[kelvin]

Cheers Pete - AFM has too much of my cash currently tho.

I just increased my BORR position by 50%, it's now over 5% of my PF... my hands got itchy.
Yeah, a little technical knowledge does help sometimes - I'm honestly winging it here. It's all a bit mad just how contagious the bank crap can be. Oil, gas, copper etc etc etc. It's almost nonsensical.

[petejh]

It's fast contagion because it's all so automated - oil, gas, copper and some other industrial commodities have reacted the way they have today because the probability of a recessionary second half of 2023 has increased - or at least the probability of a narrative about the increased likelihood of a recessionary second half has increased! etc. etc. (along with changes in various other probabilities inc. Russia escaltion, China etc. etc.)  Next week or tomorrow the probabilities can change again and prices whipsaw. I wouldn't pay too much attention to daily and weekly moves as it can drive one crazy trying to understand. Ultimately quality will out. I just try to spot opportunities according to fundamentals and then act on technical triggers given by charts.

Afm also has a big chunk of me - currently around 10% of my total pf. Paying me handsomely in divi's


btw Glencore is now the most oversold it's been on the daily RSI since March 2020, for context.

[kelvin]

Quite a few people noticing Glencore today - that was one of the first companies I did any proper DD on. I missed out there.

[petejh]

Sounds like Credit Suisse will be backstopped by the swiss central bank 'if required'. A total basket case of a business - as brilliantly explained in this FT film - which deserves to burn to the ground. Except it would probably hurt a lot of innocent people. Although in the case of CS it sounds like the proportion of innocent people banking with them may be notably small and would be doing the world a huge justice by vaporising their money.

Scenario A: ECB now free to raise rates tomorrow without crashing the economy, as would have happened had they raised rates (along with the Fed and UK next week) as CS is going off the cliff. All this banking turmoil has a slowing effect on the economy, because as banks' valuations fall credit to business becomes even more expense, meaning economy naturally slows, meaning central banks don't need to raise rates as high as previously feared to fight inflation, as inflation naturally falls due to slowing economy.
Scenario B:  Credit Suisse still goes to the wall despite central bank backstop. Rich and powerful criminals get any assets they failed to remove vaporised. ECB raise rates tomorrow along with Fed and BoE next week. Contagion spreads, certain amount of wider fallout. Same ultimate outcome as above but over a longer timeframe with more pain along the way.
Scenario C: inflation isn't demand side led but supply side. Therefore it turns out either A or B above can happen but inflation continues to stay high despite the economy tanking. Stagflation ensues as per 1970s.

I'm of the view that it's going to be C, as have been for the last 12-18 months, because of the requirements for resources to create the sort of low-carbon world the west is demanding, and the calculations in the face of this by the 'non-West', . But hope for A.

[petejh]

UBS in talks to buy Credit Suisse.

If it goes through it creates a monster much larger than Switzerland's GDP, would be around 1.5x. Far too big to allow to fail in future.

If it doesn't go through then CS toast? With fallout.


edit, too much contagion and loss of confidence among investors now. Social media much quicker than 2007/8 to sow doubt. Weekend failures/deals/bailouts seem inevitable, more next week, then Fed/BoE pausing hikes next week has potential to send stocks and bonds into melt-up territory.

[kelvin]

 Weekend failures/deals/bailouts seem inevitable, more next week, then Fed/BoE pausing hikes next week has potential to send stocks and bonds into melt-up territory.

I'm in the 'one more rise and we done' camp but in all honesty, trying to second-guess the Fed, BTFD investors, banks going to the wall, the ECB and my own inexperience is pretty futile.

A meltup does look increasingly likely in the short term tho and I'm not sure how to play it.

[petejh]

A meltup does look increasingly likely in the short term tho and I'm not sure how to play it.

The second part this thread’s title. There’ll always be more opportunities to buy, melt-ups however come along rarely and should be sold imo.

Can always leave some in quality names, don’t need to sell everything. If the market does go on a bender I’ll certainly be taking profits but leaving some in each of afm, filo, pmet, pnrl, ecora and whc. But I need the divi income now, others circumstances may differ.

