Bacanora Minerals (LON:BCN) 82.5 pence, Mkt Cap £89.0m – Board Announcement
Rio Tinto (LON:RIO) 2475.5p, Mkt Cap £46.3bn – Sale of Mt Pleasant thermal coal operation
Tri-Star Resources* (LON:TSTR) 0.09p, Mkt Cap £7.6m – Recruitment of General Manager of Production for the Oman Antimony Roaster
European equities keep the positive momentum following a number of monetary policy easing decision announced this week.
• The BoE decision to cut rates and add to stimulus saw gold prices posting a $15/oz gain with prices on course to post the second consecutive weekly gain.
• Brent is slightly off this morning following the strongest two-day rally in more than a month after the market had slipped into a bear market on Tuesday with prices coming off more than 20% from this year highs reached in Jun.
• Miners are up on stronger base metal prices as well as a weaker pound which lost 1.7% yesterday following the BoE announcement.
• Iron ore futures in China are back on a rising trend having climbed 4% today to close at the highest level since Feb/15 following an increase in steel prices.
Dow Jones Industrials -0.02% at 18,352
Nikkei 225 -0.00% at 16,254
HK Hang Seng +1.44% at 22,146
Shanghai Composite -0.19% at 2,977
FTSE 350 Mining +1.92% at 11,974
AIM Basic Resources +0.24% at 2,298 AIM resource stocks up 51% since the January low and up 41% from 1st January
The 350 Mining index is up 63% since 1st January
US – As recorded in the latest GDP numbers, business investment remained weak through Jun with factory orders posting a back to back monthly contraction in the final month of Q2/16.
• Non-farm payroll numbers are due later today with estimates for the economy to have added 180k jobs through Jul following a volatile May/Jun period.
• Average hourly earnings are expected to hold up well through Jul continuing to grow at the strongest pace since the start of the year (+0.2%mom/2.6%%yoy v 0.1%mom/2.6%yo in Jun).
• Numbers are out at 13:30pm (BST).
Date Index Period Actual Expected (Bloomberg) Previous
Monday ISM Manufacturing PMI Jul 52.9 52.9 53.2
ISM New Orders Jul 56.9 57.0
Tuesday Personal Spending Jun 0.4%mom 0.3%mom 0.2%mom
Personal Income Jun 0.2%mom 0.3%mom 0.2%mom
PCE Jun 0.1%mom/0.9%yoy 0.2%mom/0.9%yoy 0.2%mom/0.9%yoy
PCE Core Jun 0.1%mom/1.6%yoy 0.1%mom/1.6%yoy 0.2%mom/1.6%yoy
Wednesday ISM Services PMI Jul 55.5 55.9 56.5
ADP Employment Change Jul 179k 170k 172k
Thursday Weekly Jobless Claims Jul 269k 265k 266k
Factory Orders Jun -1.5%mom -1.9%mom -1.2%%mom (revised from -1.0%mom)
Friday NFPs Jun 180k 287k
Unemployment Rate 4.8% 4.9%
Av Hourly Earnings 0.2%mom/2.6%yoy 0.1%mom/2.6%yoy
Source: Bloomberg
Japan – Labour earnings surprised on the upside in Jun climbing 1.3%yoy/1.8%yoy(in real terms) marking the second strongest increase in almost two years.
Germany – Factory orders contract at a twice the forecast rate in Jun coming in below market forecasts for a third month in a row.
• Businesses slowed orders for big ticket items ahead of the Brexit vote in the end of Jun.
• Factory orders: -0.4%mom/-3.1%yoy in Jun v 0.1%%mom/0.0%yoy in May and 0.5%mom/-1.5%yoy forecast.
UK – The BoE decided to cut benchmark rates by 25bp to 0.25% and to add firepower to its asset purchases programme.
• The Bank will buy £60bn in Gilts, taking the total stock of these asset purchases to £435bn, and £10bn in sterling-denominated, non-financial, investment grade corporate bonds.
• Additionally, the BoE launched a £100bn “term funding scheme” under which lenders may borrow at rates close to the benchmark in an attempt to help banks to pass on lower borrowing costs to households and businesses.
• All nine members supported the rate cut, eight members voted in favour of the introduction of a corporate bond scheme while six members agreed to further purchases of UK bonds.
• The latest Aug inflation report guides for a 2.5% loss in GDP growth rates compared to its May estimates on the back of the Brexit vote.
• GDP growth estimate for 2016 was left unchanged at 2.0% while 2017 and 2018 numbers have been brought down to 0.8% and 1.8%, respectively, down from 2.3% for both years.
• Inflation is expected to average 0.8% in 2016, unchanged from May forecast; 2017 and 2018 numbers have been hiked to 1.9% and 2.4%, up from 1.5% and 2.1%.
• Unemployment data have also been revised up to 5.0%/5.4%%/5.6% over the 2016/17/187 period comparing to 5.1%/4.9%/4.9% estimated previously.
• The pound lost 1.7% on the announcement yesterday nearly hitting 1.310, while 10 year gilts lost 17bp hitting a record low of 0.633%.
• The average sterling corporate bond yield fell 21bp to a record low of 2.25%, according to BAML indices.
Spain – Industrial production disappointed in Jun led by a contraction in equipment and intermediate goods.
• Numbers are coming on the heels of poor manufacturing output data which came in at a three year low in Jul pointing to a weak momentum to the start of Q3/16.
• Industrial production: 0.8%yoy v 0.9%yoy (revised from 1.0%yoy) in May and 1.3%yoy forecast.
