Market Update

Fortescue - Highfield - Prairie Mining

Good afternoon

crazy times! ( I wonder, how often I have said that over the last 10 years!! ) Iron ore moving 18$ in a day...but China delivering pretty bad export numbers today schocked the market. Surprisingly, oil is actually up, again, today - metals are seeing some profit-taking - but nothing seems to be stopping the gold price from going higher! I guess just about everybody is expecting some consolidation - but its creeping higher and is trading at 1273 US$ in this moment. Probably this is an expression of the fact, that nobody has got any....Anyway - all this written about 2 hours ago, the world has changed, metals - all is getting a beating! The only thing I said above, which is still true: crazy times!!

Industrial Production numbers for Germany today have been the strongest since 2009 - probably unsustainable, though!

The big story of the day has been the Fortescue/Vale JV. Fortescue are producing iron ore of inferior quality to the iron ore contract, grading around 58%, while the contract is based on 62% iron content ( and that´s the stuff RIO and BHP are producing ). FMG are therefore receiving a discount of about 15% for their ore. Vale in turn are producing iron ore with about 65% iron content,  FMG´s ore has some more favourable qualities like low impurities and it´s better sintering. FMG and Vale are planning to blend a total of 80-100 millt of their respective ore, once arrived in China, which would result in FMG getting full price for their ore. For Vale, it would also improve the quality of their ore, and over time, would give them more market share in China than tehy have right now. Vale is also planning, at their discretion, to buy up to 15% of the capital of FMG in the m,arket.  For my old friend Andrew Forrest, this is a transaction which should cement FMG as one of the world´s top 4 producers for a long time to come! BHP and RIO will hate him even more for that....

Production of nickel pig iron in China fell to an annualized level of 282.000t p.a. on average in Jan/Feb. This is lower than expected - perhaps we are seeing some light at then end of the tunnel for nickel prices!

Highfield - I have been able to put things rght - the company has no other information on the approval process - so tehy are still expecting approvals to be in by the end of March. What tehy are saying is, that tehy need them before teh end of June, to be able to stick to the time table of first production before the end of 2017! So let´s keep our fingers crossed - the end of March is pretty close!!! There could/should be some very good news around the corner!

Prairie Mining - the company has today delivered an excellnt prefeasibility study for their Lublin Coal Project in Poland. The numbers are fantastic - sub 600 Mill US$ in development costs, for annual free cash flow of around 300 mill US$, once in full production, and at reasonable coal prices! The cost of production will only be around 25 US$/t - that´s cheaper than most in the world, and costs to the client in Middle Europe should be around 44 US$/t - again, at the very bottom range of the cost curve. The only problem: Coal mines, unfortunately, are there for a long time - and they tend to have long lead times!  PDZ are planned to be in full production by 2023...that´s a few years too long for me! But in any case, this excellent study has opened the door for somebody making a bid - or partial bid - for this small company. I am not getting too excited because of the time table  - but certainly a great outcome....Their neighbour Bogdanka should make a move rather sooner than later!

Have a nice evening