Centamin (LON:CEY) – Updated Technical Report Provides detail for recent resource and reserve estimates
Minera IRL (LON:MIRL) SUSPENDED – Board tries to sway investors with unauthorised press release as Peru director works to save company
Nyrstar – world’s largest zinc producer may go for rights issue as part of financial restructuring to cover bond repayments
Vast Resources (LON:VAST) – Manaila licence extension and plans to double throughput
Tiger Resources (ASX:TGS) – Secures funding package of $162.5m
London property – Prime market set to fall
• The market for London prime property looks set to fall as a number of factors come together to pull prices lower.
• Transactions for London are at a historic low according to Foxtons, a major agent in the market, suggesting to us that the market is on the turn.
• We understand some Middle Eastern Sovereign wealth funds are already selling commercial property and we believe that this may soon be followed by sales of London prime residential.
• We have already seen the Saudi fund withdrawing £50-70bn out of equity funds in London as lower oil prices raise deficit levels back home and the cost of funding conflict in the region escalates.
• Prices have been held up despite fewer purchases with mortgage lending rising for a fourth month in a row with greater lending amounts going to smaller numbers of buyers, a worry in its self.
• Higher interest rates are going to cause problems for borrowers of larger mortgages when rates rise and also when borrowers come off low rate deals.
• Like the corporate bond market, if the market refuses to refinance some of these mortgages eg >£500k at near historically low rates then some borrowers are going to quickly run into financial difficulties. Borrowing costs for a £500k interest only mortgage could go from around £1,000 per month today to >£2-3,000 per month as personal mortgage rates move higher representing a stretch for many households.
• Even if the BoE maintains low interest rate levels, mortgage companies cunningly shift personal mortgages to higher rates when deals expire causing an effective rise in personal rates without any intervention from the BoE.
• A US investor recently asked, how many of your staff can afford their mortgages at 5%? We dare not answer this question!
UK – Households in all UK regions expect house prices to rise over the next 12 months, but the future price index slipped to its lowest level since Feb this year, Knight Frank/Markit report said.
• House Price Sentiment Index (HPSI) came in at 58.1 this month, down from 59.3 in Sep.
• The index hit the peak of 63.2 in May last year but remained in the expansionary territory (>50.0) for 31 consecutive months.
• 4.6% of households are expecting to buy property over the next 12 months, down from 5.9% in Aug.
• The report notes a substantial division in dynamics between different regions (c.7% of households planned to buy a property in London and Yorkshire v c.2% in South East and <1% in South West) as well as low inventory levels helping to support prices (“houses listed with estate agencies across the country remains close to record lows”).
Rare Earth production cut by 9,000tpa in China
• REE production has been cut to 90,000tpa by a major group of Chinese companies and not cut by 90,000tpa as we said in our note yesterday – sorry!
• The cut of 9,000t of REE supply ‘is around 10% lower of their mandatory plan of this year’ is designed to bring the market back into balance following the release of stocks used for collapsed financing schemes.
• REE prices are already significantly higher as consumers move to buy stocks before the market tightens.
• Consumers are buying spot material for immediate use and are reported to have revealed that it is hard to purchase material though demand for Ferro-Neodymium is reported to be soft.
Economic News
US – Economic news due this week:
Date Announcement Period Actual Expected (Bloomberg) Prev month
Tuesday Housing starts Sep 6.5%mom 1.4%mom 1.7%mom (rev from -3.0%mom)
Building permits Sep -5.0%mom 0.8%mom 2.7%mom (rev from 3.5%mom)
Thursday Weekly jobless claims weekly 259k 265k 256k
Existing home sales Sep 4.7%mom 1.5%mom -5.0%mom
Friday Markit Manufacturing PMI Oct (prelim) 52.7 53.1
China – New property prices post a fifth consecutive monthly increase in Sep supported driven by demand in top-tier cities (Reuters).
• National house prices increase in 39 of 70 cities compared with 35 in Aug and 31 in Jul.
• YoY prices are still down, although the pace of declines slowed down (-0.9%yoy v -2.3%yoy in Aug and -3.7%yoy in Jul).
• First-tier cities recorded the most demand with prices in Beijing and Shanghai up 4.7%yoy and 8.3%yoy, respectively.
• Stronger demand is attributed to rebalancing of households’ wealth from equity markets to property as well as recent changes in state rules on the down-payment for first-time and second-home purchases.
Japan – Manufacturing PMI recorded a stronger than expected growth in Oct (52.5 v 51.0 in Sep and 50.5 forecast) marking the highest reading in over one-and-a-half years.
• More importantly, economic outlook in the sector is reported to have improved during the month.
• “Growth in total new orders accelerated, underpinned by a sloid increase in international demand,” the report said.
• “Subsequently, both employment and buying activity rose during the month, offsetting the declines seen in Sep.”
