FAIRFAX - Morning View - Monday 16.05.11 ( MML LN )By John Meyer | 16 May 2011, 11:52 BST
John Meyer, Fairfax
Gold $1,496/oz - Copper US$8,783/t
- US dollar is rising as investors trade out of Euros and into US dollars
- Metals are lower following US dollar strength and on Asian concerns over the arrest of Strauss-Kahn
- Chinese money markets rates jump raising the cost speculative long positions
- Metals prices are trading higher in London as the Euro regains some lost strength
Platinum week in London - where the world's platinum producers and consumers gather to discuss contracts
Dow Jones Industrials -0.79% at 12,295.75
Nikkei 225 -0.94% at 9,558.30
HK Hang Seng -1.38% at 22,951.92
China - Expectations of a cash squeeze in the financial system have lead China's money market rates to jump by the most in 3 months. The seven day re-purchase rate has climbed by 224 basis points in the past two trading days.
- China has reportedly surpassed the US, Japan and Western Europe to become the world's largest mechanical engineering market, with sales climbing to US$61bn. Expectations are that the sector will continue to soar reaching sales revenue of US$138bn by 2015
Japan - Goldman Sachs has lowered its rating for the country's equities, sending stocks lower today. The company cited "greater cautiousness" in the US economic recovery and the subsequent impact this would have on the country.
- Japan's electricity supply from Nuclear will drop further in the coming months as operator's shutdown for annual care and maintenance. Bloomberg is reporting that 6 reactors will be offline in August suggesting that up to 75% of the country's nuclear capacity will be offline for the summer month.
- Figures released this morning showed that machine order unexpectedly increased in March by 2.9%
US - The Federal Reserve Bank of New York will announce its General Economic Index later today. Expectations are that the index will have marginally declined for the first time in 6 months but that economic activity continues to expand.
- Figures released last week showed that consumer prices rose by 3.2% yoy in April- the most since 2008 on the back of higher food and fuel costs. Disregarding food and fuel costs the inflation measure was up 0.2% in March, in line with expectations.
Europe - Ministers are meeting today and tomorrow in an attempt to find a resolution to the problems facing Greece. Concerns continue to prevail that Greece will have to restructure its debt package imminently.
- Ministers will also try and finalise details over the bailout for Portugal.
- The IMF managing Director Dominique Strauss-Kahn has been charged with a criminal sex act that reportedly occurred in a New York hotel.
- Estimates for the earnings forecasts are reportedly being cut for companies across Europe as investors speculate that the bull market ages.
- CPI figures will be released at 10am. Expectations are that the yoy figure remained at 2.8%.
Greece - A poll conducted by Bloomberg suggests that up to 85% of international investors are expecting the country to default. All eyes will be on Brussels today and tomorrow as Ministers meet to decide the next move for Greece.
Australia - Some poor housing sector figures this morning. Home loan approvals fell in March to the lowest level in more than 10 years as dwindling consumer confidence and higher interest rates hit buyers.
Spanish - General election campaign starts on May the 23rd. Expectations are that the Prime Minister Jose Luis Rodriguez Zapatero will suffer a large defeat.
UK - Asking prices in the property market reportedly rose last month, supported by the public holidays leading to a limit on supply in the market.
Israel - Worrying scenes emerged over the weekend as Israeli troops shot dead at least 13 people and wounded many more as hundreds of Palestinian refugees tried to move across the boarder from Syria, Lebanon and Gaza during protests to mark the 63rd anniversary of the state of Israel.
India - State oil refiner, Indian Oil, has increased gasoline prices by the most in 3 years, boosting expectations that inflation will continue to climb in the country despite recent rate increases. Inflation reportedly hit 8.98% in March, comfortably surpassing the Reserve Bank of India by almost 1%.
Uganda - As protests continue, Yoweri Museveni the Ugandan President has been sworn in for a fourth term. Police reportedly had to use tear gas to disperse crowds that had gathered to show support for opposition leader Kizza Besigye amid rising food and fuel costs across the country.
