Economic News
US – Manufacturing sector expanded at the slowest rate since May/13 last month with new orders, production and employment posting weaker growth.
• A number of manufacturers complained about the strength of the US dollar weighing on their business overseas.
• ISM manufacturing PMI: 51.1 v 52.7 in Jul and 52.5 forecast.
• On a more positive note, auto sales hit the highest level since Jul/05 last month led by lower petrol prices and improving labour market.
• Sales climbed to 17.8m units (annualised), up from 17.3m last year. Aug numbers mark the fourth consecutive monthly >17m reading.
• Ford reported strong trucks and sport utilities vehicles sales during the month with orders for F-150 model increasing.
• Economic news due today:
o Wednesday: Jul factory orders (+0.9% v +1.8% in Jun), Aug ADP employment change (+200k v +185k in Jul), Fed Beige Book release
Eurozone – Unemployment in the region surprisingly fell to 10.9%, the lowest in a three and a half years, in Jul.
• Estimates were for no change and the rate to stay at 11.1%.
• Despite better than forecast region-wide job numbers, Spain and Greece continue to struggle with >20% jobless rates.
• The latest set of job numbers in Spain showed the nation broke its six month long trend of falling unemployment last month.
UK – Construction activity accelerated in Aug marking seven and half years of sustained growth in the sector on market PMI numbers.
• The index hit 57.3 in Aug, up from 57.1 in Jul.
Canada – The economy entered a recession last quarter after recording a second consecutive quarterly decline
• Q2/15 came in at -0.1%qoq following -0.2%qoq recorded in Q1/15.
• A 2.0%qoq decline in investments including a 3.1%qoq contraction in business spend on machinery and equipment accounted for most of the GDP decrease.
• Consumption growth accelerated (+0.6%qoq v +0.1%qoq in Q1/15) while trade posted marginal growth (exports/imports +0.1%/-0.4% v -0.3%/-0.4% in Q1/15).
Australia – The currency briefly slips below the 0.70 level against the US dollar on weak economic Chinese numbers and lower than estimated Q2/15 GDP data.
• The economy expanded 0.2%qoq through Q2/15, down from 0.9%qoq recorded in Q1/15 and below forecast +0.4%qoq.
• YoY GDP change totalled 2.0%, the weakest since late 2013.
• The slowdown was driven by “reduced mining and construction activity, coupled with a decline in exports”, according to the Australian Bureau of Statistics.
Currencies
US$1.1257/eur vs 1.1311/eur yesterday. Yen 120.05/$ vs 120.33/$. SAr 13.440/$ vs 13.266/$. $1.531/gbp vs 1.539/gbp 0.703/aud vs 0.712/aud
Commodity News
Precious metals:
Gold US$1,141/oz vs US$1,144/oz yesterday
Platinum US$1,009/oz vs US$1,016/oz yesterday
Palladium US$575/oz vs US$594/oz yesterday
Silver US$14.61/oz vs US$14.65/oz yesterday
Base metals:
Copper US$ 5,088/t vs US$5,098/t yesterday
Aluminium US$ 1,608/t vs US$1,593/t yesterday
Nickel US$ 9,855/t vs US$9,840/t yesterday
Zinc US$ 1,819/t vs US$1,817/t yesterday
Lead US$ 1,738/t vs US$1,725/t yesterday
Tin US$ 14,895/t vs US$14,000/t yesterday
Energy:
Oil US$49.0/bbl vs US$52.7/bbl yesterday
Natural Gas US$2.672/mmbtu vs US$2.686/mmbtu yesterday
Uranium US$36.95/lb vs US$36.90/lb yesterday
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$55.0/t vs US$54.7/t
Thermal coal (1st year forward cif ARA) US$52.5/t vs US$53.1/t yesterday
Other:
Tungsten - APT European prices $190/mtu (range $190-200/mtu) unchanged from Friday last week
Company News
Amur Minerals (LON:AMC) 15.5 pence, Mkt Cap £67.8m – Lanstead Equity Swap Agreement
• The company has raised a further £3m through its existing arrangement with Lanstead.
• This is in addition to the £5m raised through Lanstead based on the swap agreement put into place on the 23rd July 2013.
• As of the 17th June the company had cash balances of US$6m raised through the price-linked settlements with Lanstead.
Conclusion: Amur has benefitted from its swap arrangements with Lanstead raising 60% more than originally envisaged through the facility. These funds should be helpful while Amur work through the best development options. The company announced recently a financial advisory agreement with the Far East and Baikal Region Development fund to look at financing from Russia, India and China for the Kun-Manie project.
*SP Angel act as Nomad and Broker to Amur Minerals
Ariana Resources (LON:AAU) 0.8045p, Mkt Cap £6.5m – Start of construction at Red Rabbit
• Ariana reports that construction has commenced at the Red Rabbit gold project in Turkey. Initial site clearance is underway and the company expects the mining contractor to start on site in October.
• The company is looking to produce its first gold from the Kiziltepe sector at Red Rabbit in H2 2016. Design output is at the rate of 20,000 oz per year.
• Ariana has mobilised a drill rig to commence foundation drilling at the process plant site and also reports that it is preparing additional exploration drilling and trenching.
Conclusion: We welcome the news of the start of construction at Red Rabbit and the additional exploration work. Ariana’s Turkish partner, Proccea Construction are “working diligently through and swiftly through the mine construction schedule”. We hope that the critical phases of site preparation and foundation construction can be achieved before the onset of any bad winter weather.
