New recruit – Elizabeth Johnson
• We are very pleased to announce the recruitment of Elizabeth Johnson to our sales desk with special focus on institutional clients
• Elizabeth is a mining sales and corporate broking specialist with over 10 years’ experience in the sector most recently at FinnCap where she has acted for a number of clients. Prior to this Elizabeth ran the resources sales team at Objective Capital, a research boutique covering mining companies listed on the TSX, ASX and AIM.
• Elizabeth holds a degree in mathematics from Edinburgh University.
• ‘EJ’ as Elizabeth is known will be a significant addition to our team and to the service we offer in the resources sector.
• EJ’s email is Elizabeth.johnson@spangel.co.uk
Gold prices fall to US$1,108/oz as India unveils measures to reduce gold imports
• Gold prices fell yesterday to session lows around mid-morning in the US with December gold falling $10.40 an ounce at $1,110.60.
• India unveiled a number of moves to reduce nation’s gold imports including setting up Gold Monetization scheme and launching Sovereign Gold Bonds to put the 20,000 tons of gold held privately to more productive use.
• Gold Monetization allows holders of gold to deposit it with local banks for 1-15 years earning interest and seeking redemption at prevailing value at tenure end.
• Banks may selling available gold to jewellers to increase domestic supply.
• Sovereign Gold Bonds will be paying floating/fixed interest and is planned to replace investment in gold.
• Bonds will have an annual investment cap of up to 500g per person and to be available in denominations of 5, 10, 50 and 100g.
• Maturities will range between five and seven years.
Economic News
US – Major US equity indices ended down more than 1% overnight due to a decline in Apple shares and energy-related stocks.
• Apple dropped nearly 2% in afterhours trade as the launch of new products failed to impress investors.
• Brent futures fell 3.9% yesterday.
• Solid JOLTS job openings report show improving labour demand in Jul (+5,753k v +5,323k in Jun and +5,300k forecast).
• Strong numbers increase the likelihood of the Fed moving ahead with the start of the tightening cycle some time this year
• Yesterday the World Bank argues the US Fed risks to trigger “panic and turmoil” in emerging economies by raising rates as early as September.
China – Consumer prices growth accelerates to post the fastest pace in 13 months, although producer prices remain in a deflationary mode marking a 42nd consecutive <0 reading.
• CPI: +2.0%yoy in Aug v +1.6%yoy in Jul and +1.8%yoy forecast.
• The rate remains well below the government official target of “around 3%”.
• PPI: -5.9%yoy, the worst reading since 2009, v -5.4%yoy in Jul and -5.6%yoy forecast.
• The sustained fall in PPI comes on the back of overcapacity in heavy industries as well as softer commodity prices.
• Auto sales dropped 3.0%yoy to 1.7m vehicles in Aug in their fifth monthly decline .
• On a more separate note, FDI in mainland China jumped 22.0%yoy in Aug, up from +5.2%yoy in Jul, led by stronger investments in the nation’s high-tech service industry.
• High tech services sector registered a 59.1%yoy increase while overall the service industry was up 20.1%yoy.
• Yesterday China’s Ministry of Finance signalled the government is considering fiscal stimulus step in measures to support economic growth.
France – Manufacturing and industrial production contracts in Jul versus market expectations for a monthly increase marking the worst reading since Nov/14.
• Manufacturing production: -1.3%yoy v +0.2%yoy in Jun and +0.7%yoy forecast.
• Industrial production: -0.8%yoy v +0.7%yoy in Jun and +0.7%yoy forecast.
• Poor numbers point to a nation’s struggle to gain economic growth pace as latest data show France’s GDP expansion ground to a halt in Q2/15 after expanding 0.7% in the previous quarter.
Brazil – S&P downgraded Brazil to a junk-grade credit rating (BB- from BBB-) amid falling commodity prices, political challenges, contracting economy and growing debt.
• "The political challenges Brazil faces have continued to mount, weighing on the government's ability and willingness to submit a 2016 budget to Congress" that met economic targets, S&P said.
Japan – Typhoon flooding in north east Japan prompts the evacuation of 90,000. Flooding has overwhelmed drainage pumps at the Fukushima with the potential for contaminated water used for cooling the reactors during the meltdown and now stored at the site to be overwhelmed and washed away.
Australia – Positive employment data released this morning show a significant increase in full-time jobs in Aug taking the Australian dollar higher.
