The Silver Lake Resources Limited. (ASX: SLR) share price has been surging higher in 2020, climbing 76.1% higher to $2.36 per share. The $2.1 billion gold producer has benefitted from higher gold prices alongside its fellow ASX-listed peers.

But there’s a big reason to watch the ASX gold share in early trade this morning: the company’s latest annual report.

Why is the Silver Lake share price worth watching?

Late yesterday, Silver Lake released its annual report for the year ended 30 June 2020 (FY20). The mid-tier ASX gold miner reported multiple records across key operational and financial metrics for the year.

Gold production jumped 64% compared to FY19 for a total of 273,071 gold equivalent ounces, with gold equivalent sales up 54% to 263,362 ounces. The group’s all-in sustaining cost (AISC) came in at $1,295 per ounce, below initial guidance of $1,300 to $1,350 per ounce.

Sales guidance was twice upgraded during FY20 and Silver Lake has now delivered 6 straight years of meeting or exceeding guidance.

Underlying net profit after tax (NPAT) surging 3,852% to $257 million while operating cash flow jumped 250% to $252 million. Year-end cash and bullion increased by $139 million to $269 million while Silver Lake remained debt-free.

The Silver Lake share price has performed strongly in 2020 and there was more to like about the latest update. Management expects strong momentum into FY21 with guidance of 240,000 to 250,000 ounces at an average AISC of $1,400 to $1,500 per ounce.

The group’s diluted earnings per share came in at 31 cents per share, which means the Silver Lake share price traded at an equivalent price to earnings (P/E) ratio of 7.61 at yesterday’s close.

Foolish takeaway

FY20 was clearly a strong year for the Aussie gold miner thanks to strategic acquisitions and favourable gold prices. That has seen the Silver Lake share price outperform the S&P/ASX 200 Index (ASX: XJO) and many of its peers.

The question for investors is how much of that growth and production is already priced in.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises 1%, Cimic (ASX:CIM) up 8% on sale
• How these 3 letters could see your ASX shares outshine
• Brainchip (ASX:BRN) share price jumps on quarterly update
• How I’d position my ASX share portfolio for the next market crash

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BHP Group Ltd (ASX: BHP) share price will be on watch today following the release of its first quarter update.

How did BHP perform in the first quarter?

According to the release, BHP has started the new financial year in a positive fashion.

For the three months ended 30 September, the Big Australian achieved Iron Ore production of 66.04 Mt. While this represents a 1% quarter on quarter decline, it was up 7% on the prior corresponding period.

Management notes that record quarterly production at Jimblebar and strong supply chain performance offset the impact from planned major car dumper maintenance.

BHP’s Petroleum production grew quarter on quarter to by 1% to 27 MMboe. This was driven by the first production from Atlantis Phase 3 and higher seasonal demand at Bass Strait, which was partially offset by lower volumes at Shenzi due to planned maintenance, the impact of Tropical Storm Laura in the Gulf of Mexico, and weather impacts at North West Shelf.

This production was stronger than some analysts were expecting. For example, a note out of Goldman Sachs reveals that it was forecasting production of 26Mboe.

Also coming in ahead of expectations was BHP’s Copper production. It delivered quarterly production of 413kt, which was flat quarter on quarter. This compares to Goldman’s estimate of 365kt.

Management advised that this was driven by strong concentrator throughput at Escondida, higher production at Olympic Dam, and a recovery in production at Antamina following a six-week COVID-19 related stoppage in the June quarter.

Elsewhere, Metallurgical Coal production was down 17% quarter on quarter, Energy Coal production fell 18%, and Nickel production reduced 7%.

BHP Chief Executive Officer, Mike Henry, commented: “BHP has started the new financial year with a strong first quarter of safety and production performance. Group production rose two per cent from a year ago driven by solid results in metallurgical coal and iron ore, our major growth projects made good progress, and we secured more options in copper, nickel and oil.”

FY 2021 guidance.

BHP’s revealed that all production and unit cost guidance remains unchanged for the 2021 financial year, except for Cerrejón production guidance which is under review due to an ongoing strike.

