(MENAFN- ProactiveInvestors) US Fed preparing new rules relating to banks active in physical commodity trading business.
• New measures include imposing additional capital requirements and limiting the amount and length of time banks can own such assets and the revenue they can derive from those activities.
Gold imports into China from HK rise on new year demand - Bloomberg
• Net imports rise to 71.6t in January vs 58.8t in December.
• Mainland buyers bought 82.5t inc scrap vs 128.4t in December
• Exports to HK fell 84% to 10.9t
• China now ranks second to India in terms of gold buying
Economic News
US – New home sales held close to the fastest rate in years in Jan supported by low mortgage rates.
• Sales totalled 481k (annualised) little changed from 482k in Dec and 470k forecast.
• The median sales price was US$294k up 9.1%yoy from Jan/14.
• Inventories of new homes held at 218k or 5.4 months’ worth of demand the most since Mar/10.
• Jan inflation numbers are due later today with estimates for a fall in general inflation on mom basis. Core CPI excluding volatile energy prices is expected show a marginal increase.
Germany – The forward looking consumer confidence index to increase to 9.7 in Mar after 9.3 recorded in Feb and 9.5 forecast (GfK
• This marks the highest reading in more than a decade.
• “At present German consumers are seemingly not be greatly affected by the recent escalation of the situation in eastern Ukraine the ongoing tensions between Russia and the West as well as event in Greece. Instead their optimism continues to grow as is refelected in the stable upward trend in economic expectations” the report read.
• Falling oil prices support improving income expectations.
• A separate report showed jobless rate came in line with expectations at 6.5% in Feb with unemployment down 20k during the month compared with a 10k decline in Jan.
Greece – A day after Greece agreed an extension to the bailout programme by 4 months with its creditors Athens said the government will struggle making debt payments to the troika.
• “We will not have liquidity problems for the public sector. But we will definitely have problems in making debt repayment to the IMF now and to the ECB in Jul” Greece Finance Minister said.
• Athens must repay an IMF loan of around €1.6bn maturing in Mar and around €7.5bn to ECB due in Jul and August.
• Greece is still due to negotiate the release of €7.2bn remaining under the bailout programme.
UK – Documentary on stories from old pitmen tells of days working down pit
• Age UK are selling a new film of ex-pitmen talking about their lives down-pit with allot of ‘When I were a lad’ type stuff.
• We know they had it tough back in the day and that the youngsters of today don’t know how easy they have it but there is nothing like making a film on the subject.
• The Mining the Past – Shaping our Lives DVD costs £13 inc. P&P contact margaret.parkinson@ageuknorthstaffs.org.uk
Philippines – New mining act may include the designation of certain areas as ‘mining free zones’.
US$1.1352/eur vs 1.1370/eur yesterday. Yen 118.76/$ vs 118.74/$. SAr 11.390/$ vs 11.426/$. $1.552/gbp vs 1.552/gbp
A$0.7885aud/usd vs 0.7880aud/usd
Commodity News
Precious metals:
Gold US$1214/oz vs US$1208/oz yesterday – 10 largest gold mining companies in China produced 253t (c.8.1moz) of gold last year.
• The government’s target is for those companies to hit 260t production in 2015.
Platinum US$1186/oz vs US$1170/oz yesterday
Palladium US$813/oz vs US$802/oz yesterday
Silver US$16.82/oz vs US$16.51/oz yesterday
Base metals:
Copper US$5882/t vs US$5765/t yesterday
Aluminium US$1818/t vs US$1810/t yesterday – Rusal expects aluminium to remain in deficit with LME stocks of 2.5mt by end 2015 down from c. 4mt 2014.
• Global aluminium demand is expected to remain strong growing 6.5% (China +9.5% and ex-China +3.4%) to 59mt this year with a limited production outside of China. Chinese market to remain in overcapacity with excess production finding its way in overseas markets.
Nickel US$14520/t vs US$14395/t yesterday
Zinc US$2092/t vs US$2070/t yesterday –
• Mitsui Mining and Smelting the biggest zinc producer in Japan cut annual charges to overseas buyers amid growth in regional supply predominantly from China.
• Major clients in the Asian market are seeing a 10% decline in premiums from a record in 2014.
• Zinc deliveries in Asia are reported to have increased last year amid a crackdown on financing deals in China as the metal previously held as collateral was released into the market.
• The Company noted it was unusual to see China a net importer of zinc exporting large quantities of the metal.
• China shipped 131kt of zinc in 2014 up from 3kt in 2013.
Lead US$1771/t vs US$1777/t yesterday
Tin US$18160/t vs US$18090/t yesterday
Energy:
Oil US$61.5/bbl unch vs US$58.6/bbl yesterday – Inventories in the US climbed 2% or 8.4mbbl last week more than double market forecasts.
• US inventories remain at their highest levels in at least 80 years according to Bloomberg estimates.
