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Canada’s Premium Nickel Resources Buys Huge Liquidated State-Owned Mine in Botswana

Canada’s Premium Nickel Resources (PNR) has bought Botswana’s abandoned state copper mine known as BCL to resume operations within three years, said…

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Aerial view of rapidly sprawling Gaborone city spread out over the savannah, Gaborone, Botswana, Africa.

Canada’s Premium Nickel Resources (PNR) has bought Botswana’s abandoned state copper mine known as BCL to resume operations within three years, said Minister of Minerals, Green Technology, and Energy Resources Lefoko Moagi on Tuesday. PNR was granted exclusive rights in February for a six-month due diligence review of BCL, which went into liquidation in 2016. 

The company has signed contracts to buy two of the three shafts and related infrastructure, he said, without specifying the value. Moagi added that PNR was negotiating a separate deal to buy another BCL Group mine, the Tati nickel mine. In February, BCL liquidator Trevor Glaum said that PNR would begin construction of the mining infrastructure and prepare to operate, subject to a feasibility study, with a cost expected to exceed $400 million. 

The mine produced at peak times an average of 40,000 tonnes of copper and nickel per year, but high operational costs and low international commodity prices led to its liquidation in 2016. 

What the sale may reflect is an opportune moment for a Canadian miner to take advantage of high commodity prices and a particular focus on copper and nickel in the modern, green economy.

Five years ago, Botswana was not positioned to maximize the economic potential of the mine. However, the moment is here for these projects which can be brought into production quickly. With new projects rare and undersupply threatening pricing dynamics, these are the kinds of deals we may be seeing more frequently in the future.

That the project is located in Botswana poses some questions about the viability of the project and its operations. Mining in the country has suffered somewhat more recently, and complications always remain.

Geographical Questions

Without a doubt, Botswana is one of the world’s most successful developing countries. COVID-19 aside, the country has been on track for consistent growth.

Botswana is located in the centre of southern Africa, between South Africa, Namibia, Zambia and Zimbabwe. Once seen as a backwater with no natural resources, Botswana has long been ignored by the British Empire.

After being one of the poorest countries in the world when it gained independence in 1966, Botswana has become one of the world’s most successful developing countries. Important mineral and diamond wealth, good governance, prudent economic management and a small population of more than two million people have made Botswana a middle-income country with a transformation plan to become a high-income country by 2036.

Botswana is a high-middle-income country often touted as one of Africa’s few success stories. But despite rising profits from the country’s multinational diamond mining, the country’s bushman communities continue to suffer. The government is also grappling with a steady influx of Zimbabweans fleeing their country’s economic crisis.

Mineral extraction has made Botswana one of Africa’s richest countries. Despite this enormous wealth, Botswana remains a highly unequal country. It ranks as the most unequal country in the world on various measures of inequality, such as the Gini index.

From Diamonds, to Copper, Nickel, and more

Botswana is also known as one of the world’s largest sources of ethical diamonds, making diamonds from the country popular with consumers who care where their diamond is produced.

Mining contributes 34% of the country’s gross domestic product (GDP) and 50% of its taxes. Since diamonds were discovered in South Africa in 1967, mining revenues have been invested in infrastructure, schools, and medical centers. The industry is also considered a beneficiary of minerals, creating jobs and boosting the country’s economy.

Today, only about 20 percent of Botswana’s 2 million inhabitants are engaged in diamond mining. But the country is seeking to diversify its economy, betting that sustainable tourism will help maintain a high standard of living in the future. And projects in mining continue to hold enormous value in copper and nickel such as the one purchased by Premium Nickel Resources

Although Botswana has long been known for low inflation and controlled wage growth, a 2013 study by the Botswana Institute for Development Policy Analysis, a non-governmental think tank, on export diversification found that non-mining labor in the local private sector is more expensive than the regional average. For example, diamond processing companies claim that the cost per stone in Botswana is $60 to $65, compared with $20 to $30 in China and $12 to $25 in India.

