Market Update

Middle Island - Perseus - Resolute - Crusader - Panoramic - Cardinal - Beadell - St.Barbara

Good afternoon

to be honest with you, I could find some pretty bad swearwords for our friends, the least for those who did not bothered to vote, and on those 53% which voted for the Brexit...and for Cameron, for Johnson etc etc. This country is ruled by a bunch of completely irersponsible, purely opportunistic politicians! things are getting worse by the day...this Brexit-thing is the last thing banks around the world needed! We as well as  them already have enough problems to deal with!! Banking stocks continue to fall in Europe today, and they take the rest with it....

As you can read above, I have a laughing and a crying eye today...I cannot really feel happy for the gold price to go up, but certainly, this is the right enviroment for it to continue racing. Gold stocks show us, just how underweight generalists especially have been in gold ....they are now scrambling to get a foot into the door. Australian gold stocks largely are pricing some further advances in gold in...but I guess they might well be right!

So far, the main runs have been in establised producers - at 1850 A$/oz, many marginal players will follow. This is fresh all time high for the A$-gold price today, and it makes many forgotten projects start to look sensible again.

I just want to mention a few stocks, which still look ok in this enviroment

Middle Island -bought the Sandstone project in Western Australia only recently for a token few million$, and subsequently raised 5.5 mill A$. The project has a resource of about 480.000 oz at 1.4g, and is fully permitetd. It also has a 600.000t plant on care and maintenance + associated infrastructure ( estimated refurbishment costs of only 5-8 Mill A$ ). The very experienced MD Rick Yeates believes, that there is substantial exploration upside, which will be drill-tested in July. Linton Kirk, the project manager, is a very well regarded and experienced engineer. They could be producing 25.000oz from end 2017 onwards, and make something like 13-14 mill$ in profits ( I guess )....not bad for a 25 mill$ market cap. On top they have the REO gold project in Burkina, which is also worth a few mill$ in this market!

Perseus - producing just over 225.000 oz this year, at all-on site costs of 1200 US$, their main Edikan Mine will prduce up to 300.000oz in FY 18 and 19, at costs below 1000 US$/oz.  They are bringing the Sissingue project in Ivory Coast in production by the 3rd Quarter 2017, at 75.000 oz and all-in site costs of 630 US$ - that will bring total production to about 350-370.000 oz in 2018 and 2019 financial years. And last but not least, they took over Amara Mining in March of this year, which has a reserve of 3.2 mill oz, and could produce 220-240.000 oz from the end of 2019 on - bringing total production to about 5500.000oz pa. This stock could double again - but you will have to look forward , and don´t look back at the last Quarter, which will most probably be a very average one.

Resolute - they own the Syama Mine on Mali, the Bibiani Mine in Ghana, and the Ravenswood Mine in Australia. Pending a full feasibility study for the Australian mine, they could/should produce 450-500.000 oz for many years to come, at approx 1100 A$/oz AISC. The company is very under-owned and under-researched, but the chances are very high for RSG to be included in the S&P ASX 200 from the 2nd of Sept, which would bring a lot of attention to them. This stock could also have a market cap of 50% higher than todays 1 bill A$, if the feasibility study for ravenswood comes in as expected. All  mining projects can be financed without any capital raisings. The company has no debt.

Crusader - I thinbk many of us will have some reservation with regards to the management here. I am not 100% sure, what I should think about any case, they are no bad boys! And tehy own the Boroborema project, about which you have heard in my mails numerous times over the years. Borborema has a proven & probable reserve of 1.600.00 oz at 1.2 g in Brazil, which had a full feasibility study done on it a few years ago. That study came to the conclusion, that the project would be viable - but the market and everybody else at the time knew, that the capital cost was too high. The company has now worked on a smaller version, which is likely to produce something like 80.000 oz p.a., but at dramatically lower capex. This project alone shoudl be worth more than the market cap of 41 Mill$ - depending on the outcome of teh study, it could be worth a lot more, especially in the hands of an existing gold producer.

The second gold asset, Juruena, is also in Brazil, as you know. Production of 30.000 oz p.a. should be seen as a starter proejct, with very low costs of say 600 US$/oz due to the high grade of the deposit. Cost to bring it into production will only be 10-15 Mill$. Again - subject to the outcome of current sudies! The company has git enough cash for a very active exploration program, but not enough for production start. 

Crusader are a little un-loved, and under-rated, I this market, they should be trading quite a bit higher - just by how much, remains to be seen from the outcome of the project studies for Borborema, and Juruena - but their worth could be very substantially higher. 

Panoramic - I feel almost bad in mentioning them again...but honestly, you´ve got to mention it, when it comes to cheap gold stocks! PAN´s EV is about 45 mill A$ today - the NPV5  of their remaining gold asset is 95 mill A$ at A$ gold price 1840A$/oz - and this is based on the 290.000 oz, existimng oxide reserve. On top of that., the project has 700.000 oz of refractory reserves,which would require a different type of plant - and large exploration upside. So is this worth 50 Mill$ in a separate vehicle? I think it might be worth 100 Mill$, if they can give us further some indication, that exploration would deliver more results. PAN have stated, that tehy are looking at an IPO of this asset - sensible to me, as withing PAN, hardly any to nil value is attributed to the gold project.Let´s not forget, that nickel is back to 10.000 US$t - and let´s not forget entirely to also look at the PGM asset, which is gaining in value by the day. IF PAN double from here, the share price would easily be justifyable, in my opinion. PAN is one of my largest holdings currently.

The following stocks had news out today:

Cardinal - anounced more good drilling results today - better than average grades so far, and the width has always been excellent anyway. Also, the resource looks like continuing at depth. It´s more and more certain, that these guys are sitting on a mineable, and sizeable deposit - but an EV of 95 Mill$, fully diluted, is getting up there for a stock, which has not released a resource as yet.  The company has enough cash for now, with nearly 5 Mill in the bank, and 1.2 mill to be spent this Quarter - but the ever increasing share price will tempt them at some stage in the next three month to raise 5- or 10 mill$.I am a holder, but no buyer anymore. 

Beadell - again, I am not a buyer at these levels anymore - but very very good drilling results underpin their massive increase in price over the last few days. 24m with 8g / 13m with 164g / 6m with 351g / 4m with 35 g from AB2 Lode - 36m at 4.2g / 25 m at 3.3 g  from AB1 Lode - 27m with 13g / 19m with 2,3 g / 9m with 6g from Tap D show the excellent exploration potential. Again, some of these results from oxidised rock, which will prolong current mine life without making any modifications of the plant necessary. 

St Barbara - well a good Quarterly - guidance for the year has been exceeded for both mines ( as expected? ) - and debt will be entirely gone by year end - fantastic effort! But a market cap of 5.000 A4/oz production is really getting up there, for a stock, which has one serious mine, and one average mine. They are certainly not one of the cheaper stocks left to buy....They are THE success story within the established producer camp - stock is up by 30x in 18 month!

Have a nice evening

Wilhelm Schröder


Schröder Equities GmbH


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