Good afternoon!
By early afternoon, European equities are slightly up, as are US-futures.
The US$ is slightly weaker - goold is profiting with a convincing move to currently 1927 US$ or 2670 A$/oz.
Base metals are very strong today, driven by a strong PMI today in China - especially nickel and copper. Nickel is probably also profiting from Vale not being able to find a buyer for it´s lossmaking nickel operations in New Caledonia, which will most probably lead to the closure of Goro by the end of this year. To my knowldege, that will remove abut 30.000t from the supply side.
Liontown - what a beauty of an updated feasibility study! Kathleen Valley is expected t produce 350.000t p.a. of 6% lithium spodumene frm early 2025 ( by that time, most analysts expect a shortage of lithium ), at costs of 260 US$/t before royalties, for 40 years! No hard rock mine in the world other than Greenbushes can produce as cheap as them! And even at current,depressed prices for lithium, this mine would make money! The company is using the Roskill forward estimates as pricing - that´s 739 US$/t and sounds realistic to me, and a currency of 0,72 AUD/US$ - probably als realistic. On that basis, the project will generate 4.8 bill$ in free cash flow over it´s mine life, has a NPV of 1,12 billA$ and an IRR of 37%.
This is a large project, and it´s based on one of the top 3/4 hard rock deposits worldwide in terms of size, at excellent grades. The company will incorprate a potential doubling of size into the final feasibility study, which should be finished by the end of 2021. A scoping study, to produce not only lithium spodumene, but lithium hydroxide, will also be conducted.I think this project is large enough to be of interest to the big boys!
Via Liontown, investors also have exposure to exploration for a Julimar (Chalice ) look-a-like, called Moora. I think LTR can still go quite a bit higher from here - and very much so in comparison to Piedmont! My fund stays a happy holder here! This is a worldclass project, in terms of size, costs and general quality!
Strike - and another, very exciting announcement: The company secured up to 28 mill A$ in project financing from Macquarie Bank, at “very competitive terms”. I can only guess - 6%?? On top of that, Macquarie receives 35 Mill 29ct-options 2022! Effectively, this equals small dilution of existing holders, at a premium - and of the 28 Mill A$ in debt, about 10 mill A$ can be repaid from the potential issue of new shares at 29ct. This is a great step forward for Strike, which is now fully financed for the important wells West Erregulla 3, 4 and 5, which are to finished by about mid-year 2021 - perhaps a little earlier, as well as for the ordering of some long lead items for the production facility.
The financing also shows the extreme confidence in the project by the financier! I guess STX might have moved through 30ct today, if not for the fact, that Warrego is suspended today for a placement ( to finance it´s part of the next 3 wells ). Investors can effectively buy into the same project via Warrego, which is a 50% partner in West Erregulla, and - while not being the operator , it is is priced substantially lower than Strike.
Should the next two wells deliver to expectations - which is highly probable - Strike will prove cheap, and Warrego very cheap, based on West Erregulla! I am continuing to hold a maximum-position in STX, and a smaller one in WGO! Strike has the added potential from it´s Southern acreage as well.
Have a nice weekend!
WS
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