Good afternoon
uhhps! This did not go out yesterday - so the blog from yesterday first - further below, today´s blog! Sorry
the market is a little bit worried about the pace of the economic recovery - and looking at record corona virus infections around the world, rightly so! But does the pace of the recovery matter? I am not so sure…it´s crazy enough,. but markets are not behaving anymore the way they used to in an ultra-low interest rate enviroment, and this probably for years to come!
Bolsonaro has caught the virus! I don´t wish him what you think I might wish him - but I do wish him a few weeks with a nice incubator down his stupid throat! The US ambassador had lunch with him on the weekend! If he is as nice as the guy who was ambassador in Germany recently, I don´t wish him much ´better! But I apologize for being so badly minded…
Mrakets in Europe have been weaker, spooked by Iindustrial Production numbers in Germany, which were up by 7,8% in May, vs expected 11%.But as I am wrighting, the NASDAQ is getting pretty strong again…
Base metals so far are fairly flat - but with the start of the day in the US, gold started to move higehr and is now trading at a new recent high of 1794 US$ and 2570 A$/oz -. teh latter being more or less unchanged for the last 10 days or so. The GDXJ is trading at a new high, up by another 1% so far. And the US guys are also pushing base metals higher, as we approach the evening here in Europe…they are obviously worried about thousands of corona infections at Chilean mines. In most other countries, many of them would have been closed already - among them some of the world´s largest mines.
The Melbourne area will go into lockdown again for 6 weeks - 172 new cases in and around Melbourne just yesterday! No good….will make life for explorers in Victoria much harder.
Gascoyne - the company produced 6900 oz in June, ending the Quarter at the top of guidance. For 6 month in a row, tehy have no produced above 6.000oz - and grades are still improving, as more ore is now coming from the main pit, Gilbeys. The company is in the process of being re-capitalized, with a large placement. The best guess is, that GCY will raise 70-80 mill A$, to pay out the majority of creditors and banks, and will hit the trading screens again by late this Quarter. Not that the price will be fantastic - I guess 3-4-5 ct - but you will not find many companies, which come out of voluntary liquidiation with something being left for shareholders! We now have the upside from continued, strong production, continues exploration as well as from their second gold asset., which has more than 1 mill oz in resource and which, in the current gold price regime - is worth something as well. With a bit of luck, we might eb able to see 10ct again at some stage, limiting the losses most shareholders will have in this one.
Horizon Gold - and the disgrace continues! The only independant director resigned the other day, and Peter Sullivan who chaired Panoramic for many years and who´s borther Jamie is the only executive director of Horizon, has become director and chairman. Zeta now has a very firm grip of this company! I am hoping, that Zeta wants to achive, what I want to achieve here: Making a lot of money. I do not like the corporate situation at all - but the stock is ultra cheap as indicated by a scoping study back in 2012 ( done by a respectable guy ), which showed 213 mill A$ free cash flow at 1500 A$ gold price, and 516 Mill A$ at 2000 A$ gold price, by producing 87.000 ounces p.a. over 7 years! That compares to a market cap of 31 mill A$ for Horizon today!!! 2012 has been a long time ago - but the company has increased resources since then. I sincerely hope, that HRN will finally conduct their long awaited capital raising, and upgrade the resources! I have a considerable position in the stock, despite the corporate situation.
Metro Mining - production update out today - absolutely outstanding! New record production with 505.000t of bauxite mines, and 535.000t shipped! I understand, that the company purposely mined a little less as than tehy could have, to reduce stockpiles, as a lower level is easier to manage. Guidance for the June Quarter was 900-1.000.000 t - actual production and shipment was 1.251.000t!! The full Quarterly will tell - but I assume, that costs have been falling as well. The main worry for the market here is , whether bauxite prices will hold ok - and I think a nice trigger for the stock to run would be a longer term offtake agreement with some Chinese Alumina smelter. But for now, the company is fundamentally everything right, which is in their hands!!
Sheffield - the Quarterly Report was relatively boring, as expected. The company is working on a revamped production plan, which will probably see some changes to what product exactly they will produce, and an reduced capex for the new mineral sands mine. We might here more tomorrow in a conference call with the new driving force behind the company, a very well regarded mineral sands man. Hence, more on SFX tomorrow!
