Good afternoon
European purchasing managers Index very strong, and stronger than expected - pointing to quarterly growth approaching 1%! Manufacturing numbers for Germany slightly weaker, but very strong, still - despite the political issues here and a looming strike by metal workers. Price pressure is emerging - probably not only driven by higher oil-and metal prices. France under Macron is doing very well indeed! New spirit, new drive! And later in the day, the US have reported a very strong Manufacturing PMI as well!
This is putting renewed pressure on the US$ - and is beefing up the gold price ( currently at 1350 US$ and approaching a zone of quite heavy resistance between 1360-and 1400 US$/oz ). If gold would be going through that level, we will see a major bull market - but I would be surprised, if gold would do that without considerable work . Nickel is currently up by 220$ - breaking important resistance at 13.000 US$/t - and copper is recovering from the small sell-off yesterday. Interesting to see - the sell-off is obviously seen as a nice buying opportunity.
The A$ , fortunately / unfortunelay, depending on the point of view - is making a new, recent high at 80.50 vs the US$. For as long as commodities are going up by more, I guess Australian producers are not too unhappy! While the A$ gold price is at healthy levels as well, I guess South African producers are under pressure - the Rand gold price is trading at about 16.000, vs a high of more than 20.000 last year. The industry is also still under pressure in South Africa from constant wages growth, while the Rand has improved considerably, as chances to remove the corrupt government are increasing. Let´s hope, that it won´t be replaced by a new, similarely corrupt one!
Panoramic - I have rarely seen a company in our space announcing a rights issue ( 1:7 at 34 ct, also for shareholders in Germany, Switzerland, Luxemburg abd a few other jurisdictions ), and the share price goes up strongly! Good announcement today - sen by most as a precursor to a production start-up. The 20 Mill$ to be raised will be used for some early works like underground venitilation , as well as exploration. Especially the latter I think should produce results, showing substantial upside from the current 8.3 years to easily more than 10 years. All shareholders can apply for up to 50% more than their entitlement, without guarantees to get them - obviously very much dependant on the general takeup. The rights isue is fully underwritten by Pert quality-broker Euroz. Interesting to see, that also shareholders over here, even with registered address here ( mostly, we are holding stock via an Australian nominee company, which are rated as Australian registered anyway). According to Panoramic, this has easily been achieved - a good example for other Australian companies. If they want to - easy for us to participate!! You know, that I am very bullish nickel in the long run, and also Panoramic, given their very favourable economics at current prices for nickel, cobalt and copper. Great opportunity to add some cheap stock, even though this rights issue surprised me at the current time.
Metals Ex - an interesting example, that it sometimes pays to buy only companies with quality assets. Their Nifty Copper Mine missed targets by a big margin last Quarter, leading to substantially reduced profit numbers. Certainly, the upside in this type of company is substantial at times of rising commodity prices - but timing of buying these companies is essential.I think copper is looking great for years to come - but I would expect some more weakness in the stock.No hurry to buy them....
Aurelia Metals - I managed to sell my holding atabout 3 ct only 2.5 years ago - today they are trading at 30ct...I got cold feet at the time, and ran with the herd! The company has emerged from near-bancrupcy to being a relatively solid producer of zinc, lead, and gold - just at the right time. The recent aquisition of the Peak Mine, adding about 70.000 oz of yeraly gold as well as 8.000t copper, is shaping up to be a good one. Whether you believe it or not - I am having a good look at them again, as I believe metal prices to hold up much better than most expect today.
Black Rock Mining - we recently got attracted to this graphite developer, as our old friend and colleague, Richard Crookes, became chairman. Richard has been with the Macquarie Bank project finance team for many years, before starting to work as a director for EMR Capital, Owen Hegarty´s 2 bill PE-fund. This is the first chairman role he is taking on, and the first role in a company, where the PE-fund he is working for, is not involved. Richard is very high quality,a nd very experienced in the industry. Black Rock has a large graphite resource in Tansania. Not a good location, but I am hearing from different sources, that the government there is taking notice of the fact, that foreign mining investment has come to a halt - and more importantly, they seem happy to take the criticism on board. The next few month will show. Investment-wise, I think BKT are a good add-on to a holding in Graphex ( which are more advanced, especially on the financing with a Chinese partner ). The economics of BKT, based on the pre-feasibility study, are excellent...NPV10 of the project, and including a 16% free carried interest for the government, is 905 Mill US$, producing 250.000t of graphite. Even with a smaller case of about 1/3 the size, the IRR at about 1200 $ US for graphite ( 25-30%% or so below current prices ) would still be 35% after tax, and be 202 Mill US$ ( 90 mill US$ capex ). Again using the smaller scale, cash costs Free on board would still be only 513 US$/t vs the current 1700 $ or so....I think this will be a feasible project one day, and you are backing the judgement of Richard Crookes. The company has embarked on a final feasibility study this January, and raised 5 mill$ late last year at 6ct to pay for it. Interesting little company, which you should have on your watch-list.
As I am finishing this blog, metals are charging ahead - nickel up 3%, copper up 2,5%, gold at 1354 and up by 1%....and the US$ is getting hammered - now at a new recent low of 1.2380 against the Euro, down by 0,7% today.
have a nice day
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