Anglo American (LON:AAL) – De Beers sees stability in rough diamond sales
Keras Resources (LON:KRS) – Pre-payment agreement with Norton Gold Fields
Ormonde Mining* (LON:ORM) – Drilling at Barruecopardo shows depth potential
Ortac Resources* (LON:OTC) – President visits Ortac’s Kremnica gold mine in Slovakia
Rio Tinto (LON:RIO) – Exploration man to lead Technology and Innovation Group at Rio Tinto
Transense Technologies (LON:TRT)
Petropavlovsk* (LON:POG) – Speculation over potential for takeover lifts shares
Dow Jones Industrials -0.05% at 17,493
Nikkei 225 -0.94% at 16,499
HK Hang Seng +0.11% at 19,830
Shanghai Composite -0.77% at 2,822
FTSE 350 Mining +1.56% at 8,931
AIM Basic Resources +0.26% at 1,908
Economic News
The US$ currency strength leads oil and gold lower on increasing expectations for a Fed rate hike in Jun.
• The US dollar is up 0.3% this morning trading close to the highest level in nearly two months.
• The next FOMC is planned for Jun 14-15.
• Bloomberg estimates the probability of the rate increase in the next meeting at 32%, up 4pp from the start of last week before the release of the latest FOMC meeting minutes.
• James Bullard, the Saint Louis Fed president and a voting member of the FOMC, said the Brexit referendum scheduled for Jun 23 is unlikely to affect the timing of the next tightening policy move.
China – The Finance Ministry is issuing CNY 3bn (US$458m) of renminbi-denominated bonds in London.
• The expansion of the renminbi-denominated assets in offshore markets has been pursued by the government to boost international use of its currency.
• Moscow and Beijing have also discussed the possibility of the renminbi-denominated bond issue this year.
Germany – Respondents to the economic sentiment survey were less optimistic in May than compared to market forecasts and the previous month’s readings, according to the ZEW Institute.
• ZEW Economic Sentiment: 6.4 v 11.2 in Apr.
• The reading above 0 indicates optimisms; below indicates pessimism.
UK – The currency is up 0.4% against the greenback following the release of the Telegraph poll results regarding the EU membership vote scheduled for Jun 23.
• The Bremain camp posted a 13pp lead over Brexit supporters.
• The remain campaign is currently leading polls with 55% versus 42% in favour of the exit from the EU.
Italy – The IMF estimates the economy to reach pre-crisis levels only by the mid-2020 suggesting Italy is set for a nearly decade long period of stagnation.
• Over shorter forecast period, the IMF estimates the economy to grow only 1.25% over 2017-18, marginally better than 1.1% expected for this year.
• Weak growth rates mean deleveraging will be slow with the outstanding debt levels currently at 132.7% of GDP and some €360bn in non-performing loans.
Austria – Norbert Hofer, a far right nationalist president candidate, lost to Alexander Van der Bellen, a Green politician, who ran as independent and won 50.3% of the vote.
• A tight result highlights a rising influence of rightwing, nationalist and populist movements in Europe.
Currencies
US$1.1187/eur vs 1.1207/eur yesterday. Yen 109.57/$ vs 109.61/$. SAr 15.740/$ vs 15.596/$. $1.459/gbp vs 1.455/gbp
0.716/aud vs 0.722/aud. CNY 6.555/$ vs 6.553/$ –
Commodity News
Precious metals:
Gold US$1,244/oz vs US$1,250/oz yesterday – Azerbaijan has recorded a significant increase in gold reserves on the back of increased exploration activity and upgrades to the drilling rigs base, Minister of Ecology and Natural Resources said in a local interview.
Gold ETFs 59.4moz unch v 58.7moz yesterday – BIG jump in Gold ETF holdings potentially on concerns raised over China debt and on maybe also on bets against Fed rate tightening. Eg US dollar weakness if the Fed fails to tighten rates
Platinum US$1,008/oz vs US$1,017/oz yesterday –
Palladium US$547/oz vs US$553/oz yesterday –
Silver US$16.30/oz vs US$16.37/oz yesterday –
Base metals:
Copper US$ 4,586/t vs US$4,559/t yesterday -
Aluminium US$ 1,555/t vs US$1,536/t yesterday
Nickel US$ 8,365/t vs US$8,385/t yesterday –
Zinc US$ 1,824/t vs US$1,838/t yesterday
Lead US$ 1,644/t vs US$1,650/t yesterday
Tin US$ 15,795/t vs US$16,080/t yesterday
Energy:
Oil US$48.0/bbl vs US$48.3/bbl yesterday
Natural Gas US$2.070/mmbtu vs US$2.117/mmbtu yesterday
Uranium US$28.50/lb vs US$28.65/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$47.8/t vs US$50.8/t – The iron ore trading on China’s Dalian Commodity Exchange fell 2.5% today to a 10-month low of US$53.4/t.
Thermal coal (1st year forward cif ARA) US$46.7/t vs US$47.2/t yesterday –
Steel - prices in China continue to fall with October delivery prices falling by >6%.
Other:
Tungsten - APT European prices stood at $213-225/mtu vs $215-225/mtu
Company News
Anglo American (LON:AAL) 609 pence, Mkt Cap £7,856m – De Beers sees stability in rough diamond sales
• Anglo American reports that the 4th rough diamond sale of 2016 has, provisionally, realised US$630m “compared with $666 million value of the third sales cycle of 2016”.
• Although, as in previous announcements, the volume of the sales has not been released and therefore it is not possible to deduce a per carat value, the De Beers Chief Executive, Phillipe Mellier, is quoted saying “As normal seasonal trends return to the market, we are encouraged by the continued stability of demand for rough diamonds shown in the fourth sales cycle of 2016.”
