Good afternoon
relative to the size of the population, New York is only second to Italy in numbers of infections. I dare to say, that the US will see an explosion of cases in the next few days! This is the only thing holding me back from being outright bulllish. Yesterday, I said that this is the first day where I do feel much better about markets, and that we have seen the worst - today I think this even more…My feeling is, that markets are normalizing, if one can say something like this in the wake of unprecetended ( even in the Financial crisis 2008 ) money printing and fiscal spending.
As I am leaving early ( 3.30 pm European time ), equities around the world are trading strong in Europe, and slightly better in N.Y. - base metals are stronger , but like gold ( at 1497 US$ ) , cannot hold on to much stronger gains this morning. Bonds, are strong, and currencies have not repeated yesterday´s rollercoaster.
DO NOT FORGET GOLD IN THIS ENVIROMENT - THE ONLY CURRENCY NOT BACKED BY A GOVERNMENT OR A CENTRAL BANK, PROVEN FOR AT LEAST 5000 YEARS!! It has the potential to go for a major run this year - as have the right equities, as I am believing, that we will see a recovery of economies sometime this year - perhaps later than I expected earlier on, perhaps 3rd Quarter? All this fresh money will have to go somehwere, and we will have the same story as in the last few years - massive amounts of cash looking for any return, as government bonds around the world will not pay any interest!
Interesting little note from Cannacord today, about fly-in-fly-out ( FIFO ) operations in Western Australia. Naturally, these are more at risk than a mine operating with a largely local workforce in a corona enviroment, and I have no doubt, that we will see one or the other operation being impacted rather sooner than later. Quite a few mines are operating entirely on FIFO, and some not at all. My favourite gold miner Evolution uses FIFO only at one small mine, Cracow, and are therefor largeley insulated!!
More chaos in South America today - the unions at Escondida, the world´s largest copper mine, are accusing BHP/RIO of being irresponsible abot the way tehy are operating the mine in times of corona.
Evolution - chips as chips! You have seen the above comment. Also, EVN operate multiple mines, all in Australia with one exception ( Canada ), have just about the lowest costs of any larger gold miner, excellent management, and are 20% undervalued at the current gold price ( and have small hedging only ) . Highly liquid, strong balance sheet as well! I gold moves consistently higher over the next year or so, you will make a lot of money here, while sleeping well! And you will even continue to get a 3% or so div-yield!
Bellevue and Western African are my other two, preferred stocks. BGL not producing as yet, but with a fantastic, high grade resource right in the heart of Australian gold mining country, which is large enough to attract the larger Australian producers / West African as a ultry-low cost producer, at a large discount to NPV and just having started production - but in a relatively difficult country.
African Miners - Macquarie highlighted the risks to some of the Australian miners , active in Africa. Global travel restrictions could make things difficult for RSG ( Syama Underground, as a highly automated mine, is requiring a lot of foreign personnel, especially in the current phase ), as well as Perseus ( Yaoure is in the middle of construction phase, with 30% foreign workers ). Those two could have a problem at some stage! Western Africa are very lucky, just having completed the construction - nevertheless, while the fast majority of workers is local, tehy have some foreign staff. Those guys have agreed to work on longer rosters. I would not be surprised if all miners, not just the African ones, will look for more people, as corona and the restrictions might well have an impact, incl some workers going into quarantine.
Resolute - have announced complete refinacing of existing debt, and replaced it with 300 Mill US$ worth of a new facility ( 6! banks involved ) . It also gives them additional 85 Mill US$ worth of flexibility. I would not have thought, that something like this would be possible in this enviroment! Well done….!! The interest rate is very sexy at Libor +4%.Let´s hope for the company as well as the banks, that Syama ramp-up will go well! Mako is a good mine, but would be too small to carry this debt on it´s own.
There has been widespread directors buying in Australia in general, and in bombed-out miners especially. Directors don´t have to be right, and they do not more about corona than you or me. But this is certainly a positive signal - and indeed, I do believe, that they are right! It´s time for bottom-fishing! If I am right, and we will come to grips with the virus over the next 2-3 month, we will have an astonising come back with all this money flushing through the world!
have a nice weekend!! We will have to enjoy it at home - more table tennis, playing cards ( last night, I won! ) reading, watching TV…..and thank´s god, we have the horses, which allows us to go outside and look after them!
WS