Good afternoon
following a stellar recovery in January, some profit-taking today in equities, as well as in base metals - surprisingly except for nickel, despite it´s 20% run from recent lows - it´s up by another 0,8% so far.
PMI´s around the world slightly negative for growth….but the new, dovish stance of teh FED and some conciliatory comments regarding US-Chinese trade negotiations are certainly still helping. And today, sensational payroll numbers in the Sates - nearly double as strong as expected.Very strong labor market, despite a downgrade of the prior month by nearly 90.000.
Amazon with a shitty Quarterly after hours yesterday.
BHP/RIO and FMG had a great run this week - unfortunately on the back of the tragedy in Brazil. Many questions remain as to the reason for it, and the impact on regulations ( i.e. cost of production ) not only in Brazil. Perhaps time to wright some calls on these stocks?
Sorry, hard to keep the pace with all these Quarterlies out….
Lucapa Diamonds - I think the stock has turned the corner. The first tender under the new, Angolan sales regime went extremely well - 23 mill A$ worth of sales for just 7 stones - an average of 33.500 US$/carat. This follows on from a strong Quarterly. A discovery of a new, high-value pipe at Lulo; finishing the drill program at their exciting Brooking discovery in Australia; initial production at their new mine in Lesotho, which produced an average of 3.94cts per 100 t, vs reserve grade of 1.92ct…..On top of all this good news, 7 special diamonds were discovered in Lesotho - the ebst once with 78 and 38cts. The plant is producing well, and will reach name plate capacity in the current Quarter. The stock has been very depressed because of the general market, and tight financing in the run up to Lesotho coming on stream, and uncertainties about just how well the enw sales regime in Angola would work. I think 31 parties have been bidding for the stones - that´s very positive indeed. Recent negative press about diamonds relate to the lower-quality market segment. These and other sales show, that the market for quality stones is still fully intact!
Lucapa is now producing from two mines in two countries - and I think they are priced on one mine only. I guess LOM could be one of the highlights at INDABA next week.
With regards to a few gold stocks following: If you would run a sizeable company, which company would you take over first: a company like Breaker, where at least in the past, there have been some doubters as to regards of the quality of the resource ( I am not one of those, by the way ) - or Gascoyne, with numerous issues, but a well functioning plant - or Bellevue, where some work to tighten up the resource has to be done still, but grades are 22g/t???? I know for which one I would stick out my finger first!
Breaker Resources - strong Quarterly yesterday: 9m with 14g; 4m with 20g;15m with 5g; 4m with 10g - excellent stuff. Many results with 1-2 g and more with good width from a few to about 20m…One analyst in Australia now expects 1.5 mill oz in the next resource estimate, and believes, that 2 mill ounces by year end are a distinct possibility. He compares the stock to the two recent, unsuccesfull explorere-bids in Australia, and on that basis, values the company at a minimum of 41ct, and 81ct respectively. Wherever BRB have been drilling - in-fill as well as extensional drilling - the company has found ore! It all looks like this thing has not been finished off at all - undergrounds, as well as extensions in all directions offer very good potential, still. The company is spending heavily on exploration, with headoffice costs still examplary low. The current Quarter will see another 3.4 mill A$ in exploration spend - after that, we will see another resource upgrade, and at some stage mid-year, also the next placement. Nothing wrong with that, if the company delivers, what I expect them to! Normally, I would tout the company as a takeover-target - but Tom Sanders, with his 20% shareholding, will want to realize full value for his baby!
Bellevue Gold - anothe good Quarter from an advanced exploration stock. 3m with 86g , 6.4m with 28g, 4m with 59g from the Viago lode, which will see an addition to resources. Also high-garde results from the “Bellevue Surrounds” of 2.4m with 26g, 4m with 16g etc….The next resource estimate should be with us soon - will be evry interesting to watch! As says - there are many mills from much larger producers in trucking distance, which are always hungry for grades like the above!
Paringa - and yet another disappointment! Production start-up delayed for about 8 weeks for all sort of reasons…the projct continues to under-deliver! The worst is, that financing is tight - some more money might well be needed. All nice and good, that tehy have concluded anotehr sales contract - but I never doubted the markets ability to take their coal. The stock is way too cheap to sell it - but beware of another disappointment! Downside should be very limited - the only reasong I can see for it is another placement! Other North American coal producers must be very tempted to make an end to this sad management story! Having said this - the new MD has been in his job for only a very short time, and I guess cannot be made responsible for this delay.
Gascoyne - delivered anotehr disappointing Quarterly, just below the lower end of mch reduced guidance. The only good news: Net debt has only increased by 3 mill A$ in the Quarter to 48 mill. The plant is doing well - grade reconciliation and mining, along with increased dilution, are the main reasons for the underdelivery. In January, these problems got worse…The company is adament, that mining as well as grades will improve in the current Quarter ( reserve garde is 1.3 g vs mined grade of 0,48g in January, as I understand ) - but we have heard that before, and company was very confident for grades to increase above 1g/t as early as late November. I am p…ed off! Yes - IF they deliver on the promises, the stock is worth 2-3x current market cap, and the plant-issues have been rectified…but Jesus - this is a tough ride indeed!
Have a nice weekend, nevertheless!
WS
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