Investment Ideas From the Edge of the Bell Curve
The S&P/ASX 200 ended the day 1.8% higher, led strongly by familiar retail favourites.
The best performers on Thursday:
On Thursday, Anson Resources announced the completion of its Definitive Feasibility Study for phase 1 of its Paradox Lithium Project in Utah, US.
Anson said the DFS confirmed Paradox’s ‘advanced potential to become a major supplier of high purity, battery grade Lithium Carbonate’.
The key financial DFS estimates are captured below:
Source: ASN
The phase 1 DFS suggests Paradox is capable of delivering a “low-cost operation with revenues of US$5,080 million forecast over 23 years of operations.”
That’s about US$221 million in revenue when annualised.
The revenue is expected to come from annual production of high purity lithium carbonate of up to 13,074 tonnes per year over an initial ten years of project life.
The project is then expected to produce “at lower commercial levels”, if no further wells were to be brought online.
Here are some key assumptions underpinning the projections:
On the topic of yearly production, Anson elaborated that its production output will shrink as it cycles mining zones:
“Production of up to 13,074 tonnes per annum of lithium carbonate during years 1 to 10 from extracting brine from Clastic Zone 31 and the Mississippian formation, before progressing to Clastic Zones 19 and 29 during years 11 to 17, followed by Clastic Zones 17 and 33 during years 18 to 23 when production volumes are estimated at 7,723 tonnes per annum and 4,186 tonnes per annum, respectively.”
The All Ords is currently up 1.60%, bolstered by big moves from familiar retail favourites.
In today’s Money Morning, we bring you a warm introduction to our newest member of the Fat Tail Investment Research team, James Cooper. James worked as a geologist for a little over 10 years, and his insight into the mining space will be incomparably helpful with resource investing. It looks like he joined us just in time because James thinks right now is a prime opportunity to jump into this sector.
Do you remember the once-in-a-generation commodity boom that topped out in 2012?
That was one heck of a boom.
It lasted 6–8 years (give or take) and made a fortune for some.
As a geologist in the mining industry throughout that era, I can only say the feeling was feverish on the ground.
Just like the tech boom of late, it made its fair share of millionaires AND some prominent billionaires too.
Least of which was Andrew ‘Twiggy’ Forrest, a virtually unknown businessman in the early 2000s.
But just 3–4 years later, he was a household name across Australia.
He became part of the mega-rich fraternity.
Now an iconic business magnate, he, like many uber-rich Australians before him, benefited from the vast quantity of minerals that lie below YOUR feet.
And whether you love him or hate him, his success was very much down to timing and intricate knowledge of the industry.
Twiggy had the experience to capitalise on the opportunity that sat in front of him, or more aptly, below him.
And whether it was well-planned business shrewdness or just sheer luck, his bold move into the iron ore sector, challenging the only other iron ore players at the time — BHP and RIO — was a feat of impeccable timing.
The Chinese-led boom fuelled commodity prices across the globe, and this had an enormous impact on boosting Australia’s Terms of Trade at the time, not to mention Twiggy’s back pocket.
If you’re unfamiliar, the Terms of Trade is a ratio of the prices of exports to imports. It’s a good measure of how strongly a country performs, particularly in a resource-rich nation like ours.
I’ve highlighted the boom years in the chart below:
For most Australians, the answer was an overwhelming no!
National wealth grew exponentially from 2004–10.
But for the average Australian, the boom years did little more than change the morning newspaper headlines.
The boom came and went.
It didn’t make an ounce of difference for the majority.
https://www.moneymorning.com.au/20220908/executives-positioning-for-a-new-boom-in-commodities-now-is-the-time-to-invest-like-an-insider.html
Defence and space tech stock Electro Optic Systems (ASX:EOS) is down over 25% at midday after releasing its latest half-year results.
During the half-year period, EOS reported an impairment loss of $47.2 million for its SpaceLink segment as a result of a “significant deterioration in the risk appetite in debt and equity markets.”
EOS said its working capital situation “will remain tight until investment in contract assets can be unwound back
to cash.”
The company entered into a refinancing arrangement with WHSP for short-term working capital, but, “in the medium-term, cash is expected to be recovered by converting the contract asset to cash under existing contracts.”
On September 6, EOS entered into an agreement with a new financier for a 12-month working capital facility limited at $22.5 million with interest of 15%.
Management was blunt about its going concern viability, noting it requires fresh working capital fast … but there’s no guarantee it can secure new debt and equity funding:
“The directors note that whilst the consolidated entity has been successful in securing debt finance and raising capital in the past, and anticipates continued forbearance in relation to the 30 June 2022 covenant breaches, there is no assurance that it will be successful in agreeing a recapitalisation and/or refinancing prior to 26 September 2022, or succeed in achieving the matters referred to above.
“If the consolidated entity is unable to achieve successful outcomes in relation to the above matters, in particular, the successful recapitalisation and/or refinancing of the consolidated entity and the continued support of the financiers to the consolidated entity, material uncertainty exists that may cast significant doubt as to the ability of the consolidated entity to continue as a going concern and therefore, it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial report.”
Wall Street Journal’s Nick Timiraos reported overnight that the US Fed “appears on a path to raise interest rates by another 0.75 percentage point this month”.
This follows Fed chairman Jerome Powell’s strong pledge to fight inflation as the central bank’s foremost duty, even if it ups unemployment and curbs growth.
The interest-rate futures markets predict a 75% probability of the Fed raising rates by another 75 basis points later this month.
‘St. Louis Fed President James Bullard said in an Aug. 18 interview he was leaning in favor of a 0.75-point rate increase this month to raise the fed-funds rate to around 4% by year’s end. “I don’t really see why you want to drag out interest-rate increases into next year,” he said. “I think you might as well do it relatively quickly.”’
Speaking to CNBC, CEO of consumer giant Unilever said he is still seeing the need to raise prices as costs show no signs of easing.
Alan Jope said optimism that inflation has already peaked is “misplaced”.
Ceo of Consumer giant Unilever says he’s still raising prices:”We are not seeing an easing off in our costs & those types of commodities, so I'm afraid any early optimism that inflation had peaked & is behind us is misplaced. We anticipate we're in this for a few more months yet”
— Sara Eisen (@SaraEisen) September 6, 2022
Oil prices fell sharply overnight to levels not seen since the start of the year.
The widely followed Brent crude benchmark fell 5.2% to US$88 a barrel, falling below US$90 a barrel for the first time since February 8.
Phil Flynn, analyst at Price Futures Group, told Reuters:
“Right now the market is basing its concerns about what will happen due to sharply higher energy prices in Europe, slowing demand in Europe, and interest rates rising.”
The major US indexes rose overnight, reversing weeks of declines.
The S&P 500 rose 1.8%.
The Dow Jones Industrial Average rose 1.4%.
And the teach-heavy Nasdaq rose a whole 2.1%.
Yields on US 10-year Treasurys fell slightly to 3.264% from 3.339%.
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Investment ideas from the edge of the bell curve.
Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.
All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.
The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.
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