Kodal Minerals* (LON:KOD) – Trenching defines new >30m wide lithium bearing mineral zones
Solgold* (LON:SOLG) – Craig Jones nominated by Newcrest as new NED to SolGold
Equities are off this morning as investors are waiting for Janet Yellen to give a speech in Chicago later today during which she might comment on the recent rise in market expectations for the rate move at the March FOMC meeting.
• Market odds of a rate hike in March have gone to 88% helping the US$ index to keep on to gains recorded this week.
• Eurozone business survey to confirm the strongest growth momentum in nearly six years in Feb amid a strong increase in employment , order book and optimism.
• Based on the latest Markit Composite PMI Eurozone GDP growth may accelerate towards 0.6%qoq in Q1/17 “if this pace of expansion is sustained into Mar” versus 0.4%qoq in Q4/16.
• Gold is continuing to slide with prices off $6/oz on the back of strengthening expectations for a rate increase to be announced on Wednesday in two weeks’ time.
• Iron ore and steel futures weaken amid concerns about inventory levels in China.
• Copper is little changed today after losing 1.4% on Thursday.
• Brent is trading slightly higher following two straight session of declines.
Dow Jones Industrials -0.53% at 21,003
Nikkei 225 -0.49% at 19,469
HK Hang Seng -0.74% at 23,553
Shanghai Composite -0.36% at 3,218
FTSE 350 Mining -1.24% at 16,235
AIM Basic Resources -0.04% at 2,655
Economic News
China – Services sector growth slowed slightly for a second consecutive month in Feb after reaching a more than a year high in Dec/16, Markit Data showed.
• Despite a marginal decline in the pace of expansion, services sector showed a strong growth momentum through the Nov/16-Feb/17 period which coupled with stronger manufacturing sector is seen to maintain economic growth momentum in Q1/17.
• Composite-wise, PMI showed the second-fastest rate of growth in new orders since Mar/13 suggesting positive business outlook.
• “Overall, composite data signalled a further marked rise in average input prices, albeit one that was the weakest in four months.”
• Markit Services PMI: 52.6 v 53.1 in Jan.
• Markit Composite PMI: 52.6 v 52.2 in Jan.
UK – Growth pace in services and manufacturing slowed in Feb; although, firms continued to rate business optimism high with “sufficient confidence to maintain staffing levels in preparation for new products, expansion and increase competition”.
• Among negatives, a “weaker consumer spending was a key cause of slower service sector growth, suggesting that household budgets are starting to crack under the strain of higher prices and weak wage growth”.
• New business slowed to the lowest in five months.
• Markit Services PMI: 53.3 v 54.5 in Jan and 54.1 forecast.
• Markit Composite PMI: 53.8 v 55.4 in Jan and 55.6 forecast.
Spain – Composite PMI measuring business activity in manufacturing and services sectors surged to the highest level in one and a half years in Feb, Markit reported.
• Services sector had a particular strong run in Feb driven by solid gains in new orders.
• In line with latest reports on economic activity in other major economies, the report highlighted “sharply” increasing input costs.
• Markit said concerns remain over the strength of the consumer demand and the ability of goods and services providers to pass on higher costs onto clients.
• Selling “charges were up only marginally again in Feb (for services providers), suggesting that firms remain to be convinced that client demand is sufficiently robust to accept stronger price rises”.
• Markit Services PMI: 57.7 in Feb v 54.2 in Jan and 55.2 forecast.
• Markit Composite PMI: 57.0 in Feb v 54.7 in Jan and 55.0 forecast.
Philippines – considering ban on export of unprocessed minerals
• The Philippines is at long last considering a ban on the export of unprocessed minerals.
• This is probably another ruse to reduce mining activity by the new Minister of Mines with government support.
• It is also a sensible move for a nation which has been allowing other nations, China, to exploit the value of its mineral wealth.
• The closure of virtually all the country’s nickel laterite mines and a number of other operations in environmentally sensitive areas has led to a likely shortage of nickel laterite ores in China for nickel pig iron processing.
• The absence of iron units from nickel laterite, titano-magnetite and other co-product and by-product operations has helped to drive demand for better quality Australian iron ore which has lifted iron ore prices in China.
Currencies
US$1.0518/eur vs 1.0537/eur yesterday. Yen 114.28/$ vs 114.23/$. SAr 13.120/$ vs 13.048/$. $1.223/gbp vs $1.229/gbp.
0.755/aud vs 0.765/aud. CNY 6.900/$ vs 6.883/$.
Commodity News
Precious metals:
Gold US$1,227/oz vs US$1,245/oz yesterday
Gold ETFs 59.1moz vs US$59.0moz yesterday
Platinum US$988/oz vs US$1,015/oz yesterday
Palladium US$766/oz vs US$776/oz yesterday
Silver US$17.70/oz vs US$18.38/oz yesterday
Base metals:
Copper US$ 5,927/t vs US$6,007/t yesterday
• BHP Billiton launched a process of a divestment if the Cerro Colorado copper operation in Chile, the smallest and highest cost mine in its portfolio.
• The Company held meetings with potential buyers with preliminary information with indicative offers expected to come through later this year, Bloomberg reports.
