Apology
• “We have received a legal complaint from David Lenigas about a section of our Morning View circular on 30 October 2015 under the heading “Leni-Maths – a new branch of mathematics for extrapolating numbers with almost no primary data points”.
• This section was intended as a light hearted comment and was not factual, nor intended to impugn Mr Lenigas’ reputation.
• Mr Lenigas complains that this section was defamatory of him. While we do not believe that this publication was defamatory of Mr Lenigas, we are more than happy to clarify that in making these comments we had no intention to impugn Mr Lenigas’ reputation and we accept that it is untrue that Mr Lenigas relies upon creative mathematics.
• Mr Lenigas would like us to make clear that the data he reports in relation to the companies of which he is a director is verified by independent experts and then approved by the relevant nominated advisor.
• We apologies to Mr Lenigas for any distress he has suffered as a result and consequently we have agreed to retract and not to repeat the publication again”.
Economic News
US – Another strong monthly NFP data released on Friday coupled with an upwards revision in the previous month numbers increase chances for a Fed rate increase in the Dec
• Earnings slowed in Nov, in line with market estimates.
• Economic news due this week:
Date Index Period Actual Expected (Bloomberg) Prev month
Friday (04.12.15) NFP Nov 211k 200k 298k (revised from 271k)
Unemployment rate Nov 5.00% 5.00% 5.00%
Hourly earnings mom/yoy Nov 0.2%mom/2.3%yoy 0.2%mom/2.3%yoy 0.4%mom/2.5%yoy
Tuesday JOLTS job openings Oct 5,540k 5,526k
Thursday Jobless claims 268k 269k
Budget Nov -US$67.5bn
Friday Retail sales/core (ex auto) Nov 0.3%mom/0.3%mom 0.1%mom/0.2%mom
Core PPI 0.1%mom -0.3%mom
Consumer sentiment UoM Dec 92.0 91.3
China – Nov trade data is due tomorrow with forecasts for another weak month (Exports -5.0%yoy: Imports -11.9%yoy)
• Retail sales, industrial production and investments numbers are out later this week.
Japan – Final Q3/CY15 GDP numbers are out later today with estimates for an upwards revision in preliminary data suggesting the nation escaped recession last quarter.
• Final Q3/15 GDP: 0.0%qoq v -0.2%qoq estimated previously and -0.2%qoq recorded in Q2/15.
ECB – Mario Draghi gave a speech in New York on Friday commenting on the state of the Eurozone economy.
• “We do see some improvements as the economic recovery takes hold.”
• “Inflation has risen from its trough.”
• “Yet despite those positive signs, the trend in services inflation continues to be relatively weak.”
• Wage growth has trailed its historical averages with “a great deal of slack still remains in the labour market”.
Germany – Industrial production picked up in Oct following a drop in the previous month, amid at a slower pace than forecast.
• Industrial production: 0.2%mom/0.0%yoy v -1.1%mom/0.2%yoy in Sep and 0.8%mom/0.7%yoy forecast.
South Africa – S&P cut the nation’s credit outlook from stable to negative (BBB-) on the back of slowing economic growth.
• The agency forecasts growth to come in at 1.4% in 2015 versus 2.1% forecast previously.
Currencies
US$1.0818/eur vs 1.0883/eur yesterday. Yen 123.43/$ vs 122.78/$. SAr 14.543/$ vs 14.394/$. $1.507/gbp vs 1.511/gbp
0.730/aud vs 0.732/aud. ECB primes the market for more QE
Commodity News
Precious metals:
Gold US$1,083/oz vs US$1,060/oz yesterday
Platinum US$874/oz vs US$849/oz yesterday
Palladium US$561/oz vs US$538/oz yesterday
Silver US$14.60/oz vs US$14.12/oz yesterday
Base metals:
Copper US$ 4,604/t vs US$4,610/t yesterday – Chinese bonded stockpiles climbed 2%mom in Nov on the back of weak demand, according to a Bloomberg Intelligence survey.
• This marks the second monthly increase after three consecutive monthly declines.
• On a separate note, Chile is reported to have lost 19,000 mining jobs this year on the back of falling commodity prices.
Aluminium US$ 1,514/t vs US$1,503/t yesterday
Nickel US$ 9,065/t vs US$8,980/t yesterday – Eramet is planning to cut nickel matte production at its plant in Doniambo, New Caledonia.
• Metallurgical production at the Doniambo plant totalled 55kt Ni in 2014 with the production split between ferronickel (c.80%) and matte (20%).
• The plant has a 75kt capacity with a loss of matte operations amounting to potentially 15ktpa Ni.
Zinc US$ 1,565/t vs US$1,551/t yesterday
Lead US$ 1,689/t vs US$1,672/t yesterday
Tin US$ 14,865/t vs US$14,845/t yesterday –
Energy:
Oil US$42.6/bbl vs US$43.9/bbl yesterday
Natural Gas US$2.127/mmbtu vs US$2.191/mmbtu yesterday
Uranium US$36.10/lb vs US$36.10/lb yesterday
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$39.2/t vs US$39.0/t
Thermal coal (1st year forward cif ARA) US$45.0/t vs US$45.5/t yesterday
Other:
Tungsten - APT European prices $165-175/mtu unch again
Steel – A Chinese pig iron producer missed a bond payment on a renminbi-denominated debt forcing the Company to potentially restructure.
• Sichuan Shengda based in Sichuan said it will continue to raise money the debt through asset restructuring.
