Good afternoon
Last Friday, we hosted the Australian Resources Conference in Zurich.
A strong audience saw excellent presentations!
All stocks have been marked down heaviliy over the last few days…I think a great opportunity for us! Don´t forget, that A$ gold is still at around 2500 A$/oz!!! I have been skiing over the last few days - that saved me from recommending these stocks too early!!
In the following, a quick run-down in order of appearance at the conference:
Metro Mining - Managing Director Simon Finnis emphasized the excellent year just finished for Australia´s only, pure, and listed bauxite producer, The company produced and shipped a record 3.5 millt, just above guidance. More importantly, MMI secured a 47.5 millA$, very preferential loan from the Northern Australian Infrastructure Fund to enable the planned increase of capacity to 6 millt p.a. from 2021. The company is expected to be debt free again by the middle of 2022, indicating the very strong cash flow from this straightforward operation. Bauxite is mined without any blasting, is then crushed and shipped - it doesn´t come any easier than that! The operation will see a 18-20% cut in operating costs, once the 6 millt capacity expansion has been finished! A very cheap company, which should also profit from low freight costs this year!
Genex Power - the company is producing solar energy currently at Kidston in Northern Queensland, and has it´s second solar operation in Northern New South Wales under construction - starting generation late this year. The main price remains GNX´s pumped-hydro project at Kidston, using the two existing, mined out open pits. Financing incl equity has been negotiated - but the company late last year was stopped at the very last meter, when the Hongkong-based board of Energy Australia, the preferred off-take partner, did not sign the agreement. The company is now targeting a new, financial close for the project”in the 2nd Quarter”, and reading between the lines, I expect it potentially even sooner. But once bitten, twice shy - so it´s good to be conservative in terms of timing. Pumped-Hydro is just what Australia needs very urgently - and I think we will see a breakthrough soon here, making Genex a very cheap stock!
Chalice Gold - a newcomer to the conference, the young MD, Alex Dorsch, made a very strong impression! Led by Chairman Tim Goyder, these guys are very systematically exploring their massive, 100%-owned landholding in Northern Victoria, in land, which has many similarities to the nearby fantastic Fosterville Mine, which is a worldclass mine by any standard., and was a company maker for Kirkland Gold. Chalice has had some good sniffs already, is very well cashed up with approx 30 mill$ in cash + investments! Chalice have had a large cash holding for some time, and successfully invested it in very selective exploration. and investment opportunities for several times. The latest investment in Spectrum Metals, which is now under takeover by Silver Lake, was made at 5.3ct and should net the company something like 8-9 mill A$ after tax. Chalice is a very big story potentially, well supported by some smart people and smart money!
Graphex Mining - MD Phil Hoskins was understandably under a bit of stretch to present this slightly more complicated story in 20 min. Graphite is still new to many investors, and the problems of the big producer of this mineral, Syrah Resources, don´t help - even though the use of this companies graphite, mainly in flame-retardent building materials, is completely different.,GPX has a large backer already, who has 60 days to confirm his ongoing commitment, following the release of the recent Final Feasibility Study. It´s not easy to finance a 90 Mill US$ capex + working capital project for a 10 mill$ company - but the chances for GPX to get it done appear very high! The 330 mill US$ NPV underlines the massive returns possible here! It should be very worthwile to spend some time on Graphex! The company detailed the other day, what is left to do to get a firm commitment from it´s major financier, and probably others. They stressed, how deeply the Financier has been involved in all diicussions and all aspects of the bankable feasibility study!
Liontown Resources- the absolute star performer from last years conference has further, substantial upside! That´s the message MD David Richards sent to investors. The current resource of 139 millt of 1,33% lithium LIO2 is large by any world standard, and recent, stunning drill results of grades above 3% send the clear message to investors, that more and at higher grades even is probable! drilling is ongoing, a new reserve will be announced within a few month, and the final feasibility study will be finished this year - without the need to raise fresh capital. By the time this project could come to market in 2-2.5 years, the lithium market will have grown substantially as well. The project is 100% owned and LTR will be a prime target for all lithium majors! The company has been massively derisked since last years conference, and will not repeat the 600% increase from the last 12 month - but there is a lot of room left, and at much lower risk!
Cassini Resources - MD Richard Bevan presented the outcome of the very detailed pre-feasibility study, recently completed by top-rated JV-partner, OZ Minerals. The project needs close to 1 bill A$ in development capital, but has an expected NPV of 800 mill A$. While the JV-partners are using a potentially agressive nickel price of 7,60 US%´$lb nickel , and a currency of 67ct ( which as at today, is even more favourable ), Richard pointed out, that the NPV rises by 10% at least with every year. So even using an NPV of say 500 mill A$, the outcome would still value Cassini at more than 3x current valuation. Once OZ Minerals firmly commit to this project, producing nickel + copper as by-product, we will see a strong increase in CZI´s share price, and potentially, a friendly takeover. It makes much more sense for OZL to own this thing 100%, than to organise financing for the junior partner!
Oklo Resources - excellent presentation by MD Simon Taylor. OKU are having a nice lad position in Western mali ( which, by the way,has never seen the well documented problems in the North- and the East of the country ), right next to several major mines - the closest being Fekola ( B2 Gold ), just 25 km away from OKU´s main project. Oklo had a bit of a slow start, and but following some base work, ahs really hit it big time more recently! many first-class drilling results are showing the potential vor a very high grade, open-pittable fist resource in the next few month. The company is cashed up, is drilling, and should bring out more results over the coming weeks and month. If they deliver, what I think they could deliver, the company will not be there for a long time - the grade will tempt the big boys! Subsequently to the conference, the company announced more excellent drilling results, like 34m with 4g / 22m with 3.9g / 7m with 9 g / 7m with 13 g etc….all from a prospect called SK1. Drilling is ongoing, and the company is expecting results from SK2 and SK3 shortly. The stock was suspended the other day for a capital raising!
