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Today's Market View Including West African Minerals Corporation, Talvivaara Mining, Legend Mining, Johnson Matthey and others

Published: 22:56 21 Nov 2013 AEDT

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Applied Graphene Materials – shares soar on IPO

Applied Graphene Materials raised £11m on IPO with the shares trading yesterday up 40% on the listing price.

The funds are to be used for the expansion of grapheme production up to eight tonnes per year.

It is difficult to determine demand for grapheme in the next few years as it is still finding new applications

Scientists are working on the material to determine its potential use in a range of areas, though experiments generally require relatively small quantities of material.

While the scientific community herald graphene as the new wonder material experts reckon other new materials may prove to be more exciting

A kilo of grapheme is said to cost $40,000.

Graphite is commonly found though high purity graphite is only currently available from a few sources, mainly due to its specialist demand. 

Most graphite is produced in China and few companies are able to produce the 99.99% graphite that is desired for graphene production.

Economic View

US - Fed meeting (Oct 29-30) minutes released yesterday showed members considered to start tapering accommodation “in coming months” should economic data does not disappoint.

Officials “generally expected that the data would prove consistent with the committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months”, minutes read.

Stocks, bonds and gold fell while dollar rallied on the news.

Retail sales climbed b the most in three months in Oct as consumers’ income were boosted by cheaper gasoline prices, rising stock prices and home values. The gauge increased 0.4%mom compared with no change in Sep and a 0.1%mom gain forecast. Interestingly, the government shutdown in the first half of the month did not significantly affect the numbers.

Consumer prices fell for the first time in six months in Oct on the back of cheaper energy, clothing and new cars. The index dropped 0.1%mom compared with a 0.2%mom gain in Sep and no change forecast.

Sales of existing homes fell in Oct to the lowest reading in four months on increased mortgage rates and limited supply. Purchases came down 3.2%mom to 5.12m (annualised), compared with 5.14m forecast.

Economic data released today include: last week’s jobless claims (335k vs. 339k in the previous week), Oct PPI (+0.3%yoy vs. 0.3%yoy in Sep) and Nov Philly Fed Manufacturing Index (15.0 vs. 19.8 in Oct (readings above0.0 indicate expansion)).

China - Preliminary manufacturing PMI fell for the first time in Nov in four month suggesting a growth momentum must have passed its peak this year.

HSBC/MArkit Flash manufacturing PMI came in at 50.4 compared with 50.9 in Oct and 50.8 forecast.

Final reading will be released on Dec 2 and official numbers are due on Dec 1.

Estimates are for GDP to come down to 7.6% in Q4, down from 7.8% in Q3.

Japan - The Bank of Japan kept the pace of its monetary easing unchanged saying it would continue to increase the monetary base at a rate of around JPY 60-70tn per annum with a view to reach 2% inflation target.

The Board reiterate its positive view on the economy previously announced in Oct mentioning an increase in business investments, public spending and private consumption.

Governor Kuroda said the economy has been performing in line with expectations and more accommodation may be provided if needed.

Economists and market commentators start to doubt the government will be able to hit its target in the next two years and expect officials to extend the time frame.

Eurozone - A number of manufacturing and services sentiment indices are released this morning.

Sectors expanded for a fifth consecutive month in the euro area in Nov: Manufacturing PMI (51.5 vs. 51.3 in Oct and 51.5 forecast), Services PMI (50.9 vs. 51.6 in Oct and 51.9 forecast).

Germany posted strong PMI readings: Manufacturing PMI (52.5 vs. 51.7 in Oct and 52.0 forecast) and Services PMI (54.5 vs. 52.9 in Oct and 53.0 forecast).

US$1.3426/eur vs 1.3531/eur yesterday. Yen 100.75/$ vs 100.11/$. SAr 10.166/$ vs 10.173/$. $1.610/gbp vs 1.613/gbp

Commodity News

Precious metals:

Gold US$1,248/oz vs US$1,271/oz yesterday - Gold is up slightly this morning following a sell off recorded in the previous trading session on the Fed comments that tapering might start in “coming months”.

Chinese gold production totalled 308t (9.9moz), up 6.8%yoy, in the first nine months of the year, according to the China Gold Association.

