(MENAFN- ProactiveInvestors) US Auto sales rise 15% yoy in January
• US auto sales climbed 15% yoy in Jan with high priced pickups and SUVs making up over half of all shipments
• The sales mix indicates how lower gasoline prices is driving new demand
• All 3 Detroit car makers (GM Ford and Fiat Chrysler) posting double digit growth (+18%yoy +16%yoy and +14%yoy respectively).
• Gasoline prices have been falling since Jun last year and hit US$2/g earlier this month.
• For 24 month average retail price chart check the link: http://www.gasbuddy.com/gb_retail_price_chart.aspxtime=24
Toyota raises profit expectations
• The impact of moving currencies is showing dramatic effect around
• US companies are blaming a stronger dollar for falling profits while Toyota forecasts record profits helped by the weaker yen
• While it is easy for management teams to blame much on currency movements it does highlight the competitive advantage offered when currencies are artificially low due to stimulus policies.
• One could argue that the Chinese Renminbi has been kept artificially low relative to the US dollar for many years and should be allowed to float more naturally.
• We could also argue that the German economy has been boosted by a Euro which is cheaper than a Deutsche Mark would have ever been
• Input costs for miners are hugely sensitive to local currency movements as well as diesel and local power costs
• Recent weakness in the Australian dollar is beginning to make the region more attractive though local labour costs are said to be slow to fall.
• The collapse of the Russian Rouble is profound
• Conversely recent strength in the US dollar and therefore the Renminbi should have more impact on miner’s costs in these regions
Taiwan plane crash kills 15
• A TransAsia plane has crashed in Taiwan after a reported engine flame out on takeoff
• The plane clipped a bridge with a wing causing it to crash dramatically into a river in Taipei
• The plane was less than a year old and was carrying 58 passengers and crew.
Zambia – New President Edgar Lungu has asked the Zambian Cabinet to consider the impasse over the new mining tax regime and VAT refunds for mining companies.
• “I want an amicable settlement that must end in a win-win outcome for both the mining companies and the people of Zambia” he said.
Cape Town
• We will be at the 121 / SP Angel event at the historic Welgemeend farm house in Cape Town near the Mt Nelson Hotel on Monday and Tuesday
o • Click link for the brochure: Click for brochure
Economic News
US – S&P rating agency will pay US$1.5bn to settle a number of lawsuits over ratings released on mortgage securities in the run up to the 2008 financial crisis.
• Under the deal S&P did not admit to any wrongdoings but the agency signed a statement that its executives in 2005 delayed the integration of new valuation models that would have produced more negative ratings.
• The payout is estimated to exceed the Company’s profits earned on rating mortgage-backed securities from 2002-2007.
• A report released yesterday showed US factory orders fell more than expected in Dec (-3.4% v -1.7% in Nov and -2.4%yoy forecast) marking the fifth consecutive monthly decline.
• On a more positive note the report showed business spending measured by orders for non-defense capital goods (ex aircrafts) slipped only marginally (-0.1%) compared to a 0.6% decline reported in the previous month.
• Economic news due today:
o Jan ADP employment change (+220k v 241k in Dec) Jan ISM services PMI (56.4 v 56.5 in Dec).
Eurozone – Services sector at the fastest pace in 6 months in Jan according to the latest Markit survey results.
• Services PMI has been revised up to 52.6 from preliminary estimates for 52.2 and 52.2 in Dec.
• The business activity gained on the back of a fall in retail prices.
• Output prices fell to 46.9 from Dec’s 48.1.
• "The euro zone enjoyed a positive start to 2015 as growth of economic activity accelerated. Among the big-four nations output expanded in Germany Italy and Spain but the downturn in the French economy extended into its ninth month" Markit said.
Greece – The ECB did not accept a new Greek government’s proposal to raise the €15bn ceiling on short-term financing temporarily while Athens renegotiate its debt restructuring.
• Yanis Varoufakis Greek finance minister had proposed to the ECB to increase the ceiling by €10bn which would have acted as “bridge financing” after the bailout programme expires on 28 Feb.
• Should Greece choose to exit the bailout programme and review its economic reforms ECB may close access of Greek banks to emergency funding.
• Some of the Athens’ new proposals include revising budget surplus targets currently in the bailout programme from 4% to 1-2%.
• Market estimates suggest the government has got funds to make it to Jun before a €3.5bn bond comes due.
• Eurozone finance ministers are expected to meet in Brussels on Feb 11 and discuss Mr Varoufakis’s proposals.
