Your Daily Scan of the New Global Economy


Intel Australia

  • Australia is Flooding the Systems with Money

    Remember when shelves at the supermarket were mostly empty?

    When people would queue at 6:30am in front of the supermarket for a chance to get their hands on some simple everyday items, like toilet paper?

    Food retail sales jumped over 24% in March as Australians panic bought toilet paper but also pantry items like pasta and rice.

    Oh, how things change…

    Sales collapsed the following month when people hunkered down and stayed at home.

    Today, supermarket shelves look very different. In fact, there is so much toilet paper around, it’s on sale.

    Port Phillip Publishing

    Source: Selva Freigedo

    [Click to open in a new window]

    I took this photo a few weeks back.

    At the time of panic buying, I wasn’t too concerned about the food supply. As I wrote in The Rum Rebellion:

    Australia only imports 15% of the food we consume regularly, and we even export about 50% of what we produce agriculturally. So, I don’t think there is much need to panic about running out of food.

    What I’m more concerned about is liquidity. It’s a rush to cash as the global economy comes to a standstill.

    As soon as there are problems, liquidity drains from the system.

    There were some signs of this happening already.

    We saw stock markets drop by close to 30% in March as investors sold. ME Bank also cut the amount people could redraw from their home loans.

    Well, as it turns out, in the second half of March banks also saw more withdrawals than normal. As the Reserve Bank of Australia admitted in their Financial Stability Report:

    This included a small number of customers making very large withdrawals (more than $100,000, and in some cases into the millions of dollars).

    It’s not over.

    As The Australian reported yesterday:

    ‘[A] banking system insider says there’s been another spike in demand in the past two weeks, not quite as big as in March, coming from banks and their customers.

    “We are seeing banks are getting extra cash in anticipation of COVID restrictions easing, and retailers, pubs and clubs wanting their floats back, while people aren’t making as many deposits,” he told AAP, speaking on condition of anonymity.

    “Also when people are more uncertain about things they tend to hold more liquidity around them. No one’s suggesting there’s any concern with the banks — people just do that.”

    Before the virus came around, we had low inflation, low growth, and high asset prices. There was also a lot of easy credit with interest rates low.

    But risks too were building along with high debt. Anything could have brought in a crisis: a Chinese economic collapse, corporate debt, Brexit, trade tensions between the US and China…

    The virus was definitely an unexpected surprise…the worst kind.

    I mean it’s pretty incredible when you think about it, the virus has closed down entire industries in a matter of weeks. Car sales, real estate, health insurance, and tourism are among the top 10 industries in the world by revenue, all which will be affected by the virus.

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    We are between a rock and a hard place

    With economies in lockdown, central banks and governments have now flooded the system with money to increase confidence but also to tie us over until we find a vaccine and we can reopen. We are between a rock and a hard place, if we don’t do it, the system collapses.

    So far, governments in the G20 have provided US$9 trillion to fight COVID-19, as you can see below.

    Port Phillip Publishing

    Source: IMF

    [Click to open in a new window]

    It’s quite an emergency payout.

    Just to give you an idea of how large that amount is, the global broad money supply in 2017 — physical money circulating in the economy along with other assets that can be changed easily into cash, like bank deposits — was around US$90 trillion. We’ve just increased that by 10% in the last couple of months. US$9 trillion is half the amount the US, the largest economy in the world, produced in 2018.

    All that money just to keep things going. But, it doesn’t even look like it will be enough.

    Risks are already building, even with all that money pumped into the system. Unemployment is increasing, and the shutdowns, the decrease in tourism and consumer spending are already affecting businesses. The ASX may be recovering from the March collapse, but, as you can see below, the debt at risk from listed companies is increasing.

    Port Phillip Publishing

    Source: RBA

    [Click to open in a new window]

    According to the RBA, 25% of businesses do not have enough liquid assets to cover one month of expenses and 50% could not pay three months in expenses.

    So far, there is a lot of cheap cash around, toilet paper is on sale.