Tietto Minerals - MD Caigen Wang started the presentation, and was then follwoed by ED Mark Strizek who drove the message home, that the current 2.2 mill oz resource is expected to grow to 3 mill oz + - and after that, who knows? TIE have so far only targeted a small part of their ground holding, and while artisanal mining is no guarantee, it has been a good guide here in the past for more success. The current resource has a 1.4 mill oz high grade core to it, at 2.2 g gold/t.. If TIE can increase this over time to enable a sustainable mining operation of 200-oz + per annum, and think much larger companies will have a very close look at it. For example West African Resources, once in full rpoduction, or Perseus, once Yaoure is up and running by the end of ths year, would be prime contenders in my view. TIE are conducting a very active, 50.000m drilling program in the moment, and I would be very surprised, if we would not have a resource above 3 mill oz here by the end of this year!
Evolution Mining -Executive Chairman Jake Klein gave a great run-down of existing operations and made a big point of the advantages to invest in medium-sized companies vs the very big boys, as well as the smaller boys. Much easier to finance new developments than for smaller miners / much easier to offer career progression for strong employees / much easier to make a difference via exploration - and this is what EVN have done lately. Strong exploration results at Múngari, but especially Cowal should see a strong increase of reserves later this year. and new reserves are the largest, potential value-add for mining companies! Jake has managed a very successfull gold miner over the last 8-9 years, and I think his story of a sustainable ( in every regard ) mining company, with increasing asset quality, while maintaining a great corporate culture , has miles to go. The next mile will be driven by Cowal, and by their recent aquisition Red Lake in Ontario. The latter has established a base in North America for Evolution, and Jake managed to bring across, just how much this asset needs rejuvenation and some capital to return to former glory! The next 12 mont will be interesting for EVN, and in my opinion, will underprin them as the best gold mining company in Australia!
Bellevue Gold - MD Steve Parsons presented very well - and I think technically, the presentation was absolutely outstanding! Bellevue has been a great success, and while the share price has been a bit dissappointing ( just unchanged from last year´s conference ), it probably needed some consolidation from the previous, big run. BGL have spent the last year well, though, by adding many ounces to now 1.8 mill at the stunning grade of 11.1g gold/t. 8-9 drill rigs are currently working to expand this resource, as well as to increase the status of inferred resources to indicated resources. They have also added Deacon, which should underpin a strong increase of resources. The old Bellevue Mine is currently being dewatered, which should make further exploration and reserve-definition from underground much cheaper and faster. Again - I do not believe, that we will have BGL in Zurich next year - a potential 200.000 oz producer, at probably low costs because of the grade, will be just tu juicy for the larger , Australian gold miners, which are all spitting out cash at the current all time high A$ gold price of 2475 A$/oz!! Subsequently to the conference, BGL announced a maiden resource for the Deacon Lode, of 410.000 oz at 12,3g gold/t - even better than the previous resource grade of 11.2g. The total resource stands now at 2.2 mill oz at an average grade of 11.2 g !! The resource stimate only includes 900m of the Deacon Lode, which has been tracked over 2 km strike length already. Major shareholder Dynamic Gold increased it´s holding, and we also saw strong buying after the conference!
Strike Energy - what a story, and what a commitment! MD Stuart Nicholls probably saved the company by aquiring and driving ( very hard! ) the West Erregulla project in the Perth Basin, which subsequently delivered one of the best and largest ever gas finds onshore Australia! The share price has been languishing for a while, as the punters left the company, following a very strong share price performance. At the current 18ct/share, Strike are a steal, in my opinion. Strike will be one of the lowest cost producers of gas in the Western World, makling money even at the current, depressed prices of 2 US§ for Henry Hub Gas! But Stuart emphasized, that prices for long term contracted gas are still at around 5A$ - a fantastic price for Strike. Next steps for the company will be potential off-take agreements, and appraisal drilling - at a later stage, also more exploration drilling. The success of neighbouring Waitsia and West Erregulla have completely changed, how corporates look at the Perth Basin now. This area can change gas-dynamics in Australia, and also in South East Asia, if it´s really as big as some people start to think! The last 12 month have seen a very strong performance from Strike - but I really believe, that we can see the same again over the next 12 month! Subsequently, Strike has got caught in the general equities meltdown, and is now trading at 0,135 A$! What a buying opportunity! Director Neville Powers, ex- MD of Fortescue, used the opportunity to buy another 2 mill shares at 16ct the other day, as did a few investors from over here!
Breaker Resources - executive Chairman Tom Sanders keeps on drilling and adding value to his Lake Roe project , 100 km East of Kalgoorlie! A very active drilling program should see the next resource increase coming, adding open-pit as well as higher grade underground ounces. BRB have stablished a 3.2km long , mineralised corridor, opening the space for many ounces. Tom is adding ounces by the current drilling, but is also haveing regional discoveries in perspective. The PFS has been put on hold, as BRB wants to increase the resource first, which sounds a sensible thing to do, as it would also expand development options for the company. And last, but not least, a near 2500 A$ gold price is very sexy, if you manage to increase mineable resources! The next resource increase will be interesting!
Have a nice weekend - despite the virus - but make sure, that you don´t catch it!
WS