While a recovery with favourable prospects for the global diamond industry is expected in 2021, the economic impact of COVID-19 is likely to be deeper and longer-lasting. Developments in the diamond industry will have a telling effect on the near-term recovery, given Botswana’s dependence on the commodity.

Mineral exploration in diamond-dependent Botswana will continue despite the difficult economic conditions facing the country’s mining industry, which will have a negative impact on its economic health, says Charles Siwawa, CEO of the Mining and Exploration Organisation of Botswana (Chamber of Mines). The minerals he outlines are coal, copper, silver, lead, zinc, manganese, and iron ore, which remain attractive due to the amount of ore uncovered, as well as minerals that are economically viable. He points out that financial analysts have assured the Chamber that the mines in Botswana have net mineral values and can make positive contributions to the economy.

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

The post Canada’s Premium Nickel Resources Buys Huge Liquidated State-Owned Mine in Botswana appeared first on MiningFeeds.









Author: Matthew Evanoff

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Economics

US stocks close mixed on Powell’s hawkish remark

Dow Jones closed higher while S P 500 and Nasdaq drifted on Friday October 22 after Fed Chair Jerome Powell s tapering remarks weighed on investors…

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Dow Jones closed higher, while S&P 500 and Nasdaq drifted on Friday, October 22, after Fed Chair, Jerome Powell’s tapering remarks weighed on investors’ sentiment. However, the optimism over the robust earnings has pushed the indices towards their third consecutive week of gains.

The S&P 500 was down 0.11% to 4,544.90. The Dow Jones Industrial Average increased by 0.21% to 35,677.02. The NASDAQ Composite Index fell 0.82% to 15,090.20, and the small-cap Russell 2000 was down 0.21% to 2,291.27.

On Friday, the Federal Reserve Chair, Jerome Powell said that the central bank should start dialing back its asset-buying program soon while suggesting that the interest rate shouldn’t be increased as of now. While the strong earnings results have lifted the investors’ confidence in recent weeks, the remarks from the Fed Chair raised concerns of the investors.

The Fed has reassured that the interest rate will be kept at the “near-zero” level until the economy returns to its expected employment and the inflation would come under the Fed’s expectation level of 2%. Meanwhile, the supply-chain disruptions and the rising costs of the raw materials indicated that inflation is likely to stay above the level for some time.

Will the US Markets rise on Monday after Powell’s remarks?

The financial and the real-estate sector topped the S&P 500 index on Friday, with communication services and consumer discretionary sectors as the bottom movers. Eight of the 11 critical sectors of the S&P 500 index stayed in the positive territory.

The stocks of Cleveland-Cliffs Inc. (CLF) gained 12.10% in intraday trading, after reporting better-than-expected quarterly earnings on Friday, before the bell. The company has reported record revenue of US$6 billion in Q3, FY21, while its net income came in at US$1.28 billion.

The shares of American Express Company (AXP) rose 5.50% after the company has reported strong quarterly earnings results as more people used their cards for traveling, dining, and other leisure activities. The total revenue of the company surged around 25% YoY to US$10.92 billion, while its net income was up 70% from the previous year’s same quarter to US$1.82 billion.

The stocks of Honeywell International Inc. (HON) plunged 2.90% after the company has lowered its full-year sales forecast due to the bottleneck supply constraints. The company’s sales rose 9% YoY to US$8.47 billion in Q3, FY21, while its EPS was up 68% YoY to US$1.80 apiece. However, the company has lowered its sales forecast to be between US$34.2 billion and US$34.6 billion from its previous forecast of US$34.6 billion and US$35.2 billion.

In the financial sector, JP Morgan Chase & Co. (JPM) increased by 1.15%, Bank of America Corporation (BAC) rose 1.27%, and Morgan Stanley (MS) surged 1.54%. Citigroup, Inc. (C) and Goldman Sachs Group, Inc. (GS) gained 1.28% and 1.65%, respectively.