• The economy added 17,400 jobs versus 5,000 expected on average by economists and up from revised +39,200 reported in Jul.
• The jobless rate fell 0.1pp to 6.2% last month.
• The Australian dollar picked up from a session low of US$0.6946 and currently trades at US$0.7049
UK – House price inflation to hit 6% this year warn the Royal Institution of Chartered Surveyors
• Prices are being driven by a shortage of homes on the market
Currencies
US$1.1195/eur vs 1.1183/eur yesterday. Yen 120.82/$ vs 120.59/$. SAr 13.857/$ vs 13.632/$. UK $1.538/gbp vs 1.536/gbp
AUD 0.705/aud unch vs 0.705/aud – SA rand continues to weaken
Exchange controls are feared in Turkey and Malaysia (FT).
• Malaysia imposed exchange controls in 1997 at the start of the Asian crisis
• Nigeria and Ghana already have some exchange restrictions in place which make transactions more complicated
China – capital controls
• Beijing is tightening capital controls as the nation tries to control the impact of recent currency devaluation.
• Banks have been warned to watch out for over-invoicing of exports which is used to enable capital outflows.
• China is said to be spending around $10bn a day on defending its currency peg.
• China’s central bank is planning on imposing a new 20% reserve requirement on all currency forward positions in an attempt to limit speculation on further devaluation.
Commodity News
Precious metals:
Gold US$1,108/oz vs US$1,122/oz yesterday
Platinum US$989/oz vs US$1,004/oz yesterday – Quarterly Report from World Platinum Investment Council sees stronger investment demand offset by weaker jewellery
• The global platinum market remained in deficit through Q2 2015 though the deficit was smaller than in Q1 2015 as an increase in investment demand was offset by higher SA mine supply and lower jewellery demand.
Palladium US$585/oz vs US$588/oz yesterday – palladium prices gain on supply threat as protests disrupt South African PGM mines
Silver US$14.75/oz vs US$14.78/oz yesterday
Base metals:
Copper US$ 5,423/t vs US$5,396/t yesterday – copper prices continue to rise as Chinese copper stocks fall
• Glencore's 400,000t cut in copper production should swing the market from surplus to deficit
• Others may well follow Glencore's cut of its higher cost production while industrial action in Chile has blockaded a number of Coldelco mines causing potential to delay or defer copper shipments.
• Chinese traders are thought to be back in the market following the restart of industry after the WWII parades and the Chinese Ministry of Finance is talking of new fiscal stimulus to help infrastructure and other construction projects.
• This could help to restore copper demand growth and continue to support the recovery in copper prices
Aluminium US$ 1,637/t vs US$1,646/t yesterday
Nickel US$ 10,415/t vs US$10,065/t yesterday
Zinc US$ 1,827/t vs US$1,829/t yesterday
Lead US$ 1,732/t vs US$1,718/t yesterday
Tin US$ 15,150/t vs US$14,900/t yesterday
Energy:
Oil US$47.80/bbl vs US$49.80/bbl yesterday
Natural Gas US$2.678/mmbtu vs US$2.688/mmbtu yesterday
Uranium US$37.20/lb unch vs US$37.20/lb yesterday
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$56.60/t unch vs US$56.60/t –
• Iron ore held >US$56/t as prices climbed earlier on government pledges to speed up infrastructure spending.
Thermal coal (1st year forward cif ARA) US$50.90/t vs US$51.10/t yesterday
Other:
Tungsten - APT European prices $190/mtu (range $185-195/mtu) down $5/mtu on last Wednesday
Lithium – global lithium market set to growth at 11.12% CAGR to 2019 according to a new report by Sandler Research
Company News
Centamin (LON:CEY) 60.3 pence, Mkt Cap £695m – Updated Resource and Reserve Statement
• Total measured and indicated resource is estimated at 386 Mt at 1.03 g/t gold giving 12.9 m oz at a 0.3 g/t cut-off grade.
• Total reserves for both open pit and underground stand at 8.8m oz up 7% from the previous reserve statement of 8.2m oz on 30 Sept 2013.
• The open pit reserve is for 250 Mt at 1.03 g/t gold giving 8.3 oz.
• The underground reserve is for 2.72 Mt at 6 g/t gold giving 520,000 oz.
• Assumptions for open pit reserves are based on a gold price of US$1,300/oz and cut off grades around 0.4 g/t gold and diesel price of US$0.70/l.
• For underground reserve estimates are based on a 3 g/t cut-off grade and mining dilution of 15%.
