Alecto Minerals (LON:ALO) – Raising £665,000
Amur Minerals* (LON:AMC) – Drilling underway early on Kun Manie
Condor Gold (LON:CNR) – £240,000 from IFC brings placing proceeds to £2.8m
Gem Diamonds (LON:GEMD) – Q1 Production in line with plan; cautious view on the diamond market
Sirius Minerals (LON:SXX) – Reserve increase at North York Potash Project
Soros buys Barrick Gold and ETFs
* The latest quarterly report on money managers' positions showed Soros family office increased the interest in Barrick Gold as well as acquired call options on gold ETFs.
* Soros bought 1.7% stake in Barrick making it the biggest US-listed holding in the fund's portfolio.
* In addition, Soros disclosed owning call options on 1.1m shares int he SPDR Gold Trust, the largest gold ETF, as of the end of Q1/16.
Eldorado Gold Corp – sells China gold mines for $600m
* Eldorado Gold is selling up its gold mines in China for an impressive $600m.
* The company are selling the White Mountain and Tanjianshan mines and the Eastern Dragon project to Yintai Resources Co.
* Eldorado announced the sale of the Jinfeng mine to a unit of China National Gold for $300m in April
* Management are to use the funds for the development of its European mining portfolio with projects in Turkey, Romania, Greece and Brazil.
* We get the impression that the difficulty of operating an increasingly diverse portfolio as well as the challenges of operating in China is part of Eldorado’s decision to sell the assets.
* Eldorado expect to receive the funds in the H2 with funds from the Jinfeng mine sale to come through in Q3.
Scientists discover 4.5bn year old birthmarks on Earth
* Scientists have discovered two birthmarks in the Earth’s mantle consisting of silicate material that formed when Earth was less than 50m years old.
* https://science.sciencemag.org/content/352/6287/768 <https://research.spangel.co.uk/_act/link.php?mId=AO9456225981851888447429966424526&tId=398038010>
Brexit referendum debate – Does the EU work for us?
* Well done to BBC Newsnight and John Sweeney of Panorama for their best program yet on the Brexit debate.
* Last night felt like the first time the public was presented with facts on the EU rather than opinion.
* The fact that the European Parliament moves en-mass to Strasbourg once a month for a week at a cost of €170m highlights the way the EU works.
* Everybody things the move is insane but the French have a veto which blocks any motion to change the practice.
* As with all analysis the devil is always in the detail and thank you to Newsnight for giving us more of the detail and less of the rhetoric. See BBC Newsnight link below:
* https://thescienceexplorer.com/universe/scientists-have-discovered-45-billion-year-old-birthmarks-earth <https://research.spangel.co.uk/_act/link.php?mId=AO9456225981851888447429966424526&tId=398038011>
* https://www.bbc.co.uk/events/eqbxj5/live/c24wrz <https://research.spangel.co.uk/_act/link.php?mId=AO9456225981851888447429966424526&tId=398038012>
Dow Jones Industrials +1.00% at 17,711
Nikkei 225 +1.13% at 16,653
HK Hang Seng +1.18% at 20,119
Shanghai Composite -0.25% at 2,844
FTSE 350 Mining +1.83% at 9,233
AIM Basic Resources -0.54% at 1,916
Economic News
China – April shows acceleration in growth in real estate investment
* Chinese real estate investment rose 9.7% in April yoy with new construction starts rising 21.4% yoy from Jan-Apr vs 19.2% in Q1 measured by floor space.
* Factory output growth slipped to 6% yoy in April vs expectations for a 6.5% rise, though the rate is still very impressive particularly considering the scale of China’s factory capacity
* Fixed-asset investment fell slightly to 10.5% in the first four months from 10.7% in Q1.
* The statistics on the Chinese economy look positive to us with the ramp up in steel production serving to cut steel prices and encourage new infrastructure investment in China and overseas.
US - The US dollar index is off slightly this morning as riskier assets are attracting investors' interest helped by stronger oil prices.
