Rosh HaShanah - Jewish new year today
• President Rouhani of Iran has extended new year greetings to Jews in a tweet
• “May our shared Abrahamic roots deepen respect & bring peace & mutual understanding. L'Shanah Tovah. #RoshHashanah”
ESKOM – offtake from Cahora Bassa dam cut from 1500MW to 650MW from today till Sunday 20th
• Maintenance at the giant Cahora Bassa dam in Mozambique has caused a cut to ESKOM of significant power at a time when ESKOM is struggling to meet demand in South Africa
• This may have a knock on effect with South African industry, eg smelters and maybe some mines
Economic News
US – FOMC meeting week with chances for rates to go up this week estimated at 26%, down from 38% as of Aug, according to Bloomberg.
• Economic news due this week:
o Tuesday: Aug core retail sales (+0.2%mom v +0.4%mom in Jul), Aug retail sales incl autos (+0.3%mom v +0.6%mom in Jul), Aug industrial production (-0.2%mom v +0.6%mom in Jul), Aug manufacturing production (-0.3%mom v +0.8%mom in Jul)
o Wednesday: Aug CPI (-0.1%mom/+0.2%yoy v +0.1%mom/+0.2%yoy in Jul), Aug core CPI (+0.1%mom/+1.9%yoy v +0.1%mom/+1.8%yoy in Jul)
o Thursday: FOMC rate decision (+0.44%%/+0.25% band v +0.25%/0.00% currently in place), Weekly jobless claims (277k v 275k in the previous week), Aug housing starts (-3.0%mom v +0.2%mom in Jul), Aug building permits (+2.2%mom v -15.5%mom in Jul)
China – Major equity indices drop on Monday on the back of weaker expectations for government stimulus to support the economy.
• A mixed series of data has been released over the weekend.
o Retail sales (yoy/ytd): +10.8%yoy/+10.5%ytd in Aug v +10.5%/+10.4% in Jul and +10.6%/+10.4% forecast.
o Industrial production (yoy/ytd): +6.1%yoy/+6.3%ytd v +6.0%/6.3% in Jul and +6.5%/+6.3% forecast.
o Fixed assets investments: +6.64%yoy v +6.63%yoy in Jul.
Eurozone – Industrial production recorded the first monthly increase following two consecutive negative readings.
• Output climbed 0.6%mom in Jul, beating market estimates for a +0.3%mom reading and up on -0.4%mom seen in Jun.
India – Soft oil prices lead to further dros in wholesale prices.
• Wholesale price deflation fell 4.95%yoy in Aug, marking the steepest decline in a decade.
• In particular, fuel,. Power and light costs declined 16.5%yoy following a 12.8% decrease in Jul/15.
• Estimates were for a 4.40%yoy fall.
• This compares to +5.4%yoy reading recorded in Jul/14.
• CPI inflation is due later today with estimates for +3.57%yoy v +3.78%yoy in Jul. The RBI is likely to re-start the easing cycle sometime this year given falling rate of inflation.
Ukraine – Heavy weaponry is being withdrawn from the frontlines in Donbas, Ukraine, as parties to conflict start to adhere to Minsk peace agreement.
• Foreign ministers from Russia, Ukraine, Germany and France who met in Berlin last Saturday say a “significant progress” has been made towards a resolution of the conflict.
• Negotiators will be meeting this week to discuss regional elections in Ukraine and separatists’ controlled regions (Donetsk and Luhansk) due in Oct-Nov/15.
• National leaders will be meeting on Oct 2 in Paris.
Currencies
US$1.1332/eur vs 1.1286/eur yesterday. Yen 120.22/$ vs 120.54/$. SAr 13.579/$ vs 13.647/$. $1.546/gbp vs 1.544/gbp
0.713/aud vs 0.704/aud
Commodity News
Precious metals:
Gold US$1,108/oz vs US$1,108/oz yesterday
Platinum US$959/oz vs US$978/oz yesterday
Palladium US$591/oz vs US$583/oz yesterday
Silver US$15.50/oz vs US$14.64/oz yesterday
Base metals:
Copper US$ 5,351/t vs US$5,350/t yesterday
Aluminium US$ 1,628/t vs US$1,635/t yesterday
Nickel US$ 10,110/t vs US$10,285/t yesterday
Zinc US$ 1,783/t vs US$1,813/t yesterday
Lead US$ 1,687/t vs US$1,726/t yesterday
Tin US$ 15,500/t vs US$15,285/t yesterday
Energy:
Oil US$47.6/bbl vs US$47.9/bbl yesterday
Natural Gas US$2.714/mmbtu vs US$2.675/mmbtu yesterday
Uranium US$37.25/lb vs US$37.25/lb yesterday
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$56.9/t vs US$57.4/t
Thermal coal (1st year forward cif ARA) US$51.1/t vs US$51.2/t yesterday
Other:
Tungsten - APT European prices $190/mtu (range $185-195/mtu) down $5/mtu on last Wednesday
Ferrochrome
• Siyanda Chrome Smelting Co (SCSC) led by David Kovarsky, a former CEO of International Ferro Metals, is looking to start construction of a 150ktpa FeCr smelter in South Africa.
