Good afternoon
well golds short term fate will be decided on today with the release of US labor market numbers. They will be very important for Mrs.Yellen to make a decision...Yesterday, gold hast tested the lows, hopefully, and reversed - the same could be seen in gold equities, which rebounded nicely. If they hold this gain today, they will reverse the breakdown of the 6-month upward trend, which took place yesterday as measured by the GDXJ.
In any case, and whatever the outcome of today´s figures , I do not see the gold story as finished - too many reasons out there to own some gold!
The Chinese PMI yesterday, the strongest number in 2 years, supported base metal prices yesterday and today, and zinc especially is making new highs.
The Spanish parliament failed to elect a new government this week - there is another chance for them to do so today. As a friend of mine said - the Spanish pride does prevent everyone from giving in, even if that results in hitting a wall with 180km/h! The economic impact of this country not having had a functioning government this year is already apparent. If unsuccessfull today, new election will need to be held again in December. Bad news for Highfield - this deadlock does not make it easier to get somebody to sign on their mining permit, which fundamantally, should not have any problems to get through. I continue to hope, that the provincial governments of the two provinces involved increase the pressure to get this project off the ground, and get the central administration in Madrid to move faster!
Berkeley - this uranium developer has performed very well this year, especially in light of the uranium price, which has fallen by 25% to about 26 US$/lb this year, a multi-year low. Contract prices are still around 39 US$, though, and closer to 45$ in the longer term. The company is currently trying to lock in some longer dated contracts to underpin the planned financing of their 100%-owned and permitted ( Stage 1 ) mine in Spain. These off-takes ideally will also include some form of equity- or debt provision - but in the end, I guess some more equity will be needed as well. The Resources Financ Corp, Blackrock and Fidelity are all substantial sharehodlers and do have deep pockets, and I understand, that more, also sizeable insto´s have been trying to build a stake - probably making further equity not that hard to obtain for this only new uranium project on the drawing board I know. 15 US$ cash costs are placing BKY at the low end of the cost curve.
In the meantime, we should see some drilling results from the important Zona7, which represents stage 2 of the project, and where drilling recently has been done to increase this high grade resource.
Zinc - has broken all resistance in A$ terms now, and is 100US$ or about 5% away from doing so in US$ terms. The A$ price has shot up by 50% from DEC 2015 lows, and is tarding at the highest level since late 2007. The chart looks great ( if you need one, send us an email ), and underwrites the bullish sentiment for the metal. It´s not easy to invest in the story, as most zinc production is hidden within the major mining companies, but there are a few stocks with meaningful exposure, like Nevsun in Canada. As always, the best upside will be in the developers, and we have a few names around there like Heron Resources and Venturex in Australia, and Foran Mining in Canada, on which I would like to concentrate today.
Foran Mining - I have written about them before, and teh stock has started to move a little with a EV fully diluted of about 25 Mill Can$, trading at around 25ct. But the share price is a far cry from the level in 2012 around 80-90ct, since when zinc in can$ has moved up by 50%, and copper ( their main other metal ) in Can$ has fallen by abouit 25%.
Foran is developing a zinc/copper project in Canada, about 100km from the Hudson Bay smelter, which will run out of concentrate in about 3 years. The PEA ( similar top an advanced pre-feasibility study in Australia )from 2014 targeted 26.500t of yearly zinc production, and 17.000t of copper production, and arrived at a NPV of 382 Mill $ and capex of 240 Mill$. Capex as well as costs would have fallen again since then. The company has also iniated some successfull exploration and has had a good sniff at two further VMSA-deposits ion the area - but they remain very underexplored so far.
Pierre Lassonde, one of the very best known mining identities in Canada ( ex Vice Chairman of Newmont, co-forunder of 16 bill $ Franco-Nevada ), owns 12% alongside Darren Morcombe ( Chairman ), who is a succesfull, Australian entrepeneur living in Switzerland. From what I can see publicly, Lassonde´s average in-price is more than 50ct for FOM: In my opinion, this little stock is a real sleeper, and Hudson Bay should be the prime contender to buy it. Finishing up their smelter would result in a massive , enviromental liability of many hundred mill Can$, and tehy got to be quite desperate to add concentrate to their coffers. The very recent break-out of the zinc price could trigger some renewed interest in zinc stocks - and Foran is one of the few around. As you know, my fund owns a reasonable position here.
Genex Power - they have finally come to life a bit - not as yet in terms of a better share price, but they have seen some better turnover in the market. The next few weeks will be very important for them: In September, the government will hand down the decision about which solar projects will be supported with grants. These could be quite sizable, and I have reason to believe, that GNX´s Queensland project is one of the most eligible, and possibly, the front runner of them. Power purchase agreement, the transmission line and permits are in place. The 50 MW project will cost 118 mill A$, and the very vast majority of that should be able to be financed by debt. I believe, that a 20-30% stake at project level would be very desirable for an infrastructure-investor, as the size of this project could be much larger in future, once GNX have build a new transmission line for the adjacent hydro-pump project, which is the real price in this story. The feasibility study is planned to be finished by late September, enabling the market for the first time to run numbers on this project. While I believe, that the value of the solar project could well be 30-40 mill$ ( already more than todays market cap of 29 mill A$ ) the value of the hydro-pump asset should be much higher. I guess we will find out within the next 6 weeks - but the substantial de-risking of both projects in the near future should finally get Australian, institutional investors interested in this stock!
If you look at their Annual Report, published this week, you can find a very impressive list of deeply experienced people on the board and within the management team, quite unusual for such a small company.
Kentor - they have announced some very sexy drill core from their latest drilling program at their Australian copper project last week, and assay results should be out shortly. If they can show similar intersections like recently, the stock might well have a bit of a run. At current copper prices, I do not see this project to get off the ground any time soon, though, and I am not sure, whether you want to wait for 2-3 years, untilw e see improved prices. I think the expected bump in the share price might be a good opportunity to take some KGL off the table.
Have a nice evening,
WS
WS
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