Anglo American (LON:AAL) – De Beers diamond sales reflect seasonal closures in India and Israel
Ferrum Crescent (LON:FCR) – Myles Campion takes up executive director role
Petropavlovsk (LON:POG) – Q3 production update
Rio Tinto (LON:RIO) – Q3 production described as “strong”
Stratex International (LON:STI) – Sale of stake in Goldstone Resources raises cash to continue funding costs relating to Crusader acquisition
Goldstone Resources (LON:GRL) – breaks free as Stratex sells stake
Gold prices came off $6/oz since yesterday with the metal trading sub $1,300/oz level as investors are turn to riskier assets.
• US equities closed at another record high yesterday.
• The US$ index edged higher on the back of a weakness in the euro amid a continuing standoff between Spanish central government and Catalonia authorities over the region’s independence.
• The pound is trading higher (+0.2% at 1.3272) against the US$ as strong UK inflation lifts chances of a rate hike by the BoE.
• Copper is little changed this morning hovering around the $7,100/t mark.
• Oil prices hold onto its previous gains with Brent up 4.5% at $58.1/bbl since the start of the previous week as clashes between Iraqi government forces and Kurds in Kirkuk, one of the nation’s oldest-producing regions, shut production at two deposits.
• Iron ore futures in China fell 2.2% following three days of gains matching the dynamics in the market for steel rebars.
China’s communist party congress starts tomorrow
• The congress which meets every five years will enable President Xi Jinping to consolidate his power as he sets the agenda for the next five year plan.
• China is expected to become more progressive and potentially aggressive as it continues to push its One Belt and One Road strategy and to exert greater political influence within Asia.
• China under Xi no longer follows the philosophy of ‘hide your strengths, bide your time’ according to a former diplomat who served in India.
• We suspect to see new directives leading to the advancement clean air policies and the promotion of electric vehicles etc… to further modernise Chinese transportation.
UK peerages to be cut to 15 years
• The number of peerages has swelled to around 800 and could rise to >1,000 if the upper house continues with its current pace of growth.
• A new plan to reduce the number of peers could see the once-life position cut to 15 years in an effort to limit the number of sitting peers.
• According to the BBC the UK House of Lords is second only in number to the Chinese communist party
Gold and other rare elements formed as astronomers confirm creation of gold, platinum, silver and other heavy metals
• The detection and measurement of gravity waves as predicted by Einstein are leading to further revelations in materials science.
• The collision of stars in a kilonova which is 1,000x more powerful than a supernova is thought to be the source of heavy elements like gold and platinum.
• Collision of stars observed created as much gold as the mass of Earth
• The only problem for the next generation of astro-prospectors is the metal is around 130m light years away. Not necessarily a problem for some.
Dow Jones Industrials +0.37% at 22,957
Nikkei 225 +0.38% at 21,336
HK Hang Seng +0.02% at 28,697
Shanghai Composite -0.19% at 3,372
FTSE 350 Mining +0.18% at 17,993
AIM Basic Resources +0.28% at 2,583
Economics
UK – Inflation hit the highest level in more than five years in September on the back of higher cost of food and transport.
• Accelerating inflation put more pressure on the BoE to consider tightening the monetary policy when governors meet on November 2.
• Core inflation held at 2.7% last month, the highest rate since December 2011.
• Manufacturing input prices showed a significant 8.4%yoy increase in September underscoring the effect of the weak pound and increased costs of imported goods.
• Wages numbers are due tomorrow with estimates for labour earnings to have climbed 2.1%yoy in three months to August.
• CPI (%mom/yoy): 0.3/3.0 v 0.6/2.7 in August and 0.3/3.0 forecast.
• Core CPI (%yoy): 2.7 v 2.7 in August and 2.7 forecast.
Currencies
US$1.1771/eur vs 1.1790/eur yesterday. Yen 112.16/$ vs 111.81/$. SAr 13.324/$ vs 13.319/$. $1.328/gbp vs $1.330/gbp.
