Economic News
US – Factory sector expanded in Oct but only just according to the latest ISM data.
• ISM manufacturing PMI: 50.1 v 50.2 in Sep and 50.0 forecast.
• Respondents pointed to stronger US dollar weighing on business activity in manufacturing.
• On a positive note, new orders expanded at a faster pace with the sub-index up 2.8 points to 52.9.
Date Actual Expected (Bloomberg) Prev month
Monday ISM Manufacturing PMI Oct 50.1 50.0 50.2
Tuesday Factory Orders Sep -0.9%mom -1.7%mom
Vehicle Sales (annualised) Oct 17.7m 18.1m
Wednesday ADP Payrolls Oct 180k 200k
Trade Balance Sep -US$41.0bn -US$48.3bn
ISM Services PMI Oct 56.5 56.9
Thursday Jobless Claims weekly 260k 260k
Friday Nonfarm Payrolls Oct 180k 142k
Unemployment Oct 5.10% 5.10%
Hourly Earnings Oct 0.2%mom/2.3%yoy 0.0%mom/2.2%yoy
UK – The FCA estimates 6.9% of cardholders in the UK or 2m people are in arrears or have defaulted on outstanding borrowed amounts.
• Another 2m have persistently high levels of debt they may struggle to repay with a further 1.6m serving just minimum payments on their credit card debt.
Australia – The Australian dollar strengthened after the RBA decided to keep rates on hold at a record low of 2%.
• Rates remained unchanged at current levels since May following two cuts in the year.
• Nevertheless, the Bank noted it is open to a prospect of easing more if needed given low inflation data.
• “The outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”
Zambia – The Bank of Zambia hiked its benchmark lending rate for the first time this year in an effort to rein in inflation.
• The rate was increased to 15.5% from 12.5%.
• The inflation rate nearly doubled to 14.3% in Oct on the back of power outages and a 49% depreciation in the kwacha this year.
Currencies
US$1.0985/eur vs 1.006/eur yesterday. Yen 120.76/$ vs 120.64/$. SAr 13.823/$ vs 13.781/$. Sterling $1.541/gbp vs 1.547/gbp
0.718/aud vs 0.713/aud –
Commodity News
Precious metals:
Gold US$1,133/oz vs US$1,138/oz yesterday –
Platinum US$974/oz vs US$974/oz yesterday - Withdrawals from platinum and palladium exchange traded funds climbed the most since at least 2007 last month on the back of concerns over PGM demand outlook following the Volkswagen emissions scandal.
• Holdings in platinum and palladium ETFs fell 5.8t (-7%) and 8.3t (-10%) in Oct, respectively.
• Auto industry accounted for 45% of platinum demand and 80% of palladium consumption last year according to Johnson Matthey estimates.
Palladium US$646/oz vs US$663/oz yesterday –
Silver US$15.35/oz vs US$15.41/oz yesterday
Base metals:
Copper US$ 5,131/t vs US$5,118/t yesterday – Cochilco, a Chilean copper commission, forecasts prices to average US$5,200/t in Q4/15 and US$5,360/t next year.
• Updated 2016 forecasts represent a US$1,015/t downwards revision on previous estimates.
Aluminium US$ 1,505/t vs US$1,497/t yesterday –
Nickel US$ 10,095/t vs US$10,100/t yesterday –
Zinc US$ 1,693/t vs US$1,708/t yesterday –
Lead US$ 1,701t vs US$1,704/t yesterday
Tin US$ 15,000/t vs US$14,900/t yesterday –
Energy:
Oil US$48.90/bbl unch vs US$48.90/bbl yesterday –
Natural Gas US$2.277/mmbtu vs US$2.239/mmbtu yesterday
Uranium US$35.75/lb unch vs US$35.40/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$47.3/t vs US$48.2/t – Prices will continue to deteriorate until finding a level well below US$50/t, BHP marketing arm said.
• In the meantime, Vale reaffirmed plans to increase low cost production.
• Vale plans to ramp up sales to 300mt in China by 2019, up from 180mt recorded last year.
Thermal coal (1st year forward cif ARA) US$48.50/t vs US$47.90/t –
Lithium – researchers said to be looking at developing lithium batteries with 10x the power of conventional batteries (Nature)
Other:
Tungsten - APT European prices $165-195/mtu vs $165-185/mtu last week – spreads widen suggesting some resistance to lower prices. Prices for better quality concentrates should be higher.
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) 17.25 pence, Mkt Cap £63.5m – Consolidating additional exploration areas near the New Liberty mine.
• Aureus Mining reports that it has acquired an additional 281 sq km of exploration licences (the Cape Mount, Cape Mount West and Cape Mount East permits) close to the New Liberty gold mine in Liberia from Sarama Resources for a total of 2.6m Aureus shares plus an uncapped 1% NSR on gold produced from the Cape Mount permit area.
• The new licences cover a 15km long mineralised corridor defined by geochemical soil anomalies and an extensive area of artisanal gold working and lie “on average within a 15 kilometre radius of the New Liberty Gold Mine.”
• Sarama spent $1.8m on exploring these licences and in 2014 completed a reconnaissance diamond drilling programme comprising 15 holes (1600m) targeting the Bangoma, Saanor and Bomafa prospects within the Cape Mount licence. Fourteen of these holes intersected gold mineralisation and results reported by Sarama included a 9.3m wide intersection grading 3.9 g/t gold from a depth of 9.3m in hole CMDD004; 5m averaging 2.3g/t gold from a depth of 28m in hole CMDD007 and 2.5 g/t gold over a 3m wide intersection from a depth of 33m in hole CMDD002.
