Chieftain Chatter
Season 4
Episode 126
Sell in May and go away.....
It’s amazing how many years we have a strong market in April and give it all back in May. Seasonally, April has averaged 2.5% returns over the last 30 years while May is the worst performing month.
Well, it hasn’t necessarily been the case this April with the market off around 2% and history suggesting the decline will gain further momentum in May. To add to this argument there are currently significant geopolitical tensions which could erupt further and create short term unrest in markets.
However, the recent tit for tat (with fair warning) responses from Iran/Israel would thankfully suggest neither side wants to go too far down this path.
These bloody politicians just can’t help themselves in coming up with means to disincentivise investment. Marbles latest scheme is looking at taxing unrealised capital gains within superannuation.
With an ageing society that has come and will continue to become more reliant of social welfare they intend to kick retirees where it hurts. Of course, this will just be the start of it once they get started on super and realise how much they can steal off Australians, then they’ll roll it out across the board. If you ultimately realise a capital loss, will they refund tax paid on previous unrealised gains? Shit no, although the tax loss can be carried forward.
No matter your political persuasion these pricks eventually fall on their sword through sheer arrogance.
The US GDP came in at an annual rate of 1.6% which was well below expectations of 2.4% and belies the raft of recent positive economic data and supports the rate cut theory.
However, Personal Consumption Expenditure (PCE) rose 0.3% in the March quarter which was largely in line with forecasts but worryingly services inflation remains sticky therefore that ugly word stagflation raises its head again with prices rising and growth declining.
As JPMorgan CEI Jamie Dimon quoted
“ I’m a little worried [that] if Russia wins the war, you’d kind of see the world enter a little bit of chaos as people realign alliances and economic relationships….When I look at the range of possible outcomes, you can have that soft landing….(but)….I’m a little more worried it may not be so soft and inflation may not quite go away as people expect. I’m not talking about this year — I’m talking about 2025 or 2026”…JPMorgan CEI Jamie Dimon on the press circuit again.
Earnings in the US continue to surprise on the upside as evidenced by results from the likes of General Motors, GE Aerospace, Visa, Netflix, Spotify and while Tesla reported a sharp decline in revenue and profit their shares surged 11% (although down 40% this year) after comments that they were bringing forward the release of new more affordable models (no air cond. or electric windows) . Expectations of Tesla’s result had already been dampened with greater competition, falling demand and a focus on hybrids so, the share price recovery was not a surprise. It’s worth noting the International Energy Agency nonetheless believes one in every five cars sold globally in 2024 will be an EV, half of all cars in China and a quarter in Europe.
There is a general perception that the outperformance of earnings to date maybe an indication that earnings expectations were set to low.
Quote of the week...
“Being rich is having money, being wealthy is having time” right you are Margaret Bonnano.
On the lighter side….
School of hard rocks…
Chalice Mines (ASX:CHN) had a busy week having announced an upgraded higher grade resource for its Gonneville project with:
59m tonnes @ 2.0g/t 3E1, 0.20% Ni, 0.21% Cu, 0.019% Co
The resource will be the basis of a new high grade scoping study for a potential mine start up with work continuing on the PFS in parallel which is planned to be completed by mid-next year.
As an aside CHN has emerged with a 6.1% in Encounter Resources (ASX:ENR) ahead of ENR’s forthcoming drill program in the West Arunta as they look to emulate “rock star” neighbour WA Resources (ASX:WA1) high grade niobium discovery.
It’s that time again and rather than sift through all the quarterlies we thought we’d just pick out the best of them thus far and Perseus Mining (ASX:PRU) is the standout yet again.
PRU produced 127,000 ounces in the March quarter at an AISC of under $1,700 per ounce for a net increase in cash/bullion of $92.5m to $1.082 billion.
2024 guidance remains unchanged at 226,000 to 254,000 ounces at a range of $1,820 to $2,065 AISC.
