Bushveld Minerals (LON:BMN) – Vametco assets acquisition completed
Gem Diamonds (LON:GEMD) – Recovery of a 114 carat diamond at Letseng
Golden Star Resources (TSE:GSC) – Progress report on Prestea, Mampon and Wassa
US air strikes against Syria dampen the risk sentiment with safe haven assets such as gold and the yen up this morning; US non-farm payrolls data is due later today.
• Gold prices came in close to $1,270 in early hours of trading and are currently trade around $1,265/oz (+$12/oz) on the news of Syrian conflict escalation.
• Base metals are off across the board with copper prices down 0.75% today.
• Coking coal prices were seen climbing another 13% on Thursday on cyclone related disruptions in eastern Australia with BHP, Peabody Energy and Glencore declaring force majeure on their shipments.
• Spot prices hit $211.3/t yesterday marking the highest level in three months, according to the Steel Index.
• Iron ore futures were off as much as 7.8% today hitting the lowest level since Nov/17 following steel prices lower which in turn posted a 4.3% drop on the SHFE.
• The Department of Industry, Innovation and Science in Australia released updated iron ore forecasts guiding for prices to average $65/t in 2017 before falling to $51/t.
• “The supply of high grade iron ore should increase and persistently high rising stocks will eventually place downward pressure on the price,” the Department said.
Dow Jones Industrials +0.07% at 20,663
Nikkei 225 +0.36% at 18,665
HK Hang Seng -0.38% at 24,182
Shanghai Composite +0.17% at 3,287
FTSE 350 Mining -1.30% at 15,700
AIM Basic Resources +0.34% at 2,640
US – The US launched air strikes from its destroyers based in the Mediterranean targeting the Shayrat air base.
• Strikes were designed to “deter further use of chemical weapons”.
• Shayrat is one of the largest air bases in Syria located some 45km east of Homs.
• Commenting on the operation, White House said it believed “with a high degree of confidence” that the chemical attack had been launched from the Shayrat airfield under the command of President Assad.
• Russia condemned strikes calling US actions as an act of aggression and a “violation of international law”.
• Kremlin has already demanded an emergency meeting of the UN Security Council.
UK – The pound is off 0.4% against the US$ as the US currency climbs on safe heaven demand on the news over the Syrian conflict as well poor industrial data in the UK.
• Industrial production numbers underperformed expectations in Feb posting a second consecutive monthly decline (%mom).
• House prices growth stagnated in the three months to Mar climbing only 0.1%qoq marking the slowest pace since H1/16, according to Halifax data.
• The average UK property price is now $220k, up 3.8%yoy.
• “The annual rate of house price growth has more than halved over the past 12 months,” Halifax said.
• “A lengthy period of rapid house price growth has made it increasingly difficult for many to purchase a home as income growth has failed to keep up, which appears to have curbed housing demand.”
• Industrial Production (%mom/yoy): -0.7/+2.8 in Feb v -0.3/+3.3 in Jan and 0.2/3.7 forecast.
• Halifax Property Prices (%mom/yoy): 0.0/3.8 in Mar v 0.0/5.1 in Feb and 0.2/4.0 forecast.
Germany – Better than forecast industrial production and trade balance numbers point to a maintained growth momentum.
• Industrial output expanded 2.2%yoy beating estimates for a small decline after a strong rebound in production recorded in Jan.
• Trade surplus came in strong on solid exports (+3.1%yoy) and imports (%3.7%yoy) data.
• Industrial Production (%mom/yoy): 2.2/2.5 in Feb v 2.2/-0.5 in Jan and -0.2/+0.5 forecast.
France – Contrary to neighbouring Germany, France released a weak set of industrial production and trade numbers in Feb.
• Industrial Production (%mom/yoy): -1.6/0.7 in Feb and -0.2/-0.2 in Jan and 0.5/1.4 forecast.
Greece – Eurozone finance ministers are optimistic that a deal with the Greek government over further fiscal spending may be nearing completion.
• Reforms over pensions’ and other cuts should pave the way for the IMF to join the bailout programme.
Economic News
Currencies
US$1.0636/eur vs 1.0643/eur yesterday. Yen 110.67/$ vs 110.43/$. SAr 13.751/$ vs 13.838/$. $1.246/gbp vs $1.249/gbp.
0.753/aud vs 0.754/aud. CNY 6.898/$ vs 6.900/$.
