• A new 80 tph plant is currently being optimised to achieve full capacity.
Conclusion: The company are finding some nice stones in the small packages being recovered. The 4.7 carat stone accounted for around 36% of sales achieved for the 114 carats sold from production in May and 1st June. This has boosted the valuation being achieved which is running at a higher rate than prices achieved during trial mining.
We look forward to further news flow on operations at the plant and the timing to deliver larger packages of stones.
*SP Angel acts as Nomad & Broker to BlueRock diamonds.
Glencore has sold the last of its stake in the giant $5.9bn Tampakan project in the Philippines
• Glencore’s stake has been sold to Indophil Resources which is now a wholly-owned subsidiary of Alsons which is based in the Philippines
Wolf Minerals (LON:WLFE) 20 pence, Mkt Cap £162m – Wet Commissioning Underway at Hemerdon
• First ore has been put through the plant as part of the wet commissioning process.
• Contractors are expected to complete the works and hand over the plant to the company in August 2015.
• 100,000 tonnes of ore has been stockpiled available to be loaded on to the crusher and for plant commissioning.
• The first stage of the tailings facility has been completed to receive waste once processing starts.
Conclusion: This project is being delivered on time and on budget and the management team and EPC contractors are to be congratulated in their ability to deliver this.
Production is going into a weak environment for tungsten prices which have been trading below US$250/mtu. While it feels as if prices are trading at the bottom there is little visibility on what is driving the weak prices at present. The lifting of Chinese export quotas has been in the market for some time with the premium between Chinese and European prices narrowing. Perhaps the market is anticipating the new supply from Hemerdon and in 18 months to 2 years from Barruecopardo which is now fully funded. The Cantung mine has gone off line in this low price environment and could act as a swing producer but demand needs to return to the market for prices to recover from here. Prices are now likely to drive performance of the tungsten players rather than delivery of volumes.
Vale to go ahead with the base metals business spin off only at “appropriate” nickel and copper prices, the Company said.
• “The idea of the IPO is to create value; it was never thought of as a way of raising cash.”
• The Company is considering to float around 25-30% of the unit.
Stratex International plc (LON:STI) 1.5p, Mkt cap £7m – Altintepe project construction progressing following delays from severe weather
• Stratex has provided an update on progress at its 45% owned Altintepe gold project in Turkey where unusually severe weather earlier this year has delayed progress on construction of a 30-40,000oz pa open pit gold mine.
• Construction is now progressing well and is expected to be completed in late August.
• Initial gold production is now forecast in late Q3 2015 ramping up to the design rate of 30-40,000oz pa over the following months.
• The project development is being funded by Stratex's local Turkish partner, Bahar Madecilik, which has financed US$39m of constructon.
• Conclusion: After delays in completion due to weather, Altintepe now looks on course to produce its first gold by the end of September. The outcome of challenges to the environmental assessment are not yet known but in the meantime they are not impeding progress on the site.