* Brent oil prices are nearing the US$50/bbl mark on concerns over supply disruptions in Nigeria and market analysts revising their estimates for average prices in H2/16 higher.
* Industrial production and consumer prices data are due today.
* Estimates are for an acceleration in an inflation rate in Apr with industrial output growth expected to pick up from a two-month slump recorded through Feb-Mar.
UK - An increasing percentage of UK voters supporting the Bremain campaign as suggested by latest polls has been driving the pound higher lately.
* 55% of voters are expected to choose to stay in the EU, up from 52% recorded in a similar survey in Apr, before a referendum scheduled for the Jun 23.
* However, weak inflation numbers released this morning are likely to translate into a headwind for future gains.
* Consumer prices climbed 0.3%yoy in Apr, down from 0.5%yoy seen in Mar and 0.5%yoy forecast.
* "Falls in air fares and prices for clothing, vehicles and social housing rent were the main contributors to the decrease in the rate."
* "These downward pressures were partially offset by rising prices for motor fuels and for certain recreational goods and cultural services, and by food prices, which were unchanged during Mar and Apr 2016."
France - 2015 debt and budget deficit numbers are worse than previously estimated, according the Insee, the French national statistics bureau.
* Gross debt have been re-estimated at 96.1% of GDP, up from initially calculated 95.3%.
* Budget deficit hit 3.6% of GDP last year, 10bp higher than previously thought.
* Both of those remain in breach of the EU wide membership thresholds for 60% and 3%, respectively.
Australia - The Aussie dollar strengthened as much as 1.1% against the greenback marking the strongest intra-day move in a month as the RBA May meeting minutes showed the latest decision to bring rates lower was a much closer call than expected.
* The RBA surprised markets by cutting the benchmark rate by 25bp to 1.75% on May 3.
* Chances for another rate cut in the coming meetings have dropped to 15%, down from 24% yesterday, FT reports.
Greece - The IMF are pushing creditors to consider major concessions regarding bailout loans to Greece.
* The Fund advocated for an extension of principal and interest payments through 2040 fixing the rate of interest at the current average of 1.5% for the next 30-40 years.
* Interest payments to be postponed until repayment of the principal starts, the IMF proposes.
* On the borrower's side of things, the IMF demanded Greece to enact a set of "contingency measures" targeted at budget cuts and tax reforms should previously announced economic targets be missed.
* Contingency cuts worth about €3.5bn are coming on top of €5.4bn of austerity measures already agreed.
Currencies
US$1.1324/eur vs 1.1321/eur yesterday. Yen 109.63/$ vs 108.79/$. SAr 15.626/$ vs 15.463/$. $1.447/gbp vs 1.435/gbp
0.732/aud vs 0.730/aud. CNY 6.525/$ vs 6.522/$. – US dollar weakness - multiple reasons
Commodity News
Precious metals:
Gold US$1,271/oz vs US$1,282/oz yesterday – China’s ICBC bank buys gold vault in London as it grows its precious metals business.
* The vault is in a secret location though we believe the site is accessible with an OAP bus pass and a Zimmer frame
Gold ETFs 58.6moz v 58.3moz yesterday – a good jump in Gold ETF holdings set against a surprise pullback in the gold price
Platinum US$1,048/oz vs US$1,055/oz yesterday – platinum demand likely to rise from auto makers as they struggle to meet real-world emissions tests
* Demand falls for platinum jewellery falls as sales fall by double digits in China
Palladium US$589/oz vs US$596/oz yesterday – Norilsk fund to buy several tonnes of palladium this year (Reuters)
Silver US$17.14/oz vs US$17.32/oz yesterday
Base metals:
Copper US$ 4,651/t vs US$4,641/t yesterday
Aluminium US$ 1,555/t vs US$1,542/t yesterday
Nickel US$ 8,725/t vs US$8,650/t yesterday – Cerro Matoso union to strike after South32 Ltd management walk away from wage talks. The largest union says there is no doubt of a strike (Bloomberg).
