Chieftain Chatter
Season 5
Episode 164
The beat goes on…
According to Federal Reserve Chairman Jerome Powell we are back in “transitory inflation “territory as a result of Trumps barrage of executive orders and he wasn’t overly concerned about tariff’s and it’s merely a bump in the road. Although, Powell did comment that “I do think with the arrival of tariff inflation, further progress (on rates) maybe delayed”. The last time he referred to inflation as transitory it rocketed, and the Fed embarked on a record interest rate rise cycle.
Surprisingly markets have continued to recover and power ahead on the back of this news although volatility still remains high. One gets the feeling that the Fed doesn’t know which way to turn and is as confused as the rest of us as to the full tariff impact on rates, but I think it’s safe to assume the path for rate cuts has been slowed somewhat. The uncertainty continues to point investors down the gold path until we such as time as we get some clarity and certainty for a way forward for interest rates and the economy.
Another joining the copper price chorus is former Trafigura metals trader Kostas Bintas who still believes there is still plenty of upside and perhaps another 30% from current levels.
US policy leading to record copper imports will leave the rest of the globe and namely China critically short and when asked “Is it unreasonable to expect a copper price of $12,000 or $13,000? He responded, “I’m struggling to put a number on it because this has never happened before.” There’s no doubt the copper price has had a couple of false starts over this so called “super cycle” of electrification, none more evident than last year when after breaching the US$5 per pond level the Chinese (50% of global demand) basically withdrew from the market however he believes this cycle will lead to a lot tighter market with Trumps copper import tariffs taking effect. “The shift of inventory to the US means the Chinese copper market will be left with insufficient stocks” he said. Bintas is predicting that global demand will outstrip supply by 320,000 tons this year, which, together with the draw of stock to the US, could drain a large share of the inventories outside the US. The usual reliance on copper scrap which accounts for about a third of global copper production is drying up with US scrap levels now at negligible levels.
What could further put a rocket under metal prices is China’s plan to add to it’s reserves of key industrial metals in an effort to secure supply in the wake of trade wars as demand soars under the new world.
In particular copper, cobalt, nickel and lithium are amongst the major metals being targeted. The process falls under the banner of a China authority (National Development & Reform Commission) who recently indicated China would “move faster to fulfill the yearly task of stockpiling strategic goods” according to a Bloomberg article. Their ultimate aim is to smooth out supply in crunch times and minimise price inflation during such supply squeezes.
The lithium market still remains in a state of oversupply but like all commodities the worm will turn. Exploration budgets have been slashed, and production cuts will ultimately hit home. EV sales grew by 24% in 2024 to in excess of 17 million vehicles which reflects a ratio of 1 in 5 cars requiring an extension cord and forecasters are suggesting this figure will be 30 million in 2025. China is still leading the charge representing 65% of the vehicles sold as evidenced by BYD’s recent sales overtaking that of Tesla. There’s always a however and this came in the form of Trump announcing an additional 25% tariffs on all cars not made in the US and indicating the tariffs as permanent.
Quote of the week…
In 1849, French novelist Jean-Baptiste Alphonse Karr wrote "plus ça change, plus c'est la même chose." Loosely translated, this means that despite apparent changes, fundamental aspects of a situation remain unchanged. We think this is a fitting way to describe the current state of the lithium market.
Canaccord Lithium commentary.
On the lighter side…
School of hard rocks…
Rescue raise
Interestingly Bellevue Gold (ASX:BGL) shares tanked 15% leading up to their trading halt and subsequent suspension ahead of their operational update and expected downward production guidance.
As a result, the volume of shares traded leading up to the halt rocketed which maybe a simple case of good fortune or!!! Anyway, in the three days prior some 65 million shares were traded, and it was revealed in a podcast that BGL had cancelled an Investor Roadshow midstream with the main man hot footing it to site. Subsequently underground contractor Develop Global (ASX:DVP) released a statement after their share price fell 10% highlighting the strength of their relationship with BGL and that the “rumours in the investment community that have no basis”.
