Market Update

General - Strike - Northern Star - Syrah - Independence - Paringa

Good afternoon

Public holiday all over Europe tomorrow...

Europeans are watching Trump´s tariff decision, due tomorrow, on Alu and steel...will Europe be excluded? Nobody believes so...on the 12th of May, the Iran-decisisonís due...politics still very important for markets, the latter one especially important for oil prices....How ill EU react to Trump´s decisions? Like puppies? I guess we will....I hope we will not...short term pain might well be long term gain for Europe. Once the Americans will build proper cars, American people will buy them - tariffs are not the point...

US PMI not great but ok

Interesting to watch: Deutsche Telekom taking over Sprint - aubject to US government approval. There got to be a realistic chance, that Trump will not allow an American Telco to fall to his European enemies!???

Surprisingly, European stocks are slightly stronger - I guess ultra-low interest rates are no tendency by Draghi to change that, are still the big driver. Amazingly, German inflation at 1.4% still not existent...

Sainsbury up by 21% today - 14.4.% of the stock has been shorted! Unlucky....


Glencore getting another kick in the bum with regards to their congolese assets - this time from Mr.Gertler, ex-friend of the company. Show me your friends, and I tell you , who you are! Gertler is probably even more ruthless than Glencore, and he is taking them to court for 3 bill$...freezing the main Glencore assets in the country.

Chinese PMI a touch better than expected - business looks pretty steady in China.

Syrah Resources - Quarterly from what will be the world´s largest graphite producer. The project in Mozambique is still plagued by all sorts of commisioning problems, none of which looks very serious to me. The company expects a strong production ramp-up by 25% in the first half, and 75% in the  second half year. Demand for graphite for battery anodes will rise exponentially over the enxt few years, and all of that growth in demandcould theoretically be supplied by Syrah. The company is well financed - but they better achieve their production targets, as 80 Mill US$ in cash will be burnt in less than 9 month at the current pace. The company is targeting to be cash flow positive by the end of September. This stock is certainly not risk-free - but Syrah will be a clear market leader in it´s field and as such, is probably a target for much larger companies, should problems arise. If they deliver as planned, the stock could easily be 50% higher by the end of this year - I am happy to take this risk.

Independence - I never liked the company, and that was confirmed again with an average Quarterly Report. Jaguar and Long are two very average base metal operations, not generating much cash even under the currently strong price-regime for most base metals. Tropicana Gold  is also not shooting too many goals for them, and they are only a minority owner here. Finally, Nova Nickel certainly is an excellent asset, and is producing the highly sought after nickel for batteries. Folllowing a few early problems, productions is now ramping up the desired level of 7000t/Quarter. Grades are improving, costs are falling and should finally settle at something like 2A$ cash costs/lb. The EV of IGO is around 3.1 bill A$ - for that, you are effectively getting 30% of Tropicana ( = about 125.000 oz production p.a. ), worth 600-700 mill A$b at best, and Nova nickel - 28-29.000t of nickel production worth perhaps 1.5 bill A$. That leaves me at say 2.2 bill A$. The stock is only trading at the current elevel due to a shortage of halfway sizeable ( = investable ) diversified miners in Australia.

Paringa - the company continues with it´s slightly disappointing development...originally, production was planned for summer 2018 - then it became 3.Quarter...then second it´s 4th Quarter 2018...all because of a patch of bad weather during winter? Also, financing was always going to be relatively tight....and now production takes a bit longer than planned, which will not be without any additional costs. The listing in the States has never happened...the debt-financing is not signed as yet....and for several Quarters, we have heard about promising talk with potential offtakers. That´s not really what I call a good run! The stock has been very low risk - potentially 100% return 6 month ago - now it´s say 80% return and increased risk. That´s still cheap - but management has to get it´s act toghether.

Mineral Deposits - the company  is producing mineral sands in Senegal - in JV with Eramet, which is  50% JV-partner. Eramet has made a full, hostile bid for MDL...very unusual for a JV-partner to go hostile! Beside of being positive for the Australian resources scene, it´s interesting to see another takeover in the mineral sands space. Not much left in the sector! One of the left-overs is our little Sheffield - once the inigenous approval is there, stock will come under threat...

Northern Star - their Quarterly was not good, which is unusal. 123.000oz og gold - Jundee running at AISC of 963 A$, and Kalgoorlie at 1.239 A$/oz - that is not very impressive. To be more precise: That is not impressive vs market expectations and vs their market absolute terms, it´s very impressive, considered the tired assets they took over a few years ago! The company is guiding for 150.000 oz in the current Quarter, which would be a positive outcome. NST have done a great job with their old assets, and have been an extremely successfull explorer - combined that should give them a premium-rating. But that´s what they have currently... I see no upside unless from a much better gold price - and I rather see some more downside on any disappointment from production. No reason to buy the stock, and not too much reason to hold it...

Strike Energy - last but not least, some excellent news from them. The second drill hole has been completed - and the horizontal well, and the vertical well drilled about 700m away, have met each other as planned, at a total depth of 2.880m!! Absolutely amazing, what these drilling companies can do these days. Now the well will be prepared for fracking, and will be completed with installation of pumps etc etc. I don´t know, what exactly is happening to the budget - all the company has said is, that they have sufficient funds to complete everythinga s planned. I guess, that costs will blow out in the end by 1-2 mill $ - but that is completely unimportant compared to the potential success. As we all know, the orginal plan, to frack from inside the coal seem, had to be abandoned - fracking is now happening from just under the coal seem. Obviously, this is only the second best way to do it! Keep your fingers corssed- so far, so good - I think by the end of June we will know, whether this is a winner...or whether numerous years of waiting have been wasted!

Have a nice evening


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