Chieftain Chatter
Season 4
Episode 156
Deja Vu….
We’ve run out of steam for the year so this will be the last edition for the year but fear not we will be returning with the full subscription model next year with a very attractive introductory offer for existing viewers.??
China was quick to return serve to US export bans on Chinese semiconductors and microchips for AI by imposing export restrictions on the US for critical raw materials including Gallium, Germanium and Antimony.
These are part of a suite of 50 critical minerals listed on the US register as essential for US economic or national security wellbeing and are vulnerable to supply chain disruption.
The sanctions also include a range of other so called critical minerals which I can’t pronounce with Beijing citing national security concerns and also indicating they would be reviewing graphite exports to the US and a ban on the export of dual-use items intended for U.S. military use.
Seems this could be the start of a tit for tat trade battle, although Beijing’s response was significantly swifter than in the past with Trumps impending implementation of tariffs expected immediately following his ordination.
This time around the US actually listed a further 140 companies to its trade blacklist including large domestic chip toolmakers and semiconductor manufacturing plants
The chart below really say’s it all with recycling the only real viable alternative for germanium supply to the US and highlights the importance to continue to diversify supply chains across the full spectrum of commodities.
Fair to say from a big picture perspective markets (ex- commodities) have exceeded expectations in 2024 and growth globally has not stalled to recessionary levels as many forecast.
While Australia has lagged the disinflation cycle of the US a slowing economy would suggest rates in Australia should start to decline in 2025. Against the backdrop of a disastrous Chinese property sector the economy still managed to deliver 4.8% GDP growth and in turn we delivered a healthy 3% growth figure. Geopolitical tensions have been heightened throughout 2024 although it appears we are now starting to see hope of resolutions in certain conflicts as the next wave of “Trade Wars” fast approaches. Looking forward all the same risks apply i.e.. stretched valuations,
Interest rate uncertainty, geopolitical, recession overhang, Trump, China etc etc however according to AMP’s Shane Oliver there is still plenty of reasons to be optimistic including:
Slowing labour markets and hence inflation
Rates should continue on the slide including in Aust.
Low risk of recession, global growth slowing but still in 2.5 range.
If recession occurs it’s likely to be mild
Trump policy positive for US economy
Bottom line he expects positive returns to continue in 2025 bit with increased volatility that will include a correction of up to 15% but lower rates and US tax cuts will underpin corporate America for another 12 months. Surely commodity prices are due for a re-rate Shane?
Quote of the week….
“Absolute corruption” Elon Musk’s response to the rejection of his US$56 billion salary package by a Delaware Judge.
On the lighter side….
School of hard rocks…
Sandfire Resources (ASX:SFR) have outlined their exploration strategy aimed at delivering a 15 year reserve life at both Matsa (Iberian Pyrite Belt in Spain/Portugal) and Motheo (Kalahari Copper Belt, Botswana) within the next three to five years. SFR have aggressively increased their exploration budget by 75% to around $95m in fiscal 2025 with 20 rigs undertaking regional, infill and extensional drilling across the two main project areas. Specifically drilling at Matsa will focus on down plunge extensions for the Magdalena deposit over the next two years with any material resource/reserve upgrades expected towards the end of that campaign. Meanwhile, Motheo will have a greater focus on the region with more than of $20m designated towards unearthing the next deposit. An update to the T3 and A4 reserve and resource estimates is expected in the 2HFY25, with the A1 pre-feasibility study due in FY26. SFR has reiterated its FY2025 production, operating cost, and capex guidance ranges for Motheo and Matsa which should underpin further de-gearing of its balance sheet over the course of 2025.
Former Emperor McGowans foray into the listed renewables space was all over before it began with the former premier pulling the pin from Frontier Energy (ASX:FHE) and citing every excuse but the truth in the process.
McGowan was appointed back in August and issued with a swag of well in the money options but FHE was dealt a nasty blow when they were not issued with power capacity credits. The company is now resetting for another strike at getting the Waroona Renewable Energy Project funded and have announced an encouraging updated DFS including:
7% reduction in capex to $283m
6 year payback generating $57mEBITDA in first 10 years
Post tax IRR 15.4% and NPV $244m
The lower capital cost reflects a lower cost of some significant items including solar panels and batteries.
