Chieftain Chatter
Season 5
Episode 160
The Human Headline…
It has been sometime since an audit of the US gold reserves held in Fort Knox Kentucky (see below) has been completed so it came as no surprise that the new head of Government Efficiency or DOGE Elon Musk has decided to personally dop in and conduct a private viewing. Although many government officials have tried to visit Fort Knox it has only been visited on 3 occasions by non-authorised personnel:
1943 President Franklin D Roosevelt
1974 10 Members of Congress
2017 A few Govt. Treasury Officials
Former US Rep for Texas Ron has recently been quoted “I think the gold is there” but who owns the reserves “is a question because there is a lot of borrowing and gimmickry that goes on”
Musk has called for a live walk thorough to prove it actually exists after suggesting the 147.3 million ounces (57% of US Treasury’s holding) held at Fort Knox may have gone walkabout.
Before the Fed went on their annual hiatus, they released their latest minutes which indicated that members see risks to achieving their goals of continuing to dampen inflation while maintaining the equivalent of full employment as being on track. The overriding message still remains the Fed members need to see a continuation of dampening inflation before they recommence any easing of monetary policy. They cited strong consumer demand, trade policy uncertainty (tariffs) and immigration that could force inflation to remain sticky.
Despite some elevated commodity prices global equities are still languishing and in many cases are at all-time lows in relative terms. As highlighted in a bulletin from Resource Capital Funds (RCF) the tailwinds for commodities have never been stronger with the energy transition continuing to gain momentum however, this has failed to flow onto mainstream equities…
While on commodities Morgan Stanley have maintained their upbeat outlook for the uranium price highlighting the recent pullback is a mere blip in a long-term cycle.
ASX uranium stocks have not recovered since China’s AI disruptor DeepSeek announced they could operate at poopteenth of the cost of their competitors.
This weighed on the uranium sector that has seen a raft of deals with the US mega companies such as Google, Meta and Amazon joining forces with the major nuclear reactor companies to sure up long-term supply.
However, MS are suggesting lower costs could be a boon for the AI sector rather than hindrance and this is only supported by the evolution Small Modular Reactors and increased demand for nuclear power by many developed nations ex Australia.
They temper their price expectations somewhat should there be a resolution to the Russia/Ukraine war and Russian sanctions are removed. With the price weakening to around US$70 per pound ASX stocks have not only felt the brunt but are among the most shorted stocks on the ASX for example Boss Energy (ASX:BOE) is the most shorted stock on the ASX at 19%, followed by Paladin Energy (ASX:PDN) 16.4% and Deep Yellow (ASX:DYL) at 10.8%. Despite this MS and many other houses remain positive for 2025 with the Bank of America forecasting a 50% rise to $US120 per pound this year and subsequently to $US135 in 2026 and $US140 in 2027.
Quote of the week….
“If anyone is concerned about climate change or just wants to improve standards of living in WA, then it is a no brainer to legalise development and mining of WA uranium assets, either that or you are an idiot.”
Euroz Uranium Activist Michael Scantlebury.
On the lighter side….
School of hard rocks…
The first major resources IPO of the year on the ASX is shaping up to be Robert Friedland’s Ivanhoe Atlantic which is seeking to raise up to $300m to develop Kom Kweni iron ore project in Guinea.
Kon Kweni Iron Ore Project is a shovel-ready world-class deposit featuring a total resource of 751.9 million tonnes of Direct Ship Ore (DSO), of which 209 million tonnes is high-grade ore @ 67.8% Fe.
With a ratified mining convention and mining permit in place Ivanhoe Atlantic is finalising all approvals to commence construction in 2025. Ivanhoe Atlantic benefits from a 2021 ratified bilateral Implementation Agreement between the governments of Liberia and Guinea to evacuate iron ore mined in Guinea through Liberia. Should the project get up and running they ultimately have a goal of producing 25-30million tonnes per annum at it’s peak production.
Emeco (ASX:EHL) released a solid result following a focus back on their core rental business and essentially maintained their guidance (EBITDA $300m FY2025).
EHL reported EBITDA of $145m with cashflow of $48m largely ahead of expectations indicating strong improvement in operating margins and a return on capital of 16% continues to head towards their 20% target.
Revenue from the rental business was up 13% to $300m with a strong pipeline of new business. The only uncertainty remains the recent impact of adverse weather conditions in WA and Queensland have had on existing and delays in new contracts but that seems like a lame excuse for a softer share price following the robust result.