PRU has consistently outperformed expectations and prudently acquired Orecorp (ASX:ORR) for their next development opportunity.
CSA mine copper producer Metals Acquisition Corp (ASX:MAC) announced an updated reserve and resource number as well as providing 3 year production guidance.
The Mick McMullen lead MAC highlighted with:
67% increase in mine life till the end of 2034 with a 5 year extension
Ore reserves increase of 57% contained copper to 14.9mt @ 3.32% Cu and 12.9g/t Ag
Resources increase of 39% contained copper to 20.2mt @ 4.86% Cu and 18g/t Ag
The ramp up to 50,000 tonnes per annum should be well received by the market.
Base Resources (ASX:BSE) have received a knockout blow from US-based uranium and critical minerals producer Energy Fuels to acquire 100% of BSE via Scheme of Arrangement:
0.0260 Energy Fuels shares plus an unfranked special dividend of A$0.065 for each BSE share held,
This equates to a total consideration of approximately A$0.302 per share representing a significant (188%) premium to Base Resources’ last closing price.
Unsurprisingly, the Base Resources’ Board unanimously recommends shareholders vote in favour of the deal and intend to vote all those shares in favour.
Likewise, voting intention statements from each of BSE’s two major shareholders (respectively owning 26.5% and 24.8% of the shares on issue) received confirmation that they each also intend to vote in favour of the Scheme.
It’s been a long and not necessarily a pleasant ride for BSE shareholders so this outcome will go off like a bucket of prawns in the sun.
Someone in our office keeps banging on about Lunnon Metals (ASX:LM8) and has bought some PA and says there going to the moon.
Cause I can’t understand his “Northern Irish” accent I just play along and nod plus the odd yawn when he mentions the word “nickel.”
So, I was quite surprised when they announced some encouraging gold results from their Kambalda Nickel Project.
New Results from the Hustler, Lady Herial and Herial North prospects included:
4.3m at 8.7g/t Au from 90m (HP)
3.6m at 5.5g/t Au from 249m (HP
1.8m at 20.0g/t Au from 14m (LHP)
2.0m at 3.6g/ Au from 109m (HNP)
LM8 will progress exploration drilling at 3 other prospects as soon as possible.
Preliminary gold exploration success at the Kambalda Nickel Project highlights the prospectivity of the project for both gold and nickel. If an economic discovery of gold was made within Lunnon’s existing Mining Licenses, it could be rapidly developed within the existing Licenses to provide feed to one of the nearby gold plants.
Minres (ASX:MIN ) controlled Delta Lithium (ASX:DLI) announced an exciting new discovery at their Yinnetharra Lithium Project named the Jameson prospect which lies 20km west of the Malinda resource area within the project area in the Gascoyne.
The maiden program at Jameson has returned a whopping:
71m @ 1.2% Li2O from 27m
And includes a high grade zone of 45m @ 1.8% Li2O with drilling ongoing and more results pending.
Does anyone give a shit anymore? The share price hardly moved and DLI should consider singing from the rafters about their high grade Mt Ida gold project in the current environment.
Boss Energy (ASX:BOE) has successfully produced the first drum of uranium at its Honeymoon Uranium Project in South Australia, marking a significant achievement in the project’s commissioning process. The company now sees Honeymoon ramping up to an annual production rate of 2.45 million pounds of U3O8.
A nice financial backstop is BOE’s strategic inventory of uranium which they purchased at US$30.15/lb back in March 2021 and is now worth $110 million with the current spot price of uranium at US$88/lb.
BOE has stated that the new processing technology at Honeymoon is exceeding feasibility study forecasts, indicating successful operational performance and supporting future growth projections.
With the initial success, BOE plans to increase the production rate and mine life at Honeymoon.
Crowd favourite Capricorn Metals (ASX:CMM) has increased the reserve at their secondary Mt Gibson Gold Project (MGGP) by 26% to 61.6mt @ 0.9g/t for 1.83m ounces giving them combined reserves of more than 3m ounces.
