Good afternoon
volatility is back! Over the last 7 trading days, the S&P had an average , daily trading range of 3,5%! Absolutely incredible…Let´s see, what the current Thursday has in store for us - but it looks pretty certain to be a correction of yesterday´s 4% up-move! At least by late afternoon, we are down 2.5% , and a little less in Europe
Gold has been stable to slightly up all morning - but now, as the US awakens, it´s up quite strongly to 1563 US$/Oz, and is through 2500 A$/oz, once again…The US$ is pretty weak again - probably investors are seeing the chance for more rate cuts to come over there in the States! US 10-year bonds hit a new low in yield, at 0,92%!
Base metals are not looking as strong as earlier in the morning, but they are still up…Vale is closing it´s nickel refinery in New Caledonia, which is a High Pressure Acid Leach ( HPAL ) operation, trying to produce battery-nickel from laterites. It never worked properly over many years of trying ( and spending ) hard…approx 25.000t of nickel have been produced in 2019. Very good news for the Australian sulphide-producers, which supply into the same market, batteries et al. Not that many people would be thinking of buying a car in the moment - but that will change some time in the 2nd Quarter, I guess, once corona has quietened down a bit! Copper, perhaps surprisingly, in A$ is trading exactly at the 6-month average today…not nearly as bad, as one would think. Good news for Evolution, Newcrest, and certainly the pure producers.
The release of the new James Bond film has been postphoned into the autum! 007 is another victim of the corona virus - he must be getting old!
GM is the latest to announce a majore push into EV´s this year and next. McKinsey believe, that the German market will be seeing the most registrations of any country incl China in 2021…
Cassini Resources - at longterm prices of 7,50 US$ for nickel, 3$ for copper and 70ct currency, large retail broker Ord Minett values Cassine at 30ct in an initiation report. Nickel payability at 71% seems quite conservative, and every 1% more is supposed to add 2,5ct/share to their valuation. I think recent off-take deals are above 75%….With nickel at 6,50 US$ and an exchange rate of 65ct ( today is 65.8ct ), they value the company at 19ct/share. As I said before - the financing of thie potential mine remains very tricky. While OZ Minerals have the cash/cash flow to finance their share, Cassini would find this next to impossible, without the help of OZL. But without OZL providing/arranging financing for Cassini, the project will not proceed. So the ball lies in OZL´s field: If they want to go ahead and bring this mine into production, tehy will need to take out Cassini, or organize financing for them. OZL have many JV´s, and they have made clear, that an unfriendly takeover will not be on the cards. But at what price would a transaction be deemed friendly by the board of Cassini??? This is not a project to die for - even though it´s probably a good project, with very long mine life , and a lot of optionality. In my opinion, 20ct/share would be an appropriate level for Cassini shareholders to accept a deal. But first, OZ Minerals will have to commit to a full feasibility study, which they would have to finance on CZI´s behalf , to be paid back from production. If OZL goes ahead with it, I think that´s the time to buy Cassini!
Gascoyne - I am hearing, that the company is slowly but surely getting back on it´s feet. No doubt, that fresh equity will play a role here as well - but the gold price has come to the rescue of them, and apparently, they are close to originally planned production levels. That would be very good news indeed for a few shareholders over here! I will keep you posted - nothing is imminent, but I understand, that some large shareholders have indicated, that they would be willing to back a recapitalisation. I would expect, that potential equity backers will want to see a few month of steady production, before they commit. While usually, there is nothing left for shareholders of miners in receivership, this one could well be different!
West African Resources - Australian insto Colonial ( that´s their old name ) bought another 10 mill shares over the last few month and now hold just under 9% of the company. The first gold pour in early April? Just about the only , completely unhedged gold producer ( soon ) in Australia, of reasonable size, and despite the large financing! 300.000 oz at roughly 500 US$/oz AISC - that´s what I call money printing at a gold price of 1660, and translating into A$ at a currency of 0,66 A$/US$!! The debt, though, is in US$, so the leverage to the currency in the short term is not all that material. But debt will be gone easily after the first 12 month of production, if all goes to plan!
Have a nice evening
WS