(MENAFN- ProactiveInvestors)Mining sector ready to rally as investors take stock as commodity prices pause • A number of brokers have been calling an end to the recent rally in mining shares some even suggesting it should not have happened. But conditions have changed: • mining companies have largely resolved their debt issues • dividend cuts and further rationalisation has/is being done • losses from provisional pricing are now past • commodity prices are off their low levels and on rising trends • metal inventories are seen falling for many metals and have not built up to the levels seen in previous recessions - excepting of nickel • currency weakness oil prices shipping and lower unit costs are helping margins to grow again • lower capital cost for big ticket items are helping to lower operating and sustaining capital costs • sales from sovereign wealth funds are likely to have slowed as oil prices rise again and short sellers should be more cautious this time round • It is natural for stocks and metals to pause after a run but in our view this is just the beginning of the recovery and certainly not the end. • We advise investors to buy the dips and not to sell this particular rally Coal producers may start to show meaningful recovery • US coal exports seen drying up as local production goes out of business • China planning to cut 1.3m coal jobs and close coal mines as part of its economic restructuring programme. • Lower production: A fall in US and Chinese coal production could allow seaborne coal prices to rise again • Australian and Indonesian coal production has been hit by lower prices but should see better times • Demand growth: Internationally the Asian market continues to grow and power stations using coal continue to be built at a great rate. • Europe's thermal coal demand is more robust than is often let on and can not rely on supply from Russia and the Ukraine. • Low inventories: Coal does not stockpile well as coal stocks tend to catch fire if not consumed relatively quickly – hence there is very little inventory overhang to work through • Margin growth: Higher prices should combine with reduced production costs from weaker local currencies oil prices and lower wage bills in many areas • The situation could help to create very good conditions for margin growth without the need for a raging bull market • We wonder when X2 Resources will step into the market to buy coal assets and to start building Xstrata MkII POD along to the 121 Mining Investment Conference in London on 14th -15th April at 8 Fenchurch Place Fenchurch Street Station • See the inflatable PODs at the 121 Mining Investment Conference - Investors and analysts go free: http://www.weare121.com/121mininginvestment-london/registration/register-investor/ Dow Jones Industrials +0.13% at 17252 Nikkei 225 -0.83% at 16974 HK Hang Seng -0.15% at 20258 Shanghai Composite +0.21% at 2870 FTSE 350 Mining +1.67% at 8730 AIM Basic Resources +1.46% at 1791 Economic News US – The FOMC announcement along with economic projections is due later today. • Markets are seeing only 4% chance the Fed will move forwards with another rate hike during this meeting according to Bloomberg estimates. • Chances improves through the year with the probability currently standing at 25% for the meeting in Apr and 54% in Jun. • Retail sales fell less than forecast in Feb; however Jan revised numbers have been cut into the red. • On a more positive note New York manufacturing index recovered from a Feb slump last month while core producer prices inflation (ex energy and food) doubled in Feb. China – Chinese economy will ne be having a hard landing and the government is committed to hit growth targets Premier Li Keqiang told reports during the closing of the Annual People's Congress. Japan – A day after announcing no change to the benchmark deposit rate the BoJ Governor told parliament that 'an additional rate cut to -0.5% is possible in theory'. UK – The Chancellor of the Exchequer will deliver the annual budget today with expectations for another round of spending cuts to be announced amid downgrades to UK growth forecasts. • Nov OBR growth forecasts targeted 2.4% and 2.5% in 2016 and 2017 respectively. • Market estimates are suggesting weaker pace of expansion (2.0% and 2.2%) suggesting risks to tax revenues growth and targeted balanced budget by 2019-20. Currencies US$1.1090/eur vs 1.1087/eur yesterday. Yen 113.69/$ vs 113.04/$. SAr 16.069/$ vs 15.629/$. $1.413/gbp vs 