The market giveth and the market taketh back and never was this more evident than in the case of biotech company Opthea (ASX:OPT) releasing an unexpected Phase III trial where it’s candidate for an eye disease (macular degeneration) simply doesn’t work. The study failed to meet its primary endpoint, with the treatment arm underperforming standard of care. This was a catastrophic negative surprise to the market as Phase II data in a relatively large patient cohort was statistically significant and compelling from a clinical relevance perspective. OPT had a market cap. north of $1 billion not so long ago and remains in trading halt as the question of solvency arises. While Opthea has US$113 million of cash, its solvency is now in question because of its obligations under a 2022 development funding agreement with Carlyle Group that eventually advanced US$170 million, and it’s speculated under the terms of the agreement they may have to repay four times this amount…shite!
No love lost between mining giant Gold Fields (ASX:GFI) and Gold Roads Resources (ASX:GOR) following GFI lodging a bid for 100% of GOR in a deal where GFI quoted it was looking to iron out “dis-synergies” at the 50/50 owned Gruyere gold mine in WA.
Surprisingly, the offer was not put to shareholders to make their own decision however it’s believed pressure will come to bare from major shareholders. GFI offered the equivalent $3.05 per GOR which was a healthy 28% premium at the time however the GOR board rejected the offer outright as not being fair value. GOR have a 17.27% position in DEG, currently under takeover from NST which is a potential blocking stake however GFI have indicated they have no plans to thwart NST’s bid. According to GOR board “The offer appears to have been opportunistically tabled by Gold Fields in advance of the completion of exploration and studies into the potential underground expansion of the Gruyere mine. “An 18-month drilling program to confirm that the Gruyere orebody extends at depth, with the results of that program being material to properly understanding the potential upside value of Gruyere.”
Aurum Resources (ASX:AUE) released a cracker exploration hit from their Cote d’Ivoire Boundiali (“boondy)” Gold Project. The already impressive 1.59m ounce deposit was further complimented by:
83m @ 4.87 g/t Au from 106m
0.83m @ 172.40 g/t Au from 14.82m
53.77m @ 0.81 g/t Au from 55.13m
20.83m @ 2.63 g/t Au from 116.70m
29.44m @ 1.30 g/t Au from 142.56m
43.50m @ 1.38 g/t Au from 52.50m
13m @ 1.14 g/t Au from 202m
Mineralisation remains open at depth and along strike and all 8 of their self-owned rigs are continuing with their planned 100,000 metre program which they expect to deliver two resource upgrades over this calendar year.
Kaiser Reef Ltd (ASX:KAU) have agreed to acquire Catalyst Metals (ASX:CYL) Tassie Henty Gold Mine for $33m consisting of:
$15m cash,
$14m in worth of KAU shares, and
$4m reimbursement for environmental bonds.
There is also a deferred consideration consisting of:
50 ounces of gold per month for 5-years, capped at 3,000oz (at the current spot price A$4,800/oz, is worth $14.4m), and
a 0.5% royalty on gold produced from a discovery made at the Darwin Target Zone.
KAU also grants CYL an exclusive option to form an incorporated joint venture over KAU’s 250,000tpa Maldon operating gold processing plant and associated assets. Henty is a small operation producing about 25,000 ounces at an AISC of $2,876 and has a resource of 449,000 ounces at 3.4 g/t and a reserve of 154,000 ounces at 4 grams
Emerald Resources (ASX:EMR) finally delivered their first batch of negative news with a downgrade to their March quarter production guidance. They are now guiding that this quarters production will be in the vicinity of 20,000 ounces which is well below the 25,000 to 30,000 ounces forecast. The revised guidance was anticipated and is due to increased waste movement as cut back activities restricted access to higher-grade areas of the pit floor. The pit cut-back extends the open pit mine life, and it also facilitates the positioning for the underground portal. However, importantly this is a short-term hiccup and order will be restored in the June quarter.
