Market Update

General - Gascoyne - Lynas

Good afternoon

German Industrial Production contracted again , by 0,3%….but generally, economy is still doing quite well. European equities are being hit again by worries about Italy - Italian bonds now at 3,55% yield vs Germany 0,54%….

LME-wek starts in London…from Trafigura to Goldmans , CRU, Freeport ,J.P.Morgan,and Antofagasta - everybody is positive on copper. Main reason: Underinvestment, met by solid demand. And let´s face it: Yes, China is slowing down - but I guess we are talking a slowdown from 6.5% to say 5% worst case - that still implies demand growth, while the US is continuing to be in a strong upturn. Cash premiums in China are strong, and LME stocks keep on falling as well. Given the positive sentiment on LME-week, perhaps not surprising, that metals are trading now ( late afternoon ) at the high of the day and largely unchanged, except for weaker zinc.

Strong growth and a tightening labor market in the US could drive inflation, though - and the US is paying nearly 600 bill US$ interest this year, while the budget deficit is growing again to something like 850 bill US$! There is very little doubt, that US interest rates will rise further…There are clearly some risks out there, which could bring some interest back to the gold market!

In A$ terms, gold is very sexy anyway! The current 1691 A$/oz are just 100$ below the alltime high in 2016, while most new projects seem to come in around 1000-1100A$ in AISC. Putting another say 150$ on top of this number for development etc, and you still see margings of 500 A$/oz or so! That´s more than reasonable! And quite a few commentators expect the A$ to fall another 3% or so, fiven rising US interest rates.

Gascoyne - interesting move: Two directors make way for the 7year-COO of Evolution to get on the board, and Ian Murray, the ex-MD of Gold Road, becomes non-ex Chairman. Murray is well liked and an excellent marketer, while we all know about the excellent, operational performance of EVN´s mines in the past. Both should be able to add good value to this small company, and the simple fact, that they accepted these jobs, are positive in my view for Gascoyne. We have had a few difficult month here - the announcement could well be the start of better things to come!

Lynas - more positive noise now from Malaysia, where it seems now, that the company will get a fair hearing after 6 years of operations without any hickups. If the company has done everything it says it ahs done, the enquiry should not be a major problem! The company could come out stronger from this - but until that can happen, I guess the mood might be influenced from newspaper articles and some rethoric, which at times, could be negative.

Have a nice evening!


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