Canada – Liberals win Canadian general election to elect Justin Trudeau as Prime Minister.
• The Liberal Party took 184 seats of the 338 Parliament Total despite opinion polls before the vote pointing to a hung parliament.
• The defeated Conservative Party will be seeking an interim leader in the coming days.
• As part of the election campaign Trudeau seeks to legalise marijuana, cancel the purchase of F35 fighter jets, be more assertive on climate change and abandon bombing campaign in Syria and Iraq.
• Trudeau’s policies suggest his government plans to fly high but without the help of buying new F35 fighter planes – boom!
Economic News
China – The PBoC spent US$230bn in three months to Sep to support the Renminbi amid a sharp selloff in equity markets and slowing growth momentum in the economy.
Germany – The US Treasury calls on Germany to increase spending and help rebalancing the global economy and the Eurozone, in particular.
• “Germany… continues to run a very ;large current account surplus, and is in the strongest fiscal position to power demand across the euro area,” a semi-annual Treasury report said.
• The Eurozone remains heavily reliant on the monetary policy by the ECB and should the positive effect of weak euro and low oil prices fade there is “a risk th euro area economy could return to even lower growth”.
Australia – The Australian dollar climbed on minutes released by the RBA showing the Board is reluctant to cut rates at this point.
• Markets estimate chances for a cut during the Nov meeting at 65%.
• However, the RBA holds a positive outlook on the economy suggesting there is “further evidence” that the economy is progressing with rebalancing towards non-mining sectors.
• In addition, the RBA is concerned with “the risks in commercial property and the property development sector” that are seen increasing which in in turn may lead the Board to hold off on further monetary easing.
Currencies
US$1.1351/eur vs 1.1361/eur yesterday. Yen 119.53/$ vs 119.42/$. SAr 13.261/$ vs 13.061/$. Sterling $1.548/gbp vs 1.547/gbp
0.727/aud vs 0.729/aud –
Commodity News
Precious metals:
Gold US$1,173/oz vs US$1,173/oz yesterday –
Platinum US$1,008/oz vs US$1,013/oz yesterday
Palladium US$682/oz vs US$691/oz yesterday
Silver US$15.85/oz vs US$15.91/oz yesterday
Base metals:
Copper US$ 5,182/t vs US$5,261/t yesterday –
Aluminium US$ 1,534/t vs US$1,551/t yesterday -
Nickel US$ 10,330/t vs US$10,465/t yesterday –
Zinc US$ 1,773/t vs US$1,788/t yesterday – Vedanta kindly offers to make up some of the shortfall from Glencore’s cutback
• Its so nice to see Vedanta’s Hidustan zinc business pushing for lower zinc prices. Will they never learn?
Lead US$ 1,781/t vs US$1,798/t yesterday
Tin US$ 15,930/t vs US$15,900/t yesterday
Energy:
Oil US$48.30/bbl vs US$50.00/bbl yesterday
Natural Gas US$2.483/mmbtu vs US$2.454/mmbtu yesterday
Uranium US$37.65/lb unch vs US$37.75/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$53.8/t vs US$53.0/t –
Thermal coal (1st year forward cif ARA) US$47.50/t vs US$48.10/t
• The LA Times report that CalPERS the $293bn fund is to divest from thermal-coal related companies. Maybe better to get out now than never.
Other:
Tungsten - APT European prices $175/195 /mtu vs $180/200 /mtu – 1/3rd of Chinese production is thought to have been shut with remaining production around $170/mtu
• The market is still working through tungsten and other minor metal stocks held on the Fanya Exchange and used for financing purposes
Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10.
Company News
Aureus Mining (LON:AUE) 18.75 pence, Mkt Cap £69m – Update on New Liberty Operations
• There has been a mechanical failure on the secondary crusher resulting in a temporary shut-down of the New Liberty process plant.
• A mobile crusher has been sourced to be used temporarily to enable production to restart.
• Tools, spares and other equipment required to complete the necessary repairs are expected to enable repair work to be completed by 31 October.