At the same time, they have reconfirmed reaffirmed construction capex guidance of A$260m but lifted the pre-production mining cost by A$7m to A$86m.
The updated MGGP ORE remains shallow with an average depth of 160 metres, a maximum depth of 260 metres and operating strip ratio of 4.2.
Meanwhile, permitting underway with a response expected from the department by 2034 (sarcasm is the lowest form of humour), however the timeline for development has been stretched out till around mid-2025.
Honourable mention to 88 Energy (ASX:88E) who are well and truly doing their bit for liquidity (well volume I should say) with a lazy 25 odd billion shares on issue plus various warrants, options and performance rights and they are going back to the well (excuse the pun) again.
Why not issue another 2.6 billion shares between friends and not uncommon for this baby to trade a billion shares in a trading session!
A fairly extensive “use of funds” list including:
Planning and development activities at Project Phoenix, including post flow test studies.
Exploration and project study expenditures across the company’s portfolio of exploration opportunities.
Lease costs and additional working capital.
3 stage farm in to earn up to 45% in PEL 93 in the Owambo Basin in Namibia.
And so on…
Who’s shaking the tin…
Midas Minerals (ASX:MM1) - $1.13m at 7 cents
Emyria (ASX:EMD) - $2.3m at 5 cents (plus 1:2 option)
Lightning Minerals (ASX:L1M) - $1.5m at 7 cents (plus 1:2 option)
Waratah Minerals (ASX:WTM) - $3m at 10 cents
Godolphin Resources (ASX:GRL) - $1.1m at 3 cents (plus 1:1 option)
88 Energy Limited (ASX:88E) - $8m at $0.003
Santana Minerals (ASX:SMI) - $30.8m at $1.15
Toubani Resources (ASX:TRE) - $3.5m at 11.5 cents
A meeting with.....
Rob Watkins, MD of Carnaby Resources Ltd (ASX:CNB)
With the copper price hitting a multi-year high of >US$4.50/lb we thought it was worth revisiting a few of the copper juniors. Carnaby Resources (ASX:CNB) shot to fame in Dec’21 with a copper discovery at ‘Nil Desperandum’ located some 70km from Mt Isa. The discovery hole returned 41m @ 4.1% Cu and 0.5 g/t Au including 9m @ 10.3% Cu and 1.2 g/t Au which put a rocket under the stock, almost ‘ten bagging’ from 25c to a peak of $2.00/sh in a few months. Unfortunately, this breccia pipe was relatively constrained, but it also made another two other copper discoveries which culminated in a total resource of 21.8mt @ 1.3 % Cu and 0.2 g/t Au or 1.4 % Cu eq for 315kt of Cu eq. The mgt team were sensible enough to raise a bit of loot along the way at good prices – $20m @ $1.30/sh in Mar Q’22 and another $20m @ $1.22 in April ’23 and it still has ~$19m left. In recent times it did a deal with HMX to acquire some ground around its deposits which means it will be able to push the potential open pits deeper. CNB is in the process of completing a scoping study due in May - looking at both stand alone and toll treatment options. With Mt Isa and an underutilised mill up the road this would appear to be the logical solution and it’s not hard to envisage a scenario of say maybe 1 - 1.5mt of ore at a grade of 1.5-1.7% Cu pa to produce ~16-22kt of Cu pa for >5yrs is possible. The stock has done the classic ‘Lasonde curve’.. i.e. back to two year lows as it completes the study plus the rumours that Mt Isa will be sold/shut and hence no processing option .. but as Mark Twain stated.. ‘reports of my death have been greatly exaggerated’ . Either way, we think an EV of $80m for a company with a Cu inventory of >300kt and a potential low capital development looks pretty interesting and backed by a credible team that actually owns shares in the company they work at .. heaven forbid.. a bit of old school alignment which we like. One to put on the radar.