Anglo American (LON:AAL) – Further improvements in rough diamond sales from De Beers
Dalradian Resources (LON:DALR) – Further high grade drilling results from Curraghinalt
Mariana Resources (LON:MARL) – Withdrawal from the Nassau Gold Project in Suriname
Shanta Gold* (LON:SHG) – Discovery of higher grade gold over good intersections to extend life for Shanta
SolGold* (LON:SOLG) – Surface mineralisation
Stratex International (LON:STI) – Providing short term loan to Goldstone Resources
US dollar pulling back on lower US earnings expectations helping oil higher and lifting resources equities
• Alcoa opened the earnings season yesterday reporting a 15%yoy decline in revenues and a 75%yoy decrease in EPS in Q1/16; although, that was enough to beat market estimates on EBITDA and EPS basis.
• Metal prices are posting new gain as Brent rises past the US$43 mark and the US dollar resumes its downward trend crossing the lowest level since Oct/15.
• The FTSE All share index is slightly off this morning as gains in mining, oil and gas and financial stocks were outweighed by losses in other sectors.
• Sterling is stronger this morning driven by stronger than forecast increase in inflation in the UK.
A Fear barometer as published by CSFB has hit an all-time high according to a comment posted on Zerohedge
• The barometer measures higher put demand and lower call demand with the move driven by the call side according to CS’ Mandy Xu
• The derivatives market, a crazy place at the best of times, is assigning less than 1% probability the market will rise by 10% in the next three months vs. a 17% probability it will fall by 10%.
• While investors are fearful of the potential for emerging market debt issues to impact global equities ongoing low interest rates Fed moves to hold down the US dollar appear to be containing the potential escalation of this problem.
• The good part is that if global interest rates are to remain lower for longer then this should provide a better footing for global growth to re-establish on a more global basis.
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Dow Jones Industrials -0.12% at 17,556
Nikkei 225 +1.13% at 15,929
HK Hang Seng +0.31% at 20,504
Shanghai Composite -0.34% at 3,024
FTSE 350 Mining +3.22% at 9,269
AIM Basic Resources +1.54% at 1,804
Economic News
US – The US dollar index is trading at the lowest level since Oct/15 as weaker expectations for US interest rates hikes continued to weigh.
• This week economic news:
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Monthly Budget Mar -$104.0bn -$52.9bn
Wednesday Retail sales/Core (ex auto) Mar 0.1%mom/0.4%mom -0.1%mom/-0.1%mom
PPI/Core Mar 0.3%mom/0.1%mom -0.2%mom/0.0%mom
Thursday Weekly Jobless Claims 270k 267k
CPI Mar 0.2%mom/1.1%yoy -0.2%mom/1.0%yoy
CPI Core Mar 0.2%mom/2.3%yoy 0.3%mom/2.3%yoy
Friday Industrial Production Mar -0.1%mom -0.5%mom
Manufacturing Production Mar 0.1%mom 0.2%mom
Capacity Utilization Mar 75.3% 75.4%
New York Manufacturing Apr 2.0 0.6
UoM Consumer Sentiment Apr 92.0 91.0
Source: Bloomberg
China – Auto sales show recovery signs with Q1/16 numbers posting a 6%yoy.
• Sales came in at 2.44m units in Mar, up 8.8%.
• This compares to a 0.9%yoy decline posted in Feb and a 7.7%yoy growth in Jan.
Japan – Machine tool orders posted an eighth straight decline in Mar driven by a fall in overseas orders.
• Total machine orders were down 21.2%yoy last month with foreign orders coming down 29.5%yoy.
• Despite weak economic data, Nikkei 225 index finished higher supported by a fall in the yen that broke nearly a two-week long streak of gains in the currency.
Italy – Banks and investors agreed to create a €5bn emergency fund to help weaker lenders close capital gaps in order to calm regional financial markets.
• The move is expected to improve the confidence in the system amid growing concerns over the effect of €360bn of non-performing loans on the economy.
• In return to the decision to shore up some troubled financial institutions, the government agreed to review existing bankruptcy laws to facilitate the sale of bad loans.
• “In the next days we will make the bankruptcy procedure faster and more simple so that everyone can be assured of getting their money back in a reasonable timeframe,” Italy PM said.
• It is reported, it takes eight years on average in Italy compared with two to three years in the EU to recover bad loans.
Australia – Credit card spending seen growing in Feb supported by record low interest rates.
• Purchases using credit cards totalled A$24.8bn in Feb, up from A$21.9bn in Jan and down on A$27.6bn recorded in Dec, a two decade high.
• Total outstanding balance on credit cards crept up to A$51.9bn, up from A$50.9bn in Jan.
Greek – International lenders and Greek officials hold talks regarding the release of the €5bn in financial aid.
• Parties are set to resume negotiations after the IMF spring meeting in Washington panning to seal the deal by Apr 22.