In respect to its key commodities, in FY 2021 BHP continues to expect iron ore production of 244Mt to 253Mt, copper production of 1,480kt to 1,645kt, and petroleum production of 95MMboe to 101MMboe.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 3 high quality blue chip ASX shares to buy now
• How these 3 letters could see your ASX shares outshine
• ASX 200 Weekly Wrap: Promises of easy money push ASX 200 to post-crash high
• 5 things to watch on the ASX 200 next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Washington H. Soul Pattinson & Co Ltd (ASX: SOL) share price has been something of a quiet performer over the past 2 months. Since 19 August, the Soul Patts share price has risen from around $20.80 to yesterday’s closing price of $26.02. That’s a rise of 25%. Not a bad return for 2 months of waiting, especially since the S&P/ASX 200 Index (ASX: XJO) is ‘only’ up by 2.7% over the same period.

So what’s behind this rather sudden rally? And, perhaps more importantly, are Soul Patts shares a buy at these new levels?

What’s been moving the Soul Patts share price?

The most important thing to understand about Soul Patts is that it’s really structured more like a listed investment company (LIC) these days, rather than a ‘traditional’ share like say Woolworths Group Ltd (ASX: WOW). Unlike most companies, the vast majority of Soul Patts’ earnings come from its investment portfolio of ASX shares and unlisted assets. Sure, the company still runs a few pharmacies (its original modus operandi). But in reality, these are rather inconsequential compared with Soul Patts’ investment portfolio.

Let’s examine Soul Patts’ largest portfolio positions. The company owns:

• a 25.3% stake in TPG Telecom Ltd (ASX: TPG)
• a 43.9% stake in Brickworks Limited (ASX: BKW)
• a 50% share of New Hope Corporation Limited (ASX: NHC)
• a 19.3% stake in Australian Pharmaceutical Industries Ltd (ASX: API)
• an 8.6%  share of BKI Investment Co Ltd (ASX: BKI)
• a 22.6% stake in Clover Corporation Limited (ASX: CLV)

Over the past 2 months:

• the Brickworks share price is up 12.7%
• the TPG share price is essentially flat.
• New Hope shares are down 11.5%
• Australian Pharma shares are down 5%
• BKI shares are essentially flat
• and Clover Corp shares are down 10.5%

Of these investments, the 43.9% stake in Brickworks is by far the largest. Since Brickworks has a market capitalisation of $2.91 billion on current prices, the 12.7% jump in the Brickworks share price would have been partly responsible for Soul Patts recent gains.

Additionally, we also know that some of Soul Patts’ board members have been heavily buying shares in recent weeks too. According to ASX filings, directors Thomas Millner and Robert Millner acquired 100,000 additional Soul Patts shares between them from 6 to 9 October. Those shares are worth more than $2.6 million today. That wasn’t the only tranche of shares purchased recently either – both gentlemen were also buying in late September as well.

Investors generally like to see company directors put their money where their mouths are, so I’m sure these moves helped push up the Soul Patts share price as well.

Is Soul Patts a buy today?

Personally, I love Soul Patts. It’s one of the most diverse companies you can buy on the ASX in my view. Further, its record-breaking (and still uninterrupted) 20-year streak of annual dividend increases is unbeaten on the ASX today. I don’t think the company is as compelling a buy as it was a few months ago, but I would still pick up shares today for a long-term ‘buy-and-hold’ bottom drawer investment.

More reading

• 2 ASX shares I plan to hold til I’m 100
• 2 ASX dividend shares raising their dividends like clockwork
• 2 robust ASX 200 blue chip shares to buy today
• How to replace your entire wage with ASX dividend shares
• This is where I’d invest $1,000 right now into ASX shares

Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Is Vanguard MSCI Index International Shares ETF (ASX: VGS) the best long-term investment?

There are a lot of different exchange-traded funds (ETFs) out there that can help diversify your portfolio. They can be used to just generally invest into shares. Or they can provide tactical diversification if you want more exposure to a particular geography or industry.