In real-estate stocks, American Tower Corporation (AMT) advanced 1.86%, Equinix, Inc. (EQIX) jumped 1.52%, and Public Storage (PSA) soared 1.21%. Digital Realty Trust, Inc. (DLR) and SBA Communications Corporation (SBAC) ticked up 1.03% and 1.71%, respectively.

In the communication sector, Alphabet Inc. (GOOGL) decreased by 3.13%, Facebook, Inc. (FB) fell 5.91%, and Walt Disney Company (DIS) declined by 1.10%. Twitter Inc. (TWTR) and Snap Inc. (SNAP) plummeted 4.15% and 25.99%, respectively.

Also Read: Roper (ROP) & Seagate (STX) stocks rally after Q3 reports

Also Read: Top 7 REITs with over 50% YTD returns to explore

Overall, eight of the 11 stock segments of the S&P 500 index stayed in the positive territory.

Also Read: 5 industrial stocks with over 40% YTD returns to explore

Futures & Commodities

Gold futures were up 0.71% to US$1,794.60 per ounce. Silver increased by 0.86% to US$24.378 per ounce, while copper fell 1.24% to US$4.5018.

Brent oil futures increased by 1.55% to US$85.92 per barrel and WTI crude was up 2.06% to US$84.20.

Bond Market

The 30-year Treasury bond yields was down 2.47% to 2.075, while the 10-year bond yields fell 1.91% to 1.643.

US Dollar Futures Index decreased by 0.17% to US$93.602.










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Economics

Market weekly – Unlocking the value in fixed income (Read or listen)

At first glance, bond markets these days may look like deserts – there is little or no yield on offer with large patches appearing barren or even offering…

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At first glance, bond
markets these days may look like deserts – there is little or no yield on offer
with large patches appearing barren or even offering only negative yields. That
is to ignore a plethora of opportunities, argues Jean-Paul Chevé, head of the
Fixed Income Insurance Team within the Specialty Fixed Income Product Group.
 


Read or listen to Jean-Paul Chevé as he discusses the
potential for attractive returns for investors who take advantage of a broad
universe to invest with an appropriate investment horizon and unlock the value,
particularly in credit.


What is your assessment of fixed income markets today?

Fixed income markets are facing challenging times. However,
they are no more challenging than those we have seen over the last 10 years.

If we cast our minds back to the 1990s, the fixed income
environment was fundamentally different. When the French Treasury issued
France’s first inflation-indexed bond in 1998, it came with a nominal yield of
around 5% and a breakeven rate of 2%, giving a real yield of 3%.

Today, the breakeven inflation rate is roughly similar, but
the real yield is negative at around minus 1.5%. That is a dramatic change, but
low real yields are something we have had to live with for the last 10 years.

There have been structural changes in fixed income markets.
I see no reason to expect real yields to rise significantly in the near future.
This expectation is an important element in our vision of the fixed income
opportunity set.

Our approach involves combining two distinct investment
styles: 

  • The long-term investment approach we use to
    select securities for buy-and-hold insurance portfolios. By that, I mean applying
    a ‘buy-and-enhance’ mind-set to investing. Each investment is analysed with
    regard to the value it can generate in the long term. Dedication to detail and
    rigorous analysis in our security selection is at the heart of our process.
  • An active approach with a shorter investment
    horizon aimed at generating incremental returns relative to a standard
    multi-sector eurozone benchmark (such as the Euro Aggregate index). We actively
    manage duration exposure, positioning on the yield curve, issuer selection and
    positioning within the issuer’s capital structure. 

Each of these investment styles has strengths and
weaknesses. By combining them, we are seeking to take the best attributes of
each. The result is a rigorous process of identifying fixed income instruments
offering potential value over a long-term investment horizon. We are seeking to
unlock the potential for strong returns across the full spectrum of fixed
income markets.

