FinnAust Mining* (LON:FAM) – Specialist metallurgical advisors for Pittufik
Gemfields (LON:GEM) – Record auction revenues for Montepuez rubies
Gryphon Minerals (ASX:GRY) - Teranga Gold acquires Gryphon Mining
Kenmare Resources (LON:KMR) – Funding update
Dow Jones Industrials -0.33% at 17,675
Nikkei 225 +2.34% at 15,965
HK Hang Seng +1.69% at 20,510
Shanghai Composite +0.13% at 2,889
FTSE 350 Mining +1.71% at 9,390
AIM Basic Resources -0.80% at 1,899
Economic News
Markets are in the risk on mode as Remain campaign takes the lead in latest polls (45% v 42% for Brexit).
• Betting odds suggest a 31% chance of the UK exiting the EU, down from 44% recorded before the Cox’s death.
• The pound is up 1.6% this morning extending gains to 3.0% in the last three trading sessions.
• Safe haven assets are including the yen, US Treasuries and gold fell.
• Gold is off US$12/oz or 0.9% this morning with declines in the US$ index (-0.7%) failing to provide support for the metal.
• Brent is up 1.8% going through the US$50/bbl level.
The share of UK M&A transactions in the world’s total fell to a record low this year ahead of the EU membership vote, according to the Thomson Reuters data.
• The volume of M&A deals came in at US$57.6bn YTD accounting fot only 4% of the worldwide total.
• That is a 70%yoy drop v a 20%yoy decline in the global total. European M&A deals count is down 24%yoy.
• On the other hand, market analysts say a drop in the British currency might lead to an increase in the interest for cheaper UK assets.
US – Building permits and housing starts hovered around the same level since last year, latest US construction data showed.
Date Index Period Actual Expected (Bloomberg) Previous
Friday Housing Starts May -0.3%mom -1.9%mom 4.9%mom (revised from 6.6%mom)
Building Permits May 0.7%mom 1.3%mom 4.9%mom (revised from 3.6%mom)
Wednesday Existing Home Sales May 1.8%mom 1.7%mom
Thursday Weekly Jobless Claims 270k 277k
Markit Manufacturing PMI 50.9 50.7
Friday Durable Goods Orders/Core May -0.4%mom/0.1%mom 3.4%mom/0.5%mom
Capital Goods Orders May 0.3%mom -0.6%mom
Source: Bloomberg
China – Property prices growth slowed in May with 60 cities recording an increase, down from 65 in Apr (among the 70 tracked), according to the NBS data.
• Of 60 cities with price gains, 36 had posted slower increases than in Apr.
• The average new-house price climbed 0.84%mom in May v a 1.03%mom increase in Apr.
• Officials are adjusting the dynamics of the market given a large stock of unsold properties in smaller cities and “high valuations in top economic centres like Shanghai and Shenzhen.
• Price gains slowed in some of the largest cities as tightening measures took hold including stricter rules for non-resident homebuyers, higher second home donw-payments and bans on unregulated lending.
• Shanghai prices climbed 2.3%mom, down on the rate seen in Apr; Shenzhen prices gained 0.5%mom, down from 2.3%mom in Apr.
Japan – Weak trade data highlight the effect of stronger currency on the nation’s economy as trade balance swung into a deficit in May, marking the first negative reading since the start of the year.
• Exports: -11.3%yoy in May v -10.1%yoy in Apr and -10.0%yoy forecast.
• Imports: -13.8%yoy in May v -23.3^yoy in Apr and -13.8%yoy forecast.
• The currency appreciated c.11.4% against the US$ during the period.
• Geography wise, US exports were down 10.7%yoy, EU shipments declined 4.0%yoy and China exports dropped 14.9%yoy.
• Goods wise, steel exports fell 24.0%yoy followed by a 20.0%yoy decline in the value of semiconductors.
• Lower imports were driven by declines in oil and gas prices.
Venezuela – Chinese officials are meeting with Venezuela opposition leaders discussing fragile nation’s economic situation and the future of outstanding US$65bn in Chinese loans to the government, FT reports.
• Jose Guerra, an opposition member of the Parliament’s finance commission, confirmed talks.
• The government was seeking a grace period on its debt with a deferral of principal repayments.
• China is the largest creditor of Venezuela.
FIFA – KPMG resigns as auditor from FIFA
• KPMG diplomatically say that they are resigning over a lack of confidence in reforms.
• If that’s the diplomatic excuse we really have to wonder what all the other real reasons are.
• We would also love to hear the views of the Auditor for the European Commission? We are told they have never managed to complete and audit.
