Avocet Mining (LON:AVM) – Gold shipment from Inata
Kodal Minerals* (LON:KOD) – Exploration at Bougouni lithium project identifies new areas
Sierra Rutile (LON:SRX) SUSPENDED, – Iluka deal reinstated as independent experts confirm integrity of the dams
Tertiary Minerals* (LON:TYM) – Exclusive non-binding agreement to acquire Lassedalen
Copper at $5,914/t – expect to see copper break $6,000/t
Major miners rise as steel prices hit 2-year high with iron ore and steel prices both posting strong gains
European equities climb for a third trading session with financials leading gains and the Bloomberg World Banks Index hovering around the highest level in more than a year.
Steel prices helped higher by proposals by Chinese authorities to reduce polluting steel-scrap processing next year.
Gold and Brent are flat this morning reflecting little change in the US$ index.
Strong German data helped base metals go better yesterday supported by an underlying positive tone driven by Trump
The US dollar remains strong but with potential for further weakness should help the base metals go better in US dollar terms
Stronger US growth is firmly on the agenda as companies see Trump as a signal to take a more optimistic view of the world.
Strong US imports served to raise the US trade deficit to $42.6bn.
October imports into the US jumped 1.3% to highest level in 14 months to $229bn driven by a stronger US dollar and by a more optimistic view of US growth.
US Exports fell by 1.8% to $186.4bn due to lower shipments of farm products and lower value of petroleum products, aircraft and other industrial goods.
Vale – continues to miss creditor payments
Vale has now missed three bond payments since the Samarco jv tailings disaster last year.
Vale and BHP hope to restart the Samarco mine in mid-2017 once permits allow mining to resume.
The Minas Gerais state regulator in charge of Samarco’s licensing says that two public hearings to be held on December 14,15 will evaluate a plan to use an unused pit for waste storage. Vale are offering to use Vale infrastructure to resolve the issue of storing new tailings to enable a return to full capacity (Bloomberg)
Lithium – $2bn lithium battery plant to be built in Chile
Investors from China are reported to be in advanced talks with the Chilean government for the construction of a $2b lithium battery plant in Chile.
An initial $500m investment by a consortium of Chinese companies should prepare the way for an eventual $2bn plant employing 4,300 people.
The project sounds like a hybrid public / private partnership deal with the government to gain access to lithium brine salars in Chile for the production of 1,000t of lithium carbonate in 2018 rising to 10,000tpa in 2028.
The construction of the battery plant may be a secondary consideration promised to gain access to state held lithium salars and we are not sure why this would be built in the arid north of Chile.
Having said that, Tesla’s Giga factory is being built in the equally arid state of Nevada, though this is probably more for tax reasons.
Given renewed difficulty in getting money out of China there may be some risk to the timeline and financing of the this project.
Dow Jones Industrials +0.18% at 19,252
Nikkei 225 +0.74% at 18,497
HK Hang Seng +0.55% at 22,801
Shanghai Composite +0.71% at 3,222
FTSE 350 Mining +2.45% at 15,065 FTSE 350 +105% since 1st January
AIM Basic Resources +0.67% at 2,397 AIM Basic Resources +47% since 1st January
Economic News
ECB policy meeting expected to continue to stimulate the Eurozone following Italian referendum defeat
The ECB is now suffering from a shortage of bonds to repurchase in its asset purchase program and may choose to turn to more innovative ways to better stimulate the European Union. We have yet to hear much from talks between the ECB, Greece and the IMF held earlier this week.
US – Strong factory orders and labour productivity numbers released yesterday pointed to a solid growth momentum in H2/16.
Germany – A rebound in industrial production is pointing to stronger contribution from the sector to GDP growth in the final quarter.
Growth has been driven by stronger output of durable consumer goods and capital goods.
Industrial Production (%mom): 0.3 v -1.6 in Sep and 0.8 forecast.
Industrial Production (%yoy): 1.2 v 1.3 in Sep and 1.6 forecast.
UK - October manufacturing falls
Manufacturing output fell by 0.9% after a 0.6% rise in September
Total Industrial Production fell by 1.3% in October following a fall of 0.4% in September
UK – Nov annual house prices change rebounded from last month’s record low, although the pickup might prove to be temporary, Halifax said.
“Despite November’s pick-up, the annual rate has been on a steady downward trend in recent months since reaching a peak of 10.0% in Mar,” the latest survey read.