Each ETF is different and it’s important to understand what you’re investing into.

What is Vanguard MSCI Index International Shares ETF?

The aim of this ETF is to give investors exposure to the global share market, excluding Australia.

It’s invested in many of the world’s largest businesses in major developed countries for a low cost.

The investment is provided by Vanguard, one of the world’s leading investment managers. I think Vanguard is great. It aims to lower the cost of investing for investors. The owners of Vanguard are the investors themselves, Vanguard shares the profit by lowering costs.

I think Vanguard MSCI Index International Shares ETF is one of the best ETFs to consider because of its global diversification.

The portfolio

It’s actually invested in around 1,550 positions. That’s an excellent amount of diversification from just one investment.

Those holdings aren’t just based in one country, it’s invested right across the world. Around two thirds of the portfolio is invested in US shares, though remember that many of those US companies are global names – they just happen to be listed in the US. Other countries that represent more than 1% of the portfolio include: Japan, the UK, France, Switzerland, Canada, Germany, the Netherlands, Sweden and Hong Kong.

I also like the diversification offered in terms of the sector allocations. IT has the biggest allocation with a 22.5% holding. I believe investors should want a large tech exposure because that’s where the growth seems to be coming from.

Other sectors with a double digit allocation include 13.8% to healthcare, 12% to consumer discretionary, 11.5% to financials and 10.4% to industrials.

I’m sure you’re wondering about the actual businesses Vanguard MSCI Index International Shares ETF owns. Its biggest 10 holdings are: Apple, Microsoft, Amazon, Facebook, Alphabet, Johnson & Johnson, Nestle, Proctor & Gamble, Visa and Nvidia.

There are plenty of other interesting businesses as smaller holdings including Adobe, Salesforce.com, Walt Disney, Netflix, PayPal, SAP, Costco, ASML, AstraZeneca, Accenture and LVMH.

The performance

The ETF has performed reasonably well since inception in November 2014 with net returns of an average of 11.5% per annum. That includes the painful decline due to COVID-19.

Whilst there are some ETFs that have performed comfortably better, I think Vanguard MSCI Index International Shares ETF’s performance has been decent. A double digit return is a wealth-building growth rate.

The management fee

A big part of an ETF’s returns is a management fee. The lower the fee the higher the net return will be. Its fees can be really low because it just tracks an index rather than any active management component.

Vanguard MSCI Index International Shares ETF has an annual management fee of just 0.18%, which is very attractive to me. It’s cheaper than most Australian fund managers. 

Why I prefer it over Vanguard Diversified High Growth Index ETF (ASX: VDHG)

Vanguard Diversified High Growth Index ETF is a popular option because it offers a lot of diversification. A fund of ETFs in a single investment option. Why wouldn’t you just go with that instead?

Well, whilst I like the exposure to investments like smaller international shares and perhaps the emerging market shares, I don’t need a 10% allocation to bonds at this stage in my life.

I like the 100% allocation to shares with Vanguard MSCI Index International Shares ETF, it offers great diversification and a decent dividend income of around 2%. I think it could be one of the best, though I’d prefer to go with Betashares Global Quality Leaders ETF (ASX: QLTY). 

More reading

• Why it is important to diversify your ASX portfolio and how you can do it
• How to replace your entire wage with ASX dividend shares
• Which ASX ETFs offer the most diversification?
• Here are the 10 most popular ETFs on the ASX

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Is the National Australia Bank Ltd (ASX: NAB) share price a buy? It has risen by 10% this month, can the gains continue?

The outlook is improving for banks

Share prices are forward looking. If investors are expecting better things going into the future then they will push the NAB share price higher.

There have been a few key developments in recent weeks that should help NAB’s earnings over the medium-term. The federal budget looks supportive for the economy, particularly with tax cuts. If the economy is doing better then the major banks should beneficiaries.

The removal of responsible lending laws may help major banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) to get more credit to potential borrowers. A bigger loan book could mean higher profits, as long as bad debts don’t rise.