• 85% of Chinese steel mills reported to now operate at a loss
Company News
Anglo America (LON:AAL) 372 pence, Mkt Cap £4.8 bn - De Beers – Snap Lake to be put on care and maintenance
• Against the current weaker diamond market, the underground mine at Snap Lake is to be put on care and maintenance.
• 41 employees are to be transferred to Gahcho Kue the JV with Mountain Province Diamonds.
• The mine is to be evaluated over the next year to determine its viability.
• Snap Lake’s production was 1.4m carats a year.
• Snap Lake is the only fully owned diamond mine that De Beers currently has outside Africa.
• Snap Lake is said not to have been profitable since production started in 2008.
• The mine had been scheduled to be in production for the next 12 years.
Coal of Africa (LON:CZA) 2.6 pence, Mkt Cap £51.1m – Update on Funding for Universal Coal Acquisition
• The company is to enter into a subscription agreement with M&G Investment Management for US$3m to fund the purchase of Universal Coal.
• This will be on the same terms as the US$15m raised from Yishun Brightrise announced previously.
• The offer for Universal Coal is a combination of shares and cash – A$0.20 in cash and I new CoAl share and a non-converting secured Loan Note.
• The subscription agreement set out previously for Yishun Brightrise was at US$0.0435.
• Universal Coal has a group of coking coal and thermal coal assets with the majority of assets in South Africa including the Kangala Mine producing 2.1 Mtpa of saleable thermal coal.
• For FY 2015, Universal Coal is said to have generated cash of A$14.7m giving a year end cash balance of A$26.5 with total debt of around A$40.1m including A$30.39m of current borrowings.
• Universal Coal generated revenues of A$74.9m for FY 2015 with gross profits of A$15m and PBT of A$2.3m,
Conclusion: Thermal coal is not a popular commodity with weak prices and greater focus on climate change. This looks like a profitable asset with cash to offset debt and it is good to see that it has attracted some institutional funding.
Kenmare Resources (LON:KMR) 3.75 pence, Mkt Cap £104.3m – Share placing planned to support $175m funding to deleverage balance sheet
• Kenmare is preparing a $175m funding to deleverage the balance sheet, fill in losses and eventually restore suspended operations.
• The Sovereign wealth fund of Oman has approved an in principal investment of $100m conditional of the raising of a further $75m of capital.
• The group are in the process of preparing a prospectus for the fund raising and are in discussions with the group’s lenders for the restructuring of company debt
• The group made a loss of $44.2m in FY 2014 and forecasts are for a $54m loss for FY 2015.
• Kenmare reports that they see their Moma mineral sands mine as a world class asset producing more than 7% of the world’s TiO2 feedstock supply..
• The company reported record production of Heavy Mineral Concentrate and ilmenite production in the third quarter despite the suspension of higher cost dry mining operations.
• Iluka Resources’ offer. Illuka Resources which first proposed a combination of the two companies in June last year has withdrawn its offer for Kenmare Resources. This is hardly surprising given the state of commodities markets and reduced cash flow for commodity producers.
• Ilmenite prices continue to suffer due to overproduction of material due to its production as a by-product of iron ore mining. Ilmenite prices for 54% Tio2 FOB Australia are $100-120/t vs $240/t last year and unchanged for the past 7 months.
• Rutile prices appear to have bottomed out at low levels enabling Sierra Rutile to make positive cash flow. European customers are paying more for natural rutile due to its environmental benefits. Rutile prices have held relatively well over the past five months at around $800-840/t vs $910/t at the start of 2014 and $1,000-1,500/t in 2013 for 95% TiO2 FOB Australia steady
Conclusion: It is interesting that the sovereign wealth fund of Oman is prepared to dig deep to make this investment. The fund is effectively making a bet on the restration of global growth and its impact on generating new demand for titanium metal and pigments.
*The analyst on this note has visited Kenmare’s Moma operations in Mozambique
Minera IRL (LON:MIRL) SUSPENDED – Board sets date for second EGM for 16 December in Toronto
• The board have announced the date for the reconvening of the postponed EGM for 16th December in Toronto.
• We believe the company’s shares are effectively delisted in Toronto following their suspension on failure of the company to file its accounts.
• We have been told by company staff that sufficient information was available for the accounts to be filed but that the board continued to insist on the addition of certain information which has not been available. The insistence on the inclusion of unavailable information effectively caused the shares to be suspended in both London and Toronto. We believe the accounts will be published shortly after the board is replaced.
• We understand the current board of Minera IRL have written to shareholders making certain statements / allegations about the rebel shareholders.
• It may be interesting to note that certain allegations have previously been 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.
Conclusion: It is our view that investors should not be swayed by statements being made by the current board of Mineral IRL Limited
* 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.
Sunrise Resources (LON:SRES) 0.2 pence, Mkt Cap £1.4m – Industrial Minerals Project
• Sunrise Resources is looking to secure exploration acreage for Pozz Ash projects.
• These projects cover a deposit of volcanic ash which is a source of natural pozzolan.
• Pozzalan is a siliceous and aluminous material which can be used as a replacement for cement.
• The production of cement is responsible for 5% of global man-made carbon emissions with one tonne of CO2 for every tonne of cement used.
• Pozzalan is a natural replacement and could offer a partial replacement for cement usage.
W Resources (LON:WRES) A$0.66, Mkt Cap A$24.4m – Drill results from La Parilla
• Drill results from the latest round of DC and RC drilling in the area where the company plan to fast track has delivered good grades.
• Hole IRC1-40 has returned 40m at 0.32% WO3 near surface and 0.21% WO3 from 47.5m.
• These grades are higher than the rest of the orebody and are from the South East.