Eurozone – Mario talks down yields by suggesting a revision to the QE programme during the Dec meeting.
• The slowdown in emerging markets’ growth as well as financial market turbulence pose risks ot the Eurozone growth outlook and ingflation.
• “Most notably, the strength and persistence of the factors that are currently slowing the return of inflation to levels below, but close to, 2% in the medium term require thorough analysis,” Draghi said.
• The bank currently buys €60bn of Eurozone debt per month with a target to expand the ECB balance sheet by more than €1tn.
• Main refinancing and the overnight rate on deposits were kept unchanged at 0.05% and -0.2%, respectively.
• Germany 10-year bond yields fell to a four-month low with steeper declines recorded in Italian, Spanish and Portuguese debt yields.
• The euro fell some 3USc against the US dollar on the announcement.
• Markit Eurozone manufacturing PMI held unchanged at 52.0 in Oct n mixed data from major economies in the single currency block.
• Forward-looking indicators suggest growing risks to economic outlook with service sector expectations of activity in the next year down at a 10-month low, while manufacturing orders-to-inventory at the weakest in nine months.
• Germany manufacturing PMI: 51.6 v 52.3 in Sep and 51.7 forecast.
• France manufacturing PMI: 50.7 v 50.6 in Sep and 50.2 forecast.
• “The PMI remain at a level signalling a modest 0.4% quarterly rise in GDP, suggesting the region will struggle to attain more than 1.5% overall growth in 2015,” Markit said.
• Composite PMI climbed during the month on stronger services’ sector data.
• Eurozone services PMI: 54.2 v 53.7 in Sep and 53.5 forecast.
• Italy recorded a decline in industrial sales in Aug (-1.6%mom/-2.4%yoy v -1.1%mom/2.3%yoy in Jul) along with a significant deterioration in economic outlook as measured by placed orders (-5.5%mom/2.1%yoy v 0.4%mom/10.4%yoy in Jul).
Currencies
US$1.131/eur vs 1.1313/eur yesterday. Yen 120.33/$ vs 119.74/$. SAr 13.396/$ vs 13.561/$. Sterling $1.541/gbp vs 1.547/gbp
0.727/aud vs 0.722/aud –
Commodity News
Precious metals:
Gold US$1,175/oz vs US$1,167/oz yesterday –
Platinum US$1,014/oz vs US$1,009/oz yesterday
Palladium US$698/oz vs US$672/oz yesterday –
Silver US$16.00/oz vs US$15.78/oz yesterday
Base metals:
Copper US$ 5,280/t vs US$5,225/t yesterday –
Aluminium US$ 1,514/t vs US$1,524/t yesterday -
Nickel US$ 10,565/t vs US$10,340/t yesterday –
Zinc US$ 1,782/t vs US$1,761/t yesterday –
Lead US$ 1,777t vs US$1,762/t yesterday
Tin US$ 15,980/t vs US$15,875/t yesterday
Energy:
Oil US$48.40/bbl unch vs US$48.30/bbl yesterday –
Natural Gas US$2.355/mmbtu vs US$2.430/mmbtu yesterday
Uranium US$37.00/lb unch vs US$37.65/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$53.6/t vs US$53.9/t –
Thermal coal (1st year forward cif ARA) US$47.10/t vs US$47.50/t
Other:
Tungsten - APT European prices $170/190 cs $175/195 /mtu – last week despite Chinese producers cutting further production
Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10.
Company News
Centamin (LON:CEY) 70 pence, Mkt Cap £810m – Updated Technical Report Provides detail for recent resource and reserve estimates
• The company has published the technical report that supports its updated Mineral Resources and Reserves at Sukari.
• The open pit resource estimate is for 198 Mt at 1.05 g/t gold giving 13 m contained god oz with a 0.3 g/t cut-off grade.
• The underground estimate is for 1m oz contained gold with a 2 g/t cut-off grade.
• Estimation for the open pit resource uses Multiple Indicator Kriging with block support adjustment.
• The method estimates the histogram of drill hole sample grades in large panels (20m east x 25m north x 10m elevation) with panel sizes based on drill hole spacing.
• The resource estimation takes into consideration the selective mining being undertaken at Sukari with a selective mining unit of 5m east x 8m north x 10m.
• The Mineral Resource at Sukari has been estimated to a depth of around 1,350m based on 252,449 2m downhole composites.
• The depth is based on the initial topography which includes the Sukari hill.
• The new Mineral Reserve is for both open pit and underground has been estimated at 152 Mt at 1.05 g/t gold giving contained oz of 8.8m oz.
• Translation of resources into reserves is 64% for the open pit and 50% for the underground estimates.
• Reserves are based on a metal price of US$1,300/oz of gold with a final open-pit design strip ratio of 5.9:1.
