Good afternoon
sorry - I forgot to post yesterday´s report...pelase find it at the bottom of this report.
One of Australia´s most succesfull companies has received a large takeover bid yesterday - Unibail-Rodamco bidding 24.7 bill$ Enterprise Value for Westfield Corp, one of teh world´s largest owner of shopping malls. The Lowy-family, originally Hungaryan refugees, only started the company some time in the 1950ties, and Frank Lowy remains a legend in Australia!
Goldmans as well as UBS published positive outlooks for commodities. Especially the UBS report is very bullish on nickel, but also other EV-metals.
Glencore - had their presentation yesterday, which was very bullish on just about anything tehy produce - from copper to zinc, nickel etc. They expect 30 mill EV´s to hit the road in 2030, and asked respected commodity forecaster CRU to come up withe stimates for additional use of metals. CRU believe, that by 2030, an additional 4.1 Mt of copper will be needed yearly, as well as 1.1 mt of nickel, and 314.000t of cobalt. That´s an additional 18% of todays copper supply, another 100% of ( the right type of ) nickel, and 300% more cobalt. Glencore also annopunced, that from the second half of 2018 on, tehy will bring the Lady Loretta zinc mine in Australia progressivley back on stream, to produce 190.000t of Zn in 2020. If anything, that´s less than expected and should easily be absorbed by the market, continuing to hold Zn in supply-deficit under todays assumptions.
Cobalt was a bit of a surprise, as they are calling for a big number of cobalt production from their Katanga mine in the DRC by 2019, 38.000t, which is more than expected. In my opinion, this is very good news - the more cobalt mining companies can make available, the saver it´s to assume strong market penetration of EV´s. Cobalt is currently one of the critical elements of lithium ion batteries, and is in very short supply, potentially threatening the expansion of EV production.
Finders - extension of takeover bid by 30 days, and they removed the minimum acceptance condition ( 51% ) of their bid. 37% of shareholders have said, that they do NOT intend to accept the bid - NOT A SINGLE shareholder so far has accepted! The company also stated, that it´s in discussion with third parties, without having sufficiently progressed these talks to enable a public statement. You will remember, that the Independent Expert Report as part of the recent Part B statement valued FND at 31-35ct.
Newcrest - is selling their Cote Ivory based gold mine Bonikro for 81 Mill US$. The mine is expected to produce around 100.000oz for 4.5years at around 1000 US$/oz AISC. Cashflow from the mine, after all costs incl headoffice, is expected to be pretty small. Probably not a bad price for Newcrest - unless the Canadain aquirers can do something about costs, and/or mine life. Newcrest is a boring stock - unless you manage billions, no reason to hold it!
Pilbara - announced some excellent drilling results at their existing Pilgangoora lithium project, and will undoubtedly be able to increase the current 80 MT reserve as part of their feasibiliyt study for Stage 2 of the project, in June 2018. Stage 2 will take the project to 5Mt p.a. or 800.000t of Spodumene ( that´s a 6% lithium concentrate ). Additionally, tehy are targeting 1 millt of direct shipping ore sles from April 2018, for a limited amount of time, to profit from teh current shortage of material. They also updated the market as to capex for Stage 1, which is currently under construction and should be erady to produce in June 2018. Capex has increased by 17% to 274 millA$ due to some real cost increases, but also an increase in scope. The company is still fully financed.
Prairie Mining - the Polish Academy of Sciences, which is an important government advisor, achnowledge that new mines and foreign investors incl state of teh art technology are needed to furtehr drive the Polish coking coal industry. Prairie has got all of that....The European Comission has also confirmed Coking Coal as a critical commodity for the EU, as currently, 85% of the EU´s needs are being importetd, mainly from the US and Australia. PDZ will enjoy considerably lower transportation costs into the EU.
Coal remains a dirty word - but especially coking coal will be needed for a very long time to come as a necessary ingredient in the steel making process. At this stage, I am not aware of any new, major projects within the EU, which could reduce Europe´s dependence on imported coal! I am hoping for some more news re the Chinese feasibility study/financing in January/February - that could be very important news. The stock remains WAY to cheap!
Have a nice evening
WS
this is yesterday´s blog:
Good afternoon
forgot to mention a very strong month in Nov for Chinse EV-sales of 119 ( incl 17.000 hybrids ) - new record of course, and year so far is up by approx 55%. The global car industry has no choice to develope tehse things - China wants them, and is pushing hard. This is one of the reasons for EV´s taking off here as well - development money is flowing big time, and functionality will continue to improve dramatically over the enxt 2-3 years...
Deutsche expects China to grow by 6.3% in 2018, as well as in 2019. For India, they are expecting 7.5% growth for fical 2019, after the current year 2018 to deliver 6.6%. The India-metal consumption story is getting further air...According to Macquarie, global car sales upby 1.9% in Nov ( China unchanged from very high 2016-number, Europe strong, BRIC very strong )
German investor confidence coming down - the political stand-still is starting to impact. The risk is, that Social Democrats are getiing to much from Merkel to save the coalition.
Coal prices continue to move, despite all the bad press here in the western world. Coking coal is trading at 236 US$/t, and even thermal is just about to break 100$/t - currently trading at 98$. Great prices for companies, which produce the stuff - but also excellent news for developers. China and the developing world will not be able to do without coal for a very long time to come!
