chieftain Chatter
Season 5
Episode 161
Trumpcession…
Another new Trumpism emerges as he enacts his tariff threats across the globe that has got consumers spooked and ignited the possibility of a (global) US economic slowdown. Those who monitor the Atlanta Feds GDP forecast have seen it plummet to an annualised rate of minus 2.8% from positive 4% a month ago for the current quarter. Recent negative economic and consumer confidence data highlighted recently by the US$153 billion trade deficit in January driven by companies loading up on imports ahead of tariffs. The measure is known to be not only volatile but one of the more accurate GDP forecasters historically. Many would suggest Trumps threat to rid the public service excesses was necessary to assist bringing their bulging debt levels back into line. Furthermore, uncertainty has now been created by his apparent closeness to Russia and distancing from Europe. Should these GDP predictions come to pass the Fed may well be reconsidering their “on hold” bias towards interest rates in the short term in order to avert a Trumpcession.
China’s official manufacturing purchasing managers’ index unexpectedly returned to a level that indicates expansion, a sign of resilience in an economy hit by US tariffs and weak domestic demand.
At the National People’s Congress in Beijing last week Pres. Pong announced China is still targeting 5% GDP growth and aims to achieve this via setting their budget deficit target at a record 5.66 trillion yuan which equates to around 4% of GDP in order to counter the effects of rising US tariffs. They subsequently announced the issue of 1.3 trillion yuan of ultra-long special sovereign bonds and increased spending on their previously announced consumer goods trade-in program to boost consumer spending. Time will tell if such action is significant enough to boost their ailing economy and revitalise their property market.
Not to be outdone Europe’s premier economy, Germany, announced significant spending plans with their incoming Chancellor Fred Merz (or something like that) indicating Germany would do "whatever it takes" to defend itself and amend the constitution to exempt defense and security from limits on government spending. Germany has had a long term “fiscal brake” on defense spending which Fred intends to unwind plus issue 500 billion Euro Infrastructure Fund to be spent on transportation, energy, and housing, in a dramatic shift that upends Germany’s controls on government borrowing.
Following Trumps recent record long rant, he did suggest 25% tariffs on copper imports which sent the Cu price rocketing back into US$4.80 per pound territory and triggered a worldwide hunt for copper that can be shipped to the US before any tariffs are imposed. According to Canaccord’s Marin Roberge in order for copper to go through and sustain 5 bux a pound we need physical demand in the form of a rebound in orders for US capital goods and a rebound in copper production which would signal global growth reacceleration. Not there yet but will occur sometime in 2025 in his view.
Finally, Chinese EV manufacturer BYD raised a staggering HK$43.5 billion (US$5.6 billion) last week with the shares being offered an 8% discount or HK$335.20 each. BYD shares have been under some duress in recent years despite selling 318,000 EV’s and hybrids last month alone which is a 161% surge on the same month last year and international sales representing a growing 20% of this volume. The funds raised will be used to expand their overseas operations and R & D as they seek to localise production around the globe in order to avert tariffs on Chinese produced vehicles.
Quote of the week….
“If the blunt and chaotic implementation of Trump's spending and trade policies hit growth harder than imagined, the Federal Reserve may cut rates in the second quarter”
US Economist Phil Suttle.
On the lighter side….
School of hard rocks…
The debate over the re-opening of First Quantum’s (FM.TO) Cobre Panama Copper operation has taken quite a few twists and turns in recent times following its forced closure in November 2023 when the court rendered their mine contract with the government unconstitutional. First Quantum’s Panama troubles stem from its efforts to extend its operating (mining) contract for the massive mine after negotiating a 40-year extension under the previous government, which included a minimum annual payment of $375 million. Calls from in excess of 130 companies who supplied the mine sent letters to the Panama President requesting “prompt action” to re-open the mine which is essential to their economic well-being and reportedly accounted for 5% of GDP and 75% of exports. The President subsequently visited the site which raised hope that the $10 billion operation maybe re-started however there still remains strong environmental and political opposition and the President is yet to meet with First Quantum executives and indicating he won’t negotiate with First Quantum until it drops arbitration proceedings against Panama which has subsequently been delayed 6 months until February 2026
Fenix Resources (ASX:FEX) are set to become the next Pilbara iron producer following the lodging of a bid for Mark Creasy’s CZR Resources (ASX:CZR) which has the full support of the mining legend. Under the offer CZR shareholders will receive 0.85 FEX shares for every CZR share valuing them at around 26 cents with the offer being increased to 0.98 FEX (or 30 cents) should FEX receive acceptances of 75% from CZR shareholders on or before 7:00pm (AEDT) on 21 March 2025. With Creasy’s 44% holding already in the bag it seems a mere formality in the absence of a higher offer. The deal adds much needed scale to FEX’s potential production profile with the Robe Mesa project containing a resource of 89.6m tonnes @ 55.4% Fe for reserves of 33.4m tonnes at 55% and is directly adjacent to Rio Tinto’s (ASX:RIO) Robe Valley operations.
