Good afternoon
equities in Europe are mixed today - Germany is stronger mainly because of Volkswagen, which is up by 8% or so, The US is stronger across the board…amazing!
Industrial production in China as strong as a bull - up by 7% - while retail was also positive +5%. In the US, we also had stronger than expected numbers for IP as well as manufacturing. Unless this virus drives us completely mad, we will have a strong year ahead of us for resources! As I said before - the big stocks will continue moving ahead - but the real money is in teh small ones, like Venturex, Foran, Panoramic etc…Investors are still a bit gun shy here - but we have seen it before! In the end, all of these companies will trade at lofty valuations — from large siscounts to NPV today. So a good mixture of these things should continue to provide us with fun next year!
As I said before - the mainstream funds have underweight positions in resources ( and some of them hold none at all! ) - and tehy find it very hard to say goodbye to any growth stock, and move into some value ! Eventually, they will all do it…
Metals are doing it a bit tough today - but copper is just ahead, and nickel is up by yet another 0,7% to a staggering 17.100 US$t or 23500 A$ = 10,66 A$/lb. I guess I don´t have to tell you, which stock is my favourite at current levels….!! Gold is currently up by 20$ - probably on progress in the US for another large stimulus.
Cameco temporarely had to suspend their very large uranium mine Cigar Lake, because of a virus outbreak. This has put a rocket under many uranium stocks last night.
The big news for my fund today was
Sheffield Resources - SFX received Foreign Investment Review Board approval today, signed by Josh Frydenberg, Australia´s Treasurer! Good to see, that common sense seems to prevail in Australia! The approval was aboslutely no done deal, as you would usually expect - the future JV partner of SFX is a ( private ) large steel producer - and it´s Chinese! Given the massive problems AUstralia and China are having between each other in the moment, there had been considerable doubt, as to whether SFX would get the deal done. The Chinese are still very keen, and the JV-agreement is basically done . The changes, which had to be incorporated into the BFS - mainly regarding the production of Ilmenite, which goes to the new partner in future under an offtake-agreement - have been worked on for some time and looking at today´s presentation, should be done by the middle of next Quarter. Only then we will be able to put a definite value on this development. I am not expecting dramatic changes, though, and the NPV should be around 900 mill A$ for the project ( 100% ), with pre-production capital of about 480 mill A$. Following the placement in SFX to the partner Yansteel , and their contribution of 130 mill A$ equity into the JV, I think financiers will fall over themselves to partner them. Originally, Taurus as well as NAIF had been signed up - but I would not be surprised to see a larger inviolvement from NAIF, which would be much cheaper, I guess -usually NAIF is providing funds for 10 years + at 3.5-4% to projects, where “normal” project finance would be much closer to 10%.
So all very good here! SFX are capped at 135 mill A$ - subject to the results of the BFS, this will be just about 1/3rd of the NPV ( 50% ). So there is much fun ahead, with short term drivers being the signing of the JV-agreement, and results from the BFS! I continue to hold a very large position in my fund.
Resolute - good news also from them…I have had some erservation as to their debt position - but given today´s announcement , this should not be an issue any more. Chifeng Gold has paid a deposit of 5 mill US$, and on finishing due diligence, they will pay another 100 mill US for RSG´s Bibiani Mine in Ghana. Unless the godl price continues to move higher, this is not a great asset - and analysts had valued it at dramatically less in the past. So if all goes well in the due diligence and on the approval side, the transaction should be done by March! Excellent news for RSG, which is only capped at 800 Mill A$!
Apollo Consolidated - Roxgold have announced a new resource for their Seguela Project, for which AOP are receiving a 1,2% net royalty on every ounce produced. ROXG announced just over 1 mill oz in M&I resource at 2,5g ( doubling it ! ) plus another 370.000oz in inferred resources at 4,8g gold/t. The feasibility study will be announced during the first half of 2021. It appears, that the resource is anything but finished, and should continue to grow over time. The royalty should be worth 20 mill A$ or so, in my opinion. Alonside current cash of about 18.5 mill for AOP, this values Apollo´s Australian 1 mill oz resource at only about 25 mill A$ - and this resource is far from finsihed, as indicated by strong, recent drilling results. I continue to hold a position here, even though I am not very bullish for gold for the next few month.
Strike/Warrego - the well is now at 4025 m and foloowing small changes, by now shoudl be drilling ahead - the big target is just ahead of them!!! Towards the end of the week, things will get exciting! Christmas is coming soon???
Have a nice evening!
WS
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