Good afternoon
german factory orders were pretty bad, but they are notorious for being very volatile. I think business confidence, consumer confidence etc are all showing, that it´s in good shape.
Let´s face it - except for making a fool out of himself, Trump has not achieved anything so far - and that´s what the markets are showing us. We should not forget, though, that the world economy is in pretty good shape in the moment - it´s not all depending on this strange and dangerous man! He is creating new reasons to buy some gold just about every day, regardless what the FED will do - and Yellen´s action should be fully accepted by now anyway.
Metals are currently seeing some profit taking - investors are taking some chips of the table. I think this is wrong - but that´s how markets are working, and is nothing to worry, in my opinion.
What happened in gold stocks recently is quite remarkable...They have had a massive run until mid-February, based on record inflows into the Van Eck-vehicles. Since then, gold stocks have given up about 20% from the recent top, while physical gold has fallen less than 1%! As you will remember, we found it very hard to find some value in gold stocks more recently, but this is changing now. The A$ gold price has done nothing this year, oscillating around 1600 A$/oz, while companies have done a good job over the last 18 month to get their house in order. A company like Evolution is generating massive, free cash from it´s mines at the current gold price, and is paying back debt as fast as they can. I think the value is certainly back here - when a serious gold miner trades at 10x free cash flow, it´s a bargain!
Finders - updated yesterday re their Lerokis deposit, a small add-on resource for their existing copper project. It´s 2-3 km from existing plant, and will probably be quite small - but doing abck on the envelope calculations, it should add at least 6 month of production. Every year of additional production to the current 7 years will add approx 60 mill A$ to the projects cash flow - hence 6 month even are significant for a stock just capped at 131 mill A$ as at today. All they have been doing is actually assaying some old geotechnical holes - which resulted in some very nice intersections of 12m with 3,8% copper, 24m with 5,84%; 26m with 8% and also 3.6% zinc, which is interesting. I think the chance that this little deposit will be adding mine life is higher than 90%, even though a resource has not been calculated as yet. At this stage, all free cash will go to debt service - but debt will be gone by the middle of next year at the current rate. And I am very hopeful, that the existing mine will start producing above nameplate very soon. There is a realistic chance, that the 73.5%-owned project will produce 30.000t of copper at cash costs of 1$/lb in the coming financial year. I strongly believe, that FND should be trading roughly 50% higher than today. Triggers will be success of their ( at this stage ) very modest exploration programm, or rising production from fine-tuning the new operation. The downside might be another placement ( at least market-wise ), as I am sure, that FND would like to buy out minority partner Daewoo. This would be a very positive move and - depending on price - most probably value-enhancing, but would require more equity initially. If the latter should happen - and I have absolutely NO indication for this - it would be a great buying opportunity. I am still holding a large position in FND.
Have a nice evening
WS