Market Update

General - Oz Minerals - Berkeley - Gold Road - Lucapa - Panoramic - Prairie Mining - Paringa - Cardinal

Good afternoon

well, Donald, it was worth trying!..Not that anybody is happy with Hillary, but for our markets except for gold, it is certainly the risk-free solution to have her run the deeply divided country....let´s hope, that I am not wrong with these comments....

It seems that markets are now largely expecting the above - base metals are very strong indeed, as zinc and lead are making new highs or just about, copper trading above 5000$/t for the first time since April ( and about to march through strong chart resistance ), nickel ( if it closes at the current level ) also at a 14-month high and on it´s way to 12.300 US$/t on the charts. Equities are rallying, and the US$ is trading slightly stronger. Alone gold, as expected, is being pushed down - but if we hold the current level of around 1285 US$/oz, I think this would also be a positive outcome and better than I had feared for in case of a Hillary-win. We should not forget - whoever wins, the US are a deeply divided and unstable ( ??!!) country...lots of uncertainty out there, and many reasons to own gold for the long term!

Iron ore and steel with new highs in China-trading continue to defy the analysts....and coking coal is limit-up !

The question now is not IF we are in a commodities bull market, but  how far it can go....and as usual, I have no idea, but it feels bloody good!

Some big news out today for my universe of stocks today:

Gold Road - are selling 50% of the 6.2 mill oz  Gruyere Project to Goldfields for 350 mill A$ in cash ( of which 250 mill front up ) + 1.5% royalty on GFI´s stake above 2 mill oz produced. That is a full price being paid by GFI - equivalent to 80ct/share of GOR + all the exploration upside from their large land position + 50 mill in cash at the end of this Quarter ( prior to the GFI-funds being paid ).....The stock will have a nice jump tomorrow. Goldfields will also have to carry the first 10% in cost overruns over the 507 mill A$ expected by the feasibility study. As some broker stated today - this will be the best funded, Australian explorer.  

Cardinal - got a hammering today! The company came out with the first resource estimate, which was excellent: at a cut-off grade of 0,5g/t, 96 millt at 1.3g/t for 3.9 mill oz - most of that in inferred resources. If anything, that is slightly larger than expected. BUT: by some estimates , up to 40% of the resource could be refractory, requiring the company to look for unconventional processing routes like roasting, bacterial leaching or production of a concentrate cted result, making things harder and more complicated. Much work has to be done at the project, to find the optimal route of processing, and quite some level of work is left to extend the resource, and to infill-drill. The company is welkl cashed up to do all this.

The market reacted very negatively today, especially to the metallurgical issues facing the project. Having completely sold out earlier, I started to buy some stock today....I think it´s overdone, and I still believe, that this a good project. But I am unsure, whether we will have seen the low today - sometimes, these things overshoot

To add a further twist, Mark Thomas resigned from the board today, and Kevin Tomlison replaced Mark Conelly as chairman ( C remains as a board member for now ? ), letting me only speculate about some internal issues here....There are many possible ways to deal with the refractory ore, even though the overall grade of the deposit is not fantastic. But by no means, the story ios over - hence some bottom-fishing today. In light of the executive management, which is not very well rated, I have entered into my small position today from a trading perspective....

Prairie Mining - surprised late last week with another coup with regards to their Lublin-based asset to produce mainly thermal coal: PDZ and CC5C, which constructs 40% of Chinese coal mines incl some very deep shafts, entered into a strategic co-operation agreement, and will jointly finish a bankable feasibility study for the construction of the coal mine. The parent of CC5C is China Coal, the second largest, Chinese coal producer with assets of 50 bill US$. CC5C is also expected to organize debt-funding for the proposed mine. 

This is not a definite transaction - buta strong step towards one. Bot the companies assets, coking coal + thermal coal and both in Poland, could be company makers and could each be worth substantially more than the current share price, in my opinion.

