Market Update

General - Beadell - Perseus - Resolute - Middle Island - Panoramic - Kentor - Foran Mining

Good afternoon

equities are still running today, fuelled by endless money from central banks.Base metals are a bit stronger - zinc and nickel with new, recent highs today....

Brexit has led central banks around the world to be even more accomodative...interest rate increases in the States are off the agenda....and the way the gold price as well as gold stocks do perform, is very intriguing and makes me feel very bullish for the sector.

Let´s not forget, that all these guys have tightend their belts considerably over the last few years, and let´s not forget, that the amount of money floating around has increased dramatically since the last bull market 6-7 years ago.....the GDXJ had it´s high at 175 in 2011 - today we are trading at 42.60.....and even more important: There is a completely new bread of fundmanagers active in the market now. I spoke to a mate in Australia today, and he said, that at the EVBN corporate day, there was a majority of guys attending, who were younger than 35 years....they do not understand mining stocks in many cases, and tehy have not had the bad experienecs we have had - at least many of them! They will drive decisions and stocks - and there might well be a long way left to go!

So go for the solid stocks, like Evolution, and for some larger ones - I start liking Resolute more and more - as well as some marginal producers like Perseus - and don´t forget the exploration stocks - that´s where the real money will be made, as always - like Cardinal/Oklo/Westa African/ Middle Island/WPG to name just a few and some of which I own.

Beadell - had a stunning run the last few days - no idea, why they suddenly started racing, even relatively to the strong market. The Quarterly for the Quarter just ended might/should be very trees won´t grow into the sky here. The EV of about 430 mill A$ is not that small either for a single mine, 150.000oz producer, with an asset, which has had it´s problems in the past...and the ill-timed placement at a very low 19ct had inflated the market cap. Perhaps not a bad idea to take some of the top? I am looking at two other stocks, which are cheaper or better value in my opinion - one of them is

Perseus - while I was a touch disappointed with their capitalnraising at 50ct the other week, and also with their ongoing grade control problems, I have still all the faith in the management. PRU are clearly a marginal producer for the next 12 month, having all in site costs of about the current gold price. But costs will fall substantially in subsequent years - Sissingue will come on stream next year, and much more important, Yaouree will neary double production again in 2019 or so. This growth is not included in the share price...the market is paying nothing in my opinion for Yaouree....and that´s doing unjustice to the company in my opinion. If tehy get Sissingue and Yaouree halfway right, PRU will produce somethinmg like 550.000oz in 2019/2010 - and looking at other companies valuations of 3-3500$/oz of production, this gives us massive upside here to say 1.5 bill market cap.from 560 mill today, over 3 years or so. I think this upside ( and the great leverage to better gold price ) is more than making up for the risks involved here.

Resolute - as I indicated over the last few weeks - they are starting to impress me. The company has gone through a period of complicated structure/relatively high costs / some debt to a clean structure/no debt/moderate costs/new MD and good growth. The stock has had a reasonable run, but is not fully valued as yet, in my opinion:

Syama in Mali produces 250.000 oz p.a. for 5 years at 881 US$ AISC / Bibiani 100.000 oz p.a. at 860 US$ AISC / and potentially Ravenswood 130.000 oz for 10 years, at around 1150A$/oz AISC. RSG could well be a 450-500.000 oz producer in 18 month time. Very few brokers are actually following them - I am sure, that this will change soon. Watch this space - I will continue to dig into them!

Middle Island - this small company, managed by mining vetran Rick Yeates, has been a bit unlucky with it´s West African projects, especially in Niger, where they ran into significant, political headwind. While they still own the RIO project in Burkina, the company has established some good support for it´s share price recently from the aquisition of Sandstone, previously owned by Troy, in Western Australia. The project looks capable to produce an initial 20-25.000oz of gold p.a. , at a very low capital cost. The asset will be handed over to Middles Island next week, and drilling is planned immediately thereafter. Linton Kirk, who has been on the board as a non-exec director since 2011, has taken over as Project Manager for the new project. I have met Linton a few times - top man, very experienced, and the company will be very happy to have an engineer of his calibre running the job! I would expect some good newsflow from them over the next few month. 

Panoramic - as the 30th of June is behind us, tax-loss selling should be finished - and gold as well as nickel are running. 25 mill$ cash in tha bank, a reasonable gold project, which might turn into a good gold project by exploration, and two mothballed nickel mines, ready to go, if and when things are getting better for nickel - I see little downside here, as you know - but I thought I remind you of the fact, that all no-fundamental selling should be over now.

Kentor - I wonder, what´s going on here....I always said, that their copper project Jervois in Australia is a good one, but requires better copper prices to get the go-ahead...and those don´t seem to be in sight for this year, and probably not for 2017, either. The company is MD-less in the moment, since Simon Milroy got the sack - but it´s share price is going higher and higher. The main shareholder of KGL is an Indonesian billionaire,who also bought a coal mine in Australia, privately owned. I wonder, whether he is planning to build a larger, new resource company here, using KGL as a vehicle? Something like this could certainly drive the valuation quite a bit higher. I am just speculating here, as the copper project probably does not justify today´s valuation, especially when I look at really cheap stocks like Panoramic, which has about the same enterprise value as KGL. I know, which one I would choose! 

Foran Mining - this little Canadian puppy closed a small 1 Mill$ placement, of which majority went to company insiders - I guess to darren Morcombe and Pierre Lassonde, who have been supporting the company all way through. Hudson Bay is making consistent, interesting comments as to Foran Mining and to the future of their nearby zinc smelter, which is getting increasingly desperate for concentrate over the next few years. Zinc making a new high today, makes me remind you of this story, which could be worth several timed today´s price in a takeover. The stock traded at 80-90ct back in 2011/2012, when zinc traded hardly any higher than today, which is 4x the current price....The market cap of 21 Mill Can$ is a joke - and I remind you of my personal interest in this company, as with many companies I am writing about - mainly via my fund, Nestor Australien.

In any case, have a wonderful weekend and enjoy the soccer, if you are German, or Italian!


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