Airlander* - Hybrid Air Vehicles Airlander Airship has left its hanger at Cardington in Bedfordshire
Aureus Mining (LON:AUE) – Quarterly Report indicates further financing may be required
Kefi Minerals* (LON:KEFI) – Appointment of Mark Wellesley-Wood
Iron Ore – prices jumped on Friday to close >$60/t in China
• Chinese steel producers appear to be buying in increasing tonnages of better quality imported iron ore
• China’s People’s Daily newspaper commented that the government’s planned capacity cuts were not going to plan
• Chinese steel producers are reported to have not even managed half of the government’s 45mt target cut for 2016
S&P500 closed at a record high on Monday providing momentum for European and Asian equities which are all up this morning post better than expected US jobs numbers released on Friday.
• Chances of the Fed raising rates before year end climbed to 47% in the futures market, up from 37% on Thursday.
• US$ index jumped nearly 1% with gold shedding almost 2% or $25/oz.
• Stronger US$ dragged the pound lower on Friday with total losses over two days coming in at 2.2% compared to the pre-BoE announcement on Thursday.
• US and European bond yields are little changed this morning after having picked up in the previous trading session.
• Iron ore futures in China climbed above CNY500/t ($75/t) today hitting the highest close since Jan/15 driven by rising steel prices.
Dow Jones Industrials +1.04% at 18,544
Nikkei 225 +2.34% at 16,651
HK Hang Seng +1.57% at 22,495
Shanghai Composite +0.93% at 3,004
FTSE 350 Mining +1.88% at 12,156
AIM Basic Resources -0.11% at 2,295 AIM resource stocks up 51% since the January low and up 41% from 1st January
The 350 Mining index is up 63% since 1st January
US – Non-farm payrolls have confidently beat estimates on Friday with earnings growth holding up at the strongest pace since stat of the year.
• Jobs climbed 255k exceeding all economists’ forecasts collected by Bloomberg versus 292k recorded in Jun and 180k expected.
• Wage growth accelerated to 0.3%mom, the most since Apr and came in at 2.6%yoy, the same as in Jun.
• Gains employment were broad based distributed among manufacturers, healthcare, retailers, hospitality and government sectors.
Date Index Period Actual Expected (Bloomberg) Previous
Friday NFPs Jun 255k 180k 292k (revised from 287k)
Unemployment Rate 4.90% 4.8% 4.9%
Av Hourly Earnings 0.3%mom/2.6%yoy 0.2%mom/2.6%yoy 0.1%mom/2.6%yoy
Wednesday Job Openings Jun 5,675k 5,500k
Thursday Weekly Jobless Claims 265k 269k
Friday Retail Sales/Core Jul 0.4%mom/0.2%mom 0.6%mom/0.7%mom
UoM Consumer Sentiment Aug 91.5 90.00
Source: Bloomberg
China – Weaker renminbi helped to reduce a contraction in trade volumes through Jul the latest data showed.
• Exports (US$/CNY): -4.4%yoy/2.9%yoy in Jul v -4.8%yoy/1.3%yoy in Jun and -3.5%yoy/2.3%yoy forecast.
• Imports (US$/CNY): -12.5%yoy/-5.7%yoy in Jul and -8.4%yoy/-2.3%yoy in Jun and -7.0%yoy/-1.1%yoy forecast.
• The renminbi lost 7.4% during the respective period against the US$.
Germany – What proved to be a volatile time series, industrial production posted a rebound in Jun coming in stronger then market estimates.
• Industrial production: 0.8%mom v -0.9%mom (revised from -1.3%mom) and 0.7%mom forecast.
France – The economy should return to growth in Q3/16, according to the Bank of France estimates.
• GDP is set to grow 0.3%qoq marking a more optimistic scenario than is currently forecast by markets (+0.2%qoq).
• The economy stagnated in Q2/16 showing 0.0%qoq growth.
Italy – DBRS rating agency place Italy on a negative outlook on Friday suggesting it may be the last company from of the major four agencies valuing the sovereign debt above the BBB threshold.
• A ratings revision will lead to the ECB raising the haircut applied to the Italian government bonds placed as collateral against central banks loans.
