Metminco * (LON:MNC)– A$0.6m fundraising
Ncondezi Energy (LON:NCCL) – Updated timetable on JDA agreement
Shanta Gold (LON:SHG) – Financial restructuring to raise US$10m placing, €5m in an open offer and $US5.25m in a streaming agreement
Dow Jones Industrials +0.05% at 17,661
Nikkei 225 -0.25% at 16,107 (Markets are back from holidays; change on Monday close)
HK Hang Seng -1.66% at 20,110
Shanghai Composite -2.82% at 2,913
FTSE 350 Mining -1.49% at 9,170
AIM Basic Resources -2.13% at 1,911
Economic News
US – US equity futures are range bound this morning as investors wait for jobs report due later today with estimates for a 200k reading v 215k in Mar.
• Weekly jobless claims jumped last week to the highest level in five weeks, the data released yesterday showed.
• The four-week average adjusting for the week-by-week volatility climbed 2k to 258k, one of the lowest readings in decades.
• James Bullard, the St Louis Fed President, said options remain open regarding the rate decision in Jun.
• The US Dollar index is slightly off this morning following a three day rally that saw the US currency appreciating 1.8% against the basket of counterparts.
• Markets currently assign 10% probability the Fed will move forwards with a rate hike in Jun. That is down from a 20% chance forecast a month ago.
Date Index Period Actual Expected (Bloomberg) Previous
Monday ISM Manufacturing PMI Apr 50.8 51.4 51.8
Tuesday Auto sales Apr 17.3m 17.4m 16.5m
Wednesday ADP Employment Apr 156k 195k 194k (revised from 200k)
Productivity Q1/16 -1.0%qoq -1.3%qoq -1.7%qoq (revised from -2.2%qoq)
Factory Orders Mar 1.1%mom 0.6%mom -1.9%mom (revised from -1.7%mom)
Factory Orders (ex Transport) Mar 0.8%mom -0.9%mom (revised from -0.8%mom)
Trade Balance Mar -$40.4bn -$41.2bn -$47.0bn (revised from -$47.1bn)
Thursday Weekly Jobless Claims 274k 260k 257k
Friday NFP Apr 200k 215k
Unemployment Rate Apr 4.9% 5.0%
Labour Force Participation Apr 63.0% 63.0%
Av Earnigns Apr 0.3%mom/2.4%yoy 0.3%mom/2.3%yoy
China – Rail and highway freight volumes contracted 11.9% and 5.5% to 3.36bn and 61.5bn tonnes, respectively
• Both point to a slowing economic activity in the country as the government is continuing with a transformation of the growth model.
• Paving the way for future economic benefits, the government continued to invest in the infrastructure with FAI in railway and road construction up 0.8% and 1.7%, respectively.
Japan – The economy might be on track for a tough quarter as services industry slipped into a contractionary territory in Apr for the first time in over a year.
• Markit services PMI: 49.3 v 50.0 in Mar.
• A reduction in clients led a fall in the index with new business climbed only slightly during the month.
• The report comes on top of a record low manufacturing PMI reading of 48.2 in Apr.
• Both sub-indices dragged composite PMI to a two year low of 48.9, down from 49.9 in Mar.
• Bloomberg estimates are for the economy to post a 0.4%qoq in Q1/16 and 1.2%qoq in Q2/16 following a 1.1%qoq contraction in Q4/15.
Eurozone – Retail sales continued to contract in Apr with the rate of decline accelerating to the fastest since Feb/15.
• Sales were down in both France and Italy with growth in Germany slowing down.
• Eurozone retail PMI: 47.9 v 49.2 in Mar.
• “It was a disappointing start to the second quarter for retailers across the big-three Eurozone economies,” the report conluded.
Italy – The governor of the Italy’s central bank and a member of the ECB board, Ignazio Visco advocated for a review of the EU’s bail in regulation and a possibility of more government support for failed financial institutions.
• “We should not rule out the possibility of temporary public support in the event of systemic bank crises, when the use of a bail-in is not sufficient.”
• Visco argued the regulation will disproportionately hurt Italian retail investors.
• The nation is reported to be holding the most of non-performing loans as a percentage of gross borrowings (c.18% in 2015) among G20 countries.
Australia – The Aussie dollar grinds lower as the RBA released updated inflation forecasts guiding for a weaker price gains.
• The RBA sees inflation to come in at 1-2% in 2016 and then at 1.5-2.5% in 2017.
• This compares to three month old estimates for a 2-3% range for 2016.
Currencies
US$1.1427/eur vs 1.1478/eur yesterday. Yen 106.94/$ vs 107.12/$. SAr 14.983/$ vs 14.859/$. $1.450/gbp vs 1.450/gbp
0.738/aud vs 0.749/aud. CNY 6.499/$ vs 6.502/$.
