Bushveld Minerals (LON:BMN) – Update on Bushveld Energy
Caledonia Mining (LON:CMCL) – Gold production at the Blanket mine is moving up and on track to meet 50,000 oz target for 2016
Centamin (LON:CEY) – Increased gold production in Q3 – on track to meet 2016 production guidance
Kodal Minerals* (LON:KOD) – Geochemical anomalies identified on the Korhogo gold prospect in Cote d’Ivoire
Precious metals stocks were among the hardest hit yesterday on the back of sharp fall in gold prices with most of the names trading in the red this morning.
• FTSE is down slightly as gains in energy and financial stocks slightly compensated for losses elsewhere.
• Gold is flat after posting nearly a $45/oz decline yesterday increased expectations for the Fed to hike the rate before year end and reports that the ECB is considering ending bond purchases earlier than planned.
• Brent is up 1.3% trading at $51.5/bbl driven by a positive momentum of OPEC production cuts news and as the US API reported a fifth consecutive decline in crude inventories last week. State EIA data to be released later today with estimates for an increase.
Dow Jones Industrials -0.47% at 18,168
Nikkei 225 +0.50% at 16,819
HK Hang Seng +0.42% at 23,788
Shanghai Composite - 3,005 China National Day, week long holiday this week
FTSE 350 Mining -0.57% at 12,811 FTSE 350 +74% since 1st January
AIM Basic Resources -0.67% at 2,515 AIM Basic Resources +54% since 1st January
Economic News
US – Charles Evans, a voting member of the FOMC and a supporter of keeping rate low, said that the Nov interest rate hike is not completely off the cards with the Dec move increasingly likely to happen.
• “If data continues to roll in as they have, I would be fine with increasing the funds rate once by the end of this year,” Evans said during his speech in Auckland, New Zealand, today.
• The move “would most likely be Dec” but “could be the earlier meeting”.
Date Index Period Actual Est Previous
Monday Markit Manufacturing PMI (Final) Sep 51.5 51.4 51.4
ISM Manufacturing PMI Sep 51.5 50.3 49.4
Wards Auto Sales Sep mln 17.7 17.5 16.9
Wednesday ADP Jobs Sep '000 163 177
Markit Services PMI (Final) Sep 52.0 51.9
Markit Composite PMI (Final) Sep 52.0
Factory Orders Aug mom% -0.2 1.9
Thursday Weekly Jobless Claims '000 255 254
Friday NFP Sep '000 170 151
Unemployment Rate Sep % 4.9 4.9
Av Hourly Earnings Sep %mom 0.3 0.1
Av Hourly Earnings Sep %yoy 2.6 2.4
Source: Bloomberg
Japan – Disappointing services PMI numbers drag the composite index lower in the negative growth territory; despite a rebound in the manufacturing sector activity in Sep which recorded growth for the first time in seven months.
• That was the sharpest decline in services sector in 29 months driven by bad weather suggesting latest development may be temporary.
• “Forecasts for output over the next 12 months remained positive in Sep, twith the degree of business sentiment unchanged from Aug’s four-month high.”
• Services PMI: 48.2 v 49.6 in Aug.
• Manufacturing PMI: 50.4 v 50.3 in Aug.
• Composite PMI: 48.9 v 49.8 in Aug.
ECB – The ECB may gradually slow down purchases of assets as part of its quantitative easing programme potentially in steps of €10bn, according to central bank officials.
• Although nobody mentioned if the current deadline for purchases at €80bn of Mar/17 still stands or policymakers refer a potentially extended end date.
• The Governing Council members the question over an extension to the current deadline open at their last policy meeting in Sep.
• Draghi has previously suggested that the programme will run until end of Mar/17 “or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.”
• The next policy meetings before the suggested deadline will be held at Oct 20, Dec 8, Jan 19 and Mar 9.
• European equities opened lower this morning with Euro Stoxx 600 Index posting a 1.2% decline in early hours of trading but recovering some losses since then (-0.7% at the time of writing).
• 10 year bund yields climbed 4bp late yesterday.
Eurozone – Single currency services sector growth continued to slow down through Sep final Markit PMI numbers showed with weaker figures recorded in Germany, Italy and Spain.
• A weaker growth in services outweighed a positive growth momentum in the manufacturing segment seeing a composite PMI lower.