[petejh]

Expected but still incredible to see - UBS forced by the Swiss national bank to buy Credit Suisse, for $1bn at a fraction of its book value. Shareholders of Switzerland's oldest major bank to be pretty much zeroed. $10 billion per day was being withdrawn from CS by customers this week. I encourage anyone interested to pay £1 and read the FT today (headline says 'offers to buy' but the details show its an offer made under duress).

[remus]

Expected but still incredible to see - UBS forced by the Swiss national bank to buy Credit Suisse, for $1bn at a fraction of its book value. Shareholders of Switzerland's oldest major bank to be pretty much zeroed. $10 billion per day was being withdrawn from CS by customers this week. I encourage anyone interested to pay £1 and read the FT today (headline says 'offers to buy' but the details show its an offer made under duress).

Article available here https://archive.is/awxQe

I know very little about the banking sector, but from the outside it is interesting how much it has to do with market confidence. It seems hard to grasp whether these institutions do have deep issues because they're never allowed to actually play out. Seems similar to panic buying in a lot of ways.

[jwi]

UBS can surely not fail, I assume.

[matt463]

Expected but still incredible to see - UBS forced by the Swiss national bank to buy Credit Suisse, for $1bn at a fraction of its book value. Shareholders of Switzerland's oldest major bank to be pretty much zeroed. $10 billion per day was being withdrawn from CS by customers this week. I encourage anyone interested to pay £1 and read the FT today (headline says 'offers to buy' but the details show its an offer made under duress).

Article available here https://archive.is/awxQe

I know very little about the banking sector, but from the outside it is interesting how much it has to do with market confidence. It seems hard to grasp whether these institutions do have deep issues because they're never allowed to actually play out. Seems similar to panic buying in a lot of ways.

This is basically it. Financial institutions can't afford bank runs, whilst simultaneously allowing us all to borrow their money to buy houses/cars etc. So to avoid that and maintain confidence things have to be backstopped. Risky for UBS, but the spillover of a failure to them would probably cost more than it does to just buy CS at a discount.

[petejh]

Expected but still incredible to see - UBS forced by the Swiss national bank to buy Credit Suisse, for $1bn at a fraction of its book value. Shareholders of Switzerland's oldest major bank to be pretty much zeroed. $10 billion per day was being withdrawn from CS by customers this week. I encourage anyone interested to pay £1 and read the FT today (headline says 'offers to buy' but the details show its an offer made under duress).

Article available here https://archive.is/awxQe

I know very little about the banking sector, but from the outside it is interesting how much it has to do with market confidence. It seems hard to grasp whether these institutions do have deep issues because they're never allowed to actually play out. Seems similar to panic buying in a lot of ways.

(edit Matt said the same as me)

The issue *is* mostly all about confidence - the issue now post-SVB is panic selling in an opposite of FOMO. Because banking at heart works on the principle of a magic trick called maturity transformation where your money is put to work to make more money or create growth, but it only works if people have confidence.

When depositors confidence falters the system wobbles, and some of the weakest links fail. Credit Suisse is Europe's weakest link by far due to a complete shitshow of corporate governance (among other issues) over the last few years.  This time around the regulations and tools are doing job a better of fire-fighting (cf 2008). But there'll be more. The financial system is currently facing massive levels of fear because it all relies on people not panicking, and when panic starts it's self-fulfilling and creates its own problem. The mass anxiety will seek out the (perceived) weakest links like water. The fundamentals of CS - liquidity, capital to cover losses etc. - were sound (in the sense of being able to fulfill its demands, not in the sense of being a well-run business it wasn't it's a shitshow of an organisation which is why it's Europe's current weakest link).

The reason the banking system relies on confidence (and is destroyed by fear) is interesting and there's a really good explainer here: https://www.ft.com/content/c6fb49cb-20fc-4b8d-b693-9eff09f41580

When money is taken in from companies and individuals, it's put to work by the bank for longer duration purposes. As long as the depositor is relaxed at knowing, in theory, they couldn't get access to all their money immediately on a particular day if everyone else also wanted access to all *their* money immediately on the same day, then the system works well to create future growth.
As SVB's depositors discovered, as soon as there's a trigger to cause doubt in the magic trick - in that case SVB's over-exposure to long-term bonds that had fallen in value due to the rapid rate rises by the Fed - then people act rationally and want their money back 'in case'. The problem is this causes the issue the panic is trying to avoid. Bit like a prisoner's dilemma type scene.

