Major miners rise – despite ongoing falls in base metals prices
• Precious metals prices are showing some recovery as US dollar advance stabilises
• Someone is buying the major miners. The situation reminds us of a poem by Rudyard Kipling
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:
Economic News
US – FOMC members ahev done “everything we can to avoid surprising the markets and governments when we move”, Stanley Fisher, a voting FOMC member, said in a speech yesterday.
• Recent FOMC meeting minutes show the Fed is growing increasingly confident the rate hike is likely to come during the Dec meeting.
• “Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labour market, and inflation, these conditions could well be met by the time of the next meeting,” minutes read.
• Commenting on inflation the FOMC expect “the downward pressure from the previous declines in energy prices and the effects of past dollar appreciation would prove temporary”.
ECB – The euro is trading lower today after morning Draghi comments and as the ECB meeting minutes released yesterday point to a strong possibility of a further policy easing on 3 Dec.
• “Low core inflation is not something we can be relaxed about. We will do what we must to raise inflation as quickly as possible,” Draghi said today in Frankfurt.
Brazil – At the end of the spectrum, Brazil is battling with rapidly accelerating inflation.
• CPI hit 10.3%yoy in 12 months through Nov, up from 9.8%yoy in Oct.
• This is the first time inflation hit 10% level in last 12 years.
• Inflation has been driven by a fall in the national currency fuelling increases in import goods’ bill.
South Africa – The central bank raised rates in a move to counter inflationary pressures.
• The monetary policy committee raised the repurchase rate by 25bp to 6.25% marking the second rate increase in four months.
Zambia – President Edgar Lungu is meeting mining unions today as local producers are planning to significantly cut payroll numbers amid a sell-off in commodities markets.
• Five mining companies have notified the government of their intentions to cut jobs including a 7,000 planned reduction in Glencore’s labour force in the region.
• First Quantum is planning to to fire around 5,000 contract workers.
Currencies
US$1.0687/eur vs 1.0700/eur yesterday. Yen 122.84/$ vs 123.16/$. SAr 13.977/$ vs 14.142/$. Sterling $1.529/gbp vs 1.525/gbp
0.722/aud vs 0.718/aud – yesterday. Euro targeting 1.05 rate vs US dollar as Fed rate rise nears. Next round of ECB QE might even cause the Euro to go to parity
Commodity News
Precious metals:
Gold US$1,083/oz unch vs US$1,075/oz yesterday – Gold stabilises
Platinum US$866/oz vs US$860/oz yesterday -
Palladium US$547/oz vs US$540/oz yesterday –
Silver US$14.32/oz vs US$14.22/oz yesterday
Base metals:
Copper US$ 4,652/t vs US$4,625/t yesterday –
Aluminium US$ 1,485/t vs US$1,471/t yesterday –
Nickel US$ 8,945/t vs US$9,025/t yesterday –
Zinc US$ 1,595/t vs US$1,513/t yesterday –
Lead US$ 1,620t vs US$1,585/t yesterday –
Tin US$ 14,695/t vs US$14,58/t yesterday –
Energy:
Oil US$44.4/bbl vs US$44.3/bbl yesterday –
Natural Gas US$2.247/mmbtu vs US$2.328/mmbtu yesterday
Uranium US$36.10/lb unch vs US$36.10/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$46.4/t unch vs US$47.1/t – yesterday There’s about 300mt of surplus capacity in China that need to bulldozed, ex Rio economist
Thermal coal (1st year forward cif ARA) US$47.40/t vs US$46.90/t – yesterday
Steel – Steel mills in China estimated to lose around US$50/t of steel produced.
Iron ore – Mines Ministry in India is planning to lift a 10 % export tax on lower-grade iron ore offering support to miners struggling with falling commodity prices.
• The ministry is considering removing levies on fines with an iron content of below 58% Fe.
• While a positive development for local producers, a removal of export taxes is set to add to downward pressure on global iron ore prices.
Other:
Tungsten - APT European prices $165-175/mtu unch on last week
Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10.
