Today's edition features:
• Eurasia Mining (LON:EUA)
• KEFI Minerals (LON:KEFI)
"Eyes now turn to the US's second quarter reporting season. Friday's large batch of macro data, ranging from inflation and retail sales, through to July's Michigan Consumer Sentiment survey, provided reinforcement of the view already portrayed in Janet Yellen's semi-annual Testimony - one of continuing unspectacular growth for the remainder of 2017, while also cementing expectations for just one further rate hike that appears to have been pushed out toward the end of the year. This more dovish outlook allowed the major averages to all end the week notching up reasonable gains, sufficient to see the Dow Jones Industrial and S&P-500 both close at new all-time record highs on Friday. Despite all exceeding consensus expectations, the major financials, including Citigroup, JP Morgan and Wells Fargo, that kicked-off the round of quarterly releases, however, left traders unimpressed; all their shares ended lower, pushing the S&P-500 sector down 0.7% by the close, as weakness in their investment banking divisions was highlighted while pressure for broad portfolio rotation back into financials also reduced. This week it will be the turn of a number of the highly valued tech giants, including Netflix and Microsoft, to present their earnings, with most suggesting strong consensus-beating numbers and outlook statement will be required here also to avoid a spate of profit taking. The yield on policy sensitive 2-year Treasuries continued to decline, falling to a one-month low 1.32%, as the US$ also hit a 10-month low against the international basket to the benefit of both the Yen and the Euro. Oils benefitted from the continuing rise in crude prices last week, having seen Brent rise almost 5% over the week ahead of OPEC's 'special meeting' that has been called for today, presumably to discuss willingness amongst members and allies, like Russia, to extend or enlarge the current agreement to limit production. Momentum was sustained during this morning's Asian session, on reports from China that its own domestic crude production had declined 5.1% from last year leaving the world's largest energy importer increasingly dependent on international supplies, which rose 14% compared with last year to an average 8.5m bbl/day. Chinese equities, however, tumbled during early trading after the National Financial Work Conference signalled on Saturday an intention to tighten banking lending criteria. The Shanghai Composite rallied somewhat during later trading, however, to 1.6% down shortly before the close, while nearly all other regional equity markets took confidence from the US performance to make modest gains, leaving only the S&P/ASX-200 to end fractionally down as its financials mimicked their US counterparts in a spate of profit taking. Continental European equities remained in a positive mood last week, with the STOXX 600 having enjoying its best week in two months having added 0.2% on Friday to take the five day gain to 1.8% . With little apparent headway having been made in Brexit negotiations, however, the Pound remained weak while equity sentiment lagged Eurozone peers, leaving the FTSE-100 just 0.37% up over the same period, despite strength amongst heavily weighted miners (on the South African government's decision to suspend implementation of its mining charter) and Oils, while housebuilders led broader declines amongst industrials and consumer stocks. There is no scheduled macro data due for release today, although the EU provides its June Consumer Price Index. The US offers its NY Empire State Manufacturing Index for July. UK corporates due to release earnings or trading updates include Conviviality (CVR.L), Rio Tinto (RIO.L) and City of London Investment Group (CLIG.L). Over the weekend, former UK Labour Prime Minister, Tony Blair, injected yet more tension into the ongoing Brexit negotiations, by declaring in a considered television interview that the national mood is now swinging back to the 'remain' camp, raising new speculation that Westminster will eventually be forced to go back to the electorate for another Referendum, a circumstance under which Theresa May is unlikely to survive. For this morning, however, European equities are seen simply following the overnight markets upward, with the FTSE-100 expected to rise 25 to 30 points during opening trading."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 Friday's session 0.47% lower at 7,378.39 whilst the FTSE AIM All-Share index was down 0.27% at 954.21. In continental Europe, the CAC-40 finished little changed at 5,235.31 whilst the DAX finished 0.08% lower at 12,631.72.
Wall Street
In New York on Friday night, the Dow Jones rose 0.39% to 21,637.74, the S&P-500 gained 0.47% to 2,459.27 and the Nasdaq gained 0.61% to finish at 6,312.47.
Asia
In Asian markets this morning, the Nikkei 225 had improved 0.09% to 20,118.86, while the Hang Seng firmed 0.58% to 26,542.00.
Oil
In early trade today, WTI crude was ahead 0.32% to $46.69/bbl and Brent was up 0.39% to $49.10/bbl.
The final route of the Manchester and Leeds branches of HS2 will be announced later, including a decision over its path through Sheffield. Contracts worth £6.6bn will also be awarded for work on the first stretch of the new high speed rail line between London and Birmingham. The transport secretary said HS2 would "drive economic growth and productivity in the North and Midlands". But critics say the project will damage the environment and is too expensive. The first trains are not expected to run until 2026. The decision over its route through the North of England has been delayed for several years due to a series of disagreements, the most controversial of which has been which route it should take through Sheffield.
Source: BBC News
Company news
Eurasia Mining (LON:EUA, 0.48p) – Speculative Buy
Eurasia, the platinum and gold exploration company, announced today that it has been granted a Discovery Certificate for its 80% owned Monchetundra project. Monchetundra has global reserves and resources of 1.9Moz palladium equivalent (palladium and platinum) grading 2.0g/t over two open pits. Granting of the Discovery Certificate now gives Eurasia the exclusive right to apply for a mining licence for Monchetundra, which it expects to do so in the near future. Meanwhile, at West Kytlim, alluvial production has commenced from two production units. Eurasia plans to develop Monchetundra using a similar model, finding a suitable operator and selling operating costs for a share in revenues as West Kytlim.
Our View: Monchetundra has been somewhat under the radar while the Company focuses on production from its West Kytlim alluvial project. With the Discovery Certificate now approved Eurasia has the exclusive right to apply for the mining licence required to develop the Monchetundra project. Eurasia already has a signed EPC contract with Sinosteel for US$176m and has been in advanced talks with refineries in Russia, thus the approval of the mining licence would be an important catalyst for Company. The above announcement is another tick required for the development of Monchetundra and we look forward to West Kytlim updates as well as further developments at Monchetundra. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Eurasia Mining plc
KEFI Minerals (LON:KEFI, 4.30p) – Speculative Buy
KEFI has announced it has signed heads of terms for the financing of Tulu Kapi. The financing is in the form of a build own operate transfer (BOOT) contract with an infrastructure specialist called Oryx. The contract is worth $135m repayable over 9 years and with a 30 month grace period. Interest is 8% at $1100/oz and increases as the gold price increases, to a maximum of 16% if the gold price hits $1700/oz. KEFI will require $32m to complete the financing which could come via a number of structures including working capital facility, project level investment and KEFI equity. KEFI is targeting construction to start in 2017 and first gold production in 2019.
Our View: When KEFI took control of Tulu Kapi it had a capex requirement of approaching $300m and a significantly lower reserve grade. KEFI has dramatically reduced the capital requirement, improved the resource model, mining method and consequently the mine plan. Management has also been working on a funding solution for 18 months or so in a challenging funding environment. One of the key considerations is to minimise dilution of existing shareholders and maintain ownership of Tulu Kapi. This funding solution achieves both elements and we expect a positive share price reaction this morning. We have a Speculative Buy recommendation.