Market Update

General - Phillipines on nickel etc - Trumbull on energy - uranium - Panoramic - Graphex - Beadell - Cardinal

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 

I have copied this from my friends at Investec - interesting:

¢  Canadian exploration budgets fall. Exploration budgets allocated to Canada in 2016 totalled US$971m, which was US$214m less than in 2015 and a fall of 18% YoY. However, the decline was less than the global average decline of 21%. The 2016 total budget was a 12-year low for the country, down 70% from the 2012 high of US$3.24bn. There were 400 companies budgeting for exploration in Canada in 2016, which was 14% less than the 464 companies with budgets in the previous year. Source: SNL

And the following is interesting for companies like Strike, and certainly Genex: These are the key words from PM´s speeach last night in Australia ( after having had a big fight with Trump on the phone re refugees  ):

And without gas, or substantial new forms of energy storage, where will the firming power come from to support intermittent renewables like wind and solar?

We are willing to sit down with the states to determine the right incentives to enable desperately needed sustainable onshore gas development.

Energy storage - long neglected in Australia -will also be a priority this year.

Last week, at my request, ARENA and the Clean Energy Finance Corporation (CEFC) agreed to work together on a new funding round for large scale storage and other flexible capacity projects, including pumped hydro.

I have also written to Alan Finkel asking him to advise on the role of storage and pumped hydro in stabilising the grid.

Large scale storage will support variable renewables like wind and solar, it will get more value out of existing baseload generation and it will enhance grid stability. And we are getting on with it.

Thank you, Mr.Trumbull! Get on with it, please!

Delicate meetings today...German Foreign Minister Gabriel meets his US counterpart Rex Tillerson, who might be the most sensible member of Trump´s autocracy. Could be good to bring some calm into European/US-relationship. And Merkel visits Erdogan today.....

The A$ is strengthening aginst the US - might test the top of the recent trading range at about 77.50 against the US soon, based on strong resources prices across the board. Against the Euro, trading also at recent highs and probably testing 1.37 to the Euro soon. I think against the US, as well as against the Euro, the Aussie will have problems to break through those levels. Aussie exports looking great - but the Aussie economy is not that strong overall.

The big story in metals today is the Phillippino action: They are closing down 23 mines, and suspending a further 6 mines. As to their words, 50% of Phillippino nickel capacity is affected - that is 10-12% of the world´s nickel....can´t be bad for Australian nickel! But unfortunately, very bad for Oceana...their Didipio copper/gold mine has been suspended - might take 3-6 month to have it re-opened - but then who knows - they have to deal with a pretty crazy government. OGC have got a price from the Phillipines last year for doing everything right...mad, and I am sure, that it´s doing unjustice to them! Nevertheless - big problem - stock is down 14% today, as Didipio is their lowest cost producer and an excellent asset. The news broke at about 5 am our time, one hour before markets closed in Australia. Western Areas were up by 10% last night, and the nickel price is up by 10% over the last 4 trading days - according to Deutsche Bank, quite a few shorts have been bought here recently. 

The other big story was the declaration of force majeur by Tepco, on a 1.3 bill US$, long term uranium offtake agreement with Cameco. Potentially, this could put a dampener on future prices for uranium ( which has risen from 18 US$ in early Dec to 25 US$/lb as at yesterday).

Panoramic - very timely release of their feasibility study for Savannah today! The study is excellent, and the company is VERY happy with it - whether it will be good enough, will be decided by the nickel market! Project clearly needs slightly better prices - but not far from todays level. The details:

10 year mine life / annual production of 9.700t Ni - 5.000t of copper - 670t of cobalt / whereby first 5 years average production of 10.900t of nickel. Sustaining acsh costs are 4.40 US$/lb or 6A$/lb. Todayx, the nickel price is about 6.15 A$. Pre-production capital would be 30 mill A$, cash demand incl working capital 30 mill A$. PAN are VERY confident of getting this done without bank finance, not to talk fresh equity, as smelters around the world are screeming for nickel concentrate, which is in short supply vs nickel pig iron. The company has used a copper price of 2,57 US$lb ( vs 2,72 US$ spot ), and a cobal price of 14.50 US$/lb , also just below todays price. If the company would use say 3.00$/copper and 20$/cobalt, which is a distinct possibility, this would add 15 Mill$ in income per year. The sensitivity of the proejct is very substantial between 5 - and 6 US$lb nickel, trippling the NPV at current exchange rates. 

The company has noted numerous possibilities to reduce operating costs - one of the largest opportunities would be to produce a higher grade concentrate, which would increase income potentially by approx 10 mill$ p.a., and would cost an additional, limited amount front up of say 15 Mill A$ ( my guess ). 

Overall - the feasibility study is in line with positive expectations - but the company would need better nickel prices to give the go-ahead, unless we see better prices for copper/cobalt. An additional 10% from todays A$-nickel price might be enough - I would rather want to see 15% higher prices ( that would obviously reduce, if copper/cobalt would be higher ).

The result is no surprise for holders, I guess - the company remains a great call on the nickel price. I have seen todays price forecasts from UBS and Macquarie - 6,25 US$lb in 2018 and 7.50 US$ in 2019 and 6.00 US$ in 2018/2019 or 6.60 US$ in 2019/2020 resp - under both scenarios PAN would be VERY profitable. If you want further info - the feasibility study is in todays announcement in great detail . I guess it´s needless to declare my interest as a shareholder here....

Beadell - announced more good results from just about any part of the project they have been drilling, without having some stunning numbers like recently.

Graphex - the company has done a new resource calculation following exploration success, which resulted in a doubling of the last resource form 2015. The proejct ios far from finishd  - it´s more important, that massive upside has been demonstrated for the potential Chinese JV-partners, who are meant to finance this project. I think this announcement could be instrumental in speeding up the Chinese decision making - their market has huge appetite for especially the type of graphite coming out of GPX´s project. This is gettimng a bit boring, as the financing announcement has been taking longer than hoped for - but all ingredients are there, incl very detailed, Chinese studies ( tehy have effectively done their own feasibility study ) , for this to happen say within the enxt 3 month. A positive announcement would put a rocket under the share price, which would theoretically double it - and that´s without any expanded project, which might well be on the cards, given the large resource increase announced today. I am a holder of GPX, and a rather happy one.

Cardinal - have published further metallurgical studies today, which are looking much better. Using a slightly different processing route, costs could be kept quite low, and recoveries could be increased to above 80% - perhaps 85%. This has been a very important announcement! Remember the stock fell out of bed, when some metallurgical concerns have been published...Stated resources in Ghana are around 4 mill oz, with further, good upside...and the company is still sitting on 18 mill A$ in cash, EV of about 82 mill A$ + options. I wouild definitely buy the stock today on it´s valuation - but a major negative is the management, which has shown itself of let´s call it being tricky...I have no doubt, though, that CDV would attract corporate interest, as soon as they have a mining title!

Have a nice evening


Schröder Equities GmbH


80538 München

Tel. +49-89-4613440-0

Fax +49-89-4613440-10




eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder


The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by unauthorized persons.