Good afternoon
unfortunately, I am still not fully used to my new system, which delivers this little report...too often I manage to delete it, before it´s being sent out! I promise improvement!
The market in resources feels incredibly good - almost too good! When something like BHP moves by 30% in a fortnight, you just know, that large insto´s are moving back into our sector!! And base metals are moving accordingly: Copper at 5000$/t, nickel about to break out; zinc with new 12 month or so highs - gold obviously being bought into any attempt of consolidation - oil shaking off the Doha-meeting in less than a day, and looking like 50$ for WTI on the charts! And US-production is now coming under real pressure, as expected...
But the metals are seeing some profit-taking today, as the day progresses, and as the lacklustre US-figures have hit the market.
But as you know, oil is definitely not my favourite commodity - too much of it around, still - at least at this point in time.
Gold, zinc and nickel feel really great - more to come here, I think - and iron ore is trading at nearly 65 US$ - who would have expected that??? RIO has cut guidance for next year, BHP for this yearm for iron ore production - FMG is the big beneficiary, and their operations are going like a train, generating at least 4 bill A$ in gross cash flow with iron ore of 64$!!!
But having said all this, the macro-enviroment is still disturbing, except for China ( what a change! ). Consumer Confidence in the States not looking good, the Leading Index in the States very lacklustre - and Draghi today defended his seemingly endless printing of fresh money and will continue his 80 bill Euro/month buying spree and will leave interest rates unchanged. So I have to admit, that the current run of metal stocks might be built on hope, rather than strong numbers - still, the market in tehse things does feel stronger than in a long long time!
Perseus - excellent presentation the otehr day - may of you will have seen them in Zurich! Very detailed forecasts, based on their new mine plan, for Edikan - that mine has turned the corner operationally some time ago, and the enw mine plan is calling for nearly 8 years of production - the first 5 years for 258.000oz p.a.! You can have a look at the presentation yourself - all numbers are in there. Based on Edikan alone, the company should be worth , what´it´s trading at - and that is a market cap of 400 mill A$, or 300 mill A$ in EV.
Sissingue has been given the green light and will be in production by the middle of next year, chewing up the cash balance, but generating very nice cash thereafter. The same developement team will then move on do develope the newly aquired project - that´s excellent: training in the country with a 75.000oz producer, to move on to the real one, producing more than 200.000 oz for at least 15 years! This little company has a clear path to grown from 200.000 last year, to 500.000 oz + in 4 years - show me any established producer, who has the same growth! This stock has 1$ share price written all over it, in my opinion - but obviously, that will take a bit of time - or a better goldprice!
PRU are perhaps not for the really conservative investor - but they are currently the cheapest Australian producer of any significance - at least in my opinion - and still offer far superior leverage to the gold price than most others. We are probably, and will be seeing some more selling from investors, which got new script from the Amara takeover ( which turned out to be perfectly timed! )- that´s only normal - but investors should use this window of opportunity to build their psoition in PRU.
Evolution - had their full Quarterly out today. Record production, as reported earlier, of 209.000 oz at AISC of 1015 A$ = 743 US$ at the average forex during the quarter, generating free mine cash flow of 105 mill A$ ( average gold price during the Quarter was 1635 A$)! Pproduction was mixed, as Cowal and Mt.Carlton operated very well; Mungari, Edna May and Mt.Rawdon impacted by a seismic event, and heavy rain - all three operations are back to normal and are forecast to be much stronger in the current Quarter. All this is setting up EVN for another record-Quarter this Quarter - guidance should be achieved at the upper range, and below 1000 A$ AISC/ oz. The Quarterly Report gives you very detailed, financial numbers, if you are interested. EVN and PRU are good examples of very transparent, detailed information for investors.
The hedging position of just under 800.000 oz at 1620 A$ represents just under 1 year of production. Exploration has delivered excellent intersections from just about every existing mine area, except for Mt.Rawdon.
EVN also issued a new reserve/resource statement. Reserves net of depletion increased by 12% to 5.85 mill oz, at an assumed gold price of 1350 A$ - obviously, a conservative forecast vs current gold price of about 1600 A$/oz.Resources are up 10% to 14 mill oz...Big numbers indeed.
Good old EVN remain the mainstay of any gold investment in Australia!
OZ Minerals - good Quartely report: 31.000t of copper and 27.000oz of gold, at AISC of 1.27 $/lb copper. The company is sitting on 530 Mill A$ in cash, paid a dividend, had a larrge concentrate shipment in the first week of April, and is building up large stocks of copper/gold and gold ore. Carapateena is moving to an updated PFS, and the way it looks, it could be in production by 2019, for 50.000t of vopper and some gold p.a. 770 Mill $ in capex are quite large - but into a rising copper market, this could be a very long term and sizeable mine.
The buy-back of OZL has not started, but will shortly - the dividend yield should be above 4%. The stock is no gift - but as a sizable producer, and the way metal prices are moving in the moment, the stock will probably continue to move higher.
In the following a few reminders of kind of forgotten companies, which could have big moves, if this bull market ( yes, in silver/zinc/iron ore and nearly in gold, it is already one by definition! ) continues - and all of these companies would survive a considerable time without it happening this year...giving you great option value.
Venturex Resources - I have not spoken about them for quite some time, and there was no need to. But if this market is as strong as it feels in the moment, this will be the kind of stock, in which you could make 5x your money. Market cap 10 mill A$, resource of 300.000t copper and 900.000t zinc. Start-up with a moderate plant will cost 200 millA$ - that´s a bnig hurdle - for the production of copper/zinc from two mines, with good exploration upside. This story needs 20% better commodity prices - but the small stocks are moving, and many exploration companies, which have nothing, are capped at more...and in the end, to hold such a company, the risk is small - contrary to producers, it´s pretty hard to see them go bust!
Heron Resources - that´s another one of this type of stock - but better quality - and very active, as they have ample cash! 45 mill market cap, about 23 mill A$ in cash. Owner of the Woodlawn Zn/Co project - fully permitted, fully financed to feasibility study and more. The feasibility study should be finished this Quarter - PEA has been done some time ago. The PEA was planning for 51.000t of zinc, 10.000t of copper, and 16.000t of lead p.a. - so a reasonably sizable operation. Power & infrastructure is in place. Since the PEA, the company has been drilling very actively, and an increase of the resource ( 6.5 millt at 1.9% copper, combined 9,2% zinc/lead, 0,55g gold at 55g silver ) is more or less a sure thing.
Foran Mining - market cap of just 13 millCAN$ - many of you will know Darren Morcombe, who lives in Switzerland, and owns 12% of the company alongside Pierre Lassonde, who owns 11% ( you will know, that he is the co-founder and chairman of legendary Franco Nevada ). The company has a sizeable deposit called McIlvenna Bay in Canada - existing infrastructure, hungry mines in the area. The company has done a scoping study to produce 18.000t of copper and 27.000t of zinc p.a. in the past, and has established initial exploration success in the vicinity as well. Proven VMS-country, but the company has been effectively on hold for the last few years, waiting for a better enviroment for financing/takeover/development. This is a sleeper, and one which might well sleep for some more time - but in case you would be interested, it would take time to build even a small position anyway. Nothing wrong to sit and wait alongside Darren and Mr.Lassonde, if you are a private investor!
And in this space, we certainly have our little Panoramic - a stock which could also go to 200-300 mill$ market cap in the right enviroment, from today´s 55 mill$.
Have a nice evening!
WS