(MENAFN- ProactiveInvestors)Economic News China – Industrial production and FAI growth rates are at their lowest in years in Oct/15. • Retail sales ticked up last month albeit the pace continues to run close to multi year lows. • Industrial production: 5.6%yoy/6.1%ytd v 5.7%yoy/6.2%ytd in Sep and 5.8%yoy/6.2%ytd forecast. • Fixed asset investments (FAI): 10.2%ytd v 10.3%ytd in Sep and 10.2%ytd forecast. • Retail sales: 11.0%yoy/10.6%ytd v 10.9%yoy/10.5%ytd in Sep and 10.9%yoy/10.6%ytd forecast. • As the government continues with the economy rebalancing industrial sector battles with slowing growth and falling earning margins. • China Shanshui Cement Group said it will struggle to make a CNY2bn (US$314m) debt payment and will be filing for liquidation. • This also marks 'an even default' on it sUS$500m 7.5% dollar bonds due 2020. • This is reported to be at least the sixth company to miss its obligations payments in the nation's onshore bond market this year. • The China Iron & Steel Association is reported to have reported losses of NCY28.1bn (US$4.4bn) in the first nine months of the year. UK – Employment growth and jobless rate come ahead of expectations while earnings marginally trail estimates. • Employment change 3m through Sep: +177k v +140k in 3m through Jun and +120k forecast. • Jobless rate: 5.3% v 5.4% in the previous 3m and 5.4% forecast. • Earnings ex bonus: 2.5% v 2.8% in the previous 3m and 2.6% forecast. Currencies US$1.0742/eur vs 1.0740/eur yesterday. Yen 123.09/$ vs 123.14/$. SAr 14.169/$ vs 14.307/$. Sterling $1.517/gbp vs 1.510/gbp 0.706/aud vs 0.706/aud – yesterday Commodity News Precious metals: Gold US$1090/oz unch vs US$1092/oz yesterday – Platinum US$901/oz vs US$913/oz yesterday - Palladium US$597/oz vs US$608/oz yesterday – Silver US$14.44/oz vs US$14.51/oz yesterday Base metals: Copper US$ 4936/t vs US$4940/t yesterday – Aluminium US$ 1507/t vs US$1498/t yesterday – Nickel US$ 9510/t vs US$9565/t yesterday – The market may slip into the first deficit in a number of years in 2016 driven by a decline in Total production according on Beijing Antaike estimates. • A deficit of 23kt from surplus of 49k forecast. • Production in China the world's largest supplier is expected to fall 9.7%yoy to 560kt in 2016 including 350kt (-7.9%yoy) from NPI. • World production to fall 0.6%yoy to 1942kt next year. • In Indonesia nickel production capacities to more than triple by 2020 (380kt v 110kt in 2014) as Chinese accelerate construction of furnaces. • World demand is expected to climb 3.1%yoy to come in at 1965kt in 2016 with consumption in China up 2.1%yoy. Zinc US$ 1583/t vs US$1623/t yesterday – Lead US$ 1600t vs US$1645/t yesterday – Tin US$ 14600/t vs US$14500/t yesterday – Energy: Oil US$47.3/bbl unch vs US$47.0/bbl yesterday – Natural Gas US$2.312/mmbtu vs US$2.309/mmbtu yesterday Uranium US$36.00/lb unch vs US$36.00/lb yesterday – Bulk commodities: Iron ore 62% Fe spot (cfr Tianjin) US$47.3/t vs US$47.7/t – yesterday Thermal coal (1st year forward cif ARA) US$46.80/t vs US$47.40/t – yesterday Steel – Steel production decline in China accelerated in Oct with Total output down 3.1%yoy taking the fall in the first 10 months to 2.2%yoy. • Previously Shanghai Baosteel estimated production may eventually fall by some 20% in the long run and by at least 10% within the next decade. • BMI Research forecasts production to contract 1.4%pa between 2016 and 2019 versus the average of +6.6%pa from 2011 to 2014. Other: Tungsten - APT European prices $165-195/mtu as of last Fri unch Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10. Company News Anglo Asian Mining * (LON:AAZ) 5.1p Mkt Cap £5.7m – Going polymetallic (update note) • Flotation plant commissioned in Q3/15 constructed in under a year and at a c.US$5m cost to add a copper concentrate revenue stream from the polymetallic Gedabek mine. • Flotation circuit is in a ramp up stage towards 90tph capacity which is estimated to potentially yield 5kt Cu 16koz Au and 130koz Au in concentrate per annum. • Concentrate revenues to account for c.80% of Total group revenues once the available agitation leaching (AL) treatable ore is depleted in 2018. • AL tailings to provide low cost feed for the flotation plant benefiting unit operating costs improving overall metal recoveries raising FCF generation and helping in deleveraging of the business. • Current P/BV at 14% reflects business' cash generation and debt service concerns. • ATB debt amortization is manageable (US$2.5m per quarter through H2/18) assuming flotation plant performs in line with expectations; although a share of planned debt repayments due in 2016 to local lenders may need to be rolled over. • Flotation concentrate circuit to raise annual gold equivalent (GE) output and monetise available 102kt Cu contained in reserves but more importantly to cut operating unit costs and lead to