The best run bank in the world couldn't withstand a total loss of confidence and ensuing panic, without state support once everyone wants all their money back all at the same time the magic system no longer works.

So it won't be solved by any 'tool' it will be solved by sentiment. In the meantime other global events will play out. This will be a good opportunity for autocrats to increase the pain on the west, which is why the west are so desperate to fight each panic event asap.

[matt463]

I think in some respects this all makes current events more interesting and completely different to 2007/8. There were no complex derivatives at play here (at least to my knowledge), it was a simple error that first year econ/finance students are taught about

[petejh]

Also, there will be huge repercussions following on from this ongoing panic event. The most obvious are there will be likely be some kind of melt-up event in perceived safe havens (already began), a response by central banks, the future path of rates will need to be reconsidered (starting Weds in the US, Thurs in the UK), inflation will potentially be a big problem now it can't be controlled via rate rises - as everyone was saying for the last 2 years - how much of problem we don't yet know as it depend if the west goes into recession or worse; commodities will rear their heads again; and various other second/third order effects unknowable.

[petejh]

I think in some respects this all makes current events more interesting and completely different to 2007/8. There were no complex derivatives at play here (at least to my knowledge), it was a simple error that first year econ/finance students are taught about

Yep but more pertinent to me is this will has the potential to be 2008 but with the social media of 2023. That's what's contributing to the velocity of the panic. This dynamic is ultimately about emotion and sentiment, not terrible fundamentals (bad as some of the fundamentals no doubt are).

[petejh]

UBS can surely not fail, I assume.

Any bank can fail - try taking all the money out of it at once, because you're concerned it will fail, and it will fail.

[petejh]

There's an irony in all this that at the end of it when the dust has settled a bunch of tech bros in Bay area creating fintech, panic-withdrawing their money from a traditional bank system, may have been responsible for the trigger that changes the whole traditional banking system.

[petejh]

Worst performance is by Vizsla Copper, down 47% but learning patience is the only green here so far. After that, Aldebaran, Surge, NGEX, Camino and Largo fill out the PF.

Pete mentioned previously about going big on Filo, which also worked for me and I'm sure there's definitely something in my PF that I'll go big on this year.

An actionable heads-up for the quick, with a stomach for high-risk.

NGEX are part of the Lundin Group that owns Filo and Josemaria. They're exploring in the same Vicuna district of the Andes, just along the ridgeline from Filo. They've explored a few different zones around its Los Helados project over the last few years, with decent results. But the untested 'potro cliffs' zone was always the zone with potentially the biggest prize. This zone borders Filo's project area a few km's down the Chile/Argentina border ridgeline to the south.

NGEX just announced this morning its first drill result from the potro cliffs. A very high-grade 60m of 7.5%+ copper equiv including 10m of 18% copper. Genuinely bonanza grade.  To quote: ''Today's results include the highest copper grades drilled to date in the Vicuna District and rank among the highest copper grades intersected globally in the last few years''. This district includes Filo.

Upside:
1. Last week Lundin Mining announced it's acquiring the mine and processing facility at Caserones in Chile. Lundin Mining is part of the parent group that owns NGEX, Filo and Josemaria. The acquisition builds regional infrastructure for potential synergy with NGEX projects development. Sentiment for NGEX was already strong following this acquisition.
2. Eyes were on NGEX from the above news, sentiment now will be very strong for NGEX on this 1st drill-hole result.
3.  First holes are targeted on less information than subsequent holes, as more holes are drilled the picture becomes clearer of what may lie beneath.
4. NGEX market cap is a not-gigantic ~C$750m. A re-rate potential to ~C$2bn is possible.
5. If follow-up drill results confirm a large high grade zone at Potro, expect interest in NGEX from majors as per BHP buying 5% of Filo last year.

