Chieftain Chatter
Season 5
Episode 157
Nothing could be finer….
Than harnessing relations with China…
The Chinese continue to reaffirm their motivation to support their economy with further stimulus this year with expectations rising for further rate cuts and fiscal stimulus as the threats from Trump point towards the trade war escalating. Other than interest rates they have also suggested they will reduce the amount of cash lenders must hold as reserves to free up liquidity and they have indicated they will work with the PBOC to enhance the effectiveness of structural monetary policy tools and strengthen market stabilisation tools to support their property and share markets. Obviously, our fortunes are directly related to the outcome of these measures plus either side of government has the delicate task of maintaining fruitful ties in the wake of intensifying trade wars.
The recent shake up in the AI world just highlights how many of these stocks were priced to perfection and ripe for a correction, so it was no surprise when AI stocks got throttled following Deep Seek’s reveal that their model was considerably more efficient than the competitors. Apparently, Deep Seek works well and had quickly overtaken ChatGPT as the preferred free app in the US and UK until you ask it something controversial e.g. What happened on June 4, 1989, at Tiananmen Square? To which it responds “Sorry, that’s beyond my current scope. Let’s talk about something else.” Along the way energy stocks also wore the brunt of the sell off with nuclear power companies such as Constellation Energy in the US falling 15% and most of its peers’ following suite. This obviously flowed onto the ASX listed uranium stocks across the board falling around 20% which have been a recent beneficiary of deals with AI companies forging significant partnerships with nuclear energy companies to power their future data centre ambitions.
As Trump roles out his executive orders (most of which I agree with to date) the level of uncertainty is heightened for the US and world economy. Should his tariff threats be rolled out as campaigned the potential trade wars that will result will only create further uncertainty and geopolitical tension. As illustrated in a research piece from Canaccord last week we also need to consider the retaliatory measures that will be implemented in response by the various nations affected. His desire to maintain a strong and dominant US dollar while devaluing other currencies and demanding they import tariff loaded goods from the US is potentially farcical. US government spending is expected to be around US$7 trillion with mandatory spending, defence, and interest accounting for US$6 trillion alone, leaving a significant deficit as tax income is forecast to be around US$5 trillion. Obviously, expenditure cuts are the solution but this has the real potential of leading the US into recession. While inflation softened over 2024 it still remains above the Fed’s target level and is proving to be sticky and therefore the prospect of further rate cuts has softened and the potential for a feud between Trump and the Federal Reserve becomes heightened with their conflicting agendas.
As usual for this time of year we are confronted with a dearth of predictions for the year ahead, most of which are far from the mark or sitting on the fence. Consensus forecasts have warned that iron ore prices could collapse 30 per cent this year to about $US70 a tonne when Rio Tinto floods the market with fresh supply, deflating hopes of a sustained rebound for Australia’s key export. The following chart from Euroz highlights how successful (or not) forecasters have been in the past trying to predict the future direction of iron ore prices. They also commented that “currently the iron ore price is at cost curve (95th percentile), where it has in recent years (back to 2019) always found support”.
Anyway, cutting to the chase the general consensus seems to support a bearish outlook on iron ore and positive towards copper, gold, coking coal, and uranium (until last week!)
Quote of the week….
“Every time Zilensky comes to the US he walks away with $100 billion. I think he’s the greatest salesman on earth” DT.
On the lighter side….
School of hard rocks…
2024 market darling Spartan Resources (ASX:SPR) have started the year with a mixed bag of results from first pass drilling as part of their 85,000 metre drill program.
In particular results from extensional drilling at the new Freak discovery failed to deliver returning:
13m at 0.65g/t
2.18m at 0.44g/t
0.54m at 1.02g/t
Whilst extensional drilling at Pepper returned:
9.85m at 3.4g/t
As part of the program 20,000 metres is planned for testing near mine targets while 65,000 metres will be focussed on underground drilling of the existing resources.
Red Hawk Mining (ASX:RHK) was one of the first corporate plays of the year being gobbled up by Fortescue (ASX:FMG) in a deal which values the iron ore junior at $254m.
