China data & geopolitical risks hit miners

Resources Corner

Concerning Chinese retail sales and industrial output figures have stoked fears the world’s second largest economy is slowing down. The National Bureau of Statistics reports industrial production slowed to 8.6 per cent for January and February against expectations for 9.5 per cent growth. Chinese retail sales slowed to 11.8 per cent against expectations for 13.5 per cent growth. 
 
Following the reports release the price of iron ore for immediate delivery to China slumped 8 per cent to under $US105 per tonne and pushed Australia’s iron ore miner’s lower. Fortescue Metals Group Limited’s (ASX:FMG) founder Andrew Forrest saw about $500 million slashed from the value in his stake in one day alone. Diversified mining giants BHP Billiton Limited (ASX:BHP) and Rio Tinto Limited (ASX:RIO) shed more than 5 per cent over the week.
 
Geopolitical risks sway gold price
 
Rising political tensions between Ukraine and Russian saw investors head back to the safe haven asset of gold last week. The precious metal price gained almost $US20 to six-month highs ahead of Crimea’s decision to declare independence from Ukraine but retreated following the well-received referendum.  
 
Gold producer Silver Lake Resources Limited (ASX:SLR) has entered into a forward gold hedging programme for 50,000 ounces. The programme will start from April 2014 and continue until March 2015 at an average forward price of $A1,536 per ounce. 
 
Kingsgate Consolidated Limited (ASX:KCN) has flagged plans to raise between $39.2 million and $59.4 million to partially fund its projects. The gold miner’s capital raising will be undertaken through both a placement and entitlement offer priced at $1.00 per new share.
 
Newcrest Mining Limited(ASX:NCM) has bought options over two non-core tenements owned by Ram Resources Limited (ASX:RMR). The tenements are positioned near Newcrest’s Telfer gold-copper mine in the Pilbara region of Western Australia.
 
Investors sell out of stocks after bad news
 
Lynas Corporation Limited’s (ASX:LYC) stock lost ground after widening its first half loss and flagging the need for possible funding. The rare earths producer’s stock nudged five-year lows after reporting a first half net loss of $59.3 million. Concerns over the miner’s financial position were stoked by the company claiming it may seek more funding over the following year. 
 
Shares in Paladin Energy Limited (ASX:PDN) fell after news broke one of the world's largest gold producers Newmont Mining Corporation (NYSE: NEM) has sold a 5.4 per cent stake in the company. Newmont says the sale will generate more than $24 million in cash for the company and is inline with its strategy to divest non-core assets. 
 
Oil and gas deals in the making
 
Oil and gas explorer Otto Energy Limited (ASX:OEL) has secured a transfer of interest and operatorship in the Philippines from BHP Billiton Limited (ASX:BHP). BHP Billiton will pay Otto Energy $US3 million to terminate an exploration joint venture and an extra $US24.5 million upon completion of drilling the first exploration well.
 
Oil and gas producer Beach Energy Limited (ASX:BPT) has inked a deal to buy a support base in South Australia for $1.5 million from Geodynamics Limited (ASX:GDY). Beach Energy will acquire camp accommodation, operating support facilities for drilling and equipment suited to its current field activities. 
 
Central Petroleum Limited’s (ASX:CTP) stock jumped more than 10 per cent after the announcing its Surprise West-1 well has started production. The Northern Territory-focused explorer reports initial flow rates exceeded expectations and produced about 675 barrels of oil in the first 24 hours. 
 
Reporting season round up for miners
 
Morgans Financial Chief Economist, Michael Knox says the mining sector performed better than expected over the reporting season just gone:
 
“Earnings for the materials sector dramatically outperformed everything else, particularly for the large miners who generated very large increases in earnings because of increases in production. And, that is the result of the mining construction investment that they made in the previous couple of years. So, mining is producing the best growth in profits. So I think, all you really need there is stable prices to be able to generate a very good outlook for the resources sector.” 
 
 To watch more of the interview click here