a significant step up in EBITDA. • With concentrate revenues expected to account for a third of net sales in FY16 we re-calculated Total gold/copper/silver production and unit cost measures based on GE ounces using our long term metal prices assumptions (see the table); • Total cash costs (TCC) are forecast to further decline in FY16 from reduced levels in FY15 ($744/oz v $804/oz) on stronger production (115.2koz GE v 75.9koz GE (70.5koz Au)) and lower unit processing costs thanks to reduced cyanide usage at the AL plant; • EBITDA to come in at $35.1m next year up from $16.6m in FY15 translating into $22.6m in FCF a considerable improvement on $4.0m expected this year. • On DCF NAV basis (21.3p at 12% DR) the start of flotation concentrate production offers considerable upside to the current share price albeit the downside is equally significant should the plant fail to perform. • We reiterate our HOLD recommendation pending operational and financial results of the flotation plant operations ramp up. (Dec year end) 2014 2015E 2016E 2017E 2018E Gold price US$/oz 1267 1158 1200 1250 1300 Gold production Koz 60.3 70.5 86.0 91.2 66.9 GE production 115.2 124.2 99.9 C1 cash costs (incl PSA)) US$/oz 971 702 610 624 598 TCC (net of PSA) US$/oz 1168 804 744 764 744 Revenue US$m 68.0 76.9 111.4 125.7 104.3 EBITDA US$m 10.1 16.6 35.1 42.2 38.6 PAT US$m -10.9 -9.3 6.5 9.2 9.9 Basic EPS USc -9.8 -8.3 5.8 8.1 8.8 FCF US$m -6.9 4.0 22.6 13.0 26.6 EV/EBITDA 7.7 3.5 1.6 1.4 1.5 PER - - 1.3 0.9 0.9 Net Debt US$m 52.4 49.1 26.5 13.5 -13.1 Long term price assumptions: US$1300/oz Au US$6500/t Cu US$16/oz Ag Source: SP Angel Company *SP Angel acts as Nomad & Broker to Anglo Asian Mining. SP Angel analysts have visited the Gedabek and Gosha mine sites Centamin (LON:CEY) 58.4 pence Mkt Cap £672.8m – Quarterly Update in Line • Gold produced for the quarter was 105413 oz in line with the previous quarter and up 13% on the same time last year. • Gold sold was 104803 oz generating revenues of US$118.529m. • All in Sustaining Costs were US$981/oz against an average realised price of US$1131/oz. • Cash generated from operations over the quarter was US$31.3m in line with last year when average realised gold prices were US$1267/oz 11% higher. • EBITDA for the quarter was impacted by a fall in average realised prices by 5% from the prevous quarter a 6% increase in mine production costs and an increase in inventory and ore stockpiles. • Reported earnings fell as a result of a higher depreciation and amortisation charge as a result of a reserve update and changes in amortisation charge for capitalised underground development. • The company expect a stronger fourth quarter to deliver 430000 and 440000 oz for the full year. • For the full year the company also expect to improve on costs with a guided cash cost of production of US$700/oz and AISC of US$950/oz. • At the end of the quarter the company had cash and available for sale assets Totalling US$216.1m. Conclusion: Costs are up this quarter which may disappoint but the company expect the fourth quarter to be stronger both in terms of production and costs. Amortisation charges have gone up resulting in much larger hit to reported earnings – this does not impact cash and the cash flow potential as production grows and costs come down. This is still one of the better stories in the sector. Gem Diamonds (LON:GEMD) 103 pence Mkt Cap £142.4m – Positive Trading Update • Letseng: The company recovered 29460 carats from 1.758m ore treated and 6.24Mt of waste for the quarter. • Recovered grades were higher in line with the mine plan of mining higher grade ore in the Satellite pipe. • Letseng's Plant 1 and 2 treated 1.47 Mt of ore with 55% from the Main Pipe and 45% from the Satellite pipe. • The company sold 25460 carats for the quarter achieving revenues of US$65.6m with an achieved US$/carat of $2578/carat. • Guidance for Letseng has been revised with most parameters in guidance seeing tighter ranges rather than significant absolute changes. • Carats recovered now being guided to the upper end of the range at 105 -108 Kcarats against 102-107 Kcarats previously. • Direct cash costs before waste now 140-150 Maloti/t against 145-155 Maloti/t. • Operating cost per tonne treated now 205-225 Maloti/t against 210-230 Maloti/t. • Ghaghoo: For the quarter 31922 carats were recovered at a recovered grade of 29.1 cpht. • A second parcel of 29891 carats were sold for US$4.9m in July 2015 achieving a price per carat of US$165/carat. • The water at the rim tunnel is said to have been successfully sealed and development has now progressed through the fissure area. • Five development tunnels are being mined with a further four tunnels being developed. • Group cash at hand stood at US$86.1m US$72m attributable to Gem Diamonds. • Net cash stood at US$54m after US$20.2m was paid in dividends. • The diamond