SPDR gold holdings fell to 860.3t (27,660koz) valued at US$34.8bn, the lowest since Feb 2009, from 863.0t (27,747koz) yesterday. Holdings lost nearly a third of the total from the start of the year.

Platinum US$1,400/oz vs US$1,413/oz yesterday

Palladium US$715/oz vs US$719/oz yesterday

Silver US$19.98/oz vs US$20.35/oz yesterday

Base metals:

Copper US$ 6,986/t vs US$7,005/t yesterday - Copper is trading around US$7,000/t level despite worse than expected Chinese manufacturing PMI numbers and Fed hawkish comments regarding its bond purchasing programme.

Pan Pacific, Japanese largest copper smelter, signed a deal with Freeport for a 31% increase in TC/RCs for 2014.

The company will charge US$92/t for treatment and USc9.2/lb for refinement of the metal.

The agreement follows a similar deal reached last week between Freeport and Jiangxi Copper, Chinese biggest producer.

Aluminium US$ 1,778/t vs US$1,801/t yesterday

Nickel US$ 13,521/t vs US$13,670/t yesterday

Nickel market surplus more than doubled this year through Sep, according to the International Nickel Study Group.

Production outpaced demand by 127,100t in the first nine months of the year, up from 57,000 in same period in 2012.

Zinc US$ 1,888/t vs US$1,902/t yesterday

Lead US$ 2,084/t vs US$2,102/t yesterday

Tin US$ 22,773/t vs US$22,870/t yesterday

 

Energy:

Oil US$108.0/bbl vs US$107.0/bbl yesterday

Natural Gas US$3.666/mmbtu vs US$3.567/mmbtu yesterday

Uranium US$36.25/lb (20/11/13) vs US$36.05/lb (19/11/13)

Others:

Iron Ore - US$136.4 (20/11/13) vs US$136.3 (19/11/13) 62% Fe spot (cfr Tianjin) 

Company News

BHP Billiton (LON:BLT) – AGM Statements

The company’s AGM highlights the company’s contribution to government coffers both directly and indirectly.

$11bn was paid in taxes and governments worldwide with the bulk of this $9bn paid to the Australian government.

In Australian operations US$19bn was spent sourcing more than 70% of products from Australian businesses.

$67m was spent on local communities in Australia.

In terms of outlook the company continue to expect 7% growth from China.

Johnson Matthey (LON:JMAT) – Strong First Half Results

Sales were up 13% excluding precious metals at £1,486m.

Strong performance from Emission Control Technologies (ECT)  and Process Technologies.

The ECT division saw sales up 13% to £815m and underlying profits up 16% to £94.2m.

Light Duty Vehicle catalyst sales which account for 62% of ECT sales was up 8% to £503m with Europe up 9%, Asia up 12% and North America up 1%.

European catalyst sales were ahead of European vehicle sales which were down 2.2% over the same period.

Volumes in North America were in line with the market but prices were down reflecting lower prices of rare earth materials which were passed on to customers.

Heavy Duty Catalysts were up 19% to £280m with truck sales up and sales of non-road applications such as construction, mining and agricultural growing from a low base.

European HDD grew strongly +44% to £79m outperforming the market as result of early fitment of higher value Euro VI systems.

Process technologies was up 18% to £176m with catalyst sales to the chemicals sector up 34% to £132m.

China’s drive for energy and petrochemical self sufficiency is expected to drive growth in process technologies with the conversion of coal into substitute natural gas.

Oil & Gas catalysts were up 13% to £79m with market for purification products performing well.

Precious Metals division had sales broadly in line with last year.

The refining business saw sales down to £53m.

Net cash flow generated over the first half was £247m up 73% with free cash flow at £127m  well ahead of £70.6m generated in the first half of last year.

Capex for the period was £96.8m in line with the previous period with the major projects including expansion in ECT manufacturing in UK and Macedonia and expansion of Process Technologies in the US.

