Economic News
US – The Fed is expected to avoid changes in rates this week with market expectations suggesting no move by 2016.
• The FOMC meets on Tuesday with the respective statement due on Wednesday.
• With little change in the course of the currency monetary policy forecast to be announced this week, market focus is on advance Q3 GDP numbers due this Thursday.
Date Announcement Period Actual Expected (Bloomberg) Prev month
Monday New home sales Sep -0.4%mom 5.7%mom
Tuesday Durable Goods (Core) Sep -1.3%mom (0.0%yoy) -2.3%mom (-0.2%mom)
Non-defence Capial Goods Orders ex Air Sep 0.2%mom -0.8%mom
House prices S&P/CS Aug 0.1%mom/5.1%yoy -0.2%mom/5.0%yoy
Markit Services PMI Oct (prelim) 55.2 55.1
Wednesday FOMC statement 0.0-0.25% 0.0-0.25%
Thursday Weekly jobless claims weekly 264k 259k
Advance GDP Q3 1.5%qoq (annualised) 3.9%qoq
Advance Core PCE Q3 1.4%qoq (annualised) 1.9%qoq
Friday Personal Spending Sep 0.2%mom 0.4%mom
PCE Deflator (Core) Sep 0.2%yoy (1.4%yoy) 0.3%yoy (1.3%yoy)
China – The PBoC cut the benchmark interest rate by 0.25% to 4.35% marking the sixth cut in 12 months.
• In addition, it lowered the reserve requirement ratio for commercial banks by 0.5% to 17.5% targeting an increase in bank lending.
• The move was announced on Friday, four days after official numbers showed economic growth continued to normalise towards long term lower sustainable levels.
• The Central Committee of the CPC is meeting from Monday to Thursday to set out a new five year plan offering a roadmap for a continuing transition towards consumer-led economy.
Germany – Business climate index fell in Oct, although the decline was weaker than forecast.
• IFO Business Climate: 108.2 v 108.5 in Sep and 107.8 forecast.
• Someone may argue the modest fall is a sign of relative resilience of the economy amid a slowdown in China and emissions scandal at carmaker Volkswagen.
Currencies
US$1.1028/eur vs 1.1310/eur yesterday. Yen 121.03/$ vs 120.33/$. SAr 13.660/$ vs 13.396/$. Sterling $1.535/gbp vs 1.541/gbp
0.726/aud vs 0.727/aud –
Commodity News
Precious metals:
Gold US$1,166/oz vs US$1,175/oz yesterday – Chinese physical demand may match or exceed the record in 2013 on the back of the RMB devaluation and jitters in equity markets, according the Chinese Gold & Silver Exchange Society.
• Demand in Hong Kong is expected to pick up through H2/15 following a lacklustre first six months (H1/15: 24.8t; CY14: 61.4t)
• Purchases in mainland China is reported to have increased after the stock market turmoil and Aug surprise devaluation.
• The latest WGC data showed demand totalled 497.3t in H1/15 v 973.6t in CY14.
Platinum US$988/oz vs US$1,014/oz yesterday
Palladium US$681/oz vs US$698/oz yesterday –
Silver US$15.93/oz vs US$16.00/oz yesterday
Base metals:
Copper US$ 5,232/t vs US$5,280/t yesterday –
Aluminium US$ 1,514/t vs US$1,514/t yesterday -
Nickel US$ 10,545/t vs US$10,565/t yesterday –
Zinc US$ 1,764/t vs US$1,782/t yesterday –
Lead US$ 1,765t vs US$1,777/t yesterday
Tin US$ 15,495/t vs US$15,980/t yesterday
Energy:
Oil US$48.20/bbl unch vs US$48.40/bbl yesterday –
Natural Gas US$2.192/mmbtu vs US$2.355/mmbtu yesterday
Uranium US$36.75/lb unch vs US$37.00/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$53.5/t vs US$53.6/t –
Thermal coal (1st year forward cif ARA) US$47.10/t vs US$47.10/t
Other:
Tungsten - APT European prices $170-190/mtu $175-195/mtu – prices fell another $5/mtu last week. We were surprised to see this fall considering the reported closure of some Chinese production
Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10.
Company News
Capital Drilling (LON:CAPD) 24 pence, Mkt Cap £32.3m – Q3 Trading Update
• The company achieved revenues of US$20.8m for the period down 12% from the same time last year.
