Market Update

General - Crusader - Panoramic - Kingsgate - Breaker - Finders - Paringa - Fortescue

Good afternoon

We would like to invite you to our yearly Australian Resources Conference in Zurich, 24th of February, Hotel Baur au Lac. As always, the attending companies are inviting all interested investors and other interested followers. Please pass on the information to your colleagues as well! 

Please register by clicking this link:

Australian Resources Investment Conference

This year, following companies will attend:

Evolution Mining / Perseus Mining / Panoramic Resources / Prairie Mining / Genex Power / Graphex Mining / Breaker Resources / Peak Resources / Finders Resources / Energia Minerals


Market Update

Housing prices in the US are looking good, and growth in France is strengthening...Europe is digging itself out of the crisis? Way too early to say, as Italy and the peripheral countries are still looking bad...but generally, economies around the world are looking very reasonable! And inflation is rising as well, as are tensions surrounding King Donald I !! Later in teh day, US consumer confidence fell a little from a 11 year high, and the Chicago PMI was lower tha expected. The US is waiting for Trump to deliver on his economic promises, while equity markets are having the jitters from his erratic and autocratic style...

So gold and base metals are having a great at 1215 US$, base metals are up between 2% for copper and 3,5% for zinc...

Fortescue - very interesting comments from their chief marketing director, who said, that China is closing electric arc furnaces for energy-consumption and enviromental reasons, which produce about 100 millt of steel p.a. These things are using steel scrap, and if all of them would be closed, 50-60 Millt of additional iron ore would be needed for China to hold 800 mt of yearly steel production. He is also reporting on good demand and enquiries from China...Is this the answer to the question, why iron ore prices are still at these lofty levels? Perhaps we are underestimating the strengt of iron ore...which in turn would mean, that we are also underestimating the A$....Fortescue came out with yet another stunning Quarterly, cutting cash costs of production by a further 7%...Their total operating costs for iron ore at port in China are now around 25-26 US$t!!!! The company also received more for it´s iron ore, which is of lesser quality than the official contract in the Quarter, and expect 85-90% of the contract price for the full financial year ( current price is 83,50 US$/t , so the company will currently receive about 73 US$/t - not a bad margin!!!). At current prices, the company would be debt free this year!! The cash generation of the top iron ore producers is absolutely amazing ( FMG are producing 165-170 mt p.a. ) , and they are all keeping themselves happy by not increasing production!!

Paringa - Quarterly without much new info. The US project is going to plan, the feasibility study should be finished this Quarter. More important is, that it´s largest competitor, Alliance Resource Partners, is reporting about increasing demand for it´s coal, and rising prices. PNL need just about 50 Mill US$ incl working capital to bring 1.7 millt of annual coal production on stream, while producing an estimated 39 Mill US$ in EBITDA p.a.. That should not be hard to finance...and this does not include the additional No 11 coal seam, which should improve economics from the currently expected NPV of 172 Mill US$. Like all mining companies not in production, the development is not without it´s risks - but I see PNL as relatively low risk, and as having substantial upside from developing their second mine from cash flow. 

Breaker - one of the most frugal, Australian exploration companies is delivering again...excellent drilling results, and the market is starting to get seriously excited about them. 7m at 62g; 7,m at 7.7g; 12m at 3.14g and several other intercepts are - once again - increasing the foot print of the resource. The company has got 12 mill$ in cash, and is spending just 800.000$ this year on admin and salaries....and is spending 1.6 mill$ this Quarter on drilling. If Tom Sanders can also prove underground potential, this asset could become very sizeable. The EV of BRB is now 53 Mill A$, and while this might be appropriate for the current state of the project, it also leaves a lot of upside, if Tom can continue to deliver here. 

Panoramic - notmuch to report from their Quarterly...for a change, they did not surprise us with promising exploration results, which is slightly disappointing. The main news will be the final feasibility study, which should be announced very soon this week or next.

Finders - the detailed Quarterly did not contain many surprises - production numbers had been announced earlier. The new plant produced 6150t of copper last Quarter, and reached name plate of 25.000t p.a.. Cash costs of 1.08 US$/lb were slightly higher than expected ( but are expected at the planned 1.05$/lb this Quarter ), mined copper has been 2% higher than  expected from the reserve-calculation. It´s now all about fine tuning, and I ahve little doubt, that production in 2017 will be higher than 25.000t. The small, 3.000 pilot plant did not perform well and is undergoing some refurbishment. It will be in full production again in the June Quarter. The company has started to pay down debt last Quarter - net debt is now at approx 88 Mill US$. FND have now started exploration in earnest, and that has potential to add further reserves over the coming year or so.

The stock has started to move with good turnover, and will be going higher!

Kingsgate - will finish the month at 38 Mill A$ in net cash and no debt. The plant has been moothballed, as Thailand did not renew the necessary licenses...but certainly, KCN do own the plant and a lot of ground - without a valid mining permit. What is this worth???? God knows - anything between 20 mill and 100 mill A$...and tehy own the promising silver/gold proejct in Chile, which has a NPV of 150 Mill US at silver price of 19 US$... Company has a market cap of 62 Mill A$ and is certainly cheap - question is, though, how long it will take and how the company can realise value from Chatree.

Crusader - they are certainly not impressing me by moving fast! Very little happening at Borborema, very little cash generation from Posse iron ore, and tehy are still working on the scoping study for the first step to bring Juruena into production. Grades at Juruena are fantstic - the project now has 260.000oz of resources at average grade of 1/2 ounce - but cash is coming down and will be gone again in 3-4 month. The only good news is, that the company is debt free now.

I have no doubt, that the value of thes assets is higher than the markt cap - and potentially, a lot higher. But good old CAS are trying my patience....

have a nice evening


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