Market Update

Save the date - Sheffield - Beadell - Finders

Good afternoon


some micro-stuff first:

Beadell - had a much improved Quarter - but not sure, whether it has been good enough to avoid anotehr raising - might just be ok. They wanted to produce 60.000 oz as declared 2 month ago, and will now produce "around" 50.000 oz. This will also impact costs. They claim, that some of the planned production will only be transferred into 2018. They have had a number of smaller production issues. I still remain very cautious here - in any case, no reason to be there for now. At the current gold price, cash generation will be very difficult to achieve in 2018, and some debt-repayments might stretch the company.

Finders - new reserve statement. Reserves for about 7 years remaining, and reserve is only marginally below levels, when they started the operation. Indonesian issues like necessary approvals for additional ore bodies remain - but I think the takeover has been avoided now. Any increased bid in the high twenties might be succesfull - we will find out in the new year, whether the Indonesian bid has been entirely opportunistic, or whether it flashes out another suitor. Good to see, that a large parcel of 23 mill shares today went to institutional- and high net worth investors. The seller was a private equity group, from what I have heard, which had to be out by the 31st of Dec.

Sheffield - had a very unexpected, but rather unfortunate news yesterday: Some technical issues with the Native Title approval will delay approval for a few month. This came totally out of the blue for company as well as investors. Rather than let the bureaucrats rule about a new approval, I think tehy might choose to give Aboriginals a slightly higher royalty. This might impact the valuation by a few cent - but I think time is important, and the outlook for mineral sands is just too good to miss this great market. On the more positive side, tehy announced another binding offtake agreement with a large, Chinese entity. Stage 1 of their proposed mine is now nearly sold out, and the comany expects further news to this regard. SFX have an excellent project, and the current weakness should prove a great buying opportunity. The company has ample cash to live with a few month longer, to have full approvals in place. At this stage, tehy do not expect any big time delay for production start, as some early works are still taking place, as planned.

Last but not least some bad news from Novo Resource, the Canadian Wunderkind...they have found out, that much larger samples are needed to establish a resource for their new-style type of gold. No surprise really to me - that´s the kind of issue with nuggety ore, and has been so often in the past - even if this is now called "conglomerate", which really is only another word....I dare to say, that the new gold rush for Pilbara conglomerates is over for now!


Aother exciting year is over, also delivering some profits, and certainly many, exciting developments! Not to mention a lot of volaitily, asking for some endurance and a lot of nerves!

As BHP said mid-year - this has been the year, when electric vehicles took off, generating a lot of interests in base metals as well as in battery metals.

But it has also been a year or major volatility again! After a great start into 2017, we reached the high for many stocks in February, only to fall back heavily until mid-June. The big recovery coincided with the above mentioned BHP-comments, and a great research report by UBS, which for the first time highlighted the massive, potential EV- impact on our sector and raised a lot of attention. For mining investors, the year has been only mildly positive, which can be seen in the only single-digit performance of funds like Black Rock World Mining Fund, Earth Exploration, Craton Capital Resources or my own fund, Nestor Australien ( all in Euro-terms ). The weak A$ has not helped either, falling by 6% in Euro-terms, and the US$ by nearly 12% over the year.

And last, but not least, the world economy did progressively improve throughout the year, helping not only demand for commodities, but also changing investor-perspective on our belagured sector! And what is even better: The outlook for 2018 is better today than at any time during 2017, giving me much hope for another good year coming!! 

Major base metals are finishing the year near multi-year highs ( with the exception of nickel, where large stocks are holding the price back ), a stellar performance of smaller metals/minerals like cobalt, lithium, palladium etc, a reasonable gold price and much optimism! Iron at at 73 US$, coking coal at 236 US$, and even thermal coal at 100$ are trading at levels nobody would have expected this time last year! And last but not least, base metals/ gold look like having a nice pre-christmas finish today, Over the last few days, we have always seen some profit-taking early in the day, and then finishing off strong , on US-buying.

So what to expect from 2018??

As indicated above , I am bullish...almost reminds me of this great comment by Jim lennon, who claimed , that he e foreseen 5 of the last 3 bull markets in nickel!! But a world economy growing at recent record-levels, a sector still driven by returns than by expansion, and a US$, which seems to be past his best, are a base for a lot of fun to come. And with a bit of luck, we might actually have not only 1 good year ahead! the demand for EV´s should really take off in 2019-2020, when a myriad of new models from established car manufacturers will hit the market. By then, we shoudl also have overcome soem of biggest obstacles, like limited endurance, limited chargebility and limited charging infrastructure. 

Our sector is still very reasonably priced - from large/larger caps like BHP or Oz Minerals, Mineral Resources etc to smaller ones, like Panoramic, Foran Mining, Finders Resources and many others - they are either/and trading at sexy yields and undemanding P/Cash flows, or at very low, prospective PE´s. No exhuberance aroudn as yet!

This might be slightly different, when it comes to battery-metal producers/developers. We have seen some frentic activity here, and some massive share price moves. There could well be some disappointment in 2018, and I have trimmedmy exposure, especially to lithium, a little bit. Strong prices are usually triggering a production response - we will see more of this, as the year matures, in these speciality commodities - this is contrary to the "normal" base metals, where a supply response is nowhere to be seen as yet, mainly due to the very long lead times involved, and the limited price recovery of underlying commodity prices.

2017 has also been remarkable as a year of renewed tension around the world. Readers of my blog will undoubtedly have noticed, how disgusted I am by Trump´s actions - the man who is heading the country, which once was our biggest ally. I just hope, that he does not do anything stupid to derail all of the above hopes!

And 2017 has been another year, in which the "have´s" like us have profited at the expense of the "have-not´s"...central bank printing by nature helps property, equities and bonds  - but the people, who do not own the above, can only profit by keeping their job, if they are lucky! Not good, and something politicians will need to address more to avoid more countries to fall victim to lunatics like Trump!! I realize, that this is not easy to do in a sensible way, but education will be central to offer better chances to the lower 20% of income earners.

I wish you Happy Christmas, and a prosperous and fulfilling New Year, with lots of fun in Australian investing!