(MENAFN- ProactiveInvestors)
Glencore () – Prelims for 2014 in line
Mwana Africa () – Bond Issue for Bindura Nickel
() – Progress of buy-back programme
Rare Earth Minerals () – Increased holding in
XS Platinum – Mine geologist set to plead guilty on charges of pollution in Alaska
US - markets hit all-time high despite companies warning on the effects of a stronger dollar on their overseas earnings
• The Dow Jones index hit 18288.63 with the S&P rising to 2117.39
US – Inflation measured by the PCE index closely watched by the Fed with respect to benchmark target slowed in Jan (+0.2%yoy v +0.8%yoy in Dec and +0.2%yoy forecast) on the back of weaker oil prices.
• Excluding energy and food prices PCE core came in at +1.3%yoy unchanged from the rate in Dec and in line with market estimates.
• Serious delinquencies rate continued to decline in Jan (1.86% from 1.89% in Dec) according to Fanie Mae.
• The “normal” rate is considered <1% with expectations for the market to hit 1% levels in H2/16. This compares to a peak reached in Feb/10 of 4.20%.
• ISM manufacturing PMI fell 0.6 points to 52.9 in Feb versus 53.0 forecast with numbers affected by a prolonged negotiations over pay and benefits of dockworkers at West Coast ports that led to a significant fall in turnover at operations.
• The Pacific Maritime Association which represents the management of the ports and the International Longshore and Warehouse Union reached a deal in the end of Feb on a five year contract that should see the congestion cleared as operations come back to normal.
• The management reported the average unionised dockworker is currently on US$147000pa. The union argued the figure includes significant overtime and non-salary benefits saying the pay amounts to less than US$100000pa on average.
• The dispute affected new business orders which saw a 0.4 points decline to 52.5 in Feb.
• Economic news due today:
o Feb light vehicle sales (16.7m units annualised rate v 16.6m in Jan)
China – Party leaders and lawmakers meet this week as part of a regular annual event.
• Estimates are for the new GDP target to come below last year’s “around 7.5%” and announcements on new potential economic stimulus in the light of increasing risks of deflation.
• The PBOC has recently showed government’s pro-stimulus intentions by cutting benchamrk lending and deposit rates.
Eurozone – Inflation rate recorded a third consecutive yearly decline in Feb (-0.3%yoy v -0.6%yoy in Jan and -0.4%yoy forecast) according to the Eurostat.
• Core CPI growth was unchanged last month at 0.6%yoy in line with market estimates.
• Retail sales in Germany climbed more than forecast in Feb (+5.3%yoy v +4.8%yoy in Jan and +3.0% expected) on the back of strong labour market and a real decline in prices.
• That was the strongest increase since Jun/10 and the second consecutive positive reading.
Australia – The Australian dollar surged against the US counterpart following the RBA decision to leave benchmark rates on hold (2.25% v 2.00% forecast).
• The surprising decision was led by increasing risks in the housing market.
• Property growth in major cities accelerated recently. Prices in Sydney the largest Australia’s city climbed 13.7%oy in Feb marking the strongest gain since Sep/14.
• “Further easing of policy may be appropriate over the period ahead in order to foster sustainable growth in demand and inflation consistent with the target” Governor Glenn Stevens said.
• Commenting on the currency the Bank continues to hold the view that it “remains above most estimates of its fundamental value particularly given the significant declines in key commodity prices”.
Canada – PDAC address by Canada’s Federal Ministry for Natural Resources reckons Canada’s low-tax approach supports Canada’s competitiveness
• Mining generates $60bn pa and employs 380000 Canadians including 10000 aboriginal peoples according to the ministry
• Speaking at the PDAC conference Kelly Block referred to a number of important government announcements supporting exploration and mining development including:
o Proposal to extend the 15% Mineral Exploration Tax Credit for another year. The tax credit has helped juniors to raise more than $5.5b since 2006. The credit is scheduled to expire at the end of this month;
o Proposed expansion of the definition of Canadian Exploration Expenses for tax purposes to include costs associated with environmental studies and community consultations that are required to obtain a permit for grassroots exploration. Companies can deduct such costs immediately making it easier to raise capital.
US$1.1173/eur vs 1.1213/eur yesterday. Yen 119.74/$ vs 119.86/$. SAr 11.730/$ vs 11.713/$. $1.537/gbp vs 1.542/gbp
A$0.7810aud/usd vs 0.7784aud/usd. – Euro continues weakening
Commodity News
Precious metals:
Gold US$1209/oz vs US$1215/oz yesterday – India leaves import gold taxes unchanged in a new budget.
