Chieftain Chatter
History Lesson…
As we enter the month of May the old adage of “Sell in May and go away" raises it’s ugly head again and history will suggest this period has historically been a time of underperformance for stocks across the globe.
Historical data supports this theory of underperformance during the May to October timeframe compared to other six-month periods, for example:
Since 1990, the S&P/ASX 200 has averaged a modest 0.7% return over these six months, with positive returns in only 54% of the time.
May itself stands out as the second-worst month for Australian equities, posting an average decline of 0.39% since 1990.
Despite this seasonal weakness, the May-to-October period still delivers positive average returns, indicating that blindly selling based on the calendar may not be the best strategy.
Staying invested over time often proves more rewarding than attempting to time market peaks or troughs.
Stocks moved straight into defensive mode as soon as May kicked over and gold sparked back into favouritism putting on around 5% with uncertainty still surrounding US/China trade negotiations.
The switch to defensives was also heightened by the withdrawal of earnings guidance by the likes of Ford and Mattel in the wake of tariff uncertainty. This action is fairly typical of a bear market rally as highlighted by a Goldmans analyst “the asymmetry for equity investing is poor. Sharp rallies within bear markets are the norm, not the exception.” As long as the uncertainty continues the bleak outlook for the economy will remain and hence investors will remain on the sidelines in the safety of cash. In the last week of April alone some $9 billion came out of US equites in favour other markets including inflows of US$3.4 billion into European equities while Japanese equities had inflows of US$4.4 billion
What was of equal concern was the debilitating US trade deficit ballooning to US$140.5 billion in March which was above expectations and well above the US$123.2 billion February number.
Now, this can be largely explained by the onset of tariffs with imports of pharmaceutical products, motor vehicles and capital equipment surging for the month. Already April data is suggesting this aggressive importing is starting to wane as a result of inventories being built up, however, this will ultimately lead to a slowdown in transportation and warehousing which will reflect negatively on future economic data.
Not surprisingly the Fed kept rates unchanged and highlighted the strength that still exists in the economy with unemployment stabilising but still stated that the Committee “judges that the risks of higher unemployment and higher inflation have risen.” The post-meeting statement also noted “uncertainty around the economic outlook has increased further” and as expressed in the previous statement the Committee reiterated it “is attentive to the risks to both sides of its dual mandate.” Furthermore, inflation at an annualised rate of 2.8% remains above their target level and is still proving to be sticky with tariffs not assisting. All of this has resulted in expectations of a June rate cut easing to a 35% chance from 55% with markets starting to factor in a July easing and a cumulative 75 basis points cut for this calendar year. As a result, markets remained resilient ably supported by short term economic data and progressing negotiations on tariffs with their major trading partners including China. Once the real impact of tariffs is known we will see rate forecasts adjusted promptly as the expected raft of negative economic data starts to flow through.
Earnings reporting season has largely surprised on the upside within excess of 75% of companies reporting a blended growth rate of 12.8% versus market expectations of 7.2%.
72% of companies have exceeded EPS expectations which although below the 5-year average has surprised most analysts however guidance in many cases has been lowered or withdrawn in face of an uncertain future.
Recent oil price weakness has been driven by influential OPEC members (Saudi, Russia) announcing consecutive monthly increases in supply. An initial phase out of voluntary cuts and introduction of 138,000 barrel per day monthly increase over 18 months was thrown out the window at the latest meeting in favour of a 411,000 bpd increase. According to Energy Consultant Jorge León, “Opec+ has just thrown a bombshell into the oil market,” … “Last month’s decision was a wake-up call. Today’s decision is a definitive message that the Saudi-led group is changing strategy and pursuing market share after years of cutting production.” OPEC has cut production by about 6 million barrels per day over the last 3 years in an effort to stimulate the price however this effort has waned somewhat more recently due to tepid demand, rising US output, and lax quota discipline among members.
