Centamin (LON:CEY) 140 pence, Mkt Cap £1608m – 2016 gold production exceeds guidance
Golden Star Resources (TSX:GSC) C$1, Mkt Cap C$332m – Commercial production at Wassa underground
Keras Resources (LON:KRS) 0.5p, Mkt Cap 7.2m – Drilling results from Klondyke project
Kodal Minerals* (LON:KOD) 0.18p, Mkt Cap £8.2m – Funding to advance Bougouni lithium project
Liontown Resources 2.4c/s – shares jump on identification of 2km strike of Li2O bearing pegmatites of >100m true thickness
Copper prices are higher this morning despite a stronger dollar last week on better US jobs numbers
Precious metals are holding relatively steady
The pound is off more than 1% against the US$ after trading restarted post weekends driven by expectations for speculation the UK might be heading towards a hard Brexit.
Over the weekend, Theresa May warned that the UK unlikely to keep certain preferential “bits” of EU membership including access to tariff-free single market.
The Prime Minister to present details of the Brexit strategy in coming weeks as Article 50 is expected to be triggered before the end of Mar.
FTSE 100 is up marginally extending gains to a 10th consecutive day and marking the longest rally since May/13.
S&P 500 closed at a record high Friday after having climbed 1.7% from the start of trading in 2017.
The US$ index climbed slightly this morning following an increase recorded in Friday on good US employment numbers.
Brent is down as US drilling rigs count climbed for the 10th straight week hitting the highest level in a year as prices rebounded in Nov/Dec in 2016.
Tesla – looks set to dominate headlines as it ramps up production at its Gigafactory in Nevada
The plant is looking to hire another 4,000 personnel this year.
The factory is set to almost double global lithium-ion battery production at 35GW in 2018.
Tesla is to start shipping its new Powerwall home energy storage system within weeks
The company has also forecast sales of some 500,000 Model 3 cars by 2018 which may be helped by higher oil prices.
Around 88% of global battery production is in China, South Korea and Japan at present.
Tesla delivered a 20Mw energy storage facility within a few months, a project which would normally have taken years.
Reports suggest lithium demand could rise by 16%pa through to 2025 as battery demand ramps up.
It is not easy to ramp up lithium carbonate and lithium hydroxide production due to the capital cost of the production process and related issues.
The nature of lithium brine processing means that it takes time for lithium to come through the process before onward sale to battery grade processors.
Conclusion: the ramping up of battery production at the Gigafactory is likely to lead to a significant increase in demand and therefore pricing of lithium as traders move to secure available supply in this relatively tight market.
Bill Gross who manages the $1.7bn Janus Global fund compares Donald Trump with Benito Mussolini in today’s ‘Investment Week’
All we can say is that at least Musolini made the trains run on time.
Given the collapse in US Treasuries following the election of Trump, we see the comment as relatively benign
A big thank you to the Unions for striking on the London Underground this morning
Tube drivers start on a salary of £49,673pa with salaries rising to £50,000-60,000pa.
We reckon there are an awful lot of people who would love to earn those sorts of salaries given the chance.
Problem is tube driver jobs are only offered internally to station staff due to a deal with the unions.
Station staff are being replaced with automated ticket machines so maybe we will get automated tube drivers eventually
Dow Jones Industrials +0.32% at 19,964
Nikkei 225 -0.34% at 19,454 Bank holiday - markets closed
HK Hang Seng +0.25% at 22,559
Shanghai Composite +0.54% at 3,171
FTSE 350 Mining +1.26% at 15,108
AIM Basic Resources -0.01% at 2,437
Economic News
US – Headline payrolls numbers were broadly in line with expectations after taking previous upwards month’s revision into account.
However, the highlight of the report was a 2.9%yoy increase in average hourly earnings last month.
This marks the strongest rise since the end of the last recession in Jun/09 and points to a tightening labour market.
A slight increase in the jobless rate is attributed to a higher participation rate as more people joined the labour force, but have not yet found jobs.
Factory orders came in weak in Nov on the back of uncertainty over the same-month US presidential elections and a stronger currency.
Eurozone – Unemployment held at the lowest level in more than seven years; although, measures vary widely on a country-by-country basis.
Despite a continued decline in the unemployment rate in the single currency block, the ECB said a slack in labour market remains given a weak increase in wages.
Unemployment (%): 9.8 in Nov v 9.8 in Oct and 9.8 forecast.
Germany – A positive set of Nov economic results released this morning including an acceleration in industrial production and strong trade statistics.
Industrial production gained good growth momentum through Q4 suggesting an acceleration in a general GDP growth for the quarter.
Estimates are for the economy to post a 0.4%qoq increase in Q4/16, up from 0.2%qoq in Q3/16.
Industrial Production (%yoy): 2.2 v 1.6 (revised from 1.2) in Oct and 1.9 forecast.