• Funds are required to repay €3.5bn to the IMF and the ECB in Jul as well as meet its budget commitments.
Currencies
US$1.1434/eur vs 1.1392/eur yesterday. Yen 108.25/$ vs 108.11/$. SAr 14.688/$ vs 14.819/$. $1.430/gbp vs 1.420/gbp
0.765/aud vs 0.755/aud. CNY 6.459/$ vs 6.471/$.
Commodity News
Precious metals:
Gold US$1,261/oz vs US$1,248/oz yesterday –
• Gold ETFs 56.7moz unch vs US$56.7moz – ETF holdings
Platinum US$997/oz vs US$972/oz yesterday –
Palladium US$554/oz vs US$544/oz yesterday
Silver US$16.02/oz vs US$15.49/oz yesterday
Base metals:
Copper US$ 4,712/t vs US$4,644/t yesterday –
Aluminium US$ 1,515/t vs US$1,514/t yesterday – Alcoa cut its market deficit forecasts on the back of weaker than anticipated demand growth as Chinese consumption slows.
• In addition, one of the fastest growing sectors in terms of aluminium consumed, aerospace industry is forecast to post a 6-8% growth in sales in 2016, revised down from the 8-9% estimated in Jan.
• Alcoa estimates a 1.1mt aluminium market deficit in 2016 with demand to grow 5% and supply 2%. These comares to 1.2mt deficit and 6% and 3% growth rates forecast previously.
Nickel US$ 8,665/t vs US$8,575/t yesterday –
Zinc US$ 1,788/t vs US$1,755/t yesterday –
Lead US$ 1,702/t vs US$1,697/t yesterday –
Tin US$ 16,780/t vs US$16,850/t yesterday –
Energy:
Oil US$43.5/bbl vs US$41.7/bbl yesterday –
Natural Gas US$1.931/mmbtu vs US$1.932/mmbtu yesterday –
Uranium US$28.50/lb vs US$28.50/lb yesterday –
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$54.8/t vs US$54.6/t – Chinese steel mills ramped up production amid a seasonal increase in demand driving iron ore prices higher.
• Vale is planning to beat Rio Tinto and BHP as the top iron ore supplier for China. The company is targeting a 40% increase in shipments to China up from 180mt in 2016.
Thermal coal (1st year forward cif ARA) US$42.1/t vs US$41.5/t yesterday – .
Other:
Tungsten - APT European prices stood at $175-190/mtu vs $170-185/mtu last week –
Company News
Anglo American (LON:AAL) 620 pence, Mkt Cap £7.99bn – Further improvements in rough diamond sales from De Beers
• De Beers is voicing cautious optimism on the rough diamond market following the third sale of 2016 which, provisionally, realised a total of US$660m compared to the US$617m in the second sale of the year.
• The company commented that “Continued stability in polished diamond prices and sales of polished diamonds at the wholesale level supported a reasonably positive environment for rough diamond demand for the third consecutive sales cycle.”
• Chief Executive, Phillippe Mellier is quoted saying “So far, 2016 has seen significantly stronger rough diamond than that experienced at the end of 2015 … However, we are now moving into a part of the year where rough diamond demand has historically been lower as a result of seasonality, so we continue to adopt a prudent mind-set.”
Conclusion: Diamond sales have improved successively in the three rough diamond sales of 2016 but the company continues to caution prudence.
Dalradian Resources (LON:DALR) 58 pence, Mkt Cap £125.1m – Further high grade drilling results from Curraghinalt
• Dalradian Resources reports the results of a further 39 drill holes from its infill drilling campaign at the Curraghinalt gold deposit in Northern Ireland.
• The holes are mainly located in the central and western parts of the deposit and include a number of high grade intersections including a 1.44m intersection grading 100.66 g/t at the Sheep Dip Vein; a 0.67m intersection of theT7 Vein grading 112.45 g/t; a 1.02m intersection of the No.1 Vein grading 73.61 g/t and a 0.65m intersection grading 50.58 g/t gold from the Sperrin Vein.
• The high grade results announced today add to previously announced high grade intersections from the infill drilling programme which include a 1.24m intersection of the Crow Vein grading 100 g/t; a 0.3m wide intersection of the Causeway West Vein grading 475g/t; a 0.72m intersection of the V55 Vein averaging 106.57 g/t and a 0.76m intersection of the 106-16 Vein which averaged 95 g/t gold.
• These are among the final holes of the infill drilling programme which adds a further 50,000 metres of drilling data to the 80,000 metres which generated the previous measured and indicated estimate of 3m tonnes at an average grade of 10.4 g/t gold and 3.9 g/t silver. An updated resource estimate is “nearing completion”.
• The substantial additional drilling data has improved the correlation of the individual veins and will be used to “convert resource ounces from the Inferred to the Indicated category, in support of a feasibility study currently underway.”
