Good afternoon
while Trump is running very very hot , equities are recovering some of their large losses from Friday. London is closed - so no trading on the LME. Bond prices are treating water today, at extremely high levels.
Gold has hit a remarkarble 1550 US$ early in Asia, and continues a few $ ahead - 2265 A$/oz in A$! At current levels, somebody like Evolution had doubled net-margins at current levels - and lesser producers by much more.
Durable Goods orders are weaking in the States exaircraft, and business confidence in Germany is at a 6 year low…
Exploration for gold is definitely on the go again. Not only are small companies able now to find fresh equity ( Saturn Metals today being the latest to fill their coffers again, to further explore their 650.000oz resource ) - especially all larger producers in Australia are increasing their budgets in a very meaningful way. Aquisition targets outside of the very junior end are very sparce - hence exploration is being beefed up. Echo Resources are still in trading halt, pending a change of control….Duketon sold a small gold deposit with good upside to Regis today for 20 Mill plus more on success - just 6 month ago, the entire company was capped at 10 mill$!
Drilling companies will be writing a lot of business! The sexiest driller I know is Swick Mining ( which I own in my fund ), consistently announcing new underground drilling contracts with major companies, at improved rates.
The latest micro-cap in the gold space, which I own and which reported results + recently raised some more cash, is very close to my heart , as the MD is a good friend and relative:
Osino Resources in Canada reported some pretty exciting intersections from their Twin Hills property in Namibia. They are in very good country, having cornered a very large ground position next to two existing gold mines, owned by a private group and B2Gold. 104m with 0,7g gold, 189m with 0,69g and 78m with 0,64g are intersections these companies will take notice of - a bit of grade would be very welcome, though. The theory of the company is, that this is a sedimentary hosted deposit, typical for these grades - but also typical to find much higher grades at specific parts of the deposit. The drilling will continue - and with much better defined geology. This drilling augures very well for a large deposit - extremely promising, and no surprise, that the stock is running! OSI have very strong backing from Ross Beaty! I hope, that his nose will prove right again! The stock si coming down from today´s highs - probably a good opportunity to pick some up and go for the ride!
Prairie Mining - there is more noise about JSW/Bogdanka, the state-controlled coal miners, to hammer out a deal with them before elections in Poland in mid-October. Both companies have been underperforming operationally, and could do with some potentially very cheap additions to their neighbouring assets, which are owned by PDZ. While I have no doubt, that PDZ will get f—-ed over relative to their mega-large NPV, there could still be a good deal for shareholders at the very depressed level of PDZ´s current pricing. management of PDZ are sick & tired of Poland, which I can understand given recent experience in Poland - so both parties will see the need to do a deal! The share price in Poland, where by far most of the trading is done, is up a few ct again today. Let´s hope, that we can end this disappointig saga soon! I would be happy with a 100 mill$ valuation vs 2-or 3 billion $ worth of NPV!!! We have certainly learned our lesson here: Poland is part of the EU in a way - but unfortunately, only in a way!!
Metro Mining - the stock continues to languish, following some short-lived strength in early-to mid July.. The market is probably a bit skittish about the final feasibility study, which was meant to be out already, and is not. I am very convinced, though, that there is no negative reason for this. The board of MMI have shown before, that they are very conservative - I am sure, they will check the study backwards and forwards, before they release anything. I bought a few more today for the fund. And while the Yuan is down a few percent , the cross-rate to the A$ is more favourable than a few mont ago. Also , increasing freight rates ( while slightly negative for MMi ) will be much more negative for Chinese imports from Guinea, which have to be shipped around half the world!
Fortescue - released their result today, which was in line with substantially increased estimates. Free cash flow as 4,4 mill US$ - about doble the current net debt! No surprise, that dividends were announced again, of 24ct - bringing the dividend for the last 12 month to a huge 1,14 A$/share. If history is any guide, markets do overshoot - hence I do not dare buying the stock! But at prices of say 70 US$/t for iron ore, the company will continue to generate ample free cash, and a yield of around 10% for the next few years! They continue to do everything right - increase reserves, develope new mines ( but no major overall production increase ), increase average grade of ore produced - and not least, continue to develope their 1st-class relationships in China. Trump has a good chance to drive the world into recession - so I am a bit cautious for FMG, being a one-trick pony at this stage and very reliant on the price of iron ore.
Resolute - one of the few Australian producers, which is not overvalued - if things go ok in Syama! One little caveat: 190.000 oz are hedged at an average of 1337 US$/oz - that is a relatively large hedge book.The company has bought Toro Gold in the Ivory Coast, a privately held gold company. Some smart money has been developing this asset - so 274 Mill US$ have probably been no bargain! But numbers look ok, with cash costs of around 800 US$ for 140.000 oz of yearly production ( and more this year ), for 6.5 years. New country, but a relatively good one - and further making them an African producer. Quarterly production from existing assets around Syama was very positive - the oxide open pit performed very well and above general expectations, and more importantly, the ramp-up of the syama underground mine continued strongly. The latter is the most important asset by a long way! The Australian operations at Ravenswood continue to underperform, and the current gold price enviroment might enable RSG, to get a reasonable price for it….with Bibiani becoming an even greater chance to go into production under the improving gold price scenario. Not my favoured stock - but show me many more, which still have upside fundamantally ( and not only from momentum! ). Having said this - the world has so relatively small investments in gold, that gold stocks will continue to run well an increasing gold price scenario.
Last but least - Strike Energy have been suspended today…back on latest by Wednesday, pending exploration results from West Erregulla!! We have been waiting 10 years for this company to be successfull - now they are on the cusp of a major discovery. Let´s keep our fingers crossed!!!
Have a nice evening!
WS