Market Update

General - GoldGoldGold - West African - Cardinal - Crusader - Finders - Breaker - Highfield

Good afternoon

What a great finish to a good week!

Some good growth numbers out of Europe today, and weaker than expected CPI of Minus 0,2%...Personal Income in the States rising, but Personal Spending flat - and PMI, as well as Consumer Confidence, slightly falling...the confidence in the States has been undermined by Trump, Cruz, Clinton & Co....

Facebook´s great result followed by an even better one from Amazon...I have to admit, that there is something, which the US does well...

Iron ore prices in China as well as coking coal were limit up today, probably helping base metals in London today to a very strong day. The weak US$ might be helping as well...copper up 2%, zinc trying a new high, and nickel wants to move through the 200-day-moving average, as well as general chart resistance at 9450-9500 US$/t. And last but not least, oil is making new highs as well.

Perhaps we are seeing an element of hard asset buying here? Recent economic numbers from around the world except for China and not really making me feel that confident in any recovery in the moment...

But the place where I do feel confident  is certainly has broken out of it´s flag, and the only remaining resistance at 1280 US$ is being tried, as I am chartist tells me, that after 12809, 1440 US$ is the target! Sounds nice to me...could be a happy weekend coming! There is still nothing better than a solid bull market in gold!

I was asked today, what one should be buying, having missed this recent run until now...I would buy a mixture of quality - Evolution - and leverage - Perseus - to participate. In Evolution, you would probably underperform a strong bull run - but it´s diversity and good management will limit the potential downside. Perseus could move like a rocket, if gold rises another 100$ - that´s depsite the disappointing Quarterly yesterday. But I have confidence in the management team  to overcome the current problems  this Quarter, and combined with operating a very price sensitive, high cost mine, you are buying 6 mill oz in reserves, and 23 mill oz in resources for an Enterprise Value of just 400 Mill A$ - pretty amazing! The only thing I do not like is the very long time line to develope the new asset, Yaoure - but I guess a strong share price performance and subsequently, a capital raising, could speed that up. 

West African Resources - just having completed a heavily oversubscribed placement, somebody today bought 15 mill shares held by Ausdrill, which is drilling for WAF, and really helped out in a capital raising a few month ago, when nobody else wanted to buy a gold stock! Good on them, and good to see, that they made some money on helping out! WAF will need to deliver a few more good drill holes to underpin their strong share price performance - but I have high confidence in them doing that.

Cardinal Resources - announced some more drilling results today, delivering some decent high grade intersections. They are on their way to establish a large, low grade resource in Burkina. Too early to tell the grade - but it looks like 1.2 g or so, at low stripping ratio. So a little bit at the skinny side - higher grade results like today´s are very helpful. Similar to WAF, I am not sure, whether I would buy them at current prices - but I am certainly a happy holder, and if gold continues to move, we will have more fun in s peculative stocks anyway.

Crusader - Quarterly out - like every iron ore producer, going through a rough time recently - but March was break-even, and April shaping up very well, especially in terms of demand for their various product specifications. They are still confident of making some money in 2016 from Posse. But in light of the new bull market in gold, their assets in Brazil, namely Borborema and Juruena, are of much more interest. The company has been extremely tight on cash until the recent 6 mill$ placement. With money in the bank, they have now started a 6.000m diamond drilling program in Juruena, to convert resources, as well as extending them. This program should bring them much closer to their target of establishing a smallish, say 30.000oz p.a mine, which should generate 10 Mill$+ p.a. to enable proper exploration of their large, and very exciting ground holding at Juruena. 

Borborema is a 1.6 mill oz reserve, and optimisation studies have started here on a smaller scale plant, than originally planned., to produce 80.000 oz or so p.a. Results should be published this Quarter. In a rising gold price enviroment, some stock like Crusader could be a good bet - and I dare to say, that having commodities-legend Jim Rogers on the board, most probably will be very useful in a bull market!

We have all had our disappointments with CAS in the past - but there is potential to make some good for us! I declare my interest in CAS...

Breaker - did a small raising at a disappointing price of 13ct - anyway, they have some more funds to drill now. Let´s not forget, that this stock is coming from 3ct not too long ago. The price of 13ct is reflective of the fact, that the big breakthrough in exploration has not been achieved as yet..even though Tom Sanders has had some sniffs! What amazes me every time he is publishing his Quarterly is the fact, that he is running his company on 500.000A$ administration costs per annum - so nearly all funds raised are going into the ground. Good on him!

Finders - the share price is profiting from better sentiment in the general resources space, but it´s a little disappointing, that the company is still probably 4 weeks away from comissioning, looking at the fotos in the Quarterly today. But the stock is very cheap, once in full production of copper very soon....Cash costs less than 1$/lb, some good hedging at just under 6000 US$/lb, and an EV of about 250 mill A$ for a quality producer of 20.000t of copper cathode sub 1$/lb should be 20-30% too cheap - it all depends on your copper price outlook!

Highfield - 99 mill$ cash left in the bank, and the 222 Mill Euro bank-financing is close to being fully documented...I guess about 30-50 mill A$ would be missing...hope fully from a corporate, or an offtaker. A scoping study to convert some of the MOP ( Kcl) to SOP ( K2SO4) is substantially completed. SOP is trading at a significant premium to Kcl. Highfield have also recruited a suitable person, who is responsible for marketing of the product. First supply agreements are expected to be concluded this Quarter.

But the main point and value driver remains permitting. The responsible ministry confirms, that it´s possible to get the much desired Enviromental Approval even under the current caretaker-government - and they point out that, under Spanish law, the Ministry has only up to 6 month to issue this approval ( or to deny it, which is highly unlikely  ) This timeline expires in 4 weeks! So there is some hope, that approvals will be received before a new government will be elected in late June....The local provinces of Arragon and Navarra ( left wing, by the way ), are strongly supporting the project - but that´s no guarantee, and the Central government I guess could always find a reason for delay, if they really want to.

Highfield is still one of our largest positions - an outstanding project, and funny enough, our fund is currently holding about 8% of total NAV in companies having all activities in Spain. There is good reason for this - Highfield in potash, and Berkeley in uranium, are two worldclass assets ( by the way - Berkeley is breaking out and has ended the consolidation phase...I remind you, that BKY´s NPV , depending on your price outlook for uranium, is way above 1$/share vs 0,57 A$ share price  today...)

Have a nice weekend


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