Chieftain Chatter
Season 5
Episode 183
Time for a breather...
Finally, we have started to see a switch out of Mega Tech companies in the US into more traditional defensive sectors such as Real Estate, Staples, Utilities and Healthcare indicating the current cycle is at a mature stage despite profit results continuing to impress in the US.
The bulk of S&P500 companies have exceeded earnings expectations despite the implementation of tariffs and a cooling labour market. Although forecasts had been tempered in expectation of tariff implications, overall companies have delivered around 12% profit increases which was well above the revised 5% rise forecast. Tech companies certainly lead the charge and overall, the S&P 500 has rallied nearly 30% since it’s April lows and is up just under 10% year on year. To put this performance into perspective just two out of the S&P 500’s 11 sectors in communications services and information technology are responsible for more than two-thirds of index earnings growth thanks to the likes of Meta and Microsoft. As a result, analysts have now ratcheted up forecasts for the current quarter which is a stark turnaround from the initial impact expected from Trumps new trade policies. It still remains to be seen when the full lag impact of tariffs actually hits consumers with many suggesting the full brunt is still far from being felt. “The sheer number of ‘what ifs’ caused analysts to reduce earnings estimates months ago on tariff fears,” said Yung-Yu Ma, chief investment strategist at PNC Asset Management Group. “Now there’s more belief that this won’t be a crushing blow to the economy as once feared. But the catch is everyone is waiting to see what happens with tariffs in the coming months.”
Many major investment houses have been warning of an impending halt to rampant US share market gains as investors’ appetite for high-risk investments reached fever pitch. Up until early last week demand for tech equities, cryptocurrencies and corporate bonds was rampant on expectations of rate cuts being delivered and thus continuing to drive growth in these higher risk sectors. Although experts are still tipping a September rate cut some of the data especially the latest Producer Price Index (PPI) numbers suggest the Fed may take a dovish view and keep rates on hold but dangerously markets still seem to be exhibiting “irrational exuberance.” History would suggest often an unforeseen or Black Swan event can be the catalyst for a significant market correction after a period of such euphoria.
Despite the short-term shutdown of CATL’s mining operations at their massive Jianxiawo lithium mine the rocket under share prices has largely been sustained. Also, the CME lithium carbonate contract has jumped by 27% since the start of the month after an extended period of decline there is a general belief this cannot sustained. Underneath this rally has been the Chinese bureaucracy hell bent on stalling over capacity and thus sending a signal to the market that this maybe the first of many mines to come under government scrutiny in an effort to put a further dent in the massively over supplied market. Trading activity in Guangzhou’s Exchanges lithium contract has been at frenzied levels of late after turning over 24m (buy/sell) lots in July which was well in excess of the previous record. This sentiment driven volume escalation has resulted in the Guangzhou exchange implementing position limits on trades and this was subsequently followed by CATL’s admission which saw trades meet consecutive maximum limits with speculation that other producers maybe in the firing line. Fastmarkets’ view is that “beneath the surface demand remains tepid, inventories high and buyers cautious, underscoring a disconnect between price action and market reality.” Regardless of your view of the outlook for lithium the outcome of CATL’s reapplication for their mining license will be watched closely as will the government’s actions towards other producers with many suggesting they are under scrutiny for possible discrepancies between their licensed mining rights and actual extraction rates.
Quote of the week….
“Too many people spend money they earned... to buy things they don't want... to impress people that they don't like.” Will Rogers.
On the lighter side….
Probably fairly accurate…
School of hard rocks…
They paid f…g what?? Katanning gold producer hopeful Ausgold (ASX:AUC) have acquired a parcel of freehold land that is critical to the development of their Katanning Gold Project (KGP) and will now allow them to optimise their DFS following a long court battle. But wait for it, they are paying $35m for 860 hectares (2,025 acres) in bloody Katanning, that’s about $17,300 per acre FFS! They have been firmly bent over a barrel here so good luck to the vendors for hanging out and let’s hope the gold price stays well north of 5,000 bux per ounce for the long term. AUC have been restricted gaining access to the land during the litigation period, but 35 bricks soon sorted that out. Fortunately, AUC has $45m in the bank but that won’t go far following the settlement of this transaction.
Perseus Mining (ASX:PRU) announced their annual resources and reserves upgrade with Nyanzaga making a significant contribution to the 73% increase in reserves. PRU trotted out a maiden reserve at Nyanzaga of 2.34m ounces taking their total reserve inventory to 5m ounces when you add in their three operating mines. Total resources just missed my internal 10m ounce target (cause I like round numbers) coming at 9.7m ounces measured and indicated with Nyanzaga contributing 3.7m ounces. PRU recently released their 5 year production plan of which Nyanzaga will form a vital part with 2.34m ounces at 1.4g/t which when constructed will become PRU's lowest cost and largest contributor to group production, averaging in excess of 200,000 ounces per annum at an AISC of around $1,900 per ounce.
