China – factory activity falls as Chinese growth continues to slow through July
• The Caixin / Markit manufacturing PMI fell to 47.1 from 47.8 indicating a worsening contraction within the manufacturing sector
• Demand growth for Chinese manufactured goods appears to have slowed further in both domestic and export markets
• Recent devaluation of the Yuan has served to offset some of the currency appreciation suffered through the US dollar, Yuan currency peg
Asian markets continue to fall following the rout on the Shanghai exchange, reflecting the economic slowdown in China
• Asian stock markets continued to fall as the slowdown in China ripples across the region
• The SHE fell 4.27% followed by the Hang Seng at 1.8% down, the Nikkei at 3% lower and the Korean Kospi index 2.2% lower
• Slower manufacturing activity in China is indicating lower demand for good affecting exporters within the region
Platinum Equities – New fund inflows into Platinum ETF indicate new interest in the PGM sector
• Lonmin’s stock traded 22% higher on 18m shares traded yesterday indicating new interest in the stock and in the PGM sector as a whole
• The stock is up another 5% again this morning on another 2.8m shares traded and we wonder if some funds are positioning for a recovery in precious metals prices
• Amplats stock also took off rising 17% on the JSE yesterday with a further rise of 2% today
• The moves are particularly interesting given recent turmoil in the platinum industry in South Africa
• Implats rose 25% yesterday on the JSE rising a further 3.5% rise so far today
Economic News
Greek PM quits – calls snap election – we wonder if the calling of this election could jeopardise the agreed bailout deal
• The PM Alexis Tsipras was forced to agree to state sector cuts including pension reform to qualify for the latest bailout
• The IMF have refused to support what they see as an unsustainable deal and few observers believe that Greece will adhere to the terms of its bailout.
• Thankfully press attention is now focussed on more important matters
UK housing completions rise by 15% yoy
• 131,060 new homes were completed in the year to June – we think the number is still pathetically low
• The number of new home starts fell by 1% to 136,320 and also fell by 6% qoq – despite government pressure to encourage more building
UK reopens embassy in Tehran
• One metals trader tell us that Chinese traders have the country sewn up leaving little room for Western business
US$1.1243/eur vs 1.1123/eur last week. Yen 122.96/$ vs 124.06/$. SAr 12.9037/$ vs 12.9664/$. $1.571/gbp vs 1.565/gbp
US$0.732/aud vs0.729/aud – US dollar weakness on expectations for postponement of Fed rate rise
Commodity News
Precious metals:
Gold US$1,152/oz vs US$1,137/oz yesterday
Platinum US$1026/oz vs US$1017/oz
Palladium US$608/oz vs US$620/oz
Silver US$15.38/oz vs US$15.38/oz
Base metals:
Copper US$ 5,014/t vs US$5,055/t
Aluminium US$ 1,553/t vs US$1,568/t
Nickel US$ 10,170/t unch vs US$10,405/t
Zinc US$ 1,775/t vs US$1,810/t
Lead US$ 1,688/t vs US$1,710/t
Tin US$ 14,905/t vs US$15,350
Energy:
Oil US$46.13/bbl vs US$46.81/bbl
Natural Gas US$2.722/mmbtu vs US$2.709/mmbtu
Uranium US$36.40/lb unch vs US$36.40/lb –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$55.52/t unch vs US$55.13t –
Thermal Coal $52.4 vs $52.6 cif ARA Europe –
Tungsten - APT European prices price $205.0/mtu unch vs $215/mtu – prices unlikely to change today but there is potential for further drift in the price. We do not expect prices to rise in the short term.
Company News
Asiamet Resources (formerly Kalimantan Gold) (LON:ARS) 1.275 pence, Mkt Cap £6.4m – Amended terms over the KSK Contract of Work
• Asiamet Resources, which recently changed its name from Kalimantan Gold, has announced that it has a Memorandum of Understanding with the Government of Indonesia clarifying and amending its Contract of Work over the KSK project in central Kalimantan.
• The MoU confirms that the Contract of Work is in the 5th year of its life and that there remains 30 years to undertake exploration and mining operations. There is also provision two further extensions of 10 years to the CoW. A corporate tax rate of 30% and royalty rates of 3.75% for gold and 4% for copper have been confirmed for the project.