• The Curraghinalt deposit comprises multiple veins, some of which are high grade, hence the density of drilling required to evaluate the deposit properly.
Conclusion: Dalradian Resources has continued to produce high grade intersections from the infill drilling at Curraghinalt. The ore zones are proving to be relatively high grade but the multiple narrow structures will require detailed correlation as part of the continuing ore resource estimate and feasibility study work. We look forward to new resource estimate and the subsequent feasibility study.
Mariana Resources (LON:MARL) 1.8 pence, Mkt Cap £15.4m – Withdrawal from the Nassau Gold Project in Suriname
• Mariana Resources has announced that it is withdrawing from the Nassau gold exploration project in Suriname in order to target its funds “in particular [on] the Hot Maden project in north east Turkey”
• Under the terms of its earn in agreement with Sumin Resources Limited, has earned a 10.2% interest in the project which is located 120km from the Suriname capital, Paramaribo and approximately 20km south west of Newmont Mining’s Merian gold mine development.
• Although Mariana is clear that “The project certainly could have further potential as there are several secondary targets that have not been tested. However, Mariana believes that the significant financial obligation that would be required under the earn-in would be better utilised elsewhere.”
Conclusion: Mariana’s decision to withdraw from a project where it clearly still sees untested exploration merit highlights the difficult choices required when deploying exploration funds in the current environment. Mariana is fortunate in being able to choose to advance the Hot Maden deposit where it has already reported a 2.2m oz gold resource.
Shanta Gold* (LON:SHG) 7.25p, Mkt Cap £34m – Discovery of higher grade gold over good intersections to extend life for Shanta
• Shanta Gold report results from drilling to test extensions and continuity of existing gold resources at the Ilunga and Black Tree Hill prospects.
• Ilunga: the existing 40,000oz gold resource is just 2.5km from the New Luika plant and is open at depth and along strike with further drilling expected to extend the resource.
• Ilunga’s grades are nice too with some very good grade intersections indicating good potential for further mine development either as an extension to an open pit or with sufficient grade for underground development:
o 4m grading 6.54 g/t from 143.00m
o 14.73m at 14.31 g/t from 166.89m
• Ilunga mineralisation is shown in the drilling to extend by another 100m down-dip to 200m with only half the 400m probable strike length tested.
• Black Tree hill: Infill drilling better defines the resource to show 6,915oz of measured resource and 31,071oz of indicated. This cuts the resource down by a typical 34% to 37,986oz from the previous 57,178oz.
Conclusion: Drilling at Ilunga shows some great grades over good intersections from a mining perspective.
The results also give good indication of a significant increase in the gold resource at the site.
We would expect Ilunga to at least double its resource on these numbers with potential to double the resource again with drilling across the rest of the strike.
In all Ilunga might prove to host a resource of >160,000oz when cut should give at least >100,000oz of mineable gold ore, or one to two years of additional gold production.
The recovery of higher grade ores should also allow Shanta to blend lower grade gold ores from surface pits to further extend the company’s mine life.
The discovery of more, higher grade ore at Ilunga further confirms Bradbury’s move to bring Peet Princeloo and his team back into Shanta for their exploration skill.
* The author of this report has visited the New Luika mine site on two occasions
Solgold* (LON:SOLG) 4.1p, Mkt Cap 39m – Surface mineralisation
• SolGold have discovered further outcropping porphyry copper / gold mineralisation just 400m south of the Alpala Central discovery.
• The discovery has been made using rock-saw channel samples in trenches at the site in Ecuador.
• The extent of the surface mineralisation is not yet defined but we know there are other showings of surface porphyry-style mineralisation at Aguinaga and Trivinio within the Cascabel license area.
• Surface outcrops is reported to show very high vein density indicating good potential going forward. Vein density of up to 10% of the total rock mass sounds like it offers potential for relatively good grades within a mineralised porphyry system.
• We look forward to the assay grades with great anticipation
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.
Stratex International (LON:STI) 1.6p, Mkt cap £7.6m – Providing short term loan to Goldstone Resources
• Stratex International has announced that it “will provide an unsecured, short-term loan … of up to US$100,000” to its 33.45% owned associate, Goldstone Resources which holds the Homase Akrokerri gold project adjacent to the historic Obuasi gold mine in Ghana and other west African projects.
• The loan, which carries a 5% interest rate is repayable on or before 31st December 2016, “may be drawn against amounts in accordance with the budget approved by the Goldstone board.”
• Stratex appears to be in an increasingly pivotal position within Goldstone; Stratex’s Chairman, Christopher Hall fulfils the same role at Goldstone, while in February, Stratex’s Director, Emma Priestley, was appointed Interim Chief Executive Officer at Goldstone Resources (though Ms Priestley is not a director of Goldstone).
Conclusion: Stratex is increasing its involvement with Goldstone Resources through management links and now with the provision of a short term loan.