Chieftain Chatter
Watch the data....
Weekly job numbers in the US continue to surprise on the upside proving further resilience of the world’s largest economy and tempering rate cut expectations to perhaps two 25 point cuts between now and year end.
Non-farm payrolls increased by 254,000 in September which is the most in the last six months against a forecast of 150,000 new jobs. Nearly 70.000 of the new jobs added came from restaurants which is not reflective of an economy in decline and the underlying unemployment rate fell to 4.1%. However, to balance the ledger somewhat the US economy isn’t totally out of the woods and will still require action from the Fed to stay in balance as hours worked actually fell (must have taken the stats. from my counterparts) i.e. more people working less hours.
Therefore, we may well see another 25 points cut in November and then a full 1% in the first six months of next year leaving rates at around 3.5%. This should auger well for global share market returns (albeit more subdued than previous) as the soft landing becomes more realistic and a recession averted. This should all be prefaced by the escalation of unrest in the middle east that could destabilise markets and put a rocket under the oil price to upset the soft landing scenario. Meanwhile, US core inflation came in a little hotter than expected late last week which dampens expectations of a cut in November, however, that outcome will be heavily influenced by employment numbers due in early November.
Not forgetting there is an election campaign well underway in the US with Trump starting to move ahead in betting markets and ahead in the polls in 4 of the 6 key states being Pennsylvania, Michigan, Georgia, and Arizona.
As we’ve seen it doesn’t take much for this trend to reverse however, if Crazy Don does get over the line and the Republicans control the senate as well then we can expect a smooth path to reduced taxes, increased tariffs, increased fiscal spending and deregulation. Bottom line is this should be positive for the US dollar, equity markets and risk associated assets.
I watched with interest the recent Four Corners episode titled “Nuclear Gamble” and found it ironic when referring to renewable and net zero targets that economics was the main argument against the establishment of nuclear power in Australia. The use of the word “gamble” alone made it fairly clear where Aunty stood on the topic not to mention the raft of conflicted interviewee’s including the tainted Malcom Turnball, anti-nuclear proponent’s Peter Bradford and Simon Holmes a Court. Since when has economics been talked about in an effort to save the planet, the two just simply don’t go hand in hand on the topic. Reactors do cost in the billions however, it’s clear no one will come close to meeting emission targets without nuclear power and the technology is evolving with Small Modular Reactors emerging as a realistic option. Can’t say I’m well versed on the financial viability of nuclear plants but given the long life of traditional reactors and the environmental benefits it seems like a no brainer.
There are currently 440 operating reactors globally, with 94 in the US, 56 in France and 56 in China and yet Australian labour government remains opposed to it and puts up a barrier for yellow cake production from our vast resources. China has plans to build a further 158 reactors, with 28 already under construction. 35 countries around the globe either have nuclear energy and another 50 are planning to construct one of the 343 proposed new proposed reactors. If these plants are supposedly uneconomic then why are so many countries (less economically well off than Australia) heading down this path in favour of wind and solar?
Quote of the week….
“Most importantly, means there is no point valuing lithium stocks using spot prices when there is now corporate appeal”
Euroz Analyst Trent Barnett following Rio’s mammoth bid for Arcadium Lithium (ASX:LTM).
On the lighter side….
School of hard rocks…
These end of quarters come around all too quickly and our JRA has to wade his way through another raft of quarterlies and first cab off the rank was the ever consistent Emerald Resources (ASX:EMR). EMR produced 28,046 ounces from their Okvau gold mine in Cambodia which was towards the upper end of their 25,000-30,000 ounce guidance. They realised a gold price of $3,700per oz for $105.45m of revenue and while no costs were reported they are expected to be a bit higher than their $1,160-$1,260 guidance due to deferred stripping costs of the cut back and processing stockpiles. This result still delivers a healthy margin of around $2,300 per ounce leaving cash n bullion of $180m adding an additional $18.5m for the quarter after debt servicing leaving the debt balance at around $20m, give or take a couple of rubles.
As expected Capricorn Metals (ASX:CMM) produced a leaner quarter due to the mining of lower grade material and increased waste movement which will open up further ore zones at Bibra. CMM produced 25,600 ounces and they remain on track for FY 2025 guidance of 110,000-120,000 ounces at AISC of $1,370-$1470 per ounce. They still added $24.1m to the coffers finishing the quarter with cash and bullion of $144m. With regard to Mt Gibson, they will soon submit the Public Environment Report (PER) while tender responses for mining, power and plant designs have been received
Should be further drill results from the 5,000 metre underground drill program at Mt Gibson in the next month or two including a resource/reserve upgrade before the years out.