Company News
DiamondCorp (LON:DCP) 7.74 pence, Mkt Cap £28.4m – Development work restarts at the 290m level
• Following the stabilisation of the area with steel arched sets, tunnelling has restarted at the 290m level.
• Tunnelling is now into the more competent K4 kimberlite which is high grade and is being achieved at the pace originally planned.
• Arched steel sets will also enable the safe blasting of the slot between the 290 and 310m level.
Conclusion: It is good to see that tunnelling work has resumed at the 290m level. This combined with the successful commissioning of the conveyor belt system to bring ore to surface more efficiently should help the company progress their development work. This news should help stabilise the share price from here.
We look forward to further news flow as kimberlite from K4 is processed and there is a sufficiently large parcel generated to be sold.
Medusa Mining (ASX:MML) A$0.42, Mkt Cap A$86.2m – Fatality at Co-O Mine
• The company reported a fatality at the mine yesterday
• The incident happened at the middle of a stope manway on Level 3.
• The mine continues to be fully operational.
• Also as reported last week Geoff Davis has resigned and Andrew Teo has taken over as Executive Chairman.
Conclusion: This is sad news but has not stopped operations at the mine. A number of improvements have been put into place by the COO Rob Gregory which have been coming through in results. However, till we have clarification on changes to the management team, we have moved the shares to a hold from a buy.
Minera IRL (LON:MIRL) SUSPENDED – Minera Chairman under criminal investigation for corruption
• Minera IRL SA (Minera@IRL.com.pe) report today through RNS reach that Mr Jamie Pinto, the non-exec Chairman of Minera IRL Limited is “under criminal investigation for charges of corruption and generating losses of US$50m for the Peruvian State.”
• The company Minera IRL Limited has also put out its own RNS today, under the name of Eric Olson.
• https://www.investegate.co.uk/minera-irl-sa/rns/further-information-for-minera-irl-shareholders/201511200700094031G/
• The press release goes on
o “The investigation is in process against Mr Pinto before the 2nd Provincial Criminal Prosecutor’s Office which specializes in corruption charges for public employees. This investigation relates to the loss of large sums for the purchase of external debt during Mr Pinto’s time of employment with the Peruvian Ministry of Economy and Finance.“
o “Also, during his time as CEO of Mantaro Peru SAC, Mr Pinto utilised divisive practices in neighbouring communities to the Phosphate Exploration Project in Junin, the Project remains paralyzed indefinitely.”
o “The Board of Minera IRL Limited is currently promoting division in the Community of Ollachea, failing to use the proper channels of the elected Board of the Community, or to respect the Community’s statements.”
• https://www.investegate.co.uk/minera-irl-limited--mirl-/mkw/minera-irl-limited--update-on-developments-with---/20151120065947M8424/
• The company press release suggests that the community does not fully support Diego Benavides.
• We see the company statements as disingenuous and consistent with their attempts to damage Mr Benavides’ credibility with shareholders and the community.
Conclusion: Conversation with staff indicate support for Diego Benavides and his bid to replace the board from within the company and within the community. These conversations do not support the actions of the current board of Minera IRL Limited. It is alleged that the current board are pursuing their own agenda and that this is not in the best interests of shareholders, the community or the company in general.
* 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.
Nemaska Lithium – Strategic agreement MOU contemplates C$12m from Johnson Matthey
• Nemaska Lithium have signed an MOU with Johnson Matthey Battery Materials Ltd.
• The agreement “contemplates an up-front payment of CDN$12M by JMBM in exchange for services and products of the same value from the Nemaska Lithium Phase 1 Plant and the subsequent commercial plant to be located in Shawinigan, Quebec.
• The MOU also includes provisions for the signing of a long term supply agreement for lithium salts (lithium hydroxide and lithium carbonate) for future expected demand for JMBM’s battery material products.
• The lithium salts will be produced from the commercial hydromet plant which Nemaska Lithium also intends to build in Shawinigan. The collaboration is subject to final due diligence by JMBM and completion of the required final agreements.” According to the company president and ceo.