Our ole favourite sleeper property stock Cedar Wooda Properties (ASX:CWP) delivered an NPAT of $15m for the half and an interim dividend of 10 cents per share.
Importantly, they have gone out on a limb and updated guidance from a 10% increase to “at least a 10% increase” …crazy bastards!
Encouragingly, pre-sales sit at a healthy $642m which is up 20% from the previous corresponding period which should underpin a typically stronger second half result.
Although geographically diversified CWP has been a solid bellwether for the state of the WA property market which should receive a small boost from rate cycle peak. Not quite enough to reach my $5.80 internal target and take home the chocolates following the result but a strong outcome and outlook, nonetheless.
SRG Global (ASX:SRG) as expected delivered a strong result consistent with market expectations with a robust earnings outlook.
Despite an EBITDA of $59m (up 30%) and a dividend of 2.5 cents per share the share price paired back following a stellar run. The balance sheet remains strong with cash of $105m for net cash of $9m.
Looking forward they have an order book of $3.4 billion (pipeline of $8.5 billion) of which in excess of 80% falls into their target category of recurring annuity style earnings which should please the market.
The Diona water acquisition has now been fully integrated giving SRG confidence to upgrade EBITDA guidance in the range of $125m to $128m and EBITA of $91 to $94m.
PYC Therapeutics (ASX:PYC) have tapped shareholders for another $146m via 1 for 4 rights issue at $1.25 which was again supported by loyal Chairman Alan Tribe who dug deep yet again forking out another $35m.In addition to Mr Tribes commitment the issue is further underwritten to the tune of $70m by existing shareholders ensuring the minimum they raise will be $105m.
The raise removes any funding gap for the market and allows them to continue human trials for their child blindness drug RP11 which is entering into phase 3 trials later in the year.
In addition, PYC have an exciting Polycystic Kidney Disease (PKD) drug which has had some outstanding early-stage results in kidney repatriation and their ongoing Autosomal Dominant Optic Atrophy (ADOA) studies.
In a not so unique promotion of your share price gold producer Black Cat Syndicate (ASX:BC8) are offering shareholders an opportunity to purchase a 1 ounce “Cat Coin” at spot price to celebrate their producer status. In a good omen BC8 have cranked up the Pualsen’s Gold Mine which launched Northern Star (ASX:NST) very successfully into producer status and well beyond. However, it’s worth keeping in mind the last company to offer this Calidus Resources (ASX:CAI) and all know what happened to them although a purchase Cai coin at $2,750 in 2022 would have delivered a handsome profit unlike their shares!
Chalice Mines (ASX:CHN) received a nice boost in share price following new metallurgical recovery rates for their 100%-owned Gonneville PGE-Ni-Cu-Co Project in Perth’s backyard. These results provide optionality that could enable both small and large-scale development. The new process flowsheet now focuses on an industry standard concentrator leach magnetic separation process to produce saleable Cu-PGE-Au and Ni-Co-PGE concentrates reducing the need for a hydrometallurgical circuit which could potentially slash $500m from the capex number and reduce opex by potentially 15-20%. The project economics stack up a lot more compellingly under the new proposal and thus significantly enhancing CHN’s corporate appeal.
Recently launched Gorilla Gold (ASX:GG8) released their first round of extensional drill results from Comet Vale (Eastern Goldfields) which they currently own 51% with an option to go to 100%.
The new results outside of the current resource returned:
6m @ 22 g/t Au from 70m
7m @ 8.2 g/t Au from 216m
5m @ 7.5 g/t Au from 155m
2m @ 12.4 g/t Au from 40m
They currently have 4 rigs on site with 3 undertaking growth drilling at the Sovereign Prospect and the other exploring at Lakeview.
In addition, assay results from the maiden program at Vivien are expected in the coming weeks, whilst drilling at Mulwarrie is expected to begin imminently.
Comet Vale historically produced 200,000 ounces at 20g/t and hosts an existing 100,000 ounce 4.8g/t resource.
