Greece – The IMF may not be joining the EU latest financial rescue package for Greece.
• The Fund highlighted Athens’ high levels of debt and bad record of implementing reforms which disqualify Greece from the a third IMF bailout.
• The situation is aggravated by the fact that Germany is unlikely to secure parliamentary approval without the IMF participating in the programme.
• The Fund will considering taking part once Greece has “agreed on a comprehensive set of reforms” an Eurozone bailout lenders have “agreed on debt relief”. The latter was strongly opposed by Angela Merkel.
Economic News
US – Q2/15 GDP numbers released yesterday showed the economy climbed 2.3%qoq while Q1 data was revised to 0.6%qoq growth (from -0.2%qoq estimated previously).
• Estimates were for the 2.5%qoq increase.
• Consumer spending (+2.9%qoq) and an increase in exports (+5.3%) drove growth and more than offset soft business spending on equipment.
• Positive GDP numbers saw the US currency higher with gold and oil prices trading lower.
Japan – Inflation remains subdued by low commodity prices keeping it significantly below central bank 2% target rate.
• Core inflation (ex food prices) climbed 0.1%yoy in Jun versus no change forecast. That was the lowest rate of inflation in two years.
• The so-called “core-core” inflation (ex food and energy) rose 0.6%yoy in Jun, up from +0.4%yoy in May.
• Another disappointing report showed household spending fell 2.0%yoy in Jun compared with a 4.8%yoy increase in May and +1.9%yoy forecast.
• While unemployment rate ticked up to 3.4% last month from 3.3% in May.
Mozambique – water levels approaching critical levels at the Cahora Bassa and Kariba Dams where water levels are said to be not far above
• This is due to inadequate rainfall levels through 2014/2015.
• On the positive side this might be a great time to repair the foundations / footings to the Kariba dam which are suffering from excessive erosion from the plunge pool.
• As if that wasn’t enough the dam walls are said to be suffering some weakening of the structure due to a slow chemical reaction within the concrete which is weakening its composition
• The Cahora Bassa Dam
US$1.0954/eur vs 1.0967/eur yesterday. Yen 124.21/$ vs 124.18/$. SAr 12.744/$ vs 12.624/$. $1.558/gbp vs 1.561/gbp
US$0.728/aud unch vs0.730/aud.
Commodity News
Precious metals:
Gold US$1,082/oz vs US$1,086/oz yesterday –
Platinum US$979/oz vs US$986/oz –
Palladium US$614/oz vs US$620/oz –
Silver US$14.60/oz vs US$14.68/oz –
Base metals:
Copper US$ 5,244/t vs US$5,265/t –
Aluminium US$ 1,634/t vs US$1,653/t –
Nickel US$ 10,990/t unch vs US$11,100/t – Vale sees “positive signs” developing in Q2/15 including an increase in Chinese imports of ferronickel and unwrought nickel, a decline of stainless steel scrap discounts in Europe and an improvement in transaction prices for non-LME nickel. “We expect better (nickel) prices for the fourth quarter.”
Zinc US$ 1,949/t vs US$1,942/t –
Lead US$ 1,711/t vs US$1,710/t –
Tin US$ 16,030/t vs US$16,000/t –
Energy:
Oil US$52.60/bbl vs US$53.80/bbl
Natural Gas US$2.783/mmbtu vs US$2.847/mmbtu
Uranium US$36.00/lb unch vs US$36.00/lb –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$51.50/t unch vs US$51.20t –
Thermal Coal $56.5 vs $56.4 cif ARA Europe –
Tungsten - APT European prices price $220.0/mtu unch vs $225/mtu – No change to tungsten this week, prices still skewed by the sale of poor quality material.
• Wolf Minerals reckon some material is coming off the market which might lead to slightly tighter supply, though this may be wishful thinking
Ferrochrome - Baosteel and Tsingshan Group have reduced their ferro-chrome bid prices for August.
• The summer slowdown and potential for further pollution related shutdowns for stainless steel producers has made buyers more cautious and led to an increase in producer inventories.