• “We hope to start construction in early 2017 and should be producing ferro-chrome towards the end of 2018,” Kovarky said.
• The project is currently going through the permitting stage.
• The feasibility study is reported to have been financed by trading firm Traxys which is planning to market the product from the smelter.
• Traxys holds the right to fund the smelter construction, according to MetalBulletin.
• The smelter will have access to UG2 chrome ore, power supplied by new Medupi plant and railway that would take FeCr to the port of Richards Bay.
Company News
Anglo American (LON:AAL) 730.5 pence, Mkt Cap £10.24bn – Sale of the Mantoverde and Mantos Blancos copper mines
• Anglo American confirms that it has completed the previously announced sale of its Mantoverde and Mantos Blancos copper mines in northern Chile to an investor consortium led by Audley Capital and Orion Mine Finance for $300m.
• There is provision for additional payments of up to $200m dependant on factors such as the performance of the LME copper price and the possible future extension of the sulphide resource at the Mantoverde mine.
Central Asia Metals (LON:CAML) 160 pence, Mkt Cap £184m – Interims to 30 June 2015
• EBITDA achieved was US$16m down 27% on higher production but lower copper prices.
• Copper production over the period was up 7% to 5,444 tonnes.
• Average copper price achieved was down around 16% over the period from US$7,049/t to US$5,936/t.
• C1 cash cost stood at US$0.74/lb (us$1,631/T) against US$0.72/lb last year.
• All in costs including depreciation stood at US$1.87/lb (US$4,121/t) up 15% from last year.
• Cash at the end of the period stood at US$35.8m.
• Stage 2 expansion of Western Dumps remains on track for production in 2017.
• Guidance is for 12,000 tonnes of copper for the full year.
• Outside Kazakhstan, the company are to start a DFS on the Copper Bay project in Chile.
Conclusion: .These results read well – cash costs are being maintained with all in costs at around US$4,121/t which should enable the company to generate cash even at the US$5,000/t level – a level at which copper prices have been bouncing off. Based on guidance for the full year, the second half should see higher production at of 6,566 tonnes. The recent operational issues have been rectified with Stage 1 expansion giving production capacity of between 10,000 – 15,000 tonnes which still gives scope for some production growth till permits and Stage 2 expansion of the Western Dumps comes through.
Gem Diamonds (LON:GEMD) 125 pence, Mkt Cap £173m – Sale of 357 carat diamond
• The company has sold a 357 carat diamond recovered from Letseng in July 2015 and a 314 carat sold into a partnership
• The price achieved for both diamonds was US$19.3m.
• The 314 carat stone was a Type IIa white diamond.
• The sale represents 16% of revenues achieved in the first half of the year which was 21% down from same time in 2014.
• The average value of diamonds sold is achieving US$2,264/carat from Letseng down around 18% over the same period last year.
• These sales compare with a 197.6 carat diamond achieving US$10.6m in September 2014 and a 162 carat stone selling for US$11.1m in Feb 2014.
Conclusion: The company have not broken down the sale value of the two stones. The 314 carat Type IIa diamond which went into a partnership should in theory have achieved a premium given its greater rarity. Judging by the values achieved for smaller of but still large stones last year of around 162 – 197 carats, the valuations have come down. This would suggest softness even at the exceptional end of the market which marries with concerns about China. The market will be looking to results from Petra Diamonds expected later this week on how the broader market for diamonds is performing.
Horizonte Minerals (LON:HZM) 2.125 pence, Mkt Cap £10.5m – Acquiring additional nickel laterite concessions in Brazil
• The company reports that it has been granted a new 1610 hectare concession approximately 60 km north of its Araguaia nickel project in Para State, northern Brazil.
• The additional concession area is located adjacent to Glencore’s Vale dos Sonhos and Serra do Tapa nickel laterite deposits.
• Horizonte Minerals has also lodged applications five additional concessions to the south of the Glencore projects and for two new concessions on the south west side of its Araguaia nickel project area.
• Horizonte is continuing with metallurgical test work and environmental and social impact studies on Araguaia and is extending its land-holdings in strategic areas of favourable nickel laterite geology both adjacent to its own core project area and in proximity to Glencore’s advanced nickel laterite projects.
Orosur (LON:OMI) 5.875 pence, Mkt Cap £5.7m – Q1 Results and cost cutting programme
• Orosur reports that production in the quarter to 31st August (Q1 2016) declined by around 9% to 12,471 oz of gold (Q1 FY15 – 13,684 oz)
• Cash operating costs for the quarter rose by around 1% to $954/oz compared with $945/oz in the preceding year.
• Orosur has been working on reducing costs for the remainder of the year to below $1000/oz on an AISC basis and reports that it has implemented a 22% staff reduction during the quarter. As well as implementing plans to optimise production at the Arenal underground mine and open pit operations.
• At 31st August the company held cash of US$4.6m and reports that net debt had been reduced to $1.1m from $1.5m during the quarter.
