Good afternoon
PMI´s in Asia, as well as in Germany are pointing to a strong recovery in manufacuring…Factor activity in the States still very strong and expansionary, but a touch below expectations. Equity markets like that - they are making new highs, as well as base metals. Aluminium, copper , nickel and zinc are strong today…and gold is staging a nice recovery: Currently up by 37$ to 1814 US$ and back above the 200-day moving average. A lower US$, which is testing the 1.20-level against the Euro again, is helping here. This level is strong resistance - but I think it could fall, with the next target being 1,25 US$/Euro. As I am writing, the US$ has moved to 1,205 against teh Euro and has broken support!
Platinum ( first close above 1000 US$ in a while ) and palladium are also moving very strongly! Platinum has strong resistance around 1000-1030 US$ - if it can move through it, the 2016-high of 1200 will be the next stop.
Tensions between Australia and China are rising, still - rethoric is not good at all! I think Mr.Morrison, the Australian PM, thinks that he is a strong man! All he is, in my opinion, is a strong follower of the US!! Unfortunately, Australia is so paranoid about it´s Asian neighbours, that it´s politicians tend to follow the US blind in their ( perceived ) need of a big brother as ally!
These tensions also show themselves in share prices of the large iron ore producers, which are all way too low foo low, considered that iron ore is trading at record prices and is generating stellar returns for the Australians! Some little companies like for example Sheffield could turn out to be big loosers from politics here, waiting for Foreign Investment Review Board approval.
My fund Nestor Australien has profitet greatly from the recent run of the resources sector - but also from strongly performing industrial stocks in Australia. The fund is up by about 25% this year, and has returned 10.2% p.a. over the last 5 years in Euro-terms, or about 13% p.a. in A$-terms ( that´s after all management fees incl performance fees ). Unfortunately, our marketing is terrible, so it remains small, with just over 11 mill Euro under management. I would love to have 20-30 Mill , which would be an ideal size to also give small- and micro-caps a good weighting!
Strike Energy/ Warrego - had their AGM today and appeared very confident of the success of the currently drilled West Erregulla-well, which is drilling ahead at 3500m depth. This is getting very close to the target, which should be reached within the next week! Strike´s share price is holding well close to record highs. I have bought a position in Warrego recently, who hold 50% of the current well. While not being the operator, and not having the great ground position Strike has in the Perth Basin, I think Warrego are way too cheap vs Strike and have the chance to double over the next few month, if this well comes in as planned.
Chalice - absolutely unbelievable just a few month ago, the company raised 100 mill A$ at 3,75 A$ to continue it´s drilling success!! 80 Mill A$ are earmarked for Julimar, and 20 mill A$ for it´s other properties. Aim is to establish a resource for Julimar by the middle of next year!! This is shaping up to be a worldclass discovery just outside of Perth! My aim is to double or tripple my money in exploration stocks, so I have exited my very profitable position in Chalice - perhaps a bit prematurely. I have a relative sizeable position in
Liontown, where I am profiting from their excellent lithium project ( which for me, is screeming for corporate activity ). I think the management is working very hard on bringing this project to fruition by driving the feasibility study - probably not only producing lithium spodumene, but also lithium hydroxide. The pre-feasibility study calls for mining of 2 milltpa, a 40 year mine life, and 4,8 bill A$ free cash flow - using operating costs over the mine life of 377 US$/dmt and a price recived for spodumene of 739 US$/dmt. These parameters are looking realistic tome, and arrive at a NPV of 1,12 bill A$ for LTR - vs the current market cap of 487 Mill A$. Going further doiwnstream ( and using cheap, Western Australian gas! ) could increase the NPV to nearly 5 bill A$, according to a recent scoping study! I would not be surprised, if some large consumer of lithium like a car- or battery producer, would end up as a JV partner here.
Liontowns second project is of great, speculative interest to me, and looking at above potential, is probably coming for free: Moora is a property about 120 km North of Chalice´Julimar project. Aquired by LTR in 2018 and 2019 ( before the Julimar success ) , it has many look-a-likes to Julimar, including sueface gechemistry, which has recorded strongly anomalous values for nickel, copper and PGE´s - again similar to Julimar. LTR have recently raised funds and are well cashed up to drive exploration at Moora as well as the feasibility studies for Kathleen Valley, the lithium project. If Tim Goyder´s recent success rate ( he is Chairman of LTR as well as CHN ) can be applied, both projects will deliver! Follow the winners…!
Poseidon Nickel - Peter Harold´s new company had their AGM the other day, and raised attention today, because Andrew Forrest reduced his holding in the company from 18…to 16,4%. I had a good look at the company, and a good chat to him. While I believe, that Panoramic ( market cap 276 Mill A$ ) is still quite a bit cheaper than POS ( market cap 174 Mill A$ ), I think a nice situation could develope in POS. They have had three excellent drill hoels with long intersections of nickel, around 10% of nickel ( ! ), and are currently developing a drill dive ( 300m ) , from which to explore this anomaly further. Western Australian nickel history has shown in multiple situations, that there is normally a very high chance of different mineralised areas, once you have fund. This project has historically delivered some nice and profitable nickel production, and chances look high to me, that POS have discovered one this year. The gardes are outstanding, infrastructure is in place, and the discovery is just a few hundred meters from existing and fully functional underground development. This discovery, if further hoels prove a resource ( which looks highly likely to me ) could be brought into production very quickly, and with limited capex. POS have 15 mill cash in the bank , of which 3 mill will be used for the drill dive, and about 1 mill per month for exploration - so definitely no capital raising within the enxt 6 month, and even thereafter, probably only, if tehy have success! POS could also monetise their gold tailings resource, for which a feasibiliyt study has been done. That could be sold for I guess 10-15 mill A$, or processed by POS . The NPV at current A$ gold price is about 23 mill A$.
I think there is a good chance, that the share price might come back a little on the Forrest-news - certainly also depending on whether he will continue to sell. I also believe, that Panoramic is outstandingly cheap vs all these high-flying nickel exploreres, especially, as PAN also have very substantial exploration potential. But a fact is, that the market is paying for explorers these days, and especially those, which make high grade discoveries. I am waiting for a buying opportunity in Poseidon…in the meantime, veery worthw hile to have them on the watch list!!!
Have a nice evening
WS
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