• Mining continues as planned with ore being stockpiled.
• 10,000 oz of gold dore have been shipped from site since production started.
Conclusion: It is a shame that the secondary crusher has gone down at this stage in the ramp up but the company appear to be taking speedy action and we look forward to seeing further updates on the remedial work. The company has done well to get the mine to commissioning despite challenges during the construction phase and should have a good operational team on the ground to handle problems during the commissioning phase.
Avalon Minerals (ASX:AVI) A$0.026, A$6.6m – Drill results from the D Zone
• The company have received assay results from Hole VDD 193W in the D Zone.
• This is a wedge hole drilled from VDD 193 and is outside the current mineral resource estimate.
• Results show 39.6m at 0.8% copper including 4.5m at 2% copper.
• VDD 193W was wedged at a point 220.3m down hole from VDD 193 which has returned 26.7m at 2.6% copper from 564.6m.
• Drill hole VDD 194 has also been completed and has intersected a narrow interval of copper mineralised ironstone.
Conclusion: Drill results are showing copper mineralisation outside the current MRE and offer scope to be included in the forthcoming update for the MRE.
Petropavlovsk 6.2p, Mkt Cap £202m (LON:POX) – Annual cost guidance and reduction in net debt reiterated despite a drop in quarterly output
• Production Totalled 114.5koz in Q3/15 (Q2/15: 127.4koz; Q3/14: 150.1koz) mainly driven by lower output at Pioneer and Albyn.
• Lower output is reported to be in line with management renewed focus on cash margins as opposed to absolute level of production.
• Weaker production at Pineer is attributed to adjustments to leaching times at the processing plant to improve recoveries of the high grade material and minimise metallurgical losses.
• High grade ore from Andreevskaya pit at Pioneer “with free gold particles and grades in the hundreds of grams per tonne” is being leached for 22 hours in the plant as compared to the usual period of 10-12 hours.
• Production at Pioneer may surge to 150koz in Q4/15 (Q1-Q3/15:147.3koz) as gold in circuit is recovered.
• Production in the first nine months amounted to 354.7koz (Q1-Q3/15: 456.5koz).
• Sales in the first nine months came in at 343.5koz at an average price of US$1,198/oz (Q1-Q3/14: 460.9koz).
• The Group continued with de-leveraging of the business with net debt down at US$675m as of Q3/15 (Q2/15: US$696m).
• The Company is in discussions with contractors regarding budgeting, mine plan development and underground exploration at Pioneer.
• Net Debt guidance reiterated at US$600m by year end.
• Total cash costs (TCC) are expected to average US$600/oz, in line with previous forecasts.
Conclusion: Quarterly production has come significantly below our estimates (SPA Q3/15: 203koz; Q-Q3/15: 443koz) on the back of considerably reduced output at Pioneer. Annual output is now likely to come in below 600koz with the management remaining focused more on gross margins and de-leveraging of the Group as opposed to headline ounces produced. The previous 680kozpa production target has been dropped through H1/15 in favour of a US$500/oz gross margin goal.
On a more positive note, net debt target as well as TCC guidance remained unchanged. Assuming the Group manages to ramp up production at Pioneer in the final quarter and H2/15 production at c.335koz, annual US$500/oz gross margin target would imply H2/15 TCC at c.US$640/oz. This makes the net debt target of c.US$600m achievable, although the balance would be considerably different to our previous forecasts for a comfortably below US$600m estimate.
We will revise our earnings along with our recommendation and release updated numbers shortly.
Shanta Gold* (LON:SHG) 6.5p, Mkt Cap £30.4m – Q3 gold production rises to 24,552oz
• Shanta Gold are finally getting their act together with record gold production of 24,552oz for the third quarter vs 14,664oz for Q2.
• Gold sales were higher at 26,254oz sold at an average price of $1,175/oz (vs sales of $11,590/oz at $1,222/oz in Q2)
• Cash costs almost halved as a result of the higher output and operational improvement.
