Good afternoon
very strong durable goods orders in the States are driving the US$ higher, bonds into another very weak day, and gold through chart support at 1200 today!
The Euro needs to fall another 0,5% for the US$ to break to the upside...metals are under a little bit of pressure as well...but given recent stellar performance, this is just a blip.And while I am finishing this email, metals are having a very strong bounce and are all trading 1-2% higher!!
Gold is looking ugly! very ugly...I just cannot believe this...there is more reason than ever to own gold in this uncertainy world...but it has to go lower, before it can go up again. Obviously, the world is believing, that Trump will jump-start the US economy...and I actually think, that this might be the case - in whatever sea of tears this might end. But for now, the Dow is making new highs, commodities are booming, bonds are being hammered , the US$ very strong- all of them are having a strong direction as well as momentum - and every single of these moves is very negative for gold. Good old Stan Druckenmiller has been right to sell his gold in the election night!
The larger miners had another very strong day...BHP and RIO more than doubled now from the lows this year, while First Quantum ( up by 7.3x ), Teck ( 8.5x ), S32 ( 3.3x ), Whitehaven ( 8,8x ) or OZL ( 2.5x ), Vedanta ( 4.3x ) put in unbelievable performances. I think it´s fair to say, that the junior end has been left behind big time. Small picks like Finders Resources in copper, Foran Mining or Heron in zinc, Panoramic in nickel, or the coal stocks Prairie Mining and Paringa, have been left behind - institutional investors are so far largely ignoring these. That will hopefully change! The above are just examples of stocks I own - there are many other examples.
I have had a closer look at the tin market for the first time in many years, driven by Kasbah Resources, which is shaping up to be one of the very few producers of the smallest base metal, in the western world. Well - listed in Australia - but their asset is located in Marocco. I had been invested in KAS many years ago, and finally, these guys have delivered a feasibility study recently, which looks doable. It´s calling for a mine life of 10 years, production of 4.000t of Zn p.a. at AISC of 11.500 US$/t tin. The company owns 75%, alongside Japanese partners. The NPV of the 75% stake at the current tin price of 21.000 US$ is 95 Mill A$, the IRR is just above 30%. The total investment of 78 Mill US$ has been impossible to arrange for little Kasbah, and the company entered into a friendly takeover with Asian Mineral Resources, which is another investment I have been holding years ago. ASN is listed in Canada, and controlled by Pala Investment. Pala has in the past not always been good for minority shareholders, but via the merger, which is share-based ( paying 1.3 shares in ASN + 0,4 options, exercisable at 4ct ), they can profit from the financial muscle of Pala.
Asian Minerals are the owners of a nickel mine in Vietnam, which is on care & maintenance like so many , small nickel mines around the world. The combined market cap of KAS + ASN will be about 40 mill Can$ - pretty sexy vs the project´s NPV of just under 100 Mill Can$ at today´s tin price.
Tin is looking very strong, probably as strong as zinc. LME stocks are at an all time low, while producer stocks have been falling for 5 years as well....and the use of tin, mainly as solder in the electronics industry, is rising very slowly. The metal also has a few interesting hightech applications. Industry body, ITRI in London, has recently forecast prices of 30.000$/t for tin in 2018/2019, based on ongoing production deficits of 10-15.000t p.a. this year and next ( world production is about 400.000t only p.a. ).
Asian Minerals are buying themselves a new lease of life...and their nickel operation is a nice call option for me on the nickel price. I will do some work on this later - for now, I believe, that the tin asset alone is worth having a good look. Finally, the World Bank, Lion Selection Group are shareholders of KAS, and will be pretty strong, independant shareholders of ASN after the merger, which can only be good for small shareholders.
Have a nice evening,
WS
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