Market Update

General - Evolution - Metro

Good afternoon

BREXIT, Italy, Tariffs, Saudi Arabia - a lot to swallow for markets in the moment! And obviously, late last week, a little bit too much! In my opinion, markets have already taken more FED-action into their stride - except for one thing: oil prices are starting to bite and beef up inflation numbers - not only wages anymore. And Iran-trouble + potential Saudi-action could play havoc with oil prices - pushing inflation, and limiting growth. But being an old cynic, I think we will not see anything too drastic from Trump against his best friend, Saudi Arabia - whatever they have probably done to this journalst!

Certainly, the above is enough to bring some attention back to gold….the A$ gold price is now 1723 A$/oz - that´s just 5% less than the all time high in 2016….More importantly perhaps, the charts for US$ gold are looking interesting!

Equity markets as well as metal prices are stable today, with a slight upward bias. LME stocks for all metals continue their strong declines today…

Evolution - excellent Quarterly today…especially, as this was expected to be a little weaker. Ernest Henry once again was a fantastic money spinner and the stand-out this Quarter. 200.000 oz overall at 885 A$ AISC were a few thousand oz better than expected, but at slightly higher costs. Strong diesel prices are certainly not helping. The company is essentially debt-free now…only about 75 Mill A$ in net debt remaining. Cowal will be expanded - also helped again by good exploration results - to produce 300.000 oz p.a. on a sustainable basis for many many years to come. The stock bounced strongly last week, reflecting the better gold sentiment - so despite the strong result, the stock is only a hold in the moment, at around 3$/share. But gold is feeling strong - and EVN should continue to move with the gold price. 3% yield for EVN should continue for some time and is very sexy for a gold stock! EVN remains a core gold exposure through the cycle!

Metro Mining - production firgures for their recently comissioned bauxite mine had already been announced - at 822.000t for the Quarter the company is on track to produce the targeted 2 millt for this calendar year ( 1.2 millt produced so far ). Costs continue to come down as the operations are being ramped up to nominal capycity and fine-tuned . Cash + receivables at the end of the Quarter was 8 mill$ higher then 3 month earlier, at 38 millA$…this is the really important number!

There have been 3 main risks for MMI: 1 - the usual comissioning risk for a new mine - that´s gone now ….2 - marketing rsisks for the bauxite product - with all production for 2018 easily sold to 5 different customers , and already 80% for 2019 contracted - I think this risk is also largely gone now ….3 - price risk - well, that will always be there - but alumina market looks strong, still, and chinese bauxite production is still under pressure . This leaves mainly one risk - that´s wheather - and there is little they can do about that, although over time, some stockpile should also mitigate this risk. The stock is slated to generate very solid cash flow for many years to come - operationally, the company seems well on track to get there!

Have a nice evening!


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