Market Update

General - Evolution - Paringa - Graphex

Good afternoon

The German elections next Sunday could deliver an unpleasant surpise....Merkel will win by a very large margin, but lots of voters are still undecided, while the new right wing party ( currently at 12%! ) could profit from this. The Social Demeocrats will be the big loosers at about 20% of votes, but it´s uncertain, whether they will prolong the existing coalition with Merkel. The right wing will definitely not be party of any coalition - still, a big win of votes for them could be bad news for the overall, political climate.

Economists are upgrading growth forecasts for Europe to 2.1% this year - the ECB is at 2.2%. That´would be the best growth in 10 years.

European equites are stronger today,a s are metal prices except for gold, which looks like it wants to test the 1300-level.

Evolution - has sold Edna May, as expected - price a little bit worse than  expected: 40 Mill A$ in cash , another up to 50 Mill$ in royalties. Not that it makes a huge difference, as Edna May has been a small part of analyst´s overall valuation - but I would have hoped for a little more. EVN have issued new guidance, cutting AISC from 850-900 A$/ounce to 820-870 A$/oz - reflecting, that Edna May has been the highest cost mine within the portfolio. So I think overall, this sale is neutral to EVN - 30-40 Mill A$ less thann being hoped for, but certainly an improvement of the asset quality in terms of costs, and also mine life. Perhaps equally importantly, it fres up management capacity.

Graphex - JV-Partner CN Docking have released results from more due diligence work, namely their assessment of product specifications. They confirm, that the Graphex project contains the coarsest graphite product in the world. Also, the Chinese company reports about a 50% increase in prices for graphite this year, as China continues to clamp down on enviromentally damaging production in the country, amidst a growing market from battery producers, and housing related uses of Graphite. Unfortunately, and as you know, the project is based in Tanzania - so some time will be needed for the government to come clear with their plans for the taxing and the ownership of new mines. In a situation like this, I am sure, that it´s good to have a Chinese JV-partner!! I continue to back this company - any good news on clearing up the government plans will be very very welcome for the market 

Paringa - announced a 9% increase of capex due to sme changes to the mines design - that is just within their contingency. The changes will decrease operating costs over the mine life and hence, the NPV will be slightly higher. Construction remains on track for a mid-2018 start-up. The company has also stengthened the operating team in the US with experienced personnel. In my opinion, this stock is a very safe bet and should deliver +50% over the next 15 month.

Cardinal - a new and positive resource statement is out: 120 mT at 1,1g, using a 0,5g cut-off, for 4.3 mill oz in the indicated category. That is very positive inded, and the deposit looks to be mined in one, very large open pit down to 350 m. This update is very positive - but unless I have ovelooked it, tha granting of all necessary titles still has not happened. This is a real worry for me - millions of ounces can make very gready!!! Otherwise, the company has made some good progress on treating the ore, and recoveries are satisfactory now, though not great. But a single-pit, 4-5 mill ounce mine does find a lot of interest from larger mines - but only, once all necessary titles are there!

Have a nice evening!

WS