ENRC – consolidation of Camrose (Dan Gertler) reminds city of past misdemeanour
• ENRC’s $550m deal to buy out the remaining 49.5% of Camrose cleans up the corporate structure but is a clear reminder of a deal which the ENRC board might prefer to forget.
• Pressure has been put on the company by transparency campaigners who do now want to see offshore companies used to control activities in the DRC to help reduce corruption of officials in the region. The move is seen as consolidating ENRC’s position
Mario Monti steps down as Berlusconi rescinds support
• Berlusconi can not stand as prime minister again but is also unlikely to go to jail despite recent convictions.
• Berlusconi, age 76, passed a law during this tenure stating that no one older than 70 can be sent to prison in Italy, though we feel sure exceptions could be made.
US – Non farm payrolls beat all estimates and jumped 146,000 in Nov. Market commentators suggest numbers do not reflect Sandy storm adverse effects that may show up in Dec data.
• Oct payrolls were revised downwards to 138,000, compared with prior estimates of 171,000 .
• Analysts estimates were for 85,000 increase.
• Unemployment rate fell to 7.7%, the lowest reading since Dec 2008, down from 7.9% in Oct.
• Consumers are growing wary of the possibility of tax hikes in 2013.
• Consumer confidence measured by the University of Michigan fell to 74.5 in Dec, the lowest level in four months, down from 82.7 in Nov. Estimates were for 82.0.
• Consumers expectations six months out fell to a one-year low of 64.6 from 77.6 in Oct. The report said people were more pessimistic about the labour market, their finances and the economy.
Germany – Exports unexpectedly rose 0.3%mom in Oct on stronger demand from non-European trading partners. Exports fell 2.4%mom in Sep. Analysts expected a 0.3%mom decline.
• Imports picked up 2.5%mom, up from a decline of 1.4%mom in Sep and a rise of 0.4%mom forecast.
• Demand is helped by growth in the US and Asia.
Greece – The government is finalising its buyback of sovereign debt programme that should release aid from the IMF and the EU.
• The transaction went “very well” Prime Minister Antonis Samaras said.
• Greece is buying back €27bn (face value) worth of bonds (€10bn from local investors and €16bn from international lenders). The government is using €10bn loan from the European bailout fund. Bonds averaged a discount of 67% of face value with maturities ranging from 2023 to 2042.
China – Nov monthly passenger-vehicle sales increased to the highest in almost two years on stronger consumer confidence and dealerships increased discounts to cut stockpiles.
• Sales may exceed 19m units this year, the China Association of Automobile Manufacturers said.
• In 2013 deliveries are expected to grow at 10%, estimates of the State Information Center (part of the nation’s top economic planning body) suggest.
• Industrial production grew at 10.1%yoy in Nov, up from 9.6% in Oct and 9.8% expected. It is the fastest pace in eight months.
• Retail sales were up 14.9%yoy, up from 14.5%yoy in Oct and 14.6%yoy estimated.
• Inflation accelerated to 2%yoy in Nov, slightly below estimates of 2.1%. Prices grew 1.7%yoy in Oct.
Japan – The economy contracted at an annualized rate of 3.5% in the three months through Sep, matching a preliminary estimate. The government revised the previous quarter to a 0.1% decline. This makes Japanese economy technically in recession.
• Post elections on Dec 16, the new party is likely to aim for more fiscal stimulus and “unlimited” monetary easing to boost the economy.
• Analysts estimate the economy to decrease by 0.4% (annualized) in the Oct-Dec period and grow 1.6% in the next three months.
US$1.2905/eur vs 1.2931/eur last week. Yen 82.36/$ vs 82.36/$. SAr 8.667/$ vs 8.708/$. $1.603/gbp vs 1.605/gbp
Gold US$1,710/oz vs US$1,700/oz last week – Gold is up this morning on strong investment demand and positive economic data released in China last weekend.
• Barclays opened the largest gold vault in Europe amid strong prices and rising investment demand.
• Vault specs: situated within a 20-mile radius of central London, security includes fingerprint identification systems with a blood flow detector, roof is electrified and doors are claimed to withstand rocket-propelled grenades.
• SPDR gold trust holdings increased to 1,353t (43.511moz) value US$74.002bn from 1,352t (43.453moz) last week.
Platinum US$1,614/oz vs US$1,597/oz last week
• Protests at the Bokoni platinum mine, Limpopo, ended after 90% of the workforce reported for duty on Friday.
• Bokoni is owned by a JV of Atlatsa Resources and Anglo American Platinum and produced 59.6koz of platintum in 2011.
• Miners downed tools on Oct 1.
• Workers negotiated a one-off payment of R2,000 and R400 increase to existing allowances.
Palladium US$697/oz vs US$690/oz last week
Silver US$33.31/oz vs US$32.96/oz last week
Copper US$ 8,119/t vs US$8,004/t last week – Prices gained on better-than-expected industrial production numbers and increased copper imports in China.
• Chinese imports rebounded from the lowest level since Jul 2011. Imports gained 13.5%mom to 365,331t of refined metal, alloy and products.