• In Chile, the company is preparing for a 3,600 metres campaign of reverse circulation (RC) drilling at the Anillo project.
Noricum Gold* (LON:NMG) 0.135p, Mkt Cap £3.6m – Interim statement highlights progress at Walchem and at the new Bolnisi copper, gold project in Georgia
• Noricum Gold report progress in their interim statement today.
• The key points of the report relate to the two new major asset acquisitions made by the group.
• Walchem: is a former polymetallic mine in Austria. Management are sampling old mine workings and cliff faces and are generally investigating the mine and historic date with a view to developing a potential resource going forward.
o Recent sampling of outcrop shows: 12m @ 0.6% Cu, 0.33 g/t Au and 7.25g/t Ag.
o The highest grade was returned by WAL40 - 2m @ 1.14% Cu, 1.08g/t Au, 30.8g/t Ag.
o Other sampling from dumps and rock chips returned results up to 1.03% Cu, 5.63% Pb and 12.65% Zn.
o The average grade of the Walchen ore mined from 1942 was 1.71% Cu, 3.23% Zn, 2.48% Pb, 83g/t Ag, 0.5g/t Au.
o Bolnisi: The Bolnisi licenses acquired by Noricum have had around $30m spent on their exploration and are host non-JORC resources of 980,000t of copper, 6.6moz of gold and 22moz of silver.
o The Noricum team are working on the conversion of existing data along with some new drilling to verify existing data and potentially extend the resource. We expect any new JORC resource to substantially cut the existing non-JORC resource and to focus exploration on the most prospective areas for potential lower cost mining.
o The licenses lie around Noricum’s partner’s existing copper gold mine and there is agreement for Noricum to utilise the mine’s contemporary assay laboratory and existing geophysical and drilling teams which are working at the current Bolnisi Gold mine.
o Noricum are committed to spend $6m on the Bolnisi licenses over two years to better define the former Soviet C1 & C2 resources at three priority sites:
§ 450,000 tonnes of copper (avg grade 1.31%);
§ 835,000 oz of gold (1.16 g/t);
§ 20 Moz of silver (23.71 g/t);
§ 22,000 tonnes of lead (1.23%);
§ 52,000 tonnes of zinc (2.9%);
§ 1.5 Mt Barite (BaSO4) (27%)..
§ The team with do some confirmation drilling by twinning drill holes and with then look to extend existing key targets using geophysics ‘IP’ and scaled up larger arrays with 3S inversions of data seta and stratigraphic and electromagnetic data to look for footwall massive sulphides.
§ The figures show tight budget control with expenses of just £271,000 for the year and a loss of £271,422
§ Management: Noricum have taken on Martyn Churchouse, as an executive director. Martyn is well known in mining circles and was formerly a senior geologist for Anglo-American Namibia, Gold Fields Namibia and JCI . Martyn has had senior roles with Caucasus Minerals, Carlton Resources, African Mining & Exploration PLC and Kimcor Diamonds.
§ Mark Owen, ex Geologist for Wardell Armstrong has also joined the team as a technical director. Mark is a first class resource geologist with extensive experience working in the Former Soviet Union.
§ The two appointments give bring significant expertise and credibility to Noricum’s newly expanded exploration strategy.
Conclusion: This has been a transformational year for Noricum. While exploration results at Rotgulden and Schonberg have disappointed, the acquisition of Walchem and Bolnisi resources transform the prospects for the group and raise the bar in terms of new resource potential.
*SP Angel acts as Nomad and Broker to Noricum. An SP Angel analyst has visited the Schonberg site in Austria.
Weatherly International (LON:WTI) 0.7p, Mkt cap £6.6m – Upgrade to production forecast for Tschudi
• Weatherly International has upgraded its production forecast for the current quarter to 1,150 tonnes per month of copper from the previously announced 1,000 tpm. The upgraded production forecast represents approximately 80% of design capacity.
• The company further comments that “before year end, Weatherly will be operating a new 17,000 tonnes of copper metal per year open pit copper mine” which implies that there is a further 23% increase in annualised production to come by the end of the year at which point the ramp-up phase should be effectively complete and Tschudi will be operating at full capacity.
• The company has also announced that it is suspending mining of ore and production of concentrates at its Central Operations (Otjihase and Matchless mines) as a consequence of “the marked decline in world copper prices from January 2015”. The two mines produced 1282 tonnes of copper in concentrate during the June quarter at a C1 cost of $6,417 per tonne and this level of production is deemed “insufficient to support the ongoing costs of operating these mines.”
• The Central Operations are to be reclassified as development projects pending an improvement in copper prices. As a development project, the company plans to invest in upgrading the mineral resource base and providing additional underground access to increase production levels to a level commensurate with the treatment capacity available at Otjihase which, the company note, it has been unable to achieve over the last five years.
Conclusion: After initial teething troubles with Tschudi, the operation is now exceeding the company’s targets for ramp up and is expected to be at full capacity by the year end. The company has also taken the prudent decision to suspend production at the venerable Otjihase/Matchless complex while it seeks to build up a larger resource base to match processing capacity at Otjihase when copper prices recover.