    We are flooding the system with money but it’s all to keep the system running. We don’t know how long this will last, and don’t expect much growth from that for now.

    As I said, we are in between a rock and a hard place. Take advantage of this time to set your finances in order, instead of increasing risk.


    Harry Dent Signature

    Selva Freigedo,
    For The Daily Reckoning Australia

    PS: Jim Rickards warns that a total financial collapse is imminent. Learn how to protect your savings and investments…before it’s too late. Click here now.

    The post Australia is Flooding the Systems with Money appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • Gold Price Flirts with US$1,700 Floor as Investors Pile into Stock Markets

    It was a glum day of trade for gold overnight in US markets.

    After sinking as low as US$1,704.1, futures for the yellow metal closed at US$1,705.6. Down 1.7% for the session.

    It is the first time in a fortnight that gold looks set to relinquish this key level.

    We’ll just have to wait and see what the market has instore for us tonight…

    Appetite for risk growing

    The reason for gold’s poor showing has to do with investor sentiment. Namely, the fact that we’re seeing people rush into stocks at the moment.

    Wall Street, with the NASDAQ in particular, are leading a fresh charge. Brimming with activity and a desire for riskier assets.

    Optimism, it would seem, is the order of the day.

    No doubt, ongoing progress to revert pandemic restrictions is fuelling hopes. Especially as the US gears up for their iconic 4 July holiday.

    Whether or not it is warranted though, is the ultimate question.

    It is certainly looking likely that we may be through the worst of this pandemic.

    At least for much of the West. South America is a new, emerging concern as the virus has gripped the continent.

    However, even if the US, Australia, and much of Europe is on the road to recovery, it won’t be quick.

    Economies all around the world are going to need time to recuperate. Even if many are still hoping for that elusive ‘V-shaped’ recovery.

    Plus, we can’t ignore the political and trade disputes still floating about as well.

    China is getting bolder by the day. If tensions between the US or Australia boil over, it will wreak havoc on markets.

    Suffice to say, investors may need to take all this optimism with a grain of salt.

    Fork in the road

    Simply put, it seems as though we’re coming to a crossroads. The moment where markets will stop trading sideways and either take-off or tune out.

    As of right now, all signs are pointing to the former. With stock markets gearing up for what may be another momentous bull run.

    But there is still the possibility it could flip the other way.

    In fact, our resident editor here at The Daily Reckoning Australia — Shae Russell — has outlined why the worst may be yet to come. Her Pandemic Roadmap outlines why more pain may be on the way for share markets.

    So, before you dive into stocks, I urge you to at least give it a read. You can get your copy, for free, right here.

    It doesn’t always pay to be a contrarian, but now might be a good time to consider it.


    Ryan Clarkson-Ledward,
    For The Daily Reckoning Australia

    The post Gold Price Flirts with US$1,700 Floor as Investors Pile into Stock Markets appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • Metalicity Share Price Up as Drilling Finally Gets Underway (ASX:MCT)

    Australian small-cap explorer Metalicity Ltd [ASX:MCT] is up 14.29% at the time of writing, to trade at just under one cent per share.

    Primarily focused on the base metals sector and the development of its Admiral Bay Zinc Project, MCT has spent the best part of the past 12 months conducting operations at its Kookynie Gold Project in the WA Goldfields region.

    Metalicity Share Price - ASX MCT

    Source: Trading View

    The share price has remained depressed since August 2019, despite the release of drilling results indicating high-grade gold mineralisation.

    The Kookynie Project also boasts some good company nearby.

    It is located about 60km south-southeast from Leonora in WA.

    The project also includes the historic Cosmopolitan mine, which produced 360,000oz at a very high average head grade of 15 grams per tonne.

    According to MCT, limited work has been conducted in and around the Cosmopolitan gold mine and other prospects including Champion, McTavish, and Leipold.

    So why the fanfare now?

    If you feel like you have been inundated with news about junior gold explorers recently, then you might be onto something.

    Exclusive interview from The Daily Reckoning Australia: ‘The New Case for Gold: An Interview with Bestselling Author and Wall Street Insider, Jim Rickards’. Click here to learn more.