US$1.1453/eur vs 1.1336/eur yesterday. Yen 117.34/$ vs 117.38/$. SAr 11.417$ vs 11.495$. $1.519/gbp unch vs 1.504/gbp
A$0.7790 vs 0.7669 – Aussie dollar now close to Central Bank target of A$0.750. US accuses the Australians of manipulating rates to weaken their currency
Australia is struggling to compete with Japan and other Asian nations and is sensitive to its exchange rate with respect to tourism and other industry
Commodity News
Precious metals:
Gold US$1265/oz vs US$1283/oz yesterday -
Platinum US$1239/oz vs US$1238/oz yesterday
Palladium US$787/oz vs US$794/oz yesterday
Silver US$17.35/oz vs US$17.03/oz yesterday
Base metals:
Copper US$5638/t vs US$5645/t yesterday - Mongolia voted in favour of the underground expansion of the Oyu Tolgoi project in a “text message referendum”.
• By saying Mongolia we mean c. 10% of the nation’s 3.3m mobile phone subscribers who responded to the poll.
• Media reported 59% had responded positively to more investment as opposed to a cut in spending and the launch of austerity measures.
• Oyu Tolgoi commissioned in 2013 is currently being run as an open pit with plans for development of the high grade underground Hugo Dummett resource now postponed on the back of disputes with the government.
• The development is estimated to cost US$4.9bn according to the latest technical study released by Turquoise Hill a subsidiary of .
• The government owns a 34% interest in the project.
Aluminium US$1873/t vs US$1894/t yesterday
Nickel US$14940/t vs US$15455/t yesterday
Zinc US$2139/t vs US$2159/t yesterday
Lead US$1837/t vs US$1862/t yesterday
Tin US$18874/t vs US$18940/t yesterday
Energy:
Oil US$56.70/bbl unch vs US$56.55/bbl yesterday
Gas US price US$2.711/mmbtu vs US$2.634/mmbtu yesterday
Uranium US$37.55/t unch vs US$37.25/t yesterday
Bulk commodities:
Iron ore spot price index (62% fines Tianjin) $62.9/t yesterday vs $61.9/t on Friday – Big fall in price leading fall in Baltic price index
Thermal Coal (CFR European ARA price) $61.30/t yesterday vs $60.50/t on Friday –
Anthracite Coal – prices are likely to rise with supply issues out of the Ukraine and with Vietnam withdrawing production from seaborne markets
Speciality metals and alloys:
Tungsten APT European US$292.5/mtu unch vs US$292.5/mtu last week
Ferrochrome HC $1.08/lb Cr Q1 vs $1.15/lb Q4 quarterly Benchmark pricing
Indian Metals and Ferro Alloys Ltd the Indian ferrochrome producer listed on the Bombay Stock Exchange incurred a Rs3.74cr loss in Q3 as chrome ore mine closure due to clearance issues. The government forced the closure of the company’s chrome mine but has now given permission to restart production in October.
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
Anglo-African Minerals plc (AAM – GXG markets)
• Anglo-African Minerals which is looking to develop bauxite project in Guinea has appointed a new Project manager and construction consultant
• Anthony McCabe has more than 35 years of experience in the bauxite and alumina industries with BHP Alcan and others
• McCabe has spent the past 10 years in Guinea as Vice President and Project Director of Global Alumina's interests in the development of a bauxite mine alumina refinery and associated infrastructure.
• It is impressive to see the company take on someone with such relevant and extensive experience.
• Guinea is the go-to destination for mineable bauxite reserves and resources.
• The company has two licenses along the Conakry – Bamako railway project. Other licenses are close to existing roads.
• The company has the grand ambition to develop a vertically integrated bauxite and alumina project though it is realistic enough to suggest a more simple bauxite mining and export project might generate revenue subject to the development of the Trans Guinea Railway and while the alumina refinery is being constructed.
() – Further $4.5m loan facility with ZCI
• has signed a further loan facility with ZCI Limited its controlling shareholder.
• The loan is for $4.5m and bears a 9% interest rate
• The funds are to provide additional working capital due to lower copper prices and lower than planned production levels at the Thakadu copper mine in Botswana.
• Cost cutting: The board are cutting costs and have suspended stripping at the Mowana open pit to improve liquidity.
• Copper ore is now exposed and mineable at Mowana and is due for mining from July this year when ore at the Thakadu mine is estimated to run out.
• Debt: ZCI suspended all principal and interest payments as announced on 19 December along with the intention of the provision of up to $7m to enable the company to meet its liabilities. The $7m commitment is now available through today’s $4.5m + $2.5m a previously announced.
• currently owes ZCI approximately $100.5m.
• “The Company is taking steps to commence the process of securing additional long term funding for the new life of mine plan with an expectation of resuming Mowana waste stripping and increasing the level of ore throughput to the plant. Should the Group not secure additional funds and if current market conditions prevail the Board believes that the Company may not then be able to continue as a going concern.”