Quote of the week…
“If traders wish to believe that the Fed will come to the rescue of the world tomorrow and assuage the recent rise in policy uncertainty and political uncertainty with a signal of overt ‘dovishness,’ they should think again,” said Thierry Wizman at Macquarie.
On the lighter side…
School of hard rocks…
The Fly’s Firefly Metals (ASX:FFM) are back in focus after releasing another round of strong results at their Ming Copper/Gold project in Newfoundland, Canada. The latest results extend mineralisation in both the high-grade VMS Zone (VMS) and the Footwall Zone (FWZ) some 200m down plunge and outside of the current 58m tonnes @ 2% Cu, 0.3g/t Au resource:
VMS step out results included;
12.4m @ 3.6% Cu and 3.5g/t Au
25.8m @ 4.6% Cu and 0.5g/t Au
Stringer mineralisation in the footwall returned:
19.5m @ 2.7% Cu and 0.3g/t Au
14.5m @ 1.8% Cu and 0.1g/t Au
A down hole electromagnetic geophysical survey (DHEM) completed from the deepest step-out hole completed has highlighted the existing anomaly now extends 700m beyond the current drill extents.
Still plenty of resource upgrade potential here and about to have 7 rigs belting away and $68.5m to fund their aggressive program and worth keeping in mind they could potentially flick their Pickel Crow gold project to give the coffers a significant boost.
Turaco Gold (ASX:TCG) have grown their Côte d’Ivoire gold resource by 40% to 90.8m tonnes @ 1.2g/t for 3.55m ounces which exceeded most expectations. The latest predominantly open pit resource number encompasses 4 deposits consisting of:
Woulo Woulo 50.9m tonnes @ 1.0g/t Au for 1.6m ounces
Jonction 9.1m tonnes @ 2.1g/t Au for 610,000 ounces
Anuiri 9.7m tonnes @ 1.7g/t Au for 520,000
Asupiri 21.1m tonnes @ 1.2g/t Au for 820,000
Importantly the indicated component has increased by 17% from August last year and a PFS has commenced on a 5-6mtpa operation which is due for release mid next year.
Drilling continues with 3 rigs turning and 7,000 metres of results still pending and over 8,000m of assays yet to be included into the latest resource estimate suggesting another upgrade before the years out.
All the deposits that contributed to the resource remain open and will continue to be extended and infilled.
It seems pressure from key Gold Road Resources (ASX:GOR) shareholders to force the board to engage with Gold Fields has paid off after entering into a Scheme Implementation Deed (SID) with Gold Fields to acquire 100 per cent of the issued share capital in GOR for the equivalent of $3.40 plus a potential 35 cent fully franked dividend. Under the terms of the scheme GOR shareholders will receive a fixed cash consideration of $2.52 per share (less any special dividend) plus a variable cash consideration equal to the full value of proportionate holding in NST valued at A$0.88/sh as of 2nd of May. Therefore, total cash consideration including the divvy equates to $3.75 per share or $3.7b equity value representing a 43 per cent premium to GOR’s undisturbed closing share price on 21 March 2025 or 15% premium to last traded price. Gold Fields has confirmed to GOR that the consideration proposed under the Scheme is a ‘best and final’ price and will not be increased further in the absence of a superior proposal emerging. Not surprisingly the Gold Road Board unanimously recommends that shareholders vote in favour of the Scheme, in the absence of a superior proposal. Foreign Investment Review Board approval is required by Gold Fields along with usual conditions.
Strike Energy (ASX:STX) announced an exploration update on its Ocean Hill and Kadathinni prospects within the Perth Basin. STX pointed towards “significant upside” to the Ocean Hill resource following re-evaluation of the 3D seismic data showing significantly fewer large-scale continuous faults and less compartmentalisation than previously mapped on 2D seismic. Strike expects an appraisal program of 3 wells will be required to test the Ocean Hill structure and prove up the additional interpreted upside with a target of drilling before the end of 2025. A prospective resource for the Kadathinni exploration prospect has come in at 385 PJ 2U with a best case 3U prospective resource of north of a TCF of gas. The plan is to drill the Tathra-1 exploration well at Kadathinni sometime next year.
