(MENAFN- ProactiveInvestors) Chinese smelters and factories shutdown as part of drive to clean up air pollution around Beijing
Traders also take break as factory closures generate lesser demand for trade
Nickel - China turns off Nickel Pig Iron furnaces in Inner Mongolia and provinces around Beijing
• China has forced the closure and suspension of most or all of the Nickel Pig Iron furnaces around Beijing in an attempt to clean up air pollution during the APEC summit in Beijing.
• While many furnaces might reopen after this historic summit of world leaders some will not as prices for nickel laterite ores have risen and as Beijing continues to clean up on environmental issues.
• Indonesia’s ban on the export of nickel laterite ores is also restricting supply though Philippine production has risen to take its place. However ores out of the Philippines are said to be showing lower nickel grades making the NPI process even less viable.
• The situation should be good for nickel and ferrochrome pricing going forward.
Iron ore miners fall in Australia on lower prices
• Atlas Iron fell 14% today in Australia followed by BHP down 3% and Fortescue down 2% .
• Concerns for yet lower iron ore prices are having significant impact as there seems no end in sight to the expansion and potential overproduction of haematite iron ore for direct shipping out of Western Australia by the major miners BHP and Fortescue.
– S&P ‘defaults’ $700m bond rating
• Rating agency S&P has downgraded the rating of $700m worth of bonds issued by Resources Indonesia’s largest coal miner.
• The bonds are on credit watch after the missed an interest payment. The company say they will make the payment at end November following a 30-day grace period. The bonds come due in 2017.
• Resources is affiliated to the Bakrie Group and was formerly named Vallar plc which was financed by Nat Rothschild.
• main investment is an 85% stake in Berau Coal
• Nat Rothschild engineered the purchase of 75% of PT Berau Coal Energy and 25% of PT Bakrie & Brothers in 2011 for $3bn
• The Default notice probably reflects lower pricing conditions for coal and perhaps a softening in demand from Chinese traders.
Lithium - Cobre Montana NL (ASX:CXB) secures rights to use process technology for lithium processing
• Cobre Montana have secured a 25-year option over technology for the recovery of lithium from mica group minerals.
• The agreement could enable the company to become a major long-term supplier of lithium
• Cobre Montana holds licenses over lithium contained in mica near Coolgardie Ravensthorpe and Southern Cross in Western Australia
• The technology is developed by Perth-based Strategic Metallurgy but like many new technologies in the mining area might have its issues when scaled up to support larger scale operations.
• Recent success in demonstrating ‘proof-of-concept’ lithium carbonate production from mica with the technology has led Cobre to take the technology forward.
• Lithium is only found in compounds due to its high reactivity making its extraction more challenging.
• Lithium processors generally prefer lithium hydroxide but generally buy the carbonate for processing into hydroxide.
Ebola – Please do not forget the victims of Ebola. We recommend www.msf.org.uk/donate for donations
Economic News
US UK and Swiss regulators issued a US$3.2bn fine on five banks including UBS RBS Citi and JPMorgan on allegations of rate-rigging in the forex markets.
• Violations are reported to have started at banks in 2009 and continued in 2012.
• Traders are said to have coordinated their actions to manipulate FX benchmark rates sharing information about clients orders and agreeing trading strategies in chat rooms.
Eurozone – Industrial production is expected to post a 0.7%mom increase following a sharp decline recorded in Aug (-1.8%mom).
• Production still to post a yoy decline in Sep (-0.2%yoy v -1.9%yoy in Aug).
UK – Employment climbed less than forecast in 3 months through Sep (112k v 46k in Apr-Jun and 125k forecast) with the jobless rate unchanged at 6.0% (versus 5.9% forecast).
• On a positive note average weekly earnings (ex bonus) growth picked up and beat estimates in Sep (+1.3% v +0.9% in Aug and +1.1% forecast).