Paringa - also with some excellent news today: Todd Hannigan was appointed as CEO, and Tom Todd as CFO. Both have been shareholders already. hannigan was CEO, and Todd CFO of Aston Mining, which was merged with Whitehaven Coal a few years ago in a 5 bill A$ transaction. Both these guys would not have to work for many anymore - so they obviously view this as a outstanding opportunity to use their energy. Todd Hannigan praised the company today as using the Alliance Resources Partners model to fast track the first mine, to produce 1.7 millt of thermal coal to start the project, and to increase it in steps to 6 millt p.a. Next steps are he release of the bankable fesibiliy study,a nd full permitting of the mine, before they go into construction by the middle of next year! Again - this stock could easily double in value....

Panoramic - the company is now spinning off it´s gold subsidiary, called Horizon Gold. Shareholders of Panoramic can apply on a first-come basis any multiple of 2.000$ worth of stock in the float. The new company will have a market cap of about 30 mill A$ at the IPO price of 40ct. The market cap will be 30 mill$, of which about 14 mill are cash - and PAN will retain a 51% stake. The Gum Creek Project produced gold until 2005, when the A$ gold price was about 500 A$/oz, and has 500.000oz of resouzrces, which are amenable to conventional, open pit extraction, and 180.000 oz of underground, free milling ore. Additionally, there are about 460.000 oz of refractory ore, which at this stage, look not very profitable to be brought into production. There remains significant upside from exploration and drill-ready targets. The old mine has all infrastructure incl mine camp etc in place, but does need a  new plant. Looking at comparable projects, the EV should be rather 25-27 mill A$ ( not valuaing the refractory ore ), which equates to a market cap of 40 mill A$+ on listing, giving us an immediate uplift. This is also, what PAN had intended with this IPO - making some money for embattled shareholders. Any higher valuations will depend on exploration results / and or the gold price. I will subscribe for a significant amount.

Otherwise, the nickel price is providing some fun for PAN....I have long been saying, that a sustained nickel price of 12.000 US$+ would be needed, to bring the Savannah Mine back on sttream - well, after today´s move, we are less than 10% below that price! At this stage, we can only speculate, what production costs from a reborn Savannah, and especially Savannah North would be, as the feasibility study will only be available at around year end - but I suspect, that they will be lower than from previous production...and I hope below 4 A$/lb.....we will find out relatively soon.!

Lucapa Diamonds - sold another parcel of 1864 ct from Lulo for 8.3 mill US$ - a great average price of 4.450 US$/ct and a record result, other than for the special 404ct diamond for 16 mill US$ in Feb. The company has 2.800ct in inventory and will therefore hold another 2 sales this Quarter, one more than originally planned. This certainly indicates, that production continues to go very well this Quarter!

OZ Minerals - released the PFS for Carapateena, their next copper mine in Australia. carapateena is planned to produce 61.000t of copper and 63.000oz of gold over the approx 15 year mine life, for capex of 980 Mill A$. The IRR at an exchange rate of 75ct and a copper price long term of just under 3US$lb, gold price 1225 US$,  would be 20%.OZ Minerals are most probably fully valud at the current priuce of about 7$ - unless you are really bullish on copper. but there is very limited copper exposure available in Australia, at least in halfway sizeable, pure producers - so OZL could well run further, if the copper price manages to break out of the 12-month trading range - which looks imminent to me!

Berkeley Energia - managed to place 30 mill US$ worth of stock with major institutions at no discount, at 45p / share in London. That is a great piece of work, considered, that uranium is trading at 19 US$lb = 11 year low, and that 100% of the world´s uranium production would be loosing money at this price! It´s testimony to their excellent project quality - Zona 7, once permitted and in production, could produce uranium at an incredible 10 US$/lb....that is unheard of in the western world. The 30 mill US$ will allow them to start with construction of the crushing circuit early in 2017....

Uranium is probably the only mineral, which is down this year - and still trading at 11-year lows, way below the cost curve of western world production, and even Kazak production. It is absolutely essential for security of the world´s nuclear industry to rise substantially at some stage...yet the timing is uncertain, and nobody would have ever thought, that today´s 19 US$ would be possible! If you want to be very countercyclical, and buy a world class projects while things are really bad, this is the one! They will survive even in bad times...The next trigger for BKY will be the announcement of a startegic partner...I guess this placement could speed up this process, as it puts the company on very solide footing and put´s it in a great negotiating position.

have a nice evening


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