Economic News
US – Core inflation came in line with estimates and close to the Fed target raising chances of the central bank announcing first rate increase in years in Dec.
• On a less positive note, industrial production was down 0.2%mom driven by softer oil sector numbers and weather-related slowdown in electricity use.
• Manufacturing output accounting for 3/4s of industrial production recorded the strongest increase since Jul on the back of gains in autos, parts and construction supplies.
China – Property prices climbed led by gains in top-tier cities following more than a year of price declines.
• The government has recently boosted measures to support the sector by cutting down-payments for the state-sponsored Housing Provident Fund as well as for first time buyers.
• New home prices in 70 large cities increased by an average 0.01%yoy, up from a 0.9%yoydecline in Sep, on Reuters estimates.
• On month-on-month basis prices were up 0.2%mom, marking a sixth straight gain.
Australia – The loss of well-aid mining jobs is weighing on pay growth numbers.
• Earnings climbed 2.3%yoy in year through Sep/15 with private sector wages up 2.1%yoy and public sector pay up 2.7%yoy.
• Adjusting for a 1.5%yoy inflation and 2.1%yoy (core CPI), an increase in earnings appears to be negligible.
Currencies
US$1.0685/eur vs 1.0668/eur yesterday. Yen 123.28/$ vs 123.26/$. SAr 14.214/$ vs 14.291/$. Sterling $1.524/gbp vs 1.521/gbp
0.711/aud vs 0.711/aud – yesterday. Euro targeting 1.05 rate vs US dollar as Fed rate rise nears
Commodity News
Precious metals:
Gold US$1,073/oz unch vs US$1,082/oz yesterday – Gold fell for a seventh consecutive trading session hitting a fresh five-and-a-half-year-low today.
Platinum US$853/oz vs US$871/oz yesterday -
Palladium US$547/oz vs US$549/oz yesterday –
Silver US$14.25/oz vs US$14.29/oz yesterday
Base metals:
Copper US$ 4,655/t vs US$4,680/t yesterday – Prices touched a new six-year low dipping below the US$6,400/t level yesterday on the back of strengthening USD and growing concerns regarding Chinese metal demand.
• Codelco would rather aim for a reduction in costs rather than cutting production amid weak low copper prices environment , CEO of the Company said.
• “We-re trying to lower costs to overcome the price drop but we’re not cutting production.”
Aluminium US$ 1,478/t vs US$1,475/t yesterday –
• The market is likely to remain in surplus through 2018 with cheap Chinese exports keeping it well-supplied on BMI estimates.
• Prices are forecast to bottom at US$1,400/t in coming months amid a broader stabilisation in commodity prices in H1/16.
• Prices are expected to average US$1,575/t in 2016.
Nickel US$ 9,125/t vs US$9,255/t yesterday –
• Indonesian government is expecting three nickel smelters to start operations in 2016 taking total smelting capacity to 767kt from 524kt forecast (based on six smelters) for YE15.
Zinc US$ 1,543/t vs US$1,567/t yesterday –
Lead US$ 1,583t vs US$1,592/t yesterday –
Tin US$ 14,710/t vs US$14,655/t yesterday –
Energy:
Oil US$44.3/bbl vs US$44.9/bbl yesterday –
Natural Gas US$2.409/mmbtu vs US$2.308/mmbtu yesterday
Uranium US$36.00/lb unch vs US$36.00/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$47.2/t unch vs US$47.6/t – yesterday
• Prices to extend declines in 2016 on the back of slowing steel production and growing iron ore supply, ex-Rio chief economist estimates.
• In China “there’s a prospect of further declines in steel demand and the capacity to grow exports is almost non-existent”.
• “It does point to the need for some cutbacks” in steel production.
• “There’s about 300mt of surplus capacity in China that need to be not just shut down, it needs to be eradicated, it needs to be bulldozed”.
Thermal coal (1st year forward cif ARA) US$46.50/t vs US$46.20/t – yesterday
Steel – Steel mills in China estimated to lose around US$50/t of steel produced.
