Market Update

General - St.Barbara - Northern Star - Teranga/Gryphon - Berkeley - Prairie Mining

Good afternoon

the US$ is playing with the 1.10-level against Euro - and finally, it´s strength is putting a little bit of pressure on all the metals today - incl gold, they are all a touch down in the moment. On the other side, the strong currency is helping Euro-equity markets to a better day. 

The IMF has cut it´s GDP estimate wordlwide to 3.1% from 3.4%, following the BREXIT.

Erdogan continues to cement his dictatorship. I have cancelled our summer-holiday in Turkey this year....

A research report, released by the UN, is forecasting, that energy demand will go up substantially until 2030, if Global Warming continues. Investec reports, that a city the size of Bangkok may require additional 2 GW of power for each 1 degree temerature increase, and is asking correctly the rethoric question: will that all come from renewable sources????

Worldwide, June has been the hottest month on record ever..this is the 14th month in a row with new record temperatures...apparently also helped by El Nino - still, a very disturbing record indeed! Even I start to wonder about commenting on coal stocks...see further below...Having said this, a world without coal generated power will not be possible for many many years to come....

Anglo is reducing the guidance for copper production ths year by about 50.000t, following heavy snowfall in Chile. The comoany alkso reduced it´s forecast for iron ore production...

The Congress of the Republikan party ...lyes, lyes, and more lyes...amazing, just how blatantly US-politicians can use them - they must assume, that the US-voter is equally blatantly stupid...let´s hope, that this is not the case!

St.Barbara - full Quarterly Report out today. Production numbers had been released earlier on, and were very good , as expected. With current assets, the company has just ahd the best year they could possibly have, and things are pretty sure to deterioate from here. AISC for Gwalia have been an acellent 783 A$/oz, and for Simebri, 1293 A$/oz - both a bit better than guidance. So far - excellent - as has been the deleveraging of the balance sheet, which will turn into net cash this financial year. Simberi will continue to be a high cost producer, and needs a decision within the next 12 month as to the processing route of the sulphide ore - otherwise, procution will stop within 2 years or so. And Gwalia is getting very deep....trucking ore from 2000m below surface is not getting any cheaper.

If I assume, that the valuation for Simberi cannot be higher than say 100 mill A$, the EV of SBM is really getting up there at about 1.8 bill A$ = 4.600 A$ / oz produced, for what is effectively a one-mine stock with no growth.

Teranga / Gryphon - a strange move today - TGZ took a placement in GRY at 20.5ct for 5% of the company - unusual for a company, which is under friendly takeover by TGZ as well. They claim, that GRY needs it to advance feasibility study, drilling etc for having their project to be in construction next year, and in production by the first half of 2019. All a bit funny, as GRY should have ample cash...I think this is the merger of two questionable companies , creating one very questionable company...I would stay away...

Northern Star - without any doubt, another excellent quarter! The company produceds what tehy call underlying, free cashflow of 224 mill A$ in the financial year, cash + equivalents increaseed to 326 mill A$ from 178 Mill A$ a year ago, after paying dividends and exploring for 50 mill$. And still - I would not touch it! Jundee had a good Quarter and especially, stunning exploration success - Kundana continues to be their best operation with a very long future in front, Kanowna Belle and OPaulsons were ok without really being top assets - and Plutonic, which they have put on the block a few mont ago, is worth nothing, in my opinion. The stock is more than fully valued - it´s expensive! According to Bloomberg, all top shareholders have reduced their holdings recently - that´s not only an expression of the strong run NST have had over the last two years...

Berkeley - are making a new high just about every day, since they announced their excellent feasibility study. I have no doubt, that there is a lot of upside left for the patient investor. In the short term, though, the weak uranium price ( spot is trading at a 10-year low ), and the uncertain financing for the mine might reduce the upside. IF tehy can find a corporate investor or consumer for their equity portion of the development costs, there is no downside - IF they will tap shareholders for at least part of the equity, there might be a little downside in the stock. Just a word of caution - in the long run, the stock is worth double today´s price...

Prairie Mining - this quality story has been completely forgotten in a market, which is starting to become more interested in coal again. Prices for tehrmal coal have improved recently, and many share prices of coal producers have had a tremendous run - PDZ is just languishing at a low level. The share price of their big neighbour, Bogdanka, is up strongly from lows reached in June as well - making an early bid for PDZ a better chance. The only problem with PDZ is the long lead time to development or alternatively, a takeover ( which I still see as the long term probable outcome ). But as you know - buy straw hats in winter!

Have a nice day


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