Market Update

General - Perseus - Panoramic - Peak - West African - Newcrest

Good afternoon

back from 38 degrees in Dubai, into the Munich snow!! crazy weather here! 

Theresa May is calling ( very ) early elections for June, to give here a strong manadate for Brexit-talks...Sterling is up strongly.

The IMF increases world GDP forecast to 3.5% from 3.4%, but warns of protectionism...while China GDP surprises on the upside in the first Quarter, growing by 6.9%. Don´t ask me, why base metal prices are down today...the only "reason" I can see is, that tehy are weaker in sympathy with falling prices for iron ore and steel rebar lately. 

India gold imports very strong last month, changing the recent trend and partially explaining the strength of gold. Holdings of the SPDR are at the highest since mid December as well - no wonder amid the geopolitical instability, with elections in France looking a very tight race between the top 4 contenders - Le Pen being one of them!! The A$ gold price is currently trading a very nice 1703 A$/oz!!

Junior Gold Miners Index GDXJ in the States is changing the criteria, especially the size of companies included will not have a top limit of 1.5 bill US$, but 5 bill US$. The growing size of the ETF has made changes necessary, as the fund has been holding close to 20% of some companies. This move implies heavy selling for some companies, which have Van Eck as a very large shareholder, like SBM, RSG, BDR or PRU, while others like EVN OGC and NST will see large buying. I do not like this stuff....but it will probably create some nice trading opportunities. The Index change will take place in June.

Perseus - excellent Quarterly Report out last week, as foreshadowed. Production of 48.600 oz was slightly better than teh market had expected, even following some positive early updates by the company. Costs were pretty positive as well, at 1.098 US$ all-in site costs. Better grades as well as good mill performance and recovery rates were responsible for the good Quarter. The Youre BFS will be finished in Oct/Noc - 80% of the drilling had been completed at Quarter end. Sissingue construction is in full swing and the mine will produce first gold in the March-Quarter 2018. The market response to the result has bene positive, but still disappointing - I think just one good Quarter is not enough to fully recover a positive image. Today the stock came under pressure from the GDXJ Index announcement - but fundamentally, the stock is very cheap, if it can stick to the updated guidance! Don´t forget, that PRU should be one of the most sensitive stocks to changes in the gold price, as costs are relatively high, and the market cap is very low vs the amount of gold produced, and vs resources/reserves. I could well imagine, that one more capital raising will be necessary for the large Yaoure development - but not this year. The company is very fully financed now for Sissingue, while Edikan should produce rising free cash flow.

Panoramic - a downhole electromagnetic survey finished in March has discovered a very large EM source of 800m x 450m. This type of exploration has been very effective in the past for Savannah. Drilling will be done soon to test this EM, which could add several years of mine life by itself. The only "minor" problem: better nickel prices are needed. Macquarie estimates, that stainless steel production of the nickel intensive 300-series in the March Quarter in China has been growing by nearly 9%, auguring very well for demand.

Peak Resources - published excellent results from the BFS for their Rare Earth project in Tansania ( with processing in BREXIT-land ): Operating costs of 34 US$/kg NdPr Oxide ( vs current spot of 42 US$/kg ), post tax NPV10 of 445 mill US$ ( NPV8 of 633 mill US$ ) / 30 years mine life / free cash flow p.a. of 104 mill$. The mine/processing facilities will produce 2.420t of NdPR Oxide p.a., 530t of Samarium/Europium Carbonate, 3000t of Cerium- and 6900t of Lanthanum carbonate. The above numbers are for 100% - PEK own 75% of the project.

The company has managed to cut operating costs as well as capex significantly from the PFS. Total pre-production capex will be 356 mill US$ ( of which 267 Mill as PEK´s share ), which is  a lot of money for a company with a market cap of 47 mill A$. But the coner stone shareholders Appian Natural Resources Fund, and the World Bank´s International Finance Corp will be a big asset here. Ultimately, I still believe, that somebody from the car/battery industry should come up with a nice proposal. Nothing has fundamentally changed from 10 years ago: China is producing more than 90% of the world´s Rare Earth, and the only mine outside of any significance is the one owned by Lynas Corp, which is completely contreolled by Japanese financiers...Everybody is talking about lithium - many are talking about graphite - it took the market 12 month to start talking cobalt - yet nobody is talking about Rare Earth!!! Buy straw hats in winter - this is a great story!

West African - continue to have significant exploration success, with very high grade interstions of 3-4 m at 50-and 100g respectively. They are doing everything right, while the gold price is rising - yet the share price cannot continue with the recent recovery. Nothing wrong with the story - it´s partially the disappointing performance of gold stocks vs gold price generally over recent month. In this enviroment, it probably needs more than a good hole here & there, and more important news like new reserve statement and updated feasibility study in the 3rd Quarter. Until then, we should see many exploration results, as 6 drigs are currently drilling.

Newcrest - the vagaries of mining! A "seismic event" - which in fact is nothing else but a small earthquake! - has hit their very important Cadia Underground Mine. This is happening once in a while and is nothing to question the longer term viability of the project, but it constrains production in the short run. No major damage has been done, but Macquarie estimates, that the mine will produce from low grade stock pile for the next 6-8 weeks. 

Have a nice evening


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