Conclusion: It is good to see the upgrade in reserves with underground infrastructure enabling more efficient drilling of higher grade zones. The US$1,300/oz gold price assumption is higher than we would expect to see in today’s gold price environment.
Dalradian Resources (LON:DALR) 41.375p, mkt cap £67.7m – High grade drilling intersections from Curraghinalt
• The company reports results from 25 boreholes (8439m) from its 30,000 metres infill drilling programme in the central part of its Curraghinalt gold deposit in Northern Ireland.
• The results include a 1.24m wide intersection of the Crow Vein grading 100g/t gold from a depth of 267.88m in borehole 15-Ct-232; a 0.31m intersection of the Causeway West vein grading 475 g/t gold from 84.6m in 15-CT-223 and 1.4m wide intersection of the Mullan Vein grading 70.24g/t gold (15-CT-240.
• These latest results, from holes drilled towards the south, were principally targeted at closer investigation of veins included in the recent mineral resource estimate of 3m tonnes at an average grade of 10.4 g/t gold and 3.9 g/t silver classed as “Measured and Indicated”. In addition, however the recent drilling has encountered 3 new veins.
• The new veins, designated the Slap shot, Sperrin and Causeway veins could, in the longer term, add to the overall resource potential of Curraghinalt.
• So far, Dalradian Resources has released results from 50holes (14,204m) of the 30,000m drilling programme, which forms part of current work programme for a Feasibility study on the Curraghinalt deposit. Further results are to be released as they become available.
Conclusion: The intersection of high grade mineralisation in the infill drilling campaign should add confidence to the of the mineral resource model and the discovery of additional veins which may at some future date become part of the mineral resource is encouraging for the Company. Many of the veins at Curraghinhalt, though high grade, appear to be relatively narrow which will require careful mine planning and detailed geological interpretation at the design stage and close supervision of underground operations in a future mine
EMED Mining (LON:EMED) 3.75 pence, Mkt Cap £131m – Half Yearly Report
• For the 6 months the company reported a loss of €15.8m.
• Expenses over the period were €4.961 m and admin expenses of €1.7m with fx losses accounting for €4.2m of losses.
• At the end of June cash stood at €58.9m.
• Given the recent update there was no new news.
• The company continues to make good progress on Phase 1 development of the re-opening of the Rio Tinto mine.
Gemfields (LON:GEM) 61.3 pence, Mkt Cap £333m – Acquisition of controlling interests in emerald projects in Colombia
• The company has acquired interests in two projects in Colombia.
• The two projects are the Coscuez licence which is a historic mine and the second ISAM Europa which includes a package of new licence applications and existing concessions.
• The Total consideration for a 70% interest in the Coscuez licence is US$15m to be paid in two tranches.
• The first tranche is for US$7.5m payable by US$5m in cash and the balance of US$2.5m in Gemfields shares subject to a 3 year lock in.
• A second tranche of US$2.5m is due on the first anniversary of completion and a third and fourth tranche on completion of agreed profit targets.
• The licence covers an areas of 47 hectares including the historic Coscuez mine which has been in operation for over 25 years.
• The mine was run as an open pit till the 1990s till a small underground operation was done in the upper reaches of the deposit.
• Gemfields has conducted some preliminary geological due diligence on the deposit which included geological mapping of all accessible tunnels and excavations.
• Further work needs to be done to develop a geological model to support a mine plan.
• A second project ISAM Europa includes a number of new licence applications and assignments to existing concession contracts.
• US$7.5m is to be paid for a 75% and 70% interests in the underlying licence applications and assignments through two holding companies.
• A first tranche of US$450,000 is to be paid today.
• Further tranches are due at various stages including granting of licences, the start of bulk sampling etc.
Conclusion: The acquisition of these licences should not be a surprise to the market as the company has been looking to grow its asset base in emeralds. Colombia was the former leader of supply in the emerald market till Zambia took over through Gemfields’s Kagem mine.
Herencia Resources (LON:HER) 0.1p, Mkt Cap £3.8m – Raising £0.5m
• Herencia Resources has raised £0.5m via the issue of 512m new shares at a price of 0.1p/share.
• The funds are to be deployed on the Picachos copper project in Chile, where the company is undertaking fast-track development aimed at starting production later this year; progressing the due-diligence and negotiation process with regard to the potential Tambillos joint venture with the Chilean Ezzazuniz Group as well as funding general working capital.