Market Update

General - Fortescue - Caravel - Foran Mining

Good afternoon

good old England, what happened to you??? Complete loss of confidence in their political class...First this joke about the Brexit, then Labour headed by a guy, whom is own party does not want...numerous fall-outs by Boris Johnson, who might be good fun for a dinner, but is a miserable foreign minister and the preime example for political opportunism - now sexual harrasment ( which in my eyes, is a bit of a joke ) - and last but not least, this wonderful story about minister having secret meetings with Netanyahu, without Theresa May knowing....oh my god! What a mess...and banks are getting anxious over Brexit. Paris, Bruxelles, Dublin and Frankfurt say thank you very much!

The European Comission wants to legislate new car emission levels from 2025 resp 2030, increasing pressure on car producers to move to EV´s or cut emission of conventional cars by a level, which could be hard to achieve.

Iron ore and coal imports by China are weakening substantially - that has been expected due to a lot of plant closures over the winter, to avoid the worst pollution. I would have thought, that a relatively large part of stockpile-adjustment ahs already happened, though!

Base metals are tickling higher, as the day progresses - as is the gold price.

Just a thought: I had to preare some numbers for a investor magazine yesterday, and came across following: By 2025, anf if 15-18% of cars sold in that year would be EV´s ( estimates range from 10% to 25% ), BHP estimate, that an aditional 750.000t of copper p.a. will be needed. Sounds very small in a market of about 24 millt total production this year! Well, that´s what I thought so far. But view it this way: Total production increase over the last few years has been very roughly 2% p.a. - thatbout 500.000t. To satisfy additional demand for EV`s ( they consist of 80-90kg of copepr, versus conevntional cars 20 kg ), yearly production growth has to be increased by about double! That is a big number indeed, and the impact on price could be quite substantial.

Caravel Minerals - this little company, of which I have been an unhappy shareholder for some time, could have it´s fortuens turned around big time. CVV is sitting on a large, low grade copper resource in Western Australia, next to excellent infratsructur. They have explored a JORC-compliant resource of 850.000t + copper, originally partnered by First Quantum, who retreated, when it became obvious, that the project might not meet their minimum requirements of long term production of 50.000t copper p.a.. The company has doen a scoping study last year, which resulted in 35.000t of yearly copper production at C1 costs of 1.50 US$/lb, strip ratio better than 1:1, soft ore, for an NPV 7 of 520 mill A$. Problem: The low grade resource of 251 millt awith 0,34% copper + some molybdenum needs big scale to make it worthwhile , resulting in the planning for a 15millt p.a. plant. This in turn, is obviously expensive: 440 mill$ in capex etc...prohibitiv for a company with a market cap of 4.5 mill A$ as per today!! 

More recently, a group of investors around Alasdair Cook, an experienced resources player and founder of Panoramic Resources, have taken a placement and I guess will get involved more closely. They have developed an ore sorting process, which has now been testet on Calingirie ore ( this is the name of CVV´s proejct ) - and as it looks, the process will be able to sort the resource ore, and enrich it by about 90%! This could be the big turning point for the project: For the same production, the company might only have to build a 8 millt plant - with massive reductions in capex, obviously - and substantial improvements of treatment charges = operating costs. To some degree, reduced costs of treating the ore in the plant, will partially be offset by costs for the ore-sorting process. Neverteless - same production of 35.000t, using a plant of half the size planned for so far, and some ( probably limited, say 10% ) reduction of cash costs could make this a really great project!

Next phase will be to test the ore-sorting process on larger quantities of ore, more exploration to convert resources and probably also extend them, and hopefully, more involvement of the Alisdair Cook-team in the running of the company. For copper bulls, this is a no-brainer - but due to the limited size of the company one can only buy in small quantities, or has to wait for the next placement, which will undoubtedly come in the not too distant future!

Fortescue - today has been the last AGM of who has probably been the outstanding ( well, definitely one of the two! ) mining CEO in Australia - Nev Power. Phenomenal success in cutting costs, while all iron ore mine are performing like a train, is undoubtedly due to a good part of his leadership and teamworking spirit. The company announced also plans to go ahead with teh development of a new mine for 1-1.5 bill A$ over the enxt few years, to replace the ageing Firetail Mine in the Pilbara. While FMG will remain a div-spinner, there is a little bit of uncertainty as to the strategic direction of FMG. They have announced, that tehy would keep their eyes open for opportunities in copper, gold and lithium, on a world wide basis - and potentially even other industries. 

Foran Mining - this little Canadian stock, in which I have been holding a quite substantial position for some time, is also - very gradually - moving higher. The stock feels like it could make a nice move, as a large seller obviously has finished. I have noot done or seen numbers recently - but at todays prices, the stock is rather a copepr- than a zinc producer ( PEA talked about 17.000t p.a. of coppe, and 26.000t of zinc ). The NPV shoudl be well over 500 mill Can$ now, vs 30 mill Can$ current market cap. This stock is a real sleeper! I am sure, that one or the other corporate would be interested to develop this asset - but I am also sure, that the largest shareholders, who have been here for some time, are in no hurry and perhaps a little bit greedy as well! If you need short term performance - not sure - longer term, this thimng is a steel and should be accumulated. Anything else is not possible , anyway, because of very limited liquidity in this stock.The stock has underperformed for some time - it feels like it wants to move now.

Have a nice evening!


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