Downside:
1. NGEX has already risen in the run-up to this result on the good news around the Caserones acquisition. Traders who entered on the Caserones uplift in price will be selling this news.
2. The potro cliffs is remote, high altitude, with limited water. (same as Filo)
3. There'll be no development there for many, many years. This is a pure exploration play at this stage which if it follows the usual path will run up on future drills results, then fall as reality sinks in about the timescale and cost to develop. 

I'm somewhat familiar with NGEX's projects after having traded NGEX for good profits last year, and from them them being adjacent to Filo and part of the same parent group as Filo. Imo, NGEX will likely fly on this result on the open. If subsequent holes confirm good grades and widths like this first hole there's no reason not to expect a large rerating in price as per Filo. Market opens in an hour (TSX.v). I'll be putting in a small speculative position on market open today. I accept there's a potential for a spike and drop so will be sizing position accordingly. I won't be chasing price, I'll be leaving it in for the subsequent drill results from Potro Cliffs which will follow on over spring.

Drill result announcement here: https://ngexminerals.com/site/assets/files/113451/ngex_minerals_ltd__ngex_minerals_reports_new_discovery_at_potro.pdf

Anyone who wants to nerd on the drill result can watch the live conference call with NGEX at 4pm. https://us02web.zoom.us/j/81956452033?pwd=VVAzQmpvdzZwbnphL2pNaHQzVjJkQT09

[petejh]

Got in on market open with 2.5% of my pf at a price of $5.08.

[kelvin]

Got in on market open with 2.5% of my pf at a price of $5.08.

A nice price - it went up rapidly after.

Risk/reward on this is much improved after the first drill result. I've doubled my position to about 6% of my PF.

I should have really set out the thesis for NGEX before, I did think to but thought it was perhaps too risky for most folks until the first drill result at Potro.
The Lundins are busy laying the groundwork for the Vicuna district and the majors will be watching closely. Whilst NGEX is not so cheap for an explorer, lots of people said the same about Filo at $10 were I first bought. It's been an easy double and more from there, more if you bought on the dip. NGEX has a lot of holes to drill and if they're comparable to the first one, $5 will sound very cheap one day. Potro is perfectly positioned in the district.

Nicely done Pete and I hope others took note.

[Fultonius]

Had a look, but got no spare cash just now and couldn't get it on HL so I passed. Good luck to those who coin it.

[kelvin]

Nice to see Adam Lundin bought over one million dollars (CAD) worth of shares in NGEX today. Coat per share of $5.60 and $5.63.

Good to see.

[petejh]

Brilliant to see, he must read ukb! Follow the money.

[kelvin]

Always interesting to hear what you've been up to Kelvin, you appear to have a 'good nose' for this as they say.

Sheldon Iwentash selling his PNRL shares is a bit frustrating I agree - it will keep a lid on upside in the short-term - but anyone investing in this company has to accept this as part of the fabric. He part funded the company at a very early stage and consequently holds millions of shares at a very low price that he doesn't need to hold for the long-term to make huge profits - he's making huge profits now. He owns 6.5 million directly and another 7 million shares owned through his ThreeD Capital fund. He'll be selling-down these for a good while yet.

I'm holding for the long term on this one, as I have faith in what the EM geophysics suggests for the link-up zone at Selebi - with nickel apparently being one of the easier minerals to find with EM when there's no chance of conflating by the presence of graphite (not present at Selebi); I place a lot of weight on Warren Irwin's opinion - one of the rare straightforward more honest guys in this industry who doesn't seem to feel the need to bullshit, perhaps as he made it very big on long/shorting BreX and then Nexgen early in his career; along with two other people positive on this one; and the involvement of Boris Kamstra (Alphamin's ex ceo) gives me confidence this is the real deal in terms of an ESG-friendly, western-friendly, nickel-sulfide development in a good jurisdiction.

That said PNRL really botched a recent raising. Short term balls-up.


General market fear providing cheap entries at the moment for Filo and Afm among others.


Bit of info on PNRL from Warren Irwin. I'd listen to him on resource investing, less so on any other topic.

PNRL

For those who noticed Pete and myself mention this nickel junior, I thought Warren Irwin's recent comments on twitter were worth posting.