    Yesterday I explained that easing restrictions in WA has meant some explorers have been able to recommence previously halted operations — with their share prices reacting positively.

    It could be a similar story with MCT today.

    The junior explorer announced this morning it had commenced drilling at Kookynie, after their cap raise last week.

    Managing Director Jason Livingstone said:

    With the Company now funded post our recent capital raising, we now turn to continuing to develop the Kookynie Gold Project. An initial 40-hole RC programme is designed and is currently being executed to follow up the phenomenal drill hole results we published at Leipold and McTavish.

    Metalicity has defined a ‘exploration target’ of between 294,000 ounces and 967,000 ounces.

    Given the prominence of and attention given to the gold price recently, it is easy to equate the dramatic increases in share price of junior explorers to hype.

    Today’s announcement is more an operations update than anything else.

    Be on the lookout

    Over last few years we have seen the rise of the Penny West and Bellevue gold mines.

    These are two old high-grade WA projects which were perhaps not given the respect they deserved, until recently.

    Spectrum Metals Ltd [ASX:SPX] acquired Penny West in 2018, turning it into a success story after  Ramelius Resources Ltd [ASX:RMS] acquired the company for ~$208 million this year.

    Bellevue Gold Ltd’s [ASX:BGL] share price has rocketed from 2.5 cents to 60-plus cents per share since 2017, thanks to the success at its namesake historic project.

    This is what MCT say they are aiming to replicate.

    Turning an unloved goldfield into a success story is not impossible.

    But it is worth taking a sceptical approach, there are more flops than there are success stories in gold exploration.

    If you watch Aussie explorers, developers, or miners closely and you liked the reasoning behind today’s article, make sure to subscribe to The Daily Reckoning Australia, it’s a great way to stay ahead of the curve when it comes to Australian miners. It’s free too. Subscribe here.


    Lachlann Tierney,
    For The Daily Reckoning Australia

    The post Metalicity Share Price Up as Drilling Finally Gets Underway (ASX:MCT) appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • RareX Share Price Up on Eased WA Restrictions (ASX:REE)

    Aussie rare earths explorer Rarex Ltd [ASX:REE] has had a bumper end to the month of May, its share price is up 100% over the last 30 days.

    The rise in the REE share price has been spurred on by an announcement regarding drill results at its Trundle project and exploration recommencing at its Cummins Range project.

    ASX REE Share Price Chart - RareX Shares

    Source: Tradingview

    Upon further news from Cummins Range, REE’s share price is up 7.14% to trade at six cents per share.

    Drilling to recommence at Cummins Range

    REE’s Cummins Range project is thought to be one of only two known rare earth bearing carbonatites in Australia — the other being Mt Weld owned by Lynas Corp Ltd [ASX:LYC].

    Drilling was due to begin in April before the outbreak of the COVID-19 pandemic, resulting in bans of intrastate travel in WA.

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    Further specific restrictions were also imposed in the Kimberley region of Western Australia, where Cummins Range is located.

    As of 18 May 2020, the WA Government has begun to relax restrictions with further changes expected to be announced in the coming weeks.

    Meaning REE will now begin drilling in July.

    Why the share price reaction?

    Cummins Range has an inferred resource of 13 megatons at 1.13% total rare earth oxides for a contained 147 million kilograms.

    This inferred resource occupies only a small area on the project, approximately two by two kilometres, which offers the potential to expand the known resource.

    This morning, REE announced it had been reviewing historical drilling results at the project in preparation for the renewed exploration effort in July.

    Historical samples contained high Neodymium-Praseodymium (NdPr) content of 22.1%.

    RareX noted the NdPr content was comparable with other similar known deposits including LYC’s Mt Weld project.

    NdPr, along with other rare earthers, are seen as critical minerals in many countries due to their necessity in electric vehicles, wind turbines, and military applications.

    What’s the market for rare earths like?

    With tensions with China increasing across the globe, there has been a push to develop rare earth deposits outside of the country, which currently dominates the space.

