Aston Bay Holdings (CVE:BAY) – BHP jv on Storm copper project reports high-grade copper
Premier African Minerals (LON:LPREM) – Drilling on the Zulu Lithium Project
Randgold Resources (LON:RRS) – Continuing tax dispute in Mali
SolGold* (LON:SOLG) – Board considers investment proposal from BHP Billiton
FTSE100 is little changed this morning following a 2.1% advance last week with financial stocks trading in the red on a weakening sentiment given reports that Deutsche remains in negotiations with the US DoJ over a probe into mortgage-backed securities
• China is back from holidays with the PBoC setting the exchange rate midpoint at the lowest level in six years.
• Gold is slightly up this morning on increasing metal ETFs demand following a volatile session on Friday as US NFPs came in lower than forecast.
• Oil prices are slightly off amid a stronger US$ index after having dropped 0.3% at the end of last week on the back of US jobs data.
• Iron ore prices closed lower following steel prices lower today after having climbed on some restocking and reports of a fall in inventories earlier in the day.
China fixes currency at six-year low
• The currency was set at 6.7008 down 0.3% on the last fixing on 30 September
• The currency is allowed to trade within 2% of the PBOC central reference rate onshore
• The Chinese Yuan entered into the basket of currencies backing the IMF’s special drawing rights on 1st October
• China suffered a $18.79bn drawdown in its foreign currency reserves through September due to currency intervention as the US dollar appreciated dragging the value of the Yuan higher against most other currencies and reducing the competitiveness of Chinese manufacturing.
Dow Jones Industrials -0.15% at 18,240
Nikkei 225 0.00% at 16,860 Japan on ‘Health-Sports Day’ Holiday
HK Hang Seng 0.00% at 23,852 Chung Yeung festival holiday
Shanghai Composite +1.45% 3,048
FTSE 350 Mining +0.72% at 13,224 FTSE 350 +80% since 1st January
AIM Basic Resources +0.36% at 2,504 AIM Basic Resources +54% since 1st January
Economic News
US – Payrolls growth slowed for a third month missing market estimates in Sep, although wage growth accelerated during the month with markets continuing to expect a rate hike in Dec.
• Implied market probability of the Fed raising rates in Dec climbed to 64.3% on Friday, up from 63.6% recorded pre-jobs report on Thursday.
Date Index Period Actual Est Previous
Friday NFP Sep '000 156 172 167
Unemployment Rate Sep % 5.0 4.9 4.9
Av Hourly Earnings Sep %mom 0.2 0.3 0.1
Av Hourly Earnings Sep %yoy 2.6 2.6 2.4
Monday Columbus Day celebrations
Exchanges remain open
Wednesday JOLTS Job Openings Aug '000 5,800 5,871
FOMC Meeting Minutes Sep
Thursday Weekly Jobless Claims '000 253 249
Friday Retail Sales Sep %mom 0.6 -0.3
Core Retail Sales (ex Auto) Sep %mom 0.5 -0.1
Core PPI Sep %mom 0.1 0.1
Core PPI Sep %yoy 1.2 1.00
UoM Consumer Expectations Oct 92.0 91.2
Source: Bloomberg
China – General PMI including both services and manufacturing sectors showed the economy continued to expand through Sep, although the rate fo expansion slowed down for a second consecutive month.
• Composite PMI: 51.4 v 51.8 in Aug.
• “Fiscal policy needs to continue to support the economy, because there is insufficient growth momentum on its own,” Caixin/Markit report concludes.
Japan – The BoJ Governor hinted the economy is unlikely to reach the 2% inflation target the coming FY17
• “We will continue or even strengthen our monetary easing in coming months and years to achieve 2% inflation,” Kuroda said.
• This marks the fifth time the BoJ is revising the timing on its inflation target highlighting challenges the Bank is faced with amid weak inflation expectations and low commodity prices.
Germany – Both exports and imports rebounded strongly from post-Brexit declines recorded in Jul
• Exports (%mom): 5.4 v -2.6 in Jul and 2.2 forecast.
• Imports (%mom): 3.0 v -0.7 in Jul and 0.7 forecast.
Colombia – president Santos to donate funds from his Nobel Peace Prize to victims of the conflict
• While the funds may be well received lets hope Presidennt Santos history does not follow that of Anwar Sadat who was assassinated in 1981 after receiving the Nobel Peace prize in 1978.
US politics digs deep to find new low
• We dare not comment but wonder why the world’s most powerful nation cannot find more noble candidates for its leadership?
