Good afternoon
equities are running and running and running…and just about everything you read is: Worst recession since 2029, re-test of recent lows expected etc etc….It tells me, that there is an avalanche of cash around, which is waiting for the pullback to be deployed. Will this happen? Your instincts tell you, that it will - the reality is, that markets are racing !
The gold price saw a temporary retreat this morning, falling to 1693 US$ in Asian trading…I admit, that I sold a few gold shares today - but it already looks like a mistake. Holdings of Gold ETF´s had fallen for the first time in weeks - but the quick recovery of gold during the day tells me, that this has been very temporary. We will find out tomorrow! I would not have been surprised to see say another 30$ down or so in the gold price…but am certainly very happy to be probably proved wrong!
Well, I have been writing the above in the early afternoon - by 4 pm, the arrival of US-players has driven the gold price down to 1693 again!
Base metals are edging higher, and oil as well today. Very high volatility persists, as the market is very much distorted by the activity of oil ETF´s and other financial players.
Northern Star - the long awaited Quarterly out today, and it was bad indeed. Even though NST have underperformed this year, I would not have been surprised about a much weaker price. In any case, it should cement the recent underperformance. But the Quarterly certainly raises the question, wheather NST´s assets have been driven a bit too hard in the past. Production was down at every Australian operation, with costs up…except for Pogo in North America, which had a reasonable positive Quarter. NST is the only Australian gold miner I can see, which have stated, that production is down because of corona-issues….I think this cannot be the real reason…AISC of just about 1600 A$/oz are lightyears behind Evolution for example…and hedging ahs been deferred to harvest cash now. It results in NST having hedging in place for 215.000 oz at 2035 A$ in the June 21 Half, and 261.000 oz at 2075 A$/oz in the Dec 21 Half… that´s big hedging about 600 A$/oz below the current price and will hurt big time. Hedging thereafter is much smaller at 54.000 oz for two more Halfs…I think NST have under-delivered on reduced expectations…..and hence, I will think they could underperform still from here until they show real signs of improvement.
Perseus - this was a bad Quarter as well! Production was down from 69.100 oz in the previous Quarter, to 57.900 oz this Quarter, while AISC were 1083 US$, some 12% higehr than previous Quarter. The big difference is from Edikan: 38.000oz at 1242 US$ AISC vs 48.000oz at 1035 US$ /oz AISC in the Dec-Quarter. The sole reason for this: recovery fell from 85% to 61%! How could this happen? The company tried to maximise production by mining mainly form a pit, which contains higher gold grades - only to discover, that it impacted very badly on the recovery! In future, only 15% of this ore type will be blended into the mill feed. By the end of the Quarter, recoveries were nearly back to normal. By the end of the Quarter, PRU had a net cash position of 15 mill$ - not that bad, being in the middle of cosntruction of Yaoure, which was 52% complete.
The current Quarter should be back to something like 80.000oz of production, and costs should also fall significantly. The hedge position was bad enough, but at 22% of production for the next 2 years not a drama. Exploration delivered quite a few ore garde results, but nothing terribly exciting as far as I can see.
Overall, this was a Quarter to quickly forget - and it looks like the company can fully rehabilitate it´s image of a consistent performer in the current Quarter. PRU reporeted about many small issues surrounding the impact of corona - but so far, the operations have not been impacted, really. Jeff Quartermain mentioned, that the expats have been on roster for 12 weeks now - travel restrictions keep them at the mine sites! At some stage, these guys will be pretty sick & tired , which could impact on operations from a safety- as well as productivity perspective. The company just have to live with this risk for the time being…
So - bad Quarter, not without challenges - but no drama and well explained!
Interesting comments re roster and expats - this could impact on other miners in Western Africa as well. I am sure, that there are many guys hoping for an end of travel restrictions!
Genex - their major institutional shareholder has increased his holding again! Looks like he is full of confidence, which I am as well - but he is large enough to ensure, that the forthcoming discussions with possible incoming equity partners are not made difficult by a depressed share price ( well having said this, 19,5ct is probably still somewhat depressed - but it´s better than the recent 13-14ct!
St Barbara continues to slightly disappoint…production was down a little, driven by Gwalia, their deep underground mine. 39700 oz at 1556 A$/oz AISC is not where they want to be! The company is guiding for production at the lower end of guidance, at costs at the upper end…The ventilation shaft has taken longer than expected and will only be finished in the current Quarter, 2-3 month late. Guidance for the recently aquired Atlantic Gold operations has been left unchanged. While the share price has fallen quite a bit since aquiring Atlantic, prodution issues at home at a time of big capital spend for Atlantic are an issue, in my opinion…debt is slowly but surely becoming an issue of the next year or two. I can still not feel any rush to buy them…even though relatively performance is tempting. But it´s too early - time is on your side here I think.
Saracen - just very quickly on them…they continue to shoot the lights out! Another record Quarter…158.000 oz at AISC of 1133 A$/oz! Company finished the Quarter with a 106 mill A$ cash build - before voluntary debt repayments. Net debt now only 20 mill A$, having bought 50% of the Golden Mile only recently ( when the A$ gold price was 400$ lower! ). They will be ready for aquisition again by the end of the year - Bellevue, I can see you coming SAR´s way!?
Have a nice evening
WS
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