“Heightened affordability pressures, resulting from a sustained period of house price growth in excess of earnings rises, appear to have dampened housing demand, contributing to the slowdown in house price inflation.”
Cheap loans and weak supply of properties is expected to support prices, although, growth in prices “may slow over the coming months”.
Halifax House Prices (%mom): 0.2 in Nov v 1.5 in Oct and 0.2 forecast.
Halfiax House Prices (%yoy): 6.0 in Nov v 5.2 in Oct and 5.9 forecast.
India – The RBI left rates on hold ahead of the Fed FOMC meeting later this month.
Expectations were for the benchmark rate to come down 25bp to 6.0% in a third cut of the year.
Weakening growth momentum as suggested by the latest falling manufacturing and services PMIs may lead the RBI to resume monetary easing policies next year.
Australia – The economy posted negative growth in Q3/16, marking the first decline since Q1/11 and matching the heaviest contraction since 2008.
On annual basis, a slowdown in growth was relatively broad based including a contraction in private investment (-9.7%yoy v -13.7%yoy in Q2/16).
Household spending (57% of total economic activity) growth dropped to 2.5%yoy, compared to 2.9% in Q2 and the 10-year average of 2.8%.
Government spending was down at 3.9%yoy from 4.3% in the previous quarter.
Imports growth accelerated to 2.3%yoy, up from 0.7% in Q2/16, while exports growth fell to 6%yoy, down from 10.1%.
GDP: -0.5%qoq v 0.6%qoq in Q2/16 and -0.1%qoq forecast.
GDP (%yoy): 1.8 v 3.1 in Q2/16 and 2.2 forecast.
China closes border with Mongolia due to visit by the Dalai Lama
The boarder closure is causing problems for Rio Tinto and its hauliers with trucks bearing copper from Oyu Tolgoi mine being held in freezing temperatures at the border and then rerouted into China via another crossing.
Rio Tinto is looking to expand Oyu Tolgoi to 500,000tpa by 2027 from the current target of 200,000tpa. The closure of the border is just one of many risks of managing such a substantial investment in a politically uncertain region.
Currencies
US$1.0719/eur vs 1.0764/eur yesterday. Yen 114.00/$ vs 114.14/$. SAr 13.565/$ vs 13.647/$. $1.259/gbp vs $1.275/gbp.
0.745/aud vs 0.744/aud. CNY 6.883/$ vs 6.880/$
China currency controls continue to make life difficult for China-based companies to remit dividends abroad
Potential for further renminbi devaluation likely despite recent admission of the renminbi as an IMF reserve currency.
We see gradual renminbi depreciation as more likely given that a sudden 20-25% devaluation could cause further consternation
Investors within China who do not trust the government will continue to want to move their cash abroad whatever the rate.
We can see Chinese traders and investors restocking on base metals and
The Australian dollar fell 0.7% against the US$ on the back of poor economic data before recovering some of its losses.
Commodity News
Precious metals:
Gold US$1,172/oz vs US$1,171/oz yesterday – The PBoC paused purchases of gold with official reserves showing unchanged amounts of gold in vaults in Nov from the previous month.
Gold reserves are reported to be standing at 59.2moz.
This is only the second time the Bank did not add to its reserves since Jun/15.
Gold ETFs 59.6moz vs 59.6moz yesterday – Precious metal ETF see fastest outflows since May 2013 with net outflows of $6.24bn through November. Conversely, equity ETFs saw inflows of $75.81bn. (Bloomberg)
Platinum US$933/oz vs US$943/oz yesterday
Palladium US$730/oz vs US$752/oz yesterday
Silver US$16.79/oz vs US$16.81/oz yesterday
Base metals:
Copper US$ 5,926/t vs US$5,862/t yesterday
Aluminium US$ 1,726/t vs US$1,712/t yesterday
Nickel US$ 11,685/t vs US$11,610/t yesterday
Zinc US$ 2,852/t vs US$2,748/t yesterday
Lead US$ 2,384/t vs US$2,304/t yesterday
Tin US$ 21,150/t vs US$21,130/t yesterday
Energy:
Oil US$54.1/bbl vs US$54.9/bbl yesterday
Natural Gas US$3.710/mmbtu vs US$3.671/mmbtu yesterday
Uranium US$18.00/lb vs US$18.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$77.3/t vs US$74.8/t
Chinese steel rebar 25mm US$495.0/t vs US$489.4/t
Thermal coal (1st year forward cif ARA) US$60.9/t vs US$62.0/t yesterday
Premium hard coking coal Aus fob US$299.2/t vs US$300.0/t – unch
Other:
Tungsten - APT European prices $183-195/mtu vs $188-198/mtu last week and $198-203/mtu a week earlier – we know not why ???