Regis Resources (ASX:RRL) produced 94,500 ounces for the quarter which was under expectations with Duketon producing 57,500 ounces and Tropicana 37,000 ounces. Cash and bullion stood at a healthy $380m at quarter end and RRL reiterated its production guidance of 350,000 to 380,000 for FY2025. What the result doers highlight is that they are generating $899 per ounce of gold produced to their cash balance reflecting their unhedged exposure to record prices which should be rewarded by the market. They added $85m to the coffers while AISC’s were not reported yet however, all will be revealed when their official quarterly lands on 24th October.
Figure 1: 1QFY25 preliminary production
Source: RRL, Argonaut Research, October 2024
Following a recent site visit to their Tabba Tabbs Lithium deposit Wildcat Resources (ASX:WC8) have released some stellar assay results including:
84m at 1.4%Li2O from 236m (Leia)
89.8m at 1.2% Li2O from 260m (Leia)
61m at 1.1% Li2O from 227m (Luke)
50m at 1.1% Li2O from 178m (Luke)
27m at 1.2% Li2O from 55m (Hutt)
17m at 1.1% Li2O from 7m (Chewy)
The results are a combination of infill and extensional drilling and all point to a solid resource number and grade when all is revealed this quarter with expectations being in the range of 65 to 75 million tonnes at a grade a smidge above 1% Li2O.
This project is ticking a lot of boxes and not least being on granted mining tenure making it difficult for Tanya to knock it back and still has about $70m in cash.
Lotus Resources (ASX:LOT) has come up with an alternative start up plan for the historical Kayelekera Uranium Mine which results in lower re-start capex and shorter time to first production.
The revised capex number of US$50m (plus US$11m in preproduction costs) vs US$88m was welcomed by all in sundry as was the 8-10 month production timeline versus the previous 15 odd months. The accelerated re-start has been achieved by delaying completion of non-essential infrastructure such as ore sorting, grid power and the acid plant rebuild. This should result in first production in the third quarter of calendar year 2025 with the only negative being initial higher operating costs of US$64.10 per pound although the average AISC during full production should be US$44.80 per pound. Good outcome considering the reduced dilution for shareholders and hopefully the continue flow of good news will force the shorters to cover.
M & A activity in the lithium space was always inevitable at the bottom of the cycle so no surprises when Rio Tinto (ASX:RIO) made a play for Arcadium Lithium (ASX:LTM) and the whole sector received a red hot poker. The LTM board and shareholders couldn’t say yes quick enough when RIO flashed around $8.70 a share under their noses valuing them at nearly $10 billion and a 90% premium to their 4th October closing price. Remembering, LTM came about following the merger of Galaxy Resources (ASX:GXY) and Orecobre (ASX:ORE) to form Allkem (ASX:AKE) and is a US-based producer with operations across US, Argentina and Canada where Rio has existing operations and should the deal complete, it would make RIO one of the largest producers of lithium. LTM recently pointed to potential for US$1.3b EBITDA from 2028 which complements RIO commodity mix quite nicely.
RIO is scheduled to produce its first lithium at its Rincon Project in Argentina in the next two months and Rincon lies a mere 60km’s southwest of LTM’s Olaroz lithium asset. RIO sought to find greater exposure to the lithium after their Jadar mine in Serbia was paused indefinitely following pushback from the Serbian government.
The “buy the Burkina coup” thematic for West African Resources (ASX:WAF) has been rewarding in the past and suffice to say this time was no different albeit no coup, but speculation in the press that Burkina Faso plans to withdraw some mining permits. Comments from President Ibrahim Traore said they had “plans to withdraw mining permits from some foreign companies and will seek to produce more of its own gold, without specifying which permits could be cancelled ” Dicky Hyde was quick to clarify “WAF personnel have recently communicated directly with officials from the Ministry of Mines and Quarries in Burkina Faso who have confirmed that none of WAF’s mining permits are under review and all of them remain in good standing”. Surely they are not going to bite the hand that feeds them with WAF continuing to be one of the largest tax/royalty payers in country having paid around $100m in calendar 2023 alone plus wages to locals ($40m pa), and community initiatives of $8.5mpa.They also recently won the West African Mining Week (SAMAO) “Best Mining Company” award held in Ouagadougou (Burkina Faso’s capital) for the second year in a row. Another solid production quarter with 47,800 ounces which was down a touch due to lower underground grades at M1 South and although AISC’s were not yet disclosed we would envisage around $1,780. During the quarter WAF sold 49,600 ounces @ about $3,700 per ounce generating $183.5m and remains on track to meet guidance of 190,000-210,000 ounces. Encouragingly, Kiaka development is progressing on time and budget with first production in the third quarter of FY2025
Metals Acquisition (ASX:MAC) didn’t waste time replenishing their balance sheet following the recent renewed interest in the copper price by announcing a $150m raise at $18 per share.
