Kibo Mining (LON:KIBO) 7.1 pence, Mkt Cap £25.3m – Agreement signed with GE on Mbeya Coal to Power Project
Tethyan Resources (LON:TETH) 2.5 pence, Mkt Cap £2.3m – Raising £353,000
Chinese investors pile into commodities as Yuan continues to weaken
Copper prices regain upward momentum on strong demand for infrastructure in China and weaker supply growth
Iron ore and coal prices pull back but remain at high levels despite China raising rates and margins on futures trading
Chinese investors are piling into commodities as the US dollar continues to strengthen and as China allows its currency to depreciate against the US dollar.
President elect-Trump is likely to lower US corporation taxes bringing US dollars back into the US and to rebuild American infrastructure
Markets are increasingly pricing in a Fed Rate rise this year and further rises next year as the Fed moves to issue new treasuries into the market to cover Trump’s spending aspirations.
Middle Eastern and Chinese sovereign wealth funds are reported to have been sellers of US Treasuries this year leaving us wondering on who will buy new issues of US Treasuries going forward.
The Fed dare not go too far in terms of raising interest rates as it may damage US growth when coupled with the strong dollar.
The US Treasury may need to print new US dollar bills to pay for Trump’s expenditure plans, a move which could reverse US dollar gains and allow the Fed to maintain lower rates for longer
The impact of a significantly stronger dollar is hurting US exporters and also serves to raise the effective cost of US energy production versus overseas energy producers. Trump pledged to help US coal miners.
Mining and oil stocks trade higher as FTSE falls
US$ index is slightly off following a five sessions’ winning strake which saw the index hitting the highest level in more than a decade.
Gold prices are up (+0.7%/+$8/oz) trading at $1,216/oz after sliding below the $1,205/oz level on Friday on US$ index gains.
Brent crude is trading higher ahead of the OPEC meeting in Vienna next week and Iran’s Oil Minister suggesting it is “highly probable” members will agree details of production cuts
Base metals are all up this morning as buying accelerated as Chinese investors are using commodities as a hedge against depreciating yuan.
Iron ore futures continued to fall on the back of increased Chinese trading charges and falling steel prices.
Dow Jones Industrials -0.19% at 18,868
Nikkei 225 +0.77% at 18,106
HK Hang Seng +0.06% at 22,358
Shanghai Composite +0.79% at 3,218
FTSE 350 Mining +2.13% at 14,282 FTSE 350 +94% since 1st January
AIM Basic Resources -1.07% at 2,387 AIM Basic Resources +46% since 1st January
Economic News
US – Fed minutes are unlikely to alter Dec rate hike expectations with the latest economic data coming strong and more hawkish comments made by FOMC members.
Markets currently suggest that a hike is a done deal with the probability of an increase stading at 98%.
China – The recent industrial private report showed industrial sector remained in contraction last quarter amid state driven cutbacks of overcapacity, according to responses of 2,000 surveyed businesses.
The headline business sentiment index came in at 46 in Q3 signalling a decline in the sector activity, the Cheung Kong Graduate School of Business quarterly report read.
Large firms with a significant share of state owned companies in the category favoured better than medium and small sized companies, with respective readings of 48, 46 and 45.
The outlook remains weak as with inflation and overcapacity are forecast to “increase costs and hinder the recovery of the industrial economy”.
Shijiazhuang city stops production at steel and cement plants and cuts thermal coal power generation
Shijiazhuang city is taking drastic measures to meet emissions targets for PM 2.5 fine particles for the year.
The city produces around 15mt of steel representing around 2% of Chinese production
Shijiazhuang has also cut production by drug manufacturers as part of the measures.
The action serves to highlight China’s determination to cut pollution and to force companies to clean up
Currencies
US$1.0646/eur vs 1.0602/eur yesterday. Yen 110.67/$ vs 110.61/$. SAr 14.230/$ vs 14.575/$. $1.235/gbp vs $1.241/gbp.
