Market Update

General - Horizn - Paringa - Breaker - Coronada - Resolute

Good afternoon

Caterpillar with an excellent Quarter, but also with a very cautious outlook, citing the highest steel prices worldwide in the US, and tariffs. Thank you, Mr.Trump - you are pressuring American manufacturers!!

If it would not be sad, it would be funny: Saudi´s saying initially, that Kashoggi had left the embassy unharmed…and then they let somebody wearing his clothes ( but unfortunately, not his shoes! ) wander around in Istanbul past as many security cameras as possible….Crown Prince under even more presssure now…Their versions of the story are getting more untrustworthy by the day!

Markets under heavy pressure today from geopolitical issues…gold very strong. Base metals held up well until now - but also seeing some pressure now. For a change, bonds are strong - except for Italian bonds…I guess normal politicians with 1.300.000.000.000 Euro in debt would do everything they can to keep their interest rates low…these crazy Italians do everything they can to f..k up their bond market! It´s all quite funny…but I think European banks don´t find this Italian crisis funny at all…

The gold price looks like it wants to test the 1250 US$-level soon - 1300 would be the next target. In A$, the price is very exciting indeed: In this moment at 3.30 pm European time, it´s 1752! That´s less than 20$ below the 2-year high, and only 80$ below the all-time-high reached in 2016. No wonder our gold producers have been strong…and some more action starts to come to smaller gold producers now as well.

Horizon - extended the excellent drill intersection for zinc/copper at Gum Creek and will follow up with a full drilling programm in early November. It might not take all that much to add value to a company with an EV of only 10 mill$…letg´s hope for some more success shortly!

Paringa - Quarterly out today…sounds all good, making good progress now. Much remains to be done…but first production is now only a few month away, while the coal market in the US has improved substantially, as reported last week. The company has now sold out for 2019, and is 70% sold for 2020. PNL are reporting about record low coal stocks in the US , and observes expect more strength for coal. If these guys should be able to get say 50 US$/t from 2020, valuations would move quite a bit higher….Paringa could be a similar cash cow to Metro Mining, which strangely has made new lows today…

Breaker - very nice drilling results from Borborema …35 m with 3,8g / 22m with 3,12 g / 12 m with 3,2g / 12m with 3.4 g are exactly what the market wants to see. “Significant gold in all 37 drill holes, 57% of which are extensional ( holes ) “. I think there is very little doubt, that the 1.1 mill oz resource will grow. Next resource estimate will be subject to more drilling success, obviously. I am hoping for the 2nd Quarter 2019, and for another few-hundred thousand oz to show to the market, that Breaker could well become larger than the usual 100.000oz p.a. story…Stock had a nice move today - but tehre is still more than 50% upside to just reach the price level from March of this year, when the A$ gold price was lower tha today, and especially, when resource-expectations were generally around the 1-1.1 mill oz level . We should have considerable upside left in BRB…

Coronada Global listed today. Largest coal IPO I can remember - and yielding more than 20% ( !! ) at spot prices for coking coal. Bookbuild-Range was between 4- and 4.80 A$…placement was in the end done at 4$, and the price settled at 3.60 A$/share today. This is a very tempting story - large, long mine life, country diversity, debt free, and 100% of free cash will be paid in Div for the 2019 -results…followed by a 60-100% of free cash flow pay-out. Both types of coal are trading much higher than analysts expected only a few month ago. This stock at 3.60 A$ offers some fantastic upside for friends of coking coal! The fact, that it´s trading 10% below the issue price on day one, tells you something about the risk-adverse enviroment for resources stocks!

Resolute - a bad Quarterly, with very high costs…Syama especially was bleding, as the roaster had to be shut down, which was planned, for maintenance. But at teh same time, very wet weather hindered production from transitional ore, which was planned for treatment during that time. But all of that is not that important…more important is, that the sub level cave operation will start in December as planned. The “new” Syama underground mine is kind of a high-tech mine, with autonomous mining, sublevel-caving etc….so far, everything is on plan, but as always, the proof is in the pudding….and IF this process does not work properly, they might run into some financial problems. Net debt is about 50 mill$ now - not a major problem - but it will probably rise again this Quarter. No worries, if things go halfway ok - so let´s keep our fingers crossed! Once in production, the “new” Syama will be a great asset - with long mine life, pretty good costs, and ample exploration upside, as proven again during the Quarter. But I have to admit, that I would not dare to buy more in the moment…

Have a nice evening



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