Company News
Avocet Mining (LON:AVM) 54 pence, Mkt Cap £11.3m – Gold shipment from Inata
Avocet Mining reports that it has now received payment for a shipment of over 6,000 ounces of gold from the Inata mine, although it reports that the 1400 ounces of gold seized by bailiffs acting on behalf of disaffected former employees “remains under seizure”.
The company goes on to point out that “the mine is in production and weekly shipments have now been reinstated as normal” and that as a result of the resumption of gold shipments “the Company now has working capital to cover its corporate overheads through to the anticipated completion, in early January 2017, of the Tri-K disposal announced on 29 November 2016.”
Avocet expresses hope “that a settlement will be reached with regards to the claims of the ex-workers in the coming weeks.”
Conclusion: It appears as if Avocet is now returning to normal operations and in a position to fund itself until it completes the Tri-K transaction. The original gold seizure by the former employees was ordered to be lifted by a judge last month but this does not yet appear to have happened.
Kodal Minerals* (LON:KOD) 0.09p, mkt cap £3.9m – Exploration at Bougouni lithium project identifies new areas
Kodal Minerals reports that reconnaissance rock chip sampling at its Bougouni lithium project in Mali has yielded high grade assay results, including 2.04% lithium oxide from the Sogola pegmatite vein.
The sampling programme has also identified new areas of lithium mineralisation within the prospect area which returned assay results up to 1.9% and 1.65% lithium oxide.
The company reports that it is still awaiting assays on a further 44 samples and that meanwhile the previously announced reverse-circulation drilling programme targeting the Sogola, Ngoualana and Kola veins is continuing and expected to be completed in mid-December.
Initial [unspecified] results, presumed to also be rock chip samples, from the recently acquired Diendio prospect “confirm presence of lithium mineralisation, maximum result of 0.03% Li2O returned from limited sampling.”
Conclusion: Although rock-chip sampling is an early stage reconnaissance exploration technique, the high grade assay results and the identification of previously undiscovered areas of mineralisation provides encouragement for future more detailed follow up work. We look forward to the results from the reverse-circulation drilling.
*SP Angel acts as Financial Advisor and Broker to the company.
*Robert Wooldridge, a partner at SP Angel is also Chairman of Kodal Minerals.
Sierra Rutile (LON:SRX) SUSP, – Iluka deal reinstated as independent experts confirm integrity of the dams
Sierra Rutile’s merger with fellow mineral sands producer, Iluka, is now expected to complete this evening, Perth time, after independent geotechnical experts, Knight Piesold confirmed that “subject to the lowering of water levels in the Lanti containment ponds, the risk of immediate failure of the dams is low. Iluka confirms that the water levels in the Lanti containment ponds have been lowered to an acceptable level.”
Accordingly, the two companies have agreed that all the conditions precedent for the merger have now been satisfied.
Sierra Rutile’s announcement confirms that investigation has confirmed that “the construction of SRL’s engineered dams are considered to be compliant with the appropriate industry standards” and that the dams are operated to appropriate industry standards.
Conclusion: The possibility of the merger between Sierra Rutile and Iluka failing to complete was raised at the eleventh hour when concerns arose over the integrity of the dams. Expert inspection by independent consultants has confirmed that the dams are in fact fully compliant and the merger is now back on track.
Tertiary Minerals* (LON:TYM) 1.2p, Mkt £3.2m – Exclusive non-binding agreement to acquire Lassedalen
Tertiary Minerals reports that it has reached a non-binding agreement to acquire land and old mine workings at the Lassedalen fluorspar project in Norway for 1 Norwegian kroner.
The exclusive agreement, with the aluminium company, Hydro, is subject to a period of 12 months due-diligence and a period of a further 2 months for negotiation of a final purchase agreement.
Tertiary Minerals’ Managing Director, Richard Clemmey, commented “The potential land acquisition represents a significant milestone for our Lassedalen fluorspar project, as well [as] adding value to the project, the transaction strengthens the long term security of tenure and reduces future royalty exposure.”
Conclusion: Today’s announcement of the deal to acquire Lassedalen at minimal cost underlines Tertiary Minerals’ commitment to building its fluorspar business and follows an announcement earlier this week of the disposal of non-core gold exploration assets in Scandinavia.