• Asiamet has also confirmed that it is working with the Government to support the policy of establishing metals processing in Indonesia with local ownership of metals processing businesses rising to 40% over 15 years through progressive divestment of shares by foreign owners.
Conclusion: Asiamet appears to have established clarity over the terms of its CoW at KSK – we do not know if there were ambiguities in the original agreements but Chief Executive, Tony Manini commented that “the amended terms envisaged under this MOU consolidate Asiamet’s position in the KSK CoW for the long term and provides a secure platform upon which the Company candeliver value to all its stakeholders.” It would seem that the company can move forward with the current exploration programme and subsequent evaluations with its tenure of the KSK licence are firmly established.
Gold Fields Zar 4,730, Mkt Cap Zar 36.8 bn – Q2 2015 Results
• The company generated an operating profit for the quarter of US$278m 11% down from the same period last year on revenues of US$660m.
• The gold price achieved was US$1,174/oz down 7.5% with AISC at US$1,029/oz down 2% with gold production at 535 koz down 2.4% over the period.
• Total all in costs stood at US$1,059/oz.
• Gold production in South Africa’s South Deep increased by 7% on quarter on quarter basis with West African Operations up by 13% .
• Attributable gold production from Peru increased by 25% to 83,200 oz on a quarter on quarter basis.
• Cash inflow from operating activities improved on a quarter on quarter basis to US$191m from US$150m.
• This was due to higher operating profits and a lower seasonal tax paid in Ghana and Australia.
• Capex for the quarter decreased to US$158m from US$175m in the previous quarter.
• The company maintains a full year production guidance of around 2.2m oz with an AISC of US$1,055/oz and an AIC cost of US$1,075/oz.
Conclusion: On the face of it these look like good results. With gold prices taking less of a battering than other commodities the gold stocks look as if they under less pressure although net margins are still low at around 6.5% against the current spot price.
Kodal Minerals* (LON:KOD) 0.18p, mkt cap £1.4m – Grimeli Drill results show high grades over narrow widths
• Kodal Minerals reports results from its 21 hole, 2,000m drill program at the Grimeli copper project in Norway.
• Kodal moved drilling to a site some 200m above the first drill location where high grade copper was intersected in the first round of drill holes
• Drilling at the first location shows five drill holes intersecting high-grade copper in massive sulphides out of the first eight holes.
• The drill program appears to show that higher grade copper and zinc mineralisation occurs in lenses with abrupt transitions..
• Mr Galen White, Principal Geologist to CSA Global and consultant to the company comments “With the current information it is difficult to distinguish high grade massive sulphide zones from non-economic disseminated pyrhhotite zones. A combination of ground based electromagnetic (“EM”) and high resolution magnetic may offer potential. Now that we have located both a massive sulphide copper zinc lens and a number of disseminated pyrhhotite horizons we have locations to conduct orientation surveys. The Company is assessing this approach.”
• Drilling highlights: Sample assay results returning greater than 1% Cu or greater than 1% Zn :
o 6.39% Cu and 0.82% Zn over 0.97m (including 0.53m @ 8.39% Cu)
o 4.29% Cu and 6.98% Zn over 0.50m
o 4.92% Cu and 0.82% Zn over 0.51m
o 2.77% Cu and 1.1% Zn over 0.48m
o 0.26% Cu and 2.44% Zn over 1.0m
o Previous results include
7.24% over 1.74m stope width
4.93% Cu over 1.02m,
4.89% Cu and 0.5m
4.19% Cu over 0.5m
The grades shown above look good albeit at narrow widths. Further drilling will be required to determine if the mineralised lenses see in this drilling and on geophysics may be mineable in some form in future years.
The statement goes on to say “In recent months the Company has received a number of approaches to participate in new exploration projects. These are being assessed on merit and the Company continues to discuss various options both in Norway and elsewhere."
*SP Angel acts as Financial Advisor and Broker to the company.
*The author of this report does ‘not’ hold shares in Kodal Minerals.
Three Partners of SP Angel and SP Angel LLP hold stock in Kodal Minerals due to their long running financial support for the company.