• AISC costs fell to $608/oz from $1,157/oz indicating the company should achieve its $850-900/oz cost guidance.
• Gold production is also reported to be on track to achieve target 72,000-77,000oz for the full year.
• Net debt reduced to $49.1m from $54.5m at end of Q2.
• Underground plan: Shanta have published headline figures from management’s modelling of the underground mine.
• The project shows a surprisingly high IRR of 56% and an NPV of $72m at a $1,200/oz gold price
• The plan could enable Shanta to produce 84,000oz pa over 5 years.
Conclusion: The challenge for Shanta will be how to fund the capital required to develop the underground workings. In reality we hope the exploration team will find sufficient additional gold resources to extend the open cast operations and push the need to develop the underground mine out for another few years to enable the company to reduce debt levels to lower levels.
* The author of this report has previously visited the New Luika mine site
Sirius Minerals (LON:SXX) – Receives final decision notice granting approval to York Potash Project
• The company received the decision notice which formally grants planning permission for the company’s mine and mineral transport system application.
• This gives them the go ahead to develop the project.
• The company is currently finalising its DFS for the project which is expected to be completed this quarter.
• The remaining application permission outstanding is for the harbour facilities at Teesside and is currently with the Planning Inspectorate under review. The final decision is due no later than summer 2016. The permit should not affect the development schedule for the York Potash Project.
SolGold* (LON:SOLG) 2.225p, Mkt Cap £16.9m – High grades at Hole 12 in Cascabel assays
• SolGold report assays from Hole 12 of their Cascabel project in Ecuador
• The hole was drilled to a depth of 1,683m with the assay results reporting to 1440m
• The assays show another huge intersection of copper, gold mineralisation starting from a depth of 128m below surface
o 1,312m @ 0.67 % Cu, 0.63 g/t Au, for 1.05 % CuEq
§ Including:
§ 1,002m @ 0.76 % Cu, 0.77 g/t Au, for 1.22 % CuEq
§ 576m @ 1.03 % Cu, 1.19 g/t Au, for 1.75 % CuEq.
§ The assays from the upper portion of Eastern Limb show: 238m @ 0.47 % Cu and 0.15 g/t Au from 128m to 366m of depth
• Management also report that another target within the Cascabel license area ‘Aguinaga’ looks as if it has a similar geophysical signature to the Alumbrera copper mine in Argentina
• Drilling continues to show >1km intersections of mineralisation highlighting the sheer scale of the project. We can see large higher grade sections within much larger zones of copper, gold mineralisation.
Conclusion: It is rare to see >1km intersections of copper, gold mineralisation and these are great assay results to this type of project.
There is much more to discover and understand within the Cascabel license area. Management have some conceptual ideas for mine plans but further drilling is sure to change any ideas of how the Cascabel project might one day be developed.
What we know is that Cascabel represents a huge mass of copper, gold mineralisation with significant potential for development in future years.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.
Stratex International (LON:STI) 2.175 pence, Mkt Cap £10.2m – Gold Pour at Altintepe Gold Mine
• Following construction last month,30,000 tonnes of crushed material was put on to the heap leach as part of the first lift.
• It is anticipated that first gold pour will be achieved within two to three weeks.
Conclusion: This an important step in creating value for the company as it provides an independent source of cash flow. These funds can then be deployed to pursue core exploration activities or to invest in other corporate opportunities.
Vedanta Resources (LON:VED) 517 pence, Mkt Cap £1,392m – Hindustan Zinc looking to increase production to cover shortfall in zinc from Glencore cutbacks
• The CEO of Hindustan Zinc has said that he sees cutbacks by Glencore will create a deficit in the zinc market.
• They see this as an opportunity to boost production to cover the supply gap.
Conclusion: This is the sort of competitive behaviour that negates any role being taken by Glencore to offset supply worries that have been depressing prices. Zinc which has rallied on the back of Glencore’s announcement to cut back 500,000 tons of production has given up some of its gains as the market awaits for evidence that these cutbacks are going to come through.