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Post Market Wrap | IGO-controlled Fraser Range JV Project finds significant discovery

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This Post Market Wrap is presented by KOSEC – Kodari Securities

  • Drilling of nickel-copper targets in the area to continue
  • Likely that IGO will increase its existing Fraser Range JV stake to 76 percent
  • Negotiations to acquire the CSA Copper Mine from Glencore have concluded
  • Value-accretive mergers and acquisitions in the clean energy metals sector continuing    
  • Clean energy metals sector buoyed by rising energy prices generally around the globe.

IGO Limited (‘IGO’) has successfully transformed its business focus from gold to ‘clean energy’ metals that are essential to enabling clean energy production. The transformation involved the divestment of its 30 percent stake in the gold asset ‘Tropicana’ in May 2021 for $889 million and on 30 June 2021 settling its 49 percent JV stake in Chinese-owned Tianqi Lithium Energy Australia, for A$1.9 billion. This JV provides IGO with a 25 percent interest in the Greenbushes lithium mining operation and a 49 percent stake in the processing plant at Kwinana. The Greenbushes lithium mine in WA is the world’s largest lithium mine. Proceeds of $765 million from a capital raising were used to supplement this JV purchase price. IGO retains a 70 percent joint venture exploration interest with Antipa Minerals Limited in the world class Paterson Province. IGO also has a 70 percent stake in the graphite and nickel-copper Fraser Range Joint Venture with Carawine Resources.

Wide Graphite zone intersected at Fraser Range

Joint Venture partner with IGO, Carawine Resources, has today announced the discovery of a wide zone of graphitic gneiss, at its Red Bull tenement, within the Fraser Range Project. The Project is exploring for magmatic nickel-sulphide deposits, such as that at IGO’s nearby Nova Operation, located 30 km to the north. Both nickel sulphate and graphite are essential commodities used in the production of car batteries and solar panels.    

The discovery is considered significant in that the diamond drill hole has determined the source of the targeted conductor to be massive graphite and graphitic sediments, warranting future exploration. Drilling will continue on the Joint Venture tenements with testing for nickel-copper targets in the area to commence within 3 months. Nickel-copper alloys are used extensively in power generation.     

Joint Venture details

IGO presently holds a 70 percent stake in the tenements and has the right to increase this stake by 6 percent before June 2022, based on incremental exploration expenditure of up to $1.3 million by IGO. It is now likely that IGO will continue its exploration program in the existing tenements and take its existing stake to 76 percent.  The Joint Venture was established in 2016 and IGO is the manager and operator of the JV, having spent $5 million on exploration over the past 5 years. 

Carawine Resources’ core focus is gold, copper and base metals. IGO is more future-focused, targeting the discovery of ‘clean energy‘ metals and ‘battery metals‘. This is a key reason for the investor appeal of IGO.

Looking Ahead

The recent Red Bull tenement discovery is welcome news for IGO because its nearby Nova nickel-copper operation has a limited mine-life of another 5 years to run.

On 1 March IGO advised shareholders that negotiations with Glencore regarding the potential acquisition of the CSA Copper Mine from Glencore, have concluded. Producing 46,000 tonnes of copper annually, the estimated purchase price of this asset was around $750 million. IGO has stated its intention to continue to look for value-accretive mergers and acquisitions that are consistent with its clean energy metals strategy.    

The clean energy metals sector remains well supported as the battery storage technology sector continues to advance, buoyed by rising energy prices generally around the globe.

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world.

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Management shake up at under fire Qantas

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There’s been a management shake up at Australia’s flag carrier airline Qantas, which has come under fire for cancellations and delays

Jetstar CEO and longtime Qantas executive Gareth Evans has resigned.

He was touted as a potential replacement for controversial Qantas CEO Alan Joyce.

Gareth Evans has been with Qantas for 23 years.

He has been chief of Jetstar since 2017, but has worked across the group and has now “decided this is the right moment to move on”.

This comes as the aviation grapples with the higher fuel prices and staffing issues at airports that are affecting much of the industry globally.

Strong demand

Qantas has also updated the market, saying it’s on track to record second half earnings of just over 500 million dollars.

Underlying profit is set to return in FY23, while debt levels are now well below pre-pandemic levels.

Qantas says this is due to continued strong domestic and international travel demand.

Qantas has come under fire for long delays and cancellations
Qantas has come under fire for long delays and cancellations

After peaking at more than $6.4bn at the height of the pandemic, net debt is expected to fall to around $4bn by June 30, an improvement of around $1.5bn in the past six months.

The airline has come under sustained pressure, with many passengers complaining about long queues, cancellations and delays.

Qantas is calling for patience ahead of the winter school break rush as it hires more staff to manage increased demand at airports.

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Business

Nike to fully exit Russia

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U.S. sportswear maker Nike is making a full exit from Russia, three months after suspending its operations there, the company said in an emailed statement Thursday

The sportswear giant had said back in March that it would suspend operations at all the stores it owns or operates there.

On Thursday (June 23) the firm said it would leave the country altogether.

In a statement, Nike said it would scale down over the coming months.

The move is largely symbolic for the company, which gets less than 1% of its revenue from Russia and Ukraine combined.

It says any stores that are still open there are run by independent partners.

In May, Russian media reported that Nike had not renewed agreements with Inventive Retail Group, its largest franchisee there.

Now the full exit lputs Nike in line with other major western brands such as McDonald’s and Google.

Foreign companies seeking to leave face the prospect of new laws being passed that will allow Moscow to seize assets and impose criminal penalties.

That has prompted some businesses to accelerate their departure plans.

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Business

U.S. orders vape company Juul to cease sales

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Juul has been an industry leader in the vaping sphere since its establishment in 2015, controlling 75 per cent of America’s market by its third year of operations.

This is just the latest crackdown on the Tabacco industry by the Biden administration, all part of a sweeping effort to regulate the sector after years of delay.

The White House has also announced a rule to establish a maximum level of nicotine in tobacco products in an attempt to make them less addictive.

After a nearly two-year-long review, the FDA said Juul submitted insufficient and conflicting data to show that its e-cigarettes met public health standards.

The regulator also said the findings raised “significant questions,” including whether potentially harmful chemicals could leach out of Juul pods.

The decision potentially deals a fatal blow to the once high-flying San Francisco company.

Juul did not immediately respond to a Reuters request for comment.

The FDA had to judge whether Juul’s products, which have been sold for years without being officially authorized by the agency, were effective in getting smokers to quit and, if so, whether the benefits to smokers outweighed the potential health risks to new e-cigarette users, including teenagers.

“They prey on children.”

Democratic Senator Dick Durbin hailed the decision by the FDA on Thursday, but said “they’re in for a legal battle for sure.”

Earlier this week, the Biden administration said it also plans to propose a rule establishing a maximum nicotine level in cigarettes and other tobacco products to make them less addictive.

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