St Barbara - for a change, surprised on the upside! Excellent production report for the June Quarter ( full Quarterly later ), with 109.000oz being produced, Especially the old Gwalia Mine ( which was the first gold mine in the 80ties gold boom going into production, in 1985 with a 5 year mine life!! ) did very well. The strngly improved net cash balance of 90 mill A$ augurs well aslo for relatively low costs during the Quarter. SBM have been a laggard for a long time, suffering from what appears to ahve been an expensive takeover, and some development/production issues at the Gwalia Mine. But without more detail, too early to change my mind, which ahs been cautious for a long time.
Bellevue - excellent resource upgrade out today! Within the inferred resource of 2.3 mill oz at average grade of 10g, BGL announced the first indicated resource of 860.000 oz at 11,6g - and again, this inculeds a stunning indicated resource for Viago and Deacon Lodes, of 480.000 oz at 15,5g!! Basically all lodes are still wide open, and the company continues to drill agressively to upgarde infererd to indicated / increase inferred resources / drill regional targets. There is absolutely no doubt, that BGL will increase resources - most guesses are to 3 mill oz next year. There is also no doubt, that BGL are a prime takeove rtarget ( there are several plants in the area with either room to process more, or to replace lower grade material with BGL´s stunning grades. But the stock also had a great run! I think tehy will be stronger again tomorrow - but I would personally not buy any more at these levels!
Have a nice evening!
And here is today´s action!
Good afternoon
as you know, I have been pretty positive recently on general equity markets…but this is starting to feel pretty hot for me! The professional always sells on the way up - nothing wrong with leaving something on the table for the last buyer! I will start raising cash levels ex gold a bit more agressivley, I think. There are many risks out there - corona, trade wars, politics in Europe, Hongkong, Trump, election in the States, etc, plus the usual un-kown risks, which might apepar out of the blue. Nobody has ever died from having too much cash…
gold above 1800 US$ for the first time since 2011 , inspired buy strong ETF-inflows! many commentators are talking about gold, and nearly all of them waffle on about gold being bought for the economic impact of the virus! This is wrong , in my opinion! In a world, where interest rates will be kept articially low by massive bond buying done from the various central banks, and massive multi-trillion fiscal stimulus from governments, currencies are inevitably lossing their value! Gold is the only currency, which cannot be printed!!! That´s why it´s going up! And that´s why it might go quite a bit higher!
European equities are down this morning - but as the day progresses, US futures look like leading the way again - and that´s higher! Europe is under some pressure, as governmentsfind it very difficult to come to an agreement, how the 750 bill Euro in emergency spending to kickstart Europe after the pandemic will be spent/distributed.
Mercedes had record car sales in China last Quarter! That´s nothing short of amazing, I think!
Steel prices are going higher in China, as the country is setting a new record in steel production. That´s dragging ioron ore back up through 100 US$/t…what a feast for the large iron ore producers! Corona numbers in the US and in Latin America are still sky-high - leading investors to fear for growth, but also for reducing supply! I would be very surprised, if Chile/Peru could keep up copper production in the mdum term, with 30-40% of the workforce not working, and as ongoing , sustaining work as well as expansion work is not being done! Base metals so far are up a touch, again!
West African - continue their stunning production performance at Sanbrado!! The plant continues to do extremely well, and grads are increasing - resulting in 32.000 oz of gold production their first Quarter after first gold pour! The company is sitting on a rising cash pile - total net debt is now only 143 Mill US$! They generated 23 mill US$ in free cash, after spending 10 Mill US on the aquisition of the neighbouring ore body, and 5,5 mill on debt service! Sensational! And the best is still to come: The underground will be started seriously in the current Quarter - August? - and grade control drilling has been outstanding! This is the cheapest, halfway sizeable gold producer I know, and the discount for country/single mine producer is just too big! I am assuming aquisitions in the not too distant future - if not, I think WAF might be swallowed itself - too enticing is their massive cash flow over the enxt few years. Underground drilling has started, and I would be very surprised, if they would not extend their underground mine life by a few years. It remains my largest shareholding and a TOP 3 holding overall…
Sheffield - I listenend to a zoom call with Bruce Griffin, their new Executive Director, responsible for their world class mineral sands project in Western Ausralia. I have been bullish before - but this guy has made me really bullish! Very impressive!!! It´s a bit hard for me to comment in short, as the presentation has been very technical. But he gave a clear pathway to financing/production - and I would be extremely surprised, if this stock would not double relatively soon…and in the long run, god knows, what it might be worth! Remember, the stock is coming from 1,20 A$…I am sure, that we will see some dilution from fresh equity at some stage - but Bruce Griffin is very incentivised ( receiving 300.000$ on final investment decision, and 3 Mill shares for free )….hence dilution will only happen significantly higher. The company has enough cash to run in the current form until Feb/March next year. New estimates / research is, what is needed - no idea, when that might come through! But I am sure, that a few brokers will jostle for a capital raising transaction once the project has been advanced to FID in ( 6 month? ) some time! In the meantime, I would be very surprised, if we would not go into a nice ride here!!
