April 2017: Improving prospects?

While April was not a good month for metal market trading, investors focused on the improving prospects for mining now that the balance sheets of most major companies have been repaired. Exploration spend “is likely to creep up this year,” according to Deutsche Bank, as companies start advancing projects.

However, Deutsche Bank sees “a much slower pace of increase in growth capex than in the previous upcycle for some of the big miners, due to a more disciplined approach to allocating capital”. For maintenance spending, which includes mine replacement, it sees “an increase of 12% in 2017 and 16% in 2018”.

Worrying metal markets especially were signs that the pace of expansion in China’s manufacturing sector was easing. According to a Reuters’ poll, factory-gate price-growth slowed as the authorities moved to tackle risks in the property market and credit growth.

Markets

GOLD: Trading closed the month with a disappointed plunge in prices of a hefty 2.5%. This reflected the slowing of the flight of money to safe havens as the risks from the French of election were seen as diminishing. Global gold demand in the first quarter was down 18% compared to the same time last year, reported the World Gold Council (WGC), and inflows into exchange traded funds was a fraction of last year’s, admittedly near-record, inflows. Slower central bank demand also contributed to the weakness. However, investment in gold bars and coins grew by 9%, year on year. Much of this growth came from China, where retail investment was up 30%, the WGC commented, breaching 100t for only the fourth time on record.

PLATINUM: Eurozone car sales, a key determinant in platinum demand, fell by around 5% year-on-year in April, depressing prices.

IRON: The iron ore market surplus is expected by analysts at HSBC Global Research to “widen significantly over 2017”. They anticipate that the iron ore price will decline further on a widening surplus before stablising at around US$50/t. Normally, the first quarter of the year sees the seasonal low for iron ore supply, but this year all the major producers were able to deliver strong supplies.

COPPER: Prices for copper were also knocked back as the month closed, falling 3.4%. Analysts at bankers Macquarie commented that the negative influences were the rise in London Metal Exchange stocks and data indicating slowing economic growth in China.

NICKEL: Prices were depressed by prospects of increased supplies as the Philippines’ plan to close mines was put in doubt. Jakarta is also planning to resume nickel ore exports.

Country News

GHANA: Ghana’s vice president Dr Mahamadu Bawumia says the country has suspending issuing mining licenses until illegal mining has been effectively addressed, according to the Financial Times.  “We have suspended the issuance of mining licenses so that we can restructure the sector,” he said. However, Chinese nationals alleged they were being targeted.

ZAMBIA: Konkola Copper Mines (KCM) chairman and LSE-listed Vedanta Resources CEO, Tom Albanese, told a mining conference, according to Reuters, that the company’s focus was on ramping up KCM’s flagship Konkola Deep Mine. In a keynote speech he said that Zambia could regain its position as Africa’s largest copper producer if all smelters in the country reach their full capacity.

BOTSWANA: Russian major Norilsk Nickel has served notice that it intends to commence legal proceedings against the government of Botswana. Reuters reported that this was in respect of the government’s involvement in the “reckless trading of Botswana nickel miner BCL Limited and BCL Investments (BCL)”. Norilsk Nickel is seeking to recover nearly $280 million.

SOUTH AFRICA: The National Union of Mineworkers has declared a dispute with Pan African Resources’ Evander gold mine following the mine’s “refusal to implement the agreed retrenchment packages”, reported Reuters.

TANZANIA: Peak Resources has announced that it believes that its Ngualla project has the potential to become one of the lowest cost and highest quality rare earth projects worldwide. Delivery of the project is well timed to benefit from the expected strong uplift in the demand for permanent magnet motors required by the rapidly expanding electric vehicle market.

MALI AND COTE D’IVOIRE will emerge as the mining industry value growth outperformers among all major mining producing countries in Africa, says Fitch Group’s BMI Research. A strong project pipeline and huge untapped reserves will boost Mali’s mining sector, while a favourable regulatory environment and solid infrastructure developments will be the key drivers of Côte d’Ivoire’s growth prospects in the coming years, it says. Mali’s Ministry of Mines estimates that the country holds approximately 822t of gold reserves as of February 2017. However, only about six of Mali’s 133 potentially gold-rich reserves have been mapped out, offering significant growth opportunities for the country’s mining sector.

CONGO: – A dispute between state-owned Gecamines and its joint-venture partner Groupe Forrest International, at a cobalt mine that supplies Glencor, threatens to halt the supply of as much as 4% of the metal. According to Bloomberg, this could happen within two months.

Corporate News

ANGLO AMERICAN: National Union of Mineworkers (NUM) and Solidarity have approved the R2.3 billion sale of Anglo American’s thermal coal assets to Seriti Resources.

MINERGY: Shares in low-cost coal project Minergy have been listed on the Botswana Stock Exchange (BSE) following the raising of BWP 72 million through a private placement. Minergy plans to build an opencast coal mine with the potential to produce 2.4 Mtpa within 16 to 18 months of the BSE listing.

MOD RESOURCES: The company has welcomed a number of institutional investors onto its share register as a result of an A$14.6 million oversubscribed share placement. MOD Resources is actively exploring for sediment-hosted deposits in the Kalahari Copper Belt in Botswana with AIM-listed joint venture partner Metal Tiger.

IMPALA PLATINUM: Implats has commenced plans to restructure its Marula operation, which could result in major job losses, it said in its third quarter production results. Operational performance at Marula has been severely disrupted by community protest action.

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