1.417/gbp 0.747/aud vs 0.746/aud. CNY 6.518/$ vs 6.514/$ unch. Commodity News Precious metals: Gold US$1233/oz unch vs US$1233/oz yesterday – Gold ETFs 55.8 moz yesterday vs 55.7moz yesterday – Platinum US$966/oz vs US$954/oz yesterday Palladium US$567/oz vs US$560/oz yesterday Silver US$15.29/oz vs US$15.31/oz yesterday Base metals: Copper US$ 4950/t vs US$4900/t yesterday – • LME inventories (170kt) have been trending downwards on the way to hit the lowest since mid-14; while SHFE stockpiles (350kt) are posting new record highs. Aluminium US$ 1515/t vs US$1527/t yesterday – Nickel US$ 8495/t vs US$8580/t yesterday – Zinc US$ 1745/t vs US$1755/t yesterday Lead US$ 1778/t vs US$1806/t yesterday Tin US$ 16820/t vs US$16800/t yesterday Energy: Oil US$39.3/bbl vs US$38.4/bbl yesterday Natural Gas US$1.866/mmbtu vs US$1.826/mmbtu yesterday Uranium US$29.15/lb vs US$28.50/lb yesterday Bulk comodities: Iron ore 62% Fe spot (cfr Tianjin) US$53.2/t vs US$54.1/t – • BHP is 'more bearish about the iron ore price than the price of any other commodity that is currently part of the (Company's) portfolio' CEO Andrew Mackenzie said in Melbourne today. • Demand is continuing to slow down while new supply is coming into the market BHP said. • 'Ultimately that excess of supply will drive prices lower than where they are currently.' Thermal coal (1st year forward cif ARA) US$40.30/t vs US$39.50/t yesterday – Other: Tungsten - APT European prices stood at $165-180/mtu vs $168-185/mtu last week Company News FinnAust Mining* (LON:FAM) 2p mkt Cap £9.7m – Pituffik project work program consultants appointed • FinnAust Mining have appointed NIRAS Greenland A/S and Orbicon A/S to progress permitting and regulatory work on the Pituffik project in Greenland. • Both consulting groups are respected and experienced in infrastructure and mining work in Greenland and Denmark. • The two companies have previously advised the US Air Force on environmental management at the Thule airbase in Greenland. • SP Angel recently raised £1m fir FinnAust at 2p/s for the advance the Pituffik titanium mineral sands project in Greenland. Conclusion: The involvement of NIRAS and Orbicon should speed up the permitting process and allow FinnAust to fast-track plans for production of high-grade titanium rich mineral sands. * SP Angel acts as nomad and broker to the company Firestone Diamonds (LON:FDI) 20.5 pence Mkt Cap £63.8m – Interim Results and Project update • This morning Firestone Diamonds reports a loss of US$4.6m or 1.5cents/share for the six month period ending 31st December 2015 which is broadly comparable with the US$4.4m loss in the six months to 31st December 2014 (1.4cents/share). • Firestone Diamonds' Liqhobong diamond mine development in Lesotho is now reported to be 68% complete (61% as of end December) and remains on track for initial production during the final quarter of 2016. 'Once full production is achieved during 2017 the Mine will enable Firestone to achieve its goal of becoming a leading global mid-tier diamond producer recovering one million carats per annum.' • The project remains within budget of US$185.4m. Project spending during the half-year amounted to US$46m. • Key advances during the period include the completion of a connection to grid power which was achieved ahead of schedule in October 2015 and the completion of a revised mine plan geological model and a resource estimate which now excludes the poorer 'boart' quality material. • The key site civil engineering works have now been completed and the fabrication and erection of the plant are now largely complete suggesting that installation of the equipment should now be well underway. • The BK11 mine has been conditionally sold to Tango Mining and remains on 'care and maintenance' pending completion of the transaction 'by no later than 8 April 2016.' • The company holds cash of US$14.2m (plus US$3.9m deposits paid on hedge transactions) leaving net debt of US$20m and gearing of 15%. Firestone Diamonds has a US$15m standby facility available as it proceeds with the development of the new mine at Liqhobong. Conclusion: Firestone Diamonds has made significant progress on the development of the new Liqhobong mine and having recovered from delays encountered early in project development is now on track to complete the mine within budget and deliver initial production late this year ahead of working towards full production in 2017.
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