Good afternoon
Apple´s announcement of lower sales targets for the I-phone this Quarter, based on Chinese supply chain problems, is making people nervous about the worldwide implications of the virus for others as well….European car sales also pretty weak in January - but equities holding up halfway well so far.
HSBC will cut 35.000 jobs and take more than 7 bill $ in charges!
Jeff Bezos pledging 10 bill US$ on climate change!
The US$ continues to run from strength to strength
BHP say today, that they have not seen much of a slowdown yet for iron ore deliveries…but state, that if the virus situation does not show significant progress until the End of March, they see an impact. If contained by then, they expect stimulus and catch-up to see very limited total impact for the year.
RIO slashed iron ore output guidance for this year by 6-10 Millt, because of the recent cyclone. Iron ore prices are now more than 10% higher than recent lows, and and just 6-7% lower than Jan-highs - iron ore price is back up through 90 US$!. Amazing. Is this telling us something about inherent tightness of the iron ore market, which is plagued by weather issues in Brazil and Australia? Or is this - like equity markets - telling us, that we should not be cautious about possible virus impact? I find it very hard to believe, that this virus will not have a reasonably strong impact on world GDP growth this Quarter, and probably next - see Apple above and multiple similar announcements from other companies/tourism/luxury goods/ car industry etc etc
And in this context, the rocketing gold price ( 1604 US$ in the moment! ) could be explained ( making a new , recent closing high today? ) - beside of the fact, that there are a myriad of other ( well known and communicated ) reasons to be long gold! Gold in A$, by the way, is making new all time highs today - currently at 2399 A$/oz! As is Palladium, at 3800 A$/oz - trying to make new highs in US$ as well! Combined A$ price of Pall and Plat is 5265 A$/oz…new all time high!
Resolute - hedged another 30.000 oz yesterday to a total of 225.000oz between now and June next year. That´s a lot - and few will like this! They must be under pressure from their bankers, still? Not sure, what´s riding them here! The new reserve statement did not contain any surprises - the company is showing slightly reduced reserves after depletion, if one takes into account the planned and highly probable sale of Ravenswood soon ( I also doubt a little the value of Ravenswood reserve-ounces…which for sold for a cash outlay of 50 mill A$ + some later only recently) . A really good gold miner, in my opinion, should manage to hold and more preferentially, increase his reserves organically. At least, that´s where the real value-add for shareholders is coming from - a good combination of disciplined, cost-effective production and successfull exploration!
Panoramic/Horizon - Panoramic today sold 20,2 Mill shares in Horizon Gold for 27ct/share = 5,4 mill A$. That´s good news - anything which increases PAN-liquidity is good news in the moment. The shares were sold to largest shareholder Zeta Resources. The premium to the last traded price of 17ct is significant - nevertheless, i think it still does not represent, what Horizon could be worth. Under the circumstances, though, I think this is a good outcome for PAN - probably not that easy to get more on short notice. HRN have never been able to publish the results of the scoping study, as ASIC did not allow them to publish it ( based on inferred resources only ) - in so far nobody really knows, what Horizon is- or could be worth. In my very subjective and not informed opinion, it should ultimately be worth quite a bit more than 20 mill A$ market cap!. But PAN are still holding 24,6% or 18.8 mill shares following this transaction, so will be able to share the upside. Panoramic should also receive another 5 mill A$ approx from selling the Canadian PGM-project to Regent Gold prior to the end of March - that would be very welcome. The balance of the 20 mill$ ( estimate! ) needed = 10 mill - should come in the form of debt from Zeta, or the off-take partner Jinchuan?? Or a sale of Panton? I do not hope, that they will need to sell this one - again, ultimately, I can see much higher value in Panton, once PAN has added value here via drilling, for example - also having in mind the above mentioned prices for PGM´s!!! In the moment, there is no cash for it - but should change next year, I hope!
On Horizon - this is exactly the kind of company I am talking about further down….capped at 18.8 mill A$ today, they probably have easily 400.000 mineable ounces. Just making 100 A$/oz on them, gives you 40 mill A$ or double the market cap…ok, that would not be the NPV,…still, there is a lot of upside in these things!
Bellevue Gold - updated on it´s extensive drilling program . 8 drill rigs at work, of which 6 do infill drilling ahead of the planned resource statement in May, which aims to convert a substantial part of the 1.8 mill oz at 11,1g gold/t inferred resource, to indicated status. Strong intersections from Viago Lode, Tribune Load, Bellevue Lode and Vlad Lode…some good width of 2- 12m, with gardes raning from 5g to 36 g indicate, that the new resource statement shouldhold grades above 10g/t. All very promising…hopefully, we also will see a new resource statement late in the year, targeting above 2.5 mill oz in total resource. The dewatering of the old underground mine is in full swing, and once complete, will make drilling from underground a lot easier, faster and cheaper. That should reduce their heavy spending on drilling somewhat, but still, by mid-year, I would expect a last placement before they ( hopefully! ) will be taken out by one of the larger, Australian players. All going to plan here…except perhaps for the share price, who deserved to be 10ct higher in my opinion!
There are more and more Australian gold producers falling victim to some degree of hedging…Today OZ Minerals reported a result more or less in line with expectations - but a hedge position of 165.000oz at 1753 A$/oz! That hurts!! The company reported a profit of about 160 Mill A$ - 165.000 oz at 630 A$ /oz under water = more than 100 mill A$ in missing EBITDA…so it´s more than a little drag….To be honest a company with as sound a balance sheet as OzL - why do they do it?
Generally, I think there is significant upside to small gold stocks in Australia. I do not think, that many of them are trading based on the current A$ gold price-level. Let´s not forget, that the A$ price as at today is trading 230 A$ higher or 10,6% higher than at 31st of Dec 2019 or 31% higher than 13 month ago! We are all used to deal with 1300-1400-1500 A$ AISC/oz….but even more marginal projects might be feasible now! So I will spend some time to look at the second liners and third liners …But this is for the speculativ investor, wanting to double his money…For “normal” investors, I think stocks like Evolution / Saracen will continue to do well! Last time gold has hit a high in A$ was back in Aug/Sept 2019 ( seems like ages ago! ) , when A$ gold was 120 A$ or 5% lower than today! On the charts, I think we will see another 25% in EVN relatively easy! And for the investor type in the middle, you have the Bellevue´s of this world - not producing, but not a wild speculation either!
Have a nice evening!
WS