Good afternoon
German and US manufacturing ( especially new orders ) numbers looked better, at least just ahead of the virus really taking off.
just how much cash is still in the system one can see in today´s equity bounce…News from China really is not good -whatever this virus will bring us, the economic effect of what´s happening will be felt, without any doubt. As large parts of the Chinese economy are closed, and many Western companies set to see disruption to their supply chain, the effect will be larger than from SARS. But obviously, normally quick to react equity markets have just seen a very mild correction.
Base metals just a little weaker, gold down about 1%, and bonds, the otehr safe haven, also down somewhat.
Bell Potter see lithium prices potentially bottomin in the middle of 2020 already - based on the expectation, that Europe will catch up with larger numbers of EV´s being sold, and China will hold the subsidies. I think they might be early - but in tendence, I am seeing it in a similar way. But there is a lot of capacity, which can be brought on quickly - like the new ( and immediately mothballed ) operation of Mineral Resources / Albemarle.
Nevertheless, markets are nervous…as can be seen in the performance of some of our small caps…No doubt, that there is some fear out there!
Strike - is one of those, which got hit over the last few days. Yes - LNG prices are very low, and yes - China is the fastest growing market for it. But LNG prices have always been volatile, and the virus will be over long time before Strike will be in production. What is much more imporatnt here is that a rumoured deal of the Waitsia JV ( Beach / Mitsui ) will imediately remove the supply overhang from the local, Western Australian market. Even if this deal should not happen - as we have discussed before, there are multiple reasons, why the gas market will develope, and why Strike are very cheap - not only in my opinion. Institutional investors have very limited exposure to Strike - and private guys are driven by fear these days.The only - potentially - negative news I can imagine in the short term for Strike would be a takeover bid for Warrego - and I have absolutely no doubt, that such a takeover would be very positive in the medium- to longer term. So in my opinion, this is an even better buying opoortunity for Strike than a few days ago! It hurts in the moment to see our investment falling in value - but don´t get spooked into selling!
Dacian - the company produced largely in line with expectations last Quarter - even though production was lower, and costs higher than in the preceeding Quarter. Net debt of just under 60 Mill A$ , payable within the next 30 month. BUT in a seperate annoucement, the company asked for voluntary suspension , as the company is to make a material announcement with regards to a reduction in the reserves of the Westralia Underground Mine…and only due in the week beginning 24th of Feb. This does not sound good at all…!! The new MD, ex MD of Doray, started on the 6th of Jan - it seems that he has not been happy with everything he saw at Dacian!
Chalice - reported some encouraging results ( 4m at 4g ) from drilling on their Victorian Karri gold trend. Drilling at this early stage is only done on a very wide 500x50m grid, hence this early intersection is being seen as very encouraging. Results of another 55 holes are still pending!
Have a nice evening
WS