\u2018Guy on Rocks\u2019 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 \u201chot stocks to watch\u201d.
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10-year treasuries took a dive along with the US dollar with the DXY closing last week at 102.6, down 1.3% on the week falling further to 101.8 by early afternoon trading on Friday. <\/p>\n
US 10-year treasuries were soft dropping 39 basis points to 3.92% and falling further to 3.85% mid-week with volatility remining very low with the VIX at 12.3. <\/p>\n
Precious metals responded with gold climbing just under 3% to US$2,049\/ounce by late this week with silver putting on 3.5% to close at US$23.81 3.5%. Platinum was up 2.4% to US$940\/ounce and palladium, after Russia threatened to withdraw supply, put on a whopping US$233 to close at US$1,162\/ounce up 25% last week (figure 1), moving higher later in Friday trading to US$1,220\/ounce. <\/p>\n
Figure 1: 1 year palladium price chart (Source: https:\/\/tradingeconomics.com\/commodity\/copper, 21 December 2023.)<\/p>\n
On the back of the bullish Federal Reserve comments last week, copper was up 4 cents to US$3.89\/lb with a very large 5 cent contango for three month futures. <\/p>\n
Figure 2: 1 year copper price chart (Source: https:\/\/tradingeconomics.com\/commodity\/copper, 21 December 2023.)<\/p>\n
COP28 wrapped up last week which saw the luminaries commit to a tripling of renewable energy capacity and doubling the rate of energy efficiency. The agreement contemplates transitioning away from fossil fuels. <\/p>\n
Figure 3: Global fossil fuel consumption chart 1800-2022 (Source: https:\/\/ourworldindata.org\/fossil-fuels 21 December 2023.)<\/p>\n
I am not sure what the punters were smoking at COP28 but clearly they haven\u2019t seen the charts on fossil fuels (figure 3) which show a rapidly increasing consumption of fossil fuels, accelerating as we transition to renewable energy. <\/p>\n
Given China is putting on more coal-fired power stations (to make batteries of course) and the majority of inputs to EVs use fossil fuels as the primary energy source (because renewable energy is too expensive), then I see no reason for the trend of increasing fossil fuel consumption to change.<\/p>\n
Other notable (aspirational) statements from COP28 included a plan to adopt more zero-emission commercial vehicles, reduce cooling emissions and the implementation of new green shipping corridors. <\/p>\n
I have no doubt that OPEC has it right, projecting 2024 will be a bullish year for oil with a 2% year-on-year increase in consumption.<\/p>\n
The only sensible (and sustainable) outcome from COP28 was the commitment to increase nuclear power capacity which the IAEA believes will grow from 9% to 25% from 2022 to 2030. <\/p>\n
If this takes place, then there should be some sort of reduction in fossil fuel consumption, but I have my doubts. Coal would also likely be a casualty however this assumes nuclear power targets could be met. <\/p>\n
WTI was up 0.6% last week to close at US$71.62\/BBL before edging up to US$74\/BBL later in the week. US Inventories were down over 4MBBLS, imports steady at 6.5MBOPD, domestic production at a record 13.3m BOPD and refineries remained flat at 16MBOPD. <\/p>\n
Angola\u2019s departure from OPEC last week leaves only 12 nations left as it rejected calls to reduce output. <\/p>\n
According to Morgan Stanley (22\/12\/2023) EV sales in China grew by 14% YoY to ~702,000 units and rose ~6% MoM following month-end sales by automakers. Morgan Stanley believes the medium-term outlook looks subdued with MSe China Autos projecting 2023 BEV sales of 5.65mn units. <\/p>\n
That, combined with elevated battery inventory levels and increasing African lithium supply, should see lithium carbonate prices remaining depressed at 1Q2024: US$13.5\/t, 2Q2024: US $12.5k\/t (spot: ~US$12k\/t). <\/p>\n
Macquarie (21\/12\/2023) have also lowered their spodumene prices by 61-74% in CY2024-2026, by 2-37% in CY2027-2028, and increasing by 9-19% in CY2029-2030 (figure 4). <\/p>\n
The current depressed prices are clearly taking a toll on domestic producers with Core Lithium (ASX:CXO) suspending operations at its Finnis Lithium Project in the Northern Territory blaming soft spodumene prices. The shares were down over 20% late last week.<\/p>\n
Figure 4: Spodumene 6% Li2O US\/t (Source: Macquarie Research, 21 December 2023.)<\/p>\n
Uranium (figure 5) took a big jump last week on the back of COP 28 closing at US$86\/lb for a 5% gain. Uranium is up 8 of the last 9 weeks and over 70% year to date. The US remains heavily dependent on Russian Uranium (controlling 40% of enriched uranium) and no doubt US domestic policy is likely to remain favourable for uranium explorers and developers. <\/p>\n\n
I have no doubt, and the Cigar Social Climate Change Sceptic Committee (CSCCSC) is right behind me on this one, that we are in for a uranium boom like no other. I just thought I should share a photo of the CSCCCS smoking some zero emission Cuban cigars just after our COP29 meeting where we resolved to raise funds for water-laden rockets to the sun as part of the war on climate change (figure 6). <\/p>\n
The basis for this resolution was that dumping water on the sun would have more impact on global warming than the developed world\u2019s current energy policies.<\/p>\n
Chairman Jeff Balfe can be seen on the far left being overseen by Wendy Rhoades (Maggie Siff) from Billions. <\/p>\n
Figure 6: Cigar Social Climate Change Sceptic Committee being overlooked by Wendy Rhoades (Billions).
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I will wait for the cigar smoke to clear and the scotch to run out before rolling out the next chestnut to the Stockhead Faithful. <\/p>\n
I thought however I would recap on the performance of ASX listed uranium explorers and developers this calendar year which showed a 63% weighted increase without much fanfare (table 1). <\/p>\n
I anticipate this list will expand significantly next year as Australian resource companies branch out into jurisdictions such as Canada, the US and Namibia. As U threatens to break US$100\/lb, this could make for a wild ride in 2024. Enjoy the break and I will see you around like a rissole next year\u2026<\/p>\n
Table 1: ASX listed uranium explorers\/developers CY 2023 share price performance (source: RM Research, 21 December. 2023).
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At RM Corporate Finance, Guy Le Page is involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting, and corporate advisory roles. <\/em><\/p>\n 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. <\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.<\/p>\n Stockhead has not provided, endorsed, or otherwise assumed responsibility for any financial product advice contained in this article.<\/p>\n <\/span><\/p>\n The post Guy on Rocks: Uranium boom in \u201924? We\u2019ll smoke to that\u2026<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"