(MENAFN- ProactiveInvestors) ( ) – Raising £600000
(LON:BSE ) – Update on takeover of
World Titanium ()
Centamin Resources ( ) – Appointment of CEO
Holdings ( ) – Supplying marble to new development in Chelsea
Papua Mining ( ) – Early stage deep exploration drilling at Tripela prospect PNG
() – Advances in test work on rare earth concentrate
( ) – Approvals Update of Harbour Facilities
Copper producers to take massive hit from Provisional Pricing on sudden price fall
• Copper producers who produce copper concentrate for third party smelting are going to have to hand money back to smelters under most provisional pricing contracts.
• Producers generally get paid around 90% of the value of the contained copper on shipment with the remaining 10% paid three months later after smelting. A price fall of more than 10% means that producers generally have to payback to the smelters. That’s going to feel painful for the larger concentrate producers and Antofagasta
Copper US$5562/t – Traders break copper – as they try to repeat the collapse in oil
• Copper was forced dramatically lower by hedge funds breaking technical support levels. One NY commodity trading hedge fund reckoned the whole market was short and was looking to break the price in the way they broke oil when the support of Saudi Arabia failed. Asian funds are seen as particularly active in this market.
• Copper should not trade on the fundamentals of oil in this market in our view but this won’t stop traders from knocking the price.
• The market has been finely balanced on a supply/demand perspective with lost production in H2 ’14 causing the market to slip into deficit for the year.
• A particular fund in London holds substantial inventory said to amount to potentially half of all inventory in financing deals with significant stock in warehouses conveniently close to China.
• Forecasts are for a surplus this year but Glencore reckons around 1.8mt of new capacity is under threat and may not materialise and this would push the market to deficit. We know Las Bambas which was going to add 150000t this year is now delayed till 2016 so we are losing production before the year has really begun. So maybe the already cut Wood Mackenzie forecast for a 200000t surplus is unlikely to occur If Glencore is half right then the market could recover.
• In 2008 we saw an unusual level of supply-side discipline with production cut very quickly as copper prices fell. We already know of 300000 of cancelled / delayed production with cutting 100000t BHP 150000 and Glencore 50000t. Also the all-in-sustaining capital cost of new production is higher than the market can generally support pushing out the development of new mines and enforcing longer term capital control.
• Demand: China is seen as under wiring in new developments. This is highlighted in the iron ore to copper utilisation ratio which is now said to be at around a third of where it was back in 2004. This suggests to us that China will needs significantly more copper than is generally anticipated to meet consumer expectations in the ongoing urbanisation of the nation though it might take some time to add more wiring to new developments. We should watch for a pick up in sales of extension leads and DIY cables.
• Inventory: We reckon there are only 5 days of official copper inventory in the world and around 9 days of official and unofficial copper inventory in total. These are near historically low levels. Shorting copper is a technical game more than a fundamental investment exercise and traders who may have been supporting prices will be having a tough week. Our view is that while copper is down King copper is definitely not out!
• Quingdao scandal: The scandal in Quingdao caused much liquidation of real metal as financing dried up. The scandal is not yet over but any sense of artificial support in this market is now gone.
• Price forecasts: We forecast copper to average $6500/t for 2015 not a bullish forecast in our view with plenty of scope for upside. Longer term we can see copper returning to its peak of $10240/t in the next five years. The peak was in February 2011.
Copper prices are recovering from a major fall precipitated by traders over the last two days
• Traders and hedge funds brutalised copper pushing the metal to $5350/t yesterday with prices recovering overnight
• Sales out of China London and the US created significant downward momentum as traders sold copper on the back of successful sales in oil
• The positions are seen as generally macro based with the World Bank Global GDP downgrade supporting macro traders negative view on copper
• Traders appear more focussed on slowing demand and may be less aware of the likely deficit developing in copper for the year
• While demand is normally the key to pricing supply side shocks can have significant impact when consumers are forced to come to the open market for their copper
• The copper market saw a deficit due to supply disruption through H2 ’14 with a deficit of 611000t through the first nine months of last year according to ICSG who forecast a 307000t deficit for the full year. We expect supply disruption to now cause the market to move to deficit through 2015.
