BlueRock Diamonds* (LON:BRD) – 2015 results and strategic review update
BHP Billiton (LON:BLT) – Samarco dam failure – legal developments
Condor Gold (LON:CNR) – Identification of new exploration targets in La India area
Metals Exploration* (LON:MTL) – Runruno project update
Noricum Gold* (LON:NMG) – Potential to earn into the David Garedji Cu/Au Prospect; £1.1m equity placing
Petra Diamonds (LON:PDL) – US$6m sale of a Cullinan stone
Solgold* (LON:SOLG) – Agrees $7m loan from its major shareholder
Gold and bonds rally on dovish comments made by the BoE and ECB.
• The ECB is considering adjusting its investment criteria allowing it to expand the list of QE eligible assets, while the BoE is considering easing its monetary policy in the coming months.
• Gold is up more than 1% having added US$17/oz this morning, with US$ index and USDJPY range-bound.
• Brent is slightly off trading sub-US$50/bbl.
• The pound is hovering around the US$1.33 level after having touched US$1.321 earlier this morning on the BoE announcement.
Dow Jones Industrials +1.33% at 17,930
Nikkei 225 +0.68% at 15,682
HK Hang Seng 20,794 Bank holiday – markets are closed
Shanghai Composite +0.10% at 2,932
FTSE 350 Mining +0.03% at 10,593
AIM Basic Resources +1.31% at 1,950
Economic News
US – Jobless claims run at low levels consistent with a strong labour market pace.
• Low unemployment insurance applications together with the record high number of job vacancies suggests Jun payroll report may point to a rebound in employment growth rates.
• NFPs are due on Jul 8 and will be closely watched by Fed officials weighing the potential for another rate hike before year end.
• Markets currently assign a less than 10% chance for a rate increase before year end, down from 77% recorded before the latest NFP report released in the beginning of the month and Brexit vote results.
Date Index Period Actual Expected (Bloomberg) Previous
Monday Markit Services PMI Jun 51.3 52.00 51.3
Markit Composite PMI Jun 51.2 50.9
Tuesday GDP (Terminal) Q1 1.1%qoq 1.0%qoq 0.8%qoq
Personal Consumption (Terminal) Q1 1.5%qoq 2.0%qoq 1.9%qoq
Core PCE (Terminal) Q1 2.0%qoq 2.1%qoq 2.1%qoq
SP/CS 20 City Apr 0.5%mom/5.4%yoy 0.6%mom/5.4%yoy 0.8%mom/5.5%yoy
Wednesday Personal Income May 0.2%mom 0.3%mom 0.5%mom
Personal Spending May 0.4%mom 0.4%mom 1.1%mom
PCE May 0.2%mom/0.9%yoy 0.2%mom/1.0%yoy 0.3%mom/1.1%yoy
Core PCE May 0.2%mom/1.6%yoy 0.2%mom/1.6%yoy 0.2%mom/1.6%yoy
Thursday Weekly Jobless Claims 268k 267k 258k (revised from 259k)
Friday ISM Manufacturing PMI Jun 51.3 51.3
Wards Total Vehicles Sales Jun 17.3m 17.4m
Source: Bloomberg
China –Weak manufacturing PMI numbers released this morning with official data showing the nation manages to marginally escape a contraction in Jun, while private sector survey points another sub-50 monthly reading.
• Official Manufacturing PMI: 50.0 in Jun v 50.1 in Jun and 50.0 forecast.
• New orders, inventories, new export orders and input prices declined during the month.
• Caixin Manufacturing PMI: 48.6, the 16th monthly sub-50 reading, and 49.2 in May and 49.2 forecast.
• Services sector favoured better with new orders, selling prices and business activity reported to have improved in Jun.
• Official Services PMI: 53.7 v 53.1 in May.
Japan – A series of weak economic data released this morning comes on top of declines industrial production and exports and stagnation in retail sales announced earlier.
• Both consumer spending and inflation posted a third consecutive annual decline in May.
• Household Spending: -1.1%yoy v -0.4%yoy in Apr and -1.1%yoy forecast.
• CPI/Core CPI: -0.4%yoy/0.6%yoy v -0.3%yoy/0.7%yoy in Apr and -0.5%yoy/0.6%yoy forecast.
ECB – A flight to safety amid increased volatility following the Brexit vote have pushed yields on a number of sovereign bonds below levels that allow the ECB to include those in its QE programme.
• In response, the ECB is considering amending its investment criteria.
Eurozone – Revised measures of the manufacturing activity in the single currency area point to a stronger growth than initially estimated.
• Manufacturing PMI: 52.8 v 52.6 calculated previously and 51.5 in May.
• This is the highest PMI reported this year; although, the results were collected before EU referendum results have been released.
• The only country that has recorded a contraction in Jun was France with nationwide strikes likely to have depressed economic activity in the region.