The $1.05 cash offer will be increased to $1.20 if FMG acquires a relevant interest of 75% in 7 days (should take about 7 minutes!) and not surprisingly has the full blessing of the RHK board.. The Stephen Michael (more a rover than an agile ruckman) lead RHK have the 243m tonnes Blacksmith iron ore project which lies a mere 30km’s from FMG’s Solomon mining hub. The logical transaction solves the obvious barriers of a junior advancing to development of capital and port capacity. Mr Michael commented “Whilst we firmly believe that the Blacksmith Project has the potential to be a major iron ore project, there is significant cost, time and risk associated with developing a project of this scale, particularly in the context of an uncertain broader global economic outlook.
Emerging uranium producer Lotus Resources (ASX:LOT) released a timely update on operations at their Kayelekera Uranium project in Malawi that expects to see first production in the 3rd quarter of this calendar year.
The restart schedule and capex remain on track with a total workforce of 200 plus beavering away on the ground and key plant refurbishment contracts awarded. They subsequently followed up with a further US$38.5m of debt funding with a couple of Soth African banks bringing their total funding package to US$135.5m including their existing cash of US$82m. Keeping in mind the DFS and FEED study highlighted a 10 year production life at 2.4mlbpa at an AISC of US$44.8/lb. They also announced a further offtake deal for 800,000 pounds over 4 years with US power utility PSEG Nuclear and are advancing discussions with various other North American utility companies.
In a buoyant gold market, it’s hard to go past Delta Lithium’s (ASX:DLI) 750,000 ounce DLI high grade resource at Mt Ida with the project being fully permitted. They currently have two rigs turning with recent results confirming the potential for further resource expansion including:
3m @ 18.2 g/t Au from 283m
6m @ 13.4 g/t Au from 91m
1.2m @ 10.1g/t Au from 410m
7m @ 2.9 g/t Au from 17m
2m @ 4.9 g/t Au from 38m
1m @ 7.1 g/t Au from 128m
The first two holes from Delta’s maiden drill program at the Bombay prospect included;
14m @ 1.3g/t Au from 38m
The current drill results will support an updated resource with infill drilling leading into a Feasibility Study and DLI seems to favour a standalone operation following a recent Strategic Review of their development options with the project now placed in a wholly owned subsidiary should a suitor be looking for a clean acquisition.
Encounter Resources (ASX:ENR) have continued to expand their high grade niobium footprint adjacent to WA Resources (ASX:WA1) Luni deposit.
Further shallow drilling at Green Central has confirmed the high grade system remains open returning:
30m @ 2.0% Nb2O5
41m @ 1.8% Nb2O5
17m @ 2.1% Nb2O5
22m @ 2.0% Nb2O
These results were part of broader lower grade intersections of between 50-100 metres running over in excess of 800 metres of strike while better intersections at Green South-West included:
22m @ 3.3% Nb2O5
24m @ 2.0% Nb2O5
For scale comparison ENR included the mineralised footprint of the Boa Vista niobium deposit in Brazil which hosts a resource of 48m tonnes @ 1.01% Nb2O5 and has been supplying up to 10% of the global ferroniobium market for 20 years.
Minerals 260 (ASX:MI6) remains in trading halt following the announcement that they are acquiring the 2.3m ounce Bullabulling gold project from Chinese owned Zijin for $166.5m.
The project was previously mined by Resolute Mining (ASX:RSG) in the 1990’s but shelved due to sub $500 per ounce gold prices back in the day. There is extensive drilling and met data and the acquisition price is equivalent to $74 per ounce for the existing resource with significant exploration potential. Zijin did lodge the results of a prefeasibility study in 2013 resulting in a 7.5mtpa mining and processing operation producing 1.95m ounces of gold over a mine life of 10.5 years. The study confirmed a robust enough project based on a gold price assumption of $A1,622 an ounce. There’s been lots of inflation since this study was completed however a current record A$4,300 per ounce gold price should spit out some healthy margins. Numerous highly prospective exploration targets have been located at depth and along strike, supporting MI6’s plan to grow the Mineral Resource with an 80,000m drilling program, planned to commence as soon as the acquisition is completed.
