CODELCO – ceo makes honestly refreshing comment at press conference
San Leon Energy (LON:SLE) – Proposed OML 18 Production Arrangement and Placing for around £170.3m (US$225m) by way of a placing at 45p
SolGold* (LON:SOLG) – £16m raised in first tranche of funding.
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UK Q2 GDP numbers – possibly last of the positive economic data pre-Brexit vote
• We reckon we will see a number of negative data points relating to the impact of the Brexit vote
• Eg, stalled capital projects, hiring etc…
• More positively, the fall in Sterling is likely to have offset a deterioration in consumer confidence to help sales figures and raise manufacturing order books and output.
Oil tanker carrying diesel reported to have been hijacked by its own Crew on route from Malaysis
• The captain reported it was taking the tanker back to Batam island, South of Singapore (note: I’ve been there)
• The tanker was later found off West Kalimantan, part of the island of Borneo.
Dow Jones Industrials -0.18% at 18,448
Nikkei 225 -1.18% at 16,361
HK Hang Seng +0.41% at 22,910
Shanghai Composite +0.06% at 3,070
FTSE 350 Mining +1.43% at 11,739
AIM Basic Resources -0.44% at 2,455
Economic News
Markets are closely watching Janet Yellen speech for hints on the pace of monetary policy tightening with Asian stocks closing in the red as Japanese equities led losses following poor inflation for Jul.
• Gold prices are little changed and on the way to post the first weekly drop in the last three as investors are increasingly expecting the Fed to raise rates this year.
• Brent is flat this morning after having climbed c.1.4% on speculation OPEC is considering a concentrated action to freeze production. Iran confirmed its participation in an informal meeting of the OPEC members in Algiers next month.
• Zinc hit a 15-month high on expectations for market deficits making it the best performing commodity year to date.
• Iron ore futures were down for a second day in China (CNY436/t or $65.4/t) after having hit the strongest reading YTD on Wednesday (CNY456/t or $68.4/t).
US – Business activity is being weighed down by uncertainty over the upcoming presidential elections the latest Markit PMI data suggests.
• Services activity growth slowed to the lowest since Feb and together with a weaker expansion in the manufacturing sector led the composite PMI lower in Aug.
• Contrary to market estimates for a pick up in GDP growth in Q3 (1.5%) from a slowdown recorded in Q2 (1.2% v 1.6% in Q1), Markit reported “Historical comparisons indicate that the PMI is signalling an annualised GDP growth rate of just under 1% in the third quarter, based on the data for Jul and Aug.”
• “With job creation also waning alongside subdued price pressures, the survey datsa will fuel expectatios that the Fed will be in no rush to tighten policy again.”
• The sentiment may turn once presidential elections pass “leaving a Dec rate hike on the table”, Markit concluded.
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Markit Manufacturing PMI Aug 52.1 52.6 52.9
New Home Sales Jul (%mom) 12.4 -2.0 3.5
Wednesday Existing Home Sales Jul (%mom) -3.2 -1.1 1.1
Thursday Jobless Claims 261 265 262
Durbale Goods Orders Jul (%mom) 4.4 3.4 -3.9
Durbale Goods Orders (ex Transport) Jul (%mom) 1.5 0.4 -0.4
Capital Goods Orders (ex Air) Jul (%mom) 1.6 0.2 0.4
Markit Services PMI Aug 50.9 51.8 51.4
Markit Composite Aug 51.5 51.8
Friday GDP (Second reading) Q2 (%qoq) 1.1 1.2
Core PCE (Second reading) Q2 (%qoq) 1.7 1.7
Source: Bloomberg
Japan – Core inflation contracted for a fifth consecutive month highlighting challenges the BoJ is faced with given its 2% target.
• CPI ex fresh food: -0.5%yoy v -0.4%yoy in Jun and -0.4%yoy forecast.
• This is the weakest reading for core CPI since Mar/13 and is likely to lead the BoJ to review its policy tools during the next meeting in Sep.
• The yen gained slightly on the release of numbers and is currently trading 0.1% higher at ¥100.5 while both Topix and Nikkei 225 were among top fallers in the region posting 1.3% and 1.2% losses, respectively.
UK – Q2/16 GDP climbed 0.6%qoq/2.2%yoy, in line with preliminary estimates, while the breakdown provided showed an increase led by private spending and business investment.
• Q2 GDP: 0.6%qoq/2.2%yoy v 0.4%qoq/2.0%yoy in Q1/16.
• Private spending: 0.9%qoq v 0.7%qoq in Q1/16 and 0.8%qoq forecast.
• Business investment: 1.4%qoq v -0.1%qoq in Q1/16 and 0.4%qoq forecast.
• Government spending: -0.2%qoq v 0.5%qoq in Q1/16 and 0.3%qoq forecast.
• Exports/Imports: 0.1%qoq/1.0%qoq v -0.4%qoq/0.1%qoq in Q1/16 and 0.7%qoq/0.8%qoq forecast.
• The pound is up on the news trading at 1.323 against the US$ and extending weekly gains to 1.3%.
France – In line with previous estimates, GDP growth stalled in Q2/16 on the back of a correction in consumer spending following a rebound in Q1/16.
• Q2 GDP: 0.0%qoq/1.4%yoy v 0.7%qoq/1.4%yoy in Q1/16.
• Inventories and business investment dragged down the growth with the strike action in May and Jun dampening activity.
• Net exports and government spending climbed to offset negative effects in other segments.
