Good afternoon
PMI´s around the world have been weak, consumer confidence is very weak as well, Jobless Claims in the US are weak - but all of this is expected and is not important in the moment. Important is, wheather the economy can improve quickly again, as lockdowns are being reduced in many countries, or wheather this will take longer than one would hope for.
More important for us is perhaps, what European leaders will decide. The numbers touted around for support and a European development plan and mind-boggling, and can only be very very positive for friends of gold!
Equity markets are stronger again today…oil is very strong currently, and gold seems unstoppable!
Net inflows into gold ETF´s continue at a brisk pace, and total holdings reach new highs every day in the moment. Clearly, this is the major driver for the gold price in the moment. The big question is: Are investors buying it for coronavirus uncertainty - or are they buying for the world drowning in debt? They should do so for the latter, and if that´s correct, I can currently not see an end to continuing inflows.
Evolution - Quarterly out. A touch disppointing on produced ounces, but better on costs - and strong exploration. Production was 165.500 oz - expected was a touch more, 170-173.000 oz. Costs decleined by 7% AISC to 991 A$ or 650 US$ - excellent, and especially, as I royalties have gone up due to the better gold price. Net Mine Cashflow increased by 11% . Guidance unchanged for 725.000oz at 990 A$ AISC - might be 20-25A$ higher, if current gold price is maintained, as royalties would rise - but company states, that net cash flow would also be 90-95 mill A$ on that basis, despite lower copper-as-byproduct credits.
As at today, cash is 240 mill A$ and bank debt 570 mill A$, after paying for Red Lake, and paying 117 mill A$ in dividends.The current Quater will be stronger, as Mt.Carlton and Mt.Rawdon are both should see higher production.
Exploration is doing well at Mungari, Cowal, and Red Lake and delivered lots of positive results. A first underground mining reserve will be announced for Cowal in the second half.
Red Lake , the newly aquired mine, is making good progress, and the company has already lowered costs, increased development and exploration. The current and the enxt Quarter will be very active, and I expect, that in 6 month time, the market will get a much clearer picture emerging here.
Hedging is not large at 25.000oz / Quarter until June 2023 - that´s just about 15% of production, at just under 1900 A$/oz. Hurts, but small in the overall scheme of things. Evolution will again see higher net cash flow in the current Quarter, based on higher production, as well as the higher gold price. It will be good to see EVN have an increase of production per Quarter, following small falls every Quarter so far this financial year! My favourite gold miner should increase it´s value with the gold price, an underground mining reserve at Cowal, and a clearer future for Red Lake! By the end of the year, they will be underleveraged again, and ripe for another aquisition!
West African - I told you they would go up with hard facts of their success emerging! The Quarterly today was a stunner, and another “hard-delivery” Quarter will be coming, and in the September Quarter, underground stoping will make numbers look even better. For the Deceber Quarter, I expect that deep drilling for longer mine life will start again ( it was not started to keep movement of people to a minimum in light of corona ). The company is corona free.
The stunner for the Quarter finished: WAF brought it´s first mine on line at least 3 month earlier than planned ( that has been known ), but also 20 Mill US$ under budget!!!! They have built the 17 MW power plant themselves, at own costs ( differently to originally planned ) , which increased numbers again by 18 mill US$, but will reduce operating costs over the entire mine life. The other stunner: Amazing grade control drilling results, which augur very well for first production from underground stoping in a few month time.
Overall, a fantastic success! The company is sitting on 94 mill $ in cash, and has 200 mill$ in debt - incredible results - and is already producing free cash, after being in production for 6 weeks or so!! I wrote down numbers a few days ago - they remain unchanged, and could even be beaten, if grades are shaping as as well as grade control drilling promises. But in my opinion, and even applying a discount because of Burkina, the stock should be trading 50% higher. If nobody is smart enough to take them over, they have to do it themselves, to reduce the one-mine and one-country risk. This increases the risk in a way as well, as management is unproven as a corporate aquirer so far. But in my opinion, there are good targets at very reasonable prices around in the developing space.
Congrats to Richard Hyde - the geologist ( ! ) who had to prove, that Australians actually can deliver mines under budget in terms of costs and time! He must have a first-rated team around him! What a story - from 20 mill A$ or so market cap 4 years ago, to 500 mill A$+ in operating cash flow in 5 years! At the current 1730 US$/oz, WAF should prodzce 300.000 oz x 1100 US$ x 0,9 ( ownership 90%, 10% government ) = 520 mill A$ after all costs ( AISC will probably be below 500 US$, but I ahve reserved 130 US$ for other costs like corporate, interest and exploration ).
Bellevue - what WAF have done, tehy have in front of them: Drilling inferred resources into indicated status, perform a pre- and a feasibility study! Sounds like a long time to go, but the first indicated resource we will see in June, and exploring around an old underground mine, the going-into-production process should not be all that hard. It looks as if they will also have some open-pittable material, allowing for early cash flow. As usual, they have had many first-class drill results in the Quarter, and the resource has nowhere been closed off so far. Intense drilling is continuing for resource conversion as well as infill drilling. Dewatering of old underground mine is going tompla, and will make resource conversion a lot cheaper and faster. Negotiations for approval to drill highly prospective areas are making progress as weel. And lastly, tehy have 37 mill A$ cash in the bank, allowing for continued, frantic exploration, which might be hampered a little because of corona. But I still believe, that Belelvue will not have to develope this mine on their own. There are several aquisitive miners with strong cash flow around, who would love to get this asset…BGL is not a stock to make you rich - but I would not be surprised to eventually see 1$ being the valuation here - at current gold prices. Cash flow for the strong Australian producers is rising with the gold price, and Goldfields is also next door…they will want to find some cheap and low-risk growth, without having to go to West Africa!
Tietto - announced a lot of drilling results from their Ivory Coast project, Abujar. None of the results are spectacular - but probably more important: They have had numerous lower grade intersections between 0,5-and 1g, which will add to resources of the project. They also have had some smaller, 1-2 m inersections with strong grades. But for this project, I think it´s important to show, that the ounces are hanging together. It´s hard to mine 1 m with 6 g - but it´s a lot easier to mine 8m at say 0,8g gold/t. The avrage is, what is important - and that it´s halfway easy mineable is equally important. So I think another round of successfull drilling here! 25.000m of the planned 50.000m have been completed, and drilling is ongoing. The enxt resource stimate is due in the 3rd Quarter - I guess rather later than sooner in the Quarter. 25.000m drilling does take some time! 2000 assays are currently with the laboratory, so newsflow will continue - but you might need some patience, as the market will want to see a big number ( hopefully 3 mill oz ) before substantially rerating this stock, which is overdue in my opinion.
Have a nice evening
WS
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