Commodities
Diamonds and precious stones
Looking at my diary for next week, I am reminded that De Beers will be embarking on their final Sight of 2015. Initial thoughts are that the sale, unsurprisingly will be a small one. It will, however be the quantum of price change that will generate the highest interest.
Staying on De Beers, there are lots of stories coming out of Canada regarding the company’s Snap Lake operation including a potential closure (care and maintenance) considering the relatively high cost of production and the impact of Gaucho Kué coming on line. For record Snap Lake has an annual processing capacity of 1.1Mt with a carat production capacity of 1.4Mcts. Rio Tinto recovered a two billion year old 187.7ct diamond in Canada. So that’s announcements from Lucara, Rio, Alrosa and Petra in recent weeks… I await Gem Diamonds next update with anticipation.
Something to consider, after the call to collapse prices by 30%-50% Rapaport 1ct price index is up 0.7% following on from last month’s improvement.
Precious metals
After Mario, the Santa rally Grinch (Kudos, City AM) stole our performance, we probably now have to wait until Auntie Janet has done her bit before picking up the pieces on Gold and Silver? Although I would be taking another very long look at the physical trade data right now… more to come from me on this one. Suffice to say, Chinese and US physical demand right now, is off the chart…
https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2015/01/13/102334699-450821566.530x298.jpg?v=1421176550
Platinum still finding life, err very tough. Small positive is that Johnson Matthey estimate that the platinum market will remain in deficit. Sadly my view is that if this is a market in a deficit, then what damage would a surplus make?
This week: Gold: +1%, first time in a while, Silver: +0.2%, Platinum: +2.4%, Palladium: (0.7%), Rhodium: (2.7%)
Base metals:
After being rather beaten up in recent weeks it has been nice to see a bit of green on the board this week, even if it is relation to a weaker Dollar.
Quick question. How can S&P use a copper price that is 20% below spot to evaluate the stability of a company’s balance sheet?
This week: Aluminium: +3.6%, Copper: +1.4%, Lead: +3.3%, Nickel: +3.7%, Tin: (0.2%), Zinc: +0.3%.
Bulk commodities:
Iron ore prices continue to fall with prices for hovering around the $40/t mark, similar to the levels in 2007 when annual contracts between Vale, Rio Tinto and BHP Billiton with Chinese and Japanese steelmakers were the industry norm. Concerns of Chinese steelmakers dumping stock at almost any price will inevitably filter back to pricing.
Interestingly, as Chinese steel consumption falls, –5.7% to 590Mt in January to October, the World Steel Organization forecasts steel demand in China will fall by 3.5% in 2015 whilst our friends Rio Tinto are anticipating “China’s steel intensity to continue to rise. While steel demand in the rest of the world will grow by 65% over next 15 years”.
Let’s hope so
Company announcements/news/meetings:
DiamondCorp, (LON:DCP) Under Review (PT: Under Review)
£4m raised at 6p yesterday. As is normal in this situation I cannot discuss the name ahead of re-initiating…
However, I am really looking forward to 2016.
Petra Diamonds, (LON:PDL) Buy (PT: 135p)
On 30 November, Petra confirmed the long-awaited news that the company's lender group has agreed to waive the two covenant tests relating to EBITDA for the period to, and as at the end of the year. We believe this is a not insignificant development and counters one of the key concerns impacting market sentiment at this time. We reiterate our Buy recommendation and 135p price target.
Followed with what is an interesting acquisition at Kimberley. I am now far more comfortable with how the future looks here.
Caledonia Mining, (LON:CMCL) Buy (PT: 53p)
Don’t like gold miners? Don’t like Zimbabwe? Fine no problem,
How about an absolute return of almost 20% in this market? Not so bad now is it.
Resource update this week. Infill drilling meant 254,750t has been upgraded from inferred to indicated. Equal to 14% in terms of tonnes and 19% in terms of tonnes or around 2 years of production. Caught up with management this week and importantly they are now targeting at least a 100% replacement ratio by undertaking further drilling below the 750m level.