Commodity News
Precious metals:
Gold US$1,263/oz vs US$1,254/oz yesterday
Gold ETFs 59.1moz vs US$59.0moz yesterday
Platinum US$962/oz vs US$958/oz yesterday
Palladium US$807/oz vs US$807/oz yesterday
Silver US$18.40/oz vs US$18.24/oz yesterday
Base metals:
Copper US$ 5,819/t vs US$5,890/t yesterday
Aluminium US$ 1,952/t vs US$1,959/t yesterday
Nickel US$ 10,010/t vs US$10,305/t yesterday
Zinc US$ 2,710/t vs US$2,794/t yesterday
Lead US$ 2,251/t vs US$2,310/t yesterday
Tin US$ 20,230/t vs US$20,245/t yesterday
Energy:
Oil US$55.6/bbl vs US$54.3/bbl yesterday
Natural Gas US$3.318/mmbtu vs US$3.267/mmbtu yesterday
Uranium US$23.50/lb vs US$23.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$73.0/t vs US$77.4/t
Chinese steel rebar 25mm US$557.2/t vs US$557.1/t
Thermal coal (1st year forward cif ARA) US$67.6/t vs US$67.5/t yesterday
Premium hard coking coal Aus fob US$211.3/t vs US$187.5/t
Other:
Tungsten - APT European prices $208-216/mtu vs $187-198/mtu
Company News
Bushveld Minerals (LON:BMN) 8.6p, £63m Mkt Cap – Vametco assets acquisition completed
• The company completed the $16.5m payment for the 78.8% interest in Strategic Minerals Corporation (SMC) to Evraz Group.
• SMC holds a 75% interest in Vametco Holdings which in turn has 100% in Vametco Alloys, an owner and operator of the high grade vanadium mine and processing facilities.
• The $16.5m consideration is comprised of:
o Exclusivity fee cash payment to Evraz of $1.6m;
o Bridge loan facility from The Barak Fund SPC Ltd of $11.0m;
o Funding facility covered by the Financing and Sales and Marketing Agreement with Wogen Resources Ltd for $3.0m;
o Cash contribution from Bushveld Minerals and its partner Yellow Dragon Holdings Ltd for $0.8m.
o The acquisition represents a transformational deal for Bushveld bringing in a high quality producing asset including an experienced management team.
o The announcement touched on Vametco financial performance through a challenging 2015 with prices averaging $18.6/kg V and touching a multi-year low of $13.1/kg V in Dec.
All-in cash costs came in at $17.3/kg V;
Revenues totalled R629m generating R26k in operating profit;
2015 closing cash balance stood at R47m;
2016 audited financial results “will be announced to the market available”, with the management highlighting improved operating results during the year.
Gem Diamonds (LON:GEMD) 96p, Mkt Cap £133m – Recovery of a 114 carat diamond at Letseng
• Gem Diamonds has reported the recovery of a 114 carat type II diamond from its Letseng diamond mine in Lesotho.
• The mine has a reputation for producing large, high quality stones and the company points out that, since 2006 it has yielded 4 of the 20 largest diamonds ever recovered.
• These include the 123 carat "Star of Lesotho" and the 357 carat Letseng Dynasty diamond which was recovered in July 2015 and subsequently sold for US$19.3m.
• Conclusion: The Letseng mine is continuing to yield large high quality diamonds. We look forward to news of the sale of the most recent of these stones.
Golden Star Resources (TSE:GSC) C$1.2, Mkt Cap C$422m – Progress report on Prestea, Mampon and Wassa
• Ahead of a site visit by analysts, Golden Star Resources has provided an update on progress at its mines in Ghana where “Our transformation into a low cost, high grade, mid-tier producer remains well on track.”
• The company reports that it has started underground development in the high grade West Reef at its Prestea underground mine where it is implementing mechanised underground mining to produce 650tpd of ore from its high grade reserve of 1.1mt averaging 13.93g/t gold (490,000oz of contained gold). Golden Star expects to start ore production during Q2 of this year with “commercial production anticipated to be achieved in mid-2017.”
• At the high grade Mampon open-pit deposit mining is already underway on the 301,000t oxide ore resource which grades 4.64g/t gold. The deposit is only 65km from the Prestea plant and Mampon ore is being blended with oxide ore from the Prestea open-pits. Mining is expected to continue for three months with processing spead over six months. “Due to its high grade nature, Mampon is expected to have a positive impact on Golden Star’s cash flow during 2017.”
• The company has also disclosed that underground mining has started on the high grade “B Shoot” at its Wassa mine within time and budget. Higher volume mining methods are expected to start during Q3 2017 and as a result “this is anticipated to result in stronger production from Wassa Underground in the second half of 2017.”
• The Wassa underground mining operation appears to be performing well with the targeted 1400tpd mining rate being exceeded. Production is planned to ramp up to 2200tpd in 2018 and we speculate that if the current levels of performance are a useful guide then the ramp up may be completed earlier than expected. We look forward to the quarterly results for further details of production rates.
Conclusion: Golden Star is making significant progress in the implementation of its plans to transform its operations to high grade, low cost underground mining. The imminent analyst visit to Ghana is likely to raise the profile of the company amongst investors and we look forward to continuing news and production statistics on the underground developments when the next quarterly is available.