Kodal Minerals* (LON:KOD) – Sharply reduced loss in 2015 – focus shifting to West African
241ct diamond found at Alrosa at its Nyurbinsly open pit mine in Russia.
• The stone, thought to be one of the largest ever recovered in Russia, is described as “translucent with a grey hue”.
• This new stone joins a list, including the soon to be auctioned 1111 carat Lesedi La Rona diamond from Lucara’s Karowe mine in Botswana, of large diamonds recovered in recent years. We are tempted to speculate that recent technology installed in diamond mines is reducing the number of large stones which are broken during recovery.
• There has been press speculation that the Lesedi La Rona could realise in excess of US$70m when it is auctioned by Sothebys.
• Alrosa is the World’s largest diamond producer by volume.
Rolls Royce unveils driverless concept car
• The idea that Rolls Royce is looking at an electric future is a key point, though we note RR have been working on the Phantom Experimental Electric for at least five years.
• Electric vehicles are smoother, quitter, faster and vastly more energy efficient than gasoline so it makes sense that RR are looking at developing vehicles in this area.
• The new RR concept car looks quite bonkers but it does go to show that going electric is freeing up the imagination of designers
Boulby potash blows out
• A sudden gas blow-out has tragically killed a worker at the Boulby potash mine in West Yorkshire.
• Cleavland Potash started a consultation process to cut jobs last November amid rumours that the mine owners ISL were looking at the closure of the mine
• The Boubly mine employed around 1,100 people last year and is likely to cut back to around 700 next year with a significant number of contractor roles already cut
• The blow-out highlights the ever present danger of gas in a similar sequence of rocks as the north sea oil and gas fields
Dow Jones Industrials +0.53% at 17,733
Nikkei 225 +1.07% at 15,600
HK Hang Seng +0.66% at 20,170
Shanghai Composite +0.43% at 2,885
FTSE 350 Mining +0.83% at 9,147
AIM Basic Resources +0.15% at 1,915
Economic News
US – Inflation numbers released yesterday were broadly in line with expectations while jobless claims climbed slightly last week.
• Despite an uptick in unemployment benefits applications the general level continued to signal a healthy labour market.
• Claims remained at <300k level for 67 straight weeks now.
• On inflation, price gains were not distributed between sectors with construction sector leading the way.
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Retail Sales May 0.5%mom 0.3%mom 1.3%mom
Core Retail Sales May 0.4%mom 0.4%mom 0.8%mom
Wednesday PPI May 0.4%mom/-0.1%yoy 0.3%mom/-0.1%yoy 0.2%mom/0.0%yoy
Core PPI May 0.3%mom/1.2%yoy 0.1%mom/1.0%yoy 0.1%mom/0.9%yoy
Industrial Production May -0.4%mom -0.2%mom 0.6%mom (revised from 0.7%mom)
Capacity Utilisation May 0.749 0.752 75.3% (revised from 75.4%)
FOMC Rate 0.25%-0.50% 0.25%-0.50% 0.25%-0.50%
Thursday Weekly Jobless Claims 277k 270k 264k
Current Account Balance Q1 -$124.7bn -$125.0bn -$113.4bn (revised from -$125.3bn)
CPI May 0.3%mom/1.1%yoy 0.4%mom/1.1%yoy
Core CPI May 0.2%mom/2.2%yoy 0.2%mom/1.1%yoy
Friday Housing Starts May -1.9%mom 6.6%mom
Building Permits May 1.3%mom 4.9%mom
Source: Bloomberg
UK – The BoE left rates unchanged while saying the Brexit is the greatest domestic threat to financial stability and could lead to a recession.
• All nine members of the MPC voted to leave interest rates at historic lows of 0.5%.
• BoE comments did not help to break the declining trend of the British currency which came close to the 1.40 level against the US$.
• The currency bounced back since then and is trading at 1.43 on the back of the news of a murder of a British MP with both Remain and Leave promoters immediately suspending campaigning.
France – Wages growth accelerated to the strongest in a year in the past quarter (+0.5%qoq v 0.2%qoq in Q4/15).
• Meanwhile, labour union protest continue with union chiefs are set to hold talks with the government today in an effort to find a solution to debates around the new proposed labour regulation.
• Security forces are found in a difficult situation with capacities being stretched between protesting unions, heightened terror alert and football related clashes.
Greece – Creditors signed off on a €7.5bn bailout tranche to Greece under the €86bn programme.
• The proceeds to be used to pay off creditors including €3.35bn maturing in Jul and cover accumulated government expenses.
Currencies
US$1.1248/eur vs 1.1261/eur yesterday. Yen 104.32/$ vs 104.08/$. SAr 15.241/$ vs 15.325/$. $1.430/gbp vs $1.416/gbp.
0.739/aud vs 0.736/aud. CNY 6.590/$ vs 6.586/$.
Commodity News
Precious metals:
Gold US$1,285/oz vs US$1,308/oz yesterday - Gold is taking a hit as appetite for risk recovers with European and Asin equities up and a weaker US$ seeing base metal prices higher
• Crude is up 1.4% this morning trading at US$47.9/bbl after slipping below US$47/bbl yesterday and hitting the lowest in six weeks.
