Good afternoon
no big changes today in equities, bonds, base metals and gold….the US$ is trading at it´s recent high….
Gold ETF´s continue to see outflow every day….I think a sustained increase in the gold price we will only see, once this changes. Holdings have now fallen every day for nearly two month.
Durable Goods Orders in the States were down about 1% vs expected + 0,5%, while PMI´s are holding up at a high level.
Oil is stronger on the back of a 400m container ship being stuck in the 280m wide Suez Canal!
A bit of bad news today from some stocks:
Genex Power - they falied to raise the planned equity from an Australian company with a Chinese parent company. It looks like Foreign Investment Review Board had some requests and conditions attached to it´s approval, which the Chinese did not want to accept. At the same time, the agreements with debt providers, as well as the construction company were running out, and in the following, construction costs would have increased. I think the company moved the right way and bit the bullet: To raise the funds on their own! This is all not too bad - but the price of the additional equity raising at 20ct got to be disappointing for long standing shareholders like myself! Anyway - better to get over and done with quickly - and go it alone! The company raised 34 Mill$ in a placement at 20ct today ( I understand with some very good shareholders ) , and is conducting a 11-for-20 rights isue for all shareholders at the same price. Big raiding, big cash demand on existing holders! Not everybody will have the cash to do this….The capital raising is fully underwritten.Retail shareholders will be allowed to apply for up to 50% extra additional to their entitlement.
In a way, this is disappointing and significant dilution. This is expensive equity at such a large discount! But the fact, that GNX will keep 100% of the project, is good news for shareholders. This is a proejct, which will egnerate a lot of cash with extremely small operating costs. There is now NOTHING in the way anymore to make Firm Investment Decision ( FID) , and construction will start very quickly, probably in May .The smaller equity contributor, J-Power from japan, will contribute 25 mill A$ as planned at a price of 0,234 A$.
I have not seen research based on this new development as yet - but I do not assume a large change of NPV. Probably, the longer term value of GNX stays in the mid-thirties. But with this large rights issue, the stock will definitely come under pressure. I will take up my rights …I think there is little choice for existing holders, that to do so, given the steep discount and large dilution, if you don´t.
Resolute - this is the next bad news…the government of Ghana revoked the mining permit for Bibiane, which RSG decided to sell recently for 100 mill$. I think it´s save to assume, that this is now not going through. The sale had been a real positive for the company, as it was at a much better valuation than expected. Now Bibiani might be worth zero! We do not know as yet, why the government revoked the permit - normally, Ghana has been a good and trusted partner for mining companies. I guess we will find out more soon! The stock is down by 25% in London trading, which seems very harsh. However - I am not sure, just how badly the company needed the 100 mill from the sale…I would not rule out a capital raising to keep bankers happy!
Have a nice evening
WS