Market Update

General - Lithium et al - Evolution - Finders - Iluka

Good Afternoon!

The Chinese consumer does, what he has been told: Consumer Confidence is on a 20-year high, driven by a rise of 7.8% in Disposable Income. He is also buying cars - as do Europeans, Japanese and now also Russians, Brazlians and Indians. Global car sales increased by an estimated 3.9% YoY in August, as estimated by Macquarie. EV´s market share is rising strongly: From 1.8% last year to 3.2% in China; from 1.6% in Europe last year to 2,6% this year. Overall, marklet share of EV´s worldwide has increased from 1.9% to 2.2%. Politics everywhere are pushing this story very hard, and we will see this trend continue for years. I just hope, that governments around the world will catch up and provide the appropriate infrastructure! 

I have the distinct hope, that after 2030, I will not be able anymore to put gasoline instead of diesel into my tank!

Base metals still in correction-mode, but lead and nickel finishing the day slightly higher now.

M&A in the gold sector is heating up....Alamo is buying Richmont at a 20% premium in a share-deal, and several ( mainly Chinese bidders ) are circling the old Martabe Mine in Indonesia, now owned by EMR, the PE-fund run by Owen Heggarty.

The vagaries of counry risk: Eldorado gets hammered because of their decision to stop investing in Greece ( well understandable - that country does not appear to need any new jobs!! ) - Centerra goes through the roof because of a new agreement with Kirgyztan ( following years of desperation, though!! )

Iluka are beefing up the Zircon price by 130 US$ to 1230 US$/t - that´s earlier and stronger than expected by most analysts. There should be more coming over the next year or two - stocks are being emptied, and the negative enviroment over the last few years has limited the developement of new mines. Sheffield, one of my holdings, should profit from it. I am surprised, that Iluka have not knocked them off as yet!! A new broker report valued them at 1.40 A$, vs current price of 50ct. I have not seen this report, but I believe, that this thing is easily worth 1$ in the medium term ( earliest production in late 2019 ). Blackrock is the largest, single shareholder. 

Finders Resources - the CFO has resigned, after being with the company for 10 years or so. He made the move from the old headoffice in Sydney to Perth, and I believe that he wanted to go back there. No reason to worry...the stock has had a reasonable run this year, but is very cheap, still. I have sold a few over the last weeks, but only, as my holding got too big. At the current copper price, the project should make just above 100 Mill A$ in EBITDA p.a. for Finders - not bad for a company with 170 Mill AS$ market cap, and debt all but gone by this time next year! This is cheap, even in Indonesia!There has been a big shift in ownership over the last 12 month at FND. Resources Finance Corp is gone, and a number of Australian institutions have entered the register. I am hoping for large dividends here, once debt has gone!

Lithium stocks continued to dominate the talk today. China´s decision to stop all non-electric car sales at some stage ( exact date will follow - 2030, 2035? ), has fired up the sector big time. Galaxy, Orocobre, Mineral Resources and several smaller stocks have profited substantially over the last few trading days. It starts feeling a bit hot  - but longer term, these stocks appear still relatively cheap to me. In the end, it will all depend on the pace of EV-take up, as the world generally has enough lithium - but it might well take a few years ( and longer than some xpect ) to beef up production Graphite is obviously another story to play this ( I think Syrah is worth a good look - but I have not done enough work here ), and as we have seen over the last few month: The market is playing one story after another - first was cobalt, then rare Earth, now lithium. I think all of the relevant stocks are very cheap, IF current lithium hydroxide / lithium carbonite / lithium oxide / spodumene prices continue where they are now. Lynas in Rare Earth probably needs a continuing upward trend for Nd/Pr, if we want to see further gains, which is possible. But in my opinion, investors are still not interested enough in nickel! A well respected research company, Wood Mackenzie, suspected the other day, that we will not see any new nickel mines ( ex NPI that is, which is unsuitable for batteries ), unless nickel moves to 20.000 US$+. At that price, my favourite puppy, Panoramic, should be worth  5-6 times todays market cap....The day will come - but relistically, I think 20.000$ we will see only a few years down the track - 2021 or 2022. Anyway, with a consistent price above 12.000 US$/t I would be happy for now!

Obviously, there are many more stocks - I have named just a few. But I would like to mention Graphex and Peak - both doomed in the moment thank´s to their assets being in Tanzania. One day....

Evolution - have received a few bids for their weakest mine, Edna May. Edna May has been a bit of a problem child for EVN, requiring some capital, and lots of management attention, while producing only 8% of the current output. The asset quality of EVN has dramatically improved over the last 2-3 years, and Edna May does not fit the bill anymore. I think they might struggle, though, to get much above 100 mill A$ for it. Small beer in the overall scheme of things, and I agree with just about every analyst in town, that the mine should be sold - provided the price offered is halfway reasonable.

Have a nice evening!