Good afternoon
equity markets are relatively quiet today, without big change. But metals are weaker - China is making noises - following some producer price infaltion numbers above expectations - to try to limit price advances in commodities.
Some action in Australia:
Regis - are apparently buing 30% of the Tropicana mine from IGO for 900 mill A$. That´s top dollars for this asset, and about 10% higehr then markete xpectations. RRL are buing an asset at minimum full price, and are financing it largely with a placement 15% below it´s current share price…that´s at least teh rumour from the newspapers! They are buying a minority stake in a good asset, but without control and probably, it´s also a relatively well explored asset…no synergies either! I find this a very doubtful deal, to say the elast. Good deal for IGO! And good to see, that others like Evolution, who reportedly have also been a bidder, are not prepared to py top $!!
Genex - very highly regarded small cap fund Paradice have bought 50 mill shares at 20ct to be the second, institutional shareholder! And apparently the other large bidders in the placement recently - again according to the newspapers - have been two of the richest Australians, the founders of Atlassian! Nice endorsement!
Lithium - Macquarie have published a very bullish paper on all types of lithium. The much stroner than expected uptake of EV´s will lead to shortages of lithium from 2022. What is even more interesting, they argue, that most of the new supply is already hoovered up by offtake agreements with mainly large, Chinese companies, leaving very little material for users, which have notassured themselves of any more supply. This should be very bullish for Liontown, which are the only guys in Australia - as I believe - with a large, uncontracted resource. In fact, this looks increasingly like a top-class project, as indicated by the update of the final feasibility study work the other day. One of teh few brokers following it, Bridgestreet, estimated a NPV of 90ct for them, based on a fully integrated operation to produce lithium hydroxide. They used 12.000 US$ as a long term price for the product - Macquarie is now estimating a price of 16.800 in 2026, and a long term price of 15.000 US$/t!! I think LTR are a great investment, and I am holding a reasonable position in my fund. I am also holding Mineral Resources, which is currently making a killing in iron ore, but will increasingly make very substantial prodits from it´s world class lithium assets in Western Australia.
Have a nice evening
WS