Market Update

General - Finders - Beadell - Newcrest

Good afternoon

the Bayer takeover of Monsanto shows us, just how crazy this world hast gotten, thank´s to zero-interest rate policy:

Bayer is paying 66 Bill US$ in cash for Monsanto, equal to 15x EV/EBITDA....they will pay Monsanto a 2 bill US$ break fee, if antitrust bodies kill the deal ( well, the market is saying: it will be killed! ). Bayer claim, that the transaction will be EPS-positive! Yes it might well be - but only because of extraordinary low interest rates! Monsanto generates about 1,5 bill $ in gross profits from Roundup....One thing is for sure: This will be a very profitable transaction for investment bankers and lawyers - perhaps even for shareholders, but I doubt that! You and I will pay for any potential failure, as the EZB will probably gobble up a large chunk of the bonds to be issued....

Markets are getting very wobbly again in the moment - I think Mr.Trump gaining in the polls is not helping here. At the very least, his election would drive uncertainty big time - and hence, risk-off seems to be the story for now...

That does not help gold, though - but it puts some pressure on the A$. Hence, the A$ gold price is edging higher, trading at a healthy 1770 A$/oz in this moment.

Some very strong credit numbers from China, and strong Industrial Production yesterday, are probably helping base metal prices today - copper is up by 2% in the moment.

Beadell - positive announcement today, that they will change to power from the Brazilian grid. Currently, the company is getting 1 MW from the grid only - by year end, they will get 5 MW, and longer term, 12 MW. I have no hard facts - but experience tells me, that this will half power costs over time - potentially more. I guess that total power use of BDR would be something like 8-10 MW. As I said yesterday - stock is worth accumulating under 40ct, even though I do not subscribe to some ultra-bullish valuations of up to 80ct/share I have seen.

Finders - published a new presentation today, which is giving detailed numbers for the ramp-up of the recently commissioned copper mine in Indonesia. I started to become a little worried about progress , but things seem to be going in line with expectations: Monthly production has grown from 600t in June, to 1100t in July, 1350t in August, an expected 1750t in September, and should reach full capacity of about 2.350t/month in October. Obviously, Sept is half finished - so they must be very confident of these numbers.

Based on the current copper price, and the current 7-year mine life, the stock is halfway fairly priced - say 25-30% upside. But if you assume, that the copper price will be going back to say 3$ over the next 2-3 years, the NPV10 of Finders should be close to 140% higher than today´s share price. At 250 US$/lb, the NPV10 would be just about 80% higher than today´s market cap of 114 mill A$. One could certainly argue, that a 10% discount rate is overly conservative, and it might well be....In any case, Finders are a pretty sound story and offer good leverage to copper, and exploration success!

Newcrest - took a placement in SolGold, which is developing a copper-gold resource in Ecuador. I think this is the first investment for Newcrest in South America, and further indicates, that the enviroment in Ecuador is improving big time. Ross Beaty has become very active there - Odin Mining recently has bid for Ecuador Gold and Copper - and Lundin Mining is developing a large project in the country. 


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