Aurum Resources (ASX:AUE) have lagged the gold market despite boasting a 1.6m ounce resources at their Boundiali Project in France (Côte d’Ivoire) so it was pleasing to see the market sit up and take notice of their $35.6m capital raise at a 10% premium.
The deal is comprised of a $23.89m placement to:
· Lundin Family $11.71m (9.9% AUE)
· Zhaojin Capital Limited $8.19m (8.5% AUE)
· Montage Gold (TSX: MAU) issue of 2.9m MAU shares who will hold 9.9% of AUE.
Funds raised from the placement component will be utilised to:
Accelerate resource definition drilling at Boundiali and exploration drilling at its newly acquired Napié gold project, both in north Côte d’Ivoire, including
The purchase of two additional diamond drill rigs
Conduct PFS and DFS for the Boundiali Gold Project
Mining exploration licence application and approvals
Complete environmental and social impact study and ESIA approval.
Copper minnow Anax Metals (ASX:ANX) have entered into a funding arrangement whereby Mineral Development Partners Pte Ltd (MDP) have provided a conditional $103m package consisting of
$3.3m Convertible Note with a conversion price of $0.015
$10m investment in Whim Creek Metals (WCM) for 30%
Up to $50m investment to acquire a further 42% of WCM and develop the project,
Additional $40m base metal processing hub in the Pilbara
The $103m package is all subject to FIRB approval and due diligence.
The Whim Creek project (80% ANX,20% DVP) is fully permitted and a 20213 DFS reported a $270m pre-tax NPV for 100% of the project for a capex of $72m.
MDP is a global consortium formed to invest in and unlock value from high-potential mineral assets worldwide. It brings together an integrated international commodity trading platform, an experienced strategic mining operator, and the backing of international investment partners. With a mandate to advance metals and mining projects from feasibility through to production, MDP integrates deep technical and operational expertise, long-term capital support, and extensive networks across the global resources sector.
You deserve to hit 175m @ 2.3% Cu when operating in the sunny metropolis of Nunavut Canada. The only accessible by air White Cliff Minerals (ASX:WCN) not only returned this cracking intersection, but the hole ended in mineralisation with the last 60 meters averaging 3.9% Cu. Another hole intercepted a modest by comparison 52m at 1.16% Cu from surface while assays from the remaining 5 holes are expected in the ensuing weeks. Mineralisation is open in all directions with follow up diamond drilling planned for July with the view of drilling out a compliant JORC resource. MD Troy Whittaker commented “Our improved geological understanding of the Danvers area indicates a mineralised system that extends from surface over more than 175m vertically and potentially 7km in strike length - both to the northeast and southwest, providing scope for further high-impact intercepts from upcoming drilling” …Strewth…
Delta Lithium (ASX:DLI) have announced their intention to separate their lithium and gold assets via a gold demerger into an ASX listing to be known as Ballard Mining.
You may recall they recently upgraded the Mt Ida gold resources by 46 % to 10.3m tonnes @ 3.3 g/t for 1.1m ounces which is predominantly attributable to the Baldock deposit.
Although no parameters for the potential offshoot were given DLI intends to retain a substantial position in Ballard
Funds raised for the new vehicle will be utilised to:
· Infill drill Baldock.
· Regional Exploration and resource growth
· Feasibility Study
Ballard aims to release an initial Ore Reserve Statement and DFS in the first half of calendar 2026 at which time one would expect FID to follow.
Gorilla Gold (GG8) released further extensional drill results from Lakeview which extended mineralisation towards surface by 75 metres including:
8m @ 5.8 g/t from 68m
7m @ 1.3 g/t Au from 201m
Meanwhile, an infill hole at Lakeview returned:
8m at 1g/t from 188m
Indicating the consistency of mineralisation a 400 metre step out hole to the West supports 1km plus of strike:
7m at 1.3g/t from 201m
The focus will continue at the still highly prospective Lakeview project with the 3 rigs at Mullwarrie to move to Lakeview making it a six-rig drill fest.