• The pound recovers on the back of a campaigning suspension ahead of the 23 Jun vote following a murder of MP, a supporter of the Remain vote.
• Latest polls showed the Leave vote extended the lead to 45% over the Remain option from 38% recorded last week.
Gold ETFs 60.7moz v 60.5moz yesterday – continued rise in gold ETF holdings
Platinum US$979/oz vs US$985/oz yesterday
Palladium US$542/oz vs US$539/oz yesterday
Silver US$17.39/oz vs S$17.78/oz yesterday
Base metals:
Copper US$ 4,585/t vs US$4,572/t yesterday – Shanghai copper stocks fall 8.9% 16,233t to 166,105t deliverable (71,726 on warrant)
Copper stocks of around 150.000-200,000t are expected to rise in Asia next month as metal is reported to be shifting out from China
Warehouses in Singapore and South Korea are reported by Reuters to be paying incentives of $55/t and $60/t to attract metal
Gecamines, a state-owned DRC copper producer, is planning to invest US$717m in new operations by 2018 to increase production to at least 100ktpa.
Aluminium US$ 1,613/t vs US$1,613t yesterday
Nickel US$ 9,065/t vs US$8,885/t yesterday – Cerro Matoso union calls of strike
• Norilsk Nickel, the largest nickel producer, is expecting a 60kt deficit this year with another 100kt shortage seen in 2017.
• Despite the market shortfall, there is expected a limited effect on prices because of high inventories available.
• The Company said more cuts need to go off line to accelerate stockpiles’ drawdowns helping prices to start recovering.
Zinc US$ 1,992/t vs US$2,013/t yesterday
Lead US$ 1,712/t vs US$1,690/t yesterday
Tin US$ 17,175/t vs US$16,900/t yesterday
Energy:
Oil US$47.90/bbl vs US$49.20/bbl yesterday – Russia and Saudi Arabia do not need to cooperate to influence the oil market right now while low prices are likely to persist for 10-15 years, according to Russian oil Minister Alexander Novak.
Natural Gas US$2.590/mmbtu vs US$2.573/mmbtu yesterday
Uranium US$26.65/lb vs US$27.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$47.6/t vs US$47.3/t
Thermal coal (1st year forward cif ARA) US$54.5/t vs US$53.2/t yesterday – Japanese trading houses reported to be cutting exposure to coal following UN climate agreement in Paris last year despite record coal use in Japan.
• An Oxford University study suggests that Japan has around $85bn worth of coal fired power station assets which risk becoming stranded and written down.
• Japan has been slow to restart its Nuclear power reactors following the Fukushima disaster with coal providing base load electricity for Japanese industry.
• We can not see how Japan is going to replace coal fired power generation in the short term until they find the political will to restart idled nuclear plants.
Other:
Tungsten - APT European prices stood at $205-222/mtu unch vs $208-222/mtu –
Company News
Kodal Minerals* (LON:KOD) 0.04p, mkt cap $1.6m – Sharply reduced loss in 2015 – focus shifting to West African
• Kodal reports a loss of £466,000 for the year to end March 2015 (2014 - loss of £3.96m). The previous year’s loss included impairment losses booked against the Kodal project in Norway (3.41m), however, even setting aside the impairment charge, Kodal’s 2015/16 loss has reduced by almost 25%
• The acquisition of a portfolio of gold exploration projects in West Africa, which was completed in May, represents a significant change of focus from the Norwegian assets at Grimeli and at the Kodal phosphate and titanomagnetite project where a lengthy planning process “with no prescribed duration for this process … has the potential to add years” to the approval timetable.
• Although the company is reviewing how to follow up potential strike extensions to the mineralisation intersected in drilling at Grimeli, it is apparent that at the Kodal project the reason for “this lack of action” by the municipal authorities to advance the permitting process remains unexplained and the company has been unable to identify a means to accelerate the process. Kodal’s Chairman, David Jones, commented that “We continue to be disappointed with the pace at which the relevant Norwegian planning authorities make decisions and await further news on the scope of the environmental impact assessment work required.”
• The West African projects which come via the acquisition of Taruga Gold’s subsidiary, International Goldfields (Bermuda) include joint-venture and farm-in exploration projects funded by the major mining companies, Resolute and Newcrest as well as independently operated projects, including the Nangalasso and SLAM projects in Mali.
• The joint venture with Resolute Mining to explore the Tiebissou and Nielle licences in Cote d’Ivoire requires Resolute to spend US$3m in order to earn a 75% interest. These assets lie along strike from Endeavour Mining’s Agbaou mine. The Newcrest Mining joint-venture, also in Cote d’Ivoire, requires Newcrest to spend US$1.7m by December 2018 in order to earn a 75% interest in in the Dabakala prospect.
• Kodal Minerals reports a 31st March cash balance of £135,000. A subsequent fundraising placed 1,700m new shares at 0.04p/share to raise an additional £680,000 (gross).
• Conclusion: Kodal Minerals has contained its cost base to reduce losses while shifting focus from Norway to a number of promising gold targets in west Africa. With exploration of a number of these projects being funded by major third party mining companies, Kodal Minerals should benefit from any exploration success while minimising its own direct exploration expenditure.