Good afternoon
for now, it feels like whatever the news is, equities are going higher!
Strong results from Tesla, Twitter and Daimler are helping, but Initial Jobless Claims in the US were worse than expected. Elon Musk is calling for more nickel production!
Base metals are slightly ahead, except for nickel, which is having a very strong day, up by more than 3%.
Gold ETF´s saw inflows of nearly 1.2 mill oz this week so far…in 3 days. This compares to the average, total weekly inflow ( i.e. 5 days ) of 700-800.000 oz recently. This is certainly refelcted in the gold price, which is currently trading at 1872 US$ or 2635 A$ - finally, it´s even up in A$! That´s good - Aussie gold stocks are a little bit tired…one reason might be the relatively flat A$ gold price over the last 10 days or so - the otehr reason might be, that market participants are expecting a consolidation phase of the physical, since it has run pretty hard. But these days, consolidations might be the last thing one should wait for - sooo much moeny is flashing around in the system! But I am certainly resisting the temptation to increase weightings in gold in the moment!
Very mixed Quarterlies today…. Evolution absolutely fantastic, West African as well, while Nortehrn Star has been softish:
Evolution - what a Quarterly! Record mine operating cash flow, record net mine cashflow of 225 Mill A$, and record free cash flow of 188 Mill A$ for the Quarter, on a gold price received of 2500 A$/oz. Comparable production of 190.000 oz at 1008 A$/oz AISC - 218.000 oz at 1088 A$ incl the new Canadian mine, Red Lake. No material impact from Corona! And net debt under 200 Mill A$ now - after receiving 60 Mill A$ recently for Cracow, and furtehr free cash , it will be around 100 mill A$ as at today!!! Cowal is currently treating low grade stock piles and hence, cannot deliver booming results.- while still generating 60 mill A$ in net mine cash flow! And the mine announced it´s first underground reserve of 800.000oz, as part of a 2.9 mill oz resource - a few month earlier than expected. Furtehr excellent drilling results will certainly increase tehse numbers over time, and will drive Cowal to a sustainable level of +300.000 oz p.a. from about 230.000 oz currently. All other mines except for Mt.Carlton ( problems here had been well publicised during the Quarter ) have done very well - Ernest Henry shooting the lights out, once again! But the ebst news perhaps is, that exploration is continuing to deliver at several mines, and that Red Lake, the new aquisition, is doimng very well. About 15% of the workforce have been sacked - at the same time, underground development is increasing strongly, as is production - at costs better than expected! EVN management is getting very bullish on it´s prospects, without putting them into numbers. With the financial results for teh Half Year in mid August, EVN will publish 3-year guidance for all it´s mines. What a well managed company!!!
Northern Star - is producing more gold than EVN - this Quarter 261.000 oz - but just look at the costs! 1475 A$/oz AISC vs EVN´s 1088 ( and that even includes the - currently - very high costs at Red Lake!! As EVN´s puts it: Margins, not volume is EVN´s mantra - that might not be the greatest thing in a bull market, but reduces the risk of being trapped in a gold bear market! Making money through the cycle - very unusual for a gold miner! NST have had big roblems at Pogo in Alaska with the virus - 36 workers infected, reducing production by 25% and the company expects this to continue, while the virus is with us. Having said all this, the Quarter was a reasonable positive one otherwise, with Jundee performing well. NST is just about net-debt neutral in the moment - still a good effort after aquiring 50% of the Super Pit only recently!
As you know, I have been cautious on NST - I ahve been wrong! But I am sure, that EVN is the better company - less risk, more consistency!
West African - a stellar, first Quarter of production, as envisaged earlier y the company. No virus impact to talk about so far…plant doing extremely well, company generating lots of cash, even before the underground mine has contributed emaningful ounces. And here we see the only virus impact: Underground developpemt has been done with one shift only until late in June, as the mine has been short of staff as a consequence of the virus. This has now changed - development is now 24h and 6 days the week. While I had hoped for a August-start of stoping, it´s now going to happen in late September ( company line had been:”in the 3rd Quarter”. Anyway - this is very immaterial….As one analyst put it: This is one of the very few gold miners trading below valuation! And while the sensitivity of earnings to the gold price is fairly low ( because of the extraordinary low costs! ), WAF is the only , Australian producer of some size, which is completely unhedged!
WAF is conducting underground drilling at M1 in the moment, as I understand it. This could be the enxt bit of news - one broker is correctly pointing out, that the last deep hole has hit 25m with 15g , 150 m below the current resource. I believe, that every 100m add 1 year of mine life to the underground mine…Once the rainy season is over - normally in late Sept/early Oct - the company will start drilling the recent aquisition Togea, as part of the feasibility study. Togea is expected to increase the mine life of the Sanbrado Proejct past 10 years! As I ahve said numerous times before - WAF in my opinion is the cheapest, listed gold miner of some size in Australia! Evolution for large, institutional investors, and WAF for smaller guys are my two top picks in this market - but not only because I like the two bosses here!
As I am finishing, gold is at 1897 US$ and 2660 A$/oz!!! The US$ is weakening further - and equities are about unchanged!
Have a nice evening!
WS