UK – The BoE may ease its monetary policy within months to help minimise adverse effects of the Brexit vote on the economy, Mark Carney said yesterday.
• The pound lost 1.2% during the Carney address with yields on 10 year UK gilts hitting a record low of 0.88% and the FTSE100 closing at the highest point since Aug last year.
Currencies
US$1.1104/eur vs 1.1122/eur yesterday. Yen 102.60/$ vs 102.81/$. SAr 14.686/$ vs 14.760/$. $1.329/gbp vs $1.349/gbp.
0.747/aud vs 0.744/aud. CNY 6.658/$ vs 6.646/$.
Commodity News
Precious metals:
Gold US$1,334/oz vs US$1,320/oz yesterday
Gold ETFs 62.8moz v 62.6moz yesterday
Platinum US$1,032/oz vs US$1,005/oz yesterday
Palladium US$593/oz vs US$588/oz yesterday
Silver US$19.19/oz vs US$18.40/oz yesterday
Base metals:
Copper US$ 4,803/t vs US$4,835/t yesterday
Aluminium US$ 1,652/t vs US$1,638/t yesterday
Nickel US$ 9,555/t vs US$9,480/t yesterday
Zinc US$ 2,118/t vs US$2,092/t yesterday
Lead US$ 1,810/t vs US$1,778/t yesterday
Tin US$ 17,330/t vs US$16,975/t yesterday
Energy:
Oil US$49.9/bbl vs US$50.1/bbl yesterday
Natural Gas US$2.942/mmbtu vs US$2.872/mmbtu yesterday
Uranium US$26.40/lb vs US$26.45/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$51.7/t vs US$52.0/t
Thermal coal (1st year forward cif ARA) US$56.8/t vs US$55.0/t yesterday
Other:
Tungsten - APT European prices stood unchanged at $200-220/mtu from last week
Company News
BlueRock Diamonds* (LON:BRD) 12 pence, Mkt Cap £4.7m – 2015 results and strategic review update
• Blue Rock Diamonds released its final results for 2015 during the day yesterday. The company reports a loss of £0.82m for the calendar year 2015 (2014 – loss of £0.63m).
• At 31st December, 2015 the Group reported cash of approximately £0.18m (2014 - £0.25m). Since the end of the year the company has raised an additional £0.70m and this injection, coupled with the proceeds of sales from diamond production leads the company to report a cash balance as of 31st May 20166 of £0.56m.
• Production volumes have been variable although on a generally upward track with November 2015 throughput reaching over 9,000 tonnes. However, “following the Christmas shut down, production levels were affected by the severe drought conditions in the Northern Cape during the last quarter of the year” and production was temporarily hit although on resumption of operations in February rates of 25,000 tonnes per month were achieved.
• At these rates, “it became clear that at this level of production our plant was unable to recover diamonds efficiently and the recovered grade fell to around cpht.” The company is currently conducting a strategic review of its operations under a strengthened management team led by Adam Waugh. Results of the review are expected to be available within two months.
• As mining progresses, the company is achieving higher than expected prices for its diamonds. The average received price of US$261/carat exceeds the both “the original estimate of USD183 per carat and the updated estimate prepared by our Competent Person of USD 232 per carat; a direct reflection of the quality and shape of our stones.”
• Conclusion: Much depends on the outcome of the strategic review currently underway, however, with a potential 19 year mine life, additional kimberlite targets and diamond production attracting better than expected prices, we are hopeful that the company will have a positive story to report.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
BHP Billiton (LON:BLT) 924 pence, Mkt Cap £54bn – Samarco dam failure – legal developments
• BHP Billiton has announced that “the Superior Court of Justice in Brazil [has] issued an interim order suspending the decision of the Federal Court of Appeal to ratify the Framework Agreement” which established “a fund of up to BRL 20 billion in aggregate for clean-up costs and damages relating to the dam failure” at its jointly owned Samarco iron ore mine.
• “The effect of the interim order of the Superior Court of Justice is to reinstate the BRL 20 billion civil claim made by the Brazilian Authorities against Samarco, Vale and BHP Billiton Brasil.”
• The company has announced its intention to appeal this decision and ha reiterated its commitment to support moves for the long term recovery of the affected communities and environment.
Condor Gold (LON:CNR) 66.5p, Mkt Cap £35.1m – Identification of new exploration targets in La India area
• Condor Gold has announced the identification of 13 new exploration targets as a result of a structural geological study and follow up geochemical soil sampling.
• Initial interest is focused on a 12.5 km long mineralised corridor located 9 km north of the La India resource. Initial results include a rock chip sample reporting an assay of 53.9 g/t gold.
• The company has appointed a senior geological consultant, Dr. Warren Pratt, to oversee the continuing exploration programme.
• Conclusion: Condor Gold recently attracted new investors in the form of the Canadian mining entrepreneur, Ross Beatty and an affiliate of the specialist mining fund, Sprott. Although we imagine that the prime focus is on the development of the La India mine, the additional impetus to exploration of what appear to be promising early stage targets may be an additional effect.
