Why you should know about these money trees

Thursday, 11 April 2019
Adelaide, Australia
By Bernd Struben

  • Commodities leading the charge
  • ‘Tasmania’s Gender Optional Bill Opens Pandora’s Box’

There’s gold in them thar…trees?

Apparently so.

I must admit, I didn’t know you can use trees to help locate gold deposits. Not until Kevin Wills’ presentation at the South Australian Resources & Energy Investment Conference (SAREIC) earlier this week.

Kevin is the executive director of exploration for Aussie gold junior Marmota Ltd [ASX:MEU].

The company has a market cap of $11 million. And it uses a range of techniques to explore for gold in South Australia. A state which holds some 25% of the nation’s gold reserves.

Some of the techniques you’d expect. Like employing aerial and magnetic surveys before going to the expense of putting a drill in the ground.

Others, like biogeochemical leaf analysis, might come as a surprise.

Now it’s tempting to let your eyes glaze over when people trot out terms like ‘biogeochemical analysis’. But the idea behind it is quite simple, really.

In a nutshell, gum trees growing in areas with traces of gold in the soil draw tiny amounts of gold into their leaves. Lab analysis can then reveal which trees are located in areas with higher levels of gold in the soil.

My notes are even scratchier than normal on this point, but I believe Kevin said Marmota had sampled some 40,000 trees in their latest assay at their Aurora Tank gold project.

The rapid, low impact sampling method, together with other techniques, already helped guide the company to a high-grade gold strike in September. And they’re hoping it will do so again.

Looking at the charts, Marmota’s share price has hovered near 2.0 cents all year. It’s currently trading at 1.7 cents.

If the gum trees can help steer the company to another big gold target, the share price could take off.

That’s the exciting aspect with these kinds of small explorers. There’s a high risk of the share price doing nothing — or heading down — while they search for gold veins in areas larger than many nations. But when they do hit a big target, their share price can double…or more…in short order.

St Barbara Ltd [ASX:SBM] is a classic example.

At time of writing the gold stock is trading for $3.28 per share. And it has a market cap of $1.7 billion. But that wasn’t always the case.

Back on 6 August 2015, you could have bought shares for 39.5 cents.

Then the company’s fortunes turned around. By 22 March 2016, the share price hit $2.59. That’s a gain of 557% in just over six months.

Take that, bitcoin!

These are the kinds of early stage gold companies — and the sorts of eye-popping returns — that Harje Ronngard targets at his premium investment advisory, Gold & Commodities Stock Trader.

Now this service isn’t for everyone. By their very nature, many of Harje’s recommendations carry high risk in their hunt for supercharged returns.

But if you’ve got the stomach to ride along with the ups and downs, and you’re looking to get into the next St Barbara in its early stages, you should have a look at what Harje’s up to over at Gold & Commodities Stock Trader here.

Now to the markets…

Markets

Overnight, the Dow Jones Industrial Average closed up 40.36 points, or 0.15%.

The S&P 500 closed up 10.01 points, or 0.35%.

In Europe, the Euro Stoxx 50 index finished up 7.43 points, or 0.22%. Meanwhile, the FTSE 100 fell 0.05%, and Germany’s DAX closed up 55.34 points, or 0.47%.

In Asian markets Japan’s Nikkei 225 is up 12.74 points, or 0.06%. China’s CSI 300 is down 1.98%.

In Australia, the S&P/ASX 200 is down 18.15 points, or 0.29%.

On the commodities markets, West Texas Intermediate crude oil is US$64.35 per barrel. Brent crude is US$71.53 per barrel.

With the tremendous supply of oil coming online in the US, atop what’s being held back by Russia and the Saudis, I believe both crude benchmarks are now well into overvalued territory. But that’s not to say crude can’t go higher before taking a sharp fall.

The next OPEC+ meeting is scheduled for the end of June. Russia remains reluctant to extend its production cuts into the second half of the year. And investors remain on edge over slowing global growth.

More oil from Russia (or the Saudis), or more dour news on the global growth outlook, could be enough to send crude down 20% or more from today’s prices.

