Market Update

General - Highfield - Breaker - Kasbah

Good afternoon

Finally, the A$ is succumbing to a strong US$´s currently trading at 0.725, and looks like it might test 0,7150 A$/US$ - that is the recent low.  The weakness has been triggered by the announcement of the interim budget for Australia last night, which is forecasting a slight improvement of this years budget to the 30th of June, but a 11 bill$ in aggregate worse outcome for the next 3 years. Not a drama, and and preventing credit agencies to downgrade Australia from the current AAA rating - but that might well be to come in the not too distant future. It will probably depend on the priding for Australia´s major export goods, iron ore and coal. I think it´s more or less common sense, that prices for iron ore and coking/termal coal especially will come down next year - the question is, by how much! I would have thought, that the market is pricing in a quite substantial setback for those commodity prices already - in the currency, as well as in share prices of the relevant producers.

Base metals are having a very weak day in London. I think some doubts are creeping in as to Trump´s spending policy ( especially infrastructure ). His chief economic advisor, gary Cohen, warned last night, that the new government would need to have it´s sights on the effects of Trump´s planned policy on a potential even stronegr US$, emerging markets debt, and interest rates....reality is slowly biting, perhaps? 

The US$ gold price is having some recovery, trading at 1140 US$/oz in the A$-terms, it has a nice rebound from a low of 1517 A$/oz last week, to 1570 in the moment. That´s actually not too bad! 1570 A$ is a price all established Australian producers can easily deal with.

Interesting for Australian gold stocks is the fact, that St Barbara, Saracen, Resolute are all declared buyers of assets - and all of them are cashed up. SBM reported today, that they are now holding 70 mill A$ in net cash, while generating very meaningful free cash from Leonora. I guess Northern Star is concentrating on exploration, while Evolution is digesting it´s recent aquisitions - but both might well be buyers for the right assets as well. 

Highfield - we have not heard a lot of them recently! The share price has been pretty volatile, following to some degree the up´s & downs of global potash producers, but also some short covering/shorting of the stock. They updated the market today with regards to their enviromental permit for the new mine in Spain. The news for somewaht disappointing to me, as the ministry only on the 16th of Dec has forwarded them with detailed questions arising out of their consultancy with regional authorities. They have given Highfield 3 month to answer those. Thank´s god, HFR will be much faster in replying, as there is nothing really unexpected in those questions, and nothing which cannot be easily answered. Highfield´s management has been very happy with the letter, as they interprete this as to some action, finally. One thing is for sure: Spain is in desperate need of more employment, and regional governments have been very supportive all the way through.

Breaker - the company is progressing very well on their target to demonstrate up to 4.4 km of strike length with mineralisation. Today´s results included 39m with 3,22g gold; 12 m with 1,52g gold, as well as some re-assaying of previous results, resulting in nice upgrades: 20 m at 6,87g from previous 4,84g; 8m with 4.69g from previous 2,07g. Talk in the market is, that they are well on their way to a resource of 1 mill oz plus. Considered this dreadful market for gold stocks, BRB have done really well, and for the first time in years, they are also well cashed up and spend money, as they need to! One of the above mentioned gold producers might well start to have a look at Breaker.

Kasbah - as I reported, the merger with Asian Mineral Resources has fallen through...and has been replaced by a new deal: Pala Investment is taking a placement to raise 3.7 Mill$ at 0,027A$, which is a premium of 12% to the recent share price. Pala had already lent 1 Mill$ to Kasbah, which had no cash left. Under the circumstances, I guess a fair deal. The placement will be followed by a 1:6 rights issue to all shareholders at 0,023 - and unsurprisingly, Pala has "offered" to underwrite it. looking at the wording, Kasbah is now trying to find outside-underwriters for the transaction. If unsuccesfull, and assumed 100% shortfall of the rights issue, Pala could theoretically end up with 25% of near control. But I do not believe, that this will happen, as some investors should be attracted to a tin-play at teh current level of the tin price, and a positive outlook.

I will take up my rights.

Have a nice evening


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