• Crude steel production fell 3.1%yoy in oct and was down 2.2%yoy in the first 10 months of the year.
Other:
Tungsten - APT European prices $165-175/mtu - $165-195/mtu as of last week – spreads narrow at lower level indicating ongoing imbalance between supply and demand.
Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10.
• Prices are likely to continue slide in Q1/16 before stabilising towards the end of H1/16, according to Eti Krom, the largest ferrochrome producer in Turkey.
• “Prices have not yet hit the bottomed in Europe. It is highly likely that we will have a benchmark of US$1.00/lb in Q1/16. Prices will probably hit the bottom in Q2/15.”
Eurasian Resources Group (formerly ENRC) The market may soon face a shortage on rising costs in South Africa and little scope for increased Indian production
• “The market price should adjust substantially to a higher level mid-term, in order to justify and allow further investments in ferrochrome production in other regions,” the Company said.
• “Since there are continuous issues in South Africa with electricity and the potential for increase in India is limited, there is a strong possibility of market undersupply in the mid to long-term future.”
• Currently, high carbon ferrochrome delivered in Europe trades at 80-87c/lb.
Company News
Goldplat* (LON:GDP) 3.4 pence, Mkt Cap £5.7m – Operational Update
• The first of the 4 tonne elution columns has been successfully commissioned at the South African recovery operations.
• The availability of elution capacity will enable to continue clearing the backlog of gold inventory which will help their cash position.
• Two other 4 tonne elution columns were purchased from DRD Gold and are to be installed either in SA or Ghana.
Conclusion: Goldplat continue to implement their operational strategy to create more capacity to deal with their backlog of gold concentrate and also to build their own in house capacity. This is another piece of good news and should help with re-building cash at the company.
*SP Angel act as Nomad and Broker to Goldplat
Minera IRL (LON:MIRL) SUSPENDED – Both sides issue statements. Our conversations with Minera IRL staff support the EGM to replace the board
• Minera IRL Limited have issued yet another press release under the name of Eric Olson, who is not a director of the company.
• The other side Minera IRL SA have also issued their own response to allegations made by the Minera IRL Limited board.
• The press release by the Mineral IRL Limited board sets out the board’s vision to retake control of the business if the board is still in place following the EGM on the 24th.
• The statement also goes on to set out the board’s thoughts on the future of the Corihuarmi mine. We see these statements as disingenuous. In a world where actions speak louder than words we believe the board has taken action to close the Corihuarmi mine and cause its Peruvian subsidiary to default on its financial obligations in Peru. It is alleged that this could have caused the effective closure of the company and prompted a fire sale of the mine and other assets.
• While it is critically important for shareholders to cast their vote in this EGM, the deciding vote effectively rests with Rio Tinto.
• We believe Diego Benavides is likely to be successful in his bid to replace the entire board with a group of directors who are more interested in shareholder value than their own self interests.
• If Rio Tinto vote to support the existing board or if Rio Tinto sell their shares to a group which then votes for the current board then this will be a bad day for shareholder value in our view. We also think this will be a bad day for Rio Tinto as it is likely that the Peruvian community may well take against the group in this and possibly in other instances in Peru.
• It may be interesting to note that certain allegations were made against Jamie Pinto, a lawyer in Peru, by a Peruvian congressional committee in connection with a multi-million dollar corruption and use of insider information.
• See this link: https://incakolanews.blogspot.co.uk/2015/09/the-talented-mister-pinto-from-ikn-333.html
• https://www.investegate.co.uk/minera-irl-limited--mirl-/mkw/minera-irl-limited-sets-out-eight-point-plan-an---/20151118065904M3742/
• https://www.investegate.co.uk/minera-irl-sa/rns/response-to-minera-irl-limited-board-allegation/201511180700060740G/
* SP Angel analysts are expressing their own views and opinions in this analysis. SP Angel has no corporate connection with Minera IRL or its subsidiaries. SP Angel holds no shares in Minera IRL and does not have any current financial arrangements with the company.