Anglo Pacific () – Royalty agreement on Narrabri Coal Project
• Anglo Pacific has announced a conditional agreement to acquire a 1% royalty on the gross revenue of the Narrabri coal mine in New South Wales for US$65m made up of $60m in cash and $5m in Anglo Pacific shares.
• The royalty which takes effect from 1st January 2015 covers the Narrabri North underground longwall mine and the adjacent Narrabri South exploration area. Narribri North has JORC compliant Proven & Probable Reserves of 140m tonnes of coal included within an overall resource for the project area of 180mt of indicated resources and 380m tonnes of inferred resources.
• The mine which is operated by ASX listed Whitehaven Coal Ltd (WHC AU) is located in the Gunnedah Basin and produced 3.7m tonnes of coal in FY 2013 and 5.7m tonnes in FY 2014. Target production for FY 2015 is 6.5mt and 7mt in FY 2017. The Narrabri North mine has an estimated life of 22 years.
• The project has a number of potential expansion opportunities which “have the potential to increase ROM production beyond the approved 8mtpa”.
• The acquisition is funded from a combination of a proposed Firm Placing and Open Offer to raise US$55-60m and a US$30m 3 year revolving credit facility from Bank. The pricing of the Placing and Open Offer is to be determined as a result of a book-build
Conclusion: Securing a long term royalty on a large and growing coal mine in a stable mining area is a positive enhancement of Anglo Pacific’s portfolio. The company CEO’s comment “The Acquisition demonstrates the opportunities that the current market conditions provide and we will continue to look to enhance our royalty portfolio and further diversify our royalty income stream” can be interpreted as a clear statement of intent for the future.
Kefi Minerals* () – Tulu Kapi Resource Update
• Kefi Minerals reports an updated and independently verified indicated resource (JORC 2012 compliant) at its Tulu Kapi gold project in Ethiopia.
• The new resource estimate is 18.8m tonnes at an average grade of 2.67 g/t containing 1.62 moz of gold. An updated estimate of the inferred portion of the resource is expected “within the next couple of months” but as it will not form part of the mine planning currently underway it is clearly not a top priority task for the company.
• The indicated resource which has been independently verified by the consultants Snowden Mining Industry Consultants is based on 722 drillholes (118738m) including 298 diamond drill holes (72033m). The resource will now form the basis for a new reserve estimate and for mine planning.
• Almost 88% of the revised resource estimate (17.7m tonnes grading 2.49 g/t gold - 1.42m oz at a cut-off grade of 0.45 g/t) lies within the planned open pit mining area. The balance at a higher cut-off grade of 2.5 g/t amounts to 1.0m tonnes at an average grade of 5.6g/t gold represents a possible underground mining opportunity immediately beneath the planned open-pit mine.
• The updated resource shows a 2.2% increase in tonnage at a 3.9% higher grade than the previous resource published by Kefi Minerals for an overall increase of 6.6% in the contained ounces of gold.
• The new resource estimate also represents a 46% increase in the overall gold content of Tulu Kapi reported by the project’s previous owners in October 2012.
• The company is finalising its development plans for Kulu Tapi and expresses “confidence that development will commence in 2015 leading to commissioning at the end of 2016 for production in 2017”.
Conclusion: Since acquiring the Tulu Kapi project Kefi Minerals has made considerable progress on expanding the resource base and advancing plans for mine development.
*SP Angel act as Nomad to Kefi Minerals.
Sable Mining () – Resource update at Nimba Iron Ore Project
• Following the completion of a further 231 reverse-circulation drill holes in addition to the 373 holes previously drilled the company has issued a revised JORC (2012) compliant resource estimate for its Nimba iron ore project in Liberia. The resource estimate was conducted by the Australian consulting group Xtract Mining Consultants.
• The new estimate increases the overall size of the resource to 205.2m tonnes at an average grade of 57.8%iron from the previous (April 2014) estimate of 181.8m tonnes at 58.8% iron. Both estimates were prepared using a cut-off grade of 40% iron.
• Ninety-five percent of the new resource is classified as either measured (10%) or indicated (85%) compared to 82% classed as indicated in the earlier estimate.
• Based on an August 2013 resource (135.5mt grading 59.4% Fe) the company established a reserve estimate of 53.96m tonnes at an average grade of 61.6% iron for its March 2014 Preliminary Feasibility Study (PFS). The increased resource estimate is likely to justify a larger reserve a revision is expected to be released in Q3 2015.
• The company is reviewing its earlier Preliminary Feasibility Study (PFS) and expects to complete this work in Q3 2015 and to issue a full Bankable Feasibility Study by Q1 2016.
• Sable Mining confirms their “ultimate goal of achieving commercial iron ore production in H2 2016.”
Conclusion: The increased iron ore resource at Nimba is also expected to result in more Direct Shipping Ore helping to keep both capital and operating costs for the Nimba development project low.