Good afternoon
US labor market numbers were about in line with eexpectations. The market is still bad, bad numbers are ( very ) gradually improving..
Equity markets overcame a bout of selling today, and recovered to be just marginally down in late afternoon. Base metals the same - copper is now green, while nickel is still down 1% from being very weak earlier on. And teh same applies to gold - from a day´s low of 1933 US$, we are now back to 1947 US$/oz.
I think Australia is getting a bit crazy about the virus…having had about 40 new cases/day for more than a week now ( yes 40, having 24 mill inhabitants!!!) , the country is still having in place some very tough measures, especially in Victoria. Between all states, it remains extremely difficult and in fact almost impossible, to travel. Western Australia, though, which is just about corona-free, is therefor pretty loose. Restaurants are open, air planes within the State are packed, and reportedly, you do not feel any change at all. Western Australia has always been very remote…Property prices are going up, wages are going up, developers are sold out…a real boom. It´s driven by iron ore, gold, and other metals - but also by many people profiting big time from punting the market. Many people have taken money out of their pension funds, and are speculating. So the boom is partially fundamentally driven - but also by various government initiatives, which should be stopped. I think it will soon be hard to find labor for the mines - and it already is hard to find drill rigs for drilling from surface, and increasingly so for underground rigs. Many companies are flush with cash - the producers are anyway, but advanced explorers like De Grey, Bellevue and many others have raised significant amounts of cash and are under pressure to spend it on massive drilling programs!
Companies like Perenti, Macmahon or among the smaller ones, Swick Mining, are very cheap. They will not stay cheap for long , I think.
This means: Costs for mining companies, especially those active in Western Australia, will undoubtedly rise! Labor, drilling etc…just energy is not going up - even the oppeosite, partially thanks to a rising A$, but also because of a consistently depressed oil price. Gas has always been cheap anyway - shortages are only expected in 2-3-4 years time.
Corona numbers are not good in Germany, as they are rising by 1500-to 2000 cases/day, seeing a rising trend after the end of the summer holidays and the start of school. Numbers in France and Spain are bad. Both countries have about 10.000 new cases/day in the moment, while Italy is doing much better. Peru is one of the mining countries doing particularly bad, and obviously, countries like the US, Brazil, India are still a problem.
Liontown - are going from strength to strength. A few things are coming up here: Firstly, the feasibility study for their massive lithium project in Western Australia should be out within a month, and previous indications are for an improvement from the previous study. Also, lithium has moved back into investors spectrum more recently. I think today´s valuation of 327 mill A$ is justifyable, based on the lithium project - pending the feasibility study, which will give us betetr knowledge and numbers. Secondly, they are progerssing work on the Moora Project, also in Western Australia, and 85km from Chalice´Julimar discovery, inhibting many similarities. Chalice is currently capped at nearly 500 mill A$, and has made new highs the other day. Moora could be worth anyting - god knows. But on a long term view, Kathleen Valley, their lithium project, will probably be worth more than the current share price anyway - so Moora is effectively “for free”. I think the market has realized the potential value in Liontown - but any good news from Moora will probably let them run further. On top of the above fundamentals, there might be a little bit of corporate speculation in the share price. IGO have not made a secret at all of their desire to move into the direction of battery materials, and has put their 30% stake of Tropicana ( worth 1 bill A$ or so ) on the market. This would give them ample powder to ahve a go at Kathleen Valley, which has been shaping up as a world class asset. I continue to hold a very reasonable position in LTR.
In the absence of much micro news, I had a fresh look at the performance of the companies, which presented at our recent conference in Zurich, in late February. I have not taken into account placements etc - but I have also included rights issues. The 13 companies presenting in Zurich, have seen a 100,5% increase in share price…even if I exclude the stand-out performer, Chalice Gold, the participants have still gone up by 58% in A$ terms ( which also has increased vs the Euro by 2% since then ).
Not a bad performance! If you owned the Earth Exploration Fund ( which is within the top 10% of resources funds ), you would have made 20% - if you owned the Blackrock World Mining Fund, which I think is the No.1 performer this year, and which profited greatly from holding the large caps, ( which all have big time iron ore exposure), you would have made 27% in the same time. Even top-performing gold funds like Earth Gold, Precious Cap or Nestor Gold have all made between 45- and 50%, and did not beat the performance of presenters!
Mind you, it has not always been this good over the years!
And lastly, my own fund, Nestor Australien, which holds most stocks from the conference, is up by more than 20% since the conference, and for this year as well as over 5 years, is in the top 5% of Australian funds.
All the above fund- numbers, by the way, are in Euro´s.
I thought that these numbers are remarkable at a time, when everybody is talking about tech! Resources have been good, too!
Have a nice evening
WS
Schröder Equities GmbH
Seitzstr.7a
80538 München
Tel. +49-89-4613440-0
Fax +49-89-4613440-10
email: wschroeder@schroeder-equities.com
website: www.schroeder-equities.com
eingetragen im HR München, HRB 166985
Geschäftsführer: Wilhelm Schröder
The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at wschroeder@schroeder-equities.com immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by