Scots Ministers back Heathrow Expansion
• We would like to return the compliment by backing the expansion of Hadrian’s Wall
Currencies
US$1.1177/eur vs 1.1127/eur yesterday. Yen 103.15/$ vs 103.81/$. SAr 13.746/$ vs 13.937/$. $1.242/gbp vs $1.243/gbp.
0.759/aud vs 0.757/aud. CNY 6.670/$ vs 6.672/$.
Commodity News
Precious metals:
Gold US$1,263/oz vs US$1,255/oz yesterday – Gold ETF holdings climbed to the highest in over three years (65.8moz) as of Friday last week as investors accelerated purchases amid falling prices.
Gold ETFs 65.8moz unch vs 65.5moz yesterday – ETF holdings rising again
Platinum US$971/oz vs US$967/oz yesterday
Palladium US$671/oz vs US$669/oz yesterday
Silver US$17.73/oz vs US$17.36/oz yesterday
Base metals:
Copper US$ 4,810/t vs US$4,759/t yesterday – Grasberg open pit operations returned to normal as labour union is reported to have reached an agreement with Freeport to end strike, according to Bloomberg.
• A little over one week long labour action involved 1,000 workers at the open copper and gold mine with the onsite mill said to have adjusted running rates in response.
Aluminium US$ 1,683/t vs US$1,680/t yesterday
Nickel US$ 10,375/t vs US$10,255/t yesterday
Zinc US$ 2,342/t vs US$2,320/t yesterday
Lead US$ 2,111/t vs US$2,058/t yesterday
Tin US$ 20,110/t vs US$20,100/t yesterday
Energy:
Oil US$51.7/bbl vs US$52.7/bbl yesterday
Natural Gas US$3.166/mmbtu vs US$3.037/mmbtu yesterday
Uranium US$22.75/lb vs US$22.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$53.2/t vs US$53.4/t –
•
Chinese steel rebar 25mm US$389.5/t vs US$389.3/t
Thermal coal (1st year forward cif ARA) US$64.0/t vs US$66.5/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 unch vs $$180-200/mtu two weeks ago
Vanadium, Lithium
Renewable energy is increasingly threatening power reliability – Japan utility exec
• The head of a major Japanese power utility comments that increasing supply of renewable energy through solar and wind is threatening the reliability of power supplies.
• With Japan set to host the next Olympics, ensuring the reliability of supply is very much on the agenda.
• Coal took over from nuclear after Fukushima for base load power but is increasingly being supplemented with renewables.
• Certain utilities are trailing large-scale vanadium and lithium batteries for the storing and smoothing out of power supply from renewable sources.
Company News
Aston Bay Holdings (CVE:BAY) 0.35c/s, Mkt cap C$20.8m – BHP jv on Storm copper project reports high-grade copper
(75% BHP Billiton, 25% Aston Bay after option exercise)
• Aston Bay which is managing the exploration program at the Storm Copper project in Northern Canada reports preliminary drill results from this year’s summer field season.
• The results released show visible copper mineralisation with assay results below:
(true widths estimated to be 75-100% of core)
o 16m at 3.07% copper and 12.26g/t silver from 93m down hole
o 4m at 1.17% copper
o 20m at 0.44% copper
• The joint venture has drilled a total of 1,951m in 12 drill holes of which three are reported.
• The exploration program also covers 2,005 soil samples
• Further details can be found at https://astonbayholdings.com/storm-copper
Conclusion: Aston Bay’s drilling shows tantalising results. Results from the next nine drill holes should provide further clues as to the nature and potential extent of copper mineralisation at the Storm Copper project in Nunavut, Canada.
BHP’s financial, logistical and geological support is of great benefit to Aston Bay Minerals and marks BHP’s developing strategy to invest in promising exploration projects.
BHP’s investment in copper exploration indicates to us renewed focus on increasing or at least replacing copper production in future years. The drive to replace fossil fuels with renewable energy and more efficient vehicles is likely to lead demand growth for copper going forward.
*SP Angel act as broker to Aston Bay
Premier African Minerals (LON:PREM) 0.4 pence, Mkt Cap £7.1m – Drilling on the Zulu Lithium Project
• Premier African Minerals reports that the first two boreholes in its 20 hole, 2500m drilling programme on the Zulu Litium Project near Fort Rixon, Zimbabwe are now complete.
