Good afternoon
The US$ is playing with the 1.10 Euro-level...also strong against Sterling ( 1.21 today vs a high of 1.70 as recently as 2014! )....not good for gold & base metals! But both are managing to hold their prices in London today - base metals even a bit stronger. Gold is still fighting with the 200-day moving average...what not goes up, has to go down...so I am a little bit cautious for gold in the short term. Having said that, I have used the weakness in EVN to buy some stock...In relative terms, I am sure of doing the right thing - but I continue to feel unsure about the short term direction for the gold price.
This Trump-story in the States is becoming more bizarr by the day....what a country.....
You know me - I always have to enlighten my day with some kind of a bullish story. As you might have read, I have been talking about the bulk´s a bit the last few days...I think this story has way to run - especially in our smaller stocks.
Here you can see the performance of some companies active in coal this year. I am using the 31st of December 2015 as starting date ...that´s way higher than the lows reached in late Jan/early Feb. I am doing this just to give you a feel for the massive bull market in these things, which has gone largely unnoticed:
movement since 31.12.2015 market cap
BHP 31% 117 bill A$
Teck 354% 14 bill Can$
Anglo 250% 13 bill Pound
JSW 486% 7.3 bill Zloty or 1.9 bill US$
Bogdanka 90% 2.1 bill Zloty or 530 mill US$
Whitehaven Coal 400% 2.8 bill A$
Alliance Resource 70% 1.7 bill US$
As you can see - we are talking very serious companies here...not just some exotic little nobodies! and the market for seaborne coking coal I believe is something like 300 millt p.a. - that´s a market of 60 bill US$ at this Quarter´s contract price!
Prairie Mining - the company is genuinly bullish about their new aquisition I have been talking about yesterday. They have bought this asset for just under 3 Mill A$...amazing! Apparently, they have been the only serious bidder, who could move on the short time horizon given by the receiver of the previous owner. PDZ will use a very different approach from the big-company approach used by the previous owner...they will develope a much smaller, much cheaper operation. In Poland, we are talking low cash cost of coal production - down to 25-30 US$/t...If you apply these costs and use just half the current coking call price, you can arrive at very significant valuations for such an asset.
Furthermore, I have digged out some old initiation report from 2015, written by GMP Securities, which used to be a serious, Canadian broker...just based on the Lublin thermal coal project, they arrived at a valuation of 1.05 AS$/share price taget, using just 0,3x NPV10%, at a 80$/t long term thermal coal price!! The coal price used might be very ambitious - but a fact is, that the dirty stuff is trading at 84$/t today! A fact is also, that NOBODY would have ever thought, that thermal coal could go to anything close to todays price in 2016 - and I do not know a single analyst, who had pencilled in 100 $/t for coking coal - that is trading at 215 $ today!!
I am not saying, that we should use these prices to evaluate the long term value of coal assets....but what I am saying is, that stories like Prairie Mining are a fantastic punt! Yes, the stock has moved by 100% this year...But I think they have just started! Unfortunately, I have not been daring enough here, and only have a position of 1.5% of my fund in PDZ - but I won´t sell the few I have any time soon!
Paringa - this is a different kind of story, and with much less potential...but still a great story! Paringa will be producing thermal coal in Ohio in 2018, pending a very limited financing. The market in this stuff is very much a local market, prices are different, and normally fixed with long term contracts. PNL have the same group backing them - Ian Middlemas etc - but different management. The stock is profiting from a re-awakening of interest in coal assets in the States. Coal to be burnt in power stations will be used in the States for a long time to come, notwithstanding efforts to reduce carbon emissions. Alliance Resource Partners is a much larger entity, and a good example for what Paringa will be doing. Again - respected Australian broker Argonaut published a research report in July 2016, valuing the stock at 0,98AS$, using a 15% discount to a NPV12%.....Paringa are trading at 29ct today, just 10% higher than at the beginning of the year!! You can bet your bottom $, that Australian punters will flogg to this one, if Paririe will continue it´s run ( and it´s already trading 20% higher today in Poland and Germany, than in Australia - with combined turnover of 4 mill shares by early afternoon! )
If you want some research on these stocks, please contact us.
Lucapa - reelased some early numbers from their Quarterly Report: Record production of 8.853 ct , incl 137 specials ( diamonds above 10.8 ct ). Average size of diamonds produced was 1.9ct - also a record, resulting in an average grade of 13.7ct per 100 cubic m. Mining is going gangbusters with the new equipment - 64.700 cubic m. This is great stuff - and the diamond market is improving further, as Alrosa reported today, enabling them to sell some of their stockpile this year. The only negativ I can think of in the moment: The wet season will start in Nov, until April - stock could become a bit quieter, even though they will continue mining.
have a good evening
WS
Schröder Equities GmbH
Seitzstr.7a
80538 München
Tel. +49-89-4613440-0
Fax +49-89-4613440-10
email: wschroeder@schroeder-equities.com
website: www.schroeder-equities.com
eingetragen im HR München, HRB 166985
Geschäftsführer: Wilhelm Schröder
The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at wschroeder@schroeder-equities.com immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by unauthorized persons.