In the past few months, commodities have responded to escalating tensions between the US and China in a trade war where US President Trump has sought to address the US trade imbalance with China as well as protect US technology patents. Due to this, many investors are finding it hard to determine which commodity they should invest in.
Global economic outlook for Commodities
As per NAB’s minerals and energy outlook report, the global economic outlook remains broadly negative for commodity markets mainly due to the US-China trade tensions that have harmed industrial commodity consumers.
NAB’s minerals and energy outlook Highlights:
- In annual average terms, US dollar commodity prices are forecast to increase by 4.7 per cent in 2019, before falling by 10.5 per cent in 2020 and a further 1.0% in 2021;
- NAB’s Non-Rural Commodity Price Index is forecast to fall significantly in Q4 2019 – down by 8.2% qoq in US dollar terms;
- gold prices are expected to trend higher over the outlook period.
The prices of two commodities, namely gold and silver, have increased significantly in the last six months (refer below images). However, a notable downturn in the prices of silver in the past one month can’t be ignored. Likewise, there is also slight downfall in the prices of gold also.
Gold Six Months Price chart (Source: Thomson Reuters)
Silver Six Months Price chart (Source: Thomson Reuters)
Let us now look at the performances of few gold and silver companies, trading on ASX.
Aurelia Metals Limited (ASX: AMI)
Australian gold, silver, lead, zinc and copper mining and exploration company, Aurelia Metals Limited (AMI) recently identified new zone of strong copper mineralisation while drilling approximately 150 metres below the current Kairos resource.
Additional high-grade base metal and gold intercepts encountered in the lower Kairos area, including:
- 19 metres at 19.7% Pb+Zn, 4.3g/t Au & 0.6% Cu
- 16 metres at 17.8% Pb+Zn, 1.7g/t Au & 0.1% Cu
- 9 metres at 18.1% Pb+Zn, 5.3g/t Au & 1.7% Cu
At Hera, the company had intercepted a new zone of sulphide mineralisation along strike to the south of the Hera trend, as announced on 12 June 2019. Till now, a parent hole (HRD065) and seven daughter wedge holes have been drilled in the area.
Notable assay results which have been returned for a further five of the wedge holes, are as follows:
- HRD065W2 - 24 metres at 6.1% Pb+Zn, 0.1g/t Au, 13g/t Ag & 0.7% Cu from 903m, including 5 metres at 11.1% Pb+Zn, 0.1g/t Au, 28g/t Ag & 1.5% Cu from 922m;
- HRD065W6- 4.25 metres at 15.9% Pb+Zn, 0.5g/t Au, 54g/t Ag & 3.0% Cu from 910.75m
- HRD065W5- 5 metres at 5.7% Pb+Zn, 28g/t Ag & 0.8% Cu from 823m, including 2 metres at 11.4% Pb+Zn, 54g/t Ag & 0.8% Cu from 824m.
In FY19 (year ending 30 June 2019), the company earned a Net Profit After Tax of $36.0 million. During the year, the company’s revenue increased by 19% to $295 million driven by higher production. The company’s cash also increased by 56% to $104.3 million. The revenue from gold contributed 67% of total revenue.
Notable highlights of FY19 include:
- Strong Hera cash flow of $55.1 million, with lower sustaining capital but reduced base metal grades and realised prices;
- Peak cash flow strong $37.9 million, despite large increase in sustaining mine development of $34 million;
- Investment in growth of $22.9 million (Peak Pb/Zn expansion and Exploration);
- First year of significant tax payments, $17.4M paid during the year.
The company recently paid a dividend in respect of the 2019 financial year of 2 cents per share, fully franked.
At market close on 11 October 2019, AMI’s stock was trading at $0.450, up by 2.273% intraday, with a market capitalisation of $384.31 million. In the past six months, AMI stock declined by around 42.04% as on 8 October 2019.
