‘Guy on Rocks’ is a Stockhead series looking at the significant happenings of the resources market each week. Former geologist and experienced stockbroker Guy Le Page, director, and responsible executive at Perth-based financial services provider RM Corporate Finance, shares his high conviction views on the market and his “hot stocks to watch”.
Market Ructions
Figure 1: 1-year gold price chart (source: https://tradingeconomics.com/commodity/gold, 18 June 2024)
Gold picked up US$15 last week to close at US$2,326 before pulling back to US$2,321 in mid-week trading. Not a great deal of news driving precious metals this week other than a few speeches by Federal Reserve board members who appear to be sitting on the fence regarding near term interest rate movements.
U.S. 10-year Treasury yields were off 14 basis points to 4.27% over the last week with volatility as measured by the VIX index slightly lower at 12.75.
The US dollar index (DXY) was also flat at 105.27 with crude oil trading at US$79.25 a barrel. The benchmark 10-year U.S. recent economic news from China saw industrial production figures for May rising by 5.6% year-on-year, slightly softer than the 6.2% anticipated by the market.
Fixed asset investment dropped marginally to 4% (market expectations were 4.2%) with retail sales higher than expected (up by 0.5% for the month and 3.7% for the last year).
More importantly for base metal markets, Bells (18 June 2024) believe that many analysts are anticipating strong infrastructure spending in coming months following an increase in Chinese government bond issues which normally signals elevated levels of spending.
Figure 2: 1-year palladium price chart (source: https://tradingeconomics.com/commodity/palladium, 18 June 2024)
Palladium’s sell down continued bringing the year-to-date performance to -17.5% (figure 2) on the back of a soft auto sector outlook.
Figure 3: 1-year platinum price chart (source: https://tradingeconomics.com/commodity/platinum, 18 June 2024)
Platinum (figure 3) fared slightly better and was up US$7 to US$978/ounce after recently dipping to six-week lows of US$950/ounce as subsidies for the battery and electric vehicle sector in China permitted EV producers to launch new products and deliver price discounts, in the process taking market share off ICEs.
The World Platinum Investment Council is still predicting that global demand for platinum will exceed supply by 476,000 ounces this year representing a 6% shortfall.
Figure 4: 1-year copper price chart (source: https://tradingeconomics.com/commodity/copper, 18 June 2024)
The copper price (figure 4) dropped below US$4.46/lb in June, sharply off its record highs of US$5.20/lb last month with Chinese inventories remaining at their levels since 2020.
Finally, iron ore prices have been under pressure, no doubt influenced in part by a number of property developer liquidations as well as the rapid fall in Chinese home prices that retreated 0.71% in April, the fastest decline according to Bloomberg since October 2014.
Figure 5: 1-year iron ore price chart (source: https://tradingeconomics.com/commodity/iron-ore, 18 June 2024)
New Ideas… Thunderbirds are go
Figure 6: THB 2-year share price chart (source: CMC Markets, 18 June 2024)
The Thunderbird Resources (ASX:THB) (formerly Valor Resources) chart paints a fairly bleak picture, not unlike many of the ASX listed juniors that have been hit with a wave of selling in June.
For a company with a large footprint in the prolific uranium producing Athabasca basin, this is a little surprising with the market capitalisation retreating from a peak of around $15 million last year to around $6 million at the time of writing.
Figure 7: THB’s Athabasca basin exploration portfolio (source: THB Presentation, May 2024)
The Company recently completed a placement at 3 cents for $1.35 (CPS Capital) and is completing an underwritten Rights Offer raising a further $2.77 million (RM Corporate Finance).
The near-term focus is likely to be Hidden Bay (figure 8) where drilling is scheduled to commence over five targets in August this year. Previous drilling on the property has intersected grades over 1% U3O8 with the current targets generated by coincident gravity lows, conductors and the presence of an unconformity along an east north-east trending fault.
In addition, a radon survey has detected uranium leaking from this structure.
Figure 8: THB’s Hidden Bay uranium project in the Athabasca basin (source: THB Presentation, May 2024)
Drilling will target both unconformity and basement hosted uranium mineralisation. Australian explorers have done well in this basin, and we need to look no further than NextGen Energy Ltd’s Arrow deposit (337Mlb @ 1.8% U3O8) which is projected to produce 267Mlb of U3O8 over a 10 year+ mine life (figure 9).
The project boasts a whopping US$8 billion NPV with an internal rate of 81%!
Figure 9: Arrow deposit long sections and key metrics (source: NextGen Energy Presentation, June 2024)
A good example of Australian exploration success on steroids, or human growth hormone depending on your preference.
I think the Aloysius Parker, the man servant of Mrs Penelope Creighton-Ward in Thunderbirds (1966) would have surely recommended a dabble in this stock.
Penelope: Should I back up the truck Parker?
Parker: Yes M ’Lady
Guy Le Page is a director and responsible executive at Perth-based financial services provider RM Corporate Finance. A former geologist and experienced stockbroker, he is involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting and corporate advisory roles.
He was head of research at Morgan Stockbroking Limited (Perth) prior to joining Tolhurst Noall as a Corporate Advisor in July 1998. Prior to entering the stockbroking industry, he spent 10 years as an exploration and mining geologist in Australia, Canada, and the United States.
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