Economic News
US – Q2/15 GDP growth revision showed the economy expanded more than forecast during the quarter; although, nearly half of the upgrade was accounted for a by a continuing build-up in inventories.
• The economy grew at 3.7%qoq (annualised), up from 2.3%qoq estimated previously.
• Expectations for a delay in the Fed rate hike as well as a rebound in Asian markets saw US equities performing strongly yesterday.
• William Dudley, president of the New York Fed, said the case for monetary tightening become “less compelling than it was a few weeks ago” amid growing economic uncertainty in overseas markets.
• Among other news, weekly jobless claims posted a decline last week (271k v 277k in the previous week and 274k forecast).
• Economic news due today:
o Jul core PCE (+0.1%mom/+1.3%yoy v +0.1%mom/+1.3%yoy in Jun)
China – Markets climb for a second consecutive day following a massive correction recorded in previous trading sessions.
• On economics side of things, industrial profits contracted for a second straight month in Jul (-2.9%yoy v -0.3%yoy in Jun).
Japan – Unemployment marginally lower and retail sales jump beating estimates in Jul.
• Jobless rate: 3.3%v 3.4% in Jun and no change forecast.
• Retail sales: +1.2%mom/+1.6%yoy v -0.6%mom/+1.0%yoy and +0.6%mom/+1.1%yoy forecast.
• On a less positive front, core inflation (ex food) continues to lag behind official hopes for a stronger rate (0.0%yoy in Jul v +0.1%yoy in Jun and -0.2%yoy forecast).
Germany – Regional inflation reports coming in point to a slowdown in consumer prices’ growth in Aug with nationwide numbers expected later today (-0.1%mom/+0.1%yoy forecast v +0.3%mom/+0.1%yoy in Jul).
UK – Consumer sentiment unexpectedly climbed in Aug to match Jun/15 15-year high (7 in Aug v 4 in Jul and no change forecast), according to the GfK Consumer Confidence index.
• "Rising house price inflation and improving employment growth prospects, combined with falling petrol prices and day-to-day living costs, as well as low interest rates, are translating into high levels of confidence across all major measures," GfK said.
• Separately, Q2 GDP growth confirmed at 0.7%qoq/2.6%yoy, no change from previous estimates.
Switzerland – Beating expectations and avoiding recession, Swiss economy records a 0.2%qoq growth in Q2/15 weathering adverse effects of appreciating currency.
• Estimates were for a quarterly decline following a 0.2%qoq contraction in Q1/15.
• Growth was helped by an increase consumer spending.
Ukraine – The central bank cut the benchmark rate by 3pp to 27% as of today with inflation and declines in GDP running in double digits.
• The economy posted a 55%yoy inflation rate in Jul.
• The announcement follows a debt restructuring deal with international creditors who agreed to a 20% haircut on US$18bn worth of borrowings.
Currencies
US$1.1302/eur vs 1.1281/eur yesterday. Yen 120.79/$ vs 120.30/$. SAr 13.200/$ vs 13.057/$. $1.541/gbp vs 1.549/gbp
0.717/aud vs 0.716/aud
Commodity News
Precious metals:
Gold US$1,129/oz vs US$1,129/oz yesterday
Platinum US$1,005/oz vs US$998/oz yesterday
Palladium US$565/oz vs US$548/oz yesterday
Silver US$14.43/oz vs US$14.31/oz yesterday
Base metals:
Copper US$ 5,079/t vs US$5,025/t yesterday
Aluminium US$ 1,564/t vs US$1,552/t yesterday
Nickel US$ 9,860/t vs US$9,815/t yesterday
Zinc US$ 1,780/t vs US$1,734/t yesterday
Lead US$ 1,677/t vs US$1,668/t yesterday
Tin US$ 13,800/t vs US$13,745/t yesterday
Energy:
Oil US$47.2/bbl vs US$44.9/bbl yesterday
Natural Gas US$2.687/mmbtu vs US$2.683/mmbtu yesterday
Uranium US$36.90/lb vs US$36.90/lb yesterday
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$55.1/t vs US$55.2/t
Thermal coal (1st year forward cif ARA) US$53.6/t vs US$52.3/t yesterday
Other:
Tungsten - APT European prices $199/mtu (range $192-205/mtu) vs $203.0/mtu on Wednesday
Company News
Bacanora Minerals (LON:BCN) 87pence, Mkt Cap £74.1m – Conditional lithium supply agreement
• Bacanora Minerals reports that it has reached a conditional agreement to supply lithium hydroxide from its Sonora Lithium Project in northern Mexico to Tesla Motors’ Gigafactory in Nevada.