Regis Resources (ASX:RRL) have supposedly been at the table for every producing gold asset sale of late but are yet to strike a blow. It’s now done the full turn, and they find themselves back at potentially acquiring the 70% of Tropicana from AngloGold Ashanti they don’t already own in a deal rumoured to be worth $2.5 billion. You will recall RRL acquired their 30% interest from IGO back in 2021 for a whopping $900m and now have a war chest of cash and are in need of a boost in ounces. However, Tropicana’s open pit operation only has a few years left to run then they will be treating lower grade stockpiles and look to expand the underground operations. RRL would have a good understanding of the asset and the upside potential it offers and given it’s perceived reluctance to pay overs for other assets would suggest they won’t pay overs. RRL subsequently responded to the speculation that “they are not in advanced discussions with respect to any specific opportunity” …. should happen next week!
SRG Global (ASX:SRG) reported another robust set of numbers towards the higher end of guidance with a strong forward order book. Revenue increased 24% to $1.3 billion for an underlying EBITDA of $127.1m and NPATA of $61m representing a healthy 50% increase.
The business had strong cash generation and finished the year with net cash of $16.2m versus a proforma net debt position of $39.2m post the acquisition of Diona. Hence, they declared a dividend of 3 cents fully franked bringing the full year dividend payment to 5.5 cents.
Work in hand stands at an impressive $3.6 billion with a pipeline of opportunities totalling $8.5 billion underpinning renewed earnings guidance of 10% EBITDA growth in 2026. Bottom line bloody good result that is showing strong margin expansion, 80% annuity earnings and a solid balance sheet post the Diona Water acquisition with an enviable pipeline of new opportunities.
Macmahon Holdings (ASX:MAH) also reported earnings at the higher end of guidance with revenue of $2.4 billion odd returning an EBITDA of $387m which was generally above most analysts forecasts.
MAH announced a final dividend of 0.95cents per share, lifting the full year dividend to 1.50cps which was a 43% year on year increase and moving forward the payout ratio will increase to 30 to 45% of earnings from 20-35%... MAH noted a shift in dividend policy from FY26, with the payout expected to lift from 20-35% of earnings to 30-45% of earnings. From a balance sheet perspective gearing reduced from 26% to 19% with a net debt position of $162m. On the outlook MAH are forecasting revenue of $2.6b to $2.8b with about $2.1b already in the bag for an underling EBIT (A) of $180m to $195m
Integrated mining services group MLG Oz (ASX:MLG) reported a solid FY 2025 result with revenue up 15% to $548m and EBITDA of $66m which was up 20% on last year at an improved margin. The resulting NPAT came in at $12m and no dividend was declared as capital requirements to sustain the growth profile and future opportunities would be required within the business. MLG reported free cash flow of A$34.8m, which was materially higher than expected. 2H free cash flow was particularly strong.
Encouragingly, MLG reported net debt of A$57.8m at the end of June, which was lower than expected on the net debt of $77.5m reported at the end of December. They believe the outlook for FY2026 remains strong with momentum underpinned by a strong gold sector across the board and growing opportunities in iron ore haulage. MLG remains focused on improving margins and ins actively pursuing a range of profit-sharing project opportunities.
As we are well aware Gorilla Gold Mines (ASX:GG8) aren’t shy when it comes to drilling holes with 5 rigs turning at Comet Vale and step out diamond drilling from Sovereign delivered some cracking grades down dip including
5m @ 66.3g/t Au from 339m
8.9m @ 13.8g/t Au from 371.4m
0.9m @ 29.5g/t Au from 296m
1m @ 9.2g/t Au from 644m
They also delivered a nice hit 50m south of the Happy Jack structure:
21m @ 11.6g/t Au from 23m
Two RC rigs are undertaking exploration drilling across the Cheer, Sovereign North, Sovereign Prospects and 3 diamond rigs are operating targeting down dip mineralisation at the King Kong lode at Lakeview.
An updated MRE for Comet Vale is planned for Q4 2025. Assays are pending from diamond drill holes outside of the Mulwarrie MRE.
Not sure what this all means from an economic perspective but Encounter Resources (ASX:ENR) have released further high-grade niobium and rare earth results from their Crean prospect in the West Arunta. Diamond drilling has returned.
7.3m @ 6.3% TREO (1.5% NdPr & 850ppm DyTb) and 8.1% Nb2O5 from 91m
This was within a larger interval of 49.3m @ 1.5% TREO and 2.5% Nb2O5. This is consistent with previous high-grade hits at Crean demonstrating a highly enriched carbonatite deposit of higher proportions than many other rare earth deposits in Australia which is sure to capture the attention of it’s peers. As one George Ross from Argonaut quoted” Being enriched in heavy REEs will likely make this ore desirable to mid-stream processors who remain constantly short of heavy rare earth enriched feed into cracking plants…...ILU. Meanwhile the aircore rig has been working overtime at Green with a large batch of assays due in early September.