Apollo Consolidated - announced some very long intersections, which are comemrcial but don´t make the headlines, like 30m with 0,82g / 21m with 0,7 g or 16m with 0,82g. This is very relevant, I think, as the theory has always been, that they have a high grade resource, surrounded by a lot of tonns at low grade - but together, making it for a very nice mining situation! They also hit some very nice grades at a new drill target 2 km North, like 6m with 9,7g - indicating, that there is a lot more to come also from satellite deposits. Finally, tehy reported today, that tehy ahve received 4.5 mill US$ from a recent asset sales, bringing total cash to 21,5 mill A$. As the company has a royalty on top , over a resource which looks almost certain to get the green light relatively soon ( I would think tjhis year? ), and which is worth at least 15 mill A$ ( going up with the gold price every day as well! ), AOP only have a EV of about 60 mill A$…significantly on the cheap side! Resources like this one are generally being valued in Australia much closer to 100A$/oz - sometimes higher - and I think there is still very good potential for significant, additional resources. A lot of fun still to come here as well!!
Chalice - broker Bell Potter initiated research on them, with an initial target of 1,30A$. They state, that eventual targets could be significantly higher, with very active and ongoing drilling at both projects potentially delivering two large projects!
Northern Star have had a nice come back, announcing a strong Quarter, with 267.000 oz being produced in the June Quarter, above expectations. Operations at Jundee and Kalgoorlie ex- Super Pit were very strong, while Pogo and Super Pit a little average. The detailed Quarterly is still to come. Saracen also reported another good Quarter, even though not matching the previous one. I think the stock, which has had a stellar run, has delivered on all fronts over the last few years, and management has done a great job…unfortunately, I missed them in the past, and will not join the rush at all time highs, which most probably give them full value.
Bellevue Gold - Australian newspaper ( AFR ) reports, that Macquarie would be conductiing 80 mill A$ placement at 1,00 A$. That is probably the final placement before going into production - though that is probably still 2 years away…prefeasibility , and then feasibility study are the next steps. The balance of financing should be coming from debt….As I said - pretty well valued - but with the final placement out of the way probably by tomorrow, the stock is worth holding - and will probably continue to go with the market from here on. I think outperformance might be hard - any aquirer would not really want to pay 1 bill$, and if the company goes it alone, the hard bit of developing/comissioning is still to come! I have to say, though, that exploration success has been outstanding here, and if it continues, there is obviously more upside.
Gold is trading at 1813 US$, and A$ gold is just back up through 2600 A$ as well! Enjoy the ride! Base metals, especially zinc, are also pretty strong late this afternoon!
A last word: If you want to buy value in this market, and a stock, which ahs not moved at all depsite a great enviroment, buy Metro! As I reported the other day - operationally, they are doing an outstanding job - and even while bauxit prices are not good in the moment, I think the forthcoming Quarterly will show, that they are making strong returns, still! Aluminium has broken out from a difficult time, pricewise, and Alumina prices have recovered well from April-lows around 225-230 to the current 263, which is still 10% below recent highs in March. Metro will profit from lower freight rates this year, and from lower costs, as their operation is largely on fix costs…
Have a nice evening
WS
Schröder Equities GmbH
Seitzstr.7a
80538 München
Tel. +49-89-4613440-0
Fax +49-89-4613440-10
email: wschroeder@schroeder-equities.com
website: www.schroeder-equities.com
eingetragen im HR München, HRB 166985
Geschäftsführer: Wilhelm Schröder
The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at wschroeder@schroeder-equities.com immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by