0.786/aud vs 0.788/aud. CNY 6.615/$ vs 6.590/$.
Commodity News
Precious metals:
Gold US$1,290/oz vs US$1,304/oz yesterday
Gold ETFs 69.3moz vs US$69.2moz yesterday
Platinum US$932/oz vs US$945/oz yesterday
Palladium US$987/oz vs US$1,006/oz yesterday
Silver US$17.14/oz vs US$17.41/oz yesterday
Base metals:
Copper US$ 7,091/t vs US$7,065/t yesterday - Investors pile into Peru’s $2billion Michiquillay copper project
• More than 20 companies hoping to grab one of Peru’s sizable copper assets as country auctions off rights to develop it
• Projected to process close to 80,000 tonnes of copper in one day, mineral resources estimated at 1.1 billion tonnes of copper with an average grade of 0.629% as well as gold and silver
Aluminium US$ 2,142/t vs US$2,153/t yesterday
Nickel US$ 11,730/t vs US$11,750/t yesterday - Nickel boosted by Chinese steel producers
• Three-month nickel price boosted by the ongoing curb in Chinese output and strong demand from steel producers
• Growing optimism ahead of the upcoming 13th Five-Year Plan meeting at the 19th Party Congress in Beijing has also played major role in the higher prices
• Demand thought to continue to increase due to use in lithium ion batteries
Zinc US$ 3,136/t vs US$3,275/t yesterday
Lead US$ 2,523/t vs US$2,571/t yesterday
Tin US$ 20,650/t vs US$20,750/t yesterday
Energy:
Oil US$58.1/bbl vs US$57.9/bbl yesterday
Natural Gas US$2.998/mmbtu vs US$2.969/mmbtu yesterday
Uranium US$20.30/lb vs US$20.45/lb yesterday
Lithium - MGX Minerals makes major stride with lithium brine processing technology
• Removal of magnesium in brine is one of the major issues in processing of lithium concentrate and one of primary factors in consideration of viability of projects
• Opens up a large number of global lithium brine sources that were previously considered too high in magnesium in areas such as United states, China and Middle East
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$63.0/t vs US$62.9/t
Chinese steel rebar 25mm US$638.8/t vs US$644.4/t
Thermal coal (1st year forward cif ARA) US$85.5/t vs US$84.6/t
Premium hard coking coal Aus fob US$181.5/t vs US$181.6/t
Other:
Tungsten APT European US$280-285/mtu vs US$280-295/mtu
Company News
Anglo American (LON:AAL) 1481 pence, Mkt Cap £19.1bn –De Beers diamond sales reflect seasonal closures in India and Israel
• Anglo American reports that De Beers achieved sales of US$370m for its 8th diamond sale of 2017.
• The sales are approximately 25% lower than the US$507m achieved in the previous sales cycle and for the equivalent sales last year.
• The company comments that the sales were “in line with expectations, at what is a seasonally slower time for rough diamond demand” as De Beers “offered fewer rough diamonds for sale in Cycle 8, reflecting the concurrent timing this year of the Sight sale with the closure of polishing factories in India and Israel for the observance of religious holidays.”
• We estimate that the latest tranche of diamond sales brings De Beers cumulative sales for the year to date to approximately US$4.4bn, around 6% lower than at the equivalent point last year.
Conclusion: De Beers 2017 diamond sales are running slightly lower than last year with the latest sales reflecting specific constraining influences arising from religious holidays in India and Israel.
Ferrum Crescent (LON:FCR) 0.06 pence, Mkt Cap £1.5m – Myles Campion takes up executive director role
• Myles Campion a former mining analyst and fund manager at Oceanic Asset Management in Australia has taken up a role as executive director of Ferrum Crescent.