However, there is still a question about what’s going to happen with bad debts.

The NAB FY20 third quarter trading update saw a credit impairment charge of $570 million and the percentage of loans that are 90 days (and more) past due continues to rise each quarter. This isn’t a very good sign for the bank. However, it was pleasing to see that NAB generated $1.5 billion of statutory net profit and $1.55 billion of cash earnings. It’s still making a lot of money, despite the difficulties. 

NAB’s improving balance sheet

The big bank continues to have a good balance sheet. Indeed, at the end of the third quarter it had a CET1 capital ratio of 11.6%. It also recently announced that it was going to sell MLC Wealth to IOOF Holdings Ltd (ASX: IFL) for $1.44 billion. That’s a solid amount of extra cash for the balance sheet. Stepping away from wealth management is probably a good idea.

So, it’s a good time to buy NAB shares?

NAB’s share price and the other banks could continue to rise in the short-term if Australia’s economy and COVID-19 situation continues to remain in control.

There is more positive news coming out than negative news. The outlook for Australian house prices is improving as well, largely because of the factors I’ve already mentioned (lower taxes, a good COVID-19 situation and easier lending laws). Though there are still some reputation hits from the Hayne royal commission. NAB is going to have to pay $15 million for its referral program that broke the law, according to the BusinessInsider. 

I think banks are in for a mixed bag over the next couple of years. There may be higher lending growth, but there could also be higher bad debts if all the loan payment holidays don’t all return to making normal payments.

NAB may not be a terrible shorter-term idea today, it’s just that I think there are plenty of other ASX shares I’d rather buy first.

Which ones?

In terms of other financial businesses, I think that something like Magellan Financial Group Ltd (ASX: MFG) could be an idea. Magellan is still growing its funds under management (FUM) at an attractively good pace. The fund manager provides investors with exposure to global shares, which is the key strategy.

Magellan is making a number of interesting investments into new businesses. One example is Barrenjoey, a new Australian investment bank.

The upcoming launch of a retirement product could also be really beneficial for FUM in the coming years.

Magellan continues to steadily grow its ordinary dividend, which makes it a solid ASX dividend share in my opinion. At the current Magellan share price it offers a grossed-up dividend yield of 5%. I think Magellan has much better returns prospects than the NAB share price does at the moment.

Other ASX dividend shares I’d be happy to consider include Future Generation Investment Company Ltd (ASX: FGX), Brickworks Limited (ASX: BKW) and Pacific Current Group Ltd (ASX: PAC).

More reading

• Are ANZ (ASX:ANZ) shares a buy for dividend income today?
• ASX 200 Weekly Wrap: Promises of easy money push ASX 200 to post-crash high
• ASX 200 flat: Rio Tinto Q3 update, big four banks higher, GUD impresses
• Should you stay invested in an ASX share after a strong run?
• 2 ASX shares that could double your money in 5 years

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. The Motley Fool Australia owns shares of and has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) continued its positive run on Monday and reached a 100-day high.

While this is very positive, some ASX shares are doing even better than the index.

For example, the two ASX shares listed below have recently hit record highs. Here’s why they are on fire right now:

ARB Corporation Limited (ASX: ARB)

The ARB share price hit a record high of $32.88 on Monday. Investors have been fighting to get hold of the 4×4 accessories company’s shares since the release of a very positive first quarter update earlier this month. That update revealed that strong demand in export markets led to unaudited sales revenue growth of 17.7% for the first quarter of FY 2021.

Also growing very strongly was its profit before tax. It came in at $29.7 million for the quarter. This compares very favourably to ARB’s profit before tax of $34.4 million that it recorded in the entire first half of FY 2020. And while management advised that there is too much uncertainty for it to provide guidance, it appears confident that a strong first half profit result is coming.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The Domino’s share price continued its positive run and reached a new record high of $91.04 yesterday. The pizza chain operator’s shares have been in demand with investors this year thanks to its strong performance during the pandemic. This led to Domino’s delivering a 12.8% increase in network sales to $3.27 billion in FY 2020.

