Good afternoon
The US and China want to hold new tarde talks…major good news. The otehr good news is, that the Turkish Centralbank increased interest rates by 625 basis points - expected was 300 b.p., leading to a reversal of the Turkish Lira and some relief for Emerging Markets generally. And even more good news…following Friday´s strong increase in US labor costs, US CPI today was lower than expected, bolstering bond markets, and weakening the US$…base metals and gold are having another good day.
Yesterday, rather disappointing numbers for Chinese car sales were published - actually falling slightly YoY and subsequently, Macquarie cut it´s forecast for sales in 2018 to a meagre plus of 3% only. A very positive number, though, was a substantial plus of 64% for EV´s, despite lower subsidies since June on the purchase of these cars. EV-market share in China has been an astounding 5% - Macquarie increased their full-year forecast for Chinese EV sales to 1.05 million, from 900.000. China is clearly driving the EV-revolution! A friends of mine earlier this week joined a JP Morgan research tour in Germany, visiting a few car producers as well as a leading battery research facility. The most interesting outcome for me was, that the scientists did not see an alternative for lithium-ion batteries in the foreseeable future!
Panoramic Resources - have sold Lanfranchi for 15 mill A$ in cash. Ultra bulls for nickel might not like it, but I think it´s excellent news. PAN have taken out of Lanfranchi what they could…a lot of mobile equipment etc. PAN has tried quiet intensively to increase reserves of Lanfranchi, without much success. I guess one could find more ore - but not easy, and certainly not assured at all. Savannah is really the main asset, and PAN management can now fully concentrate on it. PAN does have about 30 mill$ in cash, plus an undrawn credit line of 40 mill$ to bring Savannah back on. Capex is 10 mill for the plant, 10 mill for the ventilation shaft, and 3 mill for various…and certainly working capital for the 3 month ramp-up period. I guess, that PAN might only draw about 25 mill of the Macquarie-loan, or even a bit less. The plant refurbishment etc is in full swing - I would hope for an update, before the Quarterly will be published in late October. The sale of Lanfranchi is a major derisking event - you can always have delays , when you restart an operation, and develope fresh underground access. This sale now makes it a safe assumption, that PAN are fully financed until free cash flow, even if something unexpected would see a delay of a month or so.
The other interesting aspect is, that you got to be very bullish on nickel to pay 15 mill$ for Lanfranchi! The buyer is Black Mountain, a private equity group. Macquarie yesterday forecast a nickel price of 16.000 by year end, based on this year being another year of demand exceeding supply. Macquarie as well as Norilsk, Scott Mackenzie and Aneka Tambang are all expecting further deficits as well.
Black Dragon Gold - this is a relatively new story…I had originally invested about 12 month ago , when it was purely listed in Canada, and when it was a restructuring under new, Australian management. In the meantime, the company got also listed in Australia. Beside of some expereinced Australians, Paul Cronin, a past CEO of succesull Anatolia Energy ( Uranium ) , is the CEO. At least equally important, they have a Spanish General Manager ( experienced ex-RIO Spain executive ) and on the board, the Spanish ex CEO of succesfull gold producer Rio Narcea, which some of you might remember. The companies gold asset is near Oviedo, in the North West of Spain, At a cut-off grade of 3g t, the proejct has about 700.000 oz at 6g, and will be developed as an underground resource. In the old days, under Rio Narcea´s ownership, the project was planned as an open-pit, which prooved difficult to be licensed. BDG believe, that as a pure underground mine, permits will be much easier to get. We all know Spain a little bit…no easy country for miners to operate in, despite a long history in mining, and despite many active mines. 40 km from BDG´s project, there is an operating gold mine, which has operated for many years, and received an extension of their mining lease 2 years ago. So it can be done, and it´s paramount, that at least part of the management is Spanish.
The other day, BDG announced some very nice high grade, long intersections, and some geologists believe, that the current resource could be doubled. A very interesting one, with a tiny market cap of just 15 mill$ - but obviously, not for the fainthearted, and I know a few experienced investors, who have turned it down as an investment preposition. Anyway - some smart money is in it - opinions do divert, thanks god! I am holding a small position, and in my opinion, so should you!
Have a nice evenin
WS
WS
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