Conclusion: These are good numbers from Johnson Matthey which is ahead of expectations. The loss of the Anglo Plat contract will impact the second half but is expected to be made up by performance in the ECT and Process technology divisions. Catalysts sales are ahead of vehicle sales with a particularly good performance in the European divisions given the state of the underlying vehicle market. Europe is said to be bottoming out in terms of light vehicle sales with UK and Spain up 7% and 6% and Germany, France and Italy down 5%, 6% and 7% respectively.

It is also interesting that they expect conversion of coal into syngas to be an on going growth business in China – this is a business that Cluff Natural Resources are targeting in the UK.

Legend Mining (ASX:LEG) – Sale of iron ore project in Cameroon to Jindal Steel

The company has announced the sale of its Iron Ore project in the Cameroon to Jindal Steel.

The share sale and deed assignment agreement is in two tranches – the first tranche is A$12m on completion of the transaction.

A second tranche of A$5.5m is payable once a Mining Convention is signed between Jindal and the Government of Cameroon.

Legend’s Nyovayang Project is an exploration project in Southern Cameroon with 3 exploration permits covering 2,469 sq km.

The company has completed aeromags and radiometric surveys and 100 DC holes showing magnetite grading 15-40% Fe.

A resource has not yet been established at the project and no DSO has been found.

Conclusion: The sale to Jindal Steel is a good result for this project as it is unlikely that Legend would have been able to take this project to development. They signed an MOU with Sundance to access the proposed railway but without DSO would have struggled to make the economics stack up. Jindal Steel’s interest in iron ore in West Africa has been widely discussed with their name coming up in connection with other projects in the area such as Afferro’s Nkout project now being taken out by IMIC.

Legend took a $25.7m impairment on exploration costs with deferred exploration and evaluation costs of $38.9m as at 1 January 2013 – most of this would relate to iron ore rather than its gold project. For Jindal A$12m up front and A$5m payable only after a mining convention signed is not a lot to pay for a seat the table while issues such as the railway and also power are sorted out.

West African Minerals (LON:WAFM) – Jindal Steel buys Legend Mining’s Ngovayang iron ore project 

Jindal Steel, the Indian steel and rail producer has agreed to buy Legend Mining‘s Ngovayang iron ore project for $17.5m in cash.

The deal is for an initial $12m in cash on completion of the transaction and a further $5.5m on completion of the Mining Convention between Jindal Steel and the Cameroon government.

This is an interesting deal and highlights Jindal’s Steel’s move into Cameroon for iron ore production. 

Ngovayang is a relatively low grade project with no appreciable known DSO material.

Legend Mining has commended that the deal gives it funds to pursue other acquisitions.

Legend holds a number of iron ore projects in Cameroon and looks likely to use the funds to expand its portfolio in the area.

West African Minerals holds licenses close to Legend’s Ngovayang iron ore project. 

Conclusion:  The deal gives a good market for potential value for the Binga iron ore prospect as well as the projects in North and South Djadom to the East of Cameroon.

*SP Angel act as broker to West African Minerals

**Two SP Angel analysts have visited the Cameroon to view infrastructure and iron ore prospects in the region

Talvivaara Mining (LON:TALV) – Talvivaara continues to assess funding options in effort to keep company alive

Talvivaara Mining and group companies have applied for corporate reorganisation in accordance with rules relating to the Finnish Corporate Reorganisation Act.

“Talvivaara also announced that the Talvivaara Group expected to require additional liquidity during the reorganisation proceedings for the payment of costs of the reorganisation proceedings and payment of new indebtedness incurred after the filing for reorganisation.”

The company has asked a group of stakeholders to stump up for a €40 million restructuring facility with Talvivaara as the guarantor and Talvivaara Sotkamo Ltd as the borrower. Unfurtunately the stakeholder group appears to have rejected the request leaving the company to apply to the Finnish courts for reorganisation.

Conclusion:   Talvivaara has few options now open to it.  Low nickel prices have not helped the company through the lengthened commissioning process

Australian Strategic Materials signs US$600 million LoI

Rowena Smith, CEO and managing director of Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF), joins Jonathan Jackson in the Proactive studio to discuss the company’ s Dubbo Project, in Central West New South Wales. This project aims to extract and process critical minerals and rare earth...

4 hours, 43 minutes ago