What is your investment horizon and investment universe?

We are an active manager with a focus on outperforming our
benchmark over a three-year rolling cycle. To realise the potential value in
fixed income instruments, we look beyond the next quarter or year. We are
investors, not traders. 

Our benchmark (the Bloomberg Barclays Euro Aggregate Bond
RI) is used for performance comparison only. By that, I mean our high
conviction strategy is not benchmark-constrained. Performance may sometimes
deviate significantly from that of the benchmark. We aim to add value over the
medium term by implementing a discretionary managed portfolio invested in debt
instruments.

We invest mainly in corporate and government bonds issued in
European currencies. The guidelines of this strategy allow for an allocation of
up to 50% in different categories such as contingent convertible bonds and
subordinated debt.

We invest in instruments with a minimum rating of
BB-/Ba3/BB- (S&P / Moody’s / Fitch) or an equivalent rating. Securities
that are non-investment grade with a rating between BB+/Ba1/BB+ and BB-/Ba3/BB-
(S&P / Moody’s / Fitch) cannot represent more than 20% of the assets in our
portfolio.

Here is a representative portfolio to give you an idea of the sort of sector allocations we might hold in our high conviction strategy:

Source: BNP Paribas
Asset Management, as of October 2021

We are focused on beating the benchmark over a rolling
three-year cycle by taking a holistic approach, positioning ourselves in the
best segments of the corporate bond markets to capture high carry and roll-down
along the interest rate curve.

We can find instruments with the potential for very
attractive returns. We look closely at bonds issued by financial institutions
in particular. These tend to have a broad hierarchy that allows us to pick
bonds in the capital structure such as subordinated bonds with spreads that are
attractive relative to government bonds. If we see value, we may invest in
perpetual bonds.

We believe there are many ways to find value in the bond
markets as long as you concentrate on visibility in the long term. We manage
portfolios using modified duration, or interest-rate sensitivity. The portfolio
currently has a duration of 8-8.5 years. At times, that may generate
volatility, but not to an extent that is out of line with our three-year
investment horizon.  

Taking positions in credit instruments requires you to take
the time to get the best results, to set a target for a holding and to be
willing to hold a position for a number of years.

So fixed income offers an alternative to equities today?

Yes of course. Remember equities are nothing more than that sliver of hope that separates assets
from liabilities.

Fixed income instruments on the other hand provide investors
with a clearer visibility in that the cash flows are certain over a longer
horizon. There may be periods of volatility when the performance of our high
conviction strategy lags behind that of the benchmark.

However, our high conviction strategy is calibrated to
deliver significant incremental returns over a three-year rolling cycle with a
very different risk profile to an equity portfolio.


Any views expressed
here are those of the author as of the date of publication, are based on
available information, and are subject to change without notice. Individual portfolio
management teams may hold different views and may take different investment
decisions for different clients. The views expressed in this podcast do not in
any way constitute investment advice.

The value of
investments and the income they generate may go down as well as up and it is
possible that investors will not recover their initial outlay. Past performance
is no guarantee for future returns.

Investing in emerging
markets, or specialised or restricted sectors is likely to be subject to a higher-than-average
volatility due to a high degree of concentration, greater uncertainty because
less information is available, there is less liquidity or due to greater
sensitivity to changes in market conditions (social, political and economic
conditions).
 

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

Writen by Investment Insights Centre. The post Market weekly – Unlocking the value in fixed income (Read or listen) appeared first on Investors’ Corner – The official blog of BNP Paribas Asset Management, the sustainable investor for a changing world.


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2 Canadian Dividend Stocks That Could Be in Danger

As investors looking to find the best Canadian dividend stocks to own, we should consistently be on the defense. It’s easy to build a portfolio of strong…

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As investors looking to find the best Canadian dividend stocks to own, we should consistently be on the defense. It’s easy to build a portfolio of strong income payers, but the harsh reality is a single poor decision can lead to underperformance for an entire portfolio.

