Good afternoon
The Junior Gold Miners ETF in the States, GDXJ US, has clearly broken out yesterday...feels good - and the large miners ETF, GDX US, looks like doing it today!!!! Physical gold had a few good days - could retest recent highs soon???
Metals are rebounding a bit half-heartedly today, while equities in Europe are having a very strong finish to the week. I have no reason for that....perhaps the very strong oil price helps? Sounds strange to say - but over the last few days, the press has been full of talk about bank exposure to the resources sector, and energy in peticular. I think this story is not going away, though. Apparently, total exposure by banks worldwide to ( very ) doubtful energy debt is something like 40 bill US$ - for most of the large banks, legal costs in their general business will be higher than write-offs for energy, and should in so far be very managable. But this is just adding to the already negative enviroment for banks - and adding mining services + mining to the total doubtful exposure, it will add another 10 - 20 bill$ or so ( that´s purely my guess ). In any case, nothing which would really worry me with regards to systemic risk....but bad enough for me to continue to stay away from banks.
Evolution - what I like about EVN is, that they never let you down! Record Quarterly production, record Quarterly cash flow, as reported in a short update today. 209.000 oz vs 203.700 previous Quarter, AISC unchanged at 1015 A$/oz, on just about exactly the same exchange rate as for the previous two Quarters. Net Mine Cash Flow ( that is after all sustaining and capital costs, before headoffice, financing and exploration ) of 105.8 mill A$! No tax payable as yet - so the company has been able to repay another 80 millA$ of debt to bring net debt down to only 365 Mill A$ ( and after paying out 12 mill in div during the Quarter) - just about one year of free cash flow, if the gold price holds at current A$-levels! Great result, and I am looking forward to see the full Quarterly soon for - hopefully - a few nice exploration results. The company is talking about yet more cost cutting to come...
Oz Minerals - are also in the middle of a cost cutting program - saving another 20 mill A$ over the next 12 month on already achieved cuts, and also expect more to come. Sounds like the difficult times for contractors and suppliers are not over as yet - and I guess salaries for mining employees are no exception! In light of the current weakness of copper - and no big change in sight in the short run! - and a relatively high A$, I do see some downside for OZL - even though I think they are really well managed these days. Somewhere between 4- and 4.50 A$ I would be a happier buyer!
Have a great weekend!
WS