Market Update

General - Perseus - Syrah

Good afternoon

factory orders in Germany very strong, PMI still strong - same in the US on Friday....Investor Confidence in Europe strong, as is the PMI - funny, enough, bonds are stronger here in Europe today.

Against a strong US$, base metals are having another good day in London today...Copper is targeting 7000 US$ again, and nickel 13.000 US$. In A$, both look even better - copper at 9.100 A$/t, a level last seen in Sept 2011, and nickel at 16.800 A$/t, the highest since June 2015. This is fun for Australian producers & developers.

The A$ gold price at 1660 A$/oz is reason for cheer for most Australian producers as well, after having traded as low as 1555 in July of this year.

But one thing is obvious: the market is driving battery metal producers ever higher, while there is very limited interest in other resources stories, incl gold. This is surprising to me on one side, as the macro enviroment is getting better by the week - but then, I guess the momentum is clearly with battery metal stocks, and many instos are still loading up on the theme. For my taste, a few things are becoming a overbought, especially lithium stock - that his despite the price for lithium carbonate hitting a new high at 21.500$ last week.

The up-and-coming Saudi Arabian prince is cleaning his back-yard - whether this is a genuine attempt to fight corruption in his country, I doubt - in any case, a great opportunity to silence his competition for the job!

Perseus - announced the results of the bankable feasibility study for their next growth project, Yaoure , on Friday. Overall, a very feasible project, with relatively low costs over the first 5 years. At a price of 1200 US$ ( used for the study ), this project is worth just about todays share price for the entire company. Sissingue, which goes into production in a few month time, and Edikan you get for free! And you are geeting free the option on a better gold price, to which Edikan is very sensitive. Sissingue, as well as Yaoure, are very worthwhile projects at lower gold prices as well, and every Quarter of good production at falling costs at Edikan will make it more probably, that PRU can stick to their plan, to finance Yaoure from cash flow and bank debt, without having to raise equity. One aspecct, which has been left behind in my opinion is the fact, that PRU will soon be a two-mine stock, reducing the risks - and in due course, a three mine stock. But a positive decision on Yaoure will only be made in the second half of 2018. This comes nicley for PRU, as by that time, they will have brought Sissingue fully on stream, and will have a better view on Edikan actually delivering on the promise of falling costs. The stock has it´s risks ( a low grade mine in Ghana, comissioning risk in Ivory Coast ) - but both risk-factors should be gone by in say 6 month time, which could/should drive a re-rating of PRU.

Syrah - aspiring to be the worlds largest grahite producer, have updated on the comissioning. First production of flake has been achieved - some issues with the bagging plant, which should be up and running in November as well. It will be very interesting to see, how the market will take the quantum of production coming from them. Some analysts are assuming falling prices for Graphite over the enxt few years, mainly because of Syrah ramping up. I guess, that it will not be as easy as this - one has to look at different product specifications for different uses in the steel-, building- and battery-industry. And obviously, nobody really knows the quantity of EV-uptake in the future anyway. So - not for widows, but with Syrah, one does buy the market leader, and one with very competive costs. If you want to be on the save side, wait a little bit, until comissioning has progressed a bit further. So far, all seems on track, which is good news!

Have a nice evening!


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