Cygnus Metals (ASX:CY5) have returned a high grade drill result outside the Corner Bay current mineral resource at their Chibougamau Copper-Gold project in Newfoundland. The intersection of 7.3m @ 4.2% Cu, 0.3g/t Au, 16.6g/t Au from 317.8m included a higher grade zone and demonstrates the potential for resource growth outside the current MRE. The result is associated with a major EM anomaly which is yet to be drilled however with two diamond drill rigs turning we can expect to see further results in the short term. The project has had a lack of drilling and utilisation of modern exploration techniques and CY5 have always been confident of additional discoveries since acquiring the project last year. The Nedlands golfer commented “We are delighted to hit the ground running with an excellent intersection from a previously undrilled area which is only 250m away from the main Corner Bay Deposit”.
Back in early December Firefly Metals (ASX:FFM) released the best results to date we’ve seen form their drilling at the Ming Mine, Green Bay Project, Newfoundland.
Drilling targeted the lower extents of the existing copper dominant 49.9Mt at 2.0% CuEq resource and included:
86.3m @ 3.7% CuEq
76.3m @ 2.9% CuEq
Four rigs are still turning underground and further results should be coming from the 130,000 metre program and will include resource extension, infill drilling and discovery drilling.
On the corporate front they have dual listed on the TSX to harness North American Insto’s and the company is still pursuing a buyer for their Pickle Crow gold project which could add north of $50m to the coffers.
Well, we surely hope there is a Plan B,C & D from the Strike Energy (ASX:STX) board following their rissoling of long serving MD & CEO Stuart Nicholls. It seems logical from a corporate perspective that the ultimate owner of STX has the deepest pockets in the land and maybe the board can orchestrate a competitive process that could see a potential bidding war not dissimilar to what transpired with Warrego Energy (ASX:WGO). In the meantime, former Woodside (ASX:WPL) Exec. and STX NED Jill Hoffman has been appointed as acting CEO and will oversee a strategic review of their current portfolio (that should take about 12 minutes). Anyway, on the quarterly front, gas production from Walyering was below expectations due to a planned 10 day maintenance shutdown. As a result, operating cashflows were around $10m and capex was $25.4m including $12m in South Erregulla & Walyering development costs and $13m exploration. On the funding front credit approval for $162m of committed funding as part of a $217m total financial package has been received which will refinance the existing debt and fund the development of South Erregulla.
Who’s shaking the tin…
Few of these relate to December when we retired hurt for Xmas…
Narryer Metals (ASX:NYM) - $1.5m at 4.5 cents
Comet Ridge (ASX:COI) - $12m at 14 cents
Brightstar Resources (ASX:BTR) - $30m at 2.3 cents
Warriedar Resource (ASX:WA8) - $9.55m at 5 cents
Vulcan Energy (ASX:VUL) - $164m at $5.85
Cyprium Metals (ASX:CYM) - $13.5m at 2.8 cents
Minbos Resources (ASX:MNB) - $6m at 7 cents (plus 2:3 options)
Terra Uranium (ASX:T92) - $750k at 4.5 cents (plus 1:1 option)
Aura Energy (ASX:AEE) – $10m at 14 cents
Sipa Resources (ASX:SRI) - $1.75m at 1.3 cents (plus 1:2 option)
Artemis Resources (ASX:ARV) - $4m at $0.007
Kingston Resources (ASX:KSN) - $8.4m at 7.5 cents
Emperor Energy (ASX:EMP) – $3m at 2.3 cents
Black Canyon (ASX:BCA) – $2.5m at 6 cents
Aura Energy (ASX:AEE) - $9m at 14 cents
Manuka Resources (ASX:MKR) - $2.4m at 3 cents
Clara Resources (ASX:C7A) - $2.1m at $0.006
Antipa Minerals (ASX:AZY) - $15m at 2.5 cents