• Purchases are further expected to pick up through Mar/Apr before the start of the Akshaya Tritiya festival a traditionally strong period for gold demand starting on Apr 21.
Platinum US$1186/oz vs US$1184/oz yesterday
Palladium US$825/oz vs US$817/oz yesterday
Silver US$16.41/oz vs US$16.64/oz yesterday
Base metals:
LME plans to raise the load out rates for registered warehouses with queues longer than 50 days.
• The rule certainly to cover Metro Detroit in the US and Pacorini Vlissingen in Netherlands facilities which saw queues climbing to c. 570 days.
• The plan is to increase the decay factor in queues from 0.5 to 1.0 implying the accelerated LoadInLoadOut rule will be in place for 1 day to clear 1 day f queues as opposed for 2 days (under 0.5 factor).
Copper US$5840/t vs US$5904/t yesterday
Aluminium US$1794/t vs US$1821/t yesterday –
Aluminium – Qatar Aluminium sees strong demand in the auto sector for the refined metal.
• A fall in oil prices is argued may see drivers to be less fuel efficiency oriented affecting the manufacturers’ drive for higher usage of the metal in vehicles production.
• While a slower than forecast substitution of steels with aluminium in vehicles may be led by weaker oil prices in the medium to long term a more short term effect of lower prices at the pump is likely to be stronger vehicle sales and higher aluminium metal orders from the sector.
Nickel US$13690/t vs US$14000/t yesterday
Zinc US$2043/t vs US$2076/t yesterday –
Lead US$1740/t vs US$1738/t yesterday
Tin US$16660/t vs US$17900/t yesterday –
Energy:
Oil US$60.7/bbl vs US$62.3/bbl yesterday –
Natural Gas US$2.655/mmbtu vs US$2.697/mmbtu yesterday
Uranium US$39.00/lb vs US$38.75/lb
Bulk commodities:
Iron ore spot price index (62% fines Tianjin) $62.20/t unch vs $62.80/t
Thermal Coal (CFR European ARA price) $62.30/t vs $63.30/t Yesterday –
China ferro-alloy imports in January:
• Ferrochrome imports rose by +16.20% yoy to 213588t in January
• Chrome ore imports fell by 16.53% yoy to 772500t in January as China maintained the closure of a number of ferrochrome furnaces
• Manganese ore imports fell by 2.04% yoy to 1506265t
Speciality metals and alloys:
Tungsten APT European US$292.5/mtu unch vs US$292.5/mtu last week
Company News
Miners switching equipment suppliers
• Equipment and service providers have done well out of mining in recent years but are having to fight hard to win new business
• A survey by Timetric’s Mining Intelligence Centre ‘MIC’ reports that 60% of miners are looking to switch equipment or technology suppliers within the next five years.
• MIC surveyed miners in India Indonesia the Philippines Pakistan Vietnam Mongolia and Thailand.
• In India miners appear to be looking to upgrade to suppliers which are able to offer broader product ranges greater customisation and better quality
Glencore () 295 pence Mkt Cap £38.6bn – Prelims for 2014 in line
• Adjusted EBITDA down 2% to US$12.8bn with marketing EBITDA up 15% to US$3bn offsetting a fall in industrial EBITDA of 7% to US$9.8bn.
• Industrial metals and minerals made and EBTIDA of US$7.077bn down 1.7% on last year.
• Copper EBTIDA was down 8% over the period to US$4.3bn with margins falling from 42% to 36% against lower copper prices of 6% over the period and production up 4%.
• African copper continues to drive volume growth up 17% over the period to 465 kt.
• Zinc EBITDA was down 11% to US$1.397bn with margins falling from 24% to 21%.
• Nickel EBITDA was up 72% to US$1031 bn with margins expanding to 31% from 24%.
• Ferroalloy EBITDA was down 11% to US$307m.
• Marketing metals and minerals EBITDA was down 6% to US$1.545bn.
• Marketing agricultural products EBITDA did well up to US$996m from US$383m last year.
• EBITDA of the energy segment was US$3.406bn down 16% with industrial EBITDA of US$2.8bn down 16% and marketing EBITDA down 15% at US$565m.
• The bigger fall in EBITDA in the energy sector reflected the big fall in prices of coking thermal coal and oil down between 9-20%.
• Impairment charges of US$146m US$489m and US$212m were recognized respectively on the Mauritanian and Congo iron ore projects and the Matanda oil block in Cameroon.
• Reported cash from operating activities before working capital changes stood at US$10.978bn down 0.7%.
