Today's Market View - Amur Minerals, FinnAust Mining, Metminco, Petra Diamonds
Date
9/21/2016 5:45:21 AM
(MENAFN- ProactiveInvestors - UK) SP Angel, 10:59
Amur Minerals* (LON:AMC) – Paul Gazzard joins board as non-exec director
FinnAust Mining* (LON:FAM) – Pituffik ilmenite potentially highest global grade. Final results
Metminco* (LON:MNC) –A$1m (£0.57m) funding for Miraflores Feasibility Study
Petra Diamonds (LON:PDL) - Preliminary results, production guidance and returning stability in rough diamond market.
European stocks are up this morning with risk on sentiment driven by stronger oil prices and investors awaiting Fed and BoJ monetary policy announcements later this week (Wednesday).
• Japanese markets were closed for a public holiday with trading on the ASX was halted in the afternoon session on technical problems.
• The pound is recovering following a sharp sell off on Friday that saw the currency lose c.1.8% on speculation that the Chancellor of the Exchequer is considering sacrificing access to the EU single market in return for a potential set of post-Brexit limits on immigration.
• Gold is up half a percentage point today on the back of a weaker US$ index.
• Copper prices came off a four-week high on the news Anglo American restarted operations at Los Bronces following a labour action.
• Iron ore futures (Jan contract) were slightly off (CNY390/t, -CNY3/t on the day) amid high port stockpiles after trading restarted after public holidays on Thursday and Friday in China.
BIS – risks to Chinese banking crisis are rising
- Bank of International Settlements quarterly review says that China's credit to GDP gap hit 30.1 in Q1 2016
- The BIS considers a credit to GDP gap of 10 to be a sign of potential danger
EU in critical situation according to reports from Angela Merkel
• The EU is debating 'Disintegration or dilution' according to reports from Angela Merkel.
• Junkers is offering the potential of free European-wide Wi-Fi in a desperate effort to win support for his vision of Europe.
• Problem is that EU member nations are deeply divided over how to create growth and manage the migrant crisis.
• Junker's threat to cut Hungary out of the EU if they vote against the free movement of people may further inflame the situation.
• As if to support the point Germany's right-wing anti-migrant party 'Aletrnative for Germany 'AfD' will enter the state parliament for the first time. Mrs Merkel's CDU party won just 17.6% of the vote in its worst ever result in Berlin.
Dow Jones Industrials -0.49% at 18,124
Nikkei 225 0.70% at 16,519 - Respect for the Aged holiday today
HK Hang Seng +0.92% at 23,550
Shanghai Composite +0.77% at 3,026
FTSE 350 Mining +3.48% at 11,555 FTSE 350 +57% since 1st January
AIM Basic Resources +0.19% At 2,439 AIM Basic Resources +50% since 1st January
US – Core inflation picked up in Aug beating marginally market expectations with the YoY rate up 2.3%yoy matching the post-recession high hit a few times since the 2008-09 recession.
• 10y government bond yields climbed following the release of the data as markets weighed the effect of stronger inflation on the Fed decision to raise rates.
• Although, given latest weak retail sales and industrial production numbers, a pickup in inflation could prove to be transitory, Bloomberg reports.
• A separate report on consumer sentiment showed that optimism failed to accelerate through Sep underperforming market estimates that forecast a small improvement.
• Despite the benefit of low interest rates and inflation rates as well as robust labour market, the index remained around its low for the year.
Date Index Period Actual Est Previous
Friday Core CPI (ex Food, Energy) Aug %mom 0.3 0.2 0.1
Core CPI (ex Food, Energy) Aug %yoy 2.3 2.2 2.2
UoM Consumer Sentiment Sep 89.8 90.6 89.8
UoM Current Conditions Sep 103.5 107.6 107.0
UoM Expectations Sep 81.1 79.7 78.7
Tuesday Housing Starts Aug %mom -1.7 2.1
Building Permits Aug %mom 1.8 -0.8
Wednesday FOMC Rate % 0.25-0.50 0.25-0.50
Fed Economic Projections
Thursday Weekly Jobless Claims 261k 260k
Existing HomeSales Aug %mom 1.1 -3.2
Friday Manufacturing PMI Sep 52.00 52.00
Source: Bloomberg
China – The number of cities that recorded an increase in property prices climbed in Aug from the previous month extending a recovery in the sector since the start of the year.
• China New Property Prices Change (70 Cities): 7.3%yoy in Aug v 6.1%yoy in Jul.
Philippines – The audit committee meeting to confirm latest results of a local mining operations' review will be held on Wednesday this week, Environment and Natural Resources Secretary Gina Lopez said.
• As of today, ten mines have been suspended after failing environmental standards and another ten more mines closures is possible, Lopez indicated.
Currencies
US$1.1169/eur vs 1.1233/eur yesterday. Yen 101.84/$ vs 102.01/$. SAr 14.062/$ vs 14.118/$. $1.305/gbp vs $1.321/gbp.
