Good afternoon
the metal-boom is in full swing...not a surprise, given the concerted growth around the world, I guess, and the very limited exploration-and capex spend of major mining companies over the last 5 years or so! We all know, that metals have run hard - sometimes it´s good to put numbers on it, just to get a feel for the extend of it!
31.12.1016 today percentage change highest price today since
Copper 4.700$/t 7150 52% July 2014
Zinc 1600 $/t 3545 121% July 20017
Lead 1790 S$/t 2630 47% Aug 2011
Tin 14500$/t 21900 51% Aug 2014
Nickel 8800$/t 13850 57% July 2015
And last but not least, WTI also ran from 48 US$ to 66 US$ since 31.12.2016, while Brent is even up more, from 37 to 70 US$. Inflation, I can finally hear you coming??
Most analysts believe, that metals have run ahead of their fundamentals - I think they are just ok! Financial players are always earlier than the fundamentals, and given the fantastic enviroment, I think if anything, there is upside for the balance of this year. The only metal at risk of correcting is probably zinc - large producers, especially Glencore, will have to watch out, that their market will not shrink because of substitution!
The US$ looks broken - at least on the charts, adding further upward pressure to metal prices. Against the Euro, there is considerable downside - more than 10% on the charts - and against the A$, about the same. Nobody can see the A$ at 90ct today - but given the positive scenario for world growth, I would not rule that out. What is speaking against the A$, is the outlook for bulk commodities, which are still Australia´s largest export goods! Iron ore as well as the different types of coal look pretty expensive - and if they retreat somewhat, a strong A$ could potentially act as a double whammy to the earnings of the majors, BHP and RIO. But I am not too concerned about this, as their valuations already assume some kind of lower prices for their bulk commodity earnings. But performance-wise, I think pure metal producers could be sexier from here.
Wages and salaries in the US are growing as expected, and so is consumer spending
Strike Energy - announced, that tehy also managed to renegotiate their second, large gas contract with Orora, a large packaging group in Australia, similar to the contract with Orica. That´s very good news - even though the exact details are confidential, I assume a significant advantage in NPV to Strike. But as usual - this is all subject to them getting their gas flowing! A new research report has been published today ( even though it was comnissioned by the company ), giving an initial valuation of 12.4ct to the stock - but with potential to multiply this, should the JAWS well be successfull. The well will sopudd ( = start drilling ) on the 14th of February, and will be the largest well of it´s kind in Australia so far. The stock has started moving over the last week - I hope, that this is only the beginning! We have been waiting for sooooo long!
Mineral Resources - Australia´s largest lithium producer ( + iron ore + mining services ) has found competition in it´s fight for AWE Ltd, a large gas producer in Australia. Mitsui is the third party to make a takeover bid for AWE, and the market is a little worried, that MIN will have to pay over the top to get their hand on AWE. But interesting to see, just how much interest there is in gas - AWE was trading at 50ct in mid November - today, they are nearly double this. IF our little STX can deliver sustained, commercials gas flows, corporate interest in them will be very large!
Apollo Minerals - this small company, being part of the highly successfull Ian Middlemas stable, is about to really get going with their Tungsten- Gold asset in Spain. The company has been a major producer of tungsten until the 1980ties, wenn prices were dramatically lower. Before the mine closed, a high grade gold resource had also been established. Until now, Apollo does not have permission to enter the underground mine, for government/safety regulations. That should change very soon. The price of tungsten increased by 50% last year. This could be a hot project - but it´s in Spain, which does not make things much easier!! Nevertheless, interesting stock to put on the watch list.They will present in Zurich 23rd of February - by then, I would hope for some progress.
Have a nice evening
WS