Pleasingly, FY 2021 started strongly, with like-for-like sales up 11% in mid-August. This appears to have set the company up to deliver strong profit growth this year. Also catching the eye of investors was the company’s long term expansion plans. It advised that it is aiming to grow its network to 5500 stores by 2033. This is more than double its current store network.

More reading

• 2 ASX growth shares I would buy with $2,000 today
• Invest like Warren Buffett and buy and hold these fantastic ASX shares
• 3 ASX growth shares that I would buy in 2020
• Top ASX tech shares to buy in October 2020
• If you LOVE a Bunnings sanga, you might LOVE the stock…

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Limited and Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Given the bleak outlook for interest rates, I continue to believe that ASX dividend shares are the best way for investors to generate an income in the current environment.

Luckily, there are plenty of quality options for investors to choose from right now.

Two that I would buy today are listed below. Here’s why I like them:

Dicker Data Ltd (ASX: DDR)

The first ASX dividend share to consider buying is Dicker Data. It is a leading distributor of computer hardware and software across the ANZ region that has been growing both its earnings and dividend at a quick rate over the last few years. Pleasingly, this has continued in 2020 despite the pandemic. In fact, just yesterday Dicker Data released its third quarter update and revealed year to date profit before tax growth of 28.3% to $60.8 million.

I believe it can continue its growth in FY 2021 and beyond thanks to its strong market position, growing vendor agreements, positive industry tailwinds, and new distribution centre. Once the latter is constructed it will give Dicker Data significant room to expand its operations and boost its revenues. For now, the company appears well-placed to increase its dividend to 35.5 cents per share this year. Based on the latest Dicker Data share price, this equates to a fully franked 3.9% dividend yield.

Rural Funds Group (ASX: RFF)

Another ASX dividend share I would buy is Rural Funds. It is an agriculture-focused property group that owns a number of properties across five agricultural sectors. These properties are of a very high quality and are leased on long term agreements to some of the biggest operators in the industry such as wine giant Treasury Wine Estates Ltd (ASX: TWE).

These tenancy agreements are a key reason why I think Rural Funds is a top option for investors. At the end of FY 2020, Rural Funds had a weighted average lease expiry (WALE) of 10.9 years. Given that these leases have rental increases built into them, the company has great visibility on its future earnings. In light of this, I believe it is well-positioned to continue growing its distribution by its 4% per annum target each year throughout the 2020s. For now, a distribution of 11.28 cents per share is expected in FY 2021. Based on the current Rural Funds share price, this works out to be a 4.75% yield.

More reading

• ASX 200 rises 1%, Cimic (ASX:CIM) up 8% on sale
• Dicker Data (ASX:DDR) share price reaches all-time high. Here’s why
• Why Dicker Data, South32, Tyro, and Uniti shares are pushing higher today
• 2 ASX shares I plan to hold til I’m 100
• 2 of the best ASX dividend shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week on a positive note and recorded a strong gain. The benchmark index rose 0.85% to 6,229.4 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to fall.

The Australian share market is set to give back some of yesterday’s gain after a poor start to the week on global markets. According to the latest SPI futures, the ASX 200 is poised to fall 40 points or 0.65% at the open. In late trade on Wall Street the Dow Jones is down 1.4%, the S&P 500 has dropped 1.6%, and the Nasdaq is 1.6% lower. Concerns that a stimulus deal in the U.S. won’t be signed is weighing on markets.

Oil prices drop lower.

It could be a poor day for energy shares such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) on Tuesday. According to Bloomberg, the WTI crude oil price has dropped 0.6% to US$40.64 a barrel and the Brent crude oil price is down 1.15% to US$42.44 a barrel. Oil prices dropped lower amid concerns over the stimulus package and on Libya’s plan to boost its output.

CSL R&D Investor Briefing.