MLG Oz (ASX:MLG) reported a strong revenue number of $268m for an EBITDA of $29.3m however, cash conversion was below forecast and net debt increased to $77.5m from $56.m due primarily to equipment capex and a delay in receipt of $12m in receivables which has now been banked. Encouragingly, new contract wins have been responsible for the increased fleet required and they concurrently announced a 3 year $75m contract win with Westgold Resources (ASX:WGX) for bulk haulage services. Growth in capital investment is also for the Granny Smith operation; Genesis ramps up and expanded fleet in preparation for elevated demand. Their EBITDA margin of 10.9% is under expectations and the market will not reward them until such time this is addressed. They also indicated the potential to assist second tier producers with logistics for toll treating their ore under a profit share arrangement in the future.
Macmahan Holdings (ASX:MAH) result was broadly in line with expectations delivering an underlying EBITDA of $181.3m for a NPATA of $47.1m and a divvy of 0.55 cents. The mining division delivered EBITDA of $167m and has a pipeline of tender projects of more than $7 billion having recently won $500m of new work. Following the Decmil acquisition the Civil division delivered an EBITDA of $13m with a strong pipeline of new work. From a balance sheet perspective, they delivered $163m in operating net cashflow for free cashflow of $49m and net debt now stands at $273m. Looking forward their order book sits at $4.3billion of work of which $2.2billion is locked in for this year and has seen MAH maintain guidance $2.4 to $2.5 billion of revenue for an underlying EBITA of $160m to $175m.
Who’s shaking the tin…
PYC Therapeutics (ASX:PYC) - $146m at $1.25
Desert Metals (ASX:DM1) - $3.25m at 1.95 cents
E79 Gold Mines (ASX:E79) - $1.8m @ 3.2 cents (plus 1:2 option)
First Graphene (ASX:FGR) - $2.4m at 5 cents
Adriatic Metals (ASX:ADT) - $80m at $3.90
Antillies Gold (ASX:AAU) - $1m at $0.004 (plus 1:2 option)
Rapid Lithium (ASX:RLL) – 1m at $0.004 plus 3:2 option)
AusQuest (ASX:AQD) - $7.5m at 3.6 cents
South Harz Potash (ASX:SPZ) - $500k @ 1 cent
Mamba Exploration (ASX:M24) – $265k at 1.2 cents
DeSoto Resources (ASX:DES) - $4.5m at 6.5 cents
Mayur Resources (ASX:MRL) - $100m at 28 cents
Asian Battery Metals (ASX:A79) - $4m at 4.5 cents
Coppermoly (ASX:COY) - $700k at 1 cent
RIU Explorers Conference and Mali
I spent a couple of days wandering around the catacombs of the Esplanade hotel where the temperature varied by about 30 degrees depending on where you were in the building at the Annual Explorers Conference. It’s always interesting to see who is still plugging their wares – the answer was many, and I quite liked the quick 15 min presentations which meant waffling was at the lower end of the scale. I didn’t come away with too many new ideas... lots of small explorers where it’s easy to see 50koz or more but does that really move the dial? The quality of projects varied considerably and if gold hadn’t gone +$4,500/oz I doubt there would have been as much activity/interest. This got me thinking about some quality projects that due to their location – namely Africa are deeply discounted to their underlying value. I listened into the Perseus Qtrly call with Jeff Quartermaine – another cracking result with genuine free cash added and yet probably trading at a >50% discount to his domestic peers. Jeff was lamenting about what the company had to do get a better rating. On our numbers PRU trades on a FY’25 EV/EBITDA of ~2.5x and this is a proven producer with a long history of beating guidance compared to the A broker note then flashed up on my screen declaring that Barrick had agree to pay the Malian govt US$438m to settle all outstanding deals and once the deal was approved then Loulo – Gounkoto would restart. Barrick were the last mining company to settle the outstanding claims with RSG paying US$160m etc. There is nothing on the Barrick website so far, but I suggest it’s a matter of time and likely to be welcomed by all African miners. A little tiddler that we like – Toubani Resources has halved since the ‘aggressive’ tax collection by the government to give it a market capitalisation of only $30m – less than many of the explorers that were wondering around last week. It has a cracking project with a large oxide gold project capable or producing 160koz per year at an AISC of US$1,004/oz for at least 9 yrs. A gold price of US$2,200/oz was assumed in the DFS to deliver a NPV of US$635m at US$2,600/oz the NPV increases to US$897m. We are hoping the Barrick resolution will give the African miners a bit of a kick because the dearth of good projects coming out of RIU reinforced the thought you gotta go where the geology tells you go!!!