"When I bought NexGen everyone thought is was a fraud, when I bought SolGol nobody thought we had anything, when I bought Premium Nickel everyone …….    Takes time.  Management definitely has screwed the financing up.  What they have is extraordinary."
"I think the CEO is in way over his head for a project of this scale and significance. I am sure there will be a transition at some point as it cannot be successful under current leadership."

I'm on the sidelines as insider selling was too much for me but Pete puts forth a good argument for PNRL and one I'm willing to listen too when they finally sort themselves out.
If Warren Irwin describes the property as "extraordinary" then it well worth doing some DD to understand why.
Certainly one for the future.

[petejh]

Afm also has a big chunk of me - currently around 10% of my total pf. Paying me handsomely in divi's

Going to bang this drum once more.  Now at 12.5% of my pf, after adding more today at C$0.95 at the market open. My average cost is somewhere around C$0.60c per share but I couldn't resist adding after last night's announcement by Myanmar government that they're ending all tin mining in country by August, due to ''wanting to preserve resources for the future'' (i.e. for when prices are higher - meant but unsaid). https://www.internationaltin.org/notice-circulating-that-myanmars-wa-state-mine-operations-are-to-be-suspended/

''If'' this happens, it will be 10% of global production gone from an already over-tight tin market. In the early stages of a perhaps decade-long supply/demand squeeze for tin which is the most crucial and overlooked of all the energy/technology transition metals. Just as Alphamin are increasing their production from opening their second mine this coming December.

To give an idea of how leveraged to the price of tin this company is, today's near 10% spike in the tin price in reaction to the Myanmar news - an increase of ~$2,500 per ton from $24,500 to $27,000 on the LME - would alone represent an approx. $50m annual increase in Alphamin's earnings were the price of tin to remain unchanged. Last year's annual earnings were $222m - so a 22% overnight increase in forward earnings compared to yesterday's tin price.
This is based on 20,000 tons of annual production which Afm will be hitting early next year when the second mine opens (12.5k tons last year, Mpnana South adds 8k tons). The company has a market cap of $900m. The company was already undervalued on a price to earnings ratio of roughly 4 at yesterday's $24,500/ton tin price. Today it's more undervalued still at $27,500/ton tin, a forward price/earnings ratio of roughly 3.5. With the company paying a 7% dividend to boot. Growth, value and takeover potential all in one.

Finally, Afm is one of the few producers still making money when the tin price was in the low $20k's - its cost of production of $14k/ton being the lowest of the global tin producers. Myanmar and Indonesia typical cost of production reportedly around the mid-$20k's/ton, which is presumably why they're shutting down mining until the outlook for future tin prices does a thingy. That's my bi-annual banging of the Alphamin drum completed for the first half of 2023. 


For those interested in the chart technicals aka tea leaves -  see two charts below (timescales are weekly and zoomed-in daily), showing 4 or 5 signals. Bear in mind nothing drawn on the charts below was drawn recently, except the completion of the righthand shoulder of the inverse H+S. All the resistance/support levels were drawn months ago, or last year.  Must be coincidence how price reacted off them. No signal is actionable by itself, the more signals that combine the stronger the evidence for price to move in the direction suggested.
- an inverse H+S pattern (bullish, suggest turnaround of trend) ;
- positive divergence on the daily MACD histogram - lower price lows but higher histogram lows (bullish, suggestive of turnaround of a downtrend),
- price reaction off a long term support line (straight blue line),
- price reaction off the 200 day moving average (blue wavy line)
- price breaking through a long-term downward-sloping resistance line - straight blue line (assuming price closes above approx $0.98c).
- the horizontal coloured bands are significant price retracement levels following the rise from Covid lows to the all-time high of April last year - you can see how price reacted when it hit the '61.8' level of C$0.63. The 61.8 level is a ratio* of pullback following a rise, not a set price, and is a very common reversal zone.


Weekly


Daily




*to be precise, the different retracement levels of 23.6, 38.2 and 61.8 are the constant ratios found between different adjacent numbers in the fib sequence. As the fib sequence proceeds into infinity the ratios tighten down to these numbers. For some reason it's useful for identifying reversals in stocks too.