Alexander Mining (LON:AXM) – Vanadium research and development project
BHP Billiton (LON:BLT) – US bond tenders
Eramet - 2020 Start for Eramet Argentina Lithium
Stratex International (LON:STI) – Request for a General Meeting
Petra Diamonds (LON:PDL) – Tanzania orders review of Petra’s diamond exports
Tethyan Resources* (LON:TETH) – Proposed delisting
Dow Jones Industrials -0.10% at 21,785
Nikkei 225 -0.63% at 19,275
HK Hang Seng +0.53% at 27,668
Shanghai Composite -0.01% at 3,365
FTSE 350 Mining -0.63% at 17,829
AIM Basic Resources +0.04% at 2,606
Economics
The US$ index weakened to a new 33 month low and the euro continued to strengthen following the ECB meeting on Thursday.
• Gold prices are trading at the highest level in a yea on the back of continued escalated rhetoric between the US and North Korea.
• Pyongyang may see another missile test this weekend amid the “founding day” celebrations on September 9.
• Copper is on course for the first weekly drop ending an eight-week bull run with the latest Chinese trade showing a slowdown in exports growth for a second month in August.
• Iron ore futures are heading for the biggest decline since May with the latest data on ore imports showing year to date shipments slowed posting a 6.6% increase (Jan-Aug) v 7.5% recorded in the Jan-Jul period.
• Oil is higher this morning and is looking to post the first weekly increase since July as Gulf Coast refiners ramp up crude processing operations following Hurricane Harvey disruptions.
Economies
US – Weekly jobless claims jumped the most since 2012 affected by Hurricane Harvey.
Date Event Survey Actual Prior Revised
Tuesday Factory Orders Jul -3.3% -3.3% 3.0% 3.2%
Factory Orders Ex Trans Jul -- 0.5% -0.2% 0.1%
Wednesday ISM Non-Manf. Composite Aug 55.5 55.3 53.9 --
U.S. Federal Reserve Releases Beige Book
Thursday Initial Jobless Claims Sep-02 242k 298k 236k --
Continuing Claims Aug-26 1945k 1940k 1942k --
Source: Bloomberg
China – Exports came in lower than forecast slowing for a second month in August amid strengthening yuan; imports performed well implying robust domestic demand.
• Nevertheless, exports are reported to be performing better posting growth after contracting in much of 2015 and 2016.
• Exports (%yoy US$): 5.5 v 7.2 in July and 6.0m forecast.
• Imports (%yoy US$): 13.3 v 11.0 in July and 10.0 forecast.
ECB – The ECB kept rates unchanged saying economic growth is recovering although underlying inflation fails to pick up significantly.
• The bank said that it will announce plans to end its €2tn economic stimulus programme in October with the council said to have had “very, very preliminary discussion” about how to phase out the QE.
• On a pro stimulus side of things, Mario Draghi mentioned stronger euro which might slow down inflation over the next two years.
• Hence, the bank revised its inflation forecasts slightly lower for the 2018-19 period to 1.2% and 1.5%, respectively, down 0.1% from June estimates.
• GDP growth estimates were left unchanged at 1.8% and 1.7%.
• The euro climbed more than 1% against the US$ at some point following the press conference and is currently trading at the highest level since early 2015.
UK – “No sign on the horizon of a return to healthier level of growth,” the British Chambers of Commerce said in its quarterly report regarding economic outlook in the UK.
• “The rising upfront cost of doing business in the UK, the uncertainty around Brexit, and the constraints created by skills gaps and shoddy infrastructure collectively outweigh any benefit arising from the recent depreciation of sterling.”
• The BCC marginally revised its 2017 GDP estimates upwards to 1.6%% (+0.1pp on previous estimates) on the back of stronger consumer spending in H1/17 but cut its 2018-19 estimates to 1.2% (-0.1pp) and 1.4% (-0.1pp).
• The BCC expected exports to contribute less to growth than many other forecasters suggest in their medium term outlooks.
France – Industrial production continued to strengthen in July hitting the highest level since Nov/15.