Issues with a company’s dividend will likely lead to a significant decline in share price and an inevitable capital loss. So in this article we’re going to take a look at two Canadian dividend options that are showing signs of potential dividend issues either through high payout ratios, or slowing dividend growth.

Decelerating growth for Saputo (TSX:SAP)

Saputo (TSE:SAP) is a Canadian company, but a global diary producer. In fact, the company generates much more of its sales from the United States (46%) than it does Canada (26%). The company also has operations in the United Kingdom and other international countries.

As a maker of cheese, milk, cream and other products, the company is a consumer defensive stock. Revenue tends to be consistent regardless of economic conditions. But, the one red flag for income investors should be that both revenue and dividend growth have been somewhat flatlining.

Prior to 2018, Saputo had put up an impressive streak of growth. The company had grown the bottom line in 6 of 7 years and revenue had grown from $6.9B in 2012 to $11.16B to close out 2017.

However, it’s becoming clear that the company’s growth is currently stalling, with earnings declining in 3 of the 4 most recent fiscal years and free cash flow generation becoming somewhat stagnant.

This is starting to impact the dividend as well. From 2012 to 2018 the company had grown its dividend by 68%. From 2018 to present day, the company’s dividend has grown by a meager 9%. In fact, its most recent dividend raise of 2.96% hardly keeps up with inflation in our current environment.

Is Saputo at risk of a dividend cut? I’d say no. The company’s dividend makes up only 47% of earnings and just under 70% of free cash flow. It also has one of the longest dividend growth streaks in the country at 23 straight years.

But there is no question that the company is currently in a rut due to supply chain issues, which has been piled on top of operational issues over the last 3-4 years. I believe there are better income options for Canadians looking at buying stocks right now. Some analysts seem to agree, cutting their price targets for Saputo back in late September.

Before I’d considering buying Saputo, I’d like to see somewhat of a return to steady growth.

NFI Group (TSX:NFI) reaching uncomfortable payout ratio in terms of earnings

NFI Group’s (TSE:NFI) struggles have been well documented over the last few years. COVID-19 had a detrimental impact on the company as factories were forced to shut down and pandemic measures were put in place.

NFI Group, or as the company used to be called, New Flyer Industries, is a manufacturer of transit busses and motor coaches.

Manufacturing represents a little more than half of the company’s revenue, while its aftermarket solutions include spare parts and servicing related to its transit buses and motor coaches.

Although the company is Canadian, most of the fabrication, manufacturing, distribution, and servicing of its products takes place in the United States. As a result, it derives most of its revenue from the US.

The key catalyst from the company as of late has been its mission to provide emission free busses, adding to the green movement in light of climate change.

Its share price recently took a hit off a poor quarterly report in which the company slashed Fiscal 2021 guidance. Cutting guidance is never a good thing for either the dividend or the share price, as the market will often adjust valuations based on future growth and the safety of the dividend.

TSE:NFI Dividend

Now, NFI Group has come out and stated that the dividend will be maintained throughout this difficult environment. But considering this is a company that just slashed its dividend 17 months ago during the heat of the pandemic, we need to take everything here with a grain of salt.

Analysts estimate the company will have a breakeven year in Fiscal 2021 before returning to profitability in 2022 with earnings of $1.05. The company currently pays a $0.85 dividend. This puts NFI Group’s payout ratio in terms of earnings in what I would deem the “uncomfortable” range over the next couple of years.

Fiscal 2022 estimates are for earnings in excess of $2 a share, which is a bottom line that more than covers its current dividend. But the issue is these estimates are multiple years out, in an operating environment that seems to be able to change on a dime.

I think management will do whatever they have to to maintain the current dividend, as two cuts in two years would be a significant blow for NFI Group. But, I just don’t trust the dividend in this environment, and if I was looking for income, I’d be looking elsewhere.

Author: Dylan Callaghan

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