• Eurozone Services PMI: 52.2 v 52.8 in Aug.
• Eurozone Manufacturing PMI: 52.6 v 51.7 in Aug.
• Eurozone Composite PMI: 52.6 v 52.9 in Aug.
• “While the PMI survey suggest the Eurozone economy continued to grow at a 0.3% rate in Q3, there are signs that momentum is waning,” Markit said.
• “While we see the Eurozone economy expanding by 1.6% in 2016, even this modest growth is looking unattainable in 2017 given the heightened political uncertainty that lies ahead.”
Currencies
US$1.1225/eur vs 1.1171/eur yesterday. Yen 102.93/$ vs 102.35/$. SAr 13.750/$ vs 13.585/$. $1.274/gbp vs $1.277/gbp.
0.762/aud vs 0.767/aud. CNY 6.672/$ vs 6.672/$.
Commodity News
Precious metals:
Gold US$1,272/oz vs US$1,310/oz yesterday
Gold ETFs 65.5moz unch vs 65.4moz yesterday
Platinum US$993/oz vs US$1,007/oz yesterday
Palladium US$694/oz vs US$714/oz yesterday
Silver US$17.94/oz vs US$18.82/oz yesterday
Base metals:
Copper US$ 4,805/t vs US$4,811/t yesterday
Aluminium US$ 1,671/t vs US$1,677/t yesterday
Nickel US$ 10,010/t vs US$10,350/t yesterday – Vale highlighted risks of Indonesia relaxing its regulations on unprocessed ores exports.
• “We must be more careful so we are not flooding the market with supply,” Vale said with regards to the news Indonesia is considering allowing exports of nickel ores with 1.8% Ni and less given a shortage of local processing capacities.
• Vale hoped government will reconsider plan to ease ban as nickel export policy has shown good progress, Bloomberg reports.
• The global market is reported to have recorded a 42.5kt deficit in first 7 months of the year, according to the INSG.
• This compares to a surplus of 93kt in FY15 (1.983mt in supply and 1.890mt in demand) and a 49kt deficit (1.913mt in supply and 1.962mt in demand) forecast for this year.
Zinc US$ 2,371/t vs US$2,401/t yesterday
Lead US$ 2,061/t vs US$2,074/t yesterday
Tin US$ 19,785/t vs US$19,950/t yesterday
Energy:
Oil US$51.6/bbl vs US$50.6/bbl yesterday
Natural Gas US$2.971/mmbtu vs US$2.899/mmbtu yesterday
Uranium US$22.65/lb vs US$22.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$53.2/t (Chinese futures markets are closed this week)
Chinese steel rebar 25mm US$389.3/t (Chinese futures markets are closed this week)
Thermal coal (1st year forward cif ARA) US$65.5/t vs US$65.0/t yesterday
Premium hard coking coal Aus fob US$213.4/t vs US$213.4/t
Other:
Tungsten - APT European prices vs $183-197/mtu vs $$180-200/mtu two weeks ago
Company News
Bushveld Minerals (LON:BMN) 1.45 pence, Mkt Cap £9.1m – Update on Bushveld Energy
• Bushveld Minerals has provided an update on the activities of its 84% owned subsidiary, Bushveld Energy Limited which is focussing on the development of opportunities for Vanadium Redox Flow Batteries (VRFBs) in the energy storage market.
• In association with the Industrial Development Corporation (IDC) studies are underway to identify the market for VRFBs in South Africa and to investigate possible sites where it would be possible to demonstrate the technology and its commercial application.
• The company is also seeking to demonstrate the market beyond S Africa via a recently signed MoU with the US based manufacturer of VRFBs, UniEnergy Technologies.
Conclusion: Initial results from the studies with IDC are expected before the end of the year - we await the findings with interest as Bushveld Minerals seeks to expand into this new technology.
Caledonia Mining (LON:CMCL) 123 pence, Mkt Cap £64.3m – Gold production at the Blanket mine is moving up and on track to meet 50,000 oz target for 2016
• Caledonia Mining has announced that its 49% owned Blanket mine in Zimbabwe has produced 13,430 oz of gold during the three months to the end of September.
