Good afternoon
thank´s god - China did not surprise on the downside! While the radio this morning told me, that this was the weakest growth number in 20 years, my take is, that China is continuing to do well ( and perhaps is defying gravity??). GDP + 7,7%; IP+ 6.8%; Fixed Asst Inv +10.7% - all these humners are good and should be a relieve for the resources sector. Perhaps the slightly improved prices for metals and iron ore, and improving demand for coal, have their reason in this growth. All provided, that the numbers are halfway accurate...!!
A little profit-taking today in the metals - I think it´s only typical weekend-stuff...perhaps it´s also weaker than expected IP and manufacturing numbers in the States.
The Australian market is still on fire in the small caps...placements left right and center - it will suck some liquidity out of the market, but it also provides much needed cash for the sector, enabling more exploration in a sector, which ahs been starved for cash for some time...And these capital raisings find ready buyers. WAF completed their placement - planned size was 10 mill$, which got increased to 12 mill$ - and got 50 mill$ of applications, from what I have heard....amazing...4 month ago, the company had difficulties to raise 2 Mill$ at half the price!
But I am also warning - small caps in many cases are starting to run ahead of themselves, and will have to deliver to justify valuations. That is even more the case with anything, which "smells" like Lithium...a huge run in the sector.!
Australian Small Cap Funds especially have grown substantially since the crash, and many of them have outperformed the wider market by not having any resources stocks...these guys will all try to buy back into the sector, and that´s what can be seen to a degree in the market in the moment - at least when it comes to gold stocks!
Regis Resourecs - reported a nice Quarter - production in line, costs 5% better than expected....That remeinds me to talk about costs in general - you have to look very carefully, when you compare costs...some companies still report cash costs only, some report All-in-sustaining-costs - some companies report all-in-site-costs like PRU, which is comparable to what EVN report -that´s AISC + major capital cost + discovery expenditure, which is getting very close to what I would really call all-in-cash-costs ( that is all costs less depreciation and headoffice and financing costs ). The latter is really making things very comparable on a mine-to mine basis, and should be used by more companies!
In any case - Regis , like just about everything else, is not that cheap at today´s gold price - but still ok - and the highest div-yield in the Australian sector is certainly an attraction! On Monmday, I will look more detailed at the sector and provide you with some comparative numbers to try to sort out the expensive stocks from the one which are still ok. I am pretty sure, that I will not find anything, which is outright cheap!
Have a nicve weekend
WS