Good afternoon
the festive season has started in earnest today! Equity markets look pretty determined to avoid last year´s December-desaster, being as strong as a bull! Base metals are stronger as well, and Palladium seems to be determined to hit 2000 US$/oz before Christmas! In this enviroment, it might even be surprising, that the gold price is holding it´s level!
I guess a set of quite strong economic numbers from China have helped: IP very strong, retail sales as well…fixed asset management still a bit subdued with a rise of “only” 5.2%. In Germany, the PMI for the manufacturing sector weak, while being stronger for services.
Pretty frentic M&A activity in major markets….and once again, in the gold sector:
Northern Star is said to raise 700 mill A$ for the purchase of 50% of the Golden Mile from Newmont. Stock is suspended, and no announcement has been made as yet. They will have to pay a bit more than Saracen in it´s recent aquisition of the other 50% from Barrick, as Newmont is the operator of the mine. As I said , when the latter deal was done: I think there has not been a sale by a mjor, where it did not work out for the buyer….! At least I cannot remember one, where Australian buyers have been involved.
Equinox Gold is buying Leagold, another Canadian gold producer, with assets predominantly in Brazil. Equinox, headed by Canadian gold mining identity Ross Beaty, has also support from Mubadala Investments, Abu Dhabi-based sovereign wealth fund. Beaty is also heavily involved in Lumina Gold Corp, Osino Resources and others.
Aussi gold miners did not bounce back as expected today - but I guess the 700 mill$ capital raising of NST is the main reason here…As you know, share prices tend to overshoot - but fundamentally, Aussie, medium sized gold producers like EVN, RRL etc are back into value-territory!
Perseus - will be included in both North American gold miner Indices from the 23rd of Dec - estimated buying necessary is more than 5% of the company. This might help to explain the very recent strength of Perseus, and I think we might see a few more cents between now and inclusion. Perseus have had agreat run this year - but perhaps one should not forget, that the newes mine, Yaoure, will not be in production until the end of 2020. If the stock goes for a bit of a run the next few days, it might make sense to take a few off the top.
Resolute - is the Australian gold miner, which to my knowledge, is the most shorted one . Nearly 9% of the equity has been shorted, rising quite strongly over the last few days. As we all know, there are some risks associated with bringing the large and highly automated Syama underground mine into production, and the country ( Mali ) is having some risks. But I dare to say, that the shorts might get pretty itchy, if the next Quarterly should show strong progress on underground mining rates at this important mine.
Liontown - the company announced some more, excellent drilling results from their lithium project in Western Australia, Kathleen Valley. 31m with 1,8% etc are certainly the kind of intersections needed to propell the resource past 100 millt. The only problem: We have enough lithium already! But while the price is currently under pressure from a slow take up of EV´s , I think this might look very different in 2-3 years time. The current price weakness makes it very difficult to keep spodumene mines profitable - and makes it next to impossible to finance new projects . This might well look different by the time they are ready to make a final investment decision. Congrats to the management: They raised money, when the iron was hot at 10ct, to be fully financed incl finishing a feasibility study in 2020. The timing of Kathleen Valley could be very good, and by that time, corporate interest might well come back to the sector as well.
Fortescue - looks like finishing the year as the second best performer of the S&P 1200 global Index - and it´s boss Elizabeth Gaines as the second most important business woman of the year, only behind Microsoft´s boss ( according to Fortune )! What an achievement ! Congrats!
Have a nice evening
WS
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