Nigeria - Reports are emerging that troops have launched attacks on suspected militant camps operated by the group called NDLF in the southern oil producing area of the Niger delta in retaliation for attacks last week. Previous militant activity has caused significant disruption to oil from the region and concerns are high that a further squeeze in output could have a major impact on the global market given the problems in the Middle East.
Currency - The euro is off this morning as against the dollar on concerns that the Greek debt issue could well stall the global economic recovery. The Aussie dollar as within touching distance of a 3 week low against the US dollar this morning as commodity prices came off. The dollar is up this morning against its most traded counter parts as investors take flight and head for safe haven investments.
US$1.4113/eur vs $1.430 eur yesterday. Yen80.97/$ vs 80.54/$, SAr7.021$ vs 6.901/$ $1.618/GBP vs 1.629/GBP
Gold US$1,497/oz vs US$1,516/oz yesterday - Prices are off this morning as the dollar advances.
- Gold coin sales are on track for the best month in a year. The U.S. Mint sold 85,000 ounces of American Eagle coins since May 1 as investors cashed in on recent prices falls.
- Noyota Minerals has announced that it has applied for a large scale mining licence in Ethiopia.
- Citic Group - The Chinese state investment company has agreed to buy Gold One International for US$469m
- SPDR gold trust holdings drop further to 1,192.25 (38,332moz) from 1,193.16t (38.361moz) current value US$57,708bn
Platinum US$1,761/oz vs US$1,780/oz yesterday -
Palladium US$709/oz vs US$722/oz yesterday -
Silver US$34.64/oz vs US$35.84/oz yesterday -
Rhodium US$2,100 vs US$2,150/oz yesterday
Prices are off across the board today as the dollar weakens and concerns remain that problems in Europe could well weigh heavy on the global economic recovery.
Copper US$8,783/t vs US$8,870 yesterday-
- Figures compiled by Bloomberg show that hedge funds have reduced their bullish bets on Copper in NYC, as concerns that growth in China is slowing. The number of net long positions has declined by 59% over the last week according to figures released by the US Commodity Futures Trading Commission.
- Chinese imports of copper in April declined by 40% on the back of concerns over the impact of increased rate rises.
Aluminium US$2,574/t vs US$2,629/t yesterday - Goldman has raised its price forecasts for aluminum to US$2,700 for the next 3 months citing market fundamentals.
- Figures released this morning show that stockpiles in Japan increased by 8.9% in April from a week earlier as disruption from the Earthquake in March continued to filter through the market.
Nickel US$24,289t vs US$24,800/t yesterday - Similarly Goldman have increased their 3 month price forecast to US$24,000 citing increasing price drivers such as energy costs.
Zinc US$2,159/t vs US$2,200/t yesterday
Lead US$2,305/t vs US$2,344/t yesterday -
Tin US$28,750/t vs US$29,600/t yesterday -
Oil US$113.46/bbl vs US$114.46/bbl yesterday - Prices are off this morning and are expected to fall in the second half of the year as demand dwindles according to Bank of America-Merrill Lynch.
Natural Gas US$4.236/mmbut vs US$4.192/mmbtu -
Uranium US$56.50 vs US$55.25 last week -
Coal - Prices have been climbing in Chinese ports as utility companies stocked up before peak summer demand for electricity with people turning on Air conditioning units, starts. Coal prices for the fuel with an energy value of 5,500kilocalories/kg climbed to US$125/t - the highest level since October 2008.
- Bloomberg reports that Inventories plunged to the lowest in almost a year in the week to May 2 after a month of maintenance at Daqin railway crimped deliveries from inland coal mines.
- Exports from China are down 19% in April from the same month last year.
- During the first four months of this year, China's coal output was 827.8 million metric tons an increase of 6.8% year on year, while coking coal output was 98.4 million metric tons, a decline of 8.3% from a year ago.