Natural Gas US$2.871/mmbtu vs US$2.910/mmbtu yesterday
Uranium US$38.75/lb unch vs US$38.75/lb
Bulk commodities:
Iron ore spot price index (62% fines Tianjin) $62.60/t unch vs $62.60/t
Thermal Coal (CFR European ARA price) $62.35/t vs $61.70/t Yesterday –
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
• Ferbasa in Brazil report lower sales of ferrosilicon and low carbon ferrochrome. Revenues rise on higher local prices
• The company sold 9308t of high carbon ferrochrome in January down 3.3% yoy
Company News
() – Maiden Resource estimate at Los Picachos
• The company has issued an initial JORC compliant resource for its Los Picachos project in Chile. At a cut-off grade of 02% copper the measured & indicated amounts to approximately 3.9m tonnes at an average grade of 0.88% copper and 7.75g/t silver with an additional 2.2m tonnes grading 0.82% copper and 7.33 g/t silver.
• Using a higher 0.85% copper cut off grade the company has identified a higher grade core of mineralisation totalling 3.4m tonnes grading 1.12% copper and 9.6 g/t silver within this overall resource. Fifty-six percent of this high grade core is classed as measured and indicated.
• Recently identified mineralisation between the 40M Shaft and the Flor del Bosque area is not included in the estimate released today. Mineralisation remains open both laterally and at depth.
• In addition to the resource estimate a review of the geological model has identified “several new target areas with considerable untested potential for higher grade tonnes”.
Conclusion: Herencia is fast-tracking mine development at Los Picachos with production targeted for the second half of 2015. The resource estimate provides a basis for detailed mine development planning and highlights the additional exploration potential of the licence area. The full extent of mineralisation has yet to be determined and “sterillisation drilling” may be prudent to ensure that the plant is not located over viable mineralisation.
* () – Production and cost control to deliver value
Today we publish the attached note on
• We have adjusted our valuation following interim results and annual production forecasts released by the Company this Monday.
• Production to recover in H2/FY15 in line with management annual revised output guidance for 200-205kt FeCr (H1/FY15: 98kt H2/FY15: 107kt).
• Stronger production to be led by an accelerated supply of high grade LG6 and MG1/2 ores stable deliveries of the UG2 concentrate and improved furnaces’ performance.
• On a cost front operations have now come down significantly after the Section 54 stoppage in Nov last year with unit costs running at normalised levels as of Dec/14 (R7.23/lb v R8.15/lb average in H1/FY15).
• We expect costs to average R7.65/lb for H2/FY15 reflecting local inflation pressures and 12.5% increase in power costs planned for Apr/15 in particular.
• Stronger production in H2/FY15 together with well contained cost inflation to translate into positive EBITDA (H2/FY15: +R40m FY15: - R54m).
• Post FY15 we expect production to increase towards optimal 90% capacity utilization rates or 240ktpa FeCr on improved furnace charge and stable smeting process.
• Stronger FeCr imports in China on limited local capacity utilization as well as an increase in nickel prices on tightening market balances and solid stainless steel production are expected to bode well for FeCr prices and IFL operating margins from FY16 onwards.
• Our model on shows significant inherent value for the company’s two ferrochrome furnaces in Buffelsfontein South Africa.
• Our NAV value of US$125m equates to 14 pence per share at an 8% discount rate implying a significant upside potential to the current share price.
• We provide a brief summary of the note together with our earnings forecasts below:
June year end FY2014 FY2015e FY2016e FY2017e FY2018e
Sales US$m 201.6 181.9 218.7 225.3 232.1
EBITDA US$m 19.4 -4.8 21.9 23.3 25.1
EBIT US$m 10.1 -13.1 14.2 15.9 18.0
PBT US$m 3.9 -19.2 8.9 10.9 13.1
PAT US$m 4.2 -19.1 6.6 8.0 9.7
EPS USc 0.76 -3.45 1.19 1.45 1.75
Cash Flow US$m 3.2 -10.4 2.9 9.1 11.4
Cash flow (-26% BEE) US$m 3.2 -10.4 2.1 6.7 8.4
EV/EBITDA na 3.4 3.1 2.8
PER na 4.7 3.8 3.0
Source: SP Angel Company
*SP Angel acts as Joint Broker to the Company
Kefi Minerals* () - Update on Share Placing
• The company has completed the final tranche of its share placing.
• The placing is for a total of 420769231 shares to raise £4.9m.
• The placing is to be fund the company through its next phase of development of Tulu Kapi.
• As a result of the placing Goldfields Resources Fund will become the largest shareholder with 15.7%.
Conclusion: Completion of funding gives Kefi the funds to start the work prior to construction targeted in late 2015.
*SP Angel act as Nomad to Kefi Minerals.
() – New Liquidity Line Being put into place
• Absa Bank are working with the company to improve the financial stability of the firm.
• A new liquidity line to fund working capital is being considered.
• The company are planning to deliver a budget to project lenders.
• This has been deferred to 31 March 2015.
() - Interims
• The company reported EBITDA of £12.9m down 54%.
• Revenues were down 20% to £68.1m.
• All in sustaining costs of US$1165/oz up 21%.
• Average gold price received was 6% down.
• Production was negatively affected by oil contamination with the BIOX plant and section 54 stoppages at Barberton Mines.
• Lower gold oz sold as a result of lower grade mining cycle at Evander Mines.
• Gold sold fell by 7% to 52942 oz.
Conclusion: These numbers do not look good with production and costs suffering.