Commodities
Diamonds and precious stones
Well, well, well, who woke up the sector?
A bit of action for investors to get their teeth into as some long awaited M&A chatter emerges with Dominion being the recipient of an unsolicited bid approach as well as De Beers taking ownership of the 50% of the retail operations it didn’t own from LVMH. There is some other chatter as well knocking about, but for today let’s just stick to what has been announced. “Boo” I hear you say!
Oh the fun and games from the >709ct diamond recovered in Sierra Leone is already starting.
https://globaltimes-sl.com/kassim-basma-to-buy-biggest-kono-diamond/ Credit Mr Smithson for sending over – I can’t say I am a regular reader to be honest.
Did you hear? The pink star (once the most expensive diamond in the world, well before the guy with the twitch realised he didn’t have $83m behind the sofa) is set to be auctioned again in April. Held in inventory at $72 million, it is fair to say that expectations of exceeding the current record for a pink diamond of $46.2 million, are high although I am not sure I can get the time off to bid for it, shame.
Precious metals
Not a bad week for the precious metals complex with bullion briefly ticking over the psychological $1,250/oz mark as the last of the March contracts expired, with quite a bit of volume in the options around that level.
Elsewhere palladium is increasingly looking like it wants to attain parity with platinum with the ratio down to 1.2, typically been around 1.5-2.0x.
The other interesting move was that of Sh.. phew, almost mispronounced that… Bitcoin as it now trades below £1,000 a thingydodah. Hmm could it really be down to Chinese regulators considering a rule that requires Bitcoin exchanges (>95% of all trades take place in/from China) to comply with current banking and money laundering regulations.
But wait, the digital news continues.
Digital gold? Never, I hear you cry. Well indeed, the digitisation of gold, or Microgold as the young’uns are calling it, is taking off as a means for the tech savvy to gain access to the yellow metal in China. Don’t believe me?
Cash for err… Microgold.
Here you are, and no, that is not a screen print of a gambling app. According to Tencent and ICBC, who are behind the digital Microgold packets, as they claim it will enable users to gift virtual bullion over a messaging app to their preferred recipient who then stores it in their own virtual vault. The price of the gold packet is then linked to the gold price and can be sold, exchanged or gifted on again however the user sees fit.
Apparently, during the last Lunar New Year period, WeChat users sent 70,000 Microgold packets worth just under 100 million Yuan ($14.51 million) across the platform and ICBC now expects over 300,000 new gold accounts to be opened as a result of the Tencent tie-up.
This could take re-gifting to a new level
Company announcements/news/meetings:
Acacia Mining (LON:ACA) (Moved to Under Review): Toss a coin time
After the announcement that the merger with Endeavour is now off, Acacia today provided an update on the implications arising from the Tanzanian Government's ban of copper/gold concentrate exports by confirming an average daily loss of revenue at Buly and Buzwagi of more than $1 million per day. Acacia retain sufficient capacity on site to continue production beyond the end of April, but the company has confirmed an assessment of this situation will take place before this point. Given the uncertainty from this directive and the inevitable impact on our forecasts, we place Acacia under review until clarity can be provided
I am genuinely worried about the fallout from this concentrate ban more than the failed merger to be honest and I cannot see Acacia coming out the other side of this unscathed. To be fair I don’t think the doomsday scenario will occur (Buly and Buzwagi closing), but the ultimate resolution will probably contain a commitment to the government for a smelter or an additional processing step to be implemented at each of the operations, as well as a possible change in the company’s advantageous taxation arrangements or a bit of both.
If sitting on a healthy profit from last year and some from 2017, yes stock is still up 22% in 2017, I would be thinking of banking a bit and waiting for some certainty to the investment case.
Ariana Resources* (LON:AAU) (Buy): Boom, production baby!
Ariana has today announced a successful start to gold and silver production at the Kiziltepe Mine as well as the conclusion to site inspections and receipt of the outstanding Operations Permit. We anticipate throughput rates and production levels will build significantly through Q2 2017 and the rest of the year. As previously noted, first production, in our view, provides a realistic catalyst for the market to reappraise Ariana as a production growth story. We thereby reiterate our Buy recommendation and 3.02p target price.
Ariana really can be one of those nice little names that just tick along, quietly adding throughput to a low cost production base through a very prospective exploration base. Conceptually, these guys have 100koz GE as a realistic production target over the longer term so keeping these on your watch list may not be the worst thing to do today.
Lucapa Diamond Co * (ASX:LOM) (Buy): Mothae JORC compliant resource published.
As promised by the company, Lucapa has today announced a maiden JORC resource estimate for the Mothae Kimberlite Diamond Project.
Highlights to the statement are as follows:
• JORC classified Indicated and Inferred Diamond Resource of 1.04 million carats at an average grade of 2.7cpht.
• Known recoveries of high-value Type IIa diamonds at Mothae contribute to an average modelled JORC diamond value of US$1,063/ct
• Potential for higher average US$ diamond prices highlighted, based on large diamond recoveries
• Mothae kimberlite pipe modelled to 500m depth – JORC resource calculated for first 300m only
Polymetal* (LON:POLY) (Buy): Nezhda partner sells stake to former CEO of Highland Gold
Just a quick comment on the announcement from Polyus Gold that it had sold its 82% stake in the Nezhda project to Mr Kulakov for $158 million. Polyus’ sale was not a major surprise given there has been some pressure to relinquish some of its projects from the government. It is important to note that this will not change the investment criteria for POLY, other than they now have until July 2017 (was April) to make an investment decision and increase their holding to 50% plus operatorship in what is one of the largest undeveloped resources in Russia.
It is also worth noting that Mr Kulakov has worked with POLY before, as the original partner to the company’s Mayskoye project.