• Underground reserves based on the stoping method being used assume dilution of 10% for flat dipping room and pillar stopes and 15% for steeply dipping long stopes.
• Mining losses assumed varied from 10% for steeply dipping long hole stopes to 50% for flat dipping long hole stopes.
Conclusion: The technical report provides good detail on how the mine has developed and supports mine plans going forward.
Minera IRL (LON:MIRL) SUSPENDED – Board tries to sway investors with unauthorised press release as Peru director works to save company
• New information suggests that Diego Benavides a founder and friend of the late Courtney Chamberlain, former ceo of Minera IRL is trying to save the company from defaulting on its commitments and from being delisted in London.
• The board of Minera IRL in London recently put a stop on gold sales from the Corihuarmi gold mine in a move which is said to have risked default by the company on its Bonding obligations in Peru.
• Mr Benavides, is a director of Minera IRL’s Peruvian subsidiaries and is working to ensure there are sufficient funds delivered to Scotia Bank in Peru to cover collateral for a c. $4m performance bond as required by Peruvian regulations. We are told that if the funds were not lodged with Scotia Bank in Peru the company would be deemed to be in default causing further problems for the company’s operation.
• Surplus funds will be remitted to Minera IRL in London to cover salaries and other expenses but with sufficient funds kept in Lima to ensure Minera IRL meets its local obligations.
• Mr Benavides negotiated and secured a $70m bridge loan from COFIDE a local Peruvian bank as part of a $240m funding for the new Ollachea gold mine. The bridge loan was used to repay due funds to McQuarrie bank and a last $12m payment due to Rio Tinto as part of the long standing agreement for the gold licenses.
• The Corihuarmi gold mine continues to operate in Peru and has worked without significant interruption according to reports with the full support of the community and local directors.
• It is interesting to note recent press releases which we believe have allegedly been issued without the full authorisation of the board and which appear to have the effect of unduly influencing investors.
• It appears as if certain directors may be working against the best interests of the company in the release of what appear to be (allegedly) potentially misleading and disingenuous statements.
• The actions of certain members of the board have paralysed construction of the new Ollachea gold mine, caused the suspension of the shares and are said to have upset members of the all-important community in Peru.
Conclusion: We believe investors should support Mr Diego Benavides in his efforts to restructure the board and to restore the company back on its path of growing gold production.
Nyrstar – world’s largest zinc producer may go for rights issue as part of financial restructuring to cover bond repayments
• Zinc prices look set for more volatility as Nyrstar, the world’s largest zinc producer restructures its finances to meet upcoming bond repayments
• The company has warned that it may need to issue new equity to cover the payments and strengthen its balance sheet
• Nyrstar has a €415m bond maturing in 2016 and may raise €200-300m to cover this and other payments depending on zinc prices
• Trafigura hold around 20% of Nyrstar stock and are likely to support an issue in our view
• Nyrstar earned some €215m in the first 9-months of this year
Vast Resources (LON:VAST) 1.35 pence, mkt Cap £22.4m – Manaila licence extension and plans to double throughput
• The company confirms that it has been granted a 3 year extension to the Manaila mining licence in Romania. The extension also expands the licence area which will facilitate additional drilling to “confirm the expected increase of the resource which is considered minable by open pit and which constitutes Phase 1 of the Manaila operation.” Manaila is reported to be performing well with “costs to date lower than expected.”
• Vast Resources also announces that, having achieved a 10ktpm throughput rate in late September, it now plans to recommission the second mill, at a cost of around US$200,000, to increase “production up to the plant’s design capacity of 20ktpm.” The costs are expected to be covered from existing cash resources and project cash-flow.
• The company also reports that the Romanian Trade Registry has confirmed the registration of its 50.1% interest in Sinarom Mining Group which owns the Manaila mine. In July, Vast Resources announced the acquisition of Sinarom for €1 plus the assumption of debts of approximately $384,650 due by Sinarom to Zheng Yuaning (the historic offtake partner for the Manaila mine) and to Shi Xu Ming, the former manager of the mine.
Tiger Resources (ASX:TGS) A$0.081, A$92.6m – Secures funding package of $162.5m
• Tiger has secured a two tranche funding package from Taurus Mining Finance Fund and the IFC.
• Taurus is to provide $122m and the IFC the rest.
• Funding will be re-finance existing debt facilities with Taurus and Gerald Metals and the cover expansion costs at the Kipoi copper project in the DRC.
• $137.5m will be for re-financing and $25m for the expansion facility.
• The expansion is to increase the capacity at the SX-EW plant from 25,000 to 32,500 tonnes per year.
• The Kipoi project is based on the Central African Copper Belt.
• Current reserves support a 16 year LOM at 32.5 ktpa according to the company.
• The all in sustaining cash cost is around US$1.68/lb.
Conclusion: Interesting to see that Tiger is attracting funding given the project’s location in the DRC.