Market Update

General - a few interesting AGM´s today

Good afternoon

German business confidence stronegr than expected today...In the absence of the majority of US-investors, no change of recent trends....

Amazing, and as I have to admit, a bit frightening...I am talking about  sky-rocketing base metal prices...which are all making new highs today in London. 

                           in A$ this year         long term                    

Zinc                    + 67%                       9-year high        

Copper               + 23%                       close to 5 year high 

Nickel                 + 30%                      15-month high - 30% to go to reach previous 3-year high

Lead                    + 25%                      9-year high

Tin                       + 45%                     2-year high - 15% to go to reach 5-year high

The numbers for this year are very similar in US$ terms - longer term, the prices are not at the same amazing levels, as in A$, as the A$ has been falling 25%+ since the last bull market in metals...and, as you know, costs have been falling....and still, there not many projects on the horizon. As one could witness at RIO´s AGM today - the talk in the mining industry, and certainly for major producers, is maximising profits and margins, as opposed to growth a few years ago. I have no doubt, that this will change - give it 12-18 month, and these guys might well change their mind. But you knopw as well as I do, that it takes a long time to develope projects these days - in 90% of situations, it also takes much longer, than initially thought! So we will have a nice bull market ahead of ourselves for a few years to come - whatever these very overbought base metals will be doing in the short run!

All this is provided, that the world does not go under. I have no doubt, that it will - my personal opinion is, that the Trump-experiment will fail big time - but that´s probably a few years away, and in the meantime, we might as well go for the ride and make the most of it! The Trump-trade is on big time, and as you can see in the relentless run of the major miners and the metals, big money is piling into a sector, which has been under-owned for years!!

These numbers for the base metals above are incredible - and I can only repeat, that small caps have done absolutely nothing as yet, compared to what they could-and will be doing!

The only casualty is gold...and the more I think about it, the short term will be bleak for gold. I hope, that I am wrong, and that this is a bear-trap only....but I fear, that we will be going lower - which will provide a fantastic buing opportunity for the longer term. 

Kingsgate - interesting AGM today. As at today, the company is free of any net-debt....Chatree is humming like a train, on track to produce a stunning 17.500 oz this month.-... until year end, when the concession to operate the plans runs out, they will have 18 mill$ in cash or slightly more, according to the chairman´s speach today. He also reports about multiple approaches they have had as to their project Nueva Esperanza in Chile, which is mainly silver, and has a NPV of 160 Mill US$ at slightly higher silver prices than today. If I value this project at just sa 40 Mill US$ = about 50 mill A$, and add the expected 18 Mill in cash, that leaves the Thai operations valued at minus 13 Mill A$.....The upside is, that something will happen to Chatree, as it should...Let´s face it: KCN have done nothing wrong in Thailand other than to f..k up government relations ( admittedly, that´s something one should not do!! ). But they are still the owner of the land , on which the mine is located, and a large plant....that could be worth 300-400 mill A$, provided they get the essential operating license back + new exploration licenses, or just 20-30 mill A$, if they have to dismantle the plant!

In my opinion, an excellent punt....downside minimal - several times upside....and not all that much gold price risk in this stock, unless gold + silver fall dramatically. Having said this, I am not a shareholder

Evolution AGM today as well - guidance for the year has been left unchanged at 800-860.000oz production at 900-960 A$ AISC. Production is frecast to continue to slightly increase, and costs continue to slightly fall....Let´s face it: A sustainable business like EVN will make a lot of money out of it´s gold mines at the current 1600 A$/oz....the very strong copper price is helping as well ( about 20000t p.a. from recent aquisition Ernest Henry ), and exploration is delivering at Cowal, Mt.Carlton, Mungari and the Tennant Creek JV....and yet the market will not be too interested, if gold falls further. I fear, that the music is playing elsewhere in the moment, and I would hold off buying any gold stocks for the moment. It does not help to be the best of a group of swimmers swimming against a strong tide!! Not even a South African Life saver will succeed in such an enviroment...

Panoramic - also had their AGM. Not much new here - the company cannot really talk much about Savannah, until the new feasibility study is out. It is stille xpected to be finished in December - but until it will be signed off by directors, we will have Christmas, also entering the major holiday period in Australia. We might have to be patient until the 3rd week of January - in any case, well in time for this year´s conference in Zurich on the 24th of February. By the way, you can already pencil in this date - Evolution and Panoramic will definitely be there, and we will fix the other companies next week. You will know many of them, but we will also have a few new names around!

Last word, and I know, that I am pushing it hard ( and I am having a substantial position in the stock! )...just ahve a clsoe look at Foran Mining, if you ahve not bought any so´s really one of the more unusual situations I have seen in my career...Using the parameters from the companies PEA ( which is slightly more demanding than an Australian PFS ) , the NPV8 as at today´s metal prices is approx 550 mill can$, vs an EV of 25 Mill Can$ today.! This is crazy stuff...and don´t get me wrong - I do not believe, that the stock will go up by 20x - but can you tell me a reason, why this thing should not trade at say 100 mill = roughly 20% of NPV????

have a nice evening


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