Good afternoon
In China, of 80700 infected - only 19 new cases - 62000 have recovered…but in Italy, 463 have died, and 9170 are infected - a plus of 1800…in Spain, there are 1204 cases, a plus of more than 600…but in Germany, the pace of increase has slowed down substantially, as it has in Korea, Iran . Europe and to some degree, the US are the main areas of concern in the moment, and you would hope, that they can deal with it as Asia has! I think major concerns are overdone…but there is no doubt, that we will have a recession in the first 2 Quarters of this year. The big question for markets currently: How quickly can governments/central banks reignite growth?
In any case - money prining, and loose fical policy will be standard…so do not put aside the allure of gold in such a ( short term? ) recovery! Gold ETF-holdings are still soaring, at least for now! Up by 1.5 mill oz in two days…And I am sure, that Mr.Trump will do “whatever it takes” to beef up the US-economy ahead of the election in November!
Metals are strong today…oil is recovering some ground…equities are rallying like mad. Let´s hope, that this is not a dead-cat bounce! As someone said the otehr day: This massive volatility shows us, that investors have no idea about direction in the moment! New situation for everybody - as usual these days! But I don´t want to winge…UP is always good enough for me!
However - as I am finishing this in late afternoon, Europe is closing down a bit again, and the US is trying to defeat some small gains of 1-1.5%. However - metals are still green, except for gold at 1655 US$!
When gold recently traded in a band of between 1550- 1575 US$/oz, the GDXJ was trading between 40-42…as at the close of yesterday, we are trading at 37!!! So I would not be surprised, if gold mines would recover a bit as well, despite gold being down 22$ currently to 1657 US$/oz .
When it comes to gold mines - or mines in general - there is one big question looming: What, if some mineworker is being tested positiv on Corona??? Will the respective mine have to be closed???? I would not be that surprised. So this is probably a real risk, which needs to be priced in. I think this might have happened already - it might be the reason for gold mines performing so badly vs the gold price? Perhaps it´s not so much the need for investors, to raise liquidity, but more the potential effect of Corona on mining operations?? The resource would not go away, and production would just be moved forward - but in some cases, I am sure we could see a liquidity crisis!
West African Resources - the ball mills are turning, ore through the CIL circuits since 7th of March…the plant is right into comissioning! Company says first gold pour by early April - but there is no reason except for being cautious and conservative, for this to take so long. The mining contractor is now working around the clock at the open pits of M1 as well as M5….350.000t from M5 at 1,5g/t are on stockpile. As at the end of feb, the company had 41 Mill US$ in cash + 40 Mill in undrawn facilites ; 83% of the proposed spending had been completed - so I assume about 35-40 mill US$ left to spend/pay. That leaves the company in a sound position, and hence, they are starting deep drilling again, to extend the 6.5-year underground mine life. As tehy have already had strong results from below the current resource, I am expecting good news from exploration to continue! Evyr additional year from underground ( or every additional 100.000 oz ) should add roughly 100 mill US$ in additional cash generation, at the current gold price. Average production over the first 5 years is expected to be 217.000 oz at below 650 US$/oz AISC….in the first year, 300.000 oz below 500 US$/oz even! Roughly 200 mill US$ or 300 mill A$ will be paid off very quickly indeed! If I assume total costs of 650 US$ in year one, cash generation should be something like 300 mill US$ or 450 mill A$ from Sanbrado over the first 12 month of operation, starting with “commercial production” some time in July/August!
If the last few percent of uncertainty will be removed - and there soes not seem to be any reason for not achieving this - WAF will be a show-case of starting a new mine! Amazingly, run by a geologist!!!! A large part of managing a gold mine start-up is strong marketing - Richard Hyde is ticking that box - another large part is getting the right people - another box ticked - a third one is being honest - also ticked - and last but not least, some luck is needed as well - box probably also ticked! The remaining task: Sell the mine at a good price, or buy something halfway cheap, to diversify risk from a one-mine stock in Burkinah Faso. Also not an easy task - let´s keep our fingers crossed! The stock is worth a lot more than 60ct!! I realize, that they have held up extremely well vs the market - still, I think the stock should be bought here! Comissioning risk is reducing by the day, hardly any gold price risk with AISC below 500 US$ - but certainly some country risk!
Tietto - announced some good drilling results from AG South, which is 1.5km South of their high grade resource AG with 19.3 millt at 2,2g gold/t: 6m with 17,52g / 2m with 2,86g / 3m with 2,22g. Nothing to get too excited - but adding to previous results there, and similar to the stuff they have been finding before. They are currently very actively drilling with 3-4 rigs - some exploration drilling, some resource drilling - so there will be good news, and I guess also some barren holes. Stock is still very cheap, considered their already large resource, and very healthy cash position, which will allow them drilling for anotehr 18month at least.
Have a nice evening!
WS