Good afternoon
Consumer Confidence in Germany very strong - probably the first positive number in a while for our economy. This and a strong US$ led to strong equity markets in Europe today.
Gold recovered from it´s lows today despite a strong US$—-pretty formidable performance!
I think it´s fair to say, that option-value has started to move into the Australian gold sector - certainly into the leading stocks. Valuations are not crazy - but they are high. Some cost pressures are emerging, as seen in a few Quarterlies. The other question is: How much option value are we prepared to pay? I am holding Evolution, for example - and the stock is not cheap. But if the gold price continues to run, potentially testing old highs? I have no doubt, that EVN will move substantially from here. I had one investor yesterday, who wanted to switch out of a relatively expensive gold stock - and wanted to know, what to buy. My advise: Unless there are some really company-specific issues, you might as well keep it - unless you are prepared to a substantially higher risk-profile!
Vale´s Quarterly pretty bad…iron ore production even lower than expected…nicjek production at the lowest in many years…full year guidance 210-220.000t nickel vs 244.000t last year. It´s hard to find it and harder to produce it! They want to invest 5 bill US$ into nickel refineries etc, also some mining activities over the enxt few years. Another one banking on nickel…
Sheffield - announced yet another zircon aooftake agreement - an increase with a large Chinese company, which already had a contract with Sheffield. They are now sold out! I am eagerly awaiting the amended feasibility study - should be out within a week or two!!
Graphex - their Quarterly today contains nothing really new - except for two important sentences: 1. They are “imminently” expecting final letters from the Tanzanian government about tax-treatment etc of the project - imminently for Africa does not say all that much - but I would think we should expect this important information within 2-3 weeks? 2. The reserve increase will be out in August - also important, as it is one condition for the financing with Castlepeak and if positive, will have positive implications for the NPV of Chilago.
Oz Minerals - a positive Quarterly - positive on production and guidance - slightly negative on costs. AISC up by a few percentage points ( despite the slightly better production! ), but guidance unchanged. A really well managed mining operation at Prominent Hill in Australia - and in Braziel, tehy find the going a bit tough ( they are not the first one! ). As I said recently - tehy might have overpaid a little in Brazil?? Carapateena is on track and on budget for first production late this year - that´s also good news. And updates on their Musgrave project in JV with Cassini and an update on Brazilian operations are expected this Quarter. The stock has performed very well - especiallyin light of slightly weaker copper prices in the moment - so I think they might only be a hold in the moment!
Regis - they have had a relatively tough Quarter! Production of 91.000 oz was in line with guidance, expectations and also the previous Quarter - but costs of AISC 1189 A$/oz were substantially higehr than the previous Quarter ( 1019 A$/Oz ) and also expectations. The company has just over 200 mill A$ in cash, which is good - but also 451.000 oz in forward sales ( spot defreed ) at 1611 A$/oz, which is clearly a negative and will not be liked by some investors in the current, very strong gold price enviroment. What is also negative is the cost outlook, which is roughly in line with the previous Quarter and therefor quite a bit higher than their historic, very low cost base. They talk about a falling off of the strip ratio in 2021 - which implies lowr costs…but I have to say: I wonder, whether old MD Mark Clark has pushed his mines very hard and left a bit of a legacy for his successor? Not a nice thought and perhaps a little cynical - but there are some indications for it. As I said above - none of the larger, Australian gold stocks are cheap - but Regis might be the first one for me take some profits, if I had some…
Have a nice evening
WS