Chieftain Chatter
Season 4
Episode 147
What a difference a day makes....
The mere mention of the word “stimulus” gets markets excited and when you add “China” commodity markets really start kicking back into action.
Chinese authorities have finally announced a raft of initiatives to reignite their ailing property sector and general economy including:
The seven-day reverse repurchase rate will be lowered to 1.5% from 1.7%.
RRR (Reserve Requirement Ratio) lowered by 0.5 percentage points, unleashing 1 trillion yuan in liquidity.
MLF (Medium Term Lending Facility) expected to be cut by 0.3 percentage points.
Minimum down-payment ratio cut to 15% for second-home buyers, from 25%.
LPR (Low Prime Rate) and deposit rates to fall by 0.2 to 0.25 percentage points.
The PBOC to cover 100% of loans for local governments buying unsold homes with cheap funding, up from 60%.
Issue 2tn yuan (US$284bn) in special sovereign bonds.
The measures are fundamentally focussed on assisting their struggling real estate market by assisting banks’ lending to consumers by cutting short term interest and mortgage rates.
Chinese authorities subsequently followed up they would allow home buyers to refinance their mortgages, which marks a shift in how Chinese pay off their home loans and could allow policies aimed at addressing a prolonged property-sector slowdown to filter through to the market more effectively. All eyes are on what further measures will be taken and whether infrastructure spending will be a part of the plan as market commentators remain doubtful that China can reach its 5% GDP growth target.
Copper responded immediately rebounding to US$4.65 per pound ,it’s highest level in a few months while iron ore rebounded through US$100 per tonne putting a rocket under our big miners. In recent times consistent negative data from China has obviously weighed heavily on commodities, so the raft of measures was welcome relief for all commodities with oil joining the party as middle east tensions escalated. The broad based slowdown combined with their plummeting property sector has hit metal prices hard applying pressure to steel makers, copper smelters and all encompassing. BHP (ASX:BHP) have not been shy in their pursuit of copper acquisitions in recent times and they are now forecasting global copper consumption will increase by an additional 1 million tonnes annually, until 2035. They now estimate we will require about 10 million tonnes of new production over the next 10 years which is a 50% increase with current production not meeting demand and the shortfall being plugged by the scrap market. “As we look towards 2050, we foresee global copper demand increasing by 70% to reach 50 million tonnes annually.
The uranium sector continues to gain momentum with 14 of the world’s largest banks pledging their support for the nuclear industry. Such names as Bank of America, Barclays, BNP Paribas, Brookfield ,Citi, Morgan Stanley came out and pledged their support which follows Microsoft signing deals to purchase $16 billion of nuclear power from the revived Three Mile Island Nuclear facility over 20 years to power their AI data centre ambitions. The deal with Constellation Energy aims to restart 835MW nuclear facility by 2028 and will spend US$1.6 billion on the facility which closed in 2019. The deal comes off the back of Oracle looking to power its planned 1GW data centre with a number of modular reactors and Amazon looking at heading down the same path. World Nuclear Association board member George Borovas commented “This event is going to be a game changer…until now banks had found it politically difficult to support new nuclear plants which often require sign off from the top brass” He added that the support from the banks would help normalise nuclear energy as “part of the solution for climate change” rather than “a necessary evil”. As we all know its farcical for emission targets to be met by 2050 without nuclear power and the US, UK, Japan, Sweden, and the UAE were among those who signed the COP28 commitment to triple capacity.
Quote of the week….
“The domestic economy issue is very complicated….so monetary loosening may not be enough adding the need for additional fiscal stimulus” Sceptical Bloomberg analyst on the Chinese stimulus.
On the lighter side….
School of hard rocks…
Delta Lithium (ASX:DLI) announced they had commenced a strategic review of their very valuable Mt Ida Gold Project to review all options available to best monetise the asset.
As their name suggests the principal focus is still on their Ida and Yinetharra lithium projects when the sector comes back into favour and are in the fortunate position of sitting with a healthy cash balance of $80m. The current gold resource stands at 6.6 million tonnes at 3.5g/t gold for 752,000 ounces with plenty of upside potential at depth. According to Bells who are conducting the review they believe the existing resource could potentially double or triple from depth extensions alone. Genesis Minerals (ASX:GMD) Leonara plant lies just 120km’s away making them potentially a likely buyer of the project
Liontown Resources (ASX:LTR) are steadily restoring the markets faith after their first shipment of spodumene concentrate from Kathleen Valley hit the high seas. The mill continues to ramp up in line with expectations producing in excess of 28,000 wmt’s of product to date at a grade of 5.2% Li2O with LTR stating “processing plant and logistics chain continues to be in line with our expectations, following the commencement of production this quarter”. The 11,855wmt shipment graded 5.2% Li2O and is enroute to China for an existing offtake customer and they expect to commence spot sales of concentrate this calendar year with an initial 10,000 tonnes earmarked for a Singapore based trader achieving a premium price to the current spot market of US$802 per dmt. LTR will progressively commence fulfilling its offtake agreements with LG Energy Solution, Telsa, and Ford.