Charles Hughes, Chief Executive Officer commented: “We have intercepted our best shallow gold mineralisation to date in LVEX041: 8m @ 5.8 g/t from 68m downhole, 75m up-dip of LVEX017 (11m @ 24.8 g/t Au from 145m). We expect gold mineralisation to come to the surface as there are historic gold mines from surface, but it is good to start getting some intercepts into the near surface position. We will have more shallow intercepts now we have the diamond rig at site, which can drill shallow angle holes and hit positions we just haven’t been able to previously.
Who’s shaking the tin…
· Corella Resources (ASX:CR9) – $1m at $0.002 (plus 1:1 option)
· Ragnar Metals (ASX:RAG) – $1.76m at 15 cents (plus 1:2 option)
· Advance Metals (ASX:AVM) – $2.55m at 5 cents (plus 1:3 option)
· Arika Resources (ASX:ARI) – $5m at 2.3 cents
· Felix Gold (ASX:FXG) - $17m at 15.5 cents
· Conrad Asia Energy (ASX:CRD) – $9m at 65 cents
· Caspin Resources (ASX:CPN) - $2m at 5 cents (plus 1:2 option)
· Adelong Gold (ASX:ADG) - $1.5m at $0.0055- (plus 1:2 option)
· Aurum Resources (ASX:AUE) - $35.6m at 35.6 cents
· Culpeo Minerals (ASX:CPO) - $3m at 1 cent (plus 1:2 option)
· Alice Queen (ASX:AQX) - $1.639m at $0.004 (plus 1:1 option)
· Tivan (ASX:TVN) - $5m at 10.5 cents (plus 1:2 option)
· Waratah Minerals (ASX:WTM) - $8.4m at 27.5 cents
A zoom call with…
Nick Woolrych, CEO of New World Resources (ASX:NWC)
We have kept on eye on NWC for the past 5 years since they acquired the Antler project copper project located in Arizona in Jan 2020. It had a terrific run from acquisition to April’21 when it essentially 12 bagged hitting a peak of 12c as they drilled and discovered high grade copper mineralisation culminating in a maiden resource of 7.7mt @ 3.9% Cueq in Nov’21. Further drilling returned some cracking intersection including 41.8m @ 3.8% Cu eq growing the resource to 11.4mt @ 4.1% Cueq in Nov’22. A PFS was delivered in July’24 showing a project capable of producing 30kt of Cueq per year at an ASIC of US$2.18/lb with capex of ~US$300m. This generated an NPV of US$4498m and IRR of 30.3% at a Cu price of US$4.20/lb. However, there was always a questions around permitting and how a small cap could fund US$300m and the stock languished – hitting multi year lows of 1.5c last year. In August last year Nick, who was previously COO was appointed MD. Nick has an operational background as CEO of PYBAR Mining and we have been impressed with his no-nonsense approach. Things changed for NWC when the orange lunatic was elected in Nov and suddenly the timeline to production in 2027 looked achievable with genuine support for domestic copper production. Currently, NWC is on track to be fully permitted within 12 months but this could potentially be bought forward should Donald want it. NWC recently announced a 25% resource increase to 14.2mt @ 3.8% Cueq and is on track to complete a DFS by the end of year. In terms of funding, all options are on the table including precious metals streams – US$288m of precious metals over the LOM, structured mine finance -US Govt Depts, specialised mining finance etc and strategic project JV. With a market capitalisation of ~$100m it looks pretty damn cheap for something that could be generating US$115m in post-tax-free cash, especially if a novel financing solution can be found minimising dilution for shareholders. We dipped our toe in the water about a month ago and weren’t feeling particularly clever as the stock retracted about 30% quick smart, but it has since recovered. There is a nice comparative slide in his recent preso on page 23 which compares it to Foran Mining which has a market capitalisation of US$1.1bn and prima facie quite similar project metrics. I wouldn’t mind just 50% of that.