Keras Resources (LON:KRS) 1.25p, Mkt Cap 16.8m – Pre-payment agreement with Norton Gold Fields
• Keras Resources announces that it has reached agreement with Norton Gold Fields on pre-payment terms for gold ore delivered to the Paddington mill in W Australia.
• The agreement means that Keras will receive 80% of the value of ore delivered when assays are received from the Paddington plant with the balance settled within 42 days. “Final reconciled production will be reported quarterly”.
• The acceleration of payments “within a short period of time from ore delivery will be a significant boost to Keras’s cash flow.”
• The Company reports that payment for the first batch of ore delivered “is currently being processed. Due to the unavailability of the sample plant, pre-payment for the second batch is anticipated to occur in the first 2 weeks of June.”
Ormonde Mining* (LON:ORM) 1.35 pence, Mkt Cap £ 6.4m – Drilling at Barruecopardo shows depth potential
• Ormonde Mining reports the results of a 2000m, five hole, drilling programme “confirming extensions to the mineralisation at depth beneath the main central part of the planned 9 year open pit” and also “following up a potentially expanded zone of mineralisation under the shallow northern end of the planned open pit …”
• The results include a 23m wide intersection at an average grade of 0.26% tungsten trioxide from a depth of 172m followed by a further 5m long intersection at an average grade of 1.95% from 404m, both in hole BAR 83 as well as 25m at 0.21% from 334m in hole BAR 85 and 6m at 2.59% from 2536m in hole BAR 86.
• “Drilling in the Northern area (BAR83, BAR84, and BAR87), below the shallow end of the currently defined open pit confirmed that this part of the resource is more complex, with multiple schist blocks present within the granite being intersected during drilling. Further drill testing is warranted to follow up on the original results from the 2012 drilling, but such work will not be immediately prioritised.”
• The results support the concept of extending the life of the Barruecopardo mine beyond the currently planned open pit into a phase 2 underground operation.
• The company has also taken the opportunity to provide an update on the project timetable for the development of the Barruecopardo mine which received mining permits late in 2014. In February this year, Ormonde Mining reported that there had been an administrative appeal relating to “an element of the compulsory land acquisition process”.
• Although the company’s actions have been exonerated “at the initial administrative level of this appeal process, … Project timelines remain likely to be impacted”.
Conclusion: The intersection of high grade tungsten mineralisation at depth below the pit development at Barruecopardo provides long-term potential to extend beyond the initial 9 year open pit into longer term underground mining.
*SP Angel acts as Broker to Ormonde Mining
Ortac Resources* (LON:OTC) 0.026p, mkt cap £1.5m – President visits Ortac’s Kremnica gold mine in Slovakia
• Press reports show pictures of the President of Slovakia visiting the historic Andrej adit in the Kremnica gold mine.
• The visit, part of a tour of the town of Kremnica including time visiting the Kremnica gold mint, probably the oldest operating gold mint in Europe.
Conclusion: We look forward to potential Presidential support for the gold mine and the jobs and prosperity the mine would create within the Kremnica community
*SP Angel acts as Nomad and broker to Ortac Resources
Rio Tinto (LON:RIO) 1980 pence, Mkt Cap £36.4bn – Exploration man to lead Technology and Innovation Group at Rio Tinto
Transense Technologies (LON:TRT) 1.27 pence, Mkt Cap £5.5m
• Stephen McIntosh has been appointed as the acting Group executive to run the Technology and Innovation group within Rio Tinto.
• We don’t normally comment on this sort of management change but in this case we feel this is a very important position within one of the world’s top resource producers.
• The reason it’s so important is that we reckon Rio Tinto stands to gain hugely over the next few years from new technological advances being applied to the mining industry.
• Sometimes technological innovation is easy to implement and sometimes it’s much more challenging – our advice, for what it is worth, is to keep it all as simple as possible and to implement in manageable stages.
• McIntosh was most recently head of exploration leading a 450-strong global team operating across 20 countries so he should know how to manage a project or two and we look forward to Stephen’s application of new technology in exploration uncovering some new rare world-class discoveries.
• More importantly hope Stephen will continue to promote the use of new technology in driving efficiency improvements in Rio’s operating mines.
• For example, Transense Technologies, (TRT LN), based in the UK which supplies Translogik sensors for tyre management for mining trucks and other vehicles. The sensors come with the added benefit of highlighting problems before they happen enabling miners to get more from their mining fleets and their mines. A flat tyre on a 200t dump truck is not an easy fix in the middle of a mine. Transense sensors transmit real time information about the tyre temperature and pressures and location to the driver and to a central control room to ensure the fleet keeps moving.
• It is these sorts of innovations which can save millions in costs and improve utilisation and mine operating rates and we hope Stephen will focus as much on these sorts of operational gains as on the discovery of the next generation of world-class resources.
Petropavlovsk* (LON:POG) 8.1p, Mkt Cap 266m – Speculation over potential for takeover lifts shares
• Petropavlovsk shares have gained from speculation in the Russian press over the potential for a deal or hostile takeover by Renova, a company controlled by ‘Victor Vekselberg’ who is reported to hold 21.45% of POGs stock.
• POGs recently agreed to buy Amur Zoloto for a total value of US$160m with US$144m to be paid in shares 30.3% of POG stock (1,434m at 6.89p) and US$16m of assumed net debt.
• The deal is expected to complete this summer but might potentially prompt a takeover before consummated
Conclusion: The company is playing down the significance of the speculation but is apparently open to more M&A ideas and potential. We suspect management are wary of a potential hostile bid by Renova and we wonder if part of the reason for paying for offering so much stock to Amur Zoloto is to make hostile action more unlikely.
*SPAngel analysts have visited the Pioneer, Malomir and Albyn gold mines in Russia