Indonesia – Government protects local shipbuilders through new 5% import tax on ships
US$1.2437/eur vs 1.2400/eur yesterday. Yen 115.032/$ vs 116.070/$. SAr11.244/$ vs 11.310/$. $1.593/gbp vs 1.585/gbp
A$0.9699 vs 0.8601 yesterday – Aussie dollar gains as US dollar pulls back
Commodity News
Precious metals:
Gold US$1163/oz vs US$1151/oz yesterday – India may review gold import curbs. Would be good for gold demand if import taxes are cut
Platinum US$1203/oz vs US$1195/oz yesterday –
Palladium US$775/oz vs US$762/oz yesterday
Silver US$15.66/oz vs US$15.53/oz yesterday
Base metals:
Copper US$6684/t vs US$6618/t yesterday –
• Prices on the Shanghai Futures Exchange climbed higher today on the back of State Reserve Bureau’s purchase talks.
• The speculation is the SRB may purchase 700000t of copper.
Aluminium US$2043/t vs US$2013/t yesterday
• First Ford F-150 pickups with aluminium body left the assembly line at Dearbon Michigan yesterday.
• Aluminium alloys are claimed to account for 95% of the new model bod compared to 5% in the current models.
• The assembly line has been fitted with new press lines to stamp 4 different types of high-strength aluminium alloys and new lines to hydroform metal tubes into support rails.
• Aluminium parts will also be treated with chemical coating system that prepares the metal for high-strength adhesives.
• It is a bold move for Ford raising the metal intensity in its F-series trucks which have proven to be the best-selling vehicle in the US for more than 30 years.
Nickel US$15572/t vs US$15160/t yesterday
• BHP decided to leave its nickel business in Western Australia under the umbrella of the Group.
• The unit includes the mt Keith Cliffs and Leinster mines as wells the Kalgoorlie smelter the Kambalda concentrator and the Kwinana refinery
• The review “is now complete and the preferred option the sale of the business has not been achieved on an acceptable basis” the Company said.
Zinc US$2284/t vs US$2242/t yesterday
Lead US$2051/t vs US$2024/t yesterday
Tin US$20150/t vs US$19945/t yesterday
Energy:
Oil US$81.20/bbl vs US$82.10/bbl yesterday –
Natural Gas US$4.184/mmbtu vs US$4.140/mmbtu yesterday
Thermal Coal $71.8/t vs $71.0/t
Uranium US$41.90/t unch vs US$41.75/t - prices continue to rise
• Final safety inspections of the Sendai units by the NRA in Japan should mean initial restarts in the first half of 2015.
• the largest listed independent uranium producer is rising
• Key Uranium explorers should also go better
Other:
Iron ore spot price index (62% fines) $75.9 vs $76.1/t –
Seabourne Coking coal (quarterly) – US$119/t vs US$119/t
Tungsten APT European US$335.0/mtu vs US$335.0/mtu –
Ferrochrome $1.15/lb Cr Q4 vs $1.19/lb Q4 quarterly Benchmark pricing –
Company News
Centamin () – Third Quarter and Nine Month Results
• The company generated EBITDA of US$37.8m up 16% on the previous quarter.
• Production was up 93624 oz up 15% on a quarter on quarter basis and up 10% from the previous year.
• Ore production from the underground was up 8% on the last quarter at 248 kt with an increase of stoping to development ore of 52% to 48%.
• Average grades on the underground mine was at 6.67 g/t up from 5.56 g/t in the previous quarter.
• Gold sold over the quarter was 91575 oz up 15.4% with average realised prices of US$1267/oz.
• For nine months the company produced 249145 oz down 6.1% from the previous year.
• Gold sold for nine months was 249882 oz down 9% on the same time last year.
• The main difference in gold produced over the nine months reflects the head grade which was 1.46 g/t gold against 2.12 g/t in the previous year.
• Cash costs of production was down 1.5% on the previous quarter to US$771/oz and for the nine months is running at US767/oz up 9% on the previous year.
• The company expect the improved productivity in the fourth quarter to bring cash cost down to US$700/oz for the full year.
• Improvements in costs came mainly from processing costs which fell to US$405/oz against US$413/oz in the previous quarter.
