October 27, 2020
Rio Tinto
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He has a wealth of experience acquired over more than two decades in both domestic and international financial markets. Aside from running the Fat Prophets group. Angus has broad investment responsibilities within the Funds Management division, which manages close to $100 million.
Angus’s investment track record began in 1982 at the young age of 13. In 1986 he received a “highly commended” award from the New Zealand Chamber of Commerce for increasing an initial investment of $200 to $35,000 on the world stock markets.
During his career, Angus has worked as a money market dealer in New Zealand, a financial consultant in the United Kingdom and the United States. Moving to Australia in 1996, Angus worked for five years as a stockbroker at Bankers Trust and JB Were before co-founding Fat Prophets in June 2000.
Majoring in Economics, Angus completed a Bachelor of Commerce degree at Otago University, New Zealand in1990. He is also a member of the Securities Institute of Australia having qualified for a Graduate Diploma in Applied Finance and Investment in 1999.
Angus is also a non executive director of Pie-face Holdings, one of Australia’s fastest growing food franchises and Fitch Metals Engineering, a rapidly expanding industrial engineering and manufacturing company. Angus is also a director of the Australasian Investment Review, a fast growing online magazine with more than 35,000 subscribers.
Simon has over 20 years of listed markets experience, having started out in real estate equity research in 1996, before heading real estate equity research teams for JB Were and Goldman Sachs from 1999. Simon was head of international equity research for Goldman Sachs JBWere (GSJBW) based in New York from 2005 where he was also broker dealer licencee of the US business, was a member of the Australian Investment Review Committee for Goldman Sachs Equity Research, and was a long term partner at GSJBW. Additionally he has had successful private business ventures, and most recently headed Real Estate Corporate Advisory for Australia and New Zealand for Goldman Sachs.
There has been plenty going on in financial markets lately, and not least of which has been the precious metals markets with gold prices hitting new highs in Australian dollar terms, and rallying almost 20% in the last few months to above US$1500. Other precious metals have also been similarly strong.
However, another metal that has been going gangbusters is nickel, with prices recently surging to five-year highs, and coming to within striking distance of US$19000 a tonne for the first time since 2014.
Against this backdrop there is a nickel stock we think you should consider owning…..
Nickel has broken above a major downward trend in recent weeks after a ten-year bear market.
What’s been happening, and why the surge?
Supply has been delivered a major shock, with Indonesia, which accounts for almost a quarter of global output, saying it will ban exports from December. This is set to create a major supply deficit next year, against the backdrop of strong demand due to the rising demand for electric vehicles.
Falling nickel stocks in LME-registered warehouses at 109,950 tonnes, down 20% so far this year, have fuelled supply concerns. This can be seen in the premium for the LME’s cash nickel over the three-month contract, which has risen above US$100 a tonne – its highest in more than a decade. The global nickel market is estimated at 14 million tonnes, and has been in deficit for some years now, and expectations were for a more balanced market next year. So prices could go a lot, lot higher.
It is estimated that the average EV could contain up to 70 kilograms of nickel per vehicle (the following image shows the commodity content of new model EVs by battery type). Nickel is also used in the steel industry, and this traditional market could also assert pressure on the nickel price over the next few years.
Source: Reuters
On the other side there are these clear supply constraints, which will see nickel move toward a supply deficit in 2020, with recent draws on the London Metal Exchange inventories a telltale sign. The move by the Indonesian Government to ban exports two years ahead of the original timetable is significant – Indonesia produced 560 million tonnes of nickel ore in 2018 and accounts for around a quarter of global supply.
Source: McKinsey
One correlation that not often discussed, is the one that exists between nickel and platinum. As can be seen on the chart below, both nickel (purple line) and platinum (orange line) have moved together in recent years – right up to the point where “both staged major multiyear decade long breakouts” within a week of each other!
How to play the bull market in nickel???
So, if you are a believer that the demand for electric vehicles will only increase, one way to play it is by having exposure to a high-class nickel miner, and one that is going to make money, the same of which might not be said of Tesla!
We have identified a strong play on the sector. The company is a high quality, pure play, nickel miner, with a strong operational track record, which was further evidenced by recent FY19 results. Brokers are also sitting up and taking notice and raising their price targets.
The company in 2019 produced nearly 18,000 tonnes of nickel at a cash price of A$2.98 per pound. With nickel currently trading at over US$5 per pound (circa A$7.50 per pound), operating margins will be significant. Any weakness in the A$ will add to the positive mix.
Robust margins are set to persist (and grow) for some time to come, based on our long-term view on the nickel market and developments in the auto industry.
This company is guiding for 2020 nickel output in the range of 21,000 to 22,000 tonnes and the unit cash cost of production to be in the range of A$2.90 to $3.30 per pound. The company has also recently delivered a very positive update on the exploration front.
What to know the name of this stock, and a way to benefit from the surging demand for electric vehicles and nickel?
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The report was launched back in 2003 as investors were still recovering from one of the most savage bear markets ever witnessed. The report has gone on to comfortably outperform the broader market over the past 16 years.
We scour the market for blue chip, mid cap and smaller stocks that represent real value in an otherwise overpriced market.
As contrarian investors, we examine company fundamentals to find those rare opportunities so often overlooked by other investors. We then use technical analysis to sharpen our timing.
Whilst you will receive recommendations across the industrial sector and also select financial stocks, key macro themes driving our stock selections include bullish views on both gold and energy stocks.
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To generate superior returns, one must understand the inherent volatility in the global resources sector; an understanding that Fat Prophets has an expertise in. We would encourage you to take a look at our Global Mining Report.
The report was launched back in 2000 in the middle of what was at the time one of the most savage bear markets ever witnessed. The report has gone on to comfortably outperform the broader market over the past 19 years.
We scour the market for blue chip, mid cap and smaller stocks that represent real value in an otherwise overpriced market.
As contrarian investors, we examine company fundamentals to find those rare opportunities so often overlooked by other investors. We then use technical analysis to sharpen our timing.
Whilst you will receive recommendations across the industrial sector and also select financial stocks, key macro themes driving our stock selections include bullish views on both gold and energy stocks.
We explain our thinking regularly in Market Comment pieces and demonstrate how exposure to our favoured sectors can add longer term stability and growth to your portfolio.
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The Daily Note has been a cornerstone of Fat Prophets communication with Members and clients for the past nine years. In the note Angus looks to cut through all the ‘noise’ and outlines what the daily stream of economic data, market news, political developments, stock and sector moves, means for the way he is positioning client portfolios, and what the outlook is going forward. And what it means for you as an investor.
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Our Daily Note comes straight from the desk of our CEO Angus Geddes each morning. Members can join for on monthly basis, or a discounted rate for longer term options.
Do you want to know what all the market movements and latest developments mean for your investment portfolio? Our CEO Angus Geddes will make sense of it all, and provide his take, in his Daily Note each morning.
The Daily Note has been a cornerstone of Fat Prophets communication with Members and clients for the past nine years. In the note Angus looks to cut through all the ‘noise’ and outlines what the daily stream of economic data, market news, political developments, stock and sector moves, means for the way he is positioning client portfolios, and what the outlook is going forward. And what it means for you as an investor.