Good afternoon
what a week! It took a while for the positive, Chinese economic numbers to sink in - but the market took heart and a lot of analysts followed! Iron ore + 22% to above 70$&/t - amazing, and despite BHP´s comments, that they see the price coming down ( and from this very high level, I do agree). Copper up by 4%, oil up by 6% - despite no results from Doha...all pretty good. The US-labor maket numbers were positive, which was a relieve, as a few other indicators in the US have not been looking good at all! And Mr.Draghi capped a good week by his promise to keep on printing...gold was thankful for that!
Chinese import numbers for metals have been very positive in March, and steel prices have rocketed, giving me some hope, that this demand is real and not only based on funny financing deals, which nobody seems to fully understand!
There is absolutely no doubt, that the sentiment has been really good this week - but it remains questionable, how much of this change has been due to economic fundamentals, and how much to short covering?
Whatever the outcome - only time will tell - investors should take a lesson from this: These days, money is moving very fast indeed, and you have to get set in our sector, when nobody wants it!
For now at least, I am riding this wonderful wave, which is finishing with some nice moves in base metals today.
Newpapers report, that GM, BMW, Daimler, and Misubishi could have similar problems with emission-cheating as Volkswagen....If that´s true - and I think this is a very good chance - the use of diesel engines will come under mroe pressure...electrical cars will profit! So Rare Earth should be a story - yet every man and his dog are punting like hell on lithium stocks...of which we have many - but we do not have many Rare Earth stocks, which nobody wants. Lynas is certainly the front runner here - but they are at the mercy of their debt-providers. Peak Resources, which presented at our conference in Zurich recently, are a great story in my opinion - currently suspended for a capital raising.
Gold Road - at mid-week, IGO sold their stake in GOR below the then prevailing market price! You would have thought, that there might have been a corporate buyer for the stake, paying a premium - but that does not seem to have been the case. Not a good sign...and then today, the company issued a new resources statement, using a higher A$ gold price than in the previous estimate ( 1700 A$/oz vs 1600 previously ), to make things look sexy. This is not the only case, where the company is presenting itself in the best possible light: They talk about 450 mill$ in capital for their mine - but this excludes working capital, which will be very high for such a big operation ( 30-40 Mill$? no idea really ), and on top of that, project financiers always want to see a healthy cash buffer of 10% of the finance, so probably another 30 mill$ or so...The company has basically putting itself on the block, and no buyers seem to emerge. The new resource is 10% higher at a massive 6.2 mill oz at 1.3g - regardless of my criticism, this is certainly very impressive. But I do not believe, that you have to be in this name...I am not that confident in the management...It´s always very subjective to say that - anyway - that´s my very personal opinion.
Lucapa Diamonds - I ahve been talking about them before..consistently producing very high quality stones from their asset in Angola from alluvials, they should have started the enw exploration programm by now - or it´s iiminent, following the end of the wet season. This will also see mining rates going up again...and the option exercise of about 60 mill options is now nearly done...29th of April is the last date to do so, which will take a lot of pressure from the market. Interestingly, the company has NOT tried to have the option exrcise underwritten - they have more money than they need. A speculative country and a speculative subject - but I think a stock worth having a punt on.
OZ Minerals and EMR Capital, the major shareholder of Highfield, are reported to be the frontrunners in teh bidding for Glencore´s Cobar Mine in Australia, which is being divested to reduce Glencore´s debt burden. 300 mill A$ seems to be the price tag here. I would like OZL to win - provided the price is right. They have done a great job with Prominent Hill, and the new management team is impressive - and tehy could do with another project, having 530 Mill A$ sitting on a very lazy balance sheet.
Western Areas - Quarterly out today. This is a good example of terible transparency...they emphasize their very low cash costs of about 2.20 $/lb for nickel, yet they are burining cash ( 12 mill$ last Quarter ), and had to raise 60 mill$ in fresh equity recently. Cash costs are more or less irrelevant - cash costs for payable nickel is more important ( generally, the nickel producers in Australia only receive about 70% of their metal in concentrate - the balance goes to the smelter ). And we all know, that the ongoing development capital for an underground mine can be very significant, + new development. I think a lot of Australian analysts had to learn that lesson recently - none of them had expected the company to burn cash!
As I am leaving into the weekend, copper and zinc are probably ending the week with new closing-highs - nice one!
Have a nice WE
WS