market remains soft according to the company with the higher value stones from Letseng still performing well. Conclusion: This trading update reads well with Letseng's specials still performing well in an otherwise softer market for diamonds. Ghaghoo's operational problems in terms of water encountered during tunnelling appear to have been fixed – this should enable more mining to be done and better visibility on the prospects for diamonds from Ghaghoo. The company also benefits from having cash on the balance sheet. This is a positive update in a sector that has been an easy sector for shorts with Petra Diamonds being an easy target against a more difficult trading environment for its broader spread of diamonds. Debt on the balance sheet is also acting as a negative in the sector. Our view is that the sector looks oversold but needs a more continuos stream of positive news flow on demand before the sector turns. Investors with a longer terms view should be picking up these stocks. Minera IRL (LON:MIRL) SUSPENDED – Shareholder Group requisitions EGM to replace the current Board of Mineral IRL Limited • A group of 'concerned shareholders' representing 10.9% has requisitioned an EGM and is seeking the removal of the current Board and its replacement by 6 new directors. The meeting is to be held on 26th November. • This EGM appears to be a response to the move by the incumbent management of Mineral IRL Limited in calling an EGM of the 99.9% owned subsidiary Mineral IRL SA to remove the current Board of the subsidiary appoint its nominees and revoke the Powers of Attorney currently held by management in the operating subsidiary. That meeting is scheduled for 'no later than November 11 2015.' [Today] • The concerned shareholder group is nominating the following as directors of Minera IRL Ltd • We observe that this group offers a blend of Peru – focussed high level technical and operational experience and is in contrast to the existing Minera IRL Limited Board which according to the company's website is comprised solely of non-executive directors • Robin Fryer and Douglas A Jones were elected by shareholders at the last AGM on the 27th August while Dr Jaime Pinto was appointed by the other two remaining board members following the failure by Daryl Hodge the previous Executive Chairman to win shareholder support. • We continue to support Diego Benavides who we consider is working in the best interests of shareholders to maintain gold production and to advance the new Ollachea gold project. o Jorge Luis Ramos – CEO of 'Cofide Peru's state-owned development bank' o Julian Bavin – 'former CEO of the Americas of Rio Tinto' o Leonard Harris – 'former CEO of Minera Yanacocha' o Frank O'Kelly – 'former member of JP Morgan' o Armando Lema – 'Partner in Estudio Thorne Echiandia & Lema' and o Diego Benavides – 'Company co-founder and President of Minera IRL SA and Compania Minera Kuri Kullu SA' o Dr Jaime Pinto Non-Executive Chairman – 'currently the principal partner of Estudio Pinto & Abrogados law firm in Lima…' o Robin Fryer Independent Non-Executive Director – 'had a long and distinguished career with Deloitte LLP where he led the global mining and metals industry practice…' o Dr Douglas A Jones Independent Non-Executive Director – 'is the Chair of the Company's Compensation Committee and a geologist with more than 35 years' experience in mineral explration having worked extensively in Australia Africa the Americas and Europe….' * SP Angel analysts are expressing their own views and opinions in this analysis. SP Angel has no corporate connection with Minera IRL or its subsidiaries. SP Angel holds no shares in Minera IRL and does not have any current financial arrangements with the company. Stratex International (LON:STI) 1.825 pence Mkt Cap £8.5m – Oksut receives EIA approval • Stratex reports that its former joint-venture partner Centerra Gold has received the final approvals for the Environmental Impact Assessment (EIA) for the Oksut gold project in Turkey. • Stratex sold the project to Centerra Gold in 2013 but retains a 1% NSR on the project up to a maximum of US$20m. • According to Centerra's announcement 'The Company will now focus on obtaining all the necessary land use and other operational permits to allow us to start construction and development of the project late in the first quarter or early in the second quarter of 2016. We are on schedule so far with first gold production anticipated in the second quarter of 2017.' • Centerra has also commented that there is additional exploration potential on the property within close proximity to the main reerve are and that it plans to start drilling 'once the necessary drill permits are approved.' Conclusion: Progress towards production during Q2 2017 at Oksut is good news for Stratex which holds a 1% NSR
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