0.754/aud vs 0.751/aud. CNY 6.672/$ vs 6.675/$.
Commodity News
Precious metals:
Gold US$1,316/oz vs US$1,315/oz yesterday – Gold – Speculative net positions in gold fell 11% for the week ended Sep 13 marking the sharpest decline in more than three months as investors adjusted their bets ahead of the FOMC meeting this week.
• Purchases in gold ETFs paused consolidating around 65.1moz levels.
Gold ETFs 65.1moz unch vs 64.8moz yesterday
Platinum US$1,028/oz vs US$1,029/oz yesterday
Palladium US$678/oz vs US$653/oz yesterday
Silver US$19.13/oz vs US$18.96/oz yesterday
Base metals:
Copper US$ 4,752/t vs US$4,764/t yesterday – Chinese copper production climbed to a record 5.5mt, up 8.7%yoy, in the first eight months on increased capacity and smelters' profit margins.
• Smelters' charges hit $105/t in Jul and Aug, the highest level since early 2015, according to Bloomberg.
• The picture is different in the zinc smelting industry with local production down 1%yoy at 4.1mt in the first eight months caused by a shortage of zinc concentrates.
• Lead production was also down at 2.8mt, off 7%yoy, due to environmental checks.
Aluminium US$ 1,575/t vs US$1,578/t yesterday –
Nickel US$ 9,895/t vs US$9,695/t yesterday –
Zinc US$ 2,214/t vs US$2,220/t yesterday –
Lead US$ 1,935/t vs US$1,935/t yesterday –
Tin US$ 19,160/t vs US$19,075/t yesterday –
Energy:
Oil US$46.3/bbl vs US$46.1/bbl yesterday
Natural Gas US$2.935/mmbtu vs US$2.901/mmbtu yesterday
Uranium US$25.25/lb vs US$25.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$52.9/t vs US$53.5/t –
Steel rebar, China 25mm US$382.3/t vs US$387.3/t – unchanged due to Chinese futures market holiday
Thermal coal (1st year forward cif ARA) US$58.5/t vs US$58.4/t yesterday -
Coking coal prices $205.9/t vs $197.7/t FOB Australia for Premium Hard Coking Coal (The Steel Index) – Prices still rising strongly
Other:
Tungsten - APT European prices vs $180-200/mtu unch again vs $185-200/mtu two weeks ago
Company News
Amur Minerals* (AMC LN) 3.2p, Mkt Cap £16.4m – Paul Gazzard joins board as non-exec director
• Paul Gazzard has joined the board of Amur Minerals as a non-executive director.
• Gazzard has worked with Robin Young and Amur Minerals as an external advisor for four years.
• Paul has previously worked as an asset manager transitioning to the commercial financing sector working with Virotec which later listed Hydrodec, the clean-tech oil re-refining group. Paul was also COO at Litebuld Group. Paul was previously a director at Locca Tech. Itf Global, Finsa, Product Station Limited and Greenhouse Advisors Ltd.
• Amur Minerals is currently working on the potential development of a 'world class' nickel project in the Amur region in the far-east of Russia.
* SP Angel act as Nomad and broker to Amur Minerals
FinnAust Mining* (FAM LN) 6.7p, mkt Cap £33m – Pituffik ilmenite potentially highest global grade. Final results
• FinnAust Mining which is evaluating the Pituffik titanium mineral sands project in Greenland has produced its financial results today.
• Nature appears to have been kind to the Pituffik project with what looks like potentially the world's highest grade ilmenite seen in sampling. The company highlights that Pituffik is in the top percentile of titanium mineral sands projects by grade reviewed by SRK.
• FinnAust have encountered areas within the project area with grades in excess of 90% ilmenite, a remarkable grade by any standards. The company states that there are potentially higher grade deposits globally but as yet they remain undiscovered. (Grades were also independently determined by visual inspection by Peter Johannessen Senior Researcher, Sedimentology & Stratigraphy Department, Geological Survey of Denmark and Greenland (GEUS)
• The board, backed by Western Areas, are 'attracted to the opportunity to deliver production at low cost in the relative near term via a dredging operation within the marine environment using industry normal equipment and practices.'
• Work has started on the delineation of a JORC resource.
• The team are progressing toward the application of an exploitation license ahead of delivering a proof-of-concept bulk sampling program in 2017.
• The company anticipates 'dredging a small amount of material next year to demonstrate that the logistics and processing routes currently being developed are precise before ramping up our operation towards a full production scenario.'
• The company is working with Royal IHC, a major Dutch dredging company which is able to lend in house wet mining equipment and generation of a 'high level' cost estimation.
• FinnAust is looking to define a processing route and has appointed KeyPointE Pty Ltd and QuedTech Pty Ltd for the next phase of metallurgical test work
• A large metallurgical sample has been prepared and shipped for purification, analysis and distribution and this should evolve into pilot scale continuous testing later this year.