0.736/aud vs 0.738/aud. CNY 6.894/$ vs 6.888/$. – Another low in the Yuan as China continues to depreciate currency against the US Dollar
Commodity News
Precious metals:
Gold US$1,216/oz vs US$1,205/oz yesterday
Gold ETFs 62.1moz vs 62.4moz yesterday
Platinum US$932/oz vs US$926/oz yesterday
Palladium US$730/oz vs US$717/oz yesterday
Silver US$16.73/oz vs US$16.51/oz yesterday
Base metals:
Copper US$ 5,576/t vs US$5,427/t yesterday
Aluminium US$ 1,715/t vs US$1,685/t yesterday – Aluminum stocks fall 2.9% in Japan
Nickel US$ 11,165/t vs US$11,045/t yesterday
Zinc US$ 2,586/t vs US$2,516/t yesterday
Lead US$ 2,185/t vs US$2,144/t yesterday
Tin US$ 20,585/t vs US$20,105/t yesterday
Energy:
Oil US$47.5/bbl vs US$46.1/bbl yesterday
Natural Gas US$2.928/mmbtu vs US$2.725/mmbtu yesterday
Uranium US$18.50/lb vs US$18.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$67.3/t vs US$69.0/t –
Chinese steel rebar 25mm US$443.4/t vs US$444.3/t –
Thermal coal (1st year forward cif ARA) US$63.0/t vs US$64.5/t yesterday
Premium hard coking coal Aus fob US$308.8/t vs US$308.8/t – remains unchanged for a week, not sure exactly why?
Ordinary hard coking coal is $270.4/t (Dalrymple Bay Coal Terminal)
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
Kibo Mining PLC (LON:KIBO) 7.1 pence, Mkt Cap £25.3m – Agreement signed with GE on Mbeya Coal to Power Project
Kibo Mining reports that it has now signed the previously announced agreement with General Electric (GE) to supply equipment, technology and services to the Mbeya Coal to Power Project (MCPP) in Tanzania.
Under the Agreement, GE will also assist in the implementation of the project which involves the development of a 250-350MW mine mouth thermal power station in at Rukwa in southwest Tanzania based on a 121m tonnes resource, of which 91% is classed as either measured or indicated, within 7 seams.
In addition to GE, Kibo Mining has previously also signed an agreement with the China based contractor, SEPCO III, “granting it the right to become the the sole bidder for the contract to build the power plant component of the MCPP in exchange for SEPCO III refunding 50% of the development costs incurred by Kibo to date on the project. Kibo has alreadt received the first tranche of this funding in the amount of US$1.m million”.
As well as the technical partners for the MCPP, Kibo Mining uses Standard Bank as its Financial Advisor for the project.
The company is expecting to complete the integrated Bankable Feasibility Study (BFS), comprising a definitive coal mining study and a power pre-feasibility study shortly.
Conclusion: The MCPP appears to be moving forward as it assembles the team which will be required to turn the forthcoming BFS into reality.
Tethyan Resources (LON:TETH) 2.5 pence, Mkt Cap £2.3m – Raising £353,000
Tethyan Resources reports that Canadian listed Southern Arc Minerals has subscribed for 16.5m new shares at a price of CAD0.36 cents per share for a 15.44% interest in the company.
In addition, Southern Arc is purchasing a further 14.64m shares in the company from Newmont taking its interest to 29.15%. Two of Southern Arc’s nominees, John Proust and Michael Andrews are to join the Board of Tethyan.
Tethyan Resources is exploring copper and gold projects in Serbia and Bulgaria and recently started drilling at the Rudnitza porphyry copper prospect in Serbia where it is planning a programme of approximately 2500m of drilling in four or five holes to a maximum depth of 800m.
In addition to its investment in Tethyan Minerals, Southern Arc is reported to hold 43% of Canadian listed Japan Gold Corp and a stake in Osisko Mining, also listed in Canada.