ASA Resource* (formerly Mwana Africa) (LON:ASA) – New NED and SP Angel appointed as Nomad and broker to ASA Resources
Bushveld Minerals (LON:BMN) – US$5.2m Financing of first tranche of Vametco acquisition
Hummingbird Resources (LON:HUM) – £45.8m raised for Yanfolila development
Kibo Mining (LON:KIBO) – Start of bid process for Mbeya Coal to Power Project
Origo Partners (suspended) – Kincora Copper placement and debt restructuring
Dow Jones Industrials +0.27% at 17,839
Nikkei 225 +0.48% at 16,642
HK Hang Seng +0.42% at 20,947
Shanghai Composite +0.46% at 2,939
FTSE 350 Mining +1.44% at 8,724
AIM Basic Resources +0.31% at 1,923
Economic News
Equities are firmer this morning ahead of the US NFP numbers due later today.
• US$ index as well as gold prices are virtually flat on the week (both -0.02% v last week) ahead of the US labour market data.
• Copper prices are up this morning (+0.9%) driven by stronger demand in Chinese markets with local metal futures trading higher.
• Oil prices help the energy sector on the back of EIA reports US production declined for a 12th week and crude stockpiles fell.
• In line with expectations, OPEC failed to agree on production caps.
US – Preliminary jobs report came in straight in line with estimates while weekly jobless claims dropped for a third week.
• While ADP is seen as a poor indicator of changes in NFPs, a slowdown in jobs gains may indicate a tightening of the labour market potentially exerting inflationary pressures on workers’ earnings and driving general prices higher.
• Chances of the Fed to hike rates this month are continuing to fall (22% v 30% at the beginning of the week) with Jul looking as the likely month of the next monetary tightening decision (55% probability assigned at the moment).
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Personal Income Apr 0.4%mom 0.4%mom 0.4%mom
Personal Consumption Apr 1.0%mom 0.7%mom 0.1%mom
PCE Apr 0.3%mom/1.1%yoy 0.3%mom/1.1%yoy 0.1%mom/0.8%yoy
PCE (Core) Apr 02%mom/1.6%yoy 0.2%mom/1.6%yoy 0.1%mom/1.6%yoy
S&P/CS House Prices Mar 0.9%mom 0.7%mom 0.7%mom
Wednesday ISM Manufacturing May 51.3 50.3 50.8
Wards Vehicles Sales May 17.4m 17.3m 17.3m
Thursday Weekly Jobless Claims 267k 270k 268k
ADP Employment Change May 173k 173k 166k (revised from 156k)
Friday NFP May 160k 160k
Unemployment Rate May 4.9% 5.0%
Av Hourly Earnings May 0.2%mom/2.5%yoy 0.3%mom/2.5%yoy
Source: Bloomberg
Japan – Labour earnings climbed by a modest 0.3%yoy in Apr, down on 1.5%yoy in Mar and underperforming expectations for a 0.9%yoy increase.
• With the economy remaining in deflation since Mar, real earnings growth was double the nominal rate (+0.6%yoy v 1.6%yoy in Mar).
Eurozone – The latest PMI data suggests the economy is set to post a 0.3%qoq growth in Q2/16, down on 0.5%qoq in Q1/16, according to Markit estimates.
• Weak outlook is driven by a decline in new business orders at manufacturing and services firms which hiut the lowest level in 16 months in May.
• “Such a lacklustre performance in the second quarter points to an ongoing lack of growth momentum, which in turn raises the prospect of policy makers seeking new ways to stimulate growth.”
• On the stimulus front, the ECB kept the pace of the monetary easing unchanged yesterday, in line with expectations, focusing on the implementation of changes announced in Mar.
• The bank brought its core inflation forecasts down suggesting weak price growth risks are becoming entrenched in the region.
• In line with the bond purchases programme updated during the Mar meeting, the ECB will start purchases of corporate debt next week.
• Prospects of ECB purchases led to a surge in the issuance of euro corporate bonds with two weeks in Apr and Mar seeing record issuances of €21.7bn and €19.7bn, respectively, which are more than double recorded in Jan.
Spain – Services sector growth accelerated in May compensating for a slowdown in the manufacturing industry, Markit PMIs showed.
• Services PMI: 55.4 v 55.1 in Apr and 54.0 forecast.
• Manufacturing PMI: 51.8 v 53.5 in Apr and 52.5 forecast.
• Composite PMI: 54.8 v 55.2 in Apr and 54.2 forecast.
• Transport, hospitality and storage subsectors posted strong performance last month.
• The economy seems to be weathering the political crisis relatively well.
