The U.S.economy grew during the March quarter at its slowest rate in two years. Gross domesticproduct rose 0.5% in the first three months of the year, less than half the rateof the previous quarter. Analysts blamed falling corporate investment and lowerexports. The numbers were also held back by a deceleration in the growth of consumerspending.
Two ofthe most important central banks had their say last week. Despite the lacklusterU.S. economic data, the Federal Reserve signaled that its concern had eased overChinese policy and the state of the global economy. As expected, the Federal OpenMarket Committee on April 27 held U.S. central interest rates at 0.25% to 0.50%but analysts now expect short-term rates to start increasing over the next few months.
Becauseof the strong yen, analysts had predicted a "big easing" at last week'smeeting of the Bank of Japan. However, the bank's governor, Haruhiko Kuroda, announcedthat the central bank would maintain interest rates at current levels. Kuroda saidhe wanted more time to judge the impact of the decision in January to set centralinterest rates at minus 0.1%.
Withregard to further easing, Kuroda said the BoJ would act "without hesitation"if further monetary loosening was needed to reach the target 2% inflation. However,the failure of the BoJ to take further action triggered an unwelcome 3% jump inthe yen on April 28. The Japanese currency closed the week at its highest levelagainst the U.S. dollar since October 2014.
The improvedglobal mood is reflected by the oil price, which in April enjoyed its largest monthlygain in seven years. The performance was boosted by the weak dollar and a declinein U.S. production. Brent crude rose 22% in April and is now more than 70% aboveits January low as investors anticipate the biggest decline in non-OPEC supply in25 years.
As SNLMetals & Mining mentioned in last week's Backfill, debt investment is in the news. Bond offeringshave soared but the bond-like securitization market continues to suffer.
Belgiumlast week issued a rare "centennial" bond, with investors accepting acoupon of only 2.3% per year until 2116. The €100 million deal echoes a 100-yearbond issued by Ireland in March and, earlier this year, France took advantage ofthe falling borrowing rates to issue 50-year debt with a yield of just 1.9%.
The largermining companies are now able to offer debt almost as cheaply, and last week to the bond market for the firsttime in a year. Having delivered a major reduction in debt, Glencore has been ableto raise US$257 million from five-year bonds with a yield of 2.25%. Yields on thecompany's bonds had risen to over 8% last year.
In contrast,the market for securitization — packaging mortgages and other loans into bond-likeinstruments — has struggled since the financial crisis. The Financial Times reportsthat Europe has just suffered its worst quarter for new securitization sales inalmost five years. According to the Association for Financial Markets in Europe,securities worth only €14.3 billion were sold during the three months to end-March.
It wasa mixed week in the U.K., with good news for sterling and currency trading, butworrying news for the local economy. Sterling has benefited from the weaker dollar,and hit a 10-week high against the U.S. currency, with investors appearing to havedecided that the U.K. will vote June 23 to remain within the European Union. A signalof this mood was an easing in the cost of insuring the currency against swings inexchange rates, and a 4x oversubscribed 50-year bond issued by the government toraise £4.8 billion.
Also,London has risen above Singapore to become the second-largest clearing center forthe renminbi with over 6% of all payments. This is the latest sign of the Chinesecurrency's growing use internationally. Both cities remain a long way behind HongKong, which accounts for almost 73% of all renminbi deals. London is the world'slargest foreign exchange trading center, with an average of US$2,150 billion tradeddaily, with the renminbi accounting for less than 2% of this total.
Lessgood news for the U.K. came from the latest GDP figures, which showed the pace ofrecovery slackened during the March quarter. The U.K.'s economy grew only 0.4%,compared with an annualized 0.6% in the three months to end-December. An economistat Schroders described the U.K.'s economy as having hit a "speed bump."
In India,the government confirmed plans to entice foreign mining companies to the country.The government will bring forward its New National Mineral Policy, which will laydown incentives and guidelines aimed at encouraging the establishment of provincial-levelmineral exploration agencies. These will enter into "equity and strategic collaborationwith foreign stand-alone mining and exploration companies," according to anofficial in the Ministry of Mines.
The HenanSecurities Regulator has warned China's retail investors against speculative trading.The announcement is part of measures to limit speculation in commodities futures,including the "ferrous complex" of steel, iron ore and coking coal. Tradersdeny that a speculative bubble is building, and argue that the recent rise in commoditiesprices is justified by the fundamentals.