We always enjoy Mr Southam’s mostly positive feedback to our commentary and appreciate his sense of humour, so much so he’s getting a showing in the Chatter two weeks running with his Cygnus Metals (ASX:CY5) releasing some (historical) results to keep momentum running in the current bullish copper price environment. CY5 have continued to review historical results from the Chibougamau Copper Project releasing some previously mined intersections that highlight the resource quality including:
· 47.4m @ 7.2% CuEq from surface (1.9% Cu, 6.7g/t Au)
· 34.1m @ 9.1% CuEq from surface (2.1% Cu, 9.0g/t Au)
· 51.7m @ 5.5% CuEq from 89.3m (3.0% Cu, 3.2g/t Au)
· 18.3m @ 12.2% CuEq from 57.0m (5.1% Cu, 9.0g/t Au, 25.1g/t Ag)
CY5 is beavering over 100,000 historical documents including drill logs which have not been look at in over 30 years and one can only conclude after reading off the FFM hymn sheet that further resource tonnes will be added to the already impressive, inferred resource inventory of 7.2m tonnes at 3.8% CuEq of which half is in the indicated category. In addition, the project is flush with infrastructure with a 900,000tpa processing facility, local mining town, sealed highway, airport, regional rail infrastructure and 25kV hydro power to the processing site.
Cashed up stablemate Firefly Metals (ASX:FFM) released further infill results from their Green Bay Cu-Au Project which just further confirm the consistency of copper dominant mineralisation for this resource.
Best results from the VMS zone included:
· 14.2m @ 7.5% CuEq1 (5.7% Cu & 2.0g/t Au)
· 9.0m @ 5.5% CuEq (4.5% Cu & 1.2g/t Au)
In the footwall zone they retrurned:
50.9m @ 2.6% CuEq (2.5% Cu & 0.2g/t Au)
46.8m @ 2.2% CuEq (2.1% Cu & 0.2g/t Au)
66.8m @ 2.1% CuEq (2.0% Cu & 0.1g/t Au)
Additional assays from continual step-out drilling are expected in the coming weeks as FFM test plunge extensions below the current Ming resource. Surface exploration drilling and geophysics is underway and will test high priority near mine targets with first results anticipated in the June quarter, whilst another rig is commencing in May, bringing the total to 7.
New kid on the block Gorilla Gold (ASX:GG8) has released a cracking intercept from its Lakeview project north of Kalgoorlie which returned:
· 96m at 2.5g/t from 125m which included 20m at 6.1g/t
They promptly tapped the market for $25m at 38 cents leaving them with just under $40m and the market gained further confidence following Genesis Minerals (ASX:GMD) decision to follow their brass to the tune of $1.84m. GG8 will accelerate drilling at Lakeview, Comet Vale, Mulwarrie and Vivien projects with extensional drilling targeting down dip and along strike extents at the Lakeview Prospect and will soon have 2 RC rigs hammering away. As some too smart for his own good analyst quoted” The working interpretation is that LVEX027 has intercepted a sigmoidal jog in the shear zone, a sort of tension gash array that possibly forms a linking structure between two shear zones. This is geology mumbo jumbo for the mineralisation has blown out in this particular zone. …
The rain has stopped, and Encounter Resources (ASX:ENR) can now recommence exploration at their Aileron Niobium Project in the West Arunta.
Their exploration activities will focus on:
· Resource definition drilling of key prospects: Green, Emily and Crean.
· Geophysical surveys: heli-borne electromagnetic (EM) survey over 1,000sqkm to assist in carbonatite targeting; ground gravity and seismic trials to image preferential weathering potential enriched niobium zones.
· Aircore drilling to test targets along major structures.
· Ongoing metallurgy studies.
· Initial environmental surveys to assist with potential future project development.
RC drilling for the resource definition activities is expected to commence shortly with a continued focus on the high-grade (enriched) niobium mineralisation.
ENR is planning on 40,000m of aircore, RC and Diamond drilling over this year’s campaign with programs to be expanded upon any additional exploration success and has $23m of cash reserves to execute the program.
