Titanium & Specialty metals
• Alcoa signed a 9-year long ad US$1.1 worth contract for supply of the primary titanium to the aircraft manufacturer Lockheed Martin.
• Lockheed Martin is planning to ramp up production of F-35 Fighter jets from the current three per month to 13 per month by the mid-2020.
Mining Engineer gets job as a bus driver
• How times can change, a newly qualified mining engineer from Queens University in Canada is said to be delighted to get a job as a bus driver
• We suspect he is not the most highly qualified bus driver in the current economic climate in Canada and wonder if he is joined in the bus depot by a range of Canadian stock promoters
Economic News
US – Mortgage applications climb as borrowers take advantage of lower long term rates.
• The gauge increased 25.5% last week, up from a 6.7% drop in the previous week.
• The average rate for a fixed 30-year mortgage fell 0.09pp to 3.99% during the period on the Mortgage Bankers Association numbers.
• Economic news due today:
Date Announcement Period Actual Expected (Bloomberg) Prev month
Monday ISM Services PMI Sep 56.9 57.5 59
Tuesday Trade Balances Aug -US$48.3 -US$48.0bn -US$41.8bn
Wednesday Consumer credit Aug US$16.0bn US$19.5bn US$18.9bn
Thursday Weekly jobless claims Oct 274k 277k
Sep FOMC meeting minutes
Japan – The current account recorded a 14th consecutive surplus in Aug although export numbers disappointed despite the weaker yen.
• The current account climbed to Y1.65tn versus Y1.8tn in Jul and Y1.23tn forecast.
• Exports increased at a 3.1%yoy in Aug, down from a 7.6%yoy growth in Jul and +4.3%yoy forecast.
• That marks the slowest increase since May.
• On a separate note, machine orders, a proxy for private capex, dropped 3.5%yoy in Aug versus estimates for a 3.5%yoy.
• The weakest pace since a 14.6%yoy decline in Nov/14 highlights business uncertainty over economic outlook.
Germany – Latest trade data point to a slowdown in the overseas demand.
• Exports fell 5.2%mom in Aug v a 0.9%mom decline forecast.
• Imports have also recorded weak performance with the gauge down 3.1%mom compared to a 0.6%mom decrease expected.
• The data comes on the back of poor industrial production numbers released yesterday and low factory orders the day before.
Currencies
US$1.1290/eur vs 1.1241/eur yesterday. Yen 119.82/$ vs 120.03/$. SAr 13.487/$ vs 13.472/$. Sterling $1.533/gbp vs 1.530/gbp
0.718/aud vs 0.720/aud –
Commodity News
Precious metals:
Gold US$1,144/oz vs US$1,149/oz yesterday –
Platinum US$935/oz vs US$941/oz yesterday
Palladium US$692/oz vs US$705/oz yesterday
Silver US$15.70/oz vs US$15.88/oz yesterday
Base metals:
Copper US$ 5,143/t vs US$5,215/t yesterday –
• Global refined copper market to remain well balanced this year (+41kt) before slipping into a deficit in 2016 (-127kt) on ICSG numbers.
• New forecasts indicate a downwards revision of previous estimates for +360kt/+230kt market balances during the 2015/2016 period, respectively.
• “Although a downward revision has been made to global usage in view of lower than anticipated growth in China, larger downward adjustments have been made to production as a result of recent announcement of production cuts,” the ICSG said.
Aluminium US$ 1,569/t vs US$1,570/t yesterday -
Nickel US$ 10,150/t vs US$10,085/t yesterday
Zinc US$ 1,681/t vs US$1,672/t yesterday
Lead US$ 1,668/t vs US$1,648/t yesterday
Tin US$ 16,000/t vs US$15,850/t yesterday
Energy:
Oil US$52.00/bbl vs US$52.60/bbl yesterday
Natural Gas US$2.470/mmbtu vs US$2.467/mmbtu yesterday
Uranium US$37.05/lb vs US$37.00/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$54.0/t unch vs US$53.7/t – price is trading but maybe less movement due to Chinese holiday
Thermal coal (1st year forward cif ARA) US$49.20/t vs US$49.90/t
Other:
Tungsten - APT European prices $180/200 per mtu unchanged at this impossibly low level
Ferrochrome – Benchmark charge chrome price for delivery in Europe fell 4c to US$1.04/lb last week marking the lowest reading since Q1/10.
Company News
Asiamet Resources (LON:ARS) 1.55 pence, Mkt Cap £7.8m – Drilling continues to report high grade copper assays from Beruang Kanan
• The company has reported the assay results of the next 5 holes from its recently completed infill drilling programme at its Beruang Kanan copper deposit in central Kalimantan.
• Among the results reported today are a 51.9m intersection at an average grade of 1.36% copper from a depth of 50m in hole BKM 32250-03; 44 metres averaging 0.91% copper from a depth of 25m in BKM 32500-01 and 76m at 0.81% copper from 3 metres depth.
• Each of the intersection contains narrower, higher grade sections ranging up to a 7.9m intersection averaging 2.61% copper in BKM 32250-03.
