Good afternoon
as bushfires and heatwaves rage throughout NSW and Australia ( another record: 41.9 degrees across Australia!!! ) , we wish everybody a Happy Christmas, and hopefully, a quiet time in good health!
Looks like we will have a strong end to the year , while trending higher, no major changes in equities - and even less action in metals and bonds today. The US$ is strong.
Resolute - the Syama-roaster went back on stream! This is a very important step for the company…the most important one , though, still remains: Bringing Syama Underground into full production, hopefully over the first half year. If that can be achieved, Resolute is probably the cheapest, mid-sized producer listed in Australia. The next Quarterly report will be closely watched for progress on the rate of mining.
Sheffield - I fear not much news recently - the market is keenly awaiting the outcome of UBS´s search for a strategic equity partner in their zircon-heavy, mineral sands project in Western Australia. Results will obviously not be announced before Christmas, but I believe, that they are very close to finding a partner. I still believe, that this is a VERY cheap company….Broker Bridge Street today reiterated, that the zircon market is still looking very sound, if not bullish, in the medium term - and for TiO2 in a similar way. Several production issues and project delays have been reported over the last few weeks, and a supply-shortfall looks almost certain from 2022 / 2023 anyway, due to exhausted mines. Psycholically, it´s a very difficult thing to constantly average down on a stock - but I am pretty convinced, that this is what you should be doing. The Bridge-Street-NPV for the project is still above 1.50 A$/share = 5x current share price, and while I have no doubt, that value will be diluted by an incoming partner, it should be possible to make some nice returns in this stock. The share price has been driven down by frustrated and stale investors - but fundamentally, nothing is wrong here, The early part of 2020 could be exciting for Sheffield, and it should also be rewarding, to hold them for the longer term!
This is the last email for 2019, which has been another difficult one for the resources sector - despite some nice improvements in the underlying commodities. The first 6 month have been very disappointing, before we witnessed a strong run-up of equity prices in the 3rd Quarter - only to see frustration gaining hold again more recently. It shows, just how important a positive mood for gold is for smaller resources companies in Australia!
Country risk has been a major factor for valuations - I think this will not change. It´s becoming ever more difficult to develope resources projects, and 2020 will not be any different.
For the resources space, 2020- and 21 will be watershed years for the takeup of electric vehicles. This could become a major story again, if early promises from the US and Europe can be fullfilled. But don´t underestimate gold as well - we could have another good price performance. And last but not least, M&A should provide us with more fun in 2020.
I am hoping for some success to be had in stocks like Panoramic, West African, Sheffield, Strike, Bellevue, Genex, Tietto, Evolution, Apollo Consolidated, Graphex to name a few - most of whom will present in Zurich on the 21st of February at our yearly resources conference, to which you and your colleagues are invited. Please keep the date free! I will send out invitations as soon as I will return from South Africa ( where I hopefully will have enough power to lighten the plastic christmas tree! ), once the list of presenters is fixed .
Have a wonderful Christmas time, and a great start into a promising 2020!
Yours
Wilhelm Schröder