Greek – questions?
• Can a lender, the EU / ECB, force a government to accept a bailout even if the people / referendum and possibly the government reject it.
• Will the ECB be able to ensure the €86bn of bailout funds are properly allocated / spent.
• The last bailout for Greece turned more into a bailout of the French and German banks which had lent funds to the Greek government.
• We struggle to see how the Greek government is going to fundamentally reform its taxation regime with so much opposition and so little local support for reform.
Economic News
China – New credit growth outpaced forecasts by nearly a third as the PBoC measures are feeding through the banking sector.
• Total financing increased to CNY 1.86tn compared with CNY 1.22tn in May and CNY 1.40tn forecast.
• New CNY loans hit 1.27tn v 0.9tn recorded in May.
• The PBoC cut the benchmark rate four times since Nov last year as well as cut the reserves requirement ratio.
• Q2 GDP numbers are due tomorrow with estimates for a +6.8%yoy reading.
Iran – The government agreed a breakthrough deal to put limits on Tehran’s nuclear activities for the next decade in exchange for a reversal of international economic sanctions.
• Oil prices are down c.2% this morning on the back of the announcement.
• The deal marks the end of two-week discussions between Iran and the US, Russia, France, China, the UK and Germany.
• The US and Iran will be holding votes in respective parliaments to formalise the agreement.
Greece – Eurozone members are considering options to release short term funding to Greece ahead of the €3.5bn repayment due to the ECB next Monday.
• The Eurogroup is looking to disburse €12bn in short-term financing for Greece.
• The proceeds may be source from the European Financial Stability Mechanism fund with €11bn currently remaining in the €60m EU-wide rescue pot.
• Other options include bilateral loans from the Eurozone members, lending €3.5bn in profits on Greek bonds held by the ECB and securitising publicly-held Greek assets.
• The government has missed another payment to the IMF this Monday (€456m) which brings the total to €2bn currently in arrears to the fund.
• Conditions of a larger €86bn bailout include a cut in pensions, VAT increase, limits on collective bargaining agreements and a number of other spending constraints. In addition, €50bn in public assets will need to be privatised under the supervision of foreign lenders.
• The reform package should be taken through parliament by Wednesday.
US$1.1030/eur vs 1.1059/eur yesterday. Yen 123.36/$ vs 123.47/$. SAr 12.439/$ vs 12.473/$. $1.548/gbp vs 1.552/gbp
US$0.743/aud vs0.742/aud
Commodity News
Precious metals:
Gold US$1,154/oz vs US$1,155/oz yesterday –
Platinum US$1,028/oz vs US$1,029/oz –
Palladium US$659/oz vs US$652/oz –
Silver US$15.36/oz vs US$15.41/oz –
Base metals:
Copper US$ 5,527/t vs US$5,572/t –
• Chinese copper imports fell mom in Jun on the back of the weak domestic demand and no arbitrage window for most of the month.
• Imports totalled 350kt, compared with 360kt in May and little change on the yoy basis.
• Copper stocks at bonded warehouses in Shanghai reached a high of 650-680kt in Jun, up from 620-650kt in late May.
• YTD copper imports are down 11%yoy with 2.24mt copper shipped.
Aluminium US$ 1,695/t vs US$1,699/t
Nickel US$ 11,480/t unch vs US$11,380/t –
Zinc US$ 2,031/t vs US$2,013/t –
Lead US$ 1,822/t vs US$1,802/t –
Tin US$ 14,630/t vs US$14,215/t –
Energy:
Oil US$56.9/bbl vs US$59.3/bbl
Natural Gas US$2.864/mmbtu vs US$2.792/mmbtu
Uranium US$36.25/lb unch vs US$36.25/lb –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$50.50/t vs US$50.50t –
• Chinese iron ore imports fell 0.9%yoy to 452.9mt in the Jan-Jun period as steel sector is challenged by property slump, overcapacity and tighter environmental control.
• Benchmark 62% CFR China prices are currently trading at the US$50/t mark reflecting slowing demand in the world’s largest buyer of the concentrate.
• Rio Tinto called the level the new normal which may persist through to 2020.
Thermal Coal $58.1 vs $58.3 cif ARA Europe –
Tungsten - APT European prices price $225.0/mtu vs $217.5/mtu on Friday
Company News
Caledonia Mining (LON:CMCL) 53 pence, Mkt Cap £27.6m – Independent director resigns
• Richard Patricio, an independent director of Caledonia Mining has resigned from the board effective on the appointment of his successor.
• Mr Patricio was not voted off the board but the number of votes withheld against his re-election has prompted his resignation.
• We think the shareholder protest which is said to have been aimed at three directors may be part of a shareholder protest against the company’s reinvestment plan into the Blanket Gold mine in Zimbabwe
Minera IRL (LON:MIRL) 5 pence, Mkt Cap £11.6m – Appointment of COO
• Eric Olson has been appointed as COO of Minera.
• Eric is a mining engineer by background with 35 years of experience in the mining industry.
• He was responsible for the Cerro de Maimon operation for GlobeStar Mining.
• The company recently announced a US$70m bridge financing as the first step towards securing the US$240m required for the development of the Ollachea project.
Conclusion: Ollachea is a good project worth developing and we look forward to futher news flow on progress on the funding.
Paragon Diamonds (LON:PRG) 5.3 pence, Mkt Cap £14.3m – Mothae Acquisition Update
• A legally binding share purchase agreement has been signed with Lucara for the purchase of Mothae.
• The acquisition is still subject to approval from the Government of Lesotho and completion of funding.
Conclusion: This is one step closer to the acquisition of Mothae and we look forward to further newsflow on this front.
W Resources (LON:WRES) 0.26 pence, Mkt Cap £9.3m – Environmental Approval for La Parrilla’s Fast Track Mine
• The company has received the environmental approval for its Fast Track Mine plan at La Parilla.
• This provides the basis for the issue of a permit for development of the mine which the company expects in September this year.
• The fast track mine plan is for a new 2.2 mtpa open pit mine south and west of the historic mine to produce 2,300 tpa of 63% WO3 concentrate.
• The mine is to be developed in two phases with an initial capex of US$16m to achieve a throughput of 750,000 tpa with the 2.2mtpa throughput requiring US$42m.
• The current inferred resource is for 46.9 Mt at 0.09% WO3 which is low grade but the company expects to release an updated resource and reserve to back mine plans.
• Work is on-going on infill drilling, metallurgical and ore sorter test work in Germany and equipment testing and selection.
Conclusion: The environmental approval paves the way to receive permits for development of the fast track mine. We look forward to further news flow on work to get this mine to development including a new resource and reserve statement.