Exports (%mom): 3.9 v 0.5 in Oct and 0.5 forecast.
Imports (%mom): 3.5 v 1.2 in Oct and 1.1 forecast.
Australia – Federal forecasts (see iron ore comment below) expect to make record mining and energy exports this year led by iron ore, coal and oil & gas.
Australia’s Department of Industry, Innovation and Science see a 30% rise in export earnings from mining and oil & gas this year on higher prices for iron ore and coal and greater LNG production.
Ivory Coast - Reports from the Ivory Coast suggest that a two day mutiny by the army has been resolved peacefully.
Unrest over pay originated in the country’s second city, Bouake on Friday and spread to other regions before being resolved on Saturday.
Details of the settlement are unclear although it is reported that the Government has agreed an amnesty for the mutineers as well as improved bonuses and working conditions.
Currencies
US$1.0536/eur vs 1.0592/eur last week. Yen 117.12/$ vs 116.18/$. SAr 13.755/$ vs 13.691/$. $1.218/gbp vs $1.238/gbp.
0.732/aud vs 0.733/aud. CNY 6.935/$ vs 6.926/$.
Commodity News
Precious metals:
Gold US$1,178/oz vs US$1,176/oz last week
Gold ETFs 57.0moz vs US$57.0moz last week
Platinum US$975/oz vs US$965/oz last week
Palladium US$761/oz vs US$740/oz last week
Silver US$16.52/oz vs US$16.47/oz last week
Base metals:
Copper US$ 5,603/t vs US$5,568/t last week - Escondida – labour talks start at Escondida, the world’s largest open pit copper mine in Chile
Workers are demanding a 7% pay rise and have until the 23rd to negotiate an agreement. Unions are preparing for a number of scenarios.
Aluminium US$ 1,709/t vs US$1,700/t last week – Blackout caused molten aluminium to solidify at Alcoa’s aluminium smelter last month in Victoria, Australia.
The blackout and solidification puts the future of the 300,000tpa smelter in doubt. The state is reported to have offered $240m worth of support
The smelter continues to operate albeit at reduced capacity
Nickel US$ 10,310/t vs US$10,180/t last week
Zinc US$ 2,628/t vs US$2,589/t last week – Hindustan Zinc received environmental approval for its Zawar Mines expansion in Rajasthan.
Production is reported to be set to increase to 4mtpa from 1.5mtpa as a result
Lead US$ 2,080/t vs US$2,038/t last week
Tin US$ 21,010/t vs US$21,080/t last week
Energy:
Oil US$56.7/bbl vs US$56.7/bbl last week
Natural Gas US$3.250/mmbtu vs US$3.235/mmbtu last week
Uranium US$21.90/lb vs US$21.65/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$73.3/t vs US$71.9/t – Australia’s Department of Industry, Innovation and Science is reported forecasting a sharp fall in iron ore prices over the next two years to $51.60/t in 2017 and $46.70/t in 2018.
The Department comments that a current rally in iron ore prices is driven by a combination of a what it sees as a temporary rise in Chinese steel production and speculative commodities trading. It expects these factors to moderate over the next two years resulting in its forecast decline in prices.
The report suggests China has >100mt of iron ore stockpiles at its port up 23% yoy.
Chinese steel rebar 25mm US$478.3/t vs US$480.1/t
Thermal coal (1st year forward cif ARA) US$62.3/t vs US$63.3/t last week – Shanxi province to consolidate coal production
The province is to cap coal production at 1bntpa and coal production capacity at 1.2btpa by 2020
The state produced nearly 1bnt in 2015
Premium hard coking coal Aus fob US$201.3/t vs US$208.1/t
Other:
Tungsten - APT European prices $187-198/mtu vs $187-198/mtu
Company News
Centamin (LON:CEY) 140 pence, Mkt Cap £1608m – 2016 gold production exceeds guidance
Centamin reports that its Sukari mine produced 136,787 ounces of gold during the December quarter bringing output for the year to 551,036 ounces. The annual output exceeds the previously issued guidance range of 520,000-540,000 ounces, which was itself increased during the course of the year from a previously indicated 470,000 ounces.
The company is indicating that 2017 production from Sukari will amount to 540,000 oz at a cash cost of US$580/oz and an all-in-sustaining cost of US$790/oz.
Centamin has also updated “The Company’s dividend policy sets a minimum payout level relative to cash flow … the Board will aim to provide an annual dividend of at least 30% of the Company’s net cash flow after sustaining capital costs and following the payment of Profit Share due to the Government of Egypt.”
Commenting on the production results and the context of a final dividend for 2016, CEO, Andrew Pardey, noted that “the fourth quarter marked a seventh successive year of growth … the Board expects to propose a final 2016 dividend that is above the level envisaged in our current policy”.