• CRU forecast copper demand will slow in China to 4% this year down from 5.5% in 2014. This compares with average 10% growth pa between 2002 and 2012. Copper stocks climbed 4.5% this year with stocks moved into official warehouses.
World Bank cut its global growth forecasts for 2015 (+3.0% from +3.4% expected in Jun) on a growing disparity in economic outlooks for the US Europe and China.
• Global growth to accelerate to +3.3% in 2016 versus +3.5% estimated previously.
• The agency is optimistic over growth prospects in the US and is referring to the economy as a “single train” leading the world expansion.
• The Bank noted risks to growth have risen recently led by a spike in financial volatility higher geopolitical tensions and stagnation in the euro region and Japan.
• US growth forecasts have been revised upwards to 3.2% from 3.0% expected previously.
• The euro area is forecast to grow 1.1% in 2015 down from a Jun estimate for 1.8%.
• China to expand 7.1% down from 7.2% forecast in Oct last year and 7.5% in Jun.
• Japan to grow 1.2% down from 1.3% estimated in Jun.
• Note the World Bank is not normally seen a leading indicator due the time it takes to produce its forecasts
China infrastructure – The Chinese government plans to accelerate development of 300 infrastructure projects worth 7tr renminbi this year.
• This is part of a wider 10tn renminbi plan to run from late 2014 through 2016.
• The plan is intended to support the structural development and change within the Chinese economy by guiding social capital into investment projects.
CAPE TOWN – NOT the MINING INDABA – meet investors and companies in a better environment.
• We are working with the 121 Mining Investment Group to recreate the conference we used to know and love in Cape Town.
• The 121 team have worked hard to assemble a solid list of institutional and other funds to meet directly with mining companies in the genteel surroundings of a historic farm house and gardens in Cape Town.
• The event is a must-attend for miners and interested funds.
Contact: leo.stemp@weare121.com or pablo.martin@weare121.com
Oil price collapse and fall in US retail sales spooks equity market
US – Retail sales disappointed yesterday posting a 0.9%mom decline against a 0.1%mom drop despite a fall in gasoline prices raising consumers’ disposable income to spend elsewhere.
• Nov sales numbers have been revised down to +0.4%mom from +0.7%mom.
• Core retail sales (ex gas and autos) were down 0.3%mom v +0.5% forecast.
• While weak Dec numbers take quarterly total down good Oct and Nov months are estimated to lead growth on the back of stronger job market.
• Fed’s Beige Book showed economic activity continued to “expand during the reporting period of mid-Nov through late Dec with most Districts reporting a modest of moderate pace of growth”.
• In the housing sector commercial real estate expanded in most Districts while residential housing sales were largely flat according to the Beige Book.
• Economic news due today:
o Jan New York manufacturing (+5.0 v -3.6 in Dec) Weekly jobless claims (290k v 294k in the previous week)
China – Money supply grew less than forecast in Dec (M2 money supply +12.2%yoy v +12.3%yoy in Nov and +12.5%yoy expected).
• The market expected lending to pick up towards the end of the year as the central bank cut rates in Nov in an effort to accelerate economic growth.
• New yuan loan fell to CNY 697.3bn down from 852.7bn in Nov and CNY 880bn expected.
• Total social financing (TSF) a broad measure of liquidity taking into account lending outside bank lending was CNY 16.46tn for the year down from 17.29tn in 2013.
India – The RBI unexpectedly cut the benchmark rate by 0.25% to 7.75% in the first reduction in almost two years as inflation slowed.
• The Bank advocated for a reduction in the headline inflation rate which had climbed to near 10% back in 2013 to drop to 8% by the end of 2014 and 6% by Jan/16.
• A fall in oil prices helped to bring the rate below 6% in recent months.
Russia – The government is planning a 10% across the board budget cuts (military sector is the only one to be spared) trying to close the budget gap.
• "Regardless of having already curbed 2015 spending we will ask parliament to cut by 10 percent all expenditure apart from defence spending" Finance Minister said yesterday at the economic
• With the inflation expected to hit 15-17% in Mar/Apr and proposed spending cuts disposable income in budget financed industries should see a significant reduction in disposable income.