• Production is now running 23% ahead year on year and 7.4% ahead of the previous quarter ending in June 2016. We estimate that this brings production to date in 2016 to almost 37,000 ounces of gold and positions the company to meet its target of 50,000 ounces of gold production for 2016 and places it on course to meet the longer term growth target of 80,000 ounces by 2021.
• The mine is currently commissioning a new ball mill which increases capacity by 20% to 1800tpd and positions the mine for the longer term as production increases to 80,000 oz pa.
• The company comments that production during the last quarter “includes production from higher grade material below 750 metres”. This material has become available as a result of the developments over the last 18 months which has seen underground development including an internal shaft (winze) and additional decline development which has provided access to this deeper mineralisation and enhanced the flexibility to transport it to surface.
• The full quarterly report which should include more details and, we anticipate demonstrate the cost benefits of the higher grade material and increased throughput, is expected to be released on 14th November.
Conclusion: The Blanket mine is on course to meet 2016 production guidance of 50,000 oz of gold production and is beginning to show the tangible benefits of its recent investment aimed at increasing output to 80,000 oz pa by 2021.
Centamin (LON:CEY) 146 pence, Mkt Cap £1687m – Increased gold production in Q3 – on track to meet 2016 production guidance
• Centamin has announced that its Sukari mine produced 148,674 ounces of gold during the three months to 30th September bringing the Total year to date output to 414,249 oz, placing it to achieve full year production “towards the upper end of our guidance range of between 520,000 and 540,000 ounces.”
• Production during the quarter was 6% higher than in Q2 and 41% above the 105,413 ounces achieved in Q3 2015.
• Today’s results do not disclose the grades, costs or recovery rates but show ore production from the underground mine (255,000 tonnes at an average grade of 9g/t) consistent with the previous quarter (256,000 tonnes). Total material moved within the open pit mine increased by over 7% to 16.2mt, however as open-pit ore production declined by 489,000 tonnes to 2.94mt, we infer that waste:ore stripping ratios increased from 3.4:1 in Q2 to 4.5:1 in Q3 – still below the 5.5:1 ratio achieved in Q3 2015.
• Treatment rates declined slightly by 4% during the quarter to 2.81mt, with the average grade of the open pit ore treated at 1.14g/t.
Conclusion: Centamin has increased gold output during the last quarter and is on course to meet its upgraded production guidance of 520-540,000 ounces of production for 2016.
Kodal Minerals* (LON:KOD) 0.1p, mkt cap $3.9m – Geochemical anomalies identified on the Korhogo gold prospect in Cote d’Ivoire
• Kodal Minerals reports that programme of wide spaced geochemical samples has identified four extensive gold geochemical anomalies on its wholly owned Korhogo prospect which covers an area of 360 square kilometres in northern Cote d’Ivoire.
• Zone 1 comprises an anomaly measuring approximately 3.5km x 1.2 km, which is consistent with existing aeromagnetic data, remains open along strike and is associated with a zone of shearing along a contact zone between metamorphic rocks and an intrusive granodiorite rock.
• Zone 4, which lies to the north of zone 1 and may lie along the same zone of shearing, lies within the granodiorite and extends over an area of 3.5km x 1 km also remains open along strike and is host to a number of artisanal mine workings.
• Zone 2, measuring 3km x 2 km includes some of the higher gold values at up to 92ppb (parts per billion) “is associated with a northeast fault zone and areas of aeromagnetic anomaly. The geochemical anomaly is consistent with the interpreted geology and geophysics.”
• Zone 3 appears to be in a similar geological setting to zone 1 and “is related to a shear zone and potential contact between granodiorites and metasediments.” The anomaly extends over an area of 2km x 1km.
• The company comments that follow-up sampling is required to identify targets for reconnaissance aircore drilling but emphasises that “Our current exploration programme is designed to target our highly prospective Bougouni Lithium projects in Mali, … however we will also continue to advance our prospective gold projects”.
Conclusion: Early stage exploration in Cote d’Ivoire has identified promising gold targets which will require follow up work prior to initial reconnaissance drilling, however it seems that for the present, the immediate exploration focus is directed to advancing the lithium project at Bougouni in Mali.
*SP Angel acts as Financial Advisor and Broker to the company. *Robert Woodridge, a partner at SP Angel is also Chairman of Kodal Minerals.