Conclusion: Centamin is achieving better than guidance gold output and is looking for further productivity increases and production growth from its Sukari mine. These improvements have provided the leeway for the company to look at increasing the likely payout when it declares the final dividend for 2016 on 1st February.
Golden Star Resources (TSX:GSC) C$1, Mkt Cap C$332m – Commercial production at Wassa underground
Golden Star reports that, effective on 1st January, it has reached commercial production at the Wassa underground mine in Ghana. The mine development has been achieved on budget and schedule.
The company has been producing development and stoping ore from the F shoot at Wassa since July 2016 and now expects “to begin longitudinal stoping of the B Shoot in the first quarter of 2017, with the larger, transverse stopes expected to be accessed in the thrd quarter of 2017.”
The company’s other operating mine at Prestea, also in Ghana, is also moving into underground operations and “is expected to achieve commercial production in mid-2017.”
Golden Star is moving into high grade non-refractory underground mining operations at both its Prestea and Wassa mines as it moves away from its open pit mining operations which were producing complex, refractory ore. As a result, the company expects to increase annual gold production to around 280,000oz pa at cash costs of US$695/oz and AISC of US$903/oz for the five year period from 2017 onwards.
The company will report on its 2016 production and 2017 production guidance later this month but has a current 2016 guidance target of 180-205,000 oz of gold at a cost of US$815-925/oz.
Conclusion: The milestone of commercial production at the Wassa underground mine, which has been achieved within budget and on schedule, keeps the company on track with its transition from open-pit into underground higher grade mining. We look forward to the production figures later this month and to further news on progress at Prestea underground.
Keras Resources (LON:KRS) 0.5p, Mkt Cap 7.2m – Drilling results from Klondyke project
Keras Resources reports that its reverse-circulation drilling campaign at the wholly owned Klondyke project in the East Pilbara District of W Australia has confirmed historic results.
The drilling, which was completed in November 2016, was undertaken over a 1.4km long strike length within an area with an existing “JORC compliant resource estimate of 5.6Mt at 2.08g/t gold (‘Au’) for 374,000oz”.
Among the assay results reported today are a 13m intersection at an average grade of 2.28g/t gold from a depth of 14m in hole KKC004; 38m averaging 1.52g/t gold (including 28m averaging 1.98g/t from surface) in hole KKC005 and 37m averaging 1.6g/t gold from 50m in hole KKC006.
Commenting on the results of the maiden drilling programme at Klondyke, Managing Director Dave Reeves pointed out that “It is important to note that our drilling tested only 1.4km of the 7.5km trend and that historic drilling did not test the full trend”.
The company is finalising planning for a 2017 drill programme which is aimed at expanding the current resource estimate.
Conclusion: Drilling at Klondyke shows shallow gold mineralisation within the existing resource area and potential to investigate further along strike to expand the resource. We look forward to hearing the company’s strategy for future resource expansion in due course.
Kodal Minerals* (LON:KOD) 0.18p, Mkt Cap £8.2m – Funding to advance Bougouni lithium project
Kodal Minerals has announced that it has raised £1m through a placing of 666.7m new shares at 0.15p/share. The funds are to be used to advance exploration of the Bougouni lithium project in Mali.
Chief Executive, Bernard Aylward, commented that “This Placing will allow the Company to accelerate our exploration activities with a further programme of drilling to follow on from the recently completed work as well as to test the newly identified high-grade pegmatite veins.”
The recent acquisition of another Malian lithium project, confusingly also known as Bougouni, by Shandong Mingrui for A$107.5m in cash has focussed attention on the lithium potential of the area. The acquisition of the property held by Birimian Gold, which has a JORC compliant indicated and inferred resource of 15.5mt at an average grade of 1.48% lithium oxide, underlines the value which can be achieved for these exploration assets in the current market.
Conclusion: The additional funding should move Kodal closer to establishing a lithium resource at Bougouni. Recent corporate acquisition activity provides an attractive valuation benchmark for lithium resources in Mali.
*SP Angel acts as Financial Advisor and Broker to the company.
*Robert Wooldridge, a partner at SP Angel is also Chairman of Kodal Minerals.
Liontown Resources (ASX:LTR) 2.9c/s, mkt cap A$25.1m – shares jump on identification of 2km strike of Li2O bearing pegmatites of >100m true thickness
Liontown’s Lake Percy prospect in the Northern Territories of Australia is the latest of a new breed of up and coming lithium producers
Geochemical assays show values of up to 354ppm Li2O.
The project lies 60km east of Kidman’s Earl Grey deposit, which has a resource of 128mt grading 1.44% Li2O
Liontown will start drilling next month and is earning into up to 70% of Lake Percy via a farm-in with White Cliff Minerals.
Liontown raised $1.4m in early October at 1c per share but will need further funding to fully evaluate the project.
The 100m true thickness is impressive and it will be interesting to see how much of this is mineralised and at what sort of average grade?