Good afternoon
China announced trade numbers today, which were much better than the market expected. I think they were absolutely outstanding!
Goldman Sachs believe, that the GDP will shrink by 35% for advanced economies and in the current Quarter. I think these numbers will turn out to be way too high! If you assume the current lockdown, and to the same extent, being kept on until the 30th of June, they might be right…even then….Consumption is not coming to a complete standstill, production and construction the same…government expenditure rising…I just cannot see these numbers!
The traditional BoFA fundmanager questionaire ( done between 1.4.- and 7.4. ) show, that cash holdings of funds have been at record levels. That´s the same I hear from Australia - people sitting on their cash, as well as funds.
The Chinese numbers, large cash holdings of investors, and very bleak outlook presented by Merrill Lynch and others tell me, that this market has limited downside! History shows, that every major crisis has been followed by a very strong rebound - BUT before things got finally better, there always was another, and very strong second leg down. Every institutional investor, and many private investors are waiting for this second leg!
And last but not least - I can see with many private contacts, that everybody is dragging his feat and wants to get back into business! Wheather it´s my kids, who want top go back to school and their sport, or wheather its small entrepeneurs and shop-owners ( but also shoppers! ) - they all want to start and are waiting full of energy!
I think for now, I will stay fully invested!
And that is certainly - and especially - true for my gold stocks! These developers are just soooo cheap! Wheather you look at West African, Tietto, Apollo Consolidated, Oklo , Horizon Gold ore probably many others - there is money to be made here! And of the gold price only stay, where it currently is, lots of money!!
Gold, by the way, is up to 1728 US$ currently - in A$, almost exactly 2700 ( the A$ is still strong at about 64ct and could go higher ). Newmont and Barrick very strong - Australia´s top gold stocks all very strong today! But again - these stocks all have room to move!
But one stock is outstanding for me:
West African Resources - I am sorry to bore you with this one! And yes, it´s my largest shareholding, so I am talking my book - and yes, I will have to sell very few again tomorrow, because the size of the holding is at my internally-set limit of 5% of the fund. They are now not a developer anymoe, but a miner! This little company will generate an operating profit from it´s 90% owned Sanbrado Mine in Burkina Faso of more than 500 Mill A$ in the next twelve month, or on average 330 mill A$ p.a. for the next 5 years at a minimum! And probably, we will see an increase of underground reserves within the next 12 month, extending this period of high production by another 2-3 years! Which way you look at it - against current valuations of stocks like Iamgold, Semafo, Endeavour or you name them , or on absolute terms - I think there is every chance to see the stock much closer to 1$ some time this year, at an unchanged gold price!
We all know, what it´s like - and the market is no different here, and it happens again and again: We believe it, when we see it! Especially, when you suddenly have a company, which a few years back was capped at 20 mill$ and sometimes less, cough up 520 mill A$ in a single year from a single mine ( that is 300.000 oz x 1230 US$ margin x 1,56 A$/US$ , 90% owned! The market cap of WAF as at today is only 470 Mill A$ , with net debt probably at something like 160 mill US$ or 250 Mill A$ - we should know, once the Quarterly comes out later this month ). I think for the first time, the market will get a feel for the earnings power of WAF with theis coming Quarterly, and a full feel, with the report for the current Quarter - and I think people will believe then!
This does not remove the negatives - Burkina Faso, and the fact, that this is a one-mine stock. But even if you discount them by 30% because of that, the stock is probably still worth 90ct….and not 55ct!
Gascoyne - and here is a story of a fallen angel! Not only that - straight move from angel to devil!! From big hopes, to ( very very ) close to bankcrupty! From bad judgement, bad management, bad luck - to finally getting close to expectations, with hard work, and what has been a very fair teamwork between banks, receiver and new management, from what I can see as an outsider. Production last Quarter has been consistently above 6.000 oz / month, and should improve, as the plant will finally be able to produce with majority of ore from it´s main pit, and improving grades. The comnpany will defintely come out of receivership, I think, for as long as the gold price remains ok. Gascoyne have no hedging in place, like nearly everybody else in Australia! And they shpuld be able to produce gold at something like 1500-1600 A$/oz AISC - details we will see from the forthcoming Quarterly, and the prospectus, which will have to be issued, when the company will do a much-awaited capital raising to pay off some of the bank-debt, and get fresh working capital. I think this could happen fairly soon - perhaps over the next month or two. Existing shareholders might not get their money back - but they will get a good chance to make some back, and re-invest at a price level, which could be very sexy. Watch out - it might be very sunny at the end of the tunnel!
Have a nice evening!
Ws