• Aureus Mining highlights the reconnaissance nature of this drill programme pointing out that at Bangoma, which is a focus of artisanal mining activity, intervals between drill holes can reach up to 600 metres while at “Saanor and Bomafa only 100 metres strike lengths for each prospect were tested.” As a result the drilling has “effectively tested only 1km of the identified 15km anomalous soil corridor.”
• Aureus Mining has already identified targets for follow up work including geological mapping, pitting and trenching as a prelude to more detailed structural and geological interpretations to identify high priority trill targets. The company, prudently, hints that the more expensive detailed drilling is likely to follow “once the Company achieves a cash flow positive position.” New Liberty is expected to achieve commercial production early next year.
Conclusion: Aureus has increased its licence holdings around the New Liberty mine to 1683 sq km through the acquisition of ground which already has demonstrable gold mineralisation. The proximity of the New Liberty operation should lower the required threshold for exploration success as discoveries could operate as satellite operations to feed the New Liberty plant without the need to justify a new stand-alone plant.
DiamondCorp (LON:DCP) 7.875 pence, Mkt Cap £29.6m – Disappointing Update at Lace Diamond Mine
Under Review
• Development work at upper K4 block where the company had planned to start production has been held up.
• Poor ground conditions at the 290m doming level has resulted in extra safety work required before blasting can be undertaken to start mining at the 310m level at K4.
• As a result of the delay, the company is in discussions with its main lenders and BEE partners to help with cashflow pressures.
• Financing arrangements with existing lenders particularly the IDC are said to be positive to roll up interest and reschedule payments.
• Development costs are running ahead of budget at R49,993/m against a budget of R38,280/m with the weakening of the rand going against them.
• On the positive side, the commissioning of conveyor belts is now 80% complete and belts are scheduled to be fully commissioned by the end of this week.
Conclusion: This is a disappointing update on Lace with difficult ground conditions holding up scope to start production.
Holding up diamond sales will impact cash flows required to meet debt payments – we expect the IDC, their main lenders to be supportive in pushing out these payments. Key will be timing on production and sales – this looks like it has been pushed out a quarter at this stage.
We have been buyers of the shares - while we believe Lace will deliver good cashflows once production has started and the management team continue to work hard to achieve this in a safe manner which is paramount, we are reviewing our valuation based on a revised timing of cashflows.
Eurasia Mining (LON:EUA) 0.575p, mkt cap £17.1m – Production licence for West Kytlim alluvial platinum project
• Eurasia Mining confirms “that, after a long period of build up, the Company now holds a Production Licence.” Completion of the “process of converting the West Kytlim licence to a Detailed Exploration and Production Licence has now been completed and …. a one off payment amount of 2,126,000 Roubles (approximately £21,000) has been transferred to the Ministry for Subsoil Use in respect of legal rights to mine reserves of platinum and gold at Eurasia’s West Kytlim Licence.” The licence is valid until 15th October 2040.
• The company is now focussing on moving to production at West Kytlim in 2016. Eurasia Mining owns 75% of West Kytlim.
• A programme of detailed exploration work has been prepared “and will be lodged with authorities in due course”.
• The mine technical design, which has been contracted to external experts, is continuing and expected to be completed by the end of the year.
• Applications have been made to the Forestry Department to allow clearance of land along the proposed route of the power line and the field camp.
Conclusion: The receipt of the licence for West Kytlim is a milestone for the company. Other matters, including detailed exploration and mine development plans and applications for Forestry clearance are underway but any protracted delay on these work-streams could jeopardise the achievement of production nest year.
SolGold* (LON:SOLG) 2p, Mkt Cap £15.2m – New high grade copper / gold porphyry discovery at Aguinaga at Cascabel
https://broadkast.ballyhoo.com.au/download/files/06996/1925890/2015.11.03%20-%20Cascabel%20Exploration%20Update%20_Aguinaga%20Sample%20Result.pdf
• SolGold have hit a section of high grade copper / gold mineralisation at surface on the flank of the Aguinaga porphyry within the Cascabel license are in Ecuador.
• The channel results show very encouraging high grades of gold and copper along a 9m length. The structure appears open ended.
o 9.0m grading 1.01 % copper, and 0.79 g/t gold.
o The last 2m of assays within the channel run at over >2% copper an >2g/t gold indicating significant potential for continuation of the high-grade mineralisation
• This sample, exposed mineralisation and geophysical modelling suggests a massive target at Aguinaga with the potential for huge mineralised intersections on drilling.
• The really exciting part of this is the exposure of high grade mineralisation at surface with its coincident location on the flank of the Aguinaga porphyry.
• A photo in the press release shows the massive nature of the exposed mineralisation.
• If drilling confirms massive intersections of high-grade mineralisation from surface this could be a game changer for SolGold.
• Geophysics indicate good potential for mineralisation at the Aguinaga porphyry. The MVI Magnetic Inversion model relates well to the IP Chargeability survey (see models in the press release) indicating very good potential for long intersections of massive sulphide mineralisation.
• Drilling at the Alpala prospect consistently shows >1km intersections of copper-gold mineralisation.
• SolGold is planning to get the prospect to drill ready status before the year end.
Conclusion: Today’s results could mark the discovery of a major new mineralised copper / gold porphyry system with high-grade mineralisation starting at surface.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.