• The company has subsequently issued a second press release today relating to a revised exploration strategy at its Toral lead-zinc exploration project
• The group is also cutting its fixed costs while looking to produce a maiden JORC resource by the year end for the Toral project in Spain.
Petropavlovsk (LON:POG) 8.0p, Mkt Cap £261m – Q3 production update
• Production amounted to 104.0koz (Q2/17: 114.3koz; Q3/16: 102.5koz) taking the total to 336.4koz (YTD16: 298.1koz).
• Pioneer contributed 35.4koz (Q2/17: 47.9koz; Q3/16: 34.3koz) with gold from circuit partly compensating for a drop in processed grades (0.59g/t v 0.78g/t in Q2/17 at the RIP plant) and lower gold recoveries in the transitional material mined from one of the pits (74.3% v 82.4% in Q2/17).
• Pokrovka produced 8.6koz (Q2/17: 8.4koz; Q3/16: 10.6koz) with the RIP plant expected to suspend operations at the end of the year ahead of the integration of processing facilities in the POX hub.
• Malomir output was 15.1koz (Q2/17: 12.3koz; Q3/16: 15.2koz), up on the previous quarter amid better processed grades.
• Albyn output was 44.9koz (Q2/17: 45.7koz; Q3/16: 42.4koz).
• The management reiterated annual production guidance at 420-460koz.
• Underground development works at Pioneer and Malomir were focused on the preparation of stopes for mining in the final quarter of the year.
• At Pioneer 966m of underground development was completed in Q3 with 17.3kt at 1.9g/t of development ore mined.
• At Malomir, 1,151m of underground development was completed during the quarter with 15.2kt at 7.4g/t of development ore mined.
• Malomir flotation plant is on course for commissioning this quarter ahead of the start of refractory gold concentrate in Q1/18.
• POX oxygen plant is targeted for commissioning in Q2/18.
Rio Tinto (LON:RIO) – 3721p, Mkt Cap £68.3bn – Q3 production described as “strong”
• Rio Tinto described its 3rd quarter production results as “strong”, with the business benefitting from the impact of productivity improvements including the automation of the iron ore rail system in the Pilbara region of Western Australia where the company reports that “More than 50% of all train kilometres are now completed in autonomous mode with drivers on board for supervision.”
• Iron ore production during the quarter of 85mt brings the total for the year to date to 241.9mt, in line with 2016. Iron ore shipments during the quarter of 85.8mt were 6% above the level achieved in Q3 2016 which were adversely impacted by shiploader maintenance.
• The new Silvergrass iron ore mine was officially opened in August and remains on track to ramp up production capacity in 2018. Overall, Rio Tinto maintains its 2017 iron ore production guidance at 330mt in line with the downward revision from 330-340mt reported with the Q2 results in July.
• Mined copper production of 120,600 tonnes brought the year to date total to 329,500 tonnes and has caused Rio Tinto to reduce its copper production guidance for 2017 to 460-480,000 tonnes from the previously indicated 500-550,000 tonnes. The downward revision reflects “the impact of the delayed ramp-up of the Los Colorados Extension project at Escondida and the impact of mine sequencing changes at Rio Tinto Kennecott”.
• The company’s guidance for refined copper production however remains unchanged at 185-225,000 tonnes though the company caveats this guidance “subject to the impact of the investigation at the Rio Tinto Kennecott smelter” where a fatality was reported in early October.
• Mined copper production at Kennecott declined by 29% compared to Q3 2016 as the mining moved into a lower grade area. Copper production at Escondida recovered by 21% compared to the previous quarter to 82,500 tonnes following the resolution of the labour disputes.
• Copper output at Oyu Tolgoi at 12,400 tonnes for the quarter “was, as anticipated significantly lower than the same period in 2016 due to lower head grades and the drawdown of stockpiles. This is despite the operation achieving a a 16 per cent increase in mill throughput compared to the third quarter of 2016.”
