Market Update

General - Graphex - West African , new research

Good afternoon

IFO Institute downgrades GDP forecast for Germany from 1.9% to 1.1% for 2019 - main reason being weakness in the car industry. The ECB is forecasting 1.7% as at today. Draghi, as planned, will stop buying bonds with fresh money this month - but they will continue to re-invest maturing debt for some time. US jobless applications continue to fall. The Italian budget problem seems to come to a positive end!

Equities are ok today, being slightly up following two strong days is a pretty good effort!

Metal markets looking quite strong today. I had another look at the base metals, which are all ( ex alu ) in supply deficit this year, as also witnessed by LME stocks, which are approaching all time lows in terms of “stocks in weekly consumption” in the case of copper, zinc and lead. And while we feel, that prices have been week - tehy have really moved more or elss sideways for the last few month. With further deficits forecast for 2019, I dare to say:

IF Trump/Xi can find a way to to finish this trade war, we will have a pretty strong year in front of us. The trade war is clearly the biggest threat to markets in 2019 - if avoided, we might have a halfway ok year for equities, and an clear upward tednency for commodities. And given the share prices. especially at the smaller end of the sprectrum, there is a lot of value around! So for a change - good prospects potentially ahead! Let´s not forget, that the world is still growing - less so than expected say 6 month ago, but probably not much below 3%.

Graphex - you might remember, that the recently announced, comprehensive financing with US private equity group Castlelake is subject mainly to the bankable feasibility study being finished ( expected by June 2019 ), and the resolution of legislative and regulatory issues in Tanzania. The feasibility study is progressing, as planned. What is very positive is, that Graphex has had more communication with the government in the last month, than in the preceding 18 month! The Prime Minister has very actively supported the project, and solutions to many, though probably not all issues, are making very strong progress. Also, headlines today indicate, that Barrick´s new boss, legendary Mark Bristow, would be close to an agreement with the government re the Acacia-issue. Both of this indicates, that the Tanzanian government is actually getting it´s act together and is supporting much-needed investment in mining in the country. I am still holding a large position here, and while I am extremely unhappy with the share price, I am very happy with the progress of the company. Buy straw hats in winter - clearly, for Graphex, it´s an arctic winter in terms of price!!!

West African once again - today the Euroz Quarterly Mining Update was out. Euroz are their corporate broker, so they have an interest - but they are also probably the closest to the company. They talk about the upated feasibility study ( due in March ) and expect an average of 240.000 oz of production for at least 5 years. Within 2 years of production ( they forecast 254.000 oz in the year to June 2021, which might be a touch too positive , and also 1350 US$ for gold ). On that basis, they forecast the company to have net cash of 240 mill A$ by June 2022 - that´s after only 2 years of production, and compares to today´s market cap of 165 mill A$!!!!!!!!! Burkina Faso is clearly not as good a country as it was say 5 years ago - but it´s clearly not that bad!! I have not given up on takeover as well. I just looked at Iamgold´s numbers ( and those guys could easily afford a cash takeover ). If those guys mad a bid at a 100% premium, i.e. 340 mill A$, their EBITDA would increase by 75% in two years time, and their production by 31% - against a market cap of WAF ( at takeover valuation of 48ct ) of only 340 mill A$ vs Iamgold´s of 2.1 bill Can $ ( which is about the same as the A$ ). So for an outlay of 14% of IAMgolds market cap, they would get an uplift in production of about 31%, and in EBITDA by +70%, while improving their AISC substantially. For me, that´s a no-brainer! I bought a few more today.

Have a nice evening


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