Austin Engineering (ASX:ANG) reported revenue of $170m which was up 18.5% for a first half EBITDA of $25.3m and an underlying NPAT of $17.4m and dividend of 0.6 cents per share. The increased sales activity has come at a cost with a number of one-off expenses related to FX, systems, new product costs, reworks etc which totalled just under $7m. The forward order book sits at $224m and ANG has purchased $20m of hardened steel to fulfill these orders and thus net cash has shifted from $9.6m to debt of $10.5m. The working capital issue and cost of capital should be offset via lower input costs and guidance was reiterated with revenue of about $350m for EBIT of $50m forecast.
WA apartment developer Finbar Group (ASX:FRI) posted another strong half delivering $9.4m in profit, however, no dividend was declared but intend to pay a full year divvy once $120m of settlements hits the coffers in the second half.
Apart from their existing two projects under development they have an additional 3 with development approval and are on the hunt for additional sites. FRI announced their intention to liquidate their properties in Karratha which could yield up to $45m. Overall a solid result and outlook but some disappointment on the deferral of the dividend as they plan for future growth and like many others the share price paired off.
WIA Gold (ASX:WIA) reported further infill and extensional results from their Kokoseb gold project in Namibia and in the process unearthed new higher grade footwall mineralisation including:
27m at 6.79 g/t Au from 207m
The central high-grade shoot has been extended across 500 metres of open strike including:
14.8m at 4.43 g/t Au from 428.9m,
11.2m at 2.26 g/t Au from 346.6m
10.6m at 3.18 g/t Au from 365.3m,
Also, infill results in the Central Zone raised resource confidence returning:
37m at 1.38 g/t Au from 27m
47m at 1.01 g/t Au from 38m
26m at 1.32 g/t Au from 71m
35m at 1.09 g/t Au from 79m
41m at 1.39 g/t Au from 109m
6 rigs continue to hammer away with the aim of increasing the higher grade inferred resource of 1.53m ounces @ 1.4g/t (0.8g/t cut off)
New kid on the block Gorilla Gold (ASX:GG8) have continued to deliver the goods since taking the reins recording further high-grade hits at their Lakeview gold project north of Kal.
Mineralisation has been extended over 400m and remains open with 3 nice hits of:
19m @ 18.1 g/t Au from 80m
11m @ 24.8 g/t Au from 145m
1m @ 10.9 g/t Au from 105m
They will continue drilling with an RC rig here while drilling is ongoing at both Sovereign and Mulwarrie and a resource estimate is underway at Vivein.
NRW Holdings (ASX:NWH) copped a flogging following the delay in their half yearly results due to their exposure to the One Steel collapse in Whyalla from which they are owed $113m. NWH has various levels of collateral which includes first ranking security over certain Whyalla Port Assets and hence there has been no impairment charge as yet ,however it has been moved to the non-current column in the balance sheet. Regardless, NWH delivered revenue of $1.65b which was up 15.8% on last year and an EBITA of $96.9m for a NPAT of $58.4m and a 7-cent dividend. Cash sits at a healthy $284m while net debt has increased to $159m following the capital spend, dividends and HSE purchase for $85m. NWH has a robust orderbook of $6.8b with a pipeline of $15b and $6.2b in active tenders and this has seen guidance maintained at $205m to $215m of EBITDA.
In a switch in focus while the lithium markets lays dormant Patriot Battery Metals (ASX:PMT) have announced a cesium discovery within the Vega zone of their high-grade lithium project with the long name.