The priceof iron ore slipped 0.5% last week, with62% Fe material closing on Friday at US$65.20 per tonne. The World Bank announcedlast week that it expects traded iron ore to average only US$50 per tonne this yearoverall, and US$51.50 per tonne in 2017. In January, the institution's expectationswere that it will average US$42 per tonne this year and US$44.10 per tonne in 2017.
The strongeriron ore prices helped Vale SAbounce back into profit,posting a net income of US$1.78 billion in the first quarter, compared with a netloss of US$3.12 billion in the same period of 2015. However, the company's net debtrose 1.7% to US$27.66 billion due to foreign exchange movements and a cash flowthat remains negative.
FitchRatings warned that rallying Chinese steel prices, which are partly fueled by speculation,will slump as mills bring back capacity and eventually increase the global supplyof steel. Fitch described the rapid increase in Chinese steel prices so far thisyear as "not sustainable, as it is largely due to a seasonal pick-up in constructionand elevated speculation in the steel futures market."
Nickel was the star performer last week,with the London Metal Exchange's three-month contract up 5.6% to US$9,495 per tonne.Week on week, the price of aluminum rose1.9% to US$1,679 per tonne and the three-month zinc price strengthened 1.8% to US$1,943 per tonne.
Copper closed Friday 0.6% higher thana week earlier at US$5,051 per tonne. However, the Chilean copper commission Cochilcokept its copper price forecast for this year at an average of US$2.15 per pound,or US$4,740 per tonne, while it projected the price to reach US$2.20 per pound,or US$4,850 per tonne, in 2017.
The sharpfall in the dollar sharpened the appeal of gold,which rose 0.5% to US$1,256 per pound. The precious metal is now up almost 19% thisyear, its best start for over three decades.
The priceof thermal coal (6,000kcal/kg, FOB Richards Bay) was unchanged last week at US$52.30per tonne. However, the price of Australian thermal coal for delivery in June hasplunged to US$46.60 per tonne, the lowest since 2006. The lower futures price inAustralia reflects the decision by Colombian coal miners to target Asia as demanddwindles in Europe and North America.
The saleof Anglo American Plc'scoal mines in South Africa is being hamperedby Eskom Holdings' attempt to transform the ownership model for its coal suppliers.An Eskom executive is reported to have suggested last week that Anglo American surrendertheir mining rights to the state.
On thefinancing front, Leigh Creek EnergyLtd. raised A$10.8 million from a private placement of 35.9 million shares. State One EquitiesLtd. acted as sole lead manager, supported by EAS Advisors LLC, acting through MerrimanCapital Inc. The funds will be used for the Leigh Creek thermal coal project inSouth Australia.
In aresearch note, Investec said the recent rally in commodity prices effectively meansthat the mining industry has passed "go," and that companies are "nowin better shape, and hence better placed for any pitfalls to come." Nevertheless,credit ratings downgrades continue to dominate the mining industry. last week by SNL Metals & Mining'sCarrie MacDonald noted that 57 metals and mining companies have seen their long-termcredit rating downgraded so far this year by Moody's, Standard & Poor's andFitch Ratings.
In asector that is heavily dependent on Chinese demand, Moody's cited slowing growthin China as a key factor behind the higher credit risk surrounding metals and miningcompanies. The rating agency noted that although many commodity prices have strengthenedrecently, several years of price declines and oversupply have stressed companies'credit profiles. This has prompted a widespread review by the rating agencies, andboth Anglo American Plc and Freeport-McMoRanInc. have lost their "investment grade" status.
AnotherSNL report last week touchedon the impact that the shortage of finance is having on mineral exploration. PaulManalo commented "a multi-year drought in financing for explorers has curbedearly stage exploration, and led to declining annual totals of both new resourceannouncements and the in situ value of metals contained in the new resources."
Initialresource announcements are one of the metrics SNL uses in its monthly Industry Monitorto track exploration activity. Manalo calculates that over the past five years thenumber of annual initial resource announcements has declined 60% — from 111 in 2011to 44 in 2015. The total in situ value of all metals in these new resources fell42%, from US$179 billion in 2011 to US$103 billion in 2015.
Therewas better news from SNLMetals & Mining writer Luis Nonito Pasuelo, who reported that the recent improvementin debt buybacks by the mining industry has sparked optimism that the mining sectoris recovering.
Severalcompanies have announced debt buybacks in the past week. Evraz Plc bought back notes worth US$184.4 million, said it will redeemall of its outstanding 4.5% notes due February 2017, worth US$1.4 billion, and paid US$76.9 millionto notes held by Paulson & Co. Meanwhile, Fortescue Metals Group Ltd. has issued a voluntary redemptionnotice to holders of its 8.25% senior unsecured notes due 2019, paying down debtworth a further US$577 million.
