Good afternoon
some mild profit-taking at the end of the week in equities . Bonds are a bit stronger, as is the US$ - perhaps on the back of some pretty bad numbers for industrial production in Germany. Metals down a bit more - all these reports about Virus-impact not helping today! A$ gold price very strong indeed, but also better in US$.
I think it´s very encouraging, that the rate of increase of virus infections continues to fall - it has more than halved from 25% 8 days ago, to just 11% yesterday. having said this, the economic impact in places is very substantial….Burberry today reported, that tehy had closed 1/3 of their shops in China. The remaining ones saw sales fall by between 70-80% over the last 2 weeks. I guess you have seen, that some commodity consumers in China have also announced force majeur on their purchases. But on the positive side: I am sure, that the Chinese government will respond with a great stimulus program, once the virus has been bedded down in a month or two.
Strike - I think the sentiment in gas markets currently might hurt them a bit. But I guess nobody expects freight rates to stay close to zero ( as they currently do! ) nor gas prices to stay at a level, which does not even cover operational costs ( again, as currently the case! ). As you know, Strike is a while away from production anyway! And if infuture somebody can cope with low prices, it will be these guys due to their superior asset quality. Strike are currently involved in groundwork - seismic, and revieing their large acreage holding in the ( potentially hosting a very large gas resource ) Perth Basin. This could result in some pretty bullish stuff. I believe, that they will update to that regard within a few weeks. Investors should really use the relatively weak prices to add or accumulate stock. The underlying worth of Strike is probably North of 30ct today ( vs 17.5ct share price ), with a chance to add substantially more value. And this is not the all-or-none situation anymore, which it was say 12 month ago! So I think the risk-return ratio is a very psoitive one here.
Bellevue Gold - the stock jumped todayfor no fundamental reason. Dynamic, the well regarded North American gold fund, increased it´s shareholding to now 13.5% of the company - even for them, a big bet. This might have changed sentiment in the stock, along with a better gold price. The rise was long overdue anyway. I looked at some numbers again today, and I think a takeover for say 500 mill A$ to pick a round number ( about 85 ct / share ) would be VERY accretive to the earnings of the larger, Australian producers - especially with the ones having existing plants in the area. As you know, they continue to have a frantic drill program on now and for the next few month, to convert their 1.8 mill oz inferred resource at 11g/t to indicated, as well as find more. It´s a bit early to say without a feasibility study - but this mine could produce 150 Mill A$ in free cash p.a. for many years. If you compare this with say Northern Star, who´s cash geneartion should be about 900 mill A$ in 2021/2022, that would add 1/6 to NST free cash, for an outlay of 1/15 of it´s market cap ( at 500 mill A$ for BGL ) . Bellevue continues to be one of my favourites, even though the share price performance has been pretty lacklustre.
Further below, you find an article which I have stolen from the Mining Journal. Good reading…Robert Friedland continues to be one of the best mining marketers of all time, and some of his comments below are very amusing and make for a good weekend!
Mining Journal:
The latest coronavirus is believed to have originated in a food market in Wuhan, China, possibly from bats. Friedland wasn't surprised, saying some of the meals he'd been offered in China had "horrified" him. "I'm a bit of a hippy - I'm happy with some tofu," he told the Cape Town stop of the Benchmark Mineral Intelligence World Tour. He expects the current virus to be contained by mid-year, but tipped coronaviruses to be an ongoing problem. "This current virus, it's not even the big one," he said. "It will mutate very rapidly."[The virus cells] don't want to kill their host, they prefer us to walk around spreading it like zombies."There will be wave after wave after wave after wave of coronaviruses."Friedland said the virus would grow, become more robust, "then it will kill you"."The only way to limit this is to cover everything in copper," he said."Silver also works but it's too expensive."Friedland said all US military facilities will have copper surfaces. This coronavirus is going to accelerate this," he said.
He added that he'd shook hands with so many people while in Cape Town that he was going to ask the Japanese to make copper gloves.Friedland noted gold had gone up due to the outbreak and copper had dropped."I think the market reaction is wrong," he said."There is absolutely no disruptive use for gold."We used to put it in our teeth. Now if you have a gold tooth you look like the Russian mafia."Copper has lost as much as US$700 per tonne since the coronavirus outbreak."It's priced for Armageddon because the media has got everyone freaked out about this virus," Friedland said."We can't build too many mines on $5500 per tonne. We need $11,000 or $12,000 per tonne.
Notwithstanding the impacts of the virus, Friedland believes the green revolution will see copper demand rise 900% by 2027."That's tomorrow morning!" he said."Not enough copper is being discovered to meet future demand.Demand is going to be like trying to get the contents of the Hoover Dam through a garden hose."The deficit in copper is going to be like the deficit in palladium."Friedland likened Chile's ageing, low-grade copper mines like Escondida to "little old ladies lying in bed waiting to die".The biggest drivers of copper demand would be the need to replace the ageing US power grid, new air conditioners as the world continued to urbanise, and electric vehicles.These babies [EVs] are really copper intensive," Friedland said.Friedland noted the surging valuation of EV-maker Tesla, which now has a market cap of $150 The price of Tesla just went to Uranus," he said."You need a telescope to see the share price.How can Tesla have that valuation and mining companies don't when Tesla needs our metals?
Revenge of the miners is opening soon at a theatre near you."If you want to clean the air, copper is the king of green metals."
In that sense, enjoy the weekend!
WS