Market Update

General - Kingsgate - Chalice - Heron

Good afternoon

Volatility continues....European stocks  recover a good deal of yesterday´s losses, catching up with the strong turnaround in US stocks on Wednesday evening...metals slightly weaker again, oil down...and gold is recovering from the late fall in N.Y. yesterday.

Inflow into gold ETF´s still the new story - in Feb this year so far, 152t inflow - that compares with total outflow of 121t over 2015 - according to Bloomberg. It feels like this new trend has not finished  yet.

Two ( previously ) large US energy stocks missed interest payments, having a combined 7.2 bill US$ in debt...Mind you - this is: missing interest payments - we are not talking about paying any debt back....that schedule will accelerate as the year progresses, but very strongly into 2017-2018. I am sure, that a lot of distressed debt holders and bankers are praying for higher oil prices, which are not really on the horizon yet.

Kingsgate - which I abandoned long time ago - have reached agreement with an unlisted group, to sell 85% of their Bowden Silver Project in N.S.W for 20 mill A$ ( much needed ) cash. KCN will retain a 15% stake, and the buyer will have to spend 4 mill in exploration. Not a bad deal in this enviroment. Silver has substantially lagged the performance of gold - for me, this is an indication, that the speculative buyer has not yet emerged - which is good. For Kingsgate, the transaction is a good one, as very few people would have attached a 20 mill$ valuation to this asset. I am still avoiding KCN, as there is way too much uncertainty as to the future of their flagship mine in Thailand, amid a very difficult government relationship.

Chalice - the stock is still trading at more than 15% discount to cash backing. Their gold project in Canada has made some progress, having 650.000 oz of M&I resources, and just over 900.000 oz of Inferred resources. That´s not fantastic - but give gold another 100$, and this kind of project will find keen buyers. In so far, a stock like CHN is very low risk buying, and offers a good option on the gold price. And not to forget - management has done it before, selling their gold asset in Eritrea, after finishing a feasibility study. I like the management, and am a patient holder....

Heron - seems to find some interest, finally, as there is much more talk about zinc now. Mines producing 650.000t of zinc ion concentrate have closed in Dec and Jan, as they had reached the end of their reserves - on top of that, Nyrstar and Glencore had announced some closures over the last few month. These substantial reductions are only now strating to have an effect on the market, as winding down takes time, and as smelting also takes 4-6 weeks from leaving the mine. Availability of metal should finally fall now, even though physical demand is not strong. Unless we have a recession, there is only one way for zinc over this year, and probably the enxt few as well. Heron have their bankable feasibility study 65% done now, and have 26 mill$ left in cash or investments - only about another 5 mill will be eneded to finish the study next Quarter. To me, this is the ebst zinc story in Australia, going potentially in production 1st Quarter 2018. That sounds a long tiem - but it´s only 2 years from now! Still agood story, and I am a patient holder here as well.

Whatever happens - have a nice evening!