• The team have a high degree of confidence that the Pituffik concentrate could, with further processing, be suitable for chloride slag manufacture to produce TiO2 pigment or titanium metal.
• Mild weather has helped the company advance with extensive trenching over the main project area and all 260 auger drill holes show significant horizons of ilmenite-rich sands.
• FinnAust report a loss before tax of £620,059 vs £561,381 in 2015.
• Management are focussed on the potential development of Pituffik but continue to see value in the exploration portfolio in Finland.
• Cash: FinnAust had £425,046 of cash in the bank at end June and has since raised a further £500,000.
Conclusion: The revelation that Pituffik is in the top percentile of ilmenite projects evaluated by SRK is good news highlighting the 'world-class' potential of the project.
* SP Angel acts as nomad and broker to the company
Metminco* (MNC LN) 0.15 pence, Mkt Cap £5.6m –A$1m (£0.57m) funding for Miraflores Feasibility Study
• Metminco has raised approximately A$1m through placing 422.2m new shares at a price of £0.00135 per share to sophisticated and professional investors.
• The new shares represent approximately 9.8 percent of the enlarged company.
• The additional funds will be used to help complete the Feasibility Study on the Miraflores Gold Project in Colombia which was acquired earlier this year. The company is also 'assessing a number of strategies to fund the Project through to the construction phase.'
• The company recently announced that its consultants, SRK had completed a scoping study to produce approximately 50,000 oz of gold per year from Miraflores over a 9 year period at a life of mine cash cost of $555/oz.
• At the scoping study level, the project requires an initial capital investment of US$81m, life-of-mine sustaining capital of a further US$17m to deliver a project after tax NPV of US$73.4m and an IRR of 26% using a life of mine gold price of US$1300/oz.
• In contrast to work by the previous owner to develop the Miraflores deposit as an open-pit mine, the SRK work considered an underground mining operation delivering a significantly reduced environmental impact as waste material is used as underground fill with a consequent reduction in the need for surface tailings disposal.
• Miraflores is the most advanced of a number of gold projects within the package of ground, known as the Quinchia project area acquired by Metminco in a transaction originally announced in March this year.
Conclusion: The additional funds should facilitate the completion of the full feasibility study for the Miraflores Gold Project and firm up the economic model delivered in the scoping study. We look forward to further news as the Feasibility work proceeds.
*SP Angel act as broker to Metminco
Petra Diamonds (PDL LN) 114.5p, mkt cap £600.2m - Preliminary results, production guidance and returning stability in rough diamond market.
• Petra Diamonds has reported a rise of almost 10% in basic eps for the year to 30th June 2016 of 10.38UScents/share (2015 – 9.46UScents/share). On a diluted basis, eps rose to 10.14cents from 9.19 cents.
• The improved results reflect a 2.5% reduction in costs to US$322.5m and a 1% increase in revenue to US$430.9m offset by higher net financial expenses and lower tax charges.
• Production rose by 16% during the year to 3.7million carats.
• The company reiterates that diamond production is expected to increase to 4.4-4.6million carats in FY 2017 'before reaching Petra's stated long term target of ca 5Mcts in FY 2018, a year earlier than expected, and rising further to ca 5.3Mcts by FY 2019'.
• The company highlights that the 18% rise in capital expenditure to US$324.1m reflects 'the peak activity around the Group's expansion programmes'. The increase in net debt to US$384.8m (2015 – US$171.7m) and in a near doubling of gearing levels to 41.3% on a net debt:net debt plus equity basis, underlines the peaking of the company's capital exposure.
• Petra Diamonds has, however, reached agreement 'with Petra's lender group during June 2016 to revise the covenant ratios related to its senior debt facilities for the next three bi-annual measurements, starting 30 June 2016.' 'However, distribution covenants were not met for the measurement period to 30 June 2016 and Petra will therefore not declare a dividend for FY 2016.'
• Capital expenditure is, now starting to decline with the completion of the new shaft and plant at the Cullinan mine expected to be completed in H2 2017 and 'Consequently the Company expects to become cash flow positive during FY 2017, with cashflows expected to rise strongly from FY 2018 onwards.'
• The company describes 'challenging conditions' for the rough diamond market in the first half of the year as a result of excess inventory of polished diamonds and a slowdown in Chinese retail demand. Petra Diamonds notes, however, that its first tender of FY 2017 was held during September 2017 yielded around $94m from the sale of 745,000 carats and with a further two tenders scheduled for later in 2016 'The market is noted as being on a stable footing with prices on a like-for-like basis generally on par with H2 FY 2016.'
Conclusion: Petra Diamonds expects production and cashflow to pick up as it reaps the benefits of its capital expansion programme. In the short term, however pressure on the balance sheet and applications of its loan covenants has caused the company to pass on payment of a dividend.
SP Angel