Market Update

general - Index Changes - Regis - Berkeley

Good afternoon

Merkel loosing some State elections on the weekend - but perhaps not as devastating, as feared. In any case, established parties incl the Greenies got a hammering, and the new right wing party managed to get 12-13% in the old west, and 24% in Sachsen, which is the old East! In Sachsen, nearly 30% of the electorate voted for right wing parties - a good deal of that coming from people, who did not participate in previous elections, and also some from the left wing!  clearly many voters voted in protest to the old establishement parties! Almost looks like the Germans are not much better than the Americans, loving this Trump!

Surprisingly, European market pretty strong today - most markets are slowly but surely approaching break even for the year!

Metals are bareley changed today...but they are coming under pressure this afternoon.

The main story of the day are Index Changes to the gold index in the States, to be effected on Friday. Evolution, Northern Star, Oceana got excluded all together, as they had grown too big for the smaller miners index, and Kingsgate got excluded for not being useful , I guess? This triggers a lot of selling for Australian gold stocks - about 60 mill shares in EVN, and an similar $-amount in Northern Star - following hot on the heels of the Newmont sell-down in Regis. 

At the same time,  the ASX 200 is getting reweighted ( all effective 18.3. ), seeing Medusa and Kingsgate depart the index, and St.Barbara getting included. 

These two , largely "artifcially" events, open the chance for liquidty, and also for us moving positions against these changes. 

St Barbara/Northern Star are expensive ( even though I have already said that at lower levels! ) , and Regis/Evolution getting very cheap, based on 2016/17 numbers:


Stock                    EV US$    EV/ oz of productionEV/reserves      AISC 2016/2017               

Evolution              2.046 Bill              2500 US$             360 US$/oz         700 US$/oz                       

Regis                     850 Mill                2450 US$             300 US$/oz         650 US$/oz

St.Barbara               1.1 Bill A$            3250 US$             550 US$/oz         740 US$/oz

Northern Star          1.4 Bill US$          2350 US$             930 US$/oz            810 US$/oz

Given, that SBM´s mine in Australia is getting very deep, and that the quality of their second mine in the Solomons is not all that great, I think they are a sell. Northern Star has relatively limited reserves, and most of their mines are very old mines - again, I think way too much is relying on their good management, and significant exploration success. 

Regis - also announced a reserve increase today from two properties within trucking distance to existing operations, at similar grades to the ore mined currently, and by 360.000 oz which is slightly more than a year of production. They also announecd some excellent drilling results close to Garden Well today, which look like they will amost certainly add to resources here. Regis do not have the diversity of Evolution, and probably also not the same, top-class management - but on above numbers, they are currently probably the cheapest of the larger, Australian producers.

Peninsula Energy/Berkeley - I am not following PEN so closely these days, but one interesting announcement from them on Friday: They entered into a sizeable, long term sales agreement for their uranium product with a large, European company. The price has not been disclosed, but is believed to be in the 45-50 US$/lb range, while some analysts are speculating, that the buyer is EDF, the large, French company. This is a big positive for the uranium market, indicating, that there is good demand for long term contracts, at good prices vs the currently depressed spot market of 28 US$/lb. PEN have production costs in the low thierties, while BKY will have costs of around 25$ from the Stage 1 project, and 15 US$, once Zona 7 is included ( and once they have has all permits for the latter in place! ). I have been wondering, why BKY is staying so cheap - the weak spot price for uranium might well be the reason. Hence, it´s paramount, that the long term market is still well and alive!

Have a good day