In anotherexample, Rio Tinto agreedto buy back US$1.36 billion in debt under a planned buyback program. The companyalso seeks to buy back Dutch auction securities, which include its 6.50% US$1.75billion notes and 2.25% US$1.25 billion notes, due 2018.
Financingin Canada during the past week included a C$2 million brokered private placementof 4.0 million units by Viscount MiningCorp. Each unit consists of one common share and one non-transferableshare purchase warrant. Gravitas Securities Inc. will receive an agency fee of 7%of the proceeds, which are intended for Viscount's wholly owned Silver Cliff silverproperty in Colorado.
has increasedits non-brokered private placement from C$2.3 million to C$2.8 million and willnow offer 34.4 million units at C$0.08 each.
has agreedto a C$4.5 million term loan with its major shareholder The Sentient Group. Theone-year loan, which will be spent on this year's exploration program, is interest-freebut Sentient will receive 952,380 shares as a fee.
In asimilar arrangement, LeadFX Inc.executed an unsecured promissory grid note in favor of Sentient's Global ResourceFund IV LP for US$2.5 million. The note, which does not carry interest, is repayableat the end of June 2017. The Sentient Group is the majority shareholder of LeadFX.
plans to raise C$2 millionby issuing 26.7 million units, with each unit consisting of one share and one warrant(each of which is exercisable for a share at 10 Canadian cents for five years).Parent Red Eagle Mining Corp.will purchase 16.9 million units.
entered intoan agreement with Marathon Gold Corp.to purchase flow-through common shares and units of the latter for C$2 million.In addition, Marathon Gold will grant Canaccord an option to sell additional unitsto raise supplementary gross proceeds of up to C$1 million. Proceeds will be usedon the Valentine Lake gold project in Newfoundland and Labrador.
plans to raiseC$7.8 million in a cross-border public offering, underwritten by a syndicate ledby Canaccord Genuity Corp., and including National Bank Financial Inc. and ParadigmCapital Inc. The company plans to issue 450,000 common shares at C$17.40/share.The proceeds are for the KSM project in British Columbia.
closed twoprivate placements for a total of C$5.5 million. One placement comprised 17.5 millionunits to raise C$3.5 million, and the second placement raised C$2 million by issuing6.7 million flow-through shares. The funds are earmarked for the Cheechoo gold project.Goldcorp Inc. exercised its right to acquire 19.9% of Sirios' share capital, acquiring6.74 million units for C$1.3 million.
The governmentof Quebec has agreed to provide OrbiteTechnologies Inc. with C$15 million in funding through InvestissementQuébec. The company intends to use the funds to "reaccelerate" its activitiesto complete a high-purity alumina plant. The financing is expected to comprise thepurchase of 10% convertible non-secured debentures in the principal amount of C$5million, purchase of the company's Class A shares for C$5 million, and grant ofa C$4.9 million bridge loan.
Alsoin Quebec, IAMGOLD Corp.secured an additional commitment of US$38 million for its revolving credit facilityfrom Investissement Québec. The credit facility, led by National Bank of Canadaand Deutsche Bank, now totals US$138 million and matures in February 2020.
closed a privateplacement of almost 75 million non-flow-through common units to raise C$6.7 million.IDM raised an additional C$4.1 million by issuing 37.3 million flow-through commonunits. The brokered portion of the financing was underwritten by a syndicate ofagents including Haywood Securities Inc., Red Cloud Klondike Strike Inc. and MedalistCapital Ltd.
is raisingC$10.0 million from a non-brokered private placement of up to 8.34 million units.Proceeds will be used for exploration and development activities.
closeda bought-deal private placement raising C$15.5 million. The company intends to usethe proceeds to incur Canadian exploration expenses on its Cariboo gold mining districtand related properties in British Columbia.
has raised theceiling for the private placement it announced in February from C$3 million to C$4million. The company will now issue up to 40 million units, at 10 Canadian centseach, rather than the original 30 million units. The proceeds are to fund the proposedacquisition of La Fortuna in Mexico, and its subsequent development, and the company'sLos Verdes copper project, also in Mexico.
reached an agreement withPrimary Capital Inc. for the offer of 16.0 million common flow-through shares toraise C$4 million on a "guaranteed" agency basis. UEX will use the proceedsfor its uranium properties in Saskatchewan's Athabasca Basin.
upgraded itsnon-brokered private placement, and is now intending to raise C$2.8 million, comparedwith the original target of C$1.0 million. GoldenArrow Resources Corp. also increased its previously announced non-brokeredprivate placement, from C$2.1 million to C$2.3 million.