The CSL Limited (ASX: CSL) share price could be on the move when it holds its annual research and development (R&D) investor briefing. One treatment of interest is EtranaDez, which was acquired from uniQure this year for US$450 million. It is a new gene therapy undergoing phase 3 trials as a treatment for haemophilia B. In FY 2020, the biotherapeutics giant invested US$922 million in its R&D. This doesn’t include the EtranaDez acquisition.

Gold price edges lower.

Gold miners Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) will be on watch after a subdued start to the week for the gold price. According to CNBC, the spot gold price has dropped 0.1% to US$1,905.50 an ounce. Once again, this appears to have been driven by concerns that a U.S. stimulus package is still a long way from being agreed.

BHP quarterly update.

The BHP Group Ltd (ASX: BHP) share price will be on watch today when it releases its first quarter update. According to a note out of Goldman Sachs, it expects the mining giant to report Petroleum production of 26Mboe, Copper production of 365kt, and iron ore shipments of 71.5Mt. The latter represents a 7% quarter on quarter decline in shipments

More reading

• 3 high quality blue chip ASX shares to buy now
• ASX 200 rises 1%, Cimic (ASX:CIM) up 8% on sale
• How these 3 letters could see your ASX shares outshine
• Brainchip (ASX:BRN) share price jumps on quarterly update
• How I’d position my ASX share portfolio for the next market crash

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Rare earth minerals explorer and mine developer Pensana Metals Ltd‘s (ASX: PM8) share price gained 1.6% today to close at $1.55 per share. This comes following the company’s update this morning on exploration activities at its new Coola Project in Angola.

Today’s 1.6% gains are roughly double the performance of the All Ordinaries Index (ASX: XAO), which closed up 0.8% for the day. But the Pensana Metal’s share price has done far more than return double the index’s gains in 2020.

Year-to-date the company’s share price is up a staggering 761%. And those gains come despite shares falling by 48% from 24 February through to 24 March during the COVID-inspired market selloff.

In case you’re wondering, if you’d picked up some shares on 24 February, today you’d be sitting on gains of 1,192%.

What did Pensana announce to keep its share price moving higher?

This morning Pensana announced that it had commenced initial field tests at its new Coola Project – 16 kilometres north of its advanced stage Longonjo Project.

The company is testing defined prospective targets for a range of heavy rare earths, light rare earths, scandium, niobium, tantalum, hafnium and fluorspar. (Don’t worry, I had to look a few of those up myself!)

The European Commission has listed these commodities as critical. And Pensana believes Coola will complement the future production of magnet metal raw materials from Longonjo.

The first assay results from early reconnaissance work confirm rare earth mineralisation in rocks and soils top 2.99% rare earth oxides.

The company also reported locating outcropping fluorspar mineralisation, stating this is of direct interest as well as being a positive sign for the presence of additional technology metals.

What Pensana’s Chief Operating Officer said

Commenting on the updated results, Dave Hammond, Pensana’s Chief Operating Officer said:

The early reconnaissance sampling results are a great start in already confirming the Coola complex as a fertile mineralised system… Systematic sampling of the 6 kilometre by 2.5 kilometre complex has now been completed and samples despatched for assay.

Exploration programs are currently in progress over 2 other prospective alkaline-carbonatite geological systems together with stream sediment sampling and geological reconnaissance of key geophysical anomalies.

We look forward to reporting further results from this exciting new exploration region on Longonjo’s doorstep.

With 2020’s share price gains of 761% in mind, Hammond surely isn’t the only one looking forward to the next set of results.

More reading

• 2 big challenges as Tesla (NASDAQ:TSLA) aims for a $25,000 car
• 3 high quality blue chip ASX shares to buy now
• Why did the Forbidden Foods (ASX:FFF) share price tumble 5% today?
• Quickstep (ASX:QHL) share price edges up on positive FY20 results
• ASX 200 rises 1%, Cimic (ASX:CIM) up 8% on sale

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla Inc (NASDAQ: TSLA) has set its sights on building an affordable car with a $25,000 starting price — again. At the company’s Battery Day last month, Tesla announced a slew of innovations designed to reduce battery production costs by up to 56% while also increasing range and power. As my Foolish colleague noted at the time, a new “tabless” cell design was the biggest breakthrough, but Tesla also discussed changes to the cells’ form factor, battery chemistry, and manufacturing process, among other things.