• The budget is estimated to see a US$240bn shortfall or 2-3% of this year GDP with around US$240bn accounted for lower oil revenues.
• While a fall in the Russian rouble has partially compensated for a fall in oil prices a weaker rouble is seen raising imported goods costs.
Australia – Good employment numbers released this morning.
• The economy added 37.4k jobs compared to a 5.0k increase forecast.
• The jobless rate fell 0.1pp to 6.1% v 6.3% estimated.
• Interesting to note all job gains were in full-time category: +41.6k full-time v -4.1k part-time.
• The Australian dollar jumped on the positive economic news from 0.814 to over 0.82.
US$1.1727/eur vs 1.1738/eur yesterday. Yen 116.98/$ vs 116.79/$. SAr 11.500$ vs 11.589$ $1.521/gbp unch vs 1.516/gbp
A$0.817 vs 0.813 – Australia’s currency is slowly lowering to 0.75/USD as forecast by Australia’s central bank governor
Commodity News
Precious metals:
Gold US$1234/oz vs US$1226/oz yesterday –
Platinum US$1238/oz vs US$1230/oz yesterday
Palladium US$774/oz vs US$792/oz yesterday
Silver US$16.85/oz vs US$16.61/oz yesterday
Base metals:
Copper US$5562/t vs US$5501/t yesterday –
Aluminium US$1788/t vs US$1776/t yesterday -
Nickel US$15538/t vs US$14060/t yesterday –
Zinc US$2045/t vs US$2012/t yesterday
Lead US$1782/t vs US$1758t yesterday
Tin US$19550/t vs US$19125/t yesterday
Energy:
Oil US$47.20/bbl vs US$46.10/bbl yesterday –
Natural Gas US price US$3.292/mmbtu vs US$2.988/mmbtu yesterday
Uranium US$35.75/t unch vs US$35.65/t yesterday
Bulk commodities:
Iron ore spot price index (62% fines Tianjin) $69.0/t vs $69.3/t yesterday –
Steel - A fall in rouble attracts buyers of Russian steel at the expense of India’s producers Bloomberg reports.
Thermal Coal (CFR European ARA price) $60.05/t vs $61.30/t yesterday – coal prices pulling back slowly in response to lower oil prices
• Emission controls make it difficult to reactivate oil fired power stations
Speciality metals and alloys:
Tungsten APT European US$295/mtu vs US$305/mtu last week –
Ferrochrome HC $1.08/lb Cr Q1 vs $1.15/lb Q4 quarterly Benchmark pricing – China scraps 1% import tax on HC ferrochrome (>4% carbon content)
Rare Earth Elements (REEs): - China’s new ‘Strict export license’ system looks is likely to continue to restrict exports of REEs and other industrial minerals.
Company News
( ) 0.325pence Mkt Cap £2.9m – Raising £600000
• reports that it has raised £600000 (gross) via the issue of 200 million new shares at 0.3 pence/ share a 40% discount to yesterday’s closing bid price.
• In November the company acquired the Kerboule gold project in Burkina Faso for £350000 in shares. The additional funds should assist in advancing exploration at Kerboule as well as on its Kossanto gold project in Mali. The company’s two gold projects in Ethiopia are currently operated under a joint-venture with Centamin.
• Alecto’s CEO Mark Jones comments that “the additional funds will further enable us to position our portfolio effectively whilst at the same time at the same time working towards a more advanced project that the company believes can be funded to production. A stronger balance sheet improves our negotiating position in joint venture and acquisition discussions”.
• As Kossanto is the subject of early stage discussions regarding a potential joint venture we assume that much of the new money will be deployed at Kerboule where a US$1.5m deferred consideration applies if a 1m oz JORC compliant inferred gold resource is defined at a 0.5g/t cut-off. Alecto now has the financial resources to move towards resource evaluation at Kerboule
(LON:BSE ) 9.25 pence Mkt Cap £52.2m – Update on takeover of
World Titanium () A$0.05 Mkt Cap A$18.1m
• The company is not increasing its offer of World Titanium at 6 pence a share.