• The nation prepares for another round of general elections due on Jun 26 after the current Parliament failed to agree new government.
Fire traps >50 miners underground in Siberian coal mine
• More than 50 miners are reported trapped in an underground coal mine at Zarechnaya in Siberia.
Russia - Khodorkovsky interview offers insight on life in the former Soviet Union and on Putin
• A memorable interview for anyone who is interested in Russia and its politics.
• https://www.youtube.com/watch?v=DkAeLeI4yGU
Americans are big buyers of ‘Dump with Trump’ lavatory paper
• Impress your neighbours with ‘Dump on Trump’ loo paper
• We feel this is a commodity which could sell rather well particularly within certain communities.
• We believe sales are going well in China and Mexico as well as the US.
Currencies
US$1.1144/eur vs 1.1209/eur yesterday. Yen 108.97/$ vs 109.06/$. SAr 15.594/$ vs 15.569/$. $1.443/gbp vs 1.444/gbp
0.725/aud vs 0.722/aud. CNY 6.586/$ vs 6.581/$
Commodity News
Precious metals:
Gold US$1,211/oz vs US$1,215/oz yesterday
Gold ETFs 59.5moz v 59.4moz yesterday –
Platinum US$959/oz vs US$974/oz yesterday –
Palladium US$539/oz vs US$545/oz yesterday
Silver US$16.08/oz vs US$16.00/oz yesterday
Base metals:
Copper US$ 4,657/t vs US$4,604/t yesterday –
Aluminium US$ 1,547/t vs US$1,572/t yesterday
Nickel US$ 8,525/t vs US$8,410/t yesterday
Zinc US$ 2,001/t vs US$1,987/t yesterday
Lead US$ 1,732/t vs US$1,731/t yesterday
Tin US$ 16,400/t vs US$16,140/t yesterday
Energy:
Oil US$50.10/bbl vs US$49.84/bbl yesterday
Natural Gas US$2.425/mmbtu vs US$2.388/mmbtu yesterday
Uranium US$28.00/lb vs US$27.25/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$44.9/t vs US$44.7/t – yesterday –
Thermal coal (1st year forward cif ARA) US$52.1/t vs US$50.9/t yesterday –
Other:
Tungsten - APT European prices stood at $213-225/mtu unch vs $215-225/mtu
Company News
ASA Resource* (LON:ASA) 0.7 pence, Mkt Cap £11m – New NED and SP Angel appointed as Nomad and broker to ASA Resources
(formerly Mwana Africa)
• ASA Resources has appointed SP Angel as Nomad and broker to ASA Resources.
• The company also announced that it has appointed Niall Henry as a new independent non-executive to the board
• ASA formerly Mwana Africa owns and operates the Freda Rebecca gold mine and the Bindura nickel mining and smelting complex in Zimbabwe
• The company continues to operate the Freda Rebecca gold mine with gold sales of 67,672oz over the past 12 months at a cash cost of just over $900/oz and an average AISC cost of just under $1,100/oz.
• The Trojan nickel mine produced 6,621t of nickel in concentrate over the past 12 months with cash costs running at around $5,520/t through the last quarter.
• The company also operates the Klipspringer diamond mine in South Africa. The mine produced 101,563cts over the past 12 months with sales at around $18/ct.
• ASA is also looking to refurbish and restart the Bindura Nickel smelter and refinery complex. Bindura state that the smelter restart project is progressing well with management looking at studies on how to modify the plant to also process Platinum Group Metals.
*SP Angel act as Nomad and broker to ASA Resources
Bushveld Minerals (LON:BMN) 1.95 pence, Mkt Cap £9.5m – US$5.2m Financing of first tranche of Vametco acquisition
• Bushveld Minerals has announced that it has secured “US$5.2m to complete the first phase of the acquisition of Strategic Minerals Corporation”.
• Bushveld Minerals is “to partner with Yellow Dragon to acquire SMC through Bushveld Vametco Limited ("BVL"), a special purpose vehicle established for the purpose of the Acquisition. Yellow Dragon is a private, strategic investor in African resource projects”
• Under the agreement, Yellow Dragon will hold 55% of Vametco and Bushveld Minerals will hold 45%. The acquisition of Vametco is to be financed by loans in proportion to this 45:55 split.
• Bushveld Minerals will fund its US$2.33m share of the initial acquisition price by “A placing of … shares … at 1.8p per share raising £1,770,000 (approximately US$2.6 million) … led by a subscription for 50,000,000 new ordinary shares for the sum of £900,000 (approximately US$1.3 million) by Yellow Dragon ("Yellow Dragon Subscription"), together with the grant of one warrant for each two shares, exercisable at 2.4p for a period of 2 years;”
• We estimate that following the subscription for 50m new shares, Yellow Dragon will hold around 9% of the enlarged Bushveld Minerals.
