Market Update

General - OZ Minerals

Good afternoon

equities are giving up some of their nice gains from yesterday…base metals largely unchanged…no major , market moving news so far today.

Sorry but I have to dwell on this kashoggi-thing! It´s so annoying to see foreign-poilcy cynism at work! Just imagine, that some journalist would walk into the Russian embassy, and come out in pieces, because of some interrogation gone crazy….Trump and the entire west would fall over themselves to cry for new sanctions… With Saudi Arabia, the Americans will send them the next 100 bill$ in weapons…Pompeo looking like a little public servant, begging for some chocolate and a smile from the big man…


Macquarie yesterday came up with some rather nice EV sales estimates for last month. 200.000 EV´s have been sold in Sept - 74% increase in China and 110% increase in the US ( driven by the new Tesla model ). But other countries like Japan and Canada, coming from a small base , where also growing at nearly 100%. The big numbers are in market share - 1.6% market share for EV´s worldwide in 2017 will grow to 2,7% on Macquarie´s numbers. As teh average size of batteries is also growing, consumption of relevant metals is growing more strongly even - but they do not give detailed estimates for that.

OZ Minerals - another good Quarterly from this very well-run company! Producing 32.000t of copper and 36.500 oz of gold in the Quarter at AISC of 1,15 US$/lb ( I think average exchange rate during the Quarter was 73ct ) is certainly excellent, and a bit better than expected. The stock is not dirt-cheap, but ok priced - and if you like copper, it´s worthwhile to have some. If consensus is right, you might have to wait 2-3 years for substantially betetr copper prices - but in the meantime, 2% yield is not so bad. And contrary to before, OZL do have a growth pipeline now. I cannot see a project of the quality of a Prominent Hill there - but certainly incremental production a few years out. If that meets with rising copper prices, the outcome might not be spectacular, but very solid. And at no point of this growth cycle, the company will have any debt - not the worst position to be in, but I would actually prefer some limited gearing of say 15%, if it gives them more fantasy. Once Carapateena is up and running late next year, they will have to do something on the aquisition front again.

This continues to apply to basically all, reasonable, Australian gold producers - from St.Barbara to Saracen and Evolution. At a varying degree, all these guys are undergeared…especially SBM, who on top are relying on their very deep mine , and will need to find a replacement for Simberi. And last but not least, the Gwalia Mine cannot produce at grades substantially above reserve-grades forever…the 350 mill$ in cash ( and growing ) in their pocket will burn like hell!

Sheffield - more exploration results from the broader Thunderbird area - not as spectacular as the results the other day, but more indication, that there is a lot more to be found. The company is certainly doing everything possible to enhance the value for potential, strategic buyers!

Have a nice evening