• Baosteel is offering around 101c/kg in China. Baosteel is also reported to have halved its purchase volumes
Company News
Antofagasta (LON:ANTO) 565p, Mkt Cap £5.6bn – Antofagasta to buy 50% of Zaldivar mine for $1bn from Barrick
• Antofagasta is buying 50% of the Zaldivar copper mine from Barrick for $1,005m.
• The transaction should complete this year and with a $980m cash payment followed by five annual payments of $5m starting in 2016.
• Antofagasta plan to use cash on the balance sheet and for the deal to be earnings accretive.
• Zaldivar is a large-scale open-pit, heap leach operation in Northern Chile.
• Production around 100,000tpa of copper.
• Cash cost of US$1.79/lb net of by-product credits.
• Pre-tax profit US$244m in 2014.
• Reserves: 2.5mt proven and probable.
• LOM: 14 years with upside potential.
• Zaldivar gross assets: US$1.4bn.
• This is a meaningful transaction for Antofagasta and helps to deleverage Barrick at a time of lower gold prices and ahead of a potential US interest rate rises.
• The two companies have a long history together of cooperation which stated with Peter Monk’s (founder and former Chairman of Barrick) association with the former Chairman of Antofagasta.
• Barrick and Antofagasta acquired Tethyan Copper some years ago for its giant Reko Dik copper project in Pakistan, though its location proved difficult from a legal and logistical perspective.
• We would not be surprised to see further co-operation between Barrick and Antofagasta going forward.
• Antofagasta recently guided the market to 665,000t of copper production for the year down from 710,000t previously due to a delay in ramp of Antucoya mine.
Conclusion: This is a great time to acquire copper mining assets as gold producers look to restructure on lower gold prices and to deleverage ahead of impending US interest rate rises.
Berkeley Resources (LON:BKY) 17.5pence, Mkt Cap £31.6m – name changed to Berkeley Energy
Berkeley Energy (LON:BKY)
• Berkeley Resources has changed its name to Berkeley Energy.
• The new name better reflects the company’s focus on the development of a new uranium mine in Salamanca, Spain.
• We expect the recent appointments of Paul Atherley and Hugo Schumann to help develop new momentum within the company and its investor base.
• The team are busy integrating results from Zona 7 into the uranium resource for future development with the mine plan
• The Mines Department in Salamanca are well acquainted with mining having issued permits in recent years to the Los Santos and Barruecopardo mines and are seen as proactive and supportive when it comes to assessing projects within the region.
Nord Gold US$2.9, Mkt Cap US$1,067m – Gross secures construction permit
• The open-pit heap leach Gross project located close to operating Neryungi mine in Yakutia secured all necessary permits to commence construction.
• Works expected to start late 2015/early 2016 (subject to Board approval) and cost US$260m over a two year construction period.
• The mine is forecast to supply 12mtpa producing c.230koz with a 17 year mine life.
• Mineral reserves are estimated at 4.5moz with additional 8.6moz contained in mineral resources.
• Pilot stage operation demonstrated good heap leach recoveries (82.5%) at the irrigation period of 150 days for -40mm ore.
• The latest FS completed in 2015 showed an IRR of 25% at a long term price of US$1,100/oz and 40% at US$1,250/oz.
• The company is considering various financing options for the project at the moment.
• In the meantime, Gross will continue to operate in a pilot phase producing 35koz in 2015 using existing facilities at the Neryungri mine. The Company plans to spend US$8.5m on detailed design works at Gross this year.
Rare Earth Minerals (LON:REM) 0.9 pence, Mkt Cap £63m – Kiran Morzaria, ceo, appointed to board
• Rare Earth Minerals, a David Lenegas, company has appointed its ‘official’ ceo Kiran Morzaria to the board.
• Kiran is currently a director of Bacanora Minerals, Academy Minerals, API Technology, Panguma Diamond. He has previously held board positions with Vatukoula Gold, Solo Oil, Lonrho Limited and a subsidiary of Bacanora Minerals.
• Kiran is described by close associates as a good technical man.