Working to bring down prices is the right strategic focus for Tesla. However, its stated goal of offering a $25,000 car within three years seems far-fetched. Additionally, with better, cheaper batteries on the way, it will be increasingly difficult for Tesla to meet its volume growth goals over the next few years.

Can it be done profitably?

There are two facets to the first major challenge Tesla faces. The first relates to whether it will be able to reduce costs enough to earn a reasonable profit on a $25,000 car. After all, when Tesla ramped up deliveries of the cheaper (sub-$40,000) Model 3 variants last spring, its gross margin plunged to 18.9% in Q2 2019 — and closer to 17% excluding regulatory credits — down from around 25% in the second half of 2018. It quickly made the $35,000 standard-range Model 3 an “off-menu” option to push buyers to pricier versions that it could produce profitably.

The cheapest version of the Model 3 available on Tesla’s website is the “standard range plus” option, which has a starting price of $37,990. This variant has a 54-kWh battery. Third-party sources have put Tesla’s 2019 battery costs between $127 per kWh and $158 per kWh. Even at the high end of that range, the battery for a standard range plus Tesla 3 would cost less than $9,000.

Thus, even if Tesla succeeds in all of its cost-reduction objectives related to batteries, the savings might be on the order of $5,000. That alone wouldn’t get Tesla close to being able to make a $25,000 car profitably.

The second issue relates to timing. Tesla did not bring a prototype of its new battery design to the Battery Day event. This raises questions about how far along it is in the development process, which requires solving some tricky problems. Moreover, Musk has frequently talked about how difficult it is to scale up manufacturing of new technologies, relative to just building a prototype.

This makes it unlikely that a $25,000 vehicle could be available in as little as three years. Another reason to take this projection with a grain of salt? CEO Elon Musk said more than two years ago that a $25,000 Tesla could come to market in about three years (i.e. 2021). That obviously isn’t happening.

Getting from here to there

Another big challenge for Tesla is driving sales of its current products before the new battery technology becomes available. Musk has previously talked about targeting 50% annual growth in vehicle deliveries. At that pace, Tesla would deliver over 1.2 million vehicles in 2022 and more than 1.8 million vehicles in 2023.

Achieving that level of growth would be difficult under any circumstances. It requires moving well beyond the early adopters and enthusiasts. Additionally, there appears to be only one high-volume product on the way to help Tesla reach these numbers (the Cybertruck).

This task will be complicated if people believe that Tesla will soon have vehicles on the market offering 50% or more additional range at significantly lower prices. Whereas early Model 3 buyers have seen their cars depreciate very little over the past few years, future buyers won’t be so lucky if Tesla puts new products that are better and cheaper on the market by 2025.

Of course, this isn’t to say that Tesla shouldn’t pursue advancements that will eventually reduce battery costs and improve performance. It is much better to disrupt your existing products than to wait for a competitor to do so. But investors shouldn’t ignore the impact of this coming disruption to Tesla’s products and pricing, either.

Tesla is on the right track

All in all, Tesla’s Battery Day presentation showed that the company is focused on the right goal: driving down costs to make its vehicles more affordable. Tesla wouldn’t be able to meet its long-term growth goals or fulfill its mission “to accelerate the world’s transition to sustainable energy” with its current product portfolio.

Furthermore, while Tesla has plenty of work to do to achieve the specific target of a $25,000 car, it has a more credible game plan for reducing costs than it did when Musk talked about this goal back in 2018.

However, while Tesla appears to be on the right track, it’s not clear how far down the track — and thus, how far ahead of competitors — the electric vehicle pioneer is right now. As a result, I would be wary of investing in Tesla at its premium valuation of more than $400 billion.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adam Levine-Weinberg has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 2 big challenges as Tesla (NASDAQ:TSLA) aims for a $25,000 car appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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