Market Update

General - Fortescue - Resolute - Highfield - West African - Cardinal - Panoramic

Good afternoon

equities are rising in Europe, the Euro is as well against the US - Pound is stronger - gold is trading at a recent low of 1260 in the moment - if the saying: the market is always right ! has it´s time again, the English will stay with us! Probably good, that the BREXIT-vote is taking place before we beat them badly in the soccer!

The German PMI was quite positive today, holding up in the current enviroment, while labor-numbers in the States had no big surprises.

Base metals are little changed except for copper, which is up by 1.5% or so to the highest level since early May - perhaps on good, Chinese import numbers for copper concentrate. Nickel has found some friends again recently - stocks have fallen from a high of 4700.000t to 383.000t today - but that´s still very high. The enw Philippino prime minister has given the top ebnviromental job to an anti-ming crusader, as Bloomberg calls her - sounds like more pressure on nickel ore exportes in this country.

The US-senate votes down a law, which would ban FBI-listed non-flyers from buying weapons!! Amazing country - you are a suspected terrorist, but they still alow you to buy a half-automated gun. And Trump is openly supporting this...perhaps you should buy some gold on the small chance, that this guy will be the next president???? 

Joke aside - if the English stay in the Euro-Zone, and they probably will - gold should be weak initially, perhaps providing us with a good buying opportunity. Gold ETF holdings have continued to rise every day, and that´s not just because of a possible BREXIT!

Fortescue - have paid back another 500 Mill US in debt, bringing the total pay-back to 2.9 bill$ in 12 month! At 50$ for iron ore, FMG are an amazing money printing machine. The CFO flags, that they could pay back another 2 bill over the next 12 month, potentially bringing gearing down to 30%. The days of FMG being a risky stock are definitely over!

Resolute - have published the final feasibility study for Bibiani. The mine has been a bad investment many years ago - but finally, it looks like it could add some value to RSG. Still not a great re-start, but 100.000 oz for 5.6 years at AISC of 895 US$ are certainly worth something. Resolute has become a net-cash gold producer over the last 12 month, ending a long story of being relatively highly geared. They will not have a problem to finance Bibiani. The stock has had a good run under John Welborn - I need to have a good look at them, but I thionk tehy might be one of the reasonably priced, Australian producers. 

Highfield - have published the scoping study to convert about 40% of their MOP ( Muriate of Potash ) into 500.000t p.a. of SOP ( Sulphate of Potash ). SOP ( currently trading at around 680 US$/t ) is a much higher value product than MOP ( price is about 285 US$/t ). The cost to convert is about 100-120 US$/t for HFR - so adding a nice 290 US$/t of production. The company believes, that it´s more appropriate to use a 250 US$ long term price differential - that still leaves an additional 130-140 US$/t or more than 65 Mill US$ p.a. in operating profit, additional to the profits from MOP-production! The capital cost would be expected to be 123 Mill US$ + 20% contingency. The project should add very substantial value to the overall project in the vicinity of 500 Mill A$ - obviously depending on your long term price asumptions,a nd the interest rate used. 

Highfield is making itself very very attractive to any of the major producers....!!!! The short position is still very high at over 7% of the stock.....somebody is very brave here, in my opinion, and must be punting on further delays to the grant of enviromental approval. Given the elections are happening on this Sunday, at the highly uncertain outcome, the shorts might have a point - but this is not a question of IF, rather on WHEN....Interesting enough, the two provincial governments involved in the mine, are both sort of left wing - and both are very supportive.

West African Resources - the company has presented to the National Comission of Mines of Burkina, and has got a favourable opinion. The enviromental and social impact study is due in July, and full permitting is expected during the 3rd Quarter. Resources drilling is in full swing, and while it will be continued throughout the year, the company will make a cut-off as at the end of June for a maiden resource estimate for the new ore body, M1, in the 3rd Quarter.

Nice foto of MD Richard Hyde with the President of Burkina as part of the announcement - obviously, Richard feels extremely comfortable in a dark suit! 

I continue to like this stock!

Cardinal Resources - have appointed Julian Barnes as Technical Project Manager. That´s a big coup, and testimony to the quality of the project. Julian is not very well known outside the mining scene, as he has never worked for public companies in senior positions ( as far as I know ). He is regarded by many as one of the worlds best consultants for mining projects. The company ahs been light on in tzerms of management so far - this is a very important step for them.

Panoramic - as you know - I have more or less always liked this company...Of all my stocks, this is probably the only one this year, heavily impacted by tax-loss selling. Very few stocks of the mining universe in Australia are trading at prices substantially below prices earlier in the tax year, which is finishing on the 30th of June. I guess every mining investor in Australia has made good money this year - even more so everybody got to be very tempted to find and realize some tax losses. PAN got to be a prime candidate! Given my above comments on nickel, a healthy cash position of about 25 mill A$ ( after all mine closure costs, a great nickel project ( potentially worth a multiple of todays share price, if nickel ever gets back to a "normal" price level ), and a very reasonable gold project, this stock is just soooooo cheap!

Our thoughts are with the poor guys from Australian mining contractor Macmahon, who got kidnapped in Nigeria - presumably by islamists....

Have a good evening


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