Volt Resources (ASX:VRC) - $1.226m at $0.0026
Marquee Resources (ASX:MQR) – $829k at 1.2 cents
Global Uranium & Enrichment (ASX:GUE) – $1.8m at 6.2 cents
Nex Metals Exploration (ASX:NME) - $1m at 2.7 cents
Cassius Mining (ASX:CMD) - $1m at 1 cent
Horizon Minerals (ASX:HRZ) - $6.345m at 4.5 cents
Challenger Gold (ASX:CEL) - $6.6m at 4.5 cents
Western Gold Resources (ASX:WGR) - $720k at 4 cents
Xanadu Mines (ASX:XAM) - $1.5m at 5.5 cents
Australasian Metals (ASX:A8G) - $750k at 13 cents
Helix Resources (ASX:HLX) - $500k at $0.005
Energy Transition Minerals (ASX:ETM) - $9m at 6.8 cents
Coppermoly (ASX:COY) - $1.05m at 1 cent
Terrain Minerals (ASX:TMX) - $450k at $0.003
Condor Energy (ASX:CND) – $3m at 2.6 cents
Lodestar Resources (ASX:LSR) - $500k at 1.1 cents (plus 1:2 option)
Arrow Minerals (ASX:AMD) - $7m at 3.8 cents (plus 1:2 free option)
eNoiva Mining (ASX:ENV) – $1.5m at $0.0035
Core Energy (ASX:CR3) – $3.7m at 1.9 cents
Leeuwin Metals (ASX:LM1) – $3.25m at 9.8 cents
Terrain Minerals (ASX:TMX) - $450k at $0.003
Element 25 (ASX:E25) - $2.85m at 32.75 cents
Omega Oil & Gas (ASX:OMA) - $7m @ 31.5 cents
Viridis Mining and Minerals (ASX:VMM) - $4m at 33 cents
Medallion Metals (ASX:MM8) - $5m at 10 cents
Accelerate Resources (ASX:AX8) - $1.35m at 1 cent
Breakthrough Minerals (ASX:BTM) - $500k at 7 cents
Estrella Resources (ASX:ESR) - $3.75m at 3 cents
Quarterly reports…it’s that time again…
The Golden Rivers
As one of the few people in Perth that didn’t go 1) Skiing in Japan 2) Skiing in Europe or 3) Dunsborough/Yallingup I can confirm that West Perth is officially absolutely dead from mid Dec to Mid Jan. I came back all excited with the onset of quarterlies and for the goldies to actually see how many generated real cash when the underlying price was the highest in history at >A$4,300/oz. The old adage of get the good news out early and the bad news never, saw many companies pre report production numbers and cash generation in early Jan – obviously many had been written from the ski slopes or the beach with their brevity.
Highlights were the number of companies (5) reporting triple digit free cash generation and of the mid cap domestic sector both RMS and RRL delivered excellent numbers -$175m and $149m respectively; offshore, WAF and PRU continue to spew cash, whilst NST the largest producer, continues to invest heavily in KCGM expansion so hence not much free cash ATM. GOR bounced back from a poor Sept Q with record production and an average gold price received of $4,093/oz to see free cash almost quadruple from $19.8m to $76.2m quarter on quarter. CMM, EMR and GMD continue to perform and as Swirv would say ‘do what it says on the tin.’ The underperformers were a couple – WGX was an average result with most analysts forecasting a downgrade in guidance after a messy result whilst BGL continue to consume cash whilst it gets it’s development ahead of production into higher grade areas. Average AISC of around A$2,100-2,200/oz show that without the gold spike many of these companies would be in quicksand. It’s a far cry from the late 1990’s when I remember being on a Durban Rudeport Deeps (well named) site trip in South Africa and the gold price was US$280/oz and their costs were like US$350/oz … this was just before the Bank of England decided to hold their quarterly gold auctions to get rid of this terrible liability.. ‘surprisingly’’, the advance notice of sale saw the price collapse by 10% to a low of US$252/oz in July’99. The bank eventually sold 12.7moz of gold at average price of US$275/oz from July’99 to Mar’02.. the good news is they only left a meagre US$31bn on the table.. I don’t feel quite as stupid now.