* The strike would normally cause nickel prices to rise but with so much nickel sitting in Chinese warehouses the strike will need to be longer than usual to make much impact in our view.
Zinc US$ 1,891/t vs US$1,892/t yesterday
Lead US$ 1,738/t vs US$1,703/t yesterday
Tin US$ 16,905/t vs US$16,715/t yesterday
Energy:
Oil US$48.9/bbl vs US$48.7/bbl yesterday
Natural Gas US$2.049/mmbtu vs US$2.072/mmbtu yesterday
Uranium US$28.35/lb vs US$28.00/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$50.3/t vs US$49.3/t – Iron ore prices appear to be turning following the fall prompted by Chinese state action to limit speculation in iron ore futures
* China ramped up the cost of buying iron ore futures on the Dalian exchange and made it perfectly clear that they wanted to discourage such investment as it was messing up their plans to rationalise overcapacity in their domestic steel industry.
* China produced a record 69mt of steel in April up 0.5% yoy.
* Chinese infrastructure spend is reported to be 720bn over the next three years following some US$380-600bn of total infrastructure spend last year, reports vary
* Chinese real estate investment rose 9.7% in April yoy with new construction starts rising 21.4% yoy from Jan-Apr vs 19.2% in Q1 measured by floor space.
* Factory output growth slipped to 6% yoy in April vs expectations for a 6.5% rise, though the rate is still very impressive particularly considering the scale of China’s factory capacity
* Fixed-asset investment fell slightly to 10.5% in the first four months from 10.7% in Q1.
* The statistics on the Chinese economy look positive to us with the ramp up in steel production serving to cut steel prices and encourage new infrastructure investment in China and overseas.
Thermal coal (1st year forward cif ARA) US$47.1/t vs US$46.3/t yesterday
Other:
Tungsten - APT European prices stood at $215-225/mtu vs $205-215/mtu two weeks ago – prices unchanged on last week
Ferrochrome – Zimbabwe defence ministry partnering with Africa Chrome Fields (ACF) a subsidiary of Fanshawe Minign Holdings on a new exothermic chrome smelting project in Kwekwe. The new technology is reported to be able to produce ultra-low carbon ferrochrome in 45 seconds.
Company News
Gem Diamonds (LON:GEMD) 135.75 pence, Mkt Cap £187.7m – Q1 Production in line with plan; cautious view on the diamond market
* Gem Diamonds reports “A strong start to the year with production in line with plan”. Production from the 70% owned Letseng mine in Lesotho of 28,698 carats during the quarter ending 31st March 2016 is 28% higher than the March 2015 quarter and only 1% below the preceding Q4 2015 output of 29,100 carats.
* The higher output compared to Q! 2015 was a combination of a 14% increase in the tonnage treated (1.625m tonnes) and a 12% increase in grade to 1.77 carats per hundred tonnes (cpht).
* Prices received over the first three tenders of Letseng diamonds averaged US$1938 per carat for the 45,311 carats sold compared to an average price of US$2157 per carat for the 35,940 carats sold in the first three tenders of 2015.
* Lower production at the Ghaghoo mine in Botswana (11,029 carats vs 11,559 carats in Q1 2015 and 25,294 carats in Q4 2015) reflects the decision to downsize operations to the 300,000 tpa level for 2016. “Although Ghaghoo will operate at a reduced production rate during 2016, prices for the Ghaghoo production will continue to be monitored and the option of returning to full production regularly reviewed.”
* Sales for Ghaghoo amounted to US$160/ carat for the 14,114 carats sold during the quarter. The price is “some 7 percent above the previous price achieved in December 2015.”
* Commenting on the state of the diamond market, the company highlights the “continued slowdown in Chinese retail demand, a strong US dollar and reports of continued high levels of polished inventory” as reasons for continuing caution in the purchasing of rough and polished diamonds.
* Excluding the receipts from the third diamond tender, Gem Diamonds reports that it held US$60.6m in cash at the end of the quarter.
