Market Update

General - Metals Ex - saracen

Good afternoon

European stocks hit by a weak US$ today, the same as Australia. The Australian Reserves Bank indicated it´s tendency to tighten in light of strong property prices, driving the A$ to a recent high against US as well as Euro. Iron ore continues it´s rise, now trading close to 67 US$, while base metals are seeing some mild profit-taking today. 

A$ gold only trading at 1560 A$ in the moment, which is a new, recent low depsite the stronger US$ gold price, and about 10% below recent highs in early June. On the charts I fear it´s heading to test 1500 A$/oz

RIO reduces iron ore production guidance by a few million tons.

Congolese, major cobalt/copper mine Tenke had a fire - not clear, how bad it has been. Cobalt prices are down a fraction in London - so probably not that big a problem!

Metals Ex- not a very convincing Quarterly from them....AISC for copper of 2,70US$/lb and 21.500US$/t for tin in operations, which have never been easy, make this a difficult stock to invest in in my opinion. No free cash generation for at least 2 more years to come will see some build-up of debt, even though production should be rising, and costs falling. But both operations are really some way off to generate halfway satisfying returns - while risks are increasing from the debt side. Not one for me to waste too much time on, as we wll not see a dramatic rise of copper prices over the next 2 years!

Saracen - a much improved Quarter from them. Both operations did well, and the company produced a recoed 80.000 oz at AISC of 1127 A$/oz during the Quarter. Nice build up of cash ( no debt ) to the equivalent of 45 Mill A$ , despite some relatively heavy expenditure, which should decrease over this year. Grades improved, recoveries and plant throughput across their operations. The guidance for production in the current financial year remains at 300.000 oz at 1150 A$ /oz AISC, which should see them generate free cash of 60 mill A$ even at current, relatively depressed A$ gold prices. Exploration surround the Carusoe Dam Underground Mine has been very succesfull, and should result in a nice reserve /resource increase in August/September. Overall, the stock is back in form, and we should see further performance, if A$ gold price bottoms out.

Reporting season is hottening up - next few days should be fun!


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