Randgold Resources (LON:RRS) – Exploration JV with Newcrest in Cote d’Ivoire
Strategic Minerals* (LON:SML) – Quarterly update September 2016
W Resources (LON:WRES) – Initial drilling results from Sao Martinho
Gold prices under pressure as US dollar hits 13.5 year high
India precipitated the fall in gold prices last Sunday under cover of news the Trump election with local press reports that the government may be considering a complete ban in the shipping of gold into India. We presume this may have been prompted by the move by individuals to convert large denominated Rupee bills, which are being withdrawn, into gold with gold looking set to take over as India’s next black market currency.
Yellen says the Fed could raise rates relatively soon and that Trump has done nothing to change the Fed’s plan for a rate increase
The Fed may also raise rates to assist the Treasury in the issuance of bonds to fund future Trump infrastructure spending
Trump may also lower US corporation taxes as pledged to further repatriate US dollars held in overseas accounts
The flow of funds back into the US could strengthen the dollar further and cause further volatility in the Emerging Markets.
Emerging Markets are fragile and volatile markets at the best of times and a liquidity squeeze in S Korea and other developing nations could well precipitate further crisis.
The question for gold bugs is, how low will gold go as the US dollar strengthens before the next crisis causes the gold price to recover.
Given that currency markets have already priced much of the Trump move into the US dollar and that further strength will damage more exports then it may be that the move in the dollar and the fall in gold prices is largely done
It may also be that the Fed could print new US dollars rather than increasing its borrowings though we seem to be the only people considering this. The inflationary impact of new money printing could be the deciding factor here.
Iron ore prices rising despite action taken by China’s authorities to reduce speculation in iron ore futures
The Iron ore 62% Fe spot (cfr Tianjin) rose to US$69.0/t from US$67.0/t yesterday despite the actions of the state to raise margins and increase costs in trading iron ore futures.
The resilience of the spot iron ore price suggests ongoing strong demand for imported seaborne iron ore reflecting a move to use better quality ores as coking coal prices remain at high levels. Cutbacks in local iron ore and the virtual elimination of the use of titano-magnetite due to its higher cost is also helping Australian iron ore exporters to gain further sales and raise prices.
There are no current cyclones affecting iron ore shipping and production at present though the threat is elevated through the cyclone season
OPEC – Venezuela’s president, who badly needs the price of oil to rise comments that OPEC are ready to reach a forceful agreement to cut oil output
Trump’s election takes some of the pressure off oil producers to lower oil prices to remain competitive and defer the rollout of electric vehicles
Higher oil prices inevitably will feed through into significantly higher inflation in weaker currency regions serving to cut demand in these areas.
Egypt – to issue first gold licenses for seven years
Ethiopia – Newmont geologists comment that Ethiopia is particularly jumping out for its exploration teams
Kefi Minerals is one of very few western companies looking to develop and further explore gold assets in Ethiopia.
Dow Jones Industrials +0.19% at 18,904
Nikkei 225 +0.59% at 17,967
HK Hang Seng +0.37% at 22,344
Shanghai Composite -0.49% at 3,193
FTSE 350 Mining -2.43% at 14,009 FTSE 350 +91% since 1st January
AIM Basic Resources +0.38% at 2,413 AIM Basic Resources +48% since 1st January
Economic News
Mexico – raises overnight interest rate as Trump victory weakens the pesp
The victory of Donald Trump has increased the key overnight rate to 5.25% the highest since 2009 as Trump’s victory continues to hurt peso.
France – French finance minister lowers GDP growth for 2016 to 1.4% from 1.5%
The news contrasts with more positive economic in the UK suggesting that Brexit is hurting Europe more than the UK.
Chile – central bank maintains rates on hold
The Chile peso has fallen by 4.2% since Trumps election. Higher copper prices are part of the decision
Japan - Prime Minister Shinzo Abe has described Donald Trump as a "trustworthy leader" after a meeting the US president-elect on Thursday
The Japanese leadership are proving themselves to be more diplomatic than many other leaders at present with positive comments of support towards the UK following Brexit.
Japan well understands the importance of strengthening its alliances with long term allies in the UK and US as China continues to undermine its economy through weakening the Yuan.
ECB - president comments, continued monetary support will a key ingredient for the economic outlook for the Eurozone
Greek debt issues are rearing their ugly head again with calls for IMF support again.
VW – cuts 30,000 jobs worldwide
Guinea – former minister of mines claims Stephen Din, head of Rio Tinto’s Guinea operation offered him a bribe in order to win back the half of Simandou which was sequestrated by BSG Resources
We wonder how credible this witness might be.
Donald Trump – refusing to go to court as the President-elect is too busy
The trial relates to claims of fraud over Trump’s Real Estate University.
Currencies
US$1.0602/eur vs 1.0723/eur yesterday. Yen 110.61/$ vs 109.51/$. SAr 14.575/$ vs 14.265/$. $1.241/gbp vs $1.247/gbp.