• Quarterly throughput at Sukari was 2388 kt for the quarter up 22% on the previous quarter and 63% on the previous year.
• This reflects the start of treatment through the new Stage 4 plant circuit.
• Commissioning activities are said to be progressing well with ramp up to expanded 10 mtpa.
• G&A costs also came down by $11/oz to US$51/oz.
• Both processing and G&A costs are still running ahead of the average for nine months of 2013 of US$299/oz for processing and US$43/oz for G&A.
• On issues around historical fuel subsidies the company has started proceedings in the Adminstrative Court in Egypt which are likely to take some time to resolve.
• Cash at the end of the quarter stood at US$109.9m in the bank with liquid assets totalling US$140.3m.
• As recently updated guidance for 2014 has been lowered to 370000 – 380000 reflecting the lower fourth quarter average grade from the underground.
Conclusion: Even with the reduced guidance for the year fourth quarter production is expected to go up to around 120000/oz for the quarter up 28% on the previous quarter – increased production is expected to drive down costs with full year cash costs still expected to be US$700/oz against year to date cash costs of US$767/oz
With realised sales of US$320.85m for nine months and full year Bloomberg forecasts standing at $507m for the full year – sales in fourth quarter would have to be around US$186.5m – assuming 120000 oz for the fourth quarter this would imply a gold price of US$1554/oz. Using a spot price of US$1150/oz production would have to be around 162000 – short term forecasts for the full year look as if they need to be downgraded.
The potential beyond the fourth quarter still looks good with cash on the balance sheet and growing production – one of the better gold producers to hold.
() – Shares jump on non-binding MOU from Chinese group
• shares jumped yesterday on the agreement of a non-binding MOU for $150m from the HK subsidiary of diversified company.
• The deal looks like a strange move for a diversified group and has a high chance of failure in our view due to technical mining challenges facing the target company.
• Hiria is a 100% subsidiary of the Marsa Group a private Canadian group which provides vehicle and yacht financial leasing.
• Marsa is a private group which is said to won around HK$6.5bn of assets including mining interests.
• have faced a number of challenges to their mining and part processing of high-grade gold ore underground in mines based within the Johannesburg area South Africa.
• The principal challenge is trying to control rising water levels and pollution from other mines in the area which are connected through a myriad of underground tunnels and mines out workings.
• Illegal miners still work some of these old mines particularly at the old Benoni mine workings where a number of illegal miners were killed in gang warfare.
Conclusion: We see this as a particularly strange offer from a diversified company to buy into a technically challenged mining business based in Johannesburg. It is difficult to find high-grade gold mines making an increasingly attractive opportunity but whoever takes the mine on will have to manage the dewatering of allot of unrelated mine workings and associated acid mine drainage. The best option from an environmental perspective is to keep pumping so the water does not accumulate sulphide minerals though who pays for this remains uncertain.
()- Q2 production levels on track for 140-155000 oz for FY 2015
• In a preliminary snapshot of the company’s Financial Q2 production for the 3 months ending 30th September (Full results are to be released on 8th December) Kirkland Lake announce that they treated 92146 tonnes of ore grading 0.41 oz/ton. In view of the reported recovery rate of 96.4% the implied production for the quarter which is not yet explicitly stated is around 36500 oz.
• The company states that it is on track to achieve its annual production guidance of 140-155000 oz.
• Kirkland Lake is a high cost operator which must be finding the current gold price environment challenging. All in cash costs of $1250/oz in Q1 were a significant improvement on the $1774/oz reported in the previous quarter. The results due on 8th December will provide a further insight into how successfully the company is continuing to reduce its costs.
• In November 2013 the company announced that it was planning to mine closer to the historic reserve grade (currently 0.5 oz/t) to restore profitability. It appears that the company is achieving significant grade improvements as head grades have improved to the current 0.41oz/t from 0.35 in Q4 2013 and 0.31 in Q1 2013.
• The company is also opening more production areas underground which should increase operational flexibility during the 2nd half of the financial year.
• As at 31st October the company’s cash balances amounted to $41.4m.