The represents a 13% discount to their closing price and funds will go straight on the balance sheet as they look to repay the Macquarie mezzanine debt facility and thus reducing their net debt to US$134m.
MAC has reported preliminary quarterly production of 10,200 tonnes of copper with C1 cash costs forecast to be in the range of US$1.90-2.00/lb.
Figure 1: 3QCY24 result
Source: MAC, Argonaut Research, October 2024
If the outlook for the copper price gives you a halfy then MAC provides excellent leverage and is expected to generate strong free cash flow in 2026 post the completion of the ventilation upgrades and cranking up production to 50,000 tonnes per annum.
Who’s shaking the tin…
American West Metals (ASX:AW1) – $6m at 9 cents
Vertex Minerals (ASX:VTX) – $1.1m 16 cents
White Cliff Minerals (ASX:WCN) – $5m at 2.5 cents (plus 1:4 option)
Riversgold (ASX:RGL) – $1.2m at $0.004 (plus1:1 option)
Neometals (ASX:NMT) - $9m at 9 cents
Metals Acquisition (ASX:MAC) – $150m at $18
Brazilian Critical Minerals (ASX:BCM) - $3.5m at 1 cent
Bowen Coking Coal(ASX:BCB) - $70m at $0.009 (plus 1:1 option)
Anax Metals (ASX:ANX) – $2.54m at 1.5 cents
James Bay Minerals (ASX:JBY) - $1.5m @ 15 cents
Zeotech (ASX:ZEO) – $1.82m @ 3 cents
Viridis Mining and Minerals (ASX:VMM) – $4m @ 52 cents
Forrestania Resources (ASX:FRS) - $0.95m @ 1.25 cents
Infinity Mining (ASX:IMI) - $2m @ 1.9 cents
Raiden Resources (ASX:RDN) $10m at 3.2 cents
A meeting with…
Peter Duerden, Managing Director, Waratah Minerals Ltd (ASX:WTM)
The Lachlan Fold Belt in NSW has been a graveyard for many a junior explorer and investor with the promise of discovering another Cadia/Ridgeway, Cowal or Northparkes and tantalising ‘technical’ success, so it was with some trepidation we organised a meeting with Peter. First thing we liked was he actually lived in the area at Orange and has been a career geologist in the region working with both the big boys – NCM and then also with ALK on the Boda Cu porphyry discovery so he knew his stuff. WTM is the re named Battery Minerals which was trying to develop a graphite project in Mozambique and in September last year a board change and project acquisition shortly thereafter saw the attention focus to the Spur project. This is located 14km west of Cadia (32moz of Au and 7.2mt of Cu). Previous drilling had returned some pretty good results including 86m @ 1.56 g/t Au from 86m, 17m @ 5.3 g/t from 50m and 67m @ 1.15 g/t from surface. Historical exploration focussed on drilling the magnetic highs, however most high value deposit are wall rock- hosted, outside the main intrusive and also its targeting epithermal – porphyry link like a Cowal. In Dec’23 it raised at a premium to market with Stu Tonkin of NST fame going to 10% and Tim Goyder popped up with 7%. Since then, it has reported some cracking intersections including 89m @ 1.73 g/t Au from 115m, 11m @ 10.8 g/t Au from 154m and is shaping up very nicely. It looks to have identified three zones of mineralisation with some good continuity on its more advanced Spur project. Geophysics also show large deep targets plus priority target zones/margins over a 10km distance. A recent raise at 25c – after a 5x uplift since the Dec’23 placement has given them $6m in the kitty to have a real crack at the exploration and another rig is coming shortly. With a market capitalisation of $60m it’s not in the tiddler bracket anymore but the target of a multi-million ounce discovery remains. This is one to put on the radar and if passion and enthusiasm could translate into success then WTM are well on their way.