• Meanwhile, the EU is crackdown on the power of kettles, toasters and other high-power items but had delayed the legislation till after the Brexit vote – wonder why?
Currencies
US$1.1338/eur vs 1.1248/eur yesterday. Yen 104.51/$ vs 104.32/$. SAr 14.904/$ vs 15.241/$. $1.463/gbp vs $1.430/gbp.
0.746/aud vs 0.739/aud. CNY 6.580/$ vs 6.590/$. – US dollar weakens on risk on sentiment as BREXIT fears recede
Commodity News
Precious metals:
Gold US$1,282/oz vs US$1,285/oz yesterday -
Gold ETFs 60.9moz v 60.7moz yesterday – continuing rise in gold ETF holdings
Platinum US$973/oz vs US$979/oz yesterday
Palladium US$542/oz vs US$542/oz yesterday
Silver US$17.43/oz vs S$17.39/oz yesterday
Base metals:
Copper US$ 4,622/t vs US$4,585/t yesterday –
Aluminium US$ 1,621/t vs US$1,613t yesterday
Nickel US$ 9,190/t vs US$9,065/t yesterday –
Zinc US$ 2,008/t vs US$1,992/t yesterday
Lead US$ 1,714/t vs US$1,712/t yesterday
Tin US$ 17,125/t vs US$17,175/t yesterday
Energy:
Oil US$50.20/bbl vs US$47.90/bbl yesterday –
Natural Gas US$2.681/mmbtu vs US$2.590/mmbtu yesterday
Uranium US$25.75/lb vs US$26.65/lb yesterday
Lithium – Nalco in talks to build new Lithium-aluminium alloy plant
• Nalco, India’s National Aluminium Company along with India’s MIDHANI Ltd are in talks to build a new Lithium-Aluminium Alloy plant.
• Lithium-Aluminium Alloys are strong and lightweight and are used in space craft and in Tesla’s high-end batteries.
• The alloy is reported to sell for around US$60,000/t and is considered to be strategic due to its potential use in defence equipment.
• The proposal is to develop a joint venture facility at a cost of around US$596m to be built at Angul, Odisha with a high-end alloy plant at MIDHANI’s Hyderabad facility.
• The move highlights India’s drive to become a significant player in new technology, space programs and similar areas.
• We do not have any idea of how much lithium a lithium-aluminium alloy plant might require but the substantial investment suggests that its going to use a significant tonnage.
• The plant might come into production at a time when demand is ramping up for battery producers. Aluminium-lithium alloys contain up to 2.34% of lithium by weight.
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$48.3/t vs US$47.6/t – India to equal world per capita steel consumption in 10 years
• The Indian Express reports that India is to raise steel consumption to 216.6kg per person from 59.4kg seen in 2014.
• Given the population of India is around 1.3bn vs China at around 1.4bn the figures could indicate that India plans to command infrastructure growth similar to that seen in China in recent years.
• The market is unlikely to head into a new Indian-super cycle on the news but is good to see the nation has such ambitions.
• The Chief of India’s largest steel producer comments that India is just at “take-off stage” and only a little push from government is needed.
• The Indian government’s ‘Housing for all’ is a novel initiative that will also give impetus to steel demand as will the construction of badly needed transportation infrastructure
Vale is talking to Asian mining companies regarding a potential sale of its minority stake in Brazilian iron-ore assets that could raise as much as US$7bn.
• The Company is also considering streaming deals as part of the financing package.
• Vale has also held talks with bankers about the disposal of its fertilizer and base metal assets.
Thermal coal (1st year forward cif ARA) US$57.2/t vs US$54.5/t yesterday –
Other:
Tungsten - APT European prices stood at $200-220/mtu vs $205-222/mtu – tungsten prices slide
Company News
FinnAust Mining* (LON:FAM) 4.6p, mkt Cap £22m – Specialist metallurgical advisors for Pittufik
• FinnAust has announced the appointment of specialist advisors to assist it in the metallurgical and flowsheet design work for its Pittuffik titanium heavy minerals project in Greenland.
• The appointment of KeyPointE and Quedtech advances the programme to produce a high quality ilmenite concentrate which will underpin the more detailed optimising and flowsheet design work which is intended to lead to “pilot scale continuous testing later in the year.”
• KeyPointE’s director, Eugene Dardengo has a career of over 30 years in the Australian minerals industry including relevant experience with minerals sands operations of Rio Tinto and Tiwest. Over the last 5 years he has assisted mineral sands operators “in Africa, India and Australia with various facets of the mineral sand processing chain.”, including “managing metllurgical testwork plans, as well as overseeing operational improvement and production planning.”