Commodity News
Precious metals:
Gold US$1,280/oz vs US$1,280/oz yesterday
• Gold ETFs 57.7moz unch vs 57.5moz yesterday –
Platinum US$1,062/oz vs US$1,060/oz yesterday
Palladium US$601/oz vs US$605/oz yesterday
Silver US$17.35/oz vs US$17.44/oz yesterday
Base metals:
Copper US$ 4,790/t vs US$4,818/t yesterday – Prices are on track for the steepest weekly decline (-5.3% so far) since Jan last year on the back of waning demand concerns and a rebound in the US dollar.
Aluminium US$ 1,615/t vs US$1,618/t yesterday
Nickel US$ 8,980/t vs US$9,270/t yesterday
Zinc US$ 1,871/t vs US$1,855/t yesterday
Lead US$ 1,735/t vs US$1,742/t yesterday
Tin US$ 17,350/t vs US$17,300/t yesterday
Energy:
Oil US$44.8/bbl vs US$45.6/bbl yesterday
Natural Gas US$2.076/mmbtu vs US$2.150/mmbtu yesterday
Uranium US$27.55/lb vs US$27.60/lb yesterday
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$55.0/t vs US$56.9/t – Prices continue to slide lower driven by a correction in steel prices.
• Steel rebar futures on the Shanghai Futures Exchange dropped by a record 9.5% this week as authorities clamped down on speculators.
Thermal coal (1st year forward cif ARA) US$46.3/t vs US$46.6/t yesterday
Other:
Tungsten - APT European prices stood at $205-215/mtu vs $188-210/mtu last week
Company News
Metminco * (LON:MNC) 0.2 pence, Mkt Cap £6.7m – A$0.6m fundraising
• Metminco reports that it has raised approximately A$0.6m (gross) through the placing of around 151.8m new shares at a price of A$0.004 (£0.0021) per share.
• Directors and management subscribed for 39.125m (approximately 25.8%) of the new shares leaving them with around 8% of the company.
• The funds raised will “be applied towards the completion of the acquisition of Minera Seafield … development of the Miraflores project and working capital”.
• Conclusion: Metminco’s acquisition of Seafield Resources’ Quinchia project provides a near term opportunity to generate cashflow by the development of the 1.88m oz Miraflores gold deposit. It is encouraging to see the commitment of management and directors and we look forward to further news in due course.
*SP Angel act as joint-broker to Metminco
Ncondezi Energy (LON:NCCL) 4.0 pence, Mkt Cap £10.0m – Updated timetable on JDA agreement
• Ncondezi Energy has issued an updated timetable and progress report on its proposed Joint Development Agreement (JDA) with Shanghai Electric Power (SEP) for the development of its 300MW power plant in northern Mozambique.
• The proposed JDA, which was announced in January, allows for SEP to invest US$25.5m “to fund the balance of the Ncondezi Project development costs to Financial Close in return for a 60% equity interest in the Ncondezi Power Project.”
• Negotiations with SEP, which is one of China’s largest power companies, have been progressing on both technical and commercial aspects of the agreement and the Mozambique electricity authorities (EdM) has granted its approval, in principle, for the transaction to proceed.
• Technical discussions to change the boiler technology from the originally proposed circulating fluidised bed technology to the lower emission pulverised coal boiler has demonstrated the positive enhancements to the project which cooperation between Ncondezi and SEP brings to the project.
• Despite these benefits, however, the complex negotiations between SEP, Ncondezi and agencies of the Mozambique and Chinese Governments have resulted in slippage to the original timetable and Ncondezi is now expecting to conclude these issues during Q3 2016.
• Although the delays are frustrating, the longer term benefits to the development of the project from ensuring commercial clarity and technical excellence from the outset should more than justify the modest extension of the timetable.
• In the interim, Ncondezi is “in the final stage of executing a shareholder loan (“Shareholder Loan”) for a minimum of US$1 million from certain of Ncondezi’s Directors, management and shareholders. The Shareholder Loan is expected to provide sufficient funding to finalise the JDA with SEP in Q3 2016.”
Conclusion: The proposed JDA with one of China’s largest power companies brings considerable technical, project development and operational skills to the Ncondezi Power Project. Slippage on the timetable to complete the negotiations until Q3 2016 is placing Ncondezi’s short term funding under pressure and it is encouraging to see management and directors joining certain key shareholders in providing a short term loan to tide the company over until the JDA can be concluded.
Shanta Gold (LON:SHG) 6.9 pence, Mkt Cap £32.2m– Financial restructuring to raise US$10m placing, €5m in an open offer and $US5.25m in a streaming agreement
• Shanta Gold is proposing to raise US$10m in an equity placement at 6.5p/s
• Management have also agreed a $5.25m streaming deal with Sliverback Limited
• The US$10m placing is to repay bond holders while pushing out the maturity date on the remaining $15m to April 2019
• The coupon on the notes increases to an impressive 13.5% from what was a not unreasonable 8.5% previously
• The restructuring of the convertible was important to safeguard the financial stability of the firm while the streaming deam and further €5m open offer should give financial headroom while the team develop the new underground mine.