In today's financial markets the uncertainty after the financial crisis is exacerbated by the turmoil in the Arab world, a weak dollar and various natural disasters. This has led many investors to commodities, especially central banks, with their free monetary policy. Currently we're in the very middle of a commodities supercycle. The price of almost all metals traded today is driven by huge amounts of speculation, as is often perceived uncomfortable for an investor with a relatively high level of risk aversion. There exists, however, a few commodities where user-demand actually outweighs supply, one of them is the unknown metal that goes under the name, Antimony.
Antimony is a rare metal used in plastics, for example, microelectronics and clothing due to the input of the fire-resistant and heat resistant properties it possesses. The market is very small, in 2010 total production was 187 000 tonnes. What is interesting is that around 90% of the total production existed in China. Something that is perhaps even more interesting is that China has put a cap on this year’s production, at 100 000 tonnes.
Hence status quo on the production side is changed, but the supply is likely to remain at the same level or increase because of the price insensitivity that exists. This means that there actually exists a profound shortage of Antimony in the world right now. The shortage is also reflected in the price that has almost quadrupled since 2009, from $ 4,000 to $ 16000 per tonne. A major question is: Why has China reduced its production so sharply? According to James Cross, Vice President of Adroit Resources, a company with the largest Antimony deposit outside China, China's sharp deceleration of output could be due to either exhausted deposits or that they want to "corner the market".
Will the price continue to rise because antimony is such a component in the production? Will we see a sharp increase in Chinese FDIs in the antimony market?
How will existing non-Chinese antimony producers react to the price increase?
One company that has really caught my attention during the past weeks is Adroit Resources, they have the largest (historic) deposit of antimony outside China. This deposit is located in Italy and they are the only player in Europe (if we disregard (Tri-star) a minor player in Turkey. Adroit has no debt and management owns large parts of the company, which reduces agency costs because their incentives are very much aligned with shareholders’ interests. Adroit Resources also has also large deposits of copper, zinc and gold on its Canadian, Red Vein property.
I have attached a link from a mining conference in London last week where a reporter from Money Week, Dominic Frisby, speaks very positively about antimony and Adroit. James Cross does also hold an extremely interesting presentation of the company. I’ve also enclosed an article in Money Week, where the same reporter discusses the antimony market.
The price of the Adroit Resources is currently 0.12 (market cap: $ 11m) which is extremely low given that only their Antimony deposits in Italy are "worth" $ 750 m. In Italy they have also found gold and are now launching a diamond-drilling program. If one includes their deposits in Canada and that European antimony is traded at a premium, the current valuation of Adroit is far too low.
I’ve also heard from very safe sources that MoneyWeek is publishing a buy-recommendation on Adroit Resources Inc sometime over the next two weeks. So my recommendation would be to keep buying until at least the level of the last private placement at $ 0,2. The management has a target level of around $ 2-3 in two years, which maybe is a bit enthusiastic. I will start realizing profits at $ 0,7-0,8 though. Keep in mind that the company has no debt and that they have strong financiers backing them up. Hopefully we could be looking at some serious Chinese acquisition attempt in a near future as well.
Does anyone hold Adroit stocks or know anything more about the company?
Video of the conference in London: http://www.viddler.com/player/5e651cb4/"/>
Link to article in MoneyWeek: http://www.moneyweek.com/home/investments/commodities/money-morning-commodities-antimony-05006
Antimony is a rare metal used in plastics, for example, microelectronics and clothing due to the input of the fire-resistant and heat resistant properties it possesses. The market is very small, in 2010 total production was 187 000 tonnes. What is interesting is that around 90% of the total production existed in China. Something that is perhaps even more interesting is that China has put a cap on this year’s production, at 100 000 tonnes.
Hence status quo on the production side is changed, but the supply is likely to remain at the same level or increase because of the price insensitivity that exists. This means that there actually exists a profound shortage of Antimony in the world right now. The shortage is also reflected in the price that has almost quadrupled since 2009, from $ 4,000 to $ 16000 per tonne. A major question is: Why has China reduced its production so sharply? According to James Cross, Vice President of Adroit Resources, a company with the largest Antimony deposit outside China, China's sharp deceleration of output could be due to either exhausted deposits or that they want to "corner the market".
Will the price continue to rise because antimony is such a component in the production? Will we see a sharp increase in Chinese FDIs in the antimony market?
How will existing non-Chinese antimony producers react to the price increase?
One company that has really caught my attention during the past weeks is Adroit Resources, they have the largest (historic) deposit of antimony outside China. This deposit is located in Italy and they are the only player in Europe (if we disregard (Tri-star) a minor player in Turkey. Adroit has no debt and management owns large parts of the company, which reduces agency costs because their incentives are very much aligned with shareholders’ interests. Adroit Resources also has also large deposits of copper, zinc and gold on its Canadian, Red Vein property.
I have attached a link from a mining conference in London last week where a reporter from Money Week, Dominic Frisby, speaks very positively about antimony and Adroit. James Cross does also hold an extremely interesting presentation of the company. I’ve also enclosed an article in Money Week, where the same reporter discusses the antimony market.
The price of the Adroit Resources is currently 0.12 (market cap: $ 11m) which is extremely low given that only their Antimony deposits in Italy are "worth" $ 750 m. In Italy they have also found gold and are now launching a diamond-drilling program. If one includes their deposits in Canada and that European antimony is traded at a premium, the current valuation of Adroit is far too low.
I’ve also heard from very safe sources that MoneyWeek is publishing a buy-recommendation on Adroit Resources Inc sometime over the next two weeks. So my recommendation would be to keep buying until at least the level of the last private placement at $ 0,2. The management has a target level of around $ 2-3 in two years, which maybe is a bit enthusiastic. I will start realizing profits at $ 0,7-0,8 though. Keep in mind that the company has no debt and that they have strong financiers backing them up. Hopefully we could be looking at some serious Chinese acquisition attempt in a near future as well.
Does anyone hold Adroit stocks or know anything more about the company?
Video of the conference in London: http://www.viddler.com/player/5e651cb4/"/>
Link to article in MoneyWeek: http://www.moneyweek.com/home/investments/commodities/money-morning-commodities-antimony-05006