A quick google of WTF is cesium and what is it used for revealed that it goes by the symbol Cs and has a number of industrial applications including the production of very accurate atomic clocks, GPS, aircraft guidance, and telecommunication systems. It’s also used to support the completion of oil and gas wells at high pressure and is worth a similar amount to an ounce of gold. Either way PMT have come with some intersections including:
10.4 m at 1.30% Cs2O
10.6 m at >1.00% Cs2O
7.1 m at >1.00% Cs2O
Now, I have no idea if these widths and grades are commercial, but it seems they have an area of 600m by 400m which remains open and warrants further investigation.
Who’s shaking the tin…
Anyone for a free option…
OzAurum Resources (ASX:OZM) - $1.75m at 6 cents
Panther Metals (ASX:PNT) - $685k at 1.3 cents (plus 1:2 option)
Kalina Power (ASX:KPO) - $1.5m at $0.008 (plus 1:2 option)
Castle Minerals (ASX:CDT) - $3m at 6 cents (plus 1:2 option)
Moab Minerals (ASX:MOM) - $500k at $0.003 (plus 1:1 option)
Flynn Gold (ASX:FG1) - $ 2.6m at 2 cents (plus 1:2 option)
Environmental Clean Technologies (ASX:ECT) - $475k at $0.001
Solis Minerals (ASX:SLM) - $4.5m at 8.5 cents (plus 1:2 option)
Nimy Resources (ASX:NIM) - $1.15m at 5.5 cents (plus 1:2 option)
Hillgrove Resources (ASX:HGO) - $13m at 3.5 cents
Black Rock Mining (ASX:BKT) - $5m at 2.3 cents
Euro Manganese (ASX:EMN) - $6.5m at 3.9 cents
West Cobar Metals (ASX:WC1) – $450k at 1.6 cents
Antillies Gold (ASX:AAU) - $1m at $0.004 (plus 1:2 option)
New World Resources (ASX:NWC) - $14m at 2¢
Petratherm Ltd (ASX:PTR) - $8.1m at 22c
New Age Exploration (ASX:NAE) - $1.6m at $0.004
Star Minerals (ASX:SMS) - $3m at 2.5 cents
A retirement beer with…
Kim ‘Lovey’ Massey
During the week I was fortunate enough to be invited to have a quiet beverage and celebrate the retirement of Kim Massey. I first met Kim probably about 15 yrs ago (I was 20...) when he was a company secretary at Regis Resources (RRL) before being promoted to CFO in due course. I had an immediate affinity with Kim as a Kangaroo supporter... we were still basking in the 1999 premiership and were confident the new breed of Ziebell, Wells, Petrie etc would see us win another one in the not too distant future… oh how wrong we were... later on, the txt messages would descend into ‘how the f..k did we pay Jarod Polek $5m for 5yr… he can’t even get a kick’ . I digress... Kim saw a man in need of some help in modelling up the company – looks pretty simple really, he stated “Production x Gold price minus Costs minus D&A to give you EBIT, minus tax will give you NPAT. We don’t mind paying tax because it means we can pay fully franked dividend and the big Italian likes dividends’’. I was a bit confused because I was used to gold companies reporting production and costs with absolutely no correlation to profits and cashflow. This was in the old days of the C1 operating cost which bore no resemblance to the profitability of the business. I remember one company (any guesses Ral?) that had a C1 cost of $700/oz yet reported a loss at a gold price of $1,600/oz – did someone say social mining? Kim was true to his word with the RRL accounts the cleanest in the sector and making a very average analyst look good. He finished up at RRL in 2019 after Clarkey et al got control of Capricorn Metals and Kim came over to be CEO. He is very much the quiet achiever with no ego – you won’t see him in the social pages or on the conference circuit – much preferring to coach and watch his boys play for the mighty Wembley Cats on the weekend. Share prices are the ultimate gauge of success and when Kim joined CMM it was about 10c or 50c after a 1 for 5... since then, its hit $8/sh or ‘only’ a 16 bagger. I did learn that Kim was the ultimate smoke bomber from work functions, and he genuinely doesn’t like public speaking (but made an excellent final one), he also mentored many a young finance graduate and when they start to choke up talking about him speaks volumes about the man. All the best in retirement Lovey and I agree with you, Jack Darling will be an excellent addition for the mighty Kangas!!!