Ben Richardson, CEO at SulNOx, confident they can cost-effectively decarbonise commercial shipping. Watch the video here.
The usual bullion bank sales happened at the comex open. But the dip was aggressively bought. There is clear demand beneath the market in gold and silver. We have to navigate some Fed jaw boning this afternoon, but a possible close over 1870 and 25.40 tomorrow. It should be interesting. Encouraging.
When will the bullion banks stop manipulating the market?
The biggest position in the GPM portfolio is West African Resources. This is a Burkina Faso gold mine, estimated to produce an average of 216,000 ounces of Gold per annum until 2030. The gold exposure is unhedged. The AISC is about $800 an ounce. The shares price was up 4.64% overnight in Australia, where the company is listed. If Gold breaks higher, this baby should rip. Just saying. Plenty of beta to the Gold price.
Just now, there are a few local difficulties in Burkina Faso, but they should be easily resolved.
All the Aussie listed Gold stocks seemed to perform last night in Oz.
As an aside, the Yellow Brick Road was written both as a children’s book, and an argument for sound money, and Gold. Follow the Yellow Brick Road!
OK, a few home truths….Gold and Silver are bubbling nicely, but GPM, and all the other PM investments (SILJ, FRES, POLY, CEY, HOC etc…) keeps disappointing. They never quite go up enough to justify the move in spot Gold and Silver.
Why?
Because there are so many stranded longs. Bag holders who are sellers on any spike.
What we need is a change of mind set where new buyers come in and just blindly buy. These miners should have a beta of 2 or 3 to spot precious metals prices. Currently we are stuck with less than 1. Miserable.
What will cause this mind set change? I am not sure. Maybe Brainard as Fed Governor. Maybe a 7 per cent print for US inflation. But the Tsunami has not burst yet in popular culture. But we need an acceleration, and so far it is not there. Not there at all. As P* accelerates (the velocity of money for those who are not economists) we need the PM space to accelerate too. Where are you, beta?
I have nothing against crypto, but the whole Gold/Crypto debate is silly. They are different animals, with different risk profiles and different cultures.
Anything that can fall 10 per cent in a day on nothing is not a store of value.
The premium is about 20%. This can be justified: there are warrants vesting in May next year to all holders at 0.3784. The ratio is 1 warrant for every 5 held. The current fully diluted NAV is 0.58, (undiluted about 0.62) so there is some free money for all holders (except it is not free, because of the 20% premium). However, this is not enough to justify the premium. There is also the leverage. The portfolio is currently 111% invested. Nice to have in a bull market. Finally, a justification for the premium is the focus on small cap uranium firms, I.e. not CCJ.
However, there are negatives too. The fees are high: 1.38 per cent plus a 2% performance fee over an 8% hurdle. Liquidity is terrible and the bid/offer spread is exorbitant. Finally, there is an over concentration in NXE. Great to not be over dependent on CJJ, and have an emphasis on smaller firms, but there is still 18% in NXE, which is one of the larger blue chip producers with out the zip of the small cap stocks. Recently GCL has been buying CCJ too, and now has a 6% position. So the small cap bias argument does not really stand up.
Finally, the premium could be justified for the expertise of the teams, and the difficulty for UK domestic investors to access Canadian and Aussie stocks.
GCL is tapping the market and issuing shares at a premium to try and damp down some of the froth in this stock
Net Net, I am offering out some of my shares on peaks and gradually swapping into URNM. I will take the FX risk. I remain mega bullish on the thesis, but I think it is time to move on. The premium is too high.
Does anybody have a model giving a precise analysis of the embedded warrants vesting in May next year - it would be nice to know exactly how much of the premium can be justified by the warrants.
Yes, a 20 per cent discount is absurd, especially with rising gold and silver prices, however, there have been a couple of issues in the portfolio recently: West African Resources mines in Burkina Faso, where there has been some local violence around gold mines. Fortuna Silver Mines has had problems in Mexico with its licenses. Shares in FSM are down about 20%. These two stocks are about 20% of the GPM portfolio.
Medium term, these issues should not matter. But in the short term, they provide good cause for investors to pause.
Once we close above 0.5, GPM should surge over 0.6 quickly. I remain long a lot, and expect the GPM share price to go well 1. So this baby should easily double.
The next step will be anew Fed chairman (Brainnard?) and the imposition of MMT as Fed policy. This should push $100 higher to 1975.
Happy Hunting x
We should break 1870 today, which is a remarkable breakdown in correlation with a higher dollar and higher us yields. Exciting. But will anybody notice and buy MTL? Next stop is 1930. Remember that MTL makes nearly $70,000 per year per dollar increase in the POG. So a $100 increase leads to increased revenues of nearly $7m. Let’s see what happens.