• The move was made on the back of Italy’s coming constitutional referendum in the autumn, a weak banking sector and a slow economic recovery.
• Radobank estimated Italian banks which currently owe €1142bn to the ECB would face a €10bn increase in collateral requirements should the downgrade happen.
• DBRS is also the only institution to rate Portugal as investment grade making it eligible for the ECB QE programme, FT reports.
South Korea – S&P increased South Korea’s credit rating by one notch to AA from AA- with a stable outlook citing the nation’s steady economic performance, solid fiscal position and flexible fiscal and monetary policies.
• “Korea has exhibited stronger economic performance in recent years than most other high-income economies,” S&P said.
• “The Korean economy remains well-diversified and is not dependent on a particular industry or export market.”
Zambia – elections this week to elect a new president and national assembly
• There are concerns over the potential for political violence ahead of the election.
UK - Airbus – SFO probe into Airbus alleging fraud, bribery and corruption
• We suspect the SFO investigation will not go down well in Europe.
Currencies
US$1.1088/eur vs 1.1148/eur yesterday. Yen 102.28/$ vs 100.93/$. SAr 13.667/$ vs 13.687/$. $1.305/gbp vs $1.314/gbp.
0.763/aud vs 0.766/aud. CNY 6.662/$ vs 6.645/$.
Commodity News
Precious metals:
Gold US$1,331/oz vs US$1,363/oz yesterday
Gold ETFs 65.6moz vs 65.1moz yesterday – big 0.5moz jump in ETF holdings over the weekend as investors took advantage of slightly lower gold prices
Platinum US$1,144/oz vs US$1,163/oz yesterday
Palladium US$694/oz vs US$704/oz yesterday
Silver US$19.66/oz vs US$20.31/oz yesterday
Base metals:
Copper US$ 4,829/t vs US$4,823/t yesterday – Chinese copper imports fell to the lowest level in 11 months on the back of low seasonal demand and growing domestic inventories.
• Inbound shipments dropped for a fourth month to 360kt in Jul, down from 420kt in Jun and 348kt recorded in 2015.
• Imports of copper concentrates and ores increased to 1.38mt, up from 1.35mt in Jun and following a 35%yoy increase in the first six months of the year.
• Glencore’s Mopani partially suspended as three workers were electrocuted underground at the Mufulira copper mine. The Mopani complex has been running at less than half its normal production rate this year.
Aluminium US$ 1,658/t vs US$1,637/t yesterday
Nickel US$ 10,825/t vs US$10,625/t yesterday
Zinc US$ 2,282/t vs US$2,265/t yesterday
Lead US$ 1,802/t vs US$1,800/t yesterday
Tin US$ 18,280/t vs US$18,120/t yesterday
Energy:
Oil US$44.8/bbl vs US$44.0/bbl yesterday
Natural Gas US$2.738/mmbtu vs US$2.824/mmbtu yesterday
Uranium US$26.25/lb vs US$26.45/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$59.1/t vs US$57.1/t –
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Chinese steel rebar 25mm US$390.4/t vs US$388.0/t
Thermal coal (1st year forward cif ARA) US$56.3/t vs US$57.1/t yesterday
Other:
Tungsten - APT European prices vs $190-200/mtu vs $180-190/mtu on last week – prices rise again
Company News
Airlander* (private) - Hybrid Air Vehicles Airlander Airship has left its hanger at Cardington in Bedfordshire
• The airship was originally developed in partnership by Northrop Grumman in the US for military surveillance but was from an original UK design.
• IN 2009 it won a US$500m US Army contract and completed a successful 90 minute test flight in New Jersey in August 2012. The contract was later cancelled .
• Bruce Dickinson, lead singer of Iron Maiden is a major investor and supporter and also a qualified commercial pilot.
• The airship takes 1.3m cubic feet of helium gas. Helium is extracted by fractional distillation from natural gas.
• The technology is interesting for the mining sector as it offers the potential for heavy lift craft (~50t) for delivering supplies and equipment to remote mining locations. The airship should be safer and more cost effective than helicopter transport and able to carry larger and heavier loads.