Hummingbird Resources (LON:HUM) 23.8 pence, Mkt Cap £ 25.4m – £45.8m raised for Yanfolila development
• Hummingbird Resources announced that it has raised approximately £45.8m (US$67m) to advance the construction of its Yanfolila gold mine in Mali.
• The company is placing approximately 103.7m new shares at 22p per share. “Up to US$10m worth of the Subscription Sahres, has been conditionally subscribed for by Sapinda Asia Limited via an underwriting subscription.”
• The issue of the shares is subject to shareholder approval on 20th June and there is an “Overallotment option to raise up to an additional £6.9 million (c US$10million) through the issue of up to 31,260,000 shares at 22 pence per share, subject to shareholder approval.”
• The fundraising represents a substantial part of the estimated US$80m capital required for Yanfolila and the “Balance of financing [is] anticipated to come from an appropriate debt facility for which the Company has received a number of expressions of interest.”
Conclusion: According to AIM’s reported statistics, the funding for Yanfolila at almost £46m is larger than the total funds raised for mining in March (£23.81m) and April (£20.15m) combined and is equivalent to over 80% of the total £55.13m raised for mining on AIM during the first 4 months of 2016. We are tempted to infer that there is a change underway in investor sentiment towards AIM Mining stocks.
Kibo Mining (LON:KIBO) 5.6 pence, Mkt Cap £19.9m – Start of bid process for Mbeya Coal to Power Project
• Kibo Mining reports that it “can commence with the formal EPC-bid process for both the Mbeya Power Plant and the Mbeya Coal Mine”. This announcement follows a meeting in Dar es Salaam between the company and the “China based EPC contractor SEPCO III” concerning the power plant.
• Under a Joint Development Agreement (JDA) between the two companies, “The first step in this process will require SEPCO III to agree and commit to an equity investment in the MCPP in order to obtain the right to be the sole EPC bidder for the Mbeya Power Plant EPC contract.”
• In order to ensure that the selection of the preferred bidder is an arms-length process and that technical and operational standards are maintained in the bidding process, Tractebel Engineering has been appointed as an “Independent Qualified Person” to oversee the process.
• Kibo Mining also reports that “The EPC bid process for the Mbeya Coal Mine is also well under way and the Company will today receive the first EPC budget quotations from eight bidders who have expressed an interest to bid for the Mbeya Coal Mine EPC and mining contract.”
Conclusion: The selection of contractors will be a further step forward for the Mbeya Coal to Power Project; we look forward to further announcements as the selection process progresses. The requirement that, subject also to satisfying technical and operational thresholds, SEPCO III becomes an equity investor in the project in order to assure the rights to be sole bidder for the power plant should help to align the interests of the contactor with those of Kibo Mining.
Origo Partners (suspended) – Kincora Copper placement and debt restructuring
• Origo Partners reports that one of its portfolio companies, Kincora Copper in Mongolia is placing C$2m worth of new shares and also restructuring its debt with Origo.
• Origo has agreed to convert a C$2m convertible note and outstanding principal interest net of C$0.5m escrowed funds to be paid to Origo into equity.
• The loan was due for repayment along with interest at 8.7%pa in October 2016.
• Origo Partners is subject to court proceedings in the Isle of Man relating to a petition to wind up the company lodged by Pacific Asia Alliance Asia Opportunity Fund L.P. a 25.6% ordinary shareholder.
• The trial date to consider the Petition is set down for Friday 22 July 2016 and Monday 25 July 2016.
• We draw shareholders attention to the following statement made by Origo on 8.04.16
• “the presentation of a petition to the Isle of Man Court for winding up is deemed to have commenced a winding up by the Isle of Man Court, under S169(2) of the Isle of Man Companies Act 1931.
• Section 167 of the Isle of Man Companies Act 1931 states that any disposition of the property of the Company after the commencement of the winding up by the Isle of Man Court is void unless the court orders otherwise. Consequently, whilst the Company's daily operations should remain broadly unaffected, disposals of its assets without Court approval may be rendered void and therefore there are likely to be challenges in implementing the Company's investing policy pending the outcome of the Trial. The Company has received legal advice that the Isle of Man Court is likely to validate realisations where no person will be prejudiced by them, and also that the provisions of section 167 of the Isle of Man Companies Act 1931 may extend to any transfer of the Company's shares.
• As a result, the trading of the Company's securities on AIM will remain suspended, pending clarification of the Company's financial position and the outcome of the Trial.”