Bitcoin - the rage continues. I have to admit, that I do not understand it - but I refuse to put in the effort, as in my opinion, this is pure gambling and has nothing to do with investment. Amazing how much bullshit you hear about it, even in the evening news! Our evening news compared the bitcoin frenzy with the housing bubble in 2007, and having similar risks for the financial system - what a lot of nonsense! Total value of bitcoins today is about the same as Exxcon´s - with the housing bubble, we were talking trillions! I continue to be a non-believer - this is not a currency, but a speculative vehicle to cater for the gambling-spirit!
Sheffield - signed a large , binding off-take agreement with China´s largest mineral sands processing company, for 27.000t of zircon concentrate p.a. for 5 years, with extensions. More off-takes are expected over coming weeks. The court case was hearing the appeal to the Native Title decision. The opposing party has lost this case twice - this is the last possible appeal, and the company is understandably extremely confident, that it will turned down again. Decision will be handed down in 6 weeks or so - some time delay because of Christmas etc, but all looking very good. Except for making some investors ( especially insto´s ) a bit cautious, this will have no effect!
Strike - nice article in the AFR, Australia´s main financial daily. It sums it up pretty nicely:
Strike sees Cooper gas beating LNG
Dienstag, Dezember 12, 2017 05:15
by Angela Macdonald-Smith
Dec. 12 (Financial Review) -- After several years in germination, Strike Energy's ambitions to crack the gas-starved east coast market look set to bloom in 2018 and if chief executive Stuart Nicholls proves right, they could provide food for thought for those eyeing LNG imports in the southern states.
Mr Nicholls said the economics of the junior's $500 million Southern Cooper Basin gas project point to the prospect of substantial volumes of gas reaching the market, with commercial gas starting to flow around the end of 2019. Gas is due to be sold to major industrial users including Orica, Brickworks and Orora that have already struck conditional purchase deals.
The depth of the coal seams targeted by the project poses a technical challenge, while Strike's small size - its market value is $66 million -means financing is also a hurdle. But the thickness of the seams holding the gas, the large volumes involved and the existing pipeline crossing the project help to offset that, analysts say.
Mr Nicholls said the project was in the "top quartile" of costs, meaning it and other projects matching that performance may leave only "a short-term opportunity" for players such as AGL Energy that are eyeing LNG imports into the south-east.
"Whether the long-term economics of an LNG import terminal can compete with the undeveloped east coast gas resources like ours, I'd be surprised," Mr Nicholls said. As for Shell's Arrow gas, which recently took a leap forward towards development, that has already been factored into the market, he said.
Mr Nicholls describes the Southern Cooper project as "probably the largest accessible undeveloped east coast gas resource at the moment" given the presence of pipeline and processing infrastructure close by and technical confidence in the gas resource. The Moomba-Adelaide gas pipeline, owned by QIC's Epic Energy, crosses the PEL96 permit held jointly by Strike and Energy World Corporation.
The tight east coast gas market, with the step-change that had taken place in prices driven by higher costs and its connection to the Asian LNG market, provided high enough prices to make it work, Mr Nicholls said in an interview, declining to be specific. Historical prices of $3-$4 a gigajoule are rapidly disappearing, with some new contracts being struck at $8-$10/GJ or higher for short-term deals.
"The current prices today are favourable and supportive of a development of the Southern Cooper Basin," he said.
Underpinning the first phase of the project is a gas sales deal with Orica that, after a lengthy dispute, was renegotiated in September for a smaller volume but at higher prices. Orica, one of several east coast gas buyers that have complained about soaring prices, has also made a loan to Strike.
The venture has yet to firm up reserves, and its existing "contingent resource" is relatively small at 155 billion cubic feet of gas. But Mr Nicholls said seismic data over PEL96 and two adjacent licences suggested a prospective resource many times that, at about 11 trillion cubic feet.
Key to converting the initial resource into reserves is the Jaws drilling campaign due to start in mid-February. An appraisal well will reach about two kilometres deep and will involve an 800-metre horizontal section that will meet with a second vertical well to be used for production. Seven fracture stimulation "stages" along the horizontal part will encourage gas to flow.
That well, to be carried out by US shale drilling expert Halliburton, will cost about $15 million. Strike is funding its share from a $9.1 million share sale in September priced at 7?? a share. The stock closed on Monday at 6??.
All going to plan, Strike hopes to declare the resource commercial in the June or September quarter of 2018. A reserve booking is targeted for the September or December quarter, followed by a final go-ahead on an initial 50 terajoules a day, 10-year project shortly afterwards.
Ongoing drilling would then progressively prove up more reserves, with an expansion to 200 TJ/day envisaged in a second phase.
"As we start to move from phase one ... to phase two ... I see the competitiveness of Strike improving against the existing suppliers that are coming into the market," Mr Nicholls said, noting the Moomba-Adelaide pipeline allows gas to flow either south or to Sydney and Brisbane.
Still, the estimated $500 million cost for the project over 10 years will require either major partners, equity finance or project finance, Mr Nicholls said.
If I am correct, that will be part of the printed daily tonight. In terms of fundamentals, the next bit of news should be a grant form the South Australian government to support the project with hopefully 8 mill$. I am expecting this some time in the enxt few weeks. Decision is overdue, but is believed to be pushed closer to the State election on the 17th of march, for politicians to have something positive to show....Strike have enough cash for Jaws 1 without the grant - but obviously, it would be very good news for Strike.