Good afternoon
The almost relentless run of equity markets came to a sudden stop yesterday, driven by a negative economic outlook by the FED , and fresh increases of corona numbers in some large US states. But the way it looks, the correction might already be over - at least Europe is up quite convingly today, and the US is up by roughly 2% as I am leavinbg.
There is just too much cash which has missed the recent run, waiting for a moment to get invested , to have a large correction in markets! IF interest rates stay very low for the next couple of years - and that´s the way it´s looking - equities are cheap! Sounds crazy, but is true - certainly relative to bonds! If interest rates do not stay low, half the world will go bust….both scenarios should be supportive for gold!
US consumer confidence surged in June
Holdings in gold ETF´s fell quite heavily the last few days - that´s a bit disturbing in the short term. But with gold currently going strong at 1737 US$, this might already be reversed. In A$ terms, gold has had a pretty strong correction - from 2700 on May 15, down to 2400 A$/oz a few days ago. We are now back at 2520 A$/oz.
Iron ore has had an impact on the A$, which has generally been strong recently. As you will know, iron ore is by far Australia´s most important good to be exported, and the appaling performance of Mr. Bolsenaro in Brazil assures, that there is a massive supply risk for Brazilian ore. Cases have been rising very strongly in Chile and Peru as well, potentially disrupting supply of copper . Base metals are also slightly up today.
West African - updated the market in my absence. The mine is going gang busters - at the end of may, the company had net debt of 130 mill US$ only - that´s only 2 month after going in production! Construction of the plant ahs been much several month faster than expected - hence the development of the underground mine could not hold up. As originally planned, underground ore from the first stopes will hit the plant only some time in the September Quarter ( given recent development rates, I assume rather earlier than later in the Quarter ). early grades should be outstanding, given recently announced grade control drliing. Also, deep drilling to increase the mine life of the underground mine will start any day now - this could be a trgger for the next leg in the share price. Also, WAF should be included in the GDXJ Index relaively soon, I believe.The stock is still at least ok to hold! They have had a good run - but show me a reasonable gold miner of resaonable size, which is cheaper! I cannot see one!
Strike Energy - the company has done some more work on interpretation of seismic work, performed around South Erregully. The work has increased confidence in also finding a very substantial gas resource here, potentially even larger than at West Erregulla. The prospect could be drilled in the first half of 2021. I am awaiting any week now a date for drilling West Errgulla 2, which is planned to greatly increase confidence in the West Erregulla gas resource. Strike is back to just above pre-crash prices - but it should prove to be still very cheap here. Next trigger might be offtake agreements with large industrial users, and certainly the drilling of the next appraisal well!!
Liontown - announced some excellent results the other day from metallurgical work. Confidence is increasing, that LTR could produce a higher grade spodumene product than normally avainlable, which would give them a realistic chance to receive a premium price for their product. The stock continues to be the best lithium story in the market, in my opinion.
Sheffield - the company has landed a major coup by signing up Bruce Griffin as Commercial Director. Bruce is regarded as one of the preeminent experts in Mineral sands, and has worked for SFX on a consultancy basis for 2 month already. He has deep knowledge of the project, and him accepting the job, adds substantial credit to the project. His salary is relatively low, but he his highly incentivised to get the project to Final Investment Decision ( which obviously assumes, that a financing ahs been concluded ). The company is also still engaged with potential partners, I understand corporates as well as PE-firms. With 7 mill A$ in cash, SFX can hold it´s own, until a partner has been found, I think. The project should underpin a share price much higher than today´s 13ct!
For me, it´s a major stepping stone to have Bruce Griffin involved, giving the company much higher visibility and increase confidence for potential off-take partners and financiers! Remember the stock was trading at 36ct as recently as in December 2019, before it came clear, that a partner would not be found. The company is now working on new project design, which would reduce initial capex, and is very advanced here. I believe, though, that the final design will be depending on the final development partner, as different off-takers have different need for product specification. But even though the share price is very depressed - this story is far from over!
Bellevue Gold - have now started regional exploration , with immediate success. A drill hole delivered 17m at 4,2g gold/t…great news! The stock has hit a new high the other day, and is clearly on the radar of large funds now. They are not as cheap as tehy used to be, with a market cap of now 650 mill A$ - but there is still upside in the stock. Nothing wrong with taking a few profits here or there, though!
Horizon Gold - Panoramic will be having the AGM on the 29th of June, where shareholders can vote on the second sale of Horizon shares to Zeta, the once largest shareholder of Panoramic. The sale has been done at 20ct/share, subject to getting approval at the AGM of Panoramic. I am strongly oppsed to this transaction, and will vote against it! 20ct is a steel by better-than-us-informed buyers, who should have seen the scoping study. As you know, I am a relatively large holder of Horizon, and I believe, that the stock is worth multiples of 20ct. The company is being starved of cash by Zeta, and I do not want to deliver control of Horizon to a bunch of people, who have not been good for us in the past! If the directors of Horizon ( who have repeatedly bought stock recently above 20ct! ) have an interest to bring the company forward, they will do a capital raising to all shareholders as soon as possible - in fact, they should have done so month and month ago - to enable drilling of the resource for upgrading of the confidence level.
Perseus - will become a member of the ASX 200 shortly. That´s good news - a lot of passive money is following this index, and this will make some kind of a holding in the company mandatory for every index fund!
Tietto - announced more high grade drilling results the other day, incl 12m at 7,5g gold/t, from underground ( 370m ) , below the high grade AG resource. The company to me looks almost certain to increase resources to abover 3 mill oz, from 2,2 mill oz currently, with the next resource estimate in September or so. at 100 A$/oz resource, this equals 300 mill A$ or just a little more than 80ct/share! On the negative side: Ivory Coast has had the first terrorist attack the other day since 2016…not good! But even at a 30% discount, the stock would be capped at 200 mill A$ vs 140 mill A$ today! 3 mill oz would also bring them on the radar screen of the Endeavour´s of this world…anything with production potential of 200.000 oz is of interest top the mid-sized players in Western Africa, like Perseus, West African Resources, Endeavour etc etc..
Have a nice weekend for now! US markets have opened VERY strong, gold is 1743 US$, and base metals are going higher! I would not mind, if markets closed here!
WS
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