De Grey Mining (ASX:DEG) have responded to media speculation that Agnico Eagle (TSX:AEM) (A$61.3b Mkt. cap) is looking to takeover DEG (A$3.2b).
The article suggested “…with the latest talk being that Agnico Eagle has submitted a buyout proposal for the $3.2bn Australian listed gold explorer.
This is not the first time takeover murmurs have circled DEG and probably won’t be the last however, DEG management was quick to point out “The suggestion in the article is incorrect and the Company notes it is pure speculation. The Company's policy is not to comment on rumours or media speculation.” which is usually code for “we are in advanced negotiations.” DEG is ripe for the pickings for the likes of an Agnicio Eagle with deep pockets to develop the proposed 10 million tonne per annum plant which is forecast to cost $1.3 billion
Reward Minerals (ASX:RWD) has attempted to recut the acquisition of the failed Kalium Lakes (ASX:KLL) Beyondie Sulphate of Potash (SOP) project on a couple of occasions and it appears they have finally succeeded. This time around RWD have purchased the projects SOP plant for a mere $2.13m and will subsequently dismantle and relocate it to their Carnarvon SOP project. Their previous attempt to purchase KLL’s plant and project failed due to their inability to raise the necessary $22.7m to fund the acquisition. Hats off to RWD if they can make this work as KLL sunk an astonishing $466m before operational failures across the board and substantial cost blowouts forced its closure after about 12 months and KLL hit the wall along with close to $80m of NAIF taxpayer funding.
Copper minnow Alma Metals (ASX:ALM) has continued to deliver the goods in a buoyant copper market which the share market continues to ignore. Following a recent near surface hit of 276m @ 0.45% Cu at their Briggs Copper project in Queensland ALM have delivered further results from the same section which highlighted further wide intervals of copper including:
3m at 0.40% copper and 21ppm molybdenum which include some nice higher grade sections.
3m at 0.26% copper and 31ppm molybdenum
MD Frazer Tabeart commented “These results continue to demonstrate the presence of significantly higher-grade copper zones close to surface within the Briggs resource, aligning with our strategy to define a higher overall resource grade,” Further assays are due in the ensuing weeks and drilling will continue with the aim of delineating an economical grade resource to complement the current 415 million tonnes at 0.25 Cu with some molybdenum sprinkles.
Strike Energy’s (ASX:STX) Mid-west power project has been awarded 85MW of reserve capacity credits in what appears to be at the detriment Frontier Energy’s (ASX:FHE) Waroona Solar Project which has been given the rissole. Aust. Market Energy Operator (AEMO) have published a Capacity Credit price of $216,092pa/MW capacity for 2026, at the higher end of STX’s previously guided range which equates to a guaranteed minimum capacity revenue stream of over $18m in the first year of the project. STX have indicated a capex of $120-$160m for the project with FID expected in November this year. They recently announced $48.5m contract with Clark Energy for the supply and commissioning of gas fired generators for the project. But wait there’s more they are also commencing flow testing at Erregulla Deeps where they encountered high pressure conventional gas flows to surface from the Kingia formation. If the flame below is a guide we should be off to the races in the near future…
Lunnon Metals (ASX:LM8) recent pivot to focus on the gold prospectivity of their Lady Herial prospect is proving positive with some nice hits from a recent round of RC drilling, including:
23m @ 16.61g/t Au from surface
13m @ 4.10g/t Au from 3m
15m @ 1.15g/t Au from 3m
18m at 5.3g/t Au from 18m
LM8 has identified two parallel mineralised zones, which are about 50-60m apart at Lady Herial and remain open down plunge and will require additional drilling to ascertain the resource potential. LM8 commented “ The Company’s current strategy aims to leverage any such discoveries with the region's existing processing capacity and together with its existing strong cash balance, thereby fund the ongoing pursuit of tier 1 deposits in one of Australia’s most prolific gold belts”
Figure 1: Lady Herial Upper Structure Cross Section
Austal’s (ASX:ASB) continuation in the “news for the right reasons” continued after announcing their US business has secured a US$152 million contract from the U.S. Navy to support infrastructure for building Columbia-class (CLB) and Virginia-class (VCS) submarines. The funding allows Austal USA to invest in the United Submarine Alliance (USA) Qualified Opportunity Fund, aimed at expanding the US’s submarine industrial base production capacity. This contract is in addition to a US$450 million agreement with General Dynamics Electric Boat announced a couple of weeks ago which sent their share price Spanish following confirmation they will own the resulting facility outright. This announcement further extends what was already an enormous amount of visibility ASB has on future works across several business fronts and solidifies indications that the US Navy is keen to increase volumes of submarine production with some urgency.
Market darling Spartan Resources (ASX:SPR) has delivered more high grade infill assays from the ever evolving Pepper deposit with significant results including:
20.61m at 10g/t Au including a whopping
13.79m at 46g/t Au, including a whopping 5m @ 111.62g/
18.49m at 19g/t Au,
Time will tell if these assays result in significant resource growth but two holes are outside the existing resource area but we should see a grade rerating when the MRE is next updated.
Meanwhile, near mine drilling at Patient Wolf returned results of:
10m at 5.7g/t Au from 138m
10m at 5.0g/t Au from 63m
3m at 3.3g/t Au from 146m
1.70m @ 31.24g/t gold from 103m
4.75m @ 6.47g/t gold from 102m
Again, it looks like SPR are onto a shallow high grade potential new resource and have 3 rigs turning to sure this up.
Who’s shaking the tin…
AAR Astral Resources (ASX:AAR) - $25m @ 9.5 cents
Nordic Nickel (ASX:NNL) - $1.05m at 6 cents
Felix Gold (ASX:FXG) - $4.8m at 7.5 cents
Firefly Metals (ASX:FFM) - $60m at 95 cents
Pacgold (ASX:PGO) - $4.1m at 9 cents
Godolphin Resources (ASX:GRL) - $1.2m at 1.25 cents
Lachlan Star (ASX:LSA) – $4.5m at 10 cents
Cauldron Energy (ASX:CXU) - $3.5m at 1.8 cents (plus 1:4 option)
Odessa Minerals (ASX:ODE) - $1.1m at $0.002
Magnetic Resources (ASX:MAU) - $10m at $1.25
Buru Energy (ASX:BRU) - $6.7m at 6.2 cents
BPM Minerals (ASX:BPM) - $.675m at 10 cents
Genmin (ASX:GEN) - $10m at 5 cents
Arika Resources (ASX:ARI) - $3m at 2.5 cents
Octava Minerals (ASX:OCT) - $1m at 8.5 cents
Australian Pacific Coal (ASX:AQC) - $20m at 12 cents
Battery Age Minerals (ASX:BM8) – $1m at 10 cents
AusQuest (ASX:AQD) - $2.6m at $0.008 (plus 1:2 option)
A zoom across the globe with…
Chris Evans CEO of Winsome Resources (ASX:WR1)
Is there a worst time zone in the world than North America with a 12 hour time difference? However, this didn’t stop Chris Evan from making time for a chat on his Adina Lithium Project at 8am WST or 8pm his time. We liked Chris from our initial meeting some 6 months ago when he was sub leasing a tiny office in West Perth and were keen to catch up post their scoping study on the project. The level of detail in his scoping was impressive and clearly more like PFS stage which he confirmed, and this was all part of the delivering a Preliminary Economic Assessment (PEA) for the Canadian market. Key findings of the study showed a robust project capable of producing 282kt of 5.5% spod per year at an AISC of US$693/t for 21 years with start-up capex a modest US$259m. Based on a spod price of US$1,375/t it delivered a NPV8 of C$1bn. One of the key differentiators is the modest capex by utilising the Renard diamond process plant and infrastructure (a $1bn development and currently operating at well above nameplate capacity). The option is to acquire this asset for a total consideration of C$52m – at the moment it’s just an option which they can extend to the end of Feb’25 by spending a total of C$6m (already spent C$4m). Then if they proceed C$15m is payable (either cash or shares) at their election. Of the total capital cost some US$67m is required for Renard plant modifications. Digging a bit deeper in the study showed a cracking Phase 1 pit with a strip of 1:1 and a grade of 1.4% for the first 5 yrs enabling project payback of only 1.8yrs. WR1 aim to complete a DFS by end of late CY25/early 26 and depending on market prices then production could start in late CY’27. Financing is always a challenge but potential green loans from Quebec govt etc may come into the mix and/or strategic partners but with $30m in the can this is enough for them to continue with their optimisation studies/DFS etc. We came away suitably impressed – Chris and team are working hard and seem to be very realistic about the project and challenges that lie ahead. He had another two zoom meetings after us which made us feel tired, even though we had just started the day - Time for another coffee.