In Australia,Regalpoint Resources Ltd.closed its previously announced renounceable rights issue but raised only A$860,000of the A$2.0 million target. In accordance with the underwriting agreement, theshortfall of 116.6 million shares will be placed by the underwriter, Patersons SecuritiesLtd.
is planningto raise A$74 million to fund development of the Gruyere gold project in WesternAustralia. An institutional placement of 98 million new shares will raise aroundA$43 million, and a 1-for-10 pro rata accelerated non-renounceable entitlement offerwill raise a further A$31 million.
agreed to a A$100 million credit facility agreement with Rio Tinto unit North Ltd.The loan will be used to fulfill the additional funding requirements for rehabilitationat the Ranger uranium project in Australia's Northern Territory.
received commitmentsto raise A$3 million from the placement of 75.5 million shares by lead broker HartleysLtd. The funds are earmarked for the Montepuez ruby project in Mozambique.
In otherfinancings last week, French Prime Minister Manuel Valls confirmed that the governmentwould facilitate another loan, of up to €200 million, to Eramet's subsidiary Societe Le Nickel, which operates theSLN nickel mine in New Caledonia. SLN is struggling to avoid bankruptcy, and theFrench state issued an emergency loan of €150 million in January. Meanwhile, Vallsalso pledged support to help replace an aging power plant at one of SLN's smelters.
announceda private placement of up to 330 million shares to raise £4 million. The group saida "strategic North American royalty company and its consortium" have committedUS$5 million to the fundraising. Most of the funds are planned for the Hot Madengold-copper project in Turkey.
has set the terms forits US$200 million convertible bond. Citigroup Global Markets Ltd., Deutsche BankAG (London), JP Morgan Securities plc and Société Générale Corporate & InvestmentBanking acted as joint book runners and joint lead managers.
received commitmentsfor the sale of 48.4 million shares to raise £1.5 million from an oversubscribedbrokered private placement. The placement follows the recent release of positiveeconomic assessment results for the Beruang Kanan Main copper deposit.
is raising £6.94million by issuing 463 million shares. Assuming exercise of the associated optionsand warrants, and no participation in the open offer, chairman Carlos Miguens wouldincrease his interest in Patagonia, through his controlled entity Cantomi, to almost54%. Proceeds will be used to provide working capital as the company's Lomada goldmine in Argentina winds down, and production at the Cap-Oeste gold project rampsup.
will raiseUS$15 million in a bought-deal financing, with BMO Capital Markets Inc. agreeingto buy 22.75 million shares. Golden Star has granted BMO an option to purchase anadditional 15% to cover overallotments.
entered intoa conditional subscription and relationship agreement with chemicals trader KingAlly Holdings Ltd. The latter will invest US$100 million, which is part of the US$275million capital restructuring plan that would also see a proposed US$100 millionequity investment by SGRF, a sovereign wealth fund of the Sultanate of Oman, andUS$75 million that will be raised from new and existing shareholders.
enteredinto a nonbinding term sheet with its major shareholders, Inflection ManagementCorp. and A.B. Aterra Resources Ltd.for a US$48.4 million funding. The company plans to use the funds for its Mangazeiskysilver project in Russia. The funding package will consist of a US$42.9 millionsecured loan, a working capital facility of US$3.5 million and a contingency facilityof US$2 million.
Changesin senior management announced during the past week include the of David Terry as president andCEO of Comstock Metals Ltd..Comstock's previous president-CEO, Ehsan Dana, resigned effective April 4.
StephenSwatton agreed to join West MelvilleMetals Inc. as its newpresident and CEO. Swatton is a 30-year mining veteran who was previouslyglobal head of business development for BHP Billiton Exploration Group, and wasCEO of Brazil Resources Inc. and Fortress Minerals Ltd. He replaces Rory Moore,who had served as president and CEO since 2012.
announcedthat Sonny Janda will step downas CEO, but remains a board member. The new CEO is Jack Bal, who will also replaceOmar Hudani as a director.
DavidPutnam resigned as interimCEO of Western Mining Network Ltd..While Putnam's resignation takes effect immediately, he will continue working withthe company during the agreed one-month notice period to ensure a smooth transition.
The managingdirector of Strategic Minerals Corp.NL, Walter Wally Martin, has died.Martin has been involved with the company since 1991.