• Year to date revenues stand at US$59.8m.
• Average Revenues per Operating Rig (ARPOR) rose 7% from the previous quarter to US$192,000.
• This was based on drilling efficiencies as well as good performance from diamond drilling exploration contracts.
• Rig utilisation stood at 34%.
• A further US$8m of debt was repaid and the company paid an interim maiden dividend of US$1.1 cents.
• Market conditions are said to remain subdued.
Conclusion: The company do not see any improvement in market conditions and against this backdrop they remain focussed on delivering low cost drilling programmes to customers and keeping costs down. Debt is being paid back and the balance sheet remains relatively strong.
Rambler Metals (LON:RMM) 4.625 pence, Mkt Cap £6.7m – Results for FY 2015 ending July 31
• The company reported revenues down 34% to C$40.886m resulting in EBTIDA of C$2.086m against EBITDA of C$27.270m.
• This resulted in a loss of C$1.44m before impairment charges.
• An impairment taken on the Ming Mine as a result of lower long term copper price assumptions resulted in losses of C$15.12m.
• A total of 17,662 dry metric tonnes of concentrate was produced for the year down 32% from last year.
• Average production costs before D&A and royalties stood at $2.16 per equivalent pound of copper up from $1.47 last year.
• Average production costs per tonne milled stood at $129/t down 4% from last year.
• Head grades fell for the last quarter to 1.93% against 2.53% for the year.
• Cash and cash equivalents at the end of the period excluding restricted cash stood at C$4.42m with C$3.25m restricted cash.
• Net debt stood at C$8.93m including restricted cash.
• As of October 23, cash stood at C$2.1m.
Conclusion: Lower mined copper grades against a lower copper price are not helping the performance of the Ming Mine. At these copper prices the mine is just generating cash. FY 2016 will incorporate the first full year of the Lower Footwall Zone optimisation strategy. We look forward to seeing if this has scope to reduce costs and improve profitability against a muted copper price background.
Randgold Resources (LON:RRS) 4610 pence, Mkt Cap £4.3bn – Major exploration push in Cote d’Ivoire as Tongon pays off its loans
• Randgold Resources has announced that its Tongon mine in Cote d’Ivoire, which came into production in April 2010 at a cost of $580m, and is targeting 260,000 oz of gold production in 2015, has now paid off its $448m shareholder loans.
• The mine is 89% owned by Randgold Resources, with 10% free carried by the Ivorian Government and 1% by a local company. The company reports that “Tongon has already paid close to $90m to the Ivorian state in the form of royalties and taxes and the country will now benefit even more from the dividends the government will receive through it 10% carried interest in the mine as well as the increased revenue when Tongon starts paying full corporate tax at the end of this year.”
• Speaking to local media, Chief Executive, Mark Bristow, pointed out that the mine had also contributed over $600m to the local economy through payments to local suppliers and the contribution of almost $6m to community projects. He also highlights the high level of employment for local workers – Tongon’s workforce is 97% Ivorian and “only two members of its management team are not Ivorians.”
• Looking to the future, Bristow announced the start of the company’s “biggest ever exploration drive in Cote d’Ivoire”. The new programme will involve a re-evaluation of the Nielle permit area, which hosts Tongon, is targeting multi-million oz deposits and will include comprehensive geophysical surveys and follow up diamond drilling.
• Based on published 2014 data, Tongon holds approximately 13% of Randgold’s gold ore reserves and produced around 20% of the group’s 1.15moz of gold production. Cash costs in 2014 of $834/oz are the second highest within the group after the aging Morila mine, recent power supply problems led to cash costs of $905/oz during the June quarter.
Conclusion: Tongon is now debt free and Randgold Resources is building on this key asset to increase its exploration effort in Cote d’Ivoire where it continues to look for multi-million oz gold deposits with a new exploration programme in the north of the country.
Tri-Star Resources* (LON:TSTR) 0.12 pence, Mkt Cap £10.7m – Board Change
• Ken Hight has resigned as Executive Director of the company with immediate effect.
• He joined Tri-Star through the Portage acquisition in Canada.
Conclusion: Ken Hight’s main focus within the group was overseeing the Canadian assets acquired through Portage. While the assets in Canada have scope for further exploration and potential development, the key target for the group now is to work with its partners to develop the antimony roaster in Oman.
*SP Angel acts as Nomad and Broker to Tri-Star Resources