• Rio Tinto comments on the developing situation at Freeport’s Grasberg mine in Indonesia where “Rio Tinto is entitled to the cash flow associated with 40% of material mined above an agreed threshold as a consequence of expansions and developments of the Grasberg facilities since 1998” and where new Government regulations impact the export of concentrates. Although “Discussions are continuing between Freeport and the Indonesian government to reach a mutually satisfactory longer-term agreement. … Rio Tinto is reporting its metal share for the third quarter as zero.”
• Bauxite production for both Q3 and the year to date rose by 4% to 12,867kt and 37,034kt respectively while alumina and bauxite production, on a year to date basis declined by 1% to 6.05mt and 2.66mt respectively.
• The company is revising its 2017 bauxite production guidance to between 50-51mt from the previously indicated 48-50mt while guidance of 8-8.2mt of alumina and 3.5-3.7mt of aluminium both remain unchanged.
• Improved quarterly diamond production at both Argyle (up 36% compared to Q3 2016 at 4.76m carats) and Diavik (up 27% compared to Q3 2016 at 1.18m carats) have prompted a revision in 2017 diamond production guidance to 19-22m carats from the earlier indication of 19-24m carats.
• Following the sale of Coal and Allied to Yancoal for $2.69bn, Rio Tinto has revised its production guidance to 13-14m tonnes of thermal coal from 17-18mt. Guidance for coking coal production remains unchanged at 7.2-7.8mt.
• Exploration expenditure during the first 9 months of 2017 amounted to US$297m (2016 US$379m). The company comments that “The bulk of the exploration expenditure this quarter was focussed on copper targets in Australia, Chile, Kazakhstan, Mongolia, Papua New Guinea, Peru, Serbia United States and Zambia”.
• Referring to its focus on cash generation, the company highlights that “We have announced over $8bn of cash returns in 2017.”
Conclusion: Rio Tinto reports a strong production quarter; downward revision to copper production guidance reflects operational issues at Kennecott and Escondida. Iron ore operations appear to be performing well and should improve further in 2018 as the new Silvergrass mine ramps up output. We note that Rio Tinto’s exploration focus appears firmly targeted at the discovery of new copper deposits.
Stratex International (LON:STI) 1.25p, Mkt cap £5.8m – Sale of stake in Goldstone Resources raises cash to continue funding costs relating to Crusader acquisition
Goldstone Resources (LON:GRL) 1.9p, mkt cap £4.7m – breaks free as Stratex sells stake
• Stratex is selling its 13.7% stake in Goldstone Resources at 1.6p/s for £0.55m.
• Emma Priestly, ceo at Goldstone has as a result resigned as a non-executive director of Stratex.
• Bill Trew who became non-executive chairman at Goldstone on 2 October recently bought 2m Goldstone shares from Emma Priestly. Trew is also on the board of construction company MAED Group.
• Goldstone recently issued new-fee shares to three directors in respect of fees and salary in order to preserve cash and to convert salaries and fees through the end September.
• Goldstone raised £1.5m through the issuance of 100m new shares at 1.5p/s representing 31.8% discount and 40.17% of the enlarged share capital on 27th September.
• BCM, a drilling and mining services company, took half the subscription representing 20.08% of the company.
Conclusion: Stratex’s loans into Crusader and future funding commitments, if the Crusader acquisition is not voted down at the General Meeting on 1st november, is likely to lead to further dilution for shareholders. Goldstone is now free to better pursue its ambitions to advance the Homase-Akrokerri gold project in Ghana. The Homase-Akrokerri structure is close to and potentially connected to the main Obuasi Gold mine shear. Rumour has it that the giant Obuasi gold mine may reopen once again if issues relating to illegal miners are resolved.
The Stratex General Meeting will be held at the offices Grant Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU at 9.30 a.m. on 1 November 2017.
Latest time and date for receipt of Forms of Proxy for the General Meeting is 9.30 a.m. on 30 October 2017