Aluminium US$ 2,106/t vs US$2,084/t last week
Nickel US$ 17,383/t vs US$17,080/t last week
Zinc US$ 2,059/t vs US$2,021/t last week
Lead US$ 2,264/t vs US$2,197/t last week
Tin US$ 22,000/t vs US$21,625/t last week – refined tin imports from Indonesia fell 28% to just under 8,000t in November from over 11,000t in October.
• Indonesia represents around 40% of global tin production - “”Its hard to get ore these days because of heavy rains,” the Indonesian Tin Mining Association president said.
• Uncertainty in production from the world’s largest tin producing nation is causing traders and consumers to invest elsewhere to ensure security of supply going forward.
• Recent changes to legislation in Indonesia requires miners to add value locally to ensure ongoing export permits.
• Rising costs and on heavy rains in Indonesia are blamed for the fall in tin production, however uncertainty over the receipt of future export permits out of Indonesia may also have reduced investment into the tin industry in Indonesia hampering production. Miners have a rocky road to tread in the export of tin ores to China.
• Not only are the Indonesian’s adding regulations to attain export permits but the Chinese are also known to adjust regulations for the issuance of import permits for raw materials.
• It is easy to see Indonesian miners struggling to match their mining schedules with the issuance of import and export permits. Traders who are able to help with the permit process will be valuable allies.
Oil US$107.5/bbl vs US$107.3/bbl last week
Natural Gas US$3.487/mmbtu vs US$3.653/mmbtu last week
Uranium US$42.50lb (close 07/12/12) unch on last week
Iron ore – Australian exports gained to a record in Oct on strengthening demand in China.
• Shipments grew 7.6%mom to 44.2mt.
• Exports to China increased 11%mom to 34mt.
• The Coalition has withdrawn from its MOU with the company to preserve and protect the Mapungubwe Cultural landscape.
• This is based on information that Vele Colliery is not complying with water legislation which requires remediation.
• The company denies these allegations and believes that it is compliance with environmental requirements and the withdrawal of the Coalition will not impact its permits.
• This is yet another problem for management in a catalogue of issues relating to the collieries operated by the company.
• The company have suffered strikes and had little choice but to give into a near-crippling wage settlement at Mooiplaats.
• $20m of the $100m of funding promised from Beijing Haohua Energy (China) has been received from the escrow account following FIRB approval. The remaining $80m still requires government approval within China.
• The other projects at Makhado and Holfontein offer better potential in our view, but the question for investors is, will the current cash burn leave sufficient funding for development of the new projects to enable the company to turn to profit in future years.
• Every issue has a silver lining and if the Mapungubwe coalition forces the closure of the Vele colliery maybe the company will loose less money and better preserve cash for future projects
ENRC (LON:ENRC) – Acquisition of Camrose from Gertler Trusts
• ENRC has made an offer to buy out the 49.5% of Camrose Resources which holds copper and cobalt interest in the DRC for $550m.
• ENRC paid $175m for their 50.5% stake in Camrose in 2010 – these were assets that had been seized from First Quantum who challenged ENRC and settled for $750m this year.
• Camrose which has near term production potential of 100,000 t of copper, lost $14.8m in the 6 months to June.
• Capex estimated in 2013 is US$300m.
Conclusion: Buying out the rest of the Camrose assets is in line with the company’s strategy of increasing its exposure to copper although question marks will remain over the history of this acquisition and the DRC as a place to operate in. While Gertler is the real winner in terms of returns, the total all in cost to ENRC(around $1.5bn including $750m settlement with First Quantum) of the potential 100,000 t of copper is not expensive.
Mwana Africa (LON:MWA)– Half Yearly Results
• The group reported half yearly revenues of $60.7m up 61%, profit before tax of $10.1m.
• Cash and cash equivalents of $39.8m included the $32,2m raised through an equity issue – cash flow from the group over the period was $19.8m - $29.7m in operational cash flow from Freda Rebecca was offset by $7.4m in care and maintenance - $6.4m on BNC and $1m on Klipspringer diamond mine.
• The company spent $4m over the period on capex mainly at Freda Rebecca and $6.6m on exploration assets.
• Freda Rebecca continues to perform and is operating now at an annualised rate of 72,000 oz with a cash cost of US$800/oz.
• BNC’s remains on target for first production in Q2 2013 and is planning to ramp up production to 7,000 t per annum of nickel in concentrate.
• Work on exploration assets in the DRC remain on target.
Conclusion: While there is no new news, the half yearly results underscore the cash generation at Freda Rebecca and the potential for this to increase as production steps up from annualised rate of 50k to 70k.Teh shares trade on an EBITDA of around 3.6x and offers good upside.
Mining last week:
Wolf Minerals (LON:WLFE) - Bridging Facility from Resource Capital Funds
Nyota Minerals (LON:NYL) – DFS at the Tulu Kapi Gold Project in Ethiopia
Ormonde Mining (LON:ORM) – Placing for £1.4m
Sundance (ASX:SDL) – Update on Hanlong Timetable
West African Minerals (LON:WAFM) – Drilling Update at Binga and Djadom South
Beowulf Mining (LON:BEM) – Update on Drill Programe at Kallak North
Discovery Metals (LON:DML) – Potential Production Disruption