Ariana Resources (LON:AAU) – Kiziltepe construction update
Goldstone Resources (LON:GRL) – Stratex increases loan facility to Goldstone
Kefi Minerals* (LON:KEFI) – Lycopodium EPC work and stock agreement and final results
Dow Jones Industrials +0.64% at 17,920
Nikkei 225 +0.58% at 16,675
HK Hang Seng +1.42% at 21,328
Shanghai Composite +0.07% at 2,936
FTSE 350 Mining +0.71% at 9,544
AIM Basic Resources +1.17% at 1,973
Economic News
Europe - Eurozone growth revised higher by the European Statistics Agency.
• The agency reckons the Eurozone economy grew at 0.6% in Q1 qoq and by 1.7% yoy
• Significant contributions were from household spending, private sector investment as well as positive numbers in inventory changes and public sector spending.
US equity markets rebounded yesterday with European markets following suit as Janet Yellen voiced her concerns over weak jobs numbers.
• Commenting on monetary policy, Yellen said that current pace remains “generally appropriate” suggesting the 15-16 Jun meeting unlikely to yield another rate hike.
• The Fed chair did not provide clear indications over the next rate move.
• Previously, markets have been increasingly expecting the Fed to move as early as Jun/Jul following the release of hawkish Apr meeting minutes.
• Two weeks ago Yellen said she expected a rate to go up “in the coming months”.
• The US$ index (0.0%), gold ($1,244/oz; -0.2%) and brent ($50.7/bbl; +0.2%) are relatively flat this morning.
US – Economic news this week:
Date Index Period Actual Expected (Bloomberg) Previous
Wednesday JOLTS Jop Openings Apr 5,650k 5,757k
Thursday Weekly Jobless Claims 270k 267k
Friday UoM Consumer Sentiment Jun 94.0 94.7
Source: Bloomberg
Germany – Industrial production rebounded in Apr led by strong gains in capital goods output.
• Production climbed 0.8%mom/1.2%yoy v -1.1%mom/0.4%yoy in Mar and 0.7%mom/1.0%yoy forecast.
• The data comes on the heels of poor factory orders that fell through Apr on weak overseas demand and a contraction in capital goods orders (-6.1%mom).
• The latter is likely to weigh on industrial production in coming months.
France – The budget deficit in the first four months of the year contracted for a their consecutive year seeing the nation moving towards the 3% GDP target demanded by the Eurozone membership charter.
• The budget deficit shrank to €56.5bn compared to €59.8bn last year.
• The budget deficit stood at 3.5% of GDP as of Dec/15 v 4.0% in Dec/14.
India – The RBI held rates unchanged at a five-year low of 6.5% matching market expectations.
• The Bank left the door open for a potential easing should inflation pressures ease.
• The repo rate remained at 6.5% after it had been cut by 25bp in Apr.
Australia – In line with expectations, the RBA left rate unchanged at a record-low 1.75% today.
• The A$ jumped 0.8% against the US$ on the news and in absence of an easing bias in the RBA statement.
• Commenting on the state of economy Governor Glenn Stevens mentioned that “recent data (suggested) overall growth is continuing, despite a very large decline in business investment.”
• “Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend.”
• Deflation pressures “to remain” for some time given “subdued growth in labour costs and very low cost pressures elsewhere in the world”.
Currencies
US$1.1366/eur vs 1.1363/eur yesterday. Yen 107.75/$ vs 107.16/$. SAr 14.854/$ vs 15.134/$. $1.459/gbp vs 1.442/gbp
0.744/aud vs 0.735/aud. CNY 6.572/$ vs 6.564/$
Commodity News
Precious metals:
Gold US$1,241/oz vs US$1,241/oz yesterday – Lundin is meeting investors regarding the potential funding for the Frute del Norte (FDN) gold project in Ecuador.
• Construction is targeted to start in 2017 with commissioning expected in 2020.
• The project is estimated to cost US$$669m in capital costs and another US$263m in sustaining costs, according to the latest feasibility study released yesterday.
• A 340koozpa operation is estimated to run at US$623/oz AISC, thanks to high grade nature of the deposit (9.7g/t Au and 12.7g/t Ag in PP reserves).
• FDN is expected to become the first large gold mine in the country.
Gold ETFs 59.8moz v 59.7moz yesterday – Gold ETFs holdings continue to Climb
Platinum US$992/oz vs US$985/oz yesterday –
Palladium US$555/oz vs US$556/oz yesterday
Silver US$16.31/oz vs US$16.40/oz yesterday
Base metals:
Copper US$ 4,614/t vs US$4,747/t yesterday –
Aluminium US$ 1,552/t vs US$1,553/t yesterday
Nickel US$ 8,635/t vs US$8,695/t yesterday – Nickel prices rise as Cerro Matoso (South 32) workers prepare for strike. Cerro Matoso is the world’s second largest ferronickel mine
• While nickel is a wild beast of a market stock levels are sufficiently high to require a prolonged strike before the world starts to run short of the metal.
Zinc US$ 2,025/t vs US$2,026/t yesterday – Two Glencore units may face renewed allegations over zinc market manipulation in an amended lawsuit filed by Duncan Galvanising Corp. Glencore Ltd and Pacorini Metals USA are argued to have monopolised the US market for special high grade zinc inflating local premiums.
