(MENAFN- ProactiveInvestors) Miners – a good new year beckons as costs fall on oil and other cost controls
• We reckon costs could fall by 15% to 25% for many miners next year as oil and other cost control measures take effect
• Halving the oil price should take at least 15% off the cost base for many open cast miner with bigger gains to be made by miners working in remote locations where oil fired power generation is widely used. Power generated using heavy fuel oils will also become cheaper.
We forecast iron ore prices would fall
We forecast oil prices would fall below $100/bbl – see The SP Angel Commodity Research Book (April 2014)
We even forecast that gold prices would average $1250/oz this year
We were a bit bullish on copper and we were not quite spot on with Tungsten but we were not far off
• We did not forecast that oil would head toward $40/bbl.
• We did not forecast the invasion of the Ukraine and the rouble collapse.
• We did forecast that iron ore prices would fall and were not surprised to see the price fall beyond our forecast
• We now forecast that costs in the mining industry will fall not just because lower oil prices lower fuel and power costs but because many local currencies have also fallen and because other inputs should come down in pricing. The challenge is for miners to pull costs back quickly to take advantage of this new working environment.
• The opportunity is there for miners to expand margins and gain better cost control and we expect more experienced teams to act quickly and make new gains.
Minnesota DNR injecting liquid potash under ice lakes to kill zebra mussels
• The Department of Natural Resources of Minnesota is to inject liquid potash under winter ice at Christmas Lake to kill off an invasion of zebra and quagga mussels.
• Zebra mussels are seen as a significant threat in the lakes of Minnesota due to their impact on the food chain and their propensity to block pipes and encourage algal growth.
• The state of Manitoba in Canada also sues liquid potash injection to clear mussels from lakes.
Sales start early in London
• It was predictable that sales would start early this year in London.
• Online sales continue to take market share from high-street retailers causing shops to work harder to catch trade.
Economic News
US – The Fed ruled the committee will remain “patient” regarding the first rate increase in years substituting the term “considerable time”.
• Chair Yellen said that current inflation and employment projections indicate that the first interest rate hike will not come for at least 2 next FOMC meetings.
• This suggest the rates are forecast to stay at record low until the end of Apr at least.
• The Fed stressed the decision will remain incoming data dependent.
• The effect of lower oil prices on slowing inflation are seen as “transitory” with consumer prices growth expected to accelerate towards 2% Fed target in 2015-16.
• Core CPI slowed to +0.1%mom in Nov down from +0.2%mom in Oct and in line with estimates.
• Economic news due today:
o Weekly jobless claims (295k v 294k in the previous week) Dec Markit services PMI (56.3 v 56.2 in Nov)
Eurozone – Inflation remained at the lowest level in 5 years further increasing the risk of deflation in the single currency block.
• CPI came in at -0.2%mom/+0.3%yoy in line with estimates.
Greece – First round of votes fail to secure the presidential seat for the PM candidate. Two more rounds are left (23 and 29 of Dec) for the New Democracy Party to approve its candidate before the government will have to call a snap election.
• The vote fell short of the required 200 majority needed of the 300 total. Stavros Dimas the ruling party’s candidate won 160 seats.
UK – The BoE released its Dec meeting minutes showing MPC voted 7 to 2 to keep rates at current lows.
• Two members Ian McCafferty and Martin Weale have been pushing for an early rate hike in all five meetings.
Switzerland – The SNB cut the benchmark rate to -0.25% the first negative deposit rate since the 1970s.
• The move is driven by a buying pressure on the currency following a flight of capital from Russia amid an unfolding financial crisis and prospects of an extensive monetary easing in the Eurozone.
• “The introduction of negative interest rates makes it less attractive to hold Swiss franc investments and thereby supports the minimum exchange rate” the SNB said.
Russia – The ruble found some support at 60-61 USDRUB level as oil prices rebounded slightly and trade above the US$60/bbl level as the central bank announced new measures to stem the devaluation.
• The bank will hold additional foreign exchange auctions if necessary.
