Market Update

General - Evolution - St Barbara - Resolute

Good afternoon

unfortunately for our commodity markets, Mr.Trump has lost a lot of credibility over the last few month, when it comes to delivery of his "grand plan" to boost infrastructure, and cut taxes to boost the US-economy...Running a country in a very complex world does take a bit more than tweeting a few stupid words!

US 10 year bonds, as well as German bonds, are back to where they traded last in early Nov 2016 - and metals/minerals have generally been under pressure lately, while equities have lost their momentum as well.

Only gold has had a good run over the last few weeks - no wonder perhaps, as geopolitical tensions have been rising, and interest rates falling. 

The Quarterly reporting season is in full swing now:

Evolution - getting almost boring, as they deliver again and again and again! Production of 203.000 oz a tounch lower than previous Quarter, as expected - compnay on track to deliver guidance for the full year of 800-860.000oz. Including the expected 210.000oz for the current Quarter, we should arrive at 835-840.000 oz for thr full year:  But the Quarter actually had a pleasant surprise: That is on costs! AISC of 840 A$/oz or 637 US$ are nothing short of exceptional...and the company is now guiding for AISC for the full financial year at the lower end of guidance ( 900-960 A$/oz ), which implies another Quarter with AISC below 900 A$, and probably rather 850 A$/oz! At current gold price and forex, Evolution´s mines deliver 500 mill A$+ in free cash per annum! Some of the larger competitors would love to be able to show these kind of numbers. And currently, the A$ gold prise is 90$ higher than the average of last Quarter....

Standouts were Ernest Henry, helped by an improving copper price, and especially Mt Carlton, which had AISC of only 509 A$/oz, delivering a net mine cash flow of a staggering 22.2 mill A$ in the Quarter ( and that was despite a 5 day shut-down due to mega-cyclone Debbi! )! The downside was still Edna May - that´s the smallest mine, but also the weakest one...The current Quarter will see a much improved Quarter for Edna May, though. The mine is not up to EVN´s standard, and nobody would be surprised, if they would sell it, once performance has been turned around.

The updated reserve statement was also very positive - after mining depletion of the last 12 month month, reserves increased by about 200.000 oz + the aquired 960.000oz of reserves of Ernest Henry. EVN now have an average mine life as per reserves only of more than 8 years, and is continuing to increase this, especially at Cowal, their largest mine, and Mt Carlton, their most profitable one ( except for Ernest Henry after copper.-credits ). Newcrest might still be the No1 by mine life and reserves - but EVN is Australia´s best gold miner, in my opinion!!

Resolute - reported their Quarter as well. Much more compelx than EVN - I will need to do more work on it tomorrow - free cash flow has not been that great, and I will need to check on this. But guidance for the fully ear has been increased for production, and exploration ahs been very is extremely sound, with more than 260 mill A$ net cash in the bank = 30% of market cap. More tomorrow.

St Barbara - a very good Quarterly, as indicated by an earlier announcement. The company generated free cash of 68 Mill A$ in the Quarter, from 95.300 oz at AISC of 862 A$/oz! Gwalia was teh standout at AISC of 786 A$/oz, but Simberia at AISC of 1.025 A$ generated cash as well. The company has incerase guidance by 5.000oz, and decreased cost guidance also slightly. But Simberi is not really going anywhere, I think, and has short mine life - while Gwalia is a very deep mine. They are handling it VERY well - but effectively, SBM are a one-mine stock. Given the stock overhang from Van Eck´s large position, there is not really a compelling reason to buy them here. The incerasing cash pile will burn a hole into their pocket....Pehaps the fully financed Dacian is starting to become attractive for them?? I am purely guessing here.

Have a nice evening


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