Metals Exploration* (LON:MTL) 7.4p, Mkt Cap £127.7m – Runruno project update
• Metals Exploration has provided an update on certain operational and financial aspects of its RunRuno gold mine in the Philippines.
• As previously reported, the mine had to temporarily suspend milling operations to assess and rectify problems with the bearings on its mill. The company now reports that, “subject to the on time arrival of replacement parts … it is expected the mill may be returned to operations later in the coming week. … Once the mill is operational “test running and debugging” operations as part of the commissioning and ramp-up program will resume.”
• The Company also reports that discussions are continuing with the project’s lenders over a restructuring of the debt facility. These discussions follow the delays encountered as a result of the disruption caused by Typhoon Lando and the resultant remedial works which have slowed production build up while the necessary regulatory permits to restart operations were secured. In the meantime, Metals Exploration has “made the interest payments scheduled for 30 June 2016 but the capital repayment has not been made.”
Conclusion: A resumption of processing operations at RunRuno is expected soon following repairs to the mill. Discussions with lenders are continuing regarding scheduling of repayments but meanwhile obligations for interest payments have been met. We look forward to confirmation of the resumption of processing operations in the near future.
*SP Angel act as Broker to Metals Exploration
Noricum Gold* (LON:NMG) 0.16p, Mkt Cap £6.4m – Potential to earn into the David Garedji Cu/Au Prospect; £1.1m equity placing
• The Company signed non-binding heads of terms with Caucasian Mining Group, the partner in the Bolnisi project, to evaluate and develop the neighbouring David Garedji Copper Gold Prospect.
• Previous exploration works have been carried out by the Soviets including 5.8km of underground development and more than 25,000m of diamond drilling.
• The prospect is estimated to host 3.1mt of ore containing 460koz gold (4.63g/t), 740koz silver (7.3g/t), 50kt copper (1.57%), 130kt lead (4.13% and 150kt zinc (4.7%) in total resources, according to Soviet data (non-JORC).
• In particular, 30 most prospective zones have been delineated with mineralised widths of up to 23m and grades reaching 55g/t gold, 253g/t silver, 21% copper, 28% lead and 35% zinc.
• Of that, nine zones are regarded as high grade gold mineralised areas with grades in the range of 3.3-14.4g/t.
• The mineralisation is reported to be controlled by steeply dipping structures and extends beyond the limits of available underground workings.
• The Company is planning to complete detailed due diligence on the prospect before agreeing final terms of a potential earn-in.
• Should the validation process confirm the presence of an attractive high grade polymetallic zone, the final agreement is expected to be similar to the ones in place between the Company and CMG with a potential to use CMG processing facilities for the David Garedji material.
• The Company remains on target to launch mining operations at the Kvemo Bolnisi in Q3/16.
• 5.7m new shares have been issued at a price of 0.14p raising £1.1m.
Conclusion: A potentially high grade polymetallic mineralised zone in close proximity to the available infrastructure may prove a valuable addition to the Noricum portfolio of Georgian assets. We are looking forward to results of the due diligence on the asset and updates on the status of the earn-in agreement.
*SP Angel acts as Nomad and Broker to Noricum.
Petra Diamonds (LON:PDL) 115p, Mkt Cap £602m – US$6m sale of a Cullinan stone
• Petra Diamonds reports that it has sold a 121.26 carat white diamond from the Cullinan mine for US$6m (US$49,480/carat) at its June diamond sale in Johannesburg.
• The company announced the discovery of this stone, which at the time it described as ““of exceptional colour and clarity” earlier this month.
• The purchaser is reported to be a joint venture between Nemsis International and Golden Yellow Diamonds described as “two leading diamond manufacturers who specialise in large diamonds.” We note that Golden Yellow Diamonds were also reported to be the purchaser of a 23 carat pink diamond from Petra’s Williamson mine in Tanzania which realised $10m in December last year.
Solgold* (LON:SOLG) 3.1p, Mkt Cap £29.3m – Agrees $7m loan from its major shareholder
• Solgold has announced that it has secured a short-term, unsecured loan agreement with DGR Global for $7m.
• The loan, which carries interest at 9.5%pa, is to be repaid by 31st December 2016, or when Solgold raises further equity, whichever occurs sooner. DGR may convert its loan into shares at the same price as any equity raising.
• DGR Global currently owns 15.99% of Solgold and includes Solgold directors Brian Moller and Nicholas Mather on its Board.
• Conclusion; As we reported yesterday, Solgold is continuing to generate exploration success at its Cascabel project in Ecuador. The loan agreement with its major shareholder should help maintain the momentum of its exploration effort. The injection of funds from a company associated with two of its directors is a strong signal to other investors of the commitment of the Solgold senior management team to exploration success at Cascabel.