• Also authorities will be ready to provide funds to recapitalise local lenders and would allow banks to temporary revalue their securities on the books using the stronger Q3 exchange rate.
Cuba - President Obama lifts Cuba embargo and eases travel restrictions to Cuba. US to open an embassy in Havana.
Sheritt the Canadian nickel company with operations in Cuba sees stock rise as Obama moves to bring Cuba closer to the US
• Russia may see the move as provocation against their ‘Cuban Communist Comrades’ lets hope they don’t send another ship-load of missiles over
Peru – Government registers 229 informal mining cooperatives
• The Peruvian government has been cracking down on illegal mining activities cleaning up polluting mines and forcing cooperatives to formalise their operations for tax and safety issues.
US$1.2308/eur vs 1.2461/eur yesterday. Yen 118.61/$ vs 117.10/$. SAr 11.550$ vs 11.647$ $1.562/gob vs 1.571/gbp
A$0.818 vs 0.818 yesterday -
Commodity News
Precious metals:
Gold US$1199/oz unch vs US$1196/oz yesterday
Platinum US$1203/oz vs US$1204/oz yesterday
Palladium US$787/oz vs US$788/oz yesterday
Silver US$16.04/oz vs US$15.84/oz yesterday
Base metals:
Copper US$6343/t vs US$6365/t yesterday
Aluminium US$1913/t vs US$1906/t yesterday
Nickel US$15463/t vs US$15665/t yesterday
Zinc US$2125/t vs US$2140/t yesterday
Lead US$1857/t vs US$1879t yesterday
Tin US$19243/t vs US$20045/t yesterday
Energy:
Oil US$62.20/bbl vs US$59.47/bbl yesterday
Natural Gas US price US$3.690/mmbtu vs US$3.650/mmbtu yesterday –
Thermal Coal $68.15/t unch vs $68.75/t
Uranium US$36.75/t unch vs US$37.25/t
Other:
Iron ore spot price index (62% fines) $69.1 unch vs $69.0/t –
Seabourne Coking coal (quarterly) – US$117/t unch vs US$117/t –
Tungsten APT European US$304/mtu range ($275-$333/mtu) vs US$317.5/mtu last week – the move probably reflects some year-end book squaring
Ferrochrome HC $1.15/lb Cr Q4 vs $1.19/lb Q3 quarterly Benchmark pricing
Company News
Platinum to sell 49% stake in Bokoni platinum mine for $385m
• Baroka Tribal Mining is buying 49% of Bokoni and Amplats' 22.5% stake in Atlatsa Resources.
• Amplats is reported to be looking to focus more on its on open-cast mines in South Africa.
(NZE:CRP) –Marine consent application decision expected in January
• ‘CRP’ report that the New Zealand Decision Making Committee is to report on the company’s marine consent application on 10 January.
• The DMC public hearing closed last Friday giving the committee 20 working days to consider its decision. The committee has concluded that it does not need any further information from the involved parties.
• Recent trials using phosphate nodules show the nodules deliver 85% of the productivity of more expensive low-sulphur triple superphosphate when applied to five pasture soils from Chatham and the South and North Islands.
• CRP has also received approval for a government grant the ‘Callaghan Innovation Research and Development (R&D) Growth Grant’ which provides 20% public co-funding for qualifying firms’ eligible expenditure capped at $5mpa over a two year period with a potential further two year extension.
Conclusion: Investors will have to wait till January for marine consent. We are hopeful that approval should be granted as we can not see how the mining of a relatively small area of silt can be any worse than the impact of the massive trawling operations which dredge vast areas of seabed in the area. We certainly believe the relative economic and agricultural benefit of phosphate nodule mining far outweighs the returns from trawling relative to the area of seabed disturbed.
() – New drilling results from Picahos copper project.
• Results from the Stage 2 drilling programme at Picachos in Chile have shown an intersection in hole DD14003 of 117m at an average grade of 1.14% copper and 10.2 g/t of silver from a depth of 182m. This intersection includes 9 metres at 2.02% copper and 19.7 g/t silver from 193m 10m at 2% copper and 17.8 g/t silver from 268m and 11m at 2.21 % and 20.4g/t from 288m.