Lead US$ 1,733/t vs US$1,743/t yesterday
Tin US$ 16,890/t vs US$16,800/t yesterday
Energy:
Oil US$50.80/bbl unch vs US$50.10/bbl yesterday
Natural Gas US$2.434/mmbtu vs US$2.452/mmbtu yesterday
Uranium US$28.25/lb vs US$28.30/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$47.8/t vs US$46.8/t – yesterday – Iron ore shipments from Australia’s Port Hedland, the world’s biggest bulk export-terminal, hit the third-highest level on record in May.
• Exports totalled 39.4mt last month, up from 37.7mt in Apr and 38.0 same month last year.
• Shipments directed to China accounted for 31.7mt in May v 32.6 in Apr and 31.7 in May/15.
• Exports reached a record 39.5mt in Mar/16.
• Strong iron ore shipments indicate the market is well supplied weighing on the prices outlook.
• The benchmark fell below the US$50/t level last week to the lowest since Feb on concerns for profit margins at Chinese steel mills.
• Prices rebounded yesterday on reports of falling port inventories trading at US$51.1/t for 62% Fe in Qingdao.
Thermal coal (1st year forward cif ARA) US$54.4/t vs US$53.3/t yesterday – Thermal coal prices have risen to a 10-month high in Europe following oil higher
• Indonesia has also set its HBA thermal coal price at $51.81/mt up 1.2% from May. Heavy rains in Indonesia have cut production helping prices higher as utilities move to buy shipments from Colombia and elsewhere.
Lithium – PepinNini adds potential lithium project to Argentine portfolio
• The Adelade-based company expects to start field activities in the Argentine spring in the Salta province which is said to be considered the most mining friendly province in Argentina. The prospect has rail, electricity and gas pipeline infrastructure in place.
Other:
Tungsten - APT European prices stood at $208-222/mtu unch vs $213-225/mtu –
Company News
Ariana Resources (LON:AAU) 1.7p, Mkt Cap £13.4m – Kiziltepe construction update
• Ariana Resources report ongoing construction of the Kiziltepe (Red Rabbit) project by their Turkish joint venture partner, Proccea.
• The project remains on target for first production in H2 2016 with commissioning on schedule for Q3 this year.
• 160 people are reported to be on site installing the plant with the foundations and structural steel work reported complete.
• Grid power is connected with 5.5MW capacity. Top soil has been stripped and access to the tailings dam due for completion this week.
• The project is due to produce 20,000ozpa of gold.
Goldstone Resources (LON:GRL) 4.2 pence, Mkt Cap £2.6m – Stratex increases loan facility to Goldstone
• Stratex has increased its unsecured loan into Goldstone Resources to $350,000 from $100,000 with repayment due by end 2016 and interest of 5%pa.
• The agreement comes after a number of initiatives to restructure and reduce running costs with all non-exec director and interim ceo fees being waved.
• The company has agreed a separation agreement with Jurie Wessels, the former MD and CEO. Mr Wessels tendered his resignation on 18 February and the board thanks for his service and invaluable efforts.
• Emma Priestly is appointed as Interim Chief Executive Officer
• Goldstone has $370,000 in cash following the loan increase.
• The funds are to be used for working capital and for Mr Wessels severance agreement.
• Stratex International holds 33.4%.
• Goldstone continue to pursue limited exploration on its properties including its flagship Akorokerri-Homase gold project in Ghana to keep its licenses in good standing.
• Goldstone can increase its stake in the Akrokerri-Homase property to 90% through the payment of $25,000 to Cherry Hill Mining Company Ltd with no other contractual hurdles.
Kefi Minerals* (LON:KEFI) 0.5 pence, Mkt Cap £16.4m – Lycopodium EPC work and stock agreement and final results
• Kefi appoints Lycopodium as its preferred EPC contractor for the Tulu Kapi project in Ethiopia.
• Lycopodium have committed to adhere to the current timetable and have an excellent track record in building gold plants in Africa.
• Lycopodium have agreed to pay for the first $2.5m of its work program in return for Kefi shares at market price and it is Lycopodium’s intention to rank alongside Ausdrill as significant shareholders in Kefi with shareholdings of under 10% each.
• The agreements underline the commitment of Lycopodium and Ausdrill in their support for the project
• Kefi Minerals also report results to end December.
• Management continues to make good progress the Tulu Kapi gold project in Ethiopia rendering last year’s results less relevant than more recent events in our view.
• Recent news highlights the reduced capex requirement for Tulu Kapi of US$130m.
• The challenge now is for Harry Adams and his team to secure US$95m of project debt from its preferred senior secured lenders along with a cost overrun facility.
• The government of Ethopia recently confirmed its $20m equity investment. A residual requirement for $15m of mezzanine and or equity finance will be optimised in Q3.
• Kefi Minerals continues to work on its Jibal Qutman gold project in Saudi Arabia.
• Kefi’s P&L statement shows £1.7m of administrative expenses for 2015 down slightly yoy leading to a loss for the year of £3.2m.
• The company reports £1m of deferred exploration costs and £1.7m of project evaluation costs plus £0.8m of advanced to a jointly controlled entity to report £3.5m of net cash used in investing activities.
• This was paid for by the raising of around £7m in stock placement
• The company employed 46 employees last year costing £0.5m plus £0.2m in fees and bonuses. Directors fees, benefits, bonuses came to £0.6m.
• The recent refining of the former Definitive Feasibility Study (DFS) achieved savings of US$13.3m in the estimated capex for Tulu Kapi.
• The main savings is the cost of the processing plant which is also increased in scale to 1.1mtpa to 1.5mtpa increasing production to 95-115kozpa
Conclusion: Management continue to refine the Tulu Kapi gold project and to put in place key elements towards its financing.
*SP Angel act as Nomad and broker to Kefi Minerals