0.738/aud vs 0.747/aud. CNY 6.888/$ vs 6.872/$. Yuan falls to lowest level for eight years
Euro falls to one year low against US dollar
Commodity News
Precious metals:
Gold US$1,205/oz vs US$1,228/oz yesterday –
Gold ETFs 62.4moz vs 62.7moz yesterday –
Platinum US$926/oz vs US$944/oz yesterday
Palladium US$717/oz vs US$719/oz yesterday –
Silver US$16.51/oz vs US$17.04/oz yesterday
Base metals:
Copper US$ 5,427/t vs US$5,469/t yesterday – KGHM, the Polish copper miner is unlikely to drop its Sierra Gorda project in Chile despite a heavy writedown last year and political pressure in Poland. KGHM has been looking to internationalise its business for as long as we can remember. (Reuters)
Aluminium US$ 1,685/t vs US$1,695/t yesterday
Nickel US$ 11,045/t vs US$11,315/t yesterday –
Zinc US$ 2,516/t vs US$2,535/t yesterday
Lead US$ 2,144/t vs US$2,158/t yesterday
Tin US$ 20,105/t vs US$20,260/t yesterday –
Energy:
Oil US$46.1/bbl vs US$46.8/bbl yesterday –
Natural Gas US$2.725/mmbtu vs US$2.754/mmbtu yesterday
Uranium US$18.50/lb vs US$18.65/lb yesterday –
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$69.0/t vs US$67.0/t –
Chinese steel rebar 25mm US$444.3/t vs US$446.3/t –
Thermal coal (1st year forward cif ARA) US$64.5/t vs US$64.5/t yesterday
Premium hard coking coal Aus fob US$308.8/t vs US$308.8/t – remains unchanged, not sure why?
Other:
Tungsten - APT European prices $198-203/mtu vs $198-205/mtu unch last week – tungsten prices edge off as price recovery struggles to get going
Company News
Randgold Resources (LON:RRS) 5700 pence, Mkt Cap £5.3bn – Exploration JV with Newcrest in Cote d’Ivoire
Randgold Resources reports that it has signed a heads of agreement to establish a joint-venture for exploration, development and mining in the south-east of Cote d’Ivoire
Randgold, which already operates the 89% owned Tongon mine in the northern part of the country, is to manage the exploration programme and any new mines which result.
The area covers the extension into Cote d’Ivoire of known gold belts in Ghana which Randgold Chief Executive, Mark Bristow, characterises as offering “the potential for the discovery of truly world class gold deposits [in] … an area that has not yet been explored in depth.”
Although it is in a different area of the country, in central Cote d’Ivoire, Newcrest has another exploration joint-venture in Cote d’Ivoire where it is spending a minimum of US$1.7m by December 2018 on exploration of Kodal Minerals’* Dabakala gold licence in order to earn a 75% interest in the property.
It is unclear whether Dabakala would fall under the scope of the joint venture with Randgold, however, it seems likely that Newcrest’s exploration team will benefit in a professional sense from the additional technical involvement of Randgold’s team with their experience in exploration developing and running the Tongon operation.
In a recent comment, Mark Bristow noted that “We’ve always believed in the prospectivity of Côte d’Ivoire and we are becoming increasingly confident that it will deliver our next world-class discovery.”
Conclusion: Randgold and Newcrest’s decision to pool their exploration efforts should highlight the gold exploration potential of Cote d’Ivoire and bring the resources to bear to maximise the chances of a successful discovery.
*SP Angel acts as Financial Advisor and Broker to the Kodal Minerals. *Robert Woodridge, a partner at SP Angel is also Chairman of Kodal Minerals.
Strategic Minerals* (LON:SML) 0.43 pence, Mkt Cap £5.2m – Quarterly update September 2016
Strategic Minerals has provided an update of activities in its three main business areas; the Cobre magnetite tailings business in New Mexico; the nickel sulphide exploration activity in W Australia; and the Redmoor tin/tungsten joint-venture at Redmoor in Cornwall.
Following the previously announced deal to secure a new major customer for its magnetite product, sales tonnages increased sharply to 7,686 tonnes for the quarter bringing 12 months sales to 30th September to 23,477 tonnes, a 68% increase over the equivalent 12 months to September 2015. The average unit sales price for the twelve months declined slightly to US$65.17/t from US$67.77/t “due to “bulk” discount pricing being applied. However, overall net profitability is expected to be maintained at the historical level of 45% of sales.”
In July, an agreement was reached with “the rail provider to the Cobre mine for US$675,000 to be paid in instalments with the final payment being made by 30 June 2017.”
In Western Australia, the company recently announced that, in conjunction with its joint-venture partner Rarus, it was funding further exploration work, including drilling, at the Hanns Camp and Mount Weld nickel and gold prospects.
The company has re-negotiated the timing of its subscription to take its ownership of the Redmoor tin/tungsten project in Cornwall in order to match timing of the company’s receipts from the rail settlement and the earnings from Cobre to the working capital requirements at Redmoor. Earlier this week the company also announced that the joint-venture had invited tenders for a 2-phase drilling programme at Redmoor during H1 2017.
At 30th September, the company had cash of US$0.51m on its balance sheet.
Conclusion: Strategic Minerals is building up sales and cash generation at its Cobre operation in the US and laying the foundations for further exploration in Australia and in Cornwall. We look forward to results as they come through.
*SP Angel act as Nomad and joint broker to Strategic Minerals alongside Optiva Securities
W Resources (LON:WRES) 0.495p, Mkt Cap £21.6m – Initial drilling results from Sao Martinho
W Resources has reported results from its first exploration drill hole on the Sao Martinho gold prospect near Portalegre in Portugal.
The hole (SMD-04) forms part of a 1500m drilling campaign which started in September and adds to pre-existing drilling work which outlines an indicated and inferred resource totalling 3.04m tonnes at an average grade of 1.04g/t gold. Inferred resources comprise approximately 85% of this total 112,000 oz resource.
Hole SMD-04 “intersected significant gold mineralisation in 6 levels including 2m at 4.2g/t and 2m at 7.6g/t.”, with individual mineralised intercepts ranging up to 8m wide and down to a maximum depth of 187.60m.
The company’s Chairman, Michael Masterman, commented “The pick-up of visual gold in subsequent holes 10 and 11 together with these first results bodes well for a very successful program.”
Conclusion: These initial results are encouraging, however, we expect that until more of the programme has been completed, the significance and potential of today’s announcement to expand the existing small, relatively low grade resource will not become apparent. We look forward to additional results as the drilling programme progresses.