Market Update

General - Gryphon - Genex Power

Good afternoon

London is closed today - so things are a bit quieter ...but this cannot be said for the Australian market last night! Gold stocks, and also most base metal stocks, were just rocketing! And gold is now trading a few $ higher than at the Australian market´s close at 8 am! It´s fighting hard with the 1300$-level...

In A$-terms, it´s trading at round 1700 A$/oz - only 100$ below the all time high. 

Chines Manufacturing PMI was still above 50 on the weekend, indicating a gradual expansion the same indication from Europe today, The US-PMI exhibited a similarly lacklustre manufacturing enviroment.

The Australian market has been very quick in looking for bargains in second-and third-teer stocks, which have put on a few strong runs recently - Gascoyne probably being teh stan-out, as it moved from 10ct at year end, to nearly 70ct today. Is there some value left at the very junior end?

I believe, that there is - but you have to be very choosy. I mentioned Crusader last week, and Panoramic - they could still be good bets. Here is perhaps another one:

Gryphon Minerals - one of the best hated gold developers in the market. Management has been very kind to itself in terms of salaries - and they have under-delivered, during years of heavy promotion. Understandably, the market hates this kind of behaviour. But my feeling is, that gold will still go higher - so one ought to look at this kind of stock. Sins might be very quickly forgotten in this very strong market, and it might pay to be a little opportunistic.

Gryphon have about 11 mill$ left in cash + liquids - enough for a few Quarters of extensive exploration. Some time ago, the company established a 3.6 Mill oz resource in Burkina, the Banfora Project. Market sources put a little bit of doubt on the quality of the resource, but in any case, it´s a large resource - whatever the history of it is! Scaling the project down to a more managable and financable project has happened over the last 2 years or so, to concentrate first on a 2 millt heap leach project, and later on , to a 2 mill heap leach + 1 mill CIL project. The latter was found to deliver the highest NPV ( 5 ) of 210 mill A$, and IRR of 42% after tax - producing 133.000 oz p.a. at 800 US$/oz AISC, and capex of 130 Mill US$. These are pretty good numbers - based on 1200 US$/oz gold price.

More recently, the company has announced a round of drilling results, showing some very high grades of between 300g and 570g/t over 1 m intervals - quarz veins, which could open up underground potential. The company has published a 3.5-4.5 mill t exploration target with 5-7g gold/t. I would take this with a pinch of salt - but without doubt, there is potential. 

The stock has had a good run recently - but at an EV of 48 Mill A$, this stock is certainly cheaper and also more advanced than quiet a few of the recent high flyers. I am currently not a shareholder.

Genex Power - came out with a rather complicated announcement last week, changing the scope of their hydro-project in Queensland. Rtaher than using the second, higher pit, they are looking at a large pond on top of the tailings, which would deliver them an additional 30m in height, better economics, and lower costs per MW produced. The scale of the opertaion could also be enlarged, to production of up to 450 MW.  How large the operation would be, is dependant also from the impact this operation would have - on selling  prices in peak hours, and on buying prices during quieter times of demand. The company further believes, that such a project could be 80% debt-financed. The sacle,a s well as the sexy nature of the project, does find a lot of interest with infrastructur funds as well. 

The next, very important step for the project would be a connection agreement with the owner of the power line, connecting Kidston with main markets. Such an agreement would substantially derisk a proejct, which otherwise, would be a lot harder to realize.

Unfortunately, I am still one of the few buyers of this stock, but believe in the quality of the project. It´s always teh same - this play is probably to uncertain for many, institutional investors - but every bit of de-risking flushes a few buyers out of the woodwork. It all depends on your willingness to take on a few risks!

Have a good evening,


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