Yovich & Co. Weekly Update - 15 December 2014

Dec 15, 2014 | Commentary

 Changes in Market

 

 

This Week’s Themes

  • December started off well for the local market but global markets dragged New Zealand stocks lower to finish the week slightly in the red. The Reserve Bank issued their final statement for the year, reiterating their previous comments and that “a period of assessment remains appropriate before considering further policy adjustment.” The OCR will remain at 3.5%, as it has since late July.

  • Across the ditch, the Mining Stocks where hit hard by falling commodity prices and more specifically the Oil Price as Brent Crude Oil dipped towards $60 for the first time since 2009. The theme amongst the Iron Ore sector and the Oil Market is that the large players are utilising their low cost bases to increase supply and push some of the higher costs processors out of the market. Consumers will be the winners in the short term, the large players will benefit in the longer term and the higher cost processors will struggle to keep their heads above water.

  • Markets in the U.S. took a big dip last week after concerns about lower global growth forecasts put a dampener on what has been a great run for U.S. markets this year.

  • The relatively hawkish tone of the New Zealand Reserve Bank helped the Kiwi to rally towards the 95 cent Aussie level and close to multi year highs.

Investment News

Sheffield Resources Limited (SFX.asx) – Thunderbird High Grade Resource Surpasses One Billion Tonnes.

Last week Sheffield announced another upgrade to the measured, indicated and inferred resource that they have at the Heavy Mineral Sands project at Thunderbird.  The following key points were made in their announcement:

  • 46% increase in high grade component of resource to 1.08 billion tonnes (Bt) @ 11.8% heavy mineral (HM) (Measured, Indicated and Inferred).

  • Thunderbird Project economics expected to be strongly enhanced by new high grade resources added in shallow up-dip region of deposit.

  • Total mineral resource for Thunderbird now stands at 3.2Bt @ 6.8% HM (Measured, Indicated and Inferred), containing 95 million tonnes (Mt) of valuable heavy mineral.

  • Improved confidence levels: 82% of total mineral resource in Measured and Indicated categories.

  • Thunderbird has one of the largest accumulations of zircon in the world.

  • Resource sets an exceptional foundation for Pre-Feasibility Study scheduled for Q1 2015.

They also confirmed that their pre-feasibility work is well advanced and is on schedule to be finalised in Q1 2015, including incorporation of the results of this Mineral Resource update.

The Thunderbird project has now cemented itself as a globally significant find. At full production, Thunderbird is planned to be supplying around 10% of the current global demand for Zircon. Sheffield remains our favourite and most exciting small mining investment. The current uncertainty in commodity prices should have very little effect on them as they are not currently producing and by the time they are, expectations are that commodity prices will return to “normal”.

Sheffield is starting to get far more exposure with both Institutional and Retail Investors, with Australia’s largest Investment Bank now producing research on Sheffield. They are very positive on their prospects with an outperform recommendation. Another research analyst from Hartleys also has a “Buy” recommendation and a $1.90 price target. The current price is 69 cents.

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Jarrod Goodall



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