• Industrial Production (%yoy): 3.7 v 2.4 (revised from 2.6) in June and 3.6 forecast.
Mexico – Tsunami warning has been issued across most of Central America following an earthquake registered 70 miles off the southwestern coast of Mexico today.
• The earthquake recorded magnitude 8.2 with tremors felt in Mexico City which was more than 500 miles away from the quake’s epicentre.
Tanzania – President John Magufuli ordered a review of the Petra Diamonds’ Williamson operation.
• Magufuli ordered local authorities to investigate allegations of under-declared diamond exports, Mining Weekly reports.
Currencies
US$1.2047/eur vs 1.1966/eur yesterday. Yen 107.64/$ vs 108.97/$. SAr 12.821/$ vs 12.823/$. $1.314/gbp vs $1.306/gbp.
0.809/aud vs 0.801/aud. CNY 6.466/$ vs 6.501/$.
Commodity News
Precious metals:
Gold US$1,354/oz vs US$1,338/oz yesterday - Gold prices could soon hit $1,400 but downside risks remain
• Downside risks remain if dollar rebounds gold prices will fall
Gold ETFs 68.5moz vs US$68.5moz yesterday
Platinum US$1,019/oz vs US$1,006/oz yesterday
Palladium US$956/oz vs US$946/oz yesterday - New Way to convert methane to methanol using gold-palladium nanoparticles
• Liquid methanol is widely used as feedstock for other chemicals and has considerable potential as an alternative fuel source
• Researchers discovered gold-palladium nanoparticles can directly oxidise methane to methanol under relatively mild conditions
Silver US$18.18/oz vs US$17.88/oz yesterday
Base metals:
Copper US$ 6,807/t vs US$6,870/t yesterday - Copper rise to three year high before slipping back 1.5%
• Copper hit a fresh three year high yesterday thanks to encouraging economic numbers out of China
• Prices on London Metal Exchange hit three year high on Tuesday clocking $6,970 a tonne
Aluminium US$ 2,094/t vs US$2,097/t yesterday
Nickel US$ 11,940/t vs US$12,135/t yesterday - Cuba shuts down nickel industry as Hurricane Irma approaches
• Cuba has begun to shut down its nickel industry in preparation for Hurricane Irma, one of two plants was closed and the other was operating at minimum capacity and is set close as conditions warrant. The industry is located near flood prone coast
Zinc US$ 3,090/t vs US$3,089/t yesterday – Chinese production dropped 8.7%yoy to 372kt in August, according to Beijing-based Antaike and its survey of 47 local smelters with total capacity of 6.1mtpa.
• Weaker production was driven by seasonal maintenance, environmental checks and limited ore supply.
• Output in September is expected to remain constrained at 370-380kt on the back of ore shortage.
Lead US$ 2,309/t vs US$2,338/t yesterday
Tin US$ 20,750/t vs US$20,730/t yesterday
Energy:
Oil US$54.7/bbl vs US$54.6/bbl yesterday
Natural Gas US$2.971/mmbtu vs US$3.023/mmbtu yesterday
Uranium US$20.90/lb vs US$20.65/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$73.2/t vs US$74.6/t
Chinese steel rebar 25mm US$674.2/t vs US$671.8/t
Thermal coal (1st year forward cif ARA) US$80.5/t vs US$80.0/t
Premium hard coking coal Aus fob US$210.0/t vs US$210.0/t
Other:
Tungsten APT European US$285-300/mtu vs US$269-275/mtu
Lithium - 2020 Start for Eramet Argentina Lithium
• Eramet, the French government metal alloys group is to start construction of a new 20,000tpa lithium carbonate project in Argentina
• The project is to use a direct extraction process, eg no evaporation ponds.
Company News
Alexander Mining (LON:AXM) 0.13 pence, Mkt Cap £1.9m – Vanadium research and development project
• Alexander Mining have announced they intend to run a research and development project for potential vanadium leaching technology.
• It’s interesting that the rise in vanadium prices has caught the attention of the team at Alexander Mining.