Ramelius Resources Limited (ASX: RMS)
Western Australian gold producer Ramelius Resources Limited (ASX: RMS) was able to achieve the September 2019 quarter production guidance by producing 44,182 ounces of gold during the September quarter. Group Quarterly gold production for the quarter includes:
- 17,504 ounces from Mt Magnet
- 11,527 ounces from Vivien
- 15,151 ounces from Edna May
The company’s key accomplishments during the quarter were:
- Ore development commenced at the Shannon underground mine (Mt Magnet)
- Release of the 2019 Resource & Reserve Statement
- Mining Proposal approval received for the Marda Gold Project 24 September 2019
- Extending the life of Vivien underground mine by one year, to June 2021
For the financial year ending 30 June 2019 (FY19), the company reported a net profit after tax of A$21.8 million, representing a decrease of 29% from the year ended 30 June 2018.
During the year, the company produced 196,679 ounces from its Mt Magnet, Vivien, and Edna May gold mines at an All-In Sustaining Cost of A$1,192 per ounce. The total sales for the year were 203,318 ounces at an average realised gold price of A$1,726 generating strong a margin of $A534 per ounce above AISC per ounce.
At market close on 11 October 2019, RMS stock was trading at $1.320, down by 5.036% intraday, with a market capitalisation of $914.93 million. In the past six months, RMS stock increased by around 57.06% as on 10 October 2019. The stock is trading at a PE multiple of 37.170x with an annual dividend yield of 0.72%.
To know more about Ramelius Resources, click here
Silver Mines Limited (ASX: SVL)
Australian public resource Silver Mines Limited (ASX: SVL) recently acquired the Bowdens Silver Project located near Mudgee in NSW.
Last month, the company completed a capital raising of A$10 million, which will be used to underpin the expansion of exploration activities including drilling at Bowdens Silver Project and the company’s Barabolar Project. Plus, the funds will also be used for completing the Environmental Impact Statement for the Bowdens Silver Project, associated land acquisitions as well as for corporate and general working capital purposes.
During the FY19 (year ending 30 June 2019), the group controlled the following projects:
- Bowdens Silver Project (silver/polymetallic);
- Barabolar Project (copper/gold/silver);
- Tuena Project (gold/silver);
- Webbs Project (silver/polymetallic); and
- Conrad Project (silver/polymetallic)
The company’s projects are covering around 80 kilometres of strike of the highly mineralised Permian Rylstone Volcanics, overlying Ordovician and Silurian formations.
During the year, the company was focussed on the continued pre-development works and mineral exploration at the Bowdens Silver Project.
In FY19, the company commenced initial exploration works at its 100% held Tuena Project which is situated at the southern end of the highly prospective Hill End Trough.
On the stock performance front, SVL’s stock has increased by 108.33% as on 9 October 2019. At market close on 11 October 2019, SVL’s stock was trading at a price of $0.095, down by 1.042% intraday, with a market capitalisation of circa $83.28 million. The stock has a 52 weeks high price of $0.155 and a 52 weeks low price of $0.026 with an average volume of ~7,788,496.
Silver Lake Resources Limited (ASX: SLR)
Silver Lake Resources Limited (ASX: SLR) recently released its September 2019 quarterly activities report in which it reported a group production of 59,288 ounces gold and 734 tonnes copper during the quarter.
Major September Highlights include:
- Mount Monger - Gold production of 36,058 ounces with higher mined grades across all underground mines driving an increased mill grade for the quarter;
- Deflector - Solid production of 25,871 ounces gold equivalent, with record monthly mine production in September and a new quarterly mill throughput record set following record production reported in the June quarter;
- $5.4 million investment in group exploration;
- Exploration success was reported at Deflector during the quarter, with ongoing diamond drilling targeting near mine Mineral Resource extensions intersecting further high-grade gold and copper mineralisation in the new area of focus;
The company believes that its operations are positioned to deliver into the upper end of sales guidance of 215,000 to 230,000 ounces gold equivalent at an average AISC range of A$1,375/oz to A$1,450/oz.
On the stock performance front, SLR’s stock has increased by 10.84% as on 10 October 2019. At market close on 11 October 2019, SLR’s stock was trading at a price of $1.035, up by 12.5% intraday, with a market capitalisation of circa $753.42 million. The stock has a 52 weeks high price of $1.525 and a 52 weeks low price of $0.455 with an average volume of ~ 7,933,876.
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