Apologies, I pretty much cut n pasted this announcement as I was fatigued and fragile.
Who’s shaking the tin…
Sovereign Metals Limited (ASX:SVM) - $40m at 85 cents
Gorilla Gold (ASX:GG8) - $25m at 38 cents
Pursuit Minerals (ASX:PUR) - $1.1m at 6 cents (plus :2 option)
Errawarra Resources (ASX:ERW) - $3m at .7 cents
Greenvale Energy (ASX:GRV) - $1.8m at 4.8 cents
Metal Hawk (ASX:MHK) - $ 2.5m at 4 cents
Kore Potash (ASX:KP2) - $10.6m at 7p Guv
Marvel Gold (ASX:MVL) – $4.325 at $0.008
Sunshine Metals (ASX:SHN) - $2.5m at $0.006 (plus 1:3 option)
Bathurst Resources (ASX:BRL) - $34.4m at 74 cents
Lodestar Resources (ASX:LSR) - $661,100 at 1.1 cents (plus 1:2 option)
Dreadnought Resources (ASX:DRE) - $10m at 1.2 cents
Tasman Resources (ASX:TAS) – $3.68m at 2 cents (plus 1:1 option)
Mindax (ASX:MDX) - $7.2m at 5 cents
Godolphin Resources (ASX:GRL) - $1m at 1.1 cents
Metals Tech (ASX:MTC) - $3.3m at 13.7 cents
Sunstone Metals (ASX:STM) - $3m at $0.005
RTG Mining ASX: (RTG) - $19m at 2.5 cents
Great Divide Mining (ASX:GDM) - $2.05m at 42 cents
Saturn Metals (ASX:STN) - $20m at 21.5 cents
Scorpion Minerals (ASX:SCN) - $250k at 2 cents (plus 1:2 option)
Avira Resources (ASX:AVW) - $506k at $0.007 (plus 1:1 option)
A zoom call with…
Rob Williamson Managing Director of Alpha HPA (ASX:A4N)
Normally opaque mineral projects with a large capital cost and a long lead time to production is enough to send me scurrying for the exit door, however, like any good investor one must keep looking at companies, and so it was that a good friend recommended we catch up with the Alpha HPA (A4N) again. We have probably seen them about half a dozen times over the past 7-8yrs and always been impressed with the ‘no bullshit’ approach to IR. So, what does A4N actually do? A4N aims to produce ultra-high purity aluminium products for use in the semi-conductor and battery industry. A4N has built a small pilot plant that produces 350t of product per year which is being used to send product to potential customers etc to get qualified that it’s a suitable production etc. This process is time consuming, and we certainly got the sense there was a lot happening behind the scenes. One of their products is the Thermal filler which semi-conductors and A1 chips more efficient through better thermal conductivity and reduces the levels of U and Th. So, the DFS outlined capex of $553m to produce 10.4kt of product generating EBITDA of $255m (at A4N discovery price of $34.4/kg with a cash cost of A$9.58/kg. EBITDA margins of 71-79% are possible and on the mid cash with prices of $42.34/kg then EBITDA increases to $336m. So how were they going to fund it – well, some very smart deals has seen them with a $320m loan facility plus a $80m cost overrun facility (NAIF and EFA) plus a $175m equity raise (@ $0.90/sh) and $21.7m grant. The loan is conditional on securing Letters of Intent (LOI) and Product qualification for 10kt of material – currently A4N has LOI of ~6kt with the aim to convert these LOI to binding contracts in the 2nd H of CY’25. Ultimately, they would like to get more LOI than product available to scale back some of their customers etc. A4N aim to be in production in FY’27 before ramping up to full production in FY’29. The company has a market capitalisation of ~$900m but it has been 40% higher when the market was a little more buoyant. It’s not hard to see that if it executes the stock could easily double and we came away suitably impressed and one to put on the watch list and wait for some more work on the markets, pricing and potential upside.