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23rd September 2013 WWW.LCC.ASIA
IMPORTANT DISCLAIMER This report has been prepared by Lincoln Crowne & Company Pty. Limited ("LCC"). The research is based on information obtained from sources believed to be accurate and reliable. LCC does not guarantee the accuracy, reliability, completeness or suitability of any such information and makes no warranty, guarantee or representation, expressly or impliedly about this research. LCC accepts no obligation to correct or update the information. No opinion or recommendation is made within this research. This report is not intended to be, nor should it be relied on, as a substitute for professional advice. This report should not be relied upon as the sole basis for any investment decision or planning, and LCC does not accept any responsibility on this basis for actions made . Page 1 / 4
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A$ Metal Price Advantage is Fading Global Economy Fundamentals
Source: Capital IQ, COMEX, LME, SHFE, Thomson Reuters, LCC research Note: the SHFE copper price is based on the LME 3-month price and includes CIF premium, tax and duty
China Monthly Copper Import Volume ( '000 t) AlloyAnodeProductsCopper Mineral Sands and Refined MineralsMonthly Average Copper Spot Price US$/lb (RHS)
3.00
3.20
3.40
3.60
3.80
0
200
400
600
800
Jun Jul Aug Sep
LME Copper Price and Stocks
Stocks ('000 lot) Price (US$/lb)Price (A$/lb)
0200400600800
100012001400
Q208
Q408
Q209
Q409
Q210
Q410
Q211
Q411
Q212
Q412
Q213
World Gold Demand and Supply
Total Demand (tonnes)Total Supply (tonnes)
23rd September 2013 WWW.LCC.ASIA
IMPORTANT DISCLAIMER This report has been prepared by Lincoln Crowne & Company Pty. Limited ("LCC"). The research is based on information obtained from sources believed to be accurate and reliable. LCC does not guarantee the accuracy, reliability, completeness or suitability of any such information and makes no warranty, guarantee or representation, expressly or impliedly about this research. LCC accepts no obligation to correct or update the information. No opinion or recommendation is made within this research. This report is not intended to be, nor should it be relied on, as a substitute for professional advice. This report should not be relied upon as the sole basis for any investment decision or planning, and LCC does not accept any responsibility on this basis for actions made . Page 2 / 4
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• Chinese copper smelters are looking for up to a 50 % increase in annual term treatment and refining charges (TC/RCs) for 2014, encouraged by greater availability of concentrates and spot charges hitting two-year highs. Large copper smelters in China, the world's top buyer of raw material concentrate, may ask for TC/RCs of about $105/t and 10.5¢/lb when they meet with miners during London Metal Exchange week, which begins on October 7.
• Anglo American has pulled out of the Pebble copper gold project in Alaska, less than two months after pledging to halve a $17 billion pipeline of potential mines and bring down the cost of keeping future options open. The decision comes after Anglo American has spent US$541 million on the project. Northern Dynasty Minerals, the 50:50 joint venture partner, will again own 100% of one of the world's most important copper and gold resource: 5.94 billion tonnes in the measured and indicated category containing 55 billion lb copper, 67 million oz gold and 3.3 billion lb molybdenum; and 4.84 billion tonnes in the inferred category, containing 26 billion lb copper, 40 million oz gold and 2.3 billion lb molybdenum. Quantities of silver, palladium and rhenium also occur in the deposit.
• The Papua New Guinea government has taken control of the Ok Tedi mine and has repealed laws protecting BHP Billiton from legal action over environmental damage. Tailings from the mine caused widespread damage to the Fly River in the 1980s and 90s. In 2001, BHP divested its majority share in the mine to a charitable trust called the PNG Sustainable Development Program, and in return was granted legal immunity.
Emerging Copper Companies
Source: Capital IQ, ASX announcements, LCC research. C1 costs and capex as estimated and announced by the respective companies.
Copper Producers
Source: Capital IQ, ASX announcements, LCC research. C1 and C3 costs as reported in last quarter, except for TGS, LCC estimate.
IMPORTANT DISCLAIMER This report has been prepared by Lincoln Crowne & Company Pty. Limited ("LCC"). The research is based on information obtained from sources believed to be accurate and reliable. LCC does not guarantee the accuracy, reliability, completeness or suitability of any such information and makes no warranty, guarantee or representation, expressly or impliedly about this research. LCC accepts no obligation to correct or update the information. No opinion or recommendation is made within this research. This report is not intended to be, nor should it be relied on, as a substitute for professional advice. This report should not be relied upon as the sole basis for any investment decision or planning, and LCC does not accept any responsibility on this basis for actions made . Page 3 / 4
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• Discovery Metals (ASX: DML) has executed a legally binding term sheet with Blumont Group Ltd (SGX: A33) to provide new capital made of a share placement (15% new shares at A$0.12 to raise A$8.75 million) and convertible bonds for US$100 million (5% 5 year convertible to ordinary shares at A$0.15 per share). DML plans to offer a share purchase plan at placement price capped at A$10 million. The US$25 million revolving credit facility is to be repaid in full. The US$129 million project finance facility is to be restructured with a US$25 m principal repayment and the US$104 m balance to be repaid in 8 quarterly instalments between 31 March 2016 and 31 December 2017. Interest is capitalised until 31 December 2015.