• The agreement, which lasts for an initial five year period from the date that Tesla places its first order can be extended for a further five year period.
• Bacanora needs to achieve certain performance milestones and reach Tesla’s product specifications within the next two years and confirm its ability to deliver product in the volumes and timetable required by Tesla.
• Work, including drilling and metallurgical test-work, is currently underway to progress the pre-feasibility work on the Sonora Lithium project which is currently assessing a mine and processing plant with an initial production capacity of 35,000 tpa of lithium compounds and the flexibility to increase production to 50,000 tpa. The pre-feasibility study is scheduled for completion by the end of Q1 2016.
• The company points out that the Sonora Lithium Project Partners (Bacanora Minerals and Rare Earth Minerals) will need “to secure significant financing through debt and / or equity” and that “Tesla has the right to participate in any such financing or other capital transactions.”
Conclusion: The conditional agreement with Tesla Bacanora may prove pivotal for Bacanora in the development of the Sonora Lithium Project. The company now needs to ensure that its pre-feasibility work is tailored to establishing that the project can deliver lithium hydroxide of a suitable specification on time and in the volumes required for Tesla’s needs.
Beowulf Mining (LON:BEM) 2.75 pence, Mkt Cap £11.8m – Half Year Results
• Beowulf Mining has reported a significantly reduced loss of £330k for the first half of 2015 compared to a loss of £1,317k in H1 2014. The 2014 figures include a loss of £777k on derivatives. The company also notes that there were lower corporate overheads, including directors and professional fees following a restructuring of management.
• Cash balances at 30th June amounted to £173k.
• The company is working towards de-risking its Kallak North iron ore deposit in Sweden and in building support of local communities.
• The project lies in an area designated as “An Area of National Interest” for minerals development and the local County Administrative Board has confirmed that “Mining is economically relevant and that the Kallak North project generates economic benefits at local, regional and national levels” and that “The Concession are applied for by the Company creates no conflicts where national interests are considered”.
Nord Gold US$2.80, Mkt Cap US$1,049m – Half year results and guidance update
• Nordgold has reported a 36% increase in EBITDA for the six months to June 2015 to $332.1m and comes after a 24% rise in EBITDA for 2014.
• Operating cash flow rose almost 90% y-o-y to $252.1 and even after a 52% rise in capital expenditure to $107.6m, free cash flow nearly doubled to $141.2m leaving the company with cash of $397.8m and an $81.1m reduction in the level of net debt during H1 to $546.2m
• Revenues rose by 4% to $$640.3m as a 7% rise in gold production to 507,500 oz was partially offset by a 7% decline in average received gold prices at $1205/oz.
• Showing the impact of declining currencies and improvements in operating efficiencies, costs on an all-in-sustaining basis declined by 20% to $722/oz.
• The company has reduced its guidance for all-in sustaining costs for the second time this year to $750-800/oz (from $850-900/oz) and is maintaining is production guidance at 925-985,000oz for 2015 while indicating that it expects to deliver in the upper part of the range. We note that with first half production of 507,500 oz, this implies that output in the second half could 5-10% lower.
• Guidance for 2015 capital expenditure of US$300m, which includes $95m for the Bouly project in Burkina Faso, remain unchanged.