DiamondCorp (LON:DCP) 9.625 pence, Mkt Cap £36.2m – Interims announced yesterday
• The company reported a pre-tax loss of £3.159m compared with £2.748m the same time last year.
• Cash balances stood at £1.942m with a further £2.089m raised after the results period.
• Development work is progressing slower than scheduled as the company put in additional support to counter more friable kimberlite found near the old workings on the eastern side of the pipe.
• These ground conditions are expected to delay the schedule for development by around 4 weeks.
• This has resulted in development costs rising to R 44,193/m against R 37,000/m.
• In addition the company are putting in place additional anti-rollback idlers for the underground conveyor belt system to meet new requirements by the Dept of Mineral Resources.
• Processing of the K6 kimberlite from the development tunnels in the UK4 block continued during the period with processing from the higher grade K4 kimberlite starting.
• Diamond recoveries from the development of the K4 block are currently exceeding expectations.
• First diamond sales are scheduled for October when a sufficient representative package of kimberlite diamonds.
Conclusion: The interims should not have brought any surprises given the operational update on the 31st July. We look forward to results of the sale of the diamond package in October. This will enable the company to upgrade the resource at Lace. Diamond prices are expected to be under pressure with greater uncertainty around China likely to impact prices with Chinese demand expected to have slowed. Financing of the cutting and polishing sector remains a concern and is likely to have been exacerbated by the recent volatility in emerging markets.
The diamond sector has pulled back significantly on the potential slowing of demand from China – falling by around 25%. While caution remains, some of these stocks are returning to good buying territory for long term holders.
EMED Mining (LON:EMED) 3.875 pence, Mkt Cap £135.6m – Operations Update
• Phase 1 development for the re-opening of the Rio Tinto copper mine.
• Waste pre-stripping has been taking place and ore being send to the floatation plant during commissioning.
• Wet commissioning is progressing well with secondary and tertiary crushers, floatation cells and pumps all said to be working.
• First concentrate was produced on the 31 July but not of sufficient quality yet to be marketed.
• The company plan to accelerate throughput capacity to 7.5 mtpa from 5 mtpa which is expected to be achieved by the end of H1 2016.
• New equipment has been ordered for the expansion to 9.5 mtpa with first delivery expected in Dec 2015.
• Focus will be on engineering and floatation.
• Infill drilling within the Cerro Colorado pit is continuing to obtain a detailed block model for mining.
• The company is in discussions to dispose of assets in Cyprus and Slovakia.
• Two new NEDs are to be appointed selected by Orion Finance and Liberty Metals & Mining.
Conclusion: Emed continue to make progress in the re-opening of Rio Tinto. It is good to see that concentrate is being produced although not yet of marketable quality. During commissioning the company are likely to be looking at the best trade-off between recovery and grade to produce concentrate. This process is likely to take around 3 months and we look forward to further updates on concentrate production and also results from infill drilling and exploration drilling.
Metminco (LON:MNC) 0.21 pence, Mkt Cap £5.6m – Half Year Results and update
• Metminco, which is evaluating the Los Calatos copper project in Peru reports that it generated a reduced pre-tax loss of $1.9m in the first six months of 2015 (H1 2014 loss of $3.3m). Loss on a per share basis declined to 9 cents compared to 19 cents in 2014.
• Following a share issue which raised $4m, the company held cash of $1.99m at 30th June (31st December 2014 $1.19m).
• During the period, Metminco has updated its resources estimate for Los Calatos (352m t at a grade of 0.75% copper and 318ppm molybdenum using a 0.5% copper cut-off) and outlined a strategic mining plan to produce around 48,500 tpa of copper in concentrates at a cash operating cost of $1.20/lb of contained copper from a 6mtpa underground mining operation.
• The revised plan for Los Calatos has significantly reduced the capital requirements for the original large scale open-pit mining plan to around $650m from the $1.5bn originally envisaged. The new plan will still need substantial infill drilling and detailed engineering work, however, in our view, the decision to review the development plan is delivering a substantially more robust project.
• As previously reported, the company has also been granted Leave to Appeal a ruling Court of Appeal of Chile’s IV Region which sought to extinguish the company’s rights over its Lollacas copper / gold project. The date for the hearing by Chile’s Supreme Court has not been disclosed.
Mwana Africa (LON:MWA) 1.125 pence, Mkt Cap £15.7m – Raising £3.67m for redevelopment of the Klipspringer mine
• Mwana Africa has announced that it is raising £3.67m by the issue of 367,643,523 shares at 1p.
• Qualifying shareholders are able to subscribe on the basis of one share for every 3,802 shares held.
• Three existing shareholeders, CIMGC, Yat Hoi Ning and Yuan Ching Hu, representing 15.66% of the shares have jointly committed to subscribe for 57,577,351 shares in the offer.
• The company plans to use the funds raised to assist in “the further development of the Klipspringer diamond mine” in S Africa.
Rare Earth Minerals (LON:REM) 1.08 pence, Mkt Cap £73.6m – Increasing its stake in Bacanora Minerals
• Rare Earth Minerals has announced that it has increased its stake in Bacanora Minerals from 16.4% to 16.8% via market purchases to the value of £324,530.
• Rare Earth Minerals also holds a direct 30% interest in Bacanora’s Mexican borates and lithium projects and has now increased its overall economic interest in the projects to 41.75%.
• Rare Earth Minerals has been progressively increasing its stake in Bacanora from 12% in December last year and David Lenigas of REM joined Bacanora’s Board in March.