Conclusion: So far the company’s greatest achievement has been the leaching of shareholder value and we suspect this latest project will result in the further leaching of shareholder funds.
BHP Billiton (LON:BLT) 1,444.p, Mkt Cap £84.5bn – US bond tenders
• BHP Billiton has announced that following its previously announced plan to spend up to US$1bn in aggregate to repurchase a portion of its debt it has received tenders for a total of US$1.25bn.
• Tenders comprise US$72.2m for the 3.25% 2021 Notes, US$416.1m for the2.875% 2022 Notes and US$765.6m for the 3.85% 2023 Notes.
• We estimate that at 30th June 2017, the Company had net debt of approximately US$16.3bn having reduced the figure from around US$26.1bn a year earlier.
• Among the FTSE 100 mining companies, BHP Billiton with gearing (net debt: capital employed) of around 21% sits at around the average gearing of 23%. To put this into context, Glencore is the most geared, at 39% (US$28bn), while Randgold Resources holds net cash of approximately US$0.6bn.
Eramet - 2020 Start for Eramet Argentina Lithium
• Eramet, the French government metal alloys group is to start construction of a new 20,000tpa lithium carbonate project in Argentina
• The project is to use a direct extraction process, eg no evaporation ponds.
Stratex International (STI LN) 1.15p, Mkt cap £5.4m – Request for a General Meeting
• Stratex International reports that a group of shareholders has requested a General Meeting to consider the termination of the proposed all-share acquisition of Crusader Resources and “to make certain changes to the board”.
• The company “is advised that the request is currently invalid” and advises shareholders to “take no action” although it indicates that it will make an “announcement in due course.”
• The Crusader acquisition represents a significant change in direction from the company’s roots in exploration in Turkey and Africa, which led amongst other achievements, to mine construction of the Altintepe gold mine, into Brazil where the new management of Stratex is looking to ally itself with Crusader to develop the Borborema and Juruena gold projects.
• Yesterday, Stratex announced that its due-diligence review had identified potential to optimise the development plan at Borborema which had the potential to reduce capex by around $20m to below $100m and also that Crusader had received an initial payment of approximately US$0.32m for the conditional sale of its Posse iron ore mine.
Conclusion: It appears that some shareholders disagree with the new course mapped out for Stratex, and we have previously noted that the acquisition price of Crusader Resources, which would leave existing Stratex shareholders with around 19% of the enlarged company, appears relatively full. We await developments but would observe in general that disputes of this nature, if they are not resolved quickly and amicably, often result in the erosion of shareholder value.
Petra Diamonds (LON:PDL) 90.2p, mkt cap £480m – Tanzania orders review of Petra’s diamond exports
• The President of Tanzania, John Magufuli, has ordered a review of Petra Diamonds and its diamond exports
• The President has also asked a number of senior public officials to resign over allegations of corruption in the mining sector.
• Petra holds a 75% stake in the Williamson diamond mine with 35% held by the Tanzanian government
• The President has ordered law enforcement agencies to investigate allegations of under-declared diamond exports as he has done with Acacia’s gold exports.
• The President’s move with Acacia was then followed by further demands for compensation payments or for a large stake in the company to be given to the government.
• New laws have increased local taxes and renegotiate contracts to enable the state to own up to 50% of mining companies.
• The government has also barred the export of gold and copper concentrates and mineral sands.
Conclusion: Petra has always appeared a respectable and honourable company. The government risks denigrating the value of it’s stake in the Williamson mine through its actions.
Tethyan Resources* (LON:TETH) 2.4p, Mkt £4m – Proposed delisting
• Tethyan Resources has announced today its proposed delisting from the London market.
• The delisting will occur subject to shareholder approval from 75% of investors who bother to vote in accordance with AIM rule 41.
• The company listed on the TSX Venture exchange market on Wednesday.
• Southern Arc Minerals currently controls 29.91% of Tethyan Resources. A recent presentation by Southern Arc Minerals describes the TSX-V listing filing as for better access to the North American mining market.
*SP Angel act as broker to Tethyan Resources