I’ll keep a close eye on the story. In the meantime, if you’re thinking about shorting oil — gaining from any price falls — you might want to hold off a few weeks. Watch this space…

Turning to gold, the yellow metal is trading for US$1,307.46 (AU$1,824.79) per troy ounce. Silver is US$15.22 (AU$21.24) per troy ounce.

One bitcoin is worth US$5,316.39.

The Aussie dollar is worth 71.65 US cents.

Commodities leading the charge

Keeping to the theme of commodities — and the ASX 200 — the Aussie index is up 11.5% since 02 January this year. That’s despite the 0.29% fall today in intraday trading.

Bloomberg tells me that’s its best first quarter performance ever, with data going back some 30 years. You can see the year-to-date chart for the ASX 200 below:



chart image

Source: Bloomberg
Click to enlarge

If you’re like me, a chart like this inspires greed and fear alike.

Greed in that there’s no reason the stock market couldn’t see another quarter like this.

And fear, because that’s not very likely.

The index’s record first-quarter performance comes as wage growth remains virtually non-existent. House prices in the capital cities continue to fall at unprecedented rates. And the economy is forecast to grow by a less than stellar 2.4% this calendar year.

But the market has shrugged this off.

You can attribute a large part of this to a return of easy money policies from major central banks across the world. In Australia, consensus forecasts have gone from seeing the RBA raise rates at least once this year to seeing the bank cut rates…likely twice.

And there’s nothing stock markets like more than easy money.

The commodities sector has been one of the biggest beneficiaries of central bank largesse. As Greg Canavan wrote here in yesterday’s guest essay, ‘Commodities in general are happy recipients of the central bank sponsored global surge in liquidity we’ve seen so far in 2019.’

Indeed, as Bloomberg notes, the commodity sector has been a big driver behind the ASX’s record first-quarter gains:

The key stock gauge [ASX 200] has persevered in part thanks to strength in commodities markets, which have propelled resources to become Australia’s second-best performing sector this year.

Iron ore’s supply shock in Brazil has helped prices of the raw material rally, lifting miners like BHP Group Ltd. and Fortescue Metals Group, said Aaron Binsted, Sydney-based portfolio manager at Lazard Asset Management. BHP, which has the second-highest weighting on the gauge, is up 17 percent this year, while Fortescue has soared 95 percent.

Now the horse is likely well and truly out of the barn for the outsized gains made by the likes of Fortescue this time around. But that’s not necessarily the case for some of the junior iron ore stocks.

Quentin Hill was one of the presenters at this week’s SAREIC. He’s the managing director for Carpentaria Resources Ltd [ASX:CAP].

The company has a market cap of $11.6 million. And it’s working on developing its Hawsons magnetite iron ore pellet project, 60 kilometres southwest of Broken Hill on the South Australia border.

Quentin was also spruiking the Brazilian dam failures and iron ore shocks as an opportunity for companies like Carpentaria.

Speaking of iron ore pellets, he noted that even before Brazil’s supply got hit, there was already an increasing supply and demand gap, particularly in the Middle East.

And he added that:

The Brazilian impacts have disrupted the overall iron ore seaborne market by between 50-70 mtpa of which 10-15 mtpa of that is for iron ore pellets. This will favour the development of our Hawsons magnetite pellet project.

Mtpa, by the way, stands for million tonnes per annum.

And Quentin believes that the supply impact from Brazil is likely to be prolonged.

That should prove good news for stocks like Carpentaria. Particularly if the company can secure the remaining 80% of funding needed for the Hawsons project’s Bankable Feasibility Study.

That’s all for today.

Be sure to tune back in tomorrow when we look at the fastest growing soft commodity market in the world. And one stock well-positioned to profit.

Now before you sign off, here’s the latest in extreme political correctness from The Australian Tribune:

‘Tasmania’s Gender Optional Bill Opens Pandora’s Box’

If your genitals don’t determine your gender, what does?

It’s a confronting question. But it’s one all Tasmanian residents will be pondering after Tasmania became the first Australian state to make gender optional on birth certificates.

While there are rare medical cases where gender at birth can be difficult to determine, the sweeping new bill could have many unintended…’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd