Good afternoon
following a time of complacency, the market is getting crazy now! Only 10 days ago, on the 20th of Feb and well into the virus-story, the S&P hit a new all time high…only to give up 10% since then! And the DAX, which hit it´s high on the 19th of Feb, has given up the same!
The gold price is down by 60 US$ from it´s recent high on the 24th of Feb, while the GDXJ is trading 20% down from it´s recent high! Gold is trading 150 US$ higher from those days back in November, when the GDXJ last traded at current levels! Amazing…it must be the search for liquidity, which is driving this move. All I can say is, that gold stocks are fundamentally rather cheap currently - in A$, it´s still trading at a staggering 2444 A$/oz. Just as an example, Macquarie are using 2074 A$/oz for the current financial year, and 1991 A$/oz for the year 2020/2021 for their estimates…Funny enough, gold seems to follow the direction of equities today!
A very volatile day today in European equities—-up and down like a yoyo…strong early in the day, the market tanked down nearly 4% from the high - only to recover and be unchanged now, as the US have started trading in positive territory. The US 10-year bond is trading close to only 1% yield, a new low…and Goldman´s are expecting a 50 bps interest rate cut soon! The OECDis expecting growth to halve to 1,5% this year, unless the virus can be contained soon.
Today has been a bit of a capitulation day for many smaller stocks, I think…West African for example traded as low as 0,45 A$ ( close at 0,53, on 15 mill shares turnover / Strike Energy traded as low as 0,115 A$ ( to close at 0,135 A$, on 30 mill shares turnover )…and there are numerous similar moves. Again, for many investors, liquidity must be the reason - I just could not imagine, why otherwise somebody is selling WAF at 45ct vs a price of 64ct less than a week ago!!
Oklo Resources - completed their placement at 0,21 A$, which was upsized to 12,5 mill A$ form the originally planned 10 mill A$ on strong demand - only to close at 0,195 A$ today, the first day of trading after the transaction!! The placement came a little surprising to me - but it got to be good news, that the company can now refrain from raising fresh capital for the next 18 month, I guess, while they undoubtedly will increase resources ove rthat time frame.
Metro Mining - the stock is not far above 3.5-year lows, despite being in production, despite of making money, despite of performing fundamentally at least in line with expectations! And all this, despite a very favourable financing for the expansion from 3.5- to 6 millt of bauxite p.a., at costs, which should fall by at least 18%! Yes - all of it´s product goes to China - but China seems to be behind the worst of the virus-impact, and Guinea , the major exporter in the world to China, seems to be in increasing trouble. They will have an election this year, and President Conde is trying to change the constitution, to allow him to run for a third time as president.There have been several instances of attacks against mining trucks, the blocking of railway lines etc. I guess it might not get any better, the closer the election comes. In any case - I would be really surprised, if Chinese buyers would not value Australian supply very highly, once Metro starts shipping again in 4 weeks time or so!
Antipa Minerals - announced a major transaction with Newcrest on Friday: 3.9 mill A$ placement at 0,017 A$ / potential investment of 60 mill A$ to earn up to 75% in some of AZY´s properties, of which 6 mill A$ will definitely be spent, within 2 years. This follows similar agreements with RIO and Fortescue, over other properties. In “normal” times ( if something like this does exist!! ) , the stock would tarde at a minimum of 2ct - this time around, it barely moved and closed at 0,014 A$! In any case, the transaction again highlights the continuing interest in the entire Paterson Province! The Newcrest deal follows some positive comments by RIO with regards to their Winu discovery, also in the Paterson, last week.
Panoramic - PAN have now completed the transfer of underground mining activities to the new underground mining contractor Barminco. They will use much better equipment, and while some of it has already arrived, more will be on site over the next couple of weeks. Barminco is a very professional and experienced underground miner, and I have no doubt, that mining rates will improve substantially! The A$ nickel price is at 19160 A$/t currently - not fantastic, but compared with a recent trading band over the last 3 month between 20.700 and 18.600 A$/t, not that bad. The feasibility study , updated recently by forecasts in early December, was calling for AISC of 3,77 US$/lb, at a currency of 68ct ( today, it´s nearly 5% better for Panoramic! ) . Even if I assume another 1US$/lb in additional costs, the company should start generating positive cash, once the ramp-up at Savannah North is complete later this year. In the meantime, the cash burn will fall substantially from month to month. The report for the current Quarter should make some interesting reading and give a first impression, how well mining is doing…but obviously, the June Quarter is the time to watch out for substantial improvements. I could well imagine, that PAN will need further financing until then - but I would think, that the major shareholder will stand by again with a loan. PAN is pretty adament, that tehyx will not need further equity. If you are brave, you buy some now - but it´s probably not the time to be brave! So wait for some information from the company ove rthe enxt 1-2-3 month to get more clarity on 1. how well mining is doing, and 2. what financing wll be provided.
Strike Energy - this was one of the most convincing presentations at our conference recently - at least in my opinion - yet the stock has fallen the heaviest during last weeks downturn, to an intra-day low of even 0,115 A$ from 0,18 A$ just a week ago! I have bought more at various levels! The best trigger for the stock to go up in the short term was the potential of a short term announcement from Beach Petroleum and Mitsui, to supply gas into the North West Shelf LNG project, as it would have removed any future supply overhang of gas in Western Australia. I can only suspect, that any agreements of such type will be made difficult by the current turmoil. But looking past this, I think opportunities for Strike to sell gas at very profitable prices into the Western Australian market will be ample….We will look back and wonder, why we did not use this buying opportunity! About 30 mill shares changed hands today - obviously, I am not alone as a believer in Strike!
Have a nice & corona-free evening!
WS