• The mine produces 70-80kt copper cathode per annum leaching ores with an average copper grades of 0.7-0.8% Cu.
Aluminium US$ 1,915/t vs US$1,936/t yesterday
• The EGA (Emirates Global Aluminium), the largest aluminium producer in the Middle East, is said to be considering an IPO on the local exchange amid a recovery in commodity prices.
• The Company was formed by a merger of two flagship state aluminium producers in 2013 with an estimated EV of around $15bn.
• Production climbed to record 2.5mt, up 4.2%yoy, earning 2.1bn dirhams ($572m) and making it the fourth-largest aluminium producer.
Nickel US$ 10,920/t vs US$10,990/t yesterday
Zinc US$ 2,809/t vs US$2,848/t yesterday
• Mitsui Mining & Smelting is considering restarting the Huanzala mine in Peru in FY18 (starting in Apr/17) on the back of a recovery in zinc prices.
• The operation was put on care maintenance in Jan/16.
• Mitsui estimates that around 70% of zinc mines break even at $1,900/t and 90% at $2,100/t.
• The Company said the rally has run ahead of itself and prices are likely to come donw to a arrange of $2,200-2,600/t in FY/18.
Lead US$ 2,261/t vs US$2,289/t yesterday
Tin US$ 19,350/t vs US$19,450/t yesterday
Energy:
Oil US$55.2/bbl vs US$56.2/bbl yesterday
Natural Gas US$2.793/mmbtu vs US$2.789/mmbtu yesterday
Uranium US$24.65/lb vs US$24.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$85.6/t vs US$85.5/t
Chinese steel rebar 25mm US$576.8/t vs US$579.4/t
Thermal coal (1st year forward cif ARA) US$66.6/t vs US$68.4/t yesterday
Premium hard coking coal Aus fob US$162.3/t vs US$161.6/t
Tungsten – APT European prices $197-207/mtu (from the 24Feb/17 week)
Company News
Kodal Minerals* (LON:KOD) 0.28p, Mkt Cap £14m – Trenching defines new >30m wide lithium bearing mineral zones
• Kodal Minerals reports that it has identified a number of new wide pegmatite zones at its lithium prospect in Mali.
• Lithium bearing style mineralisation is seen in wide zones with one of these >30m at surface and in trenching.
• Management planned 14 trenches completing some 862m and are awaiting and targeting four project areas.
• Drilling using a relatively quick and low cost reverse circulation rig is to start shortly to target the Ngoualana prospect where previous drilling shows a 28m intersection grading 1.84% lithium.
• Trenching is targeting:
o Sogola-Baoule, 31m pegmatite vein with rock chip of1.89% Li2O;
o Boumou, pegmatite veins up to 12m wide
o Orchard, parallel pegmatite veins up to 11m wide, surface samples of up to 2.04% Li2O
o Short term we expect to see some interesting lithium grades from the trenching program. These grades could be used to start to map out a near surface resource.
o We would not expect to receive assays back from the RC drill program till next month but visual inspection of the drill chips will give further dimension to the pegmatite veins and a better understanding of their orientation and potential scale.
*SP Angel acts as Financial Advisor and Broker to the company. Robert Wooldridge, a partner at SP Angel is also Chairman of Kodal Minerals.
Solgold* (LON:SOLG) 37.5p, Mkt Cap £537m – Craig Jones nominated by Newcrest as new NED to SolGold
(SolGold holds an 85% interest in ENSA which which holds 100% of Cascabel)
• SolGold which is drilling the giant Cascabel copper, gold discover in Ecuador has accepted the nomination of Craig Jones as a new Non Executive Director to represent Newcrest.
• Conditions relating to the appointment mean that Newcrest’s nominee director is not able to block a takeover and is obliged to follow the direction of the board if an independently recommended change of control transaction is supported by 60% of shareholders, eg in the event of an offer for the company which is not made by Newcrest.
• Craig Jones joined Newcrest in 2008 and has worked as General Manager Projects, General Manager Cadia Valley Operations, Executive General Manager Projects and Asset Management, Executive General Manager Australian and Indonesian Operations, Executive General Manager Australian Operations and Projects, and Executive General Manager Cadia and Morobe Mining Joint Venture. Prior to joining Newcrest Jones worked for Rio Tinto.
• Jones is currently the Executive General Manager Wafi-Golpu (Newcrest / Harmony) which should put him in the right place from a block-caving perspective.
• Newcrest recently put $23m into SolGold fending off a competing offer from BHP for funding for the further drilling and testing of the Cascabel porphyry project.
• Newcrest are specialists in deep-level block caving and are working on the development of the giant Wafi-Golpu project in jv with Harmony Gold which is also a copper, gold porphyry.
• Newcrest also operate:
o Cadia Valley, one of Australia’s largest gold mining operations located in NSW,
o Telfa a large copper, gold mine in Western Australia,
o Lihir, a gold mine in a not-so extinct volcanic crater in PNG
o Bonikro, a gold mine in the Ivory Coast,
o Gosowing a gold and silver producing mine in Indonesia.
• We understand Newcrest is keen to expand its mine portfolio and to potentially develop another giant block-cave for the large scale production of copper-gold ores.