Market Update

General - lithium stocks MIN, PLS, LTR and PLL

Good afternoon

nice relieve-rally today…could we be in for a little Christmas run? Interest rate picture looking a bit rosier of late, and at least a pause in the trade war? At least the route seems stopped for now. Metals are joining into the positive mood as well - especially copper, which is trading at it´s best since late September. Nickel barely mooved, though…I guess none of us would have expected it to be at below 11.000 as a few days ago - and hence it´s a little disappointing, that it does not move any stronger today, and despite yet another low in LME-stocks.

I had another look at the lithium sector, which hs getting a few, more positive comments lately.

One reason for this is corporate action, another one , that it seems to take longer than planned to get expansions/new proejcts going in South America. And recent comments from Albemarle have highlighted, tha there is a tendency towards lithium hydroxide production, as opposed to lithium carbonate, which favours the Australian hard rock projects vs the South American brine projects. Water - and other enviromental issues in South America also seem to favour our Australians, beside of the fact, that country risk in Australia is comparatively low.

As you know, Mineral Resources is my favourite stock here, especially following the 50% sale of Wodgina, providing the market with a very positive lookthrough-valuation. But I would also expect, that this 3 bill$ company will get increased attention from North American investors, as their multiples are just half of what these guys pay for SQM or Albemarle, the big boys. I think some discount to these valuations is definitely warranted, as the mIning Services division of MIn shoudl attract a lower rating. But using the Wodgina valuation paid by Albemarle, you are getting this for free anyway.

The other intersting stock is Pilbara. With a market cap of 1.4 bill A$, and Stage 1 of their Pilgangoora Project approaching 100% of production, it´s largely derisked now. Stage 2 has been approved - this is the raal value-add - and will be in production in the 2nd Quarter 2020. It´s not fully financed as yet - but cash flow from Stage 1, debt from offtakers and hopefully some bank debt might well do the job without any equity. Bank debt is not easy to obtain for lithium projects - it´s still new for the banks, and the pricing of the various types of lithium is not that open. This is also providing soem barrieres of entry. But in the case of PLS, witha sizeable project, long term production, and offtakes, it should be a feasible option. Also, the largest shareholder is MinRes, with 7% - and I doubt, that tehy see this as a strategic investment, following the Albemarle tarnsaction. At the right price, it might well be available - and PLS is the only existing, large hard rock project in Australia without a big brother.

On a smaller scale, Liontown LTR and Piedmont, PLL, might be of interest. PLL ahve just completed a highly oversubcribed placement at 11ct to raise 12 mill$ - so they are well cashed up. The stock is not dirt cheap - market cap incl the placment about 80 mill A$, and the resource is not high grade ( 1,1% LI2O), but the location in Northern Carolina, next to existing Lithium production and to chemical industry, makes it special. The other smaller company I like is Liontown, with Craig Williams and Tim Goyder on the board. Nice resource - 24 millt at 1,4% LI2O, and scoping study to be published in January. At this stage, they are only planning for spodumene production - which is only an enrichment to 6% lithium. But somethingh like this does not take that long to bring into production. LTR also have a second lithium project in Western Australia, which is shaping up to be larger, but at similar grade to Piedmont - and tehy also own a vanadium project, which might be interesting. So all good here - including a relativly low markt cap of 30 mill A$ - but the downside here is, that they will need some fresh equity soon. I like their approach - don´t add as much value to their product as Piedmont, but potentially not needing such a long time line to develope. Their placement last week is an indication, that the window for fresh equity is still open for some - and I think that defintely includes lithium projects in good locations. So afterall, the fact that LTR needs money might not be all that negative.

Panoramic - had a nice moove today - as had the other nickel producers IGO and WSA. PAN will still be making money even at today´s horrible nickel price - and I think looking forward, there is only one direction for the nickel price. Having said this, I guess none of us would have expected nickel at current levels just a few month ago! PAN have sold forward 7.000t of nickel at 8,50 A$/lb, which is currently about 22 mill A$ in the money and which will help to pay back the small debt position of up to 40 mill A$. I believe, though, that net debt will only be at 25 mill A$ or so, once first payment will be received 2 month after first shipment, which is expected in the first half of January. Comissioning of the plant is currently taking place, and I would expect an announcement of first nickel production very soon. This should bring further market attention

Have a nice evening , and enjoy the nice gold price, currently at 1234 US$

WS