This is a shameless pump, but please note the following: lets assume the MTL AISC is $1,400. It was $1,314 in the last quarter. Let’s then assume that production is 69,000 oz a year (taking into account productivity improvements). At POG $1,800, the revenue is thus $124.2m against a cost of $96.6m. Thus a net revenue of $27.6m. (I have not called this profit because they have interest and debt repayments. )
At POG $1,850, which is where the price has gone in the last half hour post the hot CPI (6.2%) net revenue is $31m. At $1,900, net revenue is $34.5m. At $2,000 net revenue is $41.4m. This would enable management to make a huge dent in the debt burden, and reduce the penal 15% interest rate on some of their debt to more reasonable levels.
These numbers are not correct, for sure, but they are indicative of the potential impact of a sustained rise in the POG on this stock. Just saying. If anybody has a really good model, perhaps they can share a more accurate analysis.
As Horace said: “VIXI”.
Let’s see if the market recognizes the leverage and optionality in MTL now that gold is breaking out. For the silver play, which should be bigger than the Gold play (Gold/Silver ratio should collapse) I like SILJ and FRES. FRES has a big stake in MAG. A small float, and I think is badly mispriced. I own a bit of HOC, POLY, POG and CEY and they all trade like dogs. But hope spring eternal. I also own a bit of GGP, which has a great asset (make that mind blowing) but which needs to be developed. Always tricky and expensive. Perhaps the asset is overhyped - buy the rumor and sell the fact. I also own GPM, lots of small cap exposure to miners in Canada and Australia. 20 per cent discount to NAV. I have cleaned up on GCL, from the same family. Uranium has been a much easier play than the agony of Gold and Silver miners. But perhaps our patience will now be vindicated. The Fed, and all the other Central Banks, have created this disaster. But then again, it is not a disaster. Secretly they want inflation. It is the only way out of the debt debacle.
On a different note, I was at a dinner with Greenspan in Florida a few years ago. He spoke, brilliantly, but without saying anything. Classic Greenspan. He was a master of obfuscation. That very day, the ex governor of the Central Bank of Thailand had been arrested in Thailand for mismanaging the central bank. So I asked Greenspan the obvious question: “to what extent should central bankers be held accountable for their decisions and actions?”
He gave me a withering look, which said to everyone: this bloke is a proper arse, asking such an impudent question. There was an awkward laugh from the audience. Greenspan stepped backwards, gathered himself, stepped forward and said: “if Central bankers were held accountable for their actions, there would not be enough cells in enough prisons, to keep us all locked up.” Massive laughter.
Greenspan 1, me nil. He gave me another withering look. This time the look said “go back and hide in the whole from whence you came.” I spent the rest of the evening being very quiet. These people, even if they are wrong, are class acts.
Lesson learnt.
For those of you with a technical bent, a close above .487/.49 would trigger an inverse head and shoulders with a target at .59 or thereabouts. The break is likely with a move through 1825/35 in Gold. And it is Fed time. Lets see what happens. But the potential is there.
It strikes me that this stock is now a highly levered call option on Gold. If Gold breaks 1,825/1835, and races away, the revenue of MTL will obviously increase. The excess cash flow can quickly be used to pay down the residual debt, and trigger the lower coupon. At the same time there have been production improvements and efficiency gains. The beta to Gold on a rally should be high. If Gold runs up to 2,500, the share price should surge. Does anybody have a nice spreadsheet modeling the FCF and the effect of debt reduction and coupon reduction at #2,500? If they do, please share your analysis. This could be the best LSE play in the event Gold breaks out.
Does anybody have a nice model where they can quickly plug in the rising price of Zinc and its impact on FRES revenues and earnings? Zinc was about 10% or revenues, or about $200m, ceteris paribus. I see Zinc prices are up another 8% in Shanghai this morning. Naturally it is not consequential compared to moves in Gold and Silver, but there must be somebody with a model who can articulate the impact. Thank you!
A Bloomberg journalist just commented on TV that there were rumors in the market about a potential takeover of ANTO. Thus explaining some of todays dramatic price action. Seems far fetched to me, but it would be a nice surprise. Probably nothing.
The Sprott squeeze continues.
We might consolidate for a few days but this baby is not going down.
Given the share issuance by the manager, and at a premium, it would be interesting to know if he is using the new cash to buy up more of the blue chip names, like the overweight position in NXE, or if he is buying up some of the more volatile juniors, or if he is topping up all existing holdings proportionally.