Conclusion: Gem Diamonds is on track at its Letseng mine and with the downsizing of it Botswana operation at Ghaghoo. The company reports a cautious stance on the diamond market as a result of high inventory levels, weak Chinese retail demand and the strength of the SU$.
Sirius Minerals (LON:SXX) 18.5 pence, Mkt Cap £424.5m – Reserve increase at North York Potash Project
* Sirius Minerals reports that as a result of the detailed work leading to its recently completed Definitive Feasibility Study, probable reserves on the Shelf Seam have increased to 280m tonnes at an average grade of 88.4% polyhalite from the previously reported 250m tonnes at an average grade of 87.8%.
* The results, which were prepared under the supervision of the consultants, SRK, are reported in compliance with the JORC (2012) guidelines.
* The overall resource is 2.66bn tonnes at an average grade of 85.7% polyhalite. Inferred resources comprise 1.84bn tonnes of this resource and “SRK considers that there is a good likelihood that a proportion of the currently reported Inferred Mineral Resource will be upgraded to the Indicated Mineral Resource and Ore Reserve status once the mine has been established and the polyhalite horizons have been accessed and underground exploration and grade control drilling commences.”
Alecto Minerals (LON:ALO) 0.085 pence, Mkt Cap £3.1m – Raising £665,000
* Alecto has raised £665,000 in a fully subscribed issue of 831.25m new shares at a price of 0.08p per share.
* The new shares represent 18.64% of the enlarged company.
* The additional funds are to be used to advance the Matala gold project in Zambia where Alecto is working towards the development of a 400,000 tpa open pit gold mine.
* As the placing has occurred during a close period in advance of publication of the 2015 accounts, directors were unable to participate in the placing, however “As soon as the Company is out of a close period, which is expected to occur shortly, Alecto’s CEO, Mark Jones, intends to subscribe for 12,500,000 new Ordinary Shares, amounting to £10,000 at the Placing Price.”
Conclusion: Alecto Minerals’ funding should help advance the Matala gold project towards what is reported to be “low-cost production in the near to mid-term.”
Amur Minerals* (LON:AMC) 5.25p, Mkt Cap £27.0m – Drilling underway early on Kun Manie
* Amur Minerals reports that it has started drilling three weeks earlier than planned at its Kun Manie project in the Russian Far East. As of 13th May, 496 metres of drilling had been completed in two holes of a planned 15,000 metres programme.
* Amur Minerals is planning a 7,500 metres to 9,000 metres programme of 25 to 30 drill holes to obtain a large bulk sample along the 3.5km long MKF deposit for metallurgical testing for use in the final process design.
* The bulk sample drilling should provide a mass of between 5 to 6 tonnes of mineralisation which can be used to assess the appropriate metallurgical treatment and the composition and variability of concentrate product.
* The Company is also planning to undertake additional exploration and infill drilling in order to extend the overall extent of the known deposit and to help upgrade existing inferred resources to indicated resources.
Conclusion: The company has prepared meticulously for its exploration programme at Kun Manie and the early start to drilling is welcome. The results of the metallurgical testing will be crucial to the development of the most effective flowsheet, while the infill and exploration results offer the chance to expand and upgrade the overall deposit. We look forward to results as they become available.
*SP Angel act as Nomad and Broker to Amur Minerals
Condor Gold (LON:CNR) 64.0p, Mkt Cap £33.4m – £240,000 from IFC brings placing proceeds to £2.8m
* Condor Gold reports that the IFC has exercised its “non-dilute” rights to contribute a further £240,000 to the recent placing which raised £2.578m.
* The continuing involvement of IFC brings the total funds raised to £2.818m and its decision to maintain its proportional holding is likely to be seen as a signal of confidence in the project.
* The main placing involved a £1.5m investment by the Canadian mining entrepreneur, Ross Beatty and by the specialist resources Sprott fund both of whose involvement may also be viewed in a positive light.