The big Aussie BHP (ASX:BHP) is now in a position to relaunch its bid for Anglo American (AAL:LSE) now that the 6 month standstill has lapsed. BHP has been clear they are actively looking to increase their copper exposure after publicly stating they expect a 10m tonne shortfall in 10 years. Although BHP have flimsily stated they have moved on from those opportunities there is now nothing in their way to reigniting the corporate activity. Back in April BHP proposed a A$39m scrip deal for Anglo which was given the middle finger and then upped the ante but again failed so peeled off into the bush for 6 months. In the meantime, BHP committed at least $11 billion to copper-focused projects, including replacing a $5 billion concentrator at the Escondida mine in Chile and a joint bid with Lundin Mining (LUN:TSX) for TSX listed copper explorer Filo Corp (FIL:TSX)
“The commodity is so attractive that we’d like to have more opportunities for growth,” BHP CEO Mike Henry told the Financial Times this month. Since BHP’s formal approach Anglo has completed the $3.9 billion sale of their Australian coal assets plus raised $530m in a new share issue with their share price increasing by 18% in this period while BHP’s has declined about 11%
No doubt the highlight of the week was Northern Star Resources (ASX:NST) all paper bid for De Grey Mining (ASX:DEG) via a SID (Scheme Implementation Deed) whereby NST offered DEG shareholders 0.119 NST shares for every DEG share.
The deal at time of launch represented a 37% premium to DEG’s share price valuing them at around $2.08 and has the unanimous support of the DEG board although no mention of 17.3% shareholder Gold Road Resources (ASX:GOR) intentions.
The acquisition is expected to add 530,000 ounces of annual production in the first ten years, with a pathway to 700,000 ounces pa through the development of regional production Hubs. This contribution will elevate NST to an astonishing annual production rate of 2.5m ounces by FY 2028. The acquisition of DEG would also boost NST’s group reserves and resources by 29% and 22% to 27moz and 75moz, respectively and barring a competing party securing GOR’s stake it would appear a logical transaction for DEG shareholders.
GenusPlus (ASX:GNP) have continued on their merry acquisition path acquiring 100% south west tree lopper Geographe Tree Services Pty Ltd for consideration of $7m cash.
Geographe Tree Services provides vegetation management services (tree lopping!) under a multi-year contract with a Tier 1 utility provider (2 guess’s) which aligns with GNP’s electricity network maintenance capabilities.
The entity turns over about 13m bux and will be immediately earnings accretive for GNP. The acquisition is another bolt-on, complementary acquisition by GNP which will add to revenue streams and allow for further integration into the broader electricity network maintenance market, which we view as aligning with GNP strategy, where Genus remains uniquely placed to benefit from the electrification of the nation.
Lithium hopeful Winsome Resources (ASX:WR1) have successfully renegotiated the terms of their option to acquire the Renard Production Facility, giving them greater flexibility to manage their valuable $30m cash position
Although the acquisition price remains unchanged at C$52m with the C42m option fee extended by a couple of months.
Summary of changes:
This gives WR1 the flexibility to explore potential opportunities with strategic partners which are well underway.
Their nearby Adina Lithium Project hosts a resource of 78m tonnes at 1.15% and has a compelling scoping study highlighting restart capex of about A$400m for a 20 plus year life and low 1:1 strip ratio.
Spartan Resources (ASX:SPR) didn’t waste anytime leveraging off their recent good news and promptly heading out to the market for another $200m+ at $1.32.The use of funds are listed as:
Exploration Decline & Underground Mine Development;
Underground Drilling, Surface Drilling & General Exploration;
Early Re-start Works, Site Infrastructure, Progressing Operational Readiness & Technical studies;
Buy-back 20% of the 2.5% Tembo/Taurus Royalty; and
Corporate costs & general working capital.
The previous day SPR increased the estimated resource to 2.37m oz’s at 8.52g/t Au with addition of contained ounces at Pepper from 438,000 oz’s to 873,000 oz’s at 10.3g/t Au. As part of this upgrade 80% is now in the indicated category at Never Never and Pepper and importantly the overall ounces per vertical metre has increased from 2,284oz’s to 2,735ozs.
Figure 1: Updated December 2024 Dalgaranga MRE.
Predictive Discovery (ASX:PDI) have kept on pumping out resource definition drilling at its 800W deposit at the Bankan Gold Project with more healthy results including:
5m at 7.98g/t Au from 20m
5m at 5.78g/t Au from 33m
4m at 4.90g/t Au from 43m
9m at 6.17g/t au from 42m
PDI is currently modelling the new results which will be incorporated into a maiden resource for 800W to be released early next year. PDI continues to execute on its post-PFS objective to continue to add to the existing 5.4m ounce resource and 12 year mine life producing 269,000 ounces per annum. The DFS is underway and due late next year while permitting is a key milestone in the next coupla months.
