Market Update

General - Gold - Strike - Finders - Highfield

Good afternoon

I am sure, that we are seeing a speculative bubble in the moment in commodities...but as we know, the world is underweight commodities, and These guys will be scrambling for exposure...So what should be important to us is not, whether this Thing is overbought in the short term...what is important, to be on the trend and to have expsoure to it.

Investor are still not believing the momentum of Trump....I have no doubt at all, that he will put his stamp on many things, and he will move....

This is far reaching consequences: The 20-30 year bull market in bonds is over, if you have not realized this as yet...the Long bear market in commodities is over as well....

For us that means: Don´t sell will buy it back later! It´s interesting to see, what is Happening to my fund, which has been marketed as a resources-orientated, small-to midcap Australian fund since inception in 2002 - so everybody knows our tendency and heavy overweight in resources:

The fund is up 40% this year, outperforming ( naturally ) every other Australian fund by a vast margin. Do you think, that we are getting any fresh money in?? Nothing...the contrary...over the last week or so, we have had 7% or so money-outflow! I have to sell part of positions anyway, for rsik-control reasons, as individual holdings are not supposed to get too large...and I have to sell more, because of redemptions. This is very anoying, as very soon, I actually will get inflow - forcing me to buy back things I have been selling lower down....The same is happening to everybody, I guess....and it will feed the bull market big time. We have seen it all before!! So do not sell anything, People like me will buy it of you at much higher levels!

Obviously, the strong US$ is putting pressure on Gold in the Investors expect interest rates in the States to go higher. But they will go higher everywhere...the US-market is just too important to be seen as an isolated market. Inflation is creeping in...Trump´s spending will make sure, that the expectations will be more than fulfilled....and no matter, what interest rates are doing: IF Inflation will creep in, we will see gold perform....not to talk about the other myriad of reasons speaking for gold....

So use the weakness in stocks like EVN to build your quality portfolio at very reasonable prices, and add a few hot stocks like Kingsgate, West African or even Cardinal for some fun...

Just to give you a feel for the massive moves we have had in commodities (  I calculated the numbers at lunch time today, and they will have changed...but that does not Change the Story anyway ): all prices in A$!!!

                           Price               Change from low this year       difference to 5 year high

Copper             7802 A$t        + 30%                                                7%

Zinc                    3360 A$/t     + 62%                                                 new high

Nickel                15500 A$/t     + 43%                                                41%

Gold                    1661 A$/oz      + 13%                                               10%

And we are not talking about coking coal ( up by 300% ) thermal coal ( up 100% ) or iron ore ( up more than 50% ), which are Australi´s largest export goods. The A$ will go higher - terms of trade are getting better every day in the moment - and I think the current turmoil in emerging market currencies might be over soon...

Strike Energy - the Company is raising 4.5 mill$ in a 1:14 rights issue at 7ct....This is meant to complete, what they are currently doing - but it´s not adressing the medium term need for much more money. They are also not addressing the question, who will be managing this company in future - Chairman as well as Managing Director have to ask themselves, whether they are the right people to drive this company....Don´t get me wrong..I will certainly take up my rights, and I am continuing to believe in the Company....In tendency, I support the view of this serious analyst from Taylor Collison, who recently ascribed a 37ct or so valuation to the company. But I am pushing for some changes, as do other shareholders in Australia...

Finders - very disappointing Placement...the company raised 12.2 mill$ at 12ct/share! They have been very unlucky indeed - and perhaps a bit naive as well...raising funds in the days prior to an all-important US_election in a small company had to be a hard tehy had to re-price the Placement, and ended up raising less funds than they intended to - closing the raising at a time of major turmoil in markets. This was a desaster...BUT: These guys are producing now 28.000t of copper p.a., at just over 1 US$lb cash costs - and probably AISC of around 1.30 US$/lb. The price of copper has just gone up by 25% in about 2 weeks - trading at 2.67 US$lb....and while they have hedged 26% of production between now and March 2019, that still leaves them very exposed to the strength in copper. Any weakness in the stock, which I expect, once the new shares are tradable in a few days, should be excellent buying...the mine will be producing something like 85 mill US$ in cash, with copper at 3$ - that looks to me a reasonable assumption for the longer term copper price...and 100 Mill US$, once the hedge has matured...

Highfield - has started to run as well...finally! Potash Corp is up by 10% this week, as is K+S ( even though they announced an operational loss for the Quarter, and while having a major , enviromental headache with their salt in Germany ) it might be rather the wider market, than a company-specific story here. But you will be aware, that Rajoy has managed, finally, to establish a new Government in Spain recently...the ministry is now running out of excuses, to give enviromental clearance to Highfield´s excellent potash project in Northern Spain. They have had massive, local and provincial support anyway - so we are much more hopeful now to see some action! As you know, I am a faithful shareholder - we still have a large position

Crusader - just to Keep in mind: The godl price based in Brazilian Real is actually up by 6% this week...that is with Gold trading at 1236 US$oz, as I am finshing...

and all the metals are down now! Copper down 1% from 7% up....and so on...!!!! What a market....

Have a quite weekend following this tumultous week!


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