• Expansion capex over the period in metals and mining was US$3.5bn down from US$5.85bn in the previous year.
• Copper continued to be the main area of capex spend with expansion capex of US$2.074bn for the period.
• Total capex including maintenance capex was US$6.307bn in metals and mining down from US$8.692bn last year
• For the group capex is being guided down to US$6.5-US$6.8bn down from the original guide of US$7.9bn.
Conclusion: These results do not look bad against a sector where price falls have hit numbers more on a relative basis. Marketing EBITDA has offset some of the falls in industrial EBITDA. Looking at margins on the industrial metals and mining segment Rio and BHP have better quality assets with the scale to be positioned in the top quartile in terms of cost.
On a forward EV/EBTIDA multiple of 7.5x against 6.2x for BHP and 6.6x for Rio the stock is up with events on a relative basis. The latter are better positioned should sentiment change or prices improve while at the same time offer higher yields of 5.2% and 4.8% respectively against 4% for Glencore.
Mwana Africa () 1.80 pence Mkt Cap £25.2m – Bond Issue for Bindura Nickel
• Mwana Africa has announced that its 74.73% owned subsidiary Bindura Nickel (BNC) has successfully closed a fully subscribed US$20m bond issue to raise funds for the restart of the Bindura nickel smelter in Zimbabwe.
• The Reserve Bank of Zimbabwe classification of Bindura Nickel as a “Prescribed Asset” was granted in November 2014 “meaning that Zimbabwean asset managers are required to invest a certain minimum of their assets under management into prescribed assets.”
• The 5 year bond carries a 10% semi-annual coupon rate.
• The smelter is due to reopen in approximately nine months and Mwana’s CEO Kalaa Mpinga commented “… we shall endeavour to deliver on the stated 12-month accelerated restart plan.”
Conclusion: The re-build of the smelter will be key to transforming the fortunes for BNC and the company now has the funds in place to proceed. A recent site visit to BNC showed good progress on the plant with mining being more of a constraint. Mining is still from the high grade massifs on the footwall zone with the company progressing development into the main ore body with disseminated mineralisation – grades of the disseminated material are around 0.5 to 0.8% against the higher grades being mined. A 5000m drill programme currently being undertaken will result in an updated MRE.
*An SP Angel analyst recently visited the Mwana sites around Indaba this year.
(LI:NORD) US$2.70 Mkt Cap US$1028.7m – Progress of buy-back programme
• has updated the market on the progress of its share/GDR buy-back programme which was announced on 24th February. The acquired shares are to be cancelled.
• The company’s programme is to purchase a maximum of 19 million shares to a maximum value of US$30m. The programme will end on 31st December 2015 if the other targets are not exceeded first.
• To date the company has purchased a total of 438711 GDRs at a weighted average price of price of US$2.19/share (US$960493).
Rare Earth Minerals () 0.91 pence Mkt Cap £59.2m– Increased holding in
• Rare Earth Minerals reports that it has increased its holding in to 15.02% from 14.48% as a result of on-market share purchases amounting to £334564.
• REM also holds 30% direct interests in Bacanoras’s Mexican borates and lithium projects giving it a 40.51% interest in each of the projects.
• REM has been progressively increasing its holdings in Bacanora from 12% in December.
XS Platinum – Mine geologist set to plead guilty on charges of pollution in Alaska
• The mine geologist at XS Platinum’s now dormant Platinum Creek Mine which closed in 2012 due to foreclosure
• This is the first case in Alaska charging a mining company with criminal violations of the Clean Water Act and will be watched by many more
• XS Platinum had assured regulators the operation would reuse all mining wastewater in a self-contained ‘zero discharge’ facility. The mine was extracting PGM from old tailings by processing with fresh water with ponds used to settle waste materials.
• A failure to line the settling ponds contributed to the leakage of contaminated water to into nearby salmon streams.
• A report by the Alaska Dispatch news appears to point the blame on the company’s chairman and ceo Bruce Butcher who is reported to have said the project should move ahead without liners and insisted on keeping the operations going. Butcher also insisted on keeping the mine going in mid-July despite the appearance of cloudy water in the salmon river in 2011. Slade then led a tour of the mine for potential investors on July ’11 according to the report.
• We suspect Bruce Butcher and Mark Balfour another director who are Australian citizens might not be planning holidays in the US anytime soon though the US EPA is likely to push to have them appear in court soon.
• Perhaps ‘Toxic Bob’ alias Robert Friedland might have some advice for them. Friedland was one of three people pardoned by President Bill Clinton when he left office.