• Although the samples are still being prepared for assay and hence no chemical data is yet available, the company reports that both holes intersected “Significant massive spodumene petalite lithium mineralisation” was intersected in both holes.
• The company reports that Hole ZDD14 intersected 14 metres of, presumably non-continuous, mineralisation “from 11 metres down hole to 46 metres. The second hole, ZDD16 intersected a further 26 metres of (again apparently not continuous) mineralisation from 18 metres to 58 metres depth.
Conclusion: As we observed on an earlier announcement on the drilling at the Zulu project, these are very early stage results in the overall programme and the scale and grade of any potential commercial lithium occurrence will become clearer when the drilling programme is more advanced and assay results become available.
Randgold Resources (LON:RRS) 7170 pence, Mkt Cap £6.7bn – Continuing tax dispute in Mali.
• Randgold Resources reports that in its long-running tax dispute with the Malian Government the authorities have now closed the company’s offices in the capital, Bamako. The company stresses, however that the operating mines at Morila, Loulo and Gounkoto are not affected.
• Chief Executive, Mark Bristow, commented that the company “have continued to engage with the Malian authorities at the highest level to resolve the remaining issues and to resolve the remaining issues and we trust that the parties will return to the negotiating table in the spirit of constructive partnership that had previously characterised our dealings in order to find a mutually acceptable solution.”
• The announcement also makes the point that the individual mining operations in Mali “each have legally binding establishment conventions which guarantee fiscal stability, govern the taxes applicable to the companies and allow for international arbitration in the event a dispute cannot be amicably resolved.”
• The company also notes that a recent dispute adjudicated by the International Centre for Settlement of Investment Disputes concerning the company’s Loulo mine awarded it US$9.2m plus costs for taxes “wrongfully collected by the Malian government.”
Conclusion: The taxation dispute in Mali has seen the closure of the company’s office in Bamako. The mining operations themselves remain unaffected and we speculate that the dispute may now be referred to an international adjudication tribunal which has previously been invoked in cases involving Randgold Resources and the Malian Government.
SolGold* (LON:SOLG) 18.8p, Mkt Cap £229.3m – Board considers investment proposal from BHP Billiton
• Solgold reports that it has received a proposal from BHP Billiton to acquire a 10% interest in Solgold for US$30m and to earn in to the Cascabel project itself through spending US$275m “to acquire 70% “ of Solgold’s 85% interest in the local company ENSA.
• The board considers the proposal is “NOT in the best interests of Solgold and its shareholders.”
• The BHP Billiton proposal is subject to a number of conditions which include a 60 day period of due diligence on the property and that the Solgold board should recommend the withdrawal of the motions “to approve the previously announced US$33 million financing with Maxit Capital LP (Maxit) and Newcrest Mining Limited (Newcrest) and shareholders not approving the same”.
• Solgold’s Board considers that the BHP Billiton proposal is not in the best interests of shareholders because of the high level of conditionality and non-binding nature of the proposal. It also cites that “the BHP Proposal implies an attributable price paid to Solgold and in respect of the Cascabel Project that it is at a significant discount to the current trading price of Solgold and the US$33 million financing with Maxit and Newcrest”.
• On this basis, “the current US$33 million financing with Maxit and Newcrest is the preferred option at this time as it leaves us in control of this very exciting project at Cascabel. There is considerable upside in the additional 13 targets as well as the existing and growing Alpala deposit.”
• Solgold is in the process of developing a resource statement for the most advanced of the projects at Cascabel, the Alpala project, however “This has been delayed by the discovery of high grade mineralisation in Hole 17” and Alpala remains open at depth and higher level extensions to the north, north east south west and south east. The company is also planning to step up exploration activity at a number of other prospects within the licence area including at Aguinaga, Trivino, Moran, Tandayama-America and Chinambicito.
Conclusion: The tangible interest of a second major mining company in the Cascabel project draws attention to the quality of the project and underlines the potential of the wider licence area at Cascabel which provides the potential scale to be of interest to the likes of BHP Billiton. Unless the motions to approve the Maxit and Newcrest transactions are withdrawn, which currently seems unlikely given the current Board stance, shareholders are to be given the opportunity to consider them at a General Meeting on 13th October.
The BHP proposal would give SolGold less money albeit at a better price. However, the conditions attached to the BHP offer are such that BHP could effectively take control of the project for spending $275m, though this is a huge financial commitment.
We await BHP Billiton’s response to this initial rebuttal with interest and reckon there is a good chance BHP might return with an improved proposal.