Market Update

General - Peak Resources - Newcrest - Lucapa - KGL Resources

Good afternoon

every man and his dog are writing about the commodity frenzy in China....everybody expecting a set-back...fertil ground for funds to put on a few new shorts. Understandable - but the underlying tone has certainly changed recently to the positive side, generally. Everybody agrees, that China has managed to fire up it´s economy - the big question is now, whether the private economy follows on from the government stimulus. The jury is out, and we will watch closely...

Australia is handing out a 35 bill US$, long term contract over many years to France for building a new fleet of submarines, to be manufactured partially in Australia.

Durable Goods continue the string of slightly disappointing, US economic numbers. the PMI was slightly ahead - but consumer confidence also slipped a little, again.

Peak Resources - give a good example for  how unfashionable it is to invest in Rare Earth! Hard to believe, in a time, when everybody is chasing anything which has a lithium exploration property somewhere! I can only say: Buy straw hats in winter - we have seen recently, just how quickly things can move! The company placed 1 mill$ worth of stock at 5ct( and I bought my initial position ), to be followed by a 10:36 rights issue to all shareholders, to raise another 6 mill$. Appian, the major shareholder, will take up it´s rights and will provide a loan of up to 6 mill$ to make up for all shares, which will NOT be taken up in the rights isue. On top of this, Appian will inject another 3.5 mill$ into the Tansania-JV. These financings will ensure, that the bankable feasibility study can be completed. Appian will end up with 20% direct ownership, the World Bank ( IFC ) with 5%, and Peak Resources with 75%. On top of that, IFC and Appian ( private equity fund ) will own about 20% of the listed company. I want to stress again, how important it is, to have the IFC as an ongoing financier on board.

This is a very positive outcome for Peak, as they can theoretically take in additional JV-Partners of up to 24% in the Tansanian, operating company, without lossing control - and thereby help financing the project, which is planned ( as ber PFS ) top need capital of about 300 mill $.

PEK own one of the best Rare Earth development projects worldwide - see attached, latest presentation-link:

Good size, very good grades, good people, the right mixture of Rare Earth, and fully financed to BFS, which should be finished before year end - and last but not least, in production by 2019 - what more does one need!  ( well, except for the time-line! )

Just today, the German government will decide on a 5000 Euro/car subsidy for electrical cars. I think there is nothing stopping electrical cars in the long run - even though I do not like to drive these things! The future of the diesel engine will be in electrical cars - in a word: Buy Rare Earth - there is no way to get around them in the foreseeable future!

I declare my personal interest via the Nestor Australian Fund.

Newcrest - good Quarterly, probably just about in line with expectations. Gold/copper production was generally in line - as usual for a mining company, some well performing mines and some not so good ones. 60% of the valuation is in the Cadia Mining Complex, while Gosowong will be running out in a few years time, and Lihir continues to be a complicated asset - although the last Quarter was a reasonably good one. Telfer, another large mine, was going to be in real trouble, when gold was weak a few month ago - and the company is still having about 2.6 bill$ in debt. In my opinion, the stock is definitely overvalued, and the only reason to hold it, is the liquidity....

Lucapa Diamonds - I have continued to incerase my position here...option exercise finished by the 29th of April - and the company has got all the cash it needs to drive the alluvial diamond mine in Angola further, and to agressively explore for the source of those diamonds. That´s the real price, and while the company has got many indications for where to drill, the wet season in Angola is only finished now. The next three month will see a full ramp-up to production again, and drilling drilling drilling. Today, the company announced the discovery of more high quality stones of 88cts and 33 cts, again from the new mining area E46, 

KGL Resources - Simon Milroy might well be proved right, and get this asset to a development decision! 16 m with 3.3% copper + some gold/silver at about 300m depth, outside of the current resource, are pointing in the right direction. And just beneath, there is a very strong conductor, which will be drilled shortly. Still - this asset needs better copper prices - say another 15-20% or 2.75 US$/lb to get the go-ahead - but prices like this are well possible in say 2018/2019. I probably would not buy KGL today - but I would certainly hold it - as the next few drill holes could change the game again! The major shareholder, the Salim Group from Indonesia, installed a new board member today, who is one of the close people to Mr.Salim - that shows ongoing support, as showed the fact, that they took up their share in the recent, ( small ) rights issue . 

Have a nice evening


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