Currencies
US$1.1148/eur vs 1.1130/eur yesterday. Yen 100.93/$ vs 101.37/$. SAr 13.687/$ vs 13.786/$. $1.314/gbp vs $1.330/gbp.
0.766/aud vs 0.762/aud. CNY 6.645/$ vs 6.641/$.
Commodity News
Precious metals:
Gold US$1,363/oz vs US$1,352/oz yesterday
Gold ETFs 65.1moz unch vs 65.1moz yesterday
Platinum US$1,163/oz vs US$1,155/oz yesterday
Palladium US$704/oz vs US$709/oz yesterday
Silver US$20.31/oz vs US$20.22/oz yesterday
Base metals:
Copper US$ 4,823/t vs US$4,825/t yesterday
Aluminium US$ 1,637/t vs US$1,633/t yesterday
Nickel US$ 10,625/t vs US$10,500/t yesterday
Zinc US$ 2,265/t vs US$2,260/t yesterday
Lead US$ 1,800/t vs US$1,794/t yesterday
Tin US$ 18,120/t vs US$17,845/t yesterday
Energy:
Oil US$44.0/bbl vs US$42.9/bbl yesterday
Natural Gas US$2.824/mmbtu vs US$2.843/mmbtu yesterday
Uranium US$26.45/lb vs US$26.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$57.1/t vs US$57.7/t – Port Hedland iron ore shipments climbed 9.6%yoy coming in at 38.7mt in Jul v 41.8mt in Jun/16 and 35.3mt in Jul/15.
• Deliveries to China accounted for 84% of the total with 32.5mt shipped through Jul v 345mt in Jun/16 and 29.5mt in Jul/15.
Chinese steel rebar 25mm US$388.0/t vs US$386.8/t
Thermal coal (1st year forward cif ARA) US$57.1/t vs US$59.2/t yesterday
Other:
Tungsten - APT European prices $180-190/mtu vs $175-185/mtu on last week
Company News
Bacanora Minerals (LON:BCN) 82.5 pence, Mkt Cap £89.0m – Board Announcement
• Bacanora, one of the world's most prospective lithium companies, reports the passing of its Founder and Chairman Colin Orr-Ewing.
• As a young analyst Colin was a great supporter and personal friend often meeting for drinks and dinner and weekends with the family in the country.
• We travelled together to Sierra Leone during a short break in the Civil War to see the diamond mines at Koidu. We passed tens of thousands of artisinal miners roadblocks manned by child soldiers. Colin never wavered in his quest for a good investment.
• Colin's advise was first class and stock picking earned huge rewards for Blakeney Management.
• It wasn't as if Colin knew every stock in the market but somehow he knew how to spot a good one.
• Centamin and Extract (Kalahari) were big winners for Blakeney, a fund which was more focussed on African investment than resources but which gave Colin to freedom to make good choices.
• Colin founded Bacanora around 15 years ago on a vision that Rio Tinto's borates deposits should host commercial quantities of lithium at a time when the market knew almost nothing about the metal.
• Colin knew early on that this industrial metal would become substantially more important to the world and that it's association with borates should make Bacanora's clay deposits a significant source of production.
• Colin oversaw the financing and development of the pilot plant, it is a huge shame he will not see full scale production.
• Colin is succeeded by Cordelia and Daisy.
Rio Tinto (LON:RIO) 2475.5p, Mkt Cap £46.3bn – Sale of Mt Pleasant thermal coal operation
• Rio Tinto has announced the completion of its previously announced sale of the Mount Pleasant thermal coal project to Mach Energy Australia for US$220.7m plus a quarterly royalty of 2% on sales at prices in excess of US$72.50/tonne FOB of coal produced from the existing reserve base.
• The operations, located in the Hunter Valley of New South Wales, and contain a reported proven and probable reserve of 474m tonnes of 27.2MJ/kg thermal coal with a 0.5% sulphur content.
• The sale was originally announced in January this year at a reported headline price of US$224m – further minor adjustments may be required for net debt and working capital.
• Rio Tinto has now completed some US$4.7bn of asset disposals so far this year; the “proceeds of the sale will be used for general corporate purposes.”
• Rio Tinto reports that at 30th June the Mount Pleasant project had assets of US$137m and year to date profits of US$243,000.
Conclusion: The disposal of Mount Pleasant is comparatively small in Rio Tinto’s terms representing less than 5% of the value of asset sales so far this year, however, it provides further evidence of the company’s disciplined approach to asset management.
Tri-Star Resources* (LON:TSTR) 0.09p, Mkt Cap £7.6m – Recruitment of General Manager of Production for the Oman Antimony Roaster
• Tri-Star Resources has announced the appointment of Duan Anderson as General Manager of Production for its 40% owned antimony roaster project at Sohar, Oman.
• Mr Anderson brings over 16 years of metallurgical experience including 13 years in pyrometallurgy within various operational and technical roles at Anglo American’s Platinum Division in S Africa, including the development and technical management of platinum-group metals (PGM) smelters at Polokwane, Union and Rustenburg.
• He also has experience in base metals production including roles as Refinery Manager, Production Manager and Technical Manager for smelters within Anglo American Platinum.
Conclusion: The appointment of an experienced operator with long term responsibilities for running the roaster during the construction phase of the project should help both with the development of the Antimony Roaster itself and with the transition from a construction project to an operational business.
*SP Angel acts as Nomad and Broker to Tri-Star Resources