• The airship could replace those ‘Ice Road Truckers’ who drive to the diamond mines in the Northwest Territories of Canada.
• Amur Minerals continue to consider the technology for their remote Kun Manie nickel project in the Amur region of Russia.
*SP Angel analysts have visited Hybrid Air Vehicles’ operations at Cardington, Bedfordshire.
Aureus Mining (LON:AUE) 3.3 pence, Mkt Cap £17.6m – Quarterly Report indicates further financing may be required
• Aureus Mining reports that during the quarter to 30th June its New Liberty mine produced a total of 8,274 oz of gold at a cost of US$1253/oz, generating revenue of US$14.7m prior to the suspension of processing operations.
• The production resulted from the processing of 99,438 tonnes of ore at an average grade of 2.54 g/t gold.
• Mining operations continued during the period when processing was suspended with a total of 201,774 tonnes of ore at an average grade of 3.58 g/t gold produced at an average waste:ore ratio of 12.6:1.
• Current ore stockpiles of over 200,000 tonnes of fresh ore at an average grade of 3.24 g/t gold with an additional stockpile of oxide and transitional ore amounting to over 90,000 tonnes at a grade of 1.46 g/t which should provide the operation with a reliable source of plant feed ahead of the onset of the wet season and any operational disruption to mining that should result.
• The company comments that “mining operations continue to be hampered by low equipment availability, with a consequential adverse effect on unit mining cost”. A review is underway to evaluate the options to remedy the situation and management is also assessing opportunities for improvements and cost savings in the supply chain.
• The incoming management team from MNG Gold is “currently undertaking a comprehensive review of the Company's cost base with a view to improving cash costs and operating margins. Following the completion of the operational and financial performance reviews and the achievement of steady state operations at New Liberty, management intends to produce a new life of mine plan for the Project.”
• MNG injected US$30m to stabilise the company’s finances and reassure lenders and secure the continuation of the current waiver on debt repayments, however, “management believes that the Company remains undercapitalised to deliver to its full potential and is likely to require further funding for capital investment activities to deliver improvements in operational performance.”
• The company currently holds $4.2m in cash and an inventory of $19.9m.
Conclusion: Following the $30m investment by MNG Gold, incoming management is reviewing all aspects of the operation and developing a new long term plan, however it is already making clear that further funding requirements are under consideration.
Kefi Minerals* (LON:KEFI) 0.6 pence, Mkt Cap £21.9m – Appointment of Mark Wellesley-Wood
• Kefi Minerals have appointed Mark Wellesley-Wood as a Non-Executive Director from 1 August.
o Wellesley-Wood will serve as Chair of the new Technical Review Committee and is known for his firm hand in directing boards and for his extensive African mining expertise.
o Wellesley-Wood will also assume the roles of Deputy Chairman and Senior Independent Director from January 2017.
He is best known for his roles on the boards of Durban Deeps (now DRDGold) and Mwana Africa (now called Asa Resources where he remains as a consultant).
Wellesley-Wood is currently Chairman of Tristar Resources which is currently building an Antimony Roaster in Oman in joint venture partly funded by the Oman Sovereign Wealth Fund. Wellesley-Wood was brought in to maintain focus and discipline on the board.
Wellesley-Wood will help bridge the gap between the city and the mining sector and compliment the good work being done by Harry Anagnostaras-Adams, Jeff Rayner and John Leach (who joined in July) in the development of the Tulu Kapi gold project in Ethopia.
• The Capital cost of the Tulu Kapi gold project is now estimated at US$130m with some US$85m of debt facilities secured and a $20m commitment from the Ethopian government. The company now needs to close on the remaining finance required and recently raised £3.8m at 0.5p/s through an equity placing to Odey Asset Management and to Ausdrill, the Australian drilling company.
• Kefi Minerals continues exploration at Jabal Qutman in Saudi Arabia.
Conclusion: Kefi Minerals appears to be making progress towards finalising the financing of the Tulu Kapi project in Ethopia. Strengthening the board should go some way to generating confidence within the lending banks and supporting institutions.