Mocker Monday. 22 June.
Travel industry
Good interview with the head of Flight Centre discussing how a company in one of the hardest hit sectors battened down the hatches. This also had some good insight into the expected recovery of the travel sector. ‘Survival was on the line’: Flight Centre’s near-death experience (Sydney Morning Herald)
Coronavirus, the market, and the economy
New fears of a second wave have caused more uncertainty in the markets. Some well reasoned summaries of how things are going from one of the Mocker’s favourites. How worried should investors be about a “second wave” of coronavirus cases? (Shane Oliver – Livewire Markets)
However, the market is still all over the place. New investors have been piling in and driving up prices, sometimes even of companies that are filing for bankruptcy. Interesting times. The Winner Is… Busted Companies (Jonathan Rochford – Livewire Markets)
Some of the first waves of economic fallout are coming, and with it Australians are rethinking their financial situations. 8 things we’re worried about right now, according to financial planners (Matt Hopkins – Business Insider Australia)
Valuations vs Pricing
Good article on some of the shortcomings of using PE ratios as variables. Various Mockers have differing perspectives on PE’s, but we all agree that pricing and valuation should only be part of your reasoning for buying into a company. PE Ratios are irrelevant: two erroneous metrics lead to an erroneous conclusion (Will Simpson – Blue Ocean Capital)
Resource Rising Stars
Mocker Bill has sent his usual thoughts on the latest RRS webinar
Fenix (FEX) – Small iron ore tenement they’re trying to get into production.
Saw these guys late last year and they’ve made some progress. They’ve got a small (10Mt) resource at great grade so it’s DSO and it’s the shipping by truck 650K to Geraldton which worries me. They’re AISC will be high (A70ish). Iron ore price is high which helps. Market cap of 12m and 13m to produce first ore maybe as soon as next year. If you think iron ore will stay expensive then it’s a goer. It’ll be a small operation very profitable at today’s prices. They should get approvals sorted soon, then finance and contracting etc. Went up 10% during the presentation 🙂
Stavely (SVY) – Copper explorer/developer
Seen these folks around for some time. They’ll be drilling for another 18m to get a resource and then a PFS, DFS, etc etc. It has the potential to be a huge deposit. It’s in Victoria so amenities/facilities would be easy. I wasn’t entirely convinced by their theory that it’s a magma style deposit but they think so and they’re geologists. Right now they’ve got some good grades in solid pockets and extensive lesser hits.
Liontown (LTR) – Lithium explorer (spodumene)
I saw these folks a year ago and was impressed at the grades but not buying Lithium plays at that time. Since then they have grown the size of the deposit and the grades have stayed very good. The share price is exactly where it was but has been much higher and lower through the year. They’re working on a PFS but my feeling on Lithium is that the next wave is built upon supply chain agreements so I want to see offtakes and/or some strategic investors if our dumb federal governmwnt will allow it. I can’t believe I’m actually worried about sovereign risk in Australia. Tim Goyder is the chair and owns 18% which is almost enough to invest in by itself. Market cap is ~$200M
Pilbara Minerals (PLS) – Lithium miner
I own a chunk because they’re incredibly well embedded in supply chains (offtake and investment). Right now they’re battened down with the ability to expand very quickly when Lithium picks up. It’s a big (top 5) spodumene mine with lovely C1 costs relative to their peers but Lithium in major surplus still. A year ago I would have said the price would be recovering by now but it hasn’t. They have improved their recovery rates substantially which is a relief. The new management seems quite competent. These guys present very well and don’t hide from science. I still like these folks a lot.
