Venezuela – will this be the first debt default caused by lower oil prices?
• Venezuela is rapidly liquidating its gold reserves in an effort to raise FX to meet $3.5bn of debt repayments due within 9 days followed by another $12bn next year.
• The company was holding some US$12bn worth of gold earlier this year and is thought to have been selling gold to cover its forex requirements
• The nation entered into a $1bn swap arrangement at end April with Citigroup for 1.4moz of gold
• If Venezuela defaults then the state oil company will struggle to raise letters of credit for its oil exports interrupting global oil flows and plunging the country into crisis and.
Lithium – Battery breakthrough packs 5x more power
• Cambridge electrochemists have developed a lithium-air battery which packs 5x more power for a given battery size.
• Theoretically lithium-air batteries can carry 10x the power density of current lithium battery packs.
• The batteries are said to be rechargeable 2,000 times but the team reckon there is another decade of work before commerciality.
Leni-Maths – a new branch of mathematics for extrapolating numbers with almost no primary data points
• We realise we have been calculating reserves and resource all wrong for many years now.
• There are other more complex statistical models like Kriging, polygonal, inverse distance techniques for the computation of reserves and resources.
• SP Angel analysts have been experimenting with Leni-Maths and have concluded this is a far more convenient and economic method of statistical computation
Today’s trial goes as follows:
• Leni-Maths; we noticed 25 Chinese visitors in a shop earlier today and the shop is around 50 sq ft in floor area.
• The United Kingdom is almost exactly 2.6222 trillion sq ft according to Google, which knows all things.
• Our Leni-Maths computation calculates that there should be some 1.3111 trillion Chinese visitors in the UK today based on our small statistical sample.
• Each Chinese visitor spends on average £2,688 per visit with at least 20% of that going to the UK government in the form of tax receipts.
• Leni-Maths tells us that £2,688 x 1,3111 trillion visitors x 20% tax = £704 billion.
• The UK national debt is £1.6 trillion => Leni-Maths indicates to us that the number of Chinese visitors in the UK should repay the national debt within a couple of visits
• Leni-Maths is Genius and we hope the Nobel Prize committee will consider this breakthrough in statistical mathematics
• Corbynomics, the new economic utopia of Jeremy Corbyn, leader of the Labour party, also appears to work off a branch of Leni-Maths
Economic News
US – Economic growth more than halved in Q3/15 coming close to market estimates although consumer spending was relatively resilient recording a marginal slowdown.
• Weaker growth rate was attributed to a slower rate in the inventories’ build up and adverse effects of strengthening dollar on decelerating exports.
• Improving jobs market seems to be supporting >3% growth in household spending.
• Core PCE index, a Fed’s preferred measure of inflation, has gone down during the quarter suggesting the period of slowing inflation is not over yet.
Date Announcement Period Actual Expected (Bloomberg) Prev month
Monday New home sales Sep -11.5%mom -0.6%mom 5.2%mom (rev from 5.7%)
Tuesday Durable Goods (Core) Sep -1.2%mom (-0.4%mom) -1.5%mom (0.0%mom) -3.0%mom (-0.9%mom)
Non-def Capital Goods Orders ex Air Sep -0.3%mom 0.2%mom -1.6%mom
House prices S&P/CS Aug 0.1%mom/5.1%yoy 0.1%mom/5.1%yoy -0.2%mom/5.0%yoy
Markit Services PMI Oct (prelim) 54.4 55.5 55.1
Wednesday FOMC statement 0.0-0.25% 0.0-0.25% 0.0-0.25%
Thursday Weekly jobless claims weekly 260k 265k 259k
Advance GDP Q3 1.5%qoq 1.6%qoq (annualised) 3.9%qoq
Advance Core PCE Q3 1.3%qoq 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)
Japan – The BoJ holds monetary policy unchanged despite broad market expectations for an expansion in stimulus.
• Previously, separate report showed core-core inflation (prices ex food and energy) inched up 0.1pp to 0.9%yoy while consumer spending surprisingly contracted last month.
• CPI (ex food and energy): 0.9%yoy in Sep v 0.8%yoy in Aug and 0.9%yoy forecast.
• CPI (ex food but including energy: -0.1%yoy v -0.1%yoy in Aug and -0.2%yoy forecast.
• Household spending: -0.4%yoy v 2.9%yo in Aug and 1.1%yoy forecast.
BoJ economic forecasts FY15 (Mar/16 YE) FY16 FY17
Oct GDP growth 1.2 1.4 0.3
Jul GDP growth estimates 1.7 1.5 0.2
Apr GDP growth estimates 2.0 1.5 0.2
Oct inflation (ex food) 0.1 1.4 1.8
Jul inflation estimates 0.7 1.9 1.8
Apr inflation estimates 0.8 2.0 1.9
Germany – Oct inflation numbers came in better than forecast with prices remaining unchanged through the period following a fall recorded in Sep.
• CPI (EU harmonised): 0.0%mom/0.2%yoy v -0.3%mom/-0.2%yoy in Sep and -0.1%mom/0.0% forecast.
• Retail sales increase but miss market forecasts in Sep (+3.4%yoy v +2.1%yoy (revised from +2.5%yoy) and +4.1%yoy forecast).
Spain – The economy expanded for a straight ninth month in Q3/15 comaing in line with market estimates.
• Growth in three months totalled 0.8%qoq, down from 1.0%qoq recorded in the previous quarter.
Currencies
US$1.1004/eur vs 1.0962/eur yesterday. Yen 120.51/$ vs 120.79/$. SAr 13.800/$ vs 13.750/$. Sterling $1.534/gbp vs 1.527/gbp
0.710/aud vs 0.709/aud –
Commodity News
Precious and base metals trade lower following an increase in the US dollar against major currencies as the Fed does not rule out a hike during its Dec meeting.
Precious metals:
Gold US$1,148/oz vs US$1,161/oz yesterday –
Platinum US$996/oz vs US$1000/oz yesterday
Palladium US$682/oz vs US$674/oz yesterday –
Silver US$15.59/oz vs US$15.95/oz yesterday
Base metals:
Copper US$ 5,117/t vs US$5,166/t yesterday –
Aluminium US$ 1,473/t vs US$1,474/t yesterday –
Nickel US$ 10,180/t vs US$10,450/t yesterday –
Zinc US$ 1,687/t vs US$1,723/t yesterday –
Lead US$ 1,696t vs US$1,726/t yesterday
Tin US$ 15,050/t vs US$15,250/t yesterday – only three Indonesian tin producers meet new export rules which start on Saturday (Reuters)
• New rules require Indonesian tin producers to have CnC (clean and clear) certification but only three companies have managed to get the certificates out of 22 previously registered tin exporters.
• PT Timah, Indonesia’s largest tin miner has CnC certification for around half its concession areas potentially limiting its tin exports
Energy:
Oil US$48.90/bbl unch vs US$48.70/bbl yesterday –
Natural Gas US$2.238/mmbtu vs US$2.313/mmbtu yesterday
Uranium US$35.50/lb unch vs US$35.70/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$52.9/t vs US$53.1/t –
Thermal coal (1st year forward cif ARA) US$48.20/t vs US$47.60/t – Indonesian coal exports forecast to fall below 300mt next year on lower prices
• Coal exports are forecast to fall by around 17% next year from 330-360mt this year as coal miners suspend and close production on low prices
Lithium – researchers said to be looking at developing lithium batteries with 10x the power of conventional batteries (Nature)
Other:
Tungsten - APT European prices $165-185/mtu vs $170-190/mtu last week – when will this fall in tungsten prices end?
Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10.
Company News
Asiamet Resources (LON:ARS) 1.40 pence, Mkt Cap £7.0m – Raising £1m to fund BKM Preliminary Economic Assessment
• Asiamet has announced that it plans to place up to 71.4m new shares at a price of £0.014 to raise £1m to fund the completion of a Preliminary Economic Assessment (PEA) for its Beruang Kanan Main (BKM) copper deposit in central Kalimantan.
• The company recently reported a substantial increase to the resource estimate for BKM which now stands at 15m tonnes at an average grade of 0.7% copper classed as “indicated” with an additional inferred resource of 49.7m tonnes grading 0.6% copper.
• The previous resource, dated September 2014, of 24mt at an average grade of 0.8% copper was all classed as “inferred” so the company’s recent work has both expanded the overall size of the resource by around 110% and upgraded the confidence level of a substantial portion of the resource, which should help the company with the mine and process design within the PEA.
• The PEA is expected to be completed in early 2016 and this should provide the first detailed insight into how the company plans to move forward from its exploration success into mine development. The company has identified other exploration targets within its licence area at the Beruang Kanan West and Polymetallic prospects and drilling is underway at the Beruang Kanan South area within 1.5km of BKM.
Conclusion: Asiamet Resources has made significant progress in delineating resources at BKM over the last year and in identifying additional targets which may eventually lead to further resources. We look forward to the results of the PEA in 2016.
Coal of Africa (LON:CZA) 3.2 pence, Mkt Cap £61.7m – Quarterly Update
• Over the quarter the company entered into a share subscription and loan agreement with a private investment company Yishun Brightrise.
• 183,231,261 shares were issued at a price of 5.15 pence to raise £9.4m and US$10m raised through the loan agreement.
• Yishun has started the due diligence process for a potential acquisition of a strategic interest in the Makhado coking and thermal coal project.
• The Makhado Project has been granted a mining licence but an interim court interdict stopping any mining or construction was issued against the project in Q2 2015.
• This matter is expected to be resolved in court during November 2015.
• The company hope to start pre-construction activities once a water licence has been granted.
• Mooiplaats have been placed on care and maintenance and is looking for a buyer for the mine.
Conclusion: With Mooiplaats on care and maintenance, the main upside is getting funded for the Makhado project and resolving outstanding issues to start construction. Against the current price outlook for coking and thermal coal, it is good that the company has attracted the interest of a potential investor.
Ferrum Crescent (LON:FCR) 0.375 pence, Mkt Cap £2.3m – Quarterly activities report
• The company has entered into a JV with Business Venture Investments (BVI) for the completion of the BFS on the Moonlight Project.
• This is iron ore in SA and the company needs to do infill drilling to establish a reserve for the BFS.
• BVI is the sister company of SA BEE investment house Ovation Capital.
• The project has a granted 30 year mining right and a JORC resource for 52.6 Mt at 31.3% Fe in the measured category, 83 Mt at 27.4% in the indicated category and 172 Mt at 25.3% which is inferred.
• The resource is expected to support a 20 year mine life for 4.5 mtpa pellet production.
• A conceptual study has been done to use a slurry concentrate pipeline to a pelletising plant near the Kumba railhead at Thambazimbi.
Conclusion: Having a JV partner with a BEE background is the only way this project can be progressed.
Metminco* (LON:MNC) 0.28 pence, Mkt Cap £7.5m – Ruling on the Mollacas appeal expected by year end
• Metminco reports that the Chilean Supreme Court has now heard the appeal against a ruling by the Court of Appeal of the IV Region which extinguished rights to the company’s Mollacas Copper Leach Project.
• The decision by the Supreme Court is expected by the end of 2015..
• As well as the Mollacas project, Metminco is also progressing its Los Calatos project in Peru where a recent mining study by the consultants RPM has identified underground mining options which offer enhanced economic returns compared to earlier plans to develop the deposit as a very large open pit mine.
• Metminco’s new plan, which still requires substantial infill drilling and engineering work, will mine at 25% of the rate originally envisaged (6mtpa vs 24 mtpa) to produce 46% of the copper output (45 ktpa vs 98.4 ktpa) at around half the capital expenditure ($650m vs $1.32bn). Mine life has been reduced from 34 years to 17 years.
• Cash operating costs are reported to be slightly (7%) higher at $1.20/lb after by-product credits.
• SP Angel is pleased to report that it has been appointed Joint Broker to Metminco.
*SP Angel act as joint-broker to Metminco
North River Resources (LON:NRRP) 0.13 pence, Mkt Cap £2.9m – Project Update
• The company has not secured the mining licence for the project which had been targeted for the end of October 2015.
• This is said to be the nominal date chosen for Phase 1 fund raising.
• The company is in on-going discussions with the Ministry of Mines and Energy to secure the permit.
• Securing the permit would have enabled a decision to be made by the end of the year on construction of the project.
Conclusion: Permitting has dragged on much longer than expected and we wonder what is holding up the granting of the permit given that this is a brownfield project in an already contaminated mine site environment. We are perplexed as to what the holdup could be as permitting was not considered to be much of an issue on previous visits to the mine site.
*An SP Angel analyst has previously visited the Namib lead / zinc mine
Nyota Minerals (LON:NYO) 0.055p Mkt Cap £0.826m – Performance rights for directors
• Nyota Minerals have taken the unexpected step of issuing performance rights for directors.
• The board propose (translates to have voted themselves) 72m performance rights representing 4.8% of the current issued share capital.
• We wonder if these rights should be renamed as ‘non-performance’ rights.
• Investors have witnessed spectacular non-performance in this company with the company losing its key gold asset, Tulu Kapi, to Kefi Minerals.
• The project has since been revaluated, significantly improving its calculated value, vastly improved prospects for financing and development.
• We agree with incentivising management teams but we do not agree with reward for monumental mismanagement and failure.
• We are reminded of the words of Dave Lowell in his autobiography of the ‘World’s Best Mine Finder’:
• "Finding mines is a high-risk business. In addition to the geological risk are the political risk, the metal price risk, the mine financing risk and the timid, incompetent management risk. Success is the summation of a list of well-evaluated risks."
Conclusion: We wouldn’t give a Nyota for this one