Emeco Holdings (ASX:EHL) delivered a robust profit result with revenue up 7% to $785m for an EBITDA of $301m and NPAT of $84m which was up 22%. Significantly improved margins were a highlight with operating cashflow of $114m compared to our $84m and net debt reducing to $194.9m from $280.5m in June. Utilisation averaged 85% at surface and 57% underground and there is leverage in the fleet in 2026; in the meantime, the business has secured major contract extensions with long term customers and delivered overhead and cost management programs that have paid dividends in 2025. Canaccord expects “the exit run rate for 2H should be strong and expect commentary around reaching 20% ROC in FY26 and minimal growth capex should be well received, given the free cashflow implications and potential earnings upside. FY25 guidance is for $300m operating EBITDA, and we forecast FY25 NTA per share of $1.34, and NPAT of $75.8m”.
Who’s shaking the tin…
Botala Energy (ASX:BTE) – $1.5m at 5.9 cents
Anson Resources (ASX:ASN) – $5m at 9 cents
OD6 Metals (ASX:OD6) – $2.5m at 6.5 cents (plus 1:2 option)
Sarytogan Graphite (ASX:SGA) - $3.6m at 8 cents
Wia Gold (ASX:WIA) - $30m at 30 cents
Magnetic Resources (ASX:MAU) - $35m at $1.30
Lindian Resources (ASX:LIN) - $91.5m at 21 cents
Unico Silver (ASX:USL) - $25m at 35 cents
Arafura Resources (ASX:ARU) - $80m at 19 cents
European Metals (ASX:EMH) - $3m at 16 cents
Marquee Resources (ASX:MQR) - $2.5m at 1.1 cents (plus 1:2 option)
Rokeby Resources (ASX:RKB) - $1.7m at $0.009West Cobar Metals (ASX:WC1) - $1.25m at 1.7 cents (plus 1:2 option)
Resouro Strategic Metals (ASX:RAU) - $2m at 20 cents
WIN Metals (ASX:WIN) - $2.35m at 2 cents (plus 1:2 option)
Kali Metals (ASX:KM1) - $1.2m at 14 cents
Melbana Energy (ASX:MAY) - $7m at 1.7 cents (and a swag of options)
Castle Minerals (ASX:CDT) - $3.3m at 6 cents
Great Northern Minerals (ASX:GNM) - $2.6m at 1.3 cents (plus 1:2 option)
Golden Mile Resources (ASX:G88) - $510k at $0.006
Peninsula Energy Limited (ASX.PEN) - $70m at 30 cents
A lunch with....
Nick Woolrych CEO and Warrick Amos CFO New World Copper (ASX:NWC) at Café Lucia
As hard it was to drag oneself away from reporting season (yawn) when the boys told us they were coming to town it was no brainer that a medium sized lunch was on the equation. After all, the boys had delivered a magnificent windfall for all shareholders and as the old expression goes ‘Timing is not everything it’s the only thing.’ So we were fortuitous to start buying NWC in March around the 2.8c mark – we did feel a little dopey when Liberation Day came and the stock plummeted to 1.9c but we held our nerve and continued to buy and were very pleased to wake up in late May to see a 5c cash bid was on the table from Central Asia Metals Ltd. Normally, we would probably cut and run but decided with the dearth of copper exposures out there we would hang on and see if anyone else emerged from the woodwork and sure enough Kinterra Capital lobbed a bid and after a lot of back and forth a final cash bid of 6.7c was recommended. A nice 2x bagger in a few months. With this in mind, we upgraded from the normal Houghtons white burgundy to an Amelia Park Chardy. Christian Tinelli was in his usual magnificent form and after some excellent Coffin Bay oysters we turned to what next for the boys? As with many other successful MD’s it sounds like they are being inundated with offers etc and with background working in the Cobar basin – Nick ran the Dargues Gold mine for Diversified Minerals until they sold it to Aurelia Metals, there are probably a dozen juniors operating in the area that could use his expertise etc. In addition, it sounds like there is potential for some TSX listed zombie projects that have gone nowhere for a number of years and suddenly at these commodity prices and with a capable team there could be some value to be unlocked depending on the deal structure etc. The grilled Goldband snapper was delightful, and we quickly whiled away a few hours before they had to leave for the next five appointments over the rest of the day. It was terrific lunch, lots of laughs and a firm promise that whatever they get involved in next we would like to be involved. Watch this space. It was then back to the office (briefly) to see how the markets finished… goddam... every industrial company we own was up... Should have stayed for another bottle!!