Good afternoon
before I start, I would like to remind you, that I am writing here a very subjective, superficial blog...this is NO research, you should NOT rely on it, and given that I do like most stocks I am commenting about, I am very often a shareholder!
Very strong labor markets in the US today...also wages growing...strong economy makes sure, that the Fed will continue to tighten. As you would expect, the US$ is also stronger today, Metals are having a volatile day - pretty weak in the morning, recovering strongly until jobs-numbers came out, and finally going into positive territory once the numbers were out!
Wood Mackenzies believe, that copper will rise in the medium term; that aluminium will be very strong, if Rusal cannot escape the sanctions; that lithium and cobalt will be oversupplied; and that nickel will more than double in price to 28.000US$/t over the next 2-3 years! Well I can only say, that Panoramic will start producing the stuff again by around year-end 2018!
Emerging market currencies got some relief today, despite the top election candidate in Brazil getting stabbed and nearly killed!
Genex Power - still one of my absolute favourites and largest holdings - even though the price performance continues to be disappointing. The politicalsituation in Australia is very uncertain with regards to renewable energy...Turnbull certainly was a stronger supporter than is successor! Lots of talk on regulating energy prices...BUT Labour is leading the polls for next years election by 10% or so...they are VERY strong supporters of green policies. This uncertainty has been negative for GNX, as none of the large electricity players wants to commit to long term price guarantees for as long as the political framework has not been set. BUT the State of Queensland,w hich is run by the Labour Party, could come to the rescue here ( remember: very difficult for a small company like GNX to finance a large 700 mill$ project without a guaranteed price floor for the power they plan to produce ), as it did for the Stage 1 Solar Project at Kidston. Any progress here should be a major price trigger for GNX. An offtake agreement and subsequent financing for Stage 2 and -3 ( 250 MW hydro plant, and 270 MW additional solar plant ) could/should put a rocket under the stock. Both is expected this calendar year, despite the political uncertainty.
Additionally, GNX today has entered into an agreement to buy a shovel-ready solar project in NSW called Jemalong. My guess is, that GNX will have to pay a few mill$ for it, once all conditions have been met. There will NOT be a call on shareholders...GNX has 15 mill$ in cash, and has also the capacity to refinance the 100 mill$ line of credit for solar stage 1, as this is now fully up and running and therefore derisked. This should free up another 6-7-8 mill$ (?)., probably at lower interest rates as well. Of the estimated purchase price + capex of say 95 mill A$, 60 or 65 Mill can be borrowed...And the company is planning to sell down up to half of the project at project level, making a placement of fresh stock unnecessary. For GNX, the project should give them some diversity, larger scale, and increased free cash flow. Company is at pains though to declare, that hydro and solar projects at Kidston have top priority and will continue to have. I see this little aqusition as a small positive - but a minor side-deal compared to the much larger existing projects, which have much better upside. Having said this, I think the fully derisked Solar Stage 1 project is very valuable indeed, especially to an incoming party: 14-15 mill A$ in cash generation, less 1.5 mill$ operating costs make this a very nice and tidy project - the new project could be valued at similar levels? Too early to tell, because we do not have a price guarantee as yet ( and the company might not want one, given the very strong outlook for electricity prices in New South Wales)...certainly worth something to GNX. Have a look at their webpage - the presentation their ( see link ) is very strong. Great story, still!!
http://www.genexpower.com.au/corporate-presentation.html
Prairie Mining - hottening up? Well the Polish certainly believe so, driving the share price on good turnover. JSW takeover noise is getting mich louder..According to a Reuters report, JSW is planning a full bid..."one person said, that the Prime Minister as well as the energy ministry had already provisionally approved the plan". The ruling party wants to create jobs ahead of the October-election, and wants strategic assets returned to state ownership. All great noise to my ears...Having said this, any takeover for PDZ would be below 1$, I guess - and that´s only a song vs the NPV of the two projects the company has got in Poland. But given the highly nationalist tendencies in Poland, I would be very happy to take "the sparrow in the hand vs the dove on the roof", as we say in good old Germany!
Have a nice weekend!
WS
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