Good afternoon
Gold continues to be burried…1774 as I am writing…and Gold ETF´s saw nearly 1.2 mill oz outflow last week. But I wonder, whetehr we are getting close to the bottom? I think it might be getting a little oversold here. In A$ terms, there is good support at 2400 A$ - but we are right there, and this level better holds. Don´t get me wrong - any halfway reasonable gold producer in Australia is mnaking good returns at even lower prices - but for developing miners, I would not want to see it mch lower than this.
The PMI in China was very strong, especially in manufacturing - driving the metals strongly higehr today ( Alu above 2000$/t for the first time since Okt 2018 / copper up another 1,9% / zinc up by 1% / nickel down by 0,7% ). Iron ore is holding at 130 US$. China lso added fresh liquidity to the system today.
Two great stories, for which I have beaten the drum for a while ( and sometimes at the wrong price! ), are catching my imagination these days:
Panoramic - there must be a large seller out there - or otherwise, the stock might still be suffering from the very large capital raising at 7ct! The news keeps on being very good: The ventilation shaft has been finished dramatically ahead of plan,. as well a s the development of 4 mining levels by Barminco. Reasons for both projects being so far ahead of plan and beyond any hope, have been excellent ground conditions, and a good job by the contractors! In any case, it falls back very positively on the new MD of PAN, who is obviously doing a good job!! The excellent griund conditions experienced also augur very well for mining and mining rates, once it starts. All infrastructur work will take another 5 month, but will only start in january - I guess nobody could expect the company be that far advanced as it is, and therefore, activities will start after Christmas. The company has sufficient cash to finish all this work, which is good news, and it means, that all which has to be financed is working capital. That´s not too bad and should not be a problem to find with project financiers or from banks.
With nickel prices above 16.000$/t or at 10 A$/lb, the stock is a steel and I have constantly increased my position. AISC I expect to be below 7A$/lb, or with a bit of luck, even 6 A$ once in full production. The stock has had a bad two years or so, and the image of PAN is not very good -to say the least. But looking at it in absolute terms, and even more so in relative terms vs other nickel stocks in Australia, make this company very cheap! The challenge now is to negotiate early enough new equipment and a sensible deal with the mining contractor, which undoubtedly will be Barminco. There is 6 month lead time to organize this, and the management of PAN are right on it! The second, and perhaps more difficult issue, is labor. But again - 6 month lead time should easily be sufficient to be prepared, and I am sure, that PAN will not take the risk to employ second-rated people. For this reason, I think operating costs might be a little higehr than otherwise possible- but in any case, should easily stay below 7A$/lb AISC.
Foran Mining - amazing, what new management can do to a share price! Dan Myerson´s appearance as Executive Chairman has made the share price to double within a few weeks. But the enviroment is also much more receiptive now, as copper and zinc are making new highs just about every day! While the feasibility study arrived at a NPV of I think 220 mill Can$, this only covers reserves. MUltiple drill holes outside of thie reserve have been announced,. which strongly indicate, that a much larger part of resources ( plus probably additional resources ) can be converted without too much hazzle. And needless to say, that prices used in the feasibility also appear too conservative with today´s knowledge about markets. Also, the NPV of a project with 260mill Can$ upfront investment probably does not give a true picture of the true worth of cash flows. If you do a NPV, and start with 260 mill Can$ at 5% in the red, it tends to look difficult…but once the production starts, the NPV will already look a lot healthier! I think this stock has a long way to go, and there appears to be very little selling outside of what I had to sell, to adhere to my internal rules to not have more than 5% of my fund invested in one stock for longer than a few days.
The mainstream market has not woken up to this story as yet - much fun still to come!
Have a nice evening
WS
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