Good afternoon
US consumers will love Trump...Aluminium up by another 4% or so to 2627$/t, up by 30% since sanctions were imposed. Yes, it hurts Rusal - but it hurts consumers around the world much more. Goldmans see potential for Alu to go to 3000....in the meantime, gold is marching...currently at 1352 $...and the entire base metal complex is very strong. Nickel is up by more than 1000$ to 16260 US$lb in early afternoon...!!! Copper is trading above 7000 US$ for the first time since late February.
Inflation in the EU has been revised down to 1.3%...
Nickel producers WSA and IGO have made new highs in Australia today, while my darling Panoramic has been up, but is still trading 20% below recent highs ( I think, though, that teh stock had run a little ahead of itself ). In any case - at todays currency and at 114.800 US$, the NPV of PAN´s Savannah Mine is 360 mill A$ = 73ct/share....On the charts, next stop for nickel is 20000$/t - at that level, the NPV will be around 1.50 A$. But there is no doubt, that current base metals prices are politically driven, and might be short-lived. In the long term, I see no problem for higher prices, though. BHP reported today in Shanghai, that they will be trying to beef up their nickel production , as off-take from the battery-industry is very strong, partially driven by increased use of 8:1:1 batteries, which use dramatically more nickel than lithium-ion batteries used until recently . These comments were along the same line as yesterday´s comments from Cobalt 27, who were talking of a stronger and quicker uptake of electrical vehicles, driven by China, than estimated by many market participants. And last but not least, Vale´s nickel production fell by 18% last Quarter ( though mainly by mine closures, which were unprofitable at last Quarter´s prices )
I am expecting an announcement from Panoramic on financing/re-start of Savannah before the end of June, and if the current run-up of nickel prices looks sustainable, I would even Lanfranchi to re-open at some stage....
Gascoyne - updated the market today on construction progress. Fair to say, that construction is just about to be finished...first gold pour is expected now for mid-May, more than a month early, and the project is under budget. I think the stock should be rerated, once comissioning-risk is gone...At the current gold price of 1740 A$/oz, the mine should generate something like 88 mill A$ in operating cash flow for each of the first two years. The EV of GCY should be around 290 Mill A$, once the mine has been comissioned - that makes GCY very cheap, in my opinion. Any hint of additional mine life ( currently only 6 years ) via exploration could see them quite easily at 75ct vs the current 53ct share price. Again - I think we should see something similar as we have seen in the gold sector: There is hardly any country risk for Australian producers, and they should trade at a premium! The same, by the way, should apply to Canadian base metal producers....you should buy some Foran Mining!
Breaker - what a disappointment! I have to say: the market is always right! The stock had been on a slow retreat since early this year, amid rumours, that the resource does not hang together. Consistent, pretty bullish talk by the MD, Tom Sanders, has been proved wrong today. The maiden resource of 624.000oz ( 11.8 millt at 1.6g gold ), about half of which are in the indicated category, are disappointing. I would have hoped for a resource close to 1 mill oz. While there is clearly upside from drilling here, this maiden resource, which came out 3 month late ( i.e. had 3 additional month of drilling ) is underwhelming.
Strike Energy - two announcements today re JAWS 1, the very important exploration/production testing well. The injection of concrete could not sufficiently stabilze the well bore. Hence, the company along with rig operator Halliburton have decided to side-track the well, which to me, looks very unproblemematic. The well will now be fracked from below the seam ( see announcement today ). I cannot judge, whether this frack will be as good as the originally planned one - obviously, it has not been the first choice to frack this way. According to the announcement, fracking has been done succesfully this way in the States. Let´s keep our fingers crossed - my feeling is, that we need a bit of luck here!+
As I am finishing, metals are mega strong...nickel at 15.360 + 1145US$/t! That´s pretty amazing...
Have a nice day
WS