• The company has now received assays from 66 of the 71 holes drilled and is working on a revised resource estimate to incorporate the new data, metallurgical testing to investigate the amenability of the mineralisation to heap-leaching, and a preliminary economic assessment of the viability of developing the deposit.
• Chief Executive, Tony Manini, comments that the drilling results “highlight the potential for a near term mine development with robust economics. In particular, the delineation of two discrete shallow, higher grade zones is very promising.”
Conclusion: Results reported to date from the BKM drilling programme bode well for a positive outcome to the resource evaluation. We look forward to the forthcoming resource report and the PEA.
Centamin (LON:CEY) 64 pence, Mkt Cap £737m – Quarterly gold production of 105koz keeps Centamin on track for 430-440,000 oz in 2015
• Centamin reports that it produced 105,413 oz of gold in the 3rd quarter ending 30th September. This only 2% below the 2nd quarter production and brings reported production for the first 9 months to 321,427 oz.
• Around 12.5% of the production came from the underground mine, while open pit production benefitted from a declining waste:ore ratio of approximately 5.5:1 compared to 5.9: for H1.
• The plant is reported to be operating in excess of nameplate capacity of 10mtpa with 2.673m tonnes treated during the quarter.
• In September, the company reported an updated proven and probable reserve for its surface and underground operations at Sukari Totalling 253m tonnes of ore at an average grade of 1.09 g/t gold (8.8m oz of contained gold) with a life of mine stripping ratio for the open pit (250mt proven ad probable at a grade of 1.03 g/t gold) of 5.9:1. (The reserves were calculated based on a $1300/oz gold price.)
• Chief Executive, Andrew Pardey, said that “with open pit grades set to increase towards the reserve average in the fourth quarter, production for the full year remains unchanged at between 430,000 to 440,000 ounces.”
Conclusion: Centamin is targeting production of over 108,600 oz of gold in the final quarter if it is to meet its re-iterated production guidance for the full year. This would slightly exceed the Q1 output of 108,233 oz.
Sierra Rutile (LON:SRX) 20.6 pence, Mkt Cap £107.7m – Third quarter shows strong production
• Sierra Rutile reports a strong third quarter from an operational perspective with rutile production up significantly on the second quarter
• Full year production guidance is now expected to be between 125,000-130,000t or rutile for the year
• Ilmenite producti1on remains on target for 30,000 – 35,000t with 27,149t produced for the year to date.
• Rutile sales are now fully contracted for the rest of this year at last year’s average price.
Q3 2015 Q2 2015 % change
Rutile 33,960 29,933 13%
Ilmenite 10,229 4,117 148%
Zircon Concentrate1 446 333 34%
• Management reckon they are able to maintain quarterly production growth this year suggesting to us that they may beat the upper end of the target range
• Costs: management report that direct op costs and Total op costs were slightly higher in Q3 due to the shipping of Q3 by-product ilmenite being scheduled in Q4. Normalising the cash costs for the timing of ilmenite shipments indicates the Direct op cash costs should have been within the guidance as shown below.
Q3 2015
Actuals Q2 2015 Actuals Full year 2015
Guidance
Direct operating cash cost (US$/t) 560 527 520 - 530
Total operating cash cost (US$/t) 647 636 595 - 615
All-in operating cash cost (US$/t) 670 685 650 - 670
• Fuel costs: The cost of heavy fuel oil and diesel to the mine and the power plant should be very much lower now than it was a year ago. It does take time for prices for fuel delivered into West Africa to fall as traders make out like bandits but with fuel costs representing such a large component of the cost base in such operations we should start to see the cost benefits feed through.
• Sierra Leone: Sierra Rutile continued to work through the Ebola crisis having put in place measures to monitor, protect and treat staff. The nation is waiting to be declared ebola free and this will hopefully happen shortly.
• Gangama dry mine: the construction of the Gangama dry mine is reported to be on schedule and on budget.
• Pricing: The company expect to see a shortage of premium feedstock availability over the next few years with customers showing strong interest in production to come from the Gangama Dry Mine. Management also reckon the pigment market is showing some signs of recovery.
• Financing: Sierra Rutile recently signed agreed a new standby facility from Nedbank of US$15m is to replace Pala facility at Libor plus 2% vs Pala’s facility at Libor plus 5.25%.
• The business now has access a previously restricted US$20m working capital facility from Nedbank backed by cash collateral from Pala.
Conclusion: It is good to see operational progress at the rutile mine in Sierra Leone. The mineral sands were historically seen as world class and expert guidance by Pala should further improve the oeprations.
The company made $16.7m of EBITDA for the full year last year on rutile volumes of 126,602t giving $106m of rutile sales plus $6.7m in ilmenite and $4.9m in zircon.
Rutile prices were reported at the interim to be consistent with the average through Q4 but we suspect prices dropped through Q3 hence the statement relating to achieving the Q4 average prices for shipments to the year end.
This year’s all-in cash costs should be around 5% lower than last year indicating to us some improvement in earnings for the full year, tempered by a probable fall in prices in Q3
(The company saw $837/t for rutile, $178/t for ilmenite and $134/t for zircon last year with similar rutile prices seen in H1 and Q4 but maybe not Q3)