• The company has also announced the assay results from a diamond drilling “tail” to an earlier reverse circulation borehole (PP14036) which encountered 2 additional zones of copper mineralisation. The extension intersected 8m at 1.05% copper and 6.8 g/t silver from a depth of 169m and 6m grading 2.13% copper and 21.3 g/t silver from 182m.
• Herencia’s Managing Director Graeme Sloan comments that the results from hole 3 are the best they have encountered at Picachos and “appear to be linked to” earlier results in DD14001 which encountered 31m grading 1.87% copper and 19m at 1.04% copper.
Conclusion: These intersections at depth suggest that there may be scope to expand the Picachos project. The evolving correlation between the limited drilling results will be critical to understanding the geometry of the mineralisation.
* () – raises £1m
• has raised £1m through the placing of 33.6m shares at 3 pence per share.
• Funds are to be used to continue exploration on the Cascabel project in Ecuador.
Odin Mining () which is exploring for copper gold projects in Ecuador saw its shares spike higher this week.
• The company has a 15000m drill program at Cangrejos and is working in Southern Ecuador .
• The stock is owned by Ross Beaty who is seen as an interesting investor in Canada.
*SP Angel act as Nomad and broker to and an SP Angel analyst has visited the Cascabel project
* () – Promising initial results from Phase 3 drilling programme at the MB Fluorspar Project
• has released assay results from the first hole of its Phase 3 drilling programme on its MB Fluorspar project in Nevada.
• Borehole 14TMBRC027 showed multiple thick flat lying intersections of fluorspar (CaF2) and remained in mineralisation at the end of the hole at 516m.
• This reverse-circulation borehole appears to be the most westerly of the 9 hole Phase 3 programme and lies more than 700 metres west of the area included within the currently defined inferred resources.
• The best intersections include 141.73m from 225.55m at an average grade of 11.55% fluorspar and a shallower intersection of 70.10m from 59.44m depth at an average grade of 16.63%.
• The company points out that “The grade of fluorspar encountered in this hole is increasing at depth with thick intersections grading more than 15% CaF2 previously unseen in the Company’s Phase 1 and 2 drilling campaigns.”
• The drilling programme was completed at the end of November and the results of the remaining 8 holes are still awaited.
Conclusion: The initial results from the phase 3 programme are encouraging. Of the outstanding holes 3 lie between the hole reported today and the area of inferred resources (the remainder lie to the north of the inferred resource and between the two discrete areas of inferred resources already defined). If these 3 holes (14 TMBRC028 32 and 33) also encounter fluorspar mineralisation will have made substantial progress towards demonstrating continuity of mineralisation which could lead to an expansion of the resource base of the MB Fluorspar project.
*SP Angel act as Nomad and broker to
() – New director
• have appointed David Garland a barrister at Brick Court Chambers in London.
• Garland was previously General Counsel and Company Secretary to Dominion Petroleum an AIM listed oil and gas company.
• is currently run by Chariman Michael Masterman CEO of Fortescue Metal Groups FMG Iron Bridge iron ore company and recently completed the US$1.15bn sale of a 31% interest in the project to Formosa Plastics Group.
• Masterman was also with McKinsey and at Anaconda Nickel. He is joined on the board by Byron Pirola also from Mckinsey.
• The board has a Technical Advisor in Fernando de la Fuente who has over than 39 years experience in the Exploration and Mining Geology industry in Europe.
• While we are ‘awed’ by the experience of the directors we are concerned that the board lacks the technical expertise to successfully build expand commission and run a tungsten project in Spain. Tungsten projects look relatively simple to build and run by many mining standards but have a habit of confounding teams who think they can assemble the kit and just expect good tungsten concentrates to flow.
• Running a small scale plant on the La Parrilla tin tungsten tailings might not be so hard but planning and building a new mine at Regua will be much more of a project.