Investment Matters

Company News

Australian Equities Portfolio

Sandfire (positive impact) released its quarterly activity report. 

Cash flow was well supported by higher grades and buoyant copper pricing, bringing the company’s cash balance at the end of the quarter to $574m (relative to its market capitalisation of $1.3 bn).

This strong cash balance enhances optionality in the company’s other developments (primarily T3 in Botswana and Black Butte in Montana) and sees the company well-funded to pursue these (and other) opportunities.

We continue to see the that the market undervalues the opportunities the company has.

Work continues at T3, with the construction of a 200 person camp and the clearing of a 15km access road having commenced.

***

Hastings Technology Metals (positive impact) announced a 37% upgrade to their stated reserves at sites surrounding Yangibana, the location of the company’s Rare Earths Project in Western Australia.

Shares in the company ended the week 11% higher

As part of this estimate, the amount of Total Rare Earth Oxide (TREO) rose by 15% to 158,400t with the estimated amount of Neodymium and Praseodymium (NdPr) – the key metals used in the production of permanent magnets found in wind turbines and electric vehicles increasing by 18% to 58,300 tonnes.

The holding forms a part of the basket of companies exposed to ‘green metals’ held in the Australian Equities portfolio – which includes Lynas, Independence Group and Sandfire.

***

IGO Group (neutral impact) also released its quarterly activity report.

Cash flow for the quarter was almost double that of the previous quarter, with production at its Nova Operation (Nicker, Cobalt, Copper) benefiting from higher grades and strong pricing.

The company also announced the acquisition of Silver Night, a nickel, cobalt, copper deposit 150 km north of its Nova Operation for

The previously permitted deposit has the potential to leverage existing infrastructure at Nova to extract additional value.

The company also announced that it anticipates first production of lithium from its Joint Venture with Tianqi to be in the current half (1H-22). Kwinana, the lithium hydroxide plant co-owned by the joint venture had been under care and maintenance, but will re-start to take advantage of the strength pricing we have seen recently.

***

Lynas (positive impact) released its quarterly production report.

Cash flow was pleasing, with strong NdPr pricing and receipts from sales in the previous quarter flowing through.

The company continues to make progress in the development of its cracking and leaching plant in Kargoolie and permanent disposal facility in Malaysia.

Furthermore, it has submitted the final design for its proposed heavy rare earths facility in the US.

We continue to see Lynas, as the largest rare-earths producer outside of China, as being well-positioned to benefit from rising demand for rare earths, with governments and corporates alike looking to establish redundancy in their supply chains.

***

Aurelia Metals (negative impact) release its 4th quarter and final FY21 results. It also provided guidance for FY22. A combination of weaker than expected operating performance at its recently acquired Dargues Gold Mine and disappointing guidance for FY22 saw the stock sell off heavily (-20%).

This disappointment was related to expected cost of production (AISC) at both the core Peak Mine and at Dargues. The market had expected that the anticipated record production volumes in FY22 would translate into much stronger operating profits. The guidance, whilst undoubtedly conservative, indicates that stronger production is partially offset in the short erm by costs of exploiting these new reserves.

It has been a volatile two month for Aurelia as the stock rose and fell around 20%. Why the volatility? There have been a number of significant recent positive announcements regarding the future scope of mining at Aurelia’s existing sites, its new Dargues Gold Mine, and the new Federation deposit located close to the Hera plant. The stock rose in response. Based on guidance uncertainty surrounding how profitable these deposits will be, and the speed at which they are converted into earnings remains, the stock subsequently fell.

Disappointment with early outcomes at Dargues have only added to short-term uncertainty. Taking a long-term view, we remain comfortable that value is continuing to be created.

***

The above market commentary represents the views and opinions of First Samuel Pty Ltd. Such market commentary contains information of a general nature only. Such market commentary is not intended to provide a sufficient basis on which to make any investment decision and should not be taken as such. It has not taken into consideration your objectives, needs or financial situation. Before making decisions in relation to any financial product, you should always obtain and read any relevant Product Disclosure Statement or information statement and seek personal financial advice.