• Inova Resources (ASX: IVA) has revised its ore reserve estimate for the Starra 276 underground mine near Selwyn to 854,000 tonnes grading 1.52% copper and 0.87 g/t gold for a contained 13,000 t copper and 24,000 oz gold.
• Focus Minerals (ASX: FML) “expects the gold price to go through what many will interpret as signs of recovery. In Australian dollar terms, the exchange rate will also have an impact from time to time”. Going forward, FML “needs to concentrate on the margin it makes from mining and processing its gold resource to maximize the end result for the Company and its shareholders”.
• Panoramic Resources (ASX: PAN) has provided an update on the BFS for the Gidgee gold project. The study will now include a “Wilsons Only” option. This option considers treating 300,000 tpa of high grade ore (5.5-6.0 g/t) using heap leach on site to produce 45 ,000-50,000 ozpa at C1 costs of 750-800/oz. Capital costs for this development option are reduced to A$60-70 million, compared to A$127 million for the larger development envisaged in the August 2012 scoping study.
• Regis Resources (ASX: RRL) has reported a profit after tax of A$146 million for FY2013 (+114% y/y). RLL also declared a maiden dividend of 15 cps, fully franked. Cash flow from operations was A$247 million. Gold production from Garden Well for 2014 is forecast at between 190,000 and 210,000 oz at a cash cost of A$680-$730/oz. Gold production from Moolart Well for 2014 is forecast at between 95,000 and 105,000 oz at a cash cost of A$560-$610/oz. RRL also expected to complete the development of the Rosemont gold deposit early in the December 2013 quarter. Gold production is expected to contribute 48,000-53,000 oz for FY2014.
Mergers & Acquisitions • Austral Gold (ASX: AGD) is investing C$9.3 million to take a major stake in a TSX-listed developer Gold Mines Corp with a 1.52
million ounce Lindero gold project in Argentina. • IMX Resources (ASX: IXR) has agreed to a US$60 million JV with MMG for the Nachingwea nickel project in Tanzania. MMG
may earn up to a 60% interest in the project by sole funding expenditure over a five year period structured in three stages: Stage 1 – MMG has committed to sole funding expenditure of US$10 million over the next 12 months to earn a 15% JV interest; Stage 2 – MMG may elect to sole fund a further US$25 million within a further 18 months and increase its JV interest to 40%; Stage 3 – MMG may elect to sole fund a further US$25 million within a further 30 months and increase its JV interest to 60%. MMG will become manager of the JV. Upon a decision to proceed to project development being taken, MMG has the option to increase its JV interest to 80% for a cash payment to IMX at the then fair market value.
• Overland Resources (ASX: OVR) has signed an agreement with Colombian Mines Corporation (TSXV: CMJ) that provides OVR the right to earn a 90% interest in the Rio Negro project in Colombia. The project is prospective for copper and gold.
• Vale has backed out of a US$20 million farm-in agreement with Goldminex Resources (ASX: GMX) related to five exploration licences in the Owen Stanley Range region of Papua New Guinea.
23rd September 2013 WWW.LCC.ASIA
IMPORTANT DISCLAIMER This report has been prepared by Lincoln Crowne & Company Pty. Limited ("LCC"). The research is based on information obtained from sources believed to be accurate and reliable. LCC does not guarantee the accuracy, reliability, completeness or suitability of any such information and makes no warranty, guarantee or representation, expressly or impliedly about this research. LCC accepts no obligation to correct or update the information. No opinion or recommendation is made within this research. This report is not intended to be, nor should it be relied on, as a substitute for professional advice. This report should not be relied upon as the sole basis for any investment decision or planning, and LCC does not accept any responsibility on this basis for actions made . Page 4 / 4
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Source: Capital IQ, LCC research. C1 costs and capex as estimated and announced by the respective companies. Assumption: A$/US$ exchange rate of 0.90.
Gold Producers
Source: Capital IQ, LCC research. Assumption: A$/US$ exchange rate of 0.90. Note: * These stocks are not primarily listed on the ASX. Prices, market cap and multiples are based on their primarily listed market quote.