• QuedTech’s Dr. Trevor Nicholson has also extensive experience in the Western Australian mineral sands industry dating back to 1987. He is a specialist in the “mathematical modelling of ilmenite reduction in rotary kilns.”
Conclusion: The appointment of specialist technical advisors with detailed experience of the mineral sands industry to the Pittufik project should help to move FinnAust Mining to pilot scale testing later this year.
* SP Angel acts as nomad and broker to the company
Gemfields (LON:GEM) 39.25 pence, Mkt Cap £214m – Record auction revenues for Montepuez rubies
• Gemfields reports record revenues of US$44.3m from its final auction of rubies to be held this financial year. As with all but one of the previous six auctions of rubies from the company’s Montepuez mine in Mozambique, the auction was held in Singapore.
• The company offered 75 lots totalling some 1.6m carats for sale and sold a total of 1.52m carats (71 lots) realising an average price of US$296.21/carat. This means that the sales comprised 95% of both the number of lots offered and also the total carats offered for sale, which compares favourably with previous auctions uptakes have been within a range of 66% to 98% by weight.
• The mix of quality within the stones offered for sale means that “a direct comparison with previous auction results is not possible. On a quality for quality basis, however, the per carat prices achieved were indicative of improved global demand when compared to previous auctions.”
• “Gemfields’ aggregate consolidated revenues from all rough gemstone sales for the financial year to date stands at approximately USD 174.4 million.”
• The company’s CEO, Ian Harebottle, commented “The prices achieved and the high percentage of goods sold fully support our analysis of the market conditions, the quality of Mazambique’s rubies and the increasing level of demand across various markets and categories.”
Conclusion: Gemfields is developing the market for coloured gemstones with the introduction of a reliable supply of rough gemstones and a consistent grading system for quality which helps to provide customers with a level of assurance in managing the manufacturing pipeline.
Gryphon Minerals (ASX:GRY) A$0.165, Mkt Cap A$66.3m - Teranga Gold acquires Gryphon Mining
• Teranga Gold (ASX TGZ / TSX TGZ C$1.19 – MV C$466.5m) has announced that it is to acquire the Australian company Gryphon Minerals by way of a scheme of arrangement under which each Gryphon Minerals share will be exchanged for 0.169 Teranga Gold CDI.
• The purchase price values Gryphon Gold at approximately A$63m.
• Gryphon Minerals’ main asset is the 90% owned Banfora open pit gold project in Burkina Faso which currently has a measured & indicated resource of 2.98m oz at a grade of 1.39 g/t.
• At current exchange rates, Teranga is paying around US$17.60 per ounce of the Banfora resource.
Conclusion: There appears to a move to consolidation in west African gold. Endeavour Mining recently acquired True Gold, owner off the Karma mine in also Burkina Faso in a share exchange valued at C$226m.
Kenmare Resources (LON:KMR) 0.9 pence, Mkt Cap £23.6m – Funding update
• Kenmare Resources has provided an update on plans to re-finance “and discharge US$269 million in debt and Accrued Interest”. New shares are to be issued at US$3.132 per share “(reflecting aproposed 1 for 200 consolidation which will be implemented as part of the proposals).
• The plan is to raise a minimum of US$275m of equity with the State General Reserve Fund of the Sultanate of Oman as a US$100m cornerstone investor. The company points out that the maximum of approximately US$368m “if raised, would reduce the total outstanding Group debt to nil”.
• The company discloses that “Three major shareholders have indicated their indication to participate in the Firm Placing for at least US$115m in aggregate, incluging M&G which has indicated that it intends to retain its existing percentage interest of 19.97%.”
• “Certain Lenders will underwrite up to a maximum of US$40.8m of the capital raise by agreeing to equitise a matching amount of debt, in the event that cash proceeds are less than US$275 million.”
• Operationally, the company reports that improved power quality and reliability is being seen as a result of additional transmission capacity commissioned by the supplier, Electricidade de Mozambique, in December 20145.
• Production tonnages for heavy mineral concentrates are rising as a result of increased head grades. Ilmenite production is up by 17% to 145,500 tonnes during April/May and zircon volumes have risen by 49% to 11,600 tonnes.
• The company reports that “Chinese ilmenite production reduced by an estimated 500,000 tonnes in 2015, as iron ore production in China, of which ilmenite is a by-product, continued to decline through the year. Chinese ilmenite production has continued to reduce during 2016 as a structural oversupply in the iron ore industry persists.”