Commodities
Diamonds and precious stones
To be honest, it has gone all a bit quiet this week, with the only news being a confirmation from Rapaport that polished prices have again weakened. Some price providers are claiming 32 straight months of declines for polished prices, admittedly publishing a single price for all categories is too simplistic, but the fact that no one fell out of bed at the claim says a lot about the state of the polished market both from a capacity and demand perspective.
The latest Rapi price list for July does back up the recent commentary from various producers that the market for smaller and larger goods has recovered somewhat, but unfortunately at the expense of 0.5ct and 1ct goods, often more associated with the US consumer.
Oh yes, remember the Marange Diamond fields – one of the more shameful events in Zimbabwean history, on more than one occasion. Well, the State Owned Zimbabwean Consolidated Diamond Company has just been ordered to stop mining for operating without an Environmental licence. Oh the irony.
Finally, our hopes and prayers are with the team at Mir.
Precious metals
The World Gold Council this week provided us with an update of gold demand trends in Q2 that declined 10% year on year to 953.4t. Even worse, H1 2017 vs. H1 2016 fell 14% to 2003.8t. As has been the trend recently, Total coin and bar demand grew, as did demand from India and China whist the major lag was demand from the US and also gold backed ETF’s – None of it is exactly a surprise, but I will probably use the date to pad out our next quarterly gold note anyway.
Other than that, all eyes on the US this afternoon. Strong data and the odds of rise next month could shorten significantly, which would be particularly negative for gold in the short term, until Mr Trump kicks off another twitter-tirade anyway.
Company announcements/news/meetings:
Daily company commentary is now covered in our Boom Ore Bust publication (sent by the erstwhile Jamie Campbell, so add him to your contact lists). I will reiterate some of interesting updates or comments that I feel may have been missed/underappreciated.
Naturally, if you wish to discuss any of these names in more detail, do get in touch.
Companies covered this week: AAU, LOM, APF, AAL, FRES, GAL, AMC, PREM, KDL, CEY, GFM, RRS, BOD.
Ariana Resources – Quarterly operational update (LON:AAU, Mkt cap: $18m) – Positive
Company has issued an update for Q2, following commencement of production at Kiziltepe during the period with 1,929oz Au and 14,519oz Ag in Q2, but more importantly as ramp up continues, July saw production increase to 1,370/oz Au and 6,780oz Ag with all recoveries significantly ahead of expectations with the operation transitioning in to commercial production in the month with all debt requirements being satisfied as scheduled.
Importantly the current operational statistics read well. Grades are well ahead, Au at 4g/t and Ag at 40g/t – more than double our initial expectations. Throughput tonnages are ahead of plan at 17ktpm and set to rise further. Plant operating to design and availability is ahead of expectations. Recovery rates of 94% for Au and 79% for Ag – vs. feasibility expectations of 86% and 64% read well. Expected FY production to be between 10,100 and 11,900ozs for Au and 103,500 and 106,500ozs for Ag – all significantly higher than we expected.
Anglo American – De Beers Sales Cycle 6 (LON:AAL, Mkt cap: $16.01bn) – Neutral
The provisional sales value for the 6th site of 2017 is $572m, up from $541m in the 5th sale. Commentary refers to consistently good demand for the De Beers product however with Diwali being earlier than normal in 2017, Indian demand may have been brought forward and may have an impact on the 7th site as a result.
Centamin – Model Updated, remains a Buy on valuation (LON:CEY, Mkt cap: $2.5bn) – Positive
We have undertaken a review of our estimates for Centamin following the company's H1 FY2017 results. In this note we have adjusted our forecasts and provided a valuation matrix for investors to consider their own appropriate valuation. We conclude that Centamin remains good value and that further capital distributions are a key attraction supporting our Buy recommendation and 180p target price Note published
Griffin Mining – Profitable, cash generative and still cheap (LON:GFM, Mkt cap: $150m) – Positive
Griffin Mining's interim results, as noted in the company's trading statement, confirmed the very strong performance in H1 FY2017. Profitable, cash generative and with a balance sheet that is rapidly reducing debt, Griffin should be go-to small cap mining company for investors seeking zinc exposure. Note published
Randgold Resources – Better than expected (LON:RRS, Mkt cap: $8.7bn) – Positive
Loulo-Gounkoto: 194.1koz @ $458/oz PG: 165.4koz @ cash costs of $540/oz
Tongon: 77.3koz @ 639/oz PG:78.2koz @ cash costs of $618/oz
Kibali: 63.5koz @ 859/oz PG:64.1koz @ cash costs of $659/oz
Morila: 8.3koz @ 927/oz PG: 5.4koz @ cash costs of $1,063/oz
Q2 Revenue: $422.1m PG:$392m
Group EBITDA: $229m PG:$193m
PBT: $150.1 PG:$118m
EPS: 0.88c PG: 0.77c
Clearly Randgold have had a strong quarter, again driven by the Loulo-Gounkoto complex. Elsewhere in the portfolio things are more or less as expected. As with Centamin, the strong cash generation during the period, bringing net cash balances up to $572.8 million is cause for cheers. Just what they do with that cash is a reasonable question to ask given the recent M&A talk and the confirmed need for new projects.
That's enough from me today
Stay strong
Kieron