Good afternoon
amid a wave of disagreement, Trump administration is expected to not eat as hot as they cook their stupid announcement of tariffs for steel and aluminium, which is hurting Americans, Canadians and Europeans much more than the Chinese, which he seems to target...,some pretty drastic words come to my mind, which I will not write down here..The latest rumour is, that Gary Cohn would leave his job, if Trump will finally announce the tariffs.
Equities are having a pretty goodd ay today across the board , as are metals, which profit from a weaker US$. Copper is back above 7000$, and gold at 1336 US$. Even the GDXJ is up by 3% today!!
Macquarie sees a growing copper shortage developing, as supply is growing by 1.1% p.a. over the next 4 years, and demand by 2.2%. As the time frame to develope large copper mines is so long, they see it as enivitable, that we will see a strong shortage from at least 2020, potentially earlier. It´s hard to believe - but 2020 is only 21 month away!!
13.7% of Galaxy are now being shorted, 10% of Pilbara, despite the recent, very positive announcement of the Posco-JV. I am not that familiar with Galaxy - Pilbara I think is well worth accumulating at current levels. Long term pricing of lithium is very debatable - ove rthe next year or two, they will certainly stay high, and it´s many years, until Albemarl´s and SQM´s expansion plans will come to fruition. Pilbara stage 2 has very efficient economics, and I think they will survive any potential weakness in pricing years from today.Having said this, I am not a holder currently -but I have no liquidity to play with!
West African - as you know, I cannot believe, that this thing is still tarding at around 40ct! Once again, they announced some important drilling results from Sambrado today. Firstly, they hit visible gold ( assays are outstanding ) in their first step-down hole, 80m down dip from drilling so far, indicating that the ore body is still continuing at depth and has not been closed off as yet. This is from the M1 ore body, which has got the fanatstic grades, which will be able to support production of the new mine at below 700 US$ or even lower - the feasibiliyt by mid-year will show. Secondly, they had some nice infill drilling results from M5, which is their planned, lower grade open pit: 20m at 2.2g; 18m at 2.2g; 22m at 2.4; and finally, 23m at 7.2g and 14m at 7.7g. These holes will increase confidence levels as well as the grade of the resource. This is all good news and it increases my hopes for an outstanding final feasibility released in summer, and a new resource in March ( this is still the date given by the company - but in light of the good results, I would not surprised to see the estimate a few eeks later). In any case, this will - once again - be an interim resource, as neitehr M1 nor M5 have been closed off. And I would like to add, that this small company has not been able at all yet to drill any of the regional targets, which might well add more ore bodies.
All major miners are scrambling for growth - here they can aquire it at levels substantially below NPV, as the feasibility will show.
Only one word of caution: Ougagdougo has seen anotehr terrorist attack a few days ago, as you might have seen. The country is not as save anymore as it was 2-3 years ago. People operating in the country are not seeing any impact in the countryside, but they are cautious in Ougadougo, the capital. Bad enough, and it´s not making the country more attractive as investment destination for sure!
Paringa - the stock recently slipped gradually down - yet it is one of teh saver mining stocks to invest in, even though it´s dirty thermal coal! Colonial is wining up one of their funds in the moment, forcing them to sell large lines of stock in companies like West African, Paringa, Beadell and others. It looks like their selling of close to 10 mill Paringa has depressed the share price - but finally, the line got cleared today at 34ct. Analysts have valuations for this company starting at a minimum of 70ct/share. The company is profiting fully from the recent tax cut in the States, which should add another 10ct or so to the valuation. The main risk to the company is, that gas prices in the States on a long term basis fall below 2.50 US$. This cannot be ruled out, as shale oil production is still rising, and gas is produced as a by-product. But exports of US LNG will be strongly increasing over the next 2 years, which could lead to gas prices well above 3-3.50$. That would be very bullish for PNL, as coal-powered electricity is directly competing with gas. Not inconceivable, that gas prices will rise quite a bit, and we all know, how much Trump likes American coal.
Mining risks for Paringa´s new mine are very low - projects like thismone have been developed numerous time the basin, and the underground mine is very shallow. There is a small but realistic risk, though, that PNL will need a few million $ to bring the mine fully intoproduction. If that´s the case, we are talking something like 5 mill$ top-up only. procution start-up wlll be in 4 month or so. In my opinion, comparatively low risk for making a nice 50% or so return this year.
Have a nice evening!
WS
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