• The offer period is also not being extended and is expected to close on the 6th February.
• Binding undertakings for the offer exceed 60%.
• Indications are that there will be other takers for the offer.
Conclusion: As we previously commented we think it makes sense for shareholders to accept this offer given the cash position of .
With most shareholders on side directors who are also major shareholders should concede.
Centamin Resources ( ) 65 pence Mkt Cap £754m – Appointment of CEO
• The company appoints Andrew Pardey as CEO effective 1st February 2015.
• The current CEO Josef El-Raghy will continue his role as Chairman having acted as interim CEO.
• Andrew Pardey was the COO since May 2012 and General Manager since 2008.
Conclusion: It is encouraging to see the COO being promoted to CEO with his in depth knowledge of the mine having been General Manager and COO.
Holdings ( ) 19.25p mkt cap £28.8m – Supplying marble to new development in Chelsea
• has announced the sale of 900 sq metres of marble for delivery in February to Berkeley Homes’ new phase 2 development at Chelsea Creek.
• The sale comes via ’s offtake agreement with Pisani which has supplied Berkeley’s projects in the past.
Conclusion: This initial order may herald the start of a longer term supply relationship with one of the UK’s established house-builders
Papua Mining ( ) 14.25 pence Mkt Cap £7.3m – Early stage deep exploration drilling at Tripela prospect PNG
• The company has disclosed details of its four-hole deep drilling programme at its Tripela prospect in Papua New Guinea.
• The programme which followed up an earlier programme of shallow drilling completed in May 2014 and field exploration of surface mineral veins was designed to establish the presence of mineral alteration signatures characteristic of nearby porphyry mineralisation.
• Working in association with the Centre of Excellence in Ore Deposits at the University of Tasmania Hobart the results of this current programme “contain [the mineral] epidote with a chemical signature which suggests either a very proximal position (<0.5 km) from the centro of a small porphyry deposit or a position proximal to the centre of a large deposit”.
• To date 3 holes have been completed in this programme reaching depths of 1070m 1002m and 1040m. The 4th hole (N62DDH015) is at a depth of approximately 1070m and planned to continue to 1300m. The company also plans to drill a secondary “daughter” hole from hole 015 using wedging in order to establish additional information – the programme is expected to be completed in March 2015.
Conclusion: Exploration at Tripela is at an early stage and deploying innovative exploration models so far it would appear with some success. The company expects to produce a drilling report following completion of the current drilling – we await this with interest.
() A$0.074 Mkt Cap A$24.7m – Advances in test work on rare earth concentrate
• The company has been conducting further test work to improve the grade of the concentrate.
• Several methods were used to see if improvements could be made to the grade.
• Techniques used included magnetic separation gravity separation and flotation.
• The best test work results have been through de-sliming magnetic separation regrind and floatation.
• Equipment used to perform this included hydroclones and wet magnetic separators – this flowsheet rejects 53% of the feed mass prior to the flotation stage.
• The mineral concentrate produced gave an REO grade of 52.9% at an REO recovery of 52.1% higher than the PFS assumption of 16.3% REO at 70.2% REO recovery.
• The process also improves acid consumption.
Conclusion: Improvements in results from the test work continue which is helpful with the separation techniques to reduce the feed mass also helping in terms of reagent use which should help with the ultimate plant size and costs.
– Approvals Update of Harbour Facilities
• The company are submitting a revised application for the proposed harbour facilities at Teesside.
Conclusion: We wonder why the company is revising its application on the harbour facilities associated with the York potash project. A consultation report on York Potash website shows strong support for the project from responses – we show below responses from the Consultation Report dated December 2014.
• 96% are in favour of the job creation and other socioeconomic impacts;
• 94% support the proposed location of the harbour facilities;
• 91% support the proposed design and route of the conveyor system that will transport the minerals to the harbour facilities;
• 83% support the design and form of the proposed building structures and two potential quay options;
• 80% are satisfied that the harbour facilities can proceed without harming local wildlife and ecology interests;
• 93% support the construction impacts; and
• 89% support the proposed river dredging required to develop the harbour facilities.