Steel - According to Stemcor Holdings the world's largest independent steel trader, global steel consumption this year will be higher than 2010 levels suggesting a sustained normal recovery as a result of urbanisation in the developing world. Further growth has been estimated by the company in 2012 and 2013 similarly.
- Tokyo Steel Manufacturing Co, Japan's largest electric furnace mill has slashed prices for all products across the board,
Medusa Mining* (MML LN) 501p mkt cap £941m - New discoveries add to copper portfolio in Philippines
BUY - target price raised to 599p (from 588p)
- New discoveries in the Tambis district of the Philippines show opportunities for future growth.
- Medusa Mining's update for investors shows progress with new and existing discoveries in the Philippines.
- The Tambis area which hosts the Bananghilig gold discovery also shows a series of copper porphyry and volcanic mineralised systems. Extensive IP in progress covering the entire system.
- Sawahon Creek discovery outcrops returned copper ores of 0.27% to 0.44% copper and 0.16g/t to 0.10g/t gold.
- Lower Bananghilig; discovery outcrops show a quartz vein hosted stockwork in volcanics with 0.16% copper and 0.35g/t gold. This may represent the edge of a larger heat driven system.
- Kamarangan: 2 drill holes discovered the edge of a copper molybdenum system with generally low copper values made up in better molybdenum grades.
- Supon Diroite: a fertile diorite and skarns to the west may provide a good host for mineralisation.
- Lingig: date from 40 holes here are being combined with an IP survey to plan further drilling. The basalt hosted mineralisation returned in the last hole drilled 154m at 0.45% copper with the last 46m at 0.65% copper which was abandoned in mineralisation.
- Co-O mine; The main gold mine system may also be associated with a porphyry copper system. Copper grades within the mine increase towards the east and to depth grading 0.1% to 0.4% copper.
- Saugon; gold / silver /copper/lead/zinc mineralisation possibly linked to a porphyry copper system .
- Lasang; conceptual copper porphyry based on interpretation of aeromagnetic data.(NOTE: not only RTP data that was interpreted, however the RTP data does show the anomaly quite well)
- Gamuton; four holes drilled here to test quartz veins to the west of the Co-O gold mine. Mineralisation suggests potential copper porphyry mineralisation lies nearby. Surface work discovering copper-rich veins..
- USA prospect; a 500 x 500m copper porphyry target with copper in rock chips of 0.59% and 0.42g/t of gold.
- Trento; an intense magnetic anomaly, more likely to host gold veins than copper.
- The portfolio update indicates potential for substantial discovery and for value addition to the company.
- Further technical details and discussion are available in the company press release.
- The geological team have made good progress with the development of this portfolio and today's announcement serves as good background for the recently started IP survey. The update is useful and should add value although but is difficult to financially quantify at this stage of development.
Conclusion: With so many prospects showing near economic grades of copper it must surely be a mere matter of time before the geological team make a credible copper discovery.
*Fairfax acts as advisor to Medusa Mining. Medusa is listed on the LSE Official List
Mining this week:
Ormonde Mining* (ORM LN) 10p mkt cap £30m - Tungsten prices rise as Ormonde selects engineer for project
DiamondCorp* (DCP LN) 11p mkt cap £20m - Miners push into diamond bearing kimberlite
Medusa Mining* (MML LN) 514p mkt cap £966m - Medusa hits prospective mineralisation in exploration
Ampella Mining (AMX AU) 222c/s, mkt cap A$453m - Deep drilling at Konkera indicates potential doubling of resource
Carbine Resources*+ (CRB AU) 25p, mkt cap A$25m - Drill results highlight new gold discoveries BUY
Ormonde Mining* (ORM LN) 10.5p mkt cap £35m - Tungsten prices rise further to $460-465/MTU
BUY - Target Price 21p
Shanta Gold* (SHG LN) 35p, mkt cap £63m - Drilling reports high gold grades at Bauhinia Creek
BUY - Target price 78p
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