• Estimates are for the growth to accelerate through Q3/Q4 (0.3%qoq/0.2%qoq) on a recovery in private consumption.
Currencies
US$1.1288/eur vs 1.1285/eur yesterday. Yen 100.47/$ vs 100.37/$. SAr 14.129/$ vs 14.060/$. $1.321/gbp vs $1.322/gbp.
0.763/aud vs 0.762/aud. CNY 6.670/$ vs 6.656/$.
Commodity News
Precious metals:
Gold US$1,325/oz vs US$1,326/oz yesterday
Gold ETFs 65.4moz unch vs 65.4moz yesterday
Platinum US$1,082/oz vs US$1,083/oz yesterday
Palladium US$694/oz vs US$687/oz yesterday
Silver US$18.66/oz vs US$18.65/oz yesterday
Base metals:
Copper US$ 4,649/t vs US$4,636/t yesterday
Aluminium US$ 1,645/t vs US$1,647/t yesterday
Nickel US$ 9,860/t vs US$9,920/t yesterday
Zinc US$ 2,316/t vs US$2,274/t yesterday
Lead US$ 1,878/t vs US$1,852/t yesterday
Tin US$ 18,800/t vs US$18,785/t yesterday
Energy:
Oil US$49.2/bbl vs US$48.9/bbl yesterday
Natural Gas US$2.828/mmbtu vs US$2.785/mmbtu yesterday
Uranium US$25.95/lb vs US$25.90/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$59.5/t vs US$60.8/t
• Steel production in China is facing two more years of declines after having recorded a 1.8% contraction in 2015, according to Li Xinchuang, a vice chairman at the China Iron & Steel Association.
• “Our original estimate was for a 3% decline this year.”
• “Based on how things have played out this year, I think the decline in output might be less than anticipated but the downtrend remains unchanged.”
• “Iron one should be on a downtrend, not an uptrend.”
Chinese steel rebar 25mm US$403.5/t vs US$404.9/t
Thermal coal (1st year forward cif ARA) US$57.0/t vs US$56.3/t yesterday
Other:
Tungsten - APT European prices vs $185-200/mtu unch vs $190-200/mtu
Company News
San Leon Energy (LON:SLE) 50p, Mkt Cap £30.9m – Proposed OML 18 Production Arrangement and Placing for around £170.3m (US$225m) by way of a placing at 45p
• San Leon Energy today report on their proposed OML 19 Production Arrangement.
• OML 18, the world-class Nigerian onshore oil and gas asset in which San Leon will have an initial 9.72% interest.
• As of June 2016 OML 18 was producing at approximately 50,000 bopd of oil and approximately 50 MMscfpd of gas.
• San Leon also has the right to provide oilfield services to Eroton, the operator of OML18.
• The company also reports it is raising around £170.3m (US$225m) by way of a placing at 45p. Funds release is conditional on the passing of all resolutions at the EGM scheduled for 20 September.
• Trading in shares was resumed on the London AIM market.
* SP Angel act as Nominated advisor and joint broker to San Leon
CODELCO – ceo makes honestly refreshing comment at press conference
• Nelson Pizarro, the Codelco ceo, joins the likes of Prince Phillip and Jeremy Clarkson in the refreshing nature of his comments in Chile this week.
• It is good to hear a major mining company ceo being so candid about the state of his business and we hope the Chilean state will appreciated and understand the challenges faced by the business following these comments.
• Pizarro said: "No hay plata, no hay plata, viejo, entiéndeme, no hay un puto peso”
• This is Chilean slang and translates roughly to “There is no money, there is no money, mate, understand me, there is no ****ing money!”
• The company has also issued a number of presentations highlighting the challenges of sustaining copper production as grades and ore availability fall.
• Codelco highlighted a $25bn plan to sustain a production rate of 1.7bnt of copper to 2019 though copper production might not regain this level till 2021 even with this investment.
• If the capital is not available, and there is a good chance it will not in these stressed times then Codelco copper production is forecast to fall to 1.5mt in 2019 from 1.7mtpa today and to 1mt in 2022. The forecast then shows Codelco production falling below 500,000tpa in 2028.
SolGold* (SOLG LN) 7.5p, Mkt Cap £71.5m – £16m raised in first tranche of funding.
• SolGold are raising £16m in the first tranche of their funding with Maxit Capital which is based in Canada.
• The company also reported yesterday it is in “advanced negotiations for the potential participation of a major international gold mining company in SolGold's capital raising initiatives, and the Company hopes to be able to update the market further on these developments shortly.”
• Management intend to use the proceeds to general working capital purposes and ongoing corporate costs. The team intend to contract additional drill rigs to expand exploration on the Cascabel concession for the definition of a maiden resource at Alpala and to test seven priority targets in the Cascabel cluster.
• SolGold have previously reported that it is looking at a total placement of $36.5 including a second tranche of $15m to other investors.
• The company are drilling what looks like a very large porphyry system with kilometre-long intersections of copper, gold mineralisation.
• Surface expression, trenching and geophysical work indicates the potential for a number of porphyry systems within the Cascabel concession offering potential for repetition of the mineralisation seen in drilling at Alpala.
• So far drilling has largely focussed on the Alpala portion of the license area with steeply dipping holes used to show the huge vertical extent of mineralisation in the orebody.
• High priority targets are at Tandayama America and Aguinaga which show larger surface expressions with newer targets at Moran, Carmen and Parambas and Chinambicito.