    US Senator Ted Cruz introduced legislation recently to facilitate the revival of the industry in the US.

    The legislation included tax breaks for mine developers and manufacturers — similar legislation has not been mentioned here in Australia.

    Rare earth prices can be extremely prone to geopolitical events and associated perceived supply shocks.

    REE said it anticipates rare earth prices will continue to increase as geopolitical tensions continue to rise, citing heightened geopolitical hostilities regarding COVID-19.

    For example, in 2011 NdPr prices jumped to US$280/kg following China’s ban on rare earth exports to Japan, resulting in diplomatic dispute between the two nations.

    The NdPr oxide price is currently attracting around US$38 per kilogram.

    REE seems to have plenty of interesting projects on its plate at the moment, with news regarding its Trundle Gold Project expected to be announced soon.

    If you’d like to stay up to date with RareX and other Aussie miners and explorers in the commodity space, make sure to subscribe to The Daily Reckoning Australia; it’s a great way to stay ahead of the curve when it comes to Australian miners. It’s free too. Subscribe here.

    Kind Regards,

    Lachlann Tierney,

    For The Daily Reckoning Australia


    The post RareX Share Price Up on Eased WA Restrictions (ASX:REE) appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • Tourism 'pays the price' for Council's 'blunt decision'

    The Glamorgan Spring Bay Council is dumping its high-profile visitor information centres in the Tasmanian tourist meccas of Bicheno, Triabunna and Swansea, as it struggles with financial challenges only made worse by the coronavirus crisis.

    Posted: by

  • Valor Resources Ltd Shares Muted on Sale (ASX:VAL)

    Valor Resources Ltd [ASX: VAL] announced yesterday they’ve completed the settlement on the sale for their Radio Gold Project located in Western Australia, around 400km from Perth.

    Valor Resources is an ASX listed mineral explorer with projects in Peru. The company acquired an interest on the Radio Gold Project last year. The mine has a historical production of over 72,000 ounces at 38.5 grams per tonne gold.

    What’s the deal?

    On 14 April, Valor Resources revealed they had entered into an agreement to sell the Radio Gold Project to Summit Resource Holdings Pty Ltd, a fully owned subsidiary of Nu-Fortune Gold Limited.

    According to the agreement, Valor Resources would receive $900,000 in cash for the project, which is planning to fund their projects in Peru.

    As the CEO Dr Nick Lindsay commented back in April:

    Valor entered in an agreement to acquire an initial stake and then subsequently farm-into the Radio Gold Project. The Project has strong merits and Valor was pleased to own it. However, Valor was caught out by the swiftness of the deterioration in capital markets in recent weeks and as such is not in a position to continue to fund the capital required to progress the asset. Given this scenario, divesting the asset was crucial to underpinning Valor’s ongoing viability and so whilst we are disappointed not to be able to progress with Radio, we are pleased we can fortify our balance sheet and weather this current environment and focus on our remaining highly prospective Peruvian assets.

    According to the agreement, Valor Resources was to receive the $900,000 amount through a $50,000 initial deposit. Then $700,000 in the next 30 days of the agreement and the remaining $150,000, which were a reimbursement of expenses from the project, in three $50,000 instalments to be paid after completion.

    Valor Resources announced yesterday a modification of the terms in where they agreed to a $20,000 discount on the final $150,000 expense payment if the buyer paid this sum prior to competition. Valor Resources has received a total of $880,000 and has completed the deal.

    Valor Resources confirmed they are no longer involved in the Radio Gold tenement.

    What could this mean for Valor?

    Shares opened 50% higher this morning at $0.002, but have gone back down to $0.001 at time of writing. The recent transaction raises plenty of questions on if, even with the sale, the company will need more cash, especially since Peru is one of the countries getting hit hard by COVID-19. Since the beginning of the year, Valor Resources’ shares have lost 80% of their value.

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    Selva Freigedo

    The post Valor Resources Ltd Shares Muted on Sale (ASX:VAL) appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

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