Figure 1: Map of reported results at the 800W prospect. Source: PDI
Strike Energy (ASX:STX) announced they have spudded the Walyering East-1 exploration well in the Perth Basin in what will be a short turnaround for the targeted 20-30PJ well that lies within 5km’s of their production facility.
If successful, this could potentially add upwards of 30% to reserves which would be a significant life of field extension. STX recently received credit approval from Macquarie for the first $60m tranche of funding for their South Erregulla peaking gas power station.
The package for Macquarie has been increased from $153m to $217m and Strike’s Chief Executive Officer & Managing Director Stuart Nicholls said: “This initial financing provides the funding to commence the procurement for the South Erregulla fully integrated peaking gas power station, with the increase to the development funding package supporting the overall execution of Strike’s Perth Basin Gas Acceleration Strategy.
Who’s shaking the tin…
Iondrive (ASX:ION) – $6m at 1.4 cents
Babalus Resources (ASX:BUS) - $900k at 11 cents
Alicanto Minerals (ASX:AQI) – $3m at 3 cents
Jade Gas (ASX:JGH) - $3.3m at 3.3 cents
Spartan Resources (ASX:SPR) - $220m at $1.32
Alderan Resources (ASX:AL9) - $2m at 2.5 cents (plus 1:2 option)
Titan Minerals (ASX:TTM) - $20m at 44 cents
Iris Metals (ASX:IR1) – $8m at 30 cents
St George Mining (ASX:SGQ) - $3m at 2 cents (plus 1:2 option)
29 Metals (ASX:29M) – $180m at 27 cents
Blaze Minerals (ASX:BLZ) – $1.253m at $0.004 (plus 1:2 option)
Trigg Minerals Limited (ASX:TMG) - $3m at 3.3 cents
Larvotto Resources (ASX:LRV) - $20m at 52 cents
Aurum Resources (ASX:AUE) - $10m at 35 cents
James Bay Minerals (ASX:JBY) - $ $5m at 65 cents
Castile Resources (ASX:CST) - $3.5m at 6.5 cents
Top End Energy (ASX:TEE) - $6m at 10 cents
Brightstar Resources (ASX:BTR) - $25m at 2.3 cents
Silver Mines (ASX:SVL) - $20m @ 9.2cents
A meeting with…
Mark Lynch- Staunton and Evan Cranston, CDO and Executive Chairman of Benz Mining Ltd (ASX:BNZ)
Is there a worse place in Perth to try and get a park than Hay Street Subiaco ? After doing multiple laps I finally convinced my Irish colleague (not that hard) to grab a double whopper at 10am so we could get a park at Hungry Jacks. We eventually made it to the premises next door. BNZ has been on a tear since early November when it announced it had acquired the Glenburgh project from the mighty Spartan Resources (SPR) in cash and scrip up to a value of $15.6m. Clearly, with SPR’s success at Dalgaranga this was non-core and getting zero value so the deal structure will see SPR emerge with a 15.4% interest in BNZ. The Glenburgh project has been around for awhile and if memory serves me correctly, it use to boast a 1moz resource when Gasgoyne Resources Ltd (GGY) ran this project. During their well-documented issues with grade reconciliation etc GGY re modelled the Dalgaranga project resource with a significant hair cut to both grade and tonnage. They then applied the same modelling technique to Glenburgh – essentially halving its ounces to the current quoted resource of 510koz @ 1 g/t Au, despite it being a very different geological system. In addition, BNZ believe the true potential of the project was never tested with high grade mineralisation open in many directions and the current resource is to an average depth of approximately ~100m. BNX has identified 6 high priority targets with intersections such as 8m @ 11.6 g/t Au, 28m @ 5 g/t Au and 24m @ 9.1 g/t Au etc. Words such as Tropicana and Never Never style were bandied around but regardless, it certainly looks an exciting exploration story. Drilling will begin after the Xmas break and it’s not hard to see with some success then the resource can go back to its previous estimate. BNZ also has the Eastmain project in Quebec with a current resource of 1moz @ 6.1